B.

CONSTRUCTION OF THE CONSTITUTION AND THE BILL OF RIGHTS

Cases
[G.R. No. 122156. February 3, 1997]

MANILA PRINCE HOTEL, petitioner, vs. GOVERNMENT SERVICE
INSURANCE SYSTEM, MANILA HOTEL CORPORATION, COMMITTEE ON
PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE
COUNSEL, respondents.

D E C I S I O N

BELLOSILLO, J.:

The Filipino First Policy enshrined in the 1987 Constitution, i.e., in the
grant of rights, privileges, and concessions covering the national
economy and patrimony, the State shall give preference to qualified
Filipinos,[1] is invoked by petitioner in its bid to acquire 51% of the
shares of the Manila Hotel Corporation (MHC) which owns the historic
Manila Hotel. Opposing, respondents maintain that the provision is
not self-executing but requires an implementing legislation for its
enforcement. Corollarily, they ask whether the 51% shares form part
of the national economy and patrimony covered by the protective
mantle of the Constitution.

The controversy arose when respondent Government Service
Insurance System (GSIS), pursuant to the privatization program of the
Philippine Government under Proclamation No. 50 dated 8 December
1986, decided to sell through public bidding 30% to 51% of the issued
and outstanding shares of respondent MHC. The winning bidder, or
the eventual strategic partner, is to provide management expertise
and/or an international marketing/reservation system, and financial
support to strengthen the profitability and performance of the Manila
Hotel.[2] In a close bidding held on 18 September 1995 only two (2)
bidders participated: petitioner Manila Prince Hotel Corporation, a
Filipino corporation, which offered to buy 51% of the MHC or
15,300,000 shares at P41.58 per share, and Renong Berhad, a
Malaysian firm, with ITT-Sheraton as its hotel operator, which bid for
the same number of shares at P44.00 per share, or P2.42 more than
the bid of petitioner.

Pertinent provisions of the bidding rules prepared by respondent GSIS
state -

I. EXECUTION OF THE NECESSARY CONTRACTS WITH GSIS/MHC -

1. The Highest Bidder must comply with the conditions set forth
below by October 23, 1995 (reset to November 3, 1995) or the Highest
Bidder will lose the right to purchase the Block of Shares and GSIS will
instead offer the Block of Shares to the other Qualified Bidders:

a. The Highest Bidder must negotiate and execute with the GSIS/MHC
the Management Contract, International Marketing/Reservation
System Contract or other type of contract specified by the Highest
Bidder in its strategic plan for the Manila Hotel x x x x

b. The Highest Bidder must execute the Stock Purchase and Sale
Agreement with GSIS x x x x

K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -

The Highest Bidder will be declared the Winning Bidder/Strategic
Partner after the following conditions are met:

a. Execution of the necessary contracts with GSIS/MHC not later than
October 23, 1995 (reset to November 3, 1995); and

b. Requisite approvals from the GSIS/MHC and COP (Committee on
Privatization)/ OGCC (Office of the Government Corporate Counsel)
are obtained.*3+

Pending the declaration of Renong Berhard as the winning
bidder/strategic partner and the execution of the necessary contracts,
petitioner in a letter to respondent GSIS dated 28 September 1995
matched the bid price of P44.00 per share tendered by Renong
Berhad.[4] In a subsequent letter dated 10 October 1995 petitioner
sent a managers check issued by Philtrust Bank for Thirty-three
Million Pesos (P33,000,000.00) as Bid Security to match the bid of the
Malaysian Group, Messrs. Renong Berhad x x x x[5] which respondent
GSIS refused to accept.

On 17 October 1995, perhaps apprehensive that respondent GSIS has
disregarded the tender of the matching bid and that the sale of 51% of
the MHC may be hastened by respondent GSIS and consummated
with Renong Berhad, petitioner came to this Court on prohibition and
mandamus. On 18 October 1995 the Court issued a temporary
restraining order enjoining respondents from perfecting and
consummating the sale to the Malaysian firm.

On 10 September 1996 the instant case was accepted by the Court En
Banc after it was referred to it by the First Division. The case was then
set for oral arguments with former Chief Justice Enrique M. Fernando
and Fr. Joaquin G. Bernas, S.J., as amici curiae.

In the main, petitioner invokes Sec. 10, second par., Art. XII, of the
1987 Constitution and submits that the Manila Hotel has been
identified with the Filipino nation and has practically become a
historical monument which reflects the vibrancy of Philippine heritage
and culture. It is a proud legacy of an earlier generation of Filipinos
who believed in the nobility and sacredness of independence and its
power and capacity to release the full potential of the Filipino people.
To all intents and purposes, it has become a part of the national
patrimony.[6] Petitioner also argues that since 51% of the shares of
the MHC carries with it the ownership of the business of the hotel
which is owned by respondent GSIS, a government-owned and
controlled corporation, the hotel business of respondent GSIS being a
part of the tourism industry is unquestionably a part of the national
economy. Thus, any transaction involving 51% of the shares of stock
of the MHC is clearly covered by the term national economy, to which
Sec. 10, second par., Art. XII, 1987 Constitution, applies.[7]

It is also the thesis of petitioner that since Manila Hotel is part of the
national patrimony and its business also unquestionably part of the
national economy petitioner should be preferred after it has matched
the bid offer of the Malaysian firm. For the bidding rules mandate
that if for any reason, the Highest Bidder cannot be awarded the
Block of Shares, GSIS may offer this to the other Qualified Bidders that
have validly submitted bids provided that these Qualified Bidders are
willing to match the highest bid in terms of price per share.[8]

Respondents except. They maintain that: First, Sec. 10, second par.,
Art. XII, of the 1987 Constitution is merely a statement of principle
and policy since it is not a self-executing provision and requires
implementing legislation(s) x x x x Thus, for the said provision to
operate, there must be existing laws to lay down conditions under
which business may be done.*9+

Second, granting that this provision is self-executing, Manila Hotel
does not fall under the term national patrimony which only refers to
lands of the public domain, waters, minerals, coal, petroleum and
other mineral oils, all forces of potential energy, fisheries, forests or
timber, wildlife, flora and fauna and all marine wealth in its territorial
sea, and exclusive marine zone as cited in the first and second
paragraphs of Sec. 2, Art. XII, 1987 Constitution. According to
respondents, while petitioner speaks of the guests who have slept in
the hotel and the events that have transpired therein which make the
hotel historic, these alone do not make the hotel fall under the
patrimony of the nation. What is more, the mandate of the
Constitution is addressed to the State, not to respondent GSIS which
possesses a personality of its own separate and distinct from the
Philippines as a State.

Third, granting that the Manila Hotel forms part of the national
patrimony, the constitutional provision invoked is still inapplicable
since what is being sold is only 51% of the outstanding shares of the
corporation, not the hotel building nor the land upon which the
building stands. Certainly, 51% of the equity of the MHC cannot be
considered part of the national patrimony. Moreover, if the
disposition of the shares of the MHC is really contrary to the
Constitution, petitioner should have questioned it right from the
beginning and not after it had lost in the bidding.

Fourth, the reliance by petitioner on par. V., subpar. J. 1., of the
bidding rules which provides that if for any reason, the Highest Bidder
cannot be awarded the Block of Shares, GSIS may offer this to the
other Qualified Bidders that have validly submitted bids provided that
these Qualified Bidders are willing to match the highest bid in terms
of price per share, is misplaced. Respondents postulate that the
privilege of submitting a matching bid has not yet arisen since it only
takes place if for any reason, the Highest Bidder cannot be awarded
the Block of Shares. Thus the submission by petitioner of a matching
bid is premature since Renong Berhad could still very well be awarded
the block of shares and the condition giving rise to the exercise of the
privilege to submit a matching bid had not yet taken place.

Finally, the prayer for prohibition grounded on grave abuse of
discretion should fail since respondent GSIS did not exercise its
discretion in a capricious, whimsical manner, and if ever it did abuse
its discretion it was not so patent and gross as to amount to an
evasion of a positive duty or a virtual refusal to perform a duty
enjoined by law. Similarly, the petition for mandamus should fail as
petitioner has no clear legal right to what it demands and
respondents do not have an imperative duty to perform the act
required of them by petitioner.

We now resolve. A constitution is a system of fundamental laws for
the governance and administration of a nation. It is supreme,
imperious, absolute and unalterable except by the authority from
which it emanates. It has been defined as the fundamental and
paramount law of the nation.[10] It prescribes the permanent
framework of a system of government, assigns to the different
departments their respective powers and duties, and establishes
certain fixed principles on which government is founded. The
fundamental conception in other words is that it is a supreme law to
which all other laws must conform and in accordance with which all
private rights must be determined and all public authority
administered.[11] Under the doctrine of constitutional supremacy, if a
law or contract violates any norm of the constitution that law or
contract whether promulgated by the legislative or by the executive
branch or entered into by private persons for private purposes is null
and void and without any force and effect. Thus, since the
Constitution is the fundamental, paramount and supreme law of the
nation, it is deemed written in every statute and contract.

Admittedly, some constitutions are merely declarations of policies
and principles. Their provisions command the legislature to enact
laws and carry out the purposes of the framers who merely establish
an outline of government providing for the different departments of
the governmental machinery and securing certain fundamental and
inalienable rights of citizens.[12] A provision which lays down a
general principle, such as those found in Art. II of the 1987
Constitution, is usually not self-executing. But a provision which is
complete in itself and becomes operative without the aid of
supplementary or enabling legislation, or that which supplies
sufficient rule by means of which the right it grants may be enjoyed or
protected, is self-executing. Thus a constitutional provision is self-
executing if the nature and extent of the right conferred and the
liability imposed are fixed by the constitution itself, so that they can
be determined by an examination and construction of its terms, and
there is no language indicating that the subject is referred to the
legislature for action.[13]

As against constitutions of the past, modern constitutions have been
generally drafted upon a different principle and have often become in
effect extensive codes of laws intended to operate directly upon the
people in a manner similar to that of statutory enactments, and the
function of constitutional conventions has evolved into one more like
that of a legislative body. Hence, unless it is expressly provided that a
legislative act is necessary to enforce a constitutional mandate, the
presumption now is that all provisions of the constitution are self-
executing. If the constitutional provisions are treated as requiring
legislation instead of self-executing, the legislature would have the
power to ignore and practically nullify the mandate of the
fundamental law.[14] This can be cataclysmic. That is why the
prevailing view is, as it has always been, that -

x x x x in case of doubt, the Constitution should be considered self-
executing rather than non-self-executing x x x x Unless the contrary is
clearly intended, the provisions of the Constitution should be
considered self-executing, as a contrary rule would give the legislature
discretion to determine when, or whether, they shall be effective.
These provisions would be subordinated to the will of the lawmaking
body, which could make them entirely meaningless by simply refusing
to pass the needed implementing statute.[15]

Respondents argue that Sec. 10, second par., Art. XII, of the 1987
Constitution is clearly not self-executing, as they quote from
discussions on the floor of the 1986 Constitutional Commission -

MR. RODRIGO. Madam President, I am asking this question as the
Chairman of the Committee on Style. If the wording of PREFERENCE
is given to QUALIFIED FILIPINOS, can it be understood as a
preference to qualified Filipinos vis-a-vis Filipinos who are not
qualified. So, why do we not make it clear? To qualified Filipinos as
against aliens?

THE PRESIDENT. What is the question of Commissioner Rodrigo? Is it
to remove the word QUALIFIED?

MR. RODRIGO. No, no, but say definitely TO QUALIFIED FILIPINOS
as against whom? As against aliens or over aliens ?

MR. NOLLEDO. Madam President, I think that is understood. We use
the word QUALIFIED because the existing laws or prospective laws
will always lay down conditions under which business may be done.
For example, qualifications on capital, qualifications on the setting up
of other financial structures, et cetera (underscoring supplied by
respondents).

MR. RODRIGO. It is just a matter of style.

MR. NOLLEDO. Yes.[16]

Quite apparently, Sec. 10, second par., of Art XII is couched in such a
way as not to make it appear that it is non-self-executing but simply
for purposes of style. But, certainly, the legislature is not precluded
from enacting further laws to enforce the constitutional provision so
long as the contemplated statute squares with the Constitution.
Minor details may be left to the legislature without impairing the self-
executing nature of constitutional provisions.

In self-executing constitutional provisions, the legislature may still enact legislation to facilitate the
exercise of powers directly granted by the constitution, further the operation of such a provision,
prescribe a practice to be used for its enforcement, provide a convenient remedy for the protection of
the rights secured or the determination thereof, or place reasonable safeguards around the exercise of
the right. The mere fact that legislation may supplement and add to or prescribe a penalty for the
violation of a self-executing constitutional provision does not render such a provision ineffective in the
absence of such legislation. The omission from a constitution of any express provision for a remedy for
enforcing a right or liability is not necessarily an indication that it was not intended to be self-executing.
The rule is that a self-executing provision of the constitution does not necessarily exhaust legislative
power on the subject, but any legislation must be in harmony with the constitution, further the exercise
of constitutional right and make it more available.[17] Subsequent legislation however does not
necessarily mean that the subject constitutional provision is not, by itself, fully enforceable.

Respondents also argue that the non-self-executing nature of Sec. 10,
second par., of Art. XII is implied from the tenor of the first and third
paragraphs of the same section which undoubtedly are not self-
executing.[18] The argument is flawed. If the first and third
paragraphs are not self-executing because Congress is still to enact
measures to encourage the formation and operation of enterprises
fully owned by Filipinos, as in the first paragraph, and the State still
needs legislation to regulate and exercise authority over foreign
investments within its national jurisdiction, as in the third paragraph,
then a fortiori, by the same logic, the second paragraph can only be
self-executing as it does not by its language require any legislation in
order to give preference to qualified Filipinos in the grant of rights,
privileges and concessions covering the national economy and
patrimony. A constitutional provision may be self-executing in one
part and non-self-executing in another.[19]

Even the cases cited by respondents holding that certain
constitutional provisions are merely statements of principles and
policies, which are basically not self-executing and only placed in the
Constitution as moral incentives to legislation, not as judicially
enforceable rights - are simply not in point. Basco v. Philippine
Amusements and Gaming Corporation[20] speaks of constitutional
provisions on personal dignity,[21] the sanctity of family life,[22] the
vital role of the youth in nation-building,[23] the promotion of social
justice,[24] and the values of education.[25] Tolentino v. Secretary of
Finance[26] refers to constitutional provisions on social justice and
human rights[27] and on education.[28] Lastly, Kilosbayan, Inc. v.
Morato[29] cites provisions on the promotion of general welfare,[30]
the sanctity of family life,[31] the vital role of the youth in nation-
building[32] and the promotion of total human liberation and
development.[33] A reading of these provisions indeed clearly shows
that they are not judicially enforceable constitutional rights but
merely guidelines for legislation. The very terms of the provisions
manifest that they are only principles upon which legislations must be
based. Res ipsa loquitur.

On the other hand, Sec. 10, second par., Art. XII of the 1987
Constitution is a mandatory, positive command which is complete in
itself and which needs no further guidelines or implementing laws or
rules for its enforcement. From its very words the provision does not
require any legislation to put it in operation. It is per se judicially
enforceable. When our Constitution mandates that [i]n the grant of
rights, privileges, and concessions covering national economy and
patrimony, the State shall give preference to qualified Filipinos, it
means just that - qualified Filipinos shall be preferred. And when our
Constitution declares that a right exists in certain specified
circumstances an action may be maintained to enforce such right
notwithstanding the absence of any legislation on the subject;
consequently, if there is no statute especially enacted to enforce such
constitutional right, such right enforces itself by its own inherent
potency and puissance, and from which all legislations must take their
bearings. Where there is a right there is a remedy. Ubi jus ibi
remedium.

As regards our national patrimony, a member of the 1986
Constitutional Commission[34] explains -

The patrimony of the Nation that should be conserved and developed
refers not only to our rich natural resources but also to the cultural
heritage of our race. It also refers to our intelligence in arts, sciences
and letters. Therefore, we should develop not only our lands, forests,
mines and other natural resources but also the mental ability or
faculty of our people.

We agree. In its plain and ordinary meaning, the term patrimony
pertains to heritage.[35] When the Constitution speaks of national
patrimony, it refers not only to the natural resources of the
Philippines, as the Constitution could have very well used the term
natural resources, but also to the cultural heritage of the Filipinos.

Manila Hotel has become a landmark - a living testimonial of
Philippine heritage. While it was restrictively an American hotel when
it first opened in 1912, it immediately evolved to be truly Filipino.
Formerly a concourse for the elite, it has since then become the venue
of various significant events which have shaped Philippine history. It
was called the Cultural Center of the 1930s. It was the site of the
festivities during the inauguration of the Philippine Commonwealth.
Dubbed as the Official Guest House of the Philippine Government it
plays host to dignitaries and official visitors who are accorded the
traditional Philippine hospitality.[36]

The history of the hotel has been chronicled in the book The Manila
Hotel: The Heart and Memory of a City.[37] During World War II the
hotel was converted by the Japanese Military Administration into a
military headquarters. When the American forces returned to
recapture Manila the hotel was selected by the Japanese together
with Intramuros as the two (2) places for their final stand. Thereafter,
in the 1950s and 1960s, the hotel became the center of political
activities, playing host to almost every political convention. In 1970
the hotel reopened after a renovation and reaped numerous
international recognitions, an acknowledgment of the Filipino talent
and ingenuity. In 1986 the hotel was the site of a failed coup d etat
where an aspirant for vice-president was proclaimed President of
the Philippine Republic.

For more than eight (8) decades Manila Hotel has bore mute witness
to the triumphs and failures, loves and frustrations of the Filipinos; its
existence is impressed with public interest; its own historicity
associated with our struggle for sovereignty, independence and
nationhood. Verily, Manila Hotel has become part of our national
economy and patrimony. For sure, 51% of the equity of the MHC
comes within the purview of the constitutional shelter for it
comprises the majority and controlling stock, so that anyone who
acquires or owns the 51% will have actual control and management of
the hotel. In this instance, 51% of the MHC cannot be disassociated
from the hotel and the land on which the hotel edifice stands.
Consequently, we cannot sustain respondents claim that the Filipino
First Policy provision is not applicable since what is being sold is only
51% of the outstanding shares of the corporation, not the Hotel
building nor the land upon which the building stands.[38]

The argument is pure sophistry. The term qualified Filipinos as used
in our Constitution also includes corporations at least 60% of which is
owned by Filipinos. This is very clear from the proceedings of the
1986 Constitutional Commission -

THE PRESIDENT. Commissioner Davide is recognized.

MR. DAVIDE. I would like to introduce an amendment to the Nolledo
amendment. And the amendment would consist in substituting the
words QUALIFIED FILIPINOS with the following: CITIZENS OF THE
PHILIPPINES OR CORPORATIONS OR ASSOCIATIONS WHOSE CAPITAL
OR CONTROLLING STOCK IS WHOLLY OWNED BY SUCH CITIZENS.

x x x x

MR. MONSOD. Madam President, apparently the proponent is
agreeable, but we have to raise a question. Suppose it is a
corporation that is 80-percent Filipino, do we not give it preference?

MR. DAVIDE. The Nolledo amendment would refer to an individual
Filipino. What about a corporation wholly owned by Filipino citizens?

MR. MONSOD. At least 60 percent, Madam President.

MR. DAVIDE. Is that the intention?

MR. MONSOD. Yes, because, in fact, we would be limiting it if we say
that the preference should only be 100-percent Filipino.

MR. DAVIDE. I want to get that meaning clear because QUALIFIED
FILIPINOS may refer only to individuals and not to juridical
personalities or entities.

MR. MONSOD. We agree, Madam President.[39]

x x x x

MR. RODRIGO. Before we vote, may I request that the amendment
be read again.

MR. NOLLEDO. The amendment will read: IN THE GRANT OF
RIGHTS, PRIVILEGES AND CONCESSIONS COVERING THE NATIONAL
ECONOMY AND PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO
QUALIFIED FILIPINOS. And the word Filipinos here, as intended by
the proponents, will include not only individual Filipinos but also
Filipino-controlled entities or entities fully-controlled by Filipinos.[40]

The phrase preference to qualified Filipinos was explained thus -

MR. FOZ. Madam President, I would like to request Commissioner
Nolledo to please restate his amendment so that I can ask a question.

MR. NOLLEDO. IN THE GRANT OF RIGHTS, PRIVILEGES AND
CONCESSIONS COVERING THE NATIONAL ECONOMY AND
PATRIMONY, THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS.

MR. FOZ. In connection with that amendment, if a foreign enterprise
is qualified and a Filipino enterprise is also qualified, will the Filipino
enterprise still be given a preference?

MR. NOLLEDO. Obviously.

MR. FOZ. If the foreigner is more qualified in some aspects than the
Filipino enterprise, will the Filipino still be preferred?

MR. NOLLEDO. The answer is yes.

MR. FOZ. Thank you.[41]

Expounding further on the Filipino First Policy provision Commissioner
Nolledo continues

MR. NOLLEDO. Yes, Madam President. Instead of MUST, it will be
SHALL - THE STATE SHALL GIVE PREFERENCE TO QUALIFIED
FILIPINOS. This embodies the so-called Filipino First policy. That
means that Filipinos should be given preference in the grant of
concessions, privileges and rights covering the national
patrimony.[42]

The exchange of views in the sessions of the Constitutional
Commission regarding the subject provision was still further clarified
by Commissioner Nolledo[43] -

Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias
in all economic concerns. It is better known as the FILIPINO FIRST
Policy x x x x This provision was never found in previous
Constitutions x x x x

The term qualified Filipinos simply means that preference shall be
given to those citizens who can make a viable contribution to the
common good, because of credible competence and efficiency. It
certainly does NOT mandate the pampering and preferential
treatment to Filipino citizens or organizations that are incompetent or
inefficient, since such an indiscriminate preference would be
counterproductive and inimical to the common good.

In the granting of economic rights, privileges, and concessions, when a
choice has to be made between a qualified foreigner and a
qualified Filipino, the latter shall be chosen over the former.

Lastly, the word qualified is also determinable. Petitioner was so
considered by respondent GSIS and selected as one of the qualified
bidders. It was pre-qualified by respondent GSIS in accordance with
its own guidelines so that the sole inference here is that petitioner
has been found to be possessed of proven management expertise in
the hotel industry, or it has significant equity ownership in another
hotel company, or it has an overall management and marketing
proficiency to successfully operate the Manila Hotel.[44]

The penchant to try to whittle away the mandate of the Constitution
by arguing that the subject provision is not self-executory and
requires implementing legislation is quite disturbing. The attempt to
violate a clear constitutional provision - by the government itself - is
only too distressing. To adopt such a line of reasoning is to renounce
the duty to ensure faithfulness to the Constitution. For, even some of
the provisions of the Constitution which evidently need implementing
legislation have juridical life of their own and can be the source of a
judicial remedy. We cannot simply afford the government a defense
that arises out of the failure to enact further enabling, implementing
or guiding legislation. In fine, the discourse of Fr. Joaquin G. Bernas,
S.J., on constitutional government is apt -

The executive department has a constitutional duty to implement
laws, including the Constitution, even before Congress acts - provided
that there are discoverable legal standards for executive action.
When the executive acts, it must be guided by its own understanding
of the constitutional command and of applicable laws. The
responsibility for reading and understanding the Constitution and the
laws is not the sole prerogative of Congress. If it were, the executive
would have to ask Congress, or perhaps the Court, for an
interpretation every time the executive is confronted by a
constitutional command. That is not how constitutional government
operates.[45]

Respondents further argue that the constitutional provision is
addressed to the State, not to respondent GSIS which by itself
possesses a separate and distinct personality. This argument again is
at best specious. It is undisputed that the sale of 51% of the MHC
could only be carried out with the prior approval of the State acting
through respondent Committee on Privatization. As correctly pointed
out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the
assets of respondents GSIS and MHC a state action. In
constitutional jurisprudence, the acts of persons distinct from the
government are considered state action covered by the Constitution
(1) when the activity it engages in is a public function; (2) when the
government is so significantly involved with the private actor as to
make the government responsible for his action; and, (3) when the
government has approved or authorized the action. It is evident that
the act of respondent GSIS in selling 51% of its share in respondent
MHC comes under the second and third categories of state action.
Without doubt therefore the transaction, although entered into by
respondent GSIS, is in fact a transaction of the State and therefore
subject to the constitutional command.[46]

When the Constitution addresses the State it refers not only to the
people but also to the government as elements of the State. After all,
government is composed of three (3) divisions of power - legislative,
executive and judicial. Accordingly, a constitutional mandate directed
to the State is correspondingly directed to the three (3) branches of
government. It is undeniable that in this case the subject
constitutional injunction is addressed among others to the Executive
Department and respondent GSIS, a government instrumentality
deriving its authority from the State.

It should be stressed that while the Malaysian firm offered the higher
bid it is not yet the winning bidder. The bidding rules expressly
provide that the highest bidder shall only be declared the winning
bidder after it has negotiated and executed the necessary contracts,
and secured the requisite approvals. Since the Filipino First Policy
provision of the Constitution bestows preference on qualified
Filipinos the mere tending of the highest bid is not an assurance that
the highest bidder will be declared the winning bidder. Resultantly,
respondents are not bound to make the award yet, nor are they under
obligation to enter into one with the highest bidder. For in choosing
the awardee respondents are mandated to abide by the dictates of
the 1987 Constitution the provisions of which are presumed to be
known to all the bidders and other interested parties.

Adhering to the doctrine of constitutional supremacy, the subject
constitutional provision is, as it should be, impliedly written in the
bidding rules issued by respondent GSIS, lest the bidding rules be
nullified for being violative of the Constitution. It is a basic principle
in constitutional law that all laws and contracts must conform with
the fundamental law of the land. Those which violate the
Constitution lose their reason for being.

Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason
the Highest Bidder cannot be awarded the Block of Shares, GSIS may
offer this to other Qualified Bidders that have validly submitted bids
provided that these Qualified Bidders are willing to match the highest
bid in terms of price per share.[47] Certainly, the constitutional
mandate itself is reason enough not to award the block of shares
immediately to the foreign bidder notwithstanding its submission of a
higher, or even the highest, bid. In fact, we cannot conceive of a
stronger reason than the constitutional injunction itself.

In the instant case, where a foreign firm submits the highest bid in a
public bidding concerning the grant of rights, privileges and
concessions covering the national economy and patrimony, thereby
exceeding the bid of a Filipino, there is no question that the Filipino
will have to be allowed to match the bid of the foreign entity. And if
the Filipino matches the bid of a foreign firm the award should go to
the Filipino. It must be so if we are to give life and meaning to the
Filipino First Policy provision of the 1987 Constitution. For, while this
may neither be expressly stated nor contemplated in the bidding
rules, the constitutional fiat is omnipresent to be simply disregarded.
To ignore it would be to sanction a perilous skirting of the basic law.

This Court does not discount the apprehension that this policy may
discourage foreign investors. But the Constitution and laws of the
Philippines are understood to be always open to public scrutiny.
These are given factors which investors must consider when venturing
into business in a foreign jurisdiction. Any person therefore desiring
to do business in the Philippines or with any of its agencies or
instrumentalities is presumed to know his rights and obligations
under the Constitution and the laws of the forum.

The argument of respondents that petitioner is now estopped from
questioning the sale to Renong Berhad since petitioner was well
aware from the beginning that a foreigner could participate in the
bidding is meritless. Undoubtedly, Filipinos and foreigners alike were
invited to the bidding. But foreigners may be awarded the sale only if
no Filipino qualifies, or if the qualified Filipino fails to match the
highest bid tendered by the foreign entity. In the case before us,
while petitioner was already preferred at the inception of the bidding
because of the constitutional mandate, petitioner had not yet
matched the bid offered by Renong Berhad. Thus it did not have the
right or personality then to compel respondent GSIS to accept its
earlier bid. Rightly, only after it had matched the bid of the foreign
firm and the apparent disregard by respondent GSIS of petitioners
matching bid did the latter have a cause of action.

Besides, there is no time frame for invoking the constitutional
safeguard unless perhaps the award has been finally made. To insist
on selling the Manila Hotel to foreigners when there is a Filipino
group willing to match the bid of the foreign group is to insist that
government be treated as any other ordinary market player, and
bound by its mistakes or gross errors of judgment, regardless of the
consequences to the Filipino people. The miscomprehension of the
Constitution is regrettable. Thus we would rather remedy the
indiscretion while there is still an opportunity to do so than let the
government develop the habit of forgetting that the Constitution lays
down the basic conditions and parameters for its actions.

Since petitioner has already matched the bid price tendered by
Renong Berhad pursuant to the bidding rules, respondent GSIS is left
with no alternative but to award to petitioner the block of shares of
MHC and to execute the necessary agreements and documents to
effect the sale in accordance not only with the bidding guidelines and
procedures but with the Constitution as well. The refusal of
respondent GSIS to execute the corresponding documents with
petitioner as provided in the bidding rules after the latter has
matched the bid of the Malaysian firm clearly constitutes grave abuse
of discretion.

The Filipino First Policy is a product of Philippine nationalism. It is
embodied in the 1987 Constitution not merely to be used as a
guideline for future legislation but primarily to be enforced; so must it
be enforced. This Court as the ultimate guardian of the Constitution
will never shun, under any reasonable circumstance, the duty of
upholding the majesty of the Constitution which it is tasked to
defend. It is worth emphasizing that it is not the intention of this
Court to impede and diminish, much less undermine, the influx of
foreign investments. Far from it, the Court encourages and welcomes
more business opportunities but avowedly sanctions the preference
for Filipinos whenever such preference is ordained by the
Constitution. The position of the Court on this matter could have not
been more appropriately articulated by Chief Justice Narvasa -

As scrupulously as it has tried to observe that it is not its function to
substitute its judgment for that of the legislature or the executive
about the wisdom and feasibility of legislation economic in nature,
the Supreme Court has not been spared criticism for decisions
perceived as obstacles to economic progress and development x x x x
in connection with a temporary injunction issued by the Courts First
Division against the sale of the Manila Hotel to a Malaysian Firm and
its partner, certain statements were published in a major daily to the
effect that that injunction again demonstrates that the Philippine
legal system can be a major obstacle to doing business here.

Let it be stated for the record once again that while it is no business of
the Court to intervene in contracts of the kind referred to or set itself
up as the judge of whether they are viable or attainable, it is its
bounden duty to make sure that they do not violate the Constitution
or the laws, or are not adopted or implemented with grave abuse of
discretion amounting to lack or excess of jurisdiction. It will never
shirk that duty, no matter how buffeted by winds of unfair and ill-
informed criticism.[48]

Privatization of a business asset for purposes of enhancing its
business viability and preventing further losses, regardless of the
character of the asset, should not take precedence over non-material
values. A commercial, nay even a budgetary, objective should not be
pursued at the expense of national pride and dignity. For the
Constitution enshrines higher and nobler non-material values.
Indeed, the Court will always defer to the Constitution in the proper
governance of a free society; after all, there is nothing so sacrosanct
in any economic policy as to draw itself beyond judicial review when
the Constitution is involved.[49]

Nationalism is inherent in the very concept of the Philippines being a
democratic and republican state, with sovereignty residing in the
Filipino people and from whom all government authority emanates.
In nationalism, the happiness and welfare of the people must be the
goal. The nation-state can have no higher purpose. Any
interpretation of any constitutional provision must adhere to such
basic concept. Protection of foreign investments, while laudible, is
merely a policy. It cannot override the demands of nationalism.[50]

The Manila Hotel or, for that matter, 51% of the MHC, is not just any
commodity to be sold to the highest bidder solely for the sake of
privatization. We are not talking about an ordinary piece of property
in a commercial district. We are talking about a historic relic that has
hosted many of the most important events in the short history of the
Philippines as a nation. We are talking about a hotel where heads of
states would prefer to be housed as a strong manifestation of their
desire to cloak the dignity of the highest state function to their official
visits to the Philippines. Thus the Manila Hotel has played and
continues to play a significant role as an authentic repository of
twentieth century Philippine history and culture. In this sense, it has
become truly a reflection of the Filipino soul - a place with a history of
grandeur; a most historical setting that has played a part in the
shaping of a country.[51]

This Court cannot extract rhyme nor reason from the determined
efforts of respondents to sell the historical landmark - this Grand Old
Dame of hotels in Asia - to a total stranger. For, indeed, the
conveyance of this epic exponent of the Filipino psyche to alien hands
cannot be less than mephistophelian for it is, in whatever manner
viewed, a veritable alienation of a nations soul for some pieces of
foreign silver. And so we ask: What advantage, which cannot be
equally drawn from a qualified Filipino, can be gained by the Filipinos
if Manila Hotel - and all that it stands for - is sold to a non-Filipino?
How much of national pride will vanish if the nations cultural
heritage is entrusted to a foreign entity? On the other hand, how
much dignity will be preserved and realized if the national patrimony
is safekept in the hands of a qualified, zealous and well-meaning
Filipino? This is the plain and simple meaning of the Filipino First
Policy provision of the Philippine Constitution. And this Court,
heeding the clarion call of the Constitution and accepting the duty of
being the elderly watchman of the nation, will continue to respect
and protect the sanctity of the Constitution.

WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE
SYSTEM, MANILA HOTEL CORPORATION, COMMITTEE ON
PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE
COUNSEL are directed to CEASE and DESIST from selling 51% of the
shares of the Manila Hotel Corporation to RENONG BERHAD, and to
ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL
CORPORATION to purchase the subject 51% of the shares of the
Manila Hotel Corporation at P44.00 per share and thereafter to
execute the necessary agreements and documents to effect the sale,
to issue the necessary clearances and to do such other acts and deeds
as may be necessary for the purpose.



EN BANC

[G.R. No. 118295. May 2, 1997]

WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as
members of the Philippine Senate and as taxpayers; GREGORIO
ANDOLANA and JOKER ARROYO as members of the House of
Representatives and as taxpayers; NICANOR P. PERLAS and HORACIO
R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION, NATIONAL
ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR
ALTERNATIVE DEVELOPMENT INITIATIVES, LIKAS-KAYANG
KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL
RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG
MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE PEASANT
INSTITUTE, in representation of various taxpayers and as non-
governmental organizations, petitioners, vs. EDGARDO ANGARA,
ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ,
AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO
HERRERA, JOSE LINA, GLORIA MACAPAGAL-ARROYO, ORLANDO
MERCADO, BLAS OPLE, JOHN OSMEA, SANTANINA RASUL, RAMON
REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their
respective capacities as members of the Philippine Senate who
concurred in the ratification by the President of the Philippines of the
Agreement Establishing the World Trade Organization; SALVADOR
ENRIQUEZ, in his capacity as Secretary of Budget and Management;
CARIDAD VALDEHUESA, in her capacity as National Treasurer;
RIZALINO NAVARRO, in his capacity as Secretary of Trade and
Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of
Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of
Finance; ROBERTO ROMULO, in his capacity as Secretary of Foreign
Affairs; and TEOFISTO T. GUINGONA, in his capacity as Executive
Secretary, respondents.

D E C I S I O N

PANGANIBAN, J.:

The emergence on January 1, 1995 of the World Trade Organization,
abetted by the membership thereto of the vast majority of countries
has revolutionized international business and economic relations
amongst states. It has irreversibly propelled the world towards trade
liberalization and economic globalization. Liberalization,
globalization, deregulation and privatization, the third-millennium
buzz words, are ushering in a new borderless world of business by
sweeping away as mere historical relics the heretofore traditional
modes of promoting and protecting national economies like tariffs,
export subsidies, import quotas, quantitative restrictions, tax
exemptions and currency controls. Finding market niches and
becoming the best in specific industries in a market-driven and
export-oriented global scenario are replacing age-old beggar-thy-
neighbor policies that unilaterally protect weak and inefficient
domestic producers of goods and services. In the words of Peter
Drucker, the well-known management guru, Increased participation
in the world economy has become the key to domestic economic
growth and prosperity.

Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the
Second World War, plans for the establishment of three multilateral
institutions -- inspired by that grand political body, the United Nations
-- were discussed at Dumbarton Oaks and Bretton Woods. The first
was the World Bank (WB) which was to address the rehabilitation and
reconstruction of war-ravaged and later developing countries; the
second, the International Monetary Fund (IMF) which was to deal
with currency problems; and the third, the International Trade
Organization (ITO), which was to foster order and predictability in
world trade and to minimize unilateral protectionist policies that
invite challenge, even retaliation, from other states. However, for a
variety of reasons, including its non-ratification by the United States,
the ITO, unlike the IMF and WB, never took off. What remained was
only GATT -- the General Agreement on Tariffs and Trade. GATT was a
collection of treaties governing access to the economies of treaty
adherents with no institutionalized body administering the
agreements or dependable system of dispute settlement.

After half a century and several dizzying rounds of negotiations,
principally the Kennedy Round, the Tokyo Round and the Uruguay
Round, the world finally gave birth to that administering body -- the
World Trade Organization -- with the signing of the Final Act in
Marrakesh, Morocco and the ratification of the WTO Agreement by its
members.[1]

Like many other developing countries, the Philippines joined WTO as
a founding member with the goal, as articulated by President Fidel V.
Ramos in two letters to the Senate (infra), of improving Philippine
access to foreign markets, especially its major trading partners,
through the reduction of tariffs on its exports, particularly agricultural
and industrial products. The President also saw in the WTO the
opening of new opportunities for the services sector x x x, (the
reduction of) costs and uncertainty associated with exporting x x x,
and (the attraction of) more investments into the country. Although
the Chief Executive did not expressly mention it in his letter, the
Philippines - - and this is of special interest to the legal profession - -
will benefit from the WTO system of dispute settlement by judicial
adjudication through the independent WTO settlement bodies called
(1) Dispute Settlement Panels and (2) Appellate Tribunal. Heretofore,
trade disputes were settled mainly through negotiations where
solutions were arrived at frequently on the basis of relative
bargaining strengths, and where naturally, weak and underdeveloped
countries were at a disadvantage.

The Petition in Brief

Arguing mainly (1) that the WTO requires the Philippines to place
nationals and products of member-countries on the same footing as
Filipinos and local products and (2) that the WTO intrudes, limits
and/or impairs the constitutional powers of both Congress and the
Supreme Court, the instant petition before this Court assails the WTO
Agreement for violating the mandate of the 1987 Constitution to
develop a self-reliant and independent national economy effectively
controlled by Filipinos x x x (to) give preference to qualified Filipinos
(and to) promote the preferential use of Filipino labor, domestic
materials and locally produced goods.

Simply stated, does the Philippine Constitution prohibit Philippine
participation in worldwide trade liberalization and economic
globalization? Does it prescribe Philippine integration into a global
economy that is liberalized, deregulated and privatized? These are
the main questions raised in this petition for certiorari, prohibition
and mandamus under Rule 65 of the Rules of Court praying (1) for the
nullification, on constitutional grounds, of the concurrence of the
Philippine Senate in the ratification by the President of the Philippines
of the Agreement Establishing the World Trade Organization (WTO
Agreement, for brevity) and (2) for the prohibition of its
implementation and enforcement through the release and utilization
of public funds, the assignment of public officials and employees, as
well as the use of government properties and resources by
respondent-heads of various executive offices concerned therewith.
This concurrence is embodied in Senate Resolution No. 97, dated
December 14, 1994.

The Facts

On April 15, 1994, Respondent Rizalino Navarro, then Secretary of the
Department of Trade and Industry (Secretary Navarro, for brevity),
representing the Government of the Republic of the Philippines,
signed in Marrakesh, Morocco, the Final Act Embodying the Results of
the Uruguay Round of Multilateral Negotiations (Final Act, for
brevity).

By signing the Final Act,[2] Secretary Navarro on behalf of the
Republic of the Philippines, agreed:

(a) to submit, as appropriate, the WTO Agreement for the
consideration of their respective competent authorities, with a view
to seeking approval of the Agreement in accordance with their
procedures; and

(b) to adopt the Ministerial Declarations and Decisions.

On August 12, 1994, the members of the Philippine Senate received a
letter dated August 11, 1994 from the President of the Philippines,[3]
stating among others that the Uruguay Round Final Act is hereby
submitted to the Senate for its concurrence pursuant to Section 21,
Article VII of the Constitution.

On August 13, 1994, the members of the Philippine Senate received
another letter from the President of the Philippines[4] likewise dated
August 11, 1994, which stated among others that the Uruguay Round
Final Act, the Agreement Establishing the World Trade Organization,
the Ministerial Declarations and Decisions, and the Understanding on
Commitments in Financial Services are hereby submitted to the
Senate for its concurrence pursuant to Section 21, Article VII of the
Constitution.

On December 9, 1994, the President of the Philippines certified the
necessity of the immediate adoption of P.S. 1083, a resolution
entitled Concurring in the Ratification of the Agreement Establishing
the World Trade Organization.*5+

On December 14, 1994, the Philippine Senate adopted Resolution No.
97 which Resolved, as it is hereby resolved, that the Senate concur,
as it hereby concurs, in the ratification by the President of the
Philippines of the Agreement Establishing the World Trade
Organization.*6+ The text of the WTO Agreement is written on pages
137 et seq. of Volume I of the 36-volume Uruguay Round of
Multilateral Trade Negotiations and includes various agreements and
associated legal instruments (identified in the said Agreement as
Annexes 1, 2 and 3 thereto and collectively referred to as Multilateral
Trade Agreements, for brevity) as follows:

ANNEX 1

Annex 1A: Multilateral Agreement on Trade in Goods

General Agreement on Tariffs and Trade 1994

Agreement on Agriculture

Agreement on the Application of Sanitary and

Phytosanitary Measures

Agreement on Textiles and Clothing

Agreement on Technical Barriers to Trade

Agreement on Trade-Related Investment Measures

Agreement on Implementation of Article VI of the General
Agreement on Tariffs and Trade 1994

Agreement on Implementation of Article VII of the General on Tariffs
and Trade 1994

Agreement on Pre-Shipment Inspection

Agreement on Rules of Origin

Agreement on Imports Licensing Procedures

Agreement on Subsidies and Coordinating Measures

Agreement on Safeguards

Annex 1B: General Agreement on Trade in Services and Annexes

Annex 1C: Agreement on Trade-Related Aspects of Intellectual
Property Rights

ANNEX 2

Understanding on Rules and Procedures Governing the Settlement of
Disputes

ANNEX 3

Trade Policy Review Mechanism

On December 16, 1994, the President of the Philippines signed[7] the
Instrument of Ratification, declaring:

NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of
the Republic of the Philippines, after having seen and considered the
aforementioned Agreement Establishing the World Trade
Organization and the agreements and associated legal instruments
included in Annexes one (1), two (2) and three (3) of that Agreement
which are integral parts thereof, signed at Marrakesh, Morocco on 15
April 1994, do hereby ratify and confirm the same and every Article
and Clause thereof.

To emphasize, the WTO Agreement ratified by the President of the
Philippines is composed of the Agreement Proper and the associated
legal instruments included in Annexes one (1), two (2) and three (3) of
that Agreement which are integral parts thereof.

On the other hand, the Final Act signed by Secretary Navarro
embodies not only the WTO Agreement (and its integral annexes
aforementioned) but also (1) the Ministerial Declarations and
Decisions and (2) the Understanding on Commitments in Financial
Services. In his Memorandum dated May 13, 1996,[8] the Solicitor
General describes these two latter documents as follows:

The Ministerial Decisions and Declarations are twenty-five
declarations and decisions on a wide range of matters, such as
measures in favor of least developed countries, notification
procedures, relationship of WTO with the International Monetary
Fund (IMF), and agreements on technical barriers to trade and on
dispute settlement.

The Understanding on Commitments in Financial Services dwell on,
among other things, standstill or limitations and qualifications of
commitments to existing non-conforming measures, market access,
national treatment, and definitions of non-resident supplier of
financial services, commercial presence and new financial service.

On December 29, 1994, the present petition was filed. After careful
deliberation on respondents comment and petitioners reply thereto,
the Court resolved on December 12, 1995, to give due course to the
petition, and the parties thereafter filed their respective memoranda.
The Court also requested the Honorable Lilia R. Bautista, the
Philippine Ambassador to the United Nations stationed in Geneva,
Switzerland, to submit a paper, hereafter referred to as Bautista
Paper,*9+ for brevity, (1) providing a historical background of and (2)
summarizing the said agreements.

During the Oral Argument held on August 27, 1996, the Court
directed:

(a) the petitioners to submit the (1) Senate Committee Report on the
matter in controversy and (2) the transcript of proceedings/hearings
in the Senate; and

(b) the Solicitor General, as counsel for respondents, to file (1) a list of
Philippine treaties signed prior to the Philippine adherence to the
WTO Agreement, which derogate from Philippine sovereignty and (2)
copies of the multi-volume WTO Agreement and other documents
mentioned in the Final Act, as soon as possible.

After receipt of the foregoing documents, the Court said it would
consider the case submitted for resolution. In a Compliance dated
September 16, 1996, the Solicitor General submitted a printed copy of
the 36-volume Uruguay Round of Multilateral Trade Negotiations, and
in another Compliance dated October 24, 1996, he listed the various
bilateral or multilateral treaties or international instruments
involving derogation of Philippine sovereignty. Petitioners, on the
other hand, submitted their Compliance dated January 28, 1997, on
January 30, 1997.

The Issues

In their Memorandum dated March 11, 1996, petitioners summarized
the issues as follows:

A. Whether the petition presents a political question or is otherwise
not justiciable.

B. Whether the petitioner members of the Senate who participated in
the deliberations and voting leading to the concurrence are estopped
from impugning the validity of the Agreement Establishing the World
Trade Organization or of the validity of the concurrence.

C. Whether the provisions of the Agreement Establishing the World
Trade Organization contravene the provisions of Sec. 19, Article II, and
Secs. 10 and 12, Article XII, all of the 1987 Philippine Constitution.

D. Whether provisions of the Agreement Establishing the World
Trade Organization unduly limit, restrict and impair Philippine
sovereignty specifically the legislative power which, under Sec. 2,
Article VI, 1987 Philippine Constitution is vested in the Congress of
the Philippines;

E. Whether provisions of the Agreement Establishing the World
Trade Organization interfere with the exercise of judicial power.

F. Whether the respondent members of the Senate acted in grave
abuse of discretion amounting to lack or excess of jurisdiction when
they voted for concurrence in the ratification of the constitutionally-
infirm Agreement Establishing the World Trade Organization.

G. Whether the respondent members of the Senate acted in grave
abuse of discretion amounting to lack or excess of jurisdiction when
they concurred only in the ratification of the Agreement Establishing
the World Trade Organization, and not with the Presidential
submission which included the Final Act, Ministerial Declaration and
Decisions, and the Understanding on Commitments in Financial
Services.

On the other hand, the Solicitor General as counsel for respondents
synthesized the several issues raised by petitioners into the
following:*10+

1. Whether or not the provisions of the Agreement Establishing the
World Trade Organization and the Agreements and Associated Legal
Instruments included in Annexes one (1), two (2) and three (3) of that
agreement cited by petitioners directly contravene or undermine the
letter, spirit and intent of Section 19, Article II and Sections 10 and 12,
Article XII of the 1987 Constitution.

2. Whether or not certain provisions of the Agreement unduly limit,
restrict or impair the exercise of legislative power by Congress.

3. Whether or not certain provisions of the Agreement impair the
exercise of judicial power by this Honorable Court in promulgating the
rules of evidence.

4. Whether or not the concurrence of the Senate in the ratification
by the President of the Philippines of the Agreement establishing the
World Trade Organization implied rejection of the treaty embodied in
the Final Act.

By raising and arguing only four issues against the seven presented by
petitioners, the Solicitor General has effectively ignored three,
namely: (1) whether the petition presents a political question or is
otherwise not justiciable; (2) whether petitioner-members of the
Senate (Wigberto E. Taada and Anna Dominique Coseteng) are
estopped from joining this suit; and (3) whether the respondent-
members of the Senate acted in grave abuse of discretion when they
voted for concurrence in the ratification of the WTO Agreement. The
foregoing notwithstanding, this Court resolved to deal with these
three issues thus:

(1) The political question issue -- being very fundamental and vital,
and being a matter that probes into the very jurisdiction of this Court
to hear and decide this case -- was deliberated upon by the Court and
will thus be ruled upon as the first issue;

(2) The matter of estoppel will not be taken up because this defense
is waivable and the respondents have effectively waived it by not
pursuing it in any of their pleadings; in any event, this issue, even if
ruled in respondents favor, will not cause the petitions dismissal as
there are petitioners other than the two senators, who are not
vulnerable to the defense of estoppel; and

(3) The issue of alleged grave abuse of discretion on the part of the
respondent senators will be taken up as an integral part of the
disposition of the four issues raised by the Solicitor General.

During its deliberations on the case, the Court noted that the
respondents did not question the locus standi of petitioners. Hence,
they are also deemed to have waived the benefit of such issue. They
probably realized that grave constitutional issues, expenditures of
public funds and serious international commitments of the nation are
involved here, and that transcendental public interest requires that
the substantive issues be met head on and decided on the merits,
rather than skirted or deflected by procedural matters.[11]

To recapitulate, the issues that will be ruled upon shortly are:

(1) DOES THE PETITION PRESENT A JUSTICIABLE CONTROVERSY?
OTHERWISE STATED, DOES THE PETITION INVOLVE A POLITICAL
QUESTION OVER WHICH THIS COURT HAS NO JURISDICTION?

(2) DO THE PROVISIONS OF THE WTO AGREEMENT AND ITS THREE
ANNEXES CONTRAVENE SEC. 19, ARTICLE II, AND SECS. 10 AND 12,
ARTICLE XII, OF THE PHILIPPINE CONSTITUTION?

(3) DO THE PROVISIONS OF SAID AGREEMENT AND ITS ANNEXES
LIMIT, RESTRICT, OR IMPAIR THE EXERCISE OF LEGISLATIVE POWER BY
CONGRESS?

(4) DO SAID PROVISIONS UNDULY IMPAIR OR INTERFERE WITH THE
EXERCISE OF JUDICIAL POWER BY THIS COURT IN PROMULGATING
RULES ON EVIDENCE?

(5) WAS THE CONCURRENCE OF THE SENATE IN THE WTO AGREEMENT
AND ITS ANNEXES SUFFICIENT AND/OR VALID, CONSIDERING THAT IT
DID NOT INCLUDE THE FINAL ACT, MINISTERIAL DECLARATIONS AND
DECISIONS, AND THE UNDERSTANDING ON COMMITMENTS IN
FINANCIAL SERVICES?

The First Issue: Does the Court Have Jurisdiction Over the
Controversy?

In seeking to nullify an act of the Philippine Senate on the ground that
it contravenes the Constitution, the petition no doubt raises a
justiciable controversy. Where an action of the legislative branch is
seriously alleged to have infringed the Constitution, it becomes not
only the right but in fact the duty of the judiciary to settle the dispute.
The question thus posed is judicial rather than political. The duty (to
adjudicate) remains to assure that the supremacy of the Constitution
is upheld.*12+ Once a controversy as to the application or
interpretation of a constitutional provision is raised before this Court
(as in the instant case), it becomes a legal issue which the Court is
bound by constitutional mandate to decide.*13+

The jurisdiction of this Court to adjudicate the matters[14] raised in
the petition is clearly set out in the 1987 Constitution,[15] as follows:

Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable
and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the government.

The foregoing text emphasizes the judicial departments duty and
power to strike down grave abuse of discretion on the part of any
branch or instrumentality of government including Congress. It is an
innovation in our political law.[16] As explained by former Chief
Justice Roberto Concepcion,[17] the judiciary is the final arbiter on
the question of whether or not a branch of government or any of its
officials has acted without jurisdiction or in excess of jurisdiction or so
capriciously as to constitute an abuse of discretion amounting to
excess of jurisdiction. This is not only a judicial power but a duty to
pass judgment on matters of this nature.

As this Court has repeatedly and firmly emphasized in many cases,[18]
it will not shirk, digress from or abandon its sacred duty and authority
to uphold the Constitution in matters that involve grave abuse of
discretion brought before it in appropriate cases, committed by any
officer, agency, instrumentality or department of the government.

As the petition alleges grave abuse of discretion and as there is no
other plain, speedy or adequate remedy in the ordinary course of law,
we have no hesitation at all in holding that this petition should be
given due course and the vital questions raised therein ruled upon
under Rule 65 of the Rules of Court. Indeed, certiorari, prohibition
and mandamus are appropriate remedies to raise constitutional
issues and to review and/or prohibit/nullify, when proper, acts of
legislative and executive officials. On this, we have no equivocation.

We should stress that, in deciding to take jurisdiction over this
petition, this Court will not review the wisdom of the decision of the
President and the Senate in enlisting the country into the WTO, or
pass upon the merits of trade liberalization as a policy espoused by
said international body. Neither will it rule on the propriety of the
governments economic policy of reducing/removing tariffs, taxes,
subsidies, quantitative restrictions, and other import/trade barriers.
Rather, it will only exercise its constitutional duty to determine
whether or not there had been a grave abuse of discretion amounting
to lack or excess of jurisdiction on the part of the Senate in ratifying
the WTO Agreement and its three annexes.

Second Issue: The WTO Agreement and Economic Nationalism

This is the lis mota, the main issue, raised by the petition.

Petitioners vigorously argue that the letter, spirit and intent of the
Constitution mandating economic nationalism are violated by the
so-called parity provisions and national treatment clauses
scattered in various parts not only of the WTO Agreement and its
annexes but also in the Ministerial Decisions and Declarations and in
the Understanding on Commitments in Financial Services.

Specifically, the flagship constitutional provisions referred to are
Sec. 19, Article II, and Secs. 10 and 12, Article XII, of the Constitution,
which are worded as follows:

Article II

DECLARATION OF PRINCIPLES AND STATE POLICIES

xx xx
xx xx

Sec. 19. The State shall develop a self-reliant and independent
national economy effectively controlled by Filipinos.

xx xx
xx xx

Article XII

NATIONAL ECONOMY AND PATRIMONY

xx xx
xx xx

Sec. 10. x x x. The Congress shall enact measures that will encourage
the formation and operation of enterprises whose capital is wholly
owned by Filipinos.

In the grant of rights, privileges, and concessions covering the national
economy and patrimony, the State shall give preference to qualified
Filipinos.

xx xx
xx xx

Sec. 12. The State shall promote the preferential use of Filipino labor,
domestic materials and locally produced goods, and adopt measures
that help make them competitive.

Petitioners aver that these sacred constitutional principles are
desecrated by the following WTO provisions quoted in their
memorandum:[19]

a) In the area of investment measures related to trade in goods
(TRIMS, for brevity):

Article 2

National Treatment and Quantitative Restrictions.

1. Without prejudice to other rights and obligations under GATT 1994.
no Member shall apply any TRIM that is inconsistent with the
provisions of Article III or Article XI of GATT 1994.

2. An Illustrative list of TRIMS that are inconsistent with the
obligations of general elimination of quantitative restrictions
provided for in paragraph I of Article XI of GATT 1994 is contained in
the Annex to this Agreement. (Agreement on Trade-Related
Investment Measures, Vol. 27, Uruguay Round, Legal Instruments,
p.22121, emphasis supplied).

The Annex referred to reads as follows:

ANNEX

Illustrative List

1. TRIMS that are inconsistent with the obligation of national
treatment provided for in paragraph 4 of Article III of GATT 1994
include those which are mandatory or enforceable under domestic
law or under administrative rulings, or compliance with which is
necessary to obtain an advantage, and which require:

(a) the purchase or use by an enterprise of products of domestic
origin or from any domestic source, whether specified in terms of
particular products, in terms of volume or value of products, or in
terms of proportion of volume or value of its local production; or

(b) that an enterprises purchases or use of imported products be
limited to an amount related to the volume or value of local products
that it exports.

2. TRIMS that are inconsistent with the obligations of general
elimination of quantitative restrictions provided for in paragraph 1 of
Article XI of GATT 1994 include those which are mandatory or
enforceable under domestic laws or under administrative rulings, or
compliance with which is necessary to obtain an advantage, and
which restrict:

(a) the importation by an enterprise of products used in or related to
the local production that it exports;

(b) the importation by an enterprise of products used in or related to
its local production by restricting its access to foreign exchange
inflows attributable to the enterprise; or

(c) the exportation or sale for export specified in terms of particular
products, in terms of volume or value of products, or in terms of a
preparation of volume or value of its local production. (Annex to the
Agreement on Trade-Related Investment Measures, Vol. 27, Uruguay
Round Legal Documents, p.22125, emphasis supplied).

The paragraph 4 of Article III of GATT 1994 referred to is quoted as
follows:

The products of the territory of any contracting party imported into
the territory of any other contracting party shall be accorded
treatment no less favorable than that accorded to like products of
national origin in respect of laws, regulations and requirements
affecting their internal sale, offering for sale, purchase,
transportation, distribution or use. the provisions of this paragraph
shall not prevent the application of differential internal
transportation charges which are based exclusively on the economic
operation of the means of transport and not on the nationality of the
product. (Article III, GATT 1947, as amended by the Protocol
Modifying Part II, and Article XXVI of GATT, 14 September 1948, 62
UMTS 82-84 in relation to paragraph 1(a) of the General Agreement
on Tariffs and Trade 1994, Vol. 1, Uruguay Round, Legal Instruments
p.177, emphasis supplied).

b) In the area of trade related aspects of intellectual property rights
(TRIPS, for brevity):

Each Member shall accord to the nationals of other Members
treatment no less favourable than that it accords to its own nationals
with regard to the protection of intellectual property... (par. 1, Article
3, Agreement on Trade-Related Aspect of Intellectual Property rights,
Vol. 31, Uruguay Round, Legal Instruments, p.25432 (emphasis
supplied)

(c) In the area of the General Agreement on Trade in Services:

National Treatment

1. In the sectors inscribed in its schedule, and subject to any
conditions and qualifications set out therein, each Member shall
accord to services and service suppliers of any other Member, in
respect of all measures affecting the supply of services, treatment no
less favourable than it accords to its own like services and service
suppliers.

2. A Member may meet the requirement of paragraph I by according
to services and service suppliers of any other Member, either formally
identical treatment or formally different treatment to that it accords
to its own like services and service suppliers.

3. Formally identical or formally different treatment shall be
considered to be less favourable if it modifies the conditions of
completion in favour of services or service suppliers of the Member
compared to like services or service suppliers of any other Member.
(Article XVII, General Agreement on Trade in Services, Vol. 28,
Uruguay Round Legal Instruments, p.22610 emphasis supplied).

It is petitioners position that the foregoing national treatment and
parity provisions of the WTO Agreement place nationals and
products of member countries on the same footing as Filipinos and
local products, in contravention of the Filipino First policy of the
Constitution. They allegedly render meaningless the phrase
effectively controlled by Filipinos. The constitutional conflict
becomes more manifest when viewed in the context of the clear duty
imposed on the Philippines as a WTO member to ensure the
conformity of its laws, regulations and administrative procedures with
its obligations as provided in the annexed agreements.[20] Petitioners
further argue that these provisions contravene constitutional
limitations on the role exports play in national development and
negate the preferential treatment accorded to Filipino labor, domestic
materials and locally produced goods.

On the other hand, respondents through the Solicitor General counter
(1) that such Charter provisions are not self-executing and merely set
out general policies; (2) that these nationalistic portions of the
Constitution invoked by petitioners should not be read in isolation but
should be related to other relevant provisions of Art. XII, particularly
Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses
do not conflict with the Constitution; and (4) that the WTO
Agreement contains sufficient provisions to protect developing
countries like the Philippines from the harshness of sudden trade
liberalization.

We shall now discuss and rule on these arguments.

Declaration of Principles Not Self-Executing

By its very title, Article II of the Constitution is a declaration of
principles and state policies. The counterpart of this article in the
1935 Constitution*21+ is called the basic political creed of the nation
by Dean Vicente Sinco.[22] These principles in Article II are not
intended to be self-executing principles ready for enforcement
through the courts.[23] They are used by the judiciary as aids or as
guides in the exercise of its power of judicial review, and by the
legislature in its enactment of laws. As held in the leading case of
Kilosbayan, Incorporated vs. Morato,[24] the principles and state
policies enumerated in Article II and some sections of Article XII are
not self-executing provisions, the disregard of which can give rise to
a cause of action in the courts. They do not embody judicially
enforceable constitutional rights but guidelines for legislation.

In the same light, we held in Basco vs. Pagcor[25] that broad
constitutional principles need legislative enactments to implement
them, thus:

On petitioners allegation that P.D. 1869 violates Sections 11
(Personal Dignity) 12 (Family) and 13 (Role of Youth) of Article II;
Section 13 (Social Justice) of Article XIII and Section 2 (Educational
Values) of Article XIV of the 1987 Constitution, suffice it to state also
that these are merely statements of principles and policies. As such,
they are basically not self-executing, meaning a law should be passed
by Congress to clearly define and effectuate such principles.

In general, therefore, the 1935 provisions were not intended to be
self-executing principles ready for enforcement through the courts.
They were rather directives addressed to the executive and to the
legislature. If the executive and the legislature failed to heed the
directives of the article, the available remedy was not judicial but
political. The electorate could express their displeasure with the
failure of the executive and the legislature through the language of
the ballot. (Bernas, Vol. II, p. 2).

The reasons for denying a cause of action to an alleged infringement
of broad constitutional principles are sourced from basic
considerations of due process and the lack of judicial authority to
wade into the uncharted ocean of social and economic policy
making. Mr. Justice Florentino P. Feliciano in his concurring opinion
in Oposa vs. Factoran, Jr.,[26] explained these reasons as follows:

My suggestion is simply that petitioners must, before the trial court,
show a more specific legal right -- a right cast in language of a
significantly lower order of generality than Article II (15) of the
Constitution -- that is or may be violated by the actions, or failures to
act, imputed to the public respondent by petitioners so that the trial
court can validly render judgment granting all or part of the relief
prayed for. To my mind, the court should be understood as simply
saying that such a more specific legal right or rights may well exist in
our corpus of law, considering the general policy principles found in
the Constitution and the existence of the Philippine Environment
Code, and that the trial court should have given petitioners an
effective opportunity so to demonstrate, instead of aborting the
proceedings on a motion to dismiss.

It seems to me important that the legal right which is an essential
component of a cause of action be a specific, operable legal right,
rather than a constitutional or statutory policy, for at least two (2)
reasons. One is that unless the legal right claimed to have been
violated or disregarded is given specification in operational terms,
defendants may well be unable to defend themselves intelligently and
effectively; in other words, there are due process dimensions to this
matter.

The second is a broader-gauge consideration -- where a specific
violation of law or applicable regulation is not alleged or proved,
petitioners can be expected to fall back on the expanded conception
of judicial power in the second paragraph of Section 1 of Article VIII of
the Constitution which reads:

Section 1. x x x

Judicial power includes the duty of the courts of justice to settle
actual controversies involving rights which are legally demandable
and enforceable, and to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the Government.
(Emphases supplied)

When substantive standards as general as the right to a balanced and
healthy ecology and the right to health are combined with remedial
standards as broad ranging as a grave abuse of discretion amounting
to lack or excess of jurisdiction, the result will be, it is respectfully
submitted, to propel courts into the uncharted ocean of social and
economic policy making. At least in respect of the vast area of
environmental protection and management, our courts have no claim
to special technical competence and experience and professional
qualification. Where no specific, operable norms and standards are
shown to exist, then the policy making departments -- the legislative
and executive departments -- must be given a real and effective
opportunity to fashion and promulgate those norms and standards,
and to implement them before the courts should intervene.

Economic Nationalism Should Be Read with Other Constitutional
Mandates to Attain Balanced Development of Economy

On the other hand, Secs. 10 and 12 of Article XII, apart from merely
laying down general principles relating to the national economy and
patrimony, should be read and understood in relation to the other
sections in said article, especially Secs. 1 and 13 thereof which read:

Section 1. The goals of the national economy are a more equitable
distribution of opportunities, income, and wealth; a sustained
increase in the amount of goods and services produced by the nation
for the benefit of the people; and an expanding productivity as the
key to raising the quality of life for all, especially the underprivileged.

The State shall promote industrialization and full employment based
on sound agricultural development and agrarian reform, through
industries that make full and efficient use of human and natural
resources, and which are competitive in both domestic and foreign
markets. However, the State shall protect Filipino enterprises against
unfair foreign competition and trade practices.

In the pursuit of these goals, all sectors of the economy and all regions
of the country shall be given optimum opportunity to develop. x x x

x x x x x x
x x x

Sec. 13. The State shall pursue a trade policy that serves the general
welfare and utilizes all forms and arrangements of exchange on the
basis of equality and reciprocity.

As pointed out by the Solicitor General, Sec. 1 lays down the basic
goals of national economic development, as follows:

1. A more equitable distribution of opportunities, income and wealth;

2. A sustained increase in the amount of goods and services provided
by the nation for the benefit of the people; and

3. An expanding productivity as the key to raising the quality of life
for all especially the underprivileged.

With these goals in context, the Constitution then ordains the ideals
of economic nationalism (1) by expressing preference in favor of
qualified Filipinos in the grant of rights, privileges and concessions
covering the national economy and patrimony*27+ and in the use of
Filipino labor, domestic materials and locally-produced goods; (2)
by mandating the State to adopt measures that help make them
competitive;*28+ and (3) by requiring the State to develop a self-
reliant and independent national economy effectively controlled by
Filipinos.*29+ In similar language, the Constitution takes into account
the realities of the outside world as it requires the pursuit of a trade
policy that serves the general welfare and utilizes all forms and
arrangements of exchange on the basis of equality and
reciprocity;*30+ and speaks of industries which are competitive in
both domestic and foreign markets as well as of the protection of
Filipino enterprises against unfair foreign competition and trade
practices.

It is true that in the recent case of Manila Prince Hotel vs.
Government Service Insurance System, et al.,[31] this Court held that
Sec. 10, second par., Art. XII of the 1987 Constitution is a mandatory,
positive command which is complete in itself and which needs no
further guidelines or implementing laws or rules for its enforcement.
From its very words the provision does not require any legislation to
put it in operation. It is per se judicially enforceable. However, as
the constitutional provision itself states, it is enforceable only in
regard to the grants of rights, privileges and concessions covering
national economy and patrimony and not to every aspect of trade
and commerce. It refers to exceptions rather than the rule. The issue
here is not whether this paragraph of Sec. 10 of Art. XII is self-
executing or not. Rather, the issue is whether, as a rule, there are
enough balancing provisions in the Constitution to allow the Senate to
ratify the Philippine concurrence in the WTO Agreement. And we
hold that there are.

All told, while the Constitution indeed mandates a bias in favor of
Filipino goods, services, labor and enterprises, at the same time, it
recognizes the need for business exchange with the rest of the world
on the bases of equality and reciprocity and limits protection of
Filipino enterprises only against foreign competition and trade
practices that are unfair.[32] In other words, the Constitution did not
intend to pursue an isolationist policy. It did not shut out foreign
investments, goods and services in the development of the Philippine
economy. While the Constitution does not encourage the unlimited
entry of foreign goods, services and investments into the country, it
does not prohibit them either. In fact, it allows an exchange on the
basis of equality and reciprocity, frowning only on foreign
competition that is unfair.

WTO Recognizes Need to Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has
some built-in advantages to protect weak and developing economies,
which comprise the vast majority of its members. Unlike in the UN
where major states have permanent seats and veto powers in the
Security Council, in the WTO, decisions are made on the basis of
sovereign equality, with each members vote equal in weight to that
of any other. There is no WTO equivalent of the UN Security Council.

WTO decides by consensus whenever possible, otherwise, decisions
of the Ministerial Conference and the General Council shall be taken
by the majority of the votes cast, except in cases of interpretation of
the Agreement or waiver of the obligation of a member which would
require three fourths vote. Amendments would require two thirds
vote in general. Amendments to MFN provisions and the
Amendments provision will require assent of all members. Any
member may withdraw from the Agreement upon the expiration of
six months from the date of notice of withdrawals.*33+

Hence, poor countries can protect their common interests more
effectively through the WTO than through one-on-one negotiations
with developed countries. Within the WTO, developing countries can
form powerful blocs to push their economic agenda more decisively
than outside the Organization. This is not merely a matter of practical
alliances but a negotiating strategy rooted in law. Thus, the basic
principles underlying the WTO Agreement recognize the need of
developing countries like the Philippines to share in the growth in
international trade commensurate with the needs of their economic
development. These basic principles are found in the preamble*34+
of the WTO Agreement as follows:

The Parties to this Agreement,

Recognizing that their relations in the field of trade and economic
endeavour should be conducted with a view to raising standards of
living, ensuring full employment and a large and steadily growing
volume of real income and effective demand, and expanding the
production of and trade in goods and services, while allowing for the
optimal use of the worlds resources in accordance with the objective
of sustainable development, seeking both to protect and preserve the
environment and to enhance the means for doing so in a manner
consistent with their respective needs and concerns at different levels
of economic development,

Recognizing further that there is need for positive efforts designed to
ensure that developing countries, and especially the least developed
among them, secure a share in the growth in international trade
commensurate with the needs of their economic development,

Being desirous of contributing to these objectives by entering into
reciprocal and mutually advantageous arrangements directed to the
substantial reduction of tariffs and other barriers to trade and to the
elimination of discriminatory treatment in international trade
relations,

Resolved, therefore, to develop an integrated, more viable and
durable multilateral trading system encompassing the General
Agreement on Tariffs and Trade, the results of past trade
liberalization efforts, and all of the results of the Uruguay Round of
Multilateral Trade Negotiations,

Determined to preserve the basic principles and to further the
objectives underlying this multilateral trading system, x x x.
(underscoring supplied.)

Specific WTO Provisos Protect Developing Countries

So too, the Solicitor General points out that pursuant to and
consistent with the foregoing basic principles, the WTO Agreement
grants developing countries a more lenient treatment, giving their
domestic industries some protection from the rush of foreign
competition. Thus, with respect to tariffs in general, preferential
treatment is given to developing countries in terms of the amount of
tariff reduction and the period within which the reduction is to be
spread out. Specifically, GATT requires an average tariff reduction
rate of 36% for developed countries to be effected within a period of
six (6) years while developing countries -- including the Philippines --
are required to effect an average tariff reduction of only 24% within
ten (10) years.

In respect to domestic subsidy, GATT requires developed countries to
reduce domestic support to agricultural products by 20% over six (6)
years, as compared to only 13% for developing countries to be
effected within ten (10) years.

In regard to export subsidy for agricultural products, GATT requires
developed countries to reduce their budgetary outlays for export
subsidy by 36% and export volumes receiving export subsidy by 21%
within a period of six (6) years. For developing countries, however,
the reduction rate is only two-thirds of that prescribed for developed
countries and a longer period of ten (10) years within which to effect
such reduction.

Moreover, GATT itself has provided built-in protection from unfair
foreign competition and trade practices including anti-dumping
measures, countervailing measures and safeguards against import
surges. Where local businesses are jeopardized by unfair foreign
competition, the Philippines can avail of these measures. There is
hardly therefore any basis for the statement that under the WTO,
local industries and enterprises will all be wiped out and that Filipinos
will be deprived of control of the economy. Quite the contrary, the
weaker situations of developing nations like the Philippines have
been taken into account; thus, there would be no basis to say that in
joining the WTO, the respondents have gravely abused their
discretion. True, they have made a bold decision to steer the ship of
state into the yet uncharted sea of economic liberalization. But such
decision cannot be set aside on the ground of grave abuse of
discretion, simply because we disagree with it or simply because we
believe only in other economic policies. As earlier stated, the Court
in taking jurisdiction of this case will not pass upon the advantages
and disadvantages of trade liberalization as an economic policy. It
will only perform its constitutional duty of determining whether the
Senate committed grave abuse of discretion.

Constitution Does Not Rule Out Foreign Competition

Furthermore, the constitutional policy of a self-reliant and
independent national economy*35+ does not necessarily rule out the
entry of foreign investments, goods and services. It contemplates
neither economic seclusion nor mendicancy in the international
community. As explained by Constitutional Commissioner Bernardo
Villegas, sponsor of this constitutional policy:

Economic self-reliance is a primary objective of a developing country
that is keenly aware of overdependence on external assistance for
even its most basic needs. It does not mean autarky or economic
seclusion; rather, it means avoiding mendicancy in the international
community. Independence refers to the freedom from undue foreign
control of the national economy, especially in such strategic industries
as in the development of natural resources and public utilities.*36+

The WTO reliance on most favored nation, national treatment,
and trade without discrimination cannot be struck down as
unconstitutional as in fact they are rules of equality and reciprocity
that apply to all WTO members. Aside from envisioning a trade policy
based on equality and reciprocity,*37+ the fundamental law
encourages industries that are competitive in both domestic and
foreign markets, thereby demonstrating a clear policy against a
sheltered domestic trade environment, but one in favor of the gradual
development of robust industries that can compete with the best in
the foreign markets. Indeed, Filipino managers and Filipino
enterprises have shown capability and tenacity to compete
internationally. And given a free trade environment, Filipino
entrepreneurs and managers in Hongkong have demonstrated the
Filipino capacity to grow and to prosper against the best offered
under a policy of laissez faire.

Constitution Favors Consumers, Not Industries or Enterprises

The Constitution has not really shown any unbalanced bias in favor of
any business or enterprise, nor does it contain any specific
pronouncement that Filipino companies should be pampered with a
total proscription of foreign competition. On the other hand,
respondents claim that WTO/GATT aims to make available to the
Filipino consumer the best goods and services obtainable anywhere in
the world at the most reasonable prices. Consequently, the question
boils down to whether WTO/GATT will favor the general welfare of
the public at large.

Will adherence to the WTO treaty bring this ideal (of favoring the
general welfare) to reality?

Will WTO/GATT succeed in promoting the Filipinos general welfare
because it will -- as promised by its promoters -- expand the countrys
exports and generate more employment?

Will it bring more prosperity, employment, purchasing power and
quality products at the most reasonable rates to the Filipino public?

The responses to these questions involve judgment calls by our
policy makers, for which they are answerable to our people during
appropriate electoral exercises. Such questions and the answers
thereto are not subject to judicial pronouncements based on grave
abuse of discretion.

Constitution Designed to Meet Future Events and Contingencies

No doubt, the WTO Agreement was not yet in existence when the
Constitution was drafted and ratified in 1987. That does not mean
however that the Charter is necessarily flawed in the sense that its
framers might not have anticipated the advent of a borderless world
of business. By the same token, the United Nations was not yet in
existence when the 1935 Constitution became effective. Did that
necessarily mean that the then Constitution might not have
contemplated a diminution of the absoluteness of sovereignty when
the Philippines signed the UN Charter, thereby effectively
surrendering part of its control over its foreign relations to the
decisions of various UN organs like the Security Council?

It is not difficult to answer this question. Constitutions are designed
to meet not only the vagaries of contemporary events. They should
be interpreted to cover even future and unknown circumstances. It is
to the credit of its drafters that a Constitution can withstand the
assaults of bigots and infidels but at the same time bend with the
refreshing winds of change necessitated by unfolding events. As one
eminent political law writer and respected jurist[38] explains:

The Constitution must be quintessential rather than superficial, the
root and not the blossom, the base and framework only of the edifice
that is yet to rise. It is but the core of the dream that must take
shape, not in a twinkling by mandate of our delegates, but slowly in
the crucible of Filipino minds and hearts, where it will in time
develop its sinews and gradually gather its strength and finally
achieve its substance. In fine, the Constitution cannot, like the
goddess Athena, rise full-grown from the brow of the Constitutional
Convention, nor can it conjure by mere fiat an instant Utopia. It must
grow with the society it seeks to re-structure and march apace with
the progress of the race, drawing from the vicissitudes of history the
dynamism and vitality that will keep it, far from becoming a petrified
rule, a pulsing, living law attuned to the heartbeat of the nation.

Third Issue: The WTO Agreement and Legislative Power

The WTO Agreement provides that (e)ach Member shall ensure the
conformity of its laws, regulations and administrative procedures with
its obligations as provided in the annexed Agreements.*39+
Petitioners maintain that this undertaking unduly limits, restricts and
impairs Philippine sovereignty, specifically the legislative power which
under Sec. 2, Article VI of the 1987 Philippine Constitution is vested in
the Congress of the Philippines. It is an assault on the sovereign
powers of the Philippines because this means that Congress could not
pass legislation that will be good for our national interest and general
welfare if such legislation will not conform with the WTO Agreement,
which not only relates to the trade in goods x x x but also to the flow
of investments and money x x x as well as to a whole slew of
agreements on socio-cultural matters x x x.*40+

More specifically, petitioners claim that said WTO proviso derogates
from the power to tax, which is lodged in the Congress.[41] And while
the Constitution allows Congress to authorize the President to fix
tariff rates, import and export quotas, tonnage and wharfage dues,
and other duties or imposts, such authority is subject to specified
limits and x x x such limitations and restrictions as Congress may
provide,[42] as in fact it did under Sec. 401 of the Tariff and Customs
Code.

Sovereignty Limited by International Law and Treaties

This Court notes and appreciates the ferocity and passion by which
petitioners stressed their arguments on this issue. However, while
sovereignty has traditionally been deemed absolute and all-
encompassing on the domestic level, it is however subject to
restrictions and limitations voluntarily agreed to by the Philippines,
expressly or impliedly, as a member of the family of nations.
Unquestionably, the Constitution did not envision a hermit-type
isolation of the country from the rest of the world. In its Declaration
of Principles and State Policies, the Constitution adopts the generally
accepted principles of international law as part of the law of the land,
and adheres to the policy of peace, equality, justice, freedom,
cooperation and amity, with all nations."[43] By the doctrine of
incorporation, the country is bound by generally accepted principles
of international law, which are considered to be automatically part of
our own laws.[44] One of the oldest and most fundamental rules in
international law is pacta sunt servanda -- international agreements
must be performed in good faith. A treaty engagement is not a mere
moral obligation but creates a legally binding obligation on the parties
x x x. A state which has contracted valid international obligations is
bound to make in its legislations such modifications as may be
necessary to ensure the fulfillment of the obligations
undertaken.*45+

By their inherent nature, treaties really limit or restrict the
absoluteness of sovereignty. By their voluntary act, nations may
surrender some aspects of their state power in exchange for greater
benefits granted by or derived from a convention or pact. After all,
states, like individuals, live with coequals, and in pursuit of mutually
covenanted objectives and benefits, they also commonly agree to
limit the exercise of their otherwise absolute rights. Thus, treaties
have been used to record agreements between States concerning
such widely diverse matters as, for example, the lease of naval bases,
the sale or cession of territory, the termination of war, the regulation
of conduct of hostilities, the formation of alliances, the regulation of
commercial relations, the settling of claims, the laying down of rules
governing conduct in peace and the establishment of international
organizations.[46] The sovereignty of a state therefore cannot in fact
and in reality be considered absolute. Certain restrictions enter into
the picture: (1) limitations imposed by the very nature of membership
in the family of nations and (2) limitations imposed by treaty
stipulations. As aptly put by John F. Kennedy, Today, no nation can
build its destiny alone. The age of self-sufficient nationalism is over.
The age of interdependence is here.*47+

UN Charter and Other Treaties Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51
charter members, it consented to restrict its sovereign rights under
the concept of sovereignty as auto-limitation.47-A Under Article 2
of the UN Charter, (a)ll members shall give the United Nations every
assistance in any action it takes in accordance with the present
Charter, and shall refrain from giving assistance to any state against
which the United Nations is taking preventive or enforcement action.
Such assistance includes payment of its corresponding share not
merely in administrative expenses but also in expenditures for the
peace-keeping operations of the organization. In its advisory opinion
of July 20, 1961, the International Court of Justice held that money
used by the United Nations Emergency Force in the Middle East and in
the Congo were expenses of the United Nations under Article 17,
paragraph 2, of the UN Charter. Hence, all its members must bear
their corresponding share in such expenses. In this sense, the
Philippine Congress is restricted in its power to appropriate. It is
compelled to appropriate funds whether it agrees with such peace-
keeping expenses or not. So too, under Article 105 of the said
Charter, the UN and its representatives enjoy diplomatic privileges
and immunities, thereby limiting again the exercise of sovereignty of
members within their own territory. Another example: although
sovereign equality and domestic jurisdiction of all members are
set forth as underlying principles in the UN Charter, such provisos are
however subject to enforcement measures decided by the Security
Council for the maintenance of international peace and security under
Chapter VII of the Charter. A final example: under Article 103, (i)n
the event of a conflict between the obligations of the Members of the
United Nations under the present Charter and their obligations under
any other international agreement, their obligation under the present
charter shall prevail, thus unquestionably denying the Philippines --
as a member -- the sovereign power to make a choice as to which of
conflicting obligations, if any, to honor.

Apart from the UN Treaty, the Philippines has entered into many
other international pacts -- both bilateral and multilateral -- that
involve limitations on Philippine sovereignty. These are enumerated
by the Solicitor General in his Compliance dated October 24, 1996, as
follows:

(a) Bilateral convention with the United States regarding taxes on
income, where the Philippines agreed, among others, to exempt from
tax, income received in the Philippines by, among others, the Federal
Reserve Bank of the United States, the Export/Import Bank of the
United States, the Overseas Private Investment Corporation of the
United States. Likewise, in said convention, wages, salaries and
similar remunerations paid by the United States to its citizens for
labor and personal services performed by them as employees or
officials of the United States are exempt from income tax by the
Philippines.

(b) Bilateral agreement with Belgium, providing, among others, for
the avoidance of double taxation with respect to taxes on income.

(c) Bilateral convention with the Kingdom of Sweden for the
avoidance of double taxation.

(d) Bilateral convention with the French Republic for the avoidance of
double taxation.

(e) Bilateral air transport agreement with Korea where the Philippines
agreed to exempt from all customs duties, inspection fees and other
duties or taxes aircrafts of South Korea and the regular equipment,
spare parts and supplies arriving with said aircrafts.

(f) Bilateral air service agreement with Japan, where the Philippines
agreed to exempt from customs duties, excise taxes, inspection fees
and other similar duties, taxes or charges fuel, lubricating oils, spare
parts, regular equipment, stores on board Japanese aircrafts while on
Philippine soil.

(g) Bilateral air service agreement with Belgium where the Philippines
granted Belgian air carriers the same privileges as those granted to
Japanese and Korean air carriers under separate air service
agreements.

(h) Bilateral notes with Israel for the abolition of transit and visitor
visas where the Philippines exempted Israeli nationals from the
requirement of obtaining transit or visitor visas for a sojourn in the
Philippines not exceeding 59 days.

(I) Bilateral agreement with France exempting French nationals from
the requirement of obtaining transit and visitor visa for a sojourn not
exceeding 59 days.

(j) Multilateral Convention on Special Missions, where the Philippines
agreed that premises of Special Missions in the Philippines are
inviolable and its agents can not enter said premises without consent
of the Head of Mission concerned. Special Missions are also
exempted from customs duties, taxes and related charges.

(k) Multilateral Convention on the Law of Treaties. In this convention,
the Philippines agreed to be governed by the Vienna Convention on
the Law of Treaties.

(l) Declaration of the President of the Philippines accepting
compulsory jurisdiction of the International Court of Justice. The
International Court of Justice has jurisdiction in all legal disputes
concerning the interpretation of a treaty, any question of
international law, the existence of any fact which, if established,
would constitute a breach of international obligation.

In the foregoing treaties, the Philippines has effectively agreed to
limit the exercise of its sovereign powers of taxation, eminent domain
and police power. The underlying consideration in this partial
surrender of sovereignty is the reciprocal commitment of the other
contracting states in granting the same privilege and immunities to
the Philippines, its officials and its citizens. The same reciprocity
characterizes the Philippine commitments under WTO-GATT.

International treaties, whether relating to nuclear disarmament,
human rights, the environment, the law of the sea, or trade, constrain
domestic political sovereignty through the assumption of external
obligations. But unless anarchy in international relations is preferred
as an alternative, in most cases we accept that the benefits of the
reciprocal obligations involved outweigh the costs associated with any
loss of political sovereignty. (T)rade treaties that structure relations
by reference to durable, well-defined substantive norms and objective
dispute resolution procedures reduce the risks of larger countries
exploiting raw economic power to bully smaller countries, by
subjecting power relations to some form of legal ordering. In addition,
smaller countries typically stand to gain disproportionately from trade
liberalization. This is due to the simple fact that liberalization will
provide access to a larger set of potential new trading relationship
than in case of the larger country gaining enhanced success to the
smaller countrys market.*48+

The point is that, as shown by the foregoing treaties, a portion of
sovereignty may be waived without violating the Constitution, based
on the rationale that the Philippines adopts the generally accepted
principles of international law as part of the law of the land and
adheres to the policy of x x x cooperation and amity with all nations.

Fourth Issue: The WTO Agreement and Judicial Power

Petitioners aver that paragraph 1, Article 34 of the General Provisions
and Basic Principles of the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS)[49] intrudes on the power of the
Supreme Court to promulgate rules concerning pleading, practice and
procedures.[50]

To understand the scope and meaning of Article 34, TRIPS,[51] it will
be fruitful to restate its full text as follows:

Article 34

Process Patents: Burden of Proof

1. For the purposes of civil proceedings in respect of the infringement
of the rights of the owner referred to in paragraph 1(b) of Article 28, if
the subject matter of a patent is a process for obtaining a product, the
judicial authorities shall have the authority to order the defendant to
prove that the process to obtain an identical product is different from
the patented process. Therefore, Members shall provide, in at least
one of the following circumstances, that any identical product when
produced without the consent of the patent owner shall, in the
absence of proof to the contrary, be deemed to have been obtained
by the patented process:

(a) if the product obtained by the patented process is new;

(b) if there is a substantial likelihood that the identical product was
made by the process and the owner of the patent has been unable
through reasonable efforts to determine the process actually used.

2. Any Member shall be free to provide that the burden of proof
indicated in paragraph 1 shall be on the alleged infringer only if the
condition referred to in subparagraph (a) is fulfilled or only if the
condition referred to in subparagraph (b) is fulfilled.

3. In the adduction of proof to the contrary, the legitimate interests of
defendants in protecting their manufacturing and business secrets
shall be taken into account.

From the above, a WTO Member is required to provide a rule of
disputable (note the words in the absence of proof to the contrary)
presumption that a product shown to be identical to one produced
with the use of a patented process shall be deemed to have been
obtained by the (illegal) use of the said patented process, (1) where
such product obtained by the patented product is new, or (2) where
there is substantial likelihood that the identical product was made
with the use of the said patented process but the owner of the patent
could not determine the exact process used in obtaining such identical
product. Hence, the burden of proof contemplated by Article 34
should actually be understood as the duty of the alleged patent
infringer to overthrow such presumption. Such burden, properly
understood, actually refers to the burden of evidence (burden of
going forward) placed on the producer of the identical (or fake)
product to show that his product was produced without the use of the
patented process.


The foregoing notwithstanding, the patent owner still has the burden
of proof since, regardless of the presumption provided under
paragraph 1 of Article 34, such owner still has to introduce evidence
of the existence of the alleged identical product, the fact that it is
identical to the genuine one produced by the patented process and
the fact of newness of the genuine product or the fact of
substantial likelihood that the identical product was made by the
patented process.

The foregoing should really present no problem in changing the rules
of evidence as the present law on the subject, Republic Act No. 165,
as amended, otherwise known as the Patent Law, provides a similar
presumption in cases of infringement of patented design or utility
model, thus:

SEC. 60. Infringement. - Infringement of a design patent or of a
patent for utility model shall consist in unauthorized copying of the
patented design or utility model for the purpose of trade or industry
in the article or product and in the making, using or selling of the
article or product copying the patented design or utility model.
Identity or substantial identity with the patented design or utility
model shall constitute evidence of copying. (underscoring supplied)

Moreover, it should be noted that the requirement of Article 34 to
provide a disputable presumption applies only if (1) the product
obtained by the patented process is NEW or (2) there is a substantial
likelihood that the identical product was made by the process and the
process owner has not been able through reasonable effort to
determine the process used. Where either of these two provisos does
not obtain, members shall be free to determine the appropriate
method of implementing the provisions of TRIPS within their own
internal systems and processes.

By and large, the arguments adduced in connection with our
disposition of the third issue -- derogation of legislative power - will
apply to this fourth issue also. Suffice it to say that the reciprocity
clause more than justifies such intrusion, if any actually exists.
Besides, Article 34 does not contain an unreasonable burden,
consistent as it is with due process and the concept of adversarial
dispute settlement inherent in our judicial system.

So too, since the Philippine is a signatory to most international
conventions on patents, trademarks and copyrights, the adjustment in
legislation and rules of procedure will not be substantial.[52]

Fifth Issue: Concurrence Only in the WTO Agreement and Not in
Other Documents Contained in the Final Act

Petitioners allege that the Senate concurrence in the WTO Agreement
and its annexes -- but not in the other documents referred to in the
Final Act, namely the Ministerial Declaration and Decisions and the
Understanding on Commitments in Financial Services -- is defective
and insufficient and thus constitutes abuse of discretion. They submit
that such concurrence in the WTO Agreement alone is flawed because
it is in effect a rejection of the Final Act, which in turn was the
document signed by Secretary Navarro, in representation of the
Republic upon authority of the President. They contend that the
second letter of the President to the Senate[53] which enumerated
what constitutes the Final Act should have been the subject of
concurrence of the Senate.

A final act, sometimes called protocol de clture, is an instrument
which records the winding up of the proceedings of a diplomatic
conference and usually includes a reproduction of the texts of
treaties, conventions, recommendations and other acts agreed upon
and signed by the plenipotentiaries attending the conference.*54+ It
is not the treaty itself. It is rather a summary of the proceedings of a
protracted conference which may have taken place over several
years. The text of the Final Act Embodying the Results of the
Uruguay Round of Multilateral Trade Negotiations is contained in
just one page[55] in Vol. I of the 36-volume Uruguay Round of
Multilateral Trade Negotiations. By signing said Final Act, Secretary
Navarro as representative of the Republic of the Philippines
undertook:

"(a) to submit, as appropriate, the WTO Agreement for the
consideration of their respective competent authorities with a view to
seeking approval of the Agreement in accordance with their
procedures; and

(b) to adopt the Ministerial Declarations and Decisions."

The assailed Senate Resolution No. 97 expressed concurrence in
exactly what the Final Act required from its signatories, namely,
concurrence of the Senate in the WTO Agreement.

The Ministerial Declarations and Decisions were deemed adopted
without need for ratification. They were approved by the ministers
by virtue of Article XXV: 1 of GATT which provides that
representatives of the members can meet to give effect to those
provisions of this Agreement which invoke joint action, and generally
with a view to facilitating the operation and furthering the objectives
of this Agreement.*56+

The Understanding on Commitments in Financial Services also
approved in Marrakesh does not apply to the Philippines. It applies
only to those 27 Members which have indicated in their respective
schedules of commitments on standstill, elimination of monopoly,
expansion of operation of existing financial service suppliers,
temporary entry of personnel, free transfer and processing of
information, and national treatment with respect to access to
payment, clearing systems and refinancing available in the normal
course of business.*57+

On the other hand, the WTO Agreement itself expresses what
multilateral agreements are deemed included as its integral parts,[58]
as follows:

Article II

Scope of the WTO

1. The WTO shall provide the common institutional framework for the
conduct of trade relations among its Members in matters to the
agreements and associated legal instruments included in the Annexes
to this Agreement.

2. The Agreements and associated legal instruments included in
Annexes 1, 2, and 3 (hereinafter referred to as Multilateral
Agreements) are integral parts of this Agreement, binding on all
Members.

3. The Agreements and associated legal instruments included in
Annex 4 (hereinafter referred to as Plurilateral Trade Agreements)
are also part of this Agreement for those Members that have
accepted them, and are binding on those Members. The Plurilateral
Trade Agreements do not create either obligation or rights for
Members that have not accepted them.

4. The General Agreement on Tariffs and Trade 1994 as specified in
annex 1A (hereinafter referred to as GATT 1994) is legally distinct
from the General Agreement on Tariffs and Trade, dated 30 October
1947, annexed to the Final Act adopted at the conclusion of the
Second Session of the Preparatory Committee of the United Nations
Conference on Trade and Employment, as subsequently rectified,
amended or modified (hereinafter referred to as GATT 1947).

It should be added that the Senate was well-aware of what it was
concurring in as shown by the members deliberation on August 25,
1994. After reading the letter of President Ramos dated August 11,
1994,[59] the senators of the Republic minutely dissected what the
Senate was concurring in, as follows: [60]

THE CHAIRMAN: Yes. Now, the question of the validity of the
submission came up in the first day hearing of this Committee
yesterday. Was the observation made by Senator Taada that what
was submitted to the Senate was not the agreement on establishing
the World Trade Organization by the final act of the Uruguay Round
which is not the same as the agreement establishing the World Trade
Organization? And on that basis, Senator Tolentino raised a point of
order which, however, he agreed to withdraw upon understanding
that his suggestion for an alternative solution at that time was
acceptable. That suggestion was to treat the proceedings of the
Committee as being in the nature of briefings for Senators until the
question of the submission could be clarified.

And so, Secretary Romulo, in effect, is the President submitting a
new... is he making a new submission which improves on the clarity of
the first submission?

MR. ROMULO: Mr. Chairman, to make sure that it is clear cut and
there should be no misunderstanding, it was his intention to clarify all
matters by giving this letter.

THE CHAIRMAN: Thank you.

Can this Committee hear from Senator Taada and later on Senator
Tolentino since they were the ones that raised this question
yesterday?

Senator Taada, please.

SEN. TAADA: Thank you, Mr. Chairman.

Based on what Secretary Romulo has read, it would now clearly
appear that what is being submitted to the Senate for ratification is
not the Final Act of the Uruguay Round, but rather the Agreement on
the World Trade Organization as well as the Ministerial Declarations
and Decisions, and the Understanding and Commitments in Financial
Services.

I am now satisfied with the wording of the new submission of
President Ramos.

SEN. TAADA. . . . of President Ramos, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Taada. Can we hear from
Senator Tolentino? And after him Senator Neptali Gonzales and
Senator Lina.

SEN TOLENTINO, Mr. Chairman, I have not seen the new submission
actually transmitted to us but I saw the draft of his earlier, and I think
it now complies with the provisions of the Constitution, and with the
Final Act itself. The Constitution does not require us to ratify the Final
Act. It requires us to ratify the Agreement which is now being
submitted. The Final Act itself specifies what is going to be submitted
to with the governments of the participants.

In paragraph 2 of the Final Act, we read and I quote:

By signing the present Final Act, the representatives agree: (a) to
submit as appropriate the WTO Agreement for the consideration of
the respective competent authorities with a view to seeking approval
of the Agreement in accordance with their procedures.

In other words, it is not the Final Act that was agreed to be submitted
to the governments for ratification or acceptance as whatever their
constitutional procedures may provide but it is the World Trade
Organization Agreement. And if that is the one that is being
submitted now, I think it satisfies both the Constitution and the Final
Act itself.

Thank you, Mr. Chairman.

THE CHAIRMAN. Thank you, Senator Tolentino, May I call on Senator
Gonzales.

SEN. GONZALES. Mr. Chairman, my views on this matter are already a
matter of record. And they had been adequately reflected in the
journal of yesterdays session and I dont see any need for repeating
the same.

Now, I would consider the new submission as an act ex abudante
cautela.

THE CHAIRMAN. Thank you, Senator Gonzales. Senator Lina, do you
want to make any comment on this?

SEN. LINA. Mr. President, I agree with the observation just made by
Senator Gonzales out of the abundance of question. Then the new
submission is, I believe, stating the obvious and therefore I have no
further comment to make.

Epilogue

In praying for the nullification of the Philippine ratification of the
WTO Agreement, petitioners are invoking this Courts constitutionally
imposed duty to determine whether or not there has been grave
abuse of discretion amounting to lack or excess of jurisdiction on the
part of the Senate in giving its concurrence therein via Senate
Resolution No. 97. Procedurally, a writ of certiorari grounded on
grave abuse of discretion may be issued by the Court under Rule 65 of
the Rules of Court when it is amply shown that petitioners have no
other plain, speedy and adequate remedy in the ordinary course of
law.

By grave abuse of discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction.[61] Mere
abuse of discretion is not enough. It must be grave abuse of
discretion as when the power is exercised in an arbitrary or despotic
manner by reason of passion or personal hostility, and must be so
patent and so gross as to amount to an evasion of a positive duty or
to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law.[62] Failure on the part of the petitioner to
show grave abuse of discretion will result in the dismissal of the
petition.[63]

In rendering this Decision, this Court never forgets that the Senate,
whose act is under review, is one of two sovereign houses of Congress
and is thus entitled to great respect in its actions. It is itself a
constitutional body independent and coordinate, and thus its actions
are presumed regular and done in good faith. Unless convincing proof
and persuasive arguments are presented to overthrow such
presumptions, this Court will resolve every doubt in its favor. Using
the foregoing well-accepted definition of grave abuse of discretion
and the presumption of regularity in the Senates processes, this
Court cannot find any cogent reason to impute grave abuse of
discretion to the Senates exercise of its power of concurrence in the
WTO Agreement granted it by Sec. 21 of Article VII of the
Constitution.[64]

It is true, as alleged by petitioners, that broad constitutional principles
require the State to develop an independent national economy
effectively controlled by Filipinos; and to protect and/or prefer
Filipino labor, products, domestic materials and locally produced
goods. But it is equally true that such principles -- while serving as
judicial and legislative guides -- are not in themselves sources of
causes of action. Moreover, there are other equally fundamental
constitutional principles relied upon by the Senate which mandate the
pursuit of a trade policy that serves the general welfare and utilizes
all forms and arrangements of exchange on the basis of equality and
reciprocity and the promotion of industries which are competitive
in both domestic and foreign markets, thereby justifying its
acceptance of said treaty. So too, the alleged impairment of
sovereignty in the exercise of legislative and judicial powers is
balanced by the adoption of the generally accepted principles of
international law as part of the law of the land and the adherence of
the Constitution to the policy of cooperation and amity with all
nations.

That the Senate, after deliberation and voting, voluntarily and
overwhelmingly gave its consent to the WTO Agreement thereby
making it a part of the law of the land is a legitimate exercise of its
sovereign duty and power. We find no patent and gross
arbitrariness or despotism by reason of passion or personal hostility
in such exercise. It is not impossible to surmise that this Court, or at
least some of its members, may even agree with petitioners that it is
more advantageous to the national interest to strike down Senate
Resolution No. 97. But that is not a legal reason to attribute grave
abuse of discretion to the Senate and to nullify its decision. To do so
would constitute grave abuse in the exercise of our own judicial
power and duty. Ineludably, what the Senate did was a valid exercise
of its authority. As to whether such exercise was wise, beneficial or
viable is outside the realm of judicial inquiry and review. That is a
matter between the elected policy makers and the people. As to
whether the nation should join the worldwide march toward trade
liberalization and economic globalization is a matter that our people
should determine in electing their policy makers. After all, the WTO
Agreement allows withdrawal of membership, should this be the
political desire of a member.

The eminent futurist John Naisbitt, author of the best seller
Megatrends, predicts an Asian Renaissance*65+ where the East will
become the dominant region of the world economically, politically
and culturally in the next century. He refers to the free market
espoused by WTO as the catalyst in this coming Asian ascendancy.
There are at present about 31 countries including China, Russia and
Saudi Arabia negotiating for membership in the WTO.
Notwithstanding objections against possible limitations on national
sovereignty, the WTO remains as the only viable structure for
multilateral trading and the veritable forum for the development of
international trade law. The alternative to WTO is isolation,
stagnation, if not economic self-destruction. Duly enriched with
original membership, keenly aware of the advantages and
disadvantages of globalization with its on-line experience, and
endowed with a vision of the future, the Philippines now straddles
the crossroads of an international strategy for economic prosperity
and stability in the new millennium. Let the people, through their
duly authorized elected officers, make their free choice.

WHEREFORE, the petition is DISMISSED for lack of merit.


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC



G.R. No. L-31195 June 5, 1973

PHILIPPINE BLOOMING MILLS EMPLOYMENT ORGANIZATION,
NICANOR TOLENTINO, FLORENCIO, PADRIGANO RUFINO, ROXAS
MARIANO DE LEON, ASENCION PACIENTE, BONIFACIO VACUNA,
BENJAMIN PAGCU and RODULFO MUNSOD, petitioners,
vs.
PHILIPPINE BLOOMING MILLS CO., INC. and COURT OF INDUSTRIAL
RELATIONS, respondents.

L.S. Osorio & P.B. Castillo and J.C. Espinas & Associates for
petitioners.

Demetrio B. Salem & Associates for private respondent.



MAKASIAR, J.:

The petitioner Philippine Blooming Mills Employees Organization
(hereinafter referred to as PBMEO) is a legitimate labor union
composed of the employees of the respondent Philippine Blooming
Mills Co., Inc., and petitioners Nicanor Tolentino, Florencio Padrigano,
Rufino Roxas, Mariano de Leon, Asencion Paciente, Bonifacio Vacuna,
Benjamin Pagcu and Rodulfo Munsod are officers and members of the
petitioner Union.

Petitioners claim that on March 1, 1969, they decided to stage a
mass demonstration at Malacaang on March 4, 1969, in protest
against alleged abuses of the Pasig police, to be participated in by the
workers in the first shift (from 6 A.M. to 2 P.M.) as well as those in the
regular second and third shifts (from 7 A.M. to 4 P.M. and from 8 A.M.
to 5 P.M., respectively); and that they informed the respondent
Company of their proposed demonstration.

The questioned order dated September 15, 1969, of Associate Judge
Joaquin M. Salvador of the respondent Court reproduced the
following stipulation of facts of the parties parties

3. That on March 2, 1969 complainant company learned of the
projected mass demonstration at Malacaang in protest against
alleged abuses of the Pasig Police Department to be participated by
the first shift (6:00 AM-2:00 PM) workers as well as those working in
the regular shifts (7:00 A.M. to 4:00 PM and 8:00 AM to 5:00 PM) in
the morning of March 4, 1969;

4. That a meeting was called by the Company on March 3, 1969 at
about 11:00 A.M. at the Company's canteen, and those present were:
for the Company: (1) Mr. Arthur L. Ang (2) Atty. S. de Leon, Jr., (3) and
all department and section heads. For the PBMEO (1) Florencio
Padrigano, (2) Rufino Roxas, (3) Mariano de Leon, (4) Asencion
Paciente, (5) Bonifacio Vacuna and (6) Benjamin Pagcu.

5. That the Company asked the union panel to confirm or deny said
projected mass demonstration at Malacaang on March 4, 1969.
PBMEO thru Benjamin Pagcu who acted as spokesman of the union
panel, confirmed the planned demonstration and stated that the
demonstration or rally cannot be cancelled because it has already
been agreed upon in the meeting. Pagcu explained further that the
demonstration has nothing to do with the Company because the
union has no quarrel or dispute with Management;

6. That Management, thru Atty. C.S. de Leon, Company personnel
manager, informed PBMEO that the demonstration is an inalienable
right of the union guaranteed by the Constitution but emphasized,
however, that any demonstration for that matter should not unduly
prejudice the normal operation of the Company. For which reason,
the Company, thru Atty. C.S. de Leon warned the PBMEO
representatives that workers who belong to the first and regular
shifts, who without previous leave of absence approved by the
Company, particularly , the officers present who are the organizers of
the demonstration, who shall fail to report for work the following
morning (March 4, 1969) shall be dismissed, because such failure is a
violation of the existing CBA and, therefore, would be amounting to
an illegal strike;

7. That at about 5:00 P.M. on March 3, 1969, another meeting was
convoked Company represented by Atty. C.S. de Leon, Jr. The Union
panel was composed of: Nicanor Tolentino, Rodolfo Munsod,
Benjamin Pagcu and Florencio Padrigano. In this afternoon meeting of
March 3, 1969, Company reiterated and appealed to the PBMEO
representatives that while all workers may join the Malacaang
demonstration, the workers for the first and regular shift of March 4,
1969 should be excused from joining the demonstration and should
report for work; and thus utilize the workers in the 2nd and 3rd shifts
in order not to violate the provisions of the CBA, particularly Article
XXIV: NO LOCKOUT NO STRIKE'. All those who will not follow this
warning of the Company shall be dismiss; De Leon reiterated the
Company's warning that the officers shall be primarily liable being the
organizers of the mass demonstration. The union panel countered
that it was rather too late to change their plans inasmuch as the
Malacaang demonstration will be held the following morning; and

8. That a certain Mr. Wilfredo Ariston, adviser of PBMEO sent a
cablegram to the Company which was received 9:50 A.M., March 4,
1969, the contents of which are as follows: 'REITERATING REQUEST
EXCUSE DAY SHIFT EMPLOYEES JOINING DEMONSTRATION MARCH 4,
1969.' (Pars. 3-8, Annex "F", pp. 42-43, rec.)

Because the petitioners and their members numbering about 400
proceeded with the demonstration despite the pleas of the
respondent Company that the first shift workers should not be
required to participate in the demonstration and that the workers in
the second and third shifts should be utilized for the demonstration
from 6 A.M. to 2 P.M. on March 4, 1969, respondent Company prior
notice of the mass demonstration on March 4, 1969, with the
respondent Court, a charge against petitioners and other employees
who composed the first shift, charging them with a "violation of
Section 4(a)-6 in relation to Sections 13 and 14, as well as Section 15,
all of Republic Act No. 875, and of the CBA providing for 'No Strike
and No Lockout.' " (Annex "A", pp. 19-20, rec.). The charge was
accompanied by the joint affidavit of Arthur L. Ang and Cesareo de
Leon, Jr. (Annex "B", pp. 21-24, rec.). Thereafter, a corresponding
complaint was filed, dated April 18, 1969, by Acting Chief Prosecutor
Antonio T. Tirona and Acting Prosecutor Linda P. Ilagan (Annex "C",
pp. 25-30, rec.)

In their answer, dated May 9, 1969, herein petitioners claim that
they did not violate the existing CBA because they gave the
respondent Company prior notice of the mass demonstration on
March 4, 1969; that the said mass demonstration was a valid exercise
of their constitutional freedom of speech against the alleged abuses
of some Pasig policemen; and that their mass demonstration was not
a declaration of strike because it was not directed against the
respondent firm (Annex "D", pp. 31-34, rec.)

After considering the aforementioned stipulation of facts submitted
by the parties, Judge Joaquin M. Salvador, in an order dated
September 15, 1969, found herein petitioner PBMEO guilty of
bargaining in bad faith and herein petitioners Florencio Padrigano,
Rufino Roxas, Mariano de Leon, Asencion Paciente, Bonifacio Vacuna,
Benjamin Pagcu, Nicanor Tolentino and Rodulfo Munsod as directly
responsible for perpetrating the said unfair labor practice and were,
as a consequence, considered to have lost their status as employees
of the respondent Company (Annex "F", pp. 42-56, rec.)

Herein petitioners claim that they received on September 23, 1969,
the aforesaid order (p. 11, rec.); and that they filed on September 29,
1969, because September 28, 1969 fell on Sunday (p. 59, rec.), a
motion for reconsideration of said order dated September 15, 1969,
on the ground that it is contrary to law and the evidence, as well as
asked for ten (10) days within which to file their arguments pursuant
to Sections 15, 16 and 17 of the Rules of the CIR, as amended (Annex
"G", pp. 57-60, rec. )

In its opposition dated October 7, 1969, filed on October 11, 1969
(p. 63, rec.), respondent Company averred that herein petitioners
received on September 22, 1969, the order dated September 17
(should be September 15), 1969; that under Section 15 of the
amended Rules of the Court of Industrial Relations, herein petitioners
had five (5) days from September 22, 1969 or until September 27,
1969, within which to file their motion for reconsideration; and that
because their motion for reconsideration was two (2) days late, it
should be accordingly dismissed, invoking Bien vs. Castillo, 1 which
held among others, that a motion for extension of the five-day period
for the filing of a motion for reconsideration should be filed before
the said five-day period elapses (Annex "M", pp. 61-64, rec.).

Subsequently, herein petitioners filed on October 14, 1969 their
written arguments dated October 11, 1969, in support of their motion
for reconsideration (Annex "I", pp. 65-73, rec.).

In a resolution dated October 9, 1969, the respondent en banc
dismissed the motion for reconsideration of herein petitioners for
being pro forma as it was filed beyond the reglementary period
prescribed by its Rules (Annex "J", pp. 74-75, rec.), which herein
petitioners received on October 28, 196 (pp. 12 & 76, rec.).

At the bottom of the notice of the order dated October 9, 1969,
which was released on October 24, 1969 and addressed to the
counsels of the parties (pp. 75-76, rec.), appear the requirements of
Sections 15, 16 and 17, as amended, of the Rules of the Court of
Industrial Relations, that a motion for reconsideration shall be filed
within five (5) days from receipt of its decision or order and that an
appeal from the decision, resolution or order of the C.I.R., sitting en
banc, shall be perfected within ten (10) days from receipt thereof (p.
76, rec.).

On October 31, 1969, herein petitioners filed with the respondent
court a petition for relief from the order dated October 9, 1969, on
the ground that their failure to file their motion for reconsideration
on time was due to excusable negligence and honest mistake
committed by the president of the petitioner Union and of the office
clerk of their counsel, attaching thereto the affidavits of the said
president and clerk (Annexes "K", "K-1" and "K-2", rec.).

Without waiting for any resolution on their petition for relief from
the order dated October 9, 1969, herein petitioners filed on
November 3, 1969, with the Supreme Court, a notice of appeal (Annex
"L", pp. 88-89, rec.).

I

There is need of briefly restating basic concepts and principles
which underlie the issues posed by the case at bar.

(1) In a democracy, the preservation and enhancement of the
dignity and worth of the human personality is the central core as well
as the cardinal article of faith of our civilization. The inviolable
character of man as an individual must be "protected to the largest
possible extent in his thoughts and in his beliefs as the citadel of his
person." 2

(2) The Bill of Rights is designed to preserve the ideals of liberty,
equality and security "against the assaults of opportunism, the
expediency of the passing hour, the erosion of small encroachments,
and the scorn and derision of those who have no patience with
general principles." 3

In the pithy language of Mr. Justice Robert Jackson, the purpose of
the Bill of Rights is to withdraw "certain subjects from the vicissitudes
of political controversy, to place them beyond the reach of majorities
and officials, and to establish them as legal principles to be applied by
the courts. One's rights to life, liberty and property, to free speech, or
free press, freedom of worship and assembly, and other fundamental
rights may not be submitted to a vote; they depend on the outcome
of no elections." 4 Laski proclaimed that "the happiness of the
individual, not the well-being of the State, was the criterion by which
its behaviour was to be judged. His interests, not its power, set the
limits to the authority it was entitled to exercise." 5

(3) The freedoms of expression and of assembly as well as the right
to petition are included among the immunities reserved by the
sovereign people, in the rhetorical aphorism of Justice Holmes, to
protect the ideas that we abhor or hate more than the ideas we
cherish; or as Socrates insinuated, not only to protect the minority
who want to talk, but also to benefit the majority who refuse to
listen. 6 And as Justice Douglas cogently stresses it, the liberties of
one are the liberties of all; and the liberties of one are not safe unless
the liberties of all are protected. 7

(4) The rights of free expression, free assembly and petition, are not
only civil rights but also political rights essential to man's enjoyment
of his life, to his happiness and to his full and complete fulfillment.
Thru these freedoms the citizens can participate not merely in the
periodic establishment of the government through their suffrage but
also in the administration of public affairs as well as in the discipline
of abusive public officers. The citizen is accorded these rights so that
he can appeal to the appropriate governmental officers or agencies
for redress and protection as well as for the imposition of the lawful
sanctions on erring public officers and employees.

(5) While the Bill of Rights also protects property rights, the primacy
of human rights over property rights is recognized. 8 Because these
freedoms are "delicate and vulnerable, as well as supremely precious
in our society" and the "threat of sanctions may deter their exercise
almost as potently as the actual application of sanctions," they "need
breathing space to survive," permitting government regulation only
"with narrow specificity." 9

Property and property rights can be lost thru prescription; but
human rights are imprescriptible. If human rights are extinguished by
the passage of time, then the Bill of Rights is a useless attempt to limit
the power of government and ceases to be an efficacious shield
against the tyranny of officials, of majorities, of the influential and
powerful, and of oligarchs political, economic or otherwise.

In the hierarchy of civil liberties, the rights of free expression and of
assembly occupy a preferred position as they are essential to the
preservation and vitality of our civil and political institutions; 10 and
such priority "gives these liberties the sanctity and the sanction not
permitting dubious intrusions." 11

The superiority of these freedoms over property rights is
underscored by the fact that a mere reasonable or rational relation
between the means employed by the law and its object or purpose
that the law is neither arbitrary nor discriminatory nor oppressive
would suffice to validate a law which restricts or impairs property
rights. 12 On the other hand, a constitutional or valid infringement of
human rights requires a more stringent criterion, namely existence of
a grave and immediate danger of a substantive evil which the State
has the right to prevent. So it has been stressed in the main opinion of
Mr. Justice Fernando in Gonzales vs. Comelec and reiterated by the
writer of the opinion in Imbong vs. Ferrer. 13 It should be added that
Mr. Justice Barredo in Gonzales vs. Comelec, supra, like Justices
Douglas, Black and Goldberg in N.Y. Times Co. vs. Sullivan, 14 believes
that the freedoms of speech and of the press as well as of peaceful
assembly and of petition for redress of grievances are absolute when
directed against public officials or "when exercised in relation to our
right to choose the men and women by whom we shall be governed,"
15 even as Mr. Justice Castro relies on the balancing-of-interests test.
16 Chief Justice Vinson is partial to the improbable danger rule
formulated by Chief Judge Learned Hand, viz. whether the gravity
of the evil, discounted by its improbability, justifies such invasion of
free expression as is necessary to avoid the danger. 17

II

The respondent Court of Industrial Relations, after opining that the
mass demonstration was not a declaration of strike, concluded that
by their "concerted act and the occurrence temporary stoppage of
work," herein petitioners are guilty bargaining in bad faith and hence
violated the collective bargaining agreement with private respondent
Philippine Blooming Mills Co., inc.. Set against and tested by foregoing
principles governing a democratic society, such conclusion cannot be
sustained. The demonstration held petitioners on March 4, 1969
before Malacaang was against alleged abuses of some Pasig
policemen, not against their employer, herein private respondent
firm, said demonstrate was purely and completely an exercise of their
freedom expression in general and of their right of assembly and
petition for redress of grievances in particular before appropriate
governmental agency, the Chief Executive, again the police officers of
the municipality of Pasig. They exercise their civil and political rights
for their mutual aid protection from what they believe were police
excesses. As matter of fact, it was the duty of herein private
respondent firm to protect herein petitioner Union and its members
fro the harassment of local police officers. It was to the interest
herein private respondent firm to rally to the defense of, and take up
the cudgels for, its employees, so that they can report to work free
from harassment, vexation or peril and as consequence perform more
efficiently their respective tasks enhance its productivity as well as
profits. Herein respondent employer did not even offer to intercede
for its employees with the local police. Was it securing peace for itself
at the expenses of its workers? Was it also intimidated by the local
police or did it encourage the local police to terrorize or vex its
workers? Its failure to defend its own employees all the more
weakened the position of its laborers the alleged oppressive police
who might have been all the more emboldened thereby subject its
lowly employees to further indignities.

In seeking sanctuary behind their freedom of expression well as
their right of assembly and of petition against alleged persecution of
local officialdom, the employees and laborers of herein private
respondent firm were fighting for their very survival, utilizing only the
weapons afforded them by the Constitution the untrammelled
enjoyment of their basic human rights. The pretension of their
employer that it would suffer loss or damage by reason of the
absence of its employees from 6 o'clock in the morning to 2 o'clock in
the afternoon, is a plea for the preservation merely of their property
rights. Such apprehended loss or damage would not spell the
difference between the life and death of the firm or its owners or its
management. The employees' pathetic situation was a stark reality
abused, harassment and persecuted as they believed they were by
the peace officers of the municipality. As above intimated, the
condition in which the employees found themselves vis-a-vis the local
police of Pasig, was a matter that vitally affected their right to
individual existence as well as that of their families. Material loss can
be repaired or adequately compensated. The debasement of the
human being broken in morale and brutalized in spirit-can never be
fully evaluated in monetary terms. The wounds fester and the scars
remain to humiliate him to his dying day, even as he cries in anguish
for retribution, denial of which is like rubbing salt on bruised tissues.

As heretofore stated, the primacy of human rights freedom of
expression, of peaceful assembly and of petition for redress of
grievances over property rights has been sustained. 18 Emphatic
reiteration of this basic tenet as a coveted boon at once the shield
and armor of the dignity and worth of the human personality, the all-
consuming ideal of our enlightened civilization becomes Our duty,
if freedom and social justice have any meaning at all for him who toils
so that capital can produce economic goods that can generate
happiness for all. To regard the demonstration against police officers,
not against the employer, as evidence of bad faith in collective
bargaining and hence a violation of the collective bargaining
agreement and a cause for the dismissal from employment of the
demonstrating employees, stretches unduly the compass of the
collective bargaining agreement, is "a potent means of inhibiting
speech" and therefore inflicts a moral as well as mortal wound on the
constitutional guarantees of free expression, of peaceful assembly
and of petition. 19

The collective bargaining agreement which fixes the working shifts
of the employees, according to the respondent Court Industrial
Relations, in effect imposes on the workers the "duty ... to observe
regular working hours." The strain construction of the Court of
Industrial Relations that a stipulated working shifts deny the workers
the right to stage mass demonstration against police abuses during
working hours, constitutes a virtual tyranny over the mind and life the
workers and deserves severe condemnation. Renunciation of the
freedom should not be predicated on such a slender ground.

The mass demonstration staged by the employees on March 4, 1969
could not have been legally enjoined by any court, such an injunction
would be trenching upon the freedom expression of the workers,
even if it legally appears to be illegal picketing or strike. 20 The
respondent Court of Industrial Relations in the case at bar concedes
that the mass demonstration was not a declaration of a strike "as the
same not rooted in any industrial dispute although there is concerted
act and the occurrence of a temporary stoppage work." (Annex "F", p.
45, rec.).

The respondent firm claims that there was no need for all its
employees to participate in the demonstration and that they
suggested to the Union that only the first and regular shift from 6
A.M. to 2 P.M. should report for work in order that loss or damage to
the firm will be averted. This stand failed appreciate the sine qua non
of an effective demonstration especially by a labor union, namely the
complete unity of the Union members as well as their total presence
at the demonstration site in order to generate the maximum
sympathy for the validity of their cause but also immediately action
on the part of the corresponding government agencies with
jurisdiction over the issues they raised against the local police.
Circulation is one of the aspects of freedom of expression. 21 If
demonstrators are reduced by one-third, then by that much the
circulation of the issues raised by the demonstration is diminished.
The more the participants, the more persons can be apprised of the
purpose of the rally. Moreover, the absence of one-third of their
members will be regarded as a substantial indication of disunity in
their ranks which will enervate their position and abet continued
alleged police persecution. At any rate, the Union notified the
company two days in advance of their projected demonstration and
the company could have made arrangements to counteract or prevent
whatever losses it might sustain by reason of the absence of its
workers for one day, especially in this case when the Union requested
it to excuse only the day-shift employees who will join the
demonstration on March 4, 1969 which request the Union reiterated
in their telegram received by the company at 9:50 in the morning of
March 4, 1969, the day of the mass demonstration (pp. 42-43, rec.).
There was a lack of human understanding or compassion on the part
of the firm in rejecting the request of the Union for excuse from work
for the day shifts in order to carry out its mass demonstration. And to
regard as a ground for dismissal the mass demonstration held against
the Pasig police, not against the company, is gross vindictiveness on
the part of the employer, which is as unchristian as it is
unconstitutional.

III

The respondent company is the one guilty of unfair labor practice.
Because the refusal on the part of the respondent firm to permit all its
employees and workers to join the mass demonstration against
alleged police abuses and the subsequent separation of the eight (8)
petitioners from the service constituted an unconstitutional restraint
on the freedom of expression, freedom of assembly and freedom
petition for redress of grievances, the respondent firm committed an
unfair labor practice defined in Section 4(a-1) in relation to Section 3
of Republic Act No. 875, otherwise known as the Industrial Peace Act.
Section 3 of Republic Act No. 8 guarantees to the employees the right
"to engage in concert activities for ... mutual aid or protection"; while
Section 4(a-1) regards as an unfair labor practice for an employer
interfere with, restrain or coerce employees in the exercise their
rights guaranteed in Section Three."

We repeat that the obvious purpose of the mass demonstration
staged by the workers of the respondent firm on March 4, 1969, was
for their mutual aid and protection against alleged police abuses,
denial of which was interference with or restraint on the right of the
employees to engage in such common action to better shield
themselves against such alleged police indignities. The insistence on
the part of the respondent firm that the workers for the morning and
regular shift should not participate in the mass demonstration, under
pain of dismissal, was as heretofore stated, "a potent means of
inhibiting speech." 22

Such a concerted action for their mutual help and protection
deserves at least equal protection as the concerted action of
employees in giving publicity to a letter complaint charging bank
president with immorality, nepotism, favoritism an discrimination in
the appointment and promotion of ban employees. 23 We further
ruled in the Republic Savings Bank case, supra, that for the employees
to come within the protective mantle of Section 3 in relation to
Section 4(a-1) on Republic Act No. 875, "it is not necessary that union
activity be involved or that collective bargaining be contemplated," as
long as the concerted activity is for the furtherance of their interests.
24

As stated clearly in the stipulation of facts embodied in the
questioned order of respondent Court dated September 15, 1969, the
company, "while expressly acknowledging, that the demonstration is
an inalienable right of the Union guaranteed by the Constitution,"
nonetheless emphasized that "any demonstration for that matter
should not unduly prejudice the normal operation of the company"
and "warned the PBMEO representatives that workers who belong to
the first and regular shifts, who without previous leave of absence
approved by the Company, particularly the officers present who are
the organizers of the demonstration, who shall fail to report for work
the following morning (March 4, 1969) shall be dismissed, because
such failure is a violation of the existing CBA and, therefore, would be
amounting to an illegal strike (;)" (p. III, petitioner's brief). Such threat
of dismissal tended to coerce the employees from joining the mass
demonstration. However, the issues that the employees raised
against the local police, were more important to them because they
had the courage to proceed with the demonstration, despite such
threat of dismissal. The most that could happen to them was to lose a
day's wage by reason of their absence from work on the day of the
demonstration. One day's pay means much to a laborer, more
especially if he has a family to support. Yet, they were willing to
forego their one-day salary hoping that their demonstration would
bring about the desired relief from police abuses. But management
was adamant in refusing to recognize the superior legitimacy of their
right of free speech, free assembly and the right to petition for
redress.

Because the respondent company ostensibly did not find it
necessary to demand from the workers proof of the truth of the
alleged abuses inflicted on them by the local police, it thereby
concedes that the evidence of such abuses should properly be
submitted to the corresponding authorities having jurisdiction over
their complaint and to whom such complaint may be referred by the
President of the Philippines for proper investigation and action with a
view to disciplining the local police officers involved.

On the other hand, while the respondent Court of Industrial
Relations found that the demonstration "paralyzed to a large extent
the operations of the complainant company," the respondent Court of
Industrial Relations did not make any finding as to the fact of loss
actually sustained by the firm. This significant circumstance can only
mean that the firm did not sustain any loss or damage. It did not
present evidence as to whether it lost expected profits for failure to
comply with purchase orders on that day; or that penalties were
exacted from it by customers whose orders could not be filled that
day of the demonstration; or that purchase orders were cancelled by
the customers by reason of its failure to deliver the materials ordered;
or that its own equipment or materials or products were damaged
due to absence of its workers on March 4, 1969. On the contrary, the
company saved a sizable amount in the form of wages for its
hundreds of workers, cost of fuel, water and electric consumption
that day. Such savings could have amply compensated for unrealized
profits or damages it might have sustained by reason of the absence
of its workers for only one day.

IV

Apart from violating the constitutional guarantees of free speech
and assembly as well as the right to petition for redress of grievances
of the employees, the dismissal of the eight (8) leaders of the workers
for proceeding with the demonstration and consequently being
absent from work, constitutes a denial of social justice likewise
assured by the fundamental law to these lowly employees. Section 5
of Article II of the Constitution imposes upon the State "the
promotion of social justice to insure the well-being and economic
security of all of the people," which guarantee is emphasized by the
other directive in Section 6 of Article XIV of the Constitution that "the
State shall afford protection to labor ...". Respondent Court of
Industrial Relations as an agency of the State is under obligation at all
times to give meaning and substance to these constitutional
guarantees in favor of the working man; for otherwise these
constitutional safeguards would be merely a lot of "meaningless
constitutional patter." Under the Industrial Peace Act, the Court of
Industrial Relations is enjoined to effect the policy of the law "to
eliminate the causes of industrial unrest by encouraging and
protecting the exercise by employees of their right to self-
organization for the purpose of collective bargaining and for the
promotion of their moral, social and economic well-being." It is most
unfortunate in the case at bar that respondent Court of Industrial
Relations, the very governmental agency designed therefor, failed to
implement this policy and failed to keep faith with its avowed mission
its raison d'etre as ordained and directed by the Constitution.

V

It has been likewise established that a violation of a constitutional
right divests the court of jurisdiction; and as a consequence its
judgment is null and void and confers no rights. Relief from a criminal
conviction secured at the sacrifice of constitutional liberties, may be
obtained through habeas corpus proceedings even long after the
finality of the judgment. Thus, habeas corpus is the remedy to obtain
the release of an individual, who is convicted by final judgment
through a forced confession, which violated his constitutional right
against self-incrimination; 25 or who is denied the right to present
evidence in his defense as a deprivation of his liberty without due
process of law, 26 even after the accused has already served sentence
for twenty-two years. 27

Both the respondents Court of Industrial Relations and private firm
trenched upon these constitutional immunities of petitioners. Both
failed to accord preference to such rights and aggravated the
inhumanity to which the aggrieved workers claimed they had been
subjected by the municipal police. Having violated these basic human
rights of the laborers, the Court of Industrial Relations ousted itself of
jurisdiction and the questioned orders it issued in the instant case are
a nullity. Recognition and protection of such freedoms are imperative
on all public offices including the courts 28 as well as private citizens
and corporations, the exercise and enjoyment of which must not be
nullified by mere procedural rule promulgated by the Court Industrial
Relations exercising a purely delegate legislative power, when even a
law enacted by Congress must yield to the untrammelled enjoyment
of these human rights. There is no time limit to the exercise of the
freedoms. The right to enjoy them is not exhausted by the delivery of
one speech, the printing of one article or the staging of one
demonstration. It is a continuing immunity to be invoked and
exercised when exigent and expedient whenever there are errors to
be rectified, abuses to be denounced, inhumanities to be condemned.
Otherwise these guarantees in the Bill of Rights would be vitiated by
rule on procedure prescribing the period for appeal. The battle then
would be reduced to a race for time. And in such a contest between
an employer and its laborer, the latter eventually loses because he
cannot employ the best an dedicated counsel who can defend his
interest with the required diligence and zeal, bereft as he is of the
financial resources with which to pay for competent legal services. 28-
a

VI

The Court of Industrial Relations rule prescribes that motion for
reconsideration of its order or writ should filed within five (5) days
from notice thereof and that the arguments in support of said motion
shall be filed within ten (10) days from the date of filing of such
motion for reconsideration (Sec. 16). As above intimated, these rules
of procedure were promulgated by the Court of Industrial Relations
pursuant to a legislative delegation. 29

The motion for reconsideration was filed on September 29, 1969, or
seven (7) days from notice on September 22, 1969 of the order dated
September 15, 1969 or two (2) days late. Petitioners claim that they
could have filed it on September 28, 1969, but it was a Sunday.

Does the mere fact that the motion for reconsideration was filed
two (2) days late defeat the rights of the petitioning employees? Or
more directly and concretely, does the inadvertent omission to
comply with a mere Court of Industrial Relations procedural rule
governing the period for filing a motion for reconsideration or appeal
in labor cases, promulgated pursuant to a legislative delegation,
prevail over constitutional rights? The answer should be obvious in
the light of the aforecited cases. To accord supremacy to the
foregoing rules of the Court of Industrial Relations over basic human
rights sheltered by the Constitution, is not only incompatible with the
basic tenet of constitutional government that the Constitution is
superior to any statute or subordinate rules and regulations, but also
does violence to natural reason and logic. The dominance and
superiority of the constitutional right over the aforesaid Court of
Industrial Relations procedural rule of necessity should be affirmed.
Such a Court of Industrial Relations rule as applied in this case does
not implement or reinforce or strengthen the constitutional rights
affected,' but instead constrict the same to the point of nullifying the
enjoyment thereof by the petitioning employees. Said Court of
Industrial Relations rule, promulgated as it was pursuant to a mere
legislative delegation, is unreasonable and therefore is beyond the
authority granted by the Constitution and the law. A period of five (5)
days within which to file a motion for reconsideration is too short,
especially for the aggrieved workers, who usually do not have the
ready funds to meet the necessary expenses therefor. In case of the
Court of Appeals and the Supreme Court, a period of fifteen (15) days
has been fixed for the filing of the motion for re hearing or
reconsideration (See. 10, Rule 51; Sec. 1, Rule 52; Sec. 1, Rule 56,
Revised Rules of Court). The delay in the filing of the motion for
reconsideration could have been only one day if September 28, 1969
was not a Sunday. This fact accentuates the unreasonableness of the
Court of Industrial are concerned.

