B. CONSTRUCTION OF THE CONSTITUTION AND THE BILL OF RIGHTS Cases [G.R. No. 122156.

February 3, 1997]

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

DECISION

BELLOSILLO, J.:

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

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

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

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

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

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

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

K. DECLARATION OF THE WINNING BIDDER/STRATEGIC PARTNER -

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

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

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

Pending the declaration of Renong Berhard as the winning bidder/strategic partner and the execution of the necessary contracts,

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

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

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

In the main, petitioner invokes Sec. 10, second par., Art. XII, of the 1987 Constitution and submits that the Manila Hotel has been identified with the Filipino nation and has practically become a historical monument which reflects the vibrancy of Philippine heritage and culture. It is a proud legacy of an earlier generation of Filipinos

who believed in the nobility and sacredness of independence and its power and capacity to release the full potential of the Filipino people. To all intents and purposes, it has become a part of the national patrimony.[6] Petitioner also argues that since 51% of the shares of the MHC carries with it the ownership of the business of the hotel which is owned by respondent GSIS, a government-owned and controlled corporation, the hotel business of respondent GSIS being a part of the tourism industry is unquestionably a part of the national economy. Thus, any transaction involving 51% of the shares of stock of the MHC is clearly covered by the term national economy, to which Sec. 10, second par., Art. XII, 1987 Constitution, applies.[7]

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

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

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

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

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

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

We now resolve. A constitution is a system of fundamental laws for the governance and administration of a nation. It is supreme, imperious, absolute and unalterable except by the authority from which it emanates. It has been defined as the fundamental and

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

Admittedly, some constitutions are merely declarations of policies and principles. Their provisions command the legislature to enact laws and carry out the purposes of the framers who merely establish an outline of government providing for the different departments of the governmental machinery and securing certain fundamental and inalienable rights of citizens.[12] A provision which lays down a general principle, such as those found in Art. II of the 1987 Constitution, is usually not self-executing. But a provision which is complete in itself and becomes operative without the aid of supplementary or enabling legislation, or that which supplies sufficient rule by means of which the right it grants may be enjoyed or protected, is self-executing. Thus a constitutional provision is selfexecuting if the nature and extent of the right conferred and the

liability imposed are fixed by the constitution itself, so that they can be determined by an examination and construction of its terms, and there is no language indicating that the subject is referred to the legislature for action.[13]

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

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

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

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

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

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

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

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

MR. NOLLEDO. Yes.[16]

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

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

Respondents also argue that the non-self-executing nature of Sec. 10, second par., of Art. XII is implied from the tenor of the first and third

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

Even the cases cited by respondents holding that certain constitutional provisions are merely statements of principles and policies, which are basically not self-executing and only placed in the Constitution as moral incentives to legislation, not as judicially enforceable rights - are simply not in point. Basco v. Philippine Amusements and Gaming Corporation[20] speaks of constitutional provisions on personal dignity,[21] the sanctity of family life,[22] the vital role of the youth in nation-building,[23] the promotion of social justice,[24] and the values of education.[25] Tolentino v. Secretary of Finance[26] refers to constitutional provisions on social justice and human rights[27] and on education.[28] Lastly, Kilosbayan, Inc. v. Morato[29] cites provisions on the promotion of general welfare,[30] the sanctity of family life,[31] the vital role of the youth in nationbuilding[32] and the promotion of total human liberation and

development.[33] A reading of these provisions indeed clearly shows that they are not judicially enforceable constitutional rights but merely guidelines for legislation. The very terms of the provisions manifest that they are only principles upon which legislations must be based. Res ipsa loquitur.

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

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

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

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

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

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

For more than eight (8) decades Manila Hotel has bore mute witness to the triumphs and failures, loves and frustrations of the Filipinos; its existence is impressed with public interest; its own historicity associated with our struggle for sovereignty, independence and nationhood. Verily, Manila Hotel has become part of our national economy and patrimony. For sure, 51% of the equity of the MHC comes within the purview of the constitutional shelter for it comprises the majority and controlling stock, so that anyone who acquires or owns the 51% will have actual control and management of the hotel. In this instance, 51% of the MHC cannot be disassociated from the hotel and the land on which the hotel edifice stands. Consequently, we cannot sustain respondents claim that the Filipino First Policy provision is not applicable since what is being sold is only

51% of the outstanding shares of the corporation, not the Hotel building nor the land upon which the building stands.[38]

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

THE PRESIDENT. Commissioner Davide is recognized.

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

xxxx

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

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

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

MR. DAVIDE. Is that the intention?

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

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

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

xxxx

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

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

The phrase preference to qualified Filipinos was explained thus -

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

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

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

MR. NOLLEDO. Obviously.

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

MR. NOLLEDO. The answer is yes.

MR. FOZ. Thank you.[41]

Expounding further on the Filipino First Policy provision Commissioner Nolledo continues

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

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

Paragraph 2 of Section 10 explicitly mandates the Pro-Filipino bias in all economic concerns. It is better known as the FILIPINO FIRST

Policy x x x x This provision was never found in previous Constitutions x x x x

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

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

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

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

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

Respondents further argue that the constitutional provision is addressed to the State, not to respondent GSIS which by itself

possesses a separate and distinct personality. This argument again is at best specious. It is undisputed that the sale of 51% of the MHC could only be carried out with the prior approval of the State acting through respondent Committee on Privatization. As correctly pointed out by Fr. Joaquin G. Bernas, S.J., this fact alone makes the sale of the assets of respondents GSIS and MHC a state action. In constitutional jurisprudence, the acts of persons distinct from the government are considered state action covered by the Constitution (1) when the activity it engages in is a public function; (2) when the government is so significantly involved with the private actor as to make the government responsible for his action; and, (3) when the government has approved or authorized the action. It is evident that the act of respondent GSIS in selling 51% of its share in respondent MHC comes under the second and third categories of state action. Without doubt therefore the transaction, although entered into by respondent GSIS, is in fact a transaction of the State and therefore subject to the constitutional command.[46]

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

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

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

Paragraph V. J. 1 of the bidding rules provides that [i]f for any reason the Highest Bidder cannot be awarded the Block of Shares, GSIS may offer this to other Qualified Bidders that have validly submitted bids

provided that these Qualified Bidders are willing to match the highest bid in terms of price per share.[47] Certainly, the constitutional mandate itself is reason enough not to award the block of shares immediately to the foreign bidder notwithstanding its submission of a higher, or even the highest, bid. In fact, we cannot conceive of a stronger reason than the constitutional injunction itself.

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

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

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

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

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

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

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

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

Privatization of a business asset for purposes of enhancing its business viability and preventing further losses, regardless of the character of the asset, should not take precedence over non-material values. A commercial, nay even a budgetary, objective should not be pursued at the expense of national pride and dignity. For the Constitution enshrines higher and nobler non-material values. Indeed, the Court will always defer to the Constitution in the proper

governance of a free society; after all, there is nothing so sacrosanct in any economic policy as to draw itself beyond judicial review when the Constitution is involved.[49]

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

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

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

WHEREFORE, respondents GOVERNMENT SERVICE INSURANCE SYSTEM, MANILA HOTEL CORPORATION, COMMITTEE ON PRIVATIZATION and OFFICE OF THE GOVERNMENT CORPORATE COUNSEL are directed to CEASE and DESIST from selling 51% of the shares of the Manila Hotel Corporation to RENONG BERHAD, and to ACCEPT the matching bid of petitioner MANILA PRINCE HOTEL CORPORATION to purchase the subject 51% of the shares of the

Manila Hotel Corporation at P44.00 per share and thereafter to execute the necessary agreements and documents to effect the sale, to issue the necessary clearances and to do such other acts and deeds as may be necessary for the purpose.

EN BANC

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

WIGBERTO E. TAADA and ANNA DOMINIQUE COSETENG, as members of the Philippine Senate and as taxpayers; GREGORIO ANDOLANA and JOKER ARROYO as members of the House of Representatives and as taxpayers; NICANOR P. PERLAS and HORACIO R. MORALES, both as taxpayers; CIVIL LIBERTIES UNION, NATIONAL ECONOMIC PROTECTIONISM ASSOCIATION, CENTER FOR ALTERNATIVE DEVELOPMENT INITIATIVES, LIKAS-KAYANG KAUNLARAN FOUNDATION, INC., PHILIPPINE RURAL RECONSTRUCTION MOVEMENT, DEMOKRATIKONG KILUSAN NG MAGBUBUKID NG PILIPINAS, INC., and PHILIPPINE PEASANT INSTITUTE, in representation of various taxpayers and as nongovernmental organizations, petitioners, vs. EDGARDO ANGARA, ALBERTO ROMULO, LETICIA RAMOS-SHAHANI, HEHERSON ALVAREZ, AGAPITO AQUINO, RODOLFO BIAZON, NEPTALI GONZALES, ERNESTO

HERRERA, JOSE LINA, GLORIA MACAPAGAL-ARROYO, ORLANDO MERCADO, BLAS OPLE, JOHN OSMEA, SANTANINA RASUL, RAMON REVILLA, RAUL ROCO, FRANCISCO TATAD and FREDDIE WEBB, in their respective capacities as members of the Philippine Senate who concurred in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization; SALVADOR ENRIQUEZ, in his capacity as Secretary of Budget and Management; CARIDAD VALDEHUESA, in her capacity as National Treasurer; RIZALINO NAVARRO, in his capacity as Secretary of Trade and Industry; ROBERTO SEBASTIAN, in his capacity as Secretary of Agriculture; ROBERTO DE OCAMPO, in his capacity as Secretary of Finance; ROBERTO ROMULO, in his capacity as Secretary of Foreign Affairs; and TEOFISTO T. GUINGONA, in his capacity as Executive Secretary, respondents.

DECISION

PANGANIBAN, J.:

The emergence on January 1, 1995 of the World Trade Organization, abetted by the membership thereto of the vast majority of countries has revolutionized international business and economic relations amongst states. It has irreversibly propelled the world towards trade liberalization and economic globalization. Liberalization, globalization, deregulation and privatization, the third-millennium buzz words, are ushering in a new borderless world of business by

sweeping away as mere historical relics the heretofore traditional modes of promoting and protecting national economies like tariffs, export subsidies, import quotas, quantitative restrictions, tax exemptions and currency controls. Finding market niches and becoming the best in specific industries in a market-driven and export-oriented global scenario are replacing age-old beggar-thyneighbor policies that unilaterally protect weak and inefficient domestic producers of goods and services. In the words of Peter Drucker, the well-known management guru, Increased participation in the world economy has become the key to domestic economic growth and prosperity.

Brief Historical Background

To hasten worldwide recovery from the devastation wrought by the Second World War, plans for the establishment of three multilateral institutions -- inspired by that grand political body, the United Nations -- were discussed at Dumbarton Oaks and Bretton Woods. The first was the World Bank (WB) which was to address the rehabilitation and reconstruction of war-ravaged and later developing countries; the second, the International Monetary Fund (IMF) which was to deal with currency problems; and the third, the International Trade Organization (ITO), which was to foster order and predictability in world trade and to minimize unilateral protectionist policies that invite challenge, even retaliation, from other states. However, for a variety of reasons, including its non-ratification by the United States, the ITO, unlike the IMF and WB, never took off. What remained was

only GATT -- the General Agreement on Tariffs and Trade. GATT was a collection of treaties governing access to the economies of treaty adherents with no institutionalized body administering the agreements or dependable system of dispute settlement.

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

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

solutions were arrived at frequently on the basis of relative bargaining strengths, and where naturally, weak and underdeveloped countries were at a disadvantage.

The Petition in Brief

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

Simply stated, does the Philippine Constitution prohibit Philippine participation in worldwide trade liberalization and economic globalization? Does it prescribe Philippine integration into a global economy that is liberalized, deregulated and privatized? These are the main questions raised in this petition for certiorari, prohibition and mandamus under Rule 65 of the Rules of Court praying (1) for the nullification, on constitutional grounds, of the concurrence of the Philippine Senate in the ratification by the President of the Philippines of the Agreement Establishing the World Trade Organization (WTO

Agreement, for brevity) and (2) for the prohibition of its implementation and enforcement through the release and utilization of public funds, the assignment of public officials and employees, as well as the use of government properties and resources by respondent-heads of various executive offices concerned therewith. This concurrence is embodied in Senate Resolution No. 97, dated December 14, 1994.

The Facts

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

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

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

(b) to adopt the Ministerial Declarations and Decisions.

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

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

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

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

ANNEX 1

Annex 1A:

Multilateral Agreement on Trade in Goods

General Agreement on Tariffs and Trade 1994

Agreement on Agriculture

Agreement on the Application of Sanitary and

Phytosanitary Measures

Agreement on Textiles and Clothing

Agreement on Technical Barriers to Trade

Agreement on Trade-Related Investment Measures

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

General

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

Agreement on Pre-Shipment Inspection

Agreement on Rules of Origin

Agreement on Imports Licensing Procedures

Agreement on Subsidies and Coordinating Measures

Agreement on Safeguards

Annex 1B:

General Agreement on Trade in Services and Annexes

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

ANNEX 2

Understanding on Rules and Procedures Governing the Settlement of Disputes

ANNEX 3

Trade Policy Review Mechanism

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

NOW THEREFORE, be it known that I, FIDEL V. RAMOS, President of the Republic of the Philippines, after having seen and considered the

aforementioned Agreement Establishing the World Trade Organization and the agreements and associated legal instruments included in Annexes one (1), two (2) and three (3) of that Agreement which are integral parts thereof, signed at Marrakesh, Morocco on 15 April 1994, do hereby ratify and confirm the same and every Article and Clause thereof.

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

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

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

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

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

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

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

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

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

The Issues

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(2) The matter of estoppel will not be taken up because this defense is waivable and the respondents have effectively waived it by not pursuing it in any of their pleadings; in any event, this issue, even if

ruled in respondents favor, will not cause the petitions dismissal as there are petitioners other than the two senators, who are not vulnerable to the defense of estoppel; and

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

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

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

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

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

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

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

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

The First Issue: Controversy?

Does the Court Have Jurisdiction Over the

In seeking to nullify an act of the Philippine Senate on the ground that it contravenes the Constitution, the petition no doubt raises a justiciable controversy. Where an action of the legislative branch is

seriously alleged to have infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the dispute. The question thus posed is judicial rather than political. The duty (to adjudicate) remains to assure that the supremacy of the Constitution is upheld.*12+ Once a controversy as to the application or interpretation of a constitutional provision is raised before this Court (as in the instant case), it becomes a legal issue which the Court is bound by constitutional mandate to decide.*13+

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

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

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

excess of jurisdiction. This is not only a judicial power but a duty to pass judgment on matters of this nature.

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

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

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

whether or not there had been a grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the Senate in ratifying the WTO Agreement and its three annexes.

Second Issue: The WTO Agreement and Economic Nationalism

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

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

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

Article II

DECLARATION OF PRINCIPLES AND STATE POLICIES

xx xx

xx xx

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

xx xx

xx xx

Article XII

NATIONAL ECONOMY AND PATRIMONY

xx xx

xx xx

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

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

xx xx

xx xx

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

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

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

Article 2

National Treatment and Quantitative Restrictions.

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

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

The Annex referred to reads as follows:

ANNEX

Illustrative List

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

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

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

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

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

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

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

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

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

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

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

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

National Treatment

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

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

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

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

On the other hand, respondents through the Solicitor General counter (1) that such Charter provisions are not self-executing and merely set out general policies; (2) that these nationalistic portions of the Constitution invoked by petitioners should not be read in isolation but should be related to other relevant provisions of Art. XII, particularly

Secs. 1 and 13 thereof; (3) that read properly, the cited WTO clauses do not conflict with the Constitution; and (4) that the WTO Agreement contains sufficient provisions to protect developing countries like the Philippines from the harshness of sudden trade liberalization.

We shall now discuss and rule on these arguments.

Declaration of Principles Not Self-Executing

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

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

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

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

The reasons for denying a cause of action to an alleged infringement of broad constitutional principles are sourced from basic considerations of due process and the lack of judicial authority to wade into the uncharted ocean of social and economic policy

making. Mr. Justice Florentino P. Feliciano in his concurring opinion in Oposa vs. Factoran, Jr.,[26] explained these reasons as follows:

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

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

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

Section 1.

xxx

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

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

opportunity to fashion and promulgate those norms and standards, and to implement them before the courts should intervene.

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

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

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

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

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

xxx xxx

xxx

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

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

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

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

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

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

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

here is not whether this paragraph of Sec. 10 of Art. XII is selfexecuting or not. Rather, the issue is whether, as a rule, there are enough balancing provisions in the Constitution to allow the Senate to ratify the Philippine concurrence in the WTO Agreement. And we hold that there are.

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

WTO Recognizes Need to Protect Weak Economies

Upon the other hand, respondents maintain that the WTO itself has some built-in advantages to protect weak and developing economies, which comprise the vast majority of its members. Unlike in the UN where major states have permanent seats and veto powers in the

Security Council, in the WTO, decisions are made on the basis of sovereign equality, with each members vote equal in weight to that of any other. There is no WTO equivalent of the UN Security Council.

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

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

The Parties to this Agreement,

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

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

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

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

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

Specific WTO Provisos Protect Developing Countries

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

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

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

Moreover, GATT itself has provided built-in protection from unfair foreign competition and trade practices including anti-dumping measures, countervailing measures and safeguards against import surges. Where local businesses are jeopardized by unfair foreign competition, the Philippines can avail of these measures. There is hardly therefore any basis for the statement that under the WTO, local industries and enterprises will all be wiped out and that Filipinos will be deprived of control of the economy. Quite the contrary, the weaker situations of developing nations like the Philippines have been taken into account; thus, there would be no basis to say that in joining the WTO, the respondents have gravely abused their discretion. True, they have made a bold decision to steer the ship of state into the yet uncharted sea of economic liberalization. But such decision cannot be set aside on the ground of grave abuse of

discretion, simply because we disagree with it or simply because we believe only in other economic policies. As earlier stated, the Court in taking jurisdiction of this case will not pass upon the advantages and disadvantages of trade liberalization as an economic policy. It will only perform its constitutional duty of determining whether the Senate committed grave abuse of discretion.

Constitution Does Not Rule Out Foreign Competition

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

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

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

Constitution Favors Consumers, Not Industries or Enterprises

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

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

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

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

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

Constitution Designed to Meet Future Events and Contingencies

No doubt, the WTO Agreement was not yet in existence when the Constitution was drafted and ratified in 1987. That does not mean however that the Charter is necessarily flawed in the sense that its framers might not have anticipated the advent of a borderless world of business. By the same token, the United Nations was not yet in

existence when the 1935 Constitution became effective. Did that necessarily mean that the then Constitution might not have contemplated a diminution of the absoluteness of sovereignty when the Philippines signed the UN Charter, thereby effectively surrendering part of its control over its foreign relations to the decisions of various UN organs like the Security Council?

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

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

dynamism and vitality that will keep it, far from becoming a petrified rule, a pulsing, living law attuned to the heartbeat of the nation.

Third Issue: The WTO Agreement and Legislative Power

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

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

provide,[42] as in fact it did under Sec. 401 of the Tariff and Customs Code.

Sovereignty Limited by International Law and Treaties

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

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

UN Charter and Other Treaties Limit Sovereignty

Thus, when the Philippines joined the United Nations as one of its 51 charter members, it consented to restrict its sovereign rights under

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

as a member -- the sovereign power to make a choice as to which of conflicting obligations, if any, to honor.

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

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

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

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

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

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

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

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

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

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

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

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

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

In the foregoing treaties, the Philippines has effectively agreed to limit the exercise of its sovereign powers of taxation, eminent domain

and police power. The underlying consideration in this partial surrender of sovereignty is the reciprocal commitment of the other contracting states in granting the same privilege and immunities to the Philippines, its officials and its citizens. The same reciprocity characterizes the Philippine commitments under WTO-GATT.

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

The point is that, as shown by the foregoing treaties, a portion of sovereignty may be waived without violating the Constitution, based on the rationale that the Philippines adopts the generally accepted

principles of international law as part of the law of the land and adheres to the policy of x x x cooperation and amity with all nations.

Fourth Issue: The WTO Agreement and Judicial Power

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

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

Article 34

Process Patents: Burden of Proof

1. For the purposes of civil proceedings in respect of the infringement of the rights of the owner referred to in paragraph 1(b) of Article 28, if the subject matter of a patent is a process for obtaining a product, the judicial authorities shall have the authority to order the defendant to prove that the process to obtain an identical product is different from

the patented process. Therefore, Members shall provide, in at least one of the following circumstances, that any identical product when produced without the consent of the patent owner shall, in the absence of proof to the contrary, be deemed to have been obtained by the patented process:

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

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

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

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

From the above, a WTO Member is required to provide a rule of disputable (note the words in the absence of proof to the contrary) presumption that a product shown to be identical to one produced

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

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

The foregoing should really present no problem in changing the rules of evidence as the present law on the subject, Republic Act No. 165, as amended, otherwise known as the Patent Law, provides a similar

presumption in cases of infringement of patented design or utility model, thus:

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

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

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

consistent as it is with due process and the concept of adversarial dispute settlement inherent in our judicial system.

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

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

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

A final act, sometimes called protocol de clture, is an instrument which records the winding up of the proceedings of a diplomatic

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

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

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

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

The Ministerial Declarations and Decisions were deemed adopted without need for ratification. They were approved by the ministers

by virtue of Article XXV: 1 of GATT which provides that representatives of the members can meet to give effect to those provisions of this Agreement which invoke joint action, and generally with a view to facilitating the operation and furthering the objectives of this Agreement.*56+

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

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

Article II

Scope of the WTO

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

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

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

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

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

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

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

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

THE CHAIRMAN: Thank you.

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

Senator Taada, please.

SEN. TAADA: Thank you, Mr. Chairman.

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

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

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

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

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

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

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

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

submitted now, I think it satisfies both the Constitution and the Final Act itself.

Thank you, Mr. Chairman.

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

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

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

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

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

Epilogue

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

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

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

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

balanced by the adoption of the generally accepted principles of international law as part of the law of the land and the adherence of the Constitution to the policy of cooperation and amity with all nations.

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

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

WHEREFORE, the petition is DISMISSED for lack of merit.

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines SUPREME COURT Manila

EN BANC

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

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

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

Demetrio B. Salem & Associates for private respondent.

MAKASIAR, J.:

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

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

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

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

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

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

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

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

Company's warning that the officers shall be primarily liable being the organizers of the mass demonstration. The union panel countered that it was rather too late to change their plans inasmuch as the Malacaang demonstration will be held the following morning; and

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

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

Antonio T. Tirona and Acting Prosecutor Linda P. Ilagan (Annex "C", pp. 25-30, rec.)

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

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

Herein petitioners claim that they received on September 23, 1969, the aforesaid order (p. 11, rec.); and that they filed on September 29, 1969, because September 28, 1969 fell on Sunday (p. 59, rec.), a motion for reconsideration of said order dated September 15, 1969,

on the ground that it is contrary to law and the evidence, as well as asked for ten (10) days within which to file their arguments pursuant to Sections 15, 16 and 17 of the Rules of the CIR, as amended (Annex "G", pp. 57-60, rec. )

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

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

In a resolution dated October 9, 1969, the respondent en banc dismissed the motion for reconsideration of herein petitioners for being pro forma as it was filed beyond the reglementary period

prescribed by its Rules (Annex "J", pp. 74-75, rec.), which herein petitioners received on October 28, 196 (pp. 12 & 76, rec.).

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

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

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

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

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

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

In the pithy language of Mr. Justice Robert Jackson, the purpose of the Bill of Rights is to withdraw "certain subjects from the vicissitudes of political controversy, to place them beyond the reach of majorities and officials, and to establish them as legal principles to be applied by the courts. One's rights to life, liberty and property, to free speech, or

free press, freedom of worship and assembly, and other fundamental rights may not be submitted to a vote; they depend on the outcome of no elections." 4 Laski proclaimed that "the happiness of the individual, not the well-being of the State, was the criterion by which its behaviour was to be judged. His interests, not its power, set the limits to the authority it was entitled to exercise." 5

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

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

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

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

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

The superiority of these freedoms over property rights is underscored by the fact that a mere reasonable or rational relation between the means employed by the law and its object or purpose

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

II

The respondent Court of Industrial Relations, after opining that the mass demonstration was not a declaration of strike, concluded that by their "concerted act and the occurrence temporary stoppage of work," herein petitioners are guilty bargaining in bad faith and hence violated the collective bargaining agreement with private respondent

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

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

As heretofore stated, the primacy of human rights freedom of expression, of peaceful assembly and of petition for redress of grievances over property rights has been sustained. 18 Emphatic reiteration of this basic tenet as a coveted boon at once the shield and armor of the dignity and worth of the human personality, the all-

consuming ideal of our enlightened civilization becomes Our duty, if freedom and social justice have any meaning at all for him who toils so that capital can produce economic goods that can generate happiness for all. To regard the demonstration against police officers, not against the employer, as evidence of bad faith in collective bargaining and hence a violation of the collective bargaining agreement and a cause for the dismissal from employment of the demonstrating employees, stretches unduly the compass of the collective bargaining agreement, is "a potent means of inhibiting speech" and therefore inflicts a moral as well as mortal wound on the constitutional guarantees of free expression, of peaceful assembly and of petition. 19

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

The mass demonstration staged by the employees on March 4, 1969 could not have been legally enjoined by any court, such an injunction would be trenching upon the freedom expression of the workers, even if it legally appears to be illegal picketing or strike. 20 The

respondent Court of Industrial Relations in the case at bar concedes that the mass demonstration was not a declaration of a strike "as the same not rooted in any industrial dispute although there is concerted act and the occurrence of a temporary stoppage work." (Annex "F", p. 45, rec.).

The respondent firm claims that there was no need for all its employees to participate in the demonstration and that they suggested to the Union that only the first and regular shift from 6 A.M. to 2 P.M. should report for work in order that loss or damage to the firm will be averted. This stand failed appreciate the sine qua non of an effective demonstration especially by a labor union, namely the complete unity of the Union members as well as their total presence at the demonstration site in order to generate the maximum sympathy for the validity of their cause but also immediately action on the part of the corresponding government agencies with jurisdiction over the issues they raised against the local police. Circulation is one of the aspects of freedom of expression. 21 If demonstrators are reduced by one-third, then by that much the circulation of the issues raised by the demonstration is diminished. The more the participants, the more persons can be apprised of the purpose of the rally. Moreover, the absence of one-third of their members will be regarded as a substantial indication of disunity in their ranks which will enervate their position and abet continued alleged police persecution. At any rate, the Union notified the company two days in advance of their projected demonstration and the company could have made arrangements to counteract or prevent whatever losses it might sustain by reason of the absence of its

workers for one day, especially in this case when the Union requested it to excuse only the day-shift employees who will join the demonstration on March 4, 1969 which request the Union reiterated in their telegram received by the company at 9:50 in the morning of March 4, 1969, the day of the mass demonstration (pp. 42-43, rec.). There was a lack of human understanding or compassion on the part of the firm in rejecting the request of the Union for excuse from work for the day shifts in order to carry out its mass demonstration. And to regard as a ground for dismissal the mass demonstration held against the Pasig police, not against the company, is gross vindictiveness on the part of the employer, which is as unchristian as it is unconstitutional.

III

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

interfere with, restrain or coerce employees in the exercise their rights guaranteed in Section Three."

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

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

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

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

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

IV

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

implement this policy and failed to keep faith with its avowed mission its raison d'etre as ordained and directed by the Constitution.

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

Both the respondents Court of Industrial Relations and private firm trenched upon these constitutional immunities of petitioners. Both failed to accord preference to such rights and aggravated the inhumanity to which the aggrieved workers claimed they had been subjected by the municipal police. Having violated these basic human rights of the laborers, the Court of Industrial Relations ousted itself of jurisdiction and the questioned orders it issued in the instant case are a nullity. Recognition and protection of such freedoms are imperative

on all public offices including the courts 28 as well as private citizens and corporations, the exercise and enjoyment of which must not be nullified by mere procedural rule promulgated by the Court Industrial Relations exercising a purely delegate legislative power, when even a law enacted by Congress must yield to the untrammelled enjoyment of these human rights. There is no time limit to the exercise of the freedoms. The right to enjoy them is not exhausted by the delivery of one speech, the printing of one article or the staging of one demonstration. It is a continuing immunity to be invoked and exercised when exigent and expedient whenever there are errors to be rectified, abuses to be denounced, inhumanities to be condemned. Otherwise these guarantees in the Bill of Rights would be vitiated by rule on procedure prescribing the period for appeal. The battle then would be reduced to a race for time. And in such a contest between an employer and its laborer, the latter eventually loses because he cannot employ the best an dedicated counsel who can defend his interest with the required diligence and zeal, bereft as he is of the financial resources with which to pay for competent legal services. 28a

VI

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

of procedure were promulgated by the Court of Industrial Relations pursuant to a legislative delegation. 29

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

Does the mere fact that the motion for reconsideration was filed two (2) days late defeat the rights of the petitioning employees? Or more directly and concretely, does the inadvertent omission to comply with a mere Court of Industrial Relations procedural rule governing the period for filing a motion for reconsideration or appeal in labor cases, promulgated pursuant to a legislative delegation, prevail over constitutional rights? The answer should be obvious in the light of the aforecited cases. To accord supremacy to the foregoing rules of the Court of Industrial Relations over basic human rights sheltered by the Constitution, is not only incompatible with the basic tenet of constitutional government that the Constitution is superior to any statute or subordinate rules and regulations, but also does violence to natural reason and logic. The dominance and superiority of the constitutional right over the aforesaid Court of Industrial Relations procedural rule of necessity should be affirmed. Such a Court of Industrial Relations rule as applied in this case does not implement or reinforce or strengthen the constitutional rights affected,' but instead constrict the same to the point of nullifying the enjoyment thereof by the petitioning employees. Said Court of

Industrial Relations rule, promulgated as it was pursuant to a mere legislative delegation, is unreasonable and therefore is beyond the authority granted by the Constitution and the law. A period of five (5) days within which to file a motion for reconsideration is too short, especially for the aggrieved workers, who usually do not have the ready funds to meet the necessary expenses therefor. In case of the Court of Appeals and the Supreme Court, a period of fifteen (15) days has been fixed for the filing of the motion for re hearing or reconsideration (See. 10, Rule 51; Sec. 1, Rule 52; Sec. 1, Rule 56, Revised Rules of Court). The delay in the filing of the motion for reconsideration could have been only one day if September 28, 1969 was not a Sunday. This fact accentuates the unreasonableness of the Court of Industrial are concerned.

It should be stressed here that the motion for reconsideration dated September 27, 1969, is based on the ground that the order sought to be reconsidered "is not in accordance with law, evidence and facts adduced during the hearing," and likewise prays for an extension of ten (10) days within which to file arguments pursuant to Sections 15, 16 and 17 of the Rules of the Court of Industrial Relations (Annex "G", pp. 57-60, rec.); although the arguments were actually filed by the herein petitioners on October 14, 1969 (Annex "I", pp. 7073, rec.), long after the 10-day period required for the filing of such supporting arguments counted from the filing of the motion for reconsideration. Herein petitioners received only on October 28, 1969 the resolution dated October 9, 1969 dismissing the motion for reconsideration for being pro forma since it was filed beyond the reglementary period (Annex "J", pp. 74-75, rec.)

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

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

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

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

Under this authority, this Court is enabled to cove with all situations without concerning itself about procedural niceties that do not square with the need to do justice, in any case, without further loss of time, provided that the right of the parties to a full day in court is not substantially impaired. Thus, this Court may treat an appeal as a certiorari and vice-versa. In other words, when all the material facts are spread in the records before Us, and all the parties have been duly heard, it matters little that the error of the court a quo is of judgment or of jurisdiction. We can then and there render the appropriate judgment. Is within the contemplation of this doctrine that as it is perfectly legal and within the power of this Court to strike down in an appeal acts without or in excess of jurisdiction or committed with grave abuse of discretion, it cannot be beyond the admit of its authority, in appropriate cases, to reverse in a certain proceed in any error of judgment of a court a quo which cannot be exactly categorized as a flaw of jurisdiction. If there can be any doubt, which I

do not entertain, on whether or not the errors this Court has found in the decision of the Court of Appeals are short of being jurisdiction nullities or excesses, this Court would still be on firm legal grounds should it choose to reverse said decision here and now even if such errors can be considered as mere mistakes of judgment or only as faults in the exercise of jurisdiction, so as to avoid the unnecessary return of this case to the lower court for the sole purpose of pursuing the ordinary course of an appeal. (Emphasis supplied). 30-d

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

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

union and workers in the light of the peculiar facts and circumstances revealed by the record.

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

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

As to the point that the evidence being offered by the petitioners in the motion for new trial is not "newly discovered," as such term is understood in the rules of procedure for the ordinary courts, We hold that such criterion is not binding upon the Court of Industrial Relations. Under Section 20 of Commonwealth Act No. 103, 'The Court of Industrial Relations shall adopt its, rules or procedure and shall have such other powers as generally pertain to a court of justice: Provided, however, That in the hearing, investigation and determination of any question or controversy and in exercising any duties and power under this Act, the Court shall act according to justice and equity and substantial merits of the case, without regard to technicalities or legal forms and shall not be bound by any

technical rules of legal evidence but may inform its mind in such manner as it may deem just and equitable.' By this provision the industrial court is disengaged from the rigidity of the technicalities applicable to ordinary courts. Said court is not even restricted to the specific relief demanded by the parties but may issue such orders as may be deemed necessary or expedient for the purpose of settling the dispute or dispelling any doubts that may give rise to future disputes. (Ang Tibay v. C.I.R., G.R. No. 46496, Feb. 17, 1940; Manila Trading & Supply Co. v. Phil. Labor, 71 Phil. 124.) For these reasons, We believe that this provision is ample enough to have enabled the respondent court to consider whether or not its previous ruling that petitioners constitute a minority was founded on fact, without regard to the technical meaning of newly discovered evidence. ... (Alonso v. Villamor, 16 Phil. 315; Chua Kiong v. Whitaker, 46 Phil. 578). (emphasis supplied.)

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

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

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

1019). In the latest decision in point promulgated in 1968, (Udan v. Amon, (1968, 23 SCRA citing McEntee v. Manotok, L-14968, Oct. 27, 1961, 3 SCRA 272.) Justice Zaldivar was partial to an earlier formulation of Justice Labrador that rules of procedure "are not to be applied in a very rigid, technical sense"; but are intended "to help secure substantial justice." (Ibid., p. 843) ... 30-g

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

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

Mr. Justice Douglas articulated this pointed reminder:

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

... The Motives of these men are often commendable. What we must remember, however, is that preservation of liberties does not depend on motives. A suppression of liberty has the same effect whether the suppress or be a reformer or an outlaw. The only protection against misguided zeal is a constant alertness of the infractions of the guarantees of liberty contained in our Constitution. Each surrender of liberty to the demands of the moment makes easier

another, larger surrender. The battle over the Bill of Rights is a never ending one.

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

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

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

The case at bar is worse.

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

immunities and welfare of its employees. It was pure and implement selfishness, if not greed.

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

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

xxx xxx xxx

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

xxx xxx xxx

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

xxx xxx xxx

In the final sum and substance, this Court is in unanimity that the Bank's conduct, identified as an interference with the employees' right of self-organization or as a retaliatory action, and/or as a refusal to bargain collectively, constituted an unfair labor practice within the

meaning and intendment of section 4(a) of the Industrial Peace Act. (Emphasis supplied.) 33

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

WHEREFORE, judgement is hereby rendered:

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

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

With costs against private respondent Philippine Blooming Company, Inc.

G.R. No. 81561 January 18, 1991

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

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

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

On August 14, 1987, between 10:00 and 11:00 a.m., the appellant and his common-law wife, Shirley Reyes, went to the booth of the "Manila Packing and Export Forwarders" in the Pistang Pilipino Complex, Ermita, Manila, carrying with them four (4) gift wrapped packages. Anita Reyes (the proprietress and no relation to Shirley Reyes) attended to them. The appellant informed Anita Reyes that he

was sending the packages to a friend in Zurich, Switzerland. Appellant filled up the contract necessary for the transaction, writing therein his name, passport number, the date of shipment and the name and address of the consignee, namely, "WALTER FIERZ, Mattacketr II, 8052 Zurich, Switzerland" (Decision, p. 6)

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

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

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

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

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

The package which allegedly contained books was likewise opened by Job Reyes. He discovered that the package contained bricks or cake-like dried marijuana leaves. The package which allegedly contained tabacalera cigars was also opened. It turned out that dried

marijuana leaves were neatly stocked underneath the cigars (tsn, p. 39, October 6, 1987).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The right of the people to be secure in their persons, houses, papers and effects against unreasonable searches and seizures shall not be violated, and no warrants shall issue but upon probable cause, to be determined by the judge after examination under oath or affirmation of the complainant and the witnesses he may produce, and

particularly describing the place to be searched, and the persons or things to be seized. (Sec. 1 [3], Article III)

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

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

In a number of cases, the Court strictly adhered to the exclusionary rule and has struck down the admissibility of evidence obtained in violation of the constitutional safeguard against unreasonable searches and seizures. (Bache & Co., (Phil.), Inc., v. Ruiz, 37 SCRA 823 [1971]; Lim v. Ponce de Leon, 66 SCRA 299 [1975]; People v. Burgos,

144 SCRA 1 [1986]; Roan v. Gonzales, 145 SCRA 687 [1987]; See also Salazar v. Hon. Achacoso, et al., GR No. 81510, March 14, 1990).

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

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

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

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

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

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

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

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

occupation of his dwelling and the possession of his property, subject to the right of seizure by process duly served.

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

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

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

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

local police, informed them of the bag's contents, and made it available to the authorities.

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

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

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

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

First, the factual considerations of the case at bar readily foreclose the proposition that NBI agents conducted an illegal search and seizure of the prohibited merchandise. Records of the case clearly

indicate that it was Mr. Job Reyes, the proprietor of the forwarding agency, who made search/inspection of the packages. Said inspection was reasonable and a standard operating procedure on the part of Mr. Reyes as a precautionary measure before delivery of packages to the Bureau of Customs or the Bureau of Posts (TSN, October 6 & 7, 1987, pp. 15-18; pp. 7-8; Original Records, pp. 119-122; 167-168).

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

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

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

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

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

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

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

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

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

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

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

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

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

Fiscal Formoso:

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

WITNESS:

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

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

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

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

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

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

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

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

FIRST DIVISION

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

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

DECISION

DAVIDE, JR. J.:

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

This petition for certiorari under Rule 65 of the Rules of Court seeks to declare private respondent Antonia Melodia Catolico (hereafter Catolico) not a true Servant, thereby assailing the 30 September 1993 decision[2] and 2 December 1993 Resolution[3] of the National Labor Relations Commission (NLRC) in NLRC-NCR CA No. 005160-93,

which sustained the reinstatement and monetary awards in favor of private respondent*4+ and denied the petitioners motion for reconsideration.[5]

The facts are as follows:

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

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

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

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

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

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

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

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

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

In a letter[15] to Co dated 10 February 1990, Catolico, through her counsel, explained that the check she received from YSP was a

Christmas gift and not a refund of overprice. She also averred that the preventive suspension was ill-motivated, as it sprang from an earlier incident between her and Cos secretary, Irene Soliven.

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

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

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

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

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

30 days Preventive Suspension

P 2,000.00

Backwages

26,858.50

1/12 of P26,858.50

2,238.21

Separation pay (3 years)

4,305.15

TOTAL AWARD:

P35,401.86

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

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

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

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

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

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

II. Due process was duly accorded to private respondent.

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

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

breach of confidence. And contrary to the findings of NLRC, Catolico was given ample opportunity to explain her side of the controversy.

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

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

an envelope from one of its regular suppliers as it could assume that the letter was a business communication in which it had an interest.

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

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

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

pocketed the amount in collusion with YSP. She thus concluded that her dismissal was based on a mere suspicion.

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

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

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

In the case at bar, although Catolico was given an opportunity to explain her side, she was dismissed from the service in the memorandum of 5 March 1990 issued by her Supervisor after receipt of her letter and that of her counsel. No hearing was ever conducted

after the issues were joined through said letters. The Supervisors memorandum spoke of evidences *sic+ in *WATEROUS+ possession, which were not, however, submitted. What the evidences *sic+ other than the sales invoice and the check were, only the Supervisor knew.

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

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

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

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

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

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

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

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

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

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

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

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

obtained in violation of her constitutional rights of privacy of communication and against unreasonable searches and seizures which is hereby set aside.

Costs against petitioners.

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

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

DECISION

REYES, R.T., J.:

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

He is now before this Court via a petition for review on certiorari claiming that he was illegally dismissed. To buttress his stance, he argues that (1) his dismissal does not fall under 282(e) of the Labor

Code; (2) continuing adherence to the weight standards of the company is not a bona fide occupational qualification; and (3) he was discriminated against because other overweight employees were promoted instead of being disciplined.

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

The Facts

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

The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight concerns. Apparently,

petitioner failed to meet the company's weight standards, prompting another leave without pay from March 5, 1985 to November 1985.

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

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

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

On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his residence to check on the progress of his effort to lose weight. Petitioner weighed 217 pounds, gaining 2 pounds from his previous weight. After the visit, petitioner made a

commitment[3] to reduce weight in a letter addressed to Cabin Crew Group Manager Augusto Barrios. The letter, in full, reads:

Dear Sir:

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

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

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

Respectfully Yours,

F/S Armando Yrasuegui[4]

Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained overweight. On January 3, 1990, he was informed of the PAL decision for him to remain grounded until such

time that he satisfactorily complies with the weight standards. Again, he was directed to report every two weeks for weight checks.

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

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

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

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

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

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

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

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

On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal weight, "and considering the utmost

leniency" extended to him "which spanned a period covering a total of almost five (5) years," his services were considered terminated "effective immediately."[11]

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

Labor Arbiter, NLRC and CA Dispositions

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

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

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

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

SO ORDERED.[14]

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

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

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

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

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

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

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

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

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

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

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

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

SO ORDERED.[32]

The CA opined that there was grave abuse of discretion on the part of the NLRC because it "looked at wrong and irrelevant considerations"[33] in evaluating the evidence of the parties.

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

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

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

Issues

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

I.

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

II.

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

III.

WHETHER OR NOT THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PETITIONER WAS NOT UNDULY DISCRIMINATED AGAINST WHEN HE WAS DISMISSED WHILE OTHER OVERWEIGHT

CABIN ATTENDANTS WERE EITHER GIVEN FLYING DUTIES OR PROMOTED;

IV.

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

Our Ruling

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

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

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

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

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

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

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

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

The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from the case at bar. First, Nadura was not decided under the Labor Code. The law applied in that case was Republic Act (RA) No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the rationale there cannot apply here. Third, in Nadura, the employee who was a miner, was laid off from work

because of illness, i.e., asthma. Here, petitioner was dismissed for his failure to meet the weight standards of PAL. He was not dismissed due to illness. Fourth, the issue in Nadura is whether or not the dismissed employee is entitled to separation pay and damages. Here, the issue centers on the propriety of the dismissal of petitioner for his failure to meet the weight standards of PAL. Fifth, in Nadura, the employee was not accorded due process. Here, petitioner was accorded utmost leniency. He was given more than four (4) years to comply with the weight standards of PAL.

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

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

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

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

The appellate Court disagreed and held that morbid obesity is a disability under the Rehabilitation Act and that respondent discriminated against Cook based on "perceived" disability. The

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

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

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

recognized just cause, is considered voluntary although it lacks the element of intent found in Article 282(a), (c), and (d)."[54]

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

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

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

Both arguments must fail.

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

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

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

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

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

The law leaves no room for common carrier. Thus, it is standards of PAL show its obligations imposed upon it carrier.

mistake or oversight on the part of a only logical to hold that the weight effort to comply with the exacting by law by virtue of being a common

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

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

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

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

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

In short, there is no need to individually evaluate their ability to perform their task. That an obese cabin attendant occupies more space than a slim one is an unquestionable fact which courts can

judicially recognize without introduction of evidence.[77] It would also be absurd to require airline companies to reconfigure the aircraft in order to widen the aisles and exit doors just to accommodate overweight cabin attendants like petitioner.

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

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

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

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

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

Since the burden of evidence lies with the party who asserts an affirmative allegation, petitioner has to prove his allegation with particularity. There is nothing on the records which could support the finding of discriminatory treatment. Petitioner cannot establish discrimination by simply naming the supposed cabin attendants who

are allegedly similarly situated with him. Substantial proof must be shown as to how and why they are similarly situated and the differential treatment petitioner got from PAL despite the similarity of his situation with other employees.

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

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

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

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

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

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

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

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

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

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

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

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

V. Petitioner is entitled to separation pay.

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

Normally, a legally dismissed employee is not entitled to separation pay. This may be deduced from the language of Article 279 of the

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

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

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

WHEREFORE, the appealed Decision of the Court of Appeals is AFFIRMED but MODIFIED in that petitioner Armando G. Yrasuegui is entitled to separation pay in an amount equivalent to one-half (1/2)

month's pay for every year of service, which should include his regular allowances.

[Syllabus]

EN BANC

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

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

DECISION

PANGANIBAN, J.:

A person under investigation for the commission of an offense is constitutionally guaranteed certain rights. One of the most cherished of these is the right to have competent and independent counsel

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

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

The Facts

Petitioner Jose D. Filoteo, Jr. was a police investigator of the Western Police District in Metro Manila, an old hand at dealing with suspected criminals. A recipient of various awards and commendations attesting to his competence and performance as a police officer, he could not

therefore imagine that one day he would be sitting on the other side of the investigation table as the suspected mastermind of the armed hijacking of a postal delivery van.

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

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

1) Postal Delivery Truck

2) Social Security System Medicare Checks and Vouchers

3) Social Security System Pension Checks and Vouchers

4) Treasury Warrants

5) Several Mail Matters from abroad

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

Contrary to law.

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

against them were held in absentia.[5] Only Filoteo filed this petition, after the respondent Court rendered its assailed Decision and Resolution.

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

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

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

Evidence for the Prosecution

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

As they had to deliver mail matters to several towns of Bulacan, they took the MacArthur Highway on the return trip to Pampanga. When

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

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

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

These men turned out to be Angel Liwanag and Reynaldo Frias, respectively.[14]

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

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

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

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

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

thus volunteered to help crack the case and lead the SOG team to Ricardo Perez and Raul Mendoza.

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

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

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

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

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

Consequently, Capt. Ferrer directed Lt. Pagdilao to accompany Mateo to the house of petitioner in Tondo, Manila. The lawmen found petitioner at home. Upon being invited to Camp Crame to shed light on his participation in the hijacking, petitioner was dumbfounded (parang nagulat). Pursuant to standard operating procedure in arrests, petitioner was informed of his constitutional rights,[22] whereupon they proceeded to Camp Crame. However, the group, including petitioner, returned to the latters place to recover the loot.

It was in the neighborhood, not in petitioners house, where the authorities located the checks.[23]

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

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

a.

Na ikaw ay may karapatang tumahimik;

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

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

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

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

SAGOT:- Opo.

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

S:- Opo, pipirma ako Ser.

(Sgd.)

JOSE D. FILOTEO

(Affiant)

MGA SAKSI:

(Sgd.)

(Sgd.)

ROMEO P. ESPERO

THERESA L. TOLENTINO

Ssg.,

PC

C1C

WAC (PC)"

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

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

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

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

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

S:- Noon lamang pong January 1982.

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

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

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

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

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

S:- Sa Follow-Up Unit ako.

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

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

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

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

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

S:- Si Carding Perez, ho; si Junior ho (Affiant pointed to Martin Mateo, Jr. who was seated in the investigation room and asked the name and was duly answered: Martin Mateo, Jr.); si Rey Frias; Raul Mendoza; Angelo Liwanag at ang mga taga LRP ng PC Brigade na sina Sgt. Ed Saguindel, Sgt. Dan Miravales at isa pang Sergeant na ang alam ko lang sa kanya ay JUN ang tawag namin. Walo (8) (corrected and initialled by affiant to read as SIYAM *9+) kaming lahat doon noon at ang mga gamit naman naming kotse noon ay ang kotse ng kumpare kong si Rudy Miranda na isang Mercedes Benz na may plakang NMJ659 kung saang ang driver namin noon ay si Raul Mendoza (corrected and initialled by affiant to read as AKO) at ang mga kasama naman naming sakay ay sina Angelo Liwanag, Sgt. Ed Saguindel at Sgt. Jun na parehong taga-LRP (affiant added and initialled this additional fact: AT RAUL MENDOZA). Ang isang kotse namang gamit namin ay pagaari daw ng pinsan ni Carding Perez na kanya na rin mismong minamaneho na isang Lancer na dirty-white ang kulay at ang mga sakay naman ni Carding Perez ay sina Junior Mateo, Rey Frias at Sgt. Dan Miravalles ng LRP rin. Pero may kasama pa kaming contact ni Carding Perez na taga-loob ng Post Office na sina Alias NINOY na isang dispatcher at Alias JERRY, dahil ang mastermind dito sa trabahong ito ay si Carding PEREZ at kami naman ng mga sundalong taga-LRP ay kanila lamang inimporta upang umeskort sa kanila sa pag-hijack ng delivery van.

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

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

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

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

Mercedes Benz na minamaneho pa rin ni Raul Mendoza ay dumeretso pa norte samantalang ang Lancer naman ay nag-U-turn din at sumunod sa amin. Noong makarating na kami sa Malinta, Valenzuela, Metro Manila ay inunahan na kami ng Lancer at iyon na nga, parang follow the leader na dahil siya na noon ang aming guide.

14. T:- Ipagpatuloy mo ang iyong pagsasalaysay?

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

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

S:- Sumakay kami ngayon ng taksi at bumalik na kami kina Carding Perez sa may bahay nila sa Obrero, Tondo, Manila at inabutan na namin sila na nagkakarga na noong mga duffle bag sa (sic), madilim na ho noon, sa isang kotseng mamula-mula o orange na Camaro at isa pang Mercedes Benz na brown, dahil ang Lancer ay isinoli na raw nila sa may-ari. Dinala nila ngayon ang mga duffle bag sa Bocaue,

Bulacan, iyon kasi ang usapan namin noon dahil sumilip lamang ako noon at kasama ko si Carding Perez, kami naman ngayon ay pumunta sa bahay nina Rudy Miranda sa San Marcelino, Malate, Manila na sakay ng isang Toyota Corona na brown na si Carding Perez ang nagmaneho. Pagdating namin doon sa kina Rudy Miranda ay naroon na rin noon ang Mercedes Benz na ginamit namin, pero wala na ang crew ng delivery van dahil ibinaba at iniwanan daw nila sa Caloocan City. Ang naroroon na lamang noon ay sina Angelo Liwanag, si Raul Mendoza, si Sgt. Ed Saguindel at si Sgt. Jun na parehong taga-LRP. Naiwan na noon ang Mercedes Benz namin doon kina Rudy Miranda at iniwan na rin ang susi doon sa kamag-anak, dahil hindi nila alam ang trabahong ito. Sumakay na iyong apat naming kasama sa Toyota Corona na sakay namin at inihatid namin sina Sgt. Saguindel at Sgt. Jun doon sa tinitirhan nitong huling nabanggit na sundalo doon sa malapit sa Del Pan Bridge sa may Recto Avenue sa San Nicolas yata iyon sa Manila. Kami naman ngayong apat, sina Carding Perez, Angelo Liwanag at si Raul Mendoza ay tumuloy na sa Bocaue, Bulacan. Dumaan kami sa North Diversion Road at paglabas namin sa exit papuntang Bocaue, Bulacan ay hindi na kalayuan doon, hindi ko alam ang lugar pero alam kong puntahan. Bahay daw yata ng kamag-anak ni Carding Perez iyon pero hindi ko alam ang pangalan. Naroon na ngayon ang buong tropa, maliban sa mga dalawang sundalong naihatid na namin sa may Manila, at may mga nadagdag pang ibang mukha pero hindi ko ito mga kakilala. Si JACK o Sgt. Dan Miravalles ay naroon din noon. Kumain kami, pagkatapos ay nagbukasan na ng mga duffle bag. Iyon na nga,nakita na namin ang mga tsekeng ito, (Affiant pointed to the checks he voluntarily surrendered) at aming inihiwalay ngayon sa mga sulat na naroon na sinunog lahat pagkatapos doon sa

bahay ni Junior Mateo sa Novaliches. Di magdamag ngayon ang trabaho namin, kinabukasan ay kanya-kanyang uwian na, pagkatapos ay pahinga. Kinabukasan muli, gabi, inilipat na namin doon sa bahay ni Junior Mateo ang mga tsekeng ito (Affiant again referred to said checks). Isinakay namin noon sa isang cargo truck na pag-aari din daw nina Carding. Iyong mga tsekeng iyan ngayon ay nakalagay noon doon sa isang sikretong compartment sa gitna ng truck, doon ba sa may chassis. Sikretong compartment iyon, na mahirap mahalata.

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

S:- Wala po akong baril, Ser.

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

S:- E, di ganoon na nga ho, habang tumatagal ay umiinit ang situwasyon sa aming grupo, dahil iyong partehan sana namin ay puro pangako ang nangyari. Kaya napagpasiyahan namin na hatiin na lamang iyong mga tseke upang walang onsehan sa amin. Ito ngayon ay parte namin nina Sgt. Ed Saguindel, Sgt. Dan Miravalles Alias JACK at ni Sgt. Jun, dahil noong una ay doon muna sa amin ito nakatago (The checks recovered from the Affiant was referred to). Pero habang tumatagal ay umiinit at nalaman namin pati na may alarma na, kayat

inilipat namin doon sa may Raxa Bago sa may likod ng Alhambra Cigar & Cigarette Factory sa Tondo, Manila at akin munang ipinatago sa isang kumare ko doon, pansamantala, pero hindi alam nitong kumare ko ang laman noon dahil mahigpit kong ipinagbilin na huwag nilang bubuksan. Doon na rin namin kinuha iyon noong isurender ko ang mga tsekeng ito kagabi, at hanggang sa kinuha na namin ang supot na ito (the checks placed in a plastic bag was again referred to) ay wala pa rin kamalay-malay ang kumare ko.

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

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

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

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

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

S:- Wala na po.

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

S:- Opo.

WAKAS NG SALAYSAY: . . . . . /ac

(Sgd.)

JOSE D. FILOTEO

MGA SAKSI SA LAGDA:

(Sgd.)

SSG ROMEO P. ESPERO PC

(Sgd.)

CIC THERESA TOLENTINO WAC (PC)*24+

Petitioner executed two other documents on the same day, May 30, 1982. One was a certification stating that he voluntarily surrendered voluminous assorted US checks and vouchers, that because of the large number of pieces of checks, he affixed his signature upon the middle portion of the back of each check to serve as identification in the future, prior to the completion of its proper inventory and listing conducted by elements of SOG in his presence, and that he guided the elements of SOG to the residence of Rodolfo C. Miranda, the owner of the sky-blue Mercedes Benz car which was surrendered to the SOG Headquarters.[25] The other document was a sworn statement wherein petitioner attested to his waiver of the provisions of Article 125 of the Revised Penal Code and the following facts: (a) that he was apprised of his constitutional rights under Section 20, Article IV of the (1973) Constitution, that he understood all his rights thereunder, and that the investigators offered him counsel from the CLAO-IBP but he refused to avail of the privilege; (b) that he was arrested by SOG men in his house at around 11:00 p.m. of May 29, 1982 sa dahilang ako ay kasangkot sa pagnanakaw ng mga US

Treasury Warrants, SSS Pension Checks and Vouchers at SSS Medicare Checks and Vouchers mula sa delivery van ng Philippine Mail; (c) that the SOG men confiscated from him numerous checks and a Mercedes Benz 200 colored sky-blue, and (d) that he was not hurt or maltreated nor was anything taken from him which was not duly receipted for.[26]

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

Upon learning of the whereabouts of Miravalles, Eddie Saguindel and Bernardo Relator, the team of Capt. Ferrer proceeded to Taguig, Metro Manila in the afternoon of May 30, 1982. They met Miravalles along the way to his house. Informed by Capt. Ferrer that six of his companions were already under custody and that they implicated him

as one of their confederates, Miravalles reacted by saying, Sir, ang hihina kasi ng mga loob niyan, eh.*29+

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

Aside from petitioner, Liwanag, Mateo and Perez executed sworn statements.[34] Prior to doing so, they waived their right to counsel. Liwanag and Mateo admitted their participation and implicated petitioner in the crime. Perez, on the other hand, denied having driven a Lancer car in the hijacking and stated that he was implicated in the crime only because in one drinking spree with petitioner, Mateo and one alias Buro during that month of May, they had a heated altercation. Like petitioner, Liwanag and Mendoza certified that they voluntarily surrendered vouchers and checks which were

part of their loot in the hijacking; they also executed waivers under Article 125 of the Revised Penal Code. For his part, Relator executed a certification to the effect that he voluntarily surrendered his .32 caliber Smith & Wesson service revolver used in the commission of the crime. In spite of the fact that his father-in-law was a lawyer, petitioner did not manifest that he needed the assistance of counsel. During the taking of his statement, petitioner was visited by Jimmy Victorino and another comrade from the General Assignment Section of the WPD.

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

On May 31, 1982, then Postmaster General Golez summoned postal employees Miranda, Bautista and Tagudar and directed them to proceed to Camp Crame. At the office of the SOG, they were told to go over some pictures for identification of the culprits. The three recognized and pointed to the suspects in a line-up. Tagudar identified Saguindel and Liwanag.[38] Miranda pointed at Frias and Liwanag[39] while Bautista identified Frias, Mendoza and Liwanag .[40] Petitioner himself, when told to identify his alleged cohorts,

pointed to Severino Castro as their contact at the post office.[41] Five of the suspects who were not identified in the line-up were however implicated by Liwanag, Mateo and petitioner.

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

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

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

Evidence for the Defense

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

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

Crafts,[50] and in an alleged racket in Aranque Market in Manila involving jewelries.

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

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

Mateo took the Benz in the morning of May 3, 1982. Petitioner advised him to return the car between the hours of two and three in the afternoon at the Lakan Beer House at the corner of Rizal Avenue and Zurbaran Streets in Sta. Cruz, Manila where petitioner was to meet his friend Manolo Almoguera who would be celebrating his

birthday there. Petitioner met Almoguera and company at around 3:30 in the afternoon. He waited for Mateo until shortly before 5:00 in the afternoon when he was constrained to leave without seeing Mateo because he had to attend a mandatory regular troop formation at 5:00 P.M. at the police headquarters. From there, petitioner proceeded to his area of responsibility in the tourist belt. He returned to the beer house at about 6:00 in the evening hoping to find Mateo and the automobile. A little before 8:00 oclock, someone informed him that Mateo had finally arrived. Petitioner went out and scolded Mateo for being late; the latter apologized and said that his surveillance bore good results. Petitioner then returned the car to Miranda, through the latters cousin.

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

Petitioner was then instructed to accompany Lt. Pagdilao to the residence of Miranda to get the Benz. They were on board two cars. When petitioner noticed that they were not heading for Mirandas

place, he clutched the hand of Lt. Pagdilao, pleading for pity and thinking that he was about to be salvaged. Lt. Pagdilao however informed him that they would be dropping by petitioners house first per the investigators information that more checks could be recovered thereat. A warrantless search was then allegedly conducted in petitioners house but nothing was found. Suddenly, someone from the other car came out of a nearby house owned by Mateo and reported that they had recovered some checks. Thereafter, they proceeded to the house of Miranda who was also invited for questioning. The latter surrendered his Benz to the group.

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

Meanwhile, petitioners wife reported to the WPD General Assignment Section her husbands forcible abduction by armed men whom she mistook for CIS agents. A check with the CIS yielded

negative results. Thereafter, Lt. Reynaldo Dator went to the SOG where he was informed that petitioner was being investigated but no details were given thereon pending clearance with superior officers.[53] Consequently, a newspaper carried an item on the SOGs refusal to allow petitioners co-police officers to see him in his detention cell.[54]

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

After Mateo left, a prepared statement was shown and read to petitioner. Because its contents were false, petitioner refused to sign it. Placing his arm around petitioner, a certain Capt. Lagman told petitioner that he thought they had an understanding already. Petitioner later discovered that Lagman was not member of the military but an agent of the SOG, and a member of the Contreras gang. Petitioner was therefore constrained to sign the statement because of his excruciating experience (hirap na hirap). He however admitted having read the document before affiixing his signature

thereto and initialing the corrections therein. The waiver under Article 125 of the Revised Penal Code and the certification he executed were allegedly also obtained by duress. Although he picked out one Severino Castro in a police line-up, he did not even know Castro. He implicated Castro because he was threatened by a certain Boy Zapanta.

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

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

The Respondent Courts Decision

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

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

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

Consequently, it is hereby ordered that Exhibits B, B-1 and B-2, which are the .32 Cal. Revolver, Smith and Wesson, Serial No. 11707, its

holster and six (6) live ammunition respectively, which were surrendered by accused Relator, and Exhibits J, J-1 to J-5, consisting of 187, 222, 215, 197, 194 and 22 pieces, respectively, of Social Security System and Medicare checks and vouchers, be returned to the Firearm and Explosive Unit (FEU), PC, Camp Crame, Quezon City and the Social Security System, respectively, upon proper receipts.

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

SO ORDERED.

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

The Issues

The amended petition raises the following:

Assignments of Error

and / or

Excess of Jurisdiction / Grave Abuse of Discretion

xxx

xxx

xxx

First

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

Second

The respondent court erred and gravely abused its discretion as well as exceeded its jurisdiction in finding that petitioners having

borrowed the Mercedes Benz car utilized by the other accused in the hijacking of the mail van idubitably established his direct participation and/or indispensable cooperation in the said hijacking, the same being in gross disregard of basic Rules of Law.

Third

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

Fourth

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

Fifth

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

Sixth

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

Seventh

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

Eight

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

Ninth

The respondent court erred and gravely abused its discretion as well as exceeded its jurisdiction in finding that accused Filoteos denials and alibi cannot be entertained for being quite weak and implausible. The truth of the matter being that they should have been sustained

since petitioner was not identified by the direct victims-eyewitnesses as among those who participated in or were present at the hijack and none of the checks and treasury warrants were found in his possession or retrieved from him.

Tenth

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

Eleventh

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

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

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

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

(3)

Was petitioners warrantless arrest valid and proper?

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

The Courts Ruling

Preliminary Issue: Rule 45 or Rule 65?

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

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

As amended by Republic Act No. 7975, Section 7 of P.D. No. 1606 expressly provides that (d)ecisions and final orders of the Sandiganbayan shall be appealable to the Supreme Court by petition for review on certiorari raising pure questions of law in accordance with Rule 45 of the Rules of Court. However, in exceptional cases,

this Court has taken cognizance of questions of fact in order to resolve legal issues, as where there was palpable error or grave misapprehension of facts by the lower court. Criminal cases elevated by convicted public officials from the Sandiganbayan deserve the same thorough treatment by this Court as criminal cases involving ordinary citizens simply because the constitutional presumption of innocence must be overcome by proof beyond reasonable doubt. In all criminal cases, a persons life and liberty are at stake.*61+

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

First Issue: Uncounselled Waiver

On the merits of the petition, we find that the pivotal issue here is the admissibility of petitioners extrajudicial confession which lays out in detail his complicity in the crime. Petitioner contends that respondent Court erred in admitting his extrajudicial confession notwithstanding uncontradicted testimony and documentary proof that he was made to sign the same through torture, maltreatment, physical compulsion, threats and intimidation and without the

presence and assistance of counsel. He also claims that in executing the extrajudicial confession, he was denied the right to counsel in the same way that his waiver of the said right was likewise without the benefit of counsel. Petitioner therefore questions the respondent Courts admission in evidence of his extrajudicial confession on the strength of cases[62] upholding the admissibility of extrajudicial confessions notwithstanding the absence of counsel especially where the statements are replete with details and circumstances which are indicative of voluntariness. We shall first tackle the issue of his uncounselled waiver of his right to counsel.

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

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

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

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

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

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

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

In the landmark case of Magtoto vs. Manguera,[63] the Court categorically held that the aforequoted provisions of the 1973

Constitution (which were not included in the 1935 Charter) must be prospectively applied. This Court said:

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

By parity of reasoning, the specific provision of the 1987 Constitution requiring that a waiver by an accused of his right to counsel during custodial investigation must be made with the assistance of counsel may not be applied retroactively or in cases where the extrajudicial confession was made prior to the effectivity of said Constitution. Accordingly, waivers of the right to counsel during custodial investigation without the benefit of counsel during the effectivity of the 1973 Constitution should, by such argumentation, be admissible. Although a number of cases held that extrajudicial confessions made while the 1973 Constitution was in force and effect, should have been made with the assistance of counsel,[64] the definitive ruling was

enunciated only on April 26, 1983 when this Court, through Morales, Jr., vs. Enrile,[65] issued the guidelines to be observed by law enforcers during custodial investigation. The court specifically ruled that (t)he right to counsel may be waived but the waiver shall not be valid unless made with the assistance of counsel.*66+ Thereafter, in People vs. Luvendino,[67] the Court through Mr. Justice Florentino P. Feliciano vigorously taught:

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

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

Pursuant to the above doctrine, petitioner may not claim the benefits of the Morales and Galit rulings because he executed his extrajudicial confession and his waiver to the right to counsel on May 30, 1982, or before April 26, 1983. The prospective application of judge-made laws was underscored in Co vs. Court of Appeals[68] where the Court ruled thru Chief Justice Andres R. Narvasa that in accordance with Article 8 of the Civil Code which provides that (j)udicial decisions

applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines, and Article 4 of the same Code which states that (l)aws shall have no retroactive effect unless the contrary is provided, the principle of prospectivity of statutes, original or amendatory, shall apply to judicial decisions, which, although in themselves are not laws, are nevertheless evidence of what the law means.[69]

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

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

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

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

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

xxx

xxx

x x x;

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

xxx

xxx

x x x.

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

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

The Second Issue: Confession Extracted Through Torture?

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

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

evidence showing that petitioners consent in executing the same had been vitiated.[83]

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

The Third Issue: Illegal Arrest?

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

Finally, it is much too late for appellant to raise the question of his arrest without a warrant. When accused-appellant was arrested and a case was filed against him, he pleaded not guilty upon arraignment, participated in the trial and presented his evidence. Appellant is thus

estopped from questioning the legality of his arrest. It is well-settled that any objection involving a warrant of arrest or procedure in the acquisition by the court of jurisdiction over the person of an accused must be made before he enters his plea, otherwise the objection is deemed waived. Besides, this issue is being raised for the first time by appellant. He did not move for the quashal of the information before the trial court on this ground. Consequently, any irregularity attendant to his arrest, if any, was cured when he voluntarily submitted himself to the jurisdiction of the trial court by entering a plea of not guilty and by participating in the trial. Moreover, the illegal arrest of an accused is not sufficient cause for setting aside a valid judgment rendered upon a sufficient complaint after trial free from error.

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

The Fourth Issue: Sufficiency of the Prosecutions Evidence

Contrary to petitioners claim, his culpability has been proven beyond reasonable doubt. He borrowed a car to use in the hijacking knowing fully well that his owner-type jeep would give away his identity. He

could not be identified by the postal employees in the postal van simply because after overtaking said vehicle and forcing its driver to pull over, he gave up driving the Mercedes Benz where the postal employees were made to ride, and commandeered the van. That the checks were not found in his own home is of no moment. Before the arrest and upon learning that the authorities had begun to nail down the identities of the malefactors, he had entrusted them to his kumare. It was petitioner himself who led the team of Lt. Pagdilao back to his place after he had admitted to Sgt. Arsenio Carlos that his share of the checks were in the possession of his kumare in the neighborhood.[87]

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

Having already ruled on the admissibility of petitioners confession, this Court holds that the full force of the totality of the prosecutions evidence proves his guilt well beyond reasonable doubt. Weighing heavily against the defense is the well-settled doctrine that findings of

facts of the trial courts -- in this case, the Sandiganbayan itself -particularly in the assessment of the credibility of witnesses, is binding upon this Court, absent any arbitrariness, abuse or palpable error.

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

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

So overwhelming is the prosecutions evidence that respondent Court opined that even without the inter-locking confessions of Filoteo,

Mateo and Liwanag the remaining evidence would still be sufficient for conviction.[91] Said the respondent tribunal:

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

Moreover, accused Filoteos and Mateos unexplained possession of the stolen checks raises the presumption that they were responsible for the robbery in question. It is a rule established by an abundance of jurisprudence that when stolen property is found in the possession of one, not the owner, without a satisfactory explanation of his

possession, he will be presumed the thief. This rule is in accordance with the disputable presumption that a person found in possession of a thing taken in the doing of a recent wrongful act is the taker and doer of the whole act. In the instant case, said accused has not given such satisfactory explanation, much more so when their possession had been positively established by the testimonies of prosecution witnesses Capt. Ferrer and Sgt. Carlos and by accuseds own signatures at the back of said checks.

Furthermore, accused Filoteos denials and alibi cannot be entertained for being quite weak and implausible. His claim that he merely borrowed the Mercedes Benz car from Rodolfo Miranda to help out his co-accused Mateo, who had been utilized by the police as an informer and was following up tips in certain unsolved cases, appears to be incredible and fantastic. He also claimed that he could not have participated in the hi-jack because after giving the car to Mateo in the morning of May 2, 1982, he waited at the corner of Zurbaran St. and Avenida Rizal between 2-3:00 oclock p.m. of the same day and then went to the WPD headquarters to attend the police formation at around 5:00 oclock p.m. when Mateo failed to show up. Thereafter, he tried to show through his witnesses Gary Gallardo and Manolo Almogera that he was with them between 3:00 oclock to 4:45 oclock p.m., then from 6:00 oclock to 8:30 oclock p.m. and, finally, from 10:45 oclock p.m. to 11:00 oclock of the same date. It was through said witnesses that he tried to establish his whereabouts between 4:30 oclock to 7:30 oclock p.m. of May 2, 1982, the period from the time the mail van was hi-jacked up to when postal employees Bautista, Miranda and Tagudar were brought to

Caloocan City and freed by their captors. Such alibi, however, fails to show that it was physically impossible for him to be present at the scene of the hi-jacking. We take judicial notice that the distance between the crime scene and downtown Manila is some 15-20 kilometers and negotiable over first-class roads in some thirty (30) minutes.

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

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

Final Question: Brigandage or Robbery?

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

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

Justifying the above disposition, the assailed Decision ratiocinates:

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

things or other unlawful means, committed by any person on any Philippine Highway. (Underscoring supplied)

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

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

the robbery to bring it within the ambit of PD 532. Said the Court through Mr. Justice Florenz D. Regalado:

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

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

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

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

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

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

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

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

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

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

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

belonging to another were

unlawfully taken by the accused

with intent to gain (animo lucrandi)

with intimidation against three persons (Art. 293)

in an uninhabited place, or

by an band, or

by attacking a moving motor vehicle

on a highway; and

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

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

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

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

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

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

ERMITA-MALATE HOTEL AND MOTEL OPERATORS ASSOCIATION, INC., HOTEL DEL MAR INC. and GO CHIU, petitioners-appellees,

vs. THE HONORABLE CITY MAYOR OF MANILA, respondent-appellant. VICTOR ALABANZA, intervenor-appellee.

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

FERNANDO, J.:

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

The petition for prohibition against Ordinance No. 4760 was filed on July 5, 1963 by the petitioners, Ermita-Malate Hotel and Motel Operators Association, one of its members, Hotel del Mar Inc., and a certain Go Chiu, who is "the president and general manager of the second petitioner" against the respondent Mayor of the City of Manila who was sued in his capacity as such "charged with the

general power and duty to enforce ordinances of the City of Manila and to give the necessary orders for the faithful execution and enforcement of such ordinances." (par. 1). It was alleged that the petitioner non-stock corporation is dedicated to the promotion and protection of the interest of its eighteen (18) members "operating hotels and motels, characterized as legitimate businesses duly licensed by both national and city authorities, regularly paying taxes, employing and giving livelihood to not less than 2,500 person and representing an investment of more than P3 million."1 (par. 2). It was then alleged that on June 13, 1963, the Municipal Board of the City of Manila enacted Ordinance No. 4760, approved on June 14, 1963 by the then Vice-Mayor Herminio Astorga, who was at the time acting as Mayor of the City of Manila. (par. 3).

After which the alleged grievances against the ordinance were set forth in detail. There was the assertion of its being beyond the powers of the Municipal Board of the City of Manila to enact insofar as it would regulate motels, on the ground that in the revised charter of the City of Manila or in any other law, no reference is made to motels; that Section 1 of the challenged ordinance is unconstitutional and void for being unreasonable and violative of due process insofar as it would impose P6,000.00 fee per annum for first class motels and P4,500.00 for second class motels; that the provision in the same section which would require the owner, manager, keeper or duly authorized representative of a hotel, motel, or lodging house to refrain from entertaining or accepting any guest or customer or letting any room or other quarter to any person or persons without his filling up the prescribed form in a lobby open to public view at all times and

in his presence, wherein the surname, given name and middle name, the date of birth, the address, the occupation, the sex, the nationality, the length of stay and the number of companions in the room, if any, with the name, relationship, age and sex would be specified, with data furnished as to his residence certificate as well as his passport number, if any, coupled with a certification that a person signing such form has personally filled it up and affixed his signature in the presence of such owner, manager, keeper or duly authorized representative, with such registration forms and records kept and bound together, it also being provided that the premises and facilities of such hotels, motels and lodging houses would be open for inspection either by the City Mayor, or the Chief of Police, or their duly authorized representatives is unconstitutional and void again on due process grounds, not only for being arbitrary, unreasonable or oppressive but also for being vague, indefinite and uncertain, and likewise for the alleged invasion of the right to privacy and the guaranty against self-incrimination; that Section 2 of the challenged ordinance classifying motels into two classes and requiring the maintenance of certain minimum facilities in first class motels such as a telephone in each room, a dining room or, restaurant and laundry similarly offends against the due process clause for being arbitrary, unreasonable and oppressive, a conclusion which applies to the portion of the ordinance requiring second class motels to have a dining room; that the provision of Section 2 of the challenged ordinance prohibiting a person less than 18 years old from being accepted in such hotels, motels, lodging houses, tavern or common inn unless accompanied by parents or a lawful guardian and making it unlawful for the owner, manager, keeper or duly authorized

representative of such establishments to lease any room or portion thereof more than twice every 24 hours, runs counter to the due process guaranty for lack of certainty and for its unreasonable, arbitrary and oppressive character; and that insofar as the penalty provided for in Section 4 of the challenged ordinance for a subsequent conviction would, cause the automatic cancellation of the license of the offended party, in effect causing the destruction of the business and loss of its investments, there is once again a transgression of the due process clause.

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

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

incrimination, with the assertion that the issuance of the preliminary injunction ex parte was contrary to law, respondent Mayor prayed for, its dissolution and the dismissal of the petition.

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

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

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

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

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

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

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

Thereafter came a memorandum for respondent on January 22, 1965, wherein stress was laid on the presumption of the validity of the challenged ordinance, the burden of showing its lack of conformity to the Constitution resting on the party who assails it, citing not only U.S. v. Salaveria, but likewise applicable American authorities. Such a memorandum likewise refuted point by point the

arguments advanced by petitioners against its validity. Then barely two weeks later, on February 4, 1965, the memorandum for petitioners was filed reiterating in detail what was set forth in the petition, with citations of what they considered to be applicable American authorities and praying for a judgment declaring the challenged ordinance "null and void and unenforceable" and making permanent the writ of preliminary injunction issued.

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

As noted at the outset, the judgment must be reversed. A decent regard for constitutional doctrines of a fundamental character ought

to have admonished the lower court against such a sweeping condemnation of the challenged ordinance. Its decision cannot be allowed to stand, consistently with what has hitherto been the accepted standards of constitutional adjudication, in both procedural and substantive aspects.

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

It admits of no doubt therefore that there being a presumption of validity, the necessity for evidence to rebut it is unavoidable, unless the statute or ordinance is void on its face which is not the case here. The principle has been nowhere better expressed than in the leading case of O'Gorman & Young v. Hartford Fire Insurance Co.,3 where the American Supreme Court through Justice Brandeis tersely and succinctly summed up the matter thus: The statute here questioned

deals with a subject clearly within the scope of the police power. We are asked to declare it void on the ground that the specific method of regulation prescribed is unreasonable and hence deprives the plaintiff of due process of law. As underlying questions of fact may condition the constitutionality of legislation of this character, the resumption of constitutionality must prevail in the absence of some factual foundation of record for overthrowing the statute." No such factual foundation being laid in the present case, the lower court deciding the matter on the pleadings and the stipulation of facts, the presumption of validity must prevail and the judgment against the ordinance set aside.

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

inherent and plenary power in the State which enables it to prohibit all that is hurt full to the comfort, safety, and welfare of society.7

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

It is a fact worth noting that this Court has invariably stamped with the seal of its approval, ordinances punishing vagrancy and classifying a pimp or procurer as a vagrant;8 provide a license tax for and

regulating the maintenance or operation of public dance halls;9 prohibiting gambling;10 prohibiting jueteng;11 and monte;12 prohibiting playing of panguingui on days other than Sundays or legal holidays;13 prohibiting the operation of pinball machines;14 and prohibiting any person from keeping, conducting or maintaining an opium joint or visiting a place where opium is smoked or otherwise used,15 all of which are intended to protect public morals.

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

We are thus led to considering the insistent, almost shrill tone, in which the objection is raised to the question of due process.16 There is no controlling and precise definition of due process. It furnishes though a standard to which the governmental action should conform in order that deprivation of life, liberty or property, in each appropriate case, be valid. What then is the standard of due process

which must exist both as a procedural and a substantive requisite to free the challenged ordinance, or any governmental action for that matter, from the imputation of legal infirmity sufficient to spell its doom? It is responsiveness to the supremacy of reason, obedience to the dictates of justice. Negatively put, arbitrariness is ruled out and unfairness avoided. To satisfy the due process requirement, official action, to paraphrase Cardozo, must not outrun the bounds of reason and result in sheer oppression. Due process is thus hostile to any official action marred by lack of reasonableness. Correctly it has been identified as freedom from arbitrariness. It is the embodiment of the sporting idea of fair play.17 It exacts fealty "to those strivings for justice" and judges the act of officialdom of whatever branch "in the light of reason drawn from considerations of fairness that reflect [democratic] traditions of legal and political thought."18 It is not a narrow or "technical conception with fixed content unrelated to time, place and circumstances,"19 decisions based on such a clause requiring a "close and perceptive inquiry into fundamental principles of our society."20 Questions of due process are not to be treated narrowly or pedantically in slavery to form or phrases.21

It would thus be an affront to reason to stigmatize an ordinance enacted precisely to meet what a municipal lawmaking body considers an evil of rather serious proportion an arbitrary and capricious exercise of authority. It would seem that what should be deemed unreasonable and what would amount to an abdication of the power to govern is inaction in the face of an admitted deterioration of the state of public morals. To be more specific, the Municipal Board of the City of Manila felt the need for a remedial

measure. It provided it with the enactment of the challenged ordinance. A strong case must be found in the records, and, as has been set forth, none is even attempted here to attach to an ordinance of such character the taint of nullity for an alleged failure to meet the due process requirement. Nor does it lend any semblance even of deceptive plausibility to petitioners' indictment of Ordinance No. 4760 on due process grounds to single out such features as the increased fees for motels and hotels, the curtailment of the area of freedom to contract, and, in certain particulars, its alleged vagueness.

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

persons who might otherwise engage in non-useful enterprises is, of course, generally an important factor in the determination of the amount of this kind of license fee. Hence license fees clearly in the nature of privilege taxes for revenue have frequently been upheld, especially in of licenses for the sale of liquors. In fact, in the latter cases the fees have rarely been declared unreasonable.23

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

As a matter of fact, even without reference to the wide latitude enjoyed by the City of Manila in imposing licenses for revenue, it has been explicitly held in one case that "much discretion is given to municipal corporations in determining the amount," here the license fee of the operator of a massage clinic, even if it were viewed purely as a police power measure.26 The discussion of this particular matter may fitly close with this pertinent citation from another decision of significance: "It is urged on behalf of the plaintiffs-appellees that the enforcement of the ordinance could deprive them of their lawful occupation and means of livelihood because they can not rent stalls in the public markets. But it appears that plaintiffs are also dealers in

refrigerated or cold storage meat, the sale of which outside the city markets under certain conditions is permitted x x x . And surely, the mere fact, that some individuals in the community may be deprived of their present business or a particular mode of earning a living cannot prevent the exercise of the police power. As was said in a case, persons licensed to pursue occupations which may in the public need and interest be affected by the exercise of the police power embark in these occupations subject to the disadvantages which may result from the legal exercise of that power."27

Nor does the restriction on the freedom to contract, insofar as the challenged ordinance makes it unlawful for the owner, manager, keeper or duly authorized representative of any hotel, motel, lodging house, tavern, common inn or the like, to lease or rent room or portion thereof more than twice every 24 hours, with a proviso that in all cases full payment shall be charged, call for a different conclusion. Again, such a limitation cannot be viewed as a transgression against the command of due process. It is neither unreasonable nor arbitrary. Precisely it was intended to curb the opportunity for the immoral or illegitimate use to which such premises could be, and, according to the explanatory note, are being devoted. How could it then be arbitrary or oppressive when there appears a correspondence between the undeniable existence of an undesirable situation and the legislative attempt at correction. Moreover, petitioners cannot be unaware that every regulation of conduct amounts to curtailment of liberty which as pointed out by Justice Malcolm cannot be absolute. Thus: "One thought which runs through all these different conceptions of liberty is plainly apparent. It is this: 'Liberty' as

understood in democracies, is not license; it is 'liberty regulated by law.' Implied in the term is restraint by law for the good of the individual and for the greater good of the peace and order of society and the general well-being. No man can do exactly as he pleases. Every man must renounce unbridled license. The right of the individual is necessarily subject to reasonable restraint by general law for the common good x x x The liberty of the citizen may be restrained in the interest of the public health, or of the public order and safety, or otherwise within the proper scope of the police power."28

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

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

Lastly, there is the attempt to impugn the ordinance on another due process ground by invoking the principles of vagueness or uncertainty. It would appear from a recital in the petition itself that what seems to be the gravamen of the alleged grievance is that the provisions are too detailed and specific rather than vague or uncertain. Petitioners, however, point to the requirement that a guest should give the name, relationship, age and sex of the companion or companions as indefinite and uncertain in view of the necessity for determining whether the companion or companions referred to are those arriving with the customer or guest at the time of the registry or entering the room With him at about the same time or coming at any indefinite time later to join him; a proviso in one of its sections which cast doubt as to whether the maintenance of a restaurant in a motel is dependent upon the discretion of its owners or operators; another proviso which from their standpoint would require a guess as to

whether the "full rate of payment" to be charged for every such lease thereof means a full day's or merely a half-day's rate. It may be asked, do these allegations suffice to render the ordinance void on its face for alleged vagueness or uncertainty? To ask the question is to answer it. From Connally v. General Construction Co.33 to Adderley v. Florida,34 the principle has been consistently upheld that what makes a statute susceptible to such a charge is an enactment either forbidding or requiring the doing of an act that men of common intelligence must necessarily guess at its meaning and differ as to its application. Is this the situation before us? A citation from Justice Holmes would prove illuminating: "We agree to all the generalities about not supplying criminal laws with what they omit but there is no canon against using common sense in construing laws as saying what they obviously mean."35

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

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

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines SUPREME COURT Manila

EN BANC

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

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

MELENCIO-HERRERA, J.:

This Petition for "Certiorari, Prohibition and mandamus with Preliminary Injunction and Temporary Restraining Order" filed by the Taxicab Operators of Metro Manila, Inc., Felicisimo Cabigao and Ace Transportation, seeks to declare the nullity of Memorandum Circular No. 77-42, dated October 10, 1977, of the Board of Transportation, and Memorandum Circular No. 52, dated August 15, 1980, of the Bureau of Land Transportation.

Petitioner Taxicab Operators of Metro Manila, Inc. (TOMMI) is a domestic corporation composed of taxicab operators, who are grantees of Certificates of Public Convenience to operate taxicabs within the City of Manila and to any other place in Luzon accessible to vehicular traffic. Petitioners Ace Transportation Corporation and Felicisimo Cabigao are two of the members of TOMMI, each being an operator and grantee of such certificate of public convenience.

On October 10, 1977, respondent Board of Transportation (BOT) issued Memorandum Circular No. 77-42 which reads:

SUBJECT: Phasing out and Replacement of

Old and Dilapidated Taxis

WHEREAS, it is the policy of the government to insure that only safe and comfortable units are used as public conveyances;

WHEREAS, the riding public, particularly in Metro-Manila, has, time and again, complained against, and condemned, the continued operation of old and dilapidated taxis;

WHEREAS, in order that the commuting public may be assured of comfort, convenience, and safety, a program of phasing out of old and dilapidated taxis should be adopted;

WHEREAS, after studies and inquiries made by the Board of Transportation, the latter believes that in six years of operation, a taxi operator has not only covered the cost of his taxis, but has made reasonable profit for his investments;

NOW, THEREFORE, pursuant to this policy, the Board hereby declares that no car beyond six years shall be operated as taxi, and in implementation of the same hereby promulgates the following rules and regulations:

1. As of December 31, 1977, all taxis of Model 1971 and earlier are ordered withdrawn from public service and thereafter may no longer

be registered and operated as taxis. In the registration of cards for 1978, only taxis of Model 1972 and later shall be accepted for registration and allowed for operation;

2. As of December 31, 1978, all taxis of Model 1972 are ordered withdrawn from public service and thereafter may no longer be registered and operated as taxis. In the registration of cars for 1979, only taxis of Model 1973 and later shall be accepted for registration and allowed for operation; and every year thereafter, there shall be a six-year lifetime of taxi, to wit:

1980 Model 1974

1981 Model 1975, etc.

All taxis of earlier models than those provided above are hereby ordered withdrawn from public service as of the last day of registration of each particular year and their respective plates shall be surrendered directly to the Board of Transportation for subsequent turnover to the Land Transportation Commission.

For an orderly implementation of this Memorandum Circular, the rules herein shall immediately be effective in Metro-Manila. Its implementation outside Metro- Manila shall be carried out only after

the project has been implemented in Metro-Manila and only after the date has been determined by the Board. 1

Pursuant to the above BOT circular, respondent Director of the Bureau of Land Transportation (BLT) issued Implementing Circular No. 52, dated August 15, 1980, instructing the Regional Director, the MV Registrars and other personnel of BLT, all within the National Capitol Region, to implement said Circular, and formulating a schedule of phase-out of vehicles to be allowed and accepted for registration as public conveyances. To quote said Circular:

Pursuant to BOT Memo-Circular No. 77-42, taxi units with year models over six (6) years old are now banned from operating as public utilities in Metro Manila. As such the units involved should be considered as automatically dropped as public utilities and, therefore, do not require any further dropping order from the BOT.

Henceforth, taxi units within the National Capitol Region having year models over 6 years old shall be refused registration. The following schedule of phase-out is herewith prescribed for the guidance of all concerned:

Year Model

Automatic Phase-Out Year

1980

1974

1981

1975

1982

1976

1983

1977

etc.

etc.

Strict compliance here is desired. 2

In accordance therewith, cabs of model 1971 were phase-out in registration year 1978; those of model 1972, in 1979; those of model 1973, in 1980; and those of model 1974, in 1981.

On January 27, 1981, petitioners filed a Petition with the BOT, docketed as Case No. 80-7553, seeking to nullify MC No. 77-42 or to

stop its implementation; to allow the registration and operation in 1981 and subsequent years of taxicabs of model 1974, as well as those of earlier models which were phased-out, provided that, at the time of registration, they are roadworthy and fit for operation.

On February 16, 1981, petitioners filed before the BOT a "Manifestation and Urgent Motion", praying for an early hearing of their petition. The case was heard on February 20, 1981. Petitioners presented testimonial and documentary evidence, offered the same, and manifested that they would submit additional documentary proofs. Said proofs were submitted on March 27, 1981 attached to petitioners' pleading entitled, "Manifestation, Presentation of Additional Evidence and Submission of the Case for Resolution." 3

On November 28, 1981, petitioners filed before the same Board a "Manifestation and Urgent Motion to Resolve or Decide Main Petition" praying that the case be resolved or decided not later than December 10, 1981 to enable them, in case of denial, to avail of whatever remedy they may have under the law for the protection of their interests before their 1975 model cabs are phased-out on January 1, 1982.

Petitioners, through its President, allegedly made personal followups of the case, but was later informed that the records of the case could not be located.

On December 29, 1981, the present Petition was instituted wherein the following queries were posed for consideration by this Court:

A. Did BOT and BLT promulgate the questioned memorandum circulars in accord with the manner required by Presidential Decree No. 101, thereby safeguarding the petitioners' constitutional right to procedural due process?

B. Granting, arguendo, that respondents did comply with the procedural requirements imposed by Presidential Decree No. 101, would the implementation and enforcement of the assailed memorandum circulars violate the petitioners' constitutional rights to.

(1) Equal protection of the law;

(2) Substantive due process; and

(3) Protection against arbitrary and unreasonable classification and standard?

On Procedural and Substantive Due Process:

Presidential Decree No. 101 grants to the Board of Transportation the power

4. To fix just and reasonable standards, classification, regulations, practices, measurements, or service to be furnished, imposed, observed, and followed by operators of public utility motor vehicles.

Section 2 of said Decree provides procedural guidelines for said agency to follow in the exercise of its powers:

Sec. 2. Exercise of powers. In the exercise of the powers granted in the preceding section, the Board shag proceed promptly along the method of legislative inquiry.

Apart from its own investigation and studies, the Board, in its discretion, may require the cooperation and assistance of the Bureau of Transportation, the Philippine Constabulary, particularly the Highway Patrol Group, the support agencies within the Department of Public Works, Transportation and Communications, or any other government office or agency that may be able to furnish useful information or data in the formulation of the Board of any policy, plan or program in the implementation of this Decree.

The Board may also can conferences, require the submission of position papers or other documents, information, or data by operators or other persons that may be affected by the implementation of this Decree, or employ any other suitable means of inquiry.

In support of their submission that they were denied procedural due process, petitioners contend that they were not caged upon to submit their position papers, nor were they ever summoned to attend any conference prior to the issuance of the questioned BOT Circular.

It is clear from the provision aforequoted, however, that the leeway accorded the Board gives it a wide range of choice in gathering necessary information or data in the formulation of any policy, plan or program. It is not mandatory that it should first call a conference or require the submission of position papers or other documents from operators or persons who may be affected, this being only one of the options open to the Board, which is given wide discretionary authority. Petitioners cannot justifiably claim, therefore, that they were deprived of procedural due process. Neither can they state with certainty that public respondents had not availed of other sources of inquiry prior to issuing the challenged Circulars. operators of public conveyances are not the only primary sources of the data and information that may be desired by the BOT.

Dispensing with a public hearing prior to the issuance of the Circulars is neither violative of procedural due process. As held in Central Bank vs. Hon. Cloribel and Banco Filipino, 44 SCRA 307 (1972):

Pevious notice and hearing as elements of due process, are constitutionally required for the protection of life or vested property rights, as well as of liberty, when its limitation or loss takes place in consequence of a judicial or quasi-judicial proceeding, generally dependent upon a past act or event which has to be established or ascertained. It is not essential to the validity of general rules or regulations promulgated to govern future conduct of a class or persons or enterprises, unless the law provides otherwise. (Emphasis supplied)

Petitioners further take the position that fixing the ceiling at six (6) years is arbitrary and oppressive because the roadworthiness of taxicabs depends upon their kind of maintenance and the use to which they are subjected, and, therefore, their actual physical condition should be taken into consideration at the time of registration. As public contend, however, it is impractical to subject every taxicab to constant and recurring evaluation, not to speak of the fact that it can open the door to the adoption of multiple standards, possible collusion, and even graft and corruption. A reasonable standard must be adopted to apply to an vehicles affected uniformly, fairly, and justly. The span of six years supplies that reasonable standard. The product of experience shows that by that time taxis have fully depreciated, their cost recovered, and a fair

return on investment obtained. They are also generally dilapidated and no longer fit for safe and comfortable service to the public specially considering that they are in continuous operation practically 24 hours everyday in three shifts of eight hours per shift. With that standard of reasonableness and absence of arbitrariness, the requirement of due process has been met.

On Equal Protection of the Law:

Petitioners alleged that the Circular in question violates their right to equal protection of the law because the same is being enforced in Metro Manila only and is directed solely towards the taxi industry. At the outset it should be pointed out that implementation outside Metro Manila is also envisioned in Memorandum Circular No. 77-42. To repeat the pertinent portion:

For an orderly implementation of this Memorandum Circular, the rules herein shall immediately be effective in Metro Manila. Its implementation outside Metro Manila shall be carried out only after the project has been implemented in Metro Manila and only after the date has been determined by the Board. 4

In fact, it is the understanding of the Court that implementation of the Circulars in Cebu City is already being effected, with the BOT in

the process of conducting studies regarding the operation of taxicabs in other cities.

The Board's reason for enforcing the Circular initially in Metro Manila is that taxicabs in this city, compared to those of other places, are subjected to heavier traffic pressure and more constant use. This is of common knowledge. Considering that traffic conditions are not the same in every city, a substantial distinction exists so that infringement of the equal protection clause can hardly be successfully claimed.

As enunciated in the preambular clauses of the challenged BOT Circular, the overriding consideration is the safety and comfort of the riding public from the dangers posed by old and dilapidated taxis. The State, in the exercise, of its police power, can prescribe regulations to promote the health, morals, peace, good order, safety and general welfare of the people. It can prohibit all things hurtful to comfort, safety and welfare of society. 5 It may also regulate property rights. 6 In the language of Chief Justice Enrique M. Fernando "the necessities imposed by public welfare may justify the exercise of governmental authority to regulate even if thereby certain groups may plausibly assert that their interests are disregarded". 7

In so far as the non-application of the assailed Circulars to other transportation services is concerned, it need only be recalled that the equal protection clause does not imply that the same treatment be

accorded all and sundry. It applies to things or persons Identically or similarly situated. It permits of classification of the object or subject of the law provided classification is reasonable or based on substantial distinction, which make for real differences, and that it must apply equally to each member of the class. 8 What is required under the equal protection clause is the uniform operation by legal means so that all persons under Identical or similar circumstance would be accorded the same treatment both in privilege conferred and the liabilities imposed. 9 The challenged Circulars satisfy the foregoing criteria.

Evident then is the conclusion that the questioned Circulars do not suffer from any constitutional infirmity. To declare a law unconstitutional, the infringement of constitutional right must be clear, categorical and undeniable. 10

WHEREFORE, the Writs prayed for are denied and this Petition is hereby dismissed. No costs.

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines

SUPREME COURT Manila

EN BANC

G.R. No. L-7995

May 31, 1957

LAO H. ICHONG, in his own behalf and in behalf of other alien residents, corporations and partnerships adversely affected. by Republic Act No. 1180, petitioner, vs. JAIME HERNANDEZ, Secretary of Finance, and MARCELINO SARMIENTO, City Treasurer of Manila, respondents.

Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and Associates for petitioner. Office of the Solicitor General Ambrosio Padilla and Solicitor Pacifico P. de Castro for respondent Secretary of Finance. City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S. Serrano for respondent City Treasurer. Dionisio Reyes as Amicus Curiae. Marcial G. Mendiola as Amicus Curiae.

Emiliano R. Navarro as Amicus Curiae.

LABRADOR, J.:

I. The case and issue, in general

This Court has before it the delicate task of passing upon the validity and constitutionality of a legislative enactment, fundamental and far-reaching in significance. The enactment poses questions of due process, police power and equal protection of the laws. It also poses an important issue of fact, that is whether the conditions which the disputed law purports to remedy really or actually exist. Admittedly springing from a deep, militant, and positive nationalistic impulse, the law purports to protect citizen and country from the alien retailer. Through it, and within the field of economy it regulates, Congress attempts to translate national aspirations for economic independence and national security, rooted in the drive and urge for national survival and welfare, into a concrete and tangible measures designed to free the national retailer from the competing dominance of the alien, so that the country and the nation may be free from a supposed economic dependence and bondage. Do the facts and circumstances justify the enactment?

II. Pertinent provisions of Republic Act No. 1180

Republic Act No. 1180 is entitled "An Act to Regulate the Retail Business." In effect it nationalizes the retail trade business. The main provisions of the Act are: (1) a prohibition against persons, not citizens of the Philippines, and against associations, partnerships, or corporations the capital of which are not wholly owned by citizens of the Philippines, from engaging directly or indirectly in the retail trade; (2) an exception from the above prohibition in favor of aliens actually engaged in said business on May 15, 1954, who are allowed to continue to engaged therein, unless their licenses are forfeited in accordance with the law, until their death or voluntary retirement in case of natural persons, and for ten years after the approval of the Act or until the expiration of term in case of juridical persons; (3) an exception therefrom in favor of citizens and juridical entities of the United States; (4) a provision for the forfeiture of licenses (to engage in the retail business) for violation of the laws on nationalization, control weights and measures and labor and other laws relating to trade, commerce and industry; (5) a prohibition against the establishment or opening by aliens actually engaged in the retail business of additional stores or branches of retail business, (6) a provision requiring aliens actually engaged in the retail business to present for registration with the proper authorities a verified statement concerning their businesses, giving, among other matters, the nature of the business, their assets and liabilities and their offices and principal offices of judicial entities; and (7) a provision allowing the heirs of aliens now engaged in the retail business who die, to continue such business for a period of six months for purposes of liquidation.

III. Grounds upon which petition is based-Answer thereto

Petitioner, for and in his own behalf and on behalf of other alien residents corporations and partnerships adversely affected by the provisions of Republic Act. No. 1180, brought this action to obtain a judicial declaration that said Act is unconstitutional, and to enjoin the Secretary of Finance and all other persons acting under him, particularly city and municipal treasurers, from enforcing its provisions. Petitioner attacks the constitutionality of the Act, contending that: (1) it denies to alien residents the equal protection of the laws and deprives of their liberty and property without due process of law ; (2) the subject of the Act is not expressed or comprehended in the title thereof; (3) the Act violates international and treaty obligations of the Republic of the Philippines; (4) the provisions of the Act against the transmission by aliens of their retail business thru hereditary succession, and those requiring 100% Filipino capitalization for a corporation or entity to entitle it to engage in the retail business, violate the spirit of Sections 1 and 5, Article XIII and Section 8 of Article XIV of the Constitution.

In answer, the Solicitor-General and the Fiscal of the City of Manila contend that: (1) the Act was passed in the valid exercise of the police power of the State, which exercise is authorized in the Constitution in the interest of national economic survival; (2) the Act has only one subject embraced in the title; (3) no treaty or international obligations

are infringed; (4) as regards hereditary succession, only the form is affected but the value of the property is not impaired, and the institution of inheritance is only of statutory origin.

IV. Preliminary consideration of legal principles involved

a. The police power.

There is no question that the Act was approved in the exercise of the police power, but petitioner claims that its exercise in this instance is attended by a violation of the constitutional requirements of due process and equal protection of the laws. But before proceeding to the consideration and resolution of the ultimate issue involved, it would be well to bear in mind certain basic and fundamental, albeit preliminary, considerations in the determination of the ever recurrent conflict between police power and the guarantees of due process and equal protection of the laws. What is the scope of police power, and how are the due process and equal protection clauses related to it? What is the province and power of the legislature, and what is the function and duty of the courts? These consideration must be clearly and correctly understood that their application to the facts of the case may be brought forth with clarity and the issue accordingly resolved.

It has been said the police power is so far - reaching in scope, that it has become almost impossible to limit its sweep. As it derives its existence from the very existence of the State itself, it does not need to be expressed or defined in its scope; it is said to be co-extensive with self-protection and survival, and as such it is the most positive and active of all governmental processes, the most essential, insistent and illimitable. Especially is it so under a modern democratic framework where the demands of society and of nations have multiplied to almost unimaginable proportions; the field and scope of police power has become almost boundless, just as the fields of public interest and public welfare have become almost all-embracing and have transcended human foresight. Otherwise stated, as we cannot foresee the needs and demands of public interest and welfare in this constantly changing and progressive world, so we cannot delimit beforehand the extent or scope of police power by which and through which the State seeks to attain or achieve interest or welfare. So it is that Constitutions do not define the scope or extent of the police power of the State; what they do is to set forth the limitations thereof. The most important of these are the due process clause and the equal protection clause.

b. Limitations on police power.

The basic limitations of due process and equal protection are found in the following provisions of our Constitution:

SECTION 1.(1) No person shall be deprived of life, liberty or property without due process of law, nor any person be denied the equal protection of the laws. (Article III, Phil. Constitution)

These constitutional guarantees which embody the essence of individual liberty and freedom in democracies, are not limited to citizens alone but are admittedly universal in their application, without regard to any differences of race, of color, or of nationality. (Yick Wo vs. Hopkins, 30, L. ed. 220, 226.)

c. The, equal protection clause.

The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile discrimination or the oppression of inequality. It is not intended to prohibit legislation, which is limited either in the object to which it is directed or by territory within which is to operate. It does not demand absolute equality among residents; it merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities enforced. The equal protection clause is not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within such class, and reasonable grounds exists for making a distinction between those who fall within such class and those who do not. (2 Cooley, Constitutional Limitations, 824-825.)

d. The due process clause.

The due process clause has to do with the reasonableness of legislation enacted in pursuance of the police power. Is there public interest, a public purpose; is public welfare involved? Is the Act reasonably necessary for the accomplishment of the legislature's purpose; is it not unreasonable, arbitrary or oppressive? Is there sufficient foundation or reason in connection with the matter involved; or has there not been a capricious use of the legislative power? Can the aims conceived be achieved by the means used, or is it not merely an unjustified interference with private interest? These are the questions that we ask when the due process test is applied.

The conflict, therefore, between police power and the guarantees of due process and equal protection of the laws is more apparent than real. Properly related, the power and the guarantees are supposed to coexist. The balancing is the essence or, shall it be said, the indispensable means for the attainment of legitimate aspirations of any democratic society. There can be no absolute power, whoever exercise it, for that would be tyranny. Yet there can neither be absolute liberty, for that would mean license and anarchy. So the State can deprive persons of life, liberty and property, provided there is due process of law; and persons may be classified into classes and groups, provided everyone is given the equal protection of the law. The test or standard, as always, is reason. The police power legislation

must be firmly grounded on public interest and welfare, and a reasonable relation must exist between purposes and means. And if distinction and classification has been made, there must be a reasonable basis for said distinction.

e. Legislative discretion not subject to judicial review.

Now, in this matter of equitable balancing, what is the proper place and role of the courts? It must not be overlooked, in the first place, that the legislature, which is the constitutional repository of police power and exercises the prerogative of determining the policy of the State, is by force of circumstances primarily the judge of necessity, adequacy or reasonableness and wisdom, of any law promulgated in the exercise of the police power, or of the measures adopted to implement the public policy or to achieve public interest. On the other hand, courts, although zealous guardians of individual liberty and right, have nevertheless evinced a reluctance to interfere with the exercise of the legislative prerogative. They have done so early where there has been a clear, patent or palpable arbitrary and unreasonable abuse of the legislative prerogative. Moreover, courts are not supposed to override legitimate policy, and courts never inquire into the wisdom of the law.

V. Economic problems sought to be remedied

With the above considerations in mind, we will now proceed to delve directly into the issue involved. If the disputed legislation were merely a regulation, as its title indicates, there would be no question that it falls within the legitimate scope of legislative power. But it goes further and prohibits a group of residents, the aliens, from engaging therein. The problem becomes more complex because its subject is a common, trade or occupation, as old as society itself, which from the immemorial has always been open to residents, irrespective of race, color or citizenship.

a. Importance of retail trade in the economy of the nation.

