Republiv vs salem

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 above-described
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

Dela cruz vs paras

FERNANDO, C.J.:
The crucial question posed by this certiorari proceeding is whether or not a municipal corporation, Bocaue, Bulacan,
represented by respondents, 1 can, prohibit the exercise of a lawful trade, the operation of night clubs, and the pursuit of a
lawful occupation, such clubs employing hostesses. It is contended that the ordinance assailed as invalid is tainted with nullity,
the municipality being devoid of power to prohibit a lawful business, occupation or calling, petitioners at the same time alleging
that their rights to due process and equal protection of the laws were violated as the licenses previously given to them was in
effect withdrawn without judicial hearing. 2

The assailed ordinance 3 is worded as follows: "Section 1. Title of Ordinance. This Ordinance shall be known and may be
cited as the [Prohibition and Closure Ordinance] of Bocaue, Bulacan. Section 2. Definitions of Terms (a) 'Night Club' shall
include any place or establishment selling to the public food or drinks where customers are allowed to dance. (b) 'Cabaret' or
'Dance Hall' shall include any place or establishment where dancing is permitted to the public and where professional hostesses
or hospitality girls and professional dancers are employed. (c) 'Professional hostesses' or 'hospitality girls' shall include any
woman employed by any of the establishments herein defined to entertain guests and customers at their table or to dance with
them. (d) 'Professional dancer' shall include any woman who dances at any of the establishments herein defined for a fee or
remuneration paid directly or indirectly by the operator or by the persons she dances with. (e) 'Operator' shall include the owner,
manager, administrator or any person who operates and is responsible for the operation of any night club, cabaret or dance hall.
Section 3. Prohibition in the Issuance and Renewal of Licenses, Permits. Being the principal cause in the decadence of
morality and because of their other adverse effects on this community as explained above, no operator of night clubs, cabarets
or dance halls shall henceforth be issued permits/licenses to operate within the jurisdiction of the municipality and no
license/permit shall be issued to any professional hostess, hospitality girls and professional dancer for employment in any of the
aforementioned establishments. The prohibition in the issuance of licenses/permits to said persons and operators of said
establishments shall include prohibition in the renewal thereof. Section 4. Revocation of Permits and Licenses. The licenses
and permits issued to operators of night clubs, cabarets or dance halls which are now in operation including permits issued to
professional hostesses, hospitality girls and professional dancers are hereby revoked upon the expiration of the thirty-day period
given them as provided in Section 8 hereof and thenceforth, the operation of these establishments within the jurisdiction of the
municipality shall be illegal. Section 5. Penalty in case of violation. Violation of any of the provisions of this Ordinance shall
be punishable by imprisonment not exceeding three (3) months or a fine not exceeding P200.00 or both at the discretion of the
Court. If the offense is committed by a juridical entity, the person charged with the management and/or operation thereof shall
be liable for the penalty provided herein. Section 6. Separability Clause. If, for any reason, any section or provision of this
Ordinance is held unconstitutional or invalid, no other section or provision hereof shall be affected thereby. Section 7.
Repealing Clause. All ordinance, resolutions, circulars, memoranda or parts thereof that are inconsistent with the
provisions of this Ordinance are hereby repealed. Section 8. Effectivity. This Ordinance shall take effect immediately upon
its approval; provided, however, that operators of night clubs, cabarets and dance halls now in operation including professional
hostesses, hospitality girls and professional dancers are given a period of thirty days from the approval hereof within which to
wind up their businesses and comply with the provisions of this Ordinance." 4

On November 5, 1975, two cases for prohibition with preliminary injunction were filed with the Court of First Instance of
Bulacan. 5 The grounds alleged follow:

1. Ordinance No. 84 is null and void as a municipality has no authority to prohibit a lawful business, occupation or calling.

2. Ordinance No. 84 is violative of the petitioners' right to due process and the equal protection of the law, as the license
previously given to petitioners was in effect withdrawn without judicial hearing. 3. That under Presidential Decree No. 189,
as amended, by Presidential Decree No. 259, the power to license and regulate tourist-oriented businesses including
night clubs, has been transferred to the Department of Tourism." 6 The cases were assigned to respondent Judge, now
Associate Justice Paras of the Intermediate Appellate Court, who issued a restraining order on November 7, 1975. The answers
were thereafter filed. It was therein alleged: " 1. That the Municipal Council is authorized by law not only to regulate but to
prohibit the establishment, maintenance and operation of night clubs invoking Section 2243 of the RAC, CA 601, Republic Acts
Nos. 938, 978 and 1224. 2. The Ordinance No. 84 is not violative of petitioners' right to due process and the equal protection of
the law, since property rights are subordinate to public interests. 3. That Presidential Decree No. 189, as amended, did not
deprive Municipal Councils of their jurisdiction to regulate or prohibit night clubs." 7There was the admission of the following facts
as having been established: "l. That petitioners Vicente de la Cruz, et al. in Civil Case No. 4755-M had been previously issued
licenses by the Municipal Mayor of Bocaue-petitioner Jose Torres III, since 1958; petitioner Vicente de la Cruz, since 1960;
petitioner Renato Alipio, since 1961 and petitioner Leoncio Corpuz, since 1972; 2. That petitioners had invested large sums of
money in their businesses; 3. That the night clubs are well-lighted and have no partitions, the tables being near each other; 4.
That the petitioners owners/operators of these clubs do not allow the hospitality girls therein to engage in immoral acts and to go
out with customers; 5. That these hospitality girls are made to go through periodic medical check-ups and not one of them is
suffering from any venereal disease and that those who fail to submit to a medical check-up or those who are found to be
infected with venereal disease are not allowed to work; 6. That the crime rate there is better than in other parts of Bocaue or in
other towns of Bulacan." 8 Then came on January 15, 1976 the decision upholding the constitutionality and validity of Ordinance
No. 84 and dismissing the cases. Hence this petition for certiorari by way of appeal.
In an exhaustive as well as scholarly opinion, the lower court dismissed the petitions. Its rationale is set forth in the
opening paragraph thus: "Those who lust cannot last. This in essence is why the Municipality of Bocaue, Province of
Bulacan, stigmatized as it has been by innuendos of sexual titillation and fearful of what the awesome future holds for it,
had no alternative except to order thru its legislative machinery, and even at the risk of partial economic dislocation, the
closure of its night clubs and/or cabarets. This in essence is also why this Court, obedient to the mandates of good
government, and cognizant of the categorical imperatives of the current legal and social revolution, hereby [upholds] in the
name of police power the validity and constitutionality of Ordinance No. 84, Series of 1975, of the Municipal Council of
Bocaue, Bulacan. The restraining orders heretofore issued in these two cases are therefore hereby rifted, effective the
first day of February, 1976, the purpose of the grace period being to enable the petitioners herein to apply to the proper
appellate tribunals for any contemplated redress." 9 This Court is, however, unable to agree with such a conclusion and for
reasons herein set forth, holds that reliance on the police power is insufficient to justify the enactment of the assailed ordinance.
It must be declared null and void.

1. Police power is granted to municipal corporations in general terms as follows: "General power of council to enact
ordinances and make regulations. - The municipal council shall enact such ordinances and make such regulations, not
repugnant to law, as may be necessary to carry into effect and discharge the powers and duties conferred upon it by law
and such as shall seem necessary and proper to provide for the health and safety, promote the prosperity, improve the
morals, peace, good order, comfort, and convenience of the municipality and the inhabitants thereof, and for the
protection of property therein." 10 It is practically a reproduction of the former Section 39 of Municipal Code. 11An ordinance
enacted by virtue thereof, according to Justice Moreland, speaking for the Court in the leading case of United States v.
Abendan 12 "is valid, unless it contravenes the fundamental law of the Philippine Islands, or an Act of the Philippine Legislature,
or unless it is against public policy, or is unreasonable, oppressive, partial, discriminating, or in derogation of common right.
Where the power to legislate upon a given subject, and the mode of its exercise and the details of such legislation are not
prescribed, the ordinance passed pursuant thereto must be a reasonable exercise of the power, or it will be pronounced
invalid." 13 In another leading case, United States v. Salaveria, 14 the ponente this time being Justice Malcolm, where the present
Administrative Code provision was applied, it was stated by this Court: "The general welfare clause has two branches: One
branch attaches itself to the main trunk of municipal authority, and relates to such ordinances and regulations as may be
necessary to carry into effect and discharge the powers and duties conferred upon the municipal council by law. With this class
we are not here directly concerned. The second branch of the clause is much more independent of the specific functions of the
council which are enumerated by law. It authorizes such ordinances as shall seem necessary and proper to provide for the
health and safety, promote the prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality
and the inhabitants thereof, and for the protection of property therein.' It is a general rule that ordinances passed by virtue of the
implied power found in the general welfare clause must be reasonable, consonant with the general powersand purposes of the
corporation, and not inconsistent with the laws or policy of the State." 15 If night clubs were merely then regulated and not
prohibited, certainly the assailed ordinance would pass the test of validity. In the two leading cases above set forth, this Court
had stressed reasonableness, consonant with the general powers and purposes of municipal corporations, as well as
consistency with the laws or policy of the State. It cannot be said that such a sweeping exercise of a lawmaking power by
Bocaue could qualify under the term reasonable. The objective of fostering public morals, a worthy and desirable end can be
attained by a measure that does not encompass too wide a field. Certainly the ordinance on its face is characterized by
overbreadth. The purpose sought to be achieved could have been attained by reasonable restrictions rather than by an absolute
prohibition. The admonition in Salaveria should be heeded: "The Judiciary should not lightly set aside legislative action when
there is not a clear invasion of personal or property rights under the guise of police regulation." 16 It is clear that in the guise of a
police regulation, there was in this instance a clear invasion of personal or property rights, personal in the case of those
individuals desirous of patronizing those night clubs and property in terms of the investments made and salaries to be earned by
those therein employed.

2. The decision now under review refers to Republic Act No. 938 as amended. 17 It was originally enacted on June 20, 1953.
It is entitled: "AN ACT GRANTING MUNICIPAL OR CITY BOARDS AND COUNCILS THE POWER TO REGULATE THE
ESTABLISHMENT, MAINTENANCE AND OPERATION OF CERTAIN PLACES OF AMUSEMENT WITHIN THEIR
RESPECTIVE TERRITORIAL JURISDICTIONS.' 18 Its first section insofar as pertinent reads: "The municipal or city board or
council of each chartered city shall have the power to regulate by ordinance the establishment, maintenance and operation of
night clubs, cabarets, dancing schools, pavilions, cockpits, bars, saloons, bowling alleys, billiard pools, and other similar places
of amusement within its territorial jurisdiction: ... " 19 Then on May 21, 1954, the first section was amended to include not merely
"the power to regulate, but likewise "Prohibit ... " 20 The title, however, remained the same. It is worded exactly as Republic Act
No. 938. It is to be admitted that as thus amended, if only the above portion of the Act were considered, a municipal council may
go as far as to prohibit the operation of night clubs. If that were all, then the appealed decision is not devoid of support in law.
That is not all, however. The title was not in any way altered. It was not changed one whit. The exact wording was followed. The
power granted remains that of regulation, not prohibition. There is thus support for the view advanced by petitioners that to
construe Republic Act No. 938 as allowing the prohibition of the operation of night clubs would give rise to a constitutional
question. The Constitution mandates: "Every bill shall embrace only one subject which shall be expressed in the title thereof.
" 21 Since there is no dispute as the title limits the power to regulating, not prohibiting, it would result in the statute being invalid if,
as was done by the Municipality of Bocaue, the operation of a night club was prohibited. There is a wide gap between the
exercise of a regulatory power "to provide for the health and safety, promote the prosperity, improve the morals, 22 in the
language of the Administrative Code, such competence extending to all "the great public needs, 23 to quote from Holmes, and to
interdict any calling, occupation, or enterprise. In accordance with the well-settled principle of constitutional construction that
between two possible interpretations by one of which it will be free from constitutional infirmity and by the other tainted by such
grave defect, the former is to be preferred. A construction that would save rather than one that would affix the seal of doom
certainly commends itself. We have done so before We do so again. 24

3. There is reinforcement to the conclusion reached by virtue of a specific provision of the recently-enacted Local
Government Code. 25 The general welfare clause, a reiteration of the Administrative Code provision, is set forth in the first
paragraph of Section 149 defining the powers and duties of the sangguniang bayan. It read as follows: "(a) Enact such
ordinances and issue such regulations as may be necessary to carry out and discharge the responsibilities conferred upon it by
law, and such as shall be necessary and proper to provide for the health, safety, comfort and convenience, maintain peace and
order, improve public morals, promote the prosperity and general welfare of the municipality and the inhabitants thereof, and
insure the protection of property therein; ..." 26 There are in addition provisions that may have a bearing on the question now
before this Court. Thus the sangguniang bayan shall "(rr) Regulate cafes, restaurants, beer-houses, hotels, motels, inns,
pension houses and lodging houses, except travel agencies, tourist guides, tourist transports, hotels, resorts, de luxe
restaurants, and tourist inns of international standards which shall remain under the licensing and regulatory power of the
Ministry of Tourism which shall exercise such authority without infringing on the taxing or regulatory powers of the municipality;
(ss) Regulate public dancing schools, public dance halls, and sauna baths or massage parlors; (tt) Regulate the establishment
and operation of billiard pools, theatrical performances, circuses and other forms of entertainment; ..." 27 It is clear that municipal
corporations cannot prohibit the operation of night clubs. They may be regulated, but not prevented from carrying on their
business. It would be, therefore, an exercise in futility if the decision under review were sustained. All that petitioners would have
to do is to apply once more for licenses to operate night clubs. A refusal to grant licenses, because no such businesses could
legally open, would be subject to judicial correction. That is to comply with the legislative will to allow the operation and
continued existence of night clubs subject to appropriate regulations. In the meanwhile, to compel petitioners to close their
establishments, the necessary result of an affirmance, would amount to no more than a temporary termination of their business.
During such time, their employees would undergo a period of deprivation. Certainly, if such an undesirable outcome can be
avoided, it should be. The law should not be susceptible to the reproach that it displays less than sympathetic concern for the
plight of those who, under a mistaken appreciation of a municipal power, were thus left without employment. Such a deplorable
consequence is to be avoided. If it were not thus, then the element of arbitrariness enters the picture. That is to pay less, very
much less, than full deference to the due process clause with its mandate of fairness and reasonableness.

4. The conclusion reached by this Court is not to be interpreted as a retreat from its resolute stand sustaining police power
legislation to promote public morals. The commitment to such an Ideal forbids such a backward step. Legislation of that
character is deserving of the fullest sympathy from the judiciary. Accordingly, the judiciary has not been hesitant to lend
the weight of its support to measures that can be characterized as falling within that aspect of the police power. Reference
is made by respondents to Ermita-Malate Hotel and Motel Operators Association, Inc. v. City Mayor of Manila. 28 There is a
misapprehension as to what was decided by this Court. That was a regulatory measure. Necessarily, there was no valid
objection on due process or equal protection grounds. It did not prohibit motels. It merely regulated the mode in which it may
conduct business in order precisely to put an end to practices which could encourage vice and immorality. This is an entirely
different case. What was involved is a measure not embraced within the regulatory power but an exercise of an assumed power
to prohibit. Moreover, while it was pointed out in the aforesaid Ermita-Malate Hotel and Motel Operators Association, Inc.
decision that there must be a factual foundation of invalidity, it was likewise made clear that there is no need to satisfy such a
requirement if a statute were void on its face. That it certainly is if the power to enact such ordinance is at the most dubious and
under the present Local Government Code non-existent.

WHEREFORE, the writ of certiorari is granted and the decision of the lower court dated January 15, 1976 reversed, set
aside, and nullied. Ordinance No. 84, Series of 1975 of the Municipality of Bocaue is declared void and unconstitutional.
The temporary restraining order issued by this Court is hereby made permanent. No costs.

Velasco vs villegas

FERNANDO, C.J.:

This is an appeal from an order of the lower court dismissing a suit for declaratory relief challenging the constitutionality
based on Ordinance No. 4964 of the City of Manila, the contention being that it amounts to a deprivation of property of
petitioners-appellants of their means of livelihood without due process of law. The assailed ordinance is worded thus: "It
shall be prohibited for any operator of any barber shop to conduct the business of massaging customers or other persons
in any adjacent room or rooms of said barber shop, or in any room or rooms within the same building where the barber
shop is located as long as the operator of the barber shop and the room where massaging is conducted is the same
person." 1 As noted in the appealed order, petitioners-appellants admitted that criminal cases for the violation of this ordinance
had been previously filed and decided. The lower court, therefore, held that a petition for declaratory relief did not lie, its
availability being dependent on there being as yet no case involving such issue having been filed. 2

Even if such were not the case, the attack against the validity cannot succeed. As pointed out in the brief of respondents-
appellees, it is a police power measure. The objectives behind its enactment are: "(1) To be able to impose payment of
the license fee for engaging in the business of massage clinic under Ordinance No. 3659 as amended by Ordinance
4767, an entirely different measure than the ordinance regulating the business of barbershops and, (2) in order to forestall
possible immorality which might grow out of the construction of separate rooms for massage of customers." 3 This Court
has been most liberal in sustaining ordinances based on the general welfare clause. As far back as U.S. v. Salaveria, 4 a 1918
decision, this Court through Justice Malcolm made clear the significance and scope of such a clause, which "delegates in
statutory form the police power to a municipality. As above stated, this clause has been given wide application by municipal
authorities and has in its relation to the particular circumstances of the case been liberally construed by the courts. Such, it is
well to really is the progressive view of Philippine jurisprudence." 5 As it was then, so it has continued to be. 6 There is no
showing, therefore, of the unconstitutionality of such ordinance.

WHEREFORE, the appealed order of the lower court is affirmed. No costs.

Anglo-fil

These two petitioners foe certiorari seek to annul the order of the Court of First Instance of Manila issued ex-parte, lifting
the restraining orders it had previously issued. The setting aside of the restraining orders enabled the implementation of
the Management Contract executed by and between respondents, providing for respondent Ocean Terminal Services, Inc.
as the exclusive stevedoring contractor at the South Harbor, Port of Manila.

Involved in these two petitions is the operation of stevedoring work in the South Harbor of the Port of Manila. Stevedoring,
as the term is understood in the port business, consists of the handling of cargo from the hold of the ship to the dock, in
case of pier-side unloading, or to a barge, in case of unloading at sea. The loading on the ship of outgoing cargo is also
part of stevedoring work. Stevedoring charges at rates approved by the Government are assessed and collected for the
services.

The Philippines Ports Authority (PPA), the government agency charged with the management and control of all ports, was
created by Presidential Decree No. 505, promulgated on July 11, 1974, later superseded by Presidential Decree No. 857
dated December 23, 1975. The PPAs function is to carry out an integrated program for the planning, development,
financing, and operation of ports and port districts throughout the country. Among other things, the powers, duties, and
jurisdiction of the Bureau of Customs concerning arrastre operations were transferred to and vested in the PPA.

The Philippine Integrated Port Services, Inc., (PIPSI), petitioner in G.R. No. 54966, is a stevedoring operator at the Manila
South Harbor. Anglo-Fil Trading Corporation, Aduana Stevedoring Corporation, Anda Stevedoring Corporation, Ben Paz
Port Service, Inc., Manila Stevedoring and Arrastre Services, Inc., (Anglo-Fil, et al.,) petitioners in G.R. No. 54958, are
stevedoring and arrastre operators and contractors, likewise at Manila South Harbor, Port of Manila. Anglo-Fil, et al., are
members of the Philippine Association of Stevedoring Operators and Contractors, Inc. (PASOC).

Prior to the present controversy which arose as a result of the actions of the PPA, twenty-three (23) contractors competed
at the South Harbor for the performance of stevedoring work. The licenses of these contractors had long expired when the
PPA took over the control and management of ports but they continued to operate afterwards on the strength of temporary
permits and hold-over authorities issued by PPA.

On May 4, 1976, the Board of Directors of PPA passed Resolution No. 10, approving and adopting and adopting a set of
policies on Port Administration, Management and Operation. The PPA adopted as its own the own the Bureau of Customs
policy of placing on only one organization the responsibility for the operation of arrastre and stevedoring services in one
port.

On April 11, 1980, Presidential Ferdinand E. Marcos issued Letter of Instruction No. 1005-A which among other things,
directed PPA;
 To expeditiously evaluate all recognized cargo-handling contractors and port-related service operators doing
business in all Port Districts in the country under such criteria as PPA may set and to determine the qualified
contractor or operator under said criteria in order to ensure effective utilization of port facilities, prevent pilferage
and/or pinpoint responsibility for its and provide optimum services to major ports vital to the countrys trade and
economy.

This was followed by the Presidents memorandum to respondent Bacling dated April 18, 1980, directing submission of a
report on the integrated of the stevedoring operations in Manila South Harbor and emphasizing the need for such
integration as well as the strengthening of the PPA in order to remedy the problems therein. In compliance therewith, PPA
made a study evaluation of the arrastre and stevedoring industry in the ports where integration had not yet been achieved.
A special committee was created on April 25, 1980 to make a final evaluation of existing operators in the South Harbor
and to select the most qualified among them.

On April 28, 1980, the committee submitted its report recommending the award of an exclusive contract for stevedoring
services in the South Harbor to respondent Ocean Terminal Services, Inc. (OTSI) after finding it the best qualified among
the existing contractors. The committee report and recommendation were indorsed by respondent Primitivo Solis, Jr., Port
Manager of Manila, to respondent Baclig on April 30, 1980. On May 14, 1980, the latter approved the recommendation.

In accordance with the Presidents memorandum dated April 18, 1980, PPA submitted the committee report to him. On
May 24, 1980, the President approved the recommendation to award an exclusive management contract to OTSI.

On June 27, 1980, PPA and OTSI entered into a management contract which provided, among others, for a five-year
exclusive operation by OTSI of stevedoring services in the South Harbor, renewable for another five (5) years. The
contract set the commencement of the exclusive operation by OTSI upon proper determination by PPA which shall not be
earlier that two (2) months from the approval of the contract by the Board of Directors of the PPA. The latter gave its
approval on June 27, 1980.

On July 23, 1980, petitioner PIPSI instituted an action against PPA and OTSI for the nullification of the contract between
the two, the annulment of the 10% of gross stevedoring revenue being collected by PPA, and injunction with preliminary
injunction. The case was docketed as Civil Case No. 133477 in the Court of First Instance of Manila, provided over by
respondent Judge Alfredo Lazaro. On July 29, 1980, the respondent court issued a restraining order ex-parte, enjoining
respondents PPA and OTSI from implementing the exclusive contract of stevedoring between them.

On August 21, 1980, with leave of court, petitioners, Anglo-Fil, et al., filed their complaint in intervention. The motion was
granted and on August 22, 1980, respondent court issued another ex-parte restraining order in the case to include the
petitioners Anglo-Fil et al., under the benefits of such order.

On August 30, 1980, PPA filed an urgent motion to lift the restraining orders "in view of their long delay in the resolution of
the injunction incident and the countervailing public interest involved." On September 1, 1980, respondent Judge issued
an order, which reads:

"AS PRAYED FOR, the restraining orders issued by the this Court on July 29, 1980 and August 20, 1980, are hereby
dissolved, lifted, and set aside without prejudice to the Courts resolution on the propriety of issuing the writ of preliminary
injunction prayed for by the petitioners."

On September 5, 1980, PPA sent a letter to the General Manager of PIPSI informing him that due to the lifting of the
temporary restraining order, it was withdrawing PIPSIs hold-over authority to operate or provide stevedoring services at
South Harbor effective September 7, 1980.

Petitioners Anglo-Fil, et al., and PIPSI, therefore, filed the present petitions for certiorari with preliminary injunction alleging
that the lifting of the retraining orders ex-parte by respondent Judge was clearly affected with grave abuse of discretion
amounting to lack of jurisdiction. They also applied for the issuance in the meantime of a restraining order.

On September 9, 1980, we ordered the consolidation of the two cases and on August 12, 1980, heard the petitioners
motions for a restraining order.

On September 15, 1980, the respondent court issued an order in Civil Case No. 133477 denying the application of
petitioners for a writ of preliminary injunction and affirming its order of September 1, 1980 lifting the temporary restraining
orders issued in the case.
On the same day, the Katipunan ng mga Manggagawa sa Daungan (KAMADA), a labor federation and its thirteen (13)
member labor organizations filed a petition to intervene in the consolidated cases. According to KAMADA, its members
would lose their jobs if the contract was implemented. It also alleged that the collective bargaining contract between OTSI
and PWUP would be prejudicial to workers because KAMADA members received greater benefits from the ousted
contractors;

On September 29, 1980, PIPSI filed a supplemental petition to annul the order of the respondent judge denying the
application for preliminary injunction and affirming the orders issued on July 29 and August 22, 1980. 1wphi1

On October 14, 1980, PPA filed its comment with opposition to preliminary injunction stating that the lifting of the
restraining orders by respondent judge was intended to preserve the status quo pending resolution of the preliminary
injunction; that said orders were issued without hearing or bond, therefore, the dissolution was proper considering that it
had been in force for one month and an early resolution of the motion for injunction was not in sight, and that in dissolving
an injunction already issued, the court cannot be considered as having acted without jurisdiction or in excess thereof even
if dissolution had been made without previous notice to the adverse party and without a hearing. Furthermore, it argued
that when the purpose of an administrative determination is to decide whether a right or privilege which an applicant does
not possess shall be granted to him or withheld in the exercise of a discretion vested by statute, notice and hearing are
not necessary. It also added that the policy of integration in the award by PPA to OTSI is impressed with public interest
while what is involved as far as petitioners were concerned was merely their alleged right to operate stevedoring services,
a property right the denial of which could easily be restored in the event the respondent court decided that petitioners are
entitled to it.

In their consolidated reply, Anglo-Fil, et al., argued that the temporary order in their favor was not issued ex-parte for the
following reasons: a) it was issued when PIPSI and PPA were already conducting hearings on the petition for preliminary
injunction; b) it was announced in open court; and c) PPA did not object to such issuance. Likewise, they argued that
although a permit to operate is a privilege, its withdrawal must comply with due process of law just like the practice of law,
medicine, or accountancy, and that not only property rights are involved but their very livelihood, their right to live.

On October 21, 1980, we issued a resolution granting the temporary mandatory restraining order "effective immediately
ordering respondents to allow the workers represented by said petitioner-intervenors to render the stevedoring services
performed by them on foreign vessels in the Manila South Harbor before the execution of the exclusive stevedoring
contract of June 27, 1980 until further orders of the Court, the order of respondent Judge, dated September 1 and 15,
1980 as well as the implementing letter of Philippine Ports Authority of September 5, 1980 to the contrary
notwithstanding."

On October 24, 1980, PPA issued Memorandum Order No. 23 providing for guidelines in implementing the temporary
mandatory restraining order of the Supreme Court dated October 21, 1980, to wit:

xxx xxx xxx

(1.) The Office of the Harbor Master shall determine which union has serviced a particular vessel for the period
from January 1, 1980 to June 26, 1980. The number of services performed by a particular union for a given vessel
shall be quantified for the said period after which each union shall be identified whether they are affiliated with
PWUP or KAMADA.

(2.) The most number of times that a union has serviced a particular vessel with its affiliation properly considered
shall continue to service said vessel for its incoming calls or arrivals.

(3.) If there is a tie in the number of services performed by both PWUP and KAMADA affiliated unions, the last
union that serviced said vessel shall be allowed to continue servicing the same on all its incoming calls or arrivals.

(4.) Once the union has been properly identified during the berthing meeting, the Harbor Master shall inform
Ocean Terminal Services, Inc. accordingly and shall be authorized to negotiate with the union or the gang leader
concerned on the number of gangs as may be required by the vessel or its agent.

(5.) All unions in this order shall refer only to South Harbor stevedoring union.
 (6.) KAMADA shall have the duty and responsibility to certify that the stevedores deployed in any given vessel
allowed for their work are bona fide members of their group and that they were the same stevedores who serviced
assigned vessel prior to the stevedoring services integration.

On November 7 and 10, 1980 OTSI and PPA filed their separate answers to KAMADAs petition in intervention. They
assured this Court that none of the legitimate stevedores who had joined the KAMADA would be displaced from work
provided he joined PWUP. Written guarantees of this assurance were separately submitted to this Court by both OTSI and
PWUP. OTSI further alleged in its answer that, contrary to the claim of KAMADA, the CBA signed by OTSI with PWUP
represented the best of employment ever offered to the stevedores in the South Harbor.

On November 13, 1980, Anglo-Fil, et al., filed an urgent motion to cite PPA and OTSI in contempt on the following
grounds: 1) issuance of PPA-POM Memorandum No. 23, series of 1980; 2) letter of October 29, 1980 of PPA to Anglo-Fil,
et al., denying a "non-existing" request for permission to operate by the latter; and 3) refusal of PPA authorities to issue
gate passes to KAMADA-affiliated stevedores to be used and employed by Anglo-Fil, et al., in their resumption of work,
pursuant to the Supreme Court order of October 21, 1980.

On November 20, 1980, PPA filed a motion to lift the temporary mandatory restraining order but the same was denied by
this Court.

On November 26, 1980, an urgent motion for clarification of the resolution of October 21, 1980 was filed by KAMADA
seeking clarification as to which company its workers should work for, alleging that after Antranco Stevedores Union
(Antranco) a KAMADA member, had received a letter from OTSI to supply the necessary stevedores gang to service the
S/S "Success", Anglo-Fil Trading Corporation prohibited its employees who are members of Antranco from working for
OTSI in the light of the resolution of this Court and the existing collective bargaining agreement between said union and
Anglo-FilTrading Corporation. As a consequence, the union was allegedly unable to service S/S "Success" and from
October 21, 1980 up to the present, OTSI failed to allow members of KAMADA to service several vessels.

A joint manifestation was filed by respondents PPA and OTSI alleging compliance with the above resolution to the effect
that KAMADA workers have been and are being employed on the vessels they used to serve prior to June 27, 1980, and
justifying issuance of PPA-POM Memorandum No. 23, as a means to avert possible conflict among the competing union
groups (PWUP and KAMADA) involved, to provide a reasonable and fair system for determining which group had
previously worked on a vessel and should work on its subsequent calls, and to insure that only the bonafide stevedores
contemplated by the order of this Court are allowed to work.

On December 2, 1980, another motion for clarification was filed by KAMADA regarding the phrase "foreign vessels" which
it stated to be inaccurate as KAMADA members also work on vessels of Philippine registry like those operated by Sweet
Lines and Lorenzo Shipping Lines whose vessels also dock at the Manila South Harbor. It suggested that the basis should
not be the foreign vessels but the shipping agents or charterers and consignees and that the basis for determining and
quantifying the vessels given to PWUP or KAMADA should be from January 1, 1978 to September 7, 1980.

This Court in a resolution dated December 9, 1980, granted the motion of KAMADA to wit:

xxx xxx xxx

x x x (3) GRANT the motion for clarification by petitioners-intervenors issuing a resolution previously released, the
pertinent portion of which reads, for while the order of October 21, 1980 is on its face quite definite as to what it purports
to require, this resolution may remove any doubt as to its purpose and intent, thus assuring the utmost fidelity in its
compliance. The order requires and mandates that all workers represented by said petitioners-invtervenors can continue
rendering stevedoring services performed by them on foreign vessels, in Manila South Harbor before the execution of the
exclusive stevedoring contract of June 27, 1980, until further orders of the Court, without any reference to any particular
vessel, the decisive factor being shipping lines involved and the fact that they were at that time rendering stevedoring
services, irrespective of the labor unions to which they are affiliated. xxx."

Inspite of our clarificatory order, various problems in its implementation appear to have beset the parties. Repeated
motions and manifestations and countermotions and countermanifestations were filed with unbroken regularity, swelling
the records of these petitions to unusual proportions. After requiring the parties to submit their respective positions, we
issued on January 6, 1983, a resolution which modified our earlier orders as follows:
"G.R. No. 54958 (Anglo-Fil Trading Corporation, et al. vs. Hon.Alfredo Lazaro, et al.); and G.R. No. 54966 (Philippine
Integrated Port Services, Inc. vs. Hon. Alfredo Lazaro, et al.). Considering the urgent motion and manifestation of
petitioners-intervenors filed on March 20, 1982, the comment of respondent Ocean Terminal Services, Inc., filed on June
7, 1982, the comment of respondent Philippine Ports Authority filed on June 8, 1982, the reply of petitioners-intervenors
filed on June 28, 1982, the rejoinder of respondent Ocean Terminal Services, Inc., filed on July 27, 1982, the rejoinder of
respondent Philippine Ports Authority filed on August 6, 1982 and the supplemental motion and manifestation filed by
petitioners-intervenors on September 15, 1982, the Court Resolved to direct the parties concerned to observe the
following guidelines in the allocation of stevedoring assignments: 1. Any vessel belonging to a shipping line shall be
assigned for stevedoring work to the union that had served that shipping line the greatest number of times as appearing in
the PPA records for the six-month period immediately preceding the execution of the stevedoring contract of OTSI. 2. The
above notwithstanding, whenever a vessel destined to or proceeding from the Port of Manila has been chartered for a
particular voyage by a consignee or any person having interest in the goods carried therein, such vessel shall be assigned
for stevedoring work to the union that served the charterer the greater number of times as appearing in the PPA records
for six-month period immediately preceding the execution of the stevedoring contract of OTSI. In case there are two or
more charterer who pays the highest freight charges shall be the determining fact in the assignment. 3. Vessels of new
shipping lines calling at the Port of Manila for the first time as well as vessels contracted by new charterers shall be
assigned to the union of choice of the new shipping line or charterer as the case may be."

The main issue in these petitions is whether or not the respondent judge acted with grave abuse of discretion when he
lifted ex-parte the temporary restraining order he had earlier issued also ex-parte.

From the viewpoint of procedure, we see no grave abuse of discretion or want of jurisdiction. Subsequent to the issuance
to the questioned order, the respondent court heard the parties on the petitioners application for a writ of preliminary
injunction and, after hearing the parties evidence and arguments, denied the application for the writ. We also agree the
with the respondents that it is not grave abuse of discretion when a court dissolves ex-parte abuse of discretion when a
court dissolves ex-parte a restraining order also issued ex-parte. (Calaya v. Ramos, 79 Phil, 640; Clarke v. Philippine
Ready Mix Concrete Co., 88 Phil. 460; Larap Labor Union v. Victoriano, 97 Phil. 435.)

The restraining orders dated July 29, 1980 and August 22, 1980 respectively provide:

xxx xxx xxx

"Finding the allegations in the complaint to be sufficient in form and in substance, a temporary restraining order is hereby
issued x x x.

xxx xxx xxx

"and to maintain the status quo until further orders from this court.

x x x.

xxx xxx xxx

"It appearing that on July 29, 1980, this Court issued an order granting the prayer of the original plaintiff for a temporary
restraining order, the same order is hereby reiterated and to include Anglo-Fil Trading Corporation. x x x.

xxx xxx xxx

"plaintiffs-intervenors herein and for the parties to serve the status quo until further orders from this Court." (Italics
supplied)

A restraining order is an order to maintain the subject of controversy in status quo until the hearing of an application for a
temporary injunction. Unless extended by the court, a restraining order ceases to be operative at the expiration of the time
fixed by its terms. In cases where it has been granted ex-parte, it may be dissolved upon motion before answer. (See the
Revised Rules of Court, Francisco, pp. 184-186, citing 43 CJS, 28 Am. Jur)

From the aforequoted dispositive portions, it is beyond doubt that the duration of the restraining orders was "until further
orders from the court." In lifting said restraining orders on September 1, 1980, respondent judge merely exercised the
prerogative he earlier reposed upon himself to terminate such orders when circumstances so warranted. Considering
again that the previous grants of the restraining orders in favor of petitioners were made ex-parte and without bond, the
need for a notice and hearing in regard to such lifting was not necessary, much less mandatory.

The petitioners contention that the lifting of the restraining order had rendered moot and academic the injunction case in
the trial court is likewise untenable. A restraining order is distinguished from an injunction in that it is intended as a
restraint on the defendant until the propriety of granting an injunction pendente lite can be determined, and it goes no
further than to preserve the status quo until such determination. Therefore, the grant, denial, or lifting of a restraining order
does not in anyway pre-empt the courts power to decide the issue in the main action which in the case at bar, is the
injunction suit. In fact, the records will show that the trial court proceeded with the main suit for injunction after the lifting of
the restraining orders.

Petitioner PIPSI also maintains that there were no considerations of public interest which supported the lifting. On the
contrary, the lifting allegedly permitted a situation palpably against public interest, that is, confiscation of petitioners
business and those similarly situated. This, again, is untenable.

The streamlining of the stevedoring activities in the various ports of the Philippines was undertaken by PPA to implement
LOI No. 1005-A. The public interest, public welfare, and public policy sought to be subserved by said LOI are clearly set
forth in its whereas clauses. They areas follows:

xxx xxx xxx

"WHEREAS, it is a declared national policy to support and accelerate the development of government port facilities as
well as vital port development projects and services;

xxx xxx xxx

"WHEREAS, it is a prime concern of government to protect the interests of legitimate port workers and port users in the
country;

xxx xxx xxx

"WHEREAS, there is need to rationalize and integrate cargo-handling and other port-related services as may have been
contracted out or authorized by the PPA in the various ports of the country;

"WHEREAS, the procedures of voluntary merger, consolidation and/or bidding for the awarding or contracting of cargo-
handling and other port-related services have heretofore proven ineffective and resulted in prolonged and unproductive
wrangling, all to the detriment of efficient port operations and development; and

"WHEREAS, it now become necessary to revitalize and streamline the PPA to carry out its functions and duties as a vital
link in the governmental machinery and the thrust for national economic development;"

xxx xxx xxx

Clearly, there is a reasonable relation between the undeniable existence of an undesirable situation and the statutory
attempt to avoid it. "Public welfare, then, lies at the bottom of the enactment of said law, and the state in order to promote
the general welfare may interfere with personal liberty, with property, and with business and occupations." (See Alalayan
v. National Power Corporation, 24 SCRA 172; Ermita-Malate Hotel and Motel Owners Association v. City Mayor, 20 SCRA
849) These considerations were considered by the respondent judge when he issued his questioned order dated
September 1, 1980. He stated:

xxx xxx xxx

"While in the main this Court is not insensitive to the plight of the petitioners, the overriding considerations of public
interest, as impressed by the Office of the Solicitor General, must be given greater weight and important. This is
compounded by the way and manner by which the parties are now fashioning and shaping their respective positions. The
proceedings, to say the least, have become accented with a myriad of contentious facts and intercalated with complex
legal issues. For the matter is not a simple determination of right and wrong but a collision of ideas and viewpoints. All
these, indeed, militate against an early resolution of the application for a writ of preliminary injunction.
 xxx xxx xxx

The above statement are sufficient bases for the lifting of the order. It is clear that not only did the respondent judge base
the lifting on consideration of public interest but also on the fact that the restraining orders were issued ex-parte without
bond and that the resolution of the motion for preliminary injunction was still far from being decided.

The statement of the respondent judge that "it cannot sit in judgment, without prejudice to public interest, on the truth and
wisdom of the allegation in support of the Urgent Motion" should not be interpreted to mean that courts cannot pass upon
the greater issue of whether or not public interest is served or is prejudiced. The determination by PPA that the measure
sought to be enforced is justified by public interest and the PPA manner of implementing a Presidential Decree and
Letters of Instruction are subject to judicial review.

The Constitution defines the powers of government. Who is to determine the nature, scope, and extent of such powers?
The Constitution has provided for the instrumentality of the judiciary as the rational way. In determining whether or not the
exercise of powers vested by the Constitution truly serves the general welfare or is affected by public interest, the judiciary
does not assert any superiority over the other departments but only fulfills the solemn and sacred obligation assigned to it
by the Constitutions to determine conflicting claims of authority and to establish for the parties in an actual controversy the
rights which that instrument secures and guarantees to them. This is in truth all that is involved in what is termed "judicial
supremacy" which properly is the power of judicial review under the Constitutions. (See Angara vs. Electoral Commission,
63 Phil. 139) This is why questions of expropriation of private lands, we have upheld the courts authority to make inquiry
on whether or not lands were private and whether the purpose was in fact, public. (City of Manila v. Chinese Community
of Manila, 40 Phil. 340). Similarly, in the present cases, the question of whether or not the lifting of the restraining orders
will prejudice public interest and will run counter to the protection to labor provision of the Constitution is determinable by
the judiciary under the power of judicial review.

From the records of these petitions, it is evident that the writ of certiorari cannot be granted. The respondent judges
action was not tainted by any capricious or whimsical exercise of judgment amounting to lack of jurisdiction.

It is settled to the point of being elementary that the only question involved in certiorari is jurisdiction, either want of
jurisdiction or excess thereof, and abuse of discretion shall warrant the issuance of the extra-ordinary remedy of certiorari
only when the same is grave as when the power is exercised in an arbitrary or despotic manner. . . . (FS. Divinagracia
Agro Commercial, Inc. v. Court of Appeals, 104 SCRA 180; Abig v. Constantino, 3 SCRA 299; Abad Santos v. Province of
Tarlac, 67 Phil. 480; Alafriz v. Nable, 72 Phil. 278; Travers Luna, Inc. v. Nable, 72 Phil. 278; and Villa Rey Transit, Inc. v.
Bello, 75 SCRA 735).

It is not sufficient, however, to resolve these petitions on whether or not there was grave abuse of discretion tantamount to
lack or exercise of jurisdiction.

The larger issue remains. Behind the maneuvering and skirmishing of the parties lies a question of power. Does the PPA
have the power and authority to award an exclusive stevedoring contract in favor of respondent OTSI? Is the PPA-OTSI
Management Contract executed pursuant to P.D. No. 857 and LOI No. 1005-A, valid?

The facts bearing on this issue are not in dispute and are worth reiterating. They are summarized by the respondent court
as follows:

xxx xxx xxx

"Before the advent of Presidential Decree No. 505, as amended by Presidential Decree No. 857, the administration and
management of the South Harbor, Port of Manila, was under the Bureau of Customs. It appears that the plaintiffs, among
others, were engaged in and allowed to operate stevedoring services on the basis of special permits granted by the
Bureau of Customs (Exhibit A).

"It further developed that the number of stevedoring operators or contractors made it difficult for the Bureau of Customs to
maintain order and discipline among them to the detriment of efficiency and the desired performance at the South Harbor.
This appears to be true with other ports. Thus, an in-depth study and analysis of the problems attendant to arrastre and
stevedoring operations was initiated. The only solution appeared to be the integration of contractors engaged in
stevedoring services with the ultimate objective of having only one stevedoring contractor to engage in cargo-handling
service in a given port. Accordingly, on May 8, 1975, the Bureau of Customs issued Customs Memorandum Order No. 28-
75 providing guidelines for the merger of the multi-operators in the same ports (Exhibit 1).
"On December 23, 1975, Presidential Decree No. 857 was promulgated superseding Presidential Decree No. 505
whereby the jurisdiction of the Bureau of Customs concerning arrastre operations, among others, were transferred and
vested in the PPA.

"On May 4, 1976, the PPA, pursuant to its avowed objectives, approved the PPA policies on port administration,
management and operation, adopting as a policy the horizontal and vertical integration of existing operators at each port
(Exhibit 2 and 3).

"On January 19, 1977, a memorandum order was issued whereby the different port operators or contractors who have
existing permits, licenses, contracts, and other kinds of memorandum agreement issued by the Bureau of Customs
were Temporarily allowed the continuance of their services on a hold-over capacity until such time when the PPA
implements its own pertinent policy guidelines on the matter (Exhibits 5 and 6).

On May 27, 1977, PPA Memorandum Order No. 21, series of 1977, was passed reiterating the implementation of the
policy on integration to insure efficiency and economic in cargo-handling operation and provide better service to port
users and to amply protect the interest of labor and the government as well. It is the declared policy that there should only
be one stevedoring contractor to engage in cargo-handling services in a given port.

"On April 11, 1980, the Presidential issued Letter of Instruction No. 1005-A (Exhibit 7) which directed the PPA to
accelerate the rationalization of all cargo-handling services and to expeditiously evaluate all recognized cargo-handling
contractors and port related service operators under such criteria as the PPA may set and to determine the qualified
contractor or operator in order to insure effective utilization of port facilities, prevent pilferage and/or pinpoint responsibility
for it and provide services major ports vital to the countrys trade and economy. This Letter of Instruction was dictated by
experience where the procedures of voluntary mergers, consolidation and/or bidding for the awarding or contracting of
cargo-handling and other port related services have heretofore proven ineffective and resulted in prolonged and
unproductive wrangling, all to the detriment of efficient port operations and development.

"On April 18, 1980, the President issued a memorandum to the PPA (Annex B of the Answer and Opposition of OCEAN)
to submit its report on the integration and rationalization of the stevedoring operation in Manila South Harbor and the
submission for his approval of the resolution of the board regarding contracts entered into in connection therewith. This
memorandum was dictated by heavy losses suffered by shippers as well as the smuggling of textiles in the South Harbor.

"Pursuant to and in compliance with the Letter of Instruction of April 11, 1980 and the Memorandum of the President dated
April 18, 1980, the PPA created a Special Evaluation Committee composed of Atty. David R. Simon, member of the Legal
Department of PPA and concurrently Assistant to the Port of Manila, as Chairman; Mr. Leonardo Mejia, Chief of the
Commercial Development Division, Port of Manila; and, Capt. Jovito G. Tamayo, Harbor Master and Chief of the Harbor
Operations Division of the Port of Manila, as members. The respective and individual duties of the members of the
Committee taken in their integral entirely could easily sum up to an almost complete overview of the functions of
stevedoring contractors and place them in a vantage position as to provide proper evaluation and determination of the
individual performance, qualification, and compliance of PPA requirements by each stevedoring operator.

"The Committee took into account certain factors with their corresponding percentage weights in its determination, who
among the existing operators, is most qualified for an award of an exclusive contract. In connection therewith, OCEAN
was rated 95% topping all the rest by a wide margin.

"On April 28, 1980, the Evaluation Committee submitted its report recommending the conclusion of a management
contract with OCEAN being the most qualified (Exhibit 8) which recommendation was adopted by the PPA.

"On June 27, 1980, a management contract was executed by and between PPA and OCEAN (Exhibit 11).

"On August 19, 1980, the President approved the exclusive management contract between PPA and OCEAN (Exhibit
10).

"In the meantime, in letters dated July 13, 1980 (Exhibit N) and July 14, 1980 (Exhibit F), PIPSI and INTERVENORS
were informed of the management contract with OCEAN as exclusive operator at the South harbor, Port of Manila,
beginning August 27, 1980."

xxx xxx xxx

The petitioners are on extremely shaky grounds when they invoke the non-impairment clause to sustain their charge of
invalidity. According to the petitioners, contracts entered into with local and foreign clients or customers would be
impaired.

Even in the United States during the heyday of the laissez faire philosophy, we are informed that the American Supreme
Courts interpretations have never allowed the contract clause to be an inflexible barrier to public regulation. According to
Gerald Gunther, Professor of Constitutional Law at Stanford University, historians have probably exaggerated the impact
of the early contract clause decisions on American economic and legal developments, that the protected position of
corporations in the 19th century was due less to any shield supplied by the U.S. Supreme Court than to legislative
unwillingness to impose restraints-an unwillingness reflecting the laissez faire philosophy of the day. After analyzing the
leading cases on the contract clause from 1810 (Fletcher v. Peck, 6 Cranch 87) to 1880 (Stone v. Mississippi, 101 U.S.
814) he cites the 1914 decision in Atlantic Coast Line R. Co. v. Goldsboro (232 U.S. 548) where the U.S. Court ruled "It is
settled that neither the contract clause nor the due process clause has the effect of overriding the power of the State to
establish all regulations that are reasonably necessary to secure the health, safety, good order, comfort, or general
welfare of the community; that this power can neither be abdicated nor bargained away, and is inalienable even by
express grant; and that all contract and property rights are held subject to its fair exercise" and Manigault v. Springs (199
U.S. 473) where the same Court stated that "parties by entering itno contract may not stop the legislature from enacting
laws intended for the public good." (See Gunther, Cases and Materials On Constitutional Law, 1980 Edition, pp. 554-570).

In the Philippines, the subservience of the contract clause to the police power enacting public regulations intended for the
general welfare of the community is even more clearcut.

As pointed out by then Senior Associate, now Chief Justice Enrique M. Fernando, the laissez faire or let alone philosophy
has no place in our scheme of things, not even under the 1935 Constitution. (See Fernando, The Constitution of the
Philippines, Second Edition, pp. 111-114) In his concurring opinion in Agricultural Credit and Cooperative Financing
Administration v. Confederation of Unions (30 SCRA 649, 682-683) Chief Justice Fernando stated:

"xxx With the decision reached by us today, the Government is freed from the compulsion exerted by the Bacani doctrine
of the constituent-ministrant test as a criterion for the type of activity in which it may engage. Its constricting effect is
consigned to oblivion. No doubts or misgivings need assail us that governmental efforts to promote the public weal,
whether through regulatory legislation of vast scope and amplitude or through the undertaking of business activities,
would have to face a searching and rigorous scrutiny. It is clear that their legitimacy cannot be challenged on the ground
alone of their being offensive to the implications of the laissez-faire concept. Unless there be a repugnancy then to the
limitations expressly set forth in the Constitution to protect individual rights, the government enjoys a much wider latitude
of action as to the means it chooses to cope with grave social and economic problems that urgently press for solution.
xxx"

The Manila South Harbor is public property owned by the State. The operations of this premiere port of the country,
including stevedoring work, are affected with public interest. Stevedoring services are subject to regulation and control for
the public good and in the interest of general welfare.

Not only does the PPA, as an agency of the State enjoy the presumption of validity in favor of its official acts implementing
its statutory charter, it has more than adequately proved that the integration of port services-is far from arbitrary and is
related to the stated governmental objective.

A single contractor furnishing the stevedoring requirements of a port has in its favor the economy of scale and the
maximum utilization of equipment and manpower. In turn, effective supervision and control as well as collection and
accounting of the government share of revenues are rendered easier for PPA than where there are 23 contractors for it to
oversee. As respondent court found from the evidence, the multiple-contractor system has bred cut-throat competitions in
the port. Understandably, most contractors had been unable to acquire sufficient modern facilities, observe labor
standards for their workers, maintain efficiency in services, and pay PPA dues. The questioned program would accelerate
the rationalization and integration of all cargo-handling activities and port-related services in major ports and the
development of vital port facilities, projects, and services.

The contention of petitioners Anglo-Fil, et al., that due process was violated resulting to a confiscatory effect on private
property is likewise without merit.

In the first place, the petitioners were operating merely on "hold-over" permits. These permits which were based on PPA
memorandum Order No. 1, dated January 19, 1977 provided:
 xxx xxx xxx

"In view thereof and pending proper evaluation by this Office of all existing permits, licenses, contracts, and other kinds of
memorandum agreements issued by the Bureau of Customs to the different port operators or contractors, you may
temporarily allow the continuance of their services on a hold-over capacity until such time when the PPA implements its
own pertinent policy guidelines on the matter.

xxx xxx xxx

Clearly, all hold-over permits were by nature temporary and subject to subsequent policy guidelines as may be
implemented by PPA. Such should have served as sufficient notice to petitioners that, at any time, their authorities may be
terminated.

Petitioners PIPISI would also impress upon this Court that the certification issued to it and its fellow contractors by PPA,
dated August 30, 1979, showed that they were not only kept in the dark as to PPAs subsequent move to award OTSI an
exclusive contract, but that they were actually lulled into believing that their temporary permits were being given pending
issuance of their PTO or Permit to Operate.

We do not believe so. The second paragraph of the certification states that the hold-over permit was still subject to the
memorandum quoted above. The certification provided that: "In accordance with PPA Memo Circular No. I, dated January
9, 1977, the said firm is allowed to continue operating at the South Harbor, Port manila." (italics supplied.)

Whether or not the petitioners would be issued a PTO depended on the sound discretion of PPA and on the policies, rules
and regulations that the latter may implement in accordance with the statutory grant of power. Petitioners, therefore,
cannot be said to have been deprived of property without due process because, in this respect, what was given them was
not a property right but a mere privilege and they should have taken cognizance in the South Harbor, their permits can be
withdrawn anytime the public welfare deems it best to do so.

The absence of arbitrariness or bad faith is manifest in the selection procedure adopted. The award in fabvor of OTSI was
the result of an evaluation of performance of existing contractors made by a special committee created by the PPA. The
respondent court found from the evidence that the members of that committee were "in a vantage position as to provide
proper evaluation and determination of the individual performance, qualification, and compliance of the PPA requirements
by each stevedoring operator." The committee rated OTSI with the highest grade of 95% in its evaluation.

And significantly, since no less than the President of the Philippines approved the award of the management contract to
OTSI presumptively after through consideration of all factors relevant to efficient stevedoring services, it is difficult for this
Court to find a violation of due process in the selection procedure. In the language of the Chief Justice in Lim v. Secretary
(34 SCRA 751) if the task of overturning a decision of a department head is attended with difficulty, the burden of
persuasion becomes much heavier when the challenged action is encased in the armor of an explicit presidential
approval. In the case at bar, there is nothing in the record remotely assailing the motives of the President in giving his
imprimatur to the award.

In seeking the nullification of the management contract, the petitioners also invoke the constitutional provision on
monopolies and combination. Section 2, Article XIV of the Constitution provides:

The state shall regulate or prohibit private monopolies when the public interest so requires. No combinations in restraint
1wphi1

of trade or unfair competition shall be allowed.

Private monopolies are not necessarily prohibited by the Constitution. They may be allowed to exist but under State
regulation. A determination must first be made whether public interest requires that the State should regulate or prohibit
private monopolies. A distinction prevails as regards combinations in restraint of trade and unfair competition which are
prohibited outright by the Constitution.

By their very nature, certain public services or public utilities such those which supply water, electricity, transportation,
telephone, telegraph, etc. must me given exclusive franchises if public interest is to be served. Such exclusive franchises
are not violative of the law against monopolies. (58 Corpus Juris Segundum 958-964).

Neither is the management contract violative of the Anti-Graft Law. It is a contract executed in pursuance to law and the
instructions of the President to carry out government objectives to promote public interest. The act did not cause
"undue injury" to the petitioners who as explained earlier had no vested property rights entitled to protection. There is no
undue injury to the government nor any unwarranted benefit to OTSI consideration for PPA which is the payment by OTSI
of ten percent (10%) of its gross income, something which petitioner PIPSI is loathe to pay. The rationalization and
effective utilization of port facilities is to the advantage of the Government. Furthermore, the discretion in choosing the
stevedoring contractor for the south Harbor, Port Manila, belongs by law to PPA. As long as standards are set in
determining the contractor and such standards are reasonable and related to the purpose for which they are used, the
courts should not inquire into the wisdom of PPAs choice. The criterion used by PPA namely, the identification of a
contractor with the highest potential for operating an exclusive service, appears reasonable. The factors which were taken
into account in determining the exclusive contractor are indicia of reasonableness. They are:

Productivity. 25%

Equipment Requirement
Capability 25%

Financial Capability 15%

Promptness in Paying

Government share 25%

Compliance with other

PPA Requirements... 20%

100%

It is settled rule that unless the case justifies it, the judiciary will not interfere in purely administrative matters. (Monark
International, Inc. v. Noriel, 83 SCRA 114) Such discretionary power vested in the proper administrative body, in the
absence of arbitrariness and grave abuse so as to go beyond the statutory authority, is not subject to the contrary
judgment or control of others. (See Meralco Securities Corporation v. Savellano, 117 SCRA 804). In general, courts have
no supervisory power over the proceedings and actions of the administrative departments of the government. This is
particularly true with respect to acts involving the exercise of judgment or discretion, and to findings of fact. (Pajo v. Ago
and Ortiz, 108 Phil.905)

In view of the foregoing, we find the PPA-OTSI Management Contract executed on June 27, 1980, valid and devoid of any
constitutional or legal infirmity. The respondents, however, should maintain the policy of absorption of bona-fide displaced
port workers in the integration scheme as mandated not only by LOI No. 1005-A but by the policy of the State to assure
the rights of workers to security of tenure. (sec. 9, Art. II, Constitution) We note that both PPA and OTSI have given
assurance in their answers that none of the legitimate stevedores would be displaced from work although they added that
their bonafide stevedores should join PWUP. Which union a worker or various workers should join cannot be ordained by
this Court in these petitions where the basic issue is the validity of the exclusive stevedoring contract given to one
operator for one port. This matter will have to be eventually threshed out by the workers themselves and the Ministry of
Labor and Employment before it may be elevated to us, if ever. However, we reiterate the guidelines earlier issued that no
bona fide stevedore or worker should be deprived of employment he used to enjoy simply because of the execution and
implementation of the disputed Management Contract. This absorption of bona fide workers is an act of social justice.
When a person has no property, his job may possibly be his only possession or means of livelihood. Therefore, he should
be protected against any arbitrary and unjust deprivation of his job. (See Bondoc v. Peoples Bank and Trust Company,
103 SCRA 599)

As to the contempt charges, we note that the Order of this Court dated October 21, 1980 allowed "petitioners-intervenors"
meaning KAMADA workers to work at the South Harbor pending resolution of this case, "the order of respondent judge
xxx as well as the implementing letter of Philippine Ports Authority xxx to the contrary notwithstanding." It is not clear from
said orders that the petitioners who are stevedoring operators and contactors were also specifically included. There was
no mention of them being included and allowed with KAMADA workers to resume operations at the South Harbor. The
petitioners read into the order something which was not there. The only clear import of the Order was that KAMADA
workers must be allowed to work notwithstanding any contrary provisions in the Management Contract, a situation brought
about by the lifting of the restraining orders, the denial of the petition for preliminary injunction, and the implementing letter
of PPA. It is a settled rule that a party cannot be punished for contempt unless the act which is forbidden or required to be
done is clearly and exactly defined, so that there can be no reasonable doubt or uncertainty as to what specific act or
thing is forbidden or required. (Lee Yick Hon v. Collector of Customs, 41 Phil. 548, citing U.S. v. Achi-son, etc. R. Co., 146
Fed. 176, 183; 13 CJ 15)
WHEREFORE, the petitions in G.R. No. 54958 and G.R. No. 54966 are hereby DISMISSED for lack of merit. The
respondents are, however, directed to comply with the guidelines in the above decision on the absorption of bonafide
stevedores and as thus modifies, the temporary restraining order dated October 21, 1980 is made PERMANENT. No
costs.

Bautista vs juinio

he validity of an energy conservation measure, Letter of Instruction No. 869, issued on May 31, 1979 the response to
the protracted oil crisis that dates back to 1974 is put in issue in this prohibition proceeding filed by petitioners, spouses
Mary Concepcion Bautista and Enrique D. Bautista, for being allegedly violative of the due process and equal protection
guarantees 1 of the Constitution. The use of private motor vehicles with H and EH plates on week-ends and holidays was banned from "[12:00] a.m. Saturday
morning to 5:00 a.m. Monday morning, or 1:00 a.m. of the holiday to 5:00 a.m. of the day after the holiday." 2 Motor vehicles of the following classifications
are exempted: (a) S (Service); (b) T (Truck); (e) DPL (Diplomatic); (d) CC (Consular Corps); (e) TC (Tourist Cars). 3 Pursuant
thereto, respondent Alfredo L. Juinio, then Minister of Public Works, Transportation and Communications and respondent
Romeo P. Edu, then Commissioner of Land Transportation Commission issued on June 11, 1979, Memorandum Circular No. 39,
which imposed "the penalties of fine, confiscation of vehicle and cancellation of registration on owners of the above-specified
vehicles" found violating such Letter of Instruction. 4 It was then alleged by petitioners that "while the purpose for the issuance of
the LOI 869 is laudable, to wit, energy conservation, the provision banning the use of H and EH [vehicles] is unfair,
discriminatory, [amounting to an] arbitrary classification" and thus in contravention of the equal protection clause. 5 Moreover, for
them, such Letter of Instruction is a denial of due process, more specifically, "of their right to use and enjoy their private property
and of their freedom to travel and hold family gatherings, reunions and outings on week-ends and holidays," inviting attention to
the fact that others not included in the ban enjoying "unrestricted freedom." 6 It would follow, so they contend that Memorandum
Circular No. 39 imposing penalties of fine, confiscation of the vehicle and cancellation of license is likewise unconstitutional, for
being violative of the doctrine of "undue delegation of legislative power." 7 It is to be noted that such Memorandum Circular does
not impose the penalty of confiscation but merely that of impounding, fine, and for the third offense that of cancellation of
certificate of registration and for the rest of the year or for ninety days whichever is longer.

This Court gave due course to the petition requiring respondent to answer. There was admission of the facts as
substantially alleged except, as previously noted, that the ban starts at 12:00 a.m. rather than 1:00 a.m. of a Saturday or
of a holiday and as to the mention of a Willy's Kaiser jeep being registered in the name of a certain Teresita Urbina, about
which respondents had no knowledge. There was a denial of the allegations that the classification of vehicles into heavy H
and extra heavy (EH) on the other hand and light and bantam on the other hand was violative of equal protection and the
regulation as to the use of the former cars on the dates specified a transgression of due process. The answer likewise
denied that there was an undue delegation of legislative power, reference being made to the Land Transportation and
Traffic Code. 8 There was also a procedural objection raised, namely, that what is sought amounts at most to an advisory
opinion rather than an ajudication of a case or controversy.

Petitioners filed a motion to be allowed to reply to the answer. It was granted. The reply, considering its exhaustive
character serving as its memorandum, stressed anew what it emphasized as the arbitrary, unreasonable, and oppressive
aspects of the challenged Letter of Instruction and Memorandum Circular No. 39. It disputed what it characterized as an
"erroneous and arbitrary presumption that heavy car owners unnecessarily use and therefore waste gasoline whenever
they drive their cars on week-ends and holidays;" 9 it stigmatized the ban as defeating its "avowed purpose in the case of the
affluent who own not only heavy limousines but also many small cars [as] they may be compelled to use at least two small
cars;" 10 referred to the high cost of taxis or other public transports for those "not able to afford expensive small cars [possibly] only one heavy and possible old
model;" 11 cited the case of "many eight cylinder vehicles which because of their weight have been registered as light but in fact consume more or as much gasoline as
the banned vehicles." 12 Their conclusion is that "the ban imposed, in result and effect is class legislation." 13

The parties were required to submit memoranda. Respondents did so but not petitioners. They relied on their reply to the
answer as noted, a rather comprehensive pleading. For reasons to be set forth, this Court holds that the petition cannot
prosper.

1. First as to the procedural objection. In the memorandum for respondents, one of the issues raised was whether "the
power of judicial review may be invoked considering the inadequacy of the record and the highly abstract and academic
questions raised by the petitioners." 14 It is inaccurate to say that the record is inadequate. It does not admit of doubt that the ban applies to petitioners who
are "the registered owners of an eight cylinder 1969 Buick, and the vendees of a six cylinder Willy's kaiser jeep, which are both classified as heavy or H." 15 To that extent,
therefore, the enforcement of the assailed Letter of Instruction will amount to a deprivation of what otherwise would be a valid exercise of a property right. Thus they fall
squarely within "the unchallenged rule" as to who may raise a constitutional question, namely, to quote the language of Justice Laurel in the leading case of People v.
Vera, 16 "that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain direct
injury as a result of its enforcement. 17 Moreover, that rule has been considerably relaxed. 18 The question then is neither abstract nor academic as contended by
respondents.

2. There is, however, this formidable obstacle that confronts petitioners. What they seek is for this Court to hold that a
Letter of Instruction, a regulatory measure precisely enacted to cope with the serious and grave problem of energy
conservation, is void on its face. Such a task is rendered unusually difficult by what has been referred to by Justice Laurel
in the leading case of Angara v. Electoral Commission 19 as the "presumption of constitutionality" and by the same jurist in the case of People v.
Vera 20 in slightly different words "a presumption that such an act falls within constitutional limitations." There is need then for a
factual foundation of invalidity. In the language of Ermita-Malate Hotel & Motel Operations Association, Inc. v. City Mayor or
Manila: "It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it is
unavoidable, unless the statute or ordinance is void on its face, which is not the case here. The principle has been nowhere
better expressed than in the leading case of O'Gorman & Young v. Hartford Fire Insurance Co., where the American Supreme
Court through Justice Brandeis tersely and succinctly summed up the matter thus: 'The statute here questioned deals with a
subject clearly within the scope of the police power. We are asked to declare it void on the ground that the specific method of
regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As underlying questions of fact
may condition the constitutionality of legislation of this character, the presumption of constitutionality must prevail in the absence
of some factual foundation of record for overthrowing the statute.' " 21

3. It is true, of course, that there may be instances where a police power measure may, because of its arbitrary,
oppressive or unjust character, be held offensive to the due process clause and, therefore, may, when challenged in an
appropriate legal proceeding, be declared void on its face. This is not one of them. A recital of the whereas clauses of the
Letter of Instruction makes it clear. Thus: "[Whereas], developments in the international petroleum supply situation
continue to follow a trend of limited production and spiralling prices thereby precluding the possibility of immediate relief in
supplies within the foreseeable future; [Whereas], the uncertainty of fuel supply availability underscores a compelling need
for the adoption of positive measures designed to insure the viability of the country's economy and sustain its
developmental growth; [Whereas], to cushion the effect of increasing oil prices and avoid fuel supply disruptions, it is
imperative to adopt a program directed towards the judicious use of our energy resources complemented with intensified
conservation efforts and efficient utilization thereof; * * *." 22 That is undeniable is that the action taken is an appropriate
response to a problem that presses urgently for solution. It may not be the only alternative, but its reasonableness is
immediately apparent. Thus, to repeat, substantive due process, which is the epitome of reasonableness and fair play, is not
ignored, much less infringed.

4. In the interplay between such a fundamental right and police power, especially so where the assailed governmental
action deals with the use of one's property, the latter is accorded much leeway. That is settled law. What is more, it is good
law. Due process, therefore, cannot be validly invoked. As stressed in the cited Ermita-Malate Hotel decision: "To hold
otherwise would be to unduly restrict and narrow the scope of police power which has been properly characterized as the
most essential, insistent and the least limitable of powers, extending as it does 'to all the great public needs.' It would be,
to paraphrase another leading decision, to destroy the very purpose of the state if it could be deprived or allowed itself to
be deprived of its competence to promote public health, public morals, public safety and the general welfare. Negatively
put, police power is 'that inherent and plenary power in the State which enables it to prohibit all that is hurtful to the
comfort, safety, and welfare of society.' " 23

5. The due process question having been disposed of, there is still the objection based on the equal protection clause to
be considered. A governmental act may not be offensive to the due process clause, but may run counter to such a
guarantee. Such is the case when there is no rational basis for the classification followed. That is the point raised by
petitioners. For them, there is no rational justification for the ban being imposed on vehicles classified as heavy (H) and
extra-heavy (EH), for precisely those owned by them fall within such category. Tested by the applicable standard that must
be satisfied to avoid the charge of a denial of equal protection, the objection of petitioners is shown to be lacking in merit.
Such a classification on its face cannot be characterized as an affront to reason. A legal norm according to J.M. Tuason &
Co., Inc. vs. Land Tenure Administration, 24 "whether embodied in a rule, principle, or standard, constitutes a defense against
anarchy at one extreme and tyranny at the other. Thereby, people living together in a community with its myriad and complex
problems can minimize the friction and reduce the conflicts, to assure, at the very least, a peaceful ordering of existence. The
Ideal situation is for the law's benefits to be available to all, that none be placed outside the sphere of its coverage. Only thus
could chance and favor be excluded and the affairs of men governed by that serene and impartial uniformity, which is of the very
essence of the Idea of law. The actual, given things as they are and likely to continue to be, cannot approximate the Ideal. Nor is
the law susceptible to the reproach that it does not take into account the realties of the situation. * * * 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. It suffices then that the laws operate equally and uniformly on
all persons under similar circumstances or that all persons must be treated in the same manner, the conditions not being
different, both in the privileges conferred and the liabilities imposed. Favoritism and undue preference cannot be allowed. For
the principle is that equal protection and security shall be given to every person under circumstances, which if not Identical 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." 25

6. Nor does it militate against the validity of the Letter of Instruction just because the ban imposed does not go as far as it
could have and therefore could be less efficacious in character. That was the solution which for the President expressing
a power validly lodged in him, recommended itself. There was a situation that called for a corrective measure. He decided
that what was issued by him would do just that or, at the very least, help in easing the situation. That it did not cover other
matters which could very well have been regulated does not call for a declaration of nullity. The President, to
paraphrase Lutz v. Araneta, 26 "is not required by the Constitution to adhere to the policy of all or none." 27 It is quite obvious
then that no equal protection question arises.

