Basco vs. PAGCOR (G.R. No.

91649) - Digest

Facts:

On July 11, 1983, PAGCOR was created under Presidential Decree 1869, pursuant to the policy of the
government, “ to regulate and centralize through an appropriate institution all games of chance
authorized by existing franchise or permitted by law.” This was subsequently proven to be beneficial not
just to the government but also to the society in general. It is a reliable source of much needed revenue
for the cash-strapped Government.

Petitioner is 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 it constitutes a waiver of a right prejudicial to a third person with
a right recognized by law. It waived the Manila Cit government’s right to impose taxes
and license fees, which is recognized by law. For the same reason, the law has intruded
into the local government’s right to impose local taxes and license fees. This is in
contravention of the constitutionally enshrined principle of local autonomy.

Issue:
Whether or not Presidential Decree No. 1869 is valid.

Ruling:
1. The City of Manila, being a mere Municipal corporation has no inherent right to
impose taxes. Their charter or statute must plainly show an intent to confer that power,
otherwise the municipality cannot assume it. 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.”

The Charter of Manila is subject to control by Congress. It should be stressed that

“municipal corporations are mere creatures of Congress”, which has the power to
“create and abolish municipal corporations” due to its “general legislative powers”.
Congress, therefore, has the power of control over the Local governments. 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.

2. The City of Manila’s power to impose license fees on gambling, has long been
revoked by P.D. No. 771 and vested exclusively on the National Government.
Therefore, only the National Government has the power to issue “license or permits” for
the operation of gambling.

3. Local governments have no power to tax instrumentalities of the National

Government. PAGCOR is government owned or controlled corporation with an original
charter, P.D. No. 1869. All of its shares of stocks are owned by the National
Government. 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.

4. Petitioners also argue that the Local Autonomy Clause of the Constitution will be
violated by P.D. No. 1869.

Article 10, Section 5 of the 1987 Constitution:

“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.”

SC said this is a pointless argument. The power of the local government to “impose
taxes and fees” is always subject to “limitations” which Congress may provide by law.
Besides, the principle of local autonomy under the 1987 Constitution simply means
“decentralization.” It does not make local governments sovereign within the state.

Wherefore, the petition is DISMISSED

. Physical Therapy Org. vs. Municipal Board, G.R. 10448, August 30, 1957
FACTS: Petitioner, 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 for declaratory
judgment regarding the validity of ordinance 3659 which sought to collect fees for regulation of
massage clinics. The Physical Therapy Organization, 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 (CFI) of Manila for declaratory judgment regarding the
validity of Municipal Ordinance 3659, promulgated by the Municipal Board and approved by the
City Mayor (Enacted 27 August 1954, and approved and effective 7 September 1954). To stop
the City from enforcing said ordinance, the Organization 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 Organization appealed said order of dismissal directly to the
Supreme Court. ISSUE: Whether the license fees imposed by the Ordinance against massage
clinic operators is unreasonable. HELD: NO. 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. The permit 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, but much discretion is given to municipal corporations in determining the
amount of said fee without considering it as a tax for revenue purposes. 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. 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.

Case Brief: Gerochi vs. Department of Energy

FACTS:

On June 8, 2001 Congress enacted RA 9136 or the Electric Power Industry Act of 2001.
Petitioners Romeo P. Gerochi and company assail the validity of Section 34 of the EPIRA Law
for being an undue delegation of the power of taxation. Section 34 provides for the imposition of
a “Universal Charge” to all electricity end users after a period of (1) one year after the effectively
of the EPIRA Law. The universal charge to be collected would serve as payment for government
debts, missionary electrification, equalization of taxes and royalties applied to renewable energy
and imported energy, environmental charge and for a charge to account for all forms of cross
subsidies for a period not exceeding three years. The universal charge shall be collected by the
ERC on a monthly basis from all end users and will then be managed by the PSALM Corp.
through the creation of a special trust fund.

ISSUE:

Whether or not there is an undue delegation of the power to tax on the part of the ERC

HELD:

No, the universal charge as provided for in section 34 is not a tax but an exaction of the
regulatory power (police power) of the state. The universal charge under section 34 is incidental
to the regulatory duties of the ERC, hence the provision assailed is not for generation of revenue
and therefore it cannot be considered as tax, but an execution of the states police power thru
regulation.

Moreover, the amount collected is not made certain by the ERC, but by the legislative
parameters provided for in the law (RA 9136) itself, it therefore cannot be understood as a rule
solely coming from the ERC. The ERC in this case is only a specialized administrative agency
which is tasked of executing a subordinate legislation issued by congress; which before
execution must pass both the completeness test and the sufficiency of standard test. The court in
appreciating Section 34 of RA 9136 in its entirety finds the said law and the assailed portions
free from any constitutional defect and thus deemed complete and sufficient in form.

Filstream International Inc. vs. CA

Post under Expropriation , Local Government , Political Law Case Digests

FACTS:

Filstream International is the registered owner of parcels of land located in

Antonio Rivera St., Tondo II Manila. On January 7, 1993, it filed an
ejectment suit against the occupants (private respondents) of the said
parcels of land on the grounds of termination of the lease contract and non--
payment of rentals. The ejectment suit became final and executory as no
further action was taken beyond the CA.

During the pendency of the ejectment proceedings private respondents filed

a complaint for Annulment of Deed of Exchange against Filstream. The City
of Manila came into the picture when it approved Ordinance No. 7813
authorizing Mayor Alfredo Lim to initiate acquisition through legal means of
certain parcels of land. Subsequently, the City of Manila approved Ordinance
No. 7855 declaring the expropriation of certain parcels of land which formed
part of the properties of Filstream. The said properties were sold and
distributed to qualified tenants pursuant to the Land Use Development
Program of the City of Manila. The City of Manila then filed a complaint for
eminent domain seeking to expropriate lands in Antonio Rivera St. The RTC
issued a Writ of Possession in favor of the City.

Filstream filed a motion to dismiss and a motion to quash the writ of

possession. The motion to dismiss was premised on the following grounds:
no valid cause of action; the petition does not satisfy the requirements of
public use and a mere clandestine maneuver to circumvent the writ
execution issued by the RTC of Manila in the ejectment suit; violation of the
constitutional guarantee against non-impairment of obligation and contract;
price offered was too low hence violative of the just compensation provision
of the constitution.

The RTC denied the two motions. Filstream filed a Petition for Certiorari with
the CA which dismissed the petition for being insufficient in form and
substance, aside from the fact that copies of the pleadings attached to the
petition are blurred and unreadable.
ISSUES/HELD:

1. WON City of Manila may exercise right of eminent domain despite

the existence of a final and executory judgment ordering private
respondents to vacate the lots.

YES. Petitioner Filstream anchors its claim by virtue of its ownership over the
properties and the existence of a final and executory judgment against
private respondents ordering the latter’s ejectment from the premises.

Private respondents’ claim on the other hand hinges on an alleged

supervening event which has rendered the enforcement of petitioner’s rights
moot, that is, the expropriation proceedings undertaken by the City of
Manila over the disputed premises for the benefit of herein private
respondents. For its part, the City of Manila is merely exercising its power of
eminent domain within its jurisdiction by expropriating petitioner’s properties
for public use.

There is no dispute as to the existence of a final and executory judgment in

favor of petitioner Filstream ordering the ejectment of private respondents
from the properties subject of this dispute. Thus, petitioner has every right
to assert the execution of this decision as it had already became final and
executory.

However, it must also be conceded that the City of Manila has an undeniable
right to exercise its power of eminent domain within its jurisdiction. The
right to expropriate private property for public use is expressly granted to it
under Sec 19 of the Local Government Code. Sec 100 of the Revised Charter
of the City of Manila further empowers the city government to expropriate
private property in the pursuit of its urban land reform and housing
program. The city’s right to exercise these prerogatives notwithstanding the
existence of a final and executory judgment over the property to be
expropriated had already been previously upheld by the court in the case of
Philippine Columbian Association vs Panis:

“The City of Manila, acting through its legislative branch, has the express
power to acquire private lands in the city and subdivide these lands into
home lots for sale to bona-fide tenants or occupants thereof, and to laborers
and low-salaried employees of the city.

That only a few could actually benefit from the expropriation of the property
does not diminish its public use character. It is simply not possible to
provide all at once land and shelter for all who need them (Sumulong v.
Guerrero, 154 SCRA 461 [1987]).

Corollary to the expanded notion of public use, expropriation is not anymore

confined to vast tracts of land and landed estates. It is therefore of no
moment that the land sought to be expropriated in this case is less than the
half a hectare only (Pulido v. Court of Appeals, 122 SCRA 63 [1983]).

2. WON expropriation of Filstream’s lots were legally and validly

undertaken.

NO. We take judicial notice of the fact that urban land reform has become a
paramount task in view of the acute shortage of decent housing in urban
areas particularly in Metro Manila. Nevertheless, despite the existence of a
serious dilemma, local government units are not given an unbridled
authority when exercising their power of eminent domain in pursuit of
solutions to these problems. Constitutional provisions on due process and
just compensation for the expropriation of private property must be
complied with. Other laws have also set down specific rules in the exercise of
the power of eminent domain, to wit:

• Sec 19 of LGC provides that such exercise must be pursuant to the

provisions of the Constitution and pertinent laws.

• Sec 9 of the Urban Development and Housing Act of 1992 (UDHA) provides
an order of priority in the acquisition of land for socialized housing, with
private lands listed as the last option.

• Sec 10 of UDHA provides that expropriation shall be resorted to only when

other modes of acquisition such as community mortgage, land swapping,
donation to the government, etc. have been exhausted, and, where
expropriation is resorted to, parcels of land owned by small property owners
shall be exempted.

Compliance with the above legislated conditions are deemed mandatory

because these are the only safeguards in securing the right of owners of
private property to DUE PROCESS when their property is expropriated for
public use.

There is nothing in the records which would indicate that the City of Manila
complied with the above conditions. Filstream’s 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 Filstream’s right
to due process.

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.
(Filstream International Inc. vs. CA, G.R. No. 125218 Jan. 23, 1998)

Association of Small Landowners in the Philippines, Inc. vs Secretary of

Agrarian Reform
Eminent Domain – Just Compensation

These are four consolidated cases questioning the constitutionality of the Comprehensive
Agrarian Reform Act (R.A. No. 6657 and related laws i.e., Agrarian Land Reform Code or R.A.
No. 3844).

Brief background: Article XIII of the Constitution on Social Justice and Human Rights includes
a call for the adoption by the State of an agrarian reform program. The State shall, by law,
undertake an agrarian reform program founded on the right of farmers and regular farmworkers,
who are landless, to own directly or collectively the lands they till or, in the case of other
farmworkers, to receive a just share of the fruits thereof. RA 3844 was enacted in 1963. P.D. No.
27 was promulgated in 1972 to provide for the compulsory acquisition of private lands for
distribution among tenant-farmers and to specify maximum retention limits for landowners.
In 1987, President Corazon Aquino issued E.O. No. 228, declaring full land ownership in favor
of the beneficiaries of PD 27 and providing for the valuation of still unvalued lands covered by
the decree as well as the manner of their payment. In 1987, P.P. No. 131, instituting a
comprehensive agrarian reform program (CARP) was enacted; later, E.O. No. 229, providing the
mechanics for its (PP131’s) implementation, was also enacted. Afterwhich is the enactment of
R.A. No. 6657, Comprehensive Agrarian Reform Law in 1988. This law, while considerably
changing the earlier mentioned enactments, nevertheless gives them suppletory effect insofar as
they are not inconsistent with its provisions.

[Two of the consolidated cases are discussed below]

G.R. No. 78742: (Association of Small Landowners vs Secretary)

The Association of Small Landowners in the Philippines, Inc. sought exception from the land
distribution scheme provided for in R.A. 6657. The Association is comprised of landowners of
ricelands and cornlands whose landholdings do not exceed 7 hectares. They invoke that since
their landholdings are less than 7 hectares, they should not be forced to distribute their land to
their tenants under R.A. 6657 for they themselves have shown willingness to till their own land.
In short, they want to be exempted from agrarian reform program because they claim to belong
to a different class.

G.R. No. 79777: (Manaay vs Juico)

Nicolas Manaay questioned the validity of the agrarian reform laws (PD 27, EO 228, and 229) on
the ground that these laws already valuated their lands for the agrarian reform program and that
the specific amount must be determined by the Department of Agrarian Reform (DAR). Manaay
averred that this violated the principle in eminent domain which provides that only courts can
determine just compensation. This, for Manaay, also violated due process for under the
constitution, no property shall be taken for public use without just compensation.

Manaay also questioned the provision which states that landowners may be paid for their land in
bonds and not necessarily in cash. Manaay averred that just compensation has always been in the
form of money and not in bonds.

ISSUE:

1. Whether or not there was a violation of the equal protection clause.

2. Whether or not there is a violation of due process.

3. Whether or not just compensation, under the agrarian reform program, must be in terms of
cash.

HELD:

1. No. The Association had not shown any proof that they belong to a different class exempt
from the agrarian reform program. Under the law, classification has been defined as the grouping
of persons or things similar to each other in certain particulars and different from each other in
these same particulars. To be valid, it must conform to the following requirements:

(1) it must be based on substantial distinctions;

(2) it must be germane to the purposes of the law;

(3) it must not be limited to existing conditions only; and

(4) it must apply equally to all the members of the class.

