TABLE OF CONTENTS

CONSTITUTIONAL LAW II CASES - EMINENT DOMAIN

TENORIO vs MANILA RAILROAD COMPANY ......................................... 2 MODAY vs COURT OF APPEALS................................................................... 4 FILSTREAM vs. COURT OF APPEALS ......................................................... 7 REPUBLIC vs. PRIMO MENDOZA ...............................................................12 VISAYAS REFINING COMPANY vs CAMUS AND PAREDES .............14 CITY OF MANILA vs CHINESE COMMUNITY OF MANILA ...............18 HEIRS OF SUGUITAN vs CITY OF MANDALUYONG ...........................27 MUN. OF PARANAQUE vs VM REALTY ...................................................32 BELUSO vs MUNICIPALITY OF PANAY ...................................................36 REPUBLIC vs. VDA. DE CASTELLVI, ET AL., ..........................................39 AMIGABLE vs. CUENCA .................................................................................47 NAPOCOR vs COURT OF APPEALS............................................................49 MUN. OF LA CARLOTA vs. NAWASA ........................................................54 REPUBLIC vs PLDT ..........................................................................................55 TELEBAP vs COMELEC ..................................................................................59 NAPOCOR vs IBRAHIM ..................................................................................72 SUMULONG vs GUERRERO ..........................................................................75 MANOSCA vs COURT OF APPEALS ...........................................................78 MCIAA vs LOZADA ...........................................................................................81 EPZA vs DULAY .................................................................................................85 DE KNECHT vs COURT OF APPEALS ........................................................89 MIAA vs RODRIGUEZ ......................................................................................95 REPUBLIC vs LIM .............................................................................................98 LANDBANK vs HEIRS OF RADAZA......................................................... 103 HON. EUSEBIO vs LUIS, ET. AL ................................................................ 106 APO FRUITS CORPORATION vs LANDBANK ..................................... 109 LANDBANK vs RIVERA ............................................................................... 118 DPWH SECRETARY vs SPS TECSON ..................................................... 122 EPZA vs ESTATE OF SALUD JIMENEZ .................................................. 126 MUN. OF BIAN vs. Hon. JOSE MAR GARCIA..................................... 129 AGAN JR. et al vs PIATCO ........................................................................... 134 PEOPLE vs FAJARDO ................................................................................... 173 AGAN vs PIATCO 2004................................................................................ 175 FERNANDO vs ST SCHOLASTICAS COLLEGE ................................... 183

TENORIO vs MANILA RAILROAD COMPANY

SECOND DIVISION [G.R. No. 6690. March 29, 1912.] SILVESTRA TENORIO Y VILLAMIL, plaintiff-appellee, vs. THE MANILA RAILROAD COMPANY, defendant-appellant. Jose Robles Lahesa and O'Brien & DeWitt, for appellant A. B. Ritchey, for appellee. SYLLABUS 1.RAILROAD CORPORATIONS; EMINENT DOMAIN; STATUTORY CONSTRUCTION. A statute authorizing a railroad company to exercise the power of eminent domain being in derogation of general right, and conferring upon it exceptional privileges with regard to the property of others of which it may have need, should be construed strictly in favor of land owners whose property is affected by its terms; and before any right to take possession of land under such a statute can be lawfully exercised its provisions must be "fully and fairly" complied with. 2.ID.; ID.; ACTION FOR DAMAGES. The seizure and occupation of property by such a railroad company without first serving process on the owners or occupants in the manner and form prescribed by the statute authorizing condemnation proceedings, is so gross a violation of one of the most essential conditions precedent prescribed by the statute, that no claim by the company that it is acting or desires to act under the authority of its charter in taking possession of this property, can be heard by way of defense to an action for damages for the unlawful trespass. 3.ID.; ID.; ID.; ERROR. Judgment for damages against the defendant railroad company sustained, notwithstanding the fact that there was error in excluding certain evidence offered by the defendant, it appearing from a review of the whole record that the result would not have been otherwise had this evidence been admitted. 4.ID.; ID.; ID.; MARKET VALUE OF LAND. While evidence touching the assessed valuation of land is by no means conclusive as to its actual market value, and is in general of but little value, nevertheless evidence of this nature is competent and admissible for what it is worth, where the question of damages for the unlawful taking of such land is at issue. 5.ID.; ID.; ID.; UNLAWFUL POSSESSION. A railroad company having unlawfully taken possession of a part of a tract of land, and by its operations thereon rendered the whole tract worthless to the owner, the latter is entitled to abandon the entire tract and recover damages for its full value. DECISION CARSON, J p: This is an action to recover damages for the alleged unlawful detention and occupation by defendant of a small parcel of land, the property of the plaintiff, situated near the railroad station in Dagupan in the Province of Pangasinan. Plaintiff alleges that the land in question, some 1,219 square meters in extent, is worth P7,314.40; that before it was entered upon by defendant, two small houses erected thereon brought her a rental at the rate of P280 per annum of which she has been deprived by defendant since the month of March, 1907; that the defendant company compelled her to move three buildings from the land taken by it, whereby she had suffered damages in the sum of P400 and that as a result of the unlawful occupation of this tract of land by the defendant company she had suffered further damages to the extent of P250 from the accumulation of water on an adjoining parcel of land of which she is the owner. Defendant company answering, admits that it has taken and is now occupying a small part of the land in question, 314 meters in extent; but alleges that it is now and always has been ready and willing to pay the plaintiff a fair price for the land thus taken and all damages to the remainder of her land resulting therefrom. In explanation of the fact that it took possession of and continues to occupy this part of the land in question with out the express consent of the plaintiff and without having made payment therefor, defendant company alleges that the land taken is a part of certain lands described in

condemnation proceedings instituted in the Court of First Instance of the Province of Pangasinan, whereby, by virtue of the authority lawfully conferred upon defendant company, it sought to have the land in question, and other lands in that province, condemned for use as a roadbed; and while the facts are not fully developed in the record, it does appear that condemnation proceedings were regularly instituted for the purposes indicated, and there are indications in the record that the land in question was included in the lands sought to be condemned therein, but that in those proceedings it was described as the property of one Silvino Tenorio, although the name of the true owner, the plaintiff in this action, is, as she alleges, Silvestra Tenorio. The defendant company both by demurrer and answer, undertook in the court below to question plaintiff s right to maintain this action (which is an ordinary action for damages for trespass on plaintiff's land) on the ground that under the statutory provisions for the condemnation of lands by virtue of which defendant company had already instituted proceedings looking to the condemnation of the land in question, it was the duty of the plaintiff to seek redress in those proceedings. But while we agree with counsel for defendant company that, had the defendant company before entering upon and taking possession of the land in question, proceeded in accordance with the provisions of law touching condemnation proceedings, by virtue of which it claims to have been acting, in that event the plaintiff would not be entitled to bring a separate action; we are of opinion that in the absence of proof of a substantial compliance with the provisions of law touching such proceedings the plaintiff was clearly entitled to institute any appropriate action to recover the damages which she may have suffered as a result of an unauthorized and unlawful seizure and occupation of her property. "The mode in which land may be condemned and the steps to be taken for that purpose are prescribed either by the statute or charter conferring the right of eminent domain or by a general law. The remedy so provided is exclusive, and as a general rule the steps prescribed by the statute must be followed or the proceedings will be void. Since these statutes are in derogation of general right and of common-law modes of procedure, they must be strictly construed in favor of the landowner, and must be at least substantially or as sometimes said, 'fully and fairly' complied with. Indeed the general rule in the absence of statutory provision to the contrary, is that they must be strictly complied with. . . . Thus the statutes must be complied with as to filing and contents of petition or application, . . . notice to the landowner and other persons interested in the property, . . . and all other conditions precedent prescribed by the statute." (Cyclopedia of Law and Procedure, vol. 15, pp. 815-817, and cases cited. See also American and English Encyclopedia of Law, vol. 10, p. 1054, and cases cited.) The mode in which the defendant company was authorized to exercise the power of eminent domain is to be found in various Acts of the Commission of which the following are pertinent citations: "The Government of the Philippine Islands, or of any province or department thereof, or of any municipality, and any person, or public or private corporation having by law the right to condemn private property for public use, shall exercise that right in the manner hereinafter prescribed." (Act No. 190 of the Philippine Commission, sec. 241.) "The complaint in condemnation proceedings shall state with certainty the right of condemnation, and describe the property sought to be condemned, showing the interest of each defendant separately." (Act No. 190, sec. 242.) "In addition to the method of procedure authorized for the exercise of the power of eminent domain by sections two hundred and forty-one to two hundred and fifty-three, inclusive, of Act Numbered One hundred and ninety, entitled 'An Act providing a Code of Procedure in civil actions and special proceedings in the Philippine Islands,' the procedure in this Act provided may be adopted whenever a railroad corporation seeks to appropriate land for the construction, extension, or operation of its railroad line." (Act No. 1258, sec. 1.) "Whenever a railroad corporation is authorized by its charter, or by general law, to exercise the power of eminent domain in the city of Manila or in any province, and has not obtained by agreement with the owners thereof the lands necessary for its purposes as authorized by law, it may in its complaint, . . . in the Court of First Instance of the province where the land is situated,

Join as defendants all persons owning or claiming to own, or occupying, any of the lands sought to be condemned, or any interest therein, within the city or province, respectively, showing, so far as practicable, the interest of each defendant and stating with certainty the right of condemnation, and describing the property sought to be condemned. Process requiring the defendants to appear in answer to the complaint shall be served upon all occupants of the land sought to be condemned, and upon the owners and all persons claiming interest therein, so far as known. If the title to any lands sought to be condemned appears to be in the Insular Government, although the lands are occupied by private individuals, or if it is uncertain whether the title is in the Insular Government or in private individuals, or if the title is otherwise so obscure or doubtful that the company can not with accuracy or certainty specify who are the real owners, averment may be made by the company in its complaint to that effect. Process shall be served upon residents and nonresidents in the same manner as provided therefor in Act Numbered One hundred and ninety, . . .." (Act No. 1258, sec. 3.) ". . . The provisions . . . as to persons not notified of the condemnation proceedings, shall be such as are defined in sections 248 to 253, inclusive, of Act No. 190." (Act No. 1258, sec. 5, last five lines ) "Nothing herein contained shall be construed so as to injure, prejudice, defeat, or destroy the estate, right, or title of any person claiming land or any part thereof, or any interest therein, who was not made a party defendant to the condemnation proceeding and did not have actual or constructive notice of the proceeding in such manner as the law requires." (Act No. 190, sec. 253.) The record wholly fails to disclose that process requiring the plaintiff to appear and answer the complaint filed in the condemnation proceedings was served upon her, or upon any of the occupants of the land; and this, notwithstanding the fact, as found by the trial court and practically conceded by counsel for defendant, that she was the known owner of the land in question. The statute authorizing the defendant company to exercise the power of eminent domain, being in derogation of general right and conferring upon it exceptional privileges with regard to the property of others of which it may have need, should be construed strictly in favor of landowners whose property is affected by its terms. Hence before any right to take possession of land under this statute could have been lawfully exercised by the company, the provisions of the statute must have been "fully and fairly" complied with. Manifestly, the seizure and occupation of property without first serving process on the owners or occupants is so gross a violation of one of the most essential conditions precedent prescribed by the statute, that no claim by the company that it is acting or desires to act under the authority of its charter in taking possession of this property can be heard by way of defense to an action for damages for the unlawful trespass. The right to take such land, over the objection of the owner, and to have a fair valuation placed thereon in special proceedings prescribed by law for that purpose is made to depend upon the compliance by the company with certain conditions precedent, and of course no rights can or do arise unless such conditions are fully and fairly complied with. Not only did the defendant company fail to prove in the lower court that it had served process on the owner and the occupants of the land, but it did not even claim to have done so when its counsel undertook to introduce in evidence the record in the pending condemnation proceedings. And, indeed, no such claim has at any time been made on its behalf. Plaintiff's evidence as to the value of the land appropriated is not wholly satisfactory but in the absence of any evidence whatever, worthy of the name, to put in doubt the testimony of her witnesses, we do not think that we would be justified in reversing the findings of fact by the trial judge who arrived at his conclusions after seeing and hearing these witnesses testify. Counsel for defendant company assigns among other errors the action of the trial judge in excluding certain testimony and insists that the exclusion of these witnesses justifies and requires the reversal of the judgment of the court below and the return of the record for a new trial. But while we agree with counsel that the trial judge erred in excluding certain evidence offered by the defendant, we are satisfied upon a review of the whole record that the result would not have

been otherwise had this evidence been admitted, and we do not think that a reversal should be granted for error of this character. We think that the evidence of defendant, including the map, whereby counsel undertook to show the exact amount of the land of the plaintiff occupied by the roadbed of the railroad; as also the evidence offered touching the assessed valuation of the land of the plaintiff should have been admitted for what it was worth. But we do not think that had this evidence been admitted, and granting that it would have been to the effect claimed for it by counsel for the defendant, that the result would have been different. The conclusion of the trial judge from the evidence before him was that the entire tract mentioned in his judgment had been rendered substantially worthless to the plaintiff by the unauthorized occupation of a part of it by the defendant company, and we do not think that the evidence on which he based this conclusion would be affected by proof that only a part of the tract was actually occupied and retained in possession. The theory on which the trial judge correctly proceeded was that defendant company having unlawfully taken possession of a part of the tract of land in question, and- by its operations thereon rendered the whole tract worthless to the plaintiff, plaintiff is entitled to abandon the entire tract, and recover damages for its full value. So also proof of the assessed valuation of the land in question, while proper and competent evidence in a case of this character, is at best of but very little value in a judicial inquiry as to its actual market value. We do not believe that the weight to be given the practically undisputed testimony of the witnesses for the plaintiff as to the actual market value of the land in question would have been materially affected by proof that this land was assessed at a valuation greatly less than that placed upon it by the trial judge. The judgment appealed from should be and is hereby affirmed with the costs of this instance against the appellant. Torres, Mapa, Johnson, and Moreland, JJ., concur.

MODAY vs COURT OF APPEALS

SECOND DIVISION [G.R. No. 107916. February 20, 1997.] PERCIVAL MODAY, ZOTICO MODAY (deceased) and LEONORA MODAY, petitioners, vs. COURT OF APPEALS, JUDGE EVANGELINE S. YUIPCO OF BRANCH 6, REGIONAL TRIAL COURT, AGUSAN DEL SUR AND MUNICIPALITY OF BUNAWAN, respondents. Roldan L. Torralba, for petitioners. Estanislao G. Ebarle, Jr. for public respondent Municipality of Bunawan. SYLLABUS POLITICAL LAW; LOCAL GOVERNMENT CODE (B.P. 337); POWER OF THE SANGGUNIANG PANLALAWIGAN TO REVIEW ORDINANCES, RESOLUTIONS AND EXECUTIVE ORDERS PROMULGATED BY THE MUNICIPAL MAYOR; DECLARATION OF INVALIDITY MUST BE ON THE SOLE GROUND THAT IT IS BEYOND THE POWER OF THE SANGGUNIAN BAYAN OR MAYOR TO ISSUE THE RESOLUTION, ORDINANCE OR ORDER UNDER REVIEW. The Sangguniang Panlalawigan's disapproval of Municipal Resolution No. 43-89 is an infirm action which does not render said resolution null and void. The law, as expressed in Section 153 of B.P. BLG. 337, grants the Sangguniang Panlalawigan the power to declare a municipal resolution invalid on the sole ground that it is beyond the power of the Sangguniang Bayan or the Mayor to issue. Although pertaining to a similar provision of law but different factual milieu then obtaining, the Court's pronouncements in Velazco vs.Blas, where we cited significant early jurisprudence, are applicable to the case at bar. "The only ground upon which a provincial board may declare any municipal resolution, ordinance, or order invalid is when such resolution, ordinance, or order is 'beyond the powers conferred upon the council or president making the same.' Absolutely no other ground is recognized by the law. A strictly legal question is before the provincial board in its consideration of a municipal resolution, ordinance, or order. The provincial (board's) disapproval of any resolution, ordinance, or order must be premised specifically upon the fact that such resolution, ordinance, or order is outside the scope of the legal powers conferred by law. If a provincial board passes these limits, it usurps the legislative functions of the municipal council or president. Such has been the consistent course of executive authority." Thus, the Sangguniang Panlalawigan was without the authority to disapprove Municipal Resolution No. 43-89 for the Municipality of Bunawan clearly has the power to exercise the right of eminent domain and its Sangguniang Bayan the capacity to promulgate said resolution, pursuant to the earlier-quoted Section 9 of B.P. Blg. 337. Perforce, it follows that Resolution No. 43-89 is valid and binding and could be used as lawful authority to petition for the condemnation of petitioners' property. DECISION ROMERO, J p: The main issue presented in this case is whether a municipality may expropriate private property by virtue of a municipal resolution which was disapproved by the Sangguniang Panlalawigan. Petitioner seeks the reversal of the Court of Appeals decision and resolution, promulgated on July 15, 1992 and October 22, 1992 respectively, 1 and a declaration that Municipal Resolution No. 4389 of the Bunawan Sangguniang Bayan is null and void. On July 23, 1989, the Sangguniang Bayan of the Municipality of Bunawan in Agusan del Sur passed Resolution No. 43-89, "Authorizing the Municipal Mayor to Initiate the Petition for Expropriation of a One (1) Hectare Portion of Lot No. 6138-Pls-4 Along the National Highway Owned by Percival Moday for the Site of Bunawan Farmers Center and Other Government Sports Facilities." 2 In due time, Resolution No. 43-89 was approved by then Municipal Mayor Anuncio C. Bustillo and transmitted to the Sangguniang Panlalawigan for its approval On September 11, 1989, the Sangguniang Panlalawigan disapproved said Resolution and returned it with the comment that "expropriation is unnecessary considering that there are still available lots in Bunawan for the establishment of the government center." 3

The Municipality of Bunawan, herein public respondent, subsequently filed a Petition for Eminent Domain against petitioner Percival Moday before the Regional TrialCourt at Prosperidad, Agusan del Sur. 4 The complaint was later amended to include the registered owners, Percival Moday's parents, Zotico and Leonora Moday, as party defendants. On March 6, 1991, public respondent municipality filed a Motion to Take or Enter Upon the Possession of Subject Matter of This Case stating that it had already deposited with the municipal treasurer the necessary amount in accordance with Section 2, Rule 67 of the Revised Rules of Court and that it would be in the government's best interest for public respondent to be allowed to take possession of the property. Despite petitioners' opposition and after a hearing on the merits, the Regional Trial Court granted respondent municipality's motion to take possession of the land. The lower court held that the Sangguniang Panlalawigan's failure to declare the resolution invalid leaves it effective. It added that the duty of the Sangguniang Panlalawigan is merely to review the ordinances and resolutions passed by the Sangguniang Bayan under Section 208 (1) of B.P. Blg. 337, old Local Government Code and that the exercise of eminent domain is not one of the two acts enumerated in Section 19 thereof requiring the approval of the Sangguniang Panlalawigan. 5The dispositive portion of the lower court's Order dated July 2, 1991 reads: "WHEREFORE, it appearing that the amount of P632.39 had been deposited as per Official Receipt No. 5379647 on December 12, 1989 which this Court now determines as the provisional value of the land, the Motion to Take or Enter Upon the Possession of the Property filed by petitioner through counsel is hereby GRANTED. The Sheriff of this Court is ordered to forthwith place the plaintiff in possession of the property involved. Let the hearing be set on August 9, 1991 at 8:30 o'clock in the morning for the purpose of ascertaining the just compensation or fair market value of the property sought to be taken, with notice to all the parties concerned. SO ORDERED." 6 Petitioners' motion for reconsideration was denied by the trial court on October 31, 1991. Petitioners elevated the case in a petition for certiorari alleging grave abuse of discretion on the part of the trial court but the same was dismissed by respondent appellate court on July 15, 1992. 7 The Court of Appeals held that the public purpose for the expropriation is clear from Resolution No. 43-89 and that since the Sangguniang Panlalawigan of Agusan del Sur did not declare Resolution No. 43-89 invalid, expropriation of petitioners' property could proceed. cdasia Respondent appellate court also denied petitioners' motion for reconsideration on October 22, 1992. 8 Meanwhile, the Municipality of Bunawan had erected three buildings on the subject property: the Association of Barangay Councils (ABC) Hall, the Municipal Motorpool, both wooden structures, and the Bunawan Municipal Gymnasium, which is made of concrete. In the instant petition for review filed on November 23, 1992, petitioner seeks the reversal of the decision and resolution of the Court of Appeals and a declaration that Resolution No. 43-89 of the Municipality of Bunawan is null and void. On December 8, 1993, the Court issued a temporary restraining order enjoining and restraining public respondent Judge Evangeline Yuipco from enforcing her July 2, 1991 Order and respondent municipality from using and occupying all the buildings constructed and from further constructing any building on the land subject of this petition. 9 Acting on petitioners' Omnibus Motion for Enforcement of Restraining Order and for Contempt, the Court issued a Resolution on March 15, 1995, citing incumbent municipal mayor Anuncio C. Bustillo for contempt, ordering him to pay the fine and to demolish the "blocktiendas" which were built in violation of the restraining order. 10 Former Mayor Anuncio C. Bustillo paid the fine and manifested that he lost in the May 8, 1995 election. 11 The incumbent Mayor Leonardo Barrios, filed a Manifestation, Motion to Resolve "Urgent Motion for Immediate Dissolution of the Temporary Restraining Order" and Memorandum on June 11, 1996 for the Municipality of Bunawan. 12

Petitioners contend that the Court of Appeals erred in upholding the legality of the condemnation proceedings initiated by the municipality. According to petitioners, the expropriation was politically motivated and Resolution No. 43-89 was correctly disapproved by the Sangguniang Panlalawigan, there being other municipal properties available for the purpose. Petitioners also pray that the former Mayor Anuncio C. Bustillo be ordered to pay damages for insisting on the enforcement of a void municipal resolution. The Court of Appeals declared that the Sangguniang Panlalawigan's reason for disapproving the resolution "could be baseless, because it failed to point out which and where are 'those available lots."' Respondent court also concluded that since the Sangguniang Panlalawigan did not declare the municipal board's resolution as invalid, expropriation of petitioners' property could proceed. 13 The Court finds no merit in the petition and affirms the decision of the Court of Appeals. Eminent domain, the power which the Municipality of Bunawan exercised in the instant case, is a fundamental State power that is inseparable from sovereignty. 14 It is government's right to appropriate, in the nature of a compulsory sale to the State, private property for public use or purpose. 15 Inherently possessed by the national legislature the power of eminent domain may be validly delegated to local governments, other public entities and public utilities. 16 For the taking of private property by the government to be valid, the taking must be for public use and there must be just compensation. 17 The Municipality of Bunawan's power to exercise the right of eminent domain is not disputed as it is expressly provided for in Batas Pambansa Blg. 337, the Local Government Code 18 in force at the time expropriation proceedings were initiated. Section 9 of said law states: "Section 9.Eminent Domain. A local government unit may, through its head and acting pursuant to a resolution of its sanggunian, exercise the right of eminent domain and institute condemnation proceedings for public use or purpose." What petitioners question is the lack of authority of the municipality to exercise this right since the Sangguniang Panlalawigan disapproved Resolution No. 43-89. Section 153 of B.P. Blg. 337 provides: "Sec. 153.Sangguniang Panlalawigan Review. (1) Within thirty days after receiving copies of approved ordinances, resolutions and executive orders promulgated by the municipal mayor, the sangguniang panlalawigan shall examine the documents or transmit them to the provincial attorney, or if there be none, to the .provincial fiscal, who shall examine them promptly and inform the sangguniang panlalawigan in writing of any defect or impropriety which he may discover therein and make such comments or recommendations as shall appear to him proper. (2)If the sangguniang panlalawigan shall find that any municipal ordinance, resolution or executive order is beyond the power conferred upon the sangguniang bayan or the mayor, it shall declare such ordinance, resolution or executive order invalid in whole or in part, entering its actions upon the minutes and advising the proper municipal authorities thereof. The effect of such an action shall be to annul the ordinance, resolution or executive order in question in whole or in part. The action of the sangguniang panlalawigan shall be final. xxx xxx xxx." (Emphasis supplied.) The Sangguniang Panlalawigan's disapproval of Municipal Resolution No. 43-89 is an infirm action which does not render said resolution null and void. The law, as expressed in Section 153 of B.P. Blg. 337, grants the Sangguniang Panlalawigan the power to declare a municipal resolution invalid on the sole ground that it is beyond the power of the Sangguniang Bayan or the Mayor to issue. Although pertaining to a similar provision of law but different factual milieu then obtaining, theCourt's pronouncements in Velazco v. Blas, 19 where we cited significant early jurisprudence, are applicable to the case at bar. "The only ground upon which a provincial board may declare any municipal resolution, ordinance, or order invalid is when such resolution, ordinance, or order is 'beyond the powers conferred upon the council or president making the same.' Absolutely no other ground is recognized by the law. A strictly legal question is before the provincial board in its consideration of a municipal

resolution, ordinance, or order. The provincial (board's) disapproval of any resolution, ordinance, or order must be premised specifically upon the fact that such resolution, ordinance, or order is outside the scope of the legal powers conferred by law. If a provincial board passes these limits, it usurps the legislative functions of the municipal council or president. Such has been the consistent course of executive authority." 20 Thus, the Sangguniang Panlalawigan was without the authority to disapprove Municipal Resolution No. 43-89 for the Municipality of Bunawan clearly has the power to exercise the right of eminent domain and its Sangguniang Bayan the capacity to promulgate said resolution, pursuant to the earlier-quoted Section 9 of B.P. Blg. 337. Perforce; it follows that Resolution No. 43-89 is valid and binding and could be used. as lawful authority to petition for the condemnation of petitioners' property. As regards the accusation of political oppression, it is alleged that Percival Moday incurred the ire of then Mayor Anuncio C. Bustillo when he refused to support the latter's candidacy for mayor in previous elections. Petitioners claim that then incumbent Mayor C. Bustillo used the expropriation to retaliate by expropriating their land even if there were other properties belonging to the municipality and available for the purpose. Specifically, they allege that the municipality owns a vacant seven-hectare property adjacent to petitioners' land, evidenced by a sketch plan. 21 The limitations on the power of eminent domain are that the use must be public, compensation must be made and due process of law must be observed. 22 The Supreme Court, taking cognizance of such issues as the adequacy of compensation, necessity of the taking and the public use character or the purpose of the taking,23 has ruled that the necessity of exercising eminent domain must be genuine and of a public character. 24 Government may not capriciously choose what private property should be taken. After a careful study of the records of the case, however, we find no evidentiary support for petitioners' allegations. The uncertified photocopy of the sketch plan does not conclusively prove that the municipality does own vacant land adjacent to petitioners' property suited to the purpose of the expropriation. In the questioned decision, respondent appellate court similarly held that the pleadings and documents on record have not pointed out any of respondent municipality's "other available properties available for the same purpose." 25 The accusations of political reprisal are likewise unsupported by competent evidence. Consequently, the Court holds that petitioners' demand that the former municipal mayor be personally liable for damages is without basis. WHEREFORE, the instant petition is hereby DENIED. The questioned Decision and Resolution of the Court of Appeals in the case of "Percival Moday, et al. v.Municipality of Bunawan, et al." (CA G.R. SP No. 26712) are AFFIRMED. The Temporary Restraining Order issued by the Court on December 8, 1993 is LIFTED. SO ORDERED. Regalado, Puno, Mendoza and Torres, Jr., JJ., concur. Footnotes 1."Percival Moday v. Municipality of Bunawan, et al." CA G.R. SP No. 26712, penned by Justice Artemon D. Luna, with Justices Jose A.R. Melo (now a member of thisCourt) and Segundino G. Chua, concurring, Rollo, p. 21, 36. 2.The lot is part of 5.6610 hectares covered by Transfer Certificate of Title No. T-3132 in the name of Zotico Moday, married to Leonora Moday. The assessed value of the entire lot in 1989 was P3,580.00 while the assessed value of one hectare is about P632.39. 3.Excerpts From the Minutes of the Regular Session of the Sangguniang Panlalawigan of Agusan del Sur Held at the Session Hall, Training Center, Prosperidad, on September 11, 1989. Rollo, p. 85. 4."Municipality of Bunawan, Agusan del Sur v. Percival Moday, et al.," Special Civil Case No. 719, Judge Evangeline S. Yuipco, presiding. 5."Sec. 19.Certain Acts of the Sangguniang Bayan Requiring Approval of the Sangguniang Panlalawigan. The following acts of the sangguniang bayan shall be subject to the approval of the sangguniang panlalawigan: (1)Permanent closure of a public road, street, alley, park or square; and (2)Donation of municipal funds or property."

6.Rollo, p. 75. 7."Percival Moday, et al. v. Municipality of Bunawan, et al.," CA G.R. SP No. 26712, Rollo, pp. 2125. 8.Rollo, p. 36. 9.Rollo, p. 104. 10.Rollo, pp. 242-245. 11.Rollo, pp. 248-249. 12.Rollo, p. 286. 13.Rollo, p. 24. 14.V. SINCO, PHILIPPINE POLITICAL LAW: PRINCIPLES AND CONCEPTS 592 (10th ed., 1954) citing Kohl v. US, 91 U.S. 371. A. PIMENTEL, THE LOCAL GOVERNMENT CODE OF 1991: THE KEY TO NATIONAL DEVELOPMENT 106 (1993). Visayan Refining Co. v. Camus, 40 Phil. 550. 15.BLACK'S LAW DICTIONARY 616 (4th ed.) cited in I. CRUZ, CONSTITUTIONAL LAW 59 (1991 ed.); J. BERNAS, THE 1987 PHILIPPINE CONSTITUTION, A REVIEWER-PRIMER 92 (2nd ed., 1992) citing Charles River Bridge v. Warren Bridge, 11 Pet. 420, 641 (US 1837). 16.BERNAS, op. cit. at 93; CRUZ, op. cit. at 59-60; Province of Camarines Sur v. CA, G.R. No. 103125, May 11, 1993, 222 SCRA 173. 17.Article III, Section 9 of the 1987 Constitution states that "(p)rivate property shall not be taken for public use without just compensation." 18.Approved on February 10, 1983, the Code was published in 79 O.G. No. 7. The Local Government Code of 1991 (Republic Act No. 7160) took effect on January 1, 1992, Evardone v. Comelec, G.R. No. 94010, December 2, 1991, 204 SCRA 464. 19.G.R. No. L-30456, July 30, 1982, 115 SCRA 540, 544-545. The law then in force, Section 2233 of the Revised Administrative Code, also provided that "(i)f the board should in any case find that any resolution, ordinance, or order, as aforesaid, is beyond the powers conferred upon the council or mayor making the same, it shall declare such resolution, ordinance, or order invalid, entering its action upon the minutes and advising the proper municipal authorities thereof. The effect of such action shall be to annul the resolution, ordinance, or order in question, subject to action by the Secretary of the Interior as hereinafter provided." 20.At pages 544-545, citing Gabriel v. Provincial Board of Pampanga, 50 Phil. 686, 692-693; Cario v. Jamoralne, 56 Phil. 188, Manantan v. Municipality of Luna, 82 Phil. 844, which cite the Opinions Attorney-General Wilfley (1905), II Op. Atty.-Gen., 557, 642, Opinion Attorney-General Villareal, November 22, 1922; Opinion Attorney-General Jaranilla, August 9, 1926; Provincial Circular Executive Bureau, September 16, 1918. 21.Rollo, p. 88. 22.V. SINCO, op. cit. citing Visayan Refining Company v. Camus, supra. and In re Fowler, 53 N.Y. 60. 23.Municipality of Meycauayan v. IAC, G.R. No. L-72126, January 29, 1988, 157 SCRA 690; J.M. Tuason v. Land Tenure Administration, 31 SCRA 413; National Power Corporation v. Jocson, 206 SCRA 520; Republic v. IAC, 185 SCRA 572. 24.City of Manila v. Chinese Community of Manila, 40 Phil. 349 citing Morrison v. Indianapolis, 166 Ind. 511; Stearns v. Barre, 73 Vt. 281; Wheeling v. Toledo, 72 Ohio St. 368. 25.Rollo, p. 23.

FILSTREAM vs. COURT OF APPEALS

THIRD DIVISION [G.R. No. 125218. January 23, 1998.] FILSTREAM INTERNATIONAL INCORPORATED, petitioner, vs. COURT OF APPEALS, JUDGE FELIPE S. TONGCO and THE CITY OF MANILA, respondents. [G.R. No. 128077. January 23, 1998.] FILSTREAM INTERNATIONAL INCORPORATED, petitioner, vs. COURT OF APPEALS, ORLANDO MALIT, ANTONIO CAGUIAT, ALICIA CABRERA, ARMANDO LACHICA, JACINTO CAGUIAT, GLORIA ANTONIO, ELIZALDE NAVARRA, DOLORES FUENTES, SUSANA ROY, ANTONIO IBAEZ, BENIGNO BASILIO, LUCERIA DEMATULAC, FLORENCIA GOMEZ, LAZARO GOMEZ, JOSE GOMEZ, VENANCIO MANALOTO, CRISTINO UMALI, DEMETRIA GATUS, PRISCILLA MALONG, DOMINGO AGUILA, RAMON SAN AGUSTIN, JULIAN FERRER, JR., FRANCISCO GALANG, FLORENTINO MALIWAT, SEVERINA VILLAR, TRINIDAD NAGUIT, JOSE NAGUIT, FORTUNATO AGUSTIN CABRERA, GAUDENCIO INTAL, DANILO DAVID, ENRIQUE DAVID, VICENTE DE GUZMAN, POLICARPIO LUMBA, BELEN PALMA, ELEN SOMVILLO, LEONARDO MANICAD, OPRENG MICLAT, BENITA MATA, GREGORIO LOPEZ, MARCELINA SAPNO, JESUS MERCADO and CALIXTO GOMEZ, respondents. Siruelo, Muyco & Associates Law Office for petitioner in G.R. Nos. 125218 & 128077. Lucky M. Damasen for private respondent in G.R. No. 128077. SYNOPSIS Petitioner, Filstream International, Inc., obtained a favorable judgment in an ejectment case it filed before the Metropolitan Trial Court of Manila. Said judgment became final and executory. However, during the pendency of the ejectment proceedings, the City of Manila passed an ordinance authorizing Mayor Lim to expropriate the subject properties of petitioner then occupied by private respondents. Pursuant to the complaint for eminent domain filed by the City of Manila, the trial court issued a Writ of Possession. On appeal, the Court of Appeals likewise finds for the condemnation of the property and further issuing a TRO and Writ of Preliminary Injunction against the order issued by the trial court for the imposition of its ruling in the ejectment case which has became final and executory. Petitioner Filstream went to the Supreme Court objecting to the issuance of the TRO and the preliminary injunction enjoining the execution of the writ of demolition issued in the ejectment suit. There is no dispute as to the existence of a final and executory judgment in favor of petitioner Filstream ordering the ejectment of private respondents from the properties subject of the dispute. However, it must also be conceded that the City of Manila has an undeniable right to exercise its power of eminent domain within its jurisdiction. More specifically, the City of Manila has the power to expropriate private property in the pursuit of its urban land reform and housing program as explicitly laid out in the Revised Charter of the City of Manila. In fact, the City of Manila's right to exercise these prerogatives notwithstanding the existence of a final and executory judgment over the property to be expropriated has been upheld by this Court in the case of Philippine Columbian Association vs. Panis. Nevertheless, despite the existence of a serious dilemma, local government units are not given an unbridled authority when exercising their power of eminent domain in pursuit of solutions to these problems. The basic rules shall have to be followed. The exercise by local government units of the power of eminent domain is not without limitations. 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 when the other modes of acquisition have been exhausted. Compliance with these conditions must be deemed mandatory because these are the only safeguards in securing the right of owners of private property to due process when their property is expropriated for public use. Petitioner Filstream's properties were expropriated and ordered condemned in favor of the City of Manila sans any showing that resort to the acquisition of other lands listed under Sec. 9 of RA

7279 have proved futile. Evidently, there was a violation of petitioner Filstream's right to due process which must accordingly be rectified. EDaHAT SYLLABUS 1.ADMINISTRATIVE LAW; 1991 LOCAL GOVERNMENT CODE; LOCAL GOVERNMENT; CITY OF MANILA HAS THE RIGHT TO EXERCISE ITS POWER OF EMINENT DOMAIN. The City of Manila has an undeniable right to exercise its power of eminent domain within its jurisdiction. The right to expropriate private property for public use is expressly granted to it under Section 19 of the 1991 Local Government Code. More specifically, the City of Manila has the power to expropriate private property in the pursuit of its urban land reform and housing program as explicitly laid out in the Revised Charter of the City of Manila (R A. No. 409). In fact, the City of Manila's right to exercise these prerogatives notwithstanding the existence of a final and executory judgment over the property to be expropriated has been upheld by this Court in the case of Philippine Columbian Association vs. Panis, G.R. No. 106528, December 21, 1993. 2.ID.; ID.; ID.; EXERCISE OF POWER OF EMINENT DOMAIN IS SUBJECT TO LIMITATIONS. Local government units are not given an unbridled authority when exercising their power of eminent domain in pursuit of solutions to these problems. The basic rules still have to be followed, which are as follows: "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. 3, Sec. 1, 1987 Constitution); private property shall not be taken for public use without just compensation (Art. 3, Section 9, 1987 Constitution)." Thus, the exercise by local government units of the power of eminent domain is not without limitations. Even Section 19 of the 1991 Local Government Code is very explicit that it must comply with the provisions of the Constitution and pertinent laws. The governing law that deals with the subject of expropriation for purposes of urban land reform and housing is Sections 9 and 10, Republic Act 7279 (Urban Development and Housing Act of 1992). Very clear from the abovequoted provisions are the limitations 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 when the other modes of acquisition have been exhausted. Compliance with these conditions must be deemed mandatory because these are the only safeguards in securing the right of owners of private property to due process when their property is expropriated for public use. 3.ID.; ID.; ID.; ID.; VIOLATION OF RIGHT TO DUE PROCESS MANIFEST IN CASE AT BAR. We have carefully scrutinized the records of this case and found nothing that would indicate that respondent City of Manila complied with Sec. 9 and Sec. 10 of R.A. 7279. Petitioner Filstream's properties were expropriated and ordered condemned in favor of the City of Manila sans any showing that resort to the acquisition of other lands listed under Sec. 9 of R.A. 7279 have proved futile. Evidently, there was a violation of petitioner Filstream's 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. DECISION FRANCISCO, J p: In resolving the instant petitions, the Court is tasked to strike a balance between the contending interests when the state exercises its power of eminent domain. On one side, we have the owners of the property to be expropriated who must be duly compensated for the loss of their property, while on the other is the State which must take the property for public use. prLL Petitioner, Filstream International, Inc., is the registered owner of the properties subject of this dispute consisting of adjacent parcels of land situated in Antonio Rivera Street, Tondo II, Manila,

with a total area of 3,571.10 square meters and covered by T.C.T. Nos. 203937, 203936, 169198, 169199, 169200 and 169202 of the Register of Deeds of Manila. On January 7, 1993, petitioner filed an ejectment suit before the Metropolitan Trial Court of Manila (Branch 15) docketed as Civil Case No. 140817-CV against the occupants of the above mentioned parcels of land (herein private respondents in G. R. No. 128077) on the grounds of termination of the lease contract and non-payment of rentals. Judgment was rendered by the MTC on September 14, 1993 ordering private respondents to vacate the premises and pay back rentals to petitioner. 1 Not satisfied, private respondents appealed the decision to the Regional Trial Court of Manila, Branch 4 (Civil Case No. 93-68130) which in turn affirmed the decision of the MTC in its decision dated February 22, 1994. Still not content, private respondents proceeded to the Court of Appeals via a petition for review (CA-G. R. SP No. 33714). The result however remained the same as the CA affirmed the decision of the RTC in its decision dated August 25, 1994. 2 Thereafter, no further action was taken by the private respondents, as a result of which the decision in the ejectment suit became final and executory. However, it appeared that during the pendency of the ejectment proceedings private respondents filed on May 25, 1993, a complaint for Annulment of Deed of Exchange against petitioner Filstream which was docketed in Civil Case No. 93-66059 before the RTC of Manila, Branch 43. It was at this stage that respondent City of Manila came into the picture when the city government approved Ordinance No. 7813 3 on November 5, 1993, authorizing Mayor Alfredo S. Lim to initiate the acquisition by negotiation, expropriation, purchase, or other legal means certain parcels of land registered under T.C.T. Nos. 169193, 169198, 169190, 169200, 169202 and 169192 of the Registry of Deeds of Manila which formed part of the properties of petitioner then occupied by private respondents. Subsequently, the City of Manila approved Ordinance No. 7855 4 declaring the expropriation of certain parcels of land situated along Antonio Rivera and Fernando Ma. Guerrero streets in Tondo, Manila which were owned by Mr. Enrique Quijano Gutierrez, petitioner's predecessor-in-interest. The said properties were to be sold and distributed to qualified tenants of the area pursuant to the Land Use Development Program of the City of Manila. On May 23, 1994, respondent City of Manila filed a complaint for eminent domain (Civil Case No. 94-70560) before the RTC of Manila, Branch 42, 5 seeking to expropriate the aforecited parcels of land owned by petitioner Filstream which are situated at Antonio Rivera Street, Tondo II, Manila. 6 Pursuant to the complaint filed by respondent City of Manila, the trial court issued a Writ of Possession 7 in favor of the former which ordered the transfer of possession over the disputed premises to the City of Manila. At this juncture, petitioner Filstream filed a motion to dismiss the complaint for eminent domain as well as a motion to quash the writ of possession. The motion to dismiss was premised on the following grounds: no valid cause of action; the petition does not satisfy the requirements of public use and a mere clandestine maneuver to circumvent the writ of execution issued by the RTC of Manila, Branch 4 in the ejectment suit; violation of the constitutional guarantee against non-impairment of obligations and contracts; price offered was too low hence violative of the just compensation provision of the constitution and the said amount is without the certification of the City Treasurer for availability of funds. 8 With respect to the motion to quash the writ of possession, petitioner raised the following objections: failure to comply with Section 2 of Rule 67 of the Rules of Court, Ordinance No. 7813 is a void enactment for it was approved without a public hearing and violative of the constitutional guarantee against impairment of obligations and contracts; the price is too low and unconscionable violating the just compensation provision of the constitution, and the said writ is tainted with infirmity considering the absence of a certification from the City of Manila that there is an immediately available fund for the subject expropriation. 9 Respondent City of Manila filed its opposition 10 to petitioner Filstream's two motions and to which petitioner accordingly filed a reply. 11 On September 30, 1994, the RTC of Manila, Branch

42, issued an order denying petitioner Filstream's motion to dismiss and the motion to quash the Writ of Possession and declared as follows: "IN FINE, the defendant's motion to dismiss and motion to quash writ of possession are both without merit and are hereby DENIED and the subject parcels of lands covered by TCT Nos. 203937, 203936, 169198, 169199, 169200 and 169202 (of the Register of Deeds of Manila) located at Antonio Rivera Street, Tondo II, Manila with a total area of 3,571.10 square meters are hereby declared CONDEMNED in favor of the City of Manila for distribution and resale to all poor and landless qualified residents/tenants in the said area under the city's 'land-for-the landless' program upon payment of just compensation which is yet to be determined by this Court." 12 Petitioner filed a motion for reconsideration 13 as well as a supplemental motion for reconsideration 14 seeking the reversal of the above-quoted order but the same were denied. 15 Still, petitioner filed a subsequent motion to be allowed to file a second motion for reconsideration but it was also denied. Aggrieved, petitioner filed on March 31, 1996, a Petition for Certiorari with the Court of Appeals (CA-G.R. SP No. 36904) seeking to set aside the September 30, 1994 order of the RTC of Manila, Branch 42. However, on March 18, 1996, respondent CA issued a resolution dismissing the petition in this wise: "It appearing that the above-entitled petition is insufficient in form and substance it does not comply with Section 2(a), Rule 6 of the Revised Internal Rules of the Court of Appeals which requires that the 'petition shall be . . . accompanied by . . . other pertinent documents and papers,' aside from the fact that copies of the pleadings attached to the petition are blurred and unreadable this Court resolved to summarily DISMISS the same (petition). 16 Petitioner filed a motion for reconsideration and attached clearer copies of the pertinent documents and papers pursuant to Section 2(a), Rule 6 of the Revised Internal Rules of the Court of Appeals. But on May 20, 1996 respondent CA issued a resolution denying the motion as petitioner failed to submit clearer and readable copies of the pleadings. 17 This prompted petitioner to proceed to this Court giving rise to the instant petition for review on certiorari under Rule 45 and docketed herein as G.R. No. 125218, assailing the dismissal of its petition by the CA in its resolution dated March 18, 1996 as well as that of its motion for reconsideration in the resolution dated May 20, 1996. Meanwhile, owing to the finality of the decision in the ejectment suit (Civil Case No. 140817-CV), the MTC of Manila, Branch 15, upon motion of petitioner Filstream, issued a Writ of Execution as well as a Notice to Vacate the disputed premises. 18 Private respondents filed a Motion to Recall/Quash the Writ of Execution and Notice to Vacate 19 alleging the existence of a supervening event in that the properties subject of the dispute have already been ordered condemned in an expropriation proceeding in favor of the City of Manila for the benefit of the qualified occupants thereof, thus execution shall be stayed. Petitioner opposed the motion, reiterating that the decision in the ejectment case is already final and executory and disputed private respondents' right to interpose the expropriation proceedings as a defense because the latter were not parties to the same. For its part, the City of Manila filed on March 13, 1996, a motion for intervention with prayer to stay/quash the writ of execution on the ground that it is the present possessor of the property subject of execution. In its order dated March 14, 1996, the MTC of Manila, Branch 14, denied private respondents' motion as it found the allegations therein bereft of merit and upheld the issuance of the Writ of Execution and Notice to Vacate in petitioner's favor. 20 Subsequently, the trial court also denied the motion filed by the City of Manila. On April 22, 1996, the trial court issued an order commanding the demolition of the structure erected on the disputed premises. To avert the demolition, private respondents filed before the RTC of Manila, Branch 14, a Petition for Certiorari and Prohibition with prayer for the issuance of a temporary restraining order and preliminary injunction (docketed as Civil Case No. 96-78098). On April 29, 1996, the RTC of Manila, Branch 33, issued a TRO enjoining the execution of the writ

issued in Civil Case No. 140817-CV by the MTC of Manila, Branch 14. 21 Subsequently the RTC issued a writ of preliminary injunction on May 14, 1996. 22 On May 15, 1996, the City of Manila filed its Petition for Certiorari and Prohibition with prayer for the issuance of a temporary restraining order and preliminary injunction which was raffled to Branch 23 of the RTC of Manila (docketed as Civil Case No. 96-78382), seeking the reversal of the orders issued by the MTC of Manila, Branch 14, which denied its motion to intervene and quash the writ of execution in Civil Case No. 140817-CV. Thereafter, upon motion filed by the City of Manila, an order was issued by the RTC of Manila, Branch 10, ordering the consolidation of Civil Case No. 96-78382 with Civil Case No. 96-78098 pending before Branch 14 of the RTC of Manila. 23 On May 21, 1996, the RTC of Manila, Branch 14, issued an injunction in Civil Case No. 96-78098 enjoining the implementation of the writ of execution until further orders from the court. 24 Petitioner Filstream filed a Motion to Dissolve the Writ of Preliminary Injunction and to be allowed to post a counter-bond but the trial court denied the same. Filstream then filed a motion for reconsideration from the order of denial but pending resolution of this motion, it filed a motion for voluntary inhibition of the presiding judge of the RTC of Manila, Branch 14. The motion for inhibition was granted 25 and as a result, the consolidated cases (Civil Case No. 96-78382 and 96-78098) were re-raffled to the RTC of Manila, Branch 33. cdasia During the proceedings before the RTC of Manila, Branch 33, petitioner Filstream moved for the dismissal of the consolidated cases (Civil Case No. 96-78382 and No. 96-78098) for violation of Supreme Court Circular No. 04-94 (forum shopping) because the same parties, causes of action and subject matter involved therein have already been disposed of in the decision in the ejectment case (Civil Case No. 140817) which has already become final and executory prior to the filing of these consolidated cases. On December 9, 1996, an order was issued by the RTC of Manila, Branch 33, ordering the dismissal of Civil Case Nos. 96-78382 and 96-78098 for violation of Supreme Court Circular No. 04-94. 26 Immediately thereafter, petitioner Filstream filed an Ex-parte Motion for Issuance of an Alias Writ of Demolition and Ejectment and a supplemental motion to the same dated January 10 and 13, 1997, respectively, 27 before the MTC of Manila, Branch 15, which promulgated the decision in the ejectment suit (Civil Case No. 140817-CV). On January 23, 1997, the court granted the motion and issued the corresponding writ of demolition. As a consequence of the dismissal of the consolidated cases, herein private respondents filed a Petition for Certiorari and Prohibition with prayer for the issuance of a temporary restraining order and preliminary injunction before the Court of Appeals (docketed as CA-G.R. SP No. 43101) 28 assailing the above-mentioned order of dismissal by the RTC of Manila, Branch 33, as having been issued with grave abuse of discretion tantamount to lack or in excess of jurisdiction. In a resolution dated January 28, 1997, the Court of Appeals granted herein private respondents prayer for the issuance of a temporary restraining order and directed the MTC of Manila, Branch 15, to desist from implementing the order of demolition dated January 23, 1997, unless otherwise directed. 29 At the conclusion of the hearing for the issuance of a writ of preliminary injunction, the Court of Appeals, in its resolution dated February 18, 1997, found merit in private respondents' allegations in support of their application of the issuance of the writ and granted the same, to wit: "Finding that the enforcement or implementation of the writ of execution and notice to vacate issued in Civil Case No. 140817-CV, the ejectment case before respondent Judge Jiro, during the pendency of the instant petition, would probably be in violation of petitioners' right, and would tend to render the judgment in the instant case ineffectual, and probably work injustice to the petitioners, the application for the issuance of a writ of preliminary injunction is hereby GRANTED. "WHEREFORE, upon the filing of a bond in the amount of P150,000.00, let a writ of preliminary injunction be issued enjoining respondents, their employees, agents, representatives and anyone acting in their behalf from enforcing or executing the writ of execution and notice to vacate issued

in Civil Case No. 140817-CV of the court of respondent Judge Jiro, or otherwise disturbing the status quo, until further orders of this Court." 30 In turn, petitioner Filstream is now before this Court via a Petition for Certiorari under Rule 65 (G.R. No. 128077), seeking to nullify the Resolutions of the Court ofAppeals dated January 28, 1997 and February 18, 1997 which granted herein private respondents' prayer for a TRO and Writ of Preliminary Injunction, the same being null and void for having been issued in grave abuse of discretion. Upon motion filed by petitioner Filstream, in order to avoid any conflicting decisions on the legal issues raised in the petitions, the Court ordered that the later petition, G.R. No. 128077 be consolidated with G.R. No. 128077 in the resolution of March 5, 1997. 31 The issue raised in G.R. No. 125218 is purely a procedural and technical matter. Petitioner takes exception to the resolutions of respondent CA dated March 18, 1996 and May 20, 1996 which ordered the dismissal of its Petition for Certiorari for non-compliance with Sec. 2(a) of Rule 6 of the Revised Internal Rules of the Court ofAppeals by failing to attach to its petition other pertinent documents and papers and for attaching copies of pleadings which are blurred and unreadable. Petitioner argues that respondent appellate court seriously erred in giving more premium to form rather than substance. We agree with the petitioner. A strict adherence to the technical and procedural rules in this case would defeat rather than meet the ends of justice as it would result in the violation of the substantial rights of petitioner. At stake in the appeal filed by petitioner before the CA is the exercise of their property rights over the disputed premises which have been expropriated and have in fact been ordered condemned in favor of the City of Manila. In effect, the dismissal of their appeal in the expropriation proceedings based on the aforementioned grounds is tantamount to a deprivation of property without due process of law as it would automatically validate the expropriation proceedings which the petitioner is still disputing. It must be emphasized that where substantial rights are affected, as in this case, the stringent application of procedural rules may be relaxed if only to meet the ends of substantial justice. In these instances, respondent CA can exercise its discretion to suspend its internal rules and allow the parties to present and litigate their causes of action so that the Court can make an actual and complete disposition of the issues presented in the case. Rather than simply dismissing the petition summarily for non-compliance with respondent court's internal rules, respondent CA should have instead entertained petitioner Filstream's petition for review on certiorari, and ordered petitioner to submit the corresponding pleadings which it deems relevant and replace those which are unreadable. This leniency could not have caused any prejudice to the rights of the other parties. With regard to the other petition, G.R. No. 128077, petitioner Filstream objects to the issuance by respondent CA of the restraining order and the preliminary injunction enjoining the execution of the writ of demolition issued in the ejectment suit (Civil Case No. 140817-CV) as an incident to private respondents' pending petition assailing the dismissal by the RTC of Manila, Branch 33, of the consolidated petitions for certiorari filed by private respondents and the City of Manila on the ground of forum shopping. 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. Petitioner Filstream anchors its claim by virtue of its ownership over the properties and the existence of a final and executory judgment against private respondents ordering the latter's ejectment from the premises (Civil Case No. 140817-CV). Private respondents' claim on the other hand hinges on an alleged supervening event which has rendered the enforcement of petitioner's rights moot, that is, the expropriation proceedings (Civil Case No. 94-70560) undertaken by the City of Manila over the disputed premises for the benefit of

herein private respondents. For its part, the City of Manila is merely exercising its power of eminent domain within its jurisdiction by expropriating petitioner's properties for public use. There is no dispute as to the existence of a final and executory judgment in favor of petitioner Filstream ordering the ejectment of private respondents from the properties subject of this dispute. The judgment in the ejectment suit became final and executory after private respondents failed to interpose any appeal from the adverse decision of the Court of Appeals dated August 25, 1994 in CA-G.R. SP No. 33714. Thus, petitioner has every right to assert the execution of this decision as it had already become final and executory. However, it must also be conceded that the City of Manila has an undeniable right to exercise its power of eminent domain within its jurisdiction. The right to expropriate private property for public use is expressly granted to it under Section 19 of the 1991 Local Government Code, to wit: "SEC. 19.Eminent Domain. A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided, however, That the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner, and such offer was not accepted; Provided, further, That the local government unit may immediately take possession of the property upon the filing of the expropriation proceedings and upon making a deposit with the proper court of at least fifteen (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." (Emphasis supplied) More specifically, the City of Manila has the power to expropriate private property in the pursuit of its urban land reform and housing program as explicitly laid out in the Revised Charter of the City of Manila (R.A. No. 409) as follows: "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; Emphasis supplied). 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 the 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 . . .". (Emphasis supplied). In fact, the City of Manila's right to exercise these prerogatives notwithstanding the existence of a final and executory judgment aver the property to be expropriated has been upheld by this Court in the case of Philippine Columbian Association vs. Panis, G.R. No. 106528, December 21, 1993. 32 Relying on the aforementioned provisions of the Revised Charter of the City of Manila, the Court declared that: "The City of Manila, acting through its legislative branch, has the express power to acquire private lands in the city and subdivide these lands into home lots for sale to bona fide tenants or occupants thereof, and to laborers and low-salaried employees of the city. llcd That only a few could actually benefit from the expropriation of the property does not diminish its public use character. It is simply not possible to provide all at once land and shelter for all who need them (Sumulong v. Guerrero, 154 SCRA 461 [1987]). Corollary to the expanded notion of public use, expropriation is not anymore confined to vast tracts of land and landed estates (Province of Camarines Sur v.Court of Appeals, G. R. No. 103125, May 17, 1993; J. M. Tuason and Co., Inc. v. Land Tenure Administration, 31 SCRA 413 [1970]). It is

therefore of no moment that the land sought to be expropriated in this case is less than half a hectare only (Pulido v. Court of Appeals, 122 SCRA 63 [1983]). Through the years, the public use requirement in eminent domain has evolved into a flexible concept, influenced by changing conditions (Sumulong v. Guerrero, supra; Manotok v. National Housing Authority, 150 SCRA 89 [1987]; Heirs of Juancho Ardona v. Reyes, 125 SCRA 220 [1983]). Public use now includes the broader notion of indirect public benefit or advantage, including in particular, urban land reform and housing." 33 We take judicial notice of the fact that urban land reform has become a paramount task in view of the acute shortage of decent housing in urban areas particularly in Metro Manila. Nevertheless, despite the existence of a serious dilemma, local government units are not given an unbridled authority when exercising their power of eminent domain in pursuit of solutions to these problems. The basic rules still have to be followed, which are as follows: "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. 3, Sec. 1, 1987 Constitution); private property shall not be taken for public use without just compensation (Art. 3, Section 9, 1987 Constitution)". Thus, the exercise by local government units of the power of eminent domain is not without limitations. Even Section 19 of the 1991 Local Government Code is very explicit that it must comply with the provisions of the Constitution and pertinent laws, to wit: "SEC. 19.Eminent Domain. A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: . . . (Emphasis supplied). The governing law that deals with the subject of expropriation for purposes of urban land reform and housing is Republic Act No. 7279 (Urban Development and Housing Act of 1992) and Sections 9 and 10 of which specifically provide as follows: "Sec. 9.Priorities in the acquisition of Land. Lands for socialized housing shall be acquired in the following order: (a)Those owned by the Government or any of its sub-divisions, instrumentalities, or agencies, including government-owned or -controlled corporations and their subsidiaries; (b)Alienable lands of the public domain; (c)Unregistered or abandoned and idle lands; (d)Those within the declared Areas for Priority Development, Zonal Improvement sites, and Slum Improvement and Resettlement Program sites which have not yet been acquired; (e)Bagong Lipunan Improvement of 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 ofCourt. For the purpose of socialized housing, government-owned and foreclosed properties shall be acquired by the local government units, or by the National Housing Authority primarily through negotiated purchase: Provided, That qualified beneficiaries who are actual occupants of the land shall be given the right of first refusal." (Emphasis supplied).

10

Very clear from the abovequoted provisions are the limitations 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 when the other modes of acquisition have been exhausted. Compliance with these conditions must be deemed mandatory because these are the only safeguards in securing the right of owners of private property to due process when their property is expropriated for public use. Proceeding from the parameters laid out in the above disquisitions, we now pose the crucial question: Did the City of Manila comply with the above mentioned conditions when it expropriated petitioner Filstream's properties? We have carefully scrutinized the records of this case and found nothing that would indicate that respondent City of Manila complied with Sec. 9 and Sec. 10 of R.A. 7279. Petitioner Filstream's properties were expropriated and ordered condemned in favor of the City of Manila sans any showing that resort to the acquisition of other lands listed under Sec. 9 of RA 7279 have proved futile. Evidently, there was a violation of petitioner Filstream's right to due process 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. WHEREFORE, the petitions are hereby GRANTED. In G.R. 125218, the resolutions of the Court of Appeals in CA-G.R. SP NO. 36904 dated March 18, 1996 and May 20, 1996 are hereby REVERSED and SET ASIDE. In G.R. No. 128077, the resolution of the Court of Appeals in CA-G.R. SP No. 43101 dated January 28, 1997 and February 18, 1997 are REVERSED and SET ASIDE. SO ORDERED. Narvasa, C .J ., Romero, Melo and Panganiban, JJ ., concur. Footnotes 1.Annex C, G.R. No. 128077, Rollo, pp. 72-79. 2.G.R. No. 128077, Rollo, pp. 204-211. 3.Annex E, G.R. No. 128077, Rollo, p. 86. 4.Annex F, G.R. No. 128077, Rollo, p. 88. 5.G.R. No. 125218, Rollo, p. 44. 6.Covered by T.C.T. Nos. 203937, 203936, 169198, 169199, 169200 and 199202 of the Registry of Deeds of Manila. 7.G.R. No. 125218, Rollo, p. 62. 8.G.R. No. 125218, Rollo, pp. 50-51. 9.G.R. No. 125218, Rollo, pp. 68-70. 10.G.R. No. 125218, Rollo, pp. 71, 76. 11.G.R. No. 125218, Rollo, pp. 79. 12.G.R. No. 125218, Rollo, p. 85. 13.G.R. No. 125218, Rollo, p. 86. 14.G.R. No. 125218, Rollo, p. 90. 15.G.R. No. 125218, Rollo, p. 95. 16.G.R. No. 125218, Rollo, p. 41. 17.G.R. No. 125218, Rollo, p. 43. 18.G.R. No. 128077, Rollo, pp. 106, 107. 19.G.R. No. 128077, Rollo, p. 108. 20.G.R. No. 125218, Rollo, p. 119. 21.G.R. No. 125218, Rollo, p. 137. 22.G.R. No. 125218, Rollo, p. 138.

23.G.R. No. 125218, Rollo, p. 157. 24.G.R. No. 125218, Rollo, p. 159. 25.G.R. No. 128077, Rollo, p. 181. 26.G.R. No. 125218, Rollo, p. 194. 27.G.R. No. 125218, Rollo, pp. 190-191. 28.G.R. No. 125218, Rollo, p. 42. 29.G.R. No. 125218, Rollo, p. 32. 30.G.R. No. 125218, Rollo, pp. 40-41. 31.G.R. No. 125218, Rollo, p. 427. 32.228 SCRA 668. 33.228 SCRA 668, 673.

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REPUBLIC vs. PRIMO MENDOZA

SECOND DIVISION [G.R. No. 185091. August 9, 2010.] 2:45 P.M. REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF EDUCATION DIVISION OF LIPA CITY (FOR PANINSINGIN PRIMARY SCHOOL), petitioner, vs. PRIMO MENDOZA and MARIA LUCERO, respondents. DECISION ABAD, J p: This case is about the propriety of filing an ejectment suit against the Government for its failure to acquire ownership of a privately owned property that it had long used as a school site and to pay just compensation for it. The Facts and the Case Paninsingin Primary School (PPS) is a public school operated by petitioner Republic of the Philippines (the Republic) through the Department of Education. PPS has been using 1,149 square meters of land in Lipa City, Batangas since 1957 for its school. But the property, a portion of Lots 1923 and 1925, were registered in the name of respondents Primo and Maria Mendoza (the Mendozas) under Transfer Certificate of Title (TCT) T-11410. 1 On March 27, 1962 the Mendozas caused Lots 1923 and 1925 to be consolidated and subdivided into four lots, as follows: Lot 1 292 square meters in favor of Claudia Dimayuga; Lot 2 292 square meters in favor of the Mendozas; Lot 3 543 square meters in favor of Gervacio Ronquillo; and Lot 4 1,149 square meters in favor of the City Government of Lipa. 2 As a result of subdivision, the Register of Deeds partially cancelled TCT T-11410 and issued new titles for Lots 1 and 3 in favor of Dimayuga and Ronquillo, respectively. Lot 2 remained in the name of the Mendozas but no new title was issued in the name of the City Government of Lipa for Lot 4. 3 Meantime, PPS remained in possession of the property. IaESCH The Republic claimed that, while no title was issued in the name of the City Government of Lipa, the Mendozas had relinquished to it their right over the school lot as evidenced by the consolidation and subdivision plan. Further, the property had long been tax-declared in the name of the City Government and PPS built significant, permanent improvements on the same. These improvements had also been tax-declared. 4 The Mendozas claim, on the other hand, that although PPS sought permission from them to use the property as a school site, they never relinquished their right to it. They allowed PPS to occupy the property since they had no need for it at that time. Thus, it has remained registered in their name under the original title, TCT T-11410, which had only been partially cancelled. On November 6, 1998 the Mendozas wrote PPS, demanding that it vacate the disputed property. 5 When PPS declined to do so, on January 12, 1999 the Mendozas filed a complaint with the Municipal Trial Court in Cities (MTCC) of Lipa City in Civil Case 0002-99 against PPS for unlawful detainer with application for temporary restraining order and writ of preliminary injunction. 6 On July 13, 1999 the MTCC rendered a decision, dismissing the complaint on ground of the Republic's immunity from suit. 7 The Mendozas appealed to the Regional Trial Court (RTC) of Lipa City which ruled that the Republic's consent was not necessary since the action before the MTCC was not against it. 8 In light of the RTC's decision, the Mendozas filed with the MTCC a motion to render judgment in the case before it. 9 The MTCC denied the motion, however, saying that jurisdiction over the case had passed to the RTC upon appeal. 10 Later, the RTC remanded the case back to the MTCC, 11 which then dismissed the case for insufficiency of evidence. 12 Consequently, the Mendozas once again appealed to the RTC in Civil Case 2001-0236.

On June 27, 2006 the RTC found in favor of the Mendozas and ordered PPS to vacate the property. It held that the Mendozas had the better right of possession since they were its registered owners. PPS, on the other hand, could not produce any document to prove the transfer of ownership of the land in its favor. 13 PPS moved for reconsideration, but the RTC denied it. The Republic, through the Office of the Solicitor General (OSG), appealed the RTC decision to the Court of Appeals (CA) in CA-G.R. SP 96604 on the grounds that: (1) the Mendozas were barred by laches from recovering possession of the school lot; (2) sufficient evidence showed that the Mendozas relinquished ownership of the subject lot to the City Government of Lipa City for use as school; and (3) Lot 4, Pcs-5019 has long been declared in the name of the City Government since 1957 for taxation purposes. 14 In a decision dated February 26, 2008, the CA affirmed the RTC decision. 15 Upholding the Torrens system, it emphasized the indefeasibility of the Mendozas' registered title and the imprescriptible nature of their right to eject any person occupying the property. The CA held that, this being the case, the Republic'spossession of the property through PPS should be deemed merely a tolerated one that could not ripen into ownership. DIEcHa The CA also rejected the Republic's claim of ownership since it presented no documentary evidence to prove the transfer of the property in favor of the government. Moreover, even assuming that the Mendozas relinquished their right to the property in 1957 in the government's favor, the latter never took steps to have the title to the property issued in its name or have its right as owner annotated on the Mendozas' title. The CA held that, by its omissions, the Republic may be held in estoppel to claim that the Mendozas were barred by laches from bringing its action. With the denial of its motion for reconsideration, the Republic has taken recourse to this Court via petition for review on certiorari under Rule 45. The Issue Presented The issue in this case is whether or not the CA erred in holding that the Mendozas were entitled to evict the Republic from the subject property that it had used for a public school. The Court's Ruling A decree of registration is conclusive upon all persons, including the Government of the Republic and all its branches, whether or not mentioned by name in the application for registration or its notice. 16 Indeed, title to the land, once registered, is imprescriptible. 17 No one may acquire it from the registered owner by adverse, open, and notorious possession. 18 Thus, to a registered owner under the Torrens system, the right to recover possession of the registered property is equally imprescriptible since possession is a mere consequence of ownership. Here, the existence and genuineness of the Mendozas' title over the property has not been disputed. While the consolidation and subdivision plan of Lots 1923 and 1925 shows that a 1,149 square meter lot had been designated to the City Government, the Republic itself admits that no new title was issued to it or to any of its subdivisions for the portion that PPS had been occupying since 1957. 19 That the City Government of Lipa tax-declared the property and its improvements in its name cannot defeat the Mendozas' title. This Court has allowed tax declarations to stand as proof of ownership only in the absence of a certificate of title. 20 Otherwise, they have little evidentiary weight as proof of ownership. 21 The CA erred, however, in ordering the eviction of PPS from the property that it had held as government school site for more than 50 years. The evidence on record shows that the Mendozas intended to cede the property to the City Government of Lipa permanently. In fact, they allowed the city to declare the property in its name for tax purposes. And when they sought in 1962 to have the bigger lot subdivided into four, the Mendozas earmarked Lot 4, containing 1,149 square meters, for the City Government of Lipa. Under the circumstances, it may be assumed that the Mendozas agreed to transfer ownership of the land to the government, whether to the City Government of Lipa or to the Republic, way back but never got around to do so and the Republic itself altogether forgot about it. Consequently, the Republic should be deemed entitled to

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possession pending the Mendozas' formal transfer of ownership to it upon payment of just compensation. aHICDc The Court holds that, where the owner agrees voluntarily to the taking of his property by the government for public use, he thereby waives his right to the institution of a formal expropriation proceeding covering such property. Further, as the Court also held in Eusebio v. Luis, 22 the failure for a long time of the owner to question the lack of expropriation proceedings covering a property that the government had taken constitutes a waiver of his right to gain back possession. The Mendozas' remedy is an action for the payment of just compensation, not ejectment. In Republic of the Philippines v. Court of Appeals, 23 the Court affirmed the RTC's power to award just compensation even in the absence of a proper expropriation proceeding. It held that the RTC can determine just compensation based on the evidence presented before it in an ordinary civil action for recovery of possession of property or its value and damages. As to the time when just compensation should be fixed, it is settled that where property was taken without the benefit of expropriation proceedings and its owner filed an action for recovery of possession before the commencement of expropriation proceedings, it is the value of the property at the time of taking that is controlling. 24 Since the MTCC did not have jurisdiction either to evict the Republic from the land it had taken for public use or to hear and adjudicate the Mendozas' right to just compensation for it, the CA should have ordered the complaint for unlawful detainer dismissed without prejudice to their filing a proper action for recovery of such compensation. WHEREFORE, the Court partially GRANTS the petition, REVERSES the February 26, 2008 decision and the October 20, 2008 resolution of the Court of Appeals in CA-G.R. 96604, and ORDERS the dismissal of respondents Primo and Maria Mendoza's action for eviction before the Municipal Trial Court in Cities of Lipa City in Civil Case 0002-99 without prejudice to their filing an action for payment of just compensation against the Republic of the Philippines or, when appropriate, against the City of Lipa. SO ORDERED. Carpio, Villarama, Jr., * Perez ** and Mendoza, JJ., concur. Footnotes 1.Rollo, p. 46. 2.Id. at 48. 3.Id. at 46-48. 4.Id. at 49-50; Tax Declaration (TD) 00491 issued in 1989, cancelled by TD 01914 (for the lot) and TD 0915 (for the buildings), and further cancelled by TD 00748 issued in 1995. 5.Id. at 53. 6.Id. at 52-56. 7.Id. at 57-59. 8.Id. at 60-67. 9.CA rollo, pp. 74-77. 10.Id. at 49-51. 11.Rollo, pp. 68-70. 12.Id. at 71-74. 13.CA rollo, pp. 58-63. Penned by Judge Jane Aurora C. Lantion. 14.Id. at 2-21. 15.Rollo, pp. 24-36. Penned by Associate Justice Bienvenido L. Reyes and concurred in by Associate Justices Arcangelita Romilla-Lontok and Apolinario D. Bruselas, Jr. 16.Amending and Codifying the Laws Relative to Registration of Property and for Other Purposes, Presidential Decree No. 1529, [P.D. No. 1529], 31, 2. 17.Section 47 of P.D. 1529 or the Property Registration Decree. 18.Id. at 47. 19.Rollo, p. 11. 20.Republic of the Philippines v. Catarroja, G.R. No. 171774, February 12, 2010. In this case, the tax declaration could stand as evidence of ownership because the certificate of title was never

reconstituted after its loss and no proof that it had ever been issued by a valid land registration court; and in Aguirre v. Heirs of Lucas Villanueva, G.R. No. 169898, October 27, 2006, 505 SCRA 855, 861-862, only tax declarations were presented to prove ownership along with actual possession. 21.Arbias v. Republic of the Philippines, G.R. No. 173808, September 17, 2008, 565 SCRA 582, 593594. 22.G.R. No. 162474, October 13, 2009, 603 SCRA 576, 584. 23.494 Phil. 494 (2005). 24.Supra note 22, at 586. *Designated as additional member in lieu of Associate Justice Antonio Eduardo B. Nachura, per raffle dated July 28, 2010. **Designated as additional member in lieu of Associate Justice Diosdado M. Peralta, per raffle dated July 28, 2010.

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VISAYAS REFINING COMPANY vs CAMUS AND PAREDES

FIRST DIVISION [G.R. No. 15870. December 3, 1919.] VISAYAN REFINING COMPANY, DEAN C. WORCESTER, and FRED A. LEAS, petitioners, vs. HON. MANUEL CAMUS, Judge of the Court of First Instance of the Province of Rizal and HON. QUINTIN PAREDES, Attorney-General of the Philippine Islands, respondents. Kincaid & Perkins for petitioner Assistant Attorney-General Reyes for respondents. SYLLABUS 1.EMINENT DOMAIN; PUBLIC USE; MILITARY AND AVIATION PURPOSES. The use of land by the Government for military and aviation purposes is a public use within the meaning of the provisions of law authorizing the Government of the Philippine Islands to acquire real estate for public uses by the exercise of the right of eminent domain. 2.ID.; JUDICIAL PROCEEDINGS; AUTHORITY OF GOVERNOR-GENERAL TO DIRECT INSTITUTION OF PROCEEDINGS. Judicial proceedings for the condemnation of land for public use can be maintained in the name of the Government of the Philippine Islands pursuant to the directions of the Governor-General, without any other special legislative authority than that expressed in subsection (h) of section 64 of the Administrative Code, in relation with section 3 of the Jones Act. 3.ID.; ID.; LEGISLATIVE APPROPRIATION. The existence of a legislative appropriation especially destined to pay for land to be acquired by the Government through the exercise of the power of eminent domain is not an essential prerequisite to the institution and maintenance of judicial proceedings for the expropriation of such land. All that can be required of the Government is that it should comply with the conditions laid down by law as and when those conditions arise. 4.ID.; RIGHT TO EXERCISE POWER; INHERENT IN SOVEREIGNTY. The power of eminent domain is inseparable from sovereignty, being essential to the existence of the State and inherent in government even in its most primitive forms. No law, therefore, is ever necessary to confer this right upon sovereignty or upon any Government exercising sovereign or quasi-sovereign powers. 5.ID.; ID.; DUE PROCESS OF LAW JUST COMPENSATION. The power of eminent domain, with respect to the conditions under which the property is taken, must be exercised in subjection to the restraints imposed by constitutional or organic law, and in these Islands especially with reference to section 3 of the Jones Act which declares that no law shall be enacted which shall deprive any person of property without due process of law and that private property shall not be taken for public use without just compensation. 6.ID.; ID.; METHOD OF EXPROPRIATION. If the Legislature prescribes a method of expropriation which provides for the payment of just compensation and such method is so conceived and adapted as to fulfill the constitutional requisite of due process of law, any expropriation accomplished in conformity with that method is valid. 7.ID.; ID.; ID.; PAYMENT OF COMPENSATION. There is no organic or constitutional provision in force in these Islands requiring that compensation shall actually be paid prior to the judgment of condemnation. 8.ID.; ID.; ID.; PAYMENT OF COMPENSATION AS PREREQUISITE TO ACQUISITION OF PROPERTY. The system of expropriation prescribed by laws in force in these Islands affords absolute assurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid. In this connection our courts are directed to make such final order and judgment as shall secure just compensation for the land taken, and the right of the expropriator is finally made absolutely dependent upon the payment of compensation by him. 9.ID.; ID.; GIVING OF PROVISIONAL POSSESSION TO GOVERNMENT; OFFICE OF PRELIMINARY DEPOSIT. Where provisional possession is given to the Government in an expropriation proceeding, upon the making of the deposit required by Act No. 2826 of the Philippine Legislature, the owner of the land is fully protected from any loss that might result from the temporary occupation of the land by the Government in the event that the Legislature should finally fail to

appropriate any additional amount necessary to satisfy the award of the court; for such preliminary deposit serves the double purpose of prepayment upon the value of the property, if finally expropriated, and as an indemnity against damage in the eventuality that the proceeding should fail of consummation. DECISION STREET, J p: This is an original petition, directed to the Supreme Court, containing an alternative prayer for a writ of certiorari or prohibition, as the facts may warrant, to stop certain condemnation proceedings instituted by the Government of the Philippine Islands, and now pending in the Court of First Instance of the Province of Rizal. The respondents have interposed what is called an answer, but which is in legal effect merely a demurrer, challenging the sufficiency of the allegations of the petition. The matter having been submitted upon oral argument, the cause is now before us for the decision of the question thus presented. It appears that upon September 13, 1919, the Governor-General directed the Attorney-General to cause condemnation proceedings to be begun for the purpose of expropriating a tract of land of an area of about 1,100,463 square meters, commonly known as the site of Camp Tomas Claudio. Said land is located in the municipality of Paraaque, Province of Rizal, and lies along the water front of Manila Bay, a few miles south of the city of Manila. It is stated in communication of the Governor-General that the property in question is desired by the Government of the Philippine Islands for military and aviation purposes. In conformity with the instructions of the Governor-General, condemnation proceedings were begun by the Attorney-General on September 15, 1919, by filing a complaint in the name of the Government of the Philippine Islands in the Court of First Instance of the Province of Rizal. Numerous persons are named in the complaint as defendants because of their supposed ownership of portions of the property intended to be expropriated. In the list of persons thus impleaded appear the names of the three petitioners herein, namely, the Visayan Refining Co., Dean C. Worcester, and Fred A. Leas, who are severally owners of different portions of the property in question. In the communication of the Governor-General, the Attorney-General was directed immediately upon filing the complaint to ask the court to give the Government the possession of the land to be expropriated, after the necessary deposit should be made as provided by law. Accordingly in the complaint itself the Attorney-General prayed the court promptly and provisionally to fix the sum of P600,000 as the total value of the property and to put the Government in immediate possession when said sum should be placed at the disposition of the court. An order was accordingly made on September 15, 1919, by the Honorable Judge Manuel Camus, of the Court of First Instance of the Province of Rizal, fixing the value of the property provisionally at the amount stated and ordering that the plaintiff be placed in possession, it being made to appear that a certificate of deposit for the amount stated had been delivered to the provincial treasurer. At this stage of the proceedings in the Court of First Instance the three respondents already mentioned, to wit, the Visayan Refining Co., Dean C. Worcester, and Fred A. Leas, interposed a demurrer, questioning the validity of the proceedings on the ground that there is no Act of the Philippine Legislature authorizing the exercise of the power of eminent domain to acquire land for military or aviation purposes. Contemporaneously with the filing of their demurrer, the same parties moved the Court of First Instance to revoke its order of September 15, giving the plaintiff provisional possession. This motion is based substantially on the same ground as the demurrer, that is, the lack of legislative authority for the proposed expropriation, but it contains one additional allegation to the effect that the deposit in court of the sum of P600,000, had been made without authority of law. In support of this contention it was shown, by means of an informal communication from the Insular Auditor, that the money in question had been taken from the unexpended balance of the funds appropriated by Acts Nos. 2784 and 2785 of the Philippine Legislature for the use of the Militia Commission. This appropriation showed, upon the date said deposit of P600,000 was made, an unexpended balance of P1,144,672.83

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On October 3, 1919, the Judge of the Court of First Instance overruled the demurrer interposed by the three parties mentioned and denied their motion to vacate the order granting possession to the Government. The present proceeding was thereupon instituted in this Court in the manner and for the purpose already stated. General authority to exercise the power of eminent domain is expressly conferred on the Government of the Philippine Islands, as now constituted, by section 63 of the Philippine Bill, which reads as follows: "That the Government of the Philippine Islands is hereby authorized, subject to the limitation and conditions prescribed in this Act to acquire, receive, hold, maintain, and convey title to real and personal property, and may acquire real estate for public uses by the exercise of the right of eminent domain." (Act of Congress of July 1, 1902.) Section 3 of the Jones Act contains the further provision that "private property shall not be taken for public use without just compensation." In addition to this there is found in the same section the familiar provision, already expressed in section 5 of the Philippine Bill, that no law shall be enacted which shall deprive any person of property without due process of law, or deny any person the equal protection of the laws. (Act of Congress of August 29, 1916, sec. 3.) Section 64 of the Administrative Code of the Philippine Islands (Act No. 2711) expressly confers on the Governor-General the power, among others: "To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the Government of the Philippine Islands; and to direct the Attorney-General, where such act is deemed advisable, to cause the condemnation proceedings to be begun in the court having proper jurisdiction." The procedural provisions relative to the conduct of expropriation proceedings are contained in sections 241 to 253, inclusive, of the Code of Civil Procedure, supplemented as they are by various later Acts of the Legislature. Among the salient features of the scheme of expropriation thus created are these: (1) If the court is of the opinion that the right of expropriation exists, three commissioners are appointed to hear the parties, view the premises, and assess the damages to be paid for the condemnation (sec. 243 Code Civ. Proc.); (2) after hearing the evidence submitted by the parties and assessing the damages in the manner prescribed by law (sec. 244), the commissioners make their report to the court, setting forth all their proceedings; and it is expressly declared that "none of their proceedings shall be effectual to bind the property or the parties until the court shall have accepted their report and rendered judgment in accordance with its recommendations" (sec. 245); (3) the court then acts upon the report, accepting the same in whole or in part, or rejecting, recommitting, or setting aside the same, as it sees fit (sec. 246). It is further declared in section 246 that "The court . . . may make such final order and judgment as shall secure to the plaintiff the property essential to the exercise of his rights under the law, and to the defendant just compensation for the land so taken; and the judgment shall require payment of the sum awarded as provided in the next section (i. e., sec. 247) before the plaintiff can enter upon the ground and appropriate it to the public use." Sections 247 and 251 of the same Code are of sufficient importance in this connection to warrant quotation in their entirety. They are as follows: "SEC. 247.Rights of Plaintiff After the Judgment. Upon payment by the plaintiff to the defendant of compensation as fixed by the judgment, or after tender to him of the amount so fixed and payment of the costs, the plaintiff shall have the right to enter in and upon the land so condemned, to appropriate the same to the public use defined in the judgment. In case the defendant and his attorney absent themselves from the court or decline to receive the same, payment may be made to the clerk of the court for him, and such officer shall be responsible on his bond therefor and shall be compelled to receive it." "SEC. 251.Final Judgment, Its Record and Effect. The record of the final judgment in such action shall state definitely by metes and bounds and adequate description. the particular land or interest in land condemned to the public use, and the nature of the public use. A certified copy of

the record of the judgment shall be recorded in the office of the registrar of deeds for the province in which the estate is situated, and its effect shall be to vest in the plaintiff for the public use stated the land and estate so described." The provisions which deal with the giving of immediate possession when the Government of the Philippine Islands is the plaintiff are found in Act No. 2826, which is in part as follows: "SEC. 2.When condemnation proceedings are instituted by or in favor of the Insular Government . . . in any competent court of the Philippines, the plaintiff shall be entitled to enter immediately upon the land covered by such proceedings, after depositing with the provincial treasurer the value of said land in cash, as previously and promptly determined and fixed by the competent court, which money the provincial treasurer shall retain subject to the order and final decision of the court: Provided, however, That the court may permit that in lieu of cash, there may be deposited with the provincial treasurer a certificate of deposit of any depository of the Government of the Philippine Islands, payable to the provincial treasurer on sight, for the sum ordered deposited by the court. The certificate and the sums represented by it shall be subject to the order and final decision of the court, and the court shall have authority to place said plaintiff in possession of the land, upon such deposit being made, by the proper orders and a mandate, if necessary. "SEC. 3. . . . Upon the payment by the plaintiff to the defendants of the compensation awarded by the sentence, or after the tender of said sum to the defendants, and the payment of the costs, or in case the court orders the price to be paid into court, the plaintiff shall be entitled to appropriate the land so condemned to the public use specified in the sentence. In case payment is made to the court, the clerk of the same shall be liable on his bond for the sum so paid and shall be obliged to receive the same." In connection with the foregoing provisions found in laws enacted under the American regime is to be considered the following provision of the Civil Code: "ART. 349No one may be deprived of his property unless it be by competent authority for some purpose of proven public utility and after payment of the proper compensation. "Unless this requisite has been complied with, it shall be the duty of the court to protect the owner of such property in its possession or to restore its possession to him, as the case may be." Taken together the laws mentioned supply a very complete scheme of judicial expropriation, deducing the authority from its ultimate source in sovereignty, providing in detail for the manner of its exercise, and making the right of the expropriator finally dependent upon payment of the amount awarded by the court. As has already been indicated the petition before us proceeds on the idea that the expropriation proceedings in question cannot be maintained by the Philippine Government in the absence of a statute authorizing the exercise of the power of eminent domain for military and aviation purposes; and while it is not urged that a special legislative Act must be passed every time any particular parcel of property is to be expropriated, it is claimed and this really amounts to the same thing that the Government cannot institute and prosecute expropriation proceedings unless there is already in existence a legislative appropriation especially destined to pay for the land to be taken. We are of the opinion that the contentions of the petitioners, in whatever way they may be understood or expressed, are not well founded. There is one point at least on which all must agree, namely, that if land can be taken by the Government for a public use at all, the use intended to be made of the land now in question, that is, for military and aviation purposes, is a public use. It is undeniable that a military establishment is essential to the maintenance of organized society, and the courts will take judicial notice of the recent progress of the military and naval arts resulting from the development of aeronautics. The question as to the abstract authority of the Government to maintain expropriation proceedings upon the initiative of the Governor-General should not be confused with that which has reference to the necessity for a legislative appropriation. They really involve different problems and will be separately considered.

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Upon the first, we are of the opinion that in this jurisdiction at least expropriation proceedings may be maintained upon the exclusive initiative of the Governor-General, without the aid of any special legislative authority other than that already on the statute books. Furthermore if the Government complies with the requirements of law relative to the making of a deposit in court, provisional possession of the property may be at once given to it, just as is permitted in the case of any other person or entity authorized by law to exercise the power of eminent domain Special legislative authority for the buying of a piece of land by the Government is no more necessary than for buying a paper of pins; and in the case of a forced taking of property against the will of the owner, all that can be required of the government is that it should be able to comply with the conditions laid down by law as and when those conditions arise. The contention that the authority to maintain such a proceeding cannot be delegated by the Legislature to the Chief Executive, is in our opinion wholly erroneous and apparently has its basis in a misconception of fundamentals It is recognized by all writers that the power of eminent domain is inseparable from sovereignty being essential to the existence of the State and inherent in government even in its most primitive forms. Philosophers and legists may differ as to the grounds upon which the exercise of this high power is to be justified, but no one can question its existence. No law, therefore, is ever necessary to confer this right upon sovereignty or upon any government exercising sovereign or quasi-sovereign powers. As is well said by the author of the article on Eminent Domain in the encyclopaedic treatise Ruling Case Law. "The power of eminent domain does not depend for its existence on a specific grant in the constitution. It is inherent in sovereignty and exists in a sovereign state without any recognition of it in the constitution. The provisions found in most of the state constitutions relating to the taking of property for the public use do not by implication grant the power to the government of the state, but limit a power which would otherwise be without limit." (10, R. C. L., pp. 11, 12.) In other words, the provisions now generally found in the modern laws or constitutions of civilized countries to the effect that private property shall not be taken for public use without compensation have their origin in the recognition of a necessity for restraining the sovereign and protecting the individual. Moreover, as will be at once apparent, the performance of the administrative acts necessary to the exercise of the power of eminent domain in behalf of the state is lodged by tradition in the Sovereign or other Chief Executive. Therefore, when the Philippine Legislature declared in section 64 of the Administrative Code, that the GovernorGeneral, who exercises supreme executive power in these Islands (sec. 21, Jones Act), should be the person to direct the initiation of expropriation proceedings, it placed the authority exactly where one would expect to find it, and we can conceive of no ground upon which the efficacy of the statute can reasonably be questioned. We would not of course pretend that, under our modern system of Government, in which the Legislature plays so important a role, the executive department could, without the authority of some statute, proceed to condemn property for its own uses; because the traditional prerogatives of the sovereign are not often recognized nowadays as a valid source of power, at least in countries organized under republican forms of government. Nevertheless it may be observed that the real check which the modern Legislature exerts over the Executive Department, in such a matter as this, lies not so much in the extinction of the prerogative as in the fact that the hands of the Executive can always be paralyzed by lack of money something which is ordinarily supplied only by the Legislature. At any rate the conclusion is irresistible that where the Legislature has expressly conferred the authority to maintain expropriation proceedings upon the Chief Executive, the right of the latter to proceed therein is clear. As is said by the author of the article from which we have already quoted, "Once authority is given to exercise the power of eminent domain, the matter ceases to be wholly legislative. The executive authorities may then decide whether the power will be invoked and to what extent." (10 R. C. L., p. 14.)

The power of eminent domain, with respect to the conditions under which the property is taken, must of course be exercised in subjection to all the restraints imposed by constitutional or organic law. The two provisions by which the exercise of this power is chiefly limited in this jurisdiction are found in the third section of the Jones Act, already mentioned, which among other things declares (1) that no law shall be enacted which shall deprive any person of property without due process of law and (2) that private property shall not be taken for public use without just compensation. The latter of these provisions is directly aimed at the taking of property under the exercise of the power of eminent domain; and as this requirement, in connection with the statutes enacted to make sure the payment of compensation, usually affords all the protection that the owner of property can claim, it results that the due process clause is rarely invoked by the owner in expropriation proceedings. Nevertheless it should be noted that the whole problem of expropriation is resolvable in its ultimate analysis into a constitutional question of due process of law. The specific provisions that just compensation shall be made is merely in the nature of a superadded requirement to be taken into account by the Legislature in prescribing the method of expropriation. Even were there no organic or constitutional provision in force requiring compensation to be paid, the seizure of one's property without payment, even though intended for a public use, would undoubtedly be held to be a taking without due process of law and a denial of the equal protection of the laws. This point is not merely an academic one, as might superficially seem. On the contrary it has a practical bearing on the problem before us, which may be expressed by saying that, if the Legislature has prescribed a method of expropriation which provides for the payment of just compensation, and such method is so conceived and adapted as to fulfill the constitutional requisite of due process of law, any proceeding conducted in conformity with that method must be valid. These considerations are especially important to be borne in mind in connection with the second contention made by counsel for the petitioners, namely, that land cannot be expropriated by the Government in the absence of a legislative appropriation especially destined to pay for the land to be taken. To this question we now address ourselves; and while we bear in mind the cardinal fact that just compensation must be made, the further fact must not be overlooked that there is no organic or constitutional provision in force in these Islands requiring that compensation shall actually be paid prior to the judgment of condemnation. 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 assurance that no piece of land can be finally and irrevocably taken from an unwilling owner until compensation is paid. It is true that in rare instances the proceedings may be voluntarily abandoned before the expropriation is complete or the proceedings may fail because the expropriator becomes insolvent, in either of which cases the owner retains the property; and if possession has been prematurely obtained by the plaintiff in the proceedings, it must be restored. It will be noted that the title does not actually pass to the expropriator until a certified copy of the record of the judgment is recorded in the office of the register of deeds (sec. 251, Code Civ. Proc.). Before this stage of the proceedings is reached the compensation is supposed to have been paid; and the court is plainly directed to make such final order and judgment as shall secure to the defendant just compensation for the land taken. (Sec. 246, Code Civ. Proc.) . Furthermore, the right of the expropriator is finally made dependent absolutely upon the payment of compensation by him. (Sec. 3, Act No. 2826; sec. 247, Code Civ. Proc.). It will be observed that the scheme of expropriation exemplified in our statutes does not primarily contemplate the giving of a personal judgment for the amount of the award against the expropriator: the idea is rather to protect the owner by requiring payment as a condition precedent to the acquisition of the property by the other party. The power of the court to enter a judgment for the money and to issue execution thereon against the plaintiff is, however, unquestioned; and the court can without doubt proceed in either way. But whatever course be pursued the owner is completely protected from the possibility of losing his property without compensation.

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When the Government is plaintiff the judgment will naturally take the form of an order merely requiring the payment of the award as a condition precedent to the transfer of the title, as a personal judgment against the Government could not be realized upon execution. It is presumed that by appearing as plaintiff in condemnation proceedings, the Government submits itself to the jurisdiction of the court and thereby waives its immunity from suit. As a consequence it would be theoretically subject to the same liability as any other expropriator. Nevertheless, the entering of a personal judgment against it would be an unnecessary, as well as profitless formality. In the face of the elaborate safeguards provided in our procedure, it is frivolous to speculate upon the possibility that the Legislature may finally refuse to appropriate any additional amount, over and above the provisional deposit, that may be necessary to pay the award. That it may do. But the Government can not keep the land and dishonor the judgment. Moreover, in the eventuality that the expropriation shall not be consummated, the owners will be protected by the deposit from any danger of loss resulting from the temporary occupation of the land by the Government; for it is obvious that this preliminary deposit serves the double purpose of a prepayment upon the value of the property, if finally expropriated, and as an indemnity against damage in the eventuality that the proceedings should fail of consummation. It appears that the money represented by the certificate of deposit which was placed at the disposal of the lower court, pursuant to the requirements of section 2 of Act No. 2826, was taken from certain appropriations under the control of the Militia Commission, a body created by section 29 of Act No. 2715, for the purpose, among others, of advising the Governor-General upon measures relative to the organization, equipment, and government of the National Guard and reserve militia. Counsel for the petitioners say that money appropriated for the purposes of the Militia Commission cannot be lawfully used to acquire the land which is now the subject of expropriation, because no authority for the exercise of the power of eminent domain is to be found in any of the Acts appropriating money for said Commission; from whence it is argued that the certificate of deposit affords no protection to the owners of property. The point appears to be one of little general importance, and we will not multiply words over it. Suffice it to say that in our opinion the Insular Auditor was acting within his authority when he let this money out of the Insular Treasury; and being now within the control of the lower court, it will doubtless in due time be applied to the purpose for which the deposit was made. From the foregoing discussion it is apparent that the action taken by the lower court in the condemnation proceedings aforesaid was in all respects regular and within the jurisdiction of the court. The writ prayed for in the petition before us, therefore, can not be issued. The application is accordingly denied, with costs against ,the petitioners. Arellano, C. J., Torres, Araullo and Avancea, JJ., concur. Johnson, J., reserves the right to prepare a separate opinion. Separate Opinions MALCOLM, J., concurring: I agree with the conclusion arrived at in the majority decision. I am clearly of the opinion that the alternative application for a writ of certiorari or prohibition should not be granted. An analysis into their simplest elements of the various questions presented may easily be made as follows: 1. The power of the Philippine Government in eminent domain; 2. The constitutional prohibition that (A) private property (E) shall not be taken for public use (C) without just compensation; and 3. The constitutional prohibition that no money shall be paid out of the treasury except in pursuance of an appropriation by law. 1.The power of eminent domain is expressly vested in the Government of the Philippine Islands by section 63 of the Act of Congress of July 1, 1902, commonly known as the Philippine Bill. The Philippine Legislature has, in turn by section 64 (h) of the Administrative Code of 1917, expressly delegated to the Governor-General the specific power and duty to determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the Government of the Philippine Islands. This delegation of legislative power to the Governor-General was authorized in view of the nature of eminent domain, which necessitates administrative agents for its execution,

in view of the previous attitude assumed by the Judiciary with relation to similar delegations of power, and in view of the undeniable fact that the Governor-General is a part of the same Government of the Philippine Islands to which was transferred the right of eminent domain by the Congress of the United States. (See Government of the Philippine Islands vs. Municipality of Binangonan [1916], 34 Phil. 518.) When; therefore, the Governor-General directed the AttorneyGeneral to cause condemnation proceedings to be begun in the Court of First Instance of Rizal with the object of having the Government obtain title to the site commonly known as "Camp Tomas Claudio," the Governor-General was merely acting as a mouthpiece of American sovereignty, pursuant to a delegated power transmitted by the Congress of the United States to the Government of the Philippine Islands and lodged by this latter Government in the Chief Executive. Any other holding would mean that section 64 (h) of the Administrative Code is invalid, a result to be avoided. 2.In the existing Philippine Bill of Rights (last sentence, paragraph 1, section 3, Act of Congress of August 29, 1916) is a provision that "private property shall not be taken for public use without just compensation." It seems undeniable (A) that Camp Claudio was "private property," and (B) that it was being "taken for public use," namely, for military and aviation purposes. The only remaining point concerns "just compensation," which can better be discussed under our division 3. 3.Another provision of the Philippine Bill of Rights (paragraph 15, section 3, Act of Congress of August 29, 1916) is, "that no money shall be paid out of the treasury except in pursuance of an appropriation by law." The same Organic Act provides (paragraph 1, section 24) for an Auditor who shall "audit, in accordance with law and administrative regulations, all expenditure of funds or property pertaining to, or hela in trust, by the Government." His administrative jurisdiction is made "exclusive." The Philippine Legislature could, of course, have specifically appropriated an amount for the purchase of the Camp Claudio site just as it could have specifically enacted a law for the condemnation of such site, but instead it preferred to include in the general Appropriation Acts, under the heads of The Philippine National Guard or Philippine Militia, a large amount to be expended in the discretion of the Militia Commission, which may "use the funds appropriated for other purposes, as the efficiency of the service may require." This transfer of power to the Militia Commission, like the delegation of some of the general legislative power to the Governor-General, raises no constitutional bar. The Insular Auditor has stated that there is in the treasury over a million pesos available for the condemnation of Camp Claudio, and this decision for present purposes must be taken as final and conclusive. The six hundred thousand pesos deposit is merely the provisional determination of the value of the land by the competent court, and in no way jeopardizes the financial interests of the owners of the property. No additional security is required since the sovereign power has waived its right to be sued, has pledged the public faith, and cannot obtain title until the owners receive just compensation for their property. (See Sweet vs. Rechel [1895], 159 U. S., 380.) In resume, therefore, the Governor-General of the Philippine Islands had the right to authorize the condemnation of this land for military and aviation purposes, and no constitutional provision has been violated. The Court of First Instance of Rizal has merely acted in strict accord with law, and its action should, consequently, be sustained.

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CITY OF MANILA vs CHINESE COMMUNITY OF MANILA

FIRST DIVISION [G.R. No. 14355. October 31, 1919.] THE CITY OF MANILA, plaintiff-appellant, vs. CHINESE COMMUNITY OF MANILA ET AL., defendants-appellees. City Fiscal Diaz for appellant. Crossfield & O'Brien, Williams, Ferrier & Sycip, Delgado & Delgado, Filemon Sotto, and Ramon Salinas for appellees. SYLLABUS 1.EMINENT DOMAIN; EXPROPRIATION OF PRIVATE PROPERTY, RIGHT OF COURTS TO INQUIRE INTO NECESSITY OF. When a municipal corporation attempts to expropriate private property and an objection is made thereto by the owner, the courts have ample authority, in this jurisdiction, to make inquiry, and to hear proof upon an-issue properly presented, concerning the question whether or not the purpose of the appropriation is, in fact, for some public use. The right of expropriation is not inherent power in a municipal corporation and before it can exercise the right some law must exist conferring the power upon it. A municipal corporation in this jurisdiction cannot expropriate public property. The land to be expropriated must be private, and the purpose of the expropriation must be public. If the court. upon trial, finds that neither of said condition exists, or that either one of them fails, the right to expropriate does not exist. If the property is taken in the ostensible behalf of a public improvement which it can never by any possibility serve, it is being taken for a use not public, and the owner's constitutional rights call for protection by the courts. 2.ID.; ID. Upon the other hand, the Legislature may directly determine the necessity for appropriating private property for a particular improvement for public use, and it may select the exact location of the improvement. In such a case, it is well settled that the utility of the proposed improvement, the existence of the public necessity for its construction, the expediency of constructing it, the suitableness of the location selected, and the consequent necessity of taking the lands selected, are all questions exclusively for the legislature to determine, and the courts have no power to interfere or to substitute their own views for those of the representatives of the people. 3.ID.; ID. But when the law does not designate the property to be taken, nor how much may be taken, then the necessity of taking private property is a question for the courts. 4.ID.; ID. There is a wide distinction between a legislative declaration that a municipality is given authority to exercise the right of eminent domain and a decision by the municipality that there exists a necessity for the exercise of that right in a particular case. 5.ID.; ID. Whether or not it was wise, advisable, or necessary to confer upon a municipality the power to exercise the right of eminent domain, is a question with which the courts are not concerned. But whenever that right or authority is exercised for the purpose of depriving citizens of their property, the courts are authorized, in this jurisdiction, to make inquiry and to hear proof upon the necessity in a particular case, and not the general authority. 6.ID.; ID. In the absence of some constitutional or statutory provision to the contrary, the necessity and expediency of exercising the right of eminent domain are questions essentially political and not judicial in their character. 7.ID.; ID. The taking of private property for any use which is not required by the necessities or convenience of the inhabitants of a state, is an unreasonable exercise of the right of eminent domain 8.ID.; ID. That government can scarcely be deemed free where the rights of property are left solely dependent on the legislative body without restraint. The fundamental maxims of free government seem to require that the rights of personal liberty and private property should be held sacred. At least no court of justice would be warranted in assuming that the power to violate and disregard them lurks in any general grant of legislative authority or ought to be implied from

any general expression of the people. The people ought not to be presumed to part with rights so vital to their security and well-being without a very strong and direct expression of such intention. 9.ID.; ID. The exercise of the right of eminent domain 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 laws more sedulously, than the right to the freehold of inhabitants. When the legislature interferes with that right, the plain meaning of the law should not be enlarged by doubtful interpretation. 10.ID.; ID. The very foundation of the right to exercise eminent domain is a genuine necessity, and that necessity must be of a public character. The ascertainment of the necessity must precede, and not follow, the taking of the property. The general power to exercise the right of eminent domain must not be confused with the right to exercise it in a particular case. 11.ID.; CEMETERIES, EXPROPRIATION OF. Where a cemetery is open to the public, it is a public use and no part of the ground can be taken for other public uses under a general authority. 12.ID.; ID. The city of Manila is not authorized to expropriate public property. Per MALCOLM, J., concurring: 13.EMINENT DOMAIN; POWER OF THE GOVERNMENT OF THE PHILIPPINE ISLANDS. The Government of the Philippine Islands is authorized by the Philippine Bill to acquire real estate for public use by the exercise of the right of eminent domain. 14.ID.; ID.; CITY OF MANILA. The city of Manila is authorized by the Philippine Legislature to condemn private property for public use. 16.ID.; ID.; ID.; PRIVATE PROPERTY; PUBLIC USE. The Legislature has the power to authorize the taking of land already applied to one public use and devote it to another. 16.ID.; ID.; ID., ID.; ID. When the power to take land already applied to one public use and devote it to another is granted to municipal or private corporations in express words, no question can arise. 17.ID.; ID.; ID.; ID.; ID. Land already devoted to a public use cannot be taken by the public for another use which is inconsistent with the first without special authority from the Legislature or authority granted by necessary and reasonable implication. 18.ID.; ID.; ID.; ID.; ID. Land applied to one use should not be taken for another except in cases of necessity. 19.ID.; ID.; ID.; ID.; ID.; CEMETERIES; CLASSES. Cemeteries are of two classes: public and private. 20.ID.; ID.; ID.; ID.; ID.; ID.; ID.; PUBLIC CEMETERY. A public cemetery is one used by the general community, or neighborhood, or church . 21.ID.; ID.; ID.; ID.; ID.; ID.; ID.; PRIVATE CEMETERY. A private cemetery is one used only by a family, or a small portion of a community. 22.ID.; ID.; ID.; ID.; ID.; ID.; ID.; CHINESE CEMETERY, CITY OF MANILA. The Chinese Cemetery in the city of Manila is a public cemetery. 23.ID.; ID.; ID.; ID.; ID.; ID.; ID.; ID. Cemeteries, while still devoted to pious uses, are sacred, and it cannot be supposed that the Legislature has intended that they should be violated in the absence of special provisions on the subject authorizing such invasion. 24.ID.; ID.; ID.; ID.; ID.; ID.; ID.; ID. Held: That since the city of Manila is only permitted to condemn private property for public use and since theChinese Cemetery in the city of Manila is a public cemetery already devoted to a public use, the city of Manila cannot condemn a portion of the cemetery for a public street. DECISION JOHNSON, J p: The important question presented by this appeal is: In expropriation proceedings by the city of Manila, may the courts inquire into, and hear proof upon, the necessity of the expropriation? That question arose in the following manner: On the 11th day of December, 1916, the city of Manila presented a petition in the Court of First Instance of said city, praying that certain lands, therein particularly described, be expropriated for

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the purpose of constructing a public improvement. The petitioner, in the second paragraph of the petition, alleged: "That for the purpose of constructing a public improvement, namely, the extension of Rizal Avenue, Manila, it is necessary for the plaintiff to acquire ownership in fee simple of certain parcels of land situated in the district of Binondo of said city within Block 83 of said district, and within the jurisdiction of this court." The defendant, the Comunidad de Chinos de Manila [Chinese Community of Manila], answering the petition of the plaintiff, alleged that it was a corporation organized and existing under and by virtue of the laws of the Philippine Islands, having for its purpose the benefit and general welfare of the Chinese Communityof the City of Manila; that it was the owner of parcels one and two of the land described in paragraph 2 of the complaint; that it denied that it was either necessary or expedient that the said parcels be expropriated for street purposes; that existing street and roads furnished ample means of communication for the public in the district covered by such proposed expropriation; that if the construction of the street or road should be considered a public necessity, other routes were available, which would fully satisfy the plaintiff's purposes, at much less expense and without disturbing the resting places of the dead; that it had a Torrens title for the lands in question; that the lands in question had been used by the defendant for cemetery purposes; that a great number of Chinese were buried in said cemetery; that if said expropriation be carried into effect, it would disturb the resting places of the dead, would require the expenditure of a large sum of money in the transfer or removal of the bodies to some other place or site and in the purchase of such new sites, would involve the destruction of existing monuments and the erection of new monuments in their stead, and would create irreparable loss and injury to the defendant and to all those persons owning and interested in the graves and monuments which would have to be destroyed; that the plaintiff was without right or authority to expropriate said cemetery or any part or portion thereof for street purposes; and that the expropriation, in fact, was not necessary as a public improvement. The defendant Ildefonso Tambunting, answering the petition, denied each and every allegation of the complaint, and alleged that said expropriation was not a public improvement; that it was not necessary for the plaintiff to acquire the parcels of land in question; that a portion of the lands in question was used as a cemetery in which were the graves of his ancestors; that monuments and tomb-stones of great value were found thereon; that the land had become quasi-public property of a benevolent association, dedicated and used for the burial of the dead and that many dead were buried there; that if the plaintiff deemed it necessary to extend Rizal Avenue, he had offered and still offers to grant a right of way for the said extension over other land, without cost to the plaintiff, in order that the sepulchers, chapels and graves of his ancestors may not be disturbed; that the land so ordered, free of charge, would answer every public necessity on the part of the plaintiff. The defendant Feliza Concepcion de Delgado, with her husband, Jose Maria Delgado, and each of the other defendants, answering separately, presented substantially the same defense as that presented by the Comunidad de Chinos de Manila and Ildefonso Tambunting above referred to. The foregoing parts of the defense presented by the defendants have been inserted in order to show the general character of the defenses presented by each of the defendants. The plaintiff alleged that the expropriation was necessary. The defendants each alleged (a) that no necessity existed for said expropriation and (b) that the land in question was a cemetery, which had been used as such for many years, and was covered with sepulchers and monuments, and that the same should not be converted into a street for public purposes. Upon the issue thus presented by the petition and the various answers, the Honorable Simplicio del Rosario, judge, in a very elucidated opinion, with very clear and explicit reasons, supported by abundance of authorities, decided that there was no necessity for the expropriation of the particular-strip of land in question, and absolved each and all of the defendants from all liability under the complaint, without any finding as to costs.

From that judgment the plaintiff appealed and presented the above question as its principal ground of appeal. The theory of the plaintiff is, that once it has established the fact, under the law, that it has authority to expropriate land, it may expropriate any land it may desire; that the only function of the court in such proceedings is to ascertain the value of the land in question; that neither the court nor the owners of the land can inquire into the advisable purpose of the expropriation or ask any questions concerning the necessities therefor; that the courts are mere appraisers of the land involved in expropriation proceedings, and, when the value of the land is fixed by the method adopted by the law, to render a judgment in favor of the defendant for its value. That the city of Manila has authority to expropriate private lands for public purposes, is not denied. Section 2429 of Act No. 2711 (Charter of the city ofManila) provides that "the city (Manila) . . . may condemn private property for public use." The Charter of the city of Manila contains no procedure by which the said authority may be carried into effect. We are driven, therefore, to the procedure marked out by Act No. 190 to ascertain how the said authority may be exercised. From an examination of Act No. 190, in its section 241, we find how the right of eminent domain may be exercised. Said section 241 provides that, "The Government of the Philippine Islands, or of any province or department thereof, or of anymunicipality, and any person, or public or private corporation having, by law, the right to condemn private property for public use, shall exercise that right in the manner hereinafter prescribed." Section 242 provides that a complaint in expropriation proceeding shall be presented; that the complaint shall state with certainty the right of condemnation, with a description of the property sought to be condemned together with the interest of each defendant separately Section 243 provides that if the court shall find upon trial that the right to expropriate the land in question exists, it shall then appoint commissioners. Sections 244, 245 and 246 provide the method of procedure and duty of the commissioners. Section 248 provides for an appeal from the judgment of the Court of First Instance to the Supreme Court. Said section 248 gives the Supreme Court authority to inquire into the right of expropriation on the part of the plaintiff. If the Supreme Court on appeal shall determine that no right of expropriation existed, it shall remand the cause to the Court of First Instance with a mandate that the defendant be replaced in the possession of the property and that he recover whatever damages he may have sustained by reason of the possession of the plaintiff. It is contended on the part of the plaintiff that the phrase in said section, "and if the court shall find that the right to expropriate exists," means simply that, if the court finds that there is some law authorizing the plaintiff to expropriate, then the courts have no other function than to authorize the expropriation and to proceed to ascertain the value of the land involved; that the necessity for the expropriation is a legislative and not a judicial question. Upon the question whether expropriation is a legislative function exclusively, and that the courts cannot intervene except for the purpose of determining the value of the land in question, there is much legal literature. Much has been written upon both sides of that question. A careful examination of the discussionspro and con will disclose the fact that the decisions depend largely upon particular constitutional or statutory provisions. It cannot be denied, if the legislature under proper authority should grant the expropriation of a certain or particular parcel of land for some specified public purpose, that the courts would be without jurisdiction to inquire into the purpose of that legislation. If, upon the other hand, however, the Legislature should grant general authority to a municipal corporation to expropriate private land for public purposes, we think the courts have ample authority in this jurisdiction, under the provisions above quoted, to make inquiry and to hear proof, upon an issue properly presented, concerning whether or not the lands were private and whether the purpose was, in fact, public. In other words, have not the courts in this jurisdiction the right, inasmuch as the questions relating to expropriation must be referred to them (sec. 241, Act No. 190) for final decision, to ask whether or not the law has been complied with ? Suppose, in a particular case, it should be denied that the property is not private property but public, may not

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the courts hear proof upon that question? Or, suppose the defense is, that the purpose of the expropriation is not public but private, or that there exists no public purpose at all, may not the courts make inquiry and hear proof upon that question? The city of Manila is given authority to expropriate private lands for public purposes. Can it be possible that said authority confers the right to determine for itself that the land is private and that the purpose is public, and that the people of the city of Manila who pay the taxes for its support, especially those who are directly affected, may not question one or the other, or both, of these questions? Can it be successfully contended that the phrase used in Act No. 190, "and if the court upon trial shall find that such right exists," means simply that the court shall examine the statutes simply for the purpose of ascertaining whether a law exists authorizing the petitioner to exercise the right of eminent domain ? Or, when the case arrives in the Supreme Court, can it be possible that the phrase, "if the Supreme Court shall determine that no right of expropriation exists," that that simply means that the Supreme Court shall also examine the enactments of the legislature for the purpose of determining whether or not a law exists permitting the plaintiff to expropriate? We are of the opinion that the power of the court is not limited to that question. The right of expropriation is not an inherent power in a municipal corporation, and before it can exercise the right some law must exist conferring the power upon it. When the courts come to determine the question, they must not only find (a) that a law or authority exists for the exercise of the right of eminent domain, but (b) also that the right or authority is being exercised in accordance with the law. In the present case there are two conditions imposed upon the authority conceded to the City of Manila: First, the land must be private; and, second, the purpose must be public. If the court, upon trial, finds that neither of these conditions exists or that either one of them fails, certainly it cannot be contended that the right is being exercised in accordance with law Whether the purpose for the exercise of the right of eminent domain is public, is a question of fact. Whether the land is public or private is also a question of fact; and, in our opinion, when the legislature conferred upon the courts of the Philippine Islands the right to ascertain upon trial whether the right exists for the exercise of eminent domain, it intended that the courts should inquire into, and hear proof upon, those questions. Is it possible that the owner of valuable land in this jurisdiction is compelled to stand mute while his land is being expropriated for a use not public, with the right simply to beg the city of Manila to pay him the value of his land? Does the law in this jurisdiction permit municipalities to expropriate lands, without question, simply for the purpose of satisfying the aesthetic sense of those who happen for the time being to be in authority ? Expropriation of lands usually calls for public expense. The taxpayers are called upon to pay the costs. Cannot the owners of land question the public use or the public necessity? As was said above, there is a wide divergence of opinion upon the authority of the court to question the necessity or advisability of the exercise of the right of eminent domain. The divergence is usually found to depend upon particular statutory or constitutional provisions. It has been contended and many cases are cited in support of that contention, and section 158 of volume 10 of Ruling Case Law is cited as conclusive that the necessity for taking property under the right of eminent domain is not a judicial question. But those who cited said section evidently overlooked the section immediately following (sec. 159), which adds: "But it is obvious that if the property is taken in the ostensible behalf of a public improvement which it can never by any possibility serve, it is being taken for a use not public, and the owner's constitutional rights call for protection by the courts. While many courts have used sweeping expression in the decisions in which they have disclaimed the power of supervising the selection of the sites of public improvements, it may be safely said that the courts of the various states would feel bound to interfere to prevent an abuse of the discretion delegated by the legislature, by an attempted appropriation of land in utter disregard of the possible necessity of its use, or when the alleged purpose was a cloak to some sinister scheme." Norwich City vs. Johnson, 86 Conn., 151; Bell vs. Mattoon Waterworks, etc. Co., 245 Ill., 544; Wheeling, etc. R. R. Co. vs. Toledo Ry. etc. Co., 72 Ohio St., 368; State vs. Stewart, 74 Wis., 620.)

Said section 158 (10 R. C. L., 183) which is cited as conclusive authority in support of the contention of the appellant, says: "The legislature, in providing for the exercise of the power of eminent domain, may directly determine the necessity for appropriating private property for a particular improvement for public use, and it may select the exact location of the improvement. In such a case, it is well settled that the utility of the proposed improvement, the extent of the public necessity for its construction, the expediency of constructing it, the suitableness of the location selected and the consequent necessity of taking the land selected for its site, are all questions exclusively for the legislature to determine and the courts have no power to interfere, or to substitute their own views for those of the representatives of the people." Practically every case cited in support of the above doctrine has been examined, and we are justified in making the statement that in each case the legislature directly determined the necessity for the exercise of the right of eminent domain in the particular case. It is not denied that if the necessity for the exercise of the right of eminent domain is presented to the legislative department of the government and that department decides that there exists a necessity for the exercise of the right in a particular case, that then and in that case, the courts will not go behind the action of the legislature and make inquiry concerning the necessity. But in the case of Wheeling, etc. R. R. Co. vs. Toledo, Ry., etc. Co. (72 Ohio St., 368 [106 Am. St. Rep., 622, 628] ), which is cited in support of the doctrine laid down in section 158 above quoted, the court said: "But when the statute does not designate the property to be taken nor how much may be taken, then the necessity of taking particular property is a question for the courts Where the application to condemn or appropriate is made directly to the court, the question (of necessity) should be raised and decided in limine." The legislative department of the government very rarely undertakes to designate the precise property which should be taken for public use. It has generally, like in the present case, merely conferred general authority to take land for public use when a necessity exists therefor. We believe that it can be confidently asserted that, under such statute, the allegation of the necessity for the appropriation is an issuable allegation which it is competent for the courts to decide. (Lynch vs. Forbes, 161 Mass., 302 [42 Am. St. Rep., 402, 407].) There is a wide distinction between a legislative declaration that a municipality is given authority to exercise the right of eminent domain, and a decision by the municipality that there exists a necessity for the exercise of that right in a particular case. The first is a declaration simply that there exist reasons why the right should be conferred upon municipal corporation, while the second is the application of the right to a particular case. Certainly, the legislative declaration relating to the advisability of granting the power cannot be converted into a declaration that a necessity exists for its exercise in a particular case, and especially so when, perhaps, the land in question was not within the territorial jurisdiction of the municipality at the time the legislative authority was granted. Whether it was wise, advisable, or necessary to confer upon a municipality the power to exercise the right of eminent domain, is a question with which the courts are not concerned. But when that right or authority is exercised for the purpose of depriving citizens of their property, the courts are authorized, in this jurisdiction, to make inquiry and to hear proof upon the necessity in the particular case, and not the general authority. Volume 15 of the Cyclopedia of Law and Procedure (Cyc.), page 629, is cited as a further conclusive authority upon the question that the necessity for the exercise of the right of eminent domain is a legislative and not a judicial question. Cyclopedia, at the page stated, says: "In the absence of some constitutional or statutory provision to the contrary, the necessity and expediency of exercising the right of eminent domain are questions essentially political and not judicial in their character. The determination of those questions (the necessity and the expediency) belongs to the sovereign power; the legislative department is final and conclusive, and the courts have no power to review it (the necessity and the expediency) . . . . It (the legislature) may designate the particular property to be condemned, and its determination in this respect cannot be reviewed by the courts."

