Consti 2 Cases Batch 1 Final Number

POLICE POWER G.R. No. 129098, December 6, 2006 AMELIA CABRERA, Petitioner, - versus - Chairperson, CARPIO, CARPIO MORALES, TINGA, and MANUEL LAPID, FERNANDO VELASCO, JR., JJ. BALTAZAR, REYNALDO F. CABRERA and DIONY VENTURA, Respondents. x-------------------------------------------------------------------x D E C I S I O N: TINGA, J.: The instant petition for review on certiorari seeks the reversal of the Resolution[1] dated 13 May 1996 and the Order[2] dated 21 March 1997, both issued by the Office of the Ombudsman. The Resolution dismissed the complaint-affidavit filed by petitioner against respondents and the Order denied her motion for reconsideration. The instant petition originated from a Complaint-Affidavit filed in November 1995 by petitioner Amelia M. Cabrera with the Office of the Ombudsman (Ombudsman). Named respondents were Manuel Lapid, Fernando Baltazar, Reynaldo F. Cabrera and Superintendent Diony Ventura, respectively, in their capacities as Governor of Pampanga, Mayor of Sasmuan, Pampanga, Vice-Mayor of Sasmuan, Pampanga and Superintendent of the Philippine National Police (PNP)-Region 3, Pampanga. In her three (3)-page affidavit, petitioner accused respondents of violating Section 3(e) of the Anti-Graft and Corrupt Practices Act and Article 324 of the Revised Penal Code. In her Complaint-Affidavit, petitioner stated that she entered into a lease agreement with the Municipality of Sasmuan over a tract of land for the purpose of devoting it to fishpond operations. According to petitioner, she had spent approximately P5, 000,000.00 for its construction before the fishpond operations commenced in August 1995. A month later, petitioner learned from newspaper reports of the impending demolition of her fishpond as it was purportedly illegal and blocked the flow of the Pasak River. Thus, petitioner sent the fishpond administrator to dissuade respondents from destroying her property. Despite pleas from petitioner, respondents ordered the destruction of petitioner’s fishpond. The property was demolished on 10 October 1995 by dynamite blasting. Petitioner alleged that the demolition was purposely carried out in the presence of media representatives and other government officials to gain media mileage. Petitioner imputed evident bad faith on respondents Mayor Baltazar and Vice-Mayor Cabrera in allowing the destruction of the fishpond despite their prior knowledge of the existence of the lease agreement. She also charged respondents Governor Lapid and Senior Superintendent Ventura with gross inexcusable negligence for ordering the destruction of the fishpond without first verifying its legality. At the preliminary investigation, respondents, except Senior Superintendent Ventura, submitted counter-affidavits, denying the accusations against them. In the counter-affidavit jointly filed by Mayor Baltazar and Vice-Mayor Cabrera, they

insisted that contrary to petitioners claim, the fishpond was an illegal structure because it was erected on the seashore, at the mouth of the Pasak River, and sat on an inalienable land. They claimed that the demolition was done by the Task Force Bilis Daloy upon the directive of then President Fidel V. Ramos.

In his Counter-Affidavit, Governor Lapid averred that the contract of lease between petitioner and the Municipality of Sasmuan, represented by then Mayor Abelardo Panlaqui, was executed two weeks before respondent Mayor Baltazar took his oath of office in 1995. Governor Lapid also argued that under the law, the Department of Agriculture (DA) is the government agency authorized to enter into licensing agreements for fishpond operations, and as per certification by the DA Regional Director, petitioners fishpond operation was not covered by a fishpond lease agreement or application. Governor Lapid also referred to the certification by the Municipal Health Officer of Sasmuan issued before the actual demolition of the fishpond, describing it as a nuisance per se and recommending its abatement. On 13 May 1996, the Ombudsman issued the assailed Resolution, dismissing petitioner’s complaint. The dismissal was based on the declaration that the fishpond was a nuisance per se and, thus, may be abated by respondents in the exercise of the police power of the State. Petitioner sought reconsideration of the Resolution, arguing that under Sec. 149 of Republic Act (R.A.) No. 7160, otherwise known as the Local Government Code of 1991, the exclusive authority to grant fishery privileges is vested in the municipalities. Petitioner also questioned the certification by the Municipal Health Officer, alleging that the same was issued before the ocular inspection of the property which took place only on the day of the demolition. Petitioner also contended that a judicial proceeding was necessary to determine whether the property indeed had caused the flooding. Respondents filed separate oppositions to petitioner’s motion for reconsideration. Petitioner filed a reply to the opposition and respondent Governor Lapid filed a rejoinder to the reply. In the Order dated 21 March 1997, the Ombudsman affirmed its 13 May 1996 Resolution. It ruled that the repealing clause of R.A. No. 7160 expressly repealed only Sec. 2, 6 and 29 of Presidential Decree (P.D.) No. 704 so that in harmonizing the remaining provisions of P.D. No. 704 and the provisions of R.A. No. 7160 applicable to the grant of fishery privileges, the Bureau of Fisheries and Aquatic Resources (BFAR) is the government agency authorized to grant fishpond license or permit in areas not identified as municipal waters or not declared as alienable or disposable by the Department of Environment and Natural Resources (DENR). Since it appears from DENR records that the subject property has not been declared disposable or included in areas devoted for fishpond development, the Ombudsman concluded that the lease agreement entered into by petitioner was void ab initio. In view of the illegality of the lease agreement, the Ombudsman ruled that its demolition was justified. The Ombudsman described the demolition as a valid exercise of police power and in accordance with the provision of Sec. 28 of P.D. No. 704 directing the removal of any fishpen or fishpond that obstructed the free navigation of a stream or lake. It also upheld the authority of the district health

officer to determine the abatement of a nuisance without need of judicial proceedings. Petitioner elevated the matter to this Court via a petition for review on certiorari under Rule 45 of the Rules of Court to assail the 13 May 1996 Resolution and 21 March 1997 Order of the Ombudsman. Petitioner subsequently filed an amended petition for review on certiorari to implead the Ombudsman as respondent, although in a petition for review on certiorari, the tribunal whose issuance is assailed need not be impleaded as respondent. The petition imputes the following errors on the Ombudsman: I.

THE OFFICE OF THE OMBUDSMAN ERRED AND EXCEEDED ITS AUTHORITY IN RULING THAT THE LEASE CONTRACT BETWEEN THE MUNICIPALITY OF SASMUAN AND PETITIONER IS NULL AND VOID. II. THE OFFICE OF THE OMBUDSMAN ERRED IN RULING THAT THE DEMOLITION OF THE FISHPOND WAS VALIDLY MADE BY VIRTUE OF THE DECLARATION BY THE HEALTH OFFICER THAT IT WAS A NUISANCE PER SE. III. THE OFFICE OF THE OMBUDSMAN ERRED IN RULING THAT THE DEMOLITION IS PART OF THE PROPER EXERCISE OF THE POLICE POWER OF THE STATE. IV. THE OFFICE OF THE OMBUDSMAN ERRED IN RULING THAT PETITIONER WAS GIVEN DUE NOTICE AND HEARING BEFORE THE FISHPOND WAS BLASTED. V. THE OFFICE OF THE OMBUDSMAN ERRED IN RULING THAT PROBABLE CAUSE DOES NOT EXIST TO INDICT RESPONDENTS FOR VIOLATION OF THE SUBJECT OFFENSES. Clearly, this is an appeal from the questioned issuances of the Ombudsman. However, such direct resort to this Court from a resolution or order of the Ombudsman is not sanctioned by any rule of procedure. Neither can petitioner avail of Sec. 27 of R.A. No. 6770, otherwise known as The Ombudsman Act of 1989. The provision allowed direct appeals in administrative disciplinary cases from the Office of the Ombudsman to the Supreme Court. The right to appeal is granted only in respect to orders or decisions of the Ombudsman in administrative cases. The provision does not cover resolutions of the Ombudsman

in criminal cases. More importantly, Sec. 27 of R.A. No. 6770 insofar as it allowed a direct appeal to this Court was declared unconstitutional in Fabian v. Hon. Desierto. However, an aggrieved party in criminal actions is not without any recourse. Where grave abuse of discretion amounting to lack or excess of jurisdiction taints the findings of the Ombudsman on the existence of probable cause, the aggrieved party may file a petition for certiorari under Rule 65. The remedy from resolutions of the Ombudsman in preliminary investigations of criminal cases is a petition for certiorari under Rule 65, not a petition for review on certiorari under Rule 45. But in this case, petitioner has taken the position that the Ombudsman has decided questions of substance contrary to law and the applicable decisions of the Supreme Court. That is a ground under a Rule 45 petition. Indeed, from a reading of the assignment of errors, it is clear that petitioner does not impute grave abuse of discretion to the Ombudsman in issuing the assailed Resolution and Order. Rather, she merely questions his findings and conclusions. As stated earlier, direct appeal to the Supreme Court via a petition for review on certiorari is not sanctioned by any rule of procedure. By availing of a wrong remedy, the petition should be dismissed outright. Even if the Court treats the instant appeal as a petition for certiorari under Rule 65, its dismissal is nevertheless warranted because petitioner failed to present, much more substantiate, any grave abuse of discretion on the part of the Ombudsman. A careful reading of the questioned Resolution reveals that the Ombudsman dismissed petitioners criminal complaint because respondents had validly resorted to the police power of the State when they effected the demolition of the illegal fishpond in question following the declaration thereof as a nuisance per se. Thus, the Ombudsman was of the opinion that no violation of Section 3(e) of the Anti-Graft and Corrupt Practices Act or of Article 324 of the Revised Penal Code was committed by respondents. In the words of the Ombudsman, those who participated in the blasting of the subject fishpond were only impelled by their desire to serve the best interest of the general public; for the good and the highest good. By grave abuse of discretion is meant capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction. 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. Grave abuse of discretion should be differentiated from an error in judgment. An error of judgment is one which the court may commit in the exercise of its jurisdiction, and which error is reversible only by an appeal. As long as the court acts within its jurisdiction, any alleged errors committed in the exercise of its discretion will amount to nothing more than mere errors of judgment, correctible by an appeal or a petition for review under Rule 45 of the Rules of Court. An error of

jurisdiction is one where the act complained of was issued by the court without or in excess of jurisdiction and which error is correctible only by the extraordinary writ of certiorari. The other errors raised by petitioner pertain to the Ombudsman’s opinion on the lack of probable cause to indict respondents. These are purported errors in judgment which can be corrected by an appeal, although not via a direct appeal to this Court. Direct resort to this Court may be had only through the extraordinary writ of certiorari and upon showing that the Ombudsman committed grave abuse of discretion, which petitioner failed to demonstrate. Absent any grave abuse of discretion tainting it, the courts will not interfere with the Ombudsman’s supervision and control over the preliminary investigation conducted by him. It is beyond the ambit of this Court to review the exercise of discretion of the Ombudsman in prosecuting or dismissing a complaint filed before it. The rule is based not only upon respect for the investigatory and prosecutory powers granted by the Constitution to the Office of the Ombudsman but upon practicality as well. Otherwise, the functions of the courts will be grievously hampered by innumerable petitions assailing the dismissal of investigatory proceedings conducted by the Office of the Ombudsman with regard to complaints filed before it, in much the same way that the courts would be extremely swamped if they would be compelled to review the exercise of discretion on the part of the fiscals or prosecuting attorneys each time they decide to file an information in court or dismiss a complaint by a private complainant. WHEREFORE, the instant petition for review on certiorari is DENIED. No costs. SO ORDERED.

G.R. No. 166494, June 29, 2007 CARLOS SUPERDRUG CORP., - versus - DEPARTMENT OF SOCIAL WELFARE and DEVELOPMENT (DSWD), DEPARTMENT OF HEALTH (DOH), DEPARTMENT OF FINANCE (DOF), DEPARTMENT OF JUSTICE (DOJ), and DEPARTMENT OF INTERIOR and LOCAL GOVERNMENT (DILG), Respondents. x ---------------------------------------------------------------------------------------- x DECISION: AZCUNA, J.: This is a petition for Prohibition with Prayer for Preliminary Injunction assailing the constitutionality of Section 4(a) of Republic Act (R.A.) No. 9257, 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, 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. 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; Section 9, Medical and Dental Services in Private Facilities, and Sections 10 and 11 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). On July 10, 2004, in reference to the query of the Drug Stores Association of the Philippines (DSAP) concerning the meaning of a tax deduction under the Expanded Senior Citizens Act, the DOF, through Director IV Ma. Lourdes B. Recente, clarified as follows: 1) The difference between the Tax Credit (under the Old Senior Citizens Act) and Tax Deduction (under the Expanded Senior Citizens Act). 1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior Citizens Act) grants twenty percent (20%) discount from all establishments relative to the utilization of transportation services, hotels and similar lodging establishment, restaurants and recreation centers and purchase of medicines anywhere in the country, the costs of which may be claimed by the private establishments concerned as tax credit. Effectively, a tax credit is a peso-for-peso deduction from a taxpayer’s tax liability due to the government of the amount of discounts such establishment has granted to a senior citizen. The establishment recovers the full amount of discount given to a senior citizen and hence, the government shoulders 100% of the discounts granted. It must be noted, however, that conceptually, a tax credit scheme under the Philippine tax system, necessitates that prior payments of taxes have been made and the taxpayer is attempting to recover this tax payment from his/her income tax due. The tax credit scheme under R.A. No. 7432 is, therefore, inapplicable since no tax payments have previously occurred. 1.2. The provision under R.A. No. 9257, on the other hand, provides that the establishment concerned may claim the discounts under Section 4(a), (f), (g) and (h) as tax deduction from gross income, based on the net cost of goods sold or services rendered. Under this scheme, the establishment concerned is allowed to deduct from gross income, in computing for its tax liability, the amount of discounts granted to senior citizens. Effectively, the government loses in terms of foregone revenues an amount equivalent to the marginal tax rate the said establishment is liable to pay the government. This will be an amount equivalent to 32% of the twenty percent (20%) discounts so granted. The establishment shoulders the remaining portion of the granted discounts. It may be necessary to note that while the burden on [the] government is slightly diminished in terms of its percentage share on the discounts granted to senior citizens, the number of potential establishments that may claim tax deductions, have however, been broadened. Aside from the establishments that may claim tax credits under the old law, more establishments were added under the new law such as: establishments providing medical and dental services, diagnostic and laboratory services, including professional fees of attending doctors in all private hospitals and

medical facilities, operators of domestic air and sea transport services, public railways and skyways and bus transport services. A simple illustration might help amplify the points discussed above, as follows: Tax Deduction Tax Credit

Gross Sales x x x x x x x x x x x x Less : Cost of goods sold x x x x x x x x x x Net Sales x x x x x x x x x x x x 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. 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 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 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: 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. 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 petitioner’s 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 to reduce the income prior to the application of the tax rate to compute the amount of tax which is due. 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. 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 owner’s loss. The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample. A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just compensation.

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. 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. 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. 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. 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. 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. 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. 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. 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. Petitioner’s computation is flawed. For purposes of reimbursement, the law states that the cost of the discount shall be deducted from gross income, 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 petitioner’s 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. 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. WHEREFORE, the petition is DISMISSED for lack of merit. No costs. SO ORDERED.

[G.R. No. 118127. April 12, 2005] CITY OF MANILA, HON. ALFREDO S. LIM as the Mayor of the City of Manila, HON. JOSELITO L. ATIENZA, in his capacity as Vice-Mayor of

the City of Manila and Presiding Officer of the City Council of Manila, HON. ERNESTO A. NIEVA, HON. GONZALO P. GONZALES, HON. AVELINO S. CAILIAN, HON. ROBERTO C. OCAMPO, HON. ALBERTO DOMINGO, HON. HONORIO U. LOPEZ, HON. FRANCISCO G. VARONA, JR., HON. ROMUALDO S. MARANAN, HON. NESTOR C. PONCE, JR., HON. HUMBERTO B. BASCO, HON. FLAVIANO F. CONCEPCION, JR., HON. ROMEO G. RIVERA, HON. MANUEL M. ZARCAL, HON. PEDRO S. DE JESUS, HON. BERNARDITO C. ANG, HON. MANUEL L. QUIN, HON. JHOSEP Y. LOPEZ, HON. CHIKA G. GO, HON. VICTORIANO A. MELENDEZ, HON. ERNESTO V.P. MACEDA, JR., HON. ROLANDO P. NIETO, HON. DANILO V. ROLEDA, HON. GERINO A. TOLENTINO, JR., HON. MA. PAZ E. HERRERA, HON. JOEY D. HIZON, HON. FELIXBERTO D. ESPIRITU, HON. KARLO Q. BUTIONG, HON. ROGELIO P. DELA PAZ, HON. BERNARDO D. RAGAZA, HON. MA. CORAZON R. CABALLES, HON. CASIMIRO C. SISON, HON. BIENVINIDO M. ABANTE, JR., HON. MA. LOURDES M. ISIP, HON. ALEXANDER S. RICAFORT, HON. ERNESTO F. RIVERA, HON. LEONARDO L. ANGAT, and HON. JOCELYN B. DAWIS, in their capacity as councilors of the City of Manila, petitioners, vs. HON. PERFECTO A.S. LAGUIO, JR., as Presiding Judge, RTC, Manila and MALATE TOURIST DEVELOPMENT CORPORATION, respondents. D E C I S I O N: TINGA, J.: I know only that what is moral is what you feel good after and what is immoral is what you feel bad after. Ernest Hermingway Death in the Afternoon, Ch. 1 It is a moral and political axiom that any dishonorable act, if performed by oneself, is less immoral than if performed by someone else, who would be well-intentioned in his dishonesty. J. Christopher Gerald Bonaparte in Egypt, Ch. I The Courts commitment to the protection of morals is secondary to its fealty to the fundamental law of the land. It is foremost a guardian of the Constitution but not the conscience of individuals. And if it need be, the Court will not hesitate to make the hammer fall, and heavily in the words of Justice Laurel, and uphold the constitutional guarantees when faced with laws that, though not lacking in zeal to promote morality, nevertheless fail to pass the test of constitutionality. The pivotal issue in this Petition under Rule 45 (then Rule 42) of the Revised Rules on Civil Procedure seeking the reversal of the Decision in Civil Case No. 93-66511 of

the Regional Trial Court (RTC) of Manila, Branch 18 (lower court), is the validity of Ordinance No. 7783 (the Ordinance) of the City of Manila. The antecedents are as follows: Private respondent Malate Tourist Development Corporation (MTDC) is a corporation engaged in the business of operating hotels, motels, hostels and lodging houses. It built and opened Victoria Court in Malate which was licensed as a motel although duly accredited with the Department of Tourism as a hotel. On 28 June 1993, MTDC filed a Petition for Declaratory Relief with Prayer for a Writ of Preliminary Injunction and/or Temporary Restraining Order (RTC Petition) with the lower court impleading as defendants, herein Petitioners City of Manila, Hon. Alfredo S. Lim (Lim), Hon. Joselito L. Atienza, and the members of the City Council of Manila (City Council). MTDC prayed that the Ordinance, insofar as it includes motels and inns as among its prohibited establishments, be declared invalid and unconstitutional. Enacted by the City Council on 9 March 1993 and approved by petitioner City Mayor on 30 March 1993, the said Ordinance is entitled AN ORDINANCE PROHIBITING THE ESTABLISHMENT OR OPERATION OF BUSINESSES PROVIDING CERTAIN FORMS OF AMUSEMENT, ENTERTAINMENT, SERVICES AND FACILITIES IN THE ERMITA-MALATE AREA, PRESCRIBING PENALTIES FOR VIOLATION THEREOF, AND FOR OTHER PURPOSES. The Ordinance is reproduced in full, hereunder: SECTION 1. Any provision of existing laws and ordinances to the contrary notwithstanding, no person, partnership, corporation or entity shall, in the ErmitaMalate area bounded by Teodoro M. Kalaw Sr. Street in the North, Taft Avenue in the East, Vito Cruz Street in the South and Roxas Boulevard in the West, pursuant to P.D. 499 be allowed or authorized to contract and engage in, any business providing certain forms of amusement, entertainment, services and facilities where women are used as tools in entertainment and which tend to disturb the community, annoy the inhabitants, and adversely affect the social and moral welfare of the community, such as but not limited to: 1. Sauna Parlors 2. Massage Parlors 3. Karaoke Bars 4. Beerhouses 5. Night Clubs 6. Day Clubs 7. Super Clubs 8. Discotheques 9. Cabarets 10. Dance Halls 11. Motels 12. Inns

SEC. 2 The City Mayor, the City Treasurer or any person acting in behalf of the said officials are prohibited from issuing permits, temporary or otherwise, or from granting licenses and accepting payments for the operation of business enumerated in the preceding section. SEC. 3. Owners and/or operator of establishments engaged in, or devoted to, the businesses enumerated in Section 1 hereof are hereby given three (3) months from the date of approval of this ordinance within which to wind up business operations or to transfer to any place outside of the Ermita-Malate area or convert said businesses to other kinds of business allowable within the area, such as but not limited to: 1. Curio or antique shop 2. Souvenir Shops 3. Handicrafts display centers 4. Art galleries 5. Records and music shops 6. Restaurants 7. Coffee shops 8. Flower shops 9. Music lounge and sing-along restaurants, with well-defined activities for wholesome family entertainment that cater to both local and foreign clientele. 10. Theaters engaged in the exhibition, not only of motion pictures but also of cultural shows, stage and theatrical plays, art exhibitions, concerts and the like. 11. Businesses allowable within the law and medium intensity districts as provided for in the zoning ordinances for Metropolitan Manila, except new warehouse or open-storage depot, dock or yard, motor repair shop, gasoline service station, light industry with any machinery, or funeral establishments. SEC. 4. Any person violating any provisions of this ordinance, shall upon conviction, be punished by imprisonment of one (1) year or fine of FIVE THOUSAND (P5,000.00) PESOS, or both, at the discretion of the Court, PROVIDED, that in case of juridical person, the President, the General Manager, or person-in-charge of operation shall be liable thereof; PROVIDED FURTHER, that in case of subsequent violation and conviction, the premises of the erring establishment shall be closed and padlocked permanently. SEC. 5. This ordinance shall take effect upon approval. Enacted by the City Council of Manila at its regular session today, March 9, 1993. Approved by His Honor, the Mayor on March 30, 1993. In the RTC Petition, MTDC argued that the Ordinance erroneously and improperly included in its enumeration of prohibited establishments, motels and inns such as MTDCs Victoria Court considering that these were not establishments for amusement or entertainment and they were not services or facilities for entertainment, nor did they use women as tools for entertainment, and neither did they disturb the community, annoy the inhabitants or adversely affect the social and moral welfare of the community.

MTDC further advanced that the Ordinance was invalid and unconstitutional for the following reasons: (1) The City Council has no power to prohibit the operation of motels as Section 458 (a) 4 (iv) of the Local Government Code of 1991 (the Code) grants to the City Council only the power to regulate the establishment, operation and maintenance of hotels, motels, inns, pension houses, lodging houses and other similar establishments; (2) The Ordinance is void as it is violative of Presidential Decree (P.D.) No. 499 which specifically declared portions of the Ermita-Malate area as a commercial zone with certain restrictions; (3) The Ordinance does not constitute a proper exercise of police power as the compulsory closure of the motel business has no reasonable relation to the legitimate municipal interests sought to be protected; (4) The Ordinance constitutes an ex post facto law by punishing the operation of Victoria Court which was a legitimate business prior to its enactment; (5) The Ordinance violates MTDCs constitutional rights in that: (a) it is confiscatory and constitutes an invasion of plaintiffs property rights; (b) the City Council has no power to find as a fact that a particular thing is a nuisance per se nor does it have the power to extrajudicially destroy it; and (6) The Ordinance constitutes a denial of equal protection under the law as no reasonable basis exists for prohibiting the operation of motels and inns, but not pension houses, hotels, lodging houses or other similar establishments, and for prohibiting said business in the Ermita-Malate area but not outside of this area. In their Answer dated 23 July 1993, petitioners City of Manila and Lim maintained that the City Council had the power to prohibit certain forms of entertainment in order to protect the social and moral welfare of the community as provided for in Section 458 (a) 4 (vii) of the Local Government Code, which reads, thus: Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: (4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose shall: (vii) Regulate the establishment, operation, and maintenance of any entertainment or amusement facilities, including theatrical performances, circuses, billiard pools, public dancing schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement; regulate such other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the inhabitants, or require the suspension or suppression of the same; or, prohibit certain forms of amusement or entertainment in order to protect the social and moral welfare of the community. Citing Kwong Sing v. City of Manila, petitioners insisted that the power of regulation spoken of in the above-quoted provision included the power to control, to govern and to restrain places of exhibition and amusement.

Petitioners likewise asserted that the Ordinance was enacted by the City Council of Manila to protect the social and moral welfare of the community in conjunction with its police power as found in Article III, Section 18(kk) of Republic Act No. 409, otherwise known as the Revised Charter of the City of Manila (Revised Charter of Manila) which reads, thus: ARTICLE III THE MUNICIPAL BOARD Section 18. Legislative powers. The Municipal Board shall have the following legislative powers: (kk) To enact all ordinances it may deem necessary and proper for the sanitation and safety, the furtherance of the prosperity, and the promotion of the morality, peace, good order, comfort, convenience, and general welfare of the city and its inhabitants, and such others as may be necessary to carry into effect and discharge the powers and duties conferred by this chapter; and to fix penalties for the violation of ordinances which shall not exceed two hundred pesos fine or six months imprisonment, or both such fine and imprisonment, for a single offense. Further, the petitioners noted, the Ordinance had the presumption of validity; hence, private respondent had the burden to prove its illegality or unconstitutionality. Petitioners also maintained that there was no inconsistency between P.D. 499 and the Ordinance as the latter simply disauthorized certain forms of businesses and allowed the Ermita-Malate area to remain a commercial zone. The Ordinance, the petitioners likewise claimed, cannot be assailed as ex post facto as it was prospective in operation. The Ordinance also did not infringe the equal protection clause and cannot be denounced as class legislation as there existed substantial and real differences between the Ermita-Malate area and other places in the City of Manila. On 28 June 1993, respondent Judge Perfecto A.S. Laguio, Jr. (Judge Laguio) issued an ex-parte temporary restraining order against the enforcement of the Ordinance. And on 16 July 1993, again in an intrepid gesture, he granted the writ of preliminary injunction prayed for by MTDC. After trial, on 25 November 1994, Judge Laguio rendered the assailed Decision, enjoining the petitioners from implementing the Ordinance. The dispositive portion of said Decision reads: WHEREFORE, judgment is hereby rendered declaring Ordinance No. 778[3], Series of 1993, of the City of Manila null and void, and making permanent the writ of preliminary injunction that had been issued by this Court against the defendant. No costs. SO ORDERED.

Petitioners filed with the lower court a Notice of Appeal on 12 December 1994, manifesting that they are elevating the case to this Court under then Rule 42 on pure questions of law. On 11 January 1995, petitioners filed the present Petition, alleging that the following errors were committed by the lower court in its ruling: (1) It erred in concluding that the subject ordinance is ultra vires, or otherwise, unfair, unreasonable and oppressive exercise of police power; (2) It erred in holding that the questioned Ordinance contravenes P.D. 499 which allows operators of all kinds of commercial establishments, except those specified therein; and (3) It erred in declaring the Ordinance void and unconstitutional. In the Petition and in its Memorandum, petitioners in essence repeat the assertions they made before the lower court. They contend that the assailed Ordinance was enacted in the exercise of the inherent and plenary power of the State and the general welfare clause exercised by local government units provided for in Art. 3, Sec. 18 (kk) of the Revised Charter of Manila and conjunctively, Section 458 (a) 4 (vii) of the Code. They allege that the Ordinance is a valid exercise of police power; it does not contravene P.D. 499; and that it enjoys the presumption of validity. In its Memorandum dated 27 May 1996, private respondent maintains that the Ordinance is ultra vires and that it is void for being repugnant to the general law. It reiterates that the questioned Ordinance is not a valid exercise of police power; that it is violative of due process, confiscatory and amounts to an arbitrary interference with its lawful business; that it is violative of the equal protection clause; and that it confers on petitioner City Mayor or any officer unregulated discretion in the execution of the Ordinance absent rules to guide and control his actions. This is an opportune time to express the Courts deep sentiment and tenderness for the Ermita-Malate area being its home for several decades. A long-time resident, the Court witnessed the areas many turn of events. It relished its glory days and endured its days of infamy. Much as the Court harks back to the resplendent era of the Old Manila and yearns to restore its lost grandeur, it believes that the Ordinance is not the fitting means to that end. The Court is of the opinion, and so holds, that the lower court did not err in declaring the Ordinance, as it did, ultra vires and therefore null and void. The Ordinance is so replete with constitutional infirmities that almost every sentence thereof violates a constitutional provision. The prohibitions and sanctions therein transgress the cardinal rights of persons enshrined by the Constitution. The Court is called upon to shelter these rights from attempts at rendering them worthless. The tests of a valid ordinance are well established. A long line of decisions has held that for an ordinance to be valid, it must not only be within the corporate powers of the local government unit to enact and must be passed according to the procedure prescribed by law, it must also conform to the following substantive requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may

regulate trade; (5) must be general and consistent with public policy; and (6) must not be unreasonable. Anent the first criterion, ordinances shall only be valid when they are not contrary to the Constitution and to the laws. The Ordinance must satisfy two requirements: it must pass muster under the test of constitutionality and the test of consistency with the prevailing laws. That ordinances should be constitutional uphold the principle of the supremacy of the Constitution. The requirement that the enactment must not violate existing law gives stress to the precept that local government units are able to legislate only by virtue of their derivative legislative power, a delegation of legislative power from the national legislature. The delegate cannot be superior to the principal or exercise powers higher than those of the latter. This relationship between the national legislature and the local government units has not been enfeebled by the new provisions in the Constitution strengthening the policy of local autonomy. The national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it. The Ordinance was passed by the City Council in the exercise of its police power, an enactment of the City Council acting as agent of Congress. Local government units, as agencies of the State, are endowed with police power in order to effectively accomplish and carry out the declared objects of their creation. This delegated police power is found in Section 16 of the Code, known as the general welfare clause, viz: SECTION 16. General Welfare. Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants. Local government units exercise police power through their respective legislative bodies; in this case, the sangguniang panlungsod or the city council. The Code empowers the legislative bodies to enact ordinances, approve resolutions and appropriate funds for the general welfare of the province/city/municipality and its inhabitants pursuant to Section 16 of the Code and in the proper exercise of the corporate powers of the province/city/ municipality provided under the Code. The inquiry in this Petition is concerned with the validity of the exercise of such delegated power. The Ordinance contravenes the Constitution. The police power of the City Council, however broad and far-reaching, is subordinate to the constitutional limitations thereon; and is subject to the limitation that its

exercise must be reasonable and for the public good. In the case at bar, the enactment of the Ordinance was an invalid exercise of delegated power as it is unconstitutional and repugnant to general laws. The relevant constitutional provisions are the following: SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and the promotion of the general welfare are essential for the enjoyment by all the people of the blessings of democracy. SEC. 14. The State recognizes the role of women in nation-building, and shall ensure the fundamental equality before the law of women and men. SEC. 1. No person shall be deprived of life, liberty or property without due process of law, nor shall any person be denied the equal protection of laws. Sec. 9. Private property shall not be taken for public use without just compensation. A. The Ordinance infringes the Due Process Clause The constitutional safeguard of due process is embodied in the fiat (N)o person shall be deprived of life, liberty or property without due process of law. . . There is no controlling and precise definition of due process. It furnishes though a standard to which governmental action should conform in order that deprivation of life, liberty or property, in each appropriate case, be valid. This standard is aptly described as a responsiveness to the supremacy of reason, obedience to the dictates of justice, and as such it is a limitation upon the exercise of the police power. The purpose of the guaranty is to prevent governmental encroachment against the life, liberty and property of individuals; to secure the individual from the arbitrary exercise of the powers of the government, unrestrained by the established principles of private rights and distributive justice; to protect property from confiscation by legislative enactments, from seizure, forfeiture, and destruction without a trial and conviction by the ordinary mode of judicial procedure; and to secure to all persons equal and impartial justice and the benefit of the general law. The guaranty serves as a protection against arbitrary regulation, and private corporations and partnerships are persons within the scope of the guaranty insofar as their property is concerned. This clause has been interpreted as imposing two separate limits on government, usually called procedural due process and substantive due process. Procedural due process, as the phrase implies, refers to the procedures that the government must follow before it deprives a person of life, liberty, or property. Classic procedural due process issues are concerned with what kind of notice and what form of hearing the government must provide when it takes a particular action.

Substantive due process, as that phrase connotes, asks whether the government has an adequate reason for taking away a person’s life, liberty, or property. In other words, substantive due process looks to whether there is a sufficient justification for the government’s action. Case law in the United States (U.S.) tells us that whether there is such a justification depends very much on the level of scrutiny used. For example, if a law is in an area where only rational basis review is applied, substantive due process is met so long as the law is rationally related to a legitimate government purpose. But if it is an area where strict scrutiny is used, such as for protecting fundamental rights, then the government will meet substantive due process only if it can prove that the law is necessary to achieve a compelling government purpose. The police power granted to local government units must always be exercised with utmost observance of the rights of the people to due process and equal protection of the law. Such power cannot be exercised whimsically, arbitrarily or despotically as its exercise is subject to a qualification, limitation or restriction demanded by the respect and regard due to the prescription of the fundamental law, particularly those forming part of the Bill of Rights. Individual rights, it bears emphasis, may be adversely affected only to the extent that may fairly be required by the legitimate demands of public interest or public welfare. Due process requires the intrinsic validity of the law in interfering with the rights of the person to his life, liberty and property. Requisites for the valid exercise of Police Power are not met: To successfully invoke the exercise of police power as the rationale for the enactment of the Ordinance, and to free it from the imputation of constitutional infirmity, not only must it appear that the interests of the public generally, as distinguished from those of a particular class, require an interference with private rights, but the means adopted must be reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. It must be evident that no other alternative for the accomplishment of the purpose less intrusive of private rights can work. A reasonable relation must exist between the purposes of the police measure and the means employed for its accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to private property will not be permitted to be arbitrarily invaded. Lacking a concurrence of these two requisites, the police measure shall be struck down as an arbitrary intrusion into private rights a violation of the due process clause. The Ordinance was enacted to address and arrest the social ills purportedly spawned by the establishments in the Ermita-Malate area which are allegedly operated under the deceptive veneer of legitimate, licensed and tax-paying nightclubs, bars, karaoke bars, girlie houses, cocktail lounges, hotels and motels. Petitioners insist that even the Court in the case of Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila had already taken judicial notice of the alarming increase in the rate of prostitution, adultery and fornication in Manila traceable in great part to existence of motels, which provide a necessary

atmosphere for clandestine entry, presence and exit and thus become the ideal haven for prostitutes and thrill-seekers. The object of the Ordinance was, accordingly, the promotion and protection of the social and moral values of the community. Granting for the sake of argument that the objectives of the Ordinance are within the scope of the City Councils police powers, the means employed for the accomplishment thereof were unreasonable and unduly oppressive. It is undoubtedly one of the fundamental duties of the City of Manila to make all reasonable regulations looking to the promotion of the moral and social values of the community. However, the worthy aim of fostering public morals and the eradication of the community’s social ills can be achieved through means less restrictive of private rights; it can be attained by reasonable restrictions rather than by an absolute prohibition. The closing down and transfer of businesses or their conversion into businesses allowed under the Ordinance have no reasonable relation to the accomplishment of its purposes. Otherwise stated, the prohibition of the enumerated establishments will not per se protect and promote the social and moral welfare of the community; it will not in itself eradicate the alluded social ills of prostitution, adultery, fornication nor will it arrest the spread of sexual disease in Manila. Conceding for the nonce that the Ermita-Malate area teems with houses of ill-repute and establishments of the like which the City Council may lawfully prohibit, it is baseless and insupportable to bring within that classification sauna parlors, massage parlors, karaoke bars, night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns. This is not warranted under the accepted definitions of these terms. The enumerated establishments are lawful pursuits which are not per se offensive to the moral welfare of the community. That these are used as arenas to consummate illicit sexual affairs and as venues to further the illegal prostitution is of no moment. We lay stress on the acrid truth that sexual immorality, being a human frailty, may take place in the most innocent of places that it may even take place in the substitute establishments enumerated under Section 3 of the Ordinance. If the flawed logic of the Ordinance were to be followed, in the remote instance that an immoral sexual act transpires in a church cloister or a court chamber, we would behold the spectacle of the City of Manila ordering the closure of the church or court concerned. Every house, building, park, curb, street or even vehicles for that matter will not be exempt from the prohibition. Simply because there are no pure places where there are impure men. Indeed, even the Scripture and the Tradition of Christians churches continually recall the presence and universality of sin in man’s history. The problem, it needs to be pointed out, is not the establishment, which by its nature cannot be said to be injurious to the health or comfort of the community and which in itself is a moral, but the deplorable human activity that may occur within its premises. While a motel may be used as a venue for immoral sexual activity, it cannot for that reason alone be punished. It cannot be classified as a house of illrepute or as a nuisance per se on a mere likelihood or a naked assumption. If that were so and if that were allowed, then the Ermita-Malate area would not only be

purged of its supposed social ills, it would be extinguished of its soul as well as every human activity, reprehensible or not, in its every nook and cranny would be laid bare to the estimation of the authorities. The Ordinance seeks to legislate morality but fails to address the core issues of morality. Try as the Ordinance may to shape morality, it should not foster the illusion that it can make a moral man out of it because immorality is not a thing, a building or establishment; it is in the hearts of men. The City Council instead should regulate human conduct that occurs inside the establishments, but not to the detriment of liberty and privacy which are covenants, premiums and blessings of democracy. While petitioner’s earnestness at curbing clearly objectionable social ills is commendable, they unwittingly punish even the proprietors and operators of wholesome, innocent establishments. In the instant case, there is a clear invasion of personal or property rights, personal in the case of those individuals desirous of owning, operating and patronizing those motels and property in terms of the investments made and the salaries to be paid to those therein employed. If the City of Manila so desires to put an end to prostitution, fornication and other social ills, it can instead impose reasonable regulations such as daily inspections of the establishments for any violation of the conditions of their licenses or permits; it may exercise its authority to suspend or revoke their licenses for these violations; and it may even impose increased license fees. In other words, there are other means to reasonably accomplish the desired end. Means employed are constitutionally infirm The Ordinance disallows the operation of sauna parlors, massage parlors, karaoke bars, beerhouses, night clubs, day clubs, super clubs, discotheques, cabarets, dance halls, motels and inns in the Ermita-Malate area. In Section 3 thereof, owners and/or operators of the enumerated establishments are given three (3) months from the date of approval of the Ordinance within which to wind up business operations or to transfer to any place outside the Ermita-Malate area or convert said businesses to other kinds of business allowable within the area. Further, it states in Section 4 that in cases of subsequent violations of the provisions of the Ordinance, the premises of the erring establishment shall be closed and padlocked permanently. It is readily apparent that the means employed by the Ordinance for the achievement of its purposes, the governmental interference itself, infringes on the constitutional guarantees of a person’s fundamental right to liberty and property. Liberty as guaranteed by the Constitution was defined by Justice Malcolm to include the right to exist and the right to be free from arbitrary restraint or servitude. The term cannot be dwarfed into mere freedom from physical restraint of the person of the citizen, but is deemed to embrace the right of man to enjoy the facilities with which he has been endowed by his Creator, subject only to such restraint as are necessary for the common welfare. In accordance with this case, the rights of the citizen to be free to use his faculties in all lawful ways; to live and work where he will; to earn his livelihood by any lawful calling; and to pursue any avocation are all deemed embraced in the concept of liberty.