Equal protection simply means that all persons or things similarly situated must be treated alike
both as to the rights conferred and the liabilities imposed. The Association have not shown that
they belong to a different class and entitled to a different treatment. The argument that not only
landowners but also owners of other properties must be made to share the burden of
implementing land reform must be rejected. There is a substantial distinction between these two
classes of owners that is clearly visible except to those who will not see. There is no need to
elaborate on this matter. In any event, the Congress is allowed a wide leeway in providing for a
valid classification. Its decision is accorded recognition and respect by the courts of justice
except only where its discretion is abused to the detriment of the Bill of Rights. In the contrary, it
appears that Congress is right in classifying small landowners as part of the agrarian reform
program.

2. No. It is true that the determination of just compensation is a power lodged in the courts.
However, there is no law which prohibits administrative bodies like the DAR from determining
just compensation. In fact, just compensation can be that amount agreed upon by the landowner
and the government – even without judicial intervention so long as both parties agree. The DAR
can determine just compensation through appraisers and if the landowner agrees, then judicial
intervention is not needed. What is contemplated by law however is that, the just compensation
determined by an administrative body is merely preliminary. If the landowner does not agree
with the finding of just compensation by an administrative body, then it can go to court and the
determination of the latter shall be the final determination. This is even so provided by RA 6657:

Section 16 (f): Any party who disagrees with the decision may bring the matter to the court of
proper jurisdiction for final determination of just compensation.

3. No. Money as [sole] payment for just compensation is merely a concept in traditional exercise
of eminent domain. The agrarian reform program is a revolutionary exercise of eminent domain.
The program will require billions of pesos in funds if all compensation have to be made in cash –
if everything is in cash, then the government will not have sufficient money hence, bonds, and
other securities, i.e., shares of stocks, may be used for just compensation

David vs Macapagal - Arroyo

Posted by kaye lee on 2:48 PM

G.R. No. 171396, May 3 2006 [Legislative Department - Power to Declare War and Delegate
Emergency Power]

FACTS:

On February 24, 2006, President Arroyo issued PP No. 1017 declaring a state of emergency,
thus:

NOW, THEREFORE, I, Gloria Macapagal-Arroyo, President of the Republic of the Philippines and
Commander-in-Chief of the Armed Forces of the Philippines, [calling-out power] by virtue of the powers
vested upon me by Section 18, Article 7 of the Philippine Constitution which states that: “The
President. . . whenever it becomes necessary, . . . may call out (the) armed forces to prevent or
suppress. . .rebellion. . .,― and in my capacity as their Commander-in-Chief, do hereby command the
Armed Forces of the Philippines, to maintain law and order throughout the Philippines, prevent or
suppress all forms of lawless violence as well as any act of insurrection or rebellion ["take care" power]
and to enforce obedience to all the laws and to all decrees, orders and regulations promulgated by me
personally or upon my direction; and [power to take over] as provided in Section 17, Article 12 of the
Constitution do hereby declare a State of National Emergency.

On the same day, PGMA issued G.O. No. 5 implementing PP1017, directing the members of the
AFP and PNP "to immediately carry out the necessary and appropriate actions and measures to suppress
and prevent acts of terrorism and lawless violence."

David, et al. assailed PP 1017 on the grounds that (1) it encroaches on the emergency powers of
Congress; (2) it is a subterfuge to avoid the constitutional requirements for the imposition of martial
law; and (3) it violates the constitutional guarantees of freedom of the press, of speech and of assembly.
They alleged “direct injury” resulting from “illegal arrest” and “unlawful search” committed by police
operatives pursuant to PP 1017.

During the hearing, the Solicitor General argued that the issuance of PP 1017 and GO 5 have
factual basis, and contended that the intent of the Constitution is to give full discretionary powers to the
President in determining the necessity of calling out the armed forces. The petitioners did not contend
the facts stated b the Solicitor General.

ISSUE:

Whether or not the PP 1017 and G.O. No. 5 is constitutional.

RULING:

The operative portion of PP 1017 may be divided into three important provisions, thus:
 First provision: “by virtue of the power vested upon me by Section 18, Artilce VII … do hereby
command the Armed Forces of the Philippines, to maintain law and order throughout the Philippines,
prevent or suppress all forms of lawless violence as well any act of insurrection or rebellion”

Second provision: “and to enforce obedience to all the laws and to all decrees, orders and
regulations promulgated by me personally or upon my direction;”

Third provision: “as provided in Section 17, Article XII of the Constitution do hereby declare a
State of National Emergency.”

PP 1017 is partially constitutional insofar as provided by the first provision of the decree.

First Provision: Calling Out Power.

The only criterion for the exercise of the calling-out power is that “whenever it becomes
necessary,” the President may call the armed forces “to prevent or suppress lawless violence, invasion
or rebellion.” (Integrated Bar of the Philippines v. Zamora)

President Arroyo’s declaration of a “state of rebellion” was merely an act declaring a status or
condition of public moment or interest, a declaration allowed under Section 4, Chap 2, Bk II of the
Revised Administration Code. Such declaration, in the words of Sanlakas, is harmless, without legal
significance, and deemed not written. In these cases, PP 1017 is more than that. In declaring a state of
national emergency, President Arroyo did not only rely on Section 18, Article VII of the Constitution, a
provision calling on the AFP to prevent or suppress lawless violence, invasion or rebellion. She also
relied on Section 17, Article XII, a provision on the State’s extraordinary power to take over privately-
owned public utility and business affected with public interest. Indeed, PP 1017 calls for the exercise of
an awesome power. Obviously, such Proclamation cannot be deemed harmless.

To clarify, PP 1017 is not a declaration of Martial Law. It is merely an exercise of President

Arroyo’s calling-out power for the armed forces to assist her in preventing or suppressing lawless
violence.

Second Provision: The "Take Care" Power.

The second provision pertains to the power of the President to ensure that the laws be faithfully
executed. This is based on Section 17, Article VII which reads:

SEC. 17. The President shall have control of all the executive departments, bureaus, and offices.
He shall ensure that the laws be faithfully executed.

This Court rules that the assailed PP 1017 is unconstitutional insofar as it grants President
Arroyo the authority to promulgate “decrees.” Legislative power is peculiarly within the province of
the Legislature. Section 1, Article VI categorically states that “[t]he legislative power shall be vested in
the Congress of the Philippines which shall consist of a Senate and a House of Representatives.” To be
sure, neither Martial Law nor a state of rebellion nor a state of emergency can justify President Arroyo’s
exercise of legislative power by issuing decrees.

Third Provision: The Power to Take Over

Distinction must be drawn between the President’s authority to declare “a state of national
emergency” and to exercise emergency powers. To the first, Section 18, Article VII grants the President
such power, hence, no legitimate constitutional objection can be raised. But to the second, manifold
constitutional issues arise.

Generally, Congress is the repository of emergency powers. This is evident in the tenor of
Section 23 (2), Article VI authorizing it to delegate such powers to the President. Certainly, a body
cannot delegate a power not reposed upon it. However, knowing that during grave emergencies, it may
not be possible or practicable for Congress to meet and exercise its powers, the Framers of our
Constitution deemed it wise to allow Congress to grant emergency powers to the President, subject to
certain conditions, thus:

(1) There must be a war or other emergency.

(2) The delegation must be for a limited period only.

(3) The delegation must be subject to such restrictions as the Congress may prescribe.

(4) The emergency powers must be exercised to carry out a national policy declared by
Congress.

Section 17, Article XII must be understood as an aspect of the emergency powers clause.
The taking over of private business affected with public interest is just another facet of the emergency
powers generally reposed upon Congress. Thus, when Section 17 states that the “the State may, during
the emergency and under reasonable terms prescribed by it, temporarily take over or direct the
operation of any privately owned public utility or business affected with public interest,” it refers to
Congress, not the President. Now, whether or not the President may exercise such power is dependent
on whether Congress may delegate it to him pursuant to a law prescribing the reasonable terms thereof.

Following our interpretation of Section 17, Article XII, invoked by President Arroyo in issuing PP
1017, this Court rules that such Proclamation does not authorize her during the emergency to
temporarily take over or direct the operation of any privately owned public utility or business affected
with public interest without authority from Congress.

Let it be emphasized that while the President alone can declare a state of national emergency,
however, without legislation, he has no power to take over privately-owned public utility or business
affected with public interest. Nor can he determine when such exceptional circumstances have ceased.
Likewise, without legislation, the President has no power to point out the types of businesses affected
with public interest that should be taken over. In short, the President has no absolute authority to
exercise all the powers of the State under Section 17, Article VII in the absence of an emergency powers
act passed by Congress.

As of G.O. No. 5, it is constitutional since it provides a standard by which the AFP and the PNP
should implement PP 1017, i.e. whatever is “necessary and appropriate actions and measures to
suppress and prevent acts of lawless violence.” Considering that “acts of terrorism” have not yet been
defined and made punishable by the Legislature, such portion of G.O. No. 5 is declared unconstitutional

REPUBLIC vs. LIM (GR no. 161656) - Digest

FACTS:
In 1938, the Republic instituted a special civil action for expropriation of a land in Lahug, Cebu
City for the purpose of establishing a military reservation for the Philippine Army. The said lots
were registered in the name of Gervasia and Eulalia Denzon. The Republic deposited P9,500 in
the PNB then took possession of the lots. Thereafter, on May 1940, the CFI rendered its Decision
ordering the Republic to pay the Denzons the sum of P4,062.10 as just compensation. The
Denzons appealed to the CA but it was dismissed on March 11, 1948. An entry of judgment was
made on April 5, 1948.

In 1950, 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." On September 6, 1961, Lt.
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,Valdehueza and Panerio, filed with the same CFI an action for recovery of possession
with damages against the Republic and AFP officers in possession of the property.

On November 1961, Titles of the said lots were issued in the names of Valdehueza and Panerio
with the annotation "subject to the priority of the National Airports Corporation to acquire said
parcels of land, Lots 932 and939 upon previous payment of a reasonable market value".

On July 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 because of the Republic·s
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.
They appealed the CFI·s decision to the SC. The latter 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. SC still ruled that they are not entitled to recover possession of the lots but may
only demand the payment of their fair market value.

Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932 to Vicente Lim, herein
respondent, as security for their loans. For their failure to pay Lim despite demand, he had the
mortgage foreclosed in 1976. The lot title was issued in his name.

On 1992, respondent Lim filed a complaint for quieting of title with the RTC against the
petitioners herein. On 2001, the RTC rendered a decision in favor of Lim, declaring that he is the
absolute and exclusive owner of the lot with all the rights of an absolute owner including the
right to possession. Petitioners elevated the case to the CA. In its Decision dated September 18,
2003, it sustained the RTC Decision saying: ´... 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"...”

Petitioner, through the OSG, filed with the SC a petition for review alleging that they remain as
the owner of Lot 932.

ISSUE:
Whether the Republic has retained ownership of Lot 932 despite its failure to pay respondent’s
predecessors-in-interest the just compensation therefor pursuant to the judgment of the CFI
rendered as early as May 14, 1940.

HELD:
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. 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 respondent’s predecessors-in-interest the
just compensation for Lots 932 and 939.

The Court of Appeals is correct in saying that Republic’s delay is contrary to the rules of fair
play. 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.

As early as May 19, 1966, in Valdehueza, this Court mandated the Republic to pay respondent’s
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 Court’s mandate. 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 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.
There is a recognized rule that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. So, 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? Clearly, without full payment of just compensation, there can be
no transfer of title from the landowner to the expropriator.

SC ruled in earlier cases that expropriation of lands consists of two stages. 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. The second is concerned with the determination by the court of
"the just compensation for the property sought to be taken." It is only upon the completion of
these two stages that expropriation is said to have been completed In Republic v. Salem
Investment Corporation, 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.

Thus, SC ruled that the special circumstances prevailing in this case entitle respondent to recover
possession of the expropriated lot from the Republic.

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, however, 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. 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, 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."

REPUBLIC vs. CA
G.R. No. 146587 July 2, 2002

FACTS:

Petitioner (PIA) instituted expropriation proceedings covering a total of

544,980 square meters of contiguous land situated along MacArthur
Highway, Malolos, Bulacan, to be utilized for the continued broadcast
operation and use of radio transmitter facilities for the “Voice of the
Philippines” project.
Petitioner made a deposit of P517,558.80, the sum provisionally fixed as
being the reasonable value of the property. On 26 February 1979, or more
than 9 years after the institution of the expropriation proceedings, the trial
court issued this order condemning the property and ordering the plaintiff to
pay the defendants the just compensation for the property.

It would appear that the National Government failed to pay the respondents
the just compensation pursuant to the foregoing decision. The respondents
then filed a manifestation with a motion seeking payment for the
expropriated property. In response, the court issued a writ of execution for
the implementation thereof.

Meanwhile, Pres. Estrada issued Proc. No. 22 transferring 20 hectares of the

expropriated land to the Bulacan State University.