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The volume of Cyclopedia, above referred to, cites many cases in support of the doctrine quoted. While time has not permitted an examination of all of said citations, many of them have been examined, and it can be confidently asserted that said cases which are cited in support of the assertion that, "the necessity and expediency of exercising the right of eminent domain are questions essentially political and not judicial," show clearly and invariably that in each case the legislature itself usually, by a special law, designated the particular case in which the right of eminent domain might be exercised by the particular municipal corporation or entity within the state. (Eastern R. Co. vs. Boston, etc., R. Co., 11 Mass., 125 [15 Am. Rep., 13]; Brooklyn Park Com'rs. vs. Armstrong, 45 N. Y., 234 [6 Am. Rep., 70]; Hairston vs. Danville, etc. Ry. Co., 208 U. S. 598; Cincinnati vs. Louisville, etc. Ry. Co., 223 U. S. 390; U. S. vs. Chandler-Dunbar Water Power Co., 229 U. S., 53; U. S. vs. Gettysburg, etc. Co., 160 U. S., 668; Traction Co. vs. Mining Co., 196 U. S., 239; Sears vs. City of Akron, 246 U. S., 351 [erroneously cited as 242 U. S.].) In the case of Traction Co. vs. Mining Co. (196 U. S., 239), the Supreme Court of the United States said: "It is erroneous to suppose that the legislature is beyond the control of the courts in exercising the power of eminent domain, either as to the nature of the use or the necessity to the use of any particular property. For if the use be not public or no necessity for the taking exists, the legislature cannot authorize the taking of private property against the will of the owner, notwithstanding compensation may be required." In the case of School Board of Carolina vs. Saldaa (14 Porto Rico, 339, 356), we find the Supreme Court of Porto Rico, speaking through Justice MacLeary, quoting approvingly the following, upon the question which we are discussing: "It is well settled that although the legislature must necessarily determine in the first instance whether the use for which they (municipalities, etc.) attempt to exercise the power is a public one or not, their (municipalities, etc.) determination is not final, but is subject to correction by the courts, who may undoubtedly declare the statute unconstitutional, if it shall clearly appear that the use for which it is proposed to authorize the taking of private property is in reality not public but private." Many cases are cited in support of that doctrine. Later, in the same decision, we find the Supreme Court of Porto Rico says: "At any rate, the rule is quite well settled that in the cases under consideration the determination of the necessity of taking a particular piece or a certain amount of land rests ultimately with the courts." (Spring Valley etc. Co. vs. San Mateo, etc. Co., 64 Cal., 123.) In the case of Board of Water Com'rs., etc. vs. Johnson (86 Conn., 571 [41 L. R. A., N. S., 1024] ), the Supreme Court of Connecticut approvingly quoted the following doctrine from Lewis on Eminent Domain (3d ed.), section 599: "In all such cases the necessity of public utility of the proposed work or improvement is a judicial question. In all such cases, where the authority is to take property necessary for the purpose, the necessity of taking particular property for a particular purpose is a judicial one, upon which the owner is entitled to be heard." Riley vs. Charleston, etc. Co., 71 S. C., 457, 489 [110 Am. St. Rep., 579]; Henderson vs. Lexington 132 Ky., 390, 403.) The taking of private property for any use which is not required by the necessities or convenience of the inhabitants of the state, is an unreasonable exercise of the right of eminent domain, and beyond the power of the legislature to delegate. (Bennett vs. Marion, 106 Iowa, 628, 633; Wilson vs. Pittsburg, etc. Co., 222 Pa. St., 541, 545; Greasy, etc. Co. vs. Ely, etc. Co., 132 Ky., 692, 697.) In the case of New Central Coal Co. vs. George's, etc. Co. (37 Md., 537, 564), the Supreme Court of the State of Maryland, discussing the question before us, said: "To justify the exercise of this extreme power ,(eminent domain) where the legislature has left it to depend upon the necessity that may be found to exist, in order to accomplish the purposes of the incorporation, as in this case, the party claiming the right to the exercise of the power should be required to show at least a reasonable degree of necessity for its exercise. Any rule less strict than this, with the large and almost indiscriminate delegation of the right to corporations, would likely lead to oppression and the sacrifice of private right to corporate power." In the case of Dewey vs. Chicago, etc. Co. (184 Ill., 426, 433), the court said: "Its right to condemn property is not a general power of condemnation, but is limited to cases where a necessity for

resort to private property is shown to exist. Such necessity must appear upon the face of the petition to condemn. If the necessity is denied the burden is upon the company (municipality) to establish it." (Highland, etc. Co. vs. Strickley, 116 Fed., 852, 856; Kiney vs. Citizens' Water & Light Co., 173 Ind., 252, 257; Bell vs Mattoon Waterworks, etc. Co., 245 Ill., 544 [137 Am St. Rep., 388].) It is true that many decisions may be found asserting that what is a public use is a legislative question, and many other decisions declaring with equal emphasis that it is a judicial question. But, as long as there is a constitutional or statutory provision denying the right to take land for any use other than a public use, it occurs to us that the question whether any particular use is a public one or not is ultimately, at least, a judicial question. The legislature may, it is true, in effect declare certain uses to be public, and, under the operation of the well-known rule that a statute will not be declared to be unconstitutional except in a case free, or comparatively free, from doubt, the courts will certainly sustain the action of the legislature, unless it appears that the particular use is clearly not of a public nature. The decisions must be understood with this limitation; for, certainly, no court of last resort will be willing to declare that any and every purpose which the legislature might happen to designate as a public use shall be conclusively held to be so, irrespective of the purpose in question and of its manifestly private character. Blackstone in his Commentaries on the English Law remarks that, so great is the regard of the law for private property that it will not authorize the least violation of it, even for the public good, unless there exists a very great necessity therefor. In the case of Wilkinson vs. Leland (2 Fet. [U. S.], 657), the Supreme Court of the United States said: "That government can scarcely be deemed free where the rights of property are left solely dependent on the legislative body, without restraint. The fundamental maxims of free government seem to require that the rights of personal liberty and private property should be held sacred. At least no court of justice in this country would be warranted in assuming that the power to violate and disregard them a power so repugnant to the common principles of justice and civil liberty lurked in any general grant of legislative authority, or ought to be implied from any general expression of the people. The people ought not to be presumed to part with rights so vital to their security and well-being without very strong and direct expression of such intention." (Lewis on Eminent Domain, sec. 603; Lecoul vs. Police Jury, 20 La. Ann., 308; Jefferson vs. Jazem, 7 La. Ann., 182.) Blackstone, in his Commentaries on the English Law, said that the right to own and possess land a place to live separate and apart from others to retain it as a home for the family in a way not to be molested by others is one of the most sacred rights that men are heirs to. That right has been written into the organic law of every civilized nation. The Acts of Congress of July 1, 1902, and of August 29, 1916, which provide that "no law shall be enacted in the Philippine Islands which shall deprive any person of his property without due process of law," are but a restatement of the time-honored protection of the absolute right of the individual to his property. Neither did said Acts of Congress add anything to the law already existing in the Philippine Islands. The Spaniard fully recognized the principle and adequately protected the inhabitants of the Philippine Islands against the encroachment upon the private property of the individual. Article 349 of the Civil Code provides that: "No one may be deprived of his property unless it be by competent authority, for some purpose of provenpublic utility, and after payment of the proper compensation. Unless this requisite (proven public utility and payment) has been complied with, it shall be the duty of the courts to protect the owner of such property in its possession or to restore its possession to him, as the case may be." 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 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 doubtly interpretation. (Bensley vs. Mountain lake Water Co., 13 Cal., 306 and cases cited [73 Am. Dec., 576].)

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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. Not only must the authority of municipal corporations to take property be expressly conferred and the use for which it is taken specified, but the power, with all constitutional limitation and directions for its exercise, must be strictly pursued. (Dillon on Municipal Corporations [5th Ed.], sec. 1040, and cases cited; Tenorio vs. Manila Railroad Co., 22 Phil., 411.) It can scarcely be contended that a municipality would be permitted to take property for some public use unless some public necessity existed therefor. The right to take private property for public use originates in the necessity, and the taking must be limited by such necessity. The appellant contends that inasmuch as the legislature has given it general authority to take private property for public use, that the legislature has, therefore, settled the question of the necessity in every case and that the courts are closed to the owners of the property upon that question. Can it be imagined, when the legislature adopted section 2429 of Act No. 2711, that it thereby declared that it was necessary to appropriate the property of Juan de la Cruz, whose property, perhaps, was not within thecity limits at the time the law was adopted ? The legislature, then, not having declared the necessity, can it be contemplated that it intended that a municipality should be the sole judge of the necessity in every case, and that the courts, in the face of the provision that "if upon trial they shall find that a right exists," cannot in that trial inquire into and hear proof upon the necessity for the appropriation in a particular case ? The Charter of the city of Manila authorizes the taking of private property for public use. Suppose the owner of the property denies and successfully proves that the taking of his property serves no public use: Would the courts not be justified in inquiring into that question and in finally denying the petition if no public purpose was proved ? Can it be denied that the courts have a right to inquire into that question? If the courts can ask questions and decide, upon an issue properly presented, whether the use is public or not, is not that tantamount to permitting the courts to inquire into the necessity of the appropriation? If there is no public use, then there is no necessity, and if there is no necessity, it is difficult to understand how a public use can necessarily exist. If the courts can inquire into the question whether a public use exists or not, then it seems that it must follow that they can examine into the question of the necessity. The very foundation of the right to exercise eminent domain is a genuine necessity, and that necessity must be of a public character. The ascertainment of the necessity must precede or accompany, and not follow, the taking of the land. (Morrison vs. Indianapolis, etc. Ry. Co., 166 Ind., 611; Stearns vs. Barre, 73 Vt., 281; Wheeling, etc. R. R. Co. vs. Toledo, Ry. etc. Co., 72 Ohio St., 368.) The general power to exercise the right of eminent domain must not be confused with the right to exercise it in a particular case. The power of the legislature to confer, upon municipal corporations and other entities within the State, general authority to exercise the right of eminent domain cannot be questioned by the courts, but that general authority of municipalities or entities must not be confused with the right to exercise it in particular instances. The moment the municipal corporation or entity attempts to exercise the authority conferred, it must comply with the conditions accompanying the authority. The necessity for conferring the authority upon a municipal corporation to exercise the right of eminent domain is admittedly within the power of the legislature. But whether or not the municipal corporation or entity is exercising the right in a particular case under the conditions imposed by the general authority, is a question which the courts have the right to inquire into. The conflict in the authorities upon the question whether the necessity for the exercise of the right of eminent domain is purely legislative and not judicial,arises generally in the wisdom and propriety of the legislature in authorizing the exercise of the right of eminent domain instead of in

the question of the right to exercise it in a particular case. (Creston Waterworks Co. vs. McGrath, 89 Iowa, 502.) By the weight of authorities, the courts have the power of restricting the exercise of eminent domain to the actual reasonable necessities of the case and for the purposes designated by the law. (Fairchild vs. City of St. Paul. 48 Minn.. 540.) And, moreover, the record does not show conclusively that the plaintiff has definitely decided that their exists a necessity for the appropriation of the particular land described in the complaint. Exhibits 4, 5, 7, and E clearly indicate that the municipal board believed at one time that other land might be used for the proposed improvement, thereby avoiding the necessity of disturbing the quiet resting place of the dead. Aside from insisting that there exists no necessity for the alleged improvement, the defendants further contend that the street in question should not be opened through the cemetery. One of the defendants alleges that said cemetery is public property. If that allegations is true, then, of course, the city of Manila cannot appropriate it for public use. The city of Manila can only expropriate private property. It is a well known fact that cemeteries may be public or private. The former is a cemetery used by the general community, or neighborhood, or church, while the latter is used only by a family, or a small portion of the community or neighborhood. (11 C. J., 50.) Where a cemetery is open to the public, it is a public use and no part of the ground can be taken for other public uses under a general authority. And this immunity extends to the unimproved and unoccupied parts which are held in good faith for future use. (Lewis on Eminent Domain, sec. 434, and cases cited.) The cemetery in question seems to have been established under governmental authority. The Spanish Governor-General, in an order creating the same, used the following language: "The cemetery and general hospital for indigent Chinese having been founded and maintained by the spontaneous and fraternal contribution of their protector, merchants and industrials, benefactors of mankind, in consideration of their services to the Government of the Islands its internal administration, government and regime must necessarily be adjusted to the taste and traditional practices of those born and educated in China in order that the sentiments which animated the founders may be perpetually effectuated." It is alleged, and not denied, that the cemetery in question may be used by the general community of Chinese, which fact, in the general acceptation of the definition of a public cemetery, would make the cemetery in question public property. If that is true, then, of course, the petition of the plaintiff must be denied, for the reason that the city of Manila has no authority or right under the law to expropriate public property. But, whether or not the cemetery is public or private property, its appropriation for the uses of a public street, especially during the lifetime of those specially interested in its maintenance as a cemetery, should be a question of great concern, and its appropriation should not be made for such purposes until it is fully established that the greatest necessity exists therefor. While we do not contend that the dead must not give place to the living, and while it is a matter of public knowledge that in the process of time sepulchers may become the seat of cities and cemeteries traversed by streets and daily trod by the feet o millions of men, yet, nevertheless such sacrifices and such uses of the places of the dead should not be made unless and until it is fully established that there exists an eminent necessity therefor. While cemeteries and sepulchers and the places of the burial of the dead are still within the memory and command of the active care of the living; while they are still devoted to pious uses and sacred regard, it is difficult to believe that even the legislature would adopt a law expressly providing that such places, under such circumstances, should be violated. In such an appropriation, what, we may ask, would be the measure of damages at law, for the wounded sensibilities of the living, in having the graves of kindred and loved ones blotted out and desecrated by a common highway or street for public travel ? The impossibility of measuring the damage and inadequacy of a remedy at law is too apparent to admit of argument. To disturb the mortal remains of those endeared to us in life sometimes becomes the sad duty of the living; but,

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except in cases of necessity, or for laudable purposes, the sanctity of the grave, the last resting place of our friends, should be maintained, and the preventative aid of the courts should be invoked for that object. (Railroad Company vs. Cemetery Co., 116 Tenn., 400; Evergreen Cemetery Association vs. TheCity of New Haven, 43 Conn., 234; Anderson vs. Acheson, 132 Iowa, 744; Beatty vs. Kurtz, 2 Peters, 566.) In the present case, even granting that a necessity exists for the opening of the street in question, the record contains no proof of the necessity of opening the same through the cemetery. The record shows that adjoining and adjacent lands have been offered to the city free of charge, which will answer every purpose of the plaintiff. For all of the foregoing, we are fully persuaded that the judgment of the lower court should be and is hereby affirmed, with costs against the appellant. So ordered. Arellano, C. J., Torres, Araullo and Avancea, JJ., concur. Separate Opinions MALCOLM, J., concurring: The Government of the Philippine Islands is authorized by the Philippine Bill to acquire real estate for public use by the exercise of the right of eminent domain. (Act of Congress of July 1, 1902, sec 63.) A portion of this power has been delegated by the Philippine Legislature to the city of Manila, which is permitted to "condemn private property for public use." (Administrative Code of 1917, sec. 2429.) The Code of Civil Procedure, in prescribing how the right of eminent domain may be exercised, also limits the condemnation to "private property for public use.' (Sec. 241.) As under the facts actually presented, there can be no question that a public street constitutes a public use, the only remaining question is whether or not the Chinese Cemetery and the other property here sought to be taken by the exercise 'of the right of eminent domain is private property." As narrowing our inquiry still further, let it be noted that cemeteries are of two classes, public and private. A public cemetery is one used by the generalcommunity, or neighborhood, or church; while a private cemetery is one used only by a family, or a small portion of a community (Lay vs. State, 12 Ind. App., 362; Cemetery Association vs Meninger [1875], 14 Kan., 312.) Our specific question, then, is, whether the Chinese Cemetery in the city of Manila is a public, or a private graveyard. If it be found to be the former, it is not subject to condemnation by the city of Manila; if it be found to be the latter, it is subject to condemnation. The Chinese Cemetery of Manila was established during the Spanish administration in the Philippines by public spirited Chinese. The order of the Governor-General giving governmental recognition to the cemetery reads as follows: "The cemetery and general hospital for indigent Chinese having been founded and maintained by the spontaneous and fraternal contribution of their protectors, merchants and industrials, benefactors of mankind, in consideration of their services to the Government of the Islands, its internal administration, government and regime, must necessarily be adjusted to the taste and traditional practices of those born and educated in China in order that the sentiments which animated the founders may be perpetually effectuated." Sometimes after the inauguration of the new regime in the Philippines) a corporation was organized to control the cemetery, and a Torrens title for the lands in question was obtained. From the time of its creation until the present the cemetery has been used by the Chinese community for the burial of their dead. It is said that not less than four hundred graves, many of them with handsome monuments, would be destroyed by the proposed street. This desecration is attempted as to the last resting places of the dead of a people who, because of their peculiar and ingrained ancestral worship, retain more than the usual reverence for the departed. These facts lead us straight to the conclusion that the Chinese Cemetery is not used by a family or a small portion of a community but by a particular race long existing in the country and of considerable numbers. The case, then, is one of where the city of Manila, under a general authority permitting it to condemn private property for public use, is attempting to convert a property already dedicated to a public use to an entirely different public use; and this, not directly pursuant to legislative authority, but primarily through the sole advice of the consulting architect. Two well considered decisions coming from the American state courts on almost identical facts are worthy of our consideration. The first is the case of The Evergreen Cemetery Association vs.

The City of New Haven ( [1875], 43 Conn., 234), oft cited by other courts. Here the City of New Haven, Connecticut, under the general power conferred upon it to lay out, construct, and maintain all necessary highways within its limits, proceeded to widen and straighten one of its streets, and in so doing took a small piece of land belonging to the Evergreen Cemetery Association. This association was incorporated under the general statute. The city had no special power to take any part of the cemetery for such purposes. It was found that the land taken was needed for the purposes of the cemetery and was not needed for the purpose of widening and straightening the avenue. The court said that it is unquestionable that the Legislature has the power to authorize the taking of land already applied to one public use and devote it to another. When the power is granted to municipal or private corporations in express words, no question can arise. But, it was added, "The same land cannot properly be used for burial lots and for a public highway at the same time. . . . Land therefore applied to one use should not be taken for the other except in cases of necessity. . . . There is no difficulty in effecting the desired improvement by taking land on the other side of the street. . . . The idea of running a public street, regardless of graves, monuments, and the feelings of the living, through one of our public cemeteries, would be shocking to the moral sense of the community, and would not be tolerated except upon the direct necessity." It was then held that land already devoted to a public use cannot be taken by the public for another use which is inconsistent With the first, without special authority from the Legislature, or authority granted by necessary and reasonable implication. The second decision is that Of Memphis State Line Railroad Company vs. forest Hill Cemetery Co. ([1906], 116 Tenn., 400.) Here the purpose of the proceeding was to condemn a right Of way for the railway company through the forest Hill Cemetery. The railroad proposed to run through the southeast corner of the Cemetery where no bodies were interred. The cemetery had been in use for about eight years, and during this period thirteen hundred bodies had been buried therein. The Cemetery was under the control of a corporation which, by its character, held itself out as being willing to sell lots to any one who applies therefor and pays the price demanded, except to members of the Negro race. It was found that there were two other routes along which the railroad might be located without touching the cemetery, while the present line might be pursued without interfering with Forest Hill Cemetery by making a curve around it. In the court below the railroad was granted the right of condemnation through the cemetery and damages were assessed. On appeal, the certiorari applied for was granted, and the supersedeas awarded. The court, in effect, found that the land of the Cemeter Company was devoted to a public purpose, and that under the general language of the Tenessee statute of eminent domain it could not be taken from another public purpose. The court said that in process of time the sepulcheres of the dead "are made the seats of cities, and are traverse by streets, and daily trodden by the feet of man. This is inevitable i the course of ages. But while these places are yet within the memory and under the active care of the living, while they are still devoted to pious uses, they are sacred, and we cannot suppose that the legislature intended that they should be violated, in the absence of special provisions upon the subject authorizing such invasion, and indicating a method for the disinterment, removal, and reinterment of the bodies buried, and directing how the expense thereof shall be borne." Two members of the court, delivering a separate concurring opinion, concluded with this significant and eloquent sentence: "The wheels of commerce must stop at the grave." For the foregoing reasons, and for others which are stated in the principal decision, I am of the opinion that the judgment of the lower court should be affirmed. STREET, J., dissenting: It may be admitted that, upon the evidence before us, the projected condemnation of the Chinese Cemetery is unnecessary and perhaps ill-considered. Nevertheless I concur with Justice Moir in the view that the authorities of the City of Manila are the proper judges of the propriety of the condemnation and that this Court should have nothing to do with the questions of the necessity of the taking. MOIR, J., dissenting:

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I dissent from the majority opinion in this case , which has not yet been written, and because of the importance of the question involved, present my dissent for the record. This is an action by the city of Manila for the expropriation of lad for an extension of Rizal Avenue north. The petition for condemnation was opposed by the "Comunidad de Chinos de Manila" and Ildefonso Tambunting and various others who obtained permission of the trial court to intervene in the case. All of the defendants allege in their opposition that the proposed extension of Rizal Avenue cuts through a part of the Chinese Cemetery, North of Manila, and necessitates the destruction of many monuments and the removal of many graves. The Court of First Instance of Manila, Honorable S. del Rosario, judge after the hearing the parties, decided that there was no need for constructing the street as and where proposed by the city, and dismissed the petition. The plaintiff appealed and sets up the following errors: 1.The court erred in deciding that the determination of the necessity and convenience of the expropriation of the lands of the defendants lies with the court and not with the Municipal Board of the city of Manila. 2.The court erred in permitting the presentation of proofs over the objection and exception of the plaintiff tending to demonstrate the lack of necessity of the projected street and the need of the lands in question. 3.The court erred in declaring that the plaintiff had no right to expropriate the lands in question. 4.The court erred in dismissing the complaint. The right of the plaintiff to expropriate property for public use cannot be denied. The "right of eminent domain is inherent in all sovereignties and therefore would exist without any constitutional recognition . . . The right of eminent domain antedates constitutions . . . The right can only be denied or restricted byfundamental law and is right inherent in society." (15 Cyc., pp. 557-8.) This general right was recognized in the Philippine Code of Civil Procedure effective October 1st, 1901, which prescribed the manner of exercising the right. (Section 241 et seq.) It was further recognized in the Organic Act of July 1st, 1902, which provides in section 74 "that the Government of the Philippine Islands may grantfranchises . . . including the authority to exercise the right of eminent domain for the construction and operation of works of public utility and service, and may authorize said works to be constructed and maintained over and across the public property of the United States including . . . reservations." This provision is repeated in the Jones Law of August, 1916. The legislature of the Islands conferred the right on the city of Manila. (Section 2429, Administrative Code of 1917; section 2402, Administrative Code of 1916.) Clearly having the right of expropriation, the city of Manila selected the line of its street and asked the court by proper order to place the plaintiff in possession of the land described in the complaint, and to appoint Commissioners to inspect the property, appraise the value, and assess the damages. Instead of doing so, the court entered upon the question of the right of the city to take the property and the necessity for the taking. The court says: "The controversy relates to whether or not the Chinese Cemetery, where a great majority of this race is buried and other persons belonging to other nationalities have been formerly inhumed, is private or public; whether or not said cemetery, in case it is public, would be susceptible to expropriation for the purpose of public improvements proposed by the city of Manila; whether or not the latter is justified of the necessity and expediency of similar expropriation before its right to the same would be upheld by the courts of justice; and whether or not the appreciation of said necessity pertains to the legislative or the judicial department before which the expropriation proceedings have been brought. "Relative to the first point, it is not necessary for the court to pass upon its consideration, in view of the conclusion it has arrived at the appreciation of the other points connected with each other.

"From the testimony of two reputable engineers produced by some of the defendants, it appears that the land chosen by the plaintiff for the extension of Rizal Avenue to the municipality of Caloocan is not the best or the less expensive, although upon it there may be constructed a straight road, without curves or winding; but that in order to construct said road upon said land, the city of Manila would have to remove and transfer to other places about four hundred graves and monuments, make some grubbings, undergo some leveling and build some bridges the works thereon, together with the construction of the road and the value of the lands expropriated, would mean an expenditure which will not be less than P180,000. "Beside that considerable amount, the road would have a declivity of 3 per cent which, in order to cover a distance of one kilometer, would require an energy equivalent to that which would be expended in covering a distance of two and one-half kilometers upon a level road. "On the other hand, if the road would be constructed with the deviation proposed by Ildefonso Tambunting, one of the defendants, who even offered to donate gratuitously to the city of Manila part of the land upon which said road will have to be constructed, the plaintiff entity would be able to save more than hundreds of thousands of pesos, which can be invested in other improvements of greater pressure and necessity for the benefit of the taxpayers; and it will not have to employ more time and incur greater expenditures in the removal and transfer of the remains buried in the land of the Chinese Community and of Sr. Tambunting, although with the insignificant disadvantage that the road would be a little longer by a still more insignificant extension of 426 meters and 55 centimeters, less than one-half kilometer, according to the plan included in the records; but it would offer a better panorama to those who would use it, and who would not have to traverse in their necessary or pleasure-making trips or walks any cemetery which, on account of its nature, always deserves the respect of the travellers. It should be observed that the proposed straight road over the cemetery, which the city of Manila is proposing to expropriate, does not lead to any commercial, industrial, or agricultural center, and if with said road it is endeavored to benefit some community or created interest, the same object may be obtained by the proposed deviation of the road by the defendants. The road traced by the plaintiffs has the disadvantage that the lands on both sides thereof would not serve for residential purposes, for the reason that no one has the pleasure to construct buildings upon cemeteries unless it be in very overcrowded cities, so exhausted of land that every inch thereof represents a dwelling house." And it is against this ruling, that it lies with the court to determine the necessity of the proposed street and not with the municipal board, that the appellant directs its first assignment of error. It is a right of the city government to determine whether or not it will construct streets and where, and the courts sole duty was to see that the value of the property was paid the owners after proper legal proceedings ascertaining the value. The law gives the city the right to take private property for public use. It is assumed it is unnecessary to argue that a public road is a public use. But it is argued that plaintiff must show that it is necessary to take this land for a public improvement. The law does not so read, and it is believed that the great weight of authority, including the United States Supreme Court, is against the contention. "The question of necessity is distinct from the question of public use, and the former question is exclusively for the legislature, except that if the constitution or statute authorizes the taking of property only in cases of necessity, then the necessity becomes a judicial question." (McQuillen Municipal Corporations, Vol. IV, pp. 3090-091.) "In the absence of some constitutional or statutory provision to the contrary, the necessity and expediency of exercising the right of eminent domain are questions essentially political and not judicial in their character. The determination of those questions belongs to the sovereign power; the legislative determination is final and conclusive, and the courts have no power to review it. It rests with the legislature not only to determine when the power of eminent domain may be exercised, but also the character, quality, method, and extent of such exercise. And this power is unqualified, other than by the necessity of providing that compensation shall be made.

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Nevertheless, under the express provisions of the constitution of some statesthe question of necessity is made a judicial one, to be determined by the courts and not by the legislature. "While the legislature may itself exercise the right of determining the necessity for the exercise of the power of eminent domain, it may, unless prohibited by the constitution, delegate this power to public officers or to private corporations established to carry on enterprises in which the public are interested, and their determination that a necessity for the exercise of the power exists is conclusive. There is no restraint upon the power except that requiring compensation to be made. And when the power has been so delegated it is a subject of legislative discretion to determine what prudential regulations shall be established to secure a discreet and judicious exercise of the authority. It has been held that in the absence of any statutory provision submitting the matter to a court or jury the decision of the question of necessity lies with the body of individuals to whom the state has delegated the authority to take, and the legislature may by express provision confer this power on a corporation to whom the power of eminent domain is delegated unless prohibited by the constitution. It is of course competent for the legislature to declare that the question shall be a judicial one, in which case the court and not the corporation determines the question of necessity." (15 Cyc., pp. 629-632.) To the same effect is Lewis on Eminent Domain (3d Edition, section 597). I quote from the notes to Vol. 5, Encyclopedia of United States Supreme Court Reports, p. 762, as follows: "Neither can it be said that there is any fundamental right secured by the constitution of the United States to have the questions of compensation and necessity both passed upon by one and the same jury. In many states the question of necessity is never submitted to the jury which passes upon the question of compensation. It is either settled affirmatively by the legislature, or left to the judgment of the corporation invested with the right to take property by condemnation. The question of necessity is not one of a judicial character, but rather one for determination by the lawmaking branch of the government. (Boom Co. vs. Patterson, 98 U. S., 403, 406 [25 L. ed., 206]; United States vs. Jones, 109 U. S., 513 [27 L. ed., 1015]; Backus vs. Fort Street Union Depot Co., 169 U. S., 557, 568 [42 L. ed., 853].) "Speaking generally, it is for the state primarily and exclusively, to declare for what local public purposes private property, within its limits, may be taken upon compensation to the owner, as well as to prescribe a mode in which it may be condemned and taken. (Madisonville Tract. Co. vs. St. Bernard Min. Co., 196 U. S., 239, 252 [49 L. ed., 462] .) "Courts have no power to control the legislative authority in the exercise of their right to determine when it is necessary or expedient to condemn a specific piece of property for public purposes. (Adirondack R. Co. vs. New York States, 176 U. S., 335 [~4 L. ed., 492].)" 10 R. C. L. (p. 183), states the law as follows: "158.Necessity for taking ordinarily not judicial question. The legislature, in providing for the exercise of the power of eminent domain, may directly determine the necessity for appropriating private property for a particular improvement or public use, and it may select the exact location of the improvement. In such a case, it is well settled that the utility of the proposed improvement, the extent of the public necessity for its construction, the expediency of constructing it, the suitableness of the location selected and the consequent necessity of taking the land selected for its site, are all questions exclusively for the legislature to determine, and the courts have no power to interfere, or to substitute their own views for these of the representatives of the people. Similarly, when the legislature has delegated the power of eminent domain to municipal or public service corporation or other tribunals or bodies, and has given them discretion as to when the power is to be called into exercise and to what extent, the court will not inquire into the necessity or propriety of the taking." The United States Supreme Court recently said: "The uses to which this land are to be put are undeniably public uses. When that is the case the propriety or expediency of the appropriation cannot be called in question by any other authority." (Cincinnati vs. S. & N. R. R. Co., 223 U. S., 390, quoting U. S. vs. Jones, 109, U. S., 519.) And in Sears vs. City of Akron (246 U. S., 242), decided March 4th, 1918, it said:

"Plaintiff contends that the ordinance is void because the general statute which authorized the appropriation violates both Article 1, paragraph 10, of the Federal Constitution, and the Fourteenth Amendment, in that it authorizes the municipality to determine the necessity for the taking of private propertywithout the owners having an opportunity to be heard as to such necessity; that in fact no necessity existed for any taking which would interfere with the company's project; since the city might have taken water from the Little Cuyahoga or the Tuscarawas rivers; and furthermore, that it has taken ten times as much water as it can legitimately use. It is well settled that while the question whether the purpose of a taking is a public one is judicial (Hairston vs. Danville & W. R. Co., 208 U. S. 598 [52 L. ed., 637; 28 Sup. Ct. Rep., 331; 13 Ann. Cas., 1008] ), the necessity and the proper extent of a taking is a legislative question.(Shoemaker vs. United States, 147 U. S., 282, 298 [57 L. ed., 170, 184; 13 Sup. Ct. Rep., 361]; United States vs. Gettysburg Electric R. Co., 160 U. S. 668, 685 [40 L. ed., 576, 582; 16 Sup. Ct. Rep., 427]; United States vs. Chandler-Dunbar Water Power Co., 229 U. S., 53, 65 [57 L. ed., 1063, 1076; 33 Sup. Ct. Rep., 667].)" I think the case should be decided in accordance with foregoing citations, but one other point has been argued so extensively that it ought to be considered. It is contended for the defense that this Chinese Cemetery is a public cemetery and that it cannot therefore be taken for public use. In its answer the "Comunidad de Chinos de Manila" says it is "a corporation organized and existing under and by virtue of the laws of the Philippine Islands," and that it owns the land which plaintiff seeks to acquire. The facts that it is a private corporation owning land would seem of necessity to make the land it owns private land. The fact that it belongs to the Chinese community deprives it of any public character. But admitting that it is a public cemetery, although limited in its use to the Chinese Community of the city of Manila, can it not be taken for public use? Must we let the reverence we feel for the dead and the sanctity of their final resting-place obstruct the progress of the living? It will be instructive to inquire what other jurisdictions have held on that point. On the Application of Board of Street Openings of New York City to acquire St. Johns Cemetery (133 N. Y., 329) the court of appeal said: ". . . The board instituted this proceeding under the act to acquire for park purposes the title to land below One Hundred and Fifty-fifth street known as St. John's cemetery which belonged to a religious corporation in the city of New York, commonly called Trinity Church. It was established as a cemetery as early as 1801, and used for that purpose until 1839, during which time about ten thousand human bodies had been buried therein. In 1839 an ordinance was passed by the city of New York forbidding interments south of Eighty-sixth street, and since that time no interments have been made in the cemetery, but Trinity Church has preserved and kept it in order and prevented any disturbance thereof. "It is contended on behalf of Trinity Church that under the general authority given by the statute of 1887, this land which had been devoted to cemetery purposes could not be taken for a park. The authority conferred upon the board by the act is broad and general. It is authorized to take for park purposes any land south of One Hundred and Fifty-fifth street. . . . "The fact that lands have previously been devoted to cemetery purposes does not place them beyond the reach of the power of eminent domain. That is an absolute transcendent power belonging to the sovereign which can be exercised for the public welfare whenever the sovereign authority shall determine that a necessity for its exercise exists. By its existence the homes and the dwellings of the living, and the resting places of the dead may be alike condemned. "It seems always to have been recognized in the laws of this state, that under the general laws streets and highways could be laid out through cemeteries, in the absence of special limitation or prohibition. . . ." In Re Opening of Twenty-second Street (102 Penn. State Reports, 108) the Supreme Court of the State said: "This was an action for the opening of a street through a cemetery in the City of Philadelphia. It was contended for the United American Mechanics and United Daughters of America Cemetery

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Association that by an act of the legislature of the State approved March 20th, 1849, they were forever exempt from the taking of any their property for streets, roads or alleys and this Act was formally accepted by the Cemetery Company on April 9th, 1849, and there was, therefore, a contract between the Cemetery Company and the State of Pennsylvania, which would be violated by the taking of any part of their property for street purposes. It was further contended that there were 11,000 persons buried in the cemetery. "The court held that property and contracts of all kinds must yield to the demand of the sovereign and that under the power of eminent domain all properties could be taken, and that if there was a contract between the State of Pennsylvania and the Cemetery Association, the contract itself could be taken for public use, and ordered the opening of the street through the cemetery." In Vol. 5, Encyclopedia of United States Supreme Court Reports (p. 759), it is said: "Although it has been held, that where a state has delegated the power of eminent domain to a person or corporation, and where by its exercise lands have been subject to a public use, they cannot be applied to another public use without specific authority expressed or implied to that effect yet, the general rule seems to be that the fact that property is already devoted to a public use, does not exempt it from being appropriated under the right of eminent domain, but it may be so taken for a use which is clearly superior or paramount to the one to which it is already devoted." (Citing many United States Supreme Court decisions.) A few cases have been cited where the courts refused to allow the opening of streets through cemeteries, but in my opinion they are not as well considered as the cases and authorities relied upon herein. The holding of this court in this case reverses well settled principles of law of long standing and almost universal acceptance. The other assignments of error need not be considered as they are involved in the foregoing. The decision should be reversed and the record returned to the Court of First Instance with instructions to proceed with the case in accordance with this decision.

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HEIRS OF SUGUITAN vs CITY OF MANDALUYONG

THIRD DIVISION [G.R. No. 135087. March 14, 2000.] HEIRS OF ALBERTO SUGUITAN, petitioner, vs. CITY OF MANDALUYONG, respondent. Marious Corpus for petitioner. Robert L. Lim for private respondent. SYNOPSIS On October 13, 1994, the Sangguniang Panglungsod of Mandaluyong City issued a resolution authorizing Mayor Benjamin S. Abalos to institute expropriation proceeding over the property of Alberto Suguitan located at Boni Avenue and Sto. Rosario Streets in Mandaluyong City for the expansion of Mandaluyong Medical Center. On January 20, 1995, Mayor Abalos wrote Alberto Suguitan offering to buy his property, but Suguitan refused to sell. Consequently, the City of Mandaluyongfiled a complaint for expropriation with the Regional Trial Court of Pasig. Suguitan filed a motion to dismiss. The trial court denied the said motion and subsequently, it allowed the expropriation of the subject property. Aggrieved by the said order, the heirs of Suguitan asserted 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 No. 7160, and not by means of a mere resolution. The Court ruled that 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. In the present case, the City of Mandaluyong sought 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. Therefore, while the Court remains conscious of the constitutional policy of promoting local autonomy, it 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.SECATH SYLLABUS 1.POLITICAL LAW; POWER OF EMINENT DOMAIN; ELUCIDATED. Eminent domain is the right or power of a sovereign state to appropriate private property to particular uses to promote public welfare. It is an indispensable attribute of sovereignty; a power grounded in the primary duty of government to serve the common need and advance the general welfare. Thus, the right of eminent domain appertains to every independent government without the necessity for constitutional recognition. The provisions found in modern constitutions of civilized countries relating to the taking of property for the public use do not by implication grant the power to the government, but limit a power which would otherwise be without limit. Thus, our own Constitution provides that "[p]rivate property shall not be taken for public use without just compensation." Furthermore, the due process and equal protection clauses act as additional safeguards against the arbitrary exercise of this governmental power. 2.ID.; ID.; AUTHORITY FOR THE EXERCISE THEREOF MUST BE STRICTLY CONSTRUED. Since the exercise of the power of eminent domain affects an individual's right to private property, a

constitutionally-protected right necessary for the preservation and enhancement of personal dignity and intimately connected with the rights to life and liberty, the need for its circumspect operation cannot be overemphasized. In City of Manila vs. Chinese Community of Manila we said: 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 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.) 3.ID.; ID.; LEGISLATIVE IN NATURE; MAY BE VALIDLY DELEGATED TO LOCAL GOVERNMENT UNITS. 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. 4.ID.; ID.; BASIS OF LOCAL GOVERNMENT UNITS FOR THE EXERCISE THEREOF. 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. 5.ID.; ID.; COURTS SHOULD DETERMINE WHETHER THE POWER OF EMINENT DOMAIN IS BEING EXERCISED BY LOCAL GOVERNMENTS IN ACCORDANCE WITH THE DELEGATING LAW. 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. 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. 6.ID.; ID.; REQUISITES TO BE COMPLIED BY LOCAL GOVERNMENT UNITS. 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. 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.

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7.ID.; ID.; SECTION 19 OF REPUBLIC ACT NO. 7160 REQUIRES AN ORDINANCE, NOT A RESOLUTION FOR EXERCISE THEREOF. 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 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. 8.ID.; ORDINANCE AND RESOLUTION; DIFFERENTIATED. We reiterate our ruling in Municipality of Paraaque v. V.M. Realty Corporation regarding the distinction between an ordinance and a resolution. In that 1998 case we held that: 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 Sanggunianmembers. 9.REMEDIAL LAW; SPECIAL CIVIL ACTION; EXPROPRIATION; STAGES OF PROCEEDINGS. 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. 10.ID.; ID.; ID.; ID.; DETERMINATION AND AWARD OF JUST COMPENSATION IS IN LAST STAGE. 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. 11.POLITICAL LAW; EMINENT DOMAIN; LOCAL GOVERNMENT UNITS; ORDINANCE AUTHORIZING LOCAL CHIEF EXECUTIVE TO EXERCISE POWER OF EMINENT DOMAIN IS NECESSARY PRIOR TO THE FILING OF COMPLAINT. 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. 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. 12.ID.; ID.; ID.; SECTION 19 OF REPUBLIC ACT NO. 7160 PREVAILS OVER IMPLEMENTING RULES AND REGULATIONS. 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, 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." IDASHa 13.ID.; ID.; CANNOT BE EXERCISED BY LOCAL GOVERNMENT UNITS IN CONTRAVENTION OF THE VERY LAW GIVING IT. 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. 14.REMEDIAL LAW; SPECIAL CIVIL ACTION; EXPROPRIATION; DISMISSED PETITION CAN BE REINSTATED BY LOCAL GOVERNMENT UNITS AFTER IT COMPLIED WITH ALL THE LEGAL REQUIREMENTS. 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. DECISION GONZAGA-REYES, J p: 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 will select three (3) to be appointed as Commissioners, pursuant to Section 5, Rule 67, Rules of Court. prcd SO ORDERED. 2 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 Suguitan located at Boni Avenue and Sto. Rosario streets inMandaluyong 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. 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 ofSuguitan'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

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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. Petitioners 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 Panlungsod 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 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. LexLib 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." 18Furthermore, the due process and equal protection clauses 19 act as additional safeguards against the arbitrary exercise of this governmental power. Since the exercise of the power of eminent domain affects an individual's right to private property, a constitutionally-protected right necessary for the preservation and enhancement of personal dignity and intimately connected with the rights to life and liberty, 20 the need for its circumspect operation cannot be overemphasized. In City of Manila vs. Chinese Community of Manila we said: 21 The exercise of the right of eminent domain, whether directly by the State, or by its authorized agents, is necessarily in derogation of private rights, and the rule in that case is that the authority must be strictly construed. No species of property is held by individuals with greater tenacity, and none is guarded by the constitution and the laws more sedulously, than the right to the freehold of inhabitants. When the legislature interferes with that right, and, for greater public purposes, appropriates the land of an individual without his consent, the plain meaning of the law should

not be enlarged by doubt[ful] interpretation. (Bensley vs. Mountainlake Water Co., 13 Cal., 306 and cases cited [73 Am. Dec., 576].) The statutory power of taking property from the owner without his consent is one of the most delicate exercise of governmental authority. It is to be watched with jealous scrutiny. Important as the power may be to the government, the inviolable sanctity which all free constitutions attach to the right of property of the citizens, constrains the strict observance of the substantial provisions of the law which are prescribed as modes of the exercise of the power, and to protect it from abuse. . . . (Dillon on Municipal Corporations [5th Ed.], Sec. 1040, and cases cited; Tenorio vs. Manila Railroad Co., 22 Phil., 411.) The power of eminent domain is essentially legislative in nature. It is firmly settled, however, that such power may be validly delegated to local government units, other public entities and public utilities, although the scope of this delegated legislative power is necessarily narrower than that of the delegating authority and may only be exercised in strict compliance with the terms of the delegating law. 22 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. cda 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. 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: 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

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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: llcd (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. 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. LLpr SO ORDERED. Melo, Vitug, Panganiban and Purisima, JJ., concur. Footnotes 1.Alberto Suguitan passed away on October 2, 1998. On November 25, 1998 the Court allowed the heirs of Alberto Saguitan to substitute the latter as petitioner. 2.Rollo, 17-18. 3. REPUBLIKA NG PILIPINAS SANGGUNIANG PANLUNGSOD Lungsod Ng Mandaluyong RESOLUTION NO. 396, S-1994 RESOLUTION AUTHORIZING MAYOR BENJAMIN S. ABALOS TO INITIATE AND INSTITUTE APPROPRIATE STEPS TO EFFECT THE EXPROPRIATION OF THAT PARCEL OF LAND COVERED BY TRANSFER CERTIFICATE OF TITLE NO. 56264. BE IT APPROVED by the Sangguniang Panlungsod of the City of Mandaluyong in session assembled: WHEREAS, the daily influx of patients to the Mandaluyong Medical Center has considerably increased to a point that it could not accommodate some more. WHEREAS, as the Mandaluyong Medical Center is the only institution that delivers health and medical services for free to the less fortunate residents of the City ofMandaluyong, it is imperative that appropriate steps be undertaken in order that those that need its services may be accommodated. WHEREAS, adjacent to the Mandaluyong Medical Center is a two storey building erected on aparcel of land covered by Transfer Certificate of Title No. 56264 of the Registry of Deeds for Mandaluyong Branch. WHEREAS, above structure and the land upon which the same is erected is very ideal for the projected expansion of the Mandaluyong Medical Center in order that it may continue to serve a greater number of less fortunate residents of the City. WHEREAS, and it appearing that the owner of the above property is not desirous of selling the same even under reasonable terms and conditions, there is a need that the power of eminent domain be exercised by the City Government in order that public health and welfare may continuously be served in a proper and suitable manner. NOW, THEREFORE, upon motion duly seconded, the Sangguniang Panlungsod, RESOLVED, as it hereby RESOLVES, to authorize, as Mayor Benjamin S. Abalos is hereby authorized, to initiate and institute appropriate action for the expropriation of the property covered by Transfer Certificate of Title No. 56264 of the Registry of Deeds for Mandaluyong Branch, including the improvements erected thereon in order that the proposed expansion of the Mandaluyong Medical Center maybe implemented. ADOPTED on this 13th day of October, 1994, at the City of Mandaluyong. I HEREBY CERTIFY THAT THE FOREGOING RESOLUTION WAS ADOPTED AND APPROVED BY THE SANGGUNIANG PANLUNGSOD OFMANDALUYONG IN REGULAR SESSION HELD ON THE DATE AND PLACE FIRST ABOVE GIVEN. (sgd.) WILLIARD S. WONG Sanggunian Secretary ATTESTED:APPROVED (sgd.)(sgd.) RAMON M. GUZMANBENJAMIN S. ABALOS

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Vice-MayorMayor Presiding OfficerOn: OCT 19 1994 4.Rollo, 59. 5.Ibid., 20-25. 6.Ibid., 26-37. 7.Ibid., 60; RTC Records, 86. 8.Ibid., 60-62. 9.Otherwise known as the "Local Government Code of 1991" (hereinafter, "[the] Code"). 10.Rollo, 8. 11.Ibid., 15. 12.Ibid., 50-51. 13.Ibid., 10. 14.Jeffress v. Town of Greenville, 70 S.E. 919, 921,154 N.C. 490, cited in Words and Phrases, vol. 14, p. 469 (1952). 15.Ryan v. Housing Authority of City of Newark, 15 A.2d 647, 650, 125 N.J.L. 336. 16.Schrader v. Third Judicial Dist. Court in and for Eureka County, 73 P. 2d 493, 495, 58 Nev. 188. 17.Visayan Refining Co. v. Camus and Paredes, 40 Phil. 550 (1919). 18.Art. III, sec. 9. 19.1987 Constitution, Art. III, Sec. 1. 20.Joaquin G. Bernas, The Constitution of the Republic of the Philippines: A Commentary, vol. 1, p. 43 (1987). 21.40 Phil. 349 (1919). 22.City of Manila v. Chinese Community of Manila, id.; Moday v. Court of Appeals, 268 SCRA 586 (1997). 23.City of Manila v. Chinese Community of Manila, id. 24.Isagani A. Cruz, Constitutional Law, p. 62 (1991): See also Republic of the Philippines v. La Orden de PO. Benedictinos de Filipinas, 1 SCRA 649 (1961); City of Manila v. Chinese Community of Manila, id. 25.Municipality of Paraaque v. V.M. Realty Corporation, 292 SCRA 678. 26.Id. 27.National Power Corporation v. Jocson, 206 SCRA 520 (1992), citing Municipality of Bian v. Garcia, 180 SCRA 576 (1989). 28.Code, sec. 19. 29.Supra note 25. 30.Id.

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MUNICIPALITY OF PARANAQUE vs VM REALTY

FIRST DIVISION [G.R. No. 127820. July 20, 1998.] MUNICIPALITY OF PARAAQUE, petitioner, vs. V.M. REALTY CORPORATION, respondent. Leo Luis P. Mendoza for petitioner. Robiso & Reyes for respondent. SYNOPSIS Pursuant to Sangguniang Bayan Resolution No. 93-95, Series of 1993, the Municipality of Paraaque filed with the Regional Trial Court of Makati, Branch 134, on September 20, 1993 a complaint for expropriation against private respondent over two parcels of land with a combined area of about 10,000 square meters located at Wakas, San Dionisio, Paraaque, Metro Manila and covered by Torrens Certificate of Title No. 48700. Allegedly, the complaint was filed for the purpose of alleviating the living conditions of the underprivileged by providing homes for the homeless through a socialized housing project. In an Order dated February 4, 1994, the trial court authorized petitioner to take possession of the subject property upon deposit with its clerk of court of an amount equivalent to 15 percent of its fair market value based on its current tax declaration. Private respondent filed its answer alleging in the main that the complaint failed to state a cause of action because it was filed pursuant to a resolution and not to an ordinance as required by the Local Government Code. The trial court then nullified its February 4, 1994 order and dismissed the case. On appeal, the Court of Appeals affirmed the trial court's resolution. Hence, this petition. The Supreme Court held that the petition is not meritorious. The power of eminent domain is lodged in the legislative branch of government which may delegate the exercise thereof to local government units, other public entities and public utilities. A local government unit may therefore exercise the power to expropriate private property only when authorized by Congress and subject to the latter's control and restraints, imposed through the law conferring the power or in other legislations.AIDTHC A local government unit, like the Municipality of Paraaque, cannot authorize an expropriation of private property through a mere resolution of its lawmaking body. The Local Government Code expressly and clearly requires an ordinance or a law for the purpose. 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. The fact that there is no cause of action is evident from the face of the complaint for expropriation which was based on a mere resolution. The absence of an ordinance authorizing the same is equivalent to lack of cause of action. On the other hand, the principle of res judicata does not bar subsequent proceedings for the expropriation of the same property when all the legal requirements for its valid exercise are complied with. SYLLABUS 1.CONSTITUTIONAL LAW; EMINENT DOMAIN; EXERCISE OF THE POWER OF EMINENT DOMAIN BY AN LGU; A MUNICIPALITY MAY EXERCISE THE POWER OF EMINENT DOMAIN PURSUANT ONLY TO AN ORDINANCE AND NOT A MERE RESOLUTION. Section 19 of RA 7160, which delegates to LGUs the power of eminent domain, also lays down the parameters for its exercise. It provides as follows: "Section 19. Eminent Domain. A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: . . . In the case at bar, the local chief executive sought to exercise the power of eminent domain pursuant to a resolution of the municipal council. Thus, there was no compliance with the first requisite that the mayor be authorized through an ordinance. If Congress intended to allow LGUs to exercise eminent domain through a mere resolution, it would have simply adopted the language of the previous Local Government Code. But Congress did not. In a clear divergence from the previous

Local Government Code, Section 19 of RA 7160 categorically requires that the local chief executive act pursuant to an ordinance. 2.REMEDIAL LAW; CIVIL PROCEDURE; CAUSE OF ACTION; PETITIONER'S COMPLAINT DOES NOT STATE A CAUSE OF ACTION; REASON. It is hornbook doctrine that ". . . in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted before the court for determination is the sufficiency of the allegations in the complaint itself. Whether those allegations are true or not is beside the point, for their truth is hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the court render a valid judgment in accordance with the prayer of the complaint?" The fact that there is no cause of action is evident from the face of the Complaint for expropriation which was based on a mere resolution. The absence of an ordinance authorizing the same is equivalent to lack of cause of action. Consequently, the Court of Appeals committed no reversible error in affirming the trial court's Decision which dismissed the expropriation suit. 3.ID.; EMINENT DOMAIN NOT BARRED BY RES JUDICATA. The Court holds that the principle of res judicata, which finds application in generally all cases and proceedings, cannot bar the right of the State or its agent to expropriate private property. The very nature of eminent domain, as an inherent power of the State, dictates that the right to exercise the power be absolute and unfettered even by a prior judgment or res judicata. The scope of eminent domain is plenary and, like police power, can "reach every form of property which the State might need for public use." All separate interests of individuals in property are held by the government under this tacit agreement or implied reservation. Notwithstanding the grant to individuals, the eminent domain, the highest and most exact idea of property, remains in the government, or in the aggregate body of the people in their sovereign capacity; and they have the right to resume the possession of the property whenever the public interest requires it." Thus, the State or its authorized agent cannot be forever barred from exercising said right by reason alone of previous non-compliance with any legal requirement. DECISION PANGANIBAN, J p: A local government unit (LGU), like the Municipality of Paraaque cannot authorize an expropriation of private property through a mere resolution of its lawmaking body. The Local Government Code expressly and clearly requires an ordinance or a local law for the purpose. A resolution that merely expresses the sentiment or opinion of the Municipal Council will not suffice. On the other hand, the principle of res judicata does not bar subsequent proceedings for the expropriation of the same property when all the legal requirements for its valid exercise are complied with. LLphil Statement of the Case These principles are applied by this Court in resolving this petition for review on certiorari of the July 22, 1996 Decision 1 of the Court of Appeals 2 in CA GR CV No. 48048, which affirmed in toto 3 the Regional Trial Court's August 9, 1994 Resolution. 4 The trial court dismissed the expropriation suit as follows: "The right of the plaintiff to exercise the power of eminent domain is not disputed. However, such right may be exercised only pursuant to an Ordinance (Sec. 19, R.A. No. 7160). In the instant case, there is no such ordinance passed by the Municipal Council of Paraaque enabling the Municipality, thru its Chief Executive, to exercise the power of eminent domain. The complaint, therefore, states no cause of action. Assuming that plaintiff has a cause of action, the same is barred by a prior judgment. On September 29, 1987, the plaintiff filed a complaint for expropriation involving the same parcels of land which was docketed as Civil Case No. 17939 of this Court (page 26, record). Said case was dismissed with prejudice on May 18, 1988 (page 39, record). The order of dismissal was not appealed, hence, the same became final. The plaintiff can not be allowed to pursue the present action without violating the principle of [r]es [j]udicata. While defendant in Civil Case No. 17939 was Limpan Investment Corporation, the doctrine of res judicata still applies because the judgment in said case (C.C. No. 17939) is conclusive between the parties and their successors-in-

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interest (Vda. de Buncio vs. Estate of the late Anita de Leon). The herein defendant is the successor-in-interest of Limpan Investment Corporation as shown by the 'Deed of Assignment Exchange' executed on June 13, 1990. WHEREFORE, defendant's motion for reconsideration is hereby granted. The order dated February 4, 1994 is vacated and set aside. This case is hereby dismissed. No pronouncement as to costs. SO ORDERED." 5 Factual Antecedents Pursuant to Sangguniang Bayan Resolution No. 93-95, Series of 1993, 6 the Municipality of Paraaque filed on September 20, 1993, a Complaint for expropriation 7against Private Respondent V.M. Realty Corporation, over two parcels of land (Lots 2-A-2 and 2-B-1 of Subdivision Plan Psd-17917), with a combined area of about 10,000 square meters, located at Wakas, San Dionisio, Paraaque, Metro Manila, and covered by Torrens Certificate of Title No. 48700. Allegedly, the complaint was filed "for the purpose of alleviating the living conditions of the underprivileged by providing homes for the homeless through a socialized housing project." 8Parenthetically, it was also for this stated purpose that petitioner, pursuant to its Sangguniang Bayan Resolution No. 577, Series of 1991, 9 previously made an offer to enter into a negotiated sale of the property with private respondent, which the latter did not accept. 10 Finding the Complaint sufficient in form and substance, the Regional Trial Court of Makati, Branch 134, issued an Order dated January 10, 1994, 11 giving it due course. Acting on petitioner's motion said court issued an Order dated February 4, 1994, 12 authorizing petitioner to take possession of the subject property upon deposit with its clerk of court of an amount equivalent to 15 percent of its fair market value based on its current tax declaration. On February 21, 1994, private respondent filed its Answer containing affirmative defenses and a counterclaim, 13 alleging in the main that (a) the complaint failed to state a cause of action because it was filed pursuant to a resolution and not to an ordinance as required by RA 7160 (the Local Government Code); and (b) the cause of action, if any, was barred by a prior judgment or res judicata. On private respondent's motion, its Answer was treated as a motion to dismiss. 14 On March 24, 1994, 15 petitioner filed its opposition, stressing that the trial court's Order dated February 4, 1994 was in accord with Section 19 of RA 7160, and that the principle of res judicata was not applicable. Thereafter, the trial court issued its August 9, 1994 Resolution 16 nullifying its February 4, 1994 Order and dismissing the case. Petitioner's motions for reconsideration and transfer of venue were denied by the trial court in a Resolution dated December 2, 1994. 17 Petitioner then appealed to Respondent Court, raising the following issues: "1.Whether or not the Resolution of the Paraaque Municipal Council No. 93-95, Series of 1993 is a substantial compliance of the statutory requirement of Section 19, R.A. 7180 [sic] in the exercise of the power of eminent domain by the plaintiff-appellant. 2.Whether or not the complaint in this case states no cause of action. 3.Whether or not the strict adherence to the literal observance to the rule of procedure resulted in technicality standing in the way of substantial justice. 4.Whether or not the principle of res judicata is applicable to the present case." 18 As previously mentioned, the Court of Appeals affirmed in toto the trial court's Decision. Respondent Court, in its assailed Resolution promulgated on January 8, 1997, 19 denied petitioner's Motion for Reconsideration for lack of merit. Hence, this appeal. 20 The Issues Before this Court, petitioner posits two issues, viz.: "1.A resolution duly approved by the municipal council has the same force and effect of an ordinance and will not deprive an expropriation case of a valid cause of action. 2.The principle of res judicata as a ground for dismissal of case is not applicable when public interest is primarily involved." 21

The Court's Ruling The petition is not meritorious. First Issue: Resolution Different from an Ordinance Petitioner contends that a resolution approved by the municipal council for the purpose of initiating an expropriation case "substantially complies with the requirements of the law" 22 because the terms "ordinance" and "resolution" are synonymous for "the purpose of bestowing authority [on] the local government unit through its chief executive to initiate the expropriation proceedings in court in the exercise of the power of eminent domain." 23 Petitioner seeks to bolster this contention by citing Article 36, Rule VI of the Rules and Regulations Implementing the Local Government Code, which provides: "If the LGU fails to acquire a private property for public use, purpose, or welfare through purchase, the LGU may expropriate said property through a resolution of the Sanggunian authorizing its chief executive to initiate expropriation proceedings." 24 (Emphasis supplied.) The Court disagrees. The power of eminent domain is lodged in the legislative branch of government, which may delegate the exercise thereof to LGUs, other public entities and public utilities. 25 An LGU may therefore exercise the power to expropriate private property only when authorized by Congress and subject to the latter's control and restraints imposed "through the law conferring the power or in other legislations." 26 In this case, Section 19 of RA 7160, which delegates to LGUs the power of eminent domain, also lays down the parameters for its exercise. It provides as follows: "Section 19.Eminent Domain. A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws. Provided, however, That the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner, and such offer was not accepted: Provided, further, That the local government unit may immediately take possession of the property upon the filing of the expropriation proceedings and upon making a deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated: Provided, finally, That, the amount to be paid for the expropriated .property shall be determined by the proper court, based on the fair market value at the time of the taking of the property." (Emphasis supplied) Thus, the following essential requisites must concur before an LGU can exercise the power of eminent domain: 1.An ordinance is enacted by the local legislative council authorizing the local chief executive, in behalf of the LGU, to exercise the power of eminent domain or pursue expropriation proceedings over a particular private property. LexLib 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. 27 In the case at bar, the local chief executive sought to exercise the power of eminent domain pursuant to a resolution of the municipal council. Thus, there was no compliance with the first requisite that the mayor be authorized through an ordinance. Petitioner cites Camarines Sur vs. Court of Appeals 28 to show that a resolution may suffice to support the exercise of eminent domain by an LGU. 29 This case, however, is not in point because the applicable law at that time was BP 337, 30 the previous Local Government Code, which had provided that a mere resolution would enable an LGU to exercise eminent domain. In contrast, RA 7160, 31the present Local Government Code which was already in force when the Complaint for expropriation was filed, explicitly required an ordinance for this purpose.

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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. 32 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. 33 If Congress intended to allow LGUs to exercise eminent domain through a mere resolution, it would have simply adopted the language of the previous Local Government Code. But Congress did not. In a clear divergence from the previous Local Government Code, Section 19 of RA 7160 categorically requires that the local chief executive act pursuant to an ordinance. Indeed, "[l]egislative intent is determined principally from the language of a statute. Where the language of a statute is clear and unambiguous, the law is applied according to its express terms, and interpretation would be resorted to only where a literal interpretation would be either impossible or absurd or would lead to an injustice." 34 In the instant case, there is no reason to depart from this rule, since the law requiring an ordinance is not at all impossible, absurd, or unjust. Moreover, the power of eminent domain necessarily involves a derogation of a fundamental or private right of the people. 35 Accordingly, the manifest change in the legislative language from "resolution" under the BP 337 to "ordinance" under RA 7160 demands a strict construction. "No species of property is held by individuals with greater tenacity, and is guarded by the Constitution and 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 doubtful interpretation." 36 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. 37 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. In this ruling, the Court does not diminish the policy embodied in Section 2, Article X of the Constitution, which provides that "territorial and political subdivisions shall enjoy local autonomy." It merely upholds the law as worded in RA 7160. We stress that an LGU is created by law and all its powers and rights are sourced therefrom. It has therefore no power to amend or act beyond the authority given and the limitations imposed on it by law. Strictly speaking, the power of eminent domain delegated to an LGU is in reality not eminent but "inferior" domain, since it must conform to the limits imposed by the delegation, and thus partakes only of a share in eminent domain. 38 Indeed, "the national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it." 39 Complaint Does Not State a Cause of Action In its Brief filed before Respondent Court, petitioner argues that its Sanggunian Bayan passed an ordinance on October 11, 1994 which reiterated its Resolution No. 93-35, Series of 1993, and ratified all the acts of its mayor regarding the subject expropriation. 40 This argument is bereft of merit. In the first place, petitioner merely alleged the existence of such an ordinance, but it did not present any certified true copy thereof. In the second place, petitioner did not raise this point before this Court. In fact, it was mentioned by private respondent, and only in passing. 41 In any event, this allegation does not cure the inherent defect of petitioner's Complaint for expropriation filed on September 23, 1993. It is hornbook doctrine that

". . . in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted before the court for determination is the sufficiency of the allegations in the complaint itself. Whether those allegations are true or not is beside the point, for their truth is hypothetically admitted by the motion. The issue rather is: admitting them to be true, may the court render a valid judgment in accordance with the prayer of the complaint?" 42 The fact that there is no cause of action is evident from the face of the Complaint for expropriation which was based on a mere resolution. The absence of an ordinance authorizing the same is equivalent to lack of cause of action. Consequently, the Court of Appeals committed no reversible error in affirming the trial court's Decision which dismissed the expropriation suit. Second Issue: Eminent Domain Not Barred by Res Judicata As correctly found by the Court of Appeals 43 and the trial court, 44 all the requisites for the application of res judicata are present in this case. There is a previous final judgment on the merits in a prior expropriation case involving identical interests, subject matter and cause of action, which has been rendered by a court having jurisdiction over it. Be that as it may, the Court holds that the principle of res judicata, which finds application in generally all cases and proceedings, 45 cannot bar the right of the State or its agent to expropriate private property. The very nature of eminent domain, as an inherent power of the State, dictates that the right to exercise the power be absolute and unfettered even by a prior judgment or res judicata. The scope of eminent domain is plenary and, like police power, can "reach every form of property which the State might need for public use." 46 "All separate interests of individuals in property are held of the government under this tacit agreement or implied reservation. Notwithstanding the grant to individuals, the eminent domain, the highest and most exact idea of property, remains in the government, or in the aggregate body of the people in their sovereign capacity; and they have the right to resume the possession of the property whenever the public interest requires it."47 Thus, the State or its authorized agent cannot be forever barred from exercising said right by reason alone of previous non-compliance with any legal requirement. While the principle of res judicata does not denigrate the right of the State to exercise eminent domain, it does apply to specific issues decided in a previous case. For example, a final judgment dismissing an expropriation suit on the ground that there was no prior offer precludes another suit raising the same issue; it cannot, however, bar the State or its agent from thereafter complying with this requirement, as prescribed by law, and subsequently exercising its power of eminent domain over the same property. 48 By the same token, our ruling that petitioner cannot exercise its delegated power of eminent domain through a mere resolution will not bar it from reinstituting similar proceedings, once the said legal requirement and, for that matter, all others are properly complied with. Parenthetically and by parity of reasoning, the same is also true of the principle of "law of the case." In Republic vs De Knecht, 49 the Court ruled that the power of the State or its agent to exercise eminent domain is not diminished by the mere fact that a prior final judgment over the property to be expropriated has become the law of the case as to the parties. The State or its authorized agent may still subsequently exercise its right to expropriate the same property, once all legal requirements are complied with. To rule otherwise will not only improperly diminish the power of eminent domain, but also clearly defeat social justice. WHEREFORE, the petition is hereby DENIED without prejudice to petitioner's proper exercise of its power of eminent domain over subject property. Costs against petitioner. SO ORDERED. cdrep Davide, Jr., Bellosillo, Vitug and Quisumbing, JJ ., concur. Footnotes 1.Rollo, pp. 21-25. 2.Special Sixth Division, composed of J. Antonio M. Martinez (now an associate justice of the Supreme Court), ponente and chairman; and JJ. Ricardo P. Galvez and Hilarion L. Aquino, concurring. 3.See Rollo, p. 25. 4.Penned by acting Presiding Judge Paul T. Arcangel.

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5.Resolution of the Regional Trial Court, p. 2; Rollo, p. 70. 6.Rollo, pp. 41-43. 7.Ibid., pp. 27-32. 8.Petitioner's Memorandum, p. 1; Rollo, p. 184. 9.Rollo, pp. 37-38. 10.Complaint, p. 3; Rollo, p. 29. 11.Rollo, p. 45. 12.Ibid., p. 47. 13.Ibid., pp. 48-51. 14.Private respondent's Memorandum, pp. 1-2; Rollo, pp. 197-198. 15.Rollo, pp. 66-68. 16.Ibid., pp. 69-70. 17.Ibid., pp. 71-72. 18.Ibid., pp. 78-79. 19.Ibid., p. 26. 20.The case was deemed submitted for resolution on March 13, 1998, when the Court received private respondent's Memorandum. 21.Petitioner's Memorandum, p. 3; Rollo, p. 187. 22.Ibid., p. 4; Rollo, p. 188. 23.Ibid. 24.Paragraph A. 25.Moday vs. Court of Appeals, 268 SCRA 586, 592, February 20, 1997 26.Province of Camarines Sur vs. Court of Appeals, 222 SCRA 173, 179-180, May 17, 1993, per Quiason, J. 27.Senator Aquilino Q. Pimentel, Jr., The Local Government Code of 1991: The Key To National Development, 1993 ed., p. 110. 28.Supra. 29.Petitioner's Memorandum, p. 6; Rollo, p. 189. 30.Approved on February 10, 1983 and published in 79 O.G No. 7. See Moday vs. Court of Appeals, supra, p. 593. Sec. 9 of BP 337 reads: "SEC. 9. Eminent Domain. A local government unit may, through its head and acting pursuant to a resolution of its sanggunian, exercise the right of eminent domain and institute condemnation proceedings for public use or purpose. 31.Effective January 1, 1992. 32.Mascuana vs. Provincial Board of Negros Occidental, 79 SCRA 399, 405, October 18, 1977; cited in private respondent's Memorandum, p. 5. 33.Article 107, pars. a and c, Implementing Rules and Regulations of RA 7160; cited in Pimentel, Jr., supra, pp. 163-164. 34.Azarcon vs. Sandiganbayan, 268 SCRA 747, 762, February 26, 1997, per Panganiban, J.; citing Ramirez vs. Court of Appeals, 248 SCRA 590, 596, September 28, 1995. 35.City of Manila vs. Chinese Community of Manila, 40 Phil 349, 366 (1919), and Arriete vs. Director of Public Works, 58 Phil 507, 511 (1933). See also Bernas, Joaquin G., The 1987 Constitution of the Republic of the Philippines: A Commentary, 1996 ed., p. 348. 36.Justice Isagani A. Cruz, Constitutional Law, 1993 ed., p. 59. 37.See Villa vs. Llanes, Jr., 120 SCRA 81, 84, January 21, 1983, and Wise & Co. vs. Meer, 78 Phil 655, 676 (1947). See also Art. 7, Civil Code of the Philippines. 38.Bernas, supra, pp. 348-349. 39.Magtajas vs. Pryce Properties, Corp., Inc., 234 SCRA 255, 272-273, July 20, 1994, per Cruz, J. 40.Rollo, pp. 81-82. 41.See private respondent's Memorandum, pp. 5-6; Rollo, pp. 201-202. 42.Travel Wide Associated Sales (Phils.), Inc. vs. Court of Appeals, 199 SCRA 205, 210, July 15, 1991, per Cruz, J.; citing The Heirs of Juliana Clavano vs. Genato, 80 SCRA 217, 222, October 28, 1977.

43.Decision, p. 5; Rollo, p. 25. 44.Resolution of the Regional Trial Court, p. 2; Rollo, p. 70. 45.Republic vs. Director of Lands, 99 SCRA 651, 657, September 11, 1980. 46.Bernas, supra, p. 349. 47.Ibid. 48.See National Power Corporation vs. Court of Appeals, 254 SCRA 577, March 11, 1996. 49.182 SCRA 142, 147-148, February 12, 1990.

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BELUSO vs MUNICIPALITY OF PANAY

FIRST DIVISION [G.R. No. 153974. August 7, 2006.] MIGUEL BELUSO, NATIVIDAD BELUSO, PEDRO BELUSO, ANGELITA BELUSO, RAMON BELUSO, and AMADA DANIEL, substituted by her heirs represented by TERESITA ARROBANG, petitioner, vs. THE MUNICIPALITY OF PANAY (CAPIZ), represented by its Mayor, VICENTE B. BERMEJO, respondent. DECISION AUSTRIA-MARTINEZ, J p: Before this Court is a petition for review questioning the Decision 1 of the Court of Appeals (CA) dated March 20, 2002 in CA-G.R. SP No. 47052, as well the Resolution 2 dated June 11, 2002 denying petitioners' Motion for Reconsideration thereof. The facts are as follows: Petitioners are owners of parcels of land with a total area of about 20,424 square meters, covered by Free Patent Nos. 7265, 7266, 7267, 7268, 7269, and 7270. 3 On November 8, 1995, the Sangguniang Bayan of the Municipality of Panay issued Resolution No. 95-29 authorizing the municipal government through the mayor to initiate expropriation proceedings. 4 A petition for expropriation was thereafter filed on April 14, 1997 by the Municipality of Panay (respondent) before the Regional Trial Court (RTC), Branch 18 of Roxas City, docketed as Civil Case No. V-6958. 5 Petitioners filed a Motion to Dismiss alleging that the taking is not for public use but only for the benefit of certain individuals; that it is politically motivated because petitioners voted against the incumbent mayor and vice-mayor; and that some of the supposed beneficiaries of the land sought to be expropriated have not actually signed a petition asking for the property but their signatures were forged or they were misled into signing the same. 6 On July 31, 1997, the trial court denied petitioners' Motion to Dismiss and declared that the expropriation in this case is for "public use" and the respondent has the lawful right to take the property upon payment of just compensation. 7 cHCIDE Petitioners filed an Answer on August 12, 1997 reasserting the issues they raised in their Motion to Dismiss. 8 On October 1, 1997, the trial court issued an Order appointing three persons as Commissioners to ascertain the amount of just compensation for the property. 9Petitioners filed a "Motion to Hold in Abeyance the Hearing of the Court Appointed Commissioners to Determine Just Compensation and for Clarification of the Court's Order dated October 1, 1997" which was denied by the trial court on November 3, 1997. 10 Petitioners' Motion for Reconsideration was also denied on December 9, 1997. 11 Petitioners then filed on March 2, 1998 a Petition for Certiorari before the CA claiming that they were denied due process when the trial court declared that the taking was for public purpose without receiving evidence on petitioners' claim that the Mayor of Panay was motivated by politics in expropriating their property and in denying their Motion to Hold in Abeyance the Hearing of the Court Appointed Commissioners; and that the trial court also committed grave abuse of discretion when it disregarded the affidavits of persons denying that they signed a petition addressed to the municipal government of Panay. 12 On January 17, 2001, petitioners filed a Motion to Admit Attached Memorandum and the Memorandum itself where they argued that based on the Petition for Expropriation filed by respondent, such expropriation was based only on a resolution and not on an ordinance contrary to Sec. 19 of Republic Act (R.A.) No. 7160; there was also no valid and definite offer to buy the property as the price offered by respondent to the petitioners was very low. 13 On March 20, 2002, the CA rendered its Decision dismissing the Petition for Certiorari. It held that the petitioners were not denied due process as they were able to file an answer to the complaint and were able to adduce their defenses therein; and that the purpose of the taking in this case constitutes "public use". 14Petitioners filed a Motion for Reconsideration which was denied on June 11, 2002. 15

Thus, the present petition claiming that: A.RESPONDENT IS WITHOUT, LACKS AND DOES NOT HAVE THE LAWFUL POWER TO ACQUIRE ANY OR ALL OF THE SUBJECT PROPERTIES THROUGH EMINENT DOMAIN, IT BEING EXERCISED BY MEANS OF A MERE RESOLUTION, AND NOT THROUGH AN ORDINANCE AS REQUIRED BY LAW AND APPLICABLE JURISPRUDENCE; B.RESPONDENT IS LIKEWISE WITHOUT, LACKS AND DOES NOT HAVE THE LAWFUL POWER TO ACQUIRE ANY OR ALL OF THE SUBJECT PROPERTIES THROUGH EMINENT DOMAIN, ITS PREVIOUS OFFER TO BUY THEM BEING NOT VALID; and aSACED C.IT WAS A SERIOUS ERROR ON THE PART OF THE HONORABLE COURT OF APPEALS NOT TO DISCUSS, MUCH LESS RULE ON, BOTH IN ITS QUESTIONED DECISION AND ITS RESOLUTION PROMULGATED ON 11 JUNE 2002 PETITIONERS' ARGUMENTS THAT RESPONDENT IS WITHOUT, LACKS AND DOES NOT HAVE THE LAWFUL POWER TO ACQUIRE ANY OR ALL OF THE SUBJECT PROPERTIES THROUGH EMINENT DOMAIN, IT BEING EXERCISED BY MEANS OF A MERE RESOLUTION, AND NOT THROUGH AN ORDINANCE AS REQUIRED BY LAW AND APPLICABLE JURISPRUDENCE, AND ITS PREVIOUS OFFER TO BUY THEM BEING NOT VALID, DESPITE THE FACT THAT THESE OBJECTIONS WERE PROPERLY PLEADED IN PETITIONERS' MEMORANDUM WHICH WAS DULY ADMITTED IN ITS RESOLUTION PROMULGATED ON 29 JANUARY 2001; and D.PETITIONERS WERE UTTERLY DENIED PROCEDURAL DUE PROCESS OF LAW BY THE COURT A QUO, WHEN IT SIMPLY DECLARED IN ITS ORDER DATED 31 JULY 1997 THAT THE TAKING BY RESPONDENT OF PETITIONERS' PROPERTIES IS PURPORTEDLY FOR PUBLIC PURPOSE WITHOUT RECEIVING EVIDENCE ON THEIR ASSERTED CLAIM THAT RESPONDENT'S MUNICIPAL MAYOR WAS POLITICALLY MOTIVATED IN SEEKING THE EXPROPRIATION OF THEIR PROPERTIES AND NOT FOR PUBLIC PURPOSE. 16 Petitioners argue that: contrary to Sec. 19 of R.A. No. 7160 of the Local Government Code, which provides that a local government may exercise the power of eminent domain only by "ordinance," respondent's expropriation in this case is based merely on a "resolution"; while objection on this ground was neither raised by petitioners in their Motion to Dismiss nor in their Answer, such objection may still be considered by this Court since the fact upon which it is based is apparent from the petition for expropriation itself; a defense may be favorably considered even if not raised in an appropriate pleading so long as the facts upon which it is based are undisputed; courts have also adopted a more censorious attitude in resolving questions involving the proper exercise of local bodies of the delegated power of expropriation, as compared to instances when it is directly exercised by the national legislature; respondent failed to give, prior to the petition for expropriation, a previous valid and definite offer to petitioners as the amount offered in this case was only P10.00 per square meter, when the properties are residential in nature and command a much higher price; the CA failed to discuss and rule upon the arguments raised by petitioners in their Memorandum; attached to the Motion to Dismiss were affidavits and death certificates showing that there were people whose names were in the supposed petition asking respondent for land, but who did not actually sign the same, thus showing that the present expropriation was not for a public purpose but was merely politically motivated; considering the conflicting claims regarding the purpose for which the properties are being expropriated and inasmuch as said issue may not be rightfully ruled upon merely on the basis of petitioners' Motion to Dismiss and Answer as well as respondent's Petition for Expropriation, what should have been done was for the RTC to conduct hearing where each party is given ample opportunity to prove its claim. 17 Respondent for its part contends that its power to acquire private property for public use upon payment of just compensation was correctly upheld by the trial court; that the CA was correct in finding that the petitioners were not denied due process, even though no hearing was conducted in the trial court, as petitioners were still able to adduce their objections and defenses therein; and that petitioners' arguments have been passed upon by both the trial court and the CA and were all denied for lack of substantial merit. 18 Respondent filed a Memorandum quoting at length the decision of the CA to support its position. 19 Petitioners meanwhile opted to have the case resolved based on the pleadings already filed. 20 We find the petition to be impressed with merit. CTaIHE

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Eminent domain, which is the power of a sovereign state to appropriate private property to particular uses to promote public welfare, is essentially lodged in the legislature. 21 While such power may be validly delegated to local government units (LGUs), other public entities and public utilities the exercise of such power by the delegated entities is not absolute. 22 In fact, the scope of delegated legislative power is narrower than that of the delegating authority and such entities may exercise the power to expropriate private property only when authorized by Congress and subject to its control and restraints imposed through the law conferring the power or in other legislations. 23 Indeed, LGUs by themselves have no inherent power of eminent domain. 24 Thus, strictly speaking, the power of eminent domain delegated to an LGU is in reality not eminent but "inferior" since it must conform to the limits imposed by the delegation and thus partakes only of a share in eminent domain. 25 The national legislature is still the principal of the LGUs and the latter cannot go against the principal's will or modify the same. 26 The exercise of the power of eminent domain necessarily involves a derogation of a fundamental right. 27 It greatly affects a landowner's right to private property which is a constitutionally protected right necessary for the preservation and enhancement of personal dignity and is intimately connected with the rights to life and liberty. 28 Thus, whether such power is exercised directly by the State or by its authorized agents, the exercise of such power must undergo painstaking scrutiny. 29 Indeed, despite the existence of 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. Sec. 19 of R.A. No. 7160, which delegates to LGUs the power of eminent domain expressly provides: SEC. 19.Eminent Domain. A local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided, however, That the power of eminent domain may not be exercised unless a valid and definite offer has been previously made to the owner, and such offer was not accepted: Provided, further, That the local government unit may immediately take possession of the property upon the filing of the expropriation proceedings and upon making a deposit with the proper court of at least fifteen percent (15%) of the fair market value of the property based on the current tax declaration of the property to be expropriated: Provided, finally, That, the amount to be paid for the expropriated property shall be determined by the proper court, based on the fair market value at the time of the taking of the property. ATSIED It is clear therefore that several requisites must concur before an LGU can exercise the power of eminent domain, to wit: 1.An ordinance is enacted by the local legislative council authorizing the local chief executive, in behalf of the local government unit, to exercise the power of eminent domain or pursue expropriation proceedings over a particular private property. 2.The power of eminent domain is exercised for public use, purpose or welfare, or for the benefit of the poor and the landless. 3.There is payment of just compensation, as required under Section 9, Article III of the Constitution, and other pertinent laws. 4.A valid and definite offer has been previously made to the owner of the property sought to be expropriated, but said offer was not accepted. 30 The Court in no uncertain terms have pronounced that a local government unit cannot authorize an expropriation of private property through a mere resolution of its lawmaking body. 31 R.A. No. 7160 otherwise known as the Local Government Code expressly requires an ordinance for the purpose and a resolution that merely expresses the sentiment of the municipal council will not suffice. 32

A resolution will not suffice for an LGU to be able to expropriate private property; and the reason for this is settled: . . . 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 theSanggunian members. If Congress intended to allow LGUs to exercise eminent domain through a mere resolution, it would have simply adopted the language of the previous Local Government Code. But Congress did not. In a clear divergence from the previous Local Government Code, Sec. 19 of R.A. [No.] 7160 categorically requires that the local chief executive act pursuant to an ordinance. . . . 33 As respondent's expropriation in this case was based merely on a resolution, such expropriation is clearly defective. While the Court is aware of the constitutional policy promoting local autonomy, the court cannot grant judicial sanction to an LGU's exercise of its delegated power of eminent domain in contravention of the very law giving it such power. 34 The Court notes that petitioners failed to raise this point at the earliest opportunity. Still, we are not precluded from considering the same. This Court will not hesitate to consider matters even those raised for the first time on appeal in clearly meritorious situations, 35 such as in this case. aESIDH Thus, the Court finds it unnecessary to resolve the other issues raised by petitioners. It is well to mention however that despite our ruling in this case respondent is not barred from instituting similar proceedings in the future, provided that it complies with all legal requirements. 36 WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 47052 is REVERSED and SET ASIDE. The Complaint in Civil Action No. V-6958 is DISMISSED without prejudice. No costs. SO ORDERED. Panganiban, C.J., Ynares-Santiago, Callejo, Sr. and Chico-Nazario, JJ., concur. Footnotes 1.Penned by Associate Justice Teodoro P. Regino and concurred in by Associate Justices Eugenio S. Labitoria and Rebecca De Guia-Salvador, rollo, pp. 139-145. 2.Id. at 158-159. 3.Id. at 140, CA Decision. 4.Records, pp. 9-10. 5.Id. at 1-7. 6.Id. at 54-55. 7.Id. at 75. 8.Id. at 81-85. 9.Id. at 92-93. 10.Id. at 111-112, 120. 11.Id. at 135. 12.CA rollo, pp. 7,11. 13.Id. at 136-138, 140-149. 14.Rollo, pp. 142-145. 15.Id. at 158-159. 16.Id. at 17-18. 17.Id. at 18-30. 18.Id. at 174. 19.Id. at 183-187. 20.Id. at 203.

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21.Heirs of Suguitan v. City of Mandaluyong, 384 Phil. 676, 687 (2000); Municipality of Paraaque v. V.M. Realty Corporation, 354 Phil. 684, 691 (1998); see alsoAntonio v. Geronimo, G.R. No. 124779, November 29, 2005, 476 SCRA 340, 350. 22.Heirs of Suguitan v. City of Mandaluyong, supra at 689; Municipality of Paraaque v. V.M. Realty Corporation, supra at 691; Lagcao v. Labra, G.R. No. 155746, October 13, 2004, 440 SCRA 279, 284. 23.Heirs of Suguitan v. City of Mandaluyong, supra; Municipality of Paranaque v. V.M. Realty Corporation, supra at 691. 24.Lagcao v. Labra, supra at 284. 25.Municipality of Paraaque v. V.M. Realty Corporation, supra at 695. 26.Id. 27.Municipality of Paraaque v. V.M. Realty Corporation, supra at 694. 28.Lagcao v. Labra, supra at 285. 29.Id.; see also Heirs of Suguitan v. City of Mandaluyong, supra at 688. 30.Antonio v. Geronimo, supra at 351; Municipality of Paraaque v. V.M. Realty Corporation, supra at 692. 31.Municipality of Paraaque v. V.M. Realty Corporation, supra at 687; Heirs of Suguitan v. City of Mandaluyong, supra; Antonio v. Geronimo, supra at 352. 32.Municipality of Paraaque v. V.M. Realty Corporation, supra at 687. 33.Id. at 693-694. 34.Heirs of Suguitan v. City of Mandaluyong, supra at 693. 35.Villanueva v. Court of Appeals, G.R. No 143286, April 14, 2004, 427 SCRA 439, 448. 36.Municipality of Paraaque v. V.M. Realty Corporation, supra at 697; Heirs of Suguitan v. City of Mandaluyong, supra at 693.

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REPUBLIC vs. VDA. DE CASTELLVI, ET AL.,

EN BANC [G.R. No. L-20620. August 15, 1974.] REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. CARMEN M. VDA. DE CASTELLVI, ET AL., defendants-appellees. Office of the Solicitor General for plaintiff-appellant. C .A. Mendoza & A.V . Raquiza and Alberto Cacnio & Associates for defendant-appellees. DECISION ZALDIVAR, J p: Appeal from the decision of the Court of First Instance of Pampanga in its Civil Case No. 1623, an expropriation proceeding. Plaintiff-appellant, the Republic of the Philippines, (hereinafter referred to as the Republic) filed, on June 26, 1959, a complaint for eminent domain against defendant-appellee, Carmen M. vda. de Castellvi, judicial administratrix of the estate of the late Alfonso de Castellvi hereinafter referred to as Castellvi), over a parcel of land situated in the barrio of San Jose, Floridablanca, Pampanga, described as follows: "A parcel of land, Lot No. 199-B Bureau of Lands Plan Swo-23666. Bounded on the NE by Maria Nieves Toledo-Gozun; on the SE by national road; on the SW by AFP reservation, and on the NW by AFP reservation. Containing an area of 759,299 square meters, more or less, and registered in the name of AlfonsoCastellvi under TCT No. 13631 of the Register of Deeds of Pampanga . . ."; and against defendant-appellee Maria Nieves Toledo Gozun (hereinafter referred to as ToledoGozun), over two parcels of land described as follows: "A parcel of land (Portion of Lot 1-B, 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 abovementioned 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, NatividadCastellvi de Raquiza, Jose Castellvi and Consuelo Castellvi were allowed to intervene as parties defendants. Subsequently, Joaquin V. Gozun, Jr., husband of defendant Nieves Toledo Gozun, was also allowed by the court to intervene as a party defendant. After the Republic had deposited with the Provincial Treasurer of Pampanga the amount of P259,669.10, the trial court ordered that the Republic be placed in possession of the lands. The Republic was actually placed in possession of the lands on August 10, 1959. 1 In her "motion to dismiss", dated October 22, 1959, Toledo-Gozun alleged, among other things, that her two parcels of land were residential lands, in fact a portion with an area of 343,303 square meters had already been subdivided into different lots for sale to the general public, and the remaining portion had already been set aside for expansion sites of the already completed subdivisions; that the fair market value of said lands was P15.00 per square meter, so they had a total market value of P8,085,675.00; and she prayed that the complaint be dismissed, or that she be paid the amount of P8,085,675.00, plus interest thereon at the rate of 6% per annum from October 13, 1959, and attorney's fees in the amount of P50,000.00. Intervenors Jose Castellvi and Consuelo Castellvi in their answer, filed on February 11, 1960, and also intervenor Joaquin Gozun, Jr., husband of defendant Maria Nieves Toledo-Gozun, in his motion to dismiss, dated May 27, 1960, all alleged that the value of the lands sought to be expropriated was at the rate of P15.00 per square meter. On November 4, 1959, the trial court authorized the Provincial Treasurer of Pampanga to pay defendant Toledo-Gozun the sum of P107,609.00 as provisional value of her lands. 2 On May 16, 1960 the trial Court authorized the Provincial Treasurer of Pampanga to pay defendant Castellvi the amount of P151,859.80 as provisional value of the land under her administration, and ordered said defendant to deposit the amount with the Philippine National Bank under the supervision of the Deputy Clerk of Court. In another order of May 16, 1960 the trial Court entered an order of condemnation. 3 The trial Court appointed three commissioners: Atty. Amadeo Yuzon, Clerk of Court, as commissioner for the court; Atty. Felicisimo G. Pamandanan, counsel of the Philippine National Bank Branch at Floridablanca, for the plaintiff; and Atty. Leonardo F. Lansangan, Filipino legal counsel at Clark Air Base, for the defendants. The Commissioners, after having qualified themselves, proceeded to the performance of their duties. On March 15, 1961 the Commissioners submitted their report and recommendation, wherein, after having determined that the lands sought to be expropriated were residential lands, they recommended unanimously that the lowest price that should be paid was P10.00 per square meter, for both the lands of Castellvi and Toledo-Gozun; that an additional P5,000.00 be paid to Toledo-Gozun for improvements found on her land; that legal interest on the compensation, computed from August 10, 1959, be paid after deducting the amounts already paid to the owners, and that no consequential damages be awarded. 4 The Commissioners' report was objected to by all the parties in the case by defendants Castellvi and Toledo-Gozun, who insisted that the fair market value of their lands should be fixed at P15.00 per square meter; and by the Republic, which insisted that the price to be paid for the lands should be fixed at P0.20 per square meter. 5 After the parties-defendants and intervenors had filed their respective memoranda, and the Republic, after several extensions of time, had adopted as its memorandum its objections to the report of the Commissioners, the trial court, on May 26, 1961, rendered its decision 6 the dispositive portion of which reads as follows: "WHEREFORE, taking into account all the foregoing circumstances, and that the lands are titled, . . . the rising trend of land values,. . . and the lowered purchasing power of the Philippine peso, the court finds that the unanimous recommendation of the commissioners of ten (P10.00) pesos per square meter for the three lots of the defendants subject of this action is fair and just." xxx xxx xxx

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"The plaintiff will pay 6% interest per annum on the total value of the lands of defendant ToledoGozun since (sic) the amount deposited as provisional value from August 10, 1959 until full payment is made to said defendant or deposit therefor is made in court. "In respect to the defendant Castellvi, interest at 6% per annum will also be paid by the plaintiff to defendant Castellvi from July 1, 1956 when plaintiff commenced its illegal possession of the Castellvi land when the instant action had not yet been commenced to July 10, 1959 when the provisional value thereof was actually deposited in court, on the total value of the said (Castellvi) land as herein adjudged. The same rate of interest shall be paid from July 11, 1959 on the total value of the land herein adjudged minus the amount deposited as provisional value, or P151,859.80, such interest to run until full payment is made to said defendant or deposit therefor is made in court. All the Intervenors having failed to produce evidence in support of their respective interventions, said interventions are ordered dismissed. "The costs shall be charged to the plaintiff." On June 21, 1961 the Republic filed a motion for a new trial and/or reconsideration, upon the grounds of newly-discovered evidence, that the decision was not supported by the evidence, and that the decision was against the law, against which motion defendants Castellvi and ToledoGozun filed their respective oppositions. On July 8, 1961 when the motion of the Republic for new trial and/or reconsideration was called for hearing, the Republic filed a supplemental motion for new trial upon the ground of additional newly-discovered evidence. This motion for new trial and/or reconsideration was denied by the court on July 12, 1961. On July 17, 1961 the Republic gave notice of its intention to appeal from the decision of May 26, 1961 and the order of July 12, 1961. Defendant Castellvi also filed, on July 17, 1961, her notice of appeal from the decision of the trial court. The Republic filed various ex-parte motions for extension of time within which to file its record on appeal. The Republic's record on appeal was finally submitted on December 6, 1961. Defendants Castellvi and Toledo-Gozun filed not only a joint opposition to the approval of the Republic's record on appeal, but also a joint memorandum in support of their opposition. The Republic also filed a memorandum in support of its prayer for the approval of its record on appeal. On December 27, 1961 the trial court issued an order declaring both the record on appeal filed by the Republic, and the record on appeal filed by defendant Castellvi as having been filed out of time, thereby dismissing both appeals. On January 11, 1962 the Republic filed a "motion to strike out the order of December 27, 1961 and for reconsideration", and subsequently an amended record oil 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'srecord 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 ToledoGozun 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 theRepublic 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 than 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 condemnor upon the private property for more than a momentary or limited period, and (2) devoting it to a public use in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property. This appellee argues that in the instant case the first element is wanting, for the contract of lease relied upon provides for a lease from year to year; that the second element is also wanting, because the Republic was paying the lessor Castellvi a monthly rental of P445.58; and that the contract of lease does not grant the Republic the "right and privilege" to buy the premises "at the value at the time of occupancy." 8 Appellee Toledo-Gozun did not comment on the Republic's argument in support of the second error assigned, because as far as she was concerned the Republic had not taken possession of her lands prior to August 10, 1959. 9 In order to better comprehend the issues raised in the appeal, in so far as the Castellvi property is concerned, it should be noted that the Castellvi property had been occupied by the Philippine Air Force since 1947 under a contract of lease, typified by the contract marked Exh. 4-Castellvi, the pertinent portions of which read: "CONTRACT OF LEASE "This AGREEMENT OF LEASE MADE AND ENTERED into by and between INTESTATE ESTATE OF ALFONSO DE CASTELLVI, represented by CARMEN M. DECASTELLVI Judicial Administratrix x x x 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 deFloridablanca, Pampanga . . . midiendo una extension superficial de cuatro milliones once mil cuatro cientos trienta y cinco (4,001,435) [sic] metros cuadrados, mas o menos.

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'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 anytime 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 erect additions . . . which facilities or fixtures . . . so placed in, upon or attached to the said premises shall be and remain property of the LESSEE and may be removed therefrom by the LESSEE prior to the termination of this lease. The LESSEE shall surrender possession of the premises upon the expiration or termination of this lease and if so required by the LESSOR, shall return the premises in substantially the same condition as that existing at the time same were first occupied by the AFP, reasonable and ordinary wear and tear and damages by the elements or by circumstances over which the LESSEE has no control excepted: PROVIDED, that if the LESSOR so requires the return of the premises in such condition, the LESSOR shall give written notice thereof to the LESSEE at least twenty (20) days before the termination of the lease and provided, further, that should the LESSOR give notice within the time specified above, the LESSEE shall have the right and privilege to compensate the LESSOR at the fair value or the equivalent, in lieu of performance of its obligation, if any, to restore the premises. Fair value is to be determined as the value at the time of occupancy less fair wear and tear and depreciation during the period of this lease. "6.The LESSEE may terminate this lease at any time during the term hereof by giving written notice to the LESSOR at least thirty (30) days in advance . . ." "7.The LESSEE should not be responsible, except under special legislation for any damages to the premises by reason of combat operations, acts of GOD, the elements or other acts and deeds not due to the negligence on the part of the LESSEE. "8.This LEASE AGREEMENT supersedes and voids any and all agreements and undertakings, oral or written, previously entered into between the parties covering the property herein leased, the same having been merged herein. This AGREEMENT may not be modified or altered except by instrument in writing only duly signed by the parties." 10 It was stipulated by the parties, that "the foregoing contract of lease (Exh. 4, Castellvi) is 'similar in terms and conditions, including the date', with the annual contracts entered into from year to year between defendant Castellvi and the Republic of the Philippines (p. 17, t.s.n., Vol. III)". 11 It is undisputed, therefore, that the Republic occupied Castellvi's land from July 1, 1947, by virtue of the above-mentioned contract, on a year to year basis (from July 1 of each year to June 30 of the succeeding year) under the terms and conditions therein stated. Before the expiration of the contract of lease on June 30, 1956 the Republic sought to renew the same but Castellvi refused. When the AFP refused to vacate the leased premises after the termination of the contract, on July 11, 1956, Castellvi wrote to the Chief of Staff, AFP, informing the latter that the heirs of the property had decided not to continue leasing the property in

question because they had decided to subdivide the land for sale to the general public, demanding that the property be vacated within 30 days from receipt of the letter, and that the premises be returned in substantially the same condition as before occupancy (Exh. 5 Castellvi). A follow-up letter was sent on January 12, 1957, demanding the delivery and return of the property within one month from said date (Exh. 6 Castellvi). On January 30, 1957, Lieutenant General Alfonso Arellano, Chief of Staff, answered the letter of Castellvi, saying that it was difficult for the army to vacate the premises in view of the permanent installations and other facilities worth almost P500,000.00 that were erected and already established on the property, and that, there being no other recourse, the acquisition of the property by means of expropriation proceedings would be recommended to the President (Exhibit "7" Castellvi). Defendant Castellvi then brought suit in the Court of First Instance of Pampanga, in Civil Case No. 1458, to eject the Philippine Air Force from the land. While this ejectment case was pending, the Republic instituted these expropriation proceedings, and, as stated earlier in this opinion, the Republic was placed in possession of the lands on August 10, 1959. On November 21, 1959, the Court of First Instance of Pampanga, dismissed Civil Case No. 1458, upon petition of the parties, in an order which, in part, reads as follows: "1.Plaintiff has agreed, as a matter of fact has already signed an agreement with defendants, whereby she has agreed to receive the rent of the lands, subject matter of the instant case from June 30, 1966 up to 1959 when the Philippine Air Force was placed in possession by virtue of an order of the Court upon depositing the provisional amount as fixed by the Provincial Appraisal Committee with the Provincial Treasurer of Pampanga; "2.That because of the above-cited agreement wherein the administratrix decided to get the rent corresponding to the rent from 1956 up to 1959 and considering that this action is one of illegal detainer and/or to recover the possession of said land by virtue of nonpayment 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

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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'sproperty, 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 Republicexpropriate 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 theCastellvi 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 wasCastellvi 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 Castellvi's property for purposes of eminent domain cannot be considered to have taken place in 1947 when the Republiccommenced 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 theCastellvi 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 theRepublic 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. TheRepublic'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,

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1959, the price of P10.00 per square meter fixed by the lower court "is not only exorbitant 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 (Phil. 82, 98) this Court laid down basic guidelines in determining the value of the property expropriated for public purposes. This Court said: "In determining the value of land appropriated for public purposes, the same consideration are to be regarded as in a sale of property between private parties. The inquiry, in such cases, must be what is the property worth in the market, viewed not merely with reference to the uses to which it is at the time applied, but with reference to the uses to which it is plainly adapted, that is to say, What is it worth from its availability for valuable uses? "So many and varied are the circumstances to be taken into account in determining the value of property condemned for public purposes, that it is practically impossible to formulate a rule to govern its appraisement in all cases. Exceptional circumstances will modify the most carefully guarded rule, but, as a general thing, we should say that the compensation of the owner is to be estimated by reference to the use for which the property is suitable, having regard to the existing business or wants of the community, or such as may be reasonably expected in the immediate future. (Miss. and Rum River Boom Co. vs. Patterson, 98 U.S., 403)." In expropriation proceedings, therefore, the owner of the land has the right to its value for the use for which it would bring the most in the market. 17 The owner may thus show every advantage that his property possesses, present and prospective, in order that the price it could be sold for in the market may be satisfactorily determined. 18 The owner may also show that the property is suitable for division into village or town lots. 19 The trial court, therefore, correctly considered, among other circumstances, the proposed subdivision plans of the lands sought to be expropriated in finding that those lands are residential lots. This finding of the lower court is supported not only by the unanimous opinion of the commissioners, as embodied in their report, but also by the Provincial Appraisal Committee of the province of Pampanga composed of the Provincial Treasurer, the Provincial Auditor and the District Engineer. In the minutes of the meeting of the Provincial Appraisal Committee, held on May 14, 1959 (Exh. 13-Castellvi) We read in its Resolution No. 10 the following: "3.Since 1957 the land has been classified as residential in view of its proximity to the air base and due to the fact that it was not being devoted to agriculture. In fact, there is a plan to convert it into a subdivision for residential purposes. The taxes due on the property have been paid based on its classification as residential land;" The evidence shows that Castellvi broached the idea of subdividing her land into residential lots as early as July 11, 1956 in her letter to the Chief of Staff of the Armed Forces of the Philippines. (Exh. 5-Castellvi) As a matter of fact, the layout of the subdivision plan was tentatively approved by the National Planning Commission on September 7, 1956. (Exh. 8-Castellvi). The land of Castellvi had not been devoted to agriculture since 1947 when it was leased to the Philippine Army. In 1957 said land was classified as residential, and taxes based on its classification as residential had been paid since then (Exh. 13-Castellvi). The location of the Castellvi land justifies its suitability for a

residential subdivision. As found by the trial court, "It is at the left side of the entrance of the Basa Air Base and bounded on two sides by roads (Exh. 13-Castellvi), paragraphs 1 and 2, Exh. 12Castellvi), 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-ToledoGozun). As a matter of fact, regarding lot 1-B it had already been surveyed and subdivided, and its conversion into a residential subdivision was tentatively approved by the National Planning Commission on July 8, 1959 (Exhs. 5 and 6 Toledo-Gozun). As early as June, 1958, no less than 32 man connected with the Philippine Air Force among them commissioned officers, non-commission officers, and enlisted men had requested Mr. and Mrs. Joaquin D. Gozun to open a subdivision on their lands in question (Exhs. 8, 8-A to 8-ZZ-Toledo-Gozun). 21 We agree with the findings, and the conclusions, of the lower court that the lands that are the subject of expropriation in the present case, as of August 10, 1959 when the same were taken possession of by the Republic, were residential lands and were adaptable for use as residential subdivisions. Indeed, the owners of these lands have the right to their value for the use for which they would bring the most in the market at the time the same were taken from them. The most important issue to be resolved in the present case relates to the question of what is the just compensation that should be paid to the appellees. The Republic asserts that the fair market value of the lands of the appellees is P.20 per square meter. The Republic cites the case of Republic vs. Narciso, et al., L-6594, which this Court decided on May 18, 1956. The Narciso case involved lands that belonged to Castellvi and Toledo-Gozun, and to one Donata Montemayor, which were expropriated by the Republic in 1949 and which are now the site of the Basa Air Base. In the Narciso case this Court fixed the fair market value at P.20 per square meter. The lands that are sought to be expropriated in the present case being contiguous to the lands involved in the Narciso case, it is the stand of theRepublic 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,

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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 an 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 toCastellvi 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 he 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

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notice of the fact that the value of the Philippine peso has considerably gone down since the year 1959. 30 Considering that the lands of Castellvi and Toledo-Gozun are adjoining each other, and are of the same nature, the Court has deemed it proper to fix the same price for all these lands. 3.The third issue raised by the Republic relates to the payment of interest. The Republic maintains that the lower court erred when it ordered the Republic to pay Castellvi interest at the rate of 6% per annum on the total amount adjudged as the value of the land of Castellvi, from July 1, 1956 to July 10, 1959. We find merit in this assignment of error. In ordering the Republic to pay 6% interest on the total value of the land of Castellvi from July 1, 1956 to July 10, 1959, the lower court held that the Republic had illegally possessed the land of Castellvi from July 1, 1956, after its lease of the land had expired on June 30, 1956, until August 10, 1959 when the Republic was placed in possession of the land pursuant to the writ of possession issued by the court. What really happened was that the Republic continued to occupy the land ofCastellvi 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 theRepublic 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. 16-1345, 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.'

45

"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 under the circumstances, the correct qualification that can be given is 'forgotten evidence'. Forgotten evidence, 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, J J ., did not take part. Footnotes 1.Record on Appeal, Vol. I, pp. 53-56. 2.Record on Appeal, Vol. I, pp. 53-56. 3.Record on Appeal, Vol. I, pp. 121-124. 4.Record on Appeal, Vol. I, pp. 235-261. 5.Record on Appeal, Vol. I, pp. 264-270, 284-297 and 297-299. 6.Record on Appeal, Vol. I, pp. 387-456. 7.Appellant's brief, pp. 18-30; citing the case of Penn. vs. Carolina Virginia Estate Corp., 57 SE 2d 817. 8.Appellee Castellvi's brief, pp. 21-26. 9.Appellee Toledo-Gozun's brief, pp. 7-9. The issue raised in the second error assigned should really refer only to the land of Castellvi. We find that the lands of Toledo-Gozun, unlike the land of Castellvi, were never leased to the Republic. 10.Appellant's brief, pp. 6-12. 11.Appellant's brief, p. 12. 12.Record on Appeal, Vol. II, pp. 462-463. 13.Among the cases cited under this Section is that of Penn. vs. Carolina Virginia Coastal Corporation, 57 SE 2d 817, which is cited by the Republic on p. 18 of its brief. 14.See Appellant's brief, p. 6.

15.See Appellant's brief, p. 22. 16.Similar to Section 5, Rule 69 of the old Rules of Court, the rule in force when the complaint in this case was filed. 17.King vs. Mineapolis Union Railway Co., 32 Minn. 224. 18.Little Rock Junction Ry. vs. Woodruff, 49 Ark. 381, 5 SW 792. 19.27 Am. Jur. 2d pp. 344-345; Rothnam vs. Commonwealth, 406 Pa. 376; Wichita Falls and N.W. Ry. Co. vs. Holloman, 28 Okla. 419, 114 P 700, 701. See alsoRepublic vs. Venturanza, et al., L20417, 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. II, pp. 607-613. 34.Miranda vs. Legaspi, et al., 92 Phil. 290, 293-294.

46

AMIGABLE vs. CUENCA

FIRST DIVISION [G.R. No. L-26400. February 29, 1972.] VICTORIA AMIGABLE, plaintiff-appellant, vs. NICOLAS CUENCA, as Commissioner of Public Highways and REPUBLIC OF THE PHILIPPINES, defendants-appellees. Quirico del Mar, Domingo Antigua, Antonio Paulin and N. Capangpangan for plaintiff and appellant. Assistant Solicitor General Guillermo Torres and Solicitor Dominador L. Quiroz for defendants and appellees. SYLLABUS 1.POLITICAL LAW; EMINENT DOMAIN; PROJECT USED BY GOVERNMENT FOR ROAD PURPOSES; RIGHTS OR REGISTERED OWNER TO DUE COMPENSATION ANYTIME. Considering that no annotation in favor of the government appears at the back of her certificate of title and that she has not executed any deed of conveyance of any portion of her lot to the government, the appellant remains the owner of the whole lot. As registered owner, she could bring an action to recover possession of the portion of land in question at anytime because possession is one of the attributes of ownership. However, since restoration of possession of said portion by the government is neither convenient nor feasible at this time because it has been and is now being used for road purposes, the only relief available is for the government to make due compensation which it could and should have done years ago. 2.ID.; ID.; ID.; ID.; RIGHT TO DAMAGES. The owner of the land is entitled to damages in the form of legal interest on the price of the land from the time it was taken up to the time that payment is made by the government. In addition, the government should pay for attorney's fees, the amount of which should be fixed by the trial court after hearing. 3.ID.; ID.; BASIS FOR DUE COMPENSATION. To determine the due compensation for the land appropriated by the Government, the basis should be the price or value thereof at the time of the taking. DECISION MAKALINTAL, J p: This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No. R5977, dismissing the plaintiff's complaint. Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad Estate in Cebu City as shown by Transfer Certificate of Title No. T-18060, which superseded Transfer Certificate of Title No. RT-3272 (T-3435) issued to her by the Register of Deeds of Cebu on February 1, 1924. No annotation in favor of the government of any right or interest in the property appears at the back of the certificate. Without prior expropriation or negotiated sale, the government used a portion of said lot, with an area of 6,167 square meters, for the construction of the Mango and Gorordo Avenues. It appears that said avenues were already existing in 1921 although "they were in bad condition and very narrow, unlike the wide and beautiful avenues that they are now," and "that the tracing of said roads was begun in 1924, and the formal construction in 1925." * On March 27, 1958 Amigable's counsel wrote the President of the Philippines, requesting payment of the portion of her lot which had been appropriated by the government. The claim was indorsed to the Auditor General, who disallowed it in his 9th Indorsement dated December 9, 1958. A copy of said indorsement was transmitted to Amigable's counsel by the Office of the President on January 7, 1959. On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended on April 17, 1959 upon motion of the defendants, against the Republic of the Philippines and Nicolas Cuenca, in his capacity as Commissioner of Public Highways for the recovery of ownership and possession of the 6,167 square meters of land traversed by the Mango and Gorordo Avenues. She also sought the payment of compensatory damages in the sum of P50,000.00 for the illegal

occupation of her land, moral damages in the sum of P25,000.00, attorney's fees in the sum of P5,000.00 and the costs of the suit. Within the reglementary period the defendants filed a joint answer denying the material allegations of the complaint and interposing the following affirmative defenses, to wit: (1) that the action was premature, the claim not having been filed first with the Office of the Auditor General; (2) that the right of action for the recovery of any amount which might be due the plaintiff, if any, had already prescribed; (3) that the action being a suit against the Government, the claim for moral damages, attorney's fees and costs had no valid basis since as to these items the Government had not given its consent to be sued; and (4) that inasmuch as it was the province of Cebu that appropriated and used the area involved in the construction of Mango Avenue, plaintiff had no cause of action against the defendants. During the scheduled hearings nobody appeared for the defendants notwithstanding due notice, so the trial court proceeded to receive the plaintiff's evidence ex parte. On July 29, 1959 said court rendered its decision holding that it had no jurisdiction over the plaintiff's cause of action for the recovery of possession and ownership of the portion of her lot in question on the ground that the government cannot be sued without its consent; that it had neither original nor appellate jurisdiction to hear, try and decide plaintiff's claim for compensatory damages in the sum of P50,000.00, the same being a money claim against the government; and that the claim for moral damages had long prescribed, nor did it have jurisdiction over said claim because the government had not given its consent to be sued. Accordingly, the complaint was dismissed. Unable to secure a reconsideration, the plaintiff appealed to the Court of Appeals, which subsequently certified the case to Us, there being no question of fact involved. The issue here is whether or not the appellant may properly sue the government under the facts of the case. In the case of Ministerio vs. Court of First Instance of Cebu, 1 involving a claim for payment of the value of a portion of land used for the widening of the Gorordo Avenue in Cebu City, this Court, through Mr. Justice Enrique M. Fernando, held that where the government takes away property from a private landowner for public use without going through the legal process of expropriation or negotiated sale, the aggrieved party may properly maintain a suit against the government without thereby violating the doctrine of governmental immunity from suit without its consent. We there said: ". . . If the constitutional mandate that the owner be compensated for property taken for public use were to be respected, as it should, then a suit of this character should not be summarily dismissed. The doctrine of governmental immunity from suit cannot serve as an instrument for perpetrating an injustice on a citizen. Had the government followed the procedure indicated by the governing law at the time, a complaint would have been filed by it, and only upon payment of the compensation fixed by the judgment, or after tender to the party entitled to such payment of the amount fixed, may it have the right to enter in and upon the land so condemned, to appropriate the same to the public use defined in the judgment.' If there were an observance of procedural regularity, petitioners would not be in the sad plaint they are now. It is unthinkable then that precisely because there was a failure to abide by what the law requires, the government would stand to benefit. It is just as important, if not more so, that there be fidelity to legal norms on the part of officialdom if the rule of law were to be maintained. It is not too much to say that when the government takes any property for public use, which is conditioned upon the payment of just compensation, to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a court. There is no thought then that the doctrine of immunity from suit could still be appropriately invoked." Considering that no annotation in favor of the government appears at the back of her certificate of title and that she has not executed any deed of conveyance of any portion of her lot to the government, the appellant remains the owner of the whole lot. As registered owner, she could bring an action to recover possession of the portion of land in question at anytime because possession is one of the attributes of ownership. However, since restoration of possession of said portion by the government is neither convenient nor feasible at this time because it is now and

47

has been used for road purposes, the only relief available is for the government to make due compensation which it could and should have done years ago. To determine the due compensation for the land, the basis should be the price or value thereof at the time of the taking. 2 As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the price of the land from the time it was taken up to the time that payment is made by the government. 3 In addition, the government should pay for attorney's fees, the amount of which should be fixed by the trial court after hearing. WHEREFORE, the decision appealed from is hereby set aside and the case remanded to the court a quo for the determination of compensation, including attorney's fees, to which the appellant is entitled as above indicated. No pronouncement as to costs. Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur. Footnotes *Decision, Record on Appeal, p. 12. 1.G.R. No. L-31635, August 31, 1971 (40 SCRA 464). 2.Alfonso vs. City of Pasay (106 Phil. 1017). 3.Alfonso vs. City of Pasay, supra.

48

NAPOCOR vs COURT OF APPEALS

THIRD DIVISION [G.R. No. 113194. March 11, 1996.] NATIONAL POWER CORPORATION, petitioner, vs. COURT OF APPEALS and MACAPANTON MANGONDATO, respondents. Jose G. Bruno, Wilfredo J. Collado and Rolando Gamalinda for petitioner. Macapanton K. Mangondato in his own behalf. SYLLABUS 1.POLITICAL LAW; EMINENT DOMAIN; JUST COMPENSATION; DETERMINATION THEREOF; GENERAL RULE IS DATE OF FILING OF THE COMPLAINT. 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. Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence, many rulings 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 Section 4, Rule 67 of the Revised Rules of Court. So too, where the institution of the action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint. 2.ID.; ID.; ID.; ID.; ID.; EXCEPTION IS WHERE THE COURT FIXED THE VALUE OF THE PROPERTY AS OF THE DATE OF TAKING; NOT APPLICABLE IN CASE AT BAR. The general rule admits of an exception; where this Court fixed the value of the property as of the date it was taken and not at the date of the commencement of the expropriation proceedings. This exception finds 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 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 owner's 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 petitioner's use of the land. Since the petitioner is claiming an exception to Rule 67, Section 4, it has the burden of 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. 3.ID.; ID.; "TAKING" THEREIN; ELEMENTS; WHEN SATISFIED IN CASE AT BAR. 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 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 to oust the owner and deprive him of all beneficial enjoyment of the property." In this case, the petitioner's 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 and flatly refused the claim for compensation. Only in 1990, did the petitioner recognize private respondent's 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. This is not the intent nor the expropriation contemplated by law. This is a simple attempt at a voluntary purchase and sale. Petitioner neglected and/or refused to exercise the power of eminent domain. Only in 1992, did petitioner manifest its intention to exercise the power of eminent domain. 4.ID.; ID.; JUST COMPENSATION; VALUATION OF COMMISSIONERS; FINDINGS OF FACTS OF THE COURT OF APPEALS, RESPECTED. 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 misappropriate the clear preponderance of evidence. The amount fixed and agreed to by the respondent appellate Court is not grossly exorbitant. DECISION PANGANIBAN, J p: At what point in time should the value of the land subject of expropriation be computed: at the date of the "taking" or the date of the filing of the complaint for eminent domain? This is the main question posed by the parties in this petition for review on certiorari assailing the Decision 1 of the Court of Appeals 2 which affirmed in toto the decision of the Regional Trial Court of Marawi City. 3 The dispositive portion of the decision of the trial court reads: 4 "WHEREFORE, the prayer in the recovery case for Napocor's surrender of the property is denied but Napocor is ordered to pay monthly rentals in the amount of P15,000.00 from 1978 up to July 1992 with 12% interest per annum from which sum the amount of P2,199,500.00 should be deducted; and the property is condemned in favor of Napocor effective July 1992 upon payment of the fair market value of the property at One Thousand (P1,000.00) Pesos per square meter or a total of Twenty-One Million Nine Hundred Ninety-Five Thousand (P21,995,000.00) Pesos. "SO ORDERED. Costs against NAPOCOR." The Facts The facts are undisputed by both the petitioner and the private respondent, 5 and are quoted from the Decision of the respondent Court, 6 as follows: "In 1978, National Power Corporation (NAPOCOR), took possession of a 21,995 square meter land which is a portion of Lot 1 of the subdivision plan (LRC) Psd-116159 situated in Marawi City, owned by Mangondato, and covered by Transfer Certificate of Title No. T-378-A, under the mistaken belief that it forms part of the public land reserved for use by NAPOCOR for hydroelectric power purposes under Proclamation No. 1354 of the President of the Philippines dated December 3, 1974. "NAPOCOR alleged that the subject land was until then possessed and administered by Marawi City so that in exchange for the city's waiver and quitclaim of any right over the property, NAPOCOR had paid the city a 'financial assistance' of P40.00 per square meter. "In 1979, when NAPOCOR started building its Agus I HE (Hydroelectric Plant) Project, Mangondato demanded compensation from NAPOCOR. NAPOCOR refused to compensate insisting that the property is public land and that it had already paid 'financial assistance' to Marawi City in exchange for the rights over the property. "Mangondato claimed that the subject land is his duly registered private property covered by Transfer Certificate of Title No. T-378-A in his name, and that he is not privy to any agreement between NAPOCOR and Marawi City and that any payment made to said city cannot be considered as payment to him. "More than a decade later NAPOCOR acceded to the fact that the property belongs to Mangondato. "At the outset, in March, 1990, NAPOCOR's regional legal counsel, pursuant to Executive Order No. 329 dated July 11, 1988 requested Marawi City's City Appraisal Committee to appraise the market value of the property in Saduc, Marawi City affected by the infrastructure projects of NAPOCOR without specifying any particular land-owner. The City Appraisal Committee in its Minutes dated March 8, 1990, fixed the fair market value as follows: 7 'Land Fair Market Value Per Sq. M. Price Per Sq. MPrice per Sq. M. Along the CityNot in the City National HighwayNational Highway

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P150Residential LotP100 P250Commercial LotP180 P300Industrial LotP200 (Records, Civil Case No. 610-92, p. 20). "On July 13, 1990, NAPOCOR's National Power Board (hereafter NAPOCOR's board) passed Resolution No. 90-225 resolving to pay Mangondato P100.00 per square meter for only a 12,132 square meter portion of the subject property plus 12% interest per annum from 1978. However, in the August 7, 1990 board meeting, confirmation of said resolution was deferred to allow NAPOCOR's regional legal counsel to determine whether P100.00 per square meter is the fair market value. (Records, Civil Case No. 605-92, p. 45). "On August 14, 1990, NAPOCOR's board passed Resolution No. 90-316 resolving that Mangondato be paid the base price of P40.00 per square meter for the 12,132 square meter portion (P485,280.00) plus 12% interest per annum from 1978 (P698,808.00) pending the determination whether P100.00 per square meter is the fair market value of the property (id.). "Pursuant to the aforementioned resolution Mangondato was paid P1,184,088.00 (id., p. 58). NAPOCOR's regional legal counsel's findings embodied in 2 memoranda to NAPOCOR's general counsel (dated January 29, 1991 and February 19, 1991) state that Mangondato's property is classified as industrial, that the market value of industrial lots in Marawi City when NAPOCOR took possession is P300.00 for those along the national highway and P200.00 for those not along the highway and that on the basis of recent Supreme Court decisions, NAPOCOR has to pay not less than P300.00 per square meter. NAPOCOR's general counsel incorporated the foregoing findings in his report to the board plus the data that the area possessed by NAPOCOR is 21,995 square meters, and that the legal rate of interest per annum from the time of the taking of the property alleged to be in 1978, is 12%, but recommended to the board that the fair market value of the property is P100.00 per square meter; NAPOCOR's board on May 17, 1991 passed Resolution No. 91-247 resolving to pay Mangondato P100.00 per square meter for the property excluding 12% interest per annum (id., pp. 50-52). "In a letter dated December 17, 1991, Mangondato disagreed with the NAPOCOR board's Resolution No. 91-247 pegging the compensation for his land at P100.00 per square meter without interest from 1978. Mangondato submitted that the fair market value of his land is even more than the P300.00 (per) square meter stated in the City Appraisal Report but that for expediency, he is willing to settle for P300.00 per square meter plus 12% interest per annum from 1978 (id., pp. 53-59). "In another letter dated February 4, 1992, Mangondato reiterated his disagreement to the P100.00 per square meter compensation without interest. At the same time, to get partial payment, he asked that he be paid in the meantime, P100.00 per square meter without prejudice to pursuing his claim for the proper and just compensation plus interest thereon (id., p. 60). "On February 12, 1992, NAPOCOR's general counsel filed a memorandum for its president finding no legal impediment if they, in the meantime were to pay Mangondato P100.00 per square meter without prejudice to the final determination of the proper and just compensation by the board inasmuch as the regional counsel submitted to him (general counsel) 2 memoranda stating that the appraisal of industrial lots in Marawi City when NAPOCOR took possession is P300.00 per square meter for those along the national highway and P200.00 per square meter for those not along the highway, and that NAPOCOR has to pay not less than P300.00 per square meter plus 12% interest on the basis of recent Supreme Court decisions. Further, the general counsel submitted that since the board has already set the purchase price at P100.00 per square meter (Resolution No. 91-247). NAPOCOR would not be prejudiced thereby (id., pp. 60-62). "In March, 1992, the parties executed a Deed of Sale Of A Registered Property where NAPOCOR acceded to Mangondato's request of provisional payment of P100.00 per square meter excluding interest and without prejudice to Mangondato's pursuance of claims for just compensation and interest. Mangondato was paid P1,015,412.00 in addition to the P1,184,088.00 earlier paid to him

by NAPOCOR which payments total P2,199,500.00 for the 12,995 square meter land (Records, Civil Case No. 610-92, pp. 85-87). "In his letter to NAPOCOR's president dated April 20, 1992, Mangondato asked for the payment of P300.00 per square meter plus 12% interest per annum from 1978. NAPOCOR's president, in his memorandum to the board dated April 24, 1992 recommended the approval of Mangondato's request (Records, Civil Case No. 605-92, pp. 63-69). "On May 25, 1992, NAPOCOR's board passed Resolution No. 92-121 granting its president the authority to negotiate for the payment of P100.00 per square meter for the land plus 12% interest per annum from 1978 less the payments already made to Mangondato and to Marawi City on the portion of his land and with the provisos that said authorized payment shall be effected only after Agus I HE Project has been placed in operation and that said payment shall be covered by a deed of absolute sale with a quitclaim executed by Mangondato (id., pp. 70-71). "On July 7, 1992, Mangondato filed before the lower court Civil Case No. 605-92 against NAPOCOR seeking to recover the possession of the property described in the complaint as Lots 1 and 3 of the subdivision plan (LRC) Psd-116159 against NAPOCOR, the payment of a monthly rent of P15,000.00 from 1978 until the surrender of the property, attorney's fees and costs, and the issuance of a temporary restraining order and a writ of preliminary mandatory injunction to restrain NAPOCOR from proceeding with any construction and/or improvements on Mangondato's land or from committing any act of dispossession (id., pp. 1-8). "The temporary restraining order was issued by the lower court. Anent the prayer for the writ of preliminary mandatory injunction, NAPOCOR filed its Opposition thereto on July 23, 1992 (id., pp. 17-20). "Before the lower court could resolve the pending incident on the writ of preliminary mandatory injunction, and instead of filing a motion to dismiss, NAPOCOR, on July 27, 1992, filed also before the lower court, Civil Case No. 610-92 which is a Complaint for eminent domain against Mangondato over the subject property (Records, Civil Case No. 610-92, pp. 1-3). "On the same date Mangondato filed his Manifestation in Lieu of Answer contending that the negotiations for payment made by NAPOCOR were 'virtual dictations' on a 'take it or leave it' basis; that he was given the 'run-around' by NAPOCOR for 15 years; so that there was no agreement reached as to payment because of NAPOCOR's insistence of its own determination of the price; that he treats the P2,199.500.00 so far received by him as partial payment for the rent for the use of his property. Mangondato prayed that he be compensated in damages for the unauthorized taking and continued possession of his land from 1978 until the filing of the Complaiant (sic) in the expropriation case; that should the lower court order the expropriation of the subject property, that the just compensation for the land be reckoned from the time of the filing of the expropriation case; that the expropriation case be consolidated with the recovery of possession case; that the restraining order issued in the recovery of possession case be maintained and a writ of preliminary injunction be at once issued against NAPOCOR; and that NAPOCOR be ordered to deposit the value of the land as provisionally determined by the lower court (id., pp. 4-5). "Upon agreement of the parties, the 2 cases were ordered consolidated and the lower court appointed the following commissioners: Atty. Saipal Alawi, representing the lower court; Atty. Connie Doromal, representing NAPOCOR; and Mr. Alimbsar A. Ali, from the City Assessor's Office to ascertain and report to the court the just compensation (id., pp. 6-7). "The lower court ordered NAPOCOR to deposit with the Philippine National Bank the amount of P10,997,500.00, provisionally fixing the value of the land at P500.00 per square meter P100.00 lower than the assessed value of the land appearing in Tax Declaration No. 0873 for 1992 which was used as basis by the lower court (id., p. 8). "In its Motion for Reconsideration of the Order For Provisional Deposit[,] NAPOCOR opposed the provisional value quoted by the lower court saying that the basis of the provisional value of the land should be the assessed value of the property as of the time of the taking which in this case is 1978 when the assessed value of the land under Tax Declaration No. 7394 was P100.00 per square meter (id., pp. 28-32). In reply, Mangondato filed his Opposition To Motion For Reconsideration Of

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the Order For Provisional Deposit (id., pp. 44-46). However, the lower court did not rule on the provisional value to be deposited and chose to go right into the determination of just compensation on the ground that the 'provisional valuation could not be decided without going into the second phase of expropriation cases which is the determination by the court of the just compensation for the property soguht (sic) to be taken (NPC vs. Jocson, supra)' (Decision, p. 5). "On August 5, 1992, Mangondato filed a Motion To Dismiss in the expropriation case alleging that NAPOCOR filed its Complaint for eminent domain not for the legitimate aim of pursuing NAPOCOR's business and purpose but to legitimize a patently illegal possession and at the same time continue dictating its own valuation of the property. Said motion was however, later withdrawn by Mangondato (id., pp. 37-39 and 47). "In the meanwhile, the commissioners filed their respective reports. On July 28, 1992, Commissioner Doromal filed his report recommending a fair market value of P300.00 per square meter as of November 23, 1978, (id., pp. 11-27). On August 6, 1992, Commissioners Alawi and Ali filed their joint report recommending a fair market value of P1,000.00 per square meter as of 1992 (id., pp. 40-42). "After the parties filed their respective comments to the commissioners' reports, on August 21, 1992, the lower court rendered its decision denying Mangondato recovery of possession of the property but ordering NAPOCOR to pay a monthly rent of P15,000.00 from 1978 up to July 1992 with 12% interest per annum and condemning the property in favor of NAPOCOR effective July, 1992 upon the payment of P1,000.00 per square meter or a total of P21,995,000.00 as just compensation. "Mangondato filed a Motion For Partial Execution Pending Appeal which was granted by the lower court in an Order dated September 15, 1992 (id., pp. 151-152 and 157-160). However, on appeal by NAPOCOR via a Petition For Certiorari in CA-G.R. SP No. 28971 to this Court, said Order was annulled and set aside (Rollo, pp. 30-37). "NAPOCOR filed a Motion For Reconsideration of the decision alleging that the fair market value of the property at the time it was taken allegedly in 1978 is P40.00 per square meter. After Mangondato filed his Opposition To Motion For Reconsideration the lower court denied NAPOCOR's motion for reconsideration in an Order dated September 15, 1992 (Records, Civil Case No. 610-92, pp. 145-149). "In the meanwhile, on August 7, 1992, Mangondato filed an Ex-Parte Manifestation To Correct Clerical Error of Description of Property submitting that Lot 3 which does not form part of the subject property was included in the Complaint because of a clerical error inadvertently committed by the typist who continuously copied the description of the property covered by Transfer Certificate of Title No. T-378-A, and thus praying that the position of the Complaint describing Lot 3 be deleted (Records, Civil Case No. 605-92, p. 22). "On August 12, 1992, the intervenors filed their Motion For Intervention and Intervention claiming interest against each of the parties on the ground that Lot 3 which is included in the Complaint has since been conveyed by Mangondato to their predecessors-in-interest and that they are entitled to just compensation from NAPOCOR should the lower court decide that NAPOCOR is entitled to expropriate the entire area described in the Complaint (id., pp. 23-34). "In an Order dated August 19, 1992 the lower court granted intervenor's Motion For Intervention (id., p. 72). "On August 25, 1992, the lower court ordered the deletion of the portion in the Complaint describing Lot 3 and declared that intervenors' Motion For Intervention has become moot (id., p. 82). "On October 13, 1992 the intervenors filed their Motion To Reconsider The Order Of August 25, 1992 and The Decision Dated August 21, 1992 which was however denied by the lower court in an Order dated November 26, 1992 (id., pp. 162-184)." The Issues Two errors were raised before this Court by the petitioner, thus: 8 "ASSIGNMENT OF ERRORS

THE RESPONDENT COURT ERRED IN AFFIRMING THAT THE JUST COMPENSATION FOR THE PROPERTY IS ITS VALUE IN 1992, WHEN THE COMPLAINT WAS FILED, AND NOT ITS VALUE IN 1978, WHEN THE PROPERTY WAS TAKEN BY PETITIONER. THE COURT ERRED IN FIXING THE VALUE OF JUST COMPENSATION AT P1,000.00 PER SQUARE METER INSTEAD OF P40.00 PER SQUARE METER." The petitioner summarized the two issues it raised by asking "whether or not the respondent court was justified in deviating from the well-settled doctrine that just compensation is the equivalent of the value of the property taken for public use reckoned from the time of taking." 9 In his Comment, private respondent worded the issues as follows: 10 ". . . As stated by the respondent court, Napocor, in its appeal '. . . avers that the taking of the proerty (sic) should not be reckoned as of the year 1992 when NAPOCOR filed its Complaint for eminent domain but as of the year 1978 when it took possession of the property, and that the just compensation, determined as it should be, on the basis of the value of the property as of 1978, as P40.00 per square meter.' " The petitioner, after failing to persuade both lower courts, reiterated before us its proposition (with cited cases) "that when the taking of property precedes the filing of the judicial proceeding, the value of the property at the time it was taken shall be the basis for the payment of just compensation." 11 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: 12 "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 . . ." (Emphasis supplied). Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence, many rulings 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 into the property, the just compensation is to be ascertained as of the time of the filing of the complaint. 13 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 at the date of the commencement of the expropriation proceedings. In the old case of Provincial Government of Rizal vs. Caro de Araullo, 14 the Court ruled that ". . . 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) for 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 when it was taken, which is the true measure of the damages, or just compensation, and would discourage the construction of important public improvements." In subsequently cases, 15 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, 16 said, ". . . 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 the 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 an 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."