7. It may not be amiss to refer to a 1981 American Supreme Court decision, Minnesota v. Clover Leaf Creamery
Company. 28 Respondent along with several other business corporations adversely affected involved in the manufacture and
utilization of plastic milk containers filed suit in a Minnesota district court seeking to enjoin enforcement of a Minnesota statute
banning the retail sale of milk in plastic nonreturnable, nonrefillable containers, but permitting such sale in other nonreturnable,
nonrefillable containers, such as paperboard, milk cartons. After conducting extensive evidentiary hearings, the Minnesota court
enjoined enforcement of the statute, finding that it violated among others the equal protection clause of the Fourteenth
Amendment to the Federal Constitution. The Minnesota Supreme Court affirmed. On certiorari, the United States Supreme
Court reversed, with only Justice Stevens dissenting. The opinion by Justice Brennan noted that "proponents of the legislation
argued that it would promote resource conservation, ease solid waste disposal problems, and conserve energy." 29 That sufficed
for the Court to conclude "that the ban on plastic nonreturnable milk containers bears a rational relation to the State's objectives,
and must be sustained under the Equal Protection Clause." 30 It does show that notwithstanding the "new equal protection
approach" with its emphasis on "suspect classification" and "fundamental rights and interests standard," a concept so ably
expounded by professor Gunther, the "rational relation test" 31 still retains its validity. Not that there could be any objection to the
classification here followed as being in any way susceptible to such a pejorative expression as "suspect" or that the assailed
Letter of Instruction does not qualify under "the fundamental rights and interests" standard

8. There was set forth in the petition what were referred to as "other reasonable measures which the authorities
concerned with energy conservation can take immediately, which are in fact acceptable and obviously called for and
should have been done long ago, to wit: 1. require and establish taxi stands equipped with efficient telephone and
communication systems; 2. strict implementation and observance of cargo truck hours on main arteries; 3. strict
observance of traffic rules; 4. effective solution of traffic problems and decongestion of traffic through rerouting and quick
repair of roads and efficient operation of double decker buses; 5. rationing of gasoline to avoid panic buying and give the
private car owner the option and responsibility of deciding on the use of his allocation; 6. allow neon and electrically
devised advertising signs only from five o'clock p.m. to nine o'clock p.m. 7. prohibit immediately the importation of heavy
and luxury cars and seriously re-examine the car manufacturing program." 32 Admittedly, such measures are conducive to
energy conservation. The question before us however is limited to whether or not Letter of Instruction 869 as implemented by
Memorandum Circular No. 39 is violative of certain constitutional rights. It goes no further than that. The determination of the
mode and manner through which the objective of minimizing the consumption of oil products may be attained is left to the
discretion of the political branches. 33 Absent therefore the alleged infringement of constitutional rights, more precisely the due
process and equal protection guarantees, this Court cannot adjudge Letter of Instruction No. 869 as tainted by
unconstitutionality.

9. It was likewise contended that Memorandum Circular No. 39, issued by the then respondent Minister of Public Works,
Transportation and Communications, and then respondent Land Transportation Commissioner, imposing the penalties "of
fine, confiscation of vehicle and cancellation of license is likewise unconstitutional," petitioners invoking the principle of
non-delegation of legislative power. 34 To that extent that a Letter of Instruction may be viewed as an exercise of the decree-
making power of the President, then such an argument is futile. If, however, viewed as a compliance with the duty to take care
that the laws be faithfully executed, as a consequence of which subordinate executive officials may in turn issue implementing
rules and regulations, then the objection would properly be considered as an ultra vires allegation. There is this relevant excerpt
from Teoxon v. Member of the Board of Administrators: 35 "1. The recognition of the power of administrative officials to
promulgate rules in the implementation of the statute, necessarily limited to what is provided for in the legislative enactment,
may be found in the early case of United States v. Barrias decided in 1908. Then came, in a 1914 decision, United States v.
Tupasi Molina, a delineation of the scope of such competence. Thus: 'Of course the regulations adopted under legislative
authority by a particular department must be in harmony with the provisions of the law, and for the sole purpose of carrying into
effect its general provisions. By such regulations, of course, the law itself can not be extended. So long, however, as the
regulations relate solely to carrying into effect the provisions of the law, they are valid.' In 1936, in People v. Santos, this Court
expressed its disapproval of an administrative order that would amount to an excess of the regulatory power vested in an
administrative official. We reaffirmed such a doctrine in a 1951 decision, where we again made clear that where an
administrative order betrays inconsistency or repugnancy to the provisions of the Act, 'the mandate of the Act must prevail and
must be followed.' Justice Barrera, speaking for the Court in Victorias Milling Company, Inc. v. Social Security Commission,
citing Parker as well as Davis did tersely sum up the matter thus: 'A rule is binding on tile courts so long as the procedure fixed
for its promulgation is followed and its scope is within the statutory granted by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate wisdom * * *. On the other hand, administrative interpretation of the law is
at best merely advisory, for it is the courts that finally determine what the law means.' It cannot be otherwise as the Constitution
limits the authority of the President, in whom all executive power resides, to take care that the laws be faithfully executed. No
lesser administrative executive office or agency then can, contrary to the express language of the Constitution, assert for itself a
more extensive prerogative." 36 It was alleged in the Answer of Solicitor General Estelito P. Mendoza that Letter of Instruction
869 and Memorandum Circular No. 39 were adopted pursuant to the Land Transportation and Traffic Code. 37 It contains a
specific provision as to penalties. 38 Thus: "For violation of any provisions of this Act or regulations promulgated pursuant hereto,
not hereinbefore specifically punished, a fine of not less than ten nor more than fifty pesos shall be imposed." 39 Memorandum
Circular No. 39 cannot be held to be ultra vires as long as the fine imposed is not less than ten nor more than fifty pesos. As to
suspension of registration, 40 the Code, insofar as applicable, provides: "Whenever it shall appear from the records of the
Commission that during any twelve-month period more than three warnings for violations of this Act have been given to the
owner of a motor vehicle, or that the said owner has been convicted by a competent court more than once for violation of such
laws, the Commissioner may, in his discretion, suspend the certificate of registration for a period not exceeding ninety days and,
thereupon, shall require the immediate surrender of the number plates * * *." 41 It follows that while the imposition of a fine or the
suspension of registration under the conditions therein set forth is valid under the Land Transportation and Traffic Code, the
impounding of a vehicle finds no statutory justification. To apply that portion of Memorandum Circular No. 39 would be ultra
vires. It must likewise be made clear that a penalty even if warranted can only be imposed in accordance with the procedure
required by law. 42

Tablarin vs gutierez

The petitioners sought admission into colleges or schools of medicine for the school year 1987-1988. However, the
petitioners either did not take or did not successfully take the National Medical Admission Test (NMAT) required by the
Board of Medical Education, one of the public respondents, and administered by the private respondent, the Center for
Educational Measurement (CEM).

On 5 March 1987, the petitioners filed with the Regional Trial Court, National Capital Judicial Region, a Petition for
Declaratory Judgment and Prohibition with a prayer for Temporary Restraining Order and Preliminary Injunction. The
petitioners sought to enjoin the Secretary of Education, Culture and Sports, the Board of Medical Education and the
Center for Educational Measurement from enforcing Section 5 (a) and (f) of Republic Act No. 2382, as amended, and
MECS Order No. 52, series of 1985, dated 23 August 1985 and from requiring the taking and passing of the NMAT as a
condition for securing certificates of eligibility for admission, from proceeding with accepting applications for taking the
NMAT and from administering the NMAT as scheduled on 26 April 1987 and in the future. After hearing on the petition for
issuance of preliminary injunction, the trial court denied said petition on 20 April 1987. The NMAT was conducted and
administered as previously scheduled.

Petitioners accordingly filed this Special Civil Action for certiorari with this Court to set aside the Order of the respondent
judge denying the petition for issuance of a writ of preliminary injunction.

Republic Act 2382, as amended by Republic Acts Nos. 4224 and 5946, known as the "Medical Act of 1959" defines its
basic objectives in the following manner:

Section 1. Objectives. This Act provides for and shall govern (a) the standardization and regulation of medical
education (b) the examination for registration of physicians; and (c) the supervision, control and regulation of the
practice of medicine in the Philippines. (Underscoring supplied)

The statute, among other things, created a Board of Medical Education which is composed of (a) the Secretary of
Education, Culture and Sports or his duly authorized representative, as Chairman; (b) the Secretary of Health or his duly
authorized representative; (c) the Director of Higher Education or his duly authorized representative; (d) the Chairman of
the Medical Board or his duly authorized representative; (e) a representative of the Philippine Medical Association; (f) the
Dean of the College of Medicine, University of the Philippines; (g) a representative of the Council of Deans of Philippine
Medical Schools; and (h) a representative of the Association of Philippine Medical Colleges, as members. The functions of
the Board of Medical Education specified in Section 5 of the statute include the following:

(a) To determine and prescribe equirements for admission into a recognized college of medicine;
 (b) To determine and prescribe requirements for minimum physical facilities of colleges of medicine, to wit:
buildings, including hospitals, equipment and supplies, apparatus, instruments, appliances, laboratories, bed
capacity for instruction purposes, operating and delivery rooms, facilities for outpatient services, and others, used
for didactic and practical instruction in accordance with modern trends;

(c) To determine and prescribe the minimum number and minimum qualifications of teaching personnel, including
student-teachers ratio;

(d) To determine and prescribe the minimum required curriculum leading to the degree of Doctor of Medicine;

(e) To authorize the implementation of experimental medical curriculum in a medical school that has exceptional
faculty and instrumental facilities. Such an experimental curriculum may prescribe admission and graduation
requirements other than those prescribed in this Act; Provided, That only exceptional students shall be enrolled in
the experimental curriculum;

(f) To accept applications for certification for admission to a medical school and keep a register of those issued
said certificate; and to collect from said applicants the amount of twenty-five pesos each which shall accrue to the
operating fund of the Board of Medical Education;

(g) To select, determine and approve hospitals or some departments of the hospitals for training which comply
with the minimum specific physical facilities as provided in subparagraph (b) hereof; and

(h) To promulgate and prescribe and enforce the necessary rules and regulations for the proper implementation of
the foregoing functions. (Emphasis supplied)

Section 7 prescribes certain minimum requirements for applicants to medical schools:

Admission requirements. The medical college may admit any student who has not been convicted by any court
of competent jurisdiction of any offense involving moral turpitude and who presents (a) a record of completion of a
bachelor's degree in science or arts; (b) a certificate of eligibility for entrance to a medical school from the Board
of Medical Education; (c) a certificate of good moral character issued by two former professors in the college of
liberal arts; and (d) birth certificate. Nothing in this act shall be construed to inhibit any college of medicine from
establishing, in addition to the preceding, other entrance requirements that may be deemed admissible.

xxx xxx x x x (Emphasis supplied)

MECS Order No. 52, s. 1985, issued by the then Minister of Education, Culture and Sports and dated 23 August 1985,
established a uniform admission test called the National Medical Admission Test (NMAT) as an additional requirement for
issuance of a certificate of eligibility for admission into medical schools of the Philippines, beginning with the school year
1986-1987. This Order goes on to state that:

2. The NMAT, an aptitude test, is considered as an instrument toward upgrading the selection of applicants for
admission into the medical schools and its calculated to improve the quality of medical education in the
country. The cutoff score for the successful applicants, based on the scores on the NMAT, shall be determined
every year by the Board of Medical Education after consultation with the Association of Philippine Medical
Colleges. The NMAT rating of each applicant, together with the other admission requirements as presently called
for under existing rules, shall serve as a basis for the issuance of the prescribed certificate of elegibility for
admission into the medical colleges.

3. Subject to the prior approval of the Board of Medical Education, each medical college may give other tests for
applicants who have been issued a corresponding certificate of eligibility for admission that will yield information
on other aspects of the applicant's personality to complement the information derived from the NMAT.

xxx xxx xxx

8. No applicant shall be issued the requisite Certificate of Eligibility for Admission (CEA), or admitted for
enrollment as first year student in any medical college, beginning the school year, 1986-87, without the required
NMAT qualification as called for under this Order. (Underscoring supplied)
Pursuant to MECS Order No. 52, s. 1985, the private respondent Center conducted NMATs for entrance to medical
colleges during the school year 1986-1987. In December 1986 and in April 1987, respondent Center conducted the
NMATs for admission to medical colleges during the school year 1987.1988. 1avvphi1

Petitioners raise the question of whether or not a writ of preliminary injunction may be issued to enjoin the enforcement of
Section 5 (a) and (f) of Republic Act No. 2382, as amended, and MECS Order No. 52, s. 1985, pending resolution of the
issue of constitutionality of the assailed statute and administrative order. We regard this issue as entirely peripheral in
nature. It scarcely needs documentation that a court would issue a writ of preliminary injunction only when the petitioner
assailing a statute or administrative order has made out a case of unconstitutionality strong enough to overcome, in the
mind of the judge, the presumption of constitutionality, aside from showing a clear legal right to the remedy sought. The
fundamental issue is of course the constitutionality of the statute or order assailed.

1. The petitioners invoke a number of provisions of the 1987 Constitution which are, in their assertion, violated by the
continued implementation of Section 5 (a) and (f) of Republic Act 2381, as amended, and MECS Order No. 52, s. 1985.
The provisions invoked read as follows:

(a) Article 11, Section 11: "The state values the dignity of every human person and guarantees full respect of
human rights. "

(b) ArticleII, Section l3: "The State recognizes the vital role of the youth in nation building and shall promote and
protect their physical, moral, spiritual, intellectual and social well being. It shall inculcate in the youth patriotism
and nationalism, and encourage their involvement in public and civic affairs."

(c) Article II, Section 17: "The State shall give priority to education, science and technology, arts, culture and
sports to foster patriotism and nationalism, accelerate social progress and to promote total human liberation and
development. "

(d) Article XIV, Section l: "The State shall protect and promote the right of all citizens to quality education at all
levels and take appropriate steps to make such education accessible to all. "

(e) Article XIV, Section 5 (3): "Every citizen has a right to select a profession or course of study, subject to fair,
reasonable and equitable admission and academic requirements."

Article II of the 1987 Constitution sets forth in its second half certain "State policies" which the government is enjoined to
pursue and promote. The petitioners here have not seriously undertaken to demonstrate to what extent or in what manner
the statute and the administrative order they assail collide with the State policies embodied in Sections 11, 13 and 17.
They have not, in other words, discharged the burden of proof which lies upon them. This burden is heavy enough where
the constitutional provision invoked is relatively specific, rather than abstract, in character and cast in behavioral or
operational terms. That burden of proof becomes of necessity heavier where the constitutional provision invoked is cast,
as the second portion of Article II is cast, in language descriptive of basic policies, or more precisely, of basic objectives of
State policy and therefore highly generalized in tenor. The petitioners have not made their case, even a prima facie case,
and we are not compelled to speculate and to imagine how the legislation and regulation impugned as unconstitutional
could possibly offend the constitutional provisions pointed to by the petitioners.

Turning to Article XIV, Section 1, of the 1987 Constitution, we note that once more petitioners have failed to demonstrate
that the statute and regulation they assail in fact clash with that provision. On the contrary we may note-in anticipation of
discussion infra that the statute and the regulation which petitioners attack are in fact designed to promote "quality
education" at the level of professional schools. When one reads Section 1 in relation to Section 5 (3) of Article XIV as one
must one cannot but note that the latter phrase of Section 1 is not to be read with absolute literalness. The State is not
really enjoined to take appropriate steps to make quality education " accessible to all who might for any number of
reasons wish to enroll in a professional school but rather merely to make such education accessible to all who qualify
under "fair, reasonable and equitable admission and academic requirements. "

2. In the trial court, petitioners had made the argument that Section 5 (a) and (f) of Republic Act No. 2382, as amended,
offend against the constitutional principle which forbids the undue delegation of legislative power, by failing to establish
the necessary standard to be followed by the delegate, the Board of Medical Education. The general principle of non-
delegation of legislative power, which both flows from the reinforces the more fundamental rule of the separation and
allocation of powers among the three great departments of government, 1 must be applied with circumspection in respect
of statutes which like the Medical Act of 1959, deal with subjects as obviously complex and technical as medical education
and the practice of medicine in our present day world. Mr. Justice Laurel stressed this point 47 years ago in Pangasinan
Transportation Co., Inc. vs. The Public Service Commission:2

One thing, however, is apparent in the development of the principle of separation of powers and that is that the
maxim of delegatus non potest delegare or delegate potestas non potest delegare, adopted this practice
(Delegibus et Consuetudiniis Anglia edited by G.E. Woodbine, Yale University Press, 1922, Vol. 2, p. 167) but
which is also recognized in principle in the Roman Law (d. 17.18.3) has been made to adapt itself to the
complexities of modern government, giving rise to the adoption, within certain limits of the principle of "subordinate
legislation," not only in the United States and England but in practically all modern governments. (People vs.
Rosenthal and Osmena [68 Phil. 318, 1939]. Accordingly, with the growing complexity of modern life, the
multiplication of the subjects of governmental regulation and the increased difficulty of administering the laws,
there is a constantly growing tendency toward the delegation of greater power by the legislature, and toward the
approval of the practice by the courts." 3

The standards set for subordinate legislation in the exercise of rule making authority by an administrative agency like the
Board of Medical Education are necessarily broad and highly abstract. As explained by then Mr. Justice Fernando in Edu
v. Ericta4

The standard may be either expressed or implied. If the former, the non-delegation objection is easily met. The
standard though does not have to be spelled out specifically. It could be implied from the policy and purpose of the
act considered as a whole. In the Reflector Law, clearly the legislative objective is public safety. What is sought to
be attained as in Calalang v. Williams is "safe transit upon the roads. 5

We believe and so hold that the necessary standards are set forth in Section 1 of the 1959 Medical Act: "the
standardization and regulation of medical education" and in Section 5 (a) and 7 of the same Act, the body of the statute
itself, and that these considered together are sufficient compliance with the requirements of the non-delegation principle.

3. The petitioners also urge that the NMAT prescribed in MECS Order No. 52, s. 1985, is an "unfair, unreasonable and
inequitable requirement," which results in a denial of due process. Again, petitioners have failed to specify just what
factors or features of the NMAT render it "unfair" and "unreasonable" or "inequitable." They appear to suggest that
passing the NMAT is an unnecessary requirement when added on top of the admission requirements set out in Section 7
of the Medical Act of 1959, and other admission requirements established by internal regulations of the various medical
schools, public or private. Petitioners arguments thus appear to relate to utility and wisdom or desirability of the NMAT
requirement. But constitutionality is essentially a question of power or authority: this Court has neither commission or
competence to pass upon questions of the desirability or wisdom or utility of legislation or administrative regulation. Those
questions must be address to the political departments of the government not to the courts.

There is another reason why the petitioners' arguments must fail: the legislative and administrative provisions impugned
by them constitute, to the mind of the Court, a valid exercise of the police power of the state. The police power, it is
commonplace learning, is the pervasive and non-waivable power and authority of the sovereign to secure and promote an
the important interests and needs in a word, the public order of the general community.6 An important component of
that public order is the health and physical safety and well being of the population, the securing of which no one can deny
is a legitimate objective of governmental effort and regulation. 7

Perhaps the only issue that needs some consideration is whether there is some reasonable relation between the
prescribing of passing the NMAT as a condition for admission to medical school on the one hand, and the securing of the
health and safety of the general community, on the other hand. This question is perhaps most usefully approached by
recalling that the regulation of the practice of medicine in all its branches has long been recognized as a reasonable
method of protecting the health and safety of the public.8 That the power to regulate and control the practice of medicine
includes the power to regulate admission to the ranks of those authorized to practice medicine, is also well recognized.
thus, legislation and administrative regulations requiring those who wish to practice medicine first to take and pass
medical board examinations have long ago been recognized as valid exercises of governmental power.9 Similarly, the
establishment of minimum medical educational requirements i.e., the completion of prescribed courses in a recognized
medical school for admission to the medical profession, has also been sustained as a legitimate exercise of the
regulatory authority of the state.10 What we have before us in the instant case is closely related: the regulation of access
to medical schools. MECS Order No. 52, s. 1985, as noted earlier, articulates the rationale of regulation of this type: the
improvement of the professional and technical quality of the graduates of medical schools, by upgrading the quality of
those admitted to the student body of the medical schools. That upgrading is sought by selectivity in the process of
admission, selectivity consisting, among other things, of limiting admission to those who exhibit in the required degree the
aptitude for medical studies and eventually for medical practice. The need to maintain, and the difficulties of maintaining,
high standards in our professional schools in general, and medical schools in particular, in the current stage of our social
and economic development, are widely known.

We believe that the government is entitled to prescribe an admission test like the NMAT as a means for achieving its
stated objective of "upgrading the selection of applicants into [our] medical schools" and of "improv[ing] the quality of
medical education in the country." Given the widespread use today of such admission tests in, for instance, medical
schools in the United States of America (the Medical College Admission Test [MCAT] 11 and quite probably in other
countries with far more developed educational resources than our own, and taking into account the failure or inability of
the petitioners to even attempt to prove otherwise, we are entitled to hold that the NMAT is reasonably related to the
securing of the ultimate end of legislation and regulation in this area. That end, it is useful to recall, is the protection of the
public from the potentially deadly effects of incompetence and ignorance in those who would undertake to treat our bodies
and minds for disease or trauma.

4. Petitioners have contended, finally, that MECS Order No. 52, s. 1985, is in conflict with the equal protection clause of
the Constitution. More specifically, petitioners assert that that portion of the MECS Order which provides that

the cutoff score for the successful applicants, based on the scores on the NMAT, shall be determined every-
year by the Board of Medical 11 Education after consultation with the Association of Philippine Medical Colleges.
(Emphasis supplied)

infringes the requirements of equal protection. They assert, in other words, that students seeking admission during a
given school year, e.g., 1987-1988, when subjected to a different cutoff score than that established for an, e.g., earlier
school year, are discriminated against and that this renders the MECS Order "arbitrary and capricious." The force of this
argument is more apparent than real. Different cutoff scores for different school years may be dictated by differing
conditions obtaining during those years. Thus, the appropriate cutoff score for a given year may be a function of such
factors as the number of students who have reached the cutoff score established the preceding year; the number of
places available in medical schools during the current year; the average score attained during the current year; the level
of difficulty of the test given during the current year, and so forth. To establish a permanent and immutable cutoff score
regardless of changes in circumstances from year to year, may wen result in an unreasonable rigidity. The above
language in MECS Order No. 52, far from being arbitrary or capricious, leaves the Board of Medical Education with the
measure of flexibility needed to meet circumstances as they change.

We conclude that prescribing the NMAT and requiring certain minimum scores therein as a condition for admission to
medical schools in the Philippines, do not constitute an unconstitutional imposition.

WHEREFORE, the Petition for certiorari is DISMISSED and the Order of the respondent trial court denying the petition for
a writ of preliminary injunction is AFFIRMED. Costs against petitioners.

Villanueva vs Castaneda

CRUZ, J.:

There is in the vicinity of the public market of San Fernando, Pampanga, along Mercado Street, a strip of land measuring
12 by 77 meters on which stands a conglomeration of vendors stalls together forming what is commonly known as
a talipapa. This is the subject of the herein petition. The petitioners claim they have a right to remain in and conduct
business in this area by virtue of a previous authorization granted to them by the municipal government. The respondents
deny this and justify the demolition of their stalls as illegal constructions on public property. At the petitioners' behest, we
have issued a temporary restraining order to preserve the status quo between the parties pending our decision. 1 Now we
shall rule on the merits.

This dispute goes back to November 7, 1961, when the municipal council of San Fernando adopted Resolution No. 218
authorizing some 24 members of the Fernandino United Merchants and Traders Association to construct permanent stags
and sell in the above-mentioned place. 2 The action was protested on November 10, 1961, in Civil Case No. 2040, where the
Court of First Instance of Pampanga, Branch 2, issued a writ of preliminary injunction that prevented the defendants from
constructing the said stalls until final resolution of the controversy. 3 On January 18, 1964, while this case was pending, the
municipal council of San Fernando adopted Resolution G.R. No. 29, which declared the subject area as "the parking place and
as the public plaza of the municipality, 4 thereby impliedly revoking Resolution No. 218, series of 1961. Four years later, on
November 2, 1968, Judge Andres C. Aguilar decided the aforesaid case and held that the land occupied by the petitioners,
being public in nature, was beyond the commerce of man and therefore could not be the subject of private occupancy. 5 The writ
of preliminary injunction was made permanent. 6

The decision was apparently not enforced, for the petitioners were not evicted from the place; in fact, according to then
they and the 128 other persons were in 1971 assigned specific areas or space allotments therein for which they paid daily
fees to the municipal government. 7 The problem appears to have festered for some more years under a presumably uneasy
truce among the protagonists, none of whom made any move, for some reason that does not appear in the record. Then, on
January 12, 1982, the Association of Concerned Citizens and Consumers of San Fernando filed a petition for the immediate
implementation of Resolution No. 29, to restore the subject property "to its original and customary use as a public plaza. 8

Acting thereon after an investigation conducted by the municipal attorney, 9 respondent Vicente A. Macalino, as officer-in-
charge of the office of the mayor of San Fernando, issued on June 14, 1982, a resolution requiring the municipal treasurer and
the municipal engineer to demolish the stalls in the subject place beginning July 1, 1982. 10 The reaction of the petitioners was to file a
petition for prohibition with the Court of First Instance of Pampanga, docketed as Civil Case No. 6470, on June 26, 1982. The respondent judge denied the petition on July
19, 1982, 11 and the motion for reconsideration on August 5, 1982, 12 prompting the petitioners to come to this Court on certiorari to challenge his decision. 13

As required, respondent Macalino filed his comment 14 on the petition, and the petitioners countered with their reply. 15 In compliance with our
resolution of February 2, 1983, the petitioners submitted their memorandum 16 and respondent Macalino, for his part, asked that his comment be considered his
memorandum. 17 On July 28, 1986, the new officer-in-charge of the office of the mayor of San Fernando, Paterno S. Guevarra, was impleaded in lieu of Virgilio Sanchez,
who had himself earlier replaced the original respondent Macalino. 18

After considering the issues and the arguments raised by the parties in their respective pleadings, we rule for the
respondents. The petition must be dismissed.

There is no question that the place occupied by the petitioners and from which they are sought to be evicted is a public
plaza, as found by the trial court in Civil Case No. 2040. This finding was made after consideration of the antecedent facts
as especially established by the testimony of former San Fernando Mayor Rodolfo Hizon, who later became governor of
Pampanga, that the National Planning Commission had reserved the area for a public plaza as early as 1951. This
intention was reiterated in 1964 through the adoption of Resolution No. 29. 19

It does not appear that the decision in this case was appealed or has been reversed. In Civil Case G.R. No. 6740, which
is the subject of this petition, the respondent judge saw no reason to disturb the finding in Civil Case No. 2040 and indeed
used it as a basis for his own decision sustaining the questioned order. 20

The basic contention of the petitioners is that the disputed area is under lease to them by virtue of contracts they had
entered into with the municipal government, first in 1961 insofar as the original occupants were concerned, and later with
them and the other petitioners by virtue of the space allocations made in their favor in 1971 for which they saw they are
paying daily fees. 21 The municipal government has denied making such agreements. In any case, they argue, since the fees
were collected daily, the leases, assuming their validity, could be terminated at will, or any day, as the claimed rentals indicated
that the period of the leases was from day to day. 22

The parties belabor this argument needlessly.

A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other contractual
undertaking. This is elementary. Indeed, this point was settled as early as in Municipality of Cavite vs. Rojas, 23decided in
1915, where the Court declared as null and void the lease of a public plaza of the said municipality in favor of a private person.

Justice Torres said in that case:

According to article 344 of the Civil Code: "Property for public use in provinces and in towns comprises the
provincial and town roads, the squares, streets, fountains, and public waters, the promenades, and public
works of general service supported by said towns or provinces.

The said Plaza Soledad being a promenade for public use, the municipal council of Cavite could not in
1907 withdraw or exclude from public use a portion thereof in order to lease it for the sole benefit of the
 defendant Hilaria Rojas. In leasing a portion of said plaza or public place to the defendant for private use
the plaintiff municipality exceeded its authority in the exercise of its powers by executing a contract over a
thing of which it could not dispose, nor is it empowered so to do.

The Civil Code, article 1271, prescribes that everything which is not outside the commerce of man may be
the object of a contract, and plazas and streets are outside of this commerce, as was decided by the
supreme court of Spain in its decision of February 12, 1895, which says: "communal things that cannot be
sold because they are by their very nature outside of commerce are those for public use, such as the
plazas, streets, common lands, rivers, fountains, etc."

Therefore, it must be concluded that the contract, Exhibit C, whereby the municipality of Cavite leased to
Hilaria Rojas a portion of the Plaza Soledad is null and void and of no force or effect, because it is contrary
to the law and the thing leased cannot be the object of a was held that the City of contract.

In Muyot vs. de la Fuente, 24 it was held that the City of Manila could not lease a portion of a public sidewalk on Plaza Sta.
Cruz, being likewise beyond the commerce of man.

Echoing Rojas, the decision said:

Appellants claim that they had obtained permit from the present of the City of Manila, to connect booths
Nos. 1 and 2, along the premises in question, and for the use of spaces where the booths were
constructed, they had paid and continued paying the corresponding rentals. Granting this claim to be true,
one should not entertain any doubt that such permit was not legal, because the City of Manila does not
have any power or authority at all to lease a portion of a public sidewalk. The sidewalk in question, forming
part of the public plaza of Sta. Cruz, could not be a proper subject matter of the contract, as it was not
within the commerce of man (Article 1347, new Civil Code, and article 1271, old Civil Code). Any contract
entered into by the City of Manila in connection with the sidewalk, is ipso facto null and ultra
vires. (Municipality of Cavite vs. Roxas, et a1, 30 Phil. 603.) The sidewalk in question was intended for and
was used by the public, in going from one place to another. "The streets and public places of the city shall
be kept free and clear for the use of the public, and the sidewalks and crossings for the pedestrians, and
the same shall only be used or occupied for other purpose as provided by ordinance or regulation; ..."
(Sec. 1119, Revised Ordinances of the City of Manila.) The booths in question served as fruit stands for
their owners and often, if not always, blocked the fire passage of pedestrians who had to take the plaza
itself which used to be clogged with vehicular traffic.

Exactly in point is Espiritu vs. Municipal Council of Pozorrubio, 25 where the Supreme Court declared:

There is absolutely no question that the town plaza cannot be used for the construction of market stalls,
specially of residences, and that such structures constitute a nuisance subject to abatement according to
law. Town plazas are properties of public dominion, to be devoted to public use and to be made available
to the public in general They are outside the common of man and cannot be disposed of or even leased by
the municipality to private parties.

Applying this well-settled doctrine, we rule that the petitioners had no right in the first place to occupy the disputed
premises and cannot insist in remaining there now on the strength of their alleged lease contracts. They should have
realized and accepted this earlier, considering that even before Civil Case No. 2040 was decided, the municipalcouncil of
San Fernando had already adopted Resolution No. 29, series of 1964, declaring the area as the parking place and public
plaza of the municipality.

It is the decision in Civil Case No. 2040 and the said resolution of the municipal council of San Fernando that respondent
Macalino was seeking to enforce when he ordered the demolition of the stags constructed in the disputed area. As officer-
in-charge of the office of the mayor, he had the duty to clear the area and restore it to its intended use as a parking place
and public plaza of the municipality of San Fernando, conformably to the aforementioned orders from the court and the
council. It is, therefore, not correct to say that he had acted without authority or taken the law into his hands in issuing his
order.

Neither can it be said that he acted whimsically in exercising his authority for it has been established that he directed the
demolition of the stalls only after, upon his instructions, the municipal attorney had conducted an investigation, to look into
the complaint filed by the Association of Concerned Citizens and Consumers of San Fernando. 26 There is evidence that the
petitioners were notified of this hearing, 27which they chose to disregard. Photographs of the disputed area, 28 which does look
congested and ugly, show that the complaint was valid and that the area really needed to be cleared, as recommended by the
municipal attorney.

The Court observes that even without such investigation and recommendation, the respondent mayor was justified in
ordering the area cleared on the strength alone of its status as a public plaza as declared by the judicial and legislative
authorities. In calling first for the investigation (which the petitioner saw fit to boycott), he was just scrupulously paying
deference to the requirements of due process, to remove an taint of arbitrariness in the action he was caged upon to take.

Since the occupation of the place in question in 1961 by the original 24 stallholders (whose number later ballooned to
almost 200), it has deteriorated increasingly to the great prejudice of the community in general. The proliferation of stags
therein, most of them makeshift and of flammable materials, has converted it into a veritable fire trap, which, added to the
fact that it obstructs access to and from the public market itself, has seriously endangered public safety. The filthy
condition of the talipapa, where fish and other wet items are sold, has aggravated health and sanitation problems, besides
pervading the place with a foul odor that has spread into the surrounding areas. The entire place is unsightly, to the
dismay and embarrassment of the inhabitants, who want it converted into a showcase of the town of which they can all be
proud. The vendors in the talipapa have also spilled into the street and obstruct the flow of traffic, thereby impairing the
convenience of motorists and pedestrians alike. The regular stallholders in the public market, who pay substantial rentals
to the municipality, are deprived of a sizable volume of business from prospective customers who are intercepted by
the talipapa vendors before they can reach the market proper. On top of all these, the people are denied the proper use of
the place as a public plaza, where they may spend their leisure in a relaxed and even beautiful environment and civic and
other communal activities of the town can be held.

The problems caused by the usurpation of the place by the petitioners are covered by the police power as delegated to
the municipality under the general welfare clause. 29 This authorizes the municipal council "to enact such ordinances and
make such regulations, not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties
conferred upon it by law and such as shall seem necessary and proper to provide for the health and safety, promote the
prosperity, improve the morals, peace, good order, comfort, and convenience of the municipality and the inhabitants thereof, and
for the protection of property therein." This authority was validly exercised in this casethrough the adoption of Resolution No. 29,
series of 1964, by the municipal council of San Fernando.

Even assuming a valid lease of the property in dispute, the resolution could have effectively terminated the agreement for
it is settled that the police power cannot be surrendered or bargained away through the medium of a contract. 30 In fact,
every contract affecting the public interest suffers a congenital infirmity in that it contains an implied reservation of the police
power as a postulate of the existing legal order. 31 This power can be activated at any time to change the provisions of the
contract, or even abrogate it entirely, for the promotion or protection of the general welfare. Such an act will not militate against
the impairment clause, which is subject to and limited by the paramount police power. 32

We hold that the respondent judge did not commit grave abuse of discretion in denying the petition for prohibition. On the
contrary, he acted correctly in sustaining the right and responsibility of the mayor to evict the petitioners from the disputed
area and clear it of an the structures illegally constructed therein.

The Court feels that it would have been far more amiable if the petitioners themselves, recognizing their own civic duty,
had at the outset desisted from their original stance and withdrawn in good grace from the disputed area to permit its
peaceful restoration as a public plaza and parking place for the benefit of the whole municipality. They owned this little
sacrifice to the community in general which has suffered all these many years because of their intransigence. Regrettably,
they have refused to recognize that in the truly democratic society, the interests of the few should yield to those of the
greater number in deference to the principles that the welfare of the people is the supreme law and overriding purpose.
We do not see any altruism here. The traditional ties of sharing are absent here. What we find, sad to say, is a cynical
disdaining of the spirit of "bayanihan," a selfish rejection of the cordial virtues of "pakikisama " and "pagbibigayan" which
are the hallmarks of our people.

WHEREFORE, the petition is DISMISSED. The decision dated July 19, 1982, and the order-dated August 5, 1982, are
AFFIRMED. The temporary restraining order dated August 9, 1982, is LIFTED. This decision is immediately executory.
Costs against the petitioners.

Sangalang vs iac
SARMIENTO, J.:
Before the Court are five consolidated petitions, 1 docketed as G.R. Nos. 71169, 74376, 76394, 78182, and 82281 hereof, in
the nature of appeals (by certiorari under Rule 45 of the Rules of Court) from five decisions of the Court of Appeals, denying
specific performance and damages.

The proceedings were commenced at the first instance by Jose Sangalang, joined by his wife Lutgarda Sangalang, both
residents of No. 110 Jupiter Street, Makati, Metro Manila (G.R. No. 71169) to enforce by specific performance restrictive
easement upon property, specifically the Bel- Air Village subdivision in Makati, Metro Manila, pursuant to stipulations
embodied in the deeds of sale covering the subdivision, and for damages. Later, the Sangalangs were joined by Felix
Gaston, a resident of No. 64 Jupiter Street of the same municipality, and by Mr. and Mrs. Jose and Alicia Briones, both of
No. 66 Jupiter Street. Pending further proceedings, the Bel-Air Village Association, Inc. (BAVA), an incorporated
homeowners' association, entered its appearance as plaintiff-in-intervention.

BAVA itself had brought its own complaints, four in number, likewise for specific performance and damages to enforce the
same 'deed restrictions.' (See G.R. Nos. 74376, 76394, 78182, and 82281.)

ANTECEDENTS FACTS

I. G.R. No. 71169

The facts are stated in the decision appealed from. We quote:

xxxxxxxxx

(1) Bel-Air Village is located north of Buendia Avenue extension (now Sen. Gil J. Puyat Ave.) across a
stretch of commercial block from Reposo Street in the west up to Zodiac Street in the east, When Bel-Air
Village was planned, this block between Reposo and Zodiac Streets adjoining Buendia Avenue in front of
the village was designated as a commercial block. (Copuyoc TSN, p. 10, Feb. 12, 1982).

(2) Bel-Air Village was owned and developed into a residential subdivision in the 1950s by Makati
Development Corporation (hereinafter referred to as MDC), which in 1968 was merged with appellant
Ayala Corporation.

(3) Appellees-spouses Sangalang reside at No. 11O Jupiter Street between Makati Avenue and Reposo
Street; appellees-spouses Gaston reside at No. 64 Jupiter Street between Makati Avenue and Zodiac
Street; appellees-spouses Briones reside at No. 66 Jupiter Street also between Makati Avenue and Zodiac
Street; while appellee Bel-Air Village Association, Inc. (hereinafter referred to as BAVA) is the
homeowners' association in Bel-Air Village which takes care of the sanitation, security, traffic regulations
and general welfare of the village.

(4) The lots which were acquired by appellees Sangalang and spouse Gaston and spouse and Briones
and spouse in 1960, 1957 and 1958, respectively, were all sold by MDC subject to certain conditions and
easements contained in Deed Restrictions which formed a part of each deed of sale. The pertinent
provisions in said Deed Restrictions, which are common to all lot owners in Bel-Air Village, are as follows:

I-BEL-AIR ASSOCIATION

The owner of this lot/s or his successors in interest is required to be and is automatically a member of the
Bel-Air Association and must abide by such rules and regulations laid down by the Association in the
interest of the sanitation, security and the general welfare of the community.

The association will also provide for and collect assessments, which will constitute as a lien on the
property junior only to liens of the government for taxes and to voluntary mortgages for sufficient
consideration entered into in good faith.

II-USE OF LOTS

Subject to such amendments and additional restrictions, reservations, servitudes, etc., as the Bel- Air
Association may from time to time adopt and prescribe, this lot is subject to the following restrictions:
a. This lot/s shall not be subdivided. However, three or more lots may be consolidated and subdivided into
a lesser number of lots provided that none of the resulting lots be smaller in area than the smallest lot
before the consolidation and that the consolidation and subdivision plan be duly approved by the
governing body of the Bel-Air Association.

b. This lot/s shall only be used for residential purposes.

c. Only one single family house may be constructed on a single lot, although separate servants' quarters
or garage may be built.

d. Commercial or advertising signs shall not be placed, constructed, or erected on this lot. Name plates
and professional signs of homeowners are permitted so long as they do not exceed 80 x 40 centimeters in
size.

e. No cattle, pigs, sheep, goats, ducks, geese, roosters or rabbits shall be maintained in the lot, except
that pets may be maintained but must be controlled in accordance with the rulings of the Association. The
term "pets' includes chickens not in commercial quantities.

f. The property is subject to an easement of two (2) meters within the lot and adjacent to the rear and sides
thereof not fronting a street for the purpose of drainage, sewage, water and other public facilities as may
be necessary and desirable; and the owner, lessee or his representative shall permit access thereto by
authorized representatives of the Bel-Air Association or public utility entities for the purposes for which the
easement is created.

g. This lot shall not be used for any immoral or illegal trade or activity.

h. The owner and/or lessee of this lot/s shall at all times keep the grass cut and trimmed to reduce the fire
hazard of the property.

xxx xxx xxx

VI-TERM OF RESTRICTIONS

The foregoing restrictions shall remain in force for fifty years from January 15, 1957, unless sooner
cancelled in its entirety by two thirds vote of members in good standing of the Bel-Air Association.
However, the Association may, from time to time, add new ones, amend or abolish particular restrictions or
parts thereof by majority rule.

VII--ENFORCEMENT OF RESTRICTIONS

The foregoing restrictions may be enjoined and/or enforced by court action by the Bel-Air Association, or
by the Makati Development Corporation or its assigns, or by any registered owner of land within the
boundaries of the Bel-Air Subdivision (Sub-division plan PSD-49226 and Lot 7-B, Psd-47848) or by any
member in good standing of the Bel-Air association." (Exh. 1 -b; Exh. 22, Annex "B"). (Appellant's Brief,
pp. 4- 6)

(5) When MDC sold the above-mentioned lots to appellees' predecessors-in-interest, the whole stretch of
the commercial block between Buendia Avenue and Jupiter Street, from Reposo Street in the west to
Zodiac Street in the east, was still undeveloped. Access, therefore, to Bel-Air Village was opened to all
kinds of people and even animals. So in 1966, although it was not part of the original plan, MDC
constructed a fence or wall on the commercial block along Jupiter Street. In 1970, the fence or wall was
partly destroyed by typhoon "Yoling." The destroyed portions were subsequently rebuilt by the appellant.
(Copuyoc TSN, pp. 31-34, Feb. 12, 1982). When Jupiter Street was widened in 1972 by 3.5 meters, the
fence or wall had to be destroyed. Upon request of BAVA, the wall was rebuilt inside the boundary of the
commercial block. (Copuyoc TSN, pp. 4447, Feb. 12,1982).

(6) When the appellant finally decided to subdivide and sell the lots in the commercial block between
Buendia and Jupiter, BAVA wrote the appellant on May 9, 1972, requesting for confirmation on the use of
the commercial lots. The appellant replied on May 16, 1972, informing BAVA of the restrictions intended to
 be imposed in the sale and use of the lots. Among these restrictions are: that the building shall have a set
back of 19 meters; and that with respect to vehicular traffic along Buendia Avenue, entrance only will be
allowed, and along Jupiter Street and side streets, both entrance and exit will be allowed.

(7) On June 30, 1972, appellant informed BAVA that in a few months it shall subdivide and sell the
commercial lots bordering the north side of Buendia Avenue Extension from Reposo Street up to Zodiac
Street. Appellant also informed BAVA that it had taken all precautions and will impose upon the
commercial lot owners deed restrictions which will harmonize and blend with the development and welfare
of Bel-Air Village. Appellant further applied for special membership in BAVA of the commercial lot owners.
A copy of the deed restrictions for the commercial lots was also enclosed. The proposed deed restrictions
shall include the 19 meter set back of buildings from Jupiter Street, the requirement for parking space
within the lot of one (1) parking slot for every seventy five (75) meters of office space in the building and
the limitation of vehicular traffic along Buendia to entrance only, but allowing both vehicular entrance and
vehicular exit through Jupiter Street and any side street.

In its letter of July 10, 1972, BAVA acknowledged the above letter of appellant and informed the latter that
the application for special membership of the commercial lot owners in BAVA would be submitted to
BAVA's board of governors for decision.

(8) On September 25, 1972, appellant notified BAVA that, after a careful study, it was finally decided that
the height limitation of buildings on the commercial lots shall be increased from 12.5 meters to 15 meters.
Appellant further informed BAVA that Jupiter Street shall be widened by 3.5 meters to improve traffic flow
in said street. BAVA did not reply to said letter, but on January 22, 1973, BAVA wrote a letter to the
appellant informing the latter that the Association had assessed the appellant, as special member of the
association, the amount of P40,795.00 (based on 81,590 square meters at P.50 per square meter)
representing the membership dues to the commercial lot owners for the year 1973, and requested the
appellant to remit the amount which its board of governors had already included in its current budget. In
reply, appellant on January 31, 1973 informed BAVA that due to the widening of Jupiter Street, the area of
the lots which were accepted by the Association as members was reduced to 76,726 square meters. Thus,
the corresponding dues at P.50 per square meter should be reduced to P38,363.00. This amount,
therefore, was remitted by the appellant to BAVA. Since then, the latter has been collecting membership
dues from the owners of the commercial lots as special members of the Association. As a matter of fact,
the dues were increased several times. In 1980, the commercial lot owners were already being charged
dues at the rate of P3.00 per square meter. (Domingo, TSN, p. 36, March 19, 1980). At this rate, the total
membership dues of the commercial lot owners amount to P230,178. 00 annually based on the total area
of 76,726 square meters of the commercial lots.

(9) Meantime, on April 4, 1975, the municipal council of Makati enacted its ordinance No. 81, providing for
the zonification of Makati (Exh. 18). Under this Ordinance, Bel-Air Village was classified as a Class A
Residential Zone, with its boundary in the south extending to the center line of Jupiter Street (Exh. 18-A).

Thus, Chapter III, Article 1, Section 3.03, par. F. of the Ordinance provides:

F. Bel-Air Village area, as bounded on the N by Polaris and Mercedes streets and on the NE by Estrella
Street; on the SE by Epifanio de los Santos Avenue and on the SW by the center line of Jupiter Street.
Then bounded on the N by the abandoned MRR Pasig Line; on the E by Makati Avenue; on the S by the
center line of Jupiter Street and on the W by the center line of Reposo Street." (Exh. 18-A)

Similarly, the Buendia Avenue Extension area was classified as Administrative Office Zone with its
boundary in the North-North East Extending also up to the center line of Jupiter Street (Exh. 18b).

Thus, Chapter III, Article I, Section 3.05, par. C. of the Ordinance provides:

C. The Buendia Avenue Extension areas, as bounded on the N-NE by the center line of Jupiter Street, on
the SE by Epifanio de los Santos Avenue; on the SW by Buendia Avenue and on the NW by the center line
of Reposo Street, then on the NE by Malugay Street; on the SE by Buendia Avenue and on the W by
Ayala Avenue Extension." (Exh. 18-B)
 The Residential Zone and the Administrative Office Zone, therefore, have a common boundary along the
center line of Jupiter Street.

The above zoning under Ordinance No. 81 of Makati was later followed under the Comprehensive Zoning
Ordinance for the National Capital Region adopted by the Metro Manila Commission as Ordinance 81 -01
on March 14, 1981 (Exh. 19). However, under this ordinance, Bel-Air Village is simply bounded in the
South-Southeast by Jupiter Street-not anymore up to the center line of Jupiter Street (Exh. B). Likewise,
the blockdeep strip along the northwest side of Buendia Avenue Extension from Reposo to EDSA was
classified as a High Intensity Commercial Zone (Exh. 19-c).

Thus, the Zoning District Boundaries -Makati, in Annex B of the Ordinance provides:

R-I-Low Intensity Residential

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4. Bel-Air 1, 3, 4

Bounded on the North -- J.P. Rizal and Amapola St.

South - Rockwell

Northwest - P. Burgos

Southeast - Jupiter

Southwest - Epifanio de los Santos Ave. (EDSA)

5. Bel-Air 2

Bounded on the Northwest - J.P. Rizal

Southwest - Makati Avenue

South --- Jupiter

Southeast -- Pasig Line

East - South Avenue" (Exh. 19-b)

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C-3-High Intensity Commercial Zone

2. A block deep strip along the northwest side of Buendia Ave. Ext. from Reposo to EDSA." (Exh, 19-c)

Under the above zoning classifications, Jupiter Street, therefore, is a common boundary of Bel-Air Village
and the commercial zone.

(10) Meanwhile, in 1972, BAVA had installed gates at strategic locations across Jupiter Street which were
manned and operated by its own security guards who were employed to maintain, supervise and enforce
traffic regulations in the roads and streets of the village. (Villavicencio, TSN, pp, 22-25, Oct. 30, 1980;
BAVA Petition, par. 11, Exh. 17).

Then, on January 17, 1977, the Office of the Mayor of Makati wrote BAVA directing that, in the interest of
public welfare and for the purpose of easing traffic congestion, the following streets in Bel-Air Village
should be opened for public use:
Amapola Street - from Estrella Street to Mercedes Street

Amapola Street -junction of Palma Street gate going to J. Villena Street

Mercedes Street -- from EDSA to Imelda Avenue and Amapola junction

Zodiac Street - from Mercedes Street to Buendia Avenue

Jupiter Street -- from Zodiac Street to Reposo Street connecting Metropolitan Avenue to Pasong Tamo and
V. Cruz Extension intersection

Neptune Street - from Makati Avenue to Reposo Street Orbit Street - from F. Zobel-Candelaria intersection
to Jupiter Street

Paseo de Roxas - from Mercedes Street to Buendia Avenue (Exh. 17, Annex A, BAVA Petition)

On February 10, 1977, BAVA wrote the Mayor of Makati, expressing the concern of the residents about the
opening of the streets to the general public, and requesting specifically the indefinite postponement of the
plan to open Jupiter Street to public vehicles. (Exh. 17, Annex B, BAVA Petition).

However, BAVA voluntarily opened to the public Amapola, Mercedes, Zodiac, Neptune and Paseo de
Roxas streets. (Exh. 17-A, Answer of Makati par. 3-7).

Later, on June 17,1977, the Barangay Captain of Bel-Air Village was advised by the Office of the Mayor
that, in accordance with the agreement entered into during the meeting on January 28, 1 977, the
Municipal Engineer and the Station Commander of the Makati Police were ordered to open for public use
Jupiter Street from Makati Avenue to Reposo Street. Accordingly, he was requested to advise the village
residents of the necessity of the opening of the street in the interest of public welfare. (Exh. 17, Annex E,
BAVA Petition).

Then, on June 10, 1977, the Municipal Engineer of Makati in a letter addressed to BAVA advised the latter
to open for vehicular and pedestrian traffic the entire portion of Jupiter Street from Makati Avenue to
Reposo Street (Exh. 17, BAVA Petition, par. 14).

Finally, on August 12, 1977, the municipal officials of Makati concerned allegedly opened, destroyed and
removed the gates constructed/located at the corner of Reposo Street and Jupiter Street as well as the
gates/fences located/constructed at Jupiter Street and Makati Avenue forcibly, and then opened the entire
length of Jupiter Street to public traffic. (Exh. 17, BAVA Petition, pars. 16 and 17).

(11) Before the gates were-removed, there was no parking problem or traffic problem in Jupiter Street,
because Jupiter Street was not allowed to be used by the general public (Villavicencio, TSN, pp. 24-25,
Oct. 30, 1980). However, with the opening of Zodiac Street from Estrella Street to Jupiter Street and also
the opening to the public of the entire length of Jupiter Street, there was a tremendous increase in the
volume of traffic passing along Jupiter Street coming from EDSA to Estrella Street, then to Zodiac Street to
Jupiter Street, and along the entire length of Jupiter Street to its other end at Reposo Street. (Villavicencio,
TSN, pp. 30-32, Oct. 30, 1980).

In the meantime, the purchasers of the commercial lots between Jupiter Street and Buendia Avenue
extension had started constructing their respective buildings in 1974-1975. They demolished the portions
of the fence or wall standing within the boundary of their lots. Many of the owners constructed their own
fences or walls in lieu of the wall and they employed their own security guards. (TSN, p. 83, Feb. 20,1981;
TSN, pp. 53-54; 72-74, March 20,1981; TSN, pp. 54-55, July 23, 1981).

(12) Then, on January 27, 1978, appellant donated the entire Jupiter Street from Metropolitan Avenue to
Zodiac Street to BAVA (Exh. 7)- However, even before 1978, the Makati Police and the security force of
BAVA were already the ones regulating the traffic along Jupiter Street after the gates were opened in
1977. Sancianco TSN, pp. 26-30, Oct. 2,1981).
In October, 1979, the fence at the corner of Orbit and Neptune Streets was opened and removed (BAVA
Petition, par. 22, Exh. 17). The opening of the whole stretch of Orbit Street from J.P. Rizal Avenue up to
Imelda Avenue and later to Jupiter Street was agreed to at the conference attended by the President of
BAVA in the office of the Station Commander of Makati, subject to certain conditions, to wit:

That, maintenance of Orbit St. up to Jupiter St. shall be shouldered by the Municipality of Makati.

That, street lights will be installed and maintenance of the same along Orbit St. from J.P. Rizal Ave. up to
Jupiter St. shall be undertaken by the Municipality.

That for the security of the residents of San Miguel Village and Bel-Air Village, as a result of the opening of
Orbit Street, police outposts shall be constructed by the Municipality of Makati to be headed by personnel
of Station No. 4, in close coordination with the Security Guards of San Miguel Village and Bel-Air Village."
(CF. Exh. 3 to Counter-Affidavit, of Station Commander, Ruperto Acle p. 253, records)" (Order, Civil Case
No. 34948, Exh. 17-c).

(13) Thus, with the opening of the entire length of Jupiter Street to public traffic, the different residential
lots located in the northern side of Jupiter Street ceased to be used for purely residential purposes. They
became, for all purposes, commercial in character.

(14) Subsequently, on October 29, 1979, the plaintiffs-appellees Jose D. Sangalang and Lutgarda D.
Sangalang brought the present action for damages against the defendant-appellant Ayala Corporation
predicated on both breach of contract and on tort or quasi-delict A supplemental complaint was later filed
by said appellees seeking to augment the reliefs prayed for in the original complaint because of alleged
supervening events which occurred during the trial of the case. Claiming to be similarly situated as the
plaintiffs-appellees, the spouses Felix C. Gaston and Dolores R. Gaston, Jose V. Briones and Alicia R.
Briones, and the homeowners' association (BAVA) intervened in the case.

(15) After trial on the merits, the then Court of First Instance of Rizal, Pasig, Metro Manila, rendered a
decision in favor of the appellees the dispositive portion of which is as follows:

WHEREFORE, judgment is hereby accordingly rendered as follows:

ON PLAINTIFFS' COMPLAINT:

Defendant is ordered to pay to the plaintiffs-spouses Sangalang the following damages:

1. The sum of P500,000.00 as actual and consequential damages;

2. The sum of P2,000,000.00 as moral damages;

3. The sum of P500,000.00 as exemplary damages;

4. The sum of P100,000.00 as attorney's fees; and

5. The costs of suit.

ON INTERVENORS FELIX and DOLORES GASTON'S COMPLAINT:

Defendant is ordered to pay to the spouses Felix and Dolores Gaston, the following damages:

1 . The sum of P400,000.00 as consequential damages;

2 The sum of P500,000.00 as moral damages;

3 The sum of P500,000.00 as exemplary damages:

4 The sum of P50,000.00 as attorney's fees; and

 5 The costs of suit.

ON INTERVENORS JOSE and ALICIA BRIONES' COMPLAINT:

Defendant is ordered to pay to the spouses Jose and Alicia Briones, the following damages:

1 . The sum of P400,000.00 as consequential damages;

2 The sum of P500,000.00 as moral damages;

3 The sum of P500,000.00 as exemplary damages;

4 The sum of P50,000.00 as attorney's fees; and

5 The costs of suit.

ON INTERVENOR BAVA'S COMPLAINT:

Defendant is ordered to pay intervenor BAVA, the following damages:

1. The sum of P400,000.00 as consequential damages;

2. The sum of P500,000.00 as exemplary damages;

3. The sum of P50,000.00 as attorney's fees; and

4. The costs of suit.

The above damages awarded to the plaintiffs and intervenors shall bear legal interest from the filing of the
complaint.

Defendant is further ordered to restore/reconstruct the perimeter wall at its original position in 1966 from
Reposo Street in the west to Zodiac Street in the east, at its own expense, within SIX (6) MONTHS from
finality of judgment.

SO ORDERED.

(Record on Appeal, pp. 400-401) 2

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On appeal, the Court of Appeals 3 rendered a reversal, and disposed as follows:

ACCORDINGLY, finding the decision appealed from as not supported by the facts and the law on the
matter, the same is hereby SET ASIDE and another one entered dismissing the case for lack of a cause of
action. Without pronouncement as to costs.

SO ORDERED. 4

II. G.R. No. 74376

This petition was similarly brought by BAVA to enforce the aforesaid restrictions stipulated in the deeds of sale executed
by the Ayala Corporation. The petitioner originally brought the complaint in the Regional Trial Court of Makati, 5 principally
for specific performance, plaintiff [now, petitioner] alleging that the defendant [now, private respondent] Tenorio allowed
defendant [Tenorio's co-private respondent] Gonzalves to occupy and convert the house at 50 Jupiter Street, Bel-Air Village,
Makati, Metro Manila, into a restaurant, without its knowledge and consent, and in violation of the deed restrictions which
provide that the lot and building thereon must be used only for residential purposes upon which the prayed for main relief was
for 'the defendants to permanently refrain from using the premises as commercial and to comply with the terms of the Deed
Restrictions." 6 The trial court dismissed the complaint on a procedural ground, i.e., pendency of an Identical action, Civil Case
No. 32346, entitled "Bel-Air Village Association, Inc. v. Jesus Tenorio." The Court of Appeals 7affirmed, and held, in addition, that
Jupiter Street "is classified as High density commercial (C-3) zone as per Comprehensive Zoning Ordinance No. 81-01 for
National Capital Region," 8 following its own ruling in AC-G.R. No. 66649, entitled "Bel-Air Village Association, Inc. vs. Hy-Land
Realty & Development Corporation, et al."

III. G.R. No. 76394

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Defendants-spouses Eduardo V. Romualdez, Jr. and Buena Tioseco are the owners of a house and lot
located at 108 Jupiter St., Makati, Metro Manila as evidenced by Transfer Certificate of Title No. 332394 of
the Registry of Deeds of Rizal. The fact is undisputed that at the time the defendants acquired the subject
house and lot, several restrictions were already annotated on the reverse side of their title; however, for
purposes of this appeal we shall quote hereunder only the pertinent ones, to wit:

(b,) This lot/shall be used only for residential purposes.

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IV. Term of Restriction

The foregoing restriction(s) shall remain in force for fifty years from January 15, 1957, unless sooner
cancelled in its entirety by two-thirds vote of the members in good standing of the Bel-Air Association.
However, the Association may from time to time, add new ones, amend or abolish particular restrictions or
parts thereof by majority rule.

During the early part of 1979, plaintiff noted that certain renovations and constructions were being made
by the defendants on the subject premises, for which reason the defendants were advised to inform the
plaintiff of the kind of construction that was going on. Because the defendants failed to comply with the
request of the plaintiff, the latter's chief security officer visited the subject premises on March 23, 1979 and
found out that the defendants were putting up a bake and coffee shop, which fact was confirmed by
defendant Mrs. Romualdez herself. Thereafter, the plaintiff reminded defendants that they were violating
the deed restriction. Despite said reminder, the defendants proceeded with the construction of the bake
shop. Consequently, plaintiff sent defendants a letter dated April 30, 1979 warning them that if they will not
desist from using the premises in question for commercial purposes, they will be sued for violations of the
deed restrictions.

Despite the warning, the defendants proceeded with the construction of their bake shop. 9

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The trial court 10 adjudged in favor of BAVA. On appeal, the Court of Appeals 11 reversed, on the strength of its holding in AC-
G.R. No. 66649 earlier referred to.

BAVA then elevated the matter to the Court by a petition for review on certiorari. The Court 12 initially denied the petition "for
lack of merit, it appearing that the conclusions of the respondent Court of Appeals that private respondents' bake and coffee
shop lies within a commercial zone and that said private respondents are released from their obligations to maintain the lot
known as 108 Jupiter Street for residential purposes by virtue of Ordinance No. 81 of the Municipality of Makati and
Comprehensive Zoning Ordinance No. 81-01 of the Metropolitan Manila Commission, are in accord with law and
jurisprudence," 13 for which BAVA sought a reconsideration. Pending resolution, the case was referred to the Second Division of
this Court, 14 and thereafter, to the Court En Banc en consulta. 15 Per our Resolution, dated April 29, 1988, we consolidated this
case with G.R. Nos. 74376 and 82281. 16

IV. G.R. No. 78182.

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 The case stemmed from the leasing by defendant Dolores Filley of her building and lot situated at No. 205
Reposo Street, Bel-Air Village Makati, Metro Manila to her co-defendant, the advertising firm J. Romero
and Associates, in alleged violation of deed restrictions which stipulated that Filley's lot could only be used
for residential purposes. Plaintiff sought judgment from the lower court ordering the defendants to
"permanently refrain" from using the premises in question "as commercial" and to comply with the terms of
the deed restrictions.

After the proper proceedings, the court granted the plaintiff the sought for relief with the additional
imposition of exemplary damages of P50,000.00 and attorney's fees of P10,000.00. The trial court gave
emphasis to the restrictive clauses contained in Filley's deed of sale from the plaintiff, which made the
conversion of the building into a commercial one a violation.

Defendants now seek review and reversal on three (3) assignments of errors, namely:

I.

THE TRIAL COURT ERRED IN NOT FINDING THAT THE REGULATIONS PROMULGATED BY THE
MUNICIPAL AUTHORITIES IN MAKATI AND THE MINISTRY OF HUMAN SETTLEMENT'S CHANGING
THE CHARACTER OF THE AREAS IN QUESTION HAD RENDERED THE RESTRICTIVE EASEMENT
ON THE TITLE OF THE APPELLANTS VACATED.

II.

THE COURT ERRED IN NOT RULING THAT BECAUSE THE APPELLEE(S) HAD ALLOWED THE USE
OF THE PROPERTY WITHIN THE VILLAGE FOR NON- RESIDENTIAL PURPOSES, IT IS NOW
ESTOPPED FROM ENFORCING THE RESTRICTIVE PROHIBITIONS SUBJECT MATTER OF THIS
CASE.

III.

THE COURT ERRED IN NOT FINDING THAT THERE EXISTED A BILATERAL CONTRACT BETWEEN
THE PARTIES AND THAT SINCE APPELLEE HAD NOT PERFORMED ITS OBLIGATIONS UNDER THIS
ARRANGEMENT THE APPELLANT IN TURN WAS UNDER NO OBLIGATION TO ANNOTATE THE
RESTRICTIVE PROHIBITIONS ON THE BACK OF THE TITLE.

Appellants anchor their appeal on the proposition that the Bel-Air Village area, contrary to plaintiff-
appellee's pretension of being a strictly residential zone, is in fact commercial and characterize the
restrictions contained in appellant Filley's deed of sale from the appellee as completely outmoded, which
have lost all relevance to the present-day realities in Makati, now the premier business hub of the nation,
where there is a proliferation of numerous commercial enterprises established through the years, in fact
even within the heart of so-called "residential" villages. Thus, it may be said that appellants base their
position on the inexorable march of progress which has rendered at naught the continued efficacy of the
restrictions. Appellant on the other hand, relies on a rigid interpretation of the contractual stipulations
agreed upon with appellant Filley, in effect arguing that the restrictions are valid ad infinitum.

The lower court quite properly found that other commercial establishments exist in the same area (in fact,
on the same street) but ignored it just the same and said-

The fact that defendants were able to prove the existence of several commercial establishments inside the
village does not exempt them from liability for violating some of the restrictions evidently choosing to
accord primacy to contractual stipulation. 17

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The Court of Appeals 18 overturned the lower court, 19 likewise based on AC-G.R. No. 66649. The respondent Court observed
also that J. Romero & Associates had been given authority to open a commercial office by the Human Settlements Regulatory
Commission.

V. G.R. No. 82281

The facts of this case have been based on stipulation. We quote:

COMES NOW, the Parties, assisted by their respective counsel and to this Honorable Court, respectfully
enter into the following stipulations of facts, to wit:

1. The parties admit the personal circumstances of each other as well as their capacities to sue and be
sued.

2. The parties admit that plaintiff BAVA for short) is the legally constituted homeowners' association in Bel-
Air Subdivision, Makati, Metro Manila.

3. The parties admit that defendant Violets Moncal is the registered owner of a parcel of land with a
residential house constructed thereon situated at No. 104 Jupiter Street, Bel-Air Village, Makati, Metro
Manila; that as such lot owner, she is a member of the plaintiff association.

4. The parties admit that defendant Majal Development Corporation (Majal for short) is the lessee of
defendant Moncal's house and lot located at No. 104 Jupiter Street.

5. The parties admit that a deed restrictions is annotated on the title of defendant Moncal, which provides,
among others, that the lot in question must be used only for residential purposes;' that at time Moncal
purchased her aforesaid lot in 1959 said deed restrictions was already annotated in the said title.

6. The parties admit that when Moncal leased her subject property to Majal, she did not secure the
consent of BAVA to lease the said house and lot to the present lessee.

7. The parties admit that along Jupiter Street and on the same side where Moncal's property is located,
there are restaurants, clinics placement or employment agencies and other commercial or business
establishments. These establishments, however, were sued by BAVA in the proper court.

8. The parties admit that at the time Moncal purchased the subject property from the Makati Development
Corporation, there was a perimeter wall, running along Jupiter Street, which wall was constructed by the
subdivision owner; that at that time the gates of the entrances to Jupiter Street were closed to public
traffic. In short, the entire length of Jupiter which was inside the perimeter wall was not then open to public
traffic

9. The parties admit that subsequent thereto, Ayala tore down the perimeter wall to give way to the
commercial building fronting Buendia Avenue (now Gil J. Puyat Avenue).

10. The parties admit that on August 12, 1977, the Mayor of Makati forcibly opened and removed the
street gates constructed on Jupiter Street and Reposo Street, thereby opening said streets to the public.

11. The parties admit plaintiffs letters of October 10, 23 and 31, 1984; as well as defendants' letters-reply
dated October 17 and 29, 1984. 20

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The trial court 21 dismissed the petitioner's complaint, a dismissal affirmed on appeal, 22 According to the appellate court, the
opening of Jupiter Street to human and vehicular traffic, and the commercialization of the Municipality of Makati in general, were
circumstances that had made compliance by Moncal with the aforesaid "deed restrictions" "extremely difficult and
unreasonable," 23 a development that had excused compliance altogether under Article 1267 of the Civil Code.

VI. The cases before the Court; the Court's decision.

In brief, G.R. Nos. 74376, 76394, 78182, and 82281 are efforts to enforce the "deed restrictions" in question against
specific residents (private respondents in the petitions) of Jupiter Street and with respect to G.R. No. 78182, Reposo
Street. The private respondents are alleged to have converted their residences into commercial establishments (a
restaurant in G.R. No. 74376, a bakery and coffee shop in G.R. No. 76394, an advertising firm in G.R. No. 78182; and a
construction company, apparently, in G.R. No. 82281) in violation of the said restrictions. 24
Their mother case, G. R. No. 71169 is, on the other hand, a petition to hold the vendor itself, Ayala Corporation (formerly
Makati Development Corporation), liable for tearing down the perimeter wall along Jupiter Street that had therefore closed
its commercial section from the residences of Bel-Air Village and ushering in, as a consequence, the full
"commercialization" of Jupiter Street, in violation of the very restrictions it had authored.

As We indicated, the Court of Appeals dismissed all five appeals on the basis primarily of its ruling in AC-G.R. No. 66649,
"Bel-Air Village, Inc. v. Hy-Land Realty Development Corporation, et al.," in which the appellate court explicitly rejected
claims under the same 'deed restrictions" as a result of Ordinance No. 81 enacted by the Government of the Municipality
of Makati, as well as Comprehensive Zoning Ordinance No. 8101 promulgated by the Metropolitan Manila Commission,
which two ordinances allegedly allowed the use of Jupiter Street both for residential and commercial purposes. It was
likewise held that these twin measures were valid as a legitimate exercise of police power.

The Court of Appeals' reliance on Ordinance Nos. 81. and 8101 is now assailed in these petitions, particularly the
Sangalang, et al. petition.

Aside from this fundamental issue, the petitioners likewise raise procedural questions. G.R. No. 71169, the mother case,
begins with one.

1. G.R. No. 71169

In this petition, the following questions are specifically put to the Court:

May the Honorable Intermediate Appellate Court reverse the decision of the trial court on issues which
were neither raised by AYALA in its Answers either to the Complaint or Supplemental Complaint nor
specifically assigned as one of the alleged errors on appeal? 25

May the Honorable Intermediate Appellate Court arbitrarily ignore the decisive findings of fact of the trial
court, even if uncontradicted and/or documented, and premised mainly on its own unsupported
conclusions totally reverse the trial court's decision? 26

May the Honorable Intermediate Appellate Court disregard the trial court's documented findings that
respondent Ayala for its own self-interest and commercial purposes contrived in bad faith to do away with
the Jupiter Street perimeter wall it put up three times which wall was really intended to separate the
residential from the commercial areas and thereby insure the privacy and security of Bel Air Village
pursuant to respondent Ayala's express continuing representation and/or covenant to do so? 27

a.