The U.S. Supreme Court in the case of Roth v. Board of Regents, sought to clarify the meaning of liberty. It said: While the Court has not attempted to define with exactness the liberty. . . guaranteed [by the Fifth and Fourteenth Amendments], the term denotes not merely freedom from bodily restraint but also the right of the individual to contract, to engage in any of the common occupations of life, to acquire useful knowledge, to marry, establish a home and bring up children, to worship God according to the dictates of his own conscience, and generally to enjoy those privileges long recognized as essential to the orderly pursuit of happiness by free men. In a Constitution for a free people, there can be no doubt that the meaning of liberty must be broad indeed. In another case, it also confirmed that liberty protected by the due process clause includes personal decisions relating to marriage, procreation, contraception, family relationships, child rearing, and education. In explaining the respect the Constitution demands for the autonomy of the person in making these choices, the U.S. Supreme Court explained: These matters, involving the most intimate and personal choices a person may make in a lifetime, choices central to personal dignity and autonomy, are central to the liberty protected by the Fourteenth Amendment. At the heart of liberty is the right to define one’s own concept of existence, of meaning, of universe, and of the mystery of human life. Beliefs about these matters could not define the attributes of personhood where they formed under compulsion of the State. Persons desirous to own, operate and patronize the enumerated establishments under Section 1 of the Ordinance may seek autonomy for these purposes. Motel patrons who are single and unmarried may invoke this right to autonomy to consummate their bonds in intimate sexual conduct within the motels premises be it stressed that their consensual sexual behavior does not contravene any fundamental state policy as contained in the Constitution. Adults have a right to choose to forge such relationships with others in the confines of their own private lives and still retain their dignity as free persons. The liberty protected by the Constitution allows persons the right to make this choice. Their right to liberty under the due process clause gives them the full right to engage in their conduct without intervention of the government, as long as they do not run afoul of the law. Liberty should be the rule and restraint the exception. Liberty in the constitutional sense not only means freedom from unlawful government restraint; it must include privacy as well, if it is to be a repository of freedom. The right to be let alone is the beginning of all freedom it is the most comprehensive of rights and the right most valued by civilized men. The concept of liberty compels respect for the individual whose claim to privacy and interference demands respect. As the case of Morfe v. Mutuc, borrowing the words of Laski, so very aptly stated:

Man is one among many, obstinately refusing reduction to unity. His separateness, his isolation, are indefeasible; indeed, they are so fundamental that they are the basis on which his civic obligations are built. He cannot abandon the consequences of his isolation, which are, broadly speaking, that his experience is private, and the will built out of that experience personal to himself. If he surrenders his will to others, he surrenders himself. If his will is set by the will of others, he ceases to be a master of himself. I cannot believe that a man no longer a master of himself is in any real sense free. Indeed, the right to privacy as a constitutional right was recognized in Morfe, the invasion of which should be justified by a compelling state interest. Morfe accorded recognition to the right to privacy independently of its identification with liberty; in itself it is fully deserving of constitutional protection. Governmental powers should stop short of certain intrusions into the personal life of the citizen. There is a great temptation to have an extended discussion on these civil liberties but the Court chooses to exercise restraint and restrict itself to the issues presented when it should. The previous pronouncements of the Court are not to be interpreted as a license for adults to engage in criminal conduct. The reprehensibility of such conduct is not diminished. The Court only reaffirms and guarantees their right to make this choice. Should they be prosecuted for their illegal conduct, they should suffer the consequences of the choice they have made. That, ultimately, is their choice. Modality employed is unlawful taking In addition, the Ordinance is unreasonable and oppressive as it substantially divests the respondent of the beneficial use of its property. The Ordinance in Section 1 thereof forbids the running of the enumerated businesses in the Ermita-Malate area and in Section 3 instructs its owners/operators to wind up business operations or to transfer outside the area or convert said businesses into allowed businesses. An ordinance which permanently restricts the use of property that it cannot be used for any reasonable purpose goes beyond regulation and must be recognized as a taking of the property without just compensation. It is intrusive and violative of the private property rights of individuals. The Constitution expressly provides in Article III, Section 9, that private property shall not be taken for public use without just compensation. The provision is the most important protection of property rights in the Constitution. This is a restriction on the general power of the government to take property. The constitutional provision is about ensuring that the government does not confiscate the property of some to give it to others. In part too, it is about loss spreading. If the government takes away a person’s property to benefit society, then society should pay. The principal purpose of the guarantee is to bar the Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. There are two different types of taking that can be identified. A possessory taking occurs when the government confiscates or physically occupies property. A

regulatory taking occurs when the government’s regulation leaves no reasonable economically viable use of the property. In the landmark case of Pennsylvania Coal v. Mahon, it was held that a taking also could be found if government regulation of the use of property went too far. When regulation reaches a certain magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation to support the act. While property may be regulated to a certain extent, if regulation goes too far it will be recognized as a taking. No formula or rule can be devised to answer the questions of what is too far and when regulation becomes a taking. In Mahon, Justice Holmes recognized that it was a question of degree and therefore cannot be disposed of by general propositions. On many other occasions as well, the U.S. Supreme Court has said that the issue of when regulation constitutes a taking is a matter of considering the facts in each case. The Court asks whether justice and fairness require that the economic loss caused by public action must be compensated by the government and thus borne by the public as a whole, or whether the loss should remain concentrated on those few persons subject to the public action. What is crucial in judicial consideration of regulatory takings is that government regulation is a taking if it leaves no reasonable economically viable use of property in a manner that interferes with reasonable expectations for use. A regulation that permanently denies all economically beneficial or productive use of land is, from the owner’s point of view, equivalent to a taking unless principles of nuisance or property law that existed when the owner acquired the land make the use prohibitable. When the owner of real property has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking. A regulation which denies all economically beneficial or productive use of land will require compensation under the takings clause. Where a regulation places limitations on land that fall short of eliminating all economically beneficial use, a taking nonetheless may have occurred, depending on a complex of factors including the regulations economic effect on the landowner, the extent to which the regulation interferes with reasonable investment-backed expectations and the character of government action. These inquiries are informed by the purpose of the takings clause which is to prevent the government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole. A restriction on use of property may also constitute a taking if not reasonably necessary to the effectuation of a substantial public purpose or if it has an unduly harsh impact on the distinct investment-backed expectations of the owner. The Ordinance gives the owners and operators of the prohibited establishments three (3) months from its approval within which to wind up business operations or to transfer to any place outside of the Ermita-Malate area or convert said businesses to other kinds of business allowable within the area. The directive to wind up business operations amounts to a closure of the establishment, a permanent deprivation of

property, and is practically confiscatory. Unless the owner converts his establishment to accommodate an allowed business, the structure which housed the previous business will be left empty and gathering dust. Suppose he transfers it to another area, he will likewise leave the entire establishment idle. Consideration must be given to the substantial amount of money invested to build the edifices which the owner reasonably expects to be returned within a period of time. It is apparent that the Ordinance leaves no reasonable economically viable use of property in a manner that interferes with reasonable expectations for use. The second and third options to transfer to any place outside of the Ermita-Malate area or to convert into allowed businesses are confiscatory as well. The penalty of permanent closure in cases of subsequent violations found in Section 4 of the Ordinance is also equivalent to a taking of private property. The second option instructs the owners to abandon their property and build another one outside the Ermita-Malate area. In every sense, it qualifies as a taking without just compensation with an additional burden imposed on the owner to build another establishment solely from his coffers. The proffered solution does not put an end to the problem, it merely relocates it. Not only is this impractical, it is unreasonable, onerous and oppressive. The conversion into allowed enterprises is just as ridiculous. How may the respondent convert a motel into a restaurant or a coffee shop, art gallery or music lounge without essentially destroying its property? This is a taking of private property without due process of law, nay, even without compensation. The penalty of closure likewise constitutes unlawful taking that should be compensated by the government. The burden on the owner to convert or transfer his business, otherwise it will be closed permanently after a subsequent violation should be borne by the public as this end benefits them as a whole. Petitioners cannot take refuge in classifying the measure as a zoning ordinance. A zoning ordinance, although a valid exercise of police power, which limits a wholesome property to a use which cannot reasonably be made of it constitutes the taking of such property without just compensation. Private property which is not noxious nor intended for noxious purposes may not, by zoning, be destroyed without compensation. Such principle finds no support in the principles of justice as we know them. The police powers of local government units which have always received broad and liberal interpretation cannot be stretched to cover this particular taking. Distinction should be made between destruction from necessity and eminent domain. It needs restating that the property taken in the exercise of police power is destroyed because it is noxious or intended for a noxious purpose while the property taken under the power of eminent domain is intended for a public use or purpose and is therefore wholesome. If it be of public benefit that a wholesome property remain unused or relegated to a particular purpose, then certainly the public should bear the cost of reasonable compensation for the condemnation of private property for public use.

Further, the Ordinance fails to set up any standard to guide or limit the petitioner’s actions. It in no way controls or guides the discretion vested in them. It provides no definition of the establishments covered by it and it fails to set forth the conditions when the establishments come within its ambit of prohibition. The Ordinance confers upon the mayor arbitrary and unrestricted power to close down establishments. Ordinances such as this, which make possible abuses in its execution, depending upon no conditions or qualifications whatsoever other than the unregulated arbitrary will of the city authorities as the touchstone by which its validity is to be tested, are unreasonable and invalid. The Ordinance should have established a rule by which its impartial enforcement could be secured. Ordinances placing restrictions upon the lawful use of property must, in order to be valid and constitutional, specify the rules and conditions to be observed and conduct to avoid; and must not admit of the exercise, or of an opportunity for the exercise, of unbridled discretion by the law enforcers in carrying out its provisions. Thus, in Coates v. City of Cincinnati, as cited in People v. Nazario, the U.S. Supreme Court struck down an ordinance that had made it illegal for three or more persons to assemble on any sidewalk and there conduct themselves in a manner annoying to persons passing by. The ordinance was nullified as it imposed no standard at all because one may never know in advance what annoys some people but does not annoy others. Similarly, the Ordinance does not specify the standards to ascertain which establishments tend to disturb the community, annoy the inhabitants, and adversely affect the social and moral welfare of the community. The cited case supports the nullification of the Ordinance for lack of comprehensible standards to guide the law enforcers in carrying out its provisions. Petitioners cannot therefore order the closure of the enumerated establishments without infringing the due process clause. These lawful establishments may be regulated, but not prevented from carrying on their business. This is a sweeping exercise of police power that is a result of a lack of imagination on the part of the City Council and which amounts to an interference into personal and private rights which the Court will not countenance. In this regard, we take a resolute stand to uphold the constitutional guarantee of the right to liberty and property. Worthy of note is an example derived from the U.S. of a reasonable regulation which is a far cry from the ill-considered Ordinance enacted by the City Council. In FW/PBS, INC. v. Dallas, the city of Dallas adopted a comprehensive ordinance regulating sexually oriented businesses, which are defined to include adult arcades, bookstores, video stores, cabarets, motels, and theaters as well as escort agencies, nude model studio and sexual encounter centers. Among other things, the ordinance required that such businesses be licensed. A group of motel owners were among the three groups of businesses that filed separate suits challenging the ordinance. The motel owners asserted that the city violated the due process clause by failing to produce adequate support for its supposition that renting room for fewer than ten (10) hours resulted in increased crime and other secondary effects. They likewise argued than the ten (10)-hour limitation on the rental of motel rooms

placed an unconstitutional burden on the right to freedom of association. Anent the first contention, the U.S. Supreme Court held that the reasonableness of the legislative judgment combined with a study which the city considered, was adequate to support the city’s determination that motels permitting room rentals for fewer than ten (10 ) hours should be included within the licensing scheme. As regards the second point, the Court held that limiting motel room rentals to ten (10) hours will have no discernible effect on personal bonds as those bonds that are formed from the use of a motel room for fewer than ten (10) hours are not those that have played a critical role in the culture and traditions of the nation by cultivating and transmitting shared ideals and beliefs. The ordinance challenged in the above-cited case merely regulated the targeted businesses. It imposed reasonable restrictions; hence, its validity was upheld. The case of Ermita Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila, it needs pointing out, is also different from this case in that what was involved therein was a measure which regulated the mode in which motels may conduct business in order to put an end to practices which could encourage vice and immorality. Necessarily, there was no valid objection on due process or equal protection grounds as the ordinance did not prohibit motels. The Ordinance in this case however is not a regulatory measure but is an exercise of an assumed power to prohibit. The foregoing premises show that the Ordinance is an unwarranted and unlawful curtailment of property and personal rights of citizens. For being unreasonable and an undue restraint of trade, it cannot, even under the guise of exercising police power, be upheld as valid. B. The Ordinance violates Equal Protection Clause Equal protection requires that all persons or things similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. Similar subjects, in other words, should not be treated differently, so as to give undue favor to some and unjustly discriminate against others. The guarantee means that no person or class of persons shall be denied the same protection of laws which is enjoyed by other persons or other classes in like circumstances. The equal protection of the laws is a pledge of the protection of equal laws. It limits governmental discrimination. The equal protection clause extends to artificial persons but only insofar as their property is concerned. The Court has explained the scope of the equal protection clause in this wise: What does it signify? To quote from J.M. Tuason & Co. v. Land Tenure Administration: The ideal situation is for the laws benefits to be available to all, that none be placed outside the sphere of its coverage. Only thus could chance and favor be excluded and the affairs of men governed by that serene and impartial uniformity, which is of the very essence of the idea of law. There is recognition, however, in the opinion that what in fact exists cannot approximate the ideal. Nor is the law susceptible to the reproach that it does not take into account the realities of the situation. The constitutional guarantee then is not to be given a meaning that disregards what is,

what does in fact exist. To assure that the general welfare be promoted, which is the end of law, a regulatory measure may cut into the rights to liberty and property. Those adversely affected may under such circumstances invoke the equal protection clause only if they can show that the governmental act assailed, far from being inspired by the attainment of the common weal was prompted by the spirit of hostility, or at the very least, discrimination that finds no support in reason. Classification is thus not ruled out, it being sufficient to quote from the Tuason decision anew that the laws operate equally and uniformly on all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances which, if not identical, are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding on the rest. Legislative bodies are allowed to classify the subjects of legislation. If the classification is reasonable, the law may operate only on some and not all of the people without violating the equal protection clause. The classification must, as an indispensable requisite, not be arbitrary. To be valid, it must conform to the following requirements: 1) It must be based on substantial distinctions. 2) It must be germane to the purposes of the law. 3) It must not be limited to existing conditions only. 4) It must apply equally to all members of the class. In the Courts view, there are no substantial distinctions between motels, inns, pension houses, hotels, lodging houses or other similar establishments. By definition, all are commercial establishments providing lodging and usually meals and other services for the public. No reason exists for prohibiting motels and inns but not pension houses, hotels, lodging houses or other similar establishments. The classification in the instant case is invalid as similar subjects are not similarly treated, both as to rights conferred and obligations imposed. It is arbitrary as it does not rest on substantial distinctions bearing a just and fair relation to the purpose of the Ordinance. The Court likewise cannot see the logic for prohibiting the business and operation of motels in the Ermita-Malate area but not outside of this area. A noxious establishment does not become any less noxious if located outside the area. The standard where women are used as tools for entertainment is also discriminatory as prostitution one of the hinted ills the Ordinance aims to banish is not a profession exclusive to women. Both men and women have an equal propensity to engage in prostitution. It is not any less grave a sin when men engage in it. And why would the assumption that there is an ongoing immoral activity apply only when women are employed and be inapposite when men are in harness? This

discrimination based on gender violates equal protection as it is not substantially related to important government objectives. Thus, the discrimination is invalid. Failing the test of constitutionality, the Ordinance likewise failed to pass the test of consistency with prevailing laws. C.

The Ordinance is repugnant to general laws; it is ultra vires

The Ordinance is in contravention of the Code as the latter merely empowers local government units to regulate, and not prohibit, the establishments enumerated in Section 1 thereof. The power of the City Council to regulate by ordinances the establishment, operation, and maintenance of motels, hotels and other similar establishments is found in Section 458 (a) 4 (iv), which provides that: Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: (4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose shall: (iv) Regulate the establishment, operation and maintenance of cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar establishments, including tourist guides and transports . . . . While its power to regulate the establishment, operation and maintenance of any entertainment or amusement facilities, and to prohibit certain forms of amusement or entertainment is provided under Section 458 (a) 4 (vii) of the Code, which reads as follows: Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: (4) Regulate activities relative to the use of land, buildings and structures within the city in order to promote the general welfare and for said purpose shall: (vii) Regulate the establishment, operation, and maintenance of any entertainment or amusement facilities, including theatrical performances, circuses, billiard pools, public dancing schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement; regulate such other events or activities for amusement or entertainment, particularly those which tend to disturb the

community or annoy the inhabitants, or require the suspension or suppression of the same; or, prohibit certain forms of amusement or entertainment in order to protect the social and moral welfare of the community. Clearly, with respect to cafes, restaurants, beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar establishments, the only power of the City Council to legislate relative thereto is to regulate them to promote the general welfare. The Code still withholds from cities the power to suppress and prohibit altogether the establishment, operation and maintenance of such establishments. It is well to recall the rulings of the Court in Kwong Sing v. City of Manila in that: The word regulate, as used in subsection (l), section 2444 of the Administrative Code, means and includes the power to control, to govern, and to restrain; but regulate should not be construed as synonymous with suppress or prohibit. Consequently, under the power to regulate laundries, the municipal authorities could make proper police regulations as to the mode in which the employment or business shall be exercised. And in People v. Esguerra, wherein the Court nullified an ordinance of the Municipality of Tacloban which prohibited the selling, giving and dispensing of liquor ratiocinating that the municipality is empowered only to regulate the same and not prohibit. The Court therein declared that: (A)s a general rule when a municipal corporation is specifically given authority or power to regulate or to license and regulate the liquor traffic, power to prohibit is impliedly withheld. These doctrines still hold contrary to petitioner’s assertion that they were modified by the Code vesting upon City Councils prohibitory powers. Similarly, the City Council exercises regulatory powers over public dancing schools, public dance halls, sauna baths, massage parlors, and other places for entertainment or amusement as found in the first clause of Section 458 (a) 4 (vii). Its powers to regulate, suppress and suspend such other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the inhabitants and to prohibit certain forms of amusement or entertainment in order to protect the social and moral welfare of the community are stated in the second and third clauses, respectively of the same Section. The several powers of the City Council as provided in Section 458 (a) 4 (vii) of the Code, it is pertinent to emphasize, are separated by semi-colons (;), the use of which indicates that the clauses in which these powers are set forth are independent of each other albeit closely related to justify being put together in a single enumeration or paragraph. These powers, therefore, should not be confused, commingled or consolidated as to create a conglomerated and unified power of regulation, suppression and prohibition. The Congress unequivocally specified the establishments and forms of amusement or entertainment subject to regulation among which are beerhouses, hotels, motels, inns, pension houses, lodging houses, and other similar establishments (Section 458 (a) 4 (iv)), public dancing schools, public dance halls, sauna baths, massage parlors,

and other places for entertainment or amusement (Section 458 (a) 4 (vii)). This enumeration therefore cannot be included as among other events or activities for amusement or entertainment, particularly those which tend to disturb the community or annoy the inhabitants or certain forms of amusement or entertainment which the City Council may suspend, suppress or prohibit. The rule is that the City Council has only such powers as are expressly granted to it and those which are necessarily implied or incidental to the exercise thereof. By reason of its limited powers and the nature thereof, said powers are to be construed strictissimi juris and any doubt or ambiguity arising out of the terms used in granting said powers must be construed against the City Council. Moreover, it is a general rule in statutory construction that the express mention of one person, thing, or consequence is tantamount to an express exclusion of all others. Expressio unius est exclusio alterium. This maxim is based upon the rules of logic and the natural workings of human mind. It is particularly applicable in the construction of such statutes as create new rights or remedies, impose penalties or punishments, or otherwise come under the rule of strict construction. The argument that the City Council is empowered to enact the Ordinance by virtue of the general welfare clause of the Code and of Art. 3, Sec. 18 (kk) of the Revised Charter of Manila is likewise without merit. On the first point, the ruling of the Court in People v. Esguerra, is instructive. It held that: The powers conferred upon a municipal council in the general welfare clause, or section 2238 of the Revised Administrative Code, refers to matters not covered by the other provisions of the same Code, and therefore it cannot be applied to intoxicating liquors, for the power to regulate the selling, giving away and dispensing thereof is granted specifically by section 2242 (g) to municipal councils. To hold that, under the general power granted by section 2238, a municipal council may enact the ordinance in question, notwithstanding the provision of section 2242 (g), would be to make the latter superfluous and nugatory, because the power to prohibit, includes the power to regulate, the selling, giving away and dispensing of intoxicating liquors. On the second point, it suffices to say that the Code being a later expression of the legislative will must necessarily prevail and override the earlier law, the Revised Charter of Manila. Legis posteriores priores contrarias abrogant, or later statute repeals prior ones which are repugnant thereto. As between two laws on the same subject matter, which are irreconcilably inconsistent, that which is passed later prevails, since it is the latest expression of legislative will. If there is an inconsistency or repugnance between two statutes, both relating to the same subject matter, which cannot be removed by any fair and reasonable method of interpretation, it is the latest expression of the legislative will which must prevail and override the earlier. Implied repeals are those which take place when a subsequently enacted law contains provisions contrary to those of an existing law but no provisions expressly repealing them. Such repeals have been divided into two general classes: those which occur where an act is so inconsistent or irreconcilable with an existing prior act that only one of the two can remain in force and those which occur when an act

covers the whole subject of an earlier act and is intended to be a substitute therefor. The validity of such a repeal is sustained on the ground that the latest expression of the legislative will should prevail. In addition, Section 534(f) of the Code states that all general and special laws, acts, city charters, decrees, executive orders, proclamations and administrative regulations, or part or parts thereof which are inconsistent with any of the provisions of this Code are hereby repealed or modified accordingly. Thus, submitting to petitioner’s interpretation that the Revised Charter of Manila empowers the City Council to prohibit motels, that portion of the Charter stating such must be considered repealed by the Code as it is at variance with the latter’s provisions granting the City Council mere regulatory powers. It is well to point out that petitioners also cannot seek cover under the general welfare clause authorizing the abatement of nuisances without judicial proceedings. That tenet applies to a nuisance per se, or one which affects the immediate safety of persons and property and may be summarily abated under the undefined law of necessity. It cannot be said that motels are injurious to the rights of property, health or comfort of the community. It is a legitimate business. If it be a nuisance per accidents it may be so proven in a hearing conducted for that purpose. A motel is not per se a nuisance warranting its summary abatement without judicial intervention. Notably, the City Council was conferred powers to prevent and prohibit certain activities and establishments in another section of the Code which is reproduced as follows: Section 458. Powers, Duties, Functions and Compensation. (a) The sangguniang panlungsod, as the legislative body of the city, shall enact ordinances, approve resolutions and appropriate funds for the general welfare of the city and its inhabitants pursuant to Section 16 of this Code and in the proper exercise of the corporate powers of the city as provided for under Section 22 of this Code, and shall: (1) Approve ordinances and pass resolutions necessary for an efficient and effective city government, and in this connection, shall: (v) Enact ordinances intended to prevent, suppress and impose appropriate penalties for habitual drunkenness in public places, vagrancy, mendicancy, prostitution, establishment and maintenance of houses of ill repute, gambling and other prohibited games of chance, fraudulent devices and ways to obtain money or property, drug addiction, maintenance of drug dens, drug pushing, juvenile delinquency, the printing, distribution or exhibition of obscene or pornographic materials or publications, and such other activities inimical to the welfare and morals of the inhabitants of the city; If it were the intention of Congress to confer upon the City Council the power to prohibit the establishments enumerated in Section 1 of the Ordinance, it would have so declared in uncertain terms by adding them to the list of the matters it may prohibit under the above-quoted Section. The Ordinance now vainly attempts to

lump these establishments with houses of ill-repute and expand the City Councils powers in the second and third clauses of Section 458 (a) 4 (vii) of the Code in an effort to overreach its prohibitory powers. It is evident that these establishments may only be regulated in their establishment, operation and maintenance. It is important to distinguish the punishable activities from the establishments themselves. That these establishments are recognized legitimate enterprises can be gleaned from another Section of the Code. Section 131 under the Title on Local Government Taxation expressly mentioned proprietors or operators of massage clinics, sauna, Turkish and Swedish baths, hotels, motels and lodging houses as among the contractors defined in paragraph (h) thereof. The same Section also defined amusement as a pleasurable diversion and entertainment, synonymous to relaxation, avocation, pastime or fun; and amusement places to include theaters, cinemas, concert halls, circuses and other places of amusement where one seeks admission to entertain oneself by seeing or viewing the show or performances. Thus, it can be inferred that the Code considers these establishments as legitimate enterprises and activities. It is well to recall the maxim reddendo singula singulis which means that words in different parts of a statute must be referred to their appropriate connection, giving to each in its place, its proper force and effect, and, if possible, rendering none of them useless or superfluous, even if strict grammatical construction demands otherwise. Likewise, where words under consideration appear in different sections or are widely dispersed throughout an act the same principle applies. Not only does the Ordinance contravene the Code, it likewise runs counter to the provisions of P.D. 499. As correctly argued by MTDC, the statute had already converted the residential Ermita-Malate area into a commercial area. The decree allowed the establishment and operation of all kinds of commercial establishments except warehouse or open storage depot, dump or yard, motor repair shop, gasoline service station, light industry with any machinery or funeral establishment. The rule is that for an ordinance to be valid and to have force and effect, it must not only be within the powers of the council to enact but the same must not be in conflict with or repugnant to the general law. As succinctly illustrated in Solicitor General v. Metropolitan Manila Authority: The requirement that the enactment must not violate existing law explains itself. Local political subdivisions are able to legislate only by virtue of a valid delegation of legislative power from the national legislature (except only that the power to create their own sources of revenue and to levy taxes is conferred by the Constitution itself). They are mere agents vested with what is called the power of subordinate legislation. As delegates of the Congress, the local government units cannot contravene but must obey at all times the will of their principal. In the case before us, the enactment in question, which are merely local in origin cannot prevail against the decree, which has the force and effect of a statute. Petitioners contend that the Ordinance enjoys the presumption of validity. While this may be the rule, it has already been held that although the presumption is always in favor of the validity or reasonableness of the ordinance, such presumption must nevertheless be set aside when the invalidity or unreasonableness appears on the face of the ordinance itself or is established by proper evidence. The exercise of

police power by the local government is valid unless it contravenes the fundamental law of the land, or an act of the legislature, or unless it is against public policy or is unreasonable, oppressive, partial, discriminating or in derogation of a common right. Conclusion All considered, the Ordinance invades fundamental personal and property rights and impairs personal privileges. It is constitutionally infirm. The Ordinance contravenes statutes; it is discriminatory and unreasonable in its operation; it is not sufficiently detailed and explicit that abuses may attend the enforcement of its sanctions. And not to be forgotten, the City Council under the Code had no power to enact the Ordinance and is therefore ultra vires, null and void. Concededly, the challenged Ordinance was enacted with the best of motives and shares the concern of the public for the cleansing of the Ermita-Malate area of its social sins. Police power legislation of such character deserves the full endorsement of the judiciary we reiterate our support for it. But inspite of its virtuous aims, the enactment of the Ordinance has no statutory or constitutional authority to stand on. Local legislative bodies, in this case, the City Council, cannot prohibit the operation of the enumerated establishments under Section 1 thereof or order their transfer or conversion without infringing the constitutional guarantees of due process and equal protection of laws not even under the guise of police power. WHEREFORE, the Petition is hereby DENIED and the decision of the Regional Trial Court declaring the Ordinance void is AFFIRMED. Costs against petitioners. SO ORDERED.

G.R. No. 93891

March 11, 1991

POLLUTION ADJUDICATION BOARD, petitioner vs. COURT OF APPEALS and SOLAR TEXTILE FINISHING CORPORATION, respondents. Oscar A. Pascua and Charemon Clio L. Borre for petitioner. Leonardo A. Aurelio for respondent Solar Textile Finishing Corp. RESOLUTION FELICIANO, J.: Petitioner Pollution Adjudication Board ("Board") asks us to review the Decision and Resolution promulgated on 7 February 1990 and 10 May 1990, respectively, by the Court of Appeals in C.A.-G R. No. SP 18821 entitled "Solar Textile Finishing Corporation v. Pollution Adjudication Board." In that Decision and Resolution, the Court of Appeals reversed an order of the Regional Trial Court, Quezon City, Branch 77, in Civil Case No. Q-89-2287 dismissing private respondent Solar Textile Finishing Corporation's ("Solar") petition for certiorari and remanded the case to the trial court for further proceedings. On 22 September 1988, petitioner Board issued an ex parte Order directing Solar immediately to cease and desist from utilizing its wastewater pollution source installations which were discharging untreated wastewater directly into a canal leading to the adjacent Tullahan-Tinejeros River. The Order signed by Hon. Fulgencio Factoran, Jr., as Board Chairman, reads in full as follows: Respondent, Solar Textile Finishing Corporation with plant and place of business at 999 General Pascual Avenue, Malabon, Metro Manila is involved in bleaching, rinsing and dyeing textiles with wastewater of about 30 gpm. being directly discharged untreated into the sewer. Based on findings in the Inspections conducted on 05 November 1986 and 15 November 1986, the volume of untreated wastewater discharged in the final out fall outside of the plant's compound was even greater. The result of inspection conducted on 06 September 1988 showed that respondent's Wastewater Treatment Plant was noted unoperational and the combined wastewater generated from its operation was about 30 gallons per minute and 80% of the wastewater was being directly discharged into a drainage canal leading to the TullahanTinejeros River by means of a by-pass and the remaining 20% was channelled into the plant's existing Wastewater Treatment Plant (WTP). Result of the analyses of the sample taken from the by-pass showed that the wastewater is highly pollutive in terms of Color units, BOD and Suspended Solids, among others. These acts of respondent in spite of directives to comply with the requirements are clearly in violation of Section 8 of Presidential Decree No. 984 and Section 103 of its Implementing Rules and Regulations and the 1982 Effluent Regulations. WHEREFORE, pursuant to Section 7 of P.D. 984 and Section 38 of its Implementing Rules and Regulations, respondent is hereby ordered to cease

and desist from utilizing its wastewater pollution source installation and discharging its untreated wastewater directly into the canal leading to the Tullahan-Tinejeros River effective immediately upon receipt hereof and until such time when it has fully complied with all the requirements and until further orders from this Board. SO ORDERED.1 We note that the above Order was based on findings of several inspections of Solar's plant: a. inspections conducted on 5 November 1986 and 12 November 1986 by the National Pollution Control Commission ("NPCC"), the predecessor of the Board ;2 and b. the inspection conducted on 6 September 1988 by the Department of Environment and Natural Resources ("DENR"). The findings of these two (2) inspections were that Solar's wastewater treatment plant was non-operational and that its plant generated about 30 gallons per minute of wastewater, 80% of which was being directly discharged into a drainage canal leading to the Tullahan-Tinejeros River. The remaining 20% of the wastewater was being channeled through Solar's non-operational wastewater treatment plant. Chemical analysis of samples of Solar's effluents showed the presence of pollutants on a level in excess of what was permissible under P.D. No. 984 and its Implementing Regulations. A copy of the above Order was received by Solar on 26 September 1988. A Writ of Execution issued by the Board was received by Solar on 31 March 1989. Meantime, Solar filed a motion for reconsideration/appeal with prayer for stay of execution of the Order dated 22 September 1988. Acting on this motion, the Board issued an Order dated 24 April 1989 allowing Solar to operate temporarily, to enable the Board to conduct another inspection and evaluation of Solar's wastewater treatment facilities. In the same Order, the Board directed the Regional Executive Director of the DENR/ NCR to conduct the inspection and evaluation within thirty (30) days. On 21 April 1989, however, Solar went to the Regional Trial Court of Quezon City, Branch 77, on petition for certiorari with preliminary injunction against the Board, the petition being docketed as Civil Case No. Q-89-2287. On 21 July 1989, the Regional Trial Court dismissed Solar's petition upon two (2) grounds, i.e., that appeal and not certiorari from the questioned Order of the Board as well as the Writ of Execution was the proper remedy, and that the Board's subsequent Order allowing Solar to operate temporarily had rendered Solar's petition moot and academic.

Dissatisfied, Solar went on appeal to the Court of Appeals which, in the Decision here assailed, reversed the Order of dismissal of the trial court and remanded the case to that court for further proceedings. In addition, the Court of Appeals declared the Writ of Execution null and void. At the same time, the Court of Appeals said in the dispositive portion of its Decision that: . . .. Still and all, this decision is without prejudice to whatever action the appellee [Board] may take relative to the projected 'inspection and evaluation' of appellant's [Solar's] water treatment facilities. 3 The Court of Appeals, in so ruling, held that certiorari was a proper remedy since the Orders of petitioner Board may result in great and irreparable injury to Solar; and that while the case might be moot and academic, "larger issues" demanded that the question of due process be settled. Petitioner Board moved for reconsideration, without success. The Board is now before us on a Petition for Review basically arguing that: 1. its ex parte Order dated 22 September 1988 and the Writ of Execution were issued in accordance with law and were not violative of the requirements of due process; and 2. the ex parte Order and the Writ of Execution are not the proper subjects of a petition for certiorari. The only issue before us at this time is whether or not the Court of Appeals erred in reversing the trial court on the ground that Solar had been denied due process by the Board. Petitioner Board claims that under P.D. No. 984, Section 7(a), it has legal authority to issue ex parte orders to suspend the operations of an establishment when there is prima facie evidence that such establishment is discharging effluents or wastewater, the pollution level of which exceeds the maximum permissible standards set by the NPCC (now, the Board). Petitioner Board contends that the reports before it concerning the effluent discharges of Solar into the TullahanTinejeros River provided prima facie evidence of violation by Solar of Section 5 of the 1982 Effluent Code. Solar, on the other hand, contends that under the Board's own rules and regulations, an ex parte order may issue only if the effluents discharged pose an "immediate threat to life, public health, safety or welfare, or to animal and plant life." In the instant case, according to Solar, the inspection reports before the Board made no finding that Solar's wastewater discharged posed such a threat. The Court is not persuaded by Solar's contention. Section 7(a) of P.D. No. 984 authorized petitioner Board to issue ex parte cease and desist orders under the following circumstances: P.D. 984, Section 7, paragraph (a), provides:

(a) Public Hearing. . . . Provided, That whenever the Commission finds prima facie evidence that the discharged sewage or wastes are of immediate threat to life, public health, safety or welfare, or to animal or plant life, or exceeds the allowable standards set by the Commission, the Commissioner may issue an ex-parte order directing the discontinuance of the same or the temporary suspension or cessation of operation of the establishment or person generating such sewage or wastes without the necessity of a prior public hearing. The said ex-parte order shall be immediately executory and shall remain in force until said establishment or person prevents or abates the said pollution within the allowable standards or modified or nullified by a competent court. (Emphasis supplied) We note that under the above-quoted portion of Section 7(a) of P.D. No. 984, an ex parte cease and desist order may be issued by the Board (a) whenever the wastes discharged by an establishment pose an "immediate threat to life, public health, safety or welfare, or to animal or plant life," or (b) whenever such discharges or wastes exceed "the allowable standards set by the [NPCC]." On the one hand, it is not essential that the Board prove that an "immediate threat to life, public health, safety or welfare, or to animal or plant life" exists before an ex parte cease and desist order may be issued. It is enough if the Board finds that the wastes discharged do exceed "the allowable standards set by the [NPCC]." In respect of discharges of wastes as to which allowable standards have been set by the Commission, the Board may issue an ex parte cease and desist order when there is prima facie evidence of an establishment exceeding such allowable standards. Where, however, the effluents or discharges have not yet been the subject matter of allowable standards set by the Commission, then the Board may act on an ex parte basis when it finds at least prima facie proof that the wastewater or material involved presents an "immediate threat to life, public health, safety or welfare or to animal or plant life." Since the applicable standards set by the Commission existing at any given time may well not cover every possible or imaginable kind of effluent or waste discharge, the general standard of an "immediate threat to life, public health, safety or welfare, or to animal and plant life" remains necessary. Upon the other hand, the Court must assume that the extant allowable standards have been set by the Commission or Board precisely in order to avoid or neutralize an "immediate threat to life, public health, safety or welfare, or to animal or plant life.'' Section 5 of the Effluent Regulations of 1982 4 sets out the maximum permissible levels of physical and chemical substances which effluents from domestic wastewater treatment plants and industrial plants" must not exceed "when discharged into bodies of water classified as Class A, B, C, D, SB and SC in accordance with the 1978 NPCC Rules and Regulations." The waters of TullahanTinejeros River are classified as inland waters Class D under Section 68 of the 1978 NPCC Rules and Regulations5 which in part provides that: Sec. 68. Water Usage and Classification. — The quality of Philippine waters shall be maintained in a safe and satisfactory condition according to their best usages. For this purpose, all water shall be classified according to the following beneficial usages:

(a) Fresh Surface Water Classification xxx xxx xxx Class D xxx

xxx

Best usage For agriculture, irrigation, livestock watering and industrial cooling and processing.

xxx

(Emphases supplied) The reports on the inspections carried on Solar's wastewater treatment facilities on 5 and 12 November 1986 and 6 September 1988 set forth the following Identical finding: a. For legal action in [view of] implementing rules and regulations of P.D. No. 984 and Section 5 of the Effluent Regulations of 1982. 6 Placing the maximum allowable standards set in Section 5 of the Effluent Regulations of 1982 alongside the findings of the November 1986 and September 1988 inspection reports, we get the following results:

"Inland Waters (Class C & D7 a) Color platinum cobalt units b) pH c) Temperature in °C d) Phenols mg.1 e) Suspended solids mg./1. f) BOD mg./1. g) oil/Grease in mg./1. h) Detergents mg./1."

in 100

a)

6-8.5 b) 40 c) in 0.1

d)

75

e)

in 80

f)

10

g)

5

h)

in

i) j)

Color (Apparent Color)

November 1986 Report8 Station 1 units 250

pH 9.3 Temperature (°C) Phenols in mg./1. Suspended 340 solids in mg./1. BOD (5-day) 1,100 mg./1 Oil/Grease mg./1. Detergents 2.93 mg./1. MBAS Dissolved 0 oxygen, mg./1. Settleable 0.4

September 1988 Report9 Station 1 125

8.7

80 152

1.5

Matter, mg./1. k) Total Dis 800 solved Solids mg./1. l) Total Solids 1,400 m) Turbidity NTU / ppm, SiO3

610 690 70

The November 1986 inspections report concluded that: Records of the Commission show that the plant under its previous owner, Fine Touch Finishing Corporation, was issued a Notice of Violation on 20 December 1985 directing same to cease and desist from conducting dyeing operation until such time the waste treatment plant is already completed and operational. The new owner Solar Textile Corporation informed the Commission of the plant acquisition thru its letter dated March 1986 (sic). The new owner was summoned to a hearing held on 13 October 1986 based on the adverse findings during the inspection/water sampling test conducted on 08 August 1986. As per instruction of the Legal Division a reinspection/sampling text should be conducted first before an appropriate legal action is instituted; hence, this inspection. Based on the above findings, it is clear that the new owner continuously violates the directive of the Commission by undertaking dyeing operation without completing first and operating its existing WTP. The analysis of results on water samples taken showed that the untreated wastewater from the firm pollutes our water resources. In this connection, it is recommended that appropriate legal action be instituted immediately against the firm. . . . 10 The September 1988 inspection report's conclusions were: 1. The plant was undertaking dyeing, bleaching and rinsing operations during the inspection. The combined wastewater generated from the said operations was estimated at about 30 gallons per minute. About 80% of the wastewater was traced directly discharged into a drainage canal leading to the TullahanTinejeros river by means of a bypass. The remaining 20% was channeled into the plant's existing wastewater treatment plant (WTP). 2. The WTP was noted not yet fully operational- some accessories were not yet installed. Only the sump pit and the holding/collecting tank are functional but appeared seldom used. The wastewater mentioned channeled was noted held indefinitely into the collection tank for primary treatment. There was no effluent discharge [from such collection tank]. 3. A sample from the bypass wastewater was collected for laboratory analyses. Result of the analyses show that the bypass wastewater is polluted in terms of color units, BOD and suspended solids, among others. (Please see attached laboratory resul .)11

From the foregoing reports, it is clear to this Court that there was at least prima facie evidence before the Board that the effluents emanating from Solar's plant exceeded the maximum allowable levels of physical and chemical substances set by the NPCC and that accordingly there was adequate basis supporting the ex parte cease and desist order issued by the Board. It is also well to note that the previous owner of the plant facility Fine Touch Finishing Corporation had been issued a Notice of Violation on 20 December 1985 directing it to cease and refrain from carrying out dyeing operations until the water treatment plant was completed and operational. Solar, the new owner, informed the NPCC of the acquisition of the plant on March 1986. Solar was summoned by the NPCC to a hearing on 13 October 1986 based on the results of the sampling test conducted by the NPCC on 8 August 1986. Petitioner Board refrained from issuing an ex parte cease and desist order until after the November 1986 and September 1988 re-inspections were conducted and the violation of applicable standards was confirmed. In other words, petitioner Board appears to have been remarkably forbearing in its efforts to enforce the applicable standards vis-a-vis Solar. Solar, on the other hand, seemed very casual about its continued discharge of untreated, pollutive effluents into the Tullahan- Tinerejos River, presumably loath to spend the money necessary to put its Wastewater Treatment Plant ("WTP") in an operating condition. In this connection, we note that in Technology Developers, Inc. v. Court of appeals, et al.,12 the Court very recently upheld the summary closure ordered by the Acting Mayor of Sta. Maria, Bulacan, of a pollution-causing establishment, after finding that the records showed that: 1. No mayor's permit had been secured. While it is true that the matter of determining whether there is a pollution of the environment that requires control if not prohibition of the operation of a business is essentially addressed to the then National Pollution Control Commission of the Ministry of Human Settlements, now the Environmental Management Bureau of the Department of Environment and Natural Resources, it must be recognized that the mayor of a town has as much responsibility to protect its inhabitants from pollution, and by virtue of his police power, he may deny the application for a permit to operate a business or otherwise close the same unless appropriate measures are taken to control and/or avoid injury to the health of the residents of the community from the emission in the operation of the business. 2. The Acting Mayor, in a letter of February l6, 1989, called the attention of petitioner to the pollution emitted by the fumes of its plant whose offensive odor "not only pollute the air in the locality but also affect the health of the residents in the area," so that petitioner was ordered to stop its operation until further orders and it was required to bring the following: xxx

xxx

xxx

(3) Region III-Department of Environment and Natural Resources AntiPollution permit. (Annex A-2, petition)

3. This action of the Acting Mayor was in response to the complaint of the residents of Barangay Guyong, Sta. Maria, Bulacan, directed to the Provincial Governor through channels (Annex A-B, petition).. . . 4. The closure order of the Acting Mayor was issued only after an investigation was made by Marivic Guina who in her report of December 8, 1988 observed that the fumes emitted by the plant of petitioner goes directly to the surrounding houses and that no proper air pollution device has been installed. (Annex A-9, petition) xxx

xxx

xxx

6. While petitioner was able to present a temporary permit to operate by the then National Pollution Control Commission on December 15,1987, the permit was good only up to May 25,1988 (Annex A-12, petition). Petitioner had not exerted any effort to extend or validate its permit much less to install any device to control the pollution and prevent any hazard to the health of the residents of the community." In the instant case, the ex parte cease and desist Order was issued not by a local government official but by the Pollution Adjudication Board, the very agency of the Government charged with the task of determining whether the effluents of a particular industrial establishment comply with or violate applicable anti-pollution statutory and regulatory provisions. Ex parte cease and desist orders are permitted by law and regulations in situations like that here presented precisely because stopping the continuous discharge of pollutive and untreated effluents into the rivers and other inland waters of the Philippines cannot be made to wait until protracted litigation over the ultimate correctness or propriety of such orders has run its full course, including multiple and sequential appeals such as those which Solar has taken, which of course may take several years. The relevant pollution control statute and implementing regulations were enacted and promulgated in the exercise of that pervasive, sovereign power to protect the safety, health, and general welfare and comfort of the public, as well as the protection of plant and animal life, commonly designated as the police power. It is a constitutional commonplace that the ordinary requirements of procedural due process yield to the necessities of protecting vital public interests like those here involved, through the exercise of police power. The Board's ex parte Order and Writ of Execution would, of course, have compelled Solar temporarily to stop its plant operations, a state of affairs Solar could in any case have avoided by simply absorbing the bother and burden of putting its WTP on an operational basis. Industrial establishments are not constitutionally entitled to reduce their capitals costs and operating expenses and to increase their profits by imposing upon the public threats and risks to its safety, health, general welfare and comfort, by disregarding the requirements of anti- pollution statutes and their implementing regulations. It should perhaps be made clear the Court is not here saying that the correctness of the ex parte Order and Writ of Execution may not be contested by Solar in a hearing before the Board itself. Where the establishment affected by an ex parte cease and

desist order contests the correctness of the prima facie findings of the Board, the Board must hold a public hearing where such establishment would have an opportunity to controvert the basis of such ex parte order. That such an opportunity is subsequently available is really all that is required by the due process clause of the Constitution in situations like that we have here. The Board's decision rendered after the public hearing may then be tested judicially by an appeal to the Court of Appeals in accordance with Section 7(c) of P.D. No. 984 and Section 42 of the Implementing Rules and Regulations. A subsequent public hearing is precisely what Solar should have sought instead of going to court to seek nullification of the Board's Order and Writ of Execution and instead of appealing to the Court of Appeals. It will be recalled the at the Board in fact gave Solar authority temporarily to continue operations until still another inspection of its wastewater treatment facilities and then another analysis of effluent samples could be taken and evaluated. Solar claims finally that the petition for certiorari was the proper remedy as the questioned Order and Writ of Execution issued by the Board were patent nullities. Since we have concluded that the Order and Writ of Execution were entirely within the lawful authority of petitioner Board, the trial court did not err when it dismissed Solar's petition for certiorari. It follows that the proper remedy was an appeal from the trial court to the Court of Appeals, as Solar did in fact appeal. ACCORDINGLY, the Petition for Review is given DUE COURSE and the Decision of the Court of Appeals dated 7 February 1990 and its Resolution dated 10 May 1990 in A.C.-G.R. No. SP 18821 are hereby SET ASIDE. The Order of petitioner Board dated 22 September 1988 and the Writ of Execution, as well as the decision of the trial court dated 21 July 1989, are hereby REINSTATED, without prejudice to the right of Solar to contest the correctness of the basis of the Board's Order and Writ of Execution at a public hearing before the Board.