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Simply stated, the exception finds 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 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 owner's 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 petitioner's use of the land. Since the petitioner is claiming an exception to Rule 67, Section 4, 17 it has the burden of 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, 18 in the following words: "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 to oust the owner and deprive him of all beneficial enjoyment of the property." (Emphasis supplied) In this case, the petitioner's 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 respondent's 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. cdll 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: 19 "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 another's 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 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, 20 the City entered into a lease-purchase agreement of a building constructed by the petitioner's 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." (Emphasis 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 affected only after Agus I HE project has been placed in operation." It was only then that petitioner's intent to expropriate became manifest as private respondent disagreed and, barely a month after, filed suit. 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 in 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. 21 Inasmuch as the determination of just compensation in eminent domain cases is a judicial function 22 and factual findings of the Court of Appeals are conclusive on the parties and reviewable only when the case falls within the recognized exception, 23 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. 24 To quote: 25 "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 others being as herein shown: xxx xxx xxx "Commissioner Doromal's 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 latter's chairman in response to NAPOCOR's general counsel's query (id., pp. 128-129)." 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. WHEREFORE, the petition is hereby DISMISSED and the judgment appealed from AFFIRMED, except as to the interest on the monthly rentals, which is hereby reduced from twelve percent (12%) to the legal rate of six percent (6%) per annum. Costs against the petitioner. SO ORDERED. Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur. Footnotes 1.Rollo, pp. 24-40. 2.CA-G.R. CV No. 39353, decided by the Fifth Division composed of J. Cezar D. Francisco, ponente, and JJ. Manuel C. Herrera (chairman) and Buenaventura J. Guerrero. 3.12th Judicial Region, Branch VIII, Marawi City in two (2) consolidated cases: Civil Case No. 605-92 and Civil Case No. 610-92. 4.Rollo, p. 24-A. 5.Ibid., pp. 74 & 93.

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6.Ibid., pp. 24-A-33. 7.Ibid., p. 75. 8.Ibid., p. 10. 9.Ibid., pp. 93-94. 10.Ibid., p. 50. 11.Ibid., p. 94. 12.Section 4, Rule 67 of the Revised Rules of Court. 13B. H. Berkenkotter & Co. vs. Court of Appeals, 216 SCRA 584, 587 (December 14, 1992); Republic of the Philippines vs. Philippine National Bank, 1 SCRA 957 (April 21, 1961). 14.58 Phil. 308, 316 (August 16, 1933). 15.Provincial Government of Rizal vs. Caro de Araullo, supra, at p. 317; Republic of the Philippines vs. Lara, et al., 96 Phil. 170 (November 29, 1954); Alfonso vs. Pasay City, 106 Phil. 1017 (January 30, 1960); Municipality of La Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan, infra. 16.45 SCRA 235 (May 30, 1972). 17.Supra. 18.Republic vs. Vda. de Castellvi, 58 SCRA 336, 337 (August 15, 1974). 19.Rollo, p. 36. 20.67 Phil. 1 (December 24, 1938). 21.Manila Electric Company vs. Pineda, 206 SCRA 196 (February 13, 1992). 22.National Power Corporation vs. Jocson, 206 SCRA 520 (February 25, 1992). 23.Coca-Cola Bottlers Philippines, Inc. vs. Court of Appeals, 229 SCRA 533 (January 27, 1994). 24.Republic vs. Court of Appeals, 154 SCRA 428, 430 (September 30, 1987). 25.Rollo, pp. 36-38.

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MUNICIPALITY OF LA CARLOTA vs. NAWASA

FIRST DIVISION [G.R. No. L-20232. September 30, 1964.] MUNICIPALITY OF LA CARLOTA, plaintiff-appellee, vs. NATIONAL WATERWORKS and SEWERAGE AUTHORITY (NAWASA), defendant-appellant. Rodolfo M. Uriarte, Rolando N. Medalla, Ernesto Ma. Uriarte and Abundio B. Huelar for plaintiffappellee. Government Corporate Counsel for defendant-appellant. SYLLABUS 1.CONSTITUTIONAL LAW; TRANSFER TO NAWASA OF JURISDICTION, SUPERVISION AND CONTROL OF MUNICIPAL WATERWORKS IS UNCONSTITUTIONAL. The contention of the NAWASA that although ownership of municipal waterworks may not be validly transferred to the NAWASA under Republic Act No. 1383, yet said law authorizes the NAWASA to "have jurisdiction, supervision and control" over all government owned Municipal Waterworks, is held untenable because it is hard to conceive how the jurisdiction, supervision and control of a municipality's waterworks system may be vested in the NAWASA without destroying the integrity of the said municipality's right of dominion. Ownership is nothing without the inherent rights of possession, control and enjoyment. Where 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. (Taada & Fernando, Constitution of the Philippines, 4th ed., Vol. I, 215-216). DECISION MAKALINTAL, J p: The municipality of La Carlota was the owner of the waterworks system serving its inhabitants until the enactment of Republic Act No. 1383 on June 28, 1955, when by virtue of its provisions the National Waterworks and Sewerage Authority (NAWASA) assumed ownership and took over the supervision, administration and control of the said system, including the collection of water rentals from the consumers. On April 5, 1950 the municipality commenced this action in the Court of First Instance of Negros Occidental against the NAWASA for recovery and accounting. On September 27, 1961 judgment was rendered as follows: "EN VIRTUD DE LO EXPUESTO, el Juzgado falla esta causa condenado a la demandada para que restituya al demandante el dominio y titulo, asi como la posesion, supervision, administracion y control del sistema de traida de aguas del Municipio de la Carlota. "Se ordena, asimismo, a la demandada para que dentro del plazo de 30 dias a contar desde le fecha en que esta decision quede firme y ejecutoria, rinda una cuenta detallada de todas las cantidades cobradas por ella de los consumidores del sistema durante el periodo de itempo desde que se hizo cargo del sistema hasta la fecha en que actualmente haya restituido al demandante dicho sistema. "Por falta de pruebas, se sobresee la reconvencion interpuesta por la demandada. "Las costas del juicio se tasaran en contra de la demandada." In the present appeal by the defendant it assigns one error in the judgment, namely, "in holding that the possession, administration, supervision and maintenance of the La Carlota water system is vested in the municipality of La Carlota . . . even on the assumption that ownership of said system belongs to the municipality." The appellant concedes, on the authority of City of Baguio vs. NAWASA, 57 O.G. No. 9, p. 1584, and City of Cebu vs. NAWASA, G.R. No. L-12892, April 20, 1960, that in so far as Republic Act No. 1383 transfers ownership of the water system of the appellee to the appellant the said Act is unconstitutional because it does not provide for the payment of just compensation as required by the Constitution, the transfer being in the nature of expropriation of private (patrimonial) property. However, it is contended that although ownership may not thus be transferred, the law (Sec. 1) also authorizes the NAWASA to have jurisdiction, supervision and control over . . . all areas now served by existing government owned waterworks and sewerage and drainage systems

within the boundaries of cities, municipalities, and municipal districts in the Philippines . . . "On this ground the appellant prays that the judgment appealed from be reversed in part and that the return to it of the "possession, supervision, administration and control of the La Carlota waterworks system" be ordered. In City of Cebu vs. NAWASA, supra, which was an action for declaratory relief, this Court did not squarely pass upon the question of whether, apart from ownership, the defendant could exercise "jurisdiction, supervision and control" over the Cebu waterworks system without paying just compensation. It is true that the trial court upheld the exercise of such right in its decision, leaving for future determination and question of what would constitute acts of ownership and what would be considered as an exercise of jurisdiction, supervision and control, but this Court on appeal did not treat the particular matter as an issue before it and neither passed upon it nor rendered a ruling thereon. That case is therefore no authority for the position of the appellant here as presented in its lone assignment of error. Neither may it find support in the statement in our decision in City of Baguio vs. NAWASA, supra, that "unless this aspect of the law (concerning payment of just compensation is clarified and appellee is given its due compensation, appellee cannot be deprived of its property even if appellant desires to take over the administration in line with the spirit of the law." This Court, in said decision, took note of the authorities cited by the appellant therein to sustain its contention that Congress has the power, without impairing vested rights, to transfer property of a municipal corporation from one government agency to another as long as such property continues to be devoted to its original purpose. But the decision precisely pointed out that those authorities are not in point, since the transfers involved therein were merely for purposes of administration, the ownership of and benefits from the property being retained by the municipal corporations concerned, whereas the clear intent of Republic Act No. 1383 'is to affect a real transfer of the ownership of the waterworks . . . and does not merely encompass a transfer of administration." It is hard to conceive how the jurisdiction, supervision and control of the appellee's waterworks system may be vested in the appellant without destroying the integrity of the appellee's right of dominion. Ownership is nothing without the inherent rights of possession, control and enjoyment. Where 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. Taada & Fernando, Constitution of the Philippines, 4th ed., Vol. 1, 215-216. Such deprivation would be the certain consequence if, as prayed for by the appellant, it should be allowed to assume jurisdiction supervision and control over the waterworks system of the appellee. That would be little less than all assumption of ownership itself and not of mere administration. The judgment appealed from is affirmed, with costs. Bengzon, C.J., Bautista Angelo, Reyes, J.B.L., Paredes, Dizon, Regala, Bengzon, J.P. and Zaldivar, JJ., concur. Concepcion and Barrera, JJ., took no part.

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REPUBLIC vs PLDT
EN BANC [G.R. No. L-18841. January 27, 1969.] REPUBLIC OF THE PHILIPPINES, plaintiff-appellant, vs. PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, defendant-appellant. Solicitor General Arturo A. Alafriz, Assistant Solicitor General Antonio A. Torres and Solicitor Camilo D. Quiason for plaintiff- appellant. Ponce Enrile, Siguion Reyna, Montecillo & Belo for defendant-appellant. SYLLABUS 1.CONSTITUTIONAL LAW; EMINENT DOMAIN; EXPROPRIATION OF PUBLIC SERVICE UTILITIES; PAYMENT OF JUST COMPENSATION LIKE EXPROPRIATION OF REAL PROPERTY. Where the Republic may not compel the PLDT to celebrate a contract with it, the Republic may, in the exercise of the sovereign power of eminent domain, require the telephone company to permit interconnection of the government telephone system and that of the PLDT, as the needs of the government service may require, subject to the payment of just compensation to be determined by the court. 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 the 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 the real property may, through expropriation, be subjected to an easement of right of way. The use of the PLDT's lines and services to allow interservice connection between both telephone systems is not much different. In either case private property is subjected to a burden for public use and benefit. If, under Section 6, Article XIII, of the Constitution, the State may, in the interest of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why the State may not require a public utility to render services in the general interest, provided just compensation is paid therefor. 2.ID.; ID.; ID.; DISMISSAL OF PETITION BY COURT A QUO NOT PROPER IN INSTANT CASE. The Republic's cause of action to compel the PLDT to execute a contract with the former, through the Bureau, for the use of the facilities of defendant's telephone system throughout the Philippines under such terms and conditions as the court might consider reasonable, is predicated upon the radio telephonic isolation of Bureau's facilities from the outside World if the severance of the interconnection were to be carried out by the PLDT, thereby preventing the Bureau of Telecommunications from properly discharging its functions, to the prejudice of the general public. Save for the prayer to compel the PLDT to enter into a contract (and the prayer is no essential part of the pleading), the averments make out a case for compulsory rendering of interconnecting services by the telephone company upon such terms and conditions as the court may determine to be just. And since the lower court found that both parties "are practically at one that defendant (PLDT) is entitled to reasonable compensation from plaintiff for the reasonable use of the former's telephone facilities" the lower court should have proceeded to treat the case as one of condemnation of such services independently of contract and proceeded to determine the just and reasonable compensation for the same, instead of dismissing the petition. 3.ID.; ID.; ID.; CFI AND NOT THE PSC HAS AUTHORITY TO EXERCISE JURISDICTION IN EXPROPRIATION OF PUBLIC UTILITIES. The plea that the court of first instance had no jurisdiction to entertain the petition and that the proper forum for the action was the Public Service Commission, under the law, the Public Service Commission has no authority to pass upon actions for the taking of private property under the sovereign right of eminent domain. Furthermore, while the defendant telephone company is a public utility corporation whose franchise, equipment and other properties are under the jurisdiction, supervision and control of the Public Service Commission, yet the plaintiff's telecommunications network is a public service owned by the Republic and operated by an instrumentality of the National Government, hence, exempt under Section 14 of the Public Service Act, from such jurisdiction, supervision and control.

The Bureau of Telecommunications was created in pursuance of a state policy reorganizing the government offices and the determination of state policy is not vested in the Commission. 4.REMEDIAL LAW; ESTOPPEL; GOVERNMENT NOT ESTOPPED BY THE MISTAKE OF ITS AGENTS. Section 79, subsection (b), of Executive Order No. 94, Series of 1947 does not limit the Bureau of Telecommunications to non-commercial activities or prevents it from serving the general public. 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. It is a well-known rule that erroneous application and enforcement of the law by public officers do not block subsequent correct application of the statute and that the Government is never estopped by mistake or error on the part of its agents. 5.CIVIL LAW; CONTRACTS; FREEDOM TO STIPULATE TERMS AND CONDITIONS; PARTIES CAN NOT BE COERCED. Parties can not be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and condition is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation or undue influence (Articles 1306, 1336, 1337, Civil Code of the Philippines). 6.ID.; ID.; FRAUDULENT CONTRACT OR UNFAIR COMPETITION NOT PRESENT IN CASE AT BAR. The theses that the Bureau's commercial services constituted unfair competition, and that the Bureau was guilty of fraud and abuse under its contract, are untenable: (1) the competition is merely hypothetical, the demand for telephone service being very much more than the supposed competitors can supply, (2) the PLDT franchise is non-exclusive, that it is well-known that defendant PLDT is unable to adequately cope with the current demands for telephone service and that its right to just compensation for the services rendered to the Government telephone system and its users is herein recognized and preserved, and (3) when the Bureau of Telecommunications subscribed to the trunk lines, defendant knew or should have known that their use by the subscriber was more or less public and all embracing in nature and the acceptance by the defendant of the payment of rentals, despite its knowledge that the plaintiff had extended the use of the trunk lines to commercial purposes, implies assent by the defendant to such extended use. To uphold the PLDT's contention is to subordinate the needs of the general public to the right of the PLDT to derive profit from the future expansion of its services under its non-exclusive franchise. DECISION REYES, J.B.L., J p: Direct appeals, upon a joint record on appeal, by both the plaintiff and the defendant from the dismissal, after hearing, by the Court of First Instance of Manila, in its Civil Case No. 35805, of their respective complaint and counterclaims, but making permanent a preliminary mandatory injunction therefore issued against the defendant on the inter-connection of telephone facilities owned and operated by said parties. The plaintiff, Republic of the Philippines, is a political entity exercising governmental powers through its branches and instrumentalities, one of which is the Bureau of Telecommunications. That office was created on 1 July 1947, under Executive Order No. 94, with the following powers and duties, in addition to certain powers and duties formerly vested in the Director of Posts: "SEC. 79.The Bureau of Telecommunications shall exercise the following powers and duties: "(a)To operate and maintain existing wire-telegraph and radio- telegraph offices, stations, and facilities, and those to be established to restore the pre-war telecommunication service under the Bureau of Posts, as well as such additional offices or stations as may hereafter be established to provide telecommunication service in places requiring such service; "(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

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arrangements with the present owners or operators thereof as may be agreed upon to the satisfaction of all concerned; "(c)To prescribe, subject to approval by the Department Head, equitable rates of charges for messages handled by the system and/or for timecalls and other services that may be rendered by said system; "(d)To establish and maintain coastal stations to serve ships at sea or aircrafts and, when public interest so requires, to engage in the international telecommunication service in agreement with other countries desiring to establish such service with the Republic of the Philippines; and "(e)To abide by all existing rules and regulations prescribed by the International Telecommunication Convention relative to the accounting, disposition and exchange of messages handled in the international service, and those that may hereafter be promulgated by said convention and adhered to by the Government of the Republic of the Philippines." 1 The defendant, Philippine Long Distance Telephone Company (PLDT for short), is a public service corporation holding a legislative franchise, Act 3426, as amended by Commonwealth Act 407, to install, operate and maintain a telephone system throughout the Philippines and to carry on the business of electrical transmission of messages within the Philippines and between the Philippines and the telephone systems of other countries. 2 The RCA Communications, Inc., (which is not a party to the present case, but has contractual relations with the parties) is an American corporation authorized to transact business in the Philippines and is the grantee, by assignment, of a legislative franchise to operate a domestic station for the reception and transmission of long distance wireless messages (Act 2178) and to operate broadcasting and radio-telephone and radio-telegraphic communications services (Act 3180) 3 Sometime in 1933, the defendant, PLDT, and the RCA Communications, Inc., entered into an agreement whereby telephone messages, coming from the United States and received by RCA's domestic station, could automatically be transferred to the lines of PLDT; and vice-versa, for calls collected by the PLDT for transmission from the Philippines to the United States. The contracting parties agreed to divide the tolls, as follows: 25% to PLDT and 75% to RCA. The sharing was amended in 1941 to 30% for PLDT and 70% for RCA, and again amended in 1947 to a 50-50 basis. The arrangement was later extended to radio-telephone messages to and from European and Asiatic countries. Their contract contained a stipulation that either party could terminate it on a 24-month notice to the other. 4On 2 February 1956, PLDT gave notice to RCA to terminate their contract on 2 February 1956. 5 Soon after its creation in 1947, the Bureau of Telecommunications set up its own Government Telephone System by utilizing its own appropriation and equipment and by renting trunk lines of the PLDT to enable government offices to call private parties. 6 Its application for the use of these trunk lines was in the usual form of applications for telephone service, containing a statement, above the signature of the applicant, that the latter will abide by the rules and regulations of the PLDTwhich are on file with the Public Service Commission. 7 One of the many rules prohibits the public use of the service furnished the telephone subscriber for his private use. 8 The Bureau has extended its services to the general public since 1948, 9 using the same trunk lines owned by, and rented from, the PLDT, and prescribing its (the Bureau's) own schedule of rates. 10 Through these trunk lines, a Government Telephone System (GTS) subscriber could make a call to a PLDT subscriber in the same way that the latter could make a call to the former. On 5 March 1958, the plaintiff, through the Director of Telecommunications, entered into an agreement with RCA Communications, Inc., for a joint overseas telephone service whereby the Bureau would convey radio-telephone overseas calls received by RCA's station to and from local residents. 11 Actually, they inaugurated this joint operation on 2 February 1958, under a "provisional" agreement. 12 On 7 April 1958, the defendant, Philippine Long Distance Telephone Company, complained to the Bureau of Telecommunications that said bureau was violating the conditions under which their Private Branch Exchange (PBX) is interconnected with the PLDT's facilities, referring to the rented trunk lines, for the Bureau had used the trunk lines not only for the use of government offices but

even to serve private persons or the general public, in competition with the business of the PLDT; and gave notice that if said violations were not stopped by midnight of 12 April 1958, the PLDT would sever the telephone connections. 13 When the PLDT received no reply, it disconnected the trunk lines being rented by the Bureau at midnight on 12 April 1958. 14 The result was the isolation of the Philippines, on telephone services, from the rest of the world, except the United States. 15 At that time, the Bureau was maintaining 5,000 telephones and had 5,000 pending applications for telephone connection. 16 The PLDT was also maintaining 60,000 telephones and had also 20,000 pending applications. 17 Through the years, neither of them has been able to fill up the demand for telephone service. The Bureau of Telecommunications had proposed to the PLDT on 8 January 1958 that both enter into an interconnecting agreement, with the government paying (on a call basis) for all calls passing through the interconnecting facilities from the Government Telephone System to the PLDT. 18 The PLDT replied that it was willing to enter into an agreement on overseas telephone service to Europe and Asian countries provided that the Bureau would submit to the jurisdiction and regulations of the Public Service Commission and in consideration of 37 1/2% of the gross revenues. 19 In its memorandum in lieu of oral argument in this Court dated 9 February 1964, on page 8, the defendant reduced its offer to 33 1/3% (1/3) as its share in the overseas telephone service. The proposals were not accepted by either party. On 12 April 1958, plaintiff Republic commenced suit against the defendant, Philippine Long Distance Telephone Company, in the Court of First Instance of Manila (Civil Case No. 35805), praying in its complaint for judgment commanding the PLDT to execute a contract with plaintiff, through the Bureau, for the use of the facilities of defendant's telephone system throughout the Philippines under such terms and conditions as the court might consider reasonable, and for a writ of preliminary injunction against the defendant company to restrain the severance of the existing telephone connections and/or restore those severed. Acting on the application of the plaintiff, and on the ground that the severance of telephone connections by the defendant company would isolate the Philippines from other countries, the court a quo, on 14 April 1958, issued an order for the defendant: "(1) to forthwith reconnect and restore the seventy-eight (78) trunk lines that it has disconnected between the facilities of the Government Telephone System, including its overseas telephone services, and the facilities of defendant; (2) to refrain from carrying into effect its threat to sever the existing telephone communication between the Bureau of Telecommunications and defendant, and not to make connection over its telephone system of telephone calls coming to the Philippines from foreign countries through the said Bureau's telephone facilities and the radio facilities Of RCA Communications, Inc.; and (3) to accept and connect through its telephone system all such telephone calls coming to the Philippines from foreign countries until further order of this Court." On 28 April 1958, the defendant company filed its answer, with counterclaims. It denied any obligation on its part to execute a contract of services with the Bureau of Telecommunications; contested the jurisdiction of the Court of First Instance to compel it to enter into interconnecting agreements, and averred that it was justified to disconnect the trunk lines heretofore leased to the Bureau of Telecommunications under the existing agreement because its facilities were being used in fraud of its rights. The PLDT further claimed that the Bureau was engaging in commercial telephone operations in excess of authority, in competition with, and to the prejudice of, the PLDT, using defendant's own telephone poles, without proper accounting of revenues. After trial, the lower court rendered judgment that it could not compel the PLDT to enter into an agreement with the Bureau because the parties were not in agreement; that under Executive Order 94, establishing the Bureau of Telecommunications, said Bureau was not limited to servicing government offices alone, nor was there any in the contract of lease of the trunk lines, since the PLDT knew, or ought to have known, at the time that their use by the Bureau was to be public throughout the Islands, hence the Bureau was neither guilty of fraud, abuse, or misuse of the

56

poles of the PLDT; and, in view of serious public prejudice that would result from the disconnection of the trunk lines, declared the preliminary injunction permanent, although it dismissed both the complaint and the counterclaims. Both parties appealed. Taking up first the appeal of the Republic, the latter complains of the action of the trial court in dismissing the part of its complaint seeking to compel the defendant to enter into an interconnecting contract with it, because the parties could not agree on the terms and conditions of the interconnection, and of its refusal to fix the terms and conditions therefor. We agree with the court below that parties can not be coerced to enter into a contract where no agreement is had between them as to the principal terms and conditions of the contract. Freedom to stipulate such terms and conditions is of the essence of our contractual system, and by express provision of the statute, a contract may be annulled if tainted by violence, intimidation or undue influence (Articles 1306, 1336, 1337, Civil Code of the Philippines). But the court a quo has apparently overlooked that while the Republic may not compel the PLDT to celebrate a contract with it, the Republic may, in the exercise of the sovereign power of eminent domain, require the telephone company to permit interconnection of the government telephone system and that of the PLDT, as the needs of the government service may require, subject to the payment of just compensation to be determined by the court. 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 the said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of right of way. The use of the PLDT's lines and services to allow interservice connection between both telephone systems is not much different. In either case private property is subjected to a burden for public use and benefit. If under Section 6, Article XIII, of the Constitution, the State may, in the interest of national welfare, transfer utilities to public ownership upon payment of just compensation, there is no reason why the State may not require a public utility to render services in the general interest, provided just compensation is paid therefor. Ultimately, the beneficiary of the interconnecting service would be the users of both telephone systems, so that the condemnation would be for public use. The Bureau of Telecommunications, under Section 78(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; but there is nothing in this Section that would exclude resort to condemnation proceedings where unreasonable or unjust terms and conditions are exacted, to the extent of crippling or seriously hampering the operations of said Bureau. A perusal of the complaint shows that the Republic's cause of action is predicated upon the radio telephonic isolation of the Bureau's facilities from the outside world if the severance of interconnection were to be carried out by the PLDT, thereby preventing the Bureau of Telecommunications from properly discharging its functions, to the prejudice of the general public. Save for the prayer to compel the PLDT to enter into a contract (and the prayer is no essential part of the pleading), the averments make out a case for compulsory rendering of interconnecting services by the telephone company upon such terms and conditions as the court may determine to be just. And since the lower court found that both parties "are practically at one that defendant (PLDT) is entitled to reasonable compensation from plaintiff for the reasonable use of the former's telephone facilities" (Decision, Record on Appeal, page 224), the lower court should have proceeded to treat the case as one of condemnation of such services independently of contract and proceeded to determine the just and reasonable compensation for the same, instead of dismissing the petition. This view we have taken of the true nature of the Republic's petition necessarily results in overruling the plea of defendant- appellant PLDT that the court of first instance had no jurisdiction

to entertain the petition and that the proper forum for the action was the Public Service Commission. That body, under the law, has no authority to pass upon actions for the taking of private property under the sovereign right of eminent domain. Furthermore, while the defendant telephone company is a public utility corporation whose franchise, equipment and other properties are under the jurisdiction, supervision and control of the Public Service Commission (Sec. 13, Public Service Act), yet the plaintiff's telecommunications network is a public service owned by the Republic and operated by an instrumentality of the National Government, hence exempt, under Section 14 of the Public Service Act, from such jurisdiction, supervision and control. The Bureau of Telecommunications was created in pursuance of a state policy reorganizing the government offices "to meet the exigencies attendant upon the establishment of the free and independent Government of the Republic of the Philippines, and for the purpose of promoting simplicity, economy and efficiency in its operation" (Section 1, Republic Act No. 51) and the determination of state policy is not vested in the Commission (Utilities Com. vs. Bartonville Bus Line, 290 Ill. 574; 124 N.E. 373) Defendant PLDT, as appellant, contends that the court below was in error in not holding that the Bureau of Telecommunications was not empowered to engage in commercial telephone business, and in ruling that said defendant was not justified in disconnecting the telephone trunk lines it had previously leased to the Bureau. We find that the court a quo ruled correctly in rejecting both assertions. Executive Order No. 94, Series of 1947, reorganizing the Bureau of Telecommunications, expressly empowered the latter in its Section 79, subsection (b), to "negotiate for, operate and maintain wire telephone or radio telephone communication service throughout the Philippines," and, in subsection (c), "to prescribe subject to approval by the Department Head, equitable rates of charges for messages handled by the system and/or for time calls and other services that may be rendered by the system." Nothing in these provisions limits the Bureau to non-commercial activities or prevents it from serving the general public. 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. It is a well-known rule that erroneous application and enforcement of the law by public officers do not block subsequent correct application of the statute (PLDT vs. Collector of Internal Revenue, 90 Phil. 676), and that the Government is never estopped by mistake or error on the part of its agents (Pineda vs. Court of First Instance of Tayabas, 52 Phil. 803, 807; Benguet Consolidated Mining Co. vs. Pineda, 98 Phil. 711, 724) The theses that the Bureau's commercial services constituted unfair competition, and that the Bureau was guilty of fraud and abuse under its contract, are, likewise, untenable. First, the competition is merely hypothetical, the demand for telephone service being very much more than the supposed competitors can supply. As previously noted, the PLDT had 20,000 pending applications at the time, and the Bureau had another 5,000. The telephone company's inability to meet the demands for service are notorious even now. Second, the charter of the defendant expressly provides: "Sec. 14.The rights herein granted shall not be exclusive, and the rights and power to grant to any corporation, association or person other than the grantee franchise for the telephone or electrical transmission of messages or signals shall not be impaired or affected by the granting of this franchise: " (Act 3436) And third, as the trial court correctly stated, "when the Bureau of Telecommunications subscribed to the trunk lines, defendant knew or should have known that their use by the subscriber was more or less public and all embracing in nature, that is, throughout the Philippines, if not abroad" (Decision, Record on Appeal, page 216) The acceptance by the defendant of the payment of rentals, despite its knowledge that the plaintiff had extended the use of the trunk lines to commercial purposes, continuously since 1948, implies assent by the defendant to such extended use. Since this relationship has been maintained

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for a long time and the public has patronized both telephone systems, and their interconnection is to the public convenience, it is too late for the defendant to claim misuse of its facilities, and it is not now at liberty to unilaterally sever the physical connection of the trunk lines. ". . ., but there is high authority for the position that, when such physical connection has been voluntarily made, under a fair and workable arrangement and guaranteed by contract and the continuous line has come to be patronized and established as a great public convenience, such connection shall not in breach of the agreement be severed by one of the parties. In that case, the public is held to have such an interest in the arrangement that its rights must receive due consideration. This position finds approval in State ex rel. vs. Cadwaller, 172 Ind. 619, 636, 87 N.E. 650, and is stated in the elaborate and learned opinion of Chief Justice Myers as follows: `Such physical connection cannot be required as of right, but if such connection is voluntarily made by contract, as is here alleged to be the case, so that the public acquires an interest in its continuance, the act of the parties in making such connection is equivalent to a declaration of a purpose to waive the primary right of independence, and it imposes upon the property such a public status that it may not be disregarded' citing Mohan v. Mich. Tel. Co., 132 Mich, 242, 93 N.W. 629, and the reasons upon which it is in part made to rest are referred to in the same opinion, as follows: `Where private property is by the consent of the owner invested with a public interest or privilege for the benefit of the public, the owner can no longer deal with it as private property only, but must hold it subject to the rights of the public in the exercise of that public interest or privilege conferred for their benefit.' Allnut v. Inglis (1810) 12 East, 527. The doctrine of this early case is the acknowledged law." (Clinton-Dunn Tel. Co. v. Carolina Tel. & Tel. Co., 74 S.E. 636, 638) It is clear that the main reason for the objection of the PLDT lies in the fact that said appellant did not expect that the Bureau's telephone system would expand with such rapidity as it has done; but this expansion is no ground for the discontinuance of the service agreed upon. The last issue urged by the PLDT as appellant is its right to compensation for the use of its poles for bearing telephone wires of the Bureau of Telecommunications. Admitting that Section 19 of the PLDT charter reserves to the Government "the privilege without compensation of using the poles of the grantee to attach one ten-pin crossarm, and to install, maintain and operate wires of its telegraph system thereon: Provided, however, That the Bureau of Posts shall have the right to place additional cross-arms and wires on the poles of the grantee by paying a compensation, the rate of which is to be agreed upon by the Director of Posts and the grantee; " the defendant counterclaimed for P8,772.00 for the use of its poles by the plaintiff, contending that what was allowed free use, under the aforequoted provision, was one ten-pin cross-arm attachment and only for plaintiff's telegraph system, not for its telephone system; that said Section could not refer to the plaintiff's telephone system, because it did not have such telephone system when defendant acquired its franchise. The implication of the argument is that plaintiff has to pay for the use of defendant's poles if such use is for plaintiff's telephone system and has to pay also if it attaches more than one (1) ten-pin cross-arm for telegraphic purposes. As there is no proof that the telephone wires strain the poles of the PLDT more than the telegraph wires, nor that they cause more damage than the wires of the telegraph system, or that the Government has attached to the poles more than one ten-pin in cross-arm as permitted by the PLDT charter, we see no point in this assignment of error. So long as the burden to be borne by the PLDT poles is not increased, we see no reason why the reservation in favor of the telegraph wires of the government should not be extended to its telephone line, any time that the government decided to engage also in this kind of communication. In the ultimate analysis, the true objection of the PLDT to continue the link between its network and that of the Government is that the latter competes "politically" (sic) with its own telephone services. Considering, however, that the PLDT franchise is non- exclusive; that it is well-known that defendant PLDT is unable to adequately cope with the current demands for telephone service, as shown by the number of pending applications therefor; and that the PLDT's right to just

compensation for the services rendered to the Government telephone system and its users is herein recognized and preserved, the objections of defendant-appellant are without merit. To uphold the PLDT's contention is to subordinate the needs of the general public to the right of the PLDT to derive profit from the future expansion of its services under its non-exclusive franchise. WHEREFORE, the decision of the Court of First Instance, now under appeal, is affirmed, except in so far as it dismisses the petition of the Republic of the Philippines to compel the Philippine Long Distance Telephone Company to continue servicing the Government telephone system upon such terms, and for a compensation, that the trial court may determine to be just, including the period elapsed from the filing of the original complaint or petition. And for this purpose, the records are ordered returned to the court of origin for further hearings and other proceedings not inconsistent with this opinion. No costs. Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Ruiz Castro, Fernando, Capistrano, Teehankee and Barredo, JJ., concur. Footnotes 1.Stipulated by parties (Record on Appeal, pages 70-72) 2.Stipulated by parties (Record on Appeal, pages 70-72) 3.Stipulated by parties (Record on Appeal, pages 70-72) 4.Exhibit "Q", folder of exhibits, pages 1-2, 11, 66-67, 69, 72-73, 82-83, 88. 5.T.s.n., 26 January 1959, page 11. 6.Exhibit "12-A". 7.Partial Stipulation of Facts and its Annex "D", record on appeal, pages 72, 138-139. 8.Exhibit "16", page 49. 9.T.s.n., 9 March 1960, page 9. 10.T.s.n., 9 March 1960, page 57. 11.Annex "M" to Partial Stipulation of Facts, record on appeal, pages 164-177. 12.T.s.n., 9 March 1960, pages 30-31. 13.Annex "P", record on appeal, pages 184-186. 14.Partial Stipulation of Facts, record on appeal, page 78. 15.Decision, record on appeal, pages 221-222. 16.Decision, record on appeal, page 211; Exhibit "3", record of exhibits, page 103; T.s.n., 9 March 1960, pages 56 and 59. 17.Decision, record on appeal, page 211; Exhibit "3", record on exhibits, page 103; T.s.n., 9 March 1960, pages 56 and 59. 18.Partial Stipulation of Facts, record on appeal, page 72. 19.Partial Stipulation of Facts, record on appeal, page 77.

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TELEBAP vs COMELEC
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. SYNOPSIS Section 11 (b) of R.A. No. 6646 prohibits the sale or donation of print space or air time for political ads, except to the Commission on Elections. Petitioners challenge the validity thereof 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. AICHaS Radio and television broadcasting companies 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 or franchise, the exercise of the which may reasonably be burdened with the performance by the grantee of some form of public service, such as providing print space or air time to Comelec. Section 92 of B.P. Blg. 881 must be deemed incorporated in R.A. No. 7252 granting GMA Network, Inc. a franchise and does not constitute denial of due process and that B.P. Blg. 881, 92 is not an invalid amendment of petitioner's franchise but the enforcement of a duty voluntarily assumed by petitioner in accepting a public grant of privilege. An administrative agency cannot, in the exercise of lawmaking, amend a statute of Congress. Therefore 2 of Resolution No. 2983-A of the Comelec providing for payment of just compensation is invalid. B.P. Blg. 881, 92 does not single out radio and television stations in providing free air time. There are important differences in the characteristics of the broadcast media and the print media, which justify their differential treatment for free speech purposes. The freedom of television and radio broadcasting is somewhat lesser in scope than the freedom accorded to newspaper and print media. What the COMELEC is authorized to supervise or regulate by Art. IX-C, 4 of the Constitution, 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. SYLLABUS 1.REMEDIAL LAW; ACTIONS; PARTIES; LOCUS STANDI; LAWYERS OF RADIO AND TELEVISION BROADCASTING COMPANIES WITHOUT STANDING TO QUESTION OPERATION OF SECTION 92 OF B. P. BLG. 881 PROVIDING FREE COMELEC AIR TIME. 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 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 party's 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. 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. 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 party's 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. 2.ID.; ID.; ID.; ID.; OPERATOR OF RADIO AND TV BROADCAST STATIONS WITH STANDING TO CHALLENGE RESOLUTION OF COMELEC PROVIDING FREE AIR TIME. 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. 3.CONSTITUTIONAL LAW; LEGISLATIVE DEPARTMENT; FRANCHISE OF RADIO AND TV STATIONS; SUBJECT TO AMENDMENT, ALTERATION OR REPEAL. 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. 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." 4.ID.; ID.; ID.; COMELEC RESOLUTION PROVIDING FREE COMELEC TIME, AN AMENDMENT THERETO; CASE AT BAR. 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). This provision was carried over with slight modification by the 1978 Election Code (P.D. No. 1296). 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. 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. 5.ID.; ID.; ID.; ID.; RADIO AND TV BROADCAST STATIONS DO NOT OWN THE AIRWAVES; NO PROPERTY TAKEN WHERE THEY WERE REQUIRED TO PROVIDE FREE AIRTIME TO COMELEC. As held in Red Lion Broadcasting Co. v. F.C.C., 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 license 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." As

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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. 6.ID.; ID.; ID.; SECTION 92 OF B.P. BLG. 881, A VALID AMENDMENT OF GMA'S FRANCHISE. 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 petitioner's franchise but the enforcement of a duty voluntarily assumed by petitioner in accepting a public grant of privilege. 7.ADMINISTRATIVE LAW; ADMINISTRATIVE AGENCY; CANNOT IN THE EXERCISE OF LAWMAKING, AMEND A STATUTE OF CONGRESS. 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. 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. 8.CONSTITUTIONAL LAW; BILL OF RIGHTS; EQUAL PROTECTION OF THE LAWS; IMPORTANT DIFFERENCES BETWEEN PRINT AND AIR MEDIA JUSTIFY DIFFERENTIAL TREATMENT FOR FREE SPEECH PURPOSES. 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 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. 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." Petitioners' assertion therefore that 92 of B.P. Blg 881 denies them the equal protection of the law has no basis. 9.ID.; COMMISSION ON ELECTIONS; POWER TO REGULATE; DIFFERENT FROM POWER OF CONGRESS TO PROHIBIT. 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, 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. 10.ID.; LEGISLATIVE DEPARTMENT; SEC. 92 OF B.P. BLG. 881 PROVIDING FREE COMELEC AIRTIME, UPHOLDS THE PEOPLE'S RIGHT TO INFORMATION ON MATTERS OF PUBLIC CONCERN. To affirm the validity of 92 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 people's right to information on matters of public concern. The use of property bears a social function and is subject to the state's 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. ROMERO, J., dissenting opinion: 1.CONSTITUTIONAL LAW; EMINENT DOMAIN; CONSTRUED. The power of eminent domain is a power inherent in sovereignty and requires no constitutional provision to give it force. It is the rightful authority which exists in every sovereignty, to control and regulate those rights of a public nature which pertain to its citizens in common, and to appropriate and control individual property for the public benefit as the public safety, necessity, convenience or welfare demand. The right to appropriate private property to public use, however, lies dormant in the state until legislative action is had, pointing out the occasions, the modes, the conditions and agencies for its appropriation. AECacS 2.ID.; COMMISSION ON ELECTIONS; RESOLUTION GRANTING FREE COMELEC AIR TIME, AN EXERCISE OF EMINENT DOMAIN WITHOUT PAYMENT OF JUST COMPENSATION. Section 92 of BP 881, insofar as it requires radio and television stations to provide Comelec with radio and television time free of charge is a flagrant violation of the constitutional mandate that private property shall not be taken for public use without just compensation. While it is inherent in the State, the sovereign right to appropriate property has never been understood to include taking property for public purposes without the duty and responsibility of ordering compensation to the individual whose property has been sacrificed for the good of the community. There is, of course no question that the taking of the property in the case at bar is for public use, i.e., to ensure that air time is allocated equally among the candidates, however, there is no justification for the taking without payment of just compensation. While Resolution No. 2983-A has provided that just compensation shall be paid for the 30 minutes of prime time granted by the television stations to respondent Comelec, we note that the resolution was passed pursuant to Section 92 of BP 881 which mandates that radio and television time be provided to respondent Comelec free of charge. Since the legislative intent is the controlling element in determining the administrative powers rights, privileges and immunities granted, respondent Comelec may, at any time, despite the resolution passed, compel television and radio stations to provide it with airtime free of charge. 3.ID.; EMINENT DOMAIN; LIMITATIONS. Section 9, Article III of the 1987 Constitution which reads "No private property shall be taken for public use without just compensation," gives us two limitations on the power of eminent domain: (1) the purpose of taking must be for public use and (2) just compensation must be given to the owner of the private property. 4.ID.; ID.; DIFFERENTIATED FROM POLICE POWER. Police power must be distinguished from the power of eminent domain. In the exercise of police power, there is a restriction of property interest to promote public welfare or interest which involves no compensable taking. When the power of eminent domain, however, is exercised, property interest is appropriated and applied to some public purpose necessitating compensation therefor. Traditional distinctions between police power and the power of eminent domain precluded application of both powers at the same time on the same subject. Property condemned under the exercise of police power, on the other hand, is noxious or intended for noxious purpose and, consequently, is not compensable. Police power

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proceeds from the principle that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the rights of the community. Rights of property, like all other social and conventional rights, are subject to reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and regulations established by law as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient. 5.ID.; POLICE POWER; RESTRICTION OF SALE OR DONATION OF AIRTIME DURING CAMPAIGN PERIOD TO COMELEC, AN EXERCISE THEREOF; EXERCISE EXCEEDS LIMITATION. The petition before us is no different from the above-cited case. Insofar as Sec. 92 of BP 881 read in conjunction with Sec. 11(b) of RA 6646 restricts the sale or donation of airtime by radio and television stations during the campaign period to respondent Comelec, there is an exercise of police power for the regulation of property in accordance with the Constitution. To the extent however that Sec. 92 of BP 881 mandates that airtime be provided free of charge to respondent Comelec to be allocated equally among all candidates, the regulation exceeds the limits of police power and should be recognized as a taking. In the case of Pennsylvania Coal Co. v. Mahon, Justice Holmes laid down the limits of police power in this wise, "The general rule is that while property may be regulated to a certain extent, if the regulation goes too far, will be recognized as a taking." 6.ID.; EMINENT DOMAIN; ACQUISITION OF TITLE OR POSSESSION OF PROPERTY, NOT ESSENTIAL TO TAKING. While the power of eminent domain often results in the appropriation of title to or possession of property, it need not always be the case. It is a settled rule that neither acquisition nor total destruction of value is essential to taking and it is equally in cases where title remains with the private owner that inquiry should be made to determine whether the impairment of a property is merely regulated or amounts to a compensable taking. A regulation which deprives any person profitable use of his property constitutes a taking and entitles him to compensation unless the invasion of right is so slight as to permit the regulation to be justified under the police power. Similarly, a police regulation which unreasonably restricts the right to use business property for business purposes, amounts to taking of private property and the owner may recover therefor. It is also settled jurisprudence that acquisition of right of way easement falls within the purview of eminent domain. aTcSID 7.ID.; ID.; COMPENSABLE TAKING; MANIFEST IN LOSS OF EARNING. While there is no taking or appropriation of title to, and possession of the expropriated property in the case at bar, there is compensable taking inasmuch as there is a loss of the earnings for the airtime which the petitioner-intervenors are compelled to donate. It is a loss which, to paraphrase Philippine Press Institute v. Comelec, could hardly be considered "de minimis" if we are to take into account the monetary value of the compulsory donation measured by the current advertising rates of the radio and television stations. 8.ID.; ID.; PRINT MEDIA NOT COMPELLED TO DONATE FREE SPACE. In the case of Philippine Press Institute v. Comelec, we had occasion to state that newspapers and other print media are not compelled to donate free space to respondent Comelec inasmuch as this would be in violation of the constitutional provision that no private property shall be taken for public use without just compensation. 9.ID.; ID.; ID.; RULE APPLICABLE TO RADIO AND TV STATIONS; REASON. We find no cogent reason why radio and television stations should be treated any differently considering that their operating expenses as compared to those of the newspaper and other print media publishers involve; considerably greater amount of financial resources. The fact that one needs a franchise from government to establish a radio and television station while no license is needed to start newspaper should not be made a basis for treating broadcast media any differently from the print media in compelling the former to "donate" airtime to respondent Comelec. While no franchises and rights are granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires, this provides no license

for government to disregard the cardinal rule that corporations with franchises are as much entitled to due process and equal protection of laws guaranteed under the Constitution. SHaATC VITUG, J., separate opinion: 1.CONSTITUTIONAL LAW; LEGISLATIVE DEPARTMENT; BATAS PAMBANSA BLG. 881; A LEGITIMATE EXERCISE OF POLICE POWER. I assent in most part to the well-considered opinion written by Mr. Justice Vicente V. Mendoza in his ponencia particularly, in holding that petitioner TELEBAP lacks locus standi in filing the instant petition and in declaring that Section 92 of Batas Pambansa Blg. 881 is a legitimate exercise of police power of the State. 2.ID.; STATE; POLICE POWER; STANDARDS FOR LAWFUL EXERCISE. In this case, the assailed law, in my view, has not failed in meeting the standards set forth for its lawful exercise, i.e., (a) that its utilization is demanded by the interests of the public, and (b) that the means employed are reasonably necessary, and not unduly oppressive, for the accomplishment of the purpose and objectives of the law. 3.ID.; LEGISLATIVE DEPARTMENT; FRANCHISE TO BROADCAST MEDIA; A PRIVILEGE BURDENED WITH RESPONSIBILITIES. The grant of franchise to broadcast media is a privilege burdened with responsibilities. While it is, primordially, a business enterprise, it nevertheless, also addresses in many ways certain imperatives of public service. In Stone vs. Mississippi (101, U.S. 814, cited in Cruz, Constitutional Law, 1995 ed., p. 40), a case involving a franchise to sell lotteries which petitioner claims to be a contract which may not be impaired, the United States Supreme Court opined: ". . . (T)he Legislature cannot bargain away the police power of a State. Irrevocable grants of property and franchises may be made if they do not impair the supreme authority to make laws for the right government of the State; but no Legislature can curtail the power of its successors to make such laws as they may deem proper in matters of police . . . 4.ID.; COMMISSION ON ELECTIONS; SECTION 2 OF RESOLUTION NO. 2983-A REQUIRING FREE COMELEC AIR TIME, A VALID EXERCISE OF POLICE POWER. I cannot consider COMELEC Resolution No. 2983-A, particularly Section 2 thereof, as being in contravention of B.P. No. 881. There is nothing in the law that prohibits the COMELEC from itself procuring airtime, perhaps longer than that which can reasonably be allocated, if it believes that in so opting, it does so for the public good. aHECST PANGANIBAN, J., dissenting opinion: 1.POLITICAL LAW; EMINENT DOMAIN; PRINT MEDIA CANNOT BE REQUIRED TO DONATE ADVERTISING SPACE TO COMELEC WITHOUT PAYMENT OF JUST COMPENSATION. In Philippine Press Institute Inc. (PPI) vs. Commission on Elections this Court ruled that print media companies cannot be required to donate advertising space, free of charge to the Comelec for equal allocation among candidates, on the ground that such compulsory seizure of print space is equivalent to a proscribed taking of private property for public use without payment of just compensation. 2.CONSTITUTIONAL LAW; LEGISLATIVE DEPARTMENT; FRANCHISE; ONCE GRANTED BECOMES PROPERTY OF THE GRANTEE WHICH CANNOT BE TAKEN WITHOUT PAYMENT OF JUST COMPENSATION. In stamping unbridled donations with its imprimatur, the majority overlooks the twofold nature and purpose of a franchise: other than serving the public benefit which is subject to government regulation, it must also be to the franchise holder's advantage. Once granted, a franchise (not the air lanes) together with concomitant private rights, becomes property of the grantee. It is regarded by law precisely as other property, and, as any other property, it is safeguarded by the Constitution from arbitrary revocation or impairment. The rights under a franchise can be neither taken nor curtailed for public use or purpose, even by the government as the grantor, without payment of just compensation as guaranteed under our fundamental law. The fact that the franchise relates to public use or purpose does not entitle the state to abrogate or impair its use without just compensation. 3.STATUTORY CONSTRUCTION; STATUTES; CONSIDERED VAGUE AND INVALID IF THEY LEAVE LAW ENFORCERS UNBRIDLED DISCRETION IN CARRYING OUT THEIR PROVISIONS. As a rule, a statute may be said to be vague and invalid if "it leaves law enforcers (in this case, the Comelec) unbridled discretion in carrying out its provisions and becomes an arbitrary flexing of the government muscle." (People vs. Nazario, 165 SCRA 186, 195, August 31, 1988) AScHCD

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4.CONSTITUTIONAL LAW; LEGISLATIVE DEPARTMENT; LIMITATIONS ON LEGISLATIVE REGULATIONS OF PUBLIC UTILITIES. "[L]egislative regulation of public utilities must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or appropriating private property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise." The power to regulate is subject to these constitutional limits. Consequently, "rights under a franchise cannot be taken or damaged for a public use without the making of just compensation therefor." To do so is clearly beyond the power of the legislature to regulate. 5.ID.; BILL OF RIGHTS; EQUAL PROTECTION OF LAWS; VIOLATION THEREOF MANIFEST WHERE BROADCAST STATIONS WERE COMPELLED TO DONATE FREE TIME WHILE MAKING PAYMENT TO PRINT MEDIA ADS. Smacking of undisguised discrimination is the fact that in PPI vs. Comelec, this Court has required payment of print media ads but, in this case, compels broadcast stations to donate their end product on a massive scale. The simplistic distinction given that radio and TV stations are mere grantees of government franchises while newspaper companies are not does not justify the grand larceny of precious air time. This is a violation not only of private property, but also of the constitutional right to equal protection itself. The proffered distinction between print and broadcast media is too insignificant and too flimsy to be a valid justification for the discrimination. The print and broadcast media are equal in the sense that both derive their revenues principally from paid ads. They should thus be treated equally by the law in respect of such ads. EHSAaD DECISION MENDOZA, J p: 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. dctai 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 party's 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 party's 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. Petitioner's 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 Petitioner's 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: xxx xxx xxx (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

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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 year's elections, it stands to lose P58,980,850.00 in view of COMELEC's 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 vessel's 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.

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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." 20As 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 Panganiban's 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 people's 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 community's 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." Holmes's 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 petitioner's 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 petitioner's 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 petitioner's franchise but the enforcement of a duty voluntarily assumed by petitioner in accepting a public grant of privilege. Thus far, we have confined the discussion to the provision of 92 of B.P. Blg. 881 for free air time without taking into account COMELEC Resolution No. 2983-A, 2 of which states: SEC. 2.Grant of "Comelec Time". Every radio broadcasting and television station operating under franchise shall grant the Commission, upon payment of just compensation, at least thirty (30) minutes of prime time daily, to be known as "Comelec Time", effective February 10, 1998 for candidates for President, Vice-President and Senators, and effective March 27, 1998, for candidates for local elective offices, until May 9, 1998. (Emphasis added) This is because the amendment providing for the payment of "just compensation" is invalid, being in contravention of 92 of B.P. Blg. 881 that radio and television time given during the period of

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the campaign shall be "free of charge." Indeed, Resolution No. 2983 originally provided that the time allocation 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 State's 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. xxx xxx xxx . . . 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 program 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

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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 people's right to information on matters of public concern. The use of property bears a social function and is subject to the state's 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. dctai Narvasa, C .J ., Regalado, Davide, Jr., Bellosillo, Melo, Puno, Kapunan, Martinez and Quisumbing, JJ., concur. Separate Opinions ROMERO, J ., dissenting: Section 92 of BP 881 constitutes taking of private property without just compensation. The power of eminent domain is a power inherent in sovereignty and requires no constitutional provision to give it force. It is the rightful authority which exists in every sovereignty, to control and regulate those rights of a public nature which pertain to its citizens in common, and to appropriate and control individual property for the public benefit as the public safety, necessity, convenience or welfare demand. 1 The right to appropriate private property to public use, however, lies dormant in the state until legislative action is had, pointing out the occasions, the modes, the conditions and agencies for its appropriation. 2 Section 92 of BP 881 states Sec. 92.Comelec Time. The Comelec 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 and television stations are hereby amended so as to provide radio and television time free of charge during the period of election campaign. Pursuant to Section 92 of BP 881, respondent COMELEC on March 3, 1998 passed Resolution 2983-A the pertinent provision of which reads as follows: dctai Sec. 2.Grant of "Comelec Time." Every radio broadcasting and television station operating under franchise shall grant the Commission, upon payment of just compensation, at least thirty (30) minutes of prime time daily, to be known as "Comelec Time", effective February 10, 1998 for candidates for President, Vice-President and Senators, and effective March 27, 1998, for candidates for local elective offices, until May 9, 1998. Section 92 of BP 881, insofar as it requires radio and television stations to provide Comelec with radio and television time free of charge is a flagrant violation of the constitutional mandate that private property shall not be taken for public use without just compensation. While it is inherent in the State, the sovereign right to appropriate property has never been understood to include taking property for public purposes without the duty and responsibility or ordering compensation to the individual whose property has been sacrificed for the good of the community. Hence, Section 9 Article III of the 1987 Constitution which reads "No private property shall be taken for public use without just compensation," gives us two limitations on the power of eminent domain: (1) the purpose of taking must be for public use and (2) just compensation must be given to the owner of the private property. There is, of course, no question that the taking of the property in the case at bar is for public use, i.e. to ensure that air time is allocated equally among the candidates, however, there is no justification for the taking without payment of just compensation. While Resolution No. 2983-A has provided that just compensation shall be paid for the 30 minutes of prime time granted by the television stations to respondent Comelec, we not that the resolution was passed pursuant to Section 92 of BP 881 which mandates that radio and television time be provided to respondent Comelec free of charge. Since the legislative intent is the controlling element in determining the administrative powers, rights, privileges and immunities granted, 3 respondent Comelec may, at

any time, despite the resolution passed, compel television and radio stations to provide it with airtime free of charge. Apparently, Sec 92 of BP 881 justifies such taking under the guise of police power regulation which cannot be validly done. Police power must be distinguished from the power of eminent domain. In the exercise of police power, there is a restriction of property interest to promote public welfare or interest which involves no compensable taking. When the power of eminent domain, however, is exercised, property interest is appropriated and applied to some public purpose, necessitating compensation therefor. Traditional distinctions between police power and the power of eminent domain precluded application of both powers at the same time on the same subject. 4 Hence, in the case of City of Baguio v. NAWASA, 5 the Court held that a law requiring the transfer of all municipal waterworks systems to NAWASA in exchange for its assets of equivalent value involved the exercise of eminent domain because the property involved was wholesome and intended for public use. Property condemned under the exercise of police power, on the other hand, is noxious or intended for noxious purpose and, consequently, is not compensable. Police power proceeds from the principle that every holder of property, however absolute and unqualified may be his title, holds it under the implied liability that his use of it shall not be injurious to the equal enjoyment of others having an equal right to the enjoyment of their property, nor injurious to the right of the community. Rights of property, like all other social and conventional rights, are subject to reasonable limitations in their enjoyment as shall prevent them from being injurious, and to such reasonable restraints and regulations established by law as the legislature, under the governing and controlling power vested in them by the constitution, may think necessary and expedient. 6 In the case of Small Landowners of the Philippines Inc. v. Secretary of Agrarian Reform, we found occasion to note that recent trends show a mingling of the police power and the power of eminent domain, with the latter being used as an implement of the former like the power of taxation. Citing the cases of Berman v. Parker 7and Penn Central Transportation co. v. New York City 8 where owners of the Grand Central Terminal who were not allowed to construct a multistory building to preserve a historic landmark were allowed certain compensatory rights to mitigate the loss caused by the regulation, this Court in Small Landowners of the Philippines, Inc. case held that measures prescribing retention limits for landowners under the Agrarian Reform Law involved the exercise of police power for the regulation of private property in accordance with the constitution. And, where to carry out the regulation, it became necessary to deprive owners of whatever lands they may own in excess of the maximum area allowed, the Court held that there was definitely a taking under the power of eminent domain for which payment of just compensation was imperative. The petition before us is no different from the above-cited case. Insofar as Sec 92 of BP 881 read in conjunction with Sec 11(b) of RA 6646 restricts the sale or donation of airtime by radio and television stations during the campaign period to respondent Comelec, there is an exercise of police power for the regulation of property in accordance with the Constitution. To the extent however that Sec 92 of BP 881 mandates that airtime be provided free of charge to respondent Comelec to be allocated equally among all candidates, the regulation exceeds the limits of police power and should be recognized as a taking. In the case of Pennsylvania Coal Co. v. Mahon, 9 Justice Holmes laid down the limits of police power in this wise," The general rule is that while property may be regulated to a certain extent, if the regulation goes too far, it will be recognized as a taking." While the power of eminent domain often results in the appropriation of title to or possession of property, it need not always be the case. It is a settled rule that neither acquisition of title nor total destruction of value is essential to taking and it is usually in cases where title remains, with the private owner that inquiry should be made to determine whether the impairment of a property is merely regulated or amounts to a compensable taking. A regulation which deprives any person of the profitable use of his property constitutes a taking and entitles him to compensation unless the invasion of rights is so slight as to permit the regulation to be justified

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under the police power. Similarly, a police regulation which unreasonably restricts the right to use business property for business purposes, amounts to taking of private property and the owner may recover therefor. 10 It is also settled jurisprudence that acquisition of right of way easement falls within the purview of eminent domain. 11 While there is no taking or appropriation of title to, and possession of the expropriated property in the case at bar, there is compensable taking inasmuch as there is a loss of the earnings for the airtime which the petitioner-intervenors are compelled to donate. It is a loss which, to paraphrase Philippine Press Institute v. Comelec,12 could hardly be considered "de minimis" if we are to take into account the monetary value of the compulsory donation measured by the current advertising rates of the radio and television stations. In the case of Philippine Press Institute v. Comelec, 13 we had occasion to state that newspapers and other print media are not compelled to donate free space to respondent Comelec inasmuch as this would be in violation of the constitutional provision that no private property shall be taken for public use without just compensation. We find no cogent reason why radio and television stations should be treated any differently considering that their operating expenses as compared to those of the newspaper and other print media publishers involve considerably greater amount of financial resources. The fact that one needs a franchise from government to establish a radio and television station while no license is needed to start a newspaper should not be made a basis for treating broadcast media any differently from the print media in compelling the former to "donate" airtime to respondent Comelec. While no franchises and rights are granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires, 14 this provides no license for government to disregard the cardinal rule that corporations with franchises are as much entitled to due process and equal protection of laws guaranteed under the Constitution. ACCORDINGLY, I vote to declare Section 92 of BP 881 insofar as it mandates that radio and television time be provided to respondent Comelec free of charge UNCONSTITUTIONAL. Purisima, J ., concurs. VITUG, J ., concurring and dissenting: I assent in most part to the well-considered opinion written by Mr. Justice Vicente V. Mendoza in his ponencia, particularly, in holding that petitioner TELEBAP lackslocus standi in filing the instant petition and in declaring that Section 92 of Batas Pambansa Blg. 881 is a legitimate exercise of police power of the State. The grant of franchise to broadcast media is a privilege burdened with responsibilities. While it is, primordially, a business enterprise, it nevertheless, also addresses in many ways certain imperatives of public service. In Stone vs. Mississippi (101, U.S. 814, cited in Cruz, Constitutional Law, 1995 ed., p. 40.), a case involving a franchise to sell lotteries which petitioner claims to be a contract which may not be impaired, the United States Supreme Court opined. " . . . (T)he Legislature cannot bargain away the police power of a State. Irrevocable grants of property and franchises may be made if they do not impair the supreme authority to make laws for the right government of the State; but no Legislature can curtail the power of its successors to make such laws as they may deem proper in matters of police. . . dctai In this case, the assailed law, in my view, has not failed in meeting the standards set forth for its lawful exercise, i.e., (a) that its utilization is demanded by the interests of the public, and (b) that the means employed are reasonably necessary, and not unduly oppressive, for the accomplishment of the purposes and objectives of the law. I cannot consider COMELEC Resolution No. 2983-A, particularly Section 2 thereof, as being in contravention of B.P. No. 881. There is nothing in the law that prohibits the COMELEC from itself procuring airtime, perhaps longer than that which can reasonably be allocated, if it believes that in so opting, it does so for the public good. I vote to DISMISS the petition. PANGANIBAN, J ., dissenting:

At issue in this case is the constitutionality of Section 92 of the Omnibus Election Code 1 which compels all broadcast stations in the country "to provide radio and television time, free of charge, during the period of the [election] campaigns," which the Commission on Elections shall allocate "equally and impartially among the candidates . . ." Petitioners contend, and I agree, that this legal provision is unconstitutional because it confiscates private property without due process of law and without payment of just compensation, and denies broadcast media equal protection of the law. In Philippine Press Institute, Inc. (PPI) vs. Commission on Elections, 2 this Court ruled that print media companies cannot be required to donate advertising space,free of charge, to the Comelec for equal allocation among candidates, on the ground that such compulsory seizure of print space is equivalent to a proscribed taking of private property for public use without payment of just compensation. 3 The Court's majority in the present case, speaking through the distinguished Mr. Justice Vicente V. Mendoza, holds, however, that the foregoing PPI doctrine appliesonly to print media, not to broadcast (radio and TV ) networks, arguing that "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." In other words, the majority theorizes that the forced donation of air time to the Comelec is a means by which the State gets compensation for the grant to the franchise and/or the use of the air lanes. With all due respect, I disagree. The majority is relying on a theoretical distinction that does not make any real difference. Theory must yield to reality. I respectfully submit the following arguments to support my dissent: 1.The State does not own the airwaves and broadcast frequencies. It merely allocates, supervises and regulates their proper use. Thus, other than collecting supervision or regulatory fees which it already does, it cannot exact any onerous and unreasonable post facto burdens from the franchise holders, without due process and just compensation. Moreover, the invocation of the "common good" does not excuse the unbridled and clearly excessive taking to a franchisee's property. 2.Assuming arguendo that the State owns the air lanes, the broadcasting companies already pay rental fees to the government for their use. Hence, the seizure of air time cannot be justified by the theory of compensation. 3.Airwaves and frequencies alone, without the radio and television owners' humongous investments amounting to billions of pesos, cannot be utilized for broadcasting purposes. Hence, a forced donation of broadcast time is in actual facta taking of such investments without due process and without payment of just compensation. Let me explain further each of these arguments. I THE STATE DOES NOT OWN AIR LANES; IT MERELY REGULATES THEIR PROPER USE; "COMMON GOOD" DOES NOT EXCUSE UNBRIDLED TAKING. Significantly, the majority does not claim that the State owns the air lanes. It merely contends that "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. A franchise is thus a privilege subject among other things . . . to amendment, alteration or repeal by the Congress when the common good so requires." 4 True enough, a "franchise started out as a 'royal privilege or [a] branch of the King's prerogative, subsisting in the hands of a subject.'" 5 Indeed, while the Constitution expressly provides that "[a]ll 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 other natural resources are owned by the State," it is silent as to the ownership of the airwaves and frequencies. It is then reasonable to say that no one

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owns them. Like the air we breathe and the sunshine that sustains life, the air lanes themselves "are not property because they cannot be appropriated for the benefit of any individual," 6 but are to be used to the best advantage of all. Because, as mentioned earlier, there are more prospective users than frequencies, the State in the exercise of its police power allocates, supervises and regulates their use, so as to derive maximum benefit for the general public. The franchise granted by the legislature to broadcasting companies is essentially for the purpose of putting order in the use of the airwaves by assigning to such companies their respective frequencies. The purpose is not to grant them the privilege of using public property. For, as earlier stated, airwaves are not owned by the government. Accordingly, the National Telecommunications Commission (NTC) was tasked by law to institutionalize this regulation of the air lanes. To cover the administrative cost of supervision and regulation, the NTC levies charges, which have been revised upwards in NTC Memorandum Circular No. 14-8-94 dated August 26, 1994. In accordance with this Circular, Petitioner GMA Network, Inc., for the year 1996, paid the NTC P2,880,591 of which P2,501,776.30 was NTC "supervision and regulation fee," as borne out by its Audited Consolidated Financial Statements for said year, on file with the Securities and Exchange Commission. In short, for its work of allocation, supervision and regulation, the government is adequately compensated by the broadcast media through the payment of fees unilaterally set by the former. Franchisee's Property Cannot Be Taken Without Just Compensation In stamping unbridled donations with its imprimatur, the majority overlooks the twofold nature and purpose of a franchise: other than service the public benefit which is subject to government regulation, it must also be to the franchise holder's advantage. Once granted, a franchise (not the air lanes) together with concomitant private rights, becomes property of the grantee. 7 It is regarded by law precisely as other property and, as any other property, it is safeguarded by the Constitution from arbitrary revocation or impairment. 8 The rights under a franchise can be neither taken nor curtailed for public use or purpose, even by the government as the grantor, without payment of just compensation 9 as guaranteed under our fundamental law. 10 The fact that the franchise relates to public use or purpose does not entitle the state to abrogate or impair its use without just compensation. 11 The majority further claims that, constitutionally, 12 franchises are always subject to alteration by Congress, "when the common good so requires." The question then boils down to this: Does Section 92 of the Omnibus Election Code constitute a franchise modification for the "common good," or an "unlawful taking of private property"? To answer this question, I go back to Philippine Press Institute, Inc. vs. Commission on Elections, where a unanimous Supreme Court held: 13 "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." (Emphasis in original) "Common Good" Does Not Justify Unbridled Taking of Franchisee's Broadcast Time Like the questioned resolution in PPI , Section 92 contains no limit as to the amount and recurrence of the "donation" of air time that Comelec can demand from radio and TV stations. There are no guidelines or standards provided as to the choice of stations, time and frequency of airing, and programs to be aired. Theoretically, Comelec can compel the use of all the air time of a station. The fact that Comelec has not exercised its granted power arbitrarily is immaterial because the law, as worded, admits of unbridled exercise.

"A statute is considered void for overbreadth when 'it offends the constitutional principle that a governmental purpose to control or prevent activities constitutionally subject to state regulations may not be achieved by means which sweep unnecessarily broadly and thereby invade the area of protected freedoms.' (Zwickler v. Koota, 19 L ed 2d 444 [1967]). In a series of decisions this Court has held that, even though the governmental purpose be legitimate and substantial, that purpose cannot be pursued by means that broadly stifle fundamental personal liberties when the end can be more narrowly achieved. The breadth of legislative abridgment must be viewed in the light of less drastic means for achieving the same basic purpose." 14 "In a 1968 opinion, the American Supreme Court made clear that the absence of such reasonable and definite standards in a legislation of its character is fatal. Where, as in the case of the above paragraphs, the majority of the Court could discern 'an overbreadth that makes possible oppressive or capricious application' of the statutory provisions, the line dividing the valid from the constitutionally infirm has been crossed. Such provisions offend the constitutional principle that 'a governmental purpose to control or prevent activities constitutionally subject to state regulation may not be achieved by means which sweep unnecessarily broadly and thereby invade the area of protected freedoms.' "It is undeniable, therefore, that even though the governmental purpose be legitimate and substantial, they cannot be pursued by means that broadly stifle fundamental personal liberties when the end can be more narrowly achieved. For precision of regulation is the touchstone in an area so closely related to our most precious freedoms." 15 As a rule, a statute may be said to be vague and invalid if "it leaves law enforcers (in this case, the Comelec) unbridled discretion in carrying our its provisions and becomes an arbitrary flexing of the government muscle." 16 Moreover, the extent of the actual taking of air time is enormous, exorbitant and unreasonable. In their Memorandum, 17 petitioners allege (and this has not been rebutted at all) that during the 1992 election period, GMA Network has been compelled to donate P22,498,560 worth of advertising revenues; and for the current election period, GMA stands to lose a staggering P58,980,850. Now, clearly and most obviously, these amounts are not inconsequential or de minimis. They constitute arbitrary taking on a grand scale! American jurisprudence is replete with citations showing that "[l]egislative regulation of public utilities must not have the effect of depriving an owner of his property without due process of law, nor of confiscating or appropriating private property without due process of law, nor of confiscating or appropriating private property without just compensation, nor of limiting or prescribing irrevocably vested rights or privileges lawfully acquired under a charter or franchise." The power to regulate is subject to these constitutional limits. 18 Consequently, "rights under a franchise cannot be taken or damaged for a public use without the making of just compensation therefor." 19 To do so is clearly beyond the power of the legislature to regulate. II ASSUMING THAT THE STATE OWNS AIR LANES, BROADCAST COMPANIES ALREADY PAY RENTAL THEREFOR. Let me grant for the moment and for the sake of argument that the State owns the air lanes and that, by its grant of a franchise, it should thus receive compensation for the use of said frequencies. I say, however, that by remitting unreasonably high "annual fees and charges," which as earlier stated amounts to millions of pesos yearly, television stations are in effect paying rental fees for the use (not just the regulation) of said frequencies. Except for the annual inspection conducted by the NTC, no other significant service is performed by the government in exchange for the enormous fees charged the stations. Evidently, the sums collected by the NTC exceed the cost of services performed by it, and are therefor more properly understood as rental fees for the use of the frequencies granted them. 20 Since the use of the air frequencies is already paid for annually by the broadcast entities, there is no basis for the government, through the Comelec, to compel unbridled donation of the air time of said companies without due process and without payment of just compensation. dctai

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In fact, even in the case of state-owned resources referred to earlier like oil, minerals and coal once the license to exploit and develop them is granted to a private corporation, the government can no longer arbitrarily confiscate or appropriate them gratis under the guise of serving the common good. Crude oil, for instance, once explored, drilled, and refined is thereafter considered the property of the authorized explorer (or refiner) which can sell it to the public and even to the government itself. The State simply cannot demand free gasoline for the operation of public facilities even if they benefit the people in general. It still has to pay compensation therefor. III AIRWAVES USELESS WITHOUT HUGE INVESTMENT OF BROADCAST COMPANIES Setting up and operating a credible broadcasting network requires billions of pesos in investments. It is precisely the broadcast licensee's use of a state-granted franchise or privilege which occasions its acquisition of private property in the form of broadcast facilities and its production of air time. These properties are distinct from its franchise. 21 The 1996 Audited Consolidated Balance Sheet of Petitioner GMA, on file with the SEC, shows that its "property and equipment," which it uses in its broadcast function, amount to over one billion pesos or, to be exact, P1,245,741,487. 22 This does not include the cost of producing the programs to be broadcast, talent fees and other aspects of broadcasting. In their Memorandum, 23 petitioners explain that the total cost for GMA to stay on the air (for television) at present is approximately P136,100 per hour, which includes electricity, depreciation, repairs and maintenance, technical facilities, salaries, and so on. The point is: The franchise holders can recover their huge investments only by selling air time to advertisers. This is their "product," their valuable property which Section 92 forcibly takes from them in massive amounts without payment of just compensation. It is too simplistic to say that because the Constitution allows Congress to alter franchises, ergo, an unbridled taking of private property may be allowed. If such appropriation were only, to use the words of PPI vs. Comelec, de minimis or insignificant say, one hour once or twice a month perhaps, it can be justified by the promotion of the "common good." But a taking in the gargantuan amount of over P58 million from Petitioner GMA for the 1998 election season alone is an actual seizure of its private investment, and not at all a reasonable "compensation" or "alteration" for the "common good." Certainly, this partakes of CONFISCATION of private property. What makes the taking of air time even more odious is its ex post facto nature. When the broadcast companies acquired their franchises and set up their expensive facilities, they were not informed of the immensity of the donations they are now compelled to give. dctai Note should be made, too, of the fact that what Section 92 takes away is air time. Air time is the "finished product" after a station uses its own broadcast facilities. The frequency is just the specific "route" or "channel" by which this medium reaches the TV sets of the general public. Technically, therefore, the wholesale alteration by Section 92 of all broadcast franchises would appear unrelated to the compelled donations. While the express modification is in the franchise, what Section 92 really does is that it takes away the end product of the facilities which were set up through the use of the entrepreneurs' investments and the broadcasters' work. EPILOGUE By way of epilogue, I must point out that even Respondent Comelec expressly recognizes the need for just compensation. Thus, Section 2 of its Resolution No. 2983-A states that "[e]very 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' . . ." And yet, even with such a judicious legal position taken by the very agency tasked by the Constitution to administer elections, the majority still insists on an arbitrary seizure of precious property produced and owned by private enterprise. That Petitioner GMA is a viable, even profitable, enterprise 24 is no argument for seizing its profits. The State cannot rob the rich to feed the poor in the guise of promoting the "common good." Truly, the end never justifies the means.

It cannot be denied that the amount and the extent of the air time demanded from GMA is huge and exorbitant, amounting, I repeat, to over P58 million for the 1998 election season alone. If the air time required from "every radio and television station" in the country in the magnitude stated in the aforesaid Comelec Resolution 2983-A is added up and costed, the total would indeed be staggering in several hundred million pesos. Smacking of undisguised discrimination is the fact that in PPI vs. Comelec, this Court has required payment of print media ads but, in this case, compels broadcast stations to donate their end product on a massive scale. The simplistic distinction given that radio and TV stations are mere grantees of government franchises while newspaper companies are not does not justify the grand larceny of precious air time. This is a violation not only of private property, but also of the constitutional right to equal protection itself. The proffered distinction between print and broadcast media is too insignificant and too flimsy to be a valid justification for the discrimination. The print and broadcast media are equal in the sense that both derive their revenues principally from paid ads. They should thus be treated equally by the law in respect of such ads. To sum up, the Bill of Rights of our Constitution expressly guarantees the following rights: 1.No person, whether rich or poor, shall be deprived of property without due process. 25 2.Such property shall not be taken by the government, even for the use of the general public, without first paying just compensation to the owner.26 3.No one, regardless of social or financial status, shall be denied equal protection of the law. 27 The majority, however, peremptorily brushes aside all these sacred guarantees and prefers to rely on the nebulous legal theory that broadcast stations are mere recipients of state-granted franchises which can be altered or withdrawn anytime or otherwise burdened with post facto elephantine yokes. By this short-circuited rationalization, the majority blithely ignores the private entrepreneurs' billion-peso investments and the broadcast professionals' grit and toil in transforming these invisible franchises into merchandisable property; and conveniently forgets the grim reality that the taking of honestly earned media assets is unbridled, exorbitant and arbitrary. Worse, the government, 28 against which these constitutional rights to property were in the first place written, prudently agrees to respect them and to pay adequate compensation for their taking. But ironically, the majority rejects the exemplary observance by the government of the people's rights and insists on the confiscation of their private property. I have always believed that the Supreme Court is the ever vigilant guardian of the constitutional rights of the citizens and their ultimate protector against the tyrannies of their own government. I am afraid that by this unfortunate Decision, the majority, in this instance, has instead converted this honorable and majestic Court into the people's unwitting oppressor. WHEREFORE, I vote to GRANT the petition and to declare Section 92 of the Omnibus Election Code UNCONSTITUTIONAL and VOID. Purisima, J., concurs. Footnotes 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 Ass'n 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

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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.Ed.2d. 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: xxx xxx xxx (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. I HOLMES-LASKI LETTERS 457 (1953), quoted in P. FREUND, A. SUTHERLAND, M. HOWE AND E. BROWN, CONSTITUTIONAL LAW, CASES AND OTHER PROBLEMS 1095 (1978). 23.Art. IX-C, 4. 24.B.P. Blg. 881 took effect on Dec. 3, 1985, whereas R.A. No. 7252 took effect on March 20, 1992. 25.Memorandum for Petitioners, p. 17. 26.Ibid. 27.244 SCRA 272 (1995). 28.In the United States, because of recognition of these differences in the characteristics of news media, it has been held that broadcast stations may be required to give persons subjected to personal attack during discussion of an important public issue the right to reply (Red Lion Broadcasting Corp. v. FCC, 395 U.S. 367, 23 L.Ed.2d 371 (1969)), but a similar "right of reply" is inapplicable to newspapers. It was pointed out that a statute providing for such right "operates as a command in the same sense as a statute or regulation forbidding [the newspaper] to publish specified matter. . . [It] exacts a penalty on the basis of the content of a newspaper. The first phase of the penalty [is] exacted in terms of the cost in printing and in taking up space that could be devoted to other material the newspaper may have preferred to print. . . [Faced with such a penalty,] editors might well conclude that the safe course is to avoid controversy. . . [Thus, the government-enforced] right of access inescapably 'dampens the vigor and limits the variety of public debate.'" (Miami Herald Pub. Co. v. Tornillo, 418 U.S. 241, 4 L.Ed.2d 730 (1974)) 29.Eastern Broadcasting (DYRE) Corporation v. Dans, Jr., 137 SCRA at 635. 30.Id. at 635-636. 31.This provision reads: "The Commission may, during the election period, supervise or regulate the enjoyment or utilization of all franchises or permits for the operation of transportation and other public utilities, media of communication or information, all grants, special privileges, or concessions granted by the Government or any subdivision, agency, or instrumentality thereof, including any government-owned or controlled corporation or its subsidiary. Such supervision or regulation shall aim to ensure equal opportunity, time, and space, and the right to reply, including reasonable, equal rates therefor, for public information campaigns and forums among candidates in connection with the objective of holding free, orderly, honest, peaceful, and credible elections." ROMERO, J., dissenting: 1.Cooley, Thomas. II A Treatise on Constitutional Limitations. pp. 1110. [1927]. 2.Supra at p. 1119. 3.Horack, Frank, Sutherland Statutory Construction, p. 279 [1939]. 4.Association of Small Landowners of the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 343 [1989]. 5.106 Phil. 144. 6.See Cooley, Thomas. II Constitutional Limitations. 8th Ed, pp. 1224 [1927]. 7.348 US 1954 [1954]. 8.438 US 104. 9.260 US 393. 10.Cooley, Thomas. II Constitutional Limitations. pp. 1161 [1927]. 11.Napocor v. CA, 129 SCRA 665 [1984]; Garcia v. CA, 102 SCRA 597 [1981]; Republic v. PLDT, 26 SCRA 620 [1969]. 12.244 SCRA 272 [1995]. 13.Supra. 14.See Section 11, Article XII of the 1987 Constitution. PANGANIBAN, J., dissenting: 1.92 of BP Blg. 881 (Omnibus Election Code) provides:

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"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." 2.244 SCRA 272, May 22, 1995, per Feliciano, J . 3.9, Art. III of the Constitution provides: "Sec. 9.Private property shall not be taken for public use without just compensation." 4.Pp. 6-7, Decision in GR 132922. 5.Finch, adopted by Blackstone in State v. Twin Village Water Co., 98 Me 214, 56 A 763 (1903), cited in Radio Communication of the Philippines, Inc. vs. National Telecommunications Commission, 150 SCRA 450, 457, May 29, 1987. Also in Lim vs. Pacquing, 240 SCRA 649, 678, January 27, 1995. 6.Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines, p. 2, Vol. II, (1992); citing 3 Planiol & Ripert 59. 7.36 Am Jur 2d, 4 Franchises. 8.Ibid., 5. 9.Ibid., 8 citing Los Angeles v. Los Angeles Gas & Electric Corp., 251 US 32, 64 L ed. 121, 40 S Ct 76; United States v. Brooklyn Union Gas Co. (CA 2 NY) 168 F 2d 391; South California Gas Co. v. Los Angeles, 50 Cal 2d 713, 329 P 2d 289. Also in Eight Ave. Coach Corp. v. New York, 286 NY 84, 35 NE 2d 907. 10.See footnote no. 3. 11.36 Am Jur 2d, 8 Franchises, citing Grand Turk Western R. Co. v. South Bend, 227 US 544, 57 L ed. 633, 33 S Ct 303; Wilcox Consolidated Gas Co., 212 US 19, 53 L ed. 382, 29 S Ct 192; Wilmington & W . R. Co. v. Reid, 13 Wall (US) 264, 20 L ed 568; Arkansas State Highway Commission v. Arkansas Power & Light Co.,231 Ark 307, 330 SW 2d 77; and others. 12.11, Art. XII of the Constitution provides: "Sec. 11.No franchise, certificate, or any other form of authorization for the operation of a public utility shall be granted except to citizens of the Philippines or to corporations or associations organized under the laws of the Philippines at least sixty per centum of whose capital is owned by such citizens, nor shall such franchise, certificate or authorization be exclusive in character or for a longer period than fifty years. Neither shall any such franchise or right be granted except under the condition that it shall be subject to amendment, alteration, or repeal by the Congress when the common good so requires. The State shall encourage equity participation in public utilities by the general public. The participation of foreign investors in the governing body of any public utility enterprise shall be limited to their proportionate share in its capital, and all the executive and managing officers of such corporation or association must be citizens of the Philippines. 13.244 SCRA at p. 279. 14.Blo Umpar Adiong v. Comelec, 207 SCRA 712, 719, March 31, 1992, per Gutierrez, J ., cited in Memorandum for Petitioners, p. 15. 15.Gonzales vs. Comelec, 27 SCRA 835, 871, April 18, 1969, per Fernando, J . 16.People vs. Nazario, 165 SCRA 186, 195, August 31, 1988, per Sarmiento, J . 17.See pp. 20-27 for the detailed computation. 18.Agbayani, Aguedo F., Commentaries and Jurisprudence on the Commercial Laws of the Philippines, p. 560, 1993 ed.; citing Fisher vs. Yangco Steamship Company,31 Phil 1, (1915), referring to Chicago etc. R. Co. vs. Minnesota, 134 U.S. 418, Minneapolis Eastern R. Co. vs. Minnesota, 134 U.S. 467, Chicago etc. R. Co. vs.Wellman, 143 U.S. 339, Smyth vs. Ames, 169 U.S. 466, 524, Henderson Bridge Co. vs. Henderson City, 173 U.S. 592, 614. 19.36 Am Jur 2d 732; citing Los Angeles v Los Angles Gas & E. Corp. 251 US 32, 64 L ed 121, 40 S Ct 76; United States v Brooklyn Union Gas Co. (CA2 NY) 168 F2d 391; Southern California Gas Co v. Los Angeles, 50 Cal 2d 713, 329 P2d 289, cert den 359 US 907, 3 L ed 2d 572, 79 S Ct 583.

20.Apart from paying "supervision fees," broadcast media also pay normal taxes, imposts, fees, assessments and other government charges. 21.36 Am Jur 2d pp. 724 and 727; citing Gordon v Appeal Tax Ct. 3 How (US) 133, 11 L ed. 529; Bridgeport v New York & N . H . R. Co., 36 Conn 255; Consolidated Gas Co. v Baltimore, 101 Md 541, 61 A 532. 22.In the case of ABS-CBN Broadcasting Corporation, the amount is much larger: P3,196,912,000, per its Audited Consolidated Financial Report as of December 31, 1996, on file with the SEC. 23.At p. 20. See also Annex B of said Memorandum. 24.This is not to say that all broadcast networks are profitable. A comparative study of their Financial Statements on file with the SEC shows that a majority are not really profitable. 25.1, Art. III of the Constitution. 26.9, Art. III of the Constitution. 27.1, Art. III of the Constitution. 28.As personified in this case by the Comelec.

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NAPOCOR vs IBRAHIM
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 p: Petitioner National Power Corporation (NPC) filed this Petition for Review on Certiorari, seeking to nullify the May 30, 2008 Decision 1 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 NPC's 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: SEHaTC 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 attorney's 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 NPC's 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 attorney's 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 attorney's 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; CDScaT 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 attorney's 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 attorney's 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 attorney's fees are REDUCED to P6,887,757.40 and P50,000.00, respectively. CETDHA 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 ORDERED 8 The above decision was affirmed by this Court on June 29, 2007 in G.R. No. 168732, viz.:

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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 NPC's 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 CAG.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 NPC's 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 NPC's petition for certiorari. Rejecting NPC's argument, the CA declared that this Court's 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 NPC's 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-ofway 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 TEAICc NPC is now before us faulting the CA for dismissing the former's 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 NPC's 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 Court's 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 decision's 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 Court's 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 Court's Decision. On the contrary, a perusal of the subject Decision yields to this Court the unmistakable sense that the High Court intended [NPC] to pay the full value of the subject property as just compensation without ordering the transfer o[f] respondents' title to the land. This is patent from the following language of the High Court as quoted by [NPC] itself: In disregarding this procedure and failing to recognize respondents' ownership of the sub-terrain portion, petitioner took a risk and exposed itself to greater liability with the passage of time. It must be emphasized that the acquisition of the easement is not without expense. The underground tunnels impose limitations on respondents' use of the property for an indefinite period and deprive them of its ordinary use. Based upon the foregoing, respondents are clearly entitled to the payment of just compensation. Notwithstanding the fact that [NPC] only occupies the sub-terrain portion, it is liable to pay not merely an easement but rather the full compensation for land. This is so because in this case, the nature of the easement practically deprives the owners of its normal beneficial use. Respondents, as the owners of the property thus expropriated, are entitled to a just compensation which should be neither more nor less, whenever it is possible to make the assessment, than the money equivalent of said property. 14 DcCHTa 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, inRepublic v. PLDT thus held that: "Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why said power may not be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession. It is unquestionable that real property may, through expropriation, be subjected to an easement of right-of-way." However, a simple right-of-way easement transmits no rights, except the easement. Vines Realty retains full ownership and it is not totally deprived of the use of the land. It can continue doing what it wants to do with the land, except those that would result in contact with the wires. 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 NPC's acquisition of an easement of right-of-way on the lands of respondents amounted to expropriation of the portions of the latter's 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 DTAIaH In Camarines Norte Electric Cooperative, Inc. v. Court of Appeals 19 and National Power Corporation v. Manubay Agro-Industrial Development Corporation, 20 this Court sustained the award of just compensation equivalent to the fair and full value of the property even if petitioners

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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 termarbitrary, 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 NPC's 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. Corona, Velasco, Jr., Peralta and Del Castillo, ** JJ., concur. 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.

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SUMULONG vs GUERRERO
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. DECISION CORTES, J p: On December 5, 1977 the National Housing Authority (NHA) 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. llcd 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 1224, 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 case 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, rearrangement 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 valid exercise of the power of eminent domain is a flexible and evolving concept influenced by changing conditions. In this jurisdiction, the statutory and judicial trend has been summarized as follows: 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 e., 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

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applies to the Philippines. We have never been a laissez faire State. And the necessities which impel the exertion of sovereign power are an 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. II, 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, Emphasis 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 all who need it, all at once. prLL 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 "[s]eriously concerned that, despite the efforts of Governments at the national and local levels and of international organizations, the living 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" falls within the confines of "public use". It is, particularly important to draw attention to paragraph (d) of Pres. Dec. No. 1224 which should be construed in relation with the preceding three paragraphs. Provisions on economic opportunities inextricably linked with low-cost housing, or slum clearance, relocation and resettlement, or slum improvement emphasize the public purpose of the project. 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 1 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 Lungsod 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 FY 1974-1977, p. 357]. Up to the present, housing "still remains to be out of the reach of a sizable proportion of the population" [NEDA, MEDIUM-TERM PHILIPPINE DEVELOPMENT PLAN 1987-1992, p. 240]. llcd 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 FY 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 small lots . . ." In J.M. Tuason Co., Inc. v. 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 v. 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 v. 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 v. 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 majority 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

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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 unequities 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 v. 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 Authority v. Dulay(G.R. No. 59603, April 29, 1987) for being encroachments on judicial prerogatives. This Court abandoned the ruling in National Housing Authority v. 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 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 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 inform 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. cdll 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.

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MANOSCA vs COURT OF APPEALS

FIRST DIVISION [G.R. No. 106440. January 29, 1996.] ALEJANDRO MANOSCA, ASUNClON MANOSCA and LEONICA MANOSCA, petitioners, vs. HON. COURT OF APPEALS, HON. BENJAMIN V. PELAYO, Presiding Judge, RTC-Pasig, Metro Manila, Branch 168, HON. GRADUACION A. REYES CLARAVAL, Presiding Judge, RTC-Pasig, Metro Manila, Branch 71, and REPUBLIC OF THE PHILIPPINES, respondents. Melecio Virgilio Emata Law Office for petitioners. The Solicitor General for respondents. SYLLABUS 1.POLITICAL LAW; INHERENT POWER OF THE STATE; EMINENT DOMAIN; CONCEPT. Eminent domain, also often referred to as expropriation and, with less frequency, as condemnation, is, like police power and taxation, an inherent power of sovereignty. It need not be clothed with any constitutional gear to exist; instead, provisions in our Constitution on the subject are meant more to regulate, rather than to grant, the exercise of the power. Eminent domain is generally so described as "the highest and most exact idea of property remaining in the government" that may be acquired for some public purpose through a method in the nature of a forced purchase by the State. It is a right to take or reassert dominion over property within the state for public use or to meet a public exigency. It is said to be an essential part of governance even in its most primitive form and thus inseparable from sovereignty. The only direct constitutional qualification is that "private property shall not be taken for public use without just compensation." This proscription is intended to provide a safeguard against possible abuse and so to protect as well the individual against whose property the power is sought to be enforced. 2.ID.; ID.; ID.; THE GUIDELINES SET BY THE SUPREME COURT IN GUIDO VS. RURAL PROGRESS ADMINISTRATION WERE NOT MEANT TO BE PRECLUSIVE IN NATURE AND THE POWER OF EMINENT DOMAIN SHOULD NOT BE UNDERSTOOD AS BEING CONFINED ONLY TO EXPROPRIATION OF VAST TRACTS OF LAND AND LANDED ESTATES. The court, in Guido, merely passed upon the issue of the extent of the President's power under Commonwealth Act No. 539 to, specifically, acquire private lands for subdivision into smaller home lots or farms for resale to bona fide tenants or occupants. It was in this particular context of the statute that the Court had made the pronouncement. The guidelines in Guido were not meant to be preclusive in nature and, most certainly, the power of eminent domain should not now be understood as being confined only to the expropriation of vast tracts of land and landed estates. cdasia 3.ID.; ID.; ID.; TRADITIONAL CONCEPT OF "PUBLIC USE" EXPANDED. The validity of the exercise of the power of eminent domain for traditional purposes is beyond question; it is not at all to be said, however, that public use should thereby be restricted to such traditional uses. The idea that "public use" is strictly limited to clear cases of "use by the public" has long been discarded. 4.ID.; ID.; ID.; SIGNIFICANT FACTOR TO BE CONSIDERED IN EMINENT DOMAIN IS THE PRINCIPAL OBJECTIVE OF THE EXERCISE OF THE POWER AND NOT THE CASUAL CONSEQUENCES THAT MIGHT FOLLOW FROM SUCH EXERCISE. The attempt to give some religious perspective to the case deserves little consideration, for what should be significant is the principal objective of, not the casual consequences that might follow from the exercise of the power. The purpose in setting up the marker is essentially to recognize the distinctive contribution of the late Felix Manalo to the culture of the Philippines, rather than to commemorate his founding and leadership of the Iglesia ni Cristo. The practical reality that greater benefit may be derived by members of the Iglesia ni Cristo than by most others could well be true but such a peculiar advantage still remains to be merely incidental and secondary in nature. Indeed, that only a few would actually benefit from the expropriation of property does not necessarily diminish the essence and character of public use. cdasia DECISION VITUG, J p:

In this appeal, via a petition for review on certiorari, from the decision 1 of the Court of Appeals, dated 15 January 1992, in CA-G.R. SP No. 24969 (entitled "Alejandro Manosca, et al. v. Hon. Benjamin V. Pelayo, et al."), this Court is asked to resolve whether or not the "public use" requirement of Eminent Domain is extant in the attempted expropriation by the Republic of a 492-square-meter parcel of land so declared by the National Historical Institute ("NHI") as a national historical landmark. The facts of the case are not in dispute. llcd Petitioners inherited a piece of land located at P. Burgos Street, Calzada, Taguig, Metro Manila, with an area of about four hundred ninety-two (492) square meters. When the parcel was ascertained by the NHI to have been the birthsite of Felix Y. Manalo, the founder of Iglesia Ni Cristo, it passed Resolution No. 1, Series of 1986, pursuant to Section 4 2 of Presidential Decree No. 260, declaring the land to be a national historical landmark. The resolution was, on 06 January 1986, approved by the Minister of Education, Culture and Sports. Later, the opinion of the Secretary of Justice was asked on the legality of the measure. In his Opinion No. 133, Series of 1987, the Secretary of Justice replied in the affirmative; he explained: "According to your guidelines, national landmarks are places or objects that are associated with an event, achievement, characteristic, or modification that makes a turning point or stage in Philippine history. Thus, the birthsite of the founder of the Iglesia ni Cristo, the late Felix Y. Manalo, who, admittedly, had made contributions to Philippine history and culture has been declared as a national landmark. It has been held that places invested with unusual historical interest is a public use for which the power of eminent domain may be authorized. . . . In view thereof, it is believed that the National Historical Institute as an agency of the Government charged with the maintenance and care of national shrines, monuments and landmarks and the development of historical sites that may be declared as national shrines, monuments and/or landmarks, may initiate the institution of condemnation proceedings for the purpose of acquiring the lot in question in accordance with the procedure provided for in Rule 67 of the Revised Rules of Court. The proceedings should be instituted by the Office of the Solicitor General in behalf of the Republic." Accordingly, on 29 May 1989, the Republic, through the Office of the Solicitor-General, instituted a complaint for expropriation 3 before the Regional Trial Court of Pasig for and in behalf of the NHI alleging, inter alia, that: "Pursuant to Section 4 of Presidential Decree No. 260, the National Historical Institute issued Resolution No. 1, Series of 1986, which was approved on January, 1986 by the then Minister of Education, Culture and Sports, declaring the above described parcel of land which is the birthsite of Felix Y. Manalo, founder of the 'Iglesia ni Cristo,' as a National Historical Landmark. The plaintiff perforce needs the land as such national historical landmark which is a public purpose." At the same time, respondent Republic filed an urgent motion for the issuance of an order to permit it to take immediate possession of the property. The motion was opposed by petitioners. After a hearing, the trial court issued, on 03 August 1989, 4 an order fixing the provisional market (P54,120.00) and assessed (P16,236.00) values of the property and authorizing the Republic to take over the property once the required sum would have been deposited with the Municipal Treasurer of Taguig, Metro Manila. Petitioners moved to dismiss the complaint on the main thesis that the intended expropriation was not for a public purpose and, incidentally, that the act would constitute an application of public funds, directly or indirectly, for the use, benefit, or support of Iglesia ni Cristo, a religious entity, contrary to the provision of Section 29(2), Article VI, of the 1987 Constitution. 5 Petitioners sought, in the meanwhile, a suspension in the implementation of the 03rd August 1989 order of the trial court. On 15 February 1990, following the filing of respondent Republic of its reply to petitioners' motion seeking the dismissal of the case, the trial court issued its denial of said motion to dismiss. 6 Five (5) days later, or on 20 February 1990, 7 another order was issued by the trial court, declaring moot and academic the motion for reconsideration and/or suspension of the order of 03 August 1989 with the rejection of petitioners' motion to dismiss. Petitioners' motion for the

78

reconsideration of the 20th February 1990 order was likewise denied by the trial court in its 16th April 1991 order. 8 Petitioners then lodged a petition for certiorari and prohibition with the Court of Appeals. In its now disputed 15th January1992 decision, the appellate courtdismissed the petition on the ground that the remedy of appeal in the ordinary course of law was an adequate remedy and that the petition itself, in any case, had failed to show any grave abuse of discretion or lack of jurisdictional competence on the part of the trial court. A motion for the reconsideration of the decision was denied in the 23rd July 1992 resolution of the appellate court. LexLib We begin, in this present recourse of petitioners, with a few known postulates. Eminent domain, also often referred to as expropriation and, with less frequency, as condemnation, is, like police power and taxation, an inherent power of sovereignty. It need not be clothed with any constitutional gear to exist; instead, provisions in our Constitution on the subject are meant more to regulate, rather than to grant, the exercise of the power. Eminent domain is generally so described as "the highest and most exact idea of property remaining in the government" that may be acquired for some public purpose through a method in the nature of a forced purchase by the State. 9 It is a right to take or reassert dominion over property within the state for public use or to meet a public exigency. It is said to be an essential part of governance even in its most primitive form and thus inseparable from sovereignty. 10 The only direct constitutional qualification is that "private property shall not be taken for public use without just compensation." 11This proscription is intended to provide a safeguard against possible abuse and so to protect as well the individual against whose property the power is sought to be enforced. Petitioners assert that the expropriation has failed to meet the guidelines set by this Court in the case of Guido v. Rural Progress Administration, 12 to wit: (a) the size of the land expropriated; (b) the large number of people benefited; and, (c) the extent of social and economic reform. 13 Petitioners suggest that we confine the concept of expropriation only to the following public uses, 14 i.e., the cdasia ". . . taking of property for military posts, roads, streets, sidewalks, bridges, ferries, levees, wharves, piers, public buildings including schoolhouses, parks, playgrounds, plazas, market places, artesian wells, water supply and sewerage systems, cemeteries, crematories, and railroads." This view of petitioners is much too limitative and restrictive. The court, in Guido, merely passed upon the issue of the extent of the President's power under Commonwealth Act No. 539 to, specifically, acquire private lands for subdivision into smaller home lots or farms for resale to bona fide tenants or occupants. It was in this particular context of the statute that the Court had made the pronouncement. The guidelines in Guido were not meant to be preclusive in nature and, most certainly, the power of eminent domain should not now be understood as being confined only to the expropriation of vast tracts of land and landed estates. 15 The term "public use," not having been otherwise defined by the constitution, must be considered in its general concept of meeting a public need or a public exigency. 16 Black summarizes the characterization given by various courts to the term; thus: "Public Use. Eminent domain. The constitutional and statutory basis for taking property by eminent domain. For condemnation purposes, 'public use' is one which confers some benefit or advantage to the public; it is not confined to actual use by public. It is measured in terms of right of public to use proposed facilities for which condemnation is sought and, as long as public has right of use, whether exercised by one or many members of public, a 'public advantage' or 'public benefit' accrues sufficient to constitute a public use. Montana Power Co. vs. Bokma, Mont. 457 P.2d 769, 772, 773. "Public use, in constitutional provisions restricting the exercise of the right to take private property in virtue of eminent domain, means a use concerning the whole community as distinguished from particular individuals. But each and every member of society need not be equally interested in such use, or be personally and directly affected by it; if the object is to satisfy a great public want or exigency, that is sufficient. Rindge Co. vs. Los Angeles County, 262 U.S. 700,

43 S.Ct. 689, 692, 67 L. Ed. 1186. The term may be said to mean public usefulness, utility, or advantage, or what is productive of general benefit. It may be limited to the inhabitants of a small or restricted locality, but must be in common, and not for a particular individual. The use must be a needful one for the public, which cannot be surrendered without obvious general loss and inconvenience. A 'public use' for which land may be taken defies absolute definition for it changes with varying conditions of society, new appliances in the sciences, changing conceptions of scope and functions of government, and other differing circumstances brought about by an increase in population and new modes of communication and transportation. Katz v. Brandon, 156 Conn., 521, 245 A.2d 579,586." 17 The validity of the exercise of the power of eminent domain for traditional purposes is beyond question; it is not at all to be said, however, that public use should thereby be restricted to such traditional uses. The idea that "public use" is strictly limited to clear cases of "use by the public" has long been discarded. ThisCourt in Heirs of Juancho Ardona v. Reyes, 18 quoting from Berman v. Parker (348 U.S. 25; 99 L. ed. 27), held: "We do not sit to determine whether a particular housing project is or is not desirable. The concept of the public welfare is broad and inclusive. See DayBrite Lighting, Inc. v. Missouri, 342 US 421, 424, 96 L. Ed. 469, 472, 72 S Ct 405. The values it represents are spiritual as well as physical, aesthetic as well as monetary. It is within the power of the legislature to determine that the community should be beautiful as well as healthy, spacious as well as clean, well-balanced as well as carefully patrolled. In the present case, the Congress and its authorized agencies have made determinations that take into account a wide variety of values. It is not for us to reappraise them. If those who govern the District of Columbia decide that the Nation's Capital should be beautiful as well as sanitary, there is nothing in the Fifth Amendment that stands in the way. cdasia "Once the object is within the authority of Congress, the right to realize it through the exercise of eminent domain is clear. For the power of eminent domain is merely the means to the end. See Luxton v. North River Bridge Co. 153 US 525, 529, 530, 38 L. ed. 808, 810, 14 S Ct 891; United States v. Gettysburg Electric R. Co. 160 US 668, 679, 40 L. ed. 576, 580, 16 S Ct 427." It has been explained as early as Sea v. Manila Railroad Co. 19 that: ". . . A historical research discloses the meaning of the term 'public use' to be one of constant growth. As society advances, its demands upon the individual increase and each demand is a new use to which the resources of the individual may be devoted. . . . for 'whatever is beneficially employed for the community is a public use'." Chief Justice Enrique M. Fernando states: "The taking to be valid must be for public use. There was a time when it was felt that a literal meaning should be attached to such a requirement. Whatever project is undertaken must be for the public to enjoy, as in the case of streets or parks. Otherwise, expropriation is not allowable. It is not so any more. As long as the purpose of the taking is public, then the power of eminent domain comes into play. As just noted, the constitution in at least two cases, to remove any doubt, determines what is public use. One is the expropriation of lands to be subdivided into small lots for resale at cost to individuals. The other is the transfer, through the exercise of this power, of utilities and other private enterprise to the government. It is accurate to state then that at present whatever may be beneficially employed for the general welfare satisfies the requirement of public use." 20 Chief Justice Fernando, writing the ponencia in J.M. Tuason & Co. vs. Land Tenure Administration, 21 has viewed the Constitution a dynamic instrument and one that "is not to be construed narrowly or pedantically" so as to enable it "to meet adequately whatever problems the future has in store". Fr. Joaquin Bernas, a noted constitutionalist himself, has aptly observed that what, in fact, has ultimately emerged is a concept of public use which is just as broad as "public welfare".22 Petitioners ask: But "(w)hat is the so-called unusual interest that the expropriation of (Felix Manalo's) birthplace become so vital as to be a public use appropriate for the exercise of the power of eminent domain" when only members of the Iglesia ni Cristo would benefit? This attempt to give some religious perspective to the case deserves little consideration, for what

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should be significant is the principal objective of, not the casual consequences that might follow from, the exercise of the power. The purpose in setting up the marker is essentially to recognize the distinctive contribution of the late Felix Manalo to the culture of the Philippines, rather than to commemorate his founding and leadership of the Iglesia ni Cristo. The practical reality that greater benefit may be derived by members of the Iglesia ni Cristo than by most others could well be true but such a peculiar advantage still remains to be merely incidental and secondary in nature. Indeed, that only a few would actually benefit from the expropriation of property does not necessarily diminish the essence and character of public use. 23 Petitioners contend that they have been denied due process in the fixing of the provisional value of their property. Petitioners need merely to be reminded that what the law prohibits is the lack of opportunity to be heard; 24 contrary to petitioners' argument, the records of this case are replete with pleadings 25 that could have dealt, directly or indirectly, with the provisional value of the property. Petitioners, finally, would fault respondent appellate court in sustaining the trial court's order which considered inapplicable the case of Noble v. City of Manila. 26Both courts held correctly. The Republic was not a party to the alleged contract of exchange between the Iglesia ni Cristo and petitioners which (the contracting parties) alone, not the Republic, could properly be bound. All considered, the Court finds the assailed decision to be in accord with law and jurisprudence. WHEREFORE, the petition is DENIED. No costs. cdtai SO ORDERED Padilla, Bellosillo, Kapunan and Hermosisima, Jr., JJ, concur. Footnotes 1.Penned by Justice Nathanael De Pano, Jr., with the concurrence of Justices Luis Victor and Fortunato Vailoces. 2."The National Museum and the National Historical Commission are hereby vested with the right to declare other such historical and cultural sites as National Shrines, Monuments, and/or Landmarks, in accordance with the guidelines set forth in R.A. 4846 and the spirit of this Decree." 3.Rollo, pp. 77-82. 4.Rollo, pp. 66-67. 5.Sec. 29. . . . (2)No public money or property shall be appropriated, applied, paid, or employed, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, sectarian institution, or system of religion, or of any priest, preacher, minister, or other religious teacher, or dignitary as such, except when such priest, preacher, minister or dignitary is assigned to the armed forces, or to any penal institution, or government orphanage or leprosarium. 6.Rollo, pp. 68-69. 7.Rollo, p. 70. cdasia 8.Rollo, pp. 71-76. 9.Black's Law Dictionary, 6th ed., p. 523. 10.Visayan Refining Company vs. Camus, 40 Phil. 550. 11.Sec. 9, Art. III, 1987 Constitution. 12.84 Phil. 847. 13.Rollo, pp. 38-39. 14.Rollo, p. 42. 15.See Province of Camarines Sur v. Court of Appeals, 222 SCRA 173. 16.See U.S. vs. Toribio, 15 Phil. 85. 17.Black's Law Dictionary, p. 1232. 18.125 SCRA 220. 19.42 Phil. 102. 20.Enrique Fernando, The Constitution of the Philippines, 2nd ed., pp. 523-524. 21.31 SCRA 413. 22.Joaquin Bernas, The Constitution of the Republic of the Philippines, Vol. 1, 1987 ed., p. 282.

23.Philippine Columbian Association v. Panis, 228 SCRA 668. 24.Capuno v. Jaramillo, 234 SCRA 212. 25.Those pleadings include: (a)An urgent motion that the hearing on the fixing of the property's provisional value and the taking of possession by the Republic over the same be held in abeyance until after petitioners shall have received a copy of the complaint and summons (Rollo, pp. 86-88); (b)A motion to dismiss, dated 08 August 1989, seeking to dismiss the complaint instituted by the Republic on the ground that the expropriation in question is not for a public purpose and contrary to Section 29(a), Article VI, of the 1987 Constitution (Rollo, pp. 90-91); (c)A motion for reconsideration and/or suspension of the implementation of the 03 August 1989 Order (Rollo, pp. 93-95); and (d)A motion for reconsideration of the orders dated 15 and 20 February, 1990 (Rollo, pp. 103111). 26.The Noble case holds that where there is a valid and subsisting contract between the owners of the property and the expropriating authority, there is no need or reason for expropriation (67 Phil. 1).

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MCIAA vs LOZADA
EN BANC [G.R. No. 176625. February 25, 2010.] MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and AIR TRANSPORTATION OFFICE, petitioners, vs. 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. DECISION NACHURA, J p: 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. HSEcTC 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 Lozada's 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, 1947 the 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. SATDEI

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 propose 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 1960's, 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; HTCISE (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 HSacEI In their Answer, petitioners asked for the immediate dismissal of the complaint. They specifically denied that the Government had made assurances to reconvey Lot No. 88 to respondents in the event that the property would no longer be needed for airport operations. Petitioners instead asserted that the judgment of condemnation was unconditional, and respondents were, therefore, not entitled to recover the expropriated property notwithstanding non-use or abandonment thereof. After pretrial, but before trial on the merits, the parties stipulated on the following set of facts: (1)The lot involved is Lot No. 88-SWO-25042 of the Banilad Estate, situated in the City of Cebu, containing an area of One Thousand Seventeen (1,017) square meters, more or less; (2)The property was expropriated among several other properties in Lahug in favor of the Republic of the Philippines by virtue of a Decision dated December 29, 1961 of the CFI of Cebu in Civil Case No. R-1881; (3)The public purpose for which the property was expropriated was for the purpose of the Lahug Airport; DCASEc (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

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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, Benardo 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. cCTAIE 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 . . . 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 . . . land is expropriated for a public street and the expropriation is granted upon condition that the city can only use it for a public street, then, of course, when the city abandons its use as a public street, it returns to the former owner, unless there is some statutory provision to the contrary. . . . . If, upon the contrary, however, the decree of expropriation gives to the entity a fee simple title, then, of course, the land becomes the absolute property of the expropriator, whether it be the State, a province, or municipality, and in that case the non-user does not have the effect of defeating the title acquired by the expropriation proceedings. . . . . HECTaA 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. . . . . 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, 9thus 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 caCEDA 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 andReichling 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 Government's 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 ECcTaS

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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 owner's right to justice, fairness, and equity. In light of these premises, we now expressly hold that the taking of private property, consequent to the Government's 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 EHSIcT Lozada's testimony is cogent. An octogenarian widower-retiree and a resident of Moon Park, California since 1974, he testified that government representatives verbally promised him and his late wife while the expropriation proceedings were on-going that the government shall return the property if the purpose for the expropriation no longer exists. This promise was made at the premises of the airport. As far as he could remember, there were no expropriation proceedings against his property in 1952 because the first notice of expropriation he received was in 1962. Based on the promise, he did not hire a lawyer. Lozada was firm that he was promised that the lot would be reverted to him once the public use of the lot ceases. He made it clear that the verbal promise was made in Lahug with other lot owners before the 1961 decision was handed down, though he could not name the government representatives who made the promise. It was just a verbal promise; nevertheless, it is binding. The fact that he could not supply the necessary details for the establishment of his assertions during cross-examination, but that "When it will not be used as intended, it will be returned back, we just believed in the government," does not dismantle the credibility and truthfulness of his allegation. This Court notes that he was 89 years old when he testified in November 1997 for an incident which happened decades ago. Still, he is a competent witness capable of perceiving and making his perception known. The minor lapses are immaterial. The decision of the competency of a witness rests primarily with the trial judge and must not be disturbed on appeal unless it is clear that it was erroneous. The objection to his competency must be made before he has given any testimony or as soon as the incompetency becomes apparent. Though Lozada is not part of the compromise agreement, 18 he nevertheless adduced sufficient evidence to support his claim. 19 As correctly found by the CA, unlike in Mactan Cebu International Airport Authority v. Court of Appeals, 20 cited by petitioners, where respondent therein offered testimonies which were hearsay in nature, the testimony of Lozada was based on personal knowledge as the assurance from the government was personally made to him. His testimony on cross-examination destroyed neither his credibility as a witness nor the truthfulness of his words.

Verily, factual findings of the trial court, especially when affirmed by the CA, are binding and conclusive on this Court and may not be reviewed. A petition forcertiorari 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. AaCEDS 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 Lozada's 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.: IcAaEH 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 court's 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

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courts as devices to remedy any situation in which the holder of legal title may not in good conscience retain the beneficial interest. AICDSa In constructive trusts, the arrangement is temporary and passive in which the trustee's 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 plaintiffbeneficiary 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 . . . . 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 . . . ." 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. cDTACE 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 . . .," 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: SDIACc 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 Court's decision. No costs. HTAIcD SO ORDERED. Puno, C.J., Carpio, Corona, Carpio Morales, Velasco, Jr., Leonardo-de Castro, Brion, Bersamin, Del Castillo, Abad, Villarama, Jr., Perez and Mendoza, JJ., concur.