Despite the court’s order, the Santos heirs remained unpaid and no action
was on their case until petitioner filed its manifestation and motion to permit
the deposit in court of the amount P4,664,000 by way of just compensation.

The Santos heirs submitted a counter-motion to adjust the compensation

from P6/sq.m. as previously fixed to its current zonal value of P5,000/sq.m.
or to cause the return of the expropriated property.

The RTC Bulacan ruled in favor of the Santos heirs declaring its 26 February
1979 Decision to be unenforceable on the ground of prescription in
accordance with Sec. 6, Rule 39 of the 1964/1997 ROC which states that a
final and executory judgment or order may be executed on motion within 5
years from the date of its entry. RTC denied petitioner’s Motion to Permit
Deposit and ordered the return of the expropriated property to the heirs of
Santos.

ISSUES:

1. WON the petitioner may appropriate the property

2. WON the respondents are entitled to the return of the property in
question

HELD:

1. 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. Fundamental to the independent existence
of a State, it requires no recognition by the Constitution, whose provisions
are taken as being merely confirmatory of its presence and as being
regulatory, at most, in the due exercise of the power. In the hands of the
legislature, the power is inherent, its scope matching that of taxation, even
that of police power itself, in many respects. It reaches to every form of
property the State needs for public use and, as an old case so puts it, all
separate interests of individuals in property are held under a tacit agreement
or implied reservation vesting upon the sovereign the right to resume the
possession of the property whenever the public interest so requires it.

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.

Obviously, however, the power is not without its limits: first, the taking must
be for public use, and second, that just compensation must be given to the
private owner of the property. These twin proscriptions have their origin in
the recognition of the necessity for achieving balance between the State
interests, on the one hand, and private rights, upon the other hand, by
effectively restraining the former and affording protection to the latter. In
determining “public use,” two approaches are utilized - the first is public
employment or the actual use by the public, and the second is public
advantage or benefit. It is also useful to view the matter as being subject to
constant growth, which is to say that as society advances, its demands upon
the individual so increases, and each demand is a new use to which the
resources of the individual may be devoted.

The expropriated property has been shown to be for the continued utilization
by the PIA, a significant portion thereof being ceded for the expansion of the
facilities of the Bulacan State University and for the propagation of the
Philippine carabao, themselves in line with the requirements of public
purpose. Respondents question the public nature of the utilization by
petitioner of the condemned property, pointing out that its present use
differs from the purpose originally contemplated in the 1969 expropriation
proceedings. The argument is of no moment. The property has assumed a
public character upon its expropriation. Surely, petitioner, as the condemnor
and as the owner of the property, is well within its rights to alter and decide
the use of that property, the only limitation being that it be for public use,
which, decidedly, it is.
2. NO. In insisting on the return of the expropriated property, respondents
would exhort on the pronouncement in Provincial Government of Sorsogon
vs. Vda. de Villaroya where the unpaid landowners were allowed the
alternative remedy of recovery of the property there in question. It might be
borne in mind that the case involved the municipal government of Sorsogon,
to which the power of eminent domain is not inherent, but merely delegated
and of limited application. The grant of the power of eminent domain to
local governments under Republic Act No. 7160 cannot be understood as
being the pervasive and all-encompassing power vested in the legislative
branch of government. For local governments to be able to wield the power,
it must, by enabling law, be delegated to it by the national legislature, but
even then, this delegated power of eminent domain is not, strictly speaking,
a power of eminent, but only of inferior, domain or only as broad or confined
as the real authority would want it to be.

Thus, in Valdehueza vs. Republic where the private landowners had

remained unpaid ten years after the termination of the expropriation
proceedings, this Court ruled -

“The points in dispute are whether such payment can still be made and, if
so, in what amount. Said lots have been the subject of expropriation
proceedings. By final and executory judgment in said proceedings, they
were condemned for public use, as part of an airport, and ordered sold to
the government. x x x It follows that both by virtue of the judgment, long
final, in the expropriation suit, as well as the annotations upon their title
certificates, plaintiffs are not entitled to recover possession of their
expropriated lots - which are still devoted to the public use for which they
were expropriated - but only to demand the fair market value of the same.

"Said relief may be granted under plaintiffs' prayer for: `such other
remedies, which may be deemed just and equitable under the premises'."

The Court proceeded to reiterate its pronouncement in Alfonso vs. Pasay City
where the recovery of possession of property taken for public use prayed for
by the unpaid landowner was denied even while no requisite expropriation
proceedings were first instituted. The landowner was merely given the relief
of recovering compensation for his property computed at its market value at
the time it was taken and appropriated by the State.

The judgment rendered by the Bulacan RTC in 1979 on the expropriation

proceedings provides not only for the payment of just compensation to
herein respondents but likewise adjudges the property condemned in favor
of petitioner over which parties, as well as their privies, are bound. Petitioner
has occupied, utilized and, for all intents and purposes, exercised dominion
over the property pursuant to the judgment. The exercise of such rights
vested to it as the condemnee indeed has amounted to at least a partial
compliance or satisfaction of the 1979 judgment, thereby preempting any
claim of bar by prescription on grounds of non-execution. In arguing for the
return of their property on the basis of non-payment, respondents ignore the
fact that the right of the expropriatory authority is far from that of an unpaid
seller in ordinary sales, to which the remedy of rescission might perhaps
apply. An in rem proceeding, condemnation acts upon the property. After
condemnation, the paramount title is in the public under a new and
independent title; thus, by giving notice to all claimants to a disputed title,
condemnation proceedings provide a judicial process for securing better title
against all the world than may be obtained by voluntary conveyance.

Respondents, in arguing laches against petitioner did not take into account
that the same argument could likewise apply against them. Respondents
first instituted proceedings for payment against petitioner on 09 May 1984,
or five years after the 1979 judgment had become final. The unusually long
delay in bringing the action to compel payment against herein petitioner
would militate against them. Consistently with the rule that one should take
good care of his own concern, respondents should have commenced the
proper action upon the finality of the judgment which, indeed, resulted in a
permanent deprivation of their ownership and possession of the property.

The constitutional limitation of “just compensation” is considered to be the

sum equivalent to the market value of the property, broadly described to be
the price fixed by the seller in open market in the usual and ordinary course
of legal action and competition or the fair value of the property as between
one who receives, and one who desires to sell, it fixed at the time of the
actual taking by the government. Thus, if property is taken for public use
before compensation is deposited with the court having jurisdiction over the
case, the final compensation must include interests on its just value to be
computed from the time the property is taken to the time when
compensation is actually paid or deposited with the court. In fine, between
the taking of the property and the actual payment, legal interests accrue in
order to place the owner in a position as good as (but not better than) the
position he was in before the taking occurred.

The Bulacan trial court, in its 1979 decision, was correct in imposing
interests on the zonal value of the property to be computed from the time
petitioner instituted condemnation proceedings and “took” the property in
September 1969. This allowance of interest on the amount found to be the
value of the property as of the time of the taking computed, being an
effective forbearance, at 12% per annum should help eliminate the issue of
the constant fluctuation and inflation of the value of the currency over time.
Article 1250 of the Civil Code, providing that, in case of extraordinary
inflation or deflation, the value of the currency at the time of the
establishment of the obligation shall be the basis for the payment when no
agreement to the contrary is stipulated, has strict application only to
contractual obligations. In other words, a contractual agreement is needed
for the effects of extraordinary inflation to be taken into account to alter the
value of the currency.

All given, the trial court of Bulacan in issuing its order, dated 01 March 2000,
vacating its decision of 26 February 1979 has acted beyond its lawful
cognizance, the only authority left to it being to order its execution. Verily,
private respondents, although not entitled to the return of the expropriated
property, deserve to be paid promptly on the yet unpaid award of just
compensation already fixed by final judgment of the Bulacan RTC on 26
February 1979 at P6.00 per square meter, with legal interest thereon at
12% per annum computed from the date of "taking" of the property, i.e., 19
September 1969, until the due amount shall have been fully paid.

582 Phil. 40

CORONA, J.:

Petitioners assail the February 29, 2000 decision[1] and October 12, 2000 resolution of the Court
of Appeals (CA) in CA-G.R. CV No. 56461 affirming with modification the decision of the
Regional Trial Court (RTC) of Surigao City, Branch 32, in Civil Case No. 4570.

Civil Case No. 4570 was a complaint for "Recovery of Real Property and/or its Market Value"
filed by petitioner Maria Paz Nepomuceno to recover a 652 sq. m. portion[2] of her 50,000 sq. m.
lot[3] which was occupied, developed and used as a city road by the city government of Surigao.
Maria Paz alleged that the city government neither asked her permission to use the land nor
instituted expropriation proceedings for its acquisition. On October 4, 1994, she and her
husband, co-petitioner, Fermin A. Nepomuceno, wrote respondent (then Surigao City Mayor)
Salvador Sering a letter proposing an amicable settlement for the payment of the portion taken
over by the city. They subsequently met with Mayor Sering to discuss their proposal but the
mayor rebuffed them in public and refused to pay them anything. In a letter dated January 30,
1995, petitioners sought reconsideration of the mayor's stand. But again, the city mayor turned
this down in his reply dated January 31, 1995. As a consequence, petitioners claimed that they
suffered mental anguish, embarrassment, disappointment and emotional distress which entitled
them to moral damages.

In their answer, respondents admitted the existence of the road in question but alleged that it was
constructed way back in the 1960s during the administration of former Mayor Pedro Espina. At
that time, the lot was owned by the spouses Vicente and Josefa Fernandez who signed a road
right-of-way agreement in favor of the municipal government. However, a copy of the agreement
could no longer be found because the records were completely destroyed and lost when the
Office of the City Engineer was demolished by typhoon Nitang in 1994.

After hearing the parties and evaluating their respective evidence, the RTC rendered its
decision[4] and held:
WHEREFORE, premises considered, judgment is hereby rendered ordering the City of Surigao
to pay to Maria Paz V. Nepomuceno and her husband, Fermin Nepomuceno, the sum of
P5,000.00 as attorney's fees, and the further sum of P3,260.00 as compensation for the portion of
land in dispute, with legal interest thereon from 1960 until fully paid, and upon payment,
directing her to execute the corresponding deed of conveyance in favor of the said defendant.
The Clerk of Court shall execute the necessary instrument in the event of her failure to do so.

The claims for moral and exemplary damages are denied for lack of basis. No pronouncement as
to costs.

SO ORDERED.[5]
Unsatisfied with that decision, the petitioners appealed to the CA. As stated earlier, the CA
modified the RTC decision and held that petitioners were entitled to P30,000 as moral damages
for having been rebuffed by Mayor Sering in the presence of other people. It also awarded
petitioners P20,000 as attorney's fees and litigation expenses considering that they were forced to
litigate to protect their rights and had to travel to Surigao City from their residence in Ormoc
City to prosecute their claim. The CA affirmed the decision of the trial court in all other respects.
Petitioners filed a motion for reconsideration but it was denied. Hence, this petition.

Petitioners claim that, in fixing the value of their property, justice and equity demand that the
value at the time of actual payment should be the basis, not the value at the time of the taking as
the RTC and CA held. They demand P200/sq. m. or a total sum of P130,400 plus legal interest.
In the alternative, petitioners pray for the re-examination of the meaning of just compensation
and cite the separate concurring opinion of Justice Antonio Barredo in Municipality of La
Carlota v. Spouses Gan.[6]

Petitioners also assert that the CA decision in Spouses Mamerto Espina, Sr. and Flor Espina v.
City of Ormoc[7]should be applied to this case because of the substantial factual similarity
between the two cases. In that case, the City of Ormoc was directed to institute a separate
expropriation proceeding over the subject property.

Moreover, petitioners maintain that exemplary damages should be awarded because respondent
City of Surigao illegally took their property.

Petitioners' arguments are without merit.

In a long line of cases, we have consistently ruled that where actual taking is made without the
benefit of expropriation proceedings and the owner seeks recovery of the possession of the
property prior to the filing of expropriation proceedings, it is the value of the property at the time
of taking that is controlling for purposes of compensation.[8] As pointed out in Republic v.
Lara,[9] the reason for this rule is:
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 the
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."
Thus, the value of petitioners' property must be ascertained as of 1960 when it was actually
taken. It is as of that time that the real measure of their loss may fairly be adjudged. The value,
once fixed, shall earn interest at the legal rate until full payment is effected, conformably with
other principles laid down by case law.[10]

Regarding petitioners' contention on the applicability of Article 1250 of the Civil Code,[11]
Republic v. CA[12] is enlightening:
Article 1250 of the Civil Code, providing that, in case of extraordinary inflation or deflation, the
value of the currency at the time of the establishment of the obligation shall be the basis for the
payment when no agreement to the contrary is stipulated, has strict application only to
contractual obligations. In other words, a contractual agreement is needed for the effects of
extraordinary inflation to be taken into account to alter the value of the currency. (emphasis
supplied)
Since there was never any contractual obligation between the parties in this case, Article 1250 of
the Civil Code finds no application.