G.R. No. 130230

April 15, 2005

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, Petitioner, vs. DANTE O. GARIN, respondent. D E C I S I O N: CHICO-NAZARIO, J.: At issue in this case is the validity of Section 5(f) of Republic Act No. 7924 creating the Metropolitan Manila Development Authority (MMDA), which authorizes it to confiscate and suspend or revoke driver's licenses in the enforcement of traffic laws and regulations. The issue arose from an incident involving the respondent Dante O. Garin, a lawyer, who was issued a traffic violation receipt (TVR) and his driver's license confiscated for parking illegally along Gandara Street, Binondo, Manila, on 05 August 1995. The following statements were printed on the TVR: You are hereby directed to report to the MMDA Traffic Operations Center Port Area Manila after 48 hours from date of apprehension for disposition/appropriate action thereon. Criminal case shall be filed for failure to redeem license after 30 days. Valid as temporary DRIVER'S license for seven days from date of apprehension. Shortly before the expiration of the TVR's validity, the respondent addressed a letter to then MMDA Chairman Prospero Oreta requesting the return of his driver's license, and expressing his preference for his case to be filed in court. Receiving no immediate reply, Garin filed the original complaint with application for preliminary injunction in Branch 260 of the Regional Trial Court (RTC) of Parañaque, on 12 September 1995, contending that, in the absence of any implementing rules and regulations, Sec. 5(f) of Rep. Act No. 7924 grants the MMDA unbridled discretion to deprive erring motorists of their licenses, pre-empting a judicial determination of the validity of the deprivation, thereby violating the due process clause of the Constitution. The respondent further contended that the provision violates the constitutional prohibition against undue delegation of legislative authority, allowing as it does the MMDA to fix and impose unspecified – and therefore unlimited - fines and other penalties on erring motorists.

In support of his application for a writ of preliminary injunction, Garin alleged that he suffered and continues to suffer great and irreparable damage because of the deprivation of his license and that, absent any implementing rules from the Metro Manila Council, the TVR and the confiscation of his license have no legal basis. For its part, the MMDA, represented by the Office of the Solicitor General, pointed out that the powers granted to it by Sec. 5(f) of Rep. Act No. 7924 are limited to the fixing, collection and imposition of fines and penalties for traffic violations, which powers are legislative and executive in nature; the judiciary retains the right to determine the validity of the penalty imposed. It further argued that the doctrine of separation of powers does not preclude "admixture" of the three powers of government in administrative agencies. The MMDA also refuted Garin's allegation that the Metro Manila Council, the governing board and policy making body of the petitioner, has as yet to formulate the implementing rules for Sec. 5(f) of Rep. Act No. 7924 and directed the court's attention to MMDA Memorandum Circular No. TT-95-001 dated 15 April 1995. Respondent Garin, however, questioned the validity of MMDA Memorandum Circular No. TT-95-001, as he claims that it was passed by the Metro Manila Council in the absence of a quorum. Judge Helen Bautista-Ricafort issued a temporary restraining order on 26 September 1995, extending the validity of the TVR as a temporary driver's license for twenty more days. A preliminary mandatory injunction was granted on 23 October 1995, and the MMDA was directed to return the respondent's driver's license. On 14 August 1997, the trial court rendered the assailed decision in favor of the herein respondent and held that: a. There was indeed no quorum in that First Regular Meeting of the MMDA Council held on March 23, 1995, hence MMDA Memorandum Circular No. TT-95-001, authorizing confiscation of driver's licenses upon issuance of a TVR, is void ab initio. b. The summary confiscation of a driver's license without first giving the driver an opportunity to be heard; depriving him of a property right (driver's license) without DUE PROCESS; not filling (sic) in Court the complaint of supposed traffic infraction, cannot be justified by any legislation (and is) hence unconstitutional. WHEREFORE, the temporary writ of preliminary injunction is hereby made permanent; th(e) MMDA is directed to return to plaintiff his driver's license; th(e) MMDA is likewise ordered to desist from confiscating driver's license without first giving the driver the opportunity to be heard in an appropriate proceeding. In filing this petition, the MMDA reiterates and reinforces its argument in the court below and contends that a license to operate a motor vehicle is neither a contract nor a property right, but is a privilege subject to reasonable regulation under the police power in the interest of the public safety and welfare. The petitioner further argues that revocation or suspension of this privilege does not constitute a taking without due process as long as the licensee is given the right to appeal the revocation.

To buttress its argument that a licensee may indeed appeal the taking and the judiciary retains the power to determine the validity of the confiscation, suspension or revocation of the license, the petitioner points out that under the terms of the confiscation, the licensee has three options: 1. To voluntarily pay the imposable fine, 2. To protest the apprehension by filing a protest with the MMDA Adjudication Committee, or 3. To request the referral of the TVR to the Public Prosecutor's Office. The MMDA likewise argues that Memorandum Circular No. TT-95-001 was validly passed in the presence of a quorum, and that the lower court's finding that it had not was based on a "misapprehension of facts," which the petitioner would have us review. Moreover, it asserts that though the circular is the basis for the issuance of TVRs, the basis for the summary confiscation of licenses is Sec. 5(f) of Rep. Act No. 7924 itself, and that such power is self-executory and does not require the issuance of any implementing regulation or circular. Meanwhile, on 12 August 2004, the MMDA, through its Chairman Bayani Fernando, implemented Memorandum Circular No. 04, Series of 2004, outlining the procedures for the use of the Metropolitan Traffic Ticket (MTT) scheme. Under the circular, erring motorists are issued an MTT, which can be paid at any Metrobank branch. Traffic enforcers may no longer confiscate drivers' licenses as a matter of course in cases of traffic violations. All motorists with unredeemed TVRs were given seven days from the date of implementation of the new system to pay their fines and redeem their license or vehicle plates. It would seem, therefore, that insofar as the absence of a prima facie case to enjoin the petitioner from confiscating drivers' licenses is concerned, recent events have overtaken the Court's need to decide this case, which has been rendered moot and academic by the implementation of Memorandum Circular No. 04, Series of 2004. The petitioner, however, is not precluded from re-implementing Memorandum Circular No. TT-95-001, or any other scheme, for that matter, that would entail confiscating drivers' licenses. For the proper implementation, therefore, of the petitioner's future programs, this Court deems it appropriate to make the following observations: 1. A license to operate a motor vehicle is a privilege that the state may withhold in the exercise of its police power. The petitioner correctly points out that a license to operate a motor vehicle is not a property right, but a privilege granted by the state, which may be suspended or revoked by the state in the exercise of its police power, in the interest of the public safety and welfare, subject to the procedural due process requirements. This is consistent with our rulings in Pedro v. Provincial Board of Rizal8 on the license to operate a cockpit, Tan v. Director of Forestry and Oposa v. Factoran on timber

licensing agreements, and Surigao Electric Co., Inc. v. Municipality of Surigao11 on a legislative franchise to operate an electric plant. Petitioner cites a long list of American cases to prove this point, such as State ex. Rel. Sullivan, which states in part that, "the legislative power to regulate travel over the highways and thoroughfares of the state for the general welfare is extensive. It may be exercised in any reasonable manner to conserve the safety of travelers and pedestrians. Since motor vehicles are instruments of potential danger, their registration and the licensing of their operators have been required almost from their first appearance. The right to operate them in public places is not a natural and unrestrained right, but a privilege subject to reasonable regulation, under the police power, in the interest of the public safety and welfare. The power to license imports further power to withhold or to revoke such license upon noncompliance with prescribed conditions." Likewise, the petitioner quotes the Pennsylvania Supreme Court in Commonwealth v. Funk, to the effect that: "Automobiles are vehicles of great speed and power. The use of them constitutes an element of danger to persons and property upon the highways. Carefully operated, an automobile is still a dangerous instrumentality, but, when operated by careless or incompetent persons, it becomes an engine of destruction. The Legislature, in the exercise of the police power of the commonwealth, not only may, but must, prescribe how and by whom motor vehicles shall be operated on the highways. One of the primary purposes of a system of general regulation of the subject matter, as here by the Vehicle Code, is to insure the competency of the operator of motor vehicles. Such a general law is manifestly directed to the promotion of public safety and is well within the police power." The common thread running through the cited cases is that it is the legislature, in the exercise of police power, which has the power and responsibility to regulate how and by whom motor vehicles may be operated on the state highways. 2.

The MMDA is not vested with police power.

In Metro Manila Development Authority v. Bel-Air Village Association, Inc., we categorically stated that Rep. Act No. 7924 does not grant the MMDA with police power, let alone legislative power, and that all its functions are administrative in nature. The said case also involved the herein petitioner MMDA which claimed that it had the authority to open a subdivision street owned by the Bel-Air Village Association, Inc. to public traffic because it is an agent of the state endowed with police power in the delivery of basic services in Metro Manila. From this premise, the MMDA argued that there was no need for the City of Makati to enact an ordinance opening Neptune Street to the public. Tracing the legislative history of Rep. Act No. 7924 creating the MMDA, we concluded that the MMDA is not a local government unit or a public corporation endowed with legislative power, and, unlike its predecessor, the Metro Manila Commission, it has no power to enact ordinances for the welfare of the community.

Thus, in the absence of an ordinance from the City of Makati, its own order to open the street was invalid. We restate here the doctrine in the said decision as it applies to the case at bar: police power, as an inherent attribute of sovereignty, is 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. Having been lodged primarily in the National Legislature, it cannot be exercised by any group or body of individuals not possessing legislative power. 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 (LGUs). Once delegated, the agents can exercise only such legislative powers as are conferred on them by the national lawmaking body. Our Congress delegated police power to the LGUs in the Local Government Code of 1991.15 A local government is a "political subdivision of a nation or state which is constituted by law and has substantial control of local affairs." Local government units are the provinces, cities, municipalities and barangays, which exercise police power through their respective legislative bodies. Metropolitan or Metro Manila is a body composed of several local government units. With the passage of Rep. Act No. 7924 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. Thus: . . . [T]he 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." It is an agency created for the purpose of laying down policies and coordinating with the various national government agencies, people's 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." 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 MMDA's functions. There is no grant of authority to enact ordinances and regulations for the general welfare of the inhabitants of the metropolis. Therefore, insofar as Sec. 5(f) of Rep. Act No. 7924 is understood by the lower court and by the petitioner to grant the MMDA the power to confiscate and suspend or revoke drivers' licenses without need of any other legislative enactment, such is an unauthorized exercise of police power. 3. Sec. 5(f) grants the MMDA with the duty to enforce existing traffic rules and regulations. Section 5 of Rep. Act No. 7924 enumerates the "Functions and Powers of the Metro Manila Development Authority." The contested clause in Sec. 5(f) states that the petitioner shall "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 nonmoving in nature, and confiscate and suspend or revoke drivers' licenses in the enforcement of such traffic laws and regulations, the provisions of Rep. Act No. 413618 and P.D. No. 160519 to the contrary notwithstanding," and that "(f)or this purpose, the Authority shall enforce 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." Thus, where there is a traffic law or regulation validly enacted by the legislature or those agencies to whom legislative powers have been delegated (the City of Manila in this case), the petitioner is not precluded – and in fact is duty-bound – to confiscate and suspend or revoke drivers' licenses in the exercise of its mandate of transport and traffic management, as well as the administration and implementation of all traffic enforcement operations, traffic engineering services and traffic education programs. This is consistent with our ruling in Bel-Air that the MMDA is a development authority created for the purpose of laying down policies and coordinating with the various national government agencies, people's organizations, non-governmental organizations and the private sector, which may enforce, but not enact, ordinances. This is also consistent with the fundamental rule of statutory construction that a statute is to be read in a manner that would breathe life into it, rather than defeat it, and is supported by the criteria in cases of this nature that all reasonable doubts should be resolved in favor of the constitutionality of a statute.22

A last word. The MMDA was intended to coordinate services with metro-wide impact that transcend local political boundaries or would entail huge expenditures if provided by the individual LGUs, especially with regard to transport and traffic management, and we are aware of the valiant efforts of the petitioner to untangle the increasingly traffic-snarled roads of Metro Manila. But these laudable intentions are limited by the MMDA's enabling law, which we can but interpret, and petitioner must be reminded that its efforts in this respect must be authorized by a valid law, or ordinance, or regulation arising from a legitimate source. WHEREFORE, the petition is dismissed. SO ORDERED. [G.R. No. 126102. December 4, 2000] ORTIGAS & CO. LTD., petitioner, vs. THE COURT OF APPEALS and ISMAEL G. MATHAY III, respondents. D E C I S I O N: QUISUMBING, J.: This petition seeks to reverse the decision of the Court of Appeals, dated March 25, 1996, in CA-G.R. SP No. 39193, which nullified the writ of preliminary injunction issued by the Regional Trial Court of Pasig City, Branch 261, in Civil Case No. 64931. It also assails the resolution of the appellate court, dated August 13, 1996, denying petitioners motion for reconsideration. The facts of this case, as culled from the records, are as follows: On August 25, 1976, petitioner Ortigas & Company sold to Emilia Hermoso, a parcel of land known as Lot 1, Block 21, Psd-66759, with an area of 1,508 square meters, located in Greenhills Subdivision IV, San Juan, Metro Manila, and covered by Transfer Certificate of Title No. 0737. The contract of sale provided that the lot: 1. (1) be used exclusively for residential purposes only, and not more than one single-family residential building will be constructed thereon, xxx 6. The BUYER shall not erect any sign or billboard on the roof for advertising purposes xxx 11. No single-family residential building shall be erected until the building plans, specification have been approved by the SELLER xxx 14....restrictions shall run with the land and shall be construed as real covenants until December 31, 2025 when they shall cease and terminate. These and the other conditions were duly annotated on the certificate of title issued to Emilia.

In 1981, the Metropolitan Manila Commission (now Metropolitan Manila Development Authority) enacted MMC Ordinance No. 81-01, also known as the Comprehensive Zoning Area for the National Capital Region. The ordinance reclassified as a commercial area a portion of Ortigas Avenue from Madison to Roosevelt Streets of Greenhills Subdivision where the lot is located. On June 8, 1984, private respondent Ismael Mathay III leased the lot from Emilia Hermoso and J.P. Hermoso Realty Corp.. The lease contract did not specify the purposes of the lease. Thereupon, private respondent constructed a single story commercial building for Greenhills Autohaus, Inc., a car sales company. On January 18, 1995, petitioner filed a complaint against Emilia Hermoso with the Regional Trial Court of Pasig, Branch 261. Docketed as Civil Case No. 64931, the complaint sought the demolition of the said commercial structure for having violated the terms and conditions of the Deed of Sale. Complainant prayed for the issuance of a temporary restraining order and a writ of preliminary injunction to prohibit petitioner from constructing the commercial building and/or engaging in commercial activity on the lot. The complaint was later amended to implead Ismael G. Mathay III and J.P. Hermoso Realty Corp., which has a ten percent (10%) interest in the lot. In his answer, Mathay III denied any knowledge of the restrictions on the use of the lot and filed a cross-claim against the Hermosos. On June 16, 1995, the trial court issued the writ of preliminary injunction. On June 29, 1995, Mathay III moved to set aside the injunctive order, but the trial court denied the motion. Mathay III then filed with the Court of Appeals a special civil action for certiorari, docketed as CA-G.R. SP No. 39193, ascribing to the trial court grave abuse of discretion in issuing the writ of preliminary injunction. He claimed that MMC Ordinance No. 81-01 classified the area where the lot was located as commercial area and said ordinance must be read into the August 25, 1976 Deed of Sale as a concrete exercise of police power. Ortigas and Company averred that inasmuch as the restrictions on the use of the lot were duly annotated on the title it issued to Emilia Hermoso, said restrictions must prevail over the ordinance, specially since these restrictions were agreed upon before the passage of MMC Ordinance No. 81-01. On March 25, 1996, the appellate court disposed of the case as follows: WHEREFORE, in light of the foregoing, the petition is hereby GRANTED. The assailed orders are hereby nullified and set aside. SO ORDERED. In finding for Mathay III, the Court of Appeals held that the MMC Ordinance No. 8101 effectively nullified the restrictions allowing only residential use of the property in question.

Ortigas seasonably moved for reconsideration, but the appellate court denied it on August 13, 1996. Hence, the instant petition. In its Memorandum, petitioner now submits that the principal issue in this case is whether respondent Court of Appeals correctly set aside the Order dated June 16, 1995 of the trial court which issued the writ of preliminary injunction on the sole ground that MMC Ordinance No. 81-01 nullified the building restriction imposing exclusive residential use on the property in question. It also asserts that Mathay III lacks legal capacity to question the validity of conditions of the deed of sale; and he is barred by estoppel or waiver to raise the same question like his principals, the owners. Lastly, it avers that the appellate court unaccountably failed to address several questions of fact. Principally, we must resolve the issue of whether the Court of Appeals erred in holding that the trial court committed grave abuse of discretion when it refused to apply MMC Ordinance No.81-01 to Civil Case No. 64931. But first, we must address petitioners allegation that the Court of Appeals unaccountably failed to address questions of fact. For basic is the rule that factual issues may not be raised before this Court in a petition for review and this Court is not duty-bound to consider said questions. CA-G.R. SP No. 39193 was a special civil action for certiorari, and the appellate court only had to determine if the trial court committed grave abuse of discretion amounting to want or excess of jurisdiction in issuing the writ of preliminary injunction. Thus, unless vital to our determination of the issue at hand, we shall refrain from further consideration of factual questions. Petitioner contends that the appellate court erred in limiting its decision to the cited zoning ordinance. It avers that a contractual right is not automatically discarded once a claim is made that it conflicts with police power. Petitioner submits that the restrictive clauses in the questioned contract is not in conflict with the zoning ordinance. For one, according to petitioner, the MMC Ordinance No. 81-01 did not prohibit the construction of residential buildings. Petitioner argues that even with the zoning ordinance, the seller and buyer of the re-classified lot can voluntarily agree to an exclusive residential use thereof. Hence, petitioner concludes that the Court of Appeals erred in holding that the condition imposing exclusive residential use was effectively nullified by the zoning ordinance. In its turn, private respondent argues that the appellate court correctly ruled that the trial court had acted with grave abuse of discretion in refusing to subject the contract to the MMC Ordinance No. 81-01. He avers that the appellate court properly held the police power superior to the non-impairment of contract clause in the Constitution. He concludes that the appellate court did not err in dissolving the writ of preliminary injunction issued by the trial court in excess of its jurisdiction. We note that in issuing the disputed writ of preliminary injunction, the trial court observed that the contract of sale was entered into in August 1976, while the zoning ordinance was enacted only in March 1981. The trial court reasoned that since

private respondent had failed to show that MMC Ordinance No. 81-01 had retroactive effect, said ordinance should be given prospective application only, citing Co vs. Intermediate Appellate Court, 162 SCRA 390 (1988). In general, we agree that laws are to be construed as having only prospective operation. Lex prospicit, non respicit. Equally settled, only laws existing at the time of the execution of a contract are applicable thereto and not later statutes, unless the latter are specifically intended to have retroactive effect. A later law which enlarges, abridges, or in any manner changes the intent of the parties to the contract necessarily impairs the contract itself and cannot be given retroactive effect without violating the constitutional prohibition against impairment of contracts. But, the foregoing principles do admit of certain exceptions. One involves police power. A law enacted in the exercise of police power to regulate or govern certain activities or transactions could be given retroactive effect and may reasonably impair vested rights or contracts. Police power legislation is applicable not only to future contracts, but equally to those already in existence. Non-impairment of contracts or vested rights clauses will have to yield to the superior and legitimate exercise by the State of police power to promote the health, morals, peace, education, good order, safety, and general welfare of the people. Moreover, statutes in exercise of valid police power must be read into every contract. Noteworthy, in Sangalang vs. Intermediate Appellate Court, we already upheld MMC Ordinance No. 81-01 as a legitimate police power measure. The trial courts reliance on the Co vs. IAC, is misplaced. In Co, the disputed area was agricultural and Ordinance No. 81-01 did not specifically provide that it shall have retroactive effect so as to discontinue all rights previously acquired over lands located within the zone which are neither residential nor light industrial in nature, and stated with respect to agricultural areas covered that the zoning ordinance should be given prospective operation only. The area in this case involves not agricultural but urban residential land. Ordinance No. 81-01 retroactively affected the operation of the zoning ordinance in Greenhills by reclassifying certain locations therein as commercial. Following our ruling in Ortigas & Co., Ltd. vs. Feati Bank & Trust Co., 94 SCRA 533 (1979), the contractual stipulations annotated on the Torrens Title, on which Ortigas relies, must yield to the ordinance. When that stretch of Ortigas Avenue from Roosevelt Street to Madison Street was reclassified as a commercial zone by the Metropolitan Manila Commission in March 1981, the restrictions in the contract of sale between Ortigas and Hermoso, limiting all construction on the disputed lot to single-family residential buildings, were deemed extinguished by the retroactive operation of the zoning ordinance and could no longer be enforced. While our legal system upholds the sanctity of contract so that a contract is deemed law between the contracting parties, nonetheless, stipulations in a contract cannot contravene law, morals, good customs, public order, or public policy. Otherwise such stipulations would be deemed null and void. Respondent court correctly found that the trial court committed in this case a grave abuse of discretion amounting to want of or excess of jurisdiction in refusing to treat Ordinance No. 81-01 as applicable to Civil Case No. 64931. In resolving matters in litigation, judges are not only duty-

bound to ascertain the facts and the applicable laws, they are also bound by their oath of office to apply the applicable law. As a secondary issue, petitioner contends that respondent Mathay III, as a mere lessee of the lot in question, is a total stranger to the deed of sale and is thus barred from questioning the conditions of said deed. Petitioner points out that the owners of the lot voluntarily agreed to the restrictions on the use of the lot and do not question the validity of these restrictions. Petitioner argues that Mathay III as a lessee is merely an agent of the owners, and could not override and rise above the status of his principals. Petitioner submits that he could not have a higher interest than those of the owners, the Hermosos, and thus had no locus standi to file CA-G.R. SP No. 39193 to dissolve the injunctive writ issued by the RTC of Pasig City. For his part, private respondent argues that as the lessee who built the commercial structure, it is he and he alone who stands to be either benefited or injured by the results of the judgment in Civil Case No. 64931. He avers he is the party with real interest in the subject matter of the action, as it would be his business, not the Hermosos, which would suffer had not the respondent court dissolved the writ of preliminary injunction. A real party in interest is defined as the party who stands to be benefited or injured by the judgment or the party entitled to the avails of the suit. Interest within the meaning of the rule means material interest, an interest in issue and to be affected by the decree, as distinguished from mere interest in the question involved, or a mere incidental interest. By real interest is meant a present substantial interest, as distinguished from a mere expectancy or a future, contingent, subordinate, or consequential interest. Tested by the foregoing definition, private respondent in this case is clearly a real party in interest. It is not disputed that he is in possession of the lot pursuant to a valid lease. He is a possessor in the concept of a holder of the thing under Article 525 of the Civil Code. He was impleaded as a defendant in the amended complaint in Civil Case No. 64931. Further, what petitioner seeks to enjoin is the building by respondent of a commercial structure on the lot. Clearly, it is private respondents acts which are in issue, and his interest in said issue cannot be a mere incidental interest. In its amended complaint, petitioner prayed for, among others, judgment ordering the demolition of all improvements illegally built on the lot in question. These show that it is petitioner Mathay III, doing business as Greenhills Autohaus, Inc., and not only the Hermosos, who will be adversely affected by the courts decree. Petitioner also cites the rule that a stranger to a contract has no rights or obligations under it, and thus has no standing to challenge its validity. But in seeking to enforce the stipulations in the deed of sale, petitioner impleaded private respondent as a defendant. Thus petitioner must recognize that where a plaintiff has impleaded a party as a defendant, he cannot subsequently question the latters standing in court.

WHEREFORE, the instant petition is DENIED. The challenged decision of the Court of Appeals dated March 25, 1996, as well as the assailed resolution of August 13, 1996, in CA-G.R. SP No. 39193 is AFFIRMED. Costs against petitioner. SO ORDERED.

[G.R. No. 144681. June 21, 2004] PROFESSIONAL REGULATION COMMISSION (PRC), CHAIRMAN HERMOGENES P. POBRE, ASSOCIATE COMMISSIONER ARMANDO PASCUAL, BOARD OF MEDICINE, CHAIRMAN RODOLFO P. DE GUZMAN, JOSE S. RAMIREZ, JUANITO B. BILLOTE, RUBEN R. POLICARPIO, EDGARDO T. FERNANDO and RICARDO D. FULGENCIO II, petitioners, vs. ARLENE V. DE GUZMAN, VIOLETA V. MENESES, CELERINA S. NAVARRO, JOSE RAMONCITO P. NAVARRO, ARNEL V. HERRERA and GERALDINE ELIZABETH M. PAGILAGAN, ELNORA R. RAQUENO, MARISSA A. REGODON, LAURA M. SANTOS, KARANGALAN D. SERRANO, DANILO A. VILLAVER, MARIA ROSARIO L. LEONOR, ALICIA S. LIZANO, MARITEL M. ECHIVERRI, BERNADETTE T. MENDOZA, FERNANDO F. MANDAPAT, ALELI A. GOLLAYAN, ELCIN C. ARRIOLA, HERMINIGILDA E. CONEJOS, SALLY B. BUNAGAN, ROGELIO B. ANCHETA, OSCAR H. PADUA, JR., EVELYN D. GRAJO, EVELYN S. ACOSTA, MARGARITA BELINDA L. VICENCIO, VALENTINO P. ARBOLEDA, EVELYN O. RAMOS, ACHILLES J. PERALTA, CORAZON M. CRUZ, LEUVINA P. CHICO, JOSEPH A. JAO, MA. LUISA S. GUTIERREZ, LYDIA C. CHAN, OPHELIA C. HIDALGO, FERNANDO T. CRUZ, MELVIN M. USITA, RAFAEL I. TOLENTINO, GRACE E. UY, CHERYL R. TRIGUERO, MICHAEL L. SERRANO, FEDERICO L. CASTILLO, MELITA J. CAEDO, SAMUEL B. BANGOY, BERNARDITA B. SY, GLORIA T. JULARBAL, FREDERICK D. FRANCISCO, CARLOS M. BERNARDO, JR., HUBERT S. NAZARENO, CLARISSA B. BACLIG, DAYMINDA G. BONTUYAN, BERNADETTE H. CABUHAT, NANCY J. CHAVEZ, MARIO D. CUARESMA, ERNESTO L. CUE, EVELYN C. CUNDANGAN, RHONEIL R. DEVERATURDA, DERILEEN D. DORADO, SAIBZUR N. EDDING, VIOLETA C. FELIPE, HERMINIO V. FERNANDEZ, JR., MARIA VICTORIA M. LACSAMANA, NORMA G. LAFAVILLA, RUBY B. LANTIN, MA. ELOISA Q. MALLARI, CLARISA SJ. NICOLAS, PERCIVAL H. PANGILINAN, ARNULFO A. SALVADOR, ROBERT B. SANCHEZ, MERLY D. STA. ANA and YOLANDA P. UNICA, respondents. D E C I S I O N: TINGA, J.: This petition for review under Rule 45 of the 1997 Rules of Civil Procedure seeks to nullify the Decision, dated May 16, 2000, of the Court of Appeals in CA-G.R. SP No. 37283. The appellate court affirmed the judgment dated December 19, 1994, of the Regional Trial Court (RTC) of Manila, Branch 52, in Civil Case No. 93-66530. The trial court allowed the respondents to take their physicians oath and to register as duly licensed physicians. Equally challenged is the Resolution promulgated on August 25, 2000 of the Court of Appeals, denying petitioners Motion for Reconsideration. The facts of this case are as follows:

The respondents are all graduates of the Fatima College of Medicine, Valenzuela City, Metro Manila. They passed the Physician Licensure Examination conducted in February 1993 by the Board of Medicine (Board). Petitioner Professional Regulation Commission (PRC) then released their names as successful examinees in the medical licensure examination. Shortly thereafter, the Board observed that the grades of the seventy-nine successful examinees from Fatima College in the two most difficult subjects in the medical licensure exam, Biochemistry (Bio-Chem) and Obstetrics and Gynecology (OB-Gyne), were unusually and exceptionally high. Eleven Fatima examinees scored 100% in Bio-Chem and ten got 100% in OB-Gyne, another eleven got 99% in BioChem, and twenty-one scored 99% in OB-Gyne. The Board also observed that many of those who passed from Fatima got marks of 95% or better in both subjects, and no one got a mark lower than 90%. A comparison of the performances of the candidates from other schools was made. The Board observed that strangely, the unusually high ratings were true only for Fatima College examinees. It was a recordbreaking phenomenon in the history of the Physician Licensure Examination. On June 7, 1993, the Board issued Resolution No. 19, withholding the registration as physicians of all the examinees from the Fatima College of Medicine. The PRC asked the National Bureau of Investigation (NBI) to investigate whether any anomaly or irregularity marred the February 1993 Physician Licensure Examination. Prior to the NBI investigation, the Board requested Fr. Bienvenido F. Nebres, S.J., an expert mathematician and authority in statistics, and later president of the Ateneo de Manila University, to conduct a statistical analysis of the results in Bio-Chem and Ob-Gyne of the said examination. On June 10, 1993, Fr. Nebres submitted his report. He reported that a comparison of the scores in Bio-Chem and Ob-Gyne, of the Fatima College examinees with those of examinees from De La Salle University and Perpetual Help College of Medicine showed that the scores of Fatima College examinees were not only incredibly high but unusually clustered close to each other. He concluded that there must be some unusual reason creating the clustering of scores in the two subjects. It must be a cause strong enough to eliminate the normal variations that one should expect from the examinees [of Fatima College] in terms of talent, effort, energy, etc. For its part, the NBI found that the questionable passing rate of Fatima examinees in the Physician Examination leads to the conclusion that the Fatima examinees gained early access to the test questions. On July 5, 1993, respondents Arlene V. De Guzman, Violeta V. Meneses, Celerina S. Navarro, Jose Ramoncito P. Navarro, Arnel V. Herrera, and Geraldine Elizabeth M. Pagilagan (Arlene V. De Guzman et al., for brevity) filed a special civil action for mandamus, with prayer for preliminary mandatory injunction docketed as Civil Case No. 93-66530 with the Regional Trial Court (RTC) of Manila, Branch 52. Their petition was adopted by the other respondents as intervenors. Meanwhile, the Board issued Resolution No. 26, dated July 21, 1993, charging respondents with immorality, dishonest conduct, fraud, and deceit in connection

with the Bio-Chem and Ob-Gyne examinations. It recommended that the test results of the Fatima examinees be nullified. The case was docketed as Adm. Case No. 1687 by the PRC. On July 28, 1993, the RTC issued an Order in Civil Case No. 93-66530 granting the preliminary mandatory injunction sought by the respondents. It ordered the petitioners to administer the physician’s oath to Arlene V. De Guzman et al., and enter their names in the rolls of the PRC. The petitioners then filed a special civil action for certiorari with the Court of Appeals to set aside the mandatory injunctive writ, docketed as CA-G.R. SP No. 31701. On October 21, 1993, the appellate court decided CA-G.R. SP No. 31701, with the dispositive portion of the Decision ordaining as follows: WHEREFORE, this petition is GRANTED. Accordingly, the writ of preliminary mandatory injunction issued by the lower court against petitioners is hereby nullified and set aside. SO ORDERED. Arlene V. de Guzman, et al., then elevated the foregoing Decision to this Court in G.R. No. 112315. In our Resolution dated May 23, 1994, we denied the petition for failure to show reversible error on the part of the appellate court. Meanwhile, on November 22, 1993, during the pendency of the instant petition, the pre-trial conference in Civil Case No. 93-66530 was held. Then, the parties, agreed to reduce the testimonies of their respective witnesses to sworn questions-andanswers. This was without prejudice to cross-examination by the opposing counsel. On December 13, 1993, petitioners counsel failed to appear at the trial in the mistaken belief that the trial was set for December 15. The trial court then ruled that petitioners waived their right to cross-examine the witnesses. On January 27, 1994, counsel for petitioners filed a Manifestation and Motion stating the reasons for her non-appearance and praying that the cross-examination of the witnesses for the opposing parties be reset. The trial court denied the motion for lack of notice to adverse counsel. It also denied the Motion for Reconsideration that followed on the ground that adverse counsel was notified less than three (3) days prior to the hearing. Meanwhile, to prevent the PRC and the Board from proceeding with Adm. Case No. 1687, the respondents herein moved for the issuance of a restraining order, which the lower court granted in its Order dated April 4, 1994. The petitioners then filed with this Court a petition for certiorari docketed as G.R. No. 115704, to annul the Orders of the trial court dated November 13, 1993, February 28, 1994, and April 4, 1994. We referred the petition to the Court of Appeals where it was docketed as CA-G.R. SP No. 34506.

On August 31, 1994, the appellate court decided CA-G.R. SP No. 34506 as follows: WHEREFORE, the present petition for certiorari with prayer for temporary restraining order/preliminary injunction is GRANTED and the Orders of December 13, 1993, February 7, 1994, February 28, 1994, and April 4, 1994 of the RTC-Manila, Branch 52, and all further proceedings taken by it in Special Civil Action No. 9366530 are hereby DECLARED NULL and VOID. The said RTC-Manila is ordered to allow petitioners counsel to cross-examine the respondent’s witnesses, to allow petitioners to present their evidence in due course of trial, and thereafter to decide the case on the merits on the basis of the evidence of the parties. Costs against respondents. IT IS SO ORDERED. The trial was then set and notices were sent to the parties. A day before the first hearing, on September 22, 1994, the petitioners filed an Urgent Ex-Parte Manifestation and Motion praying for the partial reconsideration of the appellate court’s decision in CA-G.R. SP No. 34506, and for the outright dismissal of Civil Case No. 93-66530. The petitioners asked for the suspension of the proceedings. In its Order dated September 23, 1994, the trial court granted the aforesaid motion, cancelled the scheduled hearing dates, and reset the proceedings to October 21 and 28, 1994. Meanwhile, on October 25, 1994, the Court of Appeals denied the partial motion for reconsideration in CA-G.R. SP No. 34506. Thus, petitioners filed with the Supreme Court a petition for review docketed as G.R. No. 117817, entitled Professional Regulation Commission, et al. v. Court of Appeals, et al. On November 11, 1994, counsel for the petitioners failed to appear at the trial of Civil Case No. 93-66530. Upon motion of the respondents herein, the trial court ruled that herein petitioners waived their right to cross-examine the herein respondents. Trial was reset to November 28, 1994. On November 25, 1994, petitioners counsel moved for the inhibition of the trial court judge for alleged partiality. On November 28, 1994, the day the Motion to Inhibit was to be heard, petitioners failed to appear. Thus, the trial court denied the Motion to Inhibit and declared Civil Case No. 93-66530 deemed submitted for decision. On December 19, 1994, the trial court handed down its judgment in Civil Case No. 93-66530, the fallo of which reads: WHEREFORE, judgment is rendered ordering the respondents to allow the petitioners and intervenors (except those with asterisks and footnotes in pages 1 & 2 of this decision) [sic], to take the physicians oath and to register them as physicians.

It should be made clear that this decision is without prejudice to any administrative disciplinary action which may be taken against any of the petitioners for such causes and in the manner provided by law and consistent with the requirements of the Constitution as any other professionals. No costs. SO ORDERED. As a result of these developments, petitioners filed with this Court a petition for review on certiorari docketed as G.R. No. 118437, entitled Professional Regulation Commission v. Hon. David G. Nitafan, praying inter alia, that (1) G.R. No. 118437 be consolidated with G.R. No. 117817; (2) the decision of the Court of Appeals dated August 31, 1994 in CA-G.R. SP No. 34506 be nullified for its failure to decree the dismissal of Civil Case No. 93-66530, and in the alternative, to set aside the decision of the trial court in Civil Case No. 93-66530, order the trial court judge to inhibit himself, and Civil Case No. 93-66530 be re-raffled to another branch. On December 26, 1994, the petitioners herein filed their Notice of Appeal in Civil Case No. 93-66530, thereby elevating the case to the Court of Appeals, where it was docketed as CA-G.R. SP No. 37283. In our Resolution of June 7, 1995, G.R. No. 118437 was consolidated with G.R. No. 117817. On July 9, 1998, we disposed of G.R. Nos. 117817 and 118437 in this wise: WHEREFORE, the petition in G.R. No. 117817 is DISMISSED for being moot. The petition in G.R. No. 118437 is likewise DISMISSED on the ground that there is a pending appeal before the Court of Appeals. Assistant Solicitor General Amparo M. Cabotaje-Tang is advised to be more circumspect in her dealings with the courts as a repetition of the same or similar acts will be dealt with accordingly. SO ORDERED. While CA-G.R. SP No. 37283 was awaiting disposition by the appellate court, Arnel V. Herrera, one of the original petitioners in Civil Case No. 93-66530, joined by twentyseven intervenors, to wit: Fernando F. Mandapat, Ophelia C. Hidalgo, Bernadette T. Mendoza, Ruby B. Lantin-Tan, Fernando T. Cruz, Marissa A. Regodon, Ma. Eloisa Q. Mallari-Largoza, Cheryl R. Triguero, Joseph A. Jao, Bernadette H. Cabuhat, Evelyn S. Acosta-Cabanes, Laura M. Santos, Maritel M. Echiverri, Bernadette C. Escusa, Carlosito C. Domingo, Alicia S. Lizano, Elnora R. Raqueno-Rabaino, Saibzur N. Edding, Derileen D. Dorado-Edding, Robert B. Sanchez, Maria Rosario L. LeonorLacandula, Geraldine Elizabeth M. Pagilagan-Palma, Margarita Belinda L. VicencioGamilla, Herminigilda E. Conejos, Leuvina P. Chico-Paguio, Elcin C. Arriola-Ocampo, and Jose Ramoncito P. Navarro, manifested that they were no longer interested in proceeding with the case and moved for its dismissal. A similar manifestation and motion was later filed by intervenors Mary Jean I. Yeban-Merlan, Michael L. Serrano, Norma G. Lafavilla, Arnulfo A. Salvador, Belinda C. Rabara, Yolanda P. Unica,

Dayminda G. Bontuyan, Clarissa B. Baclig, Ma. Luisa S. Gutierrez, Rhoneil R. Deveraturda, Aleli A. Gollayan, Evelyn C. Cundangan, Frederick D. Francisco, Violeta V. Meneses, Melita J. Caedo, Clarisa SJ. Nicolas, Federico L. Castillo, Karangalan D. Serrano, Danilo A. Villaver, Grace E. Uy, Lydia C. Chan, and Melvin M. Usita. The Court of Appeals ruled that its decision in CA-G.R. SP No. 37283 would not apply to them. On May 16, 2000, the Court of Appeals decided CA-G.R. SP No. 37283, with the following fallo, to wit: WHEREFORE, finding no reversible error in the decision appealed from, We hereby AFFIRM the same and DISMISS the instant appeal. No pronouncement as to costs. SO ORDERED. In sustaining the trial court’s decision, the appellate court ratiocinated that the respondents complied with all the statutory requirements for admission into the licensure examination for physicians in February 1993. They all passed the said examination. Having fulfilled the requirements of Republic Act No. 2382, they should be allowed to take their oaths as physicians and be registered in the rolls of the PRC. Hence, this petition raising the following issues: I WHETHER OR NOT RESPONDENTS HAVE A VALID CAUSE OF ACTION FOR MANDAMUS AGAINST PETITIONERS IN THE LIGHT OF THE RESOLUTION OF THIS HONORABLE COURT IN G.R. NO. 112315 AFFIRMING THE COURT OF APPEALS DECISION DECLARING THAT IF EVER THERE IS SOME DOUBT AS TO THE MORAL FITNESS OF EXAMINEES, THE ISSUANCE OF LICENSE TO PRACTICE MEDICINE IS NOT AUTOMATICALLY GRANTED TO THE SUCCESSFUL EXAMINEES. II WHETHER OR NOT THE PETITION FOR MANDAMUS COULD PROCEED DESPITE THE PENDENCY OF ADMINISTRATIVE CASE NO. 1687, WHICH WAS PRECISELY LODGED TO DETERMINE THE MORAL FITNESS OF RESPONDENTS TO BECOME DOCTORS. To our mind, the only issue is: Did the Court of Appeals commit a reversible error of law in sustaining the judgment of the trial court that respondents are entitled to a writ of mandamus? The petitioners submit that a writ of mandamus will not lie in this case. They point out that for a writ of mandamus to issue, the applicant must have a well-defined, clear and certain legal right to the thing demanded and it is the duty of the respondent to perform the act required. Thus, mandamus may be availed of only when the duty sought to be performed is a ministerial and not a discretionary one.