Peralta, J., is on official leave. Footnotes 1.Penned by Associate Justice Enrico A. Lanzanas, with Associate Justices Pampio A. Abarintos and Apolinario D. Bruselas, Jr., concurring; rollo, pp. 46-65. 2.Rollo, pp. 67-68. 3.TSN, June 25, 1998, p. 7. 4.Rollo, pp. 20-21. 5.Id. at 22-23. 6.Records, p. 178. 7.42 Phil. 28 (1921). 8.Id. at 29-30. 9.G.R. No. 156273, October 15, 2003, 413 SCRA 502. 10.Id. at 509-510. 11.Ruling on the Motion for Reconsideration affirming the Decision; Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority, G.R. No. 156273, August 9, 2005, 466 SCRA 288, 305. 12.132 Ind. 558, November 5, 1892. 13.121 U.S. 932, April 11, 1887. 14.57 Wash. 225, February 4, 1910. 15.CONSTITUTION, Art. III, Sec. 9. 16.Supra note 11, at 302; Vide Republic v. Lim, G.R. No. 161656, June 29, 2005, 462 SCRA 265. 17.Vide the Separate Concurring Opinion of Associate Justice Presbitero J. Velasco, Jr. 18.Petitioners' witness Michael Bacarisas testified that three other lot owners entered into a written compromise agreement with the government but Lozada was not part of it. 19.Rollo, pp. 58-59. 20.G.R. No. 121506, October 30, 1996, 263 SCRA 736. 21.Caluag v. People, G.R. No. 171511, March 4, 2009, 580 SCRA 575, 583; Gregorio Araneta University Foundation v. Regional Trial Court of Kalookan City, Br. 120,G.R. No. 139672, March 4, 2009, 580 SCRA 532, 544; Heirs of Jose T. Calo v. Calo, G.R. No. 156101, February 10, 2009, 578 SCRA 226, 232. 22.Mactan-Cebu International Airport Authority v. Tudtud, G.R. No. 174012, November 14, 2008, 571 SCRA 165, 175. 23.Supra note 9, at 512-514. 24.Art. 1187. The effects of a conditional obligation to give, once the condition has been fulfilled, shall retroact to the day of the constitution of the obligation. Nevertheless, when the obligation imposes reciprocal prestations upon the parties, the fruits and interests during the pendency of the condition shall be deemed to have been mutually compensated. . . . . 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.

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EPZA vs DULAY
EN BANC [G.R. No. L-59603. April 29, 1987.] EXPORT PROCESSING ZONE AUTHORITY, petitioner, vs. HON. CEFERINO E. DULAY, in his capacity as the Presiding Judge, Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, and SAN ANTONIO DEVELOPMENT CORPORATION, respondents. Elena M. Cuevas for respondents. SYLLABUS 1.CONSTITUTIONAL LAW; JUST COMPENSATION; PROVISIONS OF P.D. NOS. 76, 464, 794 AND 1533 CONSTITUTES IMPERMISSIBLE ENCROACHMENT ON JUDICIAL PREROGATIVES. The method of ascertaining just compensation under the aforecited decrees constitutes impermissible encroachment on judicial prerogatives. It tends to render this Court initial 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. 2.ID.; ID.; VALUATION IN THE DECREE MAY ONLY SERVE AS A GUIDING PRINCIPLE IN THE DETERMINATION OF JUST COMPENSATION BUT MAY NOT SUBSTITUTE THE COURT'S OWN JUDGMENT AS TO WHAT AMOUNT SHOULD BE AWARDED AND HOW TO ARRIVE AT SUCH AMOUNT; DOCTRINE ENUNCIATED IN THE CASE OF NATIONAL HOUSING AUTHORITY V. REYES (123 SCRA 245) ABANDONED. 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 wellestablished 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. 3.ID.; ID.; DEFINITION OF JUST COMPENSATION; WHAT CONSTITUTES ARBITRARY AND CONFISCATORY VALUATION. 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.

4.ID.; ID.; FACTORS CONSIDERED IN THE VALUATION OF PROPERTIES FOR EXPROPRIATION. 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. 5.ID.; ID.; DENIAL TO THE OWNER OF EXPROPRIATED PROPERTY OF THE OPPORTUNITY TO QUESTION THE VALUATION IN THE TAX DOCUMENTS IS VIOLATIVE OF DUE PROCESS. 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. 6.ID.; ID.; ID.; DETERMINATION OF JUST COMPENSATION, A JUDICIAL FUNCTION. 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. 7.ID.; ID.; PRESIDENTIAL DECREE NO. 1533; DECLARED UNCONSTITUTIONAL AND VOID. We, 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. DECISION GUTIERREZ, JR., J p: 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. LibLex 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 accordance 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

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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 filed 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 filed 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 filed 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 fundamental 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 on just 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 of Appeals (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. cdtai

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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 that under the conceded facts, there should be a recognition that the law as it stands must be applied; that the decree having spoken so clearly and unequivocably calls for obedience; and that on a matter where the applicable law speaks in no uncertain language, the Court has no choice except to yield to its command. We further stated that "the courts should recognize that the rule introduced by P.D. No. 76 and reiterated in subsequent decrees does not upset the established concepts of justice or the constitutional provision on just compensation for, precisely, the owner is allowed to make his own valuation of his property." While the Court yielded to executive prerogative exercised in the form of absolute law-making power, its members, nonetheless, remained uncomfortable with the implications of the decision and the abuse and unfairness which might follow in its wake. For one thing, the President himself did not seem assured or confident with his own enactment. It was not enough to lay down the law on determination of just compensation in P.D. 76. It had to be repeated and reiterated in P.D. 464, P.D. 794, and P.D. 1533. The provision is also found in P.D. 1224, P.D. 1259 and P.D. 1313. Inspite of its effectivity as general law and the wide publicity given to it, the questioned provision or an even stricter version had to be embodied in cases of specific expropriations by decree as in P.D. 1669 expropriating the Tambunting Estate and P.D. 1670 expropriating the Sunog Apog area in Tondo, Manila. In the present petition, we are once again confronted with the same question of whether the courts under P.D. 1533, which contains the same provision on just compensation as its predecessor decrees, still have the power and authority to determine just compensation, independent of what is stated by the decree and to this effect, to appoint commissioners for such purpose. This time, we answer in the affirmative. In overruling the petitioner's motion for reconsideration and objection to the commissioner's report, the trial court said: "Another consideration why the Court is empowered to appoint commissioners to assess the just compensation of these properties under eminent domain proceedings, is the well-entrenched

ruling that 'the owner of property expropriated is entitled to recover from expropriating authority the fair and full value of the lot, as of the time when possession thereof was actually taken by the province, plus consequential damages including attorney's fees from which the consequential benefits, if any should be deducted, with interest at the legal rate, on the aggregate sum due to the owner from and after the date of actual taking.' (Capitol Subdivision, Inc. v. Province of Negros Occidental, 7 SCRA 60). In fine, the decree only establishes a uniform basis for determining just compensation which the Court may consider as one of the factors in arriving at 'just compensation,' as envisage in the Constitution. In the words of Justice Barredo, 'Respondent court's invocation of General Order No. 3 of September 21, 1972 is nothing short of an unwarranted abdication of judicial authority, which no judge duly imbued with the implications of the paramount principle of independence of the judiciary should ever think of doing.' (Lina v. Purisima, 82 SCRA 344, 361; 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. LLjur 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

87

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 abrupt 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 ., concur in the result. Yap, J ., is on leave.

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DE KNECHT vs COURT OF APPEALS

SECOND DIVISION [G.R. No. 108015. May 20, 1998.] CRISTINA DE KNECHT and RENE KNECHT, petitioners, vs. HON. COURT OF APPEALS; HON. MANUEL DUMATOL, as Judge, Regional TrialCourt, Branch 112, Pasay City; HON. CONCHITA C. MORALES, as Judge, Regional Trial Court, Branch 110, Pasay City; HON. AURORA NAVARETTE-RECINA, as Judge, Regional Trial Court, Branch 119, Pasay City; HON. SOFRONIO G. SAYO, as Judge, Regional TrialCourt, Branch 111, Pasay City; REPUBLIC OF THE PHILIPPINES; SPS. MARIANO & ANACORETA NOCOM; SALEM INVESTMENT CORPORATION; SPS. ANASTACIO & FELISA BABIERA; and SPS. ALEJANDRO & FLOR SANGALANG, respondents. [G.R. No. 109234. May 20, 1998.] CRISTINA DE KNECHT and RENE KNECHT, petitioners, vs. HON. SOFRONIO SAYO, as Judge, Regional Trial Court, Branch 111, Pasay City; REPUBLIC OF THE PHILIPPINES; PHILIPPINE NATIONAL BANK; and MARIANO NOCOM, respondents. Ramon A. Gonzales for petitioners. Arturo S. Santos for private respondents. Roland A. Niedo for Phil. National Bank. SYNOPSIS The instant case is an unending sequel to several suits commenced almost twenty years ago over the same subject matter. This involves a parcel of land with an area of 8,102.68 square meters, more or less, located at the corner of the south end of the EDSA and F.B. Harrison in Pasay City. The land was owned by petitioners Cristinade Knecht and her son, under TCT No. 9032 issued in their names by the Register of Deeds of Pasay City. On the land, the Knechts constructed eight houses of strong materials, leased out the seven and occupied one of them as their residence. The property would have been expropriated as early as 1979 were it not for the intervention of the courts at the initiative of the Knechts. However, in 1982 the City Treasurer of Pasay discovered that the Knechts failed to pay real estate taxes on the property from 1980 to 1982. Consequently, the City Treasurer sold the property at public auction to the highest bidders, the Babieras and the Sangalangs allegedly without notice to the Knechts. The petitioners failed to redeem the property within one year from the date of sale. Thereafter, new titles were issued in the names of the buyers Sangalang and Babiera and then to Salem Investment Corporation to which the land was later sold. With the passage of B.P. Blg. 340 authorizing the national government to expropriate certain properties in Pasay City for the EDSA extension, the property of the Knechts became part of those expropriated under the said B.P. Blg. 340. In the meantime, the Knechts filed Civil Case No. 2961-P praying for the reconveyance, annulment of the tax sale and the titles of the Babieras and Sangalangs on the basis of absence of the required notices to the tax sale. The case, however, was later dismissed by the court on the ground of apparent lack of interest of the plaintiffs to prosecute the case. The Knechts appealed their case, but it was dismissed by the Court of Appeals as well as the Supreme Court. Three months later, the Republic of the Philippines, through the Solicitor General, filed before the RTC of Pasay City an action for the determination of just compensation of the lands expropriated under B.P. Blg. 340, docketed as Civil Case No. 7327. After the writ of possession was issued by the trial court, the government took possession of the portion of land on which seven of the eight houses of the Knechts were demolished. Since the Knechts refused to vacate their remaining house, Salem instituted against them a civil case for unlawful detainer before the Municipal Trial Court of Pasay City. The court granted the complaint and ordered the Knechts' ejectment. Meanwhile, Civil Case No. 7327 prospered and the court issued an order fixing the compensation of all the lands sought to be expropriated by the government. Here, the Knechts filed a "Motion for Intervention and to Implead Additional Parties," which was denied by the court. The new owners of the land, therefore, prayed for and were granted the release of the just compensation fixed by the court. The Knechts questioned the release of the just compensation as well as the dismissal of their motion for intervention before

the Court of Appeals. The Court of Appeals dismissed their case, hence, the Knechts filed a petitioner for annulment of judgment also before the Court of Appeals. Another action was filed by the Knechts before the Court of Appeals which challenged the validity of the titles of the Babieras and Sangalangs and prayed for the issuance of new titles in their names. The Court of Appeals dismissed the petition. The Knechts then filed a petition before the SupremeCourt. The new owners of the land in question moved for the consolidation of the two actions. Hence, these cases before the Supreme Court. The Court ruled against the petitioners. The claim of lack of notice of their tax delinquency is a factual question. This Court is not a trier of facts. This factual question had been raised repeatedly in all the previous cases filed by the Knechts. These cases have laid to rest the question of notice and all the other factual issues they raised regarding the property. Res judicata had set in. The Knechts lost whatever right or colorable title they had to the property after the Supreme Court affirmed the order of the trial court dismissing the reconveyance case. The Knechts had no legal interest in the property by the time the expropriation proceedings were instituted. They had no right to intervene and the trial court did not err in denying their motion for intervention. AcHaTE SYLLABUS 1.REMEDIAL LAW; ACTION; RES JUDICATA, AS A GROUND FOR DISMISSAL; CONSTRUED. Res judicata is a ground for dismissal of an action. It is a rule that precludes parties from relitigating issues actually litigated and determined by a prior and final judgment. It pervades every wellregulated system of jurisprudence, and is based upon two grounds embodied in various maxims of the common law one, public policy and necessity, that there should be a limit to litigation; and another, the individual should not be vexed twice for the same cause. When a right of fact has been judicially tried and determined by a court of competent jurisdiction, or an opportunity for such trial has been given, the judgment of the court, so long as it remains unreversed, should be conclusive upon the parties and those in privity with them in law or estate. To follow a contrary doctrine would subject the public peace and quiet to the will and neglect of individuals and prefer the gratification of the litigious disposition of the parties to the preservation of the public tranquility. 2.ID.; ID.; ID.; ELEMENTS. Res judicata applies when: (1) the former judgment or order is final; (2) the judgment or order is one on the merits; (3) it was rendered by a court having jurisdiction over the subject matter and the parties; (4) there is between the first and second actions, identity of parties, of subject matter and of cause of action. cTDECH 3.ID.; ID.; DISMISSAL OF ACTION FOR FAILURE TO PROSECUTE; WHEN PROPER. An action may be dismissed for failure to prosecute in any of the following instances: (1) if the plaintiff fails to appear at the time of trial, or (2) if he fails to prosecute the action for an unreasonable length of time; or (3) if he fails to comply with the Rules of Court or any order of the court. Once a case is dismissed for failure to prosecute, this has the effect of an adjudication on the merits and is understood to be with prejudice to the filing of another action unless otherwise provided in the order of dismissal. In other words, unless there be a qualification in the order of dismissal that it is without prejudice, the dismissal should be regarded as an adjudication on the merits and is with prejudice. 4.POLITICAL LAW; POWER OF THE STATE; EMINENT DOMAIN; EXERCISE THEREOF, CONSTRUED. The power of eminent domain is exercised by the filing of a complaint which shall join as defendants all persons owning or claiming to own, or occupying, any part of the expropriated land or interest therein. If a known owner is not joined as defendant, he is entitled to intervene in the proceeding; or if he is joined but not served with process and the proceeding is already closed before he came to know of the condemnation, he may maintain an independent suit for damages. The defendants in an expropriation case are not limited to the owners of the property condemned. They include all other persons owning, occupying or claiming to own the property. When a parcel of land is taken by eminent domain, the owner of the fee is not necessarily the only person who is entitled to compensation. In the American jurisdiction, the term "owner" when employed in statutes relating to eminent domain to designate the persons who are to be made parties to the proceeding, refers, as is the rule in respect of those entitled to compensation, to all

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those who have lawful interest in the property to be condemned, including a mortgagee, a lessee and a vendee in possession under an executory contract. Every person having an estate or interest at law or in equity in the land taken is entitled to share in the award. If a person claiming an interest in the land sought to be condemned is not made a party, he is given the right to intervene and lay claim to the compensation. IcCDAS DECISION PUNO, J p: In G.R. No. 108015, petitioners Cristina de Knecht and Rene Knecht seek to annul and set aside the decision of the Court of Appeals 1 in CA-G.R. SP No. 28089dismissing an action to annul (1) the decision and order of the Regional Trial Court, Branch 112, Pasay City, 2 in LRC Case No. 2636-P; (2) the order of the Regional Trial Court, Branch 110, Pasay City 3 in LRC Case No. 2652-P; and (3) the orders of dismissal by Regional Trial Court, Branch 119, Pasay City in Civil Case No. 2961-P;4 and (4) the orders and the writ of possession issued by the Regional Trial Court, Branch 111, Pasay City, 5 in Civil Case No. 7327. LLcd In G.R. No. 109234, petitioners Cristina de Knecht and Rene Knecht seek to annul the decision of the Court of Appeals 6 in CA-G.R. SP No. 27817 which dismissed the petition for certiorari questioning the order of the Regional Trial Court, Branch 111, Pasay City 7 denying its "Motion for Intervention and to Implead Additional Parties" in Civil Case No. 7327. The instant case is an unending sequel to several suits commenced almost twenty years ago over the same subject matter. This involves a parcel of land with an area of 8,102.68 square meters, more or less, located at the corner of the south end of the E. de los Santos Avenue (EDSA) 8 and F.B. Harrison in Pasay City. The land was owned by petitioners Cristina de Knecht and her son, Rene Knecht, under Transfer Certificate of Title (TCT) No. 9032 issued in their names by the Register of Deeds of Pasay City. On the land, the Knechts constructed eight (8) houses of strong materials, leased out the seven and occupied one of them as their residence. In 1979, the Republic of the Philippines initiated Civil Case No. 7001-P for expropriation against the Knechts' property before the then Court of First Instance of Rizal, Branch 111, Pasay City. 9 The government sought to utilize the land for the completion of the Manila Flood Control and Drainage Project and the extension of the EDSA towards Roxas Boulevard. The CFI issued a writ of possession. On petition of the Knechts, however, this Court, in G.R. No. L51078, held that the choice of area for the extension of EDSA was arbitrary. We annulled the writ of possession and enjoined the trial court from taking further action in Civil Case No. 7001-P. 10 In 1982, the City Treasurer of Pasay discovered that the Knechts failed to pay real estate taxes on the property from 1980 to 1982. 11 As a consequence of this deficiency, the City Treasurer sold the property at public auction on May 27, 1982 for the sum of P63,000.00, the amount of the deficiency taxes. 12 The highest bidders were respondent Spouses Anastacio and Felisa Babiera (the Babieras) and respondent Spouses Alejandro and Flor Sangalang (the Sangalangs). Petitioners failed to redeem the property within one year from the date of sale. In August 1983, Anastacio Babiera filed with respondent Regional Trial Court, Branch 112, Pasay City, a petition for registration of his name as co-owner pro-indiviso of the subject land. This case was docketed as LRC Case No. 2636-P 13 and was filed allegedly without notice to the Knechts. On September 15, 1983, the trial court ordered the Register of Deeds to register Babiera's name and the Knechts to surrender to the Register of Deeds the owner's duplicate of the title. In October 1983, Alejandro Sangalang filed LRC Case No. 2652-P before the Regional Trial Court, Branch 110, Pasay City. 14 Sangalang also sought to register his name as co-owner pro-indiviso of the subject property. The proceedings were also conducted allegedly without notice to the Knechts. The trial court granted the petition and ordered the Register of Deeds, Pasay City to cancel TCT No. 9032 in the name of the Knechts and issue a new one in the names of Babiera and Sangalang. Pursuant to said orders, the Register of Deeds cancelled TCT No. 9032 and issued TCT No. 86670 in the names of Sangalang and Babiera. The Knechts, who were in possession of the property,

allegedly learned of the auction sale only by the time they received the orders of the land registration courts. On March 12, 1985, Sangalang and Babiera sold the land to respondent Salem Investment Corporation (Salem) for P400,000.00. TCT No. 86670 was cancelled and TCT No. 94059 was issued in the name of Salem. Meanwhile, on February 17, 1983, the Batasang Pambansa passed B.P. Blg. 340 authorizing the national government to expropriate certain properties in Pasay City for the EDSA Extension, the EDSA Outfall of the Manila Flood Control and Drainage Project, and the "Cut-Off" of the Estero Tripa de Gallina which were all projects of the National Government. 15 The property of the Knechts was part of those expropriated under B.P. Blg. 340. In view of this Court's previous ruling in G.R. No. L-51078 16 annulling the expropriation proceedings in Civil Case No. 7001-P, the government apprised this Court of the subsequent enactment of B.P. Blg. 340. On February 12, 1990, we rendered a decision upholding the validity of B.P. Blg. 340 in G.R. No. 87335. 17 While G.R. No. 87335 was pending in court, on June 24, 1985, the Knechts filed Civil Case No. 2961-P before the Regional Trial Court, Branch 119, Pasay City. 18They prayed for reconveyance, annulment of the tax sale and the titles of the Babieras and Sangalangs. The Knechts based their action on lack of the required notices to the tax sale. In the same case, Salem filed on September 26, 1985 a petition for appointment of a receiver. The court granted the petition and on November 7, 1985, appointed Metropolitan Bank and Trust Company as receiver. The Knechts questioned this appointment on a petition for certiorari before the Court of Appeals in CA-G.R. SP No. 08178. The Court of Appeals dismissed the petition which this Court affirmed in G.R. No. 75609 on January 28, 1987. Meanwhile, Civil Case No. 2961-P proceeded before Branch 119. The Knechts presented their evidence. They, however, repeatedly requested for postponements. 19 At the hearing of September 13, 1988, they and their counsel failed to appear. Accordingly, the trial court dismissed the case for "apparent lack of interest of plaintiffs" . . . "considering that the case had been pending for an unreasonable length of time." 20 The Knechts moved to set aside the order of dismissal. The motion was denied for late filing and failure to furnish a copy to the other parties. 21 The Knechts questioned the order of dismissal before the Court of Appeals. The appellate court sustained the trial court. They elevated the case to this Court in G.R. No. 89862. The petition was denied for late payment of filing fees and for failure to sufficiently show any reversible error. 22 On January 17, 1990, the petition was denied with finality23 and entry of judgment was made on February 19, 1990. 24 Three (3) months later, on May 15, 1990, the Republic of the Philippines, through the Solicitor General, filed before the Regional Trial Court, Branch 111, Pasay CityCivil Case No. 7327 "[f]or determination of just compensation of lands expropriated under B.P. Blg. 340." 25 In its amended petition, the National Government named as defendants Salem, Maria del Carmen Roxas de Elizalde, Concepcion Cabarrus Vda. de Santos, Mila de la Rama and Inocentes de la Rama, the heirs of Eduardo Lesaca and Carmen Padilla. 26 As prayed for, the trial court issued a writ of possession on August 29, 1990. 27 The following day, August 30, seven of the eight houses of the Knechts were demolished and the government took possession of the portion of land on which the houses stood. 28 Meanwhile, Salem conveyed 5,611.92 square meters of the subject property to respondent spouses Mariano and Anacoreta Nocom for which TCT No. 130323 was issued in their names. Salem remained the owner of 2,490.69 square meters under TCT Nos. 130434 and 130435. Since the Knechts refused to vacate their one remaining house, Salem instituted against them Civil Case No. 85-263 for unlawful detainer before the Municipal TrialCourt, Branch 46, Pasay City. As defense, the Knechts claimed ownership of the land and building. 29 The Municipal Trial Court, however, granted the complaint and ordered the Knechts' ejectment. Pursuant to a writ of execution, the last house of the Knechts was demolished on April 6, 1991. 30 The proceedings in Civil Case No. 7327 continued. As prayed for by Salem, the trial court issued an order on September 13, 1990 for the release of P5,763,650.00 to Salem by the Philippine National

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Bank (PNB) as partial payment of just compensation. 31 On June 7, 1991, the trial court issued another order to the PNB for the release of P15,000,000.00 as another partial payment to Salem. 32 On September 9, 1991, the trial court issued an order fixing the compensation of all the lands sought to be expropriated by the government. The value of the subject land was set at P28,961.00 per square meter. 33 This valuation did not include the improvements. 34 It was after these orders that the Knechts, on September 25, 1991, filed a "Motion for Intervention and to Implead Additional Parties" in Civil Case No. 7327. They followed this with a "Motion to Inhibit Respondent Judge Sayo and to Consolidate Civil Case No. 7327 with Civil Case No. 8423." Earlier, prior to the "Motion to Inhibit Respondent Judge Sayo and to Consolidate Civil Case No. 7327 with Civil Case No. 8423," the Knechts instituted Civil Case No.8423 before the Regional Trial Court, Branch 117, Pasay City for recovery of ownership and possession of the property. On January 2, 1992, the trial court dismissed Civil Case No. 8423 on the ground of res judicata. The Knechts challenged the order of dismissal in G.R. No. 103448 before this Court. On February 5, 1992, we dismissed the Knechts' "Motion for Extension of Time to File Petition for Certiorari" for non-compliance with Circular No. 1-88 35 and for late filing of the Petition. 36Entry of judgment was made on May 21, 1992. 37 In Civil Case No. 7327, the trial court issued an order on April 14, 1992 denying the Knechts' "Motion for Intervention and to Implead Additional Parties." The courtdid not rule on the "Motion to Inhibit Respondent Judge Sayo and to Consolidate Civil Case No. 7327 with Civil Case No. 8423," declaring it moot and academic. LLcd On April 23, 1992, as prayed for by Mariano Nocom, the trial court ordered the release of P11,526,000.00 as third installment for his 5,611.92 square meters of the subject land. The Knechts questioned the release of this amount before the Court of Appeals in CA-G.R. SP No. 27817. The Knechts later amended their petition to limit their cause of action to a review of the order of April 14, 1992 which denied their "Motion for Intervention and to Implead Additional Parties." On March 5, 1993, the Court of Appeals dismissed the petition in CA-G.R. SP No. 27817 and denied the Knechts' intervention in Civil Case No. 7327 after finding that the Knechts had no legal interest on the subject property after the dismissal of Civil Case No. 2961-P. Hence the petition in G.R. No. 109234. On June 9, 1992, while CA-G.R. SP No. 27817 was pending, the Knechts instituted also before the Court of Appeals an original action for annulment of judgment of the trial courts. This case was docketed as CA-G.R. SP No. 28089. Therein, the Knechts challenged the validity of the orders of the land registration courts in the two petitions of the Sangalangs and Babieras for registration of their names 38 , the reconveyance case 39 and the just compensation proceedings. 40 The Knechts questioned the validity of the titles of the Babieras and Sangalangs, and those of Salem and the Nocoms, and prayed for the issuance of new titles in their names. They also sought to restrain further releases of payment of just compensation to Salem and the Nocoms in Civil Case No. 7327. The Court of Appeals dismissed the petition for lack of merit on November 24, 1992. Hence the filing of G.R. No. 108015. In a Resolution dated February 1, 1993, we denied the petition finding "no reversible error" committed by the Court of Appeals. The Knechts moved for reconsideration. Pending a resolution of this Court on the Knechts' motion for reconsideration, respondents Nocom moved for consolidation of the two actions. 41 We granted the motion. In their petition in G.R. No. 109234, the Knechts alleged that: "ITHE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN HOLDING THAT CIVIL CASE NO. 7327 IS NOT AN EMINENT DOMAIN PROCEEDING; IITHE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN HOLDING THAT RES JUDICATA HAS SET IN TO BAR THE MOTION FOR INTERVENTION;

IIITHE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN NOT ORDERING RESPONDENT JUDGE TO RULE ON THE MOTION FOR INHIBITION." 42 In their Motion for Reconsideration in G.R. No. 108015, the Knechts reiterate that: "ITHE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN HOLDING THAT THE PETITION FOR ANNULMENT OF JUDGMENT IS BARRED BY RES JUDICATA; IITHE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OF LAW IN UPHOLDING THE DEFENSE OF RES JUDICATA EVEN AS ITS APPLICATION INVOLVES THE SACRIFICE OF JUSTICE TO TECHNICALITY." 43 We rule against the petitioners. In its decision, the Court of Appeals held that the Knechts had no right to intervene in Civil Case No. 7327 for lack of any legal right or interest in the property subject of expropriation. The appellate court declared that Civil Case No. 7327 was not an expropriation proceeding under Rule 67 of the Revised Rules of Court but merely a case for the fixing of just compensation. 44 The Knechts' right to the land had been foreclosed after they failed to redeem it one year after the sale at public auction. Whatever right remained on the property vanished after Civil Case No. 2961-P, the reconveyance case, was dismissed by the trial court. Since the petitions questioning the order of dismissal were likewise dismissed by the Court of Appeals and this Court, the order of dismissal became final and res judicata on the issue of ownership of the land. 45 The Knechts urge this Court, in the interest of justice, to take a second look at their case. They claim that they were deprived of their property without due process of law. They allege that they did not receive notice of their tax delinquency and that the Register of Deeds did not order them to surrender their owner's duplicate for annotation of the tax lien prior to the sale. Neither did they receive notice of the auction sale. After the sale, the certificate of sale was not annotated in their title nor in the title with the Register of Deeds. In short, they did not know of the tax delinquency and the subsequent proceedings until 1983 when they received the orders of the land registration courts in LRC Cases Nos. 2636-P and 2652-P filed by the Babieras and Sangalangs. 46 This is the reason why they were unable to redeem the property. It has been ruled that the notices and publication, as well as the legal requirements for a tax delinquency sale, are mandatory; 47 and the failure to comply therewith can invalidate the sale. 48 The prescribed notices must be sent to comply with the requirements of due process. 49 The claim of lack of notice, however, is a factual question. This Court is not a trier of facts. Moreover, this factual question had been raised repeatedly in all the previous cases filed by the Knechts. These cases have laid to rest the question of notice and all the other factual issues they raised regarding the property. Res judicata had already set in. Res judicata is a ground for dismissal of an action. 50 It is a rule that precludes parties from relitigating issues actually litigated and determined by a prior and final judgment. It pervades every well-regulated system of jurisprudence, and is based upon two grounds embodied in various maxims of the common law one, public policy and necessity, that there should be a limit to litigation; 51 and another, the individual should not be vexed twice for the same cause. 52 When a right of fact has been judicially tried and determined by a court of competent jurisdiction, or an opportunity for such trial has been given, the judgment of the court, so long as it remains unreversed, should be conclusive upon the parties and those in privity with them in law or estate. 53 To follow a contrary doctrine would subject the public peace and quiet to the will and neglect of individuals and prefer the gratification of the litigious disposition of the parties to the preservation of the public tranquility. 54 Res judicata applies when: (1) the former judgment or order is final; (2) the judgment or order is one on the merits; (3) it was rendered by a court having jurisdiction over the subject matter and the parties; (4) there is between the first and second actions, identity of parties, of subject matter and of cause of action. 55 Petitioners claim that Civil Case No. 2961-P is not res judicata on CA-G.R. SP No. 28089. They contend that there was no judgment on the merits in Civil Case No. 2961-P , i.e., one rendered after a consideration of the evidence or stipulations submitted by the parties at the trial of the

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case. 56 They stress that Civil Case No. 2961-P was dismissed upon petitioners' failure to appear at several hearings and was based on "lack of interest." We are not impressed by petitioners' contention. "Lack of interest" is analogous to "failure to prosecute." Section 3 of Rule 17 of the Revised Rules of Court provides: "Section 3.Failure to Prosecute. If plaintiff fails to appear at the time of the trial, or to prosecute his action for an unreasonable length of time, or to comply with these rules or any order of the court, the action may be dismissed upon motion of the defendant or upon the court's own motion. This dismissal shall have the effect of an adjudication upon the merits, unless otherwise provided by court." An action may be dismissed for failure to prosecute in any of the following instances: (1) if the plaintiff fails to appear at the time of trial; or (2) if he fails to prosecute the action for an unreasonable length of time; or (3) if he fails to comply with the Rules of Court or any order of the court. Once a case is dismissed for failure to prosecute, this has the effect of an adjudication on the merits and is understood to be with prejudice to the filing of another action unless otherwise provided in the order of dismissal. 57 In other words, unless there be a qualification in the order of dismissal that it is without prejudice, the dismissal should be regarded as an adjudication on the merits and is with prejudice. 58 Prior to the dismissal of Civil Case No. 2961-P, the Knechts were presenting their evidence. They, however, repeatedly requested for postponements and failed to appear at the last scheduled hearing. This prompted Salem to move for dismissal of the case. The court ordered thus: "ORDER It appearing that counsel for the plaintiff has been duly notified of today's hearing but despite notice failed to appear and considering that this case has been pending for quite a considerable length of time, on motion of counsel for the defendant Salem Investment joined by Atty. Jesus Paredes for the defendant City of Pasay, for apparent lack of interest of plaintiffs, let their complaint be DISMISSED. LLcd As prayed for, let this case be reset to September 29, 1988 at 8:30 in the morning for the reception of evidence of defendant's Salem Investment on its counterclaim. SO ORDERED." 59 The order of dismissal was based on the following factors: (1) pendency of the complaint for a considerable length of time; (2) failure of counsel to appear at the scheduled hearing despite notice; and (3) lack of interest of the petitioners. Under Section 3, Rule 17, a dismissal order which does not provide that it is without prejudice to the filing of another action is understood to be an adjudication on the merits. Hence, it is one with prejudice to the filing of another action. The order of dismissal was questioned before the Court of Appeals and this Court. The petitions were dismissed and the order affirming dismissal became final in February 1990. Since the dismissal order is understood to be an adjudication on the merits, then all the elements of res judicata have been complied with. Civil Case No. 2961-P is therefore res judicata on the issue of ownership of the land. The Knechts contend, however, that the facts of the case do not call for the application of res judicata because this amounts to "a sacrifice of justice to technicality." We cannot sustain this argument. It must be noted that the Knechts were given the opportunity to assail the tax sale and present their evidence on its validity in Civil Case No. 2961-P, the reconveyance case. Through their and their counsel's negligence, however, this case was dismissed. They filed for reconsideration, but their motion was denied. The Court of Appeals upheld this dismissal. We affirmed the dismissal not on the basis of a mere technicality. This Court reviewed the merits of petitioners' case and found that the Court of Appeals committed no reversible error in its questioned judgment. 60 After years of litigation and several cases raising essentially the same issues, the Knechts cannot now be allowed to avoid the effects of res judicata. 61 Neither can they be allowed to vary the form of their action or adopt a different method of presenting their case to escape the operation

of the principle. 62 To grant what they seek will encourage endless litigations and forum-shopping. Hence, the Court of Appeals correctly dismissed CA-G.R. SP No. 28089. We find, however, that the Court of Appeals erred in declaring that Civil Case No. 7327 was not an expropriation case. It was precisely in the exercise of the state's power of eminent domain under B.P. Blg. 340 that expropriation proceedings were instituted against the owners of the lots sought to be expropriated. B.P. Blg. 340 did not, by itself, lay down the procedure for expropriation. The law merely described the specific properties expropriated and declared that just compensation was to be determined by the court. It designated the then Ministry of Public Works and Highways as the administrator in the "prosecution of the project." Thus, in the absence of a procedure in the law for expropriation, reference must be made to the provisions on eminent domain in Rule 67 of the Revised Rules of Court. Section 1 of Rule 67 of the Revised Rules of Court provides: "Section 1.The complaint. The right of eminent domain shall be exercised by the filing of a complaint which shall state with certainty the right and purpose of condemnation, describe the real or personal property sought to be condemned, and join as defendants all persons owning or claiming to own, or occupying, any part thereof or interest therein, showing, so far as practicable, the interest of each defendant separately. If the title to any property sought to be condemned appears to be in the Republic of the Philippines, although occupied by private individuals, or if the title is otherwise obscure or doubtful so that the plaintiff cannot with accuracy or certainty specify who are the real owners, averment to that effect may be made in the complaint." The power of eminent domain is exercised by the filing of a complaint which shall join as defendants all persons owning or claiming to own, or occupying, any part of the expropriated land or interest therein. 63 If a known owner is not joined as defendant, he is entitled to intervene in the proceeding; or if he is joined but not served with process and the proceeding is already closed before he came to know of the condemnation, he may maintain an independent suit for damages. 64 The defendants in an expropriation case are not limited to the owners of the property condemned. They include all other persons owning, occupying or claiming to own the property. When a parcel of land is taken by eminent domain, the owner of the fee is not necessarily the only person who is entitled to compensation. 65 In the American jurisdiction, the term "owner" when employed in statutes relating to eminent domain to designate the persons who are to be made parties to the proceeding, refers, as is the rule in respect of those entitled to compensation, to all those who have lawful interest in the property to be condemned, 66 including a mortgagee, 67 a lessee 68 and a vendee in possession under an executory contract. 69 Every person having an estate or interest at law or in equity in the land taken is entitled to share in the award. 70 If a person claiming an interest in the land sought to be condemned is not made a party, he is given the right to intervene and lay claim to the compensation. 71 The Knechts insist that although they were no longer the registered owners of the property at the time Civil Case No. 7327 was filed, they still occupied the property and therefore should have been joined as defendants in the expropriation proceedings. When the case was filed, all their eight (8) houses were still standing; seven (7) houses were demolished on August 29, 1990 and the last one on April 6, 1991. They claim that as occupants of the land at the time of expropriation, they are entitled to a share in the just compensation. Civil Case No. 7327, the expropriation case, was filed on May 15, 1990. Four months earlier, in January 1990, Civil Case No. 2961-P for reconveyance was dismissed with finality by this Court and judgment was entered in February 1990. The Knechts lost whatever right or colorable title they had to the property after we affirmed the order of the trial court dismissing the reconveyance case. The fact that the Knechts remained in physical possession cannot give them another cause of action and resurrect an already settled case. The Knechts' possession of the land and buildings was based on their claim of ownership, 72 not on any juridical title such as a lessee, mortgagee, or vendee. Since the issue of ownership was put to rest in Civil Case No. 2961-P, it follows that their physical possession of the property after the finality of said case was bereft of any legality and merely subsisted at the tolerance of the registered owners. 73 This tolerance ended when Salem

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filed Civil Case No. 85-263 for unlawful detainer against the Knechts. As prayed for, the trial court ordered their ejectment and the demolition of their remaining house. Indeed, the Knechts had no legal interest in the property by the time the expropriation proceedings were instituted. They had no right to intervene and the trial courtdid not err in denying their "Motion for Intervention and to Implead Additional Parties." Their intervention having been denied, the Knechts had no personality to move for the inhibition of respondent Judge Sayo from the case. The Court of Appeals therefore did not err in dismissing CA-G.R. SP No. 27817. IN VIEW WHEREOF, the Petition in G.R. No. 109234 is dismissed and the Motion for Reconsideration in G.R. No. 108015 is denied. The decisions of the Court ofAppeals in CA-G.R. SP No. 27817 and CA-G.R. SP No. 28089 are affirmed. SO ORDERED. LLcd Regalado, Melo, Mendoza and Martinez, JJ ., concur. Footnotes 1.Penned by Justice Pacita Canizares-Nye and concurred in by Justice Manuel Herrera and Justice Justo Torres, Jr., a former member of this Court. 2.Formerly presided by Judge Manuel Valenzuela; now presided by Judge Manuel Dumatol. 3.Formerly presided by Judge Manuel Romillo, Jr.; then presided by Judge Conchita Morales (now Justice of the Court of Appeals). 4.Presided by Judge Aurora Navarette-Recina. 5.Presided by Judge Sofronio Sayo. 6.Penned by Justice Salome Montoya and concurred in by Justices Oscar Herrera and Minerva Gonzaga-Reyes. 7.Presided by Judge Sofronio Sayo. 8.Formerly del Pan Street. 9.Civil Case No. 7001-P. 10.De Knecht v. Bautista, G.R. No. L-51078, 100 SCRA 660 [1980]. 11."Final Bill of Sale," Annex "1-C" to the Petition, G.R. No. 108015, Rollo, p. 75. 12."Certificate of Sale of Delinquent Property to Purchaser," Annexes "1-A" and "1-B" to the Petition, G.R. No. 108015, Rollo, pp. 73, 74. 13.Entitled "Petition to Register the Name of Anastacio Babiera as Co-owner Pro-indiviso of TCT No. 9032." 14.Entitled "Petition to Register the Name of Alejandrino Sangalang as Co-owner Pro-indiviso of TCT No. 9032." 15.Section 2, B.P. 340. 16.De Knecht v. Bautista, G.R. No. L-51078, 100 SCRA 660 [1980]; see also proceedings in Note No. 10. 17.Republic v. de Knecht, G.R. No. 87335, 182 SCRA 142 [1990]. 18.Presided by Judge Aurora Navarrete-Recina. 19.Decision of the Court of Appeals, CA-G.R. SP No. 28089, p. 5, G.R. No. 108015, Rollo, p. 101. 20.Order of September 13, 1988, Annex "10" to the Petition, G.R. No. 108015, Rollo, p. 89. 21.Annex "10-A" to the Petition, Rollo, G.R. No. 108015, p. 90. 22.Annex "6" to Respondent Nocoms' "Opposition to the Motion for Extension of Time to File Petition for Review on Certiorari with Motion for Contempt," G.R. No. 109234, Rollo, p. 40. 23.Annex "7" to Respondent Nocoms' "Opposition to the Motion for Extension . . . , G.R. No. 109234, Rollo, p. 42. 24.Annex "8" to Respondent Nocoms' Opposition to the Motion for Extension . . . , G.R. No. 109234, Rollo, p. 43. 25.G.R. No. 109234, Petition, p. 7, Rollo, p. 92. 26.Annex "B" to the Petition, G.R. No. 109234, Rollo, pp. 148-167. 27.Court of Appeals Rollo, pp. 111-115. 28.Petition, p. 6, G.R. No. 108015, Rollo, p. 33. 29.Petition, p. 33, G.R. No. 108015, Rollo, p. 60.

30.Petition, p. 6, G.R. No. 108015, Rollo, p. 33. 31.Annex "11" to the Petition, G.R. No. 108015, Rollo, p. 90. 32.Annex "12" to the Petition, G.R. No. 108015, Rollo, p. 91. 33.Annex "13" to the Petition, G.R. No. 108015, Rollo, pp. 92-94; Petition, G.R. No. 109234, p. 39, Rollo, p. 124. 34.Id. 35.For failure to attach proof of service (Annex "9" to Respondent Nocoms' "Opposition to the Motion for Extension of Time to File Petition for Review on Certiorari with Motion for Contempt," G.R. No. 109234, Rollo, p. 44). 36.Annex "10" to Respondent Nocoms' "Opposition to the Motion for Extension . . . ," G.R. No. 109234, Rollo, p. 46. 37.Annex "13" to Respondent Nocoms' "Opposition to the Motion for Extension . . . ," G.R. No. 109234, Rollo, p. 49. 38.LRC Cases Nos. 2636-P and 2652-P. 39.Civil Case No. 2961-P. 40.Civil Case No. 7327. 41.Motion to Consolidate by respondent Nocom, Rollo, G.R. No. 109234, pp. 58-66. 42.Petition, p. 5, Rollo, p. 90. 43.Motion for Reconsideration, p. 2, Rollo, p. 234; see also Petition, p. 8, Rollo, p. 35. 44.CA-G.R. SP No. 27817, pp. 5-8, Rollo, G.R. No. 109234, pp. 143-146. 45.CA-G.R. SP No. 28089, pp. 11-14, Rollo, G.R. No. 108015, pp. 106-110. 46.Petitions to register the names of Babiera and Sangalang as co-owners of TCT No. 9032. 47.Pantaleon v. Santos, 101 Phil. 1001 [1957]; Velayo v. Ordoveza, 102 Phil. 395, 403-404 [1957]; Presbitero v. Fernandez, 7 SCRA 625 [1963]; also cited in Vitug, Compendium of Tax Law and Jurisprudence, p. 377 [1987]. 48.Id. 49.Velayo v. Ordoveza, supra, at 403-404. 50.Rule 16, Sec. 1 [f], Revised Rules of Court. 51.Republicae ut sit finis litum Yusingco v. Ong Hing Lian, 42 SCRA 589, 601-602; see also De Ramos v. Court of Appeals, 213 SCRA 207, 214 [1992]. 52.Nemo debet bis vexari et eadem causa Yusingco v. Ong Hing Lian, supra. 53.Okol v. Tayug Rural Bank, Inc., 35 SCRA 619, 622-623 [1970]; see also Martin, Rules of Court, vol. 1, p. 852 [1989]. 54.De Ramos v. Court of Appeals, supra, at 214. 55.De Ramos v. Court of Appeals, supra, at 214-215; American Inter-Fashion Corp. v. Office of the President, 197 SCRA 409, 417 [1991]; Nator v. Court of Industrial Relations, 4 SCRA 727, 733 [1962]. 56.Regalado, Remedial Law Compendium, vol. 1, p. 308 [1988]; Saberon v. Alikpala, 62 O.G. 11267, 11270 [1967] citing Nator v. Court of Industrial Relations, 4 SCRA 727, 733 [1962]; also cited in Martin, supra, at 855. 57.Insular Veneer, Inc. v. Plan, 73 SCRA 1, 7-8 [1976]; Malvar v. Pallingayan, 18 SCRA 121, 124 [1966]; Rivera v. Luciano, 14 SCRA 947, 948 [1965]; Guanzon v. Mapa, 7 SCRA 457, 459-460 [1963]. 58.Insular Veneer v. Plan, supra, at 8. 59.Order of September 13, 1988; Annex "10" to the Petition, G.R. No. 108015, Rollo, p. 89. 60.Resolution dated November 20, 1989; Annex "6" to Respondent Nocoms' "Opposition to Motion for Extension of Time to File Petition for Review on Certiorari with Motion for Contempt," G.R. No. 109234, Rollo, p. 40; See also Note No. 20. 61.Amberti v. Court of Appeals, 195 SCRA 659, 665-666 [1991]. 62.Valera v. Banez, 116 SCRA 648, 655 [1982]. 63.Tenorio v. Manila Railroad Co., 22 Phil. 411, 416-417 [1912]; also cited in Herrera, Remedial Law, vol. 3, p. 173 [1991].

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64.Tenorio, supra; Herrera, supra; see also De Ynchausti v. Manila Electric Railroad & Light Co., 39 Phil. 908, 911 [1917]. 65.Francisco, The Revised Rules of Court in the Philippines, vol. IV-B, pp. 378-379 [1972]; citing 18 Am Jur 786-787. 66.Francisco, supra, at 394, citing 18 Am Jur 964. 67.Calumet River R. Co. v. Brown, 26 NE 501, 502 [1891]; See 27 Am Jur 2d, "Eminent Domain," Sec. 391 for a list of other cases. 68.Williams v. Jefferson County, 72 So 2d 920, 926 [1954]; See also 27 Am Jur 2d, supra. 69.Pierce County v. King, 287 P 2d 316, 318 [1955]. 70.Francisco, supra, at 378. 71.Francisco, supra, at 394. 72.Their possession was in the concept of owner or jus possessionis (See Vitug, Compendium of Civil Law and Jurisprudence, pp. 302-303 [1993]). 73.The mere holding, or possession without title whatsoever, of property in violation of the right of the owner is wrongful. Examples of this possession are the possession of a thief or usurper (See Tolentino, Civil Code of the Philippines, vol. II, p. 241 [1992]).

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MIAA vs RODRIGUEZ
THIRD DIVISION [G.R. No. 161836. February 28, 2006.] MANILA INTERNATIONAL AIRPORT AUTHORITY and FRANCISCO E. ATAYDE, petitioners, vs. JOAQUIN RODRIGUEZ, respondent. DECISION TINGA, J p: Once again the perennial clash between government taking for public purpose, on one hand, and individual property rights, on the other, comes to fore, with the present case rendered interesting by a couple of twists. Apparently the taking was effected without the aegis of an expropriation case and yet the present owner of the property who is claiming compensation purchased it knowing that it has long been used as part of the airport runway. In the early seventies, petitioner Manila International Airport Authority (MIAA), the governmentowned and controlled corporation managing and operating the Ninoy Aquino International Airport Complex, implemented expansion programs for its runway. This necessitated the acquisition and occupation of some of the properties surrounding its premises. Expropriation proceedings were thus initiated over most of the properties. On 12 January 1996, the MIAA through its then General Manager, petitioner Francisco Atayde (Atayde), received a letter 1 from respondent Joaquin Rodriguez (Rodriguez) proposing to sell at P2,350.00 per square meter, one of the lots already occupied by the expanded runway but assumed as not yet expropriated by the MIAA. The proposal did not ripen to a deal. Subsequently, on 29 April 1996, Rodriguez bought the bigger lot a portion of which was occupied by the runway, as well as all the rights to claim reasonable rents and damages for the occupation, from its owner then, Buck Estate, Inc., for P4,000,000.00. 2 The property purchased per the covering title 3 has a total area of 9,687 square meters, of which a portion consisting of 7,687.5 square meters was then already occupied by the runway. This occupied portion is hereinafter referred to as the subject lot. In a letter dated 20 January 1997, Rodriguez, through counsel, demanded from the MIAA full payment for the property and back rentals for 27 years, amounting to P468,800,000.00. 4 As he did not reach an agreement with the MIAA, Rodriguez filed a case for accion reinvindicatoria with damages. 5 Finding that the MIAA had illegally taken possession of the property, the trial court held: WHEREFORE, judgment is hereby rendered: 1.Ordering defendant to pay plaintiff the amount of P70,868,936.72 as rental for the property from 1972 to 1998; 2.Ordering defendant to pay P15,000.00 per square meter as purchase price of the property occupied by it; SacTAC 3.Ordering defendant to pay exemplary damages in the amount of P1,000,000.00; 4.Ordering defendant to pay attorney's fees equivalent to 5% of the amount due. SO ORDERED. 6 The MIAA elevated the case to the Court of Appeals, imputing as errors: (i) the award of rentals commencing from 1972; (ii) the award of exemplary damages; and (iii) the order to pay P145,305,000.00 as purchase price of the property. 7 In its Decision of 4 July 2003, the Court of Appeals modified the trial court's Decision, holding that Rodriguez is entitled to back rentals only from the time he became the registered owner of the property in 1996. According to the appellate court, the award of rentals was not based on a contract of lease; rather, it was a grant of damages representing unearned rentals or unrealized profits. Such damages, it was explained, must have been inflicted directly upon the person seeking the indemnification; thus, Rodriguez cannot claim damages he did not personally sustain or unrealized profits before he acquired the property. 8 The parties filed separate motions for reconsideration. 9 On 28 January 2004, the Court of Appeals issued a Resolution, the dispositive portion of which reads:

WHEREFORE, premises considered, this Court resolves to: (1)PARTIALLY GRANT plaintiff-appellees' motion for reconsideration by including the following rate of legal interest in the award of rentals: "Six (6%) percent per annum to be computed from the time of the judicial demand and twelve (12%) percent interest, in lieu of the six (6%) percent, upon the finality of the decision until the payment thereof." (2)DENY defendant-appellants' motion for reconsideration for lack of merit. SO ORDERED. 10 Both the MIAA and Atayde, as petitioners, have thus come before this Court. They claim that Rodriguez was a buyer in bad faith, having purchased the subject lot in a highly speculative and scheming manner, 11 and in anticipation of a grossly disproportionate amount of profit at the expense of the Government. 12 This bad faith, according to petitioners, was made evident by the fact that: (i) Rodriguez knew that the airport had been occupying the subject property even before he bought it, and he bought it at the very low price of P4,000,000.00; (ii) three months before he purchased the property, Rodriguez had written to Atayde, claiming to have the certificate of title in his name and offering to sell the lot to the MIAA for P2,350.00 per square meter; and (iii) after purchasing the property, Rodriguez increased his asking price to P9,000.00 per square meter. 13 Since Rodriguez was a buyer in bad faith, petitioners stress that the decisions of the courts below entitling him to amass profits of more than P200,000,000.00 is contrary to morals, good customs and public policy, and would lead to his unjust enrichment. 14 Further, petitioners allege that there is no basis for awarding exemplary damages and attorney's fees in favor of Rodriguez since the MIAA in fact exerted efforts to negotiate with Rodriguez. Considering that the Court of Appeals had ruled that Rodriguez could not claim damages in the form of rentals from 1972 to 1995, the alleged encroachment starting in 1972 should not be used as basis for computing and awarding damages and attorney's fees, petitioners add. 15 Petitioners posit that compared to Rodriguez's conduct of bad faith, the MIAA acted in good faith when it occupied the subject lot. They claim that the property, which was then comprised of two (2) smaller lots owned by one Eugenio Cruz, had already been expropriated by the Republic of the Philippines as early as the 1970s. Since then, and after the expansion of the runway in 1972, nobody had attempted to recover the subject lot or to demand compensation therefor (except Rodriguez). 16 Finally, even assuming that the MIAA is required to pay compensation for the subject lot once more, the same could not be at the current price of P15,000.00 per square meter as ruled by the appellate court, but rather in the price at the time of the taking, 17 petitioners close. HAICET On the other hand, Rodriguez argues that the instant petition calls for a review of the finding of facts of the Court of Appeals which is not allowed in a petition forcertiorari under Rule 45. Besides, the appellate court did not commit any reversible error. Private property shall not be taken for public use without just compensation. 18 This is a constitutional mandate that we must once more put in force. Pertinently, therefore, the Court must determine the basis of compensation, as well as the kind and form of damages due Rodriguez as a consequence of the MIAA's use and occupation of the subject lot. Likewise, the Court has to decide on the alleged bad faith on the part of Rodriguez in purchasing the property. The petition is partly meritorious. While the instant case stemmed from the accion reinvindicatoria that Rodriguez had filed, it essentially revolves around the taking of the subject lot by the MIAA. There is "taking" when the expropriator enters private property not only for a momentary period but for a more permanent duration, or 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. 19 In this context, there was taking when the MIAA occupied a portion thereof for its expanded runway. The instant case is certainly neither unique nor of first impression. Where actual taking was made without the benefit of expropriation proceedings, and the owner sought recovery of the possession of the property prior to the filing of expropriation proceedings, the Court has invariably

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ruled that it is the value of the property at the time of taking that is controlling for purposes of compensation. Thus, in Commissioner of Public Highways v. Burgos, 20 wherein it took the owner of a parcel of land thirty-five (35) years before she filed a case for recovery of possession taken by the local government unit for a road-right-of-way purpose, this Court held: . . . there being no other legal provision cited which would justify a departure form the rule that just compensation is determined on the basis of the value of the property at the time of the taking thereof in expropriation by the Government, the value of the property as it is when the Government took possession of the land in question, not the increased value resulting from the passage of time which invariably brings unearned increment to landed properties, represents the true value to be paid as just compensation for the property taken. 21 In Ansaldo v. Tantuico, Jr., 22 where the owners of two (2) lots used by the Government for road widening sought compensation twenty-six (26) years after the lots were taken, the Court ruled in the same vein, thus: The sole question thus confronting the Court involves the precise time at which just compensation should be fixed, whether as of the time of actual taking of possession by the expropriating entity or, as the Ansaldos maintain, only after conveyance of title to the expropriator pursuant to expropriation proceedings duly instituted since it is only at such a time that the constitutional requirements of due process aside from those of just compensation may be fully met. 23 xxx xxx xxx It is as of the time of such a taking, to repeat, that the just compensation for the property is to be established. As stated in Republic v. Philippine National Bank, ". . . (W)hen plaintiff takes possession before the institution of the condemnation proceedings, the value should be fixed as of the time of the taking of said possession, not of filing of the complaint and the latter should be the basis for the determination of the value, when the taking of the property involved coincides with or is subsequent to, the commencement of the proceedings. Indeed, otherwise, the provision of Rule 69, Section 3, directing that compensation 'be determined as of the date of the filing of the complaint' would never be operative. As intimated in Republic v. Lara (supra), said provision contemplates 'normal circumstances,' under which 'the complaint coincides or even precedes the taking of the property by the plaintiff.'" The reason for the rule, as pointed out in Republic v. Lara, is that ". . . (W)here property is taken ahead of the filing of the condemnation proceedings, the value thereof may be enchanced 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 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.'" Clearly, then, the value of the Ansaldos' property must be ascertained as of the year 1947, when it was actually taken, and not at the time of the filing of the expropriation suit, which, by the way, still has to be done. It is as of that time that the real measure of their loss may fairly be adjudged. The value, once fixed, shall earn interest at the legal rate until full payment is effected, conformably with other principles laid down by case law. 24 The ruling was reiterated in Eslaban v. Vda. De Onorio. 25 There, a main irrigation canal was constructed over a piece of land by the National Irrigation Administration but the property owner filed the complaint seeking compensation only nine (9) years later. The Court declared: 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 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, 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. IcHTCS 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: [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. 26 Per the findings of the trial court, 27 the subject lot was occupied as a runway of the MIAA starting in 1972. Thus, the value of the lot in 1972 should serve as the basis for the award of compensation to the owner. However, said value does not appear in the record. Now, the question of actual damages for the occupation of the subject lot. Undeniably, the MIAA's illegal occupation for more than twenty (20) years has resulted in pecuniary loss to Rodriguez and his predecessors-in-interest. Such pecuniary loss entitles him to adequate compensation in the form of actual or compensatory damages, 28 which in this case should be the legal interest (6%) 29 on the value of the land at the time of taking, from said point up to full payment by the MIAA. 30 This is based on the principle that interest "runs as a matter of law and follows from the right of the landowner to be placed in as good position as money can accomplish, as of the date of the taking." 31 The award of interest renders unwarranted the grant of back rentals as extended by the courts below. In Republic v. Lara, et al., 32 the Court ruled that the indemnity for rentals is inconsistent with a property owner's right to be paid legal interest on the value of the property, for if the condemnor is to pay the compensation due to the owners from the time of the actual taking of their property, the payment of such compensation is deemed to retroact to the actual taking of the property; and, hence, there is no basis for claiming rentals from the time of actual taking. 33 More explicitly, the Court held in Republic v. Garcellano 34 that: The uniform rule of this Court, however, is that this compensation must be, not in the form of rentals, but by way of 'interest from the date that the company [or entity] exercising the right of eminent domain take possession of the condemned lands, and the amounts granted by the court shall cease to earn interest only from the moment they are paid to the owners or deposited in court . . . . 35 Petitioners claim that Rodriguez is a buyer in bad faith since prior to his purchase he was aware of the MIAA's occupation of the property and therefore proceeded with the purchase in anticipation of enormous profits from the subsequent sale to the MIAA. The point is irrelevant. Regardless of whether or not Rodriguez acted in bad faith, all that he will be entitled to is the value of the property at the time of the taking, with legal interest thereon from that point until full payment of the compensation by the MIAA. Besides, assuming the question is of any consequence, the circumstances surrounding Rodriguez's purchase may not even amount to bad faith. Bad faith has been defined as a state of mind affirmatively operating with furtive design or with some motive of self-interest or ill will or for an ulterior purpose, and implies a conscious and intentional design to

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do a wrongful act for a dishonest purpose or moral obliquity. 36 There is nothing wrongful or dishonest in expecting to profit from one's investment. However, Rodriguez can fault but only himself for taking an obvious risk in purchasing property already being used for a public purpose. It was a self-inflicted misfortune that his investment did not generate the windfall he had expected. For ostensibly little did he know that he could not acquire more rights than the previous owners had since the government taking had taken place earlier. SCIAaT For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the lot and negotiating with any of the owners of the property. To our mind, these are wanton and irresponsible acts which should be suppressed and corrected. Hence, the award of exemplary damages and attorneys fees is in order. However, while Rodriguez is entitled to such exemplary damages and attorney's fees, the award granted by the courts below should be equitably reduced. We hold that Rodriguez is entitled only to P200,000.00 as exemplary damages, and attorney's fees equivalent to one percent (1%) of the amount due. The MIAA argues that it had already expropriated the subject lot back in the 1970s. However, the Court cannot pass upon this defense, it having been brought up for the first time. Points of law, theories, issues and arguments not adequately brought to the attention of the trial court need not be, and ordinarily will not be, considered by a reviewing court as they cannot be raised for the first time on appeal. 37 Moreover, this new theory of previous expropriation is negated by the fact that petitioners negotiated with Rodriguez when the latter offered the subject property for sale to the MIAA, as evidenced by the correspondence between the parties. 38 If the MIAA already owned the property, there would be no more need to negotiate with Rodriguez; petitioners would have asserted such fact as soon as Rodriguez had offered to sell the property to them. WHEREFORE, the petition is GRANTED IN PART. The Decision of the Court of Appeals is MODIFIED as follows: a.The MIAA is ordered to pay Joaquin Rodriguez just compensation for the subject lot, the portion actually occupied by the runway consisting of or based on the value thereof at the time of taking in 1972, with interest thereon at the legal rate of six percent (6%) per annum from the time of the taking until full payment is made. For the purpose of determining said value, the case is remanded to the lower court. Said court is ordered to make the determination with deliberate dispatch; b.The award of back rentals as damages is DELETED; c.The MIAA is ordered to PAY exemplary damages in the reduced amount of P200,000.00, and attorney's fees equivalent to one percent (1%) of the amount due. No pronouncement as to costs. HESAIT SO ORDERED. Quisumbing, Carpio and Carpio Morales, JJ., concur. Footnotes 1.Rollo, p. 104. 2.Deed of Absolute Sale, id. at 89-91. 3.After the purchase, TCT No. 109416 of the Registry of Deeds of Paraaque was issued to Rodriguez; id. at 87-88. 4.Id. at 92. 5.Id. at 82-86. The case was raffled to Branch 2, Regional Trial Court of Paraaque City. 6.Page 5 of the RTC Decision; id. at 111. 7.Appellant's Brief, CA records, p. 64. 8.Rollo, p. 39. 9.Id. at 112-116, 117-123. 10.Id. at 44. 11.Id. at 22. 12.Id. at 25. 13.Id. at 17-20. 14.Id. at 21.

15.Id. at 22-24. 16.Id. at 26-27. 17.Id. at 28-29. 18.CONSTITUTION, Art. III, Sec. 9. 19.Ansaldo v. Tantuico, Jr., G.R. No. 50147, 3 August 1990, 188 SCRA 300, 304, citing Municipality of La Carlota v. NAWASA, 12 SCRA 164. 20.No. L-36706, 31 March 1980, 96 SCRA 831. 21.Id. 838, citing Republic v. Philippine National Bank, 1 SCRA 957. 22.Supra note 19. 23.Id. at 303. 24.Id. at 304-305. 25.G.R. No. 146062, 28 June 2001, 360 SCRA 230. 26.Id. at 239-240. 27.Rollo, p. 108. 28.Civil Code, Art. 2199. 29.In Urtula v. Republic, No. L-22061, 31 January 1968, 22 SCRA 477, 481, the rate of six percent (6%) interest on the amount of just compensation was deemed a "known factor." 30.Amigable v. Cuenca, No. L-26400, 29 February 1972, 43 SCRA 360, 365; Republic v. Lara, 96 Phil. 170 (1954). 31.Urtula v. Republic, supra note 29, at 480, citing 30 C.J.S. 230. 32.96 Phil. 170 (1954). 33.Id. at 184-185. 34.103 Phil. 231 (1958), also cited in Valderhueza, et al. v. Republic, No. L-21032, 19 May 1966, 17 SCRA 107, 113. 35.Id. at 237. 36.The Philippine American Life and General Insurance Co. v. Gramaje, G.R. No. 156963, 11 November 2004, 442 SCRA 274, 285. 37.Tan Chun Suy v. Court of Appeals, G.R. No. 93640, 7 January 1994, 229 SCRA 151, 165. 38.Rollo, pp. 92-95.

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REPUBLIC vs LIM
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 p: 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. ETaSDc For failure of the Republic to pay for the lots, on September 20, 1961, the Denzons' successors-ininterest, Francisca Galeos-Valdehueza and Josefina Galeos-Panerio, 2filed 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. R7208. 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 Republic's failure to pay the amount of P4,062.10, adjudged in the expropriation proceedings. However, in view of the annotation on their land titles, they were ordered to execute a deed of sale in favor of the Republic. 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 attorney's 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). SacDIE 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:

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"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 1940's 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. . . . 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). xxx xxx xxx 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 plaintiff's 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. ESDHCa 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 asecond 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 Republic's 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 respondent's 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 Republic's 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 petitioner's 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 respondent's predecessors-in-interest the just compensation for Lots 932 and 939. The length of time and the manner with which it evaded payment demonstrate its arbitrary high-handedness and confiscatory attitude. The final judgment in the expropriation proceedings (Civil Case No. 781) was entered on April 5, 1948. More than half of a century has passed, yet, to this day, the landowner, now respondent, has remained empty-handed. Undoubtedly, over 50 years of delayed payment cannot, in any way, be viewed as fair. This is more so when such delay is accompanied by bureaucratic hassles. Apparent from Valdehueza is the fact that respondent's predecessors-ininterest were given a "run around" by the Republic's 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 respondent's predecessors-in-interest. Even President Garcia, who sent a letter to the Civil Aeronautics Administration and the Secretary of National Defense to expedite the payment, failed in granting relief to them. And, on September 6, 1961, while the Chief of Staff of the Armed Forces expressed willingness to pay the appraised value of the lots, nothing happened. aIcDCH The Court of Appeals is correct in saying that Republic's 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 government's 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 respondent's predecessors-in-interest the sum of P16,248.40 as "reasonable market value of the two lots in question." Unfortunately, it did not comply and allowed several decades to pass without obeying this Court's mandate. 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

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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 individual's 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 respondent's claim, the Republic is invoking this Court's 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 condemnor's title relates back to the date on which the petition under the Eminent Domain Act, or the commissioner's report under the Local Improvement Act, is filed. . . . 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 Republic's 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: ". . . 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" . . .ECDaTI

The second phase of the eminent domain action is concerned with the determination by the court of "the just compensation for the property sought to be taken." This is done by the court with the assistance of not more than three (3) commissioners. . . . It is only upon the completion of these two stages that expropriation is said to have been completed. 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, thefirst was in the expropriation proceedings and the second, in Valdehueza. Fifty-seven (57) years have passed since then. We cannot but construe the Republic's 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 person's 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 Republic's 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 Institute's 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. ETCcSa 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

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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 people's right, will not stand still in the face of the Republic's 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] . . . 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 respondent's title was registered first, it would be the Republic's 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 apreferential 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 owner's 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 respondent's part, it is reasonable to conclude that he entered into the contract of mortgage with Valdehueza and Panerio fully aware of the extent of his right as a mortgagee. A mortgage is merely an accessory contract intended to secure the performance of the principal obligation. One of its characteristics is that it is inseparablefrom the property. It adheres to the property regardless of who its owner may subsequently be. 25 Respondent must have known that even if Lot 932 is ultimately expropriated by the Republic, still, his right as a mortgagee is protected. In this regard, Article 2127 of the Civil Code provides: "Art. 2127.The mortgage extends to the natural accessions, to the improvements, growing fruits, and the rents or income not yet received when the obligation becomes due, and to the amount of the indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of expropriation for public use, with the declarations, amplifications, and limitations established by law, whether the estate remains in the possession of the mortgagor or it passes in the hands of a third person. HcSDIE In summation, while the prevailing doctrine is that "the non-payment of just compensation does not entitle the private landowner to recover possession of the expropriated lots, 26 however, in

cases where the government failed to pay just compensation within five (5) 27 years from the finality of the judgment in the expropriation proceedings, the owners concerned shall have the right to recover possession of their property. This is in consonance with the principle that "the government cannot keep the property and dishonor the judgment." 28 To be sure, the five-year period limitation will encourage the government to pay just compensation punctually. This is in keeping with justice and equity. After all, it is the duty of the government, whenever it takes property from private persons against their will, to facilitate the payment of just compensation. In Cosculluela v. Court of Appeals, 29 we defined just compensation as not only the correct determination of the amount to be paid to the property owner but also the payment of the property within a reasonable time. Without prompt payment, compensation cannot be considered "just." WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No. 72915 is AFFIRMED in toto. The Republic's motion for reconsideration of our Resolution dated March 1, 2004 is DENIED with FINALITY. No further pleadings will be allowed. Let an entry of judgment be made in this case. SO ORDERED. Davide, Jr., C. J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario andGarcia, JJ., concur. Footnotes 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.Cosculluela 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 taker's gain but the owner's loss. The word just is used to intensify the meaning of the word compensation, to convey the idea that the equivalent to be rendered for the property taken shall be real, substantial, full, ample." (Manila Railroad Co. vs. Velasquez, 32 Phil. 286). 15.G.R. No. 69260, December 22, 1989, 180 SCRA 576, 583-584. 16.G.R. No. 137569, June 23, 2000, 334 SCRA 320,329. 17.G.R. No. 146587, July 2, 2002, 383 SCRA 611. 18.G.R. No. 147511, January 20, 2003, 395 SCRA 494. 19.Law of Eminent Domain, Third Edition, Volume II 927 citing Robinson vs. Southern California Ry. Co., 129 Cal. 8, 61 Pac. 947; Meeker vs. Chicago, 23 Ill. App. 23; Wilson vs. Muskegon etc. R.R. Co., 132 Mich. 469, 93 N.W. 1059; Illinois Cent. R.R. Co. vs. Hoskins, 80 Miss. 730, 32 So. 150, 92 Am St. Rep. 612; McClinton vs. Pittsburg etc. Ry Co., 66 Pa St. 404.

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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 person's property is to be confiscated for that purpose. A man who comes to this court is entitled to have his rights ascertained and declared, however, inconvenient it may be to third persons to whom it may be a convenience to have the use of his property." 23.Supra at 375-376. 24.Supra. 25.Paras, Civil Code of the Philippines Annotated, 14th Ed., Book V, at 1021. 26.Republic of the Philippines vs. Court of Appeals, supra. and Reyes vs. National Housing Authority, supra. 27.Section 6, Rule 39 provides that: "A final and executory judgment or order may be executed on motion within five (5) years from the date of its entry. After the lapse of such time, and before it is barred by the statute of limitations, a judgment may be enforced by action. The revived judgment may also be enforced by motion within (5) years from the date of its entry and thereafter by action before it is barred by the statute of limitations." 28.Commissioner of Public Highways v. San Diego, No. L-30098, February 18, 1970. 29.No. L-77765, August 15, 1988, 164 SCRA 393.

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LANDBANK vs HEIRS OF RADAZA

THIRD DIVISION [G.R. No. 183279. January 25, 2010.] LAND BANK OF THE PHILIPPINES, petitioner, vs. DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD and HEIRS OF VICENTE ADAZA, HEIRS OF ROMEO ADAZA, and HEIRS OF CESAR ADAZA, represented by RUSSEL ADAZA, respondents. DECISION VELASCO, JR., J p: The Case Appealed under Rule 45 are the Decision 1 and Resolution 2 of the Court of Appeals (CA) dated December 14, 2007 and June 3, 2008, respectively, in CA-G.R. SP No. 00984, affirming the orders of the Department of Agrarian Reform Adjudication Board (DARAB) that granted private respondents' motion to withdraw amended valuation. The Facts Private respondents, namely, the heirs of Vicente, Romeo, and Cesar, all surnamed Adaza, represented by Russel (daza (Adazas, collectively), were owners of a tract of land with an area of 359 hectares, more or less, situated in Patagan, Manukan, Zamboanga del Norte and covered by Transfer Certificate of Title No. T-42963. Of the total, the Department of Agrarian Reform (DAR) identified a 278.4092-hectare portion as suitable for compulsory acquisition under the comprehensive agrarian reform program (CARP) pursuant to the Comprehensive Agrarian Reform Law of 1988 or Republic Act No. (RA) 6657, otherwise known as the CARP Law. In August 1991, the DAR sent out a notice of coverage. The claim folder profile was then endorsed to petitioner Land Bank of the Philippines (LBP) to determine the value of the land. The LBP assigned the covered 278.4092-hectare area an aggregate value of PhP 786,654.46. The DAR, in turn, offered the same amount to the Adazas as just compensation for their landholding, but the latter considered the valuation for their developed property unreasonably low and rejected the offer. This prompted DAR to order the LBP to deposit the amount aforestated to the account of the Adazas, who then secured the release of that amount without prejudice to their right to a final determination of just compensation. The DAR then subdivided the property into smaller lots and, in December 1992, distributed them to identified beneficiaries. DCASEc Pursuant to the pertinent provision of the then governing 2003 DARAB Rules of Procedure in relation to Section 16(d) of RA 6657 in case of contested valuation, the Provincial Agrarian Reform Adjudicator (PARAD) of Zamboanga del Norte conducted a summary administrative hearing to determine just compensation. In the course of the hearing and on its preliminary estimation that the computation was unconscionably low, the PARAD, by Order of December 22, 2003, 3 asked the LBP to undertake another landsite inspection and recomputation of the value of the subject landholding in accordance with the latest formulae on land valuation. The LBP later submitted its compliance report, 4 in which it came out with a new revalued figure and prayed that the PARAD adopt the recomputed value in the amount of PhP 3,426,153.80 as just compensation for the Adazas' CARP-covered property. On May 23, 2005, the PARAD issued another Order 5 disposing as follows: WHEREFORE, . . . order is hereby issued affirming the recomputed valuation of the covered landholding in the sum of P3,426,153.80 to be in accordance with the latest applicable administrative order and guidelines, without prejudice to the right of the [Adazas] to appeal, or go to the Special Agrarian Court whenever proper. 6 The Adazas found the reevaluated amount level still too low, prompting them to appeal to the DARAB, docketed as DARAB Case No. 13719LV. Pending resolution of their appeal, the Adazas interposed a Motion to Withdraw Amended Valuation 7 on August 9, 2005, seeking the release to them of the amount representing the difference between the initial valuation and the second valuation. The Adazas alleged having long been dispossessed of the subject property, while the farmer-beneficiaries installed on it are enjoying full possession of it.

In its Comment 8 dated October 6, 2005, the LBP disputed the Adazas' right to lay claim on the recomputed valuation, and, at the same time, questioned the legality of their right before the DARAB. Thus, pending finality of the resolution setting just compensation, the LBP added, no execution shall lie insofar as the incremental value is concerned. By Order 9 dated January 2, 2006, the DARAB granted the motion to withdraw amended valuation, with a directive to its Secretariat to issue the necessary writ of execution, on the strength of the ensuing ratiocination: TaIHEA Execution pending appeal is allowed when superior circumstances demanding urgency outweigh the damages that may result from the issuance of the writ. [The Adazas] were already deprived of the beneficial ownership of the subject landholding effective December 1992. . . . To the mind of this Board, the long years of waiting by the [Adazas] for the final determination of just compensation of the subject landholding outweighs the damages that may result from the issuance of the writ of execution pending appeal. Staying the execution of the 23 May 2005 Decision of the Adjudicator a quo who affirmed the valuation made by the LBP, would bring more injustice to [the Adazas]. x x x Besides, Section [1]6 of RA 6657 does not make a distinction as to initial valuation or amended valuation made by the LBP. Any valuation made by the LBP on CARP-covered land is made pursuant to Executive Order No. 405, Series of 1990. LBP then moved for reconsideration, but the DARAB, per its Order 10 of March 14, 2006, denied the motion and reiterated its earlier directive on the issuance of a writ of execution. Therefrom, the LBP went to the CA on certiorari under Rule 65. Ruling of the Appellate Court By Decision dated December 14, 2007, as effectively reiterated in a Resolution of June 3, 2008, the CA found the allegations on grave abuse of discretion on the part of the DARAB to be baseless and accordingly denied the LBP's petition for certiorari, disposing: WHEREFORE, the petition is DENIED. The assailed Orders of the DARAB dated January 2, 2006 and March 14, 2006 are hereby AFFIRMED in toto. Hence, this petition for review, on the following legal issue: WHETHER OR NOT THE [DARAB] CAN ORDER THE RELEASE TO THE LANDOWNERS, BY WAY OF EXECUTION PENDING APPEAL, OF THE INCREMENTAL DIFFERENCE OF A LANDBANK RECOMPUTATION UPHELD IN A DECISION OF THE DAR ADJUDICATOR A QUO WITHIN THE PURVIEW OF SECTION 16, ET SEQ. OF THE CARP LAW (R.A. 6657) AND ITS IMPLEMENTING RULES. EHCcIT In the main, it is the LBP's posture that the DARAB cannot validly order the release of the incremental difference (amended valuation amount of PhP 3,426,153.80 - original valuation amount of PhP 786,564.46 = incremental amount or difference) by way of execution pending appeal inasmuch as the amended valuation has yet to be approved by DAR. Without such approval, so LBP's argument goes, there is really no amended valuation within the ambit of Sec. 16 of the CARP Law, which contemplates of a DAR-LBP valuation. In the absence, thus, of a duly DARapproved valuation, there is no subject for execution. 11 And at any event, LBP also argues that it has no statutory duty to release any amount resulting from any subsequent reevaluation based on an order which is not yet final and executory. 12 Our Ruling The petition is without merit. Three points need to be emphasized at the outset. First, the amount of PhP 3,426,153.80 the Adazas want to be released pending appeal, or pending final determination of just compensation, to be precise, was arrived at by LBP, its re-evaluation efforts taken pursuant to Executive Order No. 405, 13 Series of 1990, Sec. 1 of which reads: SECTION 1. The [LBP] shall be primarily responsible for the determination of the land valuation and compensation for all private lands suitable for agriculture under the Voluntary Offer to Sell (VOS) or Compulsory Acquisition (CA) arrangement as governed by [RA] 6657. The [DAR] shall make use of the determination of the land valuation and compensation by the [LBP] in the performance of functions.

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After effecting the transfer of titles from the landowner to the Republic of the Philippines, the [LBP] shall inform the DAR of such fact in order that the latter may proceed with the distribution of the lands to the qualified agrarian reform beneficiaries . . . Second, the LBP, no less, had asked the PARAD to adopt LBP's recomputed value of PhP 3,426,153.80 as just compensation for the subject property. And third, the Adazas' landholding had already been distributed before full payment of just compensation could be effected. In fact, the Adazas have been deprived of the beneficial use and ownership of their landholding since 1992 and have received only PhP 786,564.46 for their 278.40-hectare CARP-covered lands. 14 In light of the foregoing considerations, it is but just and proper to allow, with becoming dispatch, withdrawal of the revised compensation amount, albeit protested. The concept of just compensation contemplates of just and timely payment; it embraces not only the correct determination of the amount to be paid to the landowner, but also the payment of the land within a reasonable time from its taking. 15 Without prompt payment, compensation cannot, as Land Bank of the Philippines v. Court of Appeals 16 instructs, be considered "just" for the owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for years before actually receiving the amount necessary to cope with his loss. SIaHDA The LBP's argument that by allowing withdrawal of the incremental amount, the government may be placed at a losing end, citing the possibility that the recomputed amount may be more than the just compensable value of the 278.40 hectares taken, is specious. For one, as an exercise of police power to complement eminent domain, the forced taking of private property under the CARP puts the landowners, and not the government, in a situation where the odds are already stacked against them. One thing going for the landowners, though, is that they cannot, as a matter of law, be compelled to accept the LBP's valuation of their expropriated land and/or accept DAR's offer by way of compensation. And for another, the stated risk which the DAR or the government will allegedly be exposed to if immediate withdrawal of the rejected compensation is allowed is at the moment pure speculation. The DARAB, with its presumptive expertise in agrarian land valuation, even dismissed as "very remote" the possibility of the LBP-amended valuation exceeding the value of the subject landholding using the valuation criteria and formulae prescribed under the law. It may be well to explicate at this juncture the nature of the right of landowners to the amount set aside for their land placed under CARP. Under the CARP Law, the landowners are entitled to withdraw the amount deposited in their behalf pending the final resolution of the case involving the final valuation of his property. This entitlement remains regardless of whether the amount is provisional, as contemplated in Sec. 16(d) and (e) of RA 6657 or the final compensation as provided under Sec. 18 of the same law. The provisions referred to respectively provide: Sec. 16. Procedure for Acquisition of Private Lands. For purposes of acquisition of private lands, the following procedures shall be followed: xxx xxx xxx (d)In case of rejection [of the offer of DAR to pay a corresponding value in accordance with the valuation set forth in Section 17 and 18] or failure to reply, the DAR shall conduct summary administrative proceedings to determine the compensation for the land requiring the landowner, the LBP and other interested parties to submit evidence as to the just compensation for the land, within fifteen (15) days from the receipt of the notice. . . . DIETcC (e)Upon receipt by the landowner of the corresponding payment or, in case of rejection or no response from the landowner, upon the deposit with an accessible bank designated by the DAR of the compensation in cash or in LBP bonds in accordance with this Act, the DAR shall take immediate possession of the land and shall request the proper Register of Deeds to issue a Transfer Certificate of Title (TCT) in the name of the Republic of the Philippines. The DAR shall thereafter proceed with the redistribution of the land to the qualified beneficiaries. (Emphasis supplied.) Sec. 18. Valuation and Mode of Payment. The LBP shall compensate the landowner the amount as may be agreed upon by the landowner and the DAR and the LBP in accordance with the criteria

provided for in Sections 16 and 17, 17 and other provisions hereof or as may be finally determined by the court as the just compensation for the land. In Land Bank of the Philippines v. Court of Appeals, the Court stressed the need to allow the landowners to withdraw immediately the amount deposited in their behalf, pending final determination of what is just compensation for their land, thus: The attempt to make a distinction between the deposit of compensation under Section 16(e) of RA 6657 and determination of just compensation under Section 18 is unacceptable. To withhold the right of the landowners to appropriate the amounts already deposited in their behalf as compensation for their properties simply because they rejected the DAR's valuation, and notwithstanding that they have already been deprived of the possession of such properties is an oppressive exercise of eminent domain. The irresistible expropriation of private respondents' properties was painful enough. But DAR rubbed it in all the more by withholding that which rightfully belongs to private respondents in exchange for the taking x x x. This is misery twice bestowed on private respondents, which the Court must rectify. Hence, we find it unnecessary to distinguish between provisional compensation under Section 16(e) and final compensation under Section 18 for purposes of exercising the landowners' right to appropriate the same. The immediate effect in both situations is the same, the landowner is deprived of the use and possession of his property for which he should be fairly and immediately compensated. 18 (Emphasis ours.) The LBP, in a bid to stall further the Adazas' claim to the difference of the new and original valuation amounts, would foist the argument that the sum which the CARP Law requires it to set aside and which the landowner may withdraw is the amount corresponding to the LBP-DAR valuation. LBP adds, however, that in the instant case, the DAR has yet to approve the new valuation. DTCAES The Court may accord cogency to LBP's argument, but for the fact that the Provincial Adjudicator a quo and eventually the DARAB affirmed the new property valuation made by the LBP. By virtue of such affirmatory action, the DAR has, in effect, approved the PhP 3,426,153.80-LBP valuation, DARAB being the adjudicating arm of DAR. 19 Lest it be overlooked, the DARAB has primary jurisdiction to adjudicate all agrarian disputes, inclusive of controversies relating to compensation of lands under the CARP Law, 20 as the determination of just compensation is essentially a judicial function. 21 As aptly observed by the DARAB, there is no way that such amended valuation would go down as it is the landowners who have exhibited opposition to the valuation. The LBP's lament about the impropriety of what amounts to the DARAB allowing execution pending appeal without requiring the Adazas to post a bond does not persuade. Under Rule XX, Section 2 of the 2003 DARAB Rules of Procedure, 22 the DARAB may grant a motion to execute an order or decision pending appeal upon meritorious grounds. To the DARAB, "there is no more ground more meritorious than the [Adazas'] agony of waiting for a long period of time to have their properties properly valued." 23 We cannot agree more. The length of time that the Adazas have been deprived of their property without receiving their just due on a rather simple issue of just compensation will suffice to justify the exercise by DARAB of its discretion to allow execution pending appeal. To paraphrase what we said in Apo Fruits Corporation v. Court of Appeals, 24 allowing the taking of the landowners' property and leaving them empty-handed while government withholds compensation are undoubtedly oppressive. On the matter of allowing execution pending appeal without requiring the Adazas to put up a bond, we cite with approval what the DARAB sensibly wrote on that regard: As [regards] the posting of bond, the office of bond is for the payment of damages which the aggrieved party may suffer in the event the final order or decision is reversed on appeal. As stated in the preceding paragraph the possibility of having the LBP amended valuation be reversed is very remote. Thus, this Board is of the opinion that posting of bond is not necessary for the execution pending appeal of the 23 May 2005 decision. Besides the amount to be released is the amount computed by LBP itself. WHEREFORE, this petition is hereby DENIED. SO ORDERED.

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Corona, Nachura, Peralta and Mendoza, JJ., concur. Footnotes 1.Rollo, pp. 38-51. Penned by Associate Justice Elihu A. Ybaez and concurred in by Associate Justices Romulo V. Borja and Mario V. Lopez. 2.Id. at 64-65. 3.Id. at 129. 4.Id. at 131. 5.Id. at 137-140. 6.Id. at 140. 7.Id. at 142-143. 8.Id. at 144. 9.Id. at 99-103. 10.Id. at 106-109. 11.Id. at 27-28. 12.Id. at 33. 13.Executive Order No. 405 dated June 14, 1990 vests the LBP the primary responsibility to determine the land valuation and compensation for all private lands covered by RA 6657. SeeLand Bank v. Banal, G.R. No. 143276, July 20, 2004, 434 SCRA 545; citing Philippine Veterans Bank v. Court of Appeals, G.R. No. 132767, January 18, 2000, 322 SCRA 139. 14.Rollo, p. 108. 15.Apo Fruits Corporation v. Court of Appeals, G.R. No. 164195, February 6, 2007, 514 SCRA 537. 16.G.R. No. 118712, July 5, 1996, 258 SCRA 404; citations omitted. 17.Sec. 17. Determination of Just Compensation. In determining just compensation, the cost of the acquisition of the land, the current value of like properties, its nature, actual use and income, the sworn valuation by the owner, the tax declarations and the assessment made by government assessors shall be considered. The social and economic benefits contributed by the farmers and the farm workers and by the Government to the property as well as the non-payment of taxes or loans secured from any government financing institution on the said land shall be considered as additional factors to determine its valuation. 18.G.R. No. 118712, October 6, 1995, 249 SCRA 149, 160. 19.Vda. de Tangub v. Court of Appeals, UDK No. 9864, December 3, 1990, 191 SCRA 885. 20.Nuesa v. Court of Appeals, G.R. No. 132048, March 6, 2002, 378 SCRA 351; citing DARAB Revised Rules of Procedure, Rule II, Sec. 1. 21.Association of Small Landowners in the Phil., Inc. v. Secretary of Agrarian Reform, G.R. No. 78742, July 14, 1989, 175 SCRA 343; citing Export Processing Zone Authority v. Dulay, G.R. No. 59603, April 29, 1987, 149 SCRA 305. 22.SECTION 2. Execution Pending Appeal. Any motion for execution of the decision of the Adjudicator pending appeal shall be filed before the Board which may grant the same upon meritorious grounds, upon posting of a sufficient bond in the amount conditioned for the payment of damages which the aggrieved party may suffer in the event that the final order or decision is reversed on appeal x x x. (The same provision is carried over the 2009 DARAB Rules of Procedure.) 23.Rollo, p. 109. 24.Supra note 15.

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HON. EUSEBIO vs LUIS, ET. AL

THIRD DIVISION [G.R. No. 162474. October 13, 2009.] HON. VICENTE P. EUSEBIO, LORNA A. BERNARDO, VICTOR ENDRIGA, and the CITY OF PASIG, petitioners, vs. JOVITO M. LUIS, LIDINILA LUIS SANTOS, ANGELITA CAGALINGAN, ROMEO M. LUIS, and VIRGINIA LUIS-BELLESTEROS, * respondents. DECISION PERALTA, J p: This resolves the Petition for Review on Certiorari under Rule 45 of the Rules of Court, praying that the Decision 1 of the Court of Appeals (CA) dated November 28, 2003, affirming the trial court judgment, and the CA Resolution 2 dated February 27, 2004, denying petitioners' motion for reconsideration, be reversed and set aside. The antecedent facts are as follows: Respondents are the registered owners of a parcel of land covered by Transfer Certificate of Title Nos. 53591 and 53589 with an area of 1,586 square meters. Said parcel of land was taken by the City of Pasig sometime in 1980 and used as a municipal road now known as A. Sandoval Avenue, Barangay Palatiw, Pasig City. On February 1, 1993, the Sanggunian of Pasig City passed Resolution No. 15 authorizing payments to respondents for said parcel of land. However, the Appraisal Committee of the City of Pasig, in Resolution No. 93-13 dated October 19, 1993, assessed the value of the land only at P150.00 per square meter. In a letter dated June 26, 1995, respondents requested the Appraisal Committee to consider P2,000.00 per square meter as the value of their land. One of the respondents also wrote a letter dated November 25, 1994 to Mayor Vicente P. Eusebio calling the latter's attention to the fact that a property in the same area, as the land subject of this case, had been paid for by petitioners at the price of P2,000.00 per square meter when said property was expropriated in the year 1994 also for conversion into a public road. Subsequently, respondents' counsel sent a demand letter dated August 26, 1996 to Mayor Eusebio, demanding the amount of P5,000.00 per square meter, or a total of P7,930,000.00, as just compensation for respondents' property. In response, Mayor Eusebio wrote a letter dated September 9, 1996 informing respondents that the City of Pasig cannot pay them more than the amount set by the Appraisal Committee. HaAISC Thus, on October 8, 1996, respondents filed a Complaint for Reconveyance and/or Damages (Civil Case No. 65937) against herein petitioners before the Regional Trial Court (RTC) of Pasig City, Branch 155. Respondents prayed that the property be returned to them with payment of reasonable rental for sixteen years of use at P500.00 per square meter, or P793,000.00, with legal interest of 12% per annum from date of filing of the complaint until full payment, or in the event that said property can no longer be returned, that petitioners be ordered to pay just compensation in the amount of P7,930,000.00 and rental for sixteen years of use at P500.00 per square meter, or P793,000.00, both with legal interest of 12% per annum from the date of filing of the complaint until full payment. In addition, respondents prayed for payment of moral and exemplary damages, attorney's fees and costs. After trial, the RTC rendered a Decision 3 dated January 2, 2001, the dispositive portion of which reads as follows: WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the defendants: 1.Declaring as ILLEGAL and UNJUST the action of the defendants in taking the properties of plaintiffs covered by Transfer Certificates of Title Nos. 53591 and 53589 without their consent and without the benefit of an expropriation proceedings required by law in the taking of private property for public use;

2.Ordering the defendants to jointly RETURN the subject properties to plaintiffs with payment of reasonable rental for its use in the amount of P793,000.00 with legal interest at the rate of 6% per annum from the filing of the instant Complaint until full payment is made; 3.In the event that said properties can no longer be returned to the plaintiffs as the same is already being used as a public road known as A. Sandoval Avenue, Pasig City, the defendants are hereby ordered to jointly pay the plaintiffs the fair and reasonable value therefore at P5,000.00 per square meter or a total of P7,930,000.00 with payment of reasonable rental for its use in the amount of P500.00 per square meter or a total of P793,000.00, both with legal interest at the rate of 6% per annum from the filing of the instant Complaint until full payment is made; and 4.Ordering the defendants to jointly pay the plaintiffs attorney's fees in the amount of P200,000.00. No pronouncement as to costs. SO ORDERED. HcDATC Petitioners then appealed the case to the CA, but the CA affirmed the RTC judgment in its Decision dated November 28, 2003. Petitioners' motion for reconsideration of the CA Decision was denied per Resolution dated February 27, 2004. Hence, this petition where it is alleged that: I.PUBLIC RESPONDENT COURT ERRED IN UPHOLDING THE RULING OF THE LOWER COURT DESPITE THE APPARENT LACK OF JURISDICTION BY REASON OF PRESCRIPTION OF PRIVATE RESPONDENTS' CLAIM FOR JUST COMPENSATION; II.PUBLIC RESPONDENT COURT ERRED IN FIXING THE FAIR AND REASONABLE COMPENSATION FOR RESPONDENTS' PROPERTY AT P5,000.00 PER SQUARE METER DESPITE THE GLARING FACT THAT AT THE TIME OF TAKING IN THE YEAR 1980 THE FAIR MARKET VALUE WAS PEGGED BY AN APPRAISAL COMMITTEE AT ONE HUNDRED SIXTY PESOS (PHP160.00); III.PUBLIC RESPONDENT COURT ERRED IN UPHOLDING THE JUDGMENT OF THE LOWER COURT AWARDING THE AMOUNT OF P793,000.00 AS REASONABLE RENTAL FOR THE USE OF RESPONDENTS' PROPERTY IN SPITE OF THE FACT THAT THE SAME WAS CONVERTED INTO A PUBLIC ROAD BY A PREVIOUSLY ELECTED MUNICIPAL MAYOR WITHOUT RESPONDENTS' REGISTERING ANY COMPLAINT OR PROTEST FOR THE TAKING AND DESPITE THE FACT THAT SUCH TAKING DID NOT PERSONALLY BENEFIT THE PETITIONERS BUT THE PUBLIC AT LARGE; AND IV.PUBLIC RESPONDENT COURT OF APPEALS ERRED IN AFFIRMING THE P200,000.00 AWARD FOR ATTORNEY'S FEES TO THE PRIVATE RESPONDENTS' COUNSEL DESPITE THE ABSENCE OF NEGLIGENCE OR INACTION ON THE PART OF PETITIONERS RELATIVE TO THE INSTANT CLAIM FOR JUST COMPENSATION. 4 At the outset, petitioners must be disabused of their belief that respondents' action for recovery of their property, which had been taken for public use, or to claim just compensation therefor is already barred by prescription. In Republic of the Philippines v. Court of Appeals, 5 the Court emphasized "that where private property is taken by the Government for public use without first acquiring title thereto either through expropriation or negotiated sale, the owner's action to recover the land or the value thereof does not prescribe". The Court went on to remind government agencies not to exercise the power of eminent domain with wanton disregard for property rights as Section 9, Article III of the Constitution provides that "private property shall not be taken for public use without just compensation". 6 The remaining issues here are whether respondents are entitled to regain possession of their property taken by the city government in the 1980's and, in the event that said property can no longer be returned, how should just compensation to respondents be determined. SHADEC These issues had been squarely addressed in Forfom Development Corporation v. Philippine National Railways, 7 which is closely analogous to the present case. In said earlier case, the Philippine National Railways (PNR) took possession of the private property in 1972 without going through expropriation proceedings. The San Pedro-Carmona Commuter Line Project was then implemented with the installation of railroad facilities on several parcels of land, including that of petitioner Forfom. Said owner of the private property then negotiated with PNR as to the amount

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of just compensation. No agreement having been reached, Forfom filed a complaint for Recovery of Possession of Real Property and/or Damages with the trial court sometime in August 1990. In said case, the Court held that because the landowner did not act to question the lack of expropriation proceedings for a very long period of time and even negotiated with the PNR as to how much it should be paid as just compensation, said landowner is deemed to have waived its right and is estopped from questioning the power of the PNR to expropriate or the public use for which the power was exercised. It was further declared therein that: . . . recovery of possession of the property by the landowner can no longer be allowed on the grounds of estoppel and, more importantly, of public policy which imposes upon the public utility the obligation to continue its services to the public. The non-filing of the case for expropriation will not necessarily lead to the return of the property to the landowner. What is left to the landowner is the right of compensation. . . . It is settled that non-payment of just compensation does not entitle the private landowners to recover possession of their expropriated lot. 8 Just like in the Forfom case, herein respondents also failed to question the taking of their property for a long period of time (from 1980 until the early 1990's) and, when asked during trial what action they took after their property was taken, witness Jovito Luis, one of the respondents, testified that "when we have an occasion to talk to Mayor Caruncho we always asked for compensation". 9 It is likewise undisputed that what was constructed by the city government on respondents' property was a road for public use, namely, A. Sandoval Avenue in Pasig City. Clearly, as in Forfom, herein respondents are also estopped from recovering possession of their land, but are entitled to just compensation. Now, with regard to the trial court's determination of the amount of just compensation to which respondents are entitled, the Court must strike down the same for being contrary to established rules and jurisprudence. The prevailing doctrine on judicial determination of just compensation is that set forth in Forfom. 10 Therein, the Court ruled that even if there are no expropriation proceedings instituted to determine just compensation, the trial court is still mandated to act in accordance with the procedure provided for in Section 5, Rule 67 of the 1997 Rules of Civil Procedure, requiring the appointment of not more than three competent and disinterested commissioners to ascertain and report to the court the just compensation for the subject property. The Court reiterated its ruling in National Power Corporation v. Dela Cruz 11 that "trial with the aid of commissioners is a substantial right that may not be done away with capriciously or for no reason at all". 12 It was also emphasized therein that although ascertainment of just compensation is a judicial prerogative, the commissioners' findings may only be disregarded or substituted with the trial court's own estimation of the property's value only if the commissioners have applied illegal principles to the evidence submitted to them, where they have disregarded a clear preponderance of evidence, or where the amount allowed is either grossly inadequate or excessive. Thus, the Court concluded in Forfom that: cda The judge should not have made a determination of just compensation without first having appointed the required commissioners who would initially ascertain and report the just compensation for the property involved. This being the case, we find the valuation made by the trial court to be ineffectual, not having been made in accordance with the procedure provided for by the rules. 13 Verily, the determination of just compensation for property taken for public use must be done not only for the protection of the landowners' interest but also for the good of the public. In Republic v. Court of Appeals, 14 the Court explained as follows: The concept of just compensation, however, does not imply fairness to the property owner alone. Compensation must be just not only to the property owner, but also to the public which ultimately bears the cost of expropriation. 15

It is quite clear that the Court, in formulating and promulgating the procedure provided for in Sections 5 and 6, Rule 67, found this to be the fairest way of arriving at the just compensation to be paid for private property taken for public use. With regard to the time as to when just compensation should be fixed, it is settled jurisprudence that where property was taken without the benefit of expropriation proceedings, and its owner files an action for recovery of possession thereof before the commencement of expropriation proceedings, it is the value of the property at the time of taking that is controlling. 16 Explaining the reason for this rule in Manila International Airport Authority v. Rodriguez, 17 the Court, quoting Ansaldo v. Tantuico, Jr., 18 stated, thus: The reason for the rule, as pointed out in Republic v. Lara, is that . . . [w]here property is taken ahead of the filing of the condemnation proceedings, the value thereof may be enchanced 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 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'. 19 In this case, the trial court should have fixed just compensation for the property at its value as of the time of taking in 1980, but there is nothing on record showing the value of the property at that time. The trial court, therefore, clearly erred when it based its valuation for the subject land on the price paid for properties in the same location, taken by the city government only sometime in the year 1994. DEHaTC However, in taking respondents' property without the benefit of expropriation proceedings and without payment of just compensation, the City of Pasig clearly acted in utter disregard of respondents' proprietary rights. Such conduct cannot be countenanced by the Court. For said illegal taking, the City of Pasig should definitely be held liable for damages to respondents. Again, in Manila International Airport Authority v. Rodriguez, 20 the Court held that the government agency's illegal occupation of the owner's property for a very long period of time surely resulted in pecuniary loss to the owner. The Court held as follows: Such pecuniary loss entitles him to adequate compensation in the form of actual or compensatory damages, which in this case should be the legal interest (6%) on the value of the land at the time of taking, from said point up to full payment by the MIAA. This is based on the principle that interest "runs as a matter of law and follows from the right of the landowner to be placed in as good position as money can accomplish, as of the date of the taking". The award of interest renders unwarranted the grant of back rentals as extended by the courts below. In Republic v. Lara, et al., the Court ruled that the indemnity for rentals is inconsistent with a property owner's right to be paid legal interest on the value of the property, for if the condemnor is to pay the compensation due to the owners from the time of the actual taking of their property, the payment of such compensation is deemed to retroact to the actual taking of the property; and, hence, there is no basis for claiming rentals from the time of actual taking. More explicitly, the Court held in Republic v. Garcellano that: The uniform rule of this Court, however, is that this compensation must be, not in the form of rentals, but by way of 'interest from the date that the company [or entity] exercising the right of eminent domain take possession of the condemned lands, and the amounts granted by the court shall cease to earn interest only from the moment they are paid to the owners or deposited in court . . . . xxx xxx xxx For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the lot and negotiating with any of the owners of the property. To our mind, these are wanton and irresponsible acts which should be suppressed and corrected. Hence, the award of exemplary

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damages and attorneys fees is in order. However, while Rodriguez is entitled to such exemplary damages and attorney's fees, the award granted by the courts below should be equitably reduced. We hold that Rodriguez is entitled only to P200,000.00 as exemplary damages, and attorney's fees equivalent to one percent (1%) of the amount due. 21 Lastly, with regard to the liability of petitioners Vicente P. Eusebio, Lorna A. Bernardo, and Victor Endriga all officials of the city government the Court cannot uphold the ruling that said petitioners are jointly liable in their personal capacity with the City of Pasig for payments to be made to respondents. There is a dearth of evidence which would show that said petitioners were already city government officials in 1980 or that they had any involvement whatsoever in the illegal taking of respondents' property. Thus, any liability to respondents is the sole responsibility of the City of Pasig. ADHcTE IN VIEW OF THE FOREGOING, the petition is PARTIALLY GRANTED. The Decision of the Court of Appeals dated November 28, 2003 is MODIFIED to read as follows: 1.The valuation of just compensation and award of back rentals made by the Regional Trial Court of Pasig City, Branch 155 in Civil Case No. 65937 are hereby SET ASIDE. The City of Pasig, represented by its duly-authorized officials, is DIRECTED to institute the appropriate expropriation action over the subject parcel of land within fifteen (15) days from finality of this Decision, for the proper determination of just compensation due to respondents, with interest at the legal rate of six (6%) percent per annum from the time of taking until full payment is made. 2.The City of Pasig is ORDERED to pay respondents the amounts of P200,000.00 as exemplary damages and P200,000.00 as attorney's fees. No costs. SO ORDERED. Carpio, Chico-Nazario, Velasco, Jr. and Nachura, JJ., concur. Footnotes *The Court of Appeals is dropped as one of the respondents in accordance with Section 4, Rule 45 of the Rules of Court, which states that the petition shall not implead the lower courts or judges thereof either as petitioners or respondents. 1.Penned by Associate Justice Renato C. Dacudao, with Associate Justices Cancio C. Garcia (now retired SC Associate Justice) and Danilo B. Pine, concurring; rollo, pp. 44-56. 2.Id. at 58-59. 3.Rollo, pp. 41-42. 4.Id. at 18-19. 5.G.R. No. 147245, March 31, 2005, 454 SCRA 516. 6.Id. at 528. 7.G.R. No. 124795, December 10, 2008. 8.Emphasis ours. 9.TSN, September 15, 1998; records, p. 110. 10.Supra. See note 7. 11.G.R. No. 156093, February 2, 2007, 514 SCRA 56. 12.Id. at 70. 13.Supra note 7. (Emphasis and underscoring ours.) 14.Supra note 5. 15.Id. at 536. (Emphasis ours.) 16.Forfom v. Philippine National Railways, supra note 7; Manila International Airport Authority v. Rodriguez, G.R. No. 161836, February 28, 2006, 483 SCRA 619, 627; Republic v. Court of Appeals, supra note 5, at 534-535. 17.Supra, at 628. 18.G.R. No. 50147, August 3, 1990, 188 SCRA 300. 19.Id. at 628-629. 20.Supra note 16. 21.Id. at 630-632. (Emphasis and underscoring supplied.)

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APO FRUITS CORPORATION vs LANDBANK

EN BANC [G.R. No. 164195. October 12, 2010.] APO FRUITS CORPORATION and HIJO PLANTATION, INC., petitioners, vs. LAND BANK OF THE PHILIPPINES, respondent. RESOLUTION BRION, J p: We resolve the petitioners' motion for reconsideration addressing our Resolution of December 4, 2009 whose dispositive portion directs: WHEREFORE, the Court denies the petitioners' second motion for reconsideration (with respect to the denial of the award of legal interest and attorney's fees), and reiterates the decision dated February 6, 2007 and the resolution dated December 19, 2007 of the Third Division. For a fuller and clearer presentation and appreciation of this Resolution, we hark back to the roots of this case. Factual Antecedents Apo Fruits Corporation (AFC) and Hijo Plantation, Inc. (HPI), together also referred to as petitioners, were registered owners of vast tracks of land; AFC owned 640.3483 hectares, while HPI owned 805.5308 hectares. On October 12, 1995, they voluntarily offered to sell these landholdings to the government via Voluntary Offer to Sell applications filed with the Department of Agrarian Reform (DAR). On October 16, 1996, AFC and HPI received separate notices of land acquisition and valuation of their properties from the DAR's Provincial Agrarian Reform Officer(PARO). At the assessed valuation of P165,484.47 per hectare, AFC's land was valued at P86,900,925.88, while HPI's property was valued at P164,478,178.14. HPI and AFC rejected these valuations for being very low. In its follow through action, the DAR requested the Land Bank of the Philippines (LBP) to deposit P26,409,549.86 in AFC's bank account and P45,481,706.76 in HPI's bank account, which amounts the petitioners then withdrew. The titles over AFC and HPI's properties were thereafter cancelled, and new ones were issued on December 9, 1996 in the name of the Republic of the Philippines. THDIaC On February 14, 1997, AFC and HPI filed separate petitions for determination of just compensation with the DAR Adjudication Board (DARAB). When the DARAB failed to act on these petitions for more than three years, AFC and HPI filed separate complaints for determination and payment of just compensation with the Regional Trial Court (RTC) of Tagum City, acting as a Special Agrarian Court. These complaints were subsequently consolidated. On September 25, 2001, the RTC resolved the consolidated cases, fixing the just compensation for the petitioners' 1,338.6027 hectares of land 1 at P1,383,179,000.00, with interest on this amount at the prevailing market interest rates, computed from the taking of the properties on December 9, 1996 until fully paid, minus the amounts the petitioners already received under the initial valuation. The RTC also awarded attorney's fees. LBP moved for the reconsideration of the decision. The RTC, in its order of December 5, 2001, modified its ruling and fixed the interest at the rate of 12% per annum from the time the complaint was filed until finality of the decision. The Third Division of this Court, in its Decision of February 6, 2007, affirmed this RTC decision. On motion for reconsideration, the Third Division issued its Resolution of December 19, 2007, modifying its February 6, 2007 Decision by deleting the 12% interest due on the balance of the awarded just compensation. The Third Division justified the deletion by the finding that the LBP did not delay the payment of just compensation as it had deposited the pertinent amounts due to AFC and HPI within fourteen months after they filed their complaints for just compensation with the RTC. The Court also considered that AFC had already collected approximately P149.6 million,

while HPI had already collected approximately P262 million from the LBP. The Third Division also deleted the award of attorney's fees. All parties moved for the reconsideration of the modified ruling. The Court uniformly denied all the motions in its April 30, 2008 Resolution. Entry of Judgment followed on May 16, 2008. Notwithstanding the Entry of Judgment, AFC and HPI filed the following motions on May 28, 2008: (1) Motion for Leave to File and Admit Second Motion for Reconsideration; (2) Second Motion for Reconsideration, with respect to the denial of the award of legal interest and attorney's fees; and (3) Motion to Refer the Second Motion for Reconsideration to the Honorable Court En Banc. ICcaST The Third Division found the motion to admit the Second Motion for Reconsideration and the motion to refer this second motion to the Court En Banc meritorious, and accordingly referred the case to the Court En Banc. On September 8, 2009, the Court En Banc accepted the referral. The Court En Banc Resolution On December 4, 2009, the Court En Banc, by a majority vote, denied the petitioners' second motion for reconsideration based on two considerations. First, the grant of the second motion for reconsideration runs counter to the immutability of final decisions. Moreover, the Court saw no reason to recognize the case as an exception to the immutability principle as the petitioners' private claim for the payment of interest does not qualify as either a substantial or transcendental matter or an issue of paramount public interest. Second, on the merits, the petitioners are not entitled to recover interest on the just compensation and attorney's fees because they caused the delay in the payment of the just compensation due them; they erroneously filed their complaints with the DARAB when they should have directly filed these with the RTC acting as an agrarian court. Furthermore, the Court found it significant that the LBP deposited the pertinent amounts in the petitioners' favor within fourteen months after the petitions were filed with the RTC. Under these circumstances, the Court found no unreasonable delay on the part of LBP to warrant the award of 12% interest. The Chico-Nazario Dissent Justice Minita V. Chico-Nazario, 2 the ponente of the original December 19, 2007 Resolution (deleting the 12% interest), dissented from the Court En Banc's December 4, 2009 Resolution. On the issue of immutability of judgment, Justice Chico-Nazario pointed out that under extraordinary circumstances, this Court has recalled entries of judgment on the ground of substantial justice. Given the special circumstances involved in the present case, the Court En Banc should have taken a second hard look at the petitioners' positions in their second motion for reconsideration, and acted to correct the clearly erroneous December 19, 2007 Resolution. Specifically, Justice Chico-Nazario emphasized the obligation of the State, in the exercise of its inherent power of eminent domain, to pay just compensation to the owner of the expropriated property. To be just, the compensation must not only be the correct amount to be paid; it must also be paid within a reasonable time from the time the land is taken from the owner. If not, the State must pay the landowner interest, by way of damages, from the time the property was taken until just compensation is fully paid. This interest, deemed a part of just compensation due, has been established by prevailing jurisprudence to be 12% per annum. On these premises, Justice Nazario pointed out that the government deprived the petitioners of their property on December 9, 1996, and paid the balance of the just compensation due them only on May 9, 2008. The delay of almost twelve years earned the petitioners interest in the total amount of P1,331,124,223.05. IDSaAH Despite this finding, Justice Chico-Nazario did not see it fit to declare the computed interest to be totally due; she found it unconscionable to apply the full force of the law on the LBP because of the magnitude of the amount due. She thus reduced the awarded interest to P400,000,000.00, or approximately 30% of the computed interest. The Present Motion for Reconsideration In their motion to reconsider the Court En Banc's December 4, 2009 Resolution (the present Motion for Reconsideration), the petitioners principally argue that: (a) the principle of immutability of judgment does not apply since the Entry of Judgment was issued even before the

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lapse of fifteen days from the parties' receipt of the April 30, 2008 Resolution and the petitioners timely filed their second motion for reconsideration within fifteen days from their receipt of this resolution; (b) the April 30, 2008 Resolution cannot be considered immutable considering the special and compelling circumstances attendant to the present case which fall within the exceptions to the principle of immutability of judgments; (c) the legal interest due is at 12% per annum, reckoned from the time of the taking of the subject properties and this rate is not subject to reduction. The power of the courts to equitably reduce interest rates applies solely to liquidated damages under a contract and not to interest set by the Honorable Court itself as due and owing in just compensation cases; and (d) the Honorable Court's fears that the interest payments due to the petitioners will produce more harm than good to the system of agrarian reform are misplaced and are based merely on conjectures. The Comment of the Land Bank of the Philippines The LBP commented on the petitioners' motion for reconsideration on April 28, 2010. It maintained that: (a) the doctrine of immutability of the decisions of the Supreme Court clearly applies to the present case; (b) the LBP is not guilty of undue delay in the payment of just compensation as the petitioners were promptly paid once the Court had determined the final value of the properties expropriated; (c) the Supreme Court rulings invoked by the petitioners are inapplicable to the present case; (d) since the obligation to pay just compensation is not a forbearance of money, interest should commence only after the amount due becomes ascertainable or liquidated, and the 12% interest per annum applies only to the liquidated amount, from the date of finality of judgment; (e) the imposition of 12% interest on the balance of P971,409,831.68 is unwarranted because there was no unjustified refusal by LBP to pay just compensation, and no contractual breach is involved; (f) the deletion of the attorney's fees equivalent to 10% of the amount finally awarded as just compensation is proper; (g) this case does not involve a violation of substantial justice to justify the alteration of the immutable resolution dated December 19, 2007 that deleted the award of interest and attorney's fees. The Court's Ruling We find the petitioners' arguments meritorious and accordingly GRANT the present motion for reconsideration. Just compensation a Basic Limitation on the State's Power of Eminent Domain At the heart of the present controversy is the Third Division's December 19, 2007 Resolution which held that the petitioners are not entitled to 12% interest on the balance of the just compensation belatedly paid by the LBP. In the presently assailed December 4, 2009 Resolution, we affirmed the December 19, 2007 Resolution's findings that: (a) the LBP deposited "pertinent amounts" in favor of the petitioners within fourteen months after they filed their complaint for determination of just compensation; and (b) the LBP had already paid the petitioners P411,769,168.32. We concluded then that these circumstances refuted the petitioners' assertion of unreasonable delay on the part of the LBP. A re-evaluation of the circumstances of this case and the parties' arguments, viewed in light of the just compensation requirement in the exercise of the State's inherent power of eminent domain, compels us to re-examine our findings and conclusions. Eminent domain is the power of the State to take private property for public use. 3 It is an inherent power of State as it is a power necessary for the State's existence; it is a power the State cannot do without. 4 As an inherent power, it does not need at all to be embodied in the Constitution; if it is mentioned at all, it is solely for purposes of limiting what is otherwise an unlimited power. The limitation is found in the Bill of Rights 5 that part of the Constitution whose provisions all aim at the protection of individuals against the excessive exercise of governmental powers. Section 9, Article III of the 1987 Constitution (which reads "No private property shall be taken for public use without just compensation.") provides two essential limitations to the power of

eminent domain, namely, that (1) the purpose of taking must be for public use and (2) just compensation must be given to the owner of the private property. cCSDaI It is not accidental that Section 9 specifies that compensation should be "just" as the safeguard is there to ensure a balance property is not to be taken for public use at the expense of private interests; the public, through the State, must balance the injury that the taking of property causes through compensation for what is taken,value for value. Nor is it accidental that the Bill of Rights is interpreted liberally in favor of the individual and strictly against the government. The protection of the individual is the reason for the Bill of Rights' being; to keep the exercise of the powers of government within reasonable bounds is what it seeks. 6 The concept of "just compensation" is not new to Philippine constitutional law, 7 but is not original to the Philippines; it is a transplant from the American Constitution.8 It found fertile application in this country particularly in the area of agrarian reform where the taking of private property for distribution to landless farmers has been equated to the "public use" that the Constitution requires. In Land Bank of the Philippines v. Orilla, 9 a valuation case under our agrarian reform law, this Court had occasion to state: Constitutionally, "just compensation" is the sum equivalent to the market value of the property, broadly described as 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 the one who receives and the one who desires to sell, it being fixed at the time of the actual taking by the government. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. It has been repeatedly stressed by this Court that the true measure is not the taker's gain but the owner's loss. The word "just" is used to modify the meaning of the word "compensation" to convey the idea that the equivalent to be given for the property to be taken shall be real, substantial, full and ample. 10 [Emphasis supplied.] In the present case, while the DAR initially valued the petitioners' landholdings at a total of P251,379,104.02, 11 the RTC, acting as a special agrarian court, determined the actual value of the petitioners' landholdings to be P1,383,179,000.00. This valuation, a finding of fact, has subsequently been affirmed by this Court, and is now beyond question. In eminent domain terms, this amount is the "real, substantial, full and ample" compensation the government must pay to be "just" to the landowners. Significantly, this final judicial valuation is far removed from the initial valuation made by the DAR; their values differ by P1,131,799,897.00 in itself a very substantial sum that is roughly four times the original DAR valuation. We mention these valuations as they indicate to us how undervalued the petitioners' lands had been at the start, particularly at the time the petitioners' landholdings were "taken". This reason apparently compelled the petitioners to relentlessly pursue their valuation claims all they way up to the level of this Court. While the LBP deposited the total amount of P71,891,256.62 into the petitioners' accounts (P26,409,549.86 for AFC and P45,481,706.76 for HPI) at the time the landholdings were taken, these amounts were mere partial payments that only amounted to 5% of the P1,383,179,000.00 actual value of the expropriated properties. We point this aspect out to show that the initial payments made by the LBP when the petitioners' landholdings were taken, although promptly withdrawn by the petitioners, could not by any means be considered a fair exchange of values at the time of taking; in fact, the LBP's actual deposit could not be said to be substantial even from the original LBP valuation of P251,379,103.90. IaEASH Thus, the deposits might have been sufficient for purposes of the immediate taking of the landholdings but cannot be claimed as amounts that would excuse the LBPfrom the payment of interest on the unpaid balance of the compensation due. As discussed at length below, they were not enough to compensate the petitioners for the potential income the landholdings could have earned for them if no immediate taking had taken place. Under the circumstances, the State acted oppressively and was far from "just" in their position to deny the petitioners of the potential income that the immediate taking of their properties entailed. Just Compensation from the

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Prism of the Element of Taking. Apart from the requirement that compensation for expropriated land must be fair and reasonable, compensation, to be "just," must also be made without delay. 12 Without prompt payment, compensation cannot be considered "just" if the property is immediately taken as the property owner suffers the immediate deprivation of both his land and its fruits or income. This is the principle at the core of the present case where the petitioners were made to wait for more than a decade after the taking of their property before they actually received the full amount of the principal of the just compensation due them. 13 What they have not received to date is the income of their landholdings corresponding to what they would have received had no uncompensated taking of these lands been immediately made. This income, in terms of the interest on the unpaid principal, is the subject of the current litigation. We recognized in Republic v. Court of Appeals 14 the need for prompt payment and the necessity of the payment of interest to compensate for any delay in the payment of compensation for property already taken. We ruled in this case that: 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, i[f] 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 interest[s] 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 interest[s] 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. 15 [Emphasis supplied.] Aside from this ruling, Republic notably overturned the Court's previous ruling in National Power Corporation v. Angas 16 which held that just compensation due for expropriated properties is not a loan or forbearance of money but indemnity for damages for the delay in payment; since the interest involved is in the nature of damages rather than earnings from loans, then Art. 2209 of the Civil Code, which fixes legal interest at 6%, shall apply. In Republic, the Court recognized that the just compensation due to the landowners for their expropriated property amounted to an effective forbearance on the part of the State. Applying the Eastern Shipping Lines ruling, 17 the Court fixed the applicable interest rate at 12% per annum, computed from the time the property was taken until the full amount of just compensation was paid, in order to eliminate the issue of the constant fluctuation and inflation of the value of the currency over time. In the Court's own words: The Bulacan trial court, in its 1979 decision, was correct in imposing interest[s] on the zonal value of the property to be computed from the time petitioner instituted condemnation proceedings and "took" the property in September 1969. This allowance of interest on the amount found to be the value of the property as of the time of the taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and inflation of the value of the currency over time. 18 [Emphasis supplied.] CAIHTE We subsequently upheld Republic's 12% per annum interest rate on the unpaid expropriation compensation in the following cases: Reyes v. National Housing Authority, 19 Land Bank of the Philippines v. Wycoco, 20 Republic v. Court of Appeals, 21 Land Bank of the Philippines v. Imperial, 22 Philippine Ports Authority v. Rosales-Bondoc, 23 and Curata v. Philippine Ports Authority. 24 These were the established rulings that stood before this Court issued the currently assailed Resolution of December 4, 2009. These would be the rulings this Court shall reverse and deestablish if we maintain and affirm our ruling deleting the 12% interest on the unpaid balance of compensation due for properties already taken. Under the circumstances of the present case, we see no compelling reason to depart from the rule that Republic firmly established. Let it be remembered that shorn of its eminent domain and social justice aspects, what the agrarian land reform program involves is the purchase by the

government, through the LBP, of agricultural lands for sale and distribution to farmers. As a purchase, it involves an exchange of values the landholdings in exchange for the LBP's payment. In determining the just compensation for this exchange, however, the measure to be borne in mind is not the taker's gain but the owner's loss 25 since what is involved is the takeover of private property under the State's coercive power. As mentioned above, in the value-for-value exchange in an eminent domain situation, the State must ensure that the individual whose property is taken is not shortchanged and must hence carry the burden of showing that the "just compensation" requirement of the Bill of Rights is satisfied. The owner's loss, of course, is not only his property but also its income-generating potential. Thus, when property is taken, full compensation of its value must immediately be paid to achieve a fair exchange for the property and the potential income lost. The just compensation is made available to the property owner so that he may derive income from this compensation, in the same manner that he would have derived income from his expropriated property. If full compensation is not paid for property taken, then the State must make up for the shortfall in the earning potential immediately lost due to the taking, and the absence of replacement property from which income can be derived; interest on the unpaid compensation becomes due as compliance with the constitutional mandate on eminent domain and as a basic measure of fairness. In the context of this case, when the LBP took the petitioners' landholdings without the corresponding full payment, it became liable to the petitioners for the income the landholdings would have earned had they not immediately been taken from the petitioners. What is interesting in this interplay, under the developments of this case, is that the LBP, by taking landholdings without full payment while holding on at the same time to the interest that it should have paid, effectively used or retained funds that should go to the landowners and thereby took advantage of these funds for its own account. From this point of view, the December 19, 2007 Resolution deleting the award of 12% interest is not only patently and legally wrong, but is also morally unconscionable for being grossly unfair and unjust. If the interest on the just compensation due in reality the equivalent of the fruits or income of the landholdings would have yielded had these lands not been taken would be denied, the result is effectively a confiscatory action by this Court in favor of the LBP. We would be allowing the LBP, for twelve long years, to have free use of the interest that should have gone to the landowners. Otherwise stated, if we continue to deny the petitioners' present motion for reconsideration, we would illogically and without much thought to the fairness that the situation demands uphold the interests of the LBP, not only at the expense of the landowners but also that of substantial justice as well. Lest this Court be a party to this monumental unfairness in a social program aimed at fostering balance in our society, we now have to ring the bell that we have muted in the past, and formally declare that the LBP's position is legally and morally wrong. To do less than this is to leave the demands of the constitutional just compensation standard (in terms of law) and of our own conscience (in terms of morality) wanting and unsatisfied. The Delay in Payment Issue Separately from the demandability of interest because of the failure to fully pay for property already taken, a recurring issue in the case is the attribution of the delay.ITSCED That delay in payment occurred is not and cannot at all be disputed. While the LBP claimed that it made initial payments of P411,769,168.32 (out of the principal sum due of P1,383,179,000.00), the undisputed fact is that the petitioners were deprived of their lands on December 9, 1996 (when titles to their landholdings were cancelled and transferred to the Republic of the Philippines), and received full payment of the principal amount due them only on May 9, 2008. In the interim, they received no income from their landholdings because these landholdings had been taken. Nor did they receive adequate income from what should replace the income potential of their landholdings because the LBP refused to pay interest while withholding the full amount of the principal of the just compensation due by claiming a grossly low valuation. This sad state continued for more than a decade. In any language and by any measure, a lengthy delay in payment occurred.