Moreover, petitioners cannot properly insist on the application of the CA decision in Spouses
Mamerto Espina, Sr. and Flor Espina v. City of Ormoc.[13] A decision of the CA does not
establish judicial precedent. A ruling of the CA on any question of law is not binding on this
Court.[14] In fact, the Court may review, modify or reverse any such ruling of the CA.

Finally, we deny petitioners' prayer for exemplary damages. Exemplary damages may be
imposed by way of example or correction for the public good.[15] The award of these damages is
meant to be a deterrent to socially deleterious actions.[16] Exemplary damages would have been
appropriate had it been shown that the city government indeed misused its power of eminent
domain.[17] In this case, both the RTC and the CA found there was no socially deleterious action
or misuse of power to speak of. We see no reason to rule otherwise.

WHEREFORE, the petition is hereby DENIED.

STA. ROSA REALTY DEVELOPMENT CORPORATION, petitioner, vs. COURT OF

APPEALS, JUAN B. AMANTE, FRANCISCO L. ANDAL, LUCIA ANDAL, ANDREA P.
AYENDE, LETICIA P. BALAT, FILOMENA B. BATINO, ANICETO A. BURGOS, JAIME
A. BURGOS, FLORENCIA CANUBAS, LORETO A. CANUBAS, MAXIMO A. CANUBAS,
REYNALDO CARINGAL, QUIRINO C. CASALME, BENIGNO A. CRUZAT, ELINO A.
CRUZAT, GREGORIO F. CRUZAT, RUFINO C. CRUZAT, SERGIO CRUZAT, SEVERINO
F. CRUZAT, VICTORIA DE SAGUN, SEVERINO DE SAGUN, FELICISIMO A.
GONZALES, FRANCISCO A. GONZALES, GREGORIO GONZALES, LEODEGARIO N.
GONZALES, PASCUAL P. GONZALES, ROLANDO A. GONZALES, FRANCISCO A.
JUANGCO, GERVACIO A. JUANGCO, LOURDES U. LUNA, ANSELMO M. MANDANAS,
CRISANTO MANDANAS, EMILIO M. MANDANAS, GREGORIO A. MANDANAS,
MARIO G. MANDANAS, TEODORO MANDANAS, CONSTANCIO B. MARQUEZ,
EUGENIO B. MARQUEZ, ARMANDO P. MATIENZO, DANIEL D. MATIENZO,
MAXIMINO MATIENZO, PACENCIA P. MATIENZO, DOROTEA L. PANGANIBAN,
JUANITO T. PEREZ, MARIANITO T. PEREZ, SEVERO M. PEREZ, INOCENCIA S.
PASQUIZA, BIENVENIDO F. PETATE, IGNACIO F. PETATE, JUANITO PETATE, PABLO
A. PLATON, PRECILLO V. PLATON, AQUILINO B. SUBOL, CASIANO T. VILLA,
DOMINGO VILLA, JUAN T. VILLA, MARIO C. VILLA, NATIVIDAD A. VILLA, JACINTA
S. ALVARADO, RODOLFO ANGELES, DOMINGO A. CANUBAS, EDGARDO L.
CASALME, QUIRINO DE LEON, LEONILO M. ENRIQUEZ, CLAUDIA P. GONZALES,
FELISA R. LANGUE, QUINTILLANO LANGUE, REYNALDO LANGUE, ROMEO S.
LANGUE, BONIFACIO VILLA, ROGELIO AYENDE, ANTONIO B. FERNANDEZ,
ZACARIAS HERRERA, ZACARIAS HERRERA, REYNARIO U. LAZO, AGAPITO
MATIENZO, DIONISIO F. PETATE, LITO G. REYES, JOSE M. SUBOL, CELESTINO G.
TOPI NO, ROSA C. AMANTE, SOTERA CASALME, REMIGIO M. SILVERIO, THE
SECRETARY OF AGRARIAN REFORM, DEPARTMENT OF AGRARIAN REFORM
ADJUDICATION BOARD, LAND BANK OF THE PHILIPPINES, REGISTER OF DEEDS
OF LAGUNA, DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES
REGIONAL EXECUTIVE DIRECTOR FOR REGION IV, and REGIONAL AGRARIAN
REFORM OFFICER FOR REGION IV, respondents.

DECISION

PARDO, J.:

The case before the Court is a petition for review on certiorari of the decision of the Court of
Appealsi[1] affirming the decision of the Department of Agrarian Reform Adjudication
Boardii[2] (hereafter DARAB) ordering the compulsory acquisition of petitioners property under
the Comprehensive Agrarian Reform Program (CARP).

Petitioner Sta. Rosa Realty Development Corporation (hereafter, SRRDC) was the registered
owner of two parcels of land, situated at Barangay Casile, Cabuyao, Laguna covered by TCT
Nos. 81949 and 84891, with a total area of 254.6 hectares. According to petitioner, the parcels of
land are watersheds, which provide clean potable water to the Canlubang community, and that
ninety (90) light industries are now located in the area.iii[3]

Petitioner alleged that respondents usurped its rights over the property, thereby destroying the
ecosystem. Sometime in December 1985, respondents filed a civil caseiv[4] with the Regional
Trial Court, Laguna, seeking an easement of a right of way to and from Barangay Casile. By way
of counterclaim, however, petitioner sought the ejectment of private respondents.

In October 1986 to August 1987, petitioner filed with the Municipal Trial Court, Cabuyao,
Laguna separate complaints for forcible entry against respondents.v[5]

After the filing of the ejectment cases, respondents petitioned the Department of Agrarian
Reform (DAR) for the compulsory acquisition of the SRRDC property under the CARP.
On August 11, 1989, the Municipal Agrarian Reform Officer (MARO) of Cabuyao, Laguna
issued a notice of coverage to petitioner and invited its officials or representatives to a
conference on August 18, 1989.vi[6] During the meeting, the following were present:
representatives of petitioner, the Land Bank of the Philippines, PARCCOM, PARO of Laguna,
MARO of Laguna, the BARC Chairman of Barangay Casile and some potential farmer
beneficiaries, who are residents of Barangay Casile, Cabuyao, Laguna. It was the consensus and
recommendation of the assembly that the landholding of SRRDC be placed under compulsory
acquisition.

On August 17, 1989, petitioner filed with the Municipal Agrarian Reform Office (MARO),
Cabuyao, Laguna a Protest and Objection to the compulsory acquisition of the property on the
ground that the area was not appropriate for agricultural purposes. The area was rugged in terrain
with slopes of 18% and above and that the occupants of the land were squatters, who were not
entitled to any land as beneficiaries.vii[7]

On August 29, 1989, the farmer beneficiaries together with the BARC chairman answered the
protest and objection stating that the slope of the land is not 18% but only 5-10% and that the
land is suitable and economically viable for agricultural purposes, as evidenced by the
Certification of the Department of Agriculture, municipality of Cabuyao, Laguna.viii[8]

On September 8, 1989, MARO Belen dela Torre made a summary investigation report and
forwarded the Compulsory Acquisition Folder Indorsement (CAFI) to the Provincial Agrarian
Reform Officer (hereafter, PARO).ix[9]

On September 21, 1989, PARO Durante Ubeda forwarded his endorsement of the compulsory
acquisition to the Secretary of Agrarian Reform.

On November 23, 1989, Acting Director Eduardo C. Visperas of the Bureau of Land Acquisition
and Development, DAR forwarded two (2) Compulsory Acquisition Claim Folders covering the
landholding of SRRDC, covered by TCT Nos. T-81949 and T-84891 to the President, Land
Bank of the Philippines for further review and evaluation.x[10]

On December 12, 1989, Secretary of Agrarian Reform Miriam Defensor Santiago sent two (2)
notices of acquisitionxi[11] to petitioner, stating that petitioners landholdings covered by TCT
Nos. 81949 and 84891, containing an area of 188.2858 and 58.5800 hectares, valued at
P4,417,735.65 and P1,220,229.93, respectively, had been placed under the Comprehensive
Agrarian Reform Program.

On February 6, 1990, petitioner SRRDC in two lettersxii[12] separately addressed to Secretary

Florencio B. Abad and the Director, Bureau of Land Acquisition and Distribution, sent its formal
protest, protesting not only the amount of compensation offered by DAR for the property but
also the two (2) notices of acquisition.

On March 17, 1990, Secretary Abad referred the case to the DARAB for summary proceedings
to determine just compensation under R. A. No. 6657, Section 16.
On March 23, 1990, the LBP returned the two (2) claim folders previously referred for review
and evaluation to the Director of BLAD mentioning its inability to value the SRRDC
landholding due to some deficiencies.

On March 28, 1990, Executive Director Emmanuel S. Galvez wrote Land Bank President
Deogracias Vistan to forward the two (2) claim folders involving the property of SRRDC to the
DARAB for it to conduct summary proceedings to determine the just compensation for the land.

On April 6, 1990, petitioner sent a letter to the Land Bank of the Philippines stating that its
property under the aforesaid land titles were exempt from CARP coverage because they had been
classified as watershed area and were the subject of a pending petition for land conversion.

On May 10, 1990, Director Narciso Villapando of BLAD turned over the two (2) claim folders
(CACFs) to the Executive Director of the DAR Adjudication Board for proper administrative
valuation. Acting on the CACFs, on September 10, 1990, the Board promulgated a resolution
asking the office of the Secretary of Agrarian Reform (DAR) to first resolve two (2) issues
before it proceeds with the summary land valuation proceedings.xiii[13]

The issues that need to be threshed out were as follows: (1) whether the subject parcels of land
fall within the coverage of the Compulsory Acquisition Program of the CARP; and (2) whether
the petition for land conversion of the parcels of land may be granted.

On December 7, 1990, the Office of the Secretary, DAR, through the Undersecretary for
Operations (Assistant Secretary for Luzon Operations) and the Regional Director of Region IV,
submitted a report answering the two issues raised. According to them, firstly, by virtue of the
issuance of the notice of coverage on August 11, 1989, and notice of acquisition on December
12, 1989, the property is covered under compulsory acquisition. Secondly, Administrative Order
No. 1, Series of 1990, Section IV D also supports the DAR position on the coverage of the said
property. During the consideration of the case by the Board, there was no pending petition for
land conversion specifically concerning the parcels of land in question.

On February 19, 1991, the Board sent a notice of hearing to all the parties interested, setting the
hearing for the administrative valuation of the subject parcels of land on March 6, 1991.
However, on February 22, 1991, Atty. Ma. Elena P. Hernandez-Cueva, counsel for SRRDC,
wrote the Board requesting for its assistance in the reconstruction of the records of the case
because the records could not be found as her co-counsel, Atty. Ricardo Blancaflor, who
originally handled the case for SRRDC and had possession of all the records of the case was on
indefinite leave and could not be contacted. The Board granted counsels request and moved the
hearing to April 4, 1991.

On March 18, 1991, SRRDC submitted a petition to the Board for the latter to resolve SRRDCs
petition for exemption from CARP coverage before any administrative valuation of their
landholding could be had by the Board.

On April 4, 1991, the initial DARAB hearing of the case was held and subsequently, different
dates of hearing were set without objection from counsel of SRRDC. During the April 15, 1991
hearing, the subdivision plan of subject property at Casile, Cabuyao, Laguna was submitted and
marked as Exhibit 5 for SRRDC. At the hearing on April 23, 1991, the Land Bank asked for a
period of one month to value the land in dispute.

At the hearing on April 23, 1991, certification from Deputy Zoning Administrator Generoso B.
Opina was presented. The certification issued on September 8, 1989, stated that the parcels of
land subject of the case were classified as industrial Park per Sanguniang Bayan Resolution No.
45-89 dated March 29, 1989.xiv[14]

To avert any opportunity that the DARAB might distribute the lands to the farmer beneficiaries,
on April 30, 1991, petitioner filed a petitionxv[15] with DARAB to disqualify private
respondents as beneficiaries. However, DARAB refused to address the issue of beneficiaries.

In the meantime, on January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a
decision,xvi[16] finding that private respondents illegally entered the SRRDC property, and
ordered them evicted.

On July 11, 1991, DAR Secretary Benjamin T. Leong issued a memorandum directing the Land
Bank of the Philippines to open a trust account in favor of SRRDC, for P5,637,965.55, as
valuation for the SRRDC property.