The petitioners argue that the appellate court’s decision in CA-G.R. SP No. 37283 upholding the decision of the trial court in Civil Case No. 93-66530 overlooked its own pronouncement in CA-G.R. SP No. 31701. The Court of Appeals held in CA-G.R. SP No. 31701 that the issuance of a license to engage in the practice of medicine becomes discretionary on the PRC if there exists some doubt that the successful examinee has not fully met the requirements of the law. The petitioner’s stress that this Courts Resolution dated May 24, 1994 in G.R. No. 112315 held that there was no showing that the Court of Appeals had committed any reversible error in rendering the questioned judgment in CA-G.R. SP No. 31701. The petitioners point out that our Resolution in G.R. No. 112315 has long become final and executory. Respondents counter that having passed the 1993 licensure examinations for physicians, the petitioners have the obligation to administer to them the oath as physicians and to issue their certificates of registration as physicians pursuant to Section 20 of Rep. Act No. 2382. The Court of Appeals in CA-G.R. SP No. 37283, found that respondents complied with all the requirements of Rep. Act No. 2382. Furthermore, respondents were admitted by the Medical Board to the licensure examinations and had passed the same. Hence, pursuant to Section 20 of Rep. Act No. 2382, the petitioners had the obligation to administer their oaths as physicians and register them. Mandamus is a command issuing from a court of competent jurisdiction, in the name of the state or the sovereign, directed to some inferior court, tribunal, or board, or to some corporation or person requiring the performance of a particular duty therein specified, which duty results from the official station of the party to whom the writ is directed, or from operation of law. Section 3 of Rule 65 of the 1997 Rules of Civil Procedure outlines two situations when a writ of mandamus may issue, when any tribunal, corporation, board, officer or person unlawfully (1) neglects the performance of an act which the law specifically enjoins as a duty resulting from an office, trust, or station; or (2) excludes another from the use and enjoyment of a right or office to which the other is entitled. We shall discuss the issues successively. 1. On The Existence of a Duty of the Board of Medicine To Issue Certificates of Registration as Physicians under Rep. Act No. 2382. For mandamus to prosper, there must be a showing that the officer, board, or official concerned, has a clear legal duty, not involving discretion. Moreover, there must be statutory authority for the performance of the act, and the performance of the duty has been refused. Thus, it must be pertinently asked now: Did petitioners have the duty to administer the Hippocratic Oath and register respondents as physicians under the Medical Act of 1959? As found by the Court of Appeals, on which we agree on the basis of the records: It bears emphasizing herein that petitioner-appellees and intervenor-appellees have fully complied with all the statutory requirements for admission into the licensure examinations for physicians conducted and administered by the respondent-

appellants on February 12, 14, 20 and 21, 1993. Stress, too, must be made of the fact that all of them successfully passed the same examinations. The crucial query now is whether the Court of Appeals erred in concluding that petitioners should allow the respondents to take their oaths as physicians and register them, steps which would enable respondents to practice the medical profession pursuant to Section 20 of the Medical Act of 1959? The appellate court relied on a single provision, Section 20 of Rep. Act No. 2382, in concluding that the petitioners had the ministerial obligation to administer the Hippocratic Oath to respondents and register them as physicians. But it is a basic rule in statutory construction that each part of a statute should be construed in connection with every other part to produce a harmonious whole, not confining construction to only one section. The intent or meaning of the statute should be ascertained from the statute taken as a whole, not from an isolated part of the provision. Accordingly, Section 20 of Rep. Act No. 2382, as amended should be read in conjunction with the other provisions of the Act. Thus, to determine whether the petitioners had the ministerial obligation to administer the Hippocratic Oath to respondents and register them as physicians, recourse must be had to the entirety of the Medical Act of 1959. A careful reading of Section 20 of the Medical Act of 1959 discloses that the law uses the word shall with respect to the issuance of certificates of registration. Thus, the petitioners shall sign and issue certificates of registration to those who have satisfactorily complied with the requirements of the Board. In statutory construction the term shall is a word of command. It is given imperative meaning. Thus, when an examinee satisfies the requirements for the grant of his physician’s license, the Board is obliged to administer to him his oath and register him as a physician, pursuant to Section 20 and par. (1) of Section 22[25] of the Medical Act of 1959. However, the surrounding circumstances in this case call for serious inquiry concerning the satisfactory compliance with the Board requirements by the respondents. The unusually high scores in the two most difficult subjects was phenomenal, according to Fr. Nebres, the consultant of PRC on the matter, and raised grave doubts about the integrity, if not validity, of the tests. These doubts have to be appropriately resolved. Under the second paragraph of Section 22, the Board is vested with the power to conduct administrative investigations and disapprove applications for examination or registration, pursuant to the objectives of Rep. Act No. 2382 as outlined in Section 1 thereof. In this case, after the investigation, the Board filed before the PRC, Adm. Case No. 1687 against the respondents to ascertain their moral and mental fitness to practice medicine, as required by Section 9 of Rep. Act No. 2382. In its Decision dated July 1, 1997, the Board ruled: WHEREFORE, the BOARD hereby CANCELS the respondents[] examination papers in the Physician Licensure Examinations given in February 1993 and further DEBARS them from taking any licensure examination for a period of ONE (1) YEAR from the date of the promulgation of this DECISION. They may, if they so desire, apply for the

scheduled examinations for physicians after the lapse of the period imposed by the BOARD. SO ORDERED. Until the moral and mental fitness of the respondents could be ascertained, according to petitioners, the Board has discretion to hold in abeyance the administration of the Hippocratic Oath and the issuance of the certificates to them. The writ of mandamus does not lie to compel performance of an act which is not duly authorized. The respondents nevertheless argue that under Section 20, the Board shall not issue a certificate of registration only in the following instances: (1) to any candidate who has been convicted by a court of competent jurisdiction of any criminal offense involving moral turpitude; (2) or has been found guilty of immoral or dishonorable conduct after the investigation by the Board; or (3) has been declared to be of unsound mind. They aver that none of these circumstances are present in their case. Petitioners reject respondent’s argument. We are informed that in Board Resolution No. 26, dated July 21, 1993, the Board resolved to file charges against the examinees from Fatima College of Medicine for immorality, dishonesty, fraud, and deceit in the Obstetrics-Gynecology and Biochemistry examinations. It likewise sought to cancel the examination results obtained by the examinees from the Fatima College. Section 8 of Rep. Act No. 2382 prescribes, among others, that a person who aspires to practice medicine in the Philippines, must have satisfactorily passed the corresponding Board Examination. Section 22, in turn, provides that the oath may only be administered to physicians who qualified in the examinations. The operative word here is satisfactorily, defined as sufficient to meet a condition or obligation or capable of dispelling doubt or ignorance. Gleaned from Board Resolution No. 26, the licensing authority apparently did not find that the respondents satisfactorily passed the licensure examinations. The Board instead sought to nullify the examination results obtained by the respondents. 2. On the Right Of The Respondents To Be Registered As Physicians The function of mandamus is not to establish a right but to enforce one that has been established by law. If no legal right has been violated, there can be no application of a legal remedy, and the writ of mandamus is a legal remedy for a legal right. There must be a well-defined, clear and certain legal right to the thing demanded. It is long established rule that a license to practice medicine is a privilege or franchise granted by the government. It is true that this Court has upheld the constitutional right of every citizen to select a profession or course of study subject to a fair, reasonable, and equitable admission and academic requirements.But like all rights and freedoms guaranteed by the Charter, their exercise may be so regulated pursuant to the police power of the State to safeguard health, morals, peace, education, order, safety, and general

welfare of the people. Thus, persons who desire to engage in the learned professions requiring scientific or technical knowledge may be required to take an examination as a prerequisite to engaging in their chosen careers. This regulation takes particular pertinence in the field of medicine, to protect the public from the potentially deadly effects of incompetence and ignorance among those who would practice medicine. In a previous case, it may be recalled, this Court has ordered the Board of Medical Examiners to annul both its resolution and certificate authorizing a Spanish subject, with the degree of Licentiate in Medicine and Surgery from the University of Barcelona, Spain, to practice medicine in the Philippines, without first passing the examination required by the Philippine Medical Act. In another case worth noting, we upheld the power of the State to upgrade the selection of applicants into medical schools through admission tests. It must be stressed, nevertheless, that the power to regulate the exercise of a profession or pursuit of an occupation cannot be exercised by the State or its agents in an arbitrary, despotic, or oppressive manner. A political body that regulates the exercise of a particular privilege has the authority to both forbid and grant such privilege in accordance with certain conditions. Such conditions may not, however, require giving up ones constitutional rights as a condition to acquiring the license. Under the view that the legislature cannot validly bestow an arbitrary power to grant or refuse a license on a public agency or officer, courts will generally strike down license legislation that vests in public officials discretion to grant or refuse a license to carry on some ordinarily lawful business, profession, or activity without prescribing definite rules and conditions for the guidance of said officials in the exercise of their power. In the present case, the aforementioned guidelines are provided for in Rep. Act No. 2382, as amended, which prescribes the requirements for admission to the practice of medicine, the qualifications of candidates for the board examinations, the scope and conduct of the examinations, the grounds for denying the issuance of a physician’s license, or revoking a license that has been issued. Verily, to be granted the privilege to practice medicine, the applicant must show that he possesses all the qualifications and none of the disqualifications. Furthermore, it must appear that he has fully complied with all the conditions and requirements imposed by the law and the licensing authority. Should doubt taint or mar the compliance as being less than satisfactory, then the privilege will not issue. For said privilege is distinguishable from a matter of right, which may be demanded if denied. Thus, without a definite showing that the aforesaid requirements and conditions have been satisfactorily met, the courts may not grant the writ of mandamus to secure said privilege without thwarting the legislative will. 3. On the Ripeness of the Petition for Mandamus Lastly, the petitioners herein contend that the Court of Appeals should have dismissed the petition for mandamus below for being premature. They argue that the administrative remedies had not been exhausted. The records show that this is not the first time that petitioners have sought the dismissal of Civil Case No. 9366530. This issue was raised in G.R. No. 115704, which petition we referred to the Court of Appeals, where it was docketed as CA-G.R. SP No. 34506. On motion for reconsideration in CA-G.R. SP No. 34506, the appellate court denied the motion to

dismiss on the ground that the prayers for the nullification of the order of the trial court and the dismissal of Civil Case No. 93-66530 were inconsistent reliefs. In G.R. No. 118437, the petitioners sought to nullify the decision of the Court of Appeals in CA-G.R. SP No. 34506 insofar as it did not order the dismissal of Civil Case No. 9366530. In our consolidated decision, dated July 9, 1998, in G.R. Nos. 117817 & 118437, this Court speaking through Justice Bellosillo opined that: Indeed, the issue as to whether the Court of Appeals erred in not ordering the dismissal of Civil Case No. 93-66530 sought to be resolved in the instant petition has been rendered meaningless by an event taking place prior to the filing of this petition and denial thereof should follow as a logical consequence. There is no longer any justiciable controversy so that any declaration thereon would be of no practical use or value. It should be recalled that in its decision of 19 December 1994 the trial court granted the writ of mandamus prayed for by private respondents, which decision was received by petitioners on 20 December 1994. Three (3) days after, or on 23 December 1994, petitioners filed the instant petition. By then, the remedy available to them was to appeal the decision to the Court of Appeals, which they in fact did, by filing a notice of appeal on 26 December 1994. The petitioners have shown no cogent reason for us to reverse the aforecited ruling. Nor will their reliance upon the doctrine of the exhaustion of administrative remedies in the instant case advance their cause any. Section 26 of the Medical Act of 1959 provides for the administrative and judicial remedies that respondents herein can avail to question Resolution No. 26 of the Board of Medicine, namely: (a) appeal the unfavorable judgment to the PRC; (b) should the PRC ruling still be unfavorable, to elevate the matter on appeal to the Office of the President; and (c) should they still be unsatisfied, to ask for a review of the case or to bring the case to court via a special civil action of certiorari. Thus, as a rule, mandamus will not lie when administrative remedies are still available. However, the doctrine of exhaustion of administrative remedies does not apply where, as in this case, a pure question of law is raised. On this issue, no reversible error may, thus, be laid at the door of the appellate court in CA-G.R. SP No. 37283, when it refused to dismiss Civil Case No. 93-66530. As we earlier pointed out, herein respondents Arnel V. Herrera, Fernando F. Mandapat, Ophelia C. Hidalgo, Bernadette T. Mendoza, Ruby B. Lantin-Tan, Fernando T. Cruz, Marissa A. Regodon, Ma. Eloisa Q. Mallari-Largoza, Cheryl R. Triguero, Joseph A. Jao, Bernadette H. Cabuhat, Evelyn S. Acosta-Cabanes, Laura M. Santos, Maritel M. Echiverri, Bernadette C. Escusa, Carlosito C. Domingo, Alicia S. Lizano, Elnora R. Raqueno-Rabaino, Saibzur N. Edding, Derileen D. Dorado-Edding, Robert B. Sanchez, Maria Rosario Leonor-Lacandula, Geraldine Elizabeth M. Pagilagan-Palma, Margarita Belinda L. Vicencio-Gamilla, Herminigilda E. Conejos, Leuvina P. Chico-Paguio, Elcin C. Arriola-Ocampo, and Jose Ramoncito P. Navarro manifested to the Court of Appeals during the pendency of CA-G.R. SP No. 37283, that they were no longer interested in proceeding with the case and moved for its dismissal insofar as they were concerned. A similar manifestation and motion were later filed by intervenors Mary Jean I. Yeban-Merlan, Michael L. Serrano, Norma G. Lafavilla, Arnulfo A. Salvador, Belinda C. Rabarra, Yolanda P. Unica, Dayminda G. Bontuyan, Clarissa B. Baclig, Ma. Luisa S. Gutierrez, Rhoneil R. Deveraturda, Aleli A. Gollayan, Evelyn C.

Cundangan, Frederick D. Francisco, Violeta V. Meneses, Melita J. Caedo, Clarisa SJ. Nicolas, Federico L. Castillo, Karangalan D. Serrano, Danilo A. Villaver, Grace E. Uy, Lydia C. Chan, and Melvin M. Usita. Following these manifestations and motions, the appellate court in CA-G.R. SP No. 37283 decreed that its ruling would not apply to them. Thus, inasmuch as the instant case is a petition for review of the appellate courts ruling in CA-G.R. SP No. 37283, a decision which is inapplicable to the aforementioned respondents will similarly not apply to them. As to Achilles J. Peralta, Evelyn O. Ramos, Sally B. Bunagan, Rogelio B. Ancheta, Oscar H. Padua, Jr., Evelyn D. Grajo, Valentino P. Arboleda, Carlos M. Bernardo, Jr., Mario D. Cuaresma, Violeta C. Felipe, Percival H. Pangilinan, Corazon M. Cruz and Samuel B. Bangoy, herein decision shall not apply pursuant to the Orders of the trial court in Civil Case No. 93-66530, dropping their names from the suit. Consequently, this Decision is binding only on the remaining respondents, namely: Arlene V. de Guzman, Celerina S. Navarro, Rafael I. Tolentino, Bernardita B. Sy, Gloria T. Jularbal, Hubert S. Nazareno, Nancy J. Chavez, Ernesto L. Cue, Herminio V. Fernandez, Jr., Maria Victoria M. Lacsamana and Merly D. Sta. Ana, as well as the petitioners. WHEREFORE, the instant petition is GRANTED. Accordingly, (1) the assailed decision dated May 16, 2000, of the Court of Appeals, in CA-G.R. SP No. 37283, which affirmed the judgment dated December 19, 1994, of the Regional Trial Court of Manila, Branch 52, in Civil Case No. 93-66530, ordering petitioners to administer the physicians oath to herein respondents as well as the resolution dated August 25, 2000, of the appellate court, denying the petitioners motion for reconsideration, are REVERSED and SET ASIDE; and (2) the writ of mandamus, issued in Civil Case No. 93-66530, and affirmed by the appellate court in CA-G.R. SP No. 37283 is NULLIFIED AND SET ASIDE. SO ORDERED.

G.R. No. 120095

August 5, 1996

JMM PROMOTION AND MANAGEMENT, INTERNATIONAL, INC., petitioner, vs.

INC.,

and

KARY

HON. COURT OF APPEALS, HON. MA. NIEVES CONFESSOR, then Secretary of the Department of Labor and Employment, HON. JOSE BRILLANTES, in his capacity as acting Secretary of the Department of Labor and Employment and HON. FELICISIMO JOSON, in his capacity as Administrator of the Philippine Overseas Employment Administration, respondents. KAPUNAN, J.:p The limits of government regulation under the State's police power are once again at the vortex of the instant controversy. Assailed is the government's power to control deployment of female entertainers to Japan by requiring an Artist Record Book (ARB) as a precondition to the processing by the POEA of any contract for overseas employment. By contending that the right to overseas employment is a property right within the meaning of the Constitution, petitioners vigorously aver that deprivation thereof allegedly through the onerous requirement of an ARB violates the due process clause and constitutes an invalid exercise of the police power. The factual antecedents are undisputed. Following the much-publicized death of Maricris Sioson in 1991, former President Corazon C. Aquino ordered a total ban against the deployment of performing artists to Japan and other foreign destinations. The ban was, however, rescinded after leaders of the overseas employment industry promised to extend full support for a program aimed at removing kinks in the system of deployment. In its place, the government, through the Secretary of Labor and Employment, subsequently issued Department Order No. 28, creating the Entertainment Industry Advisory Council (EIAC), which was tasked with issuing guidelines on the training, testing certification and deployment of performing artists abroad. Pursuant to the EIAC's recommendations,1 the Secretary of Labor, on January 6, 1994, issued Department Order No. 3 establishing various procedures and requirements for screening performing artists under a new system of training, testing, certification and deployment of the former. Performing artists successfully hurdling the test, training and certification requirement were to be issued an Artist's Record Book (ARB), a necessary prerequisite to processing of any contract of employment by the POEA. Upon request of the industry, implementation of the process, originally scheduled for April 1, 1994, was moved to October 1, 1994. Thereafter, the Department of Labor, following the EIAC's recommendation, issued a series of orders fine-tuning and implementing the new system. Prominent among these orders were the following issuances: 1. Department Order No. 3-A, providing for additional guidelines on the training, testing, certification and deployment of performing artists.

2. Department Order No. 3-B, pertaining to the Artist Record Book (ARB) requirement, which could be processed only after the artist could show proof of academic and skills training and has passed the required tests. 3. Department Order No. 3-E, providing the minimum salary a performing artist ought to received (not less than US$600.00 for those bound for Japan) and the authorized deductions therefrom. 4. Department Order No. 3-F, providing for the guidelines on the issuance and use of the ARB by returning performing artists who, unlike new artists, shall only undergo a Special Orientation Program (shorter than the basic program) although they must pass the academic test. In Civil Case No. 95-72750, the Federation of Entertainment Talent Managers of the Philippines (FETMOP), on January 27, 1995 filed a class suit assailing these department orders, principally contending that said orders 1) violated the constitutional right to travel; 2) abridged existing contracts for employment; and 3) deprived individual artists of their licenses without due process of law. FETMOP, likewise, averred that the issuance of the Artist Record Book (ARB) was discriminatory and illegal and "in gross violation of the constitutional right... to life liberty and property." Said Federation consequently prayed for the issuance of a writ of preliminary injunction against the aforestated orders. On February 2, 1992, JMM Promotion and Management, Inc. Kary International, Inc., herein petitioners, filed a Motion for Intervention in said civil case, which was granted by the trial court in an Order dated 15 February, 1995. However, on February 21, 1995, the trial court issued an Order denying petitioners' prayed for a writ of preliminary injunction and dismissed the complaint. On appeal from the trial court's Order, respondent court, in CA G.R. SP No. 36713 dismissed the same. Tracing the circumstances which led to the issuance of the ARB requirement and the assailed Department Order, respondent court concluded that the issuance constituted a valid exercise by the state of the police power. We agree. The latin maxim salus populi est surprema lex embodies the character of the entire spectrum of public laws aimed at promoting the general welfare of the people under the State's police power. As an inherent attribute of sovereignty which virtually "extends to all public needs,"2 this "least limitable"3 of governmental powers grants a wide panoply of instruments through which the state, as parens patriae gives effect to a host of its regulatory powers. Describing the nature and scope of the police power, Justice Malcolm, in the early case of Rubi v. Provincial Board of Mindoro4 wrote: "The police power of the State," one court has said... is a power coextensive with self-protection, and is not inaptly termed "the law of overruling necessity." It may be said to be that inherent and plenary power in the state which enables it to prohibit

all things hurtful to the comfort, safety and welfare of society." Carried onward by the current of legislature, the judiciary rarely attempts to dam the onrushing power of legislative discretion, provided the purposes of the law do not go beyond the great principles that mean security for the public welfare or do not arbitrarily interfere with the right of the individual. Thus, police power concerns government enactments which precisely interfere with personal liberty or property in order to promote the general welfare or the common good. As the assailed Department Order enjoys a presumed validity, it follows that the burden rests upon petitioners to demonstrate that the said order, particularly, its ARB requirement, does not enhance the public welfare or was exercised arbitrarily or unreasonably. A thorough review of the facts and circumstances leading to the issuance of the assailed orders compels us to rule that the Artist Record Book requirement and the questioned Department Order related to its issuance were issued by the Secretary of Labor pursuant to a valid exercise of the police power. In 1984, the Philippines emerged as the largest labor sending country in Asia dwarfing the labor export of countries with mammoth populations such as India and China. According to the National Statistics Office, this diaspora was augmented annually by over 450,000 documented and clandestine or illegal (undocumented) workers who left the country for various destinations abroad, lured by higher salaries, better work opportunities and sometimes better living conditions. Of the hundreds of thousands of workers who left the country for greener pastures in the last few years, women composed slightly close to half of those deployed, constituting 47% between 1987-1991, exceeding this proportion (58%) by the end of 1991, the year former President Aquino instituted the ban on deployment of performing artists to Japan and other countries as a result of the gruesome death of Filipino entertainer Maricris Sioson. It was during the same period that this Court took judicial notice not only of the trend, but also of the fact that most of our women, a large number employed as domestic helpers and entertainers, worked under exploitative conditions "marked by physical and personal abuse." Even then, we noted that "[t]he sordid tales of maltreatment suffered by migrant Filipina workers, even rape and various forms of torture, confirmed by testimonies of returning workers" compelled "urgent government action." Pursuant to the alarming number of reports that a significant number of Filipina performing artists ended up as prostitutes abroad (many of whom were beaten, drugged and forced into prostitution), and following the deaths of number of these women, the government began instituting measures aimed at deploying only those individuals who met set standards which would qualify them as legitimate performing artists. In spite of these measures, however, a number of our countrymen have nonetheless fallen victim to unscrupulous recruiters, ending up as virtual slaves controlled by foreign crime syndicates and forced into jobs other than those indicated in their employment contracts. Worse, some of our women have been forced into prostitution.

Thus, after a number of inadequate and failed accreditation schemes, the Secretary of Labor issued on August 16, 1993, D.O. No. 28, establishing the Entertainment Industry Advisory Council (EIAC), the policy advisory body of DOLE on entertainment industry matters. Acting on the recommendations of the said body, the Secretary of Labor, on January 6, 1994, issued the assailed orders. These orders embodied EIAC's Resolution No. 1, which called for guidelines on screening, testing and accrediting performing overseas Filipino artists. Significantly, as the respondent court noted, petitioners were duly represented in the EIAC, which gave the recommendations on which the ARB and other requirements were based. Clearly, the welfare of Filipino performing artists, particularly the women was paramount in the issuance of Department Order No. 3. Short of a total and absolute ban against the deployment of performing artists to "high risk" destinations, a measure which would only drive recruitment further underground, the new scheme at the very least rationalizes the method of screening performing artists by requiring reasonable educational and artistic skills from them and limits deployment to only those individuals adequately prepared for the unpredictable demands of employment as artists abroad. It cannot be gainsaid that this scheme at least lessens the room for exploitation by unscrupulous individuals and agencies. Moreover, here or abroad, selection of performing artists is usually accomplished by auditions, where those deemed unfit are usually weeded out through a process which is inherently subjective and vulnerable to bias and differences in taste. The ARB requirement goes one step further, however, attempting to minimize the subjectivity of the process by defining the minimum skills required from entertainers and performing artists. As the Solicitor General observed, this should be easily met by experienced artists possessing merely basic skills. The test are aimed at segregating real artists or performers from those passing themselves off as such, eager to accept any available job and therefore exposing themselves to possible exploitation. As to the other provisions of Department Order No. 3 questioned by petitioners, we see nothing wrong with the requirements for document and booking confirmation (D.O. 3-C), a minimum salary scale (D.O. 3-E), or the requirement for registration of returning performers. The requirement for a venue certificate or other documents evidencing the place and nature or work allows the government closer monitoring of foreign employers and helps keep our entertainers away from prostitution fronts and other worksites associated with unsavory, immoral, illegal or exploitative practices. Parenthetically, none of these issuances appear to us, by any stretch of the imagination, even remotely unreasonable or arbitrary. They address a felt need of according greater protection for an oft-exploited segment of our OCW's. They respond to the industry's demand for clearer and more practicable rules and guidelines. Many of these provisions were fleshed out following recommendations by, and after consultations with, the affected sectors and non-government organizations. On the whole, they are aimed at enhancing the safety and security of entertainers and artists bound for Japan and other destinations, without stifling the industry's concerns for expansion and growth.

In any event, apart from the State's police power, the Constitution itself mandates government to extend the fullest protection to our overseas workers. The basic constitutional statement on labor, embodied in Section 18 of Article II of the Constitution provides: Sec. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. More emphatically, the social justice provisions on labor of the 1987 Constitution in its first paragraph states: The State shall afford full protection to labor, local and overseas, organized and unorganized and promote full employment and equality of employment opportunities for all. Obviously, protection to labor does not indicate promotion of employment alone. Under the welfare and social justice provisions of the Constitution, the promotion of full employment, while desirable, cannot take a backseat to the government's constitutional duty to provide mechanisms for the protection of our workforce, local or overseas. As this Court explained in Philippine Association of Service Exporters (PASEI) v. Drilon, in reference to the recurring problems faced by our overseas workers: What concerns the Constitution more paramountly is that such an employment be above all, decent, just, and humane. It is bad enough that the country has to send its sons and daughters to strange lands because it cannot satisfy their employment needs at home. Under these circumstances, the Government is duty-adequate protection, personally and economically, while away from home. We now go to petitioners' assertion that the police power cannot, nevertheless, abridge the right of our performing workers to return to work abroad after having earlier qualified under the old process, because, having previously been accredited, their accreditation became a "property right," protected by the due process clause. We find this contention untenable. A profession, trade of calling is a property right within the meaning of our constitutional guarantees. One cannot be deprived of the right to work and right to make a living because these rights are property rights, the arbitrary and unwarranted deprivation of which normally constitutes an actionable wrong. Nevertheless, no right is absolute, and the proper regulation of a profession, calling, business or trade has always been upheld as a legitimate subject of a valid exercise of the police power by the state particularly when their conduct affects either the execution of legitimate governmental functions, the preservation of the State, the public health and welfare and public morals. According to the maxim, sic utere tuo ut alienum non laedas, it must of course be within the legitimate range of legislative action to define the mode and manner in which every one may so use of his own property so as not to pose injury to himself or others.

In any case, where the liberty curtailed affects at most the rights of property, the permissible scope of regulatory measures is certainly much wider. To pretend that licensing or accreditation requirements violates the due process clause is to ignore the settled practice, under the mantle of the police power, of regulating entry to the practice of various trades or professions. Professionals leaving for abroad are required to pass rigid written and practical exams before they are deemed fit to practice their trade. Seamen are required to take tests determining their seamanship. Locally, the Professional Regulation Commission has began to require previously licensed doctors and other professionals to furnish documentary proof that they has either re-trained or had undertaken continuing education courses as a requirement for renewal of their licenses. It is not claimed that these requirements pose an unwarranted deprivation of a property right under the due process clause. So long as professionals and other workers meet reasonable regulatory standards no such deprivation exists. Finally, it is a futile gesture on the part of petitioners to invoke the non-impairment clause of the Constitution to support their argument that the government cannot enact the assailed regulatory measures because they abridge the freedom to contract. In Philippine Association of Service Exporters, Inc. vs. Drilon, we held that "[t]he non-impairment clause of the Constitution... must yield to the loftier purposes targeted by the government. Equally important, into every contract is read provisions of existing law, and always, a reservation of the police power for so long as the agreement deals with a subject impressed with the public welfare. A last point. Petitioners suggest that the singling out of entertainers and performing artists under the assailed department orders constitutes class legislation which violates the equal protection clause of the Constitution. We do not agree. The equal protection clause is directed principally against undue favor and individual or class privilege. It is not intended to prohibit legislation which is limited to the object to which it is directed or by the territory in which it is to operate. It does not require absolute equality, but merely that all persons be treated alike under like conditions both as to privileges conferred and liabilities imposed. We have held, time and again, that the equal protection clause of the Constitution does not forbid classification for so long as such classification is based on real and substantial differences having a reasonable relation to the subject of the particular legislation.If classification is germane to the purpose of the law, concerns all members of the class, and applies equally to present and future conditions, the classification does not violate the equal protection guarantee. In the case at bar, the challenged Department Order clearly applies to all performing artists and entertainers destined for jobs abroad. These orders, we stressed hereinfore, further the Constitutional mandate requiring government to protect our workforce, particularly those who may be prone to abuse and exploitation as they are beyond the physical reach of government regulatory agencies. The tragic incidents must somehow stop, but short of absolutely curtailing the right of these performers and entertainers to work abroad, the assailed measures enable our government to assume a measure of control.

WHEREFORE, finding no reversible error in the decision sought to be reviewed, petition is hereby DENIED. SO ORDERED.

EMINENT DOMAIN

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. RESOLUTION 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: 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". 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. 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. 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. 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. 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.

G.R. No. 88404 October 18, 1990 PHILIPPINE LONG DISTANCE TELEPHONE CO. [PLDT], petitioner, vs. THE NATIONAL TELECOMMUNICATIONS COMMISSION AND CELLCOM, INC., (EXPRESS TELECOMMUNICATIONS CO., INC. [ETCI]), respondents. MELENCIO-HERRERA, J.: Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by way of certiorari and Prohibition under Rule 65, two (2) Orders of public respondent National Telecommunications Commission (NTC), namely, the Order of 12 December 1988 granting private respondent Express Telecommunications Co., Inc. (ETCI) provisional authority to install, operate and maintain a Cellular Mobile Telephone System in Metro-Manila (Phase A) in accordance with specified conditions, and the Order, dated 8 May 1988, denying reconsideration. On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as "An Act Granting Felix Alberto and Company, Incorporated, a Franchise to Establish Radio Stations for Domestic and Transoceanic Telecommunications." Felix Alberto & Co., Inc. (FACI) was the original corporate name, which was changed to ETCI with the amendment of the Articles of Incorporation in 1964. Much later, "CELLCOM, Inc." was the name sought to be adopted before the Securities and Exchange Commission, but this was withdrawn and abandoned. On 13 May 1987, alleging urgent public need, ETCI filed an application with public respondent NTC (docketed as NTC Case No. 87-89) for the issuance of a Certificate of Public Convenience and Necessity (CPCN) to construct, install, establish, operate and maintain a Cellular Mobile Telephone System and an Alpha Numeric Paging System in Metro Manila and in the Southern Luzon regions, with a prayer for provisional authority to operate Phase A of its proposal within Metro Manila.

PLDT filed an Opposition with a Motion to Dismiss, based primarily on the following grounds: (1) ETCI is not capacitated or qualified under its legislative franchise to operate a system-wide telephone or network of telephone service such as the one proposed in its application; (2) ETCI lacks the facilities needed and indispensable to the successful operation of the proposed cellular mobile telephone system; (3) PLDT has itself a pending application with NTC, Case No. 86-86, to install and operate a Cellular Mobile Telephone System for domestic and international service not only in Manila but also in the provinces and that under the "prior operator" or "protection of investment" doctrine, PLDT has the priority or preference in the operation of such service; and (4) the provisional authority, if granted, will result in needless, uneconomical and harmful duplication, among others. In an Order, dated 12 November 1987, NTC overruled PLDT's Opposition and declared that Rep. Act No. 2090 (1958) should be liberally construed as to include among the services under said franchise the operation of a cellular mobile telephone service. In the same Order, ETCI was required to submit the certificate of registration of its Articles of Incorporation with the Securities and Exchange Commission, the present capital and ownership structure of the company and such other evidence, oral or documentary, as may be necessary to prove its legal, financial and technical capabilities as well as the economic justifications to warrant the setting up of cellular mobile telephone and paging systems. The continuance of the hearings was also directed. After evaluating the reconsideration sought by PLDT, the NTC, in October 1988, maintained its ruling that liberally construed, applicant's franchise carries with it the privilege to operate and maintain a cellular mobile telephone service. On 12 December 1988, NTC issued the first challenged Order. Opining that "public interest, convenience and necessity further demand a second cellular mobile telephone service provider and finds PRIMA FACIE evidence showing applicant's legal, financial and technical capabilities to provide a cellular mobile service using the AMPS system," NTC granted ETCI provisional authority to install, operate and maintain a cellular mobile telephone system initially in Metro Manila, Phase A only, subject to the terms and conditions set forth in the same Order. One of the conditions prescribed (Condition No. 5) was that, within ninety (90) days from date of the acceptance by ETCI of the terms and conditions of the provisional authority, ETCI and PLDT "shall enter into an interconnection agreement for the provision of adequate interconnection facilities between applicant's cellular mobile telephone switch and the public switched telephone network and shall jointly submit such interconnection agreement to the Commission for approval." In a "Motion to Set Aside the Order" granting provisional authority, PLDT alleged essentially that the interconnection ordered was in violation of due process and that the grant of provisional authority was jurisdictionally and procedurally infirm. On 8 May 1989, NTC denied reconsideration and set the date for continuation of the hearings on the main proceedings. This is the second questioned Order.

PLDT urges us now to annul the NTC Orders of 12 December 1988 and 8 May 1989 and to order ETCI to desist from, suspend, and/or discontinue any and all acts intended for its implementation. On 15 June 1989, we resolved to dismiss the petition for its failure to comply fully with the requirements of Circular No. 1-88. Upon satisfactory showing, however, that there was, in fact, such compliance, we reconsidered the order, reinstated the Petition, and required the respondents NTC and ETCI to submit their respective Comments. On 27 February 1990, we issued a Temporary Restraining Order enjoining NTC to "Cease and Desist from all or any of its on-going proceedings and ETCI from continuing any and all acts intended or related to or which will amount to the implementation/execution of its provisional authority." This was upon PLDT's urgent manifestation that it had been served an NTC Order, dated 14 February 1990, directing immediate compliance with its Order of 12 December 1988, "otherwise the Commission shall be constrained to take the necessary measures and bring to bear upon PLDT the full sanctions provided by law." We required PLDT to post a bond of P 5M. It has complied, with the statement that it was "post(ing) the same on its agreement and/or consent to have the same forfeited in favor of Private Respondent ETCI/CELLCOM should the instant Petition be dismissed for lack of merit." ETCI took exception to the sufficiency of the bond considering its initial investment of approximately P 225M, but accepted the forfeiture proferred. ETCI moved to have the TRO lifted, which we denied on 6 March 1990. We stated, however, that the inaugural ceremony ETCI had scheduled for that day could proceed, as the same was not covered by the TRO. PLDT relies on the following grounds for the issuance of the Writs prayed for: 1. Respondent NTC's subject order effectively licensed and/or authorized a corporate entity without any franchise to operate a public utility, legislative or otherwise, to establish and operate a telecommunications system. 2. The same order validated stock transactions of a public service enterprise contrary to and/or in direct violation of Section 20(h) of the Public Service Act. 3. Respondent NTC adjudicated in the same order a controverted matter that was not heard at all in the proceedings under which it was promulgated. As correctly pointed out by respondents, this being a special civil action for certiorari and Prohibition, we only need determine if NTC acted without jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction in granting provisional authority to ETCI under the NTC questioned Orders of 12 December 1988 and 8 May 1989. The case was set for oral argument on 21 August 1990 with the parties directed to address, but not limited to, the following issues: (1) the status and coverage of Rep.

Act No. 2090 as a franchise; (2) the transfer of shares of stock of a corporation holding a CPCN; and (3) the principle and procedure of interconnection. The parties were thereafter required to submit their respective Memoranda, with which they have complied. We find no grave abuse of discretion on the part of NTC, upon the following considerations: 1.

NTC Jurisdiction

There can be no question that the NTC is the regulatory agency of the national government with jurisdiction over all telecommunications entities. It is legally clothed with authority and given ample discretion to grant a provisional permit or authority. In fact, NTC may, on its own initiative, grant such relief even in the absence of a motion from an applicant. Sec. 3. Provisional Relief. — Upon the filing of an application, complaint or petition or at any stage thereafter, the Board may grant on motion of the pleaders or on its own initiative, the relief prayed for, based on the pleading, together with the affidavits and supporting documents attached thereto, without prejudice to a final decision after completion of the hearing which shall be called within thirty (30) days from grant of authority asked for. (Rule 15, Rules of Practice and Procedure Before the Board of Communications (now NTC). What the NTC granted was such a provisional authority, with a definite expiry period of eighteen (18) months unless sooner renewed, and which may be revoked, amended or revised by the NTC. It is also limited to Metro Manila only. What is more, the main proceedings are clearly to continue as stated in the NTC Order of 8 May 1989. The provisional authority was issued after due hearing, reception of evidence and evaluation thereof, with the hearings attended by various oppositors, including PLDT. It was granted only after a prima facie showing that ETCI has the necessary legal, financial and technical capabilities and that public interest, convenience and necessity so demanded. PLDT argues, however, that a provisional authority is nothing short of a Certificate of Public Convenience and Necessity (CPCN) and that it is merely a "distinction without a difference." That is not so. Basic differences do exist, which need not be elaborated on. What should be borne in mind is that provisional authority would be meaningless if the grantee were not allowed to operate. Moreover, it is clear from the very Order of 12 December 1988 itself that its scope is limited only to the first phase, out of four, of the proposed nationwide telephone system. The installation and operation of an alpha numeric paging system was not authorized. The provisional authority is not exclusive. Its lifetime is limited and may be revoked by the NTC at any time in accordance with law. The initial expenditure of P130M more or less, is rendered necessary even under a provisional authority to enable ETCI to prove its capability. And as pointed out by the Solicitor General, on behalf of the NTC, if what had been granted were a CPCN, it would constitute a final order or

award reviewable only by ordinary appeal to the Court of Appeals pursuant to Section 9(3) of BP Blg. 129, and not by certiorari before this Court. The final outcome of the application rests within the exclusive prerogative of the NTC. Whether or not a CPCN would eventually issue would depend on the evidence to be presented during the hearings still to be conducted, and only after a full evaluation of the proof thus presented. 2.

The Coverage of ETCI's Franchise

Rep. Act No. 2090 grants ETCI (formerly FACI) "the right and privilege of constructing, installing, establishing and operating in the entire Philippines radio stations for reception and transmission of messages on radio stations in the foreign and domestic public fixed point-to-point and public base, aeronautical and land mobile stations, ... with the corresponding relay stations for the reception and transmission of wireless messages on radiotelegraphy and/or radiotelephony ...." PLDT maintains that the scope of the franchise is limited to "radio stations" and excludes telephone services such as the establishment of the proposed Cellular Mobile Telephone System (CMTS). However, in its Order of 12 November 1987, the NTC construed the technical term "radiotelephony" liberally as to include the operation of a cellular mobile telephone system. It said: In resolving the said issue, the Commission takes into consideration the different definitions of the term "radiotelephony." As defined by the New International Webster Dictionary the term "radiotelephony" is defined as a telephone carried on by aid of radiowaves without connecting wires. The International Telecommunications Union (ITU) defines a "radiotelephone call" as a "telephone call, originating in or intended on all or part of its route over the radio communications channels of the mobile service or of the mobile satellite service." From the above definitions, while under Republic Act 2090 a system-wide telephone or network of telephone service by means of connecting wires may not have been contemplated, it can be construed liberally that the operation of a cellular mobile telephone service which carries messages, either voice or record, with the aid of radiowaves or a part of its route carried over radio communication channels, is one included among the services under said franchise for which a certificate of public convenience and necessity may be applied for. The foregoing is the construction given by an administrative agency possessed of the necessary special knowledge, expertise and experience and deserves great weight and respect (Asturias Sugar Central, Inc. v. Commissioner of Customs, et al., L-19337, September 30, 1969, 29 SCRA 617). It can only be set aside on proof of gross abuse of discretion, fraud, or error of law (Tupas Local Chapter No. 979 v. NLRC, et al., L-60532-33, November 5, 1985, 139 SCRA 478). We discern none of those considerations sufficient to warrant judicial intervention. 3.

The Status of ETCI Franchise

PLDT alleges that the ETCI franchise had lapsed into nonexistence for failure of the franchise holder to begin and complete construction of the radio system authorized under the franchise as explicitly required in Section 4 of its franchise, Rep. Act No.

2090. 1 PLDT also invokes Pres. Decree No. 36, enacted on 2 November 1972, which legislates the mandatory cancellation or invalidation of all franchises for the operation of communications services, which have not been availed of or used by the party or parties in whose name they were issued. However, whether or not ETCI, and before it FACI, in contravention of its franchise, started the first of its radio telecommunication stations within (2) years from the grant of its franchise and completed the construction within ten (10) years from said date; and whether or not its franchise had remained unused from the time of its issuance, are questions of fact beyond the province of this Court, besides the wellsettled procedural consideration that factual issues are not subjects of a special civil action for certiorari (Central Bank of the Philippines vs. Court of Appeals, G.R. No. 41859, 8 March 1989, 171 SCRA 49; Ygay vs. Escareal, G.R. No. 44189, 8 February 1985, 135 SCRA 78; Filipino Merchant's Insurance Co., Inc. vs. Intermediate Appellate Court, G.R. No. 71640, 27 June 1988, 162 SCRA 669). Moreover, neither Section 4, Rep. Act No. 2090 nor Pres. Decree No. 36 should be construed as selfexecuting in working a forfeiture. Franchise holders should be given an opportunity to be heard, particularly so, where, as in this case, ETCI does not admit any breach, in consonance with the rudiments of fair play. Thus, the factual situation of this case differs from that in Angeles Ry Co. vs. City of Los Angeles (92 Pacific Reporter 490) cited by PLDT, where the grantee therein admitted its failure to complete the conditions of its franchise and yet insisted on a decree of forfeiture. More importantly, PLDT's allegation partakes of a Collateral attack on a franchise Rep. Act No. 2090), which is not allowed. A franchise is a property right and cannot be revoked or forfeited without due process of law. The determination of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the State "upon complaint or otherwise" (Sections 1, 2 and 3, Rule 66, Rules of Court), 2 the reason being that the abuse of a franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is primarily a concern of Government. A ... franchise is ... granted by law, and its ... unlawful exercise is the concern primarily of the Government. Hence, the latter as a rule is the party called upon to bring the action for such ... unlawful exercise of franchise. (IV-B V. FRANCISCO, 298 [1963 ed.], citing Cruz vs. Ramos, 84 Phil. 226). 4.

ETCI's Stock Transactions

ETCI admits that in 1964, the Albertos, as original owners of more than 40% of the outstanding capital stock sold their holdings to the Orbes. In 1968, the Albertos reacquired the shares they had sold to the Orbes. In 1987, the Albertos sold more than 40% of their shares to Horacio Yalung. Thereafter, the present stockholders acquired their ETCI shares. Moreover, in 1964, ETCI had increased its capital stock from P40,000.00 to P360,000.00; and in 1987, from P360,000.00 to P40M.

PLDT contends that the transfers in 1987 of the shares of stock to the new stockholders amount to a transfer of ETCI's franchise, which needs Congressional approval pursuant to Rep. Act No. 2090, and since such approval had not been obtained, ETCI's franchise had been invalidated. The provision relied on reads, in part, as follows: SECTION 10. The grantee shall not lease, transfer, grant the usufruct of, sell or assign this franchise nor the rights and privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity nor merge with any other person, company or corporation organized for the same purpose, without the approval of the Congress of the Philippines first had. ... It should be noted, however, that the foregoing provision is, directed to the "grantee" of the franchise, which is the corporation itself and refers to a sale, lease, or assignment of that franchise. It does not include the transfer or sale of shares of stock of a corporation by the latter's stockholders. The sale of shares of stock of a public utility is governed by another law, i.e., Section 20(h) of the Public Service Act (Commonwealth Act No. 146). Pursuant thereto, the Public Service Commission (now the NTC) is the government agency vested with the authority to approve the transfer of more than 40% of the subscribed capital stock of a telecommunications company to a single transferee, thus: SEC. 20. Acts requiring the approval of the Commission. Subject to established stations and exceptions and saving provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the approval and authorization of the Commission previously had (h) To sell or register in its books the transfer or sale of shares of its capital stock, if the result of that sale in itself or in connection with another previous sale, shall be to vest in the transferee more than forty per centum of the subscribed capital of said public service. Any transfer made in violation of this provision shall be void and of no effect and shall not be registered in the books of the public service corporation. Nothing herein contained shall be construed to prevent the holding of shares lawfully acquired. (As amended by Com. Act No. 454). In other words, transfers of shares of a public utility corporation need only NTC approval, not Congressional authorization. What transpired in ETCI were a series of transfers of shares starting in 1964 until 1987. The approval of the NTC may be deemed to have been met when it authorized the issuance of the provisional authority to ETCI. There was full disclosure before the NTC of the transfers. In fact, the NTC Order of 12 November 1987 required ETCI to submit its "present capital and ownership structure." Further, ETCI even filed a Motion before the NTC, dated 8 December 1987, or more than a year prior to the grant of provisional authority, seeking approval of the increase in its capital stock from P360,000.00 to P40M, and the stock transfers made by its stockholders. A distinction should be made between shares of stock, which are owned by stockholders, the sale of which requires only NTC approval, and the franchise itself

which is owned by the corporation as the grantee thereof, the sale or transfer of which requires Congressional sanction. Since stockholders own the shares of stock, they may dispose of the same as they see fit. They may not, however, transfer or assign the property of a corporation, like its franchise. In other words, even if the original stockholders had transferred their shares to another group of shareholders, the franchise granted to the corporation subsists as long as the corporation, as an entity, continues to exist The franchise is not thereby invalidated by the transfer of the shares. A corporation has a personality separate and distinct from that of each stockholder. It has the right of continuity or perpetual succession (Corporation Code, Sec. 2). To all appearances, the stock transfers were not just for the purpose of acquiring the ETCI franchise, considering that, as heretofore stated, a series of transfers was involved from 1964 to 1987. And, contrary to PLDT's assertion, the franchise was not the only property of ETCI of meaningful value. The "zero" book value of ETCI assets, as reflected in its balance sheet, was plausibly explained as due to the accumulated depreciation over the years entered for accounting purposes and was not reflective of the actual value that those assets would command in the market. But again, whether ETCI has offended against a provision of its franchise, or has subjected it to misuse or abuse, may more properly be inquired into in quo warranto proceedings instituted by the State. It is the condition of every franchise that it is subject to amendment, alteration, or repeal when the common good so requires (1987 Constitution, Article XII, Section 11). 5.