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An important starting point in considering attribution for the delay is that the petitioners voluntarily offered to sell their landholdings to the government's land reform program; they themselves submitted their Voluntary Offer to Sell applications to the DAR, and they fully cooperated with the government's program. The present case therefore is not one where substantial conflict arose on the issue of whether expropriation is proper; the petitioners voluntarily submitted to expropriation and surrendered their landholdings, although they contested the valuation that the government made. Presumably, had the landholdings been properly valued, the petitioners would have accepted the payment of just compensation and there would have been no need for them to go to the extent of filing a valuation case. But, as borne by the records, the petitioners' lands were grossly undervalued by the DAR, leaving the petitioners with no choice but to file actions to secure what is justly due them. The DAR's initial gross undervaluation started the cycle of court actions that followed, where the LBP eventually claimed that it could not be faulted for seeking judicial recourse to defend the government's and its own interests in light of the petitioners' valuation claims. This LBP claim, of course, conveniently forgets that at the root of all these valuation claims and counterclaims was the initial gross undervaluation by DAR that the LBP stoutly defended. At the end, this undervaluation was proven incorrect by no less than this Court; the petitioners were proven correct in their claim, and the correct valuation more than five-fold the initial DAR valuation was decreed and became final. All these developments cannot now be disregarded and reduced to insignificance. In blunter terms, the government and the LBP cannot now be heard to claim that they were simply protecting their interests when they stubbornly defended their undervalued positions before the courts. The more apt and accurate statement is that they adopted a grossly unreasonable position and the adverse developments that followed, particularly the concomitant delay, should be directly chargeable to them. To be sure, the petitioners were not completely correct in the legal steps they took in their valuation claims. They initially filed their valuation claim before the DARAB instead of immediately seeking judicial intervention. The DARAB, however, contributed its share to the petitioners' error when it failed or refused to act on the valuation petitions for more than three (3) years. Thus, on top of the DAR undervaluation was the DARAB inaction after the petitioners' landholdings had been taken. This Court's Decision of February 6, 2007 duly noted this and observed: EIDaAH It is not controverted that this case started way back on 12 October 1995, when AFC and HPI voluntarily offered to sell the properties to the DAR. In view of the failure of the parties to agree on the valuation of the properties, the Complaint for Determination of Just Compensation was filed before the DARAB on 14 February 1997. Despite the lapse of more than three years from the filing of the complaint, the DARAB failed to render a decision on the valuation of the land. Meantime, the titles over the properties of AFC and HPI had already been cancelled and in their place a new certificate of title was issued in the name of the Republic of the Philippines, even as far back as 9 December 1996. A period of almost 10 years has lapsed. For this reason, there is no dispute that this case has truly languished for a long period of time, the delay being mainly attributable to both official inaction and indecision, particularly on the determination of the amount of just compensation, to the detriment of AFC and HPI, which to date, have yet to be fully compensated for the properties which are already in the hands of farmer-beneficiaries, who, due to the lapse of time, may have already converted or sold the land awarded to them. Verily, these two cases could have been disposed with dispatch were it not for LBP's counsel causing unnecessary delay. At the inception of this case, DARAB, an agency of the DAR which was commissioned by law to determine just compensation, sat on the cases for three years, which was the reason that AFC and HPI filed the cases before the RTC. We underscore the pronouncement of the RTC that "the delay by DARAB in the determination of just compensation could only mean the reluctance of the Department of Agrarian Reform and the Land Bank of the Philippines to pay the claim of just compensation by corporate landowners."

To allow the taking of landowners' properties, and to leave them empty-handed while government withholds compensation is undoubtedly oppressive. [Emphasis supplied.] These statements cannot but be true today as they were when we originally decided the case and awarded 12% interest on the balance of the just compensation due. While the petitioners were undisputedly mistaken in initially seeking recourse through the DAR, this agency itself hence, the government committed a graver transgression when it failed to act at all on the petitioners' complaints for determination of just compensation. In sum, in a balancing of the attendant delay-related circumstances of this case, delay should be laid at the doorsteps of the government, not at the petitioners'. We conclude, too, that the government should not be allowed to exculpate itself from this delay and should suffer all the consequences the delay caused. The LBP's arguments on the applicability of cases imposing 12% interest The LBP claims in its Comment that our rulings in Republic v. Court of Appeals, 26 Reyes v. National Housing Authority, 27 and Land Bank of the Philippines v. Imperial, 28 cannot be applied to the present case. According to the LBP, Republic is inapplicable because, first, the landowners in Republic remained unpaid, notwithstanding the fact that the award for just compensation had already been fixed by final judgment; in the present case, the Court already acknowledged that "pertinent amounts" were deposited in favor of the landowners within 14 months from the filing of their complaint. Second, while Republic involved an ordinary expropriation case, the present case involves expropriation for agrarian reform. Finally, the just compensation in Republic remained unpaid notwithstanding the finality of judgment, while the just compensation in the present case was immediately paid in full after LBP received a copy of the Court's resolution. We find no merit in these assertions. SHECcD As we discussed above, the "pertinent amounts" allegedly deposited by LBP were mere partial payments that amounted to a measly 5% of the actual value of the properties expropriated. They could be the basis for the immediate taking of the expropriated property but by no stretch of the imagination can these nominal amounts be considered "pertinent" enough to satisfy the full requirement of just compensation i.e., the full and fair equivalent of the expropriated property, taking into account its income potential and the foregone income lost because of the immediate taking. We likewise find no basis to support the LBP's theory that Republic and the present case have to be treated differently because the first involves a "regular" expropriation case, while the present case involves expropriation pursuant to the country's agrarian reform program. In both cases, the power of eminent domain was used and private property was taken for public use. Why one should be different from the other, so that the just compensation ruling in one should not apply to the other, truly escapes us. If there is to be a difference, the treatment of agrarian reform expropriations should be stricter and on a higher plane because of the government's societal concerns and objectives. To be sure, the government cannot attempt to remedy the ills of one sector of society by sacrificing the interests of others within the same society. Finally, we note that the finality of the decision (that fixed the value of just compensation) in Republic was not a material consideration for the Court in awarding the landowners 12% interest. The Court, in Republic, simply affirmed the RTC ruling imposing legal interest on the amount of just compensation due. In the process, the Court determined that the legal interest should be 12% after recognizing that the just compensation due was effectively a forbearance on the part of the government. Had the finality of the judgment been the critical factor, then the 12% interest should have been imposed from the time the RTC decision fixing just compensation became final. Instead, the 12% interest was imposed from the time that the Republic commenced condemnation proceedings and "took" the property. The LBP additionally asserts that the petitioners erroneously relied on the ruling in Reyes v. National Housing Authority. The LBP claims that we cannot apply Reyesbecause it involved just

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compensation that remained unpaid despite the finality of the expropriation decision. LBP's point of distinction is that just compensation was immediately paid in the present case upon the Court's determination of the actual value of the expropriated properties. LBP claims, too, that in Reyes, the Court established that the refusal of the NHA to pay just compensation was unfounded and unjustified, whereas the LBP in the present case clearly demonstrated its willingness to pay just compensation. Lastly, in Reyes, the records showed that there was an outstanding balance that ought to be paid, while the element of an outstanding balance is absent in the present case. Contrary to the LBP's opinion, the imposition of the 12% interest in Reyes did not depend on either the finality of the decision of the expropriation court, or on the finding that the NHA's refusal to pay just compensation was unfounded and unjustified. Quite clearly, the Court imposed 12% interest based on the ruling in Republic v. Court of Appeals that ". . . if property is taken for public use before compensation is deposited with the court having jurisdiction over the case,the final compensation must include interest[s] 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 interest[s] 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." 29 This is the same legal principle applicable to the present case, as discussed above. While the LBP immediately paid the remaining balance on the just compensation due to the petitioners after this Court had fixed the value of the expropriated properties, it overlooks one essential fact from the time that the State took the petitioners' properties until the time that the petitioners were fully paid, almost 12 long years passed. This is the rationale for imposing the 12% interest in order to compensate the petitioners for the income they would have made had they been properly compensated for their properties at the time of the taking. DaScAI Finally, the LBP insists that the petitioners quoted our ruling in Land Bank of the Philippines v. Imperial out of context. According to the LBP, the Court imposed legal interest of 12% per annum only after December 31, 2006, the date when the decision on just compensation became final. The LBP is again mistaken. The Imperial case involved land that was expropriated pursuant to Presidential Decree No. 27, 30 and fell under the coverage of DAR Administrative Order (AO) No. 13. 31 This AO provided for the payment of a 6% annual interest if there is any delay in payment of just compensation. However,Imperial was decided in 2007 and AO No. 13 was only effective up to December 2006. Thus, the Court, relying on our ruling in the Republic case, applied the prevailing 12% interest ruling to the period when the just compensation remained unpaid after December 2006. It is for this reason that December 31, 2006 was important, not because it was the date of finality of the decision on just compensation. The 12% Interest Rate and the Chico-Nazario Dissent To fully reflect the concerns raised in this Court's deliberations on the present case, we feel it appropriate to discuss the Justice Minita Chico-Nazario's dissent from the Court's December 4, 2009 Resolution. While Justice Chico-Nazario admitted that the petitioners were entitled to the 12% interest, she saw it appropriate to equitably reduce the interest charges from P1,331,124,223.05 to P400,000,000.00. In support of this proposal, she enumerated various cases where the Court, pursuant to Article 1229 of the Civil Code, 32equitably reduced interest charges. We differ with our esteemed colleague's views on the application of equity. While we have equitably reduced the amount of interest awarded in numerous cases in the past, those cases involved interest that was essentially consensual in nature,i.e., interest stipulated in signed agreements between the contracting parties. In contrast, the interest involved in the present case "runs as a matter of law and follows as a matter of course from the right of the landowner to be placed in as good a position as money can accomplish, as of the date of taking." 33 Furthermore, the allegedly considerable payments made by the LBP to the petitioners cannot be a proper premise in denying the landowners the interest due them under the law and established

jurisprudence. If the just compensation for the landholdings is considerable, this compensation is not undue because the landholdings the owners gave up in exchange are also similarly considerable AFC gave up an aggregate landholding of 640.3483 hectares, while HPI's gave up 805.5308 hectares. When the petitioners surrendered these sizeable landholdings to the government, the incomes they gave up were likewise sizeable and cannot in any way be considered miniscule. The incomes due from these properties, expressed as interest, are what the government should return to the petitioners after the government took over their lands without full payment of just compensation. In other words, the value of the landholdings themselves should be equivalent to the principal sum of the just compensation due; interest is due and should be paid to compensate for the unpaid balance of this principal sum after taking has been completed. This is the compensation arrangement that should prevail if such compensation is to satisfy the constitutional standard of being "just." TEAcCD Neither can LBP's payment of the full compensation due before the finality of the judgment of this Court justify the reduction of the interest due them. To rule otherwise would be to forget that the petitioners had to wait twelve years from the time they gave up their lands before the government fully paid the principal of the just compensation due them. These were twelve years when they had no income from their landholdings because these landholdings have immediately been taken; no income, or inadequate income, accrued to them from the proceeds of compensation payment due them because full payment has been withheld by government. If the full payment of the principal sum of the just compensation is legally significant at all under the circumstances of this case, the significance is only in putting a stop to the running of the interest due because the principal of the just compensation due has been paid. To close our eyes to these realities is to condone what is effectively a confiscatory action in favor of the LBP. That the legal interest due is now almost equivalent to the principal to be paid is not per se an inequitable or unconscionable situation, considering the length of time the interest has remained unpaid almost twelve long years. From the perspective of interest income, twelve years would have been sufficient for the petitioners to double the principal, even if invested conservatively, had they been promptly paid the principal of the just compensation due them. Moreover, the interest, however enormous it may be, cannot be inequitable and unconscionable because it resulted directly from the application of law and jurisprudence standards that have taken into account fairness and equity in setting the interest rates due for the use or forebearance of money. If the LBP sees the total interest due to be immense, it only has itself to blame, as this interest piled up because it unreasonably acted in its valuation of the landholdings and consequently failed to promptly pay the petitioners. To be sure, the consequences of this failure i.e., the enormity of the total interest due and the alleged financial hemorrhage the LBP may suffer should not be the very reason that would excuse it from full compliance. To so rule is to use extremely flawed logic. To so rule is to disregard the question of how the LBP, a government financial institution that now professes difficulty in paying interest at 12% per annum, managed the funds that it failed to pay the petitioners for twelve long years. It would be utterly fallacious, too, to argue that this Court should tread lightly in imposing liabilities on the LBP because this bank represents the government and, ultimately, the public interest. Suffice it to say that public interest refers to what will benefit the public, not necessarily the government and its agencies whose task is to contribute to the benefit of the public. Greater public benefit will result if government agencies like the LBP are conscientious in undertaking its tasks in order to avoid the situation facing it in this case. Greater public interest would be served if it can contribute to the credibility of the government's land reform program through the conscientious handling of its part of this program. As our last point, equity and equitable principles only come into full play when a gap exists in the law and jurisprudence. 34 As we have shown above, established rulings of this Court are in place for full application to the present case. There is thus no occasion for the equitable consideration that Justice Chico-Nazario suggested. The Amount Due the Petitioners as Just Compensation

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As borne by the records, the 12% interest claimed is only on the difference between the price of the expropriated lands (determined with finality to be P1,383,179,000.00) and the amount of P411,769,168.32 already paid to the petitioners. The difference between these figures amounts to the remaining balance of P971,409,831.68 that was only paid on May 9, 2008. DITEAc As above discussed, this amount should bear interest at the rate of 12% per annum from the time the petitioners' properties were taken on December 9, 1996 up to the time of payment. At this rate, the LBP now owes the petitioners the total amount of One Billion Three Hundred Thirty-One Million One Hundred Twenty-Four Thousand Two Hundred Twenty-Three and 05/100 Pesos (P1,331,124,223.05), computed as follows: Just CompensationP971,409,831.68 Legal Interest from 12/09/1996 To 05/09/2008 @ 12%/annum 12/09/1996 to 12/31/199623 days7,345,455.17 01/01/1997 to 12/31/200711 years1,282,260,977.82 01/01/2008 to 05/09/2008130 days41,517,790.07 P1,331,124,223.05 35 ============= The Immutability of Judgment Issue As a rule, a final judgment may no longer be altered, amended or modified, even if the alteration, amendment or modification is meant to correct what is perceived to be an erroneous conclusion of fact or law and regardless of what court, be it the highest Court of the land, rendered it. 36 In the past, however, we have recognized exceptions to this rule by reversing judgments and recalling their entries in the interest of substantial justice and where special and compelling reasons called for such actions. Notably, in San Miguel Corporation v. National Labor Relations Commission, 37 Galman v. Sandiganbayan, 38 Philippine Consumers Foundation v. National Telecommunications Commission, 39 and Republic v. de los Angeles, 40 we reversed our judgment on the second motion for reconsideration, while in Vir-Jen Shipping and Marine Services v. National Labor Relations Commission, 41 we did so on a third motion for reconsideration. In Cathay Pacific v. Romillo 42 and Cosio v. de Rama,43 we modified or amended our ruling on the second motion for reconsideration. More recently, in the cases of Muoz v. Court of Appeals, 44 Tan Tiac Chiong v. Hon. Cosico, 45 Manotok IV v. Barque, 46 and Barnes v. Padilla, 47 we recalled entries of judgment after finding that doing so was in the interest of substantial justice. InBarnes, we said: . . . Phrased elsewise, a final and executory judgment can no longer be attacked by any of the parties or be modified, directly or indirectly, even by the highest court of the land. However, this Court has relaxed this rule in order to serve substantial justice considering (a) matters of life, liberty, honor or property, (b) the existence of special or compelling circumstances, (c) the merits of the case, (d) a cause not entirely attributable to the fault or negligence of the party favored by the suspension of the rules, (e) a lack of any showing that the review sought is merely frivolous and dilatory, and (f) the other party will not be unjustly prejudiced thereby. Invariably, rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed. Even the Rules of Court reflects this principle. The power to suspend or even disregard rules can be so pervasive and compelling as to alter even that which this Court itself had already declared to be final. 48 [Emphasis supplied.] That the issues posed by this case are of transcendental importance is not hard to discern from these discussions. A constitutional limitation, guaranteed under no less than the all-important Bill of Rights, is at stake in this case: how can compensation in an eminent domain be "just" when the payment for the compensation for property already taken has been unreasonably delayed? To claim, as the assailed Resolution does, that only private interest is involved in this case is to forget that an expropriation involves the government as a necessary actor. It forgets, too, that under

eminent domain, the constitutional limits or standards apply to government who carries the burden of showing that these standards have been met. Thus, to simply dismiss this case as a private interest matter is an extremely shortsighted view that this Court should not leave uncorrected. CaTSEA As duly noted in the above discussions, this issue is not one of first impression in our jurisdiction; the consequences of delay in the payment of just compensation have been settled by this Court in past rulings. Our settled jurisprudence on the issue alone accords this case primary importance as a contrary ruling would unsettle, on the flimsiest of grounds, all the rulings we have established in the past. More than the stability of our jurisprudence, the matter before us is of transcendental importance to the nation because of the subject matter involved agrarian reform, a societal objective that the government has unceasingly sought to achieve in the past half century. This reform program and its objectives would suffer a major setback if the government falters or is seen to be faltering, wittingly or unwittingly, through lack of good faith in implementing the needed reforms. Truly, agrarian reform is so important to the national agenda that the Solicitor General, no less, pointedly linked agricultural lands, its ownership and abuse, to the idea of revolution. 49 This linkage, to our mind, remains valid even if the landowner, not the landless farmer, is at the receiving end of the distortion of the agrarian reform program. As we have ruled often enough, rules of procedure should not be applied in a very rigid, technical sense; rules of procedure are used only to help secure, not override, substantial justice. 50 As we explained in Ginete v. Court of Appeals: 51 Let it be emphasized that the rules of procedure should be viewed as mere tools designed to facilitate the attainment of justice. Their strict and rigid application, which would result in technicalities that tend to frustrate rather than promote substantial justice, must always be eschewed. Even the Rules of Court reflect this principle. The power to suspend or even disregard rules can be so pervasive and compelling as to alter even that which this Court itself has already declared to be final, as we are now constrained to do in the instant case. xxx xxx xxx The emerging trend in the rulings of this Court is to afford every party litigant the amplest opportunity for the proper and just determination of his cause, free from the constraints of technicalities. Time and again, this Court has consistently held that rules must not be applied rigidly so as not to override substantial justice. 52 [Emphasis supplied.] Similarly, in de Guzman v. Sandiganbayan, 53 we had occasion to state: The Rules of Court was conceived and promulgated to set forth guidelines in the dispensation of justice but not to bind and chain the hand that dispenses it, for otherwise, courts will be mere slaves to or robots of technical rules, shorn of judicial discretion. That is precisely why courts in rendering justice have always been, as they ought to be, conscientiously guided by the norm that when on the balance, technicalities take a backseat against substantive rights, and not the other way around. Truly then, technicalities, in the appropriate language of Justice Makalintal, "should give way to the realities of the situation". 54 [Emphasis supplied.] We made the same recognition in Barnes, 55 on the underlying premise that a court's primordial and most important duty is to render justice; in discharging the duty to render substantial justice, it is permitted to re-examine even a final and executory judgment. aSTHDc Based on all these considerations, particularly the patently illegal and erroneous conclusion that the petitioners are not entitled to 12% interest, we find that we are duty-bound to re-examine and overturn the assailed Resolution. We shall completely and inexcusably be remiss in our duty as defenders of justice if, given the chance to make the rectification, we shall let the opportunity pass. Attorney's Fees We are fully aware that the RTC has awarded the petitioners attorney's fees when it fixed the just compensation due and decreed that interest of 12% should be paid on the balance outstanding after the taking of the petitioners' landholdings took place. The petitioners, however, have not

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raised the award of attorney's fees as an issue in the present motion for reconsideration. For this reason, we shall not touch on this issue at all in this Resolution. WHEREFORE, premises considered, we GRANT the petitioners' motion for reconsideration. The Court En Banc's Resolution dated December 4, 2009, as well as the Third Division's Resolutions dated April 30, 2008 and December 19, 2007, are hereby REVERSED and SET ASIDE. The respondent Land Bank of the Philippines is hereby ORDERED to pay petitioners Apo Fruits Corporation and Hijo Plantation, Inc. interest at the rate of 12% per annum on the unpaid balance of the just compensation, computed from the date the Government took the properties on December 9, 1996, until the respondent Land Bank of the Philippines paid on May 9, 2008 the balance on the principal amount. Unless the parties agree to a shorter payment period, payment shall be in monthly installments at the rate of P60,000,000.00 per month until the whole amount owing, including interest on the outstanding balance, is fully paid. Costs against the respondent Land Bank of the Philippines. SO ORDERED. Carpio Morales, Velasco, Jr., Del Castillo, Villarama, Jr., Perez, Mendoza and Sereno, JJ., concur. Corona, C.J. and Nachura, J., join the dissent of J. Bersamin. Carpio and Abad, JJ., are on wellness leave. Leonardo-de Castro, J., I maintain my vote in the December 4, 2009 Resolution. Peralta, J., is on leave. Bersamin, J., I dissent. Separate Opinions BERSAMIN, J., dissenting: By their motion for reconsideration, the petitioners seek the review and setting aside of the resolution dated December 4, 2009, 1 whereby the Court disposed as follows: WHEREFORE, the Court denies the petitioners' second motion for reconsideration (with respect to the denial of the award of legal interest and attorney's fees), and reiterates the decision dated February 6, 2007 and the resolution dated December 19, 2007 of the Third Division. IHcTDA SO ORDERED. The petitioners contend that the doctrine of immutability of judgment does not apply because of the several special and compelling considerations exempting them from the application of the doctrine, namely: (a) that they suffered substantial injustice from the patently unjust denial of interest; (b) that their case, being impressed with public interest, had transcendental importance; and (c) that the fact that the Court en banc had accepted the referral by the Third Division indicated that the case deserved another review. They insist that the legal interest due on the just compensation paid to them should be 12% per annum, a rate that was not subject to reduction. The majority vote to grant the motion for reconsideration. Alas, I cannot join the majority. I dissent. The resolution dated December 19, 2007 promulgated by the Third Division (deleting the award of interest of 12% per annum on the just compensation and the award of attorney's fees) already attained finality. Entry of judgment was in fact issued on May 16, 2008. In order to accord with the doctrine of immutability of judgment, the resolution dated December 4, 2009 rejected the petitioners' second motion for reconsideration (with respect to the denial of the award of legal interest and attorney's fees), pointing out that granting the motion would render nugatory the time-honored doctrine of immutability; that none of the recognized exceptions to the doctrine of immutability applied to the petitioners; that even if the reopening of the final judgment was allowed, the petitioners were still not entitled to recover interest on the just compensation because there had been no delay in paying their just compensation; and that granting the motion would produce more harm than good, considering that such reopening of a final judgment would surely open the floodgates to petitions for the resurrection of litigations long ago settled. I concede that the immutability doctrine admits several exceptions, such as: (a) the correction of clerical errors; (b) the nunc pro tunc entries that cause no prejudice to any party; (c) void

judgments; and (d) whenever circumstances transpire after the finality of the decision rendering its execution unjust and inequitable. Yet, my review of the arguments raised in the petitioners' motion for reconsideration discloses no compelling reason to deviate from the holding that none of the exceptions applies herein. Consequently, I urge that we should continue to hold that the matters involved herein were different from any of those involved in the exceptions. I do not think that the petitioners established the existence of any of the special and compelling considerations that supposedly exempted this case from the application of the immutability doctrine. Neither was it unjust to deny interest to the petitioners, who were not entitled to interest in the face of the showing that Land Bank of the Philippines (LBP) had not unduly delayed paying their just compensation. In this regard, I consider worth reiterating the following relevant portions of the questioned resolution of December 4, 2009, to wit: No Interest is Due Unless There is Delay In Payment of Just Compensation Even assuming, for the sake of argument, that the Court allows the reopening of a final judgment, AFC and HPI are still not entitled to recover interest on the just compensation and attorney's fees. xxx xxx xxx In Land Bank of the Philippines v. Wycoco, however, the Court came to explicitly rule that interest is to be imposed on the just compensation only in case of delay in its payment, which fact must be sufficiently established. Significantly, Wycoco was moored on Article 2209, Civil Code, which provides: cSDIHT Article 2209.If the obligation consists in the payment 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. (1108) The history of this case proves that Land Bank did not incur delay in the payment of the just compensation. As earlier mentioned, after the petitioners voluntarily offered to sell their lands on October 12, 1995, DAR referred their VOS applications to Land Bank for initial valuation. Land Bank initially fixed the just compensation at P165,484.47/hectare,that is, P86,900,925.88, for AFC, and P164,478,178.14, for HPI. However, both petitioners rejected Land Bank's initial valuation, prompting Land Bank to open deposit accounts in the petitioners' names, and to credit in said accounts the amounts equivalent to their valuations. Although AFC withdrew the amount of P26,409,549.86, while HPI withdrew P45,481,706.76, they still filed with DARAB separate complaints for determination of just compensation. When DARAB did not act upon their complaints for more than three years, AFC and HPI commenced their respective actions for determination of just compensation in the Tagum City RTC, which rendered its decision on September 25, 2001. It is true that Land Bank sought to appeal the RTC's decision to the CA, by filing a notice of appeal; and that Land Bank filed in March 2003 its petition for certiorari in the CA only because the RTC did not give due course to its appeal. Any intervening delay thereby entailed could not be attributed to Land Bank, however, considering that assailing an erroneous order before a higher court is a remedy afforded by law to every losing party, who cannot thus be considered to act in bad faith or in an unreasonable manner as to make such party guilty of unjustified delay. As stated in Land Bank of the Philippines v. Kumassie Plantation: The mere fact that LBP appealed the decisions of the RTC and the Court of Appeals does not mean that it deliberately delayed the payment of just compensation to KPCI. . . . It may disagree with DAR and the landowner as to the amount of just compensation to be paid to the latter and may also disagree with them and bring the matter to court for judicial determination. This makes LBP an indispensable party in cases involving just compensation for lands taken under the Agrarian Reform Program, with a right to appeal decisions in such cases that are unfavorable to it. Having only exercised its right to appeal in this case, LBP cannot be penalized by making it pay for interest. The Third Division justified its deletion of the award of interest thuswise:

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AFC and HPI now blame LBP for allegedly incurring delay in the determination and payment of just compensation. However, the same is without basis as AFC and HPI's proper recourse after rejecting the initial valuations of respondent LBP was to bring the matter to the RTC acting as a SAC, and not to file two complaints for determination of just compensation with the DAR, which was just circuitous as it had already determined the just compensation of the subject properties taken with the aid of LBP. In Land Bank of the Philippines v. Wycoco, citing Reyes v. National Housing Authority and Republic v. Court of Appeals, this Court held that the interest of 12% per annum on the just compensation is due the landowner in case of delay in payment, which will in effect make the obligation on the part of the government one of forbearance. On the other hand, interest in the form of damages cannot be applied, where there was prompt and valid payment of just compensation. 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. HICEca . . . 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. It is explicit from LBP v. Wycoco that interest on the just compensation is imposed only in case of delay in the payment thereof which must be sufficiently established. Given the foregoing, we find that the imposition of interest on the award of just compensation is not justified and should therefore be deleted. It must be emphasized that "pertinent amounts were deposited in favor of AFC and HPI within fourteen months after the filing by the latter of the Complaint for determination of just compensation before the RTC". It is likewise true that AFC and HPI already collected P149.6 and P262 million, respectively, representing just compensation for the subject properties. Clearly, there is no unreasonable delay in the payment of just compensation which should warrant the award of 12% interest per annum in AFC and HPI's favor. The foregoing justification remains correct, and is reiterated herein. 2 As far as I am concerned, nothing in the motion for reconsideration effectively refutes the aforequoted ratiocination rendered in the resolution of December 4, 2009. With LBP not being guilty of delay in paying to the petitioners their just compensation, any plea of suffering substantial injustice from the denial of interest should be justifiably rejected. Lastly, I cannot bring myself to agree that this case is impressed at all with public interest, involving as it does only a "private claim for interest and attorney's fees which cannot even be classified as unprecedented," which "does not qualify either as a substantial or transcendental matter, or as an issue of paramount public interest for no special or compelling circumstance was present to warrant the relaxation of the doctrine of immutability in favor of the petitioners." 3 ACCORDINGLY, I vote to deny the petitioners' motion for reconsideration and to uphold the resolution dated December 4, 2009. Footnotes

1.While the petitioners owned a total of 1,454.8791 hectares based on the landholdings stated in this Court's February 6, 2007 Decision, the RTC, in its decision, fixed just compensation for 1,388.6027 hectares of land. 2.Retired from the Court on December 5, 2009. 3.See Masikip v. City of Pasig, G.R. No. 136349, January 23, 2006, 479 SCRA 391, citing Visayan Refining Co. v. Camus, 40 Phil. 550, 558-559 (1919). 4.See Manapat v. Court of Appeals, G.R. Nos. 110478, 116176 and 116491-503, October 15, 2007, 536 SCRA 32. 5.See Heirs of Alberto Saguitan v. City of Mandaluyong, G.R. No. 135087, March 14, 2000, 328 SCRA 137. 6.Id., citing City of Manila v. Chinese Community of Manila, 40 Phil. 349 (1919). 7.The authority to exercise the power of eminent domain was expressly conferred to the Philippine Government through Section 63 of the Philippine Bill of 1902, which states: That the Government of the Philippine Islands is hereby authorized, subject to the limitations and conditions prescribed in this Act, to acquire, require, hold, maintain, and convey title to real and personal property, and may acquire real estate for public uses by the exercise of the right of eminent domain. (Act of Congress of July 1, 1902.) Section 74 of the same law, which deals with the authority of the Philippine Government to grant franchises and concessions, provides: That the Government of the Philippine Islands may grant franchises, privileges, and concessions, including the authority to exercise the right of eminent domain for the construction and operation of works of public utility and service . . .: Provided, That no private property shall be taken for any purpose under this section without just compensation paid or tendered therefor . . . . More specifically, Section 3 of the Jones Act (of 1916) provides that "[p]rivate property shall not be taken for public use without just compensation." See Visayan Refining Co. v. Camus, supra note 3. 8.We derived the concept of "just compensation" from the last clause of the Fifth Amendment to the United States Constitution, which reads: "No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a Grand Jury, except in cases arising in the land or naval forces, or in the Militia, when in actual service in time of War or public danger; nor shall any person be subject for the same offence to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation." The Fifth Amendment does not prohibit the government from taking its citizens' property; rather, it merely prohibits the government from taking property without paying just compensation. (26 Am. Jur. 2d Eminent Domain 3, citing Diamond Bar Cattle Co. v. U.S., 168 F.3d 1209 [10th Cir. 1999].) It is designed to secure compensation, not to limit governmental interference with property rights. (Id., citing Preseault v. I.C.C., 494 U.S. 1, 110 S. Ct. 914, 108 L. Ed. 2d 1 [1990].) It prevents the legislature (and other government actors) from depriving private persons of vested property rights except for a "public use" and upon payment of "just compensation." (Id., citing Landgraf v. USI Film Products, 511 U.S. 244, 114 S. Ct. 1522, 128 L. Ed. 2d 229 [1994].) 9.G.R. No. 157206, June 27, 2008, 556 SCRA 102, 116-117. 10.Id. 11.P86,900,925.88 for the land of AFC and P164,478,178.14 for HPI. 12.Land Bank v. Rodriguez, G.R. No. 148892, May 6, 2010. 13.Land Bank of the Philippines v. Orilla, supra note 9, at 117. 14.G.R. No. 146587, July 2, 2002, 383 SCRA 611. 15.Id. at 622-623. 16.G.R. Nos. 60225-26, May 8, 1992, 208 SCRA 542. 17.In Eastern Shipping Lines, Inc. v. Court of Appeals (G.R. No. 97412, July 12, 1994, 234 SCRA 78), we said:

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1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code. 2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit. 18.Supra note 12. 19.G.R. No. 147511, January 20, 2003, 395 SCRA 494. 20.G.R. No. 140160, January 13, 2004, 419 SCRA 67. 21.G.R. No. 147245, March 31, 2005, 454 SCRA 516. 22.G.R. No. 157753, February 12, 2007, 515 SCRA 449. 23.G.R. No. 173392, August 24, 2007, 531 SCRA 198. 24.G.R. Nos. 154211-12, June 22, 2009, 590 SCRA 214. 25.Province of Tayabas v. Perez, 66 Phil. 467; J.M. Tuazon & Co., Inc. v. Land Tenure Administration, No. L-21064, February 18, 1970, 31 SCRA 413; Municipality of Daet v. Court of Appeals, No. L-35861, October 18, 1979, 93 SCRA 503; Manotok v. National Housing Authority, No. L-55166, May 21, 1987, 150 SCRA 89. 26.Supra note 14. 27.Supra note 19. 28.Supra note 22. 29.Supra note 14. 30.Decreeing the Emancipation of Tenants from the Bondage of the Soil, Transferring to Them the Ownership of the Land They Till and Providing the Instruments and Mechanisms Therefor. 31.Rules and Regulations Governing the Grant of Increment of Six Percent (6%) Yearly Interest Compounded Annually on Lands Covered by Presidential Decree No. 27 and Executive Order No. 228 (Effective October 21, 1994). Amended by DAR AO No. 02, series of 2004 (Issued on November 4, 2004). 32.Article 1229 states: "The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor." 33.Republic v. Juan, G.R. No. L-24740, July 30, 1979, 92 SCRA 26; citing 30 CJS 230. 34.See Parent-Teachers' Association of St. Mathew Christian Academy v. Metropolitan Bank and Trust Co., G.R. No. 176518, March 2, 2010, citing Tirazona v. Philippine EDS Techno-Service, Inc. (PET, Inc.), G.R. No. 169712, January 20, 2009, 576 SCRA 625, 626. 35.Rollo, p. 1337. 36.Equitable Banking Corp. v. Sadac, G.R. No. 164772, June 8, 2006, 490 SCRA 380, 416-417. 37.G.R. No. 82467, June 29, 1989, 174 SCRA 510. 38.G.R. No. L-72670, September 12, 1986, 144 SCRA 43. 39.G.R. No. L-63318, August 18, 1984, 131 SCRA 200. 40.G.R. No. L-26112, October 4, 1971, 41 SCRA 422.

41.G.R. No. L-58011, November 18, 1983, 125 SCRA 577. 42.G.R. No. L-64276, August 12, 1986, 143 SCRA 396. 43.G.R. No. L-18452, May 20, 1966, 17 SCRA 207. 44.G.R. No. 125451, January 20, 2000, 322 SCRA 741. 45.434 Phil. 753 (2002). 46.G.R. No. 162335, December 18, 2008, 574 SCRA 468. 47.482 Phil. 903 (2004). 48.Id. at 915. 49.Oral arguments at the Supreme Court, Hacienda Luisita case, G.R. No. 171101, August 26, 2010. 50.Gregorio v. Court of Appeals, G.R. No. L-43511, July 28, 1976, 72 SCRA 121; Mc Entee v. Manotoc, G.R. No. L-14968, October 27, 1961, 3 SCRA 279; Lim Tanhu v. Ramolete, G.R. No. L40098, August 29, 1975, 66 SCRA 441. 51.G.R. No. 127596, September 24, 1998, 292 SCRA 38. 52.Id. at 51-52. 53.326 Phil. 182 (1996). 54.Id. at 191. 55.Supra note 47. BERSAMIN, J., dissenting: 1.Rollo, pp. 1428-1448. 2.Id., pp. 1440-1446; all underscorings are part of the original text. 3.Id., p. 1439.

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LANDBANK vs RIVERA
FIRST DIVISION [G.R. No. 182431. November 17, 2010.] LAND BANK OF THE PHILIPPINES, petitioner, vs. ESTHER ANSON RIVERA, ANTONIO G. ANSON AND CESAR G. ANSON, respondents. DECISION PEREZ, J p: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure filed by Petitioner Land Bank of the Philippines (LBP) assailing the Decision1 of the Court of Appeals dated 9 October 2007 in CA G.R. SP No. 87463, ordering the payment by LBP of just compensation and interest in favor of respondents Esther Anson Rivera, Antonio G. Anson and Cesar G. Anson, and at the same time directed LBP to pay the costs of suit. Likewise assailed is the Resolution 2 of the Court of Appeals dated 18 March 2008 denying the Motion for Reconsideration of LBP. 3 The respondents are the co-owners of a parcel of agricultural land embraced by Original Certificate of Title No. P-082, and later transferred in their names under Transfer Certificate of Title No. T-95690 that was placed under the coverage of Operation Land Transfer pursuant to Presidential Decree No. 27 in 1972. Only 18.8704 hectares of the total area of 20.5254 hectares were subject of the coverage. After the Department of Agrarian Reform (DAR) directed payment, LBP approved the payment of P265,494.20, exclusive of the advance payments made in the form of lease rental amounting to P75,415.88 but inclusive of 6% increment of P191,876.99 pursuant to DAR Administrative Order No. 13, series of 1994. 4 On 1 December 1994, the respondents instituted Civil Case No. 94-03 for determination and payment of just compensation before the Regional Trial Court (RTC), Branch 3 of Legaspi City, 5 claiming that the landholding involved was irrigated with two cropping seasons a year with an average gross production per season of 100cavans of 50 kilos/hectare, equivalent of 200 cavans/year/hectare; and that the fair market value of the property was not less that P130,000.00/hectare, or P2,668,302.00 for the entire landholding of 20.5254 hectares. LBP filed its answer, 6 stating that rice and corn lands placed under the coverage of Presidential Decree No. 27 7 were governed and valued in accordance with the provisions of Executive Order No. 228 8 as implemented by DAR Administrative Order No. 2, Series of 1987 and other statutes and administrative issuances; that the administrative valuation of lands covered by Presidential Decree No. 27 and Executive Order No. 228 rested solely in DAR and LBP was the only financing arm; that the funds that LBP would use to pay compensation were public funds to be disbursed only in accordance with existing laws and regulations; that the supporting documents were not yet received by LBP; and that the constitutionality of Presidential Decree No. 27 and Executive Order No. 228 was already settled. AICTcE On 6 October 2004, the RTC rendered its decision, holding: ACCORDINGLY, the just compensation of the land partly covered by TCT No. T-95690 is fixed at Php1,297,710.63. Land Bank of the Philippines is hereby ordered to pay Esther Anson, Cesar Anson and Antonio Anson the aforesaid value of the land, plus interest of 12% per annum or Php194.36 per day effective October 7, 2004, until the value is fully paid, in cash or in bond or in any other mode of payment at the option of the landowners in accordance with Sec. 18, RA 6657. 9 LBP filed a Motion for Reconsideration 10 which the RTC denied in its Order dated 29 October 2004. 11 LBP next filed a petition for Review to the Court of Appeals docketed as CA G.R. SP No. 87463. The Court of Appeals rendered a decision dated 9 October 2007, thefallo of which reads: 12 WHEREFORE, the DECISION DATED OCTOBER 6, 2004 is MODIFIED, ordering petitioner LAND BANK OF THE PHILIPPINES to pay to the respondents just compensation (inclusive of interests as of October 6, 2004) in the amount of P823,957.23, plus interest of 12% per annum on the amount of

P515,777.57, or P61,893.30 per annum, beginning October 7, 2004 until the just compensation is fully paid in accordance with this decision. In arriving at its computation, the Court of Appeals explained: In computing the just compensation of the property, pursuant to Executive Order No. 228, Sec. 2 thereof, the formula is LV = AGP x 2.5 x GSP x A (LV is Land Valuation; AGP is Average Gross Production; GSP is Government Support Price and A is the Area of the Land) WHERE: AGP = 99.36 cavans per hectare GSP = Php35.00 per cavan A = 18.8704 hectares COMPUTATION: LV = (99.36 x 2.5 x 35.00) 18.8704 LV = 8,694 x 18.8704 LV = Php164,059.26 With increment of 6% interest per annum compounded annually beginning October 21, 1972 until October 21, 1994 and immediately after said date with 12% interest per annum until the value is fully paid in accordance with extant jurisprudence, computed as follows: To be compounded annually at 6% per annum from October 21, 1972 up to October 24, 1994. The formula is SAEHaC CA = P(1+R)n (CA is Compounded Amount; P is Principal; R is Rate; and n is the number of years) WHERE: P = Php164,059.26 R = 6% per annum N = 22 years COMPUTATION: CA = 164,059.26 x (1+06) 22 CA = 164,059.26 x (1.06) 22 CA = 164,059.26 x 3.60353741 CA = Php591,193.68 Plus simple interest of 12% per annum from October 22, 1994 up to October 21, 2003, the formula of which is: I=PxRxT (I is the Interest; P is the Principal; R is the Rate and T is the time) WHERE: P = Php591,193.68 R = 12% per annum T = 9 years COMPUTATION: I = 591,193.68 x 12 x 9 I = 70,943.24 x 9 I = Php638,489.18 (Plus interest of 12% per annum from October 22, 2003 up to October 6, 2004 or a period of 350 days) I = (591,193.68 x .12) x 350 350 I = 194.3605 x 350 I = Php68,027.77 Total Interest Php706,516.95 =========== RECAPITULATION: Compounded Amount Php591,193.68

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Total Interest

706,516.95 TOTAL AMOUNT Php1,297,710.63 ============= The Court of Appeals pointed out that: Pursuant to AO 13, considering that the landholding involved herein was tenanted prior to October 21, 1972, the rate of 6% per annum is imposed, compounded annually from October 21, 1972 until October 21, 1994, the date of the effectivity of AO 13. Beyond October 21, 1994, only the simple rate of 6% per annum interest is imposable until October 6, 2004 (the date of the rendition of the decision of the RTC) on the total value (that is, P164,059.26 plus the compounded increments up to October 21, 1994) but minus the lease rentals of P75,415.88. Only the simple rate of 6% is applicable up to then because the obligation to pay was not founded on a written agreement that stipulated a different rate of interest. From October 7, 2004 until the full payment, the simple interest rate is raised to 12% per annum. The reason is that the amount thus determined had by then acquired the character of a forbearance in money. 13 LBP disagreed with the imposition of 12% interest and its liability to pay the costs of suit. It filed a Motion for Reconsideration which was denied in the Court of Appeals' Resolution dated 18 March 2008. The Court of Appeals held: We DENY the petitioner's motion for partial reconsideration for the following reasons, to wit: 1.Anent the first ground, the decision of October 9, 2007 has explained in detail why the obligation of the petitioner should be charged 12% interest. Considering that the motion fails to persuasively show that a modification of the decision thereon would be justified, we reject such ground for lack of merit. SDHITE 2.Regarding costs of suit, they are allowed to the prevailing party as a matter of course, unless there be special reasons for the court to decree otherwise (Sec. 1, Rule 43, Rules of Court). In appeals, the Court has the power to render judgment for costs as justice may require (Sec. 2, Rule 142, Rules of Court). In view of the foregoing, the award of costs to the respondents was warranted under the circumstances. 14 Before this Court, LBP raises the same issues for resolution: I.Is it valid or lawful to award 12% rate of interest per annum in favor of respondents notwithstanding the 6% rate of interest per annum compounded annually prescribed under DAR A.O. No. 13, series of 1994, DAR A.O. No. 02, series of 2004, and DAR A.O. No. 06, series of 2008, ". . . from November 1994 up to the time of actual payment? II.Is it valid or lawful to adjudge petitioner LBP, which is performing a governmental function, liable for costs of suit? 15 At the outset, the Court notes that the parcels of land subject matter of this case were acquired under Presidential Decree No. 27, but the complaint for just compensation was filed in the RTC on 1 December 1994 after Republic Act No. 6657 already took into effect. 16 Thus, our pronouncement in LBP v. Soriano 17 finds application. We quote: . . . [I]f just compensation is not settled prior to the passage of Republic Act No. 6657, it should be computed in accordance with the said law, although the property was acquired under Presidential Decree No. 27. The fixing of just compensation should therefore be based on the parameters set out in Republic Act No. 6657, with Presidential Decree No. 27 and Executive Order No. 228 having only suppletory effect. In the instant case, while the subject lands were acquired under Presidential Decree No. 27, the complaint for just compensation was only lodged before the court on 23 November 2000 or long after the passage of Republic Act No. 6657 in 1998. Therefore, Section 17 of Republic Act No. 6657 should be the principal basis of the computation for just compensation. As a matter of fact, the factors enumerated therein had already been translated into a basic formula by the DAR pursuant to its rule-making power under Section 49 of Republic Act No. 6657. The formula outlines in DAR

Administrative Order No. 5, series of 1998 should be applied in computing just compensation, thus: LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1) Where: LV = Land Value CNI = Capitalized Net Income CS = Comparable Sales MV = Market Value per Tax Declaration In the case before Us, the just compensation was computed based on Executive Order No. 228, which computation the parties do not contest. Consequently, we reiterate our rule in LBP v. Soriano that "while we uphold the amount derived from the old formula, since the application of the new formula is a matter of law and thus, should be made applicable, the parties are not precluded from asking for any additional amount as may be warranted by the new formula." 18 cSCTID That settled, we now proceed to resolve the issue of the propriety of the imposition of 12% interest on just compensation awarded to the respondents. The Court of Appeals imposed interest of 12% per annum on the amount of P515,777.57 beginning 7 October 2004, until full payment. We agree with the Court of Appeals. In Republic v. Court of Appeals, 19 we affirmed the award of 12% interest on just compensation due to the landowner. The court decreed: 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, if 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 interest on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court. In fine, between the taking of the property and the actual payment, legal interests accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred. The Bulacan trial court, in its 1979 decision, was correct in imposing interest on the zonal value of the property to be computed from the time petitioner instituted condemnation proceedings and "took" the property in September 1969. This allowance of interest on the amount found to be the value of the property as of the time of the taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and inflation of the value of the currency over time. 20 We similarly upheld Republic's 12% per annum interest rate on the unpaid expropriation compensation in the following cases: Reyes v. National Housing Authority, 21Land Bank of the Philippines v. Wycoco, 22 Republic v. Court of Appeals, 23 Land Bank of the Philippines v. Imperial, 24 Philippine Ports Authority v. Rosales-Bondoc,25 Nepomuceno v. City of Surigao, 26 and Curata v. Philippine Ports Authority. 27 Conformably with the foregoing resolution, this Court rules that a 12% interest per annum on just compensation, due to the respondents, from the finality of this decision until its satisfaction, is proper. 28 We now proceed to the issue of whether or not the Court of Appeals correctly adjudged LBP liable to pay the cost of suit. According to LBP, it performs a governmental function when it disburses the Agrarian Reform Fund to satisfy awards of just compensation. Hence, it cannot be made to pay costs in eminent domain proceedings. LBP cites Sps. Badillo v. Hon. Tayag, 29 to further bolster its claim that it is exempt from the payment of costs of suit. The Court in that case made the following pronouncement: On the other hand, the NHA contends that it is exempt from paying all kinds of fees and charges, because it performs governmental functions. It cites Public Estates Authority v. Yujuico, which holds that the Public Estates Authority (PEA), a government-owned and controlled corporation, is

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exempt from paying docket fees whenever it files a suit in relation to its governmental functions. ETHIDa We agree. People's Homesite and Housing Corporation v. Court of Industrial Relations declares that the provision of mass housing is a governmental function: Coming now to the case at bar, We note that since 1941 when the National Housing Commission (predecessor of PHHC, which is now known as the National Housing Authority [NHA] was created, the Philippine government has pursued a mass housing and resettlement program to meet the needs of Filipinos for decent housing. The agency tasked with implementing such governmental program was the PHHC. These can be gleaned from the provisions of Commonwealth Act 648, the charter of said agency. We rule that the PHHC is a governmental institution performing governmental functions. This is not the first time We are ruling on the proper characterization of housing as an activity of the government. In the 1985 case of National Housing Corporation v. Juco and the NLRC (No. L64313, January 17, 1985, 134 SCRA 172), We ruled that housing is a governmental function. While it has not always been easy to distinguish governmental from proprietary functions, the Court's declaration in the Decision quoted above is not without basis. Indeed, the characterization of governmental functions has veered away from the traditional constituent-ministrant classification that has become unrealistic, if not obsolete. Justice Isagani A. Cruz avers: "[I]t is now obligatory upon the State itself to promote social justice, to provide adequate social services to promote a rising standard of living, to afford protection to labor to formulate and implement urban and agrarian reform programs, and to adopt other measures intended to ensure the dignity, welfare and security of its citizens . . . These functions, while traditionally regarded as merely ministrant and optional, have been made compulsory by the Constitution." 30 We agree with the LBP. The relevant provision of the Rules of Court states: Rule 142 Costs Section 1.Costs ordinarily follow results of suit. Unless otherwise provided in these rules, costs shall be allowed to the prevailing party as a matter of coursebut the court shall have power, for special reasons adjudge that either party shall pay the costs of an action, or that the same be divided, as may be equitable. No costs shall be allowed against the Republic of the Philippines unless otherwise provided by law. In Heirs of Vidad v. Land Bank of the Philippines, 31 this Court extensively discussed the role of LBP in the implementation of the agrarian reform program. LBP is an agency created primarily to provide financial support in all phases of agrarian reform pursuant to Section 74 of Republic Act (RA) No. 3844 and Section 64 of RA No. 6657. It is vested with the primary responsibility and authority in the valuation and compensation of covered landholdings to carry out the full implementation of the Agrarian Reform Program. It may agree with the DAR and the land owner as to the amount of just compensation to be paid to the latter and may also disagree with them and bring the matter to court for judicial determination. cCAIDS xxx xxx xxx To the contrary, the Court had already recognized in Sharp International Marketing v. Court of Appeals that the LBP plays a significant role under the CARL and in the implementation of the CARP, thus: As may be gleaned very clearly from EO 229, the LBP is an essential part of the government sector with regard to the payment of compensation to the landowner. It is, after all, the instrumentality that is charged with the disbursement of public funds for purposes of agrarian reform. It is therefore part, an indispensable cog, in the governmental machinery that fixes and determines the amount compensable to the landowner. Were LBP to be excluded from that intricate, if not sensitive, function of establishing the compensable amount, there would be no amount "to be established by the government" as required in Sec. 6, EO 229. This is precisely why the law requires the [Deed of Absolute Sale (DAS)], even if already approved and signed by the DAR Secretary, to be transmitted still to the LBP for its review, evaluation and approval.

It needs no exceptional intelligence to understand the implications of this transmittal. It simply means that if LBP agrees on the amount stated in the DAS, after its review and evaluation, it becomes its duty to sign the deed. But not until then. For, it is only in that event that the amount to be compensated shall have been "established" according to law. Inversely, if the LBP, after review and evaluation, refuses to sign, it is because as a party to the contract it does not give its consent thereto. This necessarily implies the exercise of judgment on the part of LBP, which is not supposed to be a mere rubber stamp in the exercise. Obviously, were it not so, LBP could not have been made a distinct member of [Presidential Agrarian Reform Council (PARC)], the super body responsible for the successful implementation of the CARP. Neither would it have been given the power to review and evaluate the DAS already signed by the DAR Secretary. If the function of the LBP in this regard is merely to sign the DAS without the concomitant power of review and evaluation, its duty to "review/evaluate" mandated in Adm. Order No. 5 would have been a mere surplus age, meaningless, and a useless ceremony. xxx xxx xxx Even more explicit is R.A. 6657 with respect to the indispensable role of LBP in the determination of the amount to be compensated to the landowner. Under Sec. 18 thereof, "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 in Secs. 16 and 17, and other pertinent provisions hereof, or as may be finally determined by the court, as the just compensation for the land." xxx xxx xxx It must be observed that once an expropriation proceeding for the acquisition of private agricultural lands is commenced by the DAR, the indispensable role of Land Bankbegins. xxx xxx xxx It is evident from the afore-quoted jurisprudence that the role of LBP in the CARP is more than just the ministerial duty of keeping and disbursing the Agrarian Reform Funds. As the Court had previously declared, the LBP is primarily responsible for the valuation and determination of compensation for all private lands. It has the discretion to approve or reject the land valuation and just compensation for a private agricultural land placed under the CARP. In case the LBP disagrees with the valuation of land and determination of just compensation by a party, the DAR, or even the courts, the LBP not only has the right, but the duty, to challenge the same, by appeal to the Court of Appeals or to this Court, if appropriate. 32 CSIDTc It is clear from the above discussions that since LBP is performing a governmental function in agrarian reform proceeding, it is exempt from the payment of costs of suit as provided under Rule 142, Section 1 of the Rules of Court. WHEREFORE, premises considered, the petition is GRANTED. The decision of the Court of Appeals in CA G.R. SP No. 87463 dated 9 October 2007 is AFFIRMEDwith the MODIFICATION that LBP is hereby held exempted from the payment of costs of suit. In all other respects, the Decision of the Court of Appeals isAFFIRMED. No costs. SO ORDERED. Corona, C.J., Velasco, Jr., Leonardo-de Castro and Peralta, * JJ., concur. Footnotes 1.Penned by Associate Justice Lucas P. Bersamin (now a member of this Court), with Associate Justices Portia Alio Hormachuelos and Estela M. Perlas-Bernabe, concurring. Rollo, pp. 50-62. 2.Id. at 82-83. 3.Id. at 7. 4.Memorandum of the Petitioner. 5.Rollo, p. 139. 6.Id. at 146. 7.Entitled, "Decreeing the Emancipation of Tenants from the Bondage of the Soil Transferring to Them the Ownership of the Land They Till and Providing the Instruments and Mechanism Therefor."

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8.Declaring full land ownership to qualified farmer beneficiaries covered by Presidential Decree No. 27. Determining the value of remaining unvalued rice and corn lands subject to Presidential Decree No. 27 and providing for the manner of payment by the farmer beneficiary and modes of compensation to the landowners. 9.Id. at 122. 10.Id. at 124. 11.Id. at 123. 12.Id. at 10-20. 13.Id. at 56-57. 14.Id. at 62. 15.Id. at 6. 16.Comprehensive Agrarian Reform Law (CARL), which took effect on 15 June 1988. 17.G.R. Nos. 180772 and 180776, 6 May 2010; see also Land Bank of the Philippines v. Gallego, Jr., G.R. No. 173226, 20 January 2009, 576 SCRA 680; Land Bank of the Philippines v. Heirs of Asuncion Aonuevo Vda. De Santos, G.R. No. 179862, 3 September 2009, 598 SCRA 115. 18.Land Bank of the Philippines v. Soriano, id. 19.433 Phil. 106 (2002). 20.Id. at 122-123. 21.443 Phil. 603 (2003). 22.464 Phil. 83 (2004). 23.494 Phil. 494 (2005). 24.G.R. No. 157753, 12 February 2007, 515 SCRA 449. 25.G.R. No. 173392, 24 August 2007, 531 SCRA 198. 26.G.R. No. 146091, 28 July 2008, 560 SCRA 41. 27.G.R. Nos. 154211-12, 22 June 2009, 590 SCRA 214. 28.National Housing Authority v. Heirs of Guivelondo, G.R. No. 166518, 16 June 2009, 589 SCRA 213, 222 citing Republic v. Court of Appeals, supra note 19. 29.448 Phil. 606 (2003). 30.Id. at 617-618. 31.G.R. No. 166461, 30 April 2010. 32.Id. *Per Special Order No. 913, Associate Justice Diosdado M. Peralta is designated as additional member in place of Associate Justice Mariano C. Del Castillo who is on official leave.

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DPWH SECRETARY vs SPS TECSON

THIRD DIVISION G.R. No. 179334 July 1, 2013

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT ENGINEER CELESTINO R. CONTRERAS, Petitioners, vs. SPOUSES HERACLEO and RAMONA TECSON, Respondents. DECISION PERALTA, J.: This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA) Decision1 dated July 31, 2007 in CA-G.R. CV No. 77997. The assailed decision affirmed with modification the Regional Trial Court (RTC)2 Decision3 dated March 22, 2002 in Civil Case No. 208-M-95. The case stemmed from the following factual and procedural antecedents: Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a parcel of land with an area of 7,268 square meters located in San Pablo, Malolos, Bulacan and covered by Transfer Certificate of Title (TCT) No. T-430064 of the Register of Deeds of Bulacan. Said parcel of land was among the properties taken by the government sometime in 1940 without the owners consent and without the necessary expropriation proceedings and used for the construction of the MacArthur Highway.5 In a letter6 dated December 15, 1994, respondents demanded the payment of the fair market value of the subject parcel of land. Petitioner Celestino R. Contreras (petitioner Contreras), then District Engineer of the First Bulacan Engineering District of petitioner Department of Public Works and Highways (DPWH), offered to pay the subject land at the rate of P0.70 per square meter per Resolution of the Provincial Appraisal Committee (PAC) of Bulacan.7 Unsatisfied with the offer, respondents demanded for the return of their property or the payment of compensation at the current fair market value.8 As their demand remained unheeded, respondents filed a Complaint9 for recovery of possession with damages against petitioners, praying that they be restored to the possession of the subject parcel of land and that they be paid attorneys fees.10 Respondents claimed that the subject parcel of land was assessed at P2,543,800.00.11 Instead of filing their Answer, petitioners moved for the dismissal of the complaint on the following grounds: (1) that the suit is against the State which may not be sued without its consent; (2) that the case has already prescribed; (3) that respondents have no cause of action for failure to exhaust administrative remedies; and (4) if respondents are entitled to compensation, they should be paid only the value of the property in 1940 or 1941.12 On June 28, 1995, the RTC issued an Order13 granting respondents motion to dismiss based on the doctrine of state immunity from suit. As respondents claim includes the recovery of damages, there is no doubt that the suit is against the State for which prior waiver of immunity is required. When elevated to the CA,14 the appellate court did not agree with the RTC and found instead that

the doctrine of state immunity from suit is not applicable, because the recovery of compensation is the only relief available to the landowner. To deny such relief would undeniably cause injustice to the landowner. Besides, petitioner Contreras, in fact, had earlier offered the payment of compensation although at a lower rate.Thus, the CA reversed and set aside the dismissal of the complaint and, consequently, remanded the case to the trial court for the purpose of determining the just compensation to which respondents are entitled to recover from the government.15 With the finality of the aforesaid decision, trial proceeded in the RTC. The Branch Clerk of Court was initially appointed as the Commissioner and designated as the Chairman of the Committee that would determine just compensation,16 but the case was later referred to the PAC for the submission of a recommendation report on the value of the subject property.17 In PAC Resolution No. 99-007,18 the PAC recommended the amount of P1,500.00 per square meter as the just compensation for the subject property. On March 22, 2002, the RTC rendered a Decision,19 the dispositive portion of which reads: WHEREFORE, premises considered, the Department of Public Works and Highways or its duly assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One Thousand Five Hundred Pesos (P1,500.00) per square meter for the lot subject matter of this case in accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001. SO ORDERED.20 On appeal, the CA affirmed the above decision with the modification that the just compensation stated above should earn interest of six percent (6%) per annum computed from the filing of the action on March 17, 1995 until full payment.21 In its appeal before the CA, petitioners raised the issues of prescription and laches, which the CA brushed aside on two grounds: first, that the issue had already been raised by petitioners when the case was elevated before the CA in CA-G.R. CV No. 51454. Although it was not squarely ruled upon by the appellate court as it did not find any reason to delve further on such issues, petitioners did not assail said decision barring them now from raising exactly the same issues; and second, the issues proper for resolution had been laid down in the pre-trial order which did not include the issues of prescription and laches. Thus, the same can no longer be further considered. As to the propriety of the propertys valuation as determined by the PAC and adopted by the RTC, while recognizing the rule that the just compensation should be the reasonable value at the time of taking which is 1940, the CA found it necessary to deviate from the general rule. It opined that it would be obviously unjust and inequitable if respondents would be compensated based on the value of the property in 1940 which is P0.70 per sq m, but the compensation would be paid only today. Thus, the appellate court found it just to award compensation based on the value of the property at the time of payment. It, therefore, adopted the RTCs determination of just compensation of P1,500.00 per sq m as recommended by the PAC. The CA further ordered the payment of interest at the rate of six percent (6%) per annum reckoned from the time of taking, which is the filing of the complaint on March 17, 1995. Aggrieved, petitioners come before the Court assailing the CA decision based on the following grounds: I.

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THE COURT OF APPEALS GRAVELY ERRED IN GRANTING JUST COMPENSATION TO RESPONDENTS CONSIDERING THE HIGHLY DUBIOUS AND QUESTIONABLE CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY. II. THE COURT OF APPEALS GRAVELY ERRED IN AWARDING JUST COMPENSATION TO RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES. III. THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURTS DECISION ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS.22 Petitioners insist that the action is barred by prescription having been filed fifty-four (54) years after the accrual of the action in 1940. They explain that the court can motu proprio dismiss the complaint if it shows on its face that the action had already prescribed. Petitioners likewise aver that respondents slept on their rights for more than fifty years; hence, they are guilty of laches. Lastly, petitioners claim that the just compensation should be based on the value of the property at the time of taking in 1940 and not at the time of payment.23 The petition is partly meritorious. The instant case stemmed from an action for recovery of possession with damages filed by respondents against petitioners. It, however, revolves around the taking of the subject lot by petitioners for the construction of the MacArthur Highway. There is taking when the expropriator enters private property not only for a momentary period but for a permanent duration, or for the purpose of devoting the property to public use in such a manner as to oust the owner and deprive him of all beneficial enjoyment thereof.24 It is undisputed that the subject property was taken by petitioners without the benefit of expropriation proceedings for the construction of the MacArthur Highway. After the lapse of more than fifty years, the property owners sought recovery of the possession of their property. Is the action barred by prescription or laches? If not, are the property owners entitled to recover possession or just compensation? As aptly noted by the CA, the issues of prescription and laches are not proper issues for resolution as they were not included in the pre-trial order. We quote with approval the CAs ratiocination in this wise: Procedurally, too, prescription and laches are no longer proper issues in this appeal. In the pretrial order issued on May 17, 2001, the RTC summarized the issues raised by the defendants, to wit: (a) whether or not the plaintiffs were entitled to just compensation; (b) whether or not the valuation would be based on the corresponding value at the time of the taking or at the time of the filing of the action; and (c) whether or not the plaintiffs were entitled to damages. Nowhere did the pre-trial order indicate that prescription and laches were to be considered in the adjudication of the RTC.25 To be sure, the pre-trial order explicitly defines and limits the issues to be tried and controls the subsequent course of the action unless modified before trial to prevent manifest injustice.26

Even if we squarely deal with the issues of laches and prescription, the same must still fail. Laches is principally a doctrine of equity which is applied to avoid recognizing a right when to do so would result in a clearly inequitable situation or in an injustice.27 This doctrine finds no application in this case, since there is nothing inequitable in giving due course to respondents claim. Both equity and the law direct that a property owner should be compensated if his property is taken for public use.28 Neither shall prescription bar respondents claim following the long-standing rule "that where private property is taken by the Government for public use without first acquiring title thereto either through expropriation or negotiated sale, the owners action to recover the land or the value thereof does not prescribe."29 When a property is taken by the government for public use, jurisprudence clearly provides for the remedies available to a landowner. The owner may recover his property if its return is feasible or, if it is not, the aggrieved owner may demand payment of just compensation for the land taken.30 For failure of respondents to question the lack of expropriation proceedings for a long period of time, they are deemed to have waived and are estopped from assailing the power of the government to expropriate or the public use for which the power was exercised. What is left to respondents is the right of compensation.31 The trial and appellate courts found that respondents are entitled to compensation. The only issue left for determination is the propriety of the amount awarded to respondents. Just compensation is "the fair value of the property as between one who receives, and one who desires to sell, x x x fixed at the time of the actual taking by the government." This rule holds true when the property is taken before the filing of an expropriation suit, and even if it is the property owner who brings the action for compensation.32 The issue in this case is not novel. In Forfom Development Corporation [Forfom] v. Philippine National Railways [PNR],33 PNR entered the property of Forfom in January 1973 for public use, that is, for railroad tracks, facilities and appurtenances for use of the Carmona Commuter Service without initiating expropriation proceedings.34 In 1990, Forfom filed a complaint for recovery of possession of real property and/or damages against PNR. In Eusebio v. Luis,35 respondents parcel of land was taken in 1980 by the City of Pasig and used as a municipal road now known as A. Sandoval Avenue in Pasig City without the appropriate expropriation proceedings. In 1994, respondent demanded payment of the value of the property, but they could not agree on its valuation prompting respondent to file a complaint for reconveyance and/or damages against the city government and the mayor. In Manila International Airport Authority v. Rodriguez,36 in the early 1970s, petitioner implemented expansion programs for its runway necessitating the acquisition and occupation of some of the properties surrounding its premises. As to respondents property, no expropriation proceedings were initiated.1wphi1 In 1997, respondent demanded the payment of the value of the property, but the demand remained unheeded prompting him to institute a case for accion reivindicatoria with damages against petitioner. In Republic v. Sarabia,37 sometime in 1956, the Air Transportation Office (ATO) took possession and control of a portion of a lot situated in Aklan, registered in the name of respondent, without initiating expropriation proceedings. Several structures were erected thereon including the control tower, the Kalibo crash fire rescue station, the Kalibo airport terminal and the headquarters of the PNP Aviation Security Group. In 1995, several stores and restaurants were constructed on the remaining portion of the lot. In 1997, respondent filed a complaint for recovery of possession with damages against the storeowners where ATO intervened claiming that the storeowners were its lessees. The Court in the above-mentioned cases was confronted with common factual circumstances where the government took control and possession of the subject properties for public use without initiating expropriation proceedings and without payment of just compensation, while the

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landowners failed for a long period of time to question such government act and later instituted actions for recovery of possession with damages. The Court thus determined the landowners right to the payment of just compensation and, more importantly, the amount of just compensation. The Court has uniformly ruled that just compensation is the value of the property at the time of taking that is controlling for purposes of compensation. In Forfom, the payment of just compensation was reckoned from the time of taking in 1973; in Eusebio, the Court fixed the just compensation by determining the value of the property at the time of taking in 1980; in MIAA, the value of the lot at the time of taking in 1972 served as basis for the award of compensation to the owner; and in Republic, the Court was convinced that the taking occurred in 1956 and was thus the basis in fixing just compensation. As in said cases, just compensation due respondents in this case should, therefore, be fixed not as of the time of payment but at the time of taking, that is, in 1940. The reason for the rule has been clearly explained in Republic v. Lara, et al.,38 and repeatedly held by the Court in recent cases, thus: x x x "The value of the property should be fixed as of the date when it was taken and not the date of the filing of the proceedings." For where 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 x x x.39 Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was P0.70/sq m.40 Hence, it should, therefore, be used in determining the amount due respondents instead of the higher value which is P1,500.00. While disparity in the above amounts is obvious and may appear inequitable to respondents as they would be receiving such outdated valuation after a very long period, it is equally true that they too are remiss in guarding against the cruel effects of belated claim. The concept of just compensation does not imply fairness to the property owner alone. Compensation must be just not only to the property owner, but also to the public which ultimately bears the cost of expropriation.41 Clearly, petitioners had been occupying the subject property for more than fifty years without the benefit of expropriation proceedings. In taking respondents property without the benefit of expropriation proceedings and without payment of just compensation, petitioners clearly acted in utter disregard of respondents proprietary rights which cannot be countenanced by the Court.42 For said illegal taking, respondents are entitled to adequate compensation in the form of actual or compensatory damages which in this case should be the legal interest of six percent (6%) per annum on the value of the land at the time of taking in 1940 until full payment.43 This is based on the principle that interest runs as a matter of law and follows from the right of the landowner to be placed in as good position as money can accomplish, as of the date of taking.44 WHEREFORE, premises considered, the pet1t10n is PARTIALLY GRANTED. The Court of Appeals Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the subject property owned by respondents shall be F0.70 instead of P1,500.00 per square meter, with interest at six percent ( 6o/o) per annum from the date of taking in 1940 instead of March 17, 1995, until full payment. SO ORDERED.

DIOSDADO M. PERALTA Associate Justice WE CONCUR: (Dissenting and Concurring Opinion) PRESBITERO J. VELASCO, JR. Associate Justice Chairperson ROBERTO A. ABAD Associate Justice JOSE CATRAL MENDOZA Associate Justice See separate opinion MARVIC MARIO VICTOR F. LEONEN 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. PRESBITERO J. VELASCO, JR. Associate Justice Chairperson, Third Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Acting 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 Court's Division. MARIA LOURDES P. A. SERENO Chief Justice

Footnotes 1 Penned by Associate Justice Lucas P. Bersamin (now a member of this Court), with Associate Justices Portia Alio-Hormachuelos and Estela M. Perlas-Bernabe (now a member of this Court), concurring; rollo, pp. 124-137. 2 Branch 80, Malolos, Bulacan. 3 Penned by .Judge Caesar A. Casanova; rollo, pp. 165-167. 4 Records, p. 5. 5 Rollo, p. 125. 6 Records, p. 6. 7 Id. at 7.

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32 Republic v. Court of Appeals, supra note 27, at 534. (Emphasis supplied.) 8 Rollo, p. 125. 33 Supra note 31. 9 Records, pp. 1-4. 34 Forfom Development Corporation v. Philippine National Railways, supra note 31, at 366. 10 Id. at 3. 35 Supra note 29. 11 Id. at 2. 36 Supra note 24. 12 Id. at 17-19. 37 G.R. No. 157847, August 25, 2005, 468 SCRA 142. 13 Id. at 29-30. 38 96 Phil. 170 (1954). 14 The case was docketed as CA-G.R. CV No. 51454. 39 Republic v. Lara, et al., supra, at 177-178. 15 Embodied in a Decision dated February 11, 1999, penned by Associate Justice Artemon D. Luna, with Associate Justices Delilah Vidallon-Magtolis and Rodrigo V. Cosico, concurring; records, pp. 56-62. 16 Records, p. 104. 42 Eusebio v. Luis, supra note 29, at 587. 17 Id. at 116. 18 Id. at 122. 19 Id. at 150-152. 44 Manila International Airport Authority v. Rodriguez, supra note 24, at 761. (Citation omitted). 20 Id. at 152. 21 Supra note 1. 22 Rollo, p. 108. 23 Id. at 24-32. 24 Manila International Airport Authority v. Rodriguez, 518 Phil. 750, 757 (2006). 25 Rollo, p. 133. 26 Rules of Court, Rule 18, Sec. 7. 27 Republic v. Court of Appeals, G.R. No. 147245, March 31, 2005, 454 SCRA 516, 527. 28 Id. 29 Eusebio v. Luis, G.R. No. 162474, October 13, 2009, 603 SCRA 576, 583; Republic v. Court of Appeals, supra note 27, at 528. 30 Republic v. Court of Appeals, supra note 27, at 532. 31 Eusebio v. Luis, supra note 29, at 584; Forfom Development Corporation v. Philippine National Railways, G.R. No. 124795, December 10, 2008, 573 SCRA 350, 366-367. 43 Id. at 587-588; Forfom Development Corporation v. Philippine National Railways, supra note 31, at 373; Manila International Airport Authority v. Rodriguez, supra note 24, at 761. (Citations omitted). 40 Rollo, p. 44. 41 Republic v. Court of Appeals, supra note 27, at 536.

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EPZA vs ESTATE OF SALUD JIMENEZ

FIRST DIVISION [G.R. No. 188995. August 24, 2011.] EXPORT PROCESSING ZONE AUTHORITY (NOW PHILIPPINE EXPORT ZONE AUTHORITY), petitioner, vs. JOSE PULIDO, VICENTA PANGANIBAN, RURAL BANK OF SALINAS, INC., FRANCISCA M. PRODIGALIDAD, ABELARDO PRODIGALIDAD, CARMEN PRECIOSA TABLANTE, CARMENCITA M. PRODIGALIDAD, MELVIN J. BOUCHER, MARY LOU M. PRODIGALIDAD, SALVADOR MENES, JR., DELILAH M. PRODIGALIDAD, NANNETTE M. PRODIGALIDAD, ANSELMO M. PRODIGALIDAD III, GREGORIO M. PRODIGALIDAD, AND ESTATE OF SALUD JIMENEZ, respondents. DECISION BERSAMIN, J p: In this appeal, we heed the plea of the owner of expropriated property for the much-delayed payment of just compensation by affirming the decision promulgated on April 20, 2009 1 and the resolution dated July 20, 2009, 2 whereby the Court of Appeals (CA) respectively upheld the decision rendered on September 19, 2005 by the Regional Trial Court (RTC), Branch 17, in Cavite City, 3 and denied the petitioner's motion for reconsideration. Antecedents The controversy has its genesis in the action for the expropriation of three parcels of irrigated riceland situated in Rosario, Cavite that the petitioner commenced on May 15, 1981 in the Court of First Instance of Cavite against the several individual owners. 4 The parcels of Riceland were: (a) Lot 1408, with an area of 31,426 square meters and covered by Transfer Certificate of Title (TCT) No. T-2908 of the Registry of Deeds of Cavite in the names of Jose Pulido and Vicenta Panganiban; (b) Lot 1409-B-2, with an area of 32,907 square meters and covered by TCT No. T-70724 of the Registry of Deeds of Cavite co-owned by Francisco Prodigalidad and Medardo Prodigalidad; and (c) Lot 1406, with an area of 26,008 square meters and covered by TCT No. T-113498 registered in the name of Salud Jimenez. CTDacA During the pendency of the case, Lot 1406 was subdivided into Lot 1406-A (with an area of 12,890 square meters) and 1406-B (with an area of 13,118 square meters). On July 11, 1991, the RTC sustained the right of the petitioner to expropriate the three parcels of riceland, but later partly reconsidered and released Lot 1406-A from expropriation. The petitioner appealed to the CA. On January 4, 1993, the petitioner and the Estate of Salud Jimenez (due to Salud Jimenez having meanwhile died on October 30, 1984) entered into a Compromise Agreement, stipulating essentially as follows: (a)That the petitioner "agrees to withdraw its appeal from the Order of the Honorable Court dated October 25, 1991 which released lot 1406-A from the expropriation proceedings" and the Estate of Jimenez, in turn, "agrees to waive, quitclaim and forfeit its claim for damages and loss of income which it sustained by reason of the possession of [Lot 1406-A] by [EPZA] from 1981 up to the present"; (b)The parties agree that the Estate of Salud Jimenez would transfer Lot 1406-B to the petitioner in exchange for "lot 434 with an area of 14,167 square meters and covered by Transfer Certificate of Title No. 14772 of the Registry of Deeds of Cavite"; (c)The swap arrangement "recognizes the fact that the lot 1406-B . . . is considered expropriated in favor of the government" and the payment for which being Lot 434; and (d)The parties "agree that they will abide by the terms of the foregoing agreement in good faith and the Decision to be rendered based on this Compromise Agreement is immediately final and executory." In due time, the CA remanded the case to the RTC for the consideration and approval of the Compromise Agreement. On August 23, 1993, the RTC approved the Compromise Agreement.

Contrary to its express undertaking under the Compromise Agreement, the petitioner failed to transfer the title of Lot 434 to the Estate of Salud Jimenez because the registered owner was Progressive Realty Estate, Inc., not the petitioner. As a result, on March 13, 1997, the Estate of Salud Jimenez filed a Motion to Partially Annul the Order dated August 23, 1993. On August 4, 1997, the RTC annulled the Compromise Agreement and directed the petitioner to peacefully return Lot 1406-B to the Estate of Salud Jimenez. The petitioner went to the CA by petition for certiorari and prohibition, essentially to nullify the order dated August 4, 1997. In its decision promulgated on March 25, 1998, the CA partially granted the petition for certiorari and prohibition; set aside the order of the RTC on the return of Lot 1406-B to the Estate of Salud Jimenez; and directed that the RTC determine the just compensation for Lot 1406-B. Upon the CA's denial of its Motion for Reconsideration, the Estate of Salud Jimenez appealed to the Court (G.R. No. 137285). 5 On January 16, 2001, 6 the Court promulgated its decision in G.R. No. 137285, disposing: WHEREFORE, the instant petition is hereby denied. The Regional Trial Court of Cavite City is hereby ordered to proceed with the hearing of the expropriation proceedings, docketed as Civil Case No. N-4029, regarding the determination of just compensation for Lot 1406-B, covered and described in TCT No. T-113498-Cavite, and to resolve the same with dispatch. SO ORDERED. The Court explained in G.R. No. 137285 that the Estate of Salud Jimenez had already acknowledged the propriety of the expropriation of Lot 1406-B by entering into the Compromise Agreement; and that the provisions of the Compromise Agreement had consequently related only to the form or mode of payment of the just compensation for Lot 1406-B, that is, in lieu of cash, another lot (Lot 434) was to be delivered as just compensation to the Estate of Salud Jimenez, stating: . . . The only issue for consideration is the manner and amount of payment due to [the Estate of Salud Jimenez]. In fact, aside from the withdrawal of [PEZA's] appeal to the Court of Appeals concerning Lot 1406-A, the matter of payment of just compensation was the only subject of the compromise agreement dated January 4, 1993. Under the compromise agreement, [the Estate of Salud Jimenez] was supposed to receive [PEZA's] Lot No. 434 in exchange for Lot 1406-B. When [PEZA] failed to fulfil its obligation to deliver Lot 434, [the Estate of Salud Jimenez] can again demand for the payment but not the return of the expropriated Lot 1406-B. This interpretation by the Court of Appeals is in accordance with Sections 4 to 8, Rule 67 of the Rules of Court. 7 Considering that the decision in G.R. No. 137285 became final and executory, the RTC conducted proceedings to determine the just compensation for Lot 1406-B. During the trial, however, the petitioner raised the issue of whether the just compensation should be based on the value or assessment rate prevailing in 1981 or in 1993, insisting that the just compensation for Lot 1406-B should be equivalent to its fair market value in 1981, the time of the filing of its expropriation complaint, which was the time of the taking. The Estate of Salud Jimenez contended, in contrast, that the just compensation should be reckoned as of August 4, 1997, when theCompromise Agreement was annulled and set aside. In its decision, 8 the RTC resolved that: (a)The just compensation for Lot 1406-B should be based on the value or assessment rate prevalent in 1993, the year the parties entered into theCompromise Agreement and thereby agreed that the just compensation for Lot 1406-B was Lot 434; HCSAIa (b)The just compensation of Lot 1406-B was P6,200.00/square meter as substantiated by the several documents presented to show the value of properties adjacent to Lot 1406-B, namely: (1) the Deed of Sale of Lot 1406-A executed in 1994, whereby one of the heirs of Salud Jimenez sold the lot to the Manila Electric Company (MERALCO) for P6,395.00/square meter; (2) a certified true copy of the 1998 zonal valuation of properties along the PEZA Road, Barangay Tejero, Cavite City, containing the zonal valuations of residential and commercial properties in the area to be, respectively, P4,000.00/square meter and P8,000.00/square meter; (3) an appraisal report on Lot 1406-B by an independent appraiser stating that the value of properties in the vicinity of Lot 1406-

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B was P7,500.00/square meter in 1997; and (4) other documents showing payment of just compensation by PEZA to the owners of previously expropriated properties adjacent to or near Lot 1406-B; and (c)The total compensation to be paid should bear interest at the legal rate reckoned from August 23, 1993. On appeal, the CA affirmed the decision of the RTC. 9 Hence, the petitioner comes to the Court to seek a further review. Issue The petitioner now submits that just compensation for Lot 1406-B was only P41,610.00, the equivalent of the zonal valuation of Lot 1406-B under Tax Declaration No. 7252 issued in 1981; that any amount above Lot 1406-B's 1981 zonal valuation would unjustly enrich the Estate of Salud Jimenez due to the escalated price of the expropriated property; and that the Estate of Salud Jimenez was entitled only to compensation for the loss of its "vacant and idle land at the time of taking and/or filing of the complaint, whichever came first, and not to the incremental benefit that has been derived therefrom after the introduction of improvements thereto by [the petitioner]." 10 On the other hand, the Estate of Salud Jimenez maintains that just compensation for Lot 1406-B must be based on the value of the property (and of other properties adjacent to it) in 1993 when the parties entered into the Compromise Agreement and agreed that the just compensation for Lot 1406-B was Lot 434, or Lot 434's equivalent value. The Estate of Salud Jimenez articulates the reason in its Comment, thuswise: [T]he peremptory exercise by the state of its power to expropriate the subject lot has been extremely painful to the original owner, Salud Jimenez, who already expired on October 30, 1984 without any more enjoying the fruits of her property. Thereafter, her heirs likewise failed to savor the produce or income of the land for twenty eight (28) long years up to the present time. In contrast, petitioner without paying a single centavo for the land, has collected millions of pesos from the lessee banks and bus and jitney operators and continue to reap a bounty from the property. It cannot be gainsaid that petitioner [PEZA] has been unfairly harsh to herein respondent when it foisted a land upon which it has no legal title. In this factual milieu, justice and equity demand that an equitable relief be granted to herein respondent to fix the just compensation as of 1993 and not on May 15, 1981 which is the date of filing of the complaint. 11 The issue is simply whether or not just compensation should be based on the value of Lot 1406-B prevailing in 1981 or in 1993. Ruling The petition for review lacks merit. 1. Just compensation for Lot 1406-B must be based on value of property prevailing in 1993 What would have been an easy and straightforward implementation of the decision promulgated on January 16, 2001 in G.R. No. 137285 was delayed by the petitioner's interposition of the issue on the proper reckoning point for computing the just compensation for Lot 1406-B. A reading of the decision in G.R. No. 137285 exposes the interposition as nothing more than an insincere attempt of the petitioner to delay the inevitable performance of its obligation to pay just compensation for Lot 1406-B. Indeed, the Court pronounced there that "the compromise agreement was only about the mode of payment by swapping of lots . . ., only the originally agreed form of compensation that is by [lot] 12 payment, was rescinded." 13 TCDHaE That pronouncement became the law of the case, anything to the contrary of which the petitioner could not validly rely upon. The doctrine of the law of the case means that whatever is irrevocably established as the controlling legal rule between the same parties in the same case, whether correct on general principles or not, continues to be the law of the case for as long as the facts on which the legal rule was predicated continue to be the facts of the case before the court. 14 It applies in a situation where an appellate court has made a ruling on a question on appeal and thereafter remands the case to the lower court for further proceedings; the question then settled

by the appellate court becomes the law of the case binding the lower court and any subsequent appeal, 15 and questions necessarily involved and dealt with in a former appeal will be regarded as the law of the case in a subsequent appeal, although the questions are not expressly treated in the opinion of the court, inasmuch as the presumption is that all the facts in the case bearing on the point decided have received due consideration whether all or none of them are mentioned in the opinion.16 To reiterate, in G.R. No. 137285, the Court upheld the annulment of the Compromise Agreement and recognized that the agreed upon mode of payment of the just compensation for Lot 1406-B with Lot 434 was cancelled. It is notable that the Court mentioned nothing therein about the invalidation of the amount of just compensation corresponding to the mode of payment, which was the value of Lot 434 at the time, which silence was the Court's acknowledgment that the parties understood and accepted, by entering into the Compromise Agreement in 1993, that the just compensation for Lot 1406-B was Lot 434 (or the value of Lot 434, which at the time of the swap in 1993 was definitely much higher than Lot 434's value in 1981). Accordingly, we completely agree with the RTC's observation that "when the parties signed the compromise agreement and the same was approved, they had in fact settled between themselves the question of what is just compensation and that both of them had intended that defendant would be compensated on the basis of prevailing values at the time of the agreement." 17 We further completely agree with the CA's conclusion that "by agreeing to a land swap in 1993 in the ill-fated compromise agreement, [PEZA] had impliedly agreed to paying just compensation using the market values in 1993." 18 2. P6,200.00/square meter is the correct just compensation for Lot 1406-B With the annulment of the Compromise Agreement, the payment of just compensation for Lot 1406-B now has to be made in cash. In that regard, the order of the Court to remand to the RTC for the determination of just compensation was indubitably for the sole objective of ascertaining the equivalent monetary value in 1993 of Lot 1406-B or Lot 434. In due course, the RTC found that just compensation of Lot 1406-B was P6,200.00/square meter. Such finding, which the CA upheld, took into due consideration the clear and convincing evidence proving the fair valuation of properties similar and adjacent to Lot 1406-B at or near 1993, the time in question, namely: (a)The deed of sale executed in 1994 by one of the heirs of the late Salud Jimenez to sell Lot 1406A to MERALCO for P6,395.00/square meter; (b)A certified true copy of the 1998 zonal valuation of properties along the PEZA Road, Barangay Tejero, Cavite City showing the zonal valuations of residential and commercial properties in the vicinity of Lot 1406-B to be P4,000.00/square meter and P8,000.00/square meter, respectively; HAEDCT (c)An appraisal report done on Lot 1406-B by an independent appraiser stating that the value of properties in the vicinity of Lot 1406-B went for P7,500.00/square meter in 1997; and (d)Other documents showing payments of just compensation by PEZA to the owners of other previously expropriated properties adjacent to or near Lot 1406-B. The uniform findings of fact upon the question of just compensation reached by the CA and the RTC are entitled to the greatest respect. They are conclusive on the Court in the absence of a strong showing by the petitioner that the CA and the RTC erred in appreciating the established facts and in drawing inferences from such facts. We concur with the findings. 3. Estate of Salud Jimenez entitled to Interest of 12% per annum The power of eminent domain is not an unlimited power. Section 9, Article III of the 1987 Constitution sets down the essential limitations upon this inherent right of the State to take private property, namely: (a) that the taking must be for a public purpose; and (b) that just compensation must be paid to the owner. The State must first establish that the exercise of

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eminent domain is for a public purpose, which, here, is already settled. What remains to be determined is the just compensation. InApo Fruits Corporation v. Land Bank, 19 the Court has held that compensation cannot be just to the owner in the case of property that is immediately taken unless there is prompt payment, considering that the owner thereby immediately suffers not only the loss of his property but also the loss of its fruits or income. Thus, in addition, the owner is entitled to legal interest from the time of the taking of the property until the actual payment 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. 20 It is undeniable that just compensation was not promptly made to the Estate of Salud Jimenez for the taking of Lot 1406-B by the petitioner. The move to compensate through the swap arrangement under the Compromise Agreement was aborted or amounted to nothing through no fault of the Estate of Salud Jimenez. The petitioner, which should have known about the inefficacy of the swapping of Lot 434 for Lot 1406-B, could even be said to have resorted to the swapping for the purpose of delaying the payment. Thus, it was solely responsible for the delay. In fact, the Estate of Salud Jimenez was compelled to seek the rescission of the Compromise Agreement, a process that prolonged even more the delay in the payment of just compensation. In view of this, the CA's fixing of legal interest at only 6% per annumcannot be upheld and must be corrected, for that rate would not ensure that compensation was just in the face of the long delay in payment. Already in G.R. No. 137285, the Court noted the long delay in payment and was naturally prompted to strongly condemn "the cavalier attitude of government officials who adopt such a despotic and irresponsible stance," quoting from Cosculluela v. Court of Appeals, 21 that: [It] is high time that the petitioner be paid what was due him eleven years ago. It is arbitrary and capricious for a government agency to initiate expropriation proceedings, seize a person's property, allow a judgment of the court to become final and executory and then refuse to pay on the ground that there are no appropriations for the property earlier taken and profitably used. We condemn in the strongest possible terms the cavalier attitude of government officials who adopt such a despotic and irresponsible stance. 22 Accordingly, we hereby impose 12% interest per annum on the unpaid gross value of P81,331,600.00 for Lot 1406-B (i.e., 13,118 square meters x P6,200.00/square meter) from August 23, 1993, the date of the approval of the failed Compromise Agreement, until the full amount of the just compensation is paid, as a way of making the compensation just. This accords with a long line of pertinent jurisprudence, 23 whereby the Court has imposed interest at 12% per annum in eminent domain whenever the expropriator has not immediately delivered the just compensation. WHEREFORE, we DENY the petition for review on certiorari filed by Philippine Export Zone Authority, and AFFIRM the decision promulgated by the Court of Appeals on April 20, 2009, subject to the MODIFICATION that the legal interest chargeable on the unpaid just compensation for Lot 1406-B is 12% per annumreckoned from August 23, 1993 on the unpaid gross value of P81,331,600.00 for Lot 1406-B. This decision is immediately final and executory, and no further pleadings shall be allowed. The petitioner shall pay the costs of suit. SO ORDERED. DaECST Corona, C.J., Leonardo-de Castro, Del Castillo and Villarama, Jr., JJ., concur. Footnotes 1.Rollo, pp. 33-52; penned by Associate Justice Romeo F. Barza, and concurred in by Associate Justice Bienvenido L. Reyes and Associate Justice Arcangelita M. Romilla-Lontok (retired). 2.Id., pp. 54-55. 3.Id., pp. 62-70. 4.Id., pp. 74-81. 5.Id., pp. 150-199. 6.349 SCRA 240. 7.Id., p. 258. 8.Rollo, pp. 62-70.

9.Supra, note 1. 10.Rollo, p. 23. 11.Id., p. 310. 12.The word cash was erroneously used. 13.Estate of Salud Jimenez v. Philippine Export Processing Zone, supra, note 6, p. 259. 14.Vios, et al. v. Pantangco, Jr., G.R. No. 163103, February 6, 2009, 578 SCRA 129; citing Baes v. Lutheran Church in the Philippines, G.R. No. 142308, November 15, 2005, 475 SCRA 13, 30-31; United Overseas Bank of the Philippines v. Rose Moor Mining and Development Corporation, G.R. No. 172651, October 2, 2007, 534 SCRA 528, 542-543; citing Padillo v. Court of Appeals, G.R. No. 119707, November 29, 2001, 371 SCRA 27, 41-43. 15.Vios v. Pantangco, Jr., G.R. No. 163103, February 6, 2009, 578 SCRA 129. 16.People v. Pinuila, 103 Phil. 992, 999 (1958). 17.Supra, note 3. 18.Supra, note 1. 19.G.R. No. 164195, October 12, 2010, 632 SCRA 727. 20.Republic v. Court of Appeals, G.R. No. 146587, July 2, 2002, 383 SCRA 611, where the Court opines: The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market value of the property, broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal action and competition or the fair value of the property as between one who receives, and one who desires to sell, it fixed at the time of the actual taking by the government. Thus, if property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interests on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court. In fine, between the taking of the property and the actual payment, legal interests accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred. 21.G.R. No. L-77765, August 15, 1988, 164 SCRA 393, 401. 22.See note 6 at pp. 264-265. 23.Apo Fruits Corporation v. Land Bank of the Philippines, G.R. No. 164195, October 12, 2010, 632 SCRA 727; Curata v. Philippine Ports Authority, G.R. Nos. 154211-12, June 22, 2009, 590 SCRA 214; Philippine Ports Authority v. Rosales-Bondoc, G.R. No. 173392, August 24, 2007, 531 SCRA 198; Land Bank v. Imperial, G.R. No. 157753, February 12, 2007, 515 SCRA 449; Republic v. Court of Appeals, G.R. No. 147245, March 31, 2005, 454 SCRA 516; Land Bank v. Wycoco, G.R. No. 140160, January 13, 2004, 419 SCRA 67; Reyes v. National Housing Authority, G.R. No. 147511, January 20, 2003, 395 SCRA 494; Republic v. Court of Appeals, G.R. No. 146587, July 2, 2002, 383 SCRA 611; Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, July 12, 1994, 234 SCRA 78.

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MUNICIPALITY OF BIAN vs. Hon. JOSE MAR GARCIA

FIRST DIVISION [G.R. No. 69260. December 22, 1989.] MUNICIPALITY OF BIAN, petitioner, vs. Hon. JOSE MAR GARCIA, Judge of the Regional Trial Court at Bian, Laguna (BRANCH XXXIV, Region IV), and ERLINDA FRANCISCO, respondents. The Provincial Fiscal for petitioner. Roman M. Alonte for private respondent. SYLLABUS 1.REMEDIAL LAW; SPECIAL CIVIL ACTION; EMINENT DOMAIN; MOTION TO DISMISS FILED THEREIN TAKES PLACE OF AN ANSWER IN AN ORDINARY CIVIL ACTION. One of the defendants was Erlinda Francisco. She filed a "Motion to Dismiss" dated August 26, 1983, on the following grounds; (a) the allegations of the complaint are vague and conjectural; (b) the complaint violates the constitutional limitations of law and jurisprudence on eminent domain; (c) it is oppressive; (d) it is barred by prior decision and disposition on the subject matter; and (e) it states no cause of action. Now, her "motion to dismiss" was filed pursuant to Section 3, Rule 67 of the Rules of Court: "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 of 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 plaintiff's attorney of record and filed with the court with the proof of service." Her "motion to dismiss" was thus actually a pleading, taking the place of an answer in an ordinary civil action; it was not an ordinary motion governed by Rule 15, or a "motion to dismiss" within the contemplation of Rule 16 of the Rules of Court. 2.ID.; ID.; ID.; STAGES IN AN ACTION OF EXPROPRIATION. There are two (2) stages in every action of expropriation. The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, "of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the filing of the complaint." An order of dismissal, if this be ordained, would be a final one, of course, since it finally disposes of the action and leaves nothing more to be done by the Court on the merits. So, too, would an order of condemnation be a final one, for thereafter, as the Rules expressly state, in the proceedings before the Trial Court, "no objection to the exercise of the right of condemnation (or the propriety thereof) shall be filed or heard." The second phase of the eminent domain action is concerned with the determination by the Court of "the just compensation for the property sought to be taken." This is done by the Court with the assistance of not more than three (3) commissioners. The order fixing the just compensation on the basis of the evidence before, and findings of, the commissioners would be final, too. It would finally dispose of the second stage of the suit, and leave nothing more to be done by the Court regarding the issue. Obviously, one or another of the parties may believe the order to be erroneous in its appreciation of the evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied party may seek reversal of the order by taking an appeal therefrom. 3.ID.; ID.; PHASES OF A PARTITION AND/OR ACCOUNTING SUIT. A two-phase feature is found in the special civil action of partition and accounting under Rule 69 of the Rules of Court. The first phase of a partition and/or accounting suit is taken up with the determination of whether or not a co-ownership in fact exists, and a partition is proper (i.e., not otherwise legally proscribed) and may be made by voluntary agreement of all the parties interested in the property. This phase may end with a declaration that plaintiff is not entitled to have a partition either because a coownership does not exist, or partition is legally prohibited. It may end, on the other hand, with an adjudgment that a co-ownership does in truth exist, partition is proper in the premises and an

accounting of rents and profits received by the defendant from the real estate in question is in order. In the latter case, "the parties may, if they are able to agree, make partition among themselves by proper instruments of conveyance, and the court shall confirm the partition so agreed upon. In either case i.e., either the action is dismissed or partition and/or accounting is decreed the order is a final one, and may be appealed by any party aggrieved thereby. The second phase commences when it appears that "the parties are unable to agree upon the partition" directed by the court. In that event partition shall be done for the parties by the Court with the assistance of not more than three (3) commissioners. This second stage may well also deal with the rendition of the accounting itself and its approval by the Court after the parties have been accorded opportunity to be heard thereon, and an award for the recovery by the party or parties thereto entitled of their just share in the rents and profits of the real estate in question." Such an order is, to be sure, final and appealable. 4.ID.; ID.; EMINENT DOMAIN; PERIOD FOR APPEAL FROM AN ORDER OF CONDEMNATION. The Court holds that in actions of eminent domain, as in actions for partition, since no less than two (2) appeals are allowed by law, the period for appeal from an order of condemnation is thirty (30) days counted from notice of order and not the ordinary period of fifteen (15) days prescribed for actions in general, conformably with the provision of Section 39 of Batas Pambansa Bilang 129, in relation to paragraph 19 (b) of the Implementing Rules to the effect that in "appeals in special proceedings in accordance with Rule 109 of the Rules of Court and other cases wherein multiple appeals are allowed, the period of appeal shall be thirty (30) days, a record of appeal being required." 5.ID.; B.P. BLG. 129; PERIOD OF APPEAL FROM A SEPARATE JUDGMENT RENDERED IN AN ACTION AGAINST SEVERAL DEFENDANTS. Where a single complaint was filed against several defendants having individual, separate interests, and a separate trial was held relative to one of said defendants after which a final order or judgment was rendered on the merits of the plaintiff's claim against that particular defendant, it is obvious that in the event of an appeal from that separate judgment, the original record cannot and should not be sent up to the appellate tribunal. The record will have to stay with the trial court because it will still try the case as regards the other defendants. As the rule above quoted states, "In an action against several defendants, the court may, when a several judgment is proper, render judgment against one or more of them, leaving the action to proceed against the others." In lieu of the original record, a record on appeal will perforce have to be prepared and transmitted to the appellate court. More than one appeal being permitted in this case, therefore, "the period of appeal shall be thirty (30) days, a record of appeal being required," as provided by the Implementing Rules in relation to Section 39 of B.P. Blg. 129, supra. 6.ID.; CIVIL PROCEDURE MOTION TO DISMISS; FAILURE TO COMPLAINT TO STATE CAUSE OF ACTION, NOT GROUND THEREFOR. Nothing in the record reveals any valid cause to reverse the order of trial. What the Trial Court might have had in mind was the provision of Section 5, Rule 16 of the Rules of Court allowing "any of the grounds for dismissal" in Rule 16 to "be pleaded as an affirmative defense," and authorizing the holding of a "preliminary hearing . . . thereon as if a motion to dismiss had been filed." Assuming this to be the fact, the reception of Francisco's evidence first was wrong, because obviously, her asserted objection or defense that the locational clearance issued in her favor by the HSRC was a legal bar to the expropriation suit was not a ground for dismissal under Rule 16. She evidently meant to prove the Municipality's lack of cause of action; but lack of cause of action is not a ground for dismissal of an action under Rule 16; the ground is the failure of the complaint to state a cause of action, which is obviously not the same as plaintiff's not having a cause of action. 7.ADMINISTRATIVE LAW; HUMAN SETTLEMENT REGULATORY COMMISSION; LOCATION CLEARANCE CONSIDERED AUTOMATICALLY REVOKED IF NOT USED WITHIN ONE (1) YEAR FROM DATE OF ISSUE. It seems evident that said clearance did become a "worthless sheet of paper," as averred by the Municipality, upon the lapse of one (1) year from said date in light of the explicit condition in the clearance that it "shall be considered automatically revoked if not used within a

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period of one (1) year from date of issue," and the unrebutted fact that Francisco had not really made use of it within that period. DECISION NARVASA, J p: Three (3) questions are resolved in the action of certiorari at bar. The first is whether the special civil action of eminent domain under Rule 67 of the Rules of Court is a case "wherein multiple appeals are allowed," 1 as regards which "the period of appeal shall be thirty [30] days," 2 instead of fifteen (15) days. 3 The second is whether or not the Trial Court may treat the "motion to dismiss" filed by one of the defendants in the action of eminent domain as a motion to dismiss under Rule 16 of the Rules of Court, reverse the sequence of trial in order and hear and determine said motion to dismiss, and thereafter dismiss the expropriation suit as against the movant. And the third is whether or not a "locational clearance" issued by the Human Settlements Regulatory Commission relative to use of land is a bar to an expropriation suit involving that land. prLL The expropriation suit involved in this certiorari proceeding was commenced by complaint of the Municipality of Bian, Laguna, 4 filed in the Regional Trial Court of Laguna and City of San Pablo, presided over by respondent Judge Jose Mar Garcia. The complaint named as defendants the owners of eleven (11) adjacent parcels of land in Bian with an aggregate area of about eleven and a half (11-1/2) hectares. The land sought to be expropriated was intended for use as the new site of a modern public market and the acquisition was authorized by a resolution of the Sangguniang Bayan of Bian approved on April 11, 1983. llcd One of the defendants was Erlinda Francisco. She filed a "Motion to Dismiss" dated August 26, 1983, on the following grounds; (a) the allegations of the complaint are vague and conjectural; (b) the complaint violates the constitutional limitations of law and jurisprudence on eminent domain; (c) it is oppressive; (d) it is barred by prior decision and disposition on the subject matter; and (e) it states no cause of action. 5 Now, her "motion to dismiss" was filed pursuant to Section 3, Rule 67 of the Rules of Court: "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 of 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 plaintiff's attorney of record and filed with the court with the proof of service." Her "motion to dismiss" was thus actually a pleading, taking the place of an answer in an ordinary civil action; 6 it was not an ordinary motion governed by Rule 15, or a "motion to dismiss" within the contemplation of Rule 16 of the Rules of Court. On October 23, 1983, respondent Judge issued a writ of possession in favor of the plaintiff Municipality. On February 3, 1984, Erlinda Francisco filed a "Motion for Separate Trial," invoking Section 2, Rule 31. 7 She alleged that there had already been no little delay in bringing all the defendants within the court's jurisdiction, and some of the defendants seemed "nonchalant or without special interest in the case" if not mere "free riders;" and "while the cause of action and defenses are basically the same;" she had, among other defenses, "a constitutional defense of vested right via a pre-existing approved Locational Clearance from the H.S.R.C." 8 Until this clearance was revoked, Francisco contended, or the Municipality had submitted and obtained approval of a "rezoning of the lots in question," it was premature for it to "file a case for expropriation." 9 The Court granted the motion. By Order dated March 2, 1984, it directed that a separate trial be held for defendant Erlinda Francisco regarding her special defenses mentioned in her . . . Motion for Separate Trial and in her Motion to Dismiss, distinct from and separate from the defenses commonly raised by all the defendants in their respective motions to dismiss." At the separate trial, the Fiscal, in representation of the Municipality called the Trial Court's attention to the irregularity of allowing Francisco to present her evidence ahead of the plaintiff, "putting the cart before the horse, as it were." He argued that the motion to dismiss was in truth

an answer, citing Rural Progress Administration v. Judge de Guzman, and its filing did "not mean that the order of presentation of evidence will be reversed," but the usual procedure should be followed; and the evidence adduced should be deemed "evidence only for the motion for reconsideration of the writ of possession." 10 Nevertheless, at the hearing of March 5, and March 26, 1984, the Court directed Francisco to commence the presentation of evidence. Francisco presented the testimony of Atty. Josue L. Jorvina, Jr. and certain exhibits the Land Use Map of the Municipality of Bian, the Locational Clearance and Development Permit issued by the HSRC in favor of "Erlinda Francisco c/o Ferlins Realty & Development Corporation, and Executive Order No. 648 and Letter of Instruction No. 729, etc. Thereafter, the respondent Judge issued an Order dated July 24, 1984 dismissing the complaint "as against defendant ERLINDA FRANCISCO," and amending the Writ of Possession dated October 18, 1983 so as to "exclude therefrom and from its force and effects said defendant . . . and her property . . ." His Honor found that 1)a Locational Clearance had been issued on May 4, 1983 by the Human Settlements Regulatory Commission to the "Ferlin's Realty . . . owned by defendant Erlinda Francisco to convert . . . (her) lot to a commercial complex; 2)according to the testimony of Atty. Jorvina of the HSRC, "a grantee of a locational clearance acquires a vested right over the subject property in the sense that . . . said property may not be subject of an application for locational clearance by another applicant while said locational clearance is subsisting; 3)such a clearance should be "considered as a decision and disposition of private property coequal with or in parity with a disposition of private property through eminent domain; 4)the clearance was therefore "a legal bar against the right of plaintiff Municipality . . . to expropriate the said property." The Municipality filed on August 17, 1984 a Motion for Reconsideration. Therein it (a) reiterated its contention respecting the irregularity of the reversal of the order of trial, supra. 11 (b) decried the act of the Court in considering the case submitted for decision after the presentation of evidence by Francisco without setting the case for further hearing for the reception of the plaintiff's own proofs, (c) pointed out that as admitted by Atty. Jorvina, the locational clearance did not "mean that other persons are already prevented from filing locational clearance for the same project, and so could not be considered a bar to expropriation, (d) argued that the locational clearance issued on May 4, 1983, became a "worthless sheet of paper" one year later, on May 4, 1984 in accordance with the explicit condition in the clearance that it "shall be considered automatically revoked if not used within a period of one (1) year from date of issue," the required municipal permits to put up the commercial complex never having been obtained by Francisco; and (e) alleged that all legal requirements for the expropriation of the property had been duly complied with by the Municipality. 12 The Municipality set its motion for reconsideration for hearing on August 28, 1984 after furnishing Francisco's counsel with copy thereof. The Court however re-scheduled the hearing more than two (2) months later, on November 20, 1984. 13 Why the hearing was reset to such a remote date is not explained. On September 13, 1984, Francisco filed an "Ex-Parte Motion for Execution and/or Finality of Order," contending that the Order of July 27, 1984 had become "final and executory on August 12, 1984" for failure of the Municipality "to file a motion for reconsideration and/or appeal within the reglementary period," 14 i.e., "fifteen (15) days counted from the notice of the final order . . . appealed from." 15 On October 10, 1984, the Court issued an Order declaring the Municipality's motion for reconsideration dated August 15, 1984 to have been "filed out of time," on account of which the Court "could not give due course to and/or act . . . (thereon) except to dismiss (as it did thereby dismiss) the same." 16 It drew attention to the fact that notice of its Order of July 24, 1984 (dismissing the complaint as against Francisco) was served on plaintiff Municipality on July 27, 1984, but its motion for reconsideration was not presented until August 17, 1984, beyond the fifteen-day period for appeal prescribed by law. And on October 15, 1985, His Honor promulgated

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another Order directing the issuance of (1) a writ of execution of the Order of July 24, 1984, and (2) a "certificate of finality" of said order. 17 The Municipality attempted to have the respondent Court reconsider both said Orders of October 10, and October 15, 1984. To this end it submitted a motion contending that: 18 1)"multiple appeals are allowed by law" in actions of eminent domain, and hence the period of appeal is thirty (30), not fifteen (15) days; 2)moreover, the grant of a separate trial at Francisco's instance had given rise "ipso facto to a situation where multiple appeals became available (Sections 4 and 5, Rule 36, . . ., Santos v. Pecson, 79 Phil. 261); 3)it was wrong for the Trial Court to have acted ex parte on the motion for execution, the motion being "litigable in character;" and 4)it (the Municipality) was denied due process when the Court, after receiving Francisco's evidence and admitting her exhibits, immediately resolved the case on the merits as regards Francisco, without setting the case "for further hearing for reception of evidence for the plaintiff." The motion was denied, by Order dated October 18, 1984; hence, the special civil action of certiorari at bar. 1.There are two (2) stages in every action of expropriation. The first is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the facts involved in the suit. 19 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." 20 An order of dismissal, if this be ordained, would be a final one, of course, since it finally disposes of the action and leaves nothing more to be done by the Court on the merits. 21 So, too, would an order of condemnation be a final one, for thereafter, as the Rules expressly state, in the proceedings before the Trial Court, "no objection to the exercise of the right of condemnation (or the propriety thereof) shall be filed or heard. 22 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. 23 The order fixing the just compensation on the basis of the evidence before, and findings of, the commissioners would be final, too. It would finally dispose of the second stage of the suit, and leave nothing more to be done by the Court regarding the issue. Obviously, one or another of the parties may believe the order to be erroneous in its appreciation of the evidence or findings of fact or otherwise. Obviously, too, such a dissatisfied party may seek reversal of the order by taking an appeal therefrom. cdrep A similar two-phase feature is found in the special civil action of partition and accounting under Rule 69 of the Rules of Court. 24 The first phase of a partition and/or accounting suit is taken up with the determination of whether or not a co-ownership in fact exists, and a partition is proper (i.e., not otherwise legally proscribed) and may be made by voluntary agreement of all the parties interested in the property. 25 This phase may end with a declaration that plaintiff is not entitled to have a partition either because a co-ownership does not exist, or partition is legally prohibited. 26 It may end, on the other hand, with an adjudgment that a co-ownership does in truth exist, partition is proper in the premises and an accounting of rents and profits received by the defendant from the real estate in question is in order. 27 In the latter case, "the parties may, if they are able to agree, make partition among themselves by proper instruments of conveyance, and the court shall confirm the partition so agreed upon. 28 In either case i.e., either the action is dismissed or partition and/or accounting is decreed the order is a final one, and may be appealed by any party aggrieved thereby. 29 The second phase commences when it appears that "the parties are unable to agree upon the partition" directed by the court. In that event partition shall be done for the parties by the Court with the assistance of not more than three (3) commissioners. 30 This second stage may well also

deal with the rendition of the accounting itself and its approval by the Court after the parties have been accorded opportunity to be heard thereon, and an award for the recovery by the party or parties thereto entitled of their just share in the rents and profits of the real estate in question. 31 Such an order is, to be sure, final and appealable. Now, this Court has settled the question of the finality and appealability of a decision or order decreeing partition or recovery of property and/or accounting. InMiranda v. Court of Appeals, decided on June 18, 1986, 32 the Court resolved the question affirmatively, and expressly revoked the ruling in Zaldarriaga v. Enriquez 33 that a decision or order of partition is not final because it leaves something more to be done in the trial court for the complete disposition of the case, i.e, the appointment of commissioners, the proceedings for the determination by said commissioners of just compensation, the submission of their reports, and hearing thereon, and the approval of the partition and in Fuentebella vs. Carrascoso 34 that a judgment for recovery of property with accounting is not final, but merely interlocutory and hence not appealable until the accounting is made and passed upon. As pointed out in Miranda, imperative considerations of public policy, of sound practice and adherence to the constitutional mandate of simplified, just, speedy and inexpensive determination of every action require that judgments for recovery (or partition) of property with accounting be considered as final judgments, duly appealable. This, notwithstanding that further proceedings will still have to be rendered by the party required to do so, it will be ventilated and discussed by the parties, and will eventually be passed upon by the Court. It is of course entirely possible that the Court disposition may not sit well with either the party in whose favor the accounting is made, or the party rendering it. In either case, the Court's adjudication on the accounting is without doubt a final one, for it would finally terminate the proceedings thereon and leave nothing more to be done by the Court on the merits of the issue. And it goes without saying that any party feeling aggrieved by that ultimate action of the Court on the accounting may seek reversal or modification thereof by the Court of Appeals or the Supreme Court. 35 The Miranda doctrine was reiterated in de Guzman v. C.A.; 36 Valdez v. Bagaso; 37 Lagunzad v. Gonzales; 38 Cease v. C.A.; 39 Macadangdang v. CA.; 40 andHernandez v. C.A.; 41 Gabor v. C.A. 42 Fabrica v. C.A. 43 No reason presents itself for different disposition as regards cases of eminent domain. On the contrary, the close analogy between the special actions of eminent domain and partition already pointed out, argues for the application of the same rule to both proceedings. The Court therefore holds that in actions of eminent domain, as in actions for partition, since no less than two (2) appeals are allowed by law, the period for appeal from an order of condemnation 44 is thirty (30) days counted from notice of order and not the ordinary period of fifteen (15) days prescribed for actions in general, conformably with the provision of Section 39 of Batas Pambansa Bilang 129, in relation to paragraph 19 (b) of the Implementing Rules to the effect that in "appeals in special proceedings in accordance with Rule 109 of the Rules of Court and other cases wherein multiple appeals are allowed, the period of appeal shall be thirty (30) days, a record of appeal being required." 45 The municipality's motion for reconsideration filed on August 17, 1984 was therefore timely presented, well within the thirty-day period laid down by law therefor; and it was error for the Trial Court to have ruled otherwise and to have declared that the order sought to be considered had become final and executory. 2.As already observed, the Municipality's complaint for expropriation impleaded eleven (11) defendants. A separate trial was held on motion of one of them, Erlinda Francisco, 46 it appearing that she had asserted a defense personal and peculiar to her, and inapplicable to the other defendants, supra. Subsequently, and on the basis of the evidence presented by her, the Trial Court promulgated a separate Order dismissing the action as to her, in accordance with Section 4, Rule 36 of the Rules of Court reading as follows: Sec. 4.Several judgments. In an action against several defendants, the court may, when a several judgment is proper, render judgment against one or more of them, leaving the action to proceed against the others.

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It is now claimed by the Municipality that the issuance of such a separate, final order or judgment had given rise "ipso facto to a situation where multiple appeals became available." The Municipality is right. In the case at bar, where a single complaint was filed against several defendants having individual, separate interests, and a separate trial was held relative to one of said defendants after which a final order or judgment was rendered on the merits of the plaintiff's claim against that particular defendant, it is obvious that in the event of an appeal from that separate judgment, the original record cannot and should not be sent up to the appellate tribunal. The record will have to stay with the trial court because it will still try the case as regards the other defendants. As the rule above quoted states, "In an action against several defendants, the court may, when a several judgment is proper, render judgment against one or more of them, leaving the action to proceed against the others." 47 In lieu of the original record, a record on appeal will perforce have to be prepared and transmitted to the appellate court. More than one appeal being permitted in this case, therefore, "the period of appeal shall be thirty (30) days, a record of appeal being required," as provided by the Implementing Rules in relation to Section 39 of B.P. Blg. 129, supra. 48 3.Erlinda Francisco filed a "motion to dismiss" in traverse of the averments of the Municipality's complaint for expropriation. That "motion to dismiss" was in fact the indicated responsive pleading to the complaint, "in lieu of an answer." 49 Now, the Trial Court conducted a separate trial to determine whether or not, as alleged by Francisco in her "motion to dismiss," she had a "vested right via a pre-existing approved Locational Clearance from the HSRC," making the expropriation suit premature. 50 While such a separate trial was not improper in the premises, 51and was not put at issue by the Municipality, the latter did protest against the Trial Court's (a) reversing the order of trial and receiving first, the evidence of defendant Francisco, and (b) subsequently rendering its order sustaining Francisco's defense and dismissing the action as to her, solely on the basis of said Francisco's evidence and without giving the plaintiff an opportunity to present its own evidence on the issue. The Trial Court was clearly wrong on both counts. The Court will have to sustain the Municipality on these points. prLL Nothing in the record reveals any valid cause to reverse the order of trial. What the Trial Court might have had in mind was the provision of Section 5, Rule 16 of the Rules of Court allowing "any of the grounds for dismissal" in Rule 16 to "be pleaded as an affirmative defense," and authorizing the holding of a "preliminary hearing . . . thereon as if a motion to dismiss had been filed." Assuming this to be the fact, the reception of Francisco's evidence first was wrong, because obviously, her asserted objection or defense that the locational clearance issued in her favor by the HSRC was a legal bar to the expropriation suit was not a ground for dismissal under Rule 16. She evidently meant to prove the Municipality's lack of cause of action; but lack of cause of action is not a ground for dismissal of an action under Rule 16; the ground is the failure of the complaint to state a cause of action, which is obviously not the same as plaintiff's not having a cause of action. Nothing in the record, moreover, discloses any circumstances from which a waiver by the Municipality of the right to present contrary proofs may be inferred. So, in deciding the issue without according the Municipality that right to present contrary evidence, the Trial Court had effectively denied the Municipality due process and thus incurred in another reversible error. 4.Turning now to the locational clearance issued by the HSRC in Francisco's favor on May 4, 1983, it seems evident that said clearance did become a "worthless sheet of paper," as averred by the Municipality, upon the lapse of one (1) year from said date in light of the explicit condition in the clearance that it "shall be considered automatically revoked if not used within a period of one (1) year from date of issue," and the unrebutted fact that Francisco had not really made use of it within that period. The failure of the Court to consider these facts, despite its attention having been drawn to them, is yet another error which must be corrected. prcd WHEREFORE, the challenged Order issued by His Honor on July 24, 1984 in Civil Case No. 8-1960 is ANNULLED AND SET ASIDE, and the case is remanded to the Trial Court for the reception of the evidence of the plaintiff Municipality of Bian as against defendant Erlinda Francisco, and for

subsequent proceedings and judgment in accordance with the Rules of Court and the law. Costs against private respondent. SO ORDERED. Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur. Footnotes 1.Sec. 39, BP 129. 2.Par. 19 (b), Interim Rules of the Supreme Court en banc dated Jan. 11, 1987 in implementation of the Judiciary Reorganization Act of 1981 (B.P. Blg. 129). 3.Par. 19(a), id. 4.Docketed as Civil Case No. 8-1960. 5.Rollo, pp. 34 et seq. 6.Moran, Comments on the Rules, 1980 ed., Vol. 3, p. 248, citing Rural Progress Adm. v. Judge de Guzman, L-3224, Aug. 15, 1951. 7.Which reads as follows: "The court, in furtherance of convenience or to avoid prejudice, may order a separate trial of any claim, cross-claim, counterclaim or third-party claim, or of any separate issue or of any number of claims, cross-claims, counterclaims, third-party claims or issues." 8.Human Settlements Regulatory Commission. 9.Rollo, pp. 40-44. 10.Id., pp. 53-54. 11.Ibid. 12.Rollo., pp. 54-61. 13.Id., p. 62 (Minutes of the session of September 28, 1984). 14.Rollo, pp. 63-65. 15.Sec. 39, B.P. 129; par. 19(a), Interim Rules of the Supreme Court in Implementation of the Judiciary Reorganization Act of 1981. 16.Rollo, p. 67. 17.Id., p. 66. 18.Id., pp. 68-73. 19.SEE Secs. 1, 2 and 3, Rule 67 of the Rules of Court. 20.Sec. 4, Rule 67; See Nieto v. Isip, 97 Phil. 31; Benguet Consolidated v. Republic, 143 SCRA 466. 21.SEE Investments, Inc. v. C.A., et al., 147 SCRA 334, 339-341. 22.Ibid. 23.Secs. 5 to 8, Rule 67. 24.SEE Miranda v. C.A., 71 SCRA 295 (1976); Roque v. I.A.C., 165 SCRA 118, 125-126; Fabrica v. C.A., 148 SCRA 250; Garbo v. C.A., 129 SCRA 616; Valdez v. Bagaso, 82 SCRA 22. 25.Secs. 1 and 2, Rule 69, Rules of Court. 26.Roque v. I.A.C., supra. 27.Sec. 8, Rule 69. 28.Sec. 2, Rule 69. 29.SEE footnote 3, at page 5, supra. 30.Secs. 3-7, Rule 69. 31.Sec. 8, Rule 69, supra. 32.71 SCRA 295; 73 O.G. 11646. 33.111 Phil. 829; 1 SCRA 1188 (1966). 34.G.R. No. 48102, May 27, 1942 (unpublished), 14 L.J. 305 (1949). 35.Mr. Justice Jose Y. Feria (ret.) in his annotations on B.P. Blg. 129 and the Interim Rules and Guidelines, Rules of Court (Philippine Legal Studies, Series No. 1, 1983 ed., Central Lawbook) (at p. 52) pointed out that under Miranda, supra and de Guzman, infra, "a judgment for recovery of property is final and appealable without awaiting the accounting; and an order of partition is final and appealable without awaiting the actual partition. Hence the accounting or the partition may continue pending the appeal, and a second appeal may be taken from the judgment on the accounting or the partition."