It should be stressed here that the motion for reconsideration
dated September 27, 1969, is based on the ground that the order
sought to be reconsidered "is not in accordance with law, evidence
and facts adduced during the hearing," and likewise prays for an
extension of ten (10) days within which to file arguments pursuant to
Sections 15, 16 and 17 of the Rules of the Court of Industrial Relations
(Annex "G", pp. 57-60, rec.); although the arguments were actually
filed by the herein petitioners on October 14, 1969 (Annex "I", pp. 70-
73, rec.), long after the 10-day period required for the filing of such
supporting arguments counted from the filing of the motion for
reconsideration. Herein petitioners received only on October 28, 1969
the resolution dated October 9, 1969 dismissing the motion for
reconsideration for being pro forma since it was filed beyond the
reglementary period (Annex "J", pp. 74-75, rec.)

It is true that We ruled in several cases that where a motion to
reconsider is filed out of time, or where the arguments in suppf such
motion are filed beyond the 10 day reglementary period provided for
by the Court of Industrial Relations rules, the order or decision subject
of 29-a reconsideration becomes final and unappealable. But in all
these cases, the constitutional rights of free expression, free assembly
and petition were not involved.

It is a procedural rule that generally all causes of action and
defenses presently available must be specifically raised in the
complaint or answer; so that any cause of action or defense not raised
in such pleadings, is deemed waived. However, a constitutional issue
can be raised any time, even for the first time on appeal, if it appears
that the determination of the constitutional issue is necessary to a
decision of the case, the very lis mota of the case without the
resolution of which no final and complete determination of the
dispute can be made. 30 It is thus seen that a procedural rule of
Congress or of the Supreme Court gives way to a constitutional right.
In the instant case, the procedural rule of the Court of Industrial
Relations, a creature of Congress, must likewise yield to the
constitutional rights invoked by herein petitioners even before the
institution of the unfair labor practice charged against them and in
their defense to the said charge.

In the case at bar, enforcement of the basic human freedoms
sheltered no less by the organic law, is a most compelling reason to
deny application of a Court of Industrial Relations rule which impinges
on such human rights. 30-a

It is an accepted principle that the Supreme Court has the inherent
power to "suspend its own rules or to except a particular case from its
operation, whenever the purposes of justice require." 30-b Mr. Justice
Barredo in his concurring opinion in Estrada vs. Sto. Domingo. 30-c
reiterated this principle and added that

Under this authority, this Court is enabled to cove with all situations
without concerning itself about procedural niceties that do not square
with the need to do justice, in any case, without further loss of time,
provided that the right of the parties to a full day in court is not
substantially impaired. Thus, this Court may treat an appeal as a
certiorari and vice-versa. In other words, when all the material facts
are spread in the records before Us, and all the parties have been duly
heard, it matters little that the error of the court a quo is of judgment
or of jurisdiction. We can then and there render the appropriate
judgment. Is within the contemplation of this doctrine that as it is
perfectly legal and within the power of this Court to strike down in an
appeal acts without or in excess of jurisdiction or committed with
grave abuse of discretion, it cannot be beyond the admit of its
authority, in appropriate cases, to reverse in a certain proceed in any
error of judgment of a court a quo which cannot be exactly
categorized as a flaw of jurisdiction. If there can be any doubt, which I
do not entertain, on whether or not the errors this Court has found in
the decision of the Court of Appeals are short of being jurisdiction
nullities or excesses, this Court would still be on firm legal grounds
should it choose to reverse said decision here and now even if such
errors can be considered as mere mistakes of judgment or only as
faults in the exercise of jurisdiction, so as to avoid the unnecessary
return of this case to the lower court for the sole purpose of pursuing
the ordinary course of an appeal. (Emphasis supplied). 30-d

Insistence on the application of the questioned Court industrial
Relations rule in this particular case at bar would an unreasoning
adherence to "Procedural niceties" which denies justice to the herein
laborers, whose basic human freedoms, including the right to survive,
must be according supremacy over the property rights of their
employer firm which has been given a full hearing on this case,
especially when, as in the case at bar, no actual material damage has
be demonstrated as having been inflicted on its property rights.

If We can disregard our own rules when justice requires it,
obedience to the Constitution renders more imperative the
suspension of a Court of Industrial Relations rule that clash with the
human rights sanctioned and shielded with resolution concern by the
specific guarantees outlined in the organic law. It should be stressed
that the application in the instant case Section 15 of the Court of
Industrial Relations rules relied upon by herein respondent firm is
unreasonable and therefore such application becomes
unconstitutional as it subverts the human rights of petitioning labor
union and workers in the light of the peculiar facts and circumstances
revealed by the record.

The suspension of the application of Section 15 of the Court of
Industrial Relations rules with reference to the case at is also
authorized by Section 20 of Commonwealth Act No. 103, the C.I.R.
charter, which enjoins the Court of Industrial Relations to "act
according to justice and equity and substantial merits of the case,
without regard to technicalities or legal forms ..."

On several occasions, We emphasized this doctrine which was re-
stated by Mr. Justice Barredo, speaking for the Court, in the 1970 case
of Kapisanan, etc. vs. Hamilton, etc., et. al., 30-e thus:

As to the point that the evidence being offered by the petitioners in
the motion for new trial is not "newly discovered," as such term is
understood in the rules of procedure for the ordinary courts, We hold
that such criterion is not binding upon the Court of Industrial
Relations. Under Section 20 of Commonwealth Act No. 103, 'The Court
of Industrial Relations shall adopt its, rules or procedure and shall
have such other powers as generally pertain to a court of justice:
Provided, however, That in the hearing, investigation and
determination of any question or controversy and in exercising any
duties and power under this Act, the Court shall act according to
justice and equity and substantial merits of the case, without regard
to technicalities or legal forms and shall not be bound by any
technical rules of legal evidence but may inform its mind in such
manner as it may deem just and equitable.' By this provision the
industrial court is disengaged from the rigidity of the technicalities
applicable to ordinary courts. Said court is not even restricted to the
specific relief demanded by the parties but may issue such orders as
may be deemed necessary or expedient for the purpose of settling the
dispute or dispelling any doubts that may give rise to future disputes.
(Ang Tibay v. C.I.R., G.R. No. 46496, Feb. 17, 1940; Manila Trading &
Supply Co. v. Phil. Labor, 71 Phil. 124.) For these reasons, We believe
that this provision is ample enough to have enabled the respondent
court to consider whether or not its previous ruling that petitioners
constitute a minority was founded on fact, without regard to the
technical meaning of newly discovered evidence. ... (Alonso v.
Villamor, 16 Phil. 315; Chua Kiong v. Whitaker, 46 Phil. 578).
(emphasis supplied.)

To apply Section 15 of the Court of Industrial Relations rules with
"pedantic rigor" in the instant case is to rule in effect that the poor
workers, who can ill-afford an alert competent lawyer, can no longer
seek the sanctuary of human freedoms secured to them by the
fundamental law, simply because their counsel erroneously
believing that he received a copy of the decision on September 23,
1969, instead of September 22, 1969 - filed his motion for
reconsideration September 29, 1969, which practically is only one day
late considering that September 28, 1969 was a Sunday.

Many a time, this Court deviated from procedure technicalities
when they ceased to be instruments of justice, for the attainment of
which such rules have been devised. Summarizing the jurisprudence
on this score, Mr. Justice Fernando, speaking for a unanimous Court in
Palma vs. Oreta, 30-f Stated:

As was so aptly expressed by Justice Moreland in Alonso v. Villamor
(16 Phil. 315 [1910]. The Villamor decision was cited with approval in
Register of Deeds v. Phil. Nat. Bank, 84 Phil. 600 [1949]; Potenciano v.
Court of Appeals, 104 Phil. 156 [1958] and Uy v. Uy, 14243, June 30,
1961, 2 SCRA 675.), decided as far back as 1910, "technicality. when it
deserts its proper-office as an aid to justice and becomes its great
hindrance and chief enemy, deserves scant consideration from
courts." (Ibid., p, 322.) To that norm, this Court has remained
committed. The late Justice Recto in Blanco v. Bernabe, (63 Phil. 124
[1936]) was of a similar mind. For him the interpretation of
procedural rule should never "sacrifice the ends justice." While
"procedural laws are no other than technicalities" view them in their
entirety, 'they were adopted not as ends themselves for the
compliance with which courts have organized and function, but as
means conducive to the realization the administration of the law and
of justice (Ibid., p.,128). We have remained steadfastly opposed, in
the highly rhetorical language Justice Felix, to "a sacrifice of
substantial rights of a litigant in altar of sophisticated technicalities
with impairment of the sacred principles of justice." (Potenciano v.
Court of Appeals, 104 Phil. 156, 161 [1958]). As succinctly put by
Justice Makalintal, they "should give way to the realities of the
situation." (Urbayan v. Caltex, L-15379, Aug. 31, 1962, 5 SCRA 1016,
1019). In the latest decision in point promulgated in 1968, (Udan v.
Amon, (1968, 23 SCRA citing McEntee v. Manotok, L-14968, Oct. 27,
1961, 3 SCRA 272.) Justice Zaldivar was partial to an earlier
formulation of Justice Labrador that rules of procedure "are not to be
applied in a very rigid, technical sense"; but are intended "to help
secure substantial justice." (Ibid., p. 843) ... 30-g

Even if the questioned Court of Industrial Relations orders and rule
were to be given effect, the dismissal or termination of the
employment of the petitioning eight (8) leaders of the Union is harsh
for a one-day absence from work. The respondent Court itself
recognized the severity of such a sanction when it did not include the
dismissal of the other 393 employees who are members of the same
Union and who participated in the demonstration against the Pasig
police. As a matter of fact, upon the intercession of the Secretary of
Labor, the Union members who are not officers, were not dismissed
and only the Union itself and its thirteen (13) officers were specifically
named as respondents in the unfair labor practice charge filed against
them by the firm (pp. 16-20, respondent's Brief; Annexes "A", "B" and
"C", pp. 20-30, rec.). Counsel for respondent firm insinuates that not
all the 400 or so employee participated in the demonstration, for
which reason only the Union and its thirteen (13) officers were
specifically named in the unfair labor practice charge (p. 20,
respondent's brief). If that were so, then many, if not all, of the
morning and regular shifts reported for work on March 4, 1969 and
that, as a consequence, the firm continued in operation that day and
did not sustain any damage.

The appropriate penalty if it deserves any penalty at all should
have been simply to charge said one-day absence against their
vacation or sick leave. But to dismiss the eight (8) leaders of the
petitioner Union is a most cruel penalty, since as aforestated the
Union leaders depend on their wages for their daily sustenance as
well as that of their respective families aside from the fact that it is a
lethal blow to unionism, while at the same time strengthening the
oppressive hand of the petty tyrants in the localities.

Mr. Justice Douglas articulated this pointed reminder:

The challenge to our liberties comes frequently not from those who
consciously seek to destroy our system of Government, but from men
of goodwill good men who allow their proper concerns to blind
them to the fact that what they propose to accomplish involves an
impairment of liberty.

... The Motives of these men are often commendable. What we
must remember, however, is that preservation of liberties does not
depend on motives. A suppression of liberty has the same effect
whether the suppress or be a reformer or an outlaw. The only
protection against misguided zeal is a constant alertness of the
infractions of the guarantees of liberty contained in our Constitution.
Each surrender of liberty to the demands of the moment makes easier
another, larger surrender. The battle over the Bill of Rights is a never
ending one.

... The liberties of any person are the liberties of all of us.

... In short, the Liberties of none are safe unless the liberties of all
are protected.

... But even if we should sense no danger to our own liberties, even
if we feel secure because we belong to a group that is important and
respected, we must recognize that our Bill of Rights is a code of fair
play for the less fortunate that we in all honor and good conscience
must be observe. 31

The case at bar is worse.

Management has shown not only lack of good-will or good
intention, but a complete lack of sympathetic understanding of the
plight of its laborers who claim that they are being subjected to
indignities by the local police, It was more expedient for the firm to
conserve its income or profits than to assist its employees in their
fight for their freedoms and security against alleged petty tyrannies of
local police officers. This is sheer opportunism. Such opportunism and
expediency resorted to by the respondent company assaulted the
immunities and welfare of its employees. It was pure and implement
selfishness, if not greed.

Of happy relevance is the 1967 case of Republic Savings Bank vs.
C.I.R., 32 where the petitioner Bank dismissed eight (8) employees for
having written and published "a patently libelous letter ... to the Bank
president demanding his resignation on the grounds of immorality,
nepotism in the appointment and favoritism as well as discrimination
in the promotion of bank employees." Therein, thru Mr. Justice
Castro, We ruled:

It will avail the Bank none to gloat over this admission of the
respondents. Assuming that the latter acted in their individual
capacities when they wrote the letter-charge they were nonetheless
protected for they were engaged in concerted activity, in the exercise
of their right of self organization that includes concerted activity for
mutual aid and protection, (Section 3 of the Industrial Peace Act ...)
This is the view of some members of this Court. For, as has been aptly
stated, the joining in protests or demands, even by a small group of
employees, if in furtherance of their interests as such, is a concerted
activity protected by the Industrial Peace Act. It is not necessary that
union activity be involved or that collective bargaining be
contemplated. (Annot., 6 A.L.R. 2d 416 [1949]).

xxx xxx xxx

Instead of stifling criticism, the Bank should have allowed the
respondents to air their grievances.

xxx xxx xxx

The Bank defends its action by invoking its right to discipline for
what it calls the respondents' libel in giving undue publicity to their
letter-charge. To be sure, the right of self-organization of employees is
not unlimited (Republic Aviation Corp. vs. NLRB 324 U.S. 793 [1945]),
as the right of the employer to discharge for cause (Philippine
Education Co. v. Union of Phil. Educ. Employees, L-13773, April 29,
1960) is undenied. The Industrial Peace Act does not touch the normal
exercise of the right of the employer to select his employees or to
discharge them. It is directed solely against the abuse of that right by
interfering with the countervailing right of self organization (Phelps
Dodge Corp. v. NLRB 313 U.S. 177 [1941])...

xxx xxx xxx

In the final sum and substance, this Court is in unanimity that the
Bank's conduct, identified as an interference with the employees'
right of self-organization or as a retaliatory action, and/or as a refusal
to bargain collectively, constituted an unfair labor practice within the
meaning and intendment of section 4(a) of the Industrial Peace Act.
(Emphasis supplied.) 33

If free expression was accorded recognition and protection to
fortify labor unionism in the Republic Savings case, supra, where the
complaint assailed the morality and integrity of the bank president no
less, such recognition and protection for free speech, free assembly
and right to petition are rendered all the more justifiable and more
imperative in the case at bar, where the mass demonstration was not
against the company nor any of its officers.

WHEREFORE, judgement is hereby rendered:

(1) setting aside as null and void the orders of the respondent Court
of Industrial Relations dated September 15 and October 9, 1969; and

(2) directing the re instatement of the herein eight (8) petitioners,
with full back pay from the date of their separation from the service
until re instated, minus one day's pay and whatever earnings they
might have realized from other sources during their separation from
the service.

With costs against private respondent Philippine Blooming
Company, Inc.


G.R. No. 81561 January 18, 1991

PEOPLE OF THE PHILIPPINES, plaintiff-appellee
vs.
ANDRE MARTI, accused-appellant.

This is an appeal from a decision * rendered by the Special Criminal
Court of Manila (Regional Trial Court, Branch XLIX) convicting accused-
appellant of violation of Section 21 (b), Article IV in relation to Section
4, Article 11 and Section 2 (e) (i), Article 1 of Republic Act 6425, as
amended, otherwise known as the Dangerous Drugs Act.

The facts as summarized in the brief of the prosecution are as
follows:

On August 14, 1987, between 10:00 and 11:00 a.m., the appellant
and his common-law wife, Shirley Reyes, went to the booth of the
"Manila Packing and Export Forwarders" in the Pistang Pilipino
Complex, Ermita, Manila, carrying with them four (4) gift wrapped
packages. Anita Reyes (the proprietress and no relation to Shirley
Reyes) attended to them. The appellant informed Anita Reyes that he
was sending the packages to a friend in Zurich, Switzerland. Appellant
filled up the contract necessary for the transaction, writing therein his
name, passport number, the date of shipment and the name and
address of the consignee, namely, "WALTER FIERZ, Mattacketr II, 8052
Zurich, Switzerland" (Decision, p. 6)

Anita Reyes then asked the appellant if she could examine and
inspect the packages. Appellant, however, refused, assuring her that
the packages simply contained books, cigars, and gloves and were
gifts to his friend in Zurich. In view of appellant's representation,
Anita Reyes no longer insisted on inspecting the packages. The four
(4) packages were then placed inside a brown corrugated box one by
two feet in size (1' x 2'). Styro-foam was placed at the bottom and on
top of the packages before the box was sealed with masking tape,
thus making the box ready for shipment (Decision, p. 8).

Before delivery of appellant's box to the Bureau of Customs and/or
Bureau of Posts, Mr. Job Reyes (proprietor) and husband of Anita
(Reyes), following standard operating procedure, opened the boxes
for final inspection. When he opened appellant's box, a peculiar odor
emitted therefrom. His curiousity aroused, he squeezed one of the
bundles allegedly containing gloves and felt dried leaves inside.
Opening one of the bundles, he pulled out a cellophane wrapper
protruding from the opening of one of the gloves. He made an
opening on one of the cellophane wrappers and took several grams of
the contents thereof (tsn, pp. 29-30, October 6, 1987; Emphasis
supplied).

Job Reyes forthwith prepared a letter reporting the shipment to the
NBI and requesting a laboratory examination of the samples he
extracted from the cellophane wrapper (tsn, pp. 5-6, October 6, 1987).

He brought the letter and a sample of appellant's shipment to the
Narcotics Section of the National Bureau of Investigation (NBI), at
about 1:30 o'clock in the afternoon of that date, i.e., August 14, 1987.
He was interviewed by the Chief of Narcotics Section. Job Reyes
informed the NBI that the rest of the shipment was still in his office.
Therefore, Job Reyes and three (3) NBI agents, and a photographer,
went to the Reyes' office at Ermita, Manila (tsn, p. 30, October 6,
1987).

Job Reyes brought out the box in which appellant's packages were
placed and, in the presence of the NBI agents, opened the top flaps,
removed the styro-foam and took out the cellophane wrappers from
inside the gloves. Dried marijuana leaves were found to have been
contained inside the cellophane wrappers (tsn, p. 38, October 6, 1987;
Emphasis supplied).

The package which allegedly contained books was likewise opened
by Job Reyes. He discovered that the package contained bricks or
cake-like dried marijuana leaves. The package which allegedly
contained tabacalera cigars was also opened. It turned out that dried
marijuana leaves were neatly stocked underneath the cigars (tsn, p.
39, October 6, 1987).

The NBI agents made an inventory and took charge of the box and
of the contents thereof, after signing a "Receipt" acknowledging
custody of the said effects (tsn, pp. 2-3, October 7, 1987).

Thereupon, the NBI agents tried to locate appellant but to no avail.
Appellant's stated address in his passport being the Manila Central
Post Office, the agents requested assistance from the latter's Chief
Security. On August 27, 1987, appellant, while claiming his mail at the
Central Post Office, was invited by the NBI to shed light on the
attempted shipment of the seized dried leaves. On the same day the
Narcotics Section of the NBI submitted the dried leaves to the
Forensic Chemistry Section for laboratory examination. It turned out
that the dried leaves were marijuana flowering tops as certified by
the forensic chemist. (Appellee's Brief, pp. 9-11, Rollo, pp. 132-134).

Thereafter, an Information was filed against appellant for violation
of RA 6425, otherwise known as the Dangerous Drugs Act.

After trial, the court a quo rendered the assailed decision.

In this appeal, accused/appellant assigns the following errors, to
wit:

THE LOWER COURT ERRED IN ADMITTING IN EVIDENCE THE
ILLEGALLY SEARCHED AND SEIZED OBJECTS CONTAINED IN THE FOUR
PARCELS.

THE LOWER COURT ERRED IN CONVICTING APPELLANT DESPITE THE
UNDISPUTED FACT THAT HIS RIGHTS UNDER THE CONSTITUTION
WHILE UNDER CUSTODIAL PROCEEDINGS WERE NOT OBSERVED.

THE LOWER COURT ERRED IN NOT GIVING CREDENCE TO THE
EXPLANATION OF THE APPELLANT ON HOW THE FOUR PARCELS CAME
INTO HIS POSSESSION (Appellant's Brief, p. 1; Rollo, p. 55)

1. Appellant contends that the evidence subject of the imputed
offense had been obtained in violation of his constitutional rights
against unreasonable search and seizure and privacy of
communication (Sec. 2 and 3, Art. III, Constitution) and therefore
argues that the same should be held inadmissible in evidence (Sec. 3
(2), Art. III).

Sections 2 and 3, Article III of the Constitution provide:

Sec. 2. The right of the people to be secure in their persons, houses,
papers and effects against unreasonable searches and seizures of
whatever nature and for any purpose shall be inviolable, and no
search warrant or warrant of arrest shall issue except upon probable
cause to be determined personally by the judge after examination
under oath or affirmation of the complainant and the witnesses he
may produce, and particularly describing the place to be searched and
the persons or things to be seized.

Sec. 3. (1) The privacy of communication and correspondence shall
be inviolable except upon lawful order of the court, or when public
safety or order requires otherwise as prescribed by law.

(2) Any evidence obtained in violation of this or the preceding
section shall be inadmissible for any purpose in any proceeding.

Our present constitutional provision on the guarantee against
unreasonable search and seizure had its origin in the 1935 Charter
which, worded as follows:

The right of the people to be secure in their persons, houses, papers
and effects against unreasonable searches and seizures shall not be
violated, and no warrants shall issue but upon probable cause, to be
determined by the judge after examination under oath or affirmation
of the complainant and the witnesses he may produce, and
particularly describing the place to be searched, and the persons or
things to be seized. (Sec. 1 [3], Article III)

was in turn derived almost verbatim from the Fourth Amendment
** to the United States Constitution. As such, the Court may turn to
the pronouncements of the United States Federal Supreme Court and
State Appellate Courts which are considered doctrinal in this
jurisdiction.

Thus, following the exclusionary rule laid down in Mapp v. Ohio by
the US Federal Supreme Court (367 US 643, 81 S.Ct. 1684, 6 L.Ed. 1081
[1961]), this Court, in Stonehill v. Diokno (20 SCRA 383 [1967]),
declared as inadmissible any evidence obtained by virtue of a
defective search and seizure warrant, abandoning in the process the
ruling earlier adopted in Moncado v. People's Court (80 Phil. 1 [1948])
wherein the admissibility of evidence was not affected by the
illegality of its seizure. The 1973 Charter (Sec. 4 [2], Art. IV)
constitutionalized the Stonehill ruling and is carried over up to the
present with the advent of the 1987 Constitution.

In a number of cases, the Court strictly adhered to the exclusionary
rule and has struck down the admissibility of evidence obtained in
violation of the constitutional safeguard against unreasonable
searches and seizures. (Bache & Co., (Phil.), Inc., v. Ruiz, 37 SCRA 823
[1971]; Lim v. Ponce de Leon, 66 SCRA 299 [1975]; People v. Burgos,
144 SCRA 1 [1986]; Roan v. Gonzales, 145 SCRA 687 [1987]; See also
Salazar v. Hon. Achacoso, et al., GR No. 81510, March 14, 1990).

It must be noted, however, that in all those cases adverted to, the
evidence so obtained were invariably procured by the State acting
through the medium of its law enforcers or other authorized
government agencies.

On the other hand, the case at bar assumes a peculiar character
since the evidence sought to be excluded was primarily discovered
and obtained by a private person, acting in a private capacity and
without the intervention and participation of State authorities. Under
the circumstances, can accused/appellant validly claim that his
constitutional right against unreasonable searches and seizure has
been violated? Stated otherwise, may an act of a private individual,
allegedly in violation of appellant's constitutional rights, be invoked
against the State?

We hold in the negative. In the absence of governmental
interference, the liberties guaranteed by the Constitution cannot be
invoked against the State.

As this Court held in Villanueva v. Querubin (48 SCRA 345 [1972]:

1. This constitutional right (against unreasonable search and
seizure) refers to the immunity of one's person, whether citizen or
alien, from interference by government, included in which is his
residence, his papers, and other possessions. . . .

. . . There the state, however powerful, does not as such have the
access except under the circumstances above noted, for in the
traditional formulation, his house, however humble, is his castle. Thus
is outlawed any unwarranted intrusion by government, which is called
upon to refrain from any invasion of his dwelling and to respect the
privacies of his life. . . . (Cf. Schermerber v. California, 384 US 757
[1966] and Boyd v. United States, 116 US 616 [1886]; Emphasis
supplied).

In Burdeau v. McDowell (256 US 465 (1921), 41 S Ct. 547; 65 L.Ed.
1048), the Court there in construing the right against unreasonable
searches and seizures declared that:

(t)he Fourth Amendment gives protection against unlawful searches
and seizures, and as shown in previous cases, its protection applies to
governmental action. Its origin and history clearly show that it was
intended as a restraint upon the activities of sovereign authority, and
was not intended to be a limitation upon other than governmental
agencies; as against such authority it was the purpose of the Fourth
Amendment to secure the citizen in the right of unmolested
occupation of his dwelling and the possession of his property, subject
to the right of seizure by process duly served.

The above ruling was reiterated in State v. Bryan (457 P.2d 661
[1968]) where a parking attendant who searched the automobile to
ascertain the owner thereof found marijuana instead, without the
knowledge and participation of police authorities, was declared
admissible in prosecution for illegal possession of narcotics.

And again in the 1969 case of Walker v. State (429 S.W.2d 121), it
was held that the search and seizure clauses are restraints upon the
government and its agents, not upon private individuals (citing People
v. Potter, 240 Cal. App.2d 621, 49 Cap. Rptr, 892 (1966); State v.
Brown, Mo., 391 S.W.2d 903 (1965); State v. Olsen, Or., 317 P.2d 938
(1957).

Likewise appropos is the case of Bernas v. US (373 F.2d 517 (1967).
The Court there said:

The search of which appellant complains, however, was made by a
private citizen the owner of a motel in which appellant stayed
overnight and in which he left behind a travel case containing the
evidence*** complained of. The search was made on the motel
owner's own initiative. Because of it, he became suspicious, called the
local police, informed them of the bag's contents, and made it
available to the authorities.

The fourth amendment and the case law applying it do not require
exclusion of evidence obtained through a search by a private citizen.
Rather, the amendment only proscribes governmental action."

The contraband in the case at bar having come into possession of
the Government without the latter transgressing appellant's rights
against unreasonable search and seizure, the Court sees no cogent
reason why the same should not be admitted against him in the
prosecution of the offense charged.

Appellant, however, would like this court to believe that NBI agents
made an illegal search and seizure of the evidence later on used in
prosecuting the case which resulted in his conviction.

The postulate advanced by accused/appellant needs to be clarified
in two days. In both instances, the argument stands to fall on its own
weight, or the lack of it.

First, the factual considerations of the case at bar readily foreclose
the proposition that NBI agents conducted an illegal search and
seizure of the prohibited merchandise. Records of the case clearly
indicate that it was Mr. Job Reyes, the proprietor of the forwarding
agency, who made search/inspection of the packages. Said inspection
was reasonable and a standard operating procedure on the part of
Mr. Reyes as a precautionary measure before delivery of packages to
the Bureau of Customs or the Bureau of Posts (TSN, October 6 & 7,
1987, pp. 15-18; pp. 7-8; Original Records, pp. 119-122; 167-168).

It will be recalled that after Reyes opened the box containing the
illicit cargo, he took samples of the same to the NBI and later
summoned the agents to his place of business. Thereafter, he opened
the parcel containing the rest of the shipment and entrusted the care
and custody thereof to the NBI agents. Clearly, the NBI agents made
no search and seizure, much less an illegal one, contrary to the
postulate of accused/appellant.

Second, the mere presence of the NBI agents did not convert the
reasonable search effected by Reyes into a warrantless search and
seizure proscribed by the Constitution. Merely to observe and look at
that which is in plain sight is not a search. Having observed that which
is open, where no trespass has been committed in aid thereof, is not
search (Chadwick v. State, 429 SW2d 135). Where the contraband
articles are identified without a trespass on the part of the arresting
officer, there is not the search that is prohibited by the constitution
(US v. Lee 274 US 559, 71 L.Ed. 1202 [1927]; Ker v. State of California
374 US 23, 10 L.Ed.2d. 726 [1963]; Moore v. State, 429 SW2d 122
[1968]).

In Gandy v. Watkins (237 F. Supp. 266 [1964]), it was likewise held
that where the property was taken into custody of the police at the
specific request of the manager and where the search was initially
made by the owner there is no unreasonable search and seizure
within the constitutional meaning of the term.

That the Bill of Rights embodied in the Constitution is not meant to
be invoked against acts of private individuals finds support in the
deliberations of the Constitutional Commission. True, the liberties
guaranteed by the fundamental law of the land must always be
subject to protection. But protection against whom? Commissioner
Bernas in his sponsorship speech in the Bill of Rights answers the
query which he himself posed, as follows:

First, the general reflections. The protection of fundamental
liberties in the essence of constitutional democracy. Protection
against whom? Protection against the state. The Bill of Rights governs
the relationship between the individual and the state. Its concern is
not the relation between individuals, between a private individual
and other individuals. What the Bill of Rights does is to declare some
forbidden zones in the private sphere inaccessible to any power
holder. (Sponsorship Speech of Commissioner Bernas , Record of the
Constitutional Commission, Vol. 1, p. 674; July 17, 1986; Emphasis
supplied)

The constitutional proscription against unlawful searches and
seizures therefore applies as a restraint directed only against the
government and its agencies tasked with the enforcement of the law.
Thus, it could only be invoked against the State to whom the restraint
against arbitrary and unreasonable exercise of power is imposed.

If the search is made upon the request of law enforcers, a warrant
must generally be first secured if it is to pass the test of
constitutionality. However, if the search is made at the behest or
initiative of the proprietor of a private establishment for its own and
private purposes, as in the case at bar, and without the intervention
of police authorities, the right against unreasonable search and
seizure cannot be invoked for only the act of private individual, not
the law enforcers, is involved. In sum, the protection against
unreasonable searches and seizures cannot be extended to acts
committed by private individuals so as to bring it within the ambit of
alleged unlawful intrusion by the government.

Appellant argues, however, that since the provisions of the 1935
Constitution has been modified by the present phraseology found in
the 1987 Charter, expressly declaring as inadmissible any evidence
obtained in violation of the constitutional prohibition against illegal
search and seizure, it matters not whether the evidence was procured
by police authorities or private individuals (Appellant's Brief, p. 8,
Rollo, p. 62).

The argument is untenable. For one thing, the constitution, in laying
down the principles of the government and fundamental liberties of
the people, does not govern relationships between individuals.
Moreover, it must be emphasized that the modifications introduced in
the 1987 Constitution (re: Sec. 2, Art. III) relate to the issuance of
either a search warrant or warrant of arrest vis-a-vis the responsibility
of the judge in the issuance thereof (See Soliven v. Makasiar, 167
SCRA 393 [1988]; Circular No. 13 [October 1, 1985] and Circular No. 12
[June 30, 1987]. The modifications introduced deviate in no manner as
to whom the restriction or inhibition against unreasonable search and
seizure is directed against. The restraint stayed with the State and did
not shift to anyone else.

Corolarilly, alleged violations against unreasonable search and
seizure may only be invoked against the State by an individual
unjustly traduced by the exercise of sovereign authority. To agree
with appellant that an act of a private individual in violation of the Bill
of Rights should also be construed as an act of the State would result
in serious legal complications and an absurd interpretation of the
constitution.

Similarly, the admissibility of the evidence procured by an
individual effected through private seizure equally applies, in pari
passu, to the alleged violation, non-governmental as it is, of
appellant's constitutional rights to privacy and communication.

2. In his second assignment of error, appellant contends that the
lower court erred in convicting him despite the undisputed fact that
his rights under the constitution while under custodial investigation
were not observed.

Again, the contention is without merit, We have carefully examined
the records of the case and found nothing to indicate, as an
"undisputed fact", that appellant was not informed of his
constitutional rights or that he gave statements without the
assistance of counsel. The law enforcers testified that
accused/appellant was informed of his constitutional rights. It is
presumed that they have regularly performed their duties (See. 5(m),
Rule 131) and their testimonies should be given full faith and
credence, there being no evidence to the contrary. What is clear from
the records, on the other hand, is that appellant refused to give any
written statement while under investigation as testified by Atty.
Lastimoso of the NBI, Thus:

Fiscal Formoso:

You said that you investigated Mr. and Mrs. Job Reyes. What about
the accused here, did you investigate the accused together with the
girl?

WITNESS:

Yes, we have interviewed the accused together with the girl but the
accused availed of his constitutional right not to give any written
statement, sir. (TSN, October 8, 1987, p. 62; Original Records, p. 240)

The above testimony of the witness for the prosecution was not
contradicted by the defense on cross-examination. As borne out by
the records, neither was there any proof by the defense that
appellant gave uncounselled confession while being investigated.
What is more, we have examined the assailed judgment of the trial
court and nowhere is there any reference made to the testimony of
appellant while under custodial investigation which was utilized in the
finding of conviction. Appellant's second assignment of error is
therefore misplaced.

3. Coming now to appellant's third assignment of error, appellant
would like us to believe that he was not the owner of the packages
which contained prohibited drugs but rather a certain Michael, a
German national, whom appellant met in a pub along Ermita, Manila:
that in the course of their 30-minute conversation, Michael requested
him to ship the packages and gave him P2,000.00 for the cost of the
shipment since the German national was about to leave the country
the next day (October 15, 1987, TSN, pp. 2-10).

Rather than give the appearance of veracity, we find appellant's
disclaimer as incredulous, self-serving and contrary to human
experience. It can easily be fabricated. An acquaintance with a
complete stranger struck in half an hour could not have pushed a man
to entrust the shipment of four (4) parcels and shell out P2,000.00 for
the purpose and for appellant to readily accede to comply with the
undertaking without first ascertaining its contents. As stated by the
trial court, "(a) person would not simply entrust contraband and of
considerable value at that as the marijuana flowering tops, and the
cash amount of P2,000.00 to a complete stranger like the Accused.
The Accused, on the other hand, would not simply accept such
undertaking to take custody of the packages and ship the same from a
complete stranger on his mere say-so" (Decision, p. 19, Rollo, p. 91).
As to why he readily agreed to do the errand, appellant failed to
explain. Denials, if unsubstantiated by clear and convincing evidence,
are negative self-serving evidence which deserve no weight in law and
cannot be given greater evidentiary weight than the testimony of
credible witnesses who testify on affirmative matters (People v.
Esquillo, 171 SCRA 571 [1989]; People vs. Sariol, 174 SCRA 237 [1989]).

Appellant's bare denial is even made more suspect considering that,
as per records of the Interpol, he was previously convicted of
possession of hashish by the Kleve Court in the Federal Republic of
Germany on January 1, 1982 and that the consignee of the frustrated
shipment, Walter Fierz, also a Swiss national, was likewise convicted
for drug abuse and is just about an hour's drive from appellant's
residence in Zurich, Switzerland (TSN, October 8, 1987, p. 66; Original
Records, p. 244; Decision, p. 21; Rollo, p. 93).

Evidence to be believed, must not only proceed from the mouth of
a credible witness, but it must be credible in itself such as the
common experience and observation of mankind can approve as
probable under the circumstances (People v. Alto, 26 SCRA 342
[1968], citing Daggers v. Van Dyke, 37 N.J. Eg. 130; see also People v.
Sarda, 172 SCRA 651 [1989]; People v. Sunga, 123 SCRA 327 [1983]);
Castaares v. CA, 92 SCRA 567 [1979]). As records further show,
appellant did not even bother to ask Michael's full name, his complete
address or passport number. Furthermore, if indeed, the German
national was the owner of the merchandise, appellant should have so
indicated in the contract of shipment (Exh. "B", Original Records, p.
40). On the contrary, appellant signed the contract as the owner and
shipper thereof giving more weight to the presumption that things
which a person possesses, or exercises acts of ownership over, are
owned by him (Sec. 5 [j], Rule 131). At this point, appellant is
therefore estopped to claim otherwise.

Premises considered, we see no error committed by the trial court
in rendering the assailed judgment.

WHEREFORE, the judgment of conviction finding appellant guilty
beyond reasonable doubt of the crime charged is hereby AFFIRMED.
No costs.



FIRST DIVISION

[G.R. No. 113271. October 16, 1997]

WATEROUS DRUG CORPORATION and MS. EMMA CO, petitioners, vs.
NATIONAL LABOR RELATIONS COMMISSION and ANTONIA MELODIA
CATOLICO, respondents.

D E C I S I O N

DAVIDE, JR. J.:

Nor is he a true Servant *who+ buys dear to share in the Profit with
the Seller.*1+

This petition for certiorari under Rule 65 of the Rules of Court seeks to
declare private respondent Antonia Melodia Catolico (hereafter
Catolico) not a true Servant, thereby assailing the 30 September
1993 decision[2] and 2 December 1993 Resolution[3] of the National
Labor Relations Commission (NLRC) in NLRC-NCR CA No. 005160-93,
which sustained the reinstatement and monetary awards in favor of
private respondent*4+ and denied the petitioners motion for
reconsideration.[5]

The facts are as follows:

Catolico was hired as a pharmacist by petitioner Waterous Drug
Corporation (hereafter WATEROUS) on 15 August 1988.

On 31 July 1989, Catolico received a memorandum[6] from
WATEROUS Vice President-General Manager Emma R. Co warning her
not to dispense medicine to employees chargeable to the latters
accounts because the same was a prohibited practice. On the same
date, Co issued another memorandum[7] to Catolico warning her not
to negotiate with suppliers of medicine without consulting the
Purchasing Department, as this would impair the companys control
of purchases and, besides she was not authorized to deal directly with
the suppliers.

As regards the first memorandum, Catolico did not deny her
responsibility but explained that her act was due to negligence,
since fellow employee Irene Soliven obtained the medicines in bad
faith and through misrepresentation when she claimed that she was
given a charge slip by the Admitting Dept. Catolico then asked the
company to look into the fraudulent activities of Soliven.[8]

In a memorandum[9] dated 21 November 1989, WATEROUS
Supervisor Luzviminda E. Bautro warned Catolico against the rush
delivery of medicines without the proper documents.

On 29 January 1990, WATEROUS Control Clerk Eugenio Valdez
informed Co that he noticed an irregularity involving Catolico and
Yung Shin Pharmaceuticals, Inc. (hereafter YSP), which he described as
follows:

A case in point is medicine purchased under our Purchase Order
(P.O.) No. 19045 with YSP Sales Invoice No. 266 representing purchase
of ten (10) bottles of Voren tablets at P384.00 per unit. Previous P.O.s
issued to YSP, Inc. showed that the price per bottle is P320.00 while
P.O. No. 19045 is priced at P384.00 or an over price of P64.00 per
bottle (or total of P640.00). WDRC paid the amount of P3,840.00 thru
MBTC Check No. 222832 dated December 15, 1988. Verification was
made to YSP, Inc. to determine the discrepancy and it was found that
the cost per bottle was indeed overpriced. YSP, Inc. Accounting
Department (Ms. Estelita Reyes) confirmed that the difference
represents refund of jack-up price of ten bottles of Voren tablets per
sales invoice no. 266 as per their check voucher no. 629552 (shown to
the undersigned), which was paid to Ms. Catolico through China Bank
check no. 892068 dated November 9, 1989....

The undersigned talked to Ms. Catolico regarding the check but she
denied having received it and that she is unaware of the overprice.
However, upon conversation with Ms. Saldana, EDRC Espana
Pharmacy Clerk, she confirmed that the check amounting to P640.00
was actually received by Ms. Catolico. As a matter of fact, Ms.
Catolico even asked Ms. Saldana if she opened the envelope
containing the check but Ms. Saldana answered her talagang ganyan,
bukas. It appears that the amount in question (P640.00) had been
pocketed by Ms. Catolico.[10]

Forthwith, in her memorandum[11] dated 31 January 1990, Co asked
Catolico to explain, within twenty-four hours, her side of the reported
irregularity. Catolico asked for additional time to give her
explanation,[12] and she was granted a 48-hour extension from 1 to 3
February 1990. However, on 2 February 1990, she was informed that
effective 6 February 1990 to 7 March 1990, she would be placed on
preventive suspension to protect the interests of the company.[13]

In a letter dated 2 February 1990, Catolico requested access to the file
containing Sales Invoice No. 266 for her to be able to make a
satisfactory explanation. In said letter she protested Saldaas
invasion of her privacy when Saldaa opened an envelope addressed
to Catolico.[14]

In a letter[15] to Co dated 10 February 1990, Catolico, through her
counsel, explained that the check she received from YSP was a
Christmas gift and not a refund of overprice. She also averred that
the preventive suspension was ill-motivated, as it sprang from an
earlier incident between her and Cos secretary, Irene Soliven.

On 5 March 1990, WATEROUS Supervisor Luzviminda Bautro, issued a
memorandum[16] notifying Catolico of her termination; thus:

We received your letter of explanation and your lawyer's letter dated
Feb. 2, 1990 and Feb. 10, 1990 respectively regarding our imposition
of preventive suspension on you for acts of dishonesty. However,
said letters failed to rebut the evidences [sic] in our possession which
clearly shows that as a Pharmacist stationed at Espana Branch, you
actually made Purchase Orders at YSP Phils., Inc. for 10 bottles of
Voren tablets at P384.00/bottle with previous price of P320.00/bottle
only. A check which you received in the amount of P640.00 actually
represents the refund of over price of said medicines and this was
confirmed by Ms. Estelita Reyes, YSP Phils., Inc. Accounting
Department.

Your actuation constitutes an act of dishonesty detrimental to the
interest of the company. Accordingly, you are hereby terminated
effective March 8, 1990.

On 5 May 1990, Catolico filed before the Office of the Labor Arbiter a
complaint for unfair labor practice, illegal dismissal, and illegal
suspension.[17]

In his decision[18] of 10 May 1993, Labor Arbiter Alex Arcadio Lopez
found no proof of unfair labor practice against petitioners.
Nevertheless, he decided in favor of Catolico because petitioners
failed to prove what *they+ alleged as complainants dishonesty,
and to show that any investigation was conducted. Hence, the
dismissal was without just cause and due process. He thus declared
the dismissal and suspension illegal but disallowed reinstatement, as
it would not be to the best interest of the parties. Accordingly, he
awarded separation pay to Catolico computed at one-half months
pay for every year of service; back wages for one year; and the
additional sum of P2,000.00 for illegal suspension representing 30
days work. Arbiter Lopez computed the award in favor of Catolico as
follows:

30 days Preventive Suspension P 2,000.00

Backwages 26,858.50

1/12 of P26,858.50 2,238.21

Separation pay (3 years) 4,305.15

TOTAL AWARD: P35,401.86

Petitioners seasonably appealed from the decision and urged the
NLRC to set it aside because the Labor Arbiter erred in finding that
Catolico was denied due process and that there was no just cause to
terminate her services.

In its decision[19] of 30 September 1993, the NLRC affirmed the
findings of the Labor Arbiter on the ground that petitioners were not
able to prove a just cause for Catolicos dismissal from her
employment. It found that petitioners evidence consisted only of the
check of P640.00 drawn by YSP in favor of complainant, which her co-
employee saw when the latter opened the envelope. But, it declared
that the check was inadmissible in evidence pursuant to Sections 2
and 3(1 and 2) of Article III of the Constitution.[20] It concluded:

With the smoking gun evidence of respondents being rendered
inadmissible, by virtue of the constitutional right invoked by
complainants, respondents case falls apart as it is bereft of evidence
which cannot be used as a legal basis for complainants dismissal.

The NLRC then dismissed the appeal for lack of merit, but modified
the dispositive portion of the appealed decision by deleting the award
for illegal suspension as the same was already included in the
computation of the aggregate of the awards in the amount of
P35,401.86.

Their motion for reconsideration having been denied, petitioners filed
this special civil action for certiorari, which is anchored on the
following grounds:

I. Public respondent committed grave abuse of discretion in its
findings of facts.

II. Due process was duly accorded to private respondent.

III. Public respondent gravely erred in applying Section 3, Article III of
the 1987 Constitution.

As to the first and second grounds, petitioners insist that Catolico had
been receiving commissions from YSP, or probably from other
suppliers, and that the check issued to her on 9 November 1989 was
not the first or the last. They also maintained that Catolico occupied a
confidential position and that Catolicos receipt of YSPs check,
aggravated by her propensity to violate company rules, constituted
breach of confidence. And contrary to the findings of NLRC, Catolico
was given ample opportunity to explain her side of the controversy.

Anent the third ground, petitioners submit that, in light of the
decision in the People v. Marti,[21] the constitutional protection
against unreasonable searches and seizures refers to the immunity of
ones person from interference by government and cannot be
extended to acts committed by private individuals so as to bring it
within the ambit of alleged unlawful intrusion by the government.

In its Manifestation in Lieu of Comment, the Office of the Solicitor
General (OSG) disagreed with the NLRC's decision, as it was of the
persuasion that (a) the conclusions reached by public respondent are
inconsistent with its findings of fact; and (b) the incident involving the
opening of envelope addressed to private respondent does not
warrant the application of the constitutional provisions. It observed
that Catolico was given several opportunities to explain her side of
the check controversy, and concluded that the opportunities granted
her and her subsequent explanation satisfy the requirements of just
cause and due process. The OSG was also convinced that Catolicos
dismissal was based on just cause and that Catolicos admission of the
existence of the check, as well as her lame excuse that it was a
Christmas gift from YSP, constituted substantial evidence of
dishonesty. Finally, the OSG echoed petitioners argument that there
was no violation of the right of privacy of communication in this
case,[22] adding that petitioner WATEROUS was justified in opening
an envelope from one of its regular suppliers as it could assume that
the letter was a business communication in which it had an interest.

In its Comment which we required to be filed in view of the adverse
stand of the OSG, the NLRC contends that petitioners miserably failed
to prove their claim that it committed grave abuse of discretion in its
findings of fact. It then prays that we dismiss this petition.

In her Comment, Catolico asserts that petitioners evidence is too
flimsy to justify her dismissal. The check in issue was given to her,
and she had no duty to turn it over to her employer. Company rules
do not prohibit an employee from accepting gifts from clients, and
there is no indication in the contentious check that it was meant as a
refund for overpriced medicines. Besides, the check was discovered
in violation of the constitutional provision on the right to privacy and
communication; hence, as correctly held by the NLRC, it was
inadmissible in evidence.

Catolico likewise disputes petitioners claim that the audit report and
her initial response that she never received a check were sufficient to
justify her dismissal. When she denied having received a check from
YSP, she meant that she did not receive any refund of overprice,
consistent with her position that what she received was a token gift.
All that can be gathered from the audit report is that there was
apparently an overcharge, with no basis to conclude that Catolico
pocketed the amount in collusion with YSP. She thus concluded that
her dismissal was based on a mere suspicion.

Finally, Catolico insists that she could not have breached the trust
and confidence of WATEROUS because, being merely a pharmacist,
she did not handle confidential information or sensitive properties.
She was doing the task of a saleslady: selling drugs and making
requisitions when supplies were low.

A thorough review of the record leads us to no other conclusion than
that, except as to the third ground, the instant petition must fail.

Concededly, Catolico was denied due process. Procedural due process
requires that an employee be apprised of the charge against him,
given reasonable time to answer the charge, allowed ample
opportunity to be heard and defend himself, and assisted by a
representative if the employee so desires.[23] Ample opportunity
connotes every kind of assistance that management must accord the
employee to enable him to prepare adequately for his defense,
including legal representation.[24]

In the case at bar, although Catolico was given an opportunity to
explain her side, she was dismissed from the service in the
memorandum of 5 March 1990 issued by her Supervisor after receipt
of her letter and that of her counsel. No hearing was ever conducted
after the issues were joined through said letters. The Supervisors
memorandum spoke of evidences *sic+ in *WATEROUS+ possession,
which were not, however, submitted. What the evidences *sic+
other than the sales invoice and the check were, only the Supervisor
knew.

Catolico was also unjustly dismissed. It is settled that the burden is
on the employer to prove just and valid cause for dismissing an
employee, and its failure to discharge that burden would result in a
finding that the dismissal is unjustified.[25] Here, WATEROUS proved
unequal to the task.

It is evident from the Supervisors memorandum that Catolico was
dismissed because of an alleged anomalous transaction with YSP.
Unfortunately for petitioners, their evidence does not establish that
there was an overcharge. Control Clerk Eugenio C. Valdez, who claims
to have discovered Catolicos inappropriate transaction, stated in his
affidavit:[26]

4. My findings revealed that on or before the month of July 31, 1989,
Ms. Catolico in violation of the [company] procedure, made an under
the table deal with YSP Phils. to supply WDRC needed medicines like
Voren tablets at a jack-up price of P384.00 per bottle of 50 mg. which
has a previous price of only P320.00;

5. I verified the matter to YSP Phils. to determine the discrepancy and
I found out that the cost per bottle was indeed overpriced. The
Accounting Department of YSP Phils. through Ms. Estelita Reyes
confirmed that there was really an overprice and she said that the
difference was refunded through their check voucher no. 629552
which was shown to me and the payee is Melodia Catolico, through a
China Bank Check No. 892068 dated November 9, 1989.

It clearly appears then that Catolicos dismissal was based on hearsay
information. Estelita Reyes never testified nor executed an affidavit
relative to this case; thus, we have to reject the statements attributed
to her by Valdez. Hearsay evidence carries no probative value.[27]

Besides, it was never shown that petitioners paid for the Voren
tablets. While Valdez informed Co, through the formers
memorandum[28] of 29 January 1990, that WATEROUS paid YSP
P3,840.00 thru MBTC Check No. 222832, the said check was never
presented in evidence, nor was any receipt from YSP offered by
petitioners.

Moreover, the two purchase orders for Voren tablets presented by
petitioners do not indicate an overcharge. The purchase order dated
16 August 1989[29] stated that the Voren tablets cost P320.00 per
box, while the purchase order dated 5 October 1989[30] priced the
Voren tablets at P384.00 per bottle. The difference in price may then
be attributed to the different packaging used in each purchase order.

Assuming that there was an overcharge, the two purchase orders for
the Voren tablets were recommended by Director-MMG Mario R.
Panuncio, verified by AVP-MNG Noli M. Lopez and approved by Vice
President-General Manager Emma R. Co. The purchase orders were
silent as to Catolicos participation in the purchase. If the price
increase was objectionable to petitioners, they or their officers should
have disapproved the transaction. Consequently, petitioners had no
one to blame for their predicament but themselves. This set of facts
emphasizes the exceedingly incredible situation proposed by
petitioners. Despite the memorandum warning Catolico not to
negotiate with suppliers of medicine, there was no proof that she
ever transacted, or that she had the opportunity to transact, with the
said suppliers. Again, as the purchase orders indicate, Catolico was
not at all involved in the sale of the Voren tablets. There was no
occasion for Catolico to initiate, much less benefit from, what Valdez
called an under the table deal with YSP.

Catolicos dismissal then was obviously grounded on mere suspicion,
which in no case can justify an employees dismissal. Suspicion is not
among the valid causes provided by the Labor Code for the
termination of employment;[31] and even the dismissal of an
employee for loss of trust and confidence must rest on substantial
grounds and not on the employers arbitrariness, whims, caprices, or
suspicion.[32] Besides, Catolico was not shown to be a managerial
employee, to which class of employees the term trust and
confidence is restricted.*33+

As regards the constitutional violation upon which the NLRC anchored
its decision, we find no reason to revise the doctrine laid down in
People vs. Marti[34] that the Bill of Rights does not protect citizens
from unreasonable searches and seizures perpetrated by private
individuals. It is not true, as counsel for Catolico claims, that the
citizens have no recourse against such assaults. On the contrary, and
as said counsel admits, such an invasion gives rise to both criminal
and civil liabilities.

Finally, since it has been determined by the Labor Arbiter that
Catolicos reinstatement would not be to the best interest of the
parties, he correctly awarded separation pay to Catolico. Separation
pay in lieu of reinstatement is computed at one months salary for
every year of service.[35] In this case, however, Labor Arbiter Lopez
computed the separation pay at one-half months salary for every
year of service. Catolico did not oppose or raise an objection. As such,
we will uphold the award of separation pay as fixed by the Labor
Arbiter.

WHEREFORE, the instant petition is hereby DISMISSED and the
challenged decision and resolution of the National Labor Relations
Commission dated 30 September 1993 and 2 December 1993,
respectively, in NLRC-NCR CA No. 005160-93 are AFFIRMED, except as
to its reason for upholding the Labor Arbiters decision, viz., that the
evidence against private respondent was inadmissible for having been
obtained in violation of her constitutional rights of privacy of
communication and against unreasonable searches and seizures
which is hereby set aside.

Costs against petitioners.

[G.R. No. 168081, October 17, 2008]

ARMANDO G. YRASUEGUI, PETITIONER, VS. PHILIPPINE AIRLINES,
INC., RESPONDENT.

D E C I S I O N

REYES, R.T., J.:

THIS case portrays the peculiar story of an international flight steward
who was dismissed because of his failure to adhere to the weight
standards of the airline company.

He is now before this Court via a petition for review on certiorari
claiming that he was illegally dismissed. To buttress his stance, he
argues that (1) his dismissal does not fall under 282(e) of the Labor
Code; (2) continuing adherence to the weight standards of the
company is not a bona fide occupational qualification; and (3) he was
discriminated against
because other overweight employees were promoted instead of being
disciplined.

After a meticulous consideration of all arguments pro and con, We
uphold the legality of dismissal. Separation pay, however, should be
awarded in favor of the employee as an act of social justice or based
on equity. This is so because his dismissal is not for serious
misconduct. Neither is it reflective of his moral character.

The Facts

Petitioner Armando G. Yrasuegui was a former international flight
steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight
inches (5'8") with a large body frame. The proper weight for a man of
his height and body structure is from 147 to 166 pounds, the ideal
weight being 166 pounds, as mandated by the Cabin and Crew
Administration Manual[1] of PAL.

The weight problem of petitioner dates back to 1984. Back then, PAL
advised him to go on an extended vacation leave from December 29,
1984 to March 4, 1985 to address his weight concerns. Apparently,
petitioner failed to meet the company's weight standards, prompting
another leave without pay from March 5, 1985 to November 1985.

After meeting the required weight, petitioner was allowed to return
to work. But petitioner's weight problem recurred. He again went on
leave without pay from October 17, 1988 to February 1989.

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his
ideal weight. In line with company policy, he was removed from flight
duty effective May 6, 1989 to July 3, 1989. He was formally requested
to trim down to his ideal weight and report for weight checks on
several dates. He was also told that he may avail of the services of the
company physician should he wish to do so. He was advised that his
case will be evaluated on July 3, 1989.[2]

On February 25, 1989, petitioner underwent weight check. It was
discovered that he gained, instead of losing, weight. He was
overweight at 215 pounds, which is 49 pounds beyond the limit.
Consequently, his off-duty status was retained.

On October 17, 1989, PAL Line Administrator Gloria Dizon personally
visited petitioner at his residence to check on the progress of his
effort to lose weight. Petitioner weighed 217 pounds, gaining 2
pounds from his previous weight. After the visit, petitioner made a
commitment[3] to reduce weight in a letter addressed to Cabin Crew
Group Manager Augusto Barrios. The letter, in full, reads:

Dear Sir:

I would like to guaranty my commitment towards a weight loss
from 217 pounds to 200 pounds from today until 31 Dec. 1989.

From thereon, I promise to continue reducing at a reasonable
percentage until such time that my ideal weight is achieved.

Likewise, I promise to personally report to your office at the
designated time schedule you will set for my weight check.

Respectfully Yours,

F/S Armando Yrasuegui[4]

Despite the lapse of a ninety-day period given him to reach his ideal
weight, petitioner remained overweight. On January 3, 1990, he was
informed of the PAL decision for him to remain grounded until such
time that he satisfactorily complies with the weight standards. Again,
he was directed to report every two weeks for weight checks.

Petitioner failed to report for weight checks. Despite that, he was
given one more month to comply with the weight requirement. As
usual, he was asked to report for weight check on different dates. He
was reminded that his grounding would continue pending satisfactory
compliance with the weight standards.[5]

Again, petitioner failed to report for weight checks, although he was
seen submitting his passport for processing at the PAL Staff Service
Division.

On April 17, 1990, petitioner was formally warned that a repeated
refusal to report for weight check would be dealt with accordingly. He
was given another set of weight check dates.[6] Again, petitioner
ignored the directive and did not report for weight checks. On June
26, 1990, petitioner was required to explain his refusal to undergo
weight checks.[7]

When petitioner tipped the scale on July 30, 1990, he weighed at 212
pounds. Clearly, he was still way over his ideal weight of 166 pounds.

From then on, nothing was heard from petitioner until he followed up
his case requesting for leniency on the latter part of 1992. He weighed
at 219 pounds on August 20, 1992 and 205 pounds on November 5,
1992.

On November 13, 1992, PAL finally served petitioner a Notice of
Administrative Charge for violation of company standards on weight
requirements. He was given ten (10) days from receipt of the charge
within which to file his answer and submit controverting evidence.[8]

On December 7, 1992, petitioner submitted his Answer.[9] Notably,
he did not deny being overweight. What he claimed, instead, is that
his violation, if any, had already been condoned by PAL since "no
action has been taken by the company" regarding his case "since
1988." He also claimed that PAL discriminated against him because
"the company has not been fair in treating the cabin crew members
who are similarly situated."

On December 8, 1992, a clarificatory hearing was held where
petitioner manifested that he was undergoing a weight reduction
program to lose at least two (2) pounds per week so as to attain his
ideal weight.[10]

On June 15, 1993, petitioner was formally informed by PAL that due
to his inability to attain his ideal weight, "and considering the utmost
leniency" extended to him "which spanned a period covering a total
of almost five (5) years," his services were considered terminated
"effective immediately."[11]

His motion for reconsideration having been denied,[12] petitioner
filed a complaint for illegal dismissal against PAL.

Labor Arbiter, NLRC and CA Dispositions

On November 18, 1998, Labor Arbiter Valentin C. Reyes ruled[13] that
petitioner was illegally dismissed. The dispositive part of the Arbiter
ruling runs as follows:

WHEREFORE, in view of the foregoing, judgment is hereby
rendered, declaring the complainant's dismissal illegal, and ordering
the respondent to reinstate him to his former position or substantially
equivalent one, and to pay him:

Backwages of Php10,500.00 per month from his dismissal on June
15, 1993 until reinstated, which for purposes of appeal is hereby set
from June 15, 1993 up to August 15, 1998 at P651,000.00;

Attorney's fees of five percent (5%) of the total award.

SO ORDERED.[14]

The Labor Arbiter held that the weight standards of PAL are
reasonable in view of the nature of the job of petitioner.[15]
However, the weight standards need not be complied with under pain
of dismissal since his weight did not hamper the performance of his
duties.[16] Assuming that it did, petitioner could be transferred to
other positions where his weight would not be a negative factor.[17]
Notably, other overweight employees, i.e., Mr. Palacios, Mr. Cui, and
Mr. Barrios, were promoted instead of being disciplined.[18]

Both parties appealed to the National Labor Relations Commission
(NLRC).[19]

On October 8, 1999, the Labor Arbiter issued a writ of execution
directing the reinstatement of petitioner without loss of seniority
rights and other benefits.[20]

On February 1, 2000, the Labor Arbiter denied[21] the Motion to
Quash Writ of Execution[22] of PAL.

On March 6, 2000, PAL appealed the denial of its motion to quash to
the NLRC.[23]

On June 23, 2000, the NLRC rendered judgment[24] in the following
tenor:

WHEREFORE, premises considered[,] the Decision of the Arbiter
dated 18 November 1998 as modified by our findings herein, is hereby
AFFIRMED and that part of the dispositive portion of said decision
concerning complainant's entitlement to backwages shall be deemed
to refer to complainant's entitlement to his full backwages, inclusive
of allowances and to his other benefits or their monetary equivalent
instead of simply backwages, from date of dismissal until his actual
reinstatement or finality hereof. Respondent is enjoined to manifests
(sic) its choice of the form of the reinstatement of complainant,
whether physical or through payroll within ten (10) days from notice
failing which, the same shall be deemed as complainant's
reinstatement through payroll and execution in case of non-payment
shall accordingly be issued by the Arbiter. Both appeals of respondent
thus, are DISMISSED for utter lack of merit.[25]

According to the NLRC, "obesity, or the tendency to gain weight
uncontrollably regardless of the amount of food intake, is a disease in
itself."[26] As a consequence, there can be no intentional defiance or
serious misconduct by petitioner to the lawful order of PAL for him to
lose weight.[27]

Like the Labor Arbiter, the NLRC found the weight standards of PAL to
be reasonable. However, it found as unnecessary the Labor Arbiter
holding that petitioner was not remiss in the performance of his
duties as flight steward despite being overweight. According to the
NLRC, the Labor Arbiter should have limited himself to the issue of
whether the failure of petitioner to attain his ideal weight constituted
willful defiance of the weight standards of PAL.[28]

PAL moved for reconsideration to no avail.[29] Thus, PAL elevated the
matter to the Court of Appeals (CA) via a petition for certiorari under
Rule 65 of the 1997 Rules of Civil Procedure.[30]

By Decision dated August 31, 2004, the CA reversed[31] the NLRC:

WHEREFORE, premises considered, we hereby GRANT the petition.
The assailed NLRC decision is declared NULL and VOID and is hereby
SET ASIDE. The private respondent's complaint is hereby DISMISSED.
No costs.

SO ORDERED.[32]

The CA opined that there was grave abuse of discretion on the part of
the NLRC because it "looked at wrong and irrelevant
considerations"[33] in evaluating the evidence of the parties.
Contrary to the NLRC ruling, the weight standards of PAL are meant to
be a continuing qualification for an employee's position.[34] The
failure to adhere to the weight standards is an analogous cause for
the dismissal of an employee under Article 282(e) of the Labor Code in
relation to Article 282(a). It is not willful disobedience as the NLRC
seemed to suggest.[35] Said the CA, "the element of willfulness that
the NLRC decision cites is an irrelevant consideration in arriving at a
conclusion on whether the dismissal is legally proper."[36] In other
words, "the relevant question to ask is not one of willfulness but one
of reasonableness of the standard and whether or not the employee
qualifies or continues to qualify under this standard."[37]

Just like the Labor Arbiter and the NLRC, the CA held that the weight
standards of PAL are reasonable.[38] Thus, petitioner was legally
dismissed because he repeatedly failed to meet the prescribed weight
standards.[39] It is obvious that the issue of discrimination was only
invoked by petitioner for purposes of escaping the result of his
dismissal for being overweight.[40]

On May 10, 2005, the CA denied petitioner's motion for
reconsideration.[41] Elaborating on its earlier ruling, the CA held that
the weight standards of PAL are a bona fide occupational qualification
which, in case of violation, "justifies an employee's separation from
the service."[42]

Issues

In this Rule 45 petition for review, the following issues are posed for
resolution:

I.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT PETITIONER'S OBESITY CAN BE A GROUND FOR
DISMISSAL UNDER PARAGRAPH (e) OF ARTICLE 282 OF THE LABOR
CODE OF THE PHILIPPINES;

II.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT PETITIONER'S DISMISSAL FOR OBESITY CAN BE
PREDICATED ON THE "BONA FIDE OCCUPATIONAL QUALIFICATION
(BFOQ) DEFENSE";

III.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN
HOLDING THAT PETITIONER WAS NOT UNDULY DISCRIMINATED
AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHT
CABIN ATTENDANTS WERE EITHER GIVEN FLYING DUTIES OR
PROMOTED;

IV.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED WHEN
IT BRUSHED ASIDE PETITIONER'S CLAIMS FOR REINSTATEMENT [AND]
WAGES ALLEGEDLY FOR BEING MOOT AND ACADEMIC.[43]
(Underscoring supplied)

Our Ruling

I. The obesity of petitioner is a ground for dismissal under Article
282(e) [44] of the Labor Code.

A reading of the weight standards of PAL would lead to no other
conclusion than that they constitute a continuing qualification of an
employee in order to keep the job. Tersely put, an employee may be
dismissed the moment he is unable to comply with his ideal weight as
prescribed by the weight standards. The dismissal of the employee
would thus fall under Article 282(e) of the Labor Code. As explained
by the CA:

x x x [T]he standards violated in this case were not mere "orders" of
the employer; they were the "prescribed weights" that a cabin crew
must maintain in order to qualify for and keep his or her position in
the company. In other words, they were standards that establish
continuing qualifications for an employee's position. In this sense, the
failure to maintain these standards does not fall under Article 282(a)
whose express terms require the element of willfulness in order to be
a ground for dismissal. The failure to meet the employer's qualifying
standards is in fact a ground that does not squarely fall under grounds
(a) to (d) and is therefore one that falls under Article 282(e) - the
"other causes analogous to the foregoing."

By its nature, these "qualifying standards" are norms that apply
prior to and after an employee is hired. They apply prior to
employment because these are the standards a job applicant must
initially meet in order to be hired. They apply after hiring because an
employee must continue to meet these standards while on the job in
order to keep his job. Under this perspective, a violation is not one of
the faults for which an employee can be dismissed pursuant to pars.
(a) to (d) of Article 282; the employee can be dismissed simply
because he no longer "qualifies" for his job irrespective of whether or
not the failure to qualify was willful or intentional. x x x[45]

Petitioner, though, advances a very interesting argument. He claims
that obesity is a "physical abnormality and/or illness."[46] Relying on
Nadura v. Benguet Consolidated, Inc.,[47] he says his dismissal is
illegal:

Conscious of the fact that Nadura's case cannot be made to fall
squarely within the specific causes enumerated in subparagraphs 1(a)
to (e), Benguet invokes the provisions of subparagraph 1(f) and says
that Nadura's illness - occasional attacks of asthma - is a cause
analogous to them.

Even a cursory reading of the legal provision under consideration is
sufficient to convince anyone that, as the trial court said, "illness
cannot be included as an analogous cause by any stretch of
imagination."

It is clear that, except the just cause mentioned in sub-paragraph
1(a), all the others expressly enumerated in the law are due to the
voluntary and/or willful act of the employee. How Nadura's illness
could be considered as "analogous" to any of them is beyond our
understanding, there being no claim or pretense that the same was
contracted through his own voluntary act.[48]

The reliance on Nadura is off-tangent. The factual milieu in Nadura is
substantially different from the case at bar. First, Nadura was not
decided under the Labor Code. The law applied in that case was
Republic Act (RA) No. 1787. Second, the issue of flight safety is absent
in Nadura, thus, the rationale there cannot apply here. Third, in
Nadura, the employee who was a miner, was laid off from work
because of illness, i.e., asthma. Here, petitioner was dismissed for his
failure to meet the weight standards of PAL. He was not dismissed
due to illness. Fourth, the issue in Nadura is whether or not the
dismissed employee is entitled to separation pay and damages. Here,
the issue centers on the propriety of the dismissal of petitioner for his
failure to meet the weight standards of PAL. Fifth, in Nadura, the
employee was not accorded due process. Here, petitioner was
accorded utmost leniency. He was given more than four (4) years to
comply with the weight standards of PAL.

In the case at bar, the evidence on record militates against
petitioner's claims that obesity is a disease. That he was able to
reduce his weight from 1984 to 1992 clearly shows that it is possible
for him to lose weight given the proper attitude, determination, and
self-discipline. Indeed, during the clarificatory hearing on December 8,
1992, petitioner himself claimed that "[t]he issue is could I bring my
weight down to ideal weight which is 172, then the answer is yes. I
can do it now."[49]

True, petitioner claims that reducing weight is costing him "a lot of
expenses."[50] However, petitioner has only himself to blame. He
could have easily availed the assistance of the company physician, per
the advice of PAL.[51] He chose to ignore the suggestion. In fact, he
repeatedly failed to report when required to undergo weight checks,
without offering a valid explanation. Thus, his fluctuating weight
indicates absence of willpower rather than an illness.

Petitioner cites Bonnie Cook v. State of Rhode Island, Department of
Mental Health, Retardation and Hospitals,[52] decided by the United
States Court of Appeals (First Circuit). In that case, Cook worked from
1978 to 1980 and from 1981 to 1986 as an institutional attendant for
the mentally retarded at the Ladd Center that was being operated by
respondent. She twice resigned voluntarily with an unblemished
record. Even respondent admitted that her performance met the
Center's legitimate expectations. In 1988, Cook re-applied for a similar
position. At that time, "she stood 5'2" tall and weighed over 320
pounds." Respondent claimed that the morbid obesity of plaintiff
compromised her ability to evacuate patients in case of emergency
and it also put her at greater risk of serious diseases.

Cook contended that the action of respondent amounted to
discrimination on the basis of a handicap. This was in direct violation
of Section 504(a) of the Rehabilitation Act of 1973,[53] which
incorporates the remedies contained in Title VI of the Civil Rights Act
of 1964. Respondent claimed, however, that morbid obesity could
never constitute a handicap within the purview of the Rehabilitation
Act. Among others, obesity is a mutable condition, thus plaintiff could
simply lose weight and rid herself of concomitant disability.

The appellate Court disagreed and held that morbid obesity is a
disability under the Rehabilitation Act and that respondent
discriminated against Cook based on "perceived" disability. The
evidence included expert testimony that morbid obesity is a
physiological disorder. It involves a dysfunction of both the metabolic
system and the neurological appetite - suppressing signal system,
which is capable of causing adverse effects within the
musculoskeletal, respiratory, and cardiovascular systems. Notably,
the Court stated that "mutability is relevant only in determining the
substantiality of the limitation flowing from a given impairment," thus
"mutability only precludes those conditions that an individual can
easily and quickly reverse by behavioral alteration."

Unlike Cook, however, petitioner is not morbidly obese. In the words
of the District Court for the District of Rhode Island, Cook was
sometime before 1978 "at least one hundred pounds more than what
is considered appropriate of her height." According to the Circuit
Judge, Cook weighed "over 320 pounds" in 1988. Clearly, that is not
the case here. At his heaviest, petitioner was only less than 50 pounds
over his ideal weight.

In fine, We hold that the obesity of petitioner, when placed in the
context of his work as flight attendant, becomes an analogous cause
under Article 282(e) of the Labor Code that justifies his dismissal from
the service. His obesity may not be unintended, but is nonetheless
voluntary. As the CA correctly puts it, "[v]oluntariness basically means
that the just cause is solely attributable to the employee without any
external force influencing or controlling his actions. This element runs
through all just causes under Article 282, whether they be in the
nature of a wrongful action or omission. Gross and habitual neglect, a
recognized just cause, is considered voluntary although it lacks the
element of intent found in Article 282(a), (c), and (d)."[54]

II. The dismissal of petitioner can be predicated on the bona fide
occupational qualification defense.

Employment in particular jobs may not be limited to persons of a
particular sex, religion, or national origin unless the employer can
show that sex, religion, or national origin is an actual qualification for
performing the job. The qualification is called a bona fide
occupational qualification (BFOQ).[55] In the United States, there are
a few federal and many state job discrimination laws that contain an
exception allowing an employer to engage in an otherwise unlawful
form of prohibited discrimination when the action is based on a BFOQ
necessary to the normal operation of a business or enterprise.[56]

Petitioner contends that BFOQ is a statutory defense. It does not exist
if there is no statute providing for it.[57] Further, there is no existing
BFOQ statute that could justify his dismissal.[58]

Both arguments must fail.

First, the Constitution,[59] the Labor Code,[60] and RA No. 7277[61]
or the Magna Carta for Disabled Persons[62] contain provisions
similar to BFOQ.

Second, in British Columbia Public Service Employee Commission
(BSPSERC) v. The British Columbia Government and Service
Employee's Union (BCGSEU),[63] the Supreme Court of Canada
adopted the so-called "Meiorin Test" in determining whether an
employment policy is justified. Under this test, (1) the employer must
show that it adopted the standard for a purpose rationally connected
to the performance of the job;[64] (2) the employer must establish
that the standard is reasonably necessary[65] to the accomplishment
of that work-related purpose; and (3) the employer must establish
that the standard is reasonably necessary in order to accomplish the
legitimate work-related purpose. Similarly, in Star Paper Corporation
v. Simbol,[66] this Court held that in order to justify a BFOQ, the
employer must prove that (1) the employment qualification is
reasonably related to the essential operation of the job involved; and
(2) that there is factual basis for believing that all or substantially all
persons meeting the qualification would be unable to properly
perform the duties of the job.[67]

In short, the test of reasonableness of the company policy is used
because it is parallel to BFOQ.[68] BFOQ is valid "provided it reflects
an inherent quality reasonably necessary for satisfactory job
performance."[69]

In Duncan Association of Detailman-PTGWTO v. Glaxo Wellcome
Philippines, Inc.,[70] the Court did not hesitate to pass upon the
validity of a company policy which prohibits its employees from
marrying employees of a rival company. It was held that the company
policy is reasonable considering that its purpose is the protection of
the interests of the company against possible competitor infiltration
on its trade secrets and procedures.

Verily, there is no merit to the argument that BFOQ cannot be applied
if it has no supporting statute. Too, the Labor Arbiter,[71] NLRC,[72]
and CA[73] are one in holding that the weight standards of PAL are
reasonable. A common carrier, from the nature of its business and for
reasons of public policy, is bound to observe extraordinary diligence
for the safety of the passengers it transports.[74] It is bound to carry
its passengers safely as far as human care and foresight can provide,
using the utmost diligence of very cautious persons, with due regard
for all the circumstances.[75]

The law leaves no room for mistake or oversight on the part of a
common carrier. Thus, it is only logical to hold that the weight
standards of PAL show its effort to comply with the exacting
obligations imposed upon it by law by virtue of being a common
carrier.

The business of PAL is air transportation. As such, it has committed
itself to safely transport its passengers. In order to achieve this, it
must necessarily rely on its employees, most particularly the cabin
flight deck crew who are on board the aircraft. The weight standards
of PAL should be viewed as imposing strict norms of discipline upon
its employees.

In other words, the primary objective of PAL in the imposition of the
weight standards for cabin crew is flight safety. It cannot be gainsaid
that cabin attendants must maintain agility at all times in order to
inspire passenger confidence on their ability to care for the
passengers when something goes wrong. It is not farfetched to say
that airline companies, just like all common carriers, thrive due to
public confidence on their safety records. People, especially the riding
public, expect no less than that airline companies transport their
passengers to their respective destinations safely and soundly. A
lesser performance is unacceptable.

The task of a cabin crew or flight attendant is not limited to serving
meals or attending to the whims and caprices of the passengers. The
most important activity of the cabin crew is to care for the safety of
passengers and the evacuation of the aircraft when an emergency
occurs. Passenger safety goes to the core of the job of a cabin
attendant. Truly, airlines need cabin attendants who have the
necessary strength to open emergency doors, the agility to attend to
passengers in cramped working conditions, and the stamina to
withstand grueling flight schedules.

On board an aircraft, the body weight and size of a cabin attendant
are important factors to consider in case of emergency. Aircrafts have
constricted cabin space, and narrow aisles and exit doors. Thus, the
arguments of respondent that "[w]hether the airline's flight
attendants are overweight or not has no direct relation to its mission
of transporting passengers to their destination"; and that the weight
standards "has nothing to do with airworthiness of respondent's
airlines," must fail.

The rationale in Western Air Lines v. Criswell[76] relied upon by
petitioner cannot apply to his case. What was involved there were
two (2) airline pilots who were denied reassignment as flight
engineers upon reaching the age of 60, and a flight engineer who was
forced to retire at age 60. They sued the airline company, alleging that
the age-60 retirement for flight engineers violated the Age
Discrimination in Employment Act of 1967. Age-based BFOQ and
being overweight are not the same. The case of overweight cabin
attendants is another matter. Given the cramped cabin space and
narrow aisles and emergency exit doors of the airplane, any
overweight cabin attendant would certainly have difficulty navigating
the cramped cabin area.

In short, there is no need to individually evaluate their ability to
perform their task. That an obese cabin attendant occupies more
space than a slim one is an unquestionable fact which courts can
judicially recognize without introduction of evidence.[77] It would
also be absurd to require airline companies to reconfigure the aircraft
in order to widen the aisles and exit doors just to accommodate
overweight cabin attendants like petitioner.

The biggest problem with an overweight cabin attendant is the
possibility of impeding passengers from evacuating the aircraft,
should the occasion call for it. The job of a cabin attendant during
emergencies is to speedily get the passengers out of the aircraft
safely. Being overweight necessarily impedes mobility. Indeed, in an
emergency situation, seconds are what cabin attendants are dealing
with, not minutes. Three lost seconds can translate into three lost
lives. Evacuation might slow down just because a wide-bodied cabin
attendant is blocking the narrow aisles. These possibilities are not
remote.

Petitioner is also in estoppel. He does not dispute that the weight
standards of PAL were made known to him prior to his employment.
He is presumed to know the weight limit that he must maintain at all
times.[78] In fact, never did he question the authority of PAL when he
was repeatedly asked to trim down his weight. Bona fides exigit ut
quod convenit fiat. Good faith demands that what is agreed upon
shall be done. Kung ang tao ay tapat kanyang tutuparin ang
napagkasunduan.

Too, the weight standards of PAL provide for separate weight
limitations based on height and body frame for both male and female
cabin attendants. A progressive discipline is imposed to allow non-
compliant cabin attendants sufficient opportunity to meet the weight
standards. Thus, the clear-cut rules obviate any possibility for the
commission of abuse or arbitrary action on the part of PAL.

III. Petitioner failed to substantiate his claim that he was
discriminated against by PAL.

Petitioner next claims that PAL is using passenger safety as a
convenient excuse to discriminate against him.[79] We are
constrained, however, to hold otherwise. We agree with the CA that
"[t]he element of discrimination came into play in this case as a
secondary position for the private respondent in order to escape the
consequence of dismissal that being overweight entailed. It is a
confession-and-avoidance position that impliedly admitted the cause
of dismissal, including the reasonableness of the applicable standard
and the private respondent's failure to comply."[80] It is a basic rule
in evidence that each party must prove his affirmative allegation.[81]

Since the burden of evidence lies with the party who asserts an
affirmative allegation, petitioner has to prove his allegation with
particularity. There is nothing on the records which could support the
finding of discriminatory treatment. Petitioner cannot establish
discrimination by simply naming the supposed cabin attendants who
are allegedly similarly situated with him. Substantial proof must be
shown as to how and why they are similarly situated and the
differential treatment petitioner got from PAL despite the similarity of
his situation with other employees.

Indeed, except for pointing out the names of the supposed
overweight cabin attendants, petitioner miserably failed to indicate
their respective ideal weights; weights over their ideal weights; the
periods they were allowed to fly despite their being overweight; the
particular flights assigned to them; the discriminating treatment they
got from PAL; and other relevant data that could have adequately
established a case of discriminatory treatment by PAL. In the words of
the CA, "PAL really had no substantial case of discrimination to
meet."[82]

We are not unmindful that findings of facts of administrative
agencies, like the Labor Arbiter and the NLRC, are accorded respect,
even finality.[83] The reason is simple: administrative agencies are
experts in matters within their specific and specialized
jurisdiction.[84] But the principle is not a hard and fast rule. It only
applies if the findings of facts are duly supported by substantial
evidence. If it can be shown that administrative bodies grossly
misappreciated evidence of such nature so as to compel a conclusion
to the contrary, their findings of facts must necessarily be reversed.
Factual findings of administrative agencies do not have infallibility
and must be set aside when they fail the test of arbitrariness.[85]

Here, the Labor Arbiter and the NLRC inexplicably misappreciated
evidence. We thus annul their findings.

To make his claim more believable, petitioner invokes the equal
protection clause guaranty[86] of the Constitution. However, in the
absence of governmental interference, the liberties guaranteed by the
Constitution cannot be invoked.[87] Put differently, the Bill of Rights
is not meant to be invoked against acts of private individuals.[88]
Indeed, the United States Supreme Court, in interpreting the
Fourteenth Amendment,[89] which is the source of our equal
protection guarantee, is consistent in saying that the equal protection
erects no shield against private conduct, however discriminatory or
wrongful.[90] Private actions, no matter how egregious, cannot
violate the equal protection guarantee.[91]

IV. The claims of petitioner for reinstatement and wages are moot.

As his last contention, petitioner avers that his claims for
reinstatement and wages have not been mooted. He is entitled to
reinstatement and his full backwages, "from the time he was illegally
dismissed" up to the time that the NLRC was reversed by the CA.[92]

At this point, Article 223 of the Labor Code finds relevance:

In any event, the decision of the Labor Arbiter reinstating a
dismissed or separated employee, insofar as the reinstatement aspect
is concerned, shall immediately be executory, even pending appeal.
The employee shall either be admitted back to work under the same
terms and conditions prevailing prior to his dismissal or separation or,
at the option of the employer, merely reinstated in the payroll. The
posting of a bond by the employer shall not stay the execution for
reinstatement provided herein.

The law is very clear. Although an award or order of reinstatement is
self-executory and does not require a writ of execution,[93] the
option to exercise actual reinstatement or payroll reinstatement
belongs to the employer. It does not belong to the employee, to the
labor tribunals, or even to the courts.

Contrary to the allegation of petitioner that PAL "did everything
under the sun" to frustrate his "immediate return to his previous
position,"[94] there is evidence that PAL opted to physically reinstate
him to a substantially equivalent position in accordance with the
order of the Labor
Arbiter.[95] In fact, petitioner duly received the return to work notice
on February 23, 2001, as shown by his signature.[96]

Petitioner cannot take refuge in the pronouncements of the Court in a
case[97] that "[t]he unjustified refusal of the employer to reinstate
the dismissed employee entitles him to payment of his salaries
effective from the time the employer failed to reinstate him despite
the issuance of a writ of execution"[98] and ""even if the order of
reinstatement of the Labor Arbiter is reversed on appeal, it is
obligatory on the part of the employer to reinstate and pay the wages
of the employee during the period of appeal until reversal by the
higher court."[99] He failed to prove that he complied with the return
to work order of PAL. Neither does it appear on record that he
actually rendered services for PAL from the moment he was
dismissed, in order to insist on the payment of his full backwages.

In insisting that he be reinstated to his actual position despite being
overweight, petitioner in effect wants to render the issues in the
present case moot. He asks PAL to comply with the impossible. Time
and again, the Court ruled that the law does not exact compliance
with the impossible.[100]

V. Petitioner is entitled to separation pay.

Be that as it may, all is not lost for petitioner.

Normally, a legally dismissed employee is not entitled to separation
pay. This may be deduced from the language of Article 279 of the
Labor Code that "[a]n employee who is unjustly dismissed from work
shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and
to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his
actual reinstatement." Luckily for petitioner, this is not an ironclad
rule.

Exceptionally, separation pay is granted to a legally dismissed
employee as an act "social justice,"[101] or based on "equity."[102] In
both instances, it is required that the dismissal (1) was not for serious
misconduct; and (2) does not reflect on the moral character of the
employee.[103]

Here, We grant petitioner separation pay equivalent to one-half (1/2)
month's pay for every year of service.[104] It should include regular
allowances which he might have been receiving.[105] We are not
blind to the fact that he was not dismissed for any serious misconduct
or to any act which would reflect on his moral character. We also
recognize that his employment with PAL lasted for more or less a
decade.

WHEREFORE, the appealed Decision of the Court of Appeals is
AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui is
entitled to separation pay in an amount equivalent to one-half (1/2)
month's pay for every year of service, which should include his regular
allowances.



[Syllabus]

EN BANC

[G.R. No. 79543. October 16, 1996]

JOSE D. FILOTEO, JR., petitioner, vs. SANDIGANBAYAN and THE
PEOPLE OF THE PHILIPPINES, respondents.

D E C I S I O N

PANGANIBAN, J.:

A person under investigation for the commission of an offense is
constitutionally guaranteed certain rights. One of the most cherished
of these is the right to have competent and independent counsel
preferably of his choice. The 1987 Constitution, unlike its
predecessors, expressly covenants that such guarantee cannot be
waived except in writing and in the presence of counsel. In the
present case, petitioner claims that such proscription against an
uncounselled waiver of the right to counsel is applicable to him
retroactively, even though his custodial investigation took place in
1983 -- long before the effectivity of the new Constitution. He also
alleges that his arrest was illegal, that his extrajudicial confession was
extracted through torture, and that the prosecutions evidence was
insufficient to convict him. Finally, though not raised by petitioner,
the question of what crime -- brigandage or robbery -- was
committed is likewise motu propio addressed by the Court in this
Decision.

Challenged in the instant amended petition is the Decision[1] of
respondent Sandiganbayan[2] in Criminal Case No. 8496 promulgated
on June 19, 1987 convicting petitioner of brigandage, and the
Resolution[3] promulgated on July 27, 1987 denying his motion for
reconsideration.

The Facts

Petitioner Jose D. Filoteo, Jr. was a police investigator of the Western
Police District in Metro Manila, an old hand at dealing with suspected
criminals. A recipient of various awards and commendations attesting
to his competence and performance as a police officer, he could not
therefore imagine that one day he would be sitting on the other side
of the investigation table as the suspected mastermind of the armed
hijacking of a postal delivery van.

Along with his co-accused Martin Mateo, Jr. y Mijares, PC/Sgt.
Bernardo Relator, Jr. y Retino, CIC Ed Saguindel y Pabinguit, Ex-PC/Sgt.
Danilo Miravalles y Marcelo and civilians Ricardo Perez, Reynaldo
Frias, Raul Mendoza, Angel Liwanag, Severino Castro and Gerardo
Escalada, petitioner Filoteo was charged in the following
Information:[4]

That on or about the 3rd day of May, 1982, in the municipality of
Meycauyan, province of Bulacan, Philippines, and within the
jurisdiction of this Honorable Court, the said accused, two of whom
were armed with guns, conspiring, confederating together and
helping one another, did then and there wilfully, unlawfully and
feloniously with intent of gain and by means of violence, threat and
intimidation, stop the Postal Delivery Truck of the Bureau of Postal
while it was travelling along the MacArthur Highway of said
municipality, at the point of their guns, and then take, rob and carry
away with them the following, to wit:

1) Postal Delivery Truck

2) Social Security System Medicare Checks and Vouchers

3) Social Security System Pension Checks and Vouchers

4) Treasury Warrants

5) Several Mail Matters from abroad

in the total amount of P253,728.29 more or less, belonging to US
Government Pensionados, SSS Pensionados, SSS Medicare
Beneficiaries and Private Individuals from Bulacan, Pampanga,
Bataan, Zambales and Olongapo City, to the damage and prejudice of
the owners in the aforementioned amount.

Contrary to law.

On separate dates, accused Filoteo, Mateo, Saguindel, Relator and
Miravalles, assisted by their respective counsel, pleaded not guilty.
Their co-accused Perez, Frias, Mendoza, Liwanag, Castro and Escalada
were never arrested and remained at large. Accused Mateo escaped
from police custody and was tried in absentia in accordance with
Article IV, Section 19 of the 1973 Constitution. Accused Saguindel and
Relator failed to appear during the trial on February 21, 1985 and on
March 31, 1986, respectively, and were thus ordered arrested but
remained at large since then. Like in the case of Mateo, proceedings
against them were held in absentia.[5] Only Filoteo filed this petition,
after the respondent Court rendered its assailed Decision and
Resolution.

Before trial commenced and upon the instance of the prosecution for
a stipulation of facts, the defense admitted the following:[6]

The existence of the bound record of Criminal Case No. 50737-B-82,
consisting of 343 pages from the Bulacan CFI (Exhibit A); in 1982 or
thereabouts, accused Bernardo Relator was a PC Sergeant at Camp
Bagond Diwa, Bicutan, Metro Manila; as such PC Sergeant, accused
Relator was issued a service revolver, Smith & Wesson Revolver, 32
(sic), with Serial No. 11707 (Exhibit B) and holster (Exhibit B-1) with six
(6) live ammo (Exhibit B-2); in 1982 or thereabouts, accused Eddie
Saguindel was a PC Constable First Class; on May 30, 1982, accused
Saguindel, together with accused Relator and Danilo Miravalles, a
former PC Sergeant, was invited for investigation in connection with
the hijacking of a delivery van by the elements of the Special
Operations Group, PC, and the three availed of their right to remain
silent and to have counsel of their choice, as shown by their Joint
Affidavit (Exhibit A-20); and the existence of the sworn statement
executed by accused Martin Mateo (Exhibit A-11) as well as the
Certification dated May 30, 1982, subject to the qualification that said
document was made under duress.

The prosecution sought to prove its case with the testimonies of
Bernardo Bautista, Rodolfo Miranda, Capt. Rosendo Ferrer, M/Sgt.
Noel Alcazar and Capt. Samuel Pagdilao, Jr.6-a and the submission of
Exhibits A to K. In their defense, accused Filoteo and Miravalles
presented their respective testimonies plus those of Gary Gallardo
and Manolo Almogera. Filoteo also submitted his Exhibits 1-14-
Filoteo, but Miravalles filed no written evidence. Thereafter, the
prosecution proffered rebuttal evidence and rested with the
admission of Exhibits A-16-a, A-31 and L.

Evidence for the Prosecution

At about 6:30 in the morning of May 3, 1982, Bureau of Post mail van
no. MVD 02 left San Fernando, Pampanga to pick up and deliver mail
matters to and from Manila. On board the vehicle were Nerito
Miranda, the driver, and two couriers named Bernardo Bautista and
Eminiano Tagudar who were seated beside the driver. They arrived at
around 9:40 that morning at the Airmail Distribution Center of the
Manila International Airport where they were issued waybills[7] for
the sacks of mail they collected. They then proceeded to the Central
Post Office where they likewise gathered mail matters including 737
check letters[8] sent by the United States Embassy. All the mail
matters were placed inside the delivery van, and its door padlocked.

As they had to deliver mail matters to several towns of Bulacan, they
took the MacArthur Highway on the return trip to Pampanga. When
they reached Kalvario, Meycauayan, Bulacan at about 4:30 in the
afternoon, an old blue Mercedes Benz sedan[9] overtook their van
and cut across its path. The car had five (5) passengers -- three seated
in front and two at the back. The cars driver and the passenger
beside him were in white shirts; the third man in front and the person
immediately behind him were both clad in fatigue uniforms, while the
fifth man in the back had on a long-sleeved shirt.[10]

Two of the car passengers aimed an armalite and a hand gun at driver
Nerito Miranda as someone uttered, Are you not going to stop this
truck?*11+ Frightened, Miranda pulled over and stopped the vans
engine. Alighting from the car, the armed group identified themselves
as policemen.[12] They ordered the postal employees to disembark
from the van. As he stepped out of the van, Miranda took the ignition
key with him, but when threatened, he surrendered it to one of the
car passengers.[13] The three postal employees were then ordered to
board the Benz.

As he was about to enter the car, Bautista looked back and saw one of
the malefactors, who turned out to be Reynaldo Frias, going up the
van. Inside the car, the three delivery employees were ordered to
lower their heads. They sat between two of their captors at the back
of the car while two others were in front. Later, Nerito Miranda
asked permission to straighten up as he was feeling dizzy for lack of
air. As he stretched, he caught a glimpse of the pimply face of the
man to his left. He also recognized the driver who had glanced back.
These men turned out to be Angel Liwanag and Reynaldo Frias,
respectively.[14]

As the car started moving, Bautista complained about feeling densely
confined. He was allowed to raise his head but with eyes closed.
However, he sneaked a look and recognized the driver of the car as
Raul Mendoza and the fellow beside him who poked a balisong at
him as Angel Liwanag. The man in uniform on the front seat was
Eddie Saguindel. Earlier, as he was about to enter the car, Bautista
looked back and recognized Frias.[15] These incidents yielded the
pieces of information critical to the subsequent identification of
Mendoza, Liwanag, Saguindel and Frias in the line-up of suspects at
Camp Crame later on.

The car seemed to move around in circles. When it finally came to a
stop, the captured men discovered that they were along Kaimito Road
in Kalookan City. They were made to remove their pants and shoes
and then told to run towards the shrubs with their heads lowered.
Upon realizing that the hijackers had left, they put on their pants and
reported the incident to the Kalookan Police Station.

The Security and Intelligence Unit of the Bureau of Posts recovered
the postal van at the corner of Malindang and Angelo Streets, La
Loma, Quezon City on May 4, 1982. Discovered missing were several
mail matters,[16] including checks and warrants, along with the vans
battery, tools and fuel.[17]

In a letter-request dated May 6, 1982 to then Col. Ramon Montao,
then Postmaster General Roilo S. Golez sought the assistance of the
Special Operations Group (SOG) of the Philippine Constabulary in the
investigation of the hijacking incident.[18] Responding to the request,
the SOG, which was tasked to detect, investigate and neutralize
criminal syndicates in Metro Manila and adjacent provinces,
organized two investigative teams. One group was led by Capt.
Rosendo Ferrer and the other by 1st Lt. Samuel Pagdilao. Initially,
they conducted a massive intelligence build-up to monitor the drop
points where the stolen checks could be sold or negotiated.

On May 28, 1982, the SOG received a tip from a civilian informer that
two persons were looking for buyers of stolen checks. Capt. Ferrer
requested the informer to arrange a meeting with them. The meeting
materialized at about 9:00 P.M. of May 29, 1982 at the Bughaw
Restaurant in Cubao, Quezon City. With cash on hand, Capt. Ferrer
posed as the buyer. The informer introduced him to Rey Frias and
Rafael Alcantara. Frias in turn showed Capt. Ferrer a sample Social
Security System (SSS) pension check and told him that the bulk of the
checks were in the possession of their companions in Obrero, Tondo,
Manila. After some negotiations, they agreed to proceed to Tondo.
Then as they boarded a car, Capt. Ferrer introduced himself and his
companions as lawmen investigating the hijacking incident. Shocked
and distressed, Frias calmed down only when assured that his penalty
would be mitigated should he cooperate with the authorities. Frias
thus volunteered to help crack the case and lead the SOG team to
Ricardo Perez and Raul Mendoza.

Capt. Ferrer instructed Lt. Pagdilao, his assistant operations officer
who was in another car during the mission, to accompany Frias to
Obrero, Tondo while he escorted Alcantara to their headquarters at
Camp Crame. On the way to the headquarters, Alcantara denied
participation in the hijacking although he admitted living with Martin
Mateo who allegedly was in possession of several checks. Alcantara
was turned over to the investigation section of the SOG for further
questioning.

Meanwhile, Lt. Pagdilaos group was able to corner Ricardo Perez in
his house in Tondo. Confronted with the hijacking incident, Perez
admitted participation therein and expressed disappointment over his
inability to dispose of the checks even after a month from the
hijacking. He surrendered the checks in his possession to Lt.
Pagdilao.[19]

An hour and a half later, Capt. Ferrer received information over their
two-way radio that Ricardo Perez and Raul Mendoza were in Lt.
Pagdilaos custody. Capt. Ferrer ordered that, instead of returning to
headquarters, Lt. Pagdilao and his companions should meet him in
Quirino, Novaliches to apprehend Martin Mateo. They met at the
designated place and proceeded to Gulod, Novaliches arriving there at
about 10:30 P.M. of May 29, 1982.

Walking atop a ricefield dike to the house of Mateo, they noticed two
men heading in their direction. Perez identified them as Martin
Mateo and Angel Liwanag. The latter threw something into the
ricefield which, when retrieved, turned out to be bundles of checks
wrapped in cellophane inside a plastic bag.[20] As the two were about
to board the SOG teams's car, Mateo said, Sir, kung baga sa
basketball, talo na kami. Ibibigay ko yong para sa panalo. Marami pa
akong tseke doon sa bahay ko, sir, kunin na natin para di na natin
babalikan.*21+ Capt. Ferrer accompanied Mateo to his house where
they retrieved several other checks in another plastic bag.

On the way to the SOG headquarters in Camp Crame, Mateo and
Liwanag admitted participation in the postal hijacking. At a
confrontation with Perez and Mendoza, all four of them pointed to
petitioner, Jose D. Filoteo, Jr., as the mastermind of the crime.

Consequently, Capt. Ferrer directed Lt. Pagdilao to accompany Mateo
to the house of petitioner in Tondo, Manila. The lawmen found
petitioner at home. Upon being invited to Camp Crame to shed light
on his participation in the hijacking, petitioner was dumbfounded
(parang nagulat). Pursuant to standard operating procedure in
arrests, petitioner was informed of his constitutional rights,[22]
whereupon they proceeded to Camp Crame. However, the group,
including petitioner, returned to the latters place to recover the loot.
It was in the neighborhood, not in petitioners house, where the
authorities located the checks.[23]

The authorities confronted Filoteo about his participation in the
hijacking, telling him that Frias, Mendoza and Perez had earlier
volunteered the information that petitioner furnished the Benz used
in the hijacking. Thereupon, Filoteo admitted involvement in the
crime and pointed to three other soldiers, namely, Eddie Saguindel,
Bernardo Relator and Jack Miravalles (who turned out to be a
discharged soldier), as his confederates. At 1:45 in the afternoon of
May 30, 1982, petitioner executed a sworn statement in Tagalog
before M/Sgt. Arsenio C. Carlos and Sgt. Romeo P. Espero which,
quoted in full, reads as follows:

BABALA: -- Nais kong ipaalam sa iyo, Patrolman Filoteo, na ang
dahilan ng pagsisiyasat na ito ay tungkol sa isang kasong Robbery-in-
Band/Hi-Jacking na naganap noong ika-3 ng Mayo 1982 doon sa
Meycauyan, Bulacan, mga bandang alas-4:00 ng hapon, humigit-
kumulang, kung saang maraming tsekeng US, tseke ng BIR at iba pang
mga personal na tseke ang nabawi mula sa iyo. Nais ko ring ibigay sa
iyo ang babala alinsunod sa mga isinasaad ng Section 20, Article IV ng
Bagong Saligang Batas ng Republika ng Pilipinas, kagaya ng mga
sumusunod:

a. Na ikaw ay may karapatang tumahimik;

b. Na ikaw ay may karapatang kumuha ng isang abugadong sarili
mong pili upang may magpapayo sa iyo habang ikaw ay sinisiyasat;

c. Na ikaw ay may karapatang huwag sumagot sa mga
katanungang maaring makasira sa iyo sa dahilang anumang iyong
isalaysay ay maaaring gamitin pabor or laban sa iyo sa kinauukulang
hukuman;

d. Na ikaw ay walang maibabayad sa isang abugado, ako mismo
ang makipag-ugnayan sa CLAO-IBP upang ikaw ay magkaroon ng isang
abugadong walang bayad.

1. TANONG:- Ang mga bagay-bagay bang akin nang naipaliwanag sa
iyo ay iyong lubos na naiintindihan at nauunawaan?

SAGOT:- Opo.

2. T:- Handa mo bang lagdaan ang ilalim ng katanungan at sagot na
ito bilang katibayan na iyo ngang naiintindihan ang iyong mga
karapatan at gayun na rin sa dahilan ng pagsisiyasat na ito, at ikaw din
ay nakahanda ngang magbigay ng isang malaya at kusang-loob na
salaysay, sumagot sa mga katanungan at sumusumpang lahat ng
iyong isasalaysay ay pawang mga katotohanan lamang?

S:- Opo, pipirma ako Ser.

(Sgd.)

JOSE D. FILOTEO

(Affiant)

MGA SAKSI:

(Sgd.) (Sgd.)

ROMEO P. ESPERO THERESA L. TOLENTINO

Ssg., PC C1C WAC (PC)"

3. T:- Maari bang sabihin mong muli ang iyong buong pangalan,
edad at iba pang bagay-bagay na maaring mapagkakikilalanan sa iyo?

S:- Jose Filoteo y Diendo, 30-anyos, may asawa, isang Patrolman ng
Western Police District, Metropolitan Police Force na kasalukuyang
nakatalaga sa General Assignment Section, Investigation Division ng
naturang Distrito ng Pulisya at kasalukuyang nakatira sa No. 810
Cabesas St., Dagupan, Tondo, Manila.

4. T:- Kailan ka pa na-appoint sa service bilang isang Kabatas?

S:- Noon pong October 1978, hindi ko maalaala ang exactong petsa,
noong ako ay mapasok sa serbisyo.

5. T:- Kailan ka pa naman na-assign sa GAS, WPD, MPF?

S:- Noon lamang pong January 1982.

6. T:- Patrolman Filoteo, ikaw ba ay tubong saang bayan, lungsod or
lalawigan?

S:- Pagkakaalam ko sa tatay ko ay Bulacan samantalang ang aking ina
naman ay Bisaya, pero ako ay ipinanganak na sa Maynila noon July
17, 1951.

7. T:- Ano naman ang natapos mong kurso sa pag-aaral?

S:- Undergraduate ako ng BS Criminology sa PCCr, dahil hindi ko
natapos ang second semester ng 4th year ko.

8. T:- Ano naman ang iyong specific designation sa GAS, ID, WPD-
MPF?

S:- Sa Follow-Up Unit ako.

9. T:- At bilang miyembro ng follow-up unit ng GAS, ano naman ang
iyong mga specific duties?

S:- Kami po ang magsasagawa ng follow-up kung may mga at large sa
mga suspects namin sa mga kasong hawak ng investigation.

10. T:- Noong ika-3 ng Mayo 1982, mga bandang alas-4:00 ng hapon
humigit kumulang, saan ka naroroon at ano ang iyong ginagawa?

S:- Nasa Plaza Lawton ho kami, eh, at inaantay na namin iyong
hinayjack namin na Philippine Mail delivery van.

11. T:- Wika moy kami, sinu-sino ang tinutukoy mong mga
kasamahan?

S:- Si Carding Perez, ho; si Junior ho (Affiant pointed to Martin Mateo,
Jr. who was seated in the investigation room and asked the name and
was duly answered: Martin Mateo, Jr.); si Rey Frias; Raul Mendoza;
Angelo Liwanag at ang mga taga LRP ng PC Brigade na sina Sgt. Ed
Saguindel, Sgt. Dan Miravales at isa pang Sergeant na ang alam ko
lang sa kanya ay JUN ang tawag namin. Walo (8) (corrected and
initialled by affiant to read as SIYAM *9+) kaming lahat doon noon at
ang mga gamit naman naming kotse noon ay ang kotse ng kumpare
kong si Rudy Miranda na isang Mercedes Benz na may plakang NMJ-
659 kung saang ang driver namin noon ay si Raul Mendoza (corrected
and initialled by affiant to read as AKO) at ang mga kasama naman
naming sakay ay sina Angelo Liwanag, Sgt. Ed Saguindel at Sgt. Jun na
parehong taga-LRP (affiant added and initialled this additional fact:
AT RAUL MENDOZA). Ang isang kotse namang gamit namin ay pag-
aari daw ng pinsan ni Carding Perez na kanya na rin mismong
minamaneho na isang Lancer na dirty-white ang kulay at ang mga
sakay naman ni Carding Perez ay sina Junior Mateo, Rey Frias at Sgt.
Dan Miravalles ng LRP rin. Pero may kasama pa kaming contact ni
Carding Perez na taga-loob ng Post Office na sina Alias NINOY na isang
dispatcher at Alias JERRY, dahil ang mastermind dito sa trabahong ito
ay si Carding PEREZ at kami naman ng mga sundalong taga-LRP ay
kanila lamang inimporta upang umeskort sa kanila sa pag-hijack ng
delivery van.

12. T:- Anong oras naman noong umalis ang delivery van ng Post
Office patungong norte?

S:- Kung hindi ako nagkakamali ay nasa pagitan na noon ng alas-4:00
hanggang alas-5:00 ng hapon.

13. T:- Isalaysay mo nga ng buong-buo kung ano ang mga naganap
noong hapon na iyon?

S:- Noon pong lumakad na ang delivery van ng Central Post Office,
sinundan na namin, una ang van, sumunod ang Lancer at huli ang
Mercedes Benz namin. Pagdating namin sa Malinta, Valenzuela
Metro Manila ay nagpalit kami ng puwesto sa pagsunod, van naman
ngayon, sunod ang Mercedes Benz at huli na ang Lancer. Noong
makapasok na kami ng boundary ng Meycauyan, Bulacan ay kumuha
na kami ng tiyempo at noon makatiyempo kami ay kinat namin ang
delivery van. Tumigil naman ito at bumaba kaagad sina Sgt. Ed
Saguindel at Sgt. Jun ng LRP dahil sila noon ang may hawak ng
kanilang Armalite Rifle pero may service pa silang maiksing baril.
Pinababa nila ang tatlong maydala ng delivery van at pinasakay sa
Mercedes Benz, habang nakatutok ang kanilang mga baril sa kanila.
Ako naman ay bumaba na sa aming kotse at sumakay ng delivery van
at ako na mismo ang nagmaneho at sinamahan naman ako nina Junior
Mateo at si Rey Frias, tatlo (3) rin kaming pumalit sa puwesto noong
tatlong (3) taga-Post Office na maydala ng delivery van. Nag-Utturn
(sic) kami ngayon at ibinalik na namin sa Manila ang van. Iyong
Mercedes Benz na minamaneho pa rin ni Raul Mendoza ay dumeretso
pa norte samantalang ang Lancer naman ay nag-U-turn din at
sumunod sa amin. Noong makarating na kami sa Malinta, Valenzuela,
Metro Manila ay inunahan na kami ng Lancer at iyon na nga, parang
follow the leader na dahil siya na noon ang aming guide.

14. T:- Ipagpatuloy mo ang iyong pagsasalaysay?

S:- Dumeretso kami ngayon sa may Obrero, sa bahay mismo nina
Carding Perez, at noong nakarating ng kami roon ay iniyatras ko na
ang van sa kanilang garahe at doon ay ibinaba namin lahat ang mga
duffle bag, hindi ko na po alam kung ilan lahat iyon, na siyang laman
ng delivery van at pagkatapos ay umalis kaming muli ng mga kasama
ko rin sa van papuntang Quezon City kung saan namin inabandon ang
delivery van. Sa Retiro ho yata iyong lugar na iyon, kung hindi ako
nagkakamali.

15. T:- Ano ang mga sumunod na nangyari?

S:- Sumakay kami ngayon ng taksi at bumalik na kami kina Carding
Perez sa may bahay nila sa Obrero, Tondo, Manila at inabutan na
namin sila na nagkakarga na noong mga duffle bag sa (sic), madilim na
ho noon, sa isang kotseng mamula-mula o orange na Camaro at isa
pang Mercedes Benz na brown, dahil ang Lancer ay isinoli na raw nila
sa may-ari. Dinala nila ngayon ang mga duffle bag sa Bocaue,
Bulacan, iyon kasi ang usapan namin noon dahil sumilip lamang ako
noon at kasama ko si Carding Perez, kami naman ngayon ay pumunta
sa bahay nina Rudy Miranda sa San Marcelino, Malate, Manila na
sakay ng isang Toyota Corona na brown na si Carding Perez ang
nagmaneho. Pagdating namin doon sa kina Rudy Miranda ay naroon
na rin noon ang Mercedes Benz na ginamit namin, pero wala na ang
crew ng delivery van dahil ibinaba at iniwanan daw nila sa Caloocan
City. Ang naroroon na lamang noon ay sina Angelo Liwanag, si Raul
Mendoza, si Sgt. Ed Saguindel at si Sgt. Jun na parehong taga-LRP.
Naiwan na noon ang Mercedes Benz namin doon kina Rudy Miranda
at iniwan na rin ang susi doon sa kamag-anak, dahil hindi nila alam
ang trabahong ito. Sumakay na iyong apat naming kasama sa Toyota
Corona na sakay namin at inihatid namin sina Sgt. Saguindel at Sgt.
Jun doon sa tinitirhan nitong huling nabanggit na sundalo doon sa
malapit sa Del Pan Bridge sa may Recto Avenue sa San Nicolas yata
iyon sa Manila. Kami naman ngayong apat, sina Carding Perez,
Angelo Liwanag at si Raul Mendoza ay tumuloy na sa Bocaue, Bulacan.
Dumaan kami sa North Diversion Road at paglabas namin sa exit
papuntang Bocaue, Bulacan ay hindi na kalayuan doon, hindi ko alam
ang lugar pero alam kong puntahan. Bahay daw yata ng kamag-anak
ni Carding Perez iyon pero hindi ko alam ang pangalan. Naroon na
ngayon ang buong tropa, maliban sa mga dalawang sundalong
naihatid na namin sa may Manila, at may mga nadagdag pang ibang
mukha pero hindi ko ito mga kakilala. Si JACK o Sgt. Dan Miravalles ay
naroon din noon. Kumain kami, pagkatapos ay nagbukasan na ng mga
duffle bag. Iyon na nga,nakita na namin ang mga tsekeng ito, (Affiant
pointed to the checks he voluntarily surrendered) at aming inihiwalay
ngayon sa mga sulat na naroon na sinunog lahat pagkatapos doon sa
bahay ni Junior Mateo sa Novaliches. Di magdamag ngayon ang
trabaho namin, kinabukasan ay kanya-kanyang uwian na, pagkatapos
ay pahinga. Kinabukasan muli, gabi, inilipat na namin doon sa bahay
ni Junior Mateo ang mga tsekeng ito (Affiant again referred to said
checks). Isinakay namin noon sa isang cargo truck na pag-aari din daw
nina Carding. Iyong mga tsekeng iyan ngayon ay nakalagay noon
doon sa isang sikretong compartment sa gitna ng truck, doon ba sa
may chassis. Sikretong compartment iyon, na mahirap mahalata.

16. T: Ikaw ba naman ay mayroong dalang baril noon at kung
ganoon, sabihin mo nga kung anong uring baril iyon?

S:- Wala po akong baril, Ser.

17. T:- Paano naman napunta ang mga tsekeng ito (the checks
recovered from the Affiant was referred to) sa iyo?

S:- E, di ganoon na nga ho, habang tumatagal ay umiinit ang
situwasyon sa aming grupo, dahil iyong partehan sana namin ay puro
pangako ang nangyari. Kaya napagpasiyahan namin na hatiin na
lamang iyong mga tseke upang walang onsehan sa amin. Ito ngayon
ay parte namin nina Sgt. Ed Saguindel, Sgt. Dan Miravalles Alias JACK
at ni Sgt. Jun, dahil noong una ay doon muna sa amin ito nakatago
(The checks recovered from the Affiant was referred to). Pero habang
tumatagal ay umiinit at nalaman namin pati na may alarma na, kayat
inilipat namin doon sa may Raxa Bago sa may likod ng Alhambra Cigar
& Cigarette Factory sa Tondo, Manila at akin munang ipinatago sa
isang kumare ko doon, pansamantala, pero hindi alam nitong kumare
ko ang laman noon dahil mahigpit kong ipinagbilin na huwag nilang
bubuksan. Doon na rin namin kinuha iyon noong isurender ko ang
mga tsekeng ito kagabi, at hanggang sa kinuha na namin ang supot na
ito (the checks placed in a plastic bag was again referred to) ay wala
pa rin kamalay-malay ang kumare ko.

18. T:- Iyong sinasabi mong mga kontak nina Carding Perez sa
Central Post Office, mga kakilala mo rin ba ang mga ito?

S:- Iyong araw na lamang na iyon ko sila nakita, dahil maghapon ko
noon silang nakikita, itong si Alias NINOY lamang ang dispatcher, dahil
palabas-labas siya noon at nakikipag-usap kina Carding Perez, Raul
Mendoza at saka si Rey Frias. Makikilala ko itong si Alias NINOY kung
makita ko siyang muli.

19. T:- Sino naman ang kumontak sa iyo upang sumama sa trabahong
ito?

S:- Si Junior Mateo po, ipinakilala niya ako kina Carding at sa buong
tropa na namin.

20. T:- Pansamantala ay wala na muna akong itatanong pa sa iyo,
mayroon ka bang nais na idagdag, bawasin o palitan kaya sa salaysay
na ito?

S:- Wala na po.

21. T:- Handa mo bang lagdaan ang iyong salaysay na ito bilang
patotoo sa katotohanan nito nang hindi ka pinilit, sinaktan or
pinangakuan kaya ng anuman upang lumagda lamang?

S:- Opo.

WAKAS NG SALAYSAY: . . . . . /ac

(Sgd.)

JOSE D. FILOTEO

MGA SAKSI SA LAGDA:

(Sgd.)

SSG ROMEO P. ESPERO PC

(Sgd.)

CIC THERESA TOLENTINO WAC (PC)*24+

Petitioner executed two other documents on the same day, May 30,
1982. One was a certification stating that he voluntarily surrendered
voluminous assorted US checks and vouchers, that because of the
large number of pieces of checks, he affixed his signature upon the
middle portion of the back of each check to serve as identification in
the future, prior to the completion of its proper inventory and listing
conducted by elements of SOG in his presence, and that he guided
the elements of SOG to the residence of Rodolfo C. Miranda, the
owner of the sky-blue Mercedes Benz car which was surrendered to
the SOG Headquarters.[25] The other document was a sworn
statement wherein petitioner attested to his waiver of the provisions
of Article 125 of the Revised Penal Code and the following facts: (a)
that he was apprised of his constitutional rights under Section 20,
Article IV of the (1973) Constitution, that he understood all his rights
thereunder, and that the investigators offered him counsel from the
CLAO-IBP but he refused to avail of the privilege; (b) that he was
arrested by SOG men in his house at around 11:00 p.m. of May 29,
1982 sa dahilang ako ay kasangkot sa pagnanakaw ng mga US
Treasury Warrants, SSS Pension Checks and Vouchers at SSS Medicare
Checks and Vouchers mula sa delivery van ng Philippine Mail; (c) that
the SOG men confiscated from him numerous checks and a Mercedes
Benz 200 colored sky-blue, and (d) that he was not hurt or maltreated
nor was anything taken from him which was not duly receipted
for.[26]

As certified to by petitioner (in the above described document), he led
the SOG operatives to the house of Rodolfo Miranda on Singalong
where the latter admitted that petitioner was his friend. He denied,
however, having knowledge that his car was used in the hijacking
until the authorities came to his house. According to Miranda, he was
made to believe that his car would be used for surveillance purposes
because petitioners jeep was not available. The car was not returned
until the evening following that when it was borrowed.[27] After the
trip to Mirandas house, petitioner informed the investigators that
some more checks could be recovered from his kumare. Said checks
were retrieved and turned over to headquarters along with the car
surrendered by Miranda who later executed a sworn statement dated
May 31, 1992 at the SOG.[28]

Upon learning of the whereabouts of Miravalles, Eddie Saguindel and
Bernardo Relator, the team of Capt. Ferrer proceeded to Taguig,
Metro Manila in the afternoon of May 30, 1982. They met Miravalles
along the way to his house. Informed by Capt. Ferrer that six of his
companions were already under custody and that they implicated him
as one of their confederates, Miravalles reacted by saying, Sir, ang
hihina kasi ng mga loob niyan, eh.*29+

Capt. Ferrer later asked Miravalles to bring him to Eddie Saguindel. At
the barracks of the Long Range Patrol in Bicutan, Metro Manila,
Saguindel voluntarily accepted the invitation to proceed to the SOG
headquarters, after Miravalles initially informed him of the facts
obtained during the investigation. Saguindel was heard saying, Hindi
na kami interesado, sir, sa mga tsekeng iyan kasi isang buwan na hindi
pa nabebenta.*30+ With Miravalles and Saguindel, Capt. Ferrer and
his team moved on to Binondo, Manila to look for Bernardo Relator.
When they found him at home, Relator excused himself, went
upstairs, returned with a .32 caliber revolver with six bullets[31] and
said, Sir, ito yong baril na nagamit.*32+ The three suspects were
brought to Camp Crame for further investigation. Thereafter, Capt.
Ferrer submitted an after-operations report about their mission and
executed jointly with Lt. Pagdilao on affidavit on the same matter.[33]

Aside from petitioner, Liwanag, Mateo and Perez executed sworn
statements.[34] Prior to doing so, they waived their right to counsel.
Liwanag and Mateo admitted their participation and implicated
petitioner in the crime. Perez, on the other hand, denied having
driven a Lancer car in the hijacking and stated that he was implicated
in the crime only because in one drinking spree with petitioner,
Mateo and one alias Buro during that month of May, they had a
heated altercation. Like petitioner, Liwanag and Mendoza certified
that they voluntarily surrendered vouchers and checks which were
part of their loot in the hijacking; they also executed waivers under
Article 125 of the Revised Penal Code. For his part, Relator executed a
certification to the effect that he voluntarily surrendered his .32
caliber Smith & Wesson service revolver used in the commission of
the crime. In spite of the fact that his father-in-law was a lawyer,
petitioner did not manifest that he needed the assistance of counsel.
During the taking of his statement, petitioner was visited by Jimmy
Victorino and another comrade from the General Assignment Section
of the WPD.

For their part, Relator, Saguindel and Miravalles executed a joint
affidavit[35] manifesting their option to avail of their right to remain
silent until such time as they would have retained a counsel of their
choice. Frias and Mendoza executed a similar joint affidavit.[36]
Severino Castro, the postal employee implicated, also chose to remain
silent as he wanted to testify in court. However, he linked to the
crime a certain Gerardo Escalada, a former clerk of the Central Post
Office and son of a director of the Bureau of Posts in Region I.[37]

On May 31, 1982, then Postmaster General Golez summoned postal
employees Miranda, Bautista and Tagudar and directed them to
proceed to Camp Crame. At the office of the SOG, they were told to
go over some pictures for identification of the culprits. The three
recognized and pointed to the suspects in a line-up. Tagudar
identified Saguindel and Liwanag.[38] Miranda pointed at Frias and
Liwanag[39] while Bautista identified Frias, Mendoza and Liwanag
.[40] Petitioner himself, when told to identify his alleged cohorts,
pointed to Severino Castro as their contact at the post office.[41] Five
of the suspects who were not identified in the line-up were however
implicated by Liwanag, Mateo and petitioner.

SOG Chief Investigator Jorge C. Mercado filed a complaint for robbery-
in-band (hijacking) before the Municipal Court of Meycauyan, Bulacan
against petitioner and ten (10) others, namely, Mateo, Saguindel,
Relator, Miravalles, Perez, Frias, Mendoza, Liwanag, Castro and
Escalada (Criminal Case No. 7885).[42]

On August 8, 1983, the Information previously referred to and
aforequoted was filed with the Sandiganbayan and docketed as
Criminal Case No. 8496.

On September 20, 1983, Sandiganbayan Associate Justice Romeo M.
Escareal issued orders for the arrest of the accused[43] and fixed bail
at P13,000.00 each. Saguindel and Relator filed a motion to quash the
Information asserting that under the Articles of War and Section 1 of
P.D. 1850, they should be tried by a court martial.[44] The
Sandiganbayan denied the motion on January 3, 1984[45] on the
ground that courts martial could no longer exercise jurisdiction over
them by virtue of their separation from military service.

Evidence for the Defense

Testifying in his own defense, petitioner alleged that as a patrolman
since August 21, 1978 assigned to the Investigation Division or the
Detective Bureau of the WPD to which the General Assignment
Section belonged, he was the recipient of several awards and
recognitions starting with ranking fifth in the Final Order of Merit in
the basic course for police officers.[46] He also claimed to have
received a loyalty medal for meritorious service above the call of
duty[47] and several commendations[48] for the distinguished
performance of his duties. On that fateful date of May 3, 1982, he
was a member of the Special Task Force Unit covering the tourist belt
area.

Of the ten other accused in this case, petitioner admitted knowing
only Martin Mateo whose name appeared in the initial follow-up
operation he allegedly participated in regarding a P250,000 qualified
theft case on May 16, 1980 at the Shemberg Marketing
Corporation.[49] Although a suspect, Mateo was not charged in the
information subsequently filed in that case. Sometime in March 1981,
Mateo visited petitioner at the police headquarters seeking assistance
in his bid to lead a new life. Considering Mateos familiarity with
underworld characters, petitioner readily made him an informer who
was paid from time to time out of the police intelligence fund. Mateo
proved to be an effective informer. In fact, he allegedly supplied vital
information on the identities and whereabouts of suspects in robbery
cases at the La Elegancia Jewelry Store, at the Likha Antique and
Crafts,[50] and in an alleged racket in Aranque Market in Manila
involving jewelries.

As such informer, Mateo became accustomed to borrowing
petitioners owner-type jeep whenever he was given an assignment.
In one instance however, petitioner saw Mateo using his jeep with
some male companions. Because Mateo denied the occurrence of the
incident, petitioner from then on refused to lend his jeep to Mateo.
Instead, Mateo was given an allowance to cover his travelling
expenses.

About a month prior to May 3, 1982, petitioner met Mateo and
requested the latter to give him a good project as he was working for
his transfer to the Metrocom Intelligence Security Group (MISG). On
May 2, 1982, Mateo urged petitioner to lend him his jeep in order that
he could follow-up a bank robbery case. That same evening,
petitioner approached his kumpare, accused Rodolfo Miranda, to
borrow the latters old Mercedes Benz since, if the jeep was used,
Mateo could be identified as an informer. Petitioner left his jeep with
Miranda and went around boasting of the Mercedes Benz.*51+

Mateo took the Benz in the morning of May 3, 1982. Petitioner
advised him to return the car between the hours of two and three in
the afternoon at the Lakan Beer House at the corner of Rizal Avenue
and Zurbaran Streets in Sta. Cruz, Manila where petitioner was to
meet his friend Manolo Almoguera who would be celebrating his
birthday there. Petitioner met Almoguera and company at around
3:30 in the afternoon. He waited for Mateo until shortly before 5:00
in the afternoon when he was constrained to leave without seeing
Mateo because he had to attend a mandatory regular troop formation
at 5:00 P.M. at the police headquarters. From there, petitioner
proceeded to his area of responsibility in the tourist belt. He returned
to the beer house at about 6:00 in the evening hoping to find Mateo
and the automobile. A little before 8:00 oclock, someone informed
him that Mateo had finally arrived. Petitioner went out and scolded
Mateo for being late; the latter apologized and said that his
surveillance bore good results. Petitioner then returned the car to
Miranda, through the latters cousin.

At around 11:00 in the evening of May 29, 1982, Mateo, escorted by a
group of military men, went to petitioners house at 810 Cabezas St.,
Tondo, Manila. The group refused to give any reason for their visit
but arrested him. Wearing only short pants, petitioner was made to
board a car where he was handcuffed. The men asked him about the
Benz and the identities of his companions in an alleged hijacking
incident. Petitioner admitted having knowledge of the exact location
of the car but denied participation in the crime. Nobody apprised him
of his constitutional rights to remain silent and to be assisted by
counsel.[52]

Petitioner was then instructed to accompany Lt. Pagdilao to the
residence of Miranda to get the Benz. They were on board two cars.
When petitioner noticed that they were not heading for Mirandas
place, he clutched the hand of Lt. Pagdilao, pleading for pity and
thinking that he was about to be salvaged. Lt. Pagdilao however
informed him that they would be dropping by petitioners house first
per the investigators information that more checks could be
recovered thereat. A warrantless search was then allegedly
conducted in petitioners house but nothing was found. Suddenly,
someone from the other car came out of a nearby house owned by
Mateo and reported that they had recovered some checks.
Thereafter, they proceeded to the house of Miranda who was also
invited for questioning. The latter surrendered his Benz to the group.

At the SOG headquarters in Camp Crame, petitioner repeatedly
coaxed to admit participation in the hijacking. As he vehemently
denied the accusation against him, someone blindfolded him from
behind, led him outside and loaded him in a car. He was taken to an
unidentified place and made to lie flat on his back. An object was tied
to his small finger to electrocute him. While a wet handkerchief was
stuffed in his mouth, someone mounted his chest and applied the
water cure (tinutubig) through his nose. Because these ordeals
were simultaneously carried out, petitioner felt unbearable pain. He
sought permission to get in touch with his father-in-law, Atty. Felix
Rosacia, but his request was denied. They urged him to cooperate
otherwise something terrible would happen to him.

Meanwhile, petitioners wife reported to the WPD General
Assignment Section her husbands forcible abduction by armed men
whom she mistook for CIS agents. A check with the CIS yielded
negative results. Thereafter, Lt. Reynaldo Dator went to the SOG
where he was informed that petitioner was being investigated but no
details were given thereon pending clearance with superior
officers.[53] Consequently, a newspaper carried an item on the SOGs
refusal to allow petitioners co-police officers to see him in his
detention cell.[54]

Among his comrades, only Jimmy Victorino, formerly of the WPD who
was transferred to the SOG, was able to visit him. Petitioner revealed
to Victorino the maltreatment done him but the latter expressed
helplessness about it. In fact, Victorino advised him to just cooperate
so that the SOG would not incriminate him (para hindi ka pag-initan
dito).*55+ The advice came after petitioner was warned that he, like
Pat. Serrano of the WPD, would be liquidated by the SOG,[56] should
he refused to cooperate. Later, Mateo came to petitioners cell and
confided that he had been similarly maltreated and forced to
implicate petitioner.

After Mateo left, a prepared statement was shown and read to
petitioner. Because its contents were false, petitioner refused to sign
it. Placing his arm around petitioner, a certain Capt. Lagman told
petitioner that he thought they had an understanding already.
Petitioner later discovered that Lagman was not member of the
military but an agent of the SOG, and a member of the Contreras
gang. Petitioner was therefore constrained to sign the statement
because of his excruciating experience (hirap na hirap). He however
admitted having read the document before affiixing his signature
thereto and initialing the corrections therein. The waiver under
Article 125 of the Revised Penal Code and the certification he
executed were allegedly also obtained by duress. Although he picked
out one Severino Castro in a police line-up, he did not even know
Castro. He implicated Castro because he was threatened by a certain
Boy Zapanta.

Petitioner filed a complaint for grave coercion and maltreatment
against Lt. Rosendo Ferrer and several John Does. On August 4, 1982,
Asst. City Fiscal Emelita H. Garayblas recommended its dismissal for
petitioners failure to appear despite subpoenas and to answer
clarificatory questions as well as to authenticate his statement.[57]
However, petitioner swore that he never received the subpoenas.

Petitioners alibi was supported by Manolo Almoguera whose
birthday on May 3, 1995 was the reason for the celebration at the
Lakan Beer House. While his baptismal certificate indicated that he
was born on May 4, 1956,[58] a joint affidavit[59] also attested that
his birth date was actually May 3, 1956. Gary Gallardo, the owner of
the beer house, corroborated Almogueras testimony as to
petitioners alleged presence during the birthday celebration.

The Respondent Courts Decision

On June 18, 1987, the Sandiganbayan rendered the herein questioned
51-page Decision, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered finding accused Jose
Filoteo, Jr. y Diendo, Martin Mateo, Jr. y Mijares, Bernardo Relator, Jr.
y Retino and Eddie Saguindel y Pabinguit GUILTY as co-principals
beyond reasonable doubt of the violation of Section 2 (e), in relation
to Section 3 (b) of Presidential Decree No. 532, otherwise known as
the Anti-Piracy and Anti-Highway Robbery Law of 1974 and hereby
sentences each of said accused to suffer the indeterminate penalty
ranging from TWELVE (12) YEARS and ONE (1) DAY as minimum, to
THIRTEEN (13) YEARS, ONE (1) MONTH and ELEVEN (11) DAYS as
maximum, both of reclusion temporal, and to pay their proportionate
share of the costs of the action. Accused Danilo Miravalles y Marcelo
is hereby acquitted, with costs de oficio, for insufficiency of evidence.

No civil indemnity is hereby awarded due to the complete dearth of
any proof as to the actual damages suffered by the Bureau of Posts or
the owners of the pilfered mail matters, and it further appearing that
the mail van which was hijacked had been recovered, as well as most
of the checks and warrants which were surrendered by some of the
accused, without prejudice to the institution of the proper civil action
to recover damages should proof thereof be available.

Consequently, it is hereby ordered that Exhibits B, B-1 and B-2, which
are the .32 Cal. Revolver, Smith and Wesson, Serial No. 11707, its
holster and six (6) live ammunition respectively, which were
surrendered by accused Relator, and Exhibits J, J-1 to J-5, consisting of
187, 222, 215, 197, 194 and 22 pieces, respectively, of Social Security
System and Medicare checks and vouchers, be returned to the
Firearm and Explosive Unit (FEU), PC, Camp Crame, Quezon City and
the Social Security System, respectively, upon proper receipts.

Let copies of this decision be furnished the Postmaster-General,
Central Post Office, Liwasang Bonifacio, Metro Manila and the
Commanding General and Chief, PC-INP, Camp Crame, Quezon City for
their information and guidance with respect to the other accused who
are still at-large.

SO ORDERED.

Petitioners motion for reconsideration of said Decision was denied by
the Sandiganbayan in its challenged Resolution of July 27, 1987.
Hence, the instant alternative petition for certiorari and/or review on
certiorari charging the Sandiganbayan with having gravely abused its
discretion amounting to lack or excess of jurisdiction and with
reversible error in arriving at said Decision.

The Issues

The amended petition raises the following:

Assignments of Error

and / or

Excess of Jurisdiction / Grave Abuse of Discretion

x x x x x x x x x

First

The respondent court erred and gravely abused its discretion as well
as exceeded its jurisdiction when it made its determination of the
alleged guilt of petitioner on the basis of mere preponderance of
evidence and not proof beyond reasonable doubt.