The first question represents an attack on the appellate court's reliance on Ordinances Nos. 81 and 81-01, a matter not
supposedly taken up at the trial or assigned as an error on appeal. As a rule, the Court of Appeals (then the Intermediate
Appellate Court) may determine only such questions as have been properly raised to it, yet, this is not an inflexible rule of
procedure. In Hernandez v. Andal, 28 it was stated that "an unassigned error closely related to an error properly assigned, or
upon which the determination of the question raised by the error properly assigned is dependent, will be considered by the
appellate court notwithstanding the failure to assign it as error." 29

In Baquiran v. Court of Appeals, 30 we referred to the " modern trend of procedure . . . according] the courts broad discretionary
power" 31 and in which we allowed consideration of matters "having some bearing on the issue submitted which the parties failed
to raise or the lower court ignore[d]. 32 And in Vda. de Javellana v. Court of Appeals, 33 we permitted the consideration of a
'patent error' of the trial court by the Court of Appeals under Section 7, of Rule 51, of the Rules of Court, 34although such an error
had not been raised in the brief. But what we note is the fact that the Ayala Corporation did raise the zoning measures as
affirmative defenses, first in its answers 35 and second, in its brief, 36 and submitted at the trial as exhibits. 37 There is accordingly
no cause for complaint on the part of the petitioners for Ayala's violation of the Rules. But while there was reason for the
consideration, on appeal, of the said zoning ordinances in question, this Court nevertheless finds as inaccurate the Court of
Appeals' holding that such measures, had "in effect, [made] Jupiter Street ... a street which could be used not only for residential
purposes," 38 and that "[It lost its character as a street for the exclusive benefit of those residing in Bel-Air Village completely." 39

Among other things, there is a recognition under both Ordinances Nos. 81 and 8 1-01 that Jupiter Street lies as the
boundary between Bel-Air Village and Ayala Corporation's commercial section. And since 1957, it had been considered as
a boundary not as a part of either the residential or commercial zones of Ayala Corporation's real estate development
projects. Thus, the Bel-Air Village Association's articles of incorporation state that Bel-Air Village is 'bounded on the NE.,
from Amapola St., to de los Santos Ave., by Estrella St., on the SE from Extrella St., to Pedestrian Lane by E. De los
Santos Ave., on the SW., from Pedestrian Lane to Reposo St., by Jupiter Street

. . . . 40 Hence, it cannot be said to have been "for the exclusive benefit" of Bel-Air Village residents.

We come to the perimeter wall then standing on the commercial side of Jupiter Street the destruction of which opened the
street to the public. The petitioners contend that the opening of the thoroughfare had opened, in turn, the floodgates to the
commercialization of Bel-Air Village. The wall, so they allege, was designed precisely to protect the peace and privacy of
Bel-Air Village residents from the din and uproar of mercantile pursuits, and that the Ayala Corporation had committed
itself to maintain it. It was the opinion of the Court of Appeals, as we said, that Ayala's liability therefor, if one existed, had
been overtaken by the passage of Ordinances Nos. 81 and 82-01, opening Jupiter Street to commerce.

It is our ruling, we reiterate, that Jupiter Street lies as a mere boundary, a fact acknowledged by the authorities of Makati
and the National Government and, as a scrutiny of the records themselves reveals, by the petitioners themselves, as the
articles of incorporation of Bel-Air Village Association itself would confirm. As a consequence, Jupiter Street was intended
for the use by both -the commercial and residential blocks. It was not originally constructed, therefore, for the exclusive
use of either block, least of all the residents of Bel-Air Village, but, we repeat, in favor of both, as distinguished from the
general public.

When the wall was erected in 1966 and rebuilt twice, in 1970 and 1972, it was not for the purpose of physically separating
the two blocks. According to Ayala Corporation, it was put up to enable the Bel-Air Village Association "better control of the
security in the area, 41 and as the Ayala Corporation's "show of goodwill " 42 a view we find acceptable in the premises. For it
cannot be denied that at that time, the commercial area was vacant, "open for [sic] animals and people to have access to Bel-Air
Village." 43 There was hence a necessity for a wall.

In any case, we find the petitioners' theory, that maintaining the wall was a matter of a contractual obligation on the part of
Ayala, to be pure conjecture. The records do not establish the existence of such a purported commitment. For one, the
subdivision plans submitted did not mention anything about it. For another, there is nothing in the "deed restrictions" that
would point to any covenant regarding the construction of a wall. There is no representation or promise whatsoever
therein to that effect.

With the construction of the commercial buildings in 1974, the reason for which the wall was built- to secure Bel-Air Village
from interlopers had naturally ceased to exist. The buildings themselves had provided formidable curtains of security for
the residents. It should be noted that the commercial lot buyers themselves were forced to demolish parts of the wall to
gain access to Jupiter Street, which they had after all equal right to use.

In fine, we cannot hold the Ayala Corporation liable for damages for a commitment it did not make, much less for alleged
resort to machinations in evading it. The records, on the contrary, will show that the Bel-Air Village Association had been
informed, at the very outset, about the impending use of Jupiter Street by commercial lot buyers. We quote:

xxxxxxxxx

1. Exh. I of appellee, the memorandum of Mr. Carmelo Caluag, President of BAVA, dated May 10, 1972,
informing the BAVA Board of Governors and Barrio Council members about the future use of Jupiter Street
by the lot owners fronting Buendia Avenue. The use of Jupiter Street by the owners of the commercial lots
would necessarily require the demolition of the wall along the commercial block adjoining Jupiter Street.

2. Exh. J of appellee, the minutes of the joint meeting of BAVA Board of Governors and the Bel-Air Barrio
Council where the matter that "Buendia lot owners will have equal rights to use Jupiter Street," and that
Ayala's "plans about the sale of lots and use of Jupiter Street" were precisely taken up. This confirms that
from the start BAVA was informed that the commercial lot owners will use Jupiter Street and that
necessarily the wall along Jupiter Street would be demolished.

3. Exh. 10, the letter of Mr. Demetrio Copuyoc to the President of BAVA, dated May 16, 1972, expressly
stating that vehicular entrance and exit to the commercial lots would be allowed along Jupiter and side
streets.
 4. Exhs. 27, 27-A, 27-B, the letter of Atty. Salvador J. Lorayes dated June 30, 1972, with enclosed copy of
proposed restriction for the commercial lots to BAVA. He proposed restriction again expressly stated that
"Vehicular entrances and exits are allowed thru Jupiter and any side streets."

5. Exh. L of appellee, the minutes of the meeting of the members of BAVA, dated August 26, 1972, where
it is stated "Recently, Ayala Corporation informed the Board that the lots fronting Buendia Avenue will soon
be offered for sale, and that future lot owners will be given equal rights to use Jupiter Street as well as
members of the Association."

6. Exh. 25, the letter of Atty. Lorayes dated September 25, 1972, informing BAVA of the widening of Jupiter
Street by 3.5 meters to improve traffic flow in said street to benefit both the residents of Bel-Air and the
future owners of the commercial lots. 44

The petitioners cannot successfully rely on the alleged promise by Demetrio Copuyoc, Ayala's manager, to build a "[f]ence
along Jupiter with gate for entrance and/or exit 45 as evidence of Ayala's alleged continuing obligation to maintain a wall
between the residential and commercial sections. It should be observed that the fence referred to included a "gate for entrance
and or exit" which would have defeated the purpose of a wall, in the sense the petitioners would put in one, that is to say, an
impenetrable barrier. But as Ayala would point out subsequently, the proposed fence was not constructed because it had
become unnecessary when the commercial lot owners commenced constructions thereon.

Be that as it may, the Court cannot visualize any purported obligation by Ayala Corporation to keep the wall on the
strength of this supposed promise alone. If truly Ayala promised anything assuming that Capuyoc was authorized to bind
the corporation with a promise it would have been with respect to the fence. It would not have established the pre-existing
obligation alleged with respect to the wall.

Obligations arise, among other things, from contract. 46 If Ayala, then, were bound by an obligation, it would have been
pursuant to a contract. A contract, however, is characterized by a "meeting of minds between two persons . 47 As a consensual
relation, it must be shown to exist as a fact, clearly and convincingly. But it cannot be inferred from a mishmash of
circumstances alone disclosing some kind of an "understanding," when especially, those disparate circumstances are not
themselves incompatible with contentions that no accord had existed or had been reached. 48

The petitioners cannot simply assume that the wall was there for the purpose with which they now give it, by the bare
coincidence that it had divided the residential block from the commercial section of Bel-Air. The burden of proof rests with
them to show that it had indeed been built precisely for that objective, a proof that must satisfy the requirements of our
rules of evidence. It cannot be made to stand on the strength of plain inferences.

b.

This likewise answers the petitioners' second query, whether or not the Court of Appeals had "arbitrarily ignore(d) the
decisive findings of the trial court." 49 i.e., findings pointing to alleged acts performed by the Ayala Corporation proving its
commitment to maintain the wall abovesaid. Specifically, the petitioners refer to, among other things: (1) Ayala's alleged
announcement to Bel- Air Village Association members that "[the perimeter wall along Jupiter Street will not be
demolished," 50 (2) Ayala's alleged commitment "during the pendency of the case in the trial court" to restore the wall; (3) alleged
assurances by Copuyoc that the wall will not be removed; (4) alleged contrivances by the corporation to make the association
admit as members the commercial lot buyers which provided them equal access to Jupiter Street; and (5) Ayala's donation to
the association of Jupiter Street for "private use" of Bel-Air residents. 51

682 (1903), where it was held that "whether the plaintiffs services were solicited or whether they were offered to the
defendant for his assistance, inasmuch as these services were accepted and made use of by the latter, we must consider
that there was a tacit and mutual consent as to the rendition of services." (At 686.) In that case, the defendant had
enormously benefitted from the services that entitled the plaintiff to compensation on the theory that no one may unjustly
enrich himself at the expense of another (Solutio indebiti) The facts of this case differ.

As we stated, the Ayala Corporation's alleged conduct prior to or during the proceedings below are not necessarily at war
with claims that no commitment had been in fact made.

With respect to Ayala's alleged announcement before the association, the Court does not agree that Ayala had
categorically assumed as an obligation to maintain the wall "perpetually," i.e., until the year 2007 (the expiration date
under the "deed restrictions.") There is nothing in its statement that would bare any commitment. In connection with the
conference between the parties "during the pendency" of the trial, it is to be noted that the Ayala Corporation denies
having warranted the restoration of the said wall therein. What, on the other hand, appears in the records is the fact that
Ayala did make that promise, but provided that the Mayor allowed it. It turned out, however, that the Mayor balked at the
Idea. 52 But assuming that Ayala did promise to rebuild the wall (in that conference), it does not seem to us that it did
consequently promise to maintain it in perpetuity.

It is unfair to say, as the trial court did, that the Ayala had "contrived to make future commercial lot owners special
members of BAVA and thereby acquire equal right with the regular members thereof to use Jupiter Street 53 since, as we
stated, the commercial lot buyers have the right, in any event, to make use of Jupiter Street, whether or not they are members of
the association. It is not their memberships that give them the right to use it. They share that right with Bel-Air residents from the
outset.

The objective of making the commercial lot owners special members of the Bel-Air Village Association was not to accord
them equal access to Jupiter Street and inferentially, to give them the right to knock down the perimeter wall. It was,
rather, to regulate the use of the street owing precisely to the "planned" nature of Ayala's development project, and real
estate development in general, and this could best be done by placing the commercial lot owners under the association's
jurisdiction.

Moreover, Ayala's overtures with the association concerning the membership of commercial lot buyers therein have been
shown to be neither perfidious nor unethical nor devious (paraphrasing the lower court). We quote anew:

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(7) On June 30, 1972, appellant informed BAVA that in a few months it shall subdivide and sell the
commercial lots bordering the north side of Buendia Avenue Extension from Reposo Street up to Zodiac
Street. Appellant also informed BAVA that it had taken all precautions and will impose upon the
commercial lot owners deed restrictions which will harmonize and blend with the development and welfare
of Bel-Air Village. Appellant further applied for special membership in BAVA of the commercial lot owners.
A copy of the deed restrictions for the commercial lots was also enclosed. The proposed deed restrictions
shall include the 19 meter set back of buildings from Jupiter Street, the requirement for parking space
within the lot of one (1) parking slot for every seventy five (75) meters of office space in the building and
the limitation of vehicular traffic along Buendia to entrance only, but allowing both vehicular entrance and
vehicular exit through Jupiter Street and any side street.

In its letter of July 10, 1972, BAVA acknowledged the above letter of appellant and informed the latter that the application
for special membership of the commercial lot owners in BAVA would be submitted to BAVA's board of governors for
decision.

(8) On September 25,1972, appellant notified BAVA that, after a careful study, it was finally decided that
the height limitation of buildings on the commercial lots shall be increased from 12.5 meters to 15 meters.
Appellant further informed BAVA that Jupiter Street shall be widened by 3.5 meters to improve traffic flow
in said street. BAVA did not reply to said letter, but on January 22, 1973, BAVA wrote a letter to the
appellant informing the latter that the Association had assessed the appellant, as special member of the
association, the amount of P40,795.00 (based on 81,590 square meters at P.50 per square meter)
representing the membership dues of the commercial lot owners for the year 1973, and requested the
appellant to remit the amount which its board of governors had already included in its current budget. In
reply, appellant on January 31, 1973 informed BAVA that due to the widening of Jupiter Street, the area of
the lots which were accepted by the Association as members was reduced to 76,726 square meters. Thus,
the corresponding due at P.50 per square meter should be reduced to P38,363.00. This amount, therefore,
was remitted by the appellant to BAVA. Since then, the latter has been collecting membership dues from
the owners of the commercial lots as special members of the Association. As a matter of fact, the dues
were increased several times. In 1980, the commercial lot owners were already being charged dues at the
rate of P3.00 per square meter. (Domingo, TSN, p. 36, March 19, 1980). At this rate, the total membership
dues of the commercial lot owners amount to P230,178.00 annually based on the total area of 76,726
square meters of the commercial lots. 54

xxxxxxxxx

The alleged undertaking, finally, by Ayala in the deed of donation (over Jupiter Street) to leave Jupiter Street for the
private use of Bel-Air residents is belied by the very provisions of the deed. We quote:
 xxxxxxxxx

IV. That the offer made by the DONOR had been accepted by the DONEE subject to the condition that the
property will be used as a street for the use of the members of the DONEE, their families, personnel,
guests, domestic help and, under certain reasonable conditions and restrictions, by the general public, and
in the event that said lots or parts thereof cease to be used as such, ownership thereof shall automatically
revert to the DONOR. The DONEE shall always have Reposo Street, Makati Avenue, and Paseo de
Roxas open for the use of the general public. It is also understood that the DONOR shall continue the
maintenance of the street at its expense for a period of three years from date hereof." (Deed of Donation,
p. 6, Exh. 7) 55

xxxxxxxxx

The donation, on the contrary, gave the general public equal right to it.

The Court cannot then say, accepting the veracity of the petitioners' facts" enumerated above, that the Ayala Corporation
may be held liable for specific performance of a demandable obligation, let alone damages.

The Court adds that Ayala can hardly be held responsible for the alleged deterioration of "living and environmental
conditions" 56 of the Bel-Air area, as a consequence of "Ayala's authorized demolition of the Jupiter perimeter wall in 1974-1975.
" 57 We agree with Ayala that until 1976, "there was peace and quiet" at Jupiter Street, as the petitioners' (Sangalang, Gaston,
and Briones) complaints admit. Hence, the degeneration of peace and order in Bel-Air cannot be ascribed to the destruction of
the wall in 1974 and 1975.

What Ayala submits as the real cause was the opening of Jupiter Street to vehicular traffic in 1977., 58 But this was upon
orders of the Mayor, and for which the homeowners' association had precisely filed suit (Civil Case No. 34998) 59 to contest the
act of the Mayor.

c.

This likewise disposes of the third question presented. The petitioners' reliance on Ayala's alleged conduct (proving its
alleged commitment), so we have ruled, is not well-taken. Ayala's alleged acts do not, by themselves, reflect a
commitment to maintain the wall in dispute. It cannot be therefore said that the Court of Appeals "arbitrarily
ignore(d]" 60 the lower court's findings. Precisely, it is the duty of the appellate court to review the findings of the trial judge, be
they of fact or law. 61 It is not bound by the conclusions of the judge, for which reason it makes its own findings and arrives at its
own conclusions. Unless a grave abuse of discretion may be imputed to it, it may accept or reject the lower tribunal's
determinations and rely solely on the records.

Accordingly, the Court affirms the Court of Appeals' holding that the Ayala Corporation, in its dealings with the petitioners,
the Bel-Air Village Association in particular, had "acted with justice, gave the appellees [petitioners] their due and
observed honesty and good faith." 62 "Therefore, under both Articles 19 and 21 of the Civil Code, the appellant [Ayala] cannot
be held liable for damages." 63

2. G.R. Nos. 74376, 76394, 78182, & 82281

Our decision also resolves, quite anticlimactically, these companion cases. But we do so for various other reasons. In the
Sangalang case, we absolve the Ayala Corporation primarily owing to our finding that it is not liable for the opening of
Jupiter Street to the general public. Insofar as these petitions are concerned, we likewise exculpate the private
respondents, not only because of the fact that Jupiter Street is not covered by the restrictive easements based on the
"deed restrictions" but chiefly because the National Government itself, through the Metro Manila Commission (MMC), had
reclassified Jupiter Street into high density commercial (C-3) zone, 64 pursuant to its Ordinance No. 81-01. Hence, the
petitioners have no cause of action on the strength alone of the said "deed restrictions.

In view thereof, we find no need in resolving the questions raised as to procedure, since this disposition is sufficient to
resolve these cases.

It is not that we are saying that restrictive easements, especially the easements herein in question, are invalid or
ineffective. As far as the Bel-Air subdivision itself is concerned, certainly, they are valid and enforceable. But they are, like
all contracts, subject to the overriding demands, needs, and interests of the greater number as the State may determine in
the legitimate exercise of police power. Our jurisdiction guarantees sanctity of contract and is said to be the "law between
the contracting parties, 65 but while it is so, it cannot contravene 'law, morals, good customs, public order, or public
policy. 66 Above all, it cannot be raised as a deterrent to police power, designed precisely to promote health, safety, peace, and
enhance the common good, at the expense of contractual rights, whenever necessary. In Ortigas & Co., Limited Partnership v.
Feati Bank and Trust Co., 67 we are told:

xxxxxxxxx

2. With regard to the contention that said resolution cannot nullify the contractual obligations assumed by
the defendant-appellee referring to the restrictions incorporated in the deeds of sale and later in the
corresponding Transfer Certificates of Title issued to defendant-appellee it should be stressed, that while
non-impairment of contracts is constitutionally guaranteed, the rule is not absolute, since it has to be
reconciled with the legitimate exercise of police power, i.e., "the power to prescribe regulations to promote
the health, morals, peace, education, good order or safety and general welfare of the people.' Invariably
described as "the most essential, insistent, and illimitable of powers" and "in a sense, the greatest and
most powerful attribute of government," the exercise of the power may be judicially inquired into and
corrected only if it is capricious, whimsical, unjust or unreasonable, there having been a denial of due
process or a violation of any other applicable constitutional guarantee. As this Court held through Justice
Jose P. Bengson in Philippine Long Distance Company vs. City of Davao, et al. police power 'is elastic and
must be responsive to various social conditions; it is not confined within narrow circumscriptions of
precedents resting on past conditions; it must follow the legal progress of a democratic way of life.' We
were even more emphatic in Vda. de Genuino vs. The Court of agrarian Relations, et al., when We
declared: "We do not see why public welfare when clashing with the individual right to property should not
be made to prevail through the state's exercise of its police power."

Resolution No. 27, 1960 declaring the western part of High way 54, now E. de los Santos Avenue (EDSA,
for short) from Shaw Boulevard to the Pasig River as an industrial and commercial zone, was obviously
passed by the Municipal Council of Mandaluyong, Rizal in the exercise of police power to safeguard or
promote the health, safety, peace, good order and general welfare of the people in the locality. Judicial
notice may be taken of the conditions prevailing in the area, especially where Lots Nos. 5 and 6 are
located. The lots themselves not only front the highway; industrial and commercial complexes have
flourished about the place. EDSA, a main traffic artery which runs through several cities and municipalities
in the Metro Manila area, supports an endless stream of traffic and the resulting activity, noise and
pollution are hardly conducive to the health, safety or welfare of the residents in its route. Having been
expressly granted the power to adopt zoning and subdivision ordinances or regulations, the municipality of
Mandaluyong, through its Municipal Council, was reasonably, if not perfectly, justified under the
circumstances, in passing the subject resolution. 68

xxxxxxxxx

Undoubtedly, the MMC Ordinance represents a legitimate exercise of police power. The petitioners have not shown why
we should hold otherwise other than for the supposed "non-impairment" guaranty of the Constitution, which, as we have
declared, is secondary to the more compelling interests of general welfare. The Ordinance has not been shown to be
capricious or arbitrary or unreasonable to warrant the reversal of the judgments so appealed. In that connection, we find
no reversible error to have been committed by the Court of Appeals.

WHEREFORE, premises considered, these petitions are DENIED No pronouncement as to costs.

Del Rosario vs bengzon

his is a class suit filed by officers of the Philippine Medical Association, the national organization of medical doctors in the
Philippines, on behalf of their professional brethren who are of kindred persuasion, wherein this Court is asked to declare
as unconstitutional, hence, null and void, some provisions of the Generics Act of 1988 (Rep. Act No. 6675), and of the
implementing Administrative Order No. 62 issued pursuant thereto, specifically:

(a) Section 6, Pars. (a) and (b) of the Generics Act which provide:

a) All government health agencies and their personnel as well as other government agencies shall use
generic terminology or generic names in all transactions related to purchasing, prescribing, dispensing and
administering of drugs and medicines.
 b) All medical, dental and veterinary practitioners, including private practitioners, shall write prescriptions
using the generic name. The brand name may be included if so desired. (p. 6, Rollo.)

(b) Section 12, Pars. (b), (c) and (d) of the same law which provide:

b) For the second conviction, the penalty of file in the amount of not less than two thousand pesos
(P2,000.00) but not exceeding five thousand pesos (P5,000.00) at the discretion of the court.

c) For the third conviction, the penalty of fine in the amount of not less than five thousand pesos
(P5,000.00) but not exceeding ten thousand pesos (P10,000.00) and suspension of his license to practice
his profession for thirty (30) days at the discretion of the court.

d) For the fourth and subsequent convictions, the penalty of fine of not less than ten thousand pesos
(P10,000.00) and suspension of his license to practice his profession for one year or longer at the
discretion of the court. (pp. 6-7, Rollo.) and

(c) Sections 4 and 7, Phase 3 of Administrative Order No. 62, Series of 1989 dated March 9, 1989, of the respondent
Secretary of Health, which read as follows:

Section 4. Violative Erroneous, and Impossible Prescriptions.

4.1. Violative Prescriptions:

4.1.1 Where the generic name is not written;

4.1.2 Where the generic name is not legible and a brand name which is legible is written;

4.1.3 Where the brand name is indicated and instructions added, such as the phase 'No Substitution'
which tend to obstruct, hinder or prevent proper generic dispensing.

4.2 What to do with Violative Prescriptions.

Violative prescriptions shall not be filled. They shall be kept and reported by the pharmacist of the drug
outlet or any other interested party to the nearest DOH Officer for appropriate action. The pharmacist shall
advise the prescriber of the problem and/or instruct the customer to get the proper prescription.

4.3 Erroneous Prescriptions:

4.3.1 When the brand name precedes the generic name.

4.3.2 Where the generic name is the one in parenthesis.

4.3.3 Where the brand name in (sic) not in parenthesis.

4.3.4 Where more than one drug product is prescribed in one prescription form.

4.4 What to do with erroneous prescriptions.

Erroneous prescriptions shall be filled. Such prescriptions shall also be kept and reported by the
pharmacist of the drug outlet or any other interested party to the nearest DOH Office for appropriate
action.

xxx xxx xxx

Section 7. Timetable of Implementation.

In order to give all affected parties adequate time for learning and adjustment, the implementation of these
Rules and Regulations shall be in three phases, as follows:
 Phase 1 Education Drive ...

Phase 2 Monitoring of Compliance

xxx xxx xxx

Phase 3 Implementation.

Beginning September 1, 1989 the DOH and the other relevant agencies of government shall monitor
compliance with these Rules and Regulations and all violations shall be subject to the appropriate
sanctions and penalties provided for under these Rules and Regulations and the Generics Act of 1988.
(pp. 7-9, Rollo.)

On March 15, 1989, the full text of Republic Act No. 6675 was published in two newspapers of general circulation in the
Philippines. The law took effect on March 30, 1989, fifteen (15) days after its publication, as provided in Section 15
thereof.

Section 7, Phase 3 of Administrative Order No. 62 was amended by Administrative Order No. 76 dated August 28, 1989
by postponing to January 1, 1990 the effectivity of the sanctions and penalties for violations of the law, provided in
Sections 6 and 12 of the Generics Act and Sections 4 and 7 of the Administrative Order.

The petitioners allege that "as of this date, there is no breach or violation yet" of the law (p. 9, Rollo), which took effect on
March 30, 1989. However, as the penal provisions will only take effect on January 1, 1990, it would have been more
accurate to state that "as of this date, no breaches or violations of the law have been punished yet" (p. 9, Rollo).

The petition is captioned as an action for declaratory relief, over which this Court does not exercise jurisdiction.
Nevertheless, in view of the public interest involved, we decided to treat it as a petition for prohibition instead.

The petitioner's main argument against paragraphs (a) and (b), Section 6 of the law, is the alleged unequal treatment of
government physicians, dentists, and veterinarians, on one hand, and those in private practice on the other hand, in the
manner of prescribing generic drugs, for, while the former are allegedly required to use only generic terminology in their
prescriptions, the latter may write the brand name of the drug in parenthesis below the generic name. The favored
treatment of private doctors, dentists and veterinarians under the law is allegedly a specie of invalid class legislation.

There is no merit in that argument for it proceeds from a misreading and misinterpretation of the letter and intent of
paragraphs (a) and (b), Section 6 of the Generics Act. Indeed, as explained by the public respondent:

... while paragraph (a) enumerates the government transactions ('Purchasing, prescribing, dispensing and
administering of drugs and medicines') where the sole use of generic terminology has been required, the
'prescription' of drugs is further governed by paragraph (b). And the use of the word 'all' in the latter
provision emphasizes the absence of any distinction between government and private physicians. In other
words, in prescribing drugs, physicians, whether in government service or in private practice, are both
governed by exactly the same rules, and thus, are both authorized to include the brand name in their
respective prescriptions. (p. 44, Rollo.)

Furthermore, it may be observed that while paragraph (a) refers to "all government health agencies, and their personnel
as well as other government agencies" (not necessarily physicians, dentists and veterinarians), paragraph (b) refers to "all
medical, dental and veterinary practitioners, including private practitioners."

Petitioners concede that the requirement for doctors, dentists, and veterinarians to use the generic terminology in writing
their prescriptions, followed by the brand name in parenthesis, is "well and good" (p. 12, Rollo). However, they complain
that under paragraph (d) of the law which reads:

(d) Drug outlets, including drugstores, hospital and non-hospital pharmacies and non-traditional outlets
such as supermarkets and stores, shall inform any buyer about any and all other drug products having the
same generic name, together with their corresponding prices so that the buyer may adequately exercise
his option. Within one (1) year after approval of this Act, the drug outlets referred to herein, shall post in
conspicuous places in their establishments, a list of drug products with the same generic name and their
corresponding prices. (Annex A, p. 23, Rollo.)
the salesgirl at the drugstore counter is authorized to "substitute the prescribed medicine with another medicine belonging
to the same generic group." Since doctors are not allowed to instruct the druggist not to substitute the prescription, or to
"Dispense only as Prescribed" (per Sec. 4, Adm. Order No. 62), the petitioners argue that "the act of prescribing the
correct medicine for the patient becomes the act of the salesgirl at the drugstore counter, no longer the act of the
physician, dentist, or veterinarian" (p. 12, Rollo).

Here again, the petitioners have distorted the clear provisions of the law and the implementing administrative order. For it
is plain to see that neither paragraph (d) of Section 6 of the Generics Act, nor Section 4 of Administrative Order No. 62,
gives the salesgirl and/or druggist the discretion to substitute the doctor's prescription.

On the contrary, Section 4, par. 4.1, of Administrative Order No. 62 directs the pharmacist not to fill "violative
prescriptions" (where the generic name is not written, or illegibly written, and the prescription of a brand name is
accompanied by the doctor's instruction not to substitute it), as well as "impossible prescriptions" (par. 4.5). Even a
doctor's "erroneous" prescriptions "shall be filled," not substituted (par. 4.3, Adm. Order No. 62). And, Sections 3 and 5 of
Adm. Order No. 63 enjoin the drug outlets not (to) favor or suggest" or "impose" a particular brand or product on the
customer. The administrative older provides:

In order to ensure the informed choice and use of drugs by the patient/ buyer, the drug outlet is required
to:

3.1.1 Inform the patient/buyer of all available drug products generically equivalent to the
one prescribed with their corresponding prices. In so doing, the drug outlet shall not favor
or suggest any particular product so that the patient/buyer may fully and adequately
exercise his option to choose (Sec. 3, Adm. Order No. 63 s. 1989).

xxx xxx xxx

The following acts or omissions are considered violations of these rules and regulations:

5.1 Imposing a particular brand or product on the buyer. ... (pp. 46-47, Rollo.)

The salesgirl at the drugstore counter, merely informs the customer, but does not determine (for she is incompetent to do
so) all the other drug products or brands that have the same generic name, and their corresponding prices. That
information she may obtain from the list of drug products determined by the Bureau of Food and Drugs to have the same
generic name, or which are the chemical, biological, and therapeutic equivalent of the generic drug. All drugstores or drug
outlets are required by the law to post such list in a conspicuous place in their premises for the information of the
customers, for the choice of whether to buy the expensive brand name drug, or the less expensive generic, should be
exercised by the customer alone.

The purpose of the Generics Act is to carry out the policy of the State:

To promote, encourage and require the use of generic terminology in the importation, manufacture,
distribution, marketing, advertising and promotion, prescription and dispensing of drugs;

To ensure the adequate supply of drugs with generic names at the lowest possible cost and endeavor to
make them available for free to indigent patients;

To encourage the extensive use of drugs with generic names through a rational system of procurement
and distribution;

To emphasize the scientific basis for the use of drugs, in order that health professionals may become more
aware and cognizant of their therapeutic effectiveness; and

To promote drug safety by minimizing duplication in medications and/or use of drugs with potentially
adverse drug interactions. (pp. 3839, Rollo.)

or, as stated by the public respondent, "to promote and require the use of generic drug products that are therapeutically
equivalent to their brand-name counter-parts" (p. 39, Rollo) for "the therapeutic effect of a drug does not depend on its
'brand' but on the 'active ingredients' which it contains." The medicine that cures is the "active ingredient" of the drug, and
not the brand name by which it has been baptized by the manufacturer.

The public respondent points out that the institution of generics in the Philippines will compel physicians to prescribe
drugs based on their therapeutic or "active ingredient," instead of their well-known brand names. Multiple medications
which may produce potentially adverse, even lethal, chemical reactions in the patient will thereby be avoided. Patients
with limited means will be able to buy generic drugs that cost less but possess the same active ingredients, dosage form,
and strength as brand names, many of which are priced beyond the reach of the common tao because the high costs of
advertising, packaging, royalties, and other inputs of production determine their pricing for the market.

The Court has been unable to find any constitutional infirmity in the Generics Act. It, on the contrary, implements the
constitutional mandate for the State "to protect and promote the right to health of the people" and "to make essential
goods, health and other social services available to all the people at affordable cost" (Section 15, Art. II and Section 11,
Art. XIII, 1987 Constitution).

The prohibition against the use by doctors of "no substitution" and/or words of similar import in their prescription, is a valid
regulation to prevent the circumvention of the law. It secures to the patient the right to choose between the brand name
and its generic equivalent since his doctor is allowed to write both the generic and the brand name in his prescription
form. If a doctor is allowed to prescribe a brand-name drug with "no substitution," the patient's option to buy a lower-
priced, but equally effective, generic equivalent would thereby be curtailed. The law aims to benefit the impoverished (and
often sickly) majority of the population in a still developing country like ours, not the affluent and generally healthy minority.

There is no merit in the petitioners' theory that the Generics Act impairs the obligation of contract between a physician and
his patient, for no contract ever results from a consultation between patient and physician. A doctor may take in or refuse
a patient, just as the patient may take or refuse the doctor's advice or prescription. As aptly observed by the public
respondent, no doctor has ever filed an action for breach of contract against a patient who refused to take prescribed
medication, undergo surgery, or follow a recommended course treatment by his doctor ( p. 53, Rollo). In any event, no
private contract between doctor and patient may be allowed to override the power of the State to enact laws that are
reasonably necessary to secure the health, safety, good order, comfort, or general welfare of the community. This power
can neither be abdicated nor bargained away. All contractual and property rights are held subject to its fair exercise
(Anglo-Fil Trading Corporation vs. Lazaro, 124 SCRA 495.)

Petitioners have also assailed Section 12, paragraphs b, c and d, of the Generics Act prescribing graduated penalties
(ranging from a reprimand to a fine of not less that P10,000 and the suspension of the physician's license to practice his
profession for one [1]) year or longer, at the discretion of the court) for violations of its provisions. Petitioners' allegation
that these penalties violate the constitutional guarantee against excessive fines and cruel and degrading punishment, has
no merit. Penal sanctions are indispensable if the law is to be obeyed. They are the "teeth" of the law. Without them, the
law would be toothless, not worth the paper it is printed on, for physicians, dentists and veterinarians may freely ignore its
prescriptions and prohibitions. The penalty of suspension or cancellation of the physician's license is neither cruel,
inhuman, or degrading. It is no different from the penalty of suspension or disbarment that this Court inflicts on lawyers
and judges who misbehave or violate the laws and the Codes of Professional and Judicial Conduct.

We hold that the Generics Act and the implementing administrative orders of the Secretary of Health are constitutional. In
light of its beneficial provisions, we cannot heed the petitioners' plea to kill it aborning, i.e., before it has had a chance to
prove its value to our people as envisioned by its makers.

WHEREFORE, the petition is dismissed for lack of merit. Costs against the petitioners.

Basco vs Pagcor

PARAS, J.:

A TV ad proudly announces:

"The new PAGCOR responding through responsible gaming."

But the petitioners think otherwise, that is why, they filed the instant petition seeking to annul the Philippine Amusement
and Gaming Corporation (PAGCOR) Charter PD 1869, because it is allegedly contrary to morals, public policy and
order, and because

A. It constitutes a waiver of a right prejudicial to a third person with a right recognized by law. It waived the Manila
City government's right to impose taxes and license fees, which is recognized by law;

B. For the same reason stated in the immediately preceding paragraph, the law has intruded into the local
government's right to impose local taxes and license fees. This, in contravention of the constitutionally enshrined
principle of local autonomy;

C. It violates the equal protection clause of the constitution in that it legalizes PAGCOR conducted gambling,
while most other forms of gambling are outlawed, together with prostitution, drug trafficking and other vices;

D. It violates the avowed trend of the Cory government away from monopolistic and crony economy, and toward
free enterprise and privatization. (p. 2, Amended Petition; p. 7, Rollo)

In their Second Amended Petition, petitioners also claim that PD 1869 is contrary to the declared national policy of the
"new restored democracy" and the people's will as expressed in the 1987 Constitution. The decree is said to have a
"gambling objective" and therefore is contrary to Sections 11, 12 and 13 of Article II, Sec. 1 of Article VIII and Section 3 (2)
of Article XIV, of the present Constitution (p. 3, Second Amended Petition; p. 21, Rollo).

The procedural issue is whether petitioners, as taxpayers and practicing lawyers (petitioner Basco being also the
Chairman of the Committee on Laws of the City Council of Manila), can question and seek the annulment of PD 1869 on
the alleged grounds mentioned above.

The Philippine Amusements and Gaming Corporation (PAGCOR) was created by virtue of P.D. 1067-A dated January 1,
1977 and was granted a franchise under P.D. 1067-B also dated January 1, 1977 "to establish, operate and maintain
gambling casinos on land or water within the territorial jurisdiction of the Philippines." Its operation was originally
conducted in the well known floating casino "Philippine Tourist." The operation was considered a success for it proved to
be a potential source of revenue to fund infrastructure and socio-economic projects, thus, P.D. 1399 was passed on June
2, 1978 for PAGCOR to fully attain this objective.

Subsequently, on July 11, 1983, PAGCOR was created under P.D. 1869 to enable the Government to regulate and
centralize all games of chance authorized by existing franchise or permitted by law, under the following declared policy

Sec. 1. Declaration of Policy. It is hereby declared to be the policy of the State to centralize and integrate all
games of chance not heretofore authorized by existing franchises or permitted by law in order to attain the
following objectives:

(a) To centralize and integrate the right and authority to operate and conduct games of chance into one corporate
entity to be controlled, administered and supervised by the Government.

(b) To establish and operate clubs and casinos, for amusement and recreation, including sports gaming pools,
(basketball, football, lotteries, etc.) and such other forms of amusement and recreation including games of chance,
which may be allowed by law within the territorial jurisdiction of the Philippines and which will: (1) generate
sources of additional revenue to fund infrastructure and socio-civic projects, such as flood control programs,
beautification, sewerage and sewage projects, Tulungan ng Bayan Centers, Nutritional Programs, Population
Control and such other essential public services; (2) create recreation and integrated facilities which will expand
and improve the country's existing tourist attractions; and (3) minimize, if not totally eradicate, all the evils,
malpractices and corruptions that are normally prevalent on the conduct and operation of gambling clubs and
casinos without direct government involvement. (Section 1, P.D. 1869)

To attain these objectives PAGCOR is given territorial jurisdiction all over the Philippines. Under its Charter's repealing
clause, all laws, decrees, executive orders, rules and regulations, inconsistent therewith, are accordingly repealed,
amended or modified.

It is reported that PAGCOR is the third largest source of government revenue, next to the Bureau of Internal Revenue and
the Bureau of Customs. In 1989 alone, PAGCOR earned P3.43 Billion, and directly remitted to the National Government a
total of P2.5 Billion in form of franchise tax, government's income share, the President's Social Fund and Host Cities'
share. In addition, PAGCOR sponsored other socio-cultural and charitable projects on its own or in cooperation with
various governmental agencies, and other private associations and organizations. In its 3 1/2 years of operation under the
present administration, PAGCOR remitted to the government a total of P6.2 Billion. As of December 31, 1989, PAGCOR
was employing 4,494 employees in its nine (9) casinos nationwide, directly supporting the livelihood of Four Thousand
Four Hundred Ninety-Four (4,494) families.

But the petitioners, are questioning the validity of P.D. No. 1869. They allege that the same is "null and void" for being
"contrary to morals, public policy and public order," monopolistic and tends toward "crony economy", and is violative of the
equal protection clause and local autonomy as well as for running counter to the state policies enunciated in Sections 11
(Personal Dignity and Human Rights), 12 (Family) and 13 (Role of Youth) of Article II, Section 1 (Social Justice) of Article
XIII and Section 2 (Educational Values) of Article XIV of the 1987 Constitution.

This challenge to P.D. No. 1869 deserves a searching and thorough scrutiny and the most deliberate consideration by the
Court, involving as it does the exercise of what has been described as "the highest and most delicate function which
belongs to the judicial department of the government." (State v. Manuel, 20 N.C. 144; Lozano v. Martinez, 146 SCRA
323).

As We enter upon the task of passing on the validity of an act of a co-equal and coordinate branch of the government We
need not be reminded of the time-honored principle, deeply ingrained in our jurisprudence, that a statute is presumed to
be valid. Every presumption must be indulged in favor of its constitutionality. This is not to say that We approach Our task
with diffidence or timidity. Where it is clear that the legislature or the executive for that matter, has over-stepped the limits
of its authority under the constitution, We should not hesitate to wield the axe and let it fall heavily, as fall it must, on the
offending statute (Lozano v. Martinez, supra).

In Victoriano v. Elizalde Rope Workers' Union, et al, 59 SCRA 54, the Court thru Mr. Justice Zaldivar underscored the

. . . thoroughly established principle which must be followed in all cases where questions of constitutionality as
obtain in the instant cases are involved. All presumptions are indulged in favor of constitutionality; one who attacks
a statute alleging unconstitutionality must prove its invalidity beyond a reasonable doubt; that a law may work
hardship does not render it unconstitutional; that if any reasonable basis may be conceived which supports the
statute, it will be upheld and the challenger must negate all possible basis; that the courts are not concerned with
the wisdom, justice, policy or expediency of a statute and that a liberal interpretation of the constitution in favor of
the constitutionality of legislation should be adopted. (Danner v. Hass, 194 N.W. 2nd 534, 539; Spurbeck v.
Statton, 106 N.W. 2nd 660, 663; 59 SCRA 66; see also e.g. Salas v. Jarencio, 46 SCRA 734, 739 [1970]; Peralta
v. Commission on Elections, 82 SCRA 30, 55 [1978]; and Heirs of Ordona v. Reyes, 125 SCRA 220, 241-242
[1983] cited in Citizens Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 521, 540)

Of course, there is first, the procedural issue. The respondents are questioning the legal personality of petitioners to file
the instant petition.

Considering however the importance to the public of the case at bar, and in keeping with the Court's duty, under the 1987
Constitution, to determine whether or not the other branches of government have kept themselves within the limits of the
Constitution and the laws and that they have not abused the discretion given to them, the Court has brushed aside
technicalities of procedure and has taken cognizance of this petition. (Kapatiran ng mga Naglilingkod sa Pamahalaan ng
Pilipinas Inc. v. Tan, 163 SCRA 371)

With particular regard to the requirement of proper party as applied in the cases before us, We hold that the same
is satisfied by the petitioners and intervenors because each of them has sustained or is in danger of sustaining an
immediate injury as a result of the acts or measures complained of. And even if, strictly speaking they are not
covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so remove
the impediment to its addressing and resolving the serious constitutional questions raised.

In the first Emergency Powers Cases, ordinary citizens and taxpayers were allowed to question the
constitutionality of several executive orders issued by President Quirino although they were involving only an
indirect and general interest shared in common with the public. The Court dismissed the objection that they were
not proper parties and ruled that "the transcendental importance to the public of these cases demands that they
be settled promptly and definitely, brushing aside, if we must technicalities of procedure." We have since then
applied the exception in many other cases. (Association of Small Landowners in the Philippines, Inc. v. Sec. of
Agrarian Reform, 175 SCRA 343).
Having disposed of the procedural issue, We will now discuss the substantive issues raised.

Gambling in all its forms, unless allowed by law, is generally prohibited. But the prohibition of gambling does not mean
that the Government cannot regulate it in the exercise of its police power.

The concept of police power is well-established in this jurisdiction. It has been defined as the "state authority to enact
legislation that may interfere with personal liberty or property in order to promote the general welfare." (Edu v. Ericta, 35
SCRA 481, 487) As defined, it consists of (1) an imposition or restraint upon liberty or property, (2) in order to foster the
common good. It is not capable of an exact definition but has been, purposely, veiled in general terms to underscore its
all-comprehensive embrace. (Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386).

Its scope, ever-expanding to meet the exigencies of the times, even to anticipate the future where it could be done,
provides enough room for an efficient and flexible response to conditions and circumstances thus assuming the greatest
benefits. (Edu v. Ericta, supra)

It finds no specific Constitutional grant for the plain reason that it does not owe its origin to the charter. Along with the
taxing power and eminent domain, it is inborn in the very fact of statehood and sovereignty. It is a fundamental attribute of
government that has enabled it to perform the most vital functions of governance. Marshall, to whom the expression has
been credited, refers to it succinctly as the plenary power of the state "to govern its citizens". (Tribe, American
Constitutional Law, 323, 1978). The police power of the State is a power co-extensive with self-protection and is most
aptly termed the "law of overwhelming necessity." (Rubi v. Provincial Board of Mindoro, 39 Phil. 660, 708) It is "the most
essential, insistent, and illimitable of powers." (Smith Bell & Co. v. National, 40 Phil. 136) It is a dynamic force that enables
the state to meet the agencies of the winds of change.

What was the reason behind the enactment of P.D. 1869?

P.D. 1869 was enacted pursuant to the policy of the government to "regulate and centralize thru an appropriate institution
all games of chance authorized by existing franchise or permitted by law" (1st whereas clause, PD 1869). As was
subsequently proved, regulating and centralizing gambling operations in one corporate entity the PAGCOR, was
beneficial not just to the Government but to society in general. It is a reliable source of much needed revenue for the cash
strapped Government. It provided funds for social impact projects and subjected gambling to "close scrutiny, regulation,
supervision and control of the Government" (4th Whereas Clause, PD 1869). With the creation of PAGCOR and the direct
intervention of the Government, the evil practices and corruptions that go with gambling will be minimized if not totally
eradicated. Public welfare, then, lies at the bottom of the enactment of PD 1896.

Petitioners contend that P.D. 1869 constitutes a waiver of the right of the City of Manila to impose taxes and legal fees;
that the exemption clause in P.D. 1869 is violative of the principle of local autonomy. They must be referring to Section 13
par. (2) of P.D. 1869 which exempts PAGCOR, as the franchise holder from paying any "tax of any kind or form, income or
otherwise, as well as fees, charges or levies of whatever nature, whether National or Local."

(2) Income and other taxes. a) Franchise Holder: No tax of any kind or form, income or otherwise as well as
fees, charges or levies of whatever nature, whether National or Local, shall be assessed and collected under this
franchise from the Corporation; nor shall any form or tax or charge attach in any way to the earnings of the
Corporation, except a franchise tax of five (5%) percent of the gross revenues or earnings derived by the
Corporation from its operations under this franchise. Such tax shall be due and payable quarterly to the National
Government and shall be in lieu of all kinds of taxes, levies, fees or assessments of any kind, nature or
description, levied, established or collected by any municipal, provincial or national government authority (Section
13 [2]).

Their contention stated hereinabove is without merit for the following reasons:

(a) The City of Manila, being a mere Municipal corporation has no inherent right to impose taxes (Icard v. City of Baguio,
83 Phil. 870; City of Iloilo v. Villanueva, 105 Phil. 337; Santos v. Municipality of Caloocan, 7 SCRA 643). Thus, "the
Charter or statute must plainly show an intent to confer that power or the municipality cannot assume it" (Medina v. City of
Baguio, 12 SCRA 62). Its "power to tax" therefore must always yield to a legislative act which is superior having been
passed upon by the state itself which has the "inherent power to tax" (Bernas, the Revised [1973] Philippine Constitution,
Vol. 1, 1983 ed. p. 445).
(b) The Charter of the City of Manila is subject to control by Congress. It should be stressed that "municipal corporations
are mere creatures of Congress" (Unson v. Lacson, G.R. No. 7909, January 18, 1957) which has the power to "create and
abolish municipal corporations" due to its "general legislative powers" (Asuncion v. Yriantes, 28 Phil. 67; Merdanillo v.
Orandia, 5 SCRA 541). Congress, therefore, has the power of control over Local governments (Hebron v. Reyes, G.R. No.
9124, July 2, 1950). And if Congress can grant the City of Manila the power to tax certain matters, it can also provide for
exemptions or even take back the power.

(c) The City of Manila's power to impose license fees on gambling, has long been revoked. As early as 1975, the power of
local governments to regulate gambling thru the grant of "franchise, licenses or permits" was withdrawn by P.D. No. 771
and was vested exclusively on the National Government, thus:

Sec. 1. Any provision of law to the contrary notwithstanding, the authority of chartered cities and other local
governments to issue license, permit or other form of franchise to operate, maintain and establish horse and dog
race tracks, jai-alai and other forms of gambling is hereby revoked.

Sec. 2. Hereafter, all permits or franchises to operate, maintain and establish, horse and dog race tracks, jai-alai
and other forms of gambling shall be issued by the national government upon proper application and verification of
the qualification of the applicant . . .

Therefore, only the National Government has the power to issue "licenses or permits" for the operation of gambling.
Necessarily, the power to demand or collect license fees which is a consequence of the issuance of "licenses or permits"
is no longer vested in the City of Manila.

(d) Local governments have no power to tax instrumentalities of the National Government. PAGCOR is a government
owned or controlled corporation with an original charter, PD 1869. All of its shares of stocks are owned by the National
Government. In addition to its corporate powers (Sec. 3, Title II, PD 1869) it also exercises regulatory powers thus:

Sec. 9. Regulatory Power. The Corporation shall maintain a Registry of the affiliated entities, and shall exercise
all the powers, authority and the responsibilities vested in the Securities and Exchange Commission over such
affiliating entities mentioned under the preceding section, including, but not limited to amendments of Articles of
Incorporation and By-Laws, changes in corporate term, structure, capitalization and other matters concerning the
operation of the affiliated entities, the provisions of the Corporation Code of the Philippines to the contrary
notwithstanding, except only with respect to original incorporation.

PAGCOR has a dual role, to operate and to regulate gambling casinos. The latter role is governmental, which places it in
the category of an agency or instrumentality of the Government. Being an instrumentality of the Government, PAGCOR
should be and actually is exempt from local taxes. Otherwise, its operation might be burdened, impeded or subjected to
control by a mere Local government.

The states have no power by taxation or otherwise, to retard, impede, burden or in any manner control the
operation of constitutional laws enacted by Congress to carry into execution the powers vested in the federal
government. (MC Culloch v. Marland, 4 Wheat 316, 4 L Ed. 579)

This doctrine emanates from the "supremacy" of the National Government over local governments.

Justice Holmes, speaking for the Supreme Court, made reference to the entire absence of power on the part of
the States to touch, in that way (taxation) at least, the instrumentalities of the United States (Johnson v. Maryland,
254 US 51) and it can be agreed that no state or political subdivision can regulate a federal instrumentality in such
a way as to prevent it from consummating its federal responsibilities, or even to seriously burden it in the
accomplishment of them. (Antieau, Modern Constitutional Law, Vol. 2, p. 140, emphasis supplied)

Otherwise, mere creatures of the State can defeat National policies thru extermination of what local authorities may
perceive to be undesirable activities or enterprise using the power to tax as "a tool for regulation" (U.S. v. Sanchez, 340
US 42).

The power to tax which was called by Justice Marshall as the "power to destroy" (Mc Culloch v. Maryland, supra) cannot
be allowed to defeat an instrumentality or creation of the very entity which has the inherent power to wield it.
(e) Petitioners also argue that the Local Autonomy Clause of the Constitution will be violated by P.D. 1869. This is a
pointless argument. Article X of the 1987 Constitution (on Local Autonomy) provides:

Sec. 5. Each local government unit shall have the power to create its own source of revenue and to levy taxes,
fees, and other charges subject to such guidelines and limitation as the congress may provide, consistent with the
basic policy on local autonomy. Such taxes, fees and charges shall accrue exclusively to the local government.
(emphasis supplied)

The power of local government to "impose taxes and fees" is always subject to "limitations" which Congress may provide
by law. Since PD 1869 remains an "operative" law until "amended, repealed or revoked" (Sec. 3, Art. XVIII, 1987
Constitution), its "exemption clause" remains as an exception to the exercise of the power of local governments to impose
taxes and fees. It cannot therefore be violative but rather is consistent with the principle of local autonomy.

Besides, the principle of local autonomy under the 1987 Constitution simply means "decentralization" (III Records of the
1987 Constitutional Commission, pp. 435-436, as cited in Bernas, The Constitution of the Republic of the Philippines, Vol.
II, First Ed., 1988, p. 374). It does not make local governments sovereign within the state or an "imperium in imperio."

Local Government has been described as a political subdivision of a nation or state which is constituted by law
and has substantial control of local affairs. In a unitary system of government, such as the government under the
Philippine Constitution, local governments can only be an intra sovereign subdivision of one sovereign nation, it
cannot be an imperium in imperio. Local government in such a system can only mean a measure of
decentralization of the function of government. (emphasis supplied)

As to what state powers should be "decentralized" and what may be delegated to local government units remains a matter
of policy, which concerns wisdom. It is therefore a political question. (Citizens Alliance for Consumer Protection v. Energy
Regulatory Board, 162 SCRA 539).

What is settled is that the matter of regulating, taxing or otherwise dealing with gambling is a State concern and hence, it
is the sole prerogative of the State to retain it or delegate it to local governments.

As gambling is usually an offense against the State, legislative grant or express charter power is generally
necessary to empower the local corporation to deal with the subject. . . . In the absence of express grant of power
to enact, ordinance provisions on this subject which are inconsistent with the state laws are void. (Ligan v.
Gadsden, Ala App. 107 So. 733 Ex-Parte Solomon, 9, Cals. 440, 27 PAC 757 following in re Ah You, 88 Cal. 99,
25 PAC 974, 22 Am St. Rep. 280, 11 LRA 480, as cited in Mc Quinllan Vol. 3 Ibid, p. 548, emphasis supplied)

Petitioners next contend that P.D. 1869 violates the equal protection clause of the Constitution, because "it legalized
PAGCOR conducted gambling, while most gambling are outlawed together with prostitution, drug trafficking and other
vices" (p. 82, Rollo).

We, likewise, find no valid ground to sustain this contention. The petitioners' posture ignores the well-accepted meaning of
the clause "equal protection of the laws." The clause does not preclude classification of individuals who may be accorded
different treatment under the law as long as the classification is not unreasonable or arbitrary (Itchong v. Hernandez, 101
Phil. 1155). A law does not have to operate in equal force on all persons or things to be conformable to Article III, Section
1 of the Constitution (DECS v. San Diego, G.R. No. 89572, December 21, 1989).

The "equal protection clause" does not prohibit the Legislature from establishing classes of individuals or objects upon
which different rules shall operate (Laurel v. Misa, 43 O.G. 2847). The Constitution does not require situations which are
different in fact or opinion to be treated in law as though they were the same (Gomez v. Palomar, 25 SCRA 827).

Just how P.D. 1869 in legalizing gambling conducted by PAGCOR is violative of the equal protection is not clearly
explained in the petition. The mere fact that some gambling activities like cockfighting (P.D 449) horse racing (R.A. 306 as
amended by RA 983), sweepstakes, lotteries and races (RA 1169 as amended by B.P. 42) are legalized under certain
conditions, while others are prohibited, does not render the applicable laws, P.D. 1869 for one, unconstitutional.

If the law presumably hits the evil where it is most felt, it is not to be overthrown because there are other instances
to which it might have been applied. (Gomez v. Palomar, 25 SCRA 827)
 The equal protection clause of the 14th Amendment does not mean that all occupations called by the same name
must be treated the same way; the state may do what it can to prevent which is deemed as evil and stop short of
those cases in which harm to the few concerned is not less than the harm to the public that would insure if the rule
laid down were made mathematically exact. (Dominican Hotel v. Arizona, 249 US 2651).

Anent petitioners' claim that PD 1869 is contrary to the "avowed trend of the Cory Government away from monopolies and
crony economy and toward free enterprise and privatization" suffice it to state that this is not a ground for this Court to
nullify P.D. 1869. If, indeed, PD 1869 runs counter to the government's policies then it is for the Executive Department to
recommend to Congress its repeal or amendment.

The judiciary does not settle policy issues. The Court can only declare what the law is and not what the law should
be. Under our system of government, policy issues are within the domain of the political branches of government
1wphi1

and of the people themselves as the repository of all state power. (Valmonte v. Belmonte, Jr., 170 SCRA 256).

On the issue of "monopoly," however, the Constitution provides that:

Sec. 19. The State shall regulate or prohibit monopolies when public interest so requires. No combinations in
restraint of trade or unfair competition shall be allowed. (Art. XII, National Economy and Patrimony)

It should be noted that, as the provision is worded, monopolies are not necessarily prohibited by the Constitution. The
state must still decide whether public interest demands that monopolies be regulated or prohibited. Again, this is a matter
of policy for the Legislature to decide.

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

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

Every law has in its favor the presumption of constitutionality (Yu Cong Eng v. Trinidad, 47 Phil. 387; Salas v. Jarencio, 48
SCRA 734; Peralta v. Comelec, 82 SCRA 30; Abbas v. Comelec, 179 SCRA 287). Therefore, for PD 1869 to be nullified, it
must be shown that there is a clear and unequivocal breach of the Constitution, not merely a doubtful and equivocal one.
In other words, the grounds for nullity must be clear and beyond reasonable doubt. (Peralta v. Comelec, supra) Those
who petition this Court to declare a law, or parts thereof, unconstitutional must clearly establish the basis for such a
declaration. Otherwise, their petition must fail. Based on the grounds raised by petitioners to challenge the constitutionality
of P.D. 1869, the Court finds that petitioners have failed to overcome the presumption. The dismissal of this petition is
therefore, inevitable. But as to whether P.D. 1869 remains a wise legislation considering the issues of "morality, monopoly,
trend to free enterprise, privatization as well as the state principles on social justice, role of youth and educational values"
being raised, is up for Congress to determine.

As this Court held in Citizens' Alliance for Consumer Protection v. Energy Regulatory Board, 162 SCRA 521

Presidential Decree No. 1956, as amended by Executive Order No. 137 has, in any case, in its favor the
presumption of validity and constitutionality which petitioners Valmonte and the KMU have not overturned.
Petitioners have not undertaken to identify the provisions in the Constitution which they claim to have been
violated by that statute. This Court, however, is not compelled to speculate and to imagine how the assailed
legislation may possibly offend some provision of the Constitution. The Court notes, further, in this respect that
petitioners have in the main put in question the wisdom, justice and expediency of the establishment of the OPSF,
issues which are not properly addressed to this Court and which this Court may not constitutionally pass upon.
Those issues should be addressed rather to the political departments of government: the President and the
Congress.

Parenthetically, We wish to state that gambling is generally immoral, and this is precisely so when the gambling resorted
to is excessive. This excessiveness necessarily depends not only on the financial resources of the gambler and his family
but also on his mental, social, and spiritual outlook on life. However, the mere fact that some persons may have lost their
material fortunes, mental control, physical health, or even their lives does not necessarily mean that the same are directly
attributable to gambling. Gambling may have been the antecedent, but certainly not necessarily the cause. For the same
consequences could have been preceded by an overdose of food, drink, exercise, work, and even sex.

WHEREFORE, the petition is DISMISSED for lack of merit.

People vs judge nitafan

GUTIERREZ, JR., J.:

This petition for certiorari involves an issue that has been raised before this Court several times in the past. The petitioner,
in effect, is asking for a re-examination of our decisions on the issue of whether or not an entrustee in a trust receipt
agreement who fails to deliver the proceeds of the sale or to return the goods if not sold to the entruster-bank is liable for
the crime of estafa.

Petitioner Allied Banking Corporation charged Betty Sia Ang with estafa in Criminal Case No. 87-53501 in an information
which alleged:

That on or about July 18, 1980, in the City of Manila, Philippines, the said accused, being then the
proprietress of Eckart Enterprises, a business entity located at 756 Norberto Amoranto Avenue, Quezon
City, did then and there wilfully, unlawfully and feloniously defraud the Allied Banking Corporation, a
banking institution, represented by its Account Officer, Raymund S. Li, in the following manner, to wit: the
said accused received in trust from the aforesaid bank Gordon Plastics, plastic sheeting and Hook
Chromed, in the total amount of P398,000.00, specified in a trust receipt and covered by Domestic Letter
of Credit No. DLC-002-801254, under the express obligation on the part of said accused to sell the same
and account for the proceeds of the sale thereof, if sold, or to return said merchandise, if not sold, on or
before October 16, 1980, or upon demand, but the said accused, once in possession of the said articles,
far from complying with the aforesaid obligation, notwithstanding repeated demands made upon her to that
effect, paid only the amount of P283,115.78, thereby leaving unaccounted for the amount of P114,884.22
which, once in her possession, with intent to defraud, she misappropriated, misapplied and converted to
her own personal use and benefit, to the damage and prejudice of said Allied Banking Corporation in the
aforesaid sum of P114,884.22, Philippine Currency. (Rollo, pp. 13-14)

The accused filed a motion to quash the information on the ground that the facts charged do not constitute an offense.

On January 7, 1988, the respondent judge granted the motion to quash. The order was anchored on the premise that a
trust receipt transaction is an evidence of a loan being secured so that there is, as between the parties to it, a creditor-
debtor relationship. The court ruled that the penal clause of Presidential Decree No. 15 on the Trust Receipts Law is
inoperative because it does not actually punish an offense mala prohibita. The law only refers to the relevant estafa
provision in the Revised Penal Code. The Court relied on the judicial pronouncements in People v. Cuevo, 104 SCRA 312
[1981] where, for lack of the required number of votes, this Court upheld the dismissal of a charge for estafa for a violation
of a trust receipt agreement; and in Sia v. People, 121 SCRA 655 [1983] where we held that the violation merely gives rise
to a civil obligation. At the time the order to quash was issued or on January 7, 1988, these two decisions were the only
most recent ones. Hence, this petition.

The private respondent adopted practically the same stance of the lower court. She likewise asserts that P.D. 115 is
unconstitutional as it violates the constitutional prohibition against imprisonment for non-payment of a debt. She argues
that where no malice exists in a breach of a purely commercial undertaking, P.D. 115 imputes it.

This Court notes that the petitioner bank brought a similar case before this Court in G.R. No. 82495, entitled Allied
Banking Corporation v. Hon. Secretary Sedfrey Ordoez and Alfredo Ching which we decided on December 10, 1990
(192 SCRA 246). In that case, the petitioner additionally questioned, and we accordingly reversed, the pronouncement of
the Secretary of Justice limiting the application of the penal provision of P.D. 115 only to goods intended to be sold to the
exclusion of those still to be manufactured.

As in G.R. No. 82495, we resolve the instant petition in the light of the Court's ruling in Lee v. Rodil, 175 SCRA 100 [1989]
and Sia v. Court of Appeals, 166 SCRA 263 [1988]. We have held in the latter cases that acts involving the violation of
trust receipt agreements occurring after 29 January 1973 (date of enactment of P.D. 115) would make the accused
criminally liable for estafa under paragraph 1 (b), Article 315 of the Revised Penal Code (RPC) pursuant to the explicit
provision in Section 13 of P.D. 115.

The relevant penal provision of P.D. 115 provides:

Sec. 13 of P.D. No. 115 provides:

. . . Penalty clause. The failure of an entrustee to turn over the proceeds of the sale of the goods,
documents or instruments covered by a trust receipt to the extent of the amount owing to the entruster or
as appears in the trust receipt or to return said goods, documents or instruments if they were not sold or
disposed of in accordance with the terms of the trust receipt shall constitute the crime of estafa,
punishable under the provisions of Article Three Hundred and Fifteen, paragraph one (b) of Act Numbered
Three Thousand Eight Hundred and Fifteen, as amended, otherwise known as the Revised Penal Code. If
the violation or offense is committed by a corporation, partnership, association or other juridical entities,
the penalty provided for in this Decree shall be imposed upon the directors, officers, employees or other
officials or persons therein responsible for the offense, without prejudice to the civil liabilities arising from
the criminal offense.

Section 1 (b), Article 315 of the RPC under which the violation is made to fall, states:

. . . Swindling (estafa). Any person who shall defraud another by any of the means mentioned herein
below . . . :

xxx xxx xxx

b. By misappropriating or converting, to the prejudice of another, money, goods, or any other personal
property received by the offender in trust or on commission, or for administration, or under any other
obligation involving the duty to make delivery of or to return the same, even though such obligation be
totally or partially guaranteed by a bond; or by denying having received such money, good, or other
property.

The factual circumstances in the present case show that the alleged violation was committed sometime in 1980 or during
the effectivity of P.D. 115. The failure, therefore, to account for the P114,884.22 balance is what makes the accused-
respondent criminally liable for estafa. The Court reiterates its definitive ruling that, in the Cuevo and Sia (1983) cases
relied upon by the accused, P.D. 115 was not applied because the questioned acts were committed before its effectivity.
(Lee v. Rodil, supra, p. 108) At the time those cases were decided, the failure to comply with the obligations under the
trust receipt was susceptible to two interpretations. The Court in Sia adopted the view that a violation gives rise only to a
civil liability as the more feasible view "before the promulgation of P.D. 115," notwithstanding prior decisions where we
ruled that a breach also gives rise to a liability for estafa. (People v. Yu Chai Ho, 53 Phil. 874 [1929]; Samo v. People, 115
Phil. 346 [1962]; Philippine National Bank v. Arrozal, 103 Phil. 213 [1958]; Philippine National Bank v. Viuda e Hijos de
Angel Jose, 63 Phil. 814 [1936]).

Contrary to the reasoning of the respondent court and the accused, a trust receipt arrangement does not involve a simple
loan transaction between a creditor and debtor-importer. Apart from a loan feature, the trust receipt arrangement has a
security feature that is covered by the trust receipt itself. (Vintola v. Insular Bank of Asia and America, 151 SCRA 578
[1987]) That second feature is what provides the much needed financial assistance to our traders in the importation or
purchase of goods or merchandise through the use of those goods or merchandise as collateral for the advancements
made by a bank. (Samo v. People, supra). The title of the bank to the security is the one sought to be protected and not
the loan which is a separate and distinct agreement.

The Trust Receipts Law punishes the dishonesty and abuse of confidence in the handling of money or goods to the
prejudice of another regardless of whether the latter is the owner or not. The law does not seek to enforce payment of the
loan. Thus, there can be no violation of a right against imprisonment for non-payment of a debt.

Trust receipts are indispensable contracts in international and domestic business transactions. The prevalent use of trust
receipts, the danger of their misuse and/or misappropriation of the goods or proceeds realized from the sale of goods,
documents or instruments held in trust for entruster-banks, and the need for regulation of trust receipt transactions to
safeguard the rights and enforce the obligations of the parties involved are the main thrusts of P.D. 115. As correctly
observed by the Solicitor General, P.D. 115, like Batas Pambansa Blg. 22, punishes the act "not as an offense against
property, but as an offense against public order. . . ." The misuse of trust receipts therefore should be deterred to prevent
any possible havoc in trade circles and the banking community (citing Lozano v. Martinez, 146 SCRA 323 [1986]; Rollo, p.
57) It is in the context of upholding public interest that the law now specifically designates a breach of a trust receipt
agreement to be an act that "shall" make one liable for estafa.

The offense is punished as a malum prohibitum regardless of the existence of intent or malice. A mere failure to deliver
the proceeds of the sale or the goods if not sold, constitutes a criminal offense that causes prejudice not only to another,
but more to the public interest.

We are continually re-evaluating the opposite view which insists that the violation of a trust receipt agreement should
result only in a civil action for collection. The respondent contends that there is no malice involved. She cites the dissent
of the late Chief Justice Claudio Teehankee in Ong v. Court of Appeals, (124 SCRA 578 [1983]) to wit:

The old capitalist orientation of putting importers in jail for supposed estafa or swindling for non-payment
of the price of the imported goods released to them under trust receipts (a purely commercial transaction)
under the fiction of the trust receipt device, should no longer be permitted in this day and age.

As earlier stated, however, the law punishes the dishonesty and abuse of confidence in the handling of money or goods to
the prejudice of the bank.

The Court reiterates that the enactment of P.D. 115 is a valid exercise of the police power of the State and is, thus,
constitutional. (Lee v. Rodil, supra; Lozano v. Martinez, supra) The arguments of the respondent are appropriate for a
repeal or modification of the law and should be directed to Congress. But until the law is repealed, we are constrained to
apply it.

WHEREFORE, the petition is hereby GRANTED. The Order of the respondent Regional Trial Court of Manila, Branch 52
dated January 7, 1988 is SET ASIDE. Let this case be remanded to the said court for disposition in accordance with this
decision.

Magtajas vs pryce

CRUZ, J.:

There was instant opposition when PAGCOR announced the opening of a casino in Cagayan de Oro City. Civic
organizations angrily denounced the project. The religious elements echoed the objection and so did the women's groups
and the youth. Demonstrations were led by the mayor and the city legislators. The media trumpeted the protest,
describing the casino as an affront to the welfare of the city.

The trouble arose when in 1992, flush with its tremendous success in several cities, PAGCOR decided to expand its
operations to Cagayan de Oro City. To this end, it leased a portion of a building belonging to Pryce Properties
Corporation, Inc., one of the herein private respondents, renovated and equipped the same, and prepared to inaugurate
its casino there during the Christmas season.

The reaction of the Sangguniang Panlungsod of Cagayan de Oro City was swift and hostile. On December 7, 1992, it
enacted Ordinance No. 3353 reading as follows:

ORDINANCE NO. 3353

AN ORDINANCE PROHIBITING THE ISSUANCE OF BUSINESS PERMIT AND CANCELLING EXISTING

BUSINESS PERMIT TO ANY ESTABLISHMENT FOR THE USING AND ALLOWING TO BE USED ITS
PREMISES OR PORTION THEREOF FOR THE OPERATION OF CASINO.

BE IT ORDAINED by the Sangguniang Panlungsod of the City of Cagayan de Oro, in session assembled
that:

Sec. 1. That pursuant to the policy of the city banning the operation of casino within its territorial
jurisdiction, no business permit shall be issued to any person, partnership or corporation for the operation
of casino within the city limits.
 Sec. 2. That it shall be a violation of existing business permit by any persons, partnership or corporation
to use its business establishment or portion thereof, or allow the use thereof by others for casino operation
and other gambling activities.

Sec. 3. PENALTIES. Any violation of such existing business permit as defined in the preceding
section shall suffer the following penalties, to wit:

a) Suspension of the business permit for sixty (60) days for the first offense
and a fine of P1,000.00/day

b) Suspension of the business permit for Six (6) months for the second
offense, and a fine of P3,000.00/day

c) Permanent revocation of the business permit and imprisonment of One

(1) year, for the third and subsequent offenses.