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36.71 SCRA 195 (1976). 37.82 SCRA 22 (1978). 38.92 SCRA 476 (1979). 39.93 SCRA 483 (1981). 40.108 SCRA 314 (1981). 41.120 SCRA 856 (1983). 42.129 SCRA 616. 43.148 SCRA 250. 44.The first final order. 45.Emphasis supplied. 46.Pursuant to Sec. 2 of Rule 31 already quoted; footnote 3 on page 2, supra. 47.Emphasis supplied. 48.SEE Santos v. Pecson, et. al., 79 Phil 261, 265, 270, Dissenting Opinion, distinguishing between the situation of defendants having separate or severable interest, and that of defendants having solidary or joint or common interest. 49.See footnote 6 at page 2, supra. 50.SEE footnote 9 and related text, at page 2 supra. 51.SEE footnote 7, at page 2, supra.

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AGAN JR. et al vs PIATCO

EN BANC [G.R. No. 155001. May 5, 2003.] DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA, MANUEL ANTONIO B. BOE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON, CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P. ADOLFO, BIENVENIDO C. HILARIO, MIASCOR WORKERS UNION-NATIONAL LABOR UNION (MWU-NLU), and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA),petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, respondents. MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS CORPORATION, MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES AIRPORT SERVICES CORPORATION, MIASCOR CATERING SERVICES CORPORATION, MIASCOR AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR LOGISTICS CORPORATION, petitioners-in-intervention, [G.R. No. 155547. May 5, 2003.] SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and CONSTANTINO G. JARAULA, petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, and SECRETARY SIMEON A. DATUMANONG, in his capacity as Head of the Department of Public Works and Highways, respondents, JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C. ZIALCITA, WILLY BUYSON VILLARAMA, PROSPERO C. NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST ABAYON, and BENASING O. MACARANBON, respondents-intervenors, [G.R. No. 155661. May 5, 2003.] CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B. VALENCIA, MA. TERESA V. GAERLAN, LEONARDO DE LA ROSA, DINA C. DE LEON, VIRGIE CATAMIN RONALD SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS (SMPP), petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, respondents. Salonga Hernandez & Mendoza for petitioners in G.R. No. 155001. Jose A. Bernas for petitioners in G.R. No. 155547. Erwin P. Erfe for petitioners in G.R. No. 155661. Jose Espinas for MWU-NLU. Jose E. Marigondon for PALEA. Angara Abello Concepcion Regala and Cruz for petitioners-in-intervention. Arthur D. Lim Law Office for Asia's Emerging Dragon etc. Romulo Mabanta Buenaventura Sayoc & Delos Angeles, Chavez & Laureta & Associate and Moises Tolentino, Jr. for PIATCO. The Office of the Government Corporate Counsel for MIAA. The Solicitor General for public respondents. Mario E. Ongkiko, Fernando F. Manas, Jr. Raymund C. de Castro & Angelito S. Lazaro, Jr. for respondents-intervenors. SYNOPSIS On October 5, 1994, Asia's Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the Government for the development of Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement pursuant to

RA 6957, as amended. It was endorsed to the National Economic Development Authority (NEDA), which, in turn, reviewed and approved it for bidding. The Paircargo Consortium was the only company that submitted a competitive proposal. AEDC questioned, among others, the financial capability of Paircargo Consortium. However, the Pre-Qualification Bids and Awards Committee (PBAC) had prequalified the Paircargo Consortium to undertake the project. Later, Paircargo Consortium incorporated into Philippine International Airport Terminals Co., (PIATCO). And for failure of AEDC to match the price proposal submitted by PIATCO, the project was awarded to PIATCO. On July 12, 1997, the Government signed the 1997 Concession Agreement. Thereafter, the Amended and Restated Concession Agreement (ARCA) and three Supplements thereto were signed by the Government and PIATCO. Consequently, the workers of the international airline service providers, claiming that they stand to lose their employment upon the implementation of the said agreements, filed before this Court a petition for prohibition docketed as G.R. No. 155001. Later, the service providers joined their cause. Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula, alleging that the said contracts compelled government expenditure without appropriation, filed a similar petition docketed as G.R. No. 155547. And several employees of the MIAA likewise filed a petition docketed as G.R. No. 155661 assailing the legality of these agreements. The Court ruled that in accordance with the provisions of R.A. No. 337, as amended, the maximum amount that Security Bank, as one of the members of the Paircargo Consortium could validly invest, is only 15% of its entire net worth. The total net worth, therefore of the Paircargo Consortium, after considering the maximum amounts that may be validly invested by each of its members, is only 6.08% of the project cost, which substantially less than the prescribed minimum equity investment which is 30% of the project cost. Thus, the award of the contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is null and void. As to the validity of the agreements, the ARCA obligates the Government to pay for all loans, advances and obligations arising out of financial facilities extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its Senior Lenders and the latter fails to appoint a qualified nominee or transferee. This in effect would make the Government liable for PIATCO's loans should the conditions set forth in the ARCA arise. This is a form of direct government guarantee and to declare the PIATCO contracts valid despite the clear statutory prohibitions against a direct government guarantee would only make a mockery of that the BOT Law seeks to prevent. The Court also ruled that the operation of an international passenger airport terminal is no doubt an undertaking imbued with public interest. Thus, the privilege given to PIATCO is subject to reasonable regulation and supervision by the Government through the MIAA. Another thing, PIATCO, by the mere expedient of claiming an exclusive right to operate, cannot require the Government to break its contractual obligations to the service providers. Accordingly, the 1997 Concession Agreement, the Amended and Restated Concession Agreement and the Supplements thereto were set aside for being null and void. TCEaDI SYLLABUS 1.REMEDIAL LAW; CIVIL PROCEDURE; PARTIES; INTEREST OF PERSON ASSAILING THE CONSTITUTIONALITY OF A STATUTE MUST BE DIRECT AND PERSONAL. The question on legal standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions." Accordingly, it has been held that the interest of a person assailing the constitutionality of a statute must be direct and personal. He must be able, to show, not only that the law or any government act is invalid, but also that he sustained or is in imminent 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 or act complained of.

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2.ID.; ID.; ID.; ID.; FINANCIAL PREJUDICE IS A LEGITIMATE INTEREST SUFFICIENT TO CONFER THE REQUISITE STANDING. [P]etitioners have a direct and substantial interest to protect by reason of the implementation of the PIATCO Contracts. They stand to lose their source of livelihood, a property right which is zealously protected by the Constitution. Moreover, subsisting concession agreements between MIAA and petitioners-intervenors and service contracts between international airlines and petitioners-intervenors stand to be nullified or terminated by the operation of the NAIA IPT III under the PIATCO Contracts. The financial prejudice brought about by the PIATCO Contracts on petitioners and petitioners-intervenors in these cases are legitimate interests sufficient to confer on them the requisite standing to file the instant petitions. 3.ID.; ID.; ID.; ID.; COURT MUST BE MORE LIBERAL IN DETERMINING WHETHER THE PETITIONERS HAVE LOCUS STANDI TO FILE A PETITION. Standing is a peculiar concept in constitutional law because in some cases, suits are not brought by parties who have been personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in the public interest. Although we are not unmindful of the cases of Imus Electric Co. v. Municipality of Imus and Gonzales v. Raquiza wherein this Court held that appropriation must be made only on amounts immediately demandable, public interest demands that we take a more liberal view in determining whether the petitioners suing as legislators, taxpayers and citizens have locus standi to file the instant petition. In Kilosbayan, Inc. v. Guingona, this Court held "[i]n line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters, and non-profit civic organizations were allowed to initiate and prosecute actions before this Court to question the constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities," Further, "insofar as taxpayers' suits are concerned . . . (this Court) is not devoid of discretion as to whether or not it should be entertained." As such ". . . even if, strictly speaking, they [the petitioners] are not covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so remove the impediment to its addressing and resolving the serious constitutional questions raised." In view of the serious legal questions involved and their impact on public interest, we resolve to grant standing to the petitioners. 4.ID.; ID.; JURISDICTION; HIERARCHY OF COURTS MAY BE RELAXED WHEN THE REDRESS DESIRED CANNOT BE OBTAINED IN THE APPROPRIATE COURTS. The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over the cases at bar. The said rule may be relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of this Court's primary jurisdiction. ATaDHC 5.ID.; ID.; ID.; PROCEDURAL BARS MAY BE LOWERED TO GIVE WAY FOR THE SPEEDY DISPOSITION OF CASES OF TRANSCENDENTAL IMPORTANCE. It is easy to discern that exceptional circumstances exist in the cases at bar that call for the relaxation of the rule. Both petitioners and respondents agree that these cases are of transcendental importance as they involve the construction and operation of the country's premier international airport. Moreover, the crucial issues submitted for resolution are of first impression and they entail the proper legal interpretation of key provisions of the Constitution, the BOT Law and its Implementing Rules and Regulations. Thus, considering the nature of the controversy before the Court, procedural bars may be lowered to give way for the speedy disposition of the instant cases. 6.CIVIL LAW; OBLIGATIONS AND CONTRACTS; ARBITRATION CLAUSE; NOT BINDING TO PERSONS NOT PARTIES TO THE CONTRACT. It is established thatpetitioners in the present cases who have presented legitimate interests in the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled to submit to arbitration proceedings. A speedy and decisive resolution of all the critical issues in the present controversy, including those raised by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to allow an expeditious determination of a dispute. This objective would not be met if this Court were to

allow the parties to settle the cases by arbitration as there are certain issues involving non-parties to the PIATCO Contracts which the arbitral tribunal will not be equipped to resolve. 7.POLITICAL LAW; ADMINISTRATIVE LAW; REPUBLIC ACT NO. 6957 (BUILD-OPERATE-ANDTRANSFER or BOT LAW); CONTRACT SHALL BE AWARDED TO THE BIDDER WHO SATISFIED THE. MINIMUM FINANCIAL, TECHNICAL, ORGANIZATIONAL AND LEGAL STANDARDS REQUIRED BY LAW. Under the BOT Law, in case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder "who, having satisfied the minimum financial, technical, organizational and leg standards" required by the law, has submitted the lowest bid and most favorable terms of the project. . . . Accordingly, . . . the Paircargo Consortium or any challenger to the unsolicited proposal of AEDC has to show that it possesses the requisite financial capability to undertake the project in the minimum amount of 30% of the project cost through (i) proof of the ability to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. 8.ID.; ID.; ID.; ID.; TOTAL NET WORTH OF THE PAIRCARGO CONSORTIUM IS LESS THAT THE PRESCRIBED MINIMUM EQUITY INVESTMENT REQUIRED FOR THE PROJECT. We agree with public respondents that with respect to Security Bank, the entire amount of its net worth could not be invested in a single undertaking or enterprise, whether allied or non-allied in accordance with the provisions of R.A. No. 337, as amended or the General Banking Act[.] . . . Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium is only P528,525,656.55, representing 15% of its entire net worth. The total net worth therefore of the Paircargo Consortium, after considering the maximum amounts that may be validly invested by each of its members is P558,384,871.55 or only 6.08% of the project cost, an amount substantially less than the prescribed minimum equity investment required for the project in the amount of P2,755,095,000.00 or 30% of the project cost. cHaADC 9.ID.; ID.; PUBLIC BIDDING; PRE-QUALIFICATION STAGE; GOVERNMENT AGENCY MUST DETERMINE THE BIDDER'S FINANCIAL CAPACITY. The purpose of pre-qualification in any public bidding is to determine, at the earliest opportunity, the ability of the bidder to undertake the project. Thus, with respect to the bidder's financial capacity at the pre-qualification stage, the law requires the government agency to examine and determine the ability of the bidder to fund the entire cost of the project by considering the maximum amounts that each bidder may invest in the project at the time of pre-qualification. 10.ID.; ID.; ID.; ID.; ID.; SHOULD DETERMINE THE MAXIMUM AMOUNT THAT EACH MEMBER OF THE CONSORTIUM MAY COMMIT WITHOUT DISREGARDING THE INVESTMENT CEILINGS PROVIDED BY APPLICABLE LAW. The PBAC has determined that any prospective bidder, for the construction, operation and maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in the minimum amount of 30% of the project cost, in accordance with the 70:30 debt-to-equity ratio prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC should determine the maximum amounts that each member of the consortium may commit for the construction, operation and maintenance of the NAIA IPT III project at the time of pre-qualification. With respect to Security Bank, the maximum amount which may be invested by it would only be 15% of its net worth in view of the restrictions imposed by the General Banking Act. Disregarding the investment ceilings provided by applicable law would not result in a proper evaluation of whether or not a bidder is pre-qualified to undertake the project as for all intents and purposes, such ceiling or legal restriction determines the true maximum amount which a bidder may invest in the project. 11.ID.; ID.; ID.; ID.; ID.; EVALUATION OF THE FINANCIAL CAPACITY OF THE BIDDER MUST BE AT THE TIME THE BID IS SUBMITTED. [T]he determination of whether or not a bidder is prequalified to undertake the project requires an evaluation of the financial capacity of the said bidder at the time the bid is submittedbased on the required documents presented by the bidder. The PBAC should not be allowed to speculate on the future financial ability of the bidder to undertake the project on the basis of documents submitted. This would open doors to abuse and defeat the very purpose of a public bidding. This is especially true in the case at bar which involves

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the investment of billions of pesos by the project proponent. The relevant government authority is duty-bound to ensure that the awardee of the contract possesses the minimum required financial capability to complete the project. To allow the PBAC to estimate the bidder's future financial capability would not secure the viability and integrity of the project. 12.ID.; ID.; ID.; ID.; ID.; IF THE BIDDER FALLS SHORT OF THE MINIMUM AMOUNTS REQUIRED, THE SAID BIDDER SHOULD BE DISQUALIFIED. Thus, if themaximum amount of equity that a bidder may invest in the project at the time the bids are submitted falls short of the minimum amounts required to be put up by the bidder, said bidder should be properly disqualified. Considering that at the pre-qualification stage, the maximum amounts which the Paircargo Consortium may invest in the project fell short of the minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a qualified bidder. Thus the award of the contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is null and void. 13.ID.; ID.; ID.; RESTRICTIVE AND CONSERVATIVE APPLICATION OF THE RULES AND PROCEDURE IS NECESSARY. A restrictive and conservative application of the rules and procedures of public bidding is necessary not only to protect the impartiality and regularity of the proceedings but also to ensure the financial and technical reliability of the project. It has been held that: "The basic rule in public bidding is that bids should be evaluated based on the required documents submitted before and not after the opening of bids. Otherwise, the foundation of a fair and competitive public bidding would be defeated. Strict observance of the rules, regulations, and guidelines of the bidding process is the only safeguard to a fair, honest and competitive public bidding." ACIDSc 14.ID.; ID.; ID.; PURPOSE. By its very nature, public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. Thus: "Competition must be legitimate, fair and honest. In the field of government contract law, competition requires, not only bidding upon a common standard, a common basis, upon the same thing, the same subject matter, the same undertaking,' but also that it be legitimate, fair and honest; and not designed to injure or defraud the government." 15.ID.; ID.; ID.; ALL BIDDERS MUST BE ON EQUAL FOOTING ON THE CONTRACT RIDDED UPON. An essential element of a publicly bidded contract is that all bidders must be on equal footing. Not simply in terms of application of the procedural rules and regulations imposed by the relevant government agency, but more importantly, on the contract bidded upon. Each bidder must be able to bid on the same thing. The rationale is obvious. If the winning bidder is allowed to later include or modify certain provisions in the contract awarded such that the contract is altered in any material respect, then the essence of fair competition in the public bidding is destroyed. A public bidding would indeed be a farce if after the contract is awarded, the winning bidder may modify the contract and include provisions which are favorable to it that were not previously made available to the other bidders. 16.ID.; ID.; ID.; AMENDMENTS TO CONTRACT BIDDED; WINNING BIDDER IS NOT PRECLUDED FROM MODIFYING OR AMENDING CERTAIN PROVISIONS OF THE CONTRACT THAT DOES NOT CONSTITUTE SUBSTANTIAL OR MATERIAL AMENDMENTS. While we concede that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon, such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms. Hence, the determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by other bidders. The alterations and modifications in the contract executed between the government and the winning bidder must be such as to render such executed contract to be an entirely different contract from the one that was bidded upon. 17.ID.; ID.; ID.; ID.; SIGNIFICANT AMENDMENTS IN THE PIATCO'S DRAFT CONCESSION AGREEMENT; TYPES OF FEES THAT MAY BE IMPOSED AND COLLECTED BY PIATCO. When taken as a whole, the changes under the 1997 Concession Agreement with respect to reduction in the

types of fees that are subject to MIAA regulation and the relaxation of such regulation with respect to other fees are significant amendments that substantially distinguish the draft Concession Agreement from the 1997 Concession Agreement. The 1997 Concession Agreement, in this respect, clearly gives PIATCO more favorable terms than what was available to other bidders at the time the contract was bidded out. It is not very difficult to see that the changes in the 1997 Concession Agreement translate to direct and concrete financial advantages for PIATCO which were not available at the time the contract was offered for bidding. It cannot be denied that under the 1997 Concession Agreement only "Public Utility Revenues" are subject to MIAA regulation. Adjustments of all other fees imposed and collected by PIATCO are entirely within its control. Moreover, with respect to terminal fees, under the 1997 Concession Agreement, the same is further subject to "Interim Adjustments" not previously stipulated in the draft Concession Agreement. Finally, the change in the currency stipulated for "Public Utility Revenues" under the 1997 Concession Agreement, except terminal fees, gives PIATCO an added benefit which was not available at the time of bidding. acHCSD 18.ID.; ID.; ID.; ID.; ID.; ASSUMPTION BY THE GOVERNMENT OF THE LIABILITIES OF PIATCO IN THE EVENT OF THE LATTER'S DEFAULT TRANSLATES BETTER TERMS AND CONDITION FOR PIATCO. Under the draft Concession Agreement, default by PIATCO of any of its obligations to creditors who have provided, loaned or advanced funds for the NAIA IPT III project does not result in the assumption by the Government of these liabilities. In fact, nowhere in the said contract does default of PIATCO's loans figure in the agreement. Such default does not directly result in any concomitant right or obligation in favor of the Government. However, the 1997 Concession Agreement . . . [u]nder . . . Section 4.04 in relation to the definition of "Attendant Liabilities," default by PIATCO of its loans used to finance the NAIA IPT III project triggers the occurrence of certain events that leads to the assumption by the Government of the liability for the loans. Only in one instance may the Government escape the assumption of PIATCO's liabilities, i.e., when the Government so elects and allows a qualified operator to take over as Concessionaire. However, this circumstance is dependent on the existence and availability of a qualified operator who is willing to take over the rights and obligations of PIATCO under the contract, a circumstance that is not entirely within the control of the Government. Without going into the validity of this provision at this juncture, suffice it to state that Section 4.04 of the 1997 Concession Agreement may be considered a form of security for the loans PIATCO has obtained to finance the project, an option that was not made available in the draft Concession Agreement. Section 4.04 is an important amendment to the 1997 Concession Agreement because it grants PIATCO a financial advantage or benefit which was not previously made available during the bidding process. This financial advantage is a significant modification that translates to better terms and conditions for PIATCO. 19.ID.; ID.; ID.; ID.; SHOULD ALWAYS CONFORM TO THE GENERAL PUBLIC POLICY. [T]his Court maintains that amendments to the contract bidded upon should always conform to the general policy on public bidding if such procedure is to be faithful to its real nature and purpose. By its very nature and characteristic, competitive public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. It has been held that the three principles in public bidding are (1) the offer to the public; (2) opportunity for competition; and (3) a basis for the exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the purpose of its adoption. These are the basic parameters which every awardee of a contract bidded out must conform to, requirements of financing and borrowing notwithstanding. Thus, upon a concrete showing that, as in this case, the contract signed by the government and the contract awardee is an entirely different contract from the contract bidded, courts should not hesitate to strike down said contract in its entirety for violation of public policy on public bidding. A strict adherence on the principles, rules and regulations on public bidding must be sustained if only to preserve the integrity and the faith of the general public on the procedure. 20.ID.; ID.; ID.; ID.; ANY GOVERNMENT ACTION WHICH PERMITS ANY SUBSTANTIAL VARIANCE THEREOF IS A GRAVE ABUSE OF DISCRETION. Public bidding is a standard practice for procuring government contracts for public service and for furnishing supplies and other materials. It aims to

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secure for the government the lowest possible price under the most favorable terms and conditions, to curtail favoritism in the award of government contracts and avoid suspicion of anomalies and it places all bidders in equal footing. Any government action which permits any substantial variance between the conditions under which the bids are invited and the contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action. CaHcET 21.ID.; ID.; ID.; ID.; DIRECTLY TRANSLATES CONCRETE FINANCIAL ADVANTAGES TO PIATCO THAT WERE PREVIOUSLY NOT AVAILABLE DURING THE BIDDING PROCESS. The fact that the . . . substantial amendments were made on the 1997 Concession Agreement renders the same null and void for being contrary to public policy. These amendments convert the 1997 Concession Agreement to an entirely different agreement from the contract bidded out or the draft Concession Agreement. It is not difficult to see that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or control and the extent thereof and (2) the assumption by the Government, under certain conditions, of the liabilities of PIATCO directly translates concrete financial advantages to PIATCO that were previously not available during the bidding process. These amendments cannot be taken as merely supplements to or implementing provisions of those already existing in the draft Concession Agreement. The amendments discussed above present new terms and conditions which provide financial benefit to PIATCO which may have altered the technical and financial parameters of other bidders had they known that such terms were available. 22.ID.; ID.; BOT LAW; PURPOSE. One of the main impetus for the enactment of the BOT Law is the lack of government funds to construct the infrastructure and development projects necessary for economic growth and development. This is why private sector resources are being tapped in order to finance these projects. The BOT law allows the private sector to participate, and is in fact encouraged to do so by way of incentives, such as minimizing, the unstable flow of returns, provided that the government would not have to unnecessarily expend scarcely available funds for the project itself. As such, direct guarantee, subsidy and equity by the government in these projects are strictly prohibited. This is but logical for if the government would in the end still be at a risk of paying the debts incurred by the private entity in the BOT projects, then the purpose of the law is subverted. 23.ID.; ID.; ID.; CONDITIONS FOR THE ACCEPTANCE OF THE UNSOLICITED PROPOSAL FOR A BOT PROJECT. The BOT Law and its implementing rules provide that in order for an unsolicited proposal for a BOT project may be accepted, the following conditions must first be met: (1) the project involves a new concept in technology and/or is not part of the list of priority projects, (2) no direct government guarantee, subsidy or equity is required, and (3) the government agency or local government unit has invited by publication other interested parties to a public bidding and conducted the same. The failure to meet any of the above conditions will result in the denial of the proposal. 24.ID.; ID.; ID.; STRICTLY PROHIBITS DIRECT GOVERNMENT GUARANTEE, SUBSIDY AND EQUITY IN UNSOLICITED PROPOSAL. It is further provided that the presence of direct government guarantee, subsidy or equity will "necessarily, disqualify a proposal from being treated and accepted as an unsolicited proposal." The BOT Law clearly and strictly prohibits direct government guarantee, subsidy and equity in unsolicited proposals that the mere inclusion of a provision to that effect is fatal and is sufficient to deny the proposal. It stands to reason therefore that if a proposal can be denied by reason of the existence of direct government guarantee, then its inclusion in the contract executed after the said proposal has been accepted is likewise sufficient to invalidate the contract itself. A prohibited provision, the inclusion of which would result in the denial of a proposal cannot, and should not, be allowed to later on be inserted in the contract resulting from the said proposal. The basic rules of justice and fair play alone militate against such an occurrence and must not, therefore, be countenanced particularly in this instance where the government is exposed to the risk of shouldering hundreds of million of dollars in debt. CSDcTA

25.ID.; ID.; ID.; ID.; VIOLATED IN CASE AT BAR. The proscription against government guarantee in any form is one of the policy considerations behind the BOT Law. Clearly, in the present case, the ARCA obligates the Government to pay for all loans, advances and obligations arising out of financial facilities extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its Senior Lenders and the latter fails to appoint a qualified nominee or transferee. This in effect would make the Government liable for PIATCO's loans should the conditions as set forth in the ARCA arise. This is a form of direct government guarantee. . . . This Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be done indirectly. To declare the PIATCO contracts valid despite the clear statutory prohibition against a direct government guarantee would not only make a mockery of what the BOT Law seeks to prevent which is to expose the government to the risk of incurring a monetary obligation resulting from a contract of loan between the project proponent and its lenders and to which the Government is not a party to but would also render the BOT Law useless for what it seeks to achieve to make use of the resources of the private sector in the "financing, operation and maintenance of infrastructure and development projects" which are necessary for national growth and development but which the government, unfortunately, could ill-afford to finance at this point in time. 26.ID.; CONSTITUTIONAL LAW; POLICE POWER; TEMPORARY TAKEOVER OF BUSINESS AFFECTED WITH PUBLIC INTEREST; GOVERNMENT IS NOT REQUIRED TO COMPENSATE THE PRIVATE ENTITYOWNER. Article XII, Section 17 of the 1987 Constitution . . . pertains to the right of the State in times of national emergency, and in the exercise of its police power, to temporarily take over the operation of any business affected with public interest. In the 1986 Constitutional Commission, the term "national emergency" was defined to include threat from external aggression, calamities or national disasters, but not strikes "unless it is of such proportion that would paralyze government service." The duration of the emergency itself is the determining factor as to how long the temporary takeover by the government would last. The temporary takeover by the government extends only to the operation of the business and not to the ownership thereof. As such thegovernment is not required to compensate the private entity-owner of the said business as there is no transfer of ownership, whether permanent or temporary. The private entity-owner affected by the temporary takeover cannot, likewise, claim just compensation for the use of the said business and its properties as the temporary takeover by the government is in exercise of its police power and not of its power of eminent domain. 27.ID.; ID.; ID.; ID.; ID.; CANNOT BE CONTRAVENED BY MERE CONTRACTUAL STIPULATION. PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover and obligate the government to pay "reasonable cost for the use of the Terminal and/or Terminal Complex." Article XII, Section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to "temporarily take over or direct the operation of any privately owned public utility or business affected with public interest." It is the welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a particular business. Clearly, the State in effecting the temporary takeover is exercising its police power. Police power is the "most essential, insistent, and illimitable of powers." Its exercise therefore must not be unreasonably hampered nor its exercise be a source of obligation by the government in the absence of damage due to arbitrariness of its exercise. Thus, requiring the government to pay reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution. 28.ID.; ID.; NATIONAL ECONOMY AND PATRIMONY; CONSTITUTION STRICTLY REGULATES MONOPOLIES. A monopoly is "a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right (or power) to carry on a particular business or trade, manufacture a particular article, or control the sale of a particular commodity." The 1987 Constitution strictly regulates monopolies, whether private or public, and even provides for their prohibition if public interest so requires. . . . Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid the government in carrying on an enterprise or

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to aid in the performance of various services and functions in the interest of the public. Nonetheless, a determination must first be made as to whether public interest requires a monopoly. As monopolies are subject to abuses that can inflict severe prejudice to the public, they are subject to a higher level of State regulation than an ordinary business undertaking. ETHIDa 29.ID.; ID.; ID.; ID.; PRIVILEGE GIVEN TO PIATCO SHOULD BE SUBJECT TO REASONABLE REGULATION AND SUPERVISION BY THE GOVERNMENT. The operation of an international passenger airport terminal is no doubt an undertaking imbued with public interest. In entering into a Build-Operate-and-Transfer contract for the construction, operation and maintenance of NAIA IPT III, the government has determined that public interest would be served better if private sector resources were used in its construction and an exclusive right to operate be granted to the private entity undertaking the said project, in this case PIATCO. Nonetheless, the privilege given to PIATCO is subject to reasonable regulation and supervision by the Government through the MIAA, which is the government agency authorized to operate the NAIA complex, as well as DOTC, the department to which MIAA is attached. This is in accord with the Constitutional mandate that a monopoly which is not prohibited must be regulated. 30.ID.; ID.; ID.; ID.; OPERATION OF PUBLIC UTILITY CANNOT BE DONE IN AN ARBITRARY MANNER TO THE DETRIMENT OF THE PUBLIC. While it is the declared policy of the BOT Law to encourage private sector participation by "providing a climate of minimum government regulations," the same does not mean that Government must completely surrender its sovereign power to protect public interest in the operation of a public utility as a monopoly. The operation of said public utility can not be done in an arbitrary manner to the detriment of the public which it seeks to serve. The right granted to the public utility may be exclusive but the exercise of the right cannot run riot. Thus, while PIATCO may be authorized to exclusively operate NAIA IPT III as an international passenger terminal, the Government, through the MIAA, has the right and the duty to ensure that it is done in accord with public interest. PIATCO's right to operate NAIA IPT III cannot also violate the rights of third parties. 31.ID.; ID.; BILL OF RIGHTS NON-IMPAIRMENT OF OBLIGATIONS OF CONTRACT; PIATCO, BY CLAIMING AN EXCLUSIVE RIGHT TO OPERATE, CANNOT REQUIRE THE GOVERNMENT TO BREAK ITS CONTRACTUAL OBLIGATIONS TO THE SERVICE PROVIDERS. We hold that while the service providers presently operating at NAIA Terminal 1 do not have an absolute right for the renewal or the extension of their respective contracts, those contracts whose duration extends beyond NAIA IPT III's In-Service-Date should not be unduly prejudiced. These contracts must be respected not just by the parties thereto but also by third parties. PIATCO cannot, by law and certainly not by contract, render a valid and binding contract nugatory. PIATCO, by the mere expedient of claiming an exclusive right to operate, cannot require the Government to break its contractual obligations to the service providers. In contrast to the arrastre and stevedoring service providers in the case of Anglo-Fil Trading Corporation v. Lazaro whose contracts consist of temporary hold-over permits, the affected service providers in the cases at bar, have a valid and binding contract with the Government, through MIAA, whose period of effectivity, as well as the other terms and conditions thereof cannot be violated. 32.ID.; ID.; ID.; ID.; MIAA SHOULD ENSURE THAT WHOEVER BY CONTRACT IS GIVEN THE RIGHT TO OPERATE NAIA IPT III WILL DO SO WITHIN THE BOUNDS OF THE LAW. In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions of the 1997 Concession Agreement and the ARCA did not strip government, thru the MIAA, of its right to supervise the operation of the whole NAIA complex, including NAIA IPT III. As the primary government agency tasked with the job, it is MIAA's responsibility to ensure that whoever by contract is given the right to operate NAIA IPT III will do so within the bounds of the law and with due regard to the rights of third parties and above all, the interest of the public. TSHIDa PANGANIBAN, J., separate opinion: 1.REMEDIAL LAW; SPECIAL CIVIL ACTION; PROHIBITION; DIRECT RESORT TO THE SUPREME COURT BY THE EMPLOYEES WHO FEARED LOSS OF THEIR JOBS IS JUSTIFIED. The Court has, in the past, held that questions relating to gargantuan government contracts ought to be settled without delay. This holding applies with greater force to the instant cases. Respondent Piatco is partly

correct in averring that petitioners can obtain relief from the regional trial courts via an action to annul the contracts. Nevertheless, the unavoidable consequence of having to await the rendition and the finality of any such judgment would be a prolonged state of uncertainty that would be prejudicial to the nation, the parties and the general public. And, in light of the feared loss of jobs of the petitioning workers, consequent to the inevitable pretermination of contracts of the petitioning service providers that will follow upon the heels of the impending opening of NAIA Terminal III, the need for relief is patently urgent, and therefore, direct resort to this Court through the special civil action of prohibition is thus justified. 2.ID.; ID.; ID.; DISPOSITION THEREOF ULTIMATELY RUNS ON QUESTIONS OF LAW; CASE AT BAR. Contrary to Piatco's argument that the resolution of the issues raised in the Petitions will require delving into factual questions, I submit that their disposition ultimately turns on questions of law. Further, many of the significant and relevant factual questions can be easily addressed by an examination of the documents submitted by the parties. In any event, the Petitions raise some novel questions involving the application of the amended BOT Law, which this Court has seen fit to tackle. 3.ID.; CIVIL PROCEDURE; ARBITRATION PROCEEDINGS; CANNOT ADDRESS, DETERMINE AND DEFINITIVELY RESOLVE THE CONSTITUTIONAL AND LEGAL QUESTIONS. As will be discussed at length later, the Piatco contracts are indeed void in their entirety; thus, a resort to the aforesaid provision on arbitration is unavailing. Besides, petitioners and petitioners-in-intervention have pointed out that, even granting arguendo that the arbitration clause remained a valid provision, it still cannot bind them inasmuch as they are not parties to the Piatco contracts. And in the final analysis, it is unarguable that the arbitration process provided for under Section 10.02 of the Amended and Restated Concession Agreement (ARCA), to be undertaken by a panel of three (3) arbitrators appointed in accordance with the Rules of Arbitration of the International Chamber of Commerce, will not be able to address, determine and definitively resolve the constitutional and legal questions that have been raised in the Petitions before us. 4.ID.; ID.; LOCUS STANDI; CITIZEN, TAXPAYER AND MEMBERS OF THE HOUSE OF REPRESENTATIVES ARE SUFFICIENTLY CLOTHED WITH STANDING TO BRING SUIT QUESTIONING THE VALIDITY OF CONTRACT AFFECTING PUBLIC INTEREST. Given this Court's previous decisions in cases of similar import, no one will seriously doubt that, being taxpayers and members of the House of Representatives, Petitioners Baterina et al. have locus standi to bring the Petition in GR No. 155547. In Albano v. Reyes, this Court held that the petitioner therein, suing as a citizen, taxpayer and member of the House of Representatives, was sufficiently clothed with standing to bring the suit questioning the validity of the assailed contract. The Court cited the fact that public interest was involved, in view of the important role of the Manila International Container Terminal (MICT) in the country's economic development and the magnitude of the financial consideration. This, notwithstanding the fact that expenditure of public funds was not required under the assailed contract. CcEHaI 5.ID.; ID.; ID.; MEMBERS OF HOUSE OF REPRESENTATIVES ARE DEPRIVED OF DISCRETION; CASE AT BAR. In the cases presently under consideration, petitioners' personal and substantial interest in the controversy is shown by the fact that certain provisions in the Piatco contracts create obligations on the part of government (through the DOTC and the MIAA) to disburse public funds without prior congressional appropriations. Petitioners thus correctly assert that the injury to them has a twofold aspect: (1) they are adversely affected as taxpayers on account of the illegal disbursement of public funds; and (2) they are prejudiced qualegislators, since the contractual provisions requiring the government to incur expenditures without appropriations also operate as limitations upon the exclusive power and prerogative of Congress over the public purse. As members of the House of Representatives, they are actually deprived of discretion insofar as the inclusion of those items of expenditure in the budget is concerned. To prevent such encroachment upon the legislative privilege and obviate injury to the institution of which they are members, petitioners-legislators have locus standi to bring suit.

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6.ID.; ID.; ID.; EMPLOYEES ARE CONFRONTED WITH THE PROSPECT OF BEING LAID OFF FROM THEIR JOBS. Messrs. Agan et al. and Lopez et al., are likewise taxpayers and thus possessed of standing to challenge the illegal disbursement of public funds. Messrs. Agan et al., in particular, are employees (or representatives of employees) of various service providers that have (1) existing concession agreements with the MIAA to provide airport services necessary to the operation of the NAIA and (2) service agreements to furnish essential support services to the international airlines operating at the NAIA. Messrs. Lopez et al. are employees of the MIAA. These petitioners (Messrs. Agan et al. and Messrs. Lopez et al.) are confronted with the prospect of being laid off from their jobs and losing their means of livelihood when their employer-companies are forced to shut down or otherwise retrench and cut back on manpower. Such development would result from the imminent implementation of certain provisions in the contracts that tend toward the creation of a monopoly in favor of Piatco, its subsidiaries and related companies. 7.ID.; ID.; ID.; SERVICE PROVIDERS CLAIM TO BE DEPRIVED OF THEIR PROPERTY AND OF THE LIBERTY TO CONTRACT WITHOUT DUE PROCESS OF LAW. Petitioners-in-intervention are service providers in the business of furnishing airport-related services to international airlines and passengers in the NAIA and are therefore competitors of Piatco as far as that line of business is concerned. On account of provisions in the Piatco contracts, petitioners-in-intervention have to enter into a written contract with Piatco so as not to be shut out of NAIA Terminal III and barred from doing business there. Since there is no provision to ensure or safeguard free and fair competition, they are literally at its mercy. They claim injury on account of their deprivation of property (business) and of the liberty to contract, without due process of law. 8.ID.; ID.; ID.; IN CASES OF TRANSCENDENTAL IMPORTANCE, THE SUPREME COURT MAY RELAX THE STANDING REQUIREMENTS AND ALLOW A SUIT TO PROSPER. And even if petitioners and petitioners-in-intervention were not sufficiently clothed with legal standing, I have at the outset already established that, given its impact on the public and on national interest, this controversy is laden with transcendental importance and constitutional significance. Hence, I do not hesitate to adopt the same position as was enunciated in Kilosbayan v. Guingona Jr. that "in cases of transcendental importance, the Court may relax the standing requirements and allow a suit to prosper even when there is no direct injury to the party claiming the right of judicial review." 9.POLITICAL LAW; ADMINISTRATIVE LAW; REPUBLIC ACT NO. 6957 (BUILD-OPERATE-AND TRANSFER or BOT LAW); PUBLIC BIDDING; BIDDER MUST SATISFY THE MINIMUM REQUIREMENTS AND MEET THE TECHNICAL, FINANCIAL, ORGANIZATIONAL AND LEGAL STANDARDS. I must emphasize that the law requires the award of a BOT project to the bidder that has satisfied the minimum requirements; and met the technical, financial, organizational and legal standards provided in the BOT Law. DAHaTc 10.ID.; ID.; ID.; ID.; MUST BE CONDUCTED UNDER A TWO-STAGE SYSTEM. Section 5 of this statute requires that the price challenge via public bidding "must be conducted under a twoenvelope/two-stage system: the first envelope to contain the technical proposal and the second envelope to contain the financial proposal." Moreover, the 1994 Implementing Rules and Regulations (IRR) provide that only those bidders that have passed the prequalification stage are permitted to have their two envelopes reviewed. In other words, prospective bidders must prequalify by submitting their prequalification documents for evaluation; and only the prequalified bidders would be entitled to have their bids opened, evaluated and appreciated. On the other hand, disqualified bidders are to be informed of the reason for their disqualification. This procedure was confirmed and reiterated in the Bid Documents, which I quote thus: "Prequalified proponents will be considered eligible to move to second stage technical proposal evaluation. The second and third envelopes of pre-disqualified proponents will be returned." 11.ID.; ID.; ID.; ID.; PROPONENT MUST PROVE THAT IT IS ABLE TO RAISE THE MINIMUM AMOUNT REQUIRED FOR THE PROJECT. Aside from complying with the legal and technical requirements (track record or experience of the firm and its key personnel), a project proponent desiring to prequalify must also demonstrate its financial capacity to undertake the projects. To establish such capability, a proponent must prove that it is able to raise the minimum amount of equity required for the project and to procure the loans or financing needed for it. Since the minimum

amount of equity for the project was set at 30 percent of the minimum project cost of US$350 million, the minimum amount of equity required of any proponent stood at US$105 million. Converted to pesos at the exchange rate then of P26.239 to US$1.00 (as quoted by the Bangko Sentral ng Pilipinas), the peso equivalent of the minimum equity was P2,755,095,000. 12.ID.; ID.; ID.; ID.; ID.; NOT COMPLIED WITH IN CASE AT BAR. However, the combined equity or net worth of the Paircargo consortium stood at only P558,384,871.55. This amount was only slightly over 6 percent of the minimum project cost and very much short of the required minimum equity, which was equivalent to 30 percent of the project cost. Such deficiency should have immediately caused the disqualification of the Paircargo consortium. 13.ID.; ID.; ID.; ID.; RULES, REGULATIONS AND GUIDELINES MUST BE STRICTLY APPLIED; VIOLATED IN CASE AT BAR. By virtue of the prequalified status conferred upon the Paircargo, Undersecretary Cal's findings in effect relieved the consortium of the need to comply with the financial capability requirement imposed by the BOT Law and IRR. This position is unmistakably and squarely at odds with the Supreme Court's consistent doctrine emphasizing the strict application of pertinent rules, regulations and guidelines for the public bidding process, in order to place each bidder actual or potential on the same footing. Thus, it is unarguably irregular and contrary to the very concept of public bidding to permit a variance between the conditions under which bids are invited and those under which proposals are submitted and approved. 14.ID.; ID.; ID.; ID.; ESSENCE. Republic v. Capulong teaches that if one bidder is relieved from having to conform to the conditions that impose some duty upon it, that bidder is not contracting in fair competition with those bidders that propose to be bound by all conditions. The essence of public bidding is, after all, an opportunity for fair competition and a basis for the precise comparison of bids. Thus, each bidder must bid under the same conditions; and be subject to the same guidelines, requirements and limitations. The desired result is to be able to determine the best offer or lowest bid, all things being equal. 15.ID.; ID.; ID.; ID.; SINCE THE ENTIRE BIDDING PROCESS WAS FLAWED. AND TAINTED FROM THE VERY OUTSET, THE AWARD OF CONCESSION WAS VOID. Inasmuch as the Paircargo consortium did not possess the minimum equity equivalent to 30 percent of the minimum project cost, it should not have been prequalified or allowed to participate further in the bidding. The Prequalification and Bidding Committee (PBAC) should therefore not have opened the two envelopes of the consortium containing its technical and financial proposals; required AEDC to match the consortium's bid; or awarded the Concession Agreement to the consortium's successorin-interest, Piatco. As there was effectively no public bidding to speak of, the entire bidding process having been flawed and tainted from the very outset, therefore, the award of the concession to Paircargo's successor Piatco was void, and the Concession Agreement executed with the latter was likewise voidab initio. For this reason, Piatco cannot and should not be allowed to benefit from that Agreement. ICDcEA 16.ID.; ID.; ID.; ID.; PROTECTION OF THE PROPRIETARY INFORMATION IS APPLICABLE TO THE ORIGINATOR OF THE UNSOLICITED PROPOSAL ONLY. The "proprietary information" referred to in Section 11.6 of the IRR pertains only to the proprietary information of the originator of an unsolicited proposal, and not to those belonging to a challenger. The reason for the protection accorded proprietary information at all is the fact that, according to Section 4-A of the BOT Law as amended, a proposal qualifies as an "unsolicited proposal" when it pertains to a project that involves "a new concept or technology," and/or a project that is not on the government's list of priority projects. 17.ID.; ID.; ID.; ID.; ID.; RATIONALE. To be considered as utilizing a new concept or technology, a project must involve the possession of exclusive rights (worldwide or regional) over a process; or possession of intellectual property rights over a design, methodology or engineering concept. Patently, the intent of the BOT Law is to encourage individuals and groups to come up with creative innovations, fresh ideas and new technology. Hence, the significance and necessity of protecting proprietary information in connection with unsolicited proposals. And to make the encouragement real, the law also extends to such individuals and groups what amounts to a "right

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of first refusal" to undertake the project they conceptualized, involving the use of new technology or concepts, through the mechanism of matching a price challenge. 18.ID.; ID.; ID.; ID.; BIDDER MUST BE GIVEN ACCESS TO THE ASSUMPTION AND THE CALCULATIONS THAT WENT INTO CRAFTING THE COMPETING BID. A competing bid is never just any figure conjured from out of the blue; it is arrived at after studying economic, financial, technical and other factors; it is likewise based on certain assumptions as to the nature of the business, the market potentials, the probable demand for the product or service, the future behavior of cost items, political and other risks, and so on. It is thus self-evident that in order to be able to intelligently match a bid or price challenge, a bidder must be given access to the assumptions and the calculations that went into crafting the competing bid. In this instance, the financial and technical proposals of Piatco would have provided AEDC with the necessary information to enable it to make a reasonably informed matching bid. To put it more simply, a bidder unable to access the competitor's assumptions will never figure out how the competing bid came about; requiring him to "counter-propose" is like having him shoot at a target in the dark while blindfolded. 19.ID.; ID.; ID.; DEFINITE AND FIRM TIMETABLE FOR THE SUBMISSION OF THE REQUIREMENTS TO EXPOSE AND WEED OUT UNQUALIFIED PROPONENTS. The purpose of having a definite and firm timetable for the submission of the requirements is not only to prevent delays in the project implementation, but also to expose and weed out unqualified proponents, who might have unceremoniously slipped through the earlier prequalification process, by compelling them to put their money where their mouths are, so to speak. 20.ID.; ID.; ID.; ID.; EASILY CIRCUMVENTED BY MERELY POSTPONING THE ACTUAL ISSUANCE OF THE NOTICE OF AWARD. Nevertheless, this provision can be easily circumvented by merely postponing the actual issuance of the Notice of Award, in order to give the favored proponent sufficient time to comply with the requirements. Hence, to aver or minimize the manipulation of the post-bidding process, the IRR not only set out the precise sequence of events occurring between the completion of the evaluation of the technical bids and the issuance of the Notice of Award, but also specified the timetables for each such event. Definite allowable extensions of time were provided for, as were the consequences of a failure to meet a particular deadline. 21.ID.; ID.; ID.; ID.; TO DISCOURAGE COLLUSION AND REDUCE THE OPPORTUNITY FOR AGENTS OF GOVERNMENT TO ABUSE THEIR DISCRETION. The highly regulated time-frames within which the agents of government were to act evinced the intent to impose upon them the duty to act expeditiously throughout the process, to the end that the project be prosecuted and implemented without delay. This regulated scenario was likewise intended to discourage collusion and substantially reduce the opportunity for agents of government to abuse their discretion in the course of the award process. DcTSHa 22.ID.; ID.; ID.; PROCEDURE FOR THE AWARD OF THE PROJECTS. In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar days from the time the second-stage evaluation shall have been completed, the Committee must come to a decision whether or not to award the contract and, within 7 days therefrom, the Notice of Award must be approved by the head of agency or local government unit (LGU) concerned, and its issuance must follow within another 7 days thereafter. Section 9.2 of the IRR set the procedure applicable to projects involving substantial government undertakings as follows: Within 7 days after the decision to award is made, the draft contract shall be submitted to the ICC for clearance on a no-objection basis. If the draft contract includes government undertakings already previously approved, then the submission shall be for information only. However, should there be additional or new provisions different from the original government undertakings, the draft shall have to be reviewed and approved. The ICC has 15 working days to act thereon, and unless otherwise specified, its failure to act on the contract within the specified time frame signifies that the agency or LGU may proceed with the award. The head of agency or LGU shall approve the Notice of Award within seven days of the clearance by the ICC on a no-objection basis, and the Notice itself has to be issued within seven days thereafter.

23.ID.; ID.; ID.; VIOLATED IN CASE AT BAR. Despite the clear timetables set out in the IRR, several lengthy and still-unexplained delays occurred in the award process, as can be observed from the presentation made by the counsel for public respondents. [T]he chronology of events bespeaks an unmistakable disregard, if not disdain, by the persons in charge of the award process for the time limitations prescribed by the IRR. Their attitude flies in the face of this Court's solemn pronouncement in Republic v. Capulong that "strict observance of the rules, regulations and guidelines of the bidding process is the only safeguard to a fair, honest and competitive public bidding." From the foregoing, the only conclusion that can possibly be drawn is that the BOT law and its IRR were repeatedly violated with unmitigated impunity and by agents of government, no less! On account of such violation, the award of the contract to Piatco, which undoubtedly gained time and benefited from the delays, must be deemed null and void from the beginning. 24.ID.; ID.; ID.; CHANGES TO THE CONTRACT BIDDED OUT RESULTED IN A SUBSTANTIALLY DIFFERENT CONTRACT. After the PBAC made its decision on December 11, 1996 to award the contract to Piatco, the latter negotiated changes to the Contract bidded out and ended up with what amounts to a substantially new contract without any public bidding. This Contract was subsequently further amended four more times through negotiation and without any bidding. Thus, the contract actually executed between Piatco and DOTC/MIAA on July 12, 1997 (the Concession Agreement or "CA") differed from the contract bidded out[.] It goes without saying that the amendment of the Contract bidded out (the DCA or draft concession agreement) in such substantial manner, without any public bidding, and afterthe bidding process had been concluded on December 11, 1996 is violative of public policy on public biddings, as well as the spirit and intent of the BOT Law. The whole point of going through the public bidding exercise was completely lost. Its very rationale was totally subverted by permitting Piatco to amend the contract for which public bidding had already been concluded. Competitive bidding aims to obtain the best deal possible by fostering transparency and preventing favoritism, collusion and fraud in the awarding of contracts. That is the reason why procedural rules pertaining to public bidding demand strict observance. 25.ID.; ID.; ID.; SUBSTANTIVE AMENDMENTS TO A CONTRACT FOR WHICH A PUBLIC BIDDING HAS ALREADY BEEN FINISHED SHOULD ONLY BE AWARDED AFTER ANOTHER PUBLIC BIDDING. In a relatively early case, Caltex v. Delgado Brothers, this Court made it clear that substantive amendments to a contract for which a public bidding has already been finished should only be awarded after another public bidding: "The due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding." EaIcAS 26.ID.; ID.; ID.; TERMS, CONDITIONS AND STIPULATIONS OF THE CONTRACTS MUST REMAIN INTACT AND NOT BE SUBJECT TO FURTHER NEGOTIATION. The BOT Law cannot be said to allow the negotiation of contractual stipulations resulting in a substantially new contract after the bidding process and price challenge had been concluded. In fact, the BOT Law, in recognition of the time, money and effort invested in an unsolicited proposal, accords its originator the privilege of matching the challenger's bid. Section 4-A of the BOT Law specifically refers to a "lower price proposal" by a competing bidder; and to the right of the original proponent "to match the price" of the challenger. Thus, only the price proposals are in play. The terms, conditions and stipulations in the contract for which public bidding has been concluded are understood to remain intact and not be subject to further negotiation. Otherwise, the very essence of public bidding will be destroyed there will no basis for an exact comparison between bids. Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No. 3. The phrase amendments . . . from

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time to time refers only to those amendments to the draft concession agreement issued by the PBAC prior to the submission of the price challenge; it certainly does not include or permit amendments negotiated for and introduced after the bidding process, has been terminated. 27.ID.; ID.; ID.; REVISIONS AND AMENDMENTS IN THE CONTRACTS THAT GIVE UNDUE ADVANTAGE TO THE GOVERNMENT IS ILLEGAL. In sum, the revisions and amendments as embodied in the ARCA constitute very material alterations of the terms and conditions of the CA, and give further manifestly undue advantage to Piatco at the expense of government. Piatco claims that the changes to the CA were necessitated by the demands of its foreign lenders. However, no proof whatsoever has been adduced to buttress this claim. In any event, it is quite patent that the sum total of the aforementioned changes resulted in drastically weakening the position of government to a degree that seems quite excessive, even from the standpoint of a businessperson who regularly transacts with banks and foreign lenders, is familiar with their mindset, and understands what motivates them. On the other hand, whatever it was that impelled government officials concerned to accede to those grossly disadvantageous changes, I can only hazard a guess. There is no question in my mind that the ARCA was unauthorized and illegal for lack of public bidding and for being patently disadvantageous to government. 28.ID.; ID.; ID.; FIRST SUPPLEMENT TO VOID AND INEXISTENT ORIGINAL CONCESSION AGREEMENT IS ALSO VOID AND INOPERATIVE; CASE AT BAR. I must emphasize that the First Supplement [FS] is void in two respects. First, it is merely an amendment to the ARCA, upon which it is wholly dependent; therefore, since the ARCA is void, inexistent and not capable of being ratified or amended, it follows that the FS too is void, inexistent and inoperative. Second, even assumingarguendo that the ARCA is somehow remotely valid, nonetheless the FS, in imposing significant new obligations upon government, altered the fundamental terms and stipulations of the ARCA, thus necessitating a public bidding all over again. That the FS was entered into sans public bidding renders it utterly void and inoperative. 29.ID.; ID.; ID.; SECOND SUPPLEMENT IS ALSO VOID AND INOPERATIVE AS IT DID NOT UNDERGO ANY PUBLIC BIDDING. The Second Supplement ("SS") was executed between the government and Piatco on September 4, 2000. It calls for Piatco, acting not as concessionaire of NAIA Terminal III but as a public works contractor, to undertake in the government's stead the clearing, removal, demolition and disposal of improvements, subterranean obstructions and waste materials at the project site. The scope of the works, the procedures involved, and the obligations of the contractor are provided for in Parts II and III of the SS. Section 4.1 sets out the compensation to be paid, listing specific rates per cubic meter of materials for each phase of the work excavation, leveling, removal and disposal, backfilling and dewatering. The amounts collectible by Piatco are to be offset against the Annual Guaranteed Payments it must pay government. Though denominated as Second Supplement, it was nothing less than an entirely new public works contract. Yet it, too, did not undergo any public bidding, for which reason it is also void and inoperative. Not surprisingly, Piatco had to subcontract the works to a certain Wintrack Builders, a firm reputedly owned by a former high-ranking DOTC official. But that is another story altogether. AaSHED 30.ID.; ID.; ID.; THIRD SUPPLEMENT IS VOID AB INITIO AS IT CREATED A NEW MONETARY OBLIGATION ON THE PART OF THE GOVERNMENT WITHOUT PRIOR APPROPRIATIONS. The Third Supplement (TS) depends upon and is intended to supplement the ARCA as well as the First Supplement, both of which are void and inexistent and not capable of being ratified or amended. It follows that the TS is likewise void, inexistent and inoperative. And even if, hypothetically speaking, both ARCA and FS are valid, still, the Third Supplement imposing as it does significant new obligations upon government would in effect alter the terms and stipulations of the ARCA in material respects, thus necessitating another public bidding. Since the TS was not subjected to public bidding, it is consequently utterly void as well. At any rate, the TS created new monetary obligations on the part of government, for which there were no prior appropriations. Hence, it follows that the same is, void ab initio. 31.ID.; ID.; ID.; DIRECT GOVERNMENT GUARANTEE IS PROHIBITED IN UNSOLICITED PROPOSALS. Section 4-A of the BOT Law as amended states thatunsolicited proposals, such as the NAIA

Terminal III Project, may be accepted by government provided inter alia that no direct government guarantee, subsidy or equity is required. In short, such guarantee is prohibited in unsolicited proposals. Section 2(n) of the same legislation defines direct government guarantee as "an agreement whereby the government or any of its agencies or local government units (will) assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default." 32.ID.; ID.; ID.; ID.; REASON. In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at odds with the spirit and the intent of the BOT Law. The law meant to mobilize private resources (the private sector) to take on the burden and the risks of financing the construction, operation and maintenance of relevant infrastructure and development projects for the simple reason that government is not in a position to do so. By the same token, government guarantee was prohibited, since it would merely defeat the purpose and raison d'tre of a buildoperate-and-transfer project to be undertaken by the private sector. To the extent that the project proponent is able to obtain loans to fund the project, those risks are shared between the project proponent on the one hand, and its banks and other lenders on the other. But where the proponent or its lenders manage to cajol or coerce the government into extending a guarantee of payment of the loan obligations, the risks assumed by the lenders are passed right back to government. I cannot understand why, in the instant case, government cheerfully assented to reassuming the risks of the project when it gave the prohibited guarantee and thus simply negated the very purpose of the BOT Law and the protection it gives the government. 33.ID.; ID.; ID.; ID.; THE AMOUNT TO BE PAID BY GOVERNMENT IS GREATER OF EITHER THE APPRAISED VALUE OF THE PROJECT OR THE AGGREGATE AMOUNT OF THE MONEYS OWED BY PIATCO; CASE AT BAR. Government's agreement to pay becomes effective in the event of a default by Piatco on any of itsloan obligations to the Senior Lenders, and the amount to be paid by government is the greater of either the Appraised Value of Terminal III or the aggregate amount of the moneys owed by Piatco whether to the Senior Lenders or to other entities, including its suppliers, contractors and subcontractors. In effect, therefore, this agreement already constitutes the prohibited assumption by government of responsibility for repayment of Piatco's debts in case of a loan default. In fine, a direct government guarantee. It matters not that there is a roundabout procedure prescribed by Section 4.04(c)(iv), (v) and (vi) that would require, first, an attempt (albeit unsuccessful) by the Senior Lenders to transfer Piatco's rights to a transferee of their choice; and, second, an effort (equally unsuccessful) to "enter into any other arrangement" with the government regarding the Terminal III facility, before government is required to make good on its guarantee. What is abundantly clear is the fact that, in the devious labyrinthine process detailed in the aforesaid section, it is entirely within the Senior Lenders' power, prerogative and control exercisable via a mere refusal or inability to agree upon "a transferee" or "any other arrangement" regarding the terminal facility to push the process forward to the ultimate contractual cul-desac, wherein government will be compelled to abjectly surrender and make good on its guarantee of payment. 34.ID.; ID.; ID.; ID.; PIATCO CONTRACTS ARE GROSSLY LOPSIDED IN FAVOR OF PIATCO AND/OR ITS SENIOR LENDERS. Piatco also argues that there is no proviso requiring government to pay the Senior Lenders in the event of Piatco's default. This is literally true, in the sense that Section 4.04(c)(vi) of ARCA speaks of government making the termination payment to Piatco, not to the lenders. However, it is almost a certainty that the Senior tenders will already have made Piatco sign over to them, ahead of time, its right to receive such payments from government; and/or they may already have had themselves appointed its attorneys-in-fact for the purpose of collecting and receiving such payments. Nevertheless, as petitioners-in-intervention pointed out in their Memorandum, the termination payment is to be made to Piatco, not to the lenders; and there is no provision anywhere in the contract documents to prevent it from diverting the proceeds to its own benefit and/or to ensure that it will necessarily use the same to pay off the Senior Lenders and other creditors, in order to avert the foreclosure of the mortgage and other liens on the terminal facility. Such deficiency puts the interests of government at great risk.

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Indeed, if the unthinkable were to happen, government would be paying several hundreds of millions of dollars, but the mortgage liens on the facility may still be foreclosed by the Senior Lenders just the same. Consequently, the Piatco contracts are also objectionable for grievously failing to adequately protect government's interests. More accurately, the contracts would consistently weaken and do away with protection of government interests. As such, they are therefore grossly lopsided in favor of Piatco and/or its Senior Lenders. IAEcaH 35.ID.; ID.; ID.; ID.; AMENDED AND RESTATED CONCESSION AGREEMENT (ARCA) INTENDS TO HAVE ALL PIATCO'S DEBTS COVERED BY THE GUARANTEE. While on this subject, it is well to recall the earlier discussion regarding a particularly noticeable alteration of the concept of "Attendant Liabilities." In Section 1.06 of the CA defining the term, the Piatco debts to be assumed/paid by government were qualified by the phrases recorded and from time to time outstanding in the books of the Concessionaire and actually used for the project. These phrases were eliminated from the ARCA's definition of Attendant Liabilities. Since no explanation has been forthcoming from Piatco as to the possible justification for such a drastic change, the only conclusion possible is that it intends to have all of its debts covered by the guarantee, regardless of whether or not they are disclosed in its books. This has particular reference to those borrowings which were obtained in violation of the loan covenants requiring Piatco to maintain a minimum 70:30 debt-to-equity ratio, and even if the loan proceeds were not actually used for the project itself. This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of ARCA, the amount which government has guaranteed to pay as termination payment is the greater of either (i) the Appraised Value of the terminal facility or (ii) the aggregate of the Attendant Liabilities. Given that the Attendant Liabilities may include practically any Piatco debt under the sun, it is highly conceivable that their sum may greatly exceed the appraised value of the facility, and government may end up paying very much more than the real worth of Terminal III. (So why did government have to bother with public bidding anyway?) 36.ID.; ID.; ID.; INSTANCES WHEN TERMINATION COMPENSATION MAY BE ALLOWED. Section 7 of the BOT Law as amended in effect provides for the following limited instances when termination compensation may be allowed: 1. Termination by the government through no fault of the project proponent 2. Termination upon the parties' mutual agreement and 3. Termination by the proponent due to government's default on certain major contractual obligations. To emphasize, the law does not permit compensation for the project proponent when contract termination is due to the proponent's own fault or breach of contract. 37.ID.; ID.; ID.; ID.; VIOLATED IN CASE AT BAR. This principle was clearly violated in the Piatco Contracts. The ARCA stipulates that government is to pay termination compensation to Piatco even when termination is initiated by government. Clearly, this condition is not in line with Section 7 of the BOT Law. That provision permits a project proponent to recover the actual expenses it incurred in the prosecution of the project plus a reasonable rate of return not in excess of that provided in the contract; or to be compensated for the equivalent or proportionate contract cost as defined in the contract, in case the government is in default on certain major contractual obligations. 38.ID.; ID.; ID.; ID.; IN TERMINATION COMPENSATION, IT IS INDISPENSABLE THAT THE INTEREST OF GOVERNMENT BE DULY INSURED; NOT PRESENT IN CASE AT BAR. [I]n those instances where such termination compensation is authorized by the BOT Law, it is indispensable that the interest of government be duly insured. Section 5.08 the ARCA mandates insurance coverage for the terminal facility; but all insurance policies are to be assigned, and all proceeds are payable, to the Senior Lenders. In brief, the interest being secured by such coverage is that of the Senior Lenders, not that of government. This can hardly be considered compliance with law. 39.ID.; ID.; ID.; PROHIBITS A DIRECT GOVERNMENT SUBSIDY FOR UNSOLICITED PROPOSALS. It will be recalled that Section 4-A of the BOT Law as amended prohibits not only direct government guarantees, but likewise a direct government subsidy for unsolicited proposals. Section 13.2. b iii. of the 1999 IRR defines a direct government subsidy as encompassing "an agreement whereby the Government . . . will . . . postpone any payments due from the proponent." By any manner of interpretation or application, however, Section 8.01(d) of the ARCA clearly mandates the

indefinite postponement of payment of all of Piatco's obligations to the government, in order to ensure that Piatco's obligations to the Senior Lenders are paid in full first. That is nothing more or less than the direct government subsidy prohibited by the BOT Law and the IRR. The fact that Piatco will pay interest on the unpaid amounts owed to government does not change the situation or render the prohibited subsidy any less unacceptable. DTAIaH 40.ID.; ID.; ID.; GOVERNMENT WILL BE AT THE MERCY OF THE FOREIGN LENDERS; CASE AT BAR. Earlier; I mentioned that Section 8.01(d) of the ARCA completely eliminated the proviso in Section 8.04(d) of the CA which gave government the right to appoint a financial controller to manage the cash position of Piatco during situations of financial distress. Not only has government been deprived of any means of monitoring and managing the situation; worse, as can be seen from Section 8.01(d) above-quoted, the Senior Lenders have effectively locked in on the right to exercise financial controllership over Piatco and to allocate its cash resources to the payment of all amounts owed to the Senior Lenders before allowing any payment to be made to government. In brief, this particular provision of the ARCA has placed in the hands of foreign lenders the power and the authority to determine how much (if at all) and when the Philippine government (as grantor of the franchise) may be allowed to receive from Piatco. In that situation, government will be at the mercy of the foreign lenders. This is a situation completely contrary to the rationale of the BOT Law and to public policy. The aforesaid provision rouses mixed emotions shame and disgust at the parties' (especially the government officials') docile submission and abject servitude and surrender to the imperious and excessive demands of the foreign lenders, on the one hand; and vehement outrage at the affront to the sovereignty of the Republic and to the national honor, on the other. It is indeed time to put an end to such an unbearable, dishonorable situation. 41.ID.; CONSTITUTIONAL LAW; NATIONAL ECONOMY AND PATRIMONY; CONSTITUTION EXPRESSLY PROSCRIBES MAKING A FRANCHISE EXCLUSIVE; VIOLATED IN CASE AT BAR. What was granted to Piatco was not merely a franchise, but an "exclusive right" to operate an international passenger terminal within the "Island of Luzon." What this grant effectively means is that the government is now estopped from exercising its inherent power to award any other person another franchise or a right to operate such a public utility, in the event public interest in Luzon requires it. This restriction is highly detrimental to government and to the public interest. While it cannot be gainsaid that an enterprise that is a public utility may happen to constitute a monopoly on account of the very nature of its business and the absence of competition, such a situation does not however constitute justification to violate the constitutional prohibition and grant an exclusive franchise or exclusive. right to operate a public utility. Piatco's contention that the Constitution does not actually prohibit monopolies is beside the point. As correctly argued, the existence of a monopoly by a public utility is a situation created by circumstances that do not encourage competition. This situation is different from the grant of a franchise to operate a public utility, a privilege granted by government. Of course, the grant of a franchise may result in a monopoly. But making such franchise exclusive is what is expressly proscribed by the Constitution. 42.ID.; ID.; ID.; EASY PAYMENT PLAN OF PIATCO CONTRACTS VIOLATES THE TIME LIMITATION ON FRANCHISES. Section 11 of Article XII of the Constitution also provides that "no franchise, certificate or any other form of authorization for the operation of a public utility shall be . . . for a longer period than fifty years." After all, a franchise held for an unreasonably long time would likely give rise to the same evils as a monopoly. The Piatco Contracts have come up with an innovative way to circumvent the prohibition and obtain an extension. This fact can be gleaned from Section 8.03(b) of the ARCA [.] The easy payment scheme therein is less beneficial than it first appears. Although it enables government to avoid having to make outright payment of an obligation that will likely run into billions of pesos, this easy payment plan will nevertheless cost government considerable loss of income, which it would earn if it were to operate Terminal III by itself. Inasmuch as payments to the concessionaire (Piatco) will be on "installment basis," interest charges on the remaining unpaid balance would undoubtedly cause the total outstanding balance to swell. Piatco would thus be entitled to remain in the driver's seat and keep operating the terminal for an indefinite length of time.

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43.ID.; ID.; ID.; MONOPOLY; ELUCIDATED: Gokongwei Jr. v. Securities and Exchange Commission elucidates the criteria to be employed: "A 'monopoly' embraces any combination the tendency of which is to prevent competition in the broad and general sense, or to control prices to the detriment of the public. In short, it is the concentration of business in the hands of a few. The material consideration in determining its existence is not that prices are raised and competition actually excluded, but that power exists to raise prices or exclude competition when desired." 44.ID.; ID.; ID.; ID.; PIATCO CONTRACTS GIVE THE CONCESSIONAIRE LIMITLESS POWER OVER THE CHARGING OF FEES, RENTALS AND SO FORTH. Aside from creating a monopoly, the Piatco contracts also give the concessionaire virtually limitless power over the charging of fees, rentals and so forth. What little "oversight function" the government might be able and minded to exercise is less than sufficient to protect the public interest[.] It will be noted that Sec. 6.06 (Adjustment of Non-Public Utility Fees and Charges) has no teeth, so the concessionaire can defy the government without fear of any sanction. Moreover, Section 6.06 taken together with Section 6.03(c) of the ARCA falls short of the standard set by the BOT Law as amended, which expressly requires in Section 2(b) that the project proponent is "allowed to charge facility users appropriate tolls, fees, rentals and charges, not exceeding those proposed in its bid or as negotiated and incorporated in the contract . . ." 45.ID.; ID.; BILL OF RIGHTS; PROHIBITION AGAINST IMPAIRMENT OF CONTRACTS; VIOLATED IN CASE AT BAR. By the In-Service Date, Terminal III shall be the only facility to be operated as an international passenger terminal at the NAIA; thus, Terminal I and II shall no longer operate as such, and no one shall be allowed to compete with Piatco in the operation of an international passenger terminal in the NAIA. The bottom line is that, as of the In-Service Date, Terminal III will be the only terminal where the business of providing airport-related services to international airlines and passengers may be conducted at all. Consequently, government through the DOTC/MIAA will be compelled to cease honoring existing contracts with service providers after the In-Service Date, as they cannot be allowed to operate in Terminal III. In short, the CA and the ARCA obligate and constrain government to break its existing contracts with these service providers. 46.ID.; ID.; ID.; PROHIBITION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS; VIOLATED IN CASE AT BAR. Notably, government is not in a position to require Piatco to accommodate the displaced service providers, and it would be unrealistic to think that these service providers can perform their service contracts in some other international airport outside Luzon. Obviously, then, these displaced service providers are to borrow a quaint expression up the river without a paddle. In plainer terms, they will have lost their businesses entirely, in the blink of an eye. Moreover, since the displaced service providers, being unable to operate, will be forced to close shop, their respective employees among them Messrs. Agan and Lopez et al. have very grave cause for concern, as they will find themselves out of employment and bereft of their means of livelihood. This situation comprises still another violation of the constitution prohibition against deprivation of property without due process. True, doing business at the NAIA may be viewed more as a privilege than as a right. Nonetheless, where that privilege has been availed of by the petitioners-in-intervention service providers for years on end, a situation arises, similar to that in American Inter-fashion v. GTEB. We held therein that a privilege enjoyed for seven years "evolved into some form of property right which should not be removed . . . arbitrarily and without due process." Said pronouncement is particularly relevant and applicable to the situation at bar because the livelihood of the employees of petitioners-intervenors are at stake. DaIACS 47.ID.; ID.; ID.; PROHIBITION AGAINST DEPRIVATION OF LIBERTY WITHOUT DUE PROCESS; VIOLATED IN CASE AT BAR. The Piatco Contracts by locking out existing service providers from entry into Terminal III and restricting entry of future service providers, thereby infringed upon the freedom guaranteed to and heretofore enjoyed by international airlines to contract with local service providers of their choice, and vice versa. Both the service providers and their client airlines will be deprived of the right to liberty, which includes the right to enter into all contracts, and/or the right to make a contract in relation to one's business.

48.ID.; LEGISLATIVE DEPARTMENT; PROHIBITION AGAINST DISBURSEMENT OF PUBLIC FUNDS WITHOUT VALID APPROPRIATION; EFFECT. Clearly prohibited by the Constitution is the disbursement of public funds out of the treasury, except in pursuance of an appropriation made by law. The immediate effect of this constitutional ban is that all the various agencies of government are constrained to limit their expenditures to the amounts appropriated by law for each fiscal year; and to carefully count their cash before taking on contractual commitments. 49.ID.; ID.; ID.; EXISTENCE OF APPROPRIATIONS AND THE AVAILABILITY OF FUNDS ARE INDISPENSABLE TO THE EXECUTION OF GOVERNMENT CONTRACTS. [T]his Court has held that "(I)t is quite evident from the tenor of the language of the law that the existence of appropriations and the availability of funds are indispensable pre-requisites to or conditions sine qua non for the execution of government contracts. The obvious intent is to impose such conditions as a priori requisites to the validity of the proposed contract." 50.ID.; ID.; LEGISLATIVE POWER OVER THE PUBLIC PURSE; VIOLATED IN CASE AT BAR. But the particularly sad thing about this transaction between MIAA and DPWH is the fact that both agencies were maneuvered into (or allowed themselves to be maneuvered into) an agreement that would ensure delivery of upgraded roads for Piatco's benefit, using funds not allocated for that purpose. The agreement would then be presented to Congress as a done deal. Congress would thus be obliged to uphold the agreement and support it with the necessary allocations and appropriations for three years, in order to enable DPWH to deliver on its committed repayments to MIAA. The net result is an infringement on the legislative power over the public purse and a diminution of Congress' control over expenditures of public funds a development that would not have come about, were it not for the Supplements. Very clever but very illegal! 51.CIVIL LAW; OBLIGATIONS AND CONTRACTS; CRITERIA FOR DETERMINING WHETHER THE BESTEFFORTS BASIS WILL APPLY. To determine whether the additional obligations under the Supplements may really be undertaken on a best-efforts basis only, the nature of each of these obligations must be examined in the context of its relevance and significance to the Terminal III Project, as well as of any adverse impact that may result if such obligation is not performed or undertaken on time. In short, the criteria for determining whether the best-efforts basis will apply is whether the obligations are critical to the success of the Project and, accordingly, whether failure to perform them (or to perform them on time) could result in a material breach of the contract. 52.ID.; ID.; ID.; OBLIGATIONS IN THE SUPPLEMENTS ARE MANDATORY IN CHARACTER AND NOT FOR BEST-EFFORTS COMPLIANCE ONLY. Viewed in this light, the "Additional Special Obligations" set out in Section 4 of the FS take on a different aspect. In particular, each of the following may all be deemed to play a major role in the successful and timely prosecution of the Terminal III Project: the obtention of land required by PIATCO for the taxilane and taxiway; the implementation of government's existing storm drainage master plan; and coordination with DPWH for the completion of the three left-turning overpasses before the In-Service Date, as well as acquisition and delivery of additional land for the construction of the T2-T3 access road. Conversely, failure to deliver on any of these obligations may conceivably result in substantial prejudice to the concessionaire, to such an extent as to constitute a material breach of the Piatco Contracts. Whereupon, the concessionaire may outrightly terminate the Contracts pursuant to Section 8.01 (b)(i) and (ii) of the ARCA and seek payment of Liquidated Damages in accordance with Section 8.02(a) of the ARCA; or the concessionaire may instead require government to pay the Incremental and Consequential Losses under Section 1.23 of the ARCA. The logical conclusion then is that the obligations in the Supplements are not to be performed on a best-efforts basis only, but are unarguably mandatory in character. 53.ID.; ID.; PIATCO CONTRACTS ARE VOID AB INITIO AND INOPERATIVE. I find that all the Piatco contracts, without exception, are void ab initio, and therefore inoperative. Even the very process by which the contracts came into being the bidding and the award has been riddled with irregularities galore and blatant violations of law and public policy, far too many to ignore. There is thus no conceivable way, as proposed by some, of saving one (the original Concession Agreement) while junking all the rest. Neither is it possible to argue for the retention of the Draft Concession

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Agreement (referred to in the various pleadings as the Contract Bidded Out) as the contract that should be kept in force and effect to govern the situation, inasmuch as it was never executed by the parties. What Piatco and the government executed was the Concession Agreement which is entirely different from the Draft Concession Agreement. 54.ID.; ID.; ID.; KEEPING PIATCO ON AS CONCESSIONAIRE IS UNCONSCIONABLE. Ultimately, though, it would be tantamount to an outrageous, grievous and unforgivable mutilation of public policy and an insult to ourselves if we opt to keep in place a contract any contract for to do so would assume that we agree to having Piatco continue as the concessionaire for Terminal III. Despite all the insidious contraventions of the Constitution, law and public policy Piatco perpetrated, keeping Piatco on as concessionaire and even rewarding it by allowing it to operate and profit from Terminal III instead of imposing upon it the stiffest sanctions permissible under the laws is unconscionable. It is no exaggeration to say that Piatco may not really mind which contract we decide to keep in place. For all it may care, we can do just as well without one, if we only let it continue and operate the facility. After all, the real money will come not from building the Terminal, but fromactually operating it for fifty or more years and charging whatever it feels like, without any competition at all. This scenario must not be allowed to happen. EAHDac 55.ID.; ID.; ID.; AEDC SHOULD NOT BE ALLOWED TO OPERATE THE TERMINAL III. If the Piatco contracts are junked altogether as I think they should be, should not AEDC automatically be considered the winning bidder and therefore allowed to operate the facility? My answer is a stone-cold 'No.' AEDC never won the bidding, never signed any contract, and never built any facility. Why should it be allowed to automatically step in and benefit from the greed of another? 56.ID.; ID.; ID.; GOVERNMENT SHOULD PAY ALL REASONABLE EXPENSES INCURRED IN THE CONSTRUCTION OF TERMINAL III. Should government pay at all for reasonable expenses incurred in the construction of the Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco and, in particular, its funders, contractors and investors both local and foreign. After all, there is no question that the State needs and will make use of Terminal III, it being part and parcel of the critical infrastructure and transportation-related programs of government. In Melchor v. Commission on Audit, this Court held that even if the contract therein was void, the principle of payment by quantum meruit was found applicable, and the contractor was allowed to recover the reasonable value of the thing or services rendered (regardless of any agreement as to the supposed value), in order to avoid unjust enrichment on the part of government. The principle ofquantum meruit was likewise applied in Eslao v. Commission on Audit, because to deny payment for a building almost completed and already occupied would be to permit government to unjustly enrich itself at the expense of the contractor. The same principle was applied in Republic v. Court of Appeals. 57.ID.; ID.; ID.; POSSIBLE PRACTICAL SOLUTION IS TO BID OUT THE OPERATION OF TERMINAL III. One possible practical solution would be for government in view of the nullity of the Piatco contracts and of the fact that Terminal III has already been built and is almost finished to bid out the operation of the facility under the same or analogous principles as build-operate-andtransfer projects. To be imposed, however, is the condition that the winning bidder must pay the builder of the facility a price fixed by government based on quantum meruit; on the real, reasonable not inflated value of the built facility. How the payment or series of payments to the builder, funders, investors and contractors will be staggered and scheduled, will have to be built into the bids, along with the annual guaranteed payments to government. In this manner, this whole sordid mess could result in something truly beneficial for all, especially for the Filipino people. VITUG, J., separate dissenting opinion: 1.REMEDIAL LAW; CIVIL PROCEDURE; JURISDICTION; SUPREME COURT IS BEREFT OF JURISDICTION OVER CASES INVOLVING NULLIFICATION OF CONTRACTS. This Court is bereft of jurisdiction to hear the petitions at bar. The Constitution provides that the Supreme Court shall exercise original jurisdiction over, among other actual controversies, petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus. The cases in question, although denominated to be

petitions for prohibition, actually pray for the nullification of the PIATCO contracts and to restrain respondents from implementing said agreements for being illegal and unconstitutional. 2.ID.; ID.; ID.; SUPREME COURT IS NOT A TRIER OF FACTS. The rule is explicit. A petition for prohibition may be filed against a tribunal, corporation, board, officer or person, exercising judicial, quasi-judicial or ministerial functions. What the petitions seek from respondents do not involve judicial, quasi-judicial or ministerial functions. In prohibition, only legal issues affecting the jurisdiction of the tribunal, board or officer involved may be resolved on the basis of undisputed facts. The parties allege, respectively, contentious evidentiary facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on the basis of the contradictory factual submissions made by the parties. As the Court has so often exhorted, it is not a trier of facts. 3.ID.; ID.; ID.; PETITIONS FOR DECLARATORY RELIEF ARE COGNIZABLE BY THE REGIONAL TRIAL COURT. The petitions, in effect, are in the nature of actions for declaratory relief under Rule 63 of the Rules of Court. The Rules provide that any person interested under a contract may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder. The Supreme Court assumes no jurisdiction over petitions for declaratory relief which are cognizable by regional trial courts. 4.POLITICAL LAW; SEPARATION OF POWERS; COURT MAY NOT INTRUDE INTO EVERY AFFAIR OF GOVERNMENT. As I have so expressed in Tolentino vs. Secretary of Finance, reiterated in Santiago vs. Guingona, Jr., the Supreme Court should not be thought of as having been tasked with the awesome responsibility of overseeing the entire bureaucracy. Pervasive and limitless, such as it may seem to be under the 1987 Constitution, judicial power still succumbs to the paramount doctrine of separation of powers. The Court may not at good liberty intrude, in the guise of sovereign imprimatur, into every affair of government. What significance can still then remain of the time-honored and widely acclaimed principle of separation of powers if, at every turn, the Court allows itself to pass upon at will the disposition of a co-equal, independent and coordinate branch in our system of government. I dread to think of the so varied uncertainties that such an undue interference can lead to. DECISION PUNO, J p: Petitioners and petitioners-in-intervention filed the instant petitions for prohibition under Rule 65 of the Revised Rules of Court seeking to prohibit the Manila International Airport Authority (MIAA) and the Department of Transportation and Communications (DOTC) and its Secretary from implementing the following agreements executed by the Philippine Government through the DOTC and the MIAA and the Philippine International Air Terminals Co., Inc. (PIATCO): (1) the Concession Agreement signed on July 12, 1997, (2) the Amended and Restated Concession Agreement dated November 26, 1999, (3) the First Supplement to the Amended and Restated Concession Agreement dated August 27, 1999, (4) the Second Supplement to the Amended and Restated Concession Agreement dated September 4, 2000, and (5) the Third Supplement to the Amended and Restated Concession Agreement dated June 22, 2001 (collectively, the PIATCO Contracts). The facts are as follows: In August 1989, the DOTC engaged the services of Aeroport de Paris (ADP) to conduct a comprehensive study of the Ninoy Aquino International Airport (NAIA) and determine whether the present airport can cope with the traffic development up to the year 2010. The study consisted of two parts: first, traffic forecasts, capacity of existing facilities, NAIA future requirements, proposed master plans and development plans; and second, presentation of the preliminary design of the passenger terminal building. The ADP submitted a Draft Final Report to the DOTC in December 1989. Some time in 1993, six business leaders consisting of John Gokongwei, Andrew Gotianun, Henry Sy, Sr., Lucio Tan, George Ty and Alfonso Yuchengco met with then President Fidel V. Ramos to explore the possibility of investing in the construction and operation of a new international airport terminal. To signify their commitment to pursue the project, they formed the Asia's Emerging

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Dragon Corp. (AEDC) which was registered with the Securities and Exchange Commission (SEC) on September 15, 1993. CSaITD On October 5, 1994, AEDC submitted an unsolicited proposal to the Government through the DOTC/MIAA for the development of NAIA International Passenger Terminal III (NAIA IPT III) under a build-operate-and-transfer arrangement pursuant to RA 6957 as amended by RA 7718 (BOT Law). 1 On December 2, 1994, the DOTC issued Dept. Order No. 94-832 constituting the Prequalification Bids and Awards Committee (PBAC) for the implementation of the NAIA IPT III project. On March 27, 1995, then DOTC Secretary Jose Garcia endorsed the proposal of AEDC to the National Economic and Development Authority (NEDA). A revised proposal, however, was forwarded by the DOTC to NEDA on December 13, 1995. On January 5, 1996, the NEDA Investment Coordinating Council (NEDA ICC) Technical Board favorably endorsed the project to the ICC Cabinet Committee which approved the same, subject to certain conditions, on January 19, 1996. On February 13, 1996, the NEDA passed Board Resolution No. 2 which approved the NAIA IPT III Project. On June 7, 14, and 21, 1996, DOTC/MIAA caused the publication in two daily newspapers of an invitation for competitive or comparative proposals on AEDC's unsolicited proposal, in accordance with Sec. 4-A of RA 6957, as amended. The alternative bidders were required to submit three (3) sealed envelopes on or before 5:00 p.m. of September 20, 1996. The first envelope should contain the Prequalification Documents, the second envelope the Technical Proposal, and the third envelope the Financial Proposal of the proponent. On June 20, 1996, PBAC Bulletin No. 1 was issued, postponing the availment of the Bid Documents and the submission of the comparative bid proposals. Interested firms were permitted to obtain the Request for Proposal Documents beginning June 28, 1996, upon submission of a written application and payment of a non-refundable fee of P50,000.00 (US$2,000). The Bid Documents issued by the PBAC provided among others that the proponent must have adequate capability to sustain the financing requirement for the detailed engineering, design, construction, operation, and maintenance phases of the project. The proponent would be evaluated based on its ability to provide a minimum amount of equity to the project, and its capacity to secure external financing for the project. On July 23, 1996, the PBAC issued PBAC Bulletin No. 2 inviting all bidders to a pre-bid conference on July 29, 1996. On August 16, 1996, the PBAC issued PBAC Bulletin No. 3 amending the Bid Documents. The following amendments were made on the Bid Documents: a.Aside from the fixed Annual Guaranteed Payment, the proponent shall include in its financial proposal an additional percentage of gross revenue share of the Government, as follows: i.First 5 years5.0% ii.Next 10 years7.5% iii.Next 10 years10.0% b.The amount of the fixed Annual Guaranteed Payment shall be subject of the price challenge. Proponent may offer an Annual Guaranteed Payment which need not be of equal amount, but payment of which shall start upon site possession. c.The project proponent must have adequate capability to sustain the financing requirement for the detailed engineering, design, construction, and/or operation and maintenance phases of the project as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of: i.Proof of the availability of the project proponent and/or the consortium to provide the minimum amount of equity for the project; and ii.a letter testimonial from reputable banks attesting that the project proponent and/or the members of the consortium are banking with them, that the project proponent and/or the members are of good financial standing, and have adequate resources.

d.The basis for the prequalification shall be the proponent's compliance with the minimum technical and financial requirements provided in the Bid Documents and the IRR of the BOT Law. The minimum amount of equity shall be 30% of the Project Cost. CSaITD e.Amendments to the draft Concession Agreement shall be issued from time to time. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal. On August 29, 1996, the Second Pre-Bid Conference was held where certain clarifications were made. Upon the request of prospective bidder People's Air Cargo & Warehousing Co., Inc (Paircargo), the PBAC warranted that based on Sec. 11.6, Rule 11 of the Implementing Rules and Regulations of the BOT Law, only the proposed Annual Guaranteed Payment submitted by the challengers would be revealed to AEDC, and that the challengers' technical and financial proposals would remain confidential. The PBAC also clarified that the list of revenue sources contained in Annex 4.2a of the Bid Documents was merely indicative and that other revenue sources may be included by the proponent, subject to approval by DOTC/MIAA. Furthermore, the PBAC clarified that only those fees and charges denominated as Public Utility Fees would be subject to regulation, and those charges which would be actually deemed Public Utility Fees could still be revised, depending on the outcome of PBAC's query on the matter with the Department of Justice. In September 1996, the PBAC issued Bid Bulletin No. 5, entitled "Answers to the Queries of PAIRCARGO as Per Letter Dated September 3 and 10, 1996." Paircargo's queries and the PBAC's responses were as follows: 1.It is difficult for Paircargo and Associates to meet the required minimum equity requirement as prescribed in Section 8.3.4 of the Bid Documents considering that the capitalization of each member company is so structured to meet the requirements and needs of their current respective business undertaking/activities. In order to comply with this equity requirement, Paircargo is requesting PBAC to just allow each member of (sic) corporation of the joint Venture to just execute an agreement that embodies a commitment to infuse the required capital in case the project is awarded to the Joint Venture instead of increasing each corporation's current authorized capital stock just for prequalification purposes. In prequalification, the agency is interested in one's financial capability at the time of prequalification, not future or potential capability. A commitment to put up equity once awarded the project is not enough to establish that "present" financial capability. However, total financial capability of all member companies of the Consortium, to be established by submitting the respective companies' audited financial statements, shall be acceptable. 2.At present, Paircargo is negotiating with banks and other institutions for the extension of a Performance Security to the joint venture in the event that the Concessions Agreement (sic) is awarded to them. However, Paircargo is being required to submit a copy of the draft concession as one of the documentary requirements. Therefore, Paircargo is requesting that they'd (sic) be furnished copy of the approved negotiated agreement between the PBAC and the AEDC at the soonest possible time. A copy of the draft Concession Agreement is included in the Bid Documents. Any material changes would be made known to prospective challengers through bid bulletins. However, a final version will be issued before the award of contract. SECAHa The PBAC also stated that it would require AEDC to sign Supplement C of the Bid Documents (Acceptance of Criteria and Waiver of Rights to Enjoin Project) and to submit the same with the required Bid Security. On September 20, 1996, the consortium composed of People's Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium) submitted their competitive proposal to the PBAC. On September 23, 1996, the PBAC opened the first envelope containing the prequalification documents of the Paircargo Consortium. On the following day, September 24, 1996, the PBAC prequalified the Paircargo Consortium.

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On September 26, 1996, AEDC informed the PBAC in writing of its reservations as regards the Paircargo Consortium, which include: a.The lack of corporate approvals and financial capability of PAIRCARGO; b.The lack of corporate approvals and financial capability of PAGS; c.The prohibition imposed by RA 337, as amended (the General Banking Act) on the amount that Security Bank could legally invest in the project; d.The inclusion of Siemens as a contractor of the PAIRCARGO Joint Venture, for prequalification purposes; and e.The appointment of Lufthansa as the facility operator, in view of the Philippine requirement in the operation of a public utility. The PBAC gave its reply on October 2, 1996, informing AEDC that it had considered the issues raised by the latter, and that based on the documents submitted by Paircargo and the established prequalification criteria, the PBAC had found that the challenger, Paircargo, had prequalified to undertake the project. The Secretary of the DOTC approved the finding of the PBAC. The PBAC then proceeded with the opening of the second envelope of the Paircargo Consortium which contained its Technical Proposal. On October 3, 1996, AEDC reiterated its objections, particularly with respect to Paircargo's financial capability, in view of the restrictions imposed by Section 21-B of the General Banking Act and Sections 1380 and 1381 of the Manual Regulations for Banks and Other Financial Intermediaries. On October 7, 1996, AEDC again manifested its objections and requested that it be furnished with excerpts of the PBAC meeting and the accompanying technical evaluation report where each of the issues they raised were addressed. On October 16, 1996, the PBAC opened the third envelope submitted by AEDC and the Paircargo Consortium containing their respective financial proposals. Both proponents offered to build the NAIA Passenger Terminal III for at least $350 million at no cost to the government and to pay the government: 5% share in gross revenues for the first five years of operation, 7.5% share in gross revenues for the next ten years of operation, and 10%. share in gross revenues for the last ten years of operation, in accordance with the Bid Documents. However, in addition to the foregoing, AEDC offered to pay the government a total of P135 million as guaranteed payment for 27 years while Paircargo Consortium offered to pay the government a total of P17.75 billion for the same period. CSaITD Thus, the PBAC formally informed AEDC that it had accepted the price proposal submitted by the Paircargo Consortium, and gave AEDC 30 working days or until November 28, 1996 within which to match the said bid, otherwise, the project would be awarded to Paircargo. As AEDC failed to match the proposal within the 30-day period, then DOTC Secretary Amado Lagdameo, on December 11, 1996, issued a notice to Paircargo Consortium regarding AEDC's failure to match the proposal. On February 27, 1997, Paircargo Consortium incorporated into Philippine International Airport Terminals Co., Inc. (PIATCO). AEDC subsequently protested the alleged undue preference given to PIATCO and reiterated its objections as regards the prequalification of PIATCO. On April 11, 1997, the DOTC submitted the concession agreement for the second-pass approval of the NEDA-ICC, On April 16, 1997, AEDC filed with the Regional Trial Court of Pasig a Petition for Declaration of Nullity of the Proceedings, Mandamus and Injunction against the Secretary of the DOTC, the Chairman of the PBAC, the voting members of the PBAC and Pantaleon D. Alvarez, in his capacity as Chairman of the PBAC Technical Committee. On April 17, 1997, the NEDA-ICC conducted an ad referendum to facilitate the approval, on a noobjection basis, of the BOT agreement between the DOTC and PIATCO. As the ad referendum gathered only four (4) of the required six (6) signatures, the NEDA merely noted the agreement. On July 9, 1997, the DOTC issued the notice of award for the project to PIATCO. On July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the Build-Operate-and-

Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" (1997 Concession Agreement). The Government granted PIATCO the franchise to operate and maintain the said terminal during the concession period and to collect the fees, rentals and other charges in accordance with the rates or schedules stipulated in the 1997 Concession Agreement. The Agreement provided that the concession period shall be for twenty-five (25) years commencing from the in-service date, and may be renewed at the option of the Government for a period not exceeding twenty-five (25) years. At the end of the concession period, PIATCO shall transfer the development facility to MIAA. On November 26, 1998, the Government and PIATCO signed an Amended and Restated Concession Agreement (ARCA). Among the provisions of the 1997 Concession Agreement that were amended by the ARCA were: Sec. 1.11 pertaining to the definition of "certificate of completion"; Sec. 2.05 pertaining to the Special Obligations of GRP; Sec. 3.02 (a) dealing with the exclusivity of the franchise given to the Concessionaire; Sec. 4.04 concerning the assignment by Concessionaire of its interest in the Development Facility; Sec. 5.08 (c) dealing with the proceeds of Concessionaire's insurance; Sec. 5.10 with respect to the temporary take-over of operations by GRP; Sec. 5.16 pertaining to the taxes, duties and other imposts that may be levied on the Concessionaire; Sec. 6.03 as regards the periodic adjustment of public utility fees and charges; the entire Article VIII concerning the provisions on the termination of the contract; and Sec. 10.02 providing for the venue of the arbitration proceedings in case a dispute or controversy arises between the parties to the agreement. Subsequently, the Government and PIATCO signed three Supplements to the ARCA. The First Supplement was signed on August 27, 1999; the Second Supplement on September 4, 2000; and the Third Supplement on June 22, 2001 (collectively, Supplements). The First Supplement to the ARCA amended Sec. 1.36 of the ARCA defining "Revenues" or "Gross Revenues"; Sec. 2.05 (d) of the ARCA referring to the obligation of MIAA to provide sufficient funds for the upkeep, maintenance, repair and/or replacement of all airport facilities and equipment which are owned or operated by MIAA; and further providing additional special obligations on the part of GRP aside from those already enumerated in Sec. 2.05 of the ARCA. The First Supplement also provided a stipulation as regards the construction of a surface road to connect NAIA Terminal II and Terminal III in lieu of the proposed access tunnel crossing Runway 13/31; the swapping of obligations between GRP and PIATCO regarding the improvement of Sales Road; and the changes in the timetable. It also amended Sec. 6.01 (c) of the ARCA pertaining to the Disposition of Terminal Fees; Sec. 6.02 of the ARCA by inserting an introductory paragraph; and Sec. 6.02 (a) (iii) of the ARCA referring to the Payments of Percentage, Share in Gross Revenues. CSaITD The Second Supplement to the ARCA contained provisions concerning the clearing, removal, demolition or disposal of subterranean structures uncovered or discovered at the site of the construction of the terminal by the Concessionaire. It defined the scope of works; it provided for the procedure for the demolition of the said structures and the consideration for the same which the GRP shall pay PIATCO; it provided for time extensions, incremental and consequential costs and losses consequent to the existence of such structures; and it provided for some additional obligations on the part of PIATCO as regards the said structures. Finally, the Third Supplement provided for the obligations of the Concessionaire as regards the construction of the surface road connecting Terminals II and III. Meanwhile, the MIAA which is charged with the maintenance and operation of the NAIA Terminals I and II, had existing concession contracts with various service providers to offer international airline airport services, such as in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing, and other services, to several international airlines at the NAIA. Some of these service providers are the Miascor Group, DNATA-Wings Aviation Systems Corp., and the MacroAsia Group. Miascor, DNATA and MacroAsia, together with Philippine Airlines (PAL), are the dominant players in the industry with an aggregate market share of 70%.

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On September 17, 2002, the workers of the international airline service providers, claiming that they stand to lose their employment upon the implementation of the questioned agreements, filed before this Court a petition for prohibition to enjoin the enforcement of said agreements. 2 On October 15, 2002, the service providers, joining the cause of the petitioning workers, filed a motion for intervention and a petition-in-intervention. On October 24, 2002, Congressmen Salacnib Baterina, Clavel Martinez and Constantino Jaraula filed a similar petition with this Court. 3 On November 6, 2002, several employees of the MIAA likewise filed a petition assailing the legality of the various agreements. 4 On December 11, 2002. another group of Congressmen, Hon. Jacinto V. Paras, Rafael P. Nantes, Eduardo C. Zialcita, Willie B. Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing O. Macaranbon, moved to intervene in the case as RespondentsIntervenors. They filed their Comment-In-Intervention defending the validity of the assailed agreements and praying for the dismissal of the petitions. During the pendency of the case before this Court, President Gloria Macapagal Arroyo, on November 29, 2002, in her speech at the 2002 Golden Shell Export Awards at Malacaang Palace, stated that she will not "honor (PIATCO) contracts which the Executive Branch's legal offices have concluded (as) null and void." 5 Respondent PIATCO filed its Comments to the present petitions on November 7 and 27, 2002. The Office of the Solicitor General and the Office of the Government Corporate Counsel filed their respective Comments in behalf of the public respondents. On December 10, 2002, the Court heard the case on oral argument. After the oral argument, the Court then resolved in open court to require the parties to file simultaneously their respective Memoranda in amplification of the issues heard in the oral arguments within 30 days and to explore the possibility of arbitration or mediation as provided in the challenged contracts. CSaITD In their consolidated Memorandum, the Office of the Solicitor General and the Office of the Government Corporate Counsel prayed that the present petitions be given due course and that judgment be rendered declaring the 1997 Concession Agreement, the ARCA and the Supplements thereto void for being contrary to the Constitution, the BOT Law and its Implementing Rules and Regulations. On March 6, 2003, respondent PIATCO informed the Court that on March 4, 2003 PIATCO commenced arbitration proceedings before the International Chamber of Commerce, International Court of Arbitration (ICC) by filing a Request for Arbitration with the Secretariat of the ICC against the Government of the Republic of the Philippines acting through the DOTC and MIAA. In the present cases, the Court is again faced with the task of resolving complicated issues made difficult by their intersecting legal and economic implications. The Court is aware of the far reaching fall out effects of the ruling which it makes today. For more than a century and whenever the exigencies of the times demand it, this Court has never shirked from its solemn duty to dispense justice and resolve "actual controversies involving rights which are legally demandable and enforceable, and to determine whether or not there has been grave abuse of discretion amounting to lack or excess of jurisdiction." 6 To be sure, this Court will not begin to do otherwise today. We shall first dispose of the procedural issues raised by respondent PIATCO which they allege will bar the resolution of the instant controversy. Petitioners' Legal Standing to File the present Petitions a.G.R. Nos. 155001 and 155661 In G.R. No. 155001 individual petitioners are employees of various service providers 7 having separate concession contracts with MIAA and continuing service agreements with various international airlines to provide in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing and other services. Also included as petitioners are labor unions MIASCOR Workers Union-National Labor Union and

Philippine Airlines Employees Association, These petitioners filed the instant action for prohibition as taxpayers and as parties whose rights and interests stand to be violated by the implementation of the PIATCO Contracts. Petitioners-Intervenors in the same case are all corporations organized and existing under Philippine laws engaged in the business of providing in-flight catering, passenger handling, ramp and ground support, aircraft maintenance and provisions, cargo handling and warehousing and other services to several international airlines at the Ninoy Aquino International Airport. Petitioners-Intervenors allege that as tax-paying international airline and airport-related service operators, each one of them stands to be irreparably injured by the implementation of the PIATCO Contracts. Each of the petitioners-intervenors have separate and subsisting concession agreements with MIAA and with various international airlines which they allege are being interfered with and violated by respondent PIATCO. In G.R. No. 155661, petitioners constitute employees of MIAA and Samahang Manggagawa sa Paliparan ng Pilipinas a legitimate labor union and accredited as the sole and exclusive bargaining agent of all the employees in MIAA. Petitioners anchor their petition for prohibition on the nullity of the contracts entered into by the Government and PIATCO regarding the buildoperate-and-transfer of the NAIA IPT III. They filed the petition as taxpayers and persons who have a legitimate interest to protect in the implementation of the PIATCO Contracts. Petitioners in both cases raise the argument that the PIATCO Contracts contain stipulations which directly contravene numerous provisions of the Constitution, specific provisions of the BOT Law and its Implementing Rules and Regulations, and public policy. Petitioners contend that the DOTC and the MIAA, by entering into said contracts, have committed grave abuse of discretion amounting to lack or excess of jurisdiction which can be remedied only by a writ of prohibition, there being no plain, speedy or adequate remedy in the ordinary course of law. In particular, petitioners assail the provisions in the 1997 Concession Agreement and the ARCA which grant PIATCO the exclusive right to operate a commercial international passenger terminal within the Island of Luzon, except those international airports already existing at the time of the execution of the agreement. The contracts further provide that upon the commencement of operations at the NAIA IPT III, the Government shall cause the closure of Ninoy Aquino International Airport Passenger Terminals I and II as international passenger terminals. With respect to existing concession agreements between MIAA and international airport service providers regarding certain services or operations, the 1997 Concession Agreement and the ARCA uniformly provide that such services or operations will not be carried over to the NAIA IPT III and PIATCO is under no obligation to permit such carry over except through a separate agreement duly entered into with PIATCO. 8 With respect to the petitioning service providers and their employees, upon the commencement of operations of the NAIA IPT III, they allege that they will be effectively barred from providing international airline airport services at the NAIA Terminals I and II as all international airlines and passengers will be diverted to the NAIA IPT III. The petitioning service providers will thus be compelled to contract with PIATCO alone for such services, with no assurance that subsisting contracts with MIAA and other international airlines will be respected. Petitioning service providers stress that despite the very competitive market, the substantial capital investments required and the high rate of fees, they entered into their respective contracts with the MIAA with the understanding that the said contracts will be in force for the stipulated period, and thereafter, renewed so as to allow each of the petitioning service providers to recoup their investments and obtain a reasonable return thereon. Petitioning employees of various service providers at the NAIA Terminals I and II and of MIAA on the other hand allege that with the closure of the NAIA Terminals I and II as international passenger terminals under the PIATCO Contracts, they stand to lose employment. The question on legal standing is whether such parties have "alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult

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constitutional questions." 9 Accordingly, it has been held that the interest of a person assailing the constitutionality of a statute must be direct and personal. He must be able, to show, not only that the law or any government act is invalid, but also that he sustained or is in imminent 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 or act complained of. 10 We hold that petitioners have the requisite standing. In the abovementioned cases, petitioners have a direct and substantial interest to protect by reason of the implementation of the PIATCO Contracts. They stand to lose their source of livelihood, a property right which is zealously protected by the Constitution. Moreover, subsisting concession agreements between MIAA and petitioners-intervenors and service contracts between international airlines and petitionersintervenors stand to be nullified or terminated by the operation of the NAIA IPT III under the PIATCO Contracts. The financial prejudice brought about by the PIATCO Contracts on petitioners and petitioners-intervenors in these cases are legitimate interests sufficient to confer on them the requisite standing to file the instant petitions. CSaITD b.G.R. No. 155547 In G.R. No. 155547, petitioners filed the petition for prohibition as members of the House of Representatives, citizens and taxpayers. They allege that as members of the House of Representatives, they are especially interested in the PIATCO Contracts, because the contracts compel the Government and/or the House of Representatives to appropriate funds necessary to comply with the provisions therein. 11 They cite provisions of the PIATCO Contracts which require disbursement of unappropriated amounts in compliance with the contractual obligations of the Government. They allege that the Government obligations in the PIATCO Contracts which compel government expenditure without appropriation is a curtailment of their prerogatives as legislators, contrary to the mandate of the Constitution that "[n]o money shall be paid out of the treasury except in pursuance of an appropriation made by law." 12 Standing is a peculiar concept in constitutional law because in some cases, suits are not brought by parties who have been personally injured by the operation of a law or any other government act but by concerned citizens, taxpayers or voters who actually sue in the public interest. Although we are not unmindful of the cases of Imus Electric Co. v. Municipality of Imus 13 and Gonzales v. Raquiza 14 wherein this Court held that appropriation must be made only on amounts immediately demandable,public interest demands that we take a more liberal view in determining whether the petitioners suing as legislators, taxpayers and citizens have locus standi to file the instant petition. In Kilosbayan, Inc. v. Guingona, 15 this Court held "[i]n line with the liberal policy of this Court on locus standi, ordinary taxpayers, members of Congress, and even association of planters, and non-profit civic organizations were allowed to initiate and prosecute actions before this Court to question the constitutionality or validity of laws, acts, decisions, rulings, or orders of various government agencies or instrumentalities," 16 Further, "insofar as taxpayers' suits are concerned . . . (this Court) is not devoid of discretion as to whether or not it should be entertained." 17 As such ". . . even if, strictly speaking, they [the petitioners] are not covered by the definition, it is still within the wide discretion of the Court to waive the requirement and so remove the impediment to its addressing and resolving the serious constitutional questions raised." 18 In view of the serious legal questions involved and their impact on public interest, we resolve to grant standing to the petitioners. Other Procedural Matters Respondent PIATCO further alleges that this Court is without jurisdiction to review the instant cases as factual issues are involved which this Court is ill-equipped to resolve. Moreover, PIATCO alleges that submission of this controversy to this Court at the first instance is a violation of the rule on hierarchy of courts. They contend that trial courts have concurrent jurisdiction with this Court with respect to a special civil action for prohibition and hence, following the rule on hierarchy of courts, resort must first be had before the trial courts.

After a thorough study and careful evaluation of the issues involved, this Court is of the view that the crux of the instant controversy involves significant legal questions. The facts necessary to resolve these legal questions are well established and, hence, need not be determined by a trial court. The rule on hierarchy of courts will not also prevent this Court from assuming jurisdiction over the cases at bar. The said rule may be relaxed when the redress desired cannot be obtained in the appropriate courts or where exceptional and compelling circumstances justify availment of a remedy within and calling for the exercise of this Court's primary jurisdiction. 19 It is easy to discern that exceptional circumstances exist in the cases at bar that call for the relaxation of the rule. Both petitioners and respondents agree that these cases are of transcendental importance as they involve the construction and operation of the country's premier international airport. Moreover, the crucial issues submitted for resolution are of first impression and they entail the proper legal interpretation of key provisions of the Constitution, the BOT Law and its Implementing Rules and Regulations. Thus, considering the nature of the controversy before the Court, procedural bars may be lowered to give way for the speedy disposition of the instant cases. Legal Effect of the Commencement of Arbitration Proceedings by PIATCO There is one more procedural obstacle which must be overcome. The Court is aware that arbitration proceedings pursuant to Section 10.02 of the ARCA have been filed at the instance of respondent PIATCO. Again, we hold that the arbitration step taken by PIATCO will not oust this Court of its jurisdiction over the cases at bar. In Del Monte Corporation-USA v. Court of Appeals, 20 even after finding that the arbitration clause in the Distributorship Agreement in question is valid and the dispute between the parties is arbitrable, this Court affirmed the trial court's decision denying petitioner's Motion to Suspend Proceedings pursuant to the arbitration clause under the contract. In so ruling, this Court held that as contracts produce legal effect between the parties, their assigns and heirs, only the parties to the Distributorship Agreement are bound by its terms, including the arbitration clause stipulated therein. This Court ruled that arbitration proceedings could be called for but only with respect to the parties to the contract in question. Considering that there are parties to the case who are neither parties to the Distributorship Agreement nor heirs or assigns of the parties thereto, this Court, citing its previous ruling in Salas, Jr. v. Laperal Realty Corporation, 21 held that to tolerate the splitting of proceedings by allowing arbitration as to some of the parties on the one hand and trial for the others on the other hand would, in effect, result in multiplicity of suits, duplicitous procedure and unnecessary delay. 22 Thus, we ruled that the interest of justice would best be served if the trial court hears and adjudicates the case in a single and complete proceeding. It is established that petitioners in the present cases who have presented legitimate interests in the resolution of the controversy are not parties to the PIATCO Contracts. Accordingly, they cannot be bound by the arbitration clause provided for in the ARCA and hence, cannot be compelled to submit to arbitration proceedings.A speedy and decisive resolution of all the critical issues in the present controversy, including those raised by petitioners, cannot be made before an arbitral tribunal. The object of arbitration is precisely to allow an expeditious determination of a dispute. This objective would not be met if this Court were to allow the parties to settle the cases by arbitration as there are certain issues involving non-parties to the PIATCO Contracts which the arbitral tribunal will not be equipped to resolve. Now, to the merits of the instant controversy. I Is PIATCO a qualified bidder? Public respondents argue that the Paircargo Consortium, PIATCO's predecessor, was not a duly pre-qualified bidder on the unsolicited proposal submitted by AEDC as the Paircargo Consortium failed to meet the financial capability required under the BOT Law and the Bid Documents. They

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allege that in computing the ability of the Paircargo Consortium to meet the minimum equity requirements for the project, the entire net worth of Security Bank, a member of the consortium, should not be considered. PIATCO relies, on the other hand, on the strength of the Memorandum dated October 14, 1996 issued by the DOTC Undersecretary Primitivo C. Cal stating that the Paircargo Consortium is found to have a combined net worth of P3,900,000,000.00, sufficient to meet the equity requirements of the project. The said Memorandum was in response to a letter from Mr. Antonio Henson of AEDC to President Fidel V. Ramos questioning the financial capability of the Paircargo Consortium on the ground that it does not have the financial resources to put up the required minimum equity of P2,700,000,000.00. This contention is based on the restriction under R.A. No. 337, as amended or the General Banking Act that a commercial bank cannot invest in any single enterprise in an amount more than 15% of its net worth. In the said Memorandum, Undersecretary Cal opined: The Bid Documents, as clarified through Bid Bulletin Nos. 3 and 5, require that financial capability will be evaluated based on total financial capability of all the member companies of the [Paircargo] Consortium. In this connection, the Challenger was found to have a combined net worth of P3,926,421,242.00 that could support a project costing approximately P13 Billion. CSaITD It is not a requirement that the net worth must be "unrestricted." To impose that as a requirement now will be nothing less than unfair. The financial statement or the net worth is not the sole basis in establishing financial capability. As stated in Bid Bulletin No. 3, financial capability may also be established by testimonial letters issued by reputable banks. The Challenger has complied with this requirement. To recap, net worth reflected in the Financial Statement should not be taken as the amount of the money to be used to answer the required thirty percent (30%) equity of the challenger but rather to be used in establishing if there is enough basis to believe that the challenger can comply with the required 30% equity. In fact, proof of sufficient equity is required as one of the conditions for award of contract (Section 12.1 IRR of the BOT Law) but not for pre-qualification (Section 5.4 of the same document). 23 Under the BOT Law, in case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder "who, having satisfied the minimum financial, technical, organizational and legal standards" required by the law, has submitted the lowest bid and most favorable terms of the project, 24 Further, the 1994 Implementing Rules and Regulations of the BOT Law provide: Section 5.4Pre-qualification Requirements. xxx xxx xxx c.Financial Capability: The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction and/or operation and maintenance phases of the project, as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. The government agency/LGU concerned shall determine on a project-to-project basis and before pre-qualification, the minimum amount of equity needed. (Italics supplied) Pursuant to this provision, the PBAC issued PBAC Bulletin No. 3 dated August 16, 1996 amending the financial capability requirements for pre-qualification of the project proponent as follows: 6.Basis of Pre-qualification The basis for the pre-qualification shall be on the compliance of the proponent to the minimum technical and financial requirements provided in the Bid Documents and in the IRR of the BOT Law, R.A. No. 6957, as amended by R.A. 7718. The minimum amount of equity to which the proponent's financial capability will be based shall be thirty percent (30%) of the project cost instead of the twenty percent (20%) specified in Section 3.6.4 of the Bid Documents. This is to correlate with the required debt-to-equity ratio of 70:30 in Section 2.01a of the draft concession agreement, The debt portion of the project financing should not exceed 70% of the actual project cost.

Accordingly, based on the above provisions of law, the Paircargo Consortium or any challenger to the unsolicited proposal of AEDC has to show that it possesses the requisite financial capability to undertake the project in the minimum amount of 30% of the project cost through (i) proof of the ability to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. As the minimum project cost was estimated to be US$350,000,000.00 or roughly P9,183,650,000.00, 25 the Paircargo Consortium had to show to the satisfaction of the PBAC that it had the ability to provide the minimum equity for the project in the amount of at least P2,755,095,000.00. Paircargo's Audited Financial Statements as of 1993 and 1994 indicated that it had a net worth of P2,783,592,00 and P3,123,515,00 respectively. 26 PAGS' Audited Financial Statements as of 1995 indicate that it has approximately P26,735,700.00 to invest as its equity for the project. 27 Security Bank's Audited Financial Statements as of 1995 show that it has a net worth equivalent to its capital funds in the amount of P3,523,504,377.00. 28 We agree with public respondents that with respect to Security Bank, the entire amount of its net worth could not be invested in a single undertaking or enterprise, whether allied or non-allied in accordance with the provisions of R.A. No. 337, as amended or the General Banking Act: Sec. 21-B.The provisions in this or in any other Act to the contrary notwithstanding, the Monetary Board, whenever it shall deem appropriate and necessary to further national development objectives or support national priority projects, may authorize a commercial bank, a bank authorized to provide commercial banking services, as well as a government-owned and controlled bank, to operate under an expanded commercial banking authority and by virtue thereof exercise, in addition to powers authorized for commercial banks, the powers of an Investment House as provided in Presidential Decree No. 129, invest in the equity of a non-allied undertaking, or own a majority or all of the equity in a financial intermediary other than a commercial bank or a bank authorized to provide commercial banking services; Provided, That (a) the total investment in equities shall not exceed fifty percent (50%) of the net worth of the bank; (b) the equity investment in any one enterprise whether allied or non-allied shall not exceed fifteen percent (15%) of the net worth of the bank; (c) the equity investment of the bank, or of its wholly or majority-owned subsidiary, in a single non-allied undertaking shall not exceed thirty-five percent (35%) of the total equity in the enterprise nor shall it exceed thirty-five percent (35%) of the voting stock in that enterprise; and (d) the equity investment in other banks shall be deducted from the investing bank's net worth for purposes of computing the prescribed ratio of net worth to risk assets. xxx xxx xxx Further, the 1993 Manual of Regulations for Banks provides: SECTION X383.Other Limitations and Restrictions. The following limitations and restrictions shall also apply regarding equity investments of banks. a.In any single enterprise. The equity investments of banks in any single enterprise shall not exceed at any time fifteen percent (15%) of the net worth of the 'investing bank as defined in Sec. X106 and Subsec. X121.5. CSaITD Thus, the maximum amount that Security Bank could validly invest in the Paircargo Consortium is only P528,525,656.55, representing 15% of its entire net worth. The total net worth therefore of the Paircargo Consortium, after considering the maximum amounts that may be validly invested by each of its members is P558,384,871.55 or only 6.08% of the project cost, 29 an amount substantially less than the prescribed minimum equity investment required for the project in the amount of P2,755,095,000.00 or 30% of the project cost. The purpose of pre-qualification in any public bidding is to determine, at the earliest opportunity, the ability of the bidder to undertake the project. Thus, with respect to the bidder's financial capacity at the pre-qualification stage, the law requires the government agency to examine and determine the ability of the bidder to fund the entire cost of the project by considering the maximum amounts that each bidder may invest in the project at the time of pre-qualification.