In a primitive economy where families produce all that they consume and consume all that they produce, the dealer, of course, is unknown. But as group life develops and families begin to live in communities producing more than what they consume and needing an infinite number of things they do not produce, the dealer comes into existence. As villages develop into big communities and specialization in production begins, the dealer's importance is enhanced. Under modern conditions and standards of living, in which man's needs have multiplied and diversified to unlimited extents and proportions, the retailer comes as essential as the producer, because thru him the infinite variety of articles, goods and needed for daily life are placed within the easy reach of consumers. Retail dealers perform the functions of capillaries in the human body, thru which all the needed food and supplies are ministered to members of the communities comprising the nation.

There cannot be any question about the importance of the retailer in the life of the community. He ministers to the resident's daily needs, food in all its increasing forms, and the various little gadgets and things needed for home and daily life. He provides his customers around his store with the rice or corn, the fish, the salt, the vinegar, the spices needed for the daily cooking. He has cloths to sell, even the needle and the thread to sew them or darn the clothes that wear out. The retailer, therefore, from the lowly peddler, the owner of a small sari-sari store, to the operator of a department store or, a supermarket is so much a part of day-to-day existence.

b. The alien retailer's trait.

The alien retailer must have started plying his trades in this country in the bigger centers of population (Time there was when he was unknown in provincial towns and villages). Slowly but gradually be invaded towns and villages; now he predominates in the cities and big centers of population. He even pioneers, in far away nooks where the beginnings of community life appear, ministering to the daily needs of the residents and purchasing their agricultural produce for sale in the towns. It is an undeniable fact that in many communities the alien has replaced the native retailer. He has shown in this trade, industry without limit, and the patience and forbearance of a slave.

Derogatory epithets are hurled at him, but he laughs these off without murmur; insults of ill-bred and insolent neighbors and customers are made in his face, but he heeds them not, and he forgets and forgives. The community takes note of him, as he appears to be harmless and extremely useful.

c. Alleged alien control and dominance.

There is a general feeling on the part of the public, which appears to be true to fact, about the controlling and dominant position that the alien retailer holds in the nation's economy. Food and other essentials, clothing, almost all articles of daily life reach the residents mostly through him. In big cities and centers of population he has acquired not only predominance, but apparent control over distribution of almost all kinds of goods, such as lumber, hardware, textiles, groceries, drugs, sugar, flour, garlic, and scores of other goods and articles. And were it not for some national corporations like the Naric, the Namarco, the Facomas and the Acefa, his control over principal foods and products would easily become full and complete.

Petitioner denies that there is alien predominance and control in the retail trade. In one breath it is said that the fear is unfounded and the threat is imagined; in another, it is charged that the law is merely the result of radicalism and pure and unabashed nationalism. Alienage, it is said, is not an element of control; also so many unmanageable factors in the retail business make control virtually

impossible. The first argument which brings up an issue of fact merits serious consideration. The others are matters of opinion within the exclusive competence of the legislature and beyond our prerogative to pass upon and decide.

The best evidence are the statistics on the retail trade, which put down the figures in black and white. Between the constitutional convention year (1935), when the fear of alien domination and control of the retail trade already filled the minds of our leaders with fears and misgivings, and the year of the enactment of the nationalization of the retail trade act (1954), official statistics unmistakably point out to the ever-increasing dominance and control by the alien of the retail trade, as witness the following tables:

Assets

Gross Sales

Year and Retailers Nationality

No.-Establishments

Pesos

Per cent Distribution

Pesos

Per cent Distribution

1941:

Filipino ..........

106,671

200,323,138

55.82

174,181,924

51.74

Chinese ...........

15,356

118,348,692

32.98

148,813,239

44.21

Others ............

1,646

40,187,090

11.20

13,630,239

4.05

1947:

Filipino ..........

111,107

208,658,946

65.05

279,583,333

57.03

Chinese ...........

13,774

106,156,218

33.56

205,701,134

41.96

Others ...........

354

8,761,260

.49

4,927,168

1.01

1948:

(Census)

Filipino ..........

113,631

213,342,264

67.30

467,161,667

60.51

Chinese ..........

12,087

93,155,459

29.38

294,894,227

38.20

Others ..........

422

10,514,675

3.32

9,995,402

1.29

1949:

Filipino ..........

113,659

213,451,602

60.89

462,532,901

53.47

Chinese ..........

16,248

125,223,336

35.72

392,414,875

45.36

Others ..........

486

12,056,365

3.39

10,078,364

1.17

1951:

Filipino .........

119,352

224,053,620

61.09

466,058,052

53.07

Chinese ..........

17,429

134,325,303

36.60

404,481,384

46.06

Others ..........

347

8,614,025

2.31

7,645,327

87

AVERAGE ASSETS AND GROSS SALES PER ESTABLISHMENT

Year and Retailer's Nationality

Item Assets (Pesos)

Gross Sales

(Pesos)

1941:

Filipino .............................................

1,878

1,633

Chinese ..............................................

7,707

9,691

Others ...............................................

24,415

8,281

1947:

Filipino .............................................

1,878

2,516

Chinese ...........................................

7,707

14,934

Others ..............................................

24,749

13,919

1948:

(Census)

Filipino .............................................

1,878

4,111

Chinese .............................................

7,707

24,398

Others ..............................................

24,916

23,686

1949:

Filipino .............................................

1,878

4,069

Chinese ..............................................

7,707

24,152

Others ..............................................

24,807

20,737

1951:

Filipino .............................................

1,877

3,905

Chinese .............................................

7,707

33,207

Others ...............................................

24,824

22,033

(Estimated Assets and Gross Sales of Retail Establishments, By Year and Nationality of Owners, Benchmark: 1948 Census, issued by the Bureau of Census and Statistics, Department of Commerce and Industry; pp. 18-19 of Answer.)

The above statistics do not include corporations and partnerships, while the figures on Filipino establishments already include mere market vendors, whose capital is necessarily small..

The above figures reveal that in percentage distribution of assests and gross sales, alien participation has steadily increased during the years. It is true, of course, that Filipinos have the edge in the number of retailers, but aliens more than make up for the numerical gap through their assests and gross sales which average between six and seven times those of the very many Filipino retailers. Numbers in

retailers, here, do not imply superiority; the alien invests more capital, buys and sells six to seven times more, and gains much more. The same official report, pointing out to the known predominance of foreign elements in the retail trade, remarks that the Filipino retailers were largely engaged in minor retailer enterprises. As observed by respondents, the native investment is thinly spread, and the Filipino retailer is practically helpless in matters of capital, credit, price and supply.

d. Alien control and threat, subject of apprehension in Constitutional convention.

It is this domination and control, which we believe has been sufficiently shown to exist, that is the legislature's target in the enactment of the disputed nationalization would never have been adopted. The framers of our Constitution also believed in the existence of this alien dominance and control when they approved a resolution categorically declaring among other things, that "it is the sense of the Convention that the public interest requires the nationalization of the retail trade; . . . ." (II Aruego, The Framing of the Philippine Constitution, 662-663, quoted on page 67 of Petitioner.) That was twenty-two years ago; and the events since then have not been either pleasant or comforting. Dean Sinco of the University of the Philippines College of Law, commenting on the patrimony clause of the Preamble opines that the fathers of our Constitution were merely translating the general preoccupation of Filipinos "of the dangers from alien interests that had already brought under their

control the commercial and other economic activities of the country" (Sinco, Phil. Political Law, 10th ed., p. 114); and analyzing the concern of the members of the constitutional convention for the economic life of the citizens, in connection with the nationalistic provisions of the Constitution, he says:

But there has been a general feeling that alien dominance over the economic life of the country is not desirable and that if such a situation should remain, political independence alone is no guarantee to national stability and strength. Filipino private capital is not big enough to wrest from alien hands the control of the national economy. Moreover, it is but of recent formation and hence, largely inexperienced, timid and hesitant. Under such conditions, the government as the instrumentality of the national will, has to step in and assume the initiative, if not the leadership, in the struggle for the economic freedom of the nation in somewhat the same way that it did in the crusade for political freedom. Thus . . . it (the Constitution) envisages an organized movement for the protection of the nation not only against the possibilities of armed invasion but also against its economic subjugation by alien interests in the economic field. (Phil. Political Law by Sinco, 10th ed., p. 476.)

Belief in the existence of alien control and predominance is felt in other quarters. Filipino businessmen, manufacturers and producers believe so; they fear the dangers coming from alien control, and they express sentiments of economic independence. Witness thereto is Resolution No. 1, approved on July 18, 1953, of the Fifth National

convention of Filipino Businessmen, and a similar resolution, approved on March 20, 1954, of the Second National Convention of Manufacturers and Producers. The man in the street also believes, and fears, alien predominance and control; so our newspapers, which have editorially pointed out not only to control but to alien stranglehold. We, therefore, find alien domination and control to be a fact, a reality proved by official statistics, and felt by all the sections and groups that compose the Filipino community.

e. Dangers of alien control and dominance in retail.

But the dangers arising from alien participation in the retail trade does not seem to lie in the predominance alone; there is a prevailing feeling that such predominance may truly endanger the national interest. With ample capital, unity of purpose and action and thorough organization, alien retailers and merchants can act in such complete unison and concert on such vital matters as the fixing of prices, the determination of the amount of goods or articles to be made available in the market, and even the choice of the goods or articles they would or would not patronize or distribute, that fears of dislocation of the national economy and of the complete subservience of national economy and of the consuming public are not entirely unfounded. Nationals, producers and consumers alike can be placed completely at their mercy. This is easily illustrated. Suppose an article of daily use is desired to be prescribed by the aliens, because the producer or importer does not offer them sufficient profits, or because a new competing article offers bigger profits for its

introduction. All that aliens would do is to agree to refuse to sell the first article, eliminating it from their stocks, offering the new one as a substitute. Hence, the producers or importers of the prescribed article, or its consumers, find the article suddenly out of the prescribed article, or its consumers, find the article suddenly out of circulation. Freedom of trade is thus curtailed and free enterprise correspondingly suppressed.

We can even go farther than theoretical illustrations to show the pernicious influences of alien domination. Grave abuses have characterized the exercise of the retail trade by aliens. It is a fact within judicial notice, which courts of justice may not properly overlook or ignore in the interests of truth and justice, that there exists a general feeling on the part of the public that alien participation in the retail trade has been attended by a pernicious and intolerable practices, the mention of a few of which would suffice for our purposes; that at some time or other they have cornered the market of essential commodities, like corn and rice, creating artificial scarcities to justify and enhance profits to unreasonable proportions; that they have hoarded essential foods to the inconvenience and prejudice of the consuming public, so much so that the Government has had to establish the National Rice and Corn Corporation to save the public from their continuous hoarding practices and tendencies; that they have violated price control laws, especially on foods and essential commodities, such that the legislature had to enact a law (Sec. 9, Republic Act No. 1168), authorizing their immediate and automatic deportation for price control convictions; that they have secret combinations among themselves to control prices, cheating the

operation of the law of supply and demand; that they have connived to boycott honest merchants and traders who would not cater or yield to their demands, in unlawful restraint of freedom of trade and enterprise. They are believed by the public to have evaded tax laws, smuggled goods and money into and out of the land, violated import and export prohibitions, control laws and the like, in derision and contempt of lawful authority. It is also believed that they have engaged in corrupting public officials with fabulous bribes, indirectly causing the prevalence of graft and corruption in the Government. As a matter of fact appeals to unscrupulous aliens have been made both by the Government and by their own lawful diplomatic representatives, action which impliedly admits a prevailing feeling about the existence of many of the above practices.

The circumstances above set forth create well founded fears that worse things may come in the future. The present dominance of the alien retailer, especially in the big centers of population, therefore, becomes a potential source of danger on occasions of war or other calamity. We do not have here in this country isolated groups of harmless aliens retailing goods among nationals; what we have are well organized and powerful groups that dominate the distribution of goods and commodities in the communities and big centers of population. They owe no allegiance or loyalty to the State, and the State cannot rely upon them in times of crisis or emergency. While the national holds his life, his person and his property subject to the needs of his country, the alien may even become the potential enemy of the State.

f. Law enacted in interest of national economic survival and security.

We are fully satisfied upon a consideration of all the facts and circumstances that the disputed law is not the product of racial hostility, prejudice or discrimination, but the expression of the legitimate desire and determination of the people, thru their authorized representatives, to free the nation from the economic situation that has unfortunately been saddled upon it rightly or wrongly, to its disadvantage. The law is clearly in the interest of the public, nay of the national security itself, and indisputably falls within the scope of police power, thru which and by which the State insures its existence and security and the supreme welfare of its citizens.

VI. The Equal Protection Limitation

a. Objections to alien participation in retail trade. The next question that now poses solution is, Does the law deny the equal protection of the laws? As pointed out above, the mere fact of alienage is the root and cause of the distinction between the alien and the national as a trader. The alien resident owes allegiance to the country of his birth or his adopted country; his stay here is for personal convenience; he is attracted by the lure of gain and profit. His aim or purpose of stay, we admit, is neither illegitimate nor

immoral, but he is naturally lacking in that spirit of loyalty and enthusiasm for this country where he temporarily stays and makes his living, or of that spirit of regard, sympathy and consideration for his Filipino customers as would prevent him from taking advantage of their weakness and exploiting them. The faster he makes his pile, the earlier can the alien go back to his beloved country and his beloved kin and countrymen. The experience of the country is that the alien retailer has shown such utter disregard for his customers and the people on whom he makes his profit, that it has been found necessary to adopt the legislation, radical as it may seem.

Another objection to the alien retailer in this country is that he never really makes a genuine contribution to national income and wealth. He undoubtedly contributes to general distribution, but the gains and profits he makes are not invested in industries that would help the country's economy and increase national wealth. The alien's interest in this country being merely transient and temporary, it would indeed be ill-advised to continue entrusting the very important function of retail distribution to his hands.

The practices resorted to by aliens in the control of distribution, as already pointed out above, their secret manipulations of stocks of commodities and prices, their utter disregard of the welfare of their customers and of the ultimate happiness of the people of the nation of which they are mere guests, which practices, manipulations and disregard do not attend the exercise of the trade by the nationals, show the existence of real and actual, positive and fundamental

differences between an alien and a national which fully justify the legislative classification adopted in the retail trade measure. These differences are certainly a valid reason for the State to prefer the national over the alien in the retail trade. We would be doing violence to fact and reality were we to hold that no reason or ground for a legitimate distinction can be found between one and the other.

b. Difference in alien aims and purposes sufficient basis for distinction.

The above objectionable characteristics of the exercise of the retail trade by the aliens, which are actual and real, furnish sufficient grounds for legislative classification of retail traders into nationals and aliens. Some may disagree with the wisdom of the legislature's classification. To this we answer, that this is the prerogative of the law-making power. Since the Court finds that the classification is actual, real and reasonable, and all persons of one class are treated alike, and as it cannot be said that the classification is patently unreasonable and unfounded, it is in duty bound to declare that the legislature acted within its legitimate prerogative and it can not declare that the act transcends the limit of equal protection established by the Constitution.

Broadly speaking, the power of the legislature to make distinctions and classifications among persons is not curtailed or denied by the equal protection of the laws clause. The legislative power admits of a

wide scope of discretion, and a law can be violative of the constitutional limitation only when the classification is without reasonable basis. In addition to the authorities we have earlier cited, we can also refer to the case of Linsey vs. Natural Carbonic Fas Co. (1911), 55 L. ed., 369, which clearly and succinctly defined the application of equal protection clause to a law sought to be voided as contrary thereto:

. . . . "1. The equal protection clause of the Fourteenth Amendment does not take from the state the power to classify in the adoption of police laws, but admits of the exercise of the wide scope of discretion in that regard, and avoids what is done only when it is without any reasonable basis, and therefore is purely arbitrary. 2. A classification having some reasonable basis does not offend against that clause merely because it is not made with mathematical nicety, or because in practice it results in some inequality. 3. When the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed. 4. One who assails the classification in such a law must carry the burden of showing that it does not rest upon any reasonable basis but is essentially arbitrary."

c. Authorities recognizing citizenship as basis for classification.

The question as to whether or not citizenship is a legal and valid ground for classification has already been affirmatively decided in this

jurisdiction as well as in various courts in the United States. In the case of Smith Bell & Co. vs. Natividad, 40 Phil. 136, where the validity of Act No. 2761 of the Philippine Legislature was in issue, because of a condition therein limiting the ownership of vessels engaged in coastwise trade to corporations formed by citizens of the Philippine Islands or the United States, thus denying the right to aliens, it was held that the Philippine Legislature did not violate the equal protection clause of the Philippine Bill of Rights. The legislature in enacting the law had as ultimate purpose the encouragement of Philippine shipbuilding and the safety for these Islands from foreign interlopers. We held that this was a valid exercise of the police power, and all presumptions are in favor of its constitutionality. In substance, we held that the limitation of domestic ownership of vessels engaged in coastwise trade to citizens of the Philippines does not violate the equal protection of the law and due process or law clauses of the Philippine Bill of Rights. In rendering said decision we quoted with approval the concurring opinion of Justice Johnson in the case of Gibbons vs. Ogden, 9 Wheat., I, as follows:

"Licensing acts, in fact, in legislation, are universally restraining acts; as, for example, acts licensing gaming houses, retailers of spirituous liquors, etc. The act, in this instance, is distinctly of that character, and forms part of an extensive system, the object of which is to encourage American shipping, and place them on an equal footing with the shipping of other nations. Almost every commercial nation reserves to its own subjects a monopoly of its coasting trade; and a countervailing privilege in favor of American shipping is contemplated, in the whole legislation of the United States on this

subject. It is not to give the vessel an American character, that the license is granted; that effect has been correctly attributed to the act of her enrollment. But it is to confer on her American privileges, as contra distinguished from foreign; and to preserve the Government from fraud by foreigners; in surreptitiously intruding themselves into the American commercial marine, as well as frauds upon the revenue in the trade coastwise, that this whole system is projected."

The rule in general is as follows:

Aliens are under no special constitutional protection which forbids a classification otherwise justified simply because the limitation of the class falls along the lines of nationality. That would be requiring a higher degree of protection for aliens as a class than for similar classes than for similar classes of American citizens. Broadly speaking, the difference in status between citizens and aliens constitutes a basis for reasonable classification in the exercise of police power. (2 Am., Jur. 468-469.)

In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a statute on the licensing of hawkers and peddlers, which provided that no one can obtain a license unless he is, or has declared his intention, to become a citizen of the United States, was held valid, for the following reason: It may seem wise to the legislature to limit the business of those who are supposed to have regard for the welfare, good order and happiness of the community, and the court cannot

question this judgment and conclusion. In Bloomfield vs. State, 99 N. E. 309 (Ohio, 1912), a statute which prevented certain persons, among them aliens, from engaging in the traffic of liquors, was found not to be the result of race hatred, or in hospitality, or a deliberate purpose to discriminate, but was based on the belief that an alien cannot be sufficiently acquainted with "our institutions and our life as to enable him to appreciate the relation of this particular business to our entire social fabric", and was not, therefore, invalid. In Ohio ex rel. Clarke vs. Deckebach, 274 U. S. 392, 71 L. ed. 115 (1926), the U.S. Supreme Court had under consideration an ordinance of the city of Cincinnati prohibiting the issuance of licenses (pools and billiard rooms) to aliens. It held that plainly irrational discrimination against aliens is prohibited, but it does not follow that alien race and allegiance may not bear in some instances such a relation to a legitimate object of legislation as to be made the basis of permitted classification, and that it could not state that the legislation is clearly wrong; and that latitude must be allowed for the legislative appraisement of local conditions and for the legislative choice of methods for controlling an apprehended evil. The case of State vs. Carrol, 124 N. E. 129 (Ohio, 1919) is a parallel case to the one at bar. In Asakura vs. City of Seattle, 210 P. 30 (Washington, 1922), the business of pawn brooking was considered as having tendencies injuring public interest, and limiting it to citizens is within the scope of police power. A similar statute denying aliens the right to engage in auctioneering was also sustained in Wright vs. May, L.R.A., 1915 P. 151 (Minnesota, 1914). So also in Anton vs. Van Winkle, 297 F. 340 (Oregon, 1924), the court said that aliens are judicially known to have different interests, knowledge, attitude, psychology and loyalty, hence the prohibitions of issuance of

licenses to them for the business of pawnbroker, pool, billiard, card room, dance hall, is not an infringement of constitutional rights. In Templar vs. Michigan State Board of Examiners, 90 N.W. 1058 (Michigan, 1902), a law prohibiting the licensing of aliens as barbers was held void, but the reason for the decision was the court's findings that the exercise of the business by the aliens does not in any way affect the morals, the health, or even the convenience of the community. In Takahashi vs. Fish and Game Commission, 92 L. ed. 1479 (1947), a California statute banning the issuance of commercial fishing licenses to person ineligible to citizenship was held void, because the law conflicts with Federal power over immigration, and because there is no public interest in the mere claim of ownership of the waters and the fish in them, so there was no adequate justification for the discrimination. It further added that the law was the outgrowth of antagonism toward the persons of Japanese ancestry. However, two Justices dissented on the theory that fishing rights have been treated traditionally as natural resources. In Fraser vs. McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a state law which imposed a tax on every employer of foreign-born unnaturalized male persons over 21 years of age, was declared void because the court found that there was no reason for the classification and the tax was an arbitrary deduction from the daily wage of an employee.

d. Authorities contra explained.

It is true that some decisions of the Federal court and of the State courts in the United States hold that the distinction between aliens and citizens is not a valid ground for classification. But in this decision the laws declared invalid were found to be either arbitrary, unreasonable or capricious, or were the result or product of racial antagonism and hostility, and there was no question of public interest involved or pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059 (1925), the United States Supreme Court declared invalid a Philippine law making unlawful the keeping of books of account in any language other than English, Spanish or any other local dialect, but the main reasons for the decisions are: (1) that if Chinese were driven out of business there would be no other system of distribution, and (2) that the Chinese would fall prey to all kinds of fraud, because they would be deprived of their right to be advised of their business and to direct its conduct. The real reason for the decision, therefore, is the court's belief that no public benefit would be derived from the operations of the law and on the other hand it would deprive Chinese of something indispensable for carrying on their business. In Yick Wo vs. Hopkins, 30 L. ed 220 (1885) an ordinance conferring powers on officials to withhold consent in the operation of laundries both as to persons and place, was declared invalid, but the court said that the power granted was arbitrary, that there was no reason for the discrimination which attended the administration and implementation of the law, and that the motive thereof was mere racial hostility. In State vs. Montgomery, 47 A. 165 (Maine, 1900), a law prohibiting aliens to engage as hawkers and peddlers was declared void, because the discrimination bore no reasonable and just relation to the act in respect to which the classification was proposed.

The case at bar is radically different, and the facts make them so. As we already have said, aliens do not naturally possess the sympathetic consideration and regard for the customers with whom they come in daily contact, nor the patriotic desire to help bolster the nation's economy, except in so far as it enhances their profit, nor the loyalty and allegiance which the national owes to the land. These limitations on the qualifications of the aliens have been shown on many occasions and instances, especially in times of crisis and emergency. We can do no better than borrow the language of Anton vs. Van Winkle, 297 F. 340, 342, to drive home the reality and significance of the distinction between the alien and the national, thus:

. . . . It may be judicially known, however, that alien coming into this country are without the intimate knowledge of our laws, customs, and usages that our own people have. So it is likewise known that certain classes of aliens are of different psychology from our fellow countrymen. Furthermore, it is natural and reasonable to suppose that the foreign born, whose allegiance is first to their own country, and whose ideals of governmental environment and control have been engendered and formed under entirely different regimes and political systems, have not the same inspiration for the public weal, nor are they as well disposed toward the United States, as those who by citizenship, are a part of the government itself. Further enlargement, is unnecessary. I have said enough so that obviously it cannot be affirmed with absolute confidence that the Legislature was without plausible reason for making the classification, and therefore

appropriate discriminations against aliens as it relates to the subject of legislation. . . . .

VII. The Due Process of Law Limitation.

a. Reasonability, the test of the limitation; determination by legislature decisive.

We now come to due process as a limitation on the exercise of the police power. It has been stated by the highest authority in the United States that:

. . . . And the guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the subject sought to be attained. . . . .

xxx

xxx

xxx

So far as the requirement of due process is concerned and in the absence of other constitutional restriction a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its

purpose. The courts are without authority either to declare such policy, or, when it is declared by the legislature, to override it. If the laws passed are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio. . . . (Nebbia vs. New York, 78 L. ed. 940, 950, 957.)

Another authority states the principle thus:

. . . . Too much significance cannot be given to the word "reasonable" in considering the scope of the police power in a constitutional sense, for the test used to determine the constitutionality of the means employed by the legislature is to inquire whether the restriction it imposes on rights secured to individuals by the Bill of Rights are unreasonable, and not whether it imposes any restrictions on such rights. . . .

xxx

xxx

xxx

. . . . A statute to be within this power must also be reasonable in its operation upon the persons whom it affects, must not be for the annoyance of a particular class, and must not be unduly oppressive. (11 Am. Jur. Sec. 302., 1:1)- 1074-1075.)

In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held:

. . . . To justify the state in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and second, that the means are reasonably necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. . . .

Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389, 395, fixes this test of constitutionality:

In determining whether a given act of the Legislature, passed in the exercise of the police power to regulate the operation of a business, is or is not constitutional, one of the first questions to be considered by the court is whether the power as exercised has a sufficient foundation in reason in connection with the matter involved, or is an arbitrary, oppressive, and capricious use of that power, without substantial relation to the health, safety, morals, comfort, and general welfare of the public.

b. Petitioner's argument considered.

Petitioner's main argument is that retail is a common, ordinary occupation, one of those privileges long ago recognized as essential to the orderly pursuant of happiness by free men; that it is a gainful and honest occupation and therefore beyond the power of the legislature to prohibit and penalized. This arguments overlooks fact and reality and rests on an incorrect assumption and premise, i.e., that in this country where the occupation is engaged in by petitioner, it has been so engaged by him, by the alien in an honest creditable and unimpeachable manner, without harm or injury to the citizens and without ultimate danger to their economic peace, tranquility and welfare. But the Legislature has found, as we have also found and indicated, that the privilege has been so grossly abused by the alien, thru the illegitimate use of pernicious designs and practices, that he now enjoys a monopolistic control of the occupation and threatens a deadly stranglehold on the nation's economy endangering the national security in times of crisis and emergency.

The real question at issue, therefore, is not that posed by petitioner, which overlooks and ignores the facts and circumstances, but this, Is the exclusion in the future of aliens from the retail trade unreasonable. Arbitrary capricious, taking into account the illegitimate and pernicious form and manner in which the aliens have heretofore engaged therein? As thus correctly stated the answer is clear. The law in question is deemed absolutely necessary to bring about the desired legislative objective, i.e., to free national economy from alien control and dominance. It is not necessarily unreasonable because it affects private rights and privileges (11 Am. Jur. pp. 10801081.) The test of reasonableness of a law is the appropriateness or

adequacy under all circumstances of the means adopted to carry out its purpose into effect (Id.) Judged by this test, disputed legislation, which is not merely reasonable but actually necessary, must be considered not to have infringed the constitutional limitation of reasonableness.

The necessity of the law in question is explained in the explanatory note that accompanied the bill, which later was enacted into law:

This bill proposes to regulate the retail business. Its purpose is to prevent persons who are not citizens of the Philippines from having a strangle hold upon our economic life. If the persons who control this vital artery of our economic life are the ones who owe no allegiance to this Republic, who have no profound devotion to our free institutions, and who have no permanent stake in our people's welfare, we are not really the masters of our destiny. All aspects of our life, even our national security, will be at the mercy of other people.

In seeking to accomplish the foregoing purpose, we do not propose to deprive persons who are not citizens of the Philippines of their means of livelihood. While this bill seeks to take away from the hands of persons who are not citizens of the Philippines a power that can be wielded to paralyze all aspects of our national life and endanger our national security it respects existing rights.

The approval of this bill is necessary for our national survival.

If political independence is a legitimate aspiration of a people, then economic independence is none the less legitimate. Freedom and liberty are not real and positive if the people are subject to the economic control and domination of others, especially if not of their own race or country. The removal and eradication of the shackles of foreign economic control and domination, is one of the noblest motives that a national legislature may pursue. It is impossible to conceive that legislation that seeks to bring it about can infringe the constitutional limitation of due process. The attainment of a legitimate aspiration of a people can never be beyond the limits of legislative authority.

c. Law expressly held by Constitutional Convention to be within the sphere of legislative action.

The framers of the Constitution could not have intended to impose the constitutional restrictions of due process on the attainment of such a noble motive as freedom from economic control and domination, thru the exercise of the police power. The fathers of the Constitution must have given to the legislature full authority and power to enact legislation that would promote the supreme happiness of the people, their freedom and liberty. On the precise

issue now before us, they expressly made their voice clear; they adopted a resolution expressing their belief that the legislation in question is within the scope of the legislative power. Thus they declared the their Resolution:

That it is the sense of the Convention that the public interest requires the nationalization of retail trade; but it abstain from approving the amendment introduced by the Delegate for Manila, Mr. Araneta, and others on this matter because it is convinced that the National Assembly is authorized to promulgate a law which limits to Filipino and American citizens the privilege to engage in the retail trade. (11 Aruego, The Framing of the Philippine Constitution, quoted on pages 66 and 67 of the Memorandum for the Petitioner.)

It would do well to refer to the nationalistic tendency manifested in various provisions of the Constitution. Thus in the preamble, a principle objective is the conservation of the patrimony of the nation and as corollary the provision limiting to citizens of the Philippines the exploitation, development and utilization of its natural resources. And in Section 8 of Article XIV, it is provided that "no franchise, certificate, or any other form of authorization for the operation of the public utility shall be granted except to citizens of the Philippines." The nationalization of the retail trade is only a continuance of the nationalistic protective policy laid down as a primary objective of the Constitution. Can it be said that a law imbued with the same purpose and spirit underlying many of the provisions of the Constitution is unreasonable, invalid and unconstitutional?

The seriousness of the Legislature's concern for the plight of the nationals as manifested in the approval of the radical measures is, therefore, fully justified. It would have been recreant to its duties towards the country and its people would it view the sorry plight of the nationals with the complacency and refuse or neglect to adopt a remedy commensurate with the demands of public interest and national survival. As the repository of the sovereign power of legislation, the Legislature was in duty bound to face the problem and meet, through adequate measures, the danger and threat that alien domination of retail trade poses to national economy.

d. Provisions of law not unreasonable.

A cursory study of the provisions of the law immediately reveals how tolerant, how reasonable the Legislature has been. The law is made prospective and recognizes the right and privilege of those already engaged in the occupation to continue therein during the rest of their lives; and similar recognition of the right to continue is accorded associations of aliens. The right or privilege is denied to those only upon conviction of certain offenses. In the deliberations of the Court on this case, attention was called to the fact that the privilege should not have been denied to children and heirs of aliens now engaged in the retail trade. Such provision would defeat the law itself, its aims and purposes. Beside, the exercise of legislative discretion is not subject to judicial review. It is well settled that the

Court will not inquire into the motives of the Legislature, nor pass upon general matters of legislative judgment. The Legislature is primarily the judge of the necessity of an enactment or of any of its provisions, and every presumption is in favor of its validity, and though the Court may hold views inconsistent with the wisdom of the law, it may not annul the legislation if not palpably in excess of the legislative power. Furthermore, the test of the validity of a law attacked as a violation of due process, is not its reasonableness, but its unreasonableness, and we find the provisions are not unreasonable. These principles also answer various other arguments raised against the law, some of which are: that the law does not promote general welfare; that thousands of aliens would be thrown out of employment; that prices will increase because of the elimination of competition; that there is no need for the legislation; that adequate replacement is problematical; that there may be general breakdown; that there would be repercussions from foreigners; etc. Many of these arguments are directed against the supposed wisdom of the law which lies solely within the legislative prerogative; they do not import invalidity.

VIII. Alleged defect in the title of the law

A subordinate ground or reason for the alleged invalidity of the law is the claim that the title thereof is misleading or deceptive, as it conceals the real purpose of the bill which is to nationalize the retail business and prohibit aliens from engaging therein. The constitutional

provision which is claimed to be violated in Section 21 (1) of Article VI, which reads:

No bill which may be enacted in the law shall embrace more than one subject which shall be expressed in the title of the bill.

What the above provision prohibits is duplicity, that is, if its title completely fails to appraise the legislators or the public of the nature, scope and consequences of the law or its operation (I Sutherland, Statutory Construction, Sec. 1707, p. 297.) A cursory consideration of the title and the provisions of the bill fails to show the presence of duplicity. It is true that the term "regulate" does not and may not readily and at first glance convey the idea of "nationalization" and "prohibition", which terms express the two main purposes and objectives of the law. But "regulate" is a broader term than either prohibition or nationalization. Both of these have always been included within the term regulation.

Under the title of an act to "regulate", the sale of intoxicating liquors, the Legislature may prohibit the sale of intoxicating liquors. (Sweet vs. City of Wabash, 41 Ind., 7; quoted in page 41 of Answer.)

Within the meaning of the Constitution requiring that the subject of every act of the Legislature shall be stated in the tale, the title to regulate the sale of intoxicating liquors, etc." sufficiently expresses

the subject of an act prohibiting the sale of such liquors to minors and to persons in the habit of getting intoxicated; such matters being properly included within the subject of regulating the sale. (Williams vs. State, 48 Ind. 306, 308, quoted in p. 42 of Answer.)

The word "regulate" is of broad import, and necessarily implies some degree of restraint and prohibition of acts usually done in connection with the thing to be regulated. While word regulate does not ordinarily convey meaning of prohibit, there is no absolute reason why it should not have such meaning when used in delegating police power in connection with a thing the best or only efficacious regulation of which involves suppression. (State vs. Morton, 162 So. 718, 182 La. 887, quoted in p. 42 of Answer.)

The general rule is for the use of general terms in the title of a bill; it has also been said that the title need not be an index to the entire contents of the law (I Sutherland, Statutory Construction, See. 4803, p. 345.) The above rule was followed the title of the Act in question adopted the more general term "regulate" instead of "nationalize" or "prohibit". Furthermore, the law also contains other rules for the regulation of the retail trade which may not be included in the terms "nationalization" or "prohibition"; so were the title changed from "regulate" to "nationalize" or "prohibit", there would have been many provisions not falling within the scope of the title which would have made the Act invalid. The use of the term "regulate", therefore, is in accord with the principle governing the drafting of statutes,

under which a simple or general term should be adopted in the title, which would include all other provisions found in the body of the Act.

One purpose of the constitutional directive that the subject of a bill should be embraced in its title is to apprise the legislators of the purposes, the nature and scope of its provisions, and prevent the enactment into law of matters which have received the notice, action and study of the legislators or of the public. In the case at bar it cannot be claimed that the legislators have been appraised of the nature of the law, especially the nationalization and the prohibition provisions. The legislators took active interest in the discussion of the law, and a great many of the persons affected by the prohibitions in the law conducted a campaign against its approval. It cannot be claimed, therefore, that the reasons for declaring the law invalid ever existed. The objection must therefore, be overruled.

IX. Alleged violation of international treaties and obligations

Another subordinate argument against the validity of the law is the supposed violation thereby of the Charter of the United Nations and of the Declaration of the Human Rights adopted by the United Nations General Assembly. We find no merit in the Nations Charter imposes no strict or legal obligations regarding the rights and freedom of their subjects (Hans Kelsen, The Law of the United Nations, 1951 ed. pp. 29-32), and the Declaration of Human Rights contains nothing more than a mere recommendation or a common standard of

achievement for all peoples and all nations (Id. p. 39.) That such is the import of the United Nations Charter aid of the Declaration of Human Rights can be inferred the fact that members of the United Nations Organizations, such as Norway and Denmark, prohibit foreigners from engaging in retail trade, and in most nations of the world laws against foreigners engaged in domestic trade are adopted.

The Treaty of Amity between the Republic of the Philippines and the Republic of China of April 18, 1947 is also claimed to be violated by the law in question. All that the treaty guarantees is equality of treatment to the Chinese nationals "upon the same terms as the nationals of any other country." But the nationals of China are not discriminating against because nationals of all other countries, except those of the United States, who are granted special rights by the Constitution, are all prohibited from engaging in the retail trade. But even supposing that the law infringes upon the said treaty, the treaty is always subject to qualification or amendment by a subsequent law (U. S. vs. Thompson, 258, Fed. 257, 260), and the same may never curtail or restrict the scope of the police power of the State (plaston vs. Pennsylvania, 58 L. ed. 539.)

X. Conclusion

Resuming what we have set forth above we hold that the disputed law was enacted to remedy a real actual threat and danger to national economy posed by alien dominance and control of the retail business

and free citizens and country from dominance and control; that the enactment clearly falls within the scope of the police power of the State, thru which and by which it protects its own personality and insures its security and future; that the law does not violate the equal protection clause of the Constitution because sufficient grounds exist for the distinction between alien and citizen in the exercise of the occupation regulated, nor the due process of law clause, because the law is prospective in operation and recognizes the privilege of aliens already engaged in the occupation and reasonably protects their privilege; that the wisdom and efficacy of the law to carry out its objectives appear to us to be plainly evident as a matter of fact it seems not only appropriate but actually necessary and that in any case such matter falls within the prerogative of the Legislature, with whose power and discretion the Judicial department of the Government may not interfere; that the provisions of the law are clearly embraced in the title, and this suffers from no duplicity and has not misled the legislators or the segment of the population affected; and that it cannot be said to be void for supposed conflict with treaty obligations because no treaty has actually been entered into on the subject and the police power may not be curtailed or surrendered by any treaty or any other conventional agreement.

Some members of the Court are of the opinion that the radical effects of the law could have been made less harsh in its impact on the aliens. Thus it is stated that the more time should have been given in the law for the liquidation of existing businesses when the time comes for them to close. Our legal duty, however, is merely to determine if the law falls within the scope of legislative authority and

does not transcend the limitations of due process and equal protection guaranteed in the Constitution. Remedies against the harshness of the law should be addressed to the Legislature; they are beyond our power and jurisdiction.

The petition is hereby denied, with costs against petitioner.

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines SUPREME COURT Manila

EN BANC

G.R. No. L-7995

May 31, 1957

LAO H. ICHONG, in his own behalf and in behalf of other alien residents, corporations and partnerships adversely affected. by Republic Act No. 1180, petitioner, vs. JAIME HERNANDEZ, Secretary of Finance, and MARCELINO SARMIENTO, City Treasurer of Manila, respondents.

Ozaeta, Lichauco and Picazo and Sycip, Quisumbing, Salazar and Associates for petitioner. Office of the Solicitor General Ambrosio Padilla and Solicitor Pacifico P. de Castro for respondent Secretary of Finance. City Fiscal Eugenio Angeles and Assistant City Fiscal Eulogio S. Serrano for respondent City Treasurer. Dionisio Reyes as Amicus Curiae. Marcial G. Mendiola as Amicus Curiae. Emiliano R. Navarro as Amicus Curiae.

LABRADOR, J.:

I. The case and issue, in general

This Court has before it the delicate task of passing upon the validity and constitutionality of a legislative enactment, fundamental and far-reaching in significance. The enactment poses questions of due process, police power and equal protection of the laws. It also poses an important issue of fact, that is whether the conditions which the disputed law purports to remedy really or actually exist. Admittedly springing from a deep, militant, and positive nationalistic impulse, the law purports to protect citizen and country from the alien retailer. Through it, and within the field of economy it regulates, Congress attempts to translate national aspirations for economic independence and national security, rooted in the drive and urge for national survival and welfare, into a concrete and tangible measures designed to free the national retailer from the competing dominance of the alien, so that the country and the nation may be free from a supposed economic dependence and bondage. Do the facts and circumstances justify the enactment?

II. Pertinent provisions of Republic Act No. 1180

Republic Act No. 1180 is entitled "An Act to Regulate the Retail Business." In effect it nationalizes the retail trade business. The main provisions of the Act are: (1) a prohibition against persons, not citizens of the Philippines, and against associations, partnerships, or corporations the capital of which are not wholly owned by citizens of the Philippines, from engaging directly or indirectly in the retail trade; (2) an exception from the above prohibition in favor of aliens actually engaged in said business on May 15, 1954, who are allowed to

continue to engaged therein, unless their licenses are forfeited in accordance with the law, until their death or voluntary retirement in case of natural persons, and for ten years after the approval of the Act or until the expiration of term in case of juridical persons; (3) an exception therefrom in favor of citizens and juridical entities of the United States; (4) a provision for the forfeiture of licenses (to engage in the retail business) for violation of the laws on nationalization, control weights and measures and labor and other laws relating to trade, commerce and industry; (5) a prohibition against the establishment or opening by aliens actually engaged in the retail business of additional stores or branches of retail business, (6) a provision requiring aliens actually engaged in the retail business to present for registration with the proper authorities a verified statement concerning their businesses, giving, among other matters, the nature of the business, their assets and liabilities and their offices and principal offices of judicial entities; and (7) a provision allowing the heirs of aliens now engaged in the retail business who die, to continue such business for a period of six months for purposes of liquidation.

III. Grounds upon which petition is based-Answer thereto

Petitioner, for and in his own behalf and on behalf of other alien residents corporations and partnerships adversely affected by the provisions of Republic Act. No. 1180, brought this action to obtain a judicial declaration that said Act is unconstitutional, and to enjoin the Secretary of Finance and all other persons acting under him,

particularly city and municipal treasurers, from enforcing its provisions. Petitioner attacks the constitutionality of the Act, contending that: (1) it denies to alien residents the equal protection of the laws and deprives of their liberty and property without due process of law ; (2) the subject of the Act is not expressed or comprehended in the title thereof; (3) the Act violates international and treaty obligations of the Republic of the Philippines; (4) the provisions of the Act against the transmission by aliens of their retail business thru hereditary succession, and those requiring 100% Filipino capitalization for a corporation or entity to entitle it to engage in the retail business, violate the spirit of Sections 1 and 5, Article XIII and Section 8 of Article XIV of the Constitution.

In answer, the Solicitor-General and the Fiscal of the City of Manila contend that: (1) the Act was passed in the valid exercise of the police power of the State, which exercise is authorized in the Constitution in the interest of national economic survival; (2) the Act has only one subject embraced in the title; (3) no treaty or international obligations are infringed; (4) as regards hereditary succession, only the form is affected but the value of the property is not impaired, and the institution of inheritance is only of statutory origin.

IV. Preliminary consideration of legal principles involved

a. The police power.

There is no question that the Act was approved in the exercise of the police power, but petitioner claims that its exercise in this instance is attended by a violation of the constitutional requirements of due process and equal protection of the laws. But before proceeding to the consideration and resolution of the ultimate issue involved, it would be well to bear in mind certain basic and fundamental, albeit preliminary, considerations in the determination of the ever recurrent conflict between police power and the guarantees of due process and equal protection of the laws. What is the scope of police power, and how are the due process and equal protection clauses related to it? What is the province and power of the legislature, and what is the function and duty of the courts? These consideration must be clearly and correctly understood that their application to the facts of the case may be brought forth with clarity and the issue accordingly resolved.

It has been said the police power is so far - reaching in scope, that it has become almost impossible to limit its sweep. As it derives its existence from the very existence of the State itself, it does not need to be expressed or defined in its scope; it is said to be co-extensive with self-protection and survival, and as such it is the most positive and active of all governmental processes, the most essential, insistent and illimitable. Especially is it so under a modern democratic framework where the demands of society and of nations have multiplied to almost unimaginable proportions; the field and scope of police power has become almost boundless, just as the fields of public

interest and public welfare have become almost all-embracing and have transcended human foresight. Otherwise stated, as we cannot foresee the needs and demands of public interest and welfare in this constantly changing and progressive world, so we cannot delimit beforehand the extent or scope of police power by which and through which the State seeks to attain or achieve interest or welfare. So it is that Constitutions do not define the scope or extent of the police power of the State; what they do is to set forth the limitations thereof. The most important of these are the due process clause and the equal protection clause.

b. Limitations on police power.

The basic limitations of due process and equal protection are found in the following provisions of our Constitution:

SECTION 1.(1) No person shall be deprived of life, liberty or property without due process of law, nor any person be denied the equal protection of the laws. (Article III, Phil. Constitution)

These constitutional guarantees which embody the essence of individual liberty and freedom in democracies, are not limited to citizens alone but are admittedly universal in their application, without regard to any differences of race, of color, or of nationality. (Yick Wo vs. Hopkins, 30, L. ed. 220, 226.)

c. The, equal protection clause.

The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile discrimination or the oppression of inequality. It is not intended to prohibit legislation, which is limited either in the object to which it is directed or by territory within which is to operate. It does not demand absolute equality among residents; it merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges conferred and liabilities enforced. The equal protection clause is not infringed by legislation which applies only to those persons falling within a specified class, if it applies alike to all persons within such class, and reasonable grounds exists for making a distinction between those who fall within such class and those who do not. (2 Cooley, Constitutional Limitations, 824-825.)

d. The due process clause.

The due process clause has to do with the reasonableness of legislation enacted in pursuance of the police power. Is there public interest, a public purpose; is public welfare involved? Is the Act reasonably necessary for the accomplishment of the legislature's purpose; is it not unreasonable, arbitrary or oppressive? Is there sufficient foundation or reason in connection with the matter

involved; or has there not been a capricious use of the legislative power? Can the aims conceived be achieved by the means used, or is it not merely an unjustified interference with private interest? These are the questions that we ask when the due process test is applied.

The conflict, therefore, between police power and the guarantees of due process and equal protection of the laws is more apparent than real. Properly related, the power and the guarantees are supposed to coexist. The balancing is the essence or, shall it be said, the indispensable means for the attainment of legitimate aspirations of any democratic society. There can be no absolute power, whoever exercise it, for that would be tyranny. Yet there can neither be absolute liberty, for that would mean license and anarchy. So the State can deprive persons of life, liberty and property, provided there is due process of law; and persons may be classified into classes and groups, provided everyone is given the equal protection of the law. The test or standard, as always, is reason. The police power legislation must be firmly grounded on public interest and welfare, and a reasonable relation must exist between purposes and means. And if distinction and classification has been made, there must be a reasonable basis for said distinction.

e. Legislative discretion not subject to judicial review.

Now, in this matter of equitable balancing, what is the proper place and role of the courts? It must not be overlooked, in the first place,

that the legislature, which is the constitutional repository of police power and exercises the prerogative of determining the policy of the State, is by force of circumstances primarily the judge of necessity, adequacy or reasonableness and wisdom, of any law promulgated in the exercise of the police power, or of the measures adopted to implement the public policy or to achieve public interest. On the other hand, courts, although zealous guardians of individual liberty and right, have nevertheless evinced a reluctance to interfere with the exercise of the legislative prerogative. They have done so early where there has been a clear, patent or palpable arbitrary and unreasonable abuse of the legislative prerogative. Moreover, courts are not supposed to override legitimate policy, and courts never inquire into the wisdom of the law.

V. Economic problems sought to be remedied

With the above considerations in mind, we will now proceed to delve directly into the issue involved. If the disputed legislation were merely a regulation, as its title indicates, there would be no question that it falls within the legitimate scope of legislative power. But it goes further and prohibits a group of residents, the aliens, from engaging therein. The problem becomes more complex because its subject is a common, trade or occupation, as old as society itself, which from the immemorial has always been open to residents, irrespective of race, color or citizenship.

a. Importance of retail trade in the economy of the nation.

In a primitive economy where families produce all that they consume and consume all that they produce, the dealer, of course, is unknown. But as group life develops and families begin to live in communities producing more than what they consume and needing an infinite number of things they do not produce, the dealer comes into existence. As villages develop into big communities and specialization in production begins, the dealer's importance is enhanced. Under modern conditions and standards of living, in which man's needs have multiplied and diversified to unlimited extents and proportions, the retailer comes as essential as the producer, because thru him the infinite variety of articles, goods and needed for daily life are placed within the easy reach of consumers. Retail dealers perform the functions of capillaries in the human body, thru which all the needed food and supplies are ministered to members of the communities comprising the nation.

There cannot be any question about the importance of the retailer in the life of the community. He ministers to the resident's daily needs, food in all its increasing forms, and the various little gadgets and things needed for home and daily life. He provides his customers around his store with the rice or corn, the fish, the salt, the vinegar, the spices needed for the daily cooking. He has cloths to sell, even the needle and the thread to sew them or darn the clothes that wear out. The retailer, therefore, from the lowly peddler, the owner of a small

sari-sari store, to the operator of a department store or, a supermarket is so much a part of day-to-day existence.

b. The alien retailer's trait.

The alien retailer must have started plying his trades in this country in the bigger centers of population (Time there was when he was unknown in provincial towns and villages). Slowly but gradually be invaded towns and villages; now he predominates in the cities and big centers of population. He even pioneers, in far away nooks where the beginnings of community life appear, ministering to the daily needs of the residents and purchasing their agricultural produce for sale in the towns. It is an undeniable fact that in many communities the alien has replaced the native retailer. He has shown in this trade, industry without limit, and the patience and forbearance of a slave.

Derogatory epithets are hurled at him, but he laughs these off without murmur; insults of ill-bred and insolent neighbors and customers are made in his face, but he heeds them not, and he forgets and forgives. The community takes note of him, as he appears to be harmless and extremely useful.

c. Alleged alien control and dominance.

There is a general feeling on the part of the public, which appears to be true to fact, about the controlling and dominant position that the alien retailer holds in the nation's economy. Food and other essentials, clothing, almost all articles of daily life reach the residents mostly through him. In big cities and centers of population he has acquired not only predominance, but apparent control over distribution of almost all kinds of goods, such as lumber, hardware, textiles, groceries, drugs, sugar, flour, garlic, and scores of other goods and articles. And were it not for some national corporations like the Naric, the Namarco, the Facomas and the Acefa, his control over principal foods and products would easily become full and complete.

Petitioner denies that there is alien predominance and control in the retail trade. In one breath it is said that the fear is unfounded and the threat is imagined; in another, it is charged that the law is merely the result of radicalism and pure and unabashed nationalism. Alienage, it is said, is not an element of control; also so many unmanageable factors in the retail business make control virtually impossible. The first argument which brings up an issue of fact merits serious consideration. The others are matters of opinion within the exclusive competence of the legislature and beyond our prerogative to pass upon and decide.

The best evidence are the statistics on the retail trade, which put down the figures in black and white. Between the constitutional convention year (1935), when the fear of alien domination and control of the retail trade already filled the minds of our leaders with

fears and misgivings, and the year of the enactment of the nationalization of the retail trade act (1954), official statistics unmistakably point out to the ever-increasing dominance and control by the alien of the retail trade, as witness the following tables:

Assets

Gross Sales

Year and Retailers Nationality

No.-Establishments

Pesos

Per cent Distribution

Pesos

Per cent Distribution

1941:

Filipino ..........

106,671

200,323,138

55.82

174,181,924

51.74

Chinese ...........

15,356

118,348,692

32.98

148,813,239

44.21

Others ............

1,646

40,187,090

11.20

13,630,239

4.05

1947:

Filipino ..........

111,107

208,658,946

65.05

279,583,333

57.03

Chinese ...........

13,774

106,156,218

33.56

205,701,134

41.96

Others ...........

354

8,761,260

.49

4,927,168

1.01

1948:

(Census)

Filipino ..........

113,631

213,342,264

67.30

467,161,667

60.51

Chinese ..........

12,087

93,155,459

29.38

294,894,227

38.20

Others ..........

422

10,514,675

3.32

9,995,402

1.29

1949:

Filipino ..........

113,659

213,451,602

60.89

462,532,901

53.47

Chinese ..........

16,248

125,223,336

35.72

392,414,875

45.36

Others ..........

486

12,056,365

3.39

10,078,364

1.17

1951:

Filipino .........

119,352

224,053,620

61.09

466,058,052

53.07

Chinese ..........

17,429

134,325,303

36.60

404,481,384

46.06

Others ..........

347

8,614,025

2.31

7,645,327

87

AVERAGE ASSETS AND GROSS SALES PER ESTABLISHMENT

Year and Retailer's Nationality

Item Assets (Pesos)

Gross Sales (Pesos)

1941:

Filipino .............................................

1,878

1,633

Chinese ..............................................

7,707

9,691

Others ...............................................

24,415

8,281

1947:

Filipino .............................................

1,878

2,516

Chinese ...........................................

7,707

14,934

Others ..............................................

24,749

13,919

1948:

(Census)

Filipino .............................................

1,878

4,111

Chinese .............................................

7,707

24,398

Others ..............................................

24,916

23,686

1949:

Filipino .............................................

1,878

4,069

Chinese ..............................................

7,707

24,152

Others ..............................................

24,807

20,737

1951:

Filipino .............................................

1,877

3,905

Chinese .............................................

7,707

33,207

Others ...............................................

24,824

22,033

(Estimated Assets and Gross Sales of Retail Establishments, By Year and Nationality of Owners, Benchmark: 1948 Census, issued by the Bureau of Census and Statistics, Department of Commerce and Industry; pp. 18-19 of Answer.)

The above statistics do not include corporations and partnerships, while the figures on Filipino establishments already include mere market vendors, whose capital is necessarily small..

The above figures reveal that in percentage distribution of assests and gross sales, alien participation has steadily increased during the years. It is true, of course, that Filipinos have the edge in the number of retailers, but aliens more than make up for the numerical gap through their assests and gross sales which average between six and seven times those of the very many Filipino retailers. Numbers in retailers, here, do not imply superiority; the alien invests more capital, buys and sells six to seven times more, and gains much more. The same official report, pointing out to the known predominance of foreign elements in the retail trade, remarks that the Filipino retailers were largely engaged in minor retailer enterprises. As observed by respondents, the native investment is thinly spread, and the Filipino retailer is practically helpless in matters of capital, credit, price and supply.

d. Alien control and threat, subject of apprehension in Constitutional convention.

It is this domination and control, which we believe has been sufficiently shown to exist, that is the legislature's target in the enactment of the disputed nationalization would never have been adopted. The framers of our Constitution also believed in the existence of this alien dominance and control when they approved a resolution categorically declaring among other things, that "it is the sense of the Convention that the public interest requires the nationalization of the retail trade; . . . ." (II Aruego, The Framing of the Philippine Constitution, 662-663, quoted on page 67 of Petitioner.) That was twenty-two years ago; and the events since then have not been either pleasant or comforting. Dean Sinco of the University of the Philippines College of Law, commenting on the patrimony clause of the Preamble opines that the fathers of our Constitution were merely translating the general preoccupation of Filipinos "of the dangers from alien interests that had already brought under their control the commercial and other economic activities of the country" (Sinco, Phil. Political Law, 10th ed., p. 114); and analyzing the concern of the members of the constitutional convention for the economic life of the citizens, in connection with the nationalistic provisions of the Constitution, he says:

But there has been a general feeling that alien dominance over the economic life of the country is not desirable and that if such a situation should remain, political independence alone is no guarantee

to national stability and strength. Filipino private capital is not big enough to wrest from alien hands the control of the national economy. Moreover, it is but of recent formation and hence, largely inexperienced, timid and hesitant. Under such conditions, the government as the instrumentality of the national will, has to step in and assume the initiative, if not the leadership, in the struggle for the economic freedom of the nation in somewhat the same way that it did in the crusade for political freedom. Thus . . . it (the Constitution) envisages an organized movement for the protection of the nation not only against the possibilities of armed invasion but also against its economic subjugation by alien interests in the economic field. (Phil. Political Law by Sinco, 10th ed., p. 476.)

Belief in the existence of alien control and predominance is felt in other quarters. Filipino businessmen, manufacturers and producers believe so; they fear the dangers coming from alien control, and they express sentiments of economic independence. Witness thereto is Resolution No. 1, approved on July 18, 1953, of the Fifth National convention of Filipino Businessmen, and a similar resolution, approved on March 20, 1954, of the Second National Convention of Manufacturers and Producers. The man in the street also believes, and fears, alien predominance and control; so our newspapers, which have editorially pointed out not only to control but to alien stranglehold. We, therefore, find alien domination and control to be a fact, a reality proved by official statistics, and felt by all the sections and groups that compose the Filipino community.

e. Dangers of alien control and dominance in retail.

But the dangers arising from alien participation in the retail trade does not seem to lie in the predominance alone; there is a prevailing feeling that such predominance may truly endanger the national interest. With ample capital, unity of purpose and action and thorough organization, alien retailers and merchants can act in such complete unison and concert on such vital matters as the fixing of prices, the determination of the amount of goods or articles to be made available in the market, and even the choice of the goods or articles they would or would not patronize or distribute, that fears of dislocation of the national economy and of the complete subservience of national economy and of the consuming public are not entirely unfounded. Nationals, producers and consumers alike can be placed completely at their mercy. This is easily illustrated. Suppose an article of daily use is desired to be prescribed by the aliens, because the producer or importer does not offer them sufficient profits, or because a new competing article offers bigger profits for its introduction. All that aliens would do is to agree to refuse to sell the first article, eliminating it from their stocks, offering the new one as a substitute. Hence, the producers or importers of the prescribed article, or its consumers, find the article suddenly out of the prescribed article, or its consumers, find the article suddenly out of circulation. Freedom of trade is thus curtailed and free enterprise correspondingly suppressed.

We can even go farther than theoretical illustrations to show the pernicious influences of alien domination. Grave abuses have characterized the exercise of the retail trade by aliens. It is a fact within judicial notice, which courts of justice may not properly overlook or ignore in the interests of truth and justice, that there exists a general feeling on the part of the public that alien participation in the retail trade has been attended by a pernicious and intolerable practices, the mention of a few of which would suffice for our purposes; that at some time or other they have cornered the market of essential commodities, like corn and rice, creating artificial scarcities to justify and enhance profits to unreasonable proportions; that they have hoarded essential foods to the inconvenience and prejudice of the consuming public, so much so that the Government has had to establish the National Rice and Corn Corporation to save the public from their continuous hoarding practices and tendencies; that they have violated price control laws, especially on foods and essential commodities, such that the legislature had to enact a law (Sec. 9, Republic Act No. 1168), authorizing their immediate and automatic deportation for price control convictions; that they have secret combinations among themselves to control prices, cheating the operation of the law of supply and demand; that they have connived to boycott honest merchants and traders who would not cater or yield to their demands, in unlawful restraint of freedom of trade and enterprise. They are believed by the public to have evaded tax laws, smuggled goods and money into and out of the land, violated import and export prohibitions, control laws and the like, in derision and contempt of lawful authority. It is also believed that they have engaged in corrupting public officials with fabulous bribes, indirectly

causing the prevalence of graft and corruption in the Government. As a matter of fact appeals to unscrupulous aliens have been made both by the Government and by their own lawful diplomatic representatives, action which impliedly admits a prevailing feeling about the existence of many of the above practices.

The circumstances above set forth create well founded fears that worse things may come in the future. The present dominance of the alien retailer, especially in the big centers of population, therefore, becomes a potential source of danger on occasions of war or other calamity. We do not have here in this country isolated groups of harmless aliens retailing goods among nationals; what we have are well organized and powerful groups that dominate the distribution of goods and commodities in the communities and big centers of population. They owe no allegiance or loyalty to the State, and the State cannot rely upon them in times of crisis or emergency. While the national holds his life, his person and his property subject to the needs of his country, the alien may even become the potential enemy of the State.

f. Law enacted in interest of national economic survival and security.

We are fully satisfied upon a consideration of all the facts and circumstances that the disputed law is not the product of racial hostility, prejudice or discrimination, but the expression of the

legitimate desire and determination of the people, thru their authorized representatives, to free the nation from the economic situation that has unfortunately been saddled upon it rightly or wrongly, to its disadvantage. The law is clearly in the interest of the public, nay of the national security itself, and indisputably falls within the scope of police power, thru which and by which the State insures its existence and security and the supreme welfare of its citizens.

VI. The Equal Protection Limitation

a. Objections to alien participation in retail trade. The next question that now poses solution is, Does the law deny the equal protection of the laws? As pointed out above, the mere fact of alienage is the root and cause of the distinction between the alien and the national as a trader. The alien resident owes allegiance to the country of his birth or his adopted country; his stay here is for personal convenience; he is attracted by the lure of gain and profit. His aim or purpose of stay, we admit, is neither illegitimate nor immoral, but he is naturally lacking in that spirit of loyalty and enthusiasm for this country where he temporarily stays and makes his living, or of that spirit of regard, sympathy and consideration for his Filipino customers as would prevent him from taking advantage of their weakness and exploiting them. The faster he makes his pile, the earlier can the alien go back to his beloved country and his beloved kin and countrymen. The experience of the country is that the alien retailer has shown such utter disregard for his customers and the

people on whom he makes his profit, that it has been found necessary to adopt the legislation, radical as it may seem.

Another objection to the alien retailer in this country is that he never really makes a genuine contribution to national income and wealth. He undoubtedly contributes to general distribution, but the gains and profits he makes are not invested in industries that would help the country's economy and increase national wealth. The alien's interest in this country being merely transient and temporary, it would indeed be ill-advised to continue entrusting the very important function of retail distribution to his hands.

The practices resorted to by aliens in the control of distribution, as already pointed out above, their secret manipulations of stocks of commodities and prices, their utter disregard of the welfare of their customers and of the ultimate happiness of the people of the nation of which they are mere guests, which practices, manipulations and disregard do not attend the exercise of the trade by the nationals, show the existence of real and actual, positive and fundamental differences between an alien and a national which fully justify the legislative classification adopted in the retail trade measure. These differences are certainly a valid reason for the State to prefer the national over the alien in the retail trade. We would be doing violence to fact and reality were we to hold that no reason or ground for a legitimate distinction can be found between one and the other.

b. Difference in alien aims and purposes sufficient basis for distinction.

The above objectionable characteristics of the exercise of the retail trade by the aliens, which are actual and real, furnish sufficient grounds for legislative classification of retail traders into nationals and aliens. Some may disagree with the wisdom of the legislature's classification. To this we answer, that this is the prerogative of the law-making power. Since the Court finds that the classification is actual, real and reasonable, and all persons of one class are treated alike, and as it cannot be said that the classification is patently unreasonable and unfounded, it is in duty bound to declare that the legislature acted within its legitimate prerogative and it can not declare that the act transcends the limit of equal protection established by the Constitution.

Broadly speaking, the power of the legislature to make distinctions and classifications among persons is not curtailed or denied by the equal protection of the laws clause. The legislative power admits of a wide scope of discretion, and a law can be violative of the constitutional limitation only when the classification is without reasonable basis. In addition to the authorities we have earlier cited, we can also refer to the case of Linsey vs. Natural Carbonic Fas Co. (1911), 55 L. ed., 369, which clearly and succinctly defined the application of equal protection clause to a law sought to be voided as contrary thereto:

. . . . "1. The equal protection clause of the Fourteenth Amendment does not take from the state the power to classify in the adoption of police laws, but admits of the exercise of the wide scope of discretion in that regard, and avoids what is done only when it is without any reasonable basis, and therefore is purely arbitrary. 2. A classification having some reasonable basis does not offend against that clause merely because it is not made with mathematical nicety, or because in practice it results in some inequality. 3. When the classification in such a law is called in question, if any state of facts reasonably can be conceived that would sustain it, the existence of that state of facts at the time the law was enacted must be assumed. 4. One who assails the classification in such a law must carry the burden of showing that it does not rest upon any reasonable basis but is essentially arbitrary."

c. Authorities recognizing citizenship as basis for classification.

The question as to whether or not citizenship is a legal and valid ground for classification has already been affirmatively decided in this jurisdiction as well as in various courts in the United States. In the case of Smith Bell & Co. vs. Natividad, 40 Phil. 136, where the validity of Act No. 2761 of the Philippine Legislature was in issue, because of a condition therein limiting the ownership of vessels engaged in coastwise trade to corporations formed by citizens of the Philippine Islands or the United States, thus denying the right to aliens, it was held that the Philippine Legislature did not violate the equal

protection clause of the Philippine Bill of Rights. The legislature in enacting the law had as ultimate purpose the encouragement of Philippine shipbuilding and the safety for these Islands from foreign interlopers. We held that this was a valid exercise of the police power, and all presumptions are in favor of its constitutionality. In substance, we held that the limitation of domestic ownership of vessels engaged in coastwise trade to citizens of the Philippines does not violate the equal protection of the law and due process or law clauses of the Philippine Bill of Rights. In rendering said decision we quoted with approval the concurring opinion of Justice Johnson in the case of Gibbons vs. Ogden, 9 Wheat., I, as follows:

"Licensing acts, in fact, in legislation, are universally restraining acts; as, for example, acts licensing gaming houses, retailers of spirituous liquors, etc. The act, in this instance, is distinctly of that character, and forms part of an extensive system, the object of which is to encourage American shipping, and place them on an equal footing with the shipping of other nations. Almost every commercial nation reserves to its own subjects a monopoly of its coasting trade; and a countervailing privilege in favor of American shipping is contemplated, in the whole legislation of the United States on this subject. It is not to give the vessel an American character, that the license is granted; that effect has been correctly attributed to the act of her enrollment. But it is to confer on her American privileges, as contra distinguished from foreign; and to preserve the Government from fraud by foreigners; in surreptitiously intruding themselves into the American commercial marine, as well as frauds upon the revenue in the trade coastwise, that this whole system is projected."

The rule in general is as follows:

Aliens are under no special constitutional protection which forbids a classification otherwise justified simply because the limitation of the class falls along the lines of nationality. That would be requiring a higher degree of protection for aliens as a class than for similar classes than for similar classes of American citizens. Broadly speaking, the difference in status between citizens and aliens constitutes a basis for reasonable classification in the exercise of police power. (2 Am., Jur. 468-469.)

In Commonwealth vs. Hana, 81 N. E. 149 (Massachusetts, 1907), a statute on the licensing of hawkers and peddlers, which provided that no one can obtain a license unless he is, or has declared his intention, to become a citizen of the United States, was held valid, for the following reason: It may seem wise to the legislature to limit the business of those who are supposed to have regard for the welfare, good order and happiness of the community, and the court cannot question this judgment and conclusion. In Bloomfield vs. State, 99 N. E. 309 (Ohio, 1912), a statute which prevented certain persons, among them aliens, from engaging in the traffic of liquors, was found not to be the result of race hatred, or in hospitality, or a deliberate purpose to discriminate, but was based on the belief that an alien cannot be sufficiently acquainted with "our institutions and our life as to enable him to appreciate the relation of this particular business to our entire

social fabric", and was not, therefore, invalid. In Ohio ex rel. Clarke vs. Deckebach, 274 U. S. 392, 71 L. ed. 115 (1926), the U.S. Supreme Court had under consideration an ordinance of the city of Cincinnati prohibiting the issuance of licenses (pools and billiard rooms) to aliens. It held that plainly irrational discrimination against aliens is prohibited, but it does not follow that alien race and allegiance may not bear in some instances such a relation to a legitimate object of legislation as to be made the basis of permitted classification, and that it could not state that the legislation is clearly wrong; and that latitude must be allowed for the legislative appraisement of local conditions and for the legislative choice of methods for controlling an apprehended evil. The case of State vs. Carrol, 124 N. E. 129 (Ohio, 1919) is a parallel case to the one at bar. In Asakura vs. City of Seattle, 210 P. 30 (Washington, 1922), the business of pawn brooking was considered as having tendencies injuring public interest, and limiting it to citizens is within the scope of police power. A similar statute denying aliens the right to engage in auctioneering was also sustained in Wright vs. May, L.R.A., 1915 P. 151 (Minnesota, 1914). So also in Anton vs. Van Winkle, 297 F. 340 (Oregon, 1924), the court said that aliens are judicially known to have different interests, knowledge, attitude, psychology and loyalty, hence the prohibitions of issuance of licenses to them for the business of pawnbroker, pool, billiard, card room, dance hall, is not an infringement of constitutional rights. In Templar vs. Michigan State Board of Examiners, 90 N.W. 1058 (Michigan, 1902), a law prohibiting the licensing of aliens as barbers was held void, but the reason for the decision was the court's findings that the exercise of the business by the aliens does not in any way affect the morals, the health, or even the convenience of the

community. In Takahashi vs. Fish and Game Commission, 92 L. ed. 1479 (1947), a California statute banning the issuance of commercial fishing licenses to person ineligible to citizenship was held void, because the law conflicts with Federal power over immigration, and because there is no public interest in the mere claim of ownership of the waters and the fish in them, so there was no adequate justification for the discrimination. It further added that the law was the outgrowth of antagonism toward the persons of Japanese ancestry. However, two Justices dissented on the theory that fishing rights have been treated traditionally as natural resources. In Fraser vs. McConway & Tarley Co., 82 Fed. 257 (Pennsylvania, 1897), a state law which imposed a tax on every employer of foreign-born unnaturalized male persons over 21 years of age, was declared void because the court found that there was no reason for the classification and the tax was an arbitrary deduction from the daily wage of an employee.

d. Authorities contra explained.

It is true that some decisions of the Federal court and of the State courts in the United States hold that the distinction between aliens and citizens is not a valid ground for classification. But in this decision the laws declared invalid were found to be either arbitrary, unreasonable or capricious, or were the result or product of racial antagonism and hostility, and there was no question of public interest involved or pursued. In Yu Cong Eng vs. Trinidad, 70 L. ed. 1059 (1925), the United States Supreme Court declared invalid a Philippine

law making unlawful the keeping of books of account in any language other than English, Spanish or any other local dialect, but the main reasons for the decisions are: (1) that if Chinese were driven out of business there would be no other system of distribution, and (2) that the Chinese would fall prey to all kinds of fraud, because they would be deprived of their right to be advised of their business and to direct its conduct. The real reason for the decision, therefore, is the court's belief that no public benefit would be derived from the operations of the law and on the other hand it would deprive Chinese of something indispensable for carrying on their business. In Yick Wo vs. Hopkins, 30 L. ed 220 (1885) an ordinance conferring powers on officials to withhold consent in the operation of laundries both as to persons and place, was declared invalid, but the court said that the power granted was arbitrary, that there was no reason for the discrimination which attended the administration and implementation of the law, and that the motive thereof was mere racial hostility. In State vs. Montgomery, 47 A. 165 (Maine, 1900), a law prohibiting aliens to engage as hawkers and peddlers was declared void, because the discrimination bore no reasonable and just relation to the act in respect to which the classification was proposed.

The case at bar is radically different, and the facts make them so. As we already have said, aliens do not naturally possess the sympathetic consideration and regard for the customers with whom they come in daily contact, nor the patriotic desire to help bolster the nation's economy, except in so far as it enhances their profit, nor the loyalty and allegiance which the national owes to the land. These limitations on the qualifications of the aliens have been shown on many

occasions and instances, especially in times of crisis and emergency. We can do no better than borrow the language of Anton vs. Van Winkle, 297 F. 340, 342, to drive home the reality and significance of the distinction between the alien and the national, thus:

. . . . It may be judicially known, however, that alien coming into this country are without the intimate knowledge of our laws, customs, and usages that our own people have. So it is likewise known that certain classes of aliens are of different psychology from our fellow countrymen. Furthermore, it is natural and reasonable to suppose that the foreign born, whose allegiance is first to their own country, and whose ideals of governmental environment and control have been engendered and formed under entirely different regimes and political systems, have not the same inspiration for the public weal, nor are they as well disposed toward the United States, as those who by citizenship, are a part of the government itself. Further enlargement, is unnecessary. I have said enough so that obviously it cannot be affirmed with absolute confidence that the Legislature was without plausible reason for making the classification, and therefore appropriate discriminations against aliens as it relates to the subject of legislation. . . . .

VII. The Due Process of Law Limitation.

a. Reasonability, the test of the limitation; determination by legislature decisive.

We now come to due process as a limitation on the exercise of the police power. It has been stated by the highest authority in the United States that:

. . . . And the guaranty of due process, as has often been held, demands only that the law shall not be unreasonable, arbitrary or capricious, and that the means selected shall have a real and substantial relation to the subject sought to be attained. . . . .

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So far as the requirement of due process is concerned and in the absence of other constitutional restriction a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority either to declare such policy, or, when it is declared by the legislature, to override it. If the laws passed are seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio. . . . (Nebbia vs. New York, 78 L. ed. 940, 950, 957.)

Another authority states the principle thus:

. . . . Too much significance cannot be given to the word "reasonable" in considering the scope of the police power in a constitutional sense, for the test used to determine the constitutionality of the means employed by the legislature is to inquire whether the restriction it imposes on rights secured to individuals by the Bill of Rights are unreasonable, and not whether it imposes any restrictions on such rights. . . .

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. . . . A statute to be within this power must also be reasonable in its operation upon the persons whom it affects, must not be for the annoyance of a particular class, and must not be unduly oppressive. (11 Am. Jur. Sec. 302., 1:1)- 1074-1075.)

In the case of Lawton vs. Steele, 38 L. ed. 385, 388. it was also held:

. . . . To justify the state in thus interposing its authority in behalf of the public, it must appear, first, that the interests of the public generally, as distinguished from those of a particular class, require such interference; and second, that the means are reasonably

necessary for the accomplishment of the purpose, and not unduly oppressive upon individuals. . . .

Prata Undertaking Co. vs. State Board of Embalming, 104 ALR, 389, 395, fixes this test of constitutionality:

In determining whether a given act of the Legislature, passed in the exercise of the police power to regulate the operation of a business, is or is not constitutional, one of the first questions to be considered by the court is whether the power as exercised has a sufficient foundation in reason in connection with the matter involved, or is an arbitrary, oppressive, and capricious use of that power, without substantial relation to the health, safety, morals, comfort, and general welfare of the public.

b. Petitioner's argument considered.

Petitioner's main argument is that retail is a common, ordinary occupation, one of those privileges long ago recognized as essential to the orderly pursuant of happiness by free men; that it is a gainful and honest occupation and therefore beyond the power of the legislature to prohibit and penalized. This arguments overlooks fact and reality and rests on an incorrect assumption and premise, i.e., that in this country where the occupation is engaged in by petitioner, it has been so engaged by him, by the alien in an honest creditable and

unimpeachable manner, without harm or injury to the citizens and without ultimate danger to their economic peace, tranquility and welfare. But the Legislature has found, as we have also found and indicated, that the privilege has been so grossly abused by the alien, thru the illegitimate use of pernicious designs and practices, that he now enjoys a monopolistic control of the occupation and threatens a deadly stranglehold on the nation's economy endangering the national security in times of crisis and emergency.

The real question at issue, therefore, is not that posed by petitioner, which overlooks and ignores the facts and circumstances, but this, Is the exclusion in the future of aliens from the retail trade unreasonable. Arbitrary capricious, taking into account the illegitimate and pernicious form and manner in which the aliens have heretofore engaged therein? As thus correctly stated the answer is clear. The law in question is deemed absolutely necessary to bring about the desired legislative objective, i.e., to free national economy from alien control and dominance. It is not necessarily unreasonable because it affects private rights and privileges (11 Am. Jur. pp. 10801081.) The test of reasonableness of a law is the appropriateness or adequacy under all circumstances of the means adopted to carry out its purpose into effect (Id.) Judged by this test, disputed legislation, which is not merely reasonable but actually necessary, must be considered not to have infringed the constitutional limitation of reasonableness.

The necessity of the law in question is explained in the explanatory note that accompanied the bill, which later was enacted into law:

This bill proposes to regulate the retail business. Its purpose is to prevent persons who are not citizens of the Philippines from having a strangle hold upon our economic life. If the persons who control this vital artery of our economic life are the ones who owe no allegiance to this Republic, who have no profound devotion to our free institutions, and who have no permanent stake in our people's welfare, we are not really the masters of our destiny. All aspects of our life, even our national security, will be at the mercy of other people.

In seeking to accomplish the foregoing purpose, we do not propose to deprive persons who are not citizens of the Philippines of their means of livelihood. While this bill seeks to take away from the hands of persons who are not citizens of the Philippines a power that can be wielded to paralyze all aspects of our national life and endanger our national security it respects existing rights.

The approval of this bill is necessary for our national survival.

If political independence is a legitimate aspiration of a people, then economic independence is none the less legitimate. Freedom and liberty are not real and positive if the people are subject to the

economic control and domination of others, especially if not of their own race or country. The removal and eradication of the shackles of foreign economic control and domination, is one of the noblest motives that a national legislature may pursue. It is impossible to conceive that legislation that seeks to bring it about can infringe the constitutional limitation of due process. The attainment of a legitimate aspiration of a people can never be beyond the limits of legislative authority.

c. Law expressly held by Constitutional Convention to be within the sphere of legislative action.

The framers of the Constitution could not have intended to impose the constitutional restrictions of due process on the attainment of such a noble motive as freedom from economic control and domination, thru the exercise of the police power. The fathers of the Constitution must have given to the legislature full authority and power to enact legislation that would promote the supreme happiness of the people, their freedom and liberty. On the precise issue now before us, they expressly made their voice clear; they adopted a resolution expressing their belief that the legislation in question is within the scope of the legislative power. Thus they declared the their Resolution:

That it is the sense of the Convention that the public interest requires the nationalization of retail trade; but it abstain from

approving the amendment introduced by the Delegate for Manila, Mr. Araneta, and others on this matter because it is convinced that the National Assembly is authorized to promulgate a law which limits to Filipino and American citizens the privilege to engage in the retail trade. (11 Aruego, The Framing of the Philippine Constitution, quoted on pages 66 and 67 of the Memorandum for the Petitioner.)

It would do well to refer to the nationalistic tendency manifested in various provisions of the Constitution. Thus in the preamble, a principle objective is the conservation of the patrimony of the nation and as corollary the provision limiting to citizens of the Philippines the exploitation, development and utilization of its natural resources. And in Section 8 of Article XIV, it is provided that "no franchise, certificate, or any other form of authorization for the operation of the public utility shall be granted except to citizens of the Philippines." The nationalization of the retail trade is only a continuance of the nationalistic protective policy laid down as a primary objective of the Constitution. Can it be said that a law imbued with the same purpose and spirit underlying many of the provisions of the Constitution is unreasonable, invalid and unconstitutional?

The seriousness of the Legislature's concern for the plight of the nationals as manifested in the approval of the radical measures is, therefore, fully justified. It would have been recreant to its duties towards the country and its people would it view the sorry plight of the nationals with the complacency and refuse or neglect to adopt a remedy commensurate with the demands of public interest and

national survival. As the repository of the sovereign power of legislation, the Legislature was in duty bound to face the problem and meet, through adequate measures, the danger and threat that alien domination of retail trade poses to national economy.

d. Provisions of law not unreasonable.

A cursory study of the provisions of the law immediately reveals how tolerant, how reasonable the Legislature has been. The law is made prospective and recognizes the right and privilege of those already engaged in the occupation to continue therein during the rest of their lives; and similar recognition of the right to continue is accorded associations of aliens. The right or privilege is denied to those only upon conviction of certain offenses. In the deliberations of the Court on this case, attention was called to the fact that the privilege should not have been denied to children and heirs of aliens now engaged in the retail trade. Such provision would defeat the law itself, its aims and purposes. Beside, the exercise of legislative discretion is not subject to judicial review. It is well settled that the Court will not inquire into the motives of the Legislature, nor pass upon general matters of legislative judgment. The Legislature is primarily the judge of the necessity of an enactment or of any of its provisions, and every presumption is in favor of its validity, and though the Court may hold views inconsistent with the wisdom of the law, it may not annul the legislation if not palpably in excess of the legislative power. Furthermore, the test of the validity of a law attacked as a violation of due process, is not its reasonableness, but

its unreasonableness, and we find the provisions are not unreasonable. These principles also answer various other arguments raised against the law, some of which are: that the law does not promote general welfare; that thousands of aliens would be thrown out of employment; that prices will increase because of the elimination of competition; that there is no need for the legislation; that adequate replacement is problematical; that there may be general breakdown; that there would be repercussions from foreigners; etc. Many of these arguments are directed against the supposed wisdom of the law which lies solely within the legislative prerogative; they do not import invalidity.

VIII. Alleged defect in the title of the law

A subordinate ground or reason for the alleged invalidity of the law is the claim that the title thereof is misleading or deceptive, as it conceals the real purpose of the bill which is to nationalize the retail business and prohibit aliens from engaging therein. The constitutional provision which is claimed to be violated in Section 21 (1) of Article VI, which reads:

No bill which may be enacted in the law shall embrace more than one subject which shall be expressed in the title of the bill.

What the above provision prohibits is duplicity, that is, if its title completely fails to appraise the legislators or the public of the nature, scope and consequences of the law or its operation (I Sutherland, Statutory Construction, Sec. 1707, p. 297.) A cursory consideration of the title and the provisions of the bill fails to show the presence of duplicity. It is true that the term "regulate" does not and may not readily and at first glance convey the idea of "nationalization" and "prohibition", which terms express the two main purposes and objectives of the law. But "regulate" is a broader term than either prohibition or nationalization. Both of these have always been included within the term regulation.

Under the title of an act to "regulate", the sale of intoxicating liquors, the Legislature may prohibit the sale of intoxicating liquors. (Sweet vs. City of Wabash, 41 Ind., 7; quoted in page 41 of Answer.)

Within the meaning of the Constitution requiring that the subject of every act of the Legislature shall be stated in the tale, the title to regulate the sale of intoxicating liquors, etc." sufficiently expresses the subject of an act prohibiting the sale of such liquors to minors and to persons in the habit of getting intoxicated; such matters being properly included within the subject of regulating the sale. (Williams vs. State, 48 Ind. 306, 308, quoted in p. 42 of Answer.)

The word "regulate" is of broad import, and necessarily implies some degree of restraint and prohibition of acts usually done in

connection with the thing to be regulated. While word regulate does not ordinarily convey meaning of prohibit, there is no absolute reason why it should not have such meaning when used in delegating police power in connection with a thing the best or only efficacious regulation of which involves suppression. (State vs. Morton, 162 So. 718, 182 La. 887, quoted in p. 42 of Answer.)

The general rule is for the use of general terms in the title of a bill; it has also been said that the title need not be an index to the entire contents of the law (I Sutherland, Statutory Construction, See. 4803, p. 345.) The above rule was followed the title of the Act in question adopted the more general term "regulate" instead of "nationalize" or "prohibit". Furthermore, the law also contains other rules for the regulation of the retail trade which may not be included in the terms "nationalization" or "prohibition"; so were the title changed from "regulate" to "nationalize" or "prohibit", there would have been many provisions not falling within the scope of the title which would have made the Act invalid. The use of the term "regulate", therefore, is in accord with the principle governing the drafting of statutes, under which a simple or general term should be adopted in the title, which would include all other provisions found in the body of the Act.

One purpose of the constitutional directive that the subject of a bill should be embraced in its title is to apprise the legislators of the purposes, the nature and scope of its provisions, and prevent the enactment into law of matters which have received the notice, action and study of the legislators or of the public. In the case at bar it

cannot be claimed that the legislators have been appraised of the nature of the law, especially the nationalization and the prohibition provisions. The legislators took active interest in the discussion of the law, and a great many of the persons affected by the prohibitions in the law conducted a campaign against its approval. It cannot be claimed, therefore, that the reasons for declaring the law invalid ever existed. The objection must therefore, be overruled.

IX. Alleged violation of international treaties and obligations

Another subordinate argument against the validity of the law is the supposed violation thereby of the Charter of the United Nations and of the Declaration of the Human Rights adopted by the United Nations General Assembly. We find no merit in the Nations Charter imposes no strict or legal obligations regarding the rights and freedom of their subjects (Hans Kelsen, The Law of the United Nations, 1951 ed. pp. 29-32), and the Declaration of Human Rights contains nothing more than a mere recommendation or a common standard of achievement for all peoples and all nations (Id. p. 39.) That such is the import of the United Nations Charter aid of the Declaration of Human Rights can be inferred the fact that members of the United Nations Organizations, such as Norway and Denmark, prohibit foreigners from engaging in retail trade, and in most nations of the world laws against foreigners engaged in domestic trade are adopted.

The Treaty of Amity between the Republic of the Philippines and the Republic of China of April 18, 1947 is also claimed to be violated by the law in question. All that the treaty guarantees is equality of treatment to the Chinese nationals "upon the same terms as the nationals of any other country." But the nationals of China are not discriminating against because nationals of all other countries, except those of the United States, who are granted special rights by the Constitution, are all prohibited from engaging in the retail trade. But even supposing that the law infringes upon the said treaty, the treaty is always subject to qualification or amendment by a subsequent law (U. S. vs. Thompson, 258, Fed. 257, 260), and the same may never curtail or restrict the scope of the police power of the State (plaston vs. Pennsylvania, 58 L. ed. 539.)

X. Conclusion

Resuming what we have set forth above we hold that the disputed law was enacted to remedy a real actual threat and danger to national economy posed by alien dominance and control of the retail business and free citizens and country from dominance and control; that the enactment clearly falls within the scope of the police power of the State, thru which and by which it protects its own personality and insures its security and future; that the law does not violate the equal protection clause of the Constitution because sufficient grounds exist for the distinction between alien and citizen in the exercise of the occupation regulated, nor the due process of law clause, because the law is prospective in operation and recognizes the privilege of aliens

already engaged in the occupation and reasonably protects their privilege; that the wisdom and efficacy of the law to carry out its objectives appear to us to be plainly evident as a matter of fact it seems not only appropriate but actually necessary and that in any case such matter falls within the prerogative of the Legislature, with whose power and discretion the Judicial department of the Government may not interfere; that the provisions of the law are clearly embraced in the title, and this suffers from no duplicity and has not misled the legislators or the segment of the population affected; and that it cannot be said to be void for supposed conflict with treaty obligations because no treaty has actually been entered into on the subject and the police power may not be curtailed or surrendered by any treaty or any other conventional agreement.

Some members of the Court are of the opinion that the radical effects of the law could have been made less harsh in its impact on the aliens. Thus it is stated that the more time should have been given in the law for the liquidation of existing businesses when the time comes for them to close. Our legal duty, however, is merely to determine if the law falls within the scope of legislative authority and does not transcend the limitations of due process and equal protection guaranteed in the Constitution. Remedies against the harshness of the law should be addressed to the Legislature; they are beyond our power and jurisdiction.

The petition is hereby denied, with costs against petitioner.

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines SUPREME COURT Manila

EN BANC

G.R. No. 89572 December 21, 1989

DEPARTMENT OF EDUCATION, CULTURE AND SPORTS (DECS) and DIRECTOR OF CENTER FOR EDUCATIONAL MEASUREMENT, petitioners, vs. ROBERTO REY C. SAN DIEGO and JUDGE TERESITA DIZONCAPULONG, in her capacity as Presiding Judge of the Regional Trial Court of Valenzuela, Metro Manila, Branch 172, respondents.

Ramon M. Guevara for private respondent.

CRUZ, J.:

The issue before us is mediocrity. The question is whether a person who has thrice failed the National Medical Admission Test (NMAT) is entitled to take it again.

The petitioner contends he may not, under its rule that-

h) A student shall be allowed only three (3) chances to take the NMAT. After three (3) successive failures, a student shall not be allowed to take the NMAT for the fourth time.

The private respondent insists he can, on constitutional grounds.

But first the facts.

The private respondent is a graduate of the University of the East with a degree of Bachelor of Science in Zoology. The petitioner claims that he took the NMAT three times and flunked it as many times. 1 When he applied to take it again, the petitioner rejected his application on the basis of the aforesaid rule. He then went to the Regional Trial Court of Valenzuela, Metro Manila, to compel his admission to the test.

In his original petition for mandamus, he first invoked his constitutional rights to academic freedom and quality education. By agreement of the parties, the private respondent was allowed to take the NMAT scheduled on April 16, 1989, subject to the outcome of his petition. 2 In an amended petition filed with leave of court, he squarely challenged the constitutionality of MECS Order No. 12, Series of 1972, containing the above-cited rule. The additional grounds raised were due process and equal protection.

After hearing, the respondent judge rendered a decision on July 4, 1989, declaring the challenged order invalid and granting the petition. Judge Teresita Dizon-Capulong held that the petitioner had been deprived of his right to pursue a medical education through an arbitrary exercise of the police power. 3

We cannot sustain the respondent judge. Her decision must be reversed.

In Tablarin v. Gutierrez, 4 this Court upheld the constitutionality of the NMAT as a measure intended to limit the admission to medical schools only to those who have initially proved their competence and preparation for a medical education. Justice Florentino P. Feliciano declared for a unanimous Court:

Perhaps the only issue that needs some consideration is whether there is some reasonable relation between the prescribing of passing the NMAT as a condition for admission to medical school on the one hand, and the securing of the health and safety of the general community, on the other hand. This question is perhaps most usefully approached by recalling that the regulation of the pratice of medicine in all its branches has long been recognized as a reasonable method of protecting the health and safety of the public. That the power to regulate and control the practice of medicine includes the power to regulate admission to the ranks of those authorized to practice medicine, is also well recognized. Thus, legislation and administrative regulations requiring those who wish to practice medicine first to take and pass medical board examinations have long ago been recognized as valid exercises of governmental power. Similarly, the establishment of minimum medical educational requirements-i.e., the completion of prescribed courses in a recognized medical school-for admission to the medical profession, has also been sustained as a legitimate exercise of the regulatory authority of the state. What we have before us in the instant case is closely related: the regulation of access to medical schools. MECS Order No. 52, s. 1985, as noted earlier,

articulates the rationale of regulation of this type: the improvement of the professional and technical quality of the graduates of medical schools, by upgrading the quality of those admitted to the student body of the medical schools. That upgrading is sought by selectivity in the process of admission, selectivity consisting, among other things, of limiting admission to those who exhibit in the required degree the aptitude for medical studies and eventually for medical practice. The need to maintain, and the difficulties of maintaining, high standards in our professional schools in general, and medical schools in particular, in the current state of our social and economic development, are widely known.

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

However, the respondent judge agreed with the petitioner that the said case was not applicable. Her reason was that it upheld only the requirement for the admission test and said nothing about the socalled "three-flunk rule."

We see no reason why the rationale in the Tablarin case cannot apply to the case at bar. The issue raised in both cases is the academic preparation of the applicant. This may be gauged at least initially by the admission test and, indeed with more reliability, by the threeflunk rule. The latter cannot be regarded any less valid than the former in the regulation of the medical profession.

There is no need to redefine here the police power of the State. Suffice it to repeat that the power is validly exercised if (a) the interests of the public generally, as distinguished from those of a particular class, require the interference of the State, and (b) the means employed are reasonably necessary to the attainment of the object sought to be accomplished and not unduly oppressive upon individuals. 5

In other words, the proper exercise of the police power requires the concurrence of a lawful subject and a lawful method.

The subject of the challenged regulation is certainly within the ambit of the police power. It is the right and indeed the responsibility of the State to insure that the medical profession is not infiltrated by incompetents to whom patients may unwarily entrust their lives and health.

The method employed by the challenged regulation is not irrelevant to the purpose of the law nor is it arbitrary or oppressive. The threeflunk rule is intended to insulate the medical schools and ultimately the medical profession from the intrusion of those not qualified to be doctors.

While every person is entitled to aspire to be a doctor, he does not have a constitutional right to be a doctor. This is true of any other calling in which the public interest is involved; and the closer the link, the longer the bridge to one's ambition. The State has the responsibility to harness its human resources and to see to it that they are not dissipated or, no less worse, not used at all. These resources must be applied in a manner that will best promote the common good while also giving the individual a sense of satisfaction.

A person cannot insist on being a physician if he will be a menace to his patients. If one who wants to be a lawyer may prove better as a plumber, he should be so advised and adviced. Of course, he may not be forced to be a plumber, but on the other hand he may not force his entry into the bar. By the same token, a student who has

demonstrated promise as a pianist cannot be shunted aside to take a course in nursing, however appropriate this career may be for others.

The right to quality education invoked by the private respondent is not absolute. The Constitution also provides that "every citizen has the right to choose a profession or course of study, subject to fair, reasonable and equitable admission and academic requirements. 6

The private respondent must yield to the challenged rule and give way to those better prepared. Where even those who have qualified may still not be accommodated in our already crowded medical schools, there is all the more reason to bar those who, like him, have been tested and found wanting.

The contention that the challenged rule violates the equal protection clause is not well-taken. A law does not have to operate with equal force on all persons or things to be conformable to Article III, Section 1 of the Constitution.

There can be no question that a substantial distinction exists between medical students and other students who are not subjected to the NMAT and the three-flunk rule. The medical profession directly affects the very lives of the people, unlike other careers which, for this reason, do not require more vigilant regulation. The accountant, for example, while belonging to an equally respectable profession,

does not hold the same delicate responsibility as that of the physician and so need not be similarly treated.

There would be unequal protection if some applicants who have passed the tests are admitted and others who have also qualified are denied entrance. In other words, what the equal protection requires is equality among equals.

The Court feels that it is not enough to simply invoke the right to quality education as a guarantee of the Constitution: one must show that he is entitled to it because of his preparation and promise. The private respondent has failed the NMAT five times. 7 While his persistence is noteworthy, to say the least, it is certainly misplaced, like a hopeless love.

No depreciation is intended or made against the private respondent. It is stressed that a person who does not qualify in the NMAT is not an absolute incompetent unfit for any work or occupation. The only inference is that he is a probably better, not for the medical profession, but for another calling that has not excited his interest.

In the former, he may be a bungler or at least lackluster; in the latter, he is more likely to succeed and may even be outstanding. It is for the appropriate calling that he is entitled to quality education for

the full harnessing of his potentials and the sharpening of his latent talents toward what may even be a brilliant future.

We cannot have a society of square pegs in round holes, of dentists who should never have left the farm and engineers who should have studied banking and teachers who could be better as merchants.

It is time indeed that the State took decisive steps to regulate and enrich our system of education by directing the student to the course for which he is best suited as determined by initial tests and evaluations. Otherwise, we may be "swamped with mediocrity," in the words of Justice Holmes, not because we are lacking in intelligence but because we are a nation of misfits.

WHEREFORE, the petition is GRANTED. The decision of the respondent court dated January 13, 1989, is REVERSED, with costs against the private respondent. It is so ordered.

Fernan, C.J., Narvasa Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Footnotes

1 A check with the Department of Education showed that the private respondent had actually taken and flunked four tests already and was applying to take a fifth examination. 2 He also failed this fifth test.

2 Rollo, pp. 26-34.

3 152 SCRA 730.

4 US vs. Toribio, 15 Phil. 85; Fabie v. City of Manila, 21 Phil. 486; Ynot v. Intermediate Appellate Court, 148 SCRA 659.

5 Article XIV, Section 5(3).

6 Footnote Nos. 1 & 2.

The Lawphil Project - Arellano Law Foundation

EN BANC

CARLOS SUPERDRUG CORP.,

G.R. No. 166494

doing business under the name

and style Carlos Superdrug,

Present:

ELSIE M. CANO, doing business

under the name and style Advance

PUNO, C.J.,

Drug, Dr. SIMPLICIO L. YAP, JR.,

QUISUMBING,*

doing business under the name and

YNARES-SANTIAGO,

style City Pharmacy, MELVIN S. GUTIERREZ,**

SANDOVAL-

DELA SERNA, doing business under

CARPIO,

the name and style Botica dela Serna,

AUSTRIA-MARTINEZ,

and LEYTE SERV-WELL CORP.,

CORONA,

doing business under the name and

CARPIO MORALES,

style Leyte Serv-Well Drugstore,

AZCUNA,

Petitioners,

TINGA,

CHICO-NAZARIO,

- versus -

GARCIA,

VELASCO, JR., and

DEPARTMENT OF SOCIAL

NACHURA, JJ.

WELFARE and DEVELOPMENT

(DSWD), DEPARTMENT OF

Promulgated:

HEALTH (DOH), DEPARTMENT

OF FINANCE (DOF), DEPARTMENT

June 29, 2007

OF JUSTICE (DOJ), and

DEPARTMENT OF INTERIOR and

LOCAL GOVERNMENT (DILG),

Respondents.

x ---------------------------------------------------------------------------------------- x

DECISION

AZCUNA, J.:

This is a petition[1] for Prohibition with Prayer for Preliminary Injunction assailing the constitutionality of Section 4(a) of Republic Act (R.A.) No. 9257,*2+ otherwise known as the Expanded Senior Citizens Act of 2003.

Petitioners are domestic corporations and proprietors operating drugstores in the Philippines.

Public respondents, on the other hand, include the Department of Social Welfare and Development (DSWD), the Department of Health (DOH), the Department of Finance (DOF), the Department of Justice (DOJ), and the Department of Interior and Local Government (DILG) which have been specifically tasked to monitor the drugstores compliance with the law; promulgate the implementing rules and regulations for the effective implementation of the law; and prosecute and revoke the licenses of erring drugstore establishments.

The antecedents are as follows:

On February 26, 2004, R.A. No. 9257, amending R.A. No. 7432,[3] was signed into law by President Gloria Macapagal-Arroyo and it became effective on March 21, 2004. Section 4(a) of the Act states:

SEC. 4. Privileges for the Senior Citizens. The senior citizens shall be entitled to the following:

(a) the grant of twenty percent (20%) discount from all establishments relative to the utilization of services in hotels and similar lodging establishments, restaurants and recreation centers, and purchase of medicines in all establishments for the exclusive use or enjoyment of senior citizens, including funeral and burial services for the death of senior citizens;

...

The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted. Provided, further, That the total amount of the claimed tax deduction net of value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code, as amended.[4]

On May 28, 2004, the DSWD approved and adopted the Implementing Rules and Regulations of R.A. No. 9257, Rule VI, Article 8 of which states:

Article 8. Tax Deduction of Establishments. The establishment may claim the discounts granted under Rule V, Section 4 Discounts for Establishments;[5] Section 9, Medical and Dental Services in Private Facilities[,][6] and Sections 10[7] and 11[8] Air, Sea and Land

Transportation as tax deduction based on the net cost of the goods sold or services rendered. Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted; Provided, further, That the total amount of the claimed tax deduction net of value added tax if applicable, shall be included in their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code, as amended; Provided, finally, that the implementation of the tax deduction shall be subject to the Revenue Regulations to be issued by the Bureau of Internal Revenue (BIR) and approved by the Department of Finance (DOF).[9]

On July 10, 2004, in reference to the query of the Drug Stores Association of the Philippines (DSAP) concerning the meaning of a tax deduction under the Expanded Senior Citizens Act, the DOF, through Director IV Ma. Lourdes B. Recente, clarified as follows:

1) The difference between the Tax Credit (under the Old Senior Citizens Act) and Tax Deduction (under the Expanded Senior Citizens Act).

1.1. The provision of Section 4 of R.A. No. 7432 (the old Senior Citizens Act) grants twenty percent (20%) discount from all establishments relative to the utilization of transportation services, hotels and similar lodging establishment, restaurants and recreation centers and purchase of medicines anywhere in the country, the costs of which may be claimed by the private establishments concerned as tax credit.

Effectively, a tax credit is a peso-for-peso deduction from a taxpayers tax liability due to the government of the amount of discounts such establishment has granted to a senior citizen. The establishment recovers the full amount of discount given to a senior citizen and hence, the government shoulders 100% of the discounts granted.

It must be noted, however, that conceptually, a tax credit scheme under the Philippine tax system, necessitates that prior payments of taxes have been made and the taxpayer is attempting to recover this tax payment from his/her income tax due. The tax credit scheme

under R.A. No. 7432 is, therefore, inapplicable since no tax payments have previously occurred.

1.2. The provision under R.A. No. 9257, on the other hand, provides that the establishment concerned may claim the discounts under Section 4(a), (f), (g) and (h) as tax deduction from gross income, based on the net cost of goods sold or services rendered.

Under this scheme, the establishment concerned is allowed to deduct from gross income, in computing for its tax liability, the amount of discounts granted to senior citizens. Effectively, the government loses in terms of foregone revenues an amount equivalent to the marginal tax rate the said establishment is liable to pay the government. This will be an amount equivalent to 32% of the twenty percent (20%) discounts so granted. The establishment shoulders the remaining portion of the granted discounts.

It may be necessary to note that while the burden on [the] government is slightly diminished in terms of its percentage share on the discounts granted to senior citizens, the number of potential establishments that may claim tax deductions, have however, been broadened. Aside from the establishments that may claim tax credits under the old law, more establishments were added under the new law such as: establishments providing medical and dental services, diagnostic and laboratory services, including professional fees of attending doctors in all private hospitals and medical facilities, operators of domestic air and sea transport services, public railways and skyways and bus transport services.

A simple illustration might help amplify the points discussed above, as follows:

Tax Deduction

Tax Credit

Gross Sales

xxxxxx

xxxxxx

Less : Cost of goods sold

xxxxx

xxxxx

Net Sales

xxxxx x

xxxxxx

Less: Operating Expenses:

Tax Deduction on Discounts x x x x

--

Other deductions:

xxxx

xxxx

Net Taxable Income

xxxxx

xxxxx

Tax Due

xxx

xxx

Less: Tax Credit

--

______x x

Net Tax Due

--

xx

As shown above, under a tax deduction scheme, the tax deduction on discounts was subtracted from Net Sales together with other deductions which are considered as operating expenses before the Tax Due was computed based on the Net Taxable Income. On the other hand, under a tax credit scheme, the amount of discounts which is the tax credit item, was deducted directly from the tax due amount.[10]

Meanwhile, on October 1, 2004, Administrative Order (A.O.) No. 171 or the Policies and Guidelines to Implement the Relevant Provisions of Republic Act 9257, otherwise known as the Expanded Senior Citizens Act of 2003*11+ was issued by the DOH, providing the grant of twenty percent (20%) discount in the purchase of unbranded generic medicines from all establishments dispensing medicines for the exclusive use of the senior citizens.

On November 12, 2004, the DOH issued Administrative Order No 177[12] amending A.O. No. 171. Under A.O. No. 177, the twenty

percent discount shall not be limited to the purchase of unbranded generic medicines only, but shall extend to both prescription and nonprescription medicines whether branded or generic. Thus, it stated that *t+he grant of twenty percent (20%) discount shall be provided in the purchase of medicines from all establishments dispensing medicines for the exclusive use of the senior citizens.

Petitioners assail the constitutionality of Section 4(a) of the Expanded Senior Citizens Act based on the following grounds:[13]

1) The law is confiscatory because it infringes Art. III, Sec. 9 of the Constitution which provides that private property shall not be taken for public use without just compensation;

2) It violates the equal protection clause (Art. III, Sec. 1) enshrined in our Constitution which states that no person shall be

deprived of life, liberty or property without due process of law, nor shall any person be denied of the equal protection of the laws; and

3) The 20% discount on medicines violates the constitutional guarantee in Article XIII, Section 11 that makes essential goods, health and other social services available to all people at affordable cost.*14+

Petitioners assert that Section 4(a) of the law is unconstitutional because it constitutes deprivation of private property. Compelling drugstore owners and establishments to grant the discount will result in a loss of profit

and capital because 1) drugstores impose a mark-up of only 5% to 10% on branded medicines; and 2) the law failed to provide a scheme whereby drugstores will be justly compensated for the discount.

Examining petitioners arguments, it is apparent that what petitioners are ultimately questioning is the validity of the tax deduction scheme as a reimbursement mechanism for the twenty percent (20%) discount that they extend to senior citizens.

Based on the afore-stated DOF Opinion, the tax deduction scheme does not fully reimburse petitioners for the discount privilege accorded to senior citizens. This is because the discount is treated as a deduction, a tax-deductible expense that is subtracted from the gross income and results in a lower taxable income. Stated otherwise, it is an amount that is allowed by law[15] to reduce the income prior to the application of the tax rate to compute the amount of tax which is due.[16] Being a tax deduction, the discount does not reduce taxes owed on a peso for peso basis but merely offers a fractional reduction in taxes owed.

Theoretically, the treatment of the discount as a deduction reduces the net income of the private establishments concerned. The

discounts given would have entered the coffers and formed part of the gross sales of the private establishments, were it not for R.A. No. 9257.

The permanent reduction in their total revenues is a forced subsidy corresponding to the taking of private property for public use or benefit.[17] This constitutes compensable taking for which petitioners would ordinarily become entitled to a just compensation.

Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the takers gain but the owners loss. The word just is used to intensify the meaning of the word compensation, and to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample.[18]

A tax deduction does not offer full reimbursement of the senior citizen discount. As such, it would not meet the definition of just compensation.[19]

Having said that, this raises the question of whether the State, in promoting the health and welfare of a special group of citizens, can impose upon private establishments the burden of partly subsidizing a government program.