The NTC Interconnection Order

In the provisional authority granted by NTC to ETCI, one of the conditions imposed was that the latter and PLDT were to enter into an interconnection agreement to be jointly submitted to NTC for approval. PLDT vehemently opposes interconnection with its own public switched telephone network. It contends: that while PLDT welcomes interconnections in the furtherance of public interest, only parties who can establish that they have valid and subsisting legislative franchises are entitled to apply for a CPCN or provisional authority, absent which, NTC has no jurisdiction to grant them the CPCN or interconnection with PLDT; that the 73 telephone systems operating all over the Philippines have a viability and feasibility independent of any interconnection with PLDT; that "the NTC is not empowered to compel such a private raid on PLDT's legitimate income arising out of its gigantic investment;" that "it is not public interest, but purely a private and selfish interest which will be served by an interconnection under ETCI's terms;" and that "to compel PLDT to interconnect merely to give viability to a prospective competitor, which cannot stand on its own feet, cannot be justified in the name of a non-existent public need" (PLDT Memorandum, pp. 48 and 50). PLDT cannot justifiably refuse to interconnect. Rep. Act No. 6849, or the Municipal Telephone Act of 1989, approved on 8 February 1990, mandates interconnection providing as it does that "all domestic telecommunications carriers or utilities ... shall be interconnected to the public

switch telephone network." 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. The importance and emphasis given to interconnection dates back to Ministry Circular No. 82-81, dated 6 December 1982, providing: Sec. 1. That the government encourages the provision and operation of public mobile telephone service within local sub-base stations, particularly, in the highly commercialized areas; Sec. 5. That, in the event the authority to operate said service be granted to other applicants, other than the franchise holder, the franchise operator shall be under obligation to enter into an agreement with the domestic telephone network, under an interconnection agreement; Department of Transportation and Communication (DOTC) Circular No. 87-188, issued in 1987, also decrees: 12. All public communications carriers shall interconnect their facilities pursuant to comparatively efficient interconnection (CEI) as defined by the NTC in the interest of economic efficiency. The sharing of revenue was an additional feature considered in DOTC Circular No. 90-248, dated 14 June 1990, laying down the "Policy on Interconnection and Revenue Sharing by Public Communications Carriers," thus: WHEREAS, it is the objective of government to promote the rapid expansion of telecommunications services in all areas of the Philippines;

WHEREAS, there is a need to maximize the use of telecommunications facilities available and encourage investment in telecommunications infrastructure by suitably qualified service providers; WHEREAS, in recognition of the vital role of communications in nation building, there is a need 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. WHEREFORE, the following Department policies on interconnection and revenue sharing are hereby promulgated: 1. All facilities offering public telecommunication services interconnected into the nationwide telecommunications network/s.

shall

be

4. The interconnection of networks shall be effected in a fair and nondiscriminatory manner and within the shortest time-frame practicable. 5. The precise points of interface between service operators shall be as defined by the NTC; and the apportionment of costs and division of revenues resulting from interconnection of telecommunications networks shall be as approved and/or prescribed by the NTC. Since then, the NTC, on 12 July 1990, issued Memorandum Circular No. 7-13-90 prescribing the "Rules and Regulations Governing the Interconnection of Local Telephone Exchanges and Public Calling Offices with the Nationwide Telecommunications Network/s, the Sharing of Revenue Derived Therefrom, and for Other Purposes." The NTC order to interconnect allows the parties themselves to discuss and agree upon the specific terms and conditions of the interconnection agreement instead of the NTC itself laying down the standards of interconnection which it can very well impose. Thus it is that PLDT cannot justifiably claim denial of clue process. It has been heard. It will continue to be heard in the main proceedings. It will surely heard in the negotiations concerning the interconnection agreement. As disclosed during the hearing, the interconnection sought by ETCI is by no means a "parasitic dependence" on PLDT. The ETCI system can operate on its own even without interconnection, but it will be limited to its own subscribers. What interconnection seeks to accomplish is to enable the system to reach out to the greatest number of people possible in line with governmental policies laid down. Cellular phones can access PLDT units and vice versa in as wide an area as attainable. With the broader reach, public interest and convenience will be better served. To be sure, ETCI could provide no mean competition (although PLDT maintains that it has nothing to fear from the "innocuous interconnection"), and eat into PLDT's own toll revenue cream PLDT revenue," in its own words), but all for the eventual benefit of all that the system can reach. 6.

Ultimate Considerations

The decisive consideration are public need, public interest, and the common good. Those were the overriding factors which motivated NTC in granting provisional authority to ETCI. Article II, Section 24 of the 1987 Constitution, recognizes the vital role of communication and information in nation building. It is likewise a State policy to provide the environment for the emergence of communications structures suitable to the balanced flow of information into, out of, and across the country (Article XVI, Section 10, Ibid.). A modern and dependable communications network rendering efficient and reasonably priced services is also indispensable for accelerated economic recovery and development. To these public and national interests, public utility companies must bow and yield. Despite the fact that there is a virtual monopoly of the telephone system in the country at present, service is sadly inadequate. Customer demands are hardly met, whether fixed or mobile. There is a unanimous cry to hasten the development of a modern, efficient, satisfactory and continuous telecommunications service not only in Metro Manila but throughout the archipelago. The need therefor was dramatically emphasized by the destructive earthquake of 16 July 1990. It may be that users of the cellular mobile telephone would initially be limited to a few and to highly commercialized areas. However, it is a step in the right direction towards the enhancement of the telecommunications infrastructure, the expansion of telecommunications services in, hopefully, all areas of the country, with chances of complete disruption of communications minimized. It will thus impact on, the total development of the country's telecommunications systems and redound to the benefit of even those who may not be able to subscribe to ETCI. 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 handy mobile 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). Additionally, the State is empowered to decide whether public interest demands that monopolies be regulated or prohibited (1987 Constitution. Article XII, Section 19). WHEREFORE, finding no grave abuse of discretion, tantamount to lack of or excess of jurisdiction, on the part of the National Telecommunications Commission in issuing its challenged Orders of 12 December 1988 and 8 May 1989 in NTC Case No. 87-39, this Petition is DISMISSED for lack of merit. The Temporary Restraining Order heretofore issued is LIFTED. The bond issued as a condition for the issuance of said restraining Order is declared forfeited in favor of private respondent Express Telecommunications Co., Inc. Costs against petitioner. SO ORDERED.

G.R. No. 106804

August 12, 2004

NATIONAL POWER CORPORATION, petitioner, vs. COURT OF APPEALS and ANTONINO POBRE, respondents. DECISION The Case Before us is a petition for review of the 30 March 1992 Decision and 14 August 1992 Resolution of the Court of Appeals in CA-G.R. CV No. 16930. The Court of Appeals affirmed the Decision of the Regional Trial Court, Branch 17, Tabaco, Albay in Civil Case No. T-552. The Antecedents Petitioner National Power Corporation ("NPC") is a public corporation created to generate geothermal, hydroelectric, nuclear and other power and to transmit electric power nationwide. NPC is authorized by law to acquire property and exercise the right of eminent domain. Private respondent Antonino Pobre ("Pobre") is the owner of a 68,969 square-meter land ("Property") located in Barangay Bano, Municipality of Tiwi, Albay. The Property is covered by TCT No. 4067 and Subdivision Plan 11-9709. In 1963, Pobre began developing the Property as a resort-subdivision, which he named as "Tiwi Hot Springs Resort Subdivision." On 12 January 1966, the then Court of First Instance of Albay approved the subdivision plan of the Property. The Register of Deeds thus cancelled TCT No. 4067 and issued independent titles for the approved lots. In 1969, Pobre started advertising and selling the lots. On 4 August 1965, the Commission on Volcanology certified that thermal mineral water and steam were present beneath the Property. The Commission on Volcanology found the thermal mineral water and steam suitable for domestic use and potentially for commercial or industrial use. NPC then became involved with Pobre's Property in three instances. First was on 18 February 1972 when Pobre leased to NPC for one year eleven lots from the approved subdivision plan.

Second was sometime in 1977, the first time that NPC filed its expropriation case against Pobre to acquire an 8,311.60 square-meter portion of the Property.5 On 23 October 1979, the trial court ordered the expropriation of the lots upon NPC's payment of P25 per square meter or a total amount of P207,790. NPC began drilling operations and construction of steam wells. While this first expropriation case was pending, NPC dumped waste materials beyond the site agreed upon by NPC with Pobre. The dumping of waste materials altered the topography of some portions of the Property. NPC did not act on Pobre's complaints and NPC continued with its dumping. Third was on 1 September 1979, when NPC filed its second expropriation case against Pobre to acquire an additional 5,554 square meters of the Property. This is the subject of this petition. NPC needed the lot for the construction and maintenance of Naglagbong Well Site F-20, pursuant to Proclamation No. 7396 and Republic Act No. 5092.7 NPC immediately deposited P5,546.36 with the Philippine National Bank. The deposit represented 10% of the total market value of the lots covered by the second expropriation. On 6 September 1979, NPC entered the 5,554 square-meter lot upon the trial court's issuance of a writ of possession to NPC. On 10 December 1984, Pobre filed a motion to dismiss the second complaint for expropriation. Pobre claimed that NPC damaged his Property. Pobre prayed for just compensation of all the lots affected by NPC's actions and for the payment of damages. On 2 January 1985, NPC filed a motion to dismiss the second expropriation case on the ground that NPC had found an alternative site and that NPC had already abandoned in 1981 the project within the Property due to Pobre's opposition. On 8 January 1985, the trial court granted NPC's motion to dismiss but the trial court allowed Pobre to adduce evidence on his claim for damages. The trial court admitted Pobre's exhibits on the damages because NPC failed to object. On 30 August 1985, the trial court ordered the case submitted for decision since NPC failed to appear to present its evidence. The trial court denied NPC's motion to reconsider the submission of the case for decision. NPC filed a petition for certiorari with the then Intermediate Appellate Court, questioning the 30 August 1985 Order of the trial court. On 12 February 1987, the Intermediate Appellate Court dismissed NPC's petition but directed the lower court to rule on NPC's objections to Pobre's documentary exhibits. On 27 March 1987, the trial court admitted all of Pobre's exhibits and upheld its Order dated 30 August 1985. The trial court considered the case submitted for decision. On 29 April 1987, the trial court issued its Decision in favor of Pobre. The dispositive portion of the decision reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the defendant and against the plaintiff, ordering the plaintiff to pay unto the defendant: (1) The sum of THREE MILLION FOUR HUNDRED FORTY EIGHT THOUSAND FOUR HUNDRED FIFTY (P3,448,450.00) PESOS which is the fair market value of the subdivision of defendant with an area of sixty eight thousand nine hundred sixty nine (68,969) square meters, plus legal rate of interest per annum from September 6, 1979 until the whole amount is paid, and upon payment thereof by the plaintiff the defendant is hereby ordered to execute the necessary Deed of Conveyance or Absolute Sale of the property in favor of the plaintiff; (2) The sum of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS for and as attorney's fees. Costs against the plaintiff. SO ORDERED. On 13 July 1987, NPC filed its motion for reconsideration of the decision. On 30 October 1987, the trial court issued its Order denying NPC's motion for reconsideration. NPC appealed to the Court of Appeals. On 30 March 1992, the Court of Appeals upheld the decision of the trial court but deleted the award of attorney's fees. The dispositive portion of the decision reads: WHEREFORE, by reason of the foregoing, the Decision appealed from is AFFIRMED with the modification that the award of attorney's fees is deleted. No pronouncement as to costs. SO ORDERED. The Court of Appeals denied NPC's motion for reconsideration in a Resolution dated 14 August 1992. The Ruling of the Trial Court In its 69-page decision, the trial court recounted in great detail the scale and scope of the damage NPC inflicted on the Property that Pobre had developed into a resortsubdivision. Pobre's Property suffered "permanent injury" because of the noise, water, air and land pollution generated by NPC's geothermal plants. The construction and operation of the geothermal plants drastically changed the topography of the Property making it no longer viable as a resortsubdivision. The chemicals emitted by the geothermal plants damaged the natural resources in the Property and endangered the lives of the residents. NPC did not only take the 8,311.60 square-meter portion of the Property, but also the remaining area of the 68,969 square-meter Property. NPC had rendered Pobre's entire Property useless as a resort-subdivision. The Property has become useful only to NPC. NPC must therefore take Pobre's entire Property and pay for it.

The trial court found the following badges of NPC's bad faith: (1) NPC allowed five years to pass before it moved for the dismissal of the second expropriation case; (2) NPC did not act on Pobre's plea for NPC to eliminate or at least reduce the damage to the Property; and (3) NPC singled out Pobre's Property for piecemeal expropriation when NPC could have expropriated other properties which were not affected in their entirety by NPC's operation. The trial court found the just compensation to be P50 per square meter or a total of P3,448,450 for Pobre's 68,969 square-meter Property. NPC failed to contest this valuation. Since NPC was in bad faith and it employed dilatory tactics to prolong this case, the trial court imposed legal interest on the P3,448,450 from 6 September 1979 until full payment. The trial court awarded Pobre attorney's fees of P150,000. The Ruling of the Court of Appeals The Court of Appeals affirmed the decision of the trial court. However, the appellate court deleted the award of attorney's fees because Pobre did not properly plead for it. The Issues NPC claims that the Court of Appeals committed the following errors that warrant reversal of the appellate court's decision: 1. In not annulling the appealed Decision for having been rendered by the trial court with grave abuse of discretion and without jurisdiction; 2. In holding that NPC had "taken" the entire Property of Pobre; 3. Assuming arguendo that there was "taking" of the entire Property, in not excluding from the Property the 8,311.60 square-meter portion NPC had previously expropriated and paid for; 4. In holding that the amount of just compensation fixed by the trial court at P3,448,450.00 with interest from September 6, 1979 until fully paid, is just and fair; 5. In not holding that the just compensation should be fixed at P25.00 per square meter only as what NPC and Pobre had previously mutually agreed upon; and 6. In not totally setting aside the appealed Decision of the trial court.11 Procedural Issues NPC, represented by the Office of the Solicitor General, insists that at the time that it moved for the dismissal of its complaint, Pobre had yet to serve an answer or a motion for summary judgment on NPC. Thus, NPC as plaintiff had the right to move for the automatic dismissal of its complaint. NPC relies on Section 1, Rule 17 of the 1964 Rules of Court, the Rules then in effect. NPC argues that the dismissal

of the complaint should have carried with it the dismissal of the entire case including Pobre's counterclaim. NPC's belated attack on Pobre's claim for damages must fail. The trial court's reservation of Pobre's right to recover damages in the same case is already beyond review. The 8 January 1985 Order of the trial court attained finality when NPC failed to move for its reconsideration within the 15-day reglementary period. NPC opposed the order only on 27 May 1985 or more than four months from the issuance of the order. We cannot fault the Court of Appeals for not considering NPC's objections against the subsistence of Pobre's claim for damages. NPC neither included this issue in its assignment of errors nor discussed it in its appellant's brief. NPC also failed to question the trial court's 8 January 1985 Order in the petition for certiorari1 it had earlier filed with the Court of Appeals. It is only before this Court that NPC now vigorously assails the preservation of Pobre's claim for damages. Clearly, NPC's opposition to the existence of Pobre's claim for damages is a mere afterthought. Rules of fair play, justice and due process dictate that parties cannot raise an issue for the first time on appeal. We must correct NPC's claim that it filed the notice of dismissal just "shortly" after it had filed the complaint for expropriation. While NPC had intimated several times to the trial court its desire to dismiss the expropriation case it filed on 5 September 1979, it was only on 2 January 1985 that NPC filed its notice of dismissal. It took NPC more than five years to actually file the notice of dismissal. Five years is definitely not a short period of time. NPC obviously dilly-dallied in filing its notice of dismissal while NPC meanwhile burdened Pobre's property rights. Even a timely opposition against Pobre's claim for damages would not yield a favorable ruling for NPC. It is not Section 1, Rule 17 of the 1964 Rules of Court that is applicable to this case but Rule 67 of the same Rules, as well as jurisprudence on expropriation cases. Rule 17 referred to dismissal of civil actions in general while Rule 67 specifically governed eminent domain cases. Eminent domain is the authority and right of the state, as sovereign, to take private property for public use upon observance of due process of law and payment of just compensation. The power of eminent domain may be validly delegated to the local governments, other public entities and public utilities such as NPC. Expropriation is the procedure for enforcing the right of eminent domain. "Eminent Domain" was the former title of Rule 67 of the 1964 Rules of Court. In the 1997 Rules of Civil Procedure, which took effect on 1 July 1997, the prescribed method of expropriation is still found in Rule 67, but its title is now "Expropriation." Section 1, Rule 17 of the 1964 Rules of Court provided the exception to the general rule that the dismissal of the complaint is addressed to the sound discretion of the court. For as long as all of the elements of Section 1, Rule 17 were present the dismissal of the complaint rested exclusively on the plaintiff's will. The defending party and even the courts were powerless to prevent the dismissal. The courts could only accept and record the dismissal.22

A plain reading of Section 1, Rule 17 of the 1964 Rules of Court makes it obvious that this rule was not intended to supplement Rule 67 of the same Rules. Section 1, Rule 17 of the 1964 Rules of Court, provided that: SECTION 1. Dismissal by the plaintiff. — An action may be dismissed by the plaintiff without order of court by filing a notice of dismissal at any time before service of the answer or of a motion for summary judgment. Unless otherwise stated in the notice, the dismissal is without prejudice, except that a notice operates as an adjudication upon the merits when filed by a plaintiff who has once dismissed in a competent court an action based on or including the same claim. A class suit shall not be dismissed or compromised without approval of the court. While Section 1, Rule 17 spoke of the "service of answer or summary judgment," the Rules then did not require the filing of an answer or summary judgment in eminent domain cases. In lieu of an answer, Section 3 of Rule 67 required the defendant to file a single motion to dismiss where he should present all of his objections and defenses to the taking of his property for the purpose specified in the complaint . In short, in expropriation cases under Section 3 of Rule 67, the motion to dismiss took the place of the answer. The records show that Pobre had already filed and served on NPC his "motion to dismiss/answer" even before NPC filed its own motion to dismiss. NPC filed its notice of dismissal of the complaint on 2 January 1985. However, as early as 10 December 1984, Pobre had already filed with the trial court and served on NPC his "motion to dismiss/answer." A certain Divina Cerela received Pobre's pleading on behalf of NPC. Unfortunately for NPC, even Section 1, Rule 17 of the 1964 Rules of Court could not save its cause. NPC is in no position to invoke Section 1, Rule 17 of the 1964 Rules of Court. A plaintiff loses his right under this rule to move for the immediate dismissal of the complaint once the defendant had served on the plaintiff the answer or a motion for summary judgment before the plaintiff could file his notice of dismissal of the complaint. Pobre's "motion to dismiss/answer," filed and served way ahead of NPC's motion to dismiss, takes the case out of Section 1, Rule 17 assuming the same applies. In expropriation cases, there is no such thing as the plaintiff's matter of right to dismiss the complaint precisely because the landowner may have already suffered damages at the start of the taking. The plaintiff's right in expropriation cases to dismiss the complaint has always been subject to court approval and to certain conditions. The exceptional right that Section 1, Rule 17 of the 1964 Rules of Court conferred on the plaintiff must be understood to have applied only to other civil actions. The 1997 Rules of Civil Procedure abrogated this exceptional right. The power of eminent domain is subject to limitations. A landowner cannot be deprived of his right over his land until expropriation proceedings are instituted in court. The court must then see to it that the taking is for public use, there is payment of just compensation and there is due process of law.

If the propriety of the taking of private property through eminent domain is subject to judicial scrutiny, the dismissal of the complaint must also pass judicial inquiry because private rights may have suffered in the meantime. The dismissal, withdrawal or abandonment of the expropriation case cannot be made arbitrarily. If it appears to the court that the expropriation is not for some public use, then it becomes the duty of the court to dismiss the action. However, when the defendant claims that his land suffered damage because of the expropriation, the dismissal of the action should not foreclose the defendant's right to have his damages ascertained either in the same case or in a separate action. Thus, NPC's theory that the dismissal of its complaint carried with it the dismissal of Pobre's claim for damages is baseless. There is nothing in Rule 67 of the 1964 Rules of Court that provided for the dismissal of the defendant's claim for damages, upon the dismissal of the expropriation case. Case law holds that in the event of dismissal of the expropriation case, the claim for damages may be made either in a separate or in the same action, for all damages occasioned by the institution of the expropriation case. The dismissal of the complaint can be made under certain conditions, such as the reservation of the defendant's right to recover damages either in the same or in another action. The trial court in this case reserved Pobre's right to prove his claim in the same case, a reservation that has become final due to NPC's own fault. Factual Findings of the Trial and Appellate Courts Bind the Court The trial and appellate courts held that even before the first expropriation case, Pobre had already established his Property as a resort-subdivision. NPC had wrought so much damage to the Property that NPC had made the Property uninhabitable as a resort-subdivision. NPC's facilities such as steam wells, nag wells, power plants, power lines, and canals had hemmed in Pobre's Property. NPC's operations of its geothermal project also posed a risk to lives and properties. We uphold the factual findings of the trial and appellate courts. Questions of facts are beyond the pale of Rule 45 of the Rules of Court as a petition for review may only raise questions of law. Moreover, factual findings of the trial court, particularly when affirmed by the Court of Appeals, are generally binding on this Court. We thus find no reason to set aside the two courts' factual findings. NPC points out that it did not take Pobre's 68,969 square-meter Property. NPC argues that assuming that it is liable for damages, the 8,311.60 square-meter portion that it had successfully expropriated and fully paid for should have been excluded from the 68,969 square-meter Property that Pobre claims NPC had damaged. We are not persuaded. In its 30 October 1987 Order denying NPC's motion for reconsideration, the trial court pointed out that the Property originally had a total area of 141,300 square meters. Pobre converted the Property into a resort-subdivision and sold lots to the public. What remained of the lots are the 68,969 square meters of land. Pobre no longer claimed damages for the other lots that he had before the expropriation.

Pobre identified in court the lots forming the 68,969 square-meter Property. NPC had the opportunity to object to the identification of the lots. NPC, however, failed to do so. Thus, we do not disturb the trial and appellate courts' finding on the total land area NPC had damaged. NPC must Pay Just Compensation for the Entire Property Ordinarily, the dismissal of the expropriation case restores possession of the expropriated land to the landowner. However, when possession of the land cannot be turned over to the landowner because it is neither convenient nor feasible anymore to do so, the only remedy available to the aggrieved landowner is to demand payment of just compensation. In this case, we agree with the trial and appellate courts that it is no longer possible and practical to restore possession of the Property to Pobre. The Property is no longer habitable as a resort-subdivision. The Property is worthless to Pobre and is now useful only to NPC. Pobre has completely lost the Property as if NPC had physically taken over the entire 68,969 square-meter Property. In United States v. Causby, the U.S. Supreme Court ruled that when private property is rendered uninhabitable by an entity with the power to exercise eminent domain, the taking is deemed complete. Such taking is thus compensable. In this jurisdiction, the Court has ruled that if the government takes property without expropriation and devotes the property to public use, after many years the property owner may demand payment of just compensation. This principle is in accord with the constitutional mandate that private property shall not be taken for public use without just compensation. In the recent case of National Housing Authority v. Heirs of Isidro Guivelondo, the Court compelled the National Housing Authority ("NHA") to pay just compensation to the landowners even after the NHA had already abandoned the expropriation case. The Court pointed out that a government agency could not initiate expropriation proceedings, seize a person's property, and then just decide not to proceed with the expropriation. Such a complete turn-around is arbitrary and capricious and was condemned by the Court in the strongest possible terms. NHA was held liable to the landowners for the prejudice that they had suffered. In this case, NPC appropriated Pobre's Property without resort to expropriation proceedings. NPC dismissed its own complaint for the second expropriation. At no point did NPC institute expropriation proceedings for the lots outside the 5,554 square-meter portion subject of the second expropriation. The only issues that the trial court had to settle were the amount of just compensation and damages that NPC had to pay Pobre. This case ceased to be an action for expropriation when NPC dismissed its complaint for expropriation. Since this case has been reduced to a simple case of recovery of damages, the provisions of the Rules of Court on the

ascertainment of the just compensation to be paid were no longer applicable. A trial before commissioners, for instance, was dispensable. We have held that the usual procedure in the determination of just compensation is waived when the government itself initially violates procedural requirements. NPC's taking of Pobre's property without filing the appropriate expropriation proceedings and paying him just compensation is a transgression of procedural due process. From the beginning, NPC should have initiated expropriation proceedings for Pobre's entire 68,969 square-meter Property. NPC did not. Instead, NPC embarked on a piecemeal expropriation of the Property. Even as the second expropriation case was still pending, NPC was well aware of the damage that it had unleashed on the entire Property. NPC, however, remained impervious to Pobre's repeated demands for NPC to abate the damage that it had wrought on his Property. NPC moved for the dismissal of the complaint for the second expropriation on the ground that it had found an alternative site and there was stiff opposition from Pobre. NPC abandoned the second expropriation case five years after it had already deprived the Property virtually of all its value. NPC has demonstrated its utter disregard for Pobre's property rights. Thus, it would now be futile to compel NPC to institute expropriation proceedings to determine the just compensation for Pobre's 68,969 square-meter Property. Pobre must be spared any further delay in his pursuit to receive just compensation from NPC. Just compensation is the fair and full equivalent of the loss. The trial and appellate courts endeavored to meet this standard. The P50 per square meter valuation of the 68,969 square-meter Property is reasonable considering that the Property was already an established resort-subdivision. NPC has itself to blame for not contesting the valuation before the trial court. Based on the P50 per square meter valuation, the total amount of just compensation that NPC must pay Pobre is P3,448,450. The landowner is entitled to legal interest on the price of the land from the time of the taking up to the time of full payment by the government. In accord with jurisprudence, we fix the legal interest at six per cent (6%) per annum. The legal interest should accrue from 6 September 1979, the date when the trial court issued the writ of possession to NPC, up to the time that NPC fully pays Pobre. NPC's abuse of its eminent domain authority is appalling. However, we cannot award moral damages because Pobre did not assert his right to it. We also cannot award attorney's fees in Pobre's favor since he did not appeal from the decision of the Court of Appeals denying recovery of attorney's fees. Nonetheless, we find it proper to award P50,000 in temperate damages to Pobre. The court may award temperate or moderate damages, which are more than nominal but less than compensatory damages, if the court finds that a party has suffered some pecuniary loss but its amount cannot be proved with certainty from the nature of the case. As the trial and appellate courts noted, Pobre's resortsubdivision was no longer just a dream because Pobre had already established the

resort-subdivision and the prospect for it was initially encouraging. That is, until NPC permanently damaged Pobre's Property. NPC did not just destroy the property. NPC dashed Pobre's hope of seeing his Property achieve its full potential as a resortsubdivision. The lesson in this case must not be lost on entities with eminent domain authority. Such entities cannot trifle with a citizen's property rights. The power of eminent domain is an extraordinary power they must wield with circumspection and utmost regard for procedural requirements. Thus, we hold NPC liable for exemplary damages of P100,000. Exemplary damages or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages. WHEREFORE, we DENY the petition for lack of merit. The appealed Decision of the Court of Appeals dated 30 March 1992 in CA-G.R. CV No. 16930 is AFFIRMED with MODIFICATION. National Power Corporation is ordered to pay Antonino Pobre P3,448,450 as just compensation for the 68,969 square-meter Property at P50 per square meter. National Power Corporation is directed to pay legal interest at 6% per annum on the amount adjudged from 6 September 1979 until fully paid. Upon National Power Corporation's payment of the full amount, Antonino Pobre is ordered to execute a Deed of Conveyance of the Property in National Power Corporation's favor. National Power Corporation is further ordered to pay temperate and exemplary damages of P50,000 and P100,000, respectively. No costs. SO ORDERED.

DIOSDADO LAGCAO, G.R. No. 155746 DOROTEO LAGCAO and URSULA LAGCAO, Petitioners, Present: DAVIDE, C.J., PUNO, PANGANIBAN, QUISUMBING, YNARES-SANTIAGO, - versus - SANDOVAL-GUTIERREZ, CARPIO, AUSTRIA-MARTINEZ, CORONA, CARPIO MORALES,*

CALLEJO, SR., AZCUNA,* TINGA and CHICO-NAZARIO,* JJ. JUDGE GENEROSA G. LABRA, Branch 23, Regional Trial Court, Cebu, and the CITY OF CEBU, Respondent. Promulgated: October 13, 2004 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECISION CORONA, J.: Before us is a petition for review of the decision dated July 1, 2002 of the Regional Trial Court, Branch 23, Cebu City[1] upholding the validity of the City of Cebus Ordinance No. 1843, as well as the lower courts order dated August 26, 2002 denying petitioners motion for reconsideration. In 1964, the Province of Cebu donated 210 lots to the City of Cebu. One of these lots was Lot 1029, situated in Capitol Hills, Cebu City, with an area of 4,048 square meters. In 1965, petitioners purchased Lot 1029 on installment basis. But then, in late 1965, the 210 lots, including Lot 1029, reverted to the Province of Cebu.[2] Consequently, the province tried to annul the sale of Lot 1029 by the City of Cebu to the petitioners. This prompted the latter to sue the province for specific performance and damages in the then Court of First Instance. On July 9, 1986, the court a quo ruled in favor of petitioners and ordered the Province of Cebu to execute the final deed of sale in favor of petitioners. On June 11, 1992, the Court of Appeals affirmed the decision of the trial court. Pursuant to the ruling of the appellate court, the Province of Cebu executed on June 17, 1994 a deed of absolute sale over Lot 1029 in favor of petitioners. Thereafter, Transfer Certificate of Title (TCT) No. 129306 was issued in the name of petitioners and Crispina Lagcao. After acquiring title, petitioners tried to take possession of the lot only to discover that it was already occupied by squatters. Thus, on June 15, 1997, petitioners instituted ejectment proceedings against the squatters. The Municipal Trial Court in Cities (MTCC), Branch 1, Cebu City, rendered a decision on April 1, 1998, ordering the squatters to vacate the lot. On appeal, the RTC affirmed the MTCCs decision and issued a writ of execution and order of demolition. However, when the demolition order was about to be implemented, Cebu City Mayor Alvin Garcia wrote two letters to the MTCC, requesting the deferment of the demolition on the ground that the City was still looking for a relocation site for the squatters. Acting on the mayor’s request, the MTCC issued two orders suspending the demolition for a period of 120 days from February 22, 1999. Unfortunately for

petitioners, during the suspension period, the Sangguniang Panlungsod (SP) of Cebu City passed a resolution which identified Lot 1029 as a socialized housing site pursuant to RA 7279. Then, on June 30, 1999, the SP of Cebu City passed Ordinance No. 1772 which included Lot 1029 among the identified sites for socialized housing. On July, 19, 2000, Ordinance No. 1843 was enacted by the SP of Cebu City authorizing the mayor of Cebu City to initiate expropriation proceedings for the acquisition of Lot 1029 which was registered in the name of petitioners. The intended acquisition was to be used for the benefit of the homeless after its subdivision and sale to the actual occupants thereof. For this purpose, the ordinance appropriated the amount of P6, 881,600 for the payment of the subject lot. This ordinance was approved by Mayor Garcia on August 2, 2000. On August 29, 2000, petitioners filed with the RTC an action for declaration of nullity of Ordinance No. 1843 for being unconstitutional. The trial court rendered its decision on July 1, 2002 dismissing the complaint filed by petitioners whose subsequent motion for reconsideration was likewise denied on August 26, 2002. In this appeal, petitioners argue that Ordinance No. 1843 is unconstitutional as it sanctions the expropriation of their property for the purpose of selling it to the squatters, an endeavor contrary to the concept of public use contemplated in the Constitution. They allege that it will benefit only a handful of people. The ordinance, according to petitioners, was obviously passed for politicking, the squatters undeniably being a big source of votes. In sum, this Court is being asked to resolve whether or not the intended expropriation by the City of Cebu of a 4,048-square-meter parcel of land owned by petitioners contravenes the Constitution and applicable laws. Under Section 48 of RA 7160, otherwise known as the Local Government Code of 1991, local legislative power shall be exercised by the Sangguniang Panlungsod of the city. The legislative acts of the Sangguniang Panlungsod in the exercise of its lawmaking authority are denominated ordinances. Local government units have no inherent power of eminent domain and can exercise it only when expressly authorized by the legislature. By virtue of RA 7160, Congress conferred upon local government units the power to expropriate. Ordinance No. 1843 was enacted pursuant to Section 19 of RA 7160: SEC. 19. Eminent Domain. − A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws xxx. (italics supplied). Ordinance No. 1843 which authorized the expropriation of petitioner’s lot was enacted by the SP of Cebu City to provide socialized housing for the homeless and low-income residents of the City.

However, while we recognize that housing is one of the most serious social problems of the country, local government units do not possess unbridled authority to exercise their power of eminent domain in seeking solutions to this problem. There are two legal provisions which limit the exercise of this power: (1) no person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws; and (2) private property shall not be taken for public use without just compensation. Thus, the exercise by local government units of the power of eminent domain is not absolute. In fact, Section 19 of RA 7160 itself explicitly states that such exercise must comply with the provisions of the Constitution and pertinent laws. The exercise of the power of eminent domain drastically affects a landowners right to private property, which is as much a constitutionally-protected right necessary for the preservation and enhancement of personal dignity and intimately connected with the rights to life and liberty. Whether directly exercised by the State or by its authorized agents, the exercise of eminent domain is necessarily in derogation of private rights. For this reason, the need for a painstaking scrutiny cannot be overemphasized. The due process clause cannot be trampled upon each time an ordinance orders the expropriation of a private individual’s property. The courts cannot even adopt a hands-off policy simply because public use or public purpose is invoked by an ordinance, or just compensation has been fixed and determined. In De Knecht vs. Bautista, we said: It is obvious then that a land-owner is covered by the mantle of protection due process affords. It is a mandate of reason. It frowns on arbitrariness, it is the antithesis of any governmental act that smacks of whim or caprice. It negates state power to act in an oppressive manner. It is, as had been stressed so often, the embodiment of the sporting idea of fair play. In that sense, it stands as a guaranty of justice. That is the standard that must be met by any governmental agency in the exercise of whatever competence is entrusted to it. As was so emphatically stressed by the present Chief Justice, Acts of Congress, as well as those of the Executive, can deny due process only under pain of nullity.. The foundation of the right to exercise eminent domain is genuine necessity and that necessity must be of public character. Government may not capriciously or arbitrarily choose which private property should be expropriated. In this case, there was no showing at all why petitioner’s property was singled out for expropriation by the city ordinance or what necessity impelled the particular choice or selection. Ordinance No. 1843 stated no reason for the choice of petitioner’s property as the site of a socialized housing project. Condemnation of private lands in an irrational or piecemeal fashion or the random expropriation of small lots to accommodate no more than a few tenants or squatters is certainly not the condemnation for public use contemplated by the Constitution. This is depriving a citizen of his property for the convenience of a few without perceptible benefit to the public.

RA 7279 is the law that governs the local expropriation of property for purposes of urban land reform and housing. Sections 9 and 10 thereof provide: SEC 9. Priorities in the Acquisition of Land. − Lands for socialized housing shall be acquired in the following order: (a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies, including government-owned or controlled corporations and their subsidiaries; (b) Alienable lands of the public domain; (c) Unregistered or abandoned and idle lands; (d) Those within the declared Areas or Priority Development, Zonal Improvement Program sites, and Slum Improvement and Resettlement Program sites which have not yet been acquired; (e) Bagong Lipunan Improvement of Sites and Services or BLISS which have not yet been acquired; and (f) Privately-owned lands. Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities mentioned in this section shall not apply. The local government units shall give budgetary priority to on-site development of government lands. (Emphasis supplied). SEC. 10. Modes of Land Acquisition. − The modes of acquiring lands for purposes of this Act shall include, among others, community mortgage, land swapping, land assembly or consolidation, land banking, donation to the Government, joint venture agreement, negotiated purchase, and expropriation: Provided, however, That expropriation shall be resorted to only when other modes of acquisition have been exhausted: Provided further, That where expropriation is resorted to, parcels of land owned by small property owners shall be exempted for purposes of this Act: xxx. (Emphasis supplied). In the recent case of Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes et al. vs. City of Manila, we ruled that the above-quoted provisions are strict limitations on the exercise of the power of eminent domain by local government units, especially with respect to (1) the order of priority in acquiring land for socialized housing and (2) the resort to expropriation proceedings as a means to acquiring it. Private lands rank last in the order of priority for purposes of socialized housing. In the same vein, expropriation proceedings may be resorted to only after the other modes of acquisition are exhausted. Compliance with these conditions is mandatory because these are the only safeguards of oftentimes helpless owners of private property against what may be a tyrannical violation of due process when their property is forcibly taken from them allegedly for public use.

We have found nothing in the records indicating that the City of Cebu complied strictly with Sections 9 and 10 of RA 7279. Ordinance No. 1843 sought to expropriate petitioners property without any attempt to first acquire the lands listed in (a) to (e) of Section 9 of RA 7279. Likewise, Cebu City failed to establish that the other modes of acquisition in Section 10 of RA 7279 were first exhausted. Moreover, prior to the passage of Ordinance No. 1843, there was no evidence of a valid and definite offer to buy petitioners property as required by Section 19 of RA 7160. We therefore find Ordinance No. 1843 to be constitutionally infirm for being violative of the petitioner’s right to due process. It should also be noted that, as early as 1998, petitioners had already obtained a favorable judgment of eviction against the illegal occupants of their property. The judgment in this ejectment case had, in fact, already attained finality, with a writ of execution and an order of demolition. But Mayor Garcia requested the trial court to suspend the demolition on the pretext that the City was still searching for a relocation site for the squatters. However, instead of looking for a relocation site during the suspension period, the city council suddenly enacted Ordinance No. 1843 for the expropriation of petitioner’s lot. It was trickery and bad faith, pure and simple. The unconscionable manner in which the questioned ordinance was passed clearly indicated that respondent City transgressed the Constitution, RA 7160 and RA 7279. For an ordinance to be valid, it must not only be within the corporate powers of the city or municipality to enact but must also be passed according to the procedure prescribed by law. It must be in accordance with certain well-established basic principles of a substantive nature. These principles require that an ordinance (1) must not contravene the Constitution or any statute (2) must not be unfair or oppressive (3) must not be partial or discriminatory (4) must not prohibit but may regulate trade (5) must be general and consistent with public policy, and (6) must not be unreasonable. Ordinance No. 1843 failed to comply with the foregoing substantive requirements. A clear case of constitutional infirmity having been thus established, this Court is constrained to nullify the subject ordinance. We recapitulate: first, as earlier discussed, the questioned ordinance is repugnant to the pertinent provisions of the Constitution, RA 7279 and RA 7160; second, the precipitate manner in which it was enacted was plain oppression masquerading as a pro-poor ordinance; third, the fact that petitioners small property was singled out for expropriation for the purpose of awarding it to no more than a few squatters indicated manifest partiality against petitioners, and fourth, the ordinance failed to show that there was a reasonable relation between the end sought and the means adopted. While the objective of the City of Cebu was to provide adequate housing to slum dwellers, the means it employed in pursuit of such objective fell short of what was legal, sensible and called for by the circumstances. Indeed, experience has shown that the disregard of basic liberties and the use of short-sighted methods in expropriation proceedings have not achieved the desired results. Over the years, the government has tried to remedy the worsening squatter problem. Far from solving it, however, government’s kid-glove approach has only

resulted in the multiplication and proliferation of squatter colonies and blighted areas. A pro-poor program that is well-studied, adequately funded, genuinely sincere and truly respectful of everyone’s basic rights is what this problem calls for, not the improvident enactment of politics-based ordinances targeting small private lots in no rational fashion. WHEREFORE, the petition is hereby GRANTED. The July 1, 2002 decision of Branch 23 of the Regional Trial Court of Cebu City is REVERSED and SET ASIDE. SO ORDERED.

G.R. No. L-20620 August 15, 1974 REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. CARMEN M. VDA. DE CASTELLVI, ET AL., defendants-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 199B 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 ToledoGozun 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. 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. 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 ToledoGozun; 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. 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. 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 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. 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. 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." 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. 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 abovementioned 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. 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 ToledoGozun, 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.