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The PBAC has determined that any prospective bidder, for the construction, operation and maintenance of the NAIA IPT III project should prove that it has the ability to provide equity in the minimum amount of 30% of the project cost, in accordance with the 70:30 debt-to-equity ratio prescribed in the Bid Documents. Thus, in the case of Paircargo Consortium, the PBAC should determine the maximum amounts that each member of the consortium may commit for the construction, operation and maintenance of the NAIA IPT III project at the time of prequalification. With respect to Security Bank, the maximum amount which may be invested by it would only be 15% of its net worth in view of the restrictions imposed by the General Banking Act. Disregarding the investment ceilings provided by applicable law would not result in a proper evaluation of whether or not a bidder is pre-qualified to undertake the project as for all intents and purposes, such ceiling or legal restriction determines the true maximum amount which a bidder may invest in the project. Further, the determination of whether or not a bidder is pre-qualified to undertake the project requires an evaluation of the financial capacity of the said bidder at the time the bid is submitted based on the required documents presented by the bidder. The PBAC should not be allowed to speculate on the future financial ability of the bidder to undertake the project on the basis of documents submitted. This would open doors to abuse and defeat the very purpose of a public bidding. This is especially true in the case at bar which involves the investment of billions of pesos by the project proponent. The relevant government authority is duty-bound to ensure that the awardee of the contract possesses the minimum required financial capability to complete the project. To allow the PBAC to estimate the bidder's future financial capability would not secure the viability and integrity of the project. A restrictive and conservative application of the rules and procedures of public bidding is necessary not only to protect the impartiality and regularity of the proceedings but also to ensure the financial and technical reliability of the project. It has been held that: The basic rule in public bidding is that bids should be evaluated based on the required documents submitted before and not after the opening of bids. Otherwise, the foundation of a fair and competitive public bidding would be defeated. Strict observance of the rules, regulations, and guidelines of the bidding process is the only safeguard to a fair, honest and competitive public bidding. 30 Thus, if the maximum amount of equity that a bidder may invest in the project at the time the bids are submitted falls short of the minimum amounts required to be put up by the bidder, said bidder should be properly disqualified. Considering that at the pre-qualification stage, the maximum amounts which the Paircargo Consortium may invest in the project fell short of the minimum amounts prescribed by the PBAC, we hold that Paircargo Consortium was not a qualified bidder. Thus the award of the contract by the PBAC to the Paircargo Consortium, a disqualified bidder, is null and void. While it would be proper at this juncture to end the resolution of the instant controversy, as the legal effects of the disqualification of respondent PIATCO's predecessor would come into play and necessarily result in the nullity of all the subsequent contracts entered by it in pursuance of the project, the Court feels that it is necessary to discuss in full the pressing issues of the present controversy for a complete resolution thereof. II Is the 1997 Concession Agreement valid? Petitioners and public respondents contend that the 1997 Concession Agreement is invalid as it contains provisions that substantially depart from the draft Concession Agreement included in the Bid Documents. They maintain that a substantial departure from the draft Concession Agreement is a violation of public policy and renders the 1997 Concession Agreement null and void. PIATCO maintains, however, that the Concession Agreement attached to the Bid Documents is intended to be a draft, i.e., subject to change, alteration or modification, and that this intention was clear to all participants, including AEDC, and DOTC/MIAA. It argued further that said intention is expressed in Part C (6) of Bid Bulletin No. 3 issued by the PBAC which states:

6.Amendments to the Draft Concessions Agreement Amendments to the Draft Concessions Agreement shall be issued from time to time. Said amendments shall only cover items that would not materially affect the preparation of the proponent's proposal. By its very nature, public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. Thus: Competition must be legitimate, fair and honest. In the field of government contract law, competition requires, not only bidding upon a common standard, a common basis, upon the same thing, the same subject matter, the same undertaking,' but also that it be legitimate, fair and honest; and not designed to injure or defraud the government. 31 An essential element of a publicly bidded contract is that all bidders must be on equal footing. Not simply in terms of application of the procedural rules and regulations imposed by the relevant government agency, but more importantly, on the contract bidded upon. Each bidder must be able to bid on the same thing. The rationale is obvious. If the winning bidder is allowed to later include or modify certain provisions in the contract awarded such that the contract is altered in any material respect, then the essence of fair competition in the public bidding is destroyed. A public bidding would indeed be a farce if after the contract is awarded, the winning bidder may modify the contract and include provisions which are favorable to it that were not previously made available to the other bidders. Thus: It is inherent in public biddings that there shall be a fair competition among the bidders. The specifications in such biddings provide the common ground or basis for the bidders.The specifications should, accordingly, operate equally or indiscriminately upon all bidders. 32 The same rule was restated by Chief Justice Stuart of the Supreme Court of Minnesota: The law is well settled that where, as in this case, municipal authorities can only let a contract for public work to the lowest responsible bidder, the proposals and specifications therefore must be so framed as to permit free and full competition. Nor can they enter into a contract with the best bidder containing substantial provisions beneficial to him, not included or contemplated in the terms and specifications upon which the bids were invited. 33 In fact, in the PBAC Bid Bulletin No. 3 cited by PIATCO to support its argument that the draft concession agreement is subject to amendment, the pertinent portion of which was quoted above, the PBAC also clarified that "[s]aid amendments shall only cover items that would not materially affect the preparation of the proponent's proposal." While we concede that a winning bidder is not precluded from modifying or amending certain provisions of the contract bidded upon, such changes must not constitute substantial or material amendments that would alter the basic parameters of the contract and would constitute a denial to the other bidders of the opportunity to bid on the same terms. Hence, the determination of whether or not a modification or amendment of a contract bidded out constitutes a substantial amendment rests on whether the contract, when taken as a whole, would contain substantially different terms and conditions that would have the effect of altering the technical and/or financial proposals previously submitted by other bidders. The alterations and modifications in the contract executed between the government and the winning bidder must be such as to render such executed contract to be an entirely different contract from the one that was bidded upon. CSaITD In the case of Caltex (Philippines), Inc. v. Delgado Brothers, Inc., 34 this Court quoted with approval the ruling of the trial court that an amendment to a contract awarded through public bidding, when such subsequent amendment was made without a new public bidding, is null and void: The Court agrees with the contention of counsel for the plaintiffs that the due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the

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bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding. 35 Hence, the question that comes to fore is this: is the 1997 Concession Agreement the same agreement that was offered for public bidding, i.e., the draft Concession Agreement attached to the Bid Documents? A close comparison of the draft Concession Agreement attached to the Bid Documents and the 1997 Concession Agreement reveals that the documents differ in at least two material respects: a.Modification on the Public Utility Revenues and Non-Public Utility Revenues that may be collected by PIATCO The fees that may be, imposed and collected by PIATCO under the draft Concession Agreement and the 1997 Concession Agreement may be classified into three distinct categories: (1) fees which are subject to periodic adjustment of once every two years in accordance with a prescribed parametric formula and adjustments are made effective only upon written approval by MIAA; (2) fees other than those included in the first category which may be adjusted by PIATCO whenever it deems necessary without need for consent of DOTC/MIAA; and (3) new fees and charges that may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I, pursuant to Administrative Order No. 1, Series of 1993, as amended. The glaring distinctions between the draft Concession Agreement and the 1997 Concession Agreement lie in the types of fees included in each category and the extent of the supervision and regulation which MIAA is allowed to exercise in relation thereto. For fees under the first category, i.e., those which are subject to periodic adjustment in accordance with a prescribed parametric formula and effective only upon written approval by MIAA, the draft Concession Agreement includes the following: 36 (1)aircraft parking fees; (2)aircraft tacking fees; (3)groundhandling fees; (4)rentals and airline offices; (5)check-in counter rentals; and (6)porterage fees. Under the 1997 Concession Agreement, fees which are subject to adjustment and effective upon MIAA approval are classified as "Public Utility Revenues" and include:37 (1)aircraft parking fees; (2)aircraft tacking fees; (3)check-in counter fees; and (4)Terminal Fees. The implication of the reduced number of fees that are subject to MIAA approval is best appreciated in relation to fees included in the second category identified above. Under the 1997 Concession Agreement, fees which PIATCO may adjust whenever it deems necessary without need for consent of DOTC/MIAA are "Non-Public Utility Revenues" and is defined as "all other income not classified as Public Utility Revenues derived from operations of the Terminal and the Terminal Complex." 38 Thus, under the 1997 Concession Agreement, groundhandling fees, rentals from airline offices and porterage fees are no longer subject to MIAA regulation. Further, under Section 6.03 of the draft Concession Agreement; MIAA reserves the right to regulate (1) lobby and vehicular parking fees and (2) other new fees and charges that may be imposed by PIATCO. Such regulation may be made by periodic adjustment and is effective only upon written approval of MIAA. The full text of said provision is quoted below: Section 6.03.Periodic Adjustment in Fees and Charges. Adjustments in the aircraft parking fees, aircraft tacking fees, groundhandling fees, rentals and airline offices, check-in-counter rentals and porterage fees shall be allowed only once every two years and in accordance with the Parametric

Formula attached hereto as Annex F. Provided that adjustments shall be made effective only after the written express approval of the MIAA. Provided, further, that such approval of the MIAA, shall be contingent only on the conformity of the adjustments with the above said parametric formula. The first adjustment shall be made prior to the In-Service Date of the Terminal. The MIAA reserves the right to regulate under the foregoing terms and conditions the lobby and vehicular parking fees and other new fees and charges as contemplated in paragraph 2 of Section 6.01 if in its judgment the users of the airport shall be deprived of a free option for the services they cover. 39 On the other hand, the equivalent provision under the 1997 Concession Agreement reads: Section 6.03Periodic Adjustment in Fees, and Charges. xxx xxx xxx (c)Concessionaire shall at all times be judicious in fixing fees and charges constituting Non-Public Utility Revenues in order to ensure that End Users are not unreasonably deprived of services. While the vehicular parking fee, porterage fee and greeter/well wisher fee constitute Non-Public Utility Revenues of Concessionaire, GRP may intervene and require Concessionaire to explain and justify the fee it may set from time to time, if in the reasonable opinion of GRP the said fees have become exorbitant resulting in the unreasonable deprivation of End Users of such services. 40 Thus, under the 1997 Concession Agreement, with respect to (1) vehicular parking fee, (2) porterage fee and (3) greeter/well wisher fee, all that MIAA can do is to require PIATCO to explain and justify the fees set by PIATCO. In the draft Concession Agreement, vehicular parking fee is subject to MIAA regulation and approval under the second paragraph of Section 6.03 thereof while porterage fee is covered by the first paragraph of the same provision. There is an obvious relaxation of the extent of control and regulation by MIAA with respect to the particular fees that may be charged by PIATCO. CSaITD Moreover, with respect to the third category of fees that may be imposed and collected by PIATCO, i.e., new fees and charges that may be imposed by PIATCO which have not been previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I, under Section 6.03 of the draft Concession AgreementMIAA has reserved the right to regulate the same under the same conditions that MIAA may regulate fees under the first category, i.e., periodic adjustment of once every two years in accordance with a prescribed parametric formula and effective only upon written approval by MIAA. However, under the 1997 Concession Agreement, adjustment of fees under the third category is not subject to MIAA regulation. With respect to terminal fees that may be charged by PIATCO, 41 as shown earlier, this was included within the category of "Public Utility Revenues" under the 1997 Concession Agreement. This classification is significant because under the 1997 Concession Agreement, "Public Utility Revenues" are subject to an "Interim Adjustment" of fees upon the occurrence of certain extraordinary events specified in the agreement. 42 However, under the draft Concession Agreement, terminal fees are not included in the types of fees that may be subject to "Interim Adjustment." 43 Finally, under the 1997 Concession Agreement, "Public Utility Revenues," except terminal fees, are denominated in US Dollars 44 while payments to the Government are in Philippine Pesos. In the draft Concession Agreement, no such stipulation was included. By stipulating that "Public Utility Revenues" will be paid to PIATCO in US Dollars while payments by PIATCO to the Government are in Philippine currency under the 1997 Concession Agreement, PIATCO is able to enjoy the benefits of depreciations of the Philippine Peso, while being effectively insulated from the detrimental effects of exchange rate fluctuations. When taken as a whole, the changes under the 1997 Concession Agreement with respect to reduction in the types of fees that are subject to MIAA regulation and the relaxation of such regulation with respect to other fees are significant amendments that substantially distinguish the draft Concession Agreement from the 1997 Concession Agreement. The 1997 Concession Agreement, in this respect, clearly gives PIATCO more favorable terms than what was available to other bidders at the time the contract was bidded out. It is not very difficult to see that the changes in the 1997 Concession Agreement translate to direct and concrete financial advantages

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for PIATCO which were not available at the time the contract was offered for bidding. It cannot be denied that under the 1997 Concession Agreement only "Public Utility Revenues" are subject to MIAA regulation. Adjustments of all other fees imposed and collected by PIATCO are entirely within its control. Moreover, with respect to terminal fees, under the 1997 Concession Agreement, the same is further subject to "Interim Adjustments" not previously stipulated in the draft Concession Agreement. Finally, the change in the currency stipulated for "Public Utility Revenues" under the 1997 Concession Agreement, except terminal fees, gives PIATCO an added benefit which was not available at the time of bidding. aSTAIH b.Assumption by the Government of the liabilities of PIATCO in the event of the latter's default thereof Under the draft Concession Agreement, default by PIATCO of any of its obligations to creditors who have provided, loaned or advanced funds for the NAIA IPT III project does not result in the assumption by the Government of these liabilities. In fact, nowhere in the said contract does default of PIATCO's loans figure in the agreement. Such default does not directly result in any concomitant right or obligation in favor of the Government. However, the 1997 Concession Agreement provides: Section 4.04 Assignment. xxx xxx xxx (b)In the event Concessionaire should default in the payment of an Attendant Liability, and the default has resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. GRP shall, within one hundred eighty (180) Days from receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified, to be substituted as concessionaire and operator of the Development Facility in accordance with the terms and conditions hereof, or designate a qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this Agreement; Provided that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the Development Facility with the concomitant assumption of Attendant Liabilities. (c)If GRP should, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and organize a concession company qualified to take over the operation of the Development Facility. If the concession company should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the aforesaid period, then GRP shall at the end of the 180day period take over the Development Facility and assume Attendant Liabilities. The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as: Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors. Under the above quoted portions of Section 4.04 in relation to the definition of "Attendant Liabilities," default by PIATCO of its loans used to finance the NAIA IPT III project triggers the occurrence of certain events that leads to the assumption by the Government of the liability for the loans. Only in one instance may the Government escape the assumption of PIATCO's liabilities, i.e., when the Government so elects and allows a qualified operator to take over as Concessionaire. However, this circumstance is dependent on the existence and availability of a

qualified operator who is willing to take over the rights and obligations of PIATCO under the contract, a circumstance that is not entirely within the control of the Government. Without going into the validity of this provision at this juncture, suffice it to state that Section 4.04 of the 1997 Concession Agreement may be considered a form of security for the loans PIATCO has obtained to finance the project, an option that was not made available in the draft Concession Agreement. Section 4.04 is an important amendment to the 1997 Concession Agreement because it grants PIATCO a financial advantage or benefit which was not previously made available during the bidding process. This financial advantage is a significant modification that translates to better terms and conditions for PIATCO. PIATCO, however, argues that the parties to the bidding procedure acknowledge that the draft Concession Agreement is subject to amendment because the Bid Documents permit financing or borrowing. They claim that it was the lenders who proposed the amendments to the draft Concession Agreement which resulted in the 1997 Concession Agreement. We agree that it is not inconsistent with the rationale and purpose of the BOT Law to allow the project proponent or the winning bidder to obtain financing for the project, especially in this case which involves the construction, operation and maintenance of the NAIA IPT III. Expectedly, compliance by the project proponent of its undertakings therein would involve a substantial amount of investment. It is therefore inevitable for the awardee of the contract to seek alternate sources of funds to support the project. Be that as it may, this Court maintains that amendments to the contract bidded upon should always conform to the general policy on public bidding if such procedure is to be faithful to its real nature and purpose. By its very nature and characteristic, competitive public bidding aims to protect the public interest by giving the public the best possible advantages through open competition. 45 It has been held that the three principles in public bidding are (1) the offer to the public; (2) opportunity for competition; and (3) a basis for the exact comparison of bids. A regulation of the matter which excludes any of these factors destroys the distinctive character of the system and thwarts the purpose of its adoption. 46 These are the basic parameters which every awardee of a contract bidded out must conform to, requirements of financing and borrowing notwithstanding. Thus, upon a concrete showing that, as in this case, the contract signed by the government and the contract awardee is an entirely different contract from the contract bidded, courts should not hesitate to strike down said contract in its entirety for violation of public policy on public bidding. A strict adherence on the principles, rules and regulations on public bidding must be sustained if only to preserve the integrity and the faith of the general public on the procedure. Public bidding is a standard practice for procuring government contracts for public service and for furnishing supplies and other materials. It aims to secure for the government the lowest possible price under the most favorable terms and conditions, to curtail favoritism in the award of government contracts and avoid suspicion of anomalies and it places all bidders in equal footing. 47 Any government action which permits any substantial variance between the conditions under which the bids are invited and the contract executed after the award thereof is a grave abuse of discretion amounting to lack or excess of jurisdiction which warrants proper judicial action. In view of the above discussion, the fact that the foregoing substantial amendments were made on the 1997 Concession Agreement renders the same null and void for being contrary to public policy. These amendments convert the 1997 Concession Agreement to an entirely different agreement from the contract bidded out or the draft Concession Agreement. It is not difficult to see that the amendments on (1) the types of fees or charges that are subject to MIAA regulation or control and the extent thereof and (2) the assumption by the Government, under certain conditions, of the liabilities of PIATCO directly translates concrete financial advantages to PIATCO that were previously not available during the bidding process. These amendments cannot be taken as merely supplements to or implementing provisions of those already existing in the draft Concession Agreement. The amendments discussed above present new terms and conditions which provide financial benefit to PIATCO which may have altered the technical and financial parameters of other bidders had they known that such terms were available. III

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Direct Government Guarantee Article IV, Section 4.04(b) and (c), in relation to Article 1.06, of the 1997 Concession Agreement provides: Section 4.04 Assignment xxx xxx xxx (b)In the event Concessionaire should default in the payment of an Attendant Liability, and the default resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. GRP shall within one hundred eighty (180) days from receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified to be substituted as concessionaire and operator of the Development facility in accordance with the terms and conditions hereof, or designate a qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this Agreement; Provided, that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the Development Facility with the concomitant assumption of Attendant Liabilities. (c)If GRP, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and organize a concession company qualified to takeover the operation of the Development Facility. If the concession company should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the aforesaid period, then GRP shall at the end of the 180day period take over the Development Facility and assume Attendant Liabilities. xxx xxx xxx Section 1.06. Attendant Liabilities Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by Concessionaire to its suppliers, contractors and subcontractors. 48 It is clear from the above-quoted provisions that Government, in the event that PIATCO defaults in its loan obligations, is obligated to pay "all amounts recorded and from time to time outstanding from the books" of PIATCO which the latter owes to its creditors. 49 These amounts include "all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses." 50 This obligation of the Government to pay PIATCO's creditors upon PIATCO's default would arise if the Government opts to take over NAIA IPT III. It should be noted, however, that even if the Government chooses the second option, which is to allow PIATCO's unpaid creditors operate NAIA IPT III, the Government is still at a risk of being liable to PIATCO's creditors should the latter be unable to designate a qualified operator within the prescribed period. 51 In effect, whatever option the Government chooses to take in the event of PIATCO's failure to fulfill its loan obligations, the Government is still at a risk of assuming PIATCO's outstanding loans. This is due to the fact that the Government would only be free from assuming PIATCO's debts if the unpaid creditors would be able to designate a qualified operator within the period provided for in the contract. Thus, the Government's assumption of liability is virtually out of its control. The Government under the circumstances provided for in the 1997 Concession Agreement is at the mercy of the existence, availability and willingness of a qualified operator. The above contractual provisions constitute a direct government guarantee which is prohibited by law. One of the main impetus for the enactment of the BOT Law is the lack of government funds to construct the infrastructure and development projects necessary for economic growth and development. This is why private sector resources are being tapped in order to finance these

projects. The BOT law allows the private sector to participate, and is in fact encouraged to do so by way of incentives, such as minimizing, the unstable flow of returns, 52 provided that the government would not have to unnecessarily expend scarcely available funds for the project itself. As such, direct guarantee, subsidy and equity by the government in these projects are strictly prohibited. 53 This is but logical for if the government would in the end still be at a risk of paying the debts incurred by the private entity in the BOT projects, then the purpose of the law is subverted. Section 2(n) of the BOT Law defines direct guarantee as follows: (n)Direct government guarantee An agreement whereby the government or any of its agencies or local government units assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default. Clearly by providing that the Government "assumes" the attendant liabilities, which consists of PIATCO's unpaid debts, the 1997 Concession Agreement provided for a direct government guarantee for the debts incurred by PIATCO in the implementation of the NAIA IPT III project. It is of no moment that the relevant sections are subsumed under the title of "assignment". The provisions providing for direct government guarantee which is prohibited by law is clear from the terms thereof. The fact that the ARCA superseded the 1997 Concession Agreement did not cure this fatal defect. Article IV, Section 4.04(c), in relation to Article 1, Section 1.06, of the ARCA provides: Section 4.04 Security xxx xxx xxx (c)GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and enter into direct agreement with the Senior Lenders, or with an agent of such Senior Lenders (which agreement shall be subject to the approval of the Bangko Sentral ng Pilipinas), in such form as may be reasonably acceptable to both GRP and Senior Lenders, with regard, inter alia, to the following parameters: xxx xxx xxx (iv)If the Concessionaire [PIATCO] is in default under a payment obligation owed to the Senior Lenders, and as a result thereof the Senior Lenders have become entitled to accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of the same, and without prejudice to any other rights of the Senior Lenders or any Senior Lenders' agent may have (including without limitation under security interests granted in favor of the Senior Lenders), to either in good faith identify and designate a nominee which is qualified under sub-clause (viii)(y) below to operate the Development Facility [NAIA Terminal 3] or transfer the Concessionaire's [PIATCO] rights and obligations under this Agreement to a transferee which is qualified under sub-clause (viii) below; xxx xxx xxx (vi)if the Senior Lenders, acting in good faith and using reasonable efforts, are unable to designate a nominee or effect a transfer in terms and conditions satisfactory to the Senior Lenders within one hundred eighty (180) days after giving GRP notice as referred to respectively in (iv) or (v) above, then GRP and the Senior Lenders shall endeavor in good faith to enter into any other arrangement relating to the Development Facility [NAIA Terminal 3] (other than a turnover of the Development Facility [NAIA Terminal 3] to GRP) within the following one hundred eighty (180) days. If no agreement relating to the Development Facility [NAIA Terminal 3] is arrived at by GRP and the Senior Lenders within the said 180-day period, then at the end thereof the Development Facility [NAIA Terminal 3] shall be transferred by the Concessionaire [PIATCO] to GRP or its designee and GRP shall make a termination payment to Concessionaire [PIATCO] equal to the Appraised Value (as hereinafter defined) of the Development Facility [NAIA Terminal 3] or the sum of the Attendant Liabilities, if greater. Notwithstanding Section 8.01 (c) hereof, this Agreement shall be deemed terminated upon the transfer of the Development Facility [NAIA Terminal 3] to GRP pursuant hereto; xxx xxx xxx Section 1.06. Attendant Liabilities

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Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which may become owing by Concessionaire [PIATCO] to Senior Lenders or any other persons or entities who have provided, loaned, or advanced funds or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA Terminal 3], including, without limitation, all principal, interest, associated fees, charges, reimbursements, and other related expenses (including the fees, charges and expenses of any agents or trustees of such persons or entities), whether payable at maturity, by acceleration or otherwise, and further including amounts owed by Concessionaire [PIATCO] to its professional consultants and advisers, suppliers, contractors and sub-contractors. 54 It is clear from the foregoing contractual provisions that in the event that PIATCO fails to fulfill its loan obligations to its Senior Lenders, the Government is obligated to directly negotiate and enter into an agreement relating to NAIA IPT III with the Senior Lenders, should the latter fail to appoint a qualified nominee or transferee who will take the place of PIATCO. If the Senior Lenders and the Government are unable to enter into an agreement after the prescribed period, the Government must then pay PIATCO, upon transfer of NAIA IPT III to the Government, termination payment equal to the appraised value of the project or the value of the attendant liabilities whichever is greater. Attendant liabilities as defined in the ARCA includes all amounts owed or thereafter may be owed by PIATCO not only to the Senior Lenders with whom PIATCO has defaulted in its loan obligations but to all other persons who may have loaned, advanced funds or provided any other type of financial facilities to PIATCO for NAIA IPT III. The amount of PIATCO's debt that the Government would have to pay as a result of PIATCO's default in its loan obligations in case no qualified nominee or transferee is appointed by the Senior Lenders and no other agreement relating to NAIA IPT III has been reached between the Government and the Senior Lenders includes, but is not limited to, "all principal, interest, associated fees, charges, reimbursements, and other related expenses . . . whether payable at maturity, by acceleration or otherwise." 55 It is clear from the foregoing that the ARCA provides for a direct guarantee by the government to pay PIATCO's loans not only to its Senior Lenders but all other entities who provided PIATCO funds or services upon PIATCO's default in its loan obligation with its Senior Lenders. The fact that the Government's obligation to pay PIATCO's lenders for the latter's obligation would only arise after the Senior Lenders fail to appoint a qualified nominee or transferee does not detract from the fact that, should the conditions as stated in the contract occur, the ARCA still obligates the Government to pay any and all amounts owed by PIATCO to its lenders in connection with NAIA IPT III. Worse, the conditions that would make the Government liable for PIATCO's debts is triggered by PIATCO's own default of its loan obligations to its Senior Lenders to which loan contracts the Government was never a party to. The Government was not even given an option as to what course of action it should take in case PIATCO defaulted in the payment of its senior loans. The Government, upon PIATCO's default, would be merely notified by the Senior Lenders of the same and it is the Senior Lenders who are authorized to appoint a qualified nominee or transferee. Should the Senior Lenders fail to make such an appointment, the Government is then automatically obligated to "directly deal and negotiate" with the Senior Lenders regarding NAIA IPT III. The only way the Government would not be liable for PIATCO's debt is for a qualified nominee or transferee to be appointed in place of PIATCO to continue the construction, operation and maintenance of NAIA IPT III. This "pre-condition", however, will not take the contract out of the ambit of a direct guarantee by the government as the existence, availability and willingness of a qualified nominee or transferee is totally out of the government's control. As such the Government is virtually at the mercy of PIATCO(that it would not default on its loan obligations to its Senior Lenders), the Senior Lenders (that they would appoint a qualified nominee or transferee or agree to some other arrangement with the Government) and the existence of a qualified nominee or transferee who is able and willing to take the place of PIATCO in NAIA IPT III. The proscription against government guarantee in any form is one of the policy considerations behind the BOT Law. Clearly, in the present case, the ARCA obligates the Government to pay for all loans, advances and obligations arising out of financial facilities extended to PIATCO for the implementation of the NAIA IPT III project should PIATCO default in its loan obligations to its

Senior Lenders and the latter fails to appoint a qualified nominee or transferee. This in effect would make the Government liable for PIATCO's loans should the conditions as set forth in the ARCA arise. This is a form of direct government guarantee. The BOT Law and its implementing rules provide that in order for an unsolicited proposal for a BOT project may be accepted, the following conditions must first be met: (1) the project involves a new concept in technology and/or is not part of the list of priority projects, (2) no direct government guarantee, subsidy or equity is required, and (3) the government agency or local government unit has invited by publication other interested parties to a public bidding and conducted the same. 56The failure to meet any of the above conditions will result in the denial of the proposal. It is further provided that the presence of direct government guarantee, subsidy or equity will "necessarily, disqualify a proposal from being treated and accepted as an unsolicited proposal." 57 The BOT Law clearly and strictly prohibits direct government guarantee, subsidy and equity in unsolicited proposals that the mere inclusion of a provision to that effect is fatal and is sufficient to deny the proposal. It stands to reason therefore that if a proposal can be denied by reason of the existence of direct government guarantee, then its inclusion in the contract executed after the said proposal has been accepted is likewise sufficient to invalidate the contract itself. A prohibited provision, the inclusion of which would result in the denial of a proposal cannot, and should not, be allowed to later on be inserted in the contract resulting from the said proposal. The basic rules of justice and fair play alone militate against such an occurrence and must not, therefore, be countenanced particularly in this instance where the government is exposed to the risk of shouldering hundreds of million of dollars in debt. This Court has long and consistently adhered to the legal maxim that those that cannot be done directly cannot be done indirectly. 58 To declare the PIATCO contracts valid despite the clear statutory prohibition against a direct government guarantee would not only make a mockery of what the BOT Law seeks to prevent which is to expose the government to the risk of incurring a monetary obligation resulting from a contract of loan between the project proponent and its lenders and to which the Government is not a party to but would also render the BOT Law useless for what it seeks to achieve to make use of the resources of the private sector in the "financing, operation and maintenance of infrastructure and development projects" 59 which are necessary for national growth and development but which the government, unfortunately, could ill-afford to finance at this point in time. IV Temporary takeover of business affected with public interest Article XII, Section 17 of the 1987 Constitution provides: Section 17.In times of national emergency, when the public interest so requires, the State may, during the emergency and under reasonable terms prescribed by it, temporarily take over or direct the operation of any privately owned public utility or business affected with public interest. The above provision pertains to the right of the State in times of national emergency, and in the exercise of its police power, to temporarily take over the operation of any business affected with public interest. In the 1986 Constitutional Commission, the term "national emergency" was defined to include threat from external aggression, calamities or national disasters, but not strikes "unless it is of such proportion that would paralyze government service." 60 The duration of the emergency itself is the determining factor as to how long the temporary takeover by the government would last. 61 The temporary takeover by the government extends only to the operation of the business and not to the ownership thereof. As such the government is not required to compensate the private entity-owner of the said business as there is no transfer of ownership, whether permanent or temporary. The private entity-owner affected by the temporary takeover cannot, likewise, claim just compensation for the use of the said business and its properties as the temporary takeover by the government is in exercise of its police power and not of its power of eminent domain. Article V, Section 5.10 (c) of the 1997 Concession Agreement provides: Section 5.10 Temporary Take-over of operations by GRP.

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xxx xxx xxx (c)In the event the development Facility or any part thereof and/or the operations of Concessionaire or any part thereof, become the subject matter of or be included in any notice, notification, or declaration concerning or relating to acquisition, seizure or appropriation by GRP in times of war or national emergency, GRP shall, by written notice to Concessionaire, immediately take over the operations of the Terminal and/or the Terminal Complex. During such take over by GRP, the Concession Period shall be suspended; provided, that upon termination of war, hostilities or national emergency, the operations shall be returned to Concessionaire, at which time, the Concession period shall commence to run again. Concessionaire shall be entitled to reasonable compensation for the duration of the temporary take over by GRP, which compensation shall take into account the reasonable cost for the use of the Terminal and/or Terminal Complex, (which is in the amount at least equal to the debt service requirements of Concessionaire, if the temporary take over should occur at the time when Concessionaire is still servicing debts owed to project lenders), any loss or damage to the Development Facility, and other consequential damages. If the parties cannot agree on the reasonable compensation of Concessionaire, or on the liability of GRP as aforesaid, the matter shall be resolved in accordance with Section 10.01 [Arbitration]. Any amount determined to be payable by GRP to Concessionaire shall be offset from the amount next payable by Concessionaire to GRP. 62 PIATCO cannot, by mere contractual stipulation, contravene the Constitutional provision on temporary government takeover and obligate the government to pay "reasonable cost for the use of the Terminal and/or Terminal Complex." 63 Article XII, section 17 of the 1987 Constitution envisions a situation wherein the exigencies of the times necessitate the government to "temporarily take over or direct the operation of any privately owned public utility or business affected with public interest." It is the welfare and interest of the public which is the paramount consideration in determining whether or not to temporarily take over a particular business. Clearly, the State in effecting the temporary takeover is exercising its police power. Police power is the "most essential, insistent, and illimitable of powers." 64 Its exercise therefore must not be unreasonably hampered nor its exercise be a source of obligation by the government in the absence of damage due to arbitrariness of its exercise. 65 Thus, requiring the government to pay reasonable compensation for the reasonable use of the property pursuant to the operation of the business contravenes the Constitution. V Regulation of Monopolies A monopoly is "a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right (or power) to carry on a particular business or trade, manufacture a particular article, or control the sale of a particular commodity." 66 The 1987 Constitution strictly regulates monopolies, whether private or public, and even provides for their prohibition if public interest so requires. Article XII, Section 19 of the 1987 Constitution states: Sec. 19.The state shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed. Clearly, monopolies are not per se prohibited by the Constitution but may be permitted to exist to aid the government in carrying on an enterprise or to aid in the performance of various services and functions in the interest of the public. 67 Nonetheless, a determination must first be made as to whether public interest requires a monopoly. As monopolies are subject to abuses that can inflict severe prejudice to the public, they are subject to a higher level of State regulation than an ordinary business undertaking. In the cases at bar, PIATCO, under the 1997 Concession Agreement and the ARCA, is granted the "exclusive right to operate a commercial international passenger terminal within the Island of Luzon" at the NAIA IPT III. 68 This is with the exception of already existing international airports in Luzon such as those located in the Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag City. 69 As such, upon commencement of PIATCO's operation of NAIA IPT III, Terminals 1 and 2 of NAIA would cease to function as international passenger terminals. This, however, does not prevent MIAA to use Terminals 1 and 2 as domestic

passenger terminals or in any other manner as it may deem appropriate except those activities that would compete with NAIA IPT III in the latter's operation as an international passenger terminal. 70 The right granted to PIATCO to exclusively operate NAIA IPT III would be for a period of twenty-five (25) years from the In-Service Date 71 and renewable for another twenty-five (25) years at the option of the government. 72 Both the 1997 Concession Agreement and the ARCA further provide that, in view of the exclusive right granted to PIATCO, the concession contracts of the service providers currently servicing Terminals 1 and 2 would no longer be renewed and those concession contracts whose expiration are subsequent to the In-Service Date would cease to be effective on the said date. 73 The operation of an international passenger airport terminal is no doubt an undertaking imbued with public interest. In entering into a Build-Operate-and-Transfer contract for the construction, operation and maintenance of NAIA IPT III, the government has determined that public interest would be served better if private sector resources were used in its construction and an exclusive right to operate be granted to the private entity undertaking the said project, in this case PIATCO. Nonetheless, the privilege given to PIATCO is subject to reasonable regulation and supervision by the Government through the MIAA, which is the government agency authorized to operate the NAIA complex, as well as DOTC, the department to which MIAA is attached. 74 This is in accord with the Constitutional mandate that a monopoly which is not prohibited must be regulated. 75 While it is the declared policy of the BOT Law to encourage private sector participation by "providing a climate of minimum government regulations," 76 the same does not mean that Government must completely surrender its sovereign power to protect public interest in the operation of a public utility as a monopoly. The operation of said public utility can not be done in an arbitrary manner to the detriment of the public which it seeks to serve. The right granted to the public utility may be exclusive but the exercise of the right cannot run riot. Thus, while PIATCO may be authorized to exclusively operate NAIA IPT III as an international passenger terminal, the Government, through the MIAA, has the right and the duty to ensure that it is done in accord with public interest. PIATCO's right to operate NAIA IPT III cannot also violate the rights of third parties. Section 3.01(e) of the 1997 Concession Agreement and the ARCA provide: 3.01Concession Period xxx xxx xxx (e)GRP confirms that certain concession agreements relative to certain services and operations currently being undertaken at the Ninoy Aquino International Airport passenger Terminal I have a validity period extending beyond the In-Service Date. GRP through DOTC/MIAA, confirms that these services and operations shall not be carried over to the Terminal and the Concessionaire is under no legal obligation to permit such carry-over except through a separate agreement duly entered into with Concessionaire. In the event Concessionaire becomes involved in any litigation initiated by any such concessionaire or operator, GRP undertakes and hereby holds Concessionaire free and harmless on full indemnity basis from and against any loss and/or any liability resulting from any such litigation, including the cost of litigation and the reasonable fees paid or payable to Concessionaire's counsel of choice, all such amounts shall be fully deductible by way of an offset from any amount which the Concessionaire is bound to pay GRP under this Agreement. During the oral arguments on December 10, 2002, the counsel for the petitioners-in-intervention for G.R. No. 155001 stated that there are two service providers whose contracts are still existing and whose validity extends beyond the In-Service Date. One contract remains valid until 2008 and the other until 2010. 77 We hold that while the service providers presently operating at NAIA Terminal 1 do not have an absolute right for the renewal or the extension of their respective contracts, those contracts whose duration extends beyond NAIA IPT III's In-Service-Date should not be unduly prejudiced. These contracts must be respected not just by the parties thereto but also by third parties. PIATCO cannot, by law and certainly not by contract, render a valid and binding contract nugatory.

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PIATCO, by the mere expedient of claiming an exclusive right to operate, cannot require the Government to break its contractual obligations to the service providers. In contrast to the arrastre and stevedoring service providers in the case of Anglo-Fil Trading Corporation v. Lazaro 78 whose contracts consist of temporary hold-over permits, the affected service providers in the cases at bar, have a valid and binding contract with the Government, through MIAA, whose period of effectivity, as well as the other terms and conditions thereof cannot be violated. In fine, the efficient functioning of NAIA IPT III is imbued with public interest. The provisions of the 1997 Concession Agreement and the ARCA did not strip government, thru the MIAA, of its right to supervise the operation of the whole NAIA complex, including NAIA IPT III. As the primary government agency tasked with the job, 79 it is MIAA's responsibility to ensure that whoever by contract is given the right to operate NAIA IPT III will do so within the bounds of the law and with due regard to the rights of third parties and above all, the interest of the public. VI CONCLUSION In sum, this Court rules that in view of the absence of the requisite financial capacity of the Paircargo Consortium, predecessor of respondent PIATCO, the award by the PBAC of the contract for the construction, operation and maintenance of the NAIA IPT III is null and void. Further, considering that the 1997 Concession Agreement contains material and substantial amendments, which amendments had the effect of converting the 1997 Concession Agreement into an entirely different agreement from the contract bidded upon, the 1997 Concession Agreement is similarly null and void for being contrary to public policy. The provisions under Sections 4.04(b) and (c) in relation to Section 1.06 of the 1997 Concession Agreement and Section 4.04(c) in relation to Section 1.06 of the ARCA, which constitute a direct government guarantee expressly prohibited by, among others, the BOT Law and its Implementing Rules and Regulations are also null and void. The Supplements, being accessory contracts to the ARCA, are likewise null and void. TcEaAS WHEREFORE, the 1997 Concession Agreement, the Amended and Restated Concession Agreement and the Supplements thereto are set aside for being null and void. SO ORDERED. Davide, Jr., C.J., Bellosillo, Ynares-Santiago, Sandoval-Gutierrez, Austria Martinez, Corona and Carpio Morales, JJ., concur. Vitug, J., please see separate (dissenting) opinion Panganiban, J., please see separate opinion Quisumbing and Azcuna, JJ., concur with separate (dissenting) opinion of J. Vitug. Callejo, Sr., J., concurs with separate opinion of J. Panganiban. Carpio, J., took no part. Separate Opinions VITUG, J.: This Court is bereft of jurisdiction to hear the petitions at bar. The Constitution provides that the Supreme Court shall exercise original jurisdiction over, among other actual controversies, petitions for certiorari, prohibition, mandamus, quo warranto, and habeas corpus. 1 The cases in question, although denominated to be petitions for prohibition, actually pray for the nullification of the PIATCO contracts and to restrain respondents from implementing said agreements for being illegal and unconstitutional. Section 2, Rule 65 of the Rules of Court states: "When the proceedings of any tribunal, corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may require."

The rule is explicit. A petition for prohibition may be filed against a tribunal, corporation, board, officer or person, exercising judicial, quasi-judicial or ministerial functions. What the petitions seek from respondents do not involve judicial, quasi-judicial or ministerial functions. In prohibition, only legal issues affecting the jurisdiction of the tribunal, board or officer involved may be resolved on the basis of undisputed facts. 2 The parties allege, respectively, contentious evidentiary facts. It would be difficult, if not anomalous, to decide the jurisdictional issue on the basis of the contradictory factual submissions made by the parties. 3 As the Court has so often exhorted, it is not a trier of facts. The petitions, in effect, are in the nature of actions for declaratory relief under Rule 63 of the Rules of Court. The Rules provide that any person interested under a contract may, before breach or violation thereof, bring an action in the appropriate Regional Trial Court to determine any question of construction or validity arising, and for a declaration of his rights or duties thereunder. 4 The Supreme Court assumes no jurisdiction over petitions for declaratory relief which are cognizable by regional trial courts. 5 As I have so expressed in Tolentino vs. Secretary of Finance, 6 reiterated in Santiago vs. Guingona, Jr., 7 the Supreme Court should not be thought of as having been tasked with the awesome responsibility of overseeing the entire bureaucracy. Pervasive and limitless, such as it may seem to be under the 1987 Constitution, judicial power still succumbs to the paramount doctrine of separation of powers. The Court may not at good liberty intrude, in the guise of sovereign imprimatur, into every affair of government. What significance can still then remain of the timehonored and widely acclaimed principle of separation of powers if, at every turn, the Court allows itself to pass upon at will the disposition of a co-equal, independent and coordinate branch in our system of government. I dread to think of the so varied uncertainties that such an undue interference can lead to. CSTDIE Accordingly, I vote for the dismissal of the petition. PANGANIBAN, J.: The five contracts for the construction and the operation of Ninoy Aquino International Airport (NAIA) Terminal III, the subject of the consolidated Petitions before the Court, are replete with outright violations of law, public policy and the Constitution. The only proper thing to do is declare them all null and void ab initio and let the chips fall where they may. Fiat iustitia ruat coelum. The facts leading to this controversy are already well presented in the ponencia. I shall not burden the readers with a retelling thereof. Instead, I will cut to the chase and directly address the two sets of gut issues: 1.The first issue is procedural: Does the Supreme Court have original jurisdiction to hear and decide the Petitions? Corollarily, do petitioners have locus standi and should this Court decide the cases without any mandatory referral to arbitration? 2.The second one is substantive in character: Did the subject contracts violate the Constitution, the laws, and public policy to such an extent as to render all of them void and inexistent? My answer to all the above questions is a firm "Yes." The Procedural Issue: Jurisdiction, Standing and Arbitration Definitely and surely, the issues involved in these Petitions are clearly of transcendental importance and of national interest. The subject contracts pertain to the construction and the operation of the country's premiere international airport terminal an ultramodern world-class public utility that will play a major role in the country's economic development and serve to project a positive image of our country abroad. The five build-operate-&-transfer (BOT) contracts, while entailing the investment of billions of pesos in capital and the availment of several hundred millions of dollars in loans, contain provisions that tend to establish a monopoly, require the disbursements of public funds sans appropriations, and provide government guarantees in violation of statutory prohibitions, as well as other provisions equally offensive to law, public policy and the Constitution. Public interest will inevitably be affected thereby.

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Thus, objections to these Petitions, grounded upon (a) the hierarchy of courts, (b) the need for arbitration prior to court action, and (c) the alleged lack of sufficient personality, standing or interest, being in the main procedural matters, must now be set aside, as they have been in past cases. This Court must be permitted to perform its constitutional duty of determining whether the other agencies of government have acted within the limits of the Constitution and the laws, or if they have gravely abused the discretion entrusted to them. 1 Hierarchy of Courts The Court has, in the past, held that questions relating to gargantuan government contracts ought to be settled without delay. 2 This holding applies with greater force to the instant cases. Respondent Piatco is partly correct in averring that petitioners can obtain relief from the regional trial courts via an action to annul the contracts. Nevertheless, the unavoidable consequence of having to await the rendition and the finality of any such judgment would be a prolonged state of uncertainty that would be prejudicial to the nation, the parties and the general public. And, in light of the feared loss of jobs of the petitioning workers, consequent to the inevitable pretermination of contracts of the petitioning service providers that will follow upon the heels of the impending opening of NAIA Terminal III, the need for relief is patently urgent, and therefore, direct resort to this Court through the special civil action of prohibition is thus justified. 3 Contrary to Piatco's argument that the resolution of the issues raised in the Petitions will require delving into factual questions, 4 I submit that their disposition ultimately turns on questions of law. 5 Further, many of the significant and relevant factual questions can be easily addressed by an examination of the documents submitted by the parties. In any event, the Petitions raise some novel questions involving the application of the amended BOT Law, which this Court has seen fit to tackle. Arbitration Should the dispute be referred to arbitration prior to judicial recourse? Respondent Piatco claims that Section 10.02 of the Amended and Restated Concession Agreement (ARCA) provides for arbitration under the auspices of the International Chamber of Commerce to settle any dispute or controversy or claim arising in connection with the Concession Agreement, its amendments and supplements. The government disagrees, however, insisting that there can be no arbitration based on Section 10.02 of the ARCA, since all the Piatco contracts are void ab initio. Therefore, all contractual provisions, including Section 10.02 of the ARCA, are likewise void, inexistent and inoperative. To support its stand, the government cites Chavez v. Presidential Commission on Good Government: 6 "The void agreement will not be rendered operative by the parties' alleged performance (partial or full) of their respective prestations. A contract that violates the Constitution and the law is null and void ab initio and vests no rights and creates no obligations. It produces no legal effect at all." As will be discussed at length later, the Piatco contracts are indeed void in their entirety; thus, a resort to the aforesaid provision on arbitration is unavailing. Besides, petitioners and petitionersin-intervention have pointed out that, even granting arguendo that the arbitration clause remained a valid provision, it still cannot bind them inasmuch as they are not parties to the Piatco contracts. And in the final analysis, it is unarguable that the arbitration process provided for under Section 10.02 of the ARCA, to be undertaken by a panel of three (3) arbitrators appointed in accordance with the Rules of Arbitration of the International Chamber of Commerce, will not be able to address, determine and definitively resolve the constitutional and legal questions that have been raised in the Petitions before us. Locus Standi Given this Court's previous decisions in cases of similar import, no one will seriously doubt that, being taxpayers and members of the House of Representatives, Petitioners Baterina et al., have locus standi to bring the Petition in GR No. 155547. In Albano v. Reyes, 7 this Court held that the petitioner therein, suing as a citizen, taxpayer and member of the House of Representatives, was sufficiently clothed with standing to bring the suit questioning the validity of the assailed contract. The Court cited the fact that public interest was involved, in view of the important role of the

Manila International Container Terminal (MICT) in the country's economic development and the magnitude of the financial consideration. This, notwithstanding the fact that expenditure of public funds was not required under the assailed contract. In the cases presently under consideration, petitioners' personal and substantial interest in the controversy is shown by the fact that certain provisions in the Piatco contracts create obligations on the part of government (through the DOTC and the MIAA) to disburse public funds without prior congressional appropriations. Petitioners thus correctly assert that the injury to them has a twofold aspect: (1) they are adversely affected as taxpayers on account of the illegal disbursement of public funds; and (2) they are prejudiced qua legislators, since the contractual provisions requiring the government to incur expenditures without appropriations also operate as limitations upon the exclusive power and prerogative of Congress over the public purse. As members of the House of Representatives, they are actually deprived of discretion insofar as the inclusion of those items of expenditure in the budget is concerned. To prevent such encroachment upon the legislative privilege and obviate injury to the institution of which they are members, petitioners-legislators have locus standi to bring suit. Messrs. Agan et al and Lopez et al., are likewise taxpayers and thus possessed of standing to challenge the illegal disbursement of public funds. Messrs. Agan et al., in particular, are employees (or representatives of employees) of various service providers that have (1) existing concession agreements with the MIAA to provide airport services necessary to the operation of the NAIA and (2) service agreements to furnish essential support services to the international airlines operating at the NAIA. On the other hand, Messrs. Lopez et al. are employees of the MIAA. These petitioners (Messrs. Agan et al. and Messrs. Lopez et al.) are confronted with the prospect of being laid off from their jobs and losing their means of livelihood when their employer-companies are forced to shut down or otherwise retrench and cut back on manpower. Such development would result from the imminent implementation of certain provisions in the contracts that tend toward the creation of a monopoly in favor of Piatco, its subsidiaries and related companies. Petitioners-in-intervention are service providers in the business of furnishing airport-related services to international airlines and passengers in the NAIA and are therefore competitors of Piatco as far as that line of business is concerned. On account of provisions in the Piatco contracts, petitioners-in-intervention have to enter into a written contract with Piatco so as not to be shut out of NAIA Terminal III and barred from doing business there. Since there is no provision to ensure or safeguard free and fair competition, they are literally at its mercy. They claim injury on account of their deprivation of property (business) and of the liberty to contract, without due process of law. And even if petitioners and petitioners-in-intervention were not sufficiently clothed with legal standing, I have at the outset already established that, given its impact on the public and on national interest, this controversy is laden with transcendental importance and constitutional significance. Hence, I do not hesitate to adopt the same position as was enunciated in Kilosbayan v. Guingona Jr. 8 that "in cases of transcendental importance, the Court may relax the standing requirements and allow a suit to prosper even when there is no direct injury to the party claiming the right of judicial review." 9 The Substantive Issue: Violations of the Constitution and the Laws From the Outset, the Bidding Process Was Flawed and Tainted After studying the documents submitted and arguments advanced by the parties, I have no doubt that, right at the outset, Piatco was not qualified to participate in the bidding process for the Terminal III project, but was nevertheless permitted to do so. It even won the bidding and was helped along by what appears to be a series of collusive and corrosive acts. The build-operate-and-transfer (BOT) project for the NAIA Passenger Terminal III comes under the category of an "unsolicited proposal," which is the subject of Section 4-A of the BOT Law. 10 The

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unsolicited proposal was originally submitted by the Asia's Emerging Dragon Corporation (AEDC) to the Department of Transportation and Communications (DOTC) and the Manila International Airport Authority (MIAA), which reviewed and approved the proposal. The draft of the concession agreement as negotiated between AEDC and DOTC/MIAA was endorsed to the National Economic Development Authority (NEDA-ICC), which in turn reviewed it on the basis of its scope, economic viability, financial indicators and risks; and thereafter approved it for bidding. The DOTC/MIAA then prepared the Bid Documents, incorporating therein the negotiated Draft Concession Agreement, and published invitations for public bidding, i.e., for the submission of comparative or competitive proposals. Piatco's predecessor-in-interest, the Paircargo Consortium, was the only company that submitted a competitive bid or price challenge. At this point, I must emphasize that the law requires the award of a BOT project to the bidder that has satisfied the minimum requirements; and met the technical, financial, organizational and legal standards provided in the BOT Law. Section 5 of this statute states: "Sec. 5.Public bidding of projects. - . . . "In the case of a build-operate-and-transfer arrangement, the contract shall be awarded to the bidder who, having satisfied the minimum financial, technical, organizational and legal standards required by this Act, has submitted the lowest bid and most favorable terms for the project, based on the present value of its proposed tolls, fees, rentals and charges over a fixed term for the facility to be constructed, rehabilitated, operated and maintained according to the prescribed minimum design and performance standards, plans and specifications. . . ." (Italics supplied.) The same provision requires that the price challenge via public bidding "must be conducted under a two-envelope/two-stage system: the first envelope to contain the technical proposal and the second envelope to contain the financial proposal." Moreover, the 1994 Implementing Rules and Regulations (IRR) provide that only those bidders that have passed the prequalification stage are permitted to have their two envelopes reviewed. In other words, prospective bidders must prequalify by submitting their prequalification documents for evaluation; and only the pre-qualified bidders would be entitled to have their bids opened, evaluated and appreciated. On the other hand, disqualified bidders are to be informed of the reason for their disqualification. This procedure was confirmed and reiterated in the Bid Documents, which I quote thus: "Prequalified proponents will be considered eligible to move to second stage technical proposal evaluation. The second and third envelopes of pre-disqualified proponents will be returned." 11 Aside from complying with the legal and technical requirements (track record or experience of the firm and its key personnel), a project proponent desiring to prequalify must also demonstrate its financial capacity to undertake the project. To establish such capability, a proponent must prove that it is able to raise the minimum amount of equity required for the project and to procure the loans or financing needed for it. Section 5.4(c) of the 1994 IRR provides: "Sec. 5.4.Prequalification Requirements. To pre-qualify, a project proponent must comply with the following requirements: xxx xxx xxx "c.Financial Capability. The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction, and/or operation and maintenance phases of the project, as the case may be. For purposes of prequalification, this capability shall be measured in terms of: (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. The government Agency/LGU concerned shall determine on a project-to-project basis, and before prequalification, the minimum amount of equity needed. . . .." (Italics supplied) Since the minimum amount of equity for the project was set at 30 percent 12 of the minimum project cost of US$350 million, the minimum amount of equity required of any proponent stood at

US$105 million. Converted to pesos at the exchange rate then of P26.239 to US$1.00 (as quoted by the Bangko Sentral ng Pilipinas), the peso equivalent of the minimum equity was P2,755,095,000. However, the combined equity or net worth of the Paircargo consortium stood at only P558,384,871.55. 13 This amount was only slightly over 6 percent of the minimum project cost and very much short of the required minimum equity, which was equivalent to 30 percent of the project cost. Such deficiency should have immediately caused the disqualification of the Paircargo consortium. This matter was brought to the attention of the Prequalification and Bidding Committee (PBAC). Notwithstanding the glaring deficiency, DOTC Undersecretary Primitivo C. Cal, concurrent chair of the PBAC, declared in a Memorandum dated 14 October 1996 that "the Challenger (Paircargo consortium) was found to have a combined net worth of P3,926,421,242.00 that could support a project costing approximately P13 billion." To justify his conclusion, he asserted: "It is not a requirement that the networth must be `unrestricted.' To impose this as a requirement now will be nothing less than unfair." He further opined, "(T)he networth reflected in the Financial Statement should not be taken as the amount of money to be used to answer the required thirty (30%) percent equity of the challenger but rather to be used in establishing if there is enough basis to believe that the challenger can comply with the required 30% equity. In fact, proof of sufficient equity is required as one of the conditions for award of contract (Sec. 12.1 of IRR of the BOT Law) but not for prequalification (Sec. 5.4 of same document)." On the basis of the foregoing dubious declaration, the Paircargo consortium was deemed prequalified and thus permitted to proceed to the other stages of the bidding process. By virtue of the prequalified status conferred upon the Paircargo, Undersecretary Cal's findings in effect relieved the consortium of the need to comply with the financial capability requirement imposed by the BOT Law and IRR. This position is unmistakably and squarely at odds with the Supreme Court's consistent doctrine emphasizing the strict application of pertinent rules, regulations and guidelines for the public bidding process, in order to place each bidder actual or potential on the same footing. Thus, it is unarguably irregular and contrary to the very concept of public bidding to permit a variance between the conditions under which bids are invited and those under which proposals are submitted and approved. Republic v. Capulong 14 teaches that if one bidder is relieved from having to conform to the conditions that impose some duty upon it, that bidder is not contracting in fair competition with those bidders that propose to be bound by all conditions. The essence of public bidding is, after all, an opportunity for fair competition and a basis for the precise comparison of bids. 15 Thus, each bidder must bid under the same conditions; and be subject to the same guidelines, requirements and limitations. The desired result is to be able to determine the best offer or lowest bid, all things being equal. Inasmuch as the Paircargo consortium did not possess the minimum equity equivalent to 30 percent of the minimum project cost, it should not have been prequalified or allowed to participate further in the bidding. The Prequalification and Bidding Committee (PBAC) should therefore not have opened the two envelopes of the consortium containing its technical and financial proposals; required AEDC to match the consortium's bid; 16 or awarded the Concession Agreement to the consortium's successor-in-interest, Piatco. As there was effectively no public bidding to speak of, the entire bidding process having been flawed and tainted from the very outset, therefore, the award of the concession to Paircargo's successor Piatco was void, and the Concession Agreement executed with the latter was likewise void ab initio. For this reason, Piatco cannot and should not be allowed to benefit from that Agreement. 17 AEDC Was Deprived of the Right to Match PIATCO's Price Challenge

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In DOTC PBAC Bid Bulletin No. 4 (par. 3), Undersecretary Cal declared that, for purposes of matching the price challenge of Piatco, AEDC as originator of the unsolicited proposal would be permitted access only to the schedule of proposed Annual Guaranteed Payments submitted by Piatco, and not to the latter's financial and technical proposals that constituted the basis for the price challenge in the first place. This was supposedly in keeping with Section 11.6 of the 1994 IRR, which provides that proprietary information is to be respected, protected and treated with utmost confidentiality, and is therefore not to form part of the bidding/tender and related documents. This pronouncement, I believe, was a grievous misapplication of the mentioned provision. The "proprietary information" referred to in Section 11.6 of the IRR pertains only to the proprietary information of the originator of an unsolicited proposal, and not to those belonging to a challenger. The reason for the protection accorded proprietary information at all is the fact that, according to Section 4-A of the BOT Law as amended, a proposal qualifies as an "unsolicited proposal" when it pertains to a project that involves "a new concept or technology," and/or a project that is not on the government's list of priority projects. To be considered as utilizing a new concept or technology, a project must involve the possession of exclusive rights (worldwide or regional) over a process; or possession of intellectual property rights over a design, methodology or engineering concept. 18 Patently, the intent of the BOT Law is to encourage individuals and groups to come up with creative innovations, fresh ideas and new technology. Hence, the significance and necessity of protecting proprietary information in connection with unsolicited proposals. And to make the encouragement real, the law also extends to such individuals and groups what amounts to a "right of first refusal" to undertake the project they conceptualized, involving the use of new technology or concepts, through the mechanism of matching a price challenge. A competing bid is never just any figure conjured from out of the blue; it is arrived at after studying economic, financial, technical and other, factors; it is likewise based on certain assumptions as to the nature of the business, the market potentials, the probable demand for the product or service, the future behavior of cost items, political and other risks, and so on. It is thus self-evident that in order to be able to intelligently match a bid or price challenge, a bidder must be given access to the assumptions and the calculations that went into crafting the competing bid. In this instance, the financial and technical proposals of Piatco would have provided AEDC with the necessary information to enable it to make a reasonably informed matching bid. To put it more simply, a bidder unable to access the competitor's assumptions will never figure out how the competing bid came about; requiring him to "counter-propose" is like having him shoot at a target in the dark while blindfolded. By withholding from AEDC the challenger's financial and technical proposals containing the critical information it needed, Undersecretary Cal actually and effectively deprived AEDC of the ability to match the price challenge. One could say that AEDC did not have the benefit of a "level playing field." It seems to me, though, that AEDC was actually shut out of the game altogether. At the end of the day, the bottom line is that the validity and the propriety of the award to Piatco had been irreparably impaired. Delayed Issuance of the Notice of Award Violated the BOT Law and the IRR Section 9.5 of the IRR requires that the Notice of Award must indicate the time frame within which the winner of the bidding (and therefore the prospective awardee) shall submit the prescribed performance security, proof of commitment of equity contributions, and indications of sources of financing (loans); and, in the case of joint ventures, an agreement showing that the members are jointly and severally responsible for the obligations of the project proponent under the contract. The purpose of having a definite and firm timetable for the submission of the aforementioned requirements is not only to prevent delays in the project implementation, but also to expose and weed out unqualified proponents, who might have unceremoniously slipped through the earlier

prequalification process, by compelling them to put their money where their mouths are, so to speak. Nevertheless, this provision can be easily circumvented by merely postponing the actual issuance of the Notice of Award, in order to give the favored proponent sufficient time to comply with the requirements. Hence, to avert or minimize the manipulation of the post-bidding process, the IRR not only set out the precise sequence of events occurring between the completion of the evaluation of the technical bids and the issuance of the Notice of Award, but also specified the timetables for each such event. Definite allowable extensions of time were provided for, as were the consequences of a failure to meet a particular deadline. In particular, Section 9.1 of the 1994 IRR prescribed that within 30 calendar days from the time the second-stage evaluation shall have been completed, the Committee must come to a decision whether or not to award the contract and, within 7 days therefrom, the Notice of Award must be approved by the head of agency or local government unit (LGU) concerned, and its issuance must follow within another 7 days thereafter. Section 9.2 of the IRR set the procedure applicable to projects involving substantial government undertakings as follows: Within 7 days after the decision to award is made, the draft contract shall be submitted to the ICC for clearance on a no-objection basis. If the draft contract includes government undertakings already previously approved, then the submission shall be for information only. However, should there be additional or new provisions different from the original government undertakings, the draft shall have to be reviewed and approved. The ICC has 15 working days to act thereon, and unless otherwise specified, its failure to act on the contract within the specified time frame signifies that the agency or LGU may proceed with the award. The head of agency or LGU shall approve the Notice of Award within seven days of the clearance by the ICC on a noobjection basis, and the Notice itself has to be issued within seven days thereafter. The highly regulated time-frames within which the agents of government were to act evinced the intent to impose upon them the duty to act expeditiously throughout the process, to the end that the project be prosecuted and implemented without delay. This regulated scenario was likewise intended to discourage collusion and substantially reduce the opportunity for agents of government to abuse their discretion in the course of the award process. Despite the clear timetables set out in the IRR, several lengthy and still-unexplained delays occurred in the award process, as can be observed from the presentation made by the counsel for public respondents, 19 quoted hereinbelow: "11 Dec. 1996 The Paircargo Joint Venture was informed by the PBAC that AEDC failed to match and that negotiations preparatory to Notice of Award should be commenced. This was the decision to award that should have commenced the running of the 7-day period to approve the Notice of Award, as per Section 9.1 of the IRR, or to submit the draft contract to the ICC for approval conformably with Section 9.2. "01 April 1997 The PBAC resolved that a copy of the final draft of the Concession Agreement be submitted to the NEDA for clearance on a no-objection basis. This resolution came more than 3 months too late as it should have been made on the 20th of December 1996 at the latest. "16 April 1997 The PBAC resolved that the period of signing the Concession Agreement be extended by 15 days. "18 April 1997 NEDA approved the Concession Agreement. Again this is more than 3 months too late as the NEDA's decision should have been released on the 16th of January 1997 or fifteen days after it should have been submitted to it for review. "09 July 1997 The Notice of Award was issued to PIATCO. Following the provisions of the IRR, the Notice of Award should have been issued fourteen days after NEDA's approval, or the 28th of January 1997. In any case, even if it were to be assumed that the release of NEDA's approval on the 18th of April was timely, the Notice of Award should have been issued on the 9th of May 1997. In both cases, therefore, the release of the Notice of Award occurred in a decidedly less than timely fashion."

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This chronology of events bespeaks an unmistakable disregard, if not disdain, by the persons in charge of the award process for the time limitations prescribed by the IRR. Their attitude flies in the face of this Court's solemn pronouncement in Republic v. Capulong 20 that "strict observance of the rules, regulations and guidelines of the bidding process is the only safeguard to a fair, honest and competitive public bidding." From the foregoing, the only conclusion that can possibly be drawn is that the BOT law and its IRR were repeatedly violated with unmitigated impunity and by agents of government, no less! On account of such violation, the award of the contract to Piatco, which undoubtedly gained time and benefited from the delays, must be deemed null and void from the beginning. Further Amendments Resulted in a Substantially Different Contract, Awarded Without Public Bidding But the violations and desecrations did not stop there. After the PBAC made its decision on December 11, 1996 to award the contract to Piatco, the latter negotiated changes to the Contract bidded out and ended up with what amounts to a substantially new contract without any public bidding. This Contract was subsequently further amended four more times through negotiation and without any bidding. Thus, the contract actually executed between Piatco and DOTC/MIAA on July 12, 1997 (the Concession Agreement or "CA") differed from the contract bidded out (the draft concession agreement or "DCA") in the following very significant respects: 1.The CA inserted stipulations creating a monopoly in favor of Piatco in the business of providing airport-related services for international airlines and passengers. 21 2.The CA provided that government is to answer for Piatco's unpaid loans and debts (lumped under the term Attendant Liabilities) in the event Piatco fails to pay its senior lenders. 22 3.The CA provided that in case of termination of the contract due to the fault of government, government shall pay all expenses that Piatco incurred for the project plus the appraised value of the Terminal. 23 4.The CA imposed new and special obligations on government, including delivery of clean possession of the site for the terminal; acquisition of additional land at the government's expense for construction of road networks required by Piatco's approved plans and specifications; and assistance to Piatco in securing site utilities, as well as all necessary permits, licenses and authorizations. 24 5.Where Section 3.02 of the DCA requires government to refrain from competing with the contractor with respect to the operation of NAIA Terminal III, Section 3.02(b) of the CA excludes and prohibits everyone, including government, from directly or indirectly competing with Piatco, with respect to the operation of, as well as operations in, NAIA Terminal III. Operations in is sufficiently broad to encompass all retail and other commercial business enterprises operating within Terminal III, inclusive of the businesses of providing various airport-related services to international airlines, within the scope of the prohibition. 6.Under Section 6.01 of the DCA, the following fees are subject to the written approval of MIAA: lease/rental charges, concession privilege fees for passenger services, food services, transportation utility concessions, groundhandling, catering and miscellaneous concession fees, porterage fees, greeter/well-wisher fees, carpark fees, advertising fees, VIP facilities fees and others. Moreover, adjustments to the groundhandling fees, rentals and porterage fees are permitted only once every two years and in accordance with a parametric formula, per DCA Section 6.03. However, the CA as executed with Piatco provides in Section 6.06 that all the aforesaid fees, rentals and charges may be adjusted without MIAA's approval or intervention. Neither are the adjustments to these fees and charges subject to or limited by any parametric formula. 25 7.Section 1.29 of the DCA provides that the terminal fees, aircraft tacking fees, aircraft parking fees, check-in counter fees and other fees are to be quoted and paid in Philippine pesos. But per Section 1.33 of the CA, all the aforesaid fees save the terminal fee are denominated in US Dollars.

8.Under Section 8.07 of the DCA, the term attendant liabilities refers to liabilities pertinent to NAIA Terminal III, such as payment of lease rentals and performance of other obligations under the Land Lease Agreement; the obligations under the Tenant Agreements; and payment of all taxes, fees, charges and assessments of whatever kind that may be imposed on NAIA Terminal III or parts thereof. But in Section 1.06 of the CA, Attendant Liabilities refers to unpaid debts of Piatco: "All amounts recorded and from time to time outstanding in the books of (Piatco) as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by [Piatco] to its suppliers, contractors and subcontractors." 9.Per Sections 8.04 and 8.06 of the DCA, government may, on account of the contractors breach, rescind the contract and select one of four options: (a) take over the terminal and assume all its attendant liabilities; (b) allow the contractor's creditors to assign the Project to another entity acceptable to DOTC/MIAA; (c) pay the contractor rent for the facilities and equipment the DOTC may utilize; or (d) purchase the terminal at a price established by independent appraisers. Depending on the option selected, government may take immediate possession and control of the terminal and its operations. Government will be obligated to compensate the contractor for the "equivalent or proportionate contract costs actually disbursed," but only where government is the one in breach of the contract. But under Section 8.06(a) of the CA, whether on account of Piatco's breach of contract or its inability to pay its creditors, government is obliged to either (a) take over Terminal III and assume all of Piatco's debts or (b) permit the qualified unpaid creditors to be substituted in place of Piatco or to designate a new operator. And in the event of government's breach of contract, Piatco may compel it to purchase the terminal at fair market value, per Section 8.06(b) of the CA. 10.Under the DCA, any delay by Piatco in the payment of the amounts due the government constitutes breach of contract. However, under the CA, such delay does not necessarily constitute breach of contract, since Piatco is permitted to suspend payments to the government in order to first satisfy the claims of its secured creditors, per Section 8.04(d) of the CA. It goes without saying that the amendment of the Contract bidded out (the DCA or draft concession agreement) in such substantial manner, without any public bidding, and after the bidding process had been concluded on December 11, 1996 is violative of public policy on public biddings, as well as the spirit and intent of the BOT Law. The whole point of going through the public bidding exercise was completely lost. Its very rationale was totally subverted by permitting Piatco to amend the contract for which public bidding had already been concluded. Competitive bidding aims to obtain the best deal possible by fostering transparency and preventing favoritism, collusion and fraud in the awarding of contracts. That is the reason why procedural rules pertaining to public bidding demand strict observance. 26 In a relatively early case, Caltex v. Delgado Brothers, 27 this Court made it clear that substantive amendments to a contract for which a public bidding has already been finished should only be awarded after another public bidding: "The due execution of a contract after public bidding is a limitation upon the right of the contracting parties to alter or amend it without another public bidding, for otherwise what would a public bidding be good for if after the execution of a contract after public bidding, the contracting parties may alter or amend the contract, or even cancel it, at their will? Public biddings are held for the protection of the public, and to give the public the best possible advantages by means of open competition between the bidders. He who bids or offers the best terms is awarded the contract subject of the bid, and it is obvious that such protection and best possible advantages to the public will disappear if the parties to a contract executed after public bidding may alter or amend it without another previous public bidding." 28 The aforementioned case dealt with the unauthorized amendment of a contract executed after public bidding; in the situation before us, the amendments were made also after the bidding, but prior to execution. Be that as it may, the same rationale underlying Caltex applies to the present situation with equal force. Allowing the winning bidder to renegotiate the contract for which the

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bidding process has ended is tantamount to permitting it to put in anything it wants. Here, the winning bidder (Piatco) did not even bother to wait until after actual execution of the contract before rushing to amend it. Perhaps it believed that if the changes were made to a contract already won through bidding (DCA) instead of waiting until it is executed, the amendments would not be noticed or discovered by the public. In a later case, Mata v. San Diego, 29 this Court reiterated its ruling as follows: IcaEDC "It is true that modification of government contracts, after the same had been awarded after a public bidding, is not allowed because such modification serves to nullify the effects of the bidding and whatever advantages the Government had secured thereby and may also result in manifest injustice to the other bidders. This prohibition, however, refers to a change in vital and essential particulars of the agreement which results in a substantially new contract." Piatco's counter-argument may be summed up thus: There was nothing in the 1994 IRR that prohibited further negotiations and eventual amendments to the DCA even after the bidding had been concluded. In fact, PBAC Bid Bulletin No. 3 states: "[A]mendments to the Draft Concession Agreement shall be issued from time to time.Said amendments will only cover items that would not materially affect the preparation of the proponent's proposal." I submit that accepting such warped argument will result in perverting the policy underlying public bidding. The BOT Law cannot be said to allow the negotiation of contractual stipulations resulting in a substantially new contract after the bidding process and price challenge had been concluded. In fact, the BOT Law, in recognition of the time, money and effort invested in an unsolicited proposal, accords its originator the privilege of matching the challenger's bid. Section 4-A of the BOT Law specifically refers to a "lower price proposal" by a competing bidder; and to the right of the original proponent "to match the price" of the challenger. Thus, only the price proposals are in play. The terms, conditions and stipulations in the contract for which public bidding has been concluded are understood to remain intact and not be subject to further negotiation. Otherwise, the very essence of public bidding will be destroyed there will be no basis for an exact comparison between bids. Moreover, Piatco misinterpreted the meaning behind PBAC Bid Bulletin No. 3. The phrase amendments . . . from time to time refers only to those amendments to the draft concession agreement issued by the PBAC prior to the submission of the price challenge; it certainly does not include or permit amendments negotiated for and introduced after the bidding process, has been terminated. Piatco's Concession Agreement Was Further Amended, (ARCA) Again Without Public Bidding Not satisfied with the Concession Agreement, Piatco once more without bothering with public bidding negotiated with government for still more substantial changes. The result was the Amended and Restated Concession Agreement (ARCA) executed on November 26, 1998. The following changes were introduced: 1.The definition of Attendant Liabilities was further amended with the result that the unpaid loans of Piatco, for which government may be required to answer, are no longer limited to only those loans recorded in Piatco's books or loans whose proceeds were actually used in the Terminal III project.30 2.Although the contract may be terminated due to breach by Piatco, it will not be liable to pay the government any Liquidated Damages if a new operator is designated to take over the operation of the terminal. 31 3.The Liquidated Damages which government becomes liable for in case of its breach of contract were substantially increased. 32 4.Government's right to appoint a comptroller for Piatco in case the latter encounters liquidity problems was deleted. 33

5.Government is made liable for Incremental and Consequential Costs and Losses in case it fails to comply or cause any third party under its direct or indirect control to comply with the special obligations imposed on government. 34 6.The insurance policies obtained by Piatco covering the terminal are now required to be assigned to the Senior Lenders as security for the loans; previously, their proceeds were to be used to repair and rehabilitate the facility in case of damage. 35 7.Government bound itself to set the initial rate of the terminal fee, to be charged when Terminal III begins operations, at an amount higher than US$20. 36 8.Government waived its defense of the illegality of the contract and even agreed to be liable to pay damages to Piatco in the event the contract was declared illegal. 37 9.Even though government may be entitled to terminate the ARCA on account of breach by Piatco, government is still liable to pay Piatco the appraised value of Terminal III or the Attendant Liabilities, if the termination occurs before the In-Service Date. 38 This condition contravenes the BOT Law provision on termination compensation. 10.Government is obligated to take the administrative action required for Piatco's imposition, collection and application of all Public Utility Revenues.39 No such obligation existed previously. 11.Government is now also obligated to perform and cause other persons and entities under its direct or indirect control to perform all acts necessary to perfect the security interests to be created in favor of Piatco's Senior Lenders. 40 No such obligation existed previously. 12.DOTC/MIAA's right of intervention in instances where Piatco's Non-Public Utility Revenues become exorbitant or excessive has been removed. 41 13.The illegality and unenforceability of the ARCA or any of its material provisions was made an event of default on the part of government only, thus constituting a ground for Piatco to terminate the ARCA. 42 14.Amounts due from and payable by government under the contract were made payable on demand net of taxes, levies, imposts, duties, charges or fees of any kind except as required by law. 43 15.The Parametric Formula in the contract, which is utilized to compute for adjustments/increases to the public utility revenues (i.e., aircraft parking and tacking fees, check-in counter fee and terminal fee), was revised to permit Piatco to input its more costly short-term borrowing rates instead of the longer-terms rates in the computations for adjustments, with the end result that the changes will redound to its greater financial benefit. 16.The Certificate of Completion simply deleted the successful performance-testing of the terminal facility in accordance with defined performance standards as a pre-condition for government's acceptance of the terminal facility. 44 In sum, the foregoing revisions and amendments as embodied in the ARCA constitute very material alterations of the terms and conditions of the CA, and give further manifestly undue advantage to Piatco at the expense of government. Piatco claims that the changes to the CA were necessitated by the demands of its foreign lenders. However, no proof whatsoever has been adduced to buttress this claim. In any event, it is quite patent that the sum total of the aforementioned changes resulted in drastically weakening the position of government to a degree that seems quite excessive, even from the standpoint of a businessperson who regularly transacts with banks and foreign lenders, is familiar with their mind-set, and understands what motivates them. On the other hand, whatever it was that impelled government officials concerned to accede to those grossly disadvantageous changes, I can only hazard a guess. There is no question in my mind that the ARCA was unauthorized and illegal for lack of public bidding and for being patently disadvantageous to government. The Three Supplements Imposed New Obligations on Government, Also Without Prior Public Bidding

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After Piatco had managed to breach the protective rampart of public bidding, it recklessly went on a rampage of further assaults on the ARCA. The First Supplement Is as Void as the ARCA In the First Supplement ("FS") executed on August 27, 1999, the following changes were made to the ARCA: 1.The amounts payable by Piatco to government were reduced by allowing additional exceptions to the Gross Revenues in which government is supposed to participate. 45 2.Made part of the properties which government is obliged to construct and/or maintain and keep in good repair are (a) the access road connecting Terminals II and III the construction of this access road is the obligation of Piatco, in lieu of its obligation to construct an Access Tunnel connecting Terminals II and III; and (b) the taxilane and taxiway these are likewise part of Piatco's obligations, since they are part and parcel of the project as described in Clause 1.3 of the Bid Documents. 46 3.The MIAA is obligated to provide funding for the maintenance and repair of the airports and facilities owned or operated by it and by third persons under its control. It will also be liable to Piatco for the latter's losses, expenses and damages as well as liability to third persons, in case MIAA fails to perform such obligations. In addition, MIAA will also be liable for the incremental and consequential costs of the remedial work done by Piatco on account of the former's default. 47 4.The FS also imposed on government ten (10) "Additional Special Obligations," including the following: (a)Working for the removal of the general aviation traffic from the NAIA airport complex 48 (b)Providing through MIAA the land required by Piatco for the taxilane and one taxiway at no cost to Piatco 49 (c)Implementing the government's existing storm drainage master plan 50 (d)Coordinating with DPWH the financing, the implementation and the completion of the following works before the In-Service Date: three left-turning overpasses (EDSA to Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.); 51 and a road upgrade and improvement program involving widening, repair and resurfacing of Sales Road, Andrews Avenue and Manlunas Road; improvement of Nichols Interchange; and removal of squatters along Andrews Avenue. 52 (e)Dealing directly with BCDA and the Phil. Air Force in acquiring additional land or right of way for the road upgrade and improvement program. 53 5.Government is required to work for the immediate reversion to MIAA of the Nayong Pilipino National Park. 54 6.Government's share in the terminal fees collected was revised from a flat rate of P180 to 36 percent thereof; together with government's percentage share in the gross revenues of Piatco, the amount will be remitted to government in pesos instead of US dollars. 55 This amendment enables Piatco to benefit from the further erosion of the peso-dollar exchange rate, while preventing government from building up its foreign exchange reserves. 7.All payments from Piatco to government are now to be invoiced to MIAA, and payments are to accrue to the latter's exclusive benefit. 56 This move appears to be in support of the funds MIAA advanced to DPWH. I must emphasize that the First Supplement is void in two respects. First, it is merely an amendment to the ARCA, upon which it is wholly dependent; therefore, since the ARCA is void, inexistent and not capable of being ratified or amended, it follows that the FS too is void, inexistent and inoperative. Second, even assumingarguendo that the ARCA is somehow remotely valid, nonetheless the FS, in imposing significant new obligations upon government, altered the fundamental terms and stipulations of the ARCA, thus necessitating a public bidding all over again. That the FS was entered into sans public bidding renders it utterly void and inoperative. The Second Supplement Is Similarly Void and Inexistent

The Second Supplement ("SS") was executed between the government and Piatco on September 4, 2000. It calls for Piatco, acting not as concessionaire of NAIA Terminal III but as a public works contractor, to undertake in the government's stead the clearing, removal, demolition and disposal of improvements, subterranean obstructions and waste materials at the project site. 57 The scope of the works, the procedures involved, and the obligations of the contractor are provided for in Parts II and III of the SS. Section 4.1 sets out the compensation to be paid, listing specific rates per cubic meter of materials for each phase of the work excavation, leveling, removal and disposal, backfilling and dewatering. The amounts collectible by Piatco are to be offset against the Annual Guaranteed Payments it must pay government. Though denominated as Second Supplement, it was nothing less than an entirely new public works contract. Yet it, too, did not undergo any public bidding, for which reason it is also void and inoperative. Not surprisingly, Piatco had to subcontract the works to a certain Wintrack Builders, a firm reputedly owned by a former high-ranking DOTC official. But that is another story altogether. The Third Supplement Is Likewise Void and Inexistent The Third Supplement ("TS"), executed between the government and Piatco on June 22, 2001, passed on to the government certain obligations of Piatco as Terminal III concessionaire, with respect to the surface road connecting Terminals II and III. By way of background, at the inception of and forming part of the NAIA Terminal III project was the proposed construction of an access tunnel crossing Runway 13/31, which would connect Terminal III to Terminal II. The Bid Documents in Section 4.1.2.3[B][i] declared that the said access tunnel was subject to further negotiation; but for purposes of the bidding, the proponent should submit a bid for it as well. Therefore, the tunnel was supposed to be part and parcel of the Terminal III project. However, in Section 5 of the First Supplement, the parties declared that the access tunnel was not economically viable at that time. In lieu thereof, the parties agreed that a surface access road (now called the T2-T3 Road) was to be constructed by Piatco to connect the two terminals. Since it was plainly in substitution of the tunnel, the surface road construction should likewise be considered part and parcel of the same project, and therefore part of Piatco's obligation as well. While the access tunnel was estimated to cost about P800 million, the surface road would have a price tag in the vicinity of about P100 million, thus producing significant savings for Piatco. Yet, the Third Supplement, while confirming that Piatco would construct the T2-T3 Road, nevertheless shifted to government some of the obligations pertaining to the former, as follows: 1.Government is now obliged to remove at its own expense all tenants, squatters, improvements and/or waste materials on the site where the T2-T3 road is to be constructed. 58 There was no similar obligation on the part of government insofar as the access tunnel was concerned. 2.Should government fail to carry out its obligation as above described, Piatco may undertake it on government's behalf, subject to the terms and conditions (including compensation payments) contained in the Second Supplement. 59 3.MIAA will answer for the operation, maintenance and repair of the T2-T3 Road. 60 The TS depends upon and is intended to supplement the ARCA as well as the First Supplement, both of which are void and inexistent and not capable of being ratified or amended. It follows that the TS is likewise void, inexistent and inoperative. And even if, hypothetically speaking, both ARCA and FS are valid, still, the Third Supplement imposing as it does significant new obligations upon government would in effect alter the terms and stipulations of the ARCA in material respects, thus necessitating another public bidding. Since the TS was not subjected to public bidding, it is consequently utterly void as well. At any rate, the TS created new monetary obligations on the part of government, for which there were no prior appropriations. Hence it follows that the same is void ab initio. In patiently tracing the progress of the Piatco contracts from their inception up to the present, I noted that the whole process was riddled with significant lapses, if not outright irregularity and

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wholesale violations of law and public policy. The rationale of beginning at the beginning, so to speak, will become evident when the question of what to do with the five Piatco contracts is discussed later on. In the meantime, I shall take up specific, provisions or changes in the contracts and highlight the more prominent objectionable features. Government Directly Guarantees Piatco Debts Certainly the most discussed provision in the parties' arguments is the one creating an unauthorized, direct government guarantee of Piatco's obligations in favor of the lenders. Section 4-A of the BOT Law as amended states that unsolicited proposals, such as the NAIA Terminal III Project, may be accepted by government provided inter aliathat no direct government guarantee, subsidy or equity is required. In short, such guarantee is prohibited in unsolicited proposals. Section 2(n) of the same legislation defines direct government guarantee as "an agreement whereby the government or any of its agencies or local government units (will) assume responsibility for the repayment of debt directly incurred by the project proponent in implementing the project in case of a loan default." Both the CA and the ARCA have provisions that undeniably create such prohibited government guarantee. Section 4.04 (c)(iv) to (vi) of the ARCA, which is similar to Section 4.04 of the CA, provides thus: "(iv)that if Concessionaire is in default under a payment obligation owed to the Senior Lenders, and as a result thereof the Senior Lenders have become entitled to accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of the same . . .; (v). . . the Senior Lenders may after written notification to GRP, transfer the Concessionaire's rights and obligations to a transferee . . .; (vi)if the Senior Lenders . . . are unable to . . . effect a transfer . . ., then GRP and the Senior Lenders shall endeavor . . . to enter into any other arrangement relating to the Development Facility. . . . If no agreement relating to the Development Facility is arrived at by GRP and the Senior Lenders within the said 180-day period, then at the end thereof the Development Facility shall be transferred by the Concessionaire to GRP or its designee and GRP shall make a termination payment to Concessionaire equal to the Appraised Value (as hereinafter defined) of the Development Facility or the sum of the Attendant Liabilities, if greater . . . ." In turn, the term Attendant Liabilities is defined in Section 1.06 of the ARCA as follows: "Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which may become, owing by Concessionaire to Senior Lenders or any other persons or entities who have provided, loaned or advanced funds or provided financial facilities to Concessionaire for the Project, including, without limitation, all principal, interest, associated fees, charges, reimbursements, and other related expenses (including the fees, charges and expenses of any agents or trustees of such persons or entities), whether payable at maturity, by acceleration or otherwise, and further including amounts owed by Concessionaire to its professional consultants and advisers, suppliers, contractors and sub-contractors." Government's agreement to pay becomes effective in the event of a default by Piatco on any of its loan obligations to the Senior Lenders, and the amount to be paid by government is the greater of either the Appraised Value of Terminal III or the aggregate amount of the moneys owed by Piatco whether to the Senior Lenders or to other entities, including its suppliers, contractors and subcontractors. In effect, therefore, this agreement already constitutes the prohibited assumption by government of responsibility for repayment of Piatco's debts in case of a loan default. In fine, a direct government guarantee. It matters not that there is a roundabout procedure prescribed by Section 4.04(c)(iv), (v) and (vi) that would require, first, an attempt (albeit unsuccessful) by the Senior Lenders to transfer Piatco's rights to a transferee of their choice; and, second, an effort (equally unsuccessful) to "enter into any other arrangement" with the government regarding the Terminal III facility, before government is required to make good on its guarantee. What is abundantly clear is the fact that, in the devious labyrinthine process detailed in the aforesaid section, it is entirely within the Senior

Lenders' power, prerogative and control exercisable via a mere refusal or inability to agree upon "a transferee" or "any other arrangement" regarding the terminal facility to push the process forward to the ultimate contractual cul-de-sac, wherein government will be compelled to abjectly surrender and make good on its guarantee of payment. Piatco also argues that there is no proviso requiring government to pay the Senior Lenders in the event of Piatco's default. This is literally true, in the sense that Section 4.04(c)(vi) of ARCA speaks of government making the termination payment to Piatco, not to the lenders. However, it is almost a certainty that the Senior Lenders will already have made Piatco sign over to them, ahead of time, its right to receive such payments from government; and/or they may already have had themselves appointed its attorneys-in-fact for the purpose of collecting and receiving such payments. Nevertheless, as petitioners-in-intervention pointed out in their Memorandum, 61 the termination payment is to be made to Piatco, not to the lenders; and there is no provision anywhere in the contract documents to prevent it from diverting the proceeds to its own benefit and/or to ensure that it will necessarily use the same to pay off the Senior Lenders and other creditors, in order to avert the foreclosure of the mortgage and other liens on the terminal facility. Such deficiency puts the interests of government at great risk. Indeed, if the unthinkable were to happen, government would be paying several hundreds of millions of dollars, but the mortgage liens on the facility may still be foreclosed by the Senior Lenders just the same. Consequently, the Piatco contracts are also objectionable for grievously failing to adequately protect government's interests. More accurately, the contracts would consistently weaken and do away with protection of government interests. As such, they are therefore grossly lopsided in favor of Piatco and/or its Senior Lenders. While on this subject, it is well to recall the earlier discussion regarding a particularly noticeable alteration of the concept of "Attendant Liabilities." In Section 1.06 of the CA defining the term, the Piatco debts to be assumed/paid by government were qualified by the phrases recorded and from time to time outstanding in the books of the Concessionaire and actually used for the project. These phrases were eliminated from the ARCA's definition of Attendant Liabilities. Since no explanation has been forthcoming from Piatco as to the possible justification for such a drastic change, the only conclusion, possible is that it intends to haveall of its debts covered by the guarantee, regardless of whether or not they are disclosed in its books. This has particular reference to those borrowings which were obtained in violation of the loan covenants requiring Piatco to maintain a minimum 70:30 debt-to-equity ratio, and even if the loan proceeds were not actually used for the project itself. This point brings us back to the guarantee itself. In Section 4.04(c)(vi) of ARCA, the amount which government has guaranteed to pay as termination payment is thegreater of either (i) the Appraised Value of the terminal facility or (ii) the aggregate of the Attendant Liabilities. Given that the Attendant Liabilities may include practically any Piatco debt under the sun, it is highly conceivable that their sum may greatly exceed the appraised value of the facility, and government may end up paying very much more than the real worth of Terminal III. (So why did government have to bother with public bidding anyway?) In the final analysis, Section 4.04(c)(iv) to (vi) of the ARCA is diametrically at odds with the spirit and the intent of the BOT Law. The law meant to mobilize private resources (the private sector) to take on the burden and the risks of financing the construction, operation and maintenance of relevant infrastructure and development projects for the simple reason that government is not in a position to do so. By the same token, government guarantee was prohibited, since it would merely defeat the purpose and raison d'tre of a build-operate-and-transfer project to be undertaken by the private sector. To the extent that the project proponent is able to obtain loans to fund the project, those risks are shared between the project proponent on the one hand, and its banks and other lenders on the other. But where the proponent or its lenders manage to cajol or coerce the government into extending a guarantee of payment of the loan obligations, the risks assumed by the lenders are

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passed right back to government. I cannot understand why, in the instant case, government cheerfully assented to re-assuming the risks of the project when it gave the prohibited guarantee and thus simply negated the very purpose of the BOT Law and the protection it gives the government. Contract Termination Provisions in the Piatco Contracts Are Void The BOT Law as amended provides for contract termination as follows: "Sec. 7.Contract Termination. In the event that a project is revoked, cancelled or terminated by the government through no fault of the project proponent or by mutual agreement, the Government shall compensate the said project proponent for its actual expenses incurred in the project plus a reasonable rate of return thereon not exceeding that stated in the contract as of the date of such revocation, cancellation or termination: Provided, That the interest of the Government in this instances [sic] shall be duly insured with the Government Service Insurance System or any other insurance entity duly accredited by the Office of the Insurance Commissioner: Provided, finally, That the cost of the insurance coverage shall be included in the terms and conditions of the bidding referred to above. "In the event that the government defaults on certain major obligations in the contract and such failure is not remediable or if remediable shall remain unremedied for an unreasonable length of time, the project proponent/contractor may, by prior notice to the concerned national government agency or local government unit specifying the turn-over date, terminate the contract. The project proponent/contractor shall be reasonably compensated by the Government for equivalent or proportionate contract cost as defined in the contract." The foregoing statutory provision in effect provides for the following limited instances when termination compensation may be allowed: 1.Termination by the government through no fault of the project proponent 2.Termination upon the parties' mutual agreement 3.Termination by the proponent due to government's default on certain major contractual obligations To emphasize, the law does not permit compensation for the project proponent when contract termination is due to the proponent's own fault or breach of contract. This principle was clearly violated in the Piatco Contracts. The ARCA stipulates that government is to pay termination compensation to Piatco even when termination is initiated by government for the following causes: "(i)Failure of Concessionaire to finish the Works in all material respects in accordance with the Tender Design and the Timetable; (ii)Commission by Concessionaire of a material breach of this Agreement . . .; (iii). . . a change in control of Concessionaire arising from the sale, assignment, transfer or other disposition of capital stock which results in an ownership structure violative of statutory or constitutional limitations; (iv)A pattern of continuing or repeated non-compliance, willful violation, or non-performance of other terms and conditions hereof which is hereby deemed a material breach of this Agreement . . ." 62 As if that were not bad enough, the ARCA also inserted into Section 8.01 the phrase "Subject to Section 4.04." The effect of this insertion is that in those instances where government may terminate the contract on account of Piatco's breach, and it is nevertheless required under the ARCA to make termination compensation to Piatco even though unauthorized by law, such compensation is to be equivalent to the payment amount guaranteed by government either a) the Appraised Value of the terminal facility or (b) the aggregate of the Attendant Liabilities, whichever amount is greater! Clearly, this condition is not in line with Section 7 of the BOT Law. That provision permits a project proponent to recover the actual expenses it incurred in the prosecution of the project plus a reasonable rate of return not in excess of that provided in the contract; or to be compensated for

the equivalent or proportionate contract cost as defined in the contract, in case the government is in default on certain major contractual obligations. Furthermore, in those instances where such termination compensation is authorized by the BOT Law, it is indispensable that the interest of government be duly insured. Section 5.08 the ARCA mandates insurance coverage for the terminal facility; but all insurance policies are to be assigned, and all proceeds are payable, to the Senior Lenders. In brief, the interest being secured by such coverage is that of the Senior Lenders, not that of government. This can hardly be considered compliance with law. In essence, the ARCA provisions on termination compensation result in another unauthorized government guarantee, this time in favor of Piatco. A Prohibited Direct Government Subsidy, Which at the Same Time Is an Assault on the National Honor Still another contractual provision offensive to law and public policy is Section 8.01(d) of the ARCA, which is a "bolder and badder" version of Section 8.04(d) of the CA. It will be recalled that Section 4-A of the BOT Law as amended prohibits not only direct government guarantees, but likewise a direct government subsidy for unsolicited proposals. Section 13.2. b. iii. of the 1999 IRR defines a direct government subsidy as encompassing "an agreement whereby the Government . . . will . . .postpone any payments due from the proponent." Despite the statutory ban, Section 8.01 (d) of the ARCA provides thus: "(d)The provisions of Section 8.01(a) notwithstanding, and for the purpose of preventing a disruption of the operations in the Terminal and/or Terminal Complex, in the event that at any time Concessionaire is of the reasonable opinion that it shall be unable to meet a payment obligation owed to the Senior Lenders, Concessionaire shall give prompt notice to GRP, through DOTC/MIAA and to the Senior Lenders. In such circumstances, the Senior Lenders (or the Senior Lenders' Representative) may ensure that after making provision for administrative expenses and depreciation, the cash resources of Concessionaire shall first be used and applied to meet all payment obligations owed to the Senior Lenders. Any excess cash, after meeting such payment obligations, shall be earmarked for the payment of all sums payable by Concessionaire to GRP under this Agreement. If by reason of the foregoing GRP should be unable to collect in full all payments due to GRP under this Agreement, then the unpaid balance shall be payable within a 90day grace period counted from the relevant due date, with interest per annum at the rate equal to the average 91-day Treasury Bill Rate as of the auction date immediately preceding the relevant due date. If payment is not effected by Concessionaire within the grace period, then a spread of five (5%) percent over the applicable 91-day Treasury Bill Rate shall be added on the unpaid amount commencing on the expiry of the grace period up to the day of full payment. When the temporary illiquidity of Concessionaire shall have been corrected and the cash position of Concessionaire should indicate its ability to meet its maturing obligations, then the provisions set forth under this Section 8.01(d) shall cease to apply. The foregoing remedial measures shall be applicable only while there remains unpaid and outstanding amounts owed to the Senior Lenders." (Italics supplied) By any manner of interpretation or application, Section 8.01(d) of the ARCA clearly mandates the indefinite postponement of payment of all of Piatco's obligations to the government, in order to ensure that Piatco's obligations to the Senior Lenders are paid in full first. That is nothing more or less than the direct government subsidy prohibited by the BOT Law and the IRR. The fact that Piatco will pay interest on the unpaid amounts owed to government does not change the situation or render the prohibited subsidy any less unacceptable. But beyond the clear violations of law, there are larger issues involved in the ARCA. Earlier, I mentioned that Section 8.01(d) of the ARCA completely eliminated the proviso in Section 8.04(d) of the CA which gave government the right to appoint a financial controller to manage the cash position of Piatco during situations of financial distress. Not only has government been deprived of any means of monitoring and managing the situation; worse, as can be seen from Section

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8.01(d) above-quoted, the Senior Lenders have effectively locked in on the right to exercise financial controllership over Piatco and to allocate its cash resources to the payment of all amounts owed to the Senior Lenders before allowing any payment to be made to government. In brief, this particular provision of the ARCA has placed in the hands of foreign lenders the power and the authority to determine how much (if at all) and when the Philippine government (as grantor of the franchise) may be allowed to receive from Piatco. In that situation, government will be at the mercy of the foreign lenders. This is a situation completely contrary to the rationale of the BOT Law and to public policy. The aforesaid provision rouses mixed emotions shame and disgust at the parties' (especially the government officials') docile submission and abject servitude and surrender to the imperious and excessive demands of the foreign lenders, on the one hand; and vehement outrage at the affront to the sovereignty of the Republic and to the national honor, on the other. It is indeed time to put an end to such an unbearable, dishonorable situation. The Piatco Contracts Unarguably Violate Constitutional Injunctions I will now discuss the manner in which the Piatco Contracts offended the Constitution. The Exclusive Right Granted to Piatco to Operate a Public Utility Is Prohibited by the Constitution While Section 2.02 of the ARCA spoke of granting to Piatco "a franchise to operate and maintain the Terminal Complex," Section 3.02(a) of the same ARCA granted to Piatco, for the entire term of the concession agreement, "the exclusive right to operate a commercial international passenger terminal within the Island of Luzon" with the exception of those three terminals already existing 63 at the time of execution of the ARCA. Section 11 of Article XII of the Constitution prohibits the grant of a "franchise, certificate, or any other form of authorization for the operation of a public utility" that is "exclusive in character." In its Opinion No. 078, Series of 1995, the Department of justice held that "the NAIA Terminal III which . . . is a 'terminal for public use' is a public utility." Consequently, the constitutional prohibition against the exclusivity of a franchise applies to the franchise for the operation of NAIA Terminal III as well. What was granted to Piatco was not merely a franchise, but an "exclusive right" to operate an international passenger terminal within the "Island of Luzon." What this grant effectively means is that the government is now estopped from exercising its inherent power to award any other person another franchise or a right to operate such a public utility, in the event public interest in Luzon requires it. This restriction is highly detrimental to government and to the public interest. Former Secretary of Justice Hernando B. Perez expressed this point well in his Memorandum for the President dated 21 May 2002: "Section 3.02 on 'Exclusivity' "This provision gives to PIATCO (the Concessionaire) the exclusive right to operate a commercial international airport within the Island of Luzon with the exception of those already existing at the time of the execution of the Agreement, such as the airports at Subic, Clark and Laoag City. In the case of the Clark International Airport, however, the provision restricts its operation beyond its design capacity of 850,000 passengers per annum and the operation of new terminal facilities therein until after the new NAIA Terminal III shall have consistently reached or exceeded its design capacity of ten (10) million passenger capacity per year for three (3) consecutive years during the concession period. "This is an onerous and disadvantageous provision. It effectively grants PIATCO a monopoly in Luzon and ties the hands of government in the matter of developing new airports which may be found expedient and necessary in carrying out any future plan for an inter-modal transportation system in Luzon. "Additionally, it imposes an unreasonable restriction on the operation of the Clark International Airport which could adversely affect the operation and development of the Clark Special Economic

Zone to the economic prejudice of the local constituencies that are being benefited by its operation." (Italics supplied) While it cannot be gainsaid that an enterprise that is a public utility may happen to constitute a monopoly on account of the very nature of its business and the absence of competition, such a situation does not however constitute justification to violate the constitutional prohibition and grant an exclusive franchise or exclusive right to operate a public utility. Piatco's contention that the Constitution does not actually prohibit monopolies is beside the point. As correctly argued, 64 the existence of a monopoly by a public utility is a situation created by circumstances that do not encourage competition. This situation is different from the grant of a franchise to operate a public utility, a privilege granted by government. Of course, the grant of a franchise may result in a monopoly. But making such franchise exclusive is what is expressly proscribed by the Constitution. Actually, the aforementioned Section 3.02 of the ARCA more than just guaranteed exclusivity; it also guaranteed that the government will not improve or expand the facilities at Clark and in fact is required to put a cap on the latter's operations until after Terminal III shall have been operated at or beyond its peak capacity for three consecutive years. 65 As counsel for public respondents pointed out, in the real world where the rate of influx of international passengers can fluctuate substantially from year to year, it may take many years before Terminal III sees three consecutive years' operations at peak capacity. The Diosdado Macapagal International Airport may thus end up stagnating for a long time. Indeed, in order to ensure greater profits for Piatco, the economic progress of a region has had to be sacrificed. The Piatco Contracts Violate the Time Limitation on Franchises Section 11 of Article XII of the Constitution also provides that "no franchise, certificate or any other form of authorization for the operation of a public utility shall be . . . for a longer period than fifty years." After all, a franchise held for an unreasonably long time would likely give rise to the same evils as a monopoly. The Piatco Contracts have come up with an innovative way to circumvent the prohibition and obtain an extension. This fact can be gleaned from Section 8.03(b) of the ARCA, which I quote thus: "Sec. 8.03.Termination Procedure and Consequences of Termination. a). . . b)In the event the Agreement is terminated pursuant to Section 8.01 (b) hereof, Concessionaire shall be entitled to collect the Liquidated Damages specified in Annex 'G'. The full payment by GRP to Concessionaire of the Liquidated Damages shall be a condition precedent to the transfer by Concessionaire to GRP of the Development Facility. Prior to the full payment of the Liquidated Damages, Concessionaire shall to the extent practicable continue to operate the Terminal and the Terminal Complex and shall be entitled to retain and withhold all payments to GRP for the purpose of offsetting the same against the Liquidated Damages. Upon full payment of the Liquidated Damages, Concessionaire shall immediately transfer the Development Facility to GRP on 'as-is-where-is' basis." The aforesaid easy payment scheme is less beneficial than it first appears. Although it enables government to avoid having to make outright payment of an obligation that will likely run into billions of pesos, this easy payment plan will nevertheless cost government considerable loss of income, which it would earn if it were to operate Terminal III by itself. Inasmuch as payments to the concessionaire (Piatco) will be on "installment basis," interest charges on the remaining unpaid balance would undoubtedly cause the total outstanding balance to swell. Piatco would thus be entitled to remain in the driver's seat and keep operating the terminal for an indefinite length of time. The Contracts Create Two Monopolies for Piatco By way of background, two monopolies were actually created by the Piatco contracts. The first and more obvious one refers to the business of operating an international passenger terminal in

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Luzon, the business end of which involves providing international airlines with parking space for their aircraft, and airline passengers with the use of departure and arrival areas, check-in counters, information systems, conveyor systems, security equipment and paraphernalia, immigrations and customs processing areas; and amenities such as comfort rooms, restaurants and shops. In furtherance of the first monopoly, the Piatco Contracts stipulate that the NAIA Terminal III will be the only facility to be operated as an international passenger terminal; 66 that NAIA Terminals I and II will no longer be operated as such; 67 and that no one (including the government) will be allowed to compete with Piatco in the operation of an international passenger terminal in the NAIA Complex. 68 Given that, at this time, the government and Piatco are the only ones engaged in the business of operating an international passenger terminal, I am not acutely concerned with this particular monopolistic situation. There was however another monopoly within the NAIA created by the subject contracts for Piatco in the business of providing international airlines with the following: groundhandling, in-flight catering, cargo handling, and aircraft repair and maintenance services. These are lines of business activity in which are engaged many service providers (including the petitioners-in-intervention), who will be adversely affected upon full implementation of the Piatco Contracts, particularly Sections 3.01(d) 69 and (e) 70 of both the ARCA and the CA. On the one hand, Section 3.02(a) of the ARCA makes Terminal III the only international passenger terminal at the NAIA, and therefore the only place within the NAIA Complex where the business of providing airport-related services to international airlines may be conducted. On the other hand, Section 3.01(d) of the ARCA requires government, through the MIAA, not to allow service providers with expired MIAA contracts to renew or extend their contracts to render airportrelated services to airlines. Meanwhile, Section 3.01(e) of the ARCA requires government, through the DOTC and MIAA, not to allow service providers those with subsisting concession agreements for services and operations being conducted at Terminal I to carry over their concession agreements, services and operations to Terminal III, unless they first enter into a separate agreement with Piatco. ACaTIc The aforementioned provisions vest in Piatco effective and exclusive control over which service provider may and may not operate at Terminal III and render the airport-related services needed by international airlines. It thereby possesses the power to exclude competition. By necessary implication, it also has effective control over the fees and charges that will be imposed and collected by these service providers. This intention is exceedingly clear in the declaration by Piatco that it is "completely within its rights to exclude any party that it has not contracted with from NAIA Terminal III." 71 Worse, there is nothing whatsoever in the Piatco Contracts that can serve to restrict, control or regulate the concessionaire's discretion and power to reject any service provider and/or impose any term or condition it may see fit in any contract it enters into with a service provider. In brief, there is no safeguard whatsoever to ensure free and fair competition in the service-provider sector. In the meantime, and not surprisingly, Piatco is first in line, ready to exploit the unique business opportunity. It announced 72 that it has accredited three groundhandlers for Terminal III. Aside from the Philippine Airlines, the other accredited entities are the Philippine Airport and Ground Services Globeground, Inc. ("PAGSGlobeground") and the Orbit Air Systems, Inc. ("Orbit"). PAGSGlobeground is a wholly-owned subsidiary of the Philippine Airport and Ground Services, Inc. or PAGS, 73 while Orbit is a wholly-owned subsidiary of Friendship Holdings, Inc., 74 which is in turn owned 80 percent by PAGS. 75 PAGS is a service provider owned 60 percent by the Cheng Family; 76 it is a stockholder of 35 percent of Piatco 77 and is the latter's designated contractoroperator for NAIA Terminal III. 78 Such entry into and domination of the airport-related services sector appear to be very much in line with the following provisions contained in the First Addendum to the Piatco Shareholders

Agreement, 79 executed on July 6, 1999, which appear to constitute a sort of master plan to create a monopoly and combinations in restraint of trade: "11.The Shareholders shall ensure: a.. . . b.That (Phil. Airport and Ground Services, Inc.) PAGS and/or its designated Affiliates shall, at all times during the Concession Period, be exclusively authorized by (PIATCO) to engage in the provision of ground-handling, catering and fueling services within the Terminal Complex. c.That PAIRCARGO and/or its designated Affiliate shall, during the Concession Period, be the only entities authorized to construct and operate a warehouse for all cargo handling and related services within the Site." Precisely, proscribed by our Constitution are the monopoly and the restraint of trade being fostered by the Piatco Contracts through the erection of barriers to the entry of other service providers into Terminal III. In Tatad v. Secretary of the Department of Energy, 80 the Court ruled: ". . . [S]ection 19 of Article XII of the Constitution . . . mandates: 'The State shall regulate or prohibit monopolies when the public interest so requires. No combinations in restraint of trade or unfair competition shall be allowed.' "A monopoly is a privilege or peculiar advantage vested in one or more persons or companies, consisting in the exclusive right or power to carry on a particular business or trade, manufacture a particular article, or control the sale or the whole supply of a particular commodity. It is a form of market structure in which one or only a few firms dominate the total sales of a product or service. On the other hand, a combination in restraint of trade is an agreement or understanding between two or more persons, in the form of a contract, trust, pool, holding company, or other form of association, for the purpose of unduly restricting competition, monopolizing trade and commerce in a certain commodity, controlling its production, distribution and price, or otherwise interfering with freedom of trade without statutory authority. Combination in restraint of trade refers to the means while monopoly refers to the end. "xxx xxx xxx "Section 19, Article XII of our Constitution is anti-trust in history and in spirit. It espouses competition. The desirability of competition is the reason for the prohibition against restraint of trade, the reason for the interdiction of unfair competition, and the reason for regulation of unmitigated monopolies. Competition is thus the underlying principle of [S]ection 19, Article XII of our Constitution, . . ." 81 Gokongwei Jr. v. Securities and Exchange Commission 82 elucidates the criteria to be employed: "A 'monopoly' embraces any combination the tendency of which is to prevent competition in the broad and general sense, or to control prices to the detriment of the public. In short, it is the concentration of business in the hands of a few. The material consideration in determining its existence is not that prices are raised and competition actually excluded, but that power exists to raise prices or exclude competition when desired." 83 (Italics supplied) The Contracts Encourage Monopolistic Pricing, Too Aside from creating a monopoly, the Piatco contracts also give the concessionaire virtually limitless power over the charging of fees, rentals and so forth. What little "oversight function" the government might be able and minded to exercise is less than sufficient to protect the public interest, as can be gleaned from the following provisions: "Sec. 6.06.Adjustment of Non-Public Utility Fees and Charges "For fees, rentals and charges constituting Non-Public Utility Revenues, Concessionaire may make any adjustments it deems appropriate without need for the consent of GRP or any government agency subject to Sec. 6.03(c)." Section 6.03(c) in turn provides: "(c)Concessionaire shall at all times be judicious in fixing fees and charges constituting Non-Public Utility Revenues in order to ensure that End Users are not unreasonably deprived of services. While the vehicular parking fee, porterage fee and greeter/wellwisher fee constitute Non-Public Utility Revenues of Concessionaire, GRP may require Concessionaire to explain and justify the fee

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it may set from time to time, if in the reasonable opinion of GRP the said fees have become exorbitant resulting in the unreasonable deprivation of End Users of such services." It will be noted that the above-quoted provision has no teeth, so the concessionaire can defy the government without fear of any sanction. Moreover, Section 6.06 taken together with Section 6.03(c) of the ARCA falls short of the standard set by the BOT Law as amended, which expressly requires in Section 2(b) that the project proponent is "allowed to charge facility users appropriate tolls, fees, rentals and charges not exceeding those proposed in its bid or as negotiated and incorporated in the contract . . . ." The Piatco Contracts Violate Constitutional Prohibitions Against Impairment of Contracts and Deprivation of Property Without Due Process Earlier, I discussed how Section 3.01(e) 84 of both the CA and the ARCA requires government, through DOTC/MIAA, not to permit the carry-over to Terminal III of the services and operations of certain service providers currently operating at Terminal I with subsisting contracts. By the In-Service Date, Terminal III shall be the only facility to be operated as an international passenger terminal at the NAIA; 85 thus, Terminals I and II shall no longer operate as such, 86 and no one shall be allowed to compete with Piatco in the operation of an international passenger terminal in the NAIA. 87 The bottom line is that, as of the In-Service Date, Terminal III will be the only terminal where the business of providing airport-related services to international airlines and passengers may be conducted at all. Consequently, government through the DOTC/MIAA will be compelled to cease honoring existing contracts with service providers after the In-Service Date, as they cannot be allowed to operate in Terminal III. In short, the CA and the ARCA obligate and constrain government to break its existing contracts with these service providers. Notably, government is not in a position to require Piatco to accommodate the displaced service providers, and it would be unrealistic to think that these service providers can perform their service contracts in some other international airport outside Luzon. Obviously, then, these displaced service providers are to borrow a quaint expression up the river without a paddle. In plainer terms, they will have lost their businesses entirely, in the blink of an eye. What we have here is a set of contractual provisions that impair the obligation of contracts and contravene the constitutional prohibition against deprivation of property without due process of law. 88 Moreover, since the displaced service providers, being unable to operate, will be forced to close shop, their respective employees among them Messrs. Agan and Lopez et al. have very grave cause for concern, as they will find themselves out of employment and bereft of their means of livelihood. This situation comprises still another violation of the constitution prohibition against deprivation of property without due process. True, doing business at the NAIA may be viewed more as a privilege than as a right. Nonetheless, where that privilege has been availed of by the petitioners-in-intervention service providers for years on end, a situation arises, similar to that in American Inter-fashion v. GTEB. 89 We held therein that a privilege enjoyed for seven years "evolved into some form of property right which should not be removed . . . arbitrarily and without due process." Said pronouncement is particularly relevant and applicable to the situation at bar because the livelihood of the employees of petitioners-intervenors are at stake. The Piatco Contracts Violate Constitutional Prohibition Against Deprivation of Liberty Without Due Process The Piatco Contracts by locking out existing service providers from entry into Terminal III and restricting entry of future service providers, thereby infringed upon the freedom guaranteed to

and heretofore enjoyed by international airlines to contract with local service providers of their choice, and vice versa. Both the service providers and their client airlines will be deprived of the right to liberty, which includes the right to enter into all contracts, 90 and/or the right to make a contract in relation to one's business. 91 By Creating New Financial Obligations for Government, Supplements to the ARCA Violate the Constitutional Ban on Disbursement of Public Funds Without Valid Appropriation Clearly prohibited by the Constitution is the disbursement of public funds out of the treasury, except in pursuance of an appropriation made by law. 92 The immediate effect of this constitutional ban is that all the various agencies of government are constrained to limit their expenditures to the amounts appropriated by law for each fiscal year; and to carefully count their cash before taking on contractual commitments. Giving flesh and form to the injunction of the fundamental law, Sections 46 and 47 of Executive Order 292, otherwise known as the Administrative Code of 1987, provide as follows: "Sec. 46.Appropriation Before Entering into Contract. (1) No contract involving the expenditure of public funds shall be entered into unless there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure; and . . . "Sec. 47.Certificate Showing Appropriation to Meet Contract. Except in the case of a contract for personal service, for supplies for current consumption or to be carried in stock not exceeding the estimated consumption for three (3) months, or banking transactions of government-owned or controlled banks, no contract involving the expenditure of public funds by any government agency shall be entered into or authorized unless the proper accounting official of the agency concerned shall have certified to the officer entering into the obligation that funds have been duly appropriated for the purpose and that the amount necessary to cover the proposed contract for the current calendar year is available for expenditure on account thereof, subject to verification by the auditor concerned. The certificate signed by the proper accounting official and the auditor who verified it, shall be attached to and become an integral part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purpose until the obligation of the government agency concerned under the contract is fully extinguished." Referring to the aforequoted provisions, this Court has held that "(I)t is quite evident from the tenor of the language of the law that the existence of appropriations and the availability of funds are indispensable pre-requisites to or conditions sine qua non for the execution of government contracts. The obvious intent is to impose such conditions as a priori requisites to the validity of the proposed contract." 93 Notwithstanding the constitutional ban, statutory mandates and Jurisprudential precedents, the three Supplements to the ARCA, which were not approved by NEDA, imposed on government the additional burden of spending public moneys without prior appropriation. In the First Supplement ("FS") dated August 27, 1999, the following requirements were imposed on the government: To construct, maintain and keep in good repair and operating condition all airport support services, facilities, equipment and infrastructure owned and/or operated by MIAA, which are not part of the Project or which are located outside the Site, even though constructed by Concessionaire including the access road connecting Terminals II and III and the taxilane, taxiways and runways To obligate the MIAA to provide funding for the upkeep, maintenance and repair of the airports and facilities owned or operated by it and by third persons under its control in order to ensure compliance with international standards; and holding MIAA liable to Piatco for the latter's losses, expenses and damages as well as for the latter's liability to third persons, in case MIAA fails to perform such obligations; in addition, MIAA will also be liable for the incremental and consequential costs of the remedial work done by Piatco on account of the former's default.

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Section 4 of the FS imposed on government ten (10) "Additional Special Obligations," including the following: Providing thru MIAA the land required by Piatco for the taxilane and one taxiway, at no cost to Piatco Implementing the government's existing storm drainage master plan Coordinating with DPWH the financing, implementation and completion of the following works before the In-Service Date: three left-turning overpasses (Edsa to Tramo St., Tramo to Andrews Ave., and Manlunas Road to Sales Ave.) and a road upgrade and improvement program involving widening, repair and resurfacing of Sales Road, Andrews Avenue and Manlunas Road; improvement of Nichols Interchange; and removal of squatters along Andrews Avenue Dealing directly with BCDA and the Philippine Air Force in acquiring additional land or right of way for the road upgrade and improvement program Requiring government to work for the immediate reversion to MIAA of the Nayong Pilipino National Park, in order to permit the building of the second west parallel taxiway Section 5 of the FS also provides that in lieu of the access tunnel, a surface access road (T2-T3) will be constructed. This provision requires government to expend funds to purchase additional land from Nayong Pilipino and to clear the same in order to be able to deliver clean possession of the site to Piatco, as required in Section 5(c) of the FS. On the other hand, the Third Supplement ("TS") obligates the government to deliver, within 120 days from date thereof, clean possession of the land on which the T2-T3 Road is to be constructed. The foregoing contractual stipulations undeniably impose on government the expenditures of public funds not included in any congressional appropriation or authorized by any other statute. Piatco however attempts to take these stipulations out of the ambit of Sections 46 and 47 of the Administrative Code by characterizing them as stipulations for compliance on a "best-efforts basis" only. To determine whether the additional obligations under the Supplements may really be undertaken on a best-efforts basis only, the nature of each of these obligations must be examined in the context of its relevance and significance to the Terminal III Project, as well as of any adverse impact that may result if such obligation is not performed or undertaken on time. In short, the criteria for determining whether the best-efforts basis will apply is whether the obligations are critical to the success of the Project and, accordingly, whether failure to perform them (or to perform them on time) could result in a material breach of the contract. Viewed in this light, the "Additional Special Obligations" set out in Section 4 of the FS take on a different aspect. In particular, each of the following may all be deemed to play a major role in the successful and timely prosecution of the Terminal III Project: the obtention of land required by PIATCO for the taxilane and taxiway; the implementation of government's existing storm drainage master plan; and coordination with DPWH for the completion of the three left-turning overpasses before the In-Service Date, as well as acquisition and delivery of additional land for the construction of the T2-T3 access road. Conversely, failure to deliver on any of these obligations may conceivably result in substantial prejudice to the concessionaire, to such an extent as to constitute a material breach of the Piatco Contracts. Whereupon, the concessionaire may outrightly terminate the Contracts pursuant to Section 8.01(b)(i) and (ii) of the ARCA and seek payment of Liquidated Damages in accordance with Section 8.02(a) of the ARCA; or the concessionaire may instead require government to pay the Incremental and Consequential Losses under Section 1.23 of the ARCA. 94 The logical conclusion then is that the obligations in the Supplements are not to be performed on a bestefforts basis only, but are unarguably mandatory in character. Regarding MIAA's obligation to coordinate with the DPWH for the complete implementation of the road upgrading and improvement program for Sales, Andrews and Manlunas Roads (which provide access to the Terminal III site) prior to the In-Service Date, it is essential to take note of the fact that there was a pressing need to complete the program before the opening of Terminal III. 95 For that reason, the MIAA was compelled to enter into a memorandum of agreement with

the DPWH in order to ensure the timely completion of the road widening and improvement program. MIAA agreed to advance the total amount of P410.11 million to DPWH for the works, while the latter was committed to do the following: "2.2.8.Reimburse all advance payments to MIAA including but not limited to interest, fees, plus other costs of money within the periods CY2004 and CY2006 with payment of no less than One Hundred Million Pesos (PhP100M) every year. "2.2.9.Perform all acts necessary to include in its CY2004 to CY2006 budget allocation the repayments for the advances made by MIAA, to ensure that the advances are fully repaid by CY2006. For this purpose, DPWH shall include the amounts to be appropriated for reimbursement to MIAA in the "Not Needing Clearance" column of their Agency Budget Matrix (ABM) submitted to the Department of Budget and Management." It can be easily inferred, then, that DPWH did not set aside enough funds to be able to complete the upgrading program for the crucially situated access roads prior to the targeted opening date of Terminal III; and that, had MIAA not agreed to lend the P410 Million, DPWH would not have been able to complete the program on time. As a consequence, government would have been in breach of a material obligation. Hence, this particular undertaking of government may likewise not be construed as being for best-efforts compliance only. They also Infringe on the Legislative Prerogative and Power Over the Public Purse But the particularly sad thing about this transaction between MIAA and DPWH is the fact that both agencies were maneuvered into (or allowed themselves to be maneuvered into) an agreement that would ensure delivery of upgraded roads for Piatco's benefit, using funds not allocated for that purpose. The agreement would then be presented to Congress as a done deal. Congress would thus be obliged to uphold the agreement and support it with the necessary allocations and appropriations for three years, in order to enable DPWH to deliver on its committed repayments to MIAA. The net result is an infringement on the legislative power over the public purse and a diminution of Congress' control over expenditures of public funds a development that would not have come about, were it not for the Supplements. Very clever but very illegal! EPILOGUE What Do We Do Now? In the final analysis, there remains but one ultimate question, which I raised during the Oral Argument on December 10, 2002: What do we do with the Piatco Contracts and Terminal III? 96 (Feeding directly into the resolution of the decisive question is the other nagging issue: Why should we bother with determining the legality and validity of these contracts, when the Terminal itself has already been built and is practically complete?) Prescinding from all the foregoing disquisition, I find that all the Piatco contracts, without exception, are void ab initio, and therefore inoperative. Even the very process by which the contracts came into being the bidding and the award has been riddled with irregularities galore and blatant violations of law and public policy, far too many to ignore. There is thus no conceivable way, as proposed by some, of saving one (the original Concession Agreement) while junking all the rest. Neither is it possible to argue for the retention of the Draft Concession Agreement (referred to in the various pleadings as the Contract Bidded Out) as the contract that should be kept in force and effect to govern the situation, inasmuch as it was never executed by the parties. What Piatco and the government executed was the Concession Agreement which is entirely different from the Draft Concession Agreement. Ultimately, though, it would be tantamount to an outrageous, grievous and unforgivable mutilation of public policy and an insult to ourselves if we opt to keep in place a contract any contract for to do so would assume that we agree to having Piatco continue as the concessionaire for Terminal III. Despite all the insidious contraventions of the Constitution, law and public policy Piatco perpetrated, keeping Piatco on as concessionaire and even rewarding it by allowing it to operate

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and profit from Terminal III instead of imposing upon it the stiffest sanctions permissible under the laws is unconscionable. It is no exaggeration to say that Piatco may not really mind which contract we decide to keep in place. For all it may care, we can do just as well without one, if we only let it continue and operate the facility. After all, the real money will come not from building the Terminal, but from actually operating it for fifty or more years and charging whatever it feels like, without any competition at all. This scenario must not be allowed to happen. aATESD If the Piatco contracts are junked altogether as I think they should be, should not AEDC automatically be considered the winning bidder and therefore allowed to operate the facility? My answer is a stone-cold 'No'. AEDC never won the bidding, never signed any contract, and never built any facility. Why should it be allowed toautomatically step in and benefit from the greed of another? Should government pay at all for reasonable expenses incurred in the construction of the Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of Piatco and, in particular, its funders, contractors and investors both local and foreign. After all, there is no question that the State needs and will make use of Terminal III, it being part and parcel of the critical infrastructure and transportation-related programs of government. In Melchor v. Commission on Audit, 97 this Court held that even if the contract therein was void, the principle of payment by quantum meruit was found applicable, and the contractor was allowed to recover the reasonable value of the thing or services rendered (regardless of any agreement as to the supposed value), in order to avoid unjust enrichment on the part of government. The principle of quantum meruit was likewise applied in Eslao v. Commission on Audit, 98 because to deny payment for a building almost completed and already occupied would be to permit government to unjustly enrich itself at the expense of the contractor. The same principle was applied in Republic v. Court of Appeals. 99 One possible practical solution would be for government in view of the nullity of the Piatco contracts and of the fact that Terminal III has already been built and is almost finished to bid out the operation of the facility under the same or analogous principles as build-operate-andtransfer projects. To be imposed, however, is the condition that the winning bidder must pay the builder of the facility a price fixed by government based on quantum meruit; on the real, reasonable not inflated value of the built facility. How the payment or series of payments to the builder, funders, investors and contractors will be staggered and scheduled, will have to be built into the bids, along with the annual guaranteed payments to government. In this manner, this whole sordid mess could result in something truly beneficial for all, especially for the Filipino people. WHEREFORE, I vote to grant the Petitions and to declare the subject contracts NULL and VOID. Footnotes 1.An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector. 2.G.R. No. 155001. 3.G.R. No. 155547. 4.G.R. No. 155661. 5.An international airport is any nation's gateway to the world, the first contact of foreigners with the Philippine Republic, especially those foreigners who have not been in contact with the wonderful exports of the Philippine economy, those foreigners who have not had the benefit of enjoying Philippine export products. Because for them, when they see your products, that is the face of the Philippines they see. But if they are not exposed to your products, then it's the airport that's the first face of the Philippines they see. Therefore, it's not only a matter of opening yet, but making sure that it is a world class airport that operates without any hitches at all and without the slightest risk to travelers. But it's also emerging as a test case of my administration's commitment to fight corruption to rid our state from the hold of any vested interest, the Solicitor General, and the Justice Department have determined that all five agreements covering the NAIA Terminal 3,

most of which were contracted in the previous administration, are null and void, I cannot honor contracts which the Executive Branch's legal offices have concluded (as) null and void. I am, therefore, ordering the Department of Justice and the Presidential Anti-Graft Commission to investigate any anomalies and prosecute all those found culpable in connection with the NAIA contract. But despite all of the problems involving the PIATCO contracts, I am assuring our people, our travelers, our exporters, my administration will open the terminal even if it requires invoking the whole powers of the Presidency under the Constitution and we will open a safe, secure and smoothly functioning airport, a world class airport, as world class as the exporters we are honoring today. (Speech of President Arroyo, italics supplied) 6.Art. VIII, Sec. 1, Philippine Constitution. 7.MIASCOR, MACROASIA-EUREST, MACROASIA OGDEN and Philippine Airlines. 8.Sections 3.01 (a) and 3.02, 1997 Concession Agreement; Sections 3.01 (d) and (e) and 3.02, ARCA. 9.Kilosbayan, Inc. v. Morato, G.R. No. 118910, July 17, 1995, 246 SCRA 540, 562563, citing Baker v. Carr, 369 U.S. 186, 7 L. Ed. 633 (1962). 10.Id.; Bayan v. Zamora, G.R. No. 138570, October 10, 2000; 342 SCRA 449,478. 11.Rollo, G.R. No. 155547, p. 12. 12.Article VI, Section 29 (1). 13.G.R. No. 39842, March 28, 1934, 159 Phil. 823. 14.G.R. No. 29627, December 19, 1989; 180 SCRA 254, 260261. 15.G.R. No. 113375, May 5, 1994. 16.Id. 17.Id. citing Tan vs. Macapagal, 43 SCRA 677, 680 [1972]. 18.Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, G.R. No. 78742, July 14, 1989; 175 SCRA 343, 364365 [1989]. 19.Santiago v. Vasquez, G.R. Nos. 9928990, January 27, 1993; 217 SCRA 633, 652. 20.G.R. No. 136154, February 7, 2001; 351 SCRA 373, 381. 21.G.R. No. 135362, December 13, 1999; 320 SCRA 610. 22.Del Monte Corporation-USA v. Court of Appeals, G.R. No. 136154, February 7, 2001; 351 SCRA 373, 382. 23.Rollo, G.R. No. 155001, pp. 24872488. 24.Section 5, R.A. No. 7718. 25.At the United States Dollar-Philippine Peso exchange rate of US$1:P26.239 quoted by the Bangko Sentral ng Pilipinas at that time. 26.Rollo, G.R. No. 155001, pp. 24712474. 27.Id. at 24752477. Derived from the figures on the authorized capital stock and the shares of stock that are subscribed and paid-up. 28.Id. at 24782484. 29.MemberMaximum Amount of Equity Security BankP528,525,656.55 PAGS26,735,700.00 Paircargo3,123,515.00 TOTALP558,384,871.55 30.Republic of the Philippines vs. Hon. Ignacio C. Capulong, G.R. No. 93359, July 12, 1991; 199 SCRA 134, 146147. Italics supplied. 31.Danville Maritime, Inc. v. Commission on Audit, G.R. No. 85285, July 28, 1989, 175 SCRA 701, 713. Citations omitted. 32.A. Cobacha & D. Lucenario, LAW ON PUBLIC BIDDING AND GOVERNMENT, CONTRACTS 13 (1960). 33.Diamond v. City of Mankato, et al., 93 N.W. 912. 34.G.R. No. L-5439, December 29, 1954; 96 Phil 368.