Sec. 4. This Ordinance shall take effect ten (10) days from publication thereof.

Nor was this all. On January 4, 1993, it adopted a sterner Ordinance No. 3375-93 reading as follows:

ORDINANCE NO. 3375-93

AN ORDINANCE PROHIBITING THE OPERATION OF CASINO AND PROVIDING PENALTY FOR

VIOLATION THEREFOR.

WHEREAS, the City Council established a policy as early as 1990 against CASINO under its Resolution
No. 2295;

WHEREAS, on October 14, 1992, the City Council passed another Resolution No. 2673, reiterating its
policy against the establishment of CASINO;

WHEREAS, subsequently, thereafter, it likewise passed Ordinance No. 3353, prohibiting the issuance of
Business Permit and to cancel existing Business Permit to any establishment for the using and allowing to
be used its premises or portion thereof for the operation of CASINO;

WHEREAS, under Art. 3, section 458, No. (4), sub paragraph VI of the Local Government Code of 1991
(Rep. Act 7160) and under Art. 99, No. (4), Paragraph VI of the implementing rules of the Local
Government Code, the City Council as the Legislative Body shall enact measure to suppress any activity
inimical to public morals and general welfare of the people and/or regulate or prohibit such activity
pertaining to amusement or entertainment in order to protect social and moral welfare of the community;

NOW THEREFORE,

BE IT ORDAINED by the City Council in session duly assembled that:

Sec. 1. The operation of gambling CASINO in the City of Cagayan de Oro is hereby prohibited.

Sec. 2. Any violation of this Ordinance shall be subject to the following penalties:

a) Administrative fine of P5,000.00 shall be imposed against the proprietor, partnership or corporation
undertaking the operation, conduct, maintenance of gambling CASINO in the City and closure thereof;

b) Imprisonment of not less than six (6) months nor more than one (1) year or a fine in the amount of
P5,000.00 or both at the discretion of the court against the manager, supervisor, and/or any person
responsible in the establishment, conduct and maintenance of gambling CASINO.

Sec. 3. This Ordinance shall take effect ten (10) days after its publication in a local newspaper of
general circulation.
Pryce assailed the ordinances before the Court of Appeals, where it was joined by PAGCOR as intervenor and
supplemental petitioner. Their challenge succeeded. On March 31, 1993, the Court of Appeals declared the ordinances
invalid and issued the writ prayed for to prohibit their enforcement. 1 Reconsideration of this decision was denied on July 13,
1993. 2

Cagayan de Oro City and its mayor are now before us in this petition for review under Rule 45 of the Rules of
Court. 3 They aver that the respondent Court of Appeals erred in holding that:

1. Under existing laws, the Sangguniang Panlungsod of the City of Cagayan de Oro does not have the
power and authority to prohibit the establishment and operation of a PAGCOR gambling casino within the
City's territorial limits.

2. The phrase "gambling and other prohibited games of chance" found in Sec. 458, par. (a), sub-par. (1)
(v) of R.A. 7160 could only mean "illegal gambling."

3. The questioned Ordinances in effect annul P.D. 1869 and are therefore invalid on that point.

4. The questioned Ordinances are discriminatory to casino and partial to cockfighting and are therefore
invalid on that point.

5. The questioned Ordinances are not reasonable, not consonant with the general powers and purposes of
the instrumentality concerned and inconsistent with the laws or policy of the State.

6. It had no option but to follow the ruling in the case of Basco, et al. v. PAGCOR, G.R. No. 91649, May
14, 1991, 197 SCRA 53 in disposing of the issues presented in this present case.

PAGCOR is a corporation created directly by P.D. 1869 to help centralize and regulate all games of chance, including
casinos on land and sea within the territorial jurisdiction of the Philippines. In Basco v. Philippine Amusements and
Gaming Corporation, 4 this Court sustained the constitutionality of the decree and even cited the benefits of the entity to the
national economy as the third highest revenue-earner in the government, next only to the BIR and the Bureau of Customs.

Cagayan de Oro City, like other local political subdivisions, is empowered to enact ordinances for the purposes indicated
in the Local Government Code. It is expressly vested with the police power under what is known as the General Welfare
Clause now embodied in Section 16 as follows:

Sec. 16. General Welfare. Every local government unit shall exercise the powers expressly granted,
those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient
and effective governance, and those which are essential to the promotion of the general welfare. Within
their respective territorial jurisdictions, local government units shall ensure and support, among other
things, the preservation and enrichment of culture, promote health and safety, enhance the right of the
people to a balanced ecology, encourage and support the development of appropriate and self-reliant
scientific and technological capabilities, improve public morals, enhance economic prosperity and social
justice, promote full employment among their residents, maintain peace and order, and preserve the
comfort and convenience of their inhabitants.

In addition, Section 458 of the said Code specifically declares that:

Sec. 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:

xxx xxx xxx

(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;

This section also authorizes the local government units to regulate properties and businesses within their territorial limits
in the interest of the general welfare. 5

The petitioners argue that by virtue of these provisions, the Sangguniang Panlungsod may prohibit the operation of
casinos because they involve games of chance, which are detrimental to the people. Gambling is not allowed by general
law and even by the Constitution itself. The legislative power conferred upon local government units may be exercised
over all kinds of gambling and not only over "illegal gambling" as the respondents erroneously argue. Even if the operation
of casinos may have been permitted under P.D. 1869, the government of Cagayan de Oro City has the authority to
prohibit them within its territory pursuant to the authority entrusted to it by the Local Government Code.

It is submitted that this interpretation is consonant with the policy of local autonomy as mandated in Article II, Section 25,
and Article X of the Constitution, as well as various other provisions therein seeking to strengthen the character of the
nation. In giving the local government units the power to prevent or suppress gambling and other social problems, the
Local Government Code has recognized the competence of such communities to determine and adopt the measures best
expected to promote the general welfare of their inhabitants in line with the policies of the State.

The petitioners also stress that when the Code expressly authorized the local government units to prevent and suppress
gambling and other prohibited games of chance, like craps, baccarat, blackjack and roulette, it meant all forms of
gambling without distinction. Ubi lex non distinguit, nec nos distinguere debemos. 6 Otherwise, it would have expressly
excluded from the scope of their power casinos and other forms of gambling authorized by special law, as it could have easily
done. The fact that it did not do so simply means that the local government units are permitted to prohibit all kinds of gambling
within their territories, including the operation of casinos.

The adoption of the Local Government Code, it is pointed out, had the effect of modifying the charter of the PAGCOR. The
Code is not only a later enactment than P.D. 1869 and so is deemed to prevail in case of inconsistencies between them.
More than this, the powers of the PAGCOR under the decree are expressly discontinued by the Code insofar as they do
not conform to its philosophy and provisions, pursuant to Par. (f) of its repealing clause reading as follows:

(f) 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.

It is also maintained that assuming there is doubt regarding the effect of the Local Government Code on P.D. 1869, the
doubt must be resolved in favor of the petitioners, in accordance with the direction in the Code calling for its liberal
interpretation in favor of the local government units. Section 5 of the Code specifically provides:

Sec. 5. Rules of Interpretation. In the interpretation of the provisions of this Code, the following rules
shall apply:

(a) Any provision on a power of a local government unit shall be liberally interpreted in its favor, and in
case of doubt, any question thereon shall be resolved in favor of devolution of powers and of the lower
local government unit. Any fair and reasonable doubt as to the existence of the power shall be interpreted
in favor of the local government unit concerned;

xxx xxx xxx

(c) The general welfare provisions in this Code shall be liberally interpreted to give more powers to local
government units in accelerating economic development and upgrading the quality of life for the people in
the community; . . . (Emphasis supplied.)
Finally, the petitioners also attack gambling as intrinsically harmful and cite various provisions of the Constitution and
several decisions of this Court expressive of the general and official disapprobation of the vice. They invoke the State
policies on the family and the proper upbringing of the youth and, as might be expected, call attention to the old case
of U.S. v. Salaveria, 7 which sustained a municipal ordinance prohibiting the playing of panguingue. The petitioners decry the
immorality of gambling. They also impugn the wisdom of P.D. 1869 (which they describe as "a martial law instrument") in
creating PAGCOR and authorizing it to operate casinos "on land and sea within the territorial jurisdiction of the Philippines."

This is the opportune time to stress an important point.

The morality of gambling is not a justiciable issue. Gambling is not illegal per se. While it is generally considered inimical
to the interests of the people, there is nothing in the Constitution categorically proscribing or penalizing gambling or, for
that matter, even mentioning it at all. It is left to Congress to deal with the activity as it sees fit. In the exercise of its own
discretion, the legislature may prohibit gambling altogether or allow it without limitation or it may prohibit some forms of
gambling and allow others for whatever reasons it may consider sufficient. Thus, it has prohibited jueteng and monte but
permits lotteries, cockfighting and horse-racing. In making such choices, Congress has consulted its own wisdom, which
this Court has no authority to review, much less reverse. Well has it been said that courts do not sit to resolve the merits
of conflicting theories. 8 That is the prerogative of the political departments. It is settled that questions regarding the wisdom,
morality, or practicibility of statutes are not addressed to the judiciary but may be resolved only by the legislative and executive
departments, to which the function belongs in our scheme of government. That function is exclusive. Whichever way these
branches decide, they are answerable only to their own conscience and the constituents who will ultimately judge their acts, and
not to the courts of justice.

The only question we can and shall resolve in this petition is the validity of Ordinance No. 3355 and Ordinance No. 3375-
93 as enacted by the Sangguniang Panlungsod of Cagayan de Oro City. And we shall do so only by the criteria laid down
by law and not by our own convictions on the propriety of gambling.

The tests of a valid ordinance are well established. A long line of decisions 9 has held that to be valid, an ordinance must
conform to the following substantive requirements:

1) It must not contravene the constitution or any statute.

2) It must not be unfair or oppressive.

3) It must not be partial or discriminatory.

4) It must not prohibit but may regulate trade.

5) It must be general and consistent with public policy.

6) It must not be unreasonable.

We begin by observing that under Sec. 458 of the Local Government Code, local government units are authorized to
prevent or suppress, among others, "gambling and other prohibited games of chance." Obviously, this provision excludes
games of chance which are not prohibited but are in fact permitted by law. The petitioners are less than accurate in
claiming that the Code could have excluded such games of chance but did not. In fact it does. The language of the section
is clear and unmistakable. Under the rule of noscitur a sociis, a word or phrase should be interpreted in relation to, or
given the same meaning of, words with which it is associated. Accordingly, we conclude that since the word "gambling" is
associated with "and other prohibited games of chance," the word should be read as referring to only illegal gambling
which, like the other prohibited games of chance, must be prevented or suppressed.

We could stop here as this interpretation should settle the problem quite conclusively. But we will not. The vigorous efforts
of the petitioners on behalf of the inhabitants of Cagayan de Oro City, and the earnestness of their advocacy, deserve
more than short shrift from this Court.

The apparent flaw in the ordinances in question is that they contravene P.D. 1869 and the public policy embodied therein
insofar as they prevent PAGCOR from exercising the power conferred on it to operate a casino in Cagayan de Oro City.
The petitioners have an ingenious answer to this misgiving. They deny that it is the ordinances that have changed P.D.
1869 for an ordinance admittedly cannot prevail against a statute. Their theory is that the change has been made by the
Local Government Code itself, which was also enacted by the national lawmaking authority. In their view, the decree has
been, not really repealed by the Code, but merely "modified pro tanto" in the sense that PAGCOR cannot now operate a
casino over the objection of the local government unit concerned. This modification of P.D. 1869 by the Local Government
Code is permissible because one law can change or repeal another law.

It seems to us that the petitioners are playing with words. While insisting that the decree has only been "modified pro
tanto," they are actually arguing that it is already dead, repealed and useless for all intents and purposes because the
Code has shorn PAGCOR of all power to centralize and regulate casinos. Strictly speaking, its operations may now be not
only prohibited by the local government unit; in fact, the prohibition is not only discretionary but mandated by Section 458
of the Code if the word "shall" as used therein is to be given its accepted meaning. Local government units have now no
choice but to prevent and suppress gambling, which in the petitioners' view includes both legal and illegal gambling.
Under this construction, PAGCOR will have no more games of chance to regulate or centralize as they must all be
prohibited by the local government units pursuant to the mandatory duty imposed upon them by the Code. In this
situation, PAGCOR cannot continue to exist except only as a toothless tiger or a white elephant and will no longer be able
to exercise its powers as a prime source of government revenue through the operation of casinos.

It is noteworthy that the petitioners have cited only Par. (f) of the repealing clause, conveniently discarding the rest of the
provision which painstakingly mentions the specific laws or the parts thereof which are repealed (or modified) by the
Code. Significantly, P.D. 1869 is not one of them. A reading of the entire repealing clause, which is reproduced below, will
disclose the omission:

Sec. 534. Repealing Clause. (a) Batas Pambansa Blg. 337, otherwise known as the "Local Government
Code," Executive Order No. 112 (1987), and Executive Order No. 319 (1988) are hereby repealed.

(b) Presidential Decree Nos. 684, 1191, 1508 and such other decrees, orders, instructions, memoranda
and issuances related to or concerning the barangay are hereby repealed.

(c) The provisions of Sections 2, 3, and 4 of Republic Act No. 1939 regarding hospital fund; Section 3, a
(3) and b (2) of Republic Act. No. 5447 regarding the Special Education Fund; Presidential Decree No.
144 as amended by Presidential Decree Nos. 559 and 1741; Presidential Decree No. 231 as amended;
Presidential Decree No. 436 as amended by Presidential Decree No. 558; and Presidential Decree Nos.
381, 436, 464, 477, 526, 632, 752, and 1136 are hereby repealed and rendered of no force and effect.

(d) Presidential Decree No. 1594 is hereby repealed insofar as it governs locally-funded projects.

(e) The following provisions are hereby repealed or amended insofar as they are inconsistent with the
provisions of this Code: Sections 2, 16, and 29 of Presidential Decree No. 704; Sections 12 of Presidential
Decree No. 87, as amended; Sections 52, 53, 66, 67, 68, 69, 70, 71, 72, 73, and 74 of Presidential Decree
No. 463, as amended; and Section 16 of Presidential Decree No. 972, as amended, and

(f) 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.

Furthermore, it is a familiar rule that implied repeals are not lightly presumed in the absence of a clear and unmistakable
showing of such intention. In Lichauco & Co. v. Apostol, 10 this Court explained:

The cases relating to the subject of repeal by implication all proceed on the assumption that if the act of
later date clearly reveals an intention on the part of the lawmaking power to abrogate the prior law, this
intention must be given effect; but there must always be a sufficient revelation of this intention, and it has
become an unbending rule of statutory construction that the intention to repeal a former law will not be
imputed to the Legislature when it appears that the two statutes, or provisions, with reference to which the
question arises bear to each other the relation of general to special.

There is no sufficient indication of an implied repeal of P.D. 1869. On the contrary, as the private respondent points out,
PAGCOR is mentioned as the source of funding in two later enactments of Congress, to wit, R.A. 7309, creating a Board
of Claims under the Department of Justice for the benefit of victims of unjust punishment or detention or of violent crimes,
and R.A. 7648, providing for measures for the solution of the power crisis. PAGCOR revenues are tapped by these two
statutes. This would show that the PAGCOR charter has not been repealed by the Local Government Code but has in fact
been improved as it were to make the entity more responsive to the fiscal problems of the government.
It is a canon of legal hermeneutics that instead of pitting one statute against another in an inevitably destructive
confrontation, courts must exert every effort to reconcile them, remembering that both laws deserve a becoming respect
as the handiwork of a coordinate branch of the government. On the assumption of a conflict between P.D. 1869 and the
Code, the proper action is not to uphold one and annul the other but to give effect to both by harmonizing them if possible.
This is possible in the case before us. The proper resolution of the problem at hand is to hold that under the Local
Government Code, local government units may (and indeed must) prevent and suppress all kinds of gambling within their
territories except only those allowed by statutes like P.D. 1869. The exception reserved in such laws must be read into the
Code, to make both the Code and such laws equally effective and mutually complementary.

This approach would also affirm that there are indeed two kinds of gambling, to wit, the illegal and those authorized by
law. Legalized gambling is not a modern concept; it is probably as old as illegal gambling, if not indeed more so. The
petitioners' suggestion that the Code authorizes them to prohibit all kinds of gambling would erase the distinction between
these two forms of gambling without a clear indication that this is the will of the legislature. Plausibly, following this theory,
the City of Manila could, by mere ordinance, prohibit the Philippine Charity Sweepstakes Office from conducting a lottery
as authorized by R.A. 1169 and B.P. 42 or stop the races at the San Lazaro Hippodrome as authorized by R.A. 309 and
R.A. 983.

In light of all the above considerations, we see no way of arriving at the conclusion urged on us by the petitioners that the
ordinances in question are valid. On the contrary, we find that the ordinances violate P.D. 1869, which has the character
and force of a statute, as well as the public policy expressed in the decree allowing the playing of certain games of chance
despite the prohibition of gambling in general.

The rationale of the requirement that the ordinances should not contravene a statute is obvious. Municipal governments
are only agents of the national government. Local councils exercise only delegated legislative powers conferred on them
by Congress as the national lawmaking body. The delegate cannot be superior to the principal or exercise powers higher
than those of the latter. It is a heresy to suggest that the local government units can undo the acts of Congress, from
which they have derived their power in the first place, and negate by mere ordinance the mandate of the statute.

Municipal corporations owe their origin to, and derive their powers and rights wholly from the legislature. It
breathes into them the breath of life, without which they cannot exist. As it creates, so it may destroy. As it
may destroy, it may abridge and control. Unless there is some constitutional limitation on the right, the
legislature might, by a single act, and if we can suppose it capable of so great a folly and so great a
wrong, sweep from existence all of the municipal corporations in the State, and the corporation could not
prevent it. We know of no limitation on the right so far as to the corporation themselves are concerned.
They are, so to phrase it, the mere tenants at will of the legislature. 11

This basic 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. Without meaning to detract from that policy, we
here confirm that Congress retains control of the local government units although in significantly reduced degree now than
under our previous Constitutions. The power to create still includes the power to destroy. The power to grant still includes
the power to withhold or recall. True, there are certain notable innovations in the Constitution, like the direct conferment on
the local government units of the power to tax, 12 which cannot now be withdrawn by mere statute. By and large, however, the
national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it.

The Court understands and admires the concern of the petitioners for the welfare of their constituents and their
apprehensions that the welfare of Cagayan de Oro City will be endangered by the opening of the casino. We share the
view that "the hope of large or easy gain, obtained without special effort, turns the head of the workman" 13 and that
"habitual gambling is a cause of laziness and ruin." 14 In People v. Gorostiza, 15 we declared: "The social scourge of gambling
must be stamped out. The laws against gambling must be enforced to the limit." George Washington called gambling "the child
of avarice, the brother of iniquity and the father of mischief." Nevertheless, we must recognize the power of the legislature to
decide, in its own wisdom, to legalize certain forms of gambling, as was done in P.D. 1869 and impliedly affirmed in the Local
Government Code. That decision can be revoked by this Court only if it contravenes the Constitution as the touchstone of all
official acts. We do not find such contravention here.

We hold that the power of PAGCOR to centralize and regulate all games of chance, including casinos on land and sea
within the territorial jurisdiction of the Philippines, remains unimpaired. P.D. 1869 has not been modified by the Local
Government Code, which empowers the local government units to prevent or suppress only those forms of gambling
prohibited by law.
Casino gambling is authorized by P.D. 1869. This decree has the status of a statute that cannot be amended or nullified
by a mere ordinance. Hence, it was not competent for the Sangguniang Panlungsod of Cagayan de Oro City to enact
Ordinance No. 3353 prohibiting the use of buildings for the operation of a casino and Ordinance No. 3375-93 prohibiting
the operation of casinos. For all their praiseworthy motives, these ordinances are contrary to P.D. 1869 and the public
policy announced therein and are therefore ultra vires and void.

WHEREFORE, the petition is DENIED and the challenged decision of the respondent Court of Appeals is AFFIRMED,
with costs against the petitioners. It is so ordered.

ESTATE OF JIMENEZ VS PEZA

DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision[1] and the Resolution[2]of the Court of
Appeals[3] dated March 25, 1998 and January 14, 1999, respectively, which ordered the Presiding
Judge of the Regional Trial Court of Cavite City, Branch 17, to proceed with the hearing of the
expropriation proceedings regarding the determination of just compensation for Lot 1406-B while
setting aside the Orders dated August 4, 1997 [4] and November 3, 1997 of the said Regional Trial
Court which ordered the peaceful turnover to petitioner Estate of Salud Jimenez of said Lot 1406-B.

The facts are as follows:

On May 15, 1981, private respondent Philippine Export Processing Zone (PEZA), then called as the
Export Processing Zone Authority (EPZA), initiated before the Regional Trial Court of Cavite
expropriation proceedings[5] on three (3) parcels of irrigated riceland in Rosario, Cavite. One of the
lots, Lot 1406 (A and B) of the San Francisco de Malabon Estate, with an approximate area of 29,008
square meters, is registered in the name of Salud Jimenez under TCT No. T-113498 of the Registry of
Deeds of Cavite.

More than ten (10) years later[6], the said trial court in an Order [7] dated July 11, 1991 upheld the
right of private respondent PEZA to expropriate, among others, Lot 1406 (A and B). Reconsideration of
the said order was sought by petitioner contending that said lot would only be transferred to a private
corporation, Philippine Vinyl Corp., and hence would not be utilized for a public purpose.

In an Order[8] dated October 25, 1991, the trial court reconsidered the Order dated July 11, 1991
and released Lot 1406-A from expropriation while the expropriation of Lot 1406-B was
maintained. Finding the said order unacceptable, private respondent PEZA interposed an appeal to
the Court of Appeals.

Meanwhile, petitioner wrote a letter to private respondent offering two (2) proposals, namely:

1. Withdrawal of private respondents appeal with respect to Lot 1406-A in consideration of the
waiver of claim for damages and loss of income for the possession of said lot by private
respondent.

2. The swap of Lot 1406-B with Lot 434 covered by TCT No. T-14772 since private respondent
has no money yet to pay for the lot.

Private respondents Board approved the proposal and the compromise agreement was signed by
private respondent through its then administrator Tagumpay Jardiniano assisted by Government
Corporate Counsel Oscar I. Garcia. Said compromise agreement[9] dated January 4, 1993 is quoted
hereunder:
 1. That plaintiff agrees to withdraw its appeal from the Order of the Honorable Court dated
October 25, 1991 which released lot 1406-A from the expropriation proceedings. On the
other hand, defendant Estate of Salud Jimenez agrees to waive, quitclaim and forfeit its
claim for damages and loss of income which it sustained by reason of the possession of
said lot by plaintiff from 1981 up to the present.

2. That the parties agree that defendant Estate of Salud Jimenez shall transfer lot 1406-B with
an area of 13,118 square meters which forms part of the lot registered under TCT No.
113498 of the Registry of Deeds of Cavite to the name of the plaintiff and the same shall be
swapped and exchanged with lot 434 with an area of 14,167 square meters and covered by
Transfer Certificate of Title No. 14772 of the Registry of Deeds of Cavite which lot will be
transferred to the name of Estate of Salud Jimenez.

3. That the swap arrangement recognizes the fact that the lot 1406-B covered by TCT No. T-
113498 of the estate of defendant Salud Jimenez is considered expropriated in favor of the
government based on Order of the Honorable Court dated July 11, 1991. However, instead
of being paid the just compensation for said lot, the estate of said defendant shall be paid
with lot 434 covered by TCT No. T-14772.

4. That the parties agree that they will abide by the terms of the foregoing agreement in good
faith and the Decision to be rendered based on this Compromise Agreement is immediately
final and executory.

The Court of Appeals remanded the case to the trial court for the approval of the said compromise
agreement entered into between the parties, consequent with the withdrawal of the appeal with the
Court of Appeals. In the Order[10] dated August 23, 1993, the trial court approved the compromise
agreement.

However, private respondent failed to transfer the title of Lot 434 to petitioner inasmuch as it was
not the registered owner of the covering TCT No. T-14772 but Progressive Realty Estate, Inc. Thus, on
March 13, 1997, petitioner Estate filed a Motion to Partially Annul the Order dated August 23, 1993. [11]

In the Order[12] dated August 4, 1997, the trial court annulled the said compromise agreement
entered into between the parties and directed private respondent to peacefully turn over Lot 1406-A
to the petitioner. Disagreeing with the said Order of the trial court, respondent PEZA moved [13] for its
reconsideration. The same proved futile since the trial court denied reconsideration in its
Order[14] dated November 3, 1997.

On December 4, 1997, the trial court, at the instance [15] of petitioner, corrected the Orders dated
August 4, 1997 and November 3, 1997 by declaring that it is Lot 1406-B and not Lot 1406-A that
should be surrendered and returned to petitioner.

On November 27, 1997, respondent interposed before the Court of Appeals a petition for certiorari
and prohibition[16] seeking to nullify the Orders dated August 4, 1997 and November 3, 1997 of the
trial court. Petitioner filed its Comment[17]on January 16, 1998.

Acting on the petition, the Court of Appeals in a Decision [18]dated March 25, 1998 upheld the
rescission of the compromise agreement, ratiocinating thus:

A judicial compromise may be enforced by a writ of execution, and if a party fails or refuses to abide
by the compromise, the other party may regard it as rescinded and insist upon his original
demand. This is in accordance with Article 2041 of the Civil Code which provides:

If one of the parties fails or refuses to abide by the compromise, the other party may either enforce
the compromise or regard it as rescinded and insist upon his original demand.
The Supreme Court had the occasion to explain this provision of law in the case of Leonor v. Sycip (1
SCRA 1215). It ruled that the language of the abovementioned provision denotes that no action for
rescission is required and that the aggrieved party by the breach of compromise agreement, may
regard the compromise agreement already rescinded, to wit:

It is worthy of notice, in this connection, that, unlike Article 2039 of the same Code, which speaks of a
cause of annulment or rescission of the compromise and provides that the compromise may be
annulled or rescinded for the cause therein specified, thus suggesting an action for annulment or
rescission, said Article 2041 confers upon the party concerned not a cause for rescission, or the right
to demand rescission, of a compromise, but the authority, not only to regard it as rescinded, but, also,
to insist upon his original demand. The language of this Article 2041, particularly when contrasted
with that of Article 2039, denotes that no action for rescission is required in said Article 2041, and that
the party aggrieved by the breach of a compromise agreement may, if he chooses, bring the suit
contemplated or involved in his original demand, as if there had never been any compromise
agreement, without bringing an action for rescission thereof. He need not seek a judicial declaration of
rescission, for he may regard the compromise agreement already, rescinded.

Nonetheless, it held that:

Having upheld the rescission of the compromise agreement, what is then the status of the
expropriation proceedings? As succinctly discussed in the case of Leonor v. Sycip, the aggrieved party
may insist on his original demand as if there had never been any compromise agreement. This means
that the situation of the parties will revert back to status before the execution of the compromise
agreement, that is, the second stage of the expropriation proceedings which is the determination of
the just compensation.[19]

xxx

Thus, the appellate court partially granted the petition by setting aside the order of the trial
court regarding the peaceful turn over to the Estate of Salud Jimenez of Lot No. 1406-B and instead
ordered the trial judge to proceed with the hearing of the expropriation proceedings regarding the
determination of just compensation over Lot 1406-B.[20]

Petitioner sought[21] reconsideration of the Decision dated March 25, 1998. However, public
respondent in a Resolution[22] dated January 14, 1999 denied petitioners motion for reconsideration.

Hence, this petition anchored on the following assignment of errors, to wit:

THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR IN GIVING DUE
COURSE TO THE SPECIAL CIVIL ACTION FILED BY RESPONDENT PEZA IN CA-G.R. SP. NO.
46112 WHEN IT WAS MADE A SUBSTITUTE FOR LOST APPEAL IN CLEAR CONTRAVENTION
OF THE HONORABLE COURTS RULING IN SEMPIO VS. COURT OF APPEALS (263 SCRA 617)
AND ONGSITCO VS. COURT OF APPEALS (255 SCRA 703) AND DESPITE THE FACT THAT THE
ORDER OF THE CAVITE REGIONAL TRIAL COURT IS ALREADY FINAL AND EXECUTORY.

II

GRANTING IN GRATIA ARGUMENTI THAT THE SPECIAL CIVIL ACTION OF CERTIORARI IS

PROPER, THE COURT OF APPEALS NEVERTHELESS WRONGLY INTERPRETED THE PHRASE
ORIGINAL DEMAND CONTAINED IN ARTICLE 2041 OF THE CIVIL CODE. THE ORIGINAL
DEMAND OF PETITIONER ESTATE IS THE RETURN OF THE SUBJECT LOT (LOT 1406-B) WHICH
IS SOUGHT TO BE EXPROPRIATED AND NOT THE DETERMINATION OF JUST COMPENSATION
FOR THE LOT. FURTHERMORE, EVEN IF THE INTERPRETATION OF THE COURT OF APPEALS
OR THE IMPORT OF THE PHRASE IN QUESTION IS CORRECT, IT IS ARTICLE 2039 OF THE
CIVIL CODE AND NOT ARTICLE 2041 WHICH IS APPLICABLE TO COMPROMISE AGREEMENTS
APPROVED BY THE COURTS.[23]

We rule in favor of the respondent.

Petitioner contends that the Court of Appeals erred in entertaining the petition for certiorari filed
by respondent under Rule 65 of the Rules of Court, the same being actually a substitute for lost
appeal. It appeared that on August 11, 1997, respondent received the Order of the trial court dated
August 4, 1997 annulling the compromise agreement. On August 26, 1997, the last day for the filing
of a notice of appeal, respondent filed instead a motion for reconsideration. The Order of the trial
court denying the motion for reconsideration was received by respondent on November 23, 1997. The
reglementary period to appeal therefore lapsed on November 24, 1997. On November 27, 1997,
however, respondent filed with the Court of Appeals a petition for certiorari docketed as CA-G.R. SP.
No. 46112. Petitioner claims that appeal is the proper remedy inasmuch as the Order dated August 4,
1997 of the Regional Trial Court is a final order that completely disposes of the case. Besides,
according to petitioner, respondent is estopped in asserting that certiorari is the proper remedy
inasmuch as it invoked the fifteen (15) day reglementary period for appeal when it filed a motion for
reconsideration on August 26, 1997 and not the sixty (60) day period for filing a petition
for certiorari under Rule 65 of the Rules of Court.

The Court of Appeals did not err in entertaining the petition for certiorari under Rule 65 of The
Rules of Court. A petition for certiorari is the proper remedy when any tribunal, board, or officer
exercising judicial or quasi-judicial functions has acted without or in excess of its jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction and there is no appeal, nor any
plain, speedy, and adequate remedy at law. [24] Grave abuse of discretion is defined as the capricious
and whimsical exercise of judgment as is equivalent to lack of jurisdiction. An error of judgment
committed in the exercise of its legitimate jurisdiction is not the same as grave abuse of discretion.
An abuse of discretion is not sufficient by itself to justify the issuance of a writ of certiorari. The abuse
must be grave and patent, and it must be shown that the discretion was exercised arbitrarily and
despotically.[25]

As a general rule, a petition for certiorari will not lie if an appeal is the proper remedy thereto
such as when an error of judgment as well as of procedure are involved. As long as a court acts within
its jurisdiction and does not gravely abuse its discretion in the exercise thereof, any supposed error
committed by it will amount to nothing more than an error of judgment reviewable by a timely appeal
and not assailable by a special civil action of certiorari. However, in certain exceptional cases, where
the rigid application of such rule will result in a manifest failure or miscarriage of justice, the
provisions of the Rules of Court which are technical rules may be relaxed. Certiorari has been deemed
to be justified, for instance, in order to prevent irreparable damage and injury to a party where the
trial judge has capriciously and whimsically exercised his judgment, or where there may be danger of
clear failure of justice, or where an ordinary appeal would simply be inadequate to relieve a party
from the injurious effects of the judgment complained of. [26]

Expropriation proceedings involve two (2) phases. The first phase ends either with an order of
expropriation (where the right of plaintiff to take the land and the public purpose to which they are to
be devoted are upheld) or an order of dismissal. Either order would be a final one since it finally
disposes of the case. The second phase concerns the determination of just compensation to be
ascertained by three (3) commissioners. It ends with an order fixing the amount to be paid to the
defendant. Inasmuch as it leaves nothing more to be done, this order finally disposes of the second
stage. To both orders the remedy therefrom is an appeal. [27]

In the case at bar, the first phase was terminated when the July 11, 1991 order of expropriation
became final and the parties subsequently entered into a compromise agreement regarding the mode
of payment of just compensation. When respondent failed to abide by the terms of the compromise
agreement, petitioner filed an action to partially rescind the same. Obviously, the trial could only
validly order the rescission of the compromise agreement anent the payment of just compensation
inasmuch as that was the subject of the compromise. However, on August 4, 1991, the trial court
gravely abused its discretion when it ordered the return of Lot 1406-B. It, in effect, annulled the Order
of Expropriation dated July 11, 1991 which was already final and executory.

We affirm the appellate courts reliance on the cases of Aguilar v. Tan[28] and Bautista v.
Sarmiento[29] wherein it was ruled that the remedies of certiorari and appeal are not mutually
exclusive remedies in certain exceptional cases, such as when there is grave abuse of discretion, or
when public welfare so requires. The trial court gravely abused its discretion by setting aside the
order of expropriation which has long become final and executory and by ordering the return of Lot
1406-B to the petitioner. Its action was clearly beyond its jurisdiction for it cannot modify a final and
executory order. A final and executory order can only be annulled by a petition to annul the same on
the ground of extrinsic fraud and lack of jurisdiction [30] or a petition for relief from a final order or
judgment under Rule 38 of the Rules of Court. However, no petition to that effect was filed. Hence,
though an order completely and finally disposes of the case, if appeal is not a plain, speedy and
adequate remedy at law or the interest of substantial justice requires, a petition for certiorari may be
availed of upon showing of lack or excess of jurisdiction or grave abuse of discretion on the part of the
trial court.

According to petitioner the rule that a petition for certiorari can be availed of despite the fact that
the proper remedy is an appeal only applies in cases where the petition is filed within the
reglementary period for appeal. Inasmuch as the petition in the case at bar was filed after the fifteen
(15) day regulatory period to appeal, said exceptional rule as enshrined in the cases of Aguilar v.
Tan[31] and Bautista v. Sarmiento[32] is not applicable. We find this interpretation too restrictive. The
said cases do not set as a condition sine qua non the filing of a petition for certiorari within the fifteen
(15) day period to appeal in order for the said petition to be entertained by the court. To espouse
petitioners contention would render inutile the sixty (60) day period to file a petition
for certiorari under Rule 65. In Republic v. Court of Appeals[33], which also involved an expropriation
case where the parties entered into a compromise agreement on just compensation, this Court
entertained the petition for certiorari despite the existence of an appeal and despite its being filed
after the lapse of the fifteen (15) day period to appeal the same. We ruled that the Court has not too
infrequently given due course to a petition for certiorari, even when the proper remedy would have
been an appeal, where valid and compelling considerations would warrant such a recourse. [34] If
compelled to return the subject parcel of land, the respondent would divert its budget already
allocated for economic development in order to pay petitioner the rental payments from the lessee
banks. Re-adjusting its budget would hamper and disrupt the operation of the economic zone. We
believe that the grave abuse of discretion committed by the trial court and the consequent disruption
in the operation of the economic zone constitutes valid and compelling reasons to entertain the
petition.

Petitioner next argues that the instances cited under Section 1 of Rule 41 of the Rules of
Court[35] whereby an appeal is not allowed are exclusive grounds for a petition for certiorari. Inasmuch
as the August 4 1997 Order rescinding the compromise agreement does not fall under any of the
instances enumerated therein, a petition for certiorari will not prosper. This reasoning is severely
flawed. The said section is not phrased to make the instances mentioned therein the sole grounds for
a petition for certiorari. It only states that Rule 65 may be availed of under the grounds mentioned
therein, but it never intended said enumeration to be exclusive. It must be remembered that a wide
breadth of discretion is granted a court of justice in certiorariproceedings.[36]

In the second assignment of error, petitioner assails the interpretation by the Court of Appeals of
the phrase original demand in Article 2041 of the New Civil Code vis-a-vis the case at bar. Article 2041
provides that, If one of the parties fails or refuses to abide by the compromise, the other party may
either enforce the compromise or regard it as rescinded and insist upon his original demand.
According to petitioner, the appellate court erred in interpreting original demand as the fixing of just
compensation. Petitioner claims that the original demand is the return of Lot 1406-B as stated in
petitioners motion to dismiss[37] the complaint for expropriation inasmuch as the incorporation of the
expropriation order in the compromise agreement subjected the said order to rescission. Since the
order of expropriation was rescinded, the authority of respondent to expropriate and the purpose of
expropriation have again become subject to dispute.
 Petitioner cites cases[38] which provide that upon the failure to pay by the lessee, the lessor can
ask for the return of the lot and the ejectment of the former, this being the lessors original demand in
the complaint. We find said cases to be inapplicable to this instant case for the reason that the case
at bar is not a simple ejectment case. This is an expropriation case which involves two (2) orders: an
expropriation order and an order fixing just compensation. Once the first order becomes final and no
appeal thereto is taken, the authority to expropriate and its public use cannot anymore be
questioned.

Contrary to petitioners contention, the incorporation of the expropriation order in the compromise
agreement did not subject said order to rescission but instead constituted an admission by petitioner
of respondents authority to expropriate the subject parcel of land and the public purpose for which it
was expropriated. This is evident from paragraph three (3) of the compromise agreement which
states that the swap arrangement recognizes the fact that Lot 1406-B covered by TCT No. T-113498 of
the estate of defendant Salud Jimenez is considered expropriated in favor of the government based on
the Order of the Honorable Court dated July 11, 1991. It is crystal clear from the contents of the
agreement that the parties limited the compromise agreement to the matter of just compensation to
petitioner. Said expropriation order is not closely intertwined with the issue of payment such that
failure to pay by respondent will also nullify the right of respondent to expropriate. No statement to
this effect was mentioned in the agreement. The Order was mentioned in the agreement only to
clarify what was subject to payment.

This Court therefore finds that the Court of Appeals did not err in interpreting original demand to
mean the fixing of just compensation. The authority of respondent and the nature of the purpose
thereof have been put to rest when the Expropriation Order dated July 11, 1991 became final and was
duly admitted by petitioner in the compromise agreement. The only issue for consideration is the
manner and amount of payment due to petitioner. In fact, aside from the withdrawal of private
respondents appeal to the Court of Appeals concerning Lot 1406-A, the matter of payment of just
compensation was the only subject of the compromise agreement dated January 4, 1993. Under the
compromise agreement, petitioner was supposed to receive respondents Lot No. 434 in exchange for
Lot 1406-B. When respondent failed to fulfill its obligation to deliver Lot 434, petitioner can again
demand for the payment but not the return of the expropriated Lot 1406-B. This interpretation by the
Court of Appeals is in accordance with Sections 4 to 8, Rule 67 of the Rules of Court.

We also find as inapplicable the ruling in Gatchalian v. Arlegui[39], a case cited by petitioner, where
we held that even a final judgment can still be compromised so long as it is not fully satisfied. As
already stated, the expropriation order was not the subject of the compromise agreement. It was only
the mode of payment which was the subject of the compromise agreement.Hence, the Order of
Expropriation dated July 11, 1991 can no longer be annulled.

After having invoked the provisions of Article 2041, petitioner inconsistently contends that said
article does not apply to the case at bar inasmuch as it is only applicable to cases where a
compromise has not been approved by a court. In the case at bar, the trial court approved the
compromise agreement. Petitioner insists that Articles 2038, 2039 and 1330 of the New Civil Code
should apply. Said articles provide that:

Article 2038. A compromise in which there is mistake, fraud, violence, intimidation, undue influence,
or falsity of documents, is subject to the provisions of Article 1330 of this Code.

However, one of the parties cannot set up a mistake of fact as against the other if the latter, by virtue
of the compromise, has withdrawn from a litigation already commenced.

Article 2039. When the parties compromise generally on all differences which they might have with
each other, the discovery of documents referring to one or more but not to all of the questions settled
shall not itself be a cause for annulment or rescission of the compromise, unless said documents have
been concealed by one of the parties.
But the compromise may be annulled or rescinded if it refers only to one thing to which one of the
parties has no right, as shown by the newly discovered documents.(n)

Article 1330. A contract where consent is given through mistake, violence, intimidation, undue
influence, or fraud is voidable.[40]

The applicability of the above-quoted legal provisions will not change the outcome of the subject
of the rescission. Since the compromise agreement was only about the mode of payment by swapping
of lots and not about the right and purpose to expropriate the subject Lot 1406-B, only the originally
agreed form of compensation that is by cash payment, was rescinded.

This Court holds that respondent has the legal authority to expropriate the subject Lot 1406-B and
that the same was for a valid public purpose. In Sumulong v. Guerrero[41], this Court has ruled that,

the public use requirement for a valid exercise of the power of eminent domain is a flexible and
evolving concept influenced by changing conditions. In this jurisdiction, the statutory and judicial
trend has been summarized as follows:

this Court has ruled that the taking to be valid must be for public use. There was a time when it was
felt that a literal meaning should be attached to such a requirement. Whatever project is undertaken
must be for the public to enjoy, as in the case of streets or parks. Otherwise expropriation is not
allowable. It is not anymore. As long as the purpose of the taking is public, then the power of eminent
domain comes into play It is accurate to state then that at present whatever may be beneficially
employed for the general welfare satisfies the requirement of public use.[Heirs of Juancho Ardona v.
Reyes, 125 SCRA 220 (1983) at 234-235 quoting E. Fernando, the Constitution of the Philippines 523-4
(2nd Ed. 1977)

The term public use has acquired a more comprehensive coverage. To the literal import of the term
signifying strict use or employment by the public has been added the broader notion of indirect public
benefit or advantage.

In Manosca v. Court of Appeals, this Court has also held that what ultimately emerged is a concept
of public use which is just as broad as public welfare. [42]

Respondent PEZA expropriated the subject parcel of land pursuant to Proclamation No. 1980
dated May 30, 1980 issued by former President Ferdinand Marcos. Meanwhile, the power of eminent
domain of respondent is contained in its original charter, Presidential Decree No. 66, which provides
that:

Section 23. Eminent Domain. For the acquisition of rights of way, or of any property for the
establishment of export processing zones, or of low-cost housing projects for the employees
working in such zones, or for the protection of watershed areas, or for the construction of dams,
reservoirs, wharves, piers, docks, quays, warehouses and other terminal facilities, structures and
approaches thereto, the Authority shall have the right and power to acquire the same by purchase, by
negotiation, or by condemnation proceedings. Should the authority elect to exercise the right of
eminent domain, condemnation proceedings shall be maintained by and in the name of the Authority
and it may proceed in the manner provided for by law. (italics supplied)

Accordingly, subject Lot 1406-B was expropriated for the construction of terminal facilities,
structures and approaches thereto. The authority is broad enough to give the respondent substantial
leeway in deciding for what public use the expropriated property would be utilized. Pursuant to this
broad authority, respondent leased a portion of the lot to commercial banks while the rest was made
a transportation terminal. Said public purposes were even reaffirmed by Republic Act No. 7916, a law
amending respondent PEZAs original charter, which provides that:

Sec. 7. ECOZONE to be a Decentralized Agro-Industrial, Industrial, Commercial/Trading, Tourist,

Investment and Financial Community. Within the framework of the Constitution, the interest of
national sovereignty and territorial integrity of the Republic, ECOZONE shall be developed, as much as
possible, into a decentralized, self-reliant and self-sustaining industrial, commercial/trading, agro-
industrial, tourist, banking, financial and investment center with minimum government
intervention. Each ECOZONE shall be provided with transportation, telecommunications and other
facilities needed to generate linkage with industries and employment opportunities for its own
habitants and those of nearby towns and cities.

The ECOZONE shall administer itself on economic, financial, industrial, tourism development and such
other matters within the exclusive competence of the national government. (italics supplied)

Among the powers of PEZA enumerated by the same law are:

Sec. 12. Functions and Powers of PEZA Board. ---- The Philippine Economic Zone Authority (PEZA)
Board shall have the following function and powers:

(a) Set the general policies on the establishment and operations of the ECOZONE, Industrial estate,
exports processing zones, free trade zones, and the like;

xxx

(c) Regulate and undertake the establishment, operation and maintenance of utilities, other services
and infrastructure in the ECOZONE, such as heat, light and power, water supply, telecommunications,
transport, toll roads and bridges, port services, etc. and to fix just, reasonable and competitive rates,
fares, charges and fees thereof.[43]

In Manila Railroad Co. v. Mitchel[44], this Court has ruled that in the exercise of eminent domain,
only as much land can be taken as is necessary for the legitimate purpose of the condemnation. The
term necessary, in this connection, does not mean absolutely indispensable but requires only a
reasonable necessity of the taking for the stated purpose, growth and future needs of the
enterprise. The respondent cannot attain a self-sustaining and viable ECOZONE if inevitable needs in
the expansion in the surrounding areas are hampered by the mere refusal of the private landowners
to part with their properties. The purpose of creating an ECOZONE and other facilities is better served
if respondent directly owns the areas subject of the expansion program.

The contention of petitioner that the leasing of the subject lot to banks and building terminals was
not expressly mentioned in the original charter of respondent PEZA and that it was only after PEZA
devoted the lot to said purpose that Republic Act No. 7916 took effect, is not impressed with merit. It
should be pointed out that Presidential Decree No. 66 created the respondent PEZA to be a viable
commercial, industrial and investment area. According to the comprehensive wording of Presidential
Decree No. 66, the said decree did not intend to limit respondent PEZA to the establishment of an
export processing zone but it was also bestowed with authority to expropriate parcels of land for the
construction of terminal facilities, structures and approaches thereto. Republic Act No. 7916 simply
particularized the broad language employed by Presidential Decree No. 66 by specifying the purposes
for which PEZA shall devote the condemned lots, that is, for the construction and operation of an
industrial estate, an export processing zone, free trade zones, and the like. The expropriation of Lot
1406-B for the purpose of being leased to banks and for the construction of a terminal has the
purpose of making banking and transportation facilities easily accessible to the persons working at
the industries located in PEZA. The expropriation of adjacent areas therefore comes as a matter of
necessity to bring life to the purpose of the law. In such a manner, PEZAs goal of being a major force
in the economic development of the country would be realized. Furthermore, this Court has already
ruled that:

(T)he Legislature may directly determine the necessity for appropriating private property for a
particular improvement for public use, and it may select the exact location of the improvement.In
such a case, it is well-settled that the utility of the proposed improvement, the existence of the public
necessity for its construction, the expediency of constructing it, the suitableness of the location
selected, are all questions exclusively for the legislature to determine, and the courts have no power
to interfere or to substitute their own views for those of the representatives of the people.

In the absence of some constitutional or statutory provision to the contrary, the necessity and
expediency of exercising the right of eminent domain are questions essentially political and not
judicial in their character.[45]

Inasmuch as both Presidential Decree No. 66 and Republic Act No. 7916, bestow respondent with
authority to develop terminal facilities and banking centers, this Court will not question the
respondents lease of certain portions of the expropriated lot to banks, as well as the construction of
terminal facilities.

Petitioner contends that respondent is bound by the representations of its Chief Civil Engineer
when the latter testified before the trial court that the lot was to be devoted for the construction of
government offices. Anent this issue, suffice it to say that PEZA can vary the purpose for which a
condemned lot will be devoted to, provided that the same is for public use.Petitioner cannot impose
or dictate on the respondent what facilities to establish for as long as the same are for public purpose.

Lastly, petitioner appeals to the sense of justice and equity to this Court in restoring the said lot to
its possession. From the time of the filing of the expropriation case in 1981 up to the present,
respondent has not yet remunerated the petitioner although respondent has already received
earnings from the rental payments by lessees of the subject property.

We have ruled that the concept of just compensation embraces not only the correct determination
of the amount to be paid to the owners of the land, but also the payment of the land within a
reasonable time from its taking. Without prompt payment, compensation cannot be considered just
inasmuch as the property owner is made to suffer the consequences of being immediately deprived of
his land while being made to wait for a decade or more before actually receiving the amount
necessary to cope with his loss. [46] Payment of just compensation should follow as a matter of right
immediately after the order of expropriation is issued. Any delay in payment must be counted from
said order. However, the delay to constitute a violation of due process must be unreasonable and
inexcusable; it must be deliberately done by a party in order to defeat the ends of justice.

We find that respondent capriciously evaded its duty of giving what is due to petitioner. In the
case at bar, the expropriation order was issued by the trial court in 1991. The compromise agreement
between the parties was approved by the trial court in 1993. However, from 1993 up to the present,
respondent has failed in its obligation to pay petitioner to the prejudice of the latter. Respondent
caused damage to petitioner in making the latter to expect that it had a good title to the property to
be swapped with Lot 1406-B; and meanwhile, respondent has been reaping benefits from the lease or
rental income of the said expropriated lot. We cannot tolerate this oppressive exercise of the power of
eminent domain by respondent. As we have ruled in Cosculluela vs. Court of Appeals:[47]

In the present case, the irrigation project was completed and has been in operation since 1976. The
project is benefiting the farmers specifically and the community in general. Obviously, the petitioners
land cannot be returned to him. However, it is high time that the petitioner be paid what was due him
eleven years ago. It is arbitrary and capricious for a government agency to initiate expropriation
proceedings, seize a persons property, allow the judgment of the court to become final and executory
and then refuse to pay on the ground that there are no appropriations for the property earlier taken
and profitably used. We condemn in the strongest possible terms the cavalier attitude of government
officials who adopt such a despotic and irresponsible stance.

Though the respondent has committed a misdeed to petitioner, we cannot, however, grant the
petitioners prayer for the return of the expropriated Lot No. 1406-B. The Order of expropriation dated
July 11, 1991, has long become final and executory. Petitioner cited Provincial Government of
Sorsogon v. Rosa E. Vda. De Villaroya[48] to support its contention that it is entitled to a return of the
lot where this Court ruled that under ordinary circumstances, immediate return to the owners of the
unpaid property is the obvious remedy. However, the said statement was not the ruling in that
case. As in other cases where there was no prompt payment by the government, this Court declared
in Sorsogon that the Provincial Government of Sorsogon is expected to immediately pay as
directed. Should any further delay be encountered, the trial court is directed to seize any patrimonial
property or cash savings of the province in the amount necessary to implement this decision.
However, this Court also stressed and declared in that case that In cases where land is taken for
public use, public interest, however, must be considered.

In view of all the foregoing, justice and equity dictate that this case be remanded to the trial court
for hearing of the expropriation proceedings on the determination of just compensation for Lot 1406-B
and for its prompt payment to the petitioner.

WHEREFORE, the instant petition is hereby denied. The Regional Trial Court of Cavite City is
hereby ordered to proceed with the hearing of the expropriation proceedings, docketed as Civil Case
No. N-4029, regarding the determination of just compensation for Lot 1406-B, covered and described
in TCT No. T-113498-Cavite, and to resolve the same with dispatch.

Mandaluyong vs Aguilar

PUNO, J.:

This is a petition for review under Rule 45 of the Rules of Court of the Orders dated September 17,
1998 and December 29, 1998 of the Regional Trial Court, Branch 168, Pasig City [1]dismissing the
petitioners Amended Complaint in SCA No. 1427 for expropriation of two (2) parcels of land in
Mandaluyong City.

The antecedent facts are as follows:

On August 4, 1997, petitioner filed with the Regional Trial Court, Branch 168, Pasig City a
complaint for expropriation entitled City of Mandaluyong, plaintiff v. Antonio N., Francisco N., Thelma
N., Eusebio N., Rodolfo N., all surnamed Aguilar, defendants. Petitioner sought to expropriate three (3)
adjoining parcels of land with an aggregate area of 1,847 square meters registered under Transfer
Certificates of Title Nos. 59780, 63766 and 63767 in the names of the defendants, herein
respondents, located at 9 de Febrero Street, Barangay Mauwag, City of Mandaluyong; on a portion of
the 3 lots, respondents constructed residential houses several decades ago which they had since
leased out to tenants until the present; on the vacant portion of the lots, other families constructed
residential structures which they likewise occupied; in 1983, the lots were classified by Resolution No.
125 of the Board of the Housing and Urban Development Coordinating Council as an Area for Priority
Development for urban land reform under Proclamation Nos. 1967 and 2284 of then President Marcos;
as a result of this classification, the tenants and occupants of the lots offered to purchase the land
from respondents, but the latter refused to sell; on November 7, 1996, the Sangguniang Panlungsod
of petitioner, upon petition of the Kapitbisig, an association of tenants and occupants of the subject
land, adopted Resolution No. 516, Series of 1996 authorizing Mayor Benjamin Abalos of the City of
Mandaluyong to initiate action for the expropriation of the subject lots and construction of a medium-
rise condominium for qualified occupants of the land; on January 10, 1996, Mayor Abalos sent a letter
to respondents offering to purchase the said property at P3,000.00 per square meter; respondents did
not answer the letter. Petitioner thus prayed for the expropriation of the said lots and the fixing of just
compensation at the fair market value of P3,000.00 per square meter.[2]

In their answer, respondents, except Eusebio N. Aguilar who died in 1995, denied having received
a copy of Mayor Abalos offer to purchase their lots. They alleged that the expropriation of their land is
arbitrary and capricious, and is not for a public purpose; the subject lots are their only real property
and are too small for expropriation, while petitioner has several properties inventoried for socialized
housing; the fair market value of P3,000.00 per square meter is arbitrary because the zonal valuation
set by the Bureau of Internal Revenue is P7,000.00 per square meter. As counterclaim, respondents
prayed for damages of P21 million.[3]
 Respondents filed a Motion for Preliminary Hearing claiming that the defenses alleged in their
Answer are valid grounds for dismissal of the complaint for lack of jurisdiction over the person of the
defendants and lack of cause of action. Respondents prayed that the affirmative defenses be set for
preliminary hearing and that the complaint be dismissed. [4] Petitioner replied.

On November 5, 1997, petitioner filed an Amended Complaint and named as an additional

defendant Virginia N. Aguilar and, at the same time, substituted Eusebio Aguilar with his
heirs.Petitioner also excluded from expropriation TCT No. 59870 and thereby reduced the area sought
to be expropriated from three (3) parcels of land to two (2) parcels totalling 1,636 square meters
under TCT Nos. 63766 and 63767.[5]

The Amended Complaint was admitted by the trial court on December 18, 1997. Respondents,
who, with the exception of Virginia Aguilar and the Heirs of Eusebio Aguilar had yet to be served with
summons and copies of the Amended Complaint, filed a Manifestation and Motion adopting their
Answer with Counterclaim and Motion for Preliminary Hearing as their answer to the Amended
Complaint.[6]

The motion was granted. At the hearing of February 25, 1998, respondents presented Antonio
Aguilar who testified and identified several documentary evidence. Petitioner did not present any
evidence. Thereafter, both parties filed their respective memoranda. [7]

On September 17, 1998, the trial court issued an order dismissing the Amended Complaint after
declaring respondents as small property owners whose land is exempt from expropriation under
Republic Act No. 7279. The court also found that the expropriation was not for a public purpose for
petitioners failure to present any evidence that the intended beneficiaries of the expropriation are
landless and homeless residents of Mandaluyong. The court thus disposed of as follows:

WHEREFORE, the Amended Complaint is hereby ordered dismissed without pronouncement as to cost.

SO ORDERED.[8]

ESLEBAN VS DE ONORIO

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-existingand is sought to be
imposed only after the land has been registered under the Land Registration Act, proper expropriation
proceedings should be had, and just compensation paid to the registered owner thereof.[6]

In this case, the irrigation canal constructed by the NIA on the contested property was built only
on October 6, 1981, several years after the property had been registered on May 13,
1976.Accordingly, prior expropriation proceedings should have been filed and just compensation paid
to the owner thereof before it could be taken for public use.

Indeed, the rule is that where private property is needed for conversion to some public use, the
first thing obviously that the government should do is to offer to buy it. [7] If the owner is willing to sell
and the parties can agree on the price and the other conditions of the sale, a voluntary transaction
can then be concluded and the transfer effected without the necessity of a judicial action. Otherwise,
the government will use its power of eminent domain, subject to the payment of just compensation,
to acquire private property in order to devote it to public use.

Third. With respect to the compensation which the owner of the condemned property is entitled
to receive, it is likewise settled that it is the market value which should be paid or that sum of money
which a person, desirous but not compelled to buy, and an owner, willing but not compelled to sell,
would agree on as a price to be given and received therefor.[8] Further, just compensation means not
only the correct amount to be paid to the owner of the land but also the payment of the land within a
reasonable time from its taking. Without prompt payment, compensation cannot be considered just
for then the property owner is made to suffer the consequence of being immediately deprived of his
land while being made to wait for a decade or more before actually receiving the amount necessary to
cope with his loss.[9] Nevertheless, as noted in Ansaldo v. Tantuico, Jr.,[10] there are instances where the
expropriating agency takes over the property prior to the expropriation suit, in which case just
compensation shall be determined as of the time of taking, not as of the time of filing of the action of
eminent domain.

Before its amendment in 1997, Rule 67, 4 provided:

Order of condemnation. When such a motion is overruled or when any party fails to defend as
required by this rule, the court may enter an order of condemnation declaring that the plaintiff has a
lawful right to take the property sought to be condemned, for the public use or purpose described in
the complaint upon the payment of just compensation to be determined as of the date of the filing of
the complaint. . . .

It is now provided that-

SEC. 4. Order of expropriation. If the objections to and the defense against the right of the plaintiff to
expropriate the property are overruled, or when no party appears to defend as required by this Rule,
the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the
property sought to be expropriated, for the public use or purpose described in the complaint, upon
the payment of just compensation to be determined as of the date of the taking of the property or the
filing of the complaint, whichever came first.
A final order sustaining the right to expropriate the property may be appealed by any party aggrieved
thereby. Such appeal, however, shall not prevent the court from determining the just compensation to
be paid.

After the rendition of such an order, the plaintiff shall not be permitted to dismiss or discontinue the
proceeding except on such terms as the court deems just and equitable. (Emphasis added)

Thus, the value of the property must be determined either as of the date of the taking of the
property or the filing of the complaint, whichever came first. Even before the new rule, however, it
was already held in Commissioner of Public Highways v. Burgos [11] that the price of the land at the
time of taking, not its value after the passage of time, represents the true value to be paid as just
compensation. It was, therefore, error for the Court of Appeals to rule that the just compensation to
be paid to respondent should be determined as of the filing of the complaint in 1990, and not the time
of its taking by the NIA in 1981, because petitioner was allegedly remiss in its obligation to pay
respondent, and it was respondent who filed the complaint. In the case of Burgos,[12] it was also the
property owner who brought the action for compensation against the government after 25 years since
the taking of his property for the construction of a road.

Indeed, the value of the land may be affected by many factors. It may be enhanced on account of
its taking for public use, just as it may depreciate. As observed in Republic v. Lara:[13]

[W]here property is taken ahead of the filing of the condemnation proceedings, the value thereof may
be enhanced by the public purpose for which it is taken; the entry by the plaintiff upon the property
may have depreciated its value thereby; or there may have been a natural increase in the value of
the property from the time it is taken to the time the complaint is filed, due to general economic
conditions. The owner of private property should be compensated only for what he actually loses; it is
not intended that his compensation shall extend beyond his loss or injury. And what he loses is only
the actual value of his property at the time it is taken. This is the only way that compensation to be
paid can be truly just, i.e., just not only to the individual whose property is taken, but to the public,
which is to pay for it . . . .

In this case, the proper valuation for the property in question is P16,047.61 per hectare, the price
level for 1982, based on the appraisal report submitted by the commission (composed of the
provincial treasurer, assessor, and auditor of South Cotabato) constituted by the trial court to make
an assessment of the expropriated land and fix the price thereof on a per hectare basis. [14]

Fourth. Petitioner finally contends that it is exempt from paying any amount to respondent
because the latter executed an Affidavit of Waiver of Rights and Fees of any compensation due in
favor of the Municipal Treasurer of Barangay Sto. Nio, South Cotabato. However, as the Court of
Appeals correctly held:

[I]f NIA intended to bind the appellee to said affidavit, it would not even have bothered to give her
any amount for damages caused on the improvements/crops within the appellees property.This,
apparently was not the case, as can be gleaned from the disbursement voucher in the amount
of P4,180.00 (page 10 of the Folder of Exhibits in Civil Case 396) issued on September 17, 1983 in
favor of the appellee, and the letter from the Office of the Solicitor General recommending the giving
of financial assistance in the amount of P35,000.00 to the appellee.

Thus, We are inclined to give more credence to the appellees explanation that the waiver of rights
and fees pertains only to improvements and crops and not to the value of the land utilized by NIA for
its main canal.[15]

WHEREFORE, premises considered, the assailed decision of the Court of Appeals is hereby
AFFIRMED with MODIFICATION to the extent that the just compensation for the contested property be
paid to respondent in the amount of P16,047.61 per hectare, with interest at the legal rate of six
percent (6%) per annum from the time of taking until full payment is made. Costs against petitioner.
CEBU VS DEDAMO

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.
59204[1] 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 operative 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-----------------------------------------478 square meters expropriated

Tax Declaration-------------------------------------------03450

Title No. ---------------------------------------------------31832

Market value for the whole lot--------------------------P1,666,530.00

Market value of the Area to be expropriated----------P100,380.00

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
Agreement[4] 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.

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 of 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 commissioners 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
Governments 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 of the Court of Appeals in CA-
G.R. CV No. 59204, the petition in this case is hereby DENIED.

NHA VS GUIVELENDO

On February 23, 1999, petitioner National Housing Authority filed with the Regional Trial Court of
Cebu City, Branch 11, an Amended Complaint for eminent domain against Associacion Benevola de
Cebu, Engracia Urot and the Heirs of Isidro Guivelondo, docketed as Civil Case No. CEB-
23386. Petitioner alleged that defendant Associacion Benevola de Cebu was the claimant/owner of Lot
108-C located in the Banilad Estate, Cebu City; that defendant Engracia Urot was the claimant/owner
of Lots Nos. 108-F, 108-I, 108-G, 6019-A and 6013-A, all of the Banilad Estate; that defendant Heirs of
Isidro Guivelondo were the claimants/owners of Cadastral Lot No. 1613-D located at Carreta, Mabolo,
Cebu City; and that the lands are within a blighted urban center which petitioner intends to develop
as a socialized housing project. [1]

On November 12, 1999, the Heirs of Isidro Guivelondo, respondents herein, filed a Manifestation
stating that they were waiving their objections to petitioners power to expropriate their
properties. Hence, the trial court issued an Order as follows:

WHEREFORE, the Court hereby declares that the plaintiff has a lawful right to expropriate the
properties of the defendants who are heirs of Isidro Guivelondo.

The appointment of commissioners who would ascertain and report to the Court the just
compensation for said properties will be done as soon as the parties shall have submitted to the Court
the names of persons desired by them to be appointed as such commissioners.

SO ORDERED.[2]

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

WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by the Court in this case
fixing the just compensation for the lands of the defendants who are the heirs of Isidro Guivelondo,
more particularly Lots Nos. 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 15, 16, 19, 20, 6016-F, 6016-H,
6016-E and 6016-D of Csd-10219, which were sought to be expropriated by the plaintiff at P11,200.00
per square meter and ordering the plaintiff to pay to the said defendants the just compensation for
the said lands computed at P11,200.00 per square meter.

IT IS SO ORDERED.[4]

Petitioner NHA filed two motions for reconsideration dated August 30, 2000 and August 31, 2000,
assailing the inclusion of Lots 12, 13 and 19 as well as the amount of just compensation,
respectively. Respondent Heirs also filed a motion for reconsideration of the Partial Judgment. On
October 11, 2000, the trial court issued an Omnibus Order denying the motion for reconsideration of
respondent Heirs and the August 31, 2000 motion of petitioner, on the ground that the fixing of the
just compensation had adequate basis and support. On the other hand, the trial court granted
petitioners August 30, 2000 motion for reconsideration on the ground that the Commissioners Report
did not include Lots 12, 13 and 19 within its coverage. Thus:
WHEREFORE, in view of the foregoing premises, the Court hereby denies the motion of the heirs of
Isidro Guivelondo (with the exception of Carlota Mercado and Juanita Suemith) for reconsideration of
the partial judgment rendered in this case on August 7, 2000 and plaintiffs motion for reconsideration
of said judgment, dated August 31, 2000.

However, the Court hereby grants the plaintiffs motion for reconsideration of said judgment, dated
August 30, 2000. Accordingly, the judgment rendered in this case on August 7, 2000 is hereby set
aside insofar as it has fixed just compensations for Lots Nos. 12, 13 and 19 of Csd-10219 because the
fixing of said just compensations appears to lack adequate basis.

SO ORDERED.[5]

Petitioner filed with the Court of Appeals a petition for certiorari, which was docketed as CA-G.R.
SP No. 61746.[6] Meanwhile, on October 31, 2000, the trial court issued an Entry of Judgment over the
Partial Judgment dated August 7, 2000 as modified by the Omnibus Order dated October 11, 2000.
[7]
Subsequently, respondent Heirs filed a Motion for Execution, which was granted on November 22,
2000.

On January 31, 2001, the Court of Appeals dismissed the petition for certiorari on the ground that
the Partial Judgment and Omnibus Order became final and executory when petitioner failed to appeal
the same.[8]

Petitioners Motion for Reconsideration and Urgent Ex-Parte Motion for a Clarificatory Ruling were
denied in a Resolution dated March 18, 2001. [9] A petition for review was filed by petitioner with this
Court, which was docketed as G.R. No. 147527. However, the same was denied in a Minute Resolution
dated May 9, 2001 for failure to show that the Court of Appeals committed a reversible error. [10]

Petitioner filed a Motion for Reconsideration which was however denied with finality on August 20,
2001.[11]

Prior to the aforesaid denial of the Motion for Reconsideration, petitioner, on July 16, 2001, filed
with the trial court a Motion to Dismiss Civil Case No. CEB-23386, complaint for eminent domain,
alleging that the implementation of its socialized housing project was rendered impossible by the
unconscionable value of the land sought to be expropriated, which the intended beneficiaries can not
afford.[12] The Motion was denied on September 17, 2001, on the ground that the Partial Judgment had
already become final and executory and there was no just and equitable reason to warrant the
dismissal of the case.[13] Petitioner filed a Motion for Reconsideration, which was denied in an Order
dated November 20, 2001.[14]

Petitioner thus filed a petition for certiorari with the Court of Appeals, which was docketed as CA-
G.R. SP No. 68670, praying for the annulment of the Order of the trial court denying its Motion to
Dismiss and its Motion for Reconsideration.[15]

On February 5, 2002, the Court of Appeals summarily dismissed the petition. Immediately
thereafter, respondent Sheriff Pascual Y. Abordo of the Regional Trial Court of Cebu City, Branch 11,
served on petitioner a Notice of Levy pursuant to the Writ of Execution issued by the trial court to
enforce the Partial Judgment of August 7, 2000 and the Omnibus Order of October 11, 2000. [16]

On February 18, 2002, the Court of Appeals set aside the dismissal of the petition and reinstated
the same.[17] Thereafter, a temporary restraining order was issued enjoining respondent sheriff to
preserve the status quo.[18]

On May 27, 2002, respondent sheriff served on the Landbank of the Philippines a Notice of Third
Garnishment against the deposits, moneys and interests of petitioner therein. [19] Subsequently,
respondent sheriff levied on funds and personal properties of petitioner. [20]
 On July 16, 2002, the Court of Appeals rendered the assailed decision dismissing the petition for
certiorari.[21]

Hence, petitioner filed this petition for review, raising the following issues:

1) WHETHER OR NOT THE STATE CAN BE COMPELLED AND COERCED BY THE COURTS TO
EXERCISE OR CONTINUE WITH THE EXERCISE OF ITS INHERENT POWER OF EMINENT
DOMAIN;

2) WHETHER OR NOT JUDGMENT HAS BECOME FINAL AND EXECUTORY AND IF ESTOPPEL OR
LACHES APPLIES TO GOVERNMENT;

3) WHETHER OR NOT WRITS OF EXECUTION AND GARNISHMENT MAY BE ISSUED AGAINST THE
STATE IN AN EXPROPRIATION WHEREIN THE EXERCISE OF THE POWER OF EMINENT
DOMAIN WILL NOT SERVE PUBLIC USE OR PURPOSE {APPLICATION OF SUPREME COURT
ADMINISTRATIVE CIRCULAR NO. 10-2000}.[22]

Respondent Heirs of Isidro Guivelondo filed their Comment, arguing as follows:

AS EARLIER UPHELD BY THE HONORABLE COURT, THE JUDGMENT OF THE TRIAL COURT IS ALREADY
FINAL AND EXECUTORY, HENCE, COULD NO LONGER BE DISTURBED NOR SET ASIDE

II

THE FUNDS AND ASSETS OF THE PETITIONER ARE NOT EXEMPT FROM LEVY AND GARNISHMENT

III

THE ISSUES RAISED IN THIS SECOND PETITION FOR REVIEW WERE ALREADY RESOLVED BY THE
HONORABLE COURT[23]

In the early case of City of Manila v. Ruymann, [24] the Court was confronted with the question: May
the petitioner, in an action for expropriation, after he has been placed in possession of the property
and before the termination of the action, dismiss the petition? It resolved the issue in the affirmative
and held:

The right of the plaintiff to dismiss an action with the consent of the court is universally recognized
with certain well-defined exceptions. If the plaintiff discovers that the action which he commenced
was brought for the purpose of enforcing a right or a benefit, the advisability or necessity of which he
later discovers no longer exists, or that the result of the action would be different from what he had
intended, then he should be permitted to withdraw his action, subject to the approval of the
court. The plaintiff should not be required to continue the action, subject to some well-defined
exceptions, when it is not to his advantage to do so. Litigation should be discouraged and not
encouraged. Courts should not require parties to litigate when they no longer desire to do so. Courts,
in granting permission to dismiss an action, of course, should always take into consideration the effect
which said dismissal would have upon the rights of the defendant. [25]

Subsequently, in Metropolitan Water District v. De Los Angeles, [26] the Court had occasion to apply
the above-quoted ruling when the petitioner, during the pendency of the expropriation case, resolved
that the land sought to be condemned was no longer necessary in the maintenance and operation of
its system of waterworks. It was held:

It is not denied that the purpose of the plaintiff was to acquire the land in question for a public
use. The fundamental basis then of all actions brought for the expropriation of lands, under the power
of eminent domain, is public use. That being true, the very moment that it appears at any stage of
the proceedings that the expropriation is not for a public use, the action must necessarily fail and
should be dismissed, for the reason that the action cannot be maintained at all except when the
expropriation is for some public use. That must be true even during the pendency of the appeal of at
any other stage of the proceedings. If, for example, during the trial in the lower court, it should be
made to appear to the satisfaction of the court that the expropriation is not for some public use, it
would be the duty and the obligation of the trial court to dismiss the action. And even during the
pendency of the appeal, if it should be made to appear to the satisfaction of the appellate court that
the expropriation is not for public use, then it would become the duty and the obligation of the
appellate court to dismiss it.[27]

Notably, the foregoing cases refer to the dismissal of an action for eminent domain at the
instance of the plaintiff during the pendency of the case. The rule is different where the case had
been decided and the judgment had already become final and executory.