The Court believes so.

The Senior Citizens Act was enacted primarily to maximize the contribution of senior citizens to nation-building, and to grant benefits and privileges to them for their improvement and well-being as the State considers them an integral part of our society.[20]

The priority given to senior citizens finds its basis in the Constitution as set forth in the law itself. Thus, the Act provides:

SEC. 2. Republic Act No. 7432 is hereby amended to read as follows:

SECTION 1. Declaration of Policies and Objectives. Pursuant to Article XV, Section 4 of the Constitution, it is the duty of the family to take care of its elderly members while the State may design programs of social security for them. In addition to this, Section 10 in the Declaration of Principles and State Policies provides: The State shall provide social justice in all phases of national development. Further, Article XIII, Section 11, provides: The State shall adopt an integrated and comprehensive approach to health development which shall endeavor to make essential goods, health and other social services available to all the people at affordable cost. There shall be priority for the needs of the underprivileged sick, elderly, disabled, women and children. Consonant with these constitutional principles the following are the declared policies of this Act:

...

(f) To recognize the important role of the private sector in the improvement of the welfare of senior citizens and to actively seek their partnership.[21]

To implement the above policy, the law grants a twenty percent discount to senior citizens for medical and dental services, and diagnostic and laboratory fees; admission fees charged by theaters, concert halls, circuses, carnivals, and other similar places of culture, leisure and amusement; fares for domestic land, air and sea travel; utilization of services in hotels and similar lodging establishments, restaurants and recreation centers; and purchases of medicines for the exclusive use or enjoyment of senior citizens. As a form of reimbursement, the law provides that business establishments extending the twenty percent discount to senior citizens may claim the discount as a tax deduction.

The law is a legitimate exercise of police power which, similar to the power of eminent domain, has general welfare for its object. Police power is not capable of an exact definition, but has been purposely veiled in general terms to underscore its comprehensiveness to meet all exigencies and provide enough room for an efficient and flexible response to conditions and circumstances, thus assuring the greatest benefits. [22] Accordingly, it has been described as the most essential, insistent and the least limitable of powers, extending as it does to all the great public needs.*23+ It is *t+he power vested in the legislature by the constitution to make, ordain, and establish all manner of wholesome and reasonable laws, statutes, and ordinances, either with penalties or without, not repugnant to the constitution, as they shall judge to be for the good and welfare of the commonwealth, and of the subjects of the same.*24+

For this reason, when the conditions so demand as determined by the legislature, property rights must bow to the primacy of police power because property rights, though sheltered by due process, must yield to general welfare.[25]

Police power as an attribute to promote the common good would be diluted considerably if on the mere plea of petitioners that they will suffer loss of earnings and capital, the questioned provision is invalidated. Moreover, in the absence of evidence demonstrating the alleged confiscatory effect of the provision in question, there is no basis for its nullification in view of the presumption of validity which every law has in its favor.[26]

Given these, it is incorrect for petitioners to insist that the grant of the senior citizen discount is unduly oppressive to their business, because petitioners have not taken time to calculate correctly and come up with a financial report, so that they have not been able to show properly whether or not the tax deduction scheme really works greatly to their disadvantage.[27]

In treating the discount as a tax deduction, petitioners insist that they will incur losses because, referring to the DOF Opinion, for every P1.00 senior citizen discount that petitioners would give, P0.68 will be

shouldered by them as only P0.32 will be refunded by the government by way of a tax deduction.

To illustrate this point, petitioner Carlos Super Drug cited the antihypertensive maintenance drug Norvasc as an example. According to the latter, it acquires Norvasc from the distributors at P37.57 per tablet, and retails it at P39.60 (or at a margin of 5%). If it grants a 20% discount to senior citizens or an amount equivalent to P7.92, then it would have to sell Norvasc at P31.68 which translates to a loss from capital of P5.89 per tablet. Even if the government will allow a tax deduction, only P2.53 per tablet will be refunded and not the full amount of the discount which is P7.92. In short, only 32% of the 20% discount will be reimbursed to the drugstores.[28]

Petitioners computation is flawed. For purposes of reimbursement, the law states that the cost of the discount shall be deducted from gross income,[29] the amount of income derived from all sources before deducting allowable expenses, which will result in net income. Here, petitioners tried to show a loss on a per transaction basis, which should not be the case. An income statement, showing an accounting of petitioners sales, expenses, and net profit (or loss) for a given

period could have accurately reflected the effect of the discount on their income. Absent any financial statement, petitioners cannot substantiate their claim that they will be operating at a loss should they give the discount. In addition, the computation was erroneously based on the assumption that their customers consisted wholly of senior citizens. Lastly, the 32% tax rate is to be imposed on income, not on the amount of the discount.

Furthermore, it is unfair for petitioners to criticize the law because they cannot raise the prices of their medicines given the cutthroat nature of the players in the industry. It is a business decision on the part of petitioners to peg the mark-up at 5%. Selling the medicines below acquisition cost, as alleged by petitioners, is merely a result of this decision. Inasmuch as pricing is a property right, petitioners cannot reproach the law for being oppressive, simply because they cannot afford to raise their prices for fear of losing their customers to competition.

The Court is not oblivious of the retail side of the pharmaceutical industry and the competitive pricing component of the business. While the Constitution protects property rights, petitioners must

accept the realities of business and the State, in the exercise of police power, can intervene in the operations of a business which may result in an impairment of property rights in the process.

Moreover, the right to property has a social dimension. While Article XIII of the Constitution provides the precept for the protection of property, various laws and jurisprudence, particularly on agrarian reform and the regulation of contracts and public utilities, continuously serve as a reminder that the right to property can be relinquished upon the command of the State for the promotion of public good.[30]

Undeniably, the success of the senior citizens program rests largely on the support imparted by petitioners and the other private establishments concerned. This being the case, the means employed in invoking the active participation of the private sector, in order to achieve the purpose or objective of the law, is reasonably and directly related. Without sufficient proof that Section 4(a) of R.A. No. 9257 is arbitrary, and that the continued implementation of the same would be unconscionably detrimental to petitioners, the Court will refrain from quashing a legislative act.[31]

WHEREFORE, the petition is DISMISSED for lack of merit.

FIRST DIVISION

[G.R. No. 135962. March 27, 2000]

METROPOLITAN MANILA DEVELOPMENT AUTHORITY, petitioner, vs. BEL-AIR VILLAGE ASSOCIATION, INC., respondent.

DECISION

PUNO, J.:

Not infrequently, the government is tempted to take legal shortcuts to solve urgent problems of the people. But even when government is armed with the best of intention, we cannot allow it to run roughshod over the rule of law. Again, we let the hammer fall and fall hard on the illegal attempt of the MMDA to open for public use a private road in a private subdivision. While we hold that the general welfare should be promoted, we stress that it should not be achieved at the expense of the rule of law. h Y

Petitioner MMDA is a government agency tasked with the delivery of basic services in Metro Manila. Respondent Bel-Air Village Association, Inc. (BAVA) is a non-stock, non-profit corporation whose members are homeowners in Bel-Air Village, a private subdivision in Makati City. Respondent BAVA is the registered owner of Neptune Street, a road inside Bel-Air Village.

On December 30, 1995, respondent received from petitioner, through its Chairman, a notice dated December 22, 1995 requesting respondent to open Neptune Street to public vehicular traffic starting January 2, 1996. The notice reads: Court

"SUBJECT: NOTICE of the Opening of Neptune Street to Traffic

"Dear President Lindo,

"Please be informed that pursuant to the mandate of the MMDA law or Republic Act No. 7924 which requires the Authority to rationalize the use of roads and/or thoroughfares for the safe and convenient movement of persons, Neptune Street shall be opened to vehicular traffic effective January 2, 1996.

"In view whereof, the undersigned requests you to voluntarily open the points of entry and exit on said street.

"Thank you for your cooperation and whatever assistance that may be extended by your association to the MMDA personnel who will be directing traffic in the area.

"Finally, we are furnishing you with a copy of the handwritten instruction of the President on the matter.

"Very truly yours,

PROSPERO I. ORETA

Chairman"[1]

On the same day, respondent was apprised that the perimeter wall separating the subdivision from the adjacent Kalayaan Avenue would be demolished. Sppedsc

On January 2, 1996, respondent instituted against petitioner before the Regional Trial Court, Branch 136, Makati City, Civil Case No. 96001 for injunction. Respondent prayed for the issuance of a temporary restraining order and preliminary injunction enjoining the opening of Neptune Street and prohibiting the demolition of the perimeter wall. The trial court issued a temporary restraining order the following day.

On January 23, 1996, after due hearing, the trial court denied issuance of a preliminary injunction.[2] Respondent questioned the denial before the Court of Appeals in CA-G.R. SP No. 39549. The appellate court conducted an ocular inspection of Neptune Street[3] and on February 13, 1996, it issued a writ of preliminary injunction enjoining the implementation of the MMDAs proposed action.*4+

On January 28, 1997, the appellate court rendered a Decision on the merits of the case finding that the MMDA has no authority to order the opening of Neptune Street, a private subdivision road and cause the demolition of its perimeter walls. It held that the authority is lodged in the City Council of Makati by ordinance. The decision disposed of as follows: Jurissc

"WHEREFORE, the Petition is GRANTED; the challenged Order dated January 23, 1995, in Civil Case No. 96-001, is SET ASIDE and the Writ of Preliminary Injunction issued on February 13, 1996 is hereby made permanent.

"For want of sustainable substantiation, the Motion to Cite Roberto L. del Rosario in contempt is denied.[5]

"No pronouncement as to costs.

"SO ORDERED."[6]

The Motion for Reconsideration of the decision was denied on September 28, 1998. Hence, this recourse. Jksm

Petitioner MMDA raises the following questions:

"I

HAS THE METROPOLITAN MANILA DEVELOPMENT AUTHORITY (MMDA) THE MANDATE TO OPEN NEPTUNE STREET TO PUBLIC TRAFFIC PURSUANT TO ITS REGULATORY AND POLICE POWERS?

II

IS THE PASSAGE OF AN ORDINANCE A CONDITION PRECEDENT BEFORE THE MMDA MAY ORDER THE OPENING OF SUBDIVISION ROADS TO PUBLIC TRAFFIC?

III

IS RESPONDENT BEL-AIR VILLAGE ASSOCIATION, INC. ESTOPPED FROM DENYING OR ASSAILING THE AUTHORITY OF THE MMDA TO OPEN THE SUBJECT STREET? Jlexj

WAS RESPONDENT DEPRIVED OF DUE PROCESS DESPITE THE SEVERAL MEETINGS HELD BETWEEN MMDA AND THE AFFECTED BEL-AIR RESIDENTS AND BAVA OFFICERS?

HAS RESPONDENT COME TO COURT WITH UNCLEAN HANDS?"[7]

Neptune Street is owned by respondent BAVA. It is a private road inside Bel-Air Village, a private residential subdivision in the heart of the financial and commercial district of Makati City. It runs parallel to Kalayaan Avenue, a national road open to the general public. Dividing the two (2) streets is a concrete perimeter wall approximately fifteen (15) feet high. The western end of Neptune Street intersects Nicanor Garcia, formerly Reposo Street, a subdivision road open to public vehicular traffic, while its eastern end intersects Makati Avenue, a national road. Both ends of Neptune Street are guarded by iron gates. Edp mis

Petitioner MMDA claims that it has the authority to open Neptune Street to public traffic because it is an agent of the state endowed with police power in the delivery of basic services in Metro Manila. One of these basic services is traffic management which involves the regulation of the use of thoroughfares to insure the safety, convenience and welfare of the general public. It is alleged that the police power of MMDA was affirmed by this Court in the consolidated cases of Sangalang v. Intermediate Appellate Court.[8] From the premise that it has police power, it is now urged that there is no need for the City of Makati to enact an ordinance opening Neptune street to the public.[9]

Police power is an inherent attribute of sovereignty. It has been defined as the power vested by the Constitution in the legislature to make, ordain, and establish all manner of wholesome and reasonable laws, statutes and ordinances, either with penalties or without, not repugnant to the Constitution, as they shall judge to be for the good and welfare of the commonwealth, and for the subjects of the same.[10] The power is plenary and its scope is vast and pervasive, reaching and justifying measures for public health, public safety, public morals, and the general welfare.[11]

It bears stressing that police power is lodged primarily in the National Legislature.[12] It cannot be exercised by any group or body of individuals not possessing legislative power.[13] The National Legislature, however, may delegate this power to the President and administrative boards as well as the lawmaking bodies of municipal corporations or local government units.[14] Once delegated, the agents can exercise only such legislative powers as are conferred on them by the national lawmaking body.[15]

A local government is a "political subdivision of a nation or state which is constituted by law and has substantial control of local affairs."[16] The Local Government Code of 1991 defines a local government unit as a "body politic and corporate"[17]-- one endowed with powers as a political subdivision of the National Government and as a corporate entity representing the inhabitants of its territory.[18]

Local government units are the provinces, cities, municipalities and barangays.[19] They are also the territorial and political subdivisions of the state.[20]

Our Congress delegated police power to the local government units in the Local Government Code of 1991. This delegation is found in Section 16 of the same Code, known as the general welfare clause, viz: Chief

"Sec. 16. General Welfare.Every local government unit shall exercise the powers expressly granted, those necessarily implied therefrom, as well as powers necessary, appropriate, or incidental for its efficient and effective governance, and those which are essential to the promotion of the general welfare. Within their respective territorial jurisdictions, local government units shall ensure and support, among other things, the preservation and enrichment of culture, promote health and safety, enhance the right of the people to a balanced ecology, encourage and support the development of appropriate and self-reliant scientific and technological capabilities, improve public morals, enhance economic prosperity and social justice, promote full employment among their residents, maintain peace and order, and preserve the comfort and convenience of their inhabitants."[21]

Local government units exercise police power through their respective legislative bodies. The legislative body of the provincial government is

the sangguniang panlalawigan, that of the city government is the sangguniang panlungsod, that of the municipal government is the sangguniang bayan, and that of the barangay is the sangguniang barangay. The Local Government Code of 1991 empowers the sangguniang panlalawigan, sangguniang panlungsod and sangguniang bayan to "enact ordinances, approve resolutions and appropriate funds for the general welfare of the [province, city or municipality, as the case may be], and its inhabitants pursuant to Section 16 of the Code and in the proper exercise of the corporate powers of the [province, city municipality] provided under the Code x x x."[22] The same Code gives the sangguniang barangay the power to "enact ordinances as may be necessary to discharge the responsibilities conferred upon it by law or ordinance and to promote the general welfare of the inhabitants thereon."[23]

Metropolitan or Metro Manila is a body composed of several local government units - i.e., twelve (12) cities and five (5) municipalities, namely, the cities of Caloocan, Manila, Mandaluyong, Makati, Pasay, Pasig, Quezon, Muntinlupa, Las Pinas, Marikina, Paranaque and Valenzuela, and the municipalities of Malabon, , Navotas, , Pateros, San Juan and Taguig. With the passage of Republic Act (R. A.) No. 7924[24] in 1995, Metropolitan Manila was declared as a "special development and administrative region" and the Administration of "metro-wide" basic services affecting the region placed under "a development authority" referred to as the MMDA.[25]

"Metro-wide services" are those "services which have metro-wide impact and transcend local political boundaries or entail huge expenditures such that it would not be viable for said services to be provided by the individual local government units comprising Metro Manila."[26] There are seven (7) basic metro-wide services and the scope of these services cover the following: (1) development planning; (2) transport and traffic management; (3) solid waste disposal and management; (4) flood control and sewerage management; (5) urban renewal, zoning and land use planning, and shelter services; (6) health and sanitation, urban protection and pollution control; and (7) public safety. The basic service of transport and traffic management includes the following: Lexjuris

"(b) Transport and traffic management which include the formulation, coordination, and monitoring of policies, standards, programs and projects to rationalize the existing transport operations, infrastructure requirements, the use of thoroughfares, and promotion of safe and convenient movement of persons and goods; provision for the mass transport system and the institution of a system to regulate road users; administration and implementation of all traffic enforcement operations, traffic engineering services and traffic education programs, including the institution of a single ticketing system in Metropolitan Manila;"[27]

In the delivery of the seven (7) basic services, the MMDA has the following powers and functions: Esm

"Sec. 5. Functions and powers of the Metro Manila Development Authority.The MMDA shall:

(a) Formulate, coordinate and regulate the implementation of medium and long-term plans and programs for the delivery of metrowide services, land use and physical development within Metropolitan Manila, consistent with national development objectives and priorities;

(b) Prepare, coordinate and regulate the implementation of mediumterm investment programs for metro-wide services which shall indicate sources and uses of funds for priority programs and projects, and which shall include the packaging of projects and presentation to funding institutions; Esmsc

(c) Undertake and manage on its own metro-wide programs and projects for the delivery of specific services under its jurisdiction, subject to the approval of the Council. For this purpose, MMDA can create appropriate project management offices;

(d) Coordinate and monitor the implementation of such plans, programs and projects in Metro Manila; identify bottlenecks and adopt solutions to problems of implementation;

(e) The MMDA shall set the policies concerning traffic in Metro Manila, and shall coordinate and regulate the implementation of all programs and projects concerning traffic management, specifically pertaining to enforcement, engineering and education. Upon request, it shall be extended assistance and cooperation, including but not limited to, assignment of personnel, by all other government agencies and offices concerned;

(f) Install and administer a single ticketing system, fix, impose and collect fines and penalties for all kinds of violations of traffic rules and regulations, whether moving or non-moving in nature, and confiscate and suspend or revoke drivers licenses in the enforcement of such traffic laws and regulations, the provisions of RA 4136 and PD 1605 to the contrary notwithstanding. For this purpose, the Authority shall impose all traffic laws and regulations in Metro Manila, through its traffic operation center, and may deputize members of the PNP, traffic enforcers of local government units, duly licensed security guards, or members of non-governmental organizations to whom may be delegated certain authority, subject to such conditions and requirements as the Authority may impose; and

(g) Perform other related functions required to achieve the objectives of the MMDA, including the undertaking of delivery of basic services to the local government units, when deemed necessary subject to

prior coordination with and consent of the local government unit concerned." Jurismis

The implementation of the MMDAs plans, programs and projects is undertaken by the local government units, national government agencies, accredited peoples organizations, non-governmental organizations, and the private sector as well as by the MMDA itself. For this purpose, the MMDA has the power to enter into contracts, memoranda of agreement and other cooperative arrangements with these bodies for the delivery of the required services within Metro Manila.[28]

The governing board of the MMDA is the Metro Manila Council. The Council is composed of the mayors of the component 12 cities and 5 municipalities, the president of the Metro Manila Vice-Mayors League and the president of the Metro Manila Councilors League.*29+ The Council is headed by a Chairman who is appointed by the President and vested with the rank of cabinet member. As the policymaking body of the MMDA, the Metro Manila Council approves metro-wide plans, programs and projects, and issues the necessary rules and regulations for the implementation of said plans; it approves the annual budget of the MMDA and promulgates the rules and regulations for the delivery of basic services, collection of service and regulatory fees, fines and penalties. These functions are particularly enumerated as follows: LEX

"Sec. 6. Functions of the Metro Manila Council. -

(a) The Council shall be the policy-making body of the MMDA;

(b) It shall approve metro-wide plans, programs and projects and issue rules and regulations deemed necessary by the MMDA to carry out the purposes of this Act;

(c) It may increase the rate of allowances and per diems of the members of the Council to be effective during the term of the succeeding Council. It shall fix the compensation of the officers and personnel of the MMDA, and approve the annual budget thereof for submission to the Department of Budget and Management (DBM);

(d) It shall promulgate rules and regulations and set policies and standards for metro-wide application governing the delivery of basic services, prescribe and collect service and regulatory fees, and impose and collect fines and penalties." Jj sc

Clearly, the scope of the MMDAs function is limited to the delivery of the seven (7) basic services. One of these is transport and traffic management which includes the formulation and monitoring of policies, standards and projects to rationalize the existing transport operations, infrastructure requirements, the use of thoroughfares and

promotion of the safe movement of persons and goods. It also covers the mass transport system and the institution of a system of road regulation, the administration of all traffic enforcement operations, traffic engineering services and traffic education programs, including the institution of a single ticketing system in Metro Manila for traffic violations. Under this service, the MMDA is expressly authorized "to set the policies concerning traffic" and "coordinate and regulate the implementation of all traffic management programs." In addition, the MMDA may "install and administer a single ticketing system," fix, impose and collect fines and penalties for all traffic violations. Ca-lrsc

It will be noted that the powers of the MMDA are limited to the following acts: formulation, coordination, regulation, implementation, preparation, management, monitoring, setting of policies, installation of a system and administration. There is no syllable in R. A. No. 7924 that grants the MMDA police power, let alone legislative power. Even the Metro Manila Council has not been delegated any legislative power. Unlike the legislative bodies of the local government units, there is no provision in R. A. No. 7924 that empowers the MMDA or its Council to "enact ordinances, approve resolutions and appropriate funds for the general welfare" of the inhabitants of Metro Manila. The MMDA is, as termed in the charter itself, a "development authority."[30] It is an agency created for the purpose of laying down policies and coordinating with the various national government agencies, peoples organizations, nongovernmental organizations and the private sector for the efficient and expeditious delivery of basic services in the vast metropolitan

area. All its functions are administrative in nature and these are actually summed up in the charter itself, viz:

"Sec. 2. Creation of the Metropolitan Manila Development Authority. -- x x x.

The MMDA shall perform planning, monitoring and coordinative functions, and in the process exercise regulatory and supervisory authority over the delivery of metro-wide services within Metro Manila, without diminution of the autonomy of the local government units concerning purely local matters."[31]

Petitioner cannot seek refuge in the cases of Sangalang v. Intermediate Appellate Court[32] where we upheld a zoning ordinance issued by the Metro Manila Commission (MMC), the predecessor of the MMDA, as an exercise of police power. The first Sangalang decision was on the merits of the petition,[33] while the second decision denied reconsideration of the first case and in addition discussed the case of Yabut v. Court of Appeals.[34]

Sangalang v. IAC involved five (5) consolidated petitions filed by respondent BAVA and three residents of Bel-Air Village against other residents of the Village and the Ayala Corporation, formerly the Makati Development Corporation, as the developer of the subdivision. The petitioners sought to enforce certain restrictive

easements in the deeds of sale over their respective lots in the subdivision. These were the prohibition on the setting up of commercial and advertising signs on the lots, and the condition that the lots be used only for residential purposes. Petitioners alleged that respondents, who were residents along Jupiter Street of the subdivision, converted their residences into commercial establishments in violation of the "deed restrictions," and that respondent Ayala Corporation ushered in the full commercialization" of Jupiter Street by tearing down the perimeter wall that separated the commercial from the residential section of the village.[35]

The petitions were dismissed based on Ordinance No. 81 of the Municipal Council of Makati and Ordinance No. 81-01 of the Metro Manila Commission (MMC). Municipal Ordinance No. 81 classified Bel-Air Village as a Class A Residential Zone, with its boundary in the south extending to the center line of Jupiter Street. The Municipal Ordinance was adopted by the MMC under the Comprehensive Zoning Ordinance for the National Capital Region and promulgated as MMC Ordinance No. 81-01. Bel-Air Village was indicated therein as bounded by Jupiter Street and the block adjacent thereto was classified as a High Intensity Commercial Zone.[36]

We ruled that since both Ordinances recognized Jupiter Street as the boundary between Bel-Air Village and the commercial district, Jupiter Street was not for the exclusive benefit of Bel-Air residents. We also held that the perimeter wall on said street was constructed not to separate the residential from the commercial blocks but simply for

security reasons, hence, in tearing down said wall, Ayala Corporation did not violate the "deed restrictions" in the deeds of sale. Scc-alr

We upheld the ordinances, specifically MMC Ordinance No. 81-01, as a legitimate exercise of police power.[37] The power of the MMC and the Makati Municipal Council to enact zoning ordinances for the general welfare prevailed over the "deed restrictions".

In the second Sangalang/Yabut decision, we held that the opening of Jupiter Street was warranted by the demands of the common good in terms of "traffic decongestion and public convenience." Jupiter was opened by the Municipal Mayor to alleviate traffic congestion along the public streets adjacent to the Village.[38] The same reason was given for the opening to public vehicular traffic of Orbit Street, a road inside the same village. The destruction of the gate in Orbit Street was also made under the police power of the municipal government. The gate, like the perimeter wall along Jupiter, was a public nuisance because it hindered and impaired the use of property, hence, its summary abatement by the mayor was proper and legal.[39]

Contrary to petitioners claim, the two Sangalang cases do not apply to the case at bar. Firstly, both involved zoning ordinances passed by the municipal council of Makati and the MMC. In the instant case, the basis for the proposed opening of Neptune Street is contained in the notice of December 22, 1995 sent by petitioner to respondent BAVA, through its president. The notice does not cite any ordinance or law,

either by the Sangguniang Panlungsod of Makati City or by the MMDA, as the legal basis for the proposed opening of Neptune Street. Petitioner MMDA simply relied on its authority under its charter "to rationalize the use of roads and/or thoroughfares for the safe and convenient movement of persons." Rationalizing the use of roads and thoroughfares is one of the acts that fall within the scope of transport and traffic management. By no stretch of the imagination, however, can this be interpreted as an express or implied grant of ordinancemaking power, much less police power. Misjuris

Secondly, the MMDA is not the same entity as the MMC in Sangalang. Although the MMC is the forerunner of the present MMDA, an examination of Presidential Decree (P. D.) No. 824, the charter of the MMC, shows that the latter possessed greater powers which were not bestowed on the present MMDA. Jjlex

Metropolitan Manila was first created in 1975 by Presidential Decree (P.D.) No. 824. It comprised the Greater Manila Area composed of the contiguous four (4) cities of Manila, Quezon, Pasay and Caloocan, and the thirteen (13) municipalities of Makati, Mandaluyong, San Juan, Las Pinas, Malabon, Navotas, Pasig, Pateros, Paranaque, Marikina, Muntinlupa and Taguig in the province of Rizal, and Valenzuela in the province of Bulacan.[40] Metropolitan Manila was created as a response to the finding that the rapid growth of population and the increase of social and economic requirements in these areas demand a call for simultaneous and unified development; that the public services rendered by the respective local governments could be

administered more efficiently and economically if integrated under a system of central planning; and this coordination, "especially in the maintenance of peace and order and the eradication of social and economic ills that fanned the flames of rebellion and discontent [were] part of reform measures under Martial Law essential to the safety and security of the State."[41]

Metropolitan Manila was established as a "public corporation" with the following powers: Calrs-pped

"Section 1. Creation of the Metropolitan Manila.There is hereby created a public corporation, to be known as the Metropolitan Manila, vested with powers and attributes of a corporation including the power to make contracts, sue and be sued, acquire, purchase, expropriate, hold, transfer and dispose of property and such other powers as are necessary to carry out its purposes. The Corporation shall be administered by a Commission created under this Decree."[42]

The administration of Metropolitan Manila was placed under the Metro Manila Commission (MMC) vested with the following powers:

"Sec. 4. Powers and Functions of the Commission. - The Commission shall have the following powers and functions:

1. To act as a central government to establish and administer programs and provide services common to the area;

2. To levy and collect taxes and special assessments, borrow and expend money and issue bonds, revenue certificates, and other obligations of indebtedness. Existing tax measures should, however, continue to be operative until otherwise modified or repealed by the Commission;

3. To charge and collect fees for the use of public service facilities;

4. To appropriate money for the operation of the metropolitan government and review appropriations for the city and municipal units within its jurisdiction with authority to disapprove the same if found to be not in accordance with the established policies of the Commission, without prejudice to any contractual obligation of the local government units involved existing at the time of approval of this Decree;

5. To review, amend, revise or repeal all ordinances, resolutions and acts of cities and municipalities within Metropolitan Manila;

6. To enact or approve ordinances, resolutions and to fix penalties for any violation thereof which shall not exceed a fine of P10,000.00 or imprisonment of six years or both such fine and imprisonment for a single offense;

7. To perform general administrative, executive and policy-making functions;

8. To establish a fire control operation center, which shall direct the fire services of the city and municipal governments in the metropolitan area;

9. To establish a garbage disposal operation center, which shall direct garbage collection and disposal in the metropolitan area;

10. To establish and operate a transport and traffic center, which shall direct traffic activities; Jjjuris

11. To coordinate and monitor governmental and private activities pertaining to essential services such as transportation, flood control and drainage, water supply and sewerage, social, health and environmental services, housing, park development, and others;

12. To insure and monitor the undertaking of a comprehensive social, economic and physical planning and development of the area;

13. To study the feasibility of increasing barangay participation in the affairs of their respective local governments and to propose to the President of the Philippines definite programs and policies for implementation;

14. To submit within thirty (30) days after the close of each fiscal year an annual report to the President of the Philippines and to submit a periodic report whenever deemed necessary; and

15. To perform such other tasks as may be assigned or directed by the President of the Philippines." Sc jj

The MMC was the "central government" of Metro Manila for the purpose of establishing and administering programs providing services common to the area. As a "central government" it had the power to levy and collect taxes and special assessments, the power to charge and collect fees; the power to appropriate money for its operation, and at the same time, review appropriations for the city and municipal units within its jurisdiction. It was bestowed the power to enact or approve ordinances, resolutions and fix penalties for violation of such ordinances and resolutions. It also had the power to review, amend, revise or repeal all ordinances, resolutions and acts of

any of the four (4) cities and thirteen (13) municipalities comprising Metro Manila.

P. D. No. 824 further provided:

"Sec. 9. Until otherwise provided, the governments of the four cities and thirteen municipalities in the Metropolitan Manila shall continue to exist in their present form except as may be inconsistent with this Decree. The members of the existing city and municipal councils in Metropolitan Manila shall, upon promulgation of this Decree, and until December 31, 1975, become members of the Sangguniang Bayan which is hereby created for every city and municipality of Metropolitan Manila.

In addition, the Sangguniang Bayan shall be composed of as many barangay captains as may be determined and chosen by the Commission, and such number of representatives from other sectors of the society as may be appointed by the President upon recommendation of the Commission.

x x x.

The Sangguniang Bayan may recommend to the Commission ordinances, resolutions or such measures as it may adopt; Provided,

that no such ordinance, resolution or measure shall become effective, until after its approval by the Commission; and Provided further, that the power to impose taxes and other levies, the power to appropriate money and the power to pass ordinances or resolutions with penal sanctions shall be vested exclusively in the Commission."

The creation of the MMC also carried with it the creation of the Sangguniang Bayan. This was composed of the members of the component city and municipal councils, barangay captains chosen by the MMC and sectoral representatives appointed by the President. The Sangguniang Bayan had the power to recommend to the MMC the adoption of ordinances, resolutions or measures. It was the MMC itself, however, that possessed legislative powers. All ordinances, resolutions and measures recommended by the Sangguniang Bayan were subject to the MMCs approval. Moreover, the power to impose taxes and other levies, the power to appropriate money, and the power to pass ordinances or resolutions with penal sanctions were vested exclusively in the MMC. Sce-dp

Thus, Metropolitan Manila had a "central government," i.e., the MMC which fully possessed legislative and police powers. Whatever legislative powers the component cities and municipalities had were all subject to review and approval by the MMC.

After President Corazon Aquino assumed power, there was a clamor to restore the autonomy of the local government units in Metro

Manila. Hence, Sections 1 and 2 of Article X of the 1987 Constitution provided: Sj cj

"Section 1. The territorial and political subdivisions of the Republic of the Philippines are the provinces, cities, municipalities and barangays. There shall be autonomous regions in Muslim Mindanao and the Cordilleras as herein provided.

Section 2. The territorial and political subdivisions shall enjoy local autonomy."

The Constitution, however, recognized the necessity of creating metropolitan regions not only in the existing National Capital Region but also in potential equivalents in the Visayas and Mindanao.[43] Section 11 of the same Article X thus provided:

"Section 11. The Congress may, by law, create special metropolitan political subdivisions, subject to a plebiscite as set forth in Section 10 hereof. The component cities and municipalities shall retain their basic autonomy and shall be entitled to their own local executives and legislative assemblies. The jurisdiction of the metropolitan authority that will thereby be created shall be limited to basic services requiring coordination."

The Constitution itself expressly provides that Congress may, by law, create "special metropolitan political subdivisions" which shall be subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected; the jurisdiction of this subdivision shall be limited to basic services requiring coordination; and the cities and municipalities comprising this subdivision shall retain their basic autonomy and their own local executive and legislative assemblies.[44] Pending enactment of this law, the Transitory Provisions of the Constitution gave the President of the Philippines the power to constitute the Metropolitan Authority, viz:

"Section 8. Until otherwise provided by Congress, the President may constitute the Metropolitan Authority to be composed of the heads of all local government units comprising the Metropolitan Manila area."[45]

In 1990, President Aquino issued Executive Order (E. O.) No. 392 and constituted the Metropolitan Manila Authority (MMA). The powers and functions of the MMC were devolved to the MMA.[46] It ought to be stressed, however, that not all powers and functions of the MMC were passed to the MMA. The MMAs power was limited to the "delivery of basic urban services requiring coordination in Metropolitan Manila."*47+ The MMAs governing body, the Metropolitan Manila Council, although composed of the mayors of the component cities and municipalities, was merely given the power of: (1) formulation of policies on the delivery of basic services requiring coordination and consolidation; and (2) promulgation of

resolutions and other issuances, approval of a code of basic services and the exercise of its rule-making power.[48]

Under the 1987 Constitution, the local government units became primarily responsible for the governance of their respective political subdivisions. The MMAs jurisdiction was limited to addressing common problems involving basic services that transcended local boundaries. It did not have legislative power. Its power was merely to provide the local government units technical assistance in the preparation of local development plans. Any semblance of legislative power it had was confined to a "review [of] legislation proposed by the local legislative assemblies to ensure consistency among local governments and with the comprehensive development plan of Metro Manila," and to "advise the local governments accordingly."[49]

When R.A. No. 7924 took effect, Metropolitan Manila became a "special development and administrative region" and the MMDA a "special development authority" whose functions were "without prejudice to the autonomy of the affected local government units." The character of the MMDA was clearly defined in the legislative debates enacting its charter.

R. A. No. 7924 originated as House Bill No. 14170/ 11116 and was introduced by several legislators led by Dante Tinga, Roilo Golez and Feliciano Belmonte. It was presented to the House of Representatives

by the Committee on Local Governments chaired by Congressman Ciriaco R. Alfelor. The bill was a product of Committee consultations with the local government units in the National Capital Region (NCR), with former Chairmen of the MMC and MMA,[50] and career officials of said agencies. When the bill was first taken up by the Committee on Local Governments, the following debate took place:

"THE CHAIRMAN [Hon. Ciriaco Alfelor]: Okay, Let me explain. This has been debated a long time ago, you know. Its a special we can create a special metropolitan political subdivision. Supreme

Actually, there are only six (6) political subdivisions provided for in the Constitution: barangay, municipality, city, province, and we have the Autonomous Region of Mindanao and we have the Cordillera. So we have 6. Now.

HON. [Elias] LOPEZ: May I interrupt, Mr. Chairman. In the case of the Autonomous Region, that is also specifically mandated by the Constitution.

THE CHAIRMAN: Thats correct. But it is considered to be a political subdivision. What is the meaning of a political subdivision? Meaning to say, that it has its own government, it has its own political personality, it has the power to tax, and all governmental powers: police power and everything. All right. Authority is different; because

it does not have its own government. It is only a council, it is an organization of political subdivision, powers, no, which is not imbued with any political power. Esmmis

If you go over Section 6, where the powers and functions of the Metro Manila Development Authority, it is purely coordinative. And it provides here that the council is policy-making. All right.

Under the Constitution is a Metropolitan Authority with coordinative power. Meaning to say, it coordinates all of the different basic services which have to be delivered to the constituency. All right.

There is now a problem. Each local government unit is given its respective as a political subdivision. Kalookan has its powers, as provided for and protected and guaranteed by the Constitution. All right, the exercise. However, in the exercise of that power, it might be deleterious and disadvantageous to other local government units. So, we are forming an authority where all of these will be members and then set up a policy in order that the basic services can be effectively coordinated. All right. justice

Of course, we cannot deny that the MMDA has to survive. We have to provide some funds, resources. But it does not possess any political power. We do not elect the Governor. We do not have the power to tax. As a matter of fact, I was trying to intimate to the author that it

must have the power to sue and be sued because it coordinates. All right. It coordinates practically all these basic services so that the flow and the distribution of the basic services will be continuous. Like traffic, we cannot deny that. Its before our eyes. Sewerage, flood control, water system, peace and order, we cannot deny these. Its right on our face. We have to look for a solution. What would be the right solution? All right, we envision that there should be a coordinating agency and it is called an authority. All right, if you do not want to call it an authority, its alright. We may call it a council or maybe a management agency.

x x x."[51]

Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is that given to the Metro Manila Council to promulgate administrative rules and regulations in the implementation of the MMDAs functions. There is no grant of authority to enact ordinances and regulations for the general welfare of the inhabitants of the metropolis. This was explicitly stated in the last Committee deliberations prior to the bills presentation to Congress. Thus: Ed-p

"THE CHAIRMAN: Yeah, but we have to go over the suggested revision. I think this was already approved before, but it was reconsidered in view of the proposals, set-up, to make the MMDA stronger. Okay, so if there is no objection to paragraph "f" And then

next is paragraph "b," under Section 6. "It shall approve metro-wide plans, programs and projects and issue ordinances or resolutions deemed necessary by the MMDA to carry out the purposes of this Act." Do you have the powers? Does the MMDA because that takes the form of a local government unit, a political subdivision.

HON. [Feliciano] BELMONTE: Yes, I believe so, your Honor. When we say that it has the policies, its very clear that those policies must be followed. Otherwise, whats the use of empowering it to come out with policies. Now, the policies may be in the form of a resolution or it may be in the form of a ordinance. The term "ordinance" in this case really gives it more teeth, your honor. Otherwise, we are going to see a situation where you have the power to adopt the policy but you cannot really make it stick as in the case now, and I think here is Chairman Bunye. I think he will agree that that is the case now. Youve got the power to set a policy, the body wants to follow your policy, then we say lets call it an ordinance and see if they will not follow it.

THE CHAIRMAN: Thats very nice. I like that. However, there is a constitutional impediment. You are making this MMDA a political subdivision. The creation of the MMDA would be subject to a plebiscite. That is what Im trying to avoid. Ive been trying to avoid this kind of predicament. Under the Constitution it states: if it is a political subdivision, once it is created it has to be subject to a

plebiscite. Im trying to make this as administrative. Thats why we place the Chairman as a cabinet rank.

HON. BELMONTE: All right, Mr. Chairman, okay, what you are saying there is .

THE CHAIRMAN: In setting up ordinances, it is a political exercise. Believe me.

HON. [Elias] LOPEZ: Mr. Chairman, it can be changed into issuances of rules and regulations. That would be it shall also be enforced. Jksm

HON. BELMONTE: Okay, I will .

HON. LOPEZ: And you can also say that violation of such rule, you impose a sanction. But you know, ordinance has a different legal connotation.

HON. BELMONTE: All right. I defer to that opinion, your Honor. sc

THE CHAIRMAN: So instead of ordinances, say rules and regulations.

HON. BELMONTE: Or resolutions. Actually, they are actually considering resolutions now.

THE CHAIRMAN: Rules and resolutions.

HON. BELMONTE: Rules, regulations and resolutions."[52]

The draft of H. B. No. 14170/ 11116 was presented by the Committee to the House of Representatives. The explanatory note to the bill stated that the proposed MMDA is a "development authority" which is a "national agency, not a political government unit."[53] The explanatory note was adopted as the sponsorship speech of the Committee on Local Governments. No interpellations or debates were made on the floor and no amendments introduced. The bill was approved on second reading on the same day it was presented.[54]

When the bill was forwarded to the Senate, several amendments were made. These amendments, however, did not affect the nature of the MMDA as originally conceived in the House of Representatives.[55]

It is thus beyond doubt that the MMDA is not a local government unit or a public corporation endowed with legislative power. It is not even

a "special metropolitan political subdivision" as contemplated in Section 11, Article X of the Constitution. The creation of a "special metropolitan political subdivision" requires the approval by a majority of the votes cast in a plebiscite in the political units directly affected.[56] R. A. No. 7924 was not submitted to the inhabitants of Metro Manila in a plebiscite. The Chairman of the MMDA is not an official elected by the people, but appointed by the President with the rank and privileges of a cabinet member. In fact, part of his function is to perform such other duties as may be assigned to him by the President,[57] whereas in local government units, the President merely exercises supervisory authority. This emphasizes the administrative character of the MMDA. Newmiso

Clearly then, the MMC under P. D. No. 824 is not the same entity as the MMDA under R. A. No. 7924. Unlike the MMC, the MMDA has no power to enact ordinances for the welfare of the community. It is the local government units, acting through their respective legislative councils, that possess legislative power and police power. In the case at bar, the Sangguniang Panlungsod of Makati City did not pass any ordinance or resolution ordering the opening of Neptune Street, hence, its proposed opening by petitioner MMDA is illegal and the respondent Court of Appeals did not err in so ruling. We desist from ruling on the other issues as they are unnecessary. Esmso

We stress that this decision does not make light of the MMDAs noble efforts to solve the chaotic traffic condition in Metro Manila. Everyday, traffic jams and traffic bottlenecks plague the metropolis.

Even our once sprawling boulevards and avenues are now crammed with cars while city streets are clogged with motorists and pedestrians. Traffic has become a social malaise affecting our peoples productivity and the efficient delivery of goods and services in the country. The MMDA was created to put some order in the metropolitan transportation system but unfortunately the powers granted by its charter are limited. Its good intentions cannot justify the opening for public use of a private street in a private subdivision without any legal warrant. The promotion of the general welfare is not antithetical to the preservation of the rule of law. Sdjad

IN VIEW WHEREOF, the petition is denied. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 39549 are affirmed. Sppedsc

SO ORDERED.

Davide, Jr., C.J., (Chairman), Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

[1] Annex "D" to the CA petition, Court of Appeals (CA) Rollo, p. 27.

[2] Annex "J" to Petition, Rollo, pp. 76-78.

[3] Minutes of the Ocular Inspection, Court of Appeals Rollo, pp. 193194.

[4] CA Rollo, p. 332.

[5] Roberto L. del Rosario is a resident of Neptune Street who allegedly spearheaded a campaign to open Neptune Street to the public-- Motion to Cite in Contempt, CA Rollo, pp. 412-415.

[6] CA decision, p. 10, Rollo, p. 61.

[7] Petition, p. 15, Rollo, p. 24.

[8] 168 SCRA 634 (1988).

[9] Petition, p. 24, Rollo, p. 33.

[10] United States v. Pompeya, 31 Phil. 245, 253-254 [1915]; Churchill v. Rafferty, 32 Phil. 580, 603 [1915]; People v. Pomar, 46 Phil. 440, 447 [1924].

[11] Bernas, The 1987 Constitution of the Philippines, A Commentary, pp. 95-98 [1996].

[12] Cruz, Constitutional Law, p. 44 [1995].

[13] Id., see also 16 C.J.S., Constitutional Law, Sec. 177 [1956 ed.].

[14] Cruz, supra, at 44; Binay v. Domingo, 201 SCRA 508, 513-514 [1991].

[15] Magtajas v. Pryce Properties, 234 SCRA 255, 272 [1994].

[16] Bernas, supra, at 959, citing UP Law Center Revision Project, Part II, 712 [1970] citing Sady, "Improvement of Local Government Administration for Development Purpose," Journal of Local Administration Overseas 135 [July 1962].

[17] Section 15, Book I, Local Government Code of 1991

[18] Id.

[19] Titles I, II, III, IV, Book III, Local Government Code of 1991.

[20] Section 1, Article X, 1987 Constitution.

[21] Section 16, Book I, Local Government Code of 1991; also cited in Magtajas v. Pryce Properties Corp., Inc. supra, at 264-265.

[22] Sections 468 (a), 458 (a), and 447 (a), Book III, Local Government Code of 1991.

[23] Section 391 (a), Book III, Local Government Code of 1991.

[24] Entitled "An Act Creating the Metropolitan Manila Development Authority, Defining its Powers and Functions, Providing Funds Therefor and for Other Purposes."

[25] Section 1, R.A. 7924.

[26] Section 3, par. 1, R. A. 7924.

[27] Section 3 (b), supra; emphasis supplied.

[28] Section 9, paragraph 5, supra.

[29] Section 4, supra. Non-voting members of the Council are the heads of the Department of Transportation and Communications (DOTC), Department of Public Works and Highways (DPWH), Department of Tourism (DOT), Department of Budget and Management (DBM), Housing and Urban Development Coordinating Committee (HUDCC), and the Philippine National Police (PNP) or their duly authorized representatives.

[30] Section 1, R.A. 7924.

[31] Section 2, supra.

[32] Op cit.

[33] 168 SCRA 634 [1988].

[34] 176 SCRA 719 [1989].

[35] 168 SCRA 634, 654-655.

[36] Id. at 643.

[37] Id, at 730.

[38] Id. at 723.

[39] Like the perimeter wall along Jupiter StreetId. at 734.

[40] Section 2, P.D. 824.

[41] Whereas Clauses, P.D. 824.

[42] Section 1, P.D. 824; emphasis supplied.

[43] Speech of then Constitutional Commissioner Blas Ople, see Bernas, The Intent of the 1986 Constitution Writers, pp. 706-707 [1995].

[44] Section 11, Article X, 1987 Constitution.

[45] Section 8, Article XVIII, 1987 Constitution.

[46] Section 3, E.O. 392.

[47] Section 1, supra.

[48] Section 2, supra.

[49] Section 6, supra.

[50] Chairmen Ismael Mathay, Jr. and Ignacio Bunye.

[51] Deliberations of the Committee on Local Government, House of Representatives, Congress of the Philippines, November 10, 1993, pp. 46-48.

[52] Deliberations of the Committee on Local Governments, House of Representatives, Congress of the Philippines, November 9, 1994, pp. 68-70.

[53] Explanatory Note to H. B. 11116, p. 3.

[54] H.B. 14170/ 11116, Sponsorship and Debates, December 20, 1994.

[55] Compare H.B. 14170/ 11116 with R. A. 7924; see Senate Amendments, February 21, 1995.

[56] Section 10, Article X of the 1987 Constitution reads:

Sec. 10. No province, city, municipality, or barangay may be created, divided, merged, abolished, or its boundary substantially altered except in accordance with the criteria established in the local government code and subject to approval by a majority of the votes cast in a plebiscite in the political units directly affected."

[57] Section 7 (g), R.A. 7924.

EN BANC

REVIEW CENTER ASSOCIATION OF THE PHILIPPINES,

Petitioner,

- versus -

EXECUTIVE SECRETARY

EDUARDO ERMITA and

COMMISSION ON HIGHER

EDUCATION represented by its

Chairman ROMULO L. NERI,

Respondents.

CPA REVIEW SCHOOL OF THE

PHILIPPINES, INC. (CPAR),

PROFESSIONAL REVIEW AND

TRAINING CENTER, INC. (PRTC), ReSA REVIEW SCHOOL, INC.

(ReSA), CRC-ACE REVIEW

SCHOOL, INC. (CRC-ACE),

Petitioners-Intervenors.

PIMSAT COLLEGES,

Respondent-Intervenor.

G.R. No. 180046

Present:

PUNO, C.J.,

QUISUMBING,

YNARES-SANTIAGO,

CARPIO,

AUSTRIA-MARTINEZ,

CORONA,

CARPIO MORALES,

TINGA,

CHICO-NAZARIO,

VELASCO, JR.,

NACHURA,

LEONARDO-DE CASTRO,

BRION, and

PERALTA, JJ.

Promulgated:

April 2, 2009

x--------------------------------------------------x

DECISION

CARPIO, J.:

The Case

Before the Court is a petition for prohibition and mandamus assailing Executive Order No. 566 (EO 566)[1] and Commission on

Higher Education (CHED) Memorandum Order No. 30, series of 2007 (RIRR).[2]

The Antecedent Facts

On 11 and 12 June 2006, the Professional Regulation Commission (PRC) conducted the Nursing Board Examinations nationwide. In June 2006, licensure applicants wrote the PRC to report that handwritten copies of two sets of examinations were circulated during the examination period among the examinees reviewing at the R.A. Gapuz Review Center and Inress Review Center. George Cordero, Inress Review Centers President, was then the incumbent President of the Philippine Nurses Association. The examinees were provided with a list of 500 questions and answers in two of the examinations five subjects, particularly Tests III (Psychiatric Nursing) and V (Medical-Surgical Nursing). The PRC later admitted the leakage and traced it to two Board of Nursing members.[3] On 19 June 2006, the PRC released the results of the Nursing Board Examinations. On 18 August 2006, the Court of Appeals restrained the PRC from proceeding with the oath-taking of the successful examinees set on 22 August 2006.

Consequently, President Gloria Macapagal-Arroyo (President Arroyo) replaced all the members of the PRCs Board of Nursing. President Arroyo also ordered the examinees to re-take the Nursing Board Examinations.

On 8 September 2006, President Arroyo issued EO 566 which authorized the CHED to supervise the establishment and operation of all review centers and similar entities in the Philippines.

On 3 November 2006, the CHED, through its then Chairman Carlito S. Puno (Chairman Puno), approved CHED Memorandum Order No. 49, series of 2006 (IRR).[4]

In a letter dated 24 November 2006,[5] the Review Center Association of the Philippines (petitioner), an organization of independent review centers, asked the CHED to amend, if not withdraw the IRR arguing, among other things, that giving permits to operate a review center to Higher Education Institutions (HEIs) or consortia of HEIs and professional organizations will effectively abolish independent review centers.

In a letter dated 3 January 2007,[6] Chairman Puno wrote petitioner, through its President Jose Antonio Fudolig (Fudolig), that to suspend the implementation of the IRR would be inconsistent with the mandate of EO 566. Chairman Puno wrote that the IRR was presented to the stakeholders during a consultation process prior to its finalization and publication on 13 November 2006. Chairman Puno also wrote that petitioners comments and suggestions would be considered in the event of revisions to the IRR.

In view of petitioners continuing request to suspend and reevaluate the IRR, Chairman Puno, in a letter dated 9 February 2007,[7] invited petitioners representatives to a dialogue on 14 March 2007. In accordance with what was agreed upon during the dialogue,

petitioner submitted to the CHED its position paper on the IRR. Petitioner also requested the CHED to confirm in writing Chairman Punos statements during the dialogue, particularly on lowering of the registration fee from P400,000 to P20,000 and the requirement for reviewers to have five years teaching experience instead of five years administrative experience. Petitioner likewise requested for a categorical answer to their request for the suspension of the IRR. The CHED did not reply to the letter.

On 7 May 2007, the CHED approved the RIRR. On 22 August 2007, petitioner filed before the CHED a Petition to Clarify/Amend Revised Implementing Rules and Regulations[8] praying for a ruling:

1. Amending the RIRR by excluding independent review centers from the coverage of the CHED;

2. Clarifying the meaning of the requirement for existing review centers to tie-up or be integrated with HEIs, consortium or HEIs and PRC-recognized professional associations with recognized programs, or in the alternative, to convert into schools; and

3. Revising the rules to make it conform with Republic Act No. 7722 (RA 7722)[9] limiting the CHEDs coverage to public and private institutions of higher education as well as degree-granting programs in post-secondary educational institutions.

On 8 October 2007, the CHED issued Resolution No. 718-2007[10] referring petitioners request to exclude independent review centers from CHEDs supervision and regulation to the Office of the President as the matter requires the amendment of EO 566. In a letter dated 17 October 2007,[11] then CHED Chairman Romulo L. Neri (Chairman Neri) wrote petitioner regarding its petition to be excluded from the coverage of the CHED in the RIRR. Chairman Neri stated:

While it may be true that regulation of review centers is not one of the mandates of CHED under Republic Act 7722, however, on September 8, 2006, Her Excellency, President Gloria MacapagalArroyo, issued Executive Order No. 566 directing the Commission on Higher Education to regulate the establishment and operation of review centers and similar entities in the entire country.

With the issuance of the aforesaid Executive Order, the CHED now is the agency that is mandated to regulate the establishment and operation of all review centers as provided for under Section 4 of the Executive Order which provides that No review center or similar entities shall be established and/or operate review classes without the favorable expressed indorsement of the CHED and without the issuance of the necessary permits or authorizations to conduct review classes. x x x

To exclude the operation of independent review centers from the coverage of CHED would clearly contradict the intention of the said Executive Order No. 566.

Considering that the requests requires the amendment of Executive Order No. 566, the Commission, during its 305th Commission Meeting, resolved that the said request be directly referred to the Office of the President for appropriate action.

As to the request to clarify what is meant by tie-up/be integrated with an HEI, as required under the Revised Implementing Rules and Regulations, tie-up/be integrated simply means, to be in partner with an HEI.[12] (Boldfacing and underscoring in the original)

On 26 October 2007, petitioner filed a petition for Prohibition and Mandamus before this Court praying for the annulment of the RIRR, the declaration of EO 566 as invalid and unconstitutional, and the prohibition against CHED from implementing the RIRR.

Dr. Freddie T. Bernal, Director III, Officer-In-Charge, Office of the Director IV of CHED, sent a letter[13] to the President of Northcap Review Center, Inc., a member of petitioner, that it had until 27 November 2007 to comply with the RIRR.

On 15 February 2008,[14] PIMSAT Colleges (respondentintervenor) filed a Motion For Leave to Intervene and To Admit Comment-in-Intervention and a Comment-in-Intervention praying for the dismissal of the petition. Respondent-intervenor alleges that the Office of the President and the CHED did not commit any act of grave abuse of discretion in issuing EO 566 and the RIRR. Respondentintervenor alleges that the requirements of the RIRR are reasonable, doable, and are not designed to deprive existing review centers of their review business. The Court granted the Motion for Leave to Intervene and to Admit Comment-in-Intervention in its 11 March 2008 Resolution.[15]

On 23 April 2008, a Motion for Leave of Court for Intervention In Support of the Petition and a Petition In Intervention were filed by CPA Review School of the Philippines, Inc. (CPAR), Professional Review and Training Center, Inc. (PRTC), ReSA Review School, Inc.

(ReSA), CRC-ACE Review School, Inc. (CRC-ACE), all independent CPA review centers operating in Manila (collectively, petitionersintervenors). Petitioners-intervenors pray for the declaration of EO 566 and the RIRR as invalid on the ground that both constitute an unconstitutional exercise of legislative power. The Court granted the intervention in its 29 April 2008 Resolution.[16]

On 21 May 2008, the CHED issued CHED Memorandum Order No. 21, Series of 2008 (CMO 21, s. 2008)[17] extending the deadline for six months from 27 May 2008 for all existing independent review centers to tie-up or be integrated with HEIs in accordance with the RIRR.

In its 25 November 2008 Resolution, this Court resolved to require the parties to observe the status quo prevailing before the issuance of EO 566, the RIRR, and CMO 21, s. 2008.

The Assailed Executive Order and the RIRR

Executive Order No. 566 states in full:

EXECUTIVE ORDER NO. 566

DIRECTING THE COMMISSION ON HIGHER EDUCATION TO REGULATE THE ESTABLISHMENT AND OPERATION OF REVIEW CENTERS AND SIMILAR ENTITIES

WHEREAS, the State is mandated to protect the right of all citizens to quality education at all levels and shall take appropriate steps to make education accessible to all, pursuant to Section 1, Article XIV of the 1987 Constitution;

WHEREAS, the State has the obligation to ensure and promote quality education through the proper supervision and regulation of the licensure examinations given through the various Boards of Examiners under the Professional Regulation Commission;

WHEREAS, the lack of regulatory framework for the establishment and operation of review centers and similar entities, as shown in recent events, have adverse consequences and affect public interest and welfare;

WHEREAS, the overriding necessity to protect the public against substandard review centers and unethical practices committed by

some review centers demand that a regulatory framework for the establishment and operation of review centers and similar entities be immediately instituted;

WHEREAS, Republic Act No. 7722, otherwise known as the Higher Education Act of 1994, created the Commission on Higher Education, which is best equipped to carry out the provisions pertaining to the regulation of the establishment and operation of review centers and similar entities.

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, the President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby order:

SECTION 1. Establishment of a System of Regulation for Review Centers and Similar Entities. The Commission on Higher Education (CHED), in consultation with other concerned government agencies, is

hereby directed to formulate a framework for the regulation of review centers and similar entities, including but not limited to the development and institutionalization of policies, standards, guidelines for the establishment, operation and accreditation of review centers and similar entities; maintenance of a mechanism to monitor the adequacy, transparency and propriety of their operations; and reporting mechanisms to review performance and ethical practice.

SEC. 2. Coordination and Support. The Professional Regulation Commission (PRC), Technical Skills Development Authority (TESDA), Securities and Exchange Commission (SEC), the various Boards of Examiners under the PRC, as well as other concerned non-government organizations life professional societies, and various government agencies, such as the Department of Justice (DOJ), National Bureau of Investigation (NBI), Office of the Solicitor General (OSG), and others that may be tapped later, shall provide the necessary assistance and technical support to the CHED in the successful operationalization of the System of Regulation envisioned by this Executive Order.

SEC. 3. Permanent Office and Staff. To ensure the effective implementation of the System of Regulation, the CHED shall organize

a permanent office under its supervision to be headed by an official with the rank of Director and to be composed of highly competent individuals with expertise in educational assessment, evaluation and testing; policies and standards development, monitoring, legal and enforcement; and statistics as well as curriculum and instructional materials development. The CHED shall submit the staffing pattern and budgetary requirements to the Department of Budget and Management (DBM) for approval.

SEC. 4. Indorsement Requirement. No review center or similar entities shall be established and/or operate review classes without the favorable expressed indorsement of the CHED and without the issuance of the necessary permits or authorizations to conduct review classes. After due consultation with the stakeholders, the concerned review centers and similar entities shall be given a reasonable period, at the discretion of the CHED, to comply with the policies and standards, within a period not exceeding three (3) years, after due publication of this Executive Order. The CHED shall see to it that the System of Regulation including the implementing mechanisms, policies, guidelines and other necessary procedures and documentation for the effective implementation of the System, are completed within sixty days (60) upon effectivity of this Executive Order.

SEC. 5. Funding. The initial amount necessary for the development and implementation of the System of Regulation shall be sourced from the CHED Higher Education Development Fund (HEDF), subject to the usual government accounting and auditing practices, or from any applicable funding source identified by the DBM. For the succeeding fiscal year, such amounts as may be necessary for the budgetary requirement of implementing the System of Regulation and the provisions of this Executive Order shall be provided for in the annual General Appropriations Act in the budget of the CHED. Whenever necessary, the CHED may tap its Development Funds as supplemental source of funding for the effective implementation of the regulatory system. In this connection, the CHED is hereby authorized to create special accounts in the HEDF exclusively for the purpose of implementing the provisions of this Executive Order.

SEC. 6. Review and Reporting. The CHED shall provide for the periodic review performance of review centers and similar entities and shall make a report to the Office of the President of the results of

such review, evaluation and monitoring.

SEC. 7. Separability. Any portion or provision of this Executive Order that may be declared unconstitutional shall not have the effect of nullifying other provisions hereof, as long as such remaining provisions can still subsist and be given effect in their entirely.

SEC. 8. Repeal. All rules and regulations, other issuances or parts thereof, which are inconsistent with this Executive Order, are hereby repealed or modified accordingly.

SEC. 9. Effectivity. This Executive Order shall take effect immediately upon its publication in a national newspaper of general circulation.

DONE in the City of Manila, this 8th day of September, in the year of Our Lord, Two Thousand and Six.

(Sgd.) Gloria Macapagal-Arroyo

By the President:

(Sgd.) Eduardo R. Ermita

Executive Secretary

The pertinent provisions of the RIRR affecting independent review centers are as follows:

Rule VII

IMPLEMENTING GUIDELINES AND PROCEDURES

Section 1. Authority to Establish and Operate Only CHED recognized, accredited and reputable HEIs may be authorized to establish and operate review center/course by the CHED upon full compliance with the conditions and requirements provided herein and in other pertinent laws, rules and regulations. In addition, a consortium or consortia of qualified schools and/or entities may establish and operate review centers or conduct review classes upon compliance with the provisions of these Rules.

Rule XIV

TRANSITORY PROVISIONS

Section 1. Review centers that are existing upon the approval of Executive Order No. 566 shall be given a grace period of up to one (1) year, to tie-up/be integrated with existing HEIs[,] consortium of HEIs and PRC recognized Professional Associations with recognized programs under the conditions set forth in this Order and upon mutually acceptable covenants by the contracting parties. In the alternative, they may convert as a school and apply for the course covered by the review subject to rules and regulations of the CHED and the SEC with respect to the establishment of schools. In the meantime, no permit shall be issued if there is non-compliance with these conditions or non-compliance with the requirements set forth in these rules.

Section 2. Only after full compliance with the requirements shall a Permit be given by the CHED to review centers contemplated under this Rule.

Section 3. Failure of existing review centers to fully comply with the above shall bar them from existing as review centers and they shall be

deemed as operating illegally as such. In addition, appropriate administrative and legal proceedings shall be commence[d] against the erring entities that continue to operate and appropriate sanctions shall be imposed after due process.

The Issues

The issues raised in this case are the following:

1. Whether EO 566 is an unconstitutional exercise by the Executive of legislative power as it expands the CHEDs jurisdiction; and

2. Whether the RIRR is an invalid exercise of the Executives rulemaking power.

The Ruling of this Court

The petition has merit.

Violation of Judicial Hierarchy

The Office of the Solicitor General (OSG) prays for the dismissal of the petition. Among other grounds, the OSG alleges that petitioner violated the rule on judicial hierarchy in filing the petition directly with this Court.

This Courts original jurisdiction to issue a writ of certiorari, prohibition, mandamus, quo warranto, habeas corpus, and injunction is not exclusive but is concurrent with the Regional Trial Courts and the Court of Appeals in certain cases.[18] The Court has explained:

This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the writs an absolute, unrestrained freedom of choice of the court to which application therefor will be directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and also serves as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard of that judicial hierarchy most certainly indicates that petitions for the issuance of

extraordinary writs against first level (inferior) courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Courts original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is [an] established policy. It is a policy necessary to prevent inordinate demands upon the Courts time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Courts docket.*19+

The Court has further explained:

The propensity of litigants and lawyers to disregard the hierarchy of courts in our judicial system by seeking relief directly from this Court must be put to a halt for two reasons: (1) it would be an imposition upon the precious time of this Court; and (2) it would cause an inevitable and resultant delay, intended or otherwise, in the adjudication of cases, which in some instances had to be remanded or referred to the lower court as the proper forum under the rules of

procedure, or as better equipped to resolve the issues because this Court is not a trier of facts.[20]

The rule, however, is not absolute, as when exceptional and compelling circumstances justify the exercise of this Court of its primary jurisdiction. In this case, petitioner alleges that EO 566 expands the coverage of RA 7722 and in doing so, the Executive Department usurps the legislative powers of Congress. The issue in this case is not only the validity of the RIRR. Otherwise, the proper remedy of petitioner and petitioners-intervenors would have been an ordinary action for the nullification of the RIRR before the Regional Trial Court.[21] The alleged violation of the Constitution by the Executive Department when it issued EO 566 justifies the exercise by the Court of its primary jurisdiction over the case. The Court is not precluded from brushing aside technicalities and taking cognizance of an action due to its importance to the public and in keeping with its duty to determine whether the other branches of the Government have kept themselves within the limits of the Constitution.[22]

OSGs Technical Objections

The OSG alleges that the petition should be dismissed because the verification and certification of non-forum shopping were signed only by Fudolig without the express authority of any board resolution or power of attorney. However, the records show that Fudolig was authorized under Board Resolution No. 3, series of 2007[23] to file a petition before this Court on behalf of petitioner and to execute any and all documents necessary to implement the resolution.

The OSG also alleges that the petition should be dismissed for violation of the 2004 Rules on Notarial Practice because Fudolig only presented his community tax certificate as competent proof of identity before the notary public. The Court would have required Fudolig to comply with the 2004 Rules on Notarial Practice except that Fudolig already presented his Philippine passport before the notary public when petitioner submitted its reply to the OSGs comment.

EO 566 Expands the Coverage of RA 7722

The OSG alleges that Section 3 of RA 7722 should be read in conjunction with Section 8, enumerating the CHEDs powers and functions. In particular, the OSG alleges that the CHED has the power under paragraphs (e) and (n) of Section 8 to:

(e) monitor and evaluate the performance of programs and institutions of higher learning for appropriate incentives as well as the imposition of sanctions such as, but not limited to, diminution or withdrawal of subsidy, recommendation on the downgrading or withdrawal of accreditation, program termination or school closure;

(n) promulgate such rules and regulations and exercise such other powers and functions as may be necessary to carry out effectively the purpose and objectives of this Act[.]

The OSG justifies its stand by claiming that the term programs x x x of higher learning is broad enough to include programs offered by review centers.

We do not agree.

Section 3 of RA 7722 provides:

Sec. 3. Creation of Commission on Higher Education. - In pursuance of the abovementioned policies, the Commission on Higher Education is hereby created, hereinafter referred to as the Commission.

The Commission shall be independent and separate from the Department of Education, Culture and Sports (DECS), and attached to the Office of the President for administrative purposes only. Its coverage shall be both public and private institutions of higher education as well as degree-granting programs in all post-secondary educational institutions, public and private. (Emphasis supplied)

Neither RA 7722 nor CHED Order No. 3, series of 1994 (Implementing Rules of RA 7722)[24] defines an institution of higher learning or a program of higher learning.

Higher education, however, is defined as education beyond the secondary level*25+ or education provided by a college or university.*26+ Under the plain meaning or verba legis rule in statutory construction, if the statute is clear, plain, and free from ambiguity, it must be given its literal meaning and applied without interpretation.[27] The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute.[28] Hence, the term higher education should be taken in its ordinary sense and should be read and interpreted together with the phrase degreegranting programs in all post-secondary educational institutions, public and private. Higher education should be taken to mean tertiary education or that which grants a degree after its completion.

Further, Articles 6 and 7 of the Implementing Rules provide:

Article 6. Scope of Application. - The coverage of the Commission shall be both public and private institutions of higher education as well as degree granting programs in all post-secondary educational institutions, public and private.

These Rules shall apply to all public and private educational institutions offering tertiary degree programs.

The establishment, conversion, or elevation of degree-granting institutions shall be within the responsibility of the Commission.

Article 7. Jurisdiction. - Jurisdiction over institutions of higher learning primarily offering tertiary degree programs shall belong to the Commission. (Emphasis supplied)

Clearly, HEIs refer to degree-granting institutions, or those offering tertiary degree or post-secondary programs. In fact, Republic Act No. 8292 or the Higher Education Modernization Act of 1997 covers chartered state universities and colleges. State universities and colleges primarily offer degree courses and programs.

Sections 1 and 8, Rule IV of the RIRR define a review center and similar entities as follows:

Section 1. REVIEW CENTER. - refers to a center operated and owned by a duly authorized entity pursuant to these Rules intending to offer to the public and/or to specialized groups whether for a fee or for free a program or course of study that is intended to refresh and enhance the knowledge and competencies and skills of reviewees obtained in the formal school setting in preparation for the licensure examinations given by the Professional Regulations Commission (PRC). The term review center as understood in these rules shall also embrace the operation or conduct of review classes or courses provided by individuals whether for a fee or not in preparation for the licensure examinations given by the Professional Regulations Commission.

xxx

Section 8. SIMILAR ENTITIES the term refer to other review centers providing review or tutorial services in areas not covered by licensure examinations given by the Professional Regulations Commission including but not limited to college entrance examinations, Civil Service examinations, tutorial services in specific fields like English, Mathematics and the like.

The same Rule defines a review course as follows:

Section 3. REVIEW COURSE refers to the set of non-degree instructional program of study and/or instructional materials/module, offered by a school with a recognized course/program requiring licensure examination, that are intended merely to refresh and enhance the knowledge or competencies and skills of reviewees.

The scopes of EO 566 and the RIRR clearly expand the CHEDs coverage under RA 7722. The CHEDs coverage under RA 7722 is limited to public and private institutions of higher education and degree-granting programs in all public and private post-secondary educational institutions. EO 566 directed the CHED to formulate a framework for the regulation of review centers and similar entities.

The definition of a review center under EO 566 shows that it refers to one which offers a program or course of study that is intended to refresh and enhance the knowledge or competencies and skills of reviewees obtained in the formal school setting in preparation for the licensure examinations given by the PRC. It also covers the operation or conduct of review classes or courses provided by individuals whether for a fee or not in preparation for the licensure examinations given by the PRC.

A review center is not an institution of higher learning as contemplated by RA 7722. It does not offer a degree-granting program that would put it under the jurisdiction of the CHED. A review course is only intended to refresh and enhance the knowledge or competencies and skills of reviewees. A reviewee is not even required to enroll in a review center or to take a review course prior to taking an examination given by the PRC. Even if a reviewee enrolls in a review center, attendance in a review course is not mandatory. The reviewee is not required to attend each review class. He is not required to take or pass an examination, and neither is he given a grade. He is also not required to submit any thesis or dissertation. Thus, programs given by review centers could not be considered programs x x x of higher learning that would put them under the jurisdiction of the CHED.

Further, the similar entities in EO 566 cover centers providing review or tutorial services in areas not covered by licensure examinations given by the PRC, which include, although not limited to, college entrance examinations, Civil Services examinations, and tutorial services. These review and tutorial services hardly qualify as programs of higher learning.

Usurpation of Legislative Power

The OSG argues that President Arroyo was merely exercising her executive power to ensure that the laws are faithfully executed. The OSG further argues that President Arroyo was exercising her residual powers under Executive Order No. 292 (EO 292),[29] particularly Section 20, Title I of Book III, thus:

Section 20. Residual Powers. - Unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws and which are not specifically enumerated above, or which are not delegated by the President in accordance with law. (Emphasis supplied)

Section 20, Title I of Book III of EO 292 speaks of other powers vested in the President under the law.[30] The exercise of the Presidents residual powers under this provision requires legislation,[31] as the provision clearly states that the exercise of the Presidents other powers and functions has to be provided for under the law. There is no law granting the President the power to amend the functions of the CHED. The President may not amend RA 7722 through an Executive Order without a prior legislation granting her such power.

The President has no inherent or delegated legislative power to amend the functions of the CHED under RA 7722. Legislative power is the authority to make laws and to alter or repeal them,[32] and this power is vested with the Congress under Section 1, Article VI of the 1987 Constitution which states:

Section 1. The legislative power shall be vested in the Congress of the Philippines which shall consist of a Senate and a House of Representatives, except to the extent reserved to the people by the provision on initiative and referendum.

In Ople v. Torres,[33] the Court declared void, as a usurpation of legislative power, Administrative Order No. 308 (AO 308) issued by the President to create a national identification system. AO 308 mandates the adoption of a national identification system even in the absence of an enabling legislation. The Court distinguished between Legislative and Executive powers, as follows:

The line that delineates Legislative and Executive power is not indistinct. Legislative power is the authority, under the Constitution, to make laws, and to alter and repeal them. The Constitution, as the will of the people in their original, sovereign and unlimited capacity, has vested this power in the Congress of the Philippines. The grant of

legislative power to Congress is broad, general and comprehensive. The legislative body possesses plenary power for all purposes of civil government. Any power, deemed to be legislative by usage and tradition, is necessarily possessed by Congress, unless the Constitution has lodged it elsewhere. In fine, except as limited by the Constitution, either expressly or impliedly, legislative power embraces all subjects and extends to matters of general concern or common interest.

While Congress is vested with the power to enact laws, the President executes the laws. The executive power is vested in the President. It is generally defined as the power to enforce and administer laws. It is the power of carrying the laws into practical operation and enforcing their due observance.

As head of the Executive Department, the President is the Chief Executive. He represents the government as a whole and sees to it that all laws are enforced by the officials and employees of his department. He has control over the executive department, bureaus and offices. This means that he has the authority to assume directly the functions of the executive department, bureau and office, or

interfere with the discretion of its officials. Corollary to the power of control, the President also has the duty of supervising the enforcement of laws for the maintenance of general peace and public order. Thus, he is granted administrative power over bureaus and offices under his control to enable him to discharge his duties effectively.

Administrative power is concerned with the work of applying policies and enforcing orders as determined by proper governmental organs. It enables the President to fix a uniform standard of administrative efficiency and check the official conduct of his agents. To this end, he can issue administrative orders, rules and regulations.

x x x. An administrative order is:

Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects of governmental operation in pursuance of

his duties as administrative head shall be promulgated in administrative orders.

An administrative order is an ordinance issued by the President which relates to specific aspects in the administrative operation of government. It must be in harmony with the law and should be for the sole purpose of implementing the law and carrying out the legislative policy. x x x.[34]

Just like AO 308 in Ople v. Torres, EO 566 in this case is not supported by any enabling law. The Court further stated in Ople:

x x x. As well stated by Fisher: x x x Many regulations however, bear directly on the public. It is here that administrative legislation must be restricted in its scope and application. Regulations are not supposed to be a substitute for the general policy-making that Congress enacts in the form of a public law. Although administrative

regulations are entitled to respect, the authority to prescribe rules and regulations is not an independent source of power to make laws.*35+

Since EO 566 is an invalid exercise of legislative power, the RIRR is also an invalid exercise of the CHEDs quasi-legislative power.

Administrative agencies exercise their quasi-legislative or rulemaking power through the promulgation of rules and regulations.[36] The CHED may only exercise its rule-making power within the confines of its jurisdiction under RA 7722. The RIRR covers review centers and similar entities which are neither institutions of higher education nor institutions offering degree-granting programs.

Exercise of Police Power

Police power to prescribe regulations to promote the health, morals, education, good order or safety, and the general welfare of the people flows from the recognition that salus populi est suprema lex the welfare of the people is the supreme law.[37] Police power primarily rests with the legislature although it may be exercised by the President and administrative boards by virtue of a valid delegation.[38] Here, no delegation of police power exists under RA 7722 authorizing the President to regulate the operations of nondegree granting review centers.

Republic Act No. 8981 is Not the Appropriate Law

It is argued that the President of the Philippines has adequate powers under the law to regulate review centers and this could have been done under an existing validly delegated authority, and that the appropriate law is Republic Act No. 8981[39] (RA 8981). Under Section 5 of RA 8981, the PRC is mandated to establish and maintain a high standard of admission to the practice of all professions and at all times ensure and safeguard the integrity of all licensure examinations. Section 7 of RA 8981 further states that the PRC shall adopt measures to preserve the integrity and inviolability of licensure examinations.

There is no doubt that a principal mandate of the PRC is to preserve the integrity of licensure examinations. The PRC has the power to adopt measures to preserve the integrity and inviolability of licensure examinations. However, this power should properly be interpreted to refer to the conduct of the examinations. The enumeration of PRCs powers under Section 7(e) includes among others, the fixing of dates and places of the examinations and the appointment of supervisors and watchers. The power to preserve the integrity and inviolability of licensure examinations should be read together with these functions. These powers of the PRC have nothing to do at all with the regulation of review centers.

The PRC has the power to investigate any of the members of the Professional Regulatory Boards (PRB) for commission of any irregularities in the licensure examinations which taint or impugn the integrity and authenticity of the results of the said examinations.*40+ This is an administrative power which the PRC exercises over members of the PRB. However, this power has nothing to do with the regulation of review centers. The PRC has the power to bar PRB members from conducting review classes in review centers. However, to interpret this power to extend to the power to regulate review centers is clearly an unwarranted interpretation of RA 8981. The PRC may prohibit the members of the PRB from conducting review classes at review centers because the PRC has administrative supervision over the members of the PRB. However, such power does not extend to the regulation of review centers.

Section 7(y) of RA 8981 giving the PRC the power to perform such other functions and duties as may be necessary to carry out the provisions of RA 8981 does not extend to the regulation of review centers. There is absolutely nothing in RA 8981 that mentions regulation by the PRC of review centers.

The Court cannot likewise interpret the fact that RA 8981 penalizes any person who manipulates or rigs licensure examination results, secretly informs or makes known licensure examination questions prior to the conduct of the examination or tampers with the grades in the professional licensure examinations*41+ as a grant of power to regulate review centers. The provision simply provides for the penalties for manipulation and other corrupt practices in the conduct of the professional examinations.

The assailed EO 566 seeks to regulate not only review centers but also similar entities. The questioned CHED RIRR defines similar entities as referring to other review centers providing review or tutorial services in areas not covered by licensure examinations given by the PRC including but not limited to college entrance examinations, Civil Service examinations, tutorial services in specific fields like English, Mathematics and the like.*42+ The PRC has no mandate to supervise review centers that give courses or lectures intended to prepare examinees for licensure examinations given by the PRC. It is like the Court regulating bar review centers just because the Court conducts the bar examinations. Similarly, the PRC has no mandate to regulate similar entities whose reviewees will not even take any licensure examination given by the PRC.

WHEREFORE, we GRANT the petition and the petition-inintervention. We DECLARE Executive Order No. 566 and Commission on Higher Education Memorandum Order No. 30, series of 2007 VOID for being unconstitutional.

SO ORDERED.

ANTONIO T. CARPIO

Associate Justice

WE CONCUR:

REYNATO S. PUNO

Chief Justice

LEONARDO A. QUISUMBING

Associate Justice

CONSUELO YNARES-SANTIAGO

Associate Justice

MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice

RENATO C. CORONA

Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

DANTE O. TINGA

Associate Justice

MINITA V. CHICO-NAZARIO

Associate Justice

PRESBITERO J. VELASCO, JR.

Associate Justice

ANTONIO EDUARDO B. NACHURA

Associate Justice

ARTURO D. BRION

Associate Justice

TERESITA J. LEONARDO-DE CASTRO

Associate Justice

DIOSDADO M. PERALTA

Associate Justice

CERTIFICATION

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

REYNATO S. PUNO

Chief Justice

[1] Rollo, pp. 35-37. Directing the Commission on Higher Education to Regulate the Establishment and Operation of Review Centers and Similar Entities. Signed on 8 September 2006.

[2] Id. at 38-55. Revised Implementing Rules and Regulations Governing The Establishment and Operation of Review Centers And Similar Entities In The Philippines Pursuant To Executive Order No. 566. Approved on 7 May 2007.

[3] Virginia Madeja and Anesia Dionisio were eventually charged with violation of Republic Act No. 8981 (An Act Modernizing the Professional Regulation Commission) and Republic Act No. 3019 (The Anti-Graft and Corrupt Practices Act).

[4] Rollo, pp. 105-121. CMO 49, s. 2006 is otherwise known as the Implementing Rules and Regulations Governing the Establishment and Operation of Review Centers and Similar Entities in the Philippines.

[5]

Id. at 75-77.

[6]

Id. at 79.

[7]

Id. at 80.

[8]

Id. at 58-69.

[9] An Act Creating the Commission on Higher Education, Appropriating Funds Therefor and For Other Purposes.

[10]

Rollo, p. 180.

[11]

Id. at 181-182.

[12]

Id. at 181-182.

[13]

Id. at 92.

[14] Resolution.

Not 14 February 2008 as stated in the 11 March 2008

[15]

Rollo, p. 184.

[16]

Id. at 230.

[17]

Id. at 257.

[18] LPBS Commercial, Inc. v. Amila, G.R. No. 147443, 11 February 2008, 544 SCRA 199.

[19] Liga ng mga Barangay National v. City Mayor of Manila, 465 Phil. 529, 542-543 (2004), citing People v. Cuaresma, G.R. No. 67787, 18 April 1989, 172 SCRA 415.

[20] LPBS Commercial, Inc. v. Amila, supra note 18 at 205, citing Santiago v. Vasquez, G.R. Nos. 99289-90, 27 January 1993, 217 SCRA 633.

[21] Holy Spirit Homeowners Association, Inc. v. Defensor, G.R. No. 163980, 3 August 2006, 497 SCRA 581.

[22] Executive Secretary v. Southwing Heavy Industries, Inc., G.R. No. 164171, 20 February 2006, 482 SCRA 673.

[23]

Rollo, p. 104.

[24]

Rules and Regulations Implementing RA 7722, as amended.

*25+ WEBSTERS THIRD NEW INTERNATIONAL DICTIONARY, 1986 ed., p. 1068.

[26]

Id.

[27] SCRA 255.

Republic v. Lacap, G.R. No. 158253, 2 March 2007, 517

[28]

Id.

[29]

The Administrative Code of 1987.

[30]

See Larin v. Executive Secretary, 345 Phil. 962 (1997).

[31] See Kilusang Mayo Uno v. Director-General, National Economic Development Authority, G.R. No. 167798, 19 April 2006, 487 SCRA 623.

[32]

Id.

[33]

354 Phil. 948 (1998).

[34]

Id. at 966-968.

[35]

Id. at 970.

[36] Metropolitan Bank and Trust Company, Inc. v. National Wages and Productivity Commission, G.R. No. 144322, 6 February 2007, 514 SCRA 346.

[37] Metropolitan Manila Development Authority v. Viron Transportation Co., Inc., G.R. No. 170656, 15 August 2007, 530 SCRA 341.

[38]

Id.

[39] Otherwise known as the Philippine Regulation Commission Modernization Act of 2000.

[40]

Section 7(s).

[41]

Section 15.

[42]

Section 8, RIRR.

POWER OF EMINENT DOMAIN CASES A. When is the power exercised? Cases

lawphil

Today is Saturday, November 17, 2012

Republic of the Philippines SUPREME COURT Manila

EN BANC

G.R. No. L-119694 May 22, 1995

PHILIPPINE PRESS INSTITUTE, INC., for and in behalf of 139 members, represented by its President, Amado P. Macasaet and its Executive Director Ermin F. Garcia, Jr., petitioner, vs. COMMISSION ON ELECTIONS, respondent.

RESOLUTION

FELICIANO, J.:

The Philippine Press Institute, Inc. ("PPI") is before this Court assailing the constitutional validity of Resolution No. 2772 issued by respondent Commission on Elections ("Comelec") and its corresponding Comelec directive dated 22 March 1995, through a Petition for Certiorari and Prohibition. Petitioner PPI is a non-stock, non-profit organization of newspaper and magazine publishers.

On 2 March 1995, Comelec promulgated Resolution No. 2772, which reads in part:

xxx xxx xxx

Sec. 2. Comelec Space. The Commission shall procure free print space of not less than one half (1/2) page in at least one newspaper of general circulation in every province or city for use as "Comelec Space" from March 6, 1995 in the case of candidates for senator and from March 21, 1995 until May 12, 1995. In the absence of said newspaper, "Comelec Space" shall be obtained from any magazine or periodical of said province or city.

Sec. 3. Uses of Comelec Space. "Comelec Space" shall be allocated by the Commission, free of charge, among all candidates within the area in which the newspaper, magazine or periodical is circulated to enable the candidates to make known their qualifications, their stand on public issues and their platforms and programs of government.

"Comelec Space" shall also be used by the Commission for dissemination of vital election information.

Sec. 4. Allocation of Comelec Space. (a) "Comelec Space" shall also be available to all candidates during the periods stated in Section 2 hereof. Its allocation shall be equal and impartial among all candidates for the same office. All candidates concerned shall be furnished a copy of the allocation of "Comelec Space" for their information, guidance and compliance.

(b) Any candidate desiring to avail himself of "Comelec Space" from newspapers or publications based in the Metropolitan Manila Area shall submit an application therefor, in writing, to the Committee on Mass Media of the Commission. Any candidate desiring to avail himself of "Comelec Space" in newspapers or publications based in the provinces shall submit his application therefor, in writing, to the Provincial Election Supervisor concerned. Applications for availment of "Comelec Space" maybe filed at any time from the date of effectivity of this Resolution.

(c) The Committee on Mass Media and the Provincial Election Supervisors shall allocate available "Comelec Space" among the candidates concerned by lottery of which said candidates shall be notified in advance, in writing, to be present personally or by representative to witness the lottery at the date, time and place specified in the notice. Any party objecting to the result of the lottery may appeal to the Commission.

(d) The candidates concerned shall be notified by the Committee on Mass Media or the Provincial Election Supervisor, as the case maybe, sufficiently in advance and in writing of the date of issue and the newspaper or publication allocated to him, and the time within which he must submit the written material for publication in the "Comelec Space".

xxx xxx xxx

Sec. 8. Undue Reference to Candidates/Political Parties in Newspapers. No newspaper or publication shall allow to be printed or published in the news, opinion, features, or other sections of the newspaper or publication accounts or comments which manifestly favor or oppose any candidate or political party by unduly or repeatedly referring to or including therein said candidate or political party. However, unless the facts and circumstances clearly indicate otherwise, the Commission will respect the determination by the publisher and/or editors of the newspapers or publications that the accounts or views published are significant, newsworthy and of public interest. (Emphasis supplied)

Apparently in implementation of this Resolution, Comelec through Commissioner Regalado E. Maambong sent identical letters, dated 22 March 1995, to various publishers of newspapers like the Business World, the Philippine Star, the Malaya and the

Philippine Times Journal, all members of PPI. These letters read as follows:

This is to advise you that pursuant to Resolution No. 2772 of the Commission on Elections, you are directed to provide free print space of not less than one half (1/2) page for use as "Comelec Space" or similar to the print support which you have extended during the May 11, 1992 synchronized elections which was 2 full pages for each political party fielding senatorial candidates, from March 6, 1995 to May 6, 1995, to make known their qualifications, their stand on public issues and their platforms and programs of government.

We shall be informing the political parties and candidates to submit directly to you their pictures, biographical data, stand on key public issues and platforms of government either as raw data or in the form of positives or camera-ready materials.

Please be reminded that the political parties/candidates may be accommodated in your publication any day upon receipt of their materials until May 6, 1995 which is the last day for campaigning.

We trust you to extend your full support and cooperation in this regard. (Emphasis supplied)

In this Petition for Certiorari and Prohibition with prayer for the issuance of a Temporary Restraining Order, PPI asks us to declare Comelec Resolution No. 2772 unconstitutional and void on the ground that it violates the prohibition imposed by the Constitution upon the government, and any of its agencies, against the taking of private property for public use without just compensation. Petitioner also contends that the 22 March 1995 letter directives of Comelec requiring publishers to give free "Comelec Space" and at the same time process raw data to make it camera-ready, constitute impositions of involuntary servitude, contrary to the provisions of Section 18 (2), Article III of the 1987 Constitution. Finally, PPI argues that Section 8 of Comelec Resolution No. 2772 is violative of the constitutionally guaranteed freedom of speech, of the press and of expression. 1

On 20 April 1995, this Court issued a Temporary Restraining Order enjoining Comelec from enforcing and implementing Section 2 of Resolution No. 2772, as well as the Comelec directives addressed to various print media enterprises all dated 22 March 1995. The Court also required the respondent to file a Comment on the Petition.

The Office of the Solicitor General filed its Comment on behalf of respondent Comelec alleging that Comelec Resolution No. 2772 does not impose upon the publishers any obligation to provide free

print space in the newspapers as it does not provide any criminal or administrative sanction for non-compliance with that Resolution. According to the Solicitor General, the questioned Resolution merely established guidelines to be followed in connection with the procurement of "Comelec space," the procedure for and mode of allocation of such space to candidates and the conditions or requirements for the candidate's utilization of the "Comelec space" procured. At the same time, however, the Solicitor General argues that even if the questioned Resolution and its implementing letter directives are viewed as mandatory, the same would nevertheless be valid as an exercise of the police power of the State. The Solicitor General also maintains that Section 8 of Resolution No. 2772 is a permissible exercise of the power of supervision or regulation of the Comelec over the communication and information operations of print media enterprises during the election period to safeguard and ensure a fair, impartial and credible election. 2

At the oral hearing of this case held on 28 April 1995, respondent Comelec through its Chairman, Hon. Bernardo Pardo, in response to inquiries from the Chief Justice and other Members of the Court, stated that Resolution No. 2772, particularly Section 2 thereof and the 22 March 1995 letters dispatched to various members of petitioner PPI, were not intended to compel those members to supply Comelec with free print space. Chairman Pardo represented to the Court that Resolution and the related letter-directives were merely designed to solicit from the publishers the same free print space which many publishers had voluntarily given to Comelec

during the election period relating to the 11 May 1992 elections. Indeed, the Chairman stated that the Comelec would, that very afternoon, meet and adopt an appropriate amending or clarifying resolution, a certified true copy of which would forthwith be filed with the Court.

On 5 May 1995, the Court received from the Office of the Solicitor General a manifestation which attached a copy of Comelec Resolution No. 2772-A dated 4 May 1995. The operative portion of this Resolution follows:

NOW THEREFORE, pursuant to the powers vested in it by the Constitution, the Omnibus Election Code, Republic Acts No. 6646 and 7166 and other election laws, the Commission on Elections RESOLVED to clarify Sections 2 and 8 of Res. No. 2772 as follows:

1. Section 2 of Res. No. 2772 shall not be construed to mean as requiring publishers of the different mass media print publications to provide print space under pain of prosecution, whether administrative, civil or criminal, there being no sanction or penalty for violation of said Section provided for either in said Resolution or in Section 90 of Batas Pambansa Blg. 881, otherwise known as the Omnibus Election Code, on the grant of "Comelec space."

2. Section 8 of Res. No. 2772 shall not be construed to mean as constituting prior restraint on the part of publishers with respect to the printing or publication of materials in the news, opinion, features or other sections of their respective publications or other accounts or comments, it being clear from the last sentence of said Section 8 that the Commission shall, "unless the facts and circumstances clearly indicate otherwise . . . respect the determination by the publisher and/or editors of the newspapers or publications that the accounts or views published are significant, newsworthy and of public interest."

This Resolution shall take effect upon approval. (Emphasis in the original)

While, at this point, the Court could perhaps simply dismiss the Petition for Certiorari and Prohibition as having become moot and academic, we consider it not inappropriate to pass upon the first constitutional issue raised in this case. Our hope is to put this issue to rest and prevent its resurrection.

Section 2 of Resolution No. 2772 is not a model of clarity in expression. Section 1 of Resolution No. 2772-A did not try to redraft Section 2; accordingly, Section 2 of Resolution No. 2772 persists in its original form. Thus, we must point out that, as presently worded, and in particular as interpreted and applied by the Comelec itself in its 22 March 1995 letter-directives to

newspaper publishers, Section 2 of Resolution No. 2772 is clearly susceptible of the reading that petitioner PPI has given it. That Resolution No. 2772 does not, in express terms, threaten publishers who would disregard it or its implementing letters with some criminal or other sanction, does not by itself demonstrate that the Comelec's original intention was simply to solicit or request voluntary donations of print space from publishers. A written communication officially directing a print media company to supply free print space, dispatched by a government (here a constitutional) agency and signed by a member of the Commission presumably legally authorized to do so, is bound to produce a coercive effect upon the company so addressed. That the agency may not be legally authorized to impose, or cause the imposition of, criminal or other sanctions for disregard of such directions, only aggravates the constitutional difficulties inhearing in the present situation. The enactment or addition of such sanctions by the legislative authority itself would be open to serious constitutional objection.

To compel print media companies to donate "Comelec-space" of the dimensions specified in Section 2 of Resolution No. 2772 (not less than one-half page), amounts to "taking" of private personal property for public use or purposes. Section 2 failed to specify the intended frequency of such compulsory "donation:" only once during the period from 6 March 1995 (or 21 March 1995) until 12 May 1995? or everyday or once a week? or as often as Comelec may direct during the same period? The extent of the taking or deprivation is not insubstantial; this is not a case of a de minimis

temporary limitation or restraint upon the use of private property. The monetary value of the compulsory "donation," measured by the advertising rates ordinarily charged by newspaper publishers whether in cities or in non-urban areas, may be very substantial indeed.

The taking of print space here sought to be effected may first be appraised under the rubric of expropriation of private personal property for public use. The threshold requisites for a lawful taking of private property for public use need to be examined here: one is the necessity for the taking; another is the legal authority to effect the taking. The element of necessity for the taking has not been shown by respondent Comelec. It has not been suggested that the members of PPI are unwilling to sell print space at their normal rates to Comelec for election purposes. Indeed, the unwillingness or reluctance of Comelec to buy print space lies at the heart of the problem. 3 Similarly, it has not been suggested, let alone demonstrated, that Comelec has been granted the power of eminent domain either by the Constitution or by the legislative authority. A reasonable relationship between that power and the enforcement and administration of election laws by Comelec must be shown; it is not casually to be assumed.

That the taking is designed to subserve "public use" is not contested by petitioner PPI. We note only that, under Section 3 of Resolution No. 2772, the free "Comelec space" sought by the

respondent Commission would be used not only for informing the public about the identities, qualifications and programs of government of candidates for elective office but also for "dissemination of vital election information" (including, presumably, circulars, regulations, notices, directives, etc. issued by Comelec). It seems to the Court a matter of judicial notice that government offices and agencies (including the Supreme Court) simply purchase print space, in the ordinary course of events, when their rules and regulations, circulars, notices and so forth need officially to be brought to the attention of the general public.

The taking of private property for public use is, of course, authorized by the Constitution, but not without payment of "just compensation" (Article III, Section 9). And apparently the necessity of paying compensation for "Comelec space" is precisely what is sought to be avoided by respondent Commission, whether Section 2 of Resolution No. 2772 is read as petitioner PPI reads it, as an assertion of authority to require newspaper publishers to "donate" free print space for Comelec purposes, or as an exhortation, or perhaps an appeal, to publishers to donate free print space, as Section 1 of Resolution No. 2772-A attempts to suggest. There is nothing at all to prevent newspaper and magazine publishers from voluntarily giving free print space to Comelec for the purposes contemplated in Resolution No. 2772. Section 2 of Resolution No. 2772 does not, however, provide a constitutional basis for compelling publishers, against their will, in the kind of factual context here present, to provide free print space for Comelec

purposes. Section 2 does not constitute a valid exercise of the power of eminent domain.

We would note that the ruling here laid down by the Court is entirely in line with the theory of democratic representative government. The economic costs of informing the general public about the qualifications and programs of those seeking elective office are most appropriately distributed as widely as possible throughout our society by the utilization of public funds, especially funds raised by taxation, rather than cast solely on one small sector of society, i.e., print media enterprises. The benefits which flow from a heightened level of information on and the awareness of the electoral process are commonly thought to be communitywide; the burdens should be allocated on the same basis.

As earlier noted, the Solicitor General also contended that Section 2 of Resolution No. 2772, even if read as compelling publishers to "donate" "Comelec space, " may be sustained as a valid exercise of the police power of the state. This argument was, however, made too casually to require prolonged consideration on our part. Firstly, there was no effort (and apparently no inclination on the part of Comelec) to show that the police power essentially a power of legislation has been constitutionally delegated to respondent Commission. 4 Secondly, while private property may indeed be validly taken in the legitimate exercise of the police power of the state, there was no attempt to show

compliance in the instant case with the requisites of a lawful taking under the police power. 5

Section 2 of Resolution No. 2772 is a blunt and heavy instrument that purports, without a showing of existence of a national emergency or other imperious public necessity, indiscriminately and without regard to the individual business condition of particular newspapers or magazines located in differing parts of the country, to take private property of newspaper or magazine publishers. No attempt was made to demonstrate that a real and palpable or urgent necessity for the taking of print space confronted the Comelec and that Section 2 of Resolution No. 2772 was itself the only reasonable and calibrated response to such necessity available to the Comelec. Section 2 does not constitute a valid exercise of the police power of the State.

We turn to Section 8 of Resolution No. 2772, which needs to be quoted in full again:

Sec. 8. Undue Reference to Candidates/Political Parties in Newspapers. No newspaper or publication shall allow to be printed or published in the news, opinion, features, or other sections of the newspaper or publication accounts or comments which manifestly favor or oppose any candidate or political party by unduly or repeatedly referring to or including therein said candidate or political party. However, unless the facts and

circumstances clearly indicate otherwise, the Commission will respect the determination by the publisher and/or editors of the newspapers or publications that the accounts or views published are significant, newsworthy and of public interest.

It is not easy to understand why Section 8 was included at all in Resolution No. 2772. In any case, Section 8 should be viewed in the context of our decision in National Press Club v. Commission on Elections. 6 There the Court sustained the constitutionality of Section 11 (b) of R.A. No. 6646, known as the Electoral Reforms Law of 1987, which prohibits the sale or donation of print space and airtime for campaign or other political purposes, except to the Comelec. In doing so, the Court carefully distinguished (a) paid political advertisements which are reached by the prohibition of Section 11 (b), from (b) the reporting of news, commentaries and expressions of belief or opinion by reporters, broadcasters, editors, commentators or columnists which fall outside the scope of Section 11 (b) and which are protected by the constitutional guarantees of freedom of speech and of the press:

Secondly, and more importantly, Section 11 (b) is limited in its scope of application. Analysis of Section 11 (b) shows that it purports to apply only to the purchase and sale, including purchase and sale disguised as a donation, of print space and air time for campaign or other political purposes. Section 11 (b) does not purport in any way to restrict the reporting by newspapers or radio or television stations of news or news-worthy events relating to

candidates, their qualifications, political parties and programs of government. Moreover, Section 11 (b) does not reach commentaries and expressions of belief or opinion by reporters or broadcaster or editors or commentators or columnists in respect of candidates, their qualifications, and programs and so forth, so long at least as such comments, opinions and beliefs are not in fact advertisements for particular candidates covertly paid for. In sum, Section 11 (b) is not to be read as reaching any report or commentary or other coverage that, in responsible media, is not paid for by candidates for political office. We read Section 11 (b) as designed to cover only paid political advertisements of particular candidates.

The above limitation in scope of application of Section 11 (b) that it does not restrict either the reporting of or the expression of belief or opinion or comment upon the qualifications and programs and activities of any and all candidates for office constitutes the critical distinction which must be made between the instant case and that of Sanidad v. Commission on Elections. . . . 7 (Citations omitted; emphasis supplied)

Section 8 of Resolution No. 2772 appears to represent the effort of the Comelec to establish a guideline for implementation of the above-quoted distinction and doctrine in National Press Club an effort not blessed with evident success. Section 2 of Resolution No. 2772-A while possibly helpful, does not add substantially to the utility of Section 8 of Resolution No. 2772. The distinction between

paid political advertisements on the one hand and news reports, commentaries and expressions of belief or opinion by reporters, broadcasters, editors, etc. on the other hand, can realistically be given operative meaning only in actual cases or controversies, on a case-to-case basis, in terms of very specific sets of facts.

At all events, the Court is bound to note that PPI has failed to allege any specific affirmative action on the part of Comelec designed to enforce or implement Section 8. PPI has not claimed that it or any of its members has sustained actual or imminent injury by reason of Comelec action under Section 8. Put a little differently, the Court considers that the precise constitutional issue here sought to be raised whether or not Section 8 of Resolution No. 2772 constitutes a permissible exercise of the Comelec's power under Article IX, Section 4 of the Constitution to

supervise or regulate the enjoyment or utilization of all franchise or permits for the operation of media of communication or information [for the purpose of ensuring] equal opportunity, time and space, and the right of reply, including reasonable, equal rates therefore, for public information campaigns and forums among candidates in connection with the objective of holding free, orderly honest, peaceful and credible elections

is not ripe for judicial review for lack of an actual case or controversy involving, as the very lis mota thereof, the constitutionality of Section 8.

Summarizing our conclusions:

1. Section 2 of Resolution No. 2772, in its present form and as interpreted by Comelec in its 22 March 1995 letter directives, purports to require print media enterprises to "donate" free print space to Comelec. As such, Section 2 suffers from a fatal constitutional vice and must be set aside and nullified.

2. To the extent it pertains to Section 8 of Resolution No. 2772, the Petition for Certiorari and Prohibition must be dismissed for lack of an actual, justiciable case or controversy.

WHEREFORE, for all the foregoing, the Petition for Certiorari and Prohibition is GRANTED in part and Section 2 of Resolution No. 2772 in its present form and the related letter-directives dated 22 March 1995 are hereby SET ASIDE as null and void, and the Temporary Restraining Order is hereby MADE PERMANENT. The Petition is DISMISSED in part, to the extent it relates to Section 8 of Resolution No. 2772. No pronouncement as to costs.

Narvasa, C.J., Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza and Francisco, JJ., concur.

Quiason, J., is on leave.

Footnotes

1 Petition, pp. 6-11; Rollo, pp. 7-12.

2 Comment, pp. 5-15; Rollo, pp. 70-80.

3 As I.A. Cruz, Constitutional Law, p. 59 (1991 ed.), citing Noble v. City of Manila, 67 Phil. 1 (1938), stressed:

[w]here private properties needed for conversion to some public use, the first thing obviously that the government should do is to offer to buy it. If the owner is willing to sell and the parties can agree on the price and the other conditions of the sale, a voluntary transaction can then be concluded and the transfer effected without the necessity of judicial action.

But if the owner of the private property is unwilling to part with it, or, being willing, cannot agree to the conditions of the transfer, then it will be necessary for the government to use its coercive authority. By its power of eminent domain, it can then, upon payment of just compensation, forcibly acquire the needed property in order to devote it to the intended public use. (Emphases supplied)

4 See, in this connection, Cruz, surpra note 3 at pp. 44-45. The police power may be delegated by the legislative authority to local governments under the general welfare clause (Section 16, R.A. No. 7160, "Local Government Code of 1991"), to the President and administrative agencies. See also Binay v. Domingo, 201 SCRA 508 (1991); Philippine Association of Service Exporters, Inc. v. Drilon, 163 SCRA 386 (1988); Villacosta v. Bernardo, 143 SCRA 480 (1986).

5 See National Development Company v. Philippine Veterans Bank, 192 SCRA 257 (1990); Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 175 SCRA 343 (1989).

6 207 SCRA 1 (1992).

7 207 SCRA at 10-11.

The Lawphil Project - Arellano Law Foundation

EN BANC

[G.R. No. 132922. April 21, 1998]

TELECOMMUNICATIONS AND BROADCAST ATTORNEYS OF THE PHILIPPINES, INC. and GMA NETWORK, INC., petitioners, vs. THE COMMISSION ON ELECTIONS, respondent.

DECISION

MENDOZA, J.:

In Osmea v. COMELEC, G.R. No. 132231, decided March 31, 1998,[1] we upheld the validity of 11(b) of R.A. No. 6646 which prohibits the sale or donation of print space or air time for political ads, except to the Commission on Elections under 90, of B.P. No. 881, the Omnibus Election Code, with respect to print media, and

92, with respect to broadcast media. In the present case, we consider the validity of 92 of B.P. Blg. No. 881 against claims that the requirement that radio and television time be given free takes property without due process of law; that it violates the eminent domain clause of the Constitution which provides for the payment of just compensation; that it denies broadcast media the equal protection of the laws; and that, in any event, it violates the terms of the franchise of petitioner GMA Network, Inc.

Petitioner Telecommunications and Broadcast Attorneys of the Philippines, Inc. is an organization of lawyers of radio and television broadcasting companies. They are suing as citizens, taxpayers, and registered voters. The other petitioner, GMA Network, Inc., operates radio and television broadcasting stations throughout the Philippines under a franchise granted by Congress.

Petitioners challenge the validity of 92 on the ground (1) that it takes property without due process of law and without just compensation; (2) that it denies radio and television broadcast companies the equal protection of the laws; and (3) that it is in excess of the power given to the COMELEC to supervise or regulate the operation of media of communication or information during the period of election.

The Question of Standing

At the threshold of this suit is the question of standing of petitioner Telecommunications and Broadcast Attorneys of the Philippines, Inc. (TELEBAP). As already noted, its members assert an interest as lawyers of radio and television broadcasting companies and as citizens, taxpayers, and registered voters.

In those cases[2] in which citizens were authorized to sue, this Court upheld their standing in view of the transcendental importance of the constitutional question raised which justified the granting of relief. In contrast, in the case at bar, as will presently be shown, petitioners substantive claim is without merit. To the extent, therefore, that a partys standing is determined by the substantive merit of his case or a preliminary estimate thereof, petitioner TELEBAP must be held to be without standing. Indeed, a citizen will be allowed to raise a constitutional question only when he can show that he has personally suffered some actual or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the challenged action; and the injury is likely to be redressed by a favorable action.[3] Members of petitioner have not shown that they have suffered harm as a result of the operation of 92 of B.P. Blg. 881.