On December 19, 1991, DARAB promulgated a decision, the decretal portion of which reads:

WHEREFORE, based on the foregoing premises, the Board hereby orders:

1. The dismissal for lack of merit of the protest against the compulsory coverage of the
landholdings of Sta. Rosa Realty Development Corporation (Transfer Certificates of Title Nos.
81949 and 84891 with an area of 254.766 hectares) in Barangay Casile, Municipality of
Cabuyao, Province of Laguna under the Comprehensive Agrarian Reform Program is hereby
affirmed;

2. The Land Bank of the Philippines (LBP) to pay Sta. Rosa Realty Development Corporation
the amount of Seven Million Eight Hundred Forty-One Thousand, Nine Hundred Ninety Seven
Pesos and Sixty-Four centavos (P7,841,997.64) for its landholdings covered by the two (2)
Transfer Certificates of Title mentioned above. Should there be a rejection of the payment
tendered, to open, if none has yet been made, a trust account for said amount in the name of
Sta. Rosa Realty Development Corporation;

3. The Register of Deeds of the Province of Laguna to cancel with dispatch Transfer certificate
of Title Nos. 84891 and 81949 and new one be issued in the name of the Republic of the
Philippines, free from liens and encumbrances;

4 The Department of Environment and Natural Resources either through its Provincial Office in
Laguna or the Regional Office, Region IV, to conduct a final segregation survey on the lands
covered by Transfer certificate of Title Nos. 84891 and 81949 so the same can be transferred by
the Register of Deeds to the name of the Republic of the Philippines;
5. The Regional Office of the Department of Agrarian Reform through its Municipal and
Provincial Agrarian Reform Office to take immediate possession on the said landholding after
Title shall have been transferred to the name of the Republic of the Philippines, and distribute the
same to the immediate issuance of Emancipation Patents to the farmer-beneficiaries as
determined by the Municipal Agrarian Reform Office of Cabuyao, Laguna.xvii[17]

On January 20, 1992, the Regional Trial Court, Laguna, Branch 24, rendered a decision in Civil
Case No. B-2333xviii[18] ruling that respondents were builders in bad faith.

On February 6, 1992, petitioner filed with the Court of Appeals a petition for review of the
DARAB decision.xix[19] On November 5, 1993, the Court of Appeals promulgated a decision
affirming the decision of DARAB. The decretal portion of the Court of Appeals decision reads:

WHEREFORE, premises considered, the DARAB decision dated September 19, 1991 is
AFFIRMED, without prejudice to petitioner Sta. Rosa Realty Development Corporation
ventilating its case with the Special Agrarian Court on the issue of just compensation.xx[20]

Hence, this petition.xxi[21]

On December 15, 1993, the Court issued a Resolution which reads:

G. R. Nos. 112526 (Sta. Rosa Realty Development Corporation vs. Court of Appeals, et. al.)
Considering the compliance, dated December 13, 1993, filed by counsel for petitioner, with the
resolution of December 8, 1993 which required petitioner to post a cash bond or surety bond in
the amount of P1,500,000.00 Pesos before issuing a temporary restraining order prayed for,
manifesting that it has posted a CASH BOND in the same amount with the Cashier of the Court
as evidenced by the attached official receipt no. 315519, the Court resolved to ISSUE the
Temporary Retraining Order prayed for.

The Court therefore, resolved to restrain: (a) the Department of Agrarian Reform Adjudication
Board from enforcing its decision dated December 19, 1991 in DARAB Case No. JC-R-IV-
LAG-0001, which was affirmed by the Court of Appeals in a Decision dated November 5, 1993,
and which ordered, among others, the Regional Office of the Department of Agrarian Reform
through its Municipal and Provincial Reform Office to take immediate possession of the
landholding in dispute after title shall have been transferred to the name of the Republic of the
Philippines and to distribute the same through the immediate issuance of Emancipation Patents
to the farmer-beneficiaries as determined by the Municipal Agrarian Officer of Cabuyao,
Laguna, (b) The Department of Agrarian Reform and/or the Department of Agrarian Reform
Adjudication Board, and all persons acting for and in their behalf and under their authority from
entering the properties involved in this case and from introducing permanent infrastructures
thereon; and (c) the private respondents from further clearing the said properties of their green
cover by the cutting or burning of trees and other vegetation, effective today until further orders
from this Court.xxii[22]

The main issue raised is whether the property in question is covered by CARP despite the fact
that the entire property formed part of a watershed area prior to the enactment of R. A. No. 6657.
Under Republic Act No. 6657, there are two modes of acquisition of private land: compulsory
and voluntary. In the case at bar, the Department of Agrarian Reform sought the compulsory
acquisition of subject property under R. A. No. 6657, Section 16, to wit:

Sec. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of private lands,
the following procedures shall be followed:

a.) After having identified the land, the landowners and the beneficiaries, the DAR shall
send its notice to acquire the land to the owners thereof, by personal delivery or registered mail,
and post the same in a conspicuous place in the municipal building and barangay hall of the
place where the property is located. Said notice shall contain the offer of the DAR to pay
corresponding value in accordance with the valuation set forth in Sections 17, 18, and other
pertinent provisions hereof.

b.) Within thirty (30) days from the date of the receipt of written notice by personal delivery
or registered mail, the landowner, his administrator or representative shall inform the DAR of his
acceptance or rejection of the offer.

c.) If the landowner accepts the offer of the DAR, the LBP shall pay the landowner the
purchase price of the land within thirty (30) days after he executes and delivers a deed of transfer
in favor of the government and other muniments of title.

d.) In case of rejection or failure to reply, the DAR shall conduct summary administrative
proceedings to determine the compensation for the land requiring the landowner, the LBP and
other interested parties to submit fifteen (15) days from receipt of the notice. After the expiration
of the above period, the matter is deemed submitted for decision. The DAR shall decide the case
within thirty (30) days after it is submitted for decision.

e.) Upon receipt by the landowner of the corresponding payment, or, in case of rejection or
no response from the landowner, upon the deposit with an accessible bank designated by the
DAR of the compensation in cash or in LBP bonds in accordance with this act, the DAR shall
make immediate possession of the land and shall request the proper Register of Deeds to issue
Transfer Certificate of Titles (TCT) in the name of the Republic of the Philippines. The DAR
shall thereafter proceed with the redistribution of the land to the qualified beneficiaries.

f.) Any party who disagrees with the decision may bring the matter to the courtxxiii[23] of
proper jurisdiction for final determination of just compensation.

In compulsory acquisition of private lands, the landholding, the landowners and farmer
beneficiaries must first be identified. After identification, the DAR shall send a notice of
acquisition to the landowner, by personal delivery or registered mail, and post it in a conspicuous
place in the municipal building and barangay hall of the place where the property is located.

Within thirty (30) days from receipt of the notice of acquisition, the landowner, his administrator
or representative shall inform the DAR of his acceptance or rejection of the offer.
If the landowner accepts, he executes and delivers a deed of transfer in favor of the government
and surrenders the certificate of title. Within thirty (30) days from the execution of the deed of
transfer, the Land Bank of the Philippines (LBP) pays the owner the purchase price. If the
landowner accepts, he executes and delivers a deed of transfer in favor of the government and
surrenders the certificate of title. Within thirty days from the execution of the deed of transfer,
the Land Bank of the Philippines (LBP) pays the owner the purchase price. If the landowner
rejects the DARs offer or fails to make a reply, the DAR conducts summary administrative
proceedings to determine just compensation for the land. The landowner, the LBP representative
and other interested parties may submit evidence on just compensation within fifteen days from
notice. Within thirty days from submission, the DAR shall decide the case and inform the owner
of its decision and the amount of just compensation.

Upon receipt by the owner of the corresponding payment, or, in case of rejection or lack of
response from the latter, the DAR shall deposit the compensation in cash or in LBP bonds with
an accessible bank. The DAR shall immediately take possession of the land and cause the
issuance of a transfer certificate of title in the name of the Republic of the Philippines. The land
shall then be redistributed to the farmer beneficiaries. Any party may question the decision of the
DAR in the special agrarian courts (provisionally the Supreme Court designated branches of the
regional trial court as special agrarian courts) for final determination of just compensation.

The DAR has made compulsory acquisition the priority mode of land acquisition to hasten the
implementation of the Comprehensive Agrarian Reform Program (CARP). Under Sec. 16 of the
CARL, the first step in compulsory acquisition is the identification of the land, the landowners
and the farmer beneficiaries. However, the law is silent on how the identification process shall be
made. To fill this gap, on July 26, 1989, the DAR issued Administrative Order No. 12, series of
1989, which set the operating procedure in the identification of such lands. The procedure is as
follows:

A. The Municipal Agrarian Reform Officer (MARO), with the assistance of the pertinent
Barangay Agrarian Reform Committee (BARC), shall:

1. Update the masterlist of all agricultural lands covered under the CARP in his area of
responsibility; the masterlist should include such information as required under the attached
CARP masterlist form which shall include the name of the landowner, landholding area,
TCT/OCT number, and tax declaration number.

2. Prepare the Compulsory Acquisition Case Folder (CACF) for each title (OCT/TCT) or
landholding covered under Phase I and II of the CARP except those for which the landowners
have already filed applications to avail of other modes of land acquisition. A case folder shall
contain the following duly accomplished forms:

a) CARP CA Form 1MARO investigation report

b) CARP CA Form No 2 Summary investigation report findings and evaluation

c) CARP CA Form 3Applicants Information sheet

d) CARP CA Form 4 Beneficiaries undertaking

e) CARP CA Form 5 Transmittal report to the PARO

The MARO/BARC shall certify that all information contained in the above-mentioned forms
have been examined and verified by him and that the same are true and correct.

3. Send notice of coverage and a letter of invitation to a conference/meeting to the

landowner covered by the Compulsory Case Acquisition Folder. Invitations to the said
conference meeting shall also be sent to the prospective farmer-beneficiaries, the BARC
representatives, the Land Bank of the Philippines (LBP) representative, and the other interested
parties to discuss the inputs to the valuation of the property.

He shall discuss the MARO/BARC investigation report and solicit the views, objection,
agreements or suggestions of the participants thereon. The landowner shall also ask to indicate
his retention area. The minutes of the meeting shall be signed by all participants in the
conference and shall form an integral part of the CACF.

4. Submit all completed case folders to the Provincial Agrarian Reform Officer (PARO).

B. The PARO shall:

1. Ensure the individual case folders are forwarded to him by his MAROs.

2. Immediately upon receipt of a case folder, compute the valuation of the land in
accordance with A.O. No. 6, series of 1988. The valuation worksheet and the related CACF
valuation forms shall be duly certified correct by the PARO and all the personnel who
participated in the accomplishment of these forms.

3. In all cases, the PARO may validate the report of the MARO through ocular inspection
and verification of the property. This ocular inspection and verification shall be mandatory when
the computed value exceeds P500,000 per estate.

4. Upon determination of the valuation, forward the case folder, together with the duly
accomplished valuation forms and his recommendations, to the Central Office.

The LBP representative and the MARO concerned shall be furnished a copy each of his report.

C. DAR Central Office, specifically through the Bureau of Land Acquisition and
Distribution (BLAD), shall:

1. Within three days from receipt of the case folder from the PARO, review, evaluate and
determine the final land valuation of the property covered by the case folder. A summary review
and evaluation report shall be prepared and duly certified by the BLAD Director and the
personnel directly participating in the review and final valuation.
2. Prepare, for the signature of the Secretary or her duly authorized representative, a notice
of acquisition (CARP Form 8) for the subject property. Serve the notice to the landowner
personally or through registered mail within three days from its approval. The notice shall
include among others, the area subject of compulsory acquisition, and the amount of just
compensation offered by DAR.

3. Should the landowner accept the DARs offered value, the BLAD shall prepare and
submit to the Secretary for approval the order of acquisition. However, in case of rejection or
non-reply, the DAR Adjudication Board (DARAB) shall conduct a summary administrative
hearing to determine just compensation, in accordance with the procedures provided under
Administrative Order No. 13, series of 1989. Immediately upon receipt of the DARABs decision
on just compensation, the BLAD shall prepare and submit to the Secretary for approval the
required order of acquisition.

4. Upon the landowners receipt of payment, in case of acceptance, or upon deposit of

payment in the designated bank, in case of rejection or non-response, the Secretary shall
immediately direct the pertinent Register of Deeds to issue the corresponding Transfer
Certificate of Title (TCT) in the name of the Republic of the Philippines. Once the property is
transferred, the DAR, through the PARO, shall take possession of the land for redistribution to
qualified beneficiaries.

Administrative Order No. 12, Series of 1989 requires that the Municipal Agrarian Reform
Officer (MARO) keep an updated master list of all agricultural lands under the CARP in his area
of responsibility containing all the required information. The MARO prepares a Compulsory
Acquisition Case Folder (CACF) for each title covered by CARP. The MARO then sends the
landowner a Notice of Coverage and a letter of invitation to a conference/ meeting over the land
covered by the CACF. He also sends invitations to the prospective farmer-beneficiaries, the
representatives of the Barangay Agrarian Reform Committee (BARC), the Land Bank of the
Philippines (LBP) and other interested parties to discuss the inputs to the valuation of the
property and solicit views, suggestions, objections or agreements of the parties. At the meeting,
the landowner is asked to indicate his retention area.

The MARO shall make a report of the case to the Provincial Agrarian Reform Officer (PARO)
who shall complete the valuation of the land. Ocular inspection and verification of the property
by the PARO shall be mandatory when the computed value of the estate exceeds P500,000.00.
Upon determination of the valuation, the PARO shall forward all papers together with his
recommendation to the Central Office of the DAR. The DAR Central Office, specifically, the
Bureau of Land Acquisition and Distribution (BLAD) shall prepare, on the signature of the
Secretary or his duly authorized representative, a notice of acquisition of the subject property.
From this point, the provisions of R. A. No. 6657, Section 16 shall apply.