Expropriation proceedings consists of two stages: first, condemnation of the property after it is
determined that its acquisition will be for a public purpose or public use and, second, the
determination of just compensation to be paid for the taking of private property to be made by the
court with the assistance of not more than three commissioners. [28] Thus:

There are two (2) stages in every action for expropriation. The first is concerned with the
determination of the authority of the plaintiff to exercise the power of eminent domain and the
propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of
dismissal of the action, of condemnation declaring that the plaintiff has a lawful right to take the
property sought to be condemned, for the public use or purpose described in the complaint, upon the
payment of just compensation to be determined as of the date of the filing of the complaint. An order
of dismissal, if this be ordained, would be a final one, of course, since it finally disposes of the action
and leaves nothing more to be done by the Court on the merits. So, too, would an order of
condemnation be a final one, for thereafter, as the Rules expressly state, in the proceedings before
the Trial Court, no objection to the exercise of the right of condemnation (or the propriety thereof)
shall be filed or heard.

The second phase of the eminent domain action is concerned with the determination by the Court of
the just compensation for the property sought to be taken. This is done by the Court with the
assistance of not more than three (3) commissioners. The order fixing the just compensation on the
basis of the evidence before, and findings of, the commissioners would be final, too. It would finally
dispose of the second stage of the suit, and leave nothing more to be done by the Court regarding the
issue. Obviously, one or another of the parties may believe the order to be erroneous in its
appreciation of the evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied party
may seek a reversal of the order by taking an appeal therefrom. [29]

The outcome of the first phase of expropriation proceedings, which is either an order of
expropriation or an order of dismissal, is final since it finally disposes of the case.On the other hand,
the second phase ends with an order fixing the amount of just compensation. Both orders, being final,
are appealable.[30] An order of condemnation or dismissal is final, resolving the question of whether or
not the plaintiff has properly and legally exercised its power of eminent domain. [31] Once the first order
becomes final and no appeal thereto is taken, the authority to expropriate and its public use can no
longer be questioned.[32]

The above rule is based on Rule 67, Section 4 of the 1997 Rules of Civil Procedure, which
provides:

Order of expropriation. If the objections to and the defenses against the right of the plaintiff to
expropriate the property are overruled, or when no party appears to defend as required by this Rule,
the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the
property sought to be expropriated, for the public use or purpose described in the complaint, upon
the payment of just compensation to be determined as of the date of the taking of the property or the
filing of the complaint, whichever came first.

A final order sustaining the right to expropriate the property may be appealed by any party aggrieved
thereby. Such appeal, however, shall not prevent the court from determining the just compensation to
be paid.

After the rendition of such an order, the plaintiff shall not be permitted to dismiss or discontinue the
proceeding except on such terms as the court deems just and equitable. (underscoring ours)

In the case at bar, petitioner did not appeal the Order of the trial court dated December 10, 1999,
which declared that it has a lawful right to expropriate the properties of respondent Heirs of Isidro
Guivelondo. Hence, the Order became final and may no longer be subject to review or reversal in any
court.[33] A final and executory decision or order can no longer be disturbed or reopened no matter
how erroneous it may be. Although judicial determinations are not infallible, judicial error should be
corrected through appeals, not through repeated suits on the same claim. [34]

Petitioner anchors its arguments on the last paragraph of the above-quoted Rule 67, Section 4. In
essence, it contends that there are just and equitable grounds to allow dismissal or discontinuance of
the expropriation proceedings. More specifically, petitioner alleges that the intended public use was
rendered nugatory by the unreasonable just compensation fixed by the court, which is beyond the
means of the intended beneficiaries of the socialized housing project. The argument is tenuous.

Socialized housing has been recognized as public use for purposes of exercising the power of
eminent domain.

Housing is a basic human need. Shortage in housing is a matter of state concern since it directly and
significantly affects public health, safety, the environment and in sum, the general welfare. The public
character of housing measures does not change because units in housing projects cannot be occupied
by all but only by those who satisfy prescribed qualifications. A beginning has to be made, for it is not
possible to provide housing for all who need it, all at once.

xxx xxx xxx.

In the light of the foregoing, this Court is satisfied that socialized housing falls with the confines of
public use. xxx xxx xxx. Provisions on economic opportunities inextricably linked with low-cost
housing, or slum clearance, relocation and resettlement, or slum improvement emphasize the public
purpose of the project.[35]

The public purpose of the socialized housing project is not in any way diminished by the amount
of just compensation that the court has fixed. The need to provide decent housing to the urban poor
dwellers in the locality was not lost by the mere fact that the land cost more than petitioner had
expected. It is worthy to note that petitioner pursued its petition for certiorari with the Court of
Appeals assailing the amount of just compensation and its petition for review with this Court which
eloquently indicates that there still exists a public use for the housing project. It was only after its
appeal and petitions for review were dismissed that petitioner made a complete turn-around and
decided it did not want the property anymore.

Respondent landowners had already been prejudiced by the expropriation case. Petitioner cannot
be permitted to institute condemnation proceedings against respondents only to abandon it later
when it finds the amount of just compensation unacceptable. Indeed, our reprobation in the case
of Cosculluela v. Court of Appeals[36] is apropos:

It is arbitrary and capricious for a government agency to initiate expropriation proceedings, seize a
persons property, allow the judgment of the court to become final and executory and then refuse to
pay on the ground that there are no appropriations for the property earlier taken and profitably
used. We condemn in the strongest possible terms the cavalier attitude of government officials who
adopt such a despotic and irresponsible stance.

In order to resolve the issue of the propriety of the garnishment against petitioners funds and
personal properties, there is a need to first determine its true character as a government
entity. Generally, funds and properties of the government cannot be the object of garnishment
proceedings even if the consent to be sued had been previously granted and the state liability
adjudged.[37]

The universal rule that where the State gives its consent to be sued by private parties either by
general or special law, it may limit claimants action only up to the completion of proceedings anterior
to the stage of execution and that the power of the Courts ends when the judgment is rendered, since
government funds and properties may not be seized under writs of execution or garnishment to
satisfy such judgments, is based on obvious considerations of public policy. Disbursements of public
funds must be covered by the corresponding appropriation as required by law. The functions and
public services rendered by the State cannot be allowed to be paralyzed or disrupted by the diversion
of public funds from their legitimate and specific objects, as appropriated by law. [38]

However, if the funds belong to a public corporation or a government-owned or controlled

corporation which is clothed with a personality of its own, separate and distinct from that of the
government, then its funds are not exempt from garnishment. [39] This is so because when the
government enters into commercial business, it abandons its sovereign capacity and is to be treated
like any other corporation.[40]

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

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

This was reiterated in the subsequent case of Philippine Rock Industries, Inc. v. Board of
Liquidators:[42]

Having a juridical personality separate and distinct from the government, the funds of such
government-owned and controlled corporations and non-corporate agency, although considered
public in character, are not exempt from garnishment. This doctrine was applied to suits filed
against the Philippine Virginia Tobacco Administration (PNB vs. Pabalan, et al., 83 SCRA 695); the
National Shipyard & Steel Corporation (NASSCO vs. CIR, 118 Phil. 782); the Manila Hotel Company
(Manila Hotel Employees Asso. vs. Manila Hotel Co., 73 Phil. 374); and the People's Homesite and
Housing Corporation (PNB vs. CIR, 81 SCRA 314). [emphasis ours]

Hence, it is clear that the funds of petitioner NHA are not exempt from garnishment or
execution. Petitioners prayer for injunctive relief to restrain respondent Sheriff Pascual Abordo from
enforcing the Notice of Levy and Garnishment against its funds and properties must, therefore, be
denied.

WHEREFORE, in view of the foregoing, the instant petition for review is DENIED. The decision of
the Court of Appeals in CA-G.R. SP No. 68670, affirming the trial courts Order denying petitioners
Motion to Dismiss the expropriation proceedings in Civil Case No. CEB-23386, is AFFIRMED. Petitioners
prayer for injunctive relief against the levy and garnishment of its funds and personal properties is
DENIED. The Temporary Restraining Order dated January 22, 2003 is LIFTED.
LBP VS WYCOCO

Before the Court are consolidated petitions, the first seeking the review of the February 9, 1999
Decision[1] and the September 22, 1999 Resolution [2] of the Court of Appeals in CA-G.R. No. SP No.
39913, which modified the Decision[3] of Regional Trial Court of Cabanatuan City, Branch 23, acting as
a Special Agrarian Court in Agrarian Case No. 91 (AF); and the second for mandamus to compel the
said trial court to issue a writ of execution and to direct Judge Rodrigo S. Caspillo to inhibit himself
from Agrarian Case No. 91 (AF).

The undisputed antecedents show that Feliciano F. Wycoco is the registered owner of a 94.1690
hectare unirrigated and untenanted rice land, covered by Transfer Certificate of Title No. NT-206422
and situated in the Sitios of Ablang, Saguingan and Pinamunghilan, Barrio of San Juan, Licab, Nueva
Ecija.[4]

In line with the Comprehensive Agrarian Reform Program (CARP) of the government, Wycoco
voluntarily offered to sell the land to the Department of Agrarian Reform (DAR) for P14.9 million. [5] In
November 1991, after the DARs evaluation of the application and the determination of the just
compensation by the Land Bank of the Philippines (LBP), a notice of intention to acquire 84.5690
hectares of the property for P1,342,667.46 [6] was sent to Wycoco. The amount offered was later raised
to P2,594,045.39 and, upon review, was modified to P2,280,159.82. [7] The area which the DAR offered
to acquire excluded idle lands, river and road located therein. Wycoco rejected the offer, prompting
the DAR to indorse the case to the Department of Agrarian Reform Adjudication Board (DARAB) for the
purpose of fixing the just compensation in a summary administrative proceeding. [8] The case was
docketed as DARAB VOS Case No. 232 NE 93. Thereafter, the DARAB requested LBP to open a trust
account in the name of Wycoco and deposited the compensation offered by DAR. [9] In the meantime,
the property was distributed to farmer-beneficiaries.

On March 29, 1993, DARAB required the parties to submit their respective memoranda or position
papers in support of their claim.[10] Wycoco, however, decided to forego with the filing of the required
pleadings, and instead filed on April 13, 1993, the instant case for determination of just compensation
with the Regional Trial Court of Cabanatuan City, Branch 23, docketed as Agrarian Case No. 91 (AF).
[11]
Impleaded as party-defendants therein were DAR and LBP.

On April 30, 1993, Wycoco filed a manifestation in VOS Case No. 232 NE 93, informing the DARAB
of the pendency of Agrarian Case No. 91 (AF) with the Cabanatuan court, acting as a special agrarian
court.[12] On March 9, 1994, the DARAB issued an order dismissing the case to give way to the
determination of just compensation by the Cabanatuan court. Pertinent portion thereof states:

Admittedly, this Forum is vested with the jurisdiction to conduct administrative proceeding to
determine compensation. [H]owever, a thorough perusal of petitioners complaint showed that he did
not only raise the issue of valuation but such other matters which are beyond the competence of the
Board. Besides, the petitioner has the option to avail the administrative remedies or bring the matter
on just compensation to the Special Agrarian Court for final determination.

WHEREFORE, premises considered, this case is hereby dismissed.

SO ORDERED.[13]

Meanwhile, DAR and LBP filed their respective answers before the special agrarian court in
Agrarian Case No. 91 (AF), contending that the valuation of Wycocos property was in accordance with
law and that the latter failed to exhaust administrative remedies by not participating in the summary
administrative proceedings before the DARAB which has primary jurisdiction over determination of
land valuation.[14]

After conducting a pre-trial on October 3, 1994, the trial court issued a pre-trial order as follows:
The parties manifested that there is no possibility of amicable settlement, neither are they willing to
admit or stipulate on facts, except those contained in the pleadings.

The only issue left is for the determination of just compensation or correct valuation of the land
owned by the plaintiff subject of this case.

The parties then prayed to terminate the pre-trial conference.

AS PRAYED FOR, the pre-trial conference is considered terminated, and instead of trial, the parties are
allowed to submit their respective memoranda.

WHEREFORE, the parties are given twenty (20) days from today within which to file their simultaneous
memoranda, and another ten (10) days from receipt thereof to file their Reply/Rejoinder, if any, and
thereafter, this case shall be deemed submitted for decision.

SO ORDERED.[15]

The evidence presented by Wycoco in support of his claim were the following: (1) Transfer
Certificate of Title No. NT-206422; (2) Notice of Land Valuation dated June 18, 1992; and (3) letter
dated July 10, 1992 rejecting the counter-offer of LBP and DAR. [16] On the other hand, DAR and LBP
presented the Land Valuation Worksheets.[17]

On November 14, 1995, the trial court rendered a decision in favor of Wycoco. It ruled that there
is no need to present evidence in support of the land valuation inasmuch as it is of public knowledge
that the prevailing market value of agricultural lands sold in Licab, Nueva Ecija is from P135,000.00 to
150,000.00 per hectare. The court thus took judicial notice thereof and fixed the compensation for the
entire 94.1690 hectare land at P142,500.00 per hectare or a total of P13,428,082.00. It also awarded
Wycoco actual damages for unrealized profits plus legal interest. The dispositive portion thereof
states:

WHEREFORE, premises considered, judgment is hereby rendered:

1. Ordering the defendants to pay the amount of P13,419,082.00 to plaintiff as just compensation for
the property acquired;

2. Ordering the defendants to pay plaintiff the amount of P29,663,235.00 representing the unrealized
profits from the time of acquisition of the subject property and the sum of P8,475,210.00 for every
calendar year, until the amount of compensation is fully paid including legal interest which had
accrued thereon.

No pronouncement as to costs.

SO ORDERED.[18]

The DAR and the LBP filed separate petitions before the Court of Appeals. The petition brought by
DAR on jurisdictional and procedural issues, docketed as CA-G.R. No. SP No. 39234, was dismissed on
May 29, 1997.[19] The dismissal became final and executory on June 26, 1997. [20] This prompted
Wycoco to file a petition for mandamus before this Court, docketed as G.R. No. 146733, praying that
the decision of the Regional Trial Court of Cabanatuan City, Branch 23, in Agrarian Case No. 91 (AF) be
executed, and that Judge Rodrigo S. Caspillo, the now presiding Judge of said court, be compelled to
inhibit himself from hearing the case.

The petition brought by LBP on both substantive and procedural grounds, docketed as CA-G.R. No.
SP No. 39913, was likewise dismissed by the Court of Appeals on February 9, 1999. [21] On September
22, 1999, however, the Court of Appeals modified its decision by deducting from the compensation
due Wycoco the amount corresponding to the 3.3672 hectare portion of the 94.1690 hectare land
which was found to have been previously sold by Wycoco to the Republic, thus

WHEREFORE, and conformably with the above, Our decision of February 9, 1999 is hereby MODIFIED
in the sense that the value corresponding to the aforesaid 3.3672 hectares and all the awards
appertaining thereto in the decision a quo are ordered deducted from the totality of the awards
granted to the private respondent. In all other respects, the decision sought to be reconsidered is
hereby RE-AFFIRMED and REITERATED.

SO ORDERED.[22]

In its petition, LBP contended that the Court of Appeals erred in ruling:

THAT THE TRIAL COURT ACTING AS A SPECIAL AGRARIAN COURT MAY ASSUME JURISDICTION OVER
AGRARIAN CASE NO. 91 (AF) AND RENDER JUDGMENT THEREON WITHOUT AN INITIAL ADMINISTRATIVE
DETERMINATION OF JUST COMPENSATION BY THE DARAB PURSUANT TO SECTION 16 OF RA 6657,
OVER THE TIMELY OBJECTION OF THE PETITIONER, AND IN VIOLATION OF THE RULE ON EXHAUSTION
OF ADMINISTRATIVE REMEDIES AND ON FORUM SHOPPING;

II

THAT THE JUST COMPENSATION DETERMINED BY THE TRIAL COURT WAS SUPPORTED BY SUBSTANTIAL
EVIDENCE, WHEN IT WAS BASED ONLY ON JUDICIAL NOTICE OF THE PREVAILING MARKET VALUE OF
LAND BASED ON THE ALLEGED PRICE OF TRANSFER OF TENURAL RIGHTS, TAKEN WITHOUT NOTICE
AND HEARING IN VIOLATION OF RULE 129 OF THE RULES OF COURT;

III

THAT THE TRIAL COURT CAN REQUIRE THE PETITIONER TO COMPENSATE THE PORTIONS OF
RESPONDENTS PROPERTY WHICH WERE NOT DECLARED BY THE DAR FOR ACQUISITION, NOR
SUITABLE FOR AGRICULTURE NOR CAPABLE OF DISTRIBUTION TO FARMER BENEFICIARIES UNDER THE
CARP;

IV

THAT THE TRIAL COURT CAN AWARD AS PART OF JUST COMPENSATION LEGAL INTEREST ON THE
PRINCIPAL AND ALLEGED UNREALIZED PROFITS OF P29,663,235.00 FROM THE TIME OF ACQUISITION
OF THE SUBJECT PROPERTY AND P8,475,210.00 FOR EVERY CALENDAR YEAR THEREAFTER,
CONSIDERING THAT THE SAME HAS NO LEGAL BASIS AND THAT THE RESPONDENT RETAINED THE
TITLE TO HIS PROPERTY DESPITE THE DARS NOTICE OF ACQUISITION;

THAT THE TRIAL COURT HAD VALIDLY GRANTED EXECUTION PENDING APPEAL ON THE ALLEGEDLY
GOOD REASON OF THE PETITIONERS ADVANCED AGE AND WEAK HEALTH, CONTRARY TO THE
APPLICABLE JURISPRUDENCE AND CONSIDERING THAT THE RESPONDENT IS NOT DESTITUTE. [23]

The issues for resolution are as follows: (1) Did the Regional Trial Court, acting as Special Agrarian
Court, validly acquire jurisdiction over the instant case for determination of just compensation? (2)
Assuming that it acquired jurisdiction, was the compensation arrived at supported by evidence? (3)
Can Wycoco compel the DAR to purchase the entire land subject of the voluntary offer to sell? (4)
Were the awards of interest and damages for unrealized profits valid?
 Anent the issue of jurisdiction, the laws in point are Sections 50 and 57 of Republic Act No. 6657
(Comprehensive Agrarian Reform Law of 1988) which, in pertinent part, provide:

Section 50. Quasi-judicial Powers of the DAR. The DAR is hereby vested with primary jurisdiction to
determine and adjudicate agrarian reform matters and shall have exclusive original jurisdiction over
all matters involving the implementation of agrarian reform, except those falling under the exclusive
jurisdiction of the Department of Agriculture (DA) and the Department of Environment and Natural
Resources (DENR).

Section 57. Special Jurisdiction. The Special Agrarian Court shall have original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act.

The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction within
thirty (30) days from submission of the case for decision.

In Republic v. Court of Appeals,[24] it was held that Special Agrarian Courts are given original and
exclusive jurisdiction over two categories of cases, to wit: (1) all petitions for the determination of just
compensation; and (2) the prosecution of all criminal offenses under R.A. No. 6657. Section 50 must
be construed in harmony with Section 57 by considering cases involving the determination of just
compensation and criminal cases for violations of R.A. No. 6657 as excepted from the plenitude of
power conferred to the DAR. Indeed, there is a reason for this distinction. The DAR, as an
administrative agency, cannot be granted jurisdiction over cases of eminent domain and over criminal
cases. The valuation of property in eminent domain is essentially a judicial function which is vested
with the Special Agrarian Courts and cannot be lodged with administrative agencies. [25] In fact, Rule
XIII, Section 11 of the New Rules of Procedure of the DARAB acknowledges this power of the court,
thus

Section 11. Land Valuation and Preliminary Determination and Payment of Just Compensation. The
decision of the Adjudicator on land valuation and preliminary determination and payment of just
compensation shall not be appealable to the Board but shall be brought directly to the Regional Trial
Courts designated as Special Agrarian Courts within fifteen (15) days from receipt of the notice
thereof. Any party shall be entitled to only one motion for reconsideration. (Emphasis supplied)

Under Section 1 of Executive Order No. 405, Series of 1990, the Land Bank of the Philippines is
charged with the initial responsibility of determining the value of lands placed under land reform and
the just compensation to be paid for their taking. [26] Through a notice of voluntary offer to sell (VOS)
submitted by the landowner, accompanied by the required documents, the DAR evaluates the
application and determines the lands suitability for agriculture. The LBP likewise reviews the
application and the supporting documents and determines the valuation of the land. Thereafter, the
DAR issues the Notice of Land Valuation to the landowner. In both voluntary and compulsory
acquisition, where the landowner rejects the offer, the DAR opens an account in the name of the
landowner and conducts a summary administrative proceeding. If the landowner disagrees with the
valuation, the matter may be brought to the Regional Trial Court acting as a special agrarian
court. This in essence is the procedure for the determination of just compensation. [27]

In Land Bank of the Philippines v. Court of Appeals,[28] the landowner filed an action for
determination of just compensation without waiting for the completion of DARABs re-evaluation of the
land. This, notwithstanding, the Court held that the trial court properly acquired jurisdiction because
of its exclusive and original jurisdiction over determination of just compensation, thus

It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners. This original
and exclusive jurisdiction of the RTC would be undermined if the DAR would vest in administrative
officials original jurisdiction in compensation cases and make the RTC an appellate court for the
review of administrative decisions. Thus, although the new rules speak of directly appealing the
decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is clear from Sec. 57 that the
original and exclusive jurisdiction to determine such cases is in the RTCs. Any effort to transfer such
jurisdiction to the adjudicators and to convert the original jurisdiction of the RTCs into an appellate
jurisdiction would be contrary to Sec. 57 and therefore would be void. Thus, direct resort to the
SAC [Special Agrarian Court] by private respondent is valid. (Emphasis supplied)[29]

In the case at bar, therefore, the trial court properly acquired jurisdiction over Wycocos complaint
for determination of just compensation. It must be stressed that although no summary administrative
proceeding was held before the DARAB, LBP was able to perform its legal mandate of initially
determining the value of Wycocos land pursuant to Executive Order No. 405, Series of 1990. What is
more, DAR and LBPs conformity to the pre-trial order which limited the issue only to the determination
of just compensation estopped them from questioning the jurisdiction of the special agrarian
court. The pre-trial order limited the issues to those not disposed of by admission or agreements; and
the entry thereof controlled the subsequent course of action. [30]

Besides, the issue of whether Wycoco violated the rule on exhaustion of administrative remedies
was rendered moot and academic in view of the DARABs dismissal [31]of the administrative case to give
way to and in recognition of the courts power to determine just compensation. [32]

In arriving at the valuation of Wycocos land, the trial court took judicial notice of the alleged
prevailing market value of agricultural lands in Licab, Nueva Ecija without apprising the parties of its
intention to take judicial notice thereof. Section 3, Rule 129 of the Rules on Evidence provides:

Sec. 3. Judicial Notice, When Hearing Necessary. During the trial, the court, on its own initiative, or on
request of a party, may announce its intention to take judicial notice of any matter and allow the
parties to be heard thereon.

After trial and before judgment or on appeal, the proper court, on its own initiative, or on request of a
party, may take judicial notice of any matter and allow the parties to be heard thereon if such matter
is decisive of a material issue in the case.

Inasmuch as the valuation of the property of Wycoco is the very issue in the case at bar, the trial
court should have allowed the parties to present evidence thereon instead of practically assuming a
valuation without basis. While market value may be one of the bases of determining just
compensation, the same cannot be arbitrarily arrived at without considering the factors to be
appreciated in arriving at the fair market value of the property e.g., the cost of acquisition, the current
value of like properties, its size, shape, location, as well as the tax declarations thereon. [33] Since these
factors were not considered, a remand of the case for determination of just compensation is
necessary. The power to take judicial notice is to be exercised by courts with caution especially where
the case involves a vast tract of land. Care must be taken that the requisite notoriety exists; and
every reasonable doubt on the subject should be promptly resolved in the negative. To say that a
court will take judicial notice of a fact is merely another way of saying that the usual form of evidence
will be dispensed with if knowledge of the fact can be otherwise acquired. This is because the court
assumes that the matter is so notorious that it will not be disputed. But judicial notice is not judicial
knowledge. The mere personal knowledge of the judge is not the judicial knowledge of the court, and
he is not authorized to make his individual knowledge of a fact, not generally or professionally known,
the basis of his action.[34]

Anent the third issue, the DAR cannot be compelled to purchase the entire property voluntarily
offered by Wycoco. The power to determine whether a parcel of land may come within the coverage
of the Comprehensive Agrarian Reform Program is essentially lodged with the DAR. That Wycoco will
suffer damages by the DARs non-acquisition of the approximately 10 hectare portion of the entire
land which was found to be not suitable for agriculture is no justification to compel DAR to acquire the
whole area.

We find Wycocos claim for payment of interest partly meritorious. In Land Bank of the Philippines
v. Court of Appeals,[35] this Court struck down as void DAR Administrative Circular No. 9, Series of
1990, which provides for the opening of trust accounts in lieu of the deposit in cash or in bonds
contemplated in Section 16 (e) of RA 6657.

It is very explicit from [Section 16 (e)] that the deposit must be made only in cash or in LBP bonds.
Nowhere does it appear nor can it be inferred that the deposit can be made in any other form. If it
were the intention to include a trust account among the valid modes of deposit, that should have
been made express, or at least, qualifying words ought to have appeared from which it can be fairly
deduced that a trust account is allowed. In sum, there is no ambiguity in Section 16(e) of RA 6657 to
warrant an expanded construction of the term deposit.

xxxxxxxxx

In the present suit, the DAR clearly overstepped the limits of its powers to enact rules and regulations
when it issued Administrative Circular No. 9. There is no basis in allowing the opening of a trust
account in behalf of the landowner as compensation for his property because, as heretofore
discussed, Section 16(e) of RA 6657 is very specific that the deposit must be made only in cash or in
LBP bonds. In the same vein, petitioners cannot invoke LRA Circular Nos. 29, 29-A and 54 because
these implementing regulations can not outweigh the clear provision of the law. Respondent court
therefore did not commit any error in striking down Administrative Circular No. 9 for being null and
void.[36]

Pursuant to the forgoing decision, DAR issued Administrative Order No. 2, Series of 1996,
converting trust accounts in the name of landowners into deposit accounts.The transitory provision
thereof states

VI. TRANSITORY PROVISIONS

All trust accounts issued pursuant to Administrative Order No. 1, S. 1993 covering landholdings not
yet transferred in the name of the Republic of the Philippines as of July 5, 1996 shall immediately be
converted to deposit accounts in the name of the landowners concerned.

All Provincial Agrarian Reform Officers and Regional Directors are directed to immediately inventory
the claim folders referred to in the preceding paragraph, wherever they may be found and request the
LBP to establish the requisite deposit under this Administrative Order and to issue a new certification
to that effect. The Original Certificate of Trust Deposit previously issued should be attached to the
request of the DAR in order that the same may be replaced with a new one.

All previously established Trust Deposits which served as the basis for the transfer of the landowners
title to the Republic of the Philippines shall likewise be converted to deposits in cash and in
bonds. The Bureau of Land Acquisition and Distribution shall coordinate with the LBP for this purpose.

In light of the foregoing, the trust account opened by LBP in the name of Wycoco as the mode of
payment of just compensation should be converted to a deposit account. Such conversion should be
retroactive in application in order to rectify the error committed by the DAR in opening a trust account
and to grant the landowners the benefits concomitant to payment in cash or LBP bonds prior to the
ruling of the Court in Land Bank of the Philippines v. Court of Appeals. Otherwise, petitioners right to
payment of just and valid compensation for the expropriation of his property would be violated. [37] The
interest earnings accruing on the deposit account of landowners would suffice to compensate them
pending payment of just compensation.

In some expropriation cases, the Court imposed an interest of 12% per annum on the just
compensation due the landowner. It must be stressed, however, that in these cases, the imposition of
interest was in the nature of damages for delay in payment which in effect makes the obligation on
the part of the government one of forbearance. [38]It follows that the interest in the form of damages
cannot be applied where there was prompt and valid payment of just compensation. Conversely,
where there was delay in tendering a valid payment of just compensation, imposition of interest is in
order. This is because the replacement of the trust account with cash or LBP bonds did not ipso
facto cure the lack of compensation; for essentially, the determination of this compensation was
marred by lack of due process.[39]

Accordingly, the just compensation due Wycoco should bear 12% interest per annum from the
time LBP opened a trust account in his name up to the time said account was actually converted into
cash and LBP bonds deposit accounts. The basis of the 12% interest would be the just compensation
that would be determined by the Special Agrarian Court upon remand of the instant case. In the same
vein, the amount determined by the Special Agrarian Court would also be the basis of the interest
income on the cash and bond deposits due Wycoco from the time of the taking of the property up to
the time of actual payment of just compensation.

The award of actual damages for unrealized profits should be deleted. The amount of loss must
not only be capable of proof, but must be proven with a reasonable degree of certainty. The claim
must be premised upon competent proof or upon the best evidence obtainable, such as receipts or
other documentary proof.[40] None having been presented in the instant case, the claim for unrealized
profits cannot be granted.

From the foregoing discussion, it is clear that Wycocos petition for mandamus in G.R. No. 146733
should be dismissed. The decision of the Regional Trial Court of Cabanatuan City, Branch 23, acting as
Special Agrarian Court in Agrarian Case No. 91 (AF), cannot be enforced because there is a need to
remand the case to the trial court for determination of just compensation. Likewise, the prayer for the
inhibition of Judge Rodrigo S. Caspillo in Agrarian Case No. 91 (AF) is denied for lack of basis.

WHEREFORE, in view of all the foregoing, the petition in G.R. No. 140160
is PARTIALLY GRANTED. Agrarian Case No. 91 (AF) is REMANDED to the Regional Trial Court of
Cabanatuan City, Branch 23, for the determination of just compensation. The petition for mandamus
in G.R. No. 146733 is DISMISSED.

ESTATE OF JBL REYERS VS CITY OF MANILA

Before us are the following consolidated petitions filed by petitioners Heirs of Jose B.L. Reyes and
Edmundo Reyes: (1) a petition for review [1] of the decision[2] of the Court of Appeals dated January 27,
1998 which ordered the condemnation of petitioners properties and reversed the order [3] of the
Regional Trial Court (RTC) of Manila, Branch 9, dated October 3, 1995 dismissing the complaint of
respondent City of Manila (City) for expropriation, and (2) a petition for certiorari [4] alleging that the
Court of Appeals committed grave abuse of discretion in rendering a resolution [5] dated August 19,
1998 which issued a temporary restraining order against the Municipal Trial Court (MTC) of Manila,
Branch 10, not to (disturb) the occupancy of Dr. Rosario Abiog, one of the members of SBMI, until the
Supreme Court has decided the Petition for Review on Certiorari and a resolution[6] dated December
16, 1998 enjoining petitioners from disturbing the physical possession of all the properties subject of
the expropriation proceedings.

The undisputed facts follow.

The records show that Jose B. L. Reyes and petitioners Heirs of Edmundo Reyes are the pro-
indiviso co-owners in equal proportion of 11 parcels of land with a total area of 13,940 square meters
situated at Sta. Cruz District, Manila and covered by Transfer Certificate of Title No. 24359 issued by
the Register of Deeds of Manila. These parcels of land are being occupied and leased by different
tenants, among whom are respondents Abiog, Maglonso and members of respondent Sampaguita
Bisig ng Magkakapitbahay, Incorporated (SBMI). Petitioners leased to respondent Abiog Lot 2-E, Block
3007 of the consolidated subdivision plan (LRC) Psd- 328345, with an area of 191 square meters [7] and
to respondent Maglonso, Lot 2-R, Block 2996 of the same consolidation plan, with an area of 112
square meters.[8]

On November 9, 1993 and May 26, 1994, respectively, Jose B.L. Reyes and petitioners Heirs of
Edmundo Reyes filed ejectment complaints against respondents Rosario Abiog and Angelina
Maglonso, among others. Upon his death, Jose B.L. Reyes was substituted by his heirs. Petitioners
obtained favorable judgments against said respondents. In Civil Case No. 142851-CV, the Metropolitan
Trial Court (MTC) of Manila, Branch 10, rendered a decision dated May 9, 1994 against respondent
Abiog. In Civil Case No. 144205-CV, the MTC of Manila, Branch 3, issued judgment dated May 4, 1995
against respondent Maglonso.

Respondents Abiog and Maglonso appealed the MTC decisions but the same were denied [9] by the
RTC of Manila, Branch 28, and the RTC of Manila, Branch 38, respectively. Their appeals to the Court of
Appeals were likewise denied.[10] As no appeals were further taken, the judgments of eviction against
respondents Abiog and Maglonso became final and executory in 1998.

Meanwhile, during the pendency of the two ejectment cases against respondents Abiog and
Maglonso, respondent City filed on April 25, 1995 a complaint for eminent domain (expropriation) [11] of
the properties of petitioners at the RTC of Manila, Branch 9. The properties sought to be acquired by
the City included parcels of land occupied by respondents Abiog, Maglonso and members of
respondent SBMI.

The complaint was based on Ordinance No. 7818 enacted on November 29, 1993 authorizing the
City Mayor of Manila to expropriate certain parcels of land with an aggregate area of 9,930 square
meters, more or less, owned by Jose B.L. Reyes and Edmundo Reyes situated along the streets of Rizal
Avenue, Tecson, M. Natividad, Sampaguita, Oroquieta, M. Hizon, Felix Huertes, Bulacan, Sulu, Aurora
Boulevard, Pedro Guevarra and Kalimbas in the third district of Manila. These parcels of land are more
particularly described in the pertinent Cadastral Plan as Lot 3, Block 2995, Lot 2, Block 2996; Lot 2,
Block 2999; Lot 5, Block 2999, and Lot 2, Block 3007. According to the ordinance, the said properties
were to be distributed to the intended beneficiaries, who were the occupants of the said parcels of
land who (had) been occupying the said lands as lessees or any term thereof for a period of at least
10 years.[12]

The complaint alleged that, on March 10, 1995, respondent City thru City Legal Officer Angel
Aguirre, Jr. sent the petitioners a written offer to purchase the subject properties for P10,285,293.38
but the same was rejected. Respondent City prayed that an order be issued fixing the provisional
value of the property in the amount of P9,684,380 based on the current tax declaration of the real
properties and that it be authorized to enter and take possession thereof upon the deposit with the
trial court of the amount of P1,452,657 or 15% of the aforesaid value.

On May 15, 1995, respondent SBMI, a registered non-stock corporation composed of the residents
of the subject properties (including as well as representing herein respondents Abiog and Maglonso),
filed a motion for intervention and admission of their attached complaint with prayer for injunction.
Respondent SBMI alleged that it had a legal interest over the subject matter of the litigation as its
members were the lawful beneficiaries of the subject matter of the case. It prayed for the issuance of
a temporary restraining order to enjoin the petitioners from ousting the occupants of the subject
properties. The trial court denied the motion for intervention in an order dated June 2, 1995 on the
ground that the movants interest (was) indirect, contingent, remote, conjectual (sic), consequential
(sic) and collateral. At the very least, it (was), if it (existed) at all, purely inchoate, or in sheer
expectancy of a right that may or may not be granted. [13]

On the day SBMIs motion for intervention was denied, petitioners filed a motion to dismiss the
complaint for eminent domain for lack of merit. Among the grounds alleged were the following:

xxx that the amount allegedly deposited by the plaintiff is based on an erroneous computation since
Sec. 19 of the Local Government Code of 1991 provides that in order for the plaintiff to take
possession of the property, the deposit should be at least 15% of the fair market value of the property
based on the current tax declaration of the property to be expropriated which isP19,619,520.00, 15%
of which is P2,942,928.00; that since the subject property is allegedly being expropriated for
socialized housing, the guidelines for their equitable valuation shall be set by the Department of
Finance on the basis of the market value reflected in the zonal valuation conformably to Sec. 13 of
R.A. No. 7279; that under Department Order No. 33-93 adopted by the Department of Finance,
through the Bureau of Internal Revenue, on 26 April 1992, the zonal valuation of the subject property
is conservatively estimated at approximately P76M; that the plaintiff has no savings or
unappropriated funds to pay for the just compensation; that instead of expropriating the subject
property which enjoys the least priority in the acquisition by the City of Manila for socialized housing
under Sec. 9(t) of R.A. 7279, the money to be paid should be channeled to the development of 244
sites in Metro Manila designated as area for priority development; that the City Ordinance was not
properly adopted since there was no public hearing and neither were the defendants notified; that the
tenants occupying the subject property cannot be categorized as underprivileged and homeless
citizens or those whose income falls within the poverty threshold to be qualified as beneficiaries of the
intended socialized housing; and that the plaintiff failed to comply with Art. 34, Rule 6 of the Rules
and Regulations Implementing the Local Government Code of 1991 which requires the local
government unit to first establish the suitability of the property to be acquired for the use intended
and then proceed to obtain from the proper authorities, like the National Housing Authority, the
necessary locational clearance and other requirements imposed under existing laws, rules and
regulations.[14]

On June 6, 1995, the trial court allowed respondent City to take possession of the subject property
upon deposit of the amount of P1,542,793, based on the P10,285,293.38 offer by respondent City to
petitioners which the trial court fixed as the provisional amount of the subject properties. On June 14,
1995, respondent City filed an opposition to petitioners motion to dismiss.

On October 3, 1995, the Citys complaint for eminent domain was dismissed. [15] The trial court held
that expropriation was inappropriate because herein petitioners were in fact willing to sell the subject
properties under terms acceptable to the purchaser. Moreover, respondent City failed to show that its
offer was rejected by petitioners. Respondent Citys motion for reconsideration was denied.

On January 12, 1996, respondent City appealed the decision of the trial court to the Court of
Appeals. Thereafter, several motions[16] seeking the issuance of a temporary restraining order and
preliminary injunction were filed by respondent City to prevent petitioners from ejecting the
occupants of the subject premises. On March 21, 1996, the Court of Appeals issued a
resolution[17] denying the motions for lack of merit. Respondent Citys motion for reconsideration was
likewise denied.

Meanwhile, on January 27, 1997, in view of the finality of the judgment in the ejectment case
against respondent Abiog, the MTC of Manila, Branch 10, issued a writ of execution.

On January 31, 1997, respondent SBMI filed in the Court of Appeals a motion for leave to
intervene with prayer for injunctive relief praying that the ejectment cases be suspended or that the
execution thereof be enjoined in view of the pendency of the expropriation case filed by respondent
City over the same parcels of land.

As a follow-up, respondent Abiog filed in the appellate court, on August 25, 1997, a reiteratory
motion for issuance of temporary restraining order and to stop the execution of the order dated June
27, 1997 of the Hon. Judge Tranquil P. Salvador, MTC of Manila, Branch 10.

On August 26, 1997, the Court of Appeals issued a resolution [18] finding prima facie basis to grant
SBMIs motions. It issued a temporary restraining order to Judge Salvador, his employees and agents
to maintain the status quo. After the hearing on the propriety of the issuance of a writ of preliminary
injunction, respondent SBMI filed a reiteratory motion for injunctive relief on December 11, 1997.

On January 27, 1998, the Court of Appeals rendered the assailed decision reversing the trial court
judgment and upholding as valid respondent Citys exercise of its power of eminent domain over
petitioners properties. The dispositive portion of the decision stated:

WHEREFORE, the Orders appealed from are hereby REVERSED and SET ASIDE. The case is remanded
to the lower court to determine specifically the amount of just compensation.
SO ORDERED.[19]

According to the Court of Appeals:

xxx there is no doubt as to the public purpose of the plaintiff-appellant in expropriating the property
of the defendants-appellees. Ordinance No. 7818 expressly states that the subject parcels of land are
to be distributed to the landless poor residents therein who have been in possession of the said
property for at least ten (10) years.

xxx xxx xxx

xxx In the absence of any law which expressly provides for a period for filing an expropriation
proceeding, the lower court erred in dismissing the complaint based on unsupported accusations and
mere speculations, such as political motivation. The fact that the expropriation proceeding was not
immediately instituted does not negate the existence of the public purpose for which the ordinance
was enacted.

Another reason for the lower courts dismissal was its finding that there was no proof that the offer of
the plaintiff-appellant, through the City Legal Office, was not accepted. This conclusion by the lower
court is belied by the letter of Adoracion D. Reyes, dated 17 March 1995, xxx.

xxx xxx xxx

There can be no interpretation of the letter of the defendant-appellee other than that the valid and
definite offer of the plaintiff-appellant to purchase the subject property was not accepted and, in the
words of the defendant-appellee, was totally turned down.

The lower court in denying the plaintiff-appellants motion for reconsideration of the order of dismissal
held that the defendants-appellees were actually willing to sell, in fact, some of the tenants have
already purchased the land that they occupy. However, we agree with the plaintiff-appellant that the
contracts entered into by the defendants-appellees with some of the tenants do not affect the offer it
made. The plaintiff-appellant was not a party in those transactions and as pointed out, its concern is
the majority of those who have no means to provide themselves with decent homes to live on. [20]

From the aforementioned decision of the Court of Appeals, petitioners filed on March 19, 1998 the
present petition for review[21] before this Court. Alleging that respondent City cannot expropriate the
subject parcels of land, petitioners assigned the following as errors of the Court of Appeals:

The Court Appeals committed grave abuse and irreversible errors in holding that respondent City of
Manila may expropriate petitioners parcels of land considering that:

I. Respondent did not comply with Secs. 9 and 10 of P.D. (sic) No. 7279, otherwise known as
the Urban Development and Housing Act of 1992 and Sec. 34 of the Local Government
Code of 1991 (sic).

II. Ordinance No. 7818 enacted by the City of Manila is violative of the equal protection clause.

III. There was no valid and definite offer by the respondent City of Manila to purchase subject
parcels of land.

IV. Assuming there was a valid offer, the amount deposited for the payment of just
compensation was insufficient.

V. Petitioners are not unwilling to sell the subject parcels of land.

VI. There was no pronouncement as to just compensation. [22]

 What followed were incidents leading to the filing of the petition for certiorari against the
resolutions of the Court of Appeals which essentially sought to enjoin the petitioners from enforcing
the final judgments against respondents Abiog, Maglonso and SBMI (hereinafter, respondent
occupants) in the ejectment cases.

On August 17, 1998, respondents Abiog and Maglonso filed in the Court of Appeals an urgent
motion for protective order.

Meanwhile, on September 8, 1998, petitioners were able to secure from the MTC of Manila, Branch
3, a writ of execution of the final judgment in the other ejectment case against respondent Maglonso.

On October 19, 1998, respondent SBMI filed in the CA a similar motion for protective order. In
essence, the respondents motions for protective order sought to stop the execution of the final and
executory judgments in the ejectment cases against them.

On August 19, 1998, the Court of Appeals promulgated the first assailed resolution, [23] the
dispositive portion of which read:

Considering that this case has been elevated to the Supreme Court, the Municipal Trial Court of
Manila, Branch 10 and Sheriff Jess Areola or any other sheriff of the City of Manila, are hereby
TEMPORARILY RESTRAINED from disturbing the occupancy of Dr. Rosario Abiog, one of the members of
the SBMI until the Supreme Court has decided the Petition for Review on Certiorari.

On September 4, 1998, petitioners filed a motion to set aside as ineffective and/or null and void
the said August 19, 1998 resolution. But the Court of Appeals denied the same in a resolution dated
December 16, 1998,[24] the dispositive portion of which read:

WHEREFORE, the Estate or heirs of J.B.L. Reyes and all persons acting in their behalf are hereby
ENJOINED from disturbing the physical possession of all the properties (sic) subject of the
expropriation proceedings.

SO ORDERED.

In enjoining the petitioners from evicting respondent occupants and in effect suspending the
execution of the MTC judgments, the appellate court held that:

We do not agree with the contention of the defendants-appellees that we no longer have any
jurisdiction to issue the subject resolution. In spite of having rendered the decision on 27 January
1998, the appellate Court still has the inherent power and discretion to amend whatever order or
decision it had made before in order to render substantial justice.

xxx xxx xxx

There is no doubt that the members of SBMI have a personality to intervene before this Court. The
plaintiff-appellant itself, in their Comment to the defendants-appellees motion to set aside this Courts
19 August 1998 resolution, recognized Dr. Rosario Abiog, as one of the intended beneficiaries of the
expropriation case. The plaintiff-appellant also enumerated the ejectment cases pending before the
lower courts when it filed a motion for the issuance of temporary restraining order and/or writ of
preliminary injunction upon appeal to this Court. Moreover, the plaintiff-appellant also furnished this
Court with a copy of the THIRD PARTY CLAIM it filed before the City Sheriff Office and Sheriff Dante Lot
to enjoin them from implementing and executing the Demolition Order issued by the Metropolitan Trial
Court of Manila (Branch 3) against Angelina Maglonso.

In their motion to set aside the 19 August 1998 resolution, the defendants-appellees, quoting the
Order of the lower court denying the motion for intervention stated that:
The petition of the plaintiff to expropriate the property does not ipso facto create any fiat that would
give rise to the claim of the movant of legal interest in the property. The petition could well be denied
leaving any assertion of interest on the part of the movant absolutely untenable. If the petition, on the
other hand, is granted, that would be the time for the movant to intervene, to show that they are the
intended beneficiaries, and if the plaintiff would distribute the property to other persons, the remedy
is to compel the plaintiff to deliver the lot to them.

Having established that they are the intended beneficiaries, the intervenors then have the right to
seek protection from this Court.

On 27 January 1998, we held that the plaintiff-appellant validly exercised its power of eminent domain
and consequently may expropriate the subject property upon payment of just compensation. The
record before us shows that on 6 June 1995, the lower court allowed the plaintiff-appellant to take
possession of the subject property upon filing of P1,542,793.00 deposit. The property to be
expropriated includes the same properties subject of the ejectment cases against the intervenors.
There is nothing in the record that would show that the order of possession was ever set aside or the
deposit returned to the plaintiff-appellant.

Based on the foregoing considerations, we find that the intervenors are entitled to the injunction that
they prayed for.

To allow the demolition of the premises of the intervenors would defeat the very purpose of
expropriation which is to distribute the subject property to the intended beneficiaries who are the
occupants of the said parcels of land who have been occupying the said lands as lessees or any term
thereof for a period of at least ten (10) years.

In the case of Lourdes Guardacasa Vda. De Legaspi vs. Hon. Herminion A. Avendano, et al., the
Supreme Court ordered the suspension of the enforcement and implementation of the writ of
execution and order of demolition issued in the ejectment case until after the final termination of the
action for quieting of title because it is more equitable and just and less productive of confusion and
disturbance of physical possession with all its concomitant inconvenience and expenses.

As held in Wilmon Auto Supply Corp., et al. vs. Hon. Court of Appeals, et al., the exception to the rule
in the case of Vda. De Legaspi case, execution of the decision in the ejectment case would also have
meant demolition of the premises, which is the situation in the case at bar. [25]

Claiming that the Court of Appeals committed grave abuse of discretion amounting to lack or
excess of jurisdiction, petitioners filed the subject petition for certiorari [26]with the following
assignments of error:

PUBLIC RESPONDENT COURT OF APPEALS HAS NO JURISDICTION IN ISSUING THE PROTECTIVE ORDER
ENJOINING THE EXECUTION OF THE FINAL AND EXECUTORY JUDGMENTS IN THE EJECTMENT CASES
AGAINST PRIVATE RESPONDENTS BECAUSE THE POWER TO ISSUE SUCH ORDER HAS BEEN LODGED
WITH THE HONORABLE COURT IN VIEW OF THE PENDENCY OF G.R. NO. 132431.

II

ASSUMING ARGUENDO THAT PUBLIC RESPONDENT COURT OF APPEALS COULD ISSUE SUCH ORDER, IT
ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
ISSUING THE PROTECTIVE ORDER IN FAVOR OF PRIVATE RESPONDENTS BECAUSE IT HAS LONG BEEN
SETTLED THAT THEIR INTERESTS IN THE PROPERTIES SUBJECT OF THE EXPROPRIATION CASE ARE NOT
SUFFICIENT FOR THEM TO BE DECLARED AS INTERVENORS.

III
THE SO-CALLED PROTECTIVE ORDER IS AN INJUNCTIVE RELIEF IN DISGUISE.

IV

PRIVATE RESPONDENTS ACT OF SEEKING THE PROTECTIVE ORDER FROM THE COURT OF APPEALS,
DESPITE THE FINALITY OF THE ORDER BY THE TRIAL COURT DISALLOWING INTERVENTION,
CONSTITUTES FORUM SHOPPING.

THE ASSAILED RESOLUTIONS OF THE COURT OF APPEALS SHOULD BE SET ASIDE, FOLLOWING THE
RULING IN FILSTREAM INTERNATIONAL, INC. VS. CA, JUDGE TONGCO AND THE CITY OF MANILA (G.R.
NO. 125218, JANUARY 23, 1998) AND FILSTREAM INTERNATIONAL, INC. VS. CA, MALIT ET AL. (G.R. NO.
128077, JANUARY 23, 1998).[27]

In G.R. No 132431, petitioners allege: (1) that Ordinance 7818 is unconstitutional for violating the
equal protection clause of the 1987 Constitution and for abridging the contracts between petitioners
and prospective buyers of the subject parcels of land; (2) that, in expropriating the subject properties,
respondent Citys act of expropriation is illegal because it did not comply with Sections 9 and 10 of
Republic Act No. 7279 (The Urban Development and Housing Act of 1992); (3) that, prior to the filing
of the eminent domain complaint, respondent City did not make a valid and definite offer to purchase
the subject properties, and (4) that, assuming the offer as valid, the amount offered was insufficient.
[28]

On the other hand, in insisting that its offer was valid and that the amount it deposited was
sufficient, respondent City reiterates the reasons cited by the Court of Appeals. According to
respondent City, there is nothing in the Local Government Code of 1991 which requires the offer to be
made before enacting an enabling ordinance. The actual exercise of the power of eminent domain
begins only upon the filing of the complaint for eminent domain with the RTC by the Chief Executive
and not when an ordinance pursuant thereto has been enacted. It is therefore safe to say that the
offer to purchase can be made before the actual filing of the complaint, whether that is before or after
the ordinance is enacted.

On the sufficiency of the amount deposited, respondent City alleges that the determination of the
provisional value of the property was judicially determined by the trial court at P10,285,293.38 in its
order dated June 6, 1995. On the basis of this order, respondent City filed its compliance dated June
13, 1995 manifesting the deposit of the additional amount of P1,452,793 (15% of P10,285,293.38).

Respondent City also claims that all along petitioners were not willing to sell the subject parcels of
land as proved by the tenor of the letter of petitioners agent, Adoracion Reyes, who wrote respondent
City that it is the consensus of the heirs xxx to turn down as we are totally turning down your offer to
purchase the parcels of land subject matter of the aforesaid ordinance, or your offer is not acceptable
to us in every respect.

In G.R. No. 137146 (the petition for certiorari questioning the resolutions of the Court of Appeals
which issued a temporary restraining order and ordered the parties to maintain the status quo),
petitioners assail the resolutions of the Court of Appeals which in effect enjoined the MTC of Manila,
Branches 9 and 10, from enforcing the final judgments in the ejectment cases while the appeal from
the decision involving the same parcels of land in the expropriation case remains pending before this
Court. Petitioners maintain that, first, only this Court and not the Court of Appeals has jurisdiction to
enjoin the execution of the judgments in the ejectment cases considering that the expropriating case
is now being reviewed by this Court; second, the orders are void as they protect an alleged right that
does not belong to respondent City but to a non-party in the expropriation case; third, said orders
deprive petitioners of their property without due process of law because they amount to a second
temporary restraining order which is expressly prohibited by Section 5, Rule 58 of the Rules of
Court[29]; last, petitioners brand respondent occupants act of seeking the assailed protective order,
despite the finality of the trial court order disallowing intervention, as forum-shopping.
 To justify the propriety of their intervention and the legality of the assailed resolutions, respondent
occupants aver the following:

first, Section 9(1)[30] of BP 129 (The Judiciary Reorganization Act of 1980) is broad enough to include
protective orders. If the Court of Appeals has the power to annul judgments of the RTC, with more
reason does it have the power to annul judgments of the MTC.

second, as the undisputed rightful beneficiaries of the expropriation, they have the right to intervene.

third, their right to intervene has never been barred with finality. Due to the dismissal of the complaint
for expropriation, their motion for reconsideration of the trial court order denying their motion to
intervene was never ruled upon as it became moot and academic. The trial courts silence does not
mean a denial of the intervention and injunction that respondent occupants prayed for.

fourth, it is more appropriate in the interest of equity and justice to preserve the status quo pending
resolution by this Court of petitioners appeal in the expropriation case because they are anyway the
beneficiaries of the subject properties. The expropriation case should be considered as a supervening
event that necessitated a modification, suspension or abandonment of the MTC decisions.

fifth, respondents are not guilty of forum-shopping for the reason that the Court of Appeals never
made a ruling or decision on respondents motion to intervene. Moreover, the causes of action in the
two cases were different and distinct from each other. In the motion to intervene, respondent
occupants sought to be recognized and included as parties to the expropriation case. On the other
hand, in the motion for protective order, respondents sought to enjoin the execution of the decisions
in the ejectment cases against them.

Before proceeding to the discussion of the issues, it would be best to first recapitulate the
confusing maze of facts of this case.

It is not disputed that the petitioners acquired a favorable judgment of eviction against herein
respondents Abiog and Maglonso. In 1998, the said judgments became final and executory.
Consequently, writs of execution were issued. During the pendency of the complaints for unlawful
detainer, respondent City filed a case for the expropriation of the same properties involved in the
ejectment cases. From thereon, numerous motions to intervene and motions for injunction were filed
in the expropriation case by respondents. The trial court allowed respondent City to take possession
of the property; it denied the motions for intervention and injunction, and, after allowing respondent
City to oppose the motion to dismiss, dismissed the complaint for expropriation. On appeal, the Court
of Appeals reversed the trial court and found that respondent City properly exercised its right to
expropriate the subject properties. Petitioners appealed the CA decision to this Court. Thereafter, on
motion of respondent occupants, the Court of Appeals issued protective orders that required the
parties to maintain the status quo (prohibiting any ejectment) pending this Courts resolution of the
appeal.

Petitioner is now before us questioning the legality of the CAs expropriation order and the
propriety of its act enjoining the execution of the final judgments in the ejectment cases.

With these given facts, it is imperative to first resolve the issue of whether the respondent City
may legally expropriate the subject properties, considering that a negative finding will necessarily
moot the issue of the propriety of the protective orders of the Court of Appeals.

Whether respondent City deprived petitioners of their property without due process of law
depends on whether the City complied with the legal requirements for expropriation. Before
respondent City can exercise its power of eminent domain, the same must be sanctioned and must
not violate any law. Being a mere creation of the legislature, a local government unit can only exercise
powers granted to it by the legislature. Such is the nature of the constitutional power of control of
Congress over local government units, the latter being mere creations of the former. [31]
 When it expropriated the subject properties, respondent City relied on its powers granted by
Section 19 of the Local Government Code of 1991[32] and RA 409 (The Revised Charter of the City of
Manila). The latter specifically gives respondent City the power to expropriate private property in the
pursuit of its urban land reform and housing program. [33] Respondent City, however, is also mandated
to follow the conditions and standards prescribed by RA 7279 (the Urban Development and Housing
Act of 1992), the law governing the expropriation of property for urban land reform and housing.
Sections 9 and 10 of RA 7279 specifically provide that:

Sec. 9. Priorities in the acquisition of Land Lands for socialized housing shall be acquired in the
following order:

(a) Those owned by the Government or any of its sub-divisions, instrumentalities, or agencies,
including government-owned or controlled corporations and their subsidiaries;

(b) Alienable lands of the public domain;

(c) Unregistered or abandoned and idle lands;

(d) Those within the declared Areas of Priority Development, Zonal Improvement sites, and
Slum Improvement and Resettlement Program sites which have not yet been acquired;

(e) Bagong Lipunan Improvement sites and Services or BLISS sites which have not yet been
acquired; and

(f) Privately-owned lands.

Where on-site development is found more practicable and advantageous to the beneficiaries, the
priorities mentioned in this section shall not apply. The local government units shall give budgetary
priority to on-site development of government lands.

Sec. 10. Modes of Land Acquisition. The modes of acquiring lands for purposes of this Act shall
include, among others, community mortgage, land swapping, land assembly or consolidation, land
banking, donation to the Government, joint venture agreement, negotiated purchase, and
expropriation: Provided, however, That expropriation shall be resorted to only when other modes of
acquisition have been exhausted: Provided further, That where expropriation is resorted to, parcels of
land owned by small property owners shall be exempted for purposes of this Act:Provided, finally, that
abandoned property, as herein defined, shall be reverted and escheated to the State in a proceeding
analogous to the procedure laid down in Rule 91 of the Rules of Court. [italics supplied]

In Filstream vs. Court of Appeals,[34] we held that the above-quoted provisions are limitations to
the exercise of the power of eminent domain, specially with respect to the order of priority in
acquiring private lands and in resorting to expropriation proceedings as a means to acquire the
same. Private lands rank last in the order of priority for purposes of socialized housing. In
the same vein, expropriation proceedings are to be resorted to only after the other modes
of acquisition have been exhausted. Compliance with these conditions is mandatory because
these are the only safeguards of oftentimes helpless owners of private property against violation of
due process when their property is forcibly taken from them for public use.

We find that herein respondent City failed to prove strict compliance with the requirements of
Sections 9 and 10 of RA 7279. Respondent City neither alleged in its complaint nor proved during the
proceedings before the trial court that it complied with said requirements. Even in the Court of
Appeals, respondent City in its pleadings failed to show its compliance with the law. The Court of
Appeals was likewise silent on this specific jurisdictional issue. This is a clear violation of the right to
due process of the petitioners.

We also take note of the fact that Filstream is substantially similar in facts and issues to the case
at bar.
 In that case, Filstream acquired a favorable judgment of eviction against the occupants of its
properties in Tondo, Manila. But prior thereto, on the strength of Ordinance 7818 (the same ordinance
used by herein respondent City as basis to file the complaint for eminent domain), respondent City
initiated a complaint for expropriation of Filstreams properties in Tondo, Manila, for the benefit of the
residents thereof. Filstream filed a motion to dismiss and the City opposed the same. The trial court
denied the motion. When the judgment in the ejectment case became final, Filstream was able to
obtain a writ of execution and demolition. It thereafter filed a motion to dismiss the expropriation
complaint but the trial court denied the same and ordered the condemnation of the subject
properties. On appeal, the Court of Appeals denied Filstreams petition on a technical ground. Thus,
the case was elevated to this Court for review of the power of the City to expropriate the Filstreams
properties.

Meanwhile, the occupants and respondent City filed in separate branches of the RTC of Manila
several petitions for certiorari with prayer for injunction to prevent the execution of the judgments in
the ejectment cases. After the consolidation of the petitions for certiorari, the designated branch of
RTC Manila dismissed the cases on the ground of forum-shopping. The dismissal was appealed to the
Court of Appeals which reversed the trial courts dismissal and granted respondents prayer for
injunction. Filstream appealed the same to this Court, which appeal was consolidated with the earlier
petition for review of the decision of the Court of Appeals in the main expropriation case.

Due to the substantial resemblance of the facts and issues of the case at bar to those
in Filstream, we find no reason to depart from our ruling in said case. To quote:

The propriety of the issuance of the restraining order and the writ of preliminary injunction is but a
mere incident to the actual controversy which is rooted in the assertion of the conflicting rights of the
parties in this case over the disputed premises. In order to determine whether private respondents
are entitled to the injunctive reliefs granted by respondent CA, we deemed it proper to extract the
source of discord.

xxx xxx xxx

Proceeding from the parameters laid out in the above disquisitions, we now pose the crucial
question: Did the city of Manila comply with the abovementioned conditions when it expropriated
petitioner Filstreams properties? We have carefully scrutinized the records of this case and found
nothing that would indicate the respondent City of Manila complied with Sec. 9 and Sec. 10 of R.A.
7279. Petitioners Filstreams properties were expropriated and ordered condemned in favor of the City
of Manila sans any showing that resort to the acquisition of other lands listed under Sec. 9 of RA 7279
have proved futile. Evidently, there was a violation of petitioner Filstreams right to due process which
must accordingly be rectified.

Indeed, it must be emphasized that the State has a paramount interest in exercising its power of
eminent domain for the general good considering that the right of the State to expropriate private
property as long as it is for public use always takes precedence over the interest of private property
owners. However we must not lose sight of the fact that the individual rights affected by the exercise
of such right are also entitled to protection, bearing in mind that the exercise of this superior right
cannot override the guarantee of due process extended by the law to owners of the property to be
expropriated. In this regard, vigilance over compliance with the due process requirements is in order.
[35]

Due to the fatal infirmity in the Citys exercise of the power of eminent domain, its complaint for
expropriation must necessarily fail. Considering that the consolidated cases before us can be
completely resolved by the application of our Filstream ruling, it is needless to discuss the
constitutionality of Ordinance 7818. We herein apply the general precept that constitutional issues will
not be passed upon if the case can be decided on other grounds. [36]

In view of the dismissal of the complaint for expropriation and the favorable adjudication of
petitioners appeal from the decision of the Court of Appeals on the expropriation of the subject
properties, the petition for certiorari questioning the validity of the Court of Appeals resolutions
(allowing respondent occupants to intervene and granting their motion to enjoin the execution of the
executory judgments in the ejectment cases) becomes moot and academic.

WHEREFORE, the petitions are hereby GRANTED. In G.R. No. 132431, the decision of the Court of
Appeals dated January 27, 1998 is hereby REVERSED and SET ASIDE. In G.R. No. 137146, the
resolutions of the Court of Appeals dated August 19, 1998 and December 16, 1998 are hereby
REVERSED and SET ASIDE

NAPOCOR VS CA

Before us is a petition for review [1] of the 30 March 1992 Decision[2] and 14 August 1992 Resolution
of the Court of Appeals in CA-G.R. CV No. 16930. The Court of Appeals affirmed the Decision [3] of the
Regional Trial Court, Branch 17, Tabaco, Albay in Civil Case No. T-552.

The Antecedents

Petitioner National Power Corporation (NPC) is a public corporation created to generate

geothermal, hydroelectric, nuclear and other power and to transmit electric power nationwide. [4] NPC
is authorized by law to acquire property and exercise the right of eminent domain.
Private respondent Antonino Pobre (Pobre) is the owner of a 68,969 square-meter land (Property)
located in Barangay Bano, Municipality of Tiwi, Albay. The Property is covered by TCT No. 4067 and
Subdivision Plan 11-9709.
In 1963, Pobre began developing the Property as a resort-subdivision, which he named as Tiwi Hot
Springs Resort Subdivision. On 12 January 1966, the then Court of First Instance of Albay approved
the subdivision plan of the Property. The Register of Deeds thus cancelled TCT No. 4067 and issued
independent titles for the approved lots. In 1969, Pobre started advertising and selling the lots.
On 4 August 1965, the Commission on Volcanology certified that thermal mineral water and
steam were present beneath the Property. The Commission on Volcanology found the thermal mineral
water and steam suitable for domestic use and potentially for commercial or industrial use.
NPC then became involved with Pobres 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 NPCs 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 Pobres 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. 739[6] 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 courts 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 NPCs 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 Pobres opposition.
On 8 January 1985, the trial court granted NPCs motion to dismiss but the trial court allowed
Pobre to adduce evidence on his claim for damages. The trial court admitted Pobres 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 NPCs motion to reconsider the submission of the
case for decision.
NPC filed a petition for certiorari [8] 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 NPCs petition but directed the lower court to rule on NPCs objections to Pobres
documentary exhibits.
On 27 March 1987, the trial court admitted all of Pobres 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 attorneys
fees.

Costs against the plaintiff.

SO ORDERED.[9]

On 13 July 1987, NPC filed its motion for reconsideration of the decision. On 30 October 1987, the
trial court issued its Order denying NPCs 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 attorneys 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 attorneys fees is deleted. No pronouncement as to costs.

SO ORDERED.[10]

The Court of Appeals denied NPCs 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 resort-subdivision. Pobres Property
suffered permanent injury because of the noise, water, air and land pollution generated by NPCs
geothermal plants. The construction and operation of the geothermal plants drastically changed the
topography of the Property making it no longer viable as a resort-subdivision. The chemicals emitted
by the geothermal plants damaged the natural resources in the Property and endangered the lives of
the residents.
NPC did not only take the 8,311.60 square-meter portion of the Property, but also the remaining
area of the 68,969 square-meter Property. NPC had rendered Pobres entire Property useless as a
resort-subdivision. The Property has become useful only to NPC. NPC must therefore take Pobres
entire Property and pay for it.
The trial court found the following badges of NPCs 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 Pobres plea
for NPC to eliminate or at least reduce the damage to the Property; and (3) NPC singled out Pobres
Property for piecemeal expropriation when NPC could have expropriated other properties which were
not affected in their entirety by NPCs operation.
The trial court found the just compensation to be P50 per square meter or a total of P3,448,450
for Pobres 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 attorneys
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 attorneys 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 courts 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 Pobres
counterclaim.
NPCs belated attack on Pobres claim for damages must fail. The trial courts reservation of Pobres
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 NPCs objections against the subsistence
of Pobres claim for damages. NPC neither included this issue in its assignment of errors nor discussed
it in its appellants brief. NPC also failed to question the trial courts 8 January 1985 Order in the
petition for certiorari[12] it had earlier filed with the Court of Appeals. It is only before this Court that
NPC now vigorously assails the preservation of Pobres claim for damages. Clearly, NPCs opposition to
the existence of Pobres claim for damages is a mere afterthought. Rules of fair play, justice and due
process dictate that parties cannot raise an issue for the first time on appeal. [13]
We must correct NPCs claim that it filed the notice of dismissal just shortly after it had filed the
complaint for expropriation. While NPC had intimated several times to the trial court its desire to
dismiss the expropriation case it filed on 5 September 1979, [14] it was only on 2 January 1985 that NPC
filed its notice of dismissal.[15] It took NPC more than five years to actually file the notice of dismissal.
Five years is definitely not a short period of time. NPC obviously dilly-dallied in filing its notice of
dismissal while NPC meanwhile burdened Pobres property rights.
Even a timely opposition against Pobres claim for damages would not yield a favorable ruling for
NPC. It is not Section 1, Rule 17 of the 1964 Rules of Court that is applicable to this case but Rule 67
of the same Rules, as well as jurisprudence on expropriation cases. Rule 17 referred to dismissal of
civil actions in general while Rule 67 specifically governed eminent domain cases.
Eminent domain is the authority and right of the state, as sovereign, to take private property for
public use upon observance of due process of law and payment of just compensation. [16] The power of
eminent domain may be validly delegated to the local governments, other public entities and public
utilities[17] such as NPC. Expropriation is the procedure for enforcing the right of eminent domain.
[18]
Eminent Domain was the former title of Rule 67 of the 1964 Rules of Court. In the 1997 Rules of
Civil Procedure, which took effect on 1 July 1997, the prescribed method of expropriation is still found
in Rule 67, but its title is now Expropriation.
Section 1, Rule 17 of the 1964 Rules of Court provided the exception to the general rule that the
dismissal of the complaint is addressed to the sound discretion of the court. [19] For as long as all of the
elements of Section 1, Rule 17 were present the dismissal of the complaint rested exclusively on the
plaintiffs will.[20] The defending party and even the courts were powerless to prevent the dismissal.
[21]
The courts could only accept and record the dismissal. [22]
A plain reading of Section 1, Rule 17 of the 1964 Rules of Court makes it obvious that this rule was
not intended to supplement Rule 67 of the same Rules. Section 1, Rule 17 of the 1964 Rules of Court,
provided that:

SECTION 1. Dismissal by the plaintiff. An action may be dismissed by the plaintiff without order of
court by filing a notice of dismissal at any time before service of the answer or of a motion for
summary judgment. Unless otherwise stated in the notice, the dismissal is without prejudice, except
that a notice operates as an adjudication upon the merits when filed by a plaintiff who has once
dismissed in a competent court an action based on or including the same claim. A class suit shall not
be dismissed or compromised without approval of the court.