Nor do members of petitioner TELEBAP have an interest as registered voters since this case does not concern their right of

suffrage. Their interest in 92 of B.P. Blg. 881 should be precisely in upholding its validity.

Much less do they have an interest as taxpayers since this case does not involve the exercise by Congress of its taxing or spending power.[4] A party suing as a taxpayer must specifically show that he has a sufficient interest in preventing the illegal expenditure of money raised by taxation and that he will sustain a direct injury as a result of the enforcement of the questioned statute.

Nor indeed as a corporate entity does TELEBAP have standing to assert the rights of radio and television broadcasting companies. Standing jus tertii will be recognized only if it can be shown that the party suing has some substantial relation to the third party, or that the third party cannot assert his constitutional right, or that the right of the third party will be diluted unless the party in court is allowed to espouse the third partys constitutional claim. None of these circumstances is here present. The mere fact that TELEBAP is composed of lawyers in the broadcast industry does not entitle them to bring this suit in their name as representatives of the affected companies.

Nevertheless, we have decided to take this case since the other petitioner, GMA Network, Inc., appears to have the requisite standing to bring this constitutional challenge. Petitioner operates radio and television broadcast stations in the Philippines affected

by the enforcement of 92 of B.P. Blg. 881 requiring radio and television broadcast companies to provide free air time to the COMELEC for the use of candidates for campaign and other political purposes.

Petitioner claims that it suffered losses running to several million pesos in providing COMELEC Time in connection with the 1992 presidential election and the 1995 senatorial election and that it stands to suffer even more should it be required to do so again this year. Petitioners allegation that it will suffer losses again because it is required to provide free air time is sufficient to give it standing to question the validity of 92.[5]

Airing of COMELEC Time, a

Reasonable Condition for

Grant of Petitioners

Franchise

As pointed out in our decision in Osmea v. COMELEC, 11(b) of R.A. No. 6646 and 90 and 92 of B.P. Blg. 881 are part and parcel

of a regulatory scheme designed to equalize the opportunity of candidates in an election in regard to the use of mass media for political campaigns. These statutory provisions state in relevant parts:

R.A. No. 6646

SEC. 11. Prohibited Forms of Election Propaganda. - In addition to the forms of election propaganda prohibited under Section 85 of Batas Pambansa Blg. 881, it shall be unlawful:

....

(b) for any newspapers, radio broadcasting or television station, or other mass media, or any person making use of the mass media to sell or to give free of charge print space or air time for campaign or other political purposes except to the Commission as provided under Section 90 and 92 of Batas Pambansa Blg. 881. Any mass media columnist, commentator, announcer or personality who is a candidate for any elective public office shall take a leave of absence from his work as such during the campaign period.

B.P. Blg. 881, (Omnibus Election Code)

SEC. 90. Comelec space. - The Commission shall procure space in at least one newspaper of general circulation in every province or city: Provided, however, That in the absence of said newspaper, publication shall be done in any other magazine or periodical in said province or city, which shall be known as Comelec Space wherein candidates can announce their candidacy. Said space shall be allocated, free of charge, equally and impartially by the Commission among all candidates within the area in which the newspaper is circulated. (Sec. 45, 1978 EC).

SEC. 92. Comelec time. - The Commission shall procure radio and television time to be known as Comelec Time which shall be allocated equally and impartially among the candidates within the area of coverage of all radio and television stations. For this purpose, the franchise of all radio broadcasting and television stations are hereby amended so as to provide radio or television time, free of charge, during the period of the campaign. (Sec. 46, 1978 EC)

Thus, the law prohibits mass media from selling or donating print space and air time to the candidates and requires the COMELEC instead to procure print space and air time for allocation to the candidates. It will be noted that while 90 of B.P. Blg. 881 requires the COMELEC to procure print space which, as we have held, should be paid for, 92 states that air time shall be procured by the COMELEC free of charge.

Petitioners contend that 92 of BP Blg. 881 violates the due process clause[6] and the eminent domain provision[7] of the Constitution by taking air time from radio and television broadcasting stations without payment of just compensation. Petitioners claim that the primary source of revenue of the radio and television stations is the sale of air time to advertisers and that to require these stations to provide free air time is to authorize a taking which is not a de minimis temporary limitation or restraint upon the use of private property. According to petitioners, in 1992, the GMA Network, Inc. lost P22,498,560.00 in providing free air time of one (1) hour every morning from Mondays to Fridays and one (1) hour on Tuesdays and Thursdays from 7:00 to 8:00 p.m. (prime time) and, in this years elections, it stands to lose P58,980,850.00 in view of COMELECs requirement that radio and television stations provide at least 30 minutes of prime time daily for the COMELEC Time.[8]

Petitioners argument is without merit. All broadcasting, whether by radio or by television stations, is licensed by the government. Airwave frequencies have to be allocated as there are more individuals who want to broadcast than there are frequencies to assign.[9] A franchise is thus a privilege subject, among other things, to amendment by Congress in accordance with the constitutional provision that any such franchise or right granted . . . shall be subject to amendment, alteration or repeal by the Congress when the common good so requires.*10+

The idea that broadcast stations may be required to provide COMELEC Time free of charge is not new. It goes back to the Election Code of 1971 (R.A. No. 6388), which provided:

SEC. 49. Regulation of election propaganda through mass media. (a) The franchises of all radio broadcasting and television stations are hereby amended so as to require each such station to furnish free of charge, upon request of the Commission [on Elections], during the period of sixty days before the election not more than fifteen minutes of prime time once a week which shall be known as Comelec Time and which shall be used exclusively by the Commission to disseminate vital election information. Said Comelec Time shall be considered as part of the public service time said stations are required to furnish the Government for the dissemination of public information and education under their respective franchises or permits.

This provision was carried over with slight modification by the 1978 Election Code (P.D. No. 1296), which provided:

SEC. 46. COMELEC Time. - The Commission [on Elections] shall procure radio and television time to be known as COMELEC Time which shall be allocated equally and impartially among the candidates within the area of coverage of said radio and television

stations. For this purpose, the franchises of all radio broadcasting and television stations are hereby amended so as to require such stations to furnish the Commission radio or television time, free of charge, during the period of the campaign, at least once but not oftener than every other day.

Substantially the same provision is now embodied in 92 of B.P. Blg. 881.

Indeed, provisions for COMELEC Time have been made by amendment of the franchises of radio and television broadcast stations and, until the present case was brought, such provisions had not been thought of as taking property without just compensation. Art. XII, 11 of the Constitution authorizes the amendment of franchises for the common good. What better measure can be conceived for the common good than one for free air time for the benefit not only of candidates but even more of the public, particularly the voters, so that they will be fully informed of the issues in an election? *I+t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount.*11+

Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free air time. Even in the United States, there are responsible scholars who believe that government controls on broadcast media can constitutionally be

instituted to ensure diversity of views and attention to public affairs to further the system of free expression. For this purpose, broadcast stations may be required to give free air time to candidates in an election.[12] Thus, Professor Cass R. Sunstein of the University of Chicago Law School, in urging reforms in regulations affecting the broadcast industry, writes:

Elections. We could do a lot to improve coverage of electoral campaigns. Most important, government should ensure free media time for candidates. Almost all European nations make such provision; the United States does not. Perhaps government should pay for such time on its own. Perhaps broadcasters should have to offer it as a condition for receiving a license. Perhaps a commitment to provide free time would count in favor of the grant of a license in the first instance. Steps of this sort would simultaneously promote attention to public affairs and greater diversity of view. They would also help overcome the distorting effects of soundbites and the corrosive financial pressures faced by candidates in seeking time on the media.[13]

In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the temporary privilege of using them. Since a franchise is a mere privilege, the exercise of the privilege may reasonably be burdened with the performance by the grantee of some form of public service. Thus, in De Villata v. Stanley,[14] a regulation

requiring interisland vessels licensed to engage in the interisland trade to carry mail and, for this purpose, to give advance notice to postal authorities of date and hour of sailings of vessels and of changes of sailing hours to enable them to tender mail for transportation at the last practicable hour prior to the vessels departure, was held to be a reasonable condition for the state grant of license. Although the question of compensation for the carriage of mail was not in issue, the Court strongly implied that such service could be without compensation, as in fact under Spanish sovereignty the mail was carried free. [15]

In Philippine Long Distance Telephone Company v. NTC,[16] the Court ordered the PLDT to allow the interconnection of its domestic telephone system with the international gateway facility of Eastern Telecom. The Court cited (1) the provisions of the legislative franchise allowing such interconnection; (2) the absence of any physical, technical, or economic basis for restricting the linking up of two separate telephone systems; and (3) the possibility of increase in the volume of international traffic and more efficient service, at more moderate cost, as a result of interconnection.

Similarly, in the earlier case of PLDT v. NTC,[17] it was held:

Such regulation of the use and ownership of telecommunications systems is in the exercise of the plenary police power of the State

for the promotion of the general welfare. The 1987 Constitution recognizes the existence of that power when it provides:

Sec. 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands (Article XII).

The interconnection which has been required of PLDT is a form of intervention with property rights dictated by the objective of government to promote the rapid expansion of telecommunications services in all areas of the Philippines, . . . to maximize the use of telecommunications facilities available, . . . in recognition of the vital role of communications in nation building . . . and to ensure that all users of the public telecommunications service have access to all other users of the service wherever they may be within the Philippines at an acceptable standard of service and at reasonable cost (DOTC Circular No. 90-248). Undoubtedly, the encompassing objective is the common good. The NTC, as the regulatory agency of the State, merely exercised its delegated authority to regulate the use of telecommunications networks when it decreed interconnection.

In the granting of the privilege to operate broadcast stations and thereafter supervising radio and television stations, the state spends considerable public funds in licensing and supervising such stations.[18] It would be strange if it cannot even require the licensees to render public service by giving free air time.

Considerable effort is made in the dissent of Mr. Justice Panganiban to show that the production of television programs involves large expenditure and requires the use of equipment for which huge investments have to be made. The dissent cites the claim of GMA Network that the grant of free air time to the COMELEC for the duration of the 1998 campaign period would cost the company P52,380,000, representing revenue it would otherwise earn if the air time were sold to advertisers, and the amount of P6,600,850, representing the cost of producing a program for the COMELEC Time, or the total amount of P58,980,850.

The claim that petitioner would be losing P52,380,000 in unrealized revenue from advertising is based on the assumption that air time is finished product which, it is said, become the property of the company, like oil produced from refining or similar natural resources after undergoing a process for their production. But air time is not owned by broadcast companies. As held in Red Lion Broadcasting Co. v. F.C.C.,[19] which upheld the right of a party personally attacked to reply, licenses to broadcast do not confer ownership of designated frequencies, but only the temporary

privilege of using them. Consequently, a license permits broadcasting, but the licensee has no constitutional right to be the one who holds the license or to monopolize a radio frequency to the exclusion of his fellow citizens. There is nothing in the First Amendment which prevents the Government from requiring a licensee to share his frequency with others and to conduct himself as a proxy or fiduciary with obligations to present those views and voices which are representative of his community and which would otherwise, by necessity, be barred from the airwaves.*20+ As radio and television broadcast stations do not own the airwaves, no private property is taken by the requirement that they provide air time to the COMELEC.

Justice Panganibans dissent quotes from Tolentino on the Civil Code which says that the air lanes themselves are not property because they cannot be appropriated for the benefit of any individual. (p.5) That means neither the State nor the stations own the air lanes. Yet the dissent also says that The franchise holders can recover their huge investments only by selling air time to advertisers. (p. 13) If air lanes cannot be appropriated, how can they be used to produce air time which the franchise holders can sell to recover their investment? There is a contradiction here.

As to the additional amount of P6,600,850, it is claimed that this is the cost of producing a program and it is for such items as sets and props, video tapes, miscellaneous (other rental, supplies, transportation, etc.), and technical facilities (technical crew such

as director and cameraman as well as on air plugs). There is no basis for this claim. Expenses for these items will be for the account of the candidates. COMELEC Resolution No. 2983, 6(d) specifically provides in this connection:

(d) Additional services such as tape-recording or video-taping of programs, the preparation of visual aids, terms and condition thereof, and the consideration to be paid therefor may be arranged by the candidates with the radio/television station concerned. However, no radio/television station shall make any discrimination among candidates relative to charges, terms, practices or facilities for in connection with the services rendered.

It is unfortunate that in the effort to show that there is taking of private property worth millions of pesos, the unsubstantiated charge is made that by its decision the Court permits the grand larceny of precious time, and allows itself to become the peoples unwitting oppressor. The charge is really unfortunate. In Jackman v. Rosenbaum Co.,[21] Justice Holmes was so incensed by the resistance of property owners to the erection of party walls that he was led to say in his original draft, a statute, which embodies the communitys understanding of the reciprocal rights and duties of neighboring landowners, does not need to invoke the petty larceny of the police power in its justification. Holmess brethren corrected his taste, and Holmes had to amend the passage so that in the end it spoke only of invoking the police power.*22+ Justice Holmes spoke of the petty larceny of the police power. Now we

are being told of the grand larceny *by means of the police power+ of precious air time.

Giving Free Air Time a Duty

Assumed by Petitioner

Petitioners claim that 92 is an invalid amendment of R.A. No. 7252 which granted GMA Network, Inc. a franchise for the operation of radio and television broadcasting stations. They argue that although 5 of R.A. No. 7252 gives the government the power to temporarily use and operate the stations of petitioner GMA Network or to authorize such use and operation, the exercise of this right must be compensated.

The cited provision of R.A. No. 7252 states:

SEC. 5. Right of Government. - A special right is hereby reserved to the President of the Philippines, in times of rebellion, public peril, calamity, emergency, disaster or disturbance of peace and order, to temporarily take over and operate the stations of the grantee, to temporarily suspend the operation of any station in the interest of public safety, security and public welfare, or to authorize the temporary use and operation thereof by any agency of the

Government, upon due compensation to the grantee, for the use of said stations during the period when they shall be so operated.

The basic flaw in petitioners argument is that it assumes that the provision for COMELEC Time constitutes the use and operation of the stations of the GMA Network, Inc. This is not so. Under 92 of B.P. Blg. 881, the COMELEC does not take over the operation of radio and television stations but only the allocation of air time to the candidates for the purpose of ensuring, among other things, equal opportunity, time, and the right to reply as mandated by the Constitution.[23]

Indeed, it is wrong to claim an amendment of petitioners franchise for the reason that B.P. Blg. 881, which is said to have amended R.A. No. 7252, actually antedated it.[24] The provision of 92 of B.P. Blg. 881 must be deemed instead to be incorporated in R.A. No. 7252. And, indeed, 4 of the latter statute does.

For the fact is that the duty imposed on the GMA Network, Inc. by its franchise to render adequate public service time implements 92 of B.P. Blg. 881. Undoubtedly, its purpose is to enable the government to communicate with the people on matters of public interest. Thus, R.A. No. 7252 provides:

SEC. 4. Responsibility to the Public. - The grantee shall provide adequate public service time to enable the Government, through the said broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education; conform to the ethics of honest enterprise; and not use its station for the broadcasting of obscene and indecent language, speech, act or scene, or for the dissemination of deliberately false information or willful misrepresentation, or to the detriment of the public interest, or to incite, encourage, or assist in subversive or treasonable acts. (Emphasis added)

It is noteworthy that 49 of R.A. No. 6388, from which 92 of B.P. Blg. 881 was taken, expressly provided that the COMELEC Time should be considered as part of the public service time said stations are required to furnish the Government for the dissemination of public information and education under their respective franchises or permits. There is no reason to suppose that 92 of B.P. Blg. 881 considers the COMELEC Time therein provided to be otherwise than as a public service which petitioner is required to render under 4 of its charter (R.A. No. 7252). In sum, B.P. Blg. 881, 92 is not an invalid amendment of petitioners franchise but the enforcement of a duty voluntarily assumed by petitioner in accepting a public grant of privilege.

Thus far, we have confined the discussion to the provision of 92 of B.P. Blg. 881 for free air time without taking into account COMELEC Resolution No. 2983-A, 2 of which states:

SEC. 2. Grant of Comelec Time. - Every radio broadcasting and television station operating under franchise shall grant the Commission, upon payment of just compensation, at least thirty (30) minutes of prime time daily, to be known as Comelec Time, effective February 10, 1998 for candidates for President, VicePresident and Senators, and effective March 27, 1998, for candidates for local elective offices, until May 9, 1998. (Emphasis added)

This is because the amendment providing for the payment of just compensation is invalid, being in contravention of 92 of B.P. Blg. 881 that radio and television time given during the period of the campaign shall be free of charge. Indeed, Resolution No. 2983 originally provided that the time allocated shall be free of charge, just as 92 requires such time to be given free of charge. The amendment appears to be a reaction to petitioners claim in this case that the original provision was unconstitutional because it allegedly authorized the taking of property without just compensation.

The Solicitor General, relying on the amendment, claims that there should be no more dispute because the payment of compensation

is now provided for. It is basic, however, that an administrative agency cannot, in the exercise of lawmaking, amend a statute of Congress. Since 2 of Resolution No. 2983-A is invalid, it cannot be invoked by the parties.

Law Allows Flextime for Programming

by Stations, Not Confiscation of

Air Time by COMELEC

It is claimed that there is no standard in the law to guide the COMELEC in procuring free air time and that theoretically the COMELEC can demand all of the air time of such stations.*25+ Petitioners do not claim that COMELEC Resolution No. 2983-A arbitrarily sequesters radio and television time. What they claim is that because of the breadth of the statutory language, the provision in question is susceptible of unbridled, arbitrary and oppressive exercise.*26+

The contention has no basis. For one, the COMELEC is required to procure free air time for candidates within the area of coverage of a particular radio or television broadcaster so that it cannot, for example, procure such time for candidates outside that area. At

what time of the day and how much time the COMELEC may procure will have to be determined by it in relation to the overall objective of informing the public about the candidates, their qualifications and their programs of government. As stated in Osmea v. COMELEC, the COMELEC Time provided for in 92, as well as the COMELEC Space provided for in 90, is in lieu of paid ads which candidates are prohibited to have under 11(b) of R.A. No. 6646. Accordingly, this objective must be kept in mind in determining the details of the COMELEC Time as well as those of the COMELEC Space.

There would indeed be objection to the grant of power to the COMELEC if 92 were so detailed as to leave no room for accommodation of the demands of radio and television programming. For were that the case, there could be an intrusion into the editorial prerogatives of radio and television stations.

Differential Treatment of

Broadcast Media Justified

Petitioners complain that B.P. Blg. 881, 92 singles out radio and television stations to provide free air time. They contend that newspapers and magazines are not similarly required as, in fact, in Philippine Press Institute v. COMELEC[27] we upheld their right to

the payment of just compensation for the print space they may provide under 90.

The argument will not bear analysis. It rests on the fallacy that broadcast media are entitled to the same treatment under the free speech guarantee of the Constitution as the print media. There are important differences in the characteristics of the two media, however, which justify their differential treatment for free speech purposes. Because of the physical limitations of the broadcast spectrum, the government must, of necessity, allocate broadcast frequencies to those wishing to use them. There is no similar justification for government allocation and regulation of the print media.[28]

In the allocation of limited resources, relevant conditions may validly be imposed on the grantees or licensees. The reason for this is that, as already noted, the government spends public funds for the allocation and regulation of the broadcast industry, which it does not do in the case of the print media. To require the radio and television broadcast industry to provide free air time for the COMELEC Time is a fair exchange for what the industry gets.

From another point of view, this Court has also held that because of the unique and pervasive influence of the broadcast media, *n+ecessarily . . . the freedom of television and radio broadcasting

is somewhat lesser in scope than the freedom accorded to newspaper and print media.*29+

The broadcast media have also established a uniquely pervasive presence in the lives of all Filipinos. Newspapers and current books are found only in metropolitan areas and in the poblaciones of municipalities accessible to fast and regular transportation. Even here, there are low income masses who find the cost of books, newspapers, and magazines beyond their humble means. Basic needs like food and shelter perforce enjoy high priorities.

On the other hand, the transistor radio is found everywhere. The television set is also becoming universal. Their message may be simultaneously received by a national or regional audience of listeners including the indifferent or unwilling who happen to be within reach of a blaring radio or television set. The materials broadcast over the airwaves reach every person of every age, persons of varying susceptibilities to persuasion, persons of different I.Q.s and mental capabilities, persons whose reactions to inflammatory or offensive speech would be difficult to monitor or predict. The impact of the vibrant speech is forceful and immediate. Unlike readers of the printed work, the radio audience has lesser opportunity to cogitate, analyze, and reject the utterance.[30]

Petitioners assertion therefore that 92 of B.P. Blg. 881 denies them the equal protection of the law has no basis. In addition, their plea that 92 (free air time) and 11(b) of R.A. No. 6646 (ban on paid political ads) should be invalidated would pave the way for a return to the old regime where moneyed candidates could monopolize media advertising to the disadvantage of candidates with less resources. That is what Congress tried to reform in 1987 with the enactment of R.A. No. 6646. We are not free to set aside the judgment of Congress, especially in light of the recent failure of interested parties to have the law repealed or at least modified.

Requirement of COMELEC Time, a

Reasonable Exercise of the

States Power to Regulate

Use of Franchises

Finally, it is argued that the power to supervise or regulate given to the COMELEC under Art. IX-C, 4 of the Constitution does not include the power to prohibit. In the first place, what the COMELEC is authorized to supervise or regulate by Art. IX-C, 4 of the Constitution,[31] among other things, is the use by media of

information of their franchises or permits, while what Congress (not the COMELEC) prohibits is the sale or donation of print space or air time for political ads. In other words, the object of supervision or regulation is different from the object of the prohibition. It is another fallacy for petitioners to contend that the power to regulate does not include the power to prohibit. This may have force if the object of the power were the same.

In the second place, the prohibition in 11(b) of R.A. No. 6646 is only half of the regulatory provision in the statute. The other half is the mandate to the COMELEC to procure print space and air time for allocation to candidates. As we said in Osmea v. COMELEC:

The term political ad ban, when used to describe 11(b) of R.A. No. 6646, is misleading, for even as 11(b) prohibits the sale or donation of print space and air time to political candidates, it mandates the COMELEC to procure and itself allocate to the candidates space and time in the media. There is no suppression of political ads but only a regulation of the time and manner of advertising.

....

. . . What is involved here is simply regulation of this nature. Instead of leaving candidates to advertise freely in the mass media,

the law provides for allocation, by the COMELEC of print space and air time to give all candidates equal time and space for the purpose of ensuring free, orderly, honest, peaceful, and credible elections.

With the prohibition on media advertising by candidates themselves, the COMELEC Time and COMELEC Space are about the only means through which candidates can advertise their qualifications and programs of government. More than merely depriving candidates of time for their ads, the failure of broadcast stations to provide air time unless paid by the government would clearly deprive the people of their right to know. Art. III, 7 of the Constitution provides that the right of the people to information on matters of public concern shall be recognized, while Art. XII, 6 states that the use of property bears a social function [and] the right to own, establish, and operate economic enterprises [is] subject to the duty of the State to promote distributive justice and to intervene when the common good so demands.

To affirm the validity of 92 of B.P. Blg. 881 is to hold public broadcasters to their obligation to see to it that the variety and vigor of public debate on issues in an election is maintained. For while broadcast media are not mere common carriers but entities with free speech rights, they are also public trustees charged with the duty of ensuring that the people have access to the diversity of views on political issues. This right of the people is paramount to the autonomy of broadcast media. To affirm the validity of 92,

therefore, is likewise to uphold the peoples right to information on matters of public concern. The use of property bears a social function and is subject to the states duty to intervene for the common good. Broadcast media can find their just and highest reward in the fact that whatever altruistic service they may render in connection with the holding of elections is for that common good.

For the foregoing reasons, the petition is dismissed.

SO ORDERED.

Narvasa, C.J., Regalado, Davide, Jr., Bellosillo, Melo, Puno, Kapunan, Martinez and Quisumbing, JJ., concur.

Romero, Panganiban, and Purisima, JJ., dissent.

Vitug, J., has separate opinion.

[1] Reiterated in Kapisanan ng mga Broadkaster sa Pilipinas (Negros Occidental Chapter) v. COMELEC, (res.), G.R. No. 132749, April 2, 1998.

[2] Emergency Powers Cases [Araneta v. Dinglasan], 84 Phil. 368 (1949), Iloilo Palay and Corn Planters Assn v. Feliciano, 121 Phil. 358 (1965); Philconsa v. Gimenez, 122 Phil. 894 (1965); CLU v. Executive Secretary, 194 SCRA 317 (1991).

[3] Lawyers League for a Better Philippines v. Aquino, G.R. Nos. 73748, 73972 and 73990, May 22, 1986; In re Bermudez, 145 SCRA 160 (1986); Tatad v. Garcia, Jr., 243 SCRA 436, 473 (1995) (Mendoza, J., concurring).

[4] Const., Art. VI, 24-25 and 29.

[5] In Valmonte v. Philippine Charity Sweepstakes Office, (res.), G.R. No. 78716, Sept. 22, 1987, we held that the party bringing a suit challenging the constitutionality of a law must show not only that the law is invalid, but also that he has sustained or is in immediate danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute complained of. (Emphasis added)

*6+ Art. III, 1 provides: No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws.

*7+ Id., 9 provides: Private Property shall not be taken for public use without just compensation.

[8] Memorandum for Petitioners, pp. 21-28.

[9] Eastern Broadcasting Corp. (DYRE) v. Dans, Jr., 137 SCRA 628 (1985); Red Lion Broadcasting Corp. Co. v. FCC, 395 U.S. 367, 23 L.Ed2d 371 (1969). See The Radio Act (Act No. 3846, as amended), 3(c) & (d).

[10] Art. XII, 11.

[11] Red Lion Broadcasting Corp. v. FCC, 395 U.S. at 390, 23 L.Ed.2d at 389.

[12] E.g., Owen M. Fiss, The Irony of Free Speech 2-3 (1996) (Surely the state can be an oppressor, but it may also be a source of freedom. . . . In some instances, instrumentalities of the state will try to stifle free and open debate, and the First Amendment is

the tried-and-true mechanism that stops or prevents such abuse of state power. In other instances, however, the state may have to further the robustness of public debate. . . . It may have to allocate public resources. . . to those whose voices would not otherwise be heard in the public square.); Cass R. Sunstein, Democracy and the Problem of Free Speech 50-51 (1993) (The idea that threats to speech stem from the government is undoubtedly correct, but as usually understood, it is far too simple. Sometimes threats come from what seems to be the private sphere, and, much more fundamentally, these threats could not be made without legal entitlements that enable some private actors but not others to speak and to be heard. . . . [Government regulation] may therefore be necessary.)

[13] Cass R. Sunstein, id. at 85 (emphasis added).

[14] 32 Phil. 541 (1915).

[15] The Court said:

Considerable expenditures of public money have been made in the past and continue to be made annually for the purpose of securing the safety of vessels plying in Philippine waters. [Here the Court enumerated many government facilities to make the coastwise transportation safe.] Can it be fairly contended that a regulation is

unreasonable which requires vessels licensed to engage in the interisland trade, in whose behalf the public funds are so lavishly expended, to hold themselves in readiness to carry the public mails when duly tendered for transportation, and to give such reasonable notice of their sailing hours as will insure the prompt dispatch of all mails ready for delivery at the hours thus designated? Id., at 552.

[16] 241 SCRA 486 (1995).

[17] 190 SCRA 717, 734 (1990) (italics by the Court).

[18] For example, under the Radio Act (Act No. 3846, as amended), the government performs, inter alia, the following functions:

SEC. 3. The Secretary of Public Works and Communications is hereby empowered, to regulate the construction or manufacture, possession, control, sale and transfer of radio transmitters or transceivers (combination transmitter-receiver) and the establishment, use, the operation of all radio stations and of all form of radio communications and transmissions within the Philippines. In addition to the above he shall have the following specific powers and duties:

...

(c) He shall assign call letters and assign frequencies for each station licensed by him and for each station established by virtue of a franchise granted by the Congress of the Philippines and specify the stations to which each of such frequencies may be used;

(d) He shall promulgate rules and regulations to prevent and eliminate interference between stations and carry out the provisions of this Act and the provisions of the International Radio Regulations: Provided, however, That changes in the frequencies or in the authorized power, or in the character of emitted signals, or in the type of the power supply, or in the hours of operations of any licensed stations, shall not be made without first giving the station licensee a hearing.

[19] 395 U.S. at 394, 23 L.Ed.2d at 391, quoting 47 U.S.C. 301.

[20] 395 U.S. at 389, 23 L.Ed.2d at 388-389.

[21] 260 U.S. 22, 67 L.Ed. 107 (1922).

[22] 260 U.S. at 31, 67 L.Ed. at 112. 1 Holmes-Laski Letters 457 (1953), quoted in P. Freund, A. Sutherland, M. Howe and E. Brown, Constitutional Law, Cases and Other Problems 1095 (1978).

[23] Art. IX-C, 4.

[24] B.P. Blg. 881 took effect on Dec. 3, 1985, whereas R.A. No. 7252 took effect on March 20, 1992.

[25] Memorandum for Petitioners, p. 17.

[26] Ibid.

[27] 244 SCRA 272 (1995).

[28] In the United States, because of recognition of these differences in the characteristics of news media, it has been held that broadcast stations may be required to give persons subjected to personal attack during discussion of an important public issue the right to reply (Red Lion Broadcasting Corp. v. FCC, 395 U.S. 367, 23 L.Ed.2d 371 (1969)), but a similar right of reply is inapplicable to newspapers. It was pointed out that a statute providing for such right operates as a command in the same sense as a statute or

regulation forbidding [the newspaper] to publish specified matter. . . . [It] exacts a penalty on the basis of the content of a newspaper. The first phase of the penalty [is] exacted in terms of the cost in printing and in taking up space that could be devoted to other material the newspaper may have preferred to print. . . . [Faced with such a penalty,] editors might well conclude that the safe course is to avoid controversy. . . . [Thus, the governmentenforced+ right of access inescapably dampens the vigor and limits the variety of public debate. (Miami Herald Pub. Co. v. Tornillo, 418 U.S. 241, 4 L.Ed.2d 730 (1974))

[29] Eastern Broadcasting (DYRE) Corporation v. Dans, Jr., 137 SCRA at 635.

[30] Id. at 635-636.

*31+ This provision reads: The Commission may, during the election period, supervise or regulate the enjoyment or utilization of all franchises or permits for the operation of transportation and other public utilities, media of communication or information, all grants, special privileges, or concessions granted by the Government or any subdivision, agency, or instrumentality thereof, including any government-owned or controlled corporation or its subsidiary. Such supervision or regulation shall aim to ensure equal opportunity, time, and space, and the right to reply, including reasonable, equal rates therefor, for public information campaigns

and forums among candidates in connection with the objective of holding free, orderly, honest, peaceful, and credible elections.

B. Who may exercise the power of eminent domain? Cases

THIRD DIVISION [G.R. No. 135087. March 14, 2000] HEIRS OF ALBERTO SUGUITAN, petitioner, vs. CITY OF MANDALUYONG, respondent. frnaics DECISION GONZAGA_REYES, J.: In this petition for review on certiorari under Rule 45, petitioners[1] pray for the reversal of the Order dated July 28, 1998 issued by Branch 155 of the Regional Trial Court of Pasig in SCA No. 875 entitled "City of Mandaluyong v. Alberto S. Suguitan, the dispositive portion of which reads as follows:

WHEREFORE, in view of the foregoing, the instant Motion to Dismiss is hereby DENIED and an ORDER OF CONDEMNATION is hereby issued declaring that the plaintiff, City of Mandaluyong, has a lawful right to take the subject parcel of land together with existing improvements thereon more specifically covered by Transfer Certificate Of Title No. 56264 of the Registry of Deeds for Metro Manila District II for the public use or purpose as stated in the Complaint, upon payment of just compensation. Accordingly, in order to ascertain the just compensation, the parties are hereby directed to submit to the Court within fifteen (15) days from notice hereof, a list of independent appraisers from which the Court t will select three (3) to be appointed as Commissioners, pursuant to Section 5, Rule 67, Rules of Court. SO ORDERED.[2]ella It is undisputed by the parties that on October 13, 1994, the Sangguniang Panlungsod of Mandaluyong City issued Resolution No. 396, S-1994[3] authorizing then Mayor Benjamin S. Abalos to institute expropriation proceedings over the property of Alberto Sugui located at Boni Avenue and Sto. Rosario streets in Mandaluyong City with an area of 414 square meters and more particularly described under Transfer Certificate of Title No. 56264 of the Registry of Deeds of Metro Manila District II. The intended purpose of the expropriation was the expansion of the Mandaluyong Medical Center.

Mayor Benjamin Abalos wrote Alberto Suguitan a letter dated January 20, 1995 offering to buy his property, but Suguitan refused to sell.[4] Consequently, on March 13, 1995, the city of Mandaluyong filed a complaint[5] for expropriation with the Regional Trial Court of Pasig. The case was docketed as SCA No. 875. novero Suguitan filed a motion to dismiss[6] the complaint based on the following grounds -(1) the power of eminent domain is not being exercised in accordance with law; (2) there is no public necessity to warrant expropriation of subject property; (3) the City of Mandaluyong seeks to expropriate the said property without payment of just compensation; (4) the City of Mandaluyong has no budget and appropriation for the payment of the property being expropriated; and (5) expropriation of Suguitan' s property is but a ploy of Mayor Benjamin Abalos to acquire the same for his personal use. Respondent filed its comment and opposition to the motion. On October 24, 1995, the trial court denied Suguitan's motion to dismiss.[7] On November 14, 1995, acting upon a motion filed by the respondent, the trial court issued an order allowing the City of Mandaluyong to take immediate possession of Suguitan's property upon the deposit of P621,000 representing 15% of the fair market value of the subject property based upon the current tax declaration of such property. On December 15, 1995, the City of Mandaluyong assumed possession of the subject property by virtue of a writ of possession issued by the trial court on

December 14, 1995.[8] On July 28, 1998, the court granted the assailed order of expropriation. Petitioner assert that the city of Mandaluyong may only exercise its delegated power of eminent domain by means of an ordinance as required by section 19 of Republic Act (RA) No. 7160,[9] and not by means of a mere resolution.[10] Respondent contends, however, that it validly and legally exercised its power of eminent domain; that pursuant to article 36, Rule VI of the Implementing Rules and Regulations (IRR) of RA 7160, a resolution is a sufficient antecedent for the filing of expropriation proceedings with the Regional Trial Court. Respondent's position, which was upheld by the trial court, was explained, thus:[11] ...in the exercise of the respondent City of Mandaluyong's power of eminent domain, a "resolution" empowering the City Mayor to initiate such expropriation proceedings and thereafter when the court has already determine[d] with certainty the amount of just compensation to be paid for the property expropriated, then follows an Ordinance of the Sanggunian Panlungosd appropriating funds for the payment of the expropriated property. Admittedly, title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation.[12] novero Petitioners refute respondent's contention that only a resolution is necessary upon the initiation of expropriation proceedings

and that an ordinance is required only in order to appropriate the funds for the payment of just compensation, explaining that the resolution mentioned in article 36 of the IRR is for purposes of granting administrative authority to the local chief executive to file the expropriation case in court and to represent the local government unit in such case, but does not dispense with the necessity of an ordinance for the exercise of the power of eminent domain under section 19 of the Code.[13] The petition is imbued with merit. Eminent domain is the right or power of a sovereign state to appropriate private property to particular uses to promote public welfare.[14] It is an indispensable attribute of sovereignty; a power grounded in the primary duty of government to serve the common need and advance the general welfare.[15] Thus, the right of eminent domain appertains to every independent government without the necessity for constitutional recognition.[16] The provisions found in modern constitutions of civilized countries relating to the taking of property for the public use do not by implication grant the power to the government, but limit a power which would otherwise be without limit.[17] Thus, our own Constitution provides that "[p]rivate property shall not be taken for public use without just compensation."[18] Furthermore, the due process and equal protection clauses[19] act as additional safeguards against the arbitrary exercise of this governmental power.

Since the exercise of the power of eminent domain affects an individual's right to private property, a constitutionallyprotected right necessary for the preservation and enhancement of personal dignity and intimately connected with the rights to life and liberty,[20] the need for its circumspect operation cannot be overemphasized. In City of Manila vs. Chinese Community of Manila we said:[21] The exercise of the right of eminent domain, whether directly by the State, or by its authorized agents, is necessarily in derogation of private rights, and the rule in that case is that the authority must be strictly construed. No species of property is held by individuals with greater tenacity, and none is guarded by the constitution and the laws more sedulously, than the right to the freehold of inhabitants. When the legislature interferes with that right, and, for greater public purposes, appropriates the land of an individual without his consent, the plain meaning of the law should not be enlarged by doubt[ful] interpretation. (Bensley vs. Mountainlake Water Co., 13 Cal., 306 and cases cited [73 Am. Dec. 576].) The statutory power of taking property from the owner without his consent is one of the most delicate exercise of governmental authority. It is to be watched with jealous scrutiny. Important as the power may be to the government, the inviolable sanctity which all free constitutions attach to the right of property of the citizens, constrains the strict observance of the substantial

provisions of the law which are prescribed as modes of the exercise of the power, and to protect it from abuse. ...(Dillon on Municipal Corporations [5th Ed.], sec. 1040, and cases cited; Tenorio vs. Manila Railroad Co., 22 Phil., 411.) The power of eminent domain is essentially legislative in nature. It is firmly settled, however, that such power may be validly delegated to local government units, other public entities and public utilities, although the scope of this delegated legislative power is necessarily narrower than that of the delegating authority and may only be exercised in strict compliance with the terms of the delegating law.[22] micks The basis for the exercise of the power of eminent domain by local government units is section 19 of RA 7160 which provides that: A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, purpose, or welfare for the benefits of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws; Provided, however, That the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner, and such offer was not accepted; Provided, further, That the local government unit may immediately take possession of the property upon the filing of the expropriation proceedings and upon making a deposit with

the proper court of at least fifteen percent (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated; Provided, finally, That the amount to be paid for the expropriated property shall be determined by the proper court, based on the fair market value at the time of the taking of the property. Despite the existence of this legislative grant in favor of local governments, it is still the duty of the courts to determine whether the power of eminent domain is being exercised in accordance with the delegating law.[23] In fact, the courts have adopted a more censorious attitude in resolving questions involving the proper exercise of this delegated power by local bodies, as compared to instances when it is directly exercised by the national legislature.[24] The courts have the obligation to determine whether the following requisites have been complied with by the local government unit concerned: 1. An ordinance is enacted by the local legislative council authorizing the local chief executive, in behalf of the local government unit, to exercise the power of eminent domain or pursue expropriation proceedings over a particular private property .calr

2. The power of eminent domain is exercised for public use, purpose or welfare, or for the benefit of the poor and the landless. 3. There is payment of just compensation, as required under Section 9, Article III of the Constitution, and other pertinent laws. 4. A valid and definite offer has been previously made to the owner of the property sought to be expropriated, but said offer was not accepted.[25] In the present case, the City of Mandaluyong seeks to exercise the power of eminent domain over petitioners' property by means of a resolution, in contravention of the first requisite. The law in this case is clear and free from ambiguity. Section 19 of the Code requires an ordinance, not a resolution, for the exercise of the power of eminent domain. We reiterate our ruling in Municipality of Paraaque v. V.M. Realty Corporation[26] regarding the distinction between an ordinance and a resolution. In that 1998 case we held that:miso We are not convinced by petitioner's insistence that the terms "resolution" and "ordinance" are synonymous. A municipal ordinance is different from a resolution. An ordinance is a law, but a resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific matter. An ordinance possesses a general and permanent character, but a resolution is

temporary in nature. Additionally, the two are enacted differently -a third reading is necessary for an ordinance, but not for a resolution, unless decided otherwise by a majority of all the Sanggunian members. We cannot uphold respondent's contention that an ordinance is needed only to appropriate funds after the court has determined the amount of just compensation. An examination of the applicable law will show that an ordinance is necessary to authorize the filing of a complaint with the proper court since, beginning at this point, the power of eminent domain is already being exercised. Rule 67 of the 1997 Revised Rules of Court reveals that expropriation proceedings are comprised of two stages: (1) the first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit; it ends with an order, if not in a dismissal of the action, of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint; (2) the second phase is concerned with the determination by the court of the just compensation for the property sought to be

taken; this is done by the court with the assistance of not more than three (3) commissioners.[27] Clearly, although the determination and award of just compensation to the defendant is indispensable to the transfer of ownership in favor of the plaintiff, it is but the last stage of the expropriation proceedings, which cannot be arrived at without an initial finding by the court that the plaintiff has a lawful right to take the property sought to be expropriated, for the public use or purpose described in the complaint. An order of condemnation or dismissal at this stage would be final, resolving the question of whether or not the plaintiff has properly and legally exercised its power of eminent domain. Also, it is noted that as soon as the complaint is filed the plaintiff shall already have the right to enter upon the possession of the real property involved upon depositing with the court at least fifteen percent (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated.[28] Therefore, an ordinance promulgated by the local legislative body authorizing its local chief executive to exercise the power of eminent domain is necessary prior to the filing by the latter of the complaint with the proper court, and not only after the court has determined the amount of just compensation to which the defendant is entitled.basra Neither is respondent's position improved by its reliance upon Article 36 (a), Rule VI of the IRR which provides that:

If the LGU fails to acquire a private property for public use, purpose, or welfare through purchase, LGU may expropriate said property through a resolution of the sanggunian authorizing its chief executive to initiate expropriation proceedings. The Court has already discussed this inconsistency between the Code and the IRR, which is more apparent than real, in Municipality of Paraaque vs. V.M. Realty Corporation,[29] which we quote hereunder: Petitioner relies on Article 36, Rule VI of the Implementing Rules, which requires only a resolution to authorize an LGU to exercise eminent domain. This is clearly misplaced, because Section 19 of RA 7160, the law itself, surely prevails over said rule which merely seeks to implement it. It is axiomatic that the clear letter of the law is controlling and cannot be amended by a mere administrative rule issued for its implementation. Besides, what the discrepancy seems to indicate is a mere oversight in the wording of the implementing rules, since Article 32, Rule VI thereof, also requires that, in exercising the power of eminent domain, the chief executive of the LGU must act pursuant to an ordinance. Therefore, while we remain conscious of the constitutional policy of promoting local autonomy, we cannot grant judicial sanction to a local government unit's exercise of its delegated

power of eminent domain in contravention of the very law giving it such power. It should be noted, however, that our ruling in this case will not preclude the City of Mandaluyong from enacting the necessary ordinance and thereafter reinstituting expropriation proceedings, for so long as it has complied with all other legal requirements.[30] WHEREFORE, the petition is hereby GRANTED. The July 28, 1998 decision of Branch 155 of the Regional Trial Court of Pasig in SCA No. 875 is hereby REVERSED and SET ASIDE.akin

THIRD DIVISION [G.R. No. 132431. February 13, 2004] ESTATE OR HEIRS OF THE LATE EX-JUSTICE JOSE B. L. REYES represented by their Administratrix and Attorney-In-Fact, Adoracion D. Reyes, and the ESTATE OR HEIRS OF THE LATE DR. EDMUNDO A. REYES, represented by MARIA TERESA P. REYES and CARLOS P. REYES, petitioners, vs. CITY OF MANILA, respondent. [G.R. No. 137146. February 13, 2004]

ESTATE OF HEIRS OF THE LATE EX-JUSTICE JOSE B.L. REYES and ESTATE OR HEIRS OF THE LATE DR. EDMUNDO REYES, petitioners, vs. COURT OF APPEALS, DR. ROSARIO ABIOG, ANGELINA MAGLONSO and SAMPAGUITA BISIG NG MAGKAKAPITBAHAY, INC. and the CITY OF MANILA, respondents. DECISION CORONA, J.: Before us are the following consolidated petitions filed by petitioners Heirs of Jose B.L. Reyes and Edmundo Reyes: (1) a petition for review[1] of the decision[2] of the Court of Appeals dated January 27, 1998 which ordered the condemnation of petitioners properties and reversed the order*3+ of the Regional Trial Court (RTC) of Manila, Branch 9, dated October 3, 1995 dismissing the complaint of respondent City of Manila (City) for expropriation, and (2) a petition for certiorari[4] alleging that the Court of Appeals committed grave abuse of discretion in rendering a resolution[5] dated August 19, 1998 which issued a temporary restraining order against the Municipal Trial Court (MTC) of Manila, Branch 10, not to (disturb) the occupancy of Dr. Rosario Abiog, one of the members of SBMI, until the Supreme Court has decided the Petition for Review on Certiorari and a resolution*6+ dated December 16, 1998

enjoining petitioners from disturbing the physical possession of all the properties subject of the expropriation proceedings. The undisputed facts follow. The records show that Jose B. L. Reyes and petitioners Heirs of Edmundo Reyes are the pro-indiviso co-owners in equal proportion of 11 parcels of land with a total area of 13,940 square meters situated at Sta. Cruz District, Manila and covered by Transfer Certificate of Title No. 24359 issued by the Register of Deeds of Manila. These parcels of land are being occupied and leased by different tenants, among whom are respondents Abiog, Maglonso and members of respondent Sampaguita Bisig ng Magkakapitbahay, Incorporated (SBMI). Petitioners leased to respondent Abiog Lot 2-E, Block 3007 of the consolidated subdivision plan (LRC) Psd- 328345, with an area of 191 square meters[7] and to respondent Maglonso, Lot 2-R, Block 2996 of the same consolidation plan, with an area of 112 square meters.[8] On November 9, 1993 and May 26, 1994, respectively, Jose B.L. Reyes and petitioners Heirs of Edmundo Reyes filed ejectment complaints against respondents Rosario Abiog and Angelina Maglonso, among others. Upon his death, Jose B.L. Reyes was substituted by his heirs. Petitioners obtained favorable judgments against said respondents. In Civil Case No. 142851-CV, the Metropolitan Trial Court (MTC) of Manila, Branch 10, rendered a decision dated May 9, 1994 against respondent

Abiog. In Civil Case No. 144205-CV, the MTC of Manila, Branch 3, issued judgment dated May 4, 1995 against respondent Maglonso. Respondents Abiog and Maglonso appealed the MTC decisions but the same were denied[9] by the RTC of Manila, Branch 28, and the RTC of Manila, Branch 38, respectively. Their appeals to the Court of Appeals were likewise denied.[10] As no appeals were further taken, the judgments of eviction against respondents Abiog and Maglonso became final and executory in 1998. Meanwhile, during the pendency of the two ejectment cases against respondents Abiog and Maglonso, respondent City filed on April 25, 1995 a complaint for eminent domain (expropriation)[11] of the properties of petitioners at the RTC of Manila, Branch 9. The properties sought to be acquired by the City included parcels of land occupied by respondents Abiog, Maglonso and members of respondent SBMI. The complaint was based on Ordinance No. 7818 enacted on November 29, 1993 authorizing the City Mayor of Manila to expropriate certain parcels of land with an aggregate area of 9,930 square meters, more or less, owned by Jose B.L. Reyes and Edmundo Reyes situated along the streets of Rizal Avenue, Tecson, M. Natividad, Sampaguita, Oroquieta, M. Hizon, Felix Huertes, Bulacan, Sulu, Aurora Boulevard, Pedro Guevarra and Kalimbas in the third district of Manila. These parcels of land are

more particularly described in the pertinent Cadastral Plan as Lot 3, Block 2995, Lot 2, Block 2996; Lot 2, Block 2999; Lot 5, Block 2999, and Lot 2, Block 3007. According to the ordinance, the said properties were to be distributed to the intended beneficiaries, who were the occupants of the said parcels of land who (had) been occupying the said lands as lessees or any term thereof for a period of at least 10 years.*12+ The complaint alleged that, on March 10, 1995, respondent City thru City Legal Officer Angel Aguirre, Jr. sent the petitioners a written offer to purchase the subject properties for P10,285,293.38 but the same was rejected. Respondent City prayed that an order be issued fixing the provisional value of the property in the amount of P9,684,380 based on the current tax declaration of the real properties and that it be authorized to enter and take possession thereof upon the deposit with the trial court of the amount of P1,452,657 or 15% of the aforesaid value. On May 15, 1995, respondent SBMI, a registered non-stock corporation composed of the residents of the subject properties (including as well as representing herein respondents Abiog and Maglonso), filed a motion for intervention and admission of their attached complaint with prayer for injunction. Respondent SBMI alleged that it had a legal interest over the subject matter of the litigation as its members were the lawful beneficiaries of the subject matter of the case. It prayed for the issuance of a temporary restraining order to enjoin the petitioners from

ousting the occupants of the subject properties. The trial court denied the motion for intervention in an order dated June 2, 1995 on the ground that the movants interest (was) indirect, contingent, remote, conjectual (sic), consequential (sic) and collateral. At the very least, it (was), if it (existed) at all, purely inchoate, or in sheer expectancy of a right that may or may not be granted.*13+ On the day SBMIs motion for intervention was denied, petitioners filed a motion to dismiss the complaint for eminent domain for lack of merit. Among the grounds alleged were the following: xxx that the amount allegedly deposited by the plaintiff is based on an erroneous computation since Sec. 19 of the Local Government Code of 1991 provides that in order for the plaintiff to take possession of the property, the deposit should be at least 15% of the fair market value of the property based on the current tax declaration of the property to be expropriated which is P19,619,520.00, 15% of which is P2,942,928.00; that since the subject property is allegedly being expropriated for socialized housing, the guidelines for their equitable valuation shall be set by the Department of Finance on the basis of the market value reflected in the zonal valuation conformably to Sec. 13 of R.A. No. 7279; that under Department Order No. 33-93 adopted by the Department of Finance, through the Bureau of Internal Revenue, on 26 April 1992, the zonal valuation of the subject property is conservatively estimated at approximately P76M;

that the plaintiff has no savings or unappropriated funds to pay for the just compensation; that instead of expropriating the subject property which enjoys the least priority in the acquisition by the City of Manila for socialized housing under Sec. 9(t) of R.A. 7279, the money to be paid should be channeled to the development of 244 sites in Metro Manila designated as area for priority development; that the City Ordinance was not properly adopted since there was no public hearing and neither were the defendants notified; that the tenants occupying the subject property cannot be categorized as underprivileged and homeless citizens or those whose income falls within the poverty threshold to be qualified as beneficiaries of the intended socialized housing; and that the plaintiff failed to comply with Art. 34, Rule 6 of the Rules and Regulations Implementing the Local Government Code of 1991 which requires the local government unit to first establish the suitability of the property to be acquired for the use intended and then proceed to obtain from the proper authorities, like the National Housing Authority, the necessary locational clearance and other requirements imposed under existing laws, rules and regulations.[14] On June 6, 1995, the trial court allowed respondent City to take possession of the subject property upon deposit of the amount of P1,542,793, based on the P10,285,293.38 offer by respondent City to petitioners which the trial court fixed as the provisional amount of the subject properties. On June 14, 1995, respondent City filed an opposition to petitioners motion to dismiss.

On October 3, 1995, the Citys complaint for eminent domain was dismissed.[15] The trial court held that expropriation was inappropriate because herein petitioners were in fact willing to sell the subject properties under terms acceptable to the purchaser. Moreover, respondent City failed to show that its offer was rejected by petitioners. Respondent Citys motion for reconsideration was denied. On January 12, 1996, respondent City appealed the decision of the trial court to the Court of Appeals. Thereafter, several motions[16] seeking the issuance of a temporary restraining order and preliminary injunction were filed by respondent City to prevent petitioners from ejecting the occupants of the subject premises. On March 21, 1996, the Court of Appeals issued a resolution[17] denying the motions for lack of merit. Respondent Citys motion for reconsideration was likewise denied. Meanwhile, on January 27, 1997, in view of the finality of the judgment in the ejectment case against respondent Abiog, the MTC of Manila, Branch 10, issued a writ of execution. On January 31, 1997, respondent SBMI filed in the Court of Appeals a motion for leave to intervene with prayer for injunctive relief praying that the ejectment cases be suspended or that the execution thereof be enjoined in view of the

pendency of the expropriation case filed by respondent City over the same parcels of land. As a follow-up, respondent Abiog filed in the appellate court, on August 25, 1997, a reiteratory motion for issuance of temporary restraining order and to stop the execution of the order dated June 27, 1997 of the Hon. Judge Tranquil P. Salvador, MTC of Manila, Branch 10. On August 26, 1997, the Court of Appeals issued a resolution[18] finding prima facie basis to grant SBMIs motions. It issued a temporary restraining order to Judge Salvador, his employees and agents to maintain the status quo. After the hearing on the propriety of the issuance of a writ of preliminary injunction, respondent SBMI filed a reiteratory motion for injunctive relief on December 11, 1997. On January 27, 1998, the Court of Appeals rendered the assailed decision reversing the trial court judgment and upholding as valid respondent Citys exercise of its power of eminent domain over petitioners properties. The dispositive portion of the decision stated: WHEREFORE, the Orders appealed from are hereby REVERSED and SET ASIDE. The case is remanded to the lower court to determine specifically the amount of just compensation. SO ORDERED.[19]

According to the Court of Appeals: xxx there is no doubt as to the public purpose of the plaintiffappellant in expropriating the property of the defendantsappellees. Ordinance No. 7818 expressly states that the subject parcels of land are to be distributed to the landless poor residents therein who have been in possession of the said property for at least ten (10) years. xxx xxx xxx

xxx In the absence of any law which expressly provides for a period for filing an expropriation proceeding, the lower court erred in dismissing the complaint based on unsupported accusations and mere speculations, such as political motivation. The fact that the expropriation proceeding was not immediately instituted does not negate the existence of the public purpose for which the ordinance was enacted. Another reason for the lower courts dismissal was its finding that there was no proof that the offer of the plaintiff-appellant, through the City Legal Office, was not accepted. This conclusion by the lower court is belied by the letter of Adoracion D. Reyes, dated 17 March 1995, xxx. xxx xxx xxx

There can be no interpretation of the letter of the defendantappellee other than that the valid and definite offer of the plaintiff-appellant to purchase the subject property was not accepted and, in the words of the defendant-appellee, was totally turned down. The lower court in denying the plaintiff-appellants motion for reconsideration of the order of dismissal held that the defendants-appellees were actually willing to sell, in fact, some of the tenants have already purchased the land that they occupy. However, we agree with the plaintiff-appellant that the contracts entered into by the defendants-appellees with some of the tenants do not affect the offer it made. The plaintiffappellant was not a party in those transactions and as pointed out, its concern is the majority of those who have no means to provide themselves with decent homes to live on.[20] From the aforementioned decision of the Court of Appeals, petitioners filed on March 19, 1998 the present petition for review[21] before this Court. Alleging that respondent City cannot expropriate the subject parcels of land, petitioners assigned the following as errors of the Court of Appeals: The Court Appeals committed grave abuse and irreversible errors in holding that respondent City of Manila may expropriate petitioners parcels of land considering that:

I. Respondent did not comply with Secs. 9 and 10 of P.D. (sic) No. 7279, otherwise known as the Urban Development and Housing Act of 1992 and Sec. 34 of the Local Government Code of 1991 (sic). II. Ordinance No. 7818 enacted by the City of Manila is violative of the equal protection clause. III. There was no valid and definite offer by the respondent City of Manila to purchase subject parcels of land. IV. Assuming there was a valid offer, the amount deposited for the payment of just compensation was insufficient. V. Petitioners are not unwilling to sell the subject parcels of land. VI. [22] There was no pronouncement as to just compensation.

What followed were incidents leading to the filing of the petition for certiorari against the resolutions of the Court of Appeals which essentially sought to enjoin the petitioners from enforcing the final judgments against respondents Abiog, Maglonso and SBMI (hereinafter, respondent occupants) in the ejectment cases.

On August 17, 1998, respondents Abiog and Maglonso filed in the Court of Appeals an urgent motion for protective order. Meanwhile, on September 8, 1998, petitioners were able to secure from the MTC of Manila, Branch 3, a writ of execution of the final judgment in the other ejectment case against respondent Maglonso. On October 19, 1998, respondent SBMI filed in the CA a similar motion for protective order. In essence, the respondents motions for protective order sought to stop the execution of the final and executory judgments in the ejectment cases against them. On August 19, 1998, the Court of Appeals promulgated the first assailed resolution,[23] the dispositive portion of which read: Considering that this case has been elevated to the Supreme Court, the Municipal Trial Court of Manila, Branch 10 and Sheriff Jess Areola or any other sheriff of the City of Manila, are hereby TEMPORARILY RESTRAINED from disturbing the occupancy of Dr. Rosario Abiog, one of the members of the SBMI until the Supreme Court has decided the Petition for Review on Certiorari. On September 4, 1998, petitioners filed a motion to set aside as ineffective and/or null and void the said August 19, 1998 resolution. But the Court of Appeals denied the same in a

resolution dated December 16, 1998,[24] the dispositive portion of which read: WHEREFORE, the Estate or heirs of J.B.L. Reyes and all persons acting in their behalf are hereby ENJOINED from disturbing the physical possession of all the properties (sic) subject of the expropriation proceedings. SO ORDERED. In enjoining the petitioners from evicting respondent occupants and in effect suspending the execution of the MTC judgments, the appellate court held that: We do not agree with the contention of the defendantsappellees that we no longer have any jurisdiction to issue the subject resolution. In spite of having rendered the decision on 27 January 1998, the appellate Court still has the inherent power and discretion to amend whatever order or decision it had made before in order to render substantial justice. xxx xxx xxx

There is no doubt that the members of SBMI have a personality to intervene before this Court. The plaintiff-appellant itself, in their Comment to the defendants-appellees motion to set aside this Courts 19 August 1998 resolution, recognized Dr. Rosario Abiog, as one of the intended beneficiaries of the expropriation

case. The plaintiff-appellant also enumerated the ejectment cases pending before the lower courts when it filed a motion for the issuance of temporary restraining order and/or writ of preliminary injunction upon appeal to this Court. Moreover, the plaintiff-appellant also furnished this Court with a copy of the THIRD PARTY CLAIM it filed before the City Sheriff Office and Sheriff Dante Lot to enjoin them from implementing and executing the Demolition Order issued by the Metropolitan Trial Court of Manila (Branch 3) against Angelina Maglonso. In their motion to set aside the 19 August 1998 resolution, the defendants-appellees, quoting the Order of the lower court denying the motion for intervention stated that: The petition of the plaintiff to expropriate the property does not ipso facto create any fiat that would give rise to the claim of the movant of legal interest in the property. The petition could well be denied leaving any assertion of interest on the part of the movant absolutely untenable. If the petition, on the other hand, is granted, that would be the time for the movant to intervene, to show that they are the intended beneficiaries, and if the plaintiff would distribute the property to other persons, the remedy is to compel the plaintiff to deliver the lot to them. Having established that they are the intended beneficiaries, the intervenors then have the right to seek protection from this Court.

On 27 January 1998, we held that the plaintiff-appellant validly exercised its power of eminent domain and consequently may expropriate the subject property upon payment of just compensation. The record before us shows that on 6 June 1995, the lower court allowed the plaintiff-appellant to take possession of the subject property upon filing of P1,542,793.00 deposit. The property to be expropriated includes the same properties subject of the ejectment cases against the intervenors. There is nothing in the record that would show that the order of possession was ever set aside or the deposit returned to the plaintiff-appellant. Based on the foregoing considerations, we find that the intervenors are entitled to the injunction that they prayed for. To allow the demolition of the premises of the intervenors would defeat the very purpose of expropriation which is to distribute the subject property to the intended beneficiaries who are the occupants of the said parcels of land who have been occupying the said lands as lessees or any term thereof for a period of at least ten (10) years. In the case of Lourdes Guardacasa Vda. De Legaspi vs. Hon. Herminion A. Avendano, et al., the Supreme Court ordered the suspension of the enforcement and implementation of the writ of execution and order of demolition issued in the ejectment case until after the final termination of the action for quieting of title because it is more equitable and just and less productive of

confusion and disturbance of physical possession with all its concomitant inconvenience and expenses. As held in Wilmon Auto Supply Corp., et al. vs. Hon. Court of Appeals, et al., the exception to the rule in the case of Vda. De Legaspi case, execution of the decision in the ejectment case would also have meant demolition of the premises, which is the situation in the case at bar.[25] Claiming that the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction, petitioners filed the subject petition for certiorari[26] with the following assignments of error: I PUBLIC RESPONDENT COURT OF APPEALS HAS NO JURISDICTION IN ISSUING THE PROTECTIVE ORDER ENJOINING THE EXECUTION OF THE FINAL AND EXECUTORY JUDGMENTS IN THE EJECTMENT CASES AGAINST PRIVATE RESPONDENTS BECAUSE THE POWER TO ISSUE SUCH ORDER HAS BEEN LODGED WITH THE HONORABLE COURT IN VIEW OF THE PENDENCY OF G.R. NO. 132431. II ASSUMING ARGUENDO THAT PUBLIC RESPONDENT COURT OF APPEALS COULD ISSUE SUCH ORDER, IT ACTED WITH GRAVE

ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN ISSUING THE PROTECTIVE ORDER IN FAVOR OF PRIVATE RESPONDENTS BECAUSE IT HAS LONG BEEN SETTLED THAT THEIR INTERESTS IN THE PROPERTIES SUBJECT OF THE EXPROPRIATION CASE ARE NOT SUFFICIENT FOR THEM TO BE DECLARED AS INTERVENORS. III THE SO-CALLED PROTECTIVE ORDER IS AN INJUNCTIVE RELIEF IN DISGUISE. IV PRIVATE RESPONDENTS ACT OF SEEKING THE PROTECTIVE ORDER FROM THE COURT OF APPEALS, DESPITE THE FINALITY OF THE ORDER BY THE TRIAL COURT DISALLOWING INTERVENTION, CONSTITUTES FORUM SHOPPING. V The assailed resolutions of the Court of Appeals should be set aside, following the ruling in Filstream International, Inc. vs. CA, Judge Tongco and the City of Manila (G.R. No. 125218, January 23, 1998) and Filstream International, Inc. vs. CA, Malit et al. (G.R. No. 128077, January 23, 1998).[27]

In G.R. No 132431, petitioners allege: (1) that Ordinance 7818 is unconstitutional for violating the equal protection clause of the 1987 Constitution and for abridging the contracts between petitioners and prospective buyers of the subject parcels of land; (2) that, in expropriating the subject properties, respondent Citys act of expropriation is illegal because it did not comply with Sections 9 and 10 of Republic Act No. 7279 (The Urban Development and Housing Act of 1992); (3) that, prior to the filing of the eminent domain complaint, respondent City did not make a valid and definite offer to purchase the subject properties, and (4) that, assuming the offer as valid, the amount offered was insufficient.[28] On the other hand, in insisting that its offer was valid and that the amount it deposited was sufficient, respondent City reiterates the reasons cited by the Court of Appeals. According to respondent City, there is nothing in the Local Government Code of 1991 which requires the offer to be made before enacting an enabling ordinance. The actual exercise of the power of eminent domain begins only upon the filing of the complaint for eminent domain with the RTC by the Chief Executive and not when an ordinance pursuant thereto has been enacted. It is therefore safe to say that the offer to purchase can be made before the actual filing of the complaint, whether that is before or after the ordinance is enacted. On the sufficiency of the amount deposited, respondent City alleges that the determination of the provisional value of the

property was judicially determined by the trial court at P10,285,293.38 in its order dated June 6, 1995. On the basis of this order, respondent City filed its compliance dated June 13, 1995 manifesting the deposit of the additional amount of P1,452,793 (15% of P10,285,293.38). Respondent City also claims that all along petitioners were not willing to sell the subject parcels of land as proved by the tenor of the letter of petitioners agent, Adoracion Reyes, who wrote respondent City that it is the consensus of the heirs xxx to turn down as we are totally turning down your offer to purchase the parcels of land subject matter of the aforesaid ordinance, or your offer is not acceptable to us in every respect. In G.R. No. 137146 (the petition for certiorari questioning the resolutions of the Court of Appeals which issued a temporary restraining order and ordered the parties to maintain the status quo), petitioners assail the resolutions of the Court of Appeals which in effect enjoined the MTC of Manila, Branches 9 and 10, from enforcing the final judgments in the ejectment cases while the appeal from the decision involving the same parcels of land in the expropriation case remains pending before this Court. Petitioners maintain that, first, only this Court and not the Court of Appeals has jurisdiction to enjoin the execution of the judgments in the ejectment cases considering that the expropriating case is now being reviewed by this Court; second, the orders are void as they protect an alleged right that does not belong to respondent City but to a non-party in the

expropriation case; third, said orders deprive petitioners of their property without due process of law because they amount to a second temporary restraining order which is expressly prohibited by Section 5, Rule 58 of the Rules of Court[29]; last, petitioners brand respondent occupants act of seeking the assailed protective order, despite the finality of the trial court order disallowing intervention, as forum-shopping. To justify the propriety of their intervention and the legality of the assailed resolutions, respondent occupants aver the following: first, Section 9(1)[30] of BP 129 (The Judiciary Reorganization Act of 1980) is broad enough to include protective orders. If the Court of Appeals has the power to annul judgments of the RTC, with more reason does it have the power to annul judgments of the MTC. second, as the undisputed rightful beneficiaries of the expropriation, they have the right to intervene. third, their right to intervene has never been barred with finality. Due to the dismissal of the complaint for expropriation, their motion for reconsideration of the trial court order denying their motion to intervene was never ruled upon as it became moot and academic. The trial courts silence does not mean a denial of the intervention and injunction that respondent occupants prayed for.

fourth, it is more appropriate in the interest of equity and justice to preserve the status quo pending resolution by this Court of petitioners appeal in the expropriation case because they are anyway the beneficiaries of the subject properties. The expropriation case should be considered as a supervening event that necessitated a modification, suspension or abandonment of the MTC decisions. fifth, respondents are not guilty of forum-shopping for the reason that the Court of Appeals never made a ruling or decision on respondents motion to intervene. Moreover, the causes of action in the two cases were different and distinct from each other. In the motion to intervene, respondent occupants sought to be recognized and included as parties to the expropriation case. On the other hand, in the motion for protective order, respondents sought to enjoin the execution of the decisions in the ejectment cases against them. Before proceeding to the discussion of the issues, it would be best to first recapitulate the confusing maze of facts of this case. It is not disputed that the petitioners acquired a favorable judgment of eviction against herein respondents Abiog and Maglonso. In 1998, the said judgments became final and executory. Consequently, writs of execution were issued. During the pendency of the complaints for unlawful detainer, respondent City filed a case for the expropriation of the same

properties involved in the ejectment cases. From thereon, numerous motions to intervene and motions for injunction were filed in the expropriation case by respondents. The trial court allowed respondent City to take possession of the property; it denied the motions for intervention and injunction, and, after allowing respondent City to oppose the motion to dismiss, dismissed the complaint for expropriation. On appeal, the Court of Appeals reversed the trial court and found that respondent City properly exercised its right to expropriate the subject properties. Petitioners appealed the CA decision to this Court. Thereafter, on motion of respondent occupants, the Court of Appeals issued protective orders that required the parties to maintain the status quo (prohibiting any ejectment) pending this Courts resolution of the appeal. Petitioner is now before us questioning the legality of the CAs expropriation order and the propriety of its act enjoining the execution of the final judgments in the ejectment cases. With these given facts, it is imperative to first resolve the issue of whether the respondent City may legally expropriate the subject properties, considering that a negative finding will necessarily moot the issue of the propriety of the protective orders of the Court of Appeals. Whether respondent City deprived petitioners of their property without due process of law depends on whether the City complied with the legal requirements for expropriation. Before

respondent City can exercise its power of eminent domain, the same must be sanctioned and must not violate any law. Being a mere creation of the legislature, a local government unit can only exercise powers granted to it by the legislature. Such is the nature of the constitutional power of control of Congress over local government units, the latter being mere creations of the former.[31] When it expropriated the subject properties, respondent City relied on its powers granted by Section 19 of the Local Government Code of 1991[32] and RA 409 (The Revised Charter of the City of Manila). The latter specifically gives respondent City the power to expropriate private property in the pursuit of its urban land reform and housing program.[33] Respondent City, however, is also mandated to follow the conditions and standards prescribed by RA 7279 (the Urban Development and Housing Act of 1992), the law governing the expropriation of property for urban land reform and housing. Sections 9 and 10 of RA 7279 specifically provide that: Sec. 9. Priorities in the acquisition of Land Lands for socialized housing shall be acquired in the following order: (a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies, including governmentowned or controlled corporations and their subsidiaries; (b) Alienable lands of the public domain;

(c)

Unregistered or abandoned and idle lands;

(d) Those within the declared Areas of Priority Development, Zonal Improvement sites, and Slum Improvement and Resettlement Program sites which have not yet been acquired; (e) Bagong Lipunan Improvement sites and Services or BLISS sites which have not yet been acquired; and (f) Privately-owned lands.

Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities mentioned in this section shall not apply. The local government units shall give budgetary priority to on-site development of government lands. Sec. 10. Modes of Land Acquisition. The modes of acquiring lands for purposes of this Act shall include, among others, community mortgage, land swapping, land assembly or consolidation, land banking, donation to the Government, joint venture agreement, negotiated purchase, and expropriation: Provided, however, That expropriation shall be resorted to only when other modes of acquisition have been exhausted: Provided further, That where expropriation is resorted to, parcels of land owned by small property owners shall be exempted for purposes of this Act: Provided, finally, that

abandoned property, as herein defined, shall be reverted and escheated to the State in a proceeding analogous to the procedure laid down in Rule 91 of the Rules of Court. [italics supplied] In Filstream vs. Court of Appeals,[34] we held that the abovequoted provisions are limitations to the exercise of the power of eminent domain, specially with respect to the order of priority in acquiring private lands and in resorting to expropriation proceedings as a means to acquire the same. Private lands rank last in the order of priority for purposes of socialized housing. In the same vein, expropriation proceedings are to be resorted to only after the other modes of acquisition have been exhausted. Compliance with these conditions is mandatory because these are the only safeguards of oftentimes helpless owners of private property against violation of due process when their property is forcibly taken from them for public use. We find that herein respondent City failed to prove strict compliance with the requirements of Sections 9 and 10 of RA 7279. Respondent City neither alleged in its complaint nor proved during the proceedings before the trial court that it complied with said requirements. Even in the Court of Appeals, respondent City in its pleadings failed to show its compliance with the law. The Court of Appeals was likewise silent on this specific jurisdictional issue. This is a clear violation of the right to due process of the petitioners.

We also take note of the fact that Filstream is substantially similar in facts and issues to the case at bar. In that case, Filstream acquired a favorable judgment of eviction against the occupants of its properties in Tondo, Manila. But prior thereto, on the strength of Ordinance 7818 (the same ordinance used by herein respondent City as basis to file the complaint for eminent domain), respondent City initiated a complaint for expropriation of Filstreams properties in Tondo, Manila, for the benefit of the residents thereof. Filstream filed a motion to dismiss and the City opposed the same. The trial court denied the motion. When the judgment in the ejectment case became final, Filstream was able to obtain a writ of execution and demolition. It thereafter filed a motion to dismiss the expropriation complaint but the trial court denied the same and ordered the condemnation of the subject properties. On appeal, the Court of Appeals denied Filstreams petition on a technical ground. Thus, the case was elevated to this Court for review of the power of the City to expropriate the Filstreams properties. Meanwhile, the occupants and respondent City filed in separate branches of the RTC of Manila several petitions for certiorari with prayer for injunction to prevent the execution of the judgments in the ejectment cases. After the consolidation of the petitions for certiorari, the designated branch of RTC Manila dismissed the cases on the ground of forum-shopping. The dismissal was appealed to the Court of Appeals which reversed the trial courts dismissal and granted respondents prayer for

injunction. Filstream appealed the same to this Court, which appeal was consolidated with the earlier petition for review of the decision of the Court of Appeals in the main expropriation case. Due to the substantial resemblance of the facts and issues of the case at bar to those in Filstream, we find no reason to depart from our ruling in said case. To quote: The propriety of the issuance of the restraining order and the writ of preliminary injunction is but a mere incident to the actual controversy which is rooted in the assertion of the conflicting rights of the parties in this case over the disputed premises. In order to determine whether private respondents are entitled to the injunctive reliefs granted by respondent CA, we deemed it proper to extract the source of discord. xxx xxx xxx

Proceeding from the parameters laid out in the above disquisitions, we now pose the crucial question: Did the city of Manila comply with the abovementioned conditions when it expropriated petitioner Filstreams properties? We have carefully scrutinized the records of this case and found nothing that would indicate the respondent City of Manila complied with Sec. 9 and Sec. 10 of R.A. 7279. Petitioners Filstreams properties were expropriated and ordered condemned in favor of the City of Manila sans any showing that resort to the

acquisition of other lands listed under Sec. 9 of RA 7279 have proved futile. Evidently, there was a violation of petitioner Filstreams right to due process which must accordingly be rectified. Indeed, it must be emphasized that the State has a paramount interest in exercising its power of eminent domain for the general good considering that the right of the State to expropriate private property as long as it is for public use always takes precedence over the interest of private property owners. However we must not lose sight of the fact that the individual rights affected by the exercise of such right are also entitled to protection, bearing in mind that the exercise of this superior right cannot override the guarantee of due process extended by the law to owners of the property to be expropriated. In this regard, vigilance over compliance with the due process requirements is in order.[35] Due to the fatal infirmity in the Citys exercise of the power of eminent domain, its complaint for expropriation must necessarily fail. Considering that the consolidated cases before us can be completely resolved by the application of our Filstream ruling, it is needless to discuss the constitutionality of Ordinance 7818. We herein apply the general precept that constitutional issues will not be passed upon if the case can be decided on other grounds.[36]

In view of the dismissal of the complaint for expropriation and the favorable adjudication of petitioners appeal from the decision of the Court of Appeals on the expropriation of the subject properties, the petition for certiorari questioning the validity of the Court of Appeals resolutions (allowing respondent occupants to intervene and granting their motion to enjoin the execution of the executory judgments in the ejectment cases) becomes moot and academic. WHEREFORE, the petitions are hereby GRANTED. In G.R. No. 132431, the decision of the Court of Appeals dated January 27, 1998 is hereby REVERSED and SET ASIDE. In G.R. No. 137146, the resolutions of the Court of Appeals dated August 19, 1998 and December 16, 1998 are hereby REVERSED and SET ASIDE. SO ORDERED. Sandoval-Gutierrez, and Carpio-Morales, JJ., concur. Vitug, (Chairman), J., no part. deliberation. [1] Docketed as G.R. No. 132431. [2] Penned by Associate Justice Eubulo G. Verzola and concurred in by Associate Justices Jorge S. Imperial and Artemio G. Tuquero of the Fourth Division; Rollo of G.R. No. 132431, pp. 45-56. Did not participate in the

[3] Penned by Judge Edilberto Sandoval; Rollo of G.R. No. 132431, pp. 114-119. [4] Docketed as G.R. No. 137146. [5] Penned by Associate Justice Eubulo Verzola and concurred in by Associate Justices Jorge S. Imperial and Artemio G. Tuquero; Rollo of G.R. No. 137146, pp. 42-43. [6] Penned by Associate Justice Eubulo Verzola and concurred in by Associate Justices Jorge S. Imperial and Artemio G. Tuquero; Rollo of G.R. No. 137146, pp. 45-52. [7] Rollo of G.R. No. 137146, pp. 73-74. [8] Ibid, p. 97. [9] Ibid., pp. 73-75, 99-110. [10] Ibid., pp. 77-78, 129-133. [11] Docketed as Civil Case No. 95-73687. [12] Rollo of G.R. No. 132431, p. 47. [13] Records, pp. 170-171. [14] Records, pp. 136-148.

[15] Rollo of G.R. No. 137146, pp. 184-189. [16] Urgent Motion for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, a Reiteration of Supplement to Urgent Motion for Injunctive Relief and an Urgent Ex-Parte Motion for Temporary Restraining Order. [17] Penned by Associate Justice Pedro Ramirez and concurred in by Associate Justice Ma. Alicia Austria-Martinez (now Associate Justice of the Supreme Court) and Bernardo Salas of the Fifth Division; Rollo of G.R. No. 137146, pp. 204-207. [18] Penned by Associate Justice Maximiano C. Asuncion and concurred in by Associate Justice Minerva P. Gonzaga-Reyes (retired Associate Justice of the Supreme Court) and Eubulo G. Verzola of the Eighth Division; Rollo of G.R. No. 137146, p. 231. [19] Rollo of G.R. No. 132431, p. 56. [20] Rollo of G.R. No. 132431, pp. 52-54. [21] Docketed as G.R. No. 132431. [22] Rollo of G.R. No. 132431, p. 309.

[23] Penned by Justice Eubulo G. Verzola and concurred in by Justices Ramon A. Barcelona and Artemio G. Tuquero, Special Former Fourth Division; Rollo of G.R. No. 137146, p. 43. [24] Penned by Justice Eubulo G. Verzola and concurred in by Justices Jorge S. Imperial and Artemio G. Tuquero, Former Fourth Division; Rollo of G.R. No. 137146, p. 52. [25] Rollo of G.R. No. 137146, pp. 48, 50-51. [26] Under Rule 65 of the 1997 Rules of Civil Procedure. [27] Rollo of G.R. No. 137146, pp. 16-17. [28] Petitioners pray that Ordinance 7818 be declared unconstitutional because it violated the equal protection clause of the 1987 Constitution. According to the ordinance, the beneficiaries of the subject properties are the occupants of the said parcels of land who have been occupying the said lands as lessees or any term thereof for a period of at least ten (10) years. Petitioners contend that the distinction between lessee and non-lessee is not germane to the purpose of the law, i.e., to give the land to the landless residents. By including only 10-year occupants, it also discriminates against other occupants who may also be landless. The ordinance failed to justify the distinction between a 10-year and a less-than-10-year occupant. Likewise, the ordinance impaired the contractual rights of petitioners. Prior to the expropriation, the tenants had pending

negotiations with petitioners for the purchase of the portions of the subject properties. But after the passage of the ordinance, none of our tenants desired to negotiate with us to purchase that (sic) portions of the subject parcels of land being respectively leased by them. Quoting Filstream vs. Court of Appeals (284 SCRA 716 [1998]), petitioners also aver that, in expropriating the properties, respondent City violated Sections 9 and 10 of RA 7279 by not complying with the procedure laid down by said provisions. They even point out that the subject parcels of land are not included in the 244 sites in Metropolitan Manila designated as area for priority development under PD 1967 (An Act Amending Proclamation No. 1893 By Specifying 244 Sites in Metropolitan Manila as Area for Priority and Urban Land Reform Zones.) Petitioners likewise contend that respondent City did not make a definite and valid offer prior to the filing of the complaint for expropriation. According to Section 3 of the Ordinance 7818, the funds necessary for paying just compensation shall come from the unappropriated fund and/or savings of the City Government. Clearly, respondent City did not provide a specific amount of money for the expropriation of the subject properties. Respondent cannot therefore make any offer which may be considered definite as the ordinance which authorized it to expropriate the subject parcels of land did not even appropriate a specific and determinate sum of money for

the purpose. Thus, the amount of P10,285,293.36 stated in its letter offering to buy the properties from the petitioners, had no legal basis. Last, assuming arguendo that the offer was valid, the amount deposited for the payment of just compensation was insufficient. In the complaint, respondent City prayed that it be allowed to enter and take possession of the subject parcels of land upon the deposit of P1,452,657 which is fifteen (15%) percent of the (assessed value) of the property. Under Section 19 of the Local Government Code of 1991, the deposit should be 15% of the fair market value of the property. Petitioners contend that the fair market value of the parcels of land based on the current tax declarations is P19,619,520. 15% of which is P2,942,928. The amount deposited was therefore insufficient. [29] SEC. 5. Preliminary injunction not granted without notice; exception. xxx xxx xxx

In the event that the application for preliminary injunction is denied or not resolved within the said period, the temporary restraining order is deemed automatically not vacated. The effectivity of a temporary restraining order is not extendible without need of any judicial declaration to renew the same on the same ground for which it was issued.

xxx

xxx

xxx

[30] SECTION 9. Jurisdiction. The Intermediate Appellate Court shall exercise: (1) Original jurisdiction to issue writs of mandamus, prohibition, certiorari, habeas corpus, and quo warranto, and auxiliary writs or processes, whether or not in aid of its appellate jurisdiction; [31] See Section 10, Article X of the 1987 Constitution; Section 6 of the Local Government Code of 1991; Judge Dadole et. al. vs. Commission on Audit, G.R. No. 125350, December 3, 2002. [32] SECTION 19. Eminent Domain A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided, however, that the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner, and such offer was not accepted; Provided, further, That the local government unit may immediately take possession of the property upon the filing of the expropriation proceedings and upon making a deposit with the proper court of at least fifteen (15%) of the fair market value of the property based on the current tax declaration of the property to be

expropriated: Provided, finally, That the amount to be paid for the expropriated property shall be determined by the proper court, based on the fair market value at the time of the taking of the property. *33+ General powers The city may have a common seal and alter the same at pleasure, and may take, purchase, receive, hold, lease, convey, and dispose of real and personal property for the general interest of the city, condemn private property for public use, contract and be contracted with, sue and be sued, and prosecute and defend to final judgment and execution, and exercise all the powers hereinafter conferred. (R.A. 409, Sec. 3). xxx xxx xxx

Sec. 100. The City of Manila is authorized to acquire private lands in the city and to subdivide the same into home lots for sale on easy terms to city residents, giving first priority to the bona fide tenants or occupants of said lands, and second priority to laborers and low-salaried employees. For the purpose of this section, the city may raise necessary funds by appropriations of general funds, by securing loans or by issuing bonds, and, if necessary, may acquire the lands through expropriation proceedings in accordance with law, with the approval of the President xxx. [34] 284 SCRA 716, 731 [1998].

[35] Ibid,. pp. 731-732. [36] Filipinas Marble Corp. vs. Intermediate Appellate Court, 142 SCRA 182 [1986]; Tropical Homes, Inc. vs. National Housing Authority, 152 SCRA 540 [1987].

lawphil Today is Saturday, November 17, 2012 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 175983 April 16, 2009

METROPOLITAN CEBU WATER DISTRICT (MCWD), Petitioner, vs. J. KING AND SONS COMPANY, INC., Respondent. DECISION TINGA, J.:

Before us is a Rule 45 petition1 which seeks the reversal of the decision2 and resolution3 of the Court of Appeals in CA-G.R. CEB-SP No. 00810. The Court of Appeals decision nullified the orders4 and the writ of possession5 issued by the Regional Trial Court (RTC) of Cebu City, Branch 23, allowing petitioner to take possession of respondents property. Petitioner Metropolitan Cebu Water District is a governmentowned and controlled corporation created pursuant to Presidential Decree No. 198, as amended. Among its purposes are to acquire, install, improve, maintain and operate water supply and distribution systems within the boundaries of the District.6 Petitioner wanted to acquire a five (5)-square meter lot occupied by its production well. The lot is part of respondents property covered by TCT No. 168605 and located in Banilad, Cebu City. Petitioner initiated negotiations7 with respondent J. King and Sons Company, Inc. for the voluntary sale of the latters property. Respondent did not acquiesce to petitioners proposal. After the negotiations had failed, petitioner pursuant to its charter8 initiated expropriation proceedings through Board Resolution No. 01520049 which was duly approved by the Local Water Utilities Administration (LWUA).10 On 10 November 2004, petitioner

filed a complaint11 to expropriate the five (5)-square meter portion of respondents property. On 7 February 2005, petitioner filed a motion12 for the issuance of a writ of possession. Petitioner wanted to tender the amount to respondent during a rescheduled hearing which petitioners counsel had failed to attend.13 Petitioner deposited14 with the Clerk of Court the amount of P17,500.00 equivalent to one hundred percent (100%) of the current zonal value of the property which the Bureau of Internal Revenue had pegged at P3,500.00 per square meter.15 Subsequently, the trial court granted the motion16 and issued the writ of possession.17 Respondent moved for reconsideration but the motion was denied.18 Respondent filed a petition19 for certiorari under Rule 65 with the Court of Appeals. It sought the issuance of a temporary restraining order (TRO) which the Court of Appeals granted.20 Thus, petitioner was not able to gain entry to the lot.21 On 26 July 2006, the Court of Appeals rendered the assailed decision22 granting respondents petition. It ruled that the board resolution which authorized the filing of the expropriation complaint lacked exactitude and particularity which made it invalid; that there was no genuine necessity for the expropriation of the five (5)-square meter lot and; that the reliance on Republic Act (R.A.) No. 8974 in fixing the value of the property contravenes the judicial determination of just

compensation. Petitioner moved23 for reconsideration but the motion was rejected.24 Hence, this petition. The issues raised by petitioner can be summarized as follows: 1. Whether there was sufficient authority from the petitioners board of directors to institute the expropriation complaint; and 2. Whether the procedure in obtaining a writ of possession was properly observed. Eminent domain is the right of the state to acquire private property for public use upon payment of just compensation.25 The power of eminent domain is inseparable in sovereignty being essential to the existence of the State and inherent in government. Its exercise is proscribed by only two Constitutional requirements: first, that there must be just compensation, and second, that no person shall be deprived of life, liberty or property without due process of law26 . As an inherent sovereign prerogative, the power to expropriate pertains to the legislature. However, Congress may, as in fact it often does, delegate the exercise of the power to government agencies, public officials and quasi-public entities. Petitioner is one of the numerous government offices so

empowered. Under its charter, P.D. No. 198, as amended,27 petitioner is explicitly granted the power of eminent domain. On 7 November 2000, Congress enacted R.A. No. 8974, entitled "An Act To Facilitate The Acquisition Of Right-Of-Way, Site Or Location For National Government Infrastructure Projects And For Other Purposes." Section 2 thereof defines national government projects as follows: Sec. 2. National Government Projects.The term "national government projects" shall refer to all national government infrastructure, engineering works and service contracts, including projects undertaken by government-owned and controlled corporations, all projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary activities, such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of source of funding." (emphasis ours) R.A. No. 8974 includes projects undertaken by government owned and controlled corporations,28 such as petitioner. Moreover, the Implementing Rules and Regulations of R.A. No. 8974 explicitly includes water supply, sewerage, and waste management facilities among the national government projects

covered by the law.29 It is beyond question, therefore, that R.A. No. 8974 applies to the expropriation subject of this case. The Court of Appeals held that the board resolution authorizing the expropriation lacked exactitude and particularity. It described the board resolution as akin to a general warrant in criminal law and as such declared it invalid. Respondent reiterates the same argument in its comment and adds that petitioners exercise of the power of eminent domain was not reviewed by the LWUA. A corporation does not have powers beyond those expressly conferred upon it by its enabling law. Petitioners charter provides that it has the powers, rights and privileges given to private corporations under existing laws, in addition to the powers granted in it.30 All the powers, privileges, and duties of the district shall be exercised and performed by and through the board and that any executive, administrative or ministerial power may be delegated and redelegated by the board to any of its officers or agents for such purpose.31 Being a corporation, petitioner can exercise its powers only through its board of directors. For petitioner to exercise its power of eminent domain, two requirements should be met, namely: first, its board of directors passed a resolution authorizing the expropriation, and; second, the exercise of the power of eminent domain was subjected to

review by the LWUA. In this case, petitioners board of directors approved on 27 February 2004, Board Resolution No. 015200432 authorizing its general manager to file expropriation and other cases. Moreover, the LWUA did review and gave its stamp of approval to the filing of a complaint for the expropriation of respondents lot. Specifically, the LWUA through its Administrator, Lorenzo H. Jamora, wrote petitioners manager, Armando H. Paredes, a letter dated 28 February 200533 authorizing petitioner to file the expropriation case "against the owner of the five-square meter portion of Lot No. 921-A covered by TCT No. 168805, pursuant to Section 25 of P.D. No. 198, as amended." The letter not only explicitly debunks respondents claim that there was no authorization from LWUA but it also identifies the lot sought to be expropriated with sufficient particularity. It is settled that the validity of a complaint may be questioned immediately upon its filing through a motion to dismiss or raised thereafter as an affirmative defense. However, there is no need to further belabor the issue since it is established that petitioner has the legal capacity to institute the expropriation complaint. Anent the second issue involving the issuance of a writ of possession, a discussion on the various stages in an expropriation proceeding is necessary.

The general rule is that upon filing of the expropriation complaint, the plaintiff has the right to take or enter into possession of the real property involved if he deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation. An exception to this procedure is provided by R.A. No. 897434 . It requires the payment of one hundred percent (100%) of the zonal value of the property to be expropriated to entitle the plaintiff to a writ of possession. In an expropriation proceeding there are two stages, first, is the determination of the validity of the expropriation, and second is the determination of just compensation.35 In Tan v. Republic,36 we explained the two (2) stages in an expropriation proceeding to wit: (1) Determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, with condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned for the public use or purpose described in the complaint, upon payment of just compensation. An order of expropriation is final. An order of dismissal, if this be ordained, would be a final one, as it finally disposes of the action and leaves nothing more to be done by the courts on the merits. The order of expropriation would also be a final one for after its issuance, no objection to the right of condemnation shall be

heard. The order of expropriation may be appealed by any party aggrieved thereby by filing a record on appeal. (2) Determination by the court of the just compensation for the property sought to be taken with the assistance of not more than three (3) commissioners. The order fixing the just compensation on the basis of the evidence before the court and findings of the commissioners would likewise be a final one, as it would leave nothing more to be done by the court regarding the issue. A second and separate appeal may be taken from this order fixing the just compensation.37 Thus, the determination of the necessity of the expropriation is a justiciable question which can only be resolved during the first stage of an expropriation proceeding. Respondents claim that the expropriated property is too small to be considered for public use can only be resolved during that stage. Further, the Court of Appeals ruled that Section 4 of R.A. No. 8974 runs counter to the express mandate of Section 2 of Rule 67.38 It held that the law undermined the principle that the determination of just compensation is a judicial function. However, this Court has already settled the issue. In Republic v. Gingoyon,39 this Court held that: It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the scheme of "immediate

payment" in cases involving national government infrastructure projects. xxx It likewise bears noting that the appropriate standard of just compensation is a substantive matter. It is well within the province of the legislature to fix the standard, which it did through the enactment of Rep. Act No. 8974. Specifically, this prescribes the new standards in determining the amount of just compensation in expropriation cases relating to national government infrastructure projects, as well as the manner of payment thereof. At the same time, Section 14 of the Implementing Rules recognizes the continued applicability of Rule 67 on procedural aspects when it provides "all matters regarding defenses and objections to the complaint, issues on uncertain ownership and conflicting claims, effects of appeal on the rights of the parties, and such other incidents affecting the complaint shall be resolved under the provisions on expropriation of Rule 67 of the Rules of Court.40 R.A. No. 8974 does not take away from the courts the power to judicially determine the amount of just compensation. The law merely sets the minimum price of the property as the provisional value. Thus,

the amount of just compensation must still be determined by the courts according to the standards set forth in Section 541 of R.A. No. 8974. R.A. No. 8974 provides a different scheme for the obtention of a writ of possession. The law does not require a deposit with a government bank; instead it requires the government to immediately pay the property owner.42 The provisional character of this payment means that it is not yet final, yet, sufficient under the law to entitle the Government to the writ of possession over the expropriated property.43 The provisional payment is a prerequisite44 and a trigger45 for the issuance of the writ of possession. In Gingoyon,46 we held that: It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the scheme of "immediate payment" in cases involving national government infrastructure projects.47 xxx Rep. Act. No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no amount of statutory deconstruction can evade such requisite. It enshrines a new approach towards eminent domain that reconciles the inherent unease attending expropriation proceedings with a position of fundamental equity. While expropriation proceedings have always demanded just compensation in exchange for private

property, the previous deposit requirement impeded immediate compensation to the private owner, especially in cases wherein the determination of the final amount of compensation would prove highly disputed. Under the new modality prescribed by Rep. Act. No. 8974, the private owner sees immediate monetary recompense, with the same degree of speed as the taking of his/her property.481avvphi1 Petitioner was supposed to tender the provisional payment directly to respondent during a hearing which it had failed to attend. Petitioner, then, deposited the provisional payment with the court. The trial court did not commit an error in accepting the deposit and in issuing the writ of possession. The deposit of the provisional amount with the court is equivalent to payment. Indeed, Section 4 of R.A. No. 8974 is emphatic to the effect that "upon compliance with the guidelinesthe court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project."49 Under this statutory provision, when the government, its agencies or government-owned and controlled corporations, make the required provisional payment, the trial court has a ministerial duty to issue a writ of possession. In Capitol Steel Corporation v. PHIVIDEC Industrial Authority,50 we held that: Upon compliance with the requirements, a petitioner in an expropriation caseis entitled to a writ of possession as a

matter of right and it becomes the ministerial duty of the trial court to forthwith issue the writ of possession. No hearing is required and the court neither exercises its discretion or judgment in determining the amount of the provisional value of the properties to be expropriated as the legislature has fixed the amount under Section 4 of R.A. No. 8974.51 (emphasis ours) It is mandatory on the trial courts part to issue the writ of possession and on the sheriffs part to deliver possession of respondents property to petitioner pursuant to the writ. WHEREFORE, the Court of Appeals Decision dated 26 July 2006 and Resolution dated 28 September 2006 are REVERSED. The ORDERS of the Regional Trial Court dated 01 April 2005 and 9 May 2005 are hereby REINSTATED. The Regional Trial Court is further DIRECTED to immediately REMIT the amount of P17,500.00 to respondent and to REQUIRE the sheriff to implement the writ of possession. The case is REMANDED to the trial court for further proceedings. SO ORDERED. DANTE O. TINGA Associate Justice WE CONCUR: LEONARDO A. QUISUMBING

Associate Justice Chairperson CONCHITA CARPIO MORALES Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice ARTURO D. BRION Associate Justice ATTESTATION I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. LEONARDO A. QUISUMBING Associate Justice Chairperson, Second Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO

Chief Justice Footnotes 1 Rollo. pp. 9-23. 2 Id. at 29-36; Dated 26 July 2006; penned by Associate Justice Isaias Dicdican and concurred in by Associate Justices Apolinario Bruselas, Jr. and Agustin S. Dizon. 3 Id. at 49-50; Dated 28 September 2006. 4 Id. at 57-58; Dated 01 April 2005 and 9 May 2005, both penned by Judge Generosa Labra. 5 Id. at 98-100; Dated 21 June 2005 issued by Clerk of Court Jeoffrey Joaquino. 6 P.D. No. 198, Sec. 5. Section 5. Purpose.Local water districts may be formed pursuant to this Title for the purposes of (a) acquiring, installing, improving, maintaining and operating water supply and distribution systems for domestic, industrial, municipal and agricultural uses for residents and lands within the boundaries of such districts, (b) providing, maintaining and operating wastewater collection, treatment and disposal facilities, and (c) conducting such other functions and operations incidental to

water resource development, utilization and disposal within such districts, as are necessary or incidental to said purpose. 7 Rollo, pp. 112-116. 8 P.D. No. 198, Sec.. 25, as amended. Section 25. Authorization. The district may exercise all the powers which are expressly granted by this Title or which are necessarily implied from or incidental to the powers and purposes herein stated. For the purpose of carrying out the objectives of this Act, a district is hereby granted the power of eminent domain, the exercise thereof shall, however, be subject to review by the Administration. 9 Rollo, p. 118. 10 Id. at 95; Letter dated 28 February 2005. 11 Id. at 102-106. 12 Records, pp. 49-50. 13 Rollo, p. 40. 14 Id. at 56; Official Receipt No. 5908819 dated 16 March 2005.

15 Id. at 117. 16 Id.a t 57-58; Order dated 1 April 2005. 17 Id. at 98-100. 18 Id. at 97. 19 Id. at 233-278. 20 Id. at 82-83; Dated 28 June 2005. 21 Id. at 44. 22 Supra note 2. 23 Id. at 37-45; Dated 23 August 2006. 24 Supra note 3. 25 1987 Const., Art. III, Sec. 9. Sec. 9Private property shall not be taken for public use without just compensation. 26 Barangay Sindalan, San Fernando, Pampanga v. Court of Appeals, G.R. No.150640, 22 March 2007, 518 SCRA 649.

27 Supra note 8. 28 Rollo, p. 84. 29 Implementing Rules and Regulation of R.A. No. 8974 (2001). Sec. 2 Definition of Terms xxx (d) National government projectsbased on Section 2 of the Act, refer to all to all national government infrastructure, engineering works, and service contracts, including all projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-Transfer Law x x x these projects shall include, but not limited, to x x x water supply, sewerage and waste management facilities x x x 30 P.D. No. 198, Sec. 6, as amended, Sec. 6. Formation of District.This Act is the source of authorization and power to form and maintain a district. For purposes of this Act, a district shall be considered as a quasipublic corporation performing public service and supplying public wants. As such, a district shall exercise the powers, rights and privileges given to private corporations under existing laws,

in addition to the powers granted in, and subject to such restrictions imposed, under this Act. xxx 31 P.D. No. 198, Sec. 17, as amended. Sec. 17. Performance of District Powers.All powers, privileges, and duties of the district shall be exercised and performed by and through the board: Provided, however, that any executive, administrative or ministerial power shall be delegated and redelegated by the board to officers or agents designated for such purpose by the board. 32 Rollo, p. 118. 33 Id. at 95. 34 Infra note 42. 35 Republic v. Phil-Ville Development and Housing Corporation, G.R. No. 172243, 26 June 2007, 525 SCRA 776. 36 Tan v. Republic G.R. No. 170740, 25 May 2007,523 SCRA 203. 37 Id. at 211-212. Citing Municipality of Bian v. Garcia, G.R. No. 69260, 22 December 1989, 180 SCRA 576; National Power

Corp. v. Jocson, G.R. Nos. 94193-99, 25 February 1992, 206 SCRA 520. See also Lintag v. National Power Corporation, G.R. No. 158609, 27 July 2007, 528 SCRA 287, 297. 38 Rules of Court, Rule 67, Sec. 2. Sec.2 Entry of plaintiff upon depositing value with authorized government depositary.Upon filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the right to take or enter upon the possession of the real property involved if he deposits with the authorized government depositary an amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the orders of the court. Such deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a certificate of deposit of a government bank of the Republic of the Philippines payable on demand to the authorized government depositary. If personal property is involved, its value shall be provisionally ascertained and the amount to be deposited shall be promptly fixed by the court. After such deposit is made the court shall order the sheriff or other proper officer to forthwith place the plaintiff in possession of the property involved and promptly submit a report thereof to the court with service of copies to the parties.

39 G.R. No. 166429, 19 December 2005, 478 SCRA 474, 519. 40 Id. at 519-520. Cited in National Power Corporation v. Co, G.R. No. 166973, 10 February 2009. 41 Sec. 5 Standards for the Assessment of the Value of the Land Subject of Expropriation Proceedings or Negotiated Sale. In order to facilitate the determination of just compensation, the court may consider, among other well-established factors, the following relevant standards: (a) The classification and use for which the property is suited; (b) The developmental costs for improving the land; (c) The value declared by the owners; (d) The current selling price of similar lands in the vicinity; (e) The reasonable disturbance compensation for the removal and/or demolition of certain improvements on the land and for the value of improvements thereon; (f) The size, shape, or location, tax declaration and zonal valuation of the land; (g) The price of the land as manifested in the ocular findings, oral as well as documentary evidence presented; and

(h) Such facts and events as to enable the affected property owners to have sufficient funds to acquire similarly-situated lands of approximate areas as those required from them by the government, and thereby rehabilitate themselves as early as possible. 42 R.A. No. 8974, Sec. 4. Sec. 4. Guidelines for Expropriation Proceedings.Whenever it is necessary to acquire real property for the right-of-way, site or location for any national government infrastructure project through expropriation, the implementing agency shall initiate the expropriation proceedings before the proper court under the following guidelines: (a) Upon filing of the complaint, and after due notice to the defendant, the implementing agency shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7 hereof; xxx Upon compliance with the guidelines abovementioned, the court shall immediately issue to the implementing agency an

order to take possession of the property and start the implementation of the project. Before the court can issue a Writ of Possession, the implementing agency shall present to the court a certificate of availability of funds from the proper official concerned. xxx 43 Resolution denying Motion for Reconsideration in Republic v. Gingoyon, G.R. No. 166429, 1 February 2006, 481 SCRA 457, 467. 44 Capitol Steel Corporation v. PHIVIDEC Industrial Authority, G.R. No. 169453, 6 December 2006, 510 SCRA 590, 617. 45 Supra note 43 at 469. 46 G.R. No. 166429, 19 December 2005, 478 SCRA 474, 519. 47 Id. at 519. Cited in National Power Corporation v. Co, G.R. No. 166973, 10 February 2009. 48 Id. at 531-532. 49 Supra note 42. 50 Supra note 44.

51 Id. at 602. The Lawphil Project - Arellano Law Foundation

C. Taking 1. Requisites

lawphil Today is Saturday, November 17, 2012 Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-20620 August 15, 1974 REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. CARMEN M. VDA. DE CASTELLVI, ET AL., defendantsappellees.

Office of the Solicitor General for plaintiff-appellant. C.A. Mendoza & A. V. Raquiza and Alberto Cacnio & Associates for defendant-appellees.

ZALDIVAR, J.:p Appeal from the decision of the Court of First Instance of Pampanga in its Civil Case No. 1623, an expropriation proceeding. Plaintiff-appellant, the Republic of the Philippines, (hereinafter referred to as the Republic) filed, on June 26, 1959, a complaint for eminent domain against defendantappellee, Carmen M. Vda. de Castellvi, judicial administratrix of the estate of the late Alfonso de Castellvi (hereinafter referred to as Castellvi), over a parcel of land situated in the barrio of San Jose, Floridablanca, Pampanga, described as follows: A parcel of land, Lot No. 199-B Bureau of Lands Plan Swo 23666. Bounded on the NE by Maria Nieves Toledo-Gozun; on the SE by national road; on the SW by AFP reservation, and on the NW by AFP reservation. Containing an area of 759,299 square meters, more or less, and registered in the name of

Alfonso Castellvi under TCT No. 13631 of the Register of Pampanga ...; and against defendant-appellee Maria Nieves Toledo Gozun (hereinafter referred to as Toledo-Gozun over two parcels of land described as follows: A parcel of land (Portion Lot Blk-1, Bureau of Lands Plan Psd, 26254. Bounded on the NE by Lot 3, on the SE by Lot 3; on the SW by Lot 1-B, Blk. 2 (equivalent to Lot 199-B Swo 23666; on the NW by AFP military reservation. Containing an area of 450,273 square meters, more or less and registered in the name of Maria Nieves Toledo-Gozun under TCT No. 8708 of the Register of Deeds of Pampanga. ..., and A parcel of land (Portion of lot 3, Blk-1, Bureau of Lands Plan Psd 26254. Bounded on the NE by Lot No. 3, on the SE by school lot and national road, on the SW by Lot 1-B Blk 2 (equivalent to Lot 199-B Swo 23666), on the NW by Lot 1-B, Blk-1. Containing an area of 88,772 square meters, more or less, and registered in the name of Maria Nieves Toledo Gozun under TCT No. 8708 of the Register of Deeds of Pampanga, .... In its complaint, the Republic alleged, among other things, that the fair market value of the above-mentioned lands, according to the Committee on Appraisal for the Province of Pampanga, was not more than P2,000 per hectare, or a total

market value of P259,669.10; and prayed, that the provisional value of the lands be fixed at P259.669.10, that the court authorizes plaintiff to take immediate possession of the lands upon deposit of that amount with the Provincial Treasurer of Pampanga; that the court appoints three commissioners to ascertain and report to the court the just compensation for the property sought to be expropriated, and that the court issues thereafter a final order of condemnation. On June 29, 1959 the trial court issued an order fixing the provisional value of the lands at P259,669.10. In her "motion to dismiss" filed on July 14, 1959, Castellvi alleged, among other things, that the land under her administration, being a residential land, had a fair market value of P15.00 per square meter, so it had a total market value of P11,389,485.00; that the Republic, through the Armed Forces of the Philippines, particularly the Philippine Air Force, had been, despite repeated demands, illegally occupying her property since July 1, 1956, thereby preventing her from using and disposing of it, thus causing her damages by way of unrealized profits. This defendant prayed that the complaint be dismissed, or that the Republic be ordered to pay her P15.00 per square meter, or a total of P11,389,485.00, plus interest thereon at 6% per annum from July 1, 1956; that the Republic be ordered to pay her P5,000,000.00 as unrealized profits, and the costs of the suit.