Second

The respondent court erred and gravely abused its discretion as well
as exceeded its jurisdiction in finding that petitioners having
borrowed the Mercedes Benz car utilized by the other accused in the
hijacking of the mail van idubitably established his direct participation
and/or indispensable cooperation in the said hijacking, the same
being in gross disregard of basic Rules of Law.

Third

The respondent court erred and gravely abused its discretion as well
as exceeded its jurisdiction in finding that the voluminous SSS
Medicare and Pension Checks were confiscated from and surrendered
by petitioner and three of the other accused and in finding the
testimonies and investigation reports relative thereto, credible and
unrefuted, said findings being, insofar as petitioner is concerned,
absolutely without any basis in the evidence and in fact contrary to
the prosecutions only evidence that has some measure of
competency and admissibility.

Fourth

The respondent court erred and gravely abused its discretion in
finding that dorsal portions of the checks and warrants allegedly
taken from petitioner were signed by him to indicate his admission of
accountability therefor and that his signatures thereon confirm the
confiscation from and/or surrender by him of said checks, said
findings being absolutely without any support in the evidence.

Fifth

The respondent court erred and gravely abused its discretion as well
as exceeded its jurisdiction in admitting and considering against
petitioner his alleged extra judical confession, despite petitioners
uncontradicted testimony and documentary proof that he was made
to give or sign the same through torture, maltreatment, physical
compulsion, threats and intimidation and without the presence and
assistance of counsel, his request for which was refused, in gross
violation of Constitutional Provisions and the prevailing
jurisprudence.

Sixth

The respondent court erred and gravely abused its discretion as well
as exceeded its jurisdiction in finding that petitioners participation in
the hijacking of the mail van is indubitably established by the manner
by which the SOG operatives succeeded in ferreting out the members
of the hijacking syndicate one by one through patient sleuthing and
in finding that they did so without resorting to extra-legal measures
and that no evidence having been adduced to show that they were
actuated by improper motives to testify falsely against the herein
accused, then their testimonies should be accorded full credence.

Seventh

The respondent court erred and gravely abused its discretion as well
as exceeded its jurisdiction in finding that even setting aside the
inter-locking confessional statements of Filoteo, Mateo and Liwanag,
x x x substantial and sufficient evidence exist which indubitably prove
the guilt of Filoteo (Petitioner).

Eight

Insofar as petitioner is concerned, the respondent court erred and
gravely abused its discretion as well as exceeded its jurisdiction in
finding that accused Filoteos (petitioners) and Mateos *alleged+
unexplained possession of the stolen checks raised the presumption
that they were responsible for the robbery in question, petitioners
alleged possession not being borne out but disputed by the
prosecutions own evidence.

Ninth

The respondent court erred and gravely abused its discretion as well
as exceeded its jurisdiction in finding that accused Filoteos denials
and alibi cannot be entertained for being quite weak and implausible.
The truth of the matter being that they should have been sustained
since petitioner was not identified by the direct victims-eyewitnesses
as among those who participated in or were present at the hijack and
none of the checks and treasury warrants were found in his
possession or retrieved from him.

Tenth

The respondent court erred and gravely abused its discretion as well
as exceeded its jurisdiction in finding that the participation of
petitioner in the criminal conspiracy has been proven beyond
reasonable doubt by the evidence of record and that said evidence
not only confirms the conspiracy between *him and the other
accused] as easily discernible from their conduct before, during and
after the commission of the offense; but also their participation
therein as co-principals by direct participation and/or indispensable
cooperation.

Eleventh

The respondent Court erred and gravely abused its discretion as well
as exceeded its jurisdiction in cavalierly rejecting, through the use of
pejorative words, and without stating the legal basis of such rejection,
the various vital factual points raised by petitioner, in gross violation
of the express mandate of the 1987 Constitution.

The Court believes that the above errors may be condensed into
four:

(1) Are the written statements, particularly the extra-judicial
confession executed by the accused without the presence of his
lawyer, admissible in evidence against him?

(2) Were said statements obtained through torture, duress,
maltreatment and intimidation and therefore illegal and
inadmissible?

(3) Was petitioners warrantless arrest valid and proper?

(4) Is the evidence of the prosecution sufficient to find the
petitioner guilty beyond reasonable doubt?

The Courts Ruling

Preliminary Issue: Rule 45 or Rule 65?

Before ruling on the foregoing issues, it is necessary to dwell on the
procedural aspects of the case. Petitioner, a segurista, opted to file
an (amended) alternative petition for certiorari under Rule 65 and
for review on certiorari under Rule 45 of the Rules of Court. We
however hold that the instant petition must be considered as one for
review on certiorari under Rule 45. In Jariol, Jr. vs.
Sandiganbayan,[60] this Court clearly ruled:

Presidential Decree No. 1486, as amended by P.D. No. 1606, which
created the Sandiganbayan, specified that decisions and final orders
of the Sandiganbayan shall be subject to review on certiorari by this
Court in accordance with Rule 45 of the Rules of Court. And Rule 45 of
the Revised Rules of Court provides, in Section 2, that only questions
of law may be raised in the Petition for Review and these must be
distinctly set forth. Thus, in principle, findings of fact of the
Sandiganbayan are not to be reviewed by this Court in a petition for
review on certiorari. There are, of course, certain exceptions to this
general principle. Here, reading petitioners Petition for Review and
Memorandum in the most favorable possible light, petitioner may be
seen to be in effect asserting that the Sandiganbayan
misapprehended certain (f)acts in arriving at its factual conclusions.

As amended by Republic Act No. 7975, Section 7 of P.D. No. 1606
expressly provides that (d)ecisions and final orders of the
Sandiganbayan shall be appealable to the Supreme Court by petition
for review on certiorari raising pure questions of law in accordance
with Rule 45 of the Rules of Court. However, in exceptional cases,
this Court has taken cognizance of questions of fact in order to resolve
legal issues, as where there was palpable error or grave
misapprehension of facts by the lower court. Criminal cases elevated
by convicted public officials from the Sandiganbayan deserve the
same thorough treatment by this Court as criminal cases involving
ordinary citizens simply because the constitutional presumption of
innocence must be overcome by proof beyond reasonable doubt. In
all criminal cases, a persons life and liberty are at stake.*61+

As a petition for review under Rule 45 is the available remedy, a
petition for certiorari under Rule 65 would not prosper. Basic it is that
certiorari is invocable only where there is no other plain, speedy or
adequate remedy. For waffling on procedural matters, petitioner
could have lost this battle through a summary dismissal of his
alternative petition. But in view of the importance of the issues
raised, the Court decided to take cognizance of the matter.

First Issue: Uncounselled Waiver

On the merits of the petition, we find that the pivotal issue here is the
admissibility of petitioners extrajudicial confession which lays out in
detail his complicity in the crime. Petitioner contends that
respondent Court erred in admitting his extrajudicial confession
notwithstanding uncontradicted testimony and documentary proof
that he was made to sign the same through torture, maltreatment,
physical compulsion, threats and intimidation and without the
presence and assistance of counsel. He also claims that in executing
the extrajudicial confession, he was denied the right to counsel in the
same way that his waiver of the said right was likewise without the
benefit of counsel. Petitioner therefore questions the respondent
Courts admission in evidence of his extrajudicial confession on the
strength of cases[62] upholding the admissibility of extrajudicial
confessions notwithstanding the absence of counsel especially where
the statements are replete with details and circumstances which are
indicative of voluntariness. We shall first tackle the issue of his
uncounselled waiver of his right to counsel.

The pertinent provision of Article IV, Section 20 of the 1973
Constitution reads as follows:

No person shall be compelled to be a witness against himself. Any
person under investigation for the commission of an offense shall
have the right to remain silent and to counsel and to be informed of
such rights. No force, violence, threat, intimidation, or any other
means which vitiates the free will shall be used against him. Any
confession obtained in violation of this section shall be inadmissible in
evidence.

In comparison, the relevant rights of an accused under Article III,
Section 12 of the 1987 Constitution are, inter alia, as follows:

(1) Any person under investigation for the commission of an offense
shall have the right to be informed of his right to remain silent and to
have competent and independent counsel preferably of his own
choice. If the person cannot afford the services of counsel, he must
be provided with one. These rights cannot be waived except in
writing and in the presence of counsel.

(2) No torture, force, violence, threat, intimidation, or any other
means which vitiate the free will shall be used against him. Secret
detention places, solitary, incommunicado, or other similar forms of
detention are prohibited.

(3) Any confession or admission obtained in violation of this or
Section 17 hereof shall be inadmissible in evidence against him.

(4) The law shall provide for penal and civil sanctions for violations of
this section as well as compensation to and rehabilitation of victims of
torture or similar practices and their families. (underscoring
supplied. Obviously, the 1973 Constitution did not contain the right
against an uncounselled waiver of the right to counsel which is
provided under paragraph 1, Section 12, Article III of the 1987
Constitution, above underscored.)

In the landmark case of Magtoto vs. Manguera,[63] the Court
categorically held that the aforequoted provisions of the 1973
Constitution (which were not included in the 1935 Charter) must be
prospectively applied. This Court said:

We hold that this specific portion of this constitutional mandate has
and should be given a prospective and not a retrospective effect.
Consequently, a confession obtained from a person under
investigation for the commission of an offense, who has not been
informed of his right (to silence and) to counsel, is inadmissible in
evidence if the same had been obtained after the effectivity of the
New Constitution on January 17, 1973. Conversely, such confession is
admissible in evidence against the accused, if the same had been
obtained before the effectivity of the New Constitution, even if
presented after January 17, 1973, and even if he had not been
informed of his right to counsel, since no law gave the accused the
right to be so informed before that date.

By parity of reasoning, the specific provision of the 1987 Constitution
requiring that a waiver by an accused of his right to counsel during
custodial investigation must be made with the assistance of counsel
may not be applied retroactively or in cases where the extrajudicial
confession was made prior to the effectivity of said Constitution.
Accordingly, waivers of the right to counsel during custodial
investigation without the benefit of counsel during the effectivity of
the 1973 Constitution should, by such argumentation, be admissible.
Although a number of cases held that extrajudicial confessions made
while the 1973 Constitution was in force and effect, should have been
made with the assistance of counsel,[64] the definitive ruling was
enunciated only on April 26, 1983 when this Court, through Morales,
Jr., vs. Enrile,[65] issued the guidelines to be observed by law
enforcers during custodial investigation. The court specifically ruled
that (t)he right to counsel may be waived but the waiver shall not be
valid unless made with the assistance of counsel.*66+ Thereafter, in
People vs. Luvendino,[67] the Court through Mr. Justice Florentino P.
Feliciano vigorously taught:

x x x. The doctrine that an uncounseled waiver of the right to
counsel is not to be given legal effect was initially a judge-made one
and was first announced on 26 April 1983 in Morales vs. Enrile and
reiterated on 20 March 1985 in People vs. Galit. x x x.

While the Morales-Galit doctrine eventually became part of Section
12(1) of the 1987 Constitution, that doctrine affords no comfort to
appellant Luvendino for the requirements and restrictions outlined in
Morales and Galit have no retroactive effect and do not reach waivers
made prior to 26 April 1983 the date of promulgation of Morales.

Pursuant to the above doctrine, petitioner may not claim the benefits
of the Morales and Galit rulings because he executed his extrajudicial
confession and his waiver to the right to counsel on May 30, 1982, or
before April 26, 1983. The prospective application of judge-made
laws was underscored in Co vs. Court of Appeals[68] where the Court
ruled thru Chief Justice Andres R. Narvasa that in accordance with
Article 8 of the Civil Code which provides that (j)udicial decisions
applying or interpreting the laws or the Constitution shall form part of
the legal system of the Philippines, and Article 4 of the same Code
which states that (l)aws shall have no retroactive effect unless the
contrary is provided, the principle of prospectivity of statutes,
original or amendatory, shall apply to judicial decisions, which,
although in themselves are not laws, are nevertheless evidence of
what the law means.[69]

Petitioners contention that Article III, Section 12 of the 1987
Constitution should be given retroactive effect for being favorable to
him as an accused, cannot be sustained. While Article 22 of the
Revised Penal Code provides that (p)enal laws shall have a
retroactive effect insofar as they favor the person guilty of a felony
who is not a habitual criminal, what is being construed here is a
constitutional provision specifically contained in the Bill of Rights
which is obviously not a penal statute. A bill of rights is a declaration
and enumeration of the individual rights and privileges which the
Constitution is designed to protect against violations by the
government, or by individuals or groups of individual. It is a charter of
liberties for the individual and a limitation upon the power of the
state.[70] Penal laws, on the other hand, strictly and properly are
those imposing punishment for an offense committed against the
state which the executive of the state has the power to pardon. In
other words, a penal law denotes punishment imposed and enforced
by the state for a crime or offense against its law.[71]

Hence, petitioners vigorous reliance on People vs. Sison*72+ to make
his extrajudicial confession inadmissible is misplaced. In that case,
the extrajudicial confession was executed on May 19, 1983, clearly
after the promulgation of Morales on April 26, 1983.

The admissibility of petitioners uncounselled waiver of the right to
counsel notwithstanding, the Court has still to determine whether
such waiver was made voluntarily and intelligently.[73] The waiver
must also be categorical and definitive,[74] and must rest on clear
evidence.[75]

In his affidavit of May 30, 1982 waiving the provisions of Article 125 of
the Revised Penal Code,[76] petitioner stated that:

x x x matapos akong mapagpaliwanagan ng mga imbestigador ng
Special Operations Group, PC/INP Central Anti-Organized Crime Task
Force, Camp Crame, Quezon City ng aking mga karapatan alinsunod sa
mga isinasaad ng Section 20, Article IV ng Bagong Saligang Batas ng
Republika ng Pilipinas ay malaya at kusang-loob na nagsasalaysay ng
mga sumusunod kahit na walang abugadong magpapayo sa akin sa
pagsasagawa nito sa dahilang alam at nauunawaan ko ang aking
ginagawa at wala naman akong isasalaysay kung hindi mga
katotohanan lamang, bagamat ako ay inalok ng mga imbestigador na
ikuha ng isang abugadong walang bayad mula sa CLAO-IBP na akin
namang tinanggihan:

x x x x x x x x x;

Na ako ay hindi sinaktan o minaltrato gayunding walang kinuha mula
sa akin na hindi niresibohan;

x x x x x x x x x.

Sgt. Arsenio Carlos, investigating officer, testified that he apprised
petitioner of his right to counsel even in waiving the same right[77]
but petitioner did not even inform him that his father-in-law was a
lawyer. Although allowed to talk for thirty minutes with Jimmy
Victorino, who was his comrade at the WPD General Assignment
Section,[78] still, petitioner did not invoke his right to counsel.

It should be emphasized that petitioner could not have been ignorant
of his rights as an accused. He was a fourth year criminology student
and a topnotch student in the police basic course.[79] Having been in
the police force since 1978, with stints at the investigation division or
the detective bureau, he knew the tactics used by investigators to
incriminate criminal suspects.[80] in other words, he was
knowledgeable on the matter of extrajudicial confessions.

The Second Issue: Confession Extracted Through Torture?

Petitioners claim that he was tortured into signing the confession
appears incredible, or at least susceptible to serious doubts. The
allegation of torture was negated by the medical report[81] showing
no evidence of physical injuries upon his person. As correctly
observed by the Solicitor General, there is no reason to maltreat him
in particular when the record shows that the investigating team
respected the right of the other suspects to remain silent. When he
was presented before Judge Mariano Mendieta of the municipal court
in Meycauayan, petitioner even waived his right to present
evidence[82] instead of impugning his confession on account of the
torture allegedly inflicted upon him. If indeed he had been tortured,
he would have revived the case he filed against his alleged torturers
upon learning of its dismissal.

Furthermore, an examination of his signatures in the different
documents on record bearing the same discloses an evenness of lines
and strokes in his penmanship which is markedly consistent in his
certification, extrajudicial confession and waiver of detention.
Human experience has proven that the lines and strokes of a persons
handwriting reflect his disposition at a certain given time. In the
present case, no handwriting expert is needed to declare that
petitioners signatures were written voluntarily and not under
compulsion of fear immediately after he had been subjected to
maltreatment. In view of the foregoing, his extrajudicial confession is
presumed to have been voluntarily made, in the absence of conclusive
evidence showing that petitioners consent in executing the same had
been vitiated.[83]

Besides, the question of whether petitioner was indeed subjected to
torture or maltreatment is a factual question addressed primarily to
trial courts, the findings of which are binding on this Court whose
function, as afore-discussed, is principally to review only of questions
of law. Moreover, we have pored over the assailed Decision and we
are satisfied that respondent Court performed its duty in evaluating
the evidence. More on this later.

The Third Issue: Illegal Arrest?

Petitioner questions the manner of his arrest, stating that the
arresting officers invited him without a warrant of arrest and
brought him to Camp Crame where he was allegedly subjected to
torture almost a month after the commission of the crime.[84]
Petitioners claim is belatedly made. He should have questioned the
validity of his arrest before he entered his plea in the trial court. On
this point, this Court explained in People vs. Lopez, Jr.:[85]

Finally, it is much too late for appellant to raise the question of his
arrest without a warrant. When accused-appellant was arrested and
a case was filed against him, he pleaded not guilty upon arraignment,
participated in the trial and presented his evidence. Appellant is thus
estopped from questioning the legality of his arrest. It is well-settled
that any objection involving a warrant of arrest or procedure in the
acquisition by the court of jurisdiction over the person of an accused
must be made before he enters his plea, otherwise the objection is
deemed waived. Besides, this issue is being raised for the first time
by appellant. He did not move for the quashal of the information
before the trial court on this ground. Consequently, any irregularity
attendant to his arrest, if any, was cured when he voluntarily
submitted himself to the jurisdiction of the trial court by entering a
plea of not guilty and by participating in the trial. Moreover, the
illegal arrest of an accused is not sufficient cause for setting aside a
valid judgment rendered upon a sufficient complaint after trial free
from error.

The only move petitioner made in regard to his arrest was to file a
complaint for grave coercion, grave threat & maltreatment which
was docketed as I.S. No. 82-12684 before the Fiscals Office of Quezon
City.[86] The complaint was an offshoot of his alleged maltreatment
in the hands of the SOG upon his arrest. However, as stated above,
he did not lift a finger to revive it upon its dismissal.

The Fourth Issue: Sufficiency of the Prosecutions Evidence

Contrary to petitioners claim, his culpability has been proven beyond
reasonable doubt. He borrowed a car to use in the hijacking knowing
fully well that his owner-type jeep would give away his identity. He
could not be identified by the postal employees in the postal van
simply because after overtaking said vehicle and forcing its driver to
pull over, he gave up driving the Mercedes Benz where the postal
employees were made to ride, and commandeered the van. That the
checks were not found in his own home is of no moment. Before the
arrest and upon learning that the authorities had begun to nail down
the identities of the malefactors, he had entrusted them to his
kumare. It was petitioner himself who led the team of Lt. Pagdilao
back to his place after he had admitted to Sgt. Arsenio Carlos that his
share of the checks were in the possession of his kumare in the
neighborhood.[87]

In view of these facts, it is beyond dispute that petitioner was a direct
participant in the commission of the crime. His alibi has been
correctly considered by the Sandiganbayan to be weak and
implausible. The distance between Kalvario, Meycauayan, Bulacan
and downtown Manila where petitioner claimed to have been at the
crucial time was between fifteen (15) to twenty (20) kilometers,
which, through first-class roads, could be negotiated during that time
in approximately thirty (30) minutes. It could not therefore have
been physically impossible for him to be at the crime scene or its
immediate vicinity when the crime was committed.[88]

Having already ruled on the admissibility of petitioners confession,
this Court holds that the full force of the totality of the prosecutions
evidence proves his guilt well beyond reasonable doubt. Weighing
heavily against the defense is the well-settled doctrine that findings of
facts of the trial courts -- in this case, the Sandiganbayan itself --
particularly in the assessment of the credibility of witnesses, is
binding upon this Court, absent any arbitrariness, abuse or palpable
error.

x x x It is well-settled that this Court will not interfere with the
judgment of the trial court in passing on the credibility of the
witnesses, unless there appears in the record some fact or
circumstance of weight and influence which has been overlooked or
the significance of which has been misapprehended or
misinterpreted. The reason for this is that the trial court is in a better
position to decide the question, having heard the witnesses
themselves and observed their deportment and manner of testifying
during the trial.*89+

The doctrine is firmly settled that the trial courts conclusion on
issues of credibility is accorded with highest respect by the appellate
courts (People vs. Dominguez, 217 SCRA 170). Appellate courts will
generally respect the findings of trial courts on the credibility of
witnesses since trial courts are in a better position to weigh
conflicting testimonies. They heard the witnesses themselves and
observed their deportment and manner of testifying. x x x.*90+

So overwhelming is the prosecutions evidence that respondent Court
opined that even without the inter-locking confessions of Filoteo,
Mateo and Liwanag the remaining evidence would still be sufficient
for conviction.[91] Said the respondent tribunal:

However, even setting aside the inter-locking confessional
statements of Filoteo, Mateo and Liwanag, we are of the considered
opinion that substantial and sufficient evidence exist which
indubitably prove the guilt of Filoteo, Relator, Mateo and Saguindel
who had submitted themselves to the jurisdiction of this Court. As
above-stated, Filoteo was responsible for securing the use of the
Mercedes Benz car used by the co-conspirators in the hi-jacking.
Together with Mateo, Liwanag and Mendoza, he surrendered
voluminous assorted checks which were part of the loot. Relator
admitted that his service firearm was used by him in the hi-jacking,
which firearm was identified by prosecution witnesses Miranda and
Bautista. Saguindel was identified in line-ups at the SOG office as the
suspect clad in fatigue uniform and carrying an Armalite rifle by
prosecution witnesses Tagudar and Bautista. All three (3) accused,
namely, Mateo, Relator and Saguindel also jumped bail during the
trial and did not offer any evidence to refute the evidence presented
by the prosecution against them. Such flight to evade prosecution
constitutes an implied admission of guilt.

Moreover, accused Filoteos and Mateos unexplained possession of
the stolen checks raises the presumption that they were responsible
for the robbery in question. It is a rule established by an abundance
of jurisprudence that when stolen property is found in the possession
of one, not the owner, without a satisfactory explanation of his
possession, he will be presumed the thief. This rule is in accordance
with the disputable presumption that a person found in possession
of a thing taken in the doing of a recent wrongful act is the taker and
doer of the whole act. In the instant case, said accused has not given
such satisfactory explanation, much more so when their possession
had been positively established by the testimonies of prosecution
witnesses Capt. Ferrer and Sgt. Carlos and by accuseds own
signatures at the back of said checks.

Furthermore, accused Filoteos denials and alibi cannot be
entertained for being quite weak and implausible. His claim that he
merely borrowed the Mercedes Benz car from Rodolfo Miranda to
help out his co-accused Mateo, who had been utilized by the police as
an informer and was following up tips in certain unsolved cases,
appears to be incredible and fantastic. He also claimed that he could
not have participated in the hi-jack because after giving the car to
Mateo in the morning of May 2, 1982, he waited at the corner of
Zurbaran St. and Avenida Rizal between 2-3:00 oclock p.m. of the
same day and then went to the WPD headquarters to attend the
police formation at around 5:00 oclock p.m. when Mateo failed to
show up. Thereafter, he tried to show through his witnesses Gary
Gallardo and Manolo Almogera that he was with them between 3:00
oclock to 4:45 oclock p.m., then from 6:00 oclock to 8:30 oclock
p.m. and, finally, from 10:45 oclock p.m. to 11:00 oclock of the same
date. It was through said witnesses that he tried to establish his
whereabouts between 4:30 oclock to 7:30 oclock p.m. of May 2,
1982, the period from the time the mail van was hi-jacked up to when
postal employees Bautista, Miranda and Tagudar were brought to
Caloocan City and freed by their captors. Such alibi, however, fails to
show that it was physically impossible for him to be present at the
scene of the hi-jacking. We take judicial notice that the distance
between the crime scene and downtown Manila is some 15-20
kilometers and negotiable over first-class roads in some thirty (30)
minutes.

We are likewise convinced that there is sufficient evidence of
conspiracy as convincing as the evidence of the participation of each
of the accused. As ratiocinated in the assailed Decision:[92]

The participation of accused Filoteo, Mateo, Relator and Saguindel in
the criminal conspiracy have (sic) been proved beyond reasonable
doubt by the evidence on record and which evidence not only
confirms the existence of the conspiracy between them as easily
discernible from their conduct before, during and after the
commission of the offense, but also their participation therein as co-
principals by direct participation and/or indispensable cooperation.
Their concerted efforts were performed with closeness and
coordination indicating their common purpose. Hence, there being
collective criminal responsibility, the act of one is the act of all, and
each of the participants are responsible for what the others did in all
the stages of execution of the offense.

Final Question: Brigandage or Robbery?

The Court believes that, though not raised as an issue and though not
argued by the parties in their pleadings, the question of which law
was violated by the accused should be discussed and passed upon. In
fact, petitioner should have brought up such question as it may
benefit him with a reduced penalty.

The respondent Court convicted the accused of brigandage punishable
under Presidential Decree No. 532.[93]

Justifying the above disposition, the assailed Decision ratiocinates:

Accused herein are charged with the violation of Presidential Decree
No. 532, otherwise known as the Anti-Piracy and Anti-Highway
Robbery Law of 1974. Under said decree, with respect to the highway
robbery aspect, the offense is committed on a Philippine Highway
which under Section 2 (c) thereof has been defined as any road,
street, passage, highway and bridges or any part thereof, or railway or
railroad within the Philippines, used by persons or vehicles, or
locomotives or trains for the movement or circulation of persons or
transportation of goods, articles or property or both, while under
Section 2 (e) thereof Highway Robbery/Brigandage has been
defined as the the seizure of any person for ransom, extortion or
other unlawful purposes or the taking away of property of another by
means of violence against or intimidation of persons nor force upon
things or other unlawful means, committed by any person on any
Philippine Highway. (Underscoring supplied)

The offense described in the information and established by the
evidence presented by the prosecution properly falls within the ambit
of the aforesaid special law. Therein, it was conclusively proven that
a postal van containing mail matters, including checks and warrants,
was hi-jacked along the national highway in Bulacan by the accused,
with the attendant use of force, violence and intimidation against the
three (3) postal employees who were occupants thereof, resulting in
the unlawful taking and asportation of the entire van and its contents
consisting of mail matters. Also the evidence further showed that the
crime was committed by the accused who were PC soldiers,
policeman (sic) and private individuals in conspiracy with their co-
accused Castro and Escalada who were postal employees and who
participated in the planning of the crime. Accordingly, all the
essential requisites to constitute a consummated offense under the
law in point are present. (Underscoring in the original text.)

Obviously, the Court a quo labored under the belief that because the
taking or robbery was perpetrated on a national highway (McArthur
Highway), ergo, Presidential Decree No. 532, otherwise known as the
Anti-Piracy and Anti-Highway Robbery Law of 1974, must have been
the statute violated. Such reasoning has already been debunked by
this Court in the case of People vs. Isabelo Puno,[94] where it was
ruled in unmistakable language that it takes more than the situs of
the robbery to bring it within the ambit of PD 532. Said the Court
through Mr. Justice Florenz D. Regalado:

The following salient distinctions between brigandage and robbery
are succinctly explained in a treatise on the subject and are of
continuing validity:

The main object of the Brigandage Law is to prevent the formation of
bands of robbers. The heart of the offense consists in the formation
of a band by more than three armed persons for the purpose
indicated in art. 306. Such formation is sufficient to constitute a
violation of art. 306. It would not be necessary to show, in a
prosecution under it, that a member or members of the band actually
committed robbery or kidnapping or any other purpose attainable by
violent means. The crime is proven when the organization and
purpose of the band are shown to be such as are contemplated by art.
306. On the other hand, if robbery is committed by a band, whose
members were not primarily organized for the purpose of committing
robbery or kidnapping, etc., the crime would not be brigandage, but
only robbery. Simply because robbery was committed by a band of
more than three armed persons, it would not follow that it was
committed by a band of brigands. In the Spanish text of art. 306, it is
required that the band sala a los campos para dedicarse a robar.
(Italics ours.)

In fine, the purpose of brigandage, is inter alia, indiscriminate
highway robbery. If the purpose is only a particular robbery, the
crime is only robbery, or robbery in band if there are at least four
armed participants. The martial law legislator, in creating and
promulgating Presidential Decree No. 532 for the objectives
announced therein, could not have been unaware of that distinction
and is presumed to have adopted the same, there being no indication
to the contrary. This conclusion is buttressed by the rule on
contemporaneous construction, since it is one drawn from the time
when and the circumstances under which the decree to be construed
originated. Contemporaneous exposition or construction is the best
and strongest in the law.

Further, that Presidential Decree No. 532 punishes as highway
robbery or brigandage only acts of robbery perpetrated by outlaws
indiscriminately against any person or persons on Philippine highways
as defined therein, and not acts of robbery committed against only a
predetermined or particular victim, is evident from the preambular
clauses thereof, to wit:

WHEREAS, reports from law-enforcement agencies reveal that
lawless are still committing acts of depredation upon the persons and
properties of innocent and defenseless inhabitants who travel from
one place to another, thereby disturbing the peace, order and
tranquility of the nation and stunting the economic and social
progress of the people:

WHEREAS, such acts of depredations constitute x x x highway
robbery/brigandage which are among the highest forms of
lawlessness condemned by the penal statutes of all countries:

WHEREAS, it is imperative that said lawless elements be discouraged
from perpetrating such acts of depredations by imposing heavy
penalty on the offenders, with the end in view of eliminating all
obstacles to the economic, social, educational and community
progress of the people; (Emphasis supplied.)

Indeed, it is hard to conceive of how a single act of robbery against a
particular person chosen by the accused as their specific victim could
be considered as committed on the innocent and defenseless
inhabitants who travel from one place to another, and which single
act of depredation would be capable of stunting the economic and
social progress of the people as to be considered among the highest
forms of lawlessness condemned by the penal statutes of all
countries, and would accordingly constitute an obstacle to the
economic, social, educational and community progress of the people,
such that said isolated act would constitute the highway robbery or
brigandage contemplated and punished is said decree. This would be
an exaggeration bordering on the ridiculous.

From the above, it is clear that a finding of brigandage or highway
robbery involves not just the locus of the crime or the fact that more
than three (3) persons perpetrated it. It is essential to prove that the
outlaws were purposely organized not just for one act of robbery but
for several indiscriminate commissions thereof. In the present case,
there had been no evidence presented that the accused were a band
of outlaws organized for the purpose of depredation upon the
persons and properties of innocent and defenseless inhabitants who
travel from one place to another. What was duly proven in the
present case is one isolated hijacking of a postal van. There was also
no evidence of any previous attempts at similar robberies by the
accused to show the indiscriminate commission thereof.*95+

Upon the other hand, the Information did not specifically mention
P.D. 532.[96] The facts alleged therein and proven by the evidence
constitute the offense of robbery defined in Art. 293 in relation to Art.
295 and punished by Art. 294, par. 5, all of the Revised Penal
Code.[97] From the facts, it was duly proven that:

* personal property (treasury warrants, checks, mail, van, tools,
etc.)

* belonging to another were

* unlawfully taken by the accused

* with intent to gain (animo lucrandi)

* with intimidation against three persons (Art. 293)

* in an uninhabited place, or

* by an band, or

* by attacking a moving motor vehicle

* on a highway; and

* the intimidation was made with the use of firearms (Art. 295)

Hence, the offender shall be punished by the maximum period of the
penalty provided under paragraph 5 of Art. 294, which is, prision
correctional in its maximum period to prision mayor in its medium
period.

Effectively, the penalty imposed by the Court a quo should be
lightened. However, such lighter penalty shall benefit only herein
petitioner and not his co-accused who did not contest or appeal the
Sandiganbayans Decision.

WHEREFORE, the petition is DENIED, but the first paragraph of the
dispositive portion of the assailed Decision is partially MODIFIED to
read as follows:

WHEREFORE, judgment is hereby rendered finding accused Jose
Filoteo, Jr. y Diendo GUILTY beyond reasonable doubt as co-principal
in the crime of robbery as defined in Arts. 293 and 295 and penalized
under Art. 294, paragraph 5, of the Revised Penal Code Code
IMPOSING on him an indeterminate sentence of four (4) years and
two (2) months of prision correctional, as minimum, to ten (10) years
of prision mayor as maximum, and to pay his proportionate share of
the costs of the action.

All other parts of the disposition are hereby AFFIRMED.
POLICE POWER CASES
G.R. No. L-24693 July 31, 1967

ERMITA-MALATE HOTEL AND MOTEL OPERATORS ASSOCIATION,
INC., HOTEL DEL MAR INC. and GO CHIU, petitioners-appellees,
vs.
THE HONORABLE CITY MAYOR OF MANILA, respondent-appellant.
VICTOR ALABANZA, intervenor-appellee.

Panganiban, Abad and Associates Law Office for respondent-
appellant.
J. M. Aruego, Tenchavez and Associates for intervenor-appellee.

FERNANDO, J.:

The principal question in this appeal from a judgment of the lower
court in an action for prohibition is whether Ordinance No. 4760 of
the City of Manila is violative of the due process clause. The lower
court held that it is and adjudged it "unconstitutional, and, therefore,
null and void." For reasons to be more specifically set forth, such
judgment must be reversed, there being a failure of the requisite
showing to sustain an attack against its validity.

The petition for prohibition against Ordinance No. 4760 was filed on
July 5, 1963 by the petitioners, Ermita-Malate Hotel and Motel
Operators Association, one of its members, Hotel del Mar Inc., and a
certain Go Chiu, who is "the president and general manager of the
second petitioner" against the respondent Mayor of the City of
Manila who was sued in his capacity as such "charged with the
general power and duty to enforce ordinances of the City of Manila
and to give the necessary orders for the faithful execution and
enforcement of such ordinances." (par. 1). It was alleged that the
petitioner non-stock corporation is dedicated to the promotion and
protection of the interest of its eighteen (18) members "operating
hotels and motels, characterized as legitimate businesses duly
licensed by both national and city authorities, regularly paying taxes,
employing and giving livelihood to not less than 2,500 person and
representing an investment of more than P3 million."1 (par. 2). It was
then alleged that on June 13, 1963, the Municipal Board of the City of
Manila enacted Ordinance No. 4760, approved on June 14, 1963 by
the then Vice-Mayor Herminio Astorga, who was at the time acting as
Mayor of the City of Manila. (par. 3).

After which the alleged grievances against the ordinance were set
forth in detail. There was the assertion of its being beyond the powers
of the Municipal Board of the City of Manila to enact insofar as it
would regulate motels, on the ground that in the revised charter of
the City of Manila or in any other law, no reference is made to motels;
that Section 1 of the challenged ordinance is unconstitutional and
void for being unreasonable and violative of due process insofar as it
would impose P6,000.00 fee per annum for first class motels and
P4,500.00 for second class motels; that the provision in the same
section which would require the owner, manager, keeper or duly
authorized representative of a hotel, motel, or lodging house to
refrain from entertaining or accepting any guest or customer or letting
any room or other quarter to any person or persons without his filling
up the prescribed form in a lobby open to public view at all times and
in his presence, wherein the surname, given name and middle name,
the date of birth, the address, the occupation, the sex, the nationality,
the length of stay and the number of companions in the room, if any,
with the name, relationship, age and sex would be specified, with
data furnished as to his residence certificate as well as his passport
number, if any, coupled with a certification that a person signing such
form has personally filled it up and affixed his signature in the
presence of such owner, manager, keeper or duly authorized
representative, with such registration forms and records kept and
bound together, it also being provided that the premises and facilities
of such hotels, motels and lodging houses would be open for
inspection either by the City Mayor, or the Chief of Police, or their
duly authorized representatives is unconstitutional and void again on
due process grounds, not only for being arbitrary, unreasonable or
oppressive but also for being vague, indefinite and uncertain, and
likewise for the alleged invasion of the right to privacy and the
guaranty against self-incrimination; that Section 2 of the challenged
ordinance classifying motels into two classes and requiring the
maintenance of certain minimum facilities in first class motels such as
a telephone in each room, a dining room or, restaurant and laundry
similarly offends against the due process clause for being arbitrary,
unreasonable and oppressive, a conclusion which applies to the
portion of the ordinance requiring second class motels to have a
dining room; that the provision of Section 2 of the challenged
ordinance prohibiting a person less than 18 years old from being
accepted in such hotels, motels, lodging houses, tavern or common
inn unless accompanied by parents or a lawful guardian and making it
unlawful for the owner, manager, keeper or duly authorized
representative of such establishments to lease any room or portion
thereof more than twice every 24 hours, runs counter to the due
process guaranty for lack of certainty and for its unreasonable,
arbitrary and oppressive character; and that insofar as the penalty
provided for in Section 4 of the challenged ordinance for a subsequent
conviction would, cause the automatic cancellation of the license of
the offended party, in effect causing the destruction of the business
and loss of its investments, there is once again a transgression of the
due process clause.

There was a plea for the issuance of preliminary injunction and for a
final judgment declaring the above ordinance null and void and
unenforceable. The lower court on July 6, 1963 issued a writ of
preliminary injunction ordering respondent Mayor to refrain from
enforcing said Ordinance No. 4760 from and after July 8, 1963.

In the a answer filed on August 3, 1963, there was an admission of
the personal circumstances regarding the respondent Mayor and of
the fact that petitioners are licensed to engage in the hotel or motel
business in the City of Manila, of the provisions of the cited Ordinance
but a denial of its alleged nullity, whether on statutory or
constitutional grounds. After setting forth that the petition did fail to
state a cause of action and that the challenged ordinance bears a
reasonable relation, to a proper purpose, which is to curb immorality,
a valid and proper exercise of the police power and that only the
guests or customers not before the court could complain of the
alleged invasion of the right to privacy and the guaranty against self
incrimination, with the assertion that the issuance of the preliminary
injunction ex parte was contrary to law, respondent Mayor prayed
for, its dissolution and the dismissal of the petition.

Instead of evidence being offered by both parties, there was
submitted a stipulation of facts dated September 28, 1964, which
reads:

1. That the petitioners Ermita-Malate Hotel and Motel Operators
Association, Inc. and Hotel del Mar Inc. are duly organized and
existing under the laws of the Philippines, both with offices in the City
of Manila, while the petitioner Go Chin is the president and general
manager of Hotel del Mar Inc., and the intervenor Victor Alabanza is a
resident of Baguio City, all having the capacity to sue and be sued;

2. That the respondent Mayor is the duly elected and incumbent
City Mayor and chief executive of the City of Manila charged with the
general power and duty to enforce ordinances of the City of Manila
and to give the necessary orders for the faithful execution and
enforcement of such ordinances;

3. That the petitioners are duly licensed to engage in the business of
operating hotels and motels in Malate and Ermita districts in Manila;

4. That on June 13, 1963, the Municipal Board of the City of Manila
enacted Ordinance No. 4760, which was approved on June 14, 1963,
by Vice-Mayor Herminio Astorga, then the acting City Mayor of
Manila, in the absence of the respondent regular City Mayor,
amending sections 661, 662, 668-a, 668-b and 669 of the compilation
of the ordinances of the City of Manila besides inserting therein three
new sections. This ordinance is similar to the one vetoed by the
respondent Mayor (Annex A) for the reasons stated in its 4th
Indorsement dated February 15, 1963 (Annex B);

5. That the explanatory note signed by then Councilor Herminio
Astorga was submitted with the proposed ordinance (now Ordinance
4760) to the Municipal Board, copy of which is attached hereto as
Annex C;

6. That the City of Manila derived in 1963 an annual income of
P101,904.05 from license fees paid by the 105 hotels and motels
(including herein petitioners) operating in the City of
Manila.1wph1.t

Thereafter came a memorandum for respondent on January 22,
1965, wherein stress was laid on the presumption of the validity of
the challenged ordinance, the burden of showing its lack of
conformity to the Constitution resting on the party who assails it,
citing not only U.S. v. Salaveria, but likewise applicable American
authorities. Such a memorandum likewise refuted point by point the
arguments advanced by petitioners against its validity. Then barely
two weeks later, on February 4, 1965, the memorandum for
petitioners was filed reiterating in detail what was set forth in the
petition, with citations of what they considered to be applicable
American authorities and praying for a judgment declaring the
challenged ordinance "null and void and unenforceable" and making
permanent the writ of preliminary injunction issued.

After referring to the motels and hotels, which are members of the
petitioners association, and referring to the alleged constitutional
questions raised by the party, the lower court observed: "The only
remaining issue here being purely a question of law, the parties, with
the nod of the Court, agreed to file memoranda and thereafter, to
submit the case for decision of the Court." It does appear obvious
then that without any evidence submitted by the parties, the decision
passed upon the alleged infirmity on constitutional grounds of the
challenged ordinance, dismissing as is undoubtedly right and proper
the untenable objection on the alleged lack of authority of the City of
Manila to regulate motels, and came to the conclusion that "the
challenged Ordinance No. 4760 of the City of Manila, would be
unconstitutional and, therefore, null and void." It made permanent
the preliminary injunction issued against respondent Mayor and his
agents "to restrain him from enforcing the ordinance in question."
Hence this appeal.

As noted at the outset, the judgment must be reversed. A decent
regard for constitutional doctrines of a fundamental character ought
to have admonished the lower court against such a sweeping
condemnation of the challenged ordinance. Its decision cannot be
allowed to stand, consistently with what has hitherto been the
accepted standards of constitutional adjudication, in both procedural
and substantive aspects.

Primarily what calls for a reversal of such a decision is the absence
of any evidence to offset the presumption of validity that attaches to
a challenged statute or ordinance. As was expressed categorically by
Justice Malcolm: "The presumption is all in favor of validity x x x . The
action of the elected representatives of the people cannot be lightly
set aside. The councilors must, in the very nature of things, be familiar
with the necessities of their particular municipality and with all the
facts and circumstances which surround the subject and necessitate
action. The local legislative body, by enacting the ordinance, has in
effect given notice that the regulations are essential to the well being
of the people x x x . The Judiciary should not lightly set aside
legislative action when there is not a clear invasion of personal or
property rights under the guise of police regulation.2

It admits of no doubt therefore that there being a presumption of
validity, the necessity for evidence to rebut it is unavoidable, unless
the statute or ordinance is void on its face which is not the case here.
The principle has been nowhere better expressed than in the leading
case of O'Gorman & Young v. Hartford Fire Insurance Co.,3 where the
American Supreme Court through Justice Brandeis tersely and
succinctly summed up the matter thus: The statute here questioned
deals with a subject clearly within the scope of the police power. We
are asked to declare it void on the ground that the specific method of
regulation prescribed is unreasonable and hence deprives the plaintiff
of due process of law. As underlying questions of fact may condition
the constitutionality of legislation of this character, the resumption of
constitutionality must prevail in the absence of some factual
foundation of record for overthrowing the statute." No such factual
foundation being laid in the present case, the lower court deciding the
matter on the pleadings and the stipulation of facts, the presumption
of validity must prevail and the judgment against the ordinance set
aside.

Nor may petitioners assert with plausibility that on its face the
ordinance is fatally defective as being repugnant to the due process
clause of the Constitution. The mantle of protection associated with
the due process guaranty does not cover petitioners. This particular
manifestation of a police power measure being specifically aimed to
safeguard public morals is immune from such imputation of nullity
resting purely on conjecture and unsupported by anything of
substance. To hold otherwise would be to unduly restrict and narrow
the scope of police power which has been properly characterized as
the most essential, insistent and the least limitable of powers,4
extending as it does "to all the great public needs."5 It would be, to
paraphrase another leading decision, to destroy the very purpose of
the state if it could be deprived or allowed itself to be deprived of its
competence to promote public health, public morals, public safety
and the genera welfare.6 Negatively put, police power is "that
inherent and plenary power in the State which enables it to prohibit
all that is hurt full to the comfort, safety, and welfare of society.7

There is no question but that the challenged ordinance was
precisely enacted to minimize certain practices hurtful to public
morals. The explanatory note of the Councilor Herminio Astorga
included as annex to the stipulation of facts, speaks of the alarming
increase in the rate of prostitution, adultery and fornication in Manila
traceable in great part to the 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." The
challenged ordinance then proposes to check the clandestine
harboring of transients and guests of these establishments by
requiring these transients and guests to fill up a registration form,
prepared for the purpose, in a lobby open to public view at all times,
and by introducing several other amendatory provisions calculated to
shatter the privacy that characterizes the registration of transients
and guests." Moreover, the increase in the licensed fees was intended
to discourage "establishments of the kind from operating for purpose
other than legal" and at the same time, to increase "the income of the
city government." It would appear therefore that the stipulation of
facts, far from sustaining any attack against the validity of the
ordinance, argues eloquently for it.

It is a fact worth noting that this Court has invariably stamped with
the seal of its approval, ordinances punishing vagrancy and classifying
a pimp or procurer as a vagrant;8 provide a license tax for and
regulating the maintenance or operation of public dance halls;9
prohibiting gambling;10 prohibiting jueteng;11 and monte;12
prohibiting playing of panguingui on days other than Sundays or legal
holidays;13 prohibiting the operation of pinball machines;14 and
prohibiting any person from keeping, conducting or maintaining an
opium joint or visiting a place where opium is smoked or otherwise
used,15 all of which are intended to protect public morals.

On the legislative organs of the government, whether national or
local, primarily rest the exercise of the police power, which, it cannot
be too often emphasized, is the power to prescribe regulations to
promote the health, morals, peace, good order, safety and general
welfare of the people. In view of the requirements of due process,
equal protection and other applicable constitutional guaranties
however, the exercise of such police power insofar as it may affect the
life, liberty or property of any person is subject to judicial inquiry.
Where such exercise of police power may be considered as either
capricious, whimsical, unjust or unreasonable, a denial of due process
or a violation of any other applicable constitutional guaranty may call
for correction by the courts.

We are thus led to considering the insistent, almost shrill tone, in
which the objection is raised to the question of due process.16 There
is no controlling and precise definition of due process. It furnishes
though a standard to which the governmental action should conform
in order that deprivation of life, liberty or property, in each
appropriate case, be valid. What then is the standard of due process
which must exist both as a procedural and a substantive requisite to
free the challenged ordinance, or any governmental action for that
matter, from the imputation of legal infirmity sufficient to spell its
doom? It is responsiveness to the supremacy of reason, obedience to
the dictates of justice. Negatively put, arbitrariness is ruled out and
unfairness avoided. To satisfy the due process requirement, official
action, to paraphrase Cardozo, must not outrun the bounds of reason
and result in sheer oppression. Due process is thus hostile to any
official action marred by lack of reasonableness. Correctly it has been
identified as freedom from arbitrariness. It is the embodiment of the
sporting idea of fair play.17 It exacts fealty "to those strivings for
justice" and judges the act of officialdom of whatever branch "in the
light of reason drawn from considerations of fairness that reflect
[democratic] traditions of legal and political thought."18 It is not a
narrow or "technical conception with fixed content unrelated to time,
place and circumstances,"19 decisions based on such a clause
requiring a "close and perceptive inquiry into fundamental principles
of our society."20 Questions of due process are not to be treated
narrowly or pedantically in slavery to form or phrases.21

It would thus be an affront to reason to stigmatize an ordinance
enacted precisely to meet what a municipal lawmaking body
considers an evil of rather serious proportion an arbitrary and
capricious exercise of authority. It would seem that what should be
deemed unreasonable and what would amount to an abdication of
the power to govern is inaction in the face of an admitted
deterioration of the state of public morals. To be more specific, the
Municipal Board of the City of Manila felt the need for a remedial
measure. It provided it with the enactment of the challenged
ordinance. A strong case must be found in the records, and, as has
been set forth, none is even attempted here to attach to an ordinance
of such character the taint of nullity for an alleged failure to meet the
due process requirement. Nor does it lend any semblance even of
deceptive plausibility to petitioners' indictment of Ordinance No.
4760 on due process grounds to single out such features as the
increased fees for motels and hotels, the curtailment of the area of
freedom to contract, and, in certain particulars, its alleged vagueness.

Admittedly there was a decided increase of the annual license fees
provided for by the challenged ordinance for hotels and motels, 150%
for the former and over 200% for the latter, first-class motels being
required to pay a P6,000 annual fee and second-class motels, P4,500
yearly. It has been the settled law however, as far back as 1922 that
municipal license fees could be classified into those imposed for
regulating occupations or regular enterprises, for the regulation or
restriction of non-useful occupations or enterprises and for revenue
purposes only.22 As was explained more in detail in the above Cu
Unjieng case: (2) Licenses for non-useful occupations are also
incidental to the police power and the right to exact a fee may be
implied from the power to license and regulate, but in fixing amount
of the license fees the municipal corporations are allowed a much
wider discretion in this class of cases than in the former, and aside
from applying the well-known legal principle that municipal
ordinances must not be unreasonable, oppressive, or tyrannical,
courts have, as a general rule, declined to interfere with such
discretion. The desirability of imposing restraint upon the number of
persons who might otherwise engage in non-useful enterprises is, of
course, generally an important factor in the determination of the
amount of this kind of license fee. Hence license fees clearly in the
nature of privilege taxes for revenue have frequently been upheld,
especially in of licenses for the sale of liquors. In fact, in the latter
cases the fees have rarely been declared unreasonable.23

Moreover in the equally leading case of Lutz v. Araneta24 this Court
affirmed the doctrine earlier announced by the American Supreme
Court that taxation may be made to implement the state's police
power. Only the other day, this Court had occasion to affirm that the
broad taxing authority conferred by the Local Autonomy Act of 1959
to cities and municipalities is sufficiently plenary to cover a wide
range of subjects with the only limitation that the tax so levied is for
public purposes, just and uniform.25

As a matter of fact, even without reference to the wide latitude
enjoyed by the City of Manila in imposing licenses for revenue, it has
been explicitly held in one case that "much discretion is given to
municipal corporations in determining the amount," here the license
fee of the operator of a massage clinic, even if it were viewed purely
as a police power measure.26 The discussion of this particular matter
may fitly close with this pertinent citation from another decision of
significance: "It is urged on behalf of the plaintiffs-appellees that the
enforcement of the ordinance could deprive them of their lawful
occupation and means of livelihood because they can not rent stalls in
the public markets. But it appears that plaintiffs are also dealers in
refrigerated or cold storage meat, the sale of which outside the city
markets under certain conditions is permitted x x x . And surely, the
mere fact, that some individuals in the community may be deprived of
their present business or a particular mode of earning a living cannot
prevent the exercise of the police power. As was said in a case,
persons licensed to pursue occupations which may in the public need
and interest be affected by the exercise of the police power embark in
these occupations subject to the disadvantages which may result from
the legal exercise of that power."27

Nor does the restriction on the freedom to contract, insofar as the
challenged ordinance makes it unlawful for the owner, manager,
keeper or duly authorized representative of any hotel, motel, lodging
house, tavern, common inn or the like, to lease or rent room or
portion thereof more than twice every 24 hours, with a proviso that in
all cases full payment shall be charged, call for a different conclusion.
Again, such a limitation cannot be viewed as a transgression against
the command of due process. It is neither unreasonable nor arbitrary.
Precisely it was intended to curb the opportunity for the immoral or
illegitimate use to which such premises could be, and, according to
the explanatory note, are being devoted. How could it then be
arbitrary or oppressive when there appears a correspondence
between the undeniable existence of an undesirable situation and the
legislative attempt at correction. Moreover, petitioners cannot be
unaware that every regulation of conduct amounts to curtailment of
liberty which as pointed out by Justice Malcolm cannot be absolute.
Thus: "One thought which runs through all these different
conceptions of liberty is plainly apparent. It is this: 'Liberty' as
understood in democracies, is not license; it is 'liberty regulated by
law.' Implied in the term is restraint by law for the good of the
individual and for the greater good of the peace and order of society
and the general well-being. No man can do exactly as he pleases.
Every man must renounce unbridled license. The right of the
individual is necessarily subject to reasonable restraint by general law
for the common good x x x The liberty of the citizen may be restrained
in the interest of the public health, or of the public order and safety,
or otherwise within the proper scope of the police power."28

A similar observation was made by Justice Laurel: "Public welfare,
then, lies at the bottom of the enactment of said law, and the state in
order to promote the general welfare may interfere with personal
liberty, with property, and with business and occupations. Persons
and property may be subjected to all kinds of restraints and burdens,
in order to secure the general comfort, health, and prosperity of the
state x x x To this fundamental aim of our Government the rights of
the individual are subordinated. Liberty is a blessing without which
life is a misery, but liberty should not be made to prevail over
authority because then society will fall into anarchy. Neither should
authority be made to prevail over liberty because then the individual
will fall into slavery. The citizen should achieve the required balance
of liberty and authority in his mind through education and personal
discipline, so that there may be established the resultant equilibrium,
which means peace and order and happiness for all.29

It is noteworthy that the only decision of this Court nullifying
legislation because of undue deprivation of freedom to contract,
People v. Pomar,30 no longer "retains its virtuality as a living
principle. The policy of laissez faire has to some extent given way to
the assumption by the government of the right of intervention even in
contractual relations affected with public interest.31 What may be
stressed sufficiently is that if the liberty involved were freedom of the
mind or the person, the standard for the validity of governmental acts
is much more rigorous and exacting, but where the liberty curtailed
affects at the most rights of property, the permissible scope of
regulatory measure is wider.32 How justify then the allegation of a
denial of due process?

Lastly, there is the attempt to impugn the ordinance on another due
process ground by invoking the principles of vagueness or uncertainty.
It would appear from a recital in the petition itself that what seems to
be the gravamen of the alleged grievance is that the provisions are
too detailed and specific rather than vague or uncertain. Petitioners,
however, point to the requirement that a guest should give the name,
relationship, age and sex of the companion or companions as
indefinite and uncertain in view of the necessity for determining
whether the companion or companions referred to are those arriving
with the customer or guest at the time of the registry or entering the
room With him at about the same time or coming at any indefinite
time later to join him; a proviso in one of its sections which cast doubt
as to whether the maintenance of a restaurant in a motel is
dependent upon the discretion of its owners or operators; another
proviso which from their standpoint would require a guess as to
whether the "full rate of payment" to be charged for every such lease
thereof means a full day's or merely a half-day's rate. It may be asked,
do these allegations suffice to render the ordinance void on its face
for alleged vagueness or uncertainty? To ask the question is to answer
it. From Connally v. General Construction Co.33 to Adderley v.
Florida,34 the principle has been consistently upheld that what makes
a statute susceptible to such a charge is an enactment either
forbidding or requiring the doing of an act that men of common
intelligence must necessarily guess at its meaning and differ as to its
application. Is this the situation before us? A citation from Justice
Holmes would prove illuminating: "We agree to all the generalities
about not supplying criminal laws with what they omit but there is no
canon against using common sense in construing laws as saying what
they obviously mean."35

That is all then that this case presents. As it stands, with all due
allowance for the arguments pressed with such vigor and
determination, the attack against the validity of the challenged
ordinance cannot be considered a success. Far from it. Respect for
constitutional law principles so uniformly held and so uninterruptedly
adhered to by this Court compels a reversal of the appealed decision.

Wherefore, the judgment of the lower court is reversed and the
injunction issued lifted forthwith. With costs.


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-59234 September 30, 1982

TAXICAB OPERATORS OF METRO MANILA, INC., FELICISIMO
CABIGAO and ACE TRANSPORTATION CORPORATION, petitioners,
vs.
THE BOARD OF TRANSPORTATION and THE DIRECTOR OF THE
BUREAU OF LAND TRANSPORTATION, respondents.



MELENCIO-HERRERA, J.:

This Petition for "Certiorari, Prohibition and mandamus with
Preliminary Injunction and Temporary Restraining Order" filed by the
Taxicab Operators of Metro Manila, Inc., Felicisimo Cabigao and Ace
Transportation, seeks to declare the nullity of Memorandum Circular
No. 77-42, dated October 10, 1977, of the Board of Transportation,
and Memorandum Circular No. 52, dated August 15, 1980, of the
Bureau of Land Transportation.

Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a
domestic corporation composed of taxicab operators, who are
grantees of Certificates of Public Convenience to operate taxicabs
within the City of Manila and to any other place in Luzon accessible to
vehicular traffic. Petitioners Ace Transportation Corporation and
Felicisimo Cabigao are two of the members of TOMMI, each being an
operator and grantee of such certificate of public convenience.

On October 10, 1977, respondent Board of Transportation (BOT)
issued Memorandum Circular No. 77-42 which reads:

SUBJECT: Phasing out and Replacement of

Old and Dilapidated Taxis

WHEREAS, it is the policy of the government to insure that only safe
and comfortable units are used as public conveyances;

WHEREAS, the riding public, particularly in Metro-Manila, has, time
and again, complained against, and condemned, the continued
operation of old and dilapidated taxis;

WHEREAS, in order that the commuting public may be assured of
comfort, convenience, and safety, a program of phasing out of old and
dilapidated taxis should be adopted;

WHEREAS, after studies and inquiries made by the Board of
Transportation, the latter believes that in six years of operation, a taxi
operator has not only covered the cost of his taxis, but has made
reasonable profit for his investments;

NOW, THEREFORE, pursuant to this policy, the Board hereby
declares that no car beyond six years shall be operated as taxi, and in
implementation of the same hereby promulgates the following rules
and regulations:

1. As of December 31, 1977, all taxis of Model 1971 and earlier are
ordered withdrawn from public service and thereafter may no longer
be registered and operated as taxis. In the registration of cards for
1978, only taxis of Model 1972 and later shall be accepted for
registration and allowed for operation;

2. As of December 31, 1978, all taxis of Model 1972 are ordered
withdrawn from public service and thereafter may no longer be
registered and operated as taxis. In the registration of cars for 1979,
only taxis of Model 1973 and later shall be accepted for registration
and allowed for operation; and every year thereafter, there shall be a
six-year lifetime of taxi, to wit:

1980 Model 1974

1981 Model 1975, etc.

All taxis of earlier models than those provided above are hereby
ordered withdrawn from public service as of the last day of
registration of each particular year and their respective plates shall be
surrendered directly to the Board of Transportation for subsequent
turnover to the Land Transportation Commission.

For an orderly implementation of this Memorandum Circular, the
rules herein shall immediately be effective in Metro-Manila. Its
implementation outside Metro- Manila shall be carried out only after
the project has been implemented in Metro-Manila and only after the
date has been determined by the Board. 1

Pursuant to the above BOT circular, respondent Director of the
Bureau of Land Transportation (BLT) issued Implementing Circular No.
52, dated August 15, 1980, instructing the Regional Director, the MV
Registrars and other personnel of BLT, all within the National Capitol
Region, to implement said Circular, and formulating a schedule of
phase-out of vehicles to be allowed and accepted for registration as
public conveyances. To quote said Circular:

Pursuant to BOT Memo-Circular No. 77-42, taxi units with year
models over six (6) years old are now banned from operating as public
utilities in Metro Manila. As such the units involved should be
considered as automatically dropped as public utilities and, therefore,
do not require any further dropping order from the BOT.

Henceforth, taxi units within the National Capitol Region having
year models over 6 years old shall be refused registration. The
following schedule of phase-out is herewith prescribed for the
guidance of all concerned:

Year Model


Automatic Phase-Out Year




1980

1974


1981

1975


1982

1976


1983

1977




etc.


etc.

Strict compliance here is desired. 2

In accordance therewith, cabs of model 1971 were phase-out in
registration year 1978; those of model 1972, in 1979; those of model
1973, in 1980; and those of model 1974, in 1981.

On January 27, 1981, petitioners filed a Petition with the BOT,
docketed as Case No. 80-7553, seeking to nullify MC No. 77-42 or to
stop its implementation; to allow the registration and operation in
1981 and subsequent years of taxicabs of model 1974, as well as those
of earlier models which were phased-out, provided that, at the time
of registration, they are roadworthy and fit for operation.

On February 16, 1981, petitioners filed before the BOT a
"Manifestation and Urgent Motion", praying for an early hearing of
their petition. The case was heard on February 20, 1981. Petitioners
presented testimonial and documentary evidence, offered the same,
and manifested that they would submit additional documentary
proofs. Said proofs were submitted on March 27, 1981 attached to
petitioners' pleading entitled, "Manifestation, Presentation of
Additional Evidence and Submission of the Case for Resolution." 3

On November 28, 1981, petitioners filed before the same Board a
"Manifestation and Urgent Motion to Resolve or Decide Main
Petition" praying that the case be resolved or decided not later than
December 10, 1981 to enable them, in case of denial, to avail of
whatever remedy they may have under the law for the protection of
their interests before their 1975 model cabs are phased-out on
January 1, 1982.

Petitioners, through its President, allegedly made personal follow-
ups of the case, but was later informed that the records of the case
could not be located.

On December 29, 1981, the present Petition was instituted wherein
the following queries were posed for consideration by this Court:

A. Did BOT and BLT promulgate the questioned memorandum
circulars in accord with the manner required by Presidential Decree
No. 101, thereby safeguarding the petitioners' constitutional right to
procedural due process?

B. Granting, arguendo, that respondents did comply with the
procedural requirements imposed by Presidential Decree No. 101,
would the implementation and enforcement of the assailed
memorandum circulars violate the petitioners' constitutional rights
to.

(1) Equal protection of the law;

(2) Substantive due process; and

(3) Protection against arbitrary and unreasonable classification and
standard?

On Procedural and Substantive Due Process:

Presidential Decree No. 101 grants to the Board of Transportation
the power

4. To fix just and reasonable standards, classification, regulations,
practices, measurements, or service to be furnished, imposed,
observed, and followed by operators of public utility motor vehicles.

Section 2 of said Decree provides procedural guidelines for said
agency to follow in the exercise of its powers:

Sec. 2. Exercise of powers. In the exercise of the powers granted
in the preceding section, the Board shag proceed promptly along the
method of legislative inquiry.

Apart from its own investigation and studies, the Board, in its
discretion, may require the cooperation and assistance of the Bureau
of Transportation, the Philippine Constabulary, particularly the
Highway Patrol Group, the support agencies within the Department of
Public Works, Transportation and Communications, or any other
government office or agency that may be able to furnish useful
information or data in the formulation of the Board of any policy, plan
or program in the implementation of this Decree.

The Board may also can conferences, require the submission of
position papers or other documents, information, or data by
operators or other persons that may be affected by the
implementation of this Decree, or employ any other suitable means of
inquiry.

In support of their submission that they were denied procedural
due process, petitioners contend that they were not caged upon to
submit their position papers, nor were they ever summoned to attend
any conference prior to the issuance of the questioned BOT Circular.

It is clear from the provision aforequoted, however, that the leeway
accorded the Board gives it a wide range of choice in gathering
necessary information or data in the formulation of any policy, plan or
program. It is not mandatory that it should first call a conference or
require the submission of position papers or other documents from
operators or persons who may be affected, this being only one of the
options open to the Board, which is given wide discretionary
authority. Petitioners cannot justifiably claim, therefore, that they
were deprived of procedural due process. Neither can they state with
certainty that public respondents had not availed of other sources of
inquiry prior to issuing the challenged Circulars. operators of public
conveyances are not the only primary sources of the data and
information that may be desired by the BOT.

Dispensing with a public hearing prior to the issuance of the
Circulars is neither violative of procedural due process. As held in
Central Bank vs. Hon. Cloribel and Banco Filipino, 44 SCRA 307 (1972):

Pevious notice and hearing as elements of due process, are
constitutionally required for the protection of life or vested property
rights, as well as of liberty, when its limitation or loss takes place in
consequence of a judicial or quasi-judicial proceeding, generally
dependent upon a past act or event which has to be established or
ascertained. It is not essential to the validity of general rules or
regulations promulgated to govern future conduct of a class or
persons or enterprises, unless the law provides otherwise. (Emphasis
supplied)

Petitioners further take the position that fixing the ceiling at six (6)
years is arbitrary and oppressive because the roadworthiness of
taxicabs depends upon their kind of maintenance and the use to
which they are subjected, and, therefore, their actual physical
condition should be taken into consideration at the time of
registration. As public contend, however, it is impractical to subject
every taxicab to constant and recurring evaluation, not to speak of
the fact that it can open the door to the adoption of multiple
standards, possible collusion, and even graft and corruption. A
reasonable standard must be adopted to apply to an vehicles affected
uniformly, fairly, and justly. The span of six years supplies that
reasonable standard. The product of experience shows that by that
time taxis have fully depreciated, their cost recovered, and a fair
return on investment obtained. They are also generally dilapidated
and no longer fit for safe and comfortable service to the public
specially considering that they are in continuous operation practically
24 hours everyday in three shifts of eight hours per shift. With that
standard of reasonableness and absence of arbitrariness, the
requirement of due process has been met.

On Equal Protection of the Law:

Petitioners alleged that the Circular in question violates their right
to equal protection of the law because the same is being enforced in
Metro Manila only and is directed solely towards the taxi industry. At
the outset it should be pointed out that implementation outside
Metro Manila is also envisioned in Memorandum Circular No. 77-42.
To repeat the pertinent portion:

For an orderly implementation of this Memorandum Circular, the
rules herein shall immediately be effective in Metro Manila. Its
implementation outside Metro Manila shall be carried out only after
the project has been implemented in Metro Manila and only after the
date has been determined by the Board. 4

In fact, it is the understanding of the Court that implementation of
the Circulars in Cebu City is already being effected, with the BOT in
the process of conducting studies regarding the operation of taxicabs
in other cities.

The Board's reason for enforcing the Circular initially in Metro
Manila is that taxicabs in this city, compared to those of other places,
are subjected to heavier traffic pressure and more constant use. This
is of common knowledge. Considering that traffic conditions are not
the same in every city, a substantial distinction exists so that
infringement of the equal protection clause can hardly be successfully
claimed.

As enunciated in the preambular clauses of the challenged BOT
Circular, the overriding consideration is the safety and comfort of the
riding public from the dangers posed by old and dilapidated taxis. The
State, in the exercise, of its police power, can prescribe regulations to
promote the health, morals, peace, good order, safety and general
welfare of the people. It can prohibit all things hurtful to comfort,
safety and welfare of society.5 It may also regulate property rights. 6
In the language of Chief Justice Enrique M. Fernando "the necessities
imposed by public welfare may justify the exercise of governmental
authority to regulate even if thereby certain groups may plausibly
assert that their interests are disregarded". 7

In so far as the non-application of the assailed Circulars to other
transportation services is concerned, it need only be recalled that the
equal protection clause does not imply that the same treatment be
accorded all and sundry. It applies to things or persons Identically or
similarly situated. It permits of classification of the object or subject
of the law provided classification is reasonable or based on
substantial distinction, which make for real differences, and that it
must apply equally to each member of the class. 8 What is required
under the equal protection clause is the uniform operation by legal
means so that all persons under Identical or similar circumstance
would be accorded the same treatment both in privilege conferred
and the liabilities imposed. 9 The challenged Circulars satisfy the
foregoing criteria.

Evident then is the conclusion that the questioned Circulars do not
suffer from any constitutional infirmity. To declare a law
unconstitutional, the infringement of constitutional right must be
clear, categorical and undeniable. 10

WHEREFORE, the Writs prayed for are denied and this Petition is
hereby dismissed. No costs.

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-7995 May 31, 1957

LAO H. ICHONG, in his own behalf and in behalf of other alien
residents, corporations and partnerships adversely affected. by
Republic Act No. 1180, petitioner,
vs.
JAIME HERNANDEZ, Secretary of Finance, and MARCELINO
SARMIENTO, City Treasurer of Manila, respondents.

Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and
Associates for petitioner.
Office of the Solicitor General Ambrosio Padilla and Solicitor
Pacifico P. de Castro for respondent Secretary of Finance.
City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S.
Serrano for respondent City Treasurer.
Dionisio Reyes as Amicus Curiae.
Marcial G. Mendiola as Amicus Curiae.
Emiliano R. Navarro as Amicus Curiae.

LABRADOR, J.:

I. The case and issue, in general

This Court has before it the delicate task of passing upon the
validity and constitutionality of a legislative enactment, fundamental
and far-reaching in significance. The enactment poses questions of
due process, police power and equal protection of the laws. It also
poses an important issue of fact, that is whether the conditions which
the disputed law purports to remedy really or actually exist.
Admittedly springing from a deep, militant, and positive nationalistic
impulse, the law purports to protect citizen and country from the
alien retailer. Through it, and within the field of economy it regulates,
Congress attempts to translate national aspirations for economic
independence and national security, rooted in the drive and urge for
national survival and welfare, into a concrete and tangible measures
designed to free the national retailer from the competing dominance
of the alien, so that the country and the nation may be free from a
supposed economic dependence and bondage. Do the facts and
circumstances justify the enactment?

II. Pertinent provisions of Republic Act No. 1180

Republic Act No. 1180 is entitled "An Act to Regulate the Retail
Business." In effect it nationalizes the retail trade business. The main
provisions of the Act are: (1) a prohibition against persons, not
citizens of the Philippines, and against associations, partnerships, or
corporations the capital of which are not wholly owned by citizens of
the Philippines, from engaging directly or indirectly in the retail trade;
(2) an exception from the above prohibition in favor of aliens actually
engaged in said business on May 15, 1954, who are allowed to
continue to engaged therein, unless their licenses are forfeited in
accordance with the law, until their death or voluntary retirement in
case of natural persons, and for ten years after the approval of the Act
or until the expiration of term in case of juridical persons; (3) an
exception therefrom in favor of citizens and juridical entities of the
United States; (4) a provision for the forfeiture of licenses (to engage
in the retail business) for violation of the laws on nationalization,
control weights and measures and labor and other laws relating to
trade, commerce and industry; (5) a prohibition against the
establishment or opening by aliens actually engaged in the retail
business of additional stores or branches of retail business, (6) a
provision requiring aliens actually engaged in the retail business to
present for registration with the proper authorities a verified
statement concerning their businesses, giving, among other matters,
the nature of the business, their assets and liabilities and their offices
and principal offices of judicial entities; and (7) a provision allowing
the heirs of aliens now engaged in the retail business who die, to
continue such business for a period of six months for purposes of
liquidation.

III. Grounds upon which petition is based-Answer thereto

Petitioner, for and in his own behalf and on behalf of other alien
residents corporations and partnerships adversely affected by the
provisions of Republic Act. No. 1180, brought this action to obtain a
judicial declaration that said Act is unconstitutional, and to enjoin the
Secretary of Finance and all other persons acting under him,
particularly city and municipal treasurers, from enforcing its
provisions. Petitioner attacks the constitutionality of the Act,
contending that: (1) it denies to alien residents the equal protection
of the laws and deprives of their liberty and property without due
process of law ; (2) the subject of the Act is not expressed or
comprehended in the title thereof; (3) the Act violates international
and treaty obligations of the Republic of the Philippines; (4) the
provisions of the Act against the transmission by aliens of their retail
business thru hereditary succession, and those requiring 100% Filipino
capitalization for a corporation or entity to entitle it to engage in the
retail business, violate the spirit of Sections 1 and 5, Article XIII and
Section 8 of Article XIV of the Constitution.

In answer, the Solicitor-General and the Fiscal of the City of Manila
contend that: (1) the Act was passed in the valid exercise of the police
power of the State, which exercise is authorized in the Constitution in
the interest of national economic survival; (2) the Act has only one
subject embraced in the title; (3) no treaty or international obligations
are infringed; (4) as regards hereditary succession, only the form is
affected but the value of the property is not impaired, and the
institution of inheritance is only of statutory origin.

IV. Preliminary consideration of legal principles involved

a. The police power.

There is no question that the Act was approved in the exercise of
the police power, but petitioner claims that its exercise in this
instance is attended by a violation of the constitutional requirements
of due process and equal protection of the laws. But before
proceeding to the consideration and resolution of the ultimate issue
involved, it would be well to bear in mind certain basic and
fundamental, albeit preliminary, considerations in the determination
of the ever recurrent conflict between police power and the
guarantees of due process and equal protection of the laws. What is
the scope of police power, and how are the due process and equal
protection clauses related to it? What is the province and power of
the legislature, and what is the function and duty of the courts? These
consideration must be clearly and correctly understood that their
application to the facts of the case may be brought forth with clarity
and the issue accordingly resolved.

It has been said the police power is so far - reaching in scope, that it
has become almost impossible to limit its sweep. As it derives its
existence from the very existence of the State itself, it does not need
to be expressed or defined in its scope; it is said to be co-extensive
with self-protection and survival, and as such it is the most positive
and active of all governmental processes, the most essential, insistent
and illimitable. Especially is it so under a modern democratic
framework where the demands of society and of nations have
multiplied to almost unimaginable proportions; the field and scope of
police power has become almost boundless, just as the fields of public
interest and public welfare have become almost all-embracing and
have transcended human foresight. Otherwise stated, as we cannot
foresee the needs and demands of public interest and welfare in this
constantly changing and progressive world, so we cannot delimit
beforehand the extent or scope of police power by which and through
which the State seeks to attain or achieve interest or welfare. So it is
that Constitutions do not define the scope or extent of the police
power of the State; what they do is to set forth the limitations
thereof. The most important of these are the due process clause and
the equal protection clause.

b. Limitations on police power.

The basic limitations of due process and equal protection are found
in the following provisions of our Constitution:

SECTION 1.(1) No person shall be deprived of life, liberty or
property without due process of law, nor any person be denied the
equal protection of the laws. (Article III, Phil. Constitution)

These constitutional guarantees which embody the essence of
individual liberty and freedom in democracies, are not limited to
citizens alone but are admittedly universal in their application,
without regard to any differences of race, of color, or of nationality.
(Yick Wo vs. Hopkins, 30, L. ed. 220, 226.)

c. The, equal protection clause.

The equal protection of the law clause is against undue favor and
individual or class privilege, as well as hostile discrimination or the
oppression of inequality. It is not intended to prohibit legislation,
which is limited either in the object to which it is directed or by
territory within which is to operate. It does not demand absolute
equality among residents; it merely requires that all persons shall be
treated alike, under like circumstances and conditions both as to
privileges conferred and liabilities enforced. The equal protection
clause is not infringed by legislation which applies only to those
persons falling within a specified class, if it applies alike to all persons
within such class, and reasonable grounds exists for making a
distinction between those who fall within such class and those who
do not. (2 Cooley, Constitutional Limitations, 824-825.)

d. The due process clause.

The due process clause has to do with the reasonableness of
legislation enacted in pursuance of the police power. Is there public
interest, a public purpose; is public welfare involved? Is the Act
reasonably necessary for the accomplishment of the legislature's
purpose; is it not unreasonable, arbitrary or oppressive? Is there
sufficient foundation or reason in connection with the matter
involved; or has there not been a capricious use of the legislative
power? Can the aims conceived be achieved by the means used, or is
it not merely an unjustified interference with private interest? These
are the questions that we ask when the due process test is applied.

The conflict, therefore, between police power and the guarantees
of due process and equal protection of the laws is more apparent than
real. Properly related, the power and the guarantees are supposed to
coexist. The balancing is the essence or, shall it be said, the
indispensable means for the attainment of legitimate aspirations of
any democratic society. There can be no absolute power, whoever
exercise it, for that would be tyranny. Yet there can neither be
absolute liberty, for that would mean license and anarchy. So the
State can deprive persons of life, liberty and property, provided there
is due process of law; and persons may be classified into classes and
groups, provided everyone is given the equal protection of the law.
The test or standard, as always, is reason. The police power legislation
must be firmly grounded on public interest and welfare, and a
reasonable relation must exist between purposes and means. And if
distinction and classification has been made, there must be a
reasonable basis for said distinction.

e. Legislative discretion not subject to judicial review.

Now, in this matter of equitable balancing, what is the proper place
and role of the courts? It must not be overlooked, in the first place,
that the legislature, which is the constitutional repository of police
power and exercises the prerogative of determining the policy of the
State, is by force of circumstances primarily the judge of necessity,
adequacy or reasonableness and wisdom, of any law promulgated in
the exercise of the police power, or of the measures adopted to
implement the public policy or to achieve public interest. On the other
hand, courts, although zealous guardians of individual liberty and
right, have nevertheless evinced a reluctance to interfere with the
exercise of the legislative prerogative. They have done so early where
there has been a clear, patent or palpable arbitrary and unreasonable
abuse of the legislative prerogative. Moreover, courts are not
supposed to override legitimate policy, and courts never inquire into
the wisdom of the law.

V. Economic problems sought to be remedied

With the above considerations in mind, we will now proceed to
delve directly into the issue involved. If the disputed legislation were
merely a regulation, as its title indicates, there would be no question
that it falls within the legitimate scope of legislative power. But it
goes further and prohibits a group of residents, the aliens, from
engaging therein. The problem becomes more complex because its
subject is a common, trade or occupation, as old as society itself,
which from the immemorial has always been open to residents,
irrespective of race, color or citizenship.

a. Importance of retail trade in the economy of the nation.

In a primitive economy where families produce all that they
consume and consume all that they produce, the dealer, of course, is
unknown. But as group life develops and families begin to live in
communities producing more than what they consume and needing
an infinite number of things they do not produce, the dealer comes
into existence. As villages develop into big communities and
specialization in production begins, the dealer's importance is
enhanced. Under modern conditions and standards of living, in which
man's needs have multiplied and diversified to unlimited extents and
proportions, the retailer comes as essential as the producer, because
thru him the infinite variety of articles, goods and needed for daily life
are placed within the easy reach of consumers. Retail dealers perform
the functions of capillaries in the human body, thru which all the
needed food and supplies are ministered to members of the
communities comprising the nation.

There cannot be any question about the importance of the retailer
in the life of the community. He ministers to the resident's daily
needs, food in all its increasing forms, and the various little gadgets
and things needed for home and daily life. He provides his customers
around his store with the rice or corn, the fish, the salt, the vinegar,
the spices needed for the daily cooking. He has cloths to sell, even the
needle and the thread to sew them or darn the clothes that wear out.
The retailer, therefore, from the lowly peddler, the owner of a small
sari-sari store, to the operator of a department store or, a
supermarket is so much a part of day-to-day existence.

b. The alien retailer's trait.

The alien retailer must have started plying his trades in this country
in the bigger centers of population (Time there was when he was
unknown in provincial towns and villages). Slowly but gradually be
invaded towns and villages; now he predominates in the cities and big
centers of population. He even pioneers, in far away nooks where the
beginnings of community life appear, ministering to the daily needs of
the residents and purchasing their agricultural produce for sale in the
towns. It is an undeniable fact that in many communities the alien has
replaced the native retailer. He has shown in this trade, industry
without limit, and the patience and forbearance of a slave.

Derogatory epithets are hurled at him, but he laughs these off
without murmur; insults of ill-bred and insolent neighbors and
customers are made in his face, but he heeds them not, and he
forgets and forgives. The community takes note of him, as he appears
to be harmless and extremely useful.

c. Alleged alien control and dominance.

There is a general feeling on the part of the public, which appears to
be true to fact, about the controlling and dominant position that the
alien retailer holds in the nation's economy. Food and other
essentials, clothing, almost all articles of daily life reach the residents
mostly through him. In big cities and centers of population he has
acquired not only predominance, but apparent control over
distribution of almost all kinds of goods, such as lumber, hardware,
textiles, groceries, drugs, sugar, flour, garlic, and scores of other goods
and articles. And were it not for some national corporations like the
Naric, the Namarco, the Facomas and the Acefa, his control over
principal foods and products would easily become full and complete.

Petitioner denies that there is alien predominance and control in
the retail trade. In one breath it is said that the fear is unfounded and
the threat is imagined; in another, it is charged that the law is merely
the result of radicalism and pure and unabashed nationalism.
Alienage, it is said, is not an element of control; also so many
unmanageable factors in the retail business make control virtually
impossible. The first argument which brings up an issue of fact merits
serious consideration. The others are matters of opinion within the
exclusive competence of the legislature and beyond our prerogative
to pass upon and decide.

The best evidence are the statistics on the retail trade, which put
down the figures in black and white. Between the constitutional
convention year (1935), when the fear of alien domination and
control of the retail trade already filled the minds of our leaders with
fears and misgivings, and the year of the enactment of the
nationalization of the retail trade act (1954), official statistics
unmistakably point out to the ever-increasing dominance and control
by the alien of the retail trade, as witness the following tables:



Assets


Gross Sales

Year and Retailers
Nationality


No.-Establishments


Pesos


Per cent Distribution


Pesos


Per cent Distribution

1941:














Filipino ..........


106,671


200,323,138


55.82


174,181,924


51.74



Chinese ...........


15,356


118,348,692


32.98


148,813,239


44.21



Others ............


1,646


40,187,090


11.20


13,630,239


4.05

1947:














Filipino ..........


111,107


208,658,946


65.05


279,583,333


57.03



Chinese ...........


13,774


106,156,218


33.56


205,701,134


41.96



Others ...........


354


8,761,260


.49


4,927,168


1.01

1948:


(Census)












Filipino ..........


113,631


213,342,264


67.30


467,161,667


60.51



Chinese ..........


12,087


93,155,459


29.38


294,894,227


38.20



Others ..........


422


10,514,675


3.32


9,995,402


1.29

1949:














Filipino ..........


113,659


213,451,602


60.89


462,532,901


53.47



Chinese ..........


16,248


125,223,336


35.72


392,414,875


45.36



Others ..........


486


12,056,365


3.39


10,078,364


1.17

1951:














Filipino .........


119,352


224,053,620


61.09


466,058,052


53.07



Chinese ..........


17,429


134,325,303


36.60


404,481,384


46.06



Others ..........


347


8,614,025


2.31


7,645,327


87

AVERAGE
ASSETS AND GROSS SALES PER ESTABLISHMENT

Year and Retailer's
Nationality


Item
Assets
(Pesos)


Gross Sales
(Pesos)

1941:








Filipino .............................................


1,878


1,633



Chinese ..............................................


7,707


9,691



Others ...............................................


24,415


8,281

1947:








Filipino .............................................


1,878


2,516



Chinese ...........................................


7,707


14,934



Others ..............................................


24,749


13,919

1948:


(Census)






Filipino .............................................


1,878


4,111



Chinese .............................................


7,707


24,398



Others ..............................................


24,916


23,686

1949:








Filipino .............................................


1,878


4,069



Chinese ..............................................


7,707


24,152



Others ..............................................


24,807


20,737

1951:








Filipino .............................................


1,877


3,905



Chinese .............................................


7,707


33,207



Others ...............................................


24,824


22,033

(Estimated Assets and Gross Sales of Retail Establishments, By Year
and Nationality of Owners, Benchmark: 1948 Census, issued by the
Bureau of Census and Statistics, Department of Commerce and
Industry; pp. 18-19 of Answer.)

The above statistics do not include corporations and partnerships,
while the figures on Filipino establishments already include mere
market vendors, whose capital is necessarily small..

The above figures reveal that in percentage distribution of assests
and gross sales, alien participation has steadily increased during the
years. It is true, of course, that Filipinos have the edge in the number
of retailers, but aliens more than make up for the numerical gap
through their assests and gross sales which average between six and
seven times those of the very many Filipino retailers. Numbers in
retailers, here, do not imply superiority; the alien invests more
capital, buys and sells six to seven times more, and gains much more.
The same official report, pointing out to the known predominance of
foreign elements in the retail trade, remarks that the Filipino retailers
were largely engaged in minor retailer enterprises. As observed by
respondents, the native investment is thinly spread, and the Filipino
retailer is practically helpless in matters of capital, credit, price and
supply.

d. Alien control and threat, subject of apprehension in
Constitutional convention.

It is this domination and control, which we believe has been
sufficiently shown to exist, that is the legislature's target in the
enactment of the disputed nationalization would never have been
adopted. The framers of our Constitution also believed in the
existence of this alien dominance and control when they approved a
resolution categorically declaring among other things, that "it is the
sense of the Convention that the public interest requires the
nationalization of the retail trade; . . . ." (II Aruego, The Framing of the
Philippine Constitution, 662-663, quoted on page 67 of Petitioner.)
That was twenty-two years ago; and the events since then have not
been either pleasant or comforting. Dean Sinco of the University of
the Philippines College of Law, commenting on the patrimony clause
of the Preamble opines that the fathers of our Constitution were
merely translating the general preoccupation of Filipinos "of the
dangers from alien interests that had already brought under their
control the commercial and other economic activities of the country"
(Sinco, Phil. Political Law, 10th ed., p. 114); and analyzing the concern
of the members of the constitutional convention for the economic life
of the citizens, in connection with the nationalistic provisions of the
Constitution, he says:

But there has been a general feeling that alien dominance over the
economic life of the country is not desirable and that if such a
situation should remain, political independence alone is no guarantee
to national stability and strength. Filipino private capital is not big
enough to wrest from alien hands the control of the national
economy. Moreover, it is but of recent formation and hence, largely
inexperienced, timid and hesitant. Under such conditions, the
government as the instrumentality of the national will, has to step in
and assume the initiative, if not the leadership, in the struggle for the
economic freedom of the nation in somewhat the same way that it
did in the crusade for political freedom. Thus . . . it (the Constitution)
envisages an organized movement for the protection of the nation not
only against the possibilities of armed invasion but also against its
economic subjugation by alien interests in the economic field. (Phil.
Political Law by Sinco, 10th ed., p. 476.)

Belief in the existence of alien control and predominance is felt in
other quarters. Filipino businessmen, manufacturers and producers
believe so; they fear the dangers coming from alien control, and they
express sentiments of economic independence. Witness thereto is
Resolution No. 1, approved on July 18, 1953, of the Fifth National
convention of Filipino Businessmen, and a similar resolution,
approved on March 20, 1954, of the Second National Convention of
Manufacturers and Producers. The man in the street also believes,
and fears, alien predominance and control; so our newspapers, which
have editorially pointed out not only to control but to alien
stranglehold. We, therefore, find alien domination and control to be a
fact, a reality proved by official statistics, and felt by all the sections
and groups that compose the Filipino community.

e. Dangers of alien control and dominance in retail.

But the dangers arising from alien participation in the retail trade
does not seem to lie in the predominance alone; there is a prevailing
feeling that such predominance may truly endanger the national
interest. With ample capital, unity of purpose and action and
thorough organization, alien retailers and merchants can act in such
complete unison and concert on such vital matters as the fixing of
prices, the determination of the amount of goods or articles to be
made available in the market, and even the choice of the goods or
articles they would or would not patronize or distribute, that fears of
dislocation of the national economy and of the complete subservience
of national economy and of the consuming public are not entirely
unfounded. Nationals, producers and consumers alike can be placed
completely at their mercy. This is easily illustrated. Suppose an article
of daily use is desired to be prescribed by the aliens, because the
producer or importer does not offer them sufficient profits, or
because a new competing article offers bigger profits for its
introduction. All that aliens would do is to agree to refuse to sell the
first article, eliminating it from their stocks, offering the new one as a
substitute. Hence, the producers or importers of the prescribed
article, or its consumers, find the article suddenly out of the
prescribed article, or its consumers, find the article suddenly out of
circulation. Freedom of trade is thus curtailed and free enterprise
correspondingly suppressed.

We can even go farther than theoretical illustrations to show the
pernicious influences of alien domination. Grave abuses have
characterized the exercise of the retail trade by aliens. It is a fact
within judicial notice, which courts of justice may not properly
overlook or ignore in the interests of truth and justice, that there
exists a general feeling on the part of the public that alien
participation in the retail trade has been attended by a pernicious and
intolerable practices, the mention of a few of which would suffice for
our purposes; that at some time or other they have cornered the
market of essential commodities, like corn and rice, creating artificial
scarcities to justify and enhance profits to unreasonable proportions;
that they have hoarded essential foods to the inconvenience and
prejudice of the consuming public, so much so that the Government
has had to establish the National Rice and Corn Corporation to save
the public from their continuous hoarding practices and tendencies;
that they have violated price control laws, especially on foods and
essential commodities, such that the legislature had to enact a law
(Sec. 9, Republic Act No. 1168), authorizing their immediate and
automatic deportation for price control convictions; that they have
secret combinations among themselves to control prices, cheating the
operation of the law of supply and demand; that they have connived
to boycott honest merchants and traders who would not cater or yield
to their demands, in unlawful restraint of freedom of trade and
enterprise. They are believed by the public to have evaded tax laws,
smuggled goods and money into and out of the land, violated import
and export prohibitions, control laws and the like, in derision and
contempt of lawful authority. It is also believed that they have
engaged in corrupting public officials with fabulous bribes, indirectly
causing the prevalence of graft and corruption in the Government. As
a matter of fact appeals to unscrupulous aliens have been made both
by the Government and by their own lawful diplomatic
representatives, action which impliedly admits a prevailing feeling
about the existence of many of the above practices.

The circumstances above set forth create well founded fears that
worse things may come in the future. The present dominance of the
alien retailer, especially in the big centers of population, therefore,
becomes a potential source of danger on occasions of war or other
calamity. We do not have here in this country isolated groups of
harmless aliens retailing goods among nationals; what we have are
well organized and powerful groups that dominate the distribution of
goods and commodities in the communities and big centers of
population. They owe no allegiance or loyalty to the State, and the
State cannot rely upon them in times of crisis or emergency. While the
national holds his life, his person and his property subject to the
needs of his country, the alien may even become the potential enemy
of the State.

f. Law enacted in interest of national economic survival and
security.

We are fully satisfied upon a consideration of all the facts and
circumstances that the disputed law is not the product of racial
hostility, prejudice or discrimination, but the expression of the
legitimate desire and determination of the people, thru their
authorized representatives, to free the nation from the economic
situation that has unfortunately been saddled upon it rightly or
wrongly, to its disadvantage. The law is clearly in the interest of the
public, nay of the national security itself, and indisputably falls within
the scope of police power, thru which and by which the State insures
its existence and security and the supreme welfare of its citizens.

VI. The Equal Protection Limitation

a. Objections to alien participation in retail trade. The next
question that now poses solution is, Does the law deny the equal
protection of the laws? As pointed out above, the mere fact of
alienage is the root and cause of the distinction between the alien and
the national as a trader. The alien resident owes allegiance to the
country of his birth or his adopted country; his stay here is for
personal convenience; he is attracted by the lure of gain and profit.
His aim or purpose of stay, we admit, is neither illegitimate nor
immoral, but he is naturally lacking in that spirit of loyalty and
enthusiasm for this country where he temporarily stays and makes his
living, or of that spirit of regard, sympathy and consideration for his
Filipino customers as would prevent him from taking advantage of
their weakness and exploiting them. The faster he makes his pile, the
earlier can the alien go back to his beloved country and his beloved
kin and countrymen. The experience of the country is that the alien
retailer has shown such utter disregard for his customers and the
people on whom he makes his profit, that it has been found necessary
to adopt the legislation, radical as it may seem.

Another objection to the alien retailer in this country is that he
never really makes a genuine contribution to national income and
wealth. He undoubtedly contributes to general distribution, but the
gains and profits he makes are not invested in industries that would
help the country's economy and increase national wealth. The alien's
interest in this country being merely transient and temporary, it
would indeed be ill-advised to continue entrusting the very important
function of retail distribution to his hands.

The practices resorted to by aliens in the control of distribution, as
already pointed out above, their secret manipulations of stocks of
commodities and prices, their utter disregard of the welfare of their
customers and of the ultimate happiness of the people of the nation
of which they are mere guests, which practices, manipulations and
disregard do not attend the exercise of the trade by the nationals,
show the existence of real and actual, positive and fundamental
differences between an alien and a national which fully justify the
legislative classification adopted in the retail trade measure. These
differences are certainly a valid reason for the State to prefer the
national over the alien in the retail trade. We would be doing violence
to fact and reality were we to hold that no reason or ground for a
legitimate distinction can be found between one and the other.

b. Difference in alien aims and purposes sufficient basis for
distinction.

The above objectionable characteristics of the exercise of the retail
trade by the aliens, which are actual and real, furnish sufficient
grounds for legislative classification of retail traders into nationals and
aliens. Some may disagree with the wisdom of the legislature's
classification. To this we answer, that this is the prerogative of the
law-making power. Since the Court finds that the classification is
actual, real and reasonable, and all persons of one class are treated
alike, and as it cannot be said that the classification is patently
unreasonable and unfounded, it is in duty bound to declare that the
legislature acted within its legitimate prerogative and it can not
declare that the act transcends the limit of equal protection
established by the Constitution.

Broadly speaking, the power of the legislature to make distinctions
and classifications among persons is not curtailed or denied by the
equal protection of the laws clause. The legislative power admits of a
wide scope of discretion, and a law can be violative of the
constitutional limitation only when the classification is without
reasonable basis. In addition to the authorities we have earlier cited,
we can also refer to the case of Linsey vs. Natural Carbonic Fas Co.
(1911), 55 L. ed., 369, which clearly and succinctly defined the
application of equal protection clause to a law sought to be voided as
contrary thereto:

. . . . "1. The equal protection clause of the Fourteenth Amendment
does not take from the state the power to classify in the adoption of
police laws, but admits of the exercise of the wide scope of discretion
in that regard, and avoids what is done only when it is without any
reasonable basis, and therefore is purely arbitrary. 2. A classification
having some reasonable basis does not offend against that clause
merely because it is not made with mathematical nicety, or because
in practice it results in some inequality. 3. When the classification in
such a law is called in question, if any state of facts reasonably can be
conceived that would sustain it, the existence of that state of facts at
the time the law was enacted must be assumed. 4. One who assails
the classification in such a law must carry the burden of showing that
it does not rest upon any reasonable basis but is essentially arbitrary."

c. Authorities recognizing citizenship as basis for classification.

The question as to whether or not citizenship is a legal and valid
ground for classification has already been affirmatively decided in this
jurisdiction as well as in various courts in the United States. In the
case of Smith Bell & Co. vs. Natividad, 40 Phil. 136, where the validity
of Act No. 2761 of the Philippine Legislature was in issue, because of a
condition therein limiting the ownership of vessels engaged in
coastwise trade to corporations formed by citizens of the Philippine
Islands or the United States, thus denying the right to aliens, it was
held that the Philippine Legislature did not violate the equal
protection clause of the Philippine Bill of Rights. The legislature in
enacting the law had as ultimate purpose the encouragement of
Philippine shipbuilding and the safety for these Islands from foreign
interlopers. We held that this was a valid exercise of the police power,
and all presumptions are in favor of its constitutionality. In substance,
we held that the limitation of domestic ownership of vessels engaged
in coastwise trade to citizens of the Philippines does not violate the
equal protection of the law and due process or law clauses of the
Philippine Bill of Rights. In rendering said decision we quoted with
approval the concurring opinion of Justice Johnson in the case of
Gibbons vs. Ogden, 9 Wheat., I, as follows:

"Licensing acts, in fact, in legislation, are universally restraining
acts; as, for example, acts licensing gaming houses, retailers of
spirituous liquors, etc. The act, in this instance, is distinctly of that
character, and forms part of an extensive system, the object of which
is to encourage American shipping, and place them on an equal
footing with the shipping of other nations. Almost every commercial
nation reserves to its own subjects a monopoly of its coasting trade;
and a countervailing privilege in favor of American shipping is
contemplated, in the whole legislation of the United States on this
subject. It is not to give the vessel an American character, that the
license is granted; that effect has been correctly attributed to the act
of her enrollment. But it is to confer on her American privileges, as
contra distinguished from foreign; and to preserve the Government
from fraud by foreigners; in surreptitiously intruding themselves into
the American commercial marine, as well as frauds upon the revenue
in the trade coastwise, that this whole system is projected."

The rule in general is as follows:

Aliens are under no special constitutional protection which forbids a
classification otherwise justified simply because the limitation of the
class falls along the lines of nationality. That would be requiring a
higher degree of protection for aliens as a class than for similar classes
than for similar classes of American citizens. Broadly speaking, the
difference in status between citizens and aliens constitutes a basis for
reasonable classification in the exercise of police power. (2 Am., Jur.
468-469.)

In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a
statute on the licensing of hawkers and peddlers, which provided that
no one can obtain a license unless he is, or has declared his intention,
to become a citizen of the United States, was held valid, for the
following reason: It may seem wise to the legislature to limit the
business of those who are supposed to have regard for the welfare,
good order and happiness of the community, and the court cannot
question this judgment and conclusion. In Bloomfield vs. State, 99 N.
E. 309 (Ohio, 1912), a statute which prevented certain persons, among
them aliens, from engaging in the traffic of liquors, was found not to
be the result of race hatred, or in hospitality, or a deliberate purpose
to discriminate, but was based on the belief that an alien cannot be
sufficiently acquainted with "our institutions and our life as to enable
him to appreciate the relation of this particular business to our entire
social fabric", and was not, therefore, invalid. In Ohio ex rel. Clarke vs.
Deckebach, 274 U. S. 392, 71 L. ed. 115 (1926), the U.S. Supreme Court
had under consideration an ordinance of the city of Cincinnati
prohibiting the issuance of licenses (pools and billiard rooms) to
aliens. It held that plainly irrational discrimination against aliens is
prohibited, but it does not follow that alien race and allegiance may
not bear in some instances such a relation to a legitimate object of
legislation as to be made the basis of permitted classification, and
that it could not state that the legislation is clearly wrong; and that
latitude must be allowed for the legislative appraisement of local
conditions and for the legislative choice of methods for controlling an
apprehended evil. The case of State vs. Carrol, 124 N. E. 129 (Ohio,
1919) is a parallel case to the one at bar. In Asakura vs. City of Seattle,
210 P. 30 (Washington, 1922), the business of pawn brooking was
considered as having tendencies injuring public interest, and limiting
it to citizens is within the scope of police power. A similar statute
denying aliens the right to engage in auctioneering was also sustained
in Wright vs. May, L.R.A., 1915 P. 151 (Minnesota, 1914). So also in
Anton vs. Van Winkle, 297 F. 340 (Oregon, 1924), the court said that
aliens are judicially known to have different interests, knowledge,
attitude, psychology and loyalty, hence the prohibitions of issuance of
licenses to them for the business of pawnbroker, pool, billiard, card
room, dance hall, is not an infringement of constitutional rights. In
Templar vs. Michigan State Board of Examiners, 90 N.W. 1058
(Michigan, 1902), a law prohibiting the licensing of aliens as barbers
was held void, but the reason for the decision was the court's findings
that the exercise of the business by the aliens does not in any way
affect the morals, the health, or even the convenience of the
community. In Takahashi vs. Fish and Game Commission, 92 L. ed.
1479 (1947), a California statute banning the issuance of commercial
fishing licenses to person ineligible to citizenship was held void,
because the law conflicts with Federal power over immigration, and
because there is no public interest in the mere claim of ownership of
the waters and the fish in them, so there was no adequate
justification for the discrimination. It further added that the law was
the outgrowth of antagonism toward the persons of Japanese
ancestry. However, two Justices dissented on the theory that fishing
rights have been treated traditionally as natural resources. In Fraser
vs. McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a state
law which imposed a tax on every employer of foreign-born
unnaturalized male persons over 21 years of age, was declared void
because the court found that there was no reason for the
classification and the tax was an arbitrary deduction from the daily
wage of an employee.

d. Authorities contra explained.

It is true that some decisions of the Federal court and of the State
courts in the United States hold that the distinction between aliens
and citizens is not a valid ground for classification. But in this decision
the laws declared invalid were found to be either arbitrary,
unreasonable or capricious, or were the result or product of racial
antagonism and hostility, and there was no question of public interest
involved or pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059
(1925), the United States Supreme Court declared invalid a Philippine
law making unlawful the keeping of books of account in any language
other than English, Spanish or any other local dialect, but the main
reasons for the decisions are: (1) that if Chinese were driven out of
business there would be no other system of distribution, and (2) that
the Chinese would fall prey to all kinds of fraud, because they would
be deprived of their right to be advised of their business and to direct
its conduct. The real reason for the decision, therefore, is the court's
belief that no public benefit would be derived from the operations of
the law and on the other hand it would deprive Chinese of something
indispensable for carrying on their business. In Yick Wo vs. Hopkins,
30 L. ed 220 (1885) an ordinance conferring powers on officials to
withhold consent in the operation of laundries both as to persons and
place, was declared invalid, but the court said that the power granted
was arbitrary, that there was no reason for the discrimination which
attended the administration and implementation of the law, and that
the motive thereof was mere racial hostility. In State vs. Montgomery,
47 A. 165 (Maine, 1900), a law prohibiting aliens to engage as hawkers
and peddlers was declared void, because the discrimination bore no
reasonable and just relation to the act in respect to which the
classification was proposed.

The case at bar is radically different, and the facts make them so. As
we already have said, aliens do not naturally possess the sympathetic
consideration and regard for the customers with whom they come in
daily contact, nor the patriotic desire to help bolster the nation's
economy, except in so far as it enhances their profit, nor the loyalty
and allegiance which the national owes to the land. These limitations
on the qualifications of the aliens have been shown on many
occasions and instances, especially in times of crisis and emergency.
We can do no better than borrow the language of Anton vs. Van
Winkle, 297 F. 340, 342, to drive home the reality and significance of
the distinction between the alien and the national, thus:

. . . . It may be judicially known, however, that alien coming into this
country are without the intimate knowledge of our laws, customs,
and usages that our own people have. So it is likewise known that
certain classes of aliens are of different psychology from our fellow
countrymen. Furthermore, it is natural and reasonable to suppose
that the foreign born, whose allegiance is first to their own country,
and whose ideals of governmental environment and control have
been engendered and formed under entirely different regimes and
political systems, have not the same inspiration for the public weal,
nor are they as well disposed toward the United States, as those who
by citizenship, are a part of the government itself. Further
enlargement, is unnecessary. I have said enough so that obviously it
cannot be affirmed with absolute confidence that the Legislature was
without plausible reason for making the classification, and therefore
appropriate discriminations against aliens as it relates to the subject
of legislation. . . . .

VII. The Due Process of Law Limitation.

a. Reasonability, the test of the limitation; determination by
legislature decisive.

We now come to due process as a limitation on the exercise of the
police power. It has been stated by the highest authority in the United
States that:

. . . . And the guaranty of due process, as has often been held,
demands only that the law shall not be unreasonable, arbitrary or
capricious, and that the means selected shall have a real and
substantial relation to the subject sought to be attained. . . . .

x x x x x x x x x

So far as the requirement of due process is concerned and in the
absence of other constitutional restriction a state is free to adopt
whatever economic policy may reasonably be deemed to promote
public welfare, and to enforce that policy by legislation adapted to its
purpose. The courts are without authority either to declare such
policy, or, when it is declared by the legislature, to override it. If the
laws passed are seen to have a reasonable relation to a proper
legislative purpose, and are neither arbitrary nor discriminatory, the
requirements of due process are satisfied, and judicial determination
to that effect renders a court functus officio. . . . (Nebbia vs. New
York, 78 L. ed. 940, 950, 957.)

Another authority states the principle thus:

. . . . Too much significance cannot be given to the word
"reasonable" in considering the scope of the police power in a
constitutional sense, for the test used to determine the
constitutionality of the means employed by the legislature is to
inquire whether the restriction it imposes on rights secured to
individuals by the Bill of Rights are unreasonable, and not whether it
imposes any restrictions on such rights. . . .

x x x x x x x x x

. . . . A statute to be within this power must also be reasonable in its
operation upon the persons whom it affects, must not be for the
annoyance of a particular class, and must not be unduly oppressive.
(11 Am. Jur. Sec. 302., 1:1)- 1074-1075.)

In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held:

. . . . To justify the state in thus interposing its authority in behalf of
the public, it must appear, first, that the interests of the public
generally, as distinguished from those of a particular class, require
such interference; and second, that the means are reasonably
necessary for the accomplishment of the purpose, and not unduly
oppressive upon individuals. . . .

Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389,
395, fixes this test of constitutionality:

In determining whether a given act of the Legislature, passed in the
exercise of the police power to regulate the operation of a business, is
or is not constitutional, one of the first questions to be considered by
the court is whether the power as exercised has a sufficient
foundation in reason in connection with the matter involved, or is an
arbitrary, oppressive, and capricious use of that power, without
substantial relation to the health, safety, morals, comfort, and general
welfare of the public.

b. Petitioner's argument considered.

Petitioner's main argument is that retail is a common, ordinary
occupation, one of those privileges long ago recognized as essential to
the orderly pursuant of happiness by free men; that it is a gainful and
honest occupation and therefore beyond the power of the legislature
to prohibit and penalized. This arguments overlooks fact and reality
and rests on an incorrect assumption and premise, i.e., that in this
country where the occupation is engaged in by petitioner, it has been
so engaged by him, by the alien in an honest creditable and
unimpeachable manner, without harm or injury to the citizens and
without ultimate danger to their economic peace, tranquility and
welfare. But the Legislature has found, as we have also found and
indicated, that the privilege has been so grossly abused by the alien,
thru the illegitimate use of pernicious designs and practices, that he
now enjoys a monopolistic control of the occupation and threatens a
deadly stranglehold on the nation's economy endangering the
national security in times of crisis and emergency.

The real question at issue, therefore, is not that posed by
petitioner, which overlooks and ignores the facts and circumstances,
but this, Is the exclusion in the future of aliens from the retail trade
unreasonable. Arbitrary capricious, taking into account the
illegitimate and pernicious form and manner in which the aliens have
heretofore engaged therein? As thus correctly stated the answer is
clear. The law in question is deemed absolutely necessary to bring
about the desired legislative objective, i.e., to free national economy
from alien control and dominance. It is not necessarily unreasonable
because it affects private rights and privileges (11 Am. Jur. pp. 1080-
1081.) The test of reasonableness of a law is the appropriateness or
adequacy under all circumstances of the means adopted to carry out
its purpose into effect (Id.) Judged by this test, disputed legislation,
which is not merely reasonable but actually necessary, must be
considered not to have infringed the constitutional limitation of
reasonableness.

The necessity of the law in question is explained in the explanatory
note that accompanied the bill, which later was enacted into law:

This bill proposes to regulate the retail business. Its purpose is to
prevent persons who are not citizens of the Philippines from having a
strangle hold upon our economic life. If the persons who control this
vital artery of our economic life are the ones who owe no allegiance
to this Republic, who have no profound devotion to our free
institutions, and who have no permanent stake in our people's
welfare, we are not really the masters of our destiny. All aspects of
our life, even our national security, will be at the mercy of other
people.

In seeking to accomplish the foregoing purpose, we do not propose
to deprive persons who are not citizens of the Philippines of their
means of livelihood. While this bill seeks to take away from the hands
of persons who are not citizens of the Philippines a power that can be
wielded to paralyze all aspects of our national life and endanger our
national security it respects existing rights.

The approval of this bill is necessary for our national survival.

If political independence is a legitimate aspiration of a people, then
economic independence is none the less legitimate. Freedom and
liberty are not real and positive if the people are subject to the
economic control and domination of others, especially if not of their
own race or country. The removal and eradication of the shackles of
foreign economic control and domination, is one of the noblest
motives that a national legislature may pursue. It is impossible to
conceive that legislation that seeks to bring it about can infringe the
constitutional limitation of due process. The attainment of a
legitimate aspiration of a people can never be beyond the limits of
legislative authority.

c. Law expressly held by Constitutional Convention to be within the
sphere of legislative action.

The framers of the Constitution could not have intended to impose
the constitutional restrictions of due process on the attainment of
such a noble motive as freedom from economic control and
domination, thru the exercise of the police power. The fathers of the
Constitution must have given to the legislature full authority and
power to enact legislation that would promote the supreme
happiness of the people, their freedom and liberty. On the precise
issue now before us, they expressly made their voice clear; they
adopted a resolution expressing their belief that the legislation in
question is within the scope of the legislative power. Thus they
declared the their Resolution:

That it is the sense of the Convention that the public interest
requires the nationalization of retail trade; but it abstain from
approving the amendment introduced by the Delegate for Manila, Mr.
Araneta, and others on this matter because it is convinced that the
National Assembly is authorized to promulgate a law which limits to
Filipino and American citizens the privilege to engage in the retail
trade. (11 Aruego, The Framing of the Philippine Constitution, quoted
on pages 66 and 67 of the Memorandum for the Petitioner.)

It would do well to refer to the nationalistic tendency manifested in
various provisions of the Constitution. Thus in the preamble, a
principle objective is the conservation of the patrimony of the nation
and as corollary the provision limiting to citizens of the Philippines the
exploitation, development and utilization of its natural resources. And
in Section 8 of Article XIV, it is provided that "no franchise, certificate,
or any other form of authorization for the operation of the public
utility shall be granted except to citizens of the Philippines." The
nationalization of the retail trade is only a continuance of the
nationalistic protective policy laid down as a primary objective of the
Constitution. Can it be said that a law imbued with the same purpose
and spirit underlying many of the provisions of the Constitution is
unreasonable, invalid and unconstitutional?

The seriousness of the Legislature's concern for the plight of the
nationals as manifested in the approval of the radical measures is,
therefore, fully justified. It would have been recreant to its duties
towards the country and its people would it view the sorry plight of
the nationals with the complacency and refuse or neglect to adopt a
remedy commensurate with the demands of public interest and
national survival. As the repository of the sovereign power of
legislation, the Legislature was in duty bound to face the problem and
meet, through adequate measures, the danger and threat that alien
domination of retail trade poses to national economy.

d. Provisions of law not unreasonable.

A cursory study of the provisions of the law immediately reveals
how tolerant, how reasonable the Legislature has been. The law is
made prospective and recognizes the right and privilege of those
already engaged in the occupation to continue therein during the rest
of their lives; and similar recognition of the right to continue is
accorded associations of aliens. The right or privilege is denied to
those only upon conviction of certain offenses. In the deliberations of
the Court on this case, attention was called to the fact that the
privilege should not have been denied to children and heirs of aliens
now engaged in the retail trade. Such provision would defeat the law
itself, its aims and purposes. Beside, the exercise of legislative
discretion is not subject to judicial review. It is well settled that the
Court will not inquire into the motives of the Legislature, nor pass
upon general matters of legislative judgment. The Legislature is
primarily the judge of the necessity of an enactment or of any of its
provisions, and every presumption is in favor of its validity, and
though the Court may hold views inconsistent with the wisdom of the
law, it may not annul the legislation if not palpably in excess of the
legislative power. Furthermore, the test of the validity of a law
attacked as a violation of due process, is not its reasonableness, but
its unreasonableness, and we find the provisions are not
unreasonable. These principles also answer various other arguments
raised against the law, some of which are: that the law does not
promote general welfare; that thousands of aliens would be thrown
out of employment; that prices will increase because of the
elimination of competition; that there is no need for the legislation;
that adequate replacement is problematical; that there may be
general breakdown; that there would be repercussions from
foreigners; etc. Many of these arguments are directed against the
supposed wisdom of the law which lies solely within the legislative
prerogative; they do not import invalidity.

VIII. Alleged defect in the title of the law

A subordinate ground or reason for the alleged invalidity of the law
is the claim that the title thereof is misleading or deceptive, as it
conceals the real purpose of the bill which is to nationalize the retail
business and prohibit aliens from engaging therein. The constitutional
provision which is claimed to be violated in Section 21 (1) of Article VI,
which reads:

No bill which may be enacted in the law shall embrace more than
one subject which shall be expressed in the title of the bill.

What the above provision prohibits is duplicity, that is, if its title
completely fails to appraise the legislators or the public of the nature,
scope and consequences of the law or its operation (I Sutherland,
Statutory Construction, Sec. 1707, p. 297.) A cursory consideration of
the title and the provisions of the bill fails to show the presence of
duplicity. It is true that the term "regulate" does not and may not
readily and at first glance convey the idea of "nationalization" and
"prohibition", which terms express the two main purposes and
objectives of the law. But "regulate" is a broader term than either
prohibition or nationalization. Both of these have always been
included within the term regulation.

Under the title of an act to "regulate", the sale of intoxicating
liquors, the Legislature may prohibit the sale of intoxicating liquors.
(Sweet vs. City of Wabash, 41 Ind., 7; quoted in page 41 of Answer.)

Within the meaning of the Constitution requiring that the subject of
every act of the Legislature shall be stated in the tale, the title to
regulate the sale of intoxicating liquors, etc." sufficiently expresses
the subject of an act prohibiting the sale of such liquors to minors and
to persons in the habit of getting intoxicated; such matters being
properly included within the subject of regulating the sale. (Williams
vs. State, 48 Ind. 306, 308, quoted in p. 42 of Answer.)

The word "regulate" is of broad import, and necessarily implies
some degree of restraint and prohibition of acts usually done in
connection with the thing to be regulated. While word regulate does
not ordinarily convey meaning of prohibit, there is no absolute reason
why it should not have such meaning when used in delegating police
power in connection with a thing the best or only efficacious
regulation of which involves suppression. (State vs. Morton, 162 So.
718, 182 La. 887, quoted in p. 42 of Answer.)

The general rule is for the use of general terms in the title of a bill; it
has also been said that the title need not be an index to the entire
contents of the law (I Sutherland, Statutory Construction, See. 4803,
p. 345.) The above rule was followed the title of the Act in question
adopted the more general term "regulate" instead of "nationalize" or
"prohibit". Furthermore, the law also contains other rules for the
regulation of the retail trade which may not be included in the terms
"nationalization" or "prohibition"; so were the title changed from
"regulate" to "nationalize" or "prohibit", there would have been
many provisions not falling within the scope of the title which would
have made the Act invalid. The use of the term "regulate", therefore,
is in accord with the principle governing the drafting of statutes,
under which a simple or general term should be adopted in the title,
which would include all other provisions found in the body of the Act.

One purpose of the constitutional directive that the subject of a bill
should be embraced in its title is to apprise the legislators of the
purposes, the nature and scope of its provisions, and prevent the
enactment into law of matters which have received the notice, action
and study of the legislators or of the public. In the case at bar it
cannot be claimed that the legislators have been appraised of the
nature of the law, especially the nationalization and the prohibition
provisions. The legislators took active interest in the discussion of the
law, and a great many of the persons affected by the prohibitions in
the law conducted a campaign against its approval. It cannot be
claimed, therefore, that the reasons for declaring the law invalid ever
existed. The objection must therefore, be overruled.

IX. Alleged violation of international treaties and obligations

Another subordinate argument against the validity of the law is the
supposed violation thereby of the Charter of the United Nations and
of the Declaration of the Human Rights adopted by the United
Nations General Assembly. We find no merit in the Nations Charter
imposes no strict or legal obligations regarding the rights and freedom
of their subjects (Hans Kelsen, The Law of the United Nations, 1951
ed. pp. 29-32), and the Declaration of Human Rights contains nothing
more than a mere recommendation or a common standard of
achievement for all peoples and all nations (Id. p. 39.) That such is the
import of the United Nations Charter aid of the Declaration of Human
Rights can be inferred the fact that members of the United Nations
Organizations, such as Norway and Denmark, prohibit foreigners from
engaging in retail trade, and in most nations of the world laws against
foreigners engaged in domestic trade are adopted.

The Treaty of Amity between the Republic of the Philippines and
the Republic of China of April 18, 1947 is also claimed to be violated
by the law in question. All that the treaty guarantees is equality of
treatment to the Chinese nationals "upon the same terms as the
nationals of any other country." But the nationals of China are not
discriminating against because nationals of all other countries, except
those of the United States, who are granted special rights by the
Constitution, are all prohibited from engaging in the retail trade. But
even supposing that the law infringes upon the said treaty, the treaty
is always subject to qualification or amendment by a subsequent law
(U. S. vs. Thompson, 258, Fed. 257, 260), and the same may never
curtail or restrict the scope of the police power of the State (plaston
vs. Pennsylvania, 58 L. ed. 539.)

X. Conclusion

Resuming what we have set forth above we hold that the disputed
law was enacted to remedy a real actual threat and danger to national
economy posed by alien dominance and control of the retail business
and free citizens and country from dominance and control; that the
enactment clearly falls within the scope of the police power of the
State, thru which and by which it protects its own personality and
insures its security and future; that the law does not violate the equal
protection clause of the Constitution because sufficient grounds exist
for the distinction between alien and citizen in the exercise of the
occupation regulated, nor the due process of law clause, because the
law is prospective in operation and recognizes the privilege of aliens
already engaged in the occupation and reasonably protects their
privilege; that the wisdom and efficacy of the law to carry out its
objectives appear to us to be plainly evident as a matter of fact it
seems not only appropriate but actually necessary and that in any
case such matter falls within the prerogative of the Legislature, with
whose power and discretion the Judicial department of the
Government may not interfere; that the provisions of the law are
clearly embraced in the title, and this suffers from no duplicity and
has not misled the legislators or the segment of the population
affected; and that it cannot be said to be void for supposed conflict
with treaty obligations because no treaty has actually been entered
into on the subject and the police power may not be curtailed or
surrendered by any treaty or any other conventional agreement.

Some members of the Court are of the opinion that the radical
effects of the law could have been made less harsh in its impact on
the aliens. Thus it is stated that the more time should have been given
in the law for the liquidation of existing businesses when the time
comes for them to close. Our legal duty, however, is merely to
determine if the law falls within the scope of legislative authority and
does not transcend the limitations of due process and equal
protection guaranteed in the Constitution. Remedies against the
harshness of the law should be addressed to the Legislature; they are
beyond our power and jurisdiction.

The petition is hereby denied, with costs against petitioner.

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-7995 May 31, 1957

LAO H. ICHONG, in his own behalf and in behalf of other alien
residents, corporations and partnerships adversely affected. by
Republic Act No. 1180, petitioner,
vs.
JAIME HERNANDEZ, Secretary of Finance, and MARCELINO
SARMIENTO, City Treasurer of Manila, respondents.

Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and
Associates for petitioner.
Office of the Solicitor General Ambrosio Padilla and Solicitor
Pacifico P. de Castro for respondent Secretary of Finance.
City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S.
Serrano for respondent City Treasurer.
Dionisio Reyes as Amicus Curiae.
Marcial G. Mendiola as Amicus Curiae.
Emiliano R. Navarro as Amicus Curiae.

LABRADOR, J.:

I. The case and issue, in general

This Court has before it the delicate task of passing upon the
validity and constitutionality of a legislative enactment, fundamental
and far-reaching in significance. The enactment poses questions of
due process, police power and equal protection of the laws. It also
poses an important issue of fact, that is whether the conditions which
the disputed law purports to remedy really or actually exist.
Admittedly springing from a deep, militant, and positive nationalistic
impulse, the law purports to protect citizen and country from the
alien retailer. Through it, and within the field of economy it regulates,
Congress attempts to translate national aspirations for economic
independence and national security, rooted in the drive and urge for
national survival and welfare, into a concrete and tangible measures
designed to free the national retailer from the competing dominance
of the alien, so that the country and the nation may be free from a
supposed economic dependence and bondage. Do the facts and
circumstances justify the enactment?

II. Pertinent provisions of Republic Act No. 1180

Republic Act No. 1180 is entitled "An Act to Regulate the Retail
Business." In effect it nationalizes the retail trade business. The main
provisions of the Act are: (1) a prohibition against persons, not
citizens of the Philippines, and against associations, partnerships, or
corporations the capital of which are not wholly owned by citizens of
the Philippines, from engaging directly or indirectly in the retail trade;
(2) an exception from the above prohibition in favor of aliens actually
engaged in said business on May 15, 1954, who are allowed to
continue to engaged therein, unless their licenses are forfeited in
accordance with the law, until their death or voluntary retirement in
case of natural persons, and for ten years after the approval of the Act
or until the expiration of term in case of juridical persons; (3) an
exception therefrom in favor of citizens and juridical entities of the
United States; (4) a provision for the forfeiture of licenses (to engage
in the retail business) for violation of the laws on nationalization,
control weights and measures and labor and other laws relating to
trade, commerce and industry; (5) a prohibition against the
establishment or opening by aliens actually engaged in the retail
business of additional stores or branches of retail business, (6) a
provision requiring aliens actually engaged in the retail business to
present for registration with the proper authorities a verified
statement concerning their businesses, giving, among other matters,
the nature of the business, their assets and liabilities and their offices
and principal offices of judicial entities; and (7) a provision allowing
the heirs of aliens now engaged in the retail business who die, to
continue such business for a period of six months for purposes of
liquidation.

III. Grounds upon which petition is based-Answer thereto

Petitioner, for and in his own behalf and on behalf of other alien
residents corporations and partnerships adversely affected by the
provisions of Republic Act. No. 1180, brought this action to obtain a
judicial declaration that said Act is unconstitutional, and to enjoin the
Secretary of Finance and all other persons acting under him,
particularly city and municipal treasurers, from enforcing its
provisions. Petitioner attacks the constitutionality of the Act,
contending that: (1) it denies to alien residents the equal protection
of the laws and deprives of their liberty and property without due
process of law ; (2) the subject of the Act is not expressed or
comprehended in the title thereof; (3) the Act violates international
and treaty obligations of the Republic of the Philippines; (4) the
provisions of the Act against the transmission by aliens of their retail
business thru hereditary succession, and those requiring 100% Filipino
capitalization for a corporation or entity to entitle it to engage in the
retail business, violate the spirit of Sections 1 and 5, Article XIII and
Section 8 of Article XIV of the Constitution.

In answer, the Solicitor-General and the Fiscal of the City of Manila
contend that: (1) the Act was passed in the valid exercise of the police
power of the State, which exercise is authorized in the Constitution in
the interest of national economic survival; (2) the Act has only one
subject embraced in the title; (3) no treaty or international obligations
are infringed; (4) as regards hereditary succession, only the form is
affected but the value of the property is not impaired, and the
institution of inheritance is only of statutory origin.

IV. Preliminary consideration of legal principles involved

a. The police power.

There is no question that the Act was approved in the exercise of
the police power, but petitioner claims that its exercise in this
instance is attended by a violation of the constitutional requirements
of due process and equal protection of the laws. But before
proceeding to the consideration and resolution of the ultimate issue
involved, it would be well to bear in mind certain basic and
fundamental, albeit preliminary, considerations in the determination
of the ever recurrent conflict between police power and the
guarantees of due process and equal protection of the laws. What is
the scope of police power, and how are the due process and equal
protection clauses related to it? What is the province and power of
the legislature, and what is the function and duty of the courts? These
consideration must be clearly and correctly understood that their
application to the facts of the case may be brought forth with clarity
and the issue accordingly resolved.

It has been said the police power is so far - reaching in scope, that it
has become almost impossible to limit its sweep. As it derives its
existence from the very existence of the State itself, it does not need
to be expressed or defined in its scope; it is said to be co-extensive
with self-protection and survival, and as such it is the most positive
and active of all governmental processes, the most essential, insistent
and illimitable. Especially is it so under a modern democratic
framework where the demands of society and of nations have
multiplied to almost unimaginable proportions; the field and scope of
police power has become almost boundless, just as the fields of public
interest and public welfare have become almost all-embracing and
have transcended human foresight. Otherwise stated, as we cannot
foresee the needs and demands of public interest and welfare in this
constantly changing and progressive world, so we cannot delimit
beforehand the extent or scope of police power by which and through
which the State seeks to attain or achieve interest or welfare. So it is
that Constitutions do not define the scope or extent of the police
power of the State; what they do is to set forth the limitations
thereof. The most important of these are the due process clause and
the equal protection clause.

b. Limitations on police power.

The basic limitations of due process and equal protection are found
in the following provisions of our Constitution:

SECTION 1.(1) No person shall be deprived of life, liberty or
property without due process of law, nor any person be denied the
equal protection of the laws. (Article III, Phil. Constitution)

These constitutional guarantees which embody the essence of
individual liberty and freedom in democracies, are not limited to
citizens alone but are admittedly universal in their application,
without regard to any differences of race, of color, or of nationality.
(Yick Wo vs. Hopkins, 30, L. ed. 220, 226.)

c. The, equal protection clause.

The equal protection of the law clause is against undue favor and
individual or class privilege, as well as hostile discrimination or the
oppression of inequality. It is not intended to prohibit legislation,
which is limited either in the object to which it is directed or by
territory within which is to operate. It does not demand absolute
equality among residents; it merely requires that all persons shall be
treated alike, under like circumstances and conditions both as to
privileges conferred and liabilities enforced. The equal protection
clause is not infringed by legislation which applies only to those
persons falling within a specified class, if it applies alike to all persons
within such class, and reasonable grounds exists for making a
distinction between those who fall within such class and those who
do not. (2 Cooley, Constitutional Limitations, 824-825.)

d. The due process clause.

The due process clause has to do with the reasonableness of
legislation enacted in pursuance of the police power. Is there public
interest, a public purpose; is public welfare involved? Is the Act
reasonably necessary for the accomplishment of the legislature's
purpose; is it not unreasonable, arbitrary or oppressive? Is there
sufficient foundation or reason in connection with the matter
involved; or has there not been a capricious use of the legislative
power? Can the aims conceived be achieved by the means used, or is
it not merely an unjustified interference with private interest? These
are the questions that we ask when the due process test is applied.

The conflict, therefore, between police power and the guarantees
of due process and equal protection of the laws is more apparent than
real. Properly related, the power and the guarantees are supposed to
coexist. The balancing is the essence or, shall it be said, the
indispensable means for the attainment of legitimate aspirations of
any democratic society. There can be no absolute power, whoever
exercise it, for that would be tyranny. Yet there can neither be
absolute liberty, for that would mean license and anarchy. So the
State can deprive persons of life, liberty and property, provided there
is due process of law; and persons may be classified into classes and
groups, provided everyone is given the equal protection of the law.
The test or standard, as always, is reason. The police power legislation
must be firmly grounded on public interest and welfare, and a
reasonable relation must exist between purposes and means. And if
distinction and classification has been made, there must be a
reasonable basis for said distinction.

e. Legislative discretion not subject to judicial review.

Now, in this matter of equitable balancing, what is the proper place
and role of the courts? It must not be overlooked, in the first place,
that the legislature, which is the constitutional repository of police
power and exercises the prerogative of determining the policy of the
State, is by force of circumstances primarily the judge of necessity,
adequacy or reasonableness and wisdom, of any law promulgated in
the exercise of the police power, or of the measures adopted to
implement the public policy or to achieve public interest. On the other
hand, courts, although zealous guardians of individual liberty and
right, have nevertheless evinced a reluctance to interfere with the
exercise of the legislative prerogative. They have done so early where
there has been a clear, patent or palpable arbitrary and unreasonable
abuse of the legislative prerogative. Moreover, courts are not
supposed to override legitimate policy, and courts never inquire into
the wisdom of the law.

V. Economic problems sought to be remedied

With the above considerations in mind, we will now proceed to
delve directly into the issue involved. If the disputed legislation were
merely a regulation, as its title indicates, there would be no question
that it falls within the legitimate scope of legislative power. But it
goes further and prohibits a group of residents, the aliens, from
engaging therein. The problem becomes more complex because its
subject is a common, trade or occupation, as old as society itself,
which from the immemorial has always been open to residents,
irrespective of race, color or citizenship.

a. Importance of retail trade in the economy of the nation.

In a primitive economy where families produce all that they
consume and consume all that they produce, the dealer, of course, is
unknown. But as group life develops and families begin to live in
communities producing more than what they consume and needing
an infinite number of things they do not produce, the dealer comes
into existence. As villages develop into big communities and
specialization in production begins, the dealer's importance is
enhanced. Under modern conditions and standards of living, in which
man's needs have multiplied and diversified to unlimited extents and
proportions, the retailer comes as essential as the producer, because
thru him the infinite variety of articles, goods and needed for daily life
are placed within the easy reach of consumers. Retail dealers perform
the functions of capillaries in the human body, thru which all the
needed food and supplies are ministered to members of the
communities comprising the nation.

There cannot be any question about the importance of the retailer
in the life of the community. He ministers to the resident's daily
needs, food in all its increasing forms, and the various little gadgets
and things needed for home and daily life. He provides his customers
around his store with the rice or corn, the fish, the salt, the vinegar,
the spices needed for the daily cooking. He has cloths to sell, even the
needle and the thread to sew them or darn the clothes that wear out.
The retailer, therefore, from the lowly peddler, the owner of a small
sari-sari store, to the operator of a department store or, a
supermarket is so much a part of day-to-day existence.

b. The alien retailer's trait.

The alien retailer must have started plying his trades in this country
in the bigger centers of population (Time there was when he was
unknown in provincial towns and villages). Slowly but gradually be
invaded towns and villages; now he predominates in the cities and big
centers of population. He even pioneers, in far away nooks where the
beginnings of community life appear, ministering to the daily needs of
the residents and purchasing their agricultural produce for sale in the
towns. It is an undeniable fact that in many communities the alien has
replaced the native retailer. He has shown in this trade, industry
without limit, and the patience and forbearance of a slave.

Derogatory epithets are hurled at him, but he laughs these off
without murmur; insults of ill-bred and insolent neighbors and
customers are made in his face, but he heeds them not, and he
forgets and forgives. The community takes note of him, as he appears
to be harmless and extremely useful.

c. Alleged alien control and dominance.

There is a general feeling on the part of the public, which appears to
be true to fact, about the controlling and dominant position that the
alien retailer holds in the nation's economy. Food and other
essentials, clothing, almost all articles of daily life reach the residents
mostly through him. In big cities and centers of population he has
acquired not only predominance, but apparent control over
distribution of almost all kinds of goods, such as lumber, hardware,
textiles, groceries, drugs, sugar, flour, garlic, and scores of other goods
and articles. And were it not for some national corporations like the
Naric, the Namarco, the Facomas and the Acefa, his control over
principal foods and products would easily become full and complete.