While Section 1, Rule 17 spoke of the service of answer or summary judgment, the Rules then did
not require the filing of an answer or summary judgment in eminent domain cases. [23] In lieu of an
answer, Section 3 of Rule 67 required the defendant to file a single motion to dismiss where he should
present all of his objections and defenses to the taking of his property for the purpose specified in the
complaint.[24] In short, in expropriation cases under Section 3 of Rule 67, the motion to dismiss took
the place of the answer.
 The records show that Pobre had already filed and served on NPC his motion to
dismiss/answer[25] even before NPC filed its own motion to dismiss. NPC filed its notice of dismissal of
the complaint on 2 January 1985. However, as early as 10 December 1984, Pobre had already filed
with the trial court and served on NPC his motion to dismiss/answer. A certain Divina Cerela received
Pobres pleading on behalf of NPC. [26] Unfortunately for NPC, even Section 1, Rule 17 of the 1964 Rules
of Court could not save its cause.
NPC is in no position to invoke Section 1, Rule 17 of the 1964 Rules of Court. A plaintiff loses his
right under this rule to move for the immediate dismissal of the complaint once the defendant
had served on the plaintiff the answer or a motion for summary judgment before the plaintiff could file
his notice of dismissal of the complaint. [27] Pobres motion to dismiss/answer, filed and served way
ahead of NPCs 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 plaintiffs matter of right to dismiss the
complaint precisely because the landowner may have already suffered damages at the start of the
taking. The plaintiffs right in expropriation cases to dismiss the complaint has always been subject to
court approval and to certain conditions. [28]The exceptional right that Section 1, Rule 17 of the 1964
Rules of Court conferred on the plaintiff must be understood to have applied only to other civil
actions. The 1997 Rules of Civil Procedure abrogated this exceptional right. [29]
The power of eminent domain is subject to limitations. A landowner cannot be deprived of his
right over his land until expropriation proceedings are instituted in court. [30]The court must then see to
it that the taking is for public use, there is payment of just compensation and there is due process of
law.[31]
If the propriety of the taking of private property through eminent domain is subject to judicial
scrutiny, the dismissal of the complaint must also pass judicial inquiry because private rights may
have suffered in the meantime. The dismissal, withdrawal or abandonment of the expropriation case
cannot be made arbitrarily. If it appears to the court that the expropriation is not for some public use,
[32]
then it becomes the duty of the court to dismiss the action. [33] However, when the defendant claims
that his land suffered damage because of the expropriation, the dismissal of the action should not
foreclose the defendants right to have his damages ascertained either in the same case or in a
separate action.[34]
Thus, NPCs theory that the dismissal of its complaint carried with it the dismissal of Pobres claim
for damages is baseless. There is nothing in Rule 67 of the 1964 Rules of Court that provided for the
dismissal of the defendants claim for damages, upon the dismissal of the expropriation case. Case law
holds that in the event of dismissal of the expropriation case, the claim for damages may be made
either in a separate or in the same action, for all damages occasioned by the institution of the
expropriation case.[35] The dismissal of the complaint can be made under certain conditions, such as
the reservation of the defendants right to recover damages either in the same or in another action.
[36]
The trial court in this case reserved Pobres right to prove his claim in the same case, a reservation
that has become final due to NPCs 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. NPCs facilities such as steam
wells, nag wells, power plants, power lines, and canals had hemmed in Pobres Property. NPCs
operations of its geothermal project also posed a risk to lives and properties.
We uphold the factual findings of the trial and appellate courts. Questions of facts are beyond the
pale of Rule 45 of the Rules of Court as a petition for review may only raise questions of law.
[37]
Moreover, factual findings of the trial court, particularly when affirmed by the Court of Appeals, are
generally binding on this Court.[38] We thus find no reason to set aside the two courts factual findings.
NPC points out that it did not take Pobres 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 NPCs motion for reconsideration, the trial court pointed out
that the Property originally had a total area of 141,300 square meters. [39] Pobre converted the
Property into a resort-subdivision and sold lots to the public. What remained of the lots are the 68,969
square meters of land.[40] Pobre no longer claimed damages for the other lots that he had before the
expropriation.
Pobre identified in court the lots forming the 68,969 square-meter Property. NPC had the
opportunity to object to the identification of the lots. [41] NPC, however, failed to do so. Thus, we do not
disturb the trial and appellate courts finding on the total land area NPC had damaged.

NPC must Pay Just Compensation for the Entire Property

Ordinarily, the dismissal of the expropriation case restores possession of the expropriated land to
the landowner.[42] However, when possession of the land cannot be turned over to the landowner
because it is neither convenient nor feasible anymore to do so, the only remedy available to the
aggrieved landowner is to demand payment of just compensation. [43]
In this case, we agree with the trial and appellate courts that it is no longer possible and practical
to restore possession of the Property to Pobre. The Property is no longer habitable as a resort-
subdivision. The Property is worthless to Pobre and is now useful only to NPC. Pobre has completely
lost the Property as if NPC had physically taken over the entire 68,969 square-meter Property.
In United States v. Causby,[44] the U.S. Supreme Court ruled that when private property is
rendered uninhabitable by an entity with the power to exercise eminent domain, the taking is deemed
complete. Such taking is thus compensable.
In this jurisdiction, the Court has ruled that if the government takes property without expropriation
and devotes the property to public use, after many years the property owner may demand payment
of just compensation.[45] This principle is in accord with the constitutional mandate that private
property shall not be taken for public use without just compensation. [46]
In the recent case of National Housing Authority v. Heirs of Isidro Guivelondo,[47] the Court
compelled the National Housing Authority (NHA) to pay just compensation to the landowners even
after the NHA had already abandoned the expropriation case. The Court pointed out that a
government agency could not initiate expropriation proceedings, seize a persons 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 Pobres Property without resort to expropriation proceedings. NPC
dismissed its own complaint for the second expropriation. At no point did NPC institute expropriation
proceedings for the lots outside the 5,554 square-meter portion subject of the second expropriation.
The only issues that the trial court had to settle were the amount of just compensation and damages
that NPC had to pay Pobre.
This case ceased to be an action for expropriation when NPC dismissed its complaint for
expropriation. Since this case has been reduced to a simple case of recovery of damages, the
provisions of the Rules of Court on the ascertainment of the just compensation to be paid were no
longer applicable. A trial before commissioners, for instance, was dispensable.
We have held that the usual procedure in the determination of just compensation is waived when
the government itself initially violates procedural requirements. [48] NPCs taking of Pobres 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 Pobres 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 Pobres 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. [49] NPC abandoned the second
expropriation case five years after it had already deprived the Property virtually of all its value. NPC
has demonstrated its utter disregard for Pobres property rights.
Thus, it would now be futile to compel NPC to institute expropriation proceedings to determine the
just compensation for Pobres 68,969 square-meter Property. Pobre must be spared any further delay
in his pursuit to receive just compensation from NPC.
Just compensation is the fair and full equivalent of the loss. [50] The trial and appellate courts
endeavored to meet this standard. The P50 per square meter valuation of the 68,969 square-meter
Property is reasonable considering that the Property was already an established resort-subdivision.
NPC has itself to blame for not contesting the valuation before the trial court. Based on the P50 per
square meter valuation, the total amount of just compensation that NPC must pay Pobre
is P3,448,450.
The landowner is entitled to legal interest on the price of the land from the time of the taking up
to the time of full payment by the government. [51] In accord with jurisprudence, we fix the legal
interest at six per cent (6%) per annum. [52] The legal interest should accrue from 6 September 1979,
the date when the trial court issued the writ of possession to NPC, up to the time that NPC fully pays
Pobre.[53]
NPCs abuse of its eminent domain authority is appalling. However, we cannot award moral
damages because Pobre did not assert his right to it. [54] We also cannot award attorneys fees in Pobres
favor since he did not appeal from the decision of the Court of Appeals denying recovery of attorneys
fees.[55]
Nonetheless, we find it proper to award P50,000 in temperate damages to Pobre. The court may
award temperate or moderate damages, which are more than nominal but less than compensatory
damages, if the court finds that a party has suffered some pecuniary loss but its amount cannot be
proved with certainty from the nature of the case. [56] As the trial and appellate courts noted, Pobres
resort-subdivision was no longer just a dream because Pobre had already established the resort-
subdivision and the prospect for it was initially encouraging. That is, until NPC permanently damaged
Pobres Property. NPC did not just destroy the property. NPC dashed Pobres hope of seeing his Property
achieve its full potential as a resort-subdivision.
The lesson in this case must not be lost on entities with eminent domain authority. Such entities
cannot trifle with a citizens 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.[57]
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 Corporations payment of the full amount, Antonino Pobre is ordered to execute a Deed
of Conveyance of the Property in National Power Corporations favor. National Power Corporation is
further ordered to pay temperate and exemplary damages of P50,000 and P100,000, respectively. No
costs.
SO ORDERED.
LAGCAO VS LABRA

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.[3]

After acquiring title, petitioners tried to take possession of the lot only to discover that it was already

occupied by squatters. Thus, on June 15, 1997, petitioners instituted ejectment proceedings against

the squatters. The Municipal Trial Court in Cities (MTCC), Branch 1, Cebu City, rendered a decision on

April 1, 1998, ordering the squatters to vacate the lot. On appeal, the RTC affirmed the 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[4] 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 mayors request, the MTCC

issued two orders suspending the demolition for a period of 120 days from February 22,

1999. Unfortunately for petitioners, during the suspension period, the Sangguniang Panlungsod (SP)

of Cebu City passed a resolution which identified Lot 1029 as a socialized housing site pursuant to RA

7279.[5] Then, on June 30, 1999, the SP of Cebu City passed Ordinance No. 1772 [6] which included Lot
1029 among the identified sites for socialized housing. On July, 19, 2000, Ordinance No. 1843 [7]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. [8] They allege that it will benefit only a

handful of people. The ordinance, according to petitioners, was obviously passed for politicking, the

squatters undeniably being a big source of votes.

In sum, this Court is being asked to resolve whether or not the intended expropriation by the City of

Cebu of a 4,048-square-meter parcel of land owned by petitioners contravenes the Constitution and

applicable laws.

Under Section 48 of RA 7160,[9] otherwise known as the Local Government Code of 1991, [10] local

legislative power shall

be exercised by the Sangguniang Panlungsod of the city. The legislative acts of the Sangguniang

Panlungsod in the exercise of its lawmaking authority are denominated ordinances.

Local government units have no inherent power of eminent domain and can exercise it only when

expressly authorized by the legislature. [11] By virtue of RA 7160, Congress conferred upon local

government units the power to expropriate. Ordinance No. 1843 was enacted pursuant to Section 19

of RA 7160:
 SEC. 19. Eminent Domain. A local government unit may, through its chief executive
and acting pursuant to an ordinance, exercise the power of eminent domain for public
use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of
just compensation, pursuant to the provisions of the Constitution and pertinent laws xxx.
(italics supplied).

Ordinance No. 1843 which authorized the expropriation of petitioners lot was enacted by the SP of

Cebu City to provide socialized housing for the homeless and low-income residents of the City.

However, while we recognize that housing is one of the most serious social problems of the

country, local government units do not possess unbridled authority to exercise their power of eminent

domain in seeking solutions to this problem.

There are two legal provisions which limit the exercise of this power: (1) no person shall be

deprived of life, liberty, or property without due process of law, nor shall any person be denied the

equal protection of the laws;[12] and (2) private property shall not be taken for public use without just

compensation.[13] Thus, the exercise by local government units of the power of eminent domain is not

absolute. In fact, Section 19 of RA 7160 itself explicitly states that such exercise must comply with the

provisions of the Constitution and pertinent laws.

The exercise of the power of eminent domain drastically affects a 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.
[14]
Whether directly exercised by the State or by its authorized agents, the exercise of eminent

domain is necessarily in derogation of private rights. [15] For this reason, the need for a painstaking

scrutiny cannot be overemphasized.

The due process clause cannot be trampled upon each time an ordinance orders the expropriation of

a private individuals property. The courts cannot even adopt a hands-off policy simply because public

use or public purpose is invoked by an ordinance, or just compensation has been fixed and

determined. In De Knecht vs. Bautista,[16] we said:

It is obvious then that a land-owner is covered by the mantle of protection due process
affords. It is a mandate of reason. It frowns on arbitrariness, it is the antithesis of any
governmental act that smacks of whim or caprice. It negates state power to act in an
oppressive manner. It is, as had been stressed so often, the embodiment of the sporting
idea of fair play. In that sense, it stands as a guaranty of justice. That is the standard that
must be met by any governmental agency in the exercise of whatever competence is
 entrusted to it. As was so emphatically stressed by the present Chief Justice, Acts of
Congress, as well as those of the Executive, can deny due process only under pain of
nullity. xxx.

The foundation of the right to exercise eminent domain is genuine necessity and that necessity must

be of public character.[17] Government may not capriciously or arbitrarily choose which private

property should be expropriated. In this case, there was no showing at all why petitioners property

was singled out for expropriation by the city ordinance or what necessity impelled the particular

choice or selection. Ordinance No. 1843 stated no reason for the choice of petitioners property as the

site of a socialized housing project.

Condemnation of private lands in an irrational or piecemeal fashion or the random

expropriation of small lots to accommodate no more than a few tenants or squatters is certainly not

the condemnation for public use contemplated by the Constitution. This is depriving a citizen of his

property for the convenience of a few without perceptible benefit to the public. [18]

RA 7279 is the law that governs the local expropriation of property for purposes of urban land reform

and housing. Sections 9 and 10 thereof provide:

SEC 9. Priorities in the Acquisition of Land. Lands for socialized housing shall be
acquired in the following order:

(a) Those owned by the Government or any of its subdivisions, instrumentalities,

or agencies, including government-owned or controlled corporations and
their subsidiaries;

(b) Alienable lands of the public domain;

(c) Unregistered or abandoned and idle lands;

(d) Those within the declared Areas or Priority Development, Zonal Improvement
Program sites, and Slum Improvement and Resettlement Program sites
which have not yet been acquired;

(e) Bagong Lipunan Improvement of Sites and Services or BLISS which have not
yet been acquired; and

(f) Privately-owned lands.

Where on-site development is found more practicable and advantageous to the

beneficiaries, the priorities mentioned in this section shall not apply. The local
government units shall give budgetary priority to on-site development of government
lands. (Emphasis supplied).

SEC. 10. Modes of Land Acquisition. The modes of acquiring lands for purposes of this
Act shall include, among others, community mortgage, land swapping, land assembly or
consolidation, land banking, donation to the Government, joint venture agreement,
negotiated purchase, and expropriation: Provided, however, That expropriation shall
be resorted to only when other modes of acquisition have been exhausted:
 Provided further, That where expropriation is resorted to, parcels of land owned by small
property owners shall be exempted for purposes of this Act: xxx. (Emphasis supplied).

In the recent case of Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes et al. vs. City of

Manila,[19] we ruled that the above-quoted provisions are strict limitations on the exercise of the power

of eminent domain by local government units, especially with respect to (1) the order of priority in

acquiring land for socialized housing and (2) the resort to expropriation proceedings as a means to

acquiring it. Private lands rank last in the order of priority for purposes of socialized housing. In the

same vein, expropriation proceedings may be resorted to only after the other modes of acquisition are

exhausted. Compliance with these conditions is mandatory because these are the only safeguards of

oftentimes helpless owners of private property against what may be a tyrannical violation of due

process when their property is forcibly taken from them allegedly for public use.

We have found nothing in the records indicating that the City of Cebu complied strictly with

Sections 9 and 10 of RA 7279. Ordinance No. 1843 sought to expropriate petitioners property without

any attempt to first acquire the lands listed in (a) to (e) of Section 9 of RA 7279. Likewise, Cebu City

failed to establish that the other modes of acquisition in Section 10 of RA 7279 were first exhausted.

Moreover, prior to the passage of Ordinance No. 1843, there was no evidence of a valid and definite

offer to buy petitioners property as required by Section 19 of RA 7160. [20] We therefore find Ordinance

No. 1843 to be constitutionally infirm for being violative of the petitioners right to due process.

It should also be noted that, as early as 1998, petitioners had already obtained a favorable

judgment of eviction against the illegal occupants of their property.The judgment in this ejectment

case had, in fact, already attained finality, with a writ of execution and an order of demolition. But

Mayor Garcia requested the trial court to suspend the demolition on the pretext that the City was still

searching for a relocation site for the squatters. However, instead of looking for a relocation site

during the suspension period, the city council suddenly enacted Ordinance No. 1843 for the

expropriation of petitioners lot. It was trickery and bad faith, pure and simple. The unconscionable

manner in which the questioned ordinance was passed clearly indicated that respondent City

transgressed the Constitution, RA 7160 and RA 7279.

For an ordinance to be valid, it must not only be within the corporate powers of the city or

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.[21]

Ordinance No. 1843 failed to comply with the foregoing substantive requirements. A clear case

of constitutional infirmity having been thus established, this Court is constrained to nullify the subject

ordinance. We recapitulate:

first, as earlier discussed, the questioned ordinance is repugnant to the pertinent provisions of

the Constitution, RA 7279 and RA 7160;

second, the precipitate manner in which it was enacted was plain oppression masquerading as

a pro-poor ordinance;

third, the fact that petitioners small property was singled out for expropriation for the purpose

of awarding it to no more than a few squatters indicated manifest partiality against petitioners,

and

fourth, the ordinance failed to show that there was a reasonable relation between the end

sought and the means adopted. While the objective of the City of Cebu was to provide

adequate housing to slum dwellers, the means it employed in pursuit of such objective fell

short of what was legal, sensible and called for by the circumstances.

Indeed, experience has shown that the disregard of basic liberties and the use of short-sighted

methods in expropriation proceedings have not achieved the desired results. Over the years, the

government has tried to remedy the worsening squatter problem. Far from solving it, however,

governments 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 everyones 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.

REPUBLIC VS LIM

ustice 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).

xxxxxx

An action to quiet title is a common law remedy for the removal of any cloud or doubt or uncertainty
on the title to real property. It is essential for the plaintiff or complainant to have a legal or equitable
title or interest in the real property, which is the subject matter of the action. Also the deed, claim,
encumbrance or proceeding that is being alleged as cloud on plaintiffs title must be shown to be in
fact invalid or inoperative despite its prima facie appearance of validity or legal efficacy (Robles vs.
Court of Appeals, 328 SCRA 97). In view of the foregoing discussion, clearly, the claim of
defendant-appellant Republic constitutes a cloud, doubt or uncertainty on the title of
plaintiff-appellee Vicente Lim that can be removed by an action to quiet title.

WHEREFORE, in view of the foregoing, and finding no reversible error in the appealed May 4, 2001
Decision of Branch 9, Regional Trial Court of Cebu City, in Civil Case No. CEB-12701, the said decision
is UPHELD AND AFFIRMED. Accordingly, the appeal is DISMISSED for lack of merit.

Undaunted, petitioners, through the Office of the Solicitor General, filed with this Court a petition
for review on certiorari alleging that the Republic has remained the owner of Lot 932 as held by this
Court in Valdehueza vs. Republic.[6]

In our Resolution dated March 1, 2004, we denied the petition outright on the ground that the
Court of Appeals did not commit a reversible error. Petitioners filed an urgent motion for
reconsideration but we denied the same with finality in our Resolution of May 17, 2004.

On May 18, 2004, respondent filed an ex-parte motion for the issuance of an entry of judgment.
We only noted the motion in our Resolution of July 12, 2004.

On July 7, 2004, petitioners filed an urgent plea/motion for clarification, which is actually
a second motion for reconsideration. Thus, in our Resolution of September 6, 2004, we simply
noted without action the motion considering that the instant petition was already denied with
finality in our Resolution of May 17, 2004.
 On October 29, 2004, petitioners filed a very urgent motion for leave to file a motion for
reconsideration of our Resolution dated September 6, 2004 (with prayer to refer the case to the En
Banc). They maintain that the Republics right of ownership has been settled in Valdehueza.

The basic issue for our resolution is whether the Republic has retained ownership of Lot 932
despite its failure to pay respondents predecessors-in-interest the just compensation therefor
pursuant to the judgment of the CFI rendered as early as May 14, 1940.

Initially, we must rule on the procedural obstacle.

While we commend the Republic for the zeal with which it pursues the present case, we reiterate
that its urgent motion for clarification filed on July 7, 2004 is actually a second motion for
reconsideration. This motion is prohibited under Section 2, Rule 52, of the 1997 Rules of Civil
Procedure, as amended, which provides:

Sec. 2. Second motion for reconsideration. No second motion for reconsideration of a judgment or
final resolution by the same party shall be entertained.

Consequently, as mentioned earlier, we simply noted without action the motion since petitioners
petition was already denied with finality.

Considering the Republics urgent and serious insistence that it is still the owner of Lot 932 and in
the interest of justice, we take another hard look at the controversial issue in order to determine the
veracity of petitioners stance.

One of the basic principles enshrined in our Constitution is that no person shall be deprived of his
private property without due process of law; and in expropriation cases, an essential element of due
process is that there must be just compensation whenever private property is taken for public use.
[7]
Accordingly, Section 9, Article III, of our Constitution mandates: Private property shall not be taken
for public use without just compensation.

The Republic disregarded the foregoing provision when it failed and refused to pay respondents
predecessors-in-interest the just compensation for Lots 932 and 939. The length of time and the
manner with which it evaded payment demonstrate its arbitrary high-handedness and confiscatory
attitude. The final judgment in the expropriation proceedings (Civil Case No. 781) was entered
on April 5, 1948. More than half of a century has passed, yet, to this day, the landowner, now
respondent, has remained empty-handed. Undoubtedly, over 50 years of delayed payment cannot, in
any way, be viewed as fair. This is more so when such delay is accompanied by bureaucratic hassles.
Apparent from Valdehueza is the fact that respondents predecessors-in-interest were given a run
around by the Republics officials and agents. In 1950, despite the benefits it derived from the use of
the two lots, the National Airports Corporation denied knowledge of the claim of respondents
predecessors-in-interest. Even President Garcia, who sent a letter to the Civil Aeronautics
Administration and the Secretary of National Defense to expedite the payment, failed in granting
relief to them. And, on September 6, 1961, while the Chief of Staff of the Armed Forces expressed
willingness to pay the appraised value of the lots, nothing happened.

The Court of Appeals is correct in saying that Republics delay is contrary to the rules of fair play,
as just compensation embraces not only the correct determination of the amount to be
paid to the owners of the land, but also the payment for the land within a reasonable time
from its taking. Without prompt payment, compensation cannot be considered just. In
jurisdictions similar to ours, where an entry to the expropriated property precedes the payment of
compensation, it has been held that if the compensation is not paid in a reasonable time, the party
may be treated as a trespasser ab initio.[8]

Corollarily, in Provincial Government of Sorsogon vs. Vda. De Villaroya,[9] similar to the present
case, this Court expressed its disgust over the governments vexatious delay in the payment of just
compensation, thus:
The petitioners have been waiting for more than thirty years to be paid for their land
which was taken for use as a public high school. As a matter of fair procedure, it is the duty of
the Government, whenever it takes property from private persons against their will, to supply all
required documentation and facilitate payment of just compensation. The imposition of
unreasonable requirements and vexatious delays before effecting payment is not only
galling and arbitrary but a rich source of discontent with government. There should be
some kind of swift and effective recourse against unfeeling and uncaring acts of middle or
lower level bureaucrats.

We feel the same way in the instant case.

More than anything else, however, it is the obstinacy of the Republic that prompted us to dismiss
its petition outright. As early as May 19, 1966, in Valdehueza, this Court mandated the Republic to
pay respondents predecessors-in-interest the sum of P16,248.40 as reasonable market value of the
two lots in question. Unfortunately, it did not comply and allowed several decades to pass without
obeying this Courts mandate. Such prolonged obstinacy bespeaks of lack of respect to private rights
and to the rule of law, which we cannot countenance. It is tantamount to confiscation of private
property. While it is true that all private properties are subject to the need of government, and the
government may take them whenever the necessity or the exigency of the occasion demands,
however, the Constitution guarantees that when this governmental right of expropriation is exercised,
it shall be attended by compensation.[10] From the taking of private property by the government under
the power of eminent domain, there arises an implied promise to compensate the owner for his loss.
[11]

Significantly, the above-mentioned provision of Section 9, Article III of the Constitution is not a
grant but a limitation of power. This limiting function is in keeping with the philosophy of the Bill of
Rights against the arbitrary exercise of governmental powers to the detriment of the individuals
rights. Given this function, the provision should therefore be strictly interpreted against the
expropriator, the government, and liberally in favor of the property owner.[12]

Ironically, in opposing respondents claim, the Republic is invoking this Courts Decision
in Valdehueza, a Decision it utterly defied. How could the Republic acquire ownership over Lot 932
when it has not paid its owner the just compensation, required by law, for more than 50 years? The
recognized rule is that title to the property expropriated shall pass from the owner to the expropriator
only upon full payment of the just compensation. Jurisprudence on this settled principle is
consistent both here and in other democratic jurisdictions. In Association of Small Landowners in the
Philippines, Inc. et al., vs. Secretary of Agrarian Reform, [13] thus:

Title to property which is the subject of condemnation proceedings does not vest the
condemnor until the judgment fixing just compensation is entered and paid, but the
condemnors title relates back to the date on which the petition under the Eminent Domain Act, or the
commissioners report under the Local Improvement Act, is filed.

x x x Although the right to appropriate and use land taken for a canal is complete at the
time of entry, title to the property taken remains in the owner until payment is actually
made. (Emphasis supplied.)

In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property
does not pass to the condemnor until just compensation had actually been made. In fact, the
decisions appear to be uniform to this effect. As early as 1838, in Rubottom v. McLure, it was held
that actual payment to the owner of the condemned property was a condition precedent to
the investment of the title to the property in the State albeit not to the appropriation of it
to public use. In Rexford v. Knight, the Court of Appeals of New York said that the construction upon
the statutes was that the fee did not vest in the State until the payment of the compensation
although the authority to enter upon and appropriate the land was complete prior to the payment.
Kennedy further said that both on principle and authority the rule is . . . that the right to
enter on and use the property is complete, as soon as the property is actually
appropriated under the authority of law for a public use, but that the title does not pass
from the owner without his consent, until just compensation has been made to him.

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that:

If the laws which we have exhibited or cited in the preceding discussion are attentively
examined it will be apparent that the method of expropriation adopted in this jurisdiction
is such as to afford absolute reassurance that no piece of land can be finally and
irrevocably taken from an unwilling owner until compensation is paid...(Emphasis supplied.)

Clearly, without full payment of just compensation, there can be no transfer of title from the
landowner to the expropriator. Otherwise stated, the Republics acquisition of ownership is conditioned
upon the full payment of just compensation within a reasonable time. [14]

Significantly, in Municipality of Bian v. Garcia[15] this Court ruled that the expropriation of lands
consists of two stages, to wit:

x x x The first is concerned with the determination of the authority of the plaintiff to exercise the
power of eminent domain and the propriety of its exercise in the context of the facts involved in the
suit. It ends with an order, if not of dismissal of the action, of condemnation declaring that the plaintiff
has a lawful right to take the property sought to be condemned, for the public use or purpose
described in the complaint, upon the payment of just compensation to be determined as of the date
of the filing of the complaint x x x.

The second phase of the eminent domain action is concerned with the determination by the court of
the just compensation for the property sought to be taken. This is done by the court with the
assistance of not more than three (3) commissioners. x x x.

It is only upon the completion of these two stages that expropriation is said to have been
completed. In Republic v. Salem Investment Corporation,[16] we ruled that, the process is not
completed until payment of just compensation. Thus, here, the failure of the Republic to pay
respondent and his predecessors-in-interest for a period of 57 years rendered the expropriation
process incomplete.

The Republic now argues that under Valdehueza, respondent is not entitled to recover possession
of Lot 932 but only to demand payment of its fair market value. Of course, we are aware of the
doctrine that non-payment of just compensation (in an expropriation proceedings) does not entitle the
private landowners to recover possession of the expropriated lots. This is our ruling in the recent
cases of Republic of the Philippines vs. Court of Appeals, et al.,[17] and Reyes vs. National Housing
Authority.[18]However, the facts of the present case do not justify its application. It bears stressing that
the Republic was ordered to pay just compensation twice, the first was in the expropriation
proceedings and the second, in Valdehueza. Fifty-seven (57) years have passed since then. We
cannot but construe the Republics failure to pay just compensation as a deliberate refusal
on its part. Under such circumstance, recovery of possession is in order. In several jurisdictions,
the courts held that recovery of possession may be had when property has been wrongfully taken or
is wrongfully retained by one claiming to act under the power of eminent domain [19] or where a
rightful entry is made and the party condemning refuses to pay the compensation which
has been assessed or agreed upon;[20] or fails or refuses to have the compensation assessed and
paid.[21]

The Republic also contends that where there have been constructions being used by the military,
as in this case, public interest demands that the present suit should not be sustained.

It must be emphasized that an individual cannot be deprived of his property for the public
convenience.[22] In Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian
Reform,[23] we ruled:
One of the basic principles of the democratic system is that where the rights of the individual are
concerned, the end does not justify the means. It is not enough that there be a valid objective; it is
also necessary that the means employed to pursue it be in keeping with the Constitution. Mere
expediency will not excuse constitutional shortcuts. There is no question that not even the
strongest moral conviction or the most urgent public need, subject only to a few notable
exceptions, will excuse the bypassing of an individual's rights. It is no exaggeration to say
that a person invoking a right guaranteed under Article III of the Constitution is a majority
of one even as against the rest of the nation who would deny him that right.

The right covers the persons life, his liberty and his property under Section 1 of Article III
of the Constitution. With regard to his property, the owner enjoys the added protection of
Section 9, which reaffirms the familiar rule that private property shall not be taken for
public use without just compensation.

The Republics assertion that the defense of the State will be in grave danger if we shall order the
reversion of Lot 932 to respondent is an overstatement. First, Lot 932 had ceased to operate as an
airport. What remains in the site is just the National Historical Institutes marking stating that Lot 932
is the former location of Lahug Airport. And second, there are only thirteen (13) structures located on
Lot 932, eight (8) of which are residence apartments of military personnel. Only two (2) buildings
are actually used as training centers. Thus, practically speaking, the reversion of Lot 932 to
respondent will only affect a handful of military personnel. It will not result to irreparable damage or
damage beyond pecuniary estimation, as what the Republic vehemently claims.

We thus rule that the special circumstances prevailing in this case entitle respondent to recover
possession of the expropriated lot from the Republic. Unless this form of swift and effective relief is
granted to him, the grave injustice committed against his predecessors-in-interest, though no fault or
negligence on their part, will be perpetuated. Let this case, therefore, serve as a wake-up call to the
Republic that in the exercise of its power of eminent domain, necessarily in derogation of private
rights, it must comply with the Constitutional limitations. This Court, as the guardian of the peoples
right, will not stand still in the face of the Republics oppressive and confiscatory taking of private
property, as in this case.

At this point, it may be argued that respondent Vicente Lim acted in bad faith in entering into a
contract of mortgage with Valdehueza and Panerio despite the clear annotation in TCT No. 23934 that
Lot 932 is subject to the priority of the National Airports Corporation [to acquire said
parcels of land] x x x upon previous payment of a reasonable market value.

The issue of whether or not respondent acted in bad faith is immaterial considering that the
Republic did not complete the expropriation process. In short, it failed to perfect its title over Lot 932
by its failure to pay just compensation. The issue of bad faith would have assumed relevance if the
Republic actually acquired title over Lot 932. In such a case, even if respondents title was registered
first, it would be the Republics title or right of ownership that shall be upheld. But now, assuming
that respondent was in bad faith, can such fact vest upon the Republic a better title over
Lot 932? We believe not. This is because in the first place, the Republic has no title to speak of.

At any rate, assuming that respondent had indeed knowledge of the annotation, still nothing
would have prevented him from entering into a mortgage contract involving Lot 932 while the
expropriation proceeding was pending. Any person who deals with a property subject of an
expropriation does so at his own risk, taking into account the ultimate possibility of losing the
property in favor of the government. Here, the annotation merely served as a caveat that the
Republic had a preferential right to acquire Lot 932 upon its payment of a reasonable market
value. It did not proscribe Valdehueza and Panerio from exercising their rights of ownership including
their right to mortgage or even to dispose of their property. In Republic vs. Salem Investment
Corporation,[24] we recognized the owners absolute right over his property pending completion of the
expropriation proceeding, thus:
It is only upon the completion of these two stages that expropriation is said to have been completed.
Moreover, it is only upon payment of just compensation that title over the property passes to the
government. Therefore, until the action for expropriation has been completed and terminated,
ownership over the property being expropriated remains with the registered owner. Consequently,
the latter can exercise all rights pertaining to an owner, including the right to dispose of
his property subject to the power of the State ultimately to acquire it through
expropriation.

It bears emphasis that when Valdehueza and Panerio mortgaged Lot 932 to respondent in 1964,
they were still the owners thereof and their title had not yet passed to the petitioner Republic. In fact,
it never did. Such title or ownership was rendered conclusive when we categorically ruled
in Valdehueza that: It is true that plaintiffs are still the registered owners of the land, there
not having been a transfer of said lots in favor of the Government.

For respondents part, it is reasonable to conclude that he entered into the contract of mortgage
with Valdehueza and Panerio fully aware of the extent of his right as a mortgagee. A mortgage is
merely an accessory contract intended to secure the performance of the principal obligation. One of
its characteristics is that it is inseparablefrom 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.

AIR TRANSPO VS GOPUCO

When private land is expropriated for a particular public use, and that particular public use is
abandoned, does its former owner acquire a cause of action for recovery of the property?
 The trial courts ruling in the negative was reversed by the Court of Appeals in its Decision [1] of 28
February 2001. Hence this petition for review under Rule 45 of the 1997 Rules of Civil Procedure of the
said Decision of the court a quo, and its Resolution[2] of 22 May 2003 dismissing petitioners motion for
reconsideration.

The facts, as adduced from the records, are as follows:

Respondent Apolonio Gopuco, Jr. was the owner of Cadastral Lot No. 72 consisting of 995 square
meters located in the vicinity of the Lahug Airport in Cebu City covered by Transfer Certificate of Title
(TCT) No. 13061-T.

The Lahug Airport had been turned over by the Unites States Army to the Republic of the
Philippines sometime in 1947 through the Surplus Property Commission, which accepted it in behalf of
the Philippine Government. In 1947, the Surplus Property Commission was succeeded by the Bureau
of Aeronautics, which office was supplanted by the National Airport Corporation (NAC). The NAC was
in turn dissolved and replaced with the Civil Aeronautics Administration (CAA). [3]

Sometime in 1949, the NAC informed the owners of the various lots surrounding the Lahug
Airport, including the herein respondent, that the government was acquiring their lands for purposes
of expansion. Some landowners were convinced to sell their properties on the assurance that they
would be able to repurchase the same when these would no longer be used by the airport. Others,
including Gopuco, refused to do so.

Thus, on 16 April 1952, the CAA filed a complaint with the Court of First Instance (CFI) of Cebu for
the expropriation of Lot No. 72 and its neighboring realties, docketed as Civil Case No. R-1881.

On 29 December 1961, the CFI promulgated a Decision,

1. Declaring the expropriation of [the subject lots, including Lot No. 72] justified and in lawful exercise
of the right of eminent domain;

2. Declaring . a balance of P1,990 in favor of Apolonio Go Puco, Jr. with legal interest from November
16, 1947 until fully paid. ;

3. After the payment of the foregoing financial obligation to the landowners, directing the latter to
deliver to the plaintiff the corresponding Transfer Certificates of Title to their respective lots; and upon
the presentation of the said titles to the Register of Deeds, ordering the latter to cancel the same and
to issue, in lieu thereof, new Transfer Certificates of Title in the name of the plaintiff. [4]

No appeal was taken from the above Decision on Lot No. 72, and the judgment of condemnation
became final and executory. Thereafter, on 23 May 1962, absolute title to Lot No. 72 was transferred
to the Republic of the Philippines under TCT No. 25030. [5]

Subsequently, when the Mactan International Airport commenced operations, the Lahug Airport
was ordered closed by then President Corazon C. Aquino in a Memorandum of 29 November 1989.
[6]
Lot No. 72 was thus virtually abandoned.[7]

On 16 March 1990, Gopuco wrote[8] the Bureau of Air Transportation, through the manager of the
Lahug Airport, seeking the return of his lot and offering to return the money previously received by
him as payment for the expropriation. This letter was ignored. [9]

In the same year, Congress passed Republic Act No. 6958 creating the Mactan-Cebu International
Airport Authority (MCIAA) and in part providing for the transfer of the assets of the Lahug Airport
thereto. Consequently, on 08 May 1992, ownership of Lot No. 72 was transferred to MCIAA under TCT
No. 120356.[10]
 On 06 August 1992, Apolonio Gopuco, Jr. filed an amended complaint [11] for recovery of ownership
of Lot No. 72 against the Air Transportation Office [12] and the Province of Cebu with the Regional Trial
Court (RTC) of Cebu, Branch X, docketed as Civil Case No. CEB-11914. He maintained that by virtue of
the closure of the Lahug Airport, the original purpose for which the property was expropriated had
ceased or otherwise been abandoned, and title to the property had therefore reverted to him.

Gopuco further alleged that when the original judgment of expropriation had been handed down,
and before they could file an appeal thereto, the CAA offered them a compromise settlement whereby
they were assured that the expropriated lots would be resold to them for the same price as when it
was expropriated in the event that the Lahug Airport would be abandoned. Gopuco claims to have
accepted this offer.[13] However, he failed to present any proof on this matter, and later admitted that
insofar as the said lot was concerned, no compromise agreement was entered into by the government
and the previous owners.[14]

Lastly, Gopuco asserted that he had come across several announcements in the papers that the
Lahug Airport was soon to be developed into a commercial complex, which he took to be a scheme of
the Province of Cebu to make permanent the deprivation of his property.

On 20 May 1994, the trial court rendered a Decision [15] dismissing the complaint and directing the
herein respondent to pay the MCIAA exemplary damages, litigation expenses and costs.

Aggrieved by the holding of the trial court, Gopuco appealed to the Court of Appeals, which
overturned the RTC decision, ordered the herein petitioners to reconvey Lot No. 72 to Gopuco upon
payment of the reasonable price as determined by it, and deleted the award to the petitioners of
exemplary damages, litigation expenses and costs.

The Motion for Reconsideration was denied [16] on 22 May 2003, hence this petition, which raises
the following issues:

WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT HAS THE RIGHT TO
RECLAIM OWNERSHIP OVER THE SUBJECT EXPROPRIATED LOT BASED ON THE IMPORT OF THE
DECEMBER 29, 1961 DECISION IN CIVIL CASE NO. 1881.

WHETHER THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF LITIGATION EXPENSES AND
COSTS IN FAVOR OF PETITIONERS.

In deciding the original expropriation case that gave rise to the present controversy, Civil Case No.
R-1881, the CFI reasoned that the planned expansion of the airport justified the exercise of eminent
domain, thus:

As for the public purpose of the expropriation proceeding, it cannot be doubted. Although the 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 return 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 for 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 a showing, the Court will presume that the Lahug Airport
will continue to be in operation.[17] (emphasis supplied)

By the time Gopuco had filed his action for recovery of ownership of Lot No. 72, Lahug Airport had
indeed ceased to operate. Nevertheless, the trial court held:

The fact of abandonment or closure of the Lahug Airport admitted by the defendant did not by itself,
result in the reversion of the subject property back to the plaintiff. Nor did it vest in the plaintiff the
right to demand reconveyance of said property.
When real property has been acquired for public use unconditionally, either by eminent domain or by
purchase, the abandonment or non-use of the real property, does not ipso facto give to the previous
owner of said property any right to recover the same (Fery vs. Municipality of Cabanatuan, 42 Phil.
28).[18]

In reversing the trial court, the Court of Appeals called attention to the fact that both parties
cited Fery v. Municipality of Cabanatuan,[19] which the trial court also relied on in its Decision. The
court a quo agreed in Gopucos interpretation of Fery that when the CFI in Civil Case No. R-1881 held
that,

. . . [T]hen, 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.In the absence of such
a showing, the Court will presume that the Lahug Airport will continue to be in operation, . . . . [20]

the expropriation of the property was conditioned on its continued devotion to its public purpose.
Thus, although the MCIAA stressed that nothing in the judgment of expropriation expressly stated that
the lands would revert to their previous owners should the public use be terminated or abandoned,
the Court of Appeals nevertheless ruled that,

. . . [W]hile, there is no explicit statement that the land is expropriated with the condition that when
the purpose is ended the property shall return to its owner, the full import of the decision (in Civil
Case No. R-1881) suggests that the expropriation was granted because there is no clear showing that
Lahug Airport will be closed, the moment Mactan International Airport is put to operation. It stands to
reason that should that public use be abandoned, then the expropriated property should revert back
to its former owner.

Moreover, the foundation of the right to exercise the power of eminent domain is genuine necessity.
Condemnation is justified only if it is for the public good and there is genuine necessity of a public
character. Thus, when such genuine necessity no longer exists as when the State abandons the
property expropriated, government interest must yield to the private right of the former land owner,
whose property right was disturbed as a consequence of the exercise of eminent domain.

Justice, equity and fair play demand that the property should revert back to plaintiff-appellant upon
paying the reasonable value of the land to be based on the prevailing market value at the time of
judicial demand to recover the property. If the State expects landowners to cooperate in its bid to take
private property for its public use, so must it apply also the same standard, to allow the landowner to
reclaim the property, now that the public use has been abandoned. [21]

In this petition, the MCIAA reiterates that the Republic of the Philippines validly expropriated Lot
No. 72 through the proceedings in Civil Case No. R-1881, the judgment of which had long become
final and executory. It further asserts that said judgment vested absolute and unconditional title in the
government, specifically on the petitioners, there having been no condition whatsoever that the
property should revert to its owners in case the Lahug Airport should be abandoned.

On the other hand, the respondent would have us sustain the appellate courts interpretation
of Fery as applied to the original judgment of expropriation, to the effect that this was subject to the
condition that the Lahug Airport will continue to be in operation.

We resolve to grant the petition.

In Fery, the Court asked and answered the same question confronting us now: When private land
is expropriated for a particular public use, and that particular public use is abandoned, does the land
so expropriated return to its former owner? [22]

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. . . 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. (10 R.C.L., 240, sec. 202; 20 C.J. 1234, secs. 593-599 and numerous
cases cited; Reichling vs. Covington Lumber Co., 57 Wash., 225; 135 Am. St. Rep., 976; McConihay vs.
Wright, 121 U.S., 201.)

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. (Fort Wayne vs. Lake Shore, etc. Ry. Co., 132 Ind., 558; 18 L.R.A., 367.) (Emphases Supplied)
[23]

Did the judgment of expropriation in Civil Case No. R-1881 vest absolute and unconditional title in
the government? We have already had occasion to rule on this matter in Mactan-Cebu International
Airport Authority v. Court of Appeals,[24] which is a related action for reconveyance of a parcel of land
also subject of the expropriation proceedings in Civil Case No. R-1881. One of the landowners affected
by the said proceeding was Virginia Chiongbian, to whom the CFI ordered the Republic of the
Philippines to pay P34,415.00, with legal interest computed from the time the government began
using her land. Like the herein respondent, she did not appeal from the CFIs judgment. Also like
Gopuco, she eventually filed for the reconveyance of her property when the airport closed. Although
she was upheld by both the RTC of Cebu and the Court of Appeals, on appeal we held that the terms
of the judgment (in Civil Case No. R-1881) are clear and unequivocal and granted 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.[25] Moreover, we held that
although other lot owners were able to successfully reacquire their lands by virtue of a compromise
agreement, since CHIONGBIAN was not a party to any such agreement, she could not validly invoke
the same.

The respondent would have us revisit this ruling for three reasons. First, because he claims there
is no showing that the government benefited from entering into compromise agreements with the
other lot owners; second, because such a doctrine supposedly discriminates against those who have
neither the werewithal nor the savvy to contest the expropriation, or agree to modify the judgment;
and third, because there exists between the government and the owners of expropriated realty an
implied contract that the properties involved will be used only for the public purpose for which they
were acquired in the first place.

As to respondents first and second arguments, we have time and again ruled that a compromise
agreement, when not contrary to law, public order, public policy, morals, or good customs, is a valid
contract which is the law between the parties. [26] It is a contract perfected by mere consent,
[27]
whereby the parties, making reciprocal concessions, avoid litigation or put an end to one already
commenced. It has the force of law and is conclusive between the parties, [28] and courts will not
relieve parties from obligations voluntarily assumed, simply because their contracts turned out to be
unwise.[29] Note that respondent has not shown that any of the compromise agreements were in any
way tainted with illegality, irregularity or imprudence. Indeed, anyone who is not a party to a contract
or agreement cannot be bound by its terms, and cannot be affected by it. [30] Since Gopuco was not a
party to the compromise agreements, he cannot legally invoke the same. [31]
 Lastly, Gopuco argues that there is present, in cases of expropriation, an implied contract that the
properties will be used only for the public purpose for which they were acquired. No such contract
exists.

Eminent domain is generally described as the highest and most exact idea of property remaining
in the government that may be acquired for some public purpose through a method in the nature of a
forced purchase by the State. [32] Also often referred to as expropriation and, with less frequency, as
condemnation, it is, like police power and taxation, an inherent power of sovereignty and need not be
clothed with any constitutional gear to exist; instead, provisions in our Constitution on the subject are
meant more to regulate, rather than to grant, the exercise of the power. It is a right to take
or reassert dominion over property within the state for public use or to meet a public exigency and is
said to be an essential part of governance even in its most primitive form and thus inseparable from
sovereignty.[33] In fact, all separate interests of individuals in property are held of the government
under this tacit agreement or implied reservation. Notwithstanding the grant to individuals,
the eminent domain, the highest and most exact idea of property, remains in the government, or in
the aggregate body of people in their sovereign capacity; and they have the right to resume the
possession of the property whenever the public interest so requires it. [34]

The ubiquitous character of eminent domain is manifest in the nature of the expropriation
proceedings. Expropriation proceedings are not adversarial in the conventional sense, for the
condemning authority is not required to assert any conflicting interest in the property. Thus, by filing
the action, the condemnor in effect merely serves notice that it is taking title and possession of the
property, and the defendant asserts title or interest in the property, not to prove a right to possession,
but to prove a right to compensation for the taking. [35]

The only direct constitutional qualification is thus that private property shall not be taken for
public use without just compensation. [36] This prescription is intended to provide a safeguard against
possible abuse and so to protect as well the individual against whose property the power is sought to
be enforced.[37]

In this case, the judgment on the propriety of the taking and the adequacy of the compensation
received have long become final. We have also already held that the terms of that judgment granted
title in fee simple to the Republic of the Philippines. Therefore, pursuant to our ruling in Fery, as
recently cited in Reyes v. National Housing Authority,[38] no rights to Lot No. 72, either express or
implied, have been retained by the herein respondent.

We are not unaware of the ruling in Heirs of Timoteo Moreno v. Mactan-Cebu International Airport
Authority,[39] concerning still another set of owners of lots declared expropriated in the judgment in
Civil Case No. R-1881. As with Chiongbian and the herein respondent, the owners of the lots therein
did not appeal the judgment of expropriation, but subsequently filed a complaint for reconveyance. In
ordering MCIAA to reconvey the said lots in their favor, we held that the predicament of petitioners
therein involved a constructive trust akin to the implied trust referred to in Art. 1454[40] of the Civil
Code.[41] However, we qualified our Decision in that case, to the effect that,

We adhere to the principles enunciated in Fery and in Mactan-Cebu International Airport Authority,
and do not overrule them. Nonetheless the weight of their import, particularly our ruling as regards
the properties of respondent Chiongbian in Mactan-Cebu International Airport Authority, must be
commensurate to the facts that were established therein as distinguished from those extant in the
case at bar. Chiongbian put forth inadmissible and inconclusive evidence, while in the
instant case we have preponderant proof as found by the trial court of the existence of
the right of repurchase in favor of petitioners.

Neither has Gopuco, in the present case, adduced any evidence at all concerning a right of
repurchase in his favor. Heirs of Moreno is thus not in point.

The trial court was thus correct in denying Gopucos claim for the reconveyance of Lot No. 72 in his
favor. However, for failure of the petitioners to present any proof that this case was clearly unfounded
or filed for purposes of harassment, or that the herein respondent acted in gross and evident bad
faith, the reimposition of litigation expenses and costs has no basis. It is not sound public policy to set
a premium upon the right to litigate where such right is exercised in good faith, as in the present
case.[42]

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No.
49898 dated 28 February 2001, and its Resolution of 22 May 2003 are hereby REVERSED and SET
ASIDE. The Decision of RTC-Branch X of Cebu dated 20 May 1994 in Civil Case No. CEB-11914 is
REINSTATED with the modification that the award of exemplary damages, litigation expenses and
costs are DELETED.

SO ORDERED.

JESUS IF LORD SCHOOL FOUNDATION VS PASIG

Before us is a petition for review of the Decision [1] of the Court of Appeals (CA) in CA-G.R. CV No.
59050, and its Resolution dated February 18, 2002, denying the motion for reconsideration thereof.
The assailed decision affirmed the order of the Regional Trial Court (RTC) of Pasig, Branch 160,
declaring the respondent Municipality (now City) of Pasig as having the right to expropriate and take
possession of the subject property.

The Antecedents

The Municipality of Pasig needed an access road from E. R. Santos Street, a municipal road near
the Pasig Public Market, to Barangay Sto. Tomas Bukid, Pasig, where 60 to 70 houses, mostly made of
light materials, were located. The road had to be at least three meters in width, as required by the Fire
Code, so that fire trucks could pass through in case of conflagration. [2] Likewise, the residents in the
area needed the road for water and electrical outlets. [3] The municipality then decided to acquire 51
square meters out of the 1,791-square meter property of Lorenzo Ching Cuanco, Victor Ching Cuanco
and Ernesto Ching Cuanco Kho covered by Transfer Certificate of Title (TCT) No. PT-66585, [4] which is
abutting E. R. Santos Street.

On April 19, 1993, the Sangguniang Bayan of Pasig approved an Ordinance[5] authorizing the
municipal mayor to initiate expropriation proceedings to acquire the said property and appropriate the
fund therefor. The ordinance stated that the property owners were notified of the municipalitys intent
to purchase the property for public use as an access road but they rejected the offer.

On July 21, 1993, the municipality filed a complaint, amended on August 6, 1993, against the
Ching Cuancos for the expropriation of the property under Section 19 of Republic Act (R.A.) No. 7160,
otherwise known as the Local Government Code. The plaintiff alleged therein that it notified the
defendants, by letter, of its intention to construct an access road on a portion of the property but they
refused to sell the same portion. The plaintiff appended to the complaint a photocopy of the letter
addressed to defendant Lorenzo Ching Cuanco. [6]

The plaintiff deposited with the RTC 15% of the market value of the property based on the latest
tax declaration covering the property. On plaintiffs motion, the RTC issued a writ of possession over
the property sought to be expropriated. On November 26, 1993, the plaintiff caused the annotation of
a notice of lis pendens at the dorsal portion of TCT No. PT-92579 under the name of the Jesus Is Lord
Christian School Foundation, Incorporated (JILCSFI) which had purchased the property. [7] Thereafter,
the plaintiff constructed therein a cemented road with a width of three meters; the road was called
Damayan Street.
 In their answer,[8] the defendants claimed that, as early as February 1993, they had sold the said
property to JILCSFI as evidenced by a deed of sale [9] bearing the signature of defendant Ernesto Ching
Cuanco Kho and his wife.

When apprised about the complaint, JILCSFI filed a motion for leave to intervene as defendant-in-
intervention, which motion the RTC granted on August 26, 1994. [10]

In its answer-in-intervention, JILCSFI averred, by way of special and affirmative defenses, that the
plaintiffs exercise of eminent domain was only for a particular class and not for the benefit of the poor
and the landless. It alleged that the property sought to be expropriated is not the best portion for the
road and the least burdensome to it. The intervenor filed a crossclaim against its co-defendants for
reimbursement in case the subject property is expropriated. [11] In its amended answer, JILCSFI also
averred that it has been denied the use and enjoyment of its property because the road was
constructed in the middle portion and that the plaintiff was not the real party-in-interest. The
intervenor, likewise, interposed counterclaims against the plaintiff for moral damages and attorneys
fees.[12]

During trial, Rolando Togonon, the plaintiffs messenger, testified on direct examination that on
February 23, 1993, he served a letter of Engr. Jose Reyes, the Technical Assistant to the Mayor on
Infrastructure, to Lorenzo Ching Cuanco at his store at No. 18 Alkalde Jose Street, Kapasigan, Pasig. A
lady received the same and brought it inside the store. When she returned the letter to him, it already
bore the signature of Luz Bernarte. He identified a photocopy of the letter as similar to the one he
served at the store. On cross-examination, he admitted that he never met Luz Bernarte. [13]

Edgardo del Rosario, a resident of Sto. Tomas Bukid since 1982 declared that he would pass
through a wooden bridge to go to E. R. Santos Street. At times, the bridge would be slippery and
many had met accidents while walking along the bridge. Because of this, they requested Mayor
Vicente Eusebio to construct a road therein. He attested that after the construction of the cemented
access road, the residents had water and electricity. [14]

Augusto Paz of the City Engineers Office testified that, sometime in 1992, the plaintiff constructed
a road perpendicular from E. R. Santos Street to Sto. Tomas Bukid; he was the Project Engineer for the
said undertaking. Before the construction of the road, the lot was raw and they had to put filling
materials so that vehicles could use it. According to him, the length of the road which they
constructed was 70 meters long and 3 meters wide so that a fire truck could pass through. He averred
that there is no other road through which a fire truck could pass to go to Sto. Tomas Bukid. [15]

Manuel Tembrevilla, the Fire Marshall, averred that he had seen the new road, that is, Damayan
Street, and found that a fire truck could pass through it. He estimated the houses in the area to be
around 300 to 400. Tembrevilla also stated that Damayan Street is the only road in the area. [16]

Finally, Bonifacio Maceda, Jr., Tax Mapper IV, testified that, according to their records, JILCSFI
became the owner of the property only on January 13, 1994. [17]

The plaintiff offered in evidence a photocopy of the letter of Engr. Jose Reyes addressed to
Lorenzo Ching Cuanco to prove that the plaintiff made a definite and valid offer to acquire the
property to the co-owners. However, the RTC rejected the same letter for being a mere photocopy. [18]

For the defendant-intervenor, Normita del Rosario, owner of the property located across the
subject property, testified that there are other roads leading to E. R. Santos Street. She asserted that
only about ten houses of the urban poor are using the new road because the other residents are using
an alternative right-of-way. She averred that she did not actually occupy her property; but there were
times that she visited it.[19]

Danilo Caballero averred that he had been a resident of Sto. Tomas Bukid for seven years. From
his house, he could use three streets to go to E. R. Santos Street, namely, Catalina Street, Damayan
Street and Bagong Taon Street. On cross-examination, he admitted that no vehicle could enter Sto.
Tomas Bukid except through the newly constructed Damayan Street. [20]

Eduardo Villanueva, Chairman of the Board of Trustees and President of JILCSFI, testified that the
parcel of land was purchased for purposes of constructing a school building and a church as worship
center. He averred that the realization of these projects was delayed due to the passing of the
ordinance for expropriation.[21]

The intervenor adduced documentary evidence that on February 27, 1993, Lorenzo Ching Cuanco
and the co-owners agreed to sell their property covered by TCT No. PT-66585 for P1,719,000.00.[22] It
paid a down payment of P1,000,000.00 for the property. After payment of the total purchase price, the
Ching Cuancos executed a Deed of Absolute Sale [23] over the property on December 13, 1993. On
December 21, 1993, TCT No. PT-92579 was issued in the name of JILCSFI. [24] It declared the property
for taxation purposes under its name.[25]

On September 3, 1997, the RTC issued an Order in favor of the plaintiff, the dispositive portion of
which reads:

WHEREFORE, in view of the foregoing and in accordance with Section 4, Rule 67 of the Revised Rules
of Court, the Court Resolves to DECLARE the plaintiff as having a lawful right to take the property in
question for purposes for which the same is expropriated.

The plaintiff and intervenor are hereby directed to submit at least two (2) names of their
recommended commissioners for the determination of just compensation within ten (10) days from
receipt hereof.

SO ORDERED.[26]

The RTC held that, as gleaned from the declaration in Ordinance No. 21, there was substantial
compliance with the definite and valid offer requirement of Section 19 of R.A. No. 7160, and that the
expropriated portion is the most convenient access to the interior of Sto. Tomas Bukid.

Dissatisfied, JILCSFI elevated the case to the CA on the following assignment of errors:

First Assignment of Error

THE LOWER COURT SERIOUS[LY] ERRED WHEN IT RULED THAT PLAINTIFF-APPELLEE SUBSTANTIALLY
COMPLIED WITH THE LAW WHEN IT EXPROPRIATED JILS PROPERTY TO BE USED AS A RIGHT OF WAY.

Second Assignment of Error

THE LOWER COURT ERRED IN DISREGARDING JILS EVIDENCE PROVING THAT THERE WAS NO PUBLIC
NECESSITY TO WARRANT THE EXPROPRIATION OF THE SUBJECT PROPERTY. [27]

The Court of Appeals Decision

In a Decision dated March 13, 2001, the CA affirmed the order of the RTC. [28] The CA agreed with
the trial court that the plaintiff substantially complied with Section 19 of R.A. No. 7160, particularly
the requirement that a valid and definite offer must be made to the owner. The CA declared that the
letter of Engr. Reyes, inviting Lorenzo Ching Cuanco to a conference to discuss with him the road
project and the price of the lot, was a substantial compliance with the valid and definite offer
requirement under said Section 19. In addition, the CA noted that there was also constructive notice
to the defendants of the expropriation proceedings since a notice of lis pendens was annotated at the
dorsal portion of TCT No. PT-92579 on November 26, 1993. [29]
 Finally, the CA upheld the public necessity for the subject property based on the findings of the
trial court that the portion of the property sought to be expropriated appears to be, not only the most
convenient access to the interior of Sto. Tomas Bukid, but also an easy path for vehicles entering the
area, particularly fire trucks. Moreover, the CA took into consideration the provision of Article 33 of
the Rules and Regulations Implementing the Local Government Code, which regards the construction
or extension of roads, streets, sidewalks as public use, purpose or welfare. [30]

On April 6, 2001, JILCSFI filed a motion for reconsideration of the said decision alleging that the CA
erred in relying on the photocopy of Engr. Reyes letter to Lorenzo Ching Cuanco because the same
was not admitted in evidence by the trial court for being a mere photocopy. It also contended that the
CA erred in concluding that constructive notice of the expropriation proceeding, in the form of
annotation of the notice of lis pendens, could be considered as a substantial compliance with the
requirement under Section 19 of the Local Government Code for a valid and definite offer. JILCSFI also
averred that no inspection was ever ordered by the trial court to be conducted on the property, and, if
there was one, it had the right to be present thereat since an inspection is considered to be part of
the trial of the case.[31]

The CA denied the motion for reconsideration for lack of merit. It held that it was not precluded
from considering the photocopy[32] of the letter, notwithstanding that the same was excluded by the
trial court, since the fact of its existence was duly established by corroborative evidence. This
corroborative evidence consisted of the testimony of the plaintiffs messenger that he personally
served the letter to Lorenzo Ching Cuanco, and Municipal Ordinance No. 21 which expressly stated
that the property owners were already notified of the expropriation proceeding. The CA noted that
JILCSFI failed to adduce controverting evidence, thus the presumption of regularity was not overcome.
[33]

The Present Petition

In this petition, petitioner JILCSFI raises the following issues: (1) whether the respondent complied
with the requirement, under Section 19 of the Local Government Code, of a valid and definite offer to
acquire the property prior to the filing of the complaint; (2) whether its property which is already
intended to be used for public purposes may still be expropriated by the respondent; and (3) whether
the requisites for an easement for right-of-way under Articles 649 to 657 of the New Civil Code may
be dispensed with.

The petitioner stresses that the law explicitly requires that a valid and definite offer be made to
the owner of the property and that such offer was not accepted. It argues that, in this case, there was
no evidence to show that such offer has been made either to the previous owner or the petitioner, the
present owner. The petitioner contends that the photocopy of the letter of Engr. Reyes, notifying
Lorenzo Ching Cuanco of the respondents intention to construct a road on its property, cannot be
considered because the trial court did not admit it in evidence. And assuming that such letter is
admissible in evidence, it would not prove that the offer has been made to the previous owner
because mere notice of intent to purchase is not equivalent to an offer to purchase. The petitioner
further argues that the offer should be made to the proper party, that is, to the owner of the property.
It noted that the records in this case show that as of February 1993, it was already the owner of the
property. Assuming, therefore, that there was an offer to purchase the property, the same should have
been addressed to the petitioner, as present owner. [34]

The petitioner maintains that the power of eminent domain must be strictly construed since its
exercise is necessarily in derogation of the right to property ownership. All the requirements of the
enabling law must, therefore, be strictly complied with. Compliance with such requirements cannot be
presumed but must be proved by the local government exercising the power. The petitioner adds that
the local government should, likewise, comply with the requirements for an easement of right-of-way;
hence, the road must be established at a point least prejudicial to the owner of the property. Finally,
the petitioner argues that, if the property is already devoted to or intended to be devoted to another
public use, its expropriation should not be allowed. [35]
 For its part, the respondent avers that the CA already squarely resolved the issues raised in this
petition, and the petitioner failed to show valid and compelling reason to reverse the CAs findings.
Moreover, it is not the function of the Supreme Court to weigh the evidence on factual issues all over
again.[36] The respondent contends that the Ching Cuancos were deemed to have admitted that an
offer to purchase has been made and that they refused to accept such offer considering their failure
to specifically deny such allegation in the complaint. In light of such admission, the exclusion of the
photocopy of the letter of Engr. Reyes, therefore, is no longer significant. [37]

The Ruling of the Court

The petition is meritorious.

At the outset, it must be stressed that only questions of law may be raised by the parties and
passed upon by the Supreme Court in petitions for review on certiorari.[38]Findings of fact of the CA,
affirming those of the trial court, are final and conclusive and may not be reviewed on appeal. [39]

Nonetheless, where it is shown that the conclusion is a finding grounded on speculations,

surmises or conjectures or where the judgment is based on misapprehension of facts, the Supreme
Court may reexamine the evidence on record.[40]

Eminent Domain: Nature and Scope

The right of eminent domain is usually understood to be an ultimate right of the sovereign power
to appropriate any property within its territorial sovereignty for a public purpose. The nature and
scope of such power has been comprehensively described as follows:

It is an indispensable attribute of sovereignty; a power grounded in the primary duty of government to

serve the common need and advance the general welfare. Thus, the right of eminent domain
appertains to every independent government without the necessity for constitutional recognition. The
provisions found in modern constitutions of civilized countries relating to the taking of property for the
public use do not by implication grant the power to the government, but limit the power which would,
otherwise, be without limit. Thus, our own Constitution provides that [p]rivate property shall not be
taken for public use without just compensation. Furthermore, the due process and equal protection
clauses act as additional safeguards against the arbitrary exercise of this governmental power. [41]

Strict Construction and Burden of Proof

The exercise of the right of eminent domain, whether directly by the State or by its authorized
agents, is necessarily in derogation of private rights. [42] It is one of the harshest proceedings known to
the law. Consequently, when the sovereign delegates the power to a political unit or agency, a strict
construction will be given against the agency asserting the power. [43] The authority to condemn is to
be strictly construed in favor of the owner and against the condemnor. [44] When the power is granted,
the extent to which it may be exercised is limited to the express terms or clear implication of the
statute in which the grant is contained.[45]

Corollarily, the respondent, which is the condemnor, has the burden of proving all the essentials
necessary to show the right of condemnation. [46] It has the burden of proof to establish that it has
complied with all the requirements provided by law for the valid exercise of the power of eminent
domain.

The grant of the power of eminent domain to local government units is grounded on Section 19 of
R.A. No. 7160 which reads:

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; 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 Court declared that the following requisites for the valid exercise of the power of eminent
domain by a local government unit must be complied with:

1. An ordinance is enacted by the local legislative council authorizing the local chief executive, in
behalf of the local government unit, to exercise the power of eminent domain or pursue
expropriation proceedings over a particular private property.

2. The power of eminent domain is exercised for public use, purpose or welfare, or for the benefit
of the poor and the landless.

3. There is payment of just compensation, as required under Section 9, Article III of the
Constitution, and other pertinent laws.

4. A valid and definite offer has been previously made to the owner of the property sought to be
expropriated, but said offer was not accepted. [47]

Valid and Definite Offer

Article 35 of the Rules and Regulations Implementing the Local Government Code provides:

ARTICLE 35. Offer to Buy and Contract of Sale. (a) The offer to buy private property for public use or
purpose shall be in writing. It shall specify the property sought to be acquired, the reasons for its
acquisition, and the price offered.

(b) If the owner or owners accept the offer in its entirety, a contract of sale shall be executed and
payment forthwith made.

(c) If the owner or owners are willing to sell their property but at a price higher than that offered to
them, the local chief executive shall call them to a conference for the purpose of reaching an
agreement on the selling price. The chairman of the appropriation or finance committee of
the sanggunian, or in his absence, any member of the sanggunian duly chosen as its representative,
shall participate in the conference. When an agreement is reached by the parties, a contract of sale
shall be drawn and executed.

(d) The contract of sale shall be supported by the following documents:

(1) Resolution of the sanggunian authorizing the local chief executive to enter into a contract of sale.
The resolution shall specify the terms and conditions to be embodied in the contract;

(2) Ordinance appropriating the amount specified in the contract; and

(3) Certification of the local treasurer as to availability of funds together with a statement that such
fund shall not be disbursed or spent for any purpose other than to pay for the purchase of the
property involved.

The respondent was burdened to prove the mandatory requirement of a valid and definite offer to
the owner of the property before filing its complaint and the rejection thereof by the latter. [48] It is
incumbent upon the condemnor to exhaust all reasonable efforts to obtain the land it desires by
agreement.[49] Failure to prove compliance with the mandatory requirement will result in the dismissal
of the complaint.[50]

An offer is a unilateral proposition which one party makes to the other for the celebration of a
contract.[51] It creates a power of acceptance permitting the offeree, by accepting the offer, to
transform the offerors promise into a contractual obligation. [52] Corollarily, the offer must be complete,
indicating with sufficient clearness the kind of contract intended and definitely stating the essential
conditions of the proposed contract. [53] An offer would require, among other things, a clear certainty
on both the object and the cause or consideration of the envisioned contract. [54]

The purpose of the requirement of a valid and definite offer to be first made to the owner is to
encourage settlements and voluntary acquisition of property needed for public purposes in order to
avoid the expense and delay of a court action. [55] The law is designed to give to the owner the
opportunity to sell his land without the expense and inconvenience of a protracted and expensive
litigation. This is a substantial right which should be protected in every instance. [56] It encourages
acquisition without litigation and spares not only the landowner but also the condemnor, the
expenses and delays of litigation. It permits the landowner to receive full compensation, and the
entity acquiring the property, immediate use and enjoyment of the property. A reasonable offer in
good faith, not merely perfunctory or pro forma offer, to acquire the property for a reasonable price
must be made to the owner or his privy. [57] A single bona fide offer that is rejected by the owner will
suffice.