By order of the trial court, dated August, 1959, Amparo C. Diaz, Dolores G. viuda de Gil, Paloma Castellvi, Carmen Castellvi, Rafael Castellvi, Luis Castellvi, Natividad Castellvi de Raquiza, Jose Castellvi and Consuelo Castellvi were allowed to intervene as parties defendants. Subsequently, Joaquin V. Gozun, Jr., husband of defendant Nieves Toledo Gozun, was also allowed by the court to intervene as a party defendant. After the Republic had deposited with the Provincial Treasurer of Pampanga the amount of P259,669.10, the trial court ordered that the Republic be placed in possession of the lands. The Republic was actually placed in possession of the lands on August 10, 1959. 1 In her "motion to dismiss", dated October 22, 1959, ToledoGozun alleged, among other things, that her two parcels of land were residential lands, in fact a portion with an area of 343,303 square meters had already been subdivided into different lots for sale to the general public, and the remaining portion had already been set aside for expansion sites of the already completed subdivisions; that the fair market value of said lands was P15.00 per square meter, so they had a total market value of P8,085,675.00; and she prayed that the complaint be dismissed, or that she be paid the amount of P8,085,675.00, plus interest thereon at the rate of 6% per annum from October 13, 1959, and attorney's fees in the amount of P50,000.00.

Intervenors Jose Castellvi and Consuelo Castellvi in their answer, filed on February 11, 1960, and also intervenor Joaquin Gozun, Jr., husband of defendant Maria Nieves Toledo-Gozun, in his motion to dismiss, dated May 27, 1960, all alleged that the value of the lands sought to be expropriated was at the rate of P15.00 per square meter. On November 4, 1959, the trial court authorized the Provincial Treasurer of Pampanga to pay defendant ToledoGozun the sum of P107,609.00 as provisional value of her lands. 2 On May 16, 1960 the trial Court authorized the Provincial Treasurer of Pampanga to pay defendant Castellvi the amount of P151,859.80 as provisional value of the land under her administration, and ordered said defendant to deposit the amount with the Philippine National Bank under the supervision of the Deputy Clerk of Court. In another order of May 16, 1960 the trial Court entered an order of condemnation. 3 The trial Court appointed three commissioners: Atty. Amadeo Yuzon, Clerk of Court, as commissioner for the court; Atty. Felicisimo G. Pamandanan, counsel of the Philippine National Bank Branch at Floridablanca, for the plaintiff; and Atty. Leonardo F. Lansangan, Filipino legal counsel at Clark Air Base, for the defendants. The Commissioners, after having qualified themselves, proceeded to the performance of their duties.

On March 15,1961 the Commissioners submitted their report and recommendation, wherein, after having determined that the lands sought to be expropriated were residential lands, they recommended unanimously that the lowest price that should be paid was P10.00 per square meter, for both the lands of Castellvi and Toledo-Gozun; that an additional P5,000.00 be paid to Toledo-Gozun for improvements found on her land; that legal interest on the compensation, computed from August 10, 1959, be paid after deducting the amounts already paid to the owners, and that no consequential damages be awarded. 4 The Commissioners' report was objected to by all the parties in the case by defendants Castellvi and Toledo-Gozun, who insisted that the fair market value of their lands should be fixed at P15.00 per square meter; and by the Republic, which insisted that the price to be paid for the lands should be fixed at P0.20 per square meter. 5 After the parties-defendants and intervenors had filed their respective memoranda, and the Republic, after several extensions of time, had adopted as its memorandum its objections to the report of the Commissioners, the trial court, on May 26, 1961, rendered its decision 6 the dispositive portion of which reads as follows: WHEREFORE, taking into account all the foregoing circumstances, and that the lands are titled, ... the rising trend

of land values ..., and the lowered purchasing power of the Philippine peso, the court finds that the unanimous recommendation of the commissioners of ten (P10.00) pesos per square meter for the three lots of the defendants subject of this action is fair and just. xxx xxx xxx The plaintiff will pay 6% interest per annum on the total value of the lands of defendant Toledo-Gozun since (sic) the amount deposited as provisional value from August 10, 1959 until full payment is made to said defendant or deposit therefor is made in court. In respect to the defendant Castellvi, interest at 6% per annum will also be paid by the plaintiff to defendant Castellvi from July 1, 1956 when plaintiff commenced its illegal possession of the Castellvi land when the instant action had not yet been commenced to July 10, 1959 when the provisional value thereof was actually deposited in court, on the total value of the said (Castellvi) land as herein adjudged. The same rate of interest shall be paid from July 11, 1959 on the total value of the land herein adjudged minus the amount deposited as provisional value, or P151,859.80, such interest to run until full payment is made to said defendant or deposit therefor is made in court. All the intervenors having failed to produce evidence in support of their respective interventions, said interventions are ordered dismissed.

The costs shall be charged to the plaintiff. On June 21, 1961 the Republic filed a motion for a new trial and/or reconsideration, upon the grounds of newlydiscovered evidence, that the decision was not supported by the evidence, and that the decision was against the law, against which motion defendants Castellvi and Toledo-Gozun filed their respective oppositions. On July 8, 1961 when the motion of the Republic for new trial and/or reconsideration was called for hearing, the Republic filed a supplemental motion for new trial upon the ground of additional newlydiscovered evidence. This motion for new trial and/or reconsideration was denied by the court on July 12, 1961. On July 17, 1961 the Republic gave notice of its intention to appeal from the decision of May 26, 1961 and the order of July 12, 1961. Defendant Castellvi also filed, on July 17, 1961, her notice of appeal from the decision of the trial court. The Republic filed various ex-parte motions for extension of time within which to file its record on appeal. The Republic's record on appeal was finally submitted on December 6, 1961. Defendants Castellvi and Toledo-Gozun filed not only a joint opposition to the approval of the Republic's record on appeal, but also a joint memorandum in support of their opposition. The Republic also filed a memorandum in support of its

prayer for the approval of its record on appeal. On December 27, 1961 the trial court issued an order declaring both the record on appeal filed by the Republic, and the record on appeal filed by defendant Castellvi as having been filed out of time, thereby dismissing both appeals. On January 11, 1962 the Republic filed a "motion to strike out the order of December 27, 1961 and for reconsideration", and subsequently an amended record on appeal, against which motion the defendants Castellvi and Toledo-Gozun filed their opposition. On July 26, 1962 the trial court issued an order, stating that "in the interest of expediency, the questions raised may be properly and finally determined by the Supreme Court," and at the same time it ordered the Solicitor General to submit a record on appeal containing copies of orders and pleadings specified therein. In an order dated November 19, 1962, the trial court approved the Republic's record on appeal as amended. Defendant Castellvi did not insist on her appeal. Defendant Toledo-Gozun did not appeal. The motion to dismiss the Republic's appeal was reiterated by appellees Castellvi and Toledo-Gozun before this Court, but this Court denied the motion. In her motion of August 11, 1964, appellee Castellvi sought to increase the provisional value of her land. The Republic, in

its comment on Castellvi's motion, opposed the same. This Court denied Castellvi's motion in a resolution dated October 2,1964.

The motion of appellees, Castellvi and Toledo-Gozun, dated October 6, 1969, praying that they be authorized to mortgage the lands subject of expropriation, was denied by this Court or October 14, 1969. On February 14, 1972, Attys. Alberto Cacnio, and Associates, counsel for the estate of the late Don Alfonso de Castellvi in the expropriation proceedings, filed a notice of attorney's lien, stating that as per agreement with the administrator of the estate of Don Alfonso de Castellvi they shall receive by way of attorney's fees, "the sum equivalent to ten per centum of whatever the court may finally decide as the expropriated price of the property subject matter of the case." --------Before this Court, the Republic contends that the lower court erred: 1. In finding the price of P10 per square meter of the lands subject of the instant proceedings as just compensation;

2. In holding that the "taking" of the properties under expropriation commenced with the filing of this action; 3. In ordering plaintiff-appellant to pay 6% interest on the adjudged value of the Castellvi property to start from July of 1956; 4. In denying plaintiff-appellant's motion for new trial based on newly discovered evidence. In its brief, the Republic discusses the second error assigned as the first issue to be considered. We shall follow the sequence of the Republic's discussion. 1. In support of the assigned error that the lower court erred in holding that the "taking" of the properties under expropriation commenced with the filing of the complaint in this case, the Republic argues that the "taking" should be reckoned from the year 1947 when by virtue of a special lease agreement between the Republic and appellee Castellvi, the former was granted the "right and privilege" to buy the property should the lessor wish to terminate the lease, and that in the event of such sale, it was stipulated that the fair market value should be as of the time of occupancy; and that the permanent improvements amounting to more that half a million pesos constructed during a period of twelve years on the land, subject of expropriation, were indicative of an

agreed pattern of permanency and stability of occupancy by the Philippine Air Force in the interest of national Security. 7 Appellee Castellvi, on the other hand, maintains that the "taking" of property under the power of eminent domain requires two essential elements, to wit: (1) entrance and occupation by condemn or upon the private property for more than a momentary or limited period, and (2) devoting it to a public use in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property. This appellee argues that in the instant case the first element is wanting, for the contract of lease relied upon provides for a lease from year to year; that the second element is also wanting, because the Republic was paying the lessor Castellvi a monthly rental of P445.58; and that the contract of lease does not grant the Republic the "right and privilege" to buy the premises "at the value at the time of occupancy." 8 Appellee Toledo-Gozun did not comment on the Republic's argument in support of the second error assigned, because as far as she was concerned the Republic had not taken possession of her lands prior to August 10, 1959. 9 In order to better comprehend the issues raised in the appeal, in so far as the Castellvi property is concerned, it should be noted that the Castellvi property had been occupied by the Philippine Air Force since 1947 under a

contract of lease, typified by the contract marked Exh. 4Castellvi, the pertinent portions of which read: CONTRACT OF LEASE This AGREEMENT OF LEASE MADE AND ENTERED into by and between INTESTATE ESTATE OF ALFONSO DE CASTELLVI, represented by CARMEN M. DE CASTELLVI, Judicial Administratrix ... hereinafter called the LESSOR and THE REPUBLIC OF THE PHILIPPINES represented by MAJ. GEN. CALIXTO DUQUE, Chief of Staff of the ARMED FORCES OF THE PHILIPPINES, hereinafter called the LESSEE, WITNESSETH: 1. For and in consideration of the rentals hereinafter reserved and the mutual terms, covenants and conditions of the parties, the LESSOR has, and by these presents does, lease and let unto the LESSEE the following described land together with the improvements thereon and appurtenances thereof, viz: Un Terreno, Lote No. 27 del Plano de subdivision Psu 34752, parte de la hacienda de Campauit, situado en el Barrio de San Jose, Municipio de Floridablanca Pampanga. ... midiendo una extension superficial de cuatro milliones once mil cuatro cientos trienta y cinco (4,001,435) [sic] metros cuadrados, mas o menos.

Out of the above described property, 75.93 hectares thereof are actually occupied and covered by this contract. . Above lot is more particularly described in TCT No. 1016, province of Pampanga ... of which premises, the LESSOR warrants that he/she/they/is/are the registered owner(s) and with full authority to execute a contract of this nature. 2. The term of this lease shall be for the period beginning July 1, 1952 the date the premises were occupied by the PHILIPPINE AIR FORCE, AFP until June 30, 1953, subject to renewal for another year at the option of the LESSEE or unless sooner terminated by the LESSEE as hereinafter provided. 3. The LESSOR hereby warrants that the LESSEE shall have quiet, peaceful and undisturbed possession of the demised premises throughout the full term or period of this lease and the LESSOR undertakes without cost to the LESSEE to eject all trespassers, but should the LESSOR fail to do so, the LESSEE at its option may proceed to do so at the expense of the LESSOR. The LESSOR further agrees that should he/she/they sell or encumber all or any part of the herein described premises during the period of this lease, any conveyance will be conditioned on the right of the LESSEE hereunder.

4. The LESSEE shall pay to the LESSOR as monthly rentals under this lease the sum of FOUR HUNDRED FIFTY-FIVE PESOS & 58/100 (P455.58) ... 5. The LESSEE may, at any time prior to the termination of this lease, use the property for any purpose or purposes and, at its own costs and expense make alteration, install facilities and fixtures and errect additions ... which facilities or fixtures ... so placed in, upon or attached to the said premises shall be and remain property of the LESSEE and may be removed therefrom by the LESSEE prior to the termination of this lease. The LESSEE shall surrender possession of the premises upon the expiration or termination of this lease and if so required by the LESSOR, shall return the premises in substantially the same condition as that existing at the time same were first occupied by the AFP, reasonable and ordinary wear and tear and damages by the elements or by circumstances over which the LESSEE has no control excepted: PROVIDED, that if the LESSOR so requires the return of the premises in such condition, the LESSOR shall give written notice thereof to the LESSEE at least twenty (20) days before the termination of the lease and provided, further, that should the LESSOR give notice within the time specified above, the LESSEE shall have the right and privilege to compensate the LESSOR at the fair value or the equivalent, in lieu of performance of its obligation, if any, to restore the premises. Fair value is to be determined as the value at the time of occupancy less fair

wear and tear and depreciation during the period of this lease. 6. The LESSEE may terminate this lease at any time during the term hereof by giving written notice to the LESSOR at least thirty (30) days in advance ... 7. The LESSEE should not be responsible, except under special legislation for any damages to the premises by reason of combat operations, acts of GOD, the elements or other acts and deeds not due to the negligence on the part of the LESSEE. 8. This LEASE AGREEMENT supersedes and voids any and all agreements and undertakings, oral or written, previously entered into between the parties covering the property herein leased, the same having been merged herein. This AGREEMENT may not be modified or altered except by instrument in writing only duly signed by the parties. 10 It was stipulated by the parties, that "the foregoing contract of lease (Exh. 4, Castellvi) is 'similar in terms and conditions, including the date', with the annual contracts entered into from year to year between defendant Castellvi and the Republic of the Philippines (p. 17, t.s.n., Vol. III)". 11 It is undisputed, therefore, that the Republic occupied Castellvi's land from July 1, 1947, by virtue of the abovementioned contract, on a year to year basis (from July 1 of

each year to June 30 of the succeeding year) under the terms and conditions therein stated. Before the expiration of the contract of lease on June 30, 1956 the Republic sought to renew the same but Castellvi refused. When the AFP refused to vacate the leased premises after the termination of the contract, on July 11, 1956, Castellvi wrote to the Chief of Staff, AFP, informing the latter that the heirs of the property had decided not to continue leasing the property in question because they had decided to subdivide the land for sale to the general public, demanding that the property be vacated within 30 days from receipt of the letter, and that the premises be returned in substantially the same condition as before occupancy (Exh. 5 Castellvi). A follow-up letter was sent on January 12, 1957, demanding the delivery and return of the property within one month from said date (Exh. 6 Castellvi). On January 30, 1957, Lieutenant General Alfonso Arellano, Chief of Staff, answered the letter of Castellvi, saying that it was difficult for the army to vacate the premises in view of the permanent installations and other facilities worth almost P500,000.00 that were erected and already established on the property, and that, there being no other recourse, the acquisition of the property by means of expropriation proceedings would be recommended to the President (Exhibit "7" Castellvi). Defendant Castellvi then brought suit in the Court of First Instance of Pampanga, in Civil Case No. 1458, to eject the

Philippine Air Force from the land. While this ejectment case was pending, the Republic instituted these expropriation proceedings, and, as stated earlier in this opinion, the Republic was placed in possession of the lands on August 10, 1959, On November 21, 1959, the Court of First Instance of Pampanga, dismissed Civil Case No. 1458, upon petition of the parties, in an order which, in part, reads as follows: 1. Plaintiff has agreed, as a matter of fact has already signed an agreement with defendants, whereby she has agreed to receive the rent of the lands, subject matter of the instant case from June 30, 1966 up to 1959 when the Philippine Air Force was placed in possession by virtue of an order of the Court upon depositing the provisional amount as fixed by the Provincial Appraisal Committee with the Provincial Treasurer of Pampanga; 2. That because of the above-cited agreement wherein the administratrix decided to get the rent corresponding to the rent from 1956 up to 1959 and considering that this action is one of illegal detainer and/or to recover the possession of said land by virtue of non-payment of rents, the instant case now has become moot and academic and/or by virtue of the agreement signed by plaintiff, she has waived her cause of action in the above-entitled case. 12 The Republic urges that the "taking " of Castellvi's property should be deemed as of the year 1947 by virtue of afore-

quoted lease agreement. In American Jurisprudence, Vol. 26, 2nd edition, Section 157, on the subject of "Eminent Domain, we read the definition of "taking" (in eminent domain) as follows: Taking' under the power of eminent domain may be defined generally as entering upon private property for more than a momentary period, and, under the warrant or color of legal authority, devoting it to a public use, or otherwise informally appropriating or injuriously affecting it in such a way as substantially to oust the owner and deprive him of all beneficial enjoyment thereof. 13 Pursuant to the aforecited authority, a number of circumstances must be present in the "taking" of property for purposes of eminent domain. First, the expropriator must enter a private property. This circumstance is present in the instant case, when by virtue of the lease agreement the Republic, through the AFP, took possession of the property of Castellvi. Second, the entrance into private property must be for more than a momentary period. "Momentary" means, "lasting but a moment; of but a moment's duration" (The Oxford English Dictionary, Volume VI, page 596); "lasting a very short time; transitory; having a very brief life; operative or recurring at every moment" (Webster's Third International

Dictionary, 1963 edition.) The word "momentary" when applied to possession or occupancy of (real) property should be construed to mean "a limited period" not indefinite or permanent. The aforecited lease contract was for a period of one year, renewable from year to year. The entry on the property, under the lease, is temporary, and considered transitory. The fact that the Republic, through the AFP, constructed some installations of a permanent nature does not alter the fact that the entry into the land was transitory, or intended to last a year, although renewable from year to year by consent of 'The owner of the land. By express provision of the lease agreement the Republic, as lessee, undertook to return the premises in substantially the same condition as at the time the property was first occupied by the AFP. It is claimed that the intention of the lessee was to occupy the land permanently, as may be inferred from the construction of permanent improvements. But this "intention" cannot prevail over the clear and express terms of the lease contract. Intent is to be deduced from the language employed by the parties, and the terms 'of the contract, when unambiguous, as in the instant case, are conclusive in the absence of averment and proof of mistake or fraud the question being not what the intention was, but what is expressed in the language used. (City of Manila v. Rizal Park Co., Inc., 53 Phil. 515, 525); Magdalena Estate, Inc. v. Myrick, 71 Phil. 344, 348). Moreover, in order to judge the intention of the contracting parties, their contemporaneous and subsequent acts shall be principally considered (Art. 1371,

Civil Code). If the intention of the lessee (Republic) in 1947 was really to occupy permanently Castellvi's property, why was the contract of lease entered into on year to year basis? Why was the lease agreement renewed from year to year? Why did not the Republic expropriate this land of Castellvi in 1949 when, according to the Republic itself, it expropriated the other parcels of land that it occupied at the same time as the Castellvi land, for the purpose of converting them into a jet air base? 14 It might really have been the intention of the Republic to expropriate the lands in question at some future time, but certainly mere notice - much less an implied notice of such intention on the part of the Republic to expropriate the lands in the future did not, and could not, bind the landowner, nor bind the land itself. The expropriation must be actually commenced in court (Republic vs. Baylosis, et al., 96 Phil. 461, 484). Third, the entry into the property should be under warrant or color of legal authority. This circumstance in the "taking" may be considered as present in the instant case, because the Republic entered the Castellvi property as lessee. Fourth, the property must be devoted to a public use or otherwise informally appropriated or injuriously affected. It may be conceded that the circumstance of the property being devoted to public use is present because the property was used by the air force of the AFP.

Fifth, the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property. In the instant case, the entry of the Republic into the property and its utilization of the same for public use did not oust Castellvi and deprive her of all beneficial enjoyment of the property. Castellvi remained as owner, and was continuously recognized as owner by the Republic, as shown by the renewal of the lease contract from year to year, and by the provision in the lease contract whereby the Republic undertook to return the property to Castellvi when the lease was terminated. Neither was Castellvi deprived of all the beneficial enjoyment of the property, because the Republic was bound to pay, and had been paying, Castellvi the agreed monthly rentals until the time when it filed the complaint for eminent domain on June 26, 1959. It is clear, therefore, that the "taking" of Catellvi's property for purposes of eminent domain cannot be considered to have taken place in 1947 when the Republic commenced to occupy the property as lessee thereof. We find merit in the contention of Castellvi that two essential elements in the "taking" of property under the power of eminent domain, namely: (1) that the entrance and occupation by the condemnor must be for a permanent, or indefinite period, and (2) that in devoting the property to public use the owner was ousted from the property and deprived of its beneficial

use, were not present when the Republic entered and occupied the Castellvi property in 1947. Untenable also is the Republic's contention that although the contract between the parties was one of lease on a year to year basis, it was "in reality a more or less permanent right to occupy the premises under the guise of lease with the 'right and privilege' to buy the property should the lessor wish to terminate the lease," and "the right to buy the property is merged as an integral part of the lease relationship ... so much so that the fair market value has been agreed upon, not, as of the time of purchase, but as of the time of occupancy" 15 We cannot accept the Republic's contention that a lease on a year to year basis can give rise to a permanent right to occupy, since by express legal provision a lease made for a determinate time, as was the lease of Castellvi's land in the instant case, ceases upon the day fixed, without need of a demand (Article 1669, Civil Code). Neither can it be said that the right of eminent domain may be exercised by simply leasing the premises to be expropriated (Rule 67, Section 1, Rules of Court). Nor can it be accepted that the Republic would enter into a contract of lease where its real intention was to buy, or why the Republic should enter into a simulated contract of lease ("under the guise of lease", as expressed by counsel for the Republic) when all the time the Republic had the right of eminent domain, and could expropriate Castellvi's land if it wanted to without resorting to any guise whatsoever. Neither can we see how a right to

buy could be merged in a contract of lease in the absence of any agreement between the parties to that effect. To sustain the contention of the Republic is to sanction a practice whereby in order to secure a low price for a land which the government intends to expropriate (or would eventually expropriate) it would first negotiate with the owner of the land to lease the land (for say ten or twenty years) then expropriate the same when the lease is about to terminate, then claim that the "taking" of the property for the purposes of the expropriation be reckoned as of the date when the Government started to occupy the property under the lease, and then assert that the value of the property being expropriated be reckoned as of the start of the lease, in spite of the fact that the value of the property, for many good reasons, had in the meantime increased during the period of the lease. This would be sanctioning what obviously is a deceptive scheme, which would have the effect of depriving the owner of the property of its true and fair market value at the time when the expropriation proceedings were actually instituted in court. The Republic's claim that it had the "right and privilege" to buy the property at the value that it had at the time when it first occupied the property as lessee nowhere appears in the lease contract. What was agreed expressly in paragraph No. 5 of the lease agreement was that, should the lessor require the lessee to return the premises in the same condition as at the time the same was first occupied by the AFP, the lessee would have the "right and privilege" (or option) of paying the lessor what it would fairly cost to put

the premises in the same condition as it was at the commencement of the lease, in lieu of the lessee's performance of the undertaking to put the land in said condition. The "fair value" at the time of occupancy, mentioned in the lease agreement, does not refer to the value of the property if bought by the lessee, but refers to the cost of restoring the property in the same condition as of the time when the lessee took possession of the property. Such fair value cannot refer to the purchase price, for purchase was never intended by the parties to the lease contract. It is a rule in the interpretation of contracts that "However general the terms of a contract may be, they shall not be understood to comprehend things that are distinct and cases that are different from those upon which the parties intended to agree" (Art. 1372, Civil Code). We hold, therefore, that the "taking" of the Castellvi property should not be reckoned as of the year 1947 when the Republic first occupied the same pursuant to the contract of lease, and that the just compensation to be paid for the Castellvi property should not be determined on the basis of the value of the property as of that year. The lower court did not commit an error when it held that the "taking" of the property under expropriation commenced with the filing of the complaint in this case. Under Section 4 of Rule 67 of the Rules of Court, 16 the "just compensation" is to be determined as of the date of the

filing of the complaint. This Court has ruled that when the taking of the property sought to be expropriated coincides with the commencement of the expropriation proceedings, or takes place subsequent to the filing of the complaint for eminent domain, the just compensation should be determined as of the date of the filing of the complaint. (Republic vs. Philippine National Bank, L-14158, April 12, 1961, 1 SCRA 957, 961-962). In the instant case, it is undisputed that the Republic was placed in possession of the Castellvi property, by authority of the court, on August 10, 1959. The "taking" of the Castellvi property for the purposes of determining the just compensation to be paid must, therefore, be reckoned as of June 26, 1959 when the complaint for eminent domain was filed. Regarding the two parcels of land of Toledo-Gozun, also sought to be expropriated, which had never been under lease to the Republic, the Republic was placed in possession of said lands, also by authority of the court, on August 10, 1959, The taking of those lands, therefore, must also be reckoned as of June 26, 1959, the date of the filing of the complaint for eminent domain. 2. Regarding the first assigned error discussed as the second issue the Republic maintains that, even assuming that the value of the expropriated lands is to be determined as of June 26, 1959, the price of P10.00 per square meter fixed by the lower court "is not only exhorbitant but also

unconscionable, and almost fantastic". On the other hand, both Castellvi and Toledo-Gozun maintain that their lands are residential lands with a fair market value of not less than P15.00 per square meter. The lower court found, and declared, that the lands of Castellvi and Toledo-Gozun are residential lands. The finding of the lower court is in consonance with the unanimous opinion of the three commissioners who, in their report to the court, declared that the lands are residential lands. The Republic assails the finding that the lands are residential, contending that the plans of the appellees to convert the lands into subdivision for residential purposes were only on paper, there being no overt acts on the part of the appellees which indicated that the subdivision project had been commenced, so that any compensation to be awarded on the basis of the plans would be speculative. The Republic's contention is not well taken. We find evidence showing that the lands in question had ceased to be devoted to the production of agricultural crops, that they had become adaptable for residential purposes, and that the appellees had actually taken steps to convert their lands into residential subdivisions even before the Republic filed the complaint for eminent domain. In the case of City of Manila vs. Corrales (32 Phil. 82, 98) this Court laid down basic guidelines in determining the value of the property expropriated for public purposes. This Court said:

In determining the value of land appropriated for public purposes, the same consideration are to be regarded as in a sale of property between private parties. The inquiry, in such cases, must be what is the property worth in the market, viewed not merely with reference to the uses to which it is at the time applied, but with reference to the uses to which it is plainly adapted, that is to say, What is it worth from its availability for valuable uses? So many and varied are the circumstances to be taken into account in determining the value of property condemned for public purposes, that it is practically impossible to formulate a rule to govern its appraisement in all cases. Exceptional circumstances will modify the most carefully guarded rule, but, as a general thing, we should say that the compensation of the owner is to be estimated by reference to the use for which the property is suitable, having regard to the existing business or wants of the community, or such as may be reasonably expected in the immediate future. (Miss. and Rum River Boom Co. vs. Patterson, 98 U.S., 403). In expropriation proceedings, therefore, the owner of the land has the right to its value for the use for which it would bring the most in the market. 17 The owner may thus show every advantage that his property possesses, present and prospective, in order that the price it could be sold for in the market may be satisfactorily determined. 18 The owner may

also show that the property is suitable for division into village or town lots. 19 The trial court, therefore, correctly considered, among other circumstances, the proposed subdivision plans of the lands sought to be expropriated in finding that those lands are residential lots. This finding of the lower court is supported not only by the unanimous opinion of the commissioners, as embodied in their report, but also by the Provincial Appraisal Committee of the province of Pampanga composed of the Provincial Treasurer, the Provincial Auditor and the District Engineer. In the minutes of the meeting of the Provincial Appraisal Committee, held on May 14, 1959 (Exh. 13-Castellvi) We read in its Resolution No. 10 the following: 3. Since 1957 the land has been classified as residential in view of its proximity to the air base and due to the fact that it was not being devoted to agriculture. In fact, there is a plan to convert it into a subdivision for residential purposes. The taxes due on the property have been paid based on its classification as residential land; The evidence shows that Castellvi broached the idea of subdividing her land into residential lots as early as July 11, 1956 in her letter to the Chief of Staff of the Armed Forces of the Philippines. (Exh. 5-Castellvi) As a matter of fact, the layout of the subdivision plan was tentatively approved by the National Planning Commission on September 7, 1956.

(Exh. 8-Castellvi). The land of Castellvi had not been devoted to agriculture since 1947 when it was leased to the Philippine Army. In 1957 said land was classified as residential, and taxes based on its classification as residential had been paid since then (Exh. 13-Castellvi). The location of the Castellvi land justifies its suitability for a residential subdivision. As found by the trial court, "It is at the left side of the entrance of the Basa Air Base and bounded on two sides by roads (Exh. 13Castellvi), paragraphs 1 and 2, Exh. 12-Castellvi), the poblacion, (of Floridablanca) the municipal building, and the Pampanga Sugar Mills are closed by. The barrio schoolhouse and chapel are also near (T.S.N. November 23,1960, p. 68)." 20 The lands of Toledo-Gozun (Lot 1-B and Lot 3) are practically of the same condition as the land of Castellvi. The lands of Toledo-Gozun adjoin the land of Castellvi. They are also contiguous to the Basa Air Base, and are along the road. These lands are near the barrio schoolhouse, the barrio chapel, the Pampanga Sugar Mills, and the poblacion of Floridablanca (Exhs. 1, 3 and 4-Toledo-Gozun). As a matter of fact, regarding lot 1-B it had already been surveyed and subdivided, and its conversion into a residential subdivision was tentatively approved by the National Planning Commission on July 8, 1959 (Exhs. 5 and 6 Toledo-Gozun). As early as June, 1958, no less than 32 man connected with the Philippine Air Force among them commissioned officers, noncommission officers, and enlisted men had requested Mr. and

Mrs. Joaquin D. Gozun to open a subdivision on their lands in question (Exhs. 8, 8-A to 8-ZZ-Toledo-Gozun). 21 We agree with the findings, and the conclusions, of the lower court that the lands that are the subject of expropriation in the present case, as of August 10, 1959 when the same were taken possession of by the Republic, were residential lands and were adaptable for use as residential subdivisions. Indeed, the owners of these lands have the right to their value for the use for which they would bring the most in the market at the time the same were taken from them. The most important issue to be resolved in the present case relates to the question of what is the just compensation that should be paid to the appellees. The Republic asserts that the fair market value of the lands of the appellees is P.20 per square meter. The Republic cites the case of Republic vs. Narciso, et al., L-6594, which this Court decided on May 18, 1956. The Narciso case involved lands that belonged to Castellvi and Toledo-Gozun, and to one Donata Montemayor, which were expropriated by the Republic in 1949 and which are now the site of the Basa Air Base. In the Narciso case this Court fixed the fair market value at P.20 per square meter. The lands that are sought to be expropriated in the present case being contiguous to the lands involved in the Narciso case, it is the stand of the Republic that the price that should be fixed for the lands now in question should also be at P.20 per square meter.

We can not sustain the stand of the Republic. We find that the price of P.20 per square meter, as fixed by this Court in the Narciso case, was based on the allegation of the defendants (owners) in their answer to the complaint for eminent domain in that case that the price of their lands was P2,000.00 per hectare and that was the price that they asked the court to pay them. This Court said, then, that the owners of the land could not be given more than what they had asked, notwithstanding the recommendation of the majority of the Commission on Appraisal which was adopted by the trial court that the fair market value of the lands was P3,000.00 per hectare. We also find that the price of P.20 per square meter in the Narciso case was considered the fair market value of the lands as of the year 1949 when the expropriation proceedings were instituted, and at that time the lands were classified as sugar lands, and assessed for taxation purposes at around P400.00 per hectare, or P.04 per square meter. 22 While the lands involved in the present case, like the lands involved in the Narciso case, might have a fair market value of P.20 per square meter in 1949, it can not be denied that ten years later, in 1959, when the present proceedings were instituted, the value of those lands had increased considerably. The evidence shows that since 1949 those lands were no longer cultivated as sugar lands, and in 1959 those lands were already classified, and assessed for taxation purposes, as residential lands. In 1959 the land of Castellvi was assessed at P1.00 per square meter. 23

The Republic also points out that the Provincial Appraisal Committee of Pampanga, in its resolution No. 5 of February 15, 1957 (Exhibit D), recommended the sum of P.20 per square meter as the fair valuation of the Castellvi property. We find that this resolution was made by the Republic the basis in asking the court to fix the provisional value of the lands sought to be expropriated at P259,669.10, which was approved by the court. 24 It must be considered, however, that the amount fixed as the provisional value of the lands that are being expropriated does not necessarily represent the true and correct value of the land. The value is only "provisional" or "tentative", to serve as the basis for the immediate occupancy of the property being expropriated by the condemnor. The records show that this resolution No. 5 was repealed by the same Provincial Committee on Appraisal in its resolution No. 10 of May 14, 1959 (Exhibit 13-Castellvi). In that resolution No. 10, the appraisal committee stated that "The Committee has observed that the value of the land in this locality has increased since 1957 ...", and recommended the price of P1.50 per square meter. It follows, therefore, that, contrary to the stand of the Republic, that resolution No. 5 of the Provincial Appraisal Committee can not be made the basis for fixing the fair market value of the lands of Castellvi and Toledo-Gozun. The Republic further relied on the certification of the Acting Assistant Provincial Assessor of Pampanga, dated February 8,

1961 (Exhibit K), to the effect that in 1950 the lands of ToledoGozun were classified partly as sugar land and partly as urban land, and that the sugar land was assessed at P.40 per square meter, while part of the urban land was assessed at P.40 per square meter and part at P.20 per square meter; and that in 1956 the Castellvi land was classified as sugar land and was assessed at P450.00 per hectare, or P.045 per square meter. We can not also consider this certification of the Acting Assistant Provincial Assessor as a basis for fixing the fair market value of the lands of Castellvi and Toledo-Gozun because, as the evidence shows, the lands in question, in 1957, were already classified and assessed for taxation purposes as residential lands. The certification of the assessor refers to the year 1950 as far as the lands of Toledo-Gozun are concerned, and to the year 1956 as far as the land of Castellvi is concerned. Moreover, this Court has held that the valuation fixed for the purposes of the assessment of the land for taxation purposes can not bind the landowner where the latter did not intervene in fixing it. 25 On the other hand, the Commissioners, appointed by the court to appraise the lands that were being expropriated, recommended to the court that the price of P10.00 per square meter would be the fair market value of the lands. The commissioners made their recommendation on the basis of their observation after several ocular inspections of the lands, of their own personal knowledge of land values in the province of Pampanga, of the testimonies of the owners of

the land, and other witnesses, and of documentary evidence presented by the appellees. Both Castellvi and Toledo-Gozun testified that the fair market value of their respective land was at P15.00 per square meter. The documentary evidence considered by the commissioners consisted of deeds of sale of residential lands in the town of San Fernando and in Angeles City, in the province of Pampanga, which were sold at prices ranging from P8.00 to P20.00 per square meter (Exhibits 15, 16, 17, 18, 19, 20, 21, 22, 23-Castellvi). The commissioners also considered the decision in Civil Case No. 1531 of the Court of First Instance of Pampanga, entitled Republic vs. Sabina Tablante, which was expropriation case filed on January 13, 1959, involving a parcel of land adjacent to the Clark Air Base in Angeles City, where the court fixed the price at P18.00 per square meter (Exhibit 14-Castellvi). In their report, the commissioners, among other things, said: ... This expropriation case is specially pointed out, because the circumstances and factors involved therein are similar in many respects to the defendants' lands in this case. The land in Civil Case No. 1531 of this Court and the lands in the present case (Civil Case No. 1623) are both near the air bases, the Clark Air Base and the Basa Air Base respectively. There is a national road fronting them and are situated in a first-class municipality. As added advantage it may be said that the Basa Air Base land is very near the sugar mill at Del Carmen, Floridablanca, Pampanga, owned by the Pampanga Sugar Mills. Also just stone's throw away from the same lands is a

beautiful vacation spot at Palacol, a sitio of the town of Floridablanca, which counts with a natural swimming pool for vacationists on weekends. These advantages are not found in the case of the Clark Air Base. The defendants' lands are nearer to the poblacion of Floridablanca then Clark Air Base is nearer (sic) to the poblacion of Angeles, Pampanga. The deeds of absolute sale, according to the undersigned commissioners, as well as the land in Civil Case No. 1531 are competent evidence, because they were executed during the year 1959 and before August 10 of the same year. More specifically so the land at Clark Air Base which coincidentally is the subject matter in the complaint in said Civil Case No. 1531, it having been filed on January 13, 1959 and the taking of the land involved therein was ordered by the Court of First Instance of Pampanga on January 15, 1959, several months before the lands in this case were taken by the plaintiffs .... From the above and considering further that the lowest as well as the highest price per square meter obtainable in the market of Pampanga relative to subdivision lots within its jurisdiction in the year 1959 is very well known by the Commissioners, the Commission finds that the lowest price that can be awarded to the lands in question is P10.00 per square meter. 26 The lower court did not altogether accept the findings of the Commissioners based on the documentary evidence, but

it considered the documentary evidence as basis for comparison in determining land values. The lower court arrived at the conclusion that "the unanimous recommendation of the commissioners of ten (P10.00) pesos per square meter for the three lots of the defendants subject of this action is fair and just". 27 In arriving at its conclusion, the lower court took into consideration, among other circumstances, that the lands are titled, that there is a rising trend of land values, and the lowered purchasing power of the Philippine peso. In the case of Manila Railroad Co. vs. Caligsihan, 40 Phil. 326, 328, this Court said: A court of first instance or, on appeal, the Supreme Court, may change or modify the report of the commissioners by increasing or reducing the amount of the award if the facts of the case so justify. While great weight is attached to the report of the commissioners, yet a court may substitute therefor its estimate of the value of the property as gathered from the record in certain cases, as, where the commissioners have applied illegal principles to the evidence submitted to them, or where they have disregarded a clear preponderance of evidence, or where the amount allowed is either palpably inadequate or excessive. 28 The report of the commissioners of appraisal in condemnation proceedings are not binding, but merely

advisory in character, as far as the court is concerned. 29 In our analysis of the report of the commissioners, We find points that merit serious consideration in the determination of the just compensation that should be paid to Castellvi and Toledo-Gozun for their lands. It should be noted that the commissioners had made ocular inspections of the lands and had considered the nature and similarities of said lands in relation to the lands in other places in the province of Pampanga, like San Fernando and Angeles City. We cannot disregard the observations of the commissioners regarding the circumstances that make the lands in question suited for residential purposes their location near the Basa Air Base, just like the lands in Angeles City that are near the Clark Air Base, and the facilities that obtain because of their nearness to the big sugar central of the Pampanga Sugar mills, and to the flourishing first class town of Floridablanca. It is true that the lands in question are not in the territory of San Fernando and Angeles City, but, considering the facilities of modern communications, the town of Floridablanca may be considered practically adjacent to San Fernando and Angeles City. It is not out of place, therefore, to compare the land values in Floridablanca to the land values in San Fernando and Angeles City, and form an idea of the value of the lands in Floridablanca with reference to the land values in those two other communities. The important factor in expropriation proceeding is that the owner is awarded the just compensation for his property. We

have carefully studied the record, and the evidence, in this case, and after considering the circumstances attending the lands in question We have arrived at the conclusion that the price of P10.00 per square meter, as recommended by the commissioners and adopted by the lower court, is quite high. It is Our considered view that the price of P5.00 per square meter would be a fair valuation of the lands in question and would constitute a just compensation to the owners thereof. In arriving at this conclusion We have particularly taken into consideration the resolution of the Provincial Committee on Appraisal of the province of Pampanga informing, among others, that in the year 1959 the land of Castellvi could be sold for from P3.00 to P4.00 per square meter, while the land of Toledo-Gozun could be sold for from P2.50 to P3.00 per square meter. The Court has weighed all the circumstances relating to this expropriations proceedings, and in fixing the price of the lands that are being expropriated the Court arrived at a happy medium between the price as recommended by the commissioners and approved by the court, and the price advocated by the Republic. This Court has also taken judicial notice of the fact that the value of the Philippine peso has considerably gone down since the year 1959. 30 Considering that the lands of Castellvi and ToledoGozun are adjoining each other, and are of the same nature, the Court has deemed it proper to fix the same price for all these lands.

3. The third issue raised by the Republic relates to the payment of interest. The Republic maintains that the lower court erred when it ordered the Republic to pay Castellvi interest at the rate of 6% per annum on the total amount adjudged as the value of the land of Castellvi, from July 1, 1956 to July 10, 1959. We find merit in this assignment of error. In ordering the Republic to pay 6% interest on the total value of the land of Castellvi from July 1, 1956 to July 10, 1959, the lower court held that the Republic had illegally possessed the land of Castellvi from July 1, 1956, after its lease of the land had expired on June 30, 1956, until August 10, 1959 when the Republic was placed in possession of the land pursuant to the writ of possession issued by the court. What really happened was that the Republic continued to occupy the land of Castellvi after the expiration of its lease on June 30, 1956, so much so that Castellvi filed an ejectment case against the Republic in the Court of First Instance of Pampanga. 31 However, while that ejectment case was pending, the Republic filed the complaint for eminent domain in the present case and was placed in possession of the land on August 10, 1959, and because of the institution of the expropriation proceedings the ejectment case was later dismissed. In the order dismissing the ejectment case, the Court of First Instance of Pampanga said:

Plaintiff has agreed, as a matter of fact has already signed an agreement with defendants, whereby she had agreed to receive the rent of the lands, subject matter of the instant case from June 30, 1956 up to 1959 when the Philippine Air Force was placed in possession by virtue of an order of the Court upon depositing the provisional amount as fixed by the Provincial Appraisal Committee with the Provincial Treasurer of Pampanga; ... If Castellvi had agreed to receive the rentals from June 30, 1956 to August 10, 1959, she should be considered as having allowed her land to be leased to the Republic until August 10, 1959, and she could not at the same time be entitled to the payment of interest during the same period on the amount awarded her as the just compensation of her land. The Republic, therefore, should pay Castellvi interest at the rate of 6% per annum on the value of her land, minus the provisional value that was deposited, only from July 10, 1959 when it deposited in court the provisional value of the land. 4. The fourth error assigned by the Republic relates to the denial by the lower court of its motion for a new trial based on nearly discovered evidence. We do not find merit in this assignment of error. After the lower court had decided this case on May 26, 1961, the Republic filed a motion for a new trial,

supplemented by another motion, both based upon the ground of newly discovered evidence. The alleged newly discovered evidence in the motion filed on June 21, 1961 was a deed of absolute sale-executed on January 25, 1961, showing that a certain Serafin Francisco had sold to Pablo L. Narciso a parcel of sugar land having an area of 100,000 square meters with a sugar quota of 100 piculs, covered by P.A. No. 1701, situated in Barrio Fortuna, Floridablanca, for P14,000, or P.14 per square meter. In the supplemental motion, the alleged newly discovered evidence were: (1) a deed of sale of some 35,000 square meters of land situated at Floridablanca for P7,500.00 (or about P.21 per square meter) executed in July, 1959, by the spouses Evelyn D. Laird and Cornelio G. Laird in favor of spouses Bienvenido S. Aguas and Josefina Q. Aguas; and (2) a deed of absolute sale of a parcel of land having an area of 4,120,101 square meters, including the sugar quota covered by Plantation Audit No. 161 1345, situated at Floridablanca, Pampanga, for P860.00 per hectare (a little less than P.09 per square meter) executed on October 22, 1957 by Jesus Toledo y Mendoza in favor of the Land Tenure Administration. We find that the lower court acted correctly when it denied the motions for a new trial. To warrant the granting of a new trial based on the ground of newly discovered evidence, it must appear that the

evidence was discovered after the trial; that even with the exercise of due diligence, the evidence could not have been discovered and produced at the trial; and that the evidence is of such a nature as to alter the result of the case if admitted. 32 The lower court correctly ruled that these requisites were not complied with. The lower court, in a well-reasoned order, found that the sales made by Serafin Francisco to Pablo Narciso and that made by Jesus Toledo to the Land Tenure Administration were immaterial and irrelevant, because those sales covered sugarlands with sugar quotas, while the lands sought to be expropriated in the instant case are residential lands. The lower court also concluded that the land sold by the spouses Laird to the spouses Aguas was a sugar land. We agree with the trial court. In eminent domain proceedings, in order that evidence as to the sale price of other lands may be admitted in evidence to prove the fair market value of the land sought to be expropriated, the lands must, among other things, be shown to be similar. But even assuming, gratia argumenti, that the lands mentioned in those deeds of sale were residential, the evidence would still not warrant the grant of a new trial, for said evidence could have been discovered and produced at the trial, and they cannot be considered newly discovered

evidence as contemplated in Section 1(b) of Rule 37 of the Rules of Court. Regarding this point, the trial court said: The Court will now show that there was no reasonable diligence employed. The land described in the deed of sale executed by Serafin Francisco, copy of which is attached to the original motion, is covered by a Certificate of Title issued by the Office of the Register of Deeds of Pampanga. There is no question in the mind of the court but this document passed through the Office of the Register of Deeds for the purpose of transferring the title or annotating the sale on the certificate of title. It is true that Fiscal Lagman went to the Office of the Register of Deeds to check conveyances which may be presented in the evidence in this case as it is now sought to be done by virtue of the motions at bar, Fiscal Lagman, one of the lawyers of the plaintiff, did not exercise reasonable diligence as required by the rules. The assertion that he only went to the office of the Register of Deeds 'now and then' to check the records in that office only shows the half-hazard [sic] manner by which the plaintiff looked for evidence to be presented during the hearing before the Commissioners, if it is at all true that Fiscal Lagman did what he is supposed to have done according to Solicitor Padua. It would have been the easiest matter for plaintiff to move for the issuance of a subpoena duces tecum directing the Register of Deeds of Pampanga to come to testify and to bring with him all documents found in his office

pertaining to sales of land in Floridablanca adjacent to or near the lands in question executed or recorded from 1958 to the present. Even this elementary precaution was not done by plaintiff's numerous attorneys. The same can be said of the deeds of sale attached to the supplementary motion. They refer to lands covered by certificate of title issued by the Register of Deeds of Pampanga. For the same reason they could have been easily discovered if reasonable diligence has been exerted by the numerous lawyers of the plaintiff in this case. It is noteworthy that all these deeds of sale could be found in several government offices, namely, in the Office of the Register of Deeds of Pampanga, the Office of the Provincial Assessor of Pampanga, the Office of the Clerk of Court as a part of notarial reports of notaries public that acknowledged these documents, or in the archives of the National Library. In respect to Annex 'B' of the supplementary motion copy of the document could also be found in the Office of the Land Tenure Administration, another government entity. Any lawyer with a modicum of ability handling this expropriation case would have right away though [sic] of digging up documents diligently showing conveyances of lands near or around the parcels of land sought to be expropriated in this case in the offices that would have naturally come to his mind such as the offices mentioned above, and had counsel for the movant really exercised the reasonable diligence required by the Rule' undoubtedly they would have been able to find

these documents and/or caused the issuance of subpoena duces tecum. ... It is also recalled that during the hearing before the Court of the Report and Recommendation of the Commissioners and objection thereto, Solicitor Padua made the observation: I understand, Your Honor, that there was a sale that took place in this place of land recently where the land was sold for P0.20 which is contiguous to this land. The Court gave him permission to submit said document subject to the approval of the Court. ... This was before the decision was rendered, and later promulgated on May 26, 1961 or more than one month after Solicitor Padua made the above observation. He could have, therefore, checked up the alleged sale and moved for a reopening to adduce further evidence. He did not do so. He forgot to present the evidence at a more propitious time. Now, he seeks to introduce said evidence under the guise of newly-discovered evidence. Unfortunately the Court cannot classify it as newly-discovered evidence, because tinder the circumstances, the correct qualification that can be given is 'forgotten evidence'. Forgotten however, is not newly-discovered evidence. 33 The granting or denial of a motion for new trial is, as a general rule, discretionary with the trial court, whose

judgment should not be disturbed unless there is a clear showing of abuse of discretion. 34 We do not see any abuse of discretion on the part of the lower court when it denied the motions for a new trial. WHEREFORE, the decision appealed from is modified, as follows: (a) the lands of appellees Carmen Vda. de Castellvi and Maria Nieves Toledo-Gozun, as described in the complaint, are declared expropriated for public use; (b) the fair market value of the lands of the appellees is fixed at P5.00 per square meter; (c) the Republic must pay appellee Castellvi the sum of P3,796,495.00 as just compensation for her one parcel of land that has an area of 759,299 square meters, minus the sum of P151,859.80 that she withdrew out of the amount that was deposited in court as the provisional value of the land, with interest at the rate of 6% per annum from July 10, 1959 until the day full payment is made or deposited in court; (d) the Republic must pay appellee Toledo-Gozun the sum of P2,695,225.00 as the just compensation for her two parcels of land that have a total area of 539,045 square meters, minus the sum of P107,809.00 that she withdrew out of the amount that was deposited in court as the provisional value

of her lands, with interest at the rate of 6%, per annum from July 10, 1959 until the day full payment is made or deposited in court; (e) the attorney's lien of Atty. Alberto Cacnio is enforced; and (f) the costs should be paid by appellant Republic of the Philippines, as provided in Section 12, Rule 67, and in Section 13, Rule 141, of the Rules of Court. IT IS SO ORDERED. Makalintal, C.J., Barredo, Antonio, Esguerra, Fernandez, Muoz Palma and Aquino, JJ., concur. Castro, Fernando, Teehankee and Makasiar, JJ., took no part.

Footnotes 1 Record on Appeal, Vol. I, pp. 53-56. 2 Record on Appeal, Vol. I, pp. 53-56. 3 Record on Appeal, Vol. I, pp. 121-124. 4 Record on Appeal, Vol. I, pp. 235-261.

5 Record on Appeal, Vol. I, pp. 264-270, 284-297 and 297299. 6 Record on Appeal, Vol. I, pp. 387-456. 7 Appellant's brief, pp. 18-30; citing the case of Penn. vs. Carolina Virginia Estate Corp., 57 SE 2d 817. 8 Appellee Castellvi's brief, pp. 21-26. 9 Appellee Toledo-Gozun's brief, pp. 7-9. The issue raised in the second error assigned should really refer only to the land of Castellvi. We find that the lands of Toledo-Gozun, unlike the land of Castellvi, were never leased to the Republic. 10 Appellant's brief, pp. 6-12. 11 Appellant's brief, p. 12. 12 Record on Appeal, Vol. II, pp. 462-463. 13 Among the cases cited under this Section is that of Penn. vs. Carolina Virginia Coastal Corporation, 57 SE 2d 817, which is cited by the Republic on p. 18 of its brief. 14 See Appellant's brief, p. 6.

15 See Appellant's brief, p. 22. 16 Similar to Section 5, Rule 69 of the old Rules of Court, the rule in force when the complaint in this case was filed. 17 King vs. Mineapolis Union Railway Co., 32 Minn. 224. 18 Little Rock Junction Ry. vs. Woodruff, 49 Ark. 381; 5 SW 792. 19 27 Am. Jur. 2d pp. 344-345; Rothnam vs. Commonwealth, 406 Pa. 376; Wichita Falls and N.W. Ry. Co. vs. Holloman, 28 Okla. 419, 114 P 700, 701. See also Republic vs. Venturanza, et al., L-20417, May 30,1966, 17 SCRA 322, 331. 20 Decision of the lower court pp. 444-445, Record on Appeal, Vol. I. 21 Decision of the lower court, pp. 446-449, Record on Appeal, Vol. I. 22 Decision in the Narciso case, Exhibit H for the Republic. 23 See page 471, Record on Appeal, Vol. II, and page 41, Appellant's Brief. 24 Page 10-16, Record on Appeal, Vol. I.

25 Republic of the Philippines vs. Urtula, 110 Phil. 262-264. 26 Record on Appeal, Vol. I, pages 257-260. 27 Lower court's decision, p. 454, Record on Appeal, Vol. I. 28 See also Manila Railroad Company vs. Velasquez, 32 Phil. 286: and City of Manila vs. Estrada, 25 Phil. 208. 29 City of Cebu vs. Ledesma, 14 SCRA 666, 669. 30 In 1959 the money value of two pesos (P2.00), Philippine currency, was equal to one U.S. dollar ($1.00). As published in the "Daily Express" of August 6, 1974, the Philippine National Bank announced that the inter-bank guiding rate was P6.735 to one U.S. dollar ($1,00). 31 Civil Case No. 1548. 32 Sec. 1 (b) of Rule 37 of the Rules of Court. 33 Record on Appeal, Vol. 11, pp. 607-613. 34 Miranda vs. Legaspi, et al., 92 Phil. 290, 293-294. The Lawphil Project - Arellano Law Foundation

THIRD DIVISION [G.R. No. 107631. February 26, 1996] NATIONAL POWER CORPORATION, petitioner, vs. HON. COURT OF APPEALS and PECORP, INC. (Formerly Pacific Equipment Corp.), respondents. SYLLABUS CIVIL LAW; CONTRACTS, COST-PLUS A PERCENTAGE BASED ON ACTUAL FINAL COST; CLAIMS OF PECORP FROM NPC CAN BE BROUGHT FOR ARBITRATION AS PER CONTRACT. - The sole query here is whether or not the two (2) claims from a total of four (4.) presented by private respondent PECORP, INC. can be brought for arbitration expressly provided for in the contract it entered into with petitioner National Power Corporation (NPC). The contract is of a Cost-Plus a Percentage type -meaning, PECORP will be paid a certain percentage as fee based on the Actual Final Cost of the work. And what constitutes Actual Final Cost is the total cost to NPC of all the work performed by PECORP which includes cost of materials and supplies, structures, furnitures, charges, etc. and all other expenses as are inherent in a CostPlus and Percentage Contract and necessary for the

prosecution of the work that are approved by NPC x x x. The rift arose when NPC communicated to PECORP that it was inclined to contract directly and separately with Philippine Grouting and Guniting Co., Inc (GROGUN) for the drilling and grouting work on the construction project and consequently, PECORP will not be entitled to any fees for said task. Contending that such arrangement will violate its rights under the NPC-PECORP contract, PECORP made known to NPC its desire to bring the matter to arbitration, under Article VI of their contract. The NPC-GROGUN drilling and grouting contract, nonetheless, pushed through. As a result of such purported withdrawal, the drilling and grouting work ceased to be a part of the NPC-PECORP contract. PECORP manifested its objection to the NPC-GROGUN contract insofar as it deprives PECORP of fees on drilling and grouting. When PECORP presented to NPC four (4) claims, a board of arbitrators was convened. But it appeared that NPC was willing to arbitrate on claims (3) and (4) only NPC resisted claim and argued that PECORP withdrew claim (2) from arbitration. As NPC was uncompromising, PECORP filed an action to compel NPC to confirm all the four (4) claims for arbitration. Judgment was rendered in favor of PECORP. The trial courts short raison d etre for its order that all four (4) claims of PECORP against NPC be arbitrated upon by the arbitration board constituted by them, as merely prayed for by PECORP in its complaint, suffices in resolving the immediate conflict between NPC and PECORP. Indeed, PECORPs two subject claims (1 and 2), together with the

other two undisputed claims (3 and 4), directly and exclusively emanate from what PECORP firmly believes as contractually due it under the NPC-PECORP Cost-Plus a Percentage contract. Conversely therefore, had there been no NPC-PECORP contract, there would have been no dispute between NPC and PECORP that precipitated the suit for arbitration, as PECORPs claims for fees, in such instance, would be inexistent in the first place. APPEARANCES OF COUNSEL The Solicitor General for petitioner. Arturo D. Valar for private respondent. DECISION FRANCISCO, J.: The sole query here is whether or not the following two (2) claims 1. Fee on the cost of drilling and grouting which is ten percent (10%) of the Actual Final Cost of P6,962,519.50 - P696,251.95 2. Fee on the minimum guaranteed equipment rental which is ten percent (10%) of the Actual Final Cost of P 1.67 million - P 167,000.00

from a total of four (4) presented by herein private respondent PECORP, INC. (PECORP for brevity), can be brought for arbitration expressly provided for in the contract it entered into with herein petitioner National Power Corporation (NPC). That contract forged between the government through the NPC and PECORP as party-CONTRACTOR on June 27, 1974 was for the construction of the Mariveles Dam No. 1 and appurtenant structures of the water supply system of the Bataan Export Processing Zone at Mariveles, Bataan. It was agreed upon that the contract is of a Cost-Plus a Percentage type - meaning, PECORP will be paid a certain percentage as fee based on the Actual Final Cost of the work. And what constitutes Actual Final Cost has been aptly simplified by the trial court as the total cost to the defendant (NPC) of all the work performed by the plaintiff (PECORP) which includes cost of materials and supplies, structures, furnitures, charges, etc. and all other expenses as are inherent in a Cost-Plus and Percentage Contract and necessary for the prosecution of the work that are approved by the defendant x x x. The rift arose when NPC, in a letter dated July 11, 1974, communicated to PECORP that it was inclined to contract directly and separately with Philippine Grouting and Guniting

Co., Inc. (GROGUN) for the drilling and grouting work on the construction project and consequently, PECORP will not be entitled to any fees for said task. Contending that such NPC-GROGUN arrangement will violate its rights under the NPC-PECORP contract, PECORP made known to NPC its desire to bring the matter to arbitration, under Article VI of their contract, which reads: Should there occur any dispute, controversy, or differences between the parties arising out of this contract that cannot be resolved by them to their mutual satisfaction, the matter shall be submitted to arbitration at the choice of either party upon written demand to the other party. When formal arbitration is requested, an Arbitration Board shall be formed in the following manner: CORPORATION and CONTRACTOR shall each appoint one (1) member of this board and these members shall appoint a third member who shall act as chairman. The NPC-GROGUN drilling and grouting contract, nonetheless, pushed through on August 23, 1974. NPC tendered the following justifications for its execution: 1. The drilling and grouting work equipment were not included in the equipment availability schedules made jointly by NPC and PECORP at the start of the work.

2. PECORP failed to provide and/or rent equipment for the work and NPC could not immediately provide the equipments. 3. GROGUN had all the equipments and personnel required for the work. 4. The work could not suffer any further delay, considering that from the execution of the NPC-PECORP contract on June 27, 1974 up to the date of NPCs letter to PECORP which was July 11, 1974, PECORP had not performed any drilling and grouting work. 5. NPC was availing of its alleged statutory right under Article 1725 of the Civil Code in removing the drilling and grouting work from the scope of its contract with PECORP (NPCPECORP contract). Article 1725 reads: The owner may withdraw at will from the construction of the work, although it may have been commenced, indemnifying the contractor for all the latters expenses, work, and the usefulness which the owner may obtain therefrom, and damages. As a result of such purported withdrawal, the drilling and grouting work ceased to be a part of the NPC-PECORP contract and therefore,

a) is not an arbitrable matter thereunder, and b) precludes NPC from collecting fees for said work. Besides, the cost of drilling and grouting work under the NPC-GROGUN contract is a direct cost to NPC and thus cannot be included in the Actual Final Cost under the NPC-PECORP contract on which PECORPs fees are based. PECORPs objection to the NPC-GROGUN contract insofar as it deprives PECORP of fees on drilling and grouting is essentially anchored on the following: 1. Drilling and grouting work is but a part of its over-all contractual duty, as expressed in Article II of the NPC-PECORP contract, to undertake the construction, complete, of the Mariveles Dam No. 1, 2. PECORP was expressly allowed under the NPC-PECORP contract to sub-contract labor, supplies and/or services, apparently in order to discharge fully its contractual duty. PECORP in fact intended to do just that, when even prior to the NPCs letter of July 11, 1974, PECORP sought authorization from NPC to sub-contract the very same drilling and grouting work to the very same GROGUN in the proposed NPCGROGUN contract. And even if the proposed PECORPGROGUN sub-contract was turned down by NPC, PECORP is still entitled to the fees considering that the NPC-GROGUN contract would involve identical undertaking and party as

that in the rejected sub-contract, not to mention that it was PECORP which actually supervised the drilling and grouting work conducted by GROGUN. Roughly five (5) years after, PECORP on June 14, 1979 presented to NPC four (4) claims - two of which are the subject claims mentioned at the beginning of this opinion and the other two are: 3. Fee on the inventory of unused stocks and POL 4. Reimbursement of Medical Hospital expenses re: TK-001 Accident case P50,085.93, P 155,844.95

coupled with a request for arbitration. A board of arbitrators was thereafter convened. But after a series of written communications among the board, NPC and PECORP, it appeared that NPC was willing to arbitrate on claims (3) and (4) only. NPC resisted claim (1) (fee for drilling and grouting work) on grounds previously discussed. As to claim (2) (fee on the minimum guaranteed equipment rental), NPC argued that PECORP withdrew this claim from

arbitration, as per PECORPs letter to NPC dated May 19, 1980 which reads in full: We confirm our agreement earlier pertaining to our claim for payment for contractors fee in connection with the construction of the EPZA Dam No. 1 Project, whereby we are withdrawing our claim for fee on the guaranteed equipment rental hours for P167,000.00 in as much as this is an imputed cost and not direct cost as the rest of the claims. We understand however that the rest of the claims, in the sum of P902,182.58 shall be favorably adjudicated and endorsed. As NPC was uncompromising, PECORP filed an action in the Regional Trial Court of Manila to compel NPC to submit/confirm/certify all the four (4) claims for arbitration, where judgment was thereafter rendered in favor of PECORP, the dispositive portion of which reads: IN VIEW OF ALL THE FOREGOING, judgment is hereby rendered in favor of the plaintiff PECORP, INC. and against National Power Corporation, ordering: 1. The Board of Administrators (sic) to reconvene and to arbitrate, the four (4) claims of the plaintiff against the defendant; 2. The defendant to submit and/or confirm and certify the four (4) claims for arbitration;

3. The parties to shoulder equally the expenses for arbitration; 4. The defendant to pay the plaintiff the amount of P 10,000.00 as and for attorneys fees; 5. The defendant to pay the costs of suit; and 6. The counterclaim is hereby dismissed for lack of merit. After the trial court denied NPCs motion for reconsideration of its decision, respondent Court of Appeals, on appeal, affirmed the same but deleted the award of attorneys fees. However, in affirming said decision which merely ordered NPC and PECORP to arbitrate on all four (4) claims, respondent CA went further in disposing of issues which could have been appropriately ventilated and passed upon in the arbitration proceedings - a course of action apparently prompted by PECORPs request as contained in its Motion For Early Resolution and reiterated in a Reiteration Motion For Early Resolution, that respondent CA make: 1. a definitive ruling on whether or not the withdrawal by NPC from PECORP of the drilling and grouting work in favor of GROGUN is a valid withdrawal of work under Article 1725 of the Civil Code, and

2. an outright resolution of PECORPs claims against NPC, in order to obviate further prolonged proceedings or multiplicity of suits. Thus, in its now-assailed judgment, respondent CA resolved PECORPs claims for fees for drilling and grouting work (claim no. 1) and on the minimum guaranteed equipment rental hours (claim no. 2) in this wise: As to claim no. 1: Art. II of the contract executed between appellee and appellant provides: SCOPE OF WORK AND COMPLETION, DELAYS AND EXTENSION OF TIME. For and in consideration of the payment or payments to be made by CORPORATION in accordance with the provisions of this contract, CONTRACTOR shall fully and faithfully furnish all labor, plant and materials and construct, complete, all works required for the Project, in accordance with the terms and conditions of all the documents mentioned under Art. I above. Under the above-quoted provision, the NPC-Pecorp Contract is for the construction, complete, of the Mariveles Dam No. 1. Drilling and grouting work is just a part of the complete construction of the total project, hence, covered by and within the scope of the NPC-Pecorp Contract.

The word Project is defined in the contract to mean the Dam and Appurtenant Structures. Drilling and Grouting is part of the dam or appurtenant structures, and therefore a part of PECORPs scope of work. Appellant invokes Art. 1725 of the Civil Code to justify its claim that drilling and grouting is not included within the scope of the NPC-Grogun Contract with appellee. Art. 1725 reads: The owner may withdraw at will from the construction of the work, although it may have been commenced, indemnifying the contractor for all the latters expenses, work and the usefulness which the owner may obtain therefrom, and damages. Art. 1725 of the Civil Code is not applicable in the instant case, for the following reasons: a) there was actually no withdrawal from the construction of the work, but only a transfer of a part of the construction, which is the drilling and grouting work; b) said drilling and grouting still forms part of the project as a mere NPC-Grogun sub-contract.

Since the NPC-Grogun Contract did not amend nor nullify the cost plus provision of the NPC-Pecorp Contract, therefore, appellee Pecorp is still entitled to the said 10% fee. As to claim no. 2: x x x, appellant contends that since plaintiff-appellee had previously withdrawn (through its letter dated May 19, 1980), the claim for the minimum guaranteed equipment rentals hours for P167,000.00, the same is not covered by arbitration. The contention is likewise without merit. The letter dated May 19, 1980 (Annex 2), written by appellee to appellant partly reads: We confirm our agreement earlier pertaining to our claim for payment of contractors fees in connection with the construction of the EPZA Dam No. 1 Project, whereby we are withdrawing our claim for fee on the minimum guaranteed equipment rental hours of P167,000.00, inasmuch as this is an imputed cost and not a direct cost of the rest of the claims. We understand however, that the rest of the claims, in the sum of P902,182.56 shall be favorably adjudicated and endorsed. The above-quoted letter states that appellee was withdrawing its claim for fees in the minimum guaranteed

equipment rental hours for P 167,000.00, only upon the condition that NPC will favorably adjudicate and endorse the three other PECORP claims, amounting to P902,182.58. Thus, it is clear that withdrawal is only a proposal conditioned upon NPCs adjudication, endorsement and approval of all the three (3) other claims. However, as the record shows, NPC refused to certify for arbitration all the said three (3) other claims, hence, the withdrawal was rendered null and void. And from this second adverse judgment, NPC filed the instant petition raising the following errors: I Respondent court of appeals gravely erred in affirming the trial courts judgment with respect to the issue of private respondents right to claim percentage fee from the NPCGROGUN Contract for Drilling, and Grouting Work. II Respondent court of appeals erred in not holding that private respondents claim for a fee on the minimum guaranteed equipment rental hours in the amount of P167,000.00 is not subject to arbitration since said claim had been previously withdrawn from arbitration by private respondent.

The petition must fail. The trial courts short raison d etre for its order that all four (4) claims of PECORP against NPC be arbitrated upon by the arbitration board constituted by them, as merely prayed for by PECORP in its complaint, suffices in resolving the immediate conflict between NPC and PECORP. Indeed, PECORPs two subject claims (1 and 2), together with the other two undisputed claims (3 and 4), directly and exclusively emanate from what PECORP firmly believes as contractually due it under the NPC-PECORP Cost-Plus a Percentage contract. Conversely therefore, had there been no NPC-PECORP contract, there would have been no dispute between NPC and PECORP that precipitated the suit for arbitration, as PECORPs claims for fees, in such instance, would be inexistent in the first place. We thus quote with approval the trial courts findings and conclusion, that: The contract between the parties specifically provides as follows: ARTICLE VI ARBITRATION Should there occur any dispute controversy, or differences between the parties arising out of this contract that cannot be

resolved by them to their mutual satisfaction, the matter shall be submitted for arbitration at the choice of either party upon written demand to the other party. When formal arbitration is requested, an Arbitration Board shall be formed in the following manner: CORPORATION and CONTRACTOR shall each appoint one (1) member of this Board and these members shall appoint a third member who shall act as Chairman. x x x (Italics supplied for emphasis). It will be noted that the above-quoted provision mentions any dispute, controversy and differences between the parties and without qualification as to the nature of the dispute or controversy or differences. Thus, having arisen from the contract, the four (4) claims are, therefore, arbitrable. Philippine Law and Jurisprudence recognize arbitration agreements as valid, binding, enforceable and not contrary to public policy, thus Any stipulation that the arbitrators award or decision shall be final is valid, without prejudice to Articles 2036, 2039 and 2040 (Art. 200044, Now Civil Codes *sic+). An agreement to arbitrate is a contract, the relation of the parties is contractual and the rights and liabilities of the parties are controlled by the law of contracts. (5 AM. JUR. 2d 11).

The Court likewise accords the same approval to respondent CAs brief and straight to the point disquisitions (as quoted earlier) on why NPC cannot validly invoke Article 1725 of the Civil Code to prevent PECORP from collecting fees for drilling and grouting work conducted by GROGUN under the NPCGROGUN contract, and why PECORP cannot be deemed to have abandoned or withdrawn its claim for fees on the minimum guaranteed equipment rental against NPC. Said judgment deserves full affirmance without further elaboration. WHEREFORE, the petition for review is hereby DENIED, and respondent CAs assailed decision is AFFIRMED. SO ORDERED. Narvasa, C.J. (Chairman), Davide, Jr., Melo, and Panganiban, JJ., concur.

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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. L-60077 January 18, 1991 NATIONAL POWER CORPORATION, petitioner, vs. SPS. MISERICORDIA GUTIERREZ and RICARDO MALIT and THE HONORABLE COURT OF APPEALS, respondents. Pedro S. Dabu for private respondents.

BIDIN, J.:p This is a petition for review on certiorari filed by the National Power Corporation (NPC) seeking the reversal or modification of the March 9, 1986 Decision of the Court of Appeals in CA G.R. No. 54291-R entitled "National Power Corporation v. Sps. Misericordia Gutierrez and Ricardo Malit", affirming the December 4, 1972 Decision of the then Court of

First Instance of Pampanga, Fifth Judicial District, Branch II, in Civil Case No. 2709, entitled National Power Corporation v. Matias Cruz, et al. The undisputed facts of the case, as found by the Court of Appeals, are as follows: Plaintiff National Power Corporation, a government owned and controlled entity, in accordance with Commonwealth Act No. 120, is invested with the power of eminent domain for the purpose of pursuing its objectives, which among others is the construction, operation, and maintenance of electric transmission lines for distribution throughout the Philippines. For the construction of its 230 KV Mexico-Limay transmission lines, plaintiff's lines have to pass the lands belonging to defendants Matias Cruz, Heirs of Natalia Paule and spouses Misericordia Gutierrez and Ricardo Malit covered by tax declarations Nos. 907, 4281 and 7582, respectively. Plaintiff initiated negotiations for the acquisition of right of way easements over the aforementioned lots for the construction of its transmission lines but unsuccessful in this regard, said corporation was constrained to file eminent domain proceedings against the herein defendants on January 20, 1965. Upon filing of the corresponding complaint, plaintiff corporation deposited the amount of P973.00 with the

Provincial Treasurer of Pampanga, tendered to cover the provisional value of the land of the defendant spouses Ricardo Malit and Misericordia Gutierrez. And by virtue of which, the plaintiff corporation was placed in possession of the property of the defendant spouses so it could immediately proceed with the construction of its MexicoLimay 230 KV transmission line. In this connection, by the trial court's order of September 30, 1965, the defendant spouses were authorized to withdraw the fixed provisional value of their land in the sum of P973.00. The only controversy existing between the parties litigants is the reasonableness and adequacy of the disturbance or compensation fee of the expropriated properties. Meanwhile, for the purpose of determining the fair and just compensation due the defendants, the court appointed three commissioners, comprised of one representative of the plaintiff, one for the defendants and the other from the court, who then were empowered to receive evidence, conduct ocular inspection of the premises, and thereafter, prepare their appraisals as to the fair and just compensation to be paid to the owners of the lots. Hearings were consequently held before said commissioners and during their hearings, the case of defendant Heirs of Natalia Paule was amicably settled by virtue of a Right of Way Grant (Exh. C) executed by Guadalupe Sangalang for herself and in behalf of her co-heirs in favor of the plaintiff corporation. The case against Matias

Cruz was earlier decided by the court, thereby leaving only the case against the defendant spouses Ricardo Malit and Misericordia Gutierrez still to be resolved. Accordingly, the commissioners submitted their individual reports. The commissioner for the plaintiff corporation recommended the following: . . . that plaintiff be granted right of way easement over the 760 square meters of the defendants Malit and Gutierrez land for plaintiff transmission line upon payment of an easement fee of P1.00 therefor. . . . (Annex M) The commissioner for recommended the following: the defendant spouses

. . . that Mr. and Mrs. Ricardo Malit be paid as disturbance compensation the amount of P10.00 sq. meter or the total amount of P7,600.00' (Annex K) The Court's commissioner recommended the following: . . . the payment of Five (P 5.OO) Pesos per square meter of the area covered by the Right-of-way to be granted, . . .(Annex L) The plaintiff corporation urged the Court that the assessment as recommended by their commissioner be the one adopted. Defendant spouses, however, dissented and

objected to the price recommended by both the representative of the court and of the plaintiff corporation. With these reports submitted by the three commissioners and on the evidence adduced by the defendants as well as the plaintiff for the purpose of proving the fair market value of the property sought to be expropriated, the lower court rendered a decision the dispositive portion of which reads as follows: WHEREFORE, responsive to the foregoing considerations, judgment is hereby rendered ordering plaintiff National Power Corporation to pay defendant spouses Ricardo Malit and Misericordia Gutierrez the sum of P10.00 per square meter as the fair and reasonable compensation for the rightof-way easement of the affected area, which is 760 squares, or a total sum of P7,600.00 and P800.00 as attorney's fees' (Record on Appeal, p. 83) Dissatisfied with the decision, the plaintiff corporation filed a motion for reconsideration which was favorably acted upon by the lower court, and in an order dated June 10, 1973, it amended its previous decision in the following tenor: On the basis of an ocular inspection made personally by the undersigned, this court finally classified the land of the spouses Ricardo Malit and Misericordia to be partly commercial and partly agricultural, for which reason the

amount of P10.00 per sq. meter awarded in the decision of December 4,1972 is hereby reduced to P5.00 per square meter as the fair and reasonable market value of the 760 square meters belonging to the said spouses. There being no claim and evidence for attorney's fees, the amount of P800.00 awarded as attorney's fees, in the decision of December 4, 1972 is hereby reconsidered and set aside. (Annex S) Still not satisfied, an appeal was filed by petitioner (NPC) with the Court of Appeals but respondent Court of Appeals in its March 9, 1982, sustained the trial court, as follows: WHEREFORE, finding no reversible error committed by the court a quo, the appealed judgment is hereby affirmed with costs against the plaintiff-appellant. Hence, the instant petition. The First Division of this Court gave due course to the petition and required both parties to submit their respective memoranda (Resolution of January 12, 1983). It also noted in an internal resolution of August 17, 1983 that petitioner flied its memorandum while the respondents failed to file their memorandum within the period which expired on February 24,1983; hence, the case was considered submitted for decision.

The sole issue raised by petitioner is WHETHER PETITIONER SHOULD BE MADE TO PAY SIMPLE EASEMENT FEE OR FULL COMPENSATION FOR THE LAND TRAVERSED BY ITS TRANSMISSION LINES. It is the contention of petitioner that the Court of Appeals committed gross error by adjudging the petitioner liable for the payment of the full market value of the land traversed by its transmission lines, and that it overlooks the undeniable fact that a simple right-of-way easement (for the passage of transmission lines) transmits no rights, except that of the easement. Full ownership is retained by the private respondents and they are not totally deprived of the use of the land. They can continue planting the same agricultural crops, except those that would result in contact with the wires. On this premise, petitioner submits that if full market value is required, then full transfer of ownership is only the logical equivalent. The petition is devoid of merit. The resolution of this case hinges on the determination of whether the acquisition of a mere right-of-way is an exercise of the power of eminent domain contemplated by law. The trial court's observation shared by the appellate court show that ". . . While it is true that plaintiff are (sic) only after

a right-of-way easement, it nevertheless perpetually deprives defendants of their proprietary rights as manifested by the imposition by the plaintiff upon defendants that below said transmission lines no plant higher than three (3) meters is allowed. Furthermore, because of the high-tension current conveyed through said transmission lines, danger to life and limbs that may be caused beneath said wires cannot altogether be discounted, and to cap it all plaintiff only pays the fee to defendants once, while the latter shall continually pay the taxes due on said affected portion of their property." The foregoing facts considered, the acquisition of the rightof-way easement falls within the purview of the power of eminent domain. Such conclusion finds support in similar cases of easement of right-of-way where the Supreme Court sustained the award of just compensation for private property condemned for public use (See National Power Corporation vs. Court of Appeals, 129 SCRA 665, 1984; Garcia vs. Court of Appeals, 102 SCRA 597,1981). The Supreme Court, in Republic of the Philippines vs. PLDT, * thus held that: Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may,

through expropriation, be subjected to an easement of rightof-way. In the case at bar, the easement of right-of-way is definitely a taking under the power of eminent domain. Considering the nature and effect of the installation of the 230 KV MexicoLimay transmission lines, the limitation imposed by NPC against the use of the land for an indefinite period deprives private respondents of its ordinary use. For these reasons, the owner of the property expropriated is entitled to a just compensation, which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property. Just compensation has always been understood to be the just and complete equivalent of the loss which the owner of the thing expropriated has to suffer by reason of the expropriation (Province of Tayabas vs. Perez, 66 Phil. 467 [1938]; Assoc. of Small Land Owners of the Phils., Inc. vs. Secretary of Agrarian Reform, G.R. No. 78742; Acuna vs. Arroyo, G.R. No. 79310; Pabrico vs. Juico, G.R. No. 79744; Manaay v. Juico, G.R. No. 79777,14 July 1989, 175 SCRA 343 [1989]). The price or value of the land and its character at the time it was taken by the Government are the criteria for determining just compensation (National Power Corp. v. Court of Appeals, 129 SCRA 665, [1984]). The above price refers to the market value of the land which may be the full market value thereof. According to private respondents, the market value of their

lot is P50.00 per square meter because the said lot is adjacent to the National and super highways of Gapan, Nueva Ecija and Olongapo City. Private respondents recognize the inherent power of eminent domain being exercised by NPC when it finally consented to the expropriation of the said portion of their land, subject however to payment of just compensation. No matter how laudable NPC's purpose is, for which expropriation was sought, it is just and equitable that they be compensated the fair and full equivalent for the loss sustained, which is the measure of the indemnity, not whatever gain would accrue to the expropriating entity (EPZA v. Dulay, 149 SCRA 305 [1987]; Mun. of Daet v. Court of Appeals, 93 SCRA 503 (1979]). It appearing that the trial court did not act capriciously and arbitrarily in setting the price of P5.00 per square meter of the affected property, the said award is proper and not unreasonable. On the issue of ownership being claimed by petitioner in the event that the price of P5.00 per square meter be sustained, it is well settled that an issue which has not been raised in the Court a quo cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process . . . (Filipino Merchants v. Court of Appeals, G.R. No. 85141, November 8, 1989, 179 SCRA 638;

Commissioner of Internal Revenue v. Procter and Gamble Philippines Manufacturing Corporation, 160 SCRA 560 [1988]; Commissioner of Internal Revenue v. Wander Philippines, Inc., 160 SCRA 573 1988]). Petitioner only sought an easement of right-of-way, and as earlier discussed, the power of eminent domain may be exercised although title was not transferred to the expropriator. WHEREFORE, the assailed decision of the Court of Appeals is AFFIRMED. SO ORDERED. Fernan, C.J. and Feliciano, J., concur. Gutierrez, Jr., J., I concur but believe payment should be P10.00 a sq. meter at the very least.

Footnotes * 26 SCRA 620 (1969). The Lawphil Project - Arellano Law Foundation

lawphil

Today is Saturday, November 17, 2012 Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 183297 December 23, 2009

NATIONAL POWER CORPORATION, Petitioner, vs. OMAR G. MARUHOM, ELIAS G. MARUHOM, BUCAY G. MARUHOM, MAMOD G. MARUHOM, FAROUK G. MARUHOM, HIDJARA G. MARUHOM, ROCANIA G. MARUHOM, POTRISAM G. MARUHOM, LUMBA G. MARUHOM, SINAB G. MARUHOM, ACMAD G. MARUHOM, SOLAYMAN G. MARUHOM, MOHAMAD M. IBRAHIM, CAIRORONESA M. IBRAHIM, and LUCMAN IBRAHIM, represented by his heirs ADORA B. IBRAHIM, NASSER B. IBRAHIM, JAMALODIN B. IBRAHIM, RAJID NABBEL B. IBRAHIM, AMEER B. IBRAHIM and SARAH AIZAH B. IBRAHIM,* Respondents. DECISION NACHURA, J.:

Petitioner National Power Corporation (NPC) filed this Petition for Review on Certiorari, seeking to nullify the May 30, 2008 Decision1 of the Court of Appeals (CA) in CA-G.R. SP No. 02065-MIN, affirming the Order dated November 13, 2007 issued by Hon. Amer R. Ibrahim, which granted respondents motion for issuance of a writ of execution. The antecedents. Lucman G. Ibrahim and his co-heirs Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Rocania G. Maruhom, Potrisam G. Maruhom, Lumba G. Maruhom, Sinab G. Maruhom, Acmad G. Maruhom, Solayman G. Maruhom, Mohamad M. Ibrahim and Cairoronesa M. Ibrahim (respondents) are owners of a 70,000-square meter lot in Saduc, Marawi City. Sometime in 1978, NPC, without respondents knowledge and consent, took possession of the subterranean area of the land and constructed therein underground tunnels. The tunnels were used by NPC in siphoning the water of Lake Lanao and in the operation of NPCs Agus II, III, IV, V, VI, and VII projects located in Saguiran, Lanao del Sur; Nangca and Balo-i in Lanao del Norte; and Ditucalan and Fuentes in Iligan City. Respondents only discovered the existence of the tunnels sometime in July 1992. Thus, on October 7, 1992, respondents demanded that NPC pay damages and vacate the subterranean portion of the land, but the demand was not heeded.

Hence, on November 23, 1994, respondents instituted an action for recovery of possession of land and damages against NPC with the Regional Trial Court (RTC) of Lanao del Sur, docketed as Civil Case No. 1298-94. After trial, the RTC rendered a decision,2 the decretal portion of which reads: WHEREFORE, judgment is hereby rendered: 1. Denying *respondents+ prayer for *NPC+ to dismantle the underground tunnels constructed beneath the lands of [respondents] in Lots 1, 2, and 3 of Survey Plan FP (VII-5) 2278; 2. Ordering [NPC] to pay to [respondents] the fair market value of said 70,000 square meters of land covering Lots 1, 2, and 3 as described in Survey Plan FP (VII-5) 2278 less the area of 21,995 square meters at P1,000.00 per square meter or a total of P48,005,000.00 for the remaining unpaid portion of 48,005 square meters; with 6% interest per annum from the filing of this case until paid; 3. Ordering [NPC] to pay [respondents] a reasonable monthly rental of P0.68 per square meter of the total area of 48,005 square meters effective from its occupancy of the foregoing area in 1978 or a total of P7,050,974.40.

4. Ordering [NPC] to pay [respondents] the sum of P200,000.00 as moral damages; and 5. Ordering [NPC] to pay the further sum of P200,000.00 as attorneys fees and the costs. SO ORDERED.3 Respondents then filed an Urgent Motion for Execution of Judgment Pending Appeal. On the other hand, NPC filed a Notice of Appeal. Thereafter, it filed a vigorous opposition to the motion for execution of judgment pending appeal with a motion for reconsideration of the RTC decision. On August 26, 1996, NPC withdrew its Notice of Appeal to give way to the hearing of its motion for reconsideration. On August 28, 1996, the RTC issued an Order granting execution pending appeal and denying NPCs motion for reconsideration. The Decision of the RTC was executed pending appeal and the funds of NPC were garnished by respondents. On October 4, 1996, Lucman Ibrahim and respondents Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Potrisam G. Maruhom and Lumba G. Maruhom

filed a Petition for Relief from Judgment,4 asserting as follows: 1. They did not file a motion to reconsider or appeal the decision within the reglementary period of fifteen (15) days from receipt of judgment because they believed in good faith that the decision was for damages and rentals and attorneys fees only as prayed for in the complaint; 2. It was only on August 26, 1996 that they learned that the amounts awarded to the respondents represented not only rentals, damages and attorneys fees but the greatest portion of which was payment of just compensation which, in effect, would make the petitioner NPC the owner of the parcels of land involved in the case; 3. When they learned of the nature of the judgment, the period of appeal had already expired; 4. They were prevented by fraud, mistake, accident, or excusable negligence from taking legal steps to protect and preserve their rights over their parcels of land insofar as the part of the decision decreeing just compensation for respondents properties; 5. They would never have agreed to the alienation of their property in favor of anybody, considering the fact that the parcels of land involved in this case were among the valuable

properties they inherited from their dear father and they would rather see their land crumble to dust than sell it to anybody.5 After due proceedings, the RTC granted the petition and rendered a modified judgment dated September 8, 1997, thus: WHEREFORE, a modified judgment is hereby rendered: 1. Reducing the judgment award of [respondents] for the fair market value of P48,005,000.00 by [P]9,526,000.00 or for a difference [of] P38,479,000.00 and by the further sum of P33,603,500.00 subject of the execution pending appeal leaving a difference of [P]4,878,500.00 which may be the subject of execution upon the finality of this modified judgment with 6% interest per annum from the filing of the case until paid. 2. Awarding the sum of P1,476,911.00 to herein [respondents] Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Portrisam G. Maruhom and Lumba G. Maruhom as reasonable rental deductible from the awarded sum of P7,050,974.40 pertaining to [respondents]. 3. Ordering [NPC] embodied in the August 7, 1996 decision to pay [respondents] the sum of P200,000.00 as moral

damages; and further sum of P200,000.00 as attorneys fees and costs. SO ORDERED.6 Lucman Ibrahim and NPC then filed their separate appeals with the CA, docketed as CA-G.R. CV No. 57792. On June 8, 2005, the CA rendered a Decision,7 setting aside the modified judgment and reinstating the original Decision, amending it further by deleting the award of moral damages and reducing the amount of rentals and attorneys fees, thus: WHEREFORE, premises considered, herein Appeals are hereby partially GRANTED, the Modified Judgment is ordered SET ASIDE and rendered of no force and effect and the original Decision of the court a quo dated 7 August 1996 is hereby RESTORED with the MODIFICATION that the award of moral damages is DELETED and the amounts of rentals and attorneys fees are REDUCED to P6,887,757.40 and P50,000.00, respectively. In this connection, the Clerk of Court of RTC Lanao del Sur is hereby directed to reassess and determine the additional filing fee that should be paid by Plaintiff-Appellant IBRAHIM taking into consideration the total amount of damages sought in the complaint vis--vis the actual amount of damages awarded by this Court. Such additional filing fee shall constitute as a lien on the judgment.

SO ORDERED8 The above decision was affirmed by this Court on June 29, 2007 in G.R. No. 168732, viz.: WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in C.A.-G.R. CV No. 57792 dated June 8, 2005 is AFFIRMED. No costs. SO ORDERED.9 NPC moved for reconsideration of the Decision, but this Court denied it on August 29, 2007. To satisfy the judgment, respondents filed with the RTC a motion for execution of its August 7, 1996 decision, as modified by the CA. On November 13, 2007, the RTC granted the motion, and issued the corresponding writ of execution. Subsequently, a notice of garnishment was issued upon NPCs depositary bank. NPC then filed a Petition for Certiorari (with Urgent Prayer for the Immediate Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction) with the CA, docketed

as CA-G.R. SP No. 02065-MIN. It argued that the RTC gravely abused its discretion when it granted the motion for execution without ordering respondents to transfer their title in favor of NPC. By allowing the payment of just compensation for a parcel of land without the concomitant right of NPC to get title thereto, the RTC clearly varied the terms of the judgment in G.R. No. 168732, justifying the issuance of a writ of certiorari. NPC also prayed for the issuance of a temporary restraining order (TRO) to enjoin the implementation of the writ of execution and notice of garnishment. On November 29, 2007, the CA granted NPCs prayer and issued a TRO, enjoining the implementation of the writ of execution and the notice of garnishment. On May 30, 2008, the CA rendered the now assailed Decision,10 dismissing NPCs petition for certiorari. Rejecting NPCs argument, the CA declared that this Courts Decision in G.R. No. 168732 intended NPC to pay the full value of the property as compensation without ordering the transfer of respondents title to the land. According to the CA, in a plethora of cases involving lands traversed by NPCs transmission lines, it had been consistently ruled that an easement is compensable by the full value of the property despite the fact that NPC was only after a right-of-way easement, if by such easement it perpetually or indefinitely deprives the land owner of his proprietary rights by imposing restrictions on the use of the property. The CA, therefore,

ordered NPC to pay its admitted obligation to respondents amounting to P36,219,887.20.11 NPC is now before us faulting the CA for dismissing the formers petition for certiorari. It also prayed for a TRO to enjoin respondents and all persons acting under their authority from implementing the May 30, 2008 Decision of the CA. In its July 9, 2008 Resolution,12 this Court granted NPCs prayer, and issued a TRO enjoining the execution of the assailed CA Decision. In the main, NPC insists that the payment of just compensation for the land carries with it the correlative right to obtain title or ownership of the land taken. It stresses that this Courts Decision in G.R. No. 168732 is replete with pronouncements that the just compensation awarded to respondents corresponds to compensation for the entire land and not just for an easement or a burden on the property, thereby necessitating a transfer of title and ownership to NPC upon satisfaction of judgment. NPC added that by granting respondents motion for execution, and consequently issuing the writ of execution and notice of garnishment, the RTC and the CA allowed respondents to retain title to the property even after the payment of full compensation. This, according to NPC, was a clear case of unjust enrichment. The petition lacks merit.

It is a fundamental legal axiom that a writ of execution must conform strictly to the dispositive portion of the decision sought to be executed. A writ of execution may not vary from, or go beyond, the terms of the judgment it seeks to enforce. When a writ of execution does not conform strictly to a decisions dispositive portion, it is null and void.13 Admittedly, the tenor of the dispositive portion of the August 7, 1996 RTC decision, as modified by the CA and affirmed by this Court, did not order the transfer of ownership upon payment of the adjudged compensation. Neither did such condition appear in the text of the RTC decision, and of this Courts Decision in G.R. No. 168732. As aptly pointed out by the CA in its assailed Decision: [NPC], by its selective quotations from the Decision in G.R. No. 168732, would have Us suppose that the High Court, in decreeing that [NPC] pay the full value of the property as just compensation, implied that [NPC] was entitled to the entire land, including the surface area and not just the subterranean portion. No such inference can be drawn from [the] reading of the entirety of the High Courts Decision. On the contrary, a perusal of the subject Decision yields to this Court the unmistakable sense that the High Court intended [NPC] to pay the full value of the subject property as just compensation without ordering the transfer o*f+ respondents title to the

land. This is patent from the following language of the High Court as quoted by [NPC] itself: In disregarding this procedure and failing to recognize respondents ownership of the sub-terrain portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be emphasized that the acquisition of the easement is not without expense. The underground tunnels impose limitations on respondents use of the property for an indefinite period and deprive them of its ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just compensation. Notwithstanding the fact that [NPC] only occupies the subterrain portion, it is liable to pay not merely an easement but rather the full compensation for land. This is so because in this case, the nature of the easement practically deprives the owners of its normal beneficial use. Respondents, as the owners of the property thus expropriated, are entitled to a just compensation which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property.14 Clearly, the writ of execution issued by the RTC and affirmed by the CA does not vary, but is, in fact, consistent with the final decision in this case. The assailed writ is, therefore, valid.

Indeed, expropriation is not limited to the acquisition of real property with a corresponding transfer of title or possession. The right-of-way easement resulting in a restriction or limitation on property rights over the land traversed by transmission lines also falls within the ambit of the term expropriation.15 As we explained in Camarines Norte Electric Cooperative, Inc. v. Court of Appeals:16 The acquisition of an easement of a right-of-way falls within the purview of the power of eminent domain. Such conclusion finds support in easements of right-of-way where the Supreme Court sustained the award of just compensation for private property condemned for public use. The Supreme Court, in Republic v. PLDT thus held that: "Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of rightof-way." However, a simple right-of-way easement transmits no rights, except the easement. Vines Realty retains full

ownership and it is not totally deprived of the use of the land. It can continue doing what it wants to do with the land, except those that would result in contact with the wires.1avvphi1 The acquisition of this easement, nevertheless, is not gratis. Considering the nature and effect of the installation power lines, the limitations on the use of the land for an indefinite period deprives private respondents of its ordinary use. For these reasons, Vines Realty is entitled to payment of just compensation, which must be neither more nor less than the money equivalent of the property.17 It is, therefore, clear that NPCs acquisition of an easement of right-of-way on the lands of respondents amounted to expropriation of the portions of the latters property for which they are entitled to a reasonable and just compensation. The term just compensation had been defined as the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker's gain, but the owner's loss. The word just is used to intensify the meaning of the word compensation and to convey thereby the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, and ample.18

In Camarines Norte Electric Cooperative, Inc. v. Court of Appeals19 and National Power Corporation v. Manubay AgroIndustrial Development Corporation,20 this Court sustained the award of just compensation equivalent to the fair and full value of the property even if petitioners only sought the continuation of the exercise of their right-of-way easement and not the ownership over the land. There is simply no basis for NPC to claim that the payment of fair market value without the concomitant transfer of title constitutes an unjust enrichment. In fine, the issuance by the RTC of a writ of execution and the notice of garnishment to satisfy the judgment in favor of respondents could not be considered grave abuse of discretion. The term grave abuse of discretion, in its juridical sense, connotes capricious, despotic, oppressive, or whimsical exercise of judgment as is equivalent to lack of jurisdiction. The abuse must be of such degree as to amount to an evasion of positive duty or a virtual refusal to perform a duty enjoined by law, as where the power is exercised in an arbitrary and capricious manner by reason of passion and hostility. The word capricious, usually used in tandem with the term arbitrary, conveys the notion of willful and unreasoning action. Thus, when seeking the corrective hand of certiorari, a clear showing of caprice and arbitrariness in the exercise of discretion is imperative.21 In this case, NPC utterly failed to demonstrate caprice or arbitrariness on the part of the RTC in granting respondents motion for execution. Accordingly, the

CA committed no reversible error in dismissing NPCs petition for certiorari. It is almost trite to say that execution is the fruit and the end of the suit and is the life of the law. A judgment, if left unexecuted, would be nothing but an empty victory for the prevailing party. Litigation must end sometime and somewhere. An effective and efficient administration of justice requires that once a judgment has become final, the winning party be not deprived of the fruits of the verdict. Courts must, therefore, guard against any scheme calculated to bring about that result. Constituted as they are to put an end to controversies, courts should frown upon any attempt to prolong them.22 We, therefore, write finis to this litigation. WHEREFORE, the petition is DENIED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 02065-MIN is AFFIRMED. The temporary restraining order issued by this Court on July 9, 2008 is LIFTED. SO ORDERED. ANTONIO EDUARDO B. NACHURA Associate Justice WE CONCUR: RENATO C. CORONA

Associate Justice Chairperson PRESBITERO J. VELASCO, JR. Associate Justice DIOSDADO M. PERALTA Associate Justice MARIANO C. DEL CASTILLO** Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. RENATO C. CORONA Associate Justice Chairperson, Third Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson's Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO

Chief Justice Footnotes * The present petition impleaded Hon. Amer Ibrahim, Presiding Judge of the Regional Trial Court of Lanao del Sur, Branch 9, Marawi City; Atty. Cairoding P. Maruhom, Clerk of Court VI; and Acmad C. Aliponto, Sheriff IV, RTC-Branch 9, Marawi City, Lanao del Sur. However, Section 4, Rule 45 of the Revised Rules of Court provides that the petition shall not implead the lower courts and judges thereof as petitioners or respondents. Hence, the deletion of Hon. Ibrahim, Atty. Maruhom and Aliponto from the title. ** Additional member per Special Order No. 805 dated December 4, 2009. 1 Penned by Associate Justice RomuloV. Borja, with Associate Justices Mario N. Lopez and Elihu A. Ybaez, concurring; rollo, pp. 37-51. 2 Rollo, pp. 89-99. 3 Id. at 98-99. 4 Id. at 182-186. 5 Id. at 183-184.

6 Id. at 124-125. 7 Penned by Associate Justice Myrna Dimaranan-Vidal, with Associate Justices Teresita Dy-Liacco Flores and Edgardo A. Camello, concurring; id. at 100-119. 8 Id. at 118-119. 9 Rollo, p. 138. 10 Supra note 1. 11 Rollo, pp. 147, 151. 12 Id. 53-54. 13 Development Bank of the Phils. v. Union Bank of the Phils., 464 Phil. 161 (2004). 14 Rollo, pp. 47-48. 15 National Power Corporation v. San Pedro, G.R. No. 170945, September 26, 2006, 503 SCRA 333, 353. 16 G.R. No. 109338, November 20, 2000, 345 SCRA 85. 17 Id. at 94-95.

18 National Power Corporation v. Vda. de Capin, G.R. No. 175176, October 17, 2008, 569 SCRA 648, 667. 19 Supra note 16. 20 G.R. No. 150936, August 18, 2004, 437 SCRA 60, 67. 21 Torres v. Abundo, Sr., G.R. No. 174263, January 24, 2007, 512 SCRA 556, 568-569. 22 La Campana Development Corporation v. Development Bank of the Philippines, G.R. No. 146157, February 13, 2009. The Lawphil Project - Arellano Law Foundation

FIRST DIVISION

NATIONAL POWER

G.R. No. 168732

CORPORATION, Petitioner, Present: -versus-

LUCMAN G. IBRAHIM, OMAR Chairperson, G. MARUHOM, ELIAS G. GUTIERREZ,* MARUHOM, BUCAY G. MARUHOM, FAROUK G. MARUHOM, HIDJARA G. MARUHOM, ROCANIA G. MARUHOM, POTRISAM G. MARUHOM, LUMBA G.

PUNO, C.J.,

SANDOVAL-

CORONA, AZCUNA, and GARCIA, JJ.

Promulgated:

MARUHOM, SINAB G. MARUHOM, ACMAD G. MARUHOM, SOLAYMAN G. MARUHOM, MOHAMAD M. IBRAHIM, and CAIRONESA M. IBRAHIM, Respondents. June 29, 2007

X---------------------------------------------------------------------------------------X

DECISION

AZCUNA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to annul the Decision[1] dated June 8, 2005 rendered by the Court of Appeals (CA) in C.A.-G.R. CV No. 57792. The facts are as follows:

On November 23, 1994, respondent Lucman G. Ibrahim, in his personal capacity and in behalf of his co-heirs Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Rocania G. Maruhom, Potrisam G. Maruhom, Lumba G. Maruhom, Sinab G. Maruhom, Acmad G. Maruhom, Solayman G. Maruhom, Mohamad M. Ibrahim and Caironesa M. Ibrahim, instituted an action against petitioner National Power Corporation (NAPOCOR) for recovery of possession of land and damages before the Regional Trial Court (RTC) of Lanao del Sur.

In their complaint, Ibrahim and his co-heirs claimed that they were owners of several parcels of land described in Survey Plan FP (VII-5) 2278 consisting of 70,000 square meters, divided into three (3) lots, i.e. Lots 1, 2, and 3 consisting of 31,894, 14,915, and 23,191 square meters each respectively. Sometime in 1978, NAPOCOR, through alleged stealth and without respondents knowledge and prior consent, took possession of the sub-terrain area of their lands and constructed therein underground tunnels. The existence of the tunnels was only discovered sometime in July 1992 by respondents and then later confirmed on November 13, 1992 by NAPOCOR itself through a memorandum issued by the latters Acting Assistant Project Manager. The tunnels were apparently being used by NAPOCOR in siphoning the water of Lake Lanao and in the operation of NAPOCORs Agus II, III, IV, V, VI, VII projects located in Saguiran, Lanao del Sur; Nangca and Balo-i in Lanao del Norte; and Ditucalan and Fuentes in Iligan City.

On September 19, 1992, respondent Omar G. Maruhom requested the Marawi City Water District for a permit to construct and/or install a motorized deep well in Lot 3 located in Saduc, Marawi City but his request was turned down because the construction of the deep well would cause danger to lives and property. On October 7, 1992, respondents demanded that NAPOCOR pay damages and

vacate the sub-terrain portion of their lands but the latter refused to vacate much less pay damages. Respondents further averred that the construction of the underground tunnels has endangered their lives and properties as Marawi City lies in an area of local volcanic and tectonic activity. Further, these illegally constructed tunnels caused them sleepless nights, serious anxiety and shock thereby entitling them to recover moral damages and that by way of example for the public good, NAPOCOR must be held liable for exemplary damages.

Disputing respondents claim, NAPOCOR filed an answer with counterclaim denying the material allegations of the complaint and interposing affirmative and special defenses, namely that (1) there is a failure to state a cause of action since respondents seek possession of the sub-terrain portion when they were never in possession of the same, (2) respondents have no cause of action because they failed to show proof that they were the owners of the property, and (3) the tunnels are a government project for the benefit of all and all private lands are subject to such easement as may be necessary for the same.[2]

On August 7, 1996, the RTC rendered a Decision, the decretal portion of which reads as follows:

WHEREFORE, judgment is hereby rendered:

1. Denying plaintiffs *private respondents+ prayer for defendant [petitioner] National Power Corporation to dismantle the underground tunnels constructed between the lands of plaintiffs in Lots 1, 2, and 3 of Survey Plan FP (VII-5) 2278;

2. Ordering defendant to pay to plaintiffs the fair market value of said 70,000 square meters of land covering Lots 1, 2, and 3 as described in Survey Plan FP (VII-5) 2278 less the area of 21,995 square meters at P1,000.00 per square meter or a total of P48,005,000.00 for the remaining unpaid portion of 48,005 square meters; with 6% interest per annum from the filing of this case until paid;

3. Ordering defendant to pay plaintiffs a reasonable monthly rental of P0.68 per square meter of the total area of 48,005 square meters effective from its occupancy of the foregoing area in 1978 or a total of P7,050,974.40.

4. Ordering defendant to pay plaintiffs the sum of P200,000.00 as moral damages; and

5. Ordering defendant to pay the further sum of P200,000.00 as attorneys fees and the costs.

SO ORDERED.[3]

On August 15, 1996, Ibrahim, joined by his co-heirs, filed an Urgent Motion for Execution of Judgment Pending Appeal. On the other hand, NAPOCOR filed a Notice of Appeal by registered mail on August 19, 1996. Thereafter, NAPOCOR filed a vigorous opposition to the motion for execution of

judgment pending appeal with a motion for reconsideration of the Decision which it had received on August 9, 1996.

On August 26, 1996, NAPOCOR filed a Manifestation and Motion withdrawing its Notice of Appeal purposely to give way to the hearing of its motion for reconsideration.

On August 28, 1996, the RTC issued an Order granting execution pending appeal and denying NAPOCORs motion for reconsideration, which Order was received by NAPOCOR on September 6, 1996.

On September 9, 1996, NAPOCOR filed its Notice of Appeal by registered mail which was denied by the RTC on the ground of having been filed out of time. Meanwhile, the Decision of the RTC was executed pending appeal and funds of NAPOCOR were garnished by respondents Ibrahim and his co-heirs.