Petitioner denies that there is alien predominance and control in
the retail trade. In one breath it is said that the fear is unfounded and
the threat is imagined; in another, it is charged that the law is merely
the result of radicalism and pure and unabashed nationalism.
Alienage, it is said, is not an element of control; also so many
unmanageable factors in the retail business make control virtually
impossible. The first argument which brings up an issue of fact merits
serious consideration. The others are matters of opinion within the
exclusive competence of the legislature and beyond our prerogative
to pass upon and decide.

The best evidence are the statistics on the retail trade, which put
down the figures in black and white. Between the constitutional
convention year (1935), when the fear of alien domination and
control of the retail trade already filled the minds of our leaders with
fears and misgivings, and the year of the enactment of the
nationalization of the retail trade act (1954), official statistics
unmistakably point out to the ever-increasing dominance and control
by the alien of the retail trade, as witness the following tables:



Assets


Gross Sales

Year and Retailers
Nationality


No.-Establishments


Pesos


Per cent Distribution


Pesos


Per cent Distribution

1941:














Filipino ..........


106,671


200,323,138


55.82


174,181,924


51.74



Chinese ...........


15,356


118,348,692


32.98


148,813,239


44.21



Others ............


1,646


40,187,090


11.20


13,630,239


4.05

1947:














Filipino ..........


111,107


208,658,946


65.05


279,583,333


57.03



Chinese ...........


13,774


106,156,218


33.56


205,701,134


41.96



Others ...........


354


8,761,260


.49


4,927,168


1.01

1948:


(Census)












Filipino ..........


113,631


213,342,264


67.30


467,161,667


60.51



Chinese ..........


12,087


93,155,459


29.38


294,894,227


38.20



Others ..........


422


10,514,675


3.32


9,995,402


1.29

1949:














Filipino ..........


113,659


213,451,602


60.89


462,532,901


53.47



Chinese ..........


16,248


125,223,336


35.72


392,414,875


45.36



Others ..........


486


12,056,365


3.39


10,078,364


1.17

1951:














Filipino .........


119,352


224,053,620


61.09


466,058,052


53.07



Chinese ..........


17,429


134,325,303


36.60


404,481,384


46.06



Others ..........


347


8,614,025


2.31


7,645,327


87

AVERAGE
ASSETS AND GROSS SALES PER ESTABLISHMENT

Year and Retailer's
Nationality


Item
Assets
(Pesos)


Gross Sales
(Pesos)

1941:








Filipino .............................................


1,878


1,633



Chinese ..............................................


7,707


9,691



Others ...............................................


24,415


8,281

1947:








Filipino .............................................


1,878


2,516



Chinese ...........................................


7,707


14,934



Others ..............................................


24,749


13,919

1948:


(Census)






Filipino .............................................


1,878


4,111



Chinese .............................................


7,707


24,398



Others ..............................................


24,916


23,686

1949:








Filipino .............................................


1,878


4,069



Chinese ..............................................


7,707


24,152



Others ..............................................


24,807


20,737

1951:








Filipino .............................................


1,877


3,905



Chinese .............................................


7,707


33,207



Others ...............................................


24,824


22,033

(Estimated Assets and Gross Sales of Retail Establishments, By Year
and Nationality of Owners, Benchmark: 1948 Census, issued by the
Bureau of Census and Statistics, Department of Commerce and
Industry; pp. 18-19 of Answer.)

The above statistics do not include corporations and partnerships,
while the figures on Filipino establishments already include mere
market vendors, whose capital is necessarily small..

The above figures reveal that in percentage distribution of assests
and gross sales, alien participation has steadily increased during the
years. It is true, of course, that Filipinos have the edge in the number
of retailers, but aliens more than make up for the numerical gap
through their assests and gross sales which average between six and
seven times those of the very many Filipino retailers. Numbers in
retailers, here, do not imply superiority; the alien invests more
capital, buys and sells six to seven times more, and gains much more.
The same official report, pointing out to the known predominance of
foreign elements in the retail trade, remarks that the Filipino retailers
were largely engaged in minor retailer enterprises. As observed by
respondents, the native investment is thinly spread, and the Filipino
retailer is practically helpless in matters of capital, credit, price and
supply.

d. Alien control and threat, subject of apprehension in
Constitutional convention.

It is this domination and control, which we believe has been
sufficiently shown to exist, that is the legislature's target in the
enactment of the disputed nationalization would never have been
adopted. The framers of our Constitution also believed in the
existence of this alien dominance and control when they approved a
resolution categorically declaring among other things, that "it is the
sense of the Convention that the public interest requires the
nationalization of the retail trade; . . . ." (II Aruego, The Framing of the
Philippine Constitution, 662-663, quoted on page 67 of Petitioner.)
That was twenty-two years ago; and the events since then have not
been either pleasant or comforting. Dean Sinco of the University of
the Philippines College of Law, commenting on the patrimony clause
of the Preamble opines that the fathers of our Constitution were
merely translating the general preoccupation of Filipinos "of the
dangers from alien interests that had already brought under their
control the commercial and other economic activities of the country"
(Sinco, Phil. Political Law, 10th ed., p. 114); and analyzing the concern
of the members of the constitutional convention for the economic life
of the citizens, in connection with the nationalistic provisions of the
Constitution, he says:

But there has been a general feeling that alien dominance over the
economic life of the country is not desirable and that if such a
situation should remain, political independence alone is no guarantee
to national stability and strength. Filipino private capital is not big
enough to wrest from alien hands the control of the national
economy. Moreover, it is but of recent formation and hence, largely
inexperienced, timid and hesitant. Under such conditions, the
government as the instrumentality of the national will, has to step in
and assume the initiative, if not the leadership, in the struggle for the
economic freedom of the nation in somewhat the same way that it
did in the crusade for political freedom. Thus . . . it (the Constitution)
envisages an organized movement for the protection of the nation not
only against the possibilities of armed invasion but also against its
economic subjugation by alien interests in the economic field. (Phil.
Political Law by Sinco, 10th ed., p. 476.)

Belief in the existence of alien control and predominance is felt in
other quarters. Filipino businessmen, manufacturers and producers
believe so; they fear the dangers coming from alien control, and they
express sentiments of economic independence. Witness thereto is
Resolution No. 1, approved on July 18, 1953, of the Fifth National
convention of Filipino Businessmen, and a similar resolution,
approved on March 20, 1954, of the Second National Convention of
Manufacturers and Producers. The man in the street also believes,
and fears, alien predominance and control; so our newspapers, which
have editorially pointed out not only to control but to alien
stranglehold. We, therefore, find alien domination and control to be a
fact, a reality proved by official statistics, and felt by all the sections
and groups that compose the Filipino community.

e. Dangers of alien control and dominance in retail.

But the dangers arising from alien participation in the retail trade
does not seem to lie in the predominance alone; there is a prevailing
feeling that such predominance may truly endanger the national
interest. With ample capital, unity of purpose and action and
thorough organization, alien retailers and merchants can act in such
complete unison and concert on such vital matters as the fixing of
prices, the determination of the amount of goods or articles to be
made available in the market, and even the choice of the goods or
articles they would or would not patronize or distribute, that fears of
dislocation of the national economy and of the complete subservience
of national economy and of the consuming public are not entirely
unfounded. Nationals, producers and consumers alike can be placed
completely at their mercy. This is easily illustrated. Suppose an article
of daily use is desired to be prescribed by the aliens, because the
producer or importer does not offer them sufficient profits, or
because a new competing article offers bigger profits for its
introduction. All that aliens would do is to agree to refuse to sell the
first article, eliminating it from their stocks, offering the new one as a
substitute. Hence, the producers or importers of the prescribed
article, or its consumers, find the article suddenly out of the
prescribed article, or its consumers, find the article suddenly out of
circulation. Freedom of trade is thus curtailed and free enterprise
correspondingly suppressed.

We can even go farther than theoretical illustrations to show the
pernicious influences of alien domination. Grave abuses have
characterized the exercise of the retail trade by aliens. It is a fact
within judicial notice, which courts of justice may not properly
overlook or ignore in the interests of truth and justice, that there
exists a general feeling on the part of the public that alien
participation in the retail trade has been attended by a pernicious and
intolerable practices, the mention of a few of which would suffice for
our purposes; that at some time or other they have cornered the
market of essential commodities, like corn and rice, creating artificial
scarcities to justify and enhance profits to unreasonable proportions;
that they have hoarded essential foods to the inconvenience and
prejudice of the consuming public, so much so that the Government
has had to establish the National Rice and Corn Corporation to save
the public from their continuous hoarding practices and tendencies;
that they have violated price control laws, especially on foods and
essential commodities, such that the legislature had to enact a law
(Sec. 9, Republic Act No. 1168), authorizing their immediate and
automatic deportation for price control convictions; that they have
secret combinations among themselves to control prices, cheating the
operation of the law of supply and demand; that they have connived
to boycott honest merchants and traders who would not cater or yield
to their demands, in unlawful restraint of freedom of trade and
enterprise. They are believed by the public to have evaded tax laws,
smuggled goods and money into and out of the land, violated import
and export prohibitions, control laws and the like, in derision and
contempt of lawful authority. It is also believed that they have
engaged in corrupting public officials with fabulous bribes, indirectly
causing the prevalence of graft and corruption in the Government. As
a matter of fact appeals to unscrupulous aliens have been made both
by the Government and by their own lawful diplomatic
representatives, action which impliedly admits a prevailing feeling
about the existence of many of the above practices.

The circumstances above set forth create well founded fears that
worse things may come in the future. The present dominance of the
alien retailer, especially in the big centers of population, therefore,
becomes a potential source of danger on occasions of war or other
calamity. We do not have here in this country isolated groups of
harmless aliens retailing goods among nationals; what we have are
well organized and powerful groups that dominate the distribution of
goods and commodities in the communities and big centers of
population. They owe no allegiance or loyalty to the State, and the
State cannot rely upon them in times of crisis or emergency. While the
national holds his life, his person and his property subject to the
needs of his country, the alien may even become the potential enemy
of the State.

f. Law enacted in interest of national economic survival and
security.

We are fully satisfied upon a consideration of all the facts and
circumstances that the disputed law is not the product of racial
hostility, prejudice or discrimination, but the expression of the
legitimate desire and determination of the people, thru their
authorized representatives, to free the nation from the economic
situation that has unfortunately been saddled upon it rightly or
wrongly, to its disadvantage. The law is clearly in the interest of the
public, nay of the national security itself, and indisputably falls within
the scope of police power, thru which and by which the State insures
its existence and security and the supreme welfare of its citizens.

VI. The Equal Protection Limitation

a. Objections to alien participation in retail trade. The next
question that now poses solution is, Does the law deny the equal
protection of the laws? As pointed out above, the mere fact of
alienage is the root and cause of the distinction between the alien and
the national as a trader. The alien resident owes allegiance to the
country of his birth or his adopted country; his stay here is for
personal convenience; he is attracted by the lure of gain and profit.
His aim or purpose of stay, we admit, is neither illegitimate nor
immoral, but he is naturally lacking in that spirit of loyalty and
enthusiasm for this country where he temporarily stays and makes his
living, or of that spirit of regard, sympathy and consideration for his
Filipino customers as would prevent him from taking advantage of
their weakness and exploiting them. The faster he makes his pile, the
earlier can the alien go back to his beloved country and his beloved
kin and countrymen. The experience of the country is that the alien
retailer has shown such utter disregard for his customers and the
people on whom he makes his profit, that it has been found necessary
to adopt the legislation, radical as it may seem.

Another objection to the alien retailer in this country is that he
never really makes a genuine contribution to national income and
wealth. He undoubtedly contributes to general distribution, but the
gains and profits he makes are not invested in industries that would
help the country's economy and increase national wealth. The alien's
interest in this country being merely transient and temporary, it
would indeed be ill-advised to continue entrusting the very important
function of retail distribution to his hands.

The practices resorted to by aliens in the control of distribution, as
already pointed out above, their secret manipulations of stocks of
commodities and prices, their utter disregard of the welfare of their
customers and of the ultimate happiness of the people of the nation
of which they are mere guests, which practices, manipulations and
disregard do not attend the exercise of the trade by the nationals,
show the existence of real and actual, positive and fundamental
differences between an alien and a national which fully justify the
legislative classification adopted in the retail trade measure. These
differences are certainly a valid reason for the State to prefer the
national over the alien in the retail trade. We would be doing violence
to fact and reality were we to hold that no reason or ground for a
legitimate distinction can be found between one and the other.

b. Difference in alien aims and purposes sufficient basis for
distinction.

The above objectionable characteristics of the exercise of the retail
trade by the aliens, which are actual and real, furnish sufficient
grounds for legislative classification of retail traders into nationals and
aliens. Some may disagree with the wisdom of the legislature's
classification. To this we answer, that this is the prerogative of the
law-making power. Since the Court finds that the classification is
actual, real and reasonable, and all persons of one class are treated
alike, and as it cannot be said that the classification is patently
unreasonable and unfounded, it is in duty bound to declare that the
legislature acted within its legitimate prerogative and it can not
declare that the act transcends the limit of equal protection
established by the Constitution.

Broadly speaking, the power of the legislature to make distinctions
and classifications among persons is not curtailed or denied by the
equal protection of the laws clause. The legislative power admits of a
wide scope of discretion, and a law can be violative of the
constitutional limitation only when the classification is without
reasonable basis. In addition to the authorities we have earlier cited,
we can also refer to the case of Linsey vs. Natural Carbonic Fas Co.
(1911), 55 L. ed., 369, which clearly and succinctly defined the
application of equal protection clause to a law sought to be voided as
contrary thereto:

. . . . "1. The equal protection clause of the Fourteenth Amendment
does not take from the state the power to classify in the adoption of
police laws, but admits of the exercise of the wide scope of discretion
in that regard, and avoids what is done only when it is without any
reasonable basis, and therefore is purely arbitrary. 2. A classification
having some reasonable basis does not offend against that clause
merely because it is not made with mathematical nicety, or because
in practice it results in some inequality. 3. When the classification in
such a law is called in question, if any state of facts reasonably can be
conceived that would sustain it, the existence of that state of facts at
the time the law was enacted must be assumed. 4. One who assails
the classification in such a law must carry the burden of showing that
it does not rest upon any reasonable basis but is essentially arbitrary."

c. Authorities recognizing citizenship as basis for classification.

The question as to whether or not citizenship is a legal and valid
ground for classification has already been affirmatively decided in this
jurisdiction as well as in various courts in the United States. In the
case of Smith Bell & Co. vs. Natividad, 40 Phil. 136, where the validity
of Act No. 2761 of the Philippine Legislature was in issue, because of a
condition therein limiting the ownership of vessels engaged in
coastwise trade to corporations formed by citizens of the Philippine
Islands or the United States, thus denying the right to aliens, it was
held that the Philippine Legislature did not violate the equal
protection clause of the Philippine Bill of Rights. The legislature in
enacting the law had as ultimate purpose the encouragement of
Philippine shipbuilding and the safety for these Islands from foreign
interlopers. We held that this was a valid exercise of the police power,
and all presumptions are in favor of its constitutionality. In substance,
we held that the limitation of domestic ownership of vessels engaged
in coastwise trade to citizens of the Philippines does not violate the
equal protection of the law and due process or law clauses of the
Philippine Bill of Rights. In rendering said decision we quoted with
approval the concurring opinion of Justice Johnson in the case of
Gibbons vs. Ogden, 9 Wheat., I, as follows:

"Licensing acts, in fact, in legislation, are universally restraining
acts; as, for example, acts licensing gaming houses, retailers of
spirituous liquors, etc. The act, in this instance, is distinctly of that
character, and forms part of an extensive system, the object of which
is to encourage American shipping, and place them on an equal
footing with the shipping of other nations. Almost every commercial
nation reserves to its own subjects a monopoly of its coasting trade;
and a countervailing privilege in favor of American shipping is
contemplated, in the whole legislation of the United States on this
subject. It is not to give the vessel an American character, that the
license is granted; that effect has been correctly attributed to the act
of her enrollment. But it is to confer on her American privileges, as
contra distinguished from foreign; and to preserve the Government
from fraud by foreigners; in surreptitiously intruding themselves into
the American commercial marine, as well as frauds upon the revenue
in the trade coastwise, that this whole system is projected."

The rule in general is as follows:

Aliens are under no special constitutional protection which forbids
a classification otherwise justified simply because the limitation of the
class falls along the lines of nationality. That would be requiring a
higher degree of protection for aliens as a class than for similar classes
than for similar classes of American citizens. Broadly speaking, the
difference in status between citizens and aliens constitutes a basis for
reasonable classification in the exercise of police power. (2 Am., Jur.
468-469.)

In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a
statute on the licensing of hawkers and peddlers, which provided that
no one can obtain a license unless he is, or has declared his intention,
to become a citizen of the United States, was held valid, for the
following reason: It may seem wise to the legislature to limit the
business of those who are supposed to have regard for the welfare,
good order and happiness of the community, and the court cannot
question this judgment and conclusion. In Bloomfield vs. State, 99 N.
E. 309 (Ohio, 1912), a statute which prevented certain persons, among
them aliens, from engaging in the traffic of liquors, was found not to
be the result of race hatred, or in hospitality, or a deliberate purpose
to discriminate, but was based on the belief that an alien cannot be
sufficiently acquainted with "our institutions and our life as to enable
him to appreciate the relation of this particular business to our entire
social fabric", and was not, therefore, invalid. In Ohio ex rel. Clarke vs.
Deckebach, 274 U. S. 392, 71 L. ed. 115 (1926), the U.S. Supreme Court
had under consideration an ordinance of the city of Cincinnati
prohibiting the issuance of licenses (pools and billiard rooms) to
aliens. It held that plainly irrational discrimination against aliens is
prohibited, but it does not follow that alien race and allegiance may
not bear in some instances such a relation to a legitimate object of
legislation as to be made the basis of permitted classification, and
that it could not state that the legislation is clearly wrong; and that
latitude must be allowed for the legislative appraisement of local
conditions and for the legislative choice of methods for controlling an
apprehended evil. The case of State vs. Carrol, 124 N. E. 129 (Ohio,
1919) is a parallel case to the one at bar. In Asakura vs. City of Seattle,
210 P. 30 (Washington, 1922), the business of pawn brooking was
considered as having tendencies injuring public interest, and limiting
it to citizens is within the scope of police power. A similar statute
denying aliens the right to engage in auctioneering was also sustained
in Wright vs. May, L.R.A., 1915 P. 151 (Minnesota, 1914). So also in
Anton vs. Van Winkle, 297 F. 340 (Oregon, 1924), the court said that
aliens are judicially known to have different interests, knowledge,
attitude, psychology and loyalty, hence the prohibitions of issuance of
licenses to them for the business of pawnbroker, pool, billiard, card
room, dance hall, is not an infringement of constitutional rights. In
Templar vs. Michigan State Board of Examiners, 90 N.W. 1058
(Michigan, 1902), a law prohibiting the licensing of aliens as barbers
was held void, but the reason for the decision was the court's findings
that the exercise of the business by the aliens does not in any way
affect the morals, the health, or even the convenience of the
community. In Takahashi vs. Fish and Game Commission, 92 L. ed.
1479 (1947), a California statute banning the issuance of commercial
fishing licenses to person ineligible to citizenship was held void,
because the law conflicts with Federal power over immigration, and
because there is no public interest in the mere claim of ownership of
the waters and the fish in them, so there was no adequate
justification for the discrimination. It further added that the law was
the outgrowth of antagonism toward the persons of Japanese
ancestry. However, two Justices dissented on the theory that fishing
rights have been treated traditionally as natural resources. In Fraser
vs. McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a state
law which imposed a tax on every employer of foreign-born
unnaturalized male persons over 21 years of age, was declared void
because the court found that there was no reason for the
classification and the tax was an arbitrary deduction from the daily
wage of an employee.

d. Authorities contra explained.

It is true that some decisions of the Federal court and of the State
courts in the United States hold that the distinction between aliens
and citizens is not a valid ground for classification. But in this decision
the laws declared invalid were found to be either arbitrary,
unreasonable or capricious, or were the result or product of racial
antagonism and hostility, and there was no question of public interest
involved or pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059
(1925), the United States Supreme Court declared invalid a Philippine
law making unlawful the keeping of books of account in any language
other than English, Spanish or any other local dialect, but the main
reasons for the decisions are: (1) that if Chinese were driven out of
business there would be no other system of distribution, and (2) that
the Chinese would fall prey to all kinds of fraud, because they would
be deprived of their right to be advised of their business and to direct
its conduct. The real reason for the decision, therefore, is the court's
belief that no public benefit would be derived from the operations of
the law and on the other hand it would deprive Chinese of something
indispensable for carrying on their business. In Yick Wo vs. Hopkins,
30 L. ed 220 (1885) an ordinance conferring powers on officials to
withhold consent in the operation of laundries both as to persons and
place, was declared invalid, but the court said that the power granted
was arbitrary, that there was no reason for the discrimination which
attended the administration and implementation of the law, and that
the motive thereof was mere racial hostility. In State vs. Montgomery,
47 A. 165 (Maine, 1900), a law prohibiting aliens to engage as hawkers
and peddlers was declared void, because the discrimination bore no
reasonable and just relation to the act in respect to which the
classification was proposed.

The case at bar is radically different, and the facts make them so. As
we already have said, aliens do not naturally possess the sympathetic
consideration and regard for the customers with whom they come in
daily contact, nor the patriotic desire to help bolster the nation's
economy, except in so far as it enhances their profit, nor the loyalty
and allegiance which the national owes to the land. These limitations
on the qualifications of the aliens have been shown on many
occasions and instances, especially in times of crisis and emergency.
We can do no better than borrow the language of Anton vs. Van
Winkle, 297 F. 340, 342, to drive home the reality and significance of
the distinction between the alien and the national, thus:

. . . . It may be judicially known, however, that alien coming into this
country are without the intimate knowledge of our laws, customs,
and usages that our own people have. So it is likewise known that
certain classes of aliens are of different psychology from our fellow
countrymen. Furthermore, it is natural and reasonable to suppose
that the foreign born, whose allegiance is first to their own country,
and whose ideals of governmental environment and control have
been engendered and formed under entirely different regimes and
political systems, have not the same inspiration for the public weal,
nor are they as well disposed toward the United States, as those who
by citizenship, are a part of the government itself. Further
enlargement, is unnecessary. I have said enough so that obviously it
cannot be affirmed with absolute confidence that the Legislature was
without plausible reason for making the classification, and therefore
appropriate discriminations against aliens as it relates to the subject
of legislation. . . . .

VII. The Due Process of Law Limitation.

a. Reasonability, the test of the limitation; determination by
legislature decisive.

We now come to due process as a limitation on the exercise of the
police power. It has been stated by the highest authority in the United
States that:

. . . . And the guaranty of due process, as has often been held,
demands only that the law shall not be unreasonable, arbitrary or
capricious, and that the means selected shall have a real and
substantial relation to the subject sought to be attained. . . . .

x x x x x x x x x

So far as the requirement of due process is concerned and in the
absence of other constitutional restriction a state is free to adopt
whatever economic policy may reasonably be deemed to promote
public welfare, and to enforce that policy by legislation adapted to its
purpose. The courts are without authority either to declare such
policy, or, when it is declared by the legislature, to override it. If the
laws passed are seen to have a reasonable relation to a proper
legislative purpose, and are neither arbitrary nor discriminatory, the
requirements of due process are satisfied, and judicial determination
to that effect renders a court functus officio. . . . (Nebbia vs. New
York, 78 L. ed. 940, 950, 957.)

Another authority states the principle thus:

. . . . Too much significance cannot be given to the word
"reasonable" in considering the scope of the police power in a
constitutional sense, for the test used to determine the
constitutionality of the means employed by the legislature is to
inquire whether the restriction it imposes on rights secured to
individuals by the Bill of Rights are unreasonable, and not whether it
imposes any restrictions on such rights. . . .

x x x x x x x x x

. . . . A statute to be within this power must also be reasonable in its
operation upon the persons whom it affects, must not be for the
annoyance of a particular class, and must not be unduly oppressive.
(11 Am. Jur. Sec. 302., 1:1)- 1074-1075.)

In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held:

. . . . To justify the state in thus interposing its authority in behalf of
the public, it must appear, first, that the interests of the public
generally, as distinguished from those of a particular class, require
such interference; and second, that the means are reasonably
necessary for the accomplishment of the purpose, and not unduly
oppressive upon individuals. . . .

Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389,
395, fixes this test of constitutionality:

In determining whether a given act of the Legislature, passed in the
exercise of the police power to regulate the operation of a business, is
or is not constitutional, one of the first questions to be considered by
the court is whether the power as exercised has a sufficient
foundation in reason in connection with the matter involved, or is an
arbitrary, oppressive, and capricious use of that power, without
substantial relation to the health, safety, morals, comfort, and general
welfare of the public.

b. Petitioner's argument considered.

Petitioner's main argument is that retail is a common, ordinary
occupation, one of those privileges long ago recognized as essential to
the orderly pursuant of happiness by free men; that it is a gainful and
honest occupation and therefore beyond the power of the legislature
to prohibit and penalized. This arguments overlooks fact and reality
and rests on an incorrect assumption and premise, i.e., that in this
country where the occupation is engaged in by petitioner, it has been
so engaged by him, by the alien in an honest creditable and
unimpeachable manner, without harm or injury to the citizens and
without ultimate danger to their economic peace, tranquility and
welfare. But the Legislature has found, as we have also found and
indicated, that the privilege has been so grossly abused by the alien,
thru the illegitimate use of pernicious designs and practices, that he
now enjoys a monopolistic control of the occupation and threatens a
deadly stranglehold on the nation's economy endangering the
national security in times of crisis and emergency.

The real question at issue, therefore, is not that posed by
petitioner, which overlooks and ignores the facts and circumstances,
but this, Is the exclusion in the future of aliens from the retail trade
unreasonable. Arbitrary capricious, taking into account the
illegitimate and pernicious form and manner in which the aliens have
heretofore engaged therein? As thus correctly stated the answer is
clear. The law in question is deemed absolutely necessary to bring
about the desired legislative objective, i.e., to free national economy
from alien control and dominance. It is not necessarily unreasonable
because it affects private rights and privileges (11 Am. Jur. pp. 1080-
1081.) The test of reasonableness of a law is the appropriateness or
adequacy under all circumstances of the means adopted to carry out
its purpose into effect (Id.) Judged by this test, disputed legislation,
which is not merely reasonable but actually necessary, must be
considered not to have infringed the constitutional limitation of
reasonableness.

The necessity of the law in question is explained in the explanatory
note that accompanied the bill, which later was enacted into law:

This bill proposes to regulate the retail business. Its purpose is to
prevent persons who are not citizens of the Philippines from having a
strangle hold upon our economic life. If the persons who control this
vital artery of our economic life are the ones who owe no allegiance
to this Republic, who have no profound devotion to our free
institutions, and who have no permanent stake in our people's
welfare, we are not really the masters of our destiny. All aspects of
our life, even our national security, will be at the mercy of other
people.

In seeking to accomplish the foregoing purpose, we do not propose
to deprive persons who are not citizens of the Philippines of their
means of livelihood. While this bill seeks to take away from the hands
of persons who are not citizens of the Philippines a power that can be
wielded to paralyze all aspects of our national life and endanger our
national security it respects existing rights.

The approval of this bill is necessary for our national survival.

If political independence is a legitimate aspiration of a people, then
economic independence is none the less legitimate. Freedom and
liberty are not real and positive if the people are subject to the
economic control and domination of others, especially if not of their
own race or country. The removal and eradication of the shackles of
foreign economic control and domination, is one of the noblest
motives that a national legislature may pursue. It is impossible to
conceive that legislation that seeks to bring it about can infringe the
constitutional limitation of due process. The attainment of a
legitimate aspiration of a people can never be beyond the limits of
legislative authority.

c. Law expressly held by Constitutional Convention to be within the
sphere of legislative action.

The framers of the Constitution could not have intended to impose
the constitutional restrictions of due process on the attainment of
such a noble motive as freedom from economic control and
domination, thru the exercise of the police power. The fathers of the
Constitution must have given to the legislature full authority and
power to enact legislation that would promote the supreme
happiness of the people, their freedom and liberty. On the precise
issue now before us, they expressly made their voice clear; they
adopted a resolution expressing their belief that the legislation in
question is within the scope of the legislative power. Thus they
declared the their Resolution:

That it is the sense of the Convention that the public interest
requires the nationalization of retail trade; but it abstain from
approving the amendment introduced by the Delegate for Manila, Mr.
Araneta, and others on this matter because it is convinced that the
National Assembly is authorized to promulgate a law which limits to
Filipino and American citizens the privilege to engage in the retail
trade. (11 Aruego, The Framing of the Philippine Constitution, quoted
on pages 66 and 67 of the Memorandum for the Petitioner.)

It would do well to refer to the nationalistic tendency manifested in
various provisions of the Constitution. Thus in the preamble, a
principle objective is the conservation of the patrimony of the nation
and as corollary the provision limiting to citizens of the Philippines the
exploitation, development and utilization of its natural resources. And
in Section 8 of Article XIV, it is provided that "no franchise, certificate,
or any other form of authorization for the operation of the public
utility shall be granted except to citizens of the Philippines." The
nationalization of the retail trade is only a continuance of the
nationalistic protective policy laid down as a primary objective of the
Constitution. Can it be said that a law imbued with the same purpose
and spirit underlying many of the provisions of the Constitution is
unreasonable, invalid and unconstitutional?

The seriousness of the Legislature's concern for the plight of the
nationals as manifested in the approval of the radical measures is,
therefore, fully justified. It would have been recreant to its duties
towards the country and its people would it view the sorry plight of
the nationals with the complacency and refuse or neglect to adopt a
remedy commensurate with the demands of public interest and
national survival. As the repository of the sovereign power of
legislation, the Legislature was in duty bound to face the problem and
meet, through adequate measures, the danger and threat that alien
domination of retail trade poses to national economy.

d. Provisions of law not unreasonable.

A cursory study of the provisions of the law immediately reveals
how tolerant, how reasonable the Legislature has been. The law is
made prospective and recognizes the right and privilege of those
already engaged in the occupation to continue therein during the rest
of their lives; and similar recognition of the right to continue is
accorded associations of aliens. The right or privilege is denied to
those only upon conviction of certain offenses. In the deliberations of
the Court on this case, attention was called to the fact that the
privilege should not have been denied to children and heirs of aliens
now engaged in the retail trade. Such provision would defeat the law
itself, its aims and purposes. Beside, the exercise of legislative
discretion is not subject to judicial review. It is well settled that the
Court will not inquire into the motives of the Legislature, nor pass
upon general matters of legislative judgment. The Legislature is
primarily the judge of the necessity of an enactment or of any of its
provisions, and every presumption is in favor of its validity, and
though the Court may hold views inconsistent with the wisdom of the
law, it may not annul the legislation if not palpably in excess of the
legislative power. Furthermore, the test of the validity of a law
attacked as a violation of due process, is not its reasonableness, but
its unreasonableness, and we find the provisions are not
unreasonable. These principles also answer various other arguments
raised against the law, some of which are: that the law does not
promote general welfare; that thousands of aliens would be thrown
out of employment; that prices will increase because of the
elimination of competition; that there is no need for the legislation;
that adequate replacement is problematical; that there may be
general breakdown; that there would be repercussions from
foreigners; etc. Many of these arguments are directed against the
supposed wisdom of the law which lies solely within the legislative
prerogative; they do not import invalidity.

VIII. Alleged defect in the title of the law

A subordinate ground or reason for the alleged invalidity of the law
is the claim that the title thereof is misleading or deceptive, as it
conceals the real purpose of the bill which is to nationalize the retail
business and prohibit aliens from engaging therein. The constitutional
provision which is claimed to be violated in Section 21 (1) of Article VI,
which reads:

No bill which may be enacted in the law shall embrace more than
one subject which shall be expressed in the title of the bill.

What the above provision prohibits is duplicity, that is, if its title
completely fails to appraise the legislators or the public of the nature,
scope and consequences of the law or its operation (I Sutherland,
Statutory Construction, Sec. 1707, p. 297.) A cursory consideration of
the title and the provisions of the bill fails to show the presence of
duplicity. It is true that the term "regulate" does not and may not
readily and at first glance convey the idea of "nationalization" and
"prohibition", which terms express the two main purposes and
objectives of the law. But "regulate" is a broader term than either
prohibition or nationalization. Both of these have always been
included within the term regulation.

Under the title of an act to "regulate", the sale of intoxicating
liquors, the Legislature may prohibit the sale of intoxicating liquors.
(Sweet vs. City of Wabash, 41 Ind., 7; quoted in page 41 of Answer.)

Within the meaning of the Constitution requiring that the subject of
every act of the Legislature shall be stated in the tale, the title to
regulate the sale of intoxicating liquors, etc." sufficiently expresses
the subject of an act prohibiting the sale of such liquors to minors and
to persons in the habit of getting intoxicated; such matters being
properly included within the subject of regulating the sale. (Williams
vs. State, 48 Ind. 306, 308, quoted in p. 42 of Answer.)

The word "regulate" is of broad import, and necessarily implies
some degree of restraint and prohibition of acts usually done in
connection with the thing to be regulated. While word regulate does
not ordinarily convey meaning of prohibit, there is no absolute reason
why it should not have such meaning when used in delegating police
power in connection with a thing the best or only efficacious
regulation of which involves suppression. (State vs. Morton, 162 So.
718, 182 La. 887, quoted in p. 42 of Answer.)

The general rule is for the use of general terms in the title of a bill; it
has also been said that the title need not be an index to the entire
contents of the law (I Sutherland, Statutory Construction, See. 4803,
p. 345.) The above rule was followed the title of the Act in question
adopted the more general term "regulate" instead of "nationalize" or
"prohibit". Furthermore, the law also contains other rules for the
regulation of the retail trade which may not be included in the terms
"nationalization" or "prohibition"; so were the title changed from
"regulate" to "nationalize" or "prohibit", there would have been
many provisions not falling within the scope of the title which would
have made the Act invalid. The use of the term "regulate", therefore,
is in accord with the principle governing the drafting of statutes,
under which a simple or general term should be adopted in the title,
which would include all other provisions found in the body of the Act.

One purpose of the constitutional directive that the subject of a bill
should be embraced in its title is to apprise the legislators of the
purposes, the nature and scope of its provisions, and prevent the
enactment into law of matters which have received the notice, action
and study of the legislators or of the public. In the case at bar it
cannot be claimed that the legislators have been appraised of the
nature of the law, especially the nationalization and the prohibition
provisions. The legislators took active interest in the discussion of the
law, and a great many of the persons affected by the prohibitions in
the law conducted a campaign against its approval. It cannot be
claimed, therefore, that the reasons for declaring the law invalid ever
existed. The objection must therefore, be overruled.

IX. Alleged violation of international treaties and obligations

Another subordinate argument against the validity of the law is the
supposed violation thereby of the Charter of the United Nations and
of the Declaration of the Human Rights adopted by the United
Nations General Assembly. We find no merit in the Nations Charter
imposes no strict or legal obligations regarding the rights and freedom
of their subjects (Hans Kelsen, The Law of the United Nations, 1951
ed. pp. 29-32), and the Declaration of Human Rights contains nothing
more than a mere recommendation or a common standard of
achievement for all peoples and all nations (Id. p. 39.) That such is the
import of the United Nations Charter aid of the Declaration of Human
Rights can be inferred the fact that members of the United Nations
Organizations, such as Norway and Denmark, prohibit foreigners from
engaging in retail trade, and in most nations of the world laws against
foreigners engaged in domestic trade are adopted.

The Treaty of Amity between the Republic of the Philippines and
the Republic of China of April 18, 1947 is also claimed to be violated
by the law in question. All that the treaty guarantees is equality of
treatment to the Chinese nationals "upon the same terms as the
nationals of any other country." But the nationals of China are not
discriminating against because nationals of all other countries, except
those of the United States, who are granted special rights by the
Constitution, are all prohibited from engaging in the retail trade. But
even supposing that the law infringes upon the said treaty, the treaty
is always subject to qualification or amendment by a subsequent law
(U. S. vs. Thompson, 258, Fed. 257, 260), and the same may never
curtail or restrict the scope of the police power of the State (plaston
vs. Pennsylvania, 58 L. ed. 539.)

X. Conclusion

Resuming what we have set forth above we hold that the disputed
law was enacted to remedy a real actual threat and danger to national
economy posed by alien dominance and control of the retail business
and free citizens and country from dominance and control; that the
enactment clearly falls within the scope of the police power of the
State, thru which and by which it protects its own personality and
insures its security and future; that the law does not violate the equal
protection clause of the Constitution because sufficient grounds exist
for the distinction between alien and citizen in the exercise of the
occupation regulated, nor the due process of law clause, because the
law is prospective in operation and recognizes the privilege of aliens
already engaged in the occupation and reasonably protects their
privilege; that the wisdom and efficacy of the law to carry out its
objectives appear to us to be plainly evident as a matter of fact it
seems not only appropriate but actually necessary and that in any
case such matter falls within the prerogative of the Legislature, with
whose power and discretion the Judicial department of the
Government may not interfere; that the provisions of the law are
clearly embraced in the title, and this suffers from no duplicity and
has not misled the legislators or the segment of the population
affected; and that it cannot be said to be void for supposed conflict
with treaty obligations because no treaty has actually been entered
into on the subject and the police power may not be curtailed or
surrendered by any treaty or any other conventional agreement.

Some members of the Court are of the opinion that the radical
effects of the law could have been made less harsh in its impact on
the aliens. Thus it is stated that the more time should have been given
in the law for the liquidation of existing businesses when the time
comes for them to close. Our legal duty, however, is merely to
determine if the law falls within the scope of legislative authority and
does not transcend the limitations of due process and equal
protection guaranteed in the Constitution. Remedies against the
harshness of the law should be addressed to the Legislature; they are
beyond our power and jurisdiction.

The petition is hereby denied, with costs against petitioner.


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 89572 December 21, 1989

DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS) and
DIRECTOR OF CENTER FOR EDUCATIONAL MEASUREMENT,
petitioners,
vs.
ROBERTO REY C. SAN DIEGO and JUDGE TERESITA DIZON-
CAPULONG, in her capacity as Presiding Judge of the Regional Trial
Court of Valenzuela, Metro Manila, Branch 172, respondents.

Ramon M. Guevara for private respondent.



CRUZ, J.:

The issue before us is mediocrity. The question is whether a person
who has thrice failed the National Medical Admission Test (NMAT) is
entitled to take it again.

The petitioner contends he may not, under its rule that-

h) A student shall be allowed only three (3) chances to take the
NMAT. After three (3) successive failures, a student shall not be
allowed to take the NMAT for the fourth time.

The private respondent insists he can, on constitutional grounds.

But first the facts.

The private respondent is a graduate of the University of the East
with a degree of Bachelor of Science in Zoology. The petitioner claims
that he took the NMAT three times and flunked it as many times. 1
When he applied to take it again, the petitioner rejected his
application on the basis of the aforesaid rule. He then went to the
Regional Trial Court of Valenzuela, Metro Manila, to compel his
admission to the test.

In his original petition for mandamus, he first invoked his
constitutional rights to academic freedom and quality education. By
agreement of the parties, the private respondent was allowed to take
the NMAT scheduled on April 16, 1989, subject to the outcome of his
petition. 2 In an amended petition filed with leave of court, he
squarely challenged the constitutionality of MECS Order No. 12, Series
of 1972, containing the above-cited rule. The additional grounds
raised were due process and equal protection.

After hearing, the respondent judge rendered a decision on July 4,
1989, declaring the challenged order invalid and granting the petition.
Judge Teresita Dizon-Capulong held that the petitioner had been
deprived of his right to pursue a medical education through an
arbitrary exercise of the police power. 3

We cannot sustain the respondent judge. Her decision must be
reversed.

In Tablarin v. Gutierrez, 4 this Court upheld the constitutionality of
the NMAT as a measure intended to limit the admission to medical
schools only to those who have initially proved their competence and
preparation for a medical education. Justice Florentino P. Feliciano
declared for a unanimous Court:

Perhaps the only issue that needs some consideration is whether
there is some reasonable relation between the prescribing of passing
the NMAT as a condition for admission to medical school on the one
hand, and the securing of the health and safety of the general
community, on the other hand. This question is perhaps most usefully
approached by recalling that the regulation of the pratice of medicine
in all its branches has long been recognized as a reasonable method of
protecting the health and safety of the public. That the power to
regulate and control the practice of medicine includes the power to
regulate admission to the ranks of those authorized to practice
medicine, is also well recognized. Thus, legislation and administrative
regulations requiring those who wish to practice medicine first to take
and pass medical board examinations have long ago been recognized
as valid exercises of governmental power. Similarly, the establishment
of minimum medical educational requirements-i.e., the completion of
prescribed courses in a recognized medical school-for admission to
the medical profession, has also been sustained as a legitimate
exercise of the regulatory authority of the state. What we have before
us in the instant case is closely related: the regulation of access to
medical schools. MECS Order No. 52, s. 1985, as noted earlier,
articulates the rationale of regulation of this type: the improvement
of the professional and technical quality of the graduates of medical
schools, by upgrading the quality of those admitted to the student
body of the medical schools. That upgrading is sought by selectivity in
the process of admission, selectivity consisting, among other things,
of limiting admission to those who exhibit in the required degree the
aptitude for medical studies and eventually for medical practice. The
need to maintain, and the difficulties of maintaining, high standards
in our professional schools in general, and medical schools in
particular, in the current state of our social and economic
development, are widely known.

We believe that the government is entitled to prescribe an
admission test like the NMAT as a means of achieving its stated
objective of "upgrading the selection of applicants into [our] medical
schools" and of "improv[ing] the quality of medical education in the
country." Given the widespread use today of such admission tests in,
for instance, medical schools in the United States of America (the
Medical College Admission Test [MCAT] and quite probably, in other
countries with far more developed educational resources than our
own, and taking into account the failure or inability of the petitioners
to even attempt to prove otherwise, we are entitled to hold that the
NMAT is reasonably related to the securing of the ultimate end of
legislation and regulation in this area. That end, it is useful to recall, is
the protection of the public from the potentially deadly effects of
incompetence and ignorance in those who would undertake to treat
our bodies and minds for disease or trauma.

However, the respondent judge agreed with the petitioner that the
said case was not applicable. Her reason was that it upheld only the
requirement for the admission test and said nothing about the so-
called "three-flunk rule."

We see no reason why the rationale in the Tablarin case cannot
apply to the case at bar. The issue raised in both cases is the academic
preparation of the applicant. This may be gauged at least initially by
the admission test and, indeed with more reliability, by the three-
flunk rule. The latter cannot be regarded any less valid than the
former in the regulation of the medical profession.

There is no need to redefine here the police power of the State.
Suffice it to repeat that the power is validly exercised if (a) the
interests of the public generally, as distinguished from those of a
particular class, require the interference of the State, and (b) the
means employed are reasonably necessary to the attainment of the
object sought to be accomplished and not unduly oppressive upon
individuals. 5

In other words, the proper exercise of the police power requires the
concurrence of a lawful subject and a lawful method.

The subject of the challenged regulation is certainly within the
ambit of the police power. It is the right and indeed the responsibility
of the State to insure that the medical profession is not infiltrated by
incompetents to whom patients may unwarily entrust their lives and
health.

The method employed by the challenged regulation is not irrelevant
to the purpose of the law nor is it arbitrary or oppressive. The three-
flunk rule is intended to insulate the medical schools and ultimately
the medical profession from the intrusion of those not qualified to be
doctors.

While every person is entitled to aspire to be a doctor, he does not
have a constitutional right to be a doctor. This is true of any other
calling in which the public interest is involved; and the closer the link,
the longer the bridge to one's ambition. The State has the
responsibility to harness its human resources and to see to it that
they are not dissipated or, no less worse, not used at all. These
resources must be applied in a manner that will best promote the
common good while also giving the individual a sense of satisfaction.

A person cannot insist on being a physician if he will be a menace to
his patients. If one who wants to be a lawyer may prove better as a
plumber, he should be so advised and adviced. Of course, he may not
be forced to be a plumber, but on the other hand he may not force his
entry into the bar. By the same token, a student who has
demonstrated promise as a pianist cannot be shunted aside to take a
course in nursing, however appropriate this career may be for others.

The right to quality education invoked by the private respondent is
not absolute. The Constitution also provides that "every citizen has
the right to choose a profession or course of study, subject to fair,
reasonable and equitable admission and academic requirements. 6

The private respondent must yield to the challenged rule and give
way to those better prepared. Where even those who have qualified
may still not be accommodated in our already crowded medical
schools, there is all the more reason to bar those who, like him, have
been tested and found wanting.

The contention that the challenged rule violates the equal
protection clause is not well-taken. A law does not have to operate
with equal force on all persons or things to be conformable to Article
III, Section 1 of the Constitution.

There can be no question that a substantial distinction exists
between medical students and other students who are not subjected
to the NMAT and the three-flunk rule. The medical profession directly
affects the very lives of the people, unlike other careers which, for
this reason, do not require more vigilant regulation. The accountant,
for example, while belonging to an equally respectable profession,
does not hold the same delicate responsibility as that of the physician
and so need not be similarly treated.

There would be unequal protection if some applicants who have
passed the tests are admitted and others who have also qualified are
denied entrance. In other words, what the equal protection requires
is equality among equals.

The Court feels that it is not enough to simply invoke the right to
quality education as a guarantee of the Constitution: one must show
that he is entitled to it because of his preparation and promise. The
private respondent has failed the NMAT five times. 7 While his
persistence is noteworthy, to say the least, it is certainly misplaced,
like a hopeless love.

No depreciation is intended or made against the private
respondent. It is stressed that a person who does not qualify in the
NMAT is not an absolute incompetent unfit for any work or
occupation. The only inference is that he is a probably better, not for
the medical profession, but for another calling that has not excited his
interest.

In the former, he may be a bungler or at least lackluster; in the
latter, he is more likely to succeed and may even be outstanding. It is
for the appropriate calling that he is entitled to quality education for
the full harnessing of his potentials and the sharpening of his latent
talents toward what may even be a brilliant future.

We cannot have a society of square pegs in round holes, of dentists
who should never have left the farm and engineers who should have
studied banking and teachers who could be better as merchants.

It is time indeed that the State took decisive steps to regulate and
enrich our system of education by directing the student to the course
for which he is best suited as determined by initial tests and
evaluations. Otherwise, we may be "swamped with mediocrity," in
the words of Justice Holmes, not because we are lacking in
intelligence but because we are a nation of misfits.

WHEREFORE, the petition is GRANTED. The decision of the
respondent court dated January 13, 1989, is REVERSED, with costs
against the private respondent. It is so ordered.

Fernan, C.J., Narvasa Melencio-Herrera, Gutierrez, Jr., Paras,
Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino,
Medialdea and Regalado, JJ., concur.



Footnotes

1 A check with the Department of Education showed that the
private respondent had actually taken and flunked four tests already
and was applying to take a fifth examination. 2 He also failed this fifth
test.

2 Rollo, pp. 26-34.

3 152 SCRA 730.

4 US vs. Toribio, 15 Phil. 85; Fabie v. City of Manila, 21 Phil. 486;
Ynot v. Intermediate Appellate Court, 148 SCRA 659.

5 Article XIV, Section 5(3).

6 Footnote Nos. 1 & 2.

The Lawphil Project - Arellano Law Foundation





EN BANC



CARLOS SUPERDRUG CORP., G.R. No. 166494

doing business under the name

and style Carlos Superdrug, Present:

ELSIE M. CANO, doing business

under the name and style Advance PUNO, C.J.,

Drug, Dr. SIMPLICIO L. YAP, JR., QUISUMBING,*

doing business under the name and YNARES-SANTIAGO,

style City Pharmacy, MELVIN S. SANDOVAL-
GUTIERREZ,**

DELA SERNA, doing business under CARPIO,

the name and style Botica dela Serna, AUSTRIA-MARTINEZ,

and LEYTE SERV-WELL CORP., CORONA,

doing business under the name and CARPIO MORALES,

style Leyte Serv-Well Drugstore, AZCUNA,

Petitioners, TINGA,

CHICO-NAZARIO,

- versus - GARCIA,

VELASCO, JR., and

DEPARTMENT OF SOCIAL NACHURA, JJ.

WELFARE and DEVELOPMENT

(DSWD), DEPARTMENT OF Promulgated:

HEALTH (DOH), DEPARTMENT

OF FINANCE (DOF), DEPARTMENT June 29, 2007

OF JUSTICE (DOJ), and

DEPARTMENT OF INTERIOR and

LOCAL GOVERNMENT (DILG),

Respondents.

x ---------------------------------------------------------------------------------------- x



DECISION





AZCUNA, J.:



This is a petition[1] 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 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 10[7] and 11[8] 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 taxpayers
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

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
177[12] 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.



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 law[15] 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 takers gain but the owners 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]



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
P1.00 senior citizen discount that petitioners would give, P0.68 will be
shouldered by them as only P0.32 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 P37.57 per
tablet, and retails it at P39.60 (or at a margin of 5%). If it grants a 20%
discount to senior citizens or an amount equivalent to P7.92, then it
would have to sell Norvasc at P31.68 which translates to a loss from
capital of P5.89 per tablet. Even if the government will allow a tax
deduction, only P2.53 per tablet will be refunded and not the full
amount of the discount which is P7.92. In short, only 32% of the 20%
discount will be reimbursed to the drugstores.[28]



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.






FIRST DIVISION

[G.R. No. 135962. March 27, 2000]

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, vs.
BEL-AIR VILLAGE ASSOCIATION, INC., respondent.

D E C I S I O N

PUNO, J.:

Not infrequently, the government is tempted to take legal shortcuts
to solve urgent problems of the people. But even when government is
armed with the best of intention, we cannot allow it to run roughshod
over the rule of law. Again, we let the hammer fall and fall hard on
the illegal attempt of the MMDA to open for public use a private road
in a private subdivision. While we hold that the general welfare
should be promoted, we stress that it should not be achieved at the
expense of the rule of law. h Y


Petitioner MMDA is a government agency tasked with the delivery of
basic services in Metro Manila. Respondent Bel-Air Village
Association, Inc. (BAVA) is a non-stock, non-profit corporation whose
members are homeowners in Bel-Air Village, a private subdivision in
Makati City. Respondent BAVA is the registered owner of Neptune
Street, a road inside Bel-Air Village.

On December 30, 1995, respondent received from petitioner, through
its Chairman, a notice dated December 22, 1995 requesting
respondent to open Neptune Street to public vehicular traffic starting
January 2, 1996. The notice reads: Court

"SUBJECT: NOTICE of the Opening of Neptune Street to Traffic

"Dear President Lindo,

"Please be informed that pursuant to the mandate of the MMDA law
or Republic Act No. 7924 which requires the Authority to rationalize
the use of roads and/or thoroughfares for the safe and convenient
movement of persons, Neptune Street shall be opened to vehicular
traffic effective January 2, 1996.

"In view whereof, the undersigned requests you to voluntarily open
the points of entry and exit on said street.

"Thank you for your cooperation and whatever assistance that may
be extended by your association to the MMDA personnel who will be
directing traffic in the area.

"Finally, we are furnishing you with a copy of the handwritten
instruction of the President on the matter.

"Very truly yours,

PROSPERO I. ORETA

Chairman"[1]

On the same day, respondent was apprised that the perimeter wall
separating the subdivision from the adjacent Kalayaan Avenue would
be demolished. Sppedsc

On January 2, 1996, respondent instituted against petitioner before
the Regional Trial Court, Branch 136, Makati City, Civil Case No. 96-
001 for injunction. Respondent prayed for the issuance of a temporary
restraining order and preliminary injunction enjoining the opening of
Neptune Street and prohibiting the demolition of the perimeter wall.
The trial court issued a temporary restraining order the following day.

On January 23, 1996, after due hearing, the trial court denied issuance
of a preliminary injunction.[2] Respondent questioned the denial
before the Court of Appeals in CA-G.R. SP No. 39549. The appellate
court conducted an ocular inspection of Neptune Street[3] and on
February 13, 1996, it issued a writ of preliminary injunction enjoining
the implementation of the MMDAs proposed action.*4+

On January 28, 1997, the appellate court rendered a Decision on the
merits of the case finding that the MMDA has no authority to order
the opening of Neptune Street, a private subdivision road and cause
the demolition of its perimeter walls. It held that the authority is
lodged in the City Council of Makati by ordinance. The decision
disposed of as follows: Jurissc

"WHEREFORE, the Petition is GRANTED; the challenged Order dated
January 23, 1995, in Civil Case No. 96-001, is SET ASIDE and the Writ of
Preliminary Injunction issued on February 13, 1996 is hereby made
permanent.

"For want of sustainable substantiation, the Motion to Cite Roberto L.
del Rosario in contempt is denied.[5]

"No pronouncement as to costs.

"SO ORDERED."[6]

The Motion for Reconsideration of the decision was denied on
September 28, 1998. Hence, this recourse. Jksm

Petitioner MMDA raises the following questions:

"I

HAS THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY
(MMDA) THE MANDATE TO OPEN NEPTUNE STREET TO PUBLIC
TRAFFIC PURSUANT TO ITS REGULATORY AND POLICE POWERS?

II

IS THE PASSAGE OF AN ORDINANCE A CONDITION PRECEDENT BEFORE
THE MMDA MAY ORDER THE OPENING OF SUBDIVISION ROADS TO
PUBLIC TRAFFIC?

III

IS RESPONDENT BEL-AIR VILLAGE ASSOCIATION, INC. ESTOPPED FROM
DENYING OR ASSAILING THE AUTHORITY OF THE MMDA TO OPEN THE
SUBJECT STREET? Jlexj

V

WAS RESPONDENT DEPRIVED OF DUE PROCESS DESPITE THE SEVERAL
MEETINGS HELD BETWEEN MMDA AND THE AFFECTED BEL-AIR
RESIDENTS AND BAVA OFFICERS?

V

HAS RESPONDENT COME TO COURT WITH UNCLEAN HANDS?"[7]

Neptune Street is owned by respondent BAVA. It is a private road
inside Bel-Air Village, a private residential subdivision in the heart of
the financial and commercial district of Makati City. It runs parallel to
Kalayaan Avenue, a national road open to the general public. Dividing
the two (2) streets is a concrete perimeter wall approximately fifteen
(15) feet high. The western end of Neptune Street intersects Nicanor
Garcia, formerly Reposo Street, a subdivision road open to public
vehicular traffic, while its eastern end intersects Makati Avenue, a
national road. Both ends of Neptune Street are guarded by iron gates.
Edp mis

Petitioner MMDA claims that it has the authority to open Neptune
Street to public traffic because it is an agent of the state endowed
with police power in the delivery of basic services in Metro Manila.
One of these basic services is traffic management which involves the
regulation of the use of thoroughfares to insure the safety,
convenience and welfare of the general public. It is alleged that the
police power of MMDA was affirmed by this Court in the consolidated
cases of Sangalang v. Intermediate Appellate Court.[8] From the
premise that it has police power, it is now urged that there is no need
for the City of Makati to enact an ordinance opening Neptune street
to the public.[9]

Police power is an inherent attribute of sovereignty. It has been
defined as the power vested by the Constitution in the legislature 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 for the subjects of the
same.[10] The power is plenary and its scope is vast and pervasive,
reaching and justifying measures for public health, public safety,
public morals, and the general welfare.[11]

It bears stressing that police power is lodged primarily in the National
Legislature.[12] It cannot be exercised by any group or body of
individuals not possessing legislative power.[13] The National
Legislature, however, may delegate this power to the President and
administrative boards as well as the lawmaking bodies of municipal
corporations or local government units.[14] Once delegated, the
agents can exercise only such legislative powers as are conferred on
them by the national lawmaking body.[15]

A local government is a "political subdivision of a nation or state
which is constituted by law and has substantial control of local
affairs."[16] The Local Government Code of 1991 defines a local
government unit as a "body politic and corporate"[17]-- one endowed
with powers as a political subdivision of the National Government and
as a corporate entity representing the inhabitants of its territory.[18]
Local government units are the provinces, cities, municipalities and
barangays.[19] They are also the territorial and political subdivisions
of the state.[20]

Our Congress delegated police power to the local government units in
the Local Government Code of 1991. This delegation is found in
Section 16 of the same Code, known as the general welfare clause, viz:
Chief

"Sec. 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."[21]

Local government units exercise police power through their respective
legislative bodies. The legislative body of the provincial government is
the sangguniang panlalawigan, that of the city government is the
sangguniang panlungsod, that of the municipal government is the
sangguniang bayan, and that of the barangay is the sangguniang
barangay. The Local Government Code of 1991 empowers the
sangguniang panlalawigan, sangguniang panlungsod and sangguniang
bayan to "enact ordinances, approve resolutions and appropriate
funds for the general welfare of the [province, city or municipality, as
the case may be], 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 x x x."[22] The
same Code gives the sangguniang barangay the power to "enact
ordinances as may be necessary to discharge the responsibilities
conferred upon it by law or ordinance and to promote the general
welfare of the inhabitants thereon."[23]

Metropolitan or Metro Manila is a body composed of several local
government units - i.e., twelve (12) cities and five (5) municipalities,
namely, the cities of Caloocan, Manila, Mandaluyong, Makati, Pasay,
Pasig, Quezon, Muntinlupa, Las Pinas, Marikina, Paranaque and
Valenzuela, and the municipalities of Malabon, , Navotas, , Pateros,
San Juan and Taguig. With the passage of Republic Act (R. A.) No.
7924[24] in 1995, Metropolitan Manila was declared as a "special
development and administrative region" and the Administration of
"metro-wide" basic services affecting the region placed under "a
development authority" referred to as the MMDA.[25]

"Metro-wide services" are those "services which have metro-wide
impact and transcend local political boundaries or entail huge
expenditures such that it would not be viable for said services to be
provided by the individual local government units comprising Metro
Manila."[26] There are seven (7) basic metro-wide services and the
scope of these services cover the following: (1) development
planning; (2) transport and traffic management; (3) solid waste
disposal and management; (4) flood control and sewerage
management; (5) urban renewal, zoning and land use planning, and
shelter services; (6) health and sanitation, urban protection and
pollution control; and (7) public safety. The basic service of transport
and traffic management includes the following: Lexjuris

"(b) Transport and traffic management which include the formulation,
coordination, and monitoring of policies, standards, programs and
projects to rationalize the existing transport operations, infrastructure
requirements, the use of thoroughfares, and promotion of safe and
convenient movement of persons and goods; provision for the mass
transport system and the institution of a system to regulate road
users; administration and implementation of all traffic enforcement
operations, traffic engineering services and traffic education
programs, including the institution of a single ticketing system in
Metropolitan Manila;"[27]

In the delivery of the seven (7) basic services, the MMDA has the
following powers and functions: Esm

"Sec. 5. Functions and powers of the Metro Manila Development
Authority.The MMDA shall:

(a) Formulate, coordinate and regulate the implementation of
medium and long-term plans and programs for the delivery of metro-
wide services, land use and physical development within
Metropolitan Manila, consistent with national development
objectives and priorities;

(b) Prepare, coordinate and regulate the implementation of medium-
term investment programs for metro-wide services which shall
indicate sources and uses of funds for priority programs and projects,
and which shall include the packaging of projects and presentation to
funding institutions; Esmsc

(c) Undertake and manage on its own metro-wide programs and
projects for the delivery of specific services under its jurisdiction,
subject to the approval of the Council. For this purpose, MMDA can
create appropriate project management offices;

(d) Coordinate and monitor the implementation of such plans,
programs and projects in Metro Manila; identify bottlenecks and
adopt solutions to problems of implementation;

(e) The MMDA shall set the policies concerning traffic in Metro
Manila, and shall coordinate and regulate the implementation of all
programs and projects concerning traffic management, specifically
pertaining to enforcement, engineering and education. Upon request,
it shall be extended assistance and cooperation, including but not
limited to, assignment of personnel, by all other government agencies
and offices concerned;

(f) Install and administer a single ticketing system, fix, impose and
collect fines and penalties for all kinds of violations of traffic rules and
regulations, whether moving or non-moving in nature, and confiscate
and suspend or revoke drivers licenses in the enforcement of such
traffic laws and regulations, the provisions of RA 4136 and PD 1605 to
the contrary notwithstanding. For this purpose, the Authority shall
impose all traffic laws and regulations in Metro Manila, through its
traffic operation center, and may deputize members of the PNP,
traffic enforcers of local government units, duly licensed security
guards, or members of non-governmental organizations to whom may
be delegated certain authority, subject to such conditions and
requirements as the Authority may impose; and

(g) Perform other related functions required to achieve the objectives
of the MMDA, including the undertaking of delivery of basic services
to the local government units, when deemed necessary subject to
prior coordination with and consent of the local government unit
concerned." Jurismis

The implementation of the MMDAs plans, programs and projects is
undertaken by the local government units, national government
agencies, accredited peoples organizations, non-governmental
organizations, and the private sector as well as by the MMDA itself.
For this purpose, the MMDA has the power to enter into contracts,
memoranda of agreement and other cooperative arrangements with
these bodies for the delivery of the required services within Metro
Manila.[28]

The governing board of the MMDA is the Metro Manila Council. The
Council is composed of the mayors of the component 12 cities and 5
municipalities, the president of the Metro Manila Vice-Mayors
League and the president of the Metro Manila Councilors League.*29+
The Council is headed by a Chairman who is appointed by the
President and vested with the rank of cabinet member. As the policy-
making body of the MMDA, the Metro Manila Council approves
metro-wide plans, programs and projects, and issues the necessary
rules and regulations for the implementation of said plans; it
approves the annual budget of the MMDA and promulgates the rules
and regulations for the delivery of basic services, collection of service
and regulatory fees, fines and penalties. These functions are
particularly enumerated as follows: LEX

"Sec. 6. Functions of the Metro Manila Council. -

(a) The Council shall be the policy-making body of the MMDA;

(b) It shall approve metro-wide plans, programs and projects and
issue rules and regulations deemed necessary by the MMDA to carry
out the purposes of this Act;

(c) It may increase the rate of allowances and per diems of the
members of the Council to be effective during the term of the
succeeding Council. It shall fix the compensation of the officers and
personnel of the MMDA, and approve the annual budget thereof for
submission to the Department of Budget and Management (DBM);

(d) It shall promulgate rules and regulations and set policies and
standards for metro-wide application governing the delivery of basic
services, prescribe and collect service and regulatory fees, and impose
and collect fines and penalties." Jj sc

Clearly, the scope of the MMDAs function is limited to the delivery of
the seven (7) basic services. One of these is transport and traffic
management which includes the formulation and monitoring of
policies, standards and projects to rationalize the existing transport
operations, infrastructure requirements, the use of thoroughfares and
promotion of the safe movement of persons and goods. It also covers
the mass transport system and the institution of a system of road
regulation, the administration of all traffic enforcement operations,
traffic engineering services and traffic education programs, including
the institution of a single ticketing system in Metro Manila for traffic
violations. Under this service, the MMDA is expressly authorized "to
set the policies concerning traffic" and "coordinate and regulate the
implementation of all traffic management programs." In addition, the
MMDA may "install and administer a single ticketing system," fix,
impose and collect fines and penalties for all traffic violations. Ca-lrsc

It will be noted that the powers of the MMDA are limited to the
following acts: formulation, coordination, regulation,
implementation, preparation, management, monitoring, setting of
policies, installation of a system and administration. There is no
syllable in R. A. No. 7924 that grants the MMDA police power, let
alone legislative power. Even the Metro Manila Council has not been
delegated any legislative power. Unlike the legislative bodies of the
local government units, there is no provision in R. A. No. 7924 that
empowers the MMDA or its Council to "enact ordinances, approve
resolutions and appropriate funds for the general welfare" of the
inhabitants of Metro Manila. The MMDA is, as termed in the charter
itself, a "development authority."[30] It is an agency created for the
purpose of laying down policies and coordinating with the various
national government agencies, peoples organizations, non-
governmental organizations and the private sector for the efficient
and expeditious delivery of basic services in the vast metropolitan
area. All its functions are administrative in nature and these are
actually summed up in the charter itself, viz:

"Sec. 2. Creation of the Metropolitan Manila Development Authority.
-- x x x.

The MMDA shall perform planning, monitoring and coordinative
functions, and in the process exercise regulatory and supervisory
authority over the delivery of metro-wide services within Metro
Manila, without diminution of the autonomy of the local government
units concerning purely local matters."[31]

Petitioner cannot seek refuge in the cases of Sangalang v.
Intermediate Appellate Court[32] where we upheld a zoning
ordinance issued by the Metro Manila Commission (MMC), the
predecessor of the MMDA, as an exercise of police power. The first
Sangalang decision was on the merits of the petition,[33] while the
second decision denied reconsideration of the first case and in
addition discussed the case of Yabut v. Court of Appeals.[34]

Sangalang v. IAC involved five (5) consolidated petitions filed by
respondent BAVA and three residents of Bel-Air Village against other
residents of the Village and the Ayala Corporation, formerly the
Makati Development Corporation, as the developer of the
subdivision. The petitioners sought to enforce certain restrictive
easements in the deeds of sale over their respective lots in the
subdivision. These were the prohibition on the setting up of
commercial and advertising signs on the lots, and the condition that
the lots be used only for residential purposes. Petitioners alleged that
respondents, who were residents along Jupiter Street of the
subdivision, converted their residences into commercial
establishments in violation of the "deed restrictions," and that
respondent Ayala Corporation ushered in the full commercialization"
of Jupiter Street by tearing down the perimeter wall that separated
the commercial from the residential section of the village.[35]

The petitions were dismissed based on Ordinance No. 81 of the
Municipal Council of Makati and Ordinance No. 81-01 of the Metro
Manila Commission (MMC). Municipal Ordinance No. 81 classified
Bel-Air Village as a Class A Residential Zone, with its boundary in the
south extending to the center line of Jupiter Street. The Municipal
Ordinance was adopted by the MMC under the Comprehensive
Zoning Ordinance for the National Capital Region and promulgated as
MMC Ordinance No. 81-01. Bel-Air Village was indicated therein as
bounded by Jupiter Street and the block adjacent thereto was
classified as a High Intensity Commercial Zone.[36]

We ruled that since both Ordinances recognized Jupiter Street as the
boundary between Bel-Air Village and the commercial district, Jupiter
Street was not for the exclusive benefit of Bel-Air residents. We also
held that the perimeter wall on said street was constructed not to
separate the residential from the commercial blocks but simply for
security reasons, hence, in tearing down said wall, Ayala Corporation
did not violate the "deed restrictions" in the deeds of sale. Scc-alr

We upheld the ordinances, specifically MMC Ordinance No. 81-01, as
a legitimate exercise of police power.[37] The power of the MMC and
the Makati Municipal Council to enact zoning ordinances for the
general welfare prevailed over the "deed restrictions".

In the second Sangalang/Yabut decision, we held that the opening of
Jupiter Street was warranted by the demands of the common good in
terms of "traffic decongestion and public convenience." Jupiter was
opened by the Municipal Mayor to alleviate traffic congestion along
the public streets adjacent to the Village.[38] The same reason was
given for the opening to public vehicular traffic of Orbit Street, a road
inside the same village. The destruction of the gate in Orbit Street was
also made under the police power of the municipal government. The
gate, like the perimeter wall along Jupiter, was a public nuisance
because it hindered and impaired the use of property, hence, its
summary abatement by the mayor was proper and legal.[39]

Contrary to petitioners claim, the two Sangalang cases do not apply
to the case at bar. Firstly, both involved zoning ordinances passed by
the municipal council of Makati and the MMC. In the instant case, the
basis for the proposed opening of Neptune Street is contained in the
notice of December 22, 1995 sent by petitioner to respondent BAVA,
through its president. The notice does not cite any ordinance or law,
either by the Sangguniang Panlungsod of Makati City or by the
MMDA, as the legal basis for the proposed opening of Neptune Street.
Petitioner MMDA simply relied on its authority under its charter "to
rationalize the use of roads and/or thoroughfares for the safe and
convenient movement of persons." Rationalizing the use of roads and
thoroughfares is one of the acts that fall within the scope of transport
and traffic management. By no stretch of the imagination, however,
can this be interpreted as an express or implied grant of ordinance-
making power, much less police power. Misjuris

Secondly, the MMDA is not the same entity as the MMC in Sangalang.
Although the MMC is the forerunner of the present MMDA, an
examination of Presidential Decree (P. D.) No. 824, the charter of the
MMC, shows that the latter possessed greater powers which were not
bestowed on the present MMDA. Jjlex

Metropolitan Manila was first created in 1975 by Presidential Decree
(P.D.) No. 824. It comprised the Greater Manila Area composed of the
contiguous four (4) cities of Manila, Quezon, Pasay and Caloocan, and
the thirteen (13) municipalities of Makati, Mandaluyong, San Juan,
Las Pinas, Malabon, Navotas, Pasig, Pateros, Paranaque, Marikina,
Muntinlupa and Taguig in the province of Rizal, and Valenzuela in the
province of Bulacan.[40] Metropolitan Manila was created as a
response to the finding that the rapid growth of population and the
increase of social and economic requirements in these areas demand
a call for simultaneous and unified development; that the public
services rendered by the respective local governments could be
administered more efficiently and economically if integrated under a
system of central planning; and this coordination, "especially in the
maintenance of peace and order and the eradication of social and
economic ills that fanned the flames of rebellion and discontent
[were] part of reform measures under Martial Law essential to the
safety and security of the State."[41]

Metropolitan Manila was established as a "public corporation" with
the following powers: Calrs-pped

"Section 1. Creation of the Metropolitan Manila.There is hereby
created a public corporation, to be known as the Metropolitan
Manila, vested with powers and attributes of a corporation including
the power to make contracts, sue and be sued, acquire, purchase,
expropriate, hold, transfer and dispose of property and such other
powers as are necessary to carry out its purposes. The Corporation
shall be administered by a Commission created under this
Decree."[42]

The administration of Metropolitan Manila was placed under the
Metro Manila Commission (MMC) vested with the following powers:

"Sec. 4. Powers and Functions of the Commission. - The Commission
shall have the following powers and functions:

1. To act as a central government to establish and administer
programs and provide services common to the area;

2. To levy and collect taxes and special assessments, borrow and
expend money and issue bonds, revenue certificates, and other
obligations of indebtedness. Existing tax measures should, however,
continue to be operative until otherwise modified or repealed by the
Commission;

3. To charge and collect fees for the use of public service facilities;

4. To appropriate money for the operation of the metropolitan
government and review appropriations for the city and municipal
units within its jurisdiction with authority to disapprove the same if
found to be not in accordance with the established policies of the
Commission, without prejudice to any contractual obligation of the
local government units involved existing at the time of approval of
this Decree;

5. To review, amend, revise or repeal all ordinances, resolutions and
acts of cities and municipalities within Metropolitan Manila;

6. To enact or approve ordinances, resolutions and to fix penalties for
any violation thereof which shall not exceed a fine of P10,000.00 or
imprisonment of six years or both such fine and imprisonment for a
single offense;

7. To perform general administrative, executive and policy-making
functions;

8. To establish a fire control operation center, which shall direct the
fire services of the city and municipal governments in the
metropolitan area;

9. To establish a garbage disposal operation center, which shall direct
garbage collection and disposal in the metropolitan area;

10. To establish and operate a transport and traffic center, which shall
direct traffic activities; Jjjuris

11. To coordinate and monitor governmental and private activities
pertaining to essential services such as transportation, flood control
and drainage, water supply and sewerage, social, health and
environmental services, housing, park development, and others;

12. To insure and monitor the undertaking of a comprehensive social,
economic and physical planning and development of the area;

13. To study the feasibility of increasing barangay participation in the
affairs of their respective local governments and to propose to the
President of the Philippines definite programs and policies for
implementation;

14. To submit within thirty (30) days after the close of each fiscal year
an annual report to the President of the Philippines and to submit a
periodic report whenever deemed necessary; and

15. To perform such other tasks as may be assigned or directed by the
President of the Philippines." Sc jj

The MMC was the "central government" of Metro Manila for the
purpose of establishing and administering programs providing
services common to the area. As a "central government" it had the
power to levy and collect taxes and special assessments, the power to
charge and collect fees; the power to appropriate money for its
operation, and at the same time, review appropriations for the city
and municipal units within its jurisdiction. It was bestowed the power
to enact or approve ordinances, resolutions and fix penalties for
violation of such ordinances and resolutions. It also had the power to
review, amend, revise or repeal all ordinances, resolutions and acts of
any of the four (4) cities and thirteen (13) municipalities comprising
Metro Manila.

P. D. No. 824 further provided:

"Sec. 9. Until otherwise provided, the governments of the four cities
and thirteen municipalities in the Metropolitan Manila shall continue
to exist in their present form except as may be inconsistent with this
Decree. The members of the existing city and municipal councils in
Metropolitan Manila shall, upon promulgation of this Decree, and
until December 31, 1975, become members of the Sangguniang Bayan
which is hereby created for every city and municipality of
Metropolitan Manila.

In addition, the Sangguniang Bayan shall be composed of as many
barangay captains as may be determined and chosen by the
Commission, and such number of representatives from other sectors
of the society as may be appointed by the President upon
recommendation of the Commission.

x x x.

The Sangguniang Bayan may recommend to the Commission
ordinances, resolutions or such measures as it may adopt; Provided,
that no such ordinance, resolution or measure shall become effective,
until after its approval by the Commission; and Provided further, that
the power to impose taxes and other levies, the power to appropriate
money and the power to pass ordinances or resolutions with penal
sanctions shall be vested exclusively in the Commission."

The creation of the MMC also carried with it the creation of the
Sangguniang Bayan. This was composed of the members of the
component city and municipal councils, barangay captains chosen by
the MMC and sectoral representatives appointed by the President.
The Sangguniang Bayan had the power to recommend to the MMC
the adoption of ordinances, resolutions or measures. It was the MMC
itself, however, that possessed legislative powers. All ordinances,
resolutions and measures recommended by the Sangguniang Bayan
were subject to the MMCs approval. Moreover, the power to impose
taxes and other levies, the power to appropriate money, and the
power to pass ordinances or resolutions with penal sanctions were
vested exclusively in the MMC. Sce-dp

Thus, Metropolitan Manila had a "central government," i.e., the MMC
which fully possessed legislative and police powers. Whatever
legislative powers the component cities and municipalities had were
all subject to review and approval by the MMC.

After President Corazon Aquino assumed power, there was a clamor
to restore the autonomy of the local government units in Metro
Manila. Hence, Sections 1 and 2 of Article X of the 1987 Constitution
provided: Sj cj

"Section 1. The territorial and political subdivisions of the Republic of
the Philippines are the provinces, cities, municipalities and barangays.
There shall be autonomous regions in Muslim Mindanao and the
Cordilleras as herein provided.

Section 2. The territorial and political subdivisions shall enjoy local
autonomy."

The Constitution, however, recognized the necessity of creating
metropolitan regions not only in the existing National Capital Region
but also in potential equivalents in the Visayas and Mindanao.[43]
Section 11 of the same Article X thus provided:

"Section 11. The Congress may, by law, create special metropolitan
political subdivisions, subject to a plebiscite as set forth in Section 10
hereof. The component cities and municipalities shall retain their
basic autonomy and shall be entitled to their own local executives and
legislative assemblies. The jurisdiction of the metropolitan authority
that will thereby be created shall be limited to basic services requiring
coordination."

The Constitution itself expressly provides that Congress may, by law,
create "special metropolitan political subdivisions" which shall be
subject to approval by a majority of the votes cast in a plebiscite in
the political units directly affected; the jurisdiction of this subdivision
shall be limited to basic services requiring coordination; and the cities
and municipalities comprising this subdivision shall retain their basic
autonomy and their own local executive and legislative
assemblies.[44] Pending enactment of this law, the Transitory
Provisions of the Constitution gave the President of the Philippines
the power to constitute the Metropolitan Authority, viz:

"Section 8. Until otherwise provided by Congress, the President may
constitute the Metropolitan Authority to be composed of the heads of
all local government units comprising the Metropolitan Manila
area."[45]

In 1990, President Aquino issued Executive Order (E. O.) No. 392 and
constituted the Metropolitan Manila Authority (MMA). The powers
and functions of the MMC were devolved to the MMA.[46] It ought to
be stressed, however, that not all powers and functions of the MMC
were passed to the MMA. The MMAs power was limited to the
"delivery of basic urban services requiring coordination in
Metropolitan Manila."*47+ The MMAs governing body, the
Metropolitan Manila Council, although composed of the mayors of
the component cities and municipalities, was merely given the power
of: (1) formulation of policies on the delivery of basic services
requiring coordination and consolidation; and (2) promulgation of
resolutions and other issuances, approval of a code of basic services
and the exercise of its rule-making power.[48]

Under the 1987 Constitution, the local government units became
primarily responsible for the governance of their respective political
subdivisions. The MMAs jurisdiction was limited to addressing
common problems involving basic services that transcended local
boundaries. It did not have legislative power. Its power was merely to
provide the local government units technical assistance in the
preparation of local development plans. Any semblance of legislative
power it had was confined to a "review [of] legislation proposed by
the local legislative assemblies to ensure consistency among local
governments and with the comprehensive development plan of
Metro Manila," and to "advise the local governments
accordingly."[49]

When R.A. No. 7924 took effect, Metropolitan Manila became a
"special development and administrative region" and the MMDA a
"special development authority" whose functions were "without
prejudice to the autonomy of the affected local government units."
The character of the MMDA was clearly defined in the legislative
debates enacting its charter.

R. A. No. 7924 originated as House Bill No. 14170/ 11116 and was
introduced by several legislators led by Dante Tinga, Roilo Golez and
Feliciano Belmonte. It was presented to the House of Representatives
by the Committee on Local Governments chaired by Congressman
Ciriaco R. Alfelor. The bill was a product of Committee consultations
with the local government units in the National Capital Region (NCR),
with former Chairmen of the MMC and MMA,[50] and career officials
of said agencies. When the bill was first taken up by the Committee
on Local Governments, the following debate took place:

"THE CHAIRMAN [Hon. Ciriaco Alfelor]: Okay, Let me explain. This has
been debated a long time ago, you know. Its a special we can create
a special metropolitan political subdivision. Supreme

Actually, there are only six (6) political subdivisions provided for in the
Constitution: barangay, municipality, city, province, and we have the
Autonomous Region of Mindanao and we have the Cordillera. So we
have 6. Now.

HON. [Elias] LOPEZ: May I interrupt, Mr. Chairman. In the case of the
Autonomous Region, that is also specifically mandated by the
Constitution.

THE CHAIRMAN: Thats correct. But it is considered to be a political
subdivision. What is the meaning of a political subdivision? Meaning
to say, that it has its own government, it has its own political
personality, it has the power to tax, and all governmental powers:
police power and everything. All right. Authority is different; because
it does not have its own government. It is only a council, it is an
organization of political subdivision, powers, no, which is not imbued
with any political power. Esmmis

If you go over Section 6, where the powers and functions of the Metro
Manila Development Authority, it is purely coordinative. And it
provides here that the council is policy-making. All right.

Under the Constitution is a Metropolitan Authority with coordinative
power. Meaning to say, it coordinates all of the different basic
services which have to be delivered to the constituency. All right.

There is now a problem. Each local government unit is given its
respective as a political subdivision. Kalookan has its powers, as
provided for and protected and guaranteed by the Constitution. All
right, the exercise. However, in the exercise of that power, it might be
deleterious and disadvantageous to other local government units. So,
we are forming an authority where all of these will be members and
then set up a policy in order that the basic services can be effectively
coordinated. All right. justice

Of course, we cannot deny that the MMDA has to survive. We have to
provide some funds, resources. But it does not possess any political
power. We do not elect the Governor. We do not have the power to
tax. As a matter of fact, I was trying to intimate to the author that it
must have the power to sue and be sued because it coordinates. All
right. It coordinates practically all these basic services so that the flow
and the distribution of the basic services will be continuous. Like
traffic, we cannot deny that. Its before our eyes. Sewerage, flood
control, water system, peace and order, we cannot deny these. Its
right on our face. We have to look for a solution. What would be the
right solution? All right, we envision that there should be a
coordinating agency and it is called an authority. All right, if you do
not want to call it an authority, its alright. We may call it a council or
maybe a management agency.

x x x."[51]

Clearly, the MMDA is not a political unit of government. The power
delegated to the MMDA is that given to the Metro Manila Council to
promulgate administrative rules and regulations in the
implementation of the MMDAs functions. There is no grant of
authority to enact ordinances and regulations for the general welfare
of the inhabitants of the metropolis. This was explicitly stated in the
last Committee deliberations prior to the bills presentation to
Congress. Thus: Ed-p

"THE CHAIRMAN: Yeah, but we have to go over the suggested
revision. I think this was already approved before, but it was
reconsidered in view of the proposals, set-up, to make the MMDA
stronger. Okay, so if there is no objection to paragraph "f" And then
next is paragraph "b," under Section 6. "It shall approve metro-wide
plans, programs and projects and issue ordinances or resolutions
deemed necessary by the MMDA to carry out the purposes of this
Act." Do you have the powers? Does the MMDA because that takes
the form of a local government unit, a political subdivision.

HON. [Feliciano] BELMONTE: Yes, I believe so, your Honor. When we
say that it has the policies, its very clear that those policies must be
followed. Otherwise, whats the use of empowering it to come out
with policies. Now, the policies may be in the form of a resolution or it
may be in the form of a ordinance. The term "ordinance" in this case
really gives it more teeth, your honor. Otherwise, we are going to see
a situation where you have the power to adopt the policy but you
cannot really make it stick as in the case now, and I think here is
Chairman Bunye. I think he will agree that that is the case now.
Youve got the power to set a policy, the body wants to follow your
policy, then we say lets call it an ordinance and see if they will not
follow it.


THE CHAIRMAN: Thats very nice. I like that. However, there is a
constitutional impediment. You are making this MMDA a political
subdivision. The creation of the MMDA would be subject to a
plebiscite. That is what Im trying to avoid. Ive been trying to avoid
this kind of predicament. Under the Constitution it states: if it is a
political subdivision, once it is created it has to be subject to a
plebiscite. Im trying to make this as administrative. Thats why we
place the Chairman as a cabinet rank.

HON. BELMONTE: All right, Mr. Chairman, okay, what you are saying
there is .

THE CHAIRMAN: In setting up ordinances, it is a political exercise.
Believe me.

HON. [Elias] LOPEZ: Mr. Chairman, it can be changed into issuances of
rules and regulations. That would be it shall also be enforced. Jksm


HON. BELMONTE: Okay, I will .

HON. LOPEZ: And you can also say that violation of such rule, you
impose a sanction. But you know, ordinance has a different legal
connotation.

HON. BELMONTE: All right. I defer to that opinion, your Honor. sc

THE CHAIRMAN: So instead of ordinances, say rules and regulations.

HON. BELMONTE: Or resolutions. Actually, they are actually
considering resolutions now.

THE CHAIRMAN: Rules and resolutions.

HON. BELMONTE: Rules, regulations and resolutions."[52]

The draft of H. B. No. 14170/ 11116 was presented by the Committee
to the House of Representatives. The explanatory note to the bill
stated that the proposed MMDA is a "development authority" which
is a "national agency, not a political government unit."[53] The
explanatory note was adopted as the sponsorship speech of the
Committee on Local Governments. No interpellations or debates were
made on the floor and no amendments introduced. The bill was
approved on second reading on the same day it was presented.[54]

When the bill was forwarded to the Senate, several amendments
were made. These amendments, however, did not affect the nature of
the MMDA as originally conceived in the House of
Representatives.[55]

It is thus beyond doubt that the MMDA is not a local government unit
or a public corporation endowed with legislative power. It is not even
a "special metropolitan political subdivision" as contemplated in
Section 11, Article X of the Constitution. The creation of a "special
metropolitan political subdivision" requires the approval by a
majority of the votes cast in a plebiscite in the political units directly
affected.[56] R. A. No. 7924 was not submitted to the inhabitants of
Metro Manila in a plebiscite. The Chairman of the MMDA is not an
official elected by the people, but appointed by the President with the
rank and privileges of a cabinet member. In fact, part of his function is
to perform such other duties as may be assigned to him by the
President,[57] whereas in local government units, the President
merely exercises supervisory authority. This emphasizes the
administrative character of the MMDA. Newmiso

Clearly then, the MMC under P. D. No. 824 is not the same entity as
the MMDA under R. A. No. 7924. Unlike the MMC, the MMDA has no
power to enact ordinances for the welfare of the community. It is the
local government units, acting through their respective legislative
councils, that possess legislative power and police power. In the case
at bar, the Sangguniang Panlungsod of Makati City did not pass any
ordinance or resolution ordering the opening of Neptune Street,
hence, its proposed opening by petitioner MMDA is illegal and the
respondent Court of Appeals did not err in so ruling. We desist from
ruling on the other issues as they are unnecessary. Esmso

We stress that this decision does not make light of the MMDAs noble
efforts to solve the chaotic traffic condition in Metro Manila.
Everyday, traffic jams and traffic bottlenecks plague the metropolis.
Even our once sprawling boulevards and avenues are now crammed
with cars while city streets are clogged with motorists and
pedestrians. Traffic has become a social malaise affecting our peoples
productivity and the efficient delivery of goods and services in the
country. The MMDA was created to put some order in the
metropolitan transportation system but unfortunately the powers
granted by its charter are limited. Its good intentions cannot justify
the opening for public use of a private street in a private subdivision
without any legal warrant. The promotion of the general welfare is
not antithetical to the preservation of the rule of law. Sdjad

IN VIEW WHEREOF, the petition is denied. The Decision and
Resolution of the Court of Appeals in CA-G.R. SP No. 39549 are
affirmed. Sppedsc

SO ORDERED.

Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ.,
concur.

[1] Annex "D" to the CA petition, Court of Appeals (CA) Rollo, p. 27.

[2] Annex "J" to Petition, Rollo, pp. 76-78.

[3] Minutes of the Ocular Inspection, Court of Appeals Rollo, pp. 193-
194.

[4] CA Rollo, p. 332.

[5] Roberto L. del Rosario is a resident of Neptune Street who
allegedly spearheaded a campaign to open Neptune Street to the
public-- Motion to Cite in Contempt, CA Rollo, pp. 412-415.

[6] CA decision, p. 10, Rollo, p. 61.

[7] Petition, p. 15, Rollo, p. 24.

[8] 168 SCRA 634 (1988).

[9] Petition, p. 24, Rollo, p. 33.

[10] United States v. Pompeya, 31 Phil. 245, 253-254 [1915]; Churchill
v. Rafferty, 32 Phil. 580, 603 [1915]; People v. Pomar, 46 Phil. 440, 447
[1924].

[11] Bernas, The 1987 Constitution of the Philippines, A Commentary,
pp. 95-98 [1996].

[12] Cruz, Constitutional Law, p. 44 [1995].

[13] Id., see also 16 C.J.S., Constitutional Law, Sec. 177 [1956 ed.].

[14] Cruz, supra, at 44; Binay v. Domingo, 201 SCRA 508, 513-514
[1991].

[15] Magtajas v. Pryce Properties, 234 SCRA 255, 272 [1994].

[16] Bernas, supra, at 959, citing UP Law Center Revision Project, Part
II, 712 [1970] citing Sady, "Improvement of Local Government
Administration for Development Purpose," Journal of Local
Administration Overseas 135 [July 1962].

[17] Section 15, Book I, Local Government Code of 1991

[18] Id.

[19] Titles I, II, III, IV, Book III, Local Government Code of 1991.

[20] Section 1, Article X, 1987 Constitution.

[21] Section 16, Book I, Local Government Code of 1991; also cited in
Magtajas v. Pryce Properties Corp., Inc. supra, at 264-265.

[22] Sections 468 (a), 458 (a), and 447 (a), Book III, Local Government
Code of 1991.

[23] Section 391 (a), Book III, Local Government Code of 1991.

[24] Entitled "An Act Creating the Metropolitan Manila Development
Authority, Defining its Powers and Functions, Providing Funds
Therefor and for Other Purposes."

[25] Section 1, R.A. 7924.

[26] Section 3, par. 1, R. A. 7924.

[27] Section 3 (b), supra; emphasis supplied.

[28] Section 9, paragraph 5, supra.

[29] Section 4, supra. Non-voting members of the Council are the
heads of the Department of Transportation and Communications
(DOTC), Department of Public Works and Highways (DPWH),
Department of Tourism (DOT), Department of Budget and
Management (DBM), Housing and Urban Development Coordinating
Committee (HUDCC), and the Philippine National Police (PNP) or their
duly authorized representatives.

[30] Section 1, R.A. 7924.

[31] Section 2, supra.

[32] Op cit.

[33] 168 SCRA 634 [1988].

[34] 176 SCRA 719 [1989].

[35] 168 SCRA 634, 654-655.

[36] Id. at 643.

[37] Id, at 730.

[38] Id. at 723.

[39] Like the perimeter wall along Jupiter StreetId. at 734.

[40] Section 2, P.D. 824.

[41] Whereas Clauses, P.D. 824.

[42] Section 1, P.D. 824; emphasis supplied.

[43] Speech of then Constitutional Commissioner Blas Ople, see
Bernas, The Intent of the 1986 Constitution Writers, pp. 706-707
[1995].

[44] Section 11, Article X, 1987 Constitution.

[45] Section 8, Article XVIII, 1987 Constitution.

[46] Section 3, E.O. 392.

[47] Section 1, supra.

[48] Section 2, supra.

[49] Section 6, supra.

[50] Chairmen Ismael Mathay, Jr. and Ignacio Bunye.

[51] Deliberations of the Committee on Local Government, House of
Representatives, Congress of the Philippines, November 10, 1993, pp.
46-48.

[52] Deliberations of the Committee on Local Governments, House of
Representatives, Congress of the Philippines, November 9, 1994, pp.
68-70.

[53] Explanatory Note to H. B. 11116, p. 3.

[54] H.B. 14170/ 11116, Sponsorship and Debates, December 20,
1994.

[55] Compare H.B. 14170/ 11116 with R. A. 7924; see Senate
Amendments, February 21, 1995.

[56] Section 10, Article X of the 1987 Constitution reads:

Sec. 10. No province, city, municipality, or barangay may be created,
divided, merged, abolished, or its boundary substantially altered
except in accordance with the criteria established in the local
government code and subject to approval by a majority of the votes
cast in a plebiscite in the political units directly affected."

[57] Section 7 (g), R.A. 7924.



EN BANC



REVIEW CENTER ASSOCIATION OF THE PHILIPPINES,

Petitioner,



- versus -



EXECUTIVE SECRETARY

EDUARDO ERMITA and

COMMISSION ON HIGHER

EDUCATION represented by its

Chairman ROMULO L. NERI,

Respondents.



CPA REVIEW SCHOOL OF THE

PHILIPPINES, INC. (CPAR),

PROFESSIONAL REVIEW AND

TRAINING CENTER, INC. (PRTC), ReSA REVIEW SCHOOL, INC.

(ReSA), CRC-ACE REVIEW

SCHOOL, INC. (CRC-ACE),

Petitioners-Intervenors.





PIMSAT COLLEGES,

Respondent-Intervenor.


G.R. No. 180046



Present:



PUNO, C.J.,

QUISUMBING,

YNARES-SANTIAGO,

CARPIO,

AUSTRIA-MARTINEZ,

CORONA,

CARPIO MORALES,

TINGA,

CHICO-NAZARIO,

VELASCO, JR.,

NACHURA,

LEONARDO-DE CASTRO,

BRION, and

PERALTA, JJ.















Promulgated:

April 2, 2009


x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x



D E C I S I O N



CARPIO, J.:

The Case



Before the Court is a petition for prohibition and mandamus
assailing Executive Order No. 566 (EO 566)[1] and Commission on
Higher Education (CHED) Memorandum Order No. 30, series of 2007
(RIRR).[2]



The Antecedent Facts



On 11 and 12 June 2006, the Professional Regulation Commission
(PRC) conducted the Nursing Board Examinations nationwide. In June
2006, licensure applicants wrote the PRC to report that handwritten
copies of two sets of examinations were circulated during the
examination period among the examinees reviewing at the R.A.
Gapuz Review Center and Inress Review Center. George Cordero,
Inress Review Centers President, was then the incumbent President
of the Philippine Nurses Association. The examinees were provided
with a list of 500 questions and answers in two of the examinations
five subjects, particularly Tests III (Psychiatric Nursing) and V
(Medical-Surgical Nursing). The PRC later admitted the leakage and
traced it to two Board of Nursing members.[3] On 19 June 2006, the
PRC released the results of the Nursing Board Examinations. On 18
August 2006, the Court of Appeals restrained the PRC from
proceeding with the oath-taking of the successful examinees set on
22 August 2006.



Consequently, President Gloria Macapagal-Arroyo (President
Arroyo) replaced all the members of the PRCs Board of Nursing.
President Arroyo also ordered the examinees to re-take the Nursing
Board Examinations.



On 8 September 2006, President Arroyo issued EO 566 which
authorized the CHED to supervise the establishment and operation of
all review centers and similar entities in the Philippines.



On 3 November 2006, the CHED, through its then Chairman
Carlito S. Puno (Chairman Puno), approved CHED Memorandum Order
No. 49, series of 2006 (IRR).[4]



In a letter dated 24 November 2006,[5] the Review Center
Association of the Philippines (petitioner), an organization of
independent review centers, asked the CHED to amend, if not
withdraw the IRR arguing, among other things, that giving permits to
operate a review center to Higher Education Institutions (HEIs) or
consortia of HEIs and professional organizations will effectively
abolish independent review centers.



In a letter dated 3 January 2007,[6] Chairman Puno wrote
petitioner, through its President Jose Antonio Fudolig (Fudolig), that
to suspend the implementation of the IRR would be inconsistent with
the mandate of EO 566. Chairman Puno wrote that the IRR was
presented to the stakeholders during a consultation process prior to
its finalization and publication on 13 November 2006. Chairman Puno
also wrote that petitioners comments and suggestions would be
considered in the event of revisions to the IRR.



In view of petitioners continuing request to suspend and re-
evaluate the IRR, Chairman Puno, in a letter dated 9 February 2007,[7]
invited petitioners representatives to a dialogue on 14 March 2007.
In accordance with what was agreed upon during the dialogue,
petitioner submitted to the CHED its position paper on the IRR.
Petitioner also requested the CHED to confirm in writing Chairman
Punos statements during the dialogue, particularly on lowering of the
registration fee from P400,000 to P20,000 and the requirement for
reviewers to have five years teaching experience instead of five
years administrative experience. Petitioner likewise requested for a
categorical answer to their request for the suspension of the IRR. The
CHED did not reply to the letter.



On 7 May 2007, the CHED approved the RIRR. On 22 August
2007, petitioner filed before the CHED a Petition to Clarify/Amend
Revised Implementing Rules and Regulations[8] praying for a ruling:



1. Amending the RIRR by excluding independent review centers from
the coverage of the CHED;



2. Clarifying the meaning of the requirement for existing review
centers to tie-up or be integrated with HEIs, consortium or HEIs and
PRC-recognized professional associations with recognized programs,
or in the alternative, to convert into schools; and



3. Revising the rules to make it conform with Republic Act No. 7722
(RA 7722)*9+ limiting the CHEDs coverage to public and private
institutions of higher education as well as degree-granting programs
in post-secondary educational institutions.



On 8 October 2007, the CHED issued Resolution No. 718-2007[10]
referring petitioners request to exclude independent review centers
from CHEDs supervision and regulation to the Office of the President
as the matter requires the amendment of EO 566. In a letter dated 17
October 2007,[11] then CHED Chairman Romulo L. Neri (Chairman
Neri) wrote petitioner regarding its petition to be excluded from the
coverage of the CHED in the RIRR. Chairman Neri stated:



While it may be true that regulation of review centers is not one
of the mandates of CHED under Republic Act 7722, however, on
September 8, 2006, Her Excellency, President Gloria Macapagal-
Arroyo, issued Executive Order No. 566 directing the Commission on
Higher Education to regulate the establishment and operation of
review centers and similar entities in the entire country.



With the issuance of the aforesaid Executive Order, the CHED
now is the agency that is mandated to regulate the establishment and
operation of all review centers as provided for under Section 4 of the
Executive Order which provides that No review center or similar
entities shall be established and/or operate review classes without
the favorable expressed indorsement of the CHED and without the
issuance of the necessary permits or authorizations to conduct review
classes. x x x



To exclude the operation of independent review centers from
the coverage of CHED would clearly contradict the intention of the
said Executive Order No. 566.



Considering that the requests requires the amendment of
Executive Order No. 566, the Commission, during its 305th
Commission Meeting, resolved that the said request be directly
referred to the Office of the President for appropriate action.



As to the request to clarify what is meant by tie-up/be
integrated with an HEI, as required under the Revised Implementing
Rules and Regulations, tie-up/be integrated simply means, to be in
partner with an HEI.[12] (Boldfacing and underscoring in the original)



On 26 October 2007, petitioner filed a petition for Prohibition
and Mandamus before this Court praying for the annulment of the
RIRR, the declaration of EO 566 as invalid and unconstitutional, and
the prohibition against CHED from implementing the RIRR.



Dr. Freddie T. Bernal, Director III, Officer-In-Charge, Office of the
Director IV of CHED, sent a letter[13] to the President of Northcap
Review Center, Inc., a member of petitioner, that it had until 27
November 2007 to comply with the RIRR.



On 15 February 2008,[14] PIMSAT Colleges (respondent-
intervenor) filed a Motion For Leave to Intervene and To Admit
Comment-in-Intervention and a Comment-in-Intervention praying for
the dismissal of the petition. Respondent-intervenor alleges that the
Office of the President and the CHED did not commit any act of grave
abuse of discretion in issuing EO 566 and the RIRR. Respondent-
intervenor alleges that the requirements of the RIRR are reasonable,
doable, and are not designed to deprive existing review centers of
their review business. The Court granted the Motion for Leave to
Intervene and to Admit Comment-in-Intervention in its 11 March 2008
Resolution.[15]



On 23 April 2008, a Motion for Leave of Court for Intervention In
Support of the Petition and a Petition In Intervention were filed by
CPA Review School of the Philippines, Inc. (CPAR), Professional
Review and Training Center, Inc. (PRTC), ReSA Review School, Inc.
(ReSA), CRC-ACE Review School, Inc. (CRC-ACE), all independent CPA
review centers operating in Manila (collectively, petitioners-
intervenors). Petitioners-intervenors pray for the declaration of EO
566 and the RIRR as invalid on the ground that both constitute an
unconstitutional exercise of legislative power. The Court granted the
intervention in its 29 April 2008 Resolution.[16]



On 21 May 2008, the CHED issued CHED Memorandum Order
No. 21, Series of 2008 (CMO 21, s. 2008)[17] extending the deadline
for six months from 27 May 2008 for all existing independent review
centers to tie-up or be integrated with HEIs in accordance with the
RIRR.



In its 25 November 2008 Resolution, this Court resolved to
require the parties to observe the status quo prevailing before the
issuance of EO 566, the RIRR, and CMO 21, s. 2008.





The Assailed Executive Order and the RIRR



Executive Order No. 566 states in full:



EXECUTIVE ORDER NO. 566



DIRECTING THE COMMISSION ON HIGHER EDUCATION TO REGULATE
THE ESTABLISHMENT AND OPERATION OF REVIEW CENTERS AND
SIMILAR ENTITIES



WHEREAS, the State is mandated to protect the right of all
citizens to quality education at all levels and shall take appropriate
steps to make education accessible to all, pursuant to Section 1,
Article XIV of the 1987 Constitution;



WHEREAS, the State has the obligation to ensure and promote
quality education through the proper supervision and regulation of
the licensure examinations given through the various Boards of
Examiners under the Professional Regulation Commission;



WHEREAS, the lack of regulatory framework for the
establishment and operation of review centers and similar entities, as
shown in recent events, have adverse consequences and affect public
interest and welfare;



WHEREAS, the overriding necessity to protect the public against
substandard review centers and unethical practices committed by
some review centers demand that a regulatory framework for the
establishment and operation of review centers and similar entities be
immediately instituted;



WHEREAS, Republic Act No. 7722, otherwise known as the
Higher Education Act of 1994, created the Commission on Higher
Education, which is best equipped to carry out the provisions
pertaining to the regulation of the establishment and operation of
review centers and similar entities.



NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, the
President of the Republic of the Philippines, by virtue of the powers
vested in me by law, do hereby order:



SECTION 1. Establishment of a System of Regulation for Review
Centers and Similar Entities. The Commission on Higher Education
(CHED), in consultation with other concerned government agencies, is
hereby directed to formulate a framework for the regulation of
review centers and similar entities, including but not limited to the
development and institutionalization of policies, standards, guidelines
for the establishment, operation and accreditation of review centers
and similar entities; maintenance of a mechanism to monitor the
adequacy, transparency and propriety of their operations; and
reporting mechanisms to review performance and ethical practice.



SEC. 2. Coordination and Support. The Professional Regulation
Commission (PRC), Technical Skills Development Authority (TESDA),
Securities and Exchange Commission (SEC), the various Boards of
Examiners under the PRC, as well as other concerned non-government
organizations life professional societies, and various government
agencies, such as the Department of Justice (DOJ), National Bureau of
Investigation (NBI), Office of the Solicitor General (OSG), and others
that may be tapped later, shall provide the necessary assistance and
technical support to the CHED in the successful operationalization of
the System of Regulation envisioned by this Executive Order.



SEC. 3. Permanent Office and Staff. To ensure the effective
implementation of the System of Regulation, the CHED shall organize
a permanent office under its supervision to be headed by an official
with the rank of Director and to be composed of highly competent
individuals with expertise in educational assessment, evaluation and
testing; policies and standards development, monitoring, legal and
enforcement; and statistics as well as curriculum and instructional
materials development. The CHED shall submit the staffing pattern
and budgetary requirements to the Department of Budget and
Management (DBM) for approval.



SEC. 4. Indorsement Requirement. No review center or similar
entities shall be established and/or operate review classes without
the favorable expressed indorsement of the CHED and without the
issuance of the necessary permits or authorizations to conduct review
classes. After due consultation with the stakeholders, the concerned
review centers and similar entities shall be given a reasonable period,
at the discretion of the CHED, to comply with the policies and
standards, within a period not exceeding three (3) years, after due
publication of this Executive Order. The CHED shall see to it that the
System of Regulation including the implementing mechanisms,
policies, guidelines and other necessary procedures and
documentation for the effective implementation of the System, are
completed within sixty days (60) upon effectivity of this Executive
Order.



SEC. 5. Funding. The initial amount necessary for the
development and implementation of the System of Regulation shall
be sourced from the CHED Higher Education Development Fund
(HEDF), subject to the usual government accounting and auditing
practices, or from any applicable funding source identified by the
DBM. For the succeeding fiscal year, such amounts as may be
necessary for the budgetary requirement of implementing the System
of Regulation and the provisions of this Executive Order shall be
provided for in the annual General Appropriations Act in the budget
of the CHED. Whenever necessary, the CHED may tap its
Development Funds as supplemental source of funding for the
effective implementation of the regulatory system. In this
connection, the CHED is hereby authorized to create special accounts
in the HEDF exclusively for the purpose of implementing the
provisions of this Executive Order.





SEC. 6. Review and Reporting. The CHED shall provide for the
periodic review performance of review centers and similar entities
and shall make a report to the Office of the President of the results of
such review, evaluation and monitoring.




SEC. 7. Separability. Any portion or provision of this Executive
Order that may be declared unconstitutional shall not have the effect
of nullifying other provisions hereof, as long as such remaining
provisions can still subsist and be given effect in their entirely.



SEC. 8. Repeal. All rules and regulations, other issuances or
parts thereof, which are inconsistent with this Executive Order, are
hereby repealed or modified accordingly.



SEC. 9. Effectivity. This Executive Order shall take effect
immediately upon its publication in a national newspaper of general
circulation.



DONE in the City of Manila, this 8th day of September, in the
year of Our Lord, Two Thousand and Six.



(Sgd.) Gloria Macapagal-Arroyo



By the President:



(Sgd.) Eduardo R. Ermita

Executive Secretary





The pertinent provisions of the RIRR affecting independent
review centers are as follows:



Rule VII

IMPLEMENTING GUIDELINES AND PROCEDURES



Section 1. Authority to Establish and Operate Only CHED recognized,
accredited and reputable HEIs may be authorized to establish and
operate review center/course by the CHED upon full compliance with
the conditions and requirements provided herein and in other
pertinent laws, rules and regulations. In addition, a consortium or
consortia of qualified schools and/or entities may establish and
operate review centers or conduct review classes upon compliance
with the provisions of these Rules.















Rule XIV

TRANSITORY PROVISIONS



Section 1. Review centers that are existing upon the approval of
Executive Order No. 566 shall be given a grace period of up to one (1)
year, to tie-up/be integrated with existing HEIs[,] consortium of HEIs
and PRC recognized Professional Associations with recognized
programs under the conditions set forth in this Order and upon
mutually acceptable covenants by the contracting parties. In the
alternative, they may convert as a school and apply for the course
covered by the review subject to rules and regulations of the CHED
and the SEC with respect to the establishment of schools. In the
meantime, no permit shall be issued if there is non-compliance with
these conditions or non-compliance with the requirements set forth in
these rules.



Section 2. Only after full compliance with the requirements shall a
Permit be given by the CHED to review centers contemplated under
this Rule.



Section 3. Failure of existing review centers to fully comply with the
above shall bar them from existing as review centers and they shall be
deemed as operating illegally as such. In addition, appropriate
administrative and legal proceedings shall be commence[d] against
the erring entities that continue to operate and appropriate sanctions
shall be imposed after due process.





The Issues



The issues raised in this case are the following:



1. Whether EO 566 is an unconstitutional exercise by the Executive of
legislative power as it expands the CHEDs jurisdiction; and



2. Whether the RIRR is an invalid exercise of the Executives rule-
making power.





The Ruling of this Court



The petition has merit.





Violation of Judicial Hierarchy



The Office of the Solicitor General (OSG) prays for the dismissal
of the petition. Among other grounds, the OSG alleges that petitioner
violated the rule on judicial hierarchy in filing the petition directly
with this Court.



This Courts original jurisdiction to issue a writ of certiorari,
prohibition, mandamus, quo warranto, habeas corpus, and injunction
is not exclusive but is concurrent with the Regional Trial Courts and
the Court of Appeals in certain cases.[18] The Court has explained:



This concurrence of jurisdiction is not, however, to be taken as
according to parties seeking any of the writs an absolute,
unrestrained freedom of choice of the court to which application
therefor will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and also serves as
a general determinant of the appropriate forum for petitions for the
extraordinary writs. A becoming regard of that judicial hierarchy
most certainly indicates that petitions for the issuance of
extraordinary writs against first level (inferior) courts should be
filed with the Regional Trial Court, and those against the latter, with
the Court of Appeals. A direct invocation of the Supreme Courts
original jurisdiction to issue these writs should be allowed only when
there are special and important reasons therefor, clearly and
specifically set out in the petition. This is [an] established policy. It is
a policy necessary to prevent inordinate demands upon the Courts
time and attention which are better devoted to those matters within
its exclusive jurisdiction, and to prevent further over-crowding of the
Courts docket.*19+



The Court has further explained:



The propensity of litigants and lawyers to disregard the hierarchy
of courts in our judicial system by seeking relief directly from this
Court must be put to a halt for two reasons: (1) it would be an
imposition upon the precious time of this Court; and (2) it would
cause an inevitable and resultant delay, intended or otherwise, in the
adjudication of cases, which in some instances had to be remanded or
referred to the lower court as the proper forum under the rules of
procedure, or as better equipped to resolve the issues because this
Court is not a trier of facts.[20]





The rule, however, is not absolute, as when exceptional and
compelling circumstances justify the exercise of this Court of its
primary jurisdiction. In this case, petitioner alleges that EO 566
expands the coverage of RA 7722 and in doing so, the Executive
Department usurps the legislative powers of Congress. The issue in
this case is not only the validity of the RIRR. Otherwise, the proper
remedy of petitioner and petitioners-intervenors would have been an
ordinary action for the nullification of the RIRR before the Regional
Trial Court.[21] The alleged violation of the Constitution by the
Executive Department when it issued EO 566 justifies the exercise by
the Court of its primary jurisdiction over the case. The Court is not
precluded from brushing aside technicalities and taking cognizance of
an action due to its importance to the public and in keeping with its
duty to determine whether the other branches of the Government
have kept themselves within the limits of the Constitution.[22]



OSGs Technical Objections



The OSG alleges that the petition should be dismissed because
the verification and certification of non-forum shopping were signed
only by Fudolig without the express authority of any board resolution
or power of attorney. However, the records show that Fudolig was
authorized under Board Resolution No. 3, series of 2007[23] to file a
petition before this Court on behalf of petitioner and to execute any
and all documents necessary to implement the resolution.



The OSG also alleges that the petition should be dismissed for
violation of the 2004 Rules on Notarial Practice because Fudolig only
presented his community tax certificate as competent proof of
identity before the notary public. The Court would have required
Fudolig to comply with the 2004 Rules on Notarial Practice except that
Fudolig already presented his Philippine passport before the notary
public when petitioner submitted its reply to the OSGs comment.



EO 566 Expands the Coverage of RA 7722



The OSG alleges that Section 3 of RA 7722 should be read in
conjunction with Section 8, enumerating the CHEDs powers and
functions. In particular, the OSG alleges that the CHED has the power
under paragraphs (e) and (n) of Section 8 to:



(e) monitor and evaluate the performance of programs and
institutions of higher learning for appropriate incentives as well as the
imposition of sanctions such as, but not limited to, diminution or
withdrawal of subsidy, recommendation on the downgrading or
withdrawal of accreditation, program termination or school closure;



(n) promulgate such rules and regulations and exercise such
other powers and functions as may be necessary to carry out
effectively the purpose and objectives of this Act[.]



The OSG justifies its stand by claiming that the term programs x
x x of higher learning is broad enough to include programs offered by
review centers.



We do not agree.









Section 3 of RA 7722 provides:



Sec. 3. Creation of Commission on Higher Education. - In
pursuance of the abovementioned policies, the Commission on Higher
Education is hereby created, hereinafter referred to as the
Commission.



The Commission shall be independent and separate from the
Department of Education, Culture and Sports (DECS), and attached to
the Office of the President for administrative purposes only. Its
coverage shall be both public and private institutions of higher
education as well as degree-granting programs in all post-secondary
educational institutions, public and private. (Emphasis supplied)





Neither RA 7722 nor CHED Order No. 3, series of 1994
(Implementing Rules of RA 7722)[24] defines an institution of higher
learning or a program of higher learning.



Higher education, however, is defined as education beyond
the secondary level*25+ or education provided by a college or
university.*26+ Under the plain meaning or verba legis rule in
statutory construction, if the statute is clear, plain, and free from
ambiguity, it must be given its literal meaning and applied without
interpretation.[27] The legislature is presumed to know the meaning
of the words, to have used words advisedly, and to have expressed its
intent by use of such words as are found in the statute.[28] Hence,
the term higher education should be taken in its ordinary sense and
should be read and interpreted together with the phrase degree-
granting programs in all post-secondary educational institutions,
public and private. Higher education should be taken to mean
tertiary education or that which grants a degree after its completion.





Further, Articles 6 and 7 of the Implementing Rules provide:



Article 6. Scope of Application. - The coverage of the
Commission shall be both public and private institutions of higher
education as well as degree granting programs in all post-secondary
educational institutions, public and private.



These Rules shall apply to all public and private educational
institutions offering tertiary degree programs.



The establishment, conversion, or elevation of degree-granting
institutions shall be within the responsibility of the Commission.



Article 7. Jurisdiction. - Jurisdiction over institutions of higher
learning primarily offering tertiary degree programs shall belong to
the Commission. (Emphasis supplied)





Clearly, HEIs refer to degree-granting institutions, or those
offering tertiary degree or post-secondary programs. In fact, Republic
Act No. 8292 or the Higher Education Modernization Act of 1997
covers chartered state universities and colleges. State universities
and colleges primarily offer degree courses and programs.



Sections 1 and 8, Rule IV of the RIRR define a review center and
similar entities as follows:



Section 1. REVIEW CENTER. - refers to a center operated and
owned by a duly authorized entity pursuant to these Rules intending
to offer to the public and/or to specialized groups whether for a fee or
for free a program or course of study that is intended to refresh and
enhance the knowledge and competencies and skills of reviewees
obtained in the formal school setting in preparation for the licensure
examinations given by the Professional Regulations Commission
(PRC). The term review center as understood in these rules shall also
embrace the operation or conduct of review classes or courses
provided by individuals whether for a fee or not in preparation for the
licensure examinations given by the Professional Regulations
Commission.



x x x











Section 8. SIMILAR ENTITIES the term refer to other review
centers providing review or tutorial services in areas not covered by
licensure examinations given by the Professional Regulations
Commission including but not limited to college entrance
examinations, Civil Service examinations, tutorial services in specific
fields like English, Mathematics and the like.



The same Rule defines a review course as follows:



Section 3. REVIEW COURSE refers to the set of non-degree
instructional program of study and/or instructional materials/module,
offered by a school with a recognized course/program requiring
licensure examination, that are intended merely to refresh and
enhance the knowledge or competencies and skills of reviewees.





The scopes of EO 566 and the RIRR clearly expand the CHEDs
coverage under RA 7722. The CHEDs coverage under RA 7722 is
limited to public and private institutions of higher education and
degree-granting programs in all public and private post-secondary
educational institutions. EO 566 directed the CHED to formulate a
framework for the regulation of review centers and similar entities.



The definition of a review center under EO 566 shows that it
refers to one which offers a program or course of study that is
intended to refresh and enhance the knowledge or competencies and
skills of reviewees obtained in the formal school setting in
preparation for the licensure examinations given by the PRC. It also
covers the operation or conduct of review classes or courses provided
by individuals whether for a fee or not in preparation for the licensure
examinations given by the PRC.



A review center is not an institution of higher learning as
contemplated by RA 7722. It does not offer a degree-granting
program that would put it under the jurisdiction of the CHED. A
review course is only intended to refresh and enhance the
knowledge or competencies and skills of reviewees. A reviewee is
not even required to enroll in a review center or to take a review
course prior to taking an examination given by the PRC. Even if a
reviewee enrolls in a review center, attendance in a review course is
not mandatory. The reviewee is not required to attend each review
class. He is not required to take or pass an examination, and neither
is he given a grade. He is also not required to submit any thesis or
dissertation. Thus, programs given by review centers could not be
considered programs x x x of higher learning that would put them
under the jurisdiction of the CHED.



Further, the similar entities in EO 566 cover centers providing
review or tutorial services in areas not covered by licensure
examinations given by the PRC, which include, although not limited
to, college entrance examinations, Civil Services examinations, and
tutorial services. These review and tutorial services hardly qualify as
programs of higher learning.



Usurpation of Legislative Power



The OSG argues that President Arroyo was merely exercising her
executive power to ensure that the laws are faithfully executed. The
OSG further argues that President Arroyo was exercising her residual
powers under Executive Order No. 292 (EO 292),[29] particularly
Section 20, Title I of Book III, thus:



Section 20. Residual Powers. - Unless Congress provides
otherwise, the President shall exercise such other powers and
functions vested in the President which are provided for under the
laws and which are not specifically enumerated above, or which are
not delegated by the President in accordance with law. (Emphasis
supplied)









Section 20, Title I of Book III of EO 292 speaks of other powers
vested in the President under the law.[30] The exercise of the
Presidents residual powers under this provision requires
legislation,[31] as the provision clearly states that the exercise of the
Presidents other powers and functions has to be provided for under
the law. There is no law granting the President the power to amend
the functions of the CHED. The President may not amend RA 7722
through an Executive Order without a prior legislation granting her
such power.



The President has no inherent or delegated legislative power to
amend the functions of the CHED under RA 7722. Legislative power is
the authority to make laws and to alter or repeal them,[32] and this
power is vested with the Congress under Section 1, Article VI of the
1987 Constitution which states:



Section 1. The legislative power shall be vested in the Congress
of the Philippines which shall consist of a Senate and a House of
Representatives, except to the extent reserved to the people by the
provision on initiative and referendum.





In Ople v. Torres,[33] the Court declared void, as a usurpation of
legislative power, Administrative Order No. 308 (AO 308) issued by
the President to create a national identification system. AO 308
mandates the adoption of a national identification system even in the
absence of an enabling legislation. The Court distinguished between
Legislative and Executive powers, as follows:



The line that delineates Legislative and Executive power is not
indistinct. Legislative power is the authority, under the Constitution,
to make laws, and to alter and repeal them. The Constitution, as the
will of the people in their original, sovereign and unlimited capacity,
has vested this power in the Congress of the Philippines. The grant of
legislative power to Congress is broad, general and comprehensive.
The legislative body possesses plenary power for all purposes of civil
government. Any power, deemed to be legislative by usage and
tradition, is necessarily possessed by Congress, unless the
Constitution has lodged it elsewhere. In fine, except as limited by the
Constitution, either expressly or impliedly, legislative power embraces
all subjects and extends to matters of general concern or common
interest.



While Congress is vested with the power to enact laws, the
President executes the laws. The executive power is vested in the
President. It is generally defined as the power to enforce and
administer laws. It is the power of carrying the laws into practical
operation and enforcing their due observance.



As head of the Executive Department, the President is the Chief
Executive. He represents the government as a whole and sees to it
that all laws are enforced by the officials and employees of his
department. He has control over the executive department, bureaus
and offices. This means that he has the authority to assume directly
the functions of the executive department, bureau and office, or
interfere with the discretion of its officials. Corollary to the power of
control, the President also has the duty of supervising the
enforcement of laws for the maintenance of general peace and public
order. Thus, he is granted administrative power over bureaus and
offices under his control to enable him to discharge his duties
effectively.



Administrative power is concerned with the work of applying
policies and enforcing orders as determined by proper governmental
organs. It enables the President to fix a uniform standard of
administrative efficiency and check the official conduct of his agents.
To this end, he can issue administrative orders, rules and regulations.



x x x. An administrative order is:



Sec. 3. Administrative Orders. - Acts of the President which
relate to particular aspects of governmental operation in pursuance of
his duties as administrative head shall be promulgated in
administrative orders.



An administrative order is an ordinance issued by the President
which relates to specific aspects in the administrative operation of
government. It must be in harmony with the law and should be for
the sole purpose of implementing the law and carrying out the
legislative policy. x x x.[34]





Just like AO 308 in Ople v. Torres, EO 566 in this case is not
supported by any enabling law. The Court further stated in Ople:

x x x. As well stated by Fisher: x x x Many regulations however,
bear directly on the public. It is here that administrative legislation
must be restricted in its scope and application. Regulations are not
supposed to be a substitute for the general policy-making that
Congress enacts in the form of a public law. Although administrative
regulations are entitled to respect, the authority to prescribe rules
and regulations is not an independent source of power to make
laws.*35+





Since EO 566 is an invalid exercise of legislative power, the RIRR
is also an invalid exercise of the CHEDs quasi-legislative power.



Administrative agencies exercise their quasi-legislative or rule-
making power through the promulgation of rules and regulations.[36]
The CHED may only exercise its rule-making power within the confines
of its jurisdiction under RA 7722. The RIRR covers review centers and
similar entities which are neither institutions of higher education nor
institutions offering degree-granting programs.



Exercise of Police Power



Police power to prescribe regulations to promote the health,
morals, education, good order or safety, and the general welfare of
the people flows from the recognition that salus populi est suprema
lex the welfare of the people is the supreme law.[37] Police power
primarily rests with the legislature although it may be exercised by
the President and administrative boards by virtue of a valid
delegation.[38] Here, no delegation of police power exists under RA
7722 authorizing the President to regulate the operations of non-
degree granting review centers.





Republic Act No. 8981 is Not the Appropriate Law



It is argued that the President of the Philippines has adequate
powers under the law to regulate review centers and this could have
been done under an existing validly delegated authority, and that the
appropriate law is Republic Act No. 8981[39] (RA 8981). Under
Section 5 of RA 8981, the PRC is mandated to establish and maintain
a high standard of admission to the practice of all professions and at
all times ensure and safeguard the integrity of all licensure
examinations. Section 7 of RA 8981 further states that the PRC shall
adopt measures to preserve the integrity and inviolability of
licensure examinations.



There is no doubt that a principal mandate of the PRC is to
preserve the integrity of licensure examinations. The PRC has the
power to adopt measures to preserve the integrity and inviolability of
licensure examinations. However, this power should properly be
interpreted to refer to the conduct of the examinations. The
enumeration of PRCs powers under Section 7(e) includes among
others, the fixing of dates and places of the examinations and the
appointment of supervisors and watchers. The power to preserve the
integrity and inviolability of licensure examinations should be read
together with these functions. These powers of the PRC have nothing
to do at all with the regulation of review centers.



The PRC has the power to investigate any of the members of the
Professional Regulatory Boards (PRB) for commission of any
irregularities in the licensure examinations which taint or impugn the
integrity and authenticity of the results of the said examinations.*40+
This is an administrative power which the PRC exercises over
members of the PRB. However, this power has nothing to do with the
regulation of review centers. The PRC has the power to bar PRB
members from conducting review classes in review centers. However,
to interpret this power to extend to the power to regulate review
centers is clearly an unwarranted interpretation of RA 8981. The PRC
may prohibit the members of the PRB from conducting review classes
at review centers because the PRC has administrative supervision
over the members of the PRB. However, such power does not extend
to the regulation of review centers.



Section 7(y) of RA 8981 giving the PRC the power to perform
such other functions and duties as may be necessary to carry out the
provisions of RA 8981 does not extend to the regulation of review
centers. There is absolutely nothing in RA 8981 that mentions
regulation by the PRC of review centers.



The Court cannot likewise interpret the fact that RA 8981
penalizes any person who manipulates or rigs licensure examination
results, secretly informs or makes known licensure examination
questions prior to the conduct of the examination or tampers with the
grades in the professional licensure examinations*41+ as a grant of
power to regulate review centers. The provision simply provides for
the penalties for manipulation and other corrupt practices in the
conduct of the professional examinations.



The assailed EO 566 seeks to regulate not only review centers but
also similar entities. The questioned CHED RIRR defines similar
entities as referring to other review centers providing review or
tutorial services in areas not covered by licensure examinations given
by the PRC including but not limited to college entrance examinations,
Civil Service examinations, tutorial services in specific fields like
English, Mathematics and the like.*42+ The PRC has no mandate to
supervise review centers that give courses or lectures intended to
prepare examinees for licensure examinations given by the PRC. It is
like the Court regulating bar review centers just because the Court
conducts the bar examinations. Similarly, the PRC has no mandate to
regulate similar entities whose reviewees will not even take any
licensure examination given by the PRC.



WHEREFORE, we GRANT the petition and the petition-in-
intervention. We DECLARE Executive Order No. 566 and Commission
on Higher Education Memorandum Order No. 30, series of 2007 VOID
for being unconstitutional.



SO ORDERED.







ANTONIO T. CARPIO

Associate Justice





WE CONCUR:






REYNATO S. PUNO

Chief Justice













LEONARDO A. QUISUMBING

Associate Justice












CONSUELO YNARES-SANTIAGO

Associate Justice












MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice





RENATO C. CORONA

Associate Justice














CONCHITA CARPIO MORALES

Associate Justice












DANTE O. TINGA

Associate Justice






MINITA V. CHICO-NAZARIO

Associate Justice










PRESBITERO J. VELASCO, JR.

Associate Justice




ANTONIO EDUARDO B. NACHURA

Associate Justice









ARTURO D. BRION

Associate Justice








TERESITA J. LEONARDO-DE CASTRO

Associate Justice











DIOSDADO M. PERALTA

Associate Justice














CERTIFICATION



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.






REYNATO S. PUNO

Chief Justice





















[1] Rollo, pp. 35-37. Directing the Commission on Higher
Education to Regulate the Establishment and Operation of
Review Centers and Similar Entities. Signed on 8 September 2006.

[2] Id. at 38-55. Revised Implementing Rules and Regulations
Governing The Establishment and Operation of Review Centers And
Similar Entities In The Philippines Pursuant To Executive Order No.
566. Approved on 7 May 2007.

[3] Virginia Madeja and Anesia Dionisio were eventually
charged with violation of Republic Act No. 8981 (An Act
Modernizing the Professional Regulation Commission) and Republic
Act No. 3019 (The Anti-Graft and Corrupt Practices Act).

[4] Rollo, pp. 105-121. CMO 49, s. 2006 is otherwise known as
the Implementing Rules and Regulations Governing the
Establishment and Operation of Review Centers and Similar Entities in
the Philippines.

[5] Id. at 75-77.

[6] Id. at 79.

[7] Id. at 80.

[8] Id. at 58-69.

[9] An Act Creating the Commission on Higher Education,
Appropriating Funds Therefor and For Other Purposes.

[10] Rollo, p. 180.

[11] Id. at 181-182.

[12] Id. at 181-182.

[13] Id. at 92.

[14] Not 14 February 2008 as stated in the 11 March 2008
Resolution.

[15] Rollo, p. 184.

[16] Id. at 230.

[17] Id. at 257.

[18] LPBS Commercial, Inc. v. Amila, G.R. No. 147443, 11
February 2008, 544 SCRA 199.

[19] Liga ng mga Barangay National v. City Mayor of Manila,
465 Phil. 529, 542-543 (2004), citing People v. Cuaresma, G.R.
No. 67787, 18 April 1989, 172 SCRA 415.

[20] LPBS Commercial, Inc. v. Amila, supra note 18 at 205, citing
Santiago v. Vasquez, G.R. Nos. 99289-90, 27 January 1993, 217
SCRA 633.

[21] Holy Spirit Homeowners Association, Inc. v. Defensor, G.R.
No. 163980, 3 August 2006, 497 SCRA 581.

[22] Executive Secretary v. Southwing Heavy Industries, Inc.,
G.R. No. 164171, 20 February 2006, 482 SCRA 673.

[23] Rollo, p. 104.

[24] Rules and Regulations Implementing RA 7722, as amended.

*25+ WEBSTERS THIRD NEW INTERNATIONAL DICTIONARY,
1986 ed., p. 1068.

[26] Id.

[27] Republic v. Lacap, G.R. No. 158253, 2 March 2007, 517
SCRA 255.

[28] Id.

[29] The Administrative Code of 1987.

[30] See Larin v. Executive Secretary, 345 Phil. 962 (1997).

[31] See Kilusang Mayo Uno v. Director-General, National
Economic Development Authority, G.R. No. 167798, 19 April 2006, 487
SCRA 623.

[32] Id.

[33] 354 Phil. 948 (1998).

[34] Id. at 966-968.

[35] Id. at 970.

[36] Metropolitan Bank and Trust Company, Inc. v. National
Wages and Productivity Commission, G.R. No. 144322, 6 February
2007, 514 SCRA 346.

[37] Metropolitan Manila Development Authority v. Viron
Transportation Co., Inc., G.R. No. 170656, 15 August 2007, 530
SCRA 341.

[38] Id.

[39] Otherwise known as the Philippine Regulation Commission
Modernization Act of 2000.

[40] Section 7(s).

[41] Section 15.

[42] Section 8, RIRR.

POWER OF EMINENT DOMAIN
CASES
A. When is the power exercised?
Cases

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC



G.R. No. L-119694 May 22, 1995

PHILIPPINE PRESS INSTITUTE, INC., for and in behalf of 139
members, represented by its President, Amado P. Macasaet and its
Executive Director Ermin F. Garcia, Jr., petitioner,
vs.
COMMISSION ON ELECTIONS, respondent.

R E S O L U T I O N



FELICIANO, J.:

The Philippine Press Institute, Inc. ("PPI") is before this Court
assailing the constitutional validity of Resolution No. 2772 issued
by respondent Commission on Elections ("Comelec") and its
corresponding Comelec directive dated 22 March 1995, through a
Petition for Certiorari and Prohibition. Petitioner PPI is a non-stock,
non-profit organization of newspaper and magazine publishers.

On 2 March 1995, Comelec promulgated Resolution No. 2772,
which reads in part:

xxx xxx xxx

Sec. 2. Comelec Space. The Commission shall procure free
print space of not less than one half (1/2) page in at least one
newspaper of general circulation in every province or city for use as
"Comelec Space" from March 6, 1995 in the case of candidates for
senator and from March 21, 1995 until May 12, 1995. In the
absence of said newspaper, "Comelec Space" shall be obtained
from any magazine or periodical of said province or city.

Sec. 3. Uses of Comelec Space. "Comelec Space" shall be
allocated by the Commission, free of charge, among all candidates
within the area in which the newspaper, magazine or periodical is
circulated to enable the candidates to make known their
qualifications, their stand on public issues and their platforms and
programs of government.

"Comelec Space" shall also be used by the Commission for
dissemination of vital election information.

Sec. 4. Allocation of Comelec Space. (a) "Comelec Space" shall
also be available to all candidates during the periods stated in
Section 2 hereof. Its allocation shall be equal and impartial among
all candidates for the same office. All candidates concerned shall be
furnished a copy of the allocation of "Comelec Space" for their
information, guidance and compliance.