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35.Id., at 375. 36.Section 6.03, draft Concession Agreement. 37.Sections 1.33 and 6.03(b), 1997 Concession Agreement. 38.Sections 1.27 and 6.06, 1997 Concession Agreement. 39.Italics supplied. 40.Italics supplied. 41.Referred to as "Passenger Service Fee" under the draft Concession Agreement. 42.Section 6.05 Interim Adjustment (a)Concessionaire may apply for and, if warranted, may be granted an interim adjustment of the fees and charges constituting Public Utility Revenues upon the occurrence of extraordinary events resulting from any of the following: i.a depreciation since the last adjustment by at least fifteen percent (15%) of the value of the Philippine Peso relative to the US Dollar using the exchange rates published by the Philippine Dealing System as reference; ii.an increase since the last adjustment by at least fifteen percent (15%) in the Metro Manila Consumer Price Index based on National Census and Statistics Office publications; iii.an increase since the last adjustment in MERALCO power rates billing by at least fifteen percent (15%); iv.an increase since the last adjustment in the 180-day Treasury Bill interest rates by at least thirty (30%). xxx xxx xxx 43.Section 6.05, draft Concession Agreement. 44.Section 1.33, 1997 Concession Agreement. 45.Supra note 31, 46.Malaga v. Penachos, Jr., G.R No. 86695, September 3, 1992; 213 SCRA 516, 526. 47.A. Cobacha & D. Lucenario, LAW ON PUBLIC BIDDING AND GOVERNMENT CONTRACTS 67 (1960). 48.Italics supplied. 49.Concession Agreement, Art. 4, Sec. 4.04 (b) and (c), Art. 1, Sec. 1.06, July 12, 1997. 50.Ibid. 51.Id. at Art. 4, Sec, 4.04 (c). 52.Record of the Senate Second Regular Session 19931994, vol. III, no. 42, p. 362. 53.Republic Act No. 7718, Secs. 2 and 4-A, Implementing Rules and Regulations, Rule 11, Secs. 11.1 and 11.3. 54.Italics and caption supplied. 55.Sec. 1.06, ARCA. 56.Republic Act No. 7718, as amended, Sec. 4-A, May 5, 1994; Implementing Rules and Regulations, Rule 10, Sec. 10.1. 57.Implementing Rules and Regulations, Rule 10, Sec. 10.4. 58.North Negros Sugar Co., Inc. v. Hidalgo, G.R. No. 42334, October 31, 1936; Intestate estate of the deceased Florentino San Gil. Josefa R. Oppus v. Bonifacio San Gil, G.R. No. 48115, October 12, 1942; San Diego v. Municipality of Naujan, G.R. No. L-9920, February 29, 1960; Favis vs. Municipality of Sabagan, G.R. No. L-26522, 27 February 1969; City of Manila vs.Tarlac Development Corporation, L-24557, L-24469 & L-24481, 31 July 1968; In the matter of the Petition for Declaratory Judgment on Title to Real Property (Quieting of Title)Pechueco Sons Company v. Provincial Board of Antique, G.R. No. L-27038, January 30, 1970; Fornilda v. The Branch 164, Regional Trial Court IVth Judicial Region, Pasig, G.R. No. L-72306, October 5, 1988; Laurel v. Civil Service Commission, G.R. No. 71562, October 28, 1991; Davac v. Court of Appeals, G.R. No. 106105, April 21, 1994. 59.Republic Act No. 7718, Sec. 1. 60.III Record of the Constitutional Commission, pp. 266267 (1986). 61.Id.

62.Except for providing for the suspension of all payments due to the Government for the duration of the takeover, Article V, Section 5.10(b) of the ARCA contains the same provision. Italics and caption supplied. 63.Id. 64.Bataan Shipyard and Engineering Co., Inc. v. Presidential Commission on Good Government, G.R. No. 75885, May 27, 1987 citing Freund, The Police Power (Chicago, 1904). 65.Genuino v. Court of Agrarian Relations, G.R. No. L-25035, February 26, 1968. 66.Black's Law Dictionary, 4th Ed., p. 1158. 67.36 Am Jur 480 citing Slaughter-House Cases, 16 Wall. (US) 36, 21 L ed 394. 68.Concession Agreement ("CA") dated July 12, 1997, Art. III, Sec. 3.02(a); Amended and Restated Concession Agreement ("ARCA") dated November 26, 1998, Art. III, Sec. 3.02(a). 69.Ibid. 70.Id. at CA, Art. III, Sec. 3.02(b); ARCA, Art. III, Sec. 3.02(b). 71.The day immediately following the day on which the Certificate of Completion is issued or deemed to be issued. 72.Id., at CA, Art. III, Sec. 3.01 (a) and (b); ARCA, Art. III, Sec. 3.01 (a) and (b). 73.Id. at CA, Art. III, Sec. 3.01(d) and (e); ARCA, Art. III, Sec. 3.01(d) and (e). 74.Executive Order No. 903, as amended, Sec. 4 (b) and (c). 75.Art. XII, Sec. 19, Philippine Constitution. 76.Republic Act No. 7718, Sec. 1. 77.Transcript of Oral Arguments, p. 157, December 10, 2002. 78.G.R. No. L-54958, September 2, 1983; 09 Phil. 400. 79.Executive Order No. 903, July 21, 1983, provides: Section 5.Functions, Powers, and Duties. The Authority shall have the following functions, powers and duties: xxx xxx xxx (b)To control, supervise, construct, maintain, operate and provide such facilities or services as shall be necessary for the efficient functioning of the Airport; (c)To promulgate rules and regulations governing the planning, development, maintenance, operation and improvement of the Airport and to control and/or supervise as may be necessary the construction of any structure or the rendition of any service within the Airport; VITUG, J.: 1.Article VIII, Section 5(1), 1987 Constitution. 2.Matuguina Integrated Products, Inc. vs. CA, 263 SCRA 490; Mafinco Trading Corporation vs. Ople, 70 SCRA 139. 3.Mafinco Trading Corporation vs. Ople, supra. 4.Section 1, Rule 63, Rules of Court. 5.In re: Bermudez, 145 SCRA 160. 6.235 SCRA 630, 720. 7.298 SCRA 795. PANGANIBAN, J.: 1.See Kilosbayan, Inc. v. Guingona Jr., 232 SCRA 110, May 5, 1994; and Basco v. Phil. Amusements and Gaming Corporation, 197 SCRA 52, May 14, 1991. 2.COMELEC v. Quijano-Padilla, GR No. 151992, September 18, 2002. 3.Vide: ABS-CBN Broadcasting Corp. v. Commission on Elections, 323 SCRA 811, January 28, 2000; likewise, COMELEC v. Quijano-Padilla, supra. 4.See Respondent PIATCO's Memorandum, pp. 2526. 5.See public respondents' Memorandum, p. 24. 6.307 SCRA 394, 399, May 19, 1999, per Panganiban, J. 7.175 SCRA 264, July 11, 1989. 8.Supra, Paras, J. 9.As reiterated in Bayan (Bagong Alyansang Makabayan) v. Zamora, 342 SCRA 449, 480481, October 10, 2000.

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10.RA No. 6957 as amended by RA No. 7718. 11.Par. 3.6.1 on page 8 of the Bid Documents. 12.Initially the minimum equity was set at 20%, per Sec. 3.6.4 of the Bid Documents. However, this was later clarified in Bid Bulletin No. 3(B)(6) to read 30% of Project Cost, to bring the same in line with the draft concession agreement's Art. II Sec. 2.01(a), which specifically set the project's debtto-equity ratio at 70:30, thereby requiring a minimum equity of 30% of project cost. 13.The consortium was composed of Paircargo, PAGS and Security Bank. Paircargo's audited financial statements as of 1993 and 1994 showed a net worth of P2,783,592 and P3,123,515 respectively. PAGS' audited financial statements as of 1995 showed a paid-up capital of P5,000,000 and deposits on future subscriptions of P21,735,700, or an aggregate of P26,735,700 of equity available to invest in the project. Security Bank's audited statements for 1995 showed a net worth of P3,523,504,377. However, the bank's entire net worth was not available for investment in the project since Sec. 21-B of the General Banking Act provides inter alia that a commercial bank's equity investment in any one enterprise, whether allied or non-allied, should not exceed 15% of the net worth of the investing bank. This limitation is reiterated in Sec. 1381.1.a. of the Manual for Banks and Other Financial Intermediaries. Thus, the maximum amount which Security Bank could have legally invested in the project was only P528,525,656.55. And consequently, the maximum amount of equity which the consortium could have put up was only P558,384,871.55. 14.199 SCRA 134, July 12, 1991. 15.Malaga v. Penachos Jr., 213 SCRA 516, September 3, 1992. 16.Part of the bid process under the BOT Law is the right of the originator of an unsolicited proposal to match a price challenge. Pursuant to Sec. 4-A, "in the event another proponent submits a lower price proposal, the original proponent shall have the right to match that price within thirty (30) working days." 17.Cf. Malaga v. Penachos, Jr., supra. 18.11.2, 1994 IRR. 19.Public respondents' Memorandum, pp. 8687; prepared jointly by the solicitor general, the acting government corporate counsel, and their respective deputies and assistants. 20.Supra, note 14, per Medialdea, J. 21.3.01(d), 3.01(e), 3.02(a), 3.02(b) and 5.15 of the CA. 22.See 1.06 of the CA. 23.3.02 of the CA. 24.2.05 of the CA. 25.The parametric formula referred to in the CA applies only to the following so-called public utility fees: aircraft parking and tacking fees, check-in counter fees and terminal fees. 26.Fernandez, A Treatise on Government Contracts under Philippine Law, 2001 ed., p. 70. 27.96 Phil. 368, December 29, 1954. 28.Id., p. 375, per Paras, CJ. 29.63 SCRA 170, 177178, March 21, 1975, per Antonio, J. 30.Cf . 1.06 of the ARCA vis--vis 1.06 of the CA. 31.4.04 and 8.01 of the ARCA vis--vis 8.04 of the CA. 32.As cf. Annex "G" of the ARCA vis--vis Annex "G" of the CA. 33.Cf. 8.04(d) of the ARCA vis--vis 9.01(d) of the CA. 34.Cf. 2.05 of the ARCA vis--vis 2.05 of the CA. 35.Cf. 5.08(a) of the ARCA vis--vis 5.08(a) of the CA. 36.Cf. 6.03(a)(i) of the ARCA vis--vis 6.03(a) of the CA. 37.Cf. 8.01(b) and 12.09 of the ARCA vis--vis 8.04(b) and 12.09 of the CA. 38.Cf. 8.03(a)(i) of the ARCA vis--vis 8.06(a)(i) of the CA. 39.2.05(g) of the ARCA. 40.4.04(b) of the ARCA. 41.6.03(c) of the ARCA vis--vis 6.03(c) of the CA. 42.Cf. 8.01(b) of the ARCA vis--vis 8.04(b) of the CA.

43.12.14 of the ARCA. 44.Cf. 1.11(b) and 5.06 of the ARCA vis--vis 1.11(b) and 5.06 of the CA. 45.2 of the FS, amending 1.36 of the ARCA. 46.3 of the FS, amending 2.05(d) of the ARCA. 47.Ibid. 48.4 of the FS, adding 2.05(h) to ARCA. 49.4 of the FS, adding 2.05(i) to ARCA. 50.4 of the FS, adding 2.05(p) to ARCA. 51.Per 4 of the FS, adding 2.05(n) to ARCA. 52.Per 4 of the FS, adding 2.05(o) to ARCA. 53.Per 4 of the FS, adding 2.05(p) to ARCA. 54.Per 4 of the FS, adding 2.05(j) to ARCA. 55.8 of the FS, amending 6.01(c) of the ARCA. 56.9 of the FS, amending 6.02 of the ARCA. 57.Sec. 21 of the SS. 58.Per 3.1 of the TS. 59.Vide 3.4 of the TS. 60.4.2 of the TS. 61.Page 37. 62.8.01 (a) of the ARCA. 63.Namely, the airports at the Subic Bay Freeport Special Economic Zone, the Clark Special Economic Zone, and Laoag City. 64.Memorandum, pp. 5-7, of the petitioners-in-intervention. 65.3.02 a): ". . . With regard to CSEZ, GRP shall ensure that, until such time as the Development Facility Capacity shall have been consistently reached or exceeded for three (3) consecutive years during the Concession Period, (i) Clark International Airport shall not be operated beyond its design capacity of Eight Hundred Fifty Thousand (850,000) passengers per annum and (ii) no new terminal facilities shall be operated therein. "Development Facility Capacity" refers to the ten million (10,000,000) passenger capacity per year of the Development Facility." 66.3.02(a) of the ARCA and 3.02(a) of the CA. 67.3.02(b) and (c) of the ARCA, and 3.02(b) of the CA. 68.3.02(b) and (c) of the ARCA and 3.02(b) of the CA. Pertinent portions of 3.02(b) of the ARCA are quoted hereinbelow: "(b)On the In-Service Date, GRP shall cause the closure of the Ninoy Aquino International Airport Passenger Terminals I and II as international passenger terminals in order to allow Concessionaire, during the entire Concession Period, to exclusively operate a commercial international passenger terminal within the island of Luzon; provided that the aforesaid exclusive right to operate a commercial international passenger terminal shall be without prejudice to the international passenger terminal operations already existing on the date of this Agreement in SBFSEZ, CSEZ and Laoag City (but subject to the limitation with regard to CSEZ referred to in Section 3.02[a]). Neither shall GRP, DOTC or MIAA use or permit the use of Terminals I and/or II under any arrangement or scheme, for compensation or otherwise, with any party which would directly or indirectly compete with Concessionaire in the latter's operation of and the operations in the Terminal and Terminal Complex, including without limitation the use of Terminals I and/or II for the handling of international traffic; provided that if Terminals I and/or II are operated as domestic passenger terminals, the conduct of any activity therein which under the ordinary course of operating a domestic passenger terminal is normally undertaken, shall not be considered to be in direct or indirect competition with Concessionaire in its operation of the Development Facility." 69.Sec. 3.01(d) of the ARCA and the CA reads as follows: "(d)For the purpose of an orderly transition, MIAA shall not renew any expired concession agreement relative to any service or operation currently being undertaken at the Ninoy Aquino International Airport Passenger Terminal I, or extend any concession agreement which may expire

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subsequent hereto, except to the extent that the continuation of existing services and operations shall lapse on or before the In-Service Date. Nothing herein shall be construed to prohibit MIAA from maintaining arrangements for the uninterrupted provision of essential services at the Ninoy Aquino International Airport Passenger Terminal I until the Terminal shall have commenced operations on the In-Service Date, and thereafter, from making such arrangements as are necessary for the utilization of NAIA Passenger Terminal I as a domestic passenger terminal or as a facility other than an international passenger terminal. 70.Sec. 3.01(e) of the ARCA and the CA reads as follows: "(e)GRP confirms that certain concession agreements relative to certain services or operations currently being undertaken at the Ninoy Aquino International Airport Passenger Terminal I have a validity period extending beyond the In-Service Date. GRP, through DOTC/MIAA, confirms that these services and operations shall not be carried over to the Terminal and that Concessionaire is under no legal obligation to permit such carry-over except through a separate agreement duly entered into with Concessionaire. In the event Concessionaire becomes involved in any litigation initiated by any such concessionaire or operator, GRP undertakes and hereby holds Concessionaire free and harmless on a full indemnity basis from and against any loss and/or liability resulting from any such litigation, including the cost of litigation and the reasonable fees paid or payable to Concessionaire's counsel of choice, all such amounts being fully deductible by way of an offset from any amount which Concessionaire is bound to pay GRP under this Agreement." 71.PIATCO Comment, par. 9, on p. 6. 72.PIATCO letter dated October 14, 2002 addressed to the Board of Airline Representatives, copy attached as Annex "OO-Service Providers". 73.Based on the PAGSGlobeground GIS as of July 2000, attached as Annex "LL-Service Providers" to the Memorandum of petitioners-in-intervention. 74.Based on the Orbit GIS as of August 2000, attached as Annex "MM-Service Providers" to the Memorandum of petitioners-in-intervention. 75.Based on the Friendship Holdings, Inc. GIS as of December 2001, attached as Annex "NNService Providers" to the Memorandum of petitioners-in-intervention. 76.Per the Articles of Incorporation of PAGS, attached as Annex "Y-Service Providers" to the petition-in-intervention. 77.Per the GIS of Piatco as of May 2000. 78.Per 5.15 of both the CA and the ARCA. 79.Copy of which was presented by Piatco to the Senate Blue Ribbon Committee during committee hearings. 80.281 SCRA 330, November 5, 1997. 81.Id., pp. 355-358, per Puno, J. 82.89 SCRA 336, April 11, 1979. 83.Id., p. 376, per Antonio, J. 84.Please see footnote 70 supra. 85.3.02(a) of the CA and 3.02(a) of the ARCA. 86.3.02(b) of the CA and 3.02(b) and (c) of the ARCA. 87.Ibid. 88.1, Art. III, Constitution. 89.197 SCRA 409, May 23, 1991, per Gutierrez Jr., J. 90.See Rubi v. Provincial Board of Mindoro, 39 Phil. 660, March 7, 1919. 91.Davao Stevedores Mutual Benefit Association v. Compaia Maritima, 90 Phil. 847, February 29, 1952. 92.29(1), Article VI, 1987 Constitution. 93.Commission on Elections v. Quijano-Padilla, GR No. 151992, September 18, 2002, p. 20, per Sandoval-Gutierrez, J. 94.1.23 of the ARCA defines Incremental and Consequential Costs as "additional costs properly documented and reasonably incurred by Concessionaire (including without limitation additional

overhead costs, cost of any catch-up program, demobilization, re-mobilization, storage costs, termination penalties, increase in construction costs, additional interest expense, costs, fees and other expenses and increase in the cost of financing) in excess of a budgeted or contracted amount, occasioned by, among other things, delay in the prosecution of Works by reason not attributable to Concessionaire or a deviation from the Tender Design or any suspension or interference with the operation of the Terminal Complex by reason not attributable to Concessionaire. . . ." 95.Memorandum of Agreement between the Manila International Airport Authority and the Department of Public Works and Highways, p. 2. 96.When I asked this question, Atty. Jose A. Bernas replied that if Piatco is deemed a builder in good faith then it may be entitled to some form of compensation under the principle barring unjust enrichment. But if it is found to be a builder in bad faith then it may not be entitled to compensation. (See TSN, December 10, 2002, pp. 5871.) Faced with the same question, Solicitor General Alfredo L. Benipayo responded that the facility will not be torn down but taken over by government by virtue of police power or eminent domain. (Id., pp. 9499.) When asked the same question, Atty. Eduardo delos Angeles explained that under the provision on Step in Rights, the senior lenders can designate a qualified operator to operate the facility. (Id., pp. 225226.) This solution, however, assumes that this contractual provision is valid. 97.200 SCRA 704, August 16, 1991. 98.195 SCRA 730, April 8, 1991. 99.299 SCRA 199, November 25, 1998.

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PEOPLE vs FAJARDO
EN BANC [G.R. No. L-12172. August 29, 1958.] THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. JUAN F. FAJARDO, ET AL., defendantsappellants. Assistant Solicitor General Esmeraldo Umali and Higinio V. Catalan for appellee. Prila, Pardalis & Pejo for appellants. SYLLABUS 1.MUNICIPAL CORPORATION; CONSTITUTIONAL LAW; MUNICIPAL ORDINANCE; BUILDING PERMIT; UNDEFINED AND UNLIMITED DELEGATION OF POWER. Where an ordinance of a Municipality fails to state any policy or to set up any standard to guide or limit the mayor's action; expresses no purpose to be attained by requiring a permit; enumerates no conditions for its grant or refusal; and entirely lacks standards thus confering upon the mayor arbitrary and unrestricted power to grant or deny the issuance of building permits, such ordinance is invalid, being an undefined and unlimited delegation of power to allow or prevent an activity, per se lawful. (People vs. Vera, 65 Phil., 56; Primicias vs. Fugoso, 80 Phil. 71; Schloss Poster Adv. Co., Inc. vs. City of Rock Hill, et al., 2 SE [2d], pp. 394-395) 2.ID.; ID.; ID.; WHEN REASONABLE AND OPPRESSIVE. A Municipal Ordinance is unreasonable and oppressive if it operates to permanently deprive appellants of the right to use their own property; it then oversteps the bounds of police power without just compensation. We do not overlook that the modern tendency is to regard the beautification of neighborhoods as conducive to the comfort and happiness of residents. But while property may be regulated in the interest of the general welfare and, in its pursuit, the State may prohibit structures offensive to sight (Churchill and Tait vs. Rafferty, 32 Phil., 580), the State may not, under guise of police power, permanently divest owners of the beneficial use of their property and practically confiscate them solely to preserve or assure the aesthetic appearance of the community. To legally achieve that result, the landowner should be given just compensation and an opportunity to be heard. DECISION REYES, J.B.L., J p: Appeal from the decision of the Court of First Instance of Camarines Sur convicting defendantsappellants Juan F. Fajardo and Pedro Babilonia of a violation of Ordinance No. 7, Series of 1950, of the Municipality of Baao, Camarines Sur, for having constructed without a permit from the municipal mayor a building that destroys the view of the public plaza. It appears that on August 15, 1950, during the incumbency of defendant-appellant Juan F. Fajardo as mayor of the municipality of Baao, Camarines Sur, the municipal council passed the ordinance in question providing as follows: "SECTION 1.Any person or persons who will construct or repair a building should, before constructing or repairing, obtain a written permit from the Municipal Mayor. SEC. 2.A fee of not less than P2.00 should be charged for each building permit and P1.00 for each repair permit issued. SEC. 3.PENALTY Any violation of the provisions of the above, this ordinance, shall make the violation liable to pay a fine of not less than P25 nor more than P50 or imprisonment of not less than 12 days nor more than 24 days or both, at the discretion of the court. If said building destroys the view of the Public Plaza or occupies any public property, it shall be removed at the expense of the owner of the building or house. SEC. 4.EFFECTIVITY This ordinance shall take effect on its approval." (Orig. Recs., P. 3) Four years later, after the term of appellant Fajardo as mayor had expired, he and his son-in-law, appellant Babilonia, filed a written request with the incumbent municipal mayor for a permit to construct a building adjacent to their gasoline station on a parcel of land registered in Fajardo's name, located along the national highway and separated from the public plaza by a creek (Exh. D). On January 16, 1954, the request was denied, for the reason among others that the proposed

building would destroy the view or beauty of the public plaza (Exh. E). On January 18, 1954, defendants reiterated their request for a building permit (Exh. 3), but again the request was turned down by the mayor. Whereupon, appellants proceeded with the construction of the building without a permit, because they needed a place of residence very badly, their former house having been destroyed by a typhoon and hitherto they had been living on leased property. On February 26, 1954, appellants were charged before and convicted by the justice of the peace court of Baao, Camarines Sur, for violation of the ordinance in question. Defendants appealed to the Court of First Instance, which affirmed the conviction, and sentenced appellants to pay a fine of P35 each and the costs, as well as to demolish the building in question because it destroys the view of the public plaza of Baao, in that "it hinders the view of travelers from the National Highway to the said public plaza." From this decision, the accused appealed to the Court of Appeals, but the latter forwarded the records to us because the appeal attacks the constitutionality of the ordinance in question. We find that the appealed conviction can not stand. A first objection to the validity of the ordinance in question is that under it the mayor has absolute discretion to issue or deny a permit. The ordinance fails to state any policy, or to set up any standard to guide or limit the mayor's action. No purpose to be attained by requiring the permit is expressed; no conditions for its grant or refusal are enumerated. It is not merely a case of deficient standards; standards are entirely lacking. The ordinance thus confers upon the mayor arbitrary and unrestricted power to grant or deny the issuance of building permits, and it is a settled rule that such an undefined and unlimited delegation of power to allow or prevent an activity, per se lawful, is invalid (People vs. Vera, 65 Phil., 56; Primicias vs. Fugoso, 80 Phil., 71; Schloss Poster Adv. Co. vs. Rock Hill, 2 SE (2d) 392). The ordinance in question in no way controls or guides the discretion vested thereby in the respondents. It prescribes no uniform rule upon which the special permission of the city is to be granted. Thus the city is clothed with the uncontrolled power to capriciously grant the privilege to some and deny it to others; to refuse the application of one landowner or lessee and to grant that of another, when for all material purposes, the two are applying for precisely the same privileges under the same circumstances. The danger of such an ordinance is that it makes possible arbitrary discriminations and abuses in its execution, depending upon no conditions or qualifications whatever, other than the unregulated arbitrary will of the city authorities as the touchstone by which its validity is to be tested. Fundamental rights under our government do not depend for their existence upon such a slender and uncertain thread. Ordinances which thus invest a city council with a discretion which is purely arbitrary, and which may be exercised in the interest of a favored few, are unreasonable and invalid. The ordinance should have established a rule by which its impartial enforcement could be secured. All of the authorities cited above sustain this conclusion." xxx xxx xxx "As was said in City of Richmond vs. Dudley, 129 Ind. 112, 28 N. E. 312, 314 13 L. R. A. 587, 28 Am. St. Rep. 180: 'It seems from the foregoing authorities to be well established that municipal ordinances placing restrictions upon lawful conduct or the lawful use of property must, in order to be valid, specify the rules and conditions to be observed in such conduct or business; and must admit of the exercise of the privilege of all citizens alike who will comply with such rules and conditions; and must not admit of the exercise, or of an opportunity for the exercise, of any arbitrary discrimination by the municipal authorities between citizens who will so comply." (Schloss Poster Adv. Co., Inc.vs. City of Rock Hill, et al., 2 SE (2d), pp. 394-395). It is contended, on the other hand, that the mayor can refuse a permit solely in case that the proposed building "destroys the view of the public plaza or occupies any public property" (as stated in its section 3); and in fact, the refusal of the Mayor of Baao to issue a building permit to the appellant was predicated on the ground that the proposed building would "destroy the view of the public plaza" by preventing its being seen from the public highway. Even thus interpreted, the ordinance is unreasonable and oppressive, in that it operates to permanently deprive appellants of the right to use their own property; hence, it oversteps the bounds of police power,

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and amounts to a taking of appellants property without just compensation. We do not overlook that the modern tendency is to regard the beautification of neighborhoods as conducive to the comfort and happiness of residents. But while property may be regulated in the interest of the general welfare, and in its pursuit, the State may prohibit structures offensive to the sight (Churchill and Tait vs. Rafferty, 32 Phil. 580), the State may not, under the guise of police power, permanently divest owners of the beneficial use of their property and practically confiscate them solely to preserve or assure the aesthetic appearance of the community. As the case now stands, every structure that may be erected on appellants' land, regardless of its own beauty, stands condemned under the ordinance in question, because it would interfere with the view of the public plaza from the highway. The appellants would, in effect, be constrained to let their land remain idle and unused for the obvious purpose for which it is best suited, being urban in character. To legally achieve that result, the municipality must give appellants just compensation and an opportunity to be heard. "An ordinance which permanently so restricts the use of property that it can not be used for any reasonable purpose goes, it is plain, beyond regulation and must be recognized as a taking of the property. The only substantial difference, in such case, between restriction and actual taking, is that the restriction leaves the owner subject to the burden of payment of taxation, while outright confiscation would relieve him of that burden." (Arverne Bay Constr. Co. vs. Thatcher (N.Y.) 117 ALR. 1110, 1116). 'A regulation which substantially deprives an owner of all beneficial use of his property is confiscation and is a deprivation within the meaning of the 14th Amendment." (Sundlum vs. Zoning Bd., 145 Atl. 451; also Eaton vs. Sweeny, 177 NE 412; Taylor vs. Jacksonville, 133 So. 114). "Zoning which admittedly limits property to a use which can not reasonably be made of it cannot be said to set aside such property to a use but constitutes the taking of such property without just compensation. Use of property is an element of ownership therein. Regardless of the opinion of zealots that property may properly, by zoning, be utterly destroyed without compensation, such principle finds no support in the genius of our government nor in the principles of justice as we known them. Such a doctrine shocks the sense of justice. If it be of public benefit that property remain open and unused, then certainly the public, and not the private individuals, should bear the cost of reasonable compensation for such property under the rules of law governing the condemnation of private property for public use. (Tews vs. Woolhiser (1933) 352 111. 212, 185 N.E. 827) (Emphasis supplied.) The validity of the ordinance in question was justified by the court below under section 2243, par. (c), of the Revised Administrative Code, as amended. This section provides: "SEC. 2243.Certain legislative powers of discretionary character. The municipal council shall have authority to exercise the following discretionary powers: xxx xxx xxx (c)To establish fire limits in populous centers, prescribe the kinds of buildings that may be constructed or repaired within them, and issue permits for the creation or repair thereof, charging a fee which shall be determined by the municipal council and which shall not be less than two pesos for each building permit and one peso for each repair permit issued. The fees collected under the provisions of this subsection shall accrue to the municipal school fund." Under the provisions of the section above quoted, however, the power of the municipal council to require the issuance of building permits rests upon its first establishing fire limits in populous parts of the town and prescribing the kinds of buildings that may be constructed or repaired within them. As there is absolutely no showing in this case that the municipal council had either established fire limits within the municipality or set standards for the kind or kinds of buildings to be constructed or repaired within them before it passed the ordinance in question, it is clear that said ordinance was not conceived and promulgated under the express authority of sec. 2243 (c) aforequoted. We rule that the regulation in question, Municipal Ordinance No. 7, Series of 1950, of the Municipality of Baao, Camarines Sur, was beyond the authority of said municipality to enact, and

is therefore null and void. Hence, the conviction of herein appellants is reversed, and said accused are acquitted, with costs de oficio. So ordered. Paras, C.J., Bengzon, Padilla, Montemayor, Reyes, A., Bautista Angelo, Concepcion, Endencia and Felix, JJ., concur.

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AGAN vs PIATCO 2004

EN BANC [G.R. No. 155001. January 21, 2004.] DEMOSTHENES P. AGAN, JR., JOSEPH B. CATAHAN, JOSE MARI B. REUNILLA, MANUEL ANTONIO B. BOE, MAMERTO S. CLARA, REUEL E. DIMALANTA, MORY V. DOMALAON, CONRADO G. DIMAANO, LOLITA R. HIZON, REMEDIOS P. ADOLFO, BIENVENIDO C. HILARIO, MIASCOR WORKERS UNION-NATIONAL LABOR UNION (MWU-NLU), and PHILIPPINE AIRLINES EMPLOYEES ASSOCIATION (PALEA),petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS and SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, respondents. MIASCOR GROUNDHANDLING CORPORATION, DNATA-WINGS AVIATION SYSTEMS CORPORATION, MACROASIA-EUREST SERVICES, INC., MACROASIA-MENZIES AIRPORT SERVICES CORPORATION, MIASCOR CATERING SERVICES CORPORATION, MIASCOR AIRCRAFT MAINTENANCE CORPORATION, and MIASCOR LOGISTICS CORPORATION, petitioners-in-intervention, FLORESTE ALCONIS, GINA ALNAS, REY AMPOLOQUIO, ROSEMARIE ANG, EUGENE ARADA, NENETTE BARREIRO, NOEL BARTOLOME, ALDRIN BASTADOR, ROLETTE DIVINE BERNARDO, MINETTE BRAVO, KAREN BRECILLA, NIDA CAILAO, ERWIN CALAR, MARIFEL CONSTANTINO, JANETTE CORDERO, ARNOLD FELICITAS, MARISSA GAYAGOY, ALEX GENERILLO, ELIZABETH GRAY, ZOILO HERICO, JACQUELINE IGNACIO, THELMA INFANTE, JOEL JUMAO-AS, MARIETTA LINCHOCO, ROLLY LORICO, FRANCIS AUGUSTO MACATOL, MICHAEL MALIGAT, DENNIS MANALO, RAUL MANGALIMAN, JOEL MANLANGIT, CHARLIE MENDOZA, HAZNAH MENDOZA, NICHOLS MORALES, ALLEN OLAO, CESAR ORTAL, MICHAEL ORTEGA, WAYNE PLAZA, JOSELITO REYES, ROLANDO REYES, AILEEN SAPINA, RAMIL TAMAYO, PHILLIPS TAN, ANDREW UY, WILLIAM VELASCO, EMILIO VELEZ, NOEMI YUPANO, MARY JANE ONG, RICHARD RAMIREZ, CHERYLE MARIE ALFONSO, LYNDON BAUTISTA, MANUEL CABOCAN AND NEDY LAZO, respondents-in-intervention, NAGKAISANG MARALITA NG TAONG ASSOCIATION, INC., respondents-in-intervention, [G.R. No. 155547. January 21, 2004.] SALACNIB F. BATERINA, CLAVEL A. MARTINEZ and CONSTANTINO G. JARAULA, petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, and SECRETARY SIMEON A. DATUMANONG, in his capacity as Head of the Department of Public Works and Highways, respondents, JACINTO V. PARAS, RAFAEL P. NANTES, EDUARDO C. ZIALCITA, WILLY BUYSON VILLARAMA, PROSPERO C. NOGRALES, PROSPERO A. PICHAY, JR., HARLIN CAST ABAYON, and BENASING O. MACARANBON, respondents-intervenors, FLORESTE ALCONIS, GINA ALNAS, REY AMPOLOQUIO, ROSEMARIE ANG, EUGENE ARADA, NENETTE BARREIRO, NOEL BARTOLOME, ALDRIN BASTADOR, ROLETTE DIVINE BERNARDO, MINETTE BRAVO, KAREN BRECILLA, NIDA CAILAO, ERWIN CALAR, MARIFEL CONSTANTINO, JANETTE CORDERO, ARNOLD FELICITAS, MARISSA GAYAGOY, ALEX GENERILLO, ELIZABETH GRAY, ZOILO HERICO, JACQUELINE IGNACIO, THELMA INFANTE, JOEL JUMAO-AS, MARIETTA LINCHOCO, ROLLY LORICO, FRANCIS AUGUSTO MACATOL, MICHAEL MALIGAT, DENNIS MANALO, RAUL MANGALIMAN, JOEL MANLANGIT, CHARLIE MENDOZA, HAZNAH MENDOZA, NICHOLS MORALES, ALLEN OLAO, CESAR ORTAL, MICHAEL ORTEGA, WAYNE PLAZA, JOSELITO REYES, ROLANDO REYES, AILEEN SAPINA, RAMIL TAMAYO, PHILLIPS TAN, ANDREW UY, WILLIAM VELASCO, EMILIO VELEZ, NOEMI YUPANO, MARY JANE ONG, RICHARD RAMIREZ, CHERYLE MARIE ALFONSO, LYNDON BAUTISTA, MANUEL CABOCAN AND NEDY LAZO, respondents-in-intervention, NAGKAISANG MARALITA NG TAONG ASSOCIATION, INC., respondents-in-intervention, [G.R. No. 155661. January 21, 2004.]

CEFERINO C. LOPEZ, RAMON M. SALES, ALFREDO B. VALENCIA, MA. TERESA V. GAERLAN, LEONARDO DE LA ROSA, DINA C. DE LEON, VIRGIE CATAMIN, RONALD SCHLOBOM, ANGELITO SANTOS, MA. LUISA M. PALCON and SAMAHANG MANGGAGAWA SA PALIPARAN NG PILIPINAS (SMPP), petitioners, vs. PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC., MANILA INTERNATIONAL AIRPORT AUTHORITY, DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS, SECRETARY LEANDRO M. MENDOZA, in his capacity as Head of the Department of Transportation and Communications, respondents, FLORESTE ALCONIS, GINA ALNAS, REY AMPOLOQUIO, ROSEMARIE ANG, EUGENE ARADA, NENETTE BARREIRO, NOEL BARTOLOME, ALDRIN BASTADOR, ROLETTE DIVINE BERNARDO, MINETTE BRAVO, KAREN BRECILLA, NIDA CAILAO, ERWIN CALAR, MARIFEL CONSTANTINO, JANETTE CORDERO, ARNOLD FELICITAS, MARISSA GAYAGOY, ALEX GENERILLO, ELIZABETH GRAY, ZOILO HERICO, JACQUELINE IGNACIO, THELMA INFANTE, JOEL JUMAO-AS, MARIETTA LINCHOCO, ROLLY LORICO, FRANCIS AUGUSTO MACATOL, MICHAEL MALIGAT, DENNIS MANALO, RAUL MANGALIMAN, JOEL MANLANGIT, CHARLIE MENDOZA, HAZNAH MENDOZA, NICHOLS MORALES, ALLEN OLAO, CESAR ORTAL, MICHAEL ORTEGA, WAYNE PLAZA, JOSELITO REYES, ROLANDO REYES, AILEEN SAPINA, RAMIL TAMAYO, PHILLIPS TAN, ANDREW UY, WILLIAM VELASCO, EMILIO VELEZ, NOEMI YUPANO, MARY JANE ONG, RICHARD RAMIREZ, CHERYLE MARIE ALFONSO, LYNDON BAUTISTA, MANUEL CABOCAN AND NEDY LAZO, respondents-in-intervention, NAGKAISANG MARALITA NG TAONG ASSOCIATION, INC., respondents-in-intervention. RESOLUTION PUNO, J p: Before this Court are the separate Motions for Reconsideration filed by respondent Philippine International Air Terminals Co., Inc. (PIATCO), respondents-intervenors Jacinto V. Paras, Rafael P. Nantes, Eduardo C. Zialcita, Willie Buyson Villarama, Prospero C. Nograles, Prospero A. Pichay, Jr., Harlin Cast Abayon and Benasing O. Macaranbon, all members of the House of Representatives (Respondent Congressmen), 1 respondents-intervenors who are employees of PIATCO and other workers of the Ninoy Aquino International Airport International Passenger Terminal III (NAIA IPT III) (PIATCO Employees) 2 and respondents-intervenors Nagkaisang Maralita ng Taong Association, Inc., (NMTAI) 3 of the Decision of this Court dated May 5, 2003 declaring the contracts for the NAIA IPT III project null and void. EICDSA Briefly, the proceedings. On October 5, 1994, Asia's Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to the Philippine Government through the Department of Transportation and Communication (DOTC) and Manila International Airport Authority (MIAA) for the construction and development of the NAIA IPT III under a build-operate-and-transfer arrangement pursuant to R.A. No. 6957, as amended by R.A. No. 7718 (BOT Law). 4 In accordance with the BOT Law and its Implementing Rules and Regulations (Implementing Rules), the DOTC/MIAA invited the public for submission of competitive and comparative proposals to the unsolicited proposal of AEDC. On September 20, 1996 a consortium composed of the People's Air Cargo and Warehousing Co., Inc. (Paircargo), Phil. Air and Grounds Services, Inc. (PAGS) and Security Bank Corp. (Security Bank) (collectively, Paircargo Consortium), submitted their competitive proposal to the Prequalification Bids and Awards Committee (PBAC). After finding that the Paircargo Consortium submitted a bid superior to the unsolicited proposal of AEDC and after failure by AEDC to match the said bid, the DOTC issued the notice of award for the NAIA IPT III project to the Paircargo Consortium, which later organized into herein respondent PIATCO. Hence, on July 12, 1997, the Government, through then DOTC Secretary Arturo T. Enrile, and PIATCO, through its President, Henry T. Go, signed the "Concession Agreement for the BuildOperate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III" (1997 Concession Agreement). On November 26, 1998, the 1997 Concession Agreement was superseded by the Amended and Restated Concession Agreement (ARCA) containing certain revisions and modifications from the original contract. A series of supplemental agreements was also entered into by the Government and PIATCO. The First Supplement was signed on August 27, 1999, the Second Supplement on September 4, 2000, and the Third Supplement on June 22, 2001

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(collectively, Supplements) (the 1997 Concession Agreement, ARCA and the Supplements collectively referred to as the PIATCO Contracts). On September 17, 2002, various petitions were filed before this Court to annul the 1997 Concession Agreement, the ARCA and the Supplements and to prohibit the public respondents DOTC and MIAA from implementing them. In a decision dated May 5, 2003, this Court granted the said petitions and declared the 1997 Concession Agreement, the ARCA and the Supplements null and void. Respondent PIATCO, respondent-Congressmen and respondents-intervenors now seek the reversal of the May 5, 2003 decision and pray that the petitions be dismissed. In the alternative, PIATCO prays that the Court should not strike down the entire 1997 Concession Agreement, the ARCA and its supplements in light of their separability clause. Respondent-Congressmen and NMTAI also pray that in the alternative, the cases at bar should be referred to arbitration pursuant to the provisions of the ARCA. PIATCO-Employees pray that the petitions be dismissed and remanded to the trial courts for trial on the merits or in the alternative that the 1997 Concession Agreement, the ARCA and the Supplements be declared valid and binding. I Procedural Matters a.Lack of Jurisdiction Private respondents and respondents-intervenors reiterate a number of procedural issues which they insist deprived this Court of jurisdiction to hear and decide the instant cases on its merits. They continue to claim that the cases at bar raise factual questions which this Court is ill-equipped to resolve, hence, they must be remanded to the trial court for reception of evidence. Further, they allege that although designated as petitions for certiorari and prohibition, the cases at bar are actually actions for nullity of contracts over which the trial courts have exclusive jurisdiction. Even assuming that the cases at bar are special civil actions for certiorari and prohibition, they contend that the principle of hierarchy of courts precludes this Court from taking primary jurisdiction over them. We are not persuaded. There is a question of fact when doubt or difference arises as to the truth or falsity of the facts alleged. 5 Even a cursory reading of the cases at bar will show that the Court decided them by interpreting and applying the Constitution, the BOT Law, its Implementing Rules and other relevant legal principles on the basis of clearly undisputed facts. All the operative facts were settled, hence, there is no need for a trial type determination of their truth or falsity by a trial court. We reject the unyielding insistence of PIATCO Employees that the following factual issues are critical and beyond the capability of this Court to resolve, viz: (a) whether the National Economic Development Authority - Investment Coordinating Committee (NEDA-ICC) approved the Supplements; (b) whether the First Supplement created ten (10) new financial obligations on the part of the government; and (c) whether the 1997 Concession Agreement departed from the draft Concession Agreement contained in the Bid Documents. 6 CAcEaS The factual issue of whether the NEDA-ICC approved the Supplements is hardly relevant. It is clear in our Decision that the PIATCO contracts were invalidated on other and more substantial grounds. It did not rely on the presence or absence of NEDA-ICC approval of the Supplements. On the other hand, the last two issues do not involve disputed facts. Rather, they involve contractual provisions which are clear and categorical and need only to be interpreted. The interpretation of contracts and the determination of whether their provisions violate our laws or contravene any public policy is a legal issue which this Court may properly pass upon. Respondents' corollary contention that this Court violated the hierarchy of courts when it entertained the cases at bar must also fail. The rule on hierarchy of courts in cases falling within the concurrent jurisdiction of the trial courts and appellate courts generally applies to cases involving warring factual allegations. For this reason, litigants are required to repair to the trial courts at the first instance to determine the truth or falsity of these contending allegations on the

basis of the evidence of the parties. Cases which depend on disputed facts for decision cannot be brought immediately before appellate courts as they are not triers of facts. It goes without saying that when cases brought before the appellate courts do not involve factual but legal questions, a strict application of the rule of hierarchy of courts is not necessary. As the cases at bar merely concern the construction of the Constitution, the interpretation of the BOT Law and its Implementing Rules and Regulations on undisputed contractual provisions and government actions, and as the cases concern public interest, this Court resolved to take primary jurisdiction over them. This choice of action follows the consistent stance of this Court to settle any controversy with a high public interest component in a single proceeding and to leave no root or branch that could bear the seeds of future litigation. The suggested remand of the cases at bar to the trial court will stray away from this policy. 7 b.Legal Standing Respondent PIATCO stands pat with its argument that petitioners lack legal personality to file the cases at bar as they are not real parties in interest who are bound principally or subsidiarily to the PIATCO Contracts. Further, respondent PIATCO contends that petitioners failed to show any legally demandable or enforceable right to justify their standing to file the cases at bar. These arguments are not difficult to deflect. The determination of whether a person may institute an action or become a party to a suit brings to fore the concepts of real party in interest, capacity to sue and standing to sue. To the legally discerning, these three concepts are different although commonly directed towards ensuring that only certain parties can maintain an action. 8 As defined in the Rules of Court, a real party in interest is the party who stands to be benefited or injured by the judgment in the suit or the party entitled to the avails of the suit. 9 Capacity to sue deals with a situation where a person who may have a cause of action is disqualified from bringing a suit under applicable law or is incompetent to bring a suit or is under some legal disability that would prevent him from maintaining an action unless represented by a guardian ad litem. Legal standing is relevant in the realm of public law. In certain instances, courts have allowed private parties to institute actions challenging the validity of governmental action for violation of private rights or constitutional principles. 10 In these cases, courts apply the doctrine of legal standing by determining whether the party has a direct and personal interest in the controversy and whether such party has sustained or is in imminent danger of sustaining an injury as a result of the act complained of, a standard which is distinct from the concept of real party in interest. 11 Measured by this yardstick, the application of the doctrine on legal standing necessarily involves a preliminary consideration of the merits of the case and is not purely a procedural issue. 12 Considering the nature of the controversy and the issues raised in the cases at bar, this Court affirms its ruling that the petitioners have the requisite legal standing. The petitioners in G.R. Nos. 155001 and 155661 are employees of service providers operating at the existing international airports and employees of MIAA while petitioners-intervenors are service providers with existing contracts with MIAA and they will all sustain direct injury upon the implementation of the PIATCO Contracts. The 1997 Concession Agreement and the ARCA both provide that upon the commencement of operations at the NAIA IPT III, NAIA Passenger Terminals I and II will cease to be used as international passenger terminals. 13 Further, the ARCA provides: cSCADE (d)For the purpose of an orderly transition, MIAA shall not renew any expired concession agreement relative to any service or operation currently being undertaken at the Ninoy Aquino International Airport Passenger Terminal I, or extend any concession agreement which may expire subsequent hereto, except to the extent that the continuation of the existing services and operations shall lapse on or before the In-Service Date. 14 Beyond iota of doubt, the implementation of the PIATCO Contracts, which the petitioners and petitioners-intervenors denounce as unconstitutional and illegal, would deprive them of their sources of livelihood. Under settled jurisprudence, one's employment, profession, trade, or calling is a property right and is protected from wrongful interference. 15 It is also self evident that the petitioning service providers stand in imminent danger of losing legitimate business investments in the event the PIATCO Contracts are upheld.

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Over and above all these, constitutional and other legal issues with far-reaching economic and social implications are embedded in the cases at bar, hence, this Court liberally granted legal standing to the petitioning members of the House of Representatives. First, at stake is the buildoperate-and-transfer contract of the country's premier international airport with a projected capacity of 10 million passengers a year. Second, the huge amount of investment to complete the project is estimated to be P13,000,000,000.00. Third, the primary issues posed in the cases at bar demand a discussion and interpretation of the Constitution, the BOT Law and its implementing rules which have not been passed upon by this Court in previous cases. They can chart the future inflow of investment under the BOT Law. Before writing finis to the issue of legal standing, the Court notes the bid of new parties to participate in the cases at bar as respondents-intervenors, namely, (1) the PIATCO Employees and (2) NMTAI (collectively, the New Respondents-Intervenors). After the Court's Decision, the New Respondents- Intervenors filed separate Motions for Reconsideration-In-Intervention alleging prejudice and direct injury. PIATCO employees claim that "they have a direct and personal interest [in the controversy] . . . since they stand to lose their jobs should the government's contract with PIATCO be declared null and void." 16 NMTAI, on the other hand, represents itself as a corporation composed of responsible tax-paying Filipino citizens with the objective of "protecting and sustaining the rights of its members to civil liberties, decent livelihood, opportunities for social advancement, and to a good, conscientious and honest government." 17 The Rules of Court govern the time of filing a Motion to Intervene. Section 2, Rule 19 provides that a Motion to Intervene should be filed "before rendition of judgment . . ." The New RespondentsIntervenors filed their separate motions after a decision has been promulgated in the present cases. They have not offered any worthy explanation to justify their late intervention. Consequently, their Motions for Reconsideration-In-Intervention are denied for the rules cannot be relaxed to await litigants who sleep on their rights. In any event, a sideglance at these late motions will show that they hoist no novel arguments. c.Failure to Implead an Indispensable Party PIATCO next contends that petitioners should have impleaded the Republic of the Philippines as an indispensable party. It alleges that petitioners sued the DOTC, MIAA and the DPWH in their own capacities or as implementors of the PIATCO Contracts and not as a contract party or as representatives of the Government of the Republic of the Philippines. It then leapfrogs to the conclusion that the "absence of an indispensable party renders ineffectual all the proceedings subsequent to the filing of the complaint including the judgment." 18 PIATCO's allegations are inaccurate. The petitions clearly bear out that public respondents DOTC and MIAA were impleaded as parties to the PIATCO Contracts and not merely as their implementors. The separate petitions filed by the MIAA employees 19 and members of the House of Representatives 20 alleged that "public respondents are impleaded herein because they either executed the PIATCO Contracts or are undertaking acts which are related to the PIATCO Contracts. They are interested and indispensable parties to this Petition." 21 Thus, public respondents DOTC and MIAA were impleaded as parties to the case for having executed the contracts. More importantly, it is also too late in the day for PIATCO to raise this issue. If PIATCO seriously views the non-inclusion of the Republic of the Philippines as an indispensable party as fatal to the petitions at bar, it should have raised the issue at the onset of the proceedings as a ground to dismiss. PIATCO cannot litigate issues on a piecemeal basis, otherwise, litigations shall be like a shore that knows no end. In any event, the Solicitor General, the legal counsel of the Republic, appeared in the cases at bar in representation of the interest of the government. II Pre-qualification of PIATCO The Implementing Rules provide for the unyielding standards the PBAC should apply to determine the financial capability of a bidder for pre- qualification purposes: (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or

members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. 22 The evident intent of these standards is to protect the integrity and insure the viability of the project by seeing to it that the proponent has the financial capability to carry it out. As a further measure to achieve this intent, it maintains a certain debtto-equity ratio for the project. At the pre-qualification stage, it is most important for a bidder to show that it has the financial capacity to undertake the project by proving that it can fulfill the requirement on minimum amount of equity. For this purpose, the Bid Documents require in no uncertain terms: The minimum amount of equity to which the proponent's financial capability will be based shall be thirty percent (30%) of the project cost instead of the twenty percent (20%) specified in Section 3.6.4 of the Bid Documents. This is to correlate with the required debt-to-equity ratio of 70:30 in Section 2.01a of the draft concession agreement. The debt portion of the project financing should not exceed 70% of the actual project cost. 23 In relation thereto, section 2.01(a) of the ARCA provides: Section 2.01 Project Scope. The scope of the project shall include: (a)Financing the project at an actual Project cost of not less than Three Hundred Fifty Million United States Dollars (US$350,000,000.00) while maintaining a debt-to-equity ratio of 70:30, provided that if the actual Project costs should exceed the aforesaid amount, Concessionaire shall ensure that the debt-to-equity ratio is maintained; 24 Under the debt-to-equity restriction, a bidder may only seek financing of the NAIA IPT III Project up to 70% of the project cost. Thirty percent (30%) of the cost must come in the form of equity or investment by the bidder itself. It cannot be overly emphasized that the rules require a minimum amount of equity to ensure that a bidder is not merely an operator or implementor of the project but an investor with a substantial interest in its success. The minimum equity requirement also guarantees the Philippine government and the general public, who are the ultimate beneficiaries of the project, that a bidder will not be indifferent to the completion of the project. The discontinuance of the project will irreparably damage public interest more than private interest. cICHTD In the cases at bar, after applying the investment ceilings provided under the General Banking Act and considering the maximum amounts that each member of the consortium may validly invest in the project, it is daylight clear that the Paircargo Consortium, at the time of pre-qualification, had a net worth equivalent to only6.08% of the total estimated project cost. 25 By any reckoning, a showing by a bidder that at the time of pre-qualification its maximum funds available for investment amount to only 6.08% of the project cost is insufficient to satisfy the requirement prescribed by the Implementing Rules that the project proponent must have the ability to provide at least 30% of the total estimated project cost. In peso and centavo terms, at the time of prequalification, the Paircargo Consortium had maximum funds available for investment to the NAIA IPT III Project only in the amount of P558,384,871.55, when it had to show that it had the ability to provide at least P2,755,095,000.00. The huge disparity cannot be dismissed as of de minimis importance considering the high public interest at stake in the project. PIATCO nimbly tries to sidestep its failure by alleging that it submitted not only audited financial statements but also testimonial letters from reputable banks attesting to the good financial standing of the Paircargo Consortium. It contends that in adjudging whether the Paircargo Consortium is a pre-qualified bidder, the PBAC should have considered not only its financial statements but other factors showing its financial capability. Anent this argument, the guidelines provided in the Bid Documents are instructive: 3.3.4FINANCING AND FINANCIAL PREQUALIFICATIONS REQUIREMENTS Minimum Amount of Equity Each member of the proponent entity is to provide evidence of networth in cash and assets representing the proportionate share in the proponent entity. Audited financial statements for the past five (5) years as a company for each member are to be provided. Project Loan Financing SECcAI

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Testimonial letters from reputable banks attesting that each of the members of the ownership entity are banking with them, in good financial standing and having adequate resources are to be provided. 26 It is beyond refutation that Paircargo Consortium failed to prove its ability to provide the amount of at least P2,755,095,000.00, or 30% of the estimated project cost. Its submission of testimonial letters attesting to its good financial standing will not cure this failure. At best, the said letters merely establish its credit worthiness or its ability to obtain loans to finance the project. They do not, however, prove compliance with the aforesaid requirement of minimum amount of equity in relation to the prescribed debt-to-equity ratio. This equity cannot be satisfied through possible loans. In sum, we again hold that given the glaring gap between the net worth of Paircargo and PAGS combined with the amount of maximum funds that Security Bank may invest by equity in a nonallied undertaking, Paircargo Consortium, at the time of pre-qualification, failed to show that it had the ability to provide 30% of the project cost and necessarily, its financial capability for the project cannot pass muster. III 1997 Concession Agreement Again, we brightline the principle that in public bidding, bids are submitted in accord with the prescribed terms, conditions and parameters laid down by government and pursuant to the requirements of the project bidded upon. In light of these parameters, bidders formulate competing proposals which are evaluated to determine the bid most favorable to the government. Once the contract based on the bid most favorable to the government is awarded, all that is left to be done by the parties is to execute the necessary agreements and implement them. There can be no substantial or material change to the parameters of the project, including the essential terms and conditions of the contract bidded upon, after the contract award. If there were changes and the contracts end up unfavorable to government, the public bidding becomes a mockery and the modified contracts must be struck down. Respondents insist that there were no substantial or material amendments in the 1997 Concession Agreement as to the technical aspects of the project, i.e., engineering design, technical soundness, operational and maintenance methods and procedures of the project or the technical proposal of PIATCO. Further, they maintain that there was no modification of the financial features of the project, i.e., minimum project cost, debt-to-equity ratio, the operations and maintenance budget, the schedule and amount of annual guaranteed payments, or the financial proposal of PIATCO. A discussion of some of these changes to determine whether they altered the terms and conditions upon which the bids were made is again in order. a.Modification on Fees and Charges to be collected by PIATCO PIATCO clings to the contention that the removal of the groundhandling fees, airline office rentals and porterage fees from the category of fees subject to MIAA regulation in the 1997 Concession Agreement does not constitute a substantial amendment as these fees are not really public utility fees. In other words, PIATCO justifies the re-classification under the 1997 Concession Agreement on the ground that these fees are non-public utility revenues. We disagree. The removal of groundhandling fees, airline office rentals and porterage fees from the category of "Public Utility Revenues" under the draft Concession Agreement and its reclassification to "Non-Public Utility Revenues" under the 1997 Concession Agreement is significant and has far reaching consequence. The 1997 Concession Agreement provides that with respect to Non-Public Utility Revenues, which include groundhandling fees, airline office rentals and porterage fees, 27 "[PIATCO] may make any adjustments it deems appropriate without need for the consent of GRP or any government agency." 28 In contrast, the draft Concession Agreement specifies these fees as part of Public Utility Revenues and can be adjusted "only once every two years and in accordance with the Parametric Formula" and "the adjustments shall be made effective only after the written express approval of the MIAA." 29 The Bid Documents themselves clearly provide:

4.2.3Mechanism for Adjustment of Fees and Charges 4.2.3.1Periodic Adjustment in Fees and Charges Adjustments in the fees and charges enumerated hereunder, whether or not falling within the purview of public utility revenues, shall be allowed only once every two years in accordance with the parametric formula attached hereto as Annex 4.2f. Provided that the adjustments shall be made effective only after the written express approval of MIAA. Provided, further, that MIAA's approval, shall be contingent only on conformity of the adjustments to the said parametric formula. . . The fees and charges to be regulated in the above manner shall consist of the following: xxx xxx xxx (c)groundhandling fees; (d)rentals on airline offices; xxx xxx xxx (f)porterage fees; DHSACT xxx xxx xxx 30 The plain purpose in re-classifying groundhandling fees, airline office rentals and porterage fees as non-public utility fees is to remove them from regulation by the MIAA. In excluding these fees from government regulation, the danger to public interest cannot be downplayed. We are not impressed by the effort of PIATCO to depress this prejudice to public interest by its contention that in the 1997 Concession Agreement governing Non-Public Utility Revenues, it is provided that "[PIATCO] shall at all times be judicious in fixing fees and charges constituting NonPublic Utility Revenues in order to ensure that End Users are not unreasonably deprived of services." 31 PIATCO then peddles the proposition that the said provision confers upon MIAA " full regulatorypowers to ensure that PIATCO is charging non-public utility revenues at judicious rates." 32 To the trained eye, the argument will not fly for it is obviously non sequitur. Fairly read, it is PIATCO that wields the power to determine the judiciousness of the said fees and charges. In the draft Concession Agreement the power was expressly lodged with the MIAA and any adjustment can only be done once every two years. The changes are not insignificant specks as interpreted by PIATCO. CSaHDT PIATCO further argues that there is no substantial change in the 1997 Concession Agreement with respect to fees and charges PIATCO is allowed to impose which are not covered by Administrative Order No. 1, Series of 1993 33 as the "relevant provision of the 1997 Concession Agreement is practically identical with the draft Concession Agreement." 34 We are not persuaded. Under the draft Concession Agreement, PIATCO may impose fees and charges other than those fees and charges previously imposed or collected at the Ninoy Aquino International Airport Passenger Terminal I, subject to the written approval of MIAA. 35 Further, the draft Concession Agreement provides that MIAA reserves the right to regulate these new fees and charges if in its judgment the users of the airport shall be deprived of a free option for the services they cover. 36 In contrast, under the 1997 Concession Agreement, the MIAA merely retained the right to approve any imposition of new fees and charges which were not previously collected at the Ninoy Aquino International Airport Passenger Terminal I. The agreement did not contain an equivalent provision allowing MIAA to reserve the right to regulate the adjustments of these new fees and charges. 37 PIATCO justifies the amendment by arguing that MIAA can establish terms before approval of new fees and charges, inclusive of the mode for their adjustment. PIATCO's stance is again a strained one. There would have been no need for an amendment if there were no change in the power to regulate on the part of MIAA. The deletion of MIAAs reservation of its right to regulate the price adjustments of new fees and charges can have no other purpose but to dilute the extent of MIAAs regulation in the collection of these fees. Again, the amendment diminished the authority of MIAA to protect the public interest in case of abuse by PIATCO. b.Assumption by the Government of the liabilities of PIATCO in the event of the latter's default

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PIATCO posits the thesis that the new provisions in the 1997 Concession Agreement in case of default by PIATCO on its loans were merely meant to prescribe and limit the rights of PIATCOs creditors with regard to the NAIA Terminal III. PIATCO alleges that Section 4.04 of the 1997 Concession Agreement simply provides that PIATCOs creditors have no right to foreclose the NAIA Terminal III. We cannot concur. The pertinent provisions of the 1997 Concession Agreement state: Section 4.04Assignment. xxx xxx xxx (b)In the event Concessionaire should default in the payment of an Attendant Liability, and the default has resulted in the acceleration of the payment due date of the Attendant Liability prior to its stated date of maturity, the Unpaid Creditors and Concessionaire shall immediately inform GRP in writing of such default. GRP shall, within one hundred eighty (180) Days from receipt of the joint written notice of the Unpaid Creditors and Concessionaire, either (i) take over the Development Facility and assume the Attendant Liabilities, or (ii) allow the Unpaid Creditors, if qualified, to be substituted as concessionaire and operator of the Development Facility in accordance with the terms and conditions hereof, or designate a qualified operator acceptable to GRP to operate the Development Facility, likewise under the terms and conditions of this Agreement; Provided that if at the end of the 180-day period GRP shall not have served the Unpaid Creditors and Concessionaire written notice of its choice, GRP shall be deemed to have elected to take over the Development Facility with the concomitant assumption of Attendant Liabilities. (c)If GRP should, by written notice, allow the Unpaid Creditors to be substituted as concessionaire, the latter shall form and organize a concession company qualified to take over the operation of the Development Facility. If the concession company should elect to designate an operator for the Development Facility, the concession company shall in good faith identify and designate a qualified operator acceptable to GRP within one hundred eighty (180) days from receipt of GRP's written notice. If the concession company, acting in good faith and with due diligence, is unable to designate a qualified operator within the aforesaid period, then GRP shall at the end of the 180day period take over the Development Facility and assume Attendant Liabilities. A plain reading of the above provision shows that it spells out in limpid language the obligation of government in case of default by PIATCO on its loans. There can be no blinking from the fact that in case of PIATCOs default, the government will assume PIATCOs Attendant Liabilities as defined in the 1997 Concession Agreement. 38This obligation is not found in the draft Concession Agreement and the change runs roughshod to the spirit and policy of the BOT Law which was crafted precisely to prevent government from incurring financial risk. In any event, PIATCO pleads that the entire agreement should not be struck down as the 1997 Concession Agreement contains a separability clause. The plea is bereft of merit. The contracts at bar which made a mockery of the bidding process cannot be upheld and must be annulled in their entirety for violating law and public policy. As demonstrated, the contracts were substantially amended after their award to the successful bidder on terms more beneficial to PIATCO and prejudicial to public interest. If this flawed process would be allowed, public bidding will cease to be competitive and worse, government would not be favored with the best bid. Bidders will no longer bid on the basis of the prescribed terms and conditions in the bid documents but will formulate their bid in anticipation of the execution of a future contract containing new and better terms and conditions that were not previously available at the time of the bidding. Such a public bidding will not inure to the public good. The resulting contracts cannot be given half a life but must be struck down as totally lawless. IV. Direct Government Guarantee The respondents further contend that the PIATCO Contracts do not contain direct government guarantee provisions. They assert that section 4.04 of the ARCA, which superseded sections 4.04(b) and (c), Article IV of the 1997 Concession Agreement, is but a "clarification and explanation" 39 of the securities allowed in the bid documents. They allege that these provisions

merely provide for "compensation to PIATCO" 40 in case of a government buy-out or takeover of NAIA IPT III. The respondents, particularly respondent PIATCO, also maintain that the guarantee contained in the contracts, if any, is an indirect guarantee allowed under the BOT Law, as amended. 41 We do not agree. Section 4.04(c), Article IV 42 of the ARCA should be read in conjunction with section 1.06, Article I, 43 in the same manner that sections 4.04(b) and (c), Article IV of the 1997 Concession Agreement should be related to Article 1.06 of the same contract. Section 1.06, Article I of the ARCA and its counterpart provision in the 1997 Concession Agreement define in no uncertain terms the meaning of "attendant liabilities." They tell us of the amounts that the Government has to pay in the event respondent PIATCO defaults in its loan payments to its Senior Lenders and no qualified transferee or nominee is chosen by the Senior Lenders or is willing to take over from respondent PIATCO. A reasonable reading of all these relevant provisions would reveal that the ARCA made the Government liable to pay "all amounts . . . from time to time owed or which may become owing by Concessionaire [PIATCO] to Senior Lenders or any other persons or entities who have provided, loaned, or advanced funds or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA Terminal 3]." 44 These amounts include "without limitation, all principal, interest, associated fees, charges, reimbursements, and other related expenses . . . whether payable at maturity, by acceleration or otherwise." 45 They further include amounts owed by respondent PIATCO to its "professional consultants and advisers, suppliers, contractors and sub-contractors" as well as "fees, charges and expenses of any agents or trustees" of the Senior Lenders or any other persons or entities who have provided loans or financial facilities to respondent PIATCO in relation to NAIA IPT III. 46 The counterpart provision in the 1997 Concession Agreement specifying the attendant liabilities that the Government would be obligated to pay should PIATCO default in its loan obligations is equally onerous to the Government as those contained in the ARCA. According to the 1997 Concession Agreement, in the event the Government is forced to prematurely take over NAIA IPT III as a result of respondent PIATCOs default in the payment of its loan obligations to its Senior Lenders, it would be liable to pay the following amounts as "attendant liabilities": DTAESI Section 1.06. Attendant Liabilities Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors. 47 These provisions reject respondents contention that what the Government is obligated to pay, in the event that respondent PIATCO defaults in the payment of its loans, is merely termination payment or just compensation for its takeover of NAIA IPT III. It is clear from said section 1.06 that what the Government would pay is the sum total of all the debts, including all interest, fees and charges, that respondent PIATCO incurred in pursuance of the NAIA IPT III Project. This reading is consistent with section 4.04 of the ARCA itself which states that the Government "shall make a termination payment to Concessionaire [PIATCO] equal to the Appraised Value (as hereinafter defined) of the Development Facility [NAIA Terminal III] or the sum of the Attendant Liabilities, if greater." For sure, respondent PIATCO will not receive any amount less than sufficient to cover its debts, regardless of whether or not the value of NAIA IPT III, at the time of its turn over to the Government, may actually be less than the amount of PIATCOs debts. The scheme is a form of direct government guarantee for it is undeniable that it leaves the government no option but to pay the "attendant liabilities" in the event that the Senior Lenders are unable or unwilling to appoint a qualified nominee or transferee as a result of PIATCOs default in the payment of its Senior Loans. As we stressed in our Decision, this Court cannot depart from the legal maxim that "those that cannot be done directly cannot be done indirectly."

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This is not to hold, however, that indirect government guarantee is not allowed under the BOT Law, as amended. The intention to permit indirect government guarantee is evident from the Senate deliberations on the amendments to the BOT Law. The idea is to allow for reasonable government undertakings, such as to authorize the project proponent to undertake related ventures within the project area, in order to encourage private sector participation in development projects. 48 An example cited by then Senator Gloria Macapagal-Arroyo, one of the sponsors of R.A. No. 7718, is the Mandaluyong public market which was built under the Build-andTransfer ("BT") scheme wherein instead of the government paying for the transfer, the project proponent was allowed to operate the upper floors of the structure as a commercial mall in order to recoup their investments. 49 It was repeatedly stressed in the deliberations that in allowing indirect government guarantee, the law seeks to encourage both the government and the private sector to formulate reasonable and innovative government undertakings in pursuance of BOT projects. In no way, however, can the government be made liable for the debts of the project proponent as this would be tantamount to a direct government guarantee which is prohibited by the law. Such liability would defeat the very purpose of the BOT Law which is to encourage the use of private sector resources in the construction, maintenance and/or operation of development projects with no, or at least minimal, capital outlay on the part of the government. The respondents again urge that should this Court affirm its ruling that the PIATCO Contracts contain direct government guarantee provisions, the whole contract should not be nullified. They rely on the separability clause in the PIATCO Contracts. We are not persuaded. The BOT Law and its implementing rules provide that there are three (3) essential requisites for an unsolicited proposal to be accepted: (1) the project involves a new concept in technology and/or is not part of the list of priority projects, (2) no direct government guarantee, subsidy or equity is required, and (3) the government agency or local government unit has invited by publication other interested parties to a public bidding and conducted the same. 50 The failure to fulfill any of the requisites will result in the denial of the proposal. Indeed, it is further provided that a direct government guarantee, subsidy or equity provision will "necessarily disqualify a proposal from being treated and accepted as an unsolicited proposal." 51 In fine, the mere inclusion of a direct government guarantee in an unsolicited proposal is fatal to the proposal. There is more reason to invalidate a contract if a direct government guarantee provision is inserted later in the contract via a backdoor amendment. Such an amendment constitutes a crass circumvention of the BOT Law and renders the entire contract void. Respondent PIATCO likewise claims that in view of the fact that other BOT contracts such as the JANCOM contract, the Manila Water contract and the MRT contract had been considered valid, the PIATCO contracts should be held valid as well. 52 There is no parity in the cited cases. For instance, a reading of Metropolitan Manila Development Authority v. JANCOM Environmental Corporation 53 will show that its issue is different from the issues in the cases at bar. In the JANCOM case, the main issue is whether there is a perfected contract between JANCOM and the Government. The resolution of the issue hinged on the following: (1) whether the conditions precedent to the perfection of the contract were complied with; (2) whether there is a valid notice of award; and (3) whether the signature of the Secretary of the Department of Environment and Natural Resources is sufficient to bind the Government. These issue and sub-issues are clearly distinguishable and different. For one, the issue of direct government guarantee was not considered by this Court when it held the JANCOM contract valid, yet, it is a key reason for invalidating the PIATCO Contracts. It is a basic principle in law that cases with dissimilar facts cannot have similar disposition. This Court, however, is not unmindful of the reality that the structures comprising the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in their construction. For the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said structures. The compensation must be just and in accordance with law and equity for the government can not unjustly enrich itself at the expense of PIATCO and its investors. II.

Temporary takeover of business affected with public interest in times of national emergency Section 17, Article XII of the 1987 Constitution grants the State in times of national emergency the right to temporarily take over the operation of any business affected with public interest. This right is an exercise of police power which is one of the inherent powers of the State. Police power has been defined as the "state authority to enact legislation that may interfere with personal liberty or property in order to promote the general welfare."54 It consists of two essential elements. First, it is an imposition of restraint upon liberty or property. Second, the power is exercised for the benefit of the common good. Its definition in elastic terms underscores its all-encompassing and comprehensive embrace. 55 It is and still is the "most essential, insistent, and illimitable" 56 of the State's powers. It is familiar knowledge that unlike the power of eminent domain, police power is exercised without provision for just compensation for its paramount consideration is public welfare. 57 IaDTES It is also settled that public interest on the occasion of a national emergency is the primary consideration when the government decides to temporarily take over or direct the operation of a public utility or a business affected with public interest. The nature and extent of the emergency is the measure of the duration of the takeover as well as the terms thereof. It is the State that prescribes such reasonable terms which will guide the implementation of the temporary takeover as dictated by the exigencies of the time. As we ruled in our Decision, this power of the State can not be negated by any party nor should its exercise be a source of obligation for the State. Section 5.10(c), Article V of the ARCA provides that respondent PIATCO "shall be entitled to reasonable compensation for the duration of the temporary takeover by GRP, which compensation shall take into account the reasonable cost for the use of the Terminal and/or Terminal Complex." 58 It clearly obligates the government in the exercise of its police power to compensate respondent PIATCO and this obligation is offensive to the Constitution. Police power can not be diminished, let alone defeated by any contract for its paramount consideration is public welfare and interest. 59 Again, respondent PIATCO's reliance on the case of Heirs of Suguitan v. City of Mandaluyong 60 to justify its claim for reasonable compensation for the Government's temporary takeover of NAIA IPT III in times of national emergency is erroneous. What was involved in Heirs of Suguitan is the exercise of the state's power of eminent domain and not of police power, hence, just compensation was awarded. The cases at bar will not involve the exercise of the power of eminent domain. III. Monopoly Section 19, Article XII of the 1987 Constitution mandates that the State prohibit or regulate monopolies when public interest so requires. Monopolies are not per seprohibited. Given its susceptibility to abuse, however, the State has the bounden duty to regulate monopolies to protect public interest. Such regulation may be called for, especially in sensitive areas such as the operation of the country's premier international airport, considering the public interest at stake. By virtue of the PIATCO contracts, NAIA IPT III would be the only international passenger airport operating in the Island of Luzon, with the exception of those already operating in Subic Bay Freeport Special Economic Zone ("SBFSEZ"), Clark Special Economic Zone ("CSEZ") and in Laoag City. Undeniably, the contracts would create a monopoly in the operation of an international commercial passenger airport at the NAIA in favor of PIATCO. The grant to respondent PIATCO of the exclusive right to operate NAIA IPT III should not exempt it from regulation by the government. The government has the right, indeed the duty, to protect the interest of the public. Part of this duty is to assure that respondent PIATCOs exercise of its right does not violate the legal rights of third parties. We reiterate our ruling that while the service providers presently operating at NAIA Terminals I and II do not have the right to demand for the renewal or extension of their contracts to continue their services in NAIA IPT III, those who have

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subsisting contracts beyond the In-Service Date of NAIA IPT III can not be arbitrarily or unreasonably treated. Finally, the Respondent Congressmen assert that at least two (2) committee reports by the House of Representatives found the PIATCO contracts valid and contend that this Court, by taking cognizance of the cases at bar, reviewed an action of a co-equal body. 61 They insist that the Court must respect the findings of the said committees of the House of Representatives. 62 With due respect, we cannot subscribe to their submission. There is a fundamental difference between a case in court and an investigation of a congressional committee. The purpose of a judicial proceeding is to settle the dispute in controversy by adjudicating the legal rights and obligations of the parties to the case. On the other hand, a congressional investigation is conducted in aid of legislation. 63 Its aim is to assist and recommend to the legislature a possible action that the body may take with regard to a particular issue, specifically as to whether or not to enact a new law or amend an existing one. Consequently, this Court cannot treat the findings in a congressional committee report as binding because the facts elicited in congressional hearings are not subject to the rigors of the Rules of Court on admissibility of evidence. The Court in assuming jurisdiction over the petitions at bar simply performed its constitutional duty as the arbiter of legal disputes properly brought before it, especially in this instance when public interest requires nothing less. WHEREFORE, the motions for reconsideration filed by the respondent PIATCO, respondent Congressmen and the respondents-in-intervention are DENIED with finality. SO ORDERED. Davide, Jr., C.J., Austria-Martinez, Corona and Carpio-Morales, JJ., concur. Vitug, J., maintains his separate opinion in the main ponencia, promulgated on May 5, 2003. Panganiban, J ., reiterates his Separate Opinion in the main case, promulgated on May 5, 2003. Quisumbing, Ynares-Santiago, Sandoval-Gutierrez and Azcuna, JJ., joins J . Vitug's opinion. Carpio andTinga, JJ., took no part. Callejo, Sr., J., joins J. Panganiban in his concurring opinion. Footnotes 1.G.R. No. 155547. 2.G.R. Nos. 155001, 155547, and 155661. 3.Id. 4.An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector. 5.Ignacio v. Court of Appeals, G.R. Nos. L-49541-52164, March 28, 1980; 96 SCRA 648, 652-653. 6.Rollo, G.R. No. 155001, pp. 3102-3103. 7.Alger Electric, Inc. v. Court of Appeals, G.R. No. L-34298, February 28, 1985, 135 SCRA 37, 43. 8.J.H. Friedenthal, M. K. Kane, A. R. Miller, Civil Procedure 328 (1985). 9.Section 2, Rule 3. 10.J. Cound, Civil Procedure: Cases & Materials, 523 (1980). 11.Bayan v. Zamora, G.R. No. 138570, October 10, 2000; 342 SCRA 449, 478; Kilosbayan, Inc. v. Morato, G.R. No. 118910, July 17, 1995, 246 SCRA 540, 562-563, citing Baker v. Carr, 369 U.S. 186, 7 L. Ed. 633 (1962). 12.Supra note 11. 13.Section 3.02 (b), ARCA, November 26, 1998; Section 3.02(b) of the 1997 Concession Agreement, July 12, 1997. 14.Section 3.01 (d), ARCA. Equivalent provision is similarly numbered in the 1997 Concession Agreement. 15.Ferrer, et al. v. NLRC, G.R. No. 100898, July 5, 1993, 224 SCRA 410, 421 citing Callanta vs. Carnation Philippines, Inc., G.R. No. 70615, October 28, 1986, 145 SCRA 268. 16.Rollo, G.R. No. 15501, pp. 3096-3097. 17.Id. at p. 3098. 18.Id. at pp. 3270-3271. 19.G.R. No. 155661. 20.G.R. No. 155547.

21.Rollo, G.R. No. 155661, p. 17; Rollo, G.R. No. 155547, p. 14. 22.Section 5.4 Pre-qualification Requirements. xxx xxx xxx c.Financial Capability: The project proponent must have adequate capability to sustain the financing requirements for the detailed engineering design, construction and/or operation and maintenance phases of the project, as the case may be. For purposes of pre-qualification, this capability shall be measured in terms of (i) proof of the ability of the project proponent and/or the consortium to provide a minimum amount of equity to the project, and (ii) a letter testimonial from reputable banks attesting that the project proponent and/or members of the consortium are banking with them, that they are in good financial standing, and that they have adequate resources. The government agency/LGU concerned shall determine on a project-to-project basis and before pre-qualification, the minimum amount of equity needed. (emphasis supplied). 23.Emphasis supplied. 24.The equivalent provision in the 1997 Concession Agreement states: Section 2.01 Project Scope. The scope of the project shall include: (a)Financing the project at an actual Project cost of not less than Three Hundred Fifty Million United States Dollars (US$350,000,000.00) while maintaining a debt-to-equity ratio of 70:30, or ensuring that the debt portion of the project financing does not exceed 70% of the actual Project cost; xxx xxx xxx 25.Combined net worth of the Paircargo Consortium is P558,384,871.55 out of an estimated project cost of US$350,000,000.00 or approximately P9,183,650,000.00. 26.Rollo, G.R. No. 155547, p. 392. Emphasis supplied. 27.Under section 1.33 of the 1997 Concession Agreement, fees classified as "Public Utility Revenues" are: (a) aircraft parking fees; (b) aircraft tacking fees; (c) check-in counter fees; and (d) Terminal Fees. Section 1.27 of the 1997 Concession Agreement provides that "Non-Public Utility Revenues" refer to all other income not classified as Public Utility Revenues derived within the Terminal and the Terminal Complex . . ." 28.Section 6.06, 1997 Concession Agreement. 29.Section 6.03, Draft Concession Agreement. 30.Rollo, G.R. No. 155547, pp. 417-418. Emphasis supplied. 31.Section 6.03 (c), 1997 Concession Agreement. 32.Rollo, G.R. No. 155001, p. 3211. Emphasis supplied. 33.Administrative Order No. 1, Series of 1993 enumerates the fees and charges that may be imposed by MIAA pursuant to its Charter. 34.Rollo, G.R. No. 155001, p. 3212. 35.Par. 2, Section 6.01, Draft Concession Agreement. 36.Par. 2, Section 6.03, Draft Concession Agreement. The pertinent portions provide: Section 6.03.Periodic Adjustment in Fees and Charges. Adjustments in the aircraft parking fees, aircraft tacking fees, groundhandling fees, rentals and airline offices, check-in-counter rentals and porterage fees shall be allowed only once every two years and in accordance with the Parametric Formula attached hereto as Annex F. Provided that adjustments shall be made effective only after the written express approval of the MIAA. Provided, further, that such approval of the MIAA, shall be contingent only on the conformity of the adjustments with the above said parametric formula. The first adjustment shall be made prior to the In-Service Date of the Terminal. The MIAA reserves the right to regulate under the foregoing terms and conditions the lobby and vehicular parking fees and other new fees and charges as contemplated in paragraph 2 of Section 6.01 if in its judgment the users of the airport shall be deprived of a free option for the services they cover. Emphasis supplied. xxx xxx xxx 37.Section 6.01 (b), 1997 Concession Agreement. 38.The term "Attendant Liabilities" under the 1997 Concession Agreement is defined as:

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Attendant Liabilities refer to all amounts recorded and from time to time outstanding in the books of the Concessionaire as owing to Unpaid Creditors who have provided, loaned or advanced funds actually used for the Project, including all interests, penalties, associated fees, charges, surcharges, indemnities, reimbursements and other related expenses, and further including amounts owed by Concessionaire to its suppliers, contractors and sub-contractors. (Section 1.06) 39.Rollo, G.R. No. 15501, p. 3065. 40.Id. at p. 3071. 41.Id. at pp. 3069-3070. 42.Amended and Restated Concession Agreement dated November 26, 1998. Section 4.04 Security xxx xxx xxx (c)GRP agrees with Concessionaire (PIATCO) that it shall negotiate in good faith and enter into direct agreement with the Senior Lenders, or with an agent of such Senior Lenders (which agreement shall be subject to the approval of the Bangko Sentral ng Pilipinas), in such form as may be reasonably acceptable to both GRP and Senior Lenders, with regard, inter alia, to the following parameters: xxx xxx xxx (iv) If the Concessionaire [PIATCO] is in default under a payment obligation owed to the Senior Lenders, and as a result thereof the Senior Lenders have become entitled to accelerate the Senior Loans, the Senior Lenders shall have the right to notify GRP of the same, and without prejudice to any other rights of the Senior Lenders or any Senior Lenders' agent may have (including without limitation under security interests granted in favor of the Senior Lenders), to either in good faith identify and designate a nominee which is qualified under sub-clause (viii)(y) below to operate the Development Facility [NAIA Terminal 3] or transfer the Concessionaire's [PIATCO] rights and obligations under this Agreement to a transferee which is qualified under sub-clause (viii) below; xxx xxx xxx (vi) if the Senior Lenders, acting in good faith and using reasonable efforts, are unable to designate a nominee or effect a transfer in terms and conditions satisfactory to the Senior Lenders within one hundred eighty (180) days after giving GRP notice as referred to respectively in (iv) or (v) above, then GRP and the Senior Lenders shall endeavor in good faith to enter into any other arrangement relating to the Development Facility [NAIA Terminal 3] (other than a turnover of the Development Facility [NAIA Terminal 3] to GRP) within the following one hundred eighty (180) days. If no agreement relating to the Development Facility [NAIA Terminal 3] is arrived at by GRP and the Senior Lenders within the said 180-day period, then at the end thereof the Development Facility [NAIA Terminal 3] shall be transferred by the Concessionaire [PIATCO] to GRP or its designee and GRP shall make a termination payment to Concessionaire [PIATCO] equal to the Appraised Value (as hereinafter defined) of the Development Facility [NAIA Terminal 3] or the sum of the Attendant Liabilities, if greater. Notwithstanding Section 8.01(c) hereof, this Agreement shall be deemed terminated upon the transfer of the Development Facility [NAIA Terminal 3] to GRP pursuant hereto; xxx xxx xxx 43.Amended and Restated Concession Agreement ("ARCA") dated November 26, 1998. Section 1.06. Attendant Liabilities Attendant Liabilities refer to all amounts in each case supported by verifiable evidence from time to time owed or which may become owing by Concessionaire [PIATCO] to Senior Lenders or any other persons or entities who have provided, loaned, or advanced funds or provided financial facilities to Concessionaire [PIATCO] for the Project [NAIA Terminal 3],including, without limitation, all principal, interest, associated fees, charges, reimbursements, and other related expenses (including the fees, charges and expenses of any agents or trustees of such persons or entities), whether payable at maturity, by acceleration or otherwise, and further including amounts owed by Concessionaire [PIATCO] to its professional consultants and advisers, suppliers, contractors and sub-contractors.

44.Section 1.06, Article I, Amended and Restated Concession Agreement. 45.Id. Emphasis supplied. 46.Id. Emphasis supplied. 47.Emphasis supplied. 48.III Record of the Senate 598, 602. 49.Id. at 455-456. 50.Section 4-A, Republic Act No. 7718, as amended, May 5, 1994; Section 11.1, Rule 11, Implementing Rules and Regulations. 51.Section 11.3, Rule 11, Implementing Rules and Regulations. 52.Rollo, G.R. No. 15501, pp. 3073-3076. 53.G.R. No. 147465, January 20, 2002; 375 SCRA 320. 54.Philippine Association of Service Providers Co., Inc. v. Franklin M. Drilon, et al., G.R. No. L81958, June 30, 1988 citing Edu v. Ericta, G.R. No. L-32096, October 24, 1970, 35 SCRA 481, 487. 55.Id. 56.Bataan Shipyard and Engineering Co., Inc. v. Presidential Commission on Good Government, G.R. No. 75885; May 27, 1987 citing Freund, The Police Power (Chicago, 1904), cited by Cruz, I.A., Constitutional Law; 4th ed., p. 42, Smith, Bell & Co. v. Natividad, 40 Phil. 136, U.S. v. Toribio, 15 Phil. 85, Churchill and Tait v. Rafferty, 32 Phil. 580, and Rubi v. Provincial Board of Mindoro, 39 Phil. 660; Florentian A. Lozano v. Antonio M. Martinez, G.R. No. L-63419, December 18, 1986; Alejandro Melchor, Jr. v. Jose L. Moya, et al., G.R. No. L-35256, March 17, 1983; 206 Phil 1; Ichong vs. Hernandez, L-7995, May 31, 1957. 57.Jose D. Sangalang, et al. v. Intermediate Appellate Court, et al., G.R. Nos. 71169, 74376, 76394, 78182, 82281 and 60727, August 25, 1989. 58.Section 5.10(c), Article V of the Amended and Restated Concession Agreement, November 26, 1998. 59.Taxicabs of Metro Manila, Inc., et al. v. Board of Transportation, et al., G.R. No. L-59234, September 30, 1982, 202 Phil. 925; Ynot v. Intermediate Appellate Court, G.R. No. 74457, March 20, 1987; Presidential Commission on Good Government v. Pena, G.R. No. L-77663, April 12, 1988. 60.328 SCRA 137. 61.Rollo, G.R. No. 155547, pp. 3018-3020. 62.Id. 63.Arnault v. Nazareno, G.R. No. L-3820, July 18, 1950.

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FERNANDO vs ST SCHOLASTICAS COLLEGE

EN BANC [G.R. No. 161107. March 12, 2013.] HON. MA. LOURDES C. FERNANDO, in her capacity as City Mayor of Marikina City, JOSEPHINE C. EVANGELISTA, in her capacity as Chief, Permit Division, Office of the City Engineer, and ALFONSO ESPIRITU, in his capacity as City Engineer of Marikina City,petitioners, vs. ST. SCHOLASTICA'S COLLEGE and ST. SCHOLASTICA'S ACADEMY-MARIKINA, INC., respondents. DECISION MENDOZA, J p: Before this Court is a petition for review on certiorari under Rule 45 of the Rules of Court, which seeks to set aside the December 1, 2003 Decision 1 of the Court of Appeals (CA) in CA-G.R. SP No. 75691. The Facts Respondents St. Scholastica's College (SSC) and St. Scholastica's Academy-Marikina, Inc. (SSAMarikina) are educational institutions organized under the laws of the Republic of the Philippines, with principal offices and business addresses at Leon Guinto Street, Malate, Manila, and at West Drive, Marikina Heights, Marikina City, respectively. 2 Respondent SSC is the owner of four (4) parcels of land measuring a total of 56,306.80 square meters, located in Marikina Heights and covered by Transfer Certificate Title (TCT) No. 91537. Located within the property are SSA-Marikina, the residence of the sisters of the Benedictine Order, the formation house of the novices, and the retirement house for the elderly sisters. The property is enclosed by a tall concrete perimeter fence built some thirty (30) years ago. Abutting the fence along the West Drive are buildings, facilities, and other improvements. 3 The petitioners are the officials of the City Government of Marikina. On September 30, 1994, the Sangguniang Panlungsod of Marikina City enacted Ordinance No. 192,4 entitled "Regulating the Construction of Fences and Walls in the Municipality of Marikina." In 1995 and 1998, Ordinance Nos. 217 5 and 200 6 were enacted to amend Sections 7 and 5, respectively. Ordinance No. 192, as amended, is reproduced hereunder, as follows: ITSacC ORDINANCE No. 192 Series of 1994 ORDINANCE REGULATING THE CONSTRUCTION OF FENCES AND WALLS IN THE MUNICIPALITY OF MARIKINA WHEREAS, under Section 447.2 of Republic Act No. 7160 otherwise known as the Local Government Code of 1991 empowers the Sangguniang Bayan as the local legislative body of the municipality to ". . . Prescribe reasonable limits and restraints on the use of property within the jurisdiction of the municipality, . . ."; WHEREAS the effort of the municipality to accelerate its economic and physical development, coupled with urbanization and modernization, makes imperative the adoption of an ordinance which shall embody up-to-date and modern technical design in the construction of fences of residential, commercial and industrial buildings; WHEREAS, Presidential Decree No. 1096, otherwise known as the National Building Code of the Philippines, does not adequately provide technical guidelines for the construction of fences, in terms of design, construction, and criteria; WHEREAS, the adoption of such technical standards shall provide more efficient and effective enforcement of laws on public safety and security; WHEREAS, it has occurred in not just a few occasions that high fences or walls did not actually discourage but, in fact, even protected burglars, robbers, and other lawless elements from the view of outsiders once they have gained ingress into these walls, hence, fences not necessarily providing security, but becomes itself a "security problem"; WHEREAS, to discourage, suppress or prevent the concealment of prohibited or unlawful acts earlier enumerated, and as guardian of the people of Marikina, the municipal government seeks

to enact and implement rules and ordinances to protect and promote the health, safety and morals of its constituents; ITaCEc WHEREAS, consistent too, with the "Clean and Green Program" of the government, lowering of fences and walls shall encourage people to plant more trees and ornamental plants in their yards, and when visible, such trees and ornamental plants are expected to create an aura of a clean, green and beautiful environment for Marikeos; WHEREAS, high fences are unsightly that, in the past, people planted on sidewalks to "beautify" the faade of their residences but, however, become hazards and obstructions to pedestrians; WHEREAS, high and solid walls as fences are considered "un-neighborly" preventing community members to easily communicate and socialize and deemed to create "boxed-in" mentality among the populace; WHEREAS, to gather as wide-range of opinions and comments on this proposal, and as a requirement of the Local Government Code of 1991 (R.A. 7160), the Sangguniang Bayan of Marikina invited presidents or officers of homeowners associations, and commercial and industrial establishments in Marikina to two public hearings held on July 28, 1994 and August 25, 1994; WHEREAS, the rationale and mechanics of the proposed ordinance were fully presented to the attendees and no vehement objection was presented to the municipal government; NOW, THEREFORE, BE IT ORDAINED BY THE SANGGUNIANG BAYAN OF MARIKINA IN SESSION DULY ASSEMBLED: Section 1.Coverage. This Ordinance regulates the construction of all fences, walls and gates on lots classified or used for residential, commercial, industrial, or special purposes. Section 2.Definition of Terms. a.Front Yard refers to the area of the lot fronting a street, alley or public thoroughfare. b.Back Yard the part of the lot at the rear of the structure constructed therein. AcDaEH c.Open fence type of fence which allows a view of "thru-see" of the inner yard and the improvements therein. (Examples: wrought iron, wooden lattice, cyclone wire) d.Front gate refers to the gate which serves as a passage of persons or vehicles fronting a street, alley, or public thoroughfare. Section 3.The standard height of fences or walls allowed under this ordinance are as follows: (1)Fences on the front yard shall be no more than one (1) meter in height. Fences in excess of one (1) meter shall be of an open fence type, at least eighty percent (80%) see-thru; and (2)Fences on the side and back yard shall be in accordance with the provisions of P.D. 1096 otherwise known as the National Building Code. Section 4.No fence of any kind shall be allowed in areas specifically reserved or classified as parks. Section 5.In no case shall walls and fences be built within the five (5) meter parking area allowance located between the front monument line and the building line of commercial and industrial establishments and educational and religious institutions. 7 Section 6.Exemption. (1)The Ordinance does not cover perimeter walls of residential subdivisions. (2)When public safety or public welfare requires, the Sangguniang Bayan may allow the construction and/or maintenance of walls higher than as prescribed herein and shall issue a special permit or exemption. SICDAa Section 7.Transitory Provision. Real property owners whose existing fences and walls do not conform to the specifications herein are allowed adequate period of time from the passage of this Ordinance within which to conform, as follows: (1)Residential houses eight (8) years (2)Commercial establishments five (5) years (3)Industrial establishments three (3) years (4)Educational institutions five (5) years 8 (public and privately owned) Section 8.Penalty. Walls found not conforming to the provisions of this Ordinance shall be demolished by the municipal government at the expense of the owner of the lot or structure.

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Section 9.The Municipal Engineering Office is tasked to strictly implement this ordinance, including the issuance of the necessary implementing guidelines, issuance of building and fencing permits, and demolition of non-conforming walls at the lapse of the grace period herein provided. Section 10.Repealing Clause. All existing Ordinances and Resolutions, Rules and Regulations inconsistent with the foregoing provisions are hereby repealed, amended or modified. Section 11.Separability Clause. If for any reason or reasons, local executive orders, rules and regulations or parts thereof in conflict with this Ordinance are hereby repealed and/or modified accordingly. Section 12.Effectivity. This ordinance takes effect after publication. THcaDA APPROVED: September 30, 1994 (Emphases supplied) On April 2, 2000, the City Government of Marikina sent a letter to the respondents ordering them to demolish and replace the fence of their Marikina property to make it 80% see-thru, and, at the same time, to move it back about six (6) meters to provide parking space for vehicles to park. 9 On April 26, 2000, the respondents requested for an extension of time to comply with the directive. 10 In response, the petitioners, through then City Mayor Bayani F. Fernando, insisted on the enforcement of the subject ordinance. Not in conformity, the respondents filed a petition for prohibition with an application for a writ of preliminary injunction and temporary restraining order before the Regional Trial Court, Marikina, Branch 273 (RTC), docketed as SCA Case No. 2000-381-MK. 11 The respondents argued that the petitioners were acting in excess of jurisdiction in enforcing Ordinance No. 192, asserting that such contravenes Section 1, Article III of the 1987 Constitution. That demolishing their fence and constructing it six (6) meters back would result in the loss of at least 1,808.34 square meters, worth about P9,041,700.00, along West Drive, and at least 1,954.02 square meters, worth roughly P9,770,100.00, along East Drive. It would also result in the destruction of the garbage house, covered walk, electric house, storage house, comfort rooms, guards' room, guards' post, waiting area for visitors, waiting area for students, Blessed Virgin Shrine, P.E. area, and the multi-purpose hall, resulting in the permanent loss of their beneficial use. The respondents, thus, asserted that the implementation of the ordinance on their property would be tantamount to an appropriation of property without due process of law; and that the petitioners could only appropriate a portion of their property through eminent domain. They also pointed out that the goal of the provisions to deter lawless elements and criminality did not exist as the solid concrete walls of the school had served as sufficient protection for many years. 12 aTEAHc The petitioners, on the other hand, countered that the ordinance was a valid exercise of police power, by virtue of which, they could restrain property rights for the protection of public safety, health, morals, or the promotion of public convenience and general prosperity. 13 On June 30, 2000, the RTC issued a writ of preliminary injunction, enjoining the petitioners from implementing the demolition of the fence at SSC's Marikina property.14 Ruling of the RTC On the merits, the RTC rendered a Decision, 15 dated October 2, 2002, granting the petition and ordering the issuance of a writ of prohibition commanding the petitioners to permanently desist from enforcing or implementing Ordinance No. 192 on the respondents' property. The RTC agreed with the respondents that the order of the petitioners to demolish the fence at the SSC property in Marikina and to move it back six (6) meters would amount to an appropriation of property which could only be done through the exercise of eminent domain. It held that the petitioners could not take the respondents' property under the guise of police power to evade the payment of just compensation. It did not give weight to the petitioners' contention that the parking space was for the benefit of the students and patrons of SSA-Marikina, considering that the respondents were already providing for sufficient parking in compliance with the standards under Rule XIX of the National Building Code.

It further found that the 80% see-thru fence requirement could run counter to the respondents' right to privacy, considering that the property also served as a residence of the Benedictine sisters, who were entitled to some sense of privacy in their affairs. It also found that the respondents were able to prove that the danger to security had no basis in their case. Moreover, it held that the purpose of beautification could not be used to justify the exercise of police power. It also observed that Section 7 of Ordinance No. 192, as amended, provided for retroactive application. It held, however, that such retroactive effect should not impair the respondents' vested substantive rights over the perimeter walls, the six-meter strips of land along the walls, and the building, structures, facilities, and improvements, which would be destroyed by the demolition of the walls and the seizure of the strips of land. CaASIc The RTC also found untenable the petitioners' argument that Ordinance No. 192 was a remedial or curative statute intended to correct the defects of buildings and structures, which were brought about by the absence or insufficiency of laws. It ruled that the assailed ordinance was neither remedial nor curative in nature, considering that at the time the respondents' perimeter wall was built, the same was valid and legal, and the ordinance did not refer to any previous legislation that it sought to correct. The RTC noted that the petitioners could still take action to expropriate the subject property through eminent domain. The RTC, thus, disposed: WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued commanding the respondents to permanently desist from enforcing or implementing Ordinance No. 192, Series of 1994, as amended, on petitioners' property in question located at Marikina Heights, Marikina, Metro Manila. No pronouncement as to costs. SO ORDERED. 16 Ruling of the CA In its December 1, 2003 Decision, the CA dismissed the petitioners' appeal and affirmed the RTC decision. The CA reasoned out that the objectives stated in Ordinance No. 192 did not justify the exercise of police power, as it did not only seek to regulate, but also involved the taking of the respondents' property without due process of law. The respondents were bound to lose an unquantifiable sense of security, the beneficial use of their structures, and a total of 3,762.36 square meters of property. It, thus, ruled that the assailed ordinance could not be upheld as valid as it clearly invaded the personal and property rights of the respondents and "[f]or being unreasonable, and undue restraint of trade." 17 cDCEIA It noted that although the petitioners complied with procedural due process in enacting Ordinance No. 192, they failed to comply with substantive due process. Hence, the failure of the respondents to attend the public hearings in order to raise objections did not amount to a waiver of their right to question the validity of the ordinance. The CA also shot down the argument that the five-meter setback provision for parking was a legal easement, the use and ownership of which would remain with, and inure to, the benefit of the respondents for whom the easement was primarily intended. It found that the real intent of the setback provision was to make the parking space free for use by the public, considering that such would cease to be for the exclusive use of the school and its students as it would be situated outside school premises and beyond the school administration's control. In affirming the RTC ruling that the ordinance was not a curative statute, the CA found that the petitioner failed to point out any irregularity or invalidity in the provisions of the National Building Code that required correction or cure. It noted that any correction in the Code should be properly undertaken by the Congress and not by the City Council of Marikina through an ordinance. The CA, thus, disposed: WHEREFORE, all foregoing premises considered, the instant appeal is DENIED. The October 2, 2002 Decision and the January 13, 2003 Order of the Regional Trial Court (RTC) of Marikina City,

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Branch 273, granting petitioners-appellees' petition for Prohibition in SCA Case No. 2000-381-MK are hereby AFFIRMED. SO ORDERED. 18 Aggrieved by the decision of the CA, the petitioners are now before this Court presenting the following: CHEIcS ASSIGNMENT OF ERRORS 1.WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT CITY ORDINANCE NO. 192, SERIES OF 1994 IS NOT A VALID EXERCISE OF POLICE POWER; 2.WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE AFOREMENTIONED ORDINANCE IS AN EXERCISE OF THE CITY OF THE POWER OF EMINENT DOMAIN; 3.WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITY VIOLATED THE DUE PROCESS CLAUSE IN IMPLEMENTING ORDINANCE NO. 192, SERIES OF 1994; AND 4.WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE ABOVEMENTIONED ORDINANCE CANNOT BE GIVEN RETROACTIVE APPLICATION. 19 In this case, the petitioners admit that Section 5 of the assailed ordinance, pertaining to the fivemeter setback requirement is, as held by the lower courts, invalid. 20Nonetheless, the petitioners argue that such invalidity was subsequently cured by Zoning Ordinance No. 303, series of 2000. They also contend that Section 3, relating to the 80% see-thru fence requirement, must be complied with, as it remains to be valid. Ruling of the Court The ultimate question before the Court is whether Sections 3.1 and 5 of Ordinance No. 192 are valid exercises of police power by the City Government of Marikina. DCASIT "Police power is the plenary power vested in the legislature to make statutes and ordinances to promote the health, morals, peace, education, good order or safety and general welfare of the people." 21 The State, through the legislature, has delegated the exercise of police power to local government units, as agencies of the State. This delegation of police power is embodied in Section 16 22 of the Local Government Code of 1991 (R.A. No. 7160), known as the General Welfare Clause, 23 which has two branches. "The first, known as the general legislative power, authorizes the municipal council to enact ordinances and make regulations not repugnant to law, as may be necessary to carry into effect and discharge the powers and duties conferred upon the municipal council by law. The second, known as the police power proper, authorizes the municipality to enact ordinances as may be necessary and proper for the health and safety, prosperity, morals, peace, good order, comfort, and convenience of the municipality and its inhabitants, and for the protection of their property." 24 White Light Corporation v. City of Manila, 25 discusses the test of a valid ordinance: The test of a valid ordinance is well established. A long line of decisions including City of Manila has held that for an ordinance to be valid, it must not only be within the corporate powers of the local government unit to enact and pass according to the procedure prescribed by law, it must also conform to the following substantive requirements: (1) must not contravene the Constitution or any statute; (2) must not be unfair or oppressive; (3) must not be partial or discriminatory; (4) must not prohibit but may regulate trade; (5) must be general and consistent with public policy; and (6) must not be unreasonable. 26 Ordinance No. 192 was passed by the City Council of Marikina in the apparent exercise of its police power. To successfully invoke the exercise of police power as the rationale for the enactment of an ordinance and to free it from the imputation of constitutional infirmity, two tests have been used by the Court the rational relationship test and the strict scrutiny test: ASEcHI We ourselves have often applied the rational basis test mainly in analysis of equal protection challenges. Using the rational basis examination, laws or ordinances are upheld if they rationally further a legitimate governmental interest. Under intermediate review, governmental interest is extensively examined and the availability of less restrictive measures is considered. Applying strict

scrutiny, the focus is on the presence of compelling, rather than substantial, governmental interest and on the absence of less restrictive means for achieving that interest. 27 Even without going to a discussion of the strict scrutiny test, Ordinance No. 192, series of 1994 must be struck down for not being reasonably necessary to accomplish the City's purpose. More importantly, it is oppressive of private rights. Under the rational relationship test, an ordinance must pass the following requisites as discussed in Social Justice Society (SJS) v. Atienza, Jr.: 28 As with the State, local governments may be considered as having properly exercised their police power only if the following requisites are met: (1) the interests of the public generally, as distinguished from those of a particular class, require its exercise and (2) the means employed are reasonably necessary for the accomplishment of the purpose and not unduly oppressive upon individuals. In short, there must be a concurrence of a lawful subject and lawful method. 29 Lacking a concurrence of these two requisites, the police power measure shall be struck down as an arbitrary intrusion into private rights and a violation of the due process clause. 30 Section 3.1 and 5 of the assailed ordinance are pertinent to the issue at hand, to wit: cDAISC Section 3.The standard height of fences of walls allowed under this ordinance are as follows: (1)Fences on the front yard shall be no more than one (1) meter in height. Fences in excess of one (1) meter shall be an open fence type, at least eighty percent (80%) see-thru; xxx xxx xxx Section 5.In no case shall walls and fences be built within the five (5) meter parking area allowance located between the front monument line and the building line of commercial and industrial establishments and educational and religious institutions. The respondents, thus, sought to prohibit the petitioners from requiring them to (1) demolish their existing concrete wall, (2) build a fence (in excess of one meter) which must be 80% see-thru, and (3) build the said fence six meters back in order to provide a parking area. Setback Requirement The Court first turns its attention to Section 5 which requires the five-meter setback of the fence to provide for a parking area. The petitioners initially argued that the ownership of the parking area to be created would remain with the respondents as it would primarily be for the use of its students and faculty, and that its use by the public on non-school days would only be incidental. In their Reply, however, the petitioners admitted that Section 5 was, in fact, invalid for being repugnant to the Constitution. 31 The Court agrees with the latter position. The Court joins the CA in finding that the real intent of the setback requirement was to make the parking space free for use by the public, considering that it would no longer be for the exclusive use of the respondents as it would also be available for use by the general public. Section 9 of Article III of the 1987 Constitution, a provision on eminent domain, provides that private property shall not be taken for public use without just compensation. IDCHTE The petitioners cannot justify the setback by arguing that the ownership of the property will continue to remain with the respondents. It is a settled rule that neither the acquisition of title nor the total destruction of value is essential to taking. In fact, it is usually in cases where the title remains with the private owner that inquiry should be made to determine whether the impairment of a property is merely regulated or amounts to a compensable taking. 32 The Court is of the view that the implementation of the setback requirement would be tantamount to a taking of a total of 3,762.36 square meters of the respondents' private property for public use without just compensation, in contravention to the Constitution. Anent the objectives of prevention of concealment of unlawful acts and "un-neighborliness," it is obvious that providing for a parking area has no logical connection to, and is not reasonably necessary for, the accomplishment of these goals. Regarding the beautification purpose of the setback requirement, it has long been settled that the State may not, under the guise of police power, permanently divest owners of the beneficial use of their property solely to preserve or enhance the aesthetic appearance of the community. 33 The Court, thus, finds Section 5 to be unreasonable and oppressive as it will substantially divest

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the respondents of the beneficial use of their property solely for aesthetic purposes. Accordingly, Section 5 of Ordinance No. 192 is invalid. The petitioners, however, argue that the invalidity of Section 5 was properly cured by Zoning Ordinance No. 303, 34 Series of 2000, which classified the respondents' property to be within an institutional zone, under which a five-meter setback has been required. The petitioners are mistaken. Ordinance No. 303, Series of 2000, has no bearing to the case at hand. AcSHCD The Court notes with displeasure that this argument was only raised for the first time on appeal in this Court in the petitioners' Reply. Considering that Ordinance No. 303 was enacted on December 20, 2000, the petitioners could very well have raised it in their defense before the RTC in 2002. The settled rule in this jurisdiction is that a party cannot change the legal theory of this case under which the controversy was heard and decided in the trial court. It should be the same theory under which the review on appeal is conducted. Points of law, theories, issues, and arguments not adequately brought to the attention of the lower court will not be ordinarily considered by a reviewing court, inasmuch as they cannot be raised for the first time on appeal. This will be offensive to the basic rules of fair play, justice, and due process. 35 Furthermore, the two ordinances have completely different purposes and subjects. Ordinance No. 192 aims to regulate the construction of fences, while Ordinance No. 303 is a zoning ordinance which classifies the city into specific land uses. In fact, the five-meter setback required by Ordinance No. 303 does not even appear to be for the purpose of providing a parking area. By no stretch of the imagination, therefore, can Ordinance No. 303, "cure" Section 5 of Ordinance No. 192. In any case, the clear subject of the petition for prohibition filed by the respondents is Ordinance No. 192 and, as such, the precise issue to be determined is whether the petitioners can be prohibited from enforcing the said ordinance, and no other, against the respondents. 80% See-Thru Fence Requirement The petitioners argue that while Section 5 of Ordinance No. 192 may be invalid, Section 3.1 limiting the height of fences to one meter and requiring fences in excess of one meter to be at least 80% see-thru, should remain valid and enforceable against the respondents. The Court cannot accommodate the petitioner. HDcaAI For Section 3.1 to pass the rational relationship test, the petitioners must show the reasonable relation between the purpose of the police power measure and the means employed for its accomplishment, for even under the guise of protecting the public interest, personal rights and those pertaining to private property will not be permitted to be arbitrarily invaded. 36 The principal purpose of Section 3.1 is "to discourage, suppress or prevent the concealment of prohibited or unlawful acts." The ultimate goal of this objective is clearly the prevention of crime to ensure public safety and security. The means employed by the petitioners, however, is not reasonably necessary for the accomplishment of this purpose and is unduly oppressive to private rights. The petitioners have not adequately shown, and it does not appear obvious to this Court, that an 80% see-thru fence would provide better protection and a higher level of security, or serve as a more satisfactory criminal deterrent, than a tall solid concrete wall. It may even be argued that such exposed premises could entice and tempt would-be criminals to the property, and that a seethru fence would be easier to bypass and breach. It also appears that the respondents' concrete wall has served as more than sufficient protection over the last 40 years. As to the beautification purpose of the assailed ordinance, as previously discussed, the State may not, under the guise of police power, infringe on private rights solely for the sake of the aesthetic appearance of the community. Similarly, the Court cannot perceive how a see-thru fence will foster "neighborliness" between members of a community. Compelling the respondents to construct their fence in accordance with the assailed ordinance is, thus, a clear encroachment on their right to property, which necessarily includes their right to decide how best to protect their property.

It also appears that requiring the exposure of their property via a see-thru fence is violative of their right to privacy, considering that the residence of the Benedictine nuns is also located within the property. The right to privacy has long been considered a fundamental right guaranteed by the Constitution that must be protected from intrusion or constraint. The right to privacy is essentially the right to be let alone, 37 as governmental powers should stop short of certain intrusions into the personal life of its citizens. 38 It is inherent in the concept of liberty, enshrined in the Bill of Rights (Article III) in Sections 1, 2, 3 (1), 6, 8, and 17, Article III of the 1987 Constitution. 39 CSaITD The enforcement of Section 3.1 would, therefore, result in an undue interference with the respondents' rights to property and privacy. Section 3.1 of Ordinance No. 192 is, thus, also invalid and cannot be enforced against the respondents. No Retroactivity Ordinance No. 217 amended Section 7 of Ordinance No. 192 by including the regulation of educational institutions which was unintentionally omitted, and giving said educational institutions five (5) years from the passage of Ordinance No. 192 (and not Ordinance No. 217) to conform to its provisions. 40 The petitioners argued that the amendment could be retroactively applied because the assailed ordinance is a curative statute which is retroactive in nature. Considering that Sections 3.1 and 5 of Ordinance No. 192 cannot be enforced against the respondents, it is no longer necessary to rule on the issue of retroactivity. The Court shall, nevertheless, pass upon the issue for the sake of clarity. "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. 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. Curative statutes, therefore, by their very essence, are retroactive." 41 The petitioners argue that Ordinance No. 192 is a curative statute as it aims to correct or cure a defect in the National Building Code, namely, its failure to provide for adequate guidelines for the construction of fences. They ultimately seek to remedy an insufficiency in the law. In aiming to cure this insufficiency, the petitioners attempt to add lacking provisions to the National Building Code. This is not what is contemplated by curative statutes, which intend to correct irregularities or invalidity in the law. The petitioners fail to point out any irregular or invalid provision. As such, the assailed ordinance cannot qualify as curative and retroactive in nature. aIcHSC At any rate, there appears to be no insufficiency in the National Building Code with respect to parking provisions in relation to the issue of the respondents. Paragraph 1.16.1, Rule XIX of the Rules and Regulations of the said code requires an educational institution to provide one parking slot for every ten classrooms. As found by the lower courts, the respondents provide a total of 76 parking slots for their 80 classrooms and, thus, had more than sufficiently complied with the law. Ordinance No. 192, as amended, is, therefore, not a curative statute which may be applied retroactively. Separability Sections 3.1 and 5 of Ordinance No. 192, as amended, are, thus, invalid and cannot be enforced against the respondents. Nonetheless, "the general rule is that where part of a statute is void as repugnant to the Constitution, while another part is valid, the valid portion, if susceptible to being separated from the invalid, may stand and be enforced." 42 Thus, the other sections of the assailed ordinance remain valid and enforceable. Conclusion Considering the invalidity of Sections 3.1 and 5, it is clear that the petitioners were acting in excess of their jurisdiction in enforcing Ordinance No. 192 against the respondents. The CA was correct in affirming the decision of the RTC in issuing the writ of prohibition. The petitioners must

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permanently desist from enforcing Sections 3.1 and 5 of the assailed ordinance on the respondents' property in Marikina City. WHEREFORE, the petition is DENIED. The October 2, 2002 Decision of the Regional Trial Court in SCA Case No. 2000-381-MK is AFFIRMED but MODIFIED to read as follows: WHEREFORE, the petition is GRANTED. The writ of prohibition is hereby issued commanding the respondents to permanently desist from enforcing or implementing Sections 3.1 and 5 of Ordinance No. 192, Series of 1994, as amended, on the petitioners' property in question located in Marikina Heights, Marikina, Metro Manila. HDITCS No pronouncement as to costs. SO ORDERED. Sereno, C.J., Carpio, Velasco, Jr., Leonardo-de Castro, Brion, Peralta, Bersamin, Del Castillo, Abad, Villarama, Jr., Reyes, Perlas-Bernabe and Leonen, JJ., concur. Perez, J., is on official leave. Footnotes 1.Rollo, pp. 37-52. Penned by Associate Justice Jose L. Sabio, Jr., and concurred in by Associate Justice Delilah Vidallon-Magtolis and Associate Justice Hakim S. Abdulwahid. 2.Id. at 37-38. 3.Id. at 38. 4.Id. at 74-77. 5.Id. at 78-79. 6.Id. at 80. 7.Ordinance No. 200, Series of 1998, id. 8.Ordinance No. 217, Series of 1995, id. at 78. 9.Id. at 39. 10.Id. at 85. 11.Id. at 39. 12.Id. at 56-57. 13.Id. at 57. 14.Id. at 39-40. 15.Id. at 54-68. Penned by Judge Olga Palanca-Enriquez. 16.Id. at 68. 17.Id. at 49. 18.Id. at 51-52. 19.Id. at 17. 20.Id. at 182-188. 21.Social Justice Society (SJS) v. Atienza, Jr., G.R. No. 156052, February 13, 2008, 545 SCRA 92, 136. 22.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. 23.Acebedo Optical Company, Inc. v. Court of Appeals, 385 Phil. 956, 969 (2000). 24.Rural Bank of Makati v. Municipality of Makati, G.R. No. 150763, July 2, 2004, 433 SCRA 362, 371-372. 25.G.R. No. 122846, January 20, 2009, 576 SCRA 416. 26.Id. at 433. 27.Id. at 437.

28.Supra note 21. 29.Id. at 138. 30.City of Manila v. Laguio, Jr., 495 Phil. 289, 313 (2005). 31.Rollo, p. 184. 32.Office of the Solicitor General v. Ayala Land, Incorporated, G.R. No. 177056, September 18, 2009, 600 SCRA 617, 644-645. 33.People v. Fajardo, 104 Phil. 443, 447-448 (1958). 34.Rollo, pp. 190-310. 35.Pea v. Tolentino, G.R. Nos. 155227-28, February 9, 2011, 642 SCRA 310, 324-325. 36.City of Manila v. Laguio, Jr., supra note 30, at 312-313. 37.Gamboa v. Chan, G.R. No. 193636, July 24, 2012, 677 SCRA 385, 396, citing Morfe v. Mutuc, 130 Phil. 415 (1968). 38.White Light Corporation v. City of Manila, supra note 19, at 441, citing City of Manila v. Laguio, 495 Phil. 289 (2005). 39.Gamboa v. Chan, supra note 37, at 397-398, citing Ople v. Torres, 354 Phil. 948 (1998). Sec. 1. No person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied the equal protection of the laws. 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. xxx xxx xxx Sec. 6. The liberty of abode and of changing the same within the limits prescribed by law shall not be impaired except upon lawful order of the court. Neither shall the right to travel be impaired except in the interest of national security, public safety, or public health as may be provided by law. xxx xxx xxx Sec. 8. The right of the people, including those employed in the public and private sectors, to form unions, associations, or societies for purposes not contrary to law shall not be abridged. xxx xxx xxx Sec. 17. No person shall be compelled to be a witness against himself. 40.Rollo, pp. 78-79. 41.Narzoles v. National Labor Relations Commission, 395 Phil. 758, 764-765 (2000). 42.PKSMMN v. Executive Secretary, G.R. Nos. 147036-37, April 10, 2012, 669 SCRA 49, 74.

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