G.R. Nos. L-71998-99 June 2, 1993 EMILIANO R. DE LOS SANTOS, SPOUSES NORMA A. PADILLA and ISIDORO L. PADILLA and the HEIRS OF FRANCISCO DAYRIT, petitioners, vs. THE HON. INTERMEDIATE APPELLATE COURT, HON. JUDGE CICERRO C. JURADO and EDILBERTO CADIENTE, respondents. Isidoro L. Padilla for petitioners. Joaquin G. Mendoza for E. Cadiente. ROMERO, J.: Questioned in the instant petition for review on certiorari is the Decision of the then Intermediate Appellate Court1 affirming the December 1, 1982 order of the then Court of First Instance of Rizal, Branch XXII at Pasig2 in civil Cases Nos. 46800 which states in toto: It appearing that the construction of the road and creek in question was a project undertaken under the authority of the Minister of Public Works, the funding of which was the responsibility of the National Government and that the defendants impleaded herein are Edilberto Cadiente and Nestor Agustin and not the Republic of the Philippines which cannot be sued without its consent, this court hereby resolves to dismiss these two (2) cases without pronouncement as to costs. SO ORDERED. Civil Cases Nos. 46800 and 46801 were both filed on July 13, 1982 by petitioners who are co-owners under TCT No. 329945 of a parcel of land located in Barrio Wawa, Binangonan, Rizal with an area of nineteen thousand sixty-one (19,061) square meters. In Civil Case No. 46800, petitioners alleged in the petition for prohibition that in October 1981, without their knowledge or consent, Lorenzo

Cadiente, a private contractor and the Provincial Engineer of Rizal constructed a road nine (9) meters wide and one hundred twenty-eight meters and seventy centimeters (128.70) long occupying a total area of one thousand one hundred sixty-five (1,165) square meters of their land. Petitioners added that aside from the road, the said respondents also constructed, without their knowledge and consent, an artificial creek twenty three meters and twenty centimeters (23.20) wide and one hundred twenty-eight meters and sixtynine centimeters long (128.69) occupying an area of two thousand nine hundred six (2,906) square meters of their property. Constructed in a zig-zag manner, the creek meandered through their property. Alleging that it completed, the road and the creek would "serve no public profitable and practicable purpose but for respondents' personal profit, to the great damage and prejudice of the taxpayers and the petitioners," the same petitioners invoked their rights under Art. IV Secs. 1 and 2, of the Bill of Rights of the 1973 Constitution and prayed for the issuance of restraining order or a writ of preliminary injunction to stop the construction. They also prayed that after hearing on the merits, judgment be rendered: (1) declaring illegal the construction of the road and artificial creek which was made without their knowledge and consent, "without due process and without just compensation and in violation of the provision of statute law and of the Philippine Constitution;" (2) issuing a permanent prohibition; (3) ordering respondents to pay petitioners "jointly and collectively" P15,00.00 as attorney's fees and P600.00 for each appearance, and (4) ordering the respondents to pay the costs of the suit.3 An action for damages, Civil Case No. 46801 on the other hand, was founded on Art. 32, paragraphs 6 and 7 of the Civil Code and the constitutional provisions on the right against deprivation of property without due process of law and without just compensation. Thereafter, the two cases were consolidated. On November 11, 1982, the Solicitor General filed a motion to dismiss both cases on the following grounds: (a) with respect to Civil Case No. 46800, the pendency of Civil Case No. 46801 which involved the same parties and cause of action; (b) both cases were in reality suits against the state which could not be maintained without the State's consent; and (c) lack of cause of action. Consequently, the lower court issued the aforequoted Order of December 1, 1982. Their motion for the reconsideration of said Order having been denied, petitioners elevated (to) the cases to this Court through an "appeal by certiorari" which was docketed as G. R. No. 63610. The Second Division of this Court, however, referred the cases to the then Intermediate Appellate Court pursuant to Sec. 16 of the Interim Rules.4 In due course, the Appellate court rendered a Decision on May 22, 1985 which disposed of the cases thus: Accordingly, the two actions cannot be maintained. They are in reality suits against the state which has not given its consent to be sued (Minister [sic] vs. CFI, 40 SCRA 464; Isberto vs. Raquiza, 67 SCRA 116; Begosa v. Chairman, PVA, 32 SCRA 466). Appellants' remedy lies elsewhere.

Appellants assert that the taking of their property in the manner alleged in these two cases was without due process of law. This is not correct. The appealed order has not closed the door to appellants right, if any, to just compensation for the alleged area of their land which was expropriated. The court below dismissed the cases for lack of consent on the part of the state to be sued herein. We repeat appellants' remedy for just compensation lies elsewhere. WHEREFORE, the order appealed from is in full accord with the evidence and the law and is hereby therefore affirmed in all its parts. Costs against appellants. SO ORDERED.5 Consequently, petitioners elevated the cases to this Court through a petition for review on certiorari. The petition is anchored on the ruling of the Court in Amigable v. Cuenca6 which states: ". . . . where the government takes away property from a private landowner for public use without going through the legal process of expropriation or negotiated sale," a suit may properly be maintained against the government. We hold for the petitioners. That the principle of state immunity from suit cannot be invoked to defeat petitioners' claim has long been settled. In Ministerio v. Court of First Instance of Cebu,7 the Court held: . . . . The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen. Had the government followed the procedure indicated by the governing law at the time, a complaint would have been filed by it, and only upon payment of the compensation fixed by the judgment, or after tender to the party entitled to such payment of the amount fixed, may it "have the right to enter in and upon the land so condemned" to appropriate the same to the public use defined in the judgment. If there were an observance of procedural regularity, petitioners would not be in the said plaint they are now. It is unthinkable then that precisely because there was a failure to abide by what the law requires, the government would stand to benefit. It just as important, if not more so, that there be fidelity to legal norms on the part of the officialdom if the rule of law were to be maintained. It is not too much to say that when the government takes any property for public use, which is conditioned upon the payment of just compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a court. There is no thought then that the doctrine of immunity from suit could still be appropriately invoked. We find the facts of the Ministerio case on all fours with the instant cases insofar as the fact that the respondent government officials executed a shortcut in appropriating petitioners' property for public use is concerned. As in the Amigable case, no expropriation proceedings were initiated before construction of the projects began. In like manner, nowhere in his pleadings in the cases at bar does the Solicitor General mention that the fact that expropriation proceedings had in fact been undertaken before the road and artificial creek were constructed. Thus,

quoting the answer of the defendants in Civil Case No. 46801, the Solicitor General summarized the facts which defendants considered as constituting justification for the construction as follows: 10. The construction of the road and creek in question on the property which at the time was said to be public property, was initiated, and construction effected, through the usual and ordinary course, as shown by the following: a. November 5, 1979 — Engr. Data who was the incumbent District Engineer submitted (thru channels) plans, program of works and detailed estimates for approval of higher authorities, thru the initiation of Mayor Ynares and Assemblyman Gilberto Duavit; b. February 18, 1980 — Regional Director Eduardo L. Lagunilla, MPW Region IV, EDSA, Quezon City endorsed said request to the Minister of Public Works;. c. February 13, 1981 — Assemblyman Gilberto Duavit sent a hand-written follow-up note regarding the project; d. June 17, 1981 — The undersigned defendant Nestor Agustin was designated Chief Civil Engineer of the Rizal Engineer District, Vice Engr. Cresencio Data who reached his compulsory retirement age; e. September 23, 1981 — Funds in the amount of P588,000.00 was released for partial implementation of the project. The total amount requested was P1,200,000. 00; f. October 19, 1981 — The undersigned submitted a request to the MPWH Central Office seeking authority to effect implementation of the project; g. October 29, 1981 — The Regional Director approved the plans and program of works for the project in the amount of P588,000.00; h. November 11, 1981 — The Honorable Minister Jesus S. Hipolito granted the request to undertake the implementation of the project; i.

November 25, 1981 — Project implementation was started;

j.

March 3, 1982 — Construction of rock bulkhead was completed;

k. November 23, 1982 — P249,000.00 was released for improvement (deepening and diverting of flow) of Binangonan River which was a complimentary structure of Binangonan port system; l. April 9, 1982 — Implementation was started. Contract for this project was approved by the Regional Director in favor of EDILBERTO CADIENTE CONSTRUCTION; m. May 21, 1982 — Deepening slightly of the adjacent portion of the rock bulkhead was completed.

11.

The construction of the structures was done in good faith;

The construction of the roadway and deepening of the creek was designated to generate for the municipality of Binangonan, Rizal more benefits in the form of substantial revenue from fishing industry, parking area, market rentals, development site, and road system improvements. The area covered by said public improvements is part of the Laguna Lake area which is submerged in water even during dry season. The municipal mayor of Binangonan, Rizal stated that said area is public property.8 Public respondents' belief that the property involved is public, even if buttressed by statements of other public officials, is no reason for the unjust taking of petitioners' property. As TCT No. 329945 shows, the property was registered under the Torrens system in the names of "Emiliano R. de los Santos, married to Corazon Dayrit; and Norma Alabastro, married to Isidro L. Padilla" as early as March 29, 1971. Had the public respondents, including the other officials involved in the construction, performed their functions by exercising even the ordinary diligence expected of them as public officials, they would not have failed to note that the property is a private one. A public infrastructure losses its laudability if, in the process of undertaking it, private rights are disregarded. In this connection, the Court said in Republic v. Sandiganbayan:9 It can hardly be doubted that in exercising the right of eminent domain, the State exercises its jus imperii, as distinguished from its proprietary rights of jus gestionis. Yet, even in that area, it has been held that where private property has been taken in expropriation without just compensation being paid, the defense of immunity from suit cannot be set up by the State against an action for payment by the owner. Public respondents' assertion that the project had been completed on May 21, 1982 meets strong opposition from the petitioners who insist that the project "until now is not yet finished."10 This factual issue needs determination which only the trial court can undertake. Thus, the need for a full blown trial on the merits. We do not subscribe to the appellate court's suggestion that the remedy of the petitioners "lies elsewhere." The filing of another case to determine just compensation is superfluous. The issue may be threshed out below for practical reasons in the event that it is shown later that it is no longer possible to prohibit the public respondents from continuing with the public work. As held in the Amigable case, damages may be awarded the petitioners in the form of legal interest on the price of the land to be reckoned from the time of the unlawful taking. WHEREFORE, the petition is hereby GRANTED and Civil Cases Nos. 46800 and 46801 shall be REMANDED to the lower court for trial on the merits after the Republic of the Philippines shall have been impleaded as defendant in both cases.

NATIONAL POWER CORP., G.R. No. 156093 Petitioner, Present: QUISUMBING, J., Chairperson, - versus - CARPIO, CARPIO MORALES, TINGA, and VELASCO, JR., JJ.

SPOUSES NORBERTO AND JOSEFINA DELA CRUZ, METROBANK, Dasmarias, Cavite Branch, REYNALDO Promulgated: FERRER, and S.K. DYNAMICS MANUFACTURER CORP., February 2, 2007 Respondents. x-----------------------------------------------------------------------------------------x

DECISION

VELASCO, JR., J.:

The Case

In this petition for review under Rule 45 of the Rules of Court, petitioner National Power Corporation (NAPOCOR) seeks to annul and set aside the November 18, 2002 Decision[1] of the Court of Appeals (CA) in CA-G.R. CV No. 67446, which affirmed the December 28, 1999 Order[2] of the Imus, Cavite Regional Trial Court (RTC), Branch XX in Civil Case No. 1816-98, which fixed the fair market value of the expropriated lots at PhP 10,000.00 per square meter. The Facts Petitioner NAPOCOR is a government-owned and controlled corporation created under Republic Act No. 6395, as amended, with the mandate of developing hydroelectric power, producing transmission lines, and developing hydroelectric power throughout the Philippines. NAPOCOR decided to acquire an easement of right-of-way over portions of land within the areas of Dasmarias and Imus, Cavite for the construction and maintenance of the proposed Dasmarias-Zapote 230 kV Transmission Line Project.[3] On November 27, 1998, petitioner filed a Complaint[4] for eminent domain and expropriation of an easement of right-of-way against respondents as registered owners of the parcels of land sought to be expropriated, which were covered by Transfer Certificates of Title (TCT) Nos. T-313327, T-671864, and T-454278. The affected areas were 51.55, 18.25, and 14.625 square meters, respectively, or a total of 84.425 square meters. After respondents filed their respective answers to petitioners Complaint, petitioner deposited PhP 5,788.50 to cover the provisional value of the land in accordance with Section 2, Rule 67 of the Rules of Court.[5] Then, on February 25, 1999, petitioner filed an Urgent Ex-Parte Motion for the Issuance of a Writ of Possession, which the trial court granted in its March 9, 1999 Order. The trial court issued a Writ of Possession over the lots owned by respondents spouses de la Cruz and respondent Ferrer on March 10, 1999 and April 12, 1999, respectively. However, the trial court dropped the Dela Cruz spouses and their mortgagee, Metrobank, as parties-defendants in its May 11, 1999 Order,[6] in view of the Motion to Intervene filed by respondent/intervenor Virgilio M. Saulog, who claimed ownership of the land sought to be expropriated from respondents spouses Dela Cruz. On June 24, 1999, the trial court terminated the pre-trial in so far as respondent Ferrer was concerned, considering that the sole issue was the amount of just compensation, and issued an Order directing the constitution of a Board of Commissioners with respect to the property of respondent S.K. Dynamics. The trial court designated Mr. Lamberto C. Parra, Cavite Provincial Assessor, as chairman, while petitioner nominated the Municipal Assessor of Dasmarias, Mr. Regalado T.

Andaya, as member. commissioner.

Respondent

S.K.

Dynamics

did

not

nominate

any

As to the just compensation for the property of Saulog, successor-in-interest of the Dela Cruz spouses, the trial court ordered the latter and petitioner to submit their compromise agreement. The commissioners conducted an ocular inspection of S.K. Dynamics property, and on October 8, 1999, they submitted a report to the trial court, with the following pertinent findings: In arriving our [sic] estimate of values our studies and analysis include the following:

I. PROPERTY LOCATION

As shown to us on-site during our ocular inspection, the appraised property is land only, identified as the area affected by the construction of the National Power Corporation (NPC) Dasmarias-Zapote 230KV Transmission Lines Project, located within Barangay Salitran, Dasmarias, Cavite registered in the name of S.K. Dynamic[s] Manufacture[r], Corp., under Transfer Certificate of Title No. T-454278.

II. NEIGHBORHOOD DESCRIPTION

The neighborhood particularly in the immediate vicinity is within a mixed residential and commercial area, situated in the northern section of the Municipality of Dasmarias which was transversed [sic] by Gen. Emilio Aguinaldo Highway [where] several residential subdivisions and commercial establishment[s] are located.

Considered as some of the important improvements [on] the vicinity are (within 1.5 radius)

Orchard Golf and Country Club Golden City Subdivision Southfield Subdivisions

Arcontica Sports Complex Maxs Restaurant Waltermart Shopping Mall UMC Medical Center Several savings and Commercial Banks as well as several Gasoline stations. Community centers such as, [sic] churches, public markets, shopping malls, banks and gasoline stations are easily accessible from the subject real properties. Convenience facilities such as electricity, telephone service as well as pipe potable water supply system are all available along Gen. Emilio Aguinaldo Highway. Public transportation consisting of passenger jeepneys and buses as well taxicabs are [sic] regularly available along Gen. E. Emilio Aguinaldo Highway [sic]. IV. HIGHEST AND MOST PROFITABLE USE The subject property is situated within the residential/commercial zone and considering the area affected and taking into consideration, their location, shape, lot topography, accessibility and the predominant uses of properties in the neighborhood, as well as the trend of land developments in the vicinity, we are on the opinion that the highest and most profitable use of the property is good for residential and commercial purposes. V. VALUATION OF LAND MARKET DATA Based on the analysis of data gathered and making the proper adjustments with respect to the location, area, shape, accessibility, and the highest and best use of the subject properties, it is the opinion of the herein commissioners that the fair market value of the subject real properties is P10,000.00 per square meter, as of this date, October 05, 1999.[7] Thus, both commissioners recommended that the property of S.K. Dynamics to be expropriated by petitioner be valued at PhP 10,000.00 per square meter. The records show that the commissioners did not afford the parties the opportunity to introduce evidence in their favor, nor did they conduct hearings before them. In fact, the commissioners did not issue notices to the parties to attend hearings nor provide the concerned parties the opportunity to argue their respective causes. Upon the submission of the commissioners report, petitioner was not notified of the completion or filing of it nor given any opportunity to file its objections to it.

On December 1, 1999, respondent Ferrer filed a motion adopting in toto the commissioners report with respect to the valuation of his property.[8] On December 28, 1999, the trial court consequently issued the Order approving the commissioners report, and granted respondent Ferrers motion to adopt the subject report. Subsequently, the just compensation for the disparate properties to be expropriated by petitioner for its project was uniformly pegged at PhP 10,000.00 per square meter. Incidentally, on February 11, 2000, respondent S.K. Dynamics filed a motion informing the trial court that in addition to the portion of its property covered by TCT No. T-454278 sought to be expropriated by petitioner, the latter also took possession of an 8.55-square meter portion of S.K. Dynamics property covered by TCT No. 503484 for the same purposeto acquire an easement of right-of-way for the construction and maintenance of the proposed Dasmarias-Zapote 230 kV Transmission Line Project. Respondent S.K. Dynamics prayed that said portion be included in the computation of the just compensation to be paid by petitioner. On the same date, the Imus, Cavite RTC granted S.K. Dynamics motion to have the 8.55-square meter portion of its property included in the computation of just compensation. The Ruling of the Regional Trial Court As previously stated, in its December 28, 1999 Order, the trial court fixed the just compensation to be paid by petitioner at PhP 10,000.00 per square meter. The relevant portion of the said Order reads as follows: On October 8, 1999, a Commissioners Valuation Report was submitted in Court by the Provincial Assessor of Cavite and by the Municipal Assessor of Dasmarias, Cavite. Quoting from said Report, thus: Based on the analysis of data gathered and making the proper adjustments with respect to location, area, shape, accessibility, and the highest and best use of the subject properties, it is the opinion of herein commissioners that the fair market value of the subject real properties is ₧10,000.00 per square meter, as of this date, October 05, 1999.

Finding the opinion of the Commissioners to be in order, this Court approves the same. Accordingly, the Motion filed by [respondent] Reynaldo Ferrer adopting said valuation report is granted. SO ORDERED. [9] On January 20, 2000, petitioner filed a Motion for Reconsideration of the abovementioned Order, but said motion was denied in the trial courts March 23, 2000 Order, which states that:

The basis of [petitioner] in seeking to set aside the Order dated December 28, 1999 is its claim that the Commissioners Report fixing the just compensation at P10,000.00 per square meter is exorbitant, unjust and unreasonable. To support its contention, [petitioner] invoked Provincial Appraisal Committee Report No. 08-95 dated October 25, 1995 which set the just compensation of lots along Gen. Aguinaldo Highway at P3,000.00 per sq.m. only. By way of opposition, [respondent] Dynamics countered that the valuation of a lot under expropriation is reckoned at the time of its taking by the government. And since in the case at bar, the writ of possession was issued on March 10, 1999, the price or value for 1999 must be the one to be considered. We find for the defendant. The PAR Resolution alluded to by [petitioner] was passed in 1995 or four (4) years [before] the lot in question was taken over by the government. This explains why the price or cost of the land has considerably increased. Besides, the valuation of P10,000.00 per sq.m. was the one recommended by the commissioner designated by [petitioner] itself and concurred in by the Provincial Assessor of Cavite. Be that as it may, the Motion for Reconsideration is denied. SO ORDERED.[10] The Ruling of the Court of Appeals Unsatisfied with the amount of just compensation, petitioner filed an appeal before the CA. In resolving the appeal, the CA made the following findings: We find nothing on record which would warrant the reversal of the Order dated December 28, 1999 of the court a quo. [Petitioner] submits that the order of the court a quo adopting the Commissioners [sic] Valuation Report, fixing the just compensation for the subject lots in the amount of P10,000.00 per square meter is exhorbitant [sic], highly speculative and without any basis. In support thereto, [petitioner] presented before the court a quo the Provincial Appraisal Committee of Cavite Resolution No. 08-95 x x x which fixed the fair market value of lots located along Gen. Aguinaldo Highway, Dasmarias, Cavite, which incidentally includes the lots subject of this proceedings [sic], in the amount of P3,000.00 per square meter. We do not agree. The nature and character of the land at the time of its taking is the principal criterion to determine just compensation to the land owner. (National Power Corporation vs. Henson, 300 SCRA 751-756). The CA then cited Section 4, Rule 67 of the 1997 Rules of Civil Procedure[11] to explain why Resolution No. 08-95 could not be used as [a] basis for determining the just compensation of the subject lots, which by reason of the changed commercial

conditions in the vicinity, could have increased its value greater than its value three (3) years ago. The said resolution, which fixed the fair market value of the lots, including that of the disputed lots along Gen. Aguinaldo Highway, was approved on October 25, 1995, while petitioner filed the Complaint for the expropriation of the disputed lots on November 27, 1998, or more than three (3) years had elapsed after said resolution was approved. Reflecting on the commissioners report, the CA noted that since the property underwent important changes and improvements, the highest and most profitable use of the property is good for residential and commercial purposes. As regards the commissioners failure to conduct a hearing to give the parties the opportunity to present their respective evidence, as alleged by petitioner, the CA opined that [t]he filing by [petitioner] of a motion for reconsideration accorded it ample opportunity to dispute the findings of the commissioners, so that [petitioner] was as fully heard as there might have been hearing actually taken place x x x. The CA ultimately rendered its judgment, as follows: WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack of merit. The Order dated December 28, 1999 and March 23, 2000 of the court a quo are hereby AFFIRMED by this Court. SO ORDERED.[12] Significantly, petitioner did not file a Motion for Reconsideration of the CA November 18, 2002 Decision, but it directly filed a petition for review before us. The Issues In this petition for review, the issues are the following: PETITIONER WAS DENIED DUE PROCESS WHEN IT WAS NOT ALLOWED TO PRESENT EVIDENCE ON THE REASONABLE VALUE OF THE EXPROPRIATED PROPERTY BEFORE THE BOARD OF COMMISSIONERS. THE VALUATION OF JUST COMPENSATION HEREIN WAS NOT BASED FROM THE EVIDENCE ON RECORD AND OTHER AUTHENTIC DOCUMENTS The Courts Ruling We find this petition meritorious It is beyond question that petitions for review may only raise questions of law which must be distinctly set forth;[14] thus, this Court is mandated to only consider purely legal questions in this petition, unless called for by extraordinary circumstances. In this case, petitioner raises the issue of denial of due process because it was allegedly deprived of the opportunity to present its evidence on the just compensation of properties it wanted to expropriate, and the sufficiency of the legal

basis or bases for the trial courts Order on the matter of just compensation. Unquestionably, a petition for review under Rule 45 of the Rules of Court is the proper vehicle to raise the issues in question before this Court. In view of the significance of the issues raised in this petition, because this case involves the expenditure of public funds for a clear public purpose, this Court will overlook the fact that petitioner did not file a Motion for Reconsideration of the CA November 18, 2002 Decision, and brush aside this technicality in favor of resolving this case on the merits. First Issue: Petitioner was deprived of due process when it was not given the opportunity to present evidence before the commissioners It is undisputed that the commissioners failed to afford the parties the opportunity to introduce evidence in their favor, conduct hearings before them, issue notices to the parties to attend hearings, and provide the opportunity for the parties to argue their respective causes. It is also undisputed that petitioner was not notified of the completion or filing of the commissioners report, and that petitioner was also not given any opportunity to file its objections to the said report. A re-examination of the pertinent provisions on expropriation, under Rule 67 of the Rules of Court, reveals the following: SEC. 6. Proceedings by commissioners.Before entering upon the performance of their duties, the commissioners shall take and subscribe an oath that they will faithfully perform their duties as commissioners, which oath shall be filed in court with the other proceedings in the case. Evidence may be introduced by either party before the commissioners who are authorized to administer oaths on hearings before them, and the commissioners shall, unless the parties consent to the contrary, after due notice to the parties to attend, view and examine the property sought to be expropriated and its surroundings, and may measure the same, after which either party may, by himself or counsel, argue the case. The commissioners shall assess the consequential damages to the property not taken and deduct from such consequential damages the consequential benefits to be derived by the owner from the public use or purpose of the property taken, the operation of its franchise by the corporation or the carrying on of the business of the corporation or person taking the property. But in no case shall the consequential benefits assessed exceed the consequential damages assessed, or the owner be deprived of the actual value of his property so taken. SEC. 7. Report by commissioners and judgment thereupon.The court may order the commissioners to report when any particular portion of the real estate shall have been passed upon by them, and may render judgment upon such partial report, and direct the commissioners to proceed with their work as to subsequent portions of the property sought to be expropriated, and may from time to time so deal with such property. The commissioners shall make a full and accurate report to the court of all their proceedings, and such proceedings shall not be effectual until the court shall have accepted their report and rendered judgment in accordance with their recommendations. Except as otherwise expressly ordered by the court, such report shall be filed within sixty (60) days from the date the commissioners were notified

of their appointment, which time may be extended in the discretion of the court. Upon the filing of such report, the clerk of the court shall serve copies thereof on all interested parties, with notice that they are allowed ten (10) days within which to file objections to the findings of the report, if they so desire. SEC. 8. Action upon commissioners report.Upon the expiration of the period of ten (10) days referred to in the preceding section, or even before the expiration of such period but after all the interested parties have filed their objections to the report or their statement of agreement therewith, the court may, after hearing, accept the report and render judgment in accordance therewith; or, for cause shown, it may recommit the same to the commissioners for further report of facts; or it may set aside the report and appoint new commissioners; or it may accept the report in part and reject it in part; and it may make such order or render such judgment as shall secure to the plaintiff the property essential to the exercise of his right of expropriation, and to the defendant just compensation for the property so taken. Based on these provisions, it is clear that in addition to the ocular inspection performed by the two (2) appointed commissioners in this case, they are also required to conduct a hearing or hearings to determine just compensation; and to provide the parties the following: (1) notice of the said hearings and the opportunity to attend them; (2) the opportunity to introduce evidence in their favor during the said hearings; and (3) the opportunity for the parties to argue their respective causes during the said hearings. The appointment of commissioners to ascertain just compensation for the property sought to be taken is a mandatory requirement in expropriation cases. In the instant expropriation case, where the principal issue is the determination of just compensation, a hearing before the commissioners is indispensable to allow the parties to present evidence on the issue of just compensation. While it is true that the findings of commissioners may be disregarded and the trial court may substitute its own estimate of the value, the latter may only do so for valid reasons, that is, where the commissioners have applied illegal principles to the evidence submitted to them, where they have disregarded a clear preponderance of evidence, or where the amount allowed is either grossly inadequate or excessive. Thus, trial with the aid of the commissioners is a substantial right that may not be done away with capriciously or for no reason at all.[15] In this case, the fact that no trial or hearing was conducted to afford the parties the opportunity to present their own evidence should have impelled the trial court to disregard the commissioners findings. The absence of such trial or hearing constitutes reversible error on the part of the trial court because the parties (in particular, petitioners) right to due process was violated. The Court of Appeals erred in ruling that the petitioner was not deprived of due process when it was able to file a motion for reconsideration In ruling that petitioner was not deprived of due process because it was able to file a Motion for Reconsideration, the CA had this to say:

[Petitioner], further, asserts that the appointed commissioners failed to conduct a hearing to give the parties the opportunity to present their respective evidence. According to [petitioner], the Commissioners Valuation Report was submitted on October 8, 1999 in violation of the appellants right to due process as it was deprived of the opportunity to present evidence on the determination of the just compensation. We are not persuaded. The filing by [petitioner] of a motion for reconsideration accorded it ample opportunity to dispute the findings of the commissioners, so that [petitioner] was as fully heard as there might have been hearing actually taken place. Denial of due process cannot be successfully invoked by a party who has had the opportunity to be heard on his motion for reconsideration. (Vda. De Chua vs. Court of Appeals, 287 SCRA 33, 50).[16] In this respect, we are constrained to disagree with the CA ruling, and therefore, set it aside. While it is true that there is jurisprudence supporting the rule that the filing of a Motion for Reconsideration negates allegations of denial of due process, it is equally true that there are very specific rules for expropriation cases that require the strict observance of procedural and substantive due process,[17] because expropriation cases involve the admittedly painful deprivation of private property for public purposes and the disbursement of public funds as just compensation for the private property taken. Therefore, it is insufficient to hold that a Motion for Reconsideration in an expropriation case cures the defect in due process. As a corollary, the CAs ruling that denial of due process cannot be successfully invoked by a party who has had the opportunity to be heard on his motion for reconsideration, citing Vda. de Chua v. Court of Appeals, is not applicable to the instant case considering that the cited case involved a lack of notice of the orders of the trial court in granting letters of administration. It was essentially a private dispute and therefore, no public funds were involved. It is distinct from this expropriation case where grave consequences attached to the orders of the trial court when it determined the just compensation. The Court takes this opportunity to elucidate the ruling that the opportunity to present evidence incidental to a Motion for Reconsideration will suffice if there was no chance to do so during the trial. We find such situation to be the exception and not the general rule. The opportunity to present evidence during the trial remains a vital requirement in the observance of due process. The trial is materially and substantially different from a hearing on a Motion for Reconsideration. At the trial stage, the party is usually allowed several hearing dates depending on the number of witnesses who will be presented. At the hearing of said motion, the trial court may not be more accommodating with the grant of hearing dates even if the movant has many available witnesses. Before the decision is rendered, a trial court has an open mind on the merits of the parties positions. After the decision has been issued, the trial courts view of these positions might be inclined to the side of the winning party and might treat the Motion for Reconsideration and the evidence

adduced during the hearing of said motion perfunctorily and in a cavalier fashion. The incident might not receive the evaluation and judgment of an impartial or neutral judge. In sum, the constitutional guarantee of due process still requires that a party should be given the fullest and widest opportunity to adduce evidence during trial, and the availment of a motion for reconsideration will not satisfy a partys right to procedural due process, unless his/her inability to adduce evidence during trial was due to his/her own fault or negligence. Second Issue: The legal basis for the determination of just compensation was insufficient In this case, it is not disputed that the commissioners recommended that the just compensation be pegged at PhP 10,000.00 per square meter. The commissioners arrived at the figure in question after their ocular inspection of the property, wherein they considered the surrounding structures, the propertys location and, allegedly, the prices of the other, contiguous real properties in the area. Furthermore, based on the commissioners report, the recommended just compensation was determined as of the time of the preparation of said report on October 5, 1999. In B.H. Berkenkotter & Co. v. Court of Appeals, we held, thus: Just compensation is defined as the full and fair equivalent of the property sought to be expropriated. The measure is not the takers gain but the owners loss. The compensation, to be just, must be fair not only to the owner but also to the taker. Even as undervaluation would deprive the owner of his property without due process, so too would its overvaluation unduly favor him to the prejudice of the public. To determine just compensation, the trial court should first ascertain the market value of the property, to which should be added the consequential damages after deducting therefrom the consequential benefits which may arise from the expropriation. If the consequential benefits exceed the consequential damages, these items should be disregarded altogether as the basic value of the property should be paid in every case.

The market value of the property is the price that may be agreed upon by parties willing but not compelled to enter into the contract of sale. Not unlikely, a buyer desperate to acquire a piece of property would agree to pay more, and a seller in urgent need of funds would agree to accept less, than what it is actually worth. x x x Among the factors to be considered in arriving at the fair market value of the property are the cost of acquisition, the current value of like properties, its actual or potential uses, and in the particular case of lands, their size, shape, location, and the tax declarations thereon. It is settled that just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of the expropriation proceedings.

Where the institution of the action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint.[18] We note that in this case, the filing of the complaint for expropriation preceded the petitioners entry into the property. Therefore, it is clear that in this case, the sole basis for the determination of just compensation was the commissioners ocular inspection of the properties in question, as gleaned from the commissioners October 5, 1999 report. The trial courts reliance on the said report is a serious error considering that the recommended compensation was highly speculative and had no strong factual moorings. For one, the report did not indicate the fair market value of the lots occupied by the Orchard Golf and Country Club, Golden City Subdivision, Arcontica Sports Complex, and other business establishments cited. Also, the report did not show how convenience facilities, public transportation, and the residential and commercial zoning could have added value to the lots being expropriated. Moreover, the trial court did not amply explain the nature and application of the highest and best use method to determine the just compensation in expropriation cases. No attempt was made to justify the recommended just price in the subject report through other sufficient and reliable means such as the holding of a trial or hearing at which the parties could have had adequate opportunity to adduce their own evidence, the testimony of realtors in the area concerned, the fair market value and tax declaration, actual sales of lots in the vicinity of the lot being expropriated on or about the date of the filing of the complaint for expropriation, the pertinent zonal valuation derived from the Bureau of Internal Revenue, among others. More so, the commissioners did not take into account that the Asian financial crisis in the second semester of 1997 affected the fair market value of the subject lots. Judicial notice can be taken of the fact that after the crisis hit the real estate market, there was a downward trend in the prices of real estate in the country. Furthermore, the commissioners report itself is flawed considering that its recommended just compensation was pegged as of October 5, 1999, or the date when the said report was issued, and not the just compensation as of the date of the filing of the complaint for expropriation, or as of November 27, 1998. The period between the time of the filing of the complaint (when just compensation should have been determined), and the time when the commissioners report recommending the just compensation was issued (or almost one [1] year after the filing of the complaint), may have distorted the correct amount of just compensation. Clearly, the legal basis for the determination of just compensation in this case is insufficient as earlier enunciated. This being so, the trial courts ruling in this respect should be set aside. WHEREFORE, the petition is GRANTED. The December 28, 1999 and March 23, 2000 Orders of the Imus, Cavite RTC and the November 18, 2002 Decision of the CA are hereby SET ASIDE. This case is remanded to the said trial court for the proper

determination of just compensation in conformity with this Decision. No costs. SO ORDERED.

[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. DECISION 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 thatSEC. 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.

G.R. No. 129998 December 29, 1998 NATIONAL POWER CORPORATION, petitioner, vs. LOURDES HENSON, married to Eugenio Galvez; JOSEFINA HENSON, married to Petronio Katigbak, JESUSA HENSON; CORAZON HENSON, married to Jose Ricafort; ALFREDO TANCHIATCO; BIENVENIDO DAVID; MARIA BONDOC CAPILI, married to Romeo Capili; and MIGUEL MANOLOTO, respondents. PARDO, J.:

The case is an appeal via certiorari under Rule 45 of the Revised Rules of Court from the decision of the Court of Appeals, which affirmed with modification the decision of the Regional Trial Court, San Fernando, Pampanga, in a special civil action for eminent domain, ordering the National Power Corporation (NPC) to pay respondents landowners/claimants just compensation for the taking of their five (5) parcels of land, with an area of 63,220 square meters at P400.00, per square meter, with legal interest from September 11, 1990, plus costs of the proceedings. On March 21, 1990, the National Power Corporation (NPC) originally instituted with the Regional Trial Court, Third Judicial District, Branch 46, San Fernando, Pampanga, a complaint1 for eminent domain, later amended on October 11, 1990, for the taking for public use of five (5) parcels of land, owned or claimed by respondents, with a total aggregate area of 58,311 square meters, for the expansion of the NPC Mexico Sub-Station.2 Respondents are the registered owners/claimants of the five (5) parcels of land sought to be expropriated, situated in San Jose Matulid, Mexico, Pampanga, more particularly described as follows: Parcels of rice land, being Lot 1, 2, 3, 4, and 5 of the subdivision plan Psd-03-017121 (OLT) and being a portion of Lot 212 of Mexico Cadastre, situated in the Barangay of San Jose Matulid, Municipality of Mexico, province of Pampanga, Island of Luzon. Bounded on the North by Barangay Road Calle San Jose; on the East by Lot 6, Psd-03-017121 (OLT) owned by the National Power Corporation; on the South by Lot 101, Psd-03-017121 (OLT) being an irrigation ditch; on the West by Lot 100, Psd-030017121 (OLT) being an irrigation ditch and Barrio road, containing an aggregate area of FIFTY EIGHT THOUSAND THREE HUNDRED ELEVEN (58,311) square meters, which parcels of land are broken down as follows with claimants: 1. Lot 1-A = 43,532 sq. m. - Henson Family 2. Lot 2-A = 6,823 sq. m. - Alfredo Tanchiatco, encumbered with Land Bank of the Phil. (LBP) 3. Lot 3-A = 3,057 sq. m. - Bienvenido David, encumbered with

LBP 4. Lot 4-A = 1,438 sq. m. - Maria Bondoc Capili, encumbered with LBP 5. Lot 5-A = 3,461 sq. m. - Miguel Manoloto and Henson Family Total A = 58,311 sq. m. and covered by Transfer Certificate of Title No. 557 in the name of Henson, et al.; Transfer Certificate of Title No. 7131/Emancipation Patent No. A-277216 in the name of Alfredo Tanchiatco; Transfer Certificate of Title No. 7111/Emancipation Patent No. A-278086 in the name of Bienvenido David; Transfer Certificate of Title No. 7108/Emancipation Patent No. A-278089 in the name of Maria B. Capili; Certificate of Land Transfer No. 4550 in the name of Miguel C. Manaloto, and Subdivision Plan Psd-03-017121 (OLT), which is a subdivision of Lot 212, Mexico Cadastre as surveyed for Josefina Katigbak, et al. Said five (5) parcels of land are agricultrual/riceland covered by Operation Land Transfer (OLT) of the Department of Agrarian Reform.3 Petitioner needed the entire area of the five (5) parcels of land, comprising an aggregate area of 58,311 square meters, for the expansion of its Mexico Subdivision.4 On March 28, 1990, petitioner filed an urgent motion to fix the provisional value of the subject parcels of land. 3 On April 20, 1990, respondents filed a motion to dismiss. 4 They did not challenge petitioner's right to condemn their property, but declared that the fair market value of their property was from P180.00 to P250.00 per square meter.5 On July 10, 1990, the trial court denied respondents' motion to dismiss. The court did not declare that petitioner had a lawful right to take the property sought to be expropriated. 6 However, the court fixed the provisional value of the land at P100.00 per square meter, for a total area of 63,2207 square meters of respondents' property, to be deposited with the Provincial Treasurer of Pampanga. Petitioner deposited the amount on August 29, 1990.8

On September 5, 1990, the trial court issued a writ of possession in favor of petitioner, and, on September 11, 1990, the court's deputy sheriff placed petitioner in possession of the subject land. 9 On November 22, 1990, and December 20, 1990, the trial court granted the motions of respondents to withdraw the deposit made by petitioner of the provisional value of their property amounting to P5,831,100.00, with a balance of P690,900.00, remaining with the Provincial Treasurer of Pampanga. 10 On April 5, 1991, the trial court issued an order appointing three (3) commissioners to aid the court in the reception of evidence to determine just compensation for the taking of the subject property. After receiving the evidence and conducting an ocular inspection, the commissioners submitted to the court their individual reports. Commisioner Mariano C. Tiglao, in his report dated September 10, 1992, recommended that the fair market value of the entire 63,220 square meters property be fixed at P350.00 per square meter. Commissioner Arnold P. Atienza, in his report dated February 24, 1993, recommended that the fair market value be fixed at P375.00 per square meter. Commissioner Victorino Orocio, in his report dated April 28, 1993, recommended that the fair market value be fixed at P170.00 per square meter. 11 However, the trial court did not conduct a hearing on any of the reports. On May 19, 1993, the trial court rendered judgment fixing the amount of just compensation to be paid by petitioner for the taking of the entire area of 63,220 square meters at P400.00 per square meter, with legal interest thereon computed from September 11, 1990, when petitioner was placed in possession of the land, plus attorney's fees of P20,000.00, and costs of the proceedings. 12 In due time, petitioner appealed to the Court of Appeals.

13

On July 23, 1997, the Court of Appeals rendered decision affirming that of the Regional Trial Court, except that the award of P20,000.00, as attorney's fees was deleted. 14 Hence, this petition for review.

15

By resolution adopted on October 8, 1997, the Court required respondents to comment on the petition within ten (10) days from notice. 16 On January 7, 1998, respondents filed their comment thereon.17 By resolution adopted on February 2, 1998, the Court required petitioner to file a reply to the comment. 18On August 25, 1990, petitioner filed a reply thereto. 19

We now resolve to give due course to the petition. We modify the appealed decision. As respondents did not challenge petitioner's right to expropriate their property, the issue presented boils down to what is the just compensation for the taking of respondents' property for the expansion of the NPC's Mexico Sub-station, situated in San Jose Matulid, Mexico, Pampanga. The parcels of land sought to be expropriated are undeniably idle, undeveloped, raw agricultural land, bereft of any improvement. Except for the Henson family, all the other respondents were admittedly farmer beneficiaries under operation land transfer of the Department of Agrarian Reform. However, the land has been re-classified as residential. The nature and character of the land at the time of its taking is the principal criterion to determine just compensation to the landowner. 20 In this case, the trial court and the Court of Appeals fixed the value of the land at P400.00 per square meter, which was the selling price of lots in the adjacent fully developed subdivision, the Santo Domingo Village Subdivision. The land in question, however, was an undeveloped, idle land, principally agricultural in character, though re-classified as residential. Unfortunately, the trial court, after creating a board of commissioners to help it determine the market value of the land did not conduct a hearing on the report of the commissioners. The trial court fixed the fair market value of subject land in an amount equal to the value of lots in the adjacent fully developed subdivision. This finds no support in the evidence. The valuation was even higher than the recommendation of anyone of the commissioners. On the other hand, Commissioner Atienza recommended a fair market value at P375.00 per square meter. This appears to be the closest valuation to the market value of lots in the adjoining fully developed subdivision. Considering that the subject parcels of land are undeveloped raw land, the price of P375.00 per square meter would appear to the Court as the just compensation for the taking of such raw land. Consequently, we agree with Commissioner Atienza's report that the fair market value of subject parcels of land be fixed at P375.00 per squaremeter. We also agree with petitioner that the area of the communal irrigation canal consisting of 4,809 square meters must be excluded from the land to be expropriated. To begin with, it is excluded in the amended complaint. Hence, the trial court and the Court of Appeals erred in including the same in the area to be taken. The trial court erroneously ordered double payment for 3,611 square meters of lot 5 (portion) in the dispositive part of its decision, and, hence, this must be deleted.

The trial court and the Court of Appeals correctly required petitioner to pay legal interest 21 on the compensation awarded from September 11, 1990, the date petitioner was placed in possession of the subject land, less the amount respondents had withdrawn from the deposit that petitioner made with the Provincial Treasurer's Office. We, however, rule that petitioner is under its charter exempt from payment of costs of the proceedings. WHEREFORE, the decision of the Court of Appeals and that of the trial court subject of the appeal are hereby MODIFIED. We render judgment as follows: 1. The Court fixes the amount of P375.00, per square meter, as the just compensation to be paid to respondents for the taking of their property consisting of five (5) parcels of land, with a total area of 58,311 square meters, described in and covered by Transfer Certificates of Title Nos. 557, 7131, 7111, 7108 and Certificate of Land Transfer No. 4550, which parcels of land are broken down as follows: a. Lot 1-A, with an area of 43,532 square meters belonging to Lourdes Henson, Josefina Henson, Jesusa Henson and Corazon Henson; b. Lot 2-A, with an area of 6,823 square meters belonging to Alfredo Tanchiatco; c. Lot 3-A, with an area of 3,057 square meters belonging to Bienvenido David (TCT No. 7111) d. Lot 4-A, with an area of 1,438 square meters belonging to Maria Bondoc Capili (TCT No. 7108) e. Lot 5-A, with an area of 3,461 square meters belonging to Miguel Manaloto (150 square meters), Certificate of Land Transfer No. 4550 and Henson Family (3,311 square meters), deducting therefrom the amounts they had withdrawn from the deposit of petitioner for the provisional value of said parcels of land. 22

2. With legal interest thereon at 6% per annum commencing on September 11, 1990, until the finality of this decision, and at 12% per annum therefrom on the remaining unpaid amount until full payment. Let this decision be recorded in the office of the Register of Deeds of Pampanga. No costs in all instances. SO ORDERED.