(b) Any candidate desiring to avail himself of "Comelec Space"
from newspapers or publications based in the Metropolitan Manila
Area shall submit an application therefor, in writing, to the
Committee on Mass Media of the Commission. Any candidate
desiring to avail himself of "Comelec Space" in newspapers or
publications based in the provinces shall submit his application
therefor, in writing, to the Provincial Election Supervisor
concerned. Applications for availment of "Comelec Space" maybe
filed at any time from the date of effectivity of this Resolution.

(c) The Committee on Mass Media and the Provincial Election
Supervisors shall allocate available "Comelec Space" among the
candidates concerned by lottery of which said candidates shall be
notified in advance, in writing, to be present personally or by
representative to witness the lottery at the date, time and place
specified in the notice. Any party objecting to the result of the
lottery may appeal to the Commission.

(d) The candidates concerned shall be notified by the Committee
on Mass Media or the Provincial Election Supervisor, as the case
maybe, sufficiently in advance and in writing of the date of issue
and the newspaper or publication allocated to him, and the time
within which he must submit the written material for publication in
the "Comelec Space".

xxx xxx xxx

Sec. 8. Undue Reference to Candidates/Political Parties in
Newspapers. No newspaper or publication shall allow to be
printed or published in the news, opinion, features, or other
sections of the newspaper or publication accounts or comments
which manifestly favor or oppose any candidate or political party
by unduly or repeatedly referring to or including therein said
candidate or political party. However, unless the facts and
circumstances clearly indicate otherwise, the Commission will
respect the determination by the publisher and/or editors of the
newspapers or publications that the accounts or views published
are significant, newsworthy and of public interest. (Emphasis
supplied)

Apparently in implementation of this Resolution, Comelec
through Commissioner Regalado E. Maambong sent identical
letters, dated 22 March 1995, to various publishers of newspapers
like the Business World, the Philippine Star, the Malaya and the
Philippine Times Journal, all members of PPI. These letters read as
follows:

This is to advise you that pursuant to Resolution No. 2772 of the
Commission on Elections, you are directed to provide free print
space of not less than one half (1/2) page for use as "Comelec
Space" or similar to the print support which you have extended
during the May 11, 1992 synchronized elections which was 2 full
pages for each political party fielding senatorial candidates, from
March 6, 1995 to May 6, 1995, to make known their qualifications,
their stand on public issues and their platforms and programs of
government.

We shall be informing the political parties and candidates to
submit directly to you their pictures, biographical data, stand on
key public issues and platforms of government either as raw data
or in the form of positives or camera-ready materials.

Please be reminded that the political parties/candidates may be
accommodated in your publication any day upon receipt of their
materials until May 6, 1995 which is the last day for campaigning.

We trust you to extend your full support and cooperation in this
regard. (Emphasis supplied)

In this Petition for Certiorari and Prohibition with prayer for the
issuance of a Temporary Restraining Order, PPI asks us to declare
Comelec Resolution No. 2772 unconstitutional and void on the
ground that it violates the prohibition imposed by the Constitution
upon the government, and any of its agencies, against the taking of
private property for public use without just compensation.
Petitioner also contends that the 22 March 1995 letter directives of
Comelec requiring publishers to give free "Comelec Space" and at
the same time process raw data to make it camera-ready,
constitute impositions of involuntary servitude, contrary to the
provisions of Section 18 (2), Article III of the 1987 Constitution.
Finally, PPI argues that Section 8 of Comelec Resolution No. 2772 is
violative of the constitutionally guaranteed freedom of speech, of
the press and of expression. 1

On 20 April 1995, this Court issued a Temporary Restraining
Order enjoining Comelec from enforcing and implementing Section
2 of Resolution No. 2772, as well as the Comelec directives
addressed to various print media enterprises all dated 22 March
1995. The Court also required the respondent to file a Comment on
the Petition.

The Office of the Solicitor General filed its Comment on behalf of
respondent Comelec alleging that Comelec Resolution No. 2772
does not impose upon the publishers any obligation to provide free
print space in the newspapers as it does not provide any criminal or
administrative sanction for non-compliance with that Resolution.
According to the Solicitor General, the questioned Resolution
merely established guidelines to be followed in connection with
the procurement of "Comelec space," the procedure for and mode
of allocation of such space to candidates and the conditions or
requirements for the candidate's utilization of the "Comelec space"
procured. At the same time, however, the Solicitor General argues
that even if the questioned Resolution and its implementing letter
directives are viewed as mandatory, the same would nevertheless
be valid as an exercise of the police power of the State. The
Solicitor General also maintains that Section 8 of Resolution No.
2772 is a permissible exercise of the power of supervision or
regulation of the Comelec over the communication and
information operations of print media enterprises during the
election period to safeguard and ensure a fair, impartial and
credible election. 2

At the oral hearing of this case held on 28 April 1995, respondent
Comelec through its Chairman, Hon. Bernardo Pardo, in response
to inquiries from the Chief Justice and other Members of the Court,
stated that Resolution No. 2772, particularly Section 2 thereof and
the 22 March 1995 letters dispatched to various members of
petitioner PPI, were not intended to compel those members to
supply Comelec with free print space. Chairman Pardo represented
to the Court that Resolution and the related letter-directives were
merely designed to solicit from the publishers the same free print
space which many publishers had voluntarily given to Comelec
during the election period relating to the 11 May 1992 elections.
Indeed, the Chairman stated that the Comelec would, that very
afternoon, meet and adopt an appropriate amending or clarifying
resolution, a certified true copy of which would forthwith be filed
with the Court.

On 5 May 1995, the Court received from the Office of the
Solicitor General a manifestation which attached a copy of Comelec
Resolution No. 2772-A dated 4 May 1995. The operative portion of
this Resolution follows:

NOW THEREFORE, pursuant to the powers vested in it by the
Constitution, the Omnibus Election Code, Republic Acts No. 6646
and 7166 and other election laws, the Commission on Elections
RESOLVED to clarify Sections 2 and 8 of Res. No. 2772 as follows:

1. Section 2 of Res. No. 2772 shall not be construed to mean as
requiring publishers of the different mass media print publications
to provide print space under pain of prosecution, whether
administrative, civil or criminal, there being no sanction or penalty
for violation of said Section provided for either in said Resolution
or in Section 90 of Batas Pambansa Blg. 881, otherwise known as
the Omnibus Election Code, on the grant of "Comelec space."

2. Section 8 of Res. No. 2772 shall not be construed to mean as
constituting prior restraint on the part of publishers with respect to
the printing or publication of materials in the news, opinion,
features or other sections of their respective publications or other
accounts or comments, it being clear from the last sentence of said
Section 8 that the Commission shall, "unless the facts and
circumstances clearly indicate otherwise . . . respect the
determination by the publisher and/or editors of the newspapers
or publications that the accounts or views published are significant,
newsworthy and of public interest."

This Resolution shall take effect upon approval. (Emphasis in the
original)

While, at this point, the Court could perhaps simply dismiss the
Petition for Certiorari and Prohibition as having become moot and
academic, we consider it not inappropriate to pass upon the first
constitutional issue raised in this case. Our hope is to put this issue
to rest and prevent its resurrection.

Section 2 of Resolution No. 2772 is not a model of clarity in
expression. Section 1 of Resolution No. 2772-A did not try to
redraft Section 2; accordingly, Section 2 of Resolution No. 2772
persists in its original form. Thus, we must point out that, as
presently worded, and in particular as interpreted and applied by
the Comelec itself in its 22 March 1995 letter-directives to
newspaper publishers, Section 2 of Resolution No. 2772 is clearly
susceptible of the reading that petitioner PPI has given it. That
Resolution No. 2772 does not, in express terms, threaten
publishers who would disregard it or its implementing letters with
some criminal or other sanction, does not by itself demonstrate
that the Comelec's original intention was simply to solicit or
request voluntary donations of print space from publishers. A
written communication officially directing a print media company
to supply free print space, dispatched by a government (here a
constitutional) agency and signed by a member of the Commission
presumably legally authorized to do so, is bound to produce a
coercive effect upon the company so addressed. That the agency
may not be legally authorized to impose, or cause the imposition
of, criminal or other sanctions for disregard of such directions, only
aggravates the constitutional difficulties inhearing in the present
situation. The enactment or addition of such sanctions by the
legislative authority itself would be open to serious constitutional
objection.

To compel print media companies to donate "Comelec-space" of
the dimensions specified in Section 2 of Resolution No. 2772 (not
less than one-half page), amounts to "taking" of private personal
property for public use or purposes. Section 2 failed to specify the
intended frequency of such compulsory "donation:" only once
during the period from 6 March 1995 (or 21 March 1995) until 12
May 1995? or everyday or once a week? or as often as Comelec
may direct during the same period? The extent of the taking or
deprivation is not insubstantial; this is not a case of a de minimis
temporary limitation or restraint upon the use of private property.
The monetary value of the compulsory "donation," measured by
the advertising rates ordinarily charged by newspaper publishers
whether in cities or in non-urban areas, may be very substantial
indeed.

The taking of print space here sought to be effected may first be
appraised under the rubric of expropriation of private personal
property for public use. The threshold requisites for a lawful taking
of private property for public use need to be examined here: one is
the necessity for the taking; another is the legal authority to effect
the taking. The element of necessity for the taking has not been
shown by respondent Comelec. It has not been suggested that the
members of PPI are unwilling to sell print space at their normal
rates to Comelec for election purposes. Indeed, the unwillingness
or reluctance of Comelec to buy print space lies at the heart of the
problem. 3 Similarly, it has not been suggested, let alone
demonstrated, that Comelec has been granted the power of
eminent domain either by the Constitution or by the legislative
authority. A reasonable relationship between that power and the
enforcement and administration of election laws by Comelec must
be shown; it is not casually to be assumed.


That the taking is designed to subserve "public use" is not
contested by petitioner PPI. We note only that, under Section 3 of
Resolution No. 2772, the free "Comelec space" sought by the
respondent Commission would be used not only for informing the
public about the identities, qualifications and programs of
government of candidates for elective office but also for
"dissemination of vital election information" (including,
presumably, circulars, regulations, notices, directives, etc. issued by
Comelec). It seems to the Court a matter of judicial notice that
government offices and agencies (including the Supreme Court)
simply purchase print space, in the ordinary course of events, when
their rules and regulations, circulars, notices and so forth need
officially to be brought to the attention of the general public.

The taking of private property for public use is, of course,
authorized by the Constitution, but not without payment of "just
compensation" (Article III, Section 9). And apparently the necessity
of paying compensation for "Comelec space" is precisely what is
sought to be avoided by respondent Commission, whether Section
2 of Resolution No. 2772 is read as petitioner PPI reads it, as an
assertion of authority to require newspaper publishers to "donate"
free print space for Comelec purposes, or as an exhortation, or
perhaps an appeal, to publishers to donate free print space, as
Section 1 of Resolution No. 2772-A attempts to suggest. There is
nothing at all to prevent newspaper and magazine publishers from
voluntarily giving free print space to Comelec for the purposes
contemplated in Resolution No. 2772. Section 2 of Resolution No.
2772 does not, however, provide a constitutional basis for
compelling publishers, against their will, in the kind of factual
context here present, to provide free print space for Comelec
purposes. Section 2 does not constitute a valid exercise of the
power of eminent domain.

We would note that the ruling here laid down by the Court is
entirely in line with the theory of democratic representative
government. The economic costs of informing the general public
about the qualifications and programs of those seeking elective
office are most appropriately distributed as widely as possible
throughout our society by the utilization of public funds, especially
funds raised by taxation, rather than cast solely on one small sector
of society, i.e., print media enterprises. The benefits which flow
from a heightened level of information on and the awareness of
the electoral process are commonly thought to be community-
wide; the burdens should be allocated on the same basis.

As earlier noted, the Solicitor General also contended that
Section 2 of Resolution No. 2772, even if read as compelling
publishers to "donate" "Comelec space, " may be sustained as a
valid exercise of the police power of the state. This argument was,
however, made too casually to require prolonged consideration on
our part. Firstly, there was no effort (and apparently no inclination
on the part of Comelec) to show that the police power
essentially a power of legislation has been constitutionally
delegated to respondent Commission. 4 Secondly, while private
property may indeed be validly taken in the legitimate exercise of
the police power of the state, there was no attempt to show
compliance in the instant case with the requisites of a lawful taking
under the police power. 5

Section 2 of Resolution No. 2772 is a blunt and heavy instrument
that purports, without a showing of existence of a national
emergency or other imperious public necessity, indiscriminately
and without regard to the individual business condition of
particular newspapers or magazines located in differing parts of the
country, to take private property of newspaper or magazine
publishers. No attempt was made to demonstrate that a real and
palpable or urgent necessity for the taking of print space
confronted the Comelec and that Section 2 of Resolution No. 2772
was itself the only reasonable and calibrated response to such
necessity available to the Comelec. Section 2 does not constitute a
valid exercise of the police power of the State.

We turn to Section 8 of Resolution No. 2772, which needs to be
quoted in full again:

Sec. 8. Undue Reference to Candidates/Political Parties in
Newspapers. No newspaper or publication shall allow to be
printed or published in the news, opinion, features, or other
sections of the newspaper or publication accounts or comments
which manifestly favor or oppose any candidate or political party
by unduly or repeatedly referring to or including therein said
candidate or political party. However, unless the facts and
circumstances clearly indicate otherwise, the Commission will
respect the determination by the publisher and/or editors of the
newspapers or publications that the accounts or views published
are significant, newsworthy and of public interest.

It is not easy to understand why Section 8 was included at all in
Resolution No. 2772. In any case, Section 8 should be viewed in the
context of our decision in National Press Club v. Commission on
Elections. 6 There the Court sustained the constitutionality of
Section 11 (b) of R.A. No. 6646, known as the Electoral Reforms
Law of 1987, which prohibits the sale or donation of print space
and airtime for campaign or other political purposes, except to the
Comelec. In doing so, the Court carefully distinguished (a) paid
political advertisements which are reached by the prohibition of
Section 11 (b), from (b) the reporting of news, commentaries and
expressions of belief or opinion by reporters, broadcasters, editors,
commentators or columnists which fall outside the scope of Section
11 (b) and which are protected by the constitutional guarantees of
freedom of speech and of the press:

Secondly, and more importantly, Section 11 (b) is limited in its
scope of application. Analysis of Section 11 (b) shows that it
purports to apply only to the purchase and sale, including purchase
and sale disguised as a donation, of print space and air time for
campaign or other political purposes. Section 11 (b) does not
purport in any way to restrict the reporting by newspapers or radio
or television stations of news or news-worthy events relating to
candidates, their qualifications, political parties and programs of
government. Moreover, Section 11 (b) does not reach
commentaries and expressions of belief or opinion by reporters or
broadcaster or editors or commentators or columnists in respect of
candidates, their qualifications, and programs and so forth, so long
at least as such comments, opinions and beliefs are not in fact
advertisements for particular candidates covertly paid for. In sum,
Section 11 (b) is not to be read as reaching any report or
commentary or other coverage that, in responsible media, is not
paid for by candidates for political office. We read Section 11 (b) as
designed to cover only paid political advertisements of particular
candidates.

The above limitation in scope of application of Section 11 (b)
that it does not restrict either the reporting of or the expression of
belief or opinion or comment upon the qualifications and programs
and activities of any and all candidates for office constitutes the
critical distinction which must be made between the instant case
and that of Sanidad v. Commission on Elections. . . . 7 (Citations
omitted; emphasis supplied)

Section 8 of Resolution No. 2772 appears to represent the effort
of the Comelec to establish a guideline for implementation of the
above-quoted distinction and doctrine in National Press Club an
effort not blessed with evident success. Section 2 of Resolution No.
2772-A while possibly helpful, does not add substantially to the
utility of Section 8 of Resolution No. 2772. The distinction between
paid political advertisements on the one hand and news reports,
commentaries and expressions of belief or opinion by reporters,
broadcasters, editors, etc. on the other hand, can realistically be
given operative meaning only in actual cases or controversies, on a
case-to-case basis, in terms of very specific sets of facts.

At all events, the Court is bound to note that PPI has failed to
allege any specific affirmative action on the part of Comelec
designed to enforce or implement Section 8. PPI has not claimed
that it or any of its members has sustained actual or imminent
injury by reason of Comelec action under Section 8. Put a little
differently, the Court considers that the precise constitutional issue
here sought to be raised whether or not Section 8 of Resolution
No. 2772 constitutes a permissible exercise of the Comelec's power
under Article IX, Section 4 of the Constitution to

supervise or regulate the enjoyment or utilization of all franchise
or permits for the operation of media of communication or
information [for the purpose of ensuring] equal opportunity,
time and space, and the right of reply, including reasonable, equal
rates therefore, for public information campaigns and forums
among candidates in connection with the objective of holding free,
orderly honest, peaceful and credible elections

is not ripe for judicial review for lack of an actual case or
controversy involving, as the very lis mota thereof, the
constitutionality of Section 8.

Summarizing our conclusions:

1. Section 2 of Resolution No. 2772, in its present form and as
interpreted by Comelec in its 22 March 1995 letter directives,
purports to require print media enterprises to "donate" free print
space to Comelec. As such, Section 2 suffers from a fatal
constitutional vice and must be set aside and nullified.

2. To the extent it pertains to Section 8 of Resolution No. 2772,
the Petition for Certiorari and Prohibition must be dismissed for
lack of an actual, justiciable case or controversy.

WHEREFORE, for all the foregoing, the Petition for Certiorari and
Prohibition is GRANTED in part and Section 2 of Resolution No.
2772 in its present form and the related letter-directives dated 22
March 1995 are hereby SET ASIDE as null and void, and the
Temporary Restraining Order is hereby MADE PERMANENT. The
Petition is DISMISSED in part, to the extent it relates to Section 8 of
Resolution No. 2772. No pronouncement as to costs.

Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo,
Melo, Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur.

Quiason, J., is on leave.



Footnotes

1 Petition, pp. 6-11; Rollo, pp. 7-12.

2 Comment, pp. 5-15; Rollo, pp. 70-80.

3 As I.A. Cruz, Constitutional Law, p. 59 (1991 ed.), citing Noble v.
City of Manila, 67 Phil. 1 (1938), stressed:

[w]here private properties needed for conversion to some public
use, the first thing obviously that the government should do is to
offer to buy it. If the owner is willing to sell and the parties can
agree on the price and the other conditions of the sale, a voluntary
transaction can then be concluded and the transfer effected
without the necessity of judicial action.

But if the owner of the private property is unwilling to part with
it, or, being willing, cannot agree to the conditions of the transfer,
then it will be necessary for the government to use its coercive
authority. By its power of eminent domain, it can then, upon
payment of just compensation, forcibly acquire the needed
property in order to devote it to the intended public use.
(Emphases supplied)

4 See, in this connection, Cruz, surpra note 3 at pp. 44-45. The
police power may be delegated by the legislative authority to local
governments under the general welfare clause (Section 16, R.A. No.
7160, "Local Government Code of 1991"), to the President and
administrative agencies. See also Binay v. Domingo, 201 SCRA 508
(1991); Philippine Association of Service Exporters, Inc. v. Drilon,
163 SCRA 386 (1988); Villacosta v. Bernardo, 143 SCRA 480 (1986).

5 See National Development Company v. Philippine Veterans
Bank, 192 SCRA 257 (1990); Association of Small Landowners in the
Philippines, Inc. v. Secretary of Agrarian Reform, 175 SCRA 343
(1989).

6 207 SCRA 1 (1992).

7 207 SCRA at 10-11.

The Lawphil Project - Arellano Law Foundation


EN BANC

[G.R. No. 132922. April 21, 1998]

TELECOMMUNICATIONS AND BROADCAST ATTORNEYS OF THE
PHILIPPINES, INC. and GMA NETWORK, INC., petitioners, vs. THE
COMMISSION ON ELECTIONS, respondent.

D E C I S I O N

MENDOZA, J.:

In Osmea v. COMELEC, G.R. No. 132231, decided March 31,
1998,[1] we upheld the validity of 11(b) of R.A. No. 6646 which
prohibits the sale or donation of print space or air time for political
ads, except to the Commission on Elections under 90, of B.P. No.
881, the Omnibus Election Code, with respect to print media, and
92, with respect to broadcast media. In the present case, we
consider the validity of 92 of B.P. Blg. No. 881 against claims that
the requirement that radio and television time be given free takes
property without due process of law; that it violates the eminent
domain clause of the Constitution which provides for the payment
of just compensation; that it denies broadcast media the equal
protection of the laws; and that, in any event, it violates the terms
of the franchise of petitioner GMA Network, Inc.

Petitioner Telecommunications and Broadcast Attorneys of the
Philippines, Inc. is an organization of lawyers of radio and
television broadcasting companies. They are suing as citizens,
taxpayers, and registered voters. The other petitioner, GMA
Network, Inc., operates radio and television broadcasting stations
throughout the Philippines under a franchise granted by Congress.

Petitioners challenge the validity of 92 on the ground (1) that it
takes property without due process of law and without just
compensation; (2) that it denies radio and television broadcast
companies the equal protection of the laws; and (3) that it is in
excess of the power given to the COMELEC to supervise or regulate
the operation of media of communication or information during
the period of election.

The Question of Standing

At the threshold of this suit is the question of standing of petitioner
Telecommunications and Broadcast Attorneys of the Philippines,
Inc. (TELEBAP). As already noted, its members assert an interest as
lawyers of radio and television broadcasting companies and as
citizens, taxpayers, and registered voters.

In those cases[2] in which citizens were authorized to sue, this
Court upheld their standing in view of the transcendental
importance of the constitutional question raised which justified
the granting of relief. In contrast, in the case at bar, as will
presently be shown, petitioners substantive claim is without merit.
To the extent, therefore, that a partys standing is determined by
the substantive merit of his case or a preliminary estimate thereof,
petitioner TELEBAP must be held to be without standing. Indeed, a
citizen will be allowed to raise a constitutional question only when
he can show that he has personally suffered some actual or
threatened injury as a result of the allegedly illegal conduct of the
government; the injury is fairly traceable to the challenged action;
and the injury is likely to be redressed by a favorable action.[3]
Members of petitioner have not shown that they have suffered
harm as a result of the operation of 92 of B.P. Blg. 881.

Nor do members of petitioner TELEBAP have an interest as
registered voters since this case does not concern their right of
suffrage. Their interest in 92 of B.P. Blg. 881 should be precisely
in upholding its validity.

Much less do they have an interest as taxpayers since this case
does not involve the exercise by Congress of its taxing or spending
power.[4] A party suing as a taxpayer must specifically show that
he has a sufficient interest in preventing the illegal expenditure of
money raised by taxation and that he will sustain a direct injury as
a result of the enforcement of the questioned statute.

Nor indeed as a corporate entity does TELEBAP have standing to
assert the rights of radio and television broadcasting companies.
Standing jus tertii will be recognized only if it can be shown that
the party suing has some substantial relation to the third party, or
that the third party cannot assert his constitutional right, or that
the right of the third party will be diluted unless the party in court
is allowed to espouse the third partys constitutional claim. None
of these circumstances is here present. The mere fact that TELEBAP
is composed of lawyers in the broadcast industry does not entitle
them to bring this suit in their name as representatives of the
affected companies.

Nevertheless, we have decided to take this case since the other
petitioner, GMA Network, Inc., appears to have the requisite
standing to bring this constitutional challenge. Petitioner operates
radio and television broadcast stations in the Philippines affected
by the enforcement of 92 of B.P. Blg. 881 requiring radio and
television broadcast companies to provide free air time to the
COMELEC for the use of candidates for campaign and other political
purposes.

Petitioner claims that it suffered losses running to several million
pesos in providing COMELEC Time in connection with the 1992
presidential election and the 1995 senatorial election and that it
stands to suffer even more should it be required to do so again this
year. Petitioners allegation that it will suffer losses again because
it is required to provide free air time is sufficient to give it standing
to question the validity of 92.[5]

Airing of COMELEC Time, a

Reasonable Condition for

Grant of Petitioners

Franchise

As pointed out in our decision in Osmea v. COMELEC, 11(b) of
R.A. No. 6646 and 90 and 92 of B.P. Blg. 881 are part and parcel
of a regulatory scheme designed to equalize the opportunity of
candidates in an election in regard to the use of mass media for
political campaigns. These statutory provisions state in relevant
parts:

R.A. No. 6646

SEC. 11. Prohibited Forms of Election Propaganda. - In addition to
the forms of election propaganda prohibited under Section 85 of
Batas Pambansa Blg. 881, it shall be unlawful:

. . . .

(b) for any newspapers, radio broadcasting or television station, or
other mass media, or any person making use of the mass media to
sell or to give free of charge print space or air time for campaign or
other political purposes except to the Commission as provided
under Section 90 and 92 of Batas Pambansa Blg. 881. Any mass
media columnist, commentator, announcer or personality who is a
candidate for any elective public office shall take a leave of absence
from his work as such during the campaign period.

B.P. Blg. 881, (Omnibus Election Code)

SEC. 90. Comelec space. - The Commission shall procure space in at
least one newspaper of general circulation in every province or
city: Provided, however, That in the absence of said newspaper,
publication shall be done in any other magazine or periodical in
said province or city, which shall be known as Comelec Space
wherein candidates can announce their candidacy. Said space shall
be allocated, free of charge, equally and impartially by the
Commission among all candidates within the area in which the
newspaper is circulated. (Sec. 45, 1978 EC).

SEC. 92. Comelec time. - The Commission shall procure radio and
television time to be known as Comelec Time which shall be
allocated equally and impartially among the candidates within the
area of coverage of all radio and television stations. For this
purpose, the franchise of all radio broadcasting and television
stations are hereby amended so as to provide radio or television
time, free of charge, during the period of the campaign. (Sec. 46,
1978 EC)

Thus, the law prohibits mass media from selling or donating print
space and air time to the candidates and requires the COMELEC
instead to procure print space and air time for allocation to the
candidates. It will be noted that while 90 of B.P. Blg. 881 requires
the COMELEC to procure print space which, as we have held,
should be paid for, 92 states that air time shall be procured by the
COMELEC free of charge.

Petitioners contend that 92 of BP Blg. 881 violates the due
process clause[6] and the eminent domain provision[7] of the
Constitution by taking air time from radio and television
broadcasting stations without payment of just compensation.
Petitioners claim that the primary source of revenue of the radio
and television stations is the sale of air time to advertisers and that
to require these stations to provide free air time is to authorize a
taking which is not a de minimis temporary limitation or restraint
upon the use of private property. According to petitioners, in
1992, the GMA Network, Inc. lost P22,498,560.00 in providing free
air time of one (1) hour every morning from Mondays to Fridays
and one (1) hour on Tuesdays and Thursdays from 7:00 to 8:00 p.m.
(prime time) and, in this years elections, it stands to lose
P58,980,850.00 in view of COMELECs requirement that radio and
television stations provide at least 30 minutes of prime time daily
for the COMELEC Time.[8]

Petitioners argument is without merit. All broadcasting, whether
by radio or by television stations, is licensed by the government.
Airwave frequencies have to be allocated as there are more
individuals who want to broadcast than there are frequencies to
assign.[9] A franchise is thus a privilege subject, among other
things, to amendment by Congress in accordance with the
constitutional provision that any such franchise or right granted . .
. shall be subject to amendment, alteration or repeal by the
Congress when the common good so requires.*10+

The idea that broadcast stations may be required to provide
COMELEC Time free of charge is not new. It goes back to the
Election Code of 1971 (R.A. No. 6388), which provided:

SEC. 49. Regulation of election propaganda through mass media. -
(a) The franchises of all radio broadcasting and television stations
are hereby amended so as to require each such station to furnish
free of charge, upon request of the Commission [on Elections],
during the period of sixty days before the election not more than
fifteen minutes of prime time once a week which shall be known as
Comelec Time and which shall be used exclusively by the
Commission to disseminate vital election information. Said
Comelec Time shall be considered as part of the public service
time said stations are required to furnish the Government for the
dissemination of public information and education under their
respective franchises or permits.

This provision was carried over with slight modification by the 1978
Election Code (P.D. No. 1296), which provided:

SEC. 46. COMELEC Time. - The Commission [on Elections] shall
procure radio and television time to be known as COMELEC Time
which shall be allocated equally and impartially among the
candidates within the area of coverage of said radio and television
stations. For this purpose, the franchises of all radio broadcasting
and television stations are hereby amended so as to require such
stations to furnish the Commission radio or television time, free of
charge, during the period of the campaign, at least once but not
oftener than every other day.

Substantially the same provision is now embodied in 92 of B.P.
Blg. 881.

Indeed, provisions for COMELEC Time have been made by
amendment of the franchises of radio and television broadcast
stations and, until the present case was brought, such provisions
had not been thought of as taking property without just
compensation. Art. XII, 11 of the Constitution authorizes the
amendment of franchises for the common good. What better
measure can be conceived for the common good than one for free
air time for the benefit not only of candidates but even more of the
public, particularly the voters, so that they will be fully informed of
the issues in an election? *I+t is the right of the viewers and
listeners, not the right of the broadcasters, which is
paramount.*11+

Nor indeed can there be any constitutional objection to the
requirement that broadcast stations give free air time. Even in the
United States, there are responsible scholars who believe that
government controls on broadcast media can constitutionally be
instituted to ensure diversity of views and attention to public
affairs to further the system of free expression. For this purpose,
broadcast stations may be required to give free air time to
candidates in an election.[12] Thus, Professor Cass R. Sunstein of
the University of Chicago Law School, in urging reforms in
regulations affecting the broadcast industry, writes:

Elections. We could do a lot to improve coverage of electoral
campaigns. Most important, government should ensure free media
time for candidates. Almost all European nations make such
provision; the United States does not. Perhaps government should
pay for such time on its own. Perhaps broadcasters should have to
offer it as a condition for receiving a license. Perhaps a
commitment to provide free time would count in favor of the grant
of a license in the first instance. Steps of this sort would
simultaneously promote attention to public affairs and greater
diversity of view. They would also help overcome the distorting
effects of soundbites and the corrosive financial pressures faced
by candidates in seeking time on the media.[13]

In truth, radio and television broadcasting companies, which are
given franchises, do not own the airwaves and frequencies through
which they transmit broadcast signals and images. They are merely
given the temporary privilege of using them. Since a franchise is a
mere privilege, the exercise of the privilege may reasonably be
burdened with the performance by the grantee of some form of
public service. Thus, in De Villata v. Stanley,[14] a regulation
requiring interisland vessels licensed to engage in the interisland
trade to carry mail and, for this purpose, to give advance notice to
postal authorities of date and hour of sailings of vessels and of
changes of sailing hours to enable them to tender mail for
transportation at the last practicable hour prior to the vessels
departure, was held to be a reasonable condition for the state
grant of license. Although the question of compensation for the
carriage of mail was not in issue, the Court strongly implied that
such service could be without compensation, as in fact under
Spanish sovereignty the mail was carried free. [15]

In Philippine Long Distance Telephone Company v. NTC,[16] the
Court ordered the PLDT to allow the interconnection of its
domestic telephone system with the international gateway facility
of Eastern Telecom. The Court cited (1) the provisions of the
legislative franchise allowing such interconnection; (2) the absence
of any physical, technical, or economic basis for restricting the
linking up of two separate telephone systems; and (3) the
possibility of increase in the volume of international traffic and
more efficient service, at more moderate cost, as a result of
interconnection.

Similarly, in the earlier case of PLDT v. NTC,[17] it was held:

Such regulation of the use and ownership of telecommunications
systems is in the exercise of the plenary police power of the State
for the promotion of the general welfare. The 1987 Constitution
recognizes the existence of that power when it provides:

Sec. 6. The use of property bears a social function, and all
economic agents shall contribute to the common good. Individuals
and private groups, including corporations, cooperatives, and
similar collective organizations, shall have the right to own,
establish, and operate economic enterprises, subject to the duty of
the State to promote distributive justice and to intervene when the
common good so demands (Article XII).

The interconnection which has been required of PLDT is a form of
intervention with property rights dictated by the objective of
government to promote the rapid expansion of
telecommunications services in all areas of the Philippines, . . . to
maximize the use of telecommunications facilities available, . . . in
recognition of the vital role of communications in nation building . .
. and to ensure that all users of the public telecommunications
service have access to all other users of the service wherever they
may be within the Philippines at an acceptable standard of service
and at reasonable cost (DOTC Circular No. 90-248). Undoubtedly,
the encompassing objective is the common good. The NTC, as the
regulatory agency of the State, merely exercised its delegated
authority to regulate the use of telecommunications networks
when it decreed interconnection.

In the granting of the privilege to operate broadcast stations and
thereafter supervising radio and television stations, the state
spends considerable public funds in licensing and supervising such
stations.[18] It would be strange if it cannot even require the
licensees to render public service by giving free air time.

Considerable effort is made in the dissent of Mr. Justice
Panganiban to show that the production of television programs
involves large expenditure and requires the use of equipment for
which huge investments have to be made. The dissent cites the
claim of GMA Network that the grant of free air time to the
COMELEC for the duration of the 1998 campaign period would cost
the company P52,380,000, representing revenue it would
otherwise earn if the air time were sold to advertisers, and the
amount of P6,600,850, representing the cost of producing a
program for the COMELEC Time, or the total amount of
P58,980,850.

The claim that petitioner would be losing P52,380,000 in unrealized
revenue from advertising is based on the assumption that air time
is finished product which, it is said, become the property of the
company, like oil produced from refining or similar natural
resources after undergoing a process for their production. But air
time is not owned by broadcast companies. As held in Red Lion
Broadcasting Co. v. F.C.C.,[19] which upheld the right of a party
personally attacked to reply, licenses to broadcast do not confer
ownership of designated frequencies, but only the temporary
privilege of using them. Consequently, a license permits
broadcasting, but the licensee has no constitutional right to be the
one who holds the license or to monopolize a radio frequency to
the exclusion of his fellow citizens. There is nothing in the First
Amendment which prevents the Government from requiring a
licensee to share his frequency with others and to conduct himself
as a proxy or fiduciary with obligations to present those views and
voices which are representative of his community and which would
otherwise, by necessity, be barred from the airwaves.*20+ As radio
and television broadcast stations do not own the airwaves, no
private property is taken by the requirement that they provide air
time to the COMELEC.

Justice Panganibans dissent quotes from Tolentino on the Civil
Code which says that the air lanes themselves are not property
because they cannot be appropriated for the benefit of any
individual. (p.5) That means neither the State nor the stations
own the air lanes. Yet the dissent also says that The franchise
holders can recover their huge investments only by selling air time
to advertisers. (p. 13) If air lanes cannot be appropriated, how
can they be used to produce air time which the franchise holders
can sell to recover their investment? There is a contradiction here.

As to the additional amount of P6,600,850, it is claimed that this is
the cost of producing a program and it is for such items as sets and
props, video tapes, miscellaneous (other rental, supplies,
transportation, etc.), and technical facilities (technical crew such
as director and cameraman as well as on air plugs). There is no
basis for this claim. Expenses for these items will be for the
account of the candidates. COMELEC Resolution No. 2983, 6(d)
specifically provides in this connection:

(d) Additional services such as tape-recording or video-taping of
programs, the preparation of visual aids, terms and condition
thereof, and the consideration to be paid therefor may be arranged
by the candidates with the radio/television station concerned.
However, no radio/television station shall make any discrimination
among candidates relative to charges, terms, practices or facilities
for in connection with the services rendered.

It is unfortunate that in the effort to show that there is taking of
private property worth millions of pesos, the unsubstantiated
charge is made that by its decision the Court permits the grand
larceny of precious time, and allows itself to become the peoples
unwitting oppressor. The charge is really unfortunate. In Jackman
v. Rosenbaum Co.,[21] Justice Holmes was so incensed by the
resistance of property owners to the erection of party walls that he
was led to say in his original draft, a statute, which embodies the
communitys understanding of the reciprocal rights and duties of
neighboring landowners, does not need to invoke the petty larceny
of the police power in its justification. Holmess brethren
corrected his taste, and Holmes had to amend the passage so that
in the end it spoke only of invoking the police power.*22+ Justice
Holmes spoke of the petty larceny of the police power. Now we
are being told of the grand larceny *by means of the police power+
of precious air time.

Giving Free Air Time a Duty

Assumed by Petitioner

Petitioners claim that 92 is an invalid amendment of R.A. No.
7252 which granted GMA Network, Inc. a franchise for the
operation of radio and television broadcasting stations. They argue
that although 5 of R.A. No. 7252 gives the government the power
to temporarily use and operate the stations of petitioner GMA
Network or to authorize such use and operation, the exercise of
this right must be compensated.

The cited provision of R.A. No. 7252 states:

SEC. 5. Right of Government. - A special right is hereby reserved to
the President of the Philippines, in times of rebellion, public peril,
calamity, emergency, disaster or disturbance of peace and order, to
temporarily take over and operate the stations of the grantee, to
temporarily suspend the operation of any station in the interest of
public safety, security and public welfare, or to authorize the
temporary use and operation thereof by any agency of the
Government, upon due compensation to the grantee, for the use of
said stations during the period when they shall be so operated.

The basic flaw in petitioners argument is that it assumes that the
provision for COMELEC Time constitutes the use and operation of
the stations of the GMA Network, Inc. This is not so. Under 92 of
B.P. Blg. 881, the COMELEC does not take over the operation of
radio and television stations but only the allocation of air time to
the candidates for the purpose of ensuring, among other things,
equal opportunity, time, and the right to reply as mandated by the
Constitution.[23]

Indeed, it is wrong to claim an amendment of petitioners franchise
for the reason that B.P. Blg. 881, which is said to have amended
R.A. No. 7252, actually antedated it.[24] The provision of 92 of
B.P. Blg. 881 must be deemed instead to be incorporated in R.A.
No. 7252. And, indeed, 4 of the latter statute does.

For the fact is that the duty imposed on the GMA Network, Inc. by
its franchise to render adequate public service time implements
92 of B.P. Blg. 881. Undoubtedly, its purpose is to enable the
government to communicate with the people on matters of public
interest. Thus, R.A. No. 7252 provides:

SEC. 4. Responsibility to the Public. - The grantee shall provide
adequate public service time to enable the Government, through
the said broadcasting stations, to reach the population on
important public issues; provide at all times sound and balanced
programming; promote public participation such as in community
programming; assist in the functions of public information and
education; conform to the ethics of honest enterprise; and not use
its station for the broadcasting of obscene and indecent language,
speech, act or scene, or for the dissemination of deliberately false
information or willful misrepresentation, or to the detriment of the
public interest, or to incite, encourage, or assist in subversive or
treasonable acts. (Emphasis added)

It is noteworthy that 49 of R.A. No. 6388, from which 92 of B.P.
Blg. 881 was taken, expressly provided that the COMELEC Time
should be considered as part of the public service time said
stations are required to furnish the Government for the
dissemination of public information and education under their
respective franchises or permits. There is no reason to suppose
that 92 of B.P. Blg. 881 considers the COMELEC Time therein
provided to be otherwise than as a public service which petitioner
is required to render under 4 of its charter (R.A. No. 7252). In
sum, B.P. Blg. 881, 92 is not an invalid amendment of petitioners
franchise but the enforcement of a duty voluntarily assumed by
petitioner in accepting a public grant of privilege.

Thus far, we have confined the discussion to the provision of 92 of
B.P. Blg. 881 for free air time without taking into account COMELEC
Resolution No. 2983-A, 2 of which states:

SEC. 2. Grant of Comelec Time. - Every radio broadcasting and
television station operating under franchise shall grant the
Commission, upon payment of just compensation, at least thirty
(30) minutes of prime time daily, to be known as Comelec Time,
effective February 10, 1998 for candidates for President, Vice-
President and Senators, and effective March 27, 1998, for
candidates for local elective offices, until May 9, 1998. (Emphasis
added)

This is because the amendment providing for the payment of just
compensation is invalid, being in contravention of 92 of B.P. Blg.
881 that radio and television time given during the period of the
campaign shall be free of charge. Indeed, Resolution No. 2983
originally provided that the time allocated shall be free of charge,
just as 92 requires such time to be given free of charge. The
amendment appears to be a reaction to petitioners claim in this
case that the original provision was unconstitutional because it
allegedly authorized the taking of property without just
compensation.

The Solicitor General, relying on the amendment, claims that there
should be no more dispute because the payment of compensation
is now provided for. It is basic, however, that an administrative
agency cannot, in the exercise of lawmaking, amend a statute of
Congress. Since 2 of Resolution No. 2983-A is invalid, it cannot be
invoked by the parties.

Law Allows Flextime for Programming

by Stations, Not Confiscation of

Air Time by COMELEC

It is claimed that there is no standard in the law to guide the
COMELEC in procuring free air time and that theoretically the
COMELEC can demand all of the air time of such stations.*25+
Petitioners do not claim that COMELEC Resolution No. 2983-A
arbitrarily sequesters radio and television time. What they claim is
that because of the breadth of the statutory language, the
provision in question is susceptible of unbridled, arbitrary and
oppressive exercise.*26+

The contention has no basis. For one, the COMELEC is required to
procure free air time for candidates within the area of coverage
of a particular radio or television broadcaster so that it cannot, for
example, procure such time for candidates outside that area. At
what time of the day and how much time the COMELEC may
procure will have to be determined by it in relation to the overall
objective of informing the public about the candidates, their
qualifications and their programs of government. As stated in
Osmea v. COMELEC, the COMELEC Time provided for in 92, as
well as the COMELEC Space provided for in 90, is in lieu of paid
ads which candidates are prohibited to have under 11(b) of R.A.
No. 6646. Accordingly, this objective must be kept in mind in
determining the details of the COMELEC Time as well as those of
the COMELEC Space.

There would indeed be objection to the grant of power to the
COMELEC if 92 were so detailed as to leave no room for
accommodation of the demands of radio and television
programming. For were that the case, there could be an intrusion
into the editorial prerogatives of radio and television stations.

Differential Treatment of

Broadcast Media Justified

Petitioners complain that B.P. Blg. 881, 92 singles out radio and
television stations to provide free air time. They contend that
newspapers and magazines are not similarly required as, in fact, in
Philippine Press Institute v. COMELEC[27] we upheld their right to
the payment of just compensation for the print space they may
provide under 90.

The argument will not bear analysis. It rests on the fallacy that
broadcast media are entitled to the same treatment under the free
speech guarantee of the Constitution as the print media. There are
important differences in the characteristics of the two media,
however, which justify their differential treatment for free speech
purposes. Because of the physical limitations of the broadcast
spectrum, the government must, of necessity, allocate broadcast
frequencies to those wishing to use them. There is no similar
justification for government allocation and regulation of the print
media.[28]

In the allocation of limited resources, relevant conditions may
validly be imposed on the grantees or licensees. The reason for this
is that, as already noted, the government spends public funds for
the allocation and regulation of the broadcast industry, which it
does not do in the case of the print media. To require the radio
and television broadcast industry to provide free air time for the
COMELEC Time is a fair exchange for what the industry gets.

From another point of view, this Court has also held that because
of the unique and pervasive influence of the broadcast media,
*n+ecessarily . . . the freedom of television and radio broadcasting
is somewhat lesser in scope than the freedom accorded to
newspaper and print media.*29+

The broadcast media have also established a uniquely pervasive
presence in the lives of all Filipinos. Newspapers and current books
are found only in metropolitan areas and in the poblaciones of
municipalities accessible to fast and regular transportation. Even
here, there are low income masses who find the cost of books,
newspapers, and magazines beyond their humble means. Basic
needs like food and shelter perforce enjoy high priorities.

On the other hand, the transistor radio is found everywhere. The
television set is also becoming universal. Their message may be
simultaneously received by a national or regional audience of
listeners including the indifferent or unwilling who happen to be
within reach of a blaring radio or television set. The materials
broadcast over the airwaves reach every person of every age,
persons of varying susceptibilities to persuasion, persons of
different I.Q.s and mental capabilities, persons whose reactions to
inflammatory or offensive speech would be difficult to monitor or
predict. The impact of the vibrant speech is forceful and
immediate. Unlike readers of the printed work, the radio audience
has lesser opportunity to cogitate, analyze, and reject the
utterance.[30]

Petitioners assertion therefore that 92 of B.P. Blg. 881 denies
them the equal protection of the law has no basis. In addition,
their plea that 92 (free air time) and 11(b) of R.A. No. 6646 (ban
on paid political ads) should be invalidated would pave the way for
a return to the old regime where moneyed candidates could
monopolize media advertising to the disadvantage of candidates
with less resources. That is what Congress tried to reform in 1987
with the enactment of R.A. No. 6646. We are not free to set aside
the judgment of Congress, especially in light of the recent failure of
interested parties to have the law repealed or at least modified.

Requirement of COMELEC Time, a

Reasonable Exercise of the

States Power to Regulate

Use of Franchises

Finally, it is argued that the power to supervise or regulate given to
the COMELEC under Art. IX-C, 4 of the Constitution does not
include the power to prohibit. In the first place, what the COMELEC
is authorized to supervise or regulate by Art. IX-C, 4 of the
Constitution,[31] among other things, is the use by media of
information of their franchises or permits, while what Congress
(not the COMELEC) prohibits is the sale or donation of print space
or air time for political ads. In other words, the object of
supervision or regulation is different from the object of the
prohibition. It is another fallacy for petitioners to contend that the
power to regulate does not include the power to prohibit. This
may have force if the object of the power were the same.

In the second place, the prohibition in 11(b) of R.A. No. 6646 is
only half of the regulatory provision in the statute. The other half
is the mandate to the COMELEC to procure print space and air time
for allocation to candidates. As we said in Osmea v. COMELEC:

The term political ad ban, when used to describe 11(b) of R.A.
No. 6646, is misleading, for even as 11(b) prohibits the sale or
donation of print space and air time to political candidates, it
mandates the COMELEC to procure and itself allocate to the
candidates space and time in the media. There is no suppression of
political ads but only a regulation of the time and manner of
advertising.

. . . .

. . . What is involved here is simply regulation of this nature.
Instead of leaving candidates to advertise freely in the mass media,
the law provides for allocation, by the COMELEC of print space and
air time to give all candidates equal time and space for the purpose
of ensuring free, orderly, honest, peaceful, and credible
elections.

With the prohibition on media advertising by candidates
themselves, the COMELEC Time and COMELEC Space are about the
only means through which candidates can advertise their
qualifications and programs of government. More than merely
depriving candidates of time for their ads, the failure of broadcast
stations to provide air time unless paid by the government would
clearly deprive the people of their right to know. Art. III, 7 of the
Constitution provides that the right of the people to information
on matters of public concern shall be recognized, while Art. XII, 6
states that the use of property bears a social function *and+ the
right to own, establish, and operate economic enterprises [is]
subject to the duty of the State to promote distributive justice and
to intervene when the common good so demands.

To affirm the validity of 92 of B.P. Blg. 881 is to hold public
broadcasters to their obligation to see to it that the variety and
vigor of public debate on issues in an election is maintained. For
while broadcast media are not mere common carriers but entities
with free speech rights, they are also public trustees charged with
the duty of ensuring that the people have access to the diversity of
views on political issues. This right of the people is paramount to
the autonomy of broadcast media. To affirm the validity of 92,
therefore, is likewise to uphold the peoples right to information on
matters of public concern. The use of property bears a social
function and is subject to the states duty to intervene for the
common good. Broadcast media can find their just and highest
reward in the fact that whatever altruistic service they may render
in connection with the holding of elections is for that common
good.

For the foregoing reasons, the petition is dismissed.

SO ORDERED.

Narvasa, C.J., Regalado, Davide, Jr., Bellosillo, Melo, Puno,
Kapunan, Martinez and Quisumbing, JJ., concur.

Romero, Panganiban, and Purisima, JJ., dissent.

Vitug, J., has separate opinion.

[1] Reiterated in Kapisanan ng mga Broadkaster sa Pilipinas (Negros
Occidental Chapter) v. COMELEC, (res.), G.R. No. 132749, April 2,
1998.

[2] Emergency Powers Cases [Araneta v. Dinglasan], 84 Phil. 368
(1949), Iloilo Palay and Corn Planters Assn v. Feliciano, 121 Phil.
358 (1965); Philconsa v. Gimenez, 122 Phil. 894 (1965); CLU v.
Executive Secretary, 194 SCRA 317 (1991).

[3] Lawyers League for a Better Philippines v. Aquino, G.R. Nos.
73748, 73972 and 73990, May 22, 1986; In re Bermudez, 145 SCRA
160 (1986); Tatad v. Garcia, Jr., 243 SCRA 436, 473 (1995)
(Mendoza, J., concurring).

[4] Const., Art. VI, 24-25 and 29.

[5] In Valmonte v. Philippine Charity Sweepstakes Office, (res.),
G.R. No. 78716, Sept. 22, 1987, we held that the party bringing a
suit challenging the constitutionality of a law must show not only
that the law is invalid, but also that he has sustained or is in
immediate danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in some
indefinite way. It must appear that the person complaining has
been or is about to be denied some right or privilege to which he is
lawfully entitled or that he is about to be subjected to some
burdens or penalties by reason of the statute complained of.
(Emphasis added)

*6+ Art. III, 1 provides: 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.

*7+ Id., 9 provides: Private Property shall not be taken for public
use without just compensation.

[8] Memorandum for Petitioners, pp. 21-28.

[9] Eastern Broadcasting Corp. (DYRE) v. Dans, Jr., 137 SCRA 628
(1985); Red Lion Broadcasting Corp. Co. v. FCC, 395 U.S. 367, 23
L.Ed2d 371 (1969). See The Radio Act (Act No. 3846, as amended),
3(c) & (d).

[10] Art. XII, 11.

[11] Red Lion Broadcasting Corp. v. FCC, 395 U.S. at 390, 23 L.Ed.2d
at 389.

[12] E.g., Owen M. Fiss, The Irony of Free Speech 2-3 (1996)
(Surely the state can be an oppressor, but it may also be a source
of freedom. . . . In some instances, instrumentalities of the state
will try to stifle free and open debate, and the First Amendment is
the tried-and-true mechanism that stops or prevents such abuse of
state power. In other instances, however, the state may have to
further the robustness of public debate. . . . It may have to allocate
public resources. . . to those whose voices would not otherwise
be heard in the public square.); Cass R. Sunstein, Democracy and
the Problem of Free Speech 50-51 (1993) (The idea that threats to
speech stem from the government is undoubtedly correct, but as
usually understood, it is far too simple. Sometimes threats come
from what seems to be the private sphere, and, much more
fundamentally, these threats could not be made without legal
entitlements that enable some private actors but not others to
speak and to be heard. . . . [Government regulation] may therefore
be necessary.)

[13] Cass R. Sunstein, id. at 85 (emphasis added).

[14] 32 Phil. 541 (1915).

[15] The Court said:

Considerable expenditures of public money have been made in the
past and continue to be made annually for the purpose of securing
the safety of vessels plying in Philippine waters. [Here the Court
enumerated many government facilities to make the coastwise
transportation safe.] Can it be fairly contended that a regulation is
unreasonable which requires vessels licensed to engage in the
interisland trade, in whose behalf the public funds are so lavishly
expended, to hold themselves in readiness to carry the public mails
when duly tendered for transportation, and to give such
reasonable notice of their sailing hours as will insure the prompt
dispatch of all mails ready for delivery at the hours thus
designated? Id., at 552.

[16] 241 SCRA 486 (1995).

[17] 190 SCRA 717, 734 (1990) (italics by the Court).

[18] For example, under the Radio Act (Act No. 3846, as amended),
the government performs, inter alia, the following functions:

SEC. 3. The Secretary of Public Works and Communications
is hereby empowered, to regulate the construction or manufacture,
possession, control, sale and transfer of radio transmitters or
transceivers (combination transmitter-receiver) and the
establishment, use, the operation of all radio stations and of all
form of radio communications and transmissions within the
Philippines. In addition to the above he shall have the following
specific powers and duties:

. . .

(c) He shall assign call letters and assign frequencies for
each station licensed by him and for each station established by
virtue of a franchise granted by the Congress of the Philippines and
specify the stations to which each of such frequencies may be used;

(d) He shall promulgate rules and regulations to prevent and
eliminate interference between stations and carry out the
provisions of this Act and the provisions of the International Radio
Regulations: Provided, however, That changes in the frequencies
or in the authorized power, or in the character of emitted signals,
or in the type of the power supply, or in the hours of operations of
any licensed stations, shall not be made without first giving the
station licensee a hearing.

[19] 395 U.S. at 394, 23 L.Ed.2d at 391, quoting 47 U.S.C. 301.

[20] 395 U.S. at 389, 23 L.Ed.2d at 388-389.

[21] 260 U.S. 22, 67 L.Ed. 107 (1922).

[22] 260 U.S. at 31, 67 L.Ed. at 112. 1 Holmes-Laski Letters 457
(1953), quoted in P. Freund, A. Sutherland, M. Howe and E. Brown,
Constitutional Law, Cases and Other Problems 1095 (1978).

[23] Art. IX-C, 4.

[24] B.P. Blg. 881 took effect on Dec. 3, 1985, whereas R.A. No.
7252 took effect on March 20, 1992.

[25] Memorandum for Petitioners, p. 17.

[26] Ibid.

[27] 244 SCRA 272 (1995).

[28] In the United States, because of recognition of these
differences in the characteristics of news media, it has been held
that broadcast stations may be required to give persons subjected
to personal attack during discussion of an important public issue
the right to reply (Red Lion Broadcasting Corp. v. FCC, 395 U.S. 367,
23 L.Ed.2d 371 (1969)), but a similar right of reply is inapplicable
to newspapers. It was pointed out that a statute providing for such
right operates as a command in the same sense as a statute or
regulation forbidding [the newspaper] to publish specified matter. .
. . [It] exacts a penalty on the basis of the content of a newspaper.
The first phase of the penalty [is] exacted in terms of the cost in
printing and in taking up space that could be devoted to other
material the newspaper may have preferred to print. . . . [Faced
with such a penalty,] editors might well conclude that the safe
course is to avoid controversy. . . . [Thus, the government-
enforced+ right of access inescapably dampens the vigor and limits
the variety of public debate. (Miami Herald Pub. Co. v. Tornillo,
418 U.S. 241, 4 L.Ed.2d 730 (1974))

[29] Eastern Broadcasting (DYRE) Corporation v. Dans, Jr., 137
SCRA at 635.

[30] Id. at 635-636.

*31+ This provision reads: The Commission may, during the
election period, supervise or regulate the enjoyment or utilization
of all franchises or permits for the operation of transportation and
other public utilities, media of communication or information, all
grants, special privileges, or concessions granted by the
Government or any subdivision, agency, or instrumentality thereof,
including any government-owned or controlled corporation or its
subsidiary. Such supervision or regulation shall aim to ensure
equal opportunity, time, and space, and the right to reply, including
reasonable, equal rates therefor, for public information campaigns
and forums among candidates in connection with the objective of
holding free, orderly, honest, peaceful, and credible elections.

B. Who may exercise the power of eminent domain?
Cases





THIRD DIVISION

[G.R. No. 135087. March 14, 2000]

HEIRS OF ALBERTO SUGUITAN, petitioner, vs. CITY OF
MANDALUYONG, respondent. frnaics

D E C I S I O N

GONZAGA_REYES, J.:

In this petition for review on certiorari under Rule 45,
petitioners[1] pray for the reversal of the Order dated July 28,
1998 issued by Branch 155 of the Regional Trial Court of Pasig in
SCA No. 875 entitled "City of Mandaluyong v. Alberto S.
Suguitan, the dispositive portion of which reads as follows:

WHEREFORE, in view of the foregoing, the instant Motion to
Dismiss is hereby DENIED and an ORDER OF CONDEMNATION is
hereby issued declaring that the plaintiff, City of Mandaluyong,
has a lawful right to take the subject parcel of land together with
existing improvements thereon more specifically covered by
Transfer Certificate Of Title No. 56264 of the Registry of Deeds
for Metro Manila District II for the public use or purpose as
stated in the Complaint, upon payment of just compensation.

Accordingly, in order to ascertain the just compensation, the
parties are hereby directed to submit to the Court within fifteen
(15) days from notice hereof, a list of independent appraisers
from which the Court t will select three (3) to be appointed as
Commissioners, pursuant to Section 5, Rule 67, Rules of Court.

SO ORDERED.[2]ella

It is undisputed by the parties that on October 13, 1994, the
Sangguniang Panlungsod of Mandaluyong City issued Resolution
No. 396, S-1994[3] authorizing then Mayor Benjamin S. Abalos to
institute expropriation proceedings over the property of Alberto
Sugui located at Boni Avenue and Sto. Rosario streets in
Mandaluyong City with an area of 414 square meters and more
particularly described under Transfer Certificate of Title No.
56264 of the Registry of Deeds of Metro Manila District II. The
intended purpose of the expropriation was the expansion of the
Mandaluyong Medical Center.

Mayor Benjamin Abalos wrote Alberto Suguitan a letter dated
January 20, 1995 offering to buy his property, but Suguitan
refused to sell.[4] Consequently, on March 13, 1995, the city of
Mandaluyong filed a complaint[5] for expropriation with the
Regional Trial Court of Pasig. The case was docketed as SCA No.
875. novero

Suguitan filed a motion to dismiss[6] the complaint based on the
following grounds -(1) the power of eminent domain is not being
exercised in accordance with law; (2) there is no public necessity
to warrant expropriation of subject property; (3) the City of
Mandaluyong seeks to expropriate the said property without
payment of just compensation; (4) the City of Mandaluyong has
no budget and appropriation for the payment of the property
being expropriated; and (5) expropriation of Suguitan' s property
is but a ploy of Mayor Benjamin Abalos to acquire the same for
his personal use. Respondent filed its comment and opposition
to the motion. On October 24, 1995, the trial court denied
Suguitan's motion to dismiss.[7]

On November 14, 1995, acting upon a motion filed by the
respondent, the trial court issued an order allowing the City of
Mandaluyong to take immediate possession of Suguitan's
property upon the deposit of P621,000 representing 15% of the
fair market value of the subject property based upon the current
tax declaration of such property. On December 15, 1995, the City
of Mandaluyong assumed possession of the subject property by
virtue of a writ of possession issued by the trial court on
December 14, 1995.[8] On July 28, 1998, the court granted the
assailed order of expropriation.

Petitioner assert that the city of Mandaluyong may only exercise
its delegated power of eminent domain by means of an
ordinance as required by section 19 of Republic Act (RA) No.
7160,[9] and not by means of a mere resolution.[10] Respondent
contends, however, that it validly and legally exercised its power
of eminent domain; that pursuant to article 36, Rule VI of the
Implementing Rules and Regulations (IRR) of RA 7160, a
resolution is a sufficient antecedent for the filing of
expropriation proceedings with the Regional Trial Court.
Respondent's position, which was upheld by the trial court, was
explained, thus:[11]

...in the exercise of the respondent City of Mandaluyong's power
of eminent domain, a "resolution" empowering the City Mayor
to initiate such expropriation proceedings and thereafter when
the court has already determine[d] with certainty the amount of
just compensation to be paid for the property expropriated,
then follows an Ordinance of the Sanggunian Panlungosd
appropriating funds for the payment of the expropriated
property. Admittedly, title to the property expropriated shall
pass from the owner to the expropriator only upon full payment
of the just compensation.[12] novero

Petitioners refute respondent's contention that only a resolution
is necessary upon the initiation of expropriation proceedings
and that an ordinance is required only in order to appropriate
the funds for the payment of just compensation, explaining that
the resolution mentioned in article 36 of the IRR is for purposes
of granting administrative authority to the local chief executive
to file the expropriation case in court and to represent the local
government unit in such case, but does not dispense with the
necessity of an ordinance for the exercise of the power of
eminent domain under section 19 of the Code.[13]

The petition is imbued with merit.

Eminent domain is the right or power of a sovereign state to
appropriate private property to particular uses to promote
public welfare.[14] It is an indispensable attribute of
sovereignty; a power grounded in the primary duty of
government to serve the common need and advance the general
welfare.[15] Thus, the right of eminent domain appertains to
every independent government without the necessity for
constitutional recognition.[16] The provisions found in modern
constitutions of civilized countries relating to the taking of
property for the public use do not by implication grant the
power to the government, but limit a power which would
otherwise be without limit.[17] Thus, our own Constitution
provides that "[p]rivate property shall not be taken for public
use without just compensation."[18] Furthermore, the due
process and equal protection clauses[19] act as additional
safeguards against the arbitrary exercise of this governmental
power.

Since the exercise of the power of eminent domain affects an
individual's right to private property, a constitutionally-
protected right necessary for the preservation and enhancement
of personal dignity and intimately connected with the rights to
life and liberty,[20] the need for its circumspect operation
cannot be overemphasized. In City of Manila vs. Chinese
Community of Manila we said:[21]

The exercise of the right of eminent domain, whether directly by
the State, or by its authorized agents, is necessarily in
derogation of private rights, and the rule in that case is that the
authority must be strictly construed. No species of property is
held by individuals with greater tenacity, and none is guarded by
the constitution and the laws more sedulously, than the right to
the freehold of inhabitants. When the legislature interferes with
that right, and, for greater public purposes, appropriates the
land of an individual without his consent, the plain meaning of
the law should not be enlarged by doubt[ful] interpretation.
(Bensley vs. Mountainlake Water Co., 13 Cal., 306 and cases
cited [73 Am. Dec. 576].)

The statutory power of taking property from the owner without
his consent is one of the most delicate exercise of governmental
authority. It is to be watched with jealous scrutiny. Important as
the power may be to the government, the inviolable sanctity
which all free constitutions attach to the right of property of the
citizens, constrains the strict observance of the substantial
provisions of the law which are prescribed as modes of the
exercise of the power, and to protect it from abuse. ...(Dillon on
Municipal Corporations [5th Ed.], sec. 1040, and cases cited;
Tenorio vs. Manila Railroad Co., 22 Phil., 411.)

The power of eminent domain is essentially legislative in nature.
It is firmly settled, however, that such power may be validly
delegated to local government units, other public entities and
public utilities, although the scope of this delegated legislative
power is necessarily narrower than that of the delegating
authority and may only be exercised in strict compliance with
the terms of the delegating law.[22] micks

The basis for the exercise of the power of eminent domain by
local government units is section 19 of RA 7160 which provides
that:

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 benefits 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.

Despite the existence of this legislative grant in favor of local
governments, it is still the duty of the courts to determine
whether the power of eminent domain is being exercised in
accordance with the delegating law.[23] In fact, the courts have
adopted a more censorious attitude in resolving questions
involving the proper exercise of this delegated power by local
bodies, as compared to instances when it is directly exercised by
the national legislature.[24]

The courts have the obligation to determine whether the
following requisites have been complied with by the local
government unit concerned:

1. An ordinance is enacted by the local legislative council
authorizing the local chief executive, in behalf of the local
government unit, to exercise the power of eminent domain or
pursue expropriation proceedings over a particular private
property .calr


2. The power of eminent domain is exercised for public use,
purpose or welfare, or for the benefit of the poor and the
landless.

3. There is payment of just compensation, as required under
Section 9, Article III of the Constitution, and other pertinent
laws.

4. A valid and definite offer has been previously made to the
owner of the property sought to be expropriated, but said offer
was not accepted.[25]

In the present case, the City of Mandaluyong seeks to exercise
the power of eminent domain over petitioners' property by
means of a resolution, in contravention of the first requisite. The
law in this case is clear and free from ambiguity. Section 19 of
the Code requires an ordinance, not a resolution, for the
exercise of the power of eminent domain. We reiterate our
ruling in Municipality of Paraaque v. V.M. Realty
Corporation[26] regarding the distinction between an ordinance
and a resolution. In that 1998 case we held that:miso

We are not convinced by petitioner's insistence that the terms
"resolution" and "ordinance" are synonymous. A municipal
ordinance is different from a resolution. An ordinance is a law,
but a resolution is merely a declaration of the sentiment or
opinion of a lawmaking body on a specific matter. An ordinance
possesses a general and permanent character, but a resolution is
temporary in nature. Additionally, the two are enacted
differently -a third reading is necessary for an ordinance, but not
for a resolution, unless decided otherwise by a majority of all
the Sanggunian members.

We cannot uphold respondent's contention that an ordinance is
needed only to appropriate funds after the court has
determined the amount of just compensation. An examination
of the applicable law will show that an ordinance is necessary to
authorize the filing of a complaint with the proper court since,
beginning at this point, the power of eminent domain is already
being exercised.

Rule 67 of the 1997 Revised Rules of Court reveals that
expropriation proceedings are comprised of two stages:

(1) 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 in a 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;

(2) the second phase 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.[27]

Clearly, although the determination and award of just
compensation to the defendant is indispensable to the transfer
of ownership in favor of the plaintiff, it is but the last stage of
the expropriation proceedings, which cannot be arrived at
without an initial finding by the court 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. An order
of condemnation or dismissal at this stage would be final,
resolving the question of whether or not the plaintiff has
properly and legally exercised its power of eminent domain.

Also, it is noted that as soon as the complaint is filed the plaintiff
shall already have the right to enter upon the possession of the
real property involved upon depositing with the court 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.[28] Therefore, an ordinance promulgated by the
local legislative body authorizing its local chief executive to
exercise the power of eminent domain is necessary prior to the
filing by the latter of the complaint with the proper court, and
not only after the court has determined the amount of just
compensation to which the defendant is entitled.basra

Neither is respondent's position improved by its reliance upon
Article 36 (a), Rule VI of the IRR which provides that:

If the LGU fails to acquire a private property for public use,
purpose, or welfare through purchase, LGU may expropriate said
property through a resolution of the sanggunian authorizing its
chief executive to initiate expropriation proceedings.

The Court has already discussed this inconsistency between the
Code and the IRR, which is more apparent than real, in
Municipality of Paraaque vs. V.M. Realty Corporation,[29]
which we quote hereunder:

Petitioner relies on Article 36, Rule VI of the Implementing
Rules, which requires only a resolution to authorize an LGU to
exercise eminent domain. This is clearly misplaced, because
Section 19 of RA 7160, the law itself, surely prevails over said
rule which merely seeks to implement it. It is axiomatic that the
clear letter of the law is controlling and cannot be amended by a
mere administrative rule issued for its implementation. Besides,
what the discrepancy seems to indicate is a mere oversight in
the wording of the implementing rules, since Article 32, Rule VI
thereof, also requires that, in exercising the power of eminent
domain, the chief executive of the LGU must act pursuant to an
ordinance.

Therefore, while we remain conscious of the constitutional
policy of promoting local autonomy, we cannot grant judicial
sanction to a local government unit's exercise of its delegated
power of eminent domain in contravention of the very law
giving it such power.

It should be noted, however, that our ruling in this case will not
preclude the City of Mandaluyong from enacting the necessary
ordinance and thereafter reinstituting expropriation
proceedings, for so long as it has complied with all other legal
requirements.[30]

WHEREFORE, the petition is hereby GRANTED. The July 28, 1998
decision of Branch 155 of the Regional Trial Court of Pasig in SCA
No. 875 is hereby REVERSED and SET ASIDE.akin




THIRD DIVISION

[G.R. No. 132431. February 13, 2004]

ESTATE OR HEIRS OF THE LATE EX-JUSTICE JOSE B. L. REYES
represented by their Administratrix and Attorney-In-Fact,
Adoracion D. Reyes, and the ESTATE OR HEIRS OF THE LATE DR.
EDMUNDO A. REYES, represented by MARIA TERESA P. REYES
and CARLOS P. REYES, petitioners, vs. CITY OF MANILA,
respondent.

[G.R. No. 137146. February 13, 2004]

ESTATE OF HEIRS OF THE LATE EX-JUSTICE JOSE B.L. REYES and
ESTATE OR HEIRS OF THE LATE DR. EDMUNDO REYES,
petitioners, vs. COURT OF APPEALS, DR. ROSARIO ABIOG,
ANGELINA MAGLONSO and SAMPAGUITA BISIG NG
MAGKAKAPITBAHAY, INC. and the CITY OF MANILA,
respondents.

D E C I S I O N

CORONA, J.:

Before us are the following consolidated petitions filed by
petitioners Heirs of Jose B.L. Reyes and Edmundo Reyes: (1) a
petition for review[1] of the decision[2] of the Court of Appeals
dated January 27, 1998 which ordered the condemnation of
petitioners properties and reversed the order*3+ of the Regional
Trial Court (RTC) of Manila, Branch 9, dated October 3, 1995
dismissing the complaint of respondent City of Manila (City) for
expropriation, and (2) a petition for certiorari[4] alleging that
the Court of Appeals committed grave abuse of discretion in
rendering a resolution[5] dated August 19, 1998 which issued a
temporary restraining order against the Municipal Trial Court
(MTC) of Manila, Branch 10, not to (disturb) the occupancy of
Dr. Rosario Abiog, one of the members of SBMI, until the
Supreme Court has decided the Petition for Review on
Certiorari and a resolution*6+ dated December 16, 1998
enjoining petitioners from disturbing the physical possession of
all the properties subject of the expropriation proceedings.

The undisputed facts follow.

The records show that Jose B. L. Reyes and petitioners Heirs of
Edmundo Reyes are the pro-indiviso co-owners in equal
proportion of 11 parcels of land with a total area of 13,940
square meters situated at Sta. Cruz District, Manila and covered
by Transfer Certificate of Title No. 24359 issued by the Register
of Deeds of Manila. These parcels of land are being occupied and
leased by different tenants, among whom are respondents
Abiog, Maglonso and members of respondent Sampaguita Bisig
ng Magkakapitbahay, Incorporated (SBMI). Petitioners leased to
respondent Abiog Lot 2-E, Block 3007 of the consolidated
subdivision plan (LRC) Psd- 328345, with an area of 191 square
meters[7] and to respondent Maglonso, Lot 2-R, Block 2996 of
the same consolidation plan, with an area of 112 square
meters.[8]

On November 9, 1993 and May 26, 1994, respectively, Jose B.L.
Reyes and petitioners Heirs of Edmundo Reyes filed ejectment
complaints against respondents Rosario Abiog and Angelina
Maglonso, among others. Upon his death, Jose B.L. Reyes was
substituted by his heirs. Petitioners obtained favorable
judgments against said respondents. In Civil Case No. 142851-CV,
the Metropolitan Trial Court (MTC) of Manila, Branch 10,
rendered a decision dated May 9, 1994 against respondent
Abiog. In Civil Case No. 144205-CV, the MTC of Manila, Branch 3,
issued judgment dated May 4, 1995 against respondent
Maglonso.

Respondents Abiog and Maglonso appealed the MTC decisions
but the same were denied[9] by the RTC of Manila, Branch 28,
and the RTC of Manila, Branch 38, respectively. Their appeals to
the Court of Appeals were likewise denied.[10] As no appeals
were further taken, the judgments of eviction against
respondents Abiog and Maglonso became final and executory in
1998.

Meanwhile, during the pendency of the two ejectment cases
against respondents Abiog and Maglonso, respondent City filed
on April 25, 1995 a complaint for eminent domain
(expropriation)[11] of the properties of petitioners at the RTC of
Manila, Branch 9. The properties sought to be acquired by the
City included parcels of land occupied by respondents Abiog,
Maglonso and members of respondent SBMI.

The complaint was based on Ordinance No. 7818 enacted on
November 29, 1993 authorizing the City Mayor of Manila to
expropriate certain parcels of land with an aggregate area of
9,930 square meters, more or less, owned by Jose B.L. Reyes and
Edmundo Reyes situated along the streets of Rizal Avenue,
Tecson, M. Natividad, Sampaguita, Oroquieta, M. Hizon, Felix
Huertes, Bulacan, Sulu, Aurora Boulevard, Pedro Guevarra and
Kalimbas in the third district of Manila. These parcels of land are
more particularly described in the pertinent Cadastral Plan as
Lot 3, Block 2995, Lot 2, Block 2996; Lot 2, Block 2999; Lot 5,
Block 2999, and Lot 2, Block 3007. According to the ordinance,
the said properties were to be distributed to the intended
beneficiaries, who were the occupants of the said parcels of
land who (had) been occupying the said lands as lessees or any
term thereof for a period of at least 10 years.*12+

The complaint alleged that, on March 10, 1995, respondent City
thru City Legal Officer Angel Aguirre, Jr. sent the petitioners a
written offer to purchase the subject properties for
P10,285,293.38 but the same was rejected. Respondent City
prayed that an order be issued fixing the provisional value of the
property in the amount of P9,684,380 based on the current tax
declaration of the real properties and that it be authorized to
enter and take possession thereof upon the deposit with the
trial court of the amount of P1,452,657 or 15% of the aforesaid
value.

On May 15, 1995, respondent SBMI, a registered non-stock
corporation composed of the residents of the subject properties
(including as well as representing herein respondents Abiog and
Maglonso), filed a motion for intervention and admission of
their attached complaint with prayer for injunction. Respondent
SBMI alleged that it had a legal interest over the subject matter
of the litigation as its members were the lawful beneficiaries of
the subject matter of the case. It prayed for the issuance of a
temporary restraining order to enjoin the petitioners from
ousting the occupants of the subject properties. The trial court
denied the motion for intervention in an order dated June 2,
1995 on the ground that the movants interest (was) indirect,
contingent, remote, conjectual (sic), consequential (sic) and
collateral. At the very least, it (was), if it (existed) at all, purely
inchoate, or in sheer expectancy of a right that may or may not
be granted.*13+

On the day SBMIs motion for intervention was denied,
petitioners filed a motion to dismiss the complaint for eminent
domain for lack of merit. Among the grounds alleged were the
following:

xxx that the amount allegedly deposited by the plaintiff is based
on an erroneous computation since Sec. 19 of the Local
Government Code of 1991 provides that in order for the plaintiff
to take possession of the property, the deposit should be at least
15% of the fair market value of the property based on the
current tax declaration of the property to be expropriated which
is P19,619,520.00, 15% of which is P2,942,928.00; that since the
subject property is allegedly being expropriated for socialized
housing, the guidelines for their equitable valuation shall be set
by the Department of Finance on the basis of the market value
reflected in the zonal valuation conformably to Sec. 13 of R.A.
No. 7279; that under Department Order No. 33-93 adopted by
the Department of Finance, through the Bureau of Internal
Revenue, on 26 April 1992, the zonal valuation of the subject
property is conservatively estimated at approximately P76M;
that the plaintiff has no savings or unappropriated funds to pay
for the just compensation; that instead of expropriating the
subject property which enjoys the least priority in the
acquisition by the City of Manila for socialized housing under
Sec. 9(t) of R.A. 7279, the money to be paid should be channeled
to the development of 244 sites in Metro Manila designated as
area for priority development; that the City Ordinance was not
properly adopted since there was no public hearing and neither
were the defendants notified; that the tenants occupying the
subject property cannot be categorized as underprivileged and
homeless citizens or those whose income falls within the
poverty threshold to be qualified as beneficiaries of the
intended socialized housing; and that the plaintiff failed to
comply with Art. 34, Rule 6 of the Rules and Regulations
Implementing the Local Government Code of 1991 which
requires the local government unit to first establish the
suitability of the property to be acquired for the use intended
and then proceed to obtain from the proper authorities, like the
National Housing Authority, the necessary locational clearance
and other requirements imposed under existing laws, rules and
regulations.[14]

On June 6, 1995, the trial court allowed respondent City to take
possession of the subject property upon deposit of the amount
of P1,542,793, based on the P10,285,293.38 offer by respondent
City to petitioners which the trial court fixed as the provisional
amount of the subject properties. On June 14, 1995, respondent
City filed an opposition to petitioners motion to dismiss.

On October 3, 1995, the Citys complaint for eminent domain
was dismissed.[15] The trial court held that expropriation was
inappropriate because herein petitioners were in fact willing to
sell the subject properties under terms acceptable to the
purchaser. Moreover, respondent City failed to show that its
offer was rejected by petitioners. Respondent Citys motion for
reconsideration was denied.

On January 12, 1996, respondent City appealed the decision of
the trial court to the Court of Appeals. Thereafter, several
motions[16] seeking the issuance of a temporary restraining
order and preliminary injunction were filed by respondent City
to prevent petitioners from ejecting the occupants of the subject
premises. On March 21, 1996, the Court of Appeals issued a
resolution[17] denying the motions for lack of merit.
Respondent Citys motion for reconsideration was likewise
denied.

Meanwhile, on January 27, 1997, in view of the finality of the
judgment in the ejectment case against respondent Abiog, the
MTC of Manila, Branch 10, issued a writ of execution.

On January 31, 1997, respondent SBMI filed in the Court of
Appeals a motion for leave to intervene with prayer for
injunctive relief praying that the ejectment cases be suspended
or that the execution thereof be enjoined in view of the
pendency of the expropriation case filed by respondent City over
the same parcels of land.

As a follow-up, respondent Abiog filed in the appellate court, on
August 25, 1997, a reiteratory motion for issuance of temporary
restraining order and to stop the execution of the order dated
June 27, 1997 of the Hon. Judge Tranquil P. Salvador, MTC of
Manila, Branch 10.

On August 26, 1997, the Court of Appeals issued a resolution[18]
finding prima facie basis to grant SBMIs motions. It issued a
temporary restraining order to Judge Salvador, his employees
and agents to maintain the status quo. After the hearing on the
propriety of the issuance of a writ of preliminary injunction,
respondent SBMI filed a reiteratory motion for injunctive relief
on December 11, 1997.

On January 27, 1998, the Court of Appeals rendered the assailed
decision reversing the trial court judgment and upholding as
valid respondent Citys exercise of its power of eminent domain
over petitioners properties. The dispositive portion of the
decision stated:

WHEREFORE, the Orders appealed from are hereby REVERSED
and SET ASIDE. The case is remanded to the lower court to
determine specifically the amount of just compensation.

SO ORDERED.[19]

According to the Court of Appeals:

xxx there is no doubt as to the public purpose of the plaintiff-
appellant in expropriating the property of the defendants-
appellees. Ordinance No. 7818 expressly states that the subject
parcels of land are to be distributed to the landless poor
residents therein who have been in possession of the said
property for at least ten (10) years.

xxx xxx xxx

xxx In the absence of any law which expressly provides for a
period for filing an expropriation proceeding, the lower court
erred in dismissing the complaint based on unsupported
accusations and mere speculations, such as political motivation.
The fact that the expropriation proceeding was not immediately
instituted does not negate the existence of the public purpose
for which the ordinance was enacted.

Another reason for the lower courts dismissal was its finding
that there was no proof that the offer of the plaintiff-appellant,
through the City Legal Office, was not accepted. This conclusion
by the lower court is belied by the letter of Adoracion D. Reyes,
dated 17 March 1995, xxx.

xxx xxx xxx

There can be no interpretation of the letter of the defendant-
appellee other than that the valid and definite offer of the
plaintiff-appellant to purchase the subject property was not
accepted and, in the words of the defendant-appellee, was
totally turned down.

The lower court in denying the plaintiff-appellants motion for
reconsideration of the order of dismissal held that the
defendants-appellees were actually willing to sell, in fact, some
of the tenants have already purchased the land that they
occupy. However, we agree with the plaintiff-appellant that the
contracts entered into by the defendants-appellees with some of
the tenants do not affect the offer it made. The plaintiff-
appellant was not a party in those transactions and as pointed
out, its concern is the majority of those who have no means to
provide themselves with decent homes to live on.[20]

From the aforementioned decision of the Court of Appeals,
petitioners filed on March 19, 1998 the present petition for
review[21] before this Court. Alleging that respondent City
cannot expropriate the subject parcels of land, petitioners
assigned the following as errors of the Court of Appeals:

The Court Appeals committed grave abuse and irreversible
errors in holding that respondent City of Manila may expropriate
petitioners parcels of land considering that:

I. Respondent did not comply with Secs. 9 and 10 of P.D. (sic)
No. 7279, otherwise known as the Urban Development and
Housing Act of 1992 and Sec. 34 of the Local Government Code
of 1991 (sic).

II. Ordinance No. 7818 enacted by the City of Manila is
violative of the equal protection clause.

III. There was no valid and definite offer by the respondent
City of Manila to purchase subject parcels of land.

IV. Assuming there was a valid offer, the amount deposited
for the payment of just compensation was insufficient.

V. Petitioners are not unwilling to sell the subject parcels of
land.

VI. There was no pronouncement as to just compensation.
[22]

What followed were incidents leading to the filing of the petition
for certiorari against the resolutions of the Court of Appeals
which essentially sought to enjoin the petitioners from enforcing
the final judgments against respondents Abiog, Maglonso and
SBMI (hereinafter, respondent occupants) in the ejectment
cases.

On August 17, 1998, respondents Abiog and Maglonso filed in
the Court of Appeals an urgent motion for protective order.

Meanwhile, on September 8, 1998, petitioners were able to
secure from the MTC of Manila, Branch 3, a writ of execution of
the final judgment in the other ejectment case against
respondent Maglonso.

On October 19, 1998, respondent SBMI filed in the CA a similar
motion for protective order. In essence, the respondents
motions for protective order sought to stop the execution of
the final and executory judgments in the ejectment cases against
them.

On August 19, 1998, the Court of Appeals promulgated the first
assailed resolution,[23] the dispositive portion of which read:

Considering that this case has been elevated to the Supreme
Court, the Municipal Trial Court of Manila, Branch 10 and Sheriff
Jess Areola or any other sheriff of the City of Manila, are hereby
TEMPORARILY RESTRAINED from disturbing the occupancy of Dr.
Rosario Abiog, one of the members of the SBMI until the
Supreme Court has decided the Petition for Review on
Certiorari.

On September 4, 1998, petitioners filed a motion to set aside as
ineffective and/or null and void the said August 19, 1998
resolution. But the Court of Appeals denied the same in a
resolution dated December 16, 1998,[24] the dispositive portion
of which read:

WHEREFORE, the Estate or heirs of J.B.L. Reyes and all persons
acting in their behalf are hereby ENJOINED from disturbing the
physical possession of all the properties (sic) subject of the
expropriation proceedings.

SO ORDERED.

In enjoining the petitioners from evicting respondent occupants
and in effect suspending the execution of the MTC judgments,
the appellate court held that:

We do not agree with the contention of the defendants-
appellees that we no longer have any jurisdiction to issue the
subject resolution. In spite of having rendered the decision on 27
January 1998, the appellate Court still has the inherent power
and discretion to amend whatever order or decision it had made
before in order to render substantial justice.

xxx xxx xxx

There is no doubt that the members of SBMI have a personality
to intervene before this Court. The plaintiff-appellant itself, in
their Comment to the defendants-appellees motion to set aside
this Courts 19 August 1998 resolution, recognized Dr. Rosario
Abiog, as one of the intended beneficiaries of the expropriation
case. The plaintiff-appellant also enumerated the ejectment
cases pending before the lower courts when it filed a motion for
the issuance of temporary restraining order and/or writ of
preliminary injunction upon appeal to this Court. Moreover, the
plaintiff-appellant also furnished this Court with a copy of the
THIRD PARTY CLAIM it filed before the City Sheriff Office and
Sheriff Dante Lot to enjoin them from implementing and
executing the Demolition Order issued by the Metropolitan Trial
Court of Manila (Branch 3) against Angelina Maglonso.

In their motion to set aside the 19 August 1998 resolution, the
defendants-appellees, quoting the Order of the lower court
denying the motion for intervention stated that:

The petition of the plaintiff to expropriate the property does not
ipso facto create any fiat that would give rise to the claim of the
movant of legal interest in the property. The petition could
well be denied leaving any assertion of interest on the part of
the movant absolutely untenable. If the petition, on the other
hand, is granted, that would be the time for the movant to
intervene, to show that they are the intended beneficiaries, and
if the plaintiff would distribute the property to other persons,
the remedy is to compel the plaintiff to deliver the lot to them.

Having established that they are the intended beneficiaries, the
intervenors then have the right to seek protection from this
Court.

On 27 January 1998, we held that the plaintiff-appellant validly
exercised its power of eminent domain and consequently may
expropriate the subject property upon payment of just
compensation. The record before us shows that on 6 June 1995,
the lower court allowed the plaintiff-appellant to take
possession of the subject property upon filing of P1,542,793.00
deposit. The property to be expropriated includes the same
properties subject of the ejectment cases against the
intervenors. There is nothing in the record that would show that
the order of possession was ever set aside or the deposit
returned to the plaintiff-appellant.

Based on the foregoing considerations, we find that the
intervenors are entitled to the injunction that they prayed for.

To allow the demolition of the premises of the intervenors
would defeat the very purpose of expropriation which is to
distribute the subject property to the intended beneficiaries
who are the occupants of the said parcels of land who have been
occupying the said lands as lessees or any term thereof for a
period of at least ten (10) years.

In the case of Lourdes Guardacasa Vda. De Legaspi vs. Hon.
Herminion A. Avendano, et al., the Supreme Court ordered the
suspension of the enforcement and implementation of the writ
of execution and order of demolition issued in the ejectment
case until after the final termination of the action for quieting of
title because it is more equitable and just and less productive of
confusion and disturbance of physical possession with all its
concomitant inconvenience and expenses.

As held in Wilmon Auto Supply Corp., et al. vs. Hon. Court of
Appeals, et al., the exception to the rule in the case of Vda. De
Legaspi case, execution of the decision in the ejectment case
would also have meant demolition of the premises, which is the
situation in the case at bar.[25]

Claiming that the Court of Appeals committed grave abuse of
discretion amounting to lack or excess of jurisdiction, petitioners
filed the subject petition for certiorari[26] with the following
assignments of error:

I

PUBLIC RESPONDENT COURT OF APPEALS HAS NO JURISDICTION
IN ISSUING THE PROTECTIVE ORDER ENJOINING THE
EXECUTION OF THE FINAL AND EXECUTORY JUDGMENTS IN THE
EJECTMENT CASES AGAINST PRIVATE RESPONDENTS BECAUSE
THE POWER TO ISSUE SUCH ORDER HAS BEEN LODGED WITH
THE HONORABLE COURT IN VIEW OF THE PENDENCY OF G.R. NO.
132431.

II

ASSUMING ARGUENDO THAT PUBLIC RESPONDENT COURT OF
APPEALS COULD ISSUE SUCH ORDER, IT ACTED WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION IN ISSUING THE PROTECTIVE ORDER IN FAVOR OF
PRIVATE RESPONDENTS BECAUSE IT HAS LONG BEEN SETTLED
THAT THEIR INTERESTS IN THE PROPERTIES SUBJECT OF THE
EXPROPRIATION CASE ARE NOT SUFFICIENT FOR THEM TO BE
DECLARED AS INTERVENORS.

III

THE SO-CALLED PROTECTIVE ORDER IS AN INJUNCTIVE RELIEF IN
DISGUISE.

IV

PRIVATE RESPONDENTS ACT OF SEEKING THE PROTECTIVE
ORDER FROM THE COURT OF APPEALS, DESPITE THE FINALITY OF
THE ORDER BY THE TRIAL COURT DISALLOWING INTERVENTION,
CONSTITUTES FORUM SHOPPING.

V

The assailed resolutions of the Court of Appeals should be set
aside, following the ruling in Filstream International, Inc. vs. CA,
Judge Tongco and the City of Manila (G.R. No. 125218, January
23, 1998) and Filstream International, Inc. vs. CA, Malit et al.
(G.R. No. 128077, January 23, 1998).[27]

In G.R. No 132431, petitioners allege: (1) that Ordinance 7818 is
unconstitutional for violating the equal protection clause of the
1987 Constitution and for abridging the contracts between
petitioners and prospective buyers of the subject parcels of land;
(2) that, in expropriating the subject properties, respondent
Citys act of expropriation is illegal because it did not comply
with Sections 9 and 10 of Republic Act No. 7279 (The Urban
Development and Housing Act of 1992); (3) that, prior to the
filing of the eminent domain complaint, respondent City did not
make a valid and definite offer to purchase the subject
properties, and (4) that, assuming the offer as valid, the amount
offered was insufficient.[28]

On the other hand, in insisting that its offer was valid and that
the amount it deposited was sufficient, respondent City
reiterates the reasons cited by the Court of Appeals. According
to respondent City, there is nothing in the Local Government
Code of 1991 which requires the offer to be made before
enacting an enabling ordinance. The actual exercise of the
power of eminent domain begins only upon the filing of the
complaint for eminent domain with the RTC by the Chief
Executive and not when an ordinance pursuant thereto has been
enacted. It is therefore safe to say that the offer to purchase can
be made before the actual filing of the complaint, whether that
is before or after the ordinance is enacted.

On the sufficiency of the amount deposited, respondent City
alleges that the determination of the provisional value of the
property was judicially determined by the trial court at
P10,285,293.38 in its order dated June 6, 1995. On the basis of
this order, respondent City filed its compliance dated June 13,
1995 manifesting the deposit of the additional amount of
P1,452,793 (15% of P10,285,293.38).

Respondent City also claims that all along petitioners were not
willing to sell the subject parcels of land as proved by the tenor
of the letter of petitioners agent, Adoracion Reyes, who wrote
respondent City that it is the consensus of the heirs xxx to turn
down as we are totally turning down your offer to purchase the
parcels of land subject matter of the aforesaid ordinance, or
your offer is not acceptable to us in every respect.

In G.R. No. 137146 (the petition for certiorari questioning the
resolutions of the Court of Appeals which issued a temporary
restraining order and ordered the parties to maintain the status
quo), petitioners assail the resolutions of the Court of Appeals
which in effect enjoined the MTC of Manila, Branches 9 and 10,
from enforcing the final judgments in the ejectment cases while
the appeal from the decision involving the same parcels of land
in the expropriation case remains pending before this Court.
Petitioners maintain that, first, only this Court and not the Court
of Appeals has jurisdiction to enjoin the execution of the
judgments in the ejectment cases considering that the
expropriating case is now being reviewed by this Court; second,
the orders are void as they protect an alleged right that does not
belong to respondent City but to a non-party in the
expropriation case; third, said orders deprive petitioners of their
property without due process of law because they amount to a
second temporary restraining order which is expressly
prohibited by Section 5, Rule 58 of the Rules of Court[29]; last,
petitioners brand respondent occupants act of seeking the
assailed protective order, despite the finality of the trial court
order disallowing intervention, as forum-shopping.

To justify the propriety of their intervention and the legality of
the assailed resolutions, respondent occupants aver the
following:

first, Section 9(1)[30] of BP 129 (The Judiciary Reorganization Act
of 1980) is broad enough to include protective orders. If the
Court of Appeals has the power to annul judgments of the RTC,
with more reason does it have the power to annul judgments of
the MTC.

second, as the undisputed rightful beneficiaries of the
expropriation, they have the right to intervene.

third, their right to intervene has never been barred with
finality. Due to the dismissal of the complaint for expropriation,
their motion for reconsideration of the trial court order denying
their motion to intervene was never ruled upon as it became
moot and academic. The trial courts silence does not mean a
denial of the intervention and injunction that respondent
occupants prayed for.

fourth, it is more appropriate in the interest of equity and justice
to preserve the status quo pending resolution by this Court of
petitioners appeal in the expropriation case because they are
anyway the beneficiaries of the subject properties. The
expropriation case should be considered as a supervening event
that necessitated a modification, suspension or abandonment of
the MTC decisions.

fifth, respondents are not guilty of forum-shopping for the
reason that the Court of Appeals never made a ruling or decision
on respondents motion to intervene. Moreover, the causes of
action in the two cases were different and distinct from each
other. In the motion to intervene, respondent occupants sought
to be recognized and included as parties to the expropriation
case. On the other hand, in the motion for protective order,
respondents sought to enjoin the execution of the decisions in
the ejectment cases against them.

Before proceeding to the discussion of the issues, it would be
best to first recapitulate the confusing maze of facts of this case.

It is not disputed that the petitioners acquired a favorable
judgment of eviction against herein respondents Abiog and
Maglonso. In 1998, the said judgments became final and
executory. Consequently, writs of execution were issued. During
the pendency of the complaints for unlawful detainer,
respondent City filed a case for the expropriation of the same
properties involved in the ejectment cases. From thereon,
numerous motions to intervene and motions for injunction were
filed in the expropriation case by respondents. The trial court
allowed respondent City to take possession of the property; it
denied the motions for intervention and injunction, and, after
allowing respondent City to oppose the motion to dismiss,
dismissed the complaint for expropriation. On appeal, the Court
of Appeals reversed the trial court and found that respondent
City properly exercised its right to expropriate the subject
properties. Petitioners appealed the CA decision to this Court.
Thereafter, on motion of respondent occupants, the Court of
Appeals issued protective orders that required the parties to
maintain the status quo (prohibiting any ejectment) pending this
Courts resolution of the appeal.

Petitioner is now before us questioning the legality of the CAs
expropriation order and the propriety of its act enjoining the
execution of the final judgments in the ejectment cases.

With these given facts, it is imperative to first resolve the issue
of whether the respondent City may legally expropriate the
subject properties, considering that a negative finding will
necessarily moot the issue of the propriety of the protective
orders of the Court of Appeals.

Whether respondent City deprived petitioners of their property
without due process of law depends on whether the City
complied with the legal requirements for expropriation. Before
respondent City can exercise its power of eminent domain, the
same must be sanctioned and must not violate any law. Being a
mere creation of the legislature, a local government unit can
only exercise powers granted to it by the legislature. Such is the
nature of the constitutional power of control of Congress over
local government units, the latter being mere creations of the
former.[31]

When it expropriated the subject properties, respondent City
relied on its powers granted by Section 19 of the Local
Government Code of 1991[32] and RA 409 (The Revised Charter
of the City of Manila). The latter specifically gives respondent
City the power to expropriate private property in the pursuit of
its urban land reform and housing program.[33] Respondent
City, however, is also mandated to follow the conditions and
standards prescribed by RA 7279 (the Urban Development and
Housing Act of 1992), the law governing the expropriation of
property for urban land reform and housing. Sections 9 and 10 of
RA 7279 specifically provide that:

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 sub-
divisions, 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 of Priority Development,
Zonal Improvement sites, and Slum Improvement and
Resettlement Program sites which have not yet been acquired;

(e) Bagong Lipunan Improvement sites and Services or BLISS
sites which have not yet been acquired; and

(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.

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: 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. [italics
supplied]

In Filstream vs. Court of Appeals,[34] we held that the above-
quoted provisions are limitations to the exercise of the power of
eminent domain, specially with respect to the order of priority in
acquiring private lands and in resorting to expropriation
proceedings as a means to acquire the same. Private lands rank
last in the order of priority for purposes of socialized housing. In
the same vein, expropriation proceedings are to be resorted to
only after the other modes of acquisition have been exhausted.
Compliance with these conditions is mandatory because these
are the only safeguards of oftentimes helpless owners of private
property against violation of due process when their property is
forcibly taken from them for public use.

We find that herein respondent City failed to prove strict
compliance with the requirements of Sections 9 and 10 of RA
7279. Respondent City neither alleged in its complaint nor
proved during the proceedings before the trial court that it
complied with said requirements. Even in the Court of Appeals,
respondent City in its pleadings failed to show its compliance
with the law. The Court of Appeals was likewise silent on this
specific jurisdictional issue. This is a clear violation of the right to
due process of the petitioners.

We also take note of the fact that Filstream is substantially
similar in facts and issues to the case at bar.

In that case, Filstream acquired a favorable judgment of eviction
against the occupants of its properties in Tondo, Manila. But
prior thereto, on the strength of Ordinance 7818 (the same
ordinance used by herein respondent City as basis to file the
complaint for eminent domain), respondent City initiated a
complaint for expropriation of Filstreams properties in Tondo,
Manila, for the benefit of the residents thereof. Filstream filed a
motion to dismiss and the City opposed the same. The trial court
denied the motion. When the judgment in the ejectment case
became final, Filstream was able to obtain a writ of execution
and demolition. It thereafter filed a motion to dismiss the
expropriation complaint but the trial court denied the same and
ordered the condemnation of the subject properties. On appeal,
the Court of Appeals denied Filstreams petition on a technical
ground. Thus, the case was elevated to this Court for review of
the power of the City to expropriate the Filstreams properties.

Meanwhile, the occupants and respondent City filed in separate
branches of the RTC of Manila several petitions for certiorari
with prayer for injunction to prevent the execution of the
judgments in the ejectment cases. After the consolidation of the
petitions for certiorari, the designated branch of RTC Manila
dismissed the cases on the ground of forum-shopping. The
dismissal was appealed to the Court of Appeals which reversed
the trial courts dismissal and granted respondents prayer for
injunction. Filstream appealed the same to this Court, which
appeal was consolidated with the earlier petition for review of
the decision of the Court of Appeals in the main expropriation
case.

Due to the substantial resemblance of the facts and issues of the
case at bar to those in Filstream, we find no reason to depart
from our ruling in said case. To quote:

The propriety of the issuance of the restraining order and the
writ of preliminary injunction is but a mere incident to the actual
controversy which is rooted in the assertion of the conflicting
rights of the parties in this case over the disputed premises. In
order to determine whether private respondents are entitled to
the injunctive reliefs granted by respondent CA, we deemed it
proper to extract the source of discord.

xxx xxx xxx

Proceeding from the parameters laid out in the above
disquisitions, we now pose the crucial question: Did the city of
Manila comply with the abovementioned conditions when it
expropriated petitioner Filstreams properties? We have
carefully scrutinized the records of this case and found nothing
that would indicate the respondent City of Manila complied with
Sec. 9 and Sec. 10 of R.A. 7279. Petitioners Filstreams
properties were expropriated and ordered condemned in favor
of the City of Manila sans any showing that resort to the
acquisition of other lands listed under Sec. 9 of RA 7279 have
proved futile. Evidently, there was a violation of petitioner
Filstreams right to due process which must accordingly be
rectified.

Indeed, it must be emphasized that the State has a paramount
interest in exercising its power of eminent domain for the
general good considering that the right of the State to
expropriate private property as long as it is for public use always
takes precedence over the interest of private property owners.
However we must not lose sight of the fact that the individual
rights affected by the exercise of such right are also entitled to
protection, bearing in mind that the exercise of this superior
right cannot override the guarantee of due process extended by
the law to owners of the property to be expropriated. In this
regard, vigilance over compliance with the due process
requirements is in order.[35]

Due to the fatal infirmity in the Citys exercise of the power of
eminent domain, its complaint for expropriation must
necessarily fail. Considering that the consolidated cases before
us can be completely resolved by the application of our
Filstream ruling, it is needless to discuss the constitutionality of
Ordinance 7818. We herein apply the general precept that
constitutional issues will not be passed upon if the case can be
decided on other grounds.[36]

In view of the dismissal of the complaint for expropriation and
the favorable adjudication of petitioners appeal from the
decision of the Court of Appeals on the expropriation of the
subject properties, the petition for certiorari questioning the
validity of the Court of Appeals resolutions (allowing respondent
occupants to intervene and granting their motion to enjoin the
execution of the executory judgments in the ejectment cases)
becomes moot and academic.

WHEREFORE, the petitions are hereby GRANTED. In G.R. No.
132431, the decision of the Court of Appeals dated January 27,
1998 is hereby REVERSED and SET ASIDE. In G.R. No. 137146, the
resolutions of the Court of Appeals dated August 19, 1998 and
December 16, 1998 are hereby REVERSED and SET ASIDE.

SO ORDERED.

Sandoval-Gutierrez, and Carpio-Morales, JJ., concur.

Vitug, (Chairman), J., no part. Did not participate in the
deliberation.

[1] Docketed as G.R. No. 132431.

[2] Penned by Associate Justice Eubulo G. Verzola and concurred
in by Associate Justices Jorge S. Imperial and Artemio G. Tuquero
of the Fourth Division; Rollo of G.R. No. 132431, pp. 45-56.

[3] Penned by Judge Edilberto Sandoval; Rollo of G.R. No.
132431, pp. 114-119.

[4] Docketed as G.R. No. 137146.

[5] Penned by Associate Justice Eubulo Verzola and concurred in
by Associate Justices Jorge S. Imperial and Artemio G. Tuquero;
Rollo of G.R. No. 137146, pp. 42-43.

[6] Penned by Associate Justice Eubulo Verzola and concurred in
by Associate Justices Jorge S. Imperial and Artemio G. Tuquero;
Rollo of G.R. No. 137146, pp. 45-52.

[7] Rollo of G.R. No. 137146, pp. 73-74.

[8] Ibid, p. 97.

[9] Ibid., pp. 73-75, 99-110.

[10] Ibid., pp. 77-78, 129-133.

[11] Docketed as Civil Case No. 95-73687.

[12] Rollo of G.R. No. 132431, p. 47.

[13] Records, pp. 170-171.

[14] Records, pp. 136-148.

[15] Rollo of G.R. No. 137146, pp. 184-189.

[16] Urgent Motion for the Issuance of a Temporary Restraining
Order and/or Writ of Preliminary Injunction, a Reiteration of
Supplement to Urgent Motion for Injunctive Relief and an
Urgent Ex-Parte Motion for Temporary Restraining Order.

[17] Penned by Associate Justice Pedro Ramirez and concurred in
by Associate Justice Ma. Alicia Austria-Martinez (now Associate
Justice of the Supreme Court) and Bernardo Salas of the Fifth
Division; Rollo of G.R. No. 137146, pp. 204-207.

[18] Penned by Associate Justice Maximiano C. Asuncion and
concurred in by Associate Justice Minerva P. Gonzaga-Reyes
(retired Associate Justice of the Supreme Court) and Eubulo G.
Verzola of the Eighth Division; Rollo of G.R. No. 137146, p. 231.

[19] Rollo of G.R. No. 132431, p. 56.

[20] Rollo of G.R. No. 132431, pp. 52-54.

[21] Docketed as G.R. No. 132431.

[22] Rollo of G.R. No. 132431, p. 309.

[23] Penned by Justice Eubulo G. Verzola and concurred in by
Justices Ramon A. Barcelona and Artemio G. Tuquero, Special
Former Fourth Division; Rollo of G.R. No. 137146, p. 43.

[24] Penned by Justice Eubulo G. Verzola and concurred in by
Justices Jorge S. Imperial and Artemio G. Tuquero, Former
Fourth Division; Rollo of G.R. No. 137146, p. 52.

[25] Rollo of G.R. No. 137146, pp. 48, 50-51.

[26] Under Rule 65 of the 1997 Rules of Civil Procedure.

[27] Rollo of G.R. No. 137146, pp. 16-17.

[28] Petitioners pray that Ordinance 7818 be declared
unconstitutional because it violated the equal protection
clause of the 1987 Constitution. According to the ordinance, the
beneficiaries of the subject properties are the occupants of the
said parcels of land who have been occupying the said lands as
lessees or any term thereof for a period of at least ten (10)
years. Petitioners contend that the distinction between lessee
and non-lessee is not germane to the purpose of the law, i.e., to
give the land to the landless residents. By including only 10-year
occupants, it also discriminates against other occupants who
may also be landless. The ordinance failed to justify the
distinction between a 10-year and a less-than-10-year occupant.
Likewise, the ordinance impaired the contractual rights of
petitioners. Prior to the expropriation, the tenants had pending
negotiations with petitioners for the purchase of the portions of
the subject properties. But after the passage of the ordinance,
none of our tenants desired to negotiate with us to purchase
that (sic) portions of the subject parcels of land being
respectively leased by them.

Quoting Filstream vs. Court of Appeals (284 SCRA 716
[1998]), petitioners also aver that, in expropriating the
properties, respondent City violated Sections 9 and 10 of RA
7279 by not complying with the procedure laid down by said
provisions. They even point out that the subject parcels of land
are not included in the 244 sites in Metropolitan Manila
designated as area for priority development under PD 1967 (An
Act Amending Proclamation No. 1893 By Specifying 244 Sites in
Metropolitan Manila as Area for Priority and Urban Land Reform
Zones.)

Petitioners likewise contend that respondent City did not
make a definite and valid offer prior to the filing of the
complaint for expropriation. According to Section 3 of the
Ordinance 7818, the funds necessary for paying just
compensation shall come from the unappropriated fund and/or
savings of the City Government. Clearly, respondent City did
not provide a specific amount of money for the expropriation of
the subject properties. Respondent cannot therefore make any
offer which may be considered definite as the ordinance which
authorized it to expropriate the subject parcels of land did not
even appropriate a specific and determinate sum of money for
the purpose. Thus, the amount of P10,285,293.36 stated in its
letter offering to buy the properties from the petitioners, had no
legal basis.

Last, assuming arguendo that the offer was valid, the
amount deposited for the payment of just compensation was
insufficient. In the complaint, respondent City prayed that it be
allowed to enter and take possession of the subject parcels of
land upon the deposit of P1,452,657 which is fifteen (15%)
percent of the (assessed value) of the property. Under Section
19 of the Local Government Code of 1991, the deposit should be
15% of the fair market value of the property. Petitioners
contend that the fair market value of the parcels of land based
on the current tax declarations is P19,619,520. 15% of which is
P2,942,928. The amount deposited was therefore insufficient.

[29] SEC. 5. Preliminary injunction not granted without notice;
exception.

xxx xxx xxx

In the event that the application for preliminary injunction is
denied or not resolved within the said period, the temporary
restraining order is deemed automatically not vacated. The
effectivity of a temporary restraining order is not extendible
without need of any judicial declaration to renew the same on
the same ground for which it was issued.

xxx xxx xxx

[30] SECTION 9. Jurisdiction. The Intermediate Appellate
Court shall exercise:

(1) Original jurisdiction to issue writs of mandamus,
prohibition, certiorari, habeas corpus, and quo warranto, and
auxiliary writs or processes, whether or not in aid of its appellate
jurisdiction;

[31] See Section 10, Article X of the 1987 Constitution; Section 6
of the Local Government Code of 1991; Judge Dadole et. al. vs.
Commission on Audit, G.R. No. 125350, December 3, 2002.

[32] 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 (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.

*33+ General powers The city may have a common seal and
alter the same at pleasure, and may take, purchase, receive,
hold, lease, convey, and dispose of real and personal property
for the general interest of the city, condemn private property for
public use, contract and be contracted with, sue and be sued,
and prosecute and defend to final judgment and execution, and
exercise all the powers hereinafter conferred. (R.A. 409, Sec.
3).

xxx xxx xxx

Sec. 100. The City of Manila is authorized to acquire private
lands in the city and to subdivide the same into home lots for
sale on easy terms to city residents, giving first priority to the
bona fide tenants or occupants of said lands, and second priority
to laborers and low-salaried employees. For the purpose of this
section, the city may raise necessary funds by appropriations of
general funds, by securing loans or by issuing bonds, and, if
necessary, may acquire the lands through expropriation
proceedings in accordance with law, with the approval of the
President xxx.

[34] 284 SCRA 716, 731 [1998].

[35] Ibid,. pp. 731-732.

[36] Filipinas Marble Corp. vs. Intermediate Appellate Court, 142
SCRA 182 [1986]; Tropical Homes, Inc. vs. National Housing
Authority, 152 SCRA 540 [1987].



lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 175983 April 16, 2009

METROPOLITAN CEBU WATER DISTRICT (MCWD), Petitioner,
vs.
J. KING AND SONS COMPANY, INC., Respondent.

D E C I S I O N

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 respondents 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 respondents
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 latters
property. Respondent did not acquiesce to petitioners 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 respondents 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
petitioners counsel had failed to attend.13 Petitioner
deposited14 with the Clerk of Court the amount of P17,500.00
equivalent to one hundred percent (100%) of the current zonal
value of the property which the Bureau of Internal Revenue had
pegged at P3,500.00 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

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 respondents 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
petitioners 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 petitioners 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. Petitioners 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, petitioners 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
respondents lot. Specifically, the LWUA through its
Administrator, Lorenzo H. Jamora, wrote petitioners 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 respondents 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 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. Respondents 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.

x x x

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

x x x

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 guidelinesthe 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 caseis 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 courts part to issue the writ of
possession and on the sheriffs part to deliver possession of
respondents 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
P17,500.00 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
Associate Justice

WE CONCUR:

LEONARDO A. QUISUMBING
Associate Justice
Chairperson
CONCHITA CARPIO MORALES
Associate Justice PRESBITERO J. VELASCO, JR.
Associate Justice

ARTURO D. BRION
Associate Justice

A T T E S T A T I O N

I attest 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 Courts Division.

LEONARDO A. QUISUMBING
Associate Justice
Chairperson, Second Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the
Division Chairpersons Attestation, it is hereby certified 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 Courts Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1 Rollo. pp. 9-23.

2 Id. at 29-36; Dated 26 July 2006; penned by Associate Justice
Isaias Dicdican and concurred in by Associate Justices Apolinario
Bruselas, Jr. and Agustin S. Dizon.

3 Id. at 49-50; Dated 28 September 2006.

4 Id. at 57-58; Dated 01 April 2005 and 9 May 2005, both
penned by Judge Generosa Labra.

5 Id. at 98-100; Dated 21 June 2005 issued by Clerk of Court
Jeoffrey Joaquino.

6 P.D. No. 198, Sec. 5.

Section 5. Purpose.Local water districts may be formed
pursuant to this Title for the purposes of (a) acquiring, installing,
improving, maintaining and operating water supply and
distribution systems for domestic, industrial, municipal and
agricultural uses for residents and lands within the boundaries
of such districts, (b) providing, maintaining and operating waste-
water collection, treatment and disposal facilities, and (c)
conducting such other functions and operations incidental to
water resource development, utilization and disposal within
such districts, as are necessary or incidental to said purpose.

7 Rollo, pp. 112-116.

8 P.D. No. 198, Sec.. 25, as amended.

Section 25. Authorization. The district may exercise all the
powers which are expressly granted by this Title or which are
necessarily implied from or incidental to the powers and
purposes herein stated. For the purpose of carrying out the
objectives of this Act, a district is hereby granted the power of
eminent domain, the exercise thereof shall, however, be subject
to review by the Administration.

9 Rollo, p. 118.

10 Id. at 95; Letter dated 28 February 2005.

11 Id. at 102-106.

12 Records, pp. 49-50.

13 Rollo, p. 40.

14 Id. at 56; Official Receipt No. 5908819 dated 16 March
2005.

15 Id. at 117.

16 Id.a t 57-58; Order dated 1 April 2005.

17 Id. at 98-100.

18 Id. at 97.

19 Id. at 233-278.

20 Id. at 82-83; Dated 28 June 2005.

21 Id. at 44.

22 Supra note 2.

23 Id. at 37-45; Dated 23 August 2006.

24 Supra note 3.

25 1987 Const., Art. III, Sec. 9.

Sec. 9Private property shall not be taken for public use
without just compensation.

26 Barangay Sindalan, San Fernando, Pampanga v. Court of
Appeals, G.R. No.150640, 22 March 2007, 518 SCRA 649.

27 Supra note 8.

28 Rollo, p. 84.

29 Implementing Rules and Regulation of R.A. No. 8974
(2001).

Sec. 2 Definition of Terms

x x x

(d) National government projectsbased on Section 2 of the
Act, refer to all to all national government infrastructure,
engineering works, and service contracts, including all projects
covered by Republic Act No. 6957, as amended by Republic Act
No. 7718, otherwise known as the Build-Operate-Transfer Law x
x x these projects shall include, but not limited, to x x x water
supply, sewerage and waste management facilities x x x

30 P.D. No. 198, Sec. 6, as amended,

Sec. 6. Formation of District.This Act is the source of
authorization and power to form and maintain a district. For
purposes of this Act, a district shall be considered as a quasi-
public corporation performing public service and supplying
public wants. As such, a district shall exercise the powers, rights
and privileges given to private corporations under existing laws,
in addition to the powers granted in, and subject to such
restrictions imposed, under this Act.

xxx

31 P.D. No. 198, Sec. 17, as amended.

Sec. 17. Performance of District Powers.All powers,
privileges, and duties of the district shall be exercised and
performed by and through the board: Provided, however, that
any executive, administrative or ministerial power shall be
delegated and redelegated by the board to officers or agents
designated for such purpose by the board.

32 Rollo, p. 118.

33 Id. at 95.

34 Infra note 42.

35 Republic v. Phil-Ville Development and Housing
Corporation, G.R. No. 172243, 26 June 2007, 525 SCRA 776.

36 Tan v. Republic G.R. No. 170740, 25 May 2007,523 SCRA
203.

37 Id. at 211-212. Citing Municipality of Bian v. Garcia, G.R.
No. 69260, 22 December 1989, 180 SCRA 576; National Power
Corp. v. Jocson, G.R. Nos. 94193-99, 25 February 1992, 206 SCRA
520. See also Lintag v. National Power Corporation, G.R. No.
158609, 27 July 2007, 528 SCRA 287, 297.

38 Rules of Court, Rule 67, Sec. 2.

Sec.2 Entry of plaintiff upon depositing value with authorized
government depositary.Upon 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.

If personal property is involved, its value shall be provisionally
ascertained and the amount to be deposited shall be promptly
fixed by the court.

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.

39 G.R. No. 166429, 19 December 2005, 478 SCRA 474, 519.

40 Id. at 519-520. Cited in National Power Corporation v. Co,
G.R. No. 166973, 10 February 2009.

41 Sec. 5 Standards for the Assessment of the Value of the
Land Subject of Expropriation Proceedings or Negotiated Sale.
In order to facilitate the determination of just compensation, the
court may consider, among other well-established factors, the
following relevant standards:

(a) The classification and use for which the property is suited;

(b) The developmental costs for improving the land;

(c) The value declared by the owners;

(d) The current selling price of similar lands in the vicinity;

(e) The reasonable disturbance compensation for the removal
and/or demolition of certain improvements on the land and for
the value of improvements thereon;

(f) The size, shape, or location, tax declaration and zonal
valuation of the land;

(g) The price of the land as manifested in the ocular findings,
oral as well as documentary evidence presented; and

(h) Such facts and events as to enable the affected property
owners to have sufficient funds to acquire similarly-situated
lands of approximate areas as those required from them by the
government, and thereby rehabilitate themselves as early as
possible.

42 R.A. No. 8974, Sec. 4.

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 implementing agency shall initiate
the expropriation proceedings before the proper court under the
following guidelines:

(a) Upon 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;

x x x

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.

x x x

43 Resolution denying Motion for Reconsideration in Republic
v. Gingoyon, G.R. No. 166429, 1 February 2006, 481 SCRA 457,
467.

44 Capitol Steel Corporation v. PHIVIDEC Industrial Authority,
G.R. No. 169453, 6 December 2006, 510 SCRA 590, 617.

45 Supra note 43 at 469.

46 G.R. No. 166429, 19 December 2005, 478 SCRA 474, 519.

47 Id. at 519. Cited in National Power Corporation v. Co, G.R.
No. 166973, 10 February 2009.

48 Id. at 531-532.

49 Supra note 42.

50 Supra note 44.

51 Id. at 602.

The Lawphil Project - Arellano Law Foundation


C. Taking
1. Requisites


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC



G.R. No. L-20620 August 15, 1974

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,
vs.
CARMEN M. VDA. DE CASTELLVI, ET AL., defendants-
appellees.

Office of the Solicitor General for plaintiff-appellant.

C.A. Mendoza & A. V. Raquiza and Alberto Cacnio &
Associates for defendant-appellees.



ZALDIVAR, J.:p

Appeal from the decision of the Court of First Instance of
Pampanga in its Civil Case No. 1623, an expropriation
proceeding.

Plaintiff-appellant, the Republic of the Philippines,
(hereinafter referred to as the Republic) filed, on June 26,
1959, a complaint for eminent domain against defendant-
appellee, Carmen M. Vda. de Castellvi, judicial administratrix
of the estate of the late Alfonso de Castellvi (hereinafter
referred to as Castellvi), over a parcel of land situated in the
barrio of San Jose, Floridablanca, Pampanga, described as
follows:

A parcel of land, Lot No. 199-B Bureau of Lands Plan Swo
23666. Bounded on the NE by Maria Nieves Toledo-Gozun; on
the SE by national road; on the SW by AFP reservation, and on
the NW by AFP reservation. Containing an area of 759,299
square meters, more or less, and registered in the name of
Alfonso Castellvi under TCT No. 13631 of the Register of
Pampanga ...;

and against defendant-appellee Maria Nieves Toledo Gozun
(hereinafter referred to as Toledo-Gozun over two parcels of
land described as follows:

A parcel of land (Portion Lot Blk-1, Bureau of Lands Plan
Psd, 26254. Bounded on the NE by Lot 3, on the SE by Lot 3;
on the SW by Lot 1-B, Blk. 2 (equivalent to Lot 199-B Swo
23666; on the NW by AFP military reservation. Containing an
area of 450,273 square meters, more or less and registered in
the name of Maria Nieves Toledo-Gozun under TCT No. 8708
of the Register of Deeds of Pampanga. ..., and

A parcel of land (Portion of lot 3, Blk-1, Bureau of Lands
Plan Psd 26254. Bounded on the NE by Lot No. 3, on the SE by
school lot and national road, on the SW by Lot 1-B Blk 2
(equivalent to Lot 199-B Swo 23666), on the NW by Lot 1-B,
Blk-1. Containing an area of 88,772 square meters, more or
less, and registered in the name of Maria Nieves Toledo
Gozun under TCT No. 8708 of the Register of Deeds of
Pampanga, ....

In its complaint, the Republic alleged, among other things,
that the fair market value of the above-mentioned lands,
according to the Committee on Appraisal for the Province of
Pampanga, was not more than P2,000 per hectare, or a total
market value of P259,669.10; and prayed, that the provisional
value of the lands be fixed at P259.669.10, that the court
authorizes plaintiff to take immediate possession of the lands
upon deposit of that amount with the Provincial Treasurer of
Pampanga; that the court appoints three commissioners to
ascertain and report to the court the just compensation for
the property sought to be expropriated, and that the court
issues thereafter a final order of condemnation.

On June 29, 1959 the trial court issued an order fixing the
provisional value of the lands at P259,669.10.

In her "motion to dismiss" filed on July 14, 1959, Castellvi
alleged, among other things, that the land under her
administration, being a residential land, had a fair market
value of P15.00 per square meter, so it had a total market
value of P11,389,485.00; that the Republic, through the
Armed Forces of the Philippines, particularly the Philippine Air
Force, had been, despite repeated demands, illegally
occupying her property since July 1, 1956, thereby preventing
her from using and disposing of it, thus causing her damages
by way of unrealized profits. This defendant prayed that the
complaint be dismissed, or that the Republic be ordered to
pay her P15.00 per square meter, or a total of P11,389,485.00,
plus interest thereon at 6% per annum from July 1, 1956; that
the Republic be ordered to pay her P5,000,000.00 as
unrealized profits, and the costs of the suit.

By order of the trial court, dated August, 1959, Amparo C.
Diaz, Dolores G. viuda de Gil, Paloma Castellvi, Carmen
Castellvi, Rafael Castellvi, Luis Castellvi, Natividad Castellvi de
Raquiza, Jose Castellvi and Consuelo Castellvi were allowed to
intervene as parties defendants. Subsequently, Joaquin V.
Gozun, Jr., husband of defendant Nieves Toledo Gozun, was
also allowed by the court to intervene as a party defendant.

After the Republic had deposited with the Provincial
Treasurer of Pampanga the amount of P259,669.10, the trial
court ordered that the Republic be placed in possession of the
lands. The Republic was actually placed in possession of the
lands on August 10,
1959. 1

In her "motion to dismiss", dated October 22, 1959, Toledo-
Gozun alleged, among other things, that her two parcels of
land were residential lands, in fact a portion with an area of
343,303 square meters had already been subdivided into
different lots for sale to the general public, and the remaining
portion had already been set aside for expansion sites of the
already completed subdivisions; that the fair market value of
said lands was P15.00 per square meter, so they had a total
market value of P8,085,675.00; and she prayed that the
complaint be dismissed, or that she be paid the amount of
P8,085,675.00, plus interest thereon at the rate of 6% per
annum from October 13, 1959, and attorney's fees in the
amount of P50,000.00.

Intervenors Jose Castellvi and Consuelo Castellvi in their
answer, filed on February 11, 1960, and also intervenor
Joaquin Gozun, Jr., husband of defendant Maria Nieves
Toledo-Gozun, in his motion to dismiss, dated May 27, 1960,
all alleged that the value of the lands sought to be
expropriated was at the rate of P15.00 per square meter.

On November 4, 1959, the trial court authorized the
Provincial Treasurer of Pampanga to pay defendant Toledo-
Gozun the sum of P107,609.00 as provisional value of her
lands. 2 On May 16, 1960 the trial Court authorized the
Provincial Treasurer of Pampanga to pay defendant Castellvi
the amount of P151,859.80 as provisional value of the land
under her administration, and ordered said defendant to
deposit the amount with the Philippine National Bank under
the supervision of the Deputy Clerk of Court. In another order
of May 16, 1960 the trial Court entered an order of
condemnation. 3

The trial Court appointed three commissioners: Atty.
Amadeo Yuzon, Clerk of Court, as commissioner for the court;
Atty. Felicisimo G. Pamandanan, counsel of the Philippine
National Bank Branch at Floridablanca, for the plaintiff; and
Atty. Leonardo F. Lansangan, Filipino legal counsel at Clark Air
Base, for the defendants. The Commissioners, after having
qualified themselves, proceeded to the performance of their
duties.

On March 15,1961 the Commissioners submitted their
report and recommendation, wherein, after having
determined that the lands sought to be expropriated were
residential lands, they recommended unanimously that the
lowest price that should be paid was P10.00 per square
meter, for both the lands of Castellvi and Toledo-Gozun; that
an additional P5,000.00 be paid to Toledo-Gozun for
improvements found on her land; that legal interest on the
compensation, computed from August 10, 1959, be paid after
deducting the amounts already paid to the owners, and that
no consequential damages be awarded. 4 The Commissioners'
report was objected to by all the parties in the case by
defendants Castellvi and Toledo-Gozun, who insisted that the
fair market value of their lands should be fixed at P15.00 per
square meter; and by the Republic, which insisted that the
price to be paid for the lands should be fixed at P0.20 per
square meter. 5

After the parties-defendants and intervenors had filed their
respective memoranda, and the Republic, after several
extensions of time, had adopted as its memorandum its
objections to the report of the Commissioners, the trial court,
on May 26, 1961, rendered its decision 6 the dispositive
portion of which reads as follows:

WHEREFORE, taking into account all the foregoing
circumstances, and that the lands are titled, ... the rising trend
of land values ..., and the lowered purchasing power of the
Philippine peso, the court finds that the unanimous
recommendation of the commissioners of ten (P10.00) pesos
per square meter for the three lots of the defendants subject
of this action is fair and just.

xxx xxx xxx

The plaintiff will pay 6% interest per annum on the total
value of the lands of defendant Toledo-Gozun since (sic) the
amount deposited as provisional value from August 10, 1959
until full payment is made to said defendant or deposit
therefor is made in court.

In respect to the defendant Castellvi, interest at 6% per
annum will also be paid by the plaintiff to defendant Castellvi
from July 1, 1956 when plaintiff commenced its illegal
possession of the Castellvi land when the instant action had
not yet been commenced to July 10, 1959 when the
provisional value thereof was actually deposited in court, on
the total value of the said (Castellvi) land as herein adjudged.
The same rate of interest shall be paid from July 11, 1959 on
the total value of the land herein adjudged minus the amount
deposited as provisional value, or P151,859.80, such interest
to run until full payment is made to said defendant or deposit
therefor is made in court. All the intervenors having failed to
produce evidence in support of their respective interventions,
said interventions are ordered dismissed.

The costs shall be charged to the plaintiff.

On June 21, 1961 the Republic filed a motion for a new trial
and/or reconsideration, upon the grounds of newly-
discovered evidence, that the decision was not supported by
the evidence, and that the decision was against the law,
against which motion defendants Castellvi and Toledo-Gozun
filed their respective oppositions. On July 8, 1961 when the
motion of the Republic for new trial and/or reconsideration
was called for hearing, the Republic filed a supplemental
motion for new trial upon the ground of additional newly-
discovered evidence. This motion for new trial and/or
reconsideration was denied by the court on July 12, 1961.

On July 17, 1961 the Republic gave notice of its intention to
appeal from the decision of May 26, 1961 and the order of
July 12, 1961. Defendant Castellvi also filed, on July 17, 1961,
her notice of appeal from the decision of the trial court.

The Republic filed various ex-parte motions for extension of
time within which to file its record on appeal. The Republic's
record on appeal was finally submitted on December 6, 1961.

Defendants Castellvi and Toledo-Gozun filed not only a joint
opposition to the approval of the Republic's record on appeal,
but also a joint memorandum in support of their opposition.
The Republic also filed a memorandum in support of its
prayer for the approval of its record on appeal. On December
27, 1961 the trial court issued an order declaring both the
record on appeal filed by the Republic, and the record on
appeal filed by defendant Castellvi as having been filed out of
time, thereby dismissing both appeals.

On January 11, 1962 the Republic filed a "motion to strike
out the order of December 27, 1961 and for reconsideration",
and subsequently an amended record on appeal, against
which motion the defendants Castellvi and Toledo-Gozun
filed their opposition. On July 26, 1962 the trial court issued
an order, stating that "in the interest of expediency, the
questions raised may be properly and finally determined by
the Supreme Court," and at the same time it ordered the
Solicitor General to submit a record on appeal containing
copies of orders and pleadings specified therein. In an order
dated November 19, 1962, the trial court approved the
Republic's record on appeal as amended.

Defendant Castellvi did not insist on her appeal. Defendant
Toledo-Gozun did not appeal.

The motion to dismiss the Republic's appeal was reiterated
by appellees Castellvi and Toledo-Gozun before this Court,
but this Court denied the motion.

In her motion of August 11, 1964, appellee Castellvi sought
to increase the provisional value of her land. The Republic, in
its comment on Castellvi's motion, opposed the same. This
Court denied Castellvi's motion in a resolution dated October
2,1964.


The motion of appellees, Castellvi and Toledo-Gozun, dated
October 6, 1969, praying that they be authorized to mortgage
the lands subject of expropriation, was denied by this Court
or October 14, 1969.

On February 14, 1972, Attys. Alberto Cacnio, and
Associates, counsel for the estate of the late Don Alfonso de
Castellvi in the expropriation proceedings, filed a notice of
attorney's lien, stating that as per agreement with the
administrator of the estate of Don Alfonso de Castellvi they
shall receive by way of attorney's fees, "the sum equivalent to
ten per centum of whatever the court may finally decide as
the expropriated price of the property subject matter of the
case."

---------

Before this Court, the Republic contends that the lower
court erred:

1. In finding the price of P10 per square meter of the lands
subject of the instant proceedings as just compensation;

2. In holding that the "taking" of the properties under
expropriation commenced with the filing of this action;

3. In ordering plaintiff-appellant to pay 6% interest on the
adjudged value of the Castellvi property to start from July of
1956;

4. In denying plaintiff-appellant's motion for new trial
based on newly discovered evidence.

In its brief, the Republic discusses the second error assigned
as the first issue to be considered. We shall follow the
sequence of the Republic's discussion.

1. In support of the assigned error that the lower court
erred in holding that the "taking" of the properties under
expropriation commenced with the filing of the complaint in
this case, the Republic argues that the "taking" should be
reckoned from the year 1947 when by virtue of a special lease
agreement between the Republic and appellee Castellvi, the
former was granted the "right and privilege" to buy the
property should the lessor wish to terminate the lease, and
that in the event of such sale, it was stipulated that the fair
market value should be as of the time of occupancy; and that
the permanent improvements amounting to more that half a
million pesos constructed during a period of twelve years on
the land, subject of expropriation, were indicative of an
agreed pattern of permanency and stability of occupancy by
the Philippine Air Force in the interest of national Security. 7

Appellee Castellvi, on the other hand, maintains that the
"taking" of property under the power of eminent domain
requires two essential elements, to wit: (1) entrance and
occupation by condemn or upon the private property for
more than a momentary or limited period, and (2) devoting it
to a public use in such a way as to oust the owner and deprive
him of all beneficial enjoyment of the property. This appellee
argues that in the instant case the first element is wanting, for
the contract of lease relied upon provides for a lease from
year to year; that the second element is also wanting,
because the Republic was paying the lessor Castellvi a
monthly rental of P445.58; and that the contract of lease does
not grant the Republic the "right and privilege" to buy the
premises "at the value at the time of occupancy." 8

Appellee Toledo-Gozun did not comment on the Republic's
argument in support of the second error assigned, because as
far as she was concerned the Republic had not taken
possession of her lands prior to August 10, 1959. 9

In order to better comprehend the issues raised in the
appeal, in so far as the Castellvi property is concerned, it
should be noted that the Castellvi property had been
occupied by the Philippine Air Force since 1947 under a
contract of lease, typified by the contract marked Exh. 4-
Castellvi, the pertinent portions of which read:

CONTRACT OF LEASE

This AGREEMENT OF LEASE MADE AND ENTERED into by
and between INTESTATE ESTATE OF ALFONSO DE CASTELLVI,
represented by CARMEN M. DE CASTELLVI, Judicial
Administratrix ... hereinafter called the LESSOR and THE
REPUBLIC OF THE PHILIPPINES represented by MAJ. GEN.
CALIXTO DUQUE, Chief of Staff of the ARMED FORCES OF THE
PHILIPPINES, hereinafter called the LESSEE,

WITNESSETH:

1. For and in consideration of the rentals hereinafter
reserved and the mutual terms, covenants and conditions of
the parties, the LESSOR has, and by these presents does, lease
and let unto the LESSEE the following described land together
with the improvements thereon and appurtenances thereof,
viz:

Un Terreno, Lote No. 27 del Plano de subdivision Psu 34752,
parte de la hacienda de Campauit, situado en el Barrio de San
Jose, Municipio de Floridablanca Pampanga. ... midiendo una
extension superficial de cuatro milliones once mil cuatro
cientos trienta y cinco (4,001,435) [sic] metros cuadrados,
mas o menos.