The expropriating authority is burdened to make known its definite and valid offer to all the
owners of the property. However, it has a right to rely on what appears in the certificate of title
covering the land to be expropriated. Hence, it is required to make its offer only to the registered
owners of the property. After all, it is well-settled that persons dealing with property covered by a
Torrens certificate of title are not required to go beyond what appears on its face. [58]

In the present case, the respondent failed to prove that before it filed its complaint, it made a
written definite and valid offer to acquire the property for public use as an access road. The only
evidence adduced by the respondent to prove its compliance with Section 19 of the Local Government
Code is the photocopy of the letter purportedly bearing the signature of Engr. Jose Reyes, to only one
of the co-owners, Lorenzo Ching Cuanco. The letter reads:

MR. LORENZO CHING CUANCO

18 Alcalde Jose Street

Capasigan, Pasig

Metro Manila

Dear Mr. Cuanco:

This refers to your parcel of land located along E. Santos Street, Barangay Palatiw, Pasig, Metro Manila
embraced in and covered by TCT No. 66585, a portion of which with an area of fifty-one (51) square
meters is needed by the Municipal Government of Pasig for conversion into a road-right of way for the
benefit of several residents living in the vicinity of your property. Attached herewith is the sketch plan
for your information.

In this connection, may we respectfully request your presence in our office to discuss this project and
the price that may be mutually agreed upon by you and the Municipality of Pasig.

Thank you.

Very truly yours,

 (Sgd.)

ENGR. JOSE L. REYES

Technical Asst. to the Mayor

on Infrastructure[59]

It bears stressing, however, that the respondent offered the letter only to prove its desire or intent
to acquire the property for a right-of-way. [60] The document was not offered to prove that the
respondent made a definite and valid offer to acquire the property. Moreover, the RTC rejected the
document because the respondent failed to adduce in evidence the original copy thereof. [61] The
respondent, likewise, failed to adduce evidence that copies of the letter were sent to and received by
all the co-owners of the property, namely, Lorenzo Ching Cuanco, Victor Ching Cuanco and Ernesto
Kho.

The respondent sought to prove, through the testimony of its messenger, Rolando Togonon, that
Lorenzo Ching Cuanco received the original of the said letter. But Togonon testified that he merely
gave the letter to a lady, whom he failed to identify. He stated that the lady went inside the store of
Lorenzo Ching Cuanco, and later gave the letter back to him bearing the signature purportedly of one
Luz Bernarte. However, Togonon admitted, on cross-examination, that he did not see Bernarte affixing
her signature on the letter. Togonon also declared that he did not know and had never met Lorenzo
Ching Cuanco and Bernarte:

Q And after you received this letter from that lady, what did you do afterwards?

A I brought it with me, that letter, and then I went to Caruncho.

Q So, [M]r. Witness, you are telling this Honorable Court that this letter intended to Mr.
Lorenzo was served at Pasig Trading which was situated at No. 18 Alkalde Jose Street on
February 23, 1993?

A Yes, Maam.

ATTY. TAN:

That is all for the witness, Your Honor.

COURT:

Do you have any cross-examination?

ATTY. JOLO:

Just a few cross, Your Honor, please. With the kind permission of the Honorable Court.

COURT:

Proceed.

CROSS-EXAMINATION

BY ATTY. JOLO:

Q Mr. Witness, do you know Mr. Lorenzo Ching [Cuanco]

 A I do not know him.

Q As a matter of fact, you have not seen him even once, isnt not (sic)?

A Yes, Sir.

Q This Luz Bernarte, do you know her?

A I do not know her.

Q As a matter of fact, you did not see Mrs. Bernarte even once?

A That is correct.

Q And as a matter of fact, [M]r. Witness, you did not see Mrs. Luz Bernarte affixing her
signature on the bottom portion of this demand letter, marked as Exh. C-2?

A Yes, Sir.[62]

Even if the letter was, indeed, received by the co-owners, the letter is not a valid and definite
offer to purchase a specific portion of the property for a price certain. It is merely an invitation for only
one of the co-owners, Lorenzo Ching Cuanco, to a conference to discuss the project and the price that
may be mutually acceptable to both parties.

There is no legal and factual basis to the CAs ruling that the annotation of a notice of lis
pendens at the dorsal portion of petitioners TCT No. PT-92579 is a substantial compliance with the
requisite offer. A notice of lis pendens is a notice to the whole world of the pendency of an action
involving the title to or possession of real property and a warning that those who acquire an interest
in the property do so at their own risk and that they gamble on the result of the litigation over it.
[63]
Moreover, the lis pendenswas annotated at the dorsal portion of the title only on November 26,
1993, long after the complaint had been filed in the RTC against the Ching Cuancos.

Neither is the declaration in one of the whereas clauses of the ordinance that the property owners
were already notified by the municipality of the intent to purchase the same for public use as a
municipal road, a substantial compliance with the requirement of a valid and definite offer under
Section 19 of R.A. No. 7160. Presumably, the Sangguniang Bayan relied on the erroneous premise that
the letter of Engr. Reyes reached the co-owners of the property. In the absence of competent evidence
that, indeed, the respondent made a definite and valid offer to all the co-owners of the property, aside
from the letter of Engr. Reyes, the declaration in the ordinance is not a compliance with Section 19 of
R.A. No. 7160.

The respondent contends, however, that the Ching Cuancos, impliedly admitted the allegation in
its complaint that an offer to purchase the property was made to them and that they refused to
accept the offer by their failure to specifically deny such allegation in their answer. This contention is
wrong. As gleaned from their answer to the complaint, the Ching Cuancos specifically denied such
allegation for want of sufficient knowledge to form a belief as to its correctness. Under Section 10,
[64]
Rule 8 of the Rules of Court, such form of denial, although not specific, is sufficient.

Public Necessity

We reject the contention of the petitioner that its property can no longer be expropriated by the
respondent because it is intended for the construction of a place for religious worship and a school for
its members. As aptly explained by this Court in Manosca v. Court of Appeals,[65] thus:

It has been explained as early as Sea v. Manila Railroad Co., that:

A historical research discloses the meaning of the term public use to be one of constant growth. As
society advances, its demands upon the individual increases and each demand is a new use to which
the resources of the individual may be devoted. for whatever is beneficially employed for the
community is a public use.

Chief Justice Enrique M. Fernando states:

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 so any
more. 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 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 requirements of public use.

Chief Justice Fernando, writing the ponencia in J.M. Tuason & Co. vs. Land Tenure Administration, has
viewed the Constitution a dynamic instrument and one that is not to be construed narrowly or
pedantically so as to enable it to meet adequately whatever problems the future has in store. Fr.
Joaquin Bernas, a noted constitutionalist himself, has aptly observed that what, in fact, has ultimately
emerged is a concept of public use which is just as broad as public welfare.

Petitioners ask: But (w)hat is the so-called unusual interest that the expropriation of (Felix Manalos)
birthplace become so vital as to be a public use appropriate for the exercise of the power of eminent
domain when only members of the Iglesia ni Cristo would benefit? This attempt to give some religious
perspective to the case deserves little consideration, for what should be significant is the principal
objective of, not the casual consequences that might follow from, the exercise of the power. The
purpose in setting up the marker is essentially to recognize the distinctive contribution of the late
Felix Manalo to the culture of the Philippines, rather than to commemorate his founding and
leadership of the Iglesia ni Cristo. The practical reality that greater benefit may be derived by
members of the Iglesia ni Cristo than by most others could well be true but such a peculiar advantage
still remains to be merely incidental and secondary in nature. Indeed, that only a few would actually
benefit from the expropriation of property, does not necessarily diminish the essence and character of
public use.

The petitioner asserts that the respondent must comply with the requirements for the
establishment of an easement of right-of-way, more specifically, the road must be constructed at the
point least prejudicial to the servient state, and that there must be no adequate outlet to a public
highway. The petitioner asserts that the portion of the lot sought to be expropriated is located at the
middle portion of the petitioners entire parcel of land, thereby splitting the lot into two halves, and
making it impossible for the petitioner to put up its school building and worship center.

The subject property is expropriated for the purpose of constructing a road. The respondent is not
mandated to comply with the essential requisites for an easement of right-of-way under the New Civil
Code. Case law has it that in the absence of legislative restriction, the grantee of the power of
eminent domain may determine the location and route of the land to be taken [66] unless such
determination is capricious and wantonly injurious. [67] Expropriation is justified so long as it is for the
public good and there is genuine necessity of public character. [68] Government may not capriciously
choose what private property should be taken. [69]

The respondent has demonstrated the necessity for constructing a road from E. R. Santos Street
to Sto. Tomas Bukid. The witnesses, who were residents of Sto. Tomas Bukid, testified that although
there were other ways through which one can enter the vicinity, no vehicle, however, especially fire
trucks, could enter the area except through the newly constructed Damayan Street. This is more than
sufficient to establish that there is a genuine necessity for the construction of a road in the area. After
all, absolute necessity is not required, only reasonable and practical necessity will suffice. [70]
 Nonetheless, the respondent failed to show the necessity for constructing the road particularly in
the petitioners property and not elsewhere. [71] We note that the whereas clause of the ordinance
states that the 51-square meter lot is the shortest and most suitable access road to connect Sto.
Tomas Bukid to E. R. Santos Street. The respondents complaint also alleged that the said portion of
the petitioners lot has been surveyed as the best possible ingress and egress. However, the
respondent failed to adduce a preponderance of evidence to prove its claims.

On this point, the trial court made the following findings:

The contention of the defendants that there is an existing alley that can serve the purpose of the
expropriator is not accurate. An inspection of the vicinity reveals that the alley being referred to by
the defendants actually passes thru Bagong Taon St. but only about one-half (1/2) of its entire length
is passable by vehicle and the other half is merely a foot-path. It would be more inconvenient to
widen the alley considering that its sides are occupied by permanent structures and its length from
the municipal road to the area sought to be served by the expropriation is considerably longer than
the proposed access road. The area to be served by the access road is composed of compact wooden
houses and literally a slum area. As a result of the expropriation of the 51-square meter portion of the
property of the intervenor, a 3-meter wide road open to the public is created. This portion of the
property of the intervenor is the most convenient access to the interior of Sto. Tomas Bukid since it is
not only a short cut to the interior of the Sto. Tomas Bukid but also an easy path for vehicles entering
the area, not to mention the 3-meter wide road requirement of the Fire Code. [72]

However, as correctly pointed out by the petitioner, there is no showing in the record that an
ocular inspection was conducted during the trial. If, at all, the trial court conducted an ocular
inspection of the subject property during the trial, the petitioner was not notified thereof. The
petitioner was, therefore, deprived of its right to due process. It bears stressing that an ocular
inspection is part of the trial as evidence is thereby received and the parties are entitled to be present
at any stage of the trial. [73]Consequently, where, as in this case, the petitioner was not notified of any
ocular inspection of the property, any factual finding of the court based on the said inspection has no
probative weight. The findings of the trial court based on the conduct of the ocular inspection must,
therefore, be rejected.

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision and Resolution of the
Court of Appeals are REVERSED AND SET ASIDE. The RTC is ordered to dismiss the complaint of the
respondent without prejudice to the refiling thereof.

SO ORDERED.

REPUBLIC VS GINGOYON

After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the
possession of PIATCO, despite the avowed intent of the Government to put the airport terminal into
immediate operation. The Government and PIATCO conducted several rounds of negotiation regarding
the NAIA 3 facilities.[8] It also appears that arbitral proceedings were commenced before the
International Chamber of Commerce International Court of Arbitration and the International Centre for
the Settlement of Investment Disputes, [9] although the Government has raised jurisdictional questions
before those two bodies.[10]
Then, on 21 December 2004, the Government[11] filed a Complaint for expropriation with the Pasay
City Regional Trial Court (RTC), together with an Application for Special Raffle seeking the immediate
holding of a special raffle. The Government sought upon the filing of the complaint the issuance of a
writ of possession authorizing it to take immediate possession and control over the NAIA 3 facilities.

The Government also declared that it had deposited the amount of P3,002,125,000.00[12] (3 Billion)
[13]
in Cash with the Land Bank of the Philippines, representing the NAIA 3 terminals assessed value for
taxation purposes.[14]

The case[15] was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge Hon.
Henrick F. Gingoyon (Hon. Gingoyon). On the same day that the Complaint was filed, the RTC issued
an Order[16] directing the issuance of a writ of possession to the Government, authorizing it to take or
enter upon the possession of the NAIA 3 facilities. Citing the case of City of Manila v. Serrano,[17] the
RTC noted that it had the ministerial duty to issue the writ of possession upon the filing of a complaint
for expropriation sufficient in form and substance, and upon deposit made by the government of the
amount equivalent to the assessed value of the property subject to expropriation. The RTC found
these requisites present, particularly noting that [t]he case record shows that [the Government has]
deposited the assessed value of the [NAIA 3 facilities] in the Land Bank of the Philippines, an
authorized depositary, as shown by the certification attached to their complaint. Also on the same
day, the RTC issued a Writ of Possession. According to PIATCO, the Government was able to take
possession over the NAIA 3 facilities immediately after the Writ of Possession was issued.[18]

However, on 4 January 2005, the RTC issued another Order designed to supplement its 21 December
2004 Order and the Writ of Possession. In the 4 January 2005 Order, now assailed in the present
petition, the RTC noted that its earlier issuance of its writ of possession was pursuant to Section 2,
Rule 67 of the 1997 Rules of Civil Procedure. However, it was observed that Republic Act No. 8974
(Rep. Act No. 8974), otherwise known as An Act to Facilitate the Acquisition of Right-of-Way, Site or
Location for National Government Infrastructure Projects and For Other Purposes and its Implementing
Rules and Regulations (Implementing Rules) had amended Rule 67 in many respects.

There are at least two crucial differences between the respective procedures under Rep. Act No.
8974 and Rule 67. Under the statute, the Government is required to make immediate payment to the
property owner upon the filing of the complaint to be entitled to a writ of possession, whereas in Rule
67, the Government is required only to make an initial deposit with an authorized government
depositary. Moreover, Rule 67 prescribes that the initial deposit be equivalent to the assessed value of
the property for purposes of taxation, unlike Rep. Act No. 8974 which provides, as the relevant
standard for initial compensation, the market value of the property as stated in the tax declaration or
the current relevant zonal valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and
the value of the improvements and/or structures using the replacement cost method.

Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the
Implementing Rules, the RTC made key qualifications to its earlier issuances. First, it directed the Land
Bank of the Philippines, Baclaran Branch (LBP-Baclaran), to immediately release the amount of
US$62,343,175.77 to PIATCO, an amount which the RTC characterized as that which the Government
specifically made available for the purpose of this expropriation; and such amount to be deducted
from the amount of just compensation due PIATCO as eventually determined by the RTC. Second, the
Government was directed to submit to the RTC a Certificate of Availability of Funds signed by
authorized officials to cover the payment of just compensation. Third, the Government was directed to
maintain, preserve and safeguard the NAIA 3 facilities or perform such as acts or activities in
preparation for their direct operation of the airport terminal, pending expropriation proceedings and
full payment of just compensation. However, the Government was prohibited from performing acts of
ownership like awarding concessions or leasing any part of [NAIA 3] to other parties. [19]

The very next day after the issuance of the assailed 4 January 2005 Order, the Government
filed an Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005. On 7
January 2005, the RTC issued another Order, the second now assailed before this Court, which
appointed three (3) Commissioners to ascertain the amount of just compensation for the NAIA 3
Complex. That same day, the Government filed a Motion for Inhibition of Hon. Gingoyon.

The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10 January
2005. On the same day, it denied these motions in an Omnibus Order dated 10 January 2005. This is
the third Order now assailed before this Court. Nonetheless, while the Omnibus Order affirmed the
earlier dispositions in the 4 January 2005 Order, it excepted from affirmance the superfluous part of
the Order prohibiting the plaintiffs from awarding concessions or leasing any part of [NAIA 3] to other
parties.[20]

Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13 January 2005.
The petition prayed for the nullification of the RTC orders dated 4 January 2005, 7 January 2005, and
10 January 2005, and for the inhibition of Hon. Gingoyon from taking further action on the
expropriation case. A concurrent prayer for the issuance of a temporary restraining order and
preliminary injunction was granted by this Court in a Resolution dated 14 January 2005.[21]

The Government, in imputing grave abuse of discretion to the acts of Hon. Gingoyon, raises five
general arguments, to wit:

(i) that Rule 67, not Rep. Act No. 8974, governs the present expropriation proceedings;

(ii) that Hon. Gingoyon erred when he ordered the immediate release of the amount of US$62.3
Million to PIATCO considering that the assessed value as alleged in the complaint was only P3 Billion;

(iii) that the RTC could not have prohibited the Government from enjoining the performance of
acts of ownership;

(iv) that the appointment of the three commissioners was erroneous; and

(v) that Hon. Gingoyon should be compelled to inhibit himself from the expropriation case. [22]

Before we delve into the merits of the issues raised by the Government, it is essential to consider the
crucial holding of the Court in its 2004 Resolution in Agan, which we repeat below:

This Court, however, is not unmindful of the reality that the structures comprising the
NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their
construction. For the government to take over the said facility, it has to
compensate respondent PIATCO as builder of the said structures. The
compensation must be just and in accordance with law and equity for the
government can not unjustly enrich itself at the expense of PIATCO and its
investors.[23]

This pronouncement contains the fundamental premises which permeate this decision of the Court.
Indeed, Agan, final and executory as it is, stands as governing law in this case, and any disposition of
the present petition must conform to the conditions laid down by the Court in its 2004 Resolution.

The 2004 Resolution Which Is

Law of This Case Generally
Permits Expropriation
 The pronouncement in the 2004 Resolution is especially significant to this case in
two aspects, namely: (i) that PIATCO must receive payment of just compensation
determined in accordance with law and equity; and (ii) that the government is barred from
taking over NAIA 3 until such just compensation is paid. The parties cannot be allowed to
evade the directives laid down by this Court through any mode of judicial action, such as the
complaint for eminent domain.

It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory
guidelines which the Government must observe before it could acquire the NAIA 3 facilities. Thus, the
actions of respondent judge under review, as well as the arguments of the parties must, to merit
affirmation, pass the threshold test of whether such propositions are in accord with the 2004
Resolution.

The Government does not contest the efficacy of this pronouncement in the 2004 Resolution,
[24]
thus its application

to the case at bar is not a matter of controversy. Of course, questions such as what is the standard of
just compensation and which particular laws and equitable principles are applicable, remain in dispute
and shall be resolved forthwith.

The Government has chosen to resort to expropriation, a remedy available under the law,
which has the added benefit of an integrated process for the determination of just compensation and
the payment thereof to PIATCO. We appreciate that the case at bar is a highly unusual case, whereby
the Government seeks to expropriate a building complex constructed on land which the State already
owns.[25] There is an inherent illogic in the resort to eminent domain on property already owned by the
State. At first blush, since the State already owns the property on which NAIA 3 stands, the proper
remedy should be akin to an action for ejectment.

However, the reason for the resort by the Government to expropriation proceedings is understandable
in this case. The 2004 Resolution, in requiring the payment of just compensation prior to the takeover
by the Government of
NAIA 3, effectively precluded it from acquiring possession or ownership of the NAIA 3 through the
unilateral exercise of its rights as the owner of the ground on which the facilities stood. Thus, as
things stood after the 2004 Resolution, the right of the Government to take over the NAIA 3 terminal
was preconditioned by lawful order on the payment of just compensation to PIATCO as builder of the
structures.

The determination of just compensation could very well be agreed upon by the parties without
judicial intervention, and it appears that steps towards that direction had been engaged in. Still,
ultimately, the Government resorted to its inherent power of eminent domain through expropriation
proceedings. Is eminent domain appropriate in the first place, with due regard not only to the law on
expropriation but also to the Courts 2004 Resolution in Agan?

The right of eminent domain extends to personal and real property, and the NAIA 3 structures,
adhered as they are to the soil, are considered as real property. [26] The public purpose for the
expropriation is also beyond dispute. It should also be noted that Section 1 of Rule 67 (on
Expropriation) recognizes the possibility that the property sought to be expropriated may be titled in
the name of the

Republic of the Philippines, although occupied by private individuals, and in such case an averment to
that effect should be made in the complaint. The instant expropriation complaint did aver that the
NAIA 3 complex stands on a parcel of land owned by the Bases Conversion Development Authority,
another agency of [the Republic of the Philippines].[27]

Admittedly, eminent domain is not the sole judicial recourse by which the Government may
have acquired the NAIA 3 facilities while satisfying the requisites in the 2004 Resolution. Eminent
domain though may be the most effective, as well as the speediest means by which such goals may
be accomplished. Not only does it enable immediate possession after satisfaction of the requisites
under the law, it also has a built-in procedure through which just compensation may be ascertained.
Thus, there should be no question as to the propriety of eminent domain proceedings in this case.

Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to apply
or construe these rules in accordance with the Courts prescriptions in the 2004 Resolution to achieve
the end effect that the Government may validly take over the NAIA 3 facilities. Insofar as this case is
concerned, the 2004 Resolution is effective not only as a legal precedent, but as the source of rights
and prescriptions that must be guaranteed, if not enforced, in the resolution of this petition.
Otherwise, the integrity and efficacy of the rulings of this Court will be severely diminished.

It is from these premises that we resolve the first question, whether Rule 67 of the Rules of Court or
Rep. Act No. 8974 governs the expropriation proceedings in this case.

Application of Rule 67 Violates

the 2004 Agan Resolution

The Government insists that Rule 67 of the Rules of Court governs the expropriation proceedings in
this case to the exclusion of all other laws. On the other hand, PIATCO claims that it is Rep. Act No.
8974 which does apply. Earlier, we had adverted to the basic differences between the statute and the
procedural rule. Further elaboration is in order.

Rule 67 outlines the procedure under which eminent domain may be exercised by the Government. Yet
by no means does it serve at present as the solitary guideline through which the State may
expropriate private property. For example, Section 19 of the Local Government Code governs as to the
exercise by local government units of the power of eminent domain through an enabling ordinance.
And then there is Rep. Act No. 8974, which covers expropriation proceedings intended for national
government infrastructure projects.

Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner
than Rule 67, inescapably applies in instances when the national government expropriates property
for national government infrastructure projects. [28] Thus, if expropriation is engaged in by the national
government for purposes other than national infrastructure projects, the assessed value standard and
the deposit mode prescribed in Rule 67 continues to apply.

Under both Rule 67 and Rep. Act No. 8974, the Government commences expropriation proceedings
through the filing of a complaint. Unlike in the case of local governments which necessitate an
authorizing ordinance before expropriation may be accomplished, there is no need under Rule 67 or
Rep. Act No. 8974 for legislative authorization before the Government may proceed with a particular
exercise of eminent domain. The most crucial difference between Rule 67 and Rep. Act No. 8974
concerns the particular essential step the Government has to undertake to be entitled to a writ of
possession.
The first paragraph of Section 2 of Rule 67 provides:
 SEC. 2. Entry of plaintiff upon depositing value with authorized government
depository. Upon the filing of the complaint or at any time thereafter and after due notice to
the defendant, the plaintiff shall have the right to take or enter upon the possession of the
real property involved if he deposits with the authorized government depositary an
amount equivalent to the assessed value of the property for purposes of taxation
to be held by such bank subject to the orders of the court. Such deposit shall be
in money, unless in lieu thereof the court authorizes the deposit of a certificate of
deposit of a government bank of the Republic of the Philippines payable on
demand to the authorized government depositary.

In contrast, Section 4 of Rep. Act No. 8974 relevantly states:

SEC. 4. Guidelines for Expropriation Proceedings. Whenever it is necessary to acquire real property
for the right-of-way, site or location for any national government infrastructure project
through expropriation, the appropriate proceedings before the proper court under the
following guidelines:

a) Upon the filing of the complaint, and after due notice to the defendant, the
implementing agency shall immediately pay the owner of the property the amount
equivalent to the sum of (1) one hundred percent (100%) of the value of the property
based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR);
and (2) the value of the improvements and/or structures as determined under Section
7 hereof;

...

c) In case the completion of a government infrastructure project is of utmost urgency

and importance, and there is no existing valuation of the area concerned, the
implementing agency shall immediately pay the owner of the property its proffered
value taking into consideration the standards prescribed in Section 5 hereof.

Upon completion with the guidelines abovementioned, the court shall immediately
issue to the implementing agency an order to take possession of the property and start the
implementation of the project.

Before the court can issue a Writ of Possession, the implementing agency shall
present to the court a certificate of availability of funds from the proper official concerned.

...

As can be gleaned from the above-quoted texts, Rule 67 merely requires the Government to deposit
with an authorized government depositary the assessed value of the property for expropriation for it
to be entitled to a writ of possession. On the other hand, Rep. Act No. 8974 requires that the
Government make a direct payment to the property owner before the writ may issue. Moreover, such
payment is based on the zonal valuation of the BIR in the case of land, the value of the improvements
or structures under the replacement cost method, [29] or if no such valuation is available and in cases of
utmost urgency, the proffered value of the property to be seized.
 It is quite apparent why the Government would prefer to apply Rule 67 in lieu of Rep. Act No.
8974. Under Rule 67, it would not be obliged to immediately pay any amount to PIATCO before it can
obtain the writ of possession since all it need do is deposit the amount equivalent to the assessed
value with an authorized government depositary. Hence, it devotes considerable effort to point out
that Rep. Act No. 8974 does not apply in this case, notwithstanding the undeniable reality that NAIA 3
is a national government project. Yet, these efforts fail, especially considering the controlling effect of
the 2004 Resolution in Agan on the adjudication of this case.

It is the finding of this Court that the staging of expropriation proceedings in this case with the
exclusive use of Rule 67 would allow for the Government to take over the NAIA 3 facilities in a fashion
that directly rebukes our 2004 Resolution in Agan. This Court cannot sanction deviation from its own
final and executory orders.

Section 2 of Rule 67 provides that the State shall have the right to take or enter upon the
possession of the real property involved if [the plaintiff] deposits with the authorized government
depositary an amount equivalent to the assessed value of the property for purposes of taxation to be
held by such bank subject to the orders of the court. [30] It is thus apparent that under the provision, all
the Government need do to obtain a writ of possession is to deposit the amount equivalent to the
assessed value with an authorized government depositary.

Would the deposit under Section 2 of Rule 67 satisfy the requirement laid down in the 2004
Resolution that [f]or the government to take over the said facility, it has to compensate respondent
PIATCO as builder of the said structures? Evidently not.

If Section 2 of Rule 67 were to apply, PIATCO would be enjoined from receiving a single centavo
as just compensation before the Government takes over the NAIA 3 facility by virtue of a writ of
possession. Such an injunction squarely contradicts the letter and intent of the 2004 Resolution.
Hence, the position of the Government sanctions its own disregard or violation the prescription laid
down by this Court that there must first be just compensation paid to PIATCO before the Government
may take over the NAIA 3 facilities.

Thus, at the very least, Rule 67 cannot apply in this case without violating the 2004 Resolution. Even
assuming that Rep. Act No. 8974 does not govern in this case, it does not necessarily follow that Rule
67 should then apply. After all, adherence to the letter of Section 2, Rule 67 would in turn violate the
Courts requirement in the 2004 Resolution that there must first be payment of just compensation to
PIATCO before the Government may take over the property.

It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the
scheme of immediate payment in cases involving national government infrastructure projects. The
following portion of the Senate deliberations, cited by PIATCO in its Memorandum, is worth quoting to
cogitate on the purpose behind the plain meaning of the law:

THE CHAIRMAN (SEN. CAYETANO). x x x Because the Senate believes that, you know,
we have to pay the landowners immediately not by treasury bills but by cash.

Since we are depriving them, you know, upon payment, no, of possession, we
might as well pay them as much, no, hindi lang 50 percent.

xxx

THE CHAIRMAN (REP. VERGARA). Accepted.

xxx

THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the landowners, e.

THE CHAIRMAN (REP. VERGARA). Thats why we need to really secure the availability of
funds.

xxx

THE CHAIRMAN (SEN. CAYETANO). No, no. Its the same. It says here: iyong first
paragraph, diba? Iyong zonal talagang magbabayad muna. In other words, you
know, there must be a payment kaagad. (TSN, Bicameral Conference on the
Disagreeing Provisions of House Bill 1422 and Senate Bill 2117, August 29, 2000, pp. 14-20)

xxx

THE CHAIRMAN (SEN. CAYETANO). Okay, okay, no. Unang-una, it is not deposit, no. Its
payment.

REP. BATERINA. Its payment, ho, payment. (Id., p. 63)[31]

It likewise bears noting that the appropriate standard of just compensation is a substantive
matter. It is well within the province of the legislature to fix the standard, which it did through the
enactment of Rep. Act No. 8974. Specifically, this prescribes the new standards in determining the
amount of just compensation in expropriation cases relating to national government infrastructure
projects, as well as the manner of payment thereof. At the same time, Section 14 of the Implementing
Rules recognizes the continued applicability of Rule 67 on procedural aspects when it provides all
matters regarding defenses and objections to the complaint, issues on uncertain ownership and
conflicting claims, effects of appeal on the rights of the parties, and such other incidents affecting the
complaint shall be resolved under the provisions on expropriation of Rule 67 of the Rules of Court. [32]

Given that the 2004 Resolution militates against the continued use of the norm under Section 2, Rule
67, is it then possible to apply Rep. Act No. 8974? We find that it is, and moreover, its application in
this case complements rather than contravenes the prescriptions laid down in the 2004 Resolution.

Rep. Act No. 8974 Fits

to the Situation at Bar
and Complements the
2004 Agan Resolution

Rep. Act No. 8974 is entitled An Act To Facilitate The Acquisition Of Right-Of-Way, Site Or
Location For National Government Infrastructure Projects And For Other Purposes. Obviously, the law is
intended to cover expropriation proceedings intended for national government infrastructure projects.
Section 2 of Rep. Act No. 8974 explains what are considered as national government projects.

Sec. 2. National Government Projects. The term national government projects shall
refer to all national government infrastructure, engineering works and service contracts,
including projects undertaken by government-owned and controlled corporations, all
projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718,
otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary
activities, such as site acquisition, supply and/or installation of equipment and materials,
implementation, construction, completion, operation, maintenance, improvement, repair
and rehabilitation, regardless of the source of funding.

As acknowledged in the 2003 Decision, the development of NAIA 3 was made pursuant to a build-
operate-and-transfer arrangement pursuant to Republic Act No. 6957, as amended, [33] which pertains
to infrastructure or development projects normally financed by the public sector but which are now
wholly or partly implemented by the private sector. [34] Under the build-operate-and-transfer scheme, it
is the project proponent which undertakes the construction, including the financing, of a given
infrastructure facility.[35] In Tatad v. Garcia,[36] the Court acknowledged that the operator of the EDSA
Light Rail Transit project under a BOT scheme was the owner of the facilities such as the rail tracks,
rolling stocks like the coaches, rail stations, terminals and the power plant. [37]
There can be no doubt that PIATCO has ownership rights over the facilities which it had financed and
constructed. The 2004 Resolution squarely recognized that right when it mandated the payment of
just compensation to PIATCO prior to the takeover by the Government of NAIA 3. The fact that the
Government resorted to eminent domain proceedings in the first place is a concession on its part of
PIATCOs ownership. Indeed, if no such right is recognized, then there should be no impediment for the
Government to seize control of NAIA 3 through ordinary ejectment proceedings.

Since the rights of PIATCO over the NAIA 3 facilities are established, the nature of these facilities
should now be determined. Under Section 415(1) of the Civil Code, these facilities are ineluctably
immovable or real property, as they constitute buildings, roads and constructions of all kinds adhered
to the soil.[38] Certainly, the NAIA 3 facilities are of such nature that they cannot just be packed up and
transported by PIATCO like a traveling circus caravan.

Thus, the property subject of expropriation, the NAIA 3 facilities, are real property owned by
PIATCO. This point is critical, considering the Governments insistence that the NAIA 3 facilities cannot
be deemed as the right-of-way, site or location of a national government infrastructure project, within
the coverage of Rep. Act No. 8974.

There is no doubt that the NAIA 3 is not, under any sensible contemplation, a right-of-way. Yet
we cannot agree with the Governments insistence that neither could NAIA 3 be a site or location. The
petition quotes the definitions provided in Blacks Law Dictionary of location as the specific place or
position of a person or thing and site as pertaining to a place or location or a piece of property set
aside for specific use.[39] Yet even Blacks Law Dictionary provides that [t]he term [site] does not of
itself necessarily mean a place or tract of land fixed by definite boundaries. [40] One would assume that
the Government, to back up its contention, would be able to point to a clear-cut rule that a site or
location exclusively refers to soil, grass, pebbles and weeds. There is none.

Indeed, we cannot accept the Governments proposition that the only properties that may be
expropriated under Rep. Act No. 8974 are parcels of land. Rep. Act No. 8974 contemplates within its
coverage such real property constituting land, buildings, roads and constructions of all kinds adhered
to the soil. Section 1 of Rep. Act No. 8974, which sets the declaration of the laws policy, refers to real
property acquired for national government infrastructure projects are promptly paid just
compensation.[41] Section 4 is quite explicit in stating that the scope of the law relates to the
acquisition of real property, which under civil law includes buildings, roads and constructions adhered
to the soil.

It is moreover apparent that the law and its implementing rules commonly provide for a rule for
the valuation of improvements and/or structures thereupon separate from that of the land on which
such are constructed. Section 2 of Rep. Act No. 8974 itself recognizes that the improvements or
structures on the land may very well be the subject of expropriation proceedings. Section 4(a), in
relation to Section 7 of the law provides for the guidelines for the valuation of the improvements or
structures to be expropriated. Indeed, nothing in the law would prohibit the application of Section 7,
which provides for the valuation method of the improvements and or structures in the instances
wherein it is necessary for the Government to expropriate only the improvements or structures, as in
this case.

The law classifies the NAIA 3 facilities as real properties just like the soil to which they are
adhered. Any sub-classifications of real property and divergent treatment based thereupon for
purposes of expropriation must be based on substantial distinctions, otherwise the equal protection
clause of the Constitution is violated. There may be perhaps a molecular distinction between soil and
the inorganic improvements adhered thereto, yet there are no purposive distinctions that would justify
a variant treatment for purposes of expropriation. Both the land itself and the improvements
thereupon are susceptible to private ownership independent of each other, capable of pecuniary
estimation, and if taken from the owner, considered as a deprivation of property. The owner of
improvements seized through expropriation suffers the same degree of loss as the owner of land
seized through similar means. Equal protection demands that all persons or things similarly situated
should be treated alike, both as to rights conferred and responsibilities imposed. For purposes of
expropriation, parcels of land are similarly situated as the buildings or improvements constructed
thereon, and a disparate treatment between those two classes of real property infringes the equal
protection clause.

Even as the provisions of Rep. Act No. 8974 call for that laws application in this case, the
threshold test must still be met whether its implementation would conform to the dictates of the Court
in the 2004 Resolution. Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not
contravene the 2004 Resolution, which requires the payment of just compensation before any
takeover of the NAIA 3 facilities by the Government. The 2004 Resolution does not particularize the
extent such payment must be effected before the takeover, but it unquestionably requires at least
some degree of payment to the private property owner before a writ of possession may issue. The
utilization of Rep. Act No. 8974 guarantees compliance with this bare minimum requirement, as it
assures the private property owner the payment of, at the very least, the proffered value of the
property to be seized. Such payment of the proffered value to the owner, followed by the issuance of
the writ of possession in favor of the Government, is precisely the schematic under Rep. Act No. 8974,
one which facially complies with the prescription laid down in the 2004 Resolution.

Clearly then, we see no error on the part of the RTC when it ruled that Rep. Act No. 8974
governs the instant expropriation proceedings.
The Proper Amount to be Paid
under Rep. Act No. 8974

Then, there is the matter of the proper amount which should be paid to PIATCO by the
Government before the writ of possession may issue, consonant to Rep. Act No. 8974.

At this juncture, we must address the observation made by the Office of the Solicitor General in
behalf of the Government that there could be no BIR zonal valuations on the NAIA 3 facility, as
provided in Rep. Act No. 8974, since zonal valuations are only for parcels of land, not for airport
terminals. The Court agrees with this point, yet does not see it as an impediment for the application of
Rep. Act No. 8974.

It must be clarified that PIATCO cannot be reimbursed or justly compensated for the value of the
parcel of land on which NAIA 3 stands. PIATCO is not the owner of the land on which the NAIA 3 facility
is constructed, and it should not be entitled to just compensation that is inclusive of the value of the
land itself. It would be highly disingenuous to compensate PIATCO for the value of land it does not
own. Its entitlement to just compensation should be limited to the value of the improvements and/or
structures themselves. Thus, the determination of just compensation cannot include the BIR zonal
valuation under Section 4 of Rep. Act No. 8974.

Under Rep. Act No. 8974, the Government is required to immediately pay the owner of the
property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the
property based on the current relevant zonal valuation of the [BIR]; and (2) the value of the
improvements and/or structures as determined under Section 7. As stated above, the BIR zonal
valuation cannot apply in this case, thus the amount subject to immediate payment should be limited
to the value of the improvements and/or structures as determined under Section 7, with Section 7
referring to the implementing rules and regulations for the equitable valuation of the improvements
and/or structures on the land. Under the present implementing rules in place, the valuation of the
improvements/structures are to be based using the replacement cost method. [42] However, the
replacement cost is only one of the factors to be considered in determining the just compensation.

In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the payment
of just compensation should be in accordance with equity as well. Thus, in ascertaining the ultimate
amount of just compensation, the duty of the trial court is to ensure that such amount conforms not
only to the law, such as Rep. Act No. 8974, but to principles of equity as well.

Admittedly, there is no way, at least for the present, to immediately ascertain the value of the
improvements and structures since such valuation is a matter for factual determination. [43] Yet Rep. Act
No. 8974 permits an expedited means by which the Government can immediately take possession of
the property without having to await precise determination of the valuation. Section 4(c) of Rep. Act
No. 8974 states that in case the completion of a government infrastructure project is of utmost
urgency and importance, and there is no existing valuation of the area concerned, the
implementing agency shall immediately pay the owner of the property its proferred value, taking
into consideration the standards prescribed in Section 5 [of the law]. [44] The proffered value may strike
as a highly subjective standard based solely on the intuition of the government, but Rep. Act No. 8974
does provide relevant standards by which proffered value should be based, [45] as well as the certainty

of judicial determination of the propriety of the proffered value. [46]

In filing the complaint for expropriation, the Government alleged to have deposited the amount
of P3 Billion earmarked for expropriation, representing the assessed value of the property. The making
of the deposit, including the determination of the amount of the deposit, was undertaken under the
erroneous notion that Rule 67, and not Rep. Act No. 8974, is the applicable law. Still, as regards the
amount, the Court sees no impediment to recognize this sum of P3 Billion as the proffered value under
Section 4(b) of Rep. Act No. 8974. After all, in the initial determination of the proffered value, the
Government is not strictly required to adhere to any predetermined standards, although its proffered
value may later be subjected to judicial review using the standards enumerated under Section 5 of
Rep. Act No. 8974.
 How should we appreciate the questioned order of Hon. Gingoyon, which pegged the amount to
be immediately paid to PIATCO at around $62.3 Million? The Order dated 4 January 2005, which
mandated such amount, proves problematic in that regard. While the initial sum of P3 Billion may
have been based on the assessed value, a standard which should not however apply in this case, the
RTC cites without qualification Section 4(a) of Rep. Act No. 8974 as the basis for the amount of $62.3
Million, thus leaving the impression that the BIR zonal valuation may form part of the basis for just
compensation, which should not be the case. Moreover, respondent judge made no attempt to apply
the enumerated guidelines for determination of just compensation under Section 5 of Rep. Act No.
8974, as required for judicial review of the proffered value.

The Court notes that in the 10 January 2005 Omnibus Order, the RTC noted that the concessions
agreement entered into between the Government and PIATCO stated that the actual cost of building
NAIA 3 was not less than US$350 Million. [47] The RTC then proceeded to observe that while Rep. Act No.
8974 required the immediate payment to PIATCO the amount equivalent to 100% of the value of NAIA
3, the amount deposited by the Government constituted only 18% of this value. At this point, no
binding import should be given to this observation that the actual cost of building NAIA 3 was not less
than US$350 Million, as the final conclusions on the amount of just compensation can come only after
due ascertainment in accordance with the standards set under Rep. Act No. 8974, not the declarations
of the parties. At the same time, the expressed linkage between the BIR zonal valuation and the
amount of just compensation in this case, is revelatory of erroneous thought on the part of the RTC.

We have already pointed out the irrelevance of the BIR zonal valuation as an appropriate basis
for valuation in this case, PIATCO not being the owner of the land on which the NAIA 3 facilities stand.
The subject order is flawed insofar as it fails to qualify that such standard is inappropriate.

It does appear that the amount of US$62.3 Million was based on the certification issued by the
LBP-Baclaran that the Republic of the Philippines maintained a total balance in that branch amounting
to such amount. Yet the actual representation of the $62.3 Million is not clear. The Land Bank
Certification expressing such amount does state that it was issued upon request of the Manila
International Airport Authority purportedly as guaranty deposit for the expropriation complaint. [48]The
Government claims in its Memorandum that the entire amount was made available as a guaranty fund
for the final and executory judgment of the trial court, and not merely for the issuance of the writ of
possession.[49] One could readily conclude that the entire amount of US$62.3 Million was intended by
the Government to answer for whatever guaranties may be required for the purpose of the
expropriation complaint.
 Still, such intention the Government may have had as to the entire US$62.3 Million is only
inferentially established. In ascertaining the proffered value adduced by the Government, the amount
of P3 Billion as the amount deposited characterized in the complaint as to be held by [Land Bank]
subject to the [RTCs] orders, [50] should be deemed as controlling. There is no clear evidence that the
Government intended to offer US$62.3 Million as the initial payment of just compensation, the wording
of the Land Bank Certification notwithstanding, and credence should be given to the consistent
position of the Government on that aspect.

In any event, for the RTC to be able to justify the payment of US$62.3 Million to PIATCO and
not P3 Billion Pesos, he would have to establish that the higher amount represents the valuation of the
structures/improvements, and not the BIR zonal valuation on the land wherein NAIA 3 is built.
The Order dated 5 January 2005 fails to establish such integral fact, and in the absence of
contravening proof, the proffered value of P3 Billion, as presented by the Government, should prevail.

Strikingly, the Government submits that assuming that Rep. Act No. 8974 is applicable, the
deposited amount of P3 Billion should be considered as the proffered value, since the amount was
based on comparative values made by the City Assessor. [51] Accordingly, it should be deemed as
having faithfully complied with the requirements of the statute. [52] While the Court agrees that P3
Billion should be considered as the correct proffered value, still we cannot deem the Government as
having faithfully complied with Rep. Act No. 8974. For the law plainly requires direct payment to the
property owner, and not a mere deposit with the authorized government depositary. Without such
direct payment, no writ of possession may be obtained.

Writ of Possession May Not

Be Implemented Until Actual
Receipt by PIATCO of Proferred
Value

The Court thus finds another error on the part of the RTC. The RTC authorized the issuance of
the writ of possession to the Government notwithstanding the fact that no payment of any amount
had yet been made to PIATCO, despite the clear command of Rep. Act No. 8974 that there must first
be payment before the writ of possession can issue. While the RTC did direct the LBP-Baclaran to
immediately release the amount of US$62 Million to PIATCO, it should have likewise suspended the
writ of possession, nay, withdrawn it altogether, until the Government shall have actually paid PIATCO.
This is the inevitable consequence of the clear command of Rep. Act No. 8974 that requires immediate
payment of the initially determined amount of just compensation should be effected. Otherwise, the
overpowering intention of Rep. Act No. 8974 of ensuring payment first before transfer of repossession
would be eviscerated.

Rep. Act No. 8974 represents a significant change from previous expropriation laws such as Rule
67, or even Section 19 of the Local Government Code. Rule 67 and the Local Government Code merely
provided that the Government deposit the initial amounts [53] antecedent to acquiring possession of the
property with, respectively, an authorized
Government depositary[54] or the proper court. [55] In both cases, the private owner does not receive
compensation prior to the deprivation of property. On the other hand, Rep. Act No. 8974 mandates
immediate payment of the initial just compensation prior to the issuance of the writ of possession in
favor of the Government.

Rep. Act No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no
amount of statutory deconstruction can evade such requisite. It enshrines a new approach towards
eminent domain that reconciles the inherent unease attending expropriation proceedings with a
position of fundamental equity. While expropriation proceedings have always demanded just
compensation in exchange for private property, the previous deposit requirement impeded immediate
compensation to the private owner, especially in cases wherein the determination
of the final amount of compensation would prove highly disputed. Under the new modality prescribed
by Rep. Act No. 8974, the private owner sees immediate monetary recompense with the same degree
of speed as the taking of his/her property.

While eminent domain lies as one of the inherent powers of the State, there is no requirement
that it undertake a prolonged procedure, or that the payment of the private owner be protracted as far
as practicable. In fact, the expedited procedure of payment, as highlighted under Rep. Act No. 8974, is
inherently more fair, especially to the layperson who would be hard-pressed to fully comprehend the
social value of expropriation in the first place. Immediate payment placates to some degree whatever
ill-will that arises from expropriation, as well as satisfies the demand of basic fairness.

The Court has the duty to implement Rep. Act No. 8974 and to direct compliance with the requirement
of immediate payment in this case. Accordingly, the Writ of Possession dated 21 December
2004 should be held in abeyance, pending proof of actual payment by the Government to PIATCO of
the proffered value of the NAIA 3 facilities, which totals P3,002,125,000.00.
Rights of the Government
upon Issuance of the Writ
of Possession

Once the Government pays PIATCO the amount of the proffered value of P3 Billion, it will be entitled to
the Writ of Possession. However, the Government questions the qualification imposed by the RTC in its
4 January 2005 Order consisting of the prohibition on the Government from performing acts of
ownership such as awarding concessions or leasing any part of NAIA 3 to other parties. To be certain,
the RTC, in its 10 January 2005 Omnibus Order, expressly stated that it was not affirming the
superfluous part of the Order [of 4 January 2005] prohibiting the plaintiffs from awarding concessions
or leasing any part of NAIA [3] to other parties. [56] Still, such statement was predicated on the notion
that since the Government was not yet the owner of NAIA 3 until final payment of just compensation,
it was obviously incapacitated to perform such acts of ownership.

In deciding this question, the 2004 Resolution in Agan cannot be ignored, particularly the declaration
that [f]or the government to take over the said facility, it has to compensate respondent PIATCO as
builder of the said structures. The obvious import of this holding is that unless PIATCO is paid just
compensation, the Government is barred from taking over, a phrase which in the strictest sense could
encompass even a bar of physical possession of NAIA 3, much less operation of the facilities.

There are critical reasons for the Court to view the 2004 Resolution less stringently, and thus allow the
operation by the Government of NAIA 3 upon the effectivity of the Writ of Possession. For one, the
national prestige is diminished every day that passes with the NAIA 3 remaining mothballed. For
another, the continued non-use of the facilities contributes to its physical deterioration, if it has not
already. And still for another, the economic benefits to the Government and the country at large are
beyond dispute once the NAIA 3 is put in operation.

Rep. Act No. 8974 provides the appropriate answer for the standard that governs the extent of the
acts the Government may be authorized to perform upon the issuance of the writ of possession.
Section 4 states that the court shall immediately issue to the implementing agency an order to take
possession of the property and start the implementation of the project. We hold that accordingly,
once the Writ of Possession is effective, the Government itself is authorized to perform the acts that
are essential to the operation of the NAIA 3 as an international airport terminal upon the effectivity of
the Writ of Possession. These would include the repair, reconditioning and improvement of the
complex, maintenance of the existing facilities and equipment, installation of new facilities and
equipment, provision of services and facilities pertaining to the facilitation of air traffic and transport,
and other services that are integral to a modern-day international airport.
The Governments position is more expansive than that adopted by the Court. It argues that with
the writ of possession, it is enabled to perform acts de jure on the expropriated property. It
cites Republic v. Tagle,[57] as well as the statement therein that the expropriation of real property does
not include mere physical entry or occupation of land, and from them concludes that its mere physical
entry and occupation of the property fall short of the taking of title, which includes all the rights that
may be exercised by an owner over the subject property.

This conclusion is indeed lifted directly from statements in Tagle,[58] but not from the ratio
decidendi of that case. Tagle concerned whether a writ of possession in favor of the Government was
still necessary in light of the fact that it was already in actual possession of the property. In ruling that
the Government was entitled to the writ of possession, the Court in Tagle explains that such writ
vested not only physical possession, but also the legal right to possess the property. Continues the
Court, such legal right to possess was particularly important in the case, as there was a pending suit
against the Republic for unlawful detainer, and the writ of possession would serve to safeguard the
Government from eviction.[59]

At the same time, Tagle conforms to the obvious, that there is no transfer of ownership as of yet by
virtue of the writ of possession. Tagle may concede that the Government is entitled to exercise more
than just the right of possession by virtue of the writ of possession, yet it cannot be construed to grant
the Government the entire panoply of rights that are available to the owner. Certainly,
neither Tagle nor any other case or law, lends support to the Governments proposition that it acquires
beneficial or equitable ownership of the expropriated property merely through the writ of possession.

Indeed, this Court has been vigilant in defense of the rights of the property owner who has been
validly deprived of possession, yet retains legal title over the expropriated property pending payment
of just compensation. We reiterated the various doctrines of such import in our recent holding
in Republic v. Lim:[60]

The recognized rule is that title to the property expropriated shall pass from the
owner to the expropriator only upon full payment of the just compensation.
Jurisprudence on this settled principle is consistent both here and in other democratic
jurisdictions. In Association of Small Landowners in the Philippines, Inc. et al., vs. Secretary
of Agrarian Reform[[61]], thus:
 Title to property which is the subject of condemnation
proceedings does not vest the condemnor until the judgment fixing
just compensation is entered and paid, but the 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.
Significantly, in Municipality of Bian v. Garcia[[62]] 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[[63]] , we ruled that, the
process is not completed until payment of just compensation. Thus, here, the failure of the
Republic to pay respondent and his predecessors-in-interest for a period of 57 years
rendered the expropriation process incomplete.

Lim serves fair warning to the Government and its agencies who consistently refuse to pay just
compensation due to the private property owner whose property had been
expropriated. At the same time, Lim emphasizes the fragility of the rights of the Government as
possessor pending the final payment of just compensation, without diminishing the potency of such
rights. Indeed, the public policy, enshrined foremost in the Constitution, mandates that the
Government must pay for the private property it expropriates. Consequently, the proper judicial
attitude is to guarantee compliance with this primordial right to just compensation.
Final Determination of Just
Compensation Within 60 Days

The issuance of the writ of possession does not write finis to the expropriation proceedings. As earlier
pointed out, expropriation is not completed until payment to the property owner of just compensation.
The proffered value stands as merely a provisional determination of the amount of just compensation,
the payment of which is sufficient to transfer possession of the property to the Government. However,
to effectuate the transfer of ownership, it is necessary for the Government to pay the property owner
the final just compensation.

In Lim, the Court went as far as to countenance, given the exceptional circumstances of that case, the
reversion of the validly expropriated property to private ownership due to the failure of the
Government to pay just compensation in that case. [64] It was noted in that case that the Government
deliberately refused to pay just compensation. The Court went on to rule that in cases where the
government failed to pay just compensation within five (5) years from the finality of the judgment in
the expropriation proceedings, the owners concerned shall have the right to recover possession of
their property.[65]

Rep. Act No. 8974 mandates a speedy method by which the final determination of just
compensation may be had. Section 4 provides:
 In the event that the owner of the property contests the implementing agencys
proffered value, the court shall determine the just compensation to be paid the owner within
sixty (60) days from the date of filing of the expropriation case. When the decision of the
court becomes final and executory, the implementing agency shall pay the owner the
difference between the amount already paid and the just compensation as determined by
the court.

We hold that this provision should apply in this case. The sixty (60)-day period prescribed in
Rep. Act No. 8974 gives teeth to the laws avowed policy to ensure that owners of real property
acquired for national government infrastructure projects are promptly paid just compensation.[66] In
this case, there already has been irreversible delay in the prompt payment of PIATCO of just
compensation, and it is no longer possible for the RTC to determine the just compensation due PIATCO
within sixty (60) days from the filing of the complaint last 21 December 2004, as contemplated by the
law. Still, it is feasible to effectuate the spirit of the law by requiring the trial court to make such
determination within sixty (60) days from finality of this decision, in accordance with the guidelines
laid down in Rep. Act No. 8974 and its Implementing Rules.

Of course, once the amount of just compensation has been finally determined, the Government
is obliged to pay PIATCO the said amount. As shown in Limand other like-minded cases, the
Governments refusal to make such payment is indubitably actionable in court.

Appointment of Commissioners

The next argument for consideration is the claim of the Government that the RTC erred in appointing
the three commissioners in its 7 January 2005 Order without prior consultation with either the
Government or PIATCO, or without affording the Government the opportunity to object to the
appointment of these commissioners. We can dispose of this argument without complication.

It must be noted that Rep. Act No. 8974 is silent on the appointment of commissioners tasked with the
ascertainment of just compensation.[67] This protocol though is sanctioned under Rule 67. We rule that
the appointment of commissioners under Rule 67 may be resorted to, even in expropriation
proceedings under Rep. Act No. 8974, since the application of the provisions of Rule 67 in that regard
do not conflict with the statute. As earlier stated, Section 14 of the Implementing Rules does allow
such other incidents affecting the complaint to be resolved under the provisions on expropriation of
Rule 67 of the Rules of Court. Even without Rule 67, reference during trial to a commissioner of the
examination of an issue of fact is sanctioned under Rule 32 of the Rules of Court.

But while the appointment of commissioners under the aegis of Rule 67 may be sanctioned in
expropriation proceedings under Rep. Act No. 8974, the standards to be observed for the
determination of just compensation are provided not in Rule 67 but in the statute. In particular, the
governing standards for the determination of just compensation for the NAIA 3 facilities are found in
Section 10 of the Implementing Rules for Rep. Act No. 8974, which provides for the replacement cost
method in the valuation of improvements and structures. [68]

Nothing in Rule 67 or Rep. Act No. 8974 requires that the RTC consult with the parties in the
expropriation case on who should be appointed as commissioners. Neither does the Court feel that
such a requirement should be imposed in this case. We did rule in Municipality of Talisay v.
Ramirez[69] that there is nothing to prevent [the trial court] from seeking the recommendations of the
parties on [the] matter [of appointment of commissioners], the better to ensure their fair
representation.[70] At the same time, such solicitation of recommendations is not obligatory on the part
of the court, hence we cannot impute error on the part of the RTC in its exercise of solitary discretion
in the appointment of the commissioners.

What Rule 67 does allow though is for the parties to protest the appointment of any of these
commissioners, as provided under Section 5 of the Rule. These objections though must be made filed
within ten (10) days from service of the order of appointment of the commissioners. [71] In this case, the
proper recourse of the Government to challenge the choice of the commissioners is to file an objection
with the trial court, conformably with Section 5, Rule 67, and not as it has done, assail the same
through a special civil action for certiorari. Considering that the expropriation proceedings in this case
were effectively halted seven (7) days after the Order appointing the commissioners,[72] it is
permissible to allow the parties to file their objections with the RTC within five (5) days from finality of
this decision.
Insufficient Ground for Inhibition
of Respondent Judge

The final argument for disposition is the claim of the Government is that Hon. Gingoyon has prejudged
the expropriation case against the Governments cause and, thus, should be required to inhibit himself.
This grave charge is predicated on facts which the Government characterizes as undeniable. In
particular, the Government notes that the 4 January 2005 Order was issued motu proprio, without any
preceding motion, notice or hearing. Further, such order, which directed the payment of US$62 Million
to PIATCO, was attended with error in the computation of just compensation. The Government also
notes that the said Order was issued even before summons had been served on PIATCO.

The disqualification of a judge is a deprivation of his/her judicial power [73] and should not be allowed on
the basis of mere speculations and surmises. It certainly cannot be predicated on the adverse nature
of the judges rulings towards the movant for inhibition, especially if these rulings are in accord with
law. Neither could inhibition be justified merely on the erroneous nature of the rulings of the judge. We
emphasized in Webb v. People:[74]

To prove bias and prejudice on the part of respondent judge, petitioners harp on
the alleged adverse and erroneous rulings of respondent judge on their various
motions. By themselves, however, they do not sufficiently prove bias and
prejudice to disqualify respondent judge. To be disqualifying, the bias and
prejudice must be shown to have stemmed from an extrajudicial source and result
in an opinion on the merits on some basis other than what the judge learned from
his participation in the case. Opinions formed in the course of judicial proceedings,
although erroneous, as long as they are based on the evidence presented and conduct
observed by the judge, do not prove personal bias or prejudice on the part of the judge. As
a general rule, repeated rulings against a litigant, no matter how erroneous and
vigorously and consistently expressed, are not a basis for disqualification of a
judge on grounds of bias and prejudice. Extrinsic evidence is required to establish
bias, bad faith, malice or corrupt purpose, in addition to the palpable error which
may be inferred from the decision or order itself. Although the decision may seem
so erroneous as to raise doubts concerning a judge's integrity, absent extrinsic
evidence, the decision itself would be insufficient to establish a case against the
judge. The only exception to the rule is when the error is so gross and patent as
to produce an ineluctable inference of bad faith or malice.[75]

The Governments contentions against Hon. Gingoyon are severely undercut by the fact that the 21
December 2004 Order, which the 4 January 2005 Order sought to rectify, was indeed severely flawed
as it erroneously applied the provisions of Rule 67 of the Rules of Court, instead of Rep. Act No. 8974,
in ascertaining compliance with the requisites for the issuance of the writ of possession. The 4 January
2005 Order, which according to the Government establishes Hon. Gingoyons bias, was promulgated
precisely to correct the previous error by applying the correct provisions of law. It would not speak well
of the Court if it sanctions a judge for wanting or even attempting to correct a previous erroneous
order which precisely is the right move to take.

Neither are we convinced that the motu proprio issuance of the 4 January 2005 Order, without the
benefit of notice or hearing, sufficiently evinces bias on the part of Hon. Gingoyon. The motu
proprio amendment by a court of an erroneous order previously issued may be sanctioned depending
on the circumstances, in line with the long-recognized principle that every court has inherent power to
do all things reasonably necessary for the administration of justice within the scope of its jurisdiction.
[76]
Section 5(g), Rule 135 of the Rules of Court further recognizes the inherent power of courts to
amend and control its process and orders so as to make them conformable to law and justice, [77] a
power which Hon. Gingoyon noted in his 10 January 2005 Omnibus Order.[78] This inherent power
includes the right of the court to reverse itself, especially when in its honest opinion it has committed
an error or mistake in judgment, and that to adhere to its decision will cause injustice to a party
litigant.[79]

Certainly, the 4 January 2005 Order was designed to make the RTCs previous order conformable to law
and justice, particularly to apply the correct law of the case. Of course, as earlier established, this
effort proved incomplete, as the 4 January 2005 Order did not correctly apply Rep. Act No. 8974 in
several respects. Still, at least, the 4 January 2005 Order correctly reformed the most basic premise of
the case that Rep. Act No. 8974 governs the expropriation proceedings.
Nonetheless, the Government belittles Hon. Gingoyons invocation of Section 5(g), Rule 135 as patently
without merit. Certainly merit can be seen by the fact that the 4 January 2005 Order reoriented the
expropriation proceedings towards the correct governing law. Still, the Government claims that the
unilateral act of the RTC did not conform to law or justice, as it was not afforded the right to be heard.

The Court would be more charitably disposed towards this argument if not for the fact that the
earlier order with the 4 January 2005 Order sought to correct was itself issued without the benefit of
any hearing. In fact, nothing either in Rule 67 or Rep. Act No. 8975 requires the conduct of a hearing
prior to the issuance of the writ of possession, which by design is available immediately upon the filing
of the complaint provided that the requisites attaching thereto are present. Indeed, this expedited
process for the obtention of a writ of possession in expropriation cases comes at the expense of the
rights of the property owner to be heard or to be deprived of possession. Considering these
predicates, it would be highly awry to demand that an order modifying the earlier issuance of a writ of
possession in an expropriation case be barred until the staging of a hearing, when the issuance of the
writ of possession itself is not subject to hearing. Perhaps the conduct of a hearing under these
circumstances would be prudent. However, hearing is not mandatory, and the failure to conduct one
does not establish the manifest bias required for the inhibition of the judge.

The Government likewise faults Hon. Gingoyon for using the amount of US$350 Million as the basis for
the 100% deposit under Rep. Act No. 8974. The Court has noted that this statement was predicated on
the erroneous belief that the BIR zonal valuation applies as a standard for determination of just
compensation in this case. Yet this is manifest not of bias, but merely of error on the part of the judge.
Indeed, the Government was not the only victim of the errors of the RTC in the assailed orders. PIATCO
itself was injured by the issuance by the RTC of the writ of possession, even though the former had yet
to be paid any amount of just compensation. At the same time, the Government was also prejudiced
by the erroneous ruling of the RTC that the amount of US$62.3 Million, and not P3 Billion, should be
released to PIATCO.

The Court has not been remiss in pointing out the multiple errors committed by the RTC in its
assailed orders, to the prejudice of both parties. This attitude of error towards all does not ipso
facto negate the charge of bias. Still, great care should be had in requiring the inhibition of judges
simply because the magistrate did err. Incompetence may be a ground for administrative sanction, but
not for inhibition, which requires lack of objectivity or impartiality to sit on a case.

The Court should necessarily guard against adopting a standard that a judge should be inhibited
from hearing the case if one litigant loses trust in the judge. Such loss of trust on the part of the
Government may be palpable, yet inhibition cannot be grounded merely on the feelings of the party-
litigants. Indeed, every losing litigant in any case can resort to claiming that the judge was biased, and
he/she will gain a sympathetic ear from friends, family, and people who do not understand the judicial
process. The test in believing such a proposition should not be the vehemence of the litigants claim of
bias, but the Courts judicious estimation, as people who know better than to believe any old cry of
wolf!, whether such bias has been irrefutably exhibited.

The Court acknowledges that it had been previously held that at the very first sign of lack of
faith and trust in his actions, whether well-grounded or not, the judge has no other alternative but to
inhibit himself from the case.[80] But this doctrine is qualified by the entrenched rule that a judge may
not be legally prohibited from sitting in a litigation, but when circumstances appear that will induce
doubt to his honest actuations and probity in favor of either party, or incite such state of mind, he
should conduct a careful self-
examination. He should exercise his discretion in a way that the people's faith in the Courts of Justice
is not impaired.[81] And a self-assessment by the judge that he/she is not impaired to hear the case will
be respected by the Court absent any evidence to the contrary. As held in Chin v. Court of Appeals:

An allegation of prejudgment, without more, constitutes mere conjecture and is not

one of the "just and valid reasons" contemplated in the second paragraph of Rule 137 of the
Rules of Court for which a judge may inhibit himself from hearing the case. We have
repeatedly held that mere suspicion that a judge is partial to a party is not enough. Bare
allegations of partiality and prejudgment will not suffice in the absence of clear and
convincing evidence to overcome the presumption that the judge will undertake his noble
role to dispense justice according to law and evidence and without fear or favor. There
should be adequate evidence to prove the allegations, and there must be showing that the
judge had an interest, personal or otherwise, in the prosecution of the case. To be a
disqualifying circumstance, the bias and prejudice must be shown to have stemmed from an
extrajudicial source and result in an opinion on the merits on some basis other than what
the judge learned from his participation in the case. [82]

The mere vehemence of the Governments claim of bias does not translate to clear and convincing
evidence of impairing bias. There is no sufficient ground to direct the inhibition of Hon. Gingoyon from
hearing the expropriation case.

In conclusion, the Court summarizes its rulings as follows:

(1) The 2004 Resolution in Agan sets the base requirement that has to be observed before the
Government may take over the NAIA 3, that there must be payment to PIATCO of just compensation in
accordance with law and equity. Any ruling in the present expropriation case must be conformable to
the dictates of the Court as pronounced in the Agan cases.

(2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment by
the Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides certain
valuation standards or methods for the determination of just compensation.

(3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the Government
over NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3 Billion, representing the
proffered value of NAIA 3 under Section 4(c) of the law.
(4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of the NAIA
3 Airport terminal project by performing the acts that are essential to the operation of the NAIA 3 as
an international airport terminal upon the effectivity of the Writ of Possession, subject to the
conditions above-stated. As prescribed by the Court, such authority encompasses the repair,
reconditioning and improvement of the complex, maintenance of the existing facilities and equipment,
installation of new facilities and equipment, provision of services and facilities pertaining to the
facilitation of air traffic and transport, and other services that are integral to a modern-day
international airport.[83]

(5) The RTC is mandated to complete its determination of the just compensation within sixty (60) days
from finality of this Decision. In doing so, the RTC is obliged to comply with law and equity as ordained
in Again and the standard set under Implementing Rules of Rep. Act No. 8974 which is the
replacement cost method as the standard of valuation of structures and improvements.
(6) There was no grave abuse of discretion attending the RTC Order appointing the commissioners for
the purpose of determining just compensation. The provisions on commissioners under Rule 67 shall
apply insofar as they are not inconsistent with Rep. Act No. 8974, its Implementing Rules, or the
rulings of the Court in Agan.
(7) The Government shall pay the just compensation fixed in the decision of the trial court to PIATCO
immediately upon the finality of the said decision.

(8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon.

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

WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January 2005 and 10
January 2005 of the lower court. Said orders are AFFIRMED with the following MODIFICATIONS:

1) The implementation of the Writ of Possession dated 21 December 2005 is HELD IN

ABEYANCE, pending payment by petitioners to PIATCO of the amount of Three Billion Two
Million One Hundred Twenty Five Thousand Pesos (P3,002,125,000.00), representing the
proffered value of the NAIA 3 facilities;
2) Petitioners, upon the effectivity of the Writ of Possession, are authorized start the
implementation of the Ninoy Aquino International Airport Pasenger Terminal III project by
 performing the acts that are essential to the operation of the said International Airport
Passenger Terminal project;
3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to
determine the just compensation to be paid to PIATCO by the Government.

The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that the
parties are given ten (10) days from finality of this Decision to file, if they so choose, objections to the
appointment of the commissioners decreed therein.

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

TAXATION

YOUNG MENS ASSOCIATION VS CIR

The question at issue in this case is whether or not the building and grounds of the Young Men's Christian Association of
Manila are subject to taxation, under section 48 of the charter of the city of Manila quoted in the footnote [syllabus].

The city of Manila, contending that the property is taxable, assessed it and levied a tax thereon. It was paid under protest
and this action begun to recover it on the ground that the property was exempt from taxation under the charter of the city
of Manila. The decision was for the city and the association appealed.

The Young Men's Christian Association came to the Philippine with the army of occupation in 1898. When the large body
of troops in Manila was removed to permanent quarters at Fort William McKinley in February, 1905, an independent
association for Manila was organized under the direction of the Army and navy departments. Shortly after the organization
of the association the directors made a formal request to the international committee of the Young Men's Christian
Association in New York City for the assistance and cooperation of its foreign department. I response to this request Mr.
John R. Mott, general secretary of the foreign department, visited Manila in January 1907. After a conference with the
directors and interested friends it was decided to conduct a campaign to secure funds for an adequate and permanent
association. In the name of the international committee and friends in America Mr. Mott guaranteed P170,000 for the
construction of a building on condition that friend in the Philippines secure the site and adequately furnish the building.
The campaign for funds was begun here on February 15, 1907, and, by the 15th of March following, P83,000 was
subscribed, nearly one thousand different persons contributing. Thereupon the Young Men's Christian Association of
Manila was incorporated under the law of the Philippine Islands and received its character in June, 1907.

A site for the new building was selected on Calle Concepcion, Ermita, and the building contract was let on the 8th of
January following. The cornerstone was laid with appropriate ceremonies on July 10, 1908, and the building was formally
dedicated on October 20, 1909.

The building is composed of three parts. The main structure, located in the center, is three stories high and includes a
reception hall, social hall and game rooms, lecture room, library, reading room and rooming apartments. The small
building lying to the left of the principal structure, as one faces the front from Called Concepcion, is the kitchen and
servant's quarters. The large wing to the right is known as the athletic building, where the bowling alleys, swimming pool,
locker rooms and gymnasium-auditorium are located. The construction is of reinforced concrete with steel trussed roof
covered with interlocking red tiles.

The main or central portion of the building is 150 by 45 feet and stands 20 meters back from the sidewalk. An iron canopy,
suspended by brackets, projects over the driveway which lies in front and shelters the main entrance. A wide arched
doorway opens into a large reception room, on the left of which is the public office and the secretary's private office, while
on the right is the reading and writing rooms, and beyond that the library, each about 30 feet square. From the reception
room, on the left, a broad concrete stairway leads to the second floor.

Passing out of the rear of the reception hall one enters upon a veranda some 15 feet in width running the full length of the
main structure which looks out on the tennis courts and affords an excellent place for lounging, games and general social
purposes. To the left of the entrance hall and also opening upon the veranda are two large rooms of about the same size
as those on the right of the reception hall, the first being the billiard room and the other the restaurant. The athletic
building is entered from the rear veranda. It is a two story wing 68 by 85 feet. Passing from the veranda into the athletic
hall one finds first, on the left, the toilet room, and beyond this, to the rear, the shower baths and locker rooms. The
swimming pool is in the center of the athletic wing and is 60 by 19 feet in size, lined with cement. To the right of the
swimming pool are the bowling alleys. A wide stairways leads to the second floor. Above the swimming-pool and bowling
alley is a large room 50 by 85 feet which is the gymnasium and also the auditorium when occasion requires. About one-
third of the roof converting the athletic wing is used as a roof garden.