G.R. No. 142971

May 7, 2002

THE CITY OF CEBU, petitioner, DEDAMO, respondents.

vs. SPOUSES APOLONIO and BLASA

DAVIDE, JR., C.J.: In its petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, petitioner City of Cebu assails the decision of 11 October 1999 of the Court of Appeals in CA-G.R. CV No. 592041 affirming the judgment of 7 May 1996 of the Regional Trial Court, Branch 13, Cebu City, in Civil Case No. CEB-14632, a case

for eminent domain, which fixed the valuation of the land subject thereof on the basis of the recommendation of the commissioners appointed by it. The material operation facts are not disputed. On 17 September 1993, petitioner City of Cebu filed in Civil Case No. CEB-14632 a complaint for eminent domain against respondents spouses Apolonio and Blasa Dedamo. The petitioner alleged therein that it needed the following parcels of land of respondents, to wit: Lot No. 1527 Area-----------------------------------------------

1,146 square meters

Tax Declaration----------------------------------

03472

Title ------------------------------------------

No. 31833

Market value-------------------------------------

P240,660.00

Assessed Value----------------------------------

P72,200.00

Lot No. 1528 Area-----------------------------------------------

793 square meters

Area sought to be expropriated 478 square ---------------meters Tax Declaration 03450 ----------------------------------Title No. 31832 -------------------------------------------Market value for the whole lot P1,666,530.0 -----------------0 Market value of the Area to be P100,380.00 expropriated -Assessed ------------------------------------

Value P49,960.00

for a public purpose, i.e., for the construction of a public road which shall serve as an access/relief road of Gorordo Avenue to extend to the General Maxilum Avenue and the back of Magellan International Hotel Roads in Cebu City. The lots are the most suitable site for the purpose. The total area sought to be expropriated is 1,624 square meters with an assessed value of P1,786.400. Petitioner deposited with the Philippine National Bank the amount of P51,156 representing 15% of the fair market value of the property to enable the petitioner to take immediate possession of the property pursuant to Section 19 of R.A. No. 7160. 2 Respondents, filed a motion to dismiss the complaint because the purpose for which their property was to be expropriated was not for a public purpose but for benefit of a single private entity, the Cebu Holdings, Inc. Petitioner could simply buy directly from them the property at its fair market value if it wanted to, just like what it did with the neighboring lots. Besides, the price offered was very low in light of the consideration of P20,000 per square meter, more or less, which petitioner paid to the neighboring lots. Finally, respondents alleged that they have no other land in Cebu City. A pre-trial was thereafter had. On 23 August 1994, petitioner filed a motion for the issuance of a writ of possession pursuant to Section 19 of R.A. No. 7160. The motion was granted by the trial court on 21 September 1994.3 On 14 December 1994, the parties executed and submitted to the trial court an Agreement4 wherein they declared that they have partially settled the case and in consideration thereof they agreed: 1. That the SECOND PARTY hereby conforms to the intention to [sic] the FIRST PARTY in expropriating their parcels of land in the above-cited case as for public purpose and for the benefit of the general public; 2. That the SECOND PARTY agrees to part with the ownership of the subject parcels of land in favor of the FIRST PARTY provided the latter will pay just compensation for the same in the amount determined by the court after due notice and hearing; 3. That in the meantime the SECOND PARTY agrees to receive the amount of ONE MILLION SEVEN HUNDRED EIGHTY SIX THOUSAND FOUR HUNDRED PESOS (1,786,400.00) as provisional payment for the subject parcels of land, without prejudice to the final valuation as maybe determined by the court; 4. That the FIRST PARTY in the light of the issuance of the Writ of Possession Order dated September 21, 1994 issued by the Honorable Court, agreed to take possession over that portion of the lot sought to be expropriated where the house of the SECOND PARTY was located only after fifteen (15) days upon the receipt of the SECOND PARTY of the amount of P1,786,400.00;

5. That the SECOND PARTY upon receipt of the aforesaid provisional amount, shall turn over to the FIRST PARTY the title of the lot and within the lapse of the fifteen (15) days grace period will voluntarily demolish their house and the other structure that may be located thereon at their own expense; 6. That the FIRST PARTY and the SECOND PARTY jointly petition the Honorable Court to render judgment in said Civil Case No. CEB-14632 in accordance with this AGREEMENT; 7. That the judgment sought to be rendered under this agreement shall be followed by a supplemental judgment fixing the just compensation for the property of the SECOND PARTY after the Commissioners appointed by this Honorable Court to determine the same shall have rendered their report and approved by the court. Pursuant to said agreement, the trial court appointed three commissioners to determine the just compensation of the lots sought to be expropriated. The commissioners were Palermo M. Lugo, who was nominated by petitioner and who was designated as Chairman; Alfredo Cisneros, who was nominated by respondents; and Herbert E. Buot, who was designated by the trial court. The parties agreed to their appointment. Thereafter, the commissioners submitted their report, which contained their respective assessments of and recommendation as to the valuation of the property.1âwphi1.nêt On the basis of the commissioners' report and after due deliberation thereon, the trial court rendered its decision on 7 May 1996, 5 the decretal portion o which reads: WHEREFORE, in view of the foregoing, judgment is hereby rendered in accordance with the report of the commissioners. Plaintiff is directed to pay Spouses Apolonio S. Dedamo and Blasa Dedamo the sum of pesos: TWENTY FOUR MILLION EIGHT HUNDRED SIXTY-FIVE THOUSAND AND NINE HUNDRED THIRTY (P24,865.930.00) representing the compensation mentioned in the Complaint. Plaintiff and defendants are directed to pay the following commissioner's fee; 1. To Palermo Lugo

- P21,000.00

2. To Herbert Buot

- P19,000.00

3. To Alfredo Cisneros

- P19,000.00

Without pronouncement as to cost. SO ORDERED.

Petitioner filed a motion for reconsideration on the ground that the commissioners' report was inaccurate since it included an area which was not subject to expropriation. More specifically, it contended that Lot No. 1528 contains 793 square meters but the actual area to be expropriated is only 478 square meters. The remaining 315 square meters is the subject of a separate expropriation proceeding in Civil Case No. CEB-8348, then pending before Branch 9 of the Regional Trial Court of Cebu City. On 16 August 1996, the commissioners submitted an amended assessment for the 478 square meters of Lot No. 1528 and fixed it at P12,824.10 per square meter, or in the amount of P20,826,339.50. The assessment was approved as the just compensation thereof by the trial court in its Order of 27 December 1996.6 Accordingly, the dispositive portion of the decision was amended to reflect the new valuation. Petitioner elevated the case to the Court of Appeals, which docketed the case as CA-G.R. CV No. 59204. Petitioner alleged that the lower court erred in fixing the amount of just compensation at P20,826,339.50. The just compensation should be based on the prevailing market price of the property at the commencement of the expropriation proceedings. The petitioner did not convince the Court of Appeals. In its decision of 11 October 1999,7 the Court of Appeals affirmed in toto the decision of the trial court. Still unsatisfied, petitioner filed with us the petition for review in the case at bar. It raises the sole issue of whether just compensation should be determined as of the date of the filing of the complaint. It asserts that it should be, which in this case should be 17 September 1993 and not at the time the property was actually taken in 1994, pursuant to the decision in "National Power Corporation vs. Court of Appeals."8 In their Comment, respondents maintain that the Court of Appeals did not err in affirming the decision of the trial court because (1) the trial court decided the case on the basis of the agreement of the parties that just compensation shall be fixed by commissioners appointed by the court; (2) petitioner did not interpose any serious objection to the commissioners' report of 12 August 1996 fixing the just compensation of the 1,624-square meter lot at P20,826,339.50; hence, it was estopped from attacking the report on which the decision was based; and (3) the determined just compensation fixed is even lower than the actual value of the property at the time of the actual taking in 1994. Eminent domain is a fundamental State power that is inseparable from sovereignty. It is the Government's right to appropriate, in the nature of a compulsory sale to the State, private property for public use or purpose. 9 However, the Government must pay the owner thereof just compensation as consideration therefor. In the case at bar, the applicable law as to the point of reckoning for the determination of just compensation is Section 19 of R.A. No. 7160, which expressly

provides that just compensation shall be determined as of the time of actual taking. The Section reads as follows: SECTION 19. Eminent Domain. – A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided, however, That the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner, and such offer was not accepted: Provided, further, That the local government unit may immediately take possession of the property upon the filing of the expropriation proceedings and upon making a deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated: Provided finally, That, the amount to be paid for the expropriated property shall be determined by the proper court, based on the fair market value at the time of the taking of the property. The petitioner has misread our ruling in The National Power Corp. vs. Court of Appeals.10 We did not categorically rule in that case that just compensation should be determined as of the filing of the complaint. We explicitly stated therein that although the general rule in determining just compensation in eminent domain is the value of the property as of the date of the filing of the complaint, the rule "admits of an exception: where this Court fixed the value of the property as of the date it was taken and not at the date of the commencement of the expropriation proceedings." Also, the trial court followed the then governing procedural law on the matter, which was Section 5 of Rule 67 of the Rules of Court, which provided as follows: SEC. 5. Ascertainment of compensation. – Upon the entry of the order of condemnation, the court shall appoint not more than three (3) competent and disinterested persons as commissioners to ascertain and report to the court the just compensation for the property sought to be taken. The order of appointment shall designate the time and place of the first session of the hearing to be held by the commissioners and specify the time within which their report is to be filed with the court. More than anything else, the parties, by a solemn document freely and voluntarily agreed upon by them, agreed to be bound by the report of the commission and approved by the trial court. The agreement is a contract between the parties. It has the force of law between them and should be complied with in good faith. Article 1159 and 1315 of the Civil Code explicitly provides: Art. 1159. Obligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith.

Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are bound not only to the fulfillment of what has been expressly stipulated but also to all the consequences which, according to their nature, may be in keeping with good faith, usage and law. Furthermore, during the hearing on 22 November 1996, petitioner did not interpose a serious objection.11 It is therefore too late for petitioner to question the valuation now without violating the principle of equitable estoppel. Estoppel in pais arises when one, by his acts, representations or admissions, or by his own silence when he ought to speak out, intentionally or through culpable negligence, induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts.12 Records show that petitioner consented to conform with the valuation recommended by the commissioners. It cannot detract from its agreement now and assail correctness of the commissioners' assessment. Finally, while Section 4, Rule 67 of the Rules of Court provides that just compensation shall be determined at the time of the filing of the complaint for expropriation,13 such law cannot prevail over R.A. 7160, which is a substantive law. 14 WHEREFORE, finding no reversible error in the assailed judgment on the Court of Appeals in CA-G.R. CV No. 59204, the petition in this case is hereby DENIED. No pronouncement as to costs. SO ORDERED.

[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. RESOLUTION 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). 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. Fiftyseven (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.

[G.R. No. 139495. November 27, 2000] MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY (MCIAA), petitioner, vs. THE HON. COURT OF APPEALS and VIRGINIA CHIONGBIAN, respondents. DECISION GONZAGA-REYES, J.: This Petition for Review on Certiorari seeks the reversal of the Decision of the Court of Appeals[1] in CA G.R. CV No. 56495 entitled Virginia Chiongbian vs. Mactan-Cebu International Airport Authority which affirmed the Decision of the Regional Trial Court[2], 7th Judicial Region, Branch 24, Cebu City. The Court of Appeals rendered its decision based on the following facts: Subject of the action is Lot 941 consisting of 13,766 square meters located in Lahug, Cebu City, adjoining the then Lahug Airport and covered by TCT No. 120366 of the Registry of Deeds of Cebu City, in the name of MCIAA. During the liberation, the Lahug Airport was occupied by the United States Army. Then, in 1947, it was turned over to the Philippine Government through the Surplus Property Commission. Subsequently, it was transferred to the Bureau of Aeronautics which was succeeded by the National Airports Corporation. When the latter was dissolved, it was replaced by the Civil Aeronautics Administration (CAA). On April 16, 1952, the Republic of the Philippines, represented by the CAA, filed an expropriation proceeding, Civil Case No. R-1881 (Court of First Instance of Cebu, Third Branch), on several parcels of land in Lahug, Cebu City, which included Lot 941, for the expansion and improvement of Lahug Airport.

In June 1953, appellee Virginia Chiongbian purchased Lot 941 from its original owner, Antonina Faborada, the original defendant in the expropriation case, for P8,000.00. Subsequently, TCT No. 9919 was issued in her name (Exh. D). Then, on December 29, 1961, judgment was rendered in the expropriation case in favor of the Republic of the Philippines which was made to pay Virginia Chiongbian

the amount of P34,415.00 for Lot 941, with legal interest computed from November 16, 1947, the date when the government begun using it. Virginia Chiongbian did not appeal therefrom. Thereafter, absolute title to Lot 941 was transferred to the Republic of the Philippines under TCT No. 27696 (Exhs. E and 2). Then, in 1990, Republic Act No. 6958 was passed by Congress creating the MactanCebu International Airport Authority to which the assets of the Lahug Airport was transferred. Lot 941 was then transferred in the name of MCIAA under TCT No. 120366 on May 8, 1992. On July 24, 1995, Virginia Chiongbian filed a complaint for reconveyance of Lot 941 with the Regional Trial Court of Cebu, Branch 9, docketed as Civil Case No. CEB17650 alleging, that sometime in 1949, the National Airport Corporation (NAC) ventured to expand the Cebu Lahug Airport. As a consequence, it sought to acquire by expropriation or negotiated sale several parcels of lands adjoining the Lahug Airport, one of which was Lot 941 owned by Virginia Chiongbian. Since she and other landowners could not agree with the NACs offer for the compensation of their lands, a suit for eminent domain was instituted on April 16, 1952, before the then Court of First Instance of Cebu (Branch III), against forty-five (45) landowners, including Virginia Chiongbian, docketed as Civil Case No. R-1881, entitled Republic of the Philippine vs. Damian Ouano, et al. It was finally decided on December 29, 1961 in favor of the Republic of the Philippines. Some of the defendants-landowners, namely, Milagros Urgello, Mamerto Escano, Inc. and Ma. Atega Vda. de Deen, appealed the decision to the Court of Appeals under CA-G.R. No. 33045-R, which rendered a modified judgment allowing them to repurchase their expropriated properties. Virginia Chiongbian, on the other hand, did not appeal and instead, accepted the compensation for Lot 941 in the amount of P34,415, upon the assurance of the NAC that she or her heirs would be given the right of reconveyance for the same price once the land would no longer be used as (sic) airport. Consequently, TCT No. 9919 of Virginia Chiongbian was cancelled and TCT No. 27696 was issued in the name of the Republic of the Philippines. Then, with the creation of the MCIAA, it was cancelled and TCT No. 120366 was issued in its name. However, no expansion of the Lahug Airport was undertaken by MCIAA and its predecessors-in-interest. In fact, when Mactan International Airport was opened for commercial flights, the Lahug Airport was closed at the end of 1991 and all its airport activities were undertaken at and transferred to the Mactan International Airport. Thus, the purpose for which Lot 941 was taken ceased to exist.[3] On June 3, 1997, the RTC rendered judgment in favor of the respondent Virginia Chiongbian (CHIONGBIAN) the dispositive portion of the decision reads: WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the plaintiff, Virginia Chiongbian and against the defendant, Mactan Cebu

International Authority (MCIAA), ordering the latter to restore to plaintiff the possession and ownership of the property denominated as Lot No. 941 upon reimbursement of the expropriation price paid to plaintiff. The Register of Deeds is therefore ordered to effect the Transfer of the Certificate Title from the defendant to the plaintiff on Lot No. 941, cancelling Transfer Certificate of Title No. 120366 in the name of defendant MCIAA and to issue a new title on the same lot in the name of Virginia Chiongbian. No pronouncement as to cost. SO ORDERED.[4] Aggrieved by the holding of the trial court, the petitioner Mactan Cebu International Airport Authority (MCIAA) appealed the decision to the Court of Appeals, which affirmed the RTC decision. Motion for Reconsideration was denied[5] hence this petition where MCIAA raises the following grounds in support of its petition: I. THE COURT OF APPEALS ERRED IN UPHOLDING THE TRIAL COURTS JUDGMENT THAT THERE WAS A REPURCHASE AGREEMENT AND IGNORING PETITIONERS PROTESTATIONS THAT ADMISSION OF RESPONDENTS ORAL EVIDENCE IS NOT ALLOWED UNDER THE STATUE OF FRAUDS. II. THE COURT OF APPEALS ERRED IN HOLDING THAT THE DECISION IN LIMBACO IS MATERIAL AND APPLICABLE TO THE CASE AT BAR. III. THE COURT OF APPEALS ERRED IN HOLDING THAT THE MODIFIED JUDGMENT IN CAGR NO. 33045 SHOULD INURE TO THE BENEFIT OF CHIONGBIAN EVEN IF SHE WAS NOT A PARTY IN SAID APPEALED CASE. IV. THE COURT OF APPEALS ERRED IN RULING THAT THE RIGHT OF VIRGINIA CHIONGBIAN TO REPURCHASE SHOULD BE UNDER THE SAME TERMS AND CONDITIONS AS THE OTHER LANDOWNERS SUCH THAT HER REPURCHASE PRICE IS ONLY P 34, 415.00.[6] MCIAA contends that the Republic of the Philippines appropriated Lot No. 941 through expropriation proceedings in Civil Case No. R-1881. The judgment rendered therein was unconditional and did not contain a stipulation that ownership thereof would revert to CHIONGBIAN nor did it give CHIONGBIAN the right to repurchase the same in the event the lot was no longer used for the purpose it was expropriated. Moreover, CHIONGBIANs claim that there was a repurchase agreement is not

supported by documentary evidence. The mere fact that twenty six (26) other landowners repurchased their property located at the aforementioned Lahug airport is of no consequence considering that said landowners were able to secure a rider in their contracts entitling them to repurchase their property. MCIAA also argues that the Court of Appeals erroneously concluded that it did not object to the evidence presented by CHIONGBIAN to prove the alleged repurchase agreement considering that the transcript of stenographic notes shows that it manifested its objections thereto for being in violation of the Statute of Frauds. MCIAA also faults the Court of Appeals for applying the ruling in the case of Limbaco vs. Court of Appeals[7]. It is the position of MCIAA that the ruling in the case of Limbaco is not squarely in point with respect to the present case for the reason that the Limbaco case involved a contract of sale of real property and not an expropriation. Moreover, MCIAA alleges that the Court of Appeals erred in ruling that the case of Escao, et. al. vs. Republic[8] proves the existence of the repurchase agreement. MCIAA claims that although the parties in said case were CHIONGBIANs codefendants in Civil Case No. R-1881, CHIONGBIAN did not join in their appeal of the judgment of condemnation. The modified judgment in CA G.R. No. 33045-R should not therefore redound to CHIONGBIANs benefit who was no longer a party thereto or to the compromise agreement which Escao et. al. entered into with the Republic of the Philippines. Finally, assuming for the sake of argument that CHIONGBIAN has a right to repurchase Lot No. 941, MCIAA claims that the Court of Appeals erred in ruling that the right of CHIONGBIAN to purchase said lot should be under the same terms and conditions given to the other landowners and not at the prevailing market price. Such ruling is grossly unfair and would result in unjustly enriching CHIONGBIAN for the reason that she received just compensation for the property at the time of its taking by the government and that the property is now worth several hundreds of millions of pesos due to the improvements introduced by MCIAA.[9] On the other hand, aside from praying that this Court affirm the decision of the Court of Appeals, the private respondent CHIONGBIAN prays that the petition be denied for the reason that it violates the 1997 Rules on Civil Procedure, more specifically the requirement of a certification of non-forum shopping. CHIONGBIAN claims that the Verification and Certification on Non-Forum Shopping executed by the MCIAA on September 13, 1999 was signed by a Colonel Marcelino A. Cordova whose appointment as Assistant General Manager of MCIAA was disapproved by the Civil Service Commission as early as September 2, 1999. It is CHIONGBIANs position that since his appointment was disapproved, the Verification attached to the petition for review on certiorari cannot be considered as having been executed by the plaintiff or principal party who under Section 5, Rule 7 of the Rules of Court can validly make the certification in the instant petition. Consequently, the petition should be considered as not being verified and as such should not be considered as having been filed at all.

After a careful consideration of the arguments presented by the parties, we resolve to grant the petition. We first resolve the procedural issue. We are not persuaded by CHIONGBIANs claim that the Verification and Certification against forum shopping accompanying MCIAAs petition was insufficient for allegedly having been signed by one who was not qualified to do so. As pointed out by the MCIAA, Colonel Cordova signed the Verification and Certification against forum shopping as Acting General Manager of the MCIAA, pursuant to Office Order No. 5322-99 dated September 10, 1999 issued by the General Manager of MCIAA, Alfonso Allere.[10] Colonel Cordova did not sign the Verification and Certification against forum shopping pursuant to his appointment as assistant General Manager of the MCIAA, which was later disapproved by the Commission on Appointments. This fact has not been disputed by CHIONGBIAN. We come now to the substantive aspects of the case wherein the issue to be resolved is whether the abandonment of the public use for which Lot No. 941 was expropriated entitles CHIONGBIAN to reacquire it. In Fery vs. Municipality of Cabanatuan[11], this Court had occasion to rule on the same issue as follows: The answer to that question depends upon the character of the title acquired by the expropriator, whether it be the State, a province, a municipality, or a corporation which has the right to acquire property under the power of eminent domain. 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. If, for example, 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. Many other similar examples might be given. 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. 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.[12] In the present case, evidence reveals that Lot No. 941 was appropriated by the Republic of the Philippines through expropriation proceedings in Civil Case No. R1881. The dispositive portion of the decision in said case reads insofar as pertinent as follows:

IN VIEW OF THE FOREGOING, judgment is hereby rendered: 1. Declaring the expropriation of Lots Nos. 75, 76, 89, 90, 91, 105, 106, 107, 108, 104, 921-A, 88, 93, 913-B, 72, 77, 916, 777-A, 918, 919, 920, 764-A, 988, 744-A, 745-A, 746, 747, 752-A, 263-A, 941, 942, 740-A, 743, 985, 956, 976-A, 984, 989-A; and 947, including in the Lahug Airport, Cebu City, justified and in lawful exercise of the right of eminent domain; 2. Declaring the fair market values of the lots thus taken and condemning the plaintiff to pay the same to the respective owners with legal interest from the dates indicated therein, as follows: Lots Nos. 75, 76, 89, 90, 91, 92, 105, 106, 107, 108P31, 977 (minus P10,639 or P21,278 as balance in favor of Mamerto Escao, Inc., with legal interest from November 16, 1947 until fully paid; xxx Lot No. 941P34,415.00 in favor of Virginia Chiongbian, with legal interest from November 16, 1947 until fully paid; xxx 3. After the payment of the foregoing financial obligation to the landowners, directing the latter to deliver to the plaintiff the corresponding Transfer Certificate of Title to their representative lots; and upon the presentation of the said titles to the Register of Deeds, ordering the latter to cancel the same and to issue, in lieu thereof, new Transfer Certificates of Title in the name of the plaintiff. NO COST. SO ORDERED.[13] (Emphasis supplied) 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[14] 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. This Court consequently allowed the presentation of parol evidence to prove the existence of an agreement allowing the right of repurchase based on the following ratiocination: Under the parol evidence rule, when the terms of an agreement have been reduced into writing, it is considered as containing all the terms agreed upon, and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement. However, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading, the failure of the written agreement to express the true intent of the parties thereto. In the case at bench, the fact which private respondents seek to establish by parol evidence consists of the agreement or representation made by the NAC that induced Inez Ouano to execute the deed of sale; that the vendors and their heirs are given the right of repurchase should the

government no longer need the property. Where a parol contemporaneous agreement was the moving cause of the written contract, or where the parol agreement forms part of the consideration of the written contract, and it appears that the written contract was executed on the faith of the parol contract or representation, such evidence is admissible. It is recognized that proof is admissible of any collateral parol agreement that is not inconsistent with the terms of the written contract though it may relate to the same subject matter. The rule excluding parol evidence to vary or contradict a writing does not extend so far as to preclude the admission of existing evidence to show prior or contemporaneous collateral parol agreements between the parties, but such evidence may be received, regardless of whether or not the written agreement contains any reference to such collateral agreement, and whether the action is at law or in equity. More importantly, no objection was made by petitioner when private introduced evidence to show the right of repurchase granted by the Ouano. It has been repeatedly laid down as a rule of evidence that objection against the admission of any evidence must be made at the and if not so made, it will be understood to have been waived.[15]

respondents NAC to Inez a protest or proper time,

This pronouncement is not applicable to the present case since the parol evidence rule which provides that when the terms of a written agreement have been reduced to writing, it is considered as containing all the terms agreed upon, and there can be, between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement applies to written agreements and has no application to a judgment of a court. 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. 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. Under 1403 of the Civil Code, a contract for the sale of real property shall be unenforceable unless the same, or some note or memorandum thereof, be in writing, and subscribed by the party charged, or by his agent; evidence, therefore of the agreement cannot be received without the writing or a secondary evidence of its contents. Contrary to the finding of the Court of Appeals, the records reveal that MCIAA objected to the purpose for which the testimonies of CHIONGBIAN[16] and Patrosinio Bercede[17] (BERCEDE) were offered, i.e. to prove the existence of the alleged written agreement evincing a right to repurchase Lot No. 941 in favor of CHIONGBIAN, for being in violation of the Statute of Frauds. MCIAA also objected to the purpose for which the testimony of Attorney Manuel Pastrana (PASTRANA) was offered, i.e. to prove the existence of the alleged written agreement and an alleged deed of sale, on the same ground.[18] Consequently, the testimonies of these

witnesses are inadmissible under the Statute of Frauds to prove the existence of the alleged sale. Aside from being inadmissible under the provisions of the Statute of Frauds, CHIONGBIANs and BERCEDEs testimonies are also inadmissible for being hearsay in nature. Evidence is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of another person who is not on the witness stand.[19] CHIONGBIAN, through deposition, testified that: ATTY. DUBLIN (To Witness) Q: Mrs. Chiongbian, you said a while ago that there was an assurance by the government to return this property to you in case Lahug Airport will be no longer used, is that correct? WITNESS: A: Yes, sir. That is true. ATTY. DUBLIN: (To witness) Q: Can you recall when was this verbal assurance made? A: I cannot remember anymore. Q: You cannot also remember the year in which the alleged assurance was made? A: I cannot also remember because Im very forgetful. Q: Now, can you tell us so far as you can remember who was that person or government authority or employee that made the alleged assurance? A: The owner of the property. Q: Now, how many times was this assurance being made to you to return this property in case the Lahug Airport will no longer be used? A: 2 or 3, I cannot recall. Q: You cannot also remember in what particular place or places was this assurance being made? A: In my previous residence in Mabolo. DEPOSITION OFFICER: The assurance was made in my previous residence at Mabolo.

WITNESS: A: I entrusted that to my lawyer, Atty. Pedro Calderon. ATTY. DUBLIN: (to witness) Q: You mean the assurance was made personally to your lawyer at that time, Atty. Pedro Calderon? A: Yes, sir. Q: So you are now trying to tell us that that assurance was never made to you personally. Is that right, Mam? A: He assured me directly that the property will be returned to me. Q: When you said he, are you referring to your lawyer at that time, Atty. Pedro Calderon A: Yes, sir. Q: So, in effect, it was your lawyer, Atty. Pedro Calderon, who made the assurance to you that the property will be returned in case Lahug Airport will be abandoned? A: Yes, sir.[20] CHIONGBIANs testimony shows that she had no personal knowledge of the alleged assurance made by the Republic of the Philippines that Lot No. 941 would be returned to her in the event that the Lahug Airport was closed. She stated that she only learned of the alleged assurance of the Republic of the Philippines through her lawyer, Attorney Calderon, who was not presented as a witness. BERCEDEs testimony regarding the alleged agreement is likewise inadmissible to prove the existence of the agreement for also being hearsay in nature. Like CHIONGBIAN, BERCEDE did not have personal knowledge of the alleged assurance made by the Republic of the Philippines to his father that their land would be returned should the Lahug Airport cease to operate for he only learned of the alleged assurance through his father. PASTRANAs testimony does little to help CHIONGBIANs cause. He claims that subsequent to the execution of the alleged written agreement but prior to the rendition of judgment in the expropriation case, the Republic and CHIONGBIAN executed a Deed of Sale over Lot No. 941 wherein CHIONGBIAN sold the aforementioned lot to the Republic of the Philippines. However, CHIONGBIAN never mentioned the existence of a deed of sale.[21] In fact, the records disclose that Lot No. 941 was transferred to the Republic of the Philippines pursuant to the judgment of expropriation in Civil Case No. R-1881 which CHIONGBIAN herself enforced by filing a motion for withdrawal of the money after the decision was rendered.[22] Moreover, since the very terms of the judgment in Civil Case No. R-1881 are silent

regarding the alleged deed of sale or of the alleged written agreement acknowledging the right of CHIONGBIAN to repurchase Lot No. 941, the only logical conclusion is that no sale in fact took place and that no compromise agreement was executed prior to the rendition of the judgment. Had CHIONGBIAN and the Republic executed a contract of sale as claimed by PASTRANA, the Republic of the Philippines would not have needed to pursue the expropriation case inasmuch as it would be duplicitous and would result in the Republic of the Philippines expropriating something it had already owned. Expropriation lies only when it is made necessary by the opposition of the owner to the sale or by the lack of agreement as to the price.[23] Consequently, CHIONGBIAN cannot compel MCIAA to reconvey Lot No. 941 to her since she has no cause of action against MCIAA. Finally, CHIONGBIAN cannot invoke the modified judgment of the Court of Appeals in the case of Republic of the Philippines vs. Escao, et. al.[24] where her codefendants, Mamerto Escao, Inc., Milagros Urgello and Maria Atega Vda. De Deen entered into separate and distinct compromise agreements with the Republic of the Philippines wherein they agreed to sell their land subject of the expropriation proceedings to the latter subject to the resolutory condition that in the event the Republic of the Philippines no longer uses said property as an airport, title and ownership of said property shall revert to its respective owners upon reimbursement of the price paid therefor without interest. MCIAA correctly points out that since CHIONGBIAN did not appeal the judgment of expropriation in Civil Case No. R-1881 and was not a party to the appeal of her co-defendants, the judgment therein cannot redound to her benefit. And even assuming that CHIONGBIAN was a party to the appeal, she was not a party to the compromise agreements entered into by her co-defendants. A compromise is a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced. [25] Essentially, it is a contract perfected by mere consent, the latter being manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to constitute the contract.[26] A judicial compromise has the force of law and is conclusive between the parties[27] and it is not valid and binding on a party who did not sign the same.[28] Since CHIONGBIAN was not a party to the compromise agreements, she cannot legally invoke the same. ACCORDINGLY, the Decision of the Court of Appeals is hereby REVERSED and SET ASIDE. The complaint of Virgina Chiongbian against the Mactan-Cebu International Airport Authority for reconveyance of Lot No. 941 is DISMISSED. SO ORDERED.

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 plaintiffbeneficiary 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.

[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.

DECISION

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.

xxxxxxxxx

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 nonpayment, 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.

[G.R. No. 137569. June 23, 2000]

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. SALEM INVESTMENT CORPORATION, MARIA DEL CARMEN ROXAS DE ELIZALDE, CONCEPCION CABARRUS VDA. DE SANTOS, defendants-appellees.

MILAGROS AND INOCENTES DE LA RAMA, petitioners,

ALFREDO GUERRERO, respondent.

DECISION

MENDOZA, J.:

The main petition in this case is for determination of just compensation for the expropriation of lands under B.P. Blg. 340. Alfredo Guerrero intervened in this proceeding arguing that, instead of the De la Ramas, he should receive the just compensation for the subject land. The trial court and the Court of Appeals declared him the rightful recipient of the amount. This is an appeal from the decision[1] of the Court of Appeals. We affirm.

The facts are as follows:

On February 17, 1983, Batas Pambansa Blg. 340 was passed authorizing the expropriation of parcels of lands in the names of defendants in this case, including a portion of the land, consisting of 1,380 square meters, belonging to Milagros and Inocentes De la Rama covered by TCT No. 16213.

On December 14, 1988, or five years thereafter, Milagros and Inocentes De la Rama entered into a contract[2] with intervenor Alfredo Guerrero whereby the De la

Ramas agreed to sell to Guerrero the entire property covered by TCT No. 16213, consisting of 4,075 square meters for the amount of P11,800,000.00. The De la Ramas received the sum of P2,200,000.00 as partial payment of the purchase price, the balance thereof to be paid upon release of the title by the Philippine Veterans Bank.

On November 3, 1989, Guerrero filed in the Regional Trial Court in Pasay City a complaint for specific performance (Civil Case No. 6974-P) to compel the De la Ramas to proceed with the sale.

On July 10, 1990, while this case for specific performance was pending, the Republic of the Philippines filed the present case (Civil Case No. 7327) for expropriation pursuant to B.P. Blg. 340.[3] Among the defendants named in the complaint were Milagros and Inocentes De la Rama as registered owners of Lot 834, a portion of which (Lot 834-A) was part of the expropriated property. Upon the deposit of P12,970,350.00 representing 10 percent of the approximate market value of the subject lands, a writ of possession[4] was issued on August 29, 1990 in favor of the government.

On May 2, 1991, Guerrero filed a motion for intervention[5] alleging that the De la Ramas had agreed to sell to him the entire Lot 834 (TCT No. 16213) on December 14, 1988 and that a case for specific performance had been filed by him against the De la Ramas.

On September 9, 1991, based on the report of the committee on appraisers appointed by the court and the submissions of defendants, the trial court approved payment to the De la Ramas at the rate of P23,976.00 per square meter for the taking of 920 square meters out of the 1,380 square meters to be expropriated under B.P. Blg. 340.[6]

Meanwhile, on September 18, 1991, the trial court rendered a decision in the case for specific performance (Civil Case No. 6974-P)[7] upholding the validity of the contract to sell and ordering the De la Ramas to execute the corresponding deed of sale covering the subject property in favor of Guerrero. The De la Ramas appealed to the Court of Appeals (CA-G.R. No. CV-35116) but their petition was dismissed on July 28, 1992. They tried to appeal to this Court (G.R. No. 106488) but again they failed in their bid as their petition for review was denied on December 7, 1992.

Meanwhile, on October 2, 1991, Guerrero filed an Omnibus Motion[8] praying that the just compensation for the land be deposited in court pursuant to Rule 67, 9 of the Rules of Court. As his motion for intervention and omnibus motion had not yet been resolved, Guerrero filed with the Court of Appeals a petition for mandamus, certiorari, and injunction with temporary restraining order[9] (C.A.-G.R. SP No. 28311) to enjoin the Republic from releasing or paying to the De la Ramas any amount corresponding to the payment of the expropriated property and to compel the trial court to resolve his two motions.

On January 12, 1993, the Court of Appeals rendered a decision granting the writ of mandamus.[10]

Nonetheless, the De la Ramas filed on March 17, 1993 a Motion for Authority to Withdraw[11] the deposit made by the Republic in 1991. This motion was denied as the trial court, on May 7, 1993, allowed the intervention of Guerrero and ordered the Republic to deposit the amount of just compensation with the Clerk of Court of RTC, Pasay City.[12]

On June 16, 1993, the De la Ramas filed a Motion for Execution[13] again praying that the courts order dated September 9, 1991, approving the recommendation of the appraisal committee, be enforced. This was duly opposed by Guerrero.[14]

On June 22, 1993, the trial court denied the motion of the De la Ramas holding that there had been a change in the situation of the parties, therefore, making the execution of the September 9, 1991 Order inequitable, impossible, or unjust.[15]

As if to further delay the proceedings of this case, the De la Ramas then filed an Omnibus Motion seeking clarification of the September 18, 1991 decision of the trial court in the case for specific performance, upholding the validity of the contract to sell, insofar as the area covered by the contract was concerned, and asking that a restraining order be issued until this motion was granted.

In its order dated October 7, 1993, the trial court clarified that the area of land covered by the contract to sell included the portion expropriated by the Republic. It stated:

WHEREFORE, by way of clarification, the court holds that the transfer of title to the plaintiff under the Contract to Sell dated December 14, 1988 covers the entire Lot 834 consisting of 4,075 square meters (including the expropriated portion); that this change of owner over the entire property is necessarily junior or subject to the superior rights of the REPUBLIC over the expropriated portion (the metes and bounds of which are clearly defined in Section 1 6 of B.P. Blg. 340); that the Contract to Sell dated December 14, 1988 executed by the parties is a valid document that authorizes the plaintiff to step into the shoes of the defendants in relation to the property covered by TCT No. 16213; and that the transfer shall be free from all liens and encumbrances except for the expropriated portion of 1,380 square meters.[16]

The decision in the action for specific performance in Civil Case No. 6974-P having become final, an order of execution[17] was issued by the Pasay City RTC, and as a result of which, a deed of absolute sale[18] was executed by the Branch Clerk of Court on March 8, 1994 in favor of Guerrero upon payment by him of the sum of P8,808,000.00 on January 11, 1994 and the further sum of P1,608,900.00 on February 1, 1994 as full payment for the balance of the purchase price under the contract to sell of December 14, 1988. The entire amount was withdrawn and duly received by the De la Ramas.[19]

Thereafter, the De la Ramas sought the nullification of the June 22, 1993 order of the trial court in this case, denying their motion for execution of the order approving the recommendation of the appraisal committee, by filing a petition for certiorari and mandamus in the Court of Appeals. This petition was, however, dismissed in a decision dated July 29, 1994 of the appellate court.[20]

On April 5, 1995, the Pasay City Regional Trial Court, Branch 111, declared Guerrero the rightful owner of the 920-square meter expropriated property and ordered payment to him of just compensation for the taking of the land. The dispositive portion of its decision reads:

WHEREFORE, respondent-intervenor Alfredo Guerrero is hereby declared as the rightful person entitled to receive the just compensation of the 920-square meter portion of the property described in TCT No. 16213 of the Register of Deeds of Pasay City and ordering the Philippine National Bank to release and deliver to Uniland Realty and Development Corporation, the assignee of Guerrero, the amount of P20,000,000.00 representing the deposit made by the plaintiff through the Department of Public Works and Highways in the Philippine National Bank, Escolta Branch with the check solely payable to said Uniland Realty and Development Corporation, as assignee of Alfredo Guerrero.[21]

This decision was subsequently affirmed by the Court of Appeals.[22] Hence, this petition.

The De la Ramas contend:

I. THE COURT OF APPEALS WRONGLY INTERPRETED B.P. NO. 340 BY HOLDING THAT BATAS PAMBANSA BLG. 340 MERELY AUTHORIZED THE EXPROPRIATION OF THE LANDS OF THE DEFENDANTS, INCLUDING THAT PORTION BELONGING TO THE HEREIN PETITIONERS DE LA RAMAS COVERED BY TCT NO. 16213.

II. THE COURT OF APPEALS WRONGLY INTERPRETED THE CONTRACT TO SELL BY HOLDING THAT THE PETITIONERS DE LA RAMAS HAD CONVEYED TO THE RESPONDENT GUERRERO THE WHOLE PROPERTY COVERED BY TCT NO. 16213, INCLUDING THE EXPROPRIATED AREA.

III.THE HONORABLE COURT OF APPEALS WRONGLY DECLARED THAT THE PETITIONERS DE LA RAMAS COULD STILL SELL IN 1988 THEIR PROPERTY AS TITLE THERETO HAD NOT YET PASSED TO THE GOVERNMENT IN 1983.

IV.THE COURT OF APPEALS GRAVELY ERRED IN WRONGLY INTERPRETING THE CONTRACT TO SELL, BY HOLDING THAT PETITIONERS DE LA RAMAS HAD CONVEYED TO THE RESPONDENT GUERRERO THE RIGHT TO RECEIVE THE JUST COMPENSATION FOR THE EXPROPRIATED AREA.

V. THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE RIGHT TO RECEIVE THE JUST COMPENSATION FOR THE EXPROPRIATED AREA BECAME VESTED UPON THE RESPONDENT GUERRERO THROUGH SUBROGATION.

VI.THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE RESPONDENT GUERRERO HAD PAID TO PETITIONERS RAMAS THE FULL PURCHASE PRICE OF P11,800,00.00 STIPULATED IN THE CONTRACT TO SELL OF 14 DECEMBER 1988.[23]

As already stated, the De la Ramas and Guerrero entered into a contract to sell with respect to Lot 834. This lot has an area of 4,075 square meters. This contract was executed on December 14, 1988, after B.P. Blg. 340 was passed authorizing the expropriation of a portion of the land, consisting of 1,380 square meters, of the De la Ramas. The only issue in this case is who, between the De la Ramas and Guerrero, is/are entitled to receive payment of just compensation for the taking of 920 square meters of the land in question?

The De la Ramas claim that they should receive the amount of just compensation because when they agreed to sell Lot 834 in 1988 to Guerrero, it did not include the portion expropriated by the Republic since, at that time, such portion had been expropriated by the government by virtue of B.P. Blg. 340, which took effect on February 17, 1983. They state:

In 1988, the petitioners Ramas could no longer agree to sell to another person the expropriated property itself. For one thing, the property was already expropriated and petitioners Ramas for not objecting in effect conveyed the same to the Government. Secondly, the physical and juridical possession of the property was already in the Government. Thirdly, the equitable and beneficial title over the property was already vested in the Government, and therefore the property itself was already outside the commerce of man. As a matter of fact, the property was already part of a Government infrastructure.[24]

On the other hand, Alfredo Guerrero argues that the title to the expropriated portion of Lot 834 did not immediately pass to the government upon the enactment of B.P. Blg. 340 in 1983, as payment of just compensation was yet to be made before ownership of the land was transferred to the government. As a result, petitioners still owned the entire Lot 834 at the time they agreed to sell it to Guerrero. Therefore, since Guerrero obtained ownership of Lot 834, including the 920 square meters expropriated by the government, he has the right to receive the just compensation over the said property.

We find the De la Ramas contention without merit. We hold that Guerrero is entitled to receive payment of just compensation for the taking of the land.

The power of eminent domain

The power of eminent domain is an inherent power of the State. No constitutional conferment is necessary to vest it in the State. The constitutional provision on eminent domain, Art. III, 9, provides a limitation rather than a basis for the exercise of such power by the government. Thus, it states that "Private property shall not be taken for public use without just compensation."

Expropriation may be initiated by court action or by legislation.[25] In both instances, just compensation is determined by the courts.[26]

The expropriation of lands consists of two stages. As explained in Municipality of Bian v. Garcia:[27]

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". . . .

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. . . .

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.[28] 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.

In the case at hand, the first stage of expropriation was completed when B.P. Blg. 340 was enacted providing for the expropriation of 1,380 square meters of the land in question. The constitutionality of this law was upheld in the case of Republic v. De

Knecht.[29] In 1990, the government commenced the second stage of expropriation through the filing of a petition for the determination of just compensation. This stage was not completed, however, because of the intervention of Guerrero which gave rise to the question of ownership of the subject land. Therefore, the title to the expropriated property of the De la Ramas remained with them and did not at that point pass to the government.

The De la Ramas are mistaken in arguing that the two stages of expropriation cited above only apply to judicial, and not to legislative, expropriation. Although Congress has the power to determine what land to take, it can not do so arbitrarily. Judicial determination of the propriety of the exercise of the power, for instance, in view of allegations of partiality and prejudice by those adversely affected,[30] and the just compensation for the subject property is provided in our constitutional system.

We see no point in distinguishing between judicial and legislative expropriation as far as the two stages mentioned above are concerned. Both involve these stages and in both the process is not completed until payment of just compensation is made. The Court of Appeals was correct in saying that B.P. Blg. 340 did not effectively expropriate the land of the De la Ramas. As a matter of fact, it merely commenced the expropriation of the subject property.