Out of the above described property, 75.93 hectares
thereof are actually occupied and covered by this contract. .

Above lot is more particularly described in TCT No. 1016,
province of
Pampanga ...

of which premises, the LESSOR warrants that
he/she/they/is/are the registered owner(s) and with full
authority to execute a contract of this nature.

2. The term of this lease shall be for the period beginning
July 1, 1952 the date the premises were occupied by the
PHILIPPINE AIR FORCE, AFP until June 30, 1953, subject to
renewal for another year at the option of the LESSEE or unless
sooner terminated by the LESSEE as hereinafter provided.

3. The LESSOR hereby warrants that the LESSEE shall have
quiet, peaceful and undisturbed possession of the demised
premises throughout the full term or period of this lease and
the LESSOR undertakes without cost to the LESSEE to eject all
trespassers, but should the LESSOR fail to do so, the LESSEE at
its option may proceed to do so at the expense of the LESSOR.
The LESSOR further agrees that should he/she/they sell or
encumber all or any part of the herein described premises
during the period of this lease, any conveyance will be
conditioned on the right of the LESSEE hereunder.

4. The LESSEE shall pay to the LESSOR as monthly rentals
under this lease the sum of FOUR HUNDRED FIFTY-FIVE PESOS
& 58/100 (P455.58) ...

5. The LESSEE may, at any time prior to the termination of
this lease, use the property for any purpose or purposes and,
at its own costs and expense make alteration, install facilities
and fixtures and errect additions ... which facilities or fixtures
... so placed in, upon or attached to the said premises shall be
and remain property of the LESSEE and may be removed
therefrom by the LESSEE prior to the termination of this lease.
The LESSEE shall surrender possession of the premises upon
the expiration or termination of this lease and if so required
by the LESSOR, shall return the premises in substantially the
same condition as that existing at the time same were first
occupied by the AFP, reasonable and ordinary wear and tear
and damages by the elements or by circumstances over which
the LESSEE has no control excepted: PROVIDED, that if the
LESSOR so requires the return of the premises in such
condition, the LESSOR shall give written notice thereof to the
LESSEE at least twenty (20) days before the termination of the
lease and provided, further, that should the LESSOR give
notice within the time specified above, the LESSEE shall have
the right and privilege to compensate the LESSOR at the fair
value or the equivalent, in lieu of performance of its
obligation, if any, to restore the premises. Fair value is to be
determined as the value at the time of occupancy less fair
wear and tear and depreciation during the period of this
lease.

6. The LESSEE may terminate this lease at any time during
the term hereof by giving written notice to the LESSOR at
least thirty (30) days in advance ...

7. The LESSEE should not be responsible, except under
special legislation for any damages to the premises by reason
of combat operations, acts of GOD, the elements or other acts
and deeds not due to the negligence on the part of the
LESSEE.

8. This LEASE AGREEMENT supersedes and voids any and all
agreements and undertakings, oral or written, previously
entered into between the parties covering the property
herein leased, the same having been merged herein. This
AGREEMENT may not be modified or altered except by
instrument in writing only duly signed by the parties. 10

It was stipulated by the parties, that "the foregoing
contract of lease (Exh. 4, Castellvi) is 'similar in terms and
conditions, including the date', with the annual contracts
entered into from year to year between defendant Castellvi
and the Republic of the Philippines (p. 17, t.s.n., Vol. III)". 11 It
is undisputed, therefore, that the Republic occupied
Castellvi's land from July 1, 1947, by virtue of the above-
mentioned contract, on a year to year basis (from July 1 of
each year to June 30 of the succeeding year) under the terms
and conditions therein stated.

Before the expiration of the contract of lease on June 30,
1956 the Republic sought to renew the same but Castellvi
refused. When the AFP refused to vacate the leased premises
after the termination of the contract, on July 11, 1956,
Castellvi wrote to the Chief of Staff, AFP, informing the latter
that the heirs of the property had decided not to continue
leasing the property in question because they had decided to
subdivide the land for sale to the general public, demanding
that the property be vacated within 30 days from receipt of
the letter, and that the premises be returned in substantially
the same condition as before occupancy (Exh. 5 Castellvi).
A follow-up letter was sent on January 12, 1957, demanding
the delivery and return of the property within one month
from said date (Exh. 6 Castellvi). On January 30, 1957,
Lieutenant General Alfonso Arellano, Chief of Staff, answered
the letter of Castellvi, saying that it was difficult for the army
to vacate the premises in view of the permanent installations
and other facilities worth almost P500,000.00 that were
erected and already established on the property, and that,
there being no other recourse, the acquisition of the property
by means of expropriation proceedings would be
recommended to the President (Exhibit "7" Castellvi).

Defendant Castellvi then brought suit in the Court of First
Instance of Pampanga, in Civil Case No. 1458, to eject the
Philippine Air Force from the land. While this ejectment case
was pending, the Republic instituted these expropriation
proceedings, and, as stated earlier in this opinion, the
Republic was placed in possession of the lands on August 10,
1959, On November 21, 1959, the Court of First Instance of
Pampanga, dismissed Civil Case No. 1458, upon petition of the
parties, in an order which, in part, reads as follows:

1. Plaintiff has agreed, as a matter of fact has already
signed an agreement with defendants, whereby she has
agreed to receive the rent of the lands, subject matter of the
instant case from June 30, 1966 up to 1959 when the
Philippine Air Force was placed in possession by virtue of an
order of the Court upon depositing the provisional amount as
fixed by the Provincial Appraisal Committee with the
Provincial Treasurer of Pampanga;

2. That because of the above-cited agreement wherein the
administratrix decided to get the rent corresponding to the
rent from 1956 up to 1959 and considering that this action is
one of illegal detainer and/or to recover the possession of
said land by virtue of non-payment of rents, the instant case
now has become moot and academic and/or by virtue of the
agreement signed by plaintiff, she has waived her cause of
action in the above-entitled case. 12

The Republic urges that the "taking " of Castellvi's property
should be deemed as of the year 1947 by virtue of afore-
quoted lease agreement. In American Jurisprudence, Vol. 26,
2nd edition, Section 157, on the subject of "Eminent Domain,
we read the definition of "taking" (in eminent domain) as
follows:

Taking' under the power of eminent domain may be
defined generally as entering upon private property for more
than a momentary period, and, under the warrant or color of
legal authority, devoting it to a public use, or otherwise
informally appropriating or injuriously affecting it in such a
way as substantially to oust the owner and deprive him of all
beneficial enjoyment thereof. 13

Pursuant to the aforecited authority, a number of
circumstances must be present in the "taking" of property for
purposes of eminent domain.

First, the expropriator must enter a private property. This
circumstance is present in the instant case, when by virtue of
the lease agreement the Republic, through the AFP, took
possession of the property of Castellvi.

Second, the entrance into private property must be for
more than a momentary period. "Momentary" means,
"lasting but a moment; of but a moment's duration" (The
Oxford English Dictionary, Volume VI, page 596); "lasting a
very short time; transitory; having a very brief life; operative
or recurring at every moment" (Webster's Third International
Dictionary, 1963 edition.) The word "momentary" when
applied to possession or occupancy of (real) property should
be construed to mean "a limited period" not indefinite or
permanent. The aforecited lease contract was for a period of
one year, renewable from year to year. The entry on the
property, under the lease, is temporary, and considered
transitory. The fact that the Republic, through the AFP,
constructed some installations of a permanent nature does
not alter the fact that the entry into the land was transitory,
or intended to last a year, although renewable from year to
year by consent of 'The owner of the land. By express
provision of the lease agreement the Republic, as lessee,
undertook to return the premises in substantially the same
condition as at the time the property was first occupied by
the AFP. It is claimed that the intention of the lessee was to
occupy the land permanently, as may be inferred from the
construction of permanent improvements. But this
"intention" cannot prevail over the clear and express terms of
the lease contract. Intent is to be deduced from the language
employed by the parties, and the terms 'of the contract, when
unambiguous, as in the instant case, are conclusive in the
absence of averment and proof of mistake or fraud the
question being not what the intention was, but what is
expressed in the language used. (City of Manila v. Rizal Park
Co., Inc., 53 Phil. 515, 525); Magdalena Estate, Inc. v. Myrick,
71 Phil. 344, 348). Moreover, in order to judge the intention
of the contracting parties, their contemporaneous and
subsequent acts shall be principally considered (Art. 1371,
Civil Code). If the intention of the lessee (Republic) in 1947
was really to occupy permanently Castellvi's property, why
was the contract of lease entered into on year to year basis?
Why was the lease agreement renewed from year to year?
Why did not the Republic expropriate this land of Castellvi in
1949 when, according to the Republic itself, it expropriated
the other parcels of land that it occupied at the same time as
the Castellvi land, for the purpose of converting them into a
jet air base? 14 It might really have been the intention of the
Republic to expropriate the lands in question at some future
time, but certainly mere notice - much less an implied notice
of such intention on the part of the Republic to expropriate
the lands in the future did not, and could not, bind the
landowner, nor bind the land itself. The expropriation must
be actually commenced in court (Republic vs. Baylosis, et al.,
96 Phil. 461, 484).

Third, the entry into the property should be under warrant
or color of legal authority. This circumstance in the "taking"
may be considered as present in the instant case, because the
Republic entered the Castellvi property as lessee.

Fourth, the property must be devoted to a public use or
otherwise informally appropriated or injuriously affected. It
may be conceded that the circumstance of the property being
devoted to public use is present because the property was
used by the air force of the AFP.

Fifth, the utilization of the property for public use must be
in such a way as to oust the owner and deprive him of all
beneficial enjoyment of the property. In the instant case, the
entry of the Republic into the property and its utilization of
the same for public use did not oust Castellvi and deprive her
of all beneficial enjoyment of the property. Castellvi remained
as owner, and was continuously recognized as owner by the
Republic, as shown by the renewal of the lease contract from
year to year, and by the provision in the lease contract
whereby the Republic undertook to return the property to
Castellvi when the lease was terminated. Neither was
Castellvi deprived of all the beneficial enjoyment of the
property, because the Republic was bound to pay, and had
been paying, Castellvi the agreed monthly rentals until the
time when it filed the complaint for eminent domain on June
26, 1959.

It is clear, therefore, that the "taking" of Catellvi's property
for purposes of eminent domain cannot be considered to
have taken place in 1947 when the Republic commenced to
occupy the property as lessee thereof. We find merit in the
contention of Castellvi that two essential elements in the
"taking" of property under the power of eminent domain,
namely: (1) that the entrance and occupation by the
condemnor must be for a permanent, or indefinite period,
and (2) that in devoting the property to public use the owner
was ousted from the property and deprived of its beneficial
use, were not present when the Republic entered and
occupied the Castellvi property in 1947.

Untenable also is the Republic's contention that although
the contract between the parties was one of lease on a year
to year basis, it was "in reality a more or less permanent right
to occupy the premises under the guise of lease with the
'right and privilege' to buy the property should the lessor wish
to terminate the lease," and "the right to buy the property is
merged as an integral part of the lease relationship ... so
much so that the fair market value has been agreed upon,
not, as of the time of purchase, but as of the time of
occupancy" 15 We cannot accept the Republic's contention
that a lease on a year to year basis can give rise to a
permanent right to occupy, since by express legal provision a
lease made for a determinate time, as was the lease of
Castellvi's land in the instant case, ceases upon the day fixed,
without need of a demand (Article 1669, Civil Code). Neither
can it be said that the right of eminent domain may be
exercised by simply leasing the premises to be expropriated
(Rule 67, Section 1, Rules of Court). Nor can it be accepted
that the Republic would enter into a contract of lease where
its real intention was to buy, or why the Republic should
enter into a simulated contract of lease ("under the guise of
lease", as expressed by counsel for the Republic) when all the
time the Republic had the right of eminent domain, and could
expropriate Castellvi's land if it wanted to without resorting
to any guise whatsoever. Neither can we see how a right to
buy could be merged in a contract of lease in the absence of
any agreement between the parties to that effect. To sustain
the contention of the Republic is to sanction a practice
whereby in order to secure a low price for a land which the
government intends to expropriate (or would eventually
expropriate) it would first negotiate with the owner of the
land to lease the land (for say ten or twenty years) then
expropriate the same when the lease is about to terminate,
then claim that the "taking" of the property for the purposes
of the expropriation be reckoned as of the date when the
Government started to occupy the property under the lease,
and then assert that the value of the property being
expropriated be reckoned as of the start of the lease, in spite
of the fact that the value of the property, for many good
reasons, had in the meantime increased during the period of
the lease. This would be sanctioning what obviously is a
deceptive scheme, which would have the effect of depriving
the owner of the property of its true and fair market value at
the time when the expropriation proceedings were actually
instituted in court. The Republic's claim that it had the "right
and privilege" to buy the property at the value that it had at
the time when it first occupied the property as lessee
nowhere appears in the lease contract. What was agreed
expressly in paragraph No. 5 of the lease agreement was that,
should the lessor require the lessee to return the premises in
the same condition as at the time the same was first occupied
by the AFP, the lessee would have the "right and privilege" (or
option) of paying the lessor what it would fairly cost to put
the premises in the same condition as it was at the
commencement of the lease, in lieu of the lessee's
performance of the undertaking to put the land in said
condition. The "fair value" at the time of occupancy,
mentioned in the lease agreement, does not refer to the
value of the property if bought by the lessee, but refers to the
cost of restoring the property in the same condition as of the
time when the lessee took possession of the property. Such
fair value cannot refer to the purchase price, for purchase was
never intended by the parties to the lease contract. It is a rule
in the interpretation of contracts that "However general the
terms of a contract may be, they shall not be understood to
comprehend things that are distinct and cases that are
different from those upon which the parties intended to
agree" (Art. 1372, Civil Code).

We hold, therefore, that the "taking" of the Castellvi
property should not be reckoned as of the year 1947 when
the Republic first occupied the same pursuant to the contract
of lease, and that the just compensation to be paid for the
Castellvi property should not be determined on the basis of
the value of the property as of that year. The lower court did
not commit an error when it held that the "taking" of the
property under expropriation commenced with the filing of
the complaint in this case.

Under Section 4 of Rule 67 of the Rules of Court, 16 the
"just compensation" is to be determined as of the date of the
filing of the complaint. This Court has ruled that when the
taking of the property sought to be expropriated coincides
with the commencement of the expropriation proceedings, or
takes place subsequent to the filing of the complaint for
eminent domain, the just compensation should be
determined as of the date of the filing of the complaint.
(Republic vs. Philippine National Bank, L-14158, April 12,
1961, 1 SCRA 957, 961-962). In the instant case, it is
undisputed that the Republic was placed in possession of the
Castellvi property, by authority of the court, on August 10,
1959. The "taking" of the Castellvi property for the purposes
of determining the just compensation to be paid must,
therefore, be reckoned as of June 26, 1959 when the
complaint for eminent domain was filed.

Regarding the two parcels of land of Toledo-Gozun, also
sought to be expropriated, which had never been under lease
to the Republic, the Republic was placed in possession of said
lands, also by authority of the court, on August 10, 1959, The
taking of those lands, therefore, must also be reckoned as of
June 26, 1959, the date of the filing of the complaint for
eminent domain.

2. Regarding the first assigned error discussed as the
second issue the Republic maintains that, even assuming
that the value of the expropriated lands is to be determined
as of June 26, 1959, the price of P10.00 per square meter fixed
by the lower court "is not only exhorbitant but also
unconscionable, and almost fantastic". On the other hand,
both Castellvi and Toledo-Gozun maintain that their lands are
residential lands with a fair market value of not less than
P15.00 per square meter.

The lower court found, and declared, that the lands of
Castellvi and Toledo-Gozun are residential lands. The finding
of the lower court is in consonance with the unanimous
opinion of the three commissioners who, in their report to
the court, declared that the lands are residential lands.

The Republic assails the finding that the lands are
residential, contending that the plans of the appellees to
convert the lands into subdivision for residential purposes
were only on paper, there being no overt acts on the part of
the appellees which indicated that the subdivision project had
been commenced, so that any compensation to be awarded
on the basis of the plans would be speculative. The Republic's
contention is not well taken. We find evidence showing that
the lands in question had ceased to be devoted to the
production of agricultural crops, that they had become
adaptable for residential purposes, and that the appellees
had actually taken steps to convert their lands into residential
subdivisions even before the Republic filed the complaint for
eminent domain. In the case of City of Manila vs. Corrales (32
Phil. 82, 98) this Court laid down basic guidelines in
determining the value of the property expropriated for public
purposes. This Court said:

In determining the value of land appropriated for public
purposes, the same consideration are to be regarded as in a
sale of property between private parties. The inquiry, in such
cases, must be what is the property worth in the market,
viewed not merely with reference to the uses to which it is at
the time applied, but with reference to the uses to which it is
plainly adapted, that is to say, What is it worth from its
availability for valuable uses?

So many and varied are the circumstances to be taken into
account in determining the value of property condemned for
public purposes, that it is practically impossible to formulate a
rule to govern its appraisement in all cases. Exceptional
circumstances will modify the most carefully guarded rule,
but, as a general thing, we should say that the compensation
of the owner is to be estimated by reference to the use for
which the property is suitable, having regard to the existing
business or wants of the community, or such as may be
reasonably expected in the immediate future. (Miss. and Rum
River Boom Co. vs. Patterson, 98 U.S., 403).

In expropriation proceedings, therefore, the owner of the
land has the right to its value for the use for which it would
bring the most in the market. 17 The owner may thus show
every advantage that his property possesses, present and
prospective, in order that the price it could be sold for in the
market may be satisfactorily determined. 18 The owner may
also show that the property is suitable for division into village
or town lots. 19

The trial court, therefore, correctly considered, among
other circumstances, the proposed subdivision plans of the
lands sought to be expropriated in finding that those lands
are residential lots. This finding of the lower court is
supported not only by the unanimous opinion of the
commissioners, as embodied in their report, but also by the
Provincial Appraisal Committee of the province of Pampanga
composed of the Provincial Treasurer, the Provincial Auditor
and the District Engineer. In the minutes of the meeting of the
Provincial Appraisal Committee, held on May 14, 1959 (Exh.
13-Castellvi) We read in its Resolution No. 10 the following:

3. Since 1957 the land has been classified as residential in
view of its proximity to the air base and due to the fact that it
was not being devoted to agriculture. In fact, there is a plan
to convert it into a subdivision for residential purposes. The
taxes due on the property have been paid based on its
classification as residential land;

The evidence shows that Castellvi broached the idea of
subdividing her land into residential lots as early as July 11,
1956 in her letter to the Chief of Staff of the Armed Forces of
the Philippines. (Exh. 5-Castellvi) As a matter of fact, the
layout of the subdivision plan was tentatively approved by
the National Planning Commission on September 7, 1956.
(Exh. 8-Castellvi). The land of Castellvi had not been devoted
to agriculture since 1947 when it was leased to the Philippine
Army. In 1957 said land was classified as residential, and taxes
based on its classification as residential had been paid since
then (Exh. 13-Castellvi). The location of the Castellvi land
justifies its suitability for a residential subdivision. As found
by the trial court, "It is at the left side of the entrance of the
Basa Air Base and bounded on two sides by roads (Exh. 13-
Castellvi), paragraphs 1 and 2, Exh. 12-Castellvi), the
poblacion, (of Floridablanca) the municipal building, and the
Pampanga Sugar Mills are closed by. The barrio schoolhouse
and chapel are also near (T.S.N. November 23,1960, p. 68)."
20

The lands of Toledo-Gozun (Lot 1-B and Lot 3) are
practically of the same condition as the land of Castellvi. The
lands of Toledo-Gozun adjoin the land of Castellvi. They are
also contiguous to the Basa Air Base, and are along the road.
These lands are near the barrio schoolhouse, the barrio
chapel, the Pampanga Sugar Mills, and the poblacion of
Floridablanca (Exhs. 1, 3 and 4-Toledo-Gozun). As a matter of
fact, regarding lot 1-B it had already been surveyed and
subdivided, and its conversion into a residential subdivision
was tentatively approved by the National Planning
Commission on July 8, 1959 (Exhs. 5 and 6 Toledo-Gozun). As
early as June, 1958, no less than 32 man connected with the
Philippine Air Force among them commissioned officers, non-
commission officers, and enlisted men had requested Mr. and
Mrs. Joaquin D. Gozun to open a subdivision on their lands in
question (Exhs. 8, 8-A to 8-ZZ-Toledo-Gozun). 21

We agree with the findings, and the conclusions, of the
lower court that the lands that are the subject of
expropriation in the present case, as of August 10, 1959 when
the same were taken possession of by the Republic, were
residential lands and were adaptable for use as residential
subdivisions. Indeed, the owners of these lands have the right
to their value for the use for which they would bring the most
in the market at the time the same were taken from them.
The most important issue to be resolved in the present case
relates to the question of what is the just compensation that
should be paid to the appellees.

The Republic asserts that the fair market value of the lands
of the appellees is P.20 per square meter. The Republic cites
the case of Republic vs. Narciso, et al., L-6594, which this
Court decided on May 18, 1956. The Narciso case involved
lands that belonged to Castellvi and Toledo-Gozun, and to one
Donata Montemayor, which were expropriated by the
Republic in 1949 and which are now the site of the Basa Air
Base. In the Narciso case this Court fixed the fair market value
at P.20 per square meter. The lands that are sought to be
expropriated in the present case being contiguous to the
lands involved in the Narciso case, it is the stand of the
Republic that the price that should be fixed for the lands now
in question should also be at P.20 per square meter.

We can not sustain the stand of the Republic. We find that
the price of P.20 per square meter, as fixed by this Court in
the Narciso case, was based on the allegation of the
defendants (owners) in their answer to the complaint for
eminent domain in that case that the price of their lands was
P2,000.00 per hectare and that was the price that they asked
the court to pay them. This Court said, then, that the owners
of the land could not be given more than what they had
asked, notwithstanding the recommendation of the majority
of the Commission on Appraisal which was adopted by the
trial court that the fair market value of the lands was
P3,000.00 per hectare. We also find that the price of P.20 per
square meter in the Narciso case was considered the fair
market value of the lands as of the year 1949 when the
expropriation proceedings were instituted, and at that time
the lands were classified as sugar lands, and assessed for
taxation purposes at around P400.00 per hectare, or P.04 per
square meter. 22 While the lands involved in the present
case, like the lands involved in the Narciso case, might have a
fair market value of P.20 per square meter in 1949, it can not
be denied that ten years later, in 1959, when the present
proceedings were instituted, the value of those lands had
increased considerably. The evidence shows that since 1949
those lands were no longer cultivated as sugar lands, and in
1959 those lands were already classified, and assessed for
taxation purposes, as residential lands. In 1959 the land of
Castellvi was assessed at P1.00 per square meter. 23

The Republic also points out that the Provincial Appraisal
Committee of Pampanga, in its resolution No. 5 of February
15, 1957 (Exhibit D), recommended the sum of P.20 per
square meter as the fair valuation of the Castellvi property.
We find that this resolution was made by the Republic the
basis in asking the court to fix the provisional value of the
lands sought to be expropriated at P259,669.10, which was
approved by the court. 24 It must be considered, however,
that the amount fixed as the provisional value of the lands
that are being expropriated does not necessarily represent
the true and correct value of the land. The value is only
"provisional" or "tentative", to serve as the basis for the
immediate occupancy of the property being expropriated by
the condemnor. The records show that this resolution No. 5
was repealed by the same Provincial Committee on Appraisal
in its resolution No. 10 of May 14, 1959 (Exhibit 13-Castellvi).
In that resolution No. 10, the appraisal committee stated that
"The Committee has observed that the value of the land in
this locality has increased since 1957 ...", and recommended
the price of P1.50 per square meter. It follows, therefore,
that, contrary to the stand of the Republic, that resolution No.
5 of the Provincial Appraisal Committee can not be made the
basis for fixing the fair market value of the lands of Castellvi
and Toledo-Gozun.

The Republic further relied on the certification of the Acting
Assistant Provincial Assessor of Pampanga, dated February 8,
1961 (Exhibit K), to the effect that in 1950 the lands of Toledo-
Gozun were classified partly as sugar land and partly as urban
land, and that the sugar land was assessed at P.40 per square
meter, while part of the urban land was assessed at P.40 per
square meter and part at P.20 per square meter; and that in
1956 the Castellvi land was classified as sugar land and was
assessed at P450.00 per hectare, or P.045 per square meter.
We can not also consider this certification of the Acting
Assistant Provincial Assessor as a basis for fixing the fair
market value of the lands of Castellvi and Toledo-Gozun
because, as the evidence shows, the lands in question, in
1957, were already classified and assessed for taxation
purposes as residential lands. The certification of the assessor
refers to the year 1950 as far as the lands of Toledo-Gozun are
concerned, and to the year 1956 as far as the land of Castellvi
is concerned. Moreover, this Court has held that the valuation
fixed for the purposes of the assessment of the land for
taxation purposes can not bind the landowner where the
latter did not intervene in fixing it. 25

On the other hand, the Commissioners, appointed by the
court to appraise the lands that were being expropriated,
recommended to the court that the price of P10.00 per square
meter would be the fair market value of the lands. The
commissioners made their recommendation on the basis of
their observation after several ocular inspections of the lands,
of their own personal knowledge of land values in the
province of Pampanga, of the testimonies of the owners of
the land, and other witnesses, and of documentary evidence
presented by the appellees. Both Castellvi and Toledo-Gozun
testified that the fair market value of their respective land
was at P15.00 per square meter. The documentary evidence
considered by the commissioners consisted of deeds of sale of
residential lands in the town of San Fernando and in Angeles
City, in the province of Pampanga, which were sold at prices
ranging from P8.00 to P20.00 per square meter (Exhibits 15,
16, 17, 18, 19, 20, 21, 22, 23-Castellvi). The commissioners
also considered the decision in Civil Case No. 1531 of the
Court of First Instance of Pampanga, entitled Republic vs.
Sabina Tablante, which was expropriation case filed on
January 13, 1959, involving a parcel of land adjacent to the
Clark Air Base in Angeles City, where the court fixed the price
at P18.00 per square meter (Exhibit 14-Castellvi). In their
report, the commissioners, among other things, said:

... This expropriation case is specially pointed out, because
the circumstances and factors involved therein are similar in
many respects to the defendants' lands in this case. The land
in Civil Case No. 1531 of this Court and the lands in the
present case (Civil Case No. 1623) are both near the air bases,
the Clark Air Base and the Basa Air Base respectively. There is
a national road fronting them and are situated in a first-class
municipality. As added advantage it may be said that the Basa
Air Base land is very near the sugar mill at Del Carmen,
Floridablanca, Pampanga, owned by the Pampanga Sugar
Mills. Also just stone's throw away from the same lands is a
beautiful vacation spot at Palacol, a sitio of the town of
Floridablanca, which counts with a natural swimming pool for
vacationists on weekends. These advantages are not found in
the case of the Clark Air Base. The defendants' lands are
nearer to the poblacion of Floridablanca then Clark Air Base is
nearer (sic) to the poblacion of Angeles, Pampanga.

The deeds of absolute sale, according to the undersigned
commissioners, as well as the land in Civil Case No. 1531 are
competent evidence, because they were executed during the
year 1959 and before August 10 of the same year. More
specifically so the land at Clark Air Base which coincidentally
is the subject matter in the complaint in said Civil Case No.
1531, it having been filed on January 13, 1959 and the taking
of the land involved therein was ordered by the Court of First
Instance of Pampanga on January 15, 1959, several months
before the lands in this case were taken by the plaintiffs ....

From the above and considering further that the lowest as
well as the highest price per square meter obtainable in the
market of Pampanga relative to subdivision lots within its
jurisdiction in the year 1959 is very well known by the
Commissioners, the Commission finds that the lowest price
that can be awarded to the lands in question is P10.00 per
square meter. 26

The lower court did not altogether accept the findings of
the Commissioners based on the documentary evidence, but
it considered the documentary evidence as basis for
comparison in determining land values. The lower court
arrived at the conclusion that "the unanimous
recommendation of the commissioners of ten (P10.00) pesos
per square meter for the three lots of the defendants subject
of this action is fair and just". 27 In arriving at its conclusion,
the lower court took into consideration, among other
circumstances, that the lands are titled, that there is a rising
trend of land values, and the lowered purchasing power of
the Philippine peso.

In the case of Manila Railroad Co. vs. Caligsihan, 40 Phil.
326, 328, this Court said:

A court of first instance or, on appeal, the Supreme Court,
may change or modify the report of the commissioners by
increasing or reducing the amount of the award if the facts of
the case so justify. While great weight is attached to the
report of the commissioners, yet a court may substitute
therefor its estimate of the value of the property as gathered
from the record in certain cases, as, where the commissioners
have applied illegal principles to the evidence submitted to
them, or where they have disregarded a clear preponderance
of evidence, or where the amount allowed is either palpably
inadequate or excessive. 28

The report of the commissioners of appraisal in
condemnation proceedings are not binding, but merely
advisory in character, as far as the court is concerned. 29 In
our analysis of the report of the commissioners, We find
points that merit serious consideration in the determination
of the just compensation that should be paid to Castellvi and
Toledo-Gozun for their lands. It should be noted that the
commissioners had made ocular inspections of the lands and
had considered the nature and similarities of said lands in
relation to the lands in other places in the province of
Pampanga, like San Fernando and Angeles City. We cannot
disregard the observations of the commissioners regarding
the circumstances that make the lands in question suited for
residential purposes their location near the Basa Air Base,
just like the lands in Angeles City that are near the Clark Air
Base, and the facilities that obtain because of their nearness
to the big sugar central of the Pampanga Sugar mills, and to
the flourishing first class town of Floridablanca. It is true that
the lands in question are not in the territory of San Fernando
and Angeles City, but, considering the facilities of modern
communications, the town of Floridablanca may be
considered practically adjacent to San Fernando and Angeles
City. It is not out of place, therefore, to compare the land
values in Floridablanca to the land values in San Fernando and
Angeles City, and form an idea of the value of the lands in
Floridablanca with reference to the land values in those two
other communities.

The important factor in expropriation proceeding is that the
owner is awarded the just compensation for his property. We
have carefully studied the record, and the evidence, in this
case, and after considering the circumstances attending the
lands in question We have arrived at the conclusion that the
price of P10.00 per square meter, as recommended by the
commissioners and adopted by the lower court, is quite high.
It is Our considered view that the price of P5.00 per square
meter would be a fair valuation of the lands in question and
would constitute a just compensation to the owners thereof.
In arriving at this conclusion We have particularly taken into
consideration the resolution of the Provincial Committee on
Appraisal of the province of Pampanga informing, among
others, that in the year 1959 the land of Castellvi could be
sold for from P3.00 to P4.00 per square meter, while the land
of Toledo-Gozun could be sold for from P2.50 to P3.00 per
square meter. The Court has weighed all the circumstances
relating to this expropriations proceedings, and in fixing the
price of the lands that are being expropriated the Court
arrived at a happy medium between the price as
recommended by the commissioners and approved by the
court, and the price advocated by the Republic. This Court has
also taken judicial notice of the fact that the value of the
Philippine peso has considerably gone down since the year
1959. 30 Considering that the lands of Castellvi and Toledo-
Gozun are adjoining each other, and are of the same nature,
the Court has deemed it proper to fix the same price for all
these lands.

3. The third issue raised by the Republic relates to the
payment of interest. The Republic maintains that the lower
court erred when it ordered the Republic to pay Castellvi
interest at the rate of 6% per annum on the total amount
adjudged as the value of the land of Castellvi, from July 1,
1956 to July 10, 1959. We find merit in this assignment of
error.

In ordering the Republic to pay 6% interest on the total
value of the land of Castellvi from July 1, 1956 to July 10,
1959, the lower court held that the Republic had illegally
possessed the land of Castellvi from July 1, 1956, after its
lease of the land had expired on June 30, 1956, until August
10, 1959 when the Republic was placed in possession of the
land pursuant to the writ of possession issued by the court.
What really happened was that the Republic continued to
occupy the land of Castellvi after the expiration of its lease on
June 30, 1956, so much so that Castellvi filed an ejectment
case against the Republic in the Court of First Instance of
Pampanga. 31 However, while that ejectment case was
pending, the Republic filed the complaint for eminent domain
in the present case and was placed in possession of the land
on August 10, 1959, and because of the institution of the
expropriation proceedings the ejectment case was later
dismissed. In the order dismissing the ejectment case, the
Court of First Instance of Pampanga said:

Plaintiff has agreed, as a matter of fact has already signed
an agreement with defendants, whereby she had agreed to
receive the rent of the lands, subject matter of the instant
case from June 30, 1956 up to 1959 when the Philippine Air
Force was placed in possession by virtue of an order of the
Court upon depositing the provisional amount as fixed by the
Provincial Appraisal Committee with the Provincial Treasurer
of
Pampanga; ...

If Castellvi had agreed to receive the rentals from June 30,
1956 to August 10, 1959, she should be considered as having
allowed her land to be leased to the Republic until August 10,
1959, and she could not at the same time be entitled to the
payment of interest during the same period on the amount
awarded her as the just compensation of her land. The
Republic, therefore, should pay Castellvi interest at the rate
of 6% per annum on the value of her land, minus the
provisional value that was deposited, only from July 10, 1959
when it deposited in court the provisional value of the land.

4. The fourth error assigned by the Republic relates to the
denial by the lower court of its motion for a new trial based
on nearly discovered evidence. We do not find merit in this
assignment of error.

After the lower court had decided this case on May 26,
1961, the Republic filed a motion for a new trial,
supplemented by another motion, both based upon the
ground of newly discovered evidence. The alleged newly
discovered evidence in the motion filed on June 21, 1961 was
a deed of absolute sale-executed on January 25, 1961,
showing that a certain Serafin Francisco had sold to Pablo L.
Narciso a parcel of sugar land having an area of 100,000
square meters with a sugar quota of 100 piculs, covered by
P.A. No. 1701, situated in Barrio Fortuna, Floridablanca, for
P14,000, or P.14 per square meter.

In the supplemental motion, the alleged newly discovered
evidence were: (1) a deed of sale of some 35,000 square
meters of land situated at Floridablanca for P7,500.00 (or
about P.21 per square meter) executed in July, 1959, by the
spouses Evelyn D. Laird and Cornelio G. Laird in favor of
spouses Bienvenido S. Aguas and Josefina Q. Aguas; and (2) a
deed of absolute sale of a parcel of land having an area of
4,120,101 square meters, including the sugar quota covered
by Plantation Audit No. 161 1345, situated at Floridablanca,
Pampanga, for P860.00 per hectare (a little less than P.09 per
square meter) executed on October 22, 1957 by Jesus Toledo
y Mendoza in favor of the Land Tenure Administration.

We find that the lower court acted correctly when it denied
the motions for a new trial.

To warrant the granting of a new trial based on the ground
of newly discovered evidence, it must appear that the
evidence was discovered after the trial; that even with the
exercise of due diligence, the evidence could not have been
discovered and produced at the trial; and that the evidence is
of such a nature as to alter the result of the case if admitted.
32 The lower court correctly ruled that these requisites were
not complied with.

The lower court, in a well-reasoned order, found that the
sales made by Serafin Francisco to Pablo Narciso and that
made by Jesus Toledo to the Land Tenure Administration
were immaterial and irrelevant, because those sales covered
sugarlands with sugar quotas, while the lands sought to be
expropriated in the instant case are residential lands. The
lower court also concluded that the land sold by the spouses
Laird to the spouses Aguas was a sugar land.

We agree with the trial court. In eminent domain
proceedings, in order that evidence as to the sale price of
other lands may be admitted in evidence to prove the fair
market value of the land sought to be expropriated, the lands
must, among other things, be shown to be similar.

But even assuming, gratia argumenti, that the lands
mentioned in those deeds of sale were residential, the
evidence would still not warrant the grant of a new trial, for
said evidence could have been discovered and produced at
the trial, and they cannot be considered newly discovered
evidence as contemplated in Section 1(b) of Rule 37 of the
Rules of Court. Regarding this point, the trial court said:

The Court will now show that there was no reasonable
diligence employed.

The land described in the deed of sale executed by Serafin
Francisco, copy of which is attached to the original motion, is
covered by a Certificate of Title issued by the Office of the
Register of Deeds of Pampanga. There is no question in the
mind of the court but this document passed through the
Office of the Register of Deeds for the purpose of transferring
the title or annotating the sale on the certificate of title. It is
true that Fiscal Lagman went to the Office of the Register of
Deeds to check conveyances which may be presented in the
evidence in this case as it is now sought to be done by virtue
of the motions at bar, Fiscal Lagman, one of the lawyers of
the plaintiff, did not exercise reasonable diligence as required
by the rules. The assertion that he only went to the office of
the Register of Deeds 'now and then' to check the records in
that office only shows the half-hazard [sic] manner by which
the plaintiff looked for evidence to be presented during the
hearing before the Commissioners, if it is at all true that Fiscal
Lagman did what he is supposed to have done according to
Solicitor Padua. It would have been the easiest matter for
plaintiff to move for the issuance of a subpoena duces tecum
directing the Register of Deeds of Pampanga to come to
testify and to bring with him all documents found in his office
pertaining to sales of land in Floridablanca adjacent to or near
the lands in question executed or recorded from 1958 to the
present. Even this elementary precaution was not done by
plaintiff's numerous attorneys.

The same can be said of the deeds of sale attached to the
supplementary motion. They refer to lands covered by
certificate of title issued by the Register of Deeds of
Pampanga. For the same reason they could have been easily
discovered if reasonable diligence has been exerted by the
numerous lawyers of the plaintiff in this case. It is noteworthy
that all these deeds of sale could be found in several
government offices, namely, in the Office of the Register of
Deeds of Pampanga, the Office of the Provincial Assessor of
Pampanga, the Office of the Clerk of Court as a part of
notarial reports of notaries public that acknowledged these
documents, or in the archives of the National Library. In
respect to Annex 'B' of the supplementary motion copy of the
document could also be found in the Office of the Land
Tenure Administration, another government entity. Any
lawyer with a modicum of ability handling this expropriation
case would have right away though [sic] of digging up
documents diligently showing conveyances of lands near or
around the parcels of land sought to be expropriated in this
case in the offices that would have naturally come to his mind
such as the offices mentioned above, and had counsel for the
movant really exercised the reasonable diligence required by
the Rule' undoubtedly they would have been able to find
these documents and/or caused the issuance of subpoena
duces tecum. ...

It is also recalled that during the hearing before the Court of
the Report and Recommendation of the Commissioners and
objection thereto, Solicitor Padua made the observation:

I understand, Your Honor, that there was a sale that took
place in this place of land recently where the land was sold
for P0.20 which is contiguous to this land.

The Court gave him permission to submit said document
subject to the approval of the Court. ... This was before the
decision was rendered, and later promulgated on May 26,
1961 or more than one month after Solicitor Padua made the
above observation. He could have, therefore, checked up the
alleged sale and moved for a reopening to adduce further
evidence. He did not do so. He forgot to present the evidence
at a more propitious time. Now, he seeks to introduce said
evidence under the guise of newly-discovered evidence.
Unfortunately the Court cannot classify it as newly-discovered
evidence, because tinder the circumstances, the correct
qualification that can be given is 'forgotten evidence'.
Forgotten however, is not newly-discovered
evidence. 33

The granting or denial of a motion for new trial is, as a
general rule, discretionary with the trial court, whose
judgment should not be disturbed unless there is a clear
showing of abuse of discretion. 34 We do not see any abuse
of discretion on the part of the lower court when it denied the
motions for a new trial.

WHEREFORE, the decision appealed from is modified, as
follows:

(a) the lands of appellees Carmen Vda. de Castellvi and
Maria Nieves Toledo-Gozun, as described in the complaint,
are declared expropriated for public use;

(b) the fair market value of the lands of the appellees is
fixed at P5.00 per square meter;

(c) the Republic must pay appellee Castellvi the sum of
P3,796,495.00 as just compensation for her one parcel of land
that has an area of 759,299 square meters, minus the sum of
P151,859.80 that she withdrew out of the amount that was
deposited in court as the provisional value of the land, with
interest at the rate of 6% per annum from July 10, 1959 until
the day full payment is made or deposited in court;

(d) the Republic must pay appellee Toledo-Gozun the sum
of P2,695,225.00 as the just compensation for her two parcels
of land that have a total area of 539,045 square meters,
minus the sum of P107,809.00 that she withdrew out of the
amount that was deposited in court as the provisional value
of her lands, with interest at the rate of 6%, per annum from
July 10, 1959 until the day full payment is made or deposited
in court; (e) the attorney's lien of Atty. Alberto Cacnio is
enforced; and

(f) the costs should be paid by appellant Republic of the
Philippines, as provided in Section 12, Rule 67, and in Section
13, Rule 141, of the Rules of Court.

IT IS SO ORDERED.

Makalintal, C.J., Barredo, Antonio, Esguerra, Fernandez,
Muoz Palma and Aquino, JJ., concur.

Castro, Fernando, Teehankee and Makasiar, JJ., took no
part.



Footnotes

1 Record on Appeal, Vol. I, pp. 53-56.

2 Record on Appeal, Vol. I, pp. 53-56.

3 Record on Appeal, Vol. I, pp. 121-124.

4 Record on Appeal, Vol. I, pp. 235-261.

5 Record on Appeal, Vol. I, pp. 264-270, 284-297 and 297-
299.

6 Record on Appeal, Vol. I, pp. 387-456.

7 Appellant's brief, pp. 18-30; citing the case of Penn. vs.
Carolina Virginia Estate Corp., 57 SE 2d 817.

8 Appellee Castellvi's brief, pp. 21-26.

9 Appellee Toledo-Gozun's brief, pp. 7-9. The issue raised in
the second error assigned should really refer only to the land
of Castellvi. We find that the lands of Toledo-Gozun, unlike
the land of Castellvi, were never leased to the Republic.

10 Appellant's brief, pp. 6-12.

11 Appellant's brief, p. 12.

12 Record on Appeal, Vol. II, pp. 462-463.

13 Among the cases cited under this Section is that of Penn.
vs. Carolina Virginia Coastal Corporation, 57 SE 2d 817, which
is cited by the Republic on p. 18 of its brief.

14 See Appellant's brief, p. 6.

15 See Appellant's brief, p. 22.

16 Similar to Section 5, Rule 69 of the old Rules of Court,
the rule in force when the complaint in this case was filed.

17 King vs. Mineapolis Union Railway Co., 32 Minn. 224.

18 Little Rock Junction Ry. vs. Woodruff, 49 Ark. 381; 5 SW
792.

19 27 Am. Jur. 2d pp. 344-345; Rothnam vs.
Commonwealth, 406 Pa. 376; Wichita Falls and N.W. Ry. Co.
vs. Holloman, 28 Okla. 419, 114 P 700, 701. See also Republic
vs. Venturanza, et al.,
L-20417, May 30,1966, 17 SCRA 322, 331.

20 Decision of the lower court pp. 444-445, Record on
Appeal, Vol. I.

21 Decision of the lower court, pp. 446-449, Record on
Appeal, Vol. I.

22 Decision in the Narciso case, Exhibit H for the Republic.

23 See page 471, Record on Appeal, Vol. II, and page 41,
Appellant's Brief.

24 Page 10-16, Record on Appeal, Vol. I.

25 Republic of the Philippines vs. Urtula, 110 Phil. 262-264.

26 Record on Appeal, Vol. I, pages 257-260.

27 Lower court's decision, p. 454, Record on Appeal, Vol. I.

28 See also Manila Railroad Company vs. Velasquez, 32 Phil.
286: and City of Manila vs. Estrada, 25 Phil. 208.

29 City of Cebu vs. Ledesma, 14 SCRA 666, 669.

30 In 1959 the money value of two pesos (P2.00), Philippine
currency, was equal to one U.S. dollar ($1.00). As published in
the "Daily Express" of August 6, 1974, the Philippine National
Bank announced that the inter-bank guiding rate was P6.735
to one U.S. dollar ($1,00).

31 Civil Case No. 1548.

32 Sec. 1 (b) of Rule 37 of the Rules of Court.

33 Record on Appeal, Vol. 11, pp. 607-613.

34 Miranda vs. Legaspi, et al., 92 Phil. 290, 293-294.

The Lawphil Project - Arellano Law Foundation




THIRD DIVISION

[G.R. No. 107631. February 26, 1996]

NATIONAL POWER CORPORATION, petitioner, vs. HON.
COURT OF APPEALS and PECORP, INC. (Formerly Pacific
Equipment Corp.), respondents.

SYLLABUS

CIVIL LAW; CONTRACTS, COST-PLUS A PERCENTAGE BASED
ON ACTUAL FINAL COST; CLAIMS OF PECORP FROM NPC
CAN BE BROUGHT FOR ARBITRATION AS PER CONTRACT. - The
sole query here is whether or not the two (2) claims from a
total of four (4.) presented by private respondent PECORP,
INC. can be brought for arbitration expressly provided for in
the contract it entered into with petitioner National Power
Corporation (NPC). The contract is of a Cost-Plus a
Percentage type -meaning, PECORP will be paid a certain
percentage as fee based on the Actual Final Cost of the
work. And what constitutes Actual Final Cost is the total
cost to NPC of all the work performed by PECORP which
includes cost of materials and supplies, structures, furnitures,
charges, etc. and all other expenses as are inherent in a Cost-
Plus and Percentage Contract and necessary for the
prosecution of the work that are approved by NPC x x x. The
rift arose when NPC communicated to PECORP that it was
inclined to contract directly and separately with Philippine
Grouting and Guniting Co., Inc (GROGUN) for the drilling and
grouting work on the construction project and consequently,
PECORP will not be entitled to any fees for said task.
Contending that such arrangement will violate its rights under
the NPC-PECORP contract, PECORP made known to NPC its
desire to bring the matter to arbitration, under Article VI of
their contract. The NPC-GROGUN drilling and grouting
contract, nonetheless, pushed through. As a result of such
purported withdrawal, the drilling and grouting work
ceased to be a part of the NPC-PECORP contract. PECORP
manifested its objection to the NPC-GROGUN contract insofar
as it deprives PECORP of fees on drilling and grouting. When
PECORP presented to NPC four (4) claims, a board of
arbitrators was convened. But it appeared that NPC was
willing to arbitrate on claims (3) and (4) only NPC resisted
claim and argued that PECORP withdrew claim (2) from
arbitration. As NPC was uncompromising, PECORP filed an
action to compel NPC to confirm all the four (4) claims for
arbitration. Judgment was rendered in favor of PECORP. The
trial courts short raison d etre for its order that all four (4)
claims of PECORP against NPC be arbitrated upon by the
arbitration board constituted by them, as merely prayed for
by PECORP in its complaint, suffices in resolving the
immediate conflict between NPC and PECORP. Indeed,
PECORPs two subject claims (1 and 2), together with the
other two undisputed claims (3 and 4), directly and
exclusively emanate from what PECORP firmly believes as
contractually due it under the NPC-PECORP Cost-Plus a
Percentage contract. Conversely therefore, had there been
no NPC-PECORP contract, there would have been no dispute
between NPC and PECORP that precipitated the suit for
arbitration, as PECORPs claims for fees, in such instance,
would be inexistent in the first place.

APPEARANCES OF COUNSEL

The Solicitor General for petitioner.

Arturo D. Valar for private respondent.

D E C I S I O N

FRANCISCO, J.:

The sole query here is whether or not the following two (2)
claims

1. Fee on the cost of drilling and grouting which is ten percent
(10%) of the Actual Final Cost of P6,962,519.50 - P696,251.95

2. Fee on the minimum guaranteed equipment rental which is
ten percent (10%) of the Actual Final Cost of P 1.67 million - P
167,000.00

from a total of four (4) presented by herein private
respondent PECORP, INC. (PECORP for brevity), can be
brought for arbitration expressly provided for in the contract
it entered into with herein petitioner National Power
Corporation (NPC).

That contract forged between the government through the
NPC and PECORP as party-CONTRACTOR on June 27, 1974 was
for the construction of the Mariveles Dam No. 1 and
appurtenant structures of the water supply system of the
Bataan Export Processing Zone at Mariveles, Bataan.

It was agreed upon that the contract is of a Cost-Plus a
Percentage type - meaning, PECORP will be paid a certain
percentage as fee based on the Actual Final Cost of the
work. And what constitutes Actual Final Cost has been
aptly simplified by the trial court as the total cost to the
defendant (NPC) of all the work performed by the plaintiff
(PECORP) which includes cost of materials and supplies,
structures, furnitures, charges, etc. and all other expenses as
are inherent in a Cost-Plus and Percentage Contract and
necessary for the prosecution of the work that are approved
by the defendant x x x.

The rift arose when NPC, in a letter dated July 11, 1974,
communicated to PECORP that it was inclined to contract
directly and separately with Philippine Grouting and Guniting
Co., Inc. (GROGUN) for the drilling and grouting work on the
construction project and consequently, PECORP will not be
entitled to any fees for said task.

Contending that such NPC-GROGUN arrangement will violate
its rights under the NPC-PECORP contract, PECORP made
known to NPC its desire to bring the matter to arbitration,
under Article VI of their contract, which reads:

Should there occur any dispute, controversy, or differences
between the parties arising out of this contract that cannot be
resolved by them to their mutual satisfaction, the matter shall
be submitted to arbitration at the choice of either party upon
written demand to the other party. When formal arbitration
is requested, an Arbitration Board shall be formed in the
following manner: CORPORATION and CONTRACTOR shall
each appoint one (1) member of this board and these
members shall appoint a third member who shall act as
chairman.

The NPC-GROGUN drilling and grouting contract, nonetheless,
pushed through on August 23, 1974. NPC tendered the
following justifications for its execution:

1. The drilling and grouting work equipment were not
included in the equipment availability schedules made jointly
by NPC and PECORP at the start of the work.

2. PECORP failed to provide and/or rent equipment for the
work and NPC could not immediately provide the
equipments.

3. GROGUN had all the equipments and personnel required
for the work.

4. The work could not suffer any further delay, considering
that from the execution of the NPC-PECORP contract on June
27, 1974 up to the date of NPCs letter to PECORP which was
July 11, 1974, PECORP had not performed any drilling and
grouting work.

5. NPC was availing of its alleged statutory right under Article
1725 of the Civil Code in removing the drilling and grouting
work from the scope of its contract with PECORP (NPC-
PECORP contract). Article 1725 reads:

The owner may withdraw at will from the construction of
the work, although it may have been commenced,
indemnifying the contractor for all the latters expenses,
work, and the usefulness which the owner may obtain
therefrom, and damages.

As a result of such purported withdrawal, the drilling and
grouting work ceased to be a part of the NPC-PECORP
contract and therefore,

a) is not an arbitrable matter thereunder, and

b) precludes NPC from collecting fees for said work. Besides,
the cost of drilling and grouting work under the NPC-GROGUN
contract is a direct cost to NPC and thus cannot be included in
the Actual Final Cost under the NPC-PECORP contract on
which PECORPs fees are based.

PECORPs objection to the NPC-GROGUN contract insofar as it
deprives PECORP of fees on drilling and grouting is essentially
anchored on the following:

1. Drilling and grouting work is but a part of its over-all
contractual duty, as expressed in Article II of the NPC-PECORP
contract, to undertake the construction, complete, of the
Mariveles Dam No. 1,

2. PECORP was expressly allowed under the NPC-PECORP
contract to sub-contract labor, supplies and/or services,
apparently in order to discharge fully its contractual duty.
PECORP in fact intended to do just that, when even prior to
the NPCs letter of July 11, 1974, PECORP sought authorization
from NPC to sub-contract the very same drilling and grouting
work to the very same GROGUN in the proposed NPC-
GROGUN contract. And even if the proposed PECORP-
GROGUN sub-contract was turned down by NPC, PECORP is
still entitled to the fees considering that the NPC-GROGUN
contract would involve identical undertaking and party as
that in the rejected sub-contract, not to mention that it was
PECORP which actually supervised the drilling and grouting
work conducted by GROGUN.

Roughly five (5) years after, PECORP on June 14, 1979
presented to NPC four (4) claims - two of which are the
subject claims mentioned at the beginning of this opinion and
the other two are:

3. Fee on the inventory of unused

stocks and POL P 155,844.95

4. Reimbursement of Medical

Hospital expenses re: TK-001

Accident case P50,085.93,

coupled with a request for arbitration.

A board of arbitrators was thereafter convened. But after a
series of written communications among the board, NPC and
PECORP, it appeared that NPC was willing to arbitrate on
claims (3) and (4) only. NPC resisted claim (1) (fee for drilling
and grouting work) on grounds previously discussed. As to
claim (2) (fee on the minimum guaranteed equipment rental),
NPC argued that PECORP withdrew this claim from
arbitration, as per PECORPs letter to NPC dated May 19, 1980
which reads in full:

We confirm our agreement earlier pertaining to our claim for
payment for contractors fee in connection with the
construction of the EPZA Dam No. 1 Project, whereby we are
withdrawing our claim for fee on the guaranteed equipment
rental hours for P167,000.00 in as much as this is an imputed
cost and not direct cost as the rest of the claims. We
understand however that the rest of the claims, in the sum of
P902,182.58 shall be favorably adjudicated and endorsed.

As NPC was uncompromising, PECORP filed an action in the
Regional Trial Court of Manila to compel NPC to
submit/confirm/certify all the four (4) claims for arbitration,
where judgment was thereafter rendered in favor of PECORP,
the dispositive portion of which reads:

IN VIEW OF ALL THE FOREGOING, judgment is hereby
rendered in favor of the plaintiff PECORP, INC. and against
National Power Corporation, ordering:

1. The Board of Administrators (sic) to reconvene and to
arbitrate, the four (4) claims of the plaintiff against the
defendant;

2. The defendant to submit and/or confirm and certify the
four (4) claims for arbitration;

3. The parties to shoulder equally the expenses for
arbitration;

4. The defendant to pay the plaintiff the amount of P
10,000.00 as and for attorneys fees;

5. The defendant to pay the costs of suit; and

6. The counterclaim is hereby dismissed for lack of merit.

After the trial court denied NPCs motion for reconsideration
of its decision, respondent Court of Appeals, on appeal,
affirmed the same but deleted the award of attorneys fees.
However, in affirming said decision which merely ordered
NPC and PECORP to arbitrate on all four (4) claims,
respondent CA went further in disposing of issues which could
have been appropriately ventilated and passed upon in the
arbitration proceedings - a course of action apparently
prompted by PECORPs request as contained in its Motion
For Early Resolution and reiterated in a Reiteration Motion
For Early Resolution, that respondent CA make:

1. a definitive ruling on whether or not the withdrawal by
NPC from PECORP of the drilling and grouting work in favor of
GROGUN is a valid withdrawal of work under Article 1725 of
the Civil Code, and

2. an outright resolution of PECORPs claims against NPC, in
order to obviate further prolonged proceedings or multiplicity
of suits.

Thus, in its now-assailed judgment, respondent CA resolved
PECORPs claims for fees for drilling and grouting work (claim
no. 1) and on the minimum guaranteed equipment rental
hours (claim no. 2) in this wise:

As to claim no. 1:

Art. II of the contract executed between appellee and
appellant provides:

SCOPE OF WORK AND COMPLETION, DELAYS AND
EXTENSION OF TIME. For and in consideration of the
payment or payments to be made by CORPORATION in
accordance with the provisions of this contract, CONTRACTOR
shall fully and faithfully furnish all labor, plant and materials
and construct, complete, all works required for the Project, in
accordance with the terms and conditions of all the
documents mentioned under Art. I above.

Under the above-quoted provision, the NPC-Pecorp Contract
is for the construction, complete, of the Mariveles Dam No. 1.
Drilling and grouting work is just a part of the complete
construction of the total project, hence, covered by and
within the scope of the NPC-Pecorp Contract.

The word Project is defined in the contract to mean the
Dam and Appurtenant Structures. Drilling and Grouting is part
of the dam or appurtenant structures, and therefore a part of
PECORPs scope of work.

Appellant invokes Art. 1725 of the Civil Code to justify its
claim that drilling and grouting is not included within the
scope of the NPC-Grogun Contract with appellee.

Art. 1725 reads:

The owner may withdraw at will from the construction of the
work, although it may have been commenced, indemnifying
the contractor for all the latters expenses, work and the
usefulness which the owner may obtain therefrom, and
damages.

Art. 1725 of the Civil Code is not applicable in the instant
case, for the following reasons:

a) there was actually no withdrawal from the construction of
the work, but only a transfer of a part of the construction,
which is the drilling and grouting work;

b) said drilling and grouting still forms part of the project as a
mere NPC-Grogun sub-contract.

Since the NPC-Grogun Contract did not amend nor nullify the
cost plus provision of the NPC-Pecorp Contract, therefore,
appellee Pecorp is still entitled to the said 10% fee.

As to claim no. 2:

x x x, appellant contends that since plaintiff-appellee had
previously withdrawn (through its letter dated May 19, 1980),
the claim for the minimum guaranteed equipment rentals
hours for P167,000.00, the same is not covered by arbitration.

The contention is likewise without merit.

The letter dated May 19, 1980 (Annex 2), written by
appellee to appellant partly reads:

We confirm our agreement earlier pertaining to our claim for
payment of contractors fees in connection with the
construction of the EPZA Dam No. 1 Project, whereby we are
withdrawing our claim for fee on the minimum guaranteed
equipment rental hours of P167,000.00, inasmuch as this is an
imputed cost and not a direct cost of the rest of the claims.
We understand however, that the rest of the claims, in the
sum of P902,182.56 shall be favorably adjudicated and
endorsed.

The above-quoted letter states that appellee was
withdrawing its claim for fees in the minimum guaranteed
equipment rental hours for P 167,000.00, only upon the
condition that NPC will favorably adjudicate and endorse the
three other PECORP claims, amounting to P902,182.58.

Thus, it is clear that withdrawal is only a proposal
conditioned upon NPCs adjudication, endorsement and
approval of all the three (3) other claims. However, as the
record shows, NPC refused to certify for arbitration all the
said three (3) other claims, hence, the withdrawal was
rendered null and void.

And from this second adverse judgment, NPC filed the instant
petition raising the following errors:

I

Respondent court of appeals gravely erred in affirming the
trial courts judgment with respect to the issue of private
respondents right to claim percentage fee from the NPC-
GROGUN Contract for Drilling, and Grouting Work.

II

Respondent court of appeals erred in not holding that private
respondents claim for a fee on the minimum guaranteed
equipment rental hours in the amount of P167,000.00 is not
subject to arbitration since said claim had been previously
withdrawn from arbitration by private respondent.

The petition must fail.

The trial courts short raison d etre for its order that all four
(4) claims of PECORP against NPC be arbitrated upon by the
arbitration board constituted by them, as merely prayed for
by PECORP in its complaint, suffices in resolving the
immediate conflict between NPC and PECORP. Indeed,
PECORPs two subject claims (1 and 2), together with the
other two undisputed claims (3 and 4), directly and
exclusively emanate from what PECORP firmly believes as
contractually due it under the NPC-PECORP Cost-Plus a
Percentage contract. Conversely therefore, had there been
no NPC-PECORP contract, there would have been no dispute
between NPC and PECORP that precipitated the suit for
arbitration, as PECORPs claims for fees, in such instance,
would be inexistent in the first place. We thus quote with
approval the trial courts findings and conclusion, that:

The contract between the parties specifically provides as
follows:

ARTICLE VI

ARBITRATION

Should there occur any dispute controversy, or differences
between the parties arising out of this contract that cannot be
resolved by them to their mutual satisfaction, the matter shall
be submitted for arbitration at the choice of either party upon
written demand to the other party. When formal arbitration
is requested, an Arbitration Board shall be formed in the
following manner: CORPORATION and CONTRACTOR shall
each appoint one (1) member of this Board and these
members shall appoint a third member who shall act as
Chairman. x x x (Italics supplied for emphasis).

It will be noted that the above-quoted provision mentions
any dispute, controversy and differences between the parties
and without qualification as to the nature of the dispute or
controversy or differences. Thus, having arisen from the
contract, the four (4) claims are, therefore, arbitrable.

Philippine Law and Jurisprudence recognize arbitration
agreements as valid, binding, enforceable and not contrary to
public policy, thus

Any stipulation that the arbitrators award or decision shall
be final is valid, without prejudice to Articles 2036, 2039 and
2040 (Art. 200044, Now Civil Codes *sic+).

An agreement to arbitrate is a contract, the relation of the
parties is contractual and the rights and liabilities of the
parties are controlled by the law of contracts. (5 AM. JUR. 2d
11).

The Court likewise accords the same approval to respondent
CAs brief and straight to the point disquisitions (as quoted
earlier) on why NPC cannot validly invoke Article 1725 of the
Civil Code to prevent PECORP from collecting fees for drilling
and grouting work conducted by GROGUN under the NPC-
GROGUN contract, and why PECORP cannot be deemed to
have abandoned or withdrawn its claim for fees on the
minimum guaranteed equipment rental against NPC. Said
judgment deserves full affirmance without further
elaboration.

WHEREFORE, the petition for review is hereby DENIED, and
respondent CAs assailed decision is AFFIRMED.

SO ORDERED.

Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Panganiban,
JJ., concur.



2. What may be taken
Cases


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION



G.R. No. L-60077 January 18, 1991

NATIONAL POWER CORPORATION, petitioner,
vs.
SPS. MISERICORDIA GUTIERREZ and RICARDO MALIT and
THE HONORABLE COURT OF APPEALS, respondents.

Pedro S. Dabu for private respondents.



BIDIN, J.:p

This is a petition for review on certiorari filed by the
National Power Corporation (NPC) seeking the reversal or
modification of the March 9, 1986 Decision of the Court of
Appeals in CA G.R. No. 54291-R entitled "National Power
Corporation v. Sps. Misericordia Gutierrez and Ricardo Malit",
affirming the December 4, 1972 Decision of the then Court of
First Instance of Pampanga, Fifth Judicial District, Branch II, in
Civil Case No. 2709, entitled National Power Corporation v.
Matias Cruz, et al.

The undisputed facts of the case, as found by the Court of
Appeals, are as follows:

Plaintiff National Power Corporation, a government owned
and controlled entity, in accordance with Commonwealth Act
No. 120, is invested with the power of eminent domain for
the purpose of pursuing its objectives, which among others is
the construction, operation, and maintenance of electric
transmission lines for distribution throughout the Philippines.
For the construction of its 230 KV Mexico-Limay transmission
lines, plaintiff's lines have to pass the lands belonging to
defendants Matias Cruz, Heirs of Natalia Paule and spouses
Misericordia Gutierrez and Ricardo Malit covered by tax
declarations Nos. 907, 4281 and 7582, respectively.

Plaintiff initiated negotiations for the acquisition of right of
way easements over the aforementioned lots for the
construction of its transmission lines but unsuccessful in this
regard, said corporation was constrained to file eminent
domain proceedings against the herein defendants on January
20, 1965.

Upon filing of the corresponding complaint, plaintiff
corporation deposited the amount of P973.00 with the
Provincial Treasurer of Pampanga, tendered to cover the
provisional value of the land of the defendant spouses
Ricardo Malit and Misericordia Gutierrez. And by virtue of
which, the plaintiff corporation was placed in possession of
the property of the defendant spouses so it could
immediately proceed with the construction of its Mexico-
Limay 230 KV transmission line. In this connection, by the trial
court's order of September 30, 1965, the defendant spouses
were authorized to withdraw the fixed provisional value of
their land in the sum of P973.00.

The only controversy existing between the parties litigants
is the reasonableness and adequacy of the disturbance or
compensation fee of the expropriated properties.

Meanwhile, for the purpose of determining the fair and just
compensation due the defendants, the court appointed three
commissioners, comprised of one representative of the
plaintiff, one for the defendants and the other from the court,
who then were empowered to receive evidence, conduct
ocular inspection of the premises, and thereafter, prepare
their appraisals as to the fair and just compensation to be
paid to the owners of the lots. Hearings were consequently
held before said commissioners and during their hearings, the
case of defendant Heirs of Natalia Paule was amicably settled
by virtue of a Right of Way Grant (Exh. C) executed by
Guadalupe Sangalang for herself and in behalf of her co-heirs
in favor of the plaintiff corporation. The case against Matias
Cruz was earlier decided by the court, thereby leaving only
the case against the defendant spouses Ricardo Malit and
Misericordia Gutierrez still to be resolved. Accordingly, the
commissioners submitted their individual reports. The
commissioner for the plaintiff corporation recommended the
following:

. . . that plaintiff be granted right of way easement over the
760 square meters of the defendants Malit and Gutierrez land
for plaintiff transmission line upon payment of an easement
fee of P1.00 therefor. . . . (Annex M)

The commissioner for the defendant spouses
recommended the following:

. . . that Mr. and Mrs. Ricardo Malit be paid as disturbance
compensation the amount of P10.00 sq. meter or the total
amount of P7,600.00' (Annex K)

The Court's commissioner recommended the following:

. . . the payment of Five (P 5.OO) Pesos per square meter of
the area covered by the Right-of-way to be granted, . .
.(Annex L)

The plaintiff corporation urged the Court that the
assessment as recommended by their commissioner be the
one adopted. Defendant spouses, however, dissented and
objected to the price recommended by both the
representative of the court and of the plaintiff corporation.

With these reports submitted by the three commissioners
and on the evidence adduced by the defendants as well as the
plaintiff for the purpose of proving the fair market value of
the property sought to be expropriated, the lower court
rendered a decision the dispositive portion of which reads as
follows:

WHEREFORE, responsive to the foregoing considerations,
judgment is hereby rendered ordering plaintiff National
Power Corporation to pay defendant spouses Ricardo Malit
and Misericordia Gutierrez the sum of P10.00 per square
meter as the fair and reasonable compensation for the right-
of-way easement of the affected area, which is 760 squares,
or a total sum of P7,600.00 and P800.00 as attorney's fees'
(Record on Appeal, p. 83)

Dissatisfied with the decision, the plaintiff corporation filed
a motion for reconsideration which was favorably acted upon
by the lower court, and in an order dated June 10, 1973, it
amended its previous decision in the following tenor:

On the basis of an ocular inspection made personally by the
undersigned, this court finally classified the land of the
spouses Ricardo Malit and Misericordia to be partly
commercial and partly agricultural, for which reason the
amount of P10.00 per sq. meter awarded in the decision of
December 4,1972 is hereby reduced to P5.00 per square
meter as the fair and reasonable market value of the 760
square meters belonging to the said spouses.

There being no claim and evidence for attorney's fees, the
amount of P800.00 awarded as attorney's fees, in the decision
of December 4, 1972 is hereby reconsidered and set aside.
(Annex S)

Still not satisfied, an appeal was filed by petitioner (NPC)
with the Court of Appeals but respondent Court of Appeals in
its March 9, 1982, sustained the trial court, as follows:

WHEREFORE, finding no reversible error committed by the
court a quo, the appealed judgment is hereby affirmed with
costs against the plaintiff-appellant.

Hence, the instant petition.

The First Division of this Court gave due course to the
petition and required both parties to submit their respective
memoranda (Resolution of January 12, 1983). It also noted in
an internal resolution of August 17, 1983 that petitioner flied
its memorandum while the respondents failed to file their
memorandum within the period which expired on February
24,1983; hence, the case was considered submitted for
decision.

The sole issue raised by petitioner is

WHETHER PETITIONER SHOULD BE MADE TO PAY SIMPLE
EASEMENT FEE OR FULL COMPENSATION FOR THE LAND
TRAVERSED BY ITS TRANSMISSION LINES.

It is the contention of petitioner that the Court of Appeals
committed gross error by adjudging the petitioner liable for
the payment of the full market value of the land traversed by
its transmission lines, and that it overlooks the undeniable
fact that a simple right-of-way easement (for the passage of
transmission lines) transmits no rights, except that of the
easement.Full ownership is retained by the private
respondents and they are not totally deprived of the use of
the land. They can continue planting the same agricultural
crops, except those that would result in contact with the
wires. On this premise, petitioner submits that if full market
value is required, then full transfer of ownership is only the
logical equivalent.

The petition is devoid of merit. The resolution of this case
hinges on the determination of whether the acquisition of a
mere right-of-way is an exercise of the power of eminent
domain contemplated by law.

The trial court's observation shared by the appellate court
show that ". . . While it is true that plaintiff are (sic) only after
a right-of-way easement, it nevertheless perpetually deprives
defendants of their proprietary rights as manifested by the
imposition by the plaintiff upon defendants that below said
transmission lines no plant higher than three (3) meters is
allowed. Furthermore, because of the high-tension current
conveyed through said transmission lines, danger to life and
limbs that may be caused beneath said wires cannot
altogether be discounted, and to cap it all plaintiff only pays
the fee to defendants once, while the latter shall continually
pay the taxes due on said affected portion of their property."

The foregoing facts considered, the acquisition of the right-of-
way easement falls within the purview of the power of
eminent domain. Such conclusion finds support in similar
cases of easement of right-of-way where the Supreme Court
sustained the award of just compensation for private
property condemned for public use (See National Power
Corporation vs. Court of Appeals, 129 SCRA 665, 1984; Garcia
vs. Court of Appeals, 102 SCRA 597,1981). The Supreme Court,
in Republic of the Philippines vs. PLDT, * thus held that:

Normally, of course, the power of eminent domain results
in the taking or appropriation of title to, and possession of,
the expropriated property; but no cogent reason appears why
said power may not be availed of to impose only a burden
upon the owner of condemned property, without loss of title
and possession. It is unquestionable that real property may,
through expropriation, be subjected to an easement of right-
of-way.

In the case at bar, the easement of right-of-way is definitely
a taking under the power of eminent domain. Considering the
nature and effect of the installation of the 230 KV Mexico-
Limay transmission lines, the limitation imposed by NPC
against the use of the land for an indefinite period deprives
private respondents of its ordinary use.

For these reasons, the owner of the property expropriated
is entitled to a just compensation, which should be neither
more nor less, whenever it is possible to make the
assessment, than the money equivalent of said property. Just
compensation has always been understood to be the just and
complete equivalent of the loss which the owner of the thing
expropriated has to suffer by reason of the expropriation
(Province of Tayabas vs. Perez, 66 Phil. 467 [1938]; Assoc. of
Small Land Owners of the Phils., Inc. vs. Secretary of Agrarian
Reform, G.R. No. 78742; Acuna vs. Arroyo, G.R. No. 79310;
Pabrico vs. Juico, G.R. No. 79744; Manaay v. Juico, G.R. No.
79777,14 July 1989, 175 SCRA 343 [1989]). The price or value
of the land and its character at the time it was taken by the
Government are the criteria for determining just
compensation (National Power Corp. v. Court of Appeals, 129
SCRA 665, [1984]). The above price refers to the market value
of the land which may be the full market value thereof.
According to private respondents, the market value of their
lot is P50.00 per square meter because the said lot is adjacent
to the National and super highways of Gapan, Nueva Ecija and
Olongapo City.

Private respondents recognize the inherent power of
eminent domain being exercised by NPC when it finally
consented to the expropriation of the said portion of their
land, subject however to payment of just compensation. No
matter how laudable NPC's purpose is, for which
expropriation was sought, it is just and equitable that they be
compensated the fair and full equivalent for the loss
sustained, which is the measure of the indemnity, not
whatever gain would accrue to the expropriating entity (EPZA
v. Dulay, 149 SCRA 305 [1987]; Mun. of Daet v. Court of
Appeals, 93 SCRA 503 (1979]).

It appearing that the trial court did not act capriciously and
arbitrarily in setting the price of P5.00 per square meter of the
affected property, the said award is proper and not
unreasonable.

On the issue of ownership being claimed by petitioner in
the event that the price of P5.00 per square meter be
sustained, it is well settled that an issue which has not been
raised in the Court a quo cannot be raised for the first time on
appeal as it would be offensive to the basic rules of fair play,
justice and due process . . . (Filipino Merchants v. Court of
Appeals, G.R. No. 85141, November 8, 1989, 179 SCRA 638;
Commissioner of Internal Revenue v. Procter and Gamble
Philippines Manufacturing Corporation, 160 SCRA 560 [1988];
Commissioner of Internal Revenue v. Wander Philippines,
Inc., 160 SCRA 573 1988]). Petitioner only sought an easement
of right-of-way, and as earlier discussed, the power of
eminent domain may be exercised although title was not
transferred to the expropriator.

WHEREFORE, the assailed decision of the Court of Appeals
is AFFIRMED.

SO ORDERED.

Fernan, C.J. and Feliciano, J., concur.

Gutierrez, Jr., J., I concur but believe payment should be
P10.00 a sq. meter at the very least.



Footnotes

* 26 SCRA 620 (1969).

The Lawphil Project - Arellano Law Foundation


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 183297 December 23, 2009

NATIONAL POWER CORPORATION, Petitioner,
vs.
OMAR G. MARUHOM, ELIAS G. MARUHOM, BUCAY G.
MARUHOM, MAMOD G. MARUHOM, FAROUK G. MARUHOM,
HIDJARA G. MARUHOM, ROCANIA G. MARUHOM, POTRISAM
G. MARUHOM, LUMBA G. MARUHOM, SINAB G. MARUHOM,
ACMAD G. MARUHOM, SOLAYMAN G. MARUHOM,
MOHAMAD M. IBRAHIM, CAIRORONESA M. IBRAHIM, and
LUCMAN IBRAHIM, represented by his heirs ADORA B.
IBRAHIM, NASSER B. IBRAHIM, JAMALODIN B. IBRAHIM,
RAJID NABBEL B. IBRAHIM, AMEER B. IBRAHIM and SARAH
AIZAH B. IBRAHIM,* Respondents.

D E C I S I O N

NACHURA, J.:

Petitioner National Power Corporation (NPC) filed this
Petition for Review on Certiorari, seeking to nullify the May
30, 2008 Decision1 of the Court of Appeals (CA) in CA-G.R. SP
No. 02065-MIN, affirming the Order dated November 13,
2007 issued by Hon. Amer R. Ibrahim, which granted
respondents motion for issuance of a writ of execution.

The antecedents.

Lucman G. Ibrahim and his co-heirs Omar G. Maruhom,
Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom,
Farouk G. Maruhom, Hidjara G. Maruhom, Rocania G.
Maruhom, Potrisam G. Maruhom, Lumba G. Maruhom, Sinab
G. Maruhom, Acmad G. Maruhom, Solayman G. Maruhom,
Mohamad M. Ibrahim and Cairoronesa M. Ibrahim
(respondents) are owners of a 70,000-square meter lot in
Saduc, Marawi City. Sometime in 1978, NPC, without
respondents knowledge and consent, took possession of the
subterranean area of the land and constructed therein
underground tunnels. The tunnels were used by NPC in
siphoning the water of Lake Lanao and in the operation of
NPCs Agus II, III, IV, V, VI, and VII projects located in Saguiran,
Lanao del Sur; Nangca and Balo-i in Lanao del Norte; and
Ditucalan and Fuentes in Iligan City. Respondents only
discovered the existence of the tunnels sometime in July
1992. Thus, on October 7, 1992, respondents demanded that
NPC pay damages and vacate the subterranean portion of the
land, but the demand was not heeded.

Hence, on November 23, 1994, respondents instituted an
action for recovery of possession of land and damages against
NPC with the Regional Trial Court (RTC) of Lanao del Sur,
docketed as Civil Case No. 1298-94.

After trial, the RTC rendered a decision,2 the decretal
portion of which reads:

WHEREFORE, judgment is hereby rendered:

1. Denying *respondents+ prayer for *NPC+ to dismantle the
underground tunnels constructed beneath the lands of
[respondents] in Lots 1, 2, and 3 of Survey Plan FP (VII-5)
2278;

2. Ordering [NPC] to pay to [respondents] the fair market
value of said 70,000 square meters of land covering Lots 1, 2,
and 3 as described in Survey Plan FP (VII-5) 2278 less the area
of 21,995 square meters at P1,000.00 per square meter or a
total of P48,005,000.00 for the remaining unpaid portion of
48,005 square meters; with 6% interest per annum from the
filing of this case until paid;

3. Ordering [NPC] to pay [respondents] a reasonable
monthly rental of P0.68 per square meter of the total area of
48,005 square meters effective from its occupancy of the
foregoing area in 1978 or a total of P7,050,974.40.

4. Ordering [NPC] to pay [respondents] the sum of
P200,000.00 as moral damages; and

5. Ordering [NPC] to pay the further sum of P200,000.00 as
attorneys fees and the costs.

SO ORDERED.3

Respondents then filed an Urgent Motion for Execution of
Judgment Pending Appeal. On the other hand, NPC filed a
Notice of Appeal. Thereafter, it filed a vigorous opposition to
the motion for execution of judgment pending appeal with a
motion for reconsideration of the RTC decision.

On August 26, 1996, NPC withdrew its Notice of Appeal to
give way to the hearing of its motion for reconsideration. On
August 28, 1996, the RTC issued an Order granting execution
pending appeal and denying NPCs motion for
reconsideration. The Decision of the RTC was executed
pending appeal and the funds of NPC were garnished by
respondents.

On October 4, 1996, Lucman Ibrahim and respondents
Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom,
Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G.
Maruhom, Potrisam G. Maruhom and Lumba G. Maruhom
filed a Petition for Relief from Judgment,4 asserting as
follows:

1. They did not file a motion to reconsider or appeal the
decision within the reglementary period of fifteen (15) days
from receipt of judgment because they believed in good faith
that the decision was for damages and rentals and attorneys
fees only as prayed for in the complaint;

2. It was only on August 26, 1996 that they learned that the
amounts awarded to the respondents represented not only
rentals, damages and attorneys fees but the greatest portion
of which was payment of just compensation which, in effect,
would make the petitioner NPC the owner of the parcels of
land involved in the case;

3. When they learned of the nature of the judgment, the
period of appeal had already expired;

4. They were prevented by fraud, mistake, accident, or
excusable negligence from taking legal steps to protect and
preserve their rights over their parcels of land insofar as the
part of the decision decreeing just compensation for
respondents properties;

5. They would never have agreed to the alienation of their
property in favor of anybody, considering the fact that the
parcels of land involved in this case were among the valuable
properties they inherited from their dear father and they
would rather see their land crumble to dust than sell it to
anybody.5

After due proceedings, the RTC granted the petition and
rendered a modified judgment dated September 8, 1997,
thus:

WHEREFORE, a modified judgment is hereby rendered:

1. Reducing the judgment award of [respondents] for the
fair market value of P48,005,000.00 by [P]9,526,000.00 or for
a difference [of] P38,479,000.00 and by the further sum of
P33,603,500.00 subject of the execution pending appeal
leaving a difference of [P]4,878,500.00 which may be the
subject of execution upon the finality of this modified
judgment with 6% interest per annum from the filing of the
case until paid.

2. Awarding the sum of P1,476,911.00 to herein
[respondents] Omar G. Maruhom, Elias G. Maruhom, Bucay G.
Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom,
Hidjara G. Maruhom, Portrisam G. Maruhom and Lumba G.
Maruhom as reasonable rental deductible from the awarded
sum of P7,050,974.40 pertaining to [respondents].

3. Ordering [NPC] embodied in the August 7, 1996 decision
to pay [respondents] the sum of P200,000.00 as moral
damages; and further sum of P200,000.00 as attorneys fees
and costs.

SO ORDERED.6

Lucman Ibrahim and NPC then filed their separate appeals
with the CA, docketed as CA-G.R. CV No. 57792. On June 8,
2005, the CA rendered a Decision,7 setting aside the modified
judgment and reinstating the original Decision, amending it
further by deleting the award of moral damages and reducing
the amount of rentals and attorneys fees, thus:

WHEREFORE, premises considered, herein Appeals are
hereby partially GRANTED, the Modified Judgment is ordered
SET ASIDE and rendered of no force and effect and the
original Decision of the court a quo dated 7 August 1996 is
hereby RESTORED with the MODIFICATION that the award of
moral damages is DELETED and the amounts of rentals and
attorneys fees are REDUCED to P6,887,757.40 and
P50,000.00, respectively.

In this connection, the Clerk of Court of RTC Lanao del Sur is
hereby directed to reassess and determine the additional
filing fee that should be paid by Plaintiff-Appellant IBRAHIM
taking into consideration the total amount of damages sought
in the complaint vis--vis the actual amount of damages
awarded by this Court. Such additional filing fee shall
constitute as a lien on the judgment.

SO ORDERED8

The above decision was affirmed by this Court on June 29,
2007 in G.R. No. 168732, viz.:

WHEREFORE, the petition is DENIED and the Decision of the
Court of Appeals in C.A.-G.R. CV No. 57792 dated June 8, 2005
is AFFIRMED.

No costs.

SO ORDERED.9

NPC moved for reconsideration of the Decision, but this
Court denied it on August 29, 2007.

To satisfy the judgment, respondents filed with the RTC a
motion for execution of its August 7, 1996 decision, as
modified by the CA. On November 13, 2007, the RTC granted
the motion, and issued the corresponding writ of execution.
Subsequently, a notice of garnishment was issued upon NPCs
depositary bank.

NPC then filed a Petition for Certiorari (with Urgent Prayer
for the Immediate Issuance of a Temporary Restraining Order
and/or Writ of Preliminary Injunction) with the CA, docketed
as CA-G.R. SP No. 02065-MIN. It argued that the RTC gravely
abused its discretion when it granted

the motion for execution without ordering respondents to
transfer their title in favor of NPC. By allowing the payment of
just compensation for a parcel of land without the
concomitant right of NPC to get title thereto, the RTC clearly
varied the terms of the judgment in G.R. No. 168732,
justifying the issuance of a writ of certiorari. NPC also prayed
for the issuance of a temporary restraining order (TRO) to
enjoin the implementation of the writ of execution and notice
of garnishment. On November 29, 2007, the CA granted NPCs
prayer and issued a TRO, enjoining the implementation of the
writ of execution and the notice of garnishment.

On May 30, 2008, the CA rendered the now assailed
Decision,10 dismissing NPCs petition for certiorari. Rejecting
NPCs argument, the CA declared that this Courts Decision in
G.R. No. 168732 intended NPC to pay the full value of the
property as compensation without ordering the transfer of
respondents title to the land. According to the CA, in a
plethora of cases involving lands traversed by NPCs
transmission lines, it had been consistently ruled that an
easement is compensable by the full value of the property
despite the fact that NPC was only after a right-of-way
easement, if by such easement it perpetually or indefinitely
deprives the land owner of his proprietary rights by imposing
restrictions on the use of the property. The CA, therefore,
ordered NPC to pay its admitted obligation to respondents
amounting to P36,219,887.20.11

NPC is now before us faulting the CA for dismissing the
formers petition for certiorari. It also prayed for a TRO to
enjoin respondents and all persons acting under their
authority from implementing the May 30, 2008 Decision of
the CA. In its July 9, 2008 Resolution,12 this Court granted
NPCs prayer, and issued a TRO enjoining the execution of the
assailed CA Decision.

In the main, NPC insists that the payment of just
compensation for the land carries with it the correlative right
to obtain title or ownership of the land taken. It stresses that
this Courts Decision in G.R. No. 168732 is replete with
pronouncements that the just compensation awarded to
respondents corresponds to compensation for the entire land
and not just for an easement or a burden on the property,
thereby necessitating a transfer of title and ownership to NPC
upon satisfaction of judgment. NPC added that by granting
respondents motion for execution, and consequently issuing
the writ of execution and notice of garnishment, the RTC and
the CA allowed respondents to retain title to the property
even after the payment of full compensation. This, according
to NPC, was a clear case of unjust enrichment.

The petition lacks merit.

It is a fundamental legal axiom that a writ of execution
must conform strictly to the dispositive portion of the
decision sought to be executed. A writ of execution may not
vary from, or go beyond, the terms of the judgment it seeks
to enforce. When a writ of execution does not conform
strictly to a decisions dispositive portion, it is null and void.13

Admittedly, the tenor of the dispositive portion of the
August 7, 1996 RTC decision, as modified by the CA and
affirmed by this Court, did not order the transfer of
ownership upon payment of the adjudged compensation.
Neither did such condition appear in the text of the RTC
decision, and of this Courts Decision in G.R. No. 168732.

As aptly pointed out by the CA in its assailed Decision:

[NPC], by its selective quotations from the Decision in G.R.
No. 168732, would have Us suppose that the High Court, in
decreeing that [NPC] pay the full value of the property as just
compensation, implied that [NPC] was entitled to the entire
land, including the surface area and not just the subterranean
portion. No such inference can be drawn from [the] reading of
the entirety of the High Courts Decision. On the contrary, a
perusal of the subject Decision yields to this Court the
unmistakable sense that the High Court intended [NPC] to pay
the full value of the subject property as just compensation
without ordering the transfer o*f+ respondents title to the
land. This is patent from the following language of the High
Court as quoted by [NPC] itself:

In disregarding this procedure and failing to recognize
respondents ownership of the sub-terrain portion, petitioner
took a risk and exposed itself to greater liability with the
passage of time. It must be emphasized that the acquisition of
the easement is not without expense. The underground
tunnels impose limitations on respondents use of the
property for an indefinite period and deprive them of its
ordinary use.Based upon the foregoing, respondents are
clearly entitled to the payment of just compensation.
Notwithstanding the fact that [NPC] only occupies the sub-
terrain portion, it is liable to pay not merely an easement but
rather the full compensation for land.This is so because in this
case, the nature of the easement practically deprives the
owners of its normal beneficial use. Respondents, as the
owners of the property thus expropriated, are entitled to a
just compensation which should be neither more nor less,
whenever it is possible to make the assessment, than the
money equivalent of said property.14

Clearly, the writ of execution issued by the RTC and
affirmed by the CA does not vary, but is, in fact, consistent
with the final decision in this case. The assailed writ is,
therefore, valid.

Indeed, expropriation is not limited to the acquisition of
real property with a corresponding transfer of title or
possession. The right-of-way easement resulting in a
restriction or limitation on property rights over the land
traversed by transmission lines also falls within the ambit of
the term expropriation.15

As we explained in Camarines Norte Electric Cooperative,
Inc. v. Court of Appeals:16

The acquisition of an easement of a right-of-way falls within
the purview of the power of eminent domain. Such
conclusion finds support in easements of right-of-way where
the Supreme Court sustained the award of just compensation
for private property condemned for public use. The Supreme
Court, in Republic v. PLDT thus held that:

"Normally, of course, the power of eminent domain results
in the taking or appropriation of title to, and possession of,
the expropriated property; but no cogent reason appears why
said power may not be availed of to impose only a burden
upon the owner of condemned property, without loss of title
and possession. It is unquestionable that real property may,
through expropriation, be subjected to an easement of right-
of-way."

However, a simple right-of-way easement transmits no
rights, except the easement. Vines Realty retains full
ownership and it is not totally deprived of the use of the land.
It can continue doing what it wants to do with the land,
except those that would result in contact with the
wires.1avvphi1

The acquisition of this easement, nevertheless, is not gratis.
Considering the nature and effect of the installation power
lines, the limitations on the use of the land for an indefinite
period deprives private respondents of its ordinary use. For
these reasons, Vines Realty is entitled to payment of just
compensation, which must be neither more nor less than the
money equivalent of the property.17

It is, therefore, clear that NPCs acquisition of an easement of
right-of-way on the lands of respondents amounted to
expropriation of the portions of the latters property for
which they are entitled to a reasonable and just
compensation.

The term just compensation had been 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 thereby the idea that
the equivalent to be rendered for the property to be taken
shall be real, substantial, full, and ample.18

In Camarines Norte Electric Cooperative, Inc. v. Court of
Appeals19 and National Power Corporation v. Manubay Agro-
Industrial Development Corporation,20 this Court sustained
the award of just compensation equivalent to the fair and full
value of the property even if petitioners only sought the
continuation of the exercise of their right-of-way easement
and not the ownership over the land. There is simply no basis
for NPC to claim that the payment of fair market value
without the concomitant transfer of title constitutes an unjust
enrichment.

In fine, the issuance by the RTC of a writ of execution and
the notice of garnishment to satisfy the judgment in favor of
respondents could not be considered grave abuse of
discretion. The term grave abuse of discretion, in its juridical
sense, connotes capricious, despotic, oppressive, or whimsical
exercise of judgment as is equivalent to lack of jurisdiction.
The abuse must be of such degree as to amount to an evasion
of positive duty or a virtual refusal to perform a duty enjoined
by law, as where the power is exercised in an arbitrary and
capricious manner by reason of passion and hostility. The
word capricious, usually used in tandem with the term
arbitrary, conveys the notion of willful and unreasoning
action. Thus, when seeking the corrective hand of certiorari, a
clear showing of caprice and arbitrariness in the exercise of
discretion is imperative.21 In this case, NPC utterly failed to
demonstrate caprice or arbitrariness on the part of the RTC in
granting respondents motion for execution. Accordingly, the
CA committed no reversible error in dismissing NPCs petition
for certiorari.

It is almost trite to say that execution is the fruit and the
end of the suit and is the life of the law. A judgment, if left
unexecuted, would be nothing but an empty victory for the
prevailing party. Litigation must end sometime and
somewhere. An effective and efficient administration of
justice requires that once a judgment has become final, the
winning party be not deprived of the fruits of the verdict.
Courts must, therefore, guard against any scheme calculated
to bring about that result. Constituted as they are to put an
end to controversies, courts should frown upon any attempt
to prolong them.22 We, therefore, write finis to this litigation.

WHEREFORE, the petition is DENIED. The assailed Decision
of the Court of Appeals in CA-G.R. SP No. 02065-MIN is
AFFIRMED. The temporary restraining order issued by this
Court on July 9, 2008 is LIFTED.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA
Associate Justice

WE CONCUR:

RENATO C. CORONA
Associate Justice
Chairperson
PRESBITERO J. VELASCO, JR.
Associate Justice DIOSDADO M. PERALTA
Associate Justice

MARIANO C. DEL CASTILLO**
Associate Justice

A T T E S T A T I O N

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 Courts Division.

RENATO C. CORONA
Associate Justice
Chairperson, Third Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and
the Division Chairperson's Attestation, 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 Courts Division.

REYNATO S. PUNO
Chief Justice

Footnotes

* The present petition impleaded Hon. Amer Ibrahim,
Presiding Judge of the Regional Trial Court of Lanao del Sur,
Branch 9, Marawi City; Atty. Cairoding P. Maruhom, Clerk of
Court VI; and Acmad C. Aliponto, Sheriff IV, RTC-Branch 9,
Marawi City, Lanao del Sur. However, Section 4, Rule 45 of
the Revised Rules of Court provides that the petition shall not
implead the lower courts and judges thereof as petitioners or
respondents. Hence, the deletion of Hon. Ibrahim, Atty.
Maruhom and Aliponto from the title.

** Additional member per Special Order No. 805 dated
December 4, 2009.

1 Penned by Associate Justice RomuloV. Borja, with
Associate Justices Mario N. Lopez and Elihu A. Ybaez,
concurring; rollo, pp. 37-51.

2 Rollo, pp. 89-99.

3 Id. at 98-99.

4 Id. at 182-186.

5 Id. at 183-184.

6 Id. at 124-125.

7 Penned by Associate Justice Myrna Dimaranan-Vidal, with
Associate Justices Teresita Dy-Liacco Flores and Edgardo A.
Camello, concurring; id. at 100-119.

8 Id. at 118-119.

9 Rollo, p. 138.

10 Supra note 1.

11 Rollo, pp. 147, 151.

12 Id. 53-54.

13 Development Bank of the Phils. v. Union Bank of the
Phils., 464 Phil. 161 (2004).

14 Rollo, pp. 47-48.

15 National Power Corporation v. San Pedro, G.R. No.
170945, September 26, 2006, 503 SCRA 333, 353.

16 G.R. No. 109338, November 20, 2000, 345 SCRA 85.

17 Id. at 94-95.

18 National Power Corporation v. Vda. de Capin, G.R. No.
175176, October 17, 2008, 569 SCRA 648, 667.

19 Supra note 16.

20 G.R. No. 150936, August 18, 2004, 437 SCRA 60, 67.

21 Torres v. Abundo, Sr., G.R. No. 174263, January 24, 2007,
512 SCRA 556, 568-569.

22 La Campana Development Corporation v. Development
Bank of the Philippines, G.R. No. 146157, February 13, 2009.

The Lawphil Project - Arellano Law Foundation





FIRST DIVISION





NATIONAL POWER G.R. No. 168732

CORPORATION,

Petitioner,

Present:

-versus-



LUCMAN G. IBRAHIM, OMAR PUNO, C.J.,
Chairperson,

G. MARUHOM, ELIAS G. SANDOVAL-
GUTIERREZ,*

MARUHOM, BUCAY G. CORONA,

MARUHOM, FAROUK G. AZCUNA, and

MARUHOM, HIDJARA G. GARCIA, JJ.

MARUHOM, ROCANIA G.

MARUHOM, POTRISAM G.

MARUHOM, LUMBA G. Promulgated:

MARUHOM, SINAB G.

MARUHOM, ACMAD G.

MARUHOM, SOLAYMAN G. June 29, 2007

MARUHOM, MOHAMAD M.

IBRAHIM, and CAIRONESA M.

IBRAHIM,

Respondents.



X----------------------------------------------------------------------------------
------X



DECISION



AZCUNA, J.:





This is a petition for review on certiorari under Rule 45 of the
Rules of Court seeking to annul the Decision[1] dated June 8,
2005 rendered by the Court of Appeals (CA) in C.A.-G.R. CV
No. 57792.

The facts are as follows:





On November 23, 1994, respondent Lucman G. Ibrahim, in his
personal capacity and in behalf of his co-heirs Omar G.
Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G.
Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Rocania
G. Maruhom, Potrisam G. Maruhom, Lumba G. Maruhom,
Sinab G. Maruhom, Acmad G. Maruhom, Solayman G.
Maruhom, Mohamad M. Ibrahim and Caironesa M. Ibrahim,
instituted an action against petitioner National Power
Corporation (NAPOCOR) for recovery of possession of land
and damages before the Regional Trial Court (RTC) of Lanao
del Sur.



In their complaint, Ibrahim and his co-heirs claimed that they
were owners of several parcels of land described in Survey
Plan FP (VII-5) 2278 consisting of 70,000 square meters,
divided into three (3) lots, i.e. Lots 1, 2, and 3 consisting of
31,894, 14,915, and 23,191 square meters each respectively.
Sometime in 1978, NAPOCOR, through alleged stealth and
without respondents knowledge and prior consent, took
possession of the sub-terrain area of their lands and
constructed therein underground tunnels. The existence of
the tunnels was only discovered sometime in July 1992 by
respondents and then later confirmed on November 13, 1992
by NAPOCOR itself through a memorandum issued by the
latters Acting Assistant Project Manager. The tunnels were
apparently being used by NAPOCOR in siphoning the water of
Lake Lanao and in the operation of NAPOCORs Agus II, III, IV,
V, VI, VII projects located in Saguiran, Lanao del Sur; Nangca
and Balo-i in Lanao del Norte; and Ditucalan and Fuentes in
Iligan City.



On September 19, 1992, respondent Omar G. Maruhom
requested the Marawi City Water District for a permit to
construct and/or install a motorized deep well in Lot 3 located
in Saduc, Marawi City but his request was turned down
because the construction of the deep well would cause
danger to lives and property. On October 7, 1992,
respondents demanded that NAPOCOR pay damages and
vacate the sub-terrain portion of their lands but the latter
refused to vacate much less pay damages. Respondents
further averred that the construction of the underground
tunnels has endangered their lives and properties as Marawi
City lies in an area of local volcanic and tectonic activity.
Further, these illegally constructed tunnels caused them
sleepless nights, serious anxiety and shock thereby entitling
them to recover moral damages and that by way of example
for the public good, NAPOCOR must be held liable for
exemplary damages.



Disputing respondents claim, NAPOCOR filed an answer with
counterclaim denying the material allegations of the
complaint and interposing affirmative and special defenses,
namely that (1) there is a failure to state a cause of action
since respondents seek possession of the sub-terrain portion
when they were never in possession of the same, (2)
respondents have no cause of action because they failed to
show proof that they were the owners of the property, and
(3) the tunnels are a government project for the benefit of all
and all private lands are subject to such easement as may be
necessary for the same.[2]



On August 7, 1996, the RTC rendered a Decision, the
decretal portion of which reads as follows:



WHEREFORE, judgment is hereby rendered:



1. Denying plaintiffs *private respondents+ prayer
for defendant [petitioner] National Power Corporation to
dismantle the underground tunnels constructed between the
lands of plaintiffs in Lots 1, 2, and 3 of Survey Plan FP (VII-5)
2278;



2. Ordering defendant to pay to plaintiffs the fair
market value of said 70,000 square meters of land covering
Lots 1, 2, and 3 as described in Survey Plan FP (VII-5) 2278 less
the area of 21,995 square meters at P1,000.00 per square
meter or a total of P48,005,000.00 for the remaining unpaid
portion of 48,005 square meters; with 6% interest per annum
from the filing of this case until paid;



3. Ordering defendant to pay plaintiffs a reasonable
monthly rental of P0.68 per square meter of the total area of
48,005 square meters effective from its occupancy of the
foregoing area in 1978 or a total of P7,050,974.40.



4. Ordering defendant to pay plaintiffs the sum of
P200,000.00 as moral damages; and



5. Ordering defendant to pay the further sum of
P200,000.00 as attorneys fees and the costs.



SO ORDERED.[3]





On August 15, 1996, Ibrahim, joined by his co-heirs, filed
an Urgent Motion for Execution of Judgment Pending Appeal.
On the other hand, NAPOCOR filed a Notice of Appeal by
registered mail on August 19, 1996. Thereafter, NAPOCOR
filed a vigorous opposition to the motion for execution of
judgment pending appeal with a motion for reconsideration
of the Decision which it had received on August 9, 1996.



On August 26, 1996, NAPOCOR filed a Manifestation and
Motion withdrawing its Notice of Appeal purposely to give
way to the hearing of its motion for reconsideration.



On August 28, 1996, the RTC issued an Order granting
execution pending appeal and denying NAPOCORs motion for
reconsideration, which Order was received by NAPOCOR on
September 6, 1996.



On September 9, 1996, NAPOCOR filed its Notice of Appeal by
registered mail which was denied by the RTC on the ground of
having been filed out of time. Meanwhile, the Decision of the
RTC was executed pending appeal and funds of NAPOCOR
were garnished by respondents Ibrahim and his co-heirs.



On October 4, 1996, a Petition for Relief from Judgment was
filed by respondents Omar G. Maruhom, Elias G. Maruhom,
Bucay G. Maruhom, Mamod G. Maruhom, Farouk G.
Maruhom, Hidjara G. Maruhom, Potrisam G. Maruhom and
Lumba G. Maruhom asserting as follows:



1) they did not file a motion to reconsider or appeal
the decision within the reglementary period of fifteen (15)
days from receipt of judgment because they believed in good
faith that the decision was for damages and rentals and
attorneys fees only as prayed for in the complaint:



2) it was only on August 26, 1996 that they learned
that the amounts awarded to the plaintiffs represented not
only rentals, damages and attorneys fees but the greatest
portion of which was payment of just compensation which in
effect would make the defendant NPC the owner of the
parcels of land involved in the case;



3) when they learned of the nature of the judgment,
the period of appeal has already expired;



4) they were prevented by fraud, mistake, accident,
or excusable negligence from taking legal steps to protect and
preserve their rights over their parcels of land in so far as the
part of the decision decreeing just compensation for
petitioners properties;



5) they would never have agreed to the alienation of
their property in favor of anybody, considering the fact that
the parcels of land involved in this case were among the
valuable properties they inherited from their dear father and
they would rather see their land crumble to dust than sell it to
anybody.[4]





The RTC granted the petition and rendered a modified
judgment dated September 8, 1997, thus:



WHEREFORE, a modified judgment is hereby rendered:



1) Reducing the judgment award of plaintiffs for the
fair market value of P48,005,000.00 by 9,526,000.00 or for a
difference by P38,479,000.00 and by the further sum of
P33,603,500.00 subject of the execution pending appeal
leaving a difference of 4,878,500.00 which may be the subject
of execution upon the finality of this modified judgment with
6% interest per annum from the filing of the case until paid.



2) Awarding the sum of P1,476,911.00 to herein
petitioners Omar G. Maruhom, Elias G. Maruhom, Bucay G.
Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom,
Hidjara G. Maruhom, Portrisam G. Maruhom and Lumba G.
Maruhom as reasonable rental deductible from the awarded
sum of P7,050,974.40 pertaining to plaintiffs.



3) Ordering defendant embodied in the August 7,
1996 decision to pay plaintiffs the sum of P200,000.00 as
moral damages; and further sum of P200,000.00 as attorneys
fees and costs.



SO ORDERED.[5]





Subsequently, both respondent Ibrahim and NAPOCOR
appealed to the CA.



In the Decision dated June 8, 2005, the CA set aside the
modified judgment and reinstated the original Decision dated
August 7, 1996, amending it further by deleting the award of
moral damages and reducing the amount of rentals and
attorneys fees, thus:



WHEREFORE, premises considered, herein Appeals are
hereby partially GRANTED, the Modified Judgment is ordered
SET ASIDE and rendered of no force and effect and the
original Decision of the court a quo dated 7 August 1996 is
hereby RESTORED with the MODIFICATION that the award of
moral damages is DELETED and the amounts of rentals and
attorneys fees are REDUCED to P6,888,757.40 and
P50,000.00, respectively.



In this connection, the Clerk of Court of RTC Lanao del
Sur is hereby directed to reassess and determine the
additional filing fee that should be paid by Plaintiff-Appellant
IBRAHIM taking into consideration the total amount of
damages sought in the complaint vis--vis the actual amount
of damages awarded by this Court. Such additional filing fee
shall constitute a lien on the judgment.



SO ORDERED.[6]





Hence, this petition ascribing the following errors to the CA:





(a) RESPONDENTS WERE NOT DENIED THE BENEFICIAL
USE OF THEIR SUBJECT PROPERTIES TO ENTITLE THEM TO
JUST COMPENSATION BY WAY OF DAMAGES;



(b) ASSUMING THAT RESPONDENTS ARE ENTITLED TO
JUST COMPENSATION BY WAY OF DAMAGES, NO EVIDENCE
WAS PRESENTED ANENT THE VALUATION OF RESPONDENTS
PROPERTY AT THE TIME OF ITS TAKING IN THE YEAR 1978 TO
JUSTIFY THE AWARD OF ONE THOUSAND SQUARE METERS
(P1000.00/SQ. M.) EVEN AS PAYMENT OF BACK RENTALS IS
ITSELF IMPROPER.



This case revolves around the propriety of paying just
compensation to respondents, and, by extension, the basis
for computing the same. The threshold issue of whether
respondents are entitled to just compensation hinges upon
who owns the sub-terrain area occupied by petitioner.



Petitioner maintains that the sub-terrain portion where the
underground tunnels were constructed does not belong to
respondents because, even conceding the fact that
respondents owned the property, their right to the subsoil of
the same does not extend beyond what is necessary to enable
them to obtain all the utility and convenience that such
property can normally give. In any case, petitioner asserts
that respondents were still able to use the subject property
even with the existence of the tunnels, citing as an example
the fact that one of the respondents, Omar G. Maruhom, had
established his residence on a part of the property. Petitioner
concludes that the underground tunnels 115 meters below
respondents property could not have caused damage or
prejudice to respondents and their claim to this effect was,
therefore, purely conjectural and speculative.[7]



The contention lacks merit.



Generally, in an appeal by certiorari under Rule 45 of the
Rules of Court, the Court does not pass upon questions of
fact. Absent any showing that the trial and appellate courts
gravely abused their discretion, the Court will not examine
the evidence introduced by the parties below to determine if
they correctly assessed and evaluated the evidence on
record.[8] The jurisdiction of the Court in cases brought to it
from the CA is limited to reviewing and revising the errors of
law imputed to it, its findings of fact being as a rule conclusive
and binding on the Court.



In the present case, petitioner failed to point to any evidence
demonstrating grave abuse of discretion on the part of the CA
or to any other circumstances which would call for the
application of the exceptions to the above rule.
Consequently, the CAs findings which upheld those of the
trial court that respondents owned and possessed the
property and that its substrata was possessed by petitioner
since 1978 for the underground tunnels, cannot be disturbed.
Moreover, the Court sustains the finding of the lower courts
that the sub-terrain portion of the property similarly belongs
to respondents. This conclusion is drawn from Article 437 of
the Civil Code which provides:



ART. 437. The owner of a parcel of land is the owner of its
surface and of everything under it, and he can construct
thereon any works or make any plantations and excavations
which he may deem proper, without detriment to servitudes
and subject to special laws and ordinances. He cannot
complain of the reasonable requirements of aerial navigation.



Thus, the ownership of land extends to the surface as
well as to the subsoil under it. In Republic of the Philippines
v. Court of Appeals,[9] this principle was applied to show that
rights over lands are indivisible and, consequently, require a
definitive and categorical classification, thus:



The Court of Appeals justified this by saying there is no
conflict of interest between the owners of the surface rights
and the owners of the sub-surface rights. This is rather
strange doctrine, for it is a well-known principle that the
owner of a piece of land has rights not only to its surface but
also to everything underneath and the airspace above it up to
a reasonable height. Under the aforesaid ruling, the land is
classified as mineral underneath and agricultural on the
surface, subject to separate claims of title. This is also difficult
to understand, especially in its practical application.



Under the theory of the respondent court, the surface owner
will be planting on the land while the mining locator will be
boring tunnels underneath. The farmer cannot dig a well
because he may interfere with the mining operations below
and the miner cannot blast a tunnel lest he destroy the crops
above. How deep can the farmer, and how high can the miner
go without encroaching on each others rights? Where is the
dividing line between the surface and the sub-surface rights?



The Court feels that the rights over the land are indivisible
and that the land itself cannot be half agricultural and half
mineral. The classification must be categorical; the land must
be either completely mineral or completely agricultural.





Registered landowners may even be ousted of ownership and
possession of their properties in the event the latter are
reclassified as mineral lands because real properties are
characteristically indivisible. For the loss sustained by such
owners, they are entitled to just compensation under the
Mining Laws or in appropriate expropriation proceedings.[10]



Moreover, petitioners argument that the landowners right
extends to the sub-soil insofar as necessary for their practical
interests serves only to further weaken its case. The theory
would limit the right to the sub-soil upon the economic utility
which such area offers to the surface owners. Presumably,
the landowners right extends to such height or depth where
it is possible for them to obtain some benefit or enjoyment,
and it is extinguished beyond such limit as there would be no
more interest protected by law.[11]



In this regard, the trial court found that respondents could
have dug upon their property motorized deep wells but were
prevented from doing so by the authorities precisely because
of the construction and existence of the tunnels underneath
the surface of their property. Respondents, therefore, still
had a legal interest in the sub-terrain portion insofar as they
could have excavated the same for the construction of the
deep well. The fact that they could not was appreciated by
the RTC as proof that the tunnels interfered with
respondents enjoyment of their property and deprived them
of its full use and enjoyment, thus:



Has it deprived the plaintiffs of the use of their lands when
from the evidence they have already existing residential
houses over said tunnels and it was not shown that the
tunnels either destroyed said houses or disturb[ed] the
possession thereof by plaintiffs? From the evidence, an
affirmative answer seems to be in order. The plaintiffs and
[their] co-heirs discovered [these] big underground tunnels in
1992. This was confirmed by the defendant on November 13,
1992 by the Acting Assistant Project Manager, Agus 1 Hydro
Electric Project (Exh. K). On September 16, 1992, Atty. Omar
Maruhom (co-heir) requested the Marawi City Water District
for permit to construct a motorized deep well over Lot 3 for
his residential house (Exh. Q). He was refused the permit
because the construction of the deep well as (sic) the parcels
of land will cause danger to lives and property. He was
informed that beneath your lands are constructed the
Napocor underground tunnel in connection with Agua
Hydroelectric plant (Exh. Q-2). There in fact exists ample
evidence that this construction of the tunnel without the
prior consent of plaintiffs beneath the latters property
endangered the lives and properties of said plaintiffs. It has
been proved indubitably that Marawi City lies in an area of
local volcanic and tectonic activity. Lake Lanao has been
formed by extensive earth movements and is considered to
be a drowned basin of volcano/tectonic origin. In Marawi
City, there are a number of former volcanoes and an
extensive amount of faulting. Some of these faults are still
moving. (Feasibility Report on Marawi City Water District by
Kampsa-Kruger, Consulting Engineers, Architects and
Economists, Exh. R). Moreover, it has been shown that the
underground tunnels [have] deprived the plaintiffs of the
lawful use of the land and considerably reduced its value. On
March 6, 1995, plaintiffs applied for a two-million peso loan
with the Amanah Islamic Bank for the expansion of the
operation of the Ameer Construction and Integrated Services
to be secured by said land (Exh. N), but the application was
disapproved by the bank in its letter of April 25, 1995 (Exh. O)
stating that:



Apropos to this, we regret to inform you that we
cannot consider your loan application due to the following
reasons, to wit:



That per my actual ocular inspection and
verification, subject property offered as collateral has an
existing underground tunnel by the NPC for the Agus I Project,
which tunnel is traversing underneath your property, hence,
an encumbrance. As a matter of bank policy, property with
an existing encumbrance cannot be considered neither
accepted as collateral for a loan.



All the foregoing evidence and findings convince this Court
that preponderantly plaintiffs have established the
condemnation of their land covering an area of 48,005 sq.
meters located at Saduc, Marawi City by the defendant
National Power Corporation without even the benefit of
expropriation proceedings or the payment of any just
compensation and/or reasonable monthly rental since
1978.[12]





In the past, the Court has held 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 in the event
restoration of possession is neither convenient nor
feasible.[13] This is in accordance with the principle that
persons shall not be deprived of their property except by
competent authority and for public use and always upon
payment of just compensation.[14]



Petitioner contends that the underground tunnels in this case
constitute an easement upon the property of respondents
which does not involve any loss of title or possession. The
manner in which the easement was created by petitioner,
however, violates the due process rights of respondents as it
was without notice and indemnity to them and did not go
through proper expropriation proceedings. Petitioner could
have, at any time, validly exercised the power of eminent
domain to acquire the easement over respondents property
as this power encompasses not only the taking or
appropriation of title to and possession of the expropriated
property but likewise covers even the imposition of a mere
burden upon the owner of the condemned property.[15]
Significantly, though, landowners cannot be deprived of their
right over their land until expropriation proceedings are
instituted in court. The court must then see to it that the
taking is for public use, that there is payment of just
compensation and that there is due process of law.[16]



In disregarding this procedure and failing to recognize
respondents ownership of the sub-terrain portion, petitioner
took a risk and exposed itself to greater liability with the
passage of time. It must be emphasized that the acquisition of
the easement is not without expense. The underground
tunnels impose limitations on respondents use of the
property for an indefinite period and deprive them of its
ordinary use. Based upon the foregoing, respondents are
clearly entitled to the payment of just compensation.[17]
Notwithstanding the fact that petitioner only occupies the
sub-terrain portion, it is liable to pay not merely an easement
fee but rather the full compensation for land. This is so
because in this case, the nature of the easement practically
deprives the owners of its normal beneficial use.
Respondents, as the owners of the property thus
expropriated, are entitled to a just compensation which
should be neither more nor less, whenever it is possible to
make the assessment, than the money equivalent of said
property.[18]



The entitlement of respondents to just compensation having
been settled, the issue now is on the manner of computing
the same. In this regard, petitioner claims that the basis for
the computation of the just compensation should be the
value of the property at the time it was taken in 1978.
Petitioner also impugns the reliance made by the CA upon
National Power Corporation v. Court of Appeals and
Macapanton Mangondato[19] as the basis for computing the
amount of just compensation in this action. The CA found
that the award of damages is not excessive because the
P1000 per square meter as the fair market value was
sustained in a case involving a lot adjoining the property in
question which case involved an expropriation by [petitioner]
of portion of Lot 1 of the subdivision plan (LRC) PSD 116159
which is adjacent to Lots 2 and 3 of the same subdivision plan
which is the subject of the instant controversy.*20+



Just compensation has been understood to be the just and
complete equivalent of the loss[21] and is ordinarily
determined by referring to the value of the land and its
character at the time it was taken by the expropriating
authority.[22] There is a taking in this sense when the
owners are actually deprived or dispossessed of their
property, where there is a practical destruction or a material
impairment of the value of their property, or when they are
deprived of the ordinary use thereof. There is a taking in
this context when the expropriator enters private property
not only for a momentary period but for more permanent
duration, for the purpose of devoting the property to a public
use in such a manner as to oust the owner and deprive him of
all beneficial enjoyment thereof.*23+ Moreover, taking of
the property for purposes of eminent domain entails that the
entry into the property must be under warrant or color of
legal authority.[24]

Under the factual backdrop of this case, the last element of
taking mentioned, i.e., that the entry into the property is
under warrant or color of legal authority, is patently lacking.
Petitioner justified its nonpayment of the indemnity due
respondents upon its mistaken belief that the property
formed part of the public dominion.



This situation is on all fours with that in the Mangondato
case. NAPOCOR in that case took the property of therein
respondents in 1979, using it to build its Aqua I Hydroelectric
Plant Project, without paying any compensation, allegedly
under the mistaken belief that it was public land. It was only
in 1990, after more than a decade of beneficial use, that
NAPOCOR recognized therein respondents ownership and
negotiated for the voluntary purchase of the property.



In Mangondato, this Court held:



The First Issue: Date of Taking or Date of Suit?



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, as follows:



Sec. 4. Order of Condemnation. When such a motion
is overruled or when any party fails to defend as required by
this rule, the court may enter an order 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 (Italics supplied).



Normally, the time of the taking coincides with the
filing of the complaint for expropriation. Hence, many ruling
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 to the
property, the just compensation is to be ascertained as of the
time of filing of the complaint.



The general rule, however, admits of an exception:
where this Court fixed the value of the property as of the date
it was taken and not the date of the commencement of the
expropriation proceedings.



In the old case of Provincial Government of Rizal vs.
Caro de Araullo, the Court ruled that x x x the owners of the
land have no right to recover damages for this unearned
increment resulting from the construction of the public
improvement (lengthening of Taft Avenue from Manila to
Pasay) from which the land was taken. To permit them to do
so would be to allow them to recover more than the value of
the land at the time it was taken, which is the true measure of
the damages, or just compensation, and would discourage the
construction of important public improvements.



In subsequent cases, the Court, following the above
doctrine, invariably held that the time of taking is the critical
date in determining lawful or just compensation. Justifying
this stance, Mr. Justice (later Chief Justice) Enrique Fernando,
speaking for the Court in Municipality of La Carlota vs. The
Spouses Felicidad Baltazar and Vicente Gan, said, x x x the
owner as is the constitutional intent, is paid what he is
entitled to according to the value of the property so devoted
to public use as of the date of taking. From that time, he had
been deprived thereof. He had no choice but to submit. He is
not, however, to be despoiled of such a right. No less than
the fundamental law guarantees just compensation. It would
be injustice to him certainly if from such a period, he could
not recover the value of what was lost. There could be on the
other hand, injustice to the expropriator if by a delay in the
collection, the increment in price would accrue to the owner.
The doctrine to which this Court has been committed is
intended precisely to avoid either contingency fraught with
unfairness.



Simply stated, the exception finds the application
where the owner would be given undue incremental
advantages arising from the use to which the government
devotes the property expropriated -- as for instance, the
extension of a main thoroughfare as was in the case in Caro
de Araullo. In the instant case, however, it is difficult to
conceive of how there could have been an extra-ordinary
increase in the value of the owners land arising from the
expropriation, as indeed the records do not show any
evidence that the valuation of P1,000.00 reached in 1992 was
due to increments directly caused by petitioners use of the
land. Since the petitioner is claiming an exception to Rule 67,
Section 4, it has the burden in proving its claim that its
occupancy and use -- not ordinary inflation and increase in
land values -- was the direct cause of the increase in valuation
from 1978 to 1992.





Side Issue: When is there Taking of Property?



But there is yet another cogent reason why this
petition should be denied and why the respondent Court
should be sustained. An examination of the undisputed
factual environment would show that the taking was not
really made in 1978.



This Court has defined the elements of taking as the
main ingredient in the exercise of power of eminent domain,
in the following words:



A number of circumstances must be present in
taking of property for purposes of eminent domain: (1) the
expropriator must enter a private property; (2) the entrance
into private property must be for more than a momentary
period; (3) the entry into the property should be under
warrant or color of legal authority; (4) the property must be
devoted to a public use or otherwise informally appropriated
or injuriously affected; and (5) the utilization of the property
for public use must be in such a way to oust the owner and
deprive him of all beneficial enjoyment of the
property.(Italics supplied)



In this case, the petitioners entrance in 1978 was
without intent to expropriate or was not made under warrant
or color of legal authority, for it believed the property was
public land covered by Proclamation No. 1354. When the
private respondent raised his claim of ownership sometime in
1979, the petitioner flatly refused the claim for
compensation, nakedly insisted that the property was public
land and wrongly justified its possession by alleging it had
already paid financial assistance to Marawi City in exchange
for the rights over the property. Only in 1990, after more
than a decade of beneficial use, did the petitioner recognize
private respondents ownership and negotiate for the
voluntary purchase of the property. A Deed of Sale with
provisional payment and subject to negotiations for the
correct price was then executed. Clearly, this is not the intent
nor the expropriation contemplated by law. This is a simple
attempt at a voluntary purchase and sale. Obviously, the
petitioner neglected and/or refused to exercise the power of
eminent domain.



Only in 1992, after the private respondent sued to
recover possession and petitioner filed its Complaint to
expropriate, did petitioner manifest its intention to exercise
the power of eminent domain. Thus the respondent Court
correctly held:



If We decree that the fair market value of the land be
determined as of 1978, then We would be sanctioning a
deceptive scheme whereby NAPOCOR, for any reason other
than for eminent domain would occupy anothers property
and when later pressed for payment, first negotiate for a low
price and then conveniently expropriate the property when
the land owner refuses to accept its offer claiming that the
taking of the property for the purpose of the eminent domain
should be reckoned as of the date when it started to occupy
the property and that the value of the property should be
computed as of the date of the taking despite the increase in
the meantime in the value of the property.



In Noble vs. City of Manila, the City entered into a
lease-purchase agreement of a building constructed by the
petitioners predecessor-in-interest in accordance with the
specifications of the former. The Court held that being bound
by the said contract, the City could not expropriate the
building. Expropriation could be resorted to only when it is
made necessary by the opposition of the owner to the sale or
by the lack of any agreement as to the price. Said the Court:



The contract, therefore, in so far as it refers to the
purchase of the building, as we have interpreted it, is in force,
not having been revoked by the parties or by judicial decision.
This being the case, the city being bound to buy the building
at an agreed price, under a valid and subsisting contract, and
the plaintiff being agreeable to its sale, the expropriation
thereof, as sought by the defendant, is baseless.
Expropriation lies only when it is made necessary by the
opposition of the owner to the sale or by the lack of any
agreement as to the price. There being in the present case a
valid and subsisting contract, between the owner of the
building and the city, for the purchase thereof at an agreed
price, there is no reason for the expropriation. (Italics
supplied)



In the instant case, petitioner effectively repudiated
the deed of sale it entered into with the private respondent
when it passed Resolution No. 92-121 on May 25, 1992
authorizing its president to negotiate, inter alia, that payment
shall be effective only after Agus I HE project has been
placed in operation. It was only then that petitioners intent
to expropriate became manifest as private respondent
disagreed and, barely a month, filed suit.[25]





In the present case, to allow petitioner to use the date it
constructed the tunnels as the date of valuation would be
grossly unfair. First, it did not enter the land under warrant
or color of legal authority or with intent to expropriate the
same. In fact, it did not bother to notify the owners and
wrongly assumed it had the right to dig those tunnels under
their property. Secondly, the improvements introduced by
petitioner, namely, the tunnels, in no way contributed to an
increase in the value of the land. The trial court, therefore, as
affirmed by the CA, rightly computed the valuation of the
property as of 1992, when respondents discovered the
construction of the huge underground tunnels beneath their
lands and petitioner confirmed the same and started
negotiations for their purchase but no agreement could be
reached.[26]



As to the amount of the valuation, the RTC and the CA both
used as basis the value of the adjacent property, Lot 1 (the
property involved herein being Lots 2 and 3 of the same
subdivision plan), which was valued at P1,000 per sq. meter
as of 1990, as sustained by this Court in Mangondato, thus:

The Second Issue: Valuation



We now come to the issue of valuation.



The fair market value as held by the respondent Court,
is the amount of P1,000.00 per square meter. In an
expropriation case where the principal issue is the
determination of just compensation, as is the case here, a
trial before Commissioners is indispensable to allow the
parties to present evidence on the issue of just compensation.
Inasmuch as the determination of just compensation in
eminent domain cases is a judicial function and factual
findings of the Court of Appeals are conclusive on the parties
and reviewable only when the case falls within the recognized
exceptions, which is not the situation obtaining in this
petition, we see no reason to disturb the factual findings as to
valuation of the subject property. As can be gleaned from the
records, the court-and-the-parties-appointed commissioners
did not abuse their authority in evaluating the evidence
submitted to them nor misappreciate the clear
preponderance of evidence. The amount fixed and agreed to
by the respondent appellate Court is not grossly exorbitant.
To quote:



Commissioner Ali comes from the Office of the
Register of Deeds who may well be considered an expert,
with a general knowledge of the appraisal of real estate and
the prevailing prices of land in the vicinity of the land in
question so that his opinion on the valuation of the property
cannot be lightly brushed aside.



The prevailing market value of the land is only one of
the determinants used by the commissioners report the
other being as herein shown:



x x x



x x x



Commissioner Doromals report, recommending
P300.00 per square meter, differs from the 2 commissioners
only because his report was based on the valuation as of 1978
by the City Appraisal Committee as clarified by the latters
chairman in response to NAPOCORs general counsels query.



In sum, we agree with the Court of Appeals that
petitioner has failed to show why it should be granted an
exemption from the general rule in determining just
compensation provided under Section 4 of Rule 67. On the
contrary, private respondent has convinced us that, indeed,
such general rule should in fact be observed in this case.[27]



Petitioner has not shown any error on the part of the CA in
reaching such a valuation. Furthermore, these are factual
matters that are not within the ambit of the present review.



WHEREFORE, the petition is DENIED and the Decision of the
Court of Appeals in C.A.-G.R. CV No. 57792 dated June 8, 2005
is AFFIRMED.



No costs.



SO ORDERED.







ADOLFO S. AZCUNA

Associate Justice







WE CONCUR:









REYNATO S. PUNO

Chairperson

Chief Justice







(On Leave)

ANGELINA SANDOVAL-GUTIERREZ RENATO C. CORONA

Associate Justice Associate
Justice









CANCIO C. GARCIA

Associate Justice







CERTIFICATION



Pursuant to Section 13, Article VIII of the Constitution, it
is hereby certified 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 Courts Division.









REYNATO S. PUNO

Chief Justice

* On Leave.

[1] Rollo, pp. 114-133.

[2] Id. at 117-118.

[3] Id. at 118-119.

[4] Id. at 121-122.

[5] Id. at 122-123.

[6] Id. at 132-133.

[7] Id. at 95-98.

[8] Concepcion v. CA, G.R. No. 120707, January 31,
2000, 324 SCRA 85.

[9] G.R. No. L-43938, April 15, 1988, 160 SCRA 228.

[10] Id.

[11] Tolentino, Commentaries and Jurisprudence on
the Civil Code, Vol. II, p. 90.

[12] Rollo, pp. 152-154.

[13] Militante v. Court of Appeals, 386 Phil. 522 (2000).

[14] CONSTITUTION, Art. III, Sec. 9. See also CIVIL
CODE, Art. 435.

[15] Republic v. PLDT, 136 Phil. 20 (1969).

[16] NAPOCOR v. CA, G.R. No. 106804, August 12, 2004,
436 SCRA 195.

[17] NAPOCOR v. Gutierrez, G.R. No. 60077, January 18,
1991, 193 SCRA 1.

[18] Id.

[19] G.R. No. 113194, March 11, 1996, 254 SCRA 577.

[20] Rollo, p. 130.

[21] Supra note 16.

[22] Supra note 17.

[23] Republic of the Philippines v. Sarabia, G.R. No.
157847, August 25, 2005, 468 SCRA 142.

[24] Supra note 19.

[25] Supra, note 19 at 588-592; Emphasis supplied,
italics in the original.

[26] See RTC decision of August 7, 1996, Rollo, p. 158.

[27] See, supra note 19 at 592-593.



[Syllabus]

FIRST DIVISION

[G.R. No. 64888. November 28, 1996]

REPUBLIC OF THE PHILIPPINES (Bureau of
Telecommunications). THE DIRECTOR or ACTING DIRECTOR
OF THE BUREAU OF TELECOMMUNICATIONS, THE REGIONAL
SUPERINTENDENT OF THE BUREAU OF
TELECOMMUNICATIONS AT REGION NO. II, THE EXCHANGE
MANAGER AND CHIEF OPERATOR OF THE BUREAU OF
TELECOMMUNICATIONS AT MALOLOS, BULACAN, petitioners,
vs. REPUBLIC TELEPHONE COMPANY, INC. (now Philippine
Long Distance Telephone Company) and THE INTERMEDIATE
APPELLATE COURT, respondents.

D E C I S I O N

HERMOSISIMA, JR., J.:

Before us is a petition for the review of the decision[1] of the
then Intermediate Appellate Court[2] (now the Court of
Appeals) in an injunction suit[3] filed in the then Court of First
Instance[4] (now the Regional Trial Court) by respondent
Republic Telephone Company, Inc. (hereafter, RETELCO [now
Philippine Long Distance Telephone Company, Inc.]) against
petitioner officers of the Bureau of Telecommunications
(hereafter, BUTELCO, now the Department of
Telecommunications and Communications [DOTC]
Telecommunications Office).

The respondent appellate court narrated the facts of this
case, undisputed as they are, in the following manner:

This case arose from a complaint filed on May 17, 1972 by
petitioner-appellee, the Republic Telephone Company
[RETELCO], seeking to enjoin the respondents Director or
Acting Director of the Bureau of Telecommunications; its
Regional Superintendent; the Exchange Manager and Chief
Operator of the Bureau of Telecommunications at Malolos,
Bulacan, and the agents and representatives acting in their
behalf, from operating and maintaining their local telephone
system in Malolos, Bulacan and from soliciting subscribers in
that municipality and its environs, alleging inter alia that such
operations and maintenance of the telephone system and
solicitation of subscribers by respondents constituted an
unfair and ruinous competition to the detriment of petitioner
[RETELCO] who is a grantee of both municipal and legislative
franchises for the purpose. Respondents [BUTELCO], thru
counsel, filed a motion to dismiss the aforesaid petition on
the grounds that they are not the indispensable and real
parties in interest in the case and that petitioner [RETELCO]
has no cause of action against them. The motion was denied
on June 20, 1972 x x x and after petitioner-appellee [RETELCO]
had furnished a bond of P75,000.00, Order was issued on June
30, 1972, restraining respondents [BUTELCO] from operating
and maintaining the local telephone system in Malolos and
from soliciting customers. Respondents [BUTELCO] filed their
Answer on July 6, 1972, followed with a motion on July 8,
1972, asking for the lifting of the Writ of Preliminary
Injunction suit, contending that state-owned property, albeit
immune from suit, had been adversely affected by the
injunction. For the reason that evidence has to be adduced
yet to determine respondents *BUTELCOs+ compliance with
Executive Order No. 94, Series of 1947, the court a quo denied
the motion. On December 7, 1972, the Republic of the
Philippines, on behalf of the Bureau of Telecommunications,
begged leave of court to intervene in the proceedings on the
ground that the suit affected state property and accordingly
the state has a legal interest involved. There being no
essential dispute between the parties over the fact that the
suit indeed involved property of the state, the Answer in
Intervention was admitted and the case proceeded to trial.


It is not disputed that petitioner-appellee, Republic
Telephone Company, Inc., or RETELCO, is a domestic
corporation engaged in the business of installing, operating
and maintaining nationwide local telephone services. It had
acquired a municipal franchise on December 29, 1959 from
the Municipal Council of Malolos, Bulacan per Resolution No.
190, Series of 1959 to install, maintain and operate a local
telephone system within the municipality of Malolos for a
period of thirty-five years x x x. The municipal franchise was
approved by the Provincial Board of Bulacan on January 21,
1960 thus certificate of public convenience and necessity was
secured from the Public Service Commission on March 15,
1960 under PSC Case No. 129826 which the President of the
Philippines approved on March 23, 1960 x x x. RETELCO
accepted the commission certificate and filed the required
deposit with the Treasurer of the Philippines on April 11, 1960
x x x. On June 22, 1963, RETELCO obtained a legislative
franchise under Republic Act No. 3662 of the then Congress of
the Philippines for the construction, operation and
maintenance of a nationwide telephone service with
exchanges in various areas including the municipality of
Malolos. It was approved by the President of the Philippines
for a period of fifty years x x x and the correspondent
certificate of public convenience and necessity was granted
on January 16, 1968 under Public Service Commission case
No. 67-4023 x x x.