For a valid implementation of the CARP Program, two notices are required: (1) the notice of
coverage and letter of invitation to a preliminary conference sent to the landowner, the
representative of the BARC, LBP, farmer beneficiaries and other interested parties pursuant to
DAR A. O. No. 12, series of 1989; and (2) the notice of acquisition sent to the landowner under
Section 16 of the CARL.
The importance of the first notice, that is, the notice of coverage and the letter of invitation to a
conference, and its actual conduct cannot be understated. They are steps designed to comply with
the requirements of administrative due process. The implementation of the CARL is an exercise
of the States police power and the power of eminent domain. To the extent that the CARL
prescribes retention limits to the landowners, there is an exercise of police power for the
regulation of private property in accordance with the Constitution. But where, to carry out such
regulation, the owners are deprived of lands they own in excess of the maximum area allowed,
there is also a taking under the power of eminent domain. The taking contemplated is not mere
limitation of the use of the land. What is required is the surrender of the title to and physical
possession of the excess and all beneficial rights accruing to the owner in favor of the farmer
beneficiary.

In the case at bar, DAR has executed the taking of the property in question. However, payment
of just compensation was not in accordance with the procedural requirement. The law required
payment in cash or LBP bonds, not by trust account as was done by DAR.

In Association of Small Landowners in the Philippines v. Secretary of Agrarian Reform, we held

that The CARP Law, for its part, conditions the transfer of possession and ownership of the land
to the government on receipt of the landowner of the corresponding payment or the deposit by
the DAR of the compensation in cash or LBP bonds with an accessible bank. Until then, title also
remains with the landowner. No outright change of ownership is contemplated either.xxiv[24]

Consequently, petitioner questioned before the Court of Appeals DARABs decision ordering the
compulsory acquisition of petitioners property.xxv[25] Here, petitioner pressed the question of
whether the property was a watershed, not covered by CARP.

Article 67 of the Water Code of the Philippines (P. D. No. 1067) provides:

Art. 67. Any watershed or any area of land adjacent to any surface water or overlying any ground
water may be declared by the Department of Natural resources as a protected area. Rules and
Regulations may be promulgated by such Department to prohibit or control such activities by the
owners or occupants thereof within the protected area which may damage or cause the
deterioration of the surface water or ground water or interfere with the investigation, use, control,
protection, management or administration of such waters.

Watersheds may be defined as an area drained by a river and its tributaries and enclosed by a
boundary or divide which separates it from adjacent watersheds. Watersheds generally are
outside the commerce of man, so why was the Casile property titled in the name of SRRDC? The
answer is simple. At the time of the titling, the Department of Agriculture and Natural Resources
had not declared the property as watershed area. The parcels of land in Barangay Casile were
declared as PARK by a Zoning Ordinance adopted by the municipality of Cabuyao in 1979, as
certified by the Housing and Land Use Regulatory Board. On January 5, 1994, the Sangguniang
Bayan of Cabuyao, Laguna issued a Resolutionxxvi[26] voiding the zoning classification of the
land at Barangay Casile as Park and declaring that the land is now classified as agricultural land.
The authority of the municipality of Cabuyao, Laguna to issue zoning classification is an
exercise of its police power, not the power of eminent domain. A zoning ordinance is defined as
a local city or municipal legislation which logically arranges, prescribes, defines and apportions
a given political subdivision into specific land uses as present and future projection of
needs.xxvii[27]

In Natalia Realty, Inc. v. Department of Agrarian Reformxxviii[28] we held that lands classified
as non-agricultural prior to the effectivity of the CARL may not be compulsorily acquired for
distribution to farmer beneficiaries.

However, more than the classification of the subject land as PARK is the fact that subsequent
studies and survey showed that the parcels of land in question form a vital part of a watershed
area.xxix[29]

Now, petitioner has offered to prove that the land in dispute is a watershed or part of the
protected area for watershed purposes. Ecological balances and environmental disasters in our
day and age seem to be interconnected. Property developers and tillers of the land must be aware
of this deadly combination. In the case at bar, DAR included the disputed parcels of land for
compulsory acquisition simply because the land was allegedly devoted to agriculture and was
titled to SRRDC, hence, private and alienable land that may be subject to CARP.

However, the scenario has changed, after an in-depth study, survey and reassessment. We cannot
ignore the fact that the disputed parcels of land form a vital part of an area that need to be
protected for watershed purposes. In a report of the Ecosystems Research and Development
Bureau (ERDB), a research arm of the DENR, regarding the environmental assessment of the
Casile and Kabanga-an river watersheds, they concluded that:

The Casile barangay covered by CLOA in question is situated in the heartland of both
watersheds. Considering the barangays proximity to the Matangtubig waterworks, the activities
of the farmers which are in conflict with proper soil and water conservation practices jeopardize
and endanger the vital waterworks. Degradation of the land would have double edge detrimental
effects. On the Casile side this would mean direct siltation of the Mangumit river which drains to
the water impounding reservoir below. On the Kabanga-an side, this would mean destruction of
forest covers which acts as recharged areas of the Matang Tubig springs. Considering that the
people have little if no direct interest in the protection of the Matang Tubig structures they
couldnt care less even if it would be destroyed.

The Casile and Kabanga-an watersheds can be considered a most vital life support system to
thousands of inhabitants directly and indirectly affected by it. From these watersheds come the
natural God-given precious resource water. x x x x x

Clearing and tilling of the lands are totally inconsistent with sound watershed management. More
so, the introduction of earth disturbing activities like road building and erection of permanent
infrastructures. Unless the pernicious agricultural activities of the Casile farmers are immediately
stopped, it would not be long before these watersheds would cease to be of value. The impact of
watershed degredation threatens the livelihood of thousands of people dependent upon it.
Toward this, we hope that an acceptable comprehensive watershed development policy and
program be immediately formulated and implemented before the irreversible damage finally
happens.

Hence, the following are recommended:

7.2 The Casile farmers should be relocated and given financial assistance.

7.3 Declaration of the two watersheds as critical and in need of immediate rehabilitation.

7.4 A comprehensive and detailed watershed management plan and program be formulated and
implemented by the Canlubang Estate in coordination with pertinent government
agencies.xxx[30]

The ERDB report was prepared by a composite team headed by Dr. Emilio Rosario, the ERDB
Director, who holds a doctorate degree in water resources from U.P. Los Banos in 1987; Dr.
Medel Limsuan, who obtained his doctorate degree in watershed management from Colorado
University (US) in 1989; and Dr. Antonio M. Dano, who obtained his doctorate degree in Soil
and Water management Conservation from U.P. Los Banos in 1993.

Also, DENR Secretary Angel Alcala submitted a Memorandum for the President dated
September 7, 1993 (Subject: PFVR HWI Ref.: 933103 Presidential Instructions on the Protection
of Watersheds of the Canlubang Estates at Barrio Casile, Cabuyao, Laguna) which reads:

It is the opinion of this office that the area in question must be maintained for watershed
purposes for ecological and environmental considerations, among others. Although the 88
families who are the proposed CARP beneficiaries will be affected, it is important that a larger
view of the situation be taken as one should also consider the adverse effect on thousands of
residents downstream if the watershed will not be protected and maintained for watershed
purposes.

The foregoing considered, it is recommended that if possible, an alternate area be allocated for
the affected farmers, and that the Canlubang Estates be mandated to protect and maintain the
area in question as a permanent watershed reserved.xxxi[31]

The definition does not exactly depict the complexities of a watershed. The most important
product of a watershed is water which is one of the most important human necessity. The
protection of watersheds ensures an adequate supply of water for future generations and the
control of flashfloods that not only damage property but cause loss of lives. Protection of
watersheds is an intergenerational responsibility that needs to be answered now.

Another factor that needs to be mentioned is the fact that during the DARAB hearing, petitioner
presented proof that the Casile property has slopes of 18% and over, which exempted the land
from the coverage of CARL. R. A. No. 6657, Section 10, provides:
Section 10. Exemptions and Exclusions. Lands actually, directly and exclusively used and found
to be necessary for parks, wildlife, forest reserves, reforestration, fish sanctuaries and breeding
grounds, watersheds and mangroves, national defense, school sites and campuses including
experimental farm stations operated by public or private schools for educational purposes, seeds
and seedlings research and pilot production centers, church sites and convents appurtenent
thereto, communal burial grounds and cemeteries, penal colonies and penal farms actually
worked by the inmates, government and private research and quarantine centers, and all lands
with eighteen percent (18%) slope and over, except those already developed shall be exempt
from coverage of this Act.

Hence, during the hearing at DARAB, there was proof showing that the disputed parcels of land
may be excluded from the compulsory acquisition coverage of CARP because of its very high
slopes.

To resolve the issue as to the true nature of the parcels of land involved in the case at bar, the
Court directs the DARAB to conduct a re-evaluation of the issue.

IN VIEW WHEREOF, the Court SETS ASIDE the decision of the Court of Appeals in CA-G.
R. SP No. 27234.

In lieu thereof, the Court REMANDS the case to the DARAB for re-evaluation and
determination of the nature of the parcels of land involved to resolve the issue of its coverage by
the Comprehensive Land Reform Program.

In the meantime, the effects of the CLOAs issued by the DAR to supposed farmer beneficiaries
shall continue to be stayed by the temporary restraining order issued on December 15, 1993,
which shall remain in effect until final decision on the case.

No costs.

SO ORDERED.

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April 21, 2018 Prima Donita PH

CASE DIGEST: LAND BANK OF THE PHILIPPINES vs. DALAUTA

G.R. No. 190004

This is an action for determination of just compensation.

FACTS: Respondent was the registered owner of an agricultural land in Butuan City with an
area of 25.2160 hectares and which was placed by DAR under compulsory acquisition of
CARP as reflected in the Notice of Coverage. Petitioner LBP offered ₱192,782.59 as
compensation for the land, but Dalauta rejected such valuation for being too low.

The case was referred to the DAR Adjudication Board (DARAB) through the Provincial Agrarian
Reform Adjudicator (PARAD) of Butuan City, who affirmed the valuation made by LBP, after a
summary administrative proceeding was conducted.

Respondent filed a petition for determination of just compensation with the RTC, sitting as SAC.
He alleged that LBP’s valuation of the land was inconsistent with the rules and regulations
prescribed in DAR Administrative Order (A.O.) No. 06, series of 1992, for determining the just
compensation of lands covered by CARP’s compulsory acquisition scheme.

The Board of Commissioners constituted by SAC inspected the land and recommended that the
value of the land be pegged at ₱100,000.00 per hectarei in which both parties objected.

DAR Admin. Order No. 06 (1992) – II (A)

There shall be one basic formula for the valuation of lands covered by VOS or CA regardless of
the date of offer or coverage of the claim:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value; CNI = Capitalized Net Income; CS = Comparable Sales; MV =

Market Value per Tax Declaration

The above formula shall be used if all the three factors are present, relevant, and applicable.

A.1 When the CS factor is not present and CNI and MV are applicable, the formula shall
be: LV=(CNI x 0.9) + (MV x 0.1)
A.2 When the CNI factor is not present, and CS and MV are applicable, the formula shall
be: LV = (CS x 0.9) + (MV x 0.1)

A.3 When both the CS and CNI are not present and only MV is applicable, the formula shall
be: LV = MV x 2

A.4 In all the above, the computed value using the applicable formula or the Declared Value
by Landowner (DV), whichever is lower, shall be adopted as the Land Value.

xxx

Dalauta claimed that he had a net income of Php350,000.00 in 1993 from sales of trees to one
person, Fonacier, thus the formula of LV = CNI x 0.9 + MV x 0.1 should be used, which yields
a total value of ₱2,639,557.oo.

LBP alleged that the land had no income and the corn production found during the ocular
inspection in 1994 was only for family consumption. Thus they used the formula LV= MVx 2
which yielded a total value of ₱192,782.59.

ISSUE: Whether or not respondent is considered the trial court correctly computed the
just compensation of the subject property.

RULING: Upon an assiduous assessment of the different valuations arrived at by the DAR, the
SAC and the CA, the Court agrees with the position of Justice Francis Jardeleza that just
compensation for respondent Dalauta’s land should be computed based on the formula
provided under DAR-LBP Joint Memorandum Circular No. 11, series of 2003 (JMC No. 11
(2003)). This Memorandum Circular, which provides for the specific guidelines for properties
with standing commercial trees, explains:

The Capitalized Net Income (CNI) approach to land valuation assumes that there would be
uniform streams of future income that would be realized in perpetuity from the
seasonal/permanent crops planted to the land. In the case of commercial trees (hardwood and
soft wood species), however, only a one-time income is realized when the trees are due for
harvest. The regular CNI approach in the valuation of lands planted to commercial trees
would therefore not apply. (Emphasis and underscoring supplied.)

Dalauta’s sale of falcata trees indeed appears to be a one-time transaction. He did not claim to
have derived any other income from the property prior to receiving the Notice of Coverage from
the DAR in February 1994. For this reason, his property would be more appropriately covered by
the formula provided under JMC No. 11 (2003).