On October 4, 1996, a Petition for Relief from Judgment was filed by respondents Omar G. Maruhom, Elias G. Maruhom,

Bucay G. Maruhom, Mamod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Potrisam G. Maruhom and Lumba G. Maruhom asserting as follows:

1) they did not file a motion to reconsider or appeal the decision within the reglementary period of fifteen (15) days from receipt of judgment because they believed in good faith that the decision was for damages and rentals and attorneys fees only as prayed for in the complaint:

2) it was only on August 26, 1996 that they learned that the amounts awarded to the plaintiffs represented not only rentals, damages and attorneys fees but the greatest portion of which was payment of just compensation which in effect would make the defendant NPC the owner of the parcels of land involved in the case;

3) when they learned of the nature of the judgment, the period of appeal has already expired;

4) they were prevented by fraud, mistake, accident, or excusable negligence from taking legal steps to protect and preserve their rights over their parcels of land in so far as the part of the decision decreeing just compensation for petitioners properties;

5) they would never have agreed to the alienation of their property in favor of anybody, considering the fact that the parcels of land involved in this case were among the valuable properties they inherited from their dear father and they would rather see their land crumble to dust than sell it to anybody.[4]

The RTC granted the petition and rendered a modified judgment dated September 8, 1997, thus:

WHEREFORE, a modified judgment is hereby rendered:

1) Reducing the judgment award of plaintiffs for the fair market value of P48,005,000.00 by 9,526,000.00 or for a difference by P38,479,000.00 and by the further sum of P33,603,500.00 subject of the execution pending appeal leaving a difference of 4,878,500.00 which may be the subject of execution upon the finality of this modified judgment with 6% interest per annum from the filing of the case until paid.

2) Awarding the sum of P1,476,911.00 to herein petitioners Omar G. Maruhom, Elias G. Maruhom, Bucay G. Maruhom, Mahmod G. Maruhom, Farouk G. Maruhom, Hidjara G. Maruhom, Portrisam G. Maruhom and Lumba G. Maruhom as reasonable rental deductible from the awarded sum of P7,050,974.40 pertaining to plaintiffs.

3) Ordering defendant embodied in the August 7, 1996 decision to pay plaintiffs the sum of P200,000.00 as moral damages; and further sum of P200,000.00 as attorneys fees and costs.

SO ORDERED.[5]

Subsequently, both respondent Ibrahim and NAPOCOR appealed to the CA.

In the Decision dated June 8, 2005, the CA set aside the modified judgment and reinstated the original Decision dated August 7, 1996, amending it further by deleting the award of moral damages and reducing the amount of rentals and attorneys fees, thus:

WHEREFORE, premises considered, herein Appeals are hereby partially GRANTED, the Modified Judgment is ordered SET ASIDE and rendered of no force and effect and the original Decision of the court a quo dated 7 August 1996 is hereby RESTORED with the MODIFICATION that the award of moral damages is DELETED and the amounts of rentals and attorneys fees are REDUCED to P6,888,757.40 and P50,000.00, respectively.

In this connection, the Clerk of Court of RTC Lanao del Sur is hereby directed to reassess and determine the additional filing fee that should be paid by Plaintiff-Appellant IBRAHIM taking into consideration the total amount of damages sought in the complaint vis--vis the actual amount of damages awarded by this Court. Such additional filing fee shall constitute a lien on the judgment.

SO ORDERED.[6]

Hence, this petition ascribing the following errors to the CA:

(a) RESPONDENTS WERE NOT DENIED THE BENEFICIAL USE OF THEIR SUBJECT PROPERTIES TO ENTITLE THEM TO JUST COMPENSATION BY WAY OF DAMAGES;

(b) ASSUMING THAT RESPONDENTS ARE ENTITLED TO JUST COMPENSATION BY WAY OF DAMAGES, NO EVIDENCE WAS PRESENTED ANENT THE VALUATION OF RESPONDENTS PROPERTY AT THE TIME OF ITS TAKING IN THE YEAR 1978 TO JUSTIFY THE AWARD OF ONE THOUSAND SQUARE METERS (P1000.00/SQ. M.) EVEN AS PAYMENT OF BACK RENTALS IS ITSELF IMPROPER.

This case revolves around the propriety of paying just compensation to respondents, and, by extension, the basis for computing the same. The threshold issue of whether respondents are entitled to just compensation hinges upon who owns the sub-terrain area occupied by petitioner.

Petitioner maintains that the sub-terrain portion where the underground tunnels were constructed does not belong to respondents because, even conceding the fact that respondents owned the property, their right to the subsoil of the same does not extend beyond what is necessary to enable them to obtain all the utility and convenience that such property can normally give. In any case, petitioner asserts that respondents were still able to use the subject property even with the existence of the tunnels, citing as an example the fact that one of the respondents, Omar G. Maruhom, had

established his residence on a part of the property. Petitioner concludes that the underground tunnels 115 meters below respondents property could not have caused damage or prejudice to respondents and their claim to this effect was, therefore, purely conjectural and speculative.[7]

The contention lacks merit.

Generally, in an appeal by certiorari under Rule 45 of the Rules of Court, the Court does not pass upon questions of fact. Absent any showing that the trial and appellate courts gravely abused their discretion, the Court will not examine the evidence introduced by the parties below to determine if they correctly assessed and evaluated the evidence on record.[8] The jurisdiction of the Court in cases brought to it from the CA is limited to reviewing and revising the errors of law imputed to it, its findings of fact being as a rule conclusive and binding on the Court.

In the present case, petitioner failed to point to any evidence demonstrating grave abuse of discretion on the part of the CA or to any other circumstances which would call for the

application of the exceptions to the above rule. Consequently, the CAs findings which upheld those of the trial court that respondents owned and possessed the property and that its substrata was possessed by petitioner since 1978 for the underground tunnels, cannot be disturbed. Moreover, the Court sustains the finding of the lower courts that the sub-terrain portion of the property similarly belongs to respondents. This conclusion is drawn from Article 437 of the Civil Code which provides:

ART. 437. The owner of a parcel of land is the owner of its surface and of everything under it, and he can construct thereon any works or make any plantations and excavations which he may deem proper, without detriment to servitudes and subject to special laws and ordinances. He cannot complain of the reasonable requirements of aerial navigation.

Thus, the ownership of land extends to the surface as well as to the subsoil under it. In Republic of the Philippines v. Court of Appeals,[9] this principle was applied to show that rights over lands are indivisible and, consequently, require a definitive and categorical classification, thus:

The Court of Appeals justified this by saying there is no conflict of interest between the owners of the surface rights and the owners of the sub-surface rights. This is rather strange doctrine, for it is a well-known principle that the owner of a piece of land has rights not only to its surface but also to everything underneath and the airspace above it up to a reasonable height. Under the aforesaid ruling, the land is classified as mineral underneath and agricultural on the surface, subject to separate claims of title. This is also difficult to understand, especially in its practical application.

Under the theory of the respondent court, the surface owner will be planting on the land while the mining locator will be boring tunnels underneath. The farmer cannot dig a well because he may interfere with the mining operations below and the miner cannot blast a tunnel lest he destroy the crops above. How deep can the farmer, and how high can the miner go without encroaching on each others rights? Where is the dividing line between the surface and the sub-surface rights?

The Court feels that the rights over the land are indivisible and that the land itself cannot be half agricultural and half

mineral. The classification must be categorical; the land must be either completely mineral or completely agricultural.

Registered landowners may even be ousted of ownership and possession of their properties in the event the latter are reclassified as mineral lands because real properties are characteristically indivisible. For the loss sustained by such owners, they are entitled to just compensation under the Mining Laws or in appropriate expropriation proceedings.[10]

Moreover, petitioners argument that the landowners right extends to the sub-soil insofar as necessary for their practical interests serves only to further weaken its case. The theory would limit the right to the sub-soil upon the economic utility which such area offers to the surface owners. Presumably, the landowners right extends to such height or depth where it is possible for them to obtain some benefit or enjoyment, and it is extinguished beyond such limit as there would be no more interest protected by law.[11]

In this regard, the trial court found that respondents could have dug upon their property motorized deep wells but were prevented from doing so by the authorities precisely because of the construction and existence of the tunnels underneath the surface of their property. Respondents, therefore, still had a legal interest in the sub-terrain portion insofar as they could have excavated the same for the construction of the deep well. The fact that they could not was appreciated by the RTC as proof that the tunnels interfered with respondents enjoyment of their property and deprived them of its full use and enjoyment, thus:

Has it deprived the plaintiffs of the use of their lands when from the evidence they have already existing residential houses over said tunnels and it was not shown that the tunnels either destroyed said houses or disturb[ed] the possession thereof by plaintiffs? From the evidence, an affirmative answer seems to be in order. The plaintiffs and [their] co-heirs discovered [these] big underground tunnels in 1992. This was confirmed by the defendant on November 13, 1992 by the Acting Assistant Project Manager, Agus 1 Hydro Electric Project (Exh. K). On September 16, 1992, Atty. Omar Maruhom (co-heir) requested the Marawi City Water District for permit to construct a motorized deep well over Lot 3 for his residential house (Exh. Q). He was refused the permit because the construction of the deep well as (sic) the parcels

of land will cause danger to lives and property. He was informed that beneath your lands are constructed the Napocor underground tunnel in connection with Agua Hydroelectric plant (Exh. Q-2). There in fact exists ample evidence that this construction of the tunnel without the prior consent of plaintiffs beneath the latters property endangered the lives and properties of said plaintiffs. It has been proved indubitably that Marawi City lies in an area of local volcanic and tectonic activity. Lake Lanao has been formed by extensive earth movements and is considered to be a drowned basin of volcano/tectonic origin. In Marawi City, there are a number of former volcanoes and an extensive amount of faulting. Some of these faults are still moving. (Feasibility Report on Marawi City Water District by Kampsa-Kruger, Consulting Engineers, Architects and Economists, Exh. R). Moreover, it has been shown that the underground tunnels [have] deprived the plaintiffs of the lawful use of the land and considerably reduced its value. On March 6, 1995, plaintiffs applied for a two-million peso loan with the Amanah Islamic Bank for the expansion of the operation of the Ameer Construction and Integrated Services to be secured by said land (Exh. N), but the application was disapproved by the bank in its letter of April 25, 1995 (Exh. O) stating that:

Apropos to this, we regret to inform you that we cannot consider your loan application due to the following reasons, to wit:

That per my actual ocular inspection and verification, subject property offered as collateral has an existing underground tunnel by the NPC for the Agus I Project, which tunnel is traversing underneath your property, hence, an encumbrance. As a matter of bank policy, property with an existing encumbrance cannot be considered neither accepted as collateral for a loan.

All the foregoing evidence and findings convince this Court that preponderantly plaintiffs have established the condemnation of their land covering an area of 48,005 sq. meters located at Saduc, Marawi City by the defendant National Power Corporation without even the benefit of expropriation proceedings or the payment of any just compensation and/or reasonable monthly rental since 1978.[12]

In the past, the Court has held that if the government takes property without expropriation and devotes the property to public use, after many years, the property owner may demand payment of just compensation in the event restoration of possession is neither convenient nor feasible.[13] This is in accordance with the principle that persons shall not be deprived of their property except by competent authority and for public use and always upon payment of just compensation.[14]

Petitioner contends that the underground tunnels in this case constitute an easement upon the property of respondents which does not involve any loss of title or possession. The manner in which the easement was created by petitioner, however, violates the due process rights of respondents as it was without notice and indemnity to them and did not go through proper expropriation proceedings. Petitioner could have, at any time, validly exercised the power of eminent domain to acquire the easement over respondents property as this power encompasses not only the taking or appropriation of title to and possession of the expropriated property but likewise covers even the imposition of a mere burden upon the owner of the condemned property.[15] Significantly, though, landowners cannot be deprived of their right over their land until expropriation proceedings are

instituted in court. The court must then see to it that the taking is for public use, that there is payment of just compensation and that there is due process of law.[16]

In disregarding this procedure and failing to recognize respondents ownership of the sub-terrain portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be emphasized that the acquisition of the easement is not without expense. The underground tunnels impose limitations on respondents use of the property for an indefinite period and deprive them of its ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just compensation.[17] Notwithstanding the fact that petitioner only occupies the sub-terrain portion, it is liable to pay not merely an easement fee but rather the full compensation for land. This is so because in this case, the nature of the easement practically deprives the owners of its normal beneficial use. Respondents, as the owners of the property thus expropriated, are entitled to a just compensation which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property.[18]

The entitlement of respondents to just compensation having been settled, the issue now is on the manner of computing the same. In this regard, petitioner claims that the basis for the computation of the just compensation should be the value of the property at the time it was taken in 1978. Petitioner also impugns the reliance made by the CA upon National Power Corporation v. Court of Appeals and Macapanton Mangondato[19] as the basis for computing the amount of just compensation in this action. The CA found that the award of damages is not excessive because the P1000 per square meter as the fair market value was sustained in a case involving a lot adjoining the property in question which case involved an expropriation by [petitioner] of portion of Lot 1 of the subdivision plan (LRC) PSD 116159 which is adjacent to Lots 2 and 3 of the same subdivision plan which is the subject of the instant controversy.*20+

Just compensation has been understood to be the just and complete equivalent of the loss[21] and is ordinarily determined by referring to the value of the land and its character at the time it was taken by the expropriating authority.[22] There is a taking in this sense when the owners are actually deprived or dispossessed of their property, where there is a practical destruction or a material impairment of the value of their property, or when they are deprived of the ordinary use thereof. There is a taking in

this context when the expropriator enters private property not only for a momentary period but for more permanent duration, for the purpose of devoting the property to a public use in such a manner as to oust the owner and deprive him of all beneficial enjoyment thereof.*23+ Moreover, taking of the property for purposes of eminent domain entails that the entry into the property must be under warrant or color of legal authority.[24] Under the factual backdrop of this case, the last element of taking mentioned, i.e., that the entry into the property is under warrant or color of legal authority, is patently lacking. Petitioner justified its nonpayment of the indemnity due respondents upon its mistaken belief that the property formed part of the public dominion.

This situation is on all fours with that in the Mangondato case. NAPOCOR in that case took the property of therein respondents in 1979, using it to build its Aqua I Hydroelectric Plant Project, without paying any compensation, allegedly under the mistaken belief that it was public land. It was only in 1990, after more than a decade of beneficial use, that NAPOCOR recognized therein respondents ownership and negotiated for the voluntary purchase of the property.

In Mangondato, this Court held:

The First Issue: Date of Taking or Date of Suit?

The general rule in determining just compensation in eminent domain is the value of the property as of the date of the filing of the complaint, as follows:

Sec. 4. Order of Condemnation. When such a motion is overruled or when any party fails to defend as required by this rule, the court may enter an order of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint. x x x (Italics supplied).

Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence, many ruling

of this Court have equated just compensation with the value of the property as of the time of filing of the complaint consistent with the above provision of the Rules. So too, where the institution of the action precedes entry to the property, the just compensation is to be ascertained as of the time of filing of the complaint.

The general rule, however, admits of an exception: where this Court fixed the value of the property as of the date it was taken and not the date of the commencement of the expropriation proceedings.

In the old case of Provincial Government of Rizal vs. Caro de Araullo, the Court ruled that x x x the owners of the land have no right to recover damages for this unearned increment resulting from the construction of the public improvement (lengthening of Taft Avenue from Manila to Pasay) from which the land was taken. To permit them to do so would be to allow them to recover more than the value of the land at the time it was taken, which is the true measure of the damages, or just compensation, and would discourage the construction of important public improvements.

In subsequent cases, the Court, following the above doctrine, invariably held that the time of taking is the critical date in determining lawful or just compensation. Justifying this stance, Mr. Justice (later Chief Justice) Enrique Fernando, speaking for the Court in Municipality of La Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan, said, x x x the owner as is the constitutional intent, is paid what he is entitled to according to the value of the property so devoted to public use as of the date of taking. From that time, he had been deprived thereof. He had no choice but to submit. He is not, however, to be despoiled of such a right. No less than the fundamental law guarantees just compensation. It would be injustice to him certainly if from such a period, he could not recover the value of what was lost. There could be on the other hand, injustice to the expropriator if by a delay in the collection, the increment in price would accrue to the owner. The doctrine to which this Court has been committed is intended precisely to avoid either contingency fraught with unfairness.

Simply stated, the exception finds the application where the owner would be given undue incremental advantages arising from the use to which the government devotes the property expropriated -- as for instance, the extension of a main thoroughfare as was in the case in Caro

de Araullo. In the instant case, however, it is difficult to conceive of how there could have been an extra-ordinary increase in the value of the owners land arising from the expropriation, as indeed the records do not show any evidence that the valuation of P1,000.00 reached in 1992 was due to increments directly caused by petitioners use of the land. Since the petitioner is claiming an exception to Rule 67, Section 4, it has the burden in proving its claim that its occupancy and use -- not ordinary inflation and increase in land values -- was the direct cause of the increase in valuation from 1978 to 1992.

Side Issue: When is there Taking of Property?

But there is yet another cogent reason why this petition should be denied and why the respondent Court should be sustained. An examination of the undisputed factual environment would show that the taking was not really made in 1978.

This Court has defined the elements of taking as the main ingredient in the exercise of power of eminent domain, in the following words:

A number of circumstances must be present in taking of property for purposes of eminent domain: (1) the expropriator must enter a private property; (2) the entrance into private property must be for more than a momentary period; (3) the entry into the property should be under warrant or color of legal authority; (4) the property must be devoted to a public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way to oust the owner and deprive him of all beneficial enjoyment of the property.(Italics supplied)

In this case, the petitioners entrance in 1978 was without intent to expropriate or was not made under warrant or color of legal authority, for it believed the property was public land covered by Proclamation No. 1354. When the private respondent raised his claim of ownership sometime in 1979, the petitioner flatly refused the claim for compensation, nakedly insisted that the property was public land and wrongly justified its possession by alleging it had

already paid financial assistance to Marawi City in exchange for the rights over the property. Only in 1990, after more than a decade of beneficial use, did the petitioner recognize private respondents ownership and negotiate for the voluntary purchase of the property. A Deed of Sale with provisional payment and subject to negotiations for the correct price was then executed. Clearly, this is not the intent nor the expropriation contemplated by law. This is a simple attempt at a voluntary purchase and sale. Obviously, the petitioner neglected and/or refused to exercise the power of eminent domain.

Only in 1992, after the private respondent sued to recover possession and petitioner filed its Complaint to expropriate, did petitioner manifest its intention to exercise the power of eminent domain. Thus the respondent Court correctly held:

If We decree that the fair market value of the land be determined as of 1978, then We would be sanctioning a deceptive scheme whereby NAPOCOR, for any reason other than for eminent domain would occupy anothers property and when later pressed for payment, first negotiate for a low price and then conveniently expropriate the property when

the land owner refuses to accept its offer claiming that the taking of the property for the purpose of the eminent domain should be reckoned as of the date when it started to occupy the property and that the value of the property should be computed as of the date of the taking despite the increase in the meantime in the value of the property.

In Noble vs. City of Manila, the City entered into a lease-purchase agreement of a building constructed by the petitioners predecessor-in-interest in accordance with the specifications of the former. The Court held that being bound by the said contract, the City could not expropriate the building. Expropriation could be resorted to only when it is made necessary by the opposition of the owner to the sale or by the lack of any agreement as to the price. Said the Court:

The contract, therefore, in so far as it refers to the purchase of the building, as we have interpreted it, is in force, not having been revoked by the parties or by judicial decision. This being the case, the city being bound to buy the building at an agreed price, under a valid and subsisting contract, and the plaintiff being agreeable to its sale, the expropriation thereof, as sought by the defendant, is baseless. Expropriation lies only when it is made necessary by the

opposition of the owner to the sale or by the lack of any agreement as to the price. There being in the present case a valid and subsisting contract, between the owner of the building and the city, for the purchase thereof at an agreed price, there is no reason for the expropriation. (Italics supplied)

In the instant case, petitioner effectively repudiated the deed of sale it entered into with the private respondent when it passed Resolution No. 92-121 on May 25, 1992 authorizing its president to negotiate, inter alia, that payment shall be effective only after Agus I HE project has been placed in operation. It was only then that petitioners intent to expropriate became manifest as private respondent disagreed and, barely a month, filed suit.[25]

In the present case, to allow petitioner to use the date it constructed the tunnels as the date of valuation would be grossly unfair. First, it did not enter the land under warrant or color of legal authority or with intent to expropriate the same. In fact, it did not bother to notify the owners and wrongly assumed it had the right to dig those tunnels under

their property. Secondly, the improvements introduced by petitioner, namely, the tunnels, in no way contributed to an increase in the value of the land. The trial court, therefore, as affirmed by the CA, rightly computed the valuation of the property as of 1992, when respondents discovered the construction of the huge underground tunnels beneath their lands and petitioner confirmed the same and started negotiations for their purchase but no agreement could be reached.[26]

As to the amount of the valuation, the RTC and the CA both used as basis the value of the adjacent property, Lot 1 (the property involved herein being Lots 2 and 3 of the same subdivision plan), which was valued at P1,000 per sq. meter as of 1990, as sustained by this Court in Mangondato, thus: The Second Issue: Valuation

We now come to the issue of valuation.

The fair market value as held by the respondent Court, is the amount of P1,000.00 per square meter. In an

expropriation case where the principal issue is the determination of just compensation, as is the case here, a trial before Commissioners is indispensable to allow the parties to present evidence on the issue of just compensation. Inasmuch as the determination of just compensation in eminent domain cases is a judicial function and factual findings of the Court of Appeals are conclusive on the parties and reviewable only when the case falls within the recognized exceptions, which is not the situation obtaining in this petition, we see no reason to disturb the factual findings as to valuation of the subject property. As can be gleaned from the records, the court-and-the-parties-appointed commissioners did not abuse their authority in evaluating the evidence submitted to them nor misappreciate the clear preponderance of evidence. The amount fixed and agreed to by the respondent appellate Court is not grossly exorbitant. To quote:

Commissioner Ali comes from the Office of the Register of Deeds who may well be considered an expert, with a general knowledge of the appraisal of real estate and the prevailing prices of land in the vicinity of the land in question so that his opinion on the valuation of the property cannot be lightly brushed aside.

The prevailing market value of the land is only one of the determinants used by the commissioners report the other being as herein shown:

xxx

xxx

Commissioner Doromals report, recommending P300.00 per square meter, differs from the 2 commissioners only because his report was based on the valuation as of 1978 by the City Appraisal Committee as clarified by the latters chairman in response to NAPOCORs general counsels query.

In sum, we agree with the Court of Appeals that petitioner has failed to show why it should be granted an exemption from the general rule in determining just compensation provided under Section 4 of Rule 67. On the

contrary, private respondent has convinced us that, indeed, such general rule should in fact be observed in this case.[27]

Petitioner has not shown any error on the part of the CA in reaching such a valuation. Furthermore, these are factual matters that are not within the ambit of the present review.

WHEREFORE, the petition is DENIED and the Decision of the Court of Appeals in C.A.-G.R. CV No. 57792 dated June 8, 2005 is AFFIRMED.

No costs.

SO ORDERED.

ADOLFO S. AZCUNA Associate Justice

WE CONCUR:

REYNATO S. PUNO Chairperson Chief Justice

(On Leave) ANGELINA SANDOVAL-GUTIERREZ Associate Justice Justice RENATO C. CORONA Associate

CANCIO C. GARCIA Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

REYNATO S. PUNO Chief Justice * [1] [2] On Leave. Rollo, pp. 114-133. Id. at 117-118.

[3] [4] [5] [6] [7]

Id. at 118-119. Id. at 121-122. Id. at 122-123. Id. at 132-133. Id. at 95-98.

[8] Concepcion v. CA, G.R. No. 120707, January 31, 2000, 324 SCRA 85. [9] [10] G.R. No. L-43938, April 15, 1988, 160 SCRA 228. Id.

[11] Tolentino, Commentaries and Jurisprudence on the Civil Code, Vol. II, p. 90. [12] [13] Rollo, pp. 152-154. Militante v. Court of Appeals, 386 Phil. 522 (2000).

[14] CONSTITUTION, Art. III, Sec. 9. See also CIVIL CODE, Art. 435.

[15]

Republic v. PLDT, 136 Phil. 20 (1969).

[16] NAPOCOR v. CA, G.R. No. 106804, August 12, 2004, 436 SCRA 195. [17] NAPOCOR v. Gutierrez, G.R. No. 60077, January 18, 1991, 193 SCRA 1. [18] [19] [20] [21] [22] Id. G.R. No. 113194, March 11, 1996, 254 SCRA 577. Rollo, p. 130. Supra note 16. Supra note 17.

[23] Republic of the Philippines v. Sarabia, G.R. No. 157847, August 25, 2005, 468 SCRA 142. [24] Supra note 19.

[25] Supra, note 19 at 588-592; Emphasis supplied, italics in the original. [26] See RTC decision of August 7, 1996, Rollo, p. 158.

[27]

See, supra note 19 at 592-593.

[Syllabus] FIRST DIVISION [G.R. No. 64888. November 28, 1996] REPUBLIC OF THE PHILIPPINES (Bureau of Telecommunications). THE DIRECTOR or ACTING DIRECTOR OF THE BUREAU OF TELECOMMUNICATIONS, THE REGIONAL SUPERINTENDENT OF THE BUREAU OF TELECOMMUNICATIONS AT REGION NO. II, THE EXCHANGE MANAGER AND CHIEF OPERATOR OF THE BUREAU OF TELECOMMUNICATIONS AT MALOLOS, BULACAN, petitioners, vs. REPUBLIC TELEPHONE COMPANY, INC. (now Philippine Long Distance Telephone Company) and THE INTERMEDIATE APPELLATE COURT, respondents. DECISION HERMOSISIMA, JR., J.: Before us is a petition for the review of the decision[1] of the then Intermediate Appellate Court[2] (now the Court of Appeals) in an injunction suit[3] filed in the then Court of First

Instance[4] (now the Regional Trial Court) by respondent Republic Telephone Company, Inc. (hereafter, RETELCO [now Philippine Long Distance Telephone Company, Inc.]) against petitioner officers of the Bureau of Telecommunications (hereafter, BUTELCO, now the Department of Telecommunications and Communications [DOTC] Telecommunications Office). The respondent appellate court narrated the facts of this case, undisputed as they are, in the following manner: This case arose from a complaint filed on May 17, 1972 by petitioner-appellee, the Republic Telephone Company [RETELCO], seeking to enjoin the respondents Director or Acting Director of the Bureau of Telecommunications; its Regional Superintendent; the Exchange Manager and Chief Operator of the Bureau of Telecommunications at Malolos, Bulacan, and the agents and representatives acting in their behalf, from operating and maintaining their local telephone system in Malolos, Bulacan and from soliciting subscribers in that municipality and its environs, alleging inter alia that such operations and maintenance of the telephone system and solicitation of subscribers by respondents constituted an unfair and ruinous competition to the detriment of petitioner [RETELCO] who is a grantee of both municipal and legislative franchises for the purpose. Respondents [BUTELCO], thru counsel, filed a motion to dismiss the aforesaid petition on the grounds that they are not the indispensable and real

parties in interest in the case and that petitioner [RETELCO] has no cause of action against them. The motion was denied on June 20, 1972 x x x and after petitioner-appellee [RETELCO] had furnished a bond of P75,000.00, Order was issued on June 30, 1972, restraining respondents [BUTELCO] from operating and maintaining the local telephone system in Malolos and from soliciting customers. Respondents [BUTELCO] filed their Answer on July 6, 1972, followed with a motion on July 8, 1972, asking for the lifting of the Writ of Preliminary Injunction suit, contending that state-owned property, albeit immune from suit, had been adversely affected by the injunction. For the reason that evidence has to be adduced yet to determine respondents *BUTELCOs+ compliance with Executive Order No. 94, Series of 1947, the court a quo denied the motion. On December 7, 1972, the Republic of the Philippines, on behalf of the Bureau of Telecommunications, begged leave of court to intervene in the proceedings on the ground that the suit affected state property and accordingly the state has a legal interest involved. There being no essential dispute between the parties over the fact that the suit indeed involved property of the state, the Answer in Intervention was admitted and the case proceeded to trial.

It is not disputed that petitioner-appellee, Republic Telephone Company, Inc., or RETELCO, is a domestic corporation engaged in the business of installing, operating and maintaining nationwide local telephone services. It had

acquired a municipal franchise on December 29, 1959 from the Municipal Council of Malolos, Bulacan per Resolution No. 190, Series of 1959 to install, maintain and operate a local telephone system within the municipality of Malolos for a period of thirty-five years x x x. The municipal franchise was approved by the Provincial Board of Bulacan on January 21, 1960 thus certificate of public convenience and necessity was secured from the Public Service Commission on March 15, 1960 under PSC Case No. 129826 which the President of the Philippines approved on March 23, 1960 x x x. RETELCO accepted the commission certificate and filed the required deposit with the Treasurer of the Philippines on April 11, 1960 x x x. On June 22, 1963, RETELCO obtained a legislative franchise under Republic Act No. 3662 of the then Congress of the Philippines for the construction, operation and maintenance of a nationwide telephone service with exchanges in various areas including the municipality of Malolos. It was approved by the President of the Philippines for a period of fifty years x x x and the correspondent certificate of public convenience and necessity was granted on January 16, 1968 under Public Service Commission case No. 67-4023 x x x. From the evidence, it appears that on the basis of a viable project study and reliance upon the laws affording protection against unfair and ruinous competition, RETELCO commenced operation of its Malolos telephone venture in 1960 and as of 1963 it had 197 subscribers which number increased to 368

subscribers in May 1969. The investment made reached the sum of P263,050.88 x x x. But way back in February, 1969 RETELCO learned through public announcements of government projects to be launched that the Bureau of Telecommunications would establish and operate telephone system in Malolos to serve government offices and the private *sector+ as well thus exposing x x x appellees *RETELCOs+ telephone business operation to the risk of undue competition. Immediately, they filed protests, and sought for administrative remedies and reliefs from the Telecommunications Board, the President of the Philippines, the Secretary of the Department of Public Works and Communication, the then Speaker Jose B. Laurel, Jr. of the House of Representatives, and the Philippine National Bank which was financing the project x x x but all were to no avail. In May, 1969, the Bureau of Telecommunications commenced its operation of the telephone exchange in Malolos and, incidentally, number of the telephone subscribers of RETELCO dropped to a level of 255 as of September, 1969, to 131 in October, 1970 and to 125 as of March, 1972 x x x at the cost of P197,055.63 in terms of revenue losses x x x. However, after the preliminary injunction was issued on June 30, 1972, the number of subscribers gradually increased such that as of January, 1974 there were already 320 subscribers as against RETELCOs capacity of accommodating 450 subscribers x x x. The Bureau of Telecommunications was not subject to the jurisdiction of the Public Service Commission on matters of fixing the rates of fees to be charged to telephone

subscribers, thus RETELCO attributed the sharp decline in the number of telephone subscribers to the difference in rates individually charged by them x x x. The lower court, finding after trial that respondents [BUTELCO] and intervenors-appellants were duplicating the functions of petitioner-appellee [RETELCO] in contravention of Executive Order No. 94, Series of 1947, rendered a judgment making the preliminary injunction PERMANENT.*5+ Respondent appellate court sustained the court a quos finding that Section 79 of Executive Order No. 94, Series of 1947 prohibited any other entity, besides the present operator, from maintaining and selling telephone services in Malolos, Bulacan, unless there was first executed a mutually acceptable arrangement or agreement between such other entity and the present operator as regards the utilization of the latters existing facilities. Respondent court found respondent RETELCO to be the present operator of telephone services in Malolos, Bulacan, and BUTELCO having failed to first make arrangements with the former before establishing its own telephone system, respondent appellate court upheld the propriety of the permanent injunction issued by the court a quo in this wise: PREMISES CONSIDERED, the preliminary injunction previously granted is hereby made PERMANENT, and the respondents and the intervenor Bureau of

Telecommunications and their successors, agents, representative, and assigns, are hereby PERPETUALLY enjoined and restrained from operating and maintaining their local telephone exchange in the Municipality of Malolos, Province of Bulacan, and from soliciting customers or subscribers in said areas, UNTIL they comply with the requisites mentioned in Section 79 (B) of Executive Order No. 94, particularly with respect to needed negotiation with the petitioner or UNTIL such time as RETELCOs telephone franchise in Malolos, Bulacan shall have lawfully ceased to exist. The bond posted for the preliminary injunction is hereby cancelled.*6+ In rendering judgment in favor of respondent RETELCO, the appellate court rejected BUTELCOs main argument that Section 79 of Executive Order No. 94, Series of 1947, has been repealed by Presidential Decree No. 1 promulgated by then President Marcos in the exercise of his martial law powers, by virtue of which decree the Integrated Reorganization Plan was made part of the law of the land. Under such plan, in turn, BUTELCOs functions had been expanded to include the operation of telephone systems for government offices for purposes of augmenting inadequate private communications services. BUTELCO was rebuffed by the appellate court in this wise: Read in its entirety, the Integrated Reorganization Plan of 1972 is expressive of the indispensable need for investigation

and negotiation to determine the actual and real conditions of local telephone facilities under private ownership a proviso explicitly contained in Executive Order No. 94, without [sic] which, the announced policy of allowing private enterprise to flourish would be set to naught. This clearly negates the contention that Executive Order No. 94 was repealed, hence, the non-compliance therewith would be fatal and the installation and operation of telephone system by the Bureau of Telecommunications in Malolos, Bulacan was illegal at its inception which cannot [be] corrected by subsequent legislation or judicial approbation.*7+ Hence this petition which assails the aforecited decision on the following grounds: I THE INTERMEDIATE APPELLATE COURT ERRED IN RULING THAT THE INTEGRATED REORGANIZATION PLAN DOES NOT REPEAL AND/OR MODIFY SECTION 79 (b), EXECUTIVE ORDER NO. 94, SERIES OF 1947, INSOFAR AS THE FUNCTIONS OF BUREAU OF TELECOMMUNICATIONS ARE CONCERNED, WHICH RULING IS COMPLETELY OPPOSED TO A PRIOR DECISION OF SAME RESPONDENT COURT IN A CASE INVOLVING THE SAME PARTIES, SAME ISSUES, AND THE SAME SUBJECT MATTER. II

COROLLARY TO THE ABOVE ERROR, RESPONDENT COURT ERRED: A. IN HOLDING THAT UNDER THE INTEGRATED REORGANIZATION PLAN, THE BUREAU OF TELECOMMUNICATIONS IS NOT AUTHORIZED TO PROVIDE TELECOMMUNICATIONS FACILITIES, INCLUDING TELEPHONE SYSTEMS, FOR GOVERNMENT OFFICES, IN AREAS WHERE THERE ARE [sic] EXISTING PRIVATE TELEPHONE SYSTEM, WITHOUT NEGOTIATING WITH THE PRESENT OWNER OR OPERATORS; B. IN HOLDING THAT THE INSTALLATION AND OPERATION OF THE TELEPHONE SYSTEM BY THE BUREAU OF TELECOMMUNICATIONS, WAS ILLEGAL; AND C. IN HOLDING THAT RETELCO HAS THE EXCLUSIVE RIGHT IN OPERATING AND MAINTAINING [A] TELEPHONE SYSTEM IN GOVERNMENT OFFICES IN MALOLOS, BULACAN.*8+ We grant the petition. We agree with petitioners that respondent RETELCO did not, even under Section 79 (b) of Executive Order No. 94, Series of 1947, have the exclusive right to operate and maintain a telephone system in Malolos, Bulacan.

RETELCOs foremost argument is that such operations and maintenance of the telephone system and solicitation of subscribers by [petitioners] constituted an unfair and ruinous competition to the detriment of [RETELCO which] is a grantee of both municipal and legislative franchises for the purpose. In effect, RETELCO pleads for protection from the courts on the assumption that its franchises vested in it an exclusive right as prior operator. There is no clear showing by RETELCO, however, that its franchises are of an exclusive character. Now, the cover headings on the rollo and the records of this case show that RETELCO is now Philippine Long Distance Telephone Company (PLDT), although nothing no document or allegation in the rollo and the records indicate how the substitution came to be. At any rate, it may very well be pointed out as well that neither did the franchise of PLDT at the time of the controversy confer exclusive rights upon PLDT in the operation of a telephone system[9]. In fact, we have made it a matter of judicial notice that all legislative franchises for the operation of a telephone system contain the following provision: It is expressly provided that in the event the Philippine Government should desire to maintain and operate for itself the system and enterprise herein authorized, the grantee shall surrender his franchise and will turn over to the Government said system and all serviceable equipment therein, at cost, less reasonable depreciation.*10+

BUTELCOs initiative to operate and maintain a telephone system in Malolos, Bulacan, was undertaken pursuant to Section 79 (b) of Executive Order No. 94, Series of 1947. Said provision vested in BUTELCO the following powers and duties, among others: x x x (b) To investigate, consolidate, negotiate for, operate and maintain wire-telephone or radio telephone communication service throughout the Philippines by utilizing such existing facilities in cities, towns, and provinces as may be found feasible and under such terms and conditions or arrangements with the present owners or operators thereof as may be agreed upon to the satisfaction of all concerned x x x. While we affirmed in the case of Republic v. PLDT[11], that *t+he Bureau of Telecommunications, under section 79 (b) of Executive Order No. 94, may operate and maintain wire telephone or radio telephone communications throughout the Philippines by utilizing existing facilities in cities, towns, and provinces under such terms and conditions or arrangement with present owners or operators as may be agreed upon to the satisfaction of all concerned,*12+ we also at the same time clarified that nothing in these provisions

limits the Bureau to non-commercial activities or prevents it from serving the general public.*13+ x x x It may be that in its original prospectuses the Bureau officials had stated that the service would be limited to government offices; but such limitations could not block future expansion of the system, as authorized by the terms of the Executive Order, nor could the officials of the Bureau bind the Government not to engage in services that are authorized by law.*14+ In other words, BUTELCO cannot be said to be prohibited under the aforecited legal provision from operating and maintaining its own telephone system in Malolos, Bulacan. Now in the subsequent case of Director of the Bureau of Telecommunications v. Aligaen, we emphasized the relevance of the latter portion of Section 79 (b) of Executive Order No. 94 as providing a caveat to any initiative on the part of the government to operate and maintain a telephone system in an area where there is an existing franchise holder. In the said case of Aligaen, we foregrounded the need for BUTELCO to first enter into negotiation or arrangement with the operator or owner of the existing telephone system. We had stated, thus: x x x The Bureau of Telecommunications may take steps to improve the telephone service in any locality in the

Philippines, but in so doing it must first enter into negotiation or arrangement with the operator or owner of the existing telephone system. x x x When a private person or entity is granted a legislative franchise to operate a telephone system, or any public utility for that matter the government has the correlative obligation to afford the grantee of the franchise all the chances or opportunity to operate profitably, as long as public convenience is properly served rather than promote a competition with the grantee. x x x*15+ This is not to say, however, that the lack of prior negotiation with the existing telephone system operator renders illegal the operation by BUTELCO of a telephone system. After all, the very provision in question phrases the prior negotiation requirement in less than mandatory terms. Section 79 (b) of Executive Order No. 94, Series of 1947 provides: (b) To x x x negotiate for, operate and maintain wiretelephone or radio telecommunications service throughout the Philippines by utilizing such existing facilities in cities, towns, and provinces as may be found feasible and under such terms and conditions or arrangements with the present owners or operators thereof as may be agreed upon to the satisfaction of all concerned *emphasis supplied+. The right of the prior operator under the aforecited provision is to be unfailingly and seriously considered in case it chooses to propose arrangements or such terms and conditions

whereby BUTELCO is to coordinate its efforts to set up and operate a telephone system with the existing operator. BUTELCO, in that case, would be obligated to exercise good faith and exert optimal cooperative efforts so that it may save government some money and prevent competition by utilizing existing facilities in cities, towns and provinces x x x [of] the present owners or operators, as mandated by Section 79 (b) of Executive Order No. 94. In the case at bench, BUTELCO admittedly did not fulfill this obligation. Such failure, however, is not violative of any mandatory provision of law. There was no violation of Section 79 (b) of Executive Order No. 94 but only an irregularity in the procedure by which BUTELCO undertook the operation of a telephone system in Malolos, Bulacan. It cannot be denied that, even if prior negotiations were undertaken by BUTELCO with RETELCO, and they both could not agree on mutually acceptable terms and conditions, nothing in Section 79 (b) of Executive Order No. 94 prohibits BUTELCO from proceeding with the setting up and operation of a telephone system in Malolos, Bulacan, despite the presence of a prior operator in the person of RETELCO. Thus, any injunction prohibiting BUTELCO from operating its telephone system finds no sufficiently legal and just basis under Section 79 (b) of Executive Order No. 94. To read from Section 79 (b) of Executive Order No. 94 an ultra-protectionist policy in favor of telephone franchise

holders, smacks of a promotion of the monopolization of the countrys telephone industry which, undeniably, has contributed to the slackened pace of national development. As we have pointed out in the case of PLDT v. National Telecommunications Commission[16]: Free competition in the industry may also provide the answer to a much-desired improvement in the quality and delivery of this type of public utility, to improved technology, fast and handly mobil service, and reduced user dissatisfaction. After all, neither PLDT nor any other public utility has a constitutional right to a monopoly position in view of the Constitutional proscription that no franchise certificate or authorization shall be exclusive in character or shall last longer than fifty (50) years (ibid., Section 11; Article XIV, Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution).*17+ In the light of the above ruling, necessary no longer is it to discuss the other assigned errors of petitioner. WHEREFORE, the petition is HEREBY GRANTED. The decision of respondent Court of Appeals is hereby reversed and set aside. The questioned writ of preliminary injunction made permanent by respondent Court of First Instance (now the Regional Trial Court) in its judgment, dated January 6, 1975, is hereby dissolved for having been issued without legal basis.

No pronouncement as to costs. SO ORDERED. Padilla, (Chairman), Bellosillo, Vitug, and Kapunan, JJ., concur. [1] In CA-G.R. CV No. 59004, dated May 18, 1983, penned by Associate Justice Floreliana Castro-Bartolome and concurred in by Associate Justices B.S. de la Fuente and Mariano A. Zosa, Rollo, pp. 38-46. [2] Third Civil Cases Division. [3] Civil Case No. 4183-M filed on May 17, 1972. [4] Branch VI, Bulacan. [5] Decision in CA-G.R. CV No. 59004, pp. 3-5, Rollo, pp. 38-40. [6] Id., pp. 1-2, Rollo, pp. 36-37. [7] Id., p. 9, Rollo, p. 46. [8] Petition dated September 19, 1983, pp. 14-15, Rollo, pp. 20-21. [9] PLDT v. City of Davao, 15 SCRA 75, 82 (1965).

[10] Director of the Bureau of Telecommunications v. Aligaen, 33 SCRA 368, 384. [11] 26 SCRA 620 (1969). [12] Id., p. 628. [13] Id., p. 630. [14] Id., pp. 630-631. [15] Director of the Bureau of Telecommunications v. Aligaen, 33 SCRA 368, 383-884 (1970). [16] 190 SCRA 717 (1990). [17] Id., p. 737. 3. When taking is not compensable Carlos superdrug vs dswd

lawphil Today is Saturday, November 17, 2012 Republic of the Philippines

SUPREME COURT Manila EN BANC G.R. No. 86953 November 6, 1990 MARINE RADIO COMMUNICATIONS ASSOCIATION OF THE PHILIPPINES, INC. (MARCAPI), ROBERTO GAYA, DAVID ZAFRA and SEGUNDO P. LUSTRE, JR., petitioners, vs. HON. RAINERIO O. REYES, in his capacity as Secretary of the Department of Transportation and Communications (DOTC), HON. JOSE LUIS ALCUAZ, as Commissioner of the National Telecommunications Commission (NTC), and HON. ROSAURO SIBAL, as Chief of the Telecommunications Office (TELOF) of DOTC, respondents. F. Reyes Cabigao for petitioners.

SARMIENTO, J.: The petitioners are self-described "Filipino enterpreneurs deeply involved in the business of marine radio communications in the country. 1 They are also operators of "shore-to-ship and ship-to-shore public marine coastal radio

stations, 2 and are holders of certificates of public convenience duly issued by the National Telecommunications Commission. Among other things, they handle correspondence between vessel passengers or crew and the public. 3 Sometime in July, 1988, the Department of Transportation and Communications unveiled an P880-million maritime coastal communications system project, designed to "ensure safety of lives at sea (SOLAS) through the establishment of efficient communication facilities between coast stations and ship stations and the improvement of safety in navigational routes at sea." 4 It was set out to provide, among other things, ship-to- shore and shore-to-ship public corresponding, free of charge. 5 On August 1, 1988, Atty. F. Reyes Cabigao, in his capacity as counsel for the petitioner, Marine Radio Communications Association of the Philippines, Inc., addressed an appeal to then Secretary Rainerio Reyes, in the tenor as follows: xxx xxx xxx But you undoubtedly would understand their fears. It was their feeling that entry of the government into their line of business would certainly spell for them financial ruin as it would put into serious doubt the viability of the entire marine radio communications industry. They say that, as it is today,

the industry is not viable enough. What more, they ask, if the government steps in and eventually dips its strong fingers into the pie? 6 xxx xxx xxx On August 17, 1988, the Secretary forwarded a reply, denying Atty. Cabigao's request, for the following reasons: xxx xxx xxx MARCAPI's main business concern is public correspondence. This means that MARCAPI handles only correspondence between passengers or crew on board ship and their respective offices or residences. On the other hand, the Maritime Coastal Communications System Project to be implemented by 1989 will offer services in watch and distress signal, medical and meteorological services, port services, and public correspondence, in their order of priority. You will note that public correspondence is only fourth in the order of priority of services to be offered by the present maritime project. Primarily, it will offer distress and safety communications service which is obligatory in the maritime mobile service. This consists of monitoring by coast stations of distress signal from ships in trouble and relaying the messages to the Philippine Coast Guard which will undertake the search and rescue operations. It also includes safety

communication which refers to weather broadcast and typhoon signals that will be broadcast by the coast stations regularly. These services are offered to the public for free. It is worth noting, as it is significant, that the confidence of the public in the competence of private firms to carry out the aforecited objectives has already been eroded. After that tragic incident of the sinking of MV Dona Paz, the National Telecommunications Commission and MARINA conducted constant monitoring by sending distress signals. Out of 1,000 licensed private operators only one (1) responded to the signal. 7 On February 20, 1989, the petitioners brought the instant suit, alleging, in essence, that Secretary Rainerio Reyes had been guilty of a grave abuse of discretion. On June 7, 1990, the Court issued a Resolution, in view of the departure of Secretary Rainerio Reyes, requiring the present incumbent, Secretary Oscar Orbos, to inform the Court whether or not the Department is adopting the action of Secretary Reyes. On August 16, 1990, Assistant Secretary Wilfredo Trinidad informed us that Secretary Orbos is adopting the action complained of. The petitioners hold that the Department can not compete in the business of public correspondence, and rely on the

provisions of Section 20, of Article II, of the Constitution, which states: Sec. 20. The State recognizes the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed investments. The Solicitor General, on the other hand, submits that in spite of the above provision, the Government "cannot abandon its ministerial functions of rendering public services to the citizenry which private capital would not ordinarily undertake, or which by its very nature is better equipped to administer for the public welfare than by any private individual or entity. 8 There is no merit in this petition. The duty of the State is preeminently "to serve . . . the people, 9 and so also, to "promote a just and dynamic social order . . . through policies that provide adequate social services. . . . and an improved quality of life for all. 10 The objectives of government, as expressed in the Charter, are, among other things, "a more equitable distribution of opportunities, income, and wealth . . . [and] a sustained increase in the amount of goods and services produced by the nation for the benefit of the people . . . " 11 With respect in particular to property, the Constitution decrees:

Sec. 6. The use of property bears a social function, and all economic agents shall contribute to the common good. Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice and to intervene when the common good so demands. 12 There can hardly be any valid argument against providing for public corresponding, free of charge. It is compatible with State aims to serve the people under the Constitution, and certainly, amid these hard times, the State can do no less. The petitioners can not legitimately rely on the provisions of Section 20, of Article II, of the Constitution, to defeat the act complained of. The mandate "recogni[zing] the indispensable role of the private sector" is no more than an acknowledgment of the importance of private initiative in building the nation. However, it is not a call for official abdication of duty to citizenry. The novel provisions of the Charter sector participation, especially in the activity, 13 come, indeed, no more as monopoly of economic forces which individual initiative from the economic prescribing private field of economic responses to State has unfairly kept processes and has

held back competitiveness in the market. The Constitution does not bar, however, the Government from undertaking its own initiatives, especially in the domain of public service, and neither does it repudiate its primacy as chief economic caretaker of the nation. The principle of laissez faire has long been denied validity in this jurisdiction. In 1969, the Court promulgated Agricultural Credit and Cooperative Financing Administration v. Confederation of Unions in Government Corporations and offices, 14 where it was held: xxx xxx xxx ... The areas which used to be left to private enterprise and initiative and which the government was called upon to enter optionally and only because it was better equipped to administer for the public welfare than in any private individual or group of individuals," continue to lose their welldefined boundaries and to be absorbed within activities that the government must undertake in its sovereign capacity if it is to meet the increasing social challenges of the times. Here as almost everywhere else the tendency is undoubtedly towards a greater socialization of economic forces. Here of course this development was envisioned, indeed adopted as a national policy, by the Constitution itself in its declaration of principle concerning the promotion of social justice. 15

The requirements of social justice and the necessity for a redistribution of the national wealth and economic opportunity find in fact a greater emphasis in the 1987 Constitution, notwithstanding the novel concepts inscribed there. 16 And two decades after this Court wrote it, ACCFAs message remains the same and its lesson holds true as ever. The Court is not of the thinking that the act complained of is equivalent to a taking without just compensation. Albeit we have held that "[w]here the owner is deprived of the ordinary and beneficial use of his property or of its value by its being diverted to public use, there is taking within the constitutional sense, 17 it does not seem to us that the Department of Transportation and Communication, by providing for free public correspondence, is guilty of an uncompensated taking. Rather, the Government merely built a bridge that made the boat obsolete, although not entirely useless. Certainly, the owner of the boat can not charge the builder of the bridge for lost income. And certainly, the Government has all the right to build the bridge. WHEREFORE, the petition is DISMISSED. No costs. SO ORDERED. Fernan, C.J., Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Bidin, Cortes, Grio-Aquino, Medialdea and Regalado, JJ., concur.

Padilla, J., took no part Feliciano, J., is on leave.

Footnotes 1 Rollo, 5. 2 Id., 6. 3 Id., 13. 4 Id., 55. 5 Id 61. 6 Id., 56. 7 Id., 61. 8 Id., 78-79. 9 CONST art. II, sec. 4. 10 Supra, sec. 9.

11 Supra, art. XII, sec. 1. 12 Supra, sec. 6. 13 See supra, art. XII, sec. 1; sec. 20. 14 Nos. L-21484 and 23605, November 29, 1969,30 SCRA 649. 15 Supra, 662. 16 See CONST., art. 11, supra, art XII, supra, art. XIII. 17 Municipality of La Carlota v. National Waterworks and Sewerage Authority, No. L-20232, September 30, 1964, 12 SCRA 165,167. The Lawphil Project - Arellano Law Foundation

D. Public Use

lawphil Today is Saturday, November 17, 2012

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-48685 September 30, 1987 LORENZO SUMULONG and EMILIA VIDANES-BALAOING, petitioners, vs. HON. BUENAVENTURA GUERRERO and NATIONAL HOUSING AUTHORITY, respondents.

CORTES, J.: On December 5, 1977 the National Housing Authority (NIIA) filed a complaint for expropriation of parcels of land covering approximately twenty five (25) hectares, (in Antipolo, Rizal) including the lots of petitioners Lorenzo Sumulong and Emilia Vidanes-Balaoing with an area of 6,667 square meters and 3,333 square meters respectively. The land sought to be expropriated were valued by the NHA at one peso (P1.00) per square meter adopting the market value fixed by the provincial assessor in accordance with presidential decrees prescribing the valuation of property in expropriation proceedings.

Together with the complaint was a motion for immediate possession of the properties. The NHA deposited the amount of P158,980.00 with the Philippine National Bank, representing the "total market value" of the subject twenty five hectares of land, pursuant to Presidential Decree No. 1224 which defines "the policy on the expropriation of private property for socialized housing upon payment of just compensation." On January 17, 1978, respondent Judge issued the following Order: Plaintiff having deposited with the Philippine National Bank, Heart Center Extension Office, Diliman, Quezon City, Metro Manila, the amount of P158,980.00 representing the total market value of the subject parcels of land, let a writ of possession be issued. SO ORDERED. Pasig, Metro Manila, January 17, 1978. (SGD) BUENAVENTURA S. GUERRERO Judge

Petitioners filed a motion for reconsideration on the ground that they had been deprived of the possession of their property without due process of law. This was however, denied. Hence, this petition challenging the orders of respondent Judge and assailing the constitutionality of Pres. Decree No. 1224, as amended. Petitioners argue that: 1) Respondent Judge acted without or in excess of his jurisdiction or with grave abuse of discretion by issuing the Order of January 17, 1978 without notice and without hearing and in issuing the Order dated June 28, 1978 denying the motion for reconsideration. 2) Pres. Decree l224, as amended, is unconstitutional for being violative of the due process clause, specifically: a) The Decree would allow the taking of property regardless of size and no matter how small the area to be expropriated; b) "Socialized housing" for the purpose of condemnation proceeding, as defined in said Decree, is not really for a public purpose; c) The Decree violates procedural due process as it allows immediate taking of possession, control and disposition of property without giving the owner his day in court;

d) The Decree would allow the taking of private property upon payment of unjust and unfair valuations arbitrarily fixed by government assessors; e) The Decree would deprive the courts of their judicial discretion to determine what would be the "just compensation" in each and every raise of expropriation. Indeed, the exercise of the power of eminent domain is subject to certain limitations imposed by the constitution, to wit: Private property shall not be taken for public use without just compensation (Art. IV, Sec. 9); No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws (Art. IV, sec. 1). Nevertheless, a clear case of constitutional infirmity has to be established for this Court to nullify legislative or executive measures adopted to implement specific constitutional provisions aimed at promoting the general welfare. Petitioners' objections to the taking of their property subsumed under the headings of public use, just compensation, and due process have to be balanced against competing interests of the public recognized and sought to be served under

declared policies of the constitution as implemented by legislation. 1. Public use a) Socialized Housing Petitioners contend that "socialized housing" as defined in Pres. Decree No. 1224, as amended, for the purpose of condemnation proceedings is not "public use" since it will benefit only "a handful of people, bereft of public character." "Socialized housing" is defined as, "the construction of dwelling units for the middle and lower class members of our society, including the construction of the supporting infrastructure and other facilities" (Pres. Decree No. 1224, par. 1). This definition was later expanded to include among others: a) The construction and/or improvement of dwelling units for the middle and lower income groups of the society, including the construction of the supporting infrastructure and other facilities; b) Slum clearance, relocation and resettlement of squatters and slum dwellers as well as the provision of related facilities and services; c) Slum improvement which consists basically of allocating homelots to the dwellers in the area or property involved,

rearrangemeant and re-alignment of existing houses and other dwelling structures and the construction and provision of basic community facilities and services, where there are none, such as roads, footpaths, drainage, sewerage, water and power system schools, barangay centers, community centers, clinics, open spaces, parks, playgrounds and other recreational facilities; d) The provision of economic opportunities, including the development of commercial and industrial estates and such other facilities to enhance the total community growth; and e) Such other activities undertaken in pursuance of the objective to provide and maintain housing for the greatest number of people under Presidential Decree No, 757, (Pres. Decree No. 1259, sec. 1) The "public use" requirement for a and exercise of the power of eminent domain is a flexible and evolving concept influenced by changing conditions. In this jurisdiction, the statutory and judicial trend has been summarized as follows: The taking to be valid must be for public use. There was a time when it was felt that a literal meaning should be attached to such a requirement. Whatever project is undertaken must be for the public to enjoy, as in the case of streets or parks. Otherwise, expropriation is not allowable. It is not anymore. As long as the purpose of the taking is public, then the power of eminent domain comes into play. As just noted, the constitution in at

least two cases, to remove any doubt, determines what is public use. One is the expropriation of lands to be subdivided into small lots for resale at cost to individuals. The other is in the transfer, through the exercise of this power, of utilities and other private enterprise to the government. It is accurate to state then that at present whatever may be beneficially employed for the general welfare satisfies the requirement of public use [Heirs of Juancho Ardona v. Reyes, G.R. Nos. 60549, 60553-60555 October 26, 1983, 125 SCRA 220 (1983) at 234-5 quoting E. FERNANDO, THE CONSTITUTION OF THE PHILIPPINES 523-4, (2nd ed., 1977) Emphasis supplied]. The term "public use" has acquired a more comprehensive coverage. To the literal import of the term signifying strict use or employment by the public has been added the broader notion of indirect public benefit or advantage. As discussed in the above cited case of Heirs of Juancho Ardona: The restrictive view of public use may be appropriate for a nation which circumscribes the scope of government activities and public concerns and which possesses big and correctly located public lands that obviate the need to take private property for public purposes. Neither circumstance applies to the Philippines. We have never been a laissez faire State. And the necessities which impel the exertion of sovereign power are all too often found in areas of scarce public land or limited government resources. (p. 231)

Specifically, urban renewal or redevelopment and the construction of low-cost housing is recognized as a public purpose, not only because of the expanded concept of public use but also because of specific provisions in the Constitution. The 1973 Constitution made it incumbent upon the State to establish, maintain and ensure adequate social services including housing [Art. 11, sec. 7]. The 1987 Constitution goes even further by providing that: The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living and an improved quality of life for all. [Art. II, sec. 9] The state shall by law, and for the common good, undertake, in cooperation with the private sector, a continuing program of urban land reform and housing which will make available at affordable cost decent housing and basic services to underprivileged and homeless citizens in urban centers and resettlement areas. It shall also promote adequate employment opportunities to such citizens. In the implementation of such program the State shall respect the rights of small property owners. (Art. XIII, sec. 9, Emphaisis supplied) Housing is a basic human need. Shortage in housing is a matter of state concern since it directly and significantly affects

public health, safety, the environment and in sum, the general welfare. The public character of housing measures does not change because units in housing projects cannot be occupied by all but only by those who satisfy prescribed qualifications. A beginning has to be made, for it is not possible to provide housing for are who need it, all at once. Population growth, the migration to urban areas and the mushrooming of crowded makeshift dwellings is a worldwide development particularly in developing countries. So basic and urgent are housing problems that the United Nations General Assembly proclaimed 1987 as the "International Year of Shelter for the Homeless" "to focus the attention of the international community on those problems". The General Assembly is Seriously concerned that, despite the efforts of Governments at the national and local levels and of international organizations, the driving conditions of the majority of the people in slums and squatter areas and rural settlements, especially in developing countries, continue to deteriorate in both relative and absolute terms." [G.A. Res. 37/221, Yearbook of the United Nations 1982, Vol. 36, p. 1043-4] In the light of the foregoing, this Court is satisfied that "socialized housing" fans within the confines of "public use". It is, particularly important to draw attention to paragraph (d) of Pres. Dec. No. 1224 which opportunities inextricably linked with low-cost housing, or slum clearance, relocation and

resettlement, or slum improvement emphasize the public purpose of the project. In the case at bar, the use to which it is proposed to put the subject parcels of land meets the requisites of "public use". The lands in question are being expropriated by the NHA for the expansion of Bagong Nayon Housing Project to provide housing facilities to low-salaried government employees. Quoting respondents: 1. The Bagong Nayong Project is a housing and community development undertaking of the National Housing Authority. Phase I covers about 60 hectares of GSIS property in Antipolo, Rizal; Phase II includes about 30 hectares for industrial development and the rest are for residential housing development. It is intended for low-salaried government employees and aims to provide housing and community services for about 2,000 families in Phase I and about 4,000 families in Phase II. It is situated on rugged terrain 7.5 kms. from Marikina Town proper; 22 Kms. east of Manila; and is within the Lungs Silangan Townsite Reservation (created by Presidential Proclamation No. 1637 on April 18, 1977). The lands involved in the present petitions are parts of the expanded/additional areas for the Bagong Nayon Project

totalling 25.9725 hectares. They likewise include raw, rolling hills. (Rollo, pp. 266-7) The acute shortage of housing units in the country is of public knowledge. Official data indicate that more than one third of the households nationwide do not own their dwelling places. A significant number live in dwellings of unacceptable standards, such as shanties, natural shelters, and structures intended for commercial, industrial, or agricultural purposes. Of these unacceptable dwelling units, more than one third is located within the National Capital Region (NCR) alone which lies proximate to and is expected to be the most benefited by the housing project involved in the case at bar [See, National Census and Statistics Office, 1980 Census of Population and Housing]. According to the National Economic and Development Authority at the time of the expropriation in question, about "50 per cent of urban families, cannot afford adequate shelter even at reduced rates and will need government support to provide them with social housing, subsidized either partially or totally" [NEDA, FOUR YEAR DEVELOPMENT PLAN For 1974-1977, p. 357]. Up to the present, housing some remains to be out of the reach of a sizable proportion of the population" [NEDA, MEDIUMTERM PHILIPPINE DEVELOPMENT PLAN 1987-1992, p. 240]. The mushrooming of squatter colonies in the Metropolitan Manila area as well as in other cities and centers of population throughout the country, and, the efforts of the government to

initiate housing and other projects are matters of public knowledge [See NEDA, FOUR YEAR DEVELOPMENT PLAN For 1974-1977, pp. 357-361; NEDA, FIVE-YEAR PHILIPPINE DEVELOPMENT PLAN 1978-1982, pp. 215-228 NEDA, FIVE YEAR PHILIPPINE DEVELOPMENT PLAN 1983-1987, pp. 109-117; NEDA, MEDIUM TERM PHILIPPINE DEVELOPMENT PLAN 1987-1992, pp. 240-254]. b) Size of Property Petitioners further contend that Pres. Decree 1224, as amended, would allow the taking of "any private land" regardless of the size and no matter how small the area of the land to be expropriated. Petitioners claim that "there are vast areas of lands in Mayamot, Cupang, and San Isidro, Antipolo, Rizal hundred of hectares of which are owned by a few landowners only. It is surprising [therefore] why respondent National Housing Authority [would] include [their] two man lots ..." In J.M. Tuason Co., Inc. vs. Land Tenure Administration [G. R. No. L-21064, February 18, 1970, 31 SCRA 413 (1970) at 428] this Court earlier ruled that expropriation is not confined to landed estates. This Court, quoting the dissenting opinion of Justice J.B.L. Reyes in Republic vs. Baylosis, [96 Phil. 461 (1955)], held that:

The propriety of exercising the power of eminent domain under Article XIII, section 4 of our Constitution cannot be determined on a purely quantitative or area basis. Not only does the constitutional provision speak of lands instead of landed estates, but I see no cogent reason why the government, in its quest for social justice and peace, should exclusively devote attention to conflicts of large proportions, involving a considerable number of individuals, and eschew small controversies and wait until they grow into a major problem before taking remedial action. The said case of J.M. Tuason Co., Inc. departed from the ruling in Guido vs. Rural Progress Administration [84 Phil. 847 (1949)] which held that the test to be applied for a valid expropriation of private lands was the area of the land and not the number of people who stood to be benefited. Since then "there has evolved a clear pattern of adherence to the "number of people to be benefited test" " [Mataas na Lupa Tenants Association, Inc. v. Dimayuga, G.R. No. 32049, June 25,1984, 130 SCRA 30 (1984) at 39]. Thus, in Pulido vs. Court of Appeals [G.R. No. 57625, May 3, 1983, 122 SCRA 63 (1983) at 73], this Court stated that, "[i]t is unfortunate that the petitioner would be deprived of his landholdings, but his interest and that of his family should not stand in the way of progress and the benefit of the greater may only of the inhabitants of the country." The State acting through the NHA is vested with broad discretion to designate the particular property/properties to be

taken for socialized housing purposes and how much thereof may be expropriated. Absent a clear showing of fraud, bad faith, or gross abuse of discretion, which petitioners herein failed to demonstrate, the Court will give due weight to and leave undisturbed the NHA's choice and the size of the site for the project. The property owner may not interpose objections merely because in their judgment some other property would have been more suitable, or just as suitable, for the purpose. The right to the use, enjoyment and disposal of private property is tempered by and has to yield to the demands of the common good. The Constitutional provisions on the subject are clear: The State shall promote social justice in all phases of national development. (Art. II, sec. 10) The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good. To this end, the State shall regulate the acquisition, ownership, use and disposition of property and its increments. (Art, XIII, sec. 1) Indeed, the foregoing provisions, which are restatements of the provisions in the 1935 and 1973 Constitutions, emphasize: ...the stewardship concept, under which private property is supposed to be held by the individual only as a trustee for the

people in general, who are its real owners. As a mere steward, the individual must exercise his rights to the property not for his own exclusive and selfish benefit but for the good of the entire community or nation [Mataas na Lupa Tenants Association, Inc. supra at 42-3 citing I. CRUZ, PHILIPPINE POLITICAL LAW, 70 (1983 ed.)]. 2. Just Compensation Petitioners maintain that Pres. Decree No. 1224, as amended, would allow the taking of private property upon payment of unjust and unfair valuations arbitrarily fixed by government assessors. In addition, they assert that the Decree would deprive the courts of their judicial discretion to determine what would be "just compensation". The foregoing contentions have already been ruled upon by this Court in the case of Ignacio vs. Guerrero (G.R. No. L-49088, May 29, 1987) which, incidentally, arose from the same expropriation complaint that led to this instant petition. The provisions on just compensation found in Presidential Decree Nos. 1224, 1259 and 1313 are the same provisions found in Presidential Decree Nos. 76, 464, 794 and 1533 which were declared unconstitutional in Export Processing Zone All thirty vs. Dulay (G.R. No. 5960 April 29, 1987) for being encroachments on prerogatives.

This Court abandoned the ruling in National Housing Authority vs. Reyes [G.R. No. 49439, June 29,1983, 123 SCRA 245 (1983)] which upheld Pres. Decree No. 464, as amended by - Presidential Decree Nos. 794, 1224 and 1259. In said case of Export Processing Zone Authority, this Court pointed out that: The basic unfairness of the decrees is readily apparent. Just compensation means the value of the property at the time of the taking. It means a fair and full equivalent for the loss sustained. ALL the facts as to the condition of the property and its surroundings, its improvements and capabilities, should be considered. xxx xxx xxx Various factors can come into play in the valuation of specific properties singled out for expropriation. The values given by provincial assessors are usually uniform for very wide areas covering several barrios or even an entire total with the exception of the poblacion. Individual differences are never taken into account. The value of land is based on such generalities as its possible cultivation for rice, corn, coconuts, or other crops. Very often land described as directional has been cultivated for generations. Buildings are described in terms of only two or three classes of building materials and estimates of

areas are more often inaccurate than correct. Tax values can serve as guides but cannot be absolute substitutes for just compensation. To say that the owners are estopped to question the valuations made by assessors since they had the opportunity to protest is illusory. The overwhelming mass of landowners accept unquestioningly what is found in the tax declarations prepared by local assessors or municipal clerks for them. They do not even look at, much less analyze, the statements. The Idea of expropriation simply never occurs until a demand is made or a case filed by an agency authorized to do so. (pp. 12-3) 3. Due Process Petitioners assert that Pres. Decree 1224, as amended, violates procedural due process as it allows immediate taking of possession, control and disposition of property without giving the owner his day in court. Respondent Judge ordered the issuance of a writ of possession without notice and without hearing. The constitutionality of this procedure has also been ruled upon in the Export Processing Zone Authority case, viz: It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong. And it is repulsive to basic concepts of justice

and fairness to allow the haphazard work of minor bureaucrat or clerk to absolutely prevail over the judgment of a court promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been presented, and after all factors and considerations essential to a fair and just determination have been judiciously evaluated. (p. 13) On the matter of the issuance of a writ of possession, the ruling in the Ignacio case is reiterated, thus: [I]t is imperative that before a writ of possession is issued by the Court in expropriation proceedings, the following requisites must be met: (1) There must be a Complaint for expropriation sufficient in form and in substance; (2) A provisional determination of just compensation for the properties sought to be expropriated must be made by the trial court on the basis of judicial (not legislative or executive) discretion; and (3) The deposit requirement under Section 2, Rule 67 must be complied with. (p. 14) This Court holds that "socialized housing" defined in Pres. Decree No. 1224, as amended by Pres. Decree Nos. 1259 and 1313, constitutes "public use" for purposes of expropriation. However, as previously held by this Court, the provisions of such decrees on just compensation are unconstitutional; and in the instant case the Court finds that the Orders issued pursuant to

the corollary provisions of those decrees authorizing immediate taking without notice and hearing are violative of due process. WHEREFORE, the Orders of the lower court dated January 17, 1978 and June 28, 1978 issuing the writ of possession on the basis of the market value appearing therein are annulled for having been issued in excess of jurisdiction. Let this case be remanded to the court of origin for further proceedings to determine the compensation the petitioners are entitled to be paid. No costs. SO ORDERED. Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin and Sarmiento, JJ., concur. The Lawphil Project - Arellano Law Foundation

SECOND DIVISION

LOURDES DE LA PAZ MASIKIP,

Petitioner,

- versus -

THE CITY OF PASIG, HON. MARIETTA A. LEGASPI, in her capacity as Presiding Judge of the Regional Trial Court of Pasig City, Branch 165 and THE COURT OF APPEALS, Respondents.

G.R. No. 136349

Present:

Puno, J., Chairman, Sandoval-Gutierrez, Corona, AZCUNA, and GARCIA, JJ.

Promulgated:

January 23, 2006 x----------------------------------------------------------------------------------------x

DECISION

SANDOVAL GUTIERREZ, J.:

Where the taking by the State of private property is done for the benefit of a small community which seeks to have its own sports and recreational facility, notwithstanding that there is such a recreational facility only a short distance away, such

taking cannot be considered to be for public use. Its expropriation is not valid. In this case, the Court defines what constitutes a genuine necessity for public use.

This petition for review on certiorari assails the Decision[1] of the Court of Appeals dated October 31, 1997 in CA-G.R. SP No. 41860 affirming the Order[2] of the Regional Trial Court, Branch 165, Pasig City, dated May 7, 1996 in S.C.A. No. 873. Likewise assailed is the Resolution[3] of the same court dated November 20, 1998 denying petitioners Motion for Reconsideration.

The facts of the case are:

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

In a letter dated January 6, 1994, the then Municipality of Pasig, now City of Pasig, respondent, notified petitioner of its intention to expropriate a 1,500 square meter portion of her

property to be used for the sports development and recreational activities of the residents of Barangay Caniogan. This was pursuant to Ordinance No. 42, Series of 1993 enacted by the then Sangguniang Bayan of Pasig.

Again, on March 23, 1994, respondent wrote another letter to petitioner, but this time the purpose was allegedly in line with the program of the Municipal Government to provide land opportunities to deserving poor sectors of our community.

On May 2, 1994, petitioner sent a reply to respondent stating that the intended expropriation of her property is unconstitutional, invalid, and oppressive, as the area of her lot is neither sufficient nor suitable to provide land opportunities to deserving poor sectors of our community.

In its letter of December 20, 1994, respondent reiterated that the purpose of the expropriation of petitioners property is to provide sports and recreational facilities to its poor residents.

Subsequently, on February 21, 1995, respondent filed with the trial court a complaint for expropriation, docketed as SCA No. 873. Respondent prayed that the trial court, after due notice and hearing, issue an order for the condemnation of the property; that commissioners be appointed for the purpose of determining the just compensation; and that judgment be rendered based on the report of the commissioners.

On April 25, 1995, petitioner filed a Motion to Dismiss the complaint on the following grounds:

I PLAINTIFF HAS NO CAUSE OF ACTION FOR THE EXERCISE OF THE POWER OF EMINENT DOMAIN, CONSIDERING THAT:

(A) THERE IS NO GENUINE NECESSITY FOR THE TAKING OF THE PROPERTY SOUGHT TO BE EXPROPRIATED.

(B) PLAINTIFF HAS ARBITRARILY AND CAPRICIOUSLY CHOSEN THE PROPERTY SOUGHT TO BE EXPROPRIATED.

(C) EVEN ASSUMING ARGUENDO THAT DEFENDANTS PROPERTY MAY BE EXPROPRIATED BY PLAINTIFF, THE FAIR MARKET VALUE OF THE PROPERTY TO BE EXPROPRIATED FAR EXCEEDS SEVENTY-EIGHT THOUSAND PESOS (P78,000.00)

II

PLAINTIFFS COMPLAINT IS DEFECTIVE SUBSTANCE, CONSIDERING THAT:

IN

FORM

AND

(A) PLAINTIFF FAILS TO ALLEGE WITH CERTAINTY THE PURPOSE OF THE EXPROPRIATION.

(B) PLAINTIFF HAS FAILED TO COMPLY WITH THE PREREQUISITES LAID DOWN IN SECTION 34, RULE VI OF THE RULES AND REGULATIONS IMPLEMENTING THE LOCAL GOVERNMENT CODE; THUS, THE INSTANT EXPROPRIATION PROCEEDING IS PREMATURE.

III

THE GRANTING OF THE EXPROPRIATION WOULD VIOLATE SECTION 261 (V) OF THE OMNIBUS ELECTION CODE.

IV

PLAINTIFF CANNOT TAKE POSSESSION OF THE SUBJECT PROPERTY BY MERELY DEPOSITING AN AMOUNT EQUAL TO

FIFTEEN PERCENT (15%) OF THE VALUE OF THE PROPERTY BASED ON THE CURRENT TAX DECLARATION OF THE SUBJECT PROPERTY.[4]

On May 7, 1996, the trial court issued an Order denying the Motion to Dismiss,[5] on the ground that there is a genuine necessity to expropriate the property for the sports and recreational activities of the residents of Pasig. As to the issue of just compensation, the trial court held that the same is to be determined in accordance with the Revised Rules of Court.

Petitioner filed a motion for reconsideration but it was denied by the trial court in its Order of July 31, 1996. Forthwith, it appointed the City Assessor and City Treasurer of Pasig City as commissioners to ascertain the just compensation. This prompted petitioner to file with the Court of Appeals a special civil action for certiorari, docketed as CA-G.R. SP No. 41860. On October 31, 1997, the Appellate Court dismissed the petition for lack of merit. Petitioners Motion for Reconsideration was denied in a Resolution dated November 20, 1998.

Hence, this petition anchored on the following grounds:

THE QUESTIONED DECISION DATED 31 OCTOBER 1997 (ATTACHMENT A) AND RESOLUTION DATED 20 NOVEMBER 1998 (ATTACHMENT B) ARE CONTRARY TO LAW, THE RULES OF COURT AND JURISPRUDENCE CONSIDERING THAT:

A. THERE IS NO EVIDENCE TO PROVE THAT THERE IS GENUINE NECESSITY FOR THE TAKING OF THE PETITIONERS PROPERTY.

B. THERE IS NO EVIDENCE TO PROVE THAT THE PUBLIC USE REQUIREMENT FOR THE EXERCISE OF THE POWER OF EMINENT DOMAIN HAS BEEN COMPLIED WITH.

C. THERE IS NO EVIDENCE TO PROVE THAT RESPONDENT CITY OF PASIG HAS COMPLIED WITH ALL CONDITIONS PRECEDENT FOR THE EXERCISE OF THE POWER OF EMINENT DOMAIN.

THE COURT A QUOS ORDER DATED 07 MAY 1996 AND 31 JULY 1996, WHICH WERE AFFIRMED BY THE COURT OF APPEALS, EFFECTIVELY AMOUNT TO THE TAKING OF PETITIONERS PROPERTY WITHOUT DUE PROCESS OF LAW:

II

THE COURT OF APPEALS GRAVELY ERRED IN APPLYING OF RULE ON ACTIONABLE DOCUMENTS TO THE DOCUMENTS ATTACHED TO RESPONDENT CITY OF PASIGS COMPLAINT DATED 07 APRIL 1995 TO JUSTIFY THE COURT A QUOS DENIAL OF PETITIONERS RESPONSIVE PLEADING TO THE COMPLAINT FOR EXPROPRIATION (THE MOTION TO DISMISS DATED 21 APRIL 1995).

III

THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE RULE ON HYPOTHETICAL ADMISSION OF FACTS ALLEGED IN A COMPLAINT CONSIDERING THAT THE MOTION TO DISMISS FILED BY PETITIONER IN THE EXPROPRIATION CASE BELOW WAS THE RESPONSIVE PLEADING REQUIRED TO BE FILED UNDER THE THEN RULE 67 OF THE RULES OF COURT AND NOT AN ORIDNARY MOTION TO DISMISS UNDER RULE 16 OF THE RULES OF COURT.

The foregoing arguments may be synthesized into two main issues one substantive and one procedural. We will first address the procedural issue.

Petitioner filed her Motion to Dismiss the complaint for expropriation on April 25, 1995. It was denied by the trial court on May 7, 1996. At that time, the rule on expropriation was

governed by Section 3, Rule 67 of the Revised Rules of Court which provides:

SEC. 3. Defenses and objections. Within the time specified in the summons, each defendant, in lieu of an answer, shall present in a single motion to dismiss or for other appropriate relief, all his objections and defenses to the right of the plaintiff to take his property for the use or purpose specified in the complaint. All such objections and defenses not so presented are waived. A copy of the motion shall be served on the plaintiffs attorney of record and filed with the court with proof of service.

The motion to dismiss contemplated in the above Rule clearly constitutes the responsive pleading which takes the place of an answer to the complaint for expropriation. Such motion is the pleading that puts in issue the right of the plaintiff to expropriate the defendants property for the use specified in the complaint. All that the law requires is that a copy of the said motion be served on plaintiffs attorney of record. It is the court that at its convenience will set the case for trial after the filing of the said pleading.[6]

The Court of Appeals therefore erred in holding that the motion to dismiss filed by petitioner hypothetically admitted the truth of the facts alleged in the complaint, specifically that there is a genuine necessity to expropriate petitioners property for public use. Pursuant to the above Rule, the motion is a responsive pleading joining the issues. What the trial court should have done was to set the case for the reception of evidence to determine whether there is indeed a genuine necessity for the taking of the property, instead of summarily making a finding that the taking is for public use and appointing commissioners to fix just compensation. This is especially so considering that the purpose of the expropriation was squarely challenged and put in issue by petitioner in her motion to dismiss.

Significantly, the above Rule allowing a defendant in an expropriation case to file a motion to dismiss in lieu of an answer was amended by the 1997 Rules of Civil Procedure, which took effect on July 1, 1997. Section 3, Rule 67 now expressly mandates that any objection or defense to the taking of the property of a defendant must be set forth in an answer.

The fact that the Court of Appeals rendered its Decision in CA-G.R. SP No. 41860 on October 31, after the 1997 Rules of Civil Procedure took effect, is of no moment. It is only fair that the Rule at the time petitioner filed her motion to dismiss should govern. The new provision cannot be applied retroactively to her prejudice.

We now proceed to address the substantive issue.

In the early case of US v. Toribio,[7] this Court defined the power of eminent domain as the right of a government to take and appropriate private property to public use, whenever the public exigency requires it, which can be done only on condition of providing a reasonable compensation therefor. It has also been described as the power of the State or its instrumentalities to take private property for public use and is inseparable from sovereignty and inherent in government.[8]

The power of eminent domain is lodged in the legislative branch of the government. It delegates the exercise thereof to local government units, other public entities and public utility

corporations,[9] subject only to Constitutional limitations. Local governments have no inherent power of eminent domain and may exercise it only when expressly authorized by statute.[10] Section 19 of the Local Government Code of 1991 (Republic Act No. 7160) prescribes the delegation by Congress of the power of eminent domain to local government units and lays down the parameters for its exercise, thus:

SEC. 19. Eminent Domain. A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, purpose or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided, however, That, the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner and such offer was not accepted: Provided, further, That, the local government unit may immediately take possession of the property upon the filing of expropriation proceedings and upon making a deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated: Provided, finally, That, the amount to be paid for expropriated property shall be determined by the proper court, based on the fair market value at the time of the taking of the property.

Judicial review of the exercise of eminent domain is limited to the following areas of concern: (a) the adequacy of the compensation, (b) the necessity of the taking, and (c) the public use character of the purpose of the taking.[11]

In this case, petitioner contends that respondent City of Pasig failed to establish a genuine necessity which justifies the condemnation of her property. While she does not dispute the intended public purpose, nonetheless, she insists that there must be a genuine necessity for the proposed use and purposes. According to petitioner, there is already an established sports development and recreational activity center at Rainforest Park in Pasig City, fully operational and being utilized by its residents, including those from Barangay Caniogan. Respondent does not dispute this. Evidently, there is no genuine necessity to justify the expropriation.

The right to take private property for public purposes necessarily originates from the necessity and the taking must be limited to such necessity. In City of Manila v. Chinese Community of Manila,[12] we held that the very foundation of the right to exercise eminent domain is a genuine necessity and

that necessity must be of a public character. Moreover, the ascertainment of the necessity must precede or accompany and not follow, the taking of the land. In City of Manila v. Arellano Law College,*13+ we ruled that necessity within the rule that the particular property to be expropriated must be necessary, does not mean an absolute but only a reasonable or practical necessity, such as would combine the greatest benefit to the public with the least inconvenience and expense to the condemning party and the property owner consistent with such benefit.

Applying this standard, we hold that respondent City of Pasig has failed to establish that there is a genuine necessity to expropriate petitioners property. Our scrutiny of the records shows that the Certification[14] issued by the Caniogan Barangay Council dated November 20, 1994, the basis for the passage of Ordinance No. 42 s. 1993 authorizing the expropriation, indicates that the intended beneficiary is the Melendres Compound Homeowners Association, a private, nonprofit organization, not the residents of Caniogan. It can be gleaned that the members of the said Association are desirous of having their own private playground and recreational facility. Petitioners lot is the nearest vacant space available. The purpose is, therefore, not clearly and categorically public. The necessity has not been shown, especially considering that there exists an alternative facility for sports development and

community recreation in the area, which is the Rainforest Park, available to all residents of Pasig City, including those of Caniogan.

The right to own and possess property is one of the most cherished rights of men. It is so fundamental that it has been written into organic law of every nation where the rule of law prevails. Unless the requisite of genuine necessity for the expropriation of ones property is clearly established, it shall be the duty of the courts to protect the rights of individuals to their private property. Important as the power of eminent domain may be, the inviolable sanctity which the Constitution attaches to the property of the individual requires not only that the purpose for the taking of private property be specified. The genuine necessity for the taking, which must be of a public character, must also be shown to exist.

WHEREFORE, the petition for review is GRANTED. The challenged Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 41860 are REVERSED. The complaint for expropriation filed before the trial court by respondent City of Pasig, docketed as SCA No. 873, is ordered DISMISSED.

SO ORDERED. ANGELINA SANDOVAL-GUTIERREZ Associate Justice

WE CONCUR:

REYNATO S. PUNO Associate Justice Chairperson

RENATO C. CORONA Associate Justice

ADOLFO S. AZCUNA Associate Justice

CANCIO C. GARCIA Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.

REYNATO S. PUNO Associate Justice Chairperson, Second Division

CERTIFICATION

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairman's Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

ARTEMIO V. PANGANIBAN Chief Justice

SECOND DIVISION

[G.R. No. 156273. October 15, 2003] HEIRS OF TIMOTEO MORENO and MARIA ROTEA, namely: ESPERANZA R. EDJEC, BERNARDA R. SUELA, RUBY C. ROTEA, BERNARDA R. ROTEA, ELIA R. VDA. DE LIMBAGA, VIRGINIA R. ARBON, ROSALINDA R. ARQUISOLA, CORAZON ROTEA, FE R. EBORA, CARIDAD ROTEA, ANGELES VDA. DE RENACIA, JORGE ROTEA, MARIA LUISA ROTEA-VILLEGAS, ALFREDO R. ROTEA, represented by his heirs LIZBETH ROTEA and ELEPETH ROTEA; LUIS ROTEA, represented by his heir JENNIFER ROTEA; and ROLANDO R. ROTEA, represented by his heir ROLANDO R. ROTEA JR., petitioners, vs. MACTAN - CEBU INTERNATIONAL AIRPORT AUTHORITY, respondent. DECISION BELLOSILLO, J.: THE HEIRS OF TIMOTEO MORENO AND MARIA ROTEA, petitioners herein, are the successors-in-interest of the former registered owners of two (2) parcels of land situated in Lahug, Cebu City, designated as Lot No. 916 with an area of 2,355 square meters under TCT No. RT-7543 (106) T-13694, and Lot No. 920 consisting of 3,097 square meters under TCT No. RT-7544 (107) T-13695.[1] In 1949 the National Airport Corporation as the predecessor agency of respondent Mactan-Cebu International Airport

Authority (MCIAA) wanted to acquire Lots Nos. 916 and 920 above described among other parcels of land for the proposed expansion of Lahug Airport.[2] To entice the landowners to cede their properties, the government assured them that they could repurchase their lands once Lahug Airport was closed or its operations transferred to Mactan Airport.[3] Some of the landowners executed deeds of sale with right of repurchase in favor of the government but many others, including the owners of Lots Nos. 916 and 920 herein mentioned, refused the offer because the payment was perceived to be way below the market price.[4] On 16 April 1952, as the negotiations for the purchase of the lots necessary for the expansion and improvement of Lahug Airport irredeemably broke down, the Civil Aeronautics Administration as the successor agency of the National Airport Corporation filed a complaint with the Court of First Instance of Cebu, for the expropriation of Lots Nos. 916 and 920 and other subject realties, docketed as Civil Case No. R-1881. On 29 December 1961 the trial court promulgated its Decision in Civil Case No. R-1881 condemning Lots Nos. 916 and 920 and other lots for public use upon payment of just compensation.[5] Petitioners predecessors were paid P7,065.00 for Lot No. 916 and P9,291.00 for Lot No. 920 with consequential damages by way of legal interest from 16 November 1947. No appeal was taken from the Decision on Lots Nos. 916 and 920, and the judgment of condemnation became final and executory.[6]

Thereafter, the certificates of title for these parcels of land were issued in the name of the Republic of the Philippines under TCT No. 58691 for Lot No. 916 and TCT No. 58692 for Lot No. 920, which under RA 6958 (1990) were subsequently transferred in favor of respondent MCIAA.[7] At the end of 1991, or soon after the transfer of Lots Nos. 916 and 920 to MCIAA, Lahug Airport ceased operations as the Mactan Airport was opened for incoming and outgoing flights.[8] Lots Nos. 916 and 920 which had been expropriated for the extension of Lahug Airport were not utilized.[9] In fact, no expansion of Lahug Airport was undertaken by MCIAA and its predecessors-in-interest.[10] Hence, petitioners wrote then President Fidel V. Ramos and the airport manager begging them for the exercise of their alleged right to repurchase Lots Nos. 916 and 920.[11] Their pleas were not heeded.[12] On 11 March 1997 petitioners filed a complaint for reconveyance and damages with RTC of Cebu City against respondent MCIAA to compel the repurchase of Lots Nos. 916 and 920, docketed as Civil Case No. CEB-20015. In the main, petitioners averred that they had been convinced by the officers of the predecessor agency of respondent MCIAA not to oppose the expropriation proceedings since in the future they could repurchase the properties if the airport expansion would not push through. MCIAA did not object to petitioners evidence establishing these allegations.

When the civil case was pending, one Richard E. Enchuan filed a Motion for Transfer of Interest alleging that he acquired through deeds of assignment the rights of some of herein petitioners over Lots Nos. 916 and 920.[13] The Department of Public Works and Highways (DPWH) also sought to intervene in the civil case claiming that it leased in good faith Lot No. 920 from the predecessor agencies of respondent MCIAA and that it built thereon its Regional Equipment Services and its Region 7 Office.[14] On 12 April 1999 the trial court found merit in the claims of petitioners and granted them the right to repurchase the properties at the amount pegged as just compensation in Civil Case No. R-1881 but subject to the alleged property rights of Richard E. Enchuan and the leasehold of DPWH.[15] The trial court opined that the expropriation became illegal or functus officio when the purpose for which it was intended was no longer there.[16] Respondent MCIAA appealed the Decision of the trial court to the Court of Appeals, docketed as CA-G.R. CV No. 64456. On 20 December 2001 the Court of Appeals reversed the assailed Decision on the ground that the judgment of condemnation in Civil Case No. R-1881 was unconditional so that the rights gained therefrom by respondent MCIAA were indicative of ownership in fee simple.[17] The appellate court cited Fery v. Municpality of Cabanatuan[18] which held that mere deviation from the public

purpose for which the power of eminent domain was exercised does not justify the reversion of the property to its former owners, and Mactan-Cebu International Airport Authority v. Court of Appeals[19] which is allegedly stare decisis to the instant case to prevent the exercise of the right of repurchase as the former dealt with a parcel of land similarly expropriated under Civil Case No. R-1881.[20] On 28 November 2002 reconsideration of the Decision was denied. [21] Hence, this petition for review. Petitioners argue that Fery v. Municpality of Cabanatuan does not apply to the case at bar since what was involved therein was the right of reversion and not the right of repurchase which they are invoking. They also differentiate Mactan-Cebu International Airport Authority v. Court of Appeals[22] from the instant case in that the landowners in the MCIAA case offered inadmissible evidence to show their entitlement to a right of repurchase, while petitioners herein offered evidence based on personal knowledge for which reason MCIAA did not object and thus waived whatever objection it might have had to the admissibility thereof. Finally, petitioners allege that their right to equal protection of the laws would be infringed if some landowners are given the right to repurchase their former properties even as they are denied the exercise of such prerogative.

On the other hand, respondent MCIAA clings to our decisions in Fery v. Municpality of Cabanatuan and Mactan-Cebu International Airport Authority v. Court of Appeals. According to respondent MCIAA there is only one instance when expropriated land may be repurchased by its previous owners, and that is, if the decision of expropriation itself provides [the] condition for such repurchase. Respondent asserts that the Decision in Civil Case No. R-1881 is absolute and without conditions, thus, no repurchase could be validly exercised. This is a difficult case calling for a difficult but just solution. To begin with, there exists an undeniable historical narrative that the predecessors of respondent MCIAA had suggested to the landowners of the properties covered by the Lahug Airport expansion scheme that they could repurchase their properties at the termination of the airports venture.*23+ Some acted on this assurance and sold their properties;[24] other landowners held out and waited for the exercise of eminent domain to take its course until finally coming to terms with respondents predecessors that they would not appeal nor block further the judgment of condemnation if the same right of repurchase was extended to them.[25] A handful failed to prove that they acted on such assurance when they parted with the ownership of their lands.[26] In resolving this dispute, we must reckon with the rulings of this Court in Fery v. Municpality of Cabanatuan and Mactan-Cebu International Airport Authority v. Court of Appeals, which define

the rights and obligations of landowners whose properties were expropriated when the public purpose for which eminent domain was exercised no longer subsists. In Fery, which was cited in the recent case of Reyes v. Court of Appeals,[27] we declared that the government acquires only such rights in expropriated parcels of land as may be allowed by the character of its title over the properties If x x x land is expropriated for a particular purpose, with the condition that when that purpose is ended or abandoned the property shall return to its former owner, then, of course, when the purpose is terminated or abandoned the former owner reacquires the property so expropriated. If x x x land is expropriated for a public street and the expropriation is granted upon condition that the city can only use it for a public street, then, of course, when the city abandons its use as a public street, it returns to the former owner, unless there is some statutory provision to the contrary x x x x If, upon the contrary, however, the decree of expropriation gives to the entity a fee simple title, then, of course, the land becomes the absolute property of the expropriator, whether it be the State, a province, or municipality, and in that case the non-user does not have the effect of defeating the title acquired by the expropriation proceedings x x x x When land has been acquired for public use in fee simple, unconditionally, either by the exercise of eminent domain or by purchase, the former owner retains no rights in the land, and the public use may be abandoned, or the land may be devoted to a different use, without any impairment of the

estate or title acquired, or any reversion to the former owner x x x x[28] In Mactan-Cebu International Airport Authority, respondent Chiongbian sought to enforce an alleged right of repurchase over her properties that had been expropriated in Civil Case No. R1881. This Court did not allow her to adduce evidence of her claim, for to do so would unsettle as to her properties the judgment of condemnation in the eminent domain proceedings. We also held therein that Chiongbians evidence was both inadmissible and lacking in probative value The terms of the judgment are clear and unequivocal and grant title to Lot No. 941 in fee simple to the Republic of the Philippines. There was no condition imposed to the effect that the lot would return to CHIONGBIAN or that CHIONGBIAN had a right to repurchase the same if the purpose for which it was expropriated is ended or abandoned or if the property was to be used other than as the Lahug Airport. CHIONGBIAN cannot rely on the ruling in Mactan-Cebu International Airport vs. Court of Appeals wherein the presentation of parol evidence was allowed to prove the existence of a written agreement containing the right to repurchase. Said case did not involve expropriation proceedings but a contract of sale x x x x To permit CHIONGBIAN to prove the existence of a compromise settlement which she claims to have entered into with the Republic of the Philippines prior to the rendition of judgment in the expropriation case would result in a modification of the judgment of a court which

has long become final and executory x x x x And even assuming for the sake of argument that CHIONGBIAN could prove the existence of the alleged written agreement acknowledging her right to repurchase Lot No. 941 through parol evidence, the Court of Appeals erred in holding that the evidence presented by CHIONGBIAN was admissible x x x x Aside from being inadmissible under the provisions of the Statute of Frauds, [the] testimonies are also inadmissible for being hearsay in nature x x x x[29] We adhere to the principles enunciated in Fery and in MactanCebu International Airport Authority, and do not overrule them. Nonetheless the weight of their import, particularly our ruling as regards the properties of respondent Chiongbian in MactanCebu International Airport Authority, must be commensurate to the facts that were established therein as distinguished from those extant in the case at bar. Chiongbian put forth inadmissible and inconclusive evidence, while in the instant case we have preponderant proof as found by the trial court of the existence of the right of repurchase in favor of petitioners. Moreover, respondent MCIAA has brought to our attention a significant and telling portion in the Decision in Civil Case No. R1881 validating our discernment that the expropriation by the predecessors of respondent was ordered under the running impression that Lahug Airport would continue in operation -

As for the public purpose of the expropriation proceeding, it cannot now be doubted. Although Mactan Airport is being constructed, it does not take away the actual usefulness and importance of the Lahug Airport: it is handling the air traffic both civilian and military. From it aircrafts fly to Mindanao and Visayas and pass thru it on their flights to the North and Manila. Then, no evidence was adduced to show how soon is the Mactan Airport to be placed in operation and whether the Lahug Airport will be closed immediately thereafter. It is up to the other departments of the Government to determine said matters. The Court cannot substitute its judgment for those of the said departments or agencies. In the absence of such showing, the Court will presume that the Lahug Airport will continue to be in operation (emphasis supplied).[30] While the trial court in Civil Case No. R-1881 could have simply acknowledged the presence of public purpose for the exercise of eminent domain regardless of the survival of Lahug Airport, the trial court in its Decision chose not to do so but instead prefixed its finding of public purpose upon its understanding that Lahug Airport will continue to be in operation. Verily, these meaningful statements in the body of the Decision warrant the conclusion that the expropriated properties would remain to be so until it was confirmed that Lahug Airport was no longer in operation. This inference further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such and the expropriated lots were not being used for any airport expansion project, the rights vis--vis the expropriated Lots Nos. 916 and

920 as between the State and their former owners, petitioners herein, must be equitably adjusted; and, (b) the foregoing unmistakable declarations in the body of the Decision should merge with and become an intrinsic part of the fallo thereof which under the premises is clearly inadequate since the dispositive portion is not in accord with the findings as contained in the body thereof.[31] Significantly, in light of the discussion above, the admission of petitioners during the pre-trial of Civil Case No. CEB-20015 for reconveyance and damages that respondent MCIAA was the absolute owner of Lots Nos. 916 and 920 does not prejudice petitioners interests. This is as it should be not only because the admission concerns a legal conclusion fiercely debated by the parties[32] but more so since respondent was truly the absolute owner of the realties until it was apparent that Lahug Airport had stopped doing business. To sum up what we have said so far, the attendance in the case at bar of standing admissible evidence validating the claim of petitioners as well as the portions above-quoted of the Decision in the expropriation case volunteered no less than by respondent itself, takes this case away from the ambit of Mactan-Cebu International Airport Authority v. Court of Appeals[33] but within the principles enunciated in Fery as mentioned earlier. In addition, there should be no doubt that our present reading of the fallo of the Decision in Civil Case No. R-1881 so as to include the statements in the body thereof

afore-quoted is sanctioned by the rule that a final and executory judgment may nonetheless be clarified by reference to other portions of the decision of which it forms a part. In Republic v. De Los Angeles[34] we ruled This Court has promulgated many cases x x x wherein it was held that a judgment must not be read separately but in connection with the other portions of the decision of which it forms a part. Hence x x x the decision of the court below should be taken as a whole and considered in its entirety to get the true meaning and intent of any particular portion thereof x x x x Neither is this Court inclined to confine itself to a reading of the said fallo literally. On the contrary, the judgment portion of a decision should be interpreted and construed in harmony with the ratio decidendi thereof x x x x As stated in the case of Policarpio vs. Philippine Veterans Board, et al., supra, to get the true intent and meaning of a decision, no specific portion thereof should be resorted to but the same must be considered in its entirety. Hence, a resolution or ruling may and does appear in other parts of the decision and not merely in the fallo thereof x x x x The foregoing pronouncements find support in the case of Locsin, et al. vs. Paredes, et al., 63 Phil., 87, 91-92, wherein this Court allowed a judgment that had become final and executory to be clarified by supplying a word which had been inadvertently omitted and which, when supplied, in effect changed the literal import of the original phraseology x x x x This is so because, in the first place, if an already final judgment can still be amended to supply an omission committed through oversight, this simply

means that in the construction or interpretation of an already final decision, the fallo or dispositive portion thereof must be correlated with the body of such final decision x x x x [I]f an amendment may be allowed after a decision has already become final x x x such amendment may consist x x x either in the x x x interpretation of an ambiguous phrase therein in relation to the body of the decision which gives it life.[35] We now resolve to harmonize the respective rights of the State and petitioners to the expropriated Lots Nos. 916 and 920. Mactan-Cebu International Airport Authority[36] is correct in stating that one would not find an express statement in the Decision in Civil Case No. R-1881 to the effect that the [condemned] lot would return to [the landowner] or that [the landowner] had a right to repurchase the same if the purpose for which it was expropriated is ended or abandoned or if the property was to be used other than as the Lahug Airport. This omission notwithstanding, and while the inclusion of this pronouncement in the judgment of condemnation would have been ideal, such precision is not absolutely necessary nor is it fatal to the cause of petitioners herein. No doubt, the return or repurchase of the condemned properties of petitioners could be readily justified as the manifest legal effect or consequence of the trial courts underlying presumption that Lahug Airport will continue to be in operation when it granted the complaint for eminent domain and the airport discontinued its activities.

The predicament of petitioners involves a constructive trust, one that is akin[37] to the implied trust referred to in Art. 1454 of the Civil Code, If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him. In the case at bar, petitioners conveyed Lots Nos. 916 and 920 to the government with the latter obliging itself to use the realties for the expansion of Lahug Airport; failing to keep its bargain, the government can be compelled by petitioners to reconvey the parcels of land to them, otherwise, petitioners would be denied the use of their properties upon a state of affairs that was not conceived nor contemplated when the expropriation was authorized. Although the symmetry between the instant case and the situation contemplated by Art. 1454 is not perfect, the provision is undoubtedly applicable. For, as explained by an expert on the law of trusts: The only problem of great importance in the field of constructive trusts is to decide whether in the numerous and varying fact situations presented to the courts there is a wrongful holding of property and hence a threatened unjust enrichment of the defendant.*38+ Constructive trusts are fictions of equity which are bound by no unyielding formula when they are used by courts as devices to remedy any situation in which the holder of the legal title may not in good conscience retain the beneficial interest.[39]

In constructive trusts, the arrangement is temporary and passive in which the trustees sole duty is to transfer the title and possession over the property to the plaintiff-beneficiary.[40] Of course, the wronged party seeking the aid of a court of equity in establishing a constructive trust must himself do equity.*41+ Accordingly, the court will exercise its discretion in deciding what acts are required of the plaintiff-beneficiary as conditions precedent to obtaining such decree and has the obligation to reimburse the trustee the consideration received from the latter just as the plaintiff-beneficiary would if he proceeded on the theory of rescission.[42] In the good judgment of the court, the trustee may also be paid the necessary expenses he may have incurred in sustaining the property, his fixed costs for improvements thereon, and the monetary value of his services in managing the property to the extent that plaintiff-beneficiary will secure a benefit from his acts.[43] The rights and obligations between the constructive trustee and the beneficiary, in this case, respondent MCIAA and petitioners over Lots Nos. 916 and 920, are echoed in Art. 1190 of the Civil Code, When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received x x x x In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return x x x x

Hence, respondent MCIAA as representative of the State is obliged to reconvey Lots Nos. 916 and 920 to petitioners who shall hold the same subject to existing liens thereon, i.e., leasehold right of DPWH. In return, petitioners as if they were plaintiff-beneficiaries of a constructive trust must restore to respondent MCIAA what they received as just compensation for the expropriation of Lots Nos. 916 and 920 in Civil Case No. R1881, i.e., P7,065.00 for Lot No. 916 and P9,291.00 for Lot No. 920 with consequential damages by way of legal interest from 16 November 1947. Petitioners must likewise pay respondent MCIAA the necessary expenses it may have incurred in sustaining the properties and the monetary value of its services in managing them to the extent that petitioners will be benefited thereby. The government however may keep whatever income or fruits it may have obtained from the parcels of land, in the same way that petitioners need not account for the interests that the amounts they received as just compensation may have earned in the meantime. As a matter of justice and convenience, the law considers the fruits and interests as the equivalent of each other.[44] Under Art. 1189 of the Civil Code, If the thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor x x x, the creditor being the person who stands to receive something as a result of the process of restitution. Consequently, petitioners as creditors do not have to settle as part of the process of restitution the appreciation in value of

Lots Nos. 916 and 920 which is the natural consequence of nature and time. Petitioners need not also pay for improvements introduced by third parties, i.e., DPWH, as the disposition of these properties is governed by existing contracts and relevant provisions of law. As for the improvements that respondent MCIAA may have made on Lots Nos. 916 and 920, if any, petitioners must pay respondent their prevailing free market price in case petitioners opt to buy them and respondent decides to sell. In other words, if petitioners do not want to appropriate such improvements or respondent does not choose to sell them, the improvements would have to be removed without any obligation on the part of petitioners to pay any compensation to respondent MCIAA for whatever it may have tangibly introduced therein.[45] The medium of compensation for the restitution shall be ready money or cash payable within a period of three hundred sixty five (365) days from the date that the amount to be returned by petitioners is determined with finality, unless the parties herein stipulate and agree upon a different scheme, medium or schedule of payment. If after the period of three hundred sixty five (365) days or the lapse of the compromise scheme or schedule of payment such amount owed is not settled, the right of repurchase of petitioners and the obligation of respondent MCIAA to reconvey Lots Nos. 916 and 920 and/or the latters improvements as set forth herein shall be deemed forfeited and

the ownership of those parcels of land shall vest absolutely upon respondent MCIAA. Finally, we delete the award of P60,000.00 for attorneys fees and P15,000.00 for litigation expenses in favor of petitioners as decreed in the assailed Decision of 12 April 1999 of the trial court. It is not sound public policy to set a premium upon the right to litigate where such right is exercised in good faith, as in the present case, albeit the decision to resist the claim is erroneous.[46] The rule on awards of attorneys fees and litigation expenses is found in Art. 2208 of the Civil Code In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded;

(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interests; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff's valid and demandable claim; (6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers; (8) In actions for indemnity under workmen's compensation and employer's liability laws; (9) In a separate civil action to recover civil liability arising from a crime; (10) When at least double judicial costs are awarded; (11) In any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered. In all cases, the attorney's fees and expenses of litigation must be reasonable. As noted in Mirasol v. De la Cruz,[47] Art. 2208 intends to retain the award of attorneys fees as the exception in our law and the general rule remains that attorneys fees are not recoverable in the absence of a stipulation thereto.