From the evidence, it appears that on the basis of a viable
project study and reliance upon the laws affording protection
against unfair and ruinous competition, RETELCO commenced
operation of its Malolos telephone venture in 1960 and as of
1963 it had 197 subscribers which number increased to 368
subscribers in May 1969. The investment made reached the
sum of P263,050.88 x x x. But way back in February, 1969
RETELCO learned through public announcements of
government projects to be launched that the Bureau of
Telecommunications would establish and operate telephone
system in Malolos to serve government offices and the
private *sector+ as well thus exposing x x x appellees
*RETELCOs+ telephone business operation to the risk of
undue competition. Immediately, they filed protests, and
sought for administrative remedies and reliefs from the
Telecommunications Board, the President of the Philippines,
the Secretary of the Department of Public Works and
Communication, the then Speaker Jose B. Laurel, Jr. of the
House of Representatives, and the Philippine National Bank
which was financing the project x x x but all were to no avail.
In May, 1969, the Bureau of Telecommunications commenced
its operation of the telephone exchange in Malolos and,
incidentally, number of the telephone subscribers of RETELCO
dropped to a level of 255 as of September, 1969, to 131 in
October, 1970 and to 125 as of March, 1972 x x x at the cost
of P197,055.63 in terms of revenue losses x x x. However,
after the preliminary injunction was issued on June 30, 1972,
the number of subscribers gradually increased such that as of
January, 1974 there were already 320 subscribers as against
RETELCOs capacity of accommodating 450 subscribers x x x.
The Bureau of Telecommunications was not subject to the
jurisdiction of the Public Service Commission on matters of
fixing the rates of fees to be charged to telephone
subscribers, thus RETELCO attributed the sharp decline in the
number of telephone subscribers to the difference in rates
individually charged by them x x x.

The lower court, finding after trial that respondents
[BUTELCO] and intervenors-appellants were duplicating the
functions of petitioner-appellee [RETELCO] in contravention
of Executive Order No. 94, Series of 1947, rendered a
judgment making the preliminary injunction PERMANENT.*5+

Respondent appellate court sustained the court a quos
finding that Section 79 of Executive Order No. 94, Series of
1947 prohibited any other entity, besides the present
operator, from maintaining and selling telephone services in
Malolos, Bulacan, unless there was first executed a mutually
acceptable arrangement or agreement between such other
entity and the present operator as regards the utilization of
the latters existing facilities. Respondent court found
respondent RETELCO to be the present operator of telephone
services in Malolos, Bulacan, and BUTELCO having failed to
first make arrangements with the former before establishing
its own telephone system, respondent appellate court upheld
the propriety of the permanent injunction issued by the court
a quo in this wise:

PREMISES CONSIDERED, the preliminary injunction
previously granted is hereby made PERMANENT, and the
respondents and the intervenor Bureau of
Telecommunications and their successors, agents,
representative, and assigns, are hereby PERPETUALLY
enjoined and restrained from operating and maintaining their
local telephone exchange in the Municipality of Malolos,
Province of Bulacan, and from soliciting customers or
subscribers in said areas, UNTIL they comply with the
requisites mentioned in Section 79 (B) of Executive Order No.
94, particularly with respect to needed negotiation with the
petitioner or UNTIL such time as RETELCOs telephone
franchise in Malolos, Bulacan shall have lawfully ceased to
exist. The bond posted for the preliminary injunction is
hereby cancelled.*6+

In rendering judgment in favor of respondent RETELCO, the
appellate court rejected BUTELCOs main argument that
Section 79 of Executive Order No. 94, Series of 1947, has been
repealed by Presidential Decree No. 1 promulgated by then
President Marcos in the exercise of his martial law powers, by
virtue of which decree the Integrated Reorganization Plan
was made part of the law of the land. Under such plan, in
turn, BUTELCOs functions had been expanded to include the
operation of telephone systems for government offices for
purposes of augmenting inadequate private communications
services. BUTELCO was rebuffed by the appellate court in this
wise:

Read in its entirety, the Integrated Reorganization Plan of
1972 is expressive of the indispensable need for investigation
and negotiation to determine the actual and real conditions
of local telephone facilities under private ownership a
proviso explicitly contained in Executive Order No. 94,
without [sic] which, the announced policy of allowing private
enterprise to flourish would be set to naught. This clearly
negates the contention that Executive Order No. 94 was
repealed, hence, the non-compliance therewith would be
fatal and the installation and operation of telephone system
by the Bureau of Telecommunications in Malolos, Bulacan
was illegal at its inception which cannot [be] corrected by
subsequent legislation or judicial approbation.*7+

Hence this petition which assails the aforecited decision on
the following grounds:

I

THE INTERMEDIATE APPELLATE COURT ERRED IN RULING
THAT THE INTEGRATED REORGANIZATION PLAN DOES NOT
REPEAL AND/OR MODIFY SECTION 79 (b), EXECUTIVE ORDER
NO. 94, SERIES OF 1947, INSOFAR AS THE FUNCTIONS OF
BUREAU OF TELECOMMUNICATIONS ARE CONCERNED,
WHICH RULING IS COMPLETELY OPPOSED TO A PRIOR
DECISION OF SAME RESPONDENT COURT IN A CASE
INVOLVING THE SAME PARTIES, SAME ISSUES, AND THE SAME
SUBJECT MATTER.

II

COROLLARY TO THE ABOVE ERROR, RESPONDENT COURT
ERRED:

A. IN HOLDING THAT UNDER THE INTEGRATED
REORGANIZATION PLAN, THE BUREAU OF
TELECOMMUNICATIONS IS NOT AUTHORIZED TO PROVIDE
TELECOMMUNICATIONS FACILITIES, INCLUDING TELEPHONE
SYSTEMS, FOR GOVERNMENT OFFICES, IN AREAS WHERE
THERE ARE [sic] EXISTING PRIVATE TELEPHONE SYSTEM,
WITHOUT NEGOTIATING WITH THE PRESENT OWNER OR
OPERATORS;

B. IN HOLDING THAT THE INSTALLATION AND
OPERATION OF THE TELEPHONE SYSTEM BY THE BUREAU OF
TELECOMMUNICATIONS, WAS ILLEGAL; AND

C. IN HOLDING THAT RETELCO HAS THE EXCLUSIVE
RIGHT IN OPERATING AND MAINTAINING [A] TELEPHONE
SYSTEM IN GOVERNMENT OFFICES IN MALOLOS,
BULACAN.*8+

We grant the petition.

We agree with petitioners that respondent RETELCO did not,
even under Section 79 (b) of Executive Order No. 94, Series of
1947, have the exclusive right to operate and maintain a
telephone system in Malolos, Bulacan.

RETELCOs foremost argument is that such operations and
maintenance of the telephone system and solicitation of
subscribers by [petitioners] constituted an unfair and ruinous
competition to the detriment of [RETELCO which] is a grantee
of both municipal and legislative franchises for the purpose.
In effect, RETELCO pleads for protection from the courts on
the assumption that its franchises vested in it an exclusive
right as prior operator. There is no clear showing by RETELCO,
however, that its franchises are of an exclusive character.
Now, the cover headings on the rollo and the records of this
case show that RETELCO is now Philippine Long Distance
Telephone Company (PLDT), although nothing no document
or allegation in the rollo and the records indicate how the
substitution came to be. At any rate, it may very well be
pointed out as well that neither did the franchise of PLDT at
the time of the controversy confer exclusive rights upon PLDT
in the operation of a telephone system[9]. In fact, we have
made it a matter of judicial notice that all legislative
franchises for the operation of a telephone system contain
the following provision:

It is expressly provided that in the event the Philippine
Government should desire to maintain and operate for itself
the system and enterprise herein authorized, the grantee
shall surrender his franchise and will turn over to the
Government said system and all serviceable equipment
therein, at cost, less reasonable depreciation.*10+

BUTELCOs initiative to operate and maintain a telephone
system in Malolos, Bulacan, was undertaken pursuant to
Section 79 (b) of Executive Order No. 94, Series of 1947. Said
provision vested in BUTELCO the following powers and duties,
among others:

x x x

(b) To investigate, consolidate, negotiate for, operate and
maintain wire-telephone or radio telephone communication
service throughout the Philippines by utilizing such existing
facilities in cities, towns, and provinces as may be found
feasible and under such terms and conditions or
arrangements with the present owners or operators thereof
as may be agreed upon to the satisfaction of all concerned x x
x.

While we affirmed in the case of Republic v. PLDT[11], that
*t+he Bureau of Telecommunications, under section 79 (b) of
Executive Order No. 94, may operate and maintain wire
telephone or radio telephone communications throughout
the Philippines by utilizing existing facilities in cities, towns,
and provinces under such terms and conditions or
arrangement with present owners or operators as may be
agreed upon to the satisfaction of all concerned,*12+ we also
at the same time clarified that nothing in these provisions
limits the Bureau to non-commercial activities or prevents it
from serving the general public.*13+

x x x It may be that in its original prospectuses the Bureau
officials had stated that the service would be limited to
government offices; but such limitations could not block
future expansion of the system, as authorized by the terms of
the Executive Order, nor could the officials of the Bureau bind
the Government not to engage in services that are authorized
by law.*14+

In other words, BUTELCO cannot be said to be prohibited
under the aforecited legal provision from operating and
maintaining its own telephone system in Malolos, Bulacan.

Now in the subsequent case of Director of the Bureau of
Telecommunications v. Aligaen, we emphasized the relevance
of the latter portion of Section 79 (b) of Executive Order No.
94 as providing a caveat to any initiative on the part of the
government to operate and maintain a telephone system in
an area where there is an existing franchise holder. In the
said case of Aligaen, we foregrounded the need for BUTELCO
to first enter into negotiation or arrangement with the
operator or owner of the existing telephone system. We had
stated, thus:

x x x The Bureau of Telecommunications may take steps to
improve the telephone service in any locality in the
Philippines, but in so doing it must first enter into negotiation
or arrangement with the operator or owner of the existing
telephone system. x x x When a private person or entity is
granted a legislative franchise to operate a telephone system,
or any public utility for that matter the government has the
correlative obligation to afford the grantee of the franchise all
the chances or opportunity to operate profitably, as long as
public convenience is properly served rather than promote a
competition with the grantee. x x x*15+

This is not to say, however, that the lack of prior negotiation
with the existing telephone system operator renders illegal
the operation by BUTELCO of a telephone system. After all,
the very provision in question phrases the prior negotiation
requirement in less than mandatory terms. Section 79 (b) of
Executive Order No. 94, Series of 1947 provides:

(b) To x x x negotiate for, operate and maintain wire-
telephone or radio telecommunications service throughout
the Philippines by utilizing such existing facilities in cities,
towns, and provinces as may be found feasible and under
such terms and conditions or arrangements with the present
owners or operators thereof as may be agreed upon to the
satisfaction of all concerned *emphasis supplied+.

The right of the prior operator under the aforecited provision
is to be unfailingly and seriously considered in case it chooses
to propose arrangements or such terms and conditions
whereby BUTELCO is to coordinate its efforts to set up and
operate a telephone system with the existing operator.
BUTELCO, in that case, would be obligated to exercise good
faith and exert optimal cooperative efforts so that it may save
government some money and prevent competition by
utilizing existing facilities in cities, towns and provinces x x x
[of] the present owners or operators, as mandated by
Section 79 (b) of Executive Order No. 94.

In the case at bench, BUTELCO admittedly did not fulfill this
obligation. Such failure, however, is not violative of any
mandatory provision of law. There was no violation of
Section 79 (b) of Executive Order No. 94 but only an
irregularity in the procedure by which BUTELCO undertook
the operation of a telephone system in Malolos, Bulacan. It
cannot be denied that, even if prior negotiations were
undertaken by BUTELCO with RETELCO, and they both could
not agree on mutually acceptable terms and conditions,
nothing in Section 79 (b) of Executive Order No. 94 prohibits
BUTELCO from proceeding with the setting up and operation
of a telephone system in Malolos, Bulacan, despite the
presence of a prior operator in the person of RETELCO. Thus,
any injunction prohibiting BUTELCO from operating its
telephone system finds no sufficiently legal and just basis
under Section 79 (b) of Executive Order No. 94.

To read from Section 79 (b) of Executive Order No. 94 an
ultra-protectionist policy in favor of telephone franchise
holders, smacks of a promotion of the monopolization of the
countrys telephone industry which, undeniably, has
contributed to the slackened pace of national development.
As we have pointed out in the case of PLDT v. National
Telecommunications Commission[16]:

Free competition in the industry may also provide the
answer to a much-desired improvement in the quality and
delivery of this type of public utility, to improved technology,
fast and handly mobil service, and reduced user
dissatisfaction. After all, neither PLDT nor any other public
utility has a constitutional right to a monopoly position in
view of the Constitutional proscription that no franchise
certificate or authorization shall be exclusive in character or
shall last longer than fifty (50) years (ibid., Section 11; Article
XIV, Section 5, 1973 Constitution; Article XIV, Section 8, 1935
Constitution).*17+

In the light of the above ruling, necessary no longer is it to
discuss the other assigned errors of petitioner.

WHEREFORE, the petition is HEREBY GRANTED. The decision
of respondent Court of Appeals is hereby reversed and set
aside. The questioned writ of preliminary injunction made
permanent by respondent Court of First Instance (now the
Regional Trial Court) in its judgment, dated January 6, 1975, is
hereby dissolved for having been issued without legal basis.

No pronouncement as to costs.

SO ORDERED.

Padilla, (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur.

[1] In CA-G.R. CV No. 59004, dated May 18, 1983, penned by
Associate Justice Floreliana Castro-Bartolome and concurred
in by Associate Justices B.S. de la Fuente and Mariano A. Zosa,
Rollo, pp. 38-46.

[2] Third Civil Cases Division.

[3] Civil Case No. 4183-M filed on May 17, 1972.

[4] Branch VI, Bulacan.

[5] Decision in CA-G.R. CV No. 59004, pp. 3-5, Rollo, pp. 38-40.

[6] Id., pp. 1-2, Rollo, pp. 36-37.

[7] Id., p. 9, Rollo, p. 46.

[8] Petition dated September 19, 1983, pp. 14-15, Rollo, pp.
20-21.

[9] PLDT v. City of Davao, 15 SCRA 75, 82 (1965).

[10] Director of the Bureau of Telecommunications v. Aligaen,
33 SCRA 368, 384.

[11] 26 SCRA 620 (1969).

[12] Id., p. 628.

[13] Id., p. 630.

[14] Id., pp. 630-631.

[15] Director of the Bureau of Telecommunications v. Aligaen,
33 SCRA 368, 383-884 (1970).

[16] 190 SCRA 717 (1990).

[17] Id., p. 737.

3. When taking is not compensable

Carlos superdrug vs dswd


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 86953 November 6, 1990

MARINE RADIO COMMUNICATIONS ASSOCIATION OF THE
PHILIPPINES, INC. (MARCAPI), ROBERTO GAYA, DAVID ZAFRA
and SEGUNDO P. LUSTRE, JR., petitioners,
vs.
HON. RAINERIO O. REYES, in his capacity as Secretary of the
Department of Transportation and Communications (DOTC),
HON. JOSE LUIS ALCUAZ, as Commissioner of the National
Telecommunications Commission (NTC), and HON. ROSAURO
SIBAL, as Chief of the Telecommunications Office (TELOF) of
DOTC, respondents.

F. Reyes Cabigao for petitioners.



SARMIENTO, J.:

The petitioners are self-described "Filipino enterpreneurs
deeply involved in the business of marine radio
communications in the country. 1 They are also operators of
"shore-to-ship and ship-to-shore public marine coastal radio
stations, 2 and are holders of certificates of public
convenience duly issued by the National Telecommunications
Commission. Among other things, they handle
correspondence between vessel passengers or crew and the
public. 3

Sometime in July, 1988, the Department of Transportation
and Communications unveiled an P880-million maritime
coastal communications system project, designed to "ensure
safety of lives at sea (SOLAS) through the establishment of
efficient communication facilities between coast stations and
ship stations and the improvement of safety in navigational
routes at sea." 4 It was set out to provide, among other
things, ship-to- shore and shore-to-ship public corresponding,
free of charge. 5

On August 1, 1988, Atty. F. Reyes Cabigao, in his capacity as
counsel for the petitioner, Marine Radio Communications
Association of the Philippines, Inc., addressed an appeal to
then Secretary Rainerio Reyes, in the tenor as follows:

xxx xxx xxx

But you undoubtedly would understand their fears. It was
their feeling that entry of the government into their line of
business would certainly spell for them financial ruin as it
would put into serious doubt the viability of the entire marine
radio communications industry. They say that, as it is today,
the industry is not viable enough. What more, they ask, if the
government steps in and eventually dips its strong fingers into
the pie? 6

xxx xxx xxx

On August 17, 1988, the Secretary forwarded a reply,
denying Atty. Cabigao's request, for the following reasons:

xxx xxx xxx

MARCAPI's main business concern is public correspondence.
This means that MARCAPI handles only correspondence
between passengers or crew on board ship and their
respective offices or residences. On the other hand, the
Maritime Coastal Communications System Project to be
implemented by 1989 will offer services in watch and distress
signal, medical and meteorological services, port services, and
public correspondence, in their order of priority.

You will note that public correspondence is only fourth in
the order of priority of services to be offered by the present
maritime project. Primarily, it will offer distress and safety
communications service which is obligatory in the maritime
mobile service. This consists of monitoring by coast stations
of distress signal from ships in trouble and relaying the
messages to the Philippine Coast Guard which will undertake
the search and rescue operations. It also includes safety
communication which refers to weather broadcast and
typhoon signals that will be broadcast by the coast stations
regularly. These services are offered to the public for free.

It is worth noting, as it is significant, that the confidence of
the public in the competence of private firms to carry out the
aforecited objectives has already been eroded. After that
tragic incident of the sinking of MV Dona Paz, the National
Telecommunications Commission and MARINA conducted
constant monitoring by sending distress signals. Out of 1,000
licensed private operators only one (1) responded to the
signal. 7

On February 20, 1989, the petitioners brought the instant
suit, alleging, in essence, that Secretary Rainerio Reyes had
been guilty of a grave abuse of discretion.

On June 7, 1990, the Court issued a Resolution, in view of
the departure of Secretary Rainerio Reyes, requiring the
present incumbent, Secretary Oscar Orbos, to inform the
Court whether or not the Department is adopting the action
of Secretary Reyes. On August 16, 1990, Assistant Secretary
Wilfredo Trinidad informed us that Secretary Orbos is
adopting the action complained of.

The petitioners hold that the Department can not compete
in the business of public correspondence, and rely on the
provisions of Section 20, of Article II, of the Constitution,
which states:

Sec. 20. The State recognizes the indispensable role of the
private sector, encourages private enterprise, and provides
incentives to needed investments.

The Solicitor General, on the other hand, submits that in
spite of the above provision, the Government "cannot
abandon its ministerial functions of rendering public services
to the citizenry which private capital would not ordinarily
undertake, or which by its very nature is better equipped to
administer for the public welfare than by any private
individual or entity. 8

There is no merit in this petition.

The duty of the State is preeminently "to serve . . . the
people, 9 and so also, to "promote a just and dynamic social
order . . . through policies that provide adequate social
services. . . . and an improved quality of life for all. 10

The objectives of government, as expressed in the Charter,
are, among other things, "a more equitable distribution of
opportunities, income, and wealth . . . [and] a sustained
increase in the amount of goods and services produced by the
nation for the benefit of the people . . . " 11 With respect in
particular to property, the Constitution decrees:

Sec. 6. The use of property bears a social function, and all
economic agents shall contribute to the common good.
Individuals and private groups, including corporations,
cooperatives, and similar collective organizations, shall have
the right to own, establish, and operate economic
enterprises, subject to the duty of the State to promote
distributive justice and to intervene when the common good
so demands. 12

There can hardly be any valid argument against providing
for public corresponding, free of charge. It is compatible with
State aims to serve the people under the Constitution, and
certainly, amid these hard times, the State can do no less.

The petitioners can not legitimately rely on the provisions
of Section 20, of Article II, of the Constitution, to defeat the
act complained of. The mandate "recogni[zing] the
indispensable role of the private sector" is no more than an
acknowledgment of the importance of private initiative in
building the nation. However, it is not a call for official
abdication of duty to citizenry.

The novel provisions of the Charter prescribing private
sector participation, especially in the field of economic
activity, 13 come, indeed, no more as responses to State
monopoly of economic forces which has unfairly kept
individual initiative from the economic processes and has
held back competitiveness in the market. The Constitution
does not bar, however, the Government from undertaking its
own initiatives, especially in the domain of public service, and
neither does it repudiate its primacy as chief economic
caretaker of the nation.

The principle of laissez faire has long been denied validity in
this jurisdiction. In 1969, the Court promulgated Agricultural
Credit and Cooperative Financing Administration v.
Confederation of Unions in Government Corporations and
offices, 14 where it was held:

xxx xxx xxx

... The areas which used to be left to private enterprise and
initiative and which the government was called upon to enter
optionally and only because it was better equipped to
administer for the public welfare than in any private
individual or group of individuals," continue to lose their well-
defined boundaries and to be absorbed within activities that
the government must undertake in its sovereign capacity if it
is to meet the increasing social challenges of the times. Here
as almost everywhere else the tendency is undoubtedly
towards a greater socialization of economic forces. Here of
course this development was envisioned, indeed adopted as a
national policy, by the Constitution itself in its declaration of
principle concerning the promotion of social justice. 15

The requirements of social justice and the necessity for a
redistribution of the national wealth and economic
opportunity find in fact a greater emphasis in the 1987
Constitution, notwithstanding the novel concepts inscribed
there. 16 And two decades after this Court wrote it, ACCFAs
message remains the same and its lesson holds true as ever.

The Court is not of the thinking that the act complained of is
equivalent to a taking without just compensation. Albeit we
have held that "[w]here the owner is deprived of the ordinary
and beneficial use of his property or of its value by its being
diverted to public use, there is taking within the
constitutional sense, 17 it does not seem to us that the
Department of Transportation and Communication, by
providing for free public correspondence, is guilty of an
uncompensated taking. Rather, the Government merely built
a bridge that made the boat obsolete, although not entirely
useless. Certainly, the owner of the boat can not charge the
builder of the bridge for lost income. And certainly, the
Government has all the right to build the bridge.

WHEREFORE, the petition is DISMISSED. No costs.

SO ORDERED.

Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz,
Paras, Gancayco, Bidin, Cortes, Grio-Aquino, Medialdea and
Regalado, JJ., concur.

Padilla, J., took no part

Feliciano, J., is on leave.



Footnotes

1 Rollo, 5.

2 Id., 6.

3 Id., 13.

4 Id., 55.

5 Id 61.

6 Id., 56.

7 Id., 61.

8 Id., 78-79.

9 CONST art. II, sec. 4.

10 Supra, sec. 9.

11 Supra, art. XII, sec. 1.

12 Supra, sec. 6.

13 See supra, art. XII, sec. 1; sec. 20.

14 Nos. L-21484 and 23605, November 29, 1969,30 SCRA
649.

15 Supra, 662.

16 See CONST., art. 11, supra, art XII, supra, art. XIII.

17 Municipality of La Carlota v. National Waterworks and
Sewerage Authority, No. L-20232, September 30, 1964, 12
SCRA 165,167.

The Lawphil Project - Arellano Law Foundation


D. Public Use


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-48685 September 30, 1987

LORENZO SUMULONG and EMILIA VIDANES-BALAOING,
petitioners,
vs.
HON. BUENAVENTURA GUERRERO and NATIONAL HOUSING
AUTHORITY, respondents.



CORTES, J.:

On December 5, 1977 the National Housing Authority (NIIA)
filed a complaint for expropriation of parcels of land covering
approximately twenty five (25) hectares, (in Antipolo, Rizal)
including the lots of petitioners Lorenzo Sumulong and Emilia
Vidanes-Balaoing with an area of 6,667 square meters and 3,333
square meters respectively. The land sought to be expropriated
were valued by the NHA at one peso (P1.00) per square meter
adopting the market value fixed by the provincial assessor in
accordance with presidential decrees prescribing the valuation
of property in expropriation proceedings.

Together with the complaint was a motion for immediate
possession of the properties. The NHA deposited the amount of
P158,980.00 with the Philippine National Bank, representing the
"total market value" of the subject twenty five hectares of land,
pursuant to Presidential Decree No. 1224 which defines "the
policy on the expropriation of private property for socialized
housing upon payment of just compensation."

On January 17, 1978, respondent Judge issued the following
Order:

Plaintiff having deposited with the Philippine National Bank,
Heart Center Extension Office, Diliman, Quezon City, Metro
Manila, the amount of P158,980.00 representing the total
market value of the subject parcels of land, let a writ of
possession be issued.

SO ORDERED.

Pasig, Metro Manila, January 17, 1978.

(SGD) BUENAVENTURA S. GUERRERO

Judge

Petitioners filed a motion for reconsideration on the ground
that they had been deprived of the possession of their property
without due process of law. This was however, denied.

Hence, this petition challenging the orders of respondent
Judge and assailing the constitutionality of Pres. Decree No.
1224, as amended. Petitioners argue that:

1) Respondent Judge acted without or in excess of his
jurisdiction or with grave abuse of discretion by issuing the
Order of January 17, 1978 without notice and without hearing
and in issuing the Order dated June 28, 1978 denying the motion
for reconsideration.

2) Pres. Decree l224, as amended, is unconstitutional for being
violative of the due process clause, specifically:

a) The Decree would allow the taking of property regardless of
size and no matter how small the area to be expropriated;

b) "Socialized housing" for the purpose of condemnation
proceeding, as defined in said Decree, is not really for a public
purpose;

c) The Decree violates procedural due process as it allows
immediate taking of possession, control and disposition of
property without giving the owner his day in court;

d) The Decree would allow the taking of private property upon
payment of unjust and unfair valuations arbitrarily fixed by
government assessors;

e) The Decree would deprive the courts of their judicial
discretion to determine what would be the "just compensation"
in each and every raise of expropriation.

Indeed, the exercise of the power of eminent domain is
subject to certain limitations imposed by the constitution, to
wit:

Private property shall not be taken for public use without just
compensation (Art. IV, Sec. 9);

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 (Art. IV, sec. 1).

Nevertheless, a clear case of constitutional infirmity has to be
established for this Court to nullify legislative or executive
measures adopted to implement specific constitutional
provisions aimed at promoting the general welfare.

Petitioners' objections to the taking of their property
subsumed under the headings of public use, just compensation,
and due process have to be balanced against competing
interests of the public recognized and sought to be served under
declared policies of the constitution as implemented by
legislation.

1. Public use

a) Socialized Housing

Petitioners contend that "socialized housing" as defined in
Pres. Decree No. 1224, as amended, for the purpose of
condemnation proceedings is not "public use" since it will
benefit only "a handful of people, bereft of public character."

"Socialized housing" is defined as, "the construction of
dwelling units for the middle and lower class members of our
society, including the construction of the supporting
infrastructure and other facilities" (Pres. Decree No. 1224, par.
1). This definition was later expanded to include among others:

a) The construction and/or improvement of dwelling units for
the middle and lower income groups of the society, including the
construction of the supporting infrastructure and other facilities;

b) Slum clearance, relocation and resettlement of squatters
and slum dwellers as well as the provision of related facilities
and services;

c) Slum improvement which consists basically of allocating
homelots to the dwellers in the area or property involved,
rearrangemeant and re-alignment of existing houses and other
dwelling structures and the construction and provision of basic
community facilities and services, where there are none, such as
roads, footpaths, drainage, sewerage, water and power system
schools, barangay centers, community centers, clinics, open
spaces, parks, playgrounds and other recreational facilities;

d) The provision of economic opportunities, including the
development of commercial and industrial estates and such
other facilities to enhance the total community growth; and

e) Such other activities undertaken in pursuance of the
objective to provide and maintain housing for the greatest
number of people under Presidential Decree No, 757, (Pres.
Decree No. 1259, sec. 1)

The "public use" requirement for a and 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:

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 [Heirs of Juancho Ardona v. Reyes, G.R. Nos. 60549,
60553-60555 October 26, 1983, 125 SCRA 220 (1983) at 234-5
quoting E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES
523-4, (2nd ed., 1977) Emphasis supplied].

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. As discussed in the above
cited case of Heirs of Juancho Ardona:

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. (p. 231)

Specifically, urban renewal or redevelopment and the
construction of low-cost housing is recognized as a public
purpose, not only because of the expanded concept of public use
but also because of specific provisions in the Constitution. The
1973 Constitution made it incumbent upon the State to
establish, maintain and ensure adequate social services
including housing [Art. 11, sec. 7]. The 1987 Constitution goes
even further by providing that:

The State shall promote a just and dynamic social order that
will ensure the prosperity and independence of the nation and
free the people from poverty through policies that provide
adequate social services, promote full employment, a rising
standard of living and an improved quality of life for all. [Art. II,
sec. 9]

The state shall by law, and for the common good, undertake,
in cooperation with the private sector, a continuing program of
urban land reform and housing which will make available at
affordable cost decent housing and basic services to
underprivileged and homeless citizens in urban centers and
resettlement areas. It shall also promote adequate employment
opportunities to such citizens. In the implementation of such
program the State shall respect the rights of small property
owners. (Art. XIII, sec. 9, Emphaisis supplied)

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 are who need it, all at once.

Population growth, the migration to urban areas and the
mushrooming of crowded makeshift dwellings is a worldwide
development particularly in developing countries. So basic and
urgent are housing problems that the United Nations General
Assembly proclaimed 1987 as the "International Year of Shelter
for the Homeless" "to focus the attention of the international
community on those problems". The General Assembly is
Seriously concerned that, despite the efforts of Governments at
the national and local levels and of international organizations,
the driving conditions of the majority of the people in slums and
squatter areas and rural settlements, especially in developing
countries, continue to deteriorate in both relative and absolute
terms." [G.A. Res. 37/221, Yearbook of the United Nations 1982,
Vol. 36, p. 1043-4]

In the light of the foregoing, this Court is satisfied that
"socialized housing" fans within the confines of "public use". It
is, particularly important to draw attention to paragraph (d) of
Pres. Dec. No. 1224 which opportunities inextricably linked with
low-cost housing, or slum clearance, relocation and
resettlement, or slum improvement emphasize the public
purpose of the project.

In the case at bar, the use to which it is proposed to put the
subject parcels of land meets the requisites of "public use". The
lands in question are being expropriated by the NHA for the
expansion of Bagong Nayon Housing Project to provide housing
facilities to low-salaried government employees. Quoting
respondents:

1. The Bagong Nayong Project is a housing and community
development undertaking of the National Housing Authority.
Phase I covers about 60 hectares of GSIS property in Antipolo,
Rizal; Phase II includes about 30 hectares for industrial
development and the rest are for residential housing
development.

It is intended for low-salaried government employees and
aims to provide housing and community services for about 2,000
families in Phase I and about 4,000 families in Phase II.

It is situated on rugged terrain 7.5 kms. from Marikina Town
proper; 22 Kms. east of Manila; and is within the Lungs Silangan
Townsite Reservation (created by Presidential Proclamation No.
1637 on April 18, 1977).

The lands involved in the present petitions are parts of the
expanded/additional areas for the Bagong Nayon Project
totalling 25.9725 hectares. They likewise include raw, rolling
hills. (Rollo, pp. 266-7)

The acute shortage of housing units in the country is of public
knowledge. Official data indicate that more than one third of the
households nationwide do not own their dwelling places. A
significant number live in dwellings of unacceptable standards,
such as shanties, natural shelters, and structures intended for
commercial, industrial, or agricultural purposes. Of these
unacceptable dwelling units, more than one third is located
within the National Capital Region (NCR) alone which lies
proximate to and is expected to be the most benefited by the
housing project involved in the case at bar [See, National Census
and Statistics Office, 1980 Census of Population and Housing].

According to the National Economic and Development
Authority at the time of the expropriation in question, about "50
per cent of urban families, cannot afford adequate shelter even
at reduced rates and will need government support to provide
them with social housing, subsidized either partially or totally"
[NEDA, FOUR YEAR DEVELOPMENT PLAN For 1974-1977, p. 357].
Up to the present, housing some remains to be out of the reach
of a sizable proportion of the population" [NEDA, MEDIUM-
TERM PHILIPPINE DEVELOPMENT PLAN 1987-1992, p. 240].

The mushrooming of squatter colonies in the Metropolitan
Manila area as well as in other cities and centers of population
throughout the country, and, the efforts of the government to
initiate housing and other projects are matters of public
knowledge [See NEDA, FOUR YEAR DEVELOPMENT PLAN For
1974-1977, pp. 357-361; NEDA, FIVE-YEAR PHILIPPINE
DEVELOPMENT PLAN 1978-1982, pp. 215-228 NEDA, FIVE YEAR
PHILIPPINE DEVELOPMENT PLAN 1983-1987, pp. 109-117; NEDA,
MEDIUM TERM PHILIPPINE DEVELOPMENT PLAN 1987-1992, pp.
240-254].

b) Size of Property

Petitioners further contend that Pres. Decree 1224, as
amended, would allow the taking of "any private land"
regardless of the size and no matter how small the area of the
land to be expropriated. Petitioners claim that "there are vast
areas of lands in Mayamot, Cupang, and San Isidro, Antipolo,
Rizal hundred of hectares of which are owned by a few
landowners only. It is surprising [therefore] why respondent
National Housing Authority [would] include [their] two man lots
..."

In J.M. Tuason Co., Inc. vs. Land Tenure Administration [G. R.
No. L-21064, February 18, 1970, 31 SCRA 413 (1970) at 428] this
Court earlier ruled that expropriation is not confined to landed
estates. This Court, quoting the dissenting opinion of Justice
J.B.L. Reyes in Republic vs. Baylosis, [96 Phil. 461 (1955)], held
that:

The propriety of exercising the power of eminent domain
under Article XIII, section 4 of our Constitution cannot be
determined on a purely quantitative or area basis. Not only does
the constitutional provision speak of lands instead of landed
estates, but I see no cogent reason why the government, in its
quest for social justice and peace, should exclusively devote
attention to conflicts of large proportions, involving a
considerable number of individuals, and eschew small
controversies and wait until they grow into a major problem
before taking remedial action.

The said case of J.M. Tuason Co., Inc. departed from the ruling
in Guido vs. Rural Progress Administration [84 Phil. 847 (1949)]
which held that the test to be applied for a valid expropriation of
private lands was the area of the land and not the number of
people who stood to be benefited. Since then "there has
evolved a clear pattern of adherence to the "number of people
to be benefited test" " [Mataas na Lupa Tenants Association, Inc.
v. Dimayuga, G.R. No. 32049, June 25,1984, 130 SCRA 30 (1984)
at 39]. Thus, in Pulido vs. Court of Appeals [G.R. No. 57625, May
3, 1983, 122 SCRA 63 (1983) at 73], this Court stated that, "[i]t is
unfortunate that the petitioner would be deprived of his
landholdings, but his interest and that of his family should not
stand in the way of progress and the benefit of the greater may
only of the inhabitants of the country."

The State acting through the NHA is vested with broad
discretion to designate the particular property/properties to be
taken for socialized housing purposes and how much thereof
may be expropriated. Absent a clear showing of fraud, bad faith,
or gross abuse of discretion, which petitioners herein failed to
demonstrate, the Court will give due weight to and leave
undisturbed the NHA's choice and the size of the site for the
project. The property owner may not interpose objections
merely because in their judgment some other property would
have been more suitable, or just as suitable, for the purpose.
The right to the use, enjoyment and disposal of private property
is tempered by and has to yield to the demands of the common
good. The Constitutional provisions on the subject are clear:

The State shall promote social justice in all phases of national
development. (Art. II, sec. 10)

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 regulate the acquisition, ownership, use
and disposition of property and its increments. (Art, XIII, sec. 1)

Indeed, the foregoing provisions, which are restatements of
the provisions in the 1935 and 1973 Constitutions, emphasize:

...the stewardship concept, under which private property is
supposed to be held by the individual only as a trustee for the
people in general, who are its real owners. As a mere steward,
the individual must exercise his rights to the property not for his
own exclusive and selfish benefit but for the good of the entire
community or nation [Mataas na Lupa Tenants Association, Inc.
supra at 42-3 citing I. CRUZ, PHILIPPINE POLITICAL LAW, 70 (1983
ed.)].

2. Just Compensation

Petitioners maintain that Pres. Decree No. 1224, as amended,
would allow the taking of private property upon payment of
unjust and unfair valuations arbitrarily fixed by government
assessors. In addition, they assert that the Decree would deprive
the courts of their judicial discretion to determine what would
be "just compensation".

The foregoing contentions have already been ruled upon by
this Court in the case of Ignacio vs. Guerrero (G.R. No. L-49088,
May 29, 1987) which, incidentally, arose from the same
expropriation complaint that led to this instant petition. The
provisions on just compensation found in Presidential Decree
Nos. 1224, 1259 and 1313 are the same provisions found in
Presidential Decree Nos. 76, 464, 794 and 1533 which were
declared unconstitutional in Export Processing Zone All thirty vs.
Dulay (G.R. No. 5960 April 29, 1987) for being encroachments on
prerogatives.

This Court abandoned the ruling in National Housing Authority
vs. Reyes [G.R. No. 49439, June 29,1983, 123 SCRA 245 (1983)]
which upheld Pres. Decree No. 464, as amended by - Presidential
Decree Nos. 794, 1224 and 1259.

In said case of Export Processing Zone Authority, this Court
pointed out that:

The basic unfairness of the decrees is readily apparent.

Just compensation means the value of the property at the
time of the taking. It means a fair and full equivalent for the loss
sustained. ALL the facts as to the condition of the property and
its surroundings, its improvements and capabilities, should be
considered.

xxx xxx xxx

Various factors can come into play in the valuation of specific
properties singled out for expropriation. The values given by
provincial assessors are usually uniform for very wide areas
covering several barrios or even an entire total with the
exception of the poblacion. Individual differences are never
taken into account. The value of land is based on such
generalities as its possible cultivation for rice, corn, coconuts, or
other crops. Very often land described as directional has been
cultivated for generations. Buildings are described in terms of
only two or three classes of building materials and estimates of
areas are more often inaccurate than correct. Tax values can
serve as guides but cannot be absolute substitutes for just
compensation.

To say that the owners are estopped to question the
valuations made by assessors since they had the opportunity to
protest is illusory. The overwhelming mass of landowners accept
unquestioningly what is found in the tax declarations prepared
by local assessors or municipal clerks for them. They do not even
look at, much less analyze, the statements. The Idea of
expropriation simply never occurs until a demand is made or a
case filed by an agency authorized to do so. (pp. 12-3)

3. Due Process

Petitioners assert that Pres. Decree 1224, as amended,
violates procedural due process as it allows immediate taking of
possession, control and disposition of property without giving
the owner his day in court. Respondent Judge ordered the
issuance of a writ of possession without notice and without
hearing.

The constitutionality of this procedure has also been ruled
upon in the Export Processing Zone Authority case, viz:

It is violative of due process to deny to the owner the
opportunity to prove that the valuation in the tax documents is
unfair or wrong. And it is repulsive to basic concepts of justice
and fairness to allow the haphazard work of minor bureaucrat or
clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually
viewed the property, after evidence and arguments pro and con
have been presented, and after all factors and considerations
essential to a fair and just determination have been judiciously
evaluated. (p. 13)

On the matter of the issuance of a writ of possession, the
ruling in the Ignacio case is reiterated, thus:

[I]t is imperative that before a writ of possession is issued by
the Court in expropriation proceedings, the following requisites
must be met: (1) There must be a Complaint for expropriation
sufficient in form and in substance; (2) A provisional
determination of just compensation for the properties sought to
be expropriated must be made by the trial court on the basis of
judicial (not legislative or executive) discretion; and (3) The
deposit requirement under Section 2, Rule 67 must be complied
with. (p. 14)

This Court holds that "socialized housing" defined in Pres.
Decree No. 1224, as amended by Pres. Decree Nos. 1259 and
1313, constitutes "public use" for purposes of expropriation.
However, as previously held by this Court, the provisions of such
decrees on just compensation are unconstitutional; and in the
instant case the Court finds that the Orders issued pursuant to
the corollary provisions of those decrees authorizing immediate
taking without notice and hearing are violative of due process.

WHEREFORE, the Orders of the lower court dated January 17,
1978 and June 28, 1978 issuing the writ of possession on the
basis of the market value appearing therein are annulled for
having been issued in excess of jurisdiction. Let this case be
remanded to the court of origin for further proceedings to
determine the compensation the petitioners are entitled to be
paid. No costs.

SO ORDERED.

Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera,
Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin and
Sarmiento, JJ., concur.

The Lawphil Project - Arellano Law Foundation



SECOND DIVISION





LOURDES DE LA PAZ MASIKIP,

Petitioner,







- versus -







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.




G.R. No. 136349





Present:





Puno, J., Chairman,

Sandoval-Gutierrez,

Corona,

AZCUNA, and

GARCIA, JJ.





Promulgated:





January 23, 2006

x--------------------------------------------------------------------------------------
---x




D E C I S I O N







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 Decision[1]
of the Court of Appeals dated October 31, 1997 in CA-G.R. SP No.
41860 affirming the Order[2] of the Regional Trial Court, Branch
165, Pasig City, dated May 7, 1996 in S.C.A. No. 873. Likewise
assailed is the Resolution[3] of the same court dated November
20, 1998 denying petitioners 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 petitioners 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

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 DEFENDANTS
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



PLAINTIFFS COMPLAINT IS DEFECTIVE IN FORM AND
SUBSTANCE, CONSIDERING THAT:



(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]





On May 7, 1996, the trial court issued an Order denying the
Motion to Dismiss,[5] on the ground that 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. Petitioners 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 PETITIONERS 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 QUOS ORDER DATED 07 MAY 1996 AND 31 JULY
1996, WHICH WERE AFFIRMED BY THE COURT OF APPEALS,
EFFECTIVELY AMOUNT TO THE TAKING OF PETITIONERS
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 PASIGS COMPLAINT DATED 07 APRIL
1995 TO JUSTIFY THE COURT A QUOS DENIAL OF PETITIONERS
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:



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 plaintiffs 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 defendants property for the use specified in the
complaint. All that the law requires is that a copy of the said
motion be served on plaintiffs 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 petitioners 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.



Applying this standard, we hold that respondent City of Pasig
has failed to establish that there is a genuine necessity to
expropriate petitioners property. Our scrutiny of the records
shows that the Certification[14] 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.
Petitioners 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 ones 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

Associate Justice






ADOLFO S. AZCUNA

Associate Justice







CANCIO C. GARCIA

Associate Justice




ATTESTATION





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.




REYNATO S. PUNO

Associate Justice

Chairperson, Second Division












CERTIFICATION




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 case was assigned to the writer of the opinion of the
Court.







ARTEMIO V. PANGANIBAN

Chief Justice





SECOND DIVISION

[G.R. No. 156273. October 15, 2003]

HEIRS OF TIMOTEO MORENO and MARIA ROTEA, namely:
ESPERANZA R. EDJEC, BERNARDA R. SUELA, RUBY C. ROTEA,
BERNARDA R. ROTEA, ELIA R. VDA. DE LIMBAGA, VIRGINIA R.
ARBON, ROSALINDA R. ARQUISOLA, CORAZON ROTEA, FE R.
EBORA, CARIDAD ROTEA, ANGELES VDA. DE RENACIA, JORGE
ROTEA, MARIA LUISA ROTEA-VILLEGAS, ALFREDO R. ROTEA,
represented by his heirs LIZBETH ROTEA and ELEPETH ROTEA;
LUIS ROTEA, represented by his heir JENNIFER ROTEA; and
ROLANDO R. ROTEA, represented by his heir ROLANDO R. ROTEA
JR., petitioners, vs. MACTAN - CEBU INTERNATIONAL AIRPORT
AUTHORITY, respondent.

D E C I S I O N

BELLOSILLO, J.:

THE HEIRS OF TIMOTEO MORENO AND MARIA ROTEA,
petitioners herein, are the successors-in-interest of the former
registered owners of two (2) parcels of land situated in Lahug,
Cebu City, designated as Lot No. 916 with an area of 2,355
square meters under TCT No. RT-7543 (106) T-13694, and Lot No.
920 consisting of 3,097 square meters under TCT No. RT-7544
(107) T-13695.[1]

In 1949 the National Airport Corporation as the predecessor
agency of respondent Mactan-Cebu International Airport
Authority (MCIAA) wanted to acquire Lots Nos. 916 and 920
above described among other parcels of land for the proposed
expansion of Lahug Airport.[2] To entice the landowners to cede
their properties, the government assured them that they could
repurchase their lands once Lahug Airport was closed or its
operations transferred to Mactan Airport.[3] Some of the
landowners executed deeds of sale with right of repurchase in
favor of the government but many others, including the owners
of Lots Nos. 916 and 920 herein mentioned, refused the offer
because the payment was perceived to be way below the
market price.[4]

On 16 April 1952, as the negotiations for the purchase of the lots
necessary for the expansion and improvement of Lahug Airport
irredeemably broke down, the Civil Aeronautics Administration
as the successor agency of the National Airport Corporation filed
a complaint with the Court of First Instance of Cebu, for the
expropriation of Lots Nos. 916 and 920 and other subject
realties, docketed as Civil Case No. R-1881.

On 29 December 1961 the trial court promulgated its Decision in
Civil Case No. R-1881 condemning Lots Nos. 916 and 920 and
other lots for public use upon payment of just compensation.[5]
Petitioners predecessors were paid P7,065.00 for Lot No. 916
and P9,291.00 for Lot No. 920 with consequential damages by
way of legal interest from 16 November 1947. No appeal was
taken from the Decision on Lots Nos. 916 and 920, and the
judgment of condemnation became final and executory.[6]
Thereafter, the certificates of title for these parcels of land were
issued in the name of the Republic of the Philippines under TCT
No. 58691 for Lot No. 916 and TCT No. 58692 for Lot No. 920,
which under RA 6958 (1990) were subsequently transferred in
favor of respondent MCIAA.[7]

At the end of 1991, or soon after the transfer of Lots Nos. 916
and 920 to MCIAA, Lahug Airport ceased operations as the
Mactan Airport was opened for incoming and outgoing
flights.[8] Lots Nos. 916 and 920 which had been expropriated
for the extension of Lahug Airport were not utilized.[9] In fact,
no expansion of Lahug Airport was undertaken by MCIAA and its
predecessors-in-interest.[10] Hence, petitioners wrote then
President Fidel V. Ramos and the airport manager begging them
for the exercise of their alleged right to repurchase Lots Nos. 916
and 920.[11] Their pleas were not heeded.[12]

On 11 March 1997 petitioners filed a complaint for
reconveyance and damages with RTC of Cebu City against
respondent MCIAA to compel the repurchase of Lots Nos. 916
and 920, docketed as Civil Case No. CEB-20015. In the main,
petitioners averred that they had been convinced by the officers
of the predecessor agency of respondent MCIAA not to oppose
the expropriation proceedings since in the future they could
repurchase the properties if the airport expansion would not
push through. MCIAA did not object to petitioners evidence
establishing these allegations.

When the civil case was pending, one Richard E. Enchuan filed a
Motion for Transfer of Interest alleging that he acquired through
deeds of assignment the rights of some of herein petitioners
over Lots Nos. 916 and 920.[13] The Department of Public Works
and Highways (DPWH) also sought to intervene in the civil case
claiming that it leased in good faith Lot No. 920 from the
predecessor agencies of respondent MCIAA and that it built
thereon its Regional Equipment Services and its Region 7
Office.[14]

On 12 April 1999 the trial court found merit in the claims of
petitioners and granted them the right to repurchase the
properties at the amount pegged as just compensation in Civil
Case No. R-1881 but subject to the alleged property rights of
Richard E. Enchuan and the leasehold of DPWH.[15] The trial
court opined that the expropriation became illegal or functus
officio when the purpose for which it was intended was no
longer there.[16]

Respondent MCIAA appealed the Decision of the trial court to
the Court of Appeals, docketed as CA-G.R. CV No. 64456.

On 20 December 2001 the Court of Appeals reversed the assailed
Decision on the ground that the judgment of condemnation in
Civil Case No. R-1881 was unconditional so that the rights gained
therefrom by respondent MCIAA were indicative of ownership in
fee simple.[17] The appellate court cited Fery v. Municpality of
Cabanatuan[18] which held that mere deviation from the public
purpose for which the power of eminent domain was exercised
does not justify the reversion of the property to its former
owners, and Mactan-Cebu International Airport Authority v.
Court of Appeals[19] which is allegedly stare decisis to the
instant case to prevent the exercise of the right of repurchase as
the former dealt with a parcel of land similarly expropriated
under Civil Case No. R-1881.[20]

On 28 November 2002 reconsideration of the Decision was
denied. [21] Hence, this petition for review.

Petitioners argue that Fery v. Municpality of Cabanatuan does
not apply to the case at bar since what was involved therein was
the right of reversion and not the right of repurchase which
they are invoking. They also differentiate Mactan-Cebu
International Airport Authority v. Court of Appeals[22] from the
instant case in that the landowners in the MCIAA case offered
inadmissible evidence to show their entitlement to a right of
repurchase, while petitioners herein offered evidence based on
personal knowledge for which reason MCIAA did not object and
thus waived whatever objection it might have had to the
admissibility thereof. Finally, petitioners allege that their right
to equal protection of the laws would be infringed if some
landowners are given the right to repurchase their former
properties even as they are denied the exercise of such
prerogative.

On the other hand, respondent MCIAA clings to our decisions in
Fery v. Municpality of Cabanatuan and Mactan-Cebu
International Airport Authority v. Court of Appeals. According to
respondent MCIAA there is only one instance when
expropriated land may be repurchased by its previous owners,
and that is, if the decision of expropriation itself provides [the]
condition for such repurchase. Respondent asserts that the
Decision in Civil Case No. R-1881 is absolute and without
conditions, thus, no repurchase could be validly exercised.

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 airports venture.*23+ Some acted on this
assurance and sold their properties;[24] other landowners held
out and waited for the exercise of eminent domain to take its
course until finally coming to terms with respondents
predecessors that they would not appeal nor block further the
judgment of condemnation if the same right of repurchase was
extended to them.[25] A handful failed to prove that they acted
on such assurance when they parted with the ownership of their
lands.[26]

In resolving this dispute, we must reckon with the rulings of this
Court in Fery v. Municpality of Cabanatuan and Mactan-Cebu
International Airport Authority v. Court of Appeals, which define
the rights and obligations of landowners whose properties were
expropriated when the public purpose for which eminent
domain was exercised no longer subsists. In Fery, which was
cited in the recent case of Reyes v. Court of Appeals,[27] we
declared that the government acquires only such rights in
expropriated parcels of land as may be allowed by the character
of its title over the properties -

If x x x 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. If x x x land is
expropriated for a public street and the expropriation is granted
upon condition that the city can only use it for a public street,
then, of course, when the city abandons its use as a public
street, it returns to the former owner, unless there is some
statutory provision to the contrary x 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, whether it be the State, a province,
or municipality, and in that case the non-user does not have the
effect of defeating the title acquired by the expropriation
proceedings x 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 x x
x x[28]

In Mactan-Cebu International Airport Authority, respondent
Chiongbian sought to enforce an alleged right of repurchase over
her properties that had been expropriated in Civil Case No. R-
1881. This Court did not allow her to adduce evidence of her
claim, for to do so would unsettle as to her properties the
judgment of condemnation in the eminent domain proceedings.
We also held therein that Chiongbians evidence was both
inadmissible and lacking in probative value -

The terms of the judgment are clear and unequivocal and grant
title to Lot No. 941 in fee simple to the Republic of the
Philippines. There was no condition imposed to the effect that
the lot would return to CHIONGBIAN or that CHIONGBIAN had a
right to repurchase the same if the purpose for which it was
expropriated is ended or abandoned or if the property was to be
used other than as the Lahug Airport. CHIONGBIAN cannot rely
on the ruling in Mactan-Cebu International Airport vs. Court of
Appeals wherein the presentation of parol evidence was allowed
to prove the existence of a written agreement containing the
right to repurchase. Said case did not involve expropriation
proceedings but a contract of sale x x x x To permit CHIONGBIAN
to prove the existence of a compromise settlement which she
claims to have entered into with the Republic of the Philippines
prior to the rendition of judgment in the expropriation case
would result in a modification of the judgment of a court which
has long become final and executory x x x x And even assuming
for the sake of argument that CHIONGBIAN could prove the
existence of the alleged written agreement acknowledging her
right to repurchase Lot No. 941 through parol evidence, the
Court of Appeals erred in holding that the evidence presented by
CHIONGBIAN was admissible x x x x Aside from being
inadmissible under the provisions of the Statute of Frauds, [the]
testimonies are also inadmissible for being hearsay in nature x x
x x[29]

We adhere to the principles enunciated in Fery and in Mactan-
Cebu International Airport Authority, and do not overrule them.
Nonetheless the weight of their import, particularly our ruling as
regards the properties of respondent Chiongbian in Mactan-
Cebu International Airport Authority, must be commensurate to
the facts that were established therein as distinguished from
those extant in the case at bar. Chiongbian put forth
inadmissible and inconclusive evidence, while in the instant case
we have preponderant proof as found by the trial court of the
existence of the right of repurchase in favor of petitioners.

Moreover, respondent MCIAA has brought to our attention a
significant and telling portion in the Decision in Civil Case No. R-
1881 validating our discernment that the expropriation by the
predecessors of respondent was ordered under the running
impression that Lahug Airport would continue in operation -

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
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 judgment 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 (emphasis supplied).[30]

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 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 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--vis the expropriated Lots Nos. 916 and
920 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.[31]

Significantly, in light of the discussion above, the admission of
petitioners during the pre-trial of Civil Case No. CEB-20015 for
reconveyance and damages that respondent MCIAA was the
absolute owner of Lots Nos. 916 and 920 does not prejudice
petitioners interests. This is as it should be not only because
the admission concerns a legal conclusion fiercely debated by
the parties[32] but more so since respondent was truly the
absolute owner of the realties until it was apparent that Lahug
Airport had stopped doing business.

To sum up what we have said so far, the attendance in the case
at bar of standing admissible evidence validating the claim of
petitioners as well as the portions above-quoted of the Decision
in the expropriation case volunteered no less than by
respondent itself, takes this case away from the ambit of
Mactan-Cebu International Airport Authority v. Court of
Appeals[33] but within the principles enunciated in Fery as
mentioned earlier. In addition, there should be no doubt that
our present reading of the fallo of the Decision in Civil Case No.
R-1881 so as to include the statements in the body thereof
afore-quoted is sanctioned by the rule that a final and executory
judgment may nonetheless be clarified by reference to other
portions of the decision of which it forms a part. In Republic v.
De Los Angeles[34] we ruled -

This Court has promulgated many cases x x x wherein it was held
that a judgment must not be read separately but in connection
with the other portions of the decision of which it forms a part.
Hence x x x the decision of the court below should be taken as a
whole and considered in its entirety to get the true meaning and
intent of any particular portion thereof x x x x Neither is this
Court inclined to confine itself to a reading of the said fallo
literally. On the contrary, the judgment portion of a decision
should be interpreted and construed in harmony with the ratio
decidendi thereof x x x x As stated in the case of Policarpio vs.
Philippine Veterans Board, et al., supra, to get the true intent
and meaning of a decision, no specific portion thereof should be
resorted to but the same must be considered in its entirety.
Hence, a resolution or ruling may and does appear in other parts
of the decision and not merely in the fallo thereof x x x x The
foregoing pronouncements find support in the case of Locsin, et
al. vs. Paredes, et al., 63 Phil., 87, 91-92, wherein this Court
allowed a judgment that had become final and executory to be
clarified by supplying a word which had been inadvertently
omitted and which, when supplied, in effect changed the literal
import of the original phraseology x x x x This is so because, in
the first place, if an already final judgment can still be amended
to supply an omission committed through oversight, this simply
means that in the construction or interpretation of an already
final decision, the fallo or dispositive portion thereof must be
correlated with the body of such final decision x x x x [I]f an
amendment may be allowed after a decision has already
become final x x x such amendment may consist x x x either in
the x x x interpretation of an ambiguous phrase therein in
relation to the body of the decision which gives it life.[35]

We now resolve to harmonize the respective rights of the State
and petitioners to the expropriated Lots Nos. 916 and 920.

Mactan-Cebu International Airport Authority[36] is correct in
stating that one would not find an express statement in the
Decision in Civil Case No. R-1881 to the effect that the
[condemned] lot would return to [the landowner] or that [the
landowner] had a right to repurchase the same if the purpose
for which it was expropriated is ended or abandoned or if the
property was to be used other than as the Lahug Airport. This
omission notwithstanding, and while the inclusion of this
pronouncement in the judgment of condemnation would have
been ideal, such precision is not absolutely necessary nor is it
fatal to the cause of petitioners herein. No doubt, the return or
repurchase of the condemned properties of petitioners could be
readily justified as the manifest legal effect or consequence of
the trial courts 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.

The predicament of petitioners involves a constructive trust, one
that is akin[37] to the implied trust referred to in Art. 1454 of
the Civil Code, If an absolute conveyance of property is made in
order to secure the performance of an obligation of the grantor
toward the grantee, a trust by virtue of law is established. If the
fulfillment of the obligation is offered by the grantor when it
becomes due, he may demand the reconveyance of the property
to him. In the case at bar, petitioners conveyed Lots Nos. 916
and 920 to the government with the latter obliging itself to use
the realties for the expansion of Lahug Airport; failing to keep its
bargain, the government can be compelled by petitioners to
reconvey the parcels of land to them, otherwise, petitioners
would be denied the use of their properties upon a state of
affairs that was not conceived nor contemplated when the
expropriation was authorized.

Although the symmetry between the instant case and the
situation contemplated by Art. 1454 is not perfect, the provision
is undoubtedly applicable. For, as explained by an expert on the
law of trusts: The only problem of great importance in the field
of constructive trusts is to decide whether in the numerous and
varying fact situations presented to the courts there is a
wrongful holding of property and hence a threatened unjust
enrichment of the defendant.*38+ Constructive trusts are
fictions of equity which are bound by no unyielding formula
when they are used by courts as devices to remedy any situation
in which the holder of the legal title may not in good conscience
retain the beneficial interest.[39]

In constructive trusts, the arrangement is temporary and passive
in which the trustees sole duty is to transfer the title and
possession over the property to the plaintiff-beneficiary.[40] Of
course, the wronged party seeking the aid of a court of equity
in establishing a constructive trust must himself do equity.*41+
Accordingly, the court will exercise its discretion in deciding
what acts are required of the plaintiff-beneficiary as conditions
precedent to obtaining such decree and has the obligation to
reimburse the trustee the consideration received from the latter
just as the plaintiff-beneficiary would if he proceeded on the
theory of rescission.[42] In the good judgment of the court, the
trustee may also be paid the necessary expenses he may have
incurred in sustaining the property, his fixed costs for
improvements thereon, and the monetary value of his services
in managing the property to the extent that plaintiff-beneficiary
will secure a benefit from his acts.[43]

The rights and obligations between the constructive trustee and
the beneficiary, in this case, respondent MCIAA and petitioners
over Lots Nos. 916 and 920, are echoed in Art. 1190 of the Civil
Code, When the conditions have for their purpose the
extinguishment of an obligation to give, the parties, upon the
fulfillment of said conditions, shall return to each other what
they have received x x x x In case of the loss, deterioration or
improvement of the thing, the provisions which, with respect to
the debtor, are laid down in the preceding article shall be
applied to the party who is bound to return x x x x

Hence, respondent MCIAA as representative of the State is
obliged to reconvey Lots Nos. 916 and 920 to petitioners who
shall hold the same subject to existing liens thereon, i.e.,
leasehold right of DPWH. In return, petitioners as if they were
plaintiff-beneficiaries of a constructive trust must restore to
respondent MCIAA what they received as just compensation for
the expropriation of Lots Nos. 916 and 920 in Civil Case No. R-
1881, i.e., P7,065.00 for Lot No. 916 and P9,291.00 for Lot No.
920 with consequential damages by way of legal interest from
16 November 1947. Petitioners must likewise pay respondent
MCIAA the necessary expenses it may have incurred in
sustaining the properties and the monetary value of its services
in managing them to the extent that petitioners will be
benefited thereby. The government however may keep
whatever income or fruits it may have obtained from the parcels
of land, in the same way that petitioners need not account for
the interests that the amounts they received as just
compensation may have earned in the meantime. As a matter
of justice and convenience, the law considers the fruits and
interests as the equivalent of each other.[44]

Under Art. 1189 of the Civil Code, If the thing is improved by its
nature, or by time, the improvement shall inure to the benefit of
the creditor x x x, the creditor being the person who stands to
receive something as a result of the process of restitution.
Consequently, petitioners as creditors do not have to settle as
part of the process of restitution the appreciation in value of
Lots Nos. 916 and 920 which is the natural consequence of
nature and time.

Petitioners need not also pay for improvements introduced by
third parties, i.e., DPWH, as the disposition of these properties is
governed by existing contracts and relevant provisions of law.
As for the improvements that respondent MCIAA may have
made on Lots Nos. 916 and 920, if any, petitioners must pay
respondent their prevailing free market price in case petitioners
opt to buy them and respondent decides to sell. In other words,
if petitioners do not want to appropriate such improvements or
respondent does not choose to sell them, the improvements
would have to be removed without any obligation on the part of
petitioners to pay any compensation to respondent MCIAA for
whatever it may have tangibly introduced therein.[45]

The medium of compensation for the restitution shall be ready
money or cash payable within a period of three hundred sixty
five (365) days from the date that the amount to be returned by
petitioners is determined with finality, unless the parties herein
stipulate and agree upon a different scheme, medium or
schedule of payment. If after the period of three hundred sixty
five (365) days or the lapse of the compromise scheme or
schedule of payment such amount owed is not settled, the right
of repurchase of petitioners and the obligation of respondent
MCIAA to reconvey Lots Nos. 916 and 920 and/or the latters
improvements as set forth herein shall be deemed forfeited and
the ownership of those parcels of land shall vest absolutely upon
respondent MCIAA.

Finally, we delete the award of P60,000.00 for attorneys fees
and P15,000.00 for litigation expenses in favor of petitioners as
decreed in the assailed Decision of 12 April 1999 of the trial
court. It is not sound public policy to set a premium upon the
right to litigate where such right is exercised in good faith, as in
the present case, albeit the decision to resist the claim is
erroneous.[46]

The rule on awards of attorneys fees and litigation expenses is
found in Art. 2208 of the Civil Code -

In the absence of stipulation, attorney's fees and expenses of
litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to
protect his interests;

(3) In criminal cases of malicious prosecution against the
plaintiff;

(4) In case of a clearly unfounded civil action or proceeding
against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith
in refusing to satisfy the plaintiff's valid and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers,
laborers and skilled workers;

(8) In actions for indemnity under workmen's compensation
and employer's liability laws;

(9) In a separate civil action to recover civil liability arising
from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and
equitable that attorney's fees and expenses of litigation should
be recovered.

In all cases, the attorney's fees and expenses of litigation must
be reasonable.

As noted in Mirasol v. De la Cruz,[47] Art. 2208 intends to retain
the award of attorneys fees as the exception in our law and the
general rule remains that attorneys fees are not recoverable in
the absence of a stipulation thereto.

In the case at bar, considering the established absence of any
stipulation regarding attorneys fees, the trial court cannot base
its award on any of the exceptions enumerated in Art. 2208. The
records of the instant case do not disclose any proof presented
by petitioners to substantiate that the actuations of respondent
MCIAA were clearly unfounded or purely for the purpose of
harassment; neither does the trial court make any finding to that
effect in its appealed Decision.

While Art. 2208, par. (4), allows attorneys fees in cases of
clearly unfounded civil actions, this exception must be
understood to mean those where the defenses are so untenable
as to amount to gross and evident bad faith. Evidence must be
presented to the court as to the facts and circumstances
constituting the alleged bad faith, otherwise, the award of
attorneys fees is not justified where there is no proof other than
the bare statement of harassment that a party to be so adjudged
had acted in bad faith. The exercise of judicial discretion in the
award of attorneys fees under Art. 2208, par. (11), demands a
factual, legal or equitable justification that would bring the case
within the exception and justify the grant of such award.

WHEREFORE, the instant Petition for Review is GRANTED. The
Decision of the Court of Appeals in CA-G.R. CV No. 64456 dated
20 December 2001 and its Resolution of 28 November 2002
denying reconsideration of the Decision are REVERSED and SET
ASIDE.

The Decision of RTC-Br. 19 of Cebu City dated 12 April 1999 in
Civil Case No. CEB-20015 is MODIFIED IN PART by -

(a) ORDERING respondent Mactan-Cebu International Airport
Authority (MCIAA) TO RECONVEY to petitioner Heirs of Timoteo
Moreno and Maria Rotea, namely: Esperanza R. Edjec, Bernarda
R. Suela, Ruby C. Rotea, Bernarda R. Rotea, Elia R. Vda De
Limbaga, Virginia R. Arbon, Rosalinda R. Arquisola, Corazon
Rotea, Fe R. Ebora, Caridad Rotea, Angeles Vda. De Renacia,
Jorge Rotea, Maria Luisa Rotea-Villegas, Alfredo R. Rotea,
represented by his heirs, namely: Lizbeth Rotea and Elepeth
Rotea; Luis Rotea, represented by his heir Jennifer Rotea; and
Rolando R. Rotea, represented by his heir Rolando R. Rotea Jr.,
Lot No. 916 with an area of 2,355 square meters and Lot No. 920
consisting of 3,097 square meters in Lahug, Cebu City, with all
the improvements thereon evolving through nature or time, but
excluding those that were introduced by third parties, i.e.,
DPWH, which shall be governed by existing contracts and
relevant provisions of law;

(b) ORDERING petitioner Heirs of Timoteo Moreno and Maria
Rotea TO PAY respondent MCIAA what the former received as
just compensation for the expropriation of Lots Nos. 916 and
920 in Civil Case No. R-1881, i.e., P7,065.00 for Lot No. 916 and
P9,291.00 for Lot No. 920 with consequential damages by way of
legal interest from 16 November 1947. Petitioners must likewise
PAY respondent MCIAA the necessary expenses that the latter
may have incurred in sustaining the properties and the
monetary value of its services in managing the properties to the
extent that petitioners will secure a benefit from such acts.
Respondent MCIAA however may keep whatever income or
fruits it may have obtained from the parcels of land, in the same
way that petitioners need not account for the interests that the
amounts they received as just compensation may have earned in
the meantime;

(c) ORDERING respondent MCIAA TO CONVEY to
petitioners the improvements it may have built on Lots Nos. 916
and 920, if any, in which case petitioners SHALL PAY for these
improvements at the prevailing free market price, otherwise, if
petitioners do not want to appropriate such improvements, or if
respondent does not choose to sell them, respondent MCIAA
SHALL REMOVE these improvements WITHOUT ANY
OBLIGATION on the part of petitioners to pay any compensation
to respondent MCIAA for them;

(d) ORDERING petitioners TO PAY the amount so determined
under letter (b) of this dispositive portion as consideration for
the reconveyance of Lots Nos. 916 and 920, as well as the
prevailing free market price of the improvements built thereon
by respondent MCIAA, if any and desired to be bought and sold
by the parties, in ready money or cash PAYABLE within a period
of three hundred sixty five (365) days from the date that the
amount under letter (b) above is determined with finality, unless
the parties herein stipulate a different scheme or schedule of
payment, otherwise, after the period of three hundred sixty five
(365) days or the lapse of the compromise scheme or schedule of
payment and the amount so payable is not settled, the right of
repurchase of petitioners and the obligation of respondent
MCIAA to so reconvey Lots Nos. 916 and 920 and/or the
improvements shall be DEEMED FORFEITED and the ownership
of those parcels of land shall VEST ABSOLUTELY upon
respondent MCIAA;

(e) REMANDING the instant case to RTC-Br. 19 of Cebu City for
purposes of determining the amount of compensation for Lots
Nos. 916 and 920 to be paid by petitioners as mandated in letter
(b) hereof, and the value of the prevailing free market price of
the improvements built thereon by respondent MCIAA, if any
and desired to be bought and sold by the parties, and in general,
securing the immediate execution of this Decision under the
premises;

(f) ORDERING petitioners to respect the right of the Department
of Public Works and Highways to its lease contract until the
expiration of the lease period; and

(g) DELETING the award of P60,000.00 for attorneys fees and
P15,000.00 for litigation expenses against respondent MCIAA
and in favor of petitioners.

This Decision is without prejudice to the claim of intervenor one
Richard E. Enchuan on his allegation that he acquired through
deeds of assignment the rights of some of herein petitioners
over Lots Nos. 916 and 920.

No costs.

SO ORDERED.

Quisumbing, Austria-Martinez, Callejo, and Tinga, JJ., concur.

[1] Rollo, pp. 15, 75-78.

[2] Id., p. 154.

[3] Ibid.

[4] Id., p. 68.

[5] Decision penned by Judge Mateo Canonoy, RTC-Br. 3, Cebu
City; Rollo, pp. 84-110.

[6] Rollo, p. 17.

[7] Id., pp. 17, 79-82.

[8] Id., p. 154.

[9] Id., p. 157.

[10] Ibid.; see also Mactan-Cebu International Airport Authority
v. Court of Appeals, G.R. No. 139495, 27 November 2000, 346
SCRA 126.

[11] Rollo, pp. 82-83.

[12] Id., p. 71.

[13] Id., p. 52.

[14] Ibid.

[15] Decision penned by Judge Ramon G. Codilla Jr., RTC-Br. 19,
Cebu City; Rollo, pp. 149-159.

[16] Rollo, pp. 157-158.

[17] Decision penned by Associate Justice Portia Alio-
Hormachuelos, concurred in by Associate Justices Eriberto U.
Rosario Jr. and Amelita G. Tolentino, Seventeenth Division;
Rollo, pp. 48-63.

[18] 42 Phil. 28 (1921).

[19] See Note 10.

[20] Rollo, pp. 56-63.

[21] Resolution penned by Associate Justice Portia Alio-
Hormachuelos, concurred in by Associate Justices Buenaventura
J. Guerrero and Amelita G. Tolentino, Special Former
Seventeenth Division; Rollo, pp. 63-65.

[22] See Note 10.

[23] Mactan-Cebu International Airport Authority v. Court of
Appeals, G.R. No. 121506, 30 October 1996, 263 SCRA 736.

[24] Ibid.

[25] Ibid; Republic v. Escao, CA-G.R. No. 33045-R, 27 July 1964
as cited in Mactan-Cebu International Airport Authority v. Court
of Appeals, G.R. No. 139495, 27 November 2000, 346 SCRA 126.

[26] See Note 10.

[27] G.R. No. 147511, 20 January 2003.

[28] 42 Phil. 28, 29-30 (1921).

[29] G.R. No. 139495, 27 November 2000, 346 SCRA 126, 135-
137.

[30] Rollo, p. 224; Comment of the Solicitor General, p. 22.

[31] Rosales v. Court of Appeals, G.R. No. 137566, 28 February
2001, 353 SCRA 179; People v. Lacbayan, G.R. No. 125006, 31
August 2000, 339 SCRA 396.

[32] See Mercys Incorporated v. Verde, No. L-21571, 29
September 1966, 18 SCRA 171.

[33] See Note 10.

[34] No. L-26112, 4 October 1971, 41 SCRA 422.

[35] Id., pp. 441-446.

[36] See Note 10.

[37] The statutory enumeration of implied trusts in the Civil
Code is not exclusive, hence, Art. 1447 of the Civil Code provides
The enumeration of the following cases of implied trust does
not exclude others established by the general law of trust, but
the limitation laid down in article 1442 shall be applicable.

[38] G.G. Bogert, Handbook of the Law of Trusts, 210 (1963).

[39] Id., pp. 208-209.

[40] Id., pp. 209-210.

[41] Id., p. 209.

[42] Ibid.

[43] Ibid.

*44+ Civil Code, Art. 1187, The effects of a conditional obligation
to give, once the condition has been fulfilled, shall retroact to
the day of the constitution of the obligation. Nevertheless, when
the obligation imposes reciprocal prestations upon the parties,
the fruits and interests during the pendency of the condition
shall be deemed to have been mutually compensated. If the
obligation is unilateral, the debtor shall appropriate the fruits
and interests received, unless from the nature and
circumstances of the obligation it should be inferred that the
intention of the person constituting the same was different.

[45] See Coleongco v. Regalado, 92 Phil. 387 (1952).

[46] Mirasol v. De la Cruz, No. L-32552, 31 July 1978, 84 SCRA
337.

[47] Ibid.




THIRD DIVISION

[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.

D E C I S I O N

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, 2000[1]
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 Dasmarias, 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 Dasmarias
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. Zaballero[2] 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 Order[4] 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, Dasmarias, Cavite;

(b) Transfer Certificate of Title No. T-55702 containing an area of
20,872 square meters situated in Barrio Bangkal, Dasmarias,
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, Dasmarias,
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 lawyers 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 complaint[5]
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 attorneys fees of Atty. Joaquin Yuseco, Jr.,
collaborating counsel for petitioners.

Ocular inspections[7] 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;

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 Dasmarias
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.

x x x x x x x x x

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)

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 Dasmarias 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 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
condemnors title relates back to the date on which the petition
under the Eminent Domain Act, or the commissioners 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:

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. x x x. (emphasis supplied)

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 to the time when compensation is actually paid or
deposited in court. In Republic, et al. vs. Court of 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:

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, 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.

WHEREFORE, the appealed judgment is modified as follows:

1. Ordering respondent National Housing Authority to pay
petitioners the amount of P1,218,574.35 with legal interest
thereon at 12% per annum computed from the taking of the
expropriated properties in 1997 until the amount due shall have
been fully paid;

2. Ordering petitioners to pay the capital gains tax; and

3. Ordering petitioners to surrender to respondent National
Housing Authority the owners duplicate certificates of title of
the expropriated properties upon full payment of just
compensation.

SO ORDERED.

Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ.,
concur.

[1] Penned by Associate Justice Remedios A. Salazar-Fernando,
with Quirino D. Abad Santos, Jr. and Salvador J. Valdez, Jr, JJ.,
concurring; Annex A, Petition; Rollo, pp. 49-66.

[2] 155 SCRA 224 (1987).

[3] Exhibit B; Original Records, Volume 2, p. 305.

[4] Exhibit I; ibid., pp. 318-322.

[5] Original Records, Volume 1, pp. 1-5.

[6] Ibid., pp. 10-14.

*7+ Commissioners Report issued in compliance with the Order
dated July 13, 1994; Original Records, Volume 2, p. 407;
Commissioners Report issued in compliance with the Order
dated November 11, 1994; ibid., p. 653.

[8] Heirs of Juancho Ardona, et al. vs. Reyes, et al., 125 SCRA 220
(1983).

[9] Supra.

[10] Supra.

[11] Section 9, Article XIII, 1987 Constitution.

[12] 42 Phil 28 (1921).

[13] G.R. No. 146587, July 2, 2002.

[14] 175 SCRA 343 (1989).

[15] G.R. No. 146587, July 2, 2002.

[16] Original Records, Volume 3, pp. 731-732.

[17] See Zaballero, et al. vs. NHA, et al., supra, pp. 226-227.




FIRST DIVISION

[G.R. No. 146587. July 2, 2002]

REPUBLIC OF THE PHILIPPINES, represented by the General
Manager of the PHILIPPINE INFORMATION AGENCY (PIA),
petitioner, vs. THE HONORABLE COURT OF APPEALS and the
HEIRS OF LUIS SANTOS as herein represented by DR. SABINO
SANTOS and PURIFICACION SANTOS IMPERIAL, respondents.

D E C I S I O N

VITUG, J.:

Petitioner instituted expropriation proceedings on 19 September
1969 before the Regional Trial Court ("RTC") of Bulacan,
docketed Civil Cases No. 3839-M, No. 3840-M, No. 3841-M and
No. 3842-M, covering a total of 544,980 square meters of
contiguous land situated along MacArthur Highway, Malolos,
Bulacan, to be utilized for the continued broadcast operation
and use of radio transmitter facilities for the Voice of the
Philippines project. Petitioner, through the Philippine
Information Agency (PIA), took over the premises after the
previous lessee, the Voice of America, had ceased its
operations thereat. Petitioner made a deposit of P517,558.80,
the sum provisionally fixed as being the reasonable value of the
property. On 26 February 1979, or more than nine years after
the institution of the expropriation proceedings, the trial court
issued this order -

"WHEREFORE, premises considered, judgment is hereby
rendered:

"Condemning the properties of the defendants in Civil Cases
Nos. 3839-M to 3842-M located at KM 43, MacArthur Highway,
Malolos, Bulacan and covered by several transfer certificates of
title appearing in the Commissioners Appraisal Report
consisting of the total area of 544,980 square meters, as
indicated in plan, Exhibit A, for plaintiff, also marked as Exhibit I
for the defendants, and as Appendix A attached to the
Commissioners Appraisal Report, for the purpose stated by the
plaintiff in its complaint;

"Ordering the plaintiff to pay the defendants the just
compensation for said property which is the fair market value of
the land condemned, computed at the rate of six pesos (P6.00)
per square meter, with legal rate of interest from September 19,
1969, until fully paid; and

"Ordering the plaintiff to pay the costs of suit, which includes
the aforesaid fees of commissioners, Atty. Victorino P.
Evangelista and Mr. Pablo Domingo."[1]

The bone of contention in the instant controversy is the 76,589-
square meter property previously owned by Luis Santos,
predecessor-in-interest of herein respondents, which forms part
of the expropriated area.

It would appear that the national government failed to pay to
herein respondents the compensation pursuant to the foregoing
decision, such that a little over five years later, or on 09 May
1984, respondents filed a manifestation with a motion seeking
payment for the expropriated property. On 07 June 1984, the
Bulacan RTC, after ascertaining that the heirs remained unpaid
in the sum of P1,058,655.05, issued a writ of execution served on
the plaintiff, through the Office of the Solicitor General, for the
implementation thereof. When the order was not complied
with, respondents again filed a motion urging the trial court to
direct the provincial treasurer of Bulacan to release to them the
amount of P72,683.55, a portion of the sum deposited by
petitioner at the inception of the expropriation proceedings in
1969, corresponding to their share of the deposit. The trial court,
in its order of 10 July 1984, granted the motion.

In the meantime, President Joseph Ejercito Estrada issued
Proclamation No. 22,[2] transferring 20 hectares of the
expropriated property to the Bulacan State University for the
expansion of its facilities and another 5 hectares to be used
exclusively for the propagation of the Philippine carabao. The
remaining portion was retained by the PIA. This fact
notwithstanding, and despite the 1984 court order, the Santos
heirs remained unpaid, and no action was taken on their case
until 16 September 1999 when petitioner filed its manifestation
and motion to permit the deposit in court of the amount of
P4,664,000.00 by way of just compensation for the expropriated
property of the late Luis Santos subject to such final
computation as might be approved by the court. This time, the
Santos heirs, opposing the manifestation and motion, submitted
a counter-motion to adjust the compensation from P6.00 per
square meter previously fixed in the 1979 decision to its current
zonal valuation pegged at P5,000.00 per square meter or, in the
alternative, to cause the return to them of the expropriated
property. On 01 March 2000, the Bulacan RTC ruled in favor of
respondents and issued the assailed order, vacating its decision
of 26 February 1979 and declaring it to be unenforceable on the
ground of prescription -

"WHEREFORE, premises considered, the court hereby:

"1) declares the decision rendered by this Court on February
26, 1979 no longer enforceable, execution of the same by either
a motion or an independent action having already prescribed in
accordance with Section 6, Rule 39 of both the 1964 Revised
Rules of Court and the 1997 Rules of Civil Procedure;

"2) denies the plaintiffs Manifestation and Motion to Permit
Plaintiff to Deposit in Court Payment for Expropriated Properties
dated September 16, 1999 for the reason stated in the next
preceding paragraph hereof; and

"3) orders the return of the expropriated property of the late
defendant Luis Santos to his heirs conformably with the ruling of
the Supreme Court in Government of Sorsogon vs. Vda. De
Villaroya, 153 SCRA 291, without prejudice to any case which the
parties may deem appropriate to institute in relation with the
amount already paid to herein oppositors and the purported
transfer of a portion of the said realty to the Bulacan State
University pursuant to Proclamation No. 22 issued by President
Joseph Ejercito."[3]

Petitioner brought the matter up to the Court of Appeals but the
petition was outrightly denied. It would appear that the denial
was based on Section 4, Rule 65, of the 1997 Rules of Civil
Procedure which provided that the filing of a motion for
reconsideration in due time after filing of the judgment, order or
resolution interrupted the running of the sixty-day period within
which to file a petition for certiorari; and that if a motion for
reconsideration was denied, the aggrieved party could file the
petition only within the remaining period, but which should not
be less than five days in any event, reckoned from the notice of
such denial. The reglementary period, however, was later
modified by A.M. No. 00-2-03 S.C., now reading thusly:

Sec. 4. When and where petition filed. --- The petition shall be
filed not later than sixty (60) days from notice of the judgment,
order or resolution. In case a motion for reconsideration or new
trial is timely filed, whether such motion is required or not, the
sixty (60) day period shall be counted from notice of the denial
of said motion.

The amendatory provision, being curative in nature, should be
made applicable to all cases still pending with the courts at the
time of its effectivity.

In Narzoles vs. NLRC,[4] the Court has said:

The Court has observed that Circular No. 39-98 has generated
tremendous confusion resulting in the dismissal of numerous
cases for late filing. This may have been because, historically,
i.e., even before the 1997 revision to the Rules of Civil
Procedure, a party had a fresh period from receipt of the order
denying the motion for reconsideration to file a petition for
certiorari. Were it not for the amendments brought about by
Circular No. 39-98, the cases so dismissed would have been
resolved on the merits. Hence, the Court deemed it wise to
revert to the old rule allowing a party a fresh 60-day period from
notice of the denial of the motion for reconsideration to file a
petition for certiorari. x x x

The latest amendments took effect on September 1, 2000,
following its publication in the Manila Bulletin on August 4, 2000
and in the Philippine Daily Inquirer on August 7, 2000, two
newspapers of general circulation.

In view of its purpose, the Resolution further amending Section
4, Rule 65, can only be described as curative in nature, and the
principles governing curative statutes are applicable.

Curative statutes are enacted to cure defects in a prior law or to
validate legal proceedings which would otherwise be void for
want of conformity with certain legal requirements. (Erectors,
Inc. vs. National Labor Relations Commission, 256 SCRA 629
[1996].) They are intended to supply defects, abridge
superfluities and curb certain evils. They are intended to enable
persons to carry into effect that which they have designed or
intended, but has failed of expected legal consequence by
reason of some statutory disability or irregularity in their own
action. They make valid that which, before the enactment of the
statute was invalid. Their purpose is to give validity to acts done
that would have been invalid under existing laws, as if existing
laws have been complied with. (Batong Buhay Gold Mines, Inc.
vs. Dela Serna, 312 SCRA 22 [1999].) Curative statutes,
therefore, by their very essence, are retroactive. (Municipality
of San Narciso, Quezon vs. Mendez, Sr., 239 SCRA 11 *1994+.)*5+

At all events, petitioner has a valid point in emphasizing the
"public nature" of the expropriated property. The petition being
imbued with public interest, the Court has resolved to give it due
course and to decide the case on its merits.

Assailing the finding of prescription by the trial court, petitioner
here posited that a motion which respondents had filed on 17
February 1984, followed up by other motions subsequent
thereto, was made within the reglementary period that thereby
interrupted the 5-year prescriptive period within which to
enforce the 1979 judgment. Furthermore, petitioner claimed,
the receipt by respondents of partial compensation in the sum
of P72,683.55 on 23 July 1984 constituted partial compliance on
the part of petitioners and effectively estopped respondents
from invoking prescription expressed in Section 6, Rule 39, of the
Rules of Court.[6]

In opposing the petition, respondents advanced the view that
pursuant to Section 6, Rule 39, of the Rules of Court, the failure
of petitioner to execute the judgment, dated 26 February 1979,
within five years after it had become final and executory,
rendered it unenforceable by mere motion. The motion for
payment, dated 09 May 1984, as well as the subsequent
disbursement to them of the sum of P72,683.55 by the provincial
treasurer of Bulacan, could not be considered as having
interrupted the five-year period, since a motion, to be
considered otherwise, should instead be made by the prevailing
party, in this case by petitioner. Respondents maintained that
the P72,683.55 paid to them by the provincial treasurer of
Bulacan pursuant to the 1984 order of the trial court was part of
the initial deposit made by petitioner when it first entered
possession of the property in 1969 and should not be so
regarded as a partial payment. Respondents further questioned
the right of PIA to transfer ownership of a portion of the
property to the Bulacan State University even while the just
compensation due the heirs had yet to be finally settled.

The right of eminent domain is usually understood to be an
ultimate right of the sovereign power to appropriate any
property within its territorial sovereignty for a public
purpose.[7] Fundamental to the independent existence of a
State, it requires no recognition by the Constitution, whose
provisions are taken as being merely confirmatory of its
presence and as being regulatory, at most, in the due exercise of
the power. In the hands of the legislature, the power is
inherent, its scope matching that of taxation, even that of police
power itself, in many respects. It reaches to every form of
property the State needs for public use and, as an old case so
puts it, all separate interests of individuals in property are held
under a tacit agreement or implied reservation vesting upon the
sovereign the right to resume the possession of the property
whenever the public interest so requires it.[8]

The ubiquitous character of eminent domain is manifest in the
nature of the expropriation proceedings. Expropriation
proceedings are not adversarial in the conventional sense, for
the condemning authority is not required to assert any
conflicting interest in the property. Thus, by filing the action,
the condemnor in effect merely serves notice that it is taking
title and possession of the property, and the defendant asserts
title or interest in the property, not to prove a right to
possession, but to prove a right to compensation for the
taking.[9]

Obviously, however, the power is not without its limits: first, the
taking must be for public use, and second, that just
compensation must be given to the private owner of the
property.[10] These twin proscriptions have their origin in the
recognition of the necessity for achieving balance between the
State interests, on the one hand, and private rights, upon the
other hand, by effectively restraining the former and affording
protection to the latter.*11+ In determining public use, two
approaches are utilized - the first is public employment or the
actual use by the public, and the second is public advantage or
benefit.[12] It is also useful to view the matter as being subject
to constant growth, which is to say that as society advances, its
demands upon the individual so increases, and each demand is a
new use to which the resources of the individual may be
devoted.[13]

The expropriated property has been shown to be for the
continued utilization by the PIA, a significant portion thereof
being ceded for the expansion of the facilities of the Bulacan
State University and for the propagation of the Philippine
carabao, themselves in line with the requirements of public
purpose. Respondents question the public nature of the
utilization by petitioner of the condemned property, pointing
out that its present use differs from the purpose originally
contemplated in the 1969 expropriation proceedings. The
argument is of no moment. The property has assumed a public
character upon its expropriation. Surely, petitioner, as the
condemnor and as the owner of the property, is well within its
rights to alter and decide the use of that property, the only
limitation being that it be for public use, which, decidedly, it is.

In insisting on the return of the expropriated property,
respondents would exhort on the pronouncement in Provincial
Government of Sorsogon vs. Vda. de Villaroya[14] where the
unpaid landowners were allowed the alternative remedy of
recovery of the property there in question. It might be borne in
mind that the case involved the municipal government of
Sorsogon, to which the power of eminent domain is not
inherent, but merely delegated and of limited application. The
grant of the power of eminent domain to local governments
under Republic Act No. 7160[15] cannot be understood as being
the pervasive and all-encompassing power vested in the
legislative branch of government. For local governments to be
able to wield the power, it must, by enabling law, be delegated
to it by the national legislature, but even then, this delegated
power of eminent domain is not, strictly speaking, a power of
eminent, but only of inferior, domain or only as broad or
confined as the real authority would want it to be.[16]

Thus, in Valdehueza vs. Republic[17] 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 fair
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'."[18]

The Court proceeded to reiterate its pronouncement in Alfonso
vs. Pasay City[19] 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.[20] 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 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 expropriatory
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.[21] After
condemnation, the paramount title is in the public under a new
and independent title;[22] 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.[23]


Respondents, in arguing laches against petitioner did not take
into account that the same argument could likewise apply
against them. Respondents first instituted proceedings for
payment against petitioner on 09 May 1984, or five years after
the 1979 judgment had become final. The unusually long delay
in bringing the action to compel payment against herein
petitioner would militate against them. Consistently with the
rule that one should take good care of his own concern,
respondents should have commenced the proper action upon
the finality of the judgment which, indeed, resulted in a
permanent deprivation of their ownership and possession of the
property.[24]

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, it fixed at the time of
the actual taking by the government.[25] 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.[26] 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.[27]

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[28] should help
eliminate the issue of the constant fluctuation and inflation of
the value of the currency over time.[29] 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.[30] 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.[31]

All given, the trial court of Bulacan in issuing its order, dated 01
March 2000, vacating its decision of 26 February 1979 has acted
beyond its lawful cognizance, the only authority left to it being
to order its execution. Verily, private respondents, although not
entitled to the return of the expropriated property, deserve to
be paid promptly on the yet unpaid award of just compensation
already fixed by final judgment of the Bulacan RTC on 26
February 1979 at P6.00 per square meter, with legal interest
thereon at 12% per annum computed from the date of "taking"
of the property, i.e., 19 September 1969, until the due amount
shall have been fully paid.

WHEREFORE, the petition is GRANTED. The resolution, dated 31
July 2000, of the Court of Appeals dismissing the petition for
certiorari, as well as its resolution of 04 January 2001 denying
the motion for reconsideration, and the decision of the Regional
Trial Court of Bulacan, dated 01 March 2000, are SET ASIDE. Let
the case be forthwith remanded to the Regional Trial Court of
Bulacan for the proper execution of its decision promulgated on
26 February 1979 which is hereby REINSTATED. No costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and
Austria-Martinez, JJ., concur.

[1] Rollo, p. 66.

[2] The Dispositive Portion of Proclamation No. 22, entitled
TRANSFERRING OWNERSHIP OF A PORTION OF THE PROPERTY
OF THE PHILIPPINE INFORMATION AGENCY TO THE BULACAN
STATE UNIVERSITY, reads:

NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA,
President of the Republic of the Philippines, by virtue of the
powers vested in me by law, do hereby transfer to the Bulacan
State University, twenty (20) hectares of the property
mentioned above, and another five (5) hectares for the exclusive
use of the propagation of the Philippine carabao, adjacent to the
university campus, located in Malolos, Bulacan. The remaining
portions of the property fronting the national highway shall be
retained by the Philippine Information Agency for its proposed
development plan, including offices of the PIA Regional Office,
the Bulacan Provincial Information Center, the training center
and the depository of equipment and other properties of PIA.

[3] Rollo, pp. 76-77.

[4] 341 SCRA 533. See also PCGG vs. Desierto, 28 December
2001, G.R. No. 140358; PCGG vs. Desierto, 19 January 2001, G.R.
No. 140323; Medina Investigation vs. Court of Appeals, 20 March
2001, G.R. No. 144074; Pfizer vs. Galan, 25 May 2001, G.R. No.
143389; Santos vs. Court of Appeals, 05 July 2001, G.R. No.
141947.

[5] At pp. 537-538.

[6] Section 6, Rule 39 of the Rules of Court provides:

Execution by motion or by independent action. A final
and executory judgment or order may be executed on motion
within five (5) years from the date of its entry. After the lapse of
such time, and before it is barred by the Statute of Limitations, a
judgment may be enforced by action.

[7] Bernas, 1987 Edition, p. 276, quoting Justice Story in Charles
River Bridge vs. Warren Bridge.

[8] US vs. Certain Lands in Highlands (DY NY) 48 F Supp 306.

[9] US vs. Certain Lands in Highlands (DY NY) 48 F Supp 306; San
Bernardino Valley Municipal Water District vs. Gage Canal Co.
(4th Dist) 226 Cal App 2d 206, 37 Cal Rptr 856.

[10] Sea vs. Manila Railroad Co., 42 Phil. 102.

[11] Visayan Refining Co., vs. Camus, 40 Phil 550.

[12] Thornton Development Authority vs. Upah (DC Colo) 640 F
Supp 1071.

[13] Visayan Refining, supra.

[14] 153 SCRA 291.

[15] See Local Government Code of 1991

[16] City of Manila vs. Chinese Community of Manila, 40 Phil
349.

[17] 17 SCRA 107.

[18] At p. 112.

[19] 106 Phil. 1017.

[20] Mines vs. Canal Authority of the State (Fla) 467 So2d 989, 10
FLW 230.

[21] Cadorette vs. US CCA (Mass) 988 F2d 215.

[22] Ibid.

[23] Ibid.

[24] 17 SCRA 107, supra.

[25] Manila Railway Co. vs. Fabie, 17 Phil 206.

[26] Philippine Railway Co. vs. Solon, 13 Phil 34.

[27] Commissioner of Public Highways vs. Burgos, 96 SCRA 831.

[28] Eastern Shipping Lines, Inc. vs. Court of Appeals, 234 SCRA
78.

[29] US vs. Klamath and Moadoc Tribes, 304 US 119, 82 L Ed
1219, 58 S Ct 799.

[30] Commissioner of Public Highways vs. Burgos, supra.

[31] Ibid.




EN BANC



MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and AIR
TRANSPORTATION OFFICE,

Petitioners,









- versus -









BERNARDO L. LOZADA, SR., and the

HEIRS OF ROSARIO MERCADO, namely, VICENTE LOZADA,
MARIO M. LOZADA, MARCIA L. GODINEZ, VIRGINIA L. FLORES,
BERNARDO LOZADA, JR., DOLORES GACASAN, SOCORRO
CAFARO and ROSARIO LOZADA, represented by MARCIA
LOZADA GODINEZ,

Respondents.



G.R. No. 176625



Present:



PUNO, C.J.,

CARPIO,

CORONA,

CARPIO MORALES, VELASCO, JR., NACHURA,
LEONARDO-DE CASTRO,

BRION,

PERALTA,*

BERSAMIN,

DEL CASTILLO,

ABAD,

VILLARAMA, JR.,

PEREZ, and

MENDOZA, JJ.



Promulgated:



February 25, 2010



x------------------------------------------------------------------------------------x





DECISION



NACHURA, J.:





This is a petition for review on certiorari under Rule 45 of
the Rules of Court, seeking to reverse, annul, and set aside the
Decision[1] dated February 28, 2006 and the Resolution[2] dated
February 7, 2007 of the Court of Appeals (CA) (Cebu City),
Twentieth Division, in CA-G.R. CV No. 65796.



The antecedent facts and proceedings are as follows:



Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88),
with an area of 1,017 square meters, more or less, located in
Lahug, Cebu City. Its original owner was Anastacio Deiparine
when the same was subject to expropriation proceedings,
initiated by the Republic of the Philippines (Republic),
represented by the then Civil Aeronautics Administration (CAA),
for the expansion and improvement of the Lahug Airport. The
case was filed with the then Court of First Instance of Cebu,
Third Branch, and docketed as Civil Case No. R-1881.



As early as 1947, the lots were already occupied by the U.S.
Army. They were turned over to the Surplus Property
Commission, the Bureau of Aeronautics, the National Airport
Corporation and then to the CAA.



During the pendency of the expropriation proceedings,
respondent Bernardo L. Lozada, Sr. acquired Lot No. 88 from
Deiparine. Consequently, Transfer Certificate of Title (TCT) No.
9045 was issued in Lozadas name.



On December 29, 1961, the trial court rendered judgment
in favor of the Republic and ordered the latter to pay Lozada the
fair market value of Lot No. 88, adjudged at P3.00 per square
meter, with consequential damages by way of legal interest
computed from November 16, 1947the time when the lot was
first occupied by the airport. Lozada received the amount of
P3,018.00 by way of payment.



The affected landowners appealed. Pending appeal, the
Air Transportation Office (ATO), formerly CAA, proposed a
compromise settlement whereby the owners of the lots affected
by the expropriation proceedings would either not appeal or
withdraw their respective appeals in consideration of a
commitment that the expropriated lots would be resold at the
price they were expropriated in the event that the ATO would
abandon the Lahug Airport, pursuant to an established policy
involving similar cases. Because of this promise, Lozada did not
pursue his appeal. Thereafter, Lot No. 88 was transferred and
registered in the name of the Republic under TCT No. 25057.



The projected improvement and expansion plan of the old
Lahug Airport, however, was not pursued.



Lozada, with the other landowners, contacted then CAA
Director Vicente Rivera, Jr., requesting to repurchase the lots, as
per previous agreement. The CAA replied that there might still
be a need for the Lahug Airport to be used as an emergency DC-3
airport. It reiterated, however, the assurance that should this
Office dispose and resell the properties which may be found to
be no longer necessary as an airport, then the policy of this
Office is to give priority to the former owners subject to the
approval of the President.



On November 29, 1989, then President Corazon C. Aquino
issued a Memorandum to the Department of Transportation,
directing the transfer of general aviation operations of the Lahug
Airport to the Mactan International Airport before the end of
1990 and, upon such transfer, the closure of the Lahug Airport.



Sometime in 1990, the Congress of the Philippines passed
Republic Act (R.A.) No. 6958, entitled An Act Creating the
Mactan-Cebu International Airport Authority, Transferring
Existing Assets of the Mactan International Airport and the
Lahug Airport to the Authority, Vesting the Authority with
Power to Administer and Operate the Mactan International
Airport and the Lahug Airport, and For Other Purposes.



From the date of the institution of the expropriation
proceedings up to the present, the public purpose of the said
expropriation (expansion of the airport) was never actually
initiated, realized, or implemented. Instead, the old airport was
converted into a commercial complex. Lot No. 88 became the
site of a jail known as Bagong Buhay Rehabilitation Complex,
while a portion thereof was occupied by squatters.[3] The old
airport was converted into what is now known as the Ayala I.T.
Park, a commercial area.



Thus, on June 4, 1996, petitioners initiated a complaint for
the recovery of possession and reconveyance of ownership of
Lot No. 88. The case was docketed as Civil Case No. CEB-18823
and was raffled to the Regional Trial Court (RTC), Branch 57,
Cebu City. The complaint substantially alleged as follows:



(a) Spouses Bernardo and Rosario Lozada were the registered
owners of Lot No. 88 covered by TCT No. 9045;



(b) In the early 1960s, the Republic sought to acquire by
expropriation Lot No. 88, among others, in connection with its
program for the improvement and expansion of the Lahug
Airport;



(c) A decision was rendered by the Court of First Instance in
favor of the Government and against the land owners, among
whom was Bernardo Lozada, Sr. appealed therefrom;



(d) During the pendency of the appeal, the parties entered into
a compromise settlement to the effect that the subject property
would be resold to the original owner at the same price when it
was expropriated in the event that the Government abandons
the Lahug Airport;



(e) Title to Lot No. 88 was subsequently transferred to the
Republic of the Philippines (TCT No. 25057);



(f) The projected expansion and improvement of the Lahug
Airport did not materialize;



(g) Plaintiffs sought to repurchase their property from then
CAA Director Vicente Rivera. The latter replied by giving as
assurance that priority would be given to the previous owners,
subject to the approval of the President, should CAA decide to
dispose of the properties;



(h) On November 29, 1989, then President Corazon C. Aquino,
through a Memorandum to the Department of Transportation
and Communications (DOTC), directed the transfer of general
aviation operations at the Lahug Airport to the Mactan-Cebu
International Airport Authority;



(i) Since the public purpose for the expropriation no longer
exists, the property must be returned to the plaintiffs.[4]





In their Answer, petitioners asked for the immediate
dismissal of the complaint. They specifically denied that the
Government had made assurances to reconvey Lot No. 88 to
respondents in the event that the property would no longer be
needed for airport operations. Petitioners instead asserted that
the judgment of condemnation was unconditional, and
respondents were, therefore, not entitled to recover the
expropriated property notwithstanding non-use or
abandonment thereof.



After pretrial, but before trial on the merits, the parties
stipulated on the following set of facts:



(1) The lot involved is Lot No. 88-SWO-25042 of the Banilad
Estate, situated in the City of Cebu, containing an area of One
Thousand Seventeen (1,017) square meters, more or less;



(2) The property was expropriated among several other
properties in Lahug in favor of the Republic of the Philippines by
virtue of a Decision dated December 29, 1961 of the CFI of Cebu
in Civil Case No. R-1881;



(3) The public purpose for which the property was
expropriated was for the purpose of the Lahug Airport;



(4) After the expansion, the property was transferred in the
name of MCIAA; [and]



(5) On November 29, 1989, then President Corazon C. Aquino
directed the Department of Transportation and Communication
to transfer general aviation operations of the Lahug Airport to
the Mactan-Cebu International Airport Authority and to close
the Lahug Airport after such transfer[.][5]





During trial, respondents presented Bernardo Lozada, Sr. as
their lone witness, while petitioners presented their own
witness, Mactan-Cebu International Airport Authority legal
assistant Michael Bacarisas.



On October 22, 1999, the RTC rendered its Decision,
disposing as follows:



WHEREFORE, in the light of the foregoing, the Court
hereby renders judgment in favor of the plaintiffs, Bernardo L.
Lozada, Sr., and the heirs of Rosario Mercado, namely, Vicente
M. Lozada, Marcia L. Godinez, Virginia L. Flores, Bernardo M.
Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and Rosario M.
Lozada, represented by their attorney-in-fact Marcia Lozada
Godinez, and against defendants Cebu-Mactan International
Airport Authority (MCIAA) and Air Transportation Office (ATO):



1. ordering MCIAA and ATO to restore to plaintiffs the
possession and ownership of their land, Lot No. 88 Psd-821
(SWO-23803), upon payment of the expropriation price to
plaintiffs; and



2. ordering the Register of Deeds to effect the transfer of the
Certificate of Title from defendant[s] to plaintiffs on Lot No. [88],
cancelling TCT No. 20357 in the name of defendant MCIAA and
to issue a new title on the same lot in the name of Bernardo L.
Lozada, Sr. and the heirs of Rosario Mercado, namely: Vicente
M. Lozada, Mario M. Lozada, Marcia L. Godinez, Virginia L.
Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L.
Cafaro and Rosario M. Lozada.



No pronouncement as to costs.



SO ORDERED.[6]





Aggrieved, petitioners interposed an appeal to the CA.
After the filing of the necessary appellate briefs, the CA
rendered its assailed Decision dated February 28, 2006, denying
petitioners appeal and affirming in toto the Decision of the RTC,
Branch 57, Cebu City. Petitioners motion for reconsideration
was, likewise, denied in the questioned CA Resolution dated
February 7, 2007.



Hence, this petition arguing that: (1) the respondents
utterly failed to prove that there was a repurchase agreement or
compromise settlement between them and the Government; (2)
the judgment in Civil Case No. R-1881 was absolute and
unconditional, giving title in fee simple to the Republic; and (3)
the respondents claim of verbal assurances from government
officials violates the Statute of Frauds.



The petition should be denied.



Petitioners anchor their claim to the controverted property
on the supposition that the Decision in the pertinent
expropriation proceedings did not provide for the condition that
should the intended use of Lot No. 88 for the expansion of the
Lahug Airport be aborted or abandoned, the property would
revert to respondents, being its former owners. Petitioners cite,
in support of this position, Fery v. Municipality of
Cabanatuan,[7] which declared that the Government acquires
only such rights in expropriated parcels of land as may be
allowed by the character of its title over the properties



If x x x 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. If x x x land is
expropriated for a public street and the expropriation is granted
upon condition that the city can only use it for a public street,
then, of course, when the city abandons its use as a public
street, it returns to the former owner, unless there is some
statutory provision to the contrary. 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, whether it be the State, a province,
or municipality, and in that case the non-user does not have the
effect of defeating the title acquired by the expropriation
proceedings. 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 right 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. x x x.[8]





Contrary to the stance of petitioners, this Court had ruled
otherwise in Heirs of Timoteo Moreno and Maria Rotea v.
Mactan-Cebu International Airport Authority,[9] thus



Moreover, respondent MCIAA has brought to our
attention a significant and telling portion in the Decision in Civil
Case No. R-1881 validating our discernment that the
expropriation by the predecessors of respondent was ordered
under the running impression that Lahug Airport would continue
in operation



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
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 judgment 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 (emphasis supplied).



While in the trial in Civil Case No. R-1881 [we] could have
simply acknowledged the presence of public purpose for the
exercise of eminent domain regardless of the survival of 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 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--vis the
expropriated Lots Nos. 916 and 920 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.[10]





Indeed, the Decision in Civil Case No. R-1881 should be
read in its entirety, wherein it is apparent that the acquisition by
the Republic of the expropriated lots was subject to the
condition that the Lahug Airport would continue its operation.
The condition not having materialized because the airport had
been abandoned, the former owner should then be allowed to
reacquire the expropriated property.[11]



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.,[12] McConihay v. Theodore
Wright,[13] and Reichling v. Covington Lumber Co.,[14] all
uniformly holding that the transfer to a third party 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.



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.[15] 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.[16]



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.[17]



Even without the foregoing declaration, in the instant case,
on the question of whether respondents were able to establish
the existence of an oral compromise agreement that entitled
them to repurchase Lot No. 88 should the operations of the
Lahug Airport be abandoned, we rule in the affirmative.



It bears stressing that both the RTC, Branch 57, Cebu and
the CA have passed upon this factual issue and have declared, in
no uncertain terms, that a compromise agreement was, in fact,
entered into between the Government and respondents, with
the former undertaking to resell Lot No. 88 to the latter if the
improvement and expansion of the Lahug Airport would not be
pursued. In affirming the factual finding of the RTC to this
effect, the CA declared



Lozadas testimony is cogent. An octogenarian widower-
retiree and a resident of Moon Park, California since 1974, he
testified that government representatives verbally promised him
and his late wife while the expropriation proceedings were on-
going that the government shall return the property if the
purpose for the expropriation no longer exists. This promise
was made at the premises of the airport. As far as he could
remember, there were no expropriation proceedings against his
property in 1952 because the first notice of expropriation he
received was in 1962. Based on the promise, he did not hire a
lawyer. Lozada was firm that he was promised that the lot
would be reverted to him once the public use of the lot ceases.
He made it clear that the verbal promise was made in Lahug
with other lot owners before the 1961 decision was handed
down, though he could not name the government
representatives who made the promise. It was just a verbal
promise; nevertheless, it is binding. The fact that he could not
supply the necessary details for the establishment of his
assertions during cross-examination, but that When it will not
be used as intended, it will be returned back, we just believed in
the government, does not dismantle the credibility and
truthfulness of his allegation. This Court notes that he was 89
years old when he testified in November 1997 for an incident
which happened decades ago. Still, he is a competent witness
capable of perceiving and making his perception known. The
minor lapses are immaterial. The decision of the competency of
a witness rests primarily with the trial judge and must not be
disturbed on appeal unless it is clear that it was erroneous. The
objection to his competency must be made before he has given
any testimony or as soon as the incompetency becomes
apparent. Though Lozada is not part of the compromise
agreement,[18] he nevertheless adduced sufficient evidence to
support his claim.[19]





As correctly found by the CA, unlike in Mactan Cebu
International Airport Authority v. Court of Appeals,[20] cited by
petitioners, where respondent therein offered testimonies
which were hearsay in nature, the testimony of Lozada was
based on personal knowledge as the assurance from the
government was personally made to him. His testimony on
cross-examination destroyed neither his credibility as a witness
nor the truthfulness of his words.



Verily, factual findings of the trial court, especially when
affirmed by the CA, are binding and conclusive on this Court and
may not be reviewed. A petition for certiorari under Rule 45 of
the Rules of Court contemplates only questions of law and not of
fact.[21] Not one of the exceptions to this rule is present in this
case to warrant a reversal of such findings.



As regards the position of petitioners that respondents
testimonial evidence violates the Statute of Frauds, suffice it to
state that the Statute of Frauds operates only with respect to
executory contracts, and does not apply to contracts which have
been completely or partially performed, the rationale thereof
being as follows:



In executory contracts there is a wide field for fraud because
unless they be in writing there is no palpable evidence of the
intention of the contracting parties. The statute has precisely
been enacted to prevent fraud. 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 delivered by him from
the transaction in litigation, and, at the same time, evade the
obligations, responsibilities or liabilities assumed or contracted
by him thereby.[22]





In this case, the Statute of Frauds, invoked by petitioners
to bar the claim of respondents for the reacquisition of Lot No.
88, cannot apply, the oral compromise settlement having been
partially performed. By reason of such assurance made in their
favor, respondents relied on the same by not pursuing their
appeal before the CA. Moreover, contrary to the claim of
petitioners, the fact of Lozadas eventual conformity to the
appraisal of Lot No. 88 and his seeking the correction of a clerical
error in the judgment as to the true area of Lot No. 88 do not
conclusively establish that respondents absolutely parted with
their property. To our mind, these acts were simply meant to
cooperate with the government, particularly because of the oral
promise made to them.



The right of respondents to repurchase Lot No. 88 may be
enforced based on a constructive trust constituted on the
property held by the government in favor of the former. On this
note, our ruling in Heirs of Timoteo Moreno is instructive, viz.:




Mactan-Cebu International Airport Authority is correct in
stating that one would not find an express statement in the
Decision in Civil Case No. R-1881 to the effect that the
[condemned] lot would return to [the landowner] or that [the
landowner] had a right to repurchase the same if the purpose
for which it was expropriated is ended or abandoned or if the
property was to be used other than as the Lahug Airport. This
omission notwithstanding, and while the inclusion of this
pronouncement in the judgment of condemnation would have
been ideal, such precision is not absolutely necessary nor is it
fatal to the cause of petitioners herein. No doubt, the return or
repurchase of the condemned properties of petitioners could be
readily justified as the manifest legal effect or consequence of
the trial courts 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.



The predicament of petitioners involves a constructive
trust, one that is akin to the implied trust referred to in Art. 1454
of the Civil Code, If an absolute conveyance of property is made
in order to secure the performance of an obligation of the
grantor toward the grantee, a trust by virtue of law is
established. If the fulfillment of the obligation is offered by the
grantor when it becomes due, he may demand the reconveyance
of the property to him. In the case at bar, petitioners conveyed
Lots No. 916 and 920 to the government with the latter obliging
itself to use the realties for the expansion of Lahug Airport;
failing to keep its bargain, the government can be compelled by
petitioners to reconvey the parcels of land to them, otherwise,
petitioners would be denied the use of their properties upon a
state of affairs that was not conceived nor contemplated when
the expropriation was authorized.



Although the symmetry between the instant case and the
situation contemplated by Art. 1454 is not perfect, the provision
is undoubtedly applicable. For, as explained by an expert on the
law of trusts: The only problem of great importance in the field
of constructive trust is to decide whether in the numerous and
varying fact situations presented to the courts there is a
wrongful holding of property and hence a threatened unjust
enrichment of the defendant. Constructive trusts are fictions of
equity which are bound by no unyielding formula when they are
used by courts as devices to remedy any situation in which the
holder of legal title may not in good conscience retain the
beneficial interest.



In constructive trusts, the arrangement is temporary and
passive in which the trustees sole duty is to transfer the title
and possession over the property to the plaintiff-beneficiary. Of
course, the wronged party seeking the aid of a court of equity
in establishing a constructive trust must himself do equity.
Accordingly, the court will exercise its discretion in deciding
what acts are required of the plaintiff-beneficiary as conditions
precedent to obtaining such decree and has the obligation to
reimburse the trustee the consideration received from the latter
just as the plaintiff-beneficiary would if he proceeded on the
theory of rescission. In the good judgment of the court, the
trustee may also be paid the necessary expenses he may have
incurred in sustaining the property, his fixed costs for
improvements thereon, and the monetary value of his services
in managing the property to the extent that plaintiff-beneficiary
will secure a benefit from his acts.



The rights and obligations between the constructive
trustee and the beneficiary, in this case, respondent MCIAA and
petitioners over Lots Nos. 916 and 920, are echoed in Art. 1190
of the Civil Code, When the conditions have for their purpose
the extinguishment of an obligation to give, the parties, upon
the fulfillment of said conditions, shall return to each other what
they have received x x x In case of the loss, deterioration or
improvement of the thing, the provisions which, with respect to
the debtor, are laid down in the preceding article shall be
applied to the party who is bound to return x x x.*23+





On the matter of the repurchase price, while petitioners
are obliged to reconvey Lot No. 88 to respondents, the latter
must return to the former what they received as just
compensation for the expropriation of the property, plus legal
interest to be computed from default, which in this case runs
from the time petitioners comply with their obligation to
respondents.



Respondents must likewise pay petitioners the necessary
expenses they may have incurred in maintaining Lot No. 88, as
well as the monetary value of their services in managing it to the
extent that respondents were benefited thereby.



Following Article 1187[24] of the Civil Code, petitioners
may keep whatever income or fruits they may have obtained
from Lot No. 88, and respondents need not account for the
interests that the amounts they received as just compensation
may have earned in the meantime.



In accordance with Article 1190[25] of the Civil Code vis--
vis Article 1189, which provides that (i)f a thing is improved by
its nature, or by time, the improvement shall inure to the benefit
of the creditor x x x, respondents, as creditors, do not have to
pay, as part of the process of restitution, the appreciation in
value of Lot No. 88, which is a natural consequence of nature
and time.[26]



WHEREFORE, the petition is DENIED. The February 28,
2006 Decision of the Court of Appeals, affirming the October 22,
1999 Decision of the Regional Trial Court, Branch 87, Cebu City,
and its February 7, 2007 Resolution are AFFIRMED with
MODIFICATION as follows:



1. Respondents are ORDERED to return to petitioners the
just compensation they received for the expropriation of Lot No.
88, plus legal interest, in the case of default, to be computed
from the time petitioners comply with their obligation to
reconvey Lot No. 88 to them;



2. Respondents are ORDERED to pay petitioners the
necessary expenses the latter incurred in maintaining Lot No. 88,
plus the monetary value of their services to the extent that
respondents were benefited thereby;



3. Petitioners are ENTITLED to keep whatever fruits and income
they may have obtained from Lot No. 88; and



4. Respondents are also ENTITLED to keep whatever
interests the amounts they received as just compensation may
have earned in the meantime, as well as the appreciation in
value of Lot No. 88, which is a natural consequence of nature
and time;



In light of the foregoing modifications, the case is
REMANDED to the Regional Trial Court, Branch 57, Cebu City,
only for the purpose of receiving evidence on the amounts that
respondents will have to pay petitioners in accordance with this
Courts decision. No costs.



SO ORDERED.





ANTONIO EDUARDO B. NACHURA

Associate Justice







WE CONCUR:







REYNATO S. PUNO

Chief Justice







ANTONIO T. CARPIO

Associate Justice














RENATO C. CORONA

Associate Justice



CONCHITA CARPIO MORALES

Associate Justice












PRESBITERO J. VELASCO, JR.

Associate Justice



TERESITA J. LEONARDO-DE CASTRO

Associate Justice








ARTURO D. BRION

Associate Justice



(on official leave)

DIOSDADO M. PERALTA

Associate Justice












LUCAS P. BERSAMIN

Associate Justice



MARIANO C. DEL CASTILLO

Associate Justice




ROBERTO A. ABAD

Associate Justice









MARTIN S. VILLARAMA, JR.

Associate Justice








JOSE PORTUGAL PEREZ

Associate Justice






JOSE CATRAL MENDOZA

Associate Justice











C E R T I F I C A T I O N



Pursuant to Section 13, Article VIII of the Constitution, I
hereby certify 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.







REYNATO S. PUNO

Chief Justice













* On official leave.

[1] Penned by Associate Justice Enrico A. Lanzanas, with
Associate Justices Pampio A. Abarintos and Apolinario D.
Bruselas, Jr., concurring; rollo, pp. 46-65.

[2] Rollo, pp. 67-68.

[3] TSN, June 25, 1998, p. 7.

[4] Rollo, pp. 20-21.

[5] Id. at 22-23.

[6] Records, p. 178.

[7] 42 Phil. 28 (1921).

[8] Id. at 29-30.

[9] G.R. No. 156273, October 15, 2003, 413 SCRA 502.

[10] Id. at 509-510.

[11] Ruling on the Motion for Reconsideration affirming
the Decision; Heirs of Timoteo Moreno and Maria Rotea v.
Mactan-Cebu International Airport Authority, G.R. No. 156273,
August 9, 2005, 466 SCRA 288, 305.



[12] 132 Ind. 558, November 5, 1892.

[13] 121 U.S. 932, April 11, 1887.

[14] 57 Wash. 225, February 4, 1910.

[15] CONSTITUTION, Art. III, Sec. 9.

[16] Supra note 11, at 302; Vide Republic v. Lim, G.R. No.
161656, June 29, 2005, 462 SCRA 265.



[17] Vide the Separate Concurring Opinion of Associate
Justice Presbitero J. Velasco, Jr.

*18+ Petitioners witness Michael Bacarisas testified that
three other lot owners entered into a written compromise
agreement with the government but Lozada was not part of it.

[19] Rollo, pp. 58-59.

[20] G.R. No. 121506, October 30, 1996, 263 SCRA 736.

[21] Caluag v. People, G.R. No. 171511, March 4, 2009,
580 SCRA 575, 583; Gregorio Araneta University Foundation v.
Regional Trial Court of Kalookan City, Br. 120, G.R. No. 139672,
March 4, 2009, 580 SCRA 532, 544; Heirs of Jose T. Calo v. Calo,
G.R. No. 156101, February 10, 2009, 578 SCRA 226, 232.

[22] Mactan-Cebu International Airport Authority v.
Tudtud, G.R. No. 174012, November 14, 2008, 571 SCRA 165,
175.

[23] Supra note 9, at 512-514.

[24] Art. 1187. The effects of a conditional obligation to
give, once the condition has been fulfilled, shall retroact to the
day of the constitution of the obligation. Nevertheless, when
the obligation imposes reciprocal prestations upon the parties,
the fruits and interests during the pendency of the condition
shall be deemed to have been mutually compensated. x x x.

[25] Art. 1190. When the conditions have for their
purpose the extinguishment of an obligation to give, the parties,
upon the fulfillment of said conditions, shall return to each other
what they have received.

In case of the loss, deterioration or improvement of the
thing, the provisions which, with respect to the debtor, are laid
down in the preceding article (Article 1189) shall be applied to
the party who is bound to return.

[26] Mactan-Cebu International Airport Authority v .
Tudtud, supra note 22, at 177.


E. JUST Compesation


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-59603 April 29, 1987

EXPORT PROCESSING ZONE AUTHORITY, petitioner,
vs.
HON. CEFERINO E. DULAY, in his capacity as the Presiding
Judge, Court of First Instance of Cebu, Branch XVI, Lapu-Lapu
City, and SAN ANTONIO DEVELOPMENT CORPORATION,
respondents.
Elena M. Cuevas for respondents.

GUTIERREZ, JR., J.:

The question raised in this petition is whether or not
Presidential Decrees Numbered 76, 464, 794 and 1533 have
repealed and superseded Sections 5 to 8 of Rule 67 of the
Revised Rules of Court, such that in determining the just
compensation of property in an expropriation case, the only
basis should be its market value as declared by the owner or as
determined by the assessor, whichever is lower.

On January 15, 1979, the President of the Philippines, issued
Proclamation No. 1811, reserving a certain parcel of land of the
public domain situated in the City of Lapu-Lapu, Island of
Mactan, Cebu and covering a total area of 1,193,669 square
meters, more or less, for the establishment of an export
processing zone by petitioner Export Processing Zone Authority
(EPZA).

Not all the reserved area, however, was public land. The
proclamation included, among others, four (4) parcels of land
with an aggregate area of 22,328 square meters owned and
registered in the name of the private respondent. The petitioner,
therefore, offered to purchase the parcels of land from the
respondent in acccordance with the valuation set forth in
Section 92, Presidential Decree (P.D.) No. 464, as amended. The
parties failed to reach an agreement regarding the sale of the
property.

The petitioner filed with the then Court of First Instance of
Cebu, Branch XVI, Lapu-Lapu City, a complaint for expropriation
with a prayer for the issuance of a writ of possession against the
private respondent, to expropriate the aforesaid parcels of land
pursuant to P.D. No. 66, as amended, which empowers the
petitioner to acquire by condemnation proceedings any property
for the establishment of export processing zones, in relation to
Proclamation No. 1811, for the purpose of establishing the
Mactan Export Processing Zone.

On October 21, 1980, the respondent judge issued a writ of
possession authorizing the petitioner to take immediate
possession of the premises. On December 23, 1980, the private
respondent flied its answer.

At the pre-trial conference on February 13, 1981, the
respondent judge issued an order stating that the parties have
agreed that the only issue to be resolved is the just
compensation for the properties and that the pre-trial is thereby
terminated and the hearing on the merits is set on April 2, 1981.

On February 17, 1981, the respondent judge issued the order
of condemnation declaring the petitioner as having the lawful
right to take the properties sought to be condemned, upon the
payment of just compensation to be determined as of the filing
of the complaint. The respondent judge also issued a second
order, subject of this petition, appointing certain persons as
commissioners to ascertain and report to the court the just
compensation for the properties sought to be expropriated.

On June 19, 1981, the three commissioners submitted their
consolidated report recommending the amount of P15.00 per
square meter as the fair and reasonable value of just
compensation for the properties.

On July 29, 1981, the petitioner Med a Motion for
Reconsideration of the order of February 19, 1981 and Objection
to Commissioner's Report on the grounds that P.D. No. 1533 has
superseded Sections 5 to 8 of Rule 67 of the Rules of Court on
the ascertainment of just compensation through commissioners;
and that the compensation must not exceed the maximum
amount set by P.D. No. 1533.

On November 14, 1981, the trial court denied the petitioner's
motion for reconsideration and gave the latter ten (10) days
within which to file its objection to the Commissioner's Report.

On February 9, 1982, the petitioner flied this present petition
for certiorari and mandamus with preliminary restraining order,
enjoining the trial court from enforcing the order dated February
17, 1981 and from further proceeding with the hearing of the
expropriation case.

The only issue raised in this petition is whether or not Sections
5 to 8, Rule 67 of the Revised Rules of Court had been repealed
or deemed amended by P.D. No. 1533 insofar as the
appointment of commissioners to determine the just
compensation is concerned. Stated in another way, is the
exclusive and mandatory mode of determining just
compensation in P.D. No. 1533 valid and constitutional?

The petitioner maintains that the respondent judge acted in
excess of his jurisdiction and with grave abuse of discretion in
denying the petitioner's motion for reconsideration and in
setting the commissioner's report for hearing because under
P.D. No. 1533, which is the applicable law herein, the basis of
just compensation shall be the fair and current market value
declared by the owner of the property sought to be expropriated
or such market value as determined by the assessor, whichever
is lower. Therefore, there is no more need to appoint
commissioners as prescribed by Rule 67 of the Revised Rules of
Court and for said commissioners to consider other highly
variable factors in order to determine just compensation. The
petitioner further maintains that P.D. No. 1533 has vested on
the assessors and the property owners themselves the power or
duty to fix the market value of the properties and that said
property owners are given the full opportunity to be heard
before the Local Board of Assessment Appeals and the Central
Board of Assessment Appeals. Thus, the vesting on the assessor
or the property owner of the right to determine the just
compensation in expropriation proceedings, with appropriate
procedure for appeal to higher administrative boards, is valid
and constitutional.

Prior to the promulgation of P.D. Nos. 76, 464, 794 and 1533,
this Court has interpreted the eminent domain provisions of the
Constitution and established the meaning, under the fundametal
law, of just compensation and who has the power to determine
it. Thus, in the following cases, wherein the filing of the
expropriation proceedings were all commenced prior to the
promulgation of the aforementioned decrees, we laid down the
doctrine onjust compensation:

Municipality of Daet v. Court of Appeals (93 SCRA 503, 516),

x x x x x x x x x

"And in the case of J.M. Tuason & Co., Inc. v. Land Tenure
Administration, 31 SCRA 413, the Court, speaking thru now Chief
Justice Fernando, reiterated the 'well-settled (rule) that just
compensation means the equivalent for the value of the
property at the time of its taking. Anything beyond that is more
and anything short of that is less, than just compensation. It
means a fair and full equivalent for the loss sustained, which is
the measure of the indemnity, not whatever gain would accrue
to the expropriating entity."

Garcia v. Court ofappeals (102 SCRA 597, 608),

x x x x x x x x x

"Hence, in estimating the market value, all the capabilities of
the property and all the uses to which it may be applied or for
which it is adapted are to be considered and not merely the
condition it is in the time and the use to which it is then applied
by the owner. All the facts as to the condition of the property
and its surroundings, its improvements and capabilities may be
shown and considered in estimating its value."

Republic v. Santos (141 SCRA 30, 35-36),

"According to section 8 of Rule 67, the court is not bound by
the commissioners' report. 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 condemnation, and to the
defendant just compensation for the property expropriated. This
Court may substitute its own estimate of the value as gathered
from the record (Manila Railroad Company v. Velasquez, 32 Phil.
286)."

However, the promulgation of the aforementioned decrees
practically set aside the above and many other precedents
hammered out in the course of evidence-laden, well argued,
fully heard, studiously deliberated, and judiciously considered
court proceedings. The decrees categorically and peremptorily
limited the definition of just compensation thus:

P.D. No. 76:

x x x x x x x x x

"For purposes of just compensation in cases of private
property acquired by the government for public use, the basis
shall be the current and fair market value declared by the owner
or administrator, or such market value as determined by the
Assessor, whichever is lower."

P.D. No. 464:

"Section 92. Basis for payment of just compensation in
expropriation proceedings. In determining just compensation
which private property is acquired by the government for public
use, the basis shall be the market value declared by the owner
or administrator or anyone having legal interest in the property,
or such market value as determined by the assessor, whichever
is lower."

P.D. No. 794:

"Section 92. Basis for payment of just compensation in
expropriation proceedings. In determining just compensation
when private property is acquired by the government for public
use, the same shall not exceed the market value declared by the
owner or administrator or anyone having legal interest in the
property, or such market value as determined by the assessor,
whichever is lower."

P.D. No. 1533:

"Section 1. In determining just compensation for private
property acquired through eminent domain proceedings, the
compensation to be paid shall not exceed the value declared by
the owner or administrator or anyone having legal interest in
the property or determined by the assessor, pursuant to the
Real Property Tax Code, whichever value is lower, prior to the
recommendation or decision of the appropriate Government
office to acquire the property."

We are constrained to declare the provisions of the Decrees
on just compensation unconstitutional and void and accordingly
dismiss the instant petition for lack of merit.

The method of ascertaining just compensation under the
aforecited decrees constitutes impermissible encroachment on
judicial prerogatives. It tends to render this Court inutile in a
matter which under the Constitution is reserved to it for final
determination.

Thus, although in an expropriation proceeding the court
technically would still have the power to determine the just
compensation for the property, following the applicable decrees,
its task would be relegated to simply stating the lower value of
the property as declared either by the owner or the assessor. As
a necessary consequence, it would be useless for the court to
appoint commissioners under Rule 67 of the Rules of Court.
Moreover, the need to satisfy the due process clause in the
taking of private property is seemingly fulfilled since it cannot be
said that a judicial proceeding was not had before the actual
taking. However, the strict application of the decrees during the
proceedings would be nothing short of a mere formality or
charade as the court has only to choose between the valuation
of the owner and that of the assessor, and its choice is always
limited to the lower of the two. The court cannot exercise its
discretion or independence in determining what is just or fair.
Even a grade school pupil could substitute for the judge insofar
as the determination of constitutional just compensation is
concerned.

In the case of National Housing Authority v. Reyes (123 SCRA
245), this Court upheld P.D. No. 464, as further amended by P.D.
Nos. 794, 1224 and 1259. In this case, the petitioner National
Housing Authority contended that the owner's declaration at
P1,400.00 which happened to be lower than the assessor's
assessment, is the just compensation for the respondent's
property under section 92 of P.D. No. 464. On the other hand,
the private respondent stressed that while there may be basis
for the allegation that the respondent judge did not follow the
decree, the matter is still subject to his final disposition, he
having been vested with the original and competent authority to
exercise his judicial discretion in the light of the constitutional
clauses on due process and equal protection.

To these opposing arguments, this Court ruled ihat under the
conceded facts, there should be a recognition that the law as it
stands must be applied; that the decree having spoken so clearly
and unequivocably calls for obedience; and that on a matter
where the applicable law speaks in no uncertain language, the
Court has no choice except to yield to its command. We further
stated that "the courts should recognize that the rule introduced
by P.D. No. 76 and reiterated in subsequent decrees does not
upset the established concepts of justice or the constitutional
provision on just compensation for, precisely, the owner is
allowed to make his own valuation of his property."

While the Court yielded to executive prerogative exercised in
the form of absolute law-making power, its members,
nonetheless, remained uncomfortable with the implications of
the decision and the abuse and unfairness which might follow in
its wake. For one thing, the President himself did not seem
assured or confident with his own enactment. It was not enough
to lay down the law on determination of just compensation in
P.D. 76. It had to be repeated and reiterated in P.D. 464, P.D.
794, and P.D. 1533. The provision is also found in P.D. 1224, P.D.
1259 and P.D. 1313. Inspite of its effectivity as general law and
the wide publicity given to it, the questioned provision or an
even stricter version had to be embodied in cases of specific
expropriations by decree as in P.D. 1669 expropriating the
Tambunting Estate and P.D. 1670 expropriating the Sunog Apog
area in Tondo, Manila.