Dalauta alleges to have sold all the falcata trees in the property to Fonacier in 1993. After
Fonacier finished harvesting in January 1994, he claims that, per advice of his lawyer, he
immediately caused the date of effectivity of this Joint Memorandum Circular x x x.” It is
submitted, however, that applying the above formula to compute just compensation for
respondent’s land would be the most equitable course of action under the circumstances. Without
JMC No. 11 (2003), Dalauta’s property would have to be valued using the formula for idle lands,
the CNI and CS factors not being applicable. Following this formula, just compensation for
Dalauta’s property would only amount to ₱225,300.00, computed as follows:

LV = MVx2

Where: LV = Land Value; MV = Market Value per Tax Declaration*

 For the area planted to corn, ₱7,740.00/hectare

 For idle/pasture land, ₱3,890/hectare

Thus:

For the 4 hectares planted to corn: LV = (P7, 7 40/hectare x 4 hectares) x 2 = ₱61,920.00

For the 21 hectares of idle/pasture land: LV = (₱3,890/hectare x 21) x 2 = ₱163,380.00

Total Land Value = P61,920.00 + Pl63,380.00 = P225,300.00

CIR v. CENTRAL LUZON DRUG CORPORATION, GR NO. 148512, 2006-06-26

Facts:

Central Luzon Drug Corporation has been a retailer of medicines and other pharmaceutical
products since December 19, 1994. In 1995, it opened three (3) drugstores as a franchisee under
the business name and style of "Mercury Drug."

For the period January 1995 to December 1995, in conformity to the mandate of Sec. 4(a) of R.

Subsequently, on December 27, 1996, claiming that according to Sec. 4(a) of R.A. No. 7432, the
amount of P219,778 should be applied as a tax credit, respondent filed a claim for refund in the
amount of P150,193... he amount of P150,193 claimed as a refund represents the tax credit
allegedly due to respondent under R.A. No. 7432.
the CTA dismissed the petition, declaring that even if the law treats the 20% sales discounts
granted to senior citizens as a tax credit, the same cannot apply when there is no tax liability or
the amount of the tax credit is greater than the tax due

. In... the latter case, the tax credit will only be to the extent of the tax liability.

Also, no refund can be granted as no tax was erroneously, illegally and actually collected based
on the provisions of Section 230, now Section 229, of the Tax Code.

Furthermore, the law does not state that a refund can be claimed by the private establishment
concerned as an alternative to the tax credit.

Thus, respondent filed with the CA a Petition for Review

On May 31, 2001, the CA rendered a Decision stating that Section 229 of the Tax Code does not
apply in this case. It concluded that the 20% discount given to senior citizens which is treated as
a tax credit pursuant to Sec. 4(a) of R.A. No. 7432 is considered just compensation... and, as
such, may be carried over to the next taxable period if there is no current tax liability

Issues:

whether the 20% sales discount granted by respondent to qualified senior citizens pursuant to
Sec. 4(a) of R.A. No. 7432 may be claimed as a tax credit or as a deduction from gross sales in
accordance with Sec. 2(1) of Revenue

Regulations No. 2-94.

Ruling:

The CA and the CTA correctly ruled that based on the plain wording of the law discounts given
under R.A. No. 7432 should be treated as tax credits, not deductions from income.

The above provision explicitly employed the word "tax credit." Nothing in the provision
suggests for it to mean a "deduction" from gross sales. To construe it otherwise would be a
departure from the clear mandate of the law.

Thus, the 20% discount required by the Act to be given to senior citizens is a tax credit, not a
deduction from the gross sales of the establishment concerned.

As a corollary to this, the definition of "tax credit" found in Section 2(1) of Revenue Regulations
No. 2-94 is... erroneous as it refers to tax credit as the amount representing the 20% discount
that "shall be deducted by the said establishment from their gross sales for value added tax and
other percentage tax purposes." This definition is contrary to what our lawmakers... had
envisioned with regard to the treatment of the discount granted to senior citizens.
Finally, for purposes of clarity, Sec. 229[11] of the Tax Code does not apply to cases that fall
under Sec. 4 of R.A. No. 7432 because the former provision governs exclusively all kinds of
refund or credit of internal revenue taxes that were erroneously or... illegally imposed and
collected pursuant to the Tax Code while the latter extends the tax credit benefit to the private
establishments concerned even before tax payments have been made.

The tax credit that is contemplated under the Act is a form of just compensation, not a... remedy
for taxes that were erroneously or illegally assessed and collected. In the same vein, prior
payment of any tax liability is not a precondition before a taxable entity can benefit from the tax
credit. The credit may be availed of upon payment of the tax due, if any. Where... there is no tax
liability or where a private establishment reports a net loss for the period, the tax credit can be
availed of and carried over to the next taxable year.

It must also be stressed that unlike in Sec. 229 of the Tax Code wherein the remedy of refund is
available to the taxpayer, Sec. 4 of the law speaks only of a tax credit, not a refund.

As earlier mentioned, the tax credit benefit granted to the establishments can be deemed as their
just compensation for private property taken by the State for public use. The privilege enjoyed by
the senior citizens does not come directly from the State, but rather from the... private
establishments concerned

NATIONAL POWER CORPORATION, PETITIONER, VS. SPOUSES

IGMEDIO AND LIWAYWAY CHIONG AND THE HEIRS OF AGRIFINA
ANGELES, REPRESENTED BY FRANCISCO MERCURIO, RESPONDENTS.

DECISION

QUISUMBING, J.:

This is a petition for review of the decision[1] of the Court of Appeals, dated October 26, 2001, in
CA-G.R. SP No. 60716, affirming the Order of the Regional Trial Court (RTC) of Iba,
Zambales, Branch 71, dated June 7, 2000 in Civil Case No. 1442-I. The trial court directed
petitioner National Power Corporation (NPC) to pay the value of the land expropriated from
respondents herein for use in NPC's Northwestern Luzon Transmission Line Project. Likewise
assailed in this petition is the resolution[2] of the appellate court, dated February 26, 2002,
denying herein petitioner's motion for reconsideration.
The undisputed facts of this case are as follows:

Petitioner is a government owned and controlled corporation, created and existing pursuant to
Republic Act No. 6395,[3] as amended, for the purpose of undertaking the development of
hydroelectric power, the production of electrical power from any source, particularly by
constructing, operating, and maintaining power plants, auxiliary plants, dams, reservoirs, pipes,
mains, transmission lines, power stations, and similar works to tap the power generated from any
river, creek, lake, spring, or waterfall in the country and supplying such power to the inhabitants
thereof. In order to carry out said purposes, NPC is authorized to exercise the power of eminent
domain.

On February 19, 1998, NPC filed a complaint for eminent domain with the RTC of Iba,
Zambales. It sought the acquisition of an easement of right-of-way and certain portions of
agricultural lands owned by Igmedio and Liwayway Chiong and the Heirs of Agrifina[4] Angeles,
as represented by Francisco Mercurio, to be used in its Northwestern Luzon Transmission Line
Project. The complaint, which was docketed as Civil Case No. 1442-I, prayed for the issuance of
a writ of possession and an order of expropriation, the appointment of three (3) commissioners to
determine the just compensation, and to adjudge NPC as having a lawful right to enter, take, and
acquire an easement of right-of-way over portions of the properties owned by herein
respondents.

In their answer, the Heirs of Agrifina Angeles did not dispute the purpose of NPC in instituting
the expropriation proceedings. However, they pointed out that NPC had already entered and
taken possession of a portion of their realty with an area of 4,000 square meters, more or less
(Lot "A") and wanted to occupy another 4,000 square meters of the adjacent property (Lot "B").
Respondents averred that the fair market value for both properties was P1,100.00 per square
meter or a total of P8,800,000.00 and prayed that the trial court direct NPC to pay them said
amount.

On March 31, 1998, NPC filed an ex parte motion for the issuance of a writ of possession, which
the trial court granted.

At the pre-trial conference, the parties agreed that the controversy would be limited to
determining the actual land area taken by NPC and the just compensation to be paid by
petitioner.

On September 28, 1999, the trial court appointed as commissioners, Atty. Henry P. Alog, Atty.
Regalado Castillo, and Ms. Roselyn B. Regadio, Legal Researcher of the trial court, to determine
the fair market value of the land, as well as the total area taken by NPC from respondents.

On March 9, 2000, Atty. Castillo and Ms. Ragadio submitted their report to the court finding that
the property classified as "unirrigated riceland shall have a fair market value of P500.00 per
square meter"[5] considering that "the property is situated at Baytan, Babali, Lomboy, Sta. Cruz,
Zambales which is more than 900 meters from the town proper."[6]
On May 5, 2000, Atty. Alog submitted his report recommending that NPC pay the Heirs of
Agrifina Angeles an easement fee of P20,957.88 and the Spouses Chiong be paid total easement
fees of P9,187.05.[7] The affected properties of the Heirs of Agrifina Angeles were assessed by
Atty. Alog to have a fair market value of P22.50 per square meter, while those of the Spouses
Chiong were assigned a fair market value of P15.75 per square meter.[8]

After considering the reports of the Commissioners, the trial court on June 7, 2000 decreed as
follows:
The Commissioner's Report dated March 9, 2000 filed by Commissioner Roselyn B. Ragadio
and Atty. Regalado Castillo is given due course.

WHEREFORE, the plaintiff is directed to pay the defendants Mercurio their land containing an
area of 4,000 square meters at P500.00 per square meter and an interest of six (6%) percent per
annum from April 16, 1998 until fully paid.

SO ORDERED.[9]
Dissatisfied, NPC filed a special civil action for certiorari with the appellate court, docketed as
CA-G.R. SP No. 60716. NPC averred that the trial court committed grave abuse of discretion
amounting to excess or want of jurisdiction when it: (a) directed NPC to pay just compensation
for the land taken without first issuing an order of expropriation; (b) adopted the compensation
recommended by the two commissioners without a hearing; and (c) directed petitioner to pay the
full market value of the property instead of a mere easement fee.

On October 26, 2001, the appellate court decided CA-G.R. SP No. 60716 as follows:
WHEREFORE, in view of the foregoing, the instant petition is hereby DISMISSED for lack of
merit.

SO ORDERED.[10]
In holding that NPC was not entitled to a writ of certiorari, the Court of Appeals found that the
trial court did not commit a grave abuse of discretion when it failed to issue an expropriation
order. The appellate court pointed out that as early as the pre-trial, respondents did not question
NPC's right to expropriate their properties. Hence, the only matter to be addressed by the trial
court was the amount of just compensation to be paid. Second, NPC could not claim that it was
denied due process because the trial court issued the order without first conducting a hearing on
the commissioners' report. The court a quo noted that formal-type hearings are not necessary in
expropriation proceedings, as long as the parties are afforded a fair and reasonable opportunity to
be heard before the order to pay compensation is issued. NPC was afforded ample time or
opportunity to object to the commissioners' report before said order was issued. This it failed to
do. It likewise failed to move for reconsideration or to appeal the trial court's order. Hence, NPC
was now estopped from claiming that it had been denied due process. The appellate court
likewise found the assessed value of P500.00 per square meter to be fair as opposed to the NPC-
appointed commissioner's valuation of P22.50 per square meter. Finally, the CA held that as
NPC failed to appeal the trial court's order, certiorari could not be a substitute for a lost or lapsed
right to appeal.
NPC moved for reconsideration, but this was denied by the appellate court in its resolution of
February 26, 2002.

Hence, the instant recourse to this Court, with petitioner submitting the following issues for our
resolution:
I

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A GRAVE ERROR IN

UPHOLDING THE DECISION OF THE COURT A QUO IN DIRECTING THE PETITIONER
TO PAY THE COMPENSATION FOR THE LAND SOUGHT TO BE EXPROPRIATED
WITHOUT FIRST ORDERING ITS EXPROPRIATION.

II

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A GRAVE ERROR WHEN

IT UPHELD THE DECISION OF THE TRIAL COURT ADOPTING IN TOTO THE
UNSUBSTANTIATED REPORT OF THE APPOINTED COMMISSIONERS MS. REGADIO
AND ATTY. CASTILLO, WITHOUT CONSIDERING THE THIRD COMMISSIONER,
ATTY. ALOG AND WITHOUT CONDUCTING A HEARING.

III

WHETHER OR NOT THE COURT OF APPEALS COMMITTED A GRAVE ERROR WHEN

IT UPHELD THE DECISION OF THE TRIAL COURT IN DIRECTING PETITIONER TO
PAY THE FULL MARKET VALUE OF THE LAND INSTEAD OF THE EASEMENT FEE
AS PRAYED FOR IN THE COMPLAINT AND PROVIDED UNDER REPUBLIC ACT NO.
6395 AS AMENDED, WHICH IS OTHERWISE KNOWN AS THE REVISED NPC
CHARTER.[11]
In sum, we find that the pertinent issues before us are the following: (1) whether petitioner NPC
was deprived of due process; and (2) whether the Court of Appeals erred in sustaining the Order
of the RTC of Iba, Zambales, dated June 7, 2000, by dismissing NPC's petition for certiorari.

On the first issue, petitioner contends that the appellate court gravely erred in affirming the trial
court's order directing it to pay the respondent the compensation recommended by the majority
report of the commissioners. Petitioner points out that there were two reports submitted by the
commissioners, with conflicting findings as to the market values of the expropriated properties.
It insists that, given said situation, the trial court should have conducted hearings on the two
reports, as required by Rule 67, Sections 7[12] and 8[13] of the 1997 Rules of Civil Procedure,
before accepting the majority report. In failing to do so, the trial court not only blatantly violated
the Rules; it likewise denied petitioner due process, as the latter was not afforded a chance to
raise its objections to the majority report in a hearing held for that purpose. It was, thus, grievous
error for the appellate court to have sustained the trial court.