In the case at bar, considering the established absence of any stipulation regarding attorneys fees, the trial court cannot base its award on any of the exceptions enumerated in Art. 2208. The records of the instant case do not disclose any proof presented by petitioners to substantiate that the actuations of respondent MCIAA were clearly unfounded or purely for the purpose of harassment; neither does the trial court make any finding to that effect in its appealed Decision. While Art. 2208, par. (4), allows attorneys fees in cases of clearly unfounded civil actions, this exception must be understood to mean those where the defenses are so untenable as to amount to gross and evident bad faith. Evidence must be presented to the court as to the facts and circumstances constituting the alleged bad faith, otherwise, the award of attorneys fees is not justified where there is no proof other than the bare statement of harassment that a party to be so adjudged had acted in bad faith. The exercise of judicial discretion in the award of attorneys fees under Art. 2208, par. (11), demands a factual, legal or equitable justification that would bring the case within the exception and justify the grant of such award. WHEREFORE, the instant Petition for Review is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 64456 dated 20 December 2001 and its Resolution of 28 November 2002 denying reconsideration of the Decision are REVERSED and SET ASIDE.

The Decision of RTC-Br. 19 of Cebu City dated 12 April 1999 in Civil Case No. CEB-20015 is MODIFIED IN PART by (a) ORDERING respondent Mactan-Cebu International Airport Authority (MCIAA) TO RECONVEY to petitioner Heirs of Timoteo Moreno and Maria Rotea, namely: Esperanza R. Edjec, Bernarda R. Suela, Ruby C. Rotea, Bernarda R. Rotea, Elia R. Vda De Limbaga, Virginia R. Arbon, Rosalinda R. Arquisola, Corazon Rotea, Fe R. Ebora, Caridad Rotea, Angeles Vda. De Renacia, Jorge Rotea, Maria Luisa Rotea-Villegas, Alfredo R. Rotea, represented by his heirs, namely: Lizbeth Rotea and Elepeth Rotea; Luis Rotea, represented by his heir Jennifer Rotea; and Rolando R. Rotea, represented by his heir Rolando R. Rotea Jr., Lot No. 916 with an area of 2,355 square meters and Lot No. 920 consisting of 3,097 square meters in Lahug, Cebu City, with all the improvements thereon evolving through nature or time, but excluding those that were introduced by third parties, i.e., DPWH, which shall be governed by existing contracts and relevant provisions of law; (b) ORDERING petitioner Heirs of Timoteo Moreno and Maria Rotea TO PAY respondent MCIAA what the former received as just compensation for the expropriation of Lots Nos. 916 and 920 in Civil Case No. R-1881, i.e., P7,065.00 for Lot No. 916 and P9,291.00 for Lot No. 920 with consequential damages by way of legal interest from 16 November 1947. Petitioners must likewise PAY respondent MCIAA the necessary expenses that the latter

may have incurred in sustaining the properties and the monetary value of its services in managing the properties to the extent that petitioners will secure a benefit from such acts. Respondent MCIAA however may keep whatever income or fruits it may have obtained from the parcels of land, in the same way that petitioners need not account for the interests that the amounts they received as just compensation may have earned in the meantime; (c) ORDERING respondent MCIAA TO CONVEY to petitioners the improvements it may have built on Lots Nos. 916 and 920, if any, in which case petitioners SHALL PAY for these improvements at the prevailing free market price, otherwise, if petitioners do not want to appropriate such improvements, or if respondent does not choose to sell them, respondent MCIAA SHALL REMOVE these improvements WITHOUT ANY OBLIGATION on the part of petitioners to pay any compensation to respondent MCIAA for them; (d) ORDERING petitioners TO PAY the amount so determined under letter (b) of this dispositive portion as consideration for the reconveyance of Lots Nos. 916 and 920, as well as the prevailing free market price of the improvements built thereon by respondent MCIAA, if any and desired to be bought and sold by the parties, in ready money or cash PAYABLE within a period of three hundred sixty five (365) days from the date that the amount under letter (b) above is determined with finality, unless the parties herein stipulate a different scheme or schedule of

payment, otherwise, after the period of three hundred sixty five (365) days or the lapse of the compromise scheme or schedule of payment and the amount so payable is not settled, the right of repurchase of petitioners and the obligation of respondent MCIAA to so reconvey Lots Nos. 916 and 920 and/or the improvements shall be DEEMED FORFEITED and the ownership of those parcels of land shall VEST ABSOLUTELY upon respondent MCIAA; (e) REMANDING the instant case to RTC-Br. 19 of Cebu City for purposes of determining the amount of compensation for Lots Nos. 916 and 920 to be paid by petitioners as mandated in letter (b) hereof, and the value of the prevailing free market price of the improvements built thereon by respondent MCIAA, if any and desired to be bought and sold by the parties, and in general, securing the immediate execution of this Decision under the premises; (f) ORDERING petitioners to respect the right of the Department of Public Works and Highways to its lease contract until the expiration of the lease period; and (g) DELETING the award of P60,000.00 for attorneys fees and P15,000.00 for litigation expenses against respondent MCIAA and in favor of petitioners. This Decision is without prejudice to the claim of intervenor one Richard E. Enchuan on his allegation that he acquired through

deeds of assignment the rights of some of herein petitioners over Lots Nos. 916 and 920. No costs. SO ORDERED. Quisumbing, Austria-Martinez, Callejo, and Tinga, JJ., concur. [1] Rollo, pp. 15, 75-78. [2] Id., p. 154. [3] Ibid. [4] Id., p. 68. [5] Decision penned by Judge Mateo Canonoy, RTC-Br. 3, Cebu City; Rollo, pp. 84-110. [6] Rollo, p. 17. [7] Id., pp. 17, 79-82. [8] Id., p. 154. [9] Id., p. 157.

[10] Ibid.; see also Mactan-Cebu International Airport Authority v. Court of Appeals, G.R. No. 139495, 27 November 2000, 346 SCRA 126. [11] Rollo, pp. 82-83. [12] Id., p. 71. [13] Id., p. 52. [14] Ibid. [15] Decision penned by Judge Ramon G. Codilla Jr., RTC-Br. 19, Cebu City; Rollo, pp. 149-159. [16] Rollo, pp. 157-158. [17] Decision penned by Associate Justice Portia AlioHormachuelos, concurred in by Associate Justices Eriberto U. Rosario Jr. and Amelita G. Tolentino, Seventeenth Division; Rollo, pp. 48-63. [18] 42 Phil. 28 (1921). [19] See Note 10. [20] Rollo, pp. 56-63.

[21] Resolution penned by Associate Justice Portia AlioHormachuelos, concurred in by Associate Justices Buenaventura J. Guerrero and Amelita G. Tolentino, Special Former Seventeenth Division; Rollo, pp. 63-65. [22] See Note 10. [23] Mactan-Cebu International Airport Authority v. Court of Appeals, G.R. No. 121506, 30 October 1996, 263 SCRA 736. [24] Ibid. [25] Ibid; Republic v. Escao, CA-G.R. No. 33045-R, 27 July 1964 as cited in Mactan-Cebu International Airport Authority v. Court of Appeals, G.R. No. 139495, 27 November 2000, 346 SCRA 126. [26] See Note 10. [27] G.R. No. 147511, 20 January 2003. [28] 42 Phil. 28, 29-30 (1921). [29] G.R. No. 139495, 27 November 2000, 346 SCRA 126, 135137. [30] Rollo, p. 224; Comment of the Solicitor General, p. 22.

[31] Rosales v. Court of Appeals, G.R. No. 137566, 28 February 2001, 353 SCRA 179; People v. Lacbayan, G.R. No. 125006, 31 August 2000, 339 SCRA 396. [32] See Mercys Incorporated v. Verde, No. L-21571, 29 September 1966, 18 SCRA 171. [33] See Note 10. [34] No. L-26112, 4 October 1971, 41 SCRA 422. [35] Id., pp. 441-446. [36] See Note 10. [37] The statutory enumeration of implied trusts in the Civil Code is not exclusive, hence, Art. 1447 of the Civil Code provides The enumeration of the following cases of implied trust does not exclude others established by the general law of trust, but the limitation laid down in article 1442 shall be applicable. [38] G.G. Bogert, Handbook of the Law of Trusts, 210 (1963). [39] Id., pp. 208-209. [40] Id., pp. 209-210. [41] Id., p. 209.

[42] Ibid. [43] Ibid. *44+ Civil Code, Art. 1187, The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. If the obligation is unilateral, the debtor shall appropriate the fruits and interests received, unless from the nature and circumstances of the obligation it should be inferred that the intention of the person constituting the same was different. [45] See Coleongco v. Regalado, 92 Phil. 387 (1952). [46] Mirasol v. De la Cruz, No. L-32552, 31 July 1978, 84 SCRA 337. [47] Ibid.

THIRD DIVISION

[G.R. No. 147511. January 20, 2003] MARINA Z. REYES; ALFREDO A. FRANCISCO; ANGELITA Z. GARCIA; ALFREDO Z. FRANCISCO, JR; ARMANDO Z. FRANCISCO; ALMA C. FRANCISCO; EUGENIA Z. LUNA; CLARITA Z. ZABALLERO, LEONARDO Z. ZABALLERO, JR, and TEODORO Z. ZABALLERO, in substitution of LEONARDO M. ZABALLERO; AUGUSTO M. ZABALLERO; FRINE A. ZABALLERO; ELENA FRONDA ZABALLERO; VICTOR GREGORIO F. ZABALLERO; MARIA ELENA F. ZABALLERO; LOURDES ZABALLERO-LAVA; SOCORRO EMILIA ZABALLERO-YAP; and TERESITA F. ZABALLERO, petitioners, vs. NATIONAL HOUSING AUTHORITY, respondent. DECISION PUNO, J.: This is an appeal by certiorari from the decision of the Court of Appeals in CA-GR CV No. 51641 dated September 29, 2000[1] affirming the judgment of the Regional Trial Court of Quezon City, Branch 79 which dismissed the complaint for forfeiture of rights filed by herein petitioners, as well as the Resolution dated March 13, 2001 denying petitioners motion for reconsideration. Records show that in 1977, respondent National Housing Authority (NHA) filed separate complaints for the expropriation of sugarcane lands, particularly Lot Nos. 6450, 6448-E, 6198-A and 6199 of the cadastral survey of Dasmarias, Cavite

belonging to the petitioners, before the then Court of First Instance of Cavite, and docketed as Civil Case Nos. T.G.-392, T.G.-396 and T.G.-417. The stated public purpose of the expropriation was the expansion of the Dasmarias Resettlement Project to accommodate the squatters who were relocated from the Metropolitan Manila area. The trial court rendered judgment ordering the expropriation of these lots and the payment of just compensation. This was affirmed by the Supreme Court in a decision rendered on October 29, 1987 in the case of NHA vs. Zaballero[2] and which became final on November 26, 1987.[3] On February 24, 1989, the expropriation court (now Branch 18, Regional Trial Court of Tagaytay City) issued an Order[4] the dispositive portion of which reads: WHEREFORE, and resolving thus, let an Alias Writ of Execution be immediately issued and that: (1) The Register of Deeds of the Province of Cavite is hereby ordered to transfer, in the name of the plaintiff National Housing Authority, the following: (a) Transfer Certificate No. RT-638 containing an area of 79,167 square meters situated in Barrio Bangkal, Dasmarias, Cavite;

(b) Transfer Certificate of Title No. T-55702 containing an area of 20,872 square meters situated in Barrio Bangkal, Dasmarias, Cavite; (c) Transfer Certificate of Title No. RT-639 and RT-4641 covering Lot Nos. 6198-A and 6199 with an aggregate area of 159,985 square meters also situated in Barrio Bangkal, Dasmarias, Cavite. (2) Plaintiff National Housing Authority is likewise hereby ordered, under pain of contempt, to immediately pay the defendants, the amounts stated in the Writ of Execution as the adjudicated compensation of their expropriated properties, which process was received by it according to the records, on September 26, 1988, segregating therefrom, and in separate check, the lawyers fees in favor of Atty. Bobby P. Yuseco, in the amount of P322,123.05, as sustained by their contract as gleaned from the records, with no other deduction, paying on its own (NHA) account, the necessary legal expenses incident to the registration or issuance of new certificates of title, pursuant to the provisions of the Property Registration Law (PD 1529); (3) Defendants, however, are directed to pay the corresponding capital gains tax on the subject properties, directing them additionally, to coordinate with the plaintiff NHA in this regard, in order to facilitate the termination of this case, put an end to this controversy and consign the same to its final rest.

For the alleged failure of respondent NHA to comply with the above order, petitioners filed on April 28, 1992 a complaint[5] for forfeiture of rights before the Regional Trial Court of Quezon City, Branch 79, in Civil Case No. Q-92-12093. They alleged that respondent NHA had not relocated squatters from the Metropolitan Manila area on the expropriated lands in violation of the stated public purpose for expropriation and had not paid the just compensation fixed by the court. They prayed that respondent NHA be enjoined from disposing and alienating the expropriated properties and that judgment be rendered forfeiting all its rights and interests under the expropriation judgment. In its Answer,[6] respondent NHA averred that it had already paid a substantial amount to herein petitioners and that the expropriation judgment could not be executed in view of several issues raised by respondent NHA before the expropriation court (now Branch 18, RTC, Tagaytay City) concerning capital gains tax, registration fees and other expenses for the transfer of title to respondent NHA, as well as the claims for attorneys fees of Atty. Joaquin Yuseco, Jr., collaborating counsel for petitioners. Ocular inspections[7] conducted by the trial court on the subject properties show that: 1. 80% of Lot No. 6198-A with an area of 120,146 square meters is already occupied by relocatees whose houses are made of light materials with very few houses partly made of hollow

blocks. The relocatees were relocated only on (sic) March of 1994; 2. Most of the area covered by Lot No. 2075 is almost occupied by houses and structures, most of which are made of concrete materials. These houses are not being occupied by squatters relocated to the said lot by the defendant NHA; 3. Lot No. 6199 is also occupied by concrete houses and structures but likewise there are no relocatees in said lot. A large area of the same is still unoccupied. On September 29, 1995, the trial court rendered judgment dismissing the complaint. Finding that the failure of respondent NHA to pay just compensation and of petitioners to pay capital gains tax are both unjustified and unreasonable, the trial court held that: (1) respondent NHA is not deemed to have abandoned the public purpose for which the subject properties were expropriated because the relocation of squatters involves a long and tedious process. It ruled that respondent NHA actually pursued the public purpose of the expropriation when it entered into a contract with Arceo C. Cruz involving the construction of low cost housing on the expropriated lots to be sold to qualified low income beneficiaries; (2) there is no condition imposed in the expropriation judgment that the subject properties shall revert back to its original owners in case the purpose of expropriation is terminated or abandoned; (3) the payment of just compensation is independent of the obligation of herein

petitioners to pay capital gains tax; and (4) in the payment of just compensation, the basis should be the value at the time the property was taken. On appeal, the Court of Appeals affirmed the decision of the trial court. Petitioners are now before us raising the following assignment of errors: 1. The Honorable Court of Appeals had decided a question of substance not in accord with justice and equity when it ruled that, as the judgment of the expropriation court did not contain a condition that should the expropriated property be not used for the intended purpose it would revert to the condemnee, the action to declare the forfeiture of rights under the expropriation judgment can not prosper; 2. The Honorable Court of Appeals decided a question of substance not in accord with jurisprudence, justice and equity when it ruled that the non-payment is not a ground for forfeiture; 3. The Honorable Court of Appeals erred in not declaring the judgment of expropriation forfeited in light of the failure of respondent to use the expropriated property for the intended purpose but for a totally different purpose. The petition is not impressed with merit.

Petitioners contend that respondent NHA violated the stated public purpose for the expansion of the Dasmarias Resettlement Project when it failed to relocate the squatters from the Metro Manila area, as borne out by the ocular inspection conducted by the trial court which showed that most of the expropriated properties remain unoccupied. Petitioners likewise question the public nature of the use by respondent NHA when it entered into a contract for the construction of low cost housing units, which is allegedly different from the stated public purpose in the expropriation proceedings. Hence, it is claimed that respondent NHA has forfeited its rights and interests by virtue of the expropriation judgment and the expropriated properties should now be returned to herein petitioners. We are not persuaded. The 1987 Constitution explicitly provides for the exercise of the power of eminent domain over private properties upon payment of just compensation. More specifically, section 9, Article III states that private property shall not be taken for public use without just compensation. The constitutional restraints are public use and just compensation. Petitioners cannot insist on a restrictive view of the eminent domain provision of the Constitution by contending that the contract for low cost housing is a deviation from the stated public use. It is now settled doctrine that the concept of public use is no longer limited to traditional purposes. Here, as elsewhere, the idea that public use is strictly limited to clear

cases of use by the public has been abandoned. The term public use has now been held to be synonymous with public interest, public benefit, public welfare, and public convenience.[8] The rationale for this new approach is well explained in the case of Heirs of Juancho Ardona, et al. vs. Reyes, et al.,[9] to wit: The restrictive view of public use may be appropriate for a nation which circumscribes the scope of government activities and public concerns and which possesses big and correctly located public lands that obviate the need to take private property for public purposes. Neither circumstance applies to the Philippines. We have never been a laissez faire State. And the necessities which impel the exertion of sovereign power are all too often found in areas of scarce public land or limited government resources. xxx xxx xxx

The taking to be valid must be for public use. There was a time when it was felt that a literal meaning should be attached to such a requirement. Whatever project is undertaken must be for the public to enjoy, as in the case of streets or parks. Otherwise, expropriation is not allowable. It is not anymore. As long as the purpose of the taking is public, then the power of eminent domain comes into play. As just noted, the constitution in at least two cases, to remove any doubt, determines what is public use. One is the expropriation of lands to be subdivided

into small lots for resale at cost to individuals. The other is in the transfer, through the exercise of this power, of utilities and other private enterprise to the government. It is accurate to state then that at present whatever may be beneficially employed for the general welfare satisfies the requirement of public use. (emphasis supplied) The act of respondent NHA in entering into a contract with a real estate developer for the construction of low cost housing on the expropriated lots to be sold to qualified low income beneficiaries cannot be taken to mean as a deviation from the stated public purpose of their taking. Jurisprudence has it that the expropriation of private land for slum clearance and urban development is for a public purpose even if the developed area is later sold to private homeowners, commercials firms, entertainment and service companies, and other private concerns.[10] Moreover, the Constitution itself allows the State to undertake, for the common good and in cooperation with the private sector, a continuing program of urban land reform and housing which will make at affordable cost decent housing and basic services to underprivileged and homeless citizens in urban centers and resettlement areas.[11] The expropriation of private property for the purpose of socialized housing for the marginalized sector is in furtherance of the social justice provision under Section 1, Article XIII of the Constitution which provides that:

SECTION 1. The Congress shall give highest priority to the enactment of measures that protect and enhance the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good. To this end, the State shall require the acquisition, ownership, use and disposition of property and its increments. It follows that the low cost housing project of respondent NHA on the expropriated lots is compliant with the public use requirement. We likewise do not subscribe to petitioners contention that the stated public purpose was abandoned when respondent NHA failed to occupy the expropriated lots by relocating squatters from the Metro Manila area. The expropriation judgment declared that respondent NHA has a lawful right to take petitioners properties for the public use or purpose of expanding the Dasmarias Resettlement Project. The taking here is absolute, without any condition, restriction or qualification. Contrary to petitioners submission, the ruling enunciated in the early case of Fery vs. Municipality of Cabanatuan,[12] is still good and sound doctrine, viz.: x x x If, for example, land is expropriated for a particular purpose, with the condition that when that purpose is ended or

abandoned the property shall return to its former owner, then, of course, when the purpose is terminated or abandoned the former owner reacquires the property so expropriated. x x x If, upon the contrary, however, the decree of expropriation gives to the entity a fee simple title, then, of course, the land becomes the absolute property of the expropriator x x x. When land has been acquired for public use in fee simple unconditionally, either by the exercise of eminent domain or by purchase, the former owner retains no rights in the land, and the public use may be abandoned, or the land may be devoted to a different use, without any impairment of the estate or title acquired, or any reversion to the former owner. Petitioners further aver that the continued failure of respondent NHA to pay just compensation for a long period of time justifies the forfeiture of its rights and interests over the expropriated lots. They demand the return of the expropriated lots. Respondent NHA justifies the delay to pay just compensation by reason of the failure of petitioners to pay the capital gains tax and to surrender the owners duplicate certificates of title. In the recent case of Republic of the Philippines vs. Court of Appeals, et al.,[13] the Court ruled that non-payment of just compensation does not entitle the private landowners to recover possession of their expropriated lots. Thus:

Thus, in Valdehueza vs. Republic where the private landowners had remained unpaid ten years after the termination of the expropriation proceedings, this Court ruled The points in dispute are whether such payment can still be made and, if so, in what amount. Said lots have been the subject of expropriation proceedings. By final and executory judgment in said proceedings, they were condemned for public use, as part of an airport, and ordered sold to the government. x x x. It follows that both by virtue of the judgment, long final, in the expropriation suit, as well as the annotations upon their title certificates, plaintiffs are not entitled to recover possession of their expropriated lots which are still devoted to the public use for which they were expropriated but only to demand the market value of the same. Said relief may be granted under plaintiffs prayer for such other remedies, which may be deemed just and equitable under the premises. The Court proceeded to reiterate its pronouncement in Alfonso vs. Pasay City where the recovery of possession of property taken for public use prayed for by the unpaid landowner was denied even while no requisite expropriation proceedings were first instituted. The landowner was merely given the relief of recovering compensation for his property computed at its market value at the time it was taken and appropriated by the State.

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

First, under the expropriation judgment the payment of just compensation is not subject to any condition. Second, it is a recognized rule that although the right to enter upon and appropriate the land to public use is completed prior to payment, title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. In the case of Association of Small Landowners in the Phils., Inc., et al. vs. Secretary of Agrarian Reform,[14] it was held that: Title to property which is the subject of condemnation proceedings does not vest the condemnor until the judgment fixing just compensation is entered and paid, but the condemnors title relates back to the date on which the petition under the Eminent Domain Act, or the commissioners report under the Local Improvement Act, is filed. x x x Although the right to appropriate and use land taken for a canal is complete at the time of entry, title to the property taken remains in the owner until payment is actually made. In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property does not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to be uniformly to this effect. As early as 1838, in Rubottom v. McLure, it was held that actual payment to the owner of the condemned property was a condition precedent to the investment of the title to the

property in the State albeit not to the appropriation of it to public use. In Rexford v. Knight, the Court of Appeals of New York said that the construction upon the statutes was that the fee did not vest in the State until the payment of the compensation although the authority to enter upon and appropriate the land was complete prior to the payment. Kennedy further said that both on principle and authority the rule is x x x that the right to enter on and use the property is complete, as soon as the property is actually appropriated under the authority of law for a public use, but that the title does not pass from the owner without his consent, until just compensation has been made to him. Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that: If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid. x x x. (emphasis supplied) With respect to the amount of the just compensation still due and demandable from respondent NHA, the lower courts erred in not awarding interest computed from the time the property is actually taken to the time when compensation is actually paid or deposited in court. In Republic, et al. vs. Court of Appeals, et

al.,[15] the Court imposed interest at 12% per annum in order to help eliminate the issue of the constant fluctuation and inflation of the value of the currency over time, thus: The constitutional limitation of just compensation is considered to be the sum equivalent to the market value of the property, broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal action and competition or the fair value of the property as between one who receives, and one who desires to sell, it being fixed at the time of the actual taking by the government. Thus, if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interests on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court. In fine, between the taking of the property and the actual payment, legal interests accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred. x x x This allowance of interest on the amount found to be the value of the property as of the time of the taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and inflation of the value of the currency over time. Article 1250 of the Civil Code, providing that, in case of extraordinary inflation or deflation, the value of the currency at the time of the

establishment of the obligation shall be the basis for the payment when no agreement to the contrary is stipulated, has strict application only to contractual obligations. In other words, a contractual agreement is needed for the effects of extraordinary inflation to be taken into account to alter the value of the currency. Records show that there is an outstanding balance of P1,218,574.35 that ought to be paid to petitioners.[16] It is not disputed that respondent NHA took actual possession of the expropriated properties in 1977.[17] Perforce, while petitioners are not entitled to the return of the expropriated property, they are entitled to be paid the balance of P1,218,574.35 with legal interest thereon at 12% per annum computed from the taking of the property in 1977 until the due amount shall have been fully paid. WHEREFORE, the appealed judgment is modified as follows: 1. Ordering respondent National Housing Authority to pay petitioners the amount of P1,218,574.35 with legal interest thereon at 12% per annum computed from the taking of the expropriated properties in 1997 until the amount due shall have been fully paid; 2. Ordering petitioners to pay the capital gains tax; and

3. Ordering petitioners to surrender to respondent National Housing Authority the owners duplicate certificates of title of the expropriated properties upon full payment of just compensation. SO ORDERED. Panganiban, Sandoval-Gutierrez, Corona and Carpio-Morales, JJ., concur. [1] Penned by Associate Justice Remedios A. Salazar-Fernando, with Quirino D. Abad Santos, Jr. and Salvador J. Valdez, Jr, JJ., concurring; Annex A, Petition; Rollo, pp. 49-66. [2] 155 SCRA 224 (1987). [3] Exhibit B; Original Records, Volume 2, p. 305. [4] Exhibit I; ibid., pp. 318-322. [5] Original Records, Volume 1, pp. 1-5. [6] Ibid., pp. 10-14. *7+ Commissioners Report issued in compliance with the Order dated July 13, 1994; Original Records, Volume 2, p. 407; Commissioners Report issued in compliance with the Order dated November 11, 1994; ibid., p. 653.

[8] Heirs of Juancho Ardona, et al. vs. Reyes, et al., 125 SCRA 220 (1983). [9] Supra. [10] Supra. [11] Section 9, Article XIII, 1987 Constitution. [12] 42 Phil 28 (1921). [13] G.R. No. 146587, July 2, 2002. [14] 175 SCRA 343 (1989). [15] G.R. No. 146587, July 2, 2002. [16] Original Records, Volume 3, pp. 731-732. [17] See Zaballero, et al. vs. NHA, et al., supra, pp. 226-227.

FIRST DIVISION [G.R. No. 146587. July 2, 2002]

REPUBLIC OF THE PHILIPPINES, represented by the General Manager of the PHILIPPINE INFORMATION AGENCY (PIA), petitioner, vs. THE HONORABLE COURT OF APPEALS and the HEIRS OF LUIS SANTOS as herein represented by DR. SABINO SANTOS and PURIFICACION SANTOS IMPERIAL, respondents. DECISION VITUG, J.: Petitioner instituted expropriation proceedings on 19 September 1969 before the Regional Trial Court ("RTC") of Bulacan, docketed Civil Cases No. 3839-M, No. 3840-M, No. 3841-M and No. 3842-M, covering a total of 544,980 square meters of contiguous land situated along MacArthur Highway, Malolos, Bulacan, to be utilized for the continued broadcast operation and use of radio transmitter facilities for the Voice of the Philippines project. Petitioner, through the Philippine Information Agency (PIA), took over the premises after the previous lessee, the Voice of America, had ceased its operations thereat. Petitioner made a deposit of P517,558.80, the sum provisionally fixed as being the reasonable value of the property. On 26 February 1979, or more than nine years after the institution of the expropriation proceedings, the trial court issued this order -

"WHEREFORE, premises considered, judgment is hereby rendered: "Condemning the properties of the defendants in Civil Cases Nos. 3839-M to 3842-M located at KM 43, MacArthur Highway, Malolos, Bulacan and covered by several transfer certificates of title appearing in the Commissioners Appraisal Report consisting of the total area of 544,980 square meters, as indicated in plan, Exhibit A, for plaintiff, also marked as Exhibit I for the defendants, and as Appendix A attached to the Commissioners Appraisal Report, for the purpose stated by the plaintiff in its complaint; "Ordering the plaintiff to pay the defendants the just compensation for said property which is the fair market value of the land condemned, computed at the rate of six pesos (P6.00) per square meter, with legal rate of interest from September 19, 1969, until fully paid; and "Ordering the plaintiff to pay the costs of suit, which includes the aforesaid fees of commissioners, Atty. Victorino P. Evangelista and Mr. Pablo Domingo."[1] The bone of contention in the instant controversy is the 76,589square meter property previously owned by Luis Santos, predecessor-in-interest of herein respondents, which forms part of the expropriated area.

It would appear that the national government failed to pay to herein respondents the compensation pursuant to the foregoing decision, such that a little over five years later, or on 09 May 1984, respondents filed a manifestation with a motion seeking payment for the expropriated property. On 07 June 1984, the Bulacan RTC, after ascertaining that the heirs remained unpaid in the sum of P1,058,655.05, issued a writ of execution served on the plaintiff, through the Office of the Solicitor General, for the implementation thereof. When the order was not complied with, respondents again filed a motion urging the trial court to direct the provincial treasurer of Bulacan to release to them the amount of P72,683.55, a portion of the sum deposited by petitioner at the inception of the expropriation proceedings in 1969, corresponding to their share of the deposit. The trial court, in its order of 10 July 1984, granted the motion. In the meantime, President Joseph Ejercito Estrada issued Proclamation No. 22,[2] transferring 20 hectares of the expropriated property to the Bulacan State University for the expansion of its facilities and another 5 hectares to be used exclusively for the propagation of the Philippine carabao. The remaining portion was retained by the PIA. This fact notwithstanding, and despite the 1984 court order, the Santos heirs remained unpaid, and no action was taken on their case until 16 September 1999 when petitioner filed its manifestation and motion to permit the deposit in court of the amount of P4,664,000.00 by way of just compensation for the expropriated property of the late Luis Santos subject to such final

computation as might be approved by the court. This time, the Santos heirs, opposing the manifestation and motion, submitted a counter-motion to adjust the compensation from P6.00 per square meter previously fixed in the 1979 decision to its current zonal valuation pegged at P5,000.00 per square meter or, in the alternative, to cause the return to them of the expropriated property. On 01 March 2000, the Bulacan RTC ruled in favor of respondents and issued the assailed order, vacating its decision of 26 February 1979 and declaring it to be unenforceable on the ground of prescription "WHEREFORE, premises considered, the court hereby: "1) declares the decision rendered by this Court on February 26, 1979 no longer enforceable, execution of the same by either a motion or an independent action having already prescribed in accordance with Section 6, Rule 39 of both the 1964 Revised Rules of Court and the 1997 Rules of Civil Procedure; "2) denies the plaintiffs Manifestation and Motion to Permit Plaintiff to Deposit in Court Payment for Expropriated Properties dated September 16, 1999 for the reason stated in the next preceding paragraph hereof; and "3) orders the return of the expropriated property of the late defendant Luis Santos to his heirs conformably with the ruling of the Supreme Court in Government of Sorsogon vs. Vda. De Villaroya, 153 SCRA 291, without prejudice to any case which the

parties may deem appropriate to institute in relation with the amount already paid to herein oppositors and the purported transfer of a portion of the said realty to the Bulacan State University pursuant to Proclamation No. 22 issued by President Joseph Ejercito."[3] Petitioner brought the matter up to the Court of Appeals but the petition was outrightly denied. It would appear that the denial was based on Section 4, Rule 65, of the 1997 Rules of Civil Procedure which provided that the filing of a motion for reconsideration in due time after filing of the judgment, order or resolution interrupted the running of the sixty-day period within which to file a petition for certiorari; and that if a motion for reconsideration was denied, the aggrieved party could file the petition only within the remaining period, but which should not be less than five days in any event, reckoned from the notice of such denial. The reglementary period, however, was later modified by A.M. No. 00-2-03 S.C., now reading thusly: Sec. 4. When and where petition filed. --- The petition shall be filed not later than sixty (60) days from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from notice of the denial of said motion.

The amendatory provision, being curative in nature, should be made applicable to all cases still pending with the courts at the time of its effectivity. In Narzoles vs. NLRC,[4] the Court has said: The Court has observed that Circular No. 39-98 has generated tremendous confusion resulting in the dismissal of numerous cases for late filing. This may have been because, historically, i.e., even before the 1997 revision to the Rules of Civil Procedure, a party had a fresh period from receipt of the order denying the motion for reconsideration to file a petition for certiorari. Were it not for the amendments brought about by Circular No. 39-98, the cases so dismissed would have been resolved on the merits. Hence, the Court deemed it wise to revert to the old rule allowing a party a fresh 60-day period from notice of the denial of the motion for reconsideration to file a petition for certiorari. x x x The latest amendments took effect on September 1, 2000, following its publication in the Manila Bulletin on August 4, 2000 and in the Philippine Daily Inquirer on August 7, 2000, two newspapers of general circulation. In view of its purpose, the Resolution further amending Section 4, Rule 65, can only be described as curative in nature, and the principles governing curative statutes are applicable.

Curative statutes are enacted to cure defects in a prior law or to validate legal proceedings which would otherwise be void for want of conformity with certain legal requirements. (Erectors, Inc. vs. National Labor Relations Commission, 256 SCRA 629 [1996].) They are intended to supply defects, abridge superfluities and curb certain evils. They are intended to enable persons to carry into effect that which they have designed or intended, but has failed of expected legal consequence by reason of some statutory disability or irregularity in their own action. They make valid that which, before the enactment of the statute was invalid. Their purpose is to give validity to acts done that would have been invalid under existing laws, as if existing laws have been complied with. (Batong Buhay Gold Mines, Inc. vs. Dela Serna, 312 SCRA 22 [1999].) Curative statutes, therefore, by their very essence, are retroactive. (Municipality of San Narciso, Quezon vs. Mendez, Sr., 239 SCRA 11 *1994+.)*5+ At all events, petitioner has a valid point in emphasizing the "public nature" of the expropriated property. The petition being imbued with public interest, the Court has resolved to give it due course and to decide the case on its merits. Assailing the finding of prescription by the trial court, petitioner here posited that a motion which respondents had filed on 17 February 1984, followed up by other motions subsequent thereto, was made within the reglementary period that thereby interrupted the 5-year prescriptive period within which to enforce the 1979 judgment. Furthermore, petitioner claimed,

the receipt by respondents of partial compensation in the sum of P72,683.55 on 23 July 1984 constituted partial compliance on the part of petitioners and effectively estopped respondents from invoking prescription expressed in Section 6, Rule 39, of the Rules of Court.[6] In opposing the petition, respondents advanced the view that pursuant to Section 6, Rule 39, of the Rules of Court, the failure of petitioner to execute the judgment, dated 26 February 1979, within five years after it had become final and executory, rendered it unenforceable by mere motion. The motion for payment, dated 09 May 1984, as well as the subsequent disbursement to them of the sum of P72,683.55 by the provincial treasurer of Bulacan, could not be considered as having interrupted the five-year period, since a motion, to be considered otherwise, should instead be made by the prevailing party, in this case by petitioner. Respondents maintained that the P72,683.55 paid to them by the provincial treasurer of Bulacan pursuant to the 1984 order of the trial court was part of the initial deposit made by petitioner when it first entered possession of the property in 1969 and should not be so regarded as a partial payment. Respondents further questioned the right of PIA to transfer ownership of a portion of the property to the Bulacan State University even while the just compensation due the heirs had yet to be finally settled. The right of eminent domain is usually understood to be an ultimate right of the sovereign power to appropriate any

property within its territorial sovereignty for a public purpose.[7] Fundamental to the independent existence of a State, it requires no recognition by the Constitution, whose provisions are taken as being merely confirmatory of its presence and as being regulatory, at most, in the due exercise of the power. In the hands of the legislature, the power is inherent, its scope matching that of taxation, even that of police power itself, in many respects. It reaches to every form of property the State needs for public use and, as an old case so puts it, all separate interests of individuals in property are held under a tacit agreement or implied reservation vesting upon the sovereign the right to resume the possession of the property whenever the public interest so requires it.[8] The ubiquitous character of eminent domain is manifest in the nature of the expropriation proceedings. Expropriation proceedings are not adversarial in the conventional sense, for the condemning authority is not required to assert any conflicting interest in the property. Thus, by filing the action, the condemnor in effect merely serves notice that it is taking title and possession of the property, and the defendant asserts title or interest in the property, not to prove a right to possession, but to prove a right to compensation for the taking.[9] Obviously, however, the power is not without its limits: first, the taking must be for public use, and second, that just compensation must be given to the private owner of the

property.[10] These twin proscriptions have their origin in the recognition of the necessity for achieving balance between the State interests, on the one hand, and private rights, upon the other hand, by effectively restraining the former and affording protection to the latter.*11+ In determining public use, two approaches are utilized - the first is public employment or the actual use by the public, and the second is public advantage or benefit.[12] It is also useful to view the matter as being subject to constant growth, which is to say that as society advances, its demands upon the individual so increases, and each demand is a new use to which the resources of the individual may be devoted.[13] The expropriated property has been shown to be for the continued utilization by the PIA, a significant portion thereof being ceded for the expansion of the facilities of the Bulacan State University and for the propagation of the Philippine carabao, themselves in line with the requirements of public purpose. Respondents question the public nature of the utilization by petitioner of the condemned property, pointing out that its present use differs from the purpose originally contemplated in the 1969 expropriation proceedings. The argument is of no moment. The property has assumed a public character upon its expropriation. Surely, petitioner, as the condemnor and as the owner of the property, is well within its rights to alter and decide the use of that property, the only limitation being that it be for public use, which, decidedly, it is.

In insisting on the return of the expropriated property, respondents would exhort on the pronouncement in Provincial Government of Sorsogon vs. Vda. de Villaroya[14] where the unpaid landowners were allowed the alternative remedy of recovery of the property there in question. It might be borne in mind that the case involved the municipal government of Sorsogon, to which the power of eminent domain is not inherent, but merely delegated and of limited application. The grant of the power of eminent domain to local governments under Republic Act No. 7160[15] cannot be understood as being the pervasive and all-encompassing power vested in the legislative branch of government. For local governments to be able to wield the power, it must, by enabling law, be delegated to it by the national legislature, but even then, this delegated power of eminent domain is not, strictly speaking, a power of eminent, but only of inferior, domain or only as broad or confined as the real authority would want it to be.[16] Thus, in Valdehueza vs. Republic[17] where the private landowners had remained unpaid ten years after the termination of the expropriation proceedings, this Court ruled The points in dispute are whether such payment can still be made and, if so, in what amount. Said lots have been the subject of expropriation proceedings. By final and executory judgment in said proceedings, they were condemned for public use, as part of an airport, and ordered sold to the government. x x x It follows that both by virtue of the judgment, long final, in

the expropriation suit, as well as the annotations upon their title certificates, plaintiffs are not entitled to recover possession of their expropriated lots - which are still devoted to the public use for which they were expropriated - but only to demand the fair market value of the same. "Said relief may be granted under plaintiffs' prayer for: `such other remedies, which may be deemed just and equitable under the premises'."[18] The Court proceeded to reiterate its pronouncement in Alfonso vs. Pasay City[19] where the recovery of possession of property taken for public use prayed for by the unpaid landowner was denied even while no requisite expropriation proceedings were first instituted. The landowner was merely given the relief of recovering compensation for his property computed at its market value at the time it was taken and appropriated by the State. The judgment rendered by the Bulacan RTC in 1979 on the expropriation proceedings provides not only for the payment of just compensation to herein respondents but likewise adjudges the property condemned in favor of petitioner over which parties, as well as their privies, are bound.[20] Petitioner has occupied, utilized and, for all intents and purposes, exercised dominion over the property pursuant to the judgment. The exercise of such rights vested to it as the condemnee indeed has amounted to at least a partial compliance or satisfaction of the

1979 judgment, thereby preempting any claim of bar by prescription on grounds of non-execution. In arguing for the return of their property on the basis of non-payment, respondents ignore the fact that the right of the expropriatory authority is far from that of an unpaid seller in ordinary sales, to which the remedy of rescission might perhaps apply. An in rem proceeding, condemnation acts upon the property.[21] After condemnation, the paramount title is in the public under a new and independent title;[22] thus, by giving notice to all claimants to a disputed title, condemnation proceedings provide a judicial process for securing better title against all the world than may be obtained by voluntary conveyance.[23]

Respondents, in arguing laches against petitioner did not take into account that the same argument could likewise apply against them. Respondents first instituted proceedings for payment against petitioner on 09 May 1984, or five years after the 1979 judgment had become final. The unusually long delay in bringing the action to compel payment against herein petitioner would militate against them. Consistently with the rule that one should take good care of his own concern, respondents should have commenced the proper action upon the finality of the judgment which, indeed, resulted in a permanent deprivation of their ownership and possession of the property.[24]

The constitutional limitation of just compensation is considered to be the sum equivalent to the market value of the property, broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal action and competition or the fair value of the property as between one who receives, and one who desires to sell, it fixed at the time of the actual taking by the government.[25] Thus, if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interests on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court.[26] In fine, between the taking of the property and the actual payment, legal interests accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred.[27] The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of the property to be computed from the time petitioner instituted condemnation proceedings and took the property in September 1969. This allowance of interest on the amount found to be the value of the property as of the time of the taking computed, being an effective forbearance, at 12% per annum[28] should help eliminate the issue of the constant fluctuation and inflation of the value of the currency over time.[29] Article 1250 of the Civil Code, providing that, in case of extraordinary inflation or deflation, the value of the currency at the time of the

establishment of the obligation shall be the basis for the payment when no agreement to the contrary is stipulated, has strict application only to contractual obligations.[30] In other words, a contractual agreement is needed for the effects of extraordinary inflation to be taken into account to alter the value of the currency.[31] All given, the trial court of Bulacan in issuing its order, dated 01 March 2000, vacating its decision of 26 February 1979 has acted beyond its lawful cognizance, the only authority left to it being to order its execution. Verily, private respondents, although not entitled to the return of the expropriated property, deserve to be paid promptly on the yet unpaid award of just compensation already fixed by final judgment of the Bulacan RTC on 26 February 1979 at P6.00 per square meter, with legal interest thereon at 12% per annum computed from the date of "taking" of the property, i.e., 19 September 1969, until the due amount shall have been fully paid. WHEREFORE, the petition is GRANTED. The resolution, dated 31 July 2000, of the Court of Appeals dismissing the petition for certiorari, as well as its resolution of 04 January 2001 denying the motion for reconsideration, and the decision of the Regional Trial Court of Bulacan, dated 01 March 2000, are SET ASIDE. Let the case be forthwith remanded to the Regional Trial Court of Bulacan for the proper execution of its decision promulgated on 26 February 1979 which is hereby REINSTATED. No costs.

SO ORDERED. Davide, Jr., C.J., (Chairman), Kapunan, Ynares-Santiago, and Austria-Martinez, JJ., concur. [1] Rollo, p. 66. [2] The Dispositive Portion of Proclamation No. 22, entitled TRANSFERRING OWNERSHIP OF A PORTION OF THE PROPERTY OF THE PHILIPPINE INFORMATION AGENCY TO THE BULACAN STATE UNIVERSITY, reads: NOW, THEREFORE, I, JOSEPH EJERCITO ESTRADA, President of the Republic of the Philippines, by virtue of the powers vested in me by law, do hereby transfer to the Bulacan State University, twenty (20) hectares of the property mentioned above, and another five (5) hectares for the exclusive use of the propagation of the Philippine carabao, adjacent to the university campus, located in Malolos, Bulacan. The remaining portions of the property fronting the national highway shall be retained by the Philippine Information Agency for its proposed development plan, including offices of the PIA Regional Office, the Bulacan Provincial Information Center, the training center and the depository of equipment and other properties of PIA. [3] Rollo, pp. 76-77.

[4] 341 SCRA 533. See also PCGG vs. Desierto, 28 December 2001, G.R. No. 140358; PCGG vs. Desierto, 19 January 2001, G.R. No. 140323; Medina Investigation vs. Court of Appeals, 20 March 2001, G.R. No. 144074; Pfizer vs. Galan, 25 May 2001, G.R. No. 143389; Santos vs. Court of Appeals, 05 July 2001, G.R. No. 141947. [5] At pp. 537-538. [6] Section 6, Rule 39 of the Rules of Court provides: Execution by motion or by independent action. A final and executory judgment or order may be executed on motion within five (5) years from the date of its entry. After the lapse of such time, and before it is barred by the Statute of Limitations, a judgment may be enforced by action. [7] Bernas, 1987 Edition, p. 276, quoting Justice Story in Charles River Bridge vs. Warren Bridge. [8] US vs. Certain Lands in Highlands (DY NY) 48 F Supp 306. [9] US vs. Certain Lands in Highlands (DY NY) 48 F Supp 306; San Bernardino Valley Municipal Water District vs. Gage Canal Co. (4th Dist) 226 Cal App 2d 206, 37 Cal Rptr 856. [10] Sea vs. Manila Railroad Co., 42 Phil. 102.

[11] Visayan Refining Co., vs. Camus, 40 Phil 550. [12] Thornton Development Authority vs. Upah (DC Colo) 640 F Supp 1071. [13] Visayan Refining, supra. [14] 153 SCRA 291. [15] See Local Government Code of 1991 [16] City of Manila vs. Chinese Community of Manila, 40 Phil 349. [17] 17 SCRA 107. [18] At p. 112. [19] 106 Phil. 1017. [20] Mines vs. Canal Authority of the State (Fla) 467 So2d 989, 10 FLW 230. [21] Cadorette vs. US CCA (Mass) 988 F2d 215. [22] Ibid. [23] Ibid.

[24] 17 SCRA 107, supra. [25] Manila Railway Co. vs. Fabie, 17 Phil 206. [26] Philippine Railway Co. vs. Solon, 13 Phil 34. [27] Commissioner of Public Highways vs. Burgos, 96 SCRA 831. [28] Eastern Shipping Lines, Inc. vs. Court of Appeals, 234 SCRA 78. [29] US vs. Klamath and Moadoc Tribes, 304 US 119, 82 L Ed 1219, 58 S Ct 799. [30] Commissioner of Public Highways vs. Burgos, supra. [31] Ibid.

EN BANC

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and AIR TRANSPORTATION OFFICE,

Petitioners,

versus -

BERNARDO L. LOZADA, SR., and the HEIRS OF ROSARIO MERCADO, namely, VICENTE LOZADA, MARIO M. LOZADA, MARCIA L. GODINEZ, VIRGINIA L. FLORES, BERNARDO LOZADA, JR., DOLORES GACASAN, SOCORRO CAFARO and ROSARIO LOZADA, represented by MARCIA LOZADA GODINEZ,

Respondents.

G.R. No. 176625

Present:

PUNO, C.J., CARPIO, CORONA, CARPIO MORALES, LEONARDO-DE CASTRO, BRION, PERALTA,* BERSAMIN, VELASCO, JR., NACHURA,

DEL CASTILLO, ABAD, VILLARAMA, JR., PEREZ, and MENDOZA, JJ.

Promulgated:

February 25, 2010

x------------------------------------------------------------------------------------x

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse, annul, and set aside the Decision[1] dated February 28, 2006 and the Resolution[2] dated February 7, 2007 of the Court of Appeals (CA) (Cebu City), Twentieth Division, in CA-G.R. CV No. 65796.

The antecedent facts and proceedings are as follows:

Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017 square meters, more or less, located in Lahug, Cebu City. Its original owner was Anastacio Deiparine when the same was subject to expropriation proceedings, initiated by the Republic of the Philippines (Republic), represented by the then Civil Aeronautics Administration (CAA), for the expansion and improvement of the Lahug Airport. The

case was filed with the then Court of First Instance of Cebu, Third Branch, and docketed as Civil Case No. R-1881.

As early as 1947, the lots were already occupied by the U.S. Army. They were turned over to the Surplus Property Commission, the Bureau of Aeronautics, the National Airport Corporation and then to the CAA.

During the pendency of the expropriation proceedings, respondent Bernardo L. Lozada, Sr. acquired Lot No. 88 from Deiparine. Consequently, Transfer Certificate of Title (TCT) No. 9045 was issued in Lozadas name.

On December 29, 1961, the trial court rendered judgment in favor of the Republic and ordered the latter to pay Lozada the fair market value of Lot No. 88, adjudged at P3.00 per square meter, with consequential damages by way of legal interest computed from November 16, 1947the time when the lot was first occupied by the airport. Lozada received the amount of P3,018.00 by way of payment.

The affected landowners appealed. Pending appeal, the Air Transportation Office (ATO), formerly CAA, proposed a compromise settlement whereby the owners of the lots affected by the expropriation proceedings would either not appeal or withdraw their respective appeals in consideration of a commitment that the expropriated lots would be resold at the price they were expropriated in the event that the ATO would abandon the Lahug Airport, pursuant to an established policy involving similar cases. Because of this promise, Lozada did not pursue his appeal. Thereafter, Lot No. 88 was transferred and registered in the name of the Republic under TCT No. 25057.

The projected improvement and expansion plan of the old Lahug Airport, however, was not pursued.

Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, Jr., requesting to repurchase the lots, as per previous agreement. The CAA replied that there might still be a need for the Lahug Airport to be used as an emergency DC-3 airport. It reiterated, however, the assurance that should this Office dispose and resell the properties which may be found to be no longer necessary as an airport, then the policy of this

Office is to give priority to the former owners subject to the approval of the President.

On November 29, 1989, then President Corazon C. Aquino issued a Memorandum to the Department of Transportation, directing the transfer of general aviation operations of the Lahug Airport to the Mactan International Airport before the end of 1990 and, upon such transfer, the closure of the Lahug Airport.

Sometime in 1990, the Congress of the Philippines passed Republic Act (R.A.) No. 6958, entitled An Act Creating the Mactan-Cebu International Airport Authority, Transferring Existing Assets of the Mactan International Airport and the Lahug Airport to the Authority, Vesting the Authority with Power to Administer and Operate the Mactan International Airport and the Lahug Airport, and For Other Purposes.

From the date of the institution of the expropriation proceedings up to the present, the public purpose of the said expropriation (expansion of the airport) was never actually initiated, realized, or implemented. Instead, the old airport was converted into a commercial complex. Lot No. 88 became the

site of a jail known as Bagong Buhay Rehabilitation Complex, while a portion thereof was occupied by squatters.[3] The old airport was converted into what is now known as the Ayala I.T. Park, a commercial area.

Thus, on June 4, 1996, petitioners initiated a complaint for the recovery of possession and reconveyance of ownership of Lot No. 88. The case was docketed as Civil Case No. CEB-18823 and was raffled to the Regional Trial Court (RTC), Branch 57, Cebu City. The complaint substantially alleged as follows:

(a) Spouses Bernardo and Rosario Lozada were the registered owners of Lot No. 88 covered by TCT No. 9045;

(b) In the early 1960s, the Republic sought to acquire by expropriation Lot No. 88, among others, in connection with its program for the improvement and expansion of the Lahug Airport;

(c) A decision was rendered by the Court of First Instance in favor of the Government and against the land owners, among whom was Bernardo Lozada, Sr. appealed therefrom;

(d) During the pendency of the appeal, the parties entered into a compromise settlement to the effect that the subject property would be resold to the original owner at the same price when it was expropriated in the event that the Government abandons the Lahug Airport;

(e) Title to Lot No. 88 was subsequently transferred to the Republic of the Philippines (TCT No. 25057);

(f) The projected expansion and improvement of the Lahug Airport did not materialize;

(g) Plaintiffs sought to repurchase their property from then CAA Director Vicente Rivera. The latter replied by giving as assurance that priority would be given to the previous owners,

subject to the approval of the President, should CAA decide to dispose of the properties;

(h) On November 29, 1989, then President Corazon C. Aquino, through a Memorandum to the Department of Transportation and Communications (DOTC), directed the transfer of general aviation operations at the Lahug Airport to the Mactan-Cebu International Airport Authority;

(i) Since the public purpose for the expropriation no longer exists, the property must be returned to the plaintiffs.[4]

In their Answer, petitioners asked for the immediate dismissal of the complaint. They specifically denied that the Government had made assurances to reconvey Lot No. 88 to respondents in the event that the property would no longer be needed for airport operations. Petitioners instead asserted that the judgment of condemnation was unconditional, and respondents were, therefore, not entitled to recover the

expropriated property abandonment thereof.

notwithstanding

non-use

or

After pretrial, but before trial on the merits, the parties stipulated on the following set of facts:

(1) The lot involved is Lot No. 88-SWO-25042 of the Banilad Estate, situated in the City of Cebu, containing an area of One Thousand Seventeen (1,017) square meters, more or less;

(2) The property was expropriated among several other properties in Lahug in favor of the Republic of the Philippines by virtue of a Decision dated December 29, 1961 of the CFI of Cebu in Civil Case No. R-1881;

(3) The public purpose for which the property was expropriated was for the purpose of the Lahug Airport;

(4) After the expansion, the property was transferred in the name of MCIAA; [and]

(5) On November 29, 1989, then President Corazon C. Aquino directed the Department of Transportation and Communication to transfer general aviation operations of the Lahug Airport to the Mactan-Cebu International Airport Authority and to close the Lahug Airport after such transfer[.][5]

During trial, respondents presented Bernardo Lozada, Sr. as their lone witness, while petitioners presented their own witness, Mactan-Cebu International Airport Authority legal assistant Michael Bacarisas.

On October 22, 1999, the RTC rendered its Decision, disposing as follows:

WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the plaintiffs, Bernardo L. Lozada, Sr., and the heirs of Rosario Mercado, namely, Vicente M. Lozada, Marcia L. Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and Rosario M. Lozada, represented by their attorney-in-fact Marcia Lozada Godinez, and against defendants Cebu-Mactan International Airport Authority (MCIAA) and Air Transportation Office (ATO):

1. ordering MCIAA and ATO to restore to plaintiffs the possession and ownership of their land, Lot No. 88 Psd-821 (SWO-23803), upon payment of the expropriation price to plaintiffs; and

2. ordering the Register of Deeds to effect the transfer of the Certificate of Title from defendant[s] to plaintiffs on Lot No. [88], cancelling TCT No. 20357 in the name of defendant MCIAA and to issue a new title on the same lot in the name of Bernardo L. Lozada, Sr. and the heirs of Rosario Mercado, namely: Vicente M. Lozada, Mario M. Lozada, Marcia L. Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and Rosario M. Lozada.

No pronouncement as to costs.

SO ORDERED.[6]

Aggrieved, petitioners interposed an appeal to the CA. After the filing of the necessary appellate briefs, the CA rendered its assailed Decision dated February 28, 2006, denying petitioners appeal and affirming in toto the Decision of the RTC, Branch 57, Cebu City. Petitioners motion for reconsideration was, likewise, denied in the questioned CA Resolution dated February 7, 2007.

Hence, this petition arguing that: (1) the respondents utterly failed to prove that there was a repurchase agreement or compromise settlement between them and the Government; (2) the judgment in Civil Case No. R-1881 was absolute and unconditional, giving title in fee simple to the Republic; and (3) the respondents claim of verbal assurances from government officials violates the Statute of Frauds.

The petition should be denied.

Petitioners anchor their claim to the controverted property on the supposition that the Decision in the pertinent expropriation proceedings did not provide for the condition that should the intended use of Lot No. 88 for the expansion of the Lahug Airport be aborted or abandoned, the property would revert to respondents, being its former owners. Petitioners cite, in support of this position, Fery v. Municipality of Cabanatuan,[7] which declared that the Government acquires only such rights in expropriated parcels of land as may be allowed by the character of its title over the properties

If x x x land is expropriated for a particular purpose, with the condition that when that purpose is ended or abandoned the property shall return to its former owner, then, of course, when the purpose is terminated or abandoned the former owner reacquires the property so expropriated. If x x x land is expropriated for a public street and the expropriation is granted upon condition that the city can only use it for a public street, then, of course, when the city abandons its use as a public

street, it returns to the former owner, unless there is some statutory provision to the contrary. x x x. If, upon the contrary, however, the decree of expropriation gives to the entity a fee simple title, then, of course, the land becomes the absolute property of the expropriator, whether it be the State, a province, or municipality, and in that case the non-user does not have the effect of defeating the title acquired by the expropriation proceedings. x x x.

When land has been acquired for public use in fee simple, unconditionally, either by the exercise of eminent domain or by purchase, the former owner retains no right in the land, and the public use may be abandoned, or the land may be devoted to a different use, without any impairment of the estate or title acquired, or any reversion to the former owner. x x x.[8]

Contrary to the stance of petitioners, this Court had ruled otherwise in Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority,[9] thus

Moreover, respondent MCIAA has brought to our attention a significant and telling portion in the Decision in Civil Case No. R-1881 validating our discernment that the expropriation by the predecessors of respondent was ordered under the running impression that Lahug Airport would continue in operation

As for the public purpose of the expropriation proceeding, it cannot now be doubted. Although Mactan Airport is being constructed, it does not take away the actual usefulness and importance of the Lahug Airport: it is handling the air traffic both civilian and military. From it aircrafts fly to Mindanao and Visayas and pass thru it on their flights to the North and Manila. Then, no evidence was adduced to show how soon is the Mactan Airport to be placed in operation and whether the Lahug Airport will be closed immediately thereafter. It is up to the other departments of the Government to determine said matters. The Court cannot substitute its judgment for those of the said departments or agencies. In the absence of such showing, the Court will presume that the Lahug Airport will continue to be in operation (emphasis supplied).

While in the trial in Civil Case No. R-1881 [we] could have simply acknowledged the presence of public purpose for the

exercise of eminent domain regardless of the survival of Lahug Airport, the trial court in its Decision chose not to do so but instead prefixed its finding of public purpose upon its understanding that Lahug Airport will continue to be in operation. Verily, these meaningful statements in the body of the Decision warrant the conclusion that the expropriated properties would remain to be so until it was confirmed that Lahug Airport was no longer in operation. This inference further implies two (2) things: (a) after the Lahug Airport ceased its undertaking as such and the expropriated lots were not being used for any airport expansion project, the rights vis--vis the expropriated Lots Nos. 916 and 920 as between the State and their former owners, petitioners herein, must be equitably adjusted; and (b) the foregoing unmistakable declarations in the body of the Decision should merge with and become an intrinsic part of the fallo thereof which under the premises is clearly inadequate since the dispositive portion is not in accord with the findings as contained in the body thereof.[10]

Indeed, the Decision in Civil Case No. R-1881 should be read in its entirety, wherein it is apparent that the acquisition by the Republic of the expropriated lots was subject to the condition that the Lahug Airport would continue its operation. The condition not having materialized because the airport had

been abandoned, the former owner should then be allowed to reacquire the expropriated property.[11]

On this note, we take this opportunity to revisit our ruling in Fery, which involved an expropriation suit commenced upon parcels of land to be used as a site for a public market. Instead of putting up a public market, respondent Cabanatuan constructed residential houses for lease on the area. Claiming that the municipality lost its right to the property taken since it did not pursue its public purpose, petitioner Juan Fery, the former owner of the lots expropriated, sought to recover his properties. However, as he had admitted that, in 1915, respondent Cabanatuan acquired a fee simple title to the lands in question, judgment was rendered in favor of the municipality, following American jurisprudence, particularly City of Fort Wayne v. Lake Shore & M.S. RY. Co.,[12] McConihay v. Theodore Wright,[13] and Reichling v. Covington Lumber Co.,[14] all uniformly holding that the transfer to a third party of the expropriated real property, which necessarily resulted in the abandonment of the particular public purpose for which the property was taken, is not a ground for the recovery of the same by its previous owner, the title of the expropriating agency being one of fee simple.

Obviously, Fery was not decided pursuant to our now sacredly held constitutional right that private property shall not be taken for public use without just compensation.[15] It is well settled that the taking of private property by the Governments power of eminent domain is subject to two mandatory requirements: (1) that it is for a particular public purpose; and (2) that just compensation be paid to the property owner. These requirements partake of the nature of implied conditions that should be complied with to enable the condemnor to keep the property expropriated.[16]

More particularly, with respect to the element of public use, the expropriator should commit to use the property pursuant to the purpose stated in the petition for expropriation filed, failing which, it should file another petition for the new purpose. If not, it is then incumbent upon the expropriator to return the said property to its private owner, if the latter desires to reacquire the same. Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for the proper exercise of the power of eminent domain, namely, the particular public purpose for which the property will be devoted. Accordingly, the private property owner would be denied due process of law, and the judgment would violate the property owners right to justice, fairness, and equity.

In light of these premises, we now expressly hold that the taking of private property, consequent to the Governments exercise of its power of eminent domain, is always subject to the condition that the property be devoted to the specific public purpose for which it was taken. Corollarily, if this particular purpose or intent is not initiated or not at all pursued, and is peremptorily abandoned, then the former owners, if they so desire, may seek the reversion of the property, subject to the return of the amount of just compensation received. In such a case, the exercise of the power of eminent domain has become improper for lack of the required factual justification.[17]

Even without the foregoing declaration, in the instant case, on the question of whether respondents were able to establish the existence of an oral compromise agreement that entitled them to repurchase Lot No. 88 should the operations of the Lahug Airport be abandoned, we rule in the affirmative.

It bears stressing that both the RTC, Branch 57, Cebu and the CA have passed upon this factual issue and have declared, in no uncertain terms, that a compromise agreement was, in fact, entered into between the Government and respondents, with

the former undertaking to resell Lot No. 88 to the latter if the improvement and expansion of the Lahug Airport would not be pursued. In affirming the factual finding of the RTC to this effect, the CA declared

Lozadas testimony is cogent. An octogenarian widowerretiree and a resident of Moon Park, California since 1974, he testified that government representatives verbally promised him and his late wife while the expropriation proceedings were ongoing that the government shall return the property if the purpose for the expropriation no longer exists. This promise was made at the premises of the airport. As far as he could remember, there were no expropriation proceedings against his property in 1952 because the first notice of expropriation he received was in 1962. Based on the promise, he did not hire a lawyer. Lozada was firm that he was promised that the lot would be reverted to him once the public use of the lot ceases. He made it clear that the verbal promise was made in Lahug with other lot owners before the 1961 decision was handed down, though he could not name the government representatives who made the promise. It was just a verbal promise; nevertheless, it is binding. The fact that he could not supply the necessary details for the establishment of his assertions during cross-examination, but that When it will not be used as intended, it will be returned back, we just believed in the government, does not dismantle the credibility and

truthfulness of his allegation. This Court notes that he was 89 years old when he testified in November 1997 for an incident which happened decades ago. Still, he is a competent witness capable of perceiving and making his perception known. The minor lapses are immaterial. The decision of the competency of a witness rests primarily with the trial judge and must not be disturbed on appeal unless it is clear that it was erroneous. The objection to his competency must be made before he has given any testimony or as soon as the incompetency becomes apparent. Though Lozada is not part of the compromise agreement,[18] he nevertheless adduced sufficient evidence to support his claim.[19]

As correctly found by the CA, unlike in Mactan Cebu International Airport Authority v. Court of Appeals,[20] cited by petitioners, where respondent therein offered testimonies which were hearsay in nature, the testimony of Lozada was based on personal knowledge as the assurance from the government was personally made to him. His testimony on cross-examination destroyed neither his credibility as a witness nor the truthfulness of his words.

Verily, factual findings of the trial court, especially when affirmed by the CA, are binding and conclusive on this Court and may not be reviewed. A petition for certiorari under Rule 45 of the Rules of Court contemplates only questions of law and not of fact.[21] Not one of the exceptions to this rule is present in this case to warrant a reversal of such findings.

As regards the position of petitioners that respondents testimonial evidence violates the Statute of Frauds, suffice it to state that the Statute of Frauds operates only with respect to executory contracts, and does not apply to contracts which have been completely or partially performed, the rationale thereof being as follows:

In executory contracts there is a wide field for fraud because unless they be in writing there is no palpable evidence of the intention of the contracting parties. The statute has precisely been enacted to prevent fraud. However, if a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already delivered by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby.[22]

In this case, the Statute of Frauds, invoked by petitioners to bar the claim of respondents for the reacquisition of Lot No. 88, cannot apply, the oral compromise settlement having been partially performed. By reason of such assurance made in their favor, respondents relied on the same by not pursuing their appeal before the CA. Moreover, contrary to the claim of petitioners, the fact of Lozadas eventual conformity to the appraisal of Lot No. 88 and his seeking the correction of a clerical error in the judgment as to the true area of Lot No. 88 do not conclusively establish that respondents absolutely parted with their property. To our mind, these acts were simply meant to cooperate with the government, particularly because of the oral promise made to them.

The right of respondents to repurchase Lot No. 88 may be enforced based on a constructive trust constituted on the property held by the government in favor of the former. On this note, our ruling in Heirs of Timoteo Moreno is instructive, viz.:

Mactan-Cebu International Airport Authority is correct in stating that one would not find an express statement in the Decision in Civil Case No. R-1881 to the effect that the [condemned] lot would return to [the landowner] or that [the landowner] had a right to repurchase the same if the purpose for which it was expropriated is ended or abandoned or if the property was to be used other than as the Lahug Airport. This omission notwithstanding, and while the inclusion of this pronouncement in the judgment of condemnation would have been ideal, such precision is not absolutely necessary nor is it fatal to the cause of petitioners herein. No doubt, the return or repurchase of the condemned properties of petitioners could be readily justified as the manifest legal effect or consequence of the trial courts underlying presumption that Lahug Airport will continue to be in operation when it granted the complaint for eminent domain and the airport discontinued its activities.

The predicament of petitioners involves a constructive trust, one that is akin to the implied trust referred to in Art. 1454 of the Civil Code, If an absolute conveyance of property is made in order to secure the performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the reconveyance of the property to him. In the case at bar, petitioners conveyed

Lots No. 916 and 920 to the government with the latter obliging itself to use the realties for the expansion of Lahug Airport; failing to keep its bargain, the government can be compelled by petitioners to reconvey the parcels of land to them, otherwise, petitioners would be denied the use of their properties upon a state of affairs that was not conceived nor contemplated when the expropriation was authorized.

Although the symmetry between the instant case and the situation contemplated by Art. 1454 is not perfect, the provision is undoubtedly applicable. For, as explained by an expert on the law of trusts: The only problem of great importance in the field of constructive trust is to decide whether in the numerous and varying fact situations presented to the courts there is a wrongful holding of property and hence a threatened unjust enrichment of the defendant. Constructive trusts are fictions of equity which are bound by no unyielding formula when they are used by courts as devices to remedy any situation in which the holder of legal title may not in good conscience retain the beneficial interest.

In constructive trusts, the arrangement is temporary and passive in which the trustees sole duty is to transfer the title and possession over the property to the plaintiff-beneficiary. Of

course, the wronged party seeking the aid of a court of equity in establishing a constructive trust must himself do equity. Accordingly, the court will exercise its discretion in deciding what acts are required of the plaintiff-beneficiary as conditions precedent to obtaining such decree and has the obligation to reimburse the trustee the consideration received from the latter just as the plaintiff-beneficiary would if he proceeded on the theory of rescission. In the good judgment of the court, the trustee may also be paid the necessary expenses he may have incurred in sustaining the property, his fixed costs for improvements thereon, and the monetary value of his services in managing the property to the extent that plaintiff-beneficiary will secure a benefit from his acts.

The rights and obligations between the constructive trustee and the beneficiary, in this case, respondent MCIAA and petitioners over Lots Nos. 916 and 920, are echoed in Art. 1190 of the Civil Code, When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received x x x In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article shall be applied to the party who is bound to return x x x.*23+

On the matter of the repurchase price, while petitioners are obliged to reconvey Lot No. 88 to respondents, the latter must return to the former what they received as just compensation for the expropriation of the property, plus legal interest to be computed from default, which in this case runs from the time petitioners comply with their obligation to respondents.

Respondents must likewise pay petitioners the necessary expenses they may have incurred in maintaining Lot No. 88, as well as the monetary value of their services in managing it to the extent that respondents were benefited thereby.

Following Article 1187[24] of the Civil Code, petitioners may keep whatever income or fruits they may have obtained from Lot No. 88, and respondents need not account for the interests that the amounts they received as just compensation may have earned in the meantime.

In accordance with Article 1190[25] of the Civil Code vis-vis Article 1189, which provides that (i)f a thing is improved by its nature, or by time, the improvement shall inure to the benefit of the creditor x x x, respondents, as creditors, do not have to pay, as part of the process of restitution, the appreciation in value of Lot No. 88, which is a natural consequence of nature and time.[26]

WHEREFORE, the petition is DENIED. The February 28, 2006 Decision of the Court of Appeals, affirming the October 22, 1999 Decision of the Regional Trial Court, Branch 87, Cebu City, and its February 7, 2007 Resolution are AFFIRMED with MODIFICATION as follows:

1. Respondents are ORDERED to return to petitioners the just compensation they received for the expropriation of Lot No. 88, plus legal interest, in the case of default, to be computed from the time petitioners comply with their obligation to reconvey Lot No. 88 to them;

2. Respondents are ORDERED to pay petitioners the necessary expenses the latter incurred in maintaining Lot No. 88,

plus the monetary value of their services to the extent that respondents were benefited thereby;

3. Petitioners are ENTITLED to keep whatever fruits and income they may have obtained from Lot No. 88; and

4. Respondents are also ENTITLED to keep whatever interests the amounts they received as just compensation may have earned in the meantime, as well as the appreciation in value of Lot No. 88, which is a natural consequence of nature and time;

In light of the foregoing modifications, the case is REMANDED to the Regional Trial Court, Branch 57, Cebu City, only for the purpose of receiving evidence on the amounts that respondents will have to pay petitioners in accordance with this Courts decision. No costs.

SO ORDERED.

ANTONIO EDUARDO B. NACHURA Associate Justice

WE CONCUR:

REYNATO S. PUNO Chief Justice

ANTONIO T. CARPIO Associate Justice

RENATO C. CORONA Associate Justice

CONCHITA CARPIO MORALES

Associate Justice

PRESBITERO J. VELASCO, JR. Associate Justice

TERESITA J. LEONARDO-DE CASTRO Associate Justice

ARTURO D. BRION Associate Justice

(on official leave) DIOSDADO M. PERALTA Associate Justice

LUCAS P. BERSAMIN

Associate Justice

MARIANO C. DEL CASTILLO Associate Justice

ROBERTO A. ABAD Associate Justice

MARTIN S. VILLARAMA, JR. Associate Justice

JOSE PORTUGAL PEREZ Associate Justice

JOSE CATRAL MENDOZA Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I hereby certify that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Court.

REYNATO S. PUNO Chief Justice

On official leave.

[1] Penned by Associate Justice Enrico A. Lanzanas, with Associate Justices Pampio A. Abarintos and Apolinario D. Bruselas, Jr., concurring; rollo, pp. 46-65. [2] [3] [4] [5] [6] [7] [8] [9] [10] Rollo, pp. 67-68. TSN, June 25, 1998, p. 7. Rollo, pp. 20-21. Id. at 22-23. Records, p. 178. 42 Phil. 28 (1921). Id. at 29-30. G.R. No. 156273, October 15, 2003, 413 SCRA 502. Id. at 509-510.

[11] Ruling on the Motion for Reconsideration affirming the Decision; Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority, G.R. No. 156273, August 9, 2005, 466 SCRA 288, 305.

[12] [13] [14] [15]

132 Ind. 558, November 5, 1892. 121 U.S. 932, April 11, 1887. 57 Wash. 225, February 4, 1910. CONSTITUTION, Art. III, Sec. 9.

[16] Supra note 11, at 302; Vide Republic v. Lim, G.R. No. 161656, June 29, 2005, 462 SCRA 265.

[17] Vide the Separate Concurring Opinion of Associate Justice Presbitero J. Velasco, Jr. *18+ Petitioners witness Michael Bacarisas testified that three other lot owners entered into a written compromise agreement with the government but Lozada was not part of it. [19] Rollo, pp. 58-59.

[20]

G.R. No. 121506, October 30, 1996, 263 SCRA 736.

[21] Caluag v. People, G.R. No. 171511, March 4, 2009, 580 SCRA 575, 583; Gregorio Araneta University Foundation v. Regional Trial Court of Kalookan City, Br. 120, G.R. No. 139672, March 4, 2009, 580 SCRA 532, 544; Heirs of Jose T. Calo v. Calo, G.R. No. 156101, February 10, 2009, 578 SCRA 226, 232. [22] Mactan-Cebu International Airport Authority v. Tudtud, G.R. No. 174012, November 14, 2008, 571 SCRA 165, 175. [23] Supra note 9, at 512-514.

[24] Art. 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. x x x. [25] Art. 1190. When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received.

In case of the loss, deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in the preceding article (Article 1189) shall be applied to the party who is bound to return. [26] Mactan-Cebu International Airport Authority v . Tudtud, supra note 22, at 177.

E. JUST Compesation

lawphil Today is Saturday, November 17, 2012 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-59603 April 29, 1987

EXPORT PROCESSING ZONE AUTHORITY, petitioner, vs. HON. CEFERINO E. DULAY, in his capacity as the Presiding Judge, Court of First Instance of Cebu, Branch XVI, Lapu-Lapu

City, and SAN ANTONIO DEVELOPMENT respondents. Elena M. Cuevas for respondents. GUTIERREZ, JR., J.:

CORPORATION,

The question raised in this petition is whether or not Presidential Decrees Numbered 76, 464, 794 and 1533 have repealed and superseded Sections 5 to 8 of Rule 67 of the Revised Rules of Court, such that in determining the just compensation of property in an expropriation case, the only basis should be its market value as declared by the owner or as determined by the assessor, whichever is lower. On January 15, 1979, the President of the Philippines, issued Proclamation No. 1811, reserving a certain parcel of land of the public domain situated in the City of Lapu-Lapu, Island of Mactan, Cebu and covering a total area of 1,193,669 square meters, more or less, for the establishment of an export processing zone by petitioner Export Processing Zone Authority (EPZA). Not all the reserved area, however, was public land. The proclamation included, among others, four (4) parcels of land with an aggregate area of 22,328 square meters owned and registered in the name of the private respondent. The petitioner, therefore, offered to purchase the parcels of land from the respondent in acccordance with the valuation set forth in

Section 92, Presidential Decree (P.D.) No. 464, as amended. The parties failed to reach an agreement regarding the sale of the property. The petitioner filed with the then Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, a complaint for expropriation with a prayer for the issuance of a writ of possession against the private respondent, to expropriate the aforesaid parcels of land pursuant to P.D. No. 66, as amended, which empowers the petitioner to acquire by condemnation proceedings any property for the establishment of export processing zones, in relation to Proclamation No. 1811, for the purpose of establishing the Mactan Export Processing Zone. On October 21, 1980, the respondent judge issued a writ of possession authorizing the petitioner to take immediate possession of the premises. On December 23, 1980, the private respondent flied its answer. At the pre-trial conference on February 13, 1981, the respondent judge issued an order stating that the parties have agreed that the only issue to be resolved is the just compensation for the properties and that the pre-trial is thereby terminated and the hearing on the merits is set on April 2, 1981. On February 17, 1981, the respondent judge issued the order of condemnation declaring the petitioner as having the lawful right to take the properties sought to be condemned, upon the

payment of just compensation to be determined as of the filing of the complaint. The respondent judge also issued a second order, subject of this petition, appointing certain persons as commissioners to ascertain and report to the court the just compensation for the properties sought to be expropriated. On June 19, 1981, the three commissioners submitted their consolidated report recommending the amount of P15.00 per square meter as the fair and reasonable value of just compensation for the properties. On July 29, 1981, the petitioner Med a Motion for Reconsideration of the order of February 19, 1981 and Objection to Commissioner's Report on the grounds that P.D. No. 1533 has superseded Sections 5 to 8 of Rule 67 of the Rules of Court on the ascertainment of just compensation through commissioners; and that the compensation must not exceed the maximum amount set by P.D. No. 1533. On November 14, 1981, the trial court denied the petitioner's motion for reconsideration and gave the latter ten (10) days within which to file its objection to the Commissioner's Report. On February 9, 1982, the petitioner flied this present petition for certiorari and mandamus with preliminary restraining order, enjoining the trial court from enforcing the order dated February 17, 1981 and from further proceeding with the hearing of the expropriation case.

The only issue raised in this petition is whether or not Sections 5 to 8, Rule 67 of the Revised Rules of Court had been repealed or deemed amended by P.D. No. 1533 insofar as the appointment of commissioners to determine the just compensation is concerned. Stated in another way, is the exclusive and mandatory mode of determining just compensation in P.D. No. 1533 valid and constitutional? The petitioner maintains that the respondent judge acted in excess of his jurisdiction and with grave abuse of discretion in denying the petitioner's motion for reconsideration and in setting the commissioner's report for hearing because under P.D. No. 1533, which is the applicable law herein, the basis of just compensation shall be the fair and current market value declared by the owner of the property sought to be expropriated or such market value as determined by the assessor, whichever is lower. Therefore, there is no more need to appoint commissioners as prescribed by Rule 67 of the Revised Rules of Court and for said commissioners to consider other highly variable factors in order to determine just compensation. The petitioner further maintains that P.D. No. 1533 has vested on the assessors and the property owners themselves the power or duty to fix the market value of the properties and that said property owners are given the full opportunity to be heard before the Local Board of Assessment Appeals and the Central Board of Assessment Appeals. Thus, the vesting on the assessor or the property owner of the right to determine the just

compensation in expropriation proceedings, with appropriate procedure for appeal to higher administrative boards, is valid and constitutional. Prior to the promulgation of P.D. Nos. 76, 464, 794 and 1533, this Court has interpreted the eminent domain provisions of the Constitution and established the meaning, under the fundametal law, of just compensation and who has the power to determine it. Thus, in the following cases, wherein the filing of the expropriation proceedings were all commenced prior to the promulgation of the aforementioned decrees, we laid down the doctrine onjust compensation: Municipality of Daet v. Court of Appeals (93 SCRA 503, 516), xxx xxx xxx

"And in the case of J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413, the Court, speaking thru now Chief Justice Fernando, reiterated the 'well-settled (rule) that just compensation means the equivalent for the value of the property at the time of its taking. Anything beyond that is more and anything short of that is less, than just compensation. It means a fair and full equivalent for the loss sustained, which is the measure of the indemnity, not whatever gain would accrue to the expropriating entity." Garcia v. Court ofappeals (102 SCRA 597, 608),

xxx

xxx

xxx

"Hence, in estimating the market value, all the capabilities of the property and all the uses to which it may be applied or for which it is adapted are to be considered and not merely the condition it is in the time and the use to which it is then applied by the owner. All the facts as to the condition of the property and its surroundings, its improvements and capabilities may be shown and considered in estimating its value." Republic v. Santos (141 SCRA 30, 35-36), "According to section 8 of Rule 67, the court is not bound by the commissioners' report. It may make such order or render such judgment as shall secure to the plaintiff the property essential to the exercise of his right of condemnation, and to the defendant just compensation for the property expropriated. This Court may substitute its own estimate of the value as gathered from the record (Manila Railroad Company v. Velasquez, 32 Phil. 286)." However, the promulgation of the aforementioned decrees practically set aside the above and many other precedents hammered out in the course of evidence-laden, well argued, fully heard, studiously deliberated, and judiciously considered court proceedings. The decrees categorically and peremptorily limited the definition of just compensation thus:

P.D. No. 76: xxx xxx xxx

"For purposes of just compensation in cases of private property acquired by the government for public use, the basis shall be the current and fair market value declared by the owner or administrator, or such market value as determined by the Assessor, whichever is lower." P.D. No. 464: "Section 92. Basis for payment of just compensation in expropriation proceedings. In determining just compensation which private property is acquired by the government for public use, the basis shall be the market value declared by the owner or administrator or anyone having legal interest in the property, or such market value as determined by the assessor, whichever is lower." P.D. No. 794: "Section 92. Basis for payment of just compensation in expropriation proceedings. In determining just compensation when private property is acquired by the government for public use, the same shall not exceed the market value declared by the owner or administrator or anyone having legal interest in the

property, or such market value as determined by the assessor, whichever is lower." P.D. No. 1533: "Section 1. In determining just compensation for private property acquired through eminent domain proceedings, the compensation to be paid shall not exceed the value declared by the owner or administrator or anyone having legal interest in the property or determined by the assessor, pursuant to the Real Property Tax Code, whichever value is lower, prior to the recommendation or decision of the appropriate Government office to acquire the property." We are constrained to declare the provisions of the Decrees on just compensation unconstitutional and void and accordingly dismiss the instant petition for lack of merit. The method of ascertaining just compensation under the aforecited decrees constitutes impermissible encroachment on judicial prerogatives. It tends to render this Court inutile in a matter which under the Constitution is reserved to it for final determination. Thus, although in an expropriation proceeding the court technically would still have the power to determine the just compensation for the property, following the applicable decrees, its task would be relegated to simply stating the lower value of

the property as declared either by the owner or the assessor. As a necessary consequence, it would be useless for the court to appoint commissioners under Rule 67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the taking of private property is seemingly fulfilled since it cannot be said that a judicial proceeding was not had before the actual taking. However, the strict application of the decrees during the proceedings would be nothing short of a mere formality or charade as the court has only to choose between the valuation of the owner and that of the assessor, and its choice is always limited to the lower of the two. The court cannot exercise its discretion or independence in determining what is just or fair. Even a grade school pupil could substitute for the judge insofar as the determination of constitutional just compensation is concerned. In the case of National Housing Authority v. Reyes (123 SCRA 245), this Court upheld P.D. No. 464, as further amended by P.D. Nos. 794, 1224 and 1259. In this case, the petitioner National Housing Authority contended that the owner's declaration at P1,400.00 which happened to be lower than the assessor's assessment, is the just compensation for the respondent's property under section 92 of P.D. No. 464. On the other hand, the private respondent stressed that while there may be basis for the allegation that the respondent judge did not follow the decree, the matter is still subject to his final disposition, he having been vested with the original and competent authority to

exercise his judicial discretion in the light of the constitutional clauses on due process and equal protection. To these opposing arguments, this Court ruled ihat under the conceded facts, there should be a recognition that the law as it stands must be applied; that the decree having spoken so clearly and unequivocably calls for obedience; and that on a matter where the applicable law speaks in no uncertain language, the Court has no choice except to yield to its command. We further stated that "the courts should recognize that the rule introduced by P.D. No. 76 and reiterated in subsequent decrees does not upset the established concepts of justice or the constitutional provision on just compensation for, precisely, the owner is allowed to make his own valuation of his property." While the Court yielded to executive prerogative exercised in the form of absolute law-making power, its members, nonetheless, remained uncomfortable with the implications of the decision and the abuse and unfairness which might follow in its wake. For one thing, the President himself did not seem assured or confident with his own enactment. It was not enough to lay down the law on determination of just compensation in P.D. 76. It had to be repeated and reiterated in P.D. 464, P.D. 794, and P.D. 1533. The provision is also found in P.D. 1224, P.D. 1259 and P.D. 1313. Inspite of its effectivity as general law and the wide publicity given to it, the questioned provision or an even stricter version had to be embodied in cases of specific expropriations by decree as in P.D. 1669 expropriating the

Tambunting Estate and P.D. 1670 expropriating the Sunog Apog area in Tondo, Manila. In the present petition, we are once again confronted with the same question of whether the courts under P.D. 1533, which contains the same provision on just compensation as its predecessor decrees, still have the power and authority to determine just compensation, independent of what is stated by the decree and to this effect, to appoint commissioners for such purpose. This time, we answer in the affirmative. In overruling the petitioner's motion for reconsideration and objection to the commissioner's report, the trial court said: "Another consideration why the Court is empowered to appoint commissioners to assess the just compensation of these properties under eminent domain proceedings, is the wellentrenched ruling that 'the owner of property expropriated is entitled to recover from expropriating authority the fair and full value of the lot, as of the time when possession thereof was actually taken by the province, plus consequential damages including attorney's fees from which the consequential benefits, if any should be deducted, with interest at the legal rate, on the aggregate sum due to the owner from and after the date of actual taking.' (Capitol Subdivision, Inc. v. Province of Negros Occidental, 7 SCRA 60). In fine, the decree only

establishes a uniform basis for determining just compensation which the Court may consider as one of the factors in arriving at 'just compensation,' as envisage in the Constitution. In the words of Justice Barredo, "Respondent court's invocation of General Order No. 3 of September 21, 1972 is nothing short of an unwarranted abdication of judicial authority, which no judge duly imbued with the implications of the paramount principle of independence of the judiciary should ever think of doing." (Lina v. Purisima, 82 SCRA 344, 351; Cf. Prov. of Pangasinan v. CFI Judge of Pangasinan, Br. VIII, 80 SCRA 117) Indeed, where this Court simply follows PD 1533, thereby limiting the determination of just compensation on the value declared by the owner or administrator or as determined by the Assessor, whichever is lower, it may result in the deprivation of the landowner's right of due process to enable it to prove its claim to just compensation, as mandated by the Constitution. (Uy v. Genato, 57 SCRA 123). The tax declaration under the Real Property Tax Code is, undoubtedly, for purposes of taxation." We are convinced and so rule that the trial court correctly stated that the valuation in the decree may only serve as a guiding principle or one of the factors in determining just compensation but it may not substitute the court's own judgment as to what amount should be awarded and how to arrive at such amount. A return to the earlier well-established doctrine, to our mind, is more in keeping with the principle that the judiciary should live up to its mission "by vitalizing and not denigrating constitutional rights." (See Salonga v. Cruz Pao, 134

SCRA 438, 462; citing Mercado v. Court of First Instance of Rizal, 116 SCRA 93.) The doctrine we enunciated in National Housing Authority v. Reyes, supra, therefore, must necessarily be abandoned if we are to uphold this Court's role as the guardian of the fundamental rights guaranteed by the due process and equal protection clauses and as the final arbiter over transgressions committed against constitutional rights. The basic unfairness of the decrees is readily apparent. Just compensation means the value of the property at the time of the taking. It means a fair and full equivalent for the loss sustained. All the facts as to the condition of the property and its surroundings, its improvements and capabilities, should be considered. In this particular case, the tax declarations presented by the petitioner as basis for just compensation were made by the Lapu-Lapu municipal, later city assessor long before martial law, when land was not only much cheaper but when assessed values of properties were stated in figures constituting only a fraction of their true market value. The private respondent was not even the owner of the properties at the time. It purchased the lots for development purposes. To peg the value of the lots on the basis of documents which are out of date and at prices below the acquisition cost of present owners would be arbitrary and confiscatory.

Various factors can come into play in the valuation of specific properties singled out for expropriation. The values given by provincial assessors are usually uniform for very wide areas covering several barrios or even an entire town with the exception of the poblacion. Individual differences are never taken into account. The value of land is based on such generalities as its possible cultivation for rice, corn, coconuts, or other crops. Very often land described as "cogonal" has been cultivated for generations. Buildings are described in terms of only two or three classes of building materials and estimates of areas are more often inaccurate than correct. Tax values can serve as guides but cannot be absolute substitutes for just compensation. To say that the owners are estopped to question the valuations made by assessors since they had the opportunity to protest is illusory. The overwhelming mass of land owners accept unquestioningly what is found in the tax declarations prepared by local assessors or municipal clerks for them. They do not even look at, much less analyze, the statements. The Idea of expropriation simply never occurs until a demand is made or a case filed by an agency authorized to do so. It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong. And it is repulsive to basic concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment of a court

promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been presented, and after all factors and considerations essential to a fair and just determination have been judiciously evaluated. As was held in the case of Gideon v. Wainwright (93 ALR 2d,733,742): "In the light of these and many other prior decisions of this Court, it is not surprising that the Betts Court, when faced with the contention that 'one charged with crime, who is unable to obtain counsel must be furnished counsel by the State,' conceded that '[E]xpressions in the opinions of this court lend color to the argument. . .' 316 U.S., at 462, 463, 86 L ed. 1602, 62 S Ct. 1252. The fact is that in deciding as it did-that "appointment of counsel is not a fundamental right, essential to a fair trial" the Court in Betts v. Brady made an ubrupt brake with its own well-considered precedents. In returning to these old precedents, sounder we believe than the new, we but restore constitutional principles established to achieve a fair system of justice. . ." We return to older and more sound precedents. This Court has the duty to formulate guiding and controlling constitutional principles, precepts, doctrines, or rules. (See Salonga v. Cruz Pano, supra).

The determination of "just compensation" in eminent domain cases is a judicial function. The executive department or the legislature may make the initial determinations but when a party claims a violation of the guarantee in the Bill of Rights that private property may not be taken for public use without just compensation, no statute, decree, or executive order can mandate that its own determination shall prevail over the court's findings. Much less can the courts be precluded from looking into the "just-ness" of the decreed compensation. We, therefore, hold that P.D. No. 1533, which eliminates the court's discretion to appoint commissioners pursuant to Rule 67 of the Rules of Court, is unconstitutional and void. To hold otherwise would be to undermine the very purpose why this Court exists in the first place. WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The temporary restraining order issued on February 16, 1982 is LIFTED and SET ASIDE. SO ORDERED. Fernan, Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur. Teehankee, C.J., in the result. Yap, J., on leave. Petition dismissed. Order lifted and set aside.

The Lawphil Project - Arellano Law Foundation

1. When should just compensation be fixed?

SECOND DIVISION [G.R. No. 146062. June 28, 2001] SANTIAGO ESLABAN, JR., in his capacity as Project Manager of the National Irrigation Administration, petitioner, vs. CLARITA VDA. DE ONORIO, respondent. DECISION MENDOZA, J.: This is a petition for review of the decision[1] of the Court of Appeals which affirmed the decision of the Regional Trial Court, Branch 26, Surallah, South Cotabato, ordering the National Irrigation Administration (NIA for brevity) to pay respondent the amount of P107,517.60 as just compensation for the taking of the latters property. The facts are as follows:

Respondent Clarita Vda. de Enorio is the owner of a lot in Barangay M. Roxas, Sto. Nio, South Cotabato with an area of 39,512 square meters. The lot, known as Lot 1210-A-Pad-11000586, is covered by TCT No. T-22121 of the Registry of Deeds, South Cotabato. On October 6, 1981, Santiago Eslaban, Jr., Project Manager of the NIA, approved the construction of the main irrigation canal of the NIA on the said lot, affecting a 24,660 square meter portion thereof. Respondents husband agreed to the construction of the NIA canal provided that they be paid by the government for the area taken after the processing of documents by the Commission on Audit. Sometime in 1983, a Right-of-Way agreement was executed between respondent and the NIA (Exh. 1). The NIA then paid respondent the amount of P4,180.00 as Right-of-Way damages. Respondent subsequently executed an Affidavit of Waiver of Rights and Fees whereby she waived any compensation for damages to crops and improvements which she suffered as a result of the construction of a right-of-way on her property (Exh. 2). The same year, petitioner offered respondent the sum of P35,000.00 by way of amicable settlement pursuant to Executive Order No. 1035, 18, which provides in part that Financial assistance may also be given to owners of lands acquired under C.A. 141, as amended, for the area or portion subject to the reservation under Section 12 thereof in such

amounts as may be determined by the implementing agency/instrumentality concerned in consultation with the Commission on Audit and the assessors office concerned. Respondent demanded payment for the taking of her property, but petitioner refused to pay. Accordingly, respondent filed on December 10, 1990 a complaint against petitioner before the Regional Trial Court, praying that petitioner be ordered to pay the sum of P111,299.55 as compensation for the portion of her property used in the construction of the canal constructed by the NIA, litigation expenses, and the costs. Petitioner, through the Office of the Solicitor-General, filed an Answer, in which he admitted that NIA constructed an irrigation canal over the property of the plaintiff and that NIA paid a certain landowner whose property had been taken for irrigation purposes, but petitioner interposed the defense that: (1) the government had not consented to be sued; (2) the total area used by the NIA for its irrigation canal was only 2.27 hectares, not 24,600 square meters; and (3) respondent was not entitled to compensation for the taking of her property considering that she secured title over the property by virtue of a homestead patent under C.A. No. 141. At the pre-trial conference, the following facts were stipulated upon: (1) that the area taken was 24,660 square meters; (2) that it was a portion of the land covered by TCT

No. T-22121 in the name of respondent and her late husband (Exh. A); and (3) that this area had been taken by the NIA for the construction of an irrigation canal.[2] On October 18, 1993, the trial court rendered a decision, the dispositive portion of which reads: In view of the foregoing, decision is hereby rendered in favor of plaintiff and against the defendant ordering the defendant, National Irrigation Administration, to pay to plaintiff the sum of One Hundred Seven Thousand Five Hundred Seventeen Pesos and Sixty Centavos (P107,517.60) as just compensation for the questioned area of 24,660 square meters of land owned by plaintiff and taken by said defendant NIA which used it for its main canal plus costs.[3] On November 15, 1993, petitioner appealed to the Court of Appeals which, on October 31, 2000, affirmed the decision of the Regional Trial Court. Hence this petition. The issues in this case are: 1. WHETHER OR NOT THE PETITION IS DISMISSIBLE FOR FAILURE TO COMPLY WITH THE PROVISIONS OF SECTION 5, RULE 7 OF THE REVISED RULES OF CIVIL PROCEDURE. 2. WHETHER OR NOT LAND GRANTED BY VIRTUE OF A HOMESTEAD PATENT AND SUBSEQUENTLY REGISTERED

UNDER PRESIDENTIAL DECREE 1529 CEASES TO BE PART OF THE PUBLIC DOMAIN. 3. WHETHER OR NOT THE VALUE OF JUST COMPENSATION SHALL BE DETERMINED FROM THE TIME OF THE TAKING OR FROM THE TIME OF THE FINALITY OF THE DECISION. 4. WHETHER THE AFFIDAVIT OF WAIVER OF RIGHTS AND FEES EXECUTED BY RESPONDENT EXEMPTS PETITIONER FROM MAKING PAYMENT TO THE FORMER. We shall deal with these issues in the order they are stated. First. Rule 7, 5 of the 1997 Revised Rules on Civil Procedure provides Certification against forum shopping. The plaintiff or principal party shall certify under oath in the complaint or other initiatory pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is pending, he shall report the fact within five (5)

days therefrom to the court wherein his aforesaid complaint or initiatory pleading has been filed. Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing . . . . By reason of Rule 45, 4 of the 1997 Revised Rules on Civil Procedure, in relation to Rule 42, 2 thereof, the requirement of a certificate of non-forum shopping applies to the filing of petitions for review on certiorari of the decisions of the Court of Appeals, such as the one filed by petitioner. As provided in Rule 45, 5, The failure of the petitioner to comply with any of the foregoing requirements regarding . . . the contents of the document which should accompany the petition shall be sufficient ground for the dismissal thereof. The requirement in Rule 7, 5 that the certification should be executed by the plaintiff or the principal means that counsel cannot sign the certificate against forum-shopping. The reason for this is that the plaintiff or principal knows better than anyone else whether a petition has previously been filed involving the same case or substantially the same issues. Hence, a certification signed by counsel alone is defective and constitutes a valid cause for dismissal of the petition.[4]

In this case, the petition for review was filed by Santiago Eslaban, Jr., in his capacity as Project Manager of the NIA. However, the verification and certification against forumshopping were signed by Cesar E. Gonzales, the administrator of the agency. The real party-in-interest is the NIA, which is a body corporate. Without being duly authorized by resolution of the board of the corporation, neither Santiago Eslaban, Jr. nor Cesar E. Gonzales could sign the certificate against forumshopping accompanying the petition for review. Hence, on this ground alone, the petition should be dismissed. Second. Coming to the merits of the case, the land under litigation, as already stated, is covered by a transfer certificate of title registered in the Registry Office of Koronadal, South Cotabato on May 13, 1976. This land was originally covered by Original Certificate of Title No. (P-25592) P-9800 which was issued pursuant to a homestead patent granted on February 18, 1960. We have held: Whenever public lands are alienated, granted or conveyed to applicants thereof, and the deed grant or instrument of conveyance [sales patent] registered with the Register of Deeds and the corresponding certificate and owners duplicate of title issued, such lands are deemed registered lands under the Torrens System and the certificate of title thus issued is as conclusive and indefeasible as any other

certificate of title issued to private lands in ordinary or cadastral registration proceedings.[5] The Solicitor-General contends, however, that an encumbrance is imposed on the land in question in view of 39 of the Land Registration Act (now P.D. No. 1529, 44) which provides: Every person receiving a certificate of title in pursuance of a decree of registration, and every subsequent purchaser of registered land who takes a certificate of title for value in good faith shall hold the same free from all encumbrances except those noted on said certificate, and any of the following encumbrances which may be subsisting, namely: .... Third. Any public highway, way, private way established by law, or any government irrigation canal or lateral thereof, where the certificate of title does not state that the boundaries of such highway, way, irrigation canal or lateral thereof, have been determined. As this provision says, however, the only servitude which a private property owner is required to recognize in favor of the government is the easement of a public highway, way, private way established by law, or any government canal or lateral thereof where the certificate of title does not state

that the boundaries thereof have been pre-determined. This implies that the same should have been pre-existing at the time of the registration of the land in order that the registered owner may be compelled to respect it. Conversely, where the easement is not pre-existing and is sought to be imposed only after the land has been registered under the Land Registration Act, proper expropriation proceedings should be had, and just compensation paid to the registered owner thereof.[6] In this case, the irrigation canal constructed by the NIA on the contested property was built only on October 6, 1981, several years after the property had been registered on May 13, 1976. Accordingly, prior expropriation proceedings should have been filed and just compensation paid to the owner thereof before it could be taken for public use. Indeed, the rule is that where private property is needed for conversion to some public use, the first thing obviously that the government should do is to offer to buy it.[7] If the owner is willing to sell and the parties can agree on the price and the other conditions of the sale, a voluntary transaction can then be concluded and the transfer effected without the necessity of a judicial action. Otherwise, the government will use its power of eminent domain, subject to the payment of just compensation, to acquire private property in order to devote it to public use.

Third. With respect to the compensation which the owner of the condemned property is entitled to receive, it is likewise settled that it is the market value which should be paid or that sum of money which a person, desirous but not compelled to buy, and an owner, willing but not compelled to sell, would agree on as a price to be given and received therefor.*8+ Further, just compensation means not only the correct amount to be paid to the owner of the land but also the payment of the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered just for then the property owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for a decade or more before actually receiving the amount necessary to cope with his loss.[9] Nevertheless, as noted in Ansaldo v. Tantuico, Jr.,[10] there are instances where the expropriating agency takes over the property prior to the expropriation suit, in which case just compensation shall be determined as of the time of taking, not as of the time of filing of the action of eminent domain. Before its amendment in 1997, Rule 67, 4 provided: Order of condemnation. When such a motion is overruled or when any party fails to defend as required by this rule, the court may enter an order of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the

complaint upon the payment of just compensation to be determined as of the date of the filing of the complaint. . . . It is now provided thatSEC. 4. Order of expropriation. If the objections to and the defense against the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the property sought to be expropriated, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the taking of the property or the filing of the complaint, whichever came first. A final order sustaining the right to expropriate the property may be appealed by any party aggrieved thereby. Such appeal, however, shall not prevent the court from determining the just compensation to be paid. After the rendition of such an order, the plaintiff shall not be permitted to dismiss or discontinue the proceeding except on such terms as the court deems just and equitable. (Emphasis added) Thus, the value of the property must be determined either as of the date of the taking of the property or the filing of the

complaint, whichever came first. Even before the new rule, however, it was already held in Commissioner of Public Highways v. Burgos[11] that the price of the land at the time of taking, not its value after the passage of time, represents the true value to be paid as just compensation. It was, therefore, error for the Court of Appeals to rule that the just compensation to be paid to respondent should be determined as of the filing of the complaint in 1990, and not the time of its taking by the NIA in 1981, because petitioner was allegedly remiss in its obligation to pay respondent, and it was respondent who filed the complaint. In the case of Burgos,[12] it was also the property owner who brought the action for compensation against the government after 25 years since the taking of his property for the construction of a road. Indeed, the value of the land may be affected by many factors. It may be enhanced on account of its taking for public use, just as it may depreciate. As observed in Republic v. Lara:[13] [W]here property is taken ahead of the filing of the condemnation proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the entry by the plaintiff upon the property may have depreciated its value thereby; or there may have been a natural increase in the value of the property from the time it is taken to the time the complaint is filed, due to general

economic conditions. The owner of private property should be compensated only for what he actually loses; it is not intended that his compensation shall extend beyond his loss or injury. And what he loses is only the actual value of his property at the time it is taken. This is the only way that compensation to be paid can be truly just, i.e., just not only to the individual whose property is taken, but to the public, which is to pay for it . . . . In this case, the proper valuation for the property in question is P16,047.61 per hectare, the price level for 1982, based on the appraisal report submitted by the commission (composed of the provincial treasurer, assessor, and auditor of South Cotabato) constituted by the trial court to make an assessment of the expropriated land and fix the price thereof on a per hectare basis.[14] Fourth. Petitioner finally contends that it is exempt from paying any amount to respondent because the latter executed an Affidavit of Waiver of Rights and Fees of any compensation due in favor of the Municipal Treasurer of Barangay Sto. Nio, South Cotabato. However, as the Court of Appeals correctly held: [I]f NIA intended to bind the appellee to said affidavit, it would not even have bothered to give her any amount for damages caused on the improvements/crops within the appellees property. This, apparently was not the case, as can

be gleaned from the disbursement voucher in the amount of P4,180.00 (page 10 of the Folder of Exhibits in Civil Case 396) issued on September 17, 1983 in favor of the appellee, and the letter from the Office of the Solicitor General recommending the giving of financial assistance in the amount of P35,000.00 to the appellee. Thus, We are inclined to give more credence to the appellees explanation that the waiver of rights and fees pertains only to improvements and crops and not to the value of the land utilized by NIA for its main canal.*15+ WHEREFORE, premises considered, the assailed decision of the Court of Appeals is hereby AFFIRMED with MODIFICATION to the extent that the just compensation for the contested property be paid to respondent in the amount of P16,047.61 per hectare, with interest at the legal rate of six percent (6%) per annum from the time of taking until full payment is made. Costs against petitioner. SO ORDERED. Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur. [1] Per Justice Ramon Mabutas, Jr. and concurred in by Justice Roberto A. Barrios and Eriberto U. Rosario, Jr.

[2] CA Decision, pp. 1-2; Rollo, pp. 25-26. [3] RTC Decision, p. 5; id., p. 24. [4] Far Eastern Shipping Co. v. Court of Appeals, 297 SCRA 30 (1998). [5] Heirs of Deogracias Ramos v. Court of Appeals, 139 SCRA 295, 299 (1985); See also Samonte v. Sambilon, 107 Phil 198 (1960); El Hogar Filipino v. Olvigas, 60 Phil. 17 (1934); Manalo v. Lukban, 48 Phil. 973 (1924). [6] Heirs of Malfore v. Director of Forestry, 109 Phil. 586 (1960). [7] Noble v. City of Manila, 67 Phil. 1 (1938). [8] See Manila Railroad Company v. Caligsihan, 40 Phil. 326 (1919); City of Manila v. Estrada, 25 Phil. 208 (1913). [9] Cosculluela v. Court of Appeals, 164 SCRA 393 (1988). [10] 188 SCRA 300, 303-304 (1990). [11] 96 SCRA 831 (1980). [12] Id.

[13] 96 Phil. 170, 177-178 (1954) citing 18 Am. Jur. 873, 874. [14] RTC Decision, p. 4; Rollo, p. 23. [15] CA Decision, p. 9; id., p. 33.

Today is Saturday, November 17, 2012 Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 170740 May 25, 2007

JULITA P. TAN, Petitioner, vs. THE REPUBLIC OF THE PHILIPPINES, Represented by the PUBLIC ESTATES AUTHORITY, Respondent. DECISION SANDOVAL-GUTIERREZ, J.:

For our resolution is the Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals (Thirteenth Division, Special Division of Five) dated July 6, 2005 in CA-G.R. SP No. 84667. The undisputed facts of the case are: Julita P. Tan, petitioner herein, is the registered owner of a parcel of land consisting of 7,161 square meters located at the southern bank of the Zapote River in Sitio Wawa, Pulang Lupa, Las Pias City. Her ownership is evidenced by Transfer Certificate of Title (TCT) No. 78188 of the Registry of Deeds, same city. She acquired this property from the San Antonio Development Corporation (SADC) as shown by a document denominated "Irrevocable and Exclusive Special Power of Attorney" dated April 6, 2001, whereby she assumed SADCs "obligation of paying all imposable taxes due said land." In consideration of such assumption and "for value" she "stepped into the shoes" of SADC "free to exercise such rights and prerogatives as owner of the subject property, including the right to collect and demand payment for the sale and/or use of the subject land or any portion thereof, by and from any person or entity." The Public Estates Authority (PEA) is a government-owned and controlled corporation, organized and existing pursuant to Presidential Decree (P.D.) No. 1084 representing in this case the Republic of the Philippines, herein respondent.