In the present petition, we are once again confronted with the
same question of whether the courts under P.D. 1533, which
contains the same provision on just compensation as its
predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated by
the decree and to this effect, to appoint commissioners for such
purpose.

This time, we answer in the affirmative.

In overruling the petitioner's motion for reconsideration and
objection to the commissioner's report, the trial court said:

"Another consideration why the Court is empowered to
appoint commissioners to assess the just compensation of these
properties under eminent domain proceedings, is the well-
entrenched ruling that 'the owner of property expropriated is
entitled to recover from expropriating authority the fair and full
value of the lot, as of the time when possession thereof was
actually taken by the province, plus consequential damages
including attorney's fees from which the consequential
benefits, if any should be deducted, with interest at the legal
rate, on the aggregate sum due to the owner from and after the
date of actual taking.' (Capitol Subdivision, Inc. v. Province of
Negros Occidental, 7 SCRA 60). In fine, the decree only
establishes a uniform basis for determining just compensation
which the Court may consider as one of the factors in arriving at
'just compensation,' as envisage in the Constitution. In the
words of Justice Barredo, "Respondent court's invocation of
General Order No. 3 of September 21, 1972 is nothing short of
an unwarranted abdication of judicial authority, which no judge
duly imbued with the implications of the paramount principle of
independence of the judiciary should ever think of doing." (Lina
v. Purisima, 82 SCRA 344, 351; Cf. Prov. of Pangasinan v. CFI
Judge of Pangasinan, Br. VIII, 80 SCRA 117) Indeed, where this
Court simply follows PD 1533, thereby limiting the
determination of just compensation on the value declared by
the owner or administrator or as determined by the Assessor,
whichever is lower, it may result in the deprivation of the
landowner's right of due process to enable it to prove its claim
to just compensation, as mandated by the Constitution. (Uy v.
Genato, 57 SCRA 123). The tax declaration under the Real
Property Tax Code is, undoubtedly, for purposes of taxation."

We are convinced and so rule that the trial court correctly
stated that the valuation in the decree may only serve as a
guiding principle or one of the factors in determining just
compensation but it may not substitute the court's own
judgment as to what amount should be awarded and how to
arrive at such amount. A return to the earlier well-established
doctrine, to our mind, is more in keeping with the principle that
the judiciary should live up to its mission "by vitalizing and not
denigrating constitutional rights." (See Salonga v. Cruz Pao, 134
SCRA 438, 462; citing Mercado v. Court of First Instance of Rizal,
116 SCRA 93.) The doctrine we enunciated in National Housing
Authority v. Reyes, supra, therefore, must necessarily be
abandoned if we are to uphold this Court's role as the guardian
of the fundamental rights guaranteed by the due process and
equal protection clauses and as the final arbiter over
transgressions committed against constitutional rights.

The basic unfairness of the decrees is readily apparent.

Just compensation means the value of the property at the
time of the taking. It means a fair and full equivalent for the loss
sustained. All the facts as to the condition of the property and its
surroundings, its improvements and capabilities, should be
considered.

In this particular case, the tax declarations presented by the
petitioner as basis for just compensation were made by the
Lapu-Lapu municipal, later city assessor long before martial law,
when land was not only much cheaper but when assessed values
of properties were stated in figures constituting only a fraction
of their true market value. The private respondent was not even
the owner of the properties at the time. It purchased the lots for
development purposes. To peg the value of the lots on the basis
of documents which are out of date and at prices below the
acquisition cost of present owners would be arbitrary and
confiscatory.

Various factors can come into play in the valuation of specific
properties singled out for expropriation. The values given by
provincial assessors are usually uniform for very wide areas
covering several barrios or even an entire town with the
exception of the poblacion. Individual differences are never
taken into account. The value of land is based on such
generalities as its possible cultivation for rice, corn, coconuts, or
other crops. Very often land described as "cogonal" has been
cultivated for generations. Buildings are described in terms of
only two or three classes of building materials and estimates of
areas are more often inaccurate than correct. Tax values can
serve as guides but cannot be absolute substitutes for just
compensation.

To say that the owners are estopped to question the
valuations made by assessors since they had the opportunity to
protest is illusory. The overwhelming mass of land owners
accept unquestioningly what is found in the tax declarations
prepared by local assessors or municipal clerks for them. They
do not even look at, much less analyze, the statements. The Idea
of expropriation simply never occurs until a demand is made or a
case filed by an agency authorized to do so.

It is violative of due process to deny to the owner the
opportunity to prove that the valuation in the tax documents is
unfair or wrong. And it is repulsive to basic concepts of justice
and fairness to allow the haphazard work of a minor bureaucrat
or clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually
viewed the property, after evidence and arguments pro and con
have been presented, and after all factors and considerations
essential to a fair and just determination have been judiciously
evaluated.

As was held in the case of Gideon v. Wainwright (93 ALR
2d,733,742):

"In the light of these and many other prior decisions of this
Court, it is not surprising that the Betts Court, when faced with
the contention that 'one charged with crime, who is unable to
obtain counsel must be furnished counsel by the State,'
conceded that '[E]xpressions in the opinions of this court lend
color to the argument. . .' 316 U.S., at 462, 463, 86 L ed. 1602, 62
S Ct. 1252. The fact is that in deciding as it did-that
"appointment of counsel is not a fundamental right, essential to
a fair trial" the Court in Betts v. Brady made an ubrupt brake
with its own well-considered precedents. In returning to these
old precedents, sounder we believe than the new, we but
restore constitutional principles established to achieve a fair
system of justice. . ."

We return to older and more sound precedents. This Court has
the duty to formulate guiding and controlling constitutional
principles, precepts, doctrines, or rules. (See Salonga v. Cruz
Pano, supra).

The determination of "just compensation" in eminent domain
cases is a judicial function. The executive department or the
legislature may make the initial determinations but when a
party claims a violation of the guarantee in the Bill of Rights that
private property may not be taken for public use without just
compensation, no statute, decree, or executive order can
mandate that its own determination shall prevail over the
court's findings. Much less can the courts be precluded from
looking into the "just-ness" of the decreed compensation.

We, therefore, hold that P.D. No. 1533, which eliminates the
court's discretion to appoint commissioners pursuant to Rule 67
of the Rules of Court, is unconstitutional and void. To hold
otherwise would be to undermine the very purpose why this
Court exists in the first place.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
hereby DISMISSED. The temporary restraining order issued on
February 16, 1982 is LIFTED and SET ASIDE.

SO ORDERED.

Fernan, Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano,
Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur.
Teehankee, C.J., in the result.
Yap, J., on leave.
Petition dismissed. Order lifted and set aside.

The Lawphil Project - Arellano Law Foundation


1. When should just compensation be fixed?



SECOND DIVISION

[G.R. No. 146062. June 28, 2001]

SANTIAGO ESLABAN, JR., in his capacity as Project Manager of
the National Irrigation Administration, petitioner, vs. CLARITA
VDA. DE ONORIO, respondent.

D E C I S I O N

MENDOZA, J.:

This is a petition for review of the decision[1] of the Court of
Appeals which affirmed the decision of the Regional Trial
Court, Branch 26, Surallah, South Cotabato, ordering the
National Irrigation Administration (NIA for brevity) to pay
respondent the amount of P107,517.60 as just compensation
for the taking of the latters property.

The facts are as follows:

Respondent Clarita Vda. de Enorio is the owner of a lot in
Barangay M. Roxas, Sto. Nio, South Cotabato with an area of
39,512 square meters. The lot, known as Lot 1210-A-Pad-11-
000586, is covered by TCT No. T-22121 of the Registry of
Deeds, South Cotabato. On October 6, 1981, Santiago
Eslaban, Jr., Project Manager of the NIA, approved the
construction of the main irrigation canal of the NIA on the
said lot, affecting a 24,660 square meter portion thereof.
Respondents husband agreed to the construction of the NIA
canal provided that they be paid by the government for the
area taken after the processing of documents by the
Commission on Audit.

Sometime in 1983, a Right-of-Way agreement was executed
between respondent and the NIA (Exh. 1). The NIA then paid
respondent the amount of P4,180.00 as Right-of-Way
damages. Respondent subsequently executed an Affidavit of
Waiver of Rights and Fees whereby she waived any
compensation for damages to crops and improvements which
she suffered as a result of the construction of a right-of-way
on her property (Exh. 2). The same year, petitioner offered
respondent the sum of P35,000.00 by way of amicable
settlement pursuant to Executive Order No. 1035, 18, which
provides in part that

Financial assistance may also be given to owners of lands
acquired under C.A. 141, as amended, for the area or portion
subject to the reservation under Section 12 thereof in such
amounts as may be determined by the implementing
agency/instrumentality concerned in consultation with the
Commission on Audit and the assessors office concerned.

Respondent demanded payment for the taking of her
property, but petitioner refused to pay. Accordingly,
respondent filed on December 10, 1990 a complaint against
petitioner before the Regional Trial Court, praying that
petitioner be ordered to pay the sum of P111,299.55 as
compensation for the portion of her property used in the
construction of the canal constructed by the NIA, litigation
expenses, and the costs.

Petitioner, through the Office of the Solicitor-General, filed an
Answer, in which he admitted that NIA constructed an
irrigation canal over the property of the plaintiff and that NIA
paid a certain landowner whose property had been taken for
irrigation purposes, but petitioner interposed the defense
that: (1) the government had not consented to be sued; (2)
the total area used by the NIA for its irrigation canal was only
2.27 hectares, not 24,600 square meters; and (3) respondent
was not entitled to compensation for the taking of her
property considering that she secured title over the property
by virtue of a homestead patent under C.A. No. 141.

At the pre-trial conference, the following facts were
stipulated upon: (1) that the area taken was 24,660 square
meters; (2) that it was a portion of the land covered by TCT
No. T-22121 in the name of respondent and her late husband
(Exh. A); and (3) that this area had been taken by the NIA for
the construction of an irrigation canal.[2]

On October 18, 1993, the trial court rendered a decision, the
dispositive portion of which reads:

In view of the foregoing, decision is hereby rendered in favor
of plaintiff and against the defendant ordering the defendant,
National Irrigation Administration, to pay to plaintiff the sum
of One Hundred Seven Thousand Five Hundred Seventeen
Pesos and Sixty Centavos (P107,517.60) as just compensation
for the questioned area of 24,660 square meters of land
owned by plaintiff and taken by said defendant NIA which
used it for its main canal plus costs.[3]

On November 15, 1993, petitioner appealed to the Court of
Appeals which, on October 31, 2000, affirmed the decision of
the Regional Trial Court. Hence this petition.

The issues in this case are:

1. WHETHER OR NOT THE PETITION IS DISMISSIBLE FOR
FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 5,
RULE 7 OF THE REVISED RULES OF CIVIL PROCEDURE.

2. WHETHER OR NOT LAND GRANTED BY VIRTUE OF A
HOMESTEAD PATENT AND SUBSEQUENTLY REGISTERED
UNDER PRESIDENTIAL DECREE 1529 CEASES TO BE PART OF
THE PUBLIC DOMAIN.

3. WHETHER OR NOT THE VALUE OF JUST COMPENSATION
SHALL BE DETERMINED FROM THE TIME OF THE TAKING OR
FROM THE TIME OF THE FINALITY OF THE DECISION.

4. WHETHER THE AFFIDAVIT OF WAIVER OF RIGHTS AND FEES
EXECUTED BY RESPONDENT EXEMPTS PETITIONER FROM
MAKING PAYMENT TO THE FORMER.

We shall deal with these issues in the order they are stated.

First. Rule 7, 5 of the 1997 Revised Rules on Civil Procedure
provides

Certification against forum shopping. The plaintiff or
principal party shall certify under oath in the complaint or
other initiatory pleading asserting a claim for relief, or in a
sworn certification annexed thereto and simultaneously filed
therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any
court, tribunal or quasi-judicial agency and, to the best of his
knowledge, no such other action or claim is pending therein;
(b) if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should
thereafter learn that the same or similar action or claim has
been filed or is pending, he shall report the fact within five (5)
days therefrom to the court wherein his aforesaid complaint
or initiatory pleading has been filed.

Failure to comply with the foregoing requirements shall not
be curable by mere amendment of the complaint or other
initiatory pleading but shall be cause for the dismissal of the
case without prejudice, unless otherwise provided, upon
motion and after hearing . . . .

By reason of Rule 45, 4 of the 1997 Revised Rules on Civil
Procedure, in relation to Rule 42, 2 thereof, the requirement
of a certificate of non-forum shopping applies to the filing of
petitions for review on certiorari of the decisions of the Court
of Appeals, such as the one filed by petitioner.

As provided in Rule 45, 5, The failure of the petitioner to
comply with any of the foregoing requirements regarding . . .
the contents of the document which should accompany the
petition shall be sufficient ground for the dismissal thereof.

The requirement in Rule 7, 5 that the certification should be
executed by the plaintiff or the principal means that counsel
cannot sign the certificate against forum-shopping. The
reason for this is that the plaintiff or principal knows better
than anyone else whether a petition has previously been filed
involving the same case or substantially the same issues.
Hence, a certification signed by counsel alone is defective and
constitutes a valid cause for dismissal of the petition.[4]

In this case, the petition for review was filed by Santiago
Eslaban, Jr., in his capacity as Project Manager of the NIA.
However, the verification and certification against forum-
shopping were signed by Cesar E. Gonzales, the administrator
of the agency. The real party-in-interest is the NIA, which is a
body corporate. Without being duly authorized by resolution
of the board of the corporation, neither Santiago Eslaban, Jr.
nor Cesar E. Gonzales could sign the certificate against forum-
shopping accompanying the petition for review. Hence, on
this ground alone, the petition should be dismissed.

Second. Coming to the merits of the case, the land under
litigation, as already stated, is covered by a transfer certificate
of title registered in the Registry Office of Koronadal, South
Cotabato on May 13, 1976. This land was originally covered
by Original Certificate of Title No. (P-25592) P-9800 which was
issued pursuant to a homestead patent granted on February
18, 1960. We have held:

Whenever public lands are alienated, granted or conveyed to
applicants thereof, and the deed grant or instrument of
conveyance [sales patent] registered with the Register of
Deeds and the corresponding certificate and owners
duplicate of title issued, such lands are deemed registered
lands under the Torrens System and the certificate of title
thus issued is as conclusive and indefeasible as any other
certificate of title issued to private lands in ordinary or
cadastral registration proceedings.[5]

The Solicitor-General contends, however, that an
encumbrance is imposed on the land in question in view of
39 of the Land Registration Act (now P.D. No. 1529, 44)
which provides:

Every person receiving a certificate of title in pursuance of a
decree of registration, and every subsequent purchaser of
registered land who takes a certificate of title for value in
good faith shall hold the same free from all encumbrances
except those noted on said certificate, and any of the
following encumbrances which may be subsisting, namely:

. . . .

Third. Any public highway, way, private way established by
law, or any government irrigation canal or lateral thereof,
where the certificate of title does not state that the
boundaries of such highway, way, irrigation canal or lateral
thereof, have been determined.

As this provision says, however, the only servitude which a
private property owner is required to recognize in favor of the
government is the easement of a public highway, way,
private way established by law, or any government canal or
lateral thereof where the certificate of title does not state
that the boundaries thereof have been pre-determined. This
implies that the same should have been pre-existing at the
time of the registration of the land in order that the
registered owner may be compelled to respect it. Conversely,
where the easement is not pre-existing and is sought to be
imposed only after the land has been registered under the
Land Registration Act, proper expropriation proceedings
should be had, and just compensation paid to the registered
owner thereof.[6]

In this case, the irrigation canal constructed by the NIA on the
contested property was built only on October 6, 1981, several
years after the property had been registered on May 13,
1976. Accordingly, prior expropriation proceedings should
have been filed and just compensation paid to the owner
thereof before it could be taken for public use.

Indeed, the rule is that where private property is needed for
conversion to some public use, the first thing obviously that
the government should do is to offer to buy it.[7] If the owner
is willing to sell and the parties can agree on the price and the
other conditions of the sale, a voluntary transaction can then
be concluded and the transfer effected without the necessity
of a judicial action. Otherwise, the government will use its
power of eminent domain, subject to the payment of just
compensation, to acquire private property in order to devote
it to public use.

Third. With respect to the compensation which the owner of
the condemned property is entitled to receive, it is likewise
settled that it is the market value which should be paid 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.*8+ Further, just compensation means not only the
correct amount to be paid to the owner 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 for then the property owner is made to
suffer the consequence 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.[9] Nevertheless, as noted in Ansaldo v. Tantuico, Jr.,[10]
there are instances where the expropriating agency takes
over the property prior to the expropriation suit, in which
case just compensation shall be determined as of the time of
taking, not as of the time of filing of the action of eminent
domain.

Before its amendment in 1997, Rule 67, 4 provided:

Order of condemnation. When such a motion is overruled or
when any party fails to defend as required by this rule, the
court may enter an order 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. . . .

It is now provided that-

SEC. 4. Order of expropriation. If the objections to and the
defense 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. (Emphasis
added)

Thus, the value of the property must be determined either as
of the date of the taking of the property or the filing of the
complaint, whichever came first. Even before the new rule,
however, it was already held in Commissioner of Public
Highways v. Burgos[11] that the price of the land at the time
of taking, not its value after the passage of time, represents
the true value to be paid as just compensation. It was,
therefore, error for the Court of Appeals to rule that the just
compensation to be paid to respondent should be determined
as of the filing of the complaint in 1990, and not the time of
its taking by the NIA in 1981, because petitioner was allegedly
remiss in its obligation to pay respondent, and it was
respondent who filed the complaint. In the case of
Burgos,[12] it was also the property owner who brought the
action for compensation against the government after 25
years since the taking of his property for the construction of a
road.

Indeed, the value of the land may be affected by many
factors. It may be enhanced on account of its taking for public
use, just as it may depreciate. As observed in Republic v.
Lara:[13]

[W]here property is taken ahead of the filing of the
condemnation proceedings, the value thereof may be
enhanced by the public purpose for which it is taken; the
entry by the plaintiff upon the property may have
depreciated its value thereby; or there may have been a
natural increase in the value of the property from the time it
is taken to the time the complaint is filed, due to general
economic conditions. The owner of private property should
be compensated only for what he actually loses; it is not
intended that his compensation shall extend beyond his loss
or injury. And what he loses is only the actual value of his
property at the time it is taken. This is the only way that
compensation to be paid can be truly just, i.e., just not only
to the individual whose property is taken, but to the public,
which is to pay for it . . . .

In this case, the proper valuation for the property in question
is P16,047.61 per hectare, the price level for 1982, based on
the appraisal report submitted by the commission (composed
of the provincial treasurer, assessor, and auditor of South
Cotabato) constituted by the trial court to make an
assessment of the expropriated land and fix the price thereof
on a per hectare basis.[14]

Fourth. Petitioner finally contends that it is exempt from
paying any amount to respondent because the latter
executed an Affidavit of Waiver of Rights and Fees of any
compensation due in favor of the Municipal Treasurer of
Barangay Sto. Nio, South Cotabato. However, as the Court
of Appeals correctly held:

[I]f NIA intended to bind the appellee to said affidavit, it
would not even have bothered to give her any amount for
damages caused on the improvements/crops within the
appellees property. This, apparently was not the case, as can
be gleaned from the disbursement voucher in the amount of
P4,180.00 (page 10 of the Folder of Exhibits in Civil Case 396)
issued on September 17, 1983 in favor of the appellee, and
the letter from the Office of the Solicitor General
recommending the giving of financial assistance in the
amount of P35,000.00 to the appellee.

Thus, We are inclined to give more credence to the appellees
explanation that the waiver of rights and fees pertains only
to improvements and crops and not to the value of the land
utilized by NIA for its main canal.*15+

WHEREFORE, premises considered, the assailed decision of
the Court of Appeals is hereby AFFIRMED with MODIFICATION
to the extent that the just compensation for the contested
property be paid to respondent in the amount of P16,047.61
per hectare, with interest at the legal rate of six percent (6%)
per annum from the time of taking until full payment is made.
Costs against petitioner.

SO ORDERED.

Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr.,
JJ., concur.

[1] Per Justice Ramon Mabutas, Jr. and concurred in by Justice
Roberto A. Barrios and Eriberto U. Rosario, Jr.

[2] CA Decision, pp. 1-2; Rollo, pp. 25-26.

[3] RTC Decision, p. 5; id., p. 24.

[4] Far Eastern Shipping Co. v. Court of Appeals, 297 SCRA 30
(1998).

[5] Heirs of Deogracias Ramos v. Court of Appeals, 139 SCRA
295, 299 (1985); See also Samonte v. Sambilon, 107 Phil 198
(1960); El Hogar Filipino v. Olvigas, 60 Phil. 17 (1934); Manalo
v. Lukban, 48 Phil. 973 (1924).

[6] Heirs of Malfore v. Director of Forestry, 109 Phil. 586
(1960).

[7] Noble v. City of Manila, 67 Phil. 1 (1938).

[8] See Manila Railroad Company v. Caligsihan, 40 Phil. 326
(1919); City of Manila v. Estrada, 25 Phil. 208 (1913).

[9] Cosculluela v. Court of Appeals, 164 SCRA 393 (1988).

[10] 188 SCRA 300, 303-304 (1990).

[11] 96 SCRA 831 (1980).

[12] Id.

[13] 96 Phil. 170, 177-178 (1954) citing 18 Am. Jur. 873, 874.

[14] RTC Decision, p. 4; Rollo, p. 23.

[15] CA Decision, p. 9; id., p. 33.




Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 170740 May 25, 2007

JULITA P. TAN, Petitioner,
vs.
THE REPUBLIC OF THE PHILIPPINES, Represented by the
PUBLIC ESTATES AUTHORITY, Respondent.

D E C I S I O N

SANDOVAL-GUTIERREZ, J.:

For our resolution is the Petition for Review on Certiorari
assailing the Decision1 of the Court of Appeals (Thirteenth
Division, Special Division of Five) dated July 6, 2005 in CA-G.R.
SP No. 84667.

The undisputed facts of the case are:

Julita P. Tan, petitioner herein, is the registered owner of a
parcel of land consisting of 7,161 square meters located at the
southern bank of the Zapote River in Sitio Wawa, Pulang
Lupa, Las Pias City. Her ownership is evidenced by Transfer
Certificate of Title (TCT) No. 78188 of the Registry of Deeds,
same city. She acquired this property from the San Antonio
Development Corporation (SADC) as shown by a document
denominated "Irrevocable and Exclusive Special Power of
Attorney" dated April 6, 2001, whereby she assumed SADCs
"obligation of paying all imposable taxes due said land." In
consideration of such assumption and "for value" she
"stepped into the shoes" of SADC "free to exercise such rights
and prerogatives as owner of the subject property, including
the right to collect and demand payment for the sale and/or
use of the subject land or any portion thereof, by and from
any person or entity."

The Public Estates Authority (PEA) is a government-owned
and controlled corporation, organized and existing pursuant
to Presidential Decree (P.D.) No. 1084 representing in this
case the Republic of the Philippines, herein respondent.
Among the properties PEA manages is the Manila-Cavite
Coastal Road (Coastal Road), also known as the R-1
Expressway.

Prior to the transfer of the property to petitioner by SADC,
or on March 29, 1985, PEA wrote SADC requesting permission
to enter the latters property, then covered by TCT No.
439101, for the purpose of constructing thereon the southern
abutment of the Zapote Bridge at the Coastal Road. PEA also
proposed to SADC to start their negotiation for its acquisition
of the latters property.

On April 11, 1985, SADC replied authorizing PEA to enter
the property, subject to the condition that the latter should
pay a monthly rental of P10,000.00. PEA then directed its
contractor, the Philippine National Construction Corporation,
to enter the property and begin the necessary engineering
works on the Coastal Road.

In a letter dated May 28, 1985, PEA requested SADC either
to donate or sell the property to the government.

On October 22, 1985, SADC replied by offering to sell the
property to PEA. SADCs asking price was P1,288,980.00 plus
P400,000.00 as compensation for the house and other
improvements thereon that were destroyed during the
construction of the Coastal Road.

On January 7, 1987, PEA informed SADC it has no plan to
buy the whole lot, but only the 1,131 square meter portion
above sea level. PEA then asked SADC to submit proofs of
ownership and costs of the improvements which were
demolished.

Negotiations then ensued between the parties. However,
for the past twenty (20) years, they failed to reach an
agreement.

On October 2, 2000, SADC asked PEA to pay compensation
equivalent to the current zonal value plus interest of ten
percent (10%) per annum and a monthly rental of P10,000.00,
also with the same interest. These sums, according to SADC,
could be considered just compensation for the governments
use of the property since 1985 until September 2000 and
thereafter.

The following month, PEA inquired from the Bureau of
Internal Revenue (BIR) District 53, Alabang, Muntinlupa City
the zonal value of the SADC property. It submitted to the BIR
the appraisal reports prepared by two (2) independent
licensed appraisers.

On April 6, 2001, petitioner Julita Tan acquired the property
from SADC.1a\^/phi1.net

On July 12, 2001, the BIR sent a letter to PEA stating that
the zonal value of the property is P2,900.00 per square meter,
with the caveat that the said assessment is subject to review
and approval by higher tax authorities.

On October 9, 2001, the BIR informed PEA that the current
zonal value of the property is P20,000.00 per square meter.

In the meantime, the construction of the Coastal Road was
completed. PEA entered into a Joint Venture Agreement with
the Toll Regulatory Board and the UEM-MARA Philippine
Corporation for the toll operation of the Coastal Road, as
shown by the Certificate of the Secretary of the Toll
Regulatory Board dated May 13, 2003.2

PEA has been collecting toll fees from the road users in the
average amount of P1,039,404.85 per day, as shown by a
document denominated "Traffic Count of the Year 2002.3
Despite its collection of huge toll fees, PEA continuously
refuses to pay petitioner any compensation.

On October 22, 2001, petitioner, in her desperation, wrote
PEA expressing her willingness to be compensated through a
land swapping arrangement. She proposed that PEAs
Fishermans Wharf be given to her in exchange for her
property.

On August 6, 2002, the PEA Board approved the exchange
of a portion of petitioners lot consisting of 4,719 square
meters for PEAs Lot 12 with an area of 2,360 square meters.
The parties entered into a Memorandum of Agreement
wherein PEA agreed to execute a Deed of Exchange by way of
compensation for petitioners property affected by the
Coastal Road.

However, on June 18, 2003, PEA withdrew from the land
swapping agreement.1a\^/phi1.net Instead, on September
22, 2003, it filed with the Regional Trial Court (RTC), Branch
202, Las Pias City a complaint for expropriation, docketed as
Civil Case No. 03-0220. PEA alleged therein, among others,
that its liability for just compensation is based on the zonal
value of the land at the time of the taking in 1985. Thus, it is
liable for only P852,993.51 for the 4,719 square meter
portion. In her answer, petitioner claimed that PEA should
pay for the whole area consisting of 7,161 square meters at
P20,000.00 per square meter, the zonal value set by the BIR
pursuant to Republic Act No. 8974.4 She then prayed that she
be paid P143,200,000.00 plus interest of twelve percent (12%)
per annum, aside from the P10,000.00 monthly rental with
12% interest per annum for the occupancy and use of the
property since April 1985 up to the present.

On October 20, 2003, petitioner filed with the RTC a motion
to order PEA to immediately pay her just compensation based
on the zonal valuation of the BIR. This was opposed by PEA.

On December 16, 2003, the trial court issued the following
Order5:

WHEREFORE, finding merit to the "Motion To Order the
Plaintiff to Immediately Pay Defendant Her Expropriated
Property," dated October 20, 2003, the same is hereby
GRANTED. Accordingly, plaintiff, through PEA, is hereby
ordered to immediately pay defendant the sum of
P94,380,000.00 (ninety-four million, three hundred eighty
thousand pesos) representing the just compensation for the
4,719 square meters of defendants property covered by TCT
No. 78188 of the Registry of Deeds of Las Pias based on
P20,000.00 per square meter zonal valuation of the Bureau of
Internal Revenue.

SO ORDERED.

PEA timely filed a motion for reconsideration but it was
denied by the trial court in its Order6 dated April 14, 2004.

PEA then elevated the matter to the Court of Appeals by
way of a petition for certiorari, prohibition, and mandamus.

On July 6, 2005, the Court of Appeals rendered its Decision,
the dispositive portion of which reads:

WHEREFORE, the instant petition for certiorari and
prohibition is hereby GRANTED while that of mandamus is
hereby DENIED (sic). Accordingly, the assailed Orders, dated
December 16, 2003 and April 14, 2004, are hereby REVERSED
and SET ASIDE. Public respondent is hereby ordered to DESIST
from enforcing the assailed Orders.

SO ORDERED.

Petitioner filed a motion for reconsideration. In a
Resolution dated December 12, 2005, the Court of Appeals
denied the same.

Hence, the present petition anchored on these twin issues:
Whether the Court of Appeals erred in sustaining PEAs
petition for certiorari and prohibition and in dismissing that
for mandamus; and in holding that the just compensation for
petitioners property should be based on the BIR zonal
valuation in 1985 when petitioner entered the subject
property.1awphi1.nt

The first issue involves the nature of the two Orders of the
trial court dated December 16, 2003 and April 14, 2004. The
Order of December 16, 2003 directed PEA to pay petitioner
just compensation in the sum of P94,380,000.00. The Order of
April 14, 2004 denied PEAs motion for reconsideration. Are
these orders final or interlocutory?

Sec. 1, Rule 41 of the 1997 Rules of Civil Procedure, as
amended, partly provides:

SEC. 1. Subject of appeal. An appeal may be taken from a
judgment or final order that completely disposes of the case,
or of a particular matter therein when declared by these
Rules to be appealable.

No appeal may be taken from:

x x x

(c) an interlocutory order.

x x x

A final order is one that disposes of the subject matter in its
entirety or terminates a particular proceeding or action,
leaving nothing else to be done but to enforce by execution
what has been determined by the court, while an
interlocutory order is one which does not dispose of the case
completely but leaves something to be decided upon.7

Under Rule 67 of the same Rules, there are two (2) stages in
a condemnation proceeding:8

(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.9 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 court on the merits.10 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.11

(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 this issue. A second and separate appeal may be
taken from this order fixing the just compensation.

The trial courts Orders in Civil Case No. 03-0220 required
PEA to pay petitioner P94,380,000.00 representing the just
compensation for her 4,719 square meter lot based on the BIR
zonal valuation of P20,000.00 per square meter. Clearly, the
Orders are final, hence, appealable. However, instead of
appealing from the said Orders within the reglementary
period, PEA resorted to certiorari, prohibition and mandamus.
It is basic that the remedy of certiorari is not a substitute for a
lost appeal, as in this case.

On the second issue, Section 9, Article III of the Constitution
specifically mandates that "Private property shall not be
taken for public use without just compensation."

In City of Manila v. Estrada,12 we held that "compensation"
means "an equivalent for the value of land (property) taken."
The use of the word "just" is "to convey the idea that the
equivalent to be rendered for the property taken shall be real,
substantial, full, ample." Thus, Estrada defined just
compensation as "a fair and full equivalent for the loss
sustained." This definition has been reiterated in Manila
Railroad Co. v. Velasquez[13] and Province of Tayabas v.
Perez.14 Then in Manila Railroad Co. v. Caligsahan,15 we held
that "to be exactly just, the compensation should be
estimated at the time of the taking." Subsequently, in
Republic v. Vda. de Castellvi,16 we ruled that just
compensation is determined as of the date of the taking of
the property or the filing of the complaint, whichever came
first.

The Court of Appeals, in its challenged Decision, held that
PEAs taking of petitioners property occurred in 1985. Even if
PEA requested permission to enter the subject property and
petitioner granted such request on condition that PEA should
pay a monthly rental of P10,000.00, "it does not change the
fact that there was taking of the property for public use."
Consequently, the compensation should be computed on the
basis of the zonal value of the property at that time (1985)
which was P2,900.00 per square meter per letter dated July
12, 2001 of the BIR to PEA.

The Court of Appeals is wrong. PEAs entry into the
property with the permission of SADC, its previous owner,
was not for the purpose of expropriating the property.
Records show and as stressed by Mr. Justice Renato C.
Dacudao of the Court of Appeals in his Dissenting Opinion,
SADC allowed PEA to enter the land on condition that it
should pay a monthly rental of P10,000.00. Thereafter, PEA, in
a letter dated May 28, 1985, requested SADC to donate or sell
the land to the government. On October 22, 1985, SADC
responded, offering to sell the land to PEA for P1,288,980.00,
plus P400,000.00 representing the value of the improvements
destroyed by PEA when it entered the property. However,
since 1985 up to the present, no agreement has been reached
between PEA and SADC or herein petitioner who acquired the
property from the latter.

While PEA has been earning huge toll fees, it has refused to
pay petitioner any compensation for the use of her property
in violation of her right as an owner.

The above circumstances clearly show that when PEA
entered petitioners land in 1985, it was not for the purpose
of expropriating it. We stress that after its entry, PEA wrote
SADC requesting to donate or sell the land to the
government. Indeed, there was no intention on the part of
PEA to expropriate the subject property. Why did it ask
permission from SADC to enter the property? Thereafter, why
did it request SADC to donate or sell the land to the
government? It could have simply exercised its power of
eminent domain.

Section 2, Rule 67 (on Expropriation) of the same Rules
provides, among others, that 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. It
bears reiterating that in Republic v. Vda. de Castellvi,17 we
ruled that just compensation is determined as of the date of
the taking of the property or the filing of the complaint,
whichever came first.

We have made it clear that there was no taking of the
property in 1985 by PEA for purposes of expropriation. As
shown by the records, PEA filed with the RTC its petition for
expropriation on September 22, 2003. The trial court,
therefore, was correct in ordering respondent, through PEA,
upon the filing of its complaint for expropriation, to pay
petitioner just compensation on the basis of the BIR zonal
valuation of the subject property at P20,000.00 per square
meter.

In sum, we rule that the Court of Appeals erred (1) in not
dismissing PEAs petition for certiorari, prohibition and
mandamus; and (2) in ruling that PEAs taking of the property
occurred in 1985 and that the compensation should be based
on the BIR zonal valuation in that year.

WHEREFORE, the assailed Decision of the Court of Appeals
dated July 6, 2005, in CA-G.R. SP No. 84667 is REVERSED. The
Decision of the RTC, Branch 202, Las Pias City is AFFIRMED.

SO ORDERED.

ANGELINA SANDOVAL-GUTIERREZ
Associate Justice

WE CONCUR:

REYNATO S. PUNO
Chief Justice
Chairperson
(On leave)
RENATO C. CORONA
Associate Justice
ADOLFO S. AZCUNA
Asscociate Justice

CANCIO C. GARCIA
Associate Justice

C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, it is
hereby certified that the conclusions in the above Decision
were reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.

REYNATO S. PUNO
Chief Justice

Footnotes

1 Rollo, pp. 63-87. Penned by Associate Justice Edgardo F.
Sundiam with Associate Justice Arturo D. Brion and Associate
Justice Celia C. Librea-Leagogo, concurring; and Associate
Justice Renato C. Dacudao and Associate Justice Japar B.
Dimaampao, dissenting.

2 Annex "O" of the petition, Rollo, pp. 120-124.

3 Annex "P", id., p. 125.

4 Entitled "An Act To Facilitate The Acquisition of Right-Of-
Way, Site Of Location For National Government Infrastructure
Projects And For Other Purposes." It was signed into law on
November 7, 2000.

5 Rollo, pp. 196-198.

6 Id., pp. 319-322.S

7 Valenzuela v. Court of Appeals, G.R. No. 149449, February
20, 2006, 482 SCRA 637, citing Rizal Commercial Banking Corp.
v. Magwin Marketing Corp., 402 SCRA 592 (2003).

8 As held in Municipality of Bian v. Garcia, G.R. No. 69260,
December 22, 1989, 180 SCRA 576; National Power Corp. v.
Jocson, G.R. Nos. 94193-99, February 25, 1992, 206 SCRA 520.

9 See also National Housing Authority v. Heirs of Isidro
Guivelendo, G.R. No. 154111, June 19, 2003, 404 SCRA 389;
Estate of Salud Jimenez v. Philippine Export Processing Zone,
G.R. No. 137285, January 16, 2001, 349 SCRA 240.

10 See also Investments, Inc. v. Court of Appeals, G.R. No.
60036, January 27, 1987, 147 SCRA 334, 339-341.

11 Sec. 4, Rule 67, 1997 Rules of Civil Procedure, as
amended. See also par. 19 (1) Interim Rules of the Supreme
Court dated January 11, 1987 in relation to Sec. 39, Judiciary
Reorganization Act of 1981 (BP Blg. 129); Heirs of Alberto
Suguitan v. City of Mandaluyong, 384 Phil. 578 (2000).

12 25 Phil. 208 (1913).

13 32 Phil. 286 (1915).

14 66 Phil. 467 (1938).

15 40 Phil. 326 (1919). See also Republic v. Lara, 96 Phil. 170
(1954), J.M. Tuason & Co. Inc. v. Land Tenure Administration,
G.R. No. 21064, February 18, 1970, 31 SCRA 413; National
Power Corp. v. Chiong, G.R. No. 152436, June 20, 2003, 404
SCRA 527.


16 G.R. No. 20620, August 15, 1974, 58 SCRA 336.

17 Supra, footnote 16.

The Lawphil Project - Arellano Law Foundation






SECOND DIVISION



HEIRS OF MATEO PIDACAN AND ROMANA EIGO, namely:
PACITA PIDACAN VDA. DE ZUBIRI (deceased), survived by
JOSE BELLO BATINA, VICKY BELLO BATINA, ROBERTO BELLO
BATINA, VILMA BELLO BATINA, and FRANCISCO N. BATINA;
and ADELA PIDACAN VDA. DE ROBLES,

Petitioners,

G.R. No. 162779



Present:



QUISUMBING, J., Chairperson,

CARPIO,

CARPIO MORALES,*

TINGA, and

VELASCO, JR., JJ.



- versus -








AIR TRANSPORTATION OFFICE (ATO), represented by its
Acting Director BIENVENIDO MANGA,

Respondent.


Promulgated:



June 15, 2007

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
- - -x


DECISION



QUISUMBING, J.:

For review on certiorari are the Decision[1] dated August 20,
2003 and the Resolution dated March 17, 2004 of the Court of
Appeals in CA-G.R. CV No. 72404, which reversed the
Decision[2] dated February 1, 2001 of the Regional Trial Court
(RTC) of San Jose, Occidental Mindoro, Branch 46 in Civil Case
No. R-800.

The facts, summarized by the Court of Appeals and borne by
the records, are as follows:

Sometime in 1935, spouses Mateo Pidacan and Romana Eigo
acquired under the homestead provision of Act No. 2874[3] a
parcel of land consisting of about 22 hectares situated in San
Jose, Occidental Mindoro. Patent No. 33883 and Original
Certificate of Title (OCT) No. 2204 were issued on the land, in
the names of the Pidacan spouses.

In 1948, the Civil Aeronautics Administration (now Air
Transportation Office or ATO) used a portion of the said
property as an airport. Upon the death of the Pidacan spouses
in 1974, the ATO constructed a perimeter fence and a new
terminal building on the property. The ATO also lengthened,
widened, and cemented the airports runway.

The spouses heirs namely, Pacita Pidacan Vda. de Zubiri and
Adela Pidacan Vda. de Robles demanded from ATO the
payment of the value of the property as well as rentals for the
use of the occupied premises. However, they were told that
payment could not be made because the property was still in
their parents name.

With the loss of the owners copy of OCT No. 2204, Pacita
Pidacan Vda. de Zubiri filed a petition for the issuance of
another owners duplicate. The heirs then executed an
extrajudicial settlement adjudicating the property among
themselves.

On February 23, 1988, OCT No. 2204 was cancelled and
Transfer Certificate of Title (TCT) No. T-7160 was issued in
favor of the heirs. The heirs presented TCT No. T-7160 and the
death certificates of their parents to the ATO, but the latter
still refused to pay them.

The heirs claimed that they were entitled to payment of
rentals plus the value of the property. The ATO countered
that the heirs were not entitled to any payment, either of the
value of the land or of the rentals because the property had
been sold to its predecessor, the defunct Civil Aeronautics
Administration for P0.70 per square meter. The ATO claimed
that even if it failed to obtain title in its name, it had been
declaring the property for taxation purposes.

The heirs subsequently filed with the RTC a complaint[4]
against the ATO for payment of the value of the property as
well as rentals for its use and occupation. The ATO, in turn,
filed a complaint for expropriation, which was dismissed on
the ground that it would be absurd for the ATO to expropriate
a parcel of land it considered its own.

Pacita Pidacan Vda. de Zubiri was substituted by her surviving
son, Tomas Batina, who in turn was later substituted by his
heirs namely, Jose Bello Batina, Vicky Bello Batina, Roberto
Bello Batina, and Vilma Bello Batina. Francisco N. Batina, an
alleged son of Tomas Batina, intervened in the proceedings.

On September 12, 1994, the trial court promulgated a
Decision[5] ordering the ATO to pay rentals and the value of
the land at P89 per square meter. The ATO appealed to the
Court of Appeals on the ground that the trial court erred in
fixing the value of the property on the basis of its present
value.

The Court of Appeals rendered a Decision[6] setting aside the
RTC Decision and remanded the case to the court a quo for
further proceedings. The appellate court also ruled that just
compensation should be determined as of the time the
property was taken for public use.

After trial upon remand of the case to the court of origin,
judgment was rendered anew as follows:

WHEREFORE, in view of all the foregoing, judgment is hereby
rendered:

1. Expropriating the actual area occupied by the defendant
Air Transportation Office of the plaintiffs property covered by
Transfer Certificate of Title No. T-7160, totaling Two Hundred
Fifteen Thousand Seven Hundred Thirty Seven (215,737)
square meters, in favor of defendant;

2. Ordering defendant Air Transportation Office to pay
plaintiffs the amount of Three Hundred Four ((P304.00) Pesos
per square meter for the area herein expropriated which
totals to Sixty Five Million Five Hundred Eight (sic) Four
Thousand Forty Eight (P65,584,048.00) Pesos with interest
thereon at the rate of 12% per annum from February 1, 2001,
until the same is fully paid.

3. Ordering defendant Air Transportation Office to pay
plaintiffs monthly rentals for the use and occupation of the
subject property cited in item No. 1 above, computed as
follows:

a) Three Thousand Fifty Eight Pesos and Forty Centavos
(P3,058.40) from 1957 to 1977;

b) Four Thousand Twenty Two Pesos and Sixty five
Centavos (P4,022.60) from 1978 to 1979;

c) Six Thousand Thirty Four Pesos and Fifty Centavos
(P6,034.50) from 1980 to 1984;

d) Nine Thousand Six Hundred Ninety Nine Pesos and Sixty
Centavos (P9,699.60) from 1985 to 1991;

e) Seventeen Thousand Nine Hundred thirteen Pesos and
Sixty Centavos (P17,913.60) from 1992 to 1994;

f) Thirty Seven Thousand One Hundred Eighty One Pesos
and Eighty Centavos (P37,181.80) from 1995 to 1997;

g) Fifty Four Thousand Six Hundred Fifty Eight Pesos and
Sixty Centavos (P54,658.60) from 1998 to January 31, 2001;

or a total monthly rentals, from January 1, 1957 to January
31, 2001, of Six Million Two hundred Forty Nine Thousand Six
Hundred Forty Five Pesos and Forty Centavos (P6,249,645.40)
with interest thereon at the rate of 12% per annum, until the
same is fully paid;

4. Ordering defendant Air Transportation Office to pay
plaintiffs ten (10%) per cent of the amount involved as and for
attorneys fees and expenses of litigation; and

5. Ordering defendant Air Transportation Office to pay the
costs of suit.

SO ORDERED.[7]

The ATO once again appealed to the Court of Appeals, which
in its assailed Decision reversed the trial courts ruling, thus:

WHEREFORE, premises considered, the assailed Decision
dated February 1, 2001 of the Regional Trial Court of San Jose,
Occidental Mindoro in Civil Case No. R-800 is hereby
REVERSED AND SET ASIDE and a new one entered remanding
the instant case to the court a quo for the determination of
just compensation on the basis of the market value prevailing
in 1948. No pronouncement as to costs.

SO ORDERED.[8]

The heirs moved for reconsideration but it was denied.
Aggrieved, the heirs filed the instant petition alleging that:

I

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
ERROR AND ABUSE OF DISCRETION BY DISREGARDING THE
LAW, JURISPRUDENCE AND EVIDENCE IN REVERSING THE
TRIAL COURTS DECISION AND RULING THAT THERE WAS
TAKING OF THE SUBJECT PROPERTY IN 1948*;+

II

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
ERROR AND ABUSE OF DISCRETION BY DISREGARDING THE
LAW, JURISPRUDENCE AND EVIDENCE IN RULING THAT THE
REMAND OF THE CASE TO THE LOWER COURT WAS ONLY FOR
THE PURPOSE OF ASCERTAINING THE TIME OF TAKING OF
THE SUBJECT PROPERTY[;]

III

THE HONORABLE COURT OF APPEALS COMMITTED GRAVE
ERROR AND ABUSE OF DISCRETION BY DISREGARDING THE
LAW, JURISPRUDENCE AND EVIDENCE IN REVERSING THE
DECISION OF THE LOWER COURT WHICH ORDERED THE
PAYMENT OF UNPAID RENTALS FROM 1957 TO 2001[.][9]

Petitioners contend the reckoning point for taking cannot be
1948 as the elements necessary to constitute taking were not
present at that time. They also point out that the ATOs
complaint for expropriation filed in 1993 is inconsistent with
its claim that it had already bought the property in 1959 or
that there was already taking in 1948. Petitioners further
allege that the ATO is estopped from questioning the
valuation of the property at P304 per square meter because it
was the ATO that actually recommended the said amount.
Finally, petitioners insist that the Pidacan spouses merely
leased the property to the ATO.

Respondent ATO, on the other hand, counters that the fact of
taking has been definitely established by the Court of Appeals
and implicitly admitted by petitioners. The ATO stresses that
for the purpose of fixing just compensation, the only issue is
the time of taking, which it maintains was in 1948 when an
airport was constructed on the property. Lastly, the ATO calls
our attention to the alleged absence of any competent
evidence proving the existence of a contract of lease between
the parties.

Simply put, the issues for resolution are: (1) whether there
was taking of the subject property; (2) the time when the
taking took place; and (3) the appropriate value of just
compensation.

On the first issue, we are unable to consider the parties bare
allegation that there was a contract of lease or a contract of
sale between the ATO and the Pidacan spouses, for lack of
competent evidence adduced to prove either claim. On the
contrary, preponderance of evidence on record strongly
indicates that the ATOs conversion of the property into an
airport in 1948 comes within the purview of eminent domain.

Eminent domain or expropriation is the inherent right of the
state to condemn private property to public use upon
payment of just compensation.[10] A number of
circumstances must be present in the taking of property for
purposes of eminent domain: (1) the expropriator must enter
a private property; (2) the entrance into private property
must be for more than a momentary period; (3) the entry into
the property should be under warrant or color of legal
authority; (4) the property must be devoted to a public use or
otherwise informally appropriated or injuriously affected; and
(5) the utilization of the property for public use must be in
such a way as to oust the owner and deprive him of all
beneficial enjoyment of the property.[11]

When private property is rendered uninhabitable by an entity
with the power to exercise eminent domain, the taking is
deemed complete.[12] Taking occurs not only when the
government actually deprives or dispossesses the property
owner of his property or of its ordinary use, but also when
there is a practical destruction or material impairment of the
value of his property.[13]

In this case, it is undisputed that petitioners private property
was converted into an airport by respondent ATO. As a
consequence, petitioners were completely deprived of
beneficial use and enjoyment of their property. Clearly, there
was taking in the concept of expropriation as early as 1948
when the airport was constructed on petitioners private
land.

As a rule, the determination of just compensation in eminent
domain cases is reckoned from the time of taking.[14] In this
case, however, application of the said rule would lead to
grave injustice. Note that the ATO had been using petitioners
property as airport since 1948 without having instituted the
proper expropriation proceedings. To peg the value of the
property at the time of taking in 1948, despite the
exponential increase in its value considering the lapse of over
half a century, would be iniquitous. We cannot allow the ATO
to conveniently invoke the right of eminent domain to take
advantage of the ridiculously low value of the property at the
time of taking that it arbitrarily chooses to the prejudice of
petitioners.

In this particular case, justice and fairness dictate that the
appropriate reckoning point for the valuation of petitioners
property is when the trial court made its order of
expropriation in 2001. As for the fair value of the subject
property, we believe that the amount arrived at by the
commissioners appointed by the trial court, P304.39 per
square meter, constitutes just compensation to
petitioners.[15]

However, the trial courts award of rental payments to
petitioners is not supported by evidence on record and must
be deleted. To justify such award, the purported contract of
lease must first be proven by competent evidence. The
letter[16] of one Director Nabor C. Gaviola of the Department
of Transportation and Communications endorsing the appeal
of a certain Herminia R. Parales for the immediate payment of
rentals is plain hearsay and does little to prove the existence
of a contract of lease between the parties.

Lastly, the interest accruing fixed by the trial court at the rate
of 12% per annum is not consistent with law and should be
reduced to the legal interest rate of 6% per annum.[17]

WHEREFORE, the petition is GRANTED. The assailed Decision
dated August 20, 2003 and the Resolution dated March 17,
2004 of the Court of Appeals in CA-G.R. CV No. 72404 are SET
ASIDE. The Decision dated February 1, 2001 of the Regional
Trial Court of San Jose, Occidental Mindoro, Branch 46 in Civil
Case No. R-800 is AFFIRMED with MODIFICATION, as follows:

1. The actual area occupied by respondent ATO covered by
Transfer Certificate of Title No. T-7160, totaling 215,737
square meters is declared expropriated in favor of the ATO.

2. The ATO is ordered to pay petitioners the amount of
P304.39 per square meter for the area expropriated, or a total
of P65,668,185.43 with interest at the rate of 6% per annum
from February 1, 2001, until the same is fully paid.

No pronouncement as to costs.

SO ORDERED.










LEONARDO A. QUISUMBING

Associate Justice





WE CONCUR:









ANTONIO T. CARPIO

Associate Justice

(On official leave)

CONCHITA CARPIO MORALES

Associate Justice


DANTE O. TINGA

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice





A T T E S T A T I O N



I attest 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 Courts Division.












LEONARDO A. QUISUMBING

Associate Justice

Chairperson





C E R T I F I C A T I O N



Pursuant to Section 13, Article VIII of the Constitution,
and the Division Chairpersons Attestation, 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 Courts Division.












REYNATO S. PUNO

Chief Justice



Bigo in some parts of the records.

* On official leave.

[1] Rollo, pp. 36-52. Penned by Associate Justice Mercedes
Gozo-Dadole, with Associate Justices Delilah Vidallon-
Magtolis and Rosmari D. Carandang concurring.

[2] CA rollo, pp. 67-80. Penned by Executive Judge Ernesto
P. Pagayatan.

*3+ Otherwise known as The Public Land Act.

[4] Records, Vol. I, pp. 1-7.

[5] Records, Vol. II, pp. 368-374.

[6] Id. at 455-463.

[7] CA rollo, pp. 79-80.

[8] Rollo, pp. 51-52.

[9] Id. at 176.

[10] Robern Development Corporation v. Quitain, G.R. No.
135042, September 23, 1999, 315 SCRA 150, 165.

[11] National Power Corporation v. Court of Appeals, G.R.
No. 113194, March 11, 1996, 254 SCRA 577, 590.

[12] National Power Corporation v. Court of Appeals, G.R.
No. 106804, August 12, 2004, 436 SCRA 195, 209, citing United
States v. Causby, 328 U.S. 256 (1946).

[13] Republic v. Court of Appeals, G.R. No. 147245, March
31, 2005, 454 SCRA 516, 536.

[14] Gabatin v. Land Bank of the Philippines, G.R. No.
148223, November 25, 2004, 444 SCRA 176, 190.

[15] Records, Vol. II, p. 608.

[16] Records, Vol. I, p. 335.

[17] Civil Code. ART. 2209. If the obligation consists in the
payment of a sum of money, and the debtor incurs in delay,
the indemnity for damages, there being no stipulation to the
contrary, shall be the payment of the interest agreed upon,
and in the absence of stipulation, the legal interest, which is
six per cent per annum.


2. Form of payment



THIRD DIVISION

[G.R. No. 137431. September 7, 2000]

EDGARDO SANTOS, represented by his attorney-in-fact
ROMEO L. SANTOS, petitioner, vs. LAND BANK OF THE
PHILIPPINES, JESUS DIAZ, ROBERTO ONG and AUGUSTO
AQUINO, respondents.

D E C I S I O N

PANGANIBAN, J.:

The Comprehensive Agrarian Reform Law (RA 6657) provides
that just compensation to landowners shall be paid in cash
and bonds. Hence, a trial court decision directing the payment
of such compensation "in the manner provided by R.A. 6657"
is not illegally amended but is merely clarified by an order,
issued during the execution proceedings, that such amount
shall be paid in cash and bonds.

The Case

Before the Court is a Petition for Review on Certiorari of the
December 8, 1998 Decision[1] and the February 2, 1999
Resolution[2] of the Court of Appeals (CA)[3] in CA-GR SP No.
48517, which had respectively dismissed the Petition for
Certiorari and Mandamus, filed by petitioner, and denied
reconsideration.

The decretal part of the assailed Decision reads:

"WHEREFORE, the petition is DISMISSED. The Order of April
24, 1998 is AFFIRMED."[4]

The Facts

The antecedents of the case are adequately summarized in
the assailed Decision, as follows:

"It appears that petitioner Edgardo Santos is the plaintiff in
Agrarian Case No. RTC 94-3206 for the determination of just
compensation regarding properties which were taken by DAR
under P.D. No. 27 in 1972. On August 12, 1997, the Regional
Trial Court, sitting as an Agrarian Court rendered judgment,
the dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered (1) fixing the
amount of P49,241,876.00 to be the just compensation for
the irrigated and unirrigated ricelands with areas of 36.4152
and 40.7874 hectares, respectively, and situated at Pinit,
Ocampo, Camarines Sur which are portions of the agricultural
lands covered by Transfer Certificates of Title Nos. 2883 and
2884 in the name of the [p]laintiff, and which were taken by
the government pursuant to Land Reform Program as
provided in Presidential Decree No. 27; and (2) ordering
Defendant Land Bank of the Philippines to pay [p]laintiff the
amount of FORTY-FIVE MILLION SIX HUNDRED NINE-EIGHT
THOUSAND EIGHT HUNDRED FIVE AND 34/100
(P45,698,805.34) PESOS, Philippine [c]urrency, in the manner
provided by R.A. 6657, by way of full payment of the said just
compensation. No pronouncement as to costs."

"A preliminary valuation in the amount of P3,543,070.66 had
in fact been previously released by the Land Bank in cash and
bond; thus deducting it from the total amount adjudged, the
balance unpaid amount[ed] to P45,698,805.34 which was
ordered by the Regional Trial Court to be paid in accordance
with RA 6657.

"The Land Bank elevated the matter to the Supreme Court,
which eventually dismissed the appeal in its Resolution dated
December 17, 1997. Accordingly, a writ of execution was
issued by the Regional Trial Court on December 4, 1997 and a
notice of garnishment was served on the Land Bank on
December 17, 1997.

"On December 22, 1997, the Regional Trial Court issued an
Order declaring that the Land Bank had complied with the
writ of execution and ordered the same to release the
amount of P44,749,947.82 to petitioner and the amount of
P948,857.52 to the Clerk of Court as commission fees for
execution of judgment.

"The Land Bank remitted the amount of P948,857.52 to the
Clerk of Court on December 24, 1997 and released the
amount of P3,621,023.01 in cash and Land Bank Bond No. AR-
0002206 in the amount of P41,128,024.81 to the petitioner.

"Petitioner filed a motion for the issuance of an alias writ of
execution before the Regional Trial Court, praying that the
payment of the compensation be in proportion of
P8,629,179.36 in bonds and P32,499,745 in cash, alleging that
the cash portion should include the amounts in the Decision
representing the interest payments.

"Before the motion could be resolved by the Regional Trial
Court, petitioner moved to withdraw the same and instead
filed a motion for release of the balance of the garnished
amount. He claimed that the payment of P41,128,024.81 in
Land Bank Bonds was not acceptable to him and that the said
amount should be paid in cash or certified check. The
respondent Land Bank, on the other hand, opposed the
motion, contending that the judgment amount had already
been satisfied on December 24, 1997.

"The Regional Trial Court issued an Order on March 20, 1998
for the Land Bank to release the balance of P41,128,024.81
from the garnished amount in cash or certified check.

"The Land Bank moved for a reconsideration of the said
Order, maintaining that the payment was properly made in
Land Bank Bonds.

"On March 25, 1998, petitioner filed a motion to hold the
Land Bank in contempt for its refusal to release the balance of
the garnished amount in cash or certified check.

"Respondent Regional Trial Court presided over by a new
judge, resolved the two motions on April 24, 1998. It held that
the payment of just compensation must be computed in the
manner provided for in Section 18, Republic Act No. 6657.
Thus, it ruled that:


"To summarize, the very issue to be resolved in the instant
case is to determine how much should be paid in cash and
how much also should be paid in bonds, to fully satisfy the
judgment herein rendered in the amount of P49,241,876.00,
the computation of which is as follows:

Total land value per judgment P49,241,876.00

Amount payable in bonds:

70% (50 has) P22,323,932.75

75% (excess) P13,012,907.41 35,336,840.16

Amount payable in cash:

30% (50 has) P9,567,399.75

35% (excess) 4,337,635.81 13,905,035.56

Less:

Preliminary valuation: P3,543,070.66

Commissioner's Fee: 948,857.52

Payment to plaintiff on

12-24-97 3,621,023.01 P 8,112,951.19

______________

P 5,792,084.37

"Consequently, not only must the Order of March 20, 1997 be
reconsidered, but by implication, the Order of this Court
dated December 22, 1997 is likewise deemed reconsidered. It
goes without saying that the payment of just compensation
must be made in accordance with Sec. 18, Republic Act No.
6657 in relation to Section 9, Rule 39 of the 1997 Rules of Civil
Procedure insofar as it does not contravene x x x the former.

"On the basis of the foregoing discussion, this Court finds no
merit [i]n the motion to cite in contempt of court the Land
Bank of the Philippines.

"Be it also noted that Defendant Land Bank, through counsel,
has submitted a re-computation of the compensation in
accordance with her manifestation on oral argument [with]
which this court begs to disagree.

"WHEREFORE, Defendant Land Bank of the Philippines is
hereby ordered to pay the [p]laintiff the [c]ash [b]alance of
FIVE MILLION SEVEN HUNDRED NINETY TWO THOUSAND
EIGHTY-FOUR and 37/100 (P5,792,084.37), Philippine
[c]urrency and the amount of THIRTY FIVE MILLION, THREE
HUNDRED THIRTY SIX THOUSAND EIGHT HUNDRED FORTY
and 16/100 (P35,336,840.16) PESOS in government
instruments or bonds to fully satisfy the Judgment herein in
the amount of forty-nine million two hundred forty one
thousand eight hundred seventy six (P49,241,876.00) pesos,
Philippine [c]urrency as just compensation due the [p]laintiff.

"Thus, the Order of this Court dated March 20, 1998 is hereby
reconsidered and SET ASIDE and by implication, the Order
dated December 22, 1997 is hereby deemed reconsidered and
MODIFIED accordingly.

"The Motion to Cite in Contempt of Court the Land Bank of
the Philippines is hereby DENIED.

"SO ORDERED."

"Petitioner's motion to reconsider the above-mentioned
Order was denied on June 17, 1998[;] hence, this petition."[5]

The CA Ruling

The CA upheld the questioned April 24, 1998 Order of the trial
court. The appellate court opined that the Order merely
ascertained the mode of compensation for petitioner's
expropriated properties, as decreed in the final judgment,
and was issued pursuant to the court a quo's general
supervisory control over the process of execution. Said the
CA:

"RA 6657 is clear and leaves no doubt as to its interpretation
regarding the manner of payment of just compensation. The
provision allows the landowner to choose the manner of
payment from the list provided therein, but since plaintiff had
obviously wanted payment to be made in cash, then the trial
court, through the new presiding judge, Judge Villegas-
Llaguno, had only to apply Section 18 of R.A. 6657 which
provides for the payment of a percentage thereon in cash and
the balance in bond, in the exercise of her ministerial duty to
execute the decision which ha[d] become final and executory.
Nevertheless, in the exercise of her supervisory powers over
the execution of a final and executory judgment, Judge
Villegas-Llaguno found it necessary to modify the order of
Judge Naval dated December 22, 1997 as regards the order of
execution since it had erroneously applied Section 9, Article
39 of the Rules of Court regarding satisfaction of money
judgments in the manner of payment even as to the portion
required to be paid in bonds, and thus, had completely
disregarded the portion in the final and executory decision of
August 12, 1997 which makes direct reference to RA 6657.

"The garnishment, on the other hand, of the amount of
P45,698,805.34 from the Land Bank of the Philippines does
not affect the execution of the judgment in the case. As
above-expounded, the judgment was to be fully executed in
accordance with the provisions of R.A. 6657 which allows the
landowner to have the compensation be paid in cash and in
bond, but not fully in cash, as herein petitioner would like to
maintain. Technically, the garnishment which was made in
this case pursuant to the order of execution by Judge Naval
shall extend only to the cash portion of the judgment amount.
On the other hand, with respect to the amount to be issued in
bonds, the only jurisdiction of the trial court is to order the
Land Bank of the Philippines to issue the corresponding bonds
and deliver the same to herein petitioners.

Hence, this Petition.[6]

Issues

In his Memorandum,[7] petitioner submits the following
issues for resolution:

"1. Did respondent judge act without jurisdiction when she
issued the Order dated 24 April 1998 amending the final
Judgment dated 12 August 1997?

"2. Is it a ministerial duty of the respondent judge to order
the release and of the Land Bank to release the garnished
amount under Section 9 (c) of Rule 39 of the Rules of Court?

"3. May respondent Land Bank question the legality of its
own compliance with the Writ of Execution?

"4. Are the respondent judge and the respondent Land Bank
and its officials liable for damages under Section 3 of Rule 65
of the Rules of Court?"[8]

In short, the main issue is whether the April 24, 1998 Order of
Judge Llaguno was proper.

The Court's Ruling

We find no merit in this Petition.

Main Issue: Propriety and Efficacy of the April 24, 1998 RTC
Order

Petitioner insists that the April 24, 1998 Order of Judge
Llaguno was issued without jurisdiction. That is, it allegedly
amended the August 12, 1997 judgment of the Special
Agrarian Court by requiring the payment of compensation in
cash and bonds.

Assailed Order Not an

Amendment, But an Iteration

of Final Judgment

The argument is not persuasive. The April 24, 1998 Order was
not an illegal amendment of the August 12, 1997 judgment
which had become final and executory. The reason is that the
Order did not revise, correct, or alter the Decision. Rather, the
Order iterated and made clear the essence of the final
judgment.

The August 12, 1997 judgment mandated compensation to
the petitioner "in the manner provided by R.A. 6657."[9]
There is certitude with regard to this assertion. The confusion
in the present case, which required the issuance of the
assailed Order, arose from petitioner's belief that the Land
Bank had obligated itself to pay in cash the compensation due
him. This fact can allegedly be gleaned from its compliance
with the December 4, 1997 Writ of Execution and December
19, 1997 Notice of Garnishment.

Compensation Due Petitioner to Be Paid Pursuant to RA 6657

However, it is clear from the August 12, 1997 judgment that
the compensation was to be paid "in the manner provided by
RA 6657."[10] Pursuant to Section 18 of the same law,
payment was to be in cash and bonds, as indicated below:

"Section 18. Valuation and Mode of Compensation. -- The LBP
shall compensate the landowner in such amount as may be
agreed upon by the landowner and the DAR and LBP, in
accordance with the criteria provided for in Sections 16 and
17, and other pertinent provisions hereof, or as may be finally
determined by the court, as the just compensation for the
land.

"The compensation shall be paid in one of the following
modes, at the option of the landowner:

(1) Cash payment, under the following terms and conditions

(a) For lands above fifty(50) hectares, insofar as the excess
hectarage is concerned.


Twenty-five percent (25%) cash, the balance to be paid in
government financial instruments negotiable at any time

(b) For lands above twenty-four (24) hectares and up to fifty
(50) hectares


Thirty-percent (30%) cash, the balance to be paid in
government financial instruments negotiable at anytime."

Be that as it may, petitioner contends that the bank is
estopped from questioning its alleged undertaking to pay him
in cash. This contention was purportedly manifested in its
letter-compliance with the Writ of Execution and the Notice
of Garnishment. In the letter, respondent said that it was
segregating a specified amount from the Agrarian Reform
Fund, in order to pay him. He insists that such amount was
garnished in accordance with Section 1, Rule 39 of the Rules
of Court, and should have been delivered to him pursuant to
Section 9 of the same Rule.

We disagree. Respondent bank was obliged to follow the
mandate of the August 12, 1997 judgment. Hence, its
compliance with the Writ of Execution and the Notice of
Garnishment[11] ought to have been construed as an
agreement to pay petitioner in the manner set forth in
Republic Act No. 6657. Its compliance was not an undertaking
to pay in cash because such act would have been a deviation
from the dictum of the final judgment, to which execution
must conform.[12] Paying in cash, as petitioner demands, is
not compatible with such judgment.

Misplaced is petitioner's reliance on Section 9, Rule 39 of the
Rules of Court, because the final judgment decrees payment
in cash and bonds. Indeed, this provision must be taken in
conjunction with RA 6657. Since respondent bank had already
given petitioner the entire adjudged amount in the required
proportion of cash and bonds, it must be deemed to have
complied with its duty under Rule 39.

We understand petitioner's desire to be paid in cash; after all,
his compensation was long overdue. However, we cannot
grant his Petition because it is not sustained by the law. In
this regard, we recall the Court's explanation in Association of
Small Landowners in the Philippines, Inc. v. Secretary of
Agrarian Reform:[13]

"It cannot be denied from these cases that the traditional
method for the payment of just compensation is money and
no other. And so, conformably, has just compensation been
paid in the past solely in that medium. However, we do not
deal here with the traditional exercise of the power of
eminent domain. This is not an ordinary expropriation where
only a specific property of relatively limited area is sought to
be taken by the State from its owner for a specific and
perhaps local purpose. What we deal with here is a
revolutionary kind of expropriation.

x x x x x x x x x

"With these assumptions, the Court hereby declares that the
content and manner of the just compensation provided for in
the afore-quoted Section 18 of the CARP Law is not violative
of the Constitution. We do not mind admitting that a certain
degree of pragmatism has influenced our decision on this
issue, but after all this Court is not a cloistered institution
removed from the realities and demands of society or
oblivious to the need for its enhancement. The Court is as
acutely anxious as the rest our people to see the goal of
agrarian reform achieved at last after the frustrations and
deprivations of our peasant masses during all these
disappointing decades. We are aware that invalidation of the
said section will result in the nullification of the entire
program, killing the farmer's hopes even as they approach
realization and resurrecting the specter of discontent and
dissent in the restless countryside. That is not in our view the
intention of the Constitution, and that is not what we shall
decree today.

"Accepting the theory that payment of the just compensation
is not always required to be made fully in money, we find
further that the proportion of cash payment to the other
things of value constituting the total payment, as determined
on the basis of the areas of the lands expropriated, is not
unduly oppressive upon the landowner. It is noted that the
smaller the land, the bigger the payment in money, primarily
because the small landowner will be needing it more than the
big landowners, who can afford a bigger balance in bonds and
other things of value. No less importantly, the government
financial instruments making up the balance of the payment
are 'negotiable at any time.' The other modes, which are
likewise available to be landowner at his option, are also not
unreasonable because payment is made in shares of stock,
LBP bonds, other properties or assets, tax credits, and other
things of value equivalent to the amount of just
compensation.

"Admittedly, the compensation contemplated in the law will
cause the landowners, big and small, not a little
inconvenience. As already remarked, this cannot be avoided.
Nevertheless, it is devoutly hoped that these countrymen of
ours, conscious as we know they are of the need for their
forbearance and even sacrifice, will not begrudge us their
indispensable share in the attainment of the ideal of agrarian
reform. Otherwise, our pursuit of this elusive goal will be like
the quest for the Holy Grail."

All told, we hold that the appellate court was correct in
sustaining the propriety and the efficacy of the April 24, 1998
Order of Judge Llaguno. In the exercise of her supervisory
powers over the execution of a final and executory
judgment,[14] such as her August 12, 1997 Decision, special
circumstances attending its execution impelled her to issue
the Order clarifying the terms thereof.

Petitioner's claim for damages against the bank must likewise
be denied because, as already explained, it was well within its
rights in resisting the former's claim.

WHEREFORE, the Petition is hereby DENIED and the assailed
Decision AFFIRMED. Costs against petitioner.

SO ORDERED.

Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ.,
concur.

[1] Rollo, pp. 28-37.

[2] Ibid., p. 38.

[3] Seventh Division composed of Justices Salome A.
Montoya, chairman and ponente; and Ruben T. Reyes and
Eloy R. Bello, members, both concurring.

[4] CA Decision, p. 10; rollo, p. 37.

[5] CA Decision, pp. 1-5; rollo, pp. 28-32.

[6] The case was deemed submitted for decision on October
29, 1999, upon receipt by this Court of the respondents'
Memorandum, signed by Atty. Augusto M. Aquino of
Gonzales Aquino & Associates. Petitioner's Memorandum,
signed by Atty. Fernando A. Santiago, was received on
October 20, 1999.

[7] Rollo, pp. 199-214.

[8] Ibid., pp. 204-205. The issue of whether bonds constitute
"just compensation" within the constitutional provision could
not be taken up by the Court because it was not raised by the
parties.

[9]9 Rollo, p. 45.

[10] Entitled "An Act Instituting A Comprehensive Agrarian
Reform Program To Promote Social Justice And
Industrialization, Providing The Mechanism For Its
Implementation, And For Other Purposes."

[11] Through the December 19, 1997 letter of Augusto M.
Aquino, LBP vice president, Agrarian Legal Office; rollo, p. 50.
The pertinent portion of the letter reads:

"Relative to the above-subject, please be informed that Land
Bank has segregated from the National Government's
Agrarian Reform Fund (ARF) in the Bank's custody the amount
of P45,698,805.34 to satisfy the RTC x x x determined
compensation for plaintiff's parcels of land placed by the
Department of Agrarian Reform (DAR) under Operation Land
Transfer pursuant to Presidential Decree No. 27, to be
delivered to plaintiff only upon final release order of the
court. The amount shall be taken from the ARF which answers
for the payment of lands covered by the Government's
agrarian reform program, not from Land Bank's corporate
funds which are separate from the ARF."

[12] Because execution which varies the tenor of the
judgment or exceeds the terms thereof is a nullity. Equatorial
Realty Development, Inc. v. Mayfair Theater, GR No. 136221,
May 12, 2000; Philippine Bank of Communications v. Court of
Appeals, 279 SCRA 364, September 23, 1997; Matuguina
Integrated Wood Products, Inc. v. Court of Appeals, 263 SCRA
490, October 24, 1996; Ex-Bataan Veterans Security Agency,
Inc. v. National Labor Relations Commission, 250 SCRA 418,
November 29, 1995.

[13] 175 SCRA 343, July 14, 1989, per Cruz, J.

[14] The rule is that the court which rendered the decision has
a general supervisory control over the process of execution.
Panado et al. v Court of Appeals, 298 SCRA 110, October 14,
1998; Balais v. Velasco, 252 SCRA 707, January 31, 1996.


3. Effects of non payment



EN BANC

[G.R. No. 161656. June 29, 2005]

REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA,
COMMODORE EDGARDO GALEOS, ANTONIO CABALUNA,
DOROTEO MANTOS & FLORENCIO BELOTINDOS, petitioners,
vs. VICENTE G. LIM, respondent.

R E S O L U T I O N

SANDOVAL-GUTIERREZ, J.:

Justice is the first virtue of social institutions.[1] When the
state wields its power of eminent domain, there arises a
correlative obligation on its part to pay the owner of the
expropriated property a just compensation. If it fails, there is
a clear case of injustice that must be redressed. In the
present case, fifty-seven (57) years have lapsed from the time
the Decision in the subject expropriation proceedings became
final, but still the Republic of the Philippines, herein
petitioner, has not compensated the owner of the property.
To tolerate such prolonged inaction on its part is to encourage
distrust and resentment among our people the very vices
that corrode the ties of civility and tempt men to act in ways
they would otherwise shun.

A revisit of the pertinent facts in the instant case is
imperative.

On September 5, 1938, the Republic of the Philippines
(Republic) instituted a special civil action for expropriation
with the Court of First Instance (CFI) of Cebu, docketed as Civil
Case No. 781, involving Lots 932 and 939 of the Banilad Friar
Land Estate, Lahug, Cebu City, for the purpose of establishing
a military reservation for the Philippine Army. Lot 932 was
registered in the name of Gervasia Denzon under Transfer
Certificate of Title (TCT) No. 14921 with an area of 25,137
square meters, while Lot 939 was in the name of Eulalia
Denzon and covered by TCT No. 12560 consisting of 13,164
square meters.

After depositing P9,500.00 with the Philippine National Bank,
pursuant to the Order of the CFI dated October 19, 1938, the
Republic took possession of the lots. Thereafter, or on May
14, 1940, the CFI rendered its Decision ordering the Republic
to pay the Denzons the sum of P4,062.10 as just
compensation.

The Denzons interposed an appeal to the Court of Appeals but
it was dismissed on March 11, 1948. An entry of judgment
was made on April 5, 1948.

In 1950, Jose Galeos, one of the heirs of the Denzons, filed
with the National Airports Corporation a claim for rentals for
the two lots, but it denied knowledge of the matter.
Another heir, Nestor Belocura, brought the claim to the Office
of then President Carlos Garcia who wrote the Civil
Aeronautics Administration and the Secretary of National
Defense to expedite action on said claim. On September 6,
1961, Lt. Manuel Cabal rejected the claim but expressed
willingness to pay the appraised value of the lots within a
reasonable time.

For failure of the Republic to pay for the lots, on September
20, 1961, the Denzons successors-in-interest, Francisca
Galeos-Valdehueza and Josefina Galeos-Panerio,[2] filed with
the same CFI an action for recovery of possession with
damages against the Republic and officers of the Armed
Forces of the Philippines in possession of the property. The
case was docketed as Civil Case No. R-7208.

In the interim or on November 9, 1961, TCT Nos. 23934 and
23935 covering Lots 932 and 939 were issued in the names of
Francisca Valdehueza and Josefina Panerio, respectively.
Annotated thereon was the phrase subject to the priority of
the National Airports Corporation to acquire said parcels of
land, Lots 932 and 939 upon previous payment of a
reasonable market value.

On July 31, 1962, the CFI promulgated its Decision in favor of
Valdehueza and Panerio, holding that they are the owners
and have retained their right as such over Lots 932 and 939
because of the Republics failure to pay the amount of
P4,062.10, adjudged in the expropriation proceedings.
However, in view of the annotation on their land titles, they
were ordered to execute a deed of sale in favor of the
Republic. In view of the differences in money value from
1940 up to the present, the court adjusted the market value
at P16,248.40, to be paid with 6% interest per annum from
April 5, 1948, date of entry in the expropriation proceedings,
until full payment.

After their motion for reconsideration was denied,
Valdehueza and Panerio appealed from the CFI Decision, in
view of the amount in controversy, directly to this Court. The
case was docketed as No. L-21032.[3] On May 19, 1966, this
Court rendered its Decision affirming the CFI Decision. It held
that Valdehueza and Panerio are still the registered owners of
Lots 932 and 939, there having been no payment of just
compensation by the Republic. Apparently, this Court found
nothing in the records to show that the Republic paid the
owners or their successors-in-interest according to the CFI
decision. While it deposited the amount of P9,500,00, and
said deposit was allegedly disbursed, however, the payees
could not be ascertained.

Notwithstanding the above finding, this Court still ruled that
Valdehueza and Panerio are not entitled to recover
possession of the lots but may only demand the payment of
their fair market value, ratiocinating as follows:

Appellants would contend that: (1) possession of Lots 932
and 939 should be restored to them as owners of the same;
(2) the Republic should be ordered to pay rentals for the use
of said lots, plus attorneys fees; and (3) the court a quo in the
present suit had no power to fix the value of the lots and
order the execution of the deed of sale after payment.

It is true that plaintiffs are still the registered owners of the
land, there not having been a transfer of said lots in favor of
the Government. The records do not show that the
Government paid the owners or their successors-in-interest
according to the 1940 CFI decision although, as stated,
P9,500.00 was deposited by it, and said deposit had been
disbursed. With the records lost, however, it cannot be
known who received the money (Exh. 14 says: It is further
certified that the corresponding Vouchers and pertinent
Journal and Cash Book were destroyed during the last World
War, and therefore the names of the payees concerned
cannot be ascertained.) And the Government now admits
that there is no available record showing that payment for
the value of the lots in question has been made (Stipulation
of Facts, par. 9, Rec. on Appeal, p. 28).

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. In fact, the abovementioned title certificates
secured by plaintiffs over said lots contained annotations of
the right of the National Airports Corporation (now CAA) to
pay for and acquire them. 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 fair market value of
the same.

Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot
932 to Vicente Lim, herein respondent,[4] as security for their
loans. For their failure to pay Lim despite demand, he had the
mortgage foreclosed in 1976. Thus, TCT No. 23934 was
cancelled, and in lieu thereof, TCT No. 63894 was issued in his
name.

On August 20, 1992, respondent Lim filed a complaint for
quieting of title with the Regional Trial Court (RTC), Branch 10,
Cebu City, against General Romeo Zulueta, as Commander of
the Armed Forces of the Philippines, Commodore Edgardo
Galeos, as Commander of Naval District V of the Philippine
Navy, Antonio Cabaluna, Doroteo Mantos and Florencio
Belotindos, herein petitioners. Subsequently, he amended
the complaint to implead the Republic.

On May 4, 2001, the RTC rendered a decision in favor of
respondent, thus:

WHEREFORE, judgment is hereby rendered in favor of
plaintiff Vicente Lim and against all defendants, public and
private, declaring plaintiff Vicente Lim the absolute and
exclusive owner of Lot No. 932 with all the rights of an
absolute owner including the right to possession. The
monetary claims in the complaint and in the counter claims
contained in the answer of defendants are ordered Dismissed.

Petitioners elevated the case to the Court of Appeals,
docketed therein as CA-G.R. CV No. 72915. In its Decision[5]
dated September 18, 2003, the Appellate Court sustained the
RTC Decision, thus:

Obviously, defendant-appellant Republic evaded its duty of
paying what was due to the landowners. The expropriation
proceedings had already become final in the late 1940s and
yet, up to now, or more than fifty (50) years after, the
Republic had not yet paid the compensation fixed by the
court while continuously reaping benefits from the
expropriated property to the prejudice of the landowner. x x
x. This is contrary to the rules of fair play because 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 for the land within a reasonable
time from its taking. Without prompt payment, compensation
cannot be considered just for the property owner is made
to suffer the consequence of being immediately deprived of
his land while being made to wait for a decade or more, in
this case more than 50 years, before actually receiving the
amount necessary to cope with the loss. To allow the taking
of the landowners properties, and in the meantime leave
them empty-handed by withholding payment of
compensation while the government speculates on whether
or not it will pursue expropriation, or worse, for government
to subsequently decide to abandon the property and return it
to the landowners, is undoubtedly an oppressive exercise of
eminent domain that must never be sanctioned. (Land Bank
of the Philippines vs. Court of Appeals, 258 SCRA 404).

x x x x x
x

An action to quiet title is a common law remedy for the
removal of any cloud or doubt or uncertainty on the title to
real property. It is essential for the plaintiff or complainant to
have a legal or equitable title or interest in the real property,
which is the subject matter of the action. Also the deed,
claim, encumbrance or proceeding that is being alleged as
cloud on plaintiffs title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or
legal efficacy (Robles vs. Court of Appeals, 328 SCRA 97). In
view of the foregoing discussion, clearly, the claim of
defendant-appellant Republic constitutes a cloud, doubt or
uncertainty on the title of plaintiff-appellee Vicente Lim that
can be removed by an action to quiet title.

WHEREFORE, in view of the foregoing, and finding no
reversible error in the appealed May 4, 2001 Decision of
Branch 9, Regional Trial Court of Cebu City, in Civil Case No.
CEB-12701, the said decision is UPHELD AND AFFIRMED.
Accordingly, the appeal is DISMISSED for lack of merit.

Undaunted, petitioners, through the Office of the Solicitor
General, filed with this Court a petition for review on
certiorari alleging that the Republic has remained the owner
of Lot 932 as held by this Court in Valdehueza vs. Republic.[6]

In our Resolution dated March 1, 2004, we denied the
petition outright on the ground that the Court of Appeals did
not commit a reversible error. Petitioners filed an urgent
motion for reconsideration but we denied the same with
finality in our Resolution of May 17, 2004.

On May 18, 2004, respondent filed an ex-parte motion for the
issuance of an entry of judgment. We only noted the motion
in our Resolution of July 12, 2004.

On July 7, 2004, petitioners filed an urgent plea/motion for
clarification, which is actually a second motion for
reconsideration. Thus, in our Resolution of September 6,
2004, we simply noted without action the motion considering
that the instant petition was already denied with finality in
our Resolution of May 17, 2004.

On October 29, 2004, petitioners filed a very urgent motion
for leave to file a motion for reconsideration of our
Resolution dated September 6, 2004 (with prayer to refer the
case to the En Banc). They maintain that the Republics right
of ownership has been settled in Valdehueza.

The basic issue for our resolution is whether the Republic has
retained ownership of Lot 932 despite its failure to pay
respondents predecessors-in-interest the just compensation
therefor pursuant to the judgment of the CFI rendered as
early as May 14, 1940.

Initially, we must rule on the procedural obstacle.

While we commend the Republic for the zeal with which it
pursues the present case, we reiterate that its urgent motion
for clarification filed on July 7, 2004 is actually a second
motion for reconsideration. This motion is prohibited under
Section 2, Rule 52, of the 1997 Rules of Civil Procedure, as
amended, which provides:

Sec. 2. Second motion for reconsideration. No second
motion for reconsideration of a judgment or final resolution
by the same party shall be entertained.

Consequently, as mentioned earlier, we simply noted without
action the motion since petitioners petition was already
denied with finality.

Considering the Republics urgent and serious insistence that
it is still the owner of Lot 932 and in the interest of justice, we
take another hard look at the controversial issue in order to
determine the veracity of petitioners stance.

One of the basic principles enshrined in our Constitution is
that no person shall be deprived of his private property
without due process of law; and in expropriation cases, an
essential element of due process is that there must be just
compensation whenever private property is taken for public
use.[7] Accordingly, Section 9, Article III, of our Constitution
mandates: Private property shall not be taken for public use
without just compensation.

The Republic disregarded the foregoing provision when it
failed and refused to pay respondents predecessors-in-
interest the just compensation for Lots 932 and 939. The
length of time and the manner with which it evaded payment
demonstrate its arbitrary high-handedness and confiscatory
attitude. The final judgment in the expropriation proceedings
(Civil Case No. 781) was entered on April 5, 1948. More than
half of a century has passed, yet, to this day, the landowner,
now respondent, has remained empty-handed. Undoubtedly,
over 50 years of delayed payment cannot, in any way, be
viewed as fair. This is more so when such delay is
accompanied by bureaucratic hassles. Apparent from
Valdehueza is the fact that respondents predecessors-in-
interest were given a run around by the Republics officials
and agents. In 1950, despite the benefits it derived from the
use of the two lots, the National Airports Corporation denied
knowledge of the claim of respondents predecessors-in-
interest. Even President Garcia, who sent a letter to the Civil
Aeronautics Administration and the Secretary of National
Defense to expedite the payment, failed in granting relief to
them. And, on September 6, 1961, while the Chief of Staff of
the Armed Forces expressed willingness to pay the appraised
value of the lots, nothing happened.

The Court of Appeals is correct in saying that Republics delay
is contrary to the rules of fair play, as just compensation
embraces not only the correct determination of the amount
to be paid to the owners of the land, but also the payment for
the land within a reasonable time from its taking. Without
prompt payment, compensation cannot be considered just.
In jurisdictions similar to ours, where an entry to the
expropriated property precedes the payment of
compensation, it has been held that if the compensation is
not paid in a reasonable time, the party may be treated as a
trespasser ab initio.[8]

Corollarily, in Provincial Government of Sorsogon vs. Vda. De
Villaroya,[9] similar to the present case, this Court expressed
its disgust over the governments vexatious delay in the
payment of just compensation, thus:

The petitioners have been waiting for more than thirty years
to be paid for their land which was taken for use as a public
high school. As a matter of fair procedure, it is the duty of the
Government, whenever it takes property from private
persons against their will, to supply all required
documentation and facilitate payment of just compensation.
The imposition of unreasonable requirements and vexatious
delays before effecting payment is not only galling and
arbitrary but a rich source of discontent with government.
There should be some kind of swift and effective recourse
against unfeeling and uncaring acts of middle or lower level
bureaucrats.

We feel the same way in the instant case.

More than anything else, however, it is the obstinacy of the
Republic that prompted us to dismiss its petition outright. As
early as May 19, 1966, in Valdehueza, this Court mandated
the Republic to pay respondents predecessors-in-interest the
sum of P16,248.40 as reasonable market value of the two
lots in question. Unfortunately, it did not comply and
allowed several decades to pass without obeying this Courts
mandate. Such prolonged obstinacy bespeaks of lack of
respect to private rights and to the rule of law, which we
cannot countenance. It is tantamount to confiscation of
private property. While it is true that all private properties
are subject to the need of government, and the government
may take them whenever the necessity or the exigency of the
occasion demands, however, the Constitution guarantees that
when this governmental right of expropriation is exercised, it
shall be attended by compensation.[10] From the taking of
private property by the government under the power of
eminent domain, there arises an implied promise to
compensate the owner for his loss.[11]

Significantly, the above-mentioned provision of Section 9,
Article III of the Constitution is not a grant but a limitation of
power. This limiting function is in keeping with the
philosophy of the Bill of Rights against the arbitrary exercise
of governmental powers to the detriment of the individuals
rights. Given this function, the provision should therefore be
strictly interpreted against the expropriator, the government,
and liberally in favor of the property owner.[12]

Ironically, in opposing respondents claim, the Republic is
invoking this Courts Decision in Valdehueza, a Decision it
utterly defied. How could the Republic acquire ownership
over Lot 932 when it has not paid its owner the just
compensation, required by law, for more than 50 years? 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,[13] 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
condemnors title relates back to the date on which the
petition under the Eminent Domain Act, or the
commissioners 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 Republics acquisition of
ownership is conditioned upon the full payment of just
compensation within a reasonable time.[14]

Significantly, in Municipality of Bian v. Garcia[15] this Court
ruled that the expropriation of lands consists of two stages, to
wit:

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,*16+ 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.

The Republic now argues that under Valdehueza, respondent
is not entitled to recover possession of Lot 932 but only to
demand payment of its fair market value. Of course, we are
aware of the doctrine that non-payment of just
compensation (in an expropriation proceedings) does not
entitle the private landowners to recover possession of the
expropriated lots. This is our ruling in the recent cases of
Republic of the Philippines vs. Court of Appeals, et al.,[17] and
Reyes vs. National Housing Authority.[18] However, the facts
of the present case do not justify its application. It bears
stressing that the Republic was ordered to pay just
compensation twice, the first was in the expropriation
proceedings and the second, in Valdehueza. Fifty-seven (57)
years have passed since then. We cannot but construe the
Republics failure to pay just compensation as a deliberate
refusal on its part. Under such circumstance, recovery of
possession is in order. In several jurisdictions, the courts held
that recovery of possession may be had when property has
been wrongfully taken or is wrongfully retained by one
claiming to act under the power of eminent domain[19] or
where a rightful entry is made and the party condemning
refuses to pay the compensation which has been assessed or
agreed upon;[20] or fails or refuses to have the compensation
assessed and paid.[21]

The Republic also contends that where there have been
constructions being used by the military, as in this case, public
interest demands that the present suit should not be
sustained.

It must be emphasized that an individual cannot be deprived
of his property for the public convenience.[22] In Association
of Small Landowners in the Philippines, Inc. vs. Secretary of
Agrarian Reform,[23] we ruled:

One of the basic principles of the democratic system is that
where the rights of the individual are concerned, the end
does not justify the means. It is not enough that there be a
valid objective; it is also necessary that the means employed
to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is
no question that not even the strongest moral conviction or
the most urgent public need, subject only to a few notable
exceptions, will excuse the bypassing of an individual's rights.
It is no exaggeration to say that a person invoking a right
guaranteed under Article III of the Constitution is a majority
of one even as against the rest of the nation who would deny
him that right.

The right covers the persons life, his liberty and his property
under Section 1 of Article III of the Constitution. With regard
to his property, the owner enjoys the added protection of
Section 9, which reaffirms the familiar rule that private
property shall not be taken for public use without just
compensation.

The Republics assertion that the defense of the State will be
in grave danger if we shall order the reversion of Lot 932 to
respondent is an overstatement. First, Lot 932 had ceased to
operate as an airport. What remains in the site is just the
National Historical Institutes marking stating that Lot 932 is
the former location of Lahug Airport. And second, there are
only thirteen (13) structures located on Lot 932, eight (8) of
which are residence apartments of military personnel. Only
two (2) buildings are actually used as training centers. Thus,
practically speaking, the reversion of Lot 932 to respondent
will only affect a handful of military personnel. It will not
result to irreparable damage or damage beyond pecuniary
estimation, as what the Republic vehemently claims.

We thus rule that the special circumstances prevailing in this
case entitle respondent to recover possession of the
expropriated lot from the Republic. Unless this form of swift
and effective relief is granted to him, the grave injustice
committed against his predecessors-in-interest, though no
fault or negligence on their part, will be perpetuated. Let this
case, therefore, serve as a wake-up call to the Republic that in
the exercise of its power of eminent domain, necessarily in
derogation of private rights, it must comply with the
Constitutional limitations. This Court, as the guardian of the
peoples right, will not stand still in the face of the Republics
oppressive and confiscatory taking of private property, as in
this case.

At this point, it may be argued that respondent Vicente Lim
acted in bad faith in entering into a contract of mortgage with
Valdehueza and Panerio despite the clear annotation in TCT
No. 23934 that Lot 932 is subject to the priority of the
National Airports Corporation [to acquire said parcels of land]
x x x upon previous payment of a reasonable market value.

The issue of whether or not respondent acted in bad faith is
immaterial considering that the Republic did not complete
the expropriation process. In short, it failed to perfect its title
over Lot 932 by its failure to pay just compensation. The issue
of bad faith would have assumed relevance if the Republic
actually acquired title over Lot 932. In such a case, even if
respondents title was registered first, it would be the
Republics title or right of ownership that shall be upheld. But
now, assuming that respondent was in bad faith, can such fact
vest upon the Republic a better title over Lot 932? We
believe not. This is because in the first place, the Republic has
no title to speak of.

At any rate, assuming that respondent had indeed knowledge
of the annotation, still nothing would have prevented him
from entering into a mortgage contract involving Lot 932
while the expropriation proceeding was pending. Any person
who deals with a property subject of an expropriation does so
at his own risk, taking into account the ultimate possibility of
losing the property in favor of the government. Here, the
annotation merely served as a caveat that the Republic had a
preferential right to acquire Lot 932 upon its payment of a
reasonable market value. It did not proscribe Valdehueza
and Panerio from exercising their rights of ownership
including their right to mortgage or even to dispose of their
property. In Republic vs. Salem Investment Corporation,[24]
we recognized the owners absolute right over his property
pending completion of the expropriation proceeding, thus:

It is only upon the completion of these two stages that
expropriation is said to have been completed. Moreover, it is
only upon payment of just compensation that title over the
property passes to the government. Therefore, until the
action for expropriation has been completed and terminated,
ownership over the property being expropriated remains with
the registered owner. Consequently, the latter can exercise all
rights pertaining to an owner, including the right to dispose
of his property subject to the power of the State ultimately to
acquire it through expropriation.

It bears emphasis that when Valdehueza and Panerio
mortgaged Lot 932 to respondent in 1964, they were still the
owners thereof and their title had not yet passed to the
petitioner Republic. In fact, it never did. Such title or
ownership was rendered conclusive when we categorically
ruled in Valdehueza that: It is true that plaintiffs are still the
registered owners of the land, there not having been a
transfer of said lots in favor of the Government.

For respondents part, it is reasonable to conclude that he
entered into the contract of mortgage with Valdehueza and
Panerio fully aware of the extent of his right as a mortgagee.
A mortgage is merely an accessory contract intended to
secure the performance of the principal obligation. One of its
characteristics is that it is inseparable from the property. It
adheres to the property regardless of who its owner may
subsequently be.[25] Respondent must have known that even
if Lot 932 is ultimately expropriated by the Republic, still, his
right as a mortgagee is protected. In this regard, Article 2127
of the Civil Code provides:

Art. 2127. The mortgage extends to the natural accessions,
to the improvements, growing fruits, and the rents or income
not yet received when the obligation becomes due, and to the
amount of the indemnity granted or owing to the proprietor
from the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations,
amplifications, and limitations established by law, whether
the estate remains in the possession of the mortgagor or it
passes in the hands of a third person.

In summation, while the prevailing doctrine is that the non-
payment of just compensation does not entitle the private
landowner to recover possession of the expropriated lots,[26]
however, in cases where the government failed to pay just
compensation within five (5)[27] years from the finality of the
judgment in the expropriation proceedings, the owners
concerned shall have the right to recover possession of their
property. This is in consonance with the principle that the
government cannot keep the property and dishonor the
judgment.*28+ To be sure, the five-year period limitation will
encourage the government to pay just compensation
punctually. This is in keeping with justice and equity. After
all, it is the duty of the government, whenever it takes
property from private persons against their will, to facilitate
the payment of just compensation. In Cosculluela v. Court of
Appeals,[29] we defined just compensation as not only the
correct determination of the amount to be paid to the
property owner but also the payment of the property within a
reasonable time. Without prompt payment, compensation
cannot be considered just.

WHEREFORE, the assailed Decision of the Court of Appeals in
CA-G.R. CV No. 72915 is AFFIRMED in toto.

The Republics motion for reconsideration of our Resolution
dated March 1, 2004 is DENIED with FINALITY. No further
pleadings will be allowed.

Let an entry of judgment be made in this case.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-
Santiago, Carpio, Austria-Martinez, Corona, Carpio-Morales,
Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ.,
concur.

[1] Rawls, A Theory of Justice (1971) at 4.

[2] They were joined by their husbands, Angel Valdehueza
and Pablo Panerio, and father, Jose Galeos.

[3] May 19, 1966, 17 SCRA 107.

[4] The mortgage was duly annotated at the back of the
mortgagors title in 1964, while the Decision of this Court in
Valdehueza vs. Republic was annotated in 1974.

[5] Penned by Justice Sergio L. Pestao (retired) and
concurred in by Justices Perlita J. Tria Tirona and Jose C.
Mendoza.

[6] Supra.

[7] Coscuella vs. Court of Appeals, No. L-77765, August 15,
1988, 164 SCRA 393, citing Province of Pangasinan vs. CFI
Judge of Pangasinan, Branch VIII, 80 SCRA 117, 120-121
(1977).

[8] Law of Eminent Domain, Third Edition, Volume II 931
citing Cushman vs. Smith, 34 Me. 247; and see Davis vs.
Russel, 47 Me. 443.

[9] No. L-64037, August 27, 1987, 153 SCRA 291.

[10] 26 Am Jur 2d 168.

[11] Ibid.

[12] Cruz, Constitutional Law, 1995 Ed., at 58-59.

[13] G.R. No. 78742, July 14, 1989, 175 SCRA 343.

*14+ Just compensation is described as a full and fair
equivalent of the property taken from the private owner by
the expropriator. This is intended to indemnify the owner
fully for the loss he has sustained as a result of the
expropriation. The measure of this compensation is not the
takers gain but the owners 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
taken shall be real, substantial, full, ample. (Manila Railroad
Co. vs. Velasquez, 32 Phil. 286).

[15] G.R. No. 69260, December 22, 1989, 180 SCRA 576, 583-
584.

[16] G.R. No. 137569, June 23, 2000, 334 SCRA 320, 329.

[17] G.R. No. 146587, July 2, 2002, 383 SCRA 611.

[18] G.R. No. 147511, January 20, 2003, 395 SCRA 494.

[19] Law of Eminent Domain, Third Edition, Volume II 927
citing Robinson vs. Southern California Ry.Co., 129 Cal. 8, 61
Pac. 947; Meeker vs. Chicago, 23 Ill. App. 23; Wilson vs.
Muskegon etc. R.R. Co., 132 Mich. 469, 93 N.W. 1059; Illinois
Cent.R.R. Co. vs. Hoskins, 80 Miss. 730, 32 So. 150, 92 Am St.
Rep. 612; McClinton vs. Pittsburg etc. Ry Co., 66 Pa St. 404

[20] Id., citing White vs. Wabash, St. Louis & Pacific Ry. Co., 64
Ia. 281,20 N.W. 436; St. Joseph & Denver City R.R. Co. vs.
Callender, 13 Kan. 496; Blackshire vs. Atchison,Topeka and
Sta. Fe R.R. Co., 13 Kan. 514; Kanne v. Minneapolis & St. Louis
Ry.Co., 30 Minn. 423; Bartleson vs. Minneapolis, 33 Minn.
468; Wheeling etc. R.R.Co. vs. Warrell, 122 Pa St. 613, 16 Alt
20

[21] Id., citing Connellsville Gas Coal Co. vs. Baltimore, etc.
R.R. Co., 216 Pa St.309, 65 Atl. 669.

[22] Law of Eminent Domain, Third Edition, Volume II 929
citing Hooper vs. Columbus & Western Ry.Co., 78 Ala. 213;
Stratten vs. Great Western & Bradford Ry.Co., 40 L.J. Eq. 50.
In the latter case the court says. With regard to what is said
as to public interests, I am not inclined to listen to any
suggestion of public interest as against private rights acquired
in a lawful way. I do not think that the interest of the public
in using something that is provided for their convenience is to
be upheld at the price of saying that a persons property is to
be confiscated for that purpose. A man who comes to this
court is entitled to have his rights ascertained and declared,
however, inconvenient it may be to third persons to whom it
may be a convenience to have the use of his property.

[23] Supra at 375-376.

[24] Supra.

[25] Paras, Civil Code of the Philippines Annotated, 14th Ed.,
Book V, at 1021.

[26] Republic of the Philippines vs. Court of Appeals, supra.
and Reyes vs. National Housing Authority, supra.

*27+ Section 6, Rule 39 provides that: A final and executory
judgment or order may be executed on motion within five (5)
years from the date of its entry. After the lapse of such time,
and before it is barred by the statute of limitations, a
judgment may be enforced by action. The revived judgment
may also be enforced by motion within (5) years from the
date of its entry and thereafter by action before it is barred by
the statute of limitations.

[28] Commissioner of Public Highways v. San Diego, No. L-
30098, February 18, 1970.

[29] No. L-77765, August 15, 1988, 164 SCRA 393.




F. Judicial Review


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. L-51078 October 30, 1980

CRISTINA DE KNECHT, petitioner,
vs.
HON. PEDRO JL. BAUTISTA, as Judge presiding over Branch III
of the Court of First Instance (Pasay City) and the REPUBLIC OF
THE PHILIPPINES, respondents.



FERNANDEZ, J.:

This is a petition for certiorari and prohibition filed by Cristina
de Knecht against the Honorable Pedro JL. Bautista, as Judge
presiding over Branch III of the Court of First Instance of Rizal
(Pasay City), and the Republic of the Philippines pines seeking
the following relief:

WHEREFORE, petitioner respectfully prays that judgment be
rendered annulling the order for immediate possession issued
by respondent court in the expropriation proceedings and
commanding respondents to desist from further proceedings in
the expropriation action or the order for immediate possession
issued in said action, with costs.

Petitioner prays that a restraint order or writ of preliminary
injunction be issued ex-parte enjoining respondents, their
representative representative and agents from enforcing the
here questioned order for mediate posession petitioner offering
to post a bond executed to the parties enjoined in an amount to
be fixed by the Court to the effect that she will pay to such
parties all damages which they may sustain by reason of the
injunction if the Court should finally decide she is not entitled
there

She prays for such other remedy as the Court may deem just
and equitable in the premises.

Quezon City for July 1979. 1

The petitioner alleges that than ten (10) years ago, the
government through the Department of Public Workmen's and
Communication (now MPH) prepared a to Epifanio de los Santos
Avenue (EDSA) to Roxas Boulevard; that the proposed
extension, an adjunct of building program, the Manila Cavite
Coastal Read Project, would pass through Cuneta Avenue up to
Roxas Boulevard that this route would be a straight one taking
into account the direction of EDSA; that preparation to the
implementation of the aforesaid plan, or on December 13, 1974,
then Secretary Baltazar Aquino of the Department of Public
Highways directed the City Engineer of Pasay City not to issue
temporary or permanent permits for the construction and/or
improvement of buildings and other structures located within
the proposed extension through Cuneta Avenue that shortly
thereafter the Department of Public Highways decided to make
the proposed extension go through Fernando Rein and Del Pan
Streets which are lined with old substantial houses; that upon
learning of the changed the owners of the residential houses
that would be affected, the herein petitioner being one of them,
filed on April 15, 1977 a formal petition to President Ferdinand
E. Marcos asking him to order the Ministry of Public Highways to
adoption, the original plan of making the extension of EDSA
through Araneta Avenue instead of the new plan going through
Fernando Rein and Del Pan Streets; that President Marcos
directed then Minister Baltazar Aquino to explain within twenty-
four (24) hours why the proposed project should not be
suspended; that on April 21, 1977 then Minister Aquino
submitted his explanation defending the new proposed route;
that the President then referred the matter to the Human
Settlements Commission for investigation and recommendation;
that after formal hearings to which all the parties proponents
and oppositors were given full opportunity to ventilate their
views and to present their evidence, the Settlements
Commission submitted a report recommending the reversion of
the extension of EDSA to the original plan passing through
Cuneta Avenue; and that notwithstanding the said report and
recommendation, the Ministry of Public Highways insisted on
implementing the plan to make the extension of EDSA go
through Fernando Rein and Del Pan Streets. 2

In February 1979, the government filed in the Court of First
Instance of Rizal, Branch III, Pascual City presided by the
respondent Judge, a complaint for expropriation against the
owners of the houses standing along Fernando Rein and Del Pan
Streets, among them the herein petitioner. The complaint was
docketed as Civil Case No. 7001-P and entitled "Republic of the
Philippines vs. Concepcion Cabarrus Vda. de Santos, etc."

The herein petitioner filed a motion to dismiss dated March
19, 1979 on the following grounds:

(a) court had no jurisdiction over the subject matter of the
action because the complaint failed to allege that the instant
project for expropriation bore the approval of the Ministry of
Human Settlements and the Metro Manila Government nor
pursuant to Presidential Decrees Nos. 824, 1396 and 1517;

(b) The choice of properties to be expropriated made by the
Ministry of Public Highways was arbitrary and erroneous;

(c) The complaint was premature as the plaintiff never really
had gone through serious negotiations with the defendant for
the purchase of her property; and

(d) The complaint relied on an arbitrary and erroneous
valuation of properties and disregarded consequential damages.

An urgent motion dated March 28, 1979 for preliminary
junction was also filed.

In June 1979 the Republic of the Philippines filed a motion for
the issuance of a writ of possession of the property sought to be
expropriated on the ground that said Republic had made the
required deposit with the Philippine National Bank.

The respondent judge issued a writ of possession dated June
14, 1979 authorizing the Republic of the Philippines to take and
enter upon the possession of the properties sought be
condemned. 3

The petitioner contends that "Respondent court lacked or
exceeded its jurisdiction or gravely abused its discretion in
issuing the order to take over and enter upon the possession of
the properties sought to be expropriated-petitioner having
raised a constitutional question which respondent court must
resolve before it can issue an order to take or enter upon the
possession of properties sought to be expropriated." 4

The petitioner assails the choice of the Fernando Rein and Del
Pan Streets route on the following grounds:

The choice of property to be expropriated cannot be without
rhyme or reason. The condemnor may not choose any property
it wants. Where the legislature has delegated a power of
eminent do-main, the question of the necessity for taking a
particular fine for the intended improvement rests in the
discretion of the grantee power subject however to review by
the courts in case of fraud, bad faith or gross abuse of discretion.
The choice of property must be examined for bad faith,
arbitrariness or capriciousness and due process determination as
to whether or not the proposed location was proper in terms of
the public interests. Even the claim of respondent's Secretary
Baltazar Aquino that there would be a saving of P2 million under
his new plan must be reviewed for it bears no relation to the site
of the proposed EDSA extension As envisioned by the
government, the EDSA extension would be linked to the Cavite
Expressway. Logically then, the proposed extension must point
to the south and not detour to the north.

Also, the equal protection of the law must be accorded, not on
to the motel owners along Cuneta (Fisher) Avenue, but also to
the owners of solid and substantial homes and quality
residential lands occupied for generations. 5

The respondents maintain that the respondent court did not
act without jurisdiction or exceed its jurisdiction or gravel abuse
its discretion in issuing the order dated June 14, 1979
authorizing the Republic of the Philippines to take over and
enter the possession of the properties sought to be appropriated
because the Republic has complied with all the statutory
requirements which entitled it to have immediate possession of
the properties involved. 6

Defending the change of the EDSA extension to pass through
Fernando Rein Del Pan Streets, the respondents aver:

'There was no sudden change of plan in the selection of the
site of the EDSA Extension to Roxas Blvd. As a matter of fact,
when the Ministry of Public Highways decided to change the site
of EDSA Ex- tension to Roxas Boulevard from Cuneta Avenue to
the Del Pan Fernando Item Streets the residents of Del Pan
and Fernando Rein Streets who were to be adversely affected by
the construction of ED SA Extension to Roxas Boulevard along
Del Pan - Fernando Rein Streets were duly notified of such
proposed project. Petitioner herein was one of those notified
Annex 1). It be conceded that the Cuneta Avenue line goes
southward and outward (from the city center while the Del Pan
Fernando Rein Streets line follows northward and inward
direction. It must be stated that both lines, Cuneta Avenue and
Del Pan Fernando Rein Streets lines, meet satisfactorily
planning and design criteria and therefore are both acceptable.
In selecting the Del Pan Fernando Rein Streets line the
Government did not do so because it wanted to save the motel
located along Cuneta Avenue but because it wanted to minimize
the social impact factor or problem involved. 7

There is no question as to the right of the Republic of the
Philippines to take private property for public use upon the
payment of just compensation. Section 2, Article IV of the
Constitution of the Philippines provides: "Private property shall
not be taken for public use without just compensation."

It is recognized, was, that the government may not
capriciously or arbitrarily' choose what private property should
be taken. In J. M. Tuazon & Co., Inc. vs. Land Tenure
administration 31 SCRA, 413, 433, the Supreme Court said:

For the purpose of obtaining a judicial declaration of nullity, it
is enough if the respondents or defendants named be the
government officials who would give operation and effect to
official action allegedly tainted with unconstitutionality. Thus,
where the statute assailed was sought to be enforced by the
Land Tenure Administrative and the Solicitor General, the two
officials may be made respondents in the action without need of
including the Executive Secretary as a party in the action

The failure to meet tile exacting standard of due process
would likewise constitute a valid objection to the exercise of this
congressional power. That was so intimated in the above leading
Guido Case. There was an earlier pronouncement to that effect
in a decision rendered long before the adoption of the
Constitution under the previous organic law then in force, while
the Philippines was still an unincorporated territory of the
United States.

It is obvious then that a landowner 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 impressive 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 government talk 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, ...

In the same case the Supreme Court concluded:

With due recognition then of the power of Congress to
designate the particular property to be taken and how much
thereof may be condemned in the exercise of the power of
expropriation, it is still a judicial question whether in the
exercise of such competence, the party adversely affected is the
victim of partiality and prejudice. That the equal protection
clause will not allow. (p. 436)

In the instant case, it is a fact that the Department of Public
Highways originally establish the extension of EDSA along
Cuneta Avenue. It is to be presumed that the Department of
Public Highways made studies before deciding on Cuneta
Avenue. It is indeed odd why suddenly the proposed extension
of EDSA to Roxas Boulevard was changed to go through
Fernando Rein-Del Pan Streets which the Solicitor General con-
cedes "... the Del Pan Fernando Rein Streets line follows
northward and inward direction. While admit "that both lines,
Cuneta Avenue and Del Pan Fernando Rein Streets lines, meet
satisfactorily planning and design criteria and therefore are both
acceptable ... the Solicitor General justifies the change to Del
Pan Fernando Rein Streets on the ground that the
government "wanted to the social impact factor or problem
involved." 8

It is doubtful whether the extension of EDSA along Cuneta
Avenue can be objected to on the ground of social impact. The
improvements and buildings along Cuneta Avenue to be affected
by the extension are mostly motels. Even granting, arguendo,
that more people be affected, the Human Setlements
Commission has suggested coordinative efforts of said
Commission with the National Housing Authority and other
government agencies in the relocation and resettlement of
those adversely affected. 9

The Human Settlements Commission considered conditionality
social impact and cost. The pertinent portion of its report reads:

Comparison of Alignment 1 (Cuneta Fisher) and Alignment 2
(Del Pan Fernando Rein) based on the criteria of functionality,
social impact and cost

A. Functionality

This issue has to do with the physical design of a highway,
inclusive of engineering factors and management consideration

From both engineering and traffic management viewpoints, it
is incontestable that the straighter and shorter alignment is
preferable to one which is not. Systematically and
diagramatically, alignment 1 is straighter than alignment 2. In
fact, Director Antonio Goco of the Department of Public
Highways admitted that alignment 2 is three (3) meters longer
than alignment 1. Furthermore, alignment 1 is definitely the
contour conforming alignment to EDSA whereas alignment 2
affords a greater radius of unnatural curvature as it hooks
slightly northward before finally joining with Roxas Boulevard.
Besides, whichever alignment is adopted, there will be a need
for a grade separator or interchange at the Roxas Boulevard
junction. From the of highway design, it is imperative to have
interchanges as far apart as possible to avoid traffic from slow
down in negotiating the slope on the interchanges. Up north
would be the future Buendia Avenue- Roxas Boulevard
Interchange. Consequently, alignment 1 which is farther away
from Buendia Avenue than alignment 2 is the better alignment
from the viewpoint of the construction of the grade separator or
interchange, a necessary corollary to the extension project.
Finally, the choice of alignment 2 which is longer by three (3)
meters than alignment 1 could have serious repercussions on
our energy conservation drive and from the larger perspective of
the national economy, considering that, by ad- statistical data,
no less than fifty thousand (50,000) vehicles a day will have to
traverse an extra three (3) meters.

B. Social Impact

The following factual data which have a direct bearing on the
issue of social impact were culled from the records of the case
and the evidence presented during the public hearings:

(1) Number of property owners:




Alignment 1


73

Alignment 2


49

(2) Incidence of non-resident owner:




Alignment 1


25 (34.3%)

Alignment 2


31 (63.3%)

(3) Number of actually affected residents:




Alignment 1


547

Alignment 2


290 (estimated)

(4) Average income of residents:




Alignment 2:




Below P350 P350 P500 P 500 P 800 P800 Pl000 Over
P1000 16 (28%) 24 (42%) 0 (14%) 5 (9%) 4 (7%)

Alignment 2: Figures not available.

It is evident from the foregoing figures that social impact is
greater on the residents of alignment 1.

C. Cost

The resolution of the issue of right-of-way acquisition cost
depends to a large extend on the nature of the properties to be
affected and the relative value thereof. A comparison of
alignment 1 and alignment 2 on these two points has produced
the following results:

(1) Nature and number of properties involved:

Line I Line 2

Lots


Lots


Improvement


Lots


Improvements

Residential


41


46


38


34

Commercial


25


24


11


13

Industrial


5


3


1


1

Church


1


1


1


1

Educational


_


_


_


_

TOTAL


72


75


51


49

(2) Relative value of properties affected:

Lots


Improvements


Total




Alignment 1


P9,300,136


P5,928,680


P15,228,816

Alignment 2


8,314,890


6,644,130


14,959,020

Difference








P269,796

It is obvious from the immediately table that the right- of-way
acquisition cost difference factor of the two alignment is only
P269,196 and not P2M as alleged by the Department of Public
Highways and P1.2M as claimed by the oppositors.
Consequently, the cost difference factor between the two
alignments is so minimal as to be practically nil in the
consideration of the issues involved in this case. 10

After considering all the issues and factors, the Human
Setlements Commission made the following recommendations:

Weighing in the balance the issues and factors of necessity,
functionality, impact, cost and property valuation as basis for
scheme of compensation to be adopted in the instant case, the
Hearing Board takes cognizance of the following points:

1. The EDSA extension to Roxas Boulevard is necessary and
desirable from the strictly technical viewpoint and the overall
perspective of the Metro Manila transport system.

2. The right-of-way acquisition cost difference factor is so
minimal as to influence in any way the choice of either
alignment as the extension of EDSA to Roxas Boulevard.

3. The negotiated sale approach to compensation as proposed
should apply to a whichever alignment is selected.

4. The factor of functionality states strongly against the
selection of alignment 2 while the factor of great social and
economic impact bears grieviously on the residents of alignment
1.

The course of the decision in this case consequently boils
down to the soul-searching and heart-rending choice between
people on one hand and progress and development on the
other. In deciding in favor of the latter, the Hearing Board is not
unmindful that progress and development are carried out by the
State precisely and ultimately for the benefit of its people and
therefore, recommends the reverend of the extension project to
alignment 1. However, before the Government, through its
implementing agencies, particularly the Department of Public
Highways, undertakes the actual step of appropriating
properties on alignment I to pave the way for the extension the
hearing Board recommends the following as absolute. binding
and imperative preconditions:

1. The preparation, and ignore importantly, the execution of a
comprehensive and detailed plan for the relocation and
resettlement of the adversely and genuinely affected residents
of alignment I which will necessitate the coordinative efforts of
such agencies as the Human Settlements Commission, the
National Housing Authority and other such governmental
agencies. To be concrete, a self sufficient community or human
settlement complete with infrastructure capture market, school,
church and industries for employment should be set up to
enable the affected residents of alignment 1 to maintain, their
present social and economic standing.

2. The prompt payment of fair and just compensation through
the negotiated sale approach.

Finally, the Hearing Board recommends that the Department
of Public Highways conduct public hearings before undertaking
on future expropriations of private properties for public use.

Respectfully submitted to the Human Settlements Commission
Commissioners for consideration, final disposition and
endorsement thereof to His Excellency, the President of the
Philippines.

Makati, Metro Manila, July 4, 1977. 11

... From all the foregoing, the facts of record and
recommendations of the Human Settlements Commission, it is
clear that the choice of Fernando Rein Del Pan Streets as the
line through which the Epifanio de los Santos Avenue should be
extended to Roxas Boulevard is arbitrary and should not receive
judicial approval. The respondent judge committed a grave
abuse of discretion in allowing the Republic of the Philippines to
take immediate possession of the properties sought to be
expropriated.

WHEREFORE, the petition for certiorari and prohibition is
hereby granted. The order of June 14, 1979 authorizing the
Republic of the Philippines to take or enter upon the possession
of the properties sought to be condemned is set aside and the
respondent Judge is permanently enjoined from taking any
further action on Civil Case No. 7001-P, entitled "Republic of the
Philippines vs. Concepcion Cabarrus Vda. de Santos, etc." except
to dismiss said case.

SO ORDERED.

Teehankee, Acting C.J., Makasiar, Guerrero, and Melencio-
Herrera Herrera, JJ., concur.



Footnotes

1 Petition, Rollo, P. 7.

2 Petitioner's Memorandum. Rollo pp. 174-177.

3 Memorandum of Respondents, Rollo, p. 156.

4 Petition, Rollo p. 4.

5 Rollo, pp- 5-6.

6 Memorandum of Respondents, Rollo, pp. 161-162.

7 Ibid Rollo, pp. 165-166.

8 Ibid Rollo, p. 166.

9 Report and Recommendation, Rollo, pp. 125- 126.

10 Ibid Rollo, pp. 120-123.

11 Ibid Rollo, pp. 125-126.

The Lawphil Project - Arellano Law Foundation



lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-12792 February 28, 1961

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,
vs.
LA ORDEN DE PP. BENEDICTINOS DE FILIPINAS, defendant-
appellee.

Office of the Solicitor General for plaintiff-appellant.
Ledesma, Puno, Guytingco, Antonio and Associates for
defendant-appellee.

DIZON, J.:

To ease and solve the daily traffic congestion on Legarda
Street, the Government drew plans to extend Azcarraga street
from its junction with Mendiola street, up to the Sta. Mesa
Rotonda, Sampaloc, Manila. To carry out this plan it offered to
buy a portion of approximately 6,000 square meters of a bigger
parcel belonging to La Orden de PP. Benedictinos de Filipinas, a
domestic religious corporation that owns the San Beda College, a
private educational institution situated on Mendiola street. Not
having been able to reach an agreement on the matter with the
owner, the Government instituted the present expropriation
proceedings.

On May 27, 1957 the trial court, upon application of the
Government hereinafter referred to as appellant issued an
order fixing the provisional value of the property in question at
P270,000.00 and authorizing appellant to take immediate
possession thereof upon depositing said amount. The deposit
having been made with the City Treasurer of Manila, the trial
court issued the corresponding order directing the Sheriff of
Manila to place appellant in possession of the property
aforesaid.

On June 8, 1957, as directed by the Rules of Court, the herein
appellee, in lieu of an answer, filed a motion to dismiss the
complaint based on the following grounds:

I. That the property sought to be expropriated is already
dedicated to public use and therefore is not subject to
expropriation.

II. That there is no necessity for the proposed expropriation.

III. That the proposed Azcarraga Extension could pass through
a different site which would entail less expense to the
Government and which would not necessitate the expropriation
of a property dedicated to education.

IV. That the present action filed by the plaintiff against the
defendant is discriminatory.

V. That the herein plaintiff does not count with sufficient
funds to push through its project of constructing the proposed
Azcarraga Extension and to allow the plaintiff to expropriate
defendant's property at this time would be only to needlessly
deprive the latter of the use of its property.".

The government filed a written opposition to the motion to
dismiss (Record on Appeal, pp. 30-37) while appellee filed a
reply thereto (Id., pp. 38-48). On July 29, 1957, without receiving
evidence upon the questions of fact arising from the complaint,
the motion to dismiss and the opposition thereto filed, the trial
court issued the appealed order dismissing the case.

The appealed order shows that the trial court limited itself to
deciding the point of whether or not the expropriation of the
property in question is necessary (Rec. on Ap., p. 50) and, having
arrived at the conclusion that such expropriation was not of
extreme necessity, dismissed the proceedings.

It is to be observed that paragraph IV of the complaint
expressly alleges that appellant needs, among other properties,
the portion of appellee's property in question for the purpose of
constructing the Azcarraga street extension, and that paragraph
VII of the same complaint expressly alleges that, in accordance
with Section 64(b) of the Revised Administrative Code, the
President of the Philippines had authorized the acquisition, thru
condemnation proceedings, of the aforesaid parcel of land
belonging to appellee, as evidenced by the third indorsement
dated May 15, 1957 of the Executive Secretary, Office of the
President of the Philippines, a copy of which was attached to the
complaint as Annex "C" and made an integral part thereof. In
denial of these allegations appellee's motion to dismiss alleged
that "there is no necessity for the proposed expropriation".
Thus, the question of fact decisive of the whole case arose.

It is the rule in this jurisdiction that private property may be
expropriated for public use and upon payment of just
compensation; that condemnation of private property is
justified only if it is for the public good and there is a genuine
necessity therefor of a public character. Consequently, the
courts have the power to inquire into the legality of the exercise
of the right of eminent domain and to determine whether or not
there is a genuine necessity therefor (City of Manila vs. Chinese
Community, 40 Phil. 349; Manila Railroad Company vs. Hacienda
Benito, Inc., 37 O.G. 1957).

Upon the other hand, it does not need extended argument to
show that whether or not the proposed opening of the
Azcarraga extension is a necessity in order to relieve the daily
congestion of traffic on Legarda St., is a question of fact
dependent not only upon the facts of which the trial court very
liberally took judicial notice but also up on other factors that do
not appear of record and must, therefore, be established by
means of evidence. We are, therefore, of the opinion that the
parties should have been given an opportunity to present their
respective evidence upon these factors and others that might be
of direct or indirect help in determining the vital question of fact
involved, namely, the need to open the extension of Azcarraga
street to ease and solve the traffic congestion on Legarda street.

WHEREFORE, the appealed order of dismissal is set aside and
the present case is remanded to the trial court for further
proceedings in accordance with this decision. Without costs.

Bengzon, Actg. C.J., Padilla, Bautista Angelo, Labrador, Reyes,
J.B.L., Barrera and Paredes JJ., concur.
Concepcion, J., took no part.

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3.Power of Taxation


lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-19201 June 16, 1965

REV. FR. CASIMIRO LLADOC, petitioner,
vs.
The COMMISSIONER OF INTERNAL REVENUE and The
COURT of TAX APPEALS, respondents.

Hilado and Hilado for petitioner.
Office of the Solicitor General for respondents.

PAREDES, J.:

Sometime in 1957, the M.B. Estate, Inc., of Bacolod City,
donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then
parish priest of Victorias, Negros Occidental, and predecessor
of herein petitioner, for the construction of a new Catholic
Church in the locality. The total amount was actually spent for
the purpose intended.

On March 3, 1958, the donor M.B. Estate, Inc., filed the
donor's gift tax return. Under date of April 29, 1960, the
respondent Commissioner of Internal Revenue issued an
assessment for donee's gift tax against the Catholic Parish of
Victorias, Negros Occidental, of which petitioner was the
priest. The tax amounted to P1,370.00 including surcharges,
interests of 1% monthly from May 15, 1958 to June 15, 1960,
and the compromise for the late filing of the return.

Petitioner lodged a protest to the assessment and
requested the withdrawal thereof. The protest and the
motion for reconsideration presented to the Commissioner of
Internal Revenue were denied. The petitioner appealed to the
Court of Tax Appeals on November 2, 1960. In the petition for
review, the Rev. Fr. Casimiro Lladoc claimed, among others,
that at the time of the donation, he was not the parish priest
in Victorias; that there is no legal entity or juridical person
known as the "Catholic Parish Priest of Victorias," and,
therefore, he should not be liable for the donee's gift tax. It
was also asserted that the assessment of the gift tax, even
against the Roman Catholic Church, would not be valid, for
such would be a clear violation of the provisions of the
Constitution.

After hearing, the CTA rendered judgment, the pertinent
portions of which are quoted below:

... . Parish priests of the Roman Catholic Church under
canon laws are similarly situated as its Archbishops and
Bishops with respect to the properties of the church within
their parish. They are the guardians, superintendents or
administrators of these properties, with the right of
succession and may sue and be sued.

x x x x x x x x x

The petitioner impugns the, fairness of the assessment with
the argument that he should not be held liable for gift taxes
on donation which he did not receive personally since he was
not yet the parish priest of Victorias in the year 1957 when
said donation was given. It is intimated that if someone has to
pay at all, it should be petitioner's predecessor, the Rev. Fr.
Crispin Ruiz, who received the donation in behalf of the
Catholic parish of Victorias or the Roman Catholic Church.
Following petitioner's line of thinking, we should be equally
unfair to hold that the assessment now in question should
have been addressed to, and collected from, the Rev. Fr.
Crispin Ruiz to be paid from income derived from his present
parish where ever it may be. It does not seem right to
indirectly burden the present parishioners of Rev. Fr. Ruiz for
donee's gift tax on a donation to which they were not
benefited.

x x x x x x x x x

We saw no legal basis then as we see none now, to include
within the Constitutional exemption, taxes which partake of
the nature of an excise upon the use made of the properties
or upon the exercise of the privilege of receiving the
properties. (Phipps vs. Commissioner of Internal Revenue, 91
F [2d] 627; 1938, 302 U.S. 742.)

It is a cardinal rule in taxation that exemptions from
payment thereof are highly disfavored by law, and the party
claiming exemption must justify his claim by a clear, positive,
or express grant of such privilege by law. (Collector vs. Manila
Jockey Club, G.R. No. L-8755, March 23, 1956; 53 O.G. 3762.)

The phrase "exempt from taxation" as employed in Section
22(3), Article VI of the Constitution of the Philippines, should
not be interpreted to mean exemption from all kinds of taxes.
Statutes exempting charitable and religious property from
taxation should be construed fairly though strictly and in such
manner as to give effect to the main intent of the lawmakers.
(Roman Catholic Church vs. Hastrings 5 Phil. 701.)

x x x x x x x x x

WHEREFORE, in view of the foregoing considerations, the
decision of the respondent Commissioner of Internal Revenue
appealed from, is hereby affirmed except with regard to the
imposition of the compromise penalty in the amount of
P20.00 (Collector of Internal Revenue v. U.S.T., G.R. No. L-
11274, Nov. 28, 1958); ..., and the petitioner, the Rev. Fr.
Casimiro Lladoc is hereby ordered to pay to the respondent
the amount of P900.00 as donee's gift tax, plus the surcharge
of five per centum (5%) as ad valorem penalty under Section
119 (c) of the Tax Code, and one per centum (1%) monthly
interest from May 15, 1958 to the date of actual payment.
The surcharge of 25% provided in Section 120 for failure to
file a return may not be imposed as the failure to file a return
was not due to willful neglect.( ... ) No costs.

The above judgment is now before us on appeal, petitioner
assigning two (2) errors allegedly committed by the Tax Court,
all of which converge on the singular issue of whether or not
petitioner should be liable for the assessed donee's gift tax on
the P10,000.00 donated for the construction of the Victorias
Parish Church.

Section 22 (3), Art. VI of the Constitution of the Philippines,
exempts from taxation cemeteries, churches and parsonages
or convents, appurtenant thereto, and all lands, buildings,
and improvements used exclusively for religious purposes.
The exemption is only from the payment of taxes assessed on
such properties enumerated, as property taxes, as contra
distinguished from excise taxes. In the present case, what the
Collector assessed was a donee's gift tax; the assessment was
not on the properties themselves. It did not rest upon general
ownership; it was an excise upon the use made of the
properties, upon the exercise of the privilege of receiving the
properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627).
Manifestly, gift tax is not within the exempting provisions of
the section just mentioned. A gift tax is not a property tax,
but an excise tax imposed on the transfer of property by way
of gift inter vivos, the imposition of which on property used
exclusively for religious purposes, does not constitute an
impairment of the Constitution. As well observed by the
learned respondent Court, the phrase "exempt from
taxation," as employed in the Constitution (supra) should not
be interpreted to mean exemption from all kinds of taxes.
And there being no clear, positive or express grant of such
privilege by law, in favor of petitioner, the exemption herein
must be denied.

The next issue which readily presents itself, in view of
petitioner's thesis, and Our finding that a tax liability exists, is,
who should be called upon to pay the gift tax? Petitioner
postulates that he should not be liable, because at the time of
the donation he was not the priest of Victorias. We note the
merit of the above claim, and in order to put things in their
proper light, this Court, in its Resolution of March 15, 1965,
ordered the parties to show cause why the Head of the
Diocese to which the parish of Victorias pertains, should not
be substituted in lieu of petitioner Rev. Fr. Casimiro Lladoc it
appearing that the Head of such Diocese is the real party in
interest. The Solicitor General, in representation of the
Commissioner of Internal Revenue, interposed no objection
to such a substitution. Counsel for the petitioner did not also
offer objection thereto.

On April 30, 1965, in a resolution, We ordered the Head of
the Diocese to present whatever legal issues and/or defenses
he might wish to raise, to which resolution counsel for
petitioner, who also appeared as counsel for the Head of the
Diocese, the Roman Catholic Bishop of Bacolod, manifested
that it was submitting itself to the jurisdiction and orders of
this Court and that it was presenting, by reference, the brief
of petitioner Rev. Fr. Casimiro Lladoc as its own and for all
purposes.

In view here of and considering that as heretofore stated,
the assessment at bar had been properly made and the
imposition of the tax is not a violation of the constitutional
provision exempting churches, parsonages or convents, etc.
(Art VI, sec. 22 [3], Constitution), the Head of the Diocese, to
which the parish Victorias Pertains, is liable for the payment
thereof.

The decision appealed from should be, as it is hereby
affirmed insofar as tax liability is concerned; it is modified, in
the sense that petitioner herein is not personally liable for the
said gift tax, and that the Head of the Diocese, herein
substitute petitioner, should pay, as he is presently ordered
to pay, the said gift tax, without special, pronouncement as to
costs.

Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L.,
Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ.,
concur.
Barrera, J., took no part.

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