Thus, in 1988, the De la Ramas still had authority to transfer ownership of their land and convey all rights, including the right to receive just compensation, to Guerrero.

The Contract to Sell and the Deed of Absolute Sale

The contract to sell between the De la Ramas and Guerrero, executed on December 14, 1988, reads:

CONTRACT TO SELL

KNOW ALL MEN BY THESE PRESENTS:

This CONTRACT is made and executed by and between:

MILAGROS DE LA RAMA and INOCENTES DE LA RAMA, of legal age, both single, Filipinos Citizen and with residence and postal address at 2838 F.B. Harrison St., Pasay City, Metro Manila, hereinafter referred to as the SELLERS.

- and -

ALFREDO S. GUERRERO, of legal age, Filipino, married to SUSANA C. PASCUAL and with residence and postal address at No. 17 Mangyan, La Vista, Quezon City, hereinafter referred to as the BUYER.

WITNESSETH:

WHEREAS, the SELLERS are the registered owners of a parcel of land consisting of 4,075 square meters together with all the improvements thereon situated at 2838 F.B. Harrison St., Pasay City, covered by Transfer Certificate of Title No. 16213 of the Registry of Deeds of Pasay City and more particularly described as follows:

A PARCEL OF LAND (Lot 834 of the Cadastral Survey of Pasay, L.R.C. Cad. Rec. No.), situated in the City of Pasay. Bounded on the N., along line 1-2 by Lot 835; and along line 2-3 by Lot 836, on the NE., and SE., along lines 3-4-5 by Lot 833, all of Pasay Cadastre; and on the SW., along lines 5-6-1 by Calle F.B. Harrison. Beginning at a point marked "1" on plan, being N. 3 deg. 50E., 100.44 m. from B.L.L.M. 5, Pasay Cadastre; thence N. 84 deg. 19E., 73.79 m. to point 2; thence N. 84 deg. 19E., 14.47 m. to point 3; thence S. 93 deg. 11E., 45.69 m. to point 4; thence S. 33 deg. 10W., 87.39 m. to point 5; thence N. 10 deg. 46W., 11.82 m. to point 6; thence N. 10 deg. 46W., 35.70 m. to point of beginning; containing an area of FOUR THOUSAND AND SEVENTY FIVE (4,075) SQUARE METERS. All points referred to are indicated on the plan and marked on the ground by Old Points; bearing true date of the cadastral survey, Oct., 1928 to Nov., 1930.

WHEREAS, the SELLERS offer to sell and the BUYER agrees to buy the abovedescribed real property;

NOW, THEREFORE, for and in consideration of the amount of ELEVEN MILLION EIGHT HUNDRED THOUSAND PESOS (P11,800.000.00) the parties hereby agree to enter unto the Contract subject to such terms and conditions as follows:

1. Upon execution of this Contract, the BUYER shall pay the SELLERS the sum of TWO MILLION TWO HUNDRED THOUSAND PESOS (P2,200,000.00) it being understood and agreed that this payment shall be for the purpose of liquidating in full the mortgage indebtedness and affecting the redemption of the property subject of the sale as annotated at the back of the title;

2. The balance of EIGHT MILLION EIGHT HUNDRED THOUSAND PESOS (P8,800,000.00) shall be paid by the BUYER upon release of the title by Phil. Veterans Bank and execution of the Deed of Absolute Sale;

3. The amount of P800,000.00 shall be paid by the BUYER upon payment of Capital Gains Tax and documentary sales stamp by the SELLERS and their vacation of the premises.

4. All existing improvements shall be assigned to the BUYER;

5. The SELLERS shall settle all realty taxes up to the end of 1988, water and electric bills;

6. The SELLERS shall pay three percent (3%) of the total consideration as brokers commission to be computed in the purchase price of P11,000,000.00;

7. It is hereby agreed and covenanted and stipulated by and between the parties hereto that the SELLERS shall execute and deliver to the BUYER a formal Absolute Deed of Sale free from all liens and encumbrances;

8. That the SELLERS shall vacate the premises and or deliver the physical possession of the property within thirty (30) days from the date of sale, that is upon complete payment by the BUYER of the agreed purchase price and execution of Deed of Sale;

9. That the execution of all legal documents in connection with this sale transaction shall be done thru SELLERS legal counsel;

10. The BUYER shall assume payment of transfer and registration expenses.

IN WITNESS WHEREOF, the parties have hereunto set their hands this 14th day of December 1988 at Manila, Metro Manila.[31]

The land, as described above in the Contract to Sell, includes the land expropriated under B.P. Blg. 340, to wit:

6. A parcel of land (a portion of Lot No. 834 of the Cadastral Survey of Pasay, Cadastral Case No. 23, G.L.R.O. Cadastral Record No. 1368), situated in the City of Pasay, bounded on the southeast, along lines 1-2-3 by Lot No. 833, Pasay Cadastre; and on the southwest, along lines 3-4-5 by Calle F.B. Harrison; and on the north, points 5-17-17-1 by the remaining portion of Lot 834; beginning at point marked "1" on plan, being S. 32 deg. 17 44"E., 267.187 meters from BLLM No. 5, Pasay Cadastre; thence S.9 deg. 11E., 11.579 m. to point "2"; thence S.82 deg. 10W., 87.390 m. to point "3"; thence N. 10 deg. 45 58"W., 11.82 m. to point "4"; thence N. 10 deg. 46 W., 15,568.4 m. to point "5"; thence S.15 deg. 37 27"E., 3.287 m. to point "6"; thence S.34 deg.. 3227"E., 3.287 m. to point "7"; thence S. 53 deg. 2650"E., 3.287 m. to point "8"; thence S. 72 deg. 2251"E., 3.287 m. to point "9"; thence N. 88 deg. 4032"E., 3.287 m. to point "10"; thence N. 72 deg. 0053"E., 6.480 m. to point "11"; thence N. 84 deg. 55 05"E., 10.375 m. to point "12"; thence N. 85 deg. 3814"E., 10.375 m. to point "13"; thence N. 86 deg. 21 10"E., 10.375 m. to point "14"; thence N. 87 deg. 04 18"E., 10.375 m. to point "15"; thence N. 87 deg. 97 06"E., 10.375 m. to point "16"; thence N. 88 deg. 3011"E., 10.375 m. to point "17"; thence N. 89 deg. 1256"E., 9.422 m. to the point of beginning, containing an area of one thousand three hundred eighty square meters (1,380.00 Sq.M.), more or less.[32]

As the trial court in the case for specific performance ruled, the contract to sell covered the entire Lot 834, including the expropriated area, which was then owned by the De la Ramas.

It is true that the contract to sell did not convey to Guerrero the subject parcel of land described therein. However, it created an obligation on the part of the De la Ramas to convey the land, subject to the fulfillment of the suspensive conditions therein stated. The declaration of this contracts validity, which paved the way for the subsequent execution of the Deed of Absolute Sale on March 8, 1994, following the order of the Regional Trial Court for its execution, by the Clerk of Court, Branch 113, Pasay City, effectively conveyed ownership of said parcel of land to Guerrero.

The contention that the Deed of Absolute Sale excluded the portion expropriated by the government is untenable. The Deed of Absolute Sale reads in pertinent parts:

That for and in consideration of the sum of ELEVEN MILLION PESOS (P11,000,000), Philippine Currency, paid by the VENDEE, the VENDORS, by these presents hereby SELL, TRANSFER, CONVEY and ASSIGN, unto the herein VENDEE, his heirs, successors-in-interest and assigns, by way of absolute sale, a parcel of land located in 2838 F.B. Harrison Street, Pasay City, formerly covered by Transfer Certificate of Title No. 16213 of the land records of Pasay City, presently covered by the new Transfer Certificate of Title No. 132995, together with all improvements thereon, free from all liens and encumbrances whatsoever except over a portion equal to one thousand three hundred eighty (1,380) square meters expropriated by the Republic of the Philippines under and by virtue of Batas Pambansa Blg. 340 which took effect on February 17, 1983, the technical description of which is found therein, and which Lot 834 in its entirety is more particularly described as follows:

A PARCEL OF LAND (Lot 834 of the Cadastral Survey of Pasay, L.R.C. Cad. Rec No. ), situated in the City of Pasay. Bounded on the N. along line 1-2 by Lot 835, and along line 2-3 by Lot 836; on the NE., and SE., along lines 3-4-5 by Lot 833; all of Pasay Cadastre; and on the SW., along lines 5-6-1 by Calle F.B. Harrison. Beginning at a point marked "1" on plan, being N. 3 deg. 50E., 100.44 from B.I.I.M. 5; Pasay Cadastre; thence N. 84 deg. 19E., 73.79 m. to point 2; thence N. 84 deg. 19E., 14.47 m. to point 3; thence S. 9 deg. 11E., 45.69 m. to point 4; thence S.53 deg. 10W., 87.39 m. to point 5; thence N. 10 deg. 46W., 11.82 m. to point 6; thence N. 10 deg. 46W., 35. 70 m. to point of beginning; containing an area of FOUR THOUSAND AND SEVENTY FIVE (4,075) SQUARE METERS. All points referred to are indicated on the plan and are marked on the ground by Old Points; bearing true date of the Cadastral Survey, Oct. 1928 to Nov. 1, 1930.[33]

The underscored phrase does not say that the expropriated portion of the lot was excluded from the sale. Rather, it states that the entire property, consisting of 4,075 square meters, was being sold free from all liens and encumbrances except the lien in favor of the government over the portion being expropriated by it. Stated in another way, Guerrero was buying the entire property free from all claims of third persons except those of the government.

Evidently, Lot 834 was conveyed in 1994 to Guerrero by virtue of the Deed of Absolute Sale. This contract was registered in the Register of Deeds and, accordingly, a new transfer certificate of title was issued to Guerrero.[34] Pursuant thereto, and by virtue of subrogation, the latter became the rightful owner entitled to receive the just compensation from the Republic.

The De la Ramas make much of the fact that ownership of the land was transferred to the government because the equitable and the beneficial title was already acquired by it in 1983, leaving them with only the naked title. However, as this Court held in Association of Small Landowners in the Phil., Inc. v. Secretary of Agrarian Reform:[35]

The recognized rule, indeed, 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. Thus:

. . . although the right to expropriate 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 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 . . . 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."

The amount paid by Guerrero

Lastly, the De la Ramas contend that Guerrero only paid P7,417,000.00 and not P8,800,000.00 as stipulated in the contract to sell. However, Guerrero explained in his comment in this case:

In making such misleading allegations, petitioners withheld the information that on January 25, 1994, Branch 114 of the Pasay City Regional Trial Court had issued an order which explained very clearly why the sum of P7,417,000.00 deposited by Guerrero constitute full payment of the agreed price, viz:

Plaintiffs motion is meritorious. The decision dated September 18, 1991 rendered in this case has long become final and executory. Paragraph 4 of the dispositive portion of said decision reads as follows:

4. Ordering defendants Milagros dela Rama and Inocentes dela Rama to execute the corresponding deed of sale conveying the subject property, free from all liens and encumbrances in favor of the plaintiff upon payment of the latter of his balance of P8,800,000.00:

....

6. Ordering both defendants, jointly and severally, to pay the plaintiff the following:

a.....the sum of P500,000.00 by way of moral damages;

b.....the sum of P200,000.00 by way of exemplary damages;

c.....the sum of P100,000.00 by way of attorneys fees;

d.....legal interest of the amount of P2,200,000.00 from August 2, 1989 until the deed of absolute sale is executed in favor of the plaintiff;

The plaintiff [Alfredo Guerrero] is therefore entitled to collect from the defendants [Milagros and Inocentes de la Rama] the sum of P800,000.00 in damages and attorneys fees, and interest at the legal rate. The earlier computation of the courts Branch Sheriff Edilberto Santiago is wrong. The legal rate of interest for damages, and even for loans where interest was not stipulated, is 6% per annum (Art. 2209, Civil Code). The rate of 12% per annum was established by the Monetary Board when, under the power vested in it by P.D. 116 to amend Act No. 2655 (more commonly known as the Anti Usury Law), it amended Section 1 by increasing the rate of legal interest for loans, renewals and forbearance thereof, as well as for judgments, from 6% per annum to 12% per annum. Inasmuch as the Monetary Board may not repeal or amend the Civil Code, in the face of the apparent conflict between Art. 2209 and Act No. 2655 as amended, it is this courts persuasion that the ruling of the Monetary Board applies only to banks, financing companies, pawnshops and intermediaries performing quasi-banking functions, all of which are under the control and supervision of the Central Bank and of the Monetary Board.

The interest rate on the P2,200,000.00 paid to the defendants by the plaintiff at the inception of the transactions should be only 6% per annum from August 2, 1989, and as of January 2, 1994 this amounts to the sum of P583,000.00 and P11,000.00 every month thereafter until the deed of absolute sale over the property subject matter of this case is executed. The amounts payable by the defendants to the plaintiff therefore stands at a total of P1,383,000.00. Offsetting this amount from the balance of P8,800,000.00, the plaintiff must still pay to the defendants the sum of P7,417,000.00. The plaintiff has already deposited with the Clerk of Court of this court the sum of P5,808,100.00 as of January 11, 1994; he should add to this the sum of P1,608,900.00.[36]

The De la Ramas question this ruling of the lower court. They say:

That Petitioners do not agree with the explanation of the lower Court, which held that the Petitioners are liable to pay legal interest on the initial payment of P2,200.000 that petitioners received under the Contract To Sell as part of the purchase price. Why should Petitioners pay legal interest on a sum of money that was payable to them and which they received as initial payment of the purchase price? This ruling is absurd and preposterous. It is a legal monstrosity.[37]

Petitioners can no longer question a judgment which has already become final and executory. The order of the Regional Trial Court on the payment of legal interest was issued on September 18, 1991 in the case for specific performance against the De la Ramas (Civil Case No. 6974-P). Hence, they are already barred from questioning it now in this proceeding.

Finally, we take note of the fact that the De la Ramas have withdrawn and appropriated for themselves the amount paid by Guerrero. This amount represented the purchase price of the entire 4,075 square meters of land, including the expropriated portion, which was the subject of their agreement. The payment, therefore, to them of the value of the expropriated portion would unjustly enrich them.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED.

SO ORDERED.

G.R. No. 143643

June 27, 2003

NATIONAL POWER CORPORATION, petitioner, vs. SPS. JOSE C. CAMPOS, JR. and MA. CLARA LOPEZ-CAMPOS, respondents. CALLEJO, SR., J.: This is a petition for review of the Decision1 dated June 16, 2000 of the Court of Appeals in CA-G.R. CV No. 54265. The assailed decision affirmed in toto the Decision2 of the Regional Trial Court (RTC) of Quezon City, Branch 98, which ordered petitioner National Power Corporation to pay, among others, actual, moral and nominal damages in the total amount of P1,980,000 to respondents Spouses Jose C. Campos, Jr. and Ma. Clara A. Lopez-Campos. The petition at bar stemmed from the following antecedents: On February 2, 1996, the respondents filed with the court a quo an action for sum of money and damages against the petitioner. In their complaint, the respondents alleged that they are the owners of a parcel of land situated in Bo. San Agustin, Dasmariñas, Cavite, consisting of 66,819 square meters ("subject property") covered by Transfer Certificate of Title (TCT) No. T-957323. Sometime in the middle of 1970, Dr. Paulo C. Campos, who was then the President of the Cavite Electric Cooperative and brother of respondent Jose C. Campos, Jr., verbally requested the respondents to grant the petitioner a right-of-way over a portion of the subject property. Wooden electrical posts and transmission lines were to be installed for the electrification of Puerto Azul. The respondents acceded to this request upon the condition that the said installation would only be temporary in nature. The petitioner assured the respondents that the arrangement would be temporary and that the wooden electric posts would be relocated as soon as permanent posts and transmission lines shall have been installed. Contrary to the verbal agreement of the parties, however, the petitioner continued to use the subject property for its wooden electrical posts and transmission lines without compensating the respondents therefor.3 The complaint likewise alleged that some time in 1994, the petitioner’s agents trespassed on the subject property and conducted engineering surveys thereon. The respondents’ caretaker asked these agents to leave the property. Thereafter, in 1995, a certain "Mr. Raz," who claimed to be the petitioner’s agent, went to the office of respondent Jose C. Campos, Jr., then Associate Justice of the Supreme Court, and requested permission from the latter to enter the subject property and conduct a survey in connection with the petitioner’s plan to erect an all-steel transmission line tower on a 24-square meter area inside the subject property. Respondent Jose Campos, Jr., refused to grant the permission and expressed his preference to talk to the Chief of the Calaca Sub-station or the head of the petitioner’s Quezon City office. The respondents did not hear from "Mr. Raz" or any one from the petitioner’s office since then. Sometime in July or August of 1995, the petitioner’s agents again trespassed on the subject property, presenting to the respondents’ caretaker a letter of authority purportedly written by respondent Jose C. Campos, Jr. When the caretaker demanded that the letter be given to him for verification with respondent Jose C. Campos, Jr. himself, the petitioner’s agents refused to do so. Consequently, the caretaker ordered the agents to leave the subject property.4 The complaint further alleged that on December 12, 1995, the petitioner instituted an expropriation case involving the subject property before the RTC of Imus, Cavite, Branch 22. The case was docketed as Civil Case No. 1174-95. The petitioner alleged in its complaint therein that the subject property was selected "in a manner compatible with the greatest public good and the least private injury" and that it (petitioner) had tried to negotiate with the respondents for the acquisition of the right-of-way easement on the subject property but that the parties failed to reach an amicable settlement.5

The respondents maintained that, contrary to the petitioner’s allegations, there were other more suitable or appropriate sites for the petitioner’s all-steel transmission lines and that the petitioner chose the subject property in a whimsical and capricious manner. The respondents averred that the proposed right-of-way was not the least injurious to them as the system design prepared by the petitioner could be further revised to avoid having to traverse the subject property. The respondents vigorously denied negotiating with the petitioner in connection with the latter’s acquisition of a rightof-way on the subject property. 6 Finally, the complaint alleged that unaware of the petitioner’s intention to expropriate a portion of the subject property, the respondents sold the same to Solar Resources, Inc. As a consequence, the respondents stand to lose a substantial amount of money derived from the proceeds of the sale of the subject property should the buyer (Solar Resources, Inc.) decide to annul the sale because of the contemplated expropriation of the subject property. 7 The complaint a quo thus prayed that the petitioner be adjudged liable to pay the respondents, among others, actual, nominal and moral damages: WHEREFORE, premises considered, it is respectfully prayed that the Honorable Court award the plaintiffs: a. Actual damages for the use of defendants’ property since middle 1970’s, including legal interest thereon, as may be established during the trial; b. P1,000,000.00 as nominal damages; c. P1,000,000.00 as moral damages; d. Lost business opportunity as may be established during the trial; e. P250,000.00 as attorney’s fees; f. Costs of suit. Plaintiffs pray for other, further and different reliefs as may be just and equitable under the premises.8 Upon receipt of the summons and complaint, the petitioner moved for additional time to file its responsive pleading. However, instead of filing an answer to the complaint, the petitioner filed a motion to dismiss on the ground that the action had prescribed and that there was another action pending between the same parties for the same cause (litis pendencia). The respondents opposed said motion. On May 2, 1996, the RTC issued an order denying the petitioner’s motion to dismiss. The petitioner then moved for reconsideration of the aforesaid order. The respondents opposed the same and moved to declare the petitioner in default on the ground that its motion for reconsideration did not have the required notice of hearing; hence, it did not toll the running of the reglementary period to file an answer. On July 15, 1996, the RTC issued an order denying the petitioner’s motion for reconsideration. Subsequently, on July 24, 1996, it issued another order granting the respondents’ motion and declared the petitioner in default for its failure to file an answer. The petitioner filed a motion to set aside the order of default but the same was denied by the RTC.

The petitioner filed a petition for certiorari, prohibition and preliminary injunction with the Court of Appeals, docketed as CA-G.R. SP No. 41782, assailing the May 2, 1996, July 15, 1996 and July 24, 1996 Orders issued by the RTC as having been issued with grave abuse of discretion and to enjoin it from proceeding with the case. On February 13, 1996, the CA dismissed the petition for certiorari, prohibition and preliminary injunction filed by the petitioner in CA-G.R. SP No. 41782. In the meantime, the respondents adduced their evidence ex parte in the RTC. As synthesized by the trial court, the respondents adduced evidence, thus: From the evidence thus far submitted, it appears that the plaintiffs spouses, both of whom professional of high standing in society, are the absolute owners of a certain parcel of land situated in Bo. San Agustin, Dasmariñas, Cavite, consisting of 66,819 square meters, more or less, covered and embraced in TCT No. T-95732. Sometime in the mid-1970, Dr. Paulo C. Campos, brother of Justice Jose Campos, Jr., then President of the Cavite Electric Cooperative, approached the latter and confided to him the desire of the National Power Corporation to be allowed to install temporary wooden electric posts on the portion of his wife’s property in order that the high-tension transmission line coming from Kaliraya passing thru that part of Cavite can be continued to the direction of Puerto Azul. Having heard the plea of his brother and the fact that National Power Corporation was under pressure because at the time that Puerto Azul was being developed there was no electricity nor was there electrical lines towards that place and acting on the belief that the installation of wooden electric posts would be temporary in nature, plaintiffs gave oral permission for the NPC personnel to enter the said parcel of land. Dr. Paulo C. Campos, assured him that it was just a temporary measure to meet the emergency need of the Puerto Azul and that the wooden electric posts will be relocated when a permanent posts and transmission lines shall have been installed. Pursuant to their understanding, the National Power Corporation installed wooden posts across a portion of plaintiffs’ property occupying a total area of about 2,000 square meters more or less. To date, defendant NPC has been using the plaintiffs’ property for its wooden electrical posts and transmission lines; that the latter has estimated that the aggregate rental (which they peg at the conservative rate of P1.00 per square meter) of the 2,000 square meters for twenty-four (24) years period, would amount to the aggregate sum of P480,000.00. From the time National Power Corporation installed those temporary wooden posts, no notice was ever served upon the plaintiffs of their intention to relocate the same or to install permanent transmission line on the property. Also, there was no personal contact between them. However, in late 1994, plaintiffs’ overseer found a group of persons of the defendant NPC conducting survey inside the said property, and were asked to leave the premises upon being discovered that they have no authority to do so from the owners thereof. Subsequently thereafter, or sometime in 1995, a person by the name of Mr. Paz, bearing a letter from Calaca Regional Office, went to see Justice Jose C. Campos, Jr. in his office, informing the latter that he was authorized by the National Power Corporation to acquire private lands. In the same breath, Mr. Paz requested his permission to let NPC men enter the subject property and to conduct a survey in connection with its plan to erect an all steel transmission line tower on a 24 square meter area inside plaintiffs’ property, but same was denied. Justice Campos, however, expressed his preference to talk instead to the Chief of the Calaca Substation or the Head of the NPC, Quezon City office. Since then, nothing however transpired. Sometime in July or August 1995, plaintiffs learned that defendant’s agents again entered the subject property. This time, they have presented to the caretaker a letter of authority supposedly from Justice Jose C. Campos, Jr. And, when prodded to see the letter for

verification, defendant’s agents refused to do so. So, they were ordered out of the vicinity. Plaintiffs stressed that defendant’s repeated intrusions into their property without their expressed knowledge and consent had impugned on their constitutional right to protection over their property. Later, on December 12, 1995, plaintiffs received copy of summons and complaint in Civil Case No. 1174-95 filed by the defendant before the Regional Trial Court, Fourth Judicial Region, Branch 22, Imus, Cavite for the expropriation of 5,320 square meters of plaintiffs’ above-described property to be used as right-of-way for the all-steel transmission line tower of the Calaca-Dasmariñas 230 KV T/L Project. But what had caused plaintiffs’ discomfiture is the allegation in said complaint stating that the "parcel of land sought to be expropriated has not been applied to nor expropriated for any public use and is selected by plaintiff in a manner compatible with the greatest good and the least private injury" and that defendant "had negotiated with (plaintiffs) for the acquisition of the right-of-way easement over the portion of the same for the public purpose as above-stated at a price prescribed by law, but failed to reach an agreement with them notwithstanding the repeated negotiations between the parties". Plaintiffs’ assert that at no instance was there a negotiation between them and the NPC or its representative. The alleged "talk" initiated by Mr. Paz with Justice Campos, Jr. just ended in the latter’s remonstrance and in prevailing upon the former of his preference to discuss the matter with a more responsible officer of the National Power Corporation, such as the Chief of the Calaca Sub-Station or the Head of NPC’s Office in Quezon City. But plaintiffs’ plea just fell on the deaf ear. The next thing they know was Civil Case No. Q-1174-95 already filed in court. A party to a case shall not do falsehood nor shall mislead or misrepresent the contents of its pleading. That gross misrepresentation had been made by the National Power Corporation in their said pleading is irrefutable. Plaintiffs-spouses Campos declared that there are other areas more suitable or appropriate that can be utilized as alternative sites for the all-steel transmission line tower. Just a few meters from the planned right-of-way is an abandoned road occupied by squatters; it is a government property and the possession of which the NPC need not compensate. The latter had not exercised judiciously in the proper selection of the property to be appropriated. Evidently, NPC’s choice was whimsical and capricious. Such arbitrary selection of plaintiffs’ property despite the availability of another property in a manner compatible with the greatest public good and the least private injury, constitutes an impermissible encroachment of plaintiffs’ proprietary rights and their right to due process and equal protection. Concededly, NPC’s intention is to expropriate a portion of plaintiffs’ property. This limitation on the right of ownership is the paramount right of the National Power Corporation granted by law. But before a person can be deprived of his property through the exercise of the power of eminent domain, the requisites of law must strictly be complied with. (Endencia vs. Lualhati, 9 Phil. 177) No person shall be deprived of his property except by competent authority and for public use and always upon payment of just compensation. Should this requirement be not first complied with, the courts shall protect and, in a proper case, restore the owner in his possession. (Art. 433 Civil Code of the Philippines) Records disclose that in breach of such verbal promise, defendant NPC had not withdrawn the wooden electrical posts and transmission lines; said wooden electrical posts and transmission lines still occupy a portion of plaintiffs’ property; that the NPC had benefited from them for a long period of time already, sans compensation to the owners thereof.

Without first complying with the primordial requisites appurtenant to the exercise of the power of eminent domain, defendant NPC again boldly intruded into plaintiffs’ property by conducting engineering surveys with the end in view of expropriating 5,320 square meters thereof to be used as right-of-way for the all-steel transmission line tower of the CalacaDasmariñas 230 KV T/L Project. Such acts constitute a deprivation of one’s property for public use without due compensation. It would therefore seem that the expropriation had indeed departed from its own purpose and turns out to be an instrument to repudiate compliance with obligation legally and validly contracted. 9 On September 26, 1996, the RTC rendered a decision finding the petitioner liable for damages to the respondents. The dispositive portion of the RTC decision reads: WHEREFORE, in view of the foregoing consideration, justment [sic] is hereby rendered in favor of the plaintiffs, condemning the defendant to pay – (a) Actual damages of P480,000.00 for the use of plaintiff’s property; (b) One Million Pesos (P1,000,000.00) as moral damages; (c ) Five Hundred Thousand Pesos (P500,000.00) as nominal damages; (d) One Hundred Fifty Thousand Pesos (P150,000.00) as attorney’s fees; and (e) Costs of suit in the amount of P11,239.00. SO ORDERED.10 The petitioner appealed the decision to the Court of Appeals which on June 16, 1990 rendered a decision affirming the ruling of the RTC. Essentially, the CA held that the respondents’ claim for compensation and damages had not prescribed because Section 3(i) of the petitioner’s Charter, Republic Act No. 6395, as amended, is not applicable to the case. The CA likewise gave scant consideration to the petitioner’s claim that the respondents’ complaint should be dismissed on the ground of litis pendencia. According to the CA, the complaint a quo was the more appropriate action considering that the venue for the expropriation case (Civil Case No. 1174-95) was initially improperly laid. The petitioner filed the expropriation proceedings with the RTC in Imus, Cavite, when the subject property is located in Dasmariñas, Cavite. Moreover, the parties in the two actions are not the same since the respondents were no longer included as defendants in the petitioner’s amended complaint in the expropriation case (Civil Case No. 1174-95) but were already replaced by Solar Resources, Inc., the buyer of the subject property, as defendant therein. The CA likewise found the damages awarded by the RTC in favor of the respondents just and reasonable under the circumstances obtaining in the case. The petitioner now comes to this Court seeking to reverse and set aside the assailed decision. The petitioner alleges as follows: I

The Court of Appeals grievously erred and labored under a gross misapprehension of fact in finding that the Complaint below should not be dismissed on the ground of prescription. II The Court of Appeals erred in affirming the award of nominal and moral damages, attorney’s fees and costs of litigation.11 Citing Article 620 of the Civil Code, the petitioner contends that it had already acquired the easement of right-of-way over the portion of the subject property by prescription, the said easement having been allegedly continuous and apparent for a period of about twenty-three (23) years, i.e., from about the middle of 1970 to the early part of 1994. The petitioner further invokes Section 3(i) of its Charter in asserting that the respondents already waived their right to institute any action for compensation and/or damages concerning the acquisition of the easement of right-of-way in the subject property. Accordingly, the petitioner concludes that the award of damages in favor of the respondents is not warranted. The petition is bereft of merit. The petitioner’s claim that, under Article 620 of the Civil Code, it had already acquired by prescription the easement of right-of-way over that portion of the subject property where its wooden electric posts and transmission lines were erected is untenable. Article 620 of the Civil Code provides that: Art. 620. Continuous and apparent easements are acquired either by virtue of a title or by prescription of ten years. Prescription as a mode of acquisition requires the existence of the following: (1) capacity to acquire by prescription; (2) a thing capable of acquisition by prescription; (3) possession of the thing under certain conditions; and (4) lapse of time provided by law. 12 Acquisitive prescription may either be ordinary, in which case the possession must be in good faith and with just title, 13 or extraordinary, in which case there is neither good faith nor just title. In either case, there has to be possession which must be in the concept of an owner, public, peaceful and uninterrupted. 14 As a corollary, Article 1119 of the Civil Code provides that: Art. 1119. Acts of possessory character executed in virtue of license or by mere tolerance of the owner shall not be available for the purposes of possession. In this case, the records clearly reveal that the petitioner’s possession of that portion of the subject property where it erected the wooden posts and transmission lines was merely upon the tolerance of the respondents. Accordingly, this permissive use by the petitioner of that portion of the subject property, no matter how long continued, will not create an easement of right-of-way by prescription. The case of Cuaycong vs. Benedicto15 is particularly instructive. In that case, the plaintiffs for more than twenty years made use of the road that passed through the hacienda owned by the defendants, being the only road that connected the plaintiff’s hacienda to the public road. The defendants closed the road in question and refused the use of the same unless a toll was paid. The plaintiffs therein brought an action to enjoin the defendants from interfering with the use of the road. In support of their action, the plaintiffs presented evidence tending to show that they have acquired the right-ofway through the road by prescription. This Court rejected the contention, holding as follows: Had it been shown that the road had been maintained at the public expense, with the acquiescence of the owners of the estates crossed by it, this would indicate such adverse

possession by the government as in course of time would ripen into title or warrant the presumption of a grant or of a dedication. But in this case there is no such evidence, and the claims of plaintiffs, whether regarded as members of the public asserting a right to use the road as such, or as persons claiming a private easement of way over the land of another must be regarded as resting upon the mere fact of user. If the owner of a tract of land, to accommodate his neighbors or the public in general, permits them to cross his property, it is reasonable to suppose that it is not his intention, in so doing, to divest himself of the ownership of the land so used, or to establish an easement upon it, and that the persons to whom such permission, tacit or express, is granted, do not regard their privilege of use as being based upon anything more than the mere tolerance of the owner. Clearly, such permissive use is in its inception based upon an essentially revocable license. If the use continues for a long period of time, no change being made in the relations of the parties by any express or implied agreement, does the owner of the property affected lose his right of revocation? Or, putting the same question in another form, does the mere permissive use ripen into title by prescription? It is a fundamental principle of the law in this jurisdiction concerning the possession of real property that such possession is not affected by acts of a possessory character which are "merely tolerated" by the possessor, which are or due to his license (Civil Code, arts. 444 and 1942). This principle is applicable not only with respect to the prescription of the dominium as a whole, but to the prescription of right in rem. In the case of Cortes vs. Palanca Yu-Tibo (2 Phil. Rep., 24, 38), the Court said: The provision of article 1942 of the Civil Code to the effect that acts which are merely tolerated produce no effect with respect to possession is applicable as much to the prescription of real rights as to the prescription of the fee, it being a glaring and selfevident error to affirm the contrary, as does the appellant in his motion papers. Possession is the fundamental basis of prescription. Without it no kind of prescription is possible, not even the extraordinary. Consequently, if acts of mere tolerance produce no effect with respect to possession, as that article provides, in conformity with article 444 of the same Code, it is evident that they can produce no effect with respect to prescription, whether ordinary or extraordinary. This is true whether the prescriptive acquisition be of a fee or of real rights, for the same reason holds in one and the other case; that is, that there has been no true possession in the legal sense of the word. (Citations omitted) Possession, under the Civil Code, to constitute the foundation of a prescriptive right, must be possession under claim of title (en concepto de dueño), or to use the common law equivalent of the term, it must be adverse. Acts of possessory character performed by one who holds by mere tolerance of the owner are clearly not en concepto de dueño, and such possessory acts, no matter how long so continued, do not start the running of the period of prescription. 16 Following the foregoing disquisition, the petitioner’s claim that it had acquired the easement of rightof-way by prescription must perforce fail. As intimated above, possession is the fundamental basis of prescription, whether ordinary or extraordinary. The petitioner never acquired the requisite possession in this case. Its use of that portion of the subject property where it erected the wooden poles and transmission lines was due merely to the tacit license and tolerance of the respondents. As such, it cannot be made the basis of the acquisition of an easement of right-of-way by prescription.

Neither can the petitioner invoke Section 3(i) of its Charter (Rep. Act No. 6395, as amended) to put up the defense of prescription against the respondents. The said provision reads in part: Sec. 3(i). … The Corporation or its representatives may also enter upon private property in the lawful performance or prosecution of its business or purposes, including the construction of transmission lines thereon; Provided, that the owner of such private property shall be paid the just compensation therefor in accordance with the provisions hereinafter provided; Provided, further, that any action by any person claiming compensation and/or damages shall be filed within five years after the right-of-way, transmission lines, substations, plants or other facilities shall have been established: Provided, finally, that after the said period no suit shall be brought to question the said right-of-way, transmission lines, substations, plants or other facilities nor the amounts of compensation and/or damages involved; Two requisites must be complied before the above provision of law may be invoked: 1. The petitioner entered upon the private property in the lawful performance or prosecution of its businesses or purposes; and 2.The owner of the private property shall be paid the just compensation therefor. As correctly asserted by the respondents, Section 3(i) of Rep. Act No. 6395, as amended, presupposes that the petitioner had already taken the property through a negotiated sale or the exercise of the power of eminent domain, and not where, as in this case, the petitioner was merely temporarily allowed to erect wooden electrical posts and transmission lines on the subject property. Significantly, the provision uses the term "just compensation," implying that the power of eminent domain must first be exercised by the petitioner in accordance with Section 9, Article III of the Constitution, which provides that "no private property shall be taken for public use without just compensation." This Court’s ruling in Lopez vs. Auditor General17 is likewise in point: The petitioner brought this case to this Court on the sole issue of prescription. He cites Alfonso vs. Pasay Cityin which a lot owner was allowed to bring an action to recover compensation for the value of his land, which the Government had taken for road purposes, despite the lapse of thirty years (1924-1954). On the other hand, the respondents base their defense of prescription on Jaen vs. Agregado which held an action for compensation for land taken in building a road barred by prescription because it was brought after more than ten years (i.e., thirty three years, from 1920 to 1953). They argue that the ruling in Alfonso cannot be applied to this case because, unlike Alfonso who made repeated demands for compensation within ten years, thereby interrupting the running of the period of prescription, the petitioner here filed his claim only in 1959. It is true that in Alfonso vs. Pasay City this Court made the statement that "registered lands are not subject to prescription and that on grounds of equity, the government should pay for private property which it appropriates though for the benefit of the public, regardless of the passing of time." But the rationale in that case is that where private property is taken by the Government for public use without first acquiring title thereto either through expropriation or negotiated sale, the owner’s action to recover the land or the value thereof does not prescribe. This is the point that has been overlooked by both parties.

On the other hand, where private property is acquired by the Government and all that remains is the payment of the price, the owner’s action to collect the price must be brought within ten years otherwise it would be barred by the statue of limitations. 18 Thus, the five-year period provided under Section 3(i) of Rep. Act No. 6395, as amended, within which all claims for compensation and/or damages may be allowed against the petitioner should be reckoned from the time that it acquired title over the private property on which the right-of-way is sought to be established. Prior thereto, the claims for compensation and/or damages do not prescribe. In this case, the findings of the CA is apropos: Undeniably, NPC never acquired title over the property over which its wooden electrical posts and transmission lines were erected. It never filed expropriation proceedings against such property. Neither did it negotiate for the sale of the same. It was merely allowed to temporarily enter into the premises. As NPC’s entry was gained through permission, it had no intention to acquire ownership either by voluntary purchase or by the exercise of eminent domain.19 The petitioner instituted the expropriation proceedings only on December 12, 1995. Indisputably, the petitioner never acquired title to that portion of the subject property where it erected the wooden electrical posts and transmission lines. Until such time, the five-year prescriptive period within which the respondents’ right to file an action to claim for compensation and/or damages for the petitioner’s use of their property does not even commence to run. The CA thus correctly ruled that Section 3(i) of Rep. Act No. 6395, as amended, finds no application in this case and that the respondents’ action against the petitioner has not prescribed. With respect to the damages awarded in favor of the respondents, the petitioner avers, thus: The Court of Appeals erred in affirming the award of nominal and moral damages, attorney’s fees and costs of litigation. It follows from Section 31(c) of R.A. 6395 that the award moral and nominal damages, as well as attorney’s fees and costs are baseless. The right to claim them has likewise prescribed.20 With our ruling that the claims of the respondents had not prescribed, the petitioner’s contention that the respondents are not entitled to moral and nominal damages and attorney’s fees must fail. In affixing the award for moral and nominal damages and attorney’s fees, the CA ratiocinated: With respect to the fourth assignment of error, this Court is not persuaded to reverse much less modify the court a quo’s findings. An award of moral damages would require certain conditions to be met, to wit: (1) first, there must be an injury, whether physical, mental or psychological, clearly sustained by the claimant; (2) second, there must be a culpable act or omission factually established; (3) third, the wrongful act or omission of the defendant is the proximate cause of the injury sustained by the claimant; and (4) fourth, the award of damages is predicated on any of the cases stated in Article 2219 of the Civil Code. NPC made it appear that it negotiated with the appellees when no actual negotiations took place. This allegation seriously affected the on-going sale of the property to Solar Resources, Inc. as appellees seemed to have sold the property knowing fully well that a

portion thereof was being expropriated. Such an act falls well within Article 21 of the Civil Code. NPC’s subterfuge certainly besmirched the reputation and professional standing of Justice Jose C. Campos, Jr. and Professor Maria Clara A. Lopez-Campos, and caused them physical suffering, mental anguish, moral shock and wounded feelings. The records show that Justice Campos’ career included, among other[s], being a Professor of Law at the University of the Philippines; Acting Chairman of the Board of Transportation; Presiding Judge of the Court of First Instance of Pasay City, and Associate Justice of the Court of Appeals. Such career reached its apex when he was appointed Associate Justice of the Supreme Court in 1992. Justice Campos was a member of the Judicial and Bar Council when NPC filed its Civil Case No. 1174-95. Professor Maria Clara A. Lopez-Campos is a noted authority in Corporate and Banking Laws and is a Professor Emerita of the University of the Philippines from 1981 to the present. She had taught more than three decades at the College of Law. Against such backdrop, it does not take too much imagination to conclude that the oppressive and wanton manner in which NPC sought to exercise its statutory right of eminent domain warranted the grant of moral damages. On the award of nominal damages, such are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. As previously discussed, it does not brood well for a government entity such as NPC to disregard the tenets of private property enshrined in the Constitution. NPC not only intentionally trespassed on appellees’ property and conducted engineering surveys thereon but also sought to fool the appellees’ caretaker by claiming that such entry was authorized. Moreover, NPC even justifies such trespass as falling under its right to expropriate the property. Under the circumstances, the award of nominal damages is sustained. That NPC’s highhanded exercise of its right of eminent domain constrained the appellees to engage the services of counsel is obvious. As testified upon, the appellees engaged their counsel for an agreed fee of P250,000.00. The trial court substantially reduced this to P150,000.00. Inasmuch as such services included not only the present action but also those for Civil Case No. 1174-95 erroneously filed by NPC with the Regional Trial Court of Imus, Cavite, and the Petition for Certiorari in CA-GR No. 41782, this Court finds such attorney’s fees to be reasonable and equitable. 21 We agree with the CA. The award of moral damages in favor of the respondents is proper given the circumstances obtaining in this case. As found by the CA: NPC made it appear that it negotiated with the appellees when no actual negotiation took place. This allegation seriously affected the on-going sale of the property to Solar Resources, Inc. as appellees seemed to have sold the property knowing fully well that a portion thereof was being expropriated. Such an act falls well within Article 21 of the Civil Code. NPC’s subterfuge certainly besmirched the reputation and professionally standing of Justice Jose C. Campos, Jr. and Professor Maria Clara A. Lopez-Campos, and caused them physical suffering, mental anguish, moral shock and wounded feelings. The records show that Justice Campos’ career included, among other[s], being a Professor of Law at the University of the Philippines; Acting Chairman of the Board of Transportation; Presiding Judge of the Court of First Instance of Pasay City, and Associate Justice of the Court of Appeals. Such career reached its apex when he was appointed Associate Justice of

the Supreme Court in 1992. Justice Campos was a member of the Judicial and Bar Council when NPC filed its Civil Case No. 1174-95. Professor Maria Clara A. Lopez-Campos is a noted authority in Corporate and Banking Laws and is a Professor Emerita of the University of the Philippines from 1981 to the present. She had taught more than three decades at the College of Law. Against such backdrop, it does not take too much imagination to conclude that the oppressive and wanton manner in which NPC sought to exercise its statutory right of eminent domain warranted the grant of moral damages. 22 Further, nominal damages are adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him. 23 Similarly, the court may award nominal damages in every case where any property right has been invaded. 24 The petitioner, in blatant disregard of the respondents’ proprietary right, trespassed the subject property and conducted engineering surveys thereon. It even attempted to deceive the respondents’ caretaker by claiming that its agents were authorized by the respondents to enter the property when in fact, the respondents never gave such authority. Under the circumstances, the award of nominal damages is likewise warranted. Finally, the award of attorney’s fees as part of damages is deemed just and equitable considering that by the petitioner’s unjustified acts, the respondents were obviously compelled to litigate and incur expenses to protect their interests over the subject property. 25 WHEREFORE, the petition is hereby DENIED for lack of merit. The assailed Decision dated June 16, 2000 of the Court of Appeals in CA-G.R. CV No. 54265 is AFFIRMED in toto. SO ORDERED.