The second and third floors of the main building are given over almost wholly to rooming apartments and baths. On the
second floor over the entrance hall is a members' parlor, from which a small balcony projects over the main entrance. The
remainder of the second floor and all to the third are composed of the living rooms. These apartments, of which there are
14 on the second and 20 on the third floor are approximately 18 by 14 feet each. They provide accommodations for 64
men.

The purposes of the association, as set forth in its charter and constitution, are:

To develop the Christian character and usefulness of its members, to improve the spiritual, intellectual, social and
physical condition of young men, and to acquire, hold, mortgage, and dispose of the necessary lands, buildings
and personal property for the use of said corporation exclusively for religious, charitable and educational
purposes, and not for investment or profit.

The purposes of this association shall be exclusively religious, charitable and educational, in developing the
Christian character and usefulness of its members and in improving the spiritual, mental, social and physical
condition of young men.

Speaking generally, the association claims exemption from taxation on the ground that it is a religious, charitable and
educational institution combined. That it has an educational department is not denied. It is undisputed that the aim of this
department is to furnish, at much less than cost, instruction in subjects that will greatly increase the mental efficiency and
wage-earning capacity of young men, prepare them in special lines of business and offer them special lines of study.
Attention is given to subjects included in civil service and consular examinations both here and in the United States. The
courses offer commercial subjects, as well as many others, and include stenography and typewriting, bookkeeping,
arithmetic, English composition, foreign languages, including elementary and advanced Spanish and Tagalog, special
courses in Philippine history, public speaking, surveying, horticulture, tropical dependencies, and the group of subjects
required for entrance into the consular services, such as political economy, American and modern history. Courses are
also offered in law, social, ethics, political economy and other subjects.

The institution has also its religious department. In that department there are, generally speaking, three main lines of work
Bible study, religious meetings and special classes. Course are offered in the Life of Christ and the Old Testament and
in the larger social significance of the teachings of Jesus. Meetings are held on Sunday afternoons and several times
during the week and courses are offered in the study of missions, in the method of teaching the Bible and kindred
subjects.

The atmosphere of the Young Men's Christian Association is distinctly religious and there is constant effort on the part of
the officials to create a religious spirit; and to that end there is continuous pressure to induce members to attend not only
the religious services of the association but also those of one or another of the churches of Manila. While the association
is nonsectarian, it is preeminently religious; and the fundamental basis and groundwork is the Christian religion. All of the
officials of the association are devoted Christians, members of a church, and have dedicated their lives to the spread of
the Christian principles and building of Christian character.

The institution also has charitable features. It makes no profit on any of its activities. The professors and instructors in all
departments serve without pay and freely give of their time and ability to further the purposes of the institution. The chief
secretary and his assistant receive no salary from the institution. Whatever they are paid comes from the United States. In
estimating the cost of instruction in the various departments, or of the other things for which pay is received, no account is
taken of the interest on the money invested in the grounds and building, of deterioration in value resulting from the lapse
of time, or of the fact that the professors and instructors and certain officials receive no pay. We have, then, a building and
grounds, professors and instructors, and certain institution officials, furnished free of charge, and which makes no profit
even on that basis. This, it would seem, would lend some color to the claim that the association takes on some of the
aspect of a charitable institution. While it appears that the association is not exclusively religious or charitable or
educational, it is demonstrated that it is a happy combination of all three, giving to its membership the religious
opportunities of the church, the educational opportunities of the school and the blessings of charity where needed without
the recipient feeling or even knowing that he is the object of charity.

It is claimed, however, that the institution is run as a business in that it keeps a lodging and boarding house. It may be
admitted that there are 64 persons occupying rooms in the main building as lodgers or roomers and that they take their
meals at the restaurant below. These facts, however, are far from constituting a business in ordinary acceptation of the
word. In the first place, no profit is realized by the association in any sense. In the second place, it is undoubted, as it is
undisputed, that the purpose of the association is not, primarily, to obtain the money which comes from the lodgers and
boarders. The real purpose is to keep the membership continually within the sphere of influence of the institution; and
thereby to prevent, as far as possible, the opportunities which vice president to young men in foreign countries who lack
home or other similar influences. We regard this feature of the institution not as a business or means of making money,
but, rather, as a very efficient means of maintaining the influence of the institution over its membership. As we held in the
case of the Columbia Club, religious and moral teachings do not always stop with the spoken word; but to be effective in
the highest degree they must follow the young man through as many moments of his life as possible. To this end the
feature of the Young Men's Christian Association to which objection is made lends itself with great effect; and we are,
accordingly, forced to regards this activity of the institution not as a business but as a method by which the institution
maintains its influence and conserves the benefits which its organization was designed to confer.

As we have seen in the description already given of the association building and grounds, no part is occupied for any but
institutional purposes. From end to end the building and grounds are devoted exclusively to the purposes stated in the
constitution of the association. The library and reading rooms, the game and lounging halls, the lecture rooms, the
auditorium, the baths, pools, devices for physical development, and the grounds, are all dedicated exclusively to the
objects and purpose of the association the building of Christian character and the creation of moral sentiment and fiber
in men. It is the belief of the Young Men's Christian Association that a Christian man, a man of moral sentiment and firm
moral fiber, is yet a better man for being also all-round man one who is sound not only according to Christian principles
and the highest moral conceptions, but physically and mentally; whose body and mind act in harmony and within the limits
which the rights of others set; who are gentleman in physical and mental struggles, as well as in religious service; who
have self-respect and self-restraint; who can hit hard and still kindly; who can lose without envy; who can congratulate his
conqueror with sincerity; who can vie without temper, contend without malice, concede without regret; who can win and
still be generous, in short, one who fights hard but square. To the production of such men the association lends all its
efforts, husbands all its resources.

We are aware that there are many decisions holding that institutions of this character are not exempt from taxation; but,
on investigation, we find that the majority of them are based on statutes much narrower than the one under consider and
that in all probability the decisions would have been otherwise if the court had been passing on a statute similar to ours.
On the other hand, there are many decisions of the courts in the United States founded on statutes like the Philippine
statute which hold that associations of this class are exempt from taxation. We have examined all of the decisions, both
for and against, with care and deliberation, and we are convinced that the weight of authority sustains the positions we
take in this case.

There is no doubt about the correctness of the contention that an institution must devote itself exclusively to one or the
other of the purpose mentioned in the statute before it can be exempt from taxation; but the statute does not say that it
must be devoted exclusively to any one of the purposes therein mentioned. It may be a combination of two or three or
more of those purposes and still be entitled to exempt. The Young Men's Christian Association of Manila cannot be said to
be an institution used exclusively for religious purposes, or an institution used exclusively for charitable purposes, or an
institution devoted exclusively to educational purposes; but we believe it can be truthfully said that it is an institution used
exclusively for all three purposes, and that, as such, it is entitled to be exempted from taxation.
The judgment appealed from is reversed and the cause remanded with instructions to enter a judgment against the city of
Manila and in favor of the Young Men's Christian Association of Manila in the sum of P6,221.35. Without costs in this
instance. So ordered.

ROMAN CATHOLIC VS ILOCOS

AVANCEA, J.:

The plaintiff, the Roman Catholic Apostolic Church, represented by the Bishop of Nueva Segovia, possesses and is the
owner of a parcel of land in the municipality of San Nicolas, Ilocos Norte, all four sides of which face on public streets. On
the south side is a part of the churchyard, the convent and an adjacent lot used for a vegetable garden, containing an
area off 1,624 square meters, in which there is a stable and a well for the use of the convent. In the center is the
remainder of the churchyard and the church. On the north is an old cemetery with two of its walls still standing, and a
portion where formerly stood a tower, the base of which still be seen, containing a total area of 8,955 square meters.

As required by the defendants, on July 3, 1925 the plaintiff paid, under protest, the land tax on the lot adjoining the
convent and the lot which formerly was the cemetery with the portion where the tower stood.

The plaintiff filed this action for the recovery of the sum paid by to the defendants by way of land tax, alleging that the
collection of this tax is illegal. The lower court absolved the defendants from the complaint in regard to the lot adjoining
convent and declared that the tax collected on the lot, which formerly was the cemetery and on the portion where the
lower stood, was illegal. Both parties appealed from this judgment.

The exemption in favor of the convent in the payment of the land tax (sec. 344 [c] Administrative Code) refers to the home
of the parties who presides over the church and who has to take care of himself in order to discharge his duties. In
therefore must, in the sense, include not only the land actually occupied by the church, but also the adjacent ground
destined to the ordinary incidental uses of man. Except in large cities where the density of the population and the
development of commerce require the use of larger tracts of land for buildings, a vegetable garden belongs to a house
and, in the case of a convent, it use is limited to the necessities of the priest, which comes under the exemption. lawphi1.net

In regard to the lot which formerly was the cemetery, while it is no longer used as such, neither is it used for commercial
purposes and, according to the evidence, is now being used as a lodging house by the people who participate in religious
festivities, which constitutes an incidental use in religious functions, which also comes within the exemption.

The judgment appealed from is reversed in all it parts and it is held that both lots are exempt from land tax and the
defendants are ordered to refund to plaintiff whatever was paid as such tax, without any special pronouncement as to
costs. So ordered.

PUNZALAN VS CITY BOARD OF MANILA

REYES, J.:

This suit was commenced in the Court of First Instance of Manila by two lawyers, a medical practitioner, a public
accountant, a dental surgeon and a pharmacist, purportedly "in their own behalf and in behalf of other professionals
practising in the City of Manila who may desire to join it." Object of the suit is the annulment of Ordinance No. 3398 of the
City of Manila together with the provision of the Manila charter authorizing it and the refund of taxes collected under the
ordinance but paid under protest.

The ordinance in question, which was approved by the municipal board of the City of Manila on July 25, 1950, imposes a
municipal occupation tax on persons exercising various professions in the city and penalizes non-payment of the tax "by a
fine of not more than two hundred pesos or by imprisonment of not more than six months, or by both such fine and
imprisonment in the discretion of the court." Among the professions taxed were those to which plaintiffs belong. The
ordinance was enacted pursuant to paragraph (1) of section 18 of the Revised Charter of the City of Manila (as amended
by Republic Act No. 409), which empowers the Municipal Board of said city to impose a municipal occupation tax, not to
exceed P50 per annum, on persons engaged in the various professions above referred to.
Having already paid their occupation tax under section 201 of the National Internal Revenue Code, plaintiffs, upon being
required to pay the additional tax prescribed in the ordinance, paid the same under protest and then brought the present
suit for the purpose already stated. The lower court upheld the validity of the provision of law authorizing the enactment of
the ordinance but declared the ordinance itself illegal and void on the ground that the penalty there in provided for non-
payment of the tax was not legally authorized. From this decision both parties appealed to this Court, and the only
question they have presented for our determination is whether this ruling is correct or not, for though the decision is silent
on the refund of taxes paid plaintiffs make no assignment of error on this point.

To begin with defendants' appeal, we find that the lower court was in error in saying that the imposition of the penalty
provided for in the ordinance was without the authority of law. The last paragraph (kk) of the very section that authorizes
the enactment of this tax ordinance (section 18 of the Manila Charter) in express terms also empowers the Municipal
Board "to fix penalties for the violation of ordinances which shall not exceed to(sic) two hundred pesos fine or six months"
imprisonment, or both such fine and imprisonment, for a single offense." Hence, the pronouncement below that the
ordinance in question is illegal and void because it imposes a penalty not authorized by law is clearly without basis.

As to plaintiffs' appeal, the contention in substance is that this ordinance and the law authorizing it constitute class
legislation, are unjust and oppressive, and authorize what amounts to double taxation.

In raising the hue and cry of "class legislation", the burden of plaintiffs' complaint is not that the professions to which they
respectively belong have been singled out for the imposition of this municipal occupation tax; and in any event, the
Legislature may, in its discretion, select what occupations shall be taxed, and in the exercise of that discretion it may tax
all, or it may select for taxation certain classes and leave the others untaxed. (Cooley on Taxation, Vol. 4, 4th ed., pp.
3393-3395.) Plaintiffs' complaint is that while the law has authorized the City of Manila to impose the said tax, it has
withheld that authority from other chartered cities, not to mention municipalities. We do not think it is for the courts to
judge what particular cities or municipalities should be empowered to impose occupation taxes in addition to those
imposed by the National Government. That matter is peculiarly within the domain of the political departments and the
courts would do well not to encroach upon it. Moreover, as the seat of the National Government and with a population and
volume of trade many times that of any other Philippine city or municipality, Manila, no doubt, offers a more lucrative field
for the practice of the professions, so that it is but fair that the professionals in Manila be made to pay a higher occupation
tax than their brethren in the provinces.

Plaintiffs brand the ordinance unjust and oppressive because they say that it creates discrimination within a class in that
while professionals with offices in Manila have to pay the tax, outsiders who have no offices in the city but practice their
profession therein are not subject to the tax. Plaintiffs make a distinction that is not found in the ordinance. The ordinance
imposes the tax upon every person "exercising" or "pursuing" in the City of Manila naturally any one of the
occupations named, but does not say that such person must have his office in Manila. What constitutes exercise or
pursuit of a profession in the city is a matter of judicial determination. The argument against double taxation may not be
invoked where one tax is imposed by the state and the other is imposed by the city (1 Cooley on Taxation, 4th ed., p.
492), it being widely recognized that there is nothing inherently obnoxious in the requirement that license fees or taxes be
exacted with respect to the same occupation, calling or activity by both the state and the political subdivisions thereof. (51
Am. Jur., 341.)

In view of the foregoing, the judgment appealed from is reversed in so far as it declares Ordinance No. 3398 of the City of
Manila illegal and void and affirmed in so far as it holds the validity of the provision of the Manila charter authorizing it.
With costs against plaintiffs-appellants.

AMERICAN BIBLE VS

Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business
in the Philippines through its Philippine agency established in Manila in November, 1898, with its principal office at 636
Isaac Peral in said City. The defendant appellee is a municipal corporation with powers that are to be exercised in
conformity with the provisions of Republic Act No. 409, known as the Revised Charter of the City of Manila.

In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles and/or gospel portions
thereof (except during the Japanese occupation) throughout the Philippines and translating the same into several
Philippine dialects. On May 29 1953, the acting City Treasurer of the City of Manila informed plaintiff that it was
conducting the business of general merchandise since November, 1945, without providing itself with the necessary
Mayor's permit and municipal license, in violation of Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028
and 3364, and required plaintiff to secure, within three days, the corresponding permit and license fees, together with
compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of P5,821.45
(Annex A).

Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff deposit and pay under protest
the sum of P5,891.45, if suit was to be taken in court regarding the same (Annex B). To avoid the closing of its business
as well as further fines and penalties in the premises on October 24, 1953, plaintiff paid to the defendant under protest the
said permit and license fees in the aforementioned amount, giving at the same time notice to the City Treasurer that suit
would be taken in court to question the legality of the ordinances under which, the said fees were being collected (Annex
C), which was done on the same date by filing the complaint that gave rise to this action. In its complaint plaintiff prays
that judgment be rendered declaring the said Municipal Ordinance No. 3000, as amended, and Ordinances Nos. 2529,
3028 and 3364 illegal and unconstitutional, and that the defendant be ordered to refund to the plaintiff the sum of
P5,891.45 paid under protest, together with legal interest thereon, and the costs, plaintiff further praying for such other
relief and remedy as the court may deem just equitable.

Defendant answered the complaint, maintaining in turn that said ordinances were enacted by the Municipal Board of the
City of Manila by virtue of the power granted to it by section 2444, subsection (m-2) of the Revised Administrative Code,
superseded on June 18, 1949, by section 18, subsection (1) of Republic Act No. 409, known as the Revised Charter of the
City of Manila, and praying that the complaint be dismissed, with costs against plaintiff. This answer was replied by the
plaintiff reiterating the unconstitutionality of the often-repeated ordinances.

Before trial the parties submitted the following stipulation of facts:

COME NOW the parties in the above-entitled case, thru their undersigned attorneys and respectfully submit the
following stipulation of facts:

1. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac Peral, Manila, Bibles, New
Testaments, bible portions and bible concordance in English and other foreign languages imported by it from the
United States as well as Bibles, New Testaments and bible portions in the local dialects imported and/or
purchased locally; that from the fourth quarter of 1945 to the first quarter of 1953 inclusive the sales made by the
plaintiff were as follows:

2. That the parties hereby reserve the right to present evidence of other facts not herein stipulated.

WHEREFORE, it is respectfully prayed that this case be set for hearing so that the parties may present further
evidence on their behalf. (Record on Appeal, pp. 15-16).

When the case was set for hearing, plaintiff proved, among other things, that it has been in existence in the Philippines
since 1899, and that its parent society is in New York, United States of America; that its, contiguous real properties located
at Isaac Peral are exempt from real estate taxes; and that it was never required to pay any municipal license fee or tax
before the war, nor does the American Bible Society in the United States pay any license fee or sales tax for the sale of
bible therein. Plaintiff further tried to establish that it never made any profit from the sale of its bibles, which are disposed
of for as low as one third of the cost, and that in order to maintain its operating cost it obtains substantial remittances from
its New York office and voluntary contributions and gifts from certain churches, both in the United States and in the
Philippines, which are interested in its missionary work. Regarding plaintiff's contention of lack of profit in the sale of
bibles, defendant retorts that the admissions of plaintiff-appellant's lone witness who testified on cross-examination that
bibles bearing the price of 70 cents each from plaintiff-appellant's New York office are sold here by plaintiff-appellant at
P1.30 each; those bearing the price of $4.50 each are sold here at P10 each; those bearing the price of $7 each are sold
here at P15 each; and those bearing the price of $11 each are sold here at P22 each, clearly show that plaintiff's
contention that it never makes any profit from the sale of its bible, is evidently untenable.

After hearing the Court rendered judgment, the last part of which is as follows:

As may be seen from the repealed section (m-2) of the Revised Administrative Code and the repealing portions
(o) of section 18 of Republic Act No. 409, although they seemingly differ in the way the legislative intent is
expressed, yet their meaning is practically the same for the purpose of taxing the merchandise mentioned in said
legal provisions, and that the taxes to be levied by said ordinances is in the nature of percentage graduated taxes
(Sec. 3 of Ordinance No. 3000, as amended, and Sec. 1, Group 2, of Ordinance No. 2529, as amended by
Ordinance No. 3364).
 IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of the opinion and so holds that this case
should be dismissed, as it is hereby dismissed, for lack of merits, with costs against the plaintiff.

Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certified the case to Us for the
reason that the errors assigned to the lower Court involved only questions of law.

Appellant contends that the lower Court erred:

1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, are not unconstitutional;

2. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code under which Ordinances
Nos. 2592 and 3000 were promulgated, was not repealed by Section 18 of Republic Act No. 409;

3. In not holding that an ordinance providing for taxes based on gross sales or receipts, in order to be valid under
the new Charter of the City of Manila, must first be approved by the President of the Philippines; and

4. In holding that, as the sales made by the plaintiff-appellant have assumed commercial proportions, it cannot
escape from the operation of said municipal ordinances under the cloak of religious privilege.

The issues. As may be seen from the proceeding statement of the case, the issues involved in the present controversy
may be reduced to the following: (1) whether or not the ordinances of the City of Manila, Nos. 3000, as amended, and
2529, 3028 and 3364, are constitutional and valid; and (2) whether the provisions of said ordinances are applicable or not
to the case at bar.

Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides that:

(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the
free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall
forever be allowed. No religion test shall be required for the exercise of civil or political rights.

Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos. 2529 and 3000, as
respectively amended, are unconstitutional and illegal in so far as its society is concerned, because they provide for
religious censorship and restrain the free exercise and enjoyment of its religious profession, to wit: the distribution and
sale of bibles and other religious literature to the people of the Philippines.

Before entering into a discussion of the constitutional aspect of the case, We shall first consider the provisions of the
questioned ordinances in relation to their application to the sale of bibles, etc. by appellant. The records, show that by
letter of May 29, 1953 (Annex A), the City Treasurer required plaintiff to secure a Mayor's permit in connection with the
society's alleged business of distributing and selling bibles, etc. and to pay permit dues in the sum of P35 for the period
covered in this litigation, plus the sum of P35 for compromise on account of plaintiff's failure to secure the permit required
by Ordinance No. 3000 of the City of Manila, as amended. This Ordinance is of general application and not particularly
directed against institutions like the plaintiff, and it does not contain any provisions whatever prescribing religious
censorship nor restraining the free exercise and enjoyment of any religious profession. Section 1 of Ordinance No. 3000
reads as follows:

SEC. 1. PERMITS NECESSARY. It shall be unlawful for any person or entity to conduct or engage in any of the
businesses, trades, or occupations enumerated in Section 3 of this Ordinance or other businesses, trades, or
occupations for which a permit is required for the proper supervision and enforcement of existing laws and
ordinances governing the sanitation, security, and welfare of the public and the health of the employees engaged
in the business specified in said section 3 hereof, WITHOUT FIRST HAVING OBTAINED A PERMIT THEREFOR
FROM THE MAYOR AND THE NECESSARY LICENSE FROM THE CITY TREASURER.

The business, trade or occupation of the plaintiff involved in this case is not particularly mentioned in Section 3 of the
Ordinance, and the record does not show that a permit is required therefor under existing laws and ordinances for the
proper supervision and enforcement of their provisions governing the sanitation, security and welfare of the public and the
health of the employees engaged in the business of the plaintiff. However, sections 3 of Ordinance 3000 contains item No.
79, which reads as follows:
 79. All other businesses, trades or occupations not
mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00

Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax said business, trade
or occupation.

As to the license fees that the Treasurer of the City of Manila required the society to pay from the 4th quarter of 1945 to
the 1st quarter of 1953 in the sum of P5,821.45, including the sum of P50 as compromise, Ordinance No. 2529, as
amended by Ordinances Nos. 2779, 2821 and 3028 prescribes the following:

SEC. 1. FEES. Subject to the provisions of section 578 of the Revised Ordinances of the City of Manila, as
amended, there shall be paid to the City Treasurer for engaging in any of the businesses or occupations below
enumerated, quarterly, license fees based on gross sales or receipts realized during the preceding quarter in
accordance with the rates herein prescribed: PROVIDED, HOWEVER, That a person engaged in any businesses
or occupation for the first time shall pay the initial license fee based on the probable gross sales or receipts for the
first quarter beginning from the date of the opening of the business as indicated herein for the corresponding
business or occupation.

xxx xxx xxx

GROUP 2. Retail dealers in new (not yet used) merchandise, which dealers are not yet subject to the payment
of any municipal tax, such as (1) retail dealers in general merchandise; (2) retail dealers exclusively engaged in
the sale of . . . books, including stationery.

xxx xxx xxx

As may be seen, the license fees required to be paid quarterly in Section 1 of said Ordinance No. 2529, as amended, are
not imposed directly upon any religious institution but upon those engaged in any of the business or occupations therein
enumerated, such as retail "dealers in general merchandise" which, it is alleged, cover the business or occupation of
selling bibles, books, etc.

Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) of said legal body, as
amended by Act No. 3659, approved on December 8, 1929, empowers the Municipal Board of the City of Manila:

(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both, and (b) retail dealers
in new (not yet used) merchandise, which dealers are not yet subject to the payment of any municipal tax.

For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in general merchandise,
and (2) retail dealers exclusively engaged in the sale of (a) textiles . . . (e) books, including stationery, paper and
office supplies, . . .: PROVIDED, HOWEVER, That the combined total tax of any debtor or manufacturer, or both,
enumerated under these subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned
herein, SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS PER ANNUM.

and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, were enacted in virtue of the
power that said Act No. 3669 conferred upon the City of Manila. Appellant, however, contends that said ordinances are
longer in force and effect as the law under which they were promulgated has been expressly repealed by Section 102 of
Republic Act No. 409 passed on June 18, 1949, known as the Revised Manila Charter.

Passing upon this point the lower Court categorically stated that Republic Act No. 409 expressly repealed the provisions
of Chapter 60 of the Revised Administrative Code but in the opinion of the trial Judge, although Section 2444 (m-2) of the
former Manila Charter and section 18 (o) of the new seemingly differ in the way the legislative intent was expressed, yet
their meaning is practically the same for the purpose of taxing the merchandise mentioned in both legal provisions and,
consequently, Ordinances Nos. 2529 and 3000, as amended, are to be considered as still in full force and effect
uninterruptedly up to the present.

Often the legislature, instead of simply amending the pre-existing statute, will repeal the old statute in its entirety
and by the same enactment re-enact all or certain portions of the preexisting law. Of course, the problem created
by this sort of legislative action involves mainly the effect of the repeal upon rights and liabilities which accrued
 under the original statute. Are those rights and liabilities destroyed or preserved? The authorities are divided as to
the effect of simultaneous repeals and re-enactments. Some adhere to the view that the rights and liabilities
accrued under the repealed act are destroyed, since the statutes from which they sprang are actually terminated,
even though for only a very short period of time. Others, and they seem to be in the majority, refuse to accept this
view of the situation, and consequently maintain that all rights an liabilities which have accrued under the original
statute are preserved and may be enforced, since the re-enactment neutralizes the repeal, therefore, continuing
the law in force without interruption. (Crawford-Statutory Construction, Sec. 322).

Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces a new and wider concept of taxation and
is different from the provisions of Section 2444(m-2) that the former cannot be considered as a substantial re-enactment
of the provisions of the latter. We have quoted above the provisions of section 2444(m-2) of the Revised Administrative
Code and We shall now copy hereunder the provisions of Section 18, subdivision (o) of Republic Act No. 409, which reads
as follows:

(o) To tax and fix the license fee on dealers in general merchandise, including importers and indentors, except
those dealers who may be expressly subject to the payment of some other municipal tax under the provisions of
this section.

Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For purposes of
the tax on retail dealers, general merchandise shall be classified into four main classes: namely (1) luxury articles,
(2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. A separate license shall be
prescribed for each class but where commodities of different classes are sold in the same establishment, it shall
not be compulsory for the owner to secure more than one license if he pays the higher or highest rate of tax
prescribed by ordinance. Wholesale dealers shall pay the license tax as such, as may be provided by ordinance.

For purposes of this section, the term "General merchandise" shall include poultry and livestock, agricultural
products, fish and other allied products.

The only essential difference that We find between these two provisions that may have any bearing on the case at bar, is
that, while subsection (m-2) prescribes that the combined total tax of any dealer or manufacturer, or both, enumerated
under subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned therein, shall not be in excess
of P500 per annum, the corresponding section 18, subsection (o) of Republic Act No. 409, does not contain any limitation
as to the amount of tax or license fee that the retail dealer has to pay per annum. Hence, and in accordance with the
weight of the authorities above referred to that maintain that "all rights and liabilities which have accrued under the original
statute are preserved and may be enforced, since the reenactment neutralizes the repeal, therefore continuing the law in
force without interruption", We hold that the questioned ordinances of the City of Manila are still in force and effect.

Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved by the President of the
Philippines as per section 18, subsection (ii) of Republic Act No. 409, which reads as follows:

(ii) To tax, license and regulate any business, trade or occupation being conducted within the City of Manila, not
otherwise enumerated in the preceding subsections, including percentage taxes based on gross sales or receipts,
subject to the approval of the PRESIDENT, except amusement taxes.

but this requirement of the President's approval was not contained in section 2444 of the former Charter of the City of
Manila under which Ordinance No. 2529 was promulgated. Anyway, as stated by appellee's counsel, the business of
"retail dealers in general merchandise" is expressly enumerated in subsection (o), section 18 of Republic Act No. 409;
hence, an ordinance prescribing a municipal tax on said business does not have to be approved by the President to be
effective, as it is not among those referred to in said subsection (ii). Moreover, the questioned ordinances are still in force,
having been promulgated by the Municipal Board of the City of Manila under the authority granted to it by law.

The question that now remains to be determined is whether said ordinances are inapplicable, invalid or unconstitutional if
applied to the alleged business of distribution and sale of bibles to the people of the Philippines by a religious corporation
like the American Bible Society, plaintiff herein.

With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028, appellant contends that it is
unconstitutional and illegal because it restrains the free exercise and enjoyment of the religious profession and worship of
appellant.
Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the freedom of religious
profession and worship. "Religion has been spoken of as a profession of faith to an active power that binds and elevates
man to its Creator" (Aglipay vs. Ruiz, 64 Phil., 201).It has reference to one's views of his relations to His Creator and to
the obligations they impose of reverence to His being and character, and obedience to His Will (Davis vs. Beason, 133
U.S., 342). The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with
it the right to disseminate religious information. Any restraints of such right can only be justified like other restraints of
freedom of expression on the grounds that there is a clear and present danger of any substantive evil which the State has
the right to prevent". (Taada and Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p. 297). In the case at
bar the license fee herein involved is imposed upon appellant for its distribution and sale of bibles and other religious
literature:

In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a license be obtained before
a person could canvass or solicit orders for goods, paintings, pictures, wares or merchandise cannot be made to
apply to members of Jehovah's Witnesses who went about from door to door distributing literature and soliciting
people to "purchase" certain religious books and pamphlets, all published by the Watch Tower Bible & Tract
Society. The "price" of the books was twenty-five cents each, the "price" of the pamphlets five cents each. It was
shown that in making the solicitations there was a request for additional "contribution" of twenty-five cents each for
the books and five cents each for the pamphlets. Lesser sum were accepted, however, and books were even
donated in case interested persons were without funds.

On the above facts the Supreme Court held that it could not be said that petitioners were engaged in commercial
rather than a religious venture. Their activities could not be described as embraced in the occupation of selling
books and pamphlets. Then the Court continued:

"We do not mean to say that religious groups and the press are free from all financial burdens of government.
See Grosjean vs. American Press Co., 297 U.S., 233, 250, 80 L. ed. 660, 668, 56 S. Ct. 444. We have here
something quite different, for example, from a tax on the income of one who engages in religious activities or a tax
on property used or employed in connection with activities. It is one thing to impose a tax on the income or
property of a preacher. It is quite another to exact a tax from him for the privilege of delivering a sermon. The tax
imposed by the City of Jeannette is a flat license tax, payment of which is a condition of the exercise of these
constitutional privileges. The power to tax the exercise of a privilege is the power to control or suppress its
enjoyment. . . . Those who can tax the exercise of this religious practice can make its exercise so costly as to
deprive it of the resources necessary for its maintenance. Those who can tax the privilege of engaging in this form
of missionary evangelism can close all its doors to all those who do not have a full purse. Spreading religious
beliefs in this ancient and honorable manner would thus be denied the needy. . . .

It is contended however that the fact that the license tax can suppress or control this activity is unimportant if it
does not do so. But that is to disregard the nature of this tax. It is a license tax a flat tax imposed on the
exercise of a privilege granted by the Bill of Rights . . . The power to impose a license tax on the exercise of these
freedom is indeed as potent as the power of censorship which this Court has repeatedly struck down. . . . It is not
a nominal fee imposed as a regulatory measure to defray the expenses of policing the activities in question. It is in
no way apportioned. It is flat license tax levied and collected as a condition to the pursuit of activities whose
enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably tends to suppress their
exercise. That is almost uniformly recognized as the inherent vice and evil of this flat license tax."

Nor could dissemination of religious information be conditioned upon the approval of an official or manager even if
the town were owned by a corporation as held in the case of Marsh vs. State of Alabama (326 U.S. 501), or by the
United States itself as held in the case of Tucker vs. Texas (326 U.S. 517). In the former case the Supreme Court
expressed the opinion that the right to enjoy freedom of the press and religion occupies a preferred position as
against the constitutional right of property owners.

"When we balance the constitutional rights of owners of property against those of the people to enjoy freedom of
press and religion, as we must here, we remain mindful of the fact that the latter occupy a preferred position. . . .
In our view the circumstance that the property rights to the premises where the deprivation of property here
involved, took place, were held by others than the public, is not sufficient to justify the State's permitting a
corporation to govern a community of citizens so as to restrict their fundamental liberties and the enforcement of
such restraint by the application of a State statute." (Taada and Fernando on the Constitution of the Philippines,
Vol. 1, 4th ed., p. 304-306).

Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, provides:
 SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. The following organizations shall not be taxed
under this Title in respect to income received by them as such

(e) Corporations or associations organized and operated exclusively for religious, charitable, . . . or educational
purposes, . . .: Provided, however, That the income of whatever kind and character from any of its properties, real
or personal, or from any activity conducted for profit, regardless of the disposition made of such income, shall be
liable to the tax imposed under this Code;

Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from this tax and says that
such exemption clearly indicates that the act of distributing and selling bibles, etc. is purely religious and does not fall
under the above legal provisions.

It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some instances a
little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the business or
occupation of selling said "merchandise" for profit. For this reason We believe that the provisions of City of Manila
Ordinance No. 2529, as amended, cannot be applied to appellant, for in doing so it would impair its free exercise and
enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs.

With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit before any person can
engage in any of the businesses, trades or occupations enumerated therein, We do not find that it imposes any charge
upon the enjoyment of a right granted by the Constitution, nor tax the exercise of religious practices. In the case
of Coleman vs. City of Griffin, 189 S.E. 427, this point was elucidated as follows:

An ordinance by the City of Griffin, declaring that the practice of distributing either by hand or otherwise, circulars,
handbooks, advertising, or literature of any kind, whether said articles are being delivered free, or whether same
are being sold within the city limits of the City of Griffin, without first obtaining written permission from the city
manager of the City of Griffin, shall be deemed a nuisance and punishable as an offense against the City of
Griffin, does not deprive defendant of his constitutional right of the free exercise and enjoyment of religious
profession and worship, even though it prohibits him from introducing and carrying out a scheme or purpose
which he sees fit to claim as a part of his religious system.

It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if applied to plaintiff
Society. But as Ordinance No. 2529 of the City of Manila, as amended, is not applicable to plaintiff-appellant and
defendant-appellee is powerless to license or tax the business of plaintiff Society involved herein for, as stated before, it
would impair plaintiff's right to the free exercise and enjoyment of its religious profession and worship, as well as its rights
of dissemination of religious beliefs, We find that Ordinance No. 3000, as amended is also inapplicable to said business,
trade or occupation of the plaintiff.

Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from,
sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it. Without pronouncement as to costs.
It is so ordered.

Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary corporation duly registered and doing business
in the Philippines through its Philippine agency established in Manila in November, 1898, with its principal office at 636
Isaac Peral in said City. The defendant appellee is a municipal corporation with powers that are to be exercised in
conformity with the provisions of Republic Act No. 409, known as the Revised Charter of the City of Manila.

In the course of its ministry, plaintiff's Philippine agency has been distributing and selling bibles and/or gospel portions
thereof (except during the Japanese occupation) throughout the Philippines and translating the same into several
Philippine dialects. On May 29 1953, the acting City Treasurer of the City of Manila informed plaintiff that it was
conducting the business of general merchandise since November, 1945, without providing itself with the necessary
Mayor's permit and municipal license, in violation of Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028
and 3364, and required plaintiff to secure, within three days, the corresponding permit and license fees, together with
compromise covering the period from the 4th quarter of 1945 to the 2nd quarter of 1953, in the total sum of P5,821.45
(Annex A).
Plaintiff protested against this requirement, but the City Treasurer demanded that plaintiff deposit and pay under protest
the sum of P5,891.45, if suit was to be taken in court regarding the same (Annex B). To avoid the closing of its business
as well as further fines and penalties in the premises on October 24, 1953, plaintiff paid to the defendant under protest the
said permit and license fees in the aforementioned amount, giving at the same time notice to the City Treasurer that suit
would be taken in court to question the legality of the ordinances under which, the said fees were being collected (Annex
C), which was done on the same date by filing the complaint that gave rise to this action. In its complaint plaintiff prays
that judgment be rendered declaring the said Municipal Ordinance No. 3000, as amended, and Ordinances Nos. 2529,
3028 and 3364 illegal and unconstitutional, and that the defendant be ordered to refund to the plaintiff the sum of
P5,891.45 paid under protest, together with legal interest thereon, and the costs, plaintiff further praying for such other
relief and remedy as the court may deem just equitable.

Defendant answered the complaint, maintaining in turn that said ordinances were enacted by the Municipal Board of the
City of Manila by virtue of the power granted to it by section 2444, subsection (m-2) of the Revised Administrative Code,
superseded on June 18, 1949, by section 18, subsection (1) of Republic Act No. 409, known as the Revised Charter of the
City of Manila, and praying that the complaint be dismissed, with costs against plaintiff. This answer was replied by the
plaintiff reiterating the unconstitutionality of the often-repeated ordinances.

Before trial the parties submitted the following stipulation of facts:

COME NOW the parties in the above-entitled case, thru their undersigned attorneys and respectfully submit the
following stipulation of facts:

1. That the plaintiff sold for the use of the purchasers at its principal office at 636 Isaac Peral, Manila, Bibles, New
Testaments, bible portions and bible concordance in English and other foreign languages imported by it from the
United States as well as Bibles, New Testaments and bible portions in the local dialects imported and/or
purchased locally; that from the fourth quarter of 1945 to the first quarter of 1953 inclusive the sales made by the
plaintiff were as follows:

Quarter Amount of Sales

4th quarter 1945 P1,244.21

1st quarter 1946 2,206.85

2nd quarter 1946 1,950.38

3rd quarter 1946 2,235.99

4th quarter 1946 3,256.04

1st quarter 1947 13,241.07

2nd quarter 1947 15,774.55

3rd quarter 1947 14,654.13

4th quarter 1947 12,590.94

1st quarter 1948 11,143.90

2nd quarter 1948 14,715.26

3rd quarter 1948 38,333.83

4th quarter 1948 16,179.90

1st quarter 1949 23,975.10

2nd quarter 1949 17,802.08

3rd quarter 1949 16,640.79

4th quarter 1949 15,961.38

1st quarter 1950 18,562.46

2nd quarter 1950 21,816.32

3rd quarter 1950 25,004.55

 4th quarter 1950 45,287.92

1st quarter 1951 37,841.21

2nd quarter 1951 29,103.98

3rd quarter 1951 20,181.10

4th quarter 1951 22,968.91

1st quarter 1952 23,002.65

2nd quarter 1952 17,626.96

3rd quarter 1952 17,921.01

4th quarter 1952 24,180.72

1st quarter 1953 29,516.21

2. That the parties hereby reserve the right to present evidence of other facts not herein stipulated.

WHEREFORE, it is respectfully prayed that this case be set for hearing so that the parties may present further
evidence on their behalf. (Record on Appeal, pp. 15-16).

When the case was set for hearing, plaintiff proved, among other things, that it has been in existence in the Philippines
since 1899, and that its parent society is in New York, United States of America; that its, contiguous real properties located
at Isaac Peral are exempt from real estate taxes; and that it was never required to pay any municipal license fee or tax
before the war, nor does the American Bible Society in the United States pay any license fee or sales tax for the sale of
bible therein. Plaintiff further tried to establish that it never made any profit from the sale of its bibles, which are disposed
of for as low as one third of the cost, and that in order to maintain its operating cost it obtains substantial remittances from
its New York office and voluntary contributions and gifts from certain churches, both in the United States and in the
Philippines, which are interested in its missionary work. Regarding plaintiff's contention of lack of profit in the sale of
bibles, defendant retorts that the admissions of plaintiff-appellant's lone witness who testified on cross-examination that
bibles bearing the price of 70 cents each from plaintiff-appellant's New York office are sold here by plaintiff-appellant at
P1.30 each; those bearing the price of $4.50 each are sold here at P10 each; those bearing the price of $7 each are sold
here at P15 each; and those bearing the price of $11 each are sold here at P22 each, clearly show that plaintiff's
contention that it never makes any profit from the sale of its bible, is evidently untenable.

After hearing the Court rendered judgment, the last part of which is as follows:

As may be seen from the repealed section (m-2) of the Revised Administrative Code and the repealing portions
(o) of section 18 of Republic Act No. 409, although they seemingly differ in the way the legislative intent is
expressed, yet their meaning is practically the same for the purpose of taxing the merchandise mentioned in said
legal provisions, and that the taxes to be levied by said ordinances is in the nature of percentage graduated taxes
(Sec. 3 of Ordinance No. 3000, as amended, and Sec. 1, Group 2, of Ordinance No. 2529, as amended by
Ordinance No. 3364).

IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is of the opinion and so holds that this case
should be dismissed, as it is hereby dismissed, for lack of merits, with costs against the plaintiff.

Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals which certified the case to Us for the
reason that the errors assigned to the lower Court involved only questions of law.

Appellant contends that the lower Court erred:

1. In holding that Ordinances Nos. 2529 and 3000, as respectively amended, are not unconstitutional;

2. In holding that subsection m-2 of Section 2444 of the Revised Administrative Code under which Ordinances
Nos. 2592 and 3000 were promulgated, was not repealed by Section 18 of Republic Act No. 409;

3. In not holding that an ordinance providing for taxes based on gross sales or receipts, in order to be valid under
the new Charter of the City of Manila, must first be approved by the President of the Philippines; and

4. In holding that, as the sales made by the plaintiff-appellant have assumed commercial proportions, it cannot
escape from the operation of said municipal ordinances under the cloak of religious privilege.

The issues. As may be seen from the proceeding statement of the case, the issues involved in the present controversy
may be reduced to the following: (1) whether or not the ordinances of the City of Manila, Nos. 3000, as amended, and
2529, 3028 and 3364, are constitutional and valid; and (2) whether the provisions of said ordinances are applicable or not
to the case at bar.

Section 1, subsection (7) of Article III of the Constitution of the Republic of the Philippines, provides that:

(7) No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the
free exercise and enjoyment of religious profession and worship, without discrimination or preference, shall
forever be allowed. No religion test shall be required for the exercise of civil or political rights.

Predicated on this constitutional mandate, plaintiff-appellant contends that Ordinances Nos. 2529 and 3000, as
respectively amended, are unconstitutional and illegal in so far as its society is concerned, because they provide for
religious censorship and restrain the free exercise and enjoyment of its religious profession, to wit: the distribution and
sale of bibles and other religious literature to the people of the Philippines.

Before entering into a discussion of the constitutional aspect of the case, We shall first consider the provisions of the
questioned ordinances in relation to their application to the sale of bibles, etc. by appellant. The records, show that by
letter of May 29, 1953 (Annex A), the City Treasurer required plaintiff to secure a Mayor's permit in connection with the
society's alleged business of distributing and selling bibles, etc. and to pay permit dues in the sum of P35 for the period
covered in this litigation, plus the sum of P35 for compromise on account of plaintiff's failure to secure the permit required
by Ordinance No. 3000 of the City of Manila, as amended. This Ordinance is of general application and not particularly
directed against institutions like the plaintiff, and it does not contain any provisions whatever prescribing religious
censorship nor restraining the free exercise and enjoyment of any religious profession. Section 1 of Ordinance No. 3000
reads as follows:

SEC. 1. PERMITS NECESSARY. It shall be unlawful for any person or entity to conduct or engage in any of the
businesses, trades, or occupations enumerated in Section 3 of this Ordinance or other businesses, trades, or
occupations for which a permit is required for the proper supervision and enforcement of existing laws and
ordinances governing the sanitation, security, and welfare of the public and the health of the employees engaged
in the business specified in said section 3 hereof, WITHOUT FIRST HAVING OBTAINED A PERMIT THEREFOR
FROM THE MAYOR AND THE NECESSARY LICENSE FROM THE CITY TREASURER.

The business, trade or occupation of the plaintiff involved in this case is not particularly mentioned in Section 3 of the
Ordinance, and the record does not show that a permit is required therefor under existing laws and ordinances for the
proper supervision and enforcement of their provisions governing the sanitation, security and welfare of the public and the
health of the employees engaged in the business of the plaintiff. However, sections 3 of Ordinance 3000 contains item No.
79, which reads as follows:

79. All other businesses, trades or occupations not

mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00

Therefore, the necessity of the permit is made to depend upon the power of the City to license or tax said business, trade
or occupation.

As to the license fees that the Treasurer of the City of Manila required the society to pay from the 4th quarter of 1945 to
the 1st quarter of 1953 in the sum of P5,821.45, including the sum of P50 as compromise, Ordinance No. 2529, as
amended by Ordinances Nos. 2779, 2821 and 3028 prescribes the following:

SEC. 1. FEES. Subject to the provisions of section 578 of the Revised Ordinances of the City of Manila, as
amended, there shall be paid to the City Treasurer for engaging in any of the businesses or occupations below
enumerated, quarterly, license fees based on gross sales or receipts realized during the preceding quarter in
accordance with the rates herein prescribed: PROVIDED, HOWEVER, That a person engaged in any businesses
or occupation for the first time shall pay the initial license fee based on the probable gross sales or receipts for the
first quarter beginning from the date of the opening of the business as indicated herein for the corresponding
business or occupation.

xxx xxx xxx

GROUP 2. Retail dealers in new (not yet used) merchandise, which dealers are not yet subject to the payment
of any municipal tax, such as (1) retail dealers in general merchandise; (2) retail dealers exclusively engaged in
the sale of . . . books, including stationery.

xxx xxx xxx

As may be seen, the license fees required to be paid quarterly in Section 1 of said Ordinance No. 2529, as amended, are
not imposed directly upon any religious institution but upon those engaged in any of the business or occupations therein
enumerated, such as retail "dealers in general merchandise" which, it is alleged, cover the business or occupation of
selling bibles, books, etc.

Chapter 60 of the Revised Administrative Code which includes section 2444, subsection (m-2) of said legal body, as
amended by Act No. 3659, approved on December 8, 1929, empowers the Municipal Board of the City of Manila:

(M-2) To tax and fix the license fee on (a) dealers in new automobiles or accessories or both, and (b) retail dealers
in new (not yet used) merchandise, which dealers are not yet subject to the payment of any municipal tax.

For the purpose of taxation, these retail dealers shall be classified as (1) retail dealers in general merchandise,
and (2) retail dealers exclusively engaged in the sale of (a) textiles . . . (e) books, including stationery, paper and
office supplies, . . .: PROVIDED, HOWEVER, That the combined total tax of any debtor or manufacturer, or both,
 enumerated under these subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned
herein, SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS PER ANNUM.

and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as amended, were enacted in virtue of the
power that said Act No. 3669 conferred upon the City of Manila. Appellant, however, contends that said ordinances are
longer in force and effect as the law under which they were promulgated has been expressly repealed by Section 102 of
Republic Act No. 409 passed on June 18, 1949, known as the Revised Manila Charter.

Passing upon this point the lower Court categorically stated that Republic Act No. 409 expressly repealed the provisions
of Chapter 60 of the Revised Administrative Code but in the opinion of the trial Judge, although Section 2444 (m-2) of the
former Manila Charter and section 18 (o) of the new seemingly differ in the way the legislative intent was expressed, yet
their meaning is practically the same for the purpose of taxing the merchandise mentioned in both legal provisions and,
consequently, Ordinances Nos. 2529 and 3000, as amended, are to be considered as still in full force and effect
uninterruptedly up to the present.

Often the legislature, instead of simply amending the pre-existing statute, will repeal the old statute in its entirety
and by the same enactment re-enact all or certain portions of the preexisting law. Of course, the problem created
by this sort of legislative action involves mainly the effect of the repeal upon rights and liabilities which accrued
under the original statute. Are those rights and liabilities destroyed or preserved? The authorities are divided as to
the effect of simultaneous repeals and re-enactments. Some adhere to the view that the rights and liabilities
accrued under the repealed act are destroyed, since the statutes from which they sprang are actually terminated,
even though for only a very short period of time. Others, and they seem to be in the majority, refuse to accept this
view of the situation, and consequently maintain that all rights an liabilities which have accrued under the original
statute are preserved and may be enforced, since the re-enactment neutralizes the repeal, therefore, continuing
the law in force without interruption. (Crawford-Statutory Construction, Sec. 322).

Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces a new and wider concept of taxation and
is different from the provisions of Section 2444(m-2) that the former cannot be considered as a substantial re-enactment
of the provisions of the latter. We have quoted above the provisions of section 2444(m-2) of the Revised Administrative
Code and We shall now copy hereunder the provisions of Section 18, subdivision (o) of Republic Act No. 409, which reads
as follows:

(o) To tax and fix the license fee on dealers in general merchandise, including importers and indentors, except
those dealers who may be expressly subject to the payment of some other municipal tax under the provisions of
this section.

Dealers in general merchandise shall be classified as (a) wholesale dealers and (b) retail dealers. For purposes of
the tax on retail dealers, general merchandise shall be classified into four main classes: namely (1) luxury articles,
(2) semi-luxury articles, (3) essential commodities, and (4) miscellaneous articles. A separate license shall be
prescribed for each class but where commodities of different classes are sold in the same establishment, it shall
not be compulsory for the owner to secure more than one license if he pays the higher or highest rate of tax
prescribed by ordinance. Wholesale dealers shall pay the license tax as such, as may be provided by ordinance.

For purposes of this section, the term "General merchandise" shall include poultry and livestock, agricultural
products, fish and other allied products.

The only essential difference that We find between these two provisions that may have any bearing on the case at bar, is
that, while subsection (m-2) prescribes that the combined total tax of any dealer or manufacturer, or both, enumerated
under subsections (m-1) and (m-2), whether dealing in one or all of the articles mentioned therein, shall not be in excess
of P500 per annum, the corresponding section 18, subsection (o) of Republic Act No. 409, does not contain any limitation
as to the amount of tax or license fee that the retail dealer has to pay per annum. Hence, and in accordance with the
weight of the authorities above referred to that maintain that "all rights and liabilities which have accrued under the original
statute are preserved and may be enforced, since the reenactment neutralizes the repeal, therefore continuing the law in
force without interruption", We hold that the questioned ordinances of the City of Manila are still in force and effect.

Plaintiff, however, argues that the questioned ordinances, to be valid, must first be approved by the President of the
Philippines as per section 18, subsection (ii) of Republic Act No. 409, which reads as follows:
 (ii) To tax, license and regulate any business, trade or occupation being conducted within the City of Manila, not
otherwise enumerated in the preceding subsections, including percentage taxes based on gross sales or receipts,
subject to the approval of the PRESIDENT, except amusement taxes.

but this requirement of the President's approval was not contained in section 2444 of the former Charter of the City of
Manila under which Ordinance No. 2529 was promulgated. Anyway, as stated by appellee's counsel, the business of
"retail dealers in general merchandise" is expressly enumerated in subsection (o), section 18 of Republic Act No. 409;
hence, an ordinance prescribing a municipal tax on said business does not have to be approved by the President to be
effective, as it is not among those referred to in said subsection (ii). Moreover, the questioned ordinances are still in force,
having been promulgated by the Municipal Board of the City of Manila under the authority granted to it by law.

The question that now remains to be determined is whether said ordinances are inapplicable, invalid or unconstitutional if
applied to the alleged business of distribution and sale of bibles to the people of the Philippines by a religious corporation
like the American Bible Society, plaintiff herein.

With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779, 2821 and 3028, appellant contends that it is
unconstitutional and illegal because it restrains the free exercise and enjoyment of the religious profession and worship of
appellant.

Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted, guarantees the freedom of religious
profession and worship. "Religion has been spoken of as a profession of faith to an active power that binds and elevates
man to its Creator" (Aglipay vs. Ruiz, 64 Phil., 201).It has reference to one's views of his relations to His Creator and to
the obligations they impose of reverence to His being and character, and obedience to His Will (Davis vs. Beason, 133
U.S., 342). The constitutional guaranty of the free exercise and enjoyment of religious profession and worship carries with
it the right to disseminate religious information. Any restraints of such right can only be justified like other restraints of
freedom of expression on the grounds that there is a clear and present danger of any substantive evil which the State has
the right to prevent". (Taada and Fernando on the Constitution of the Philippines, Vol. 1, 4th ed., p. 297). In the case at
bar the license fee herein involved is imposed upon appellant for its distribution and sale of bibles and other religious
literature:

In the case of Murdock vs. Pennsylvania, it was held that an ordinance requiring that a license be obtained before
a person could canvass or solicit orders for goods, paintings, pictures, wares or merchandise cannot be made to
apply to members of Jehovah's Witnesses who went about from door to door distributing literature and soliciting
people to "purchase" certain religious books and pamphlets, all published by the Watch Tower Bible & Tract
Society. The "price" of the books was twenty-five cents each, the "price" of the pamphlets five cents each. It was
shown that in making the solicitations there was a request for additional "contribution" of twenty-five cents each for
the books and five cents each for the pamphlets. Lesser sum were accepted, however, and books were even
donated in case interested persons were without funds.

On the above facts the Supreme Court held that it could not be said that petitioners were engaged in commercial
rather than a religious venture. Their activities could not be described as embraced in the occupation of selling
books and pamphlets. Then the Court continued:

"We do not mean to say that religious groups and the press are free from all financial burdens of government.
See Grosjean vs. American Press Co., 297 U.S., 233, 250, 80 L. ed. 660, 668, 56 S. Ct. 444. We have here
something quite different, for example, from a tax on the income of one who engages in religious activities or a tax
on property used or employed in connection with activities. It is one thing to impose a tax on the income or
property of a preacher. It is quite another to exact a tax from him for the privilege of delivering a sermon. The tax
imposed by the City of Jeannette is a flat license tax, payment of which is a condition of the exercise of these
constitutional privileges. The power to tax the exercise of a privilege is the power to control or suppress its
enjoyment. . . . Those who can tax the exercise of this religious practice can make its exercise so costly as to
deprive it of the resources necessary for its maintenance. Those who can tax the privilege of engaging in this form
of missionary evangelism can close all its doors to all those who do not have a full purse. Spreading religious
beliefs in this ancient and honorable manner would thus be denied the needy. . . .

It is contended however that the fact that the license tax can suppress or control this activity is unimportant if it
does not do so. But that is to disregard the nature of this tax. It is a license tax a flat tax imposed on the
exercise of a privilege granted by the Bill of Rights . . . The power to impose a license tax on the exercise of these
freedom is indeed as potent as the power of censorship which this Court has repeatedly struck down. . . . It is not
a nominal fee imposed as a regulatory measure to defray the expenses of policing the activities in question. It is in
 no way apportioned. It is flat license tax levied and collected as a condition to the pursuit of activities whose
enjoyment is guaranteed by the constitutional liberties of press and religion and inevitably tends to suppress their
exercise. That is almost uniformly recognized as the inherent vice and evil of this flat license tax."

Nor could dissemination of religious information be conditioned upon the approval of an official or manager even if
the town were owned by a corporation as held in the case of Marsh vs. State of Alabama (326 U.S. 501), or by the
United States itself as held in the case of Tucker vs. Texas (326 U.S. 517). In the former case the Supreme Court
expressed the opinion that the right to enjoy freedom of the press and religion occupies a preferred position as
against the constitutional right of property owners.

"When we balance the constitutional rights of owners of property against those of the people to enjoy freedom of
press and religion, as we must here, we remain mindful of the fact that the latter occupy a preferred position. . . .
In our view the circumstance that the property rights to the premises where the deprivation of property here
involved, took place, were held by others than the public, is not sufficient to justify the State's permitting a
corporation to govern a community of citizens so as to restrict their fundamental liberties and the enforcement of
such restraint by the application of a State statute." (Taada and Fernando on the Constitution of the Philippines,
Vol. 1, 4th ed., p. 304-306).

Section 27 of Commonwealth Act No. 466, otherwise known as the National Internal Revenue Code, provides:

SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. The following organizations shall not be taxed
under this Title in respect to income received by them as such

(e) Corporations or associations organized and operated exclusively for religious, charitable, . . . or educational
purposes, . . .: Provided, however, That the income of whatever kind and character from any of its properties, real
or personal, or from any activity conducted for profit, regardless of the disposition made of such income, shall be
liable to the tax imposed under this Code;

Appellant's counsel claims that the Collector of Internal Revenue has exempted the plaintiff from this tax and says that
such exemption clearly indicates that the act of distributing and selling bibles, etc. is purely religious and does not fall
under the above legal provisions.

It may be true that in the case at bar the price asked for the bibles and other religious pamphlets was in some instances a
little bit higher than the actual cost of the same but this cannot mean that appellant was engaged in the business or
occupation of selling said "merchandise" for profit. For this reason We believe that the provisions of City of Manila
Ordinance No. 2529, as amended, cannot be applied to appellant, for in doing so it would impair its free exercise and
enjoyment of its religious profession and worship as well as its rights of dissemination of religious beliefs.

With respect to Ordinance No. 3000, as amended, which requires the obtention the Mayor's permit before any person can
engage in any of the businesses, trades or occupations enumerated therein, We do not find that it imposes any charge
upon the enjoyment of a right granted by the Constitution, nor tax the exercise of religious practices. In the case
of Coleman vs. City of Griffin, 189 S.E. 427, this point was elucidated as follows:

An ordinance by the City of Griffin, declaring that the practice of distributing either by hand or otherwise, circulars,
handbooks, advertising, or literature of any kind, whether said articles are being delivered free, or whether same
are being sold within the city limits of the City of Griffin, without first obtaining written permission from the city
manager of the City of Griffin, shall be deemed a nuisance and punishable as an offense against the City of
Griffin, does not deprive defendant of his constitutional right of the free exercise and enjoyment of religious
profession and worship, even though it prohibits him from introducing and carrying out a scheme or purpose
which he sees fit to claim as a part of his religious system.

It seems clear, therefore, that Ordinance No. 3000 cannot be considered unconstitutional, even if applied to plaintiff
Society. But as Ordinance No. 2529 of the City of Manila, as amended, is not applicable to plaintiff-appellant and
defendant-appellee is powerless to license or tax the business of plaintiff Society involved herein for, as stated before, it
would impair plaintiff's right to the free exercise and enjoyment of its religious profession and worship, as well as its rights
of dissemination of religious beliefs, We find that Ordinance No. 3000, as amended is also inapplicable to said business,
trade or occupation of the plaintiff.
Wherefore, and on the strength of the foregoing considerations, We hereby reverse the decision appealed from,
sentencing defendant return to plaintiff the sum of P5,891.45 unduly collected from it. Without pronouncement as to costs.
It is so ordered.

IN THE MATTER OF A PETITION FOR DECLARATORY JUDGMENT REGARDING THE VALIDITY OF MUNICIPAL
ORDINANCE NO. 3659 OF THE CITY OF MANILA. PHYSICAL THERAPY ORGANIZATION OF THE PHILIPPINES,
INC., petitioner-appellant,
vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA and ARSENIO H. LACSON, as Mayor of the City of
Manila, respondents-appellees.

Mariano M. de Joya for appellant.

City Fiscal Eugenio Angeles and Assistant Fiscal Arsenio Naawa for appellees.

MONTEMAYOR, J.:

The petitioner-appellant, an association of registered massagists and licensed operators of massage clinics in the City of
Manila and other parts of the country, filed an action in the Court of First Instance of Manila for declaratory judgment
regarding the validity of Municipal Ordinance No. 3659, promulgated by the Municipal Board and approved by the City
Mayor. To stop the City from enforcing said ordinance, the petitioner secured an injunction upon filing of a bond in the sum
of P1,000.00. A hearing was held, but the parties without introducing any evidence submitted the case for decision on the
pleadings, although they submitted written memoranda. Thereafter, the trial court dismissed the petition and later
dissolved the writ of injunction previously issued.

The petitioner appealed said order of dismissal directly to this Court. In support of its appeal, petitioner-appellant contends
among other things that the trial court erred in holding that the Ordinance in question has not restricted the practice of
massotherapy in massage clinics to hygienic and aesthetic massage, that the Ordinance is valid as it does not regulate
the practice of massage, that the Municipal Board of Manila has the power to enact the Ordinance in question by virtue of
Section 18, Subsection (kk), Republic Act 409, and that permit fee of P100.00 is moderate and not unreasonable.
Inasmuch as the appellant assails and discuss certain provisions regarding the ordinance in question, and it is necessary
to pass upon the same, for purposes of ready reference, we are reproducing said ordinance in toto.

ORDINANCE No. 3659

AN ORDINANCE REGULATING THE OPERATION OF MASSAGE CLINICS IN THE CITY OF MANILA AND
PROVIDING PENALTIES FOR VIOLATIONS THEREOF.

Be it ordained by the Municipal Board of the City of Manila, that:

Section 1. Definition. For the purpose of this Ordinance the following words and phrases shall be taken in the
sense hereinbelow indicated:

(a) Massage clinic shall include any place or establishment used in the practice of hygienic and aesthetic
massage;

(b) Hygienic and aesthetic massage shall include any system of manipulation of treatment of the superficial parts
of the human body of hygienic and aesthetic purposes by rubbing, stroking, kneading, or tapping with the hand or
an instrument;

(c) Massagist shall include any person who shall have passed the required examination and shall have been
issued a massagist certificate by the Committee of Examiners of Massagist, or by the Director of Health or his
authorized representative;

(d) Attendant or helper shall include any person employed by a duly qualified massagist in any message clinic to
assist the latter in the practice of hygienic and aesthethic massage;

(e) Operator shall include the owner, manager, administrator, or any person who operates or is responsible for the
operation of a message clinic.
SEC. 2. Permit Fees. No person shall engage in the operation of a massage clinic or in the occupation of
attendant or helper therein without first having obtained a permit therefor from the Mayor. For every permit granted
under the provisions of this Ordinance, there shall be paid to the City Treasurer the following annual fees:

(a) Operator of a massage P100.00

(b) Attendant or helper 5.00

Said permit, which shall be renewed every year, may be revoked by the Mayor at any time for the violation of this
Ordinance.

SEC. 3. Building requirement. (a) In each massage clinic, there shall be separate rooms for the male and
female customers. Rooms where massage operations are performed shall be provided with sliding curtains only
instead of swinging doors. The clinic shall be properly ventilated, well lighted and maintained under sanitary
conditions at all times while the establishment is open for business and shall be provided with the necessary toilet
and washing facilities.

(b) In every clinic there shall be no private rooms or separated compartment except those assigned for toilet,
lavatories, dressing room, office or kitchen.

(c) Every massage clinic shall "provided with only one entrance and it shall have no direct or indirect
communication whatsoever with any dwelling place, house or building.

SEC. 4. Regulations for the operation of massage clinics. (a) It shall be unlawful for any operator massagist,
attendant or helper to use, or allow the use of, a massage clinic as a place of assignation or permit the
commission therein of any incident or immoral act. Massage clinics shall be used only for hygienic and aesthetic
massage.

(b) Massage clinics shall open at eight o'clock a.m. and shall close at eleven o'clock p.m.

(c) While engaged in the actual performance of their duties, massagists, attendants and helpers in a massage
clinic shall be as properly and sufficiently clad as to avoid suspicion of intent to commit an indecent or immoral act;

(d) Attendants or helpers may render service to any individual customer only for hygienic and aesthetic purposes
under the order, direction, supervision, control and responsibility of a qualified massagist.

SEC. 5. Qualifications No person who has previously been convicted by final judgment of competent court of
any violation of the provisions of paragraphs 3 and 5 of Art. 202 and Arts. 335, 336, 340 and 342 of the Revised
Penal Code, or Secs. 819 of the City of Manila, or who is suffering from any venereal or communicable disease
shall engage in the occupation of massagist, attendant or helper in any massage clinic. Applicants for Mayor's
permit shall attach to their application a police clearance and health certificate duly issued by the City Health
Officers as well as a massagist certificate duly issued by the Committee or Examiners for Massagists or by the
Director of Health or his authorized representatives, in case of massagists.

SEC. 6. Duty of operator of massage clinic. No operator of massage clinic shall allow such clinic to operate
without a duly qualified massagist nor allow, any man or woman to act as massagist, attendant or helper therein
without the Mayor's permit provided for in the preceding sections. He shall submit whenever required by the Mayor
or his authorized representative the persons acting as massagists, attendants or helpers in his clinic. He shall
place the massage clinic open to inspection at all times by the police, health officers, and other law enforcement
agencies of the government, shall be held liable for anything which may happen with the premises of the massage
clinic.

SEC. 7. Penalty. Any person violating any of the provisions of this Ordinance shall upon conviction, be
punished by a fine of not less than fifty pesos nor more than two hundred pesos or by imprisonment for not less
than six days nor more than six months, or both such fine and imprisonment, at the discretion of the court.

SEC. 8. Repealing Clause. All ordinances or parts of ordinances, which are inconsistent herewith, are hereby
repealed.
 SEC. 9. Effectivity. This Ordinance shall take effect upon its approval.

Enacted, August 27, 1954.

Approved, September 7, 1954.

The main contention of the appellant in its appeal and the principal ground of its petition for declaratory judgment is that
the City of Manila is without authority to regulate the operation of massagists and the operation of massage clinics within
its jurisdiction; that whereas under the Old City Charter, particularly, Section 2444 (e) of the Revised Administrative Code,
the Municipal Board was expressly granted the power to regulate and fix the license fee for the occupation of massagists,
under the New Charter of Manila, Republic Act 409, said power has been withdrawn or omitted and that now the Director
of Health, pursuant to authority conferred by Section 938 of the Revised Administrative Code and Executive Order No.
317, series of 1941, as amended by Executive Order No. 392, series, 1951, is the one who exercises supervision over the
practice of massage and over massage clinics in the Philippines; that the Director of Health has issued Administrative
Order No. 10, dated May 5, 1953, prescribing "rules and regulations governing the examination for admission to the
practice of massage, and the operation of massage clinics, offices, or establishments in the Philippines", which order was
approved by the Secretary of Health and duly published in the Official Gazette; that Section 1 (a) of Ordinance No. 3659
has restricted the practice of massage to only hygienic and aesthetic massage prohibits or does not allow qualified
massagists to practice therapeutic massage in their massage clinics. Appellant also contends that the license fee of
P100.00 for operator in Section 2 of the Ordinance is unreasonable, nay, unconscionable.

If we can ascertain the intention of the Manila Municipal Board in promulgating the Ordinance in question, much of the
objection of appellant to its legality may be solved. It would appear to us that the purpose of the Ordinance is not to
regulate the practice of massage, much less to restrict the practice of licensed and qualified massagists of therapeutic
massage in the Philippines. The end sought to be attained in the Ordinance is to prevent the commission of immorality
and the practice of prostitution in an establishment masquerading as a massage clinic where the operators thereof offer to
massage or manipulate superficial parts of the bodies of customers for hygienic and aesthetic purposes. This intention
can readily be understood by the building requirements in Section 3 of the Ordinance, requiring that there be separate
rooms for male and female customers; that instead of said rooms being separated by permanent partitions and swinging
doors, there should only be sliding curtains between them; that there should be "no private rooms or separated
compartments, except those assigned for toilet, lavatories, dressing room, office or kitchen"; that every massage clinic
should be provided with only one entrance and shall have no direct or indirect communication whatsoever with any
dwelling place, house or building; and that no operator, massagists, attendant or helper will be allowed "to use or allow the
use of a massage clinic as a place of assignation or permit the commission therein of any immoral or incident act", and in
fixing the operating hours of such clinic between 8:00 a.m. and 11:00 p.m. This intention of the Ordinance was correctly
ascertained by Judge Hermogenes Concepcion, presiding in the trial court, in his order of dismissal where he said: "What
the Ordinance tries to avoid is that the massage clinic run by an operator who may not be a masseur or massagista may
be used as cover for the running or maintaining a house of prostitution."

Ordinance No. 3659, particularly, Sections 1 to 4, should be considered as limited to massage clinics used in the practice
of hygienic and aesthetic massage. We do not believe that Municipal Board of the City of Manila and the Mayor wanted or
intended to regulate the practice of massage in general or restrict the same to hygienic and aesthetic only.

As to the authority of the City Board to enact the Ordinance in question, the City Fiscal, in representation of the appellees,
calls our attention to Section 18 of the New Charter of the City of Manila, Act No. 409, which gives legislative powers to
the Municipal Board to enact all ordinances it may deem necessary and proper for the promotion of the morality, peace,
good order, comfort, convenience and general welfare of the City and its inhabitants. This is generally referred to as the
General Welfare Clause, a delegation in statutory form of the police power, under which municipal corporations, are
authorized to enact ordinances to provide for the health and safety, and promote the morality, peace and general welfare
of its inhabitants. We agree with the City Fiscal.

As regards the permit fee of P100.00, it will be seen that said fee is made payable not by the masseur or massagist, but
by the operator of a massage clinic who may not be a massagist himself. Compared to permit fees required in other
operations, P100.00 may appear to be too large and rather unreasonable. However, much discretion is given to municipal
corporations in determining the amount of said fee without considering it as a tax for revenue purposes:

The amount of the fee or charge is properly considered in determining whether it is a tax or an exercise of the
police power. The amount may be so large as to itself show that the purpose was to raise revenue and not to
regulate, but in regard to this matter there is a marked distinction between license fees imposed upon useful and
beneficial occupations which the sovereign wishes to regulate but not restrict, and those which are inimical and
 dangerous to public health, morals or safety. In the latter case the fee may be very large without necessarily being
a tax. (Cooley on Taxation, Vol. IV, pp. 3516-17; underlining supplied.)

Evidently, the Manila Municipal Board considered the practice of hygienic and aesthetic massage not as a useful and
beneficial occupation which will promote and is conducive to public morals, and consequently, imposed the said permit fee
for its regulation.

In conclusion, we find and hold that the Ordinance in question as we interpret it and as intended by the appellees is valid.
We deem it unnecessary to discuss and pass upon the other points raised in the appeal. The order appealed from is
hereby affirmed. No costs.