Among the properties PEA manages is the Manila-Cavite Coastal Road (Coastal Road), also known as the R-1 Expressway. Prior to the transfer of the property to petitioner by SADC, or on March 29, 1985, PEA wrote SADC requesting permission to enter the latters property, then covered by TCT No. 439101, for the purpose of constructing thereon the southern abutment of the Zapote Bridge at the Coastal Road. PEA also proposed to SADC to start their negotiation for its acquisition of the latters property. On April 11, 1985, SADC replied authorizing PEA to enter the property, subject to the condition that the latter should pay a monthly rental of P10,000.00. PEA then directed its contractor, the Philippine National Construction Corporation, to enter the property and begin the necessary engineering works on the Coastal Road. In a letter dated May 28, 1985, PEA requested SADC either to donate or sell the property to the government. On October 22, 1985, SADC replied by offering to sell the property to PEA. SADCs asking price was P1,288,980.00 plus P400,000.00 as compensation for the house and other improvements thereon that were destroyed during the construction of the Coastal Road.

On January 7, 1987, PEA informed SADC it has no plan to buy the whole lot, but only the 1,131 square meter portion above sea level. PEA then asked SADC to submit proofs of ownership and costs of the improvements which were demolished. Negotiations then ensued between the parties. However, for the past twenty (20) years, they failed to reach an agreement. On October 2, 2000, SADC asked PEA to pay compensation equivalent to the current zonal value plus interest of ten percent (10%) per annum and a monthly rental of P10,000.00, also with the same interest. These sums, according to SADC, could be considered just compensation for the governments use of the property since 1985 until September 2000 and thereafter. The following month, PEA inquired from the Bureau of Internal Revenue (BIR) District 53, Alabang, Muntinlupa City the zonal value of the SADC property. It submitted to the BIR the appraisal reports prepared by two (2) independent licensed appraisers. On April 6, 2001, petitioner Julita Tan acquired the property from SADC.1a\^/phi1.net

On July 12, 2001, the BIR sent a letter to PEA stating that the zonal value of the property is P2,900.00 per square meter, with the caveat that the said assessment is subject to review and approval by higher tax authorities. On October 9, 2001, the BIR informed PEA that the current zonal value of the property is P20,000.00 per square meter. In the meantime, the construction of the Coastal Road was completed. PEA entered into a Joint Venture Agreement with the Toll Regulatory Board and the UEM-MARA Philippine Corporation for the toll operation of the Coastal Road, as shown by the Certificate of the Secretary of the Toll Regulatory Board dated May 13, 2003.2 PEA has been collecting toll fees from the road users in the average amount of P1,039,404.85 per day, as shown by a document denominated "Traffic Count of the Year 2002.3 Despite its collection of huge toll fees, PEA continuously refuses to pay petitioner any compensation. On October 22, 2001, petitioner, in her desperation, wrote PEA expressing her willingness to be compensated through a land swapping arrangement. She proposed that PEAs Fishermans Wharf be given to her in exchange for her property.

On August 6, 2002, the PEA Board approved the exchange of a portion of petitioners lot consisting of 4,719 square meters for PEAs Lot 12 with an area of 2,360 square meters. The parties entered into a Memorandum of Agreement wherein PEA agreed to execute a Deed of Exchange by way of compensation for petitioners property affected by the Coastal Road. However, on June 18, 2003, PEA withdrew from the land swapping agreement.1a\^/phi1.net Instead, on September 22, 2003, it filed with the Regional Trial Court (RTC), Branch 202, Las Pias City a complaint for expropriation, docketed as Civil Case No. 03-0220. PEA alleged therein, among others, that its liability for just compensation is based on the zonal value of the land at the time of the taking in 1985. Thus, it is liable for only P852,993.51 for the 4,719 square meter portion. In her answer, petitioner claimed that PEA should pay for the whole area consisting of 7,161 square meters at P20,000.00 per square meter, the zonal value set by the BIR pursuant to Republic Act No. 8974.4 She then prayed that she be paid P143,200,000.00 plus interest of twelve percent (12%) per annum, aside from the P10,000.00 monthly rental with 12% interest per annum for the occupancy and use of the property since April 1985 up to the present. On October 20, 2003, petitioner filed with the RTC a motion to order PEA to immediately pay her just compensation based on the zonal valuation of the BIR. This was opposed by PEA.

On December 16, 2003, the trial court issued the following Order5: WHEREFORE, finding merit to the "Motion To Order the Plaintiff to Immediately Pay Defendant Her Expropriated Property," dated October 20, 2003, the same is hereby GRANTED. Accordingly, plaintiff, through PEA, is hereby ordered to immediately pay defendant the sum of P94,380,000.00 (ninety-four million, three hundred eighty thousand pesos) representing the just compensation for the 4,719 square meters of defendants property covered by TCT No. 78188 of the Registry of Deeds of Las Pias based on P20,000.00 per square meter zonal valuation of the Bureau of Internal Revenue. SO ORDERED. PEA timely filed a motion for reconsideration but it was denied by the trial court in its Order6 dated April 14, 2004. PEA then elevated the matter to the Court of Appeals by way of a petition for certiorari, prohibition, and mandamus. On July 6, 2005, the Court of Appeals rendered its Decision, the dispositive portion of which reads:

WHEREFORE, the instant petition for certiorari and prohibition is hereby GRANTED while that of mandamus is hereby DENIED (sic). Accordingly, the assailed Orders, dated December 16, 2003 and April 14, 2004, are hereby REVERSED and SET ASIDE. Public respondent is hereby ordered to DESIST from enforcing the assailed Orders. SO ORDERED. Petitioner filed a motion for reconsideration. In a Resolution dated December 12, 2005, the Court of Appeals denied the same. Hence, the present petition anchored on these twin issues: Whether the Court of Appeals erred in sustaining PEAs petition for certiorari and prohibition and in dismissing that for mandamus; and in holding that the just compensation for petitioners property should be based on the BIR zonal valuation in 1985 when petitioner entered the subject property.1awphi1.nt The first issue involves the nature of the two Orders of the trial court dated December 16, 2003 and April 14, 2004. The Order of December 16, 2003 directed PEA to pay petitioner just compensation in the sum of P94,380,000.00. The Order of April 14, 2004 denied PEAs motion for reconsideration. Are these orders final or interlocutory?

Sec. 1, Rule 41 of the 1997 Rules of Civil Procedure, as amended, partly provides: SEC. 1. Subject of appeal. An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable. No appeal may be taken from: xxx (c) an interlocutory order. xxx A final order is one that disposes of the subject matter in its entirety or terminates a particular proceeding or action, leaving nothing else to be done but to enforce by execution what has been determined by the court, while an interlocutory order is one which does not dispose of the case completely but leaves something to be decided upon.7 Under Rule 67 of the same Rules, there are two (2) stages in a condemnation proceeding:8 (1) Determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of

its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, with condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned for the public use or purpose described in the complaint, upon payment of just compensation. An order of expropriation is final.9 An order of dismissal, if this be ordained, would be a final one, as it finally disposes of the action and leaves nothing more to be done by the court on the merits.10 The order of expropriation would also be a final one for after its issuance, no objection to the right of condemnation shall be heard. The order of expropriation may be appealed by any party aggrieved thereby by filing a record on appeal.11 (2) Determination by the court of the just compensation for the property sought to be taken with the assistance of not more than three (3) commissioners. The order fixing the just compensation on the basis of the evidence before the court and findings of the commissioners would likewise be a final one, as it would leave nothing more to be done by the court regarding this issue. A second and separate appeal may be taken from this order fixing the just compensation. The trial courts Orders in Civil Case No. 03-0220 required PEA to pay petitioner P94,380,000.00 representing the just compensation for her 4,719 square meter lot based on the BIR zonal valuation of P20,000.00 per square meter. Clearly, the Orders are final, hence, appealable. However, instead of

appealing from the said Orders within the reglementary period, PEA resorted to certiorari, prohibition and mandamus. It is basic that the remedy of certiorari is not a substitute for a lost appeal, as in this case. On the second issue, Section 9, Article III of the Constitution specifically mandates that "Private property shall not be taken for public use without just compensation." In City of Manila v. Estrada,12 we held that "compensation" means "an equivalent for the value of land (property) taken." The use of the word "just" is "to convey the idea that the equivalent to be rendered for the property taken shall be real, substantial, full, ample." Thus, Estrada defined just compensation as "a fair and full equivalent for the loss sustained." This definition has been reiterated in Manila Railroad Co. v. Velasquez[13] and Province of Tayabas v. Perez.14 Then in Manila Railroad Co. v. Caligsahan,15 we held that "to be exactly just, the compensation should be estimated at the time of the taking." Subsequently, in Republic v. Vda. de Castellvi,16 we ruled that just compensation is determined as of the date of the taking of the property or the filing of the complaint, whichever came first. The Court of Appeals, in its challenged Decision, held that PEAs taking of petitioners property occurred in 1985. Even if PEA requested permission to enter the subject property and

petitioner granted such request on condition that PEA should pay a monthly rental of P10,000.00, "it does not change the fact that there was taking of the property for public use." Consequently, the compensation should be computed on the basis of the zonal value of the property at that time (1985) which was P2,900.00 per square meter per letter dated July 12, 2001 of the BIR to PEA. The Court of Appeals is wrong. PEAs entry into the property with the permission of SADC, its previous owner, was not for the purpose of expropriating the property. Records show and as stressed by Mr. Justice Renato C. Dacudao of the Court of Appeals in his Dissenting Opinion, SADC allowed PEA to enter the land on condition that it should pay a monthly rental of P10,000.00. Thereafter, PEA, in a letter dated May 28, 1985, requested SADC to donate or sell the land to the government. On October 22, 1985, SADC responded, offering to sell the land to PEA for P1,288,980.00, plus P400,000.00 representing the value of the improvements destroyed by PEA when it entered the property. However, since 1985 up to the present, no agreement has been reached between PEA and SADC or herein petitioner who acquired the property from the latter. While PEA has been earning huge toll fees, it has refused to pay petitioner any compensation for the use of her property in violation of her right as an owner.

The above circumstances clearly show that when PEA entered petitioners land in 1985, it was not for the purpose of expropriating it. We stress that after its entry, PEA wrote SADC requesting to donate or sell the land to the government. Indeed, there was no intention on the part of PEA to expropriate the subject property. Why did it ask permission from SADC to enter the property? Thereafter, why did it request SADC to donate or sell the land to the government? It could have simply exercised its power of eminent domain. Section 2, Rule 67 (on Expropriation) of the same Rules provides, among others, that upon the filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the right to take or enter upon the possession of the real property involved if he deposits with the authorized government depositary an amount equivalent to the assessed value of the property. It bears reiterating that in Republic v. Vda. de Castellvi,17 we ruled that just compensation is determined as of the date of the taking of the property or the filing of the complaint, whichever came first. We have made it clear that there was no taking of the property in 1985 by PEA for purposes of expropriation. As shown by the records, PEA filed with the RTC its petition for expropriation on September 22, 2003. The trial court, therefore, was correct in ordering respondent, through PEA,

upon the filing of its complaint for expropriation, to pay petitioner just compensation on the basis of the BIR zonal valuation of the subject property at P20,000.00 per square meter. In sum, we rule that the Court of Appeals erred (1) in not dismissing PEAs petition for certiorari, prohibition and mandamus; and (2) in ruling that PEAs taking of the property occurred in 1985 and that the compensation should be based on the BIR zonal valuation in that year. WHEREFORE, the assailed Decision of the Court of Appeals dated July 6, 2005, in CA-G.R. SP No. 84667 is REVERSED. The Decision of the RTC, Branch 202, Las Pias City is AFFIRMED. SO ORDERED. ANGELINA SANDOVAL-GUTIERREZ Associate Justice WE CONCUR: REYNATO S. PUNO Chief Justice Chairperson (On leave) RENATO C. CORONA Associate Justice

ADOLFO S. AZCUNA Asscociate Justice CANCIO C. GARCIA Associate Justice CERTIFICATION Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice Footnotes 1 Rollo, pp. 63-87. Penned by Associate Justice Edgardo F. Sundiam with Associate Justice Arturo D. Brion and Associate Justice Celia C. Librea-Leagogo, concurring; and Associate Justice Renato C. Dacudao and Associate Justice Japar B. Dimaampao, dissenting. 2 Annex "O" of the petition, Rollo, pp. 120-124. 3 Annex "P", id., p. 125.

4 Entitled "An Act To Facilitate The Acquisition of Right-OfWay, Site Of Location For National Government Infrastructure Projects And For Other Purposes." It was signed into law on November 7, 2000. 5 Rollo, pp. 196-198. 6 Id., pp. 319-322.S 7 Valenzuela v. Court of Appeals, G.R. No. 149449, February 20, 2006, 482 SCRA 637, citing Rizal Commercial Banking Corp. v. Magwin Marketing Corp., 402 SCRA 592 (2003). 8 As held in Municipality of Bian v. Garcia, G.R. No. 69260, December 22, 1989, 180 SCRA 576; National Power Corp. v. Jocson, G.R. Nos. 94193-99, February 25, 1992, 206 SCRA 520. 9 See also National Housing Authority v. Heirs of Isidro Guivelendo, G.R. No. 154111, June 19, 2003, 404 SCRA 389; Estate of Salud Jimenez v. Philippine Export Processing Zone, G.R. No. 137285, January 16, 2001, 349 SCRA 240. 10 See also Investments, Inc. v. Court of Appeals, G.R. No. 60036, January 27, 1987, 147 SCRA 334, 339-341. 11 Sec. 4, Rule 67, 1997 Rules of Civil Procedure, as amended. See also par. 19 (1) Interim Rules of the Supreme Court dated January 11, 1987 in relation to Sec. 39, Judiciary

Reorganization Act of 1981 (BP Blg. 129); Heirs of Alberto Suguitan v. City of Mandaluyong, 384 Phil. 578 (2000). 12 25 Phil. 208 (1913). 13 32 Phil. 286 (1915). 14 66 Phil. 467 (1938). 15 40 Phil. 326 (1919). See also Republic v. Lara, 96 Phil. 170 (1954), J.M. Tuason & Co. Inc. v. Land Tenure Administration, G.R. No. 21064, February 18, 1970, 31 SCRA 413; National Power Corp. v. Chiong, G.R. No. 152436, June 20, 2003, 404 SCRA 527.

16 G.R. No. 20620, August 15, 1974, 58 SCRA 336. 17 Supra, footnote 16. The Lawphil Project - Arellano Law Foundation

SECOND DIVISION

HEIRS OF MATEO PIDACAN AND ROMANA EIGO, namely: PACITA PIDACAN VDA. DE ZUBIRI (deceased), survived by JOSE BELLO BATINA, VICKY BELLO BATINA, ROBERTO BELLO BATINA, VILMA BELLO BATINA, and FRANCISCO N. BATINA; and ADELA PIDACAN VDA. DE ROBLES, Petitioners, G.R. No. 162779

Present:

QUISUMBING, J., Chairperson, CARPIO, CARPIO MORALES,* TINGA, and VELASCO, JR., JJ.

- versus -

AIR TRANSPORTATION OFFICE (ATO), represented by its Acting Director BIENVENIDO MANGA, Respondent.

Promulgated:

June 15, 2007 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.: For review on certiorari are the Decision[1] dated August 20, 2003 and the Resolution dated March 17, 2004 of the Court of Appeals in CA-G.R. CV No. 72404, which reversed the Decision[2] dated February 1, 2001 of the Regional Trial Court (RTC) of San Jose, Occidental Mindoro, Branch 46 in Civil Case No. R-800. The facts, summarized by the Court of Appeals and borne by the records, are as follows: Sometime in 1935, spouses Mateo Pidacan and Romana Eigo acquired under the homestead provision of Act No. 2874[3] a parcel of land consisting of about 22 hectares situated in San Jose, Occidental Mindoro. Patent No. 33883 and Original Certificate of Title (OCT) No. 2204 were issued on the land, in the names of the Pidacan spouses. In 1948, the Civil Aeronautics Administration (now Air Transportation Office or ATO) used a portion of the said property as an airport. Upon the death of the Pidacan spouses in 1974, the ATO constructed a perimeter fence and a new

terminal building on the property. The ATO also lengthened, widened, and cemented the airports runway. The spouses heirs namely, Pacita Pidacan Vda. de Zubiri and Adela Pidacan Vda. de Robles demanded from ATO the payment of the value of the property as well as rentals for the use of the occupied premises. However, they were told that payment could not be made because the property was still in their parents name. With the loss of the owners copy of OCT No. 2204, Pacita Pidacan Vda. de Zubiri filed a petition for the issuance of another owners duplicate. The heirs then executed an extrajudicial settlement adjudicating the property among themselves. On February 23, 1988, OCT No. 2204 was cancelled and Transfer Certificate of Title (TCT) No. T-7160 was issued in favor of the heirs. The heirs presented TCT No. T-7160 and the death certificates of their parents to the ATO, but the latter still refused to pay them. The heirs claimed that they were entitled to payment of rentals plus the value of the property. The ATO countered that the heirs were not entitled to any payment, either of the value of the land or of the rentals because the property had been sold to its predecessor, the defunct Civil Aeronautics Administration for P0.70 per square meter. The ATO claimed

that even if it failed to obtain title in its name, it had been declaring the property for taxation purposes. The heirs subsequently filed with the RTC a complaint[4] against the ATO for payment of the value of the property as well as rentals for its use and occupation. The ATO, in turn, filed a complaint for expropriation, which was dismissed on the ground that it would be absurd for the ATO to expropriate a parcel of land it considered its own. Pacita Pidacan Vda. de Zubiri was substituted by her surviving son, Tomas Batina, who in turn was later substituted by his heirs namely, Jose Bello Batina, Vicky Bello Batina, Roberto Bello Batina, and Vilma Bello Batina. Francisco N. Batina, an alleged son of Tomas Batina, intervened in the proceedings. On September 12, 1994, the trial court promulgated a Decision[5] ordering the ATO to pay rentals and the value of the land at P89 per square meter. The ATO appealed to the Court of Appeals on the ground that the trial court erred in fixing the value of the property on the basis of its present value. The Court of Appeals rendered a Decision[6] setting aside the RTC Decision and remanded the case to the court a quo for further proceedings. The appellate court also ruled that just compensation should be determined as of the time the property was taken for public use.

After trial upon remand of the case to the court of origin, judgment was rendered anew as follows: WHEREFORE, in view of all the foregoing, judgment is hereby rendered: 1. Expropriating the actual area occupied by the defendant Air Transportation Office of the plaintiffs property covered by Transfer Certificate of Title No. T-7160, totaling Two Hundred Fifteen Thousand Seven Hundred Thirty Seven (215,737) square meters, in favor of defendant; 2. Ordering defendant Air Transportation Office to pay plaintiffs the amount of Three Hundred Four ((P304.00) Pesos per square meter for the area herein expropriated which totals to Sixty Five Million Five Hundred Eight (sic) Four Thousand Forty Eight (P65,584,048.00) Pesos with interest thereon at the rate of 12% per annum from February 1, 2001, until the same is fully paid. 3. Ordering defendant Air Transportation Office to pay plaintiffs monthly rentals for the use and occupation of the subject property cited in item No. 1 above, computed as follows: a) Three Thousand Fifty Eight Pesos and Forty Centavos (P3,058.40) from 1957 to 1977;

b) Four Thousand Twenty Two Pesos and Sixty five Centavos (P4,022.60) from 1978 to 1979; c) Six Thousand Thirty Four Pesos and Fifty Centavos (P6,034.50) from 1980 to 1984; d) Nine Thousand Six Hundred Ninety Nine Pesos and Sixty Centavos (P9,699.60) from 1985 to 1991; e) Seventeen Thousand Nine Hundred thirteen Pesos and Sixty Centavos (P17,913.60) from 1992 to 1994; f) Thirty Seven Thousand One Hundred Eighty One Pesos and Eighty Centavos (P37,181.80) from 1995 to 1997; g) Fifty Four Thousand Six Hundred Fifty Eight Pesos and Sixty Centavos (P54,658.60) from 1998 to January 31, 2001; or a total monthly rentals, from January 1, 1957 to January 31, 2001, of Six Million Two hundred Forty Nine Thousand Six Hundred Forty Five Pesos and Forty Centavos (P6,249,645.40) with interest thereon at the rate of 12% per annum, until the same is fully paid; 4. Ordering defendant Air Transportation Office to pay plaintiffs ten (10%) per cent of the amount involved as and for attorneys fees and expenses of litigation; and

5. Ordering defendant Air Transportation Office to pay the costs of suit. SO ORDERED.[7] The ATO once again appealed to the Court of Appeals, which in its assailed Decision reversed the trial courts ruling, thus: WHEREFORE, premises considered, the assailed Decision dated February 1, 2001 of the Regional Trial Court of San Jose, Occidental Mindoro in Civil Case No. R-800 is hereby REVERSED AND SET ASIDE and a new one entered remanding the instant case to the court a quo for the determination of just compensation on the basis of the market value prevailing in 1948. No pronouncement as to costs. SO ORDERED.[8] The heirs moved for reconsideration but it was denied. Aggrieved, the heirs filed the instant petition alleging that: I THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND ABUSE OF DISCRETION BY DISREGARDING THE LAW, JURISPRUDENCE AND EVIDENCE IN REVERSING THE

TRIAL COURTS DECISION AND RULING THAT THERE WAS TAKING OF THE SUBJECT PROPERTY IN 1948*;+ II THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND ABUSE OF DISCRETION BY DISREGARDING THE LAW, JURISPRUDENCE AND EVIDENCE IN RULING THAT THE REMAND OF THE CASE TO THE LOWER COURT WAS ONLY FOR THE PURPOSE OF ASCERTAINING THE TIME OF TAKING OF THE SUBJECT PROPERTY[;] III THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND ABUSE OF DISCRETION BY DISREGARDING THE LAW, JURISPRUDENCE AND EVIDENCE IN REVERSING THE DECISION OF THE LOWER COURT WHICH ORDERED THE PAYMENT OF UNPAID RENTALS FROM 1957 TO 2001[.][9] Petitioners contend the reckoning point for taking cannot be 1948 as the elements necessary to constitute taking were not present at that time. They also point out that the ATOs complaint for expropriation filed in 1993 is inconsistent with its claim that it had already bought the property in 1959 or that there was already taking in 1948. Petitioners further allege that the ATO is estopped from questioning the valuation of the property at P304 per square meter because it

was the ATO that actually recommended the said amount. Finally, petitioners insist that the Pidacan spouses merely leased the property to the ATO. Respondent ATO, on the other hand, counters that the fact of taking has been definitely established by the Court of Appeals and implicitly admitted by petitioners. The ATO stresses that for the purpose of fixing just compensation, the only issue is the time of taking, which it maintains was in 1948 when an airport was constructed on the property. Lastly, the ATO calls our attention to the alleged absence of any competent evidence proving the existence of a contract of lease between the parties. Simply put, the issues for resolution are: (1) whether there was taking of the subject property; (2) the time when the taking took place; and (3) the appropriate value of just compensation. On the first issue, we are unable to consider the parties bare allegation that there was a contract of lease or a contract of sale between the ATO and the Pidacan spouses, for lack of competent evidence adduced to prove either claim. On the contrary, preponderance of evidence on record strongly indicates that the ATOs conversion of the property into an airport in 1948 comes within the purview of eminent domain.

Eminent domain or expropriation is the inherent right of the state to condemn private property to public use upon payment of just compensation.[10] A number of circumstances must be present in the taking of property for purposes of eminent domain: (1) the expropriator must enter a private property; (2) the entrance into private property must be for more than a momentary period; (3) the entry into the property should be under warrant or color of legal authority; (4) the property must be devoted to a public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property.[11] When private property is rendered uninhabitable by an entity with the power to exercise eminent domain, the taking is deemed complete.[12] Taking occurs not only when the government actually deprives or dispossesses the property owner of his property or of its ordinary use, but also when there is a practical destruction or material impairment of the value of his property.[13] In this case, it is undisputed that petitioners private property was converted into an airport by respondent ATO. As a consequence, petitioners were completely deprived of beneficial use and enjoyment of their property. Clearly, there was taking in the concept of expropriation as early as 1948

when the airport was constructed on petitioners private land. As a rule, the determination of just compensation in eminent domain cases is reckoned from the time of taking.[14] In this case, however, application of the said rule would lead to grave injustice. Note that the ATO had been using petitioners property as airport since 1948 without having instituted the proper expropriation proceedings. To peg the value of the property at the time of taking in 1948, despite the exponential increase in its value considering the lapse of over half a century, would be iniquitous. We cannot allow the ATO to conveniently invoke the right of eminent domain to take advantage of the ridiculously low value of the property at the time of taking that it arbitrarily chooses to the prejudice of petitioners. In this particular case, justice and fairness dictate that the appropriate reckoning point for the valuation of petitioners property is when the trial court made its order of expropriation in 2001. As for the fair value of the subject property, we believe that the amount arrived at by the commissioners appointed by the trial court, P304.39 per square meter, constitutes just compensation to petitioners.[15] However, the trial courts award of rental payments to petitioners is not supported by evidence on record and must

be deleted. To justify such award, the purported contract of lease must first be proven by competent evidence. The letter[16] of one Director Nabor C. Gaviola of the Department of Transportation and Communications endorsing the appeal of a certain Herminia R. Parales for the immediate payment of rentals is plain hearsay and does little to prove the existence of a contract of lease between the parties. Lastly, the interest accruing fixed by the trial court at the rate of 12% per annum is not consistent with law and should be reduced to the legal interest rate of 6% per annum.[17] WHEREFORE, the petition is GRANTED. The assailed Decision dated August 20, 2003 and the Resolution dated March 17, 2004 of the Court of Appeals in CA-G.R. CV No. 72404 are SET ASIDE. The Decision dated February 1, 2001 of the Regional Trial Court of San Jose, Occidental Mindoro, Branch 46 in Civil Case No. R-800 is AFFIRMED with MODIFICATION, as follows: 1. The actual area occupied by respondent ATO covered by Transfer Certificate of Title No. T-7160, totaling 215,737 square meters is declared expropriated in favor of the ATO. 2. The ATO is ordered to pay petitioners the amount of P304.39 per square meter for the area expropriated, or a total of P65,668,185.43 with interest at the rate of 6% per annum from February 1, 2001, until the same is fully paid.

No pronouncement as to costs. SO ORDERED.

LEONARDO A. QUISUMBING Associate Justice

WE CONCUR:

ANTONIO T. CARPIO Associate Justice (On official leave) CONCHITA CARPIO MORALES Associate Justice

DANTE O. TINGA Associate Justice PRESBITERO J. VELASCO, JR. Associate Justice

ATTESTATION

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division.

LEONARDO A. QUISUMBING Associate Justice Chairperson

CERTIFICATION

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

REYNATO S. PUNO Chief Justice

Bigo in some parts of the records.

On official leave.

[1] Rollo, pp. 36-52. Penned by Associate Justice Mercedes Gozo-Dadole, with Associate Justices Delilah VidallonMagtolis and Rosmari D. Carandang concurring. [2] CA rollo, pp. 67-80. Penned by Executive Judge Ernesto P. Pagayatan. *3+ [4] [5] [6] [7] [8] [9] Otherwise known as The Public Land Act. Records, Vol. I, pp. 1-7. Records, Vol. II, pp. 368-374. Id. at 455-463. CA rollo, pp. 79-80. Rollo, pp. 51-52. Id. at 176.

[10] Robern Development Corporation v. Quitain, G.R. No. 135042, September 23, 1999, 315 SCRA 150, 165. [11] National Power Corporation v. Court of Appeals, G.R. No. 113194, March 11, 1996, 254 SCRA 577, 590.

[12] National Power Corporation v. Court of Appeals, G.R. No. 106804, August 12, 2004, 436 SCRA 195, 209, citing United States v. Causby, 328 U.S. 256 (1946). [13] Republic v. Court of Appeals, G.R. No. 147245, March 31, 2005, 454 SCRA 516, 536. [14] Gabatin v. Land Bank of the Philippines, G.R. No. 148223, November 25, 2004, 444 SCRA 176, 190. [15] [16] Records, Vol. II, p. 608. Records, Vol. I, p. 335.

[17] Civil Code. ART. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per annum.

2. Form of payment

THIRD DIVISION

[G.R. No. 137431. September 7, 2000] EDGARDO SANTOS, represented by his attorney-in-fact ROMEO L. SANTOS, petitioner, vs. LAND BANK OF THE PHILIPPINES, JESUS DIAZ, ROBERTO ONG and AUGUSTO AQUINO, respondents. DECISION PANGANIBAN, J.: The Comprehensive Agrarian Reform Law (RA 6657) provides that just compensation to landowners shall be paid in cash and bonds. Hence, a trial court decision directing the payment of such compensation "in the manner provided by R.A. 6657" is not illegally amended but is merely clarified by an order, issued during the execution proceedings, that such amount shall be paid in cash and bonds. The Case Before the Court is a Petition for Review on Certiorari of the December 8, 1998 Decision[1] and the February 2, 1999 Resolution[2] of the Court of Appeals (CA)[3] in CA-GR SP No. 48517, which had respectively dismissed the Petition for Certiorari and Mandamus, filed by petitioner, and denied reconsideration.

The decretal part of the assailed Decision reads: "WHEREFORE, the petition is DISMISSED. The Order of April 24, 1998 is AFFIRMED."[4] The Facts The antecedents of the case are adequately summarized in the assailed Decision, as follows: "It appears that petitioner Edgardo Santos is the plaintiff in Agrarian Case No. RTC 94-3206 for the determination of just compensation regarding properties which were taken by DAR under P.D. No. 27 in 1972. On August 12, 1997, the Regional Trial Court, sitting as an Agrarian Court rendered judgment, the dispositive portion of which reads: "WHEREFORE, judgment is hereby rendered (1) fixing the amount of P49,241,876.00 to be the just compensation for the irrigated and unirrigated ricelands with areas of 36.4152 and 40.7874 hectares, respectively, and situated at Pinit, Ocampo, Camarines Sur which are portions of the agricultural lands covered by Transfer Certificates of Title Nos. 2883 and 2884 in the name of the [p]laintiff, and which were taken by the government pursuant to Land Reform Program as provided in Presidential Decree No. 27; and (2) ordering Defendant Land Bank of the Philippines to pay [p]laintiff the

amount of FORTY-FIVE MILLION SIX HUNDRED NINE-EIGHT THOUSAND EIGHT HUNDRED FIVE AND 34/100 (P45,698,805.34) PESOS, Philippine [c]urrency, in the manner provided by R.A. 6657, by way of full payment of the said just compensation. No pronouncement as to costs." "A preliminary valuation in the amount of P3,543,070.66 had in fact been previously released by the Land Bank in cash and bond; thus deducting it from the total amount adjudged, the balance unpaid amount[ed] to P45,698,805.34 which was ordered by the Regional Trial Court to be paid in accordance with RA 6657. "The Land Bank elevated the matter to the Supreme Court, which eventually dismissed the appeal in its Resolution dated December 17, 1997. Accordingly, a writ of execution was issued by the Regional Trial Court on December 4, 1997 and a notice of garnishment was served on the Land Bank on December 17, 1997. "On December 22, 1997, the Regional Trial Court issued an Order declaring that the Land Bank had complied with the writ of execution and ordered the same to release the amount of P44,749,947.82 to petitioner and the amount of P948,857.52 to the Clerk of Court as commission fees for execution of judgment.

"The Land Bank remitted the amount of P948,857.52 to the Clerk of Court on December 24, 1997 and released the amount of P3,621,023.01 in cash and Land Bank Bond No. AR0002206 in the amount of P41,128,024.81 to the petitioner. "Petitioner filed a motion for the issuance of an alias writ of execution before the Regional Trial Court, praying that the payment of the compensation be in proportion of P8,629,179.36 in bonds and P32,499,745 in cash, alleging that the cash portion should include the amounts in the Decision representing the interest payments. "Before the motion could be resolved by the Regional Trial Court, petitioner moved to withdraw the same and instead filed a motion for release of the balance of the garnished amount. He claimed that the payment of P41,128,024.81 in Land Bank Bonds was not acceptable to him and that the said amount should be paid in cash or certified check. The respondent Land Bank, on the other hand, opposed the motion, contending that the judgment amount had already been satisfied on December 24, 1997. "The Regional Trial Court issued an Order on March 20, 1998 for the Land Bank to release the balance of P41,128,024.81 from the garnished amount in cash or certified check.

"The Land Bank moved for a reconsideration of the said Order, maintaining that the payment was properly made in Land Bank Bonds. "On March 25, 1998, petitioner filed a motion to hold the Land Bank in contempt for its refusal to release the balance of the garnished amount in cash or certified check. "Respondent Regional Trial Court presided over by a new judge, resolved the two motions on April 24, 1998. It held that the payment of just compensation must be computed in the manner provided for in Section 18, Republic Act No. 6657. Thus, it ruled that:

"To summarize, the very issue to be resolved in the instant case is to determine how much should be paid in cash and how much also should be paid in bonds, to fully satisfy the judgment herein rendered in the amount of P49,241,876.00, the computation of which is as follows: Total land value per judgment P49,241,876.00 Amount payable in bonds: 70% (50 has) P22,323,932.75 75% (excess) P13,012,907.41 35,336,840.16

Amount payable in cash: 30% (50 has) P9,567,399.75 35% (excess) 4,337,635.81 13,905,035.56 Less: Preliminary valuation: P3,543,070.66 Commissioner's Fee: 948,857.52 Payment to plaintiff on 12-24-97 3,621,023.01 P 8,112,951.19 ______________ P 5,792,084.37 "Consequently, not only must the Order of March 20, 1997 be reconsidered, but by implication, the Order of this Court dated December 22, 1997 is likewise deemed reconsidered. It goes without saying that the payment of just compensation must be made in accordance with Sec. 18, Republic Act No. 6657 in relation to Section 9, Rule 39 of the 1997 Rules of Civil Procedure insofar as it does not contravene x x x the former.

"On the basis of the foregoing discussion, this Court finds no merit [i]n the motion to cite in contempt of court the Land Bank of the Philippines. "Be it also noted that Defendant Land Bank, through counsel, has submitted a re-computation of the compensation in accordance with her manifestation on oral argument [with] which this court begs to disagree. "WHEREFORE, Defendant Land Bank of the Philippines is hereby ordered to pay the [p]laintiff the [c]ash [b]alance of FIVE MILLION SEVEN HUNDRED NINETY TWO THOUSAND EIGHTY-FOUR and 37/100 (P5,792,084.37), Philippine [c]urrency and the amount of THIRTY FIVE MILLION, THREE HUNDRED THIRTY SIX THOUSAND EIGHT HUNDRED FORTY and 16/100 (P35,336,840.16) PESOS in government instruments or bonds to fully satisfy the Judgment herein in the amount of forty-nine million two hundred forty one thousand eight hundred seventy six (P49,241,876.00) pesos, Philippine [c]urrency as just compensation due the [p]laintiff. "Thus, the Order of this Court dated March 20, 1998 is hereby reconsidered and SET ASIDE and by implication, the Order dated December 22, 1997 is hereby deemed reconsidered and MODIFIED accordingly.

"The Motion to Cite in Contempt of Court the Land Bank of the Philippines is hereby DENIED. "SO ORDERED." "Petitioner's motion to reconsider the above-mentioned Order was denied on June 17, 1998[;] hence, this petition."[5] The CA Ruling The CA upheld the questioned April 24, 1998 Order of the trial court. The appellate court opined that the Order merely ascertained the mode of compensation for petitioner's expropriated properties, as decreed in the final judgment, and was issued pursuant to the court a quo's general supervisory control over the process of execution. Said the CA: "RA 6657 is clear and leaves no doubt as to its interpretation regarding the manner of payment of just compensation. The provision allows the landowner to choose the manner of payment from the list provided therein, but since plaintiff had obviously wanted payment to be made in cash, then the trial court, through the new presiding judge, Judge VillegasLlaguno, had only to apply Section 18 of R.A. 6657 which provides for the payment of a percentage thereon in cash and the balance in bond, in the exercise of her ministerial duty to execute the decision which ha[d] become final and executory.

Nevertheless, in the exercise of her supervisory powers over the execution of a final and executory judgment, Judge Villegas-Llaguno found it necessary to modify the order of Judge Naval dated December 22, 1997 as regards the order of execution since it had erroneously applied Section 9, Article 39 of the Rules of Court regarding satisfaction of money judgments in the manner of payment even as to the portion required to be paid in bonds, and thus, had completely disregarded the portion in the final and executory decision of August 12, 1997 which makes direct reference to RA 6657. "The garnishment, on the other hand, of the amount of P45,698,805.34 from the Land Bank of the Philippines does not affect the execution of the judgment in the case. As above-expounded, the judgment was to be fully executed in accordance with the provisions of R.A. 6657 which allows the landowner to have the compensation be paid in cash and in bond, but not fully in cash, as herein petitioner would like to maintain. Technically, the garnishment which was made in this case pursuant to the order of execution by Judge Naval shall extend only to the cash portion of the judgment amount. On the other hand, with respect to the amount to be issued in bonds, the only jurisdiction of the trial court is to order the Land Bank of the Philippines to issue the corresponding bonds and deliver the same to herein petitioners. Hence, this Petition.[6]

Issues In his Memorandum,[7] petitioner submits the following issues for resolution: "1. Did respondent judge act without jurisdiction when she issued the Order dated 24 April 1998 amending the final Judgment dated 12 August 1997? "2. Is it a ministerial duty of the respondent judge to order the release and of the Land Bank to release the garnished amount under Section 9 (c) of Rule 39 of the Rules of Court? "3. May respondent Land Bank question the legality of its own compliance with the Writ of Execution? "4. Are the respondent judge and the respondent Land Bank and its officials liable for damages under Section 3 of Rule 65 of the Rules of Court?"[8] In short, the main issue is whether the April 24, 1998 Order of Judge Llaguno was proper. The Court's Ruling We find no merit in this Petition.

Main Issue: Propriety and Efficacy of the April 24, 1998 RTC Order Petitioner insists that the April 24, 1998 Order of Judge Llaguno was issued without jurisdiction. That is, it allegedly amended the August 12, 1997 judgment of the Special Agrarian Court by requiring the payment of compensation in cash and bonds. Assailed Order Not an Amendment, But an Iteration of Final Judgment The argument is not persuasive. The April 24, 1998 Order was not an illegal amendment of the August 12, 1997 judgment which had become final and executory. The reason is that the Order did not revise, correct, or alter the Decision. Rather, the Order iterated and made clear the essence of the final judgment. The August 12, 1997 judgment mandated compensation to the petitioner "in the manner provided by R.A. 6657."[9] There is certitude with regard to this assertion. The confusion in the present case, which required the issuance of the assailed Order, arose from petitioner's belief that the Land Bank had obligated itself to pay in cash the compensation due

him. This fact can allegedly be gleaned from its compliance with the December 4, 1997 Writ of Execution and December 19, 1997 Notice of Garnishment. Compensation Due Petitioner to Be Paid Pursuant to RA 6657 However, it is clear from the August 12, 1997 judgment that the compensation was to be paid "in the manner provided by RA 6657."[10] Pursuant to Section 18 of the same law, payment was to be in cash and bonds, as indicated below: "Section 18. Valuation and Mode of Compensation. -- The LBP shall compensate the landowner in such amount as may be agreed upon by the landowner and the DAR and LBP, in accordance with the criteria provided for in Sections 16 and 17, and other pertinent provisions hereof, or as may be finally determined by the court, as the just compensation for the land. "The compensation shall be paid in one of the following modes, at the option of the landowner: (1) Cash payment, under the following terms and conditions (a) For lands above fifty(50) hectares, insofar as the excess hectarage is concerned.

Twenty-five percent (25%) cash, the balance to be paid in government financial instruments negotiable at any time (b) For lands above twenty-four (24) hectares and up to fifty (50) hectares

Thirty-percent (30%) cash, the balance to be paid in government financial instruments negotiable at anytime." Be that as it may, petitioner contends that the bank is estopped from questioning its alleged undertaking to pay him in cash. This contention was purportedly manifested in its letter-compliance with the Writ of Execution and the Notice of Garnishment. In the letter, respondent said that it was segregating a specified amount from the Agrarian Reform Fund, in order to pay him. He insists that such amount was garnished in accordance with Section 1, Rule 39 of the Rules of Court, and should have been delivered to him pursuant to Section 9 of the same Rule. We disagree. Respondent bank was obliged to follow the mandate of the August 12, 1997 judgment. Hence, its compliance with the Writ of Execution and the Notice of Garnishment[11] ought to have been construed as an agreement to pay petitioner in the manner set forth in Republic Act No. 6657. Its compliance was not an undertaking to pay in cash because such act would have been a deviation

from the dictum of the final judgment, to which execution must conform.[12] Paying in cash, as petitioner demands, is not compatible with such judgment. Misplaced is petitioner's reliance on Section 9, Rule 39 of the Rules of Court, because the final judgment decrees payment in cash and bonds. Indeed, this provision must be taken in conjunction with RA 6657. Since respondent bank had already given petitioner the entire adjudged amount in the required proportion of cash and bonds, it must be deemed to have complied with its duty under Rule 39. We understand petitioner's desire to be paid in cash; after all, his compensation was long overdue. However, we cannot grant his Petition because it is not sustained by the law. In this regard, we recall the Court's explanation in Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform:[13] "It cannot be denied from these cases that the traditional method for the payment of just compensation is money and no other. And so, conformably, has just compensation been paid in the past solely in that medium. However, we do not deal here with the traditional exercise of the power of eminent domain. This is not an ordinary expropriation where only a specific property of relatively limited area is sought to be taken by the State from its owner for a specific and

perhaps local purpose. What we deal with here is a revolutionary kind of expropriation. xxxxxxxxx "With these assumptions, the Court hereby declares that the content and manner of the just compensation provided for in the afore-quoted Section 18 of the CARP Law is not violative of the Constitution. We do not mind admitting that a certain degree of pragmatism has influenced our decision on this issue, but after all this Court is not a cloistered institution removed from the realities and demands of society or oblivious to the need for its enhancement. The Court is as acutely anxious as the rest our people to see the goal of agrarian reform achieved at last after the frustrations and deprivations of our peasant masses during all these disappointing decades. We are aware that invalidation of the said section will result in the nullification of the entire program, killing the farmer's hopes even as they approach realization and resurrecting the specter of discontent and dissent in the restless countryside. That is not in our view the intention of the Constitution, and that is not what we shall decree today. "Accepting the theory that payment of the just compensation is not always required to be made fully in money, we find further that the proportion of cash payment to the other things of value constituting the total payment, as determined

on the basis of the areas of the lands expropriated, is not unduly oppressive upon the landowner. It is noted that the smaller the land, the bigger the payment in money, primarily because the small landowner will be needing it more than the big landowners, who can afford a bigger balance in bonds and other things of value. No less importantly, the government financial instruments making up the balance of the payment are 'negotiable at any time.' The other modes, which are likewise available to be landowner at his option, are also not unreasonable because payment is made in shares of stock, LBP bonds, other properties or assets, tax credits, and other things of value equivalent to the amount of just compensation. "Admittedly, the compensation contemplated in the law will cause the landowners, big and small, not a little inconvenience. As already remarked, this cannot be avoided. Nevertheless, it is devoutly hoped that these countrymen of ours, conscious as we know they are of the need for their forbearance and even sacrifice, will not begrudge us their indispensable share in the attainment of the ideal of agrarian reform. Otherwise, our pursuit of this elusive goal will be like the quest for the Holy Grail." All told, we hold that the appellate court was correct in sustaining the propriety and the efficacy of the April 24, 1998 Order of Judge Llaguno. In the exercise of her supervisory powers over the execution of a final and executory

judgment,[14] such as her August 12, 1997 Decision, special circumstances attending its execution impelled her to issue the Order clarifying the terms thereof. Petitioner's claim for damages against the bank must likewise be denied because, as already explained, it was well within its rights in resisting the former's claim. WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioner. SO ORDERED. Melo, (Chairman), Vitug, Purisima, and Gonzaga-Reyes, JJ., concur. [1] Rollo, pp. 28-37. [2] Ibid., p. 38. [3] Seventh Division composed of Justices Salome A. Montoya, chairman and ponente; and Ruben T. Reyes and Eloy R. Bello, members, both concurring. [4] CA Decision, p. 10; rollo, p. 37. [5] CA Decision, pp. 1-5; rollo, pp. 28-32.

[6] The case was deemed submitted for decision on October 29, 1999, upon receipt by this Court of the respondents' Memorandum, signed by Atty. Augusto M. Aquino of Gonzales Aquino & Associates. Petitioner's Memorandum, signed by Atty. Fernando A. Santiago, was received on October 20, 1999. [7] Rollo, pp. 199-214. [8] Ibid., pp. 204-205. The issue of whether bonds constitute "just compensation" within the constitutional provision could not be taken up by the Court because it was not raised by the parties. [9]9 Rollo, p. 45. [10] Entitled "An Act Instituting A Comprehensive Agrarian Reform Program To Promote Social Justice And Industrialization, Providing The Mechanism For Its Implementation, And For Other Purposes." [11] Through the December 19, 1997 letter of Augusto M. Aquino, LBP vice president, Agrarian Legal Office; rollo, p. 50. The pertinent portion of the letter reads: "Relative to the above-subject, please be informed that Land Bank has segregated from the National Government's Agrarian Reform Fund (ARF) in the Bank's custody the amount

of P45,698,805.34 to satisfy the RTC x x x determined compensation for plaintiff's parcels of land placed by the Department of Agrarian Reform (DAR) under Operation Land Transfer pursuant to Presidential Decree No. 27, to be delivered to plaintiff only upon final release order of the court. The amount shall be taken from the ARF which answers for the payment of lands covered by the Government's agrarian reform program, not from Land Bank's corporate funds which are separate from the ARF." [12] Because execution which varies the tenor of the judgment or exceeds the terms thereof is a nullity. Equatorial Realty Development, Inc. v. Mayfair Theater, GR No. 136221, May 12, 2000; Philippine Bank of Communications v. Court of Appeals, 279 SCRA 364, September 23, 1997; Matuguina Integrated Wood Products, Inc. v. Court of Appeals, 263 SCRA 490, October 24, 1996; Ex-Bataan Veterans Security Agency, Inc. v. National Labor Relations Commission, 250 SCRA 418, November 29, 1995. [13] 175 SCRA 343, July 14, 1989, per Cruz, J. [14] The rule is that the court which rendered the decision has a general supervisory control over the process of execution. Panado et al. v Court of Appeals, 298 SCRA 110, October 14, 1998; Balais v. Velasco, 252 SCRA 707, January 31, 1996.

3. Effects of non payment

EN BANC [G.R. No. 161656. June 29, 2005] REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA, COMMODORE EDGARDO GALEOS, ANTONIO CABALUNA, DOROTEO MANTOS & FLORENCIO BELOTINDOS, petitioners, vs. VICENTE G. LIM, respondent. RESOLUTION SANDOVAL-GUTIERREZ, J.: Justice is the first virtue of social institutions.[1] When the state wields its power of eminent domain, there arises a correlative obligation on its part to pay the owner of the expropriated property a just compensation. If it fails, there is a clear case of injustice that must be redressed. In the present case, fifty-seven (57) years have lapsed from the time the Decision in the subject expropriation proceedings became final, but still the Republic of the Philippines, herein petitioner, has not compensated the owner of the property. To tolerate such prolonged inaction on its part is to encourage distrust and resentment among our people the very vices

that corrode the ties of civility and tempt men to act in ways they would otherwise shun. A revisit of the pertinent facts in the instant case is imperative. On September 5, 1938, the Republic of the Philippines (Republic) instituted a special civil action for expropriation with the Court of First Instance (CFI) of Cebu, docketed as Civil Case No. 781, involving Lots 932 and 939 of the Banilad Friar Land Estate, Lahug, Cebu City, for the purpose of establishing a military reservation for the Philippine Army. Lot 932 was registered in the name of Gervasia Denzon under Transfer Certificate of Title (TCT) No. 14921 with an area of 25,137 square meters, while Lot 939 was in the name of Eulalia Denzon and covered by TCT No. 12560 consisting of 13,164 square meters. After depositing P9,500.00 with the Philippine National Bank, pursuant to the Order of the CFI dated October 19, 1938, the Republic took possession of the lots. Thereafter, or on May 14, 1940, the CFI rendered its Decision ordering the Republic to pay the Denzons the sum of P4,062.10 as just compensation. The Denzons interposed an appeal to the Court of Appeals but it was dismissed on March 11, 1948. An entry of judgment was made on April 5, 1948.

In 1950, Jose Galeos, one of the heirs of the Denzons, filed with the National Airports Corporation a claim for rentals for the two lots, but it denied knowledge of the matter. Another heir, Nestor Belocura, brought the claim to the Office of then President Carlos Garcia who wrote the Civil Aeronautics Administration and the Secretary of National Defense to expedite action on said claim. On September 6, 1961, Lt. Manuel Cabal rejected the claim but expressed willingness to pay the appraised value of the lots within a reasonable time. For failure of the Republic to pay for the lots, on September 20, 1961, the Denzons successors-in-interest, Francisca Galeos-Valdehueza and Josefina Galeos-Panerio,[2] filed with the same CFI an action for recovery of possession with damages against the Republic and officers of the Armed Forces of the Philippines in possession of the property. The case was docketed as Civil Case No. R-7208. In the interim or on November 9, 1961, TCT Nos. 23934 and 23935 covering Lots 932 and 939 were issued in the names of Francisca Valdehueza and Josefina Panerio, respectively. Annotated thereon was the phrase subject to the priority of the National Airports Corporation to acquire said parcels of land, Lots 932 and 939 upon previous payment of a reasonable market value.

On July 31, 1962, the CFI promulgated its Decision in favor of Valdehueza and Panerio, holding that they are the owners and have retained their right as such over Lots 932 and 939 because of the Republics failure to pay the amount of P4,062.10, adjudged in the expropriation proceedings. However, in view of the annotation on their land titles, they were ordered to execute a deed of sale in favor of the Republic. In view of the differences in money value from 1940 up to the present, the court adjusted the market value at P16,248.40, to be paid with 6% interest per annum from April 5, 1948, date of entry in the expropriation proceedings, until full payment. After their motion for reconsideration was denied, Valdehueza and Panerio appealed from the CFI Decision, in view of the amount in controversy, directly to this Court. The case was docketed as No. L-21032.[3] On May 19, 1966, this Court rendered its Decision affirming the CFI Decision. It held that Valdehueza and Panerio are still the registered owners of Lots 932 and 939, there having been no payment of just compensation by the Republic. Apparently, this Court found nothing in the records to show that the Republic paid the owners or their successors-in-interest according to the CFI decision. While it deposited the amount of P9,500,00, and said deposit was allegedly disbursed, however, the payees could not be ascertained.

Notwithstanding the above finding, this Court still ruled that Valdehueza and Panerio are not entitled to recover possession of the lots but may only demand the payment of their fair market value, ratiocinating as follows: Appellants would contend that: (1) possession of Lots 932 and 939 should be restored to them as owners of the same; (2) the Republic should be ordered to pay rentals for the use of said lots, plus attorneys fees; and (3) the court a quo in the present suit had no power to fix the value of the lots and order the execution of the deed of sale after payment. It is true that plaintiffs are still the registered owners of the land, there not having been a transfer of said lots in favor of the Government. The records do not show that the Government paid the owners or their successors-in-interest according to the 1940 CFI decision although, as stated, P9,500.00 was deposited by it, and said deposit had been disbursed. With the records lost, however, it cannot be known who received the money (Exh. 14 says: It is further certified that the corresponding Vouchers and pertinent Journal and Cash Book were destroyed during the last World War, and therefore the names of the payees concerned cannot be ascertained.) And the Government now admits that there is no available record showing that payment for the value of the lots in question has been made (Stipulation of Facts, par. 9, Rec. on Appeal, p. 28).

The points in dispute are whether such payment can still be made and, if so, in what amount. Said lots have been the subject of expropriation proceedings. By final and executory judgment in said proceedings, they were condemned for public use, as part of an airport, and ordered sold to the Government. In fact, the abovementioned title certificates secured by plaintiffs over said lots contained annotations of the right of the National Airports Corporation (now CAA) to pay for and acquire them. It follows that both by virtue of the judgment, long final, in the expropriation suit, as well as the annotations upon their title certificates, plaintiffs are not entitled to recover possession of their expropriated lots which are still devoted to the public use for which they were expropriated but only to demand the fair market value of the same. Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932 to Vicente Lim, herein respondent,[4] as security for their loans. For their failure to pay Lim despite demand, he had the mortgage foreclosed in 1976. Thus, TCT No. 23934 was cancelled, and in lieu thereof, TCT No. 63894 was issued in his name. On August 20, 1992, respondent Lim filed a complaint for quieting of title with the Regional Trial Court (RTC), Branch 10, Cebu City, against General Romeo Zulueta, as Commander of the Armed Forces of the Philippines, Commodore Edgardo Galeos, as Commander of Naval District V of the Philippine

Navy, Antonio Cabaluna, Doroteo Mantos and Florencio Belotindos, herein petitioners. Subsequently, he amended the complaint to implead the Republic. On May 4, 2001, the RTC rendered a decision in favor of respondent, thus: WHEREFORE, judgment is hereby rendered in favor of plaintiff Vicente Lim and against all defendants, public and private, declaring plaintiff Vicente Lim the absolute and exclusive owner of Lot No. 932 with all the rights of an absolute owner including the right to possession. The monetary claims in the complaint and in the counter claims contained in the answer of defendants are ordered Dismissed. Petitioners elevated the case to the Court of Appeals, docketed therein as CA-G.R. CV No. 72915. In its Decision[5] dated September 18, 2003, the Appellate Court sustained the RTC Decision, thus: Obviously, defendant-appellant Republic evaded its duty of paying what was due to the landowners. The expropriation proceedings had already become final in the late 1940s and yet, up to now, or more than fifty (50) years after, the Republic had not yet paid the compensation fixed by the court while continuously reaping benefits from the expropriated property to the prejudice of the landowner. x x x. This is contrary to the rules of fair play because the concept

of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also the payment for the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered just for the property owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for a decade or more, in this case more than 50 years, before actually receiving the amount necessary to cope with the loss. To allow the taking of the landowners properties, and in the meantime leave them empty-handed by withholding payment of compensation while the government speculates on whether or not it will pursue expropriation, or worse, for government to subsequently decide to abandon the property and return it to the landowners, is undoubtedly an oppressive exercise of eminent domain that must never be sanctioned. (Land Bank of the Philippines vs. Court of Appeals, 258 SCRA 404). x x x x x x

An action to quiet title is a common law remedy for the removal of any cloud or doubt or uncertainty on the title to real property. It is essential for the plaintiff or complainant to have a legal or equitable title or interest in the real property, which is the subject matter of the action. Also the deed, claim, encumbrance or proceeding that is being alleged as cloud on plaintiffs title must be shown to be in fact invalid or

inoperative despite its prima facie appearance of validity or legal efficacy (Robles vs. Court of Appeals, 328 SCRA 97). In view of the foregoing discussion, clearly, the claim of defendant-appellant Republic constitutes a cloud, doubt or uncertainty on the title of plaintiff-appellee Vicente Lim that can be removed by an action to quiet title. WHEREFORE, in view of the foregoing, and finding no reversible error in the appealed May 4, 2001 Decision of Branch 9, Regional Trial Court of Cebu City, in Civil Case No. CEB-12701, the said decision is UPHELD AND AFFIRMED. Accordingly, the appeal is DISMISSED for lack of merit. Undaunted, petitioners, through the Office of the Solicitor General, filed with this Court a petition for review on certiorari alleging that the Republic has remained the owner of Lot 932 as held by this Court in Valdehueza vs. Republic.[6] In our Resolution dated March 1, 2004, we denied the petition outright on the ground that the Court of Appeals did not commit a reversible error. Petitioners filed an urgent motion for reconsideration but we denied the same with finality in our Resolution of May 17, 2004. On May 18, 2004, respondent filed an ex-parte motion for the issuance of an entry of judgment. We only noted the motion in our Resolution of July 12, 2004.

On July 7, 2004, petitioners filed an urgent plea/motion for clarification, which is actually a second motion for reconsideration. Thus, in our Resolution of September 6, 2004, we simply noted without action the motion considering that the instant petition was already denied with finality in our Resolution of May 17, 2004. On October 29, 2004, petitioners filed a very urgent motion for leave to file a motion for reconsideration of our Resolution dated September 6, 2004 (with prayer to refer the case to the En Banc). They maintain that the Republics right of ownership has been settled in Valdehueza. The basic issue for our resolution is whether the Republic has retained ownership of Lot 932 despite its failure to pay respondents predecessors-in-interest the just compensation therefor pursuant to the judgment of the CFI rendered as early as May 14, 1940. Initially, we must rule on the procedural obstacle. While we commend the Republic for the zeal with which it pursues the present case, we reiterate that its urgent motion for clarification filed on July 7, 2004 is actually a second motion for reconsideration. This motion is prohibited under Section 2, Rule 52, of the 1997 Rules of Civil Procedure, as amended, which provides:

Sec. 2. Second motion for reconsideration. No second motion for reconsideration of a judgment or final resolution by the same party shall be entertained. Consequently, as mentioned earlier, we simply noted without action the motion since petitioners petition was already denied with finality. Considering the Republics urgent and serious insistence that it is still the owner of Lot 932 and in the interest of justice, we take another hard look at the controversial issue in order to determine the veracity of petitioners stance. One of the basic principles enshrined in our Constitution is that no person shall be deprived of his private property without due process of law; and in expropriation cases, an essential element of due process is that there must be just compensation whenever private property is taken for public use.[7] Accordingly, Section 9, Article III, of our Constitution mandates: Private property shall not be taken for public use without just compensation. The Republic disregarded the foregoing provision when it failed and refused to pay respondents predecessors-ininterest the just compensation for Lots 932 and 939. The length of time and the manner with which it evaded payment demonstrate its arbitrary high-handedness and confiscatory attitude. The final judgment in the expropriation proceedings

(Civil Case No. 781) was entered on April 5, 1948. More than half of a century has passed, yet, to this day, the landowner, now respondent, has remained empty-handed. Undoubtedly, over 50 years of delayed payment cannot, in any way, be viewed as fair. This is more so when such delay is accompanied by bureaucratic hassles. Apparent from Valdehueza is the fact that respondents predecessors-ininterest were given a run around by the Republics officials and agents. In 1950, despite the benefits it derived from the use of the two lots, the National Airports Corporation denied knowledge of the claim of respondents predecessors-ininterest. Even President Garcia, who sent a letter to the Civil Aeronautics Administration and the Secretary of National Defense to expedite the payment, failed in granting relief to them. And, on September 6, 1961, while the Chief of Staff of the Armed Forces expressed willingness to pay the appraised value of the lots, nothing happened. The Court of Appeals is correct in saying that Republics delay is contrary to the rules of fair play, as just compensation embraces not only the correct determination of the amount to be paid to the owners of the land, but also the payment for the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered just. In jurisdictions similar to ours, where an entry to the expropriated property precedes the payment of compensation, it has been held that if the compensation is

not paid in a reasonable time, the party may be treated as a trespasser ab initio.[8] Corollarily, in Provincial Government of Sorsogon vs. Vda. De Villaroya,[9] similar to the present case, this Court expressed its disgust over the governments vexatious delay in the payment of just compensation, thus: The petitioners have been waiting for more than thirty years to be paid for their land which was taken for use as a public high school. As a matter of fair procedure, it is the duty of the Government, whenever it takes property from private persons against their will, to supply all required documentation and facilitate payment of just compensation. The imposition of unreasonable requirements and vexatious delays before effecting payment is not only galling and arbitrary but a rich source of discontent with government. There should be some kind of swift and effective recourse against unfeeling and uncaring acts of middle or lower level bureaucrats. We feel the same way in the instant case. More than anything else, however, it is the obstinacy of the Republic that prompted us to dismiss its petition outright. As early as May 19, 1966, in Valdehueza, this Court mandated the Republic to pay respondents predecessors-in-interest the sum of P16,248.40 as reasonable market value of the two

lots in question. Unfortunately, it did not comply and allowed several decades to pass without obeying this Courts mandate. Such prolonged obstinacy bespeaks of lack of respect to private rights and to the rule of law, which we cannot countenance. It is tantamount to confiscation of private property. While it is true that all private properties are subject to the need of government, and the government may take them whenever the necessity or the exigency of the occasion demands, however, the Constitution guarantees that when this governmental right of expropriation is exercised, it shall be attended by compensation.[10] From the taking of private property by the government under the power of eminent domain, there arises an implied promise to compensate the owner for his loss.[11] Significantly, the above-mentioned provision of Section 9, Article III of the Constitution is not a grant but a limitation of power. This limiting function is in keeping with the philosophy of the Bill of Rights against the arbitrary exercise of governmental powers to the detriment of the individuals rights. Given this function, the provision should therefore be strictly interpreted against the expropriator, the government, and liberally in favor of the property owner.[12] Ironically, in opposing respondents claim, the Republic is invoking this Courts Decision in Valdehueza, a Decision it utterly defied. How could the Republic acquire ownership over Lot 932 when it has not paid its owner the just

compensation, required by law, for more than 50 years? The recognized rule is that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. Jurisprudence on this settled principle is consistent both here and in other democratic jurisdictions. In Association of Small Landowners in the Philippines, Inc. et al., vs. Secretary of Agrarian Reform,[13] thus: Title to property which is the subject of condemnation proceedings does not vest the condemnor until the judgment fixing just compensation is entered and paid, but the condemnors title relates back to the date on which the petition under the Eminent Domain Act, or the commissioners report under the Local Improvement Act, is filed. x x x Although the right to appropriate and use land taken for a canal is complete at the time of entry, title to the property taken remains in the owner until payment is actually made. (Emphasis supplied.) In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that title to property does not pass to the condemnor until just compensation had actually been made. In fact, the decisions appear to be uniform to this effect. As early as 1838, in Rubottom v. McLure, it was held that actual payment to the owner of the condemned

property was a condition precedent to the investment of the title to the property in the State albeit not to the appropriation of it to public use. In Rexford v. Knight, the Court of Appeals of New York said that the construction upon the statutes was that the fee did not vest in the State until the payment of the compensation although the authority to enter upon and appropriate the land was complete prior to the payment. Kennedy further said that both on principle and authority the rule is . . . that the right to enter on and use the property is complete, as soon as the property is actually appropriated under the authority of law for a public use, but that the title does not pass from the owner without his consent, until just compensation has been made to him. Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes, that: If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid...(Emphasis supplied.) Clearly, without full payment of just compensation, there can be no transfer of title from the landowner to the expropriator. Otherwise stated, the Republics acquisition of

ownership is conditioned upon the full payment of just compensation within a reasonable time.[14] Significantly, in Municipality of Bian v. Garcia[15] this Court ruled that the expropriation of lands consists of two stages, to wit: x x x The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint x x x. The second phase of the eminent domain action is concerned with the determination by the court of the just compensation for the property sought to be taken. This is done by the court with the assistance of not more than three (3) commissioners. x x x. It is only upon the completion of these two stages that expropriation is said to have been completed. In Republic v. Salem Investment Corporation,*16+ we ruled that, the process is not completed until payment of just

compensation. Thus, here, the failure of the Republic to pay respondent and his predecessors-in-interest for a period of 57 years rendered the expropriation process incomplete. The Republic now argues that under Valdehueza, respondent is not entitled to recover possession of Lot 932 but only to demand payment of its fair market value. Of course, we are aware of the doctrine that non-payment of just compensation (in an expropriation proceedings) does not entitle the private landowners to recover possession of the expropriated lots. This is our ruling in the recent cases of Republic of the Philippines vs. Court of Appeals, et al.,[17] and Reyes vs. National Housing Authority.[18] However, the facts of the present case do not justify its application. It bears stressing that the Republic was ordered to pay just compensation twice, the first was in the expropriation proceedings and the second, in Valdehueza. Fifty-seven (57) years have passed since then. We cannot but construe the Republics failure to pay just compensation as a deliberate refusal on its part. Under such circumstance, recovery of possession is in order. In several jurisdictions, the courts held that recovery of possession may be had when property has been wrongfully taken or is wrongfully retained by one claiming to act under the power of eminent domain[19] or where a rightful entry is made and the party condemning refuses to pay the compensation which has been assessed or agreed upon;[20] or fails or refuses to have the compensation assessed and paid.[21]

The Republic also contends that where there have been constructions being used by the military, as in this case, public interest demands that the present suit should not be sustained. It must be emphasized that an individual cannot be deprived of his property for the public convenience.[22] In Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform,[23] we ruled: One of the basic principles of the democratic system is that where the rights of the individual are concerned, the end does not justify the means. It is not enough that there be a valid objective; it is also necessary that the means employed to pursue it be in keeping with the Constitution. Mere expediency will not excuse constitutional shortcuts. There is no question that not even the strongest moral conviction or the most urgent public need, subject only to a few notable exceptions, will excuse the bypassing of an individual's rights. It is no exaggeration to say that a person invoking a right guaranteed under Article III of the Constitution is a majority of one even as against the rest of the nation who would deny him that right. The right covers the persons life, his liberty and his property under Section 1 of Article III of the Constitution. With regard to his property, the owner enjoys the added protection of

Section 9, which reaffirms the familiar rule that private property shall not be taken for public use without just compensation. The Republics assertion that the defense of the State will be in grave danger if we shall order the reversion of Lot 932 to respondent is an overstatement. First, Lot 932 had ceased to operate as an airport. What remains in the site is just the National Historical Institutes marking stating that Lot 932 is the former location of Lahug Airport. And second, there are only thirteen (13) structures located on Lot 932, eight (8) of which are residence apartments of military personnel. Only two (2) buildings are actually used as training centers. Thus, practically speaking, the reversion of Lot 932 to respondent will only affect a handful of military personnel. It will not result to irreparable damage or damage beyond pecuniary estimation, as what the Republic vehemently claims. We thus rule that the special circumstances prevailing in this case entitle respondent to recover possession of the expropriated lot from the Republic. Unless this form of swift and effective relief is granted to him, the grave injustice committed against his predecessors-in-interest, though no fault or negligence on their part, will be perpetuated. Let this case, therefore, serve as a wake-up call to the Republic that in the exercise of its power of eminent domain, necessarily in derogation of private rights, it must comply with the Constitutional limitations. This Court, as the guardian of the

peoples right, will not stand still in the face of the Republics oppressive and confiscatory taking of private property, as in this case. At this point, it may be argued that respondent Vicente Lim acted in bad faith in entering into a contract of mortgage with Valdehueza and Panerio despite the clear annotation in TCT No. 23934 that Lot 932 is subject to the priority of the National Airports Corporation [to acquire said parcels of land] x x x upon previous payment of a reasonable market value. The issue of whether or not respondent acted in bad faith is immaterial considering that the Republic did not complete the expropriation process. In short, it failed to perfect its title over Lot 932 by its failure to pay just compensation. The issue of bad faith would have assumed relevance if the Republic actually acquired title over Lot 932. In such a case, even if respondents title was registered first, it would be the Republics title or right of ownership that shall be upheld. But now, assuming that respondent was in bad faith, can such fact vest upon the Republic a better title over Lot 932? We believe not. This is because in the first place, the Republic has no title to speak of. At any rate, assuming that respondent had indeed knowledge of the annotation, still nothing would have prevented him from entering into a mortgage contract involving Lot 932 while the expropriation proceeding was pending. Any person

who deals with a property subject of an expropriation does so at his own risk, taking into account the ultimate possibility of losing the property in favor of the government. Here, the annotation merely served as a caveat that the Republic had a preferential right to acquire Lot 932 upon its payment of a reasonable market value. It did not proscribe Valdehueza and Panerio from exercising their rights of ownership including their right to mortgage or even to dispose of their property. In Republic vs. Salem Investment Corporation,[24] we recognized the owners absolute right over his property pending completion of the expropriation proceeding, thus: It is only upon the completion of these two stages that expropriation is said to have been completed. Moreover, it is only upon payment of just compensation that title over the property passes to the government. Therefore, until the action for expropriation has been completed and terminated, ownership over the property being expropriated remains with the registered owner. Consequently, the latter can exercise all rights pertaining to an owner, including the right to dispose of his property subject to the power of the State ultimately to acquire it through expropriation. It bears emphasis that when Valdehueza and Panerio mortgaged Lot 932 to respondent in 1964, they were still the owners thereof and their title had not yet passed to the petitioner Republic. In fact, it never did. Such title or ownership was rendered conclusive when we categorically

ruled in Valdehueza that: It is true that plaintiffs are still the registered owners of the land, there not having been a transfer of said lots in favor of the Government. For respondents part, it is reasonable to conclude that he entered into the contract of mortgage with Valdehueza and Panerio fully aware of the extent of his right as a mortgagee. A mortgage is merely an accessory contract intended to secure the performance of the principal obligation. One of its characteristics is that it is inseparable from the property. It adheres to the property regardless of who its owner may subsequently be.[25] Respondent must have known that even if Lot 932 is ultimately expropriated by the Republic, still, his right as a mortgagee is protected. In this regard, Article 2127 of the Civil Code provides: Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents or income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with the declarations, amplifications, and limitations established by law, whether the estate remains in the possession of the mortgagor or it passes in the hands of a third person. In summation, while the prevailing doctrine is that the nonpayment of just compensation does not entitle the private

landowner to recover possession of the expropriated lots,[26] however, in cases where the government failed to pay just compensation within five (5)[27] years from the finality of the judgment in the expropriation proceedings, the owners concerned shall have the right to recover possession of their property. This is in consonance with the principle that the government cannot keep the property and dishonor the judgment.*28+ To be sure, the five-year period limitation will encourage the government to pay just compensation punctually. This is in keeping with justice and equity. After all, it is the duty of the government, whenever it takes property from private persons against their will, to facilitate the payment of just compensation. In Cosculluela v. Court of Appeals,[29] we defined just compensation as not only the correct determination of the amount to be paid to the property owner but also the payment of the property within a reasonable time. Without prompt payment, compensation cannot be considered just. WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 72915 is AFFIRMED in toto. The Republics motion for reconsideration of our Resolution dated March 1, 2004 is DENIED with FINALITY. No further pleadings will be allowed. Let an entry of judgment be made in this case.

SO ORDERED. Davide, Jr., C.J., Puno, Panganiban, Quisumbing, YnaresSantiago, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur. [1] Rawls, A Theory of Justice (1971) at 4. [2] They were joined by their husbands, Angel Valdehueza and Pablo Panerio, and father, Jose Galeos. [3] May 19, 1966, 17 SCRA 107. [4] The mortgage was duly annotated at the back of the mortgagors title in 1964, while the Decision of this Court in Valdehueza vs. Republic was annotated in 1974. [5] Penned by Justice Sergio L. Pestao (retired) and concurred in by Justices Perlita J. Tria Tirona and Jose C. Mendoza. [6] Supra. [7] Coscuella vs. Court of Appeals, No. L-77765, August 15, 1988, 164 SCRA 393, citing Province of Pangasinan vs. CFI Judge of Pangasinan, Branch VIII, 80 SCRA 117, 120-121 (1977).

[8] Law of Eminent Domain, Third Edition, Volume II 931 citing Cushman vs. Smith, 34 Me. 247; and see Davis vs. Russel, 47 Me. 443. [9] No. L-64037, August 27, 1987, 153 SCRA 291. [10] 26 Am Jur 2d 168. [11] Ibid. [12] Cruz, Constitutional Law, 1995 Ed., at 58-59. [13] G.R. No. 78742, July 14, 1989, 175 SCRA 343. *14+ Just compensation is described as a full and fair equivalent of the property taken from the private owner by the expropriator. This is intended to indemnify the owner fully for the loss he has sustained as a result of the expropriation. The measure of this compensation is not the takers gain but the owners loss. The word just is used to intensify the meaning of the word compensation, to convey the idea that the equivalent to be rendered for the property taken shall be real, substantial, full, ample. (Manila Railroad Co. vs. Velasquez, 32 Phil. 286). [15] G.R. No. 69260, December 22, 1989, 180 SCRA 576, 583584.

[16] G.R. No. 137569, June 23, 2000, 334 SCRA 320, 329. [17] G.R. No. 146587, July 2, 2002, 383 SCRA 611. [18] G.R. No. 147511, January 20, 2003, 395 SCRA 494. [19] Law of Eminent Domain, Third Edition, Volume II 927 citing Robinson vs. Southern California Ry.Co., 129 Cal. 8, 61 Pac. 947; Meeker vs. Chicago, 23 Ill. App. 23; Wilson vs. Muskegon etc. R.R. Co., 132 Mich. 469, 93 N.W. 1059; Illinois Cent.R.R. Co. vs. Hoskins, 80 Miss. 730, 32 So. 150, 92 Am St. Rep. 612; McClinton vs. Pittsburg etc. Ry Co., 66 Pa St. 404 [20] Id., citing White vs. Wabash, St. Louis & Pacific Ry. Co., 64 Ia. 281,20 N.W. 436; St. Joseph & Denver City R.R. Co. vs. Callender, 13 Kan. 496; Blackshire vs. Atchison,Topeka and Sta. Fe R.R. Co., 13 Kan. 514; Kanne v. Minneapolis & St. Louis Ry.Co., 30 Minn. 423; Bartleson vs. Minneapolis, 33 Minn. 468; Wheeling etc. R.R.Co. vs. Warrell, 122 Pa St. 613, 16 Alt 20 [21] Id., citing Connellsville Gas Coal Co. vs. Baltimore, etc. R.R. Co., 216 Pa St.309, 65 Atl. 669. [22] Law of Eminent Domain, Third Edition, Volume II 929 citing Hooper vs. Columbus & Western Ry.Co., 78 Ala. 213; Stratten vs. Great Western & Bradford Ry.Co., 40 L.J. Eq. 50.

In the latter case the court says. With regard to what is said as to public interests, I am not inclined to listen to any suggestion of public interest as against private rights acquired in a lawful way. I do not think that the interest of the public in using something that is provided for their convenience is to be upheld at the price of saying that a persons property is to be confiscated for that purpose. A man who comes to this court is entitled to have his rights ascertained and declared, however, inconvenient it may be to third persons to whom it may be a convenience to have the use of his property. [23] Supra at 375-376. [24] Supra. [25] Paras, Civil Code of the Philippines Annotated, 14th Ed., Book V, at 1021. [26] Republic of the Philippines vs. Court of Appeals, supra. and Reyes vs. National Housing Authority, supra. *27+ Section 6, Rule 39 provides that: A final and executory judgment or order may be executed on motion within five (5) years from the date of its entry. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action. The revived judgment may also be enforced by motion within (5) years from the

date of its entry and thereafter by action before it is barred by the statute of limitations. [28] Commissioner of Public Highways v. San Diego, No. L30098, February 18, 1970. [29] No. L-77765, August 15, 1988, 164 SCRA 393.

F. Judicial Review

lawphil Today is Saturday, November 17, 2012 Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-51078 October 30, 1980 CRISTINA DE KNECHT, petitioner, vs.

HON. PEDRO JL. BAUTISTA, as Judge presiding over Branch III of the Court of First Instance (Pasay City) and the REPUBLIC OF THE PHILIPPINES, respondents.

FERNANDEZ, J.: This is a petition for certiorari and prohibition filed by Cristina de Knecht against the Honorable Pedro JL. Bautista, as Judge presiding over Branch III of the Court of First Instance of Rizal (Pasay City), and the Republic of the Philippines pines seeking the following relief: WHEREFORE, petitioner respectfully prays that judgment be rendered annulling the order for immediate possession issued by respondent court in the expropriation proceedings and commanding respondents to desist from further proceedings in the expropriation action or the order for immediate possession issued in said action, with costs. Petitioner prays that a restraint order or writ of preliminary injunction be issued ex-parte enjoining respondents, their representative representative and agents from enforcing the here questioned order for mediate posession petitioner offering to post a bond executed to the parties enjoined in an amount to be fixed by the Court to the effect that she will pay to such parties all damages which they may sustain by reason of the

injunction if the Court should finally decide she is not entitled there She prays for such other remedy as the Court may deem just and equitable in the premises. Quezon City for July 1979. 1 The petitioner alleges that than ten (10) years ago, the government through the Department of Public Workmen's and Communication (now MPH) prepared a to Epifanio de los Santos Avenue (EDSA) to Roxas Boulevard; that the proposed extension, an adjunct of building program, the Manila Cavite Coastal Read Project, would pass through Cuneta Avenue up to Roxas Boulevard that this route would be a straight one taking into account the direction of EDSA; that preparation to the implementation of the aforesaid plan, or on December 13, 1974, then Secretary Baltazar Aquino of the Department of Public Highways directed the City Engineer of Pasay City not to issue temporary or permanent permits for the construction and/or improvement of buildings and other structures located within the proposed extension through Cuneta Avenue that shortly thereafter the Department of Public Highways decided to make the proposed extension go through Fernando Rein and Del Pan Streets which are lined with old substantial houses; that upon learning of the changed the owners of the residential houses that would be affected, the herein petitioner being one of them, filed on April 15, 1977 a formal petition to President Ferdinand

E. Marcos asking him to order the Ministry of Public Highways to adoption, the original plan of making the extension of EDSA through Araneta Avenue instead of the new plan going through Fernando Rein and Del Pan Streets; that President Marcos directed then Minister Baltazar Aquino to explain within twentyfour (24) hours why the proposed project should not be suspended; that on April 21, 1977 then Minister Aquino submitted his explanation defending the new proposed route; that the President then referred the matter to the Human Settlements Commission for investigation and recommendation; that after formal hearings to which all the parties proponents and oppositors were given full opportunity to ventilate their views and to present their evidence, the Settlements Commission submitted a report recommending the reversion of the extension of EDSA to the original plan passing through Cuneta Avenue; and that notwithstanding the said report and recommendation, the Ministry of Public Highways insisted on implementing the plan to make the extension of EDSA go through Fernando Rein and Del Pan Streets. 2 In February 1979, the government filed in the Court of First Instance of Rizal, Branch III, Pascual City presided by the respondent Judge, a complaint for expropriation against the owners of the houses standing along Fernando Rein and Del Pan Streets, among them the herein petitioner. The complaint was docketed as Civil Case No. 7001-P and entitled "Republic of the Philippines vs. Concepcion Cabarrus Vda. de Santos, etc."

The herein petitioner filed a motion to dismiss dated March 19, 1979 on the following grounds: (a) court had no jurisdiction over the subject matter of the action because the complaint failed to allege that the instant project for expropriation bore the approval of the Ministry of Human Settlements and the Metro Manila Government nor pursuant to Presidential Decrees Nos. 824, 1396 and 1517; (b) The choice of properties to be expropriated made by the Ministry of Public Highways was arbitrary and erroneous; (c) The complaint was premature as the plaintiff never really had gone through serious negotiations with the defendant for the purchase of her property; and (d) The complaint relied on an arbitrary and erroneous valuation of properties and disregarded consequential damages. An urgent motion dated March 28, 1979 for preliminary junction was also filed. In June 1979 the Republic of the Philippines filed a motion for the issuance of a writ of possession of the property sought to be expropriated on the ground that said Republic had made the required deposit with the Philippine National Bank.

The respondent judge issued a writ of possession dated June 14, 1979 authorizing the Republic of the Philippines to take and enter upon the possession of the properties sought be condemned. 3 The petitioner contends that "Respondent court lacked or exceeded its jurisdiction or gravely abused its discretion in issuing the order to take over and enter upon the possession of the properties sought to be expropriated-petitioner having raised a constitutional question which respondent court must resolve before it can issue an order to take or enter upon the possession of properties sought to be expropriated." 4 The petitioner assails the choice of the Fernando Rein and Del Pan Streets route on the following grounds: The choice of property to be expropriated cannot be without rhyme or reason. The condemnor may not choose any property it wants. Where the legislature has delegated a power of eminent do-main, the question of the necessity for taking a particular fine for the intended improvement rests in the discretion of the grantee power subject however to review by the courts in case of fraud, bad faith or gross abuse of discretion. The choice of property must be examined for bad faith, arbitrariness or capriciousness and due process determination as to whether or not the proposed location was proper in terms of the public interests. Even the claim of respondent's Secretary Baltazar Aquino that there would be a saving of P2 million under

his new plan must be reviewed for it bears no relation to the site of the proposed EDSA extension As envisioned by the government, the EDSA extension would be linked to the Cavite Expressway. Logically then, the proposed extension must point to the south and not detour to the north. Also, the equal protection of the law must be accorded, not on to the motel owners along Cuneta (Fisher) Avenue, but also to the owners of solid and substantial homes and quality residential lands occupied for generations. 5 The respondents maintain that the respondent court did not act without jurisdiction or exceed its jurisdiction or gravel abuse its discretion in issuing the order dated June 14, 1979 authorizing the Republic of the Philippines to take over and enter the possession of the properties sought to be appropriated because the Republic has complied with all the statutory requirements which entitled it to have immediate possession of the properties involved. 6 Defending the change of the EDSA extension to pass through Fernando Rein Del Pan Streets, the respondents aver: 'There was no sudden change of plan in the selection of the site of the EDSA Extension to Roxas Blvd. As a matter of fact, when the Ministry of Public Highways decided to change the site of EDSA Ex- tension to Roxas Boulevard from Cuneta Avenue to the Del Pan Fernando Item Streets the residents of Del Pan

and Fernando Rein Streets who were to be adversely affected by the construction of ED SA Extension to Roxas Boulevard along Del Pan - Fernando Rein Streets were duly notified of such proposed project. Petitioner herein was one of those notified Annex 1). It be conceded that the Cuneta Avenue line goes southward and outward (from the city center while the Del Pan Fernando Rein Streets line follows northward and inward direction. It must be stated that both lines, Cuneta Avenue and Del Pan Fernando Rein Streets lines, meet satisfactorily planning and design criteria and therefore are both acceptable. In selecting the Del Pan Fernando Rein Streets line the Government did not do so because it wanted to save the motel located along Cuneta Avenue but because it wanted to minimize the social impact factor or problem involved. 7 There is no question as to the right of the Republic of the Philippines to take private property for public use upon the payment of just compensation. Section 2, Article IV of the Constitution of the Philippines provides: "Private property shall not be taken for public use without just compensation." It is recognized, was, that the government may not capriciously or arbitrarily' choose what private property should be taken. In J. M. Tuazon & Co., Inc. vs. Land Tenure administration 31 SCRA, 413, 433, the Supreme Court said: For the purpose of obtaining a judicial declaration of nullity, it is enough if the respondents or defendants named be the

government officials who would give operation and effect to official action allegedly tainted with unconstitutionality. Thus, where the statute assailed was sought to be enforced by the Land Tenure Administrative and the Solicitor General, the two officials may be made respondents in the action without need of including the Executive Secretary as a party in the action The failure to meet tile exacting standard of due process would likewise constitute a valid objection to the exercise of this congressional power. That was so intimated in the above leading Guido Case. There was an earlier pronouncement to that effect in a decision rendered long before the adoption of the Constitution under the previous organic law then in force, while the Philippines was still an unincorporated territory of the United States. It is obvious then that a landowner is covered by the mantle of protection due process affords. It is a mandate of reason. It frowns on arbitrariness, it is the antithesis of any governmental act that smacks of whim or caprice. It negates state power to act in an impressive manner. It is, as had been stressed so often, the embodiment of the sporting Idea of fair play. In that sense, it stands as a guaranty of justice. That is the standard that must be met by any government talk agency in the exercise of whatever competence is entrusted to it. As was so emphatically stressed by the present Chief Justice, 'Acts of Congress, as well as those of the Executive, can deny due process only under pain of nullity, ...

In the same case the Supreme Court concluded: With due recognition then of the power of Congress to designate the particular property to be taken and how much thereof may be condemned in the exercise of the power of expropriation, it is still a judicial question whether in the exercise of such competence, the party adversely affected is the victim of partiality and prejudice. That the equal protection clause will not allow. (p. 436) In the instant case, it is a fact that the Department of Public Highways originally establish the extension of EDSA along Cuneta Avenue. It is to be presumed that the Department of Public Highways made studies before deciding on Cuneta Avenue. It is indeed odd why suddenly the proposed extension of EDSA to Roxas Boulevard was changed to go through Fernando Rein-Del Pan Streets which the Solicitor General concedes "... the Del Pan Fernando Rein Streets line follows northward and inward direction. While admit "that both lines, Cuneta Avenue and Del Pan Fernando Rein Streets lines, meet satisfactorily planning and design criteria and therefore are both acceptable ... the Solicitor General justifies the change to Del Pan Fernando Rein Streets on the ground that the government "wanted to the social impact factor or problem involved." 8

It is doubtful whether the extension of EDSA along Cuneta Avenue can be objected to on the ground of social impact. The improvements and buildings along Cuneta Avenue to be affected by the extension are mostly motels. Even granting, arguendo, that more people be affected, the Human Setlements Commission has suggested coordinative efforts of said Commission with the National Housing Authority and other government agencies in the relocation and resettlement of those adversely affected. 9 The Human Settlements Commission considered conditionality social impact and cost. The pertinent portion of its report reads: Comparison of Alignment 1 (Cuneta Fisher) and Alignment 2 (Del Pan Fernando Rein) based on the criteria of functionality, social impact and cost A. Functionality This issue has to do with the physical design of a highway, inclusive of engineering factors and management consideration From both engineering and traffic management viewpoints, it is incontestable that the straighter and shorter alignment is preferable to one which is not. Systematically and diagramatically, alignment 1 is straighter than alignment 2. In fact, Director Antonio Goco of the Department of Public Highways admitted that alignment 2 is three (3) meters longer

than alignment 1. Furthermore, alignment 1 is definitely the contour conforming alignment to EDSA whereas alignment 2 affords a greater radius of unnatural curvature as it hooks slightly northward before finally joining with Roxas Boulevard. Besides, whichever alignment is adopted, there will be a need for a grade separator or interchange at the Roxas Boulevard junction. From the of highway design, it is imperative to have interchanges as far apart as possible to avoid traffic from slow down in negotiating the slope on the interchanges. Up north would be the future Buendia Avenue- Roxas Boulevard Interchange. Consequently, alignment 1 which is farther away from Buendia Avenue than alignment 2 is the better alignment from the viewpoint of the construction of the grade separator or interchange, a necessary corollary to the extension project. Finally, the choice of alignment 2 which is longer by three (3) meters than alignment 1 could have serious repercussions on our energy conservation drive and from the larger perspective of the national economy, considering that, by ad- statistical data, no less than fifty thousand (50,000) vehicles a day will have to traverse an extra three (3) meters. B. Social Impact The following factual data which have a direct bearing on the issue of social impact were culled from the records of the case and the evidence presented during the public hearings: (1) Number of property owners:

Alignment 1

73 Alignment 2

49 (2) Incidence of non-resident owner:

Alignment 1

25 (34.3%) Alignment 2

31 (63.3%)

(3) Number of actually affected residents:

Alignment 1

547 Alignment 2

290 (estimated) (4) Average income of residents:

Alignment 2:

Below P350 P350 P500 P 500 P 800 P800 Pl000 Over P1000 16 (28%) 24 (42%) 0 (14%) 5 (9%) 4 (7%)

Alignment 2: Figures not available. It is evident from the foregoing figures that social impact is greater on the residents of alignment 1. C. Cost The resolution of the issue of right-of-way acquisition cost depends to a large extend on the nature of the properties to be affected and the relative value thereof. A comparison of alignment 1 and alignment 2 on these two points has produced the following results: (1) Nature and number of properties involved: Line I Line 2 Lots

Lots

Improvement

Lots

Improvements Residential

41

46

38

34 Commercial

25

24

11

13 Industrial

1 Church

1 Educational

_ TOTAL

72

75

51

49 (2) Relative value of properties affected: Lots

Improvements

Total

Alignment 1

P9,300,136

P5,928,680

P15,228,816

Alignment 2

8,314,890

6,644,130

14,959,020 Difference

P269,796 It is obvious from the immediately table that the right- of-way acquisition cost difference factor of the two alignment is only P269,196 and not P2M as alleged by the Department of Public Highways and P1.2M as claimed by the oppositors. Consequently, the cost difference factor between the two

alignments is so minimal as to be practically nil in the consideration of the issues involved in this case. 10 After considering all the issues and factors, the Human Setlements Commission made the following recommendations: Weighing in the balance the issues and factors of necessity, functionality, impact, cost and property valuation as basis for scheme of compensation to be adopted in the instant case, the Hearing Board takes cognizance of the following points: 1. The EDSA extension to Roxas Boulevard is necessary and desirable from the strictly technical viewpoint and the overall perspective of the Metro Manila transport system. 2. The right-of-way acquisition cost difference factor is so minimal as to influence in any way the choice of either alignment as the extension of EDSA to Roxas Boulevard. 3. The negotiated sale approach to compensation as proposed should apply to a whichever alignment is selected. 4. The factor of functionality states strongly against the selection of alignment 2 while the factor of great social and economic impact bears grieviously on the residents of alignment 1.

The course of the decision in this case consequently boils down to the soul-searching and heart-rending choice between people on one hand and progress and development on the other. In deciding in favor of the latter, the Hearing Board is not unmindful that progress and development are carried out by the State precisely and ultimately for the benefit of its people and therefore, recommends the reverend of the extension project to alignment 1. However, before the Government, through its implementing agencies, particularly the Department of Public Highways, undertakes the actual step of appropriating properties on alignment I to pave the way for the extension the hearing Board recommends the following as absolute. binding and imperative preconditions: 1. The preparation, and ignore importantly, the execution of a comprehensive and detailed plan for the relocation and resettlement of the adversely and genuinely affected residents of alignment I which will necessitate the coordinative efforts of such agencies as the Human Settlements Commission, the National Housing Authority and other such governmental agencies. To be concrete, a self sufficient community or human settlement complete with infrastructure capture market, school, church and industries for employment should be set up to enable the affected residents of alignment 1 to maintain, their present social and economic standing. 2. The prompt payment of fair and just compensation through the negotiated sale approach.

Finally, the Hearing Board recommends that the Department of Public Highways conduct public hearings before undertaking on future expropriations of private properties for public use. Respectfully submitted to the Human Settlements Commission Commissioners for consideration, final disposition and endorsement thereof to His Excellency, the President of the Philippines. Makati, Metro Manila, July 4, 1977. 11 ... From all the foregoing, the facts of record and recommendations of the Human Settlements Commission, it is clear that the choice of Fernando Rein Del Pan Streets as the line through which the Epifanio de los Santos Avenue should be extended to Roxas Boulevard is arbitrary and should not receive judicial approval. The respondent judge committed a grave abuse of discretion in allowing the Republic of the Philippines to take immediate possession of the properties sought to be expropriated. WHEREFORE, the petition for certiorari and prohibition is hereby granted. The order of June 14, 1979 authorizing the Republic of the Philippines to take or enter upon the possession of the properties sought to be condemned is set aside and the respondent Judge is permanently enjoined from taking any further action on Civil Case No. 7001-P, entitled "Republic of the

Philippines vs. Concepcion Cabarrus Vda. de Santos, etc." except to dismiss said case. SO ORDERED. Teehankee, Acting C.J., Makasiar, Guerrero, and MelencioHerrera Herrera, JJ., concur.

Footnotes 1 Petition, Rollo, P. 7. 2 Petitioner's Memorandum. Rollo pp. 174-177. 3 Memorandum of Respondents, Rollo, p. 156. 4 Petition, Rollo p. 4. 5 Rollo, pp- 5-6. 6 Memorandum of Respondents, Rollo, pp. 161-162. 7 Ibid Rollo, pp. 165-166. 8 Ibid Rollo, p. 166.

9 Report and Recommendation, Rollo, pp. 125- 126. 10 Ibid Rollo, pp. 120-123. 11 Ibid Rollo, pp. 125-126. The Lawphil Project - Arellano Law Foundation

lawphil Today is Saturday, November 17, 2012 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-12792 February 28, 1961

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. LA ORDEN DE PP. BENEDICTINOS DE FILIPINAS, defendantappellee. Office of the Solicitor General for plaintiff-appellant.

Ledesma, Puno, Guytingco, Antonio and Associates for defendant-appellee. DIZON, J.: To ease and solve the daily traffic congestion on Legarda Street, the Government drew plans to extend Azcarraga street from its junction with Mendiola street, up to the Sta. Mesa Rotonda, Sampaloc, Manila. To carry out this plan it offered to buy a portion of approximately 6,000 square meters of a bigger parcel belonging to La Orden de PP. Benedictinos de Filipinas, a domestic religious corporation that owns the San Beda College, a private educational institution situated on Mendiola street. Not having been able to reach an agreement on the matter with the owner, the Government instituted the present expropriation proceedings. On May 27, 1957 the trial court, upon application of the Government hereinafter referred to as appellant issued an order fixing the provisional value of the property in question at P270,000.00 and authorizing appellant to take immediate possession thereof upon depositing said amount. The deposit having been made with the City Treasurer of Manila, the trial court issued the corresponding order directing the Sheriff of Manila to place appellant in possession of the property aforesaid.

On June 8, 1957, as directed by the Rules of Court, the herein appellee, in lieu of an answer, filed a motion to dismiss the complaint based on the following grounds: I. That the property sought to be expropriated is already dedicated to public use and therefore is not subject to expropriation. II. That there is no necessity for the proposed expropriation. III. That the proposed Azcarraga Extension could pass through a different site which would entail less expense to the Government and which would not necessitate the expropriation of a property dedicated to education. IV. That the present action filed by the plaintiff against the defendant is discriminatory. V. That the herein plaintiff does not count with sufficient funds to push through its project of constructing the proposed Azcarraga Extension and to allow the plaintiff to expropriate defendant's property at this time would be only to needlessly deprive the latter of the use of its property.". The government filed a written opposition to the motion to dismiss (Record on Appeal, pp. 30-37) while appellee filed a reply thereto (Id., pp. 38-48). On July 29, 1957, without receiving evidence upon the questions of fact arising from the complaint,

the motion to dismiss and the opposition thereto filed, the trial court issued the appealed order dismissing the case. The appealed order shows that the trial court limited itself to deciding the point of whether or not the expropriation of the property in question is necessary (Rec. on Ap., p. 50) and, having arrived at the conclusion that such expropriation was not of extreme necessity, dismissed the proceedings. It is to be observed that paragraph IV of the complaint expressly alleges that appellant needs, among other properties, the portion of appellee's property in question for the purpose of constructing the Azcarraga street extension, and that paragraph VII of the same complaint expressly alleges that, in accordance with Section 64(b) of the Revised Administrative Code, the President of the Philippines had authorized the acquisition, thru condemnation proceedings, of the aforesaid parcel of land belonging to appellee, as evidenced by the third indorsement dated May 15, 1957 of the Executive Secretary, Office of the President of the Philippines, a copy of which was attached to the complaint as Annex "C" and made an integral part thereof. In denial of these allegations appellee's motion to dismiss alleged that "there is no necessity for the proposed expropriation". Thus, the question of fact decisive of the whole case arose. It is the rule in this jurisdiction that private property may be expropriated for public use and upon payment of just compensation; that condemnation of private property is

justified only if it is for the public good and there is a genuine necessity therefor of a public character. Consequently, the courts have the power to inquire into the legality of the exercise of the right of eminent domain and to determine whether or not there is a genuine necessity therefor (City of Manila vs. Chinese Community, 40 Phil. 349; Manila Railroad Company vs. Hacienda Benito, Inc., 37 O.G. 1957). Upon the other hand, it does not need extended argument to show that whether or not the proposed opening of the Azcarraga extension is a necessity in order to relieve the daily congestion of traffic on Legarda St., is a question of fact dependent not only upon the facts of which the trial court very liberally took judicial notice but also up on other factors that do not appear of record and must, therefore, be established by means of evidence. We are, therefore, of the opinion that the parties should have been given an opportunity to present their respective evidence upon these factors and others that might be of direct or indirect help in determining the vital question of fact involved, namely, the need to open the extension of Azcarraga street to ease and solve the traffic congestion on Legarda street. WHEREFORE, the appealed order of dismissal is set aside and the present case is remanded to the trial court for further proceedings in accordance with this decision. Without costs. Bengzon, Actg. C.J., Padilla, Bautista Angelo, Labrador, Reyes, J.B.L., Barrera and Paredes JJ., concur.

Concepcion, J., took no part. The Lawphil Project - Arellano Law Foundation

3.Power of Taxation

lawphil Today is Saturday, November 17, 2012 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-19201 June 16, 1965

REV. FR. CASIMIRO LLADOC, petitioner, vs. The COMMISSIONER OF INTERNAL REVENUE and The COURT of TAX APPEALS, respondents. Hilado and Hilado for petitioner. Office of the Solicitor General for respondents.

PAREDES, J.: Sometime in 1957, the M.B. Estate, Inc., of Bacolod City, donated P10,000.00 in cash to Rev. Fr. Crispin Ruiz, then parish priest of Victorias, Negros Occidental, and predecessor of herein petitioner, for the construction of a new Catholic Church in the locality. The total amount was actually spent for the purpose intended. On March 3, 1958, the donor M.B. Estate, Inc., filed the donor's gift tax return. Under date of April 29, 1960, the respondent Commissioner of Internal Revenue issued an assessment for donee's gift tax against the Catholic Parish of Victorias, Negros Occidental, of which petitioner was the priest. The tax amounted to P1,370.00 including surcharges, interests of 1% monthly from May 15, 1958 to June 15, 1960, and the compromise for the late filing of the return. Petitioner lodged a protest to the assessment and requested the withdrawal thereof. The protest and the motion for reconsideration presented to the Commissioner of Internal Revenue were denied. The petitioner appealed to the Court of Tax Appeals on November 2, 1960. In the petition for review, the Rev. Fr. Casimiro Lladoc claimed, among others, that at the time of the donation, he was not the parish priest in Victorias; that there is no legal entity or juridical person known as the "Catholic Parish Priest of Victorias," and, therefore, he should not be liable for the donee's gift tax. It

was also asserted that the assessment of the gift tax, even against the Roman Catholic Church, would not be valid, for such would be a clear violation of the provisions of the Constitution. After hearing, the CTA rendered judgment, the pertinent portions of which are quoted below: ... . Parish priests of the Roman Catholic Church under canon laws are similarly situated as its Archbishops and Bishops with respect to the properties of the church within their parish. They are the guardians, superintendents or administrators of these properties, with the right of succession and may sue and be sued. xxx xxx xxx

The petitioner impugns the, fairness of the assessment with the argument that he should not be held liable for gift taxes on donation which he did not receive personally since he was not yet the parish priest of Victorias in the year 1957 when said donation was given. It is intimated that if someone has to pay at all, it should be petitioner's predecessor, the Rev. Fr. Crispin Ruiz, who received the donation in behalf of the Catholic parish of Victorias or the Roman Catholic Church. Following petitioner's line of thinking, we should be equally unfair to hold that the assessment now in question should have been addressed to, and collected from, the Rev. Fr.

Crispin Ruiz to be paid from income derived from his present parish where ever it may be. It does not seem right to indirectly burden the present parishioners of Rev. Fr. Ruiz for donee's gift tax on a donation to which they were not benefited. xxx xxx xxx

We saw no legal basis then as we see none now, to include within the Constitutional exemption, taxes which partake of the nature of an excise upon the use made of the properties or upon the exercise of the privilege of receiving the properties. (Phipps vs. Commissioner of Internal Revenue, 91 F [2d] 627; 1938, 302 U.S. 742.) It is a cardinal rule in taxation that exemptions from payment thereof are highly disfavored by law, and the party claiming exemption must justify his claim by a clear, positive, or express grant of such privilege by law. (Collector vs. Manila Jockey Club, G.R. No. L-8755, March 23, 1956; 53 O.G. 3762.) The phrase "exempt from taxation" as employed in Section 22(3), Article VI of the Constitution of the Philippines, should not be interpreted to mean exemption from all kinds of taxes. Statutes exempting charitable and religious property from taxation should be construed fairly though strictly and in such manner as to give effect to the main intent of the lawmakers. (Roman Catholic Church vs. Hastrings 5 Phil. 701.)

xxx

xxx

xxx

WHEREFORE, in view of the foregoing considerations, the decision of the respondent Commissioner of Internal Revenue appealed from, is hereby affirmed except with regard to the imposition of the compromise penalty in the amount of P20.00 (Collector of Internal Revenue v. U.S.T., G.R. No. L11274, Nov. 28, 1958); ..., and the petitioner, the Rev. Fr. Casimiro Lladoc is hereby ordered to pay to the respondent the amount of P900.00 as donee's gift tax, plus the surcharge of five per centum (5%) as ad valorem penalty under Section 119 (c) of the Tax Code, and one per centum (1%) monthly interest from May 15, 1958 to the date of actual payment. The surcharge of 25% provided in Section 120 for failure to file a return may not be imposed as the failure to file a return was not due to willful neglect.( ... ) No costs. The above judgment is now before us on appeal, petitioner assigning two (2) errors allegedly committed by the Tax Court, all of which converge on the singular issue of whether or not petitioner should be liable for the assessed donee's gift tax on the P10,000.00 donated for the construction of the Victorias Parish Church. Section 22 (3), Art. VI of the Constitution of the Philippines, exempts from taxation cemeteries, churches and parsonages or convents, appurtenant thereto, and all lands, buildings,

and improvements used exclusively for religious purposes. The exemption is only from the payment of taxes assessed on such properties enumerated, as property taxes, as contra distinguished from excise taxes. In the present case, what the Collector assessed was a donee's gift tax; the assessment was not on the properties themselves. It did not rest upon general ownership; it was an excise upon the use made of the properties, upon the exercise of the privilege of receiving the properties (Phipps vs. Com. of Int. Rec. 91 F 2d 627). Manifestly, gift tax is not within the exempting provisions of the section just mentioned. A gift tax is not a property tax, but an excise tax imposed on the transfer of property by way of gift inter vivos, the imposition of which on property used exclusively for religious purposes, does not constitute an impairment of the Constitution. As well observed by the learned respondent Court, the phrase "exempt from taxation," as employed in the Constitution (supra) should not be interpreted to mean exemption from all kinds of taxes. And there being no clear, positive or express grant of such privilege by law, in favor of petitioner, the exemption herein must be denied. The next issue which readily presents itself, in view of petitioner's thesis, and Our finding that a tax liability exists, is, who should be called upon to pay the gift tax? Petitioner postulates that he should not be liable, because at the time of the donation he was not the priest of Victorias. We note the merit of the above claim, and in order to put things in their

proper light, this Court, in its Resolution of March 15, 1965, ordered the parties to show cause why the Head of the Diocese to which the parish of Victorias pertains, should not be substituted in lieu of petitioner Rev. Fr. Casimiro Lladoc it appearing that the Head of such Diocese is the real party in interest. The Solicitor General, in representation of the Commissioner of Internal Revenue, interposed no objection to such a substitution. Counsel for the petitioner did not also offer objection thereto. On April 30, 1965, in a resolution, We ordered the Head of the Diocese to present whatever legal issues and/or defenses he might wish to raise, to which resolution counsel for petitioner, who also appeared as counsel for the Head of the Diocese, the Roman Catholic Bishop of Bacolod, manifested that it was submitting itself to the jurisdiction and orders of this Court and that it was presenting, by reference, the brief of petitioner Rev. Fr. Casimiro Lladoc as its own and for all purposes. In view here of and considering that as heretofore stated, the assessment at bar had been properly made and the imposition of the tax is not a violation of the constitutional provision exempting churches, parsonages or convents, etc. (Art VI, sec. 22 [3], Constitution), the Head of the Diocese, to which the parish Victorias Pertains, is liable for the payment thereof.

The decision appealed from should be, as it is hereby affirmed insofar as tax liability is concerned; it is modified, in the sense that petitioner herein is not personally liable for the said gift tax, and that the Head of the Diocese, herein substitute petitioner, should pay, as he is presently ordered to pay, the said gift tax, without special, pronouncement as to costs. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Dizon, Regala, Makalintal, Bengzon, J.P., and Zaldivar, JJ., concur. Barrera, J., took no part. The Lawphil Project - Arellano Law Foundation