The respondents, Heirs of Agrifina Angeles, point out that the petitioner's contentions are
without basis, since it was given ample time and/or opportunity by the trial court to object to the
questioned order. The respondents assert that the petitioner, had it been so minded, could have
moved for reconsideration or filed an appeal therefrom within the reglementary period, but it did
not. Instead, it opted for the wrong remedy by filing a special civil action for certiorari with the
Court of Appeals, after the period to appeal had lapsed. Having made an erroneous choice in its
remedies, petitioner cannot now come to this Tribunal crying that it was denied due process.

On record we find that the majority report of Commissioners Ragadio and Atty. Castillo was
submitted to the trial court on March 9, 2000, while the minority report of Commissioner Atty.
Alog, was submitted on May 5, 2000. It is not disputed that petitioner was furnished copies of
said reports. After petitioner NPC obtained its copy of the majority report, it did nothing. The
records do not disclose any objection thereto or any comment opposing the findings and
recommendations of the two commissioners in their report.

The majority report was submitted on March 9, 2000. The trial court issued its order adopting
the majority report on June 7, 2000. Clearly, petitioner had ample time to make its objections or
ventilate its opposition to the majority report before the trial court. A formal hearing or trial was
not required for the petitioner to avail of its opportunity to object and oppose the majority report.
Petitioner could have filed a motion raising all possible grounds for objecting to the findings and
recommendations of the commissioners. It could have moved the trial court to remand the report
to the commissioners for additional facts. Or it could have moved to expunge the majority report,
for reasons petitioner could muster. Petitioner, however, failed to seize the opportunity to
register its opposition or objections before the trial court. It is a bit too late in the day now to be
asking for a hearing on the pretext that it had not been afforded due process.

The elements of due process are well established, viz:

(1) There must be a court or tribunal clothed with judicial power to hear and determine the
matter before it;

(2) Jurisdiction must be lawfully acquired over the person of the defendant or property which
is the subject of the proceedings;

(3) The defendant must be given an opportunity to be heard; and

(4) Judgment must be rendered upon lawful hearing.[14]

What is repugnant to due process is the denial of the opportunity to be heard.[15] As pointed out
that the petitioner was afforded this opportunity is beyond question. Having failed to make use of
this opportunity, the petitioner cannot justifiably claim now that its right to due process has been
violated.

The duty of the court in considering the commissioners' report is to satisfy itself that just
compensation will be made to the defendant by its final judgment in the matter, and in order to
fulfill its duty in this respect, the court will be obliged to exercise its discretion in dealing with
the report as the particular circumstances of the case may require.[16] Rule 67, Section 8, of the
1997 Rules of Civil Procedure clearly shows that the trial court has the discretion to act upon the
commissioners' report in any of the following ways: (1) it may accept the same and render
judgment therewith; or (2) for cause shown, it may: [a] recommit the report to the commissioners
for further report of facts; or [b] set aside the report and appoint new commissioners; or [c]
accept the report in part and reject it in part; and it may make such order or render such judgment
as shall secure to the plaintiff the property essential to the exercise of his right of expropriation,
and to the defendant just compensation for the property so taken.[17]

From March 9, 2000 to June 7, 2000, petitioner did not object to the majority report. On record,
it did not, at the time, signify its opposition thereto, or specify that not all of the evidence,
pertinent and material thereto, had been considered by the commissioners or presented to the
court. The option of recommitting the report of the commissioners, which petitioner now claims,
was not ventilated before the trial court. No claim appears on record that fraud or prejudice
tainted the majority report. When it still had the opportunity below, herein petitioner did not
challenge the majority report on the ground that the commissioners concerned disregarded the
evidence before them, or used an improper rule of assessment, in their submission to the trial
court. As previously held, where there was no opposition filed to the Commissioners' Report in
the lower court, the findings in said Report will not be disturbed.[18] Absent the objections raised
by the petitioner, it became the duty of the trial court to make a final order and judgment in
which the proper award will be made and thus end the controversy.

Moreover, after its receipt of the trial court's order dated June 7, 2000, which decided the issue of
compensation as delineated at the pre-trial, petitioner resorted to a special civil action, rather than
an appeal before the Court of Appeals. As aptly pointed out, petitioner could not utilize
certiorari as a substitute for its lost right of appeal. We also agree that the trial court did not
abuse its discretion in ruling on the very issue of just compensation for the land taken, as
delineated by the party themselves at the pre-trial.

Nevertheless, we shall now take up the matter of valuation and just compensation if only to
avoid any further delay in its resolution.

The fair market value of the 4,000 square meters occupied by the petitioner was fixed by the trial
court in its order of June 7, 2000 at P500.00 per square meter. The appellate court affirmed the
said valuation.

In contesting the valuation, petitioner argues now that the Court of Appeals gravely erred in
upholding the RTC order requiring it to pay the full market value of the expropriated properties,
notwithstanding the fact that the petitioner was only acquiring an easement of right-of-way. The
petitioner points out under Section 3-A[19] of RA No. 6395, where only an easement of right-of-
way shall be acquired, with the principal purpose for which the land is actually devoted is
unimpaired, the compensation should not exceed ten percent (10%) of the market value of the
property. Thus, in sustaining the order of the lower court directing the petitioner to pay the
respondents the full recommended value of their properties, the Court of Appeals completely
violated and disregarded RA No. 6395, as amended.

Petitioner averred in its complaint in Civil Case No. 1442-I, that it sought to acquire "an
easement of right-of-way" over portions of the properties owned by respondents, for a total of
10,950 square meters.[20] However, a perusal of its complaint shows that petitioner also stated
that it would erect structures for its transmission lines on portions of the expropriated property.
In other words, the expropriation was not to be limited for the purpose of "easement of right-of-
way." In fact, in their Answer, the Heirs of Agrifina Angeles, alleged that petitioner had actually
occupied an area of 4,000 square meters wherein it constructed structures for its transmission
lines and was seeking to occupy another 4,000 square meters.[21] Petitioner failed to controvert
this material allegation. Justifiably, the market value of these 4,000 square meters allegedly
occupied by the petitioner has became the very crux of the present case.

In eminent domain or expropriation proceedings, the general rule is that the just compensation to
which the owner of condemned property is entitled to is the market value.[22] Market value is
"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."[23] The
aforementioned rule, however, is modified where only a part of a certain property is
expropriated. In such a case the owner is not restricted to compensation for the portion actually
taken. In addition to the market value of the portion taken, he is also entitled to recover for the
consequential damage, if any, to the remaining part of the property. At the same time, from the
total compensation must be deducted the value of the consequential benefits.[24]

In fixing the valuation at P500.00 per square meter, the Court of Appeals noted that the trial
court had considered the reports of the commissioners and the proofs submitted by the parties.
This included the fair market value of P1,100.00 per square meter proffered by the
respondents.[25] This valuation by owners of the property may not be binding upon the petitioner
or the court, although it should at least set a ceiling price for the compensation to be awarded.[26]
The trial court found that the parcels of land sought to be expropriated are agricultural land, with
minimal improvements. It is the nature and character of the land at the time of its taking that is
the principal criterion to determine just compensation to the landowner.[27] Hence, the trial court
accepted not the owner's valuation of P1,100 per square meter but only P500 as recommended in
the majority report of the commissioners.

As to the price of P22.50 per square meter recommended by the minority report of
Commissioner Atty. Alog, the Court of Appeals found it unconscionably inadequate. It was
rightly rejected by the trial court.

In finding that the trial court did not abuse its authority in evaluating the evidence and the reports
placed before it nor did it misapply the rules governing fair valuation, the Court of Appeals
found the majority report's valuation of P500 per square meter to be fair. Said factual finding of
the Court of Appeals, absent any showing that the valuation is exorbitant or otherwise
unjustified, is binding on the parties as well as this Court.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of
Appeals, dated October 26, 2001 as well as its resolution of February 26, 2002, denying the
petitioner's motion for reconsideration, in CA-G.R. SP No. 60716 are AFFIRMED. Costs
against petitioner.

SO ORDERED.
Heirs of Juancho Ardona vs. Reyes, 125 SCRA 220 (1983) G.R. Nos. L-
60549, 60553 to 60555 October 26, 1983

Fact: The Philippine Tourism Authority filed four (4) Complaints with the Court of First
Instance of Cebu City for the expropriation of some 282 hectares of rolling land situated in
barangays Malubog and Babag, Cebu City, The defendants filed their respective Opposition with
Motion to Dismiss and/or Reconsideration, manifestation adopting the answer.

In their motions to dismiss, the petitioners alleged, in addition to the issue of public use, that
there is no specific constitutional provision authorizing the taking of private property for tourism
purposes; that assuming that PTA has such power, the intended use cannot be paramount to the
determination of the land as a land reform area; that limiting the amount of compensation by
Legislative fiat is constitutionally repugnant; and that since the land is under the land reform
program, it is the Court of Agrarian Relations and not the Court of First Instance that has
jurisdiction over the expropriation cases.

The Philippine Tourism Authority having deposited with The Philippine National Bank, Cebu
City Branch, an amount equivalent to 10% of the value of the properties pursuant to Presidential
Decree No. 1533. the lower court issued separate orders authorizing PTA to take immediate
possession of the premises and directing the issuance of writs of possession.

Issue: Whether the actions to expropriate properties are constitutionally infirm in the taking of
private property for the promotion of tourism?

Held: No, petitioners have also failed to overcome the deference that is appropriately accorded to
formulations of national policy expressed in legislation. The expressions of national policy are
found in the revised charter of the Philippine Tourism Authority, Presidential Decree No. 564: 2.
Acquisition of Private Lands, Power of Eminent Domain. — To acquire by purchase, by
negotiation or by condemnation proceedings any private land within and without the tourist
zones for any of the following reasons: (a) consolidation of lands for tourist zone development
purposes, (b) prevention of land speculation in areas declared as tourist zones, (c) acquisition of
right of way to the zones, (d) protection of water shed areas and natural assets with tourism
value, and (e) for any other purpose expressly authorized under this Decree and accordingly, to
exercise the power of eminent domain under its own name, which shall proceed in the manner
prescribed by law and/or the Rules of Court on condemnation proceedings. The Authority may
use any mode of payment which it may deem expedient and acceptable to the land owners:
Provided, That in case bonds are used as payment, the conditions and restrictions set forth in
Chapter III, Section 8 to 13 inclusively, of this Decree shall apply

REYES VS. NATIONAL HOUSING AUTHORITY [395 SCRA 494; GR NO.

147511; 20 JAN 2003]

Saturday, January 31, 2009 Posted by Coffeeholic Writes

Labels: Case Digests, Political Law

Facts: Respondent National Housing Authority (NHA)

filed complaints for the expropriation of sugarcane lands
belonging to the petitioners. The stated public purpose of
the expropriation was the expansion of the Dasmariñas
Resettlement Project to accommodate the squatters who
were relocated from the Metropolitan Manila area. The trial
court rendered judgment ordering the expropriation of
these lots and the payment of just compensation. The
Supreme Court affirmed the judgment of the lower court.

A few years later, petitioners contended that respondent

NHA violated the stated public purpose for the expansion of
the Dasmariñas Resettlement Project when it failed to
relocate the squatters from the Metro Manila area, as borne
out by the ocular inspection conducted by the trial court
which showed that most of the expropriated properties
remain unoccupied. Petitioners likewise question the public
nature of the use by respondent NHA when it entered into
a contract for the construction of low cost housing units,
which is allegedly different from the stated public purpose
in the expropriation proceedings. Hence, it is claimed that
respondent NHA has forfeited its rights and interests by
virtue of the expropriation judgment and the expropriated
properties should now be returned to herein petitioners.

Issue: Whether or not the judgment of expropriation

was forfeited in the light of the failure of respondent NHA
to use the expropriated property for the intended purpose
but for a totally different purpose.

Held: The Supreme Court held in favor of the respondent

NHA. Accordingly, petitioners cannot insist on a restrictive
view of the eminent domain provision of the Constitution
by contending that the contract for low cost housing is a
deviation from the stated public use. It is now settled
doctrine that the concept of public use is no longer limited
to traditional purposes. The term "public use" has now
been held to be synonymous with "public interest," "public
benefit," "public welfare," and "public convenience." Thus,
whatever may be beneficially employed for the general
welfare satisfies the requirement of public use."

In addition, the expropriation of private land for slum

clearance and urban development is for a public purpose
even if the developed area is later sold to private
homeowners, commercials firms, entertainment and
service companies, and other private concerns. Moreover,
the Constitution itself allows the State to undertake, for the
common good and in cooperation with the private sector, a
continuing program of urban land reform and housing
which will make at affordable cost decent housing and
basic services to underprivileged and homeless citizens in
urban centers and resettlement areas. The expropriation of
private property for the purpose of socialized housing for
the marginalized sector is in furtherance of social justice.