Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-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 and O'Brien, Williams, Ferrier and Sycip, Delgado and Delgado, Filemon Sotto, and Ramon Salinas for
appellees.

JOHNSON, J .:
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 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 Community of 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
itdenied 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 tombstones 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 offered,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 theComunidad
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 sepulchres
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 ambulance 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
advisible purpose of 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 of Manila) provides that "the city (Manila) . . . may
condemn privateproperty 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 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."
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 the rightto
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 legislature.
Much has been written upon both sides of that question. A careful examination of the discussions pro 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 parcelof
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 no 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 the courts hear proof upon that question? Or,
suppose the defense is, that the purpose of the expropriation is not public butprivate, 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 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, is 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 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 ofWheeling, etc. R. R. Co. vs.
Toledo, Ry, etc., Co. (72 Ohio St., 368 [106 Am. St. rep., 622, 628]), which was 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 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 limene.
The legislative department of the government was 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 exist 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 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 andexpediency 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.
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 purpose 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 necessary 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. 338].)
It is true that naby 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
legislative 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 legislative 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 Pet. [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 defendant 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 legislature authority, or ought to be implied from any general
expression of the people. The people ought no 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 proven public 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. (Bensely 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 government 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 the city 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., 511; 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 distributing the quiet resting place of the dead.
Aside from insisting that there exists no necessity for the alleged improvements, 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 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 sepulchres may become the seat of cities and cemeteries traversed by streets
and daily trod by the feet of 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 sepulchres 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, 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
Associationvs. The City 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.

Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 88404 October 18, 1990
PHILIPPINE LONG DISTANCE TELEPHONE CO. [PLDT], petitioner,
vs.
THE NATIONAL TELECOMMUNICATIONS COMMISSION AND CELLCOM, INC., (EXPRESS
TELECOMMUNICATIONS CO., INC. [ETCI]), respondents.
Alampan & Manhit Law Offices for petitioner.
Gozon, Fernandez, Defensor & Parel for private respondent.

D E C I S I O N
MELENCIO-HERRERA, J.:
Petitioner Philippine Long Distance Telephone Company (PLDT) assails, by way of certiorari and Prohibition under Rule
65, two (2) Orders of public respondent National Telecommunications Commission (NTC), namely, the Order of 12
December 1988 granting private respondent Express Telecommunications Co., Inc. (ETCI) provisional authority to install,
operate and maintain a Cellular Mobile Telephone System in Metro-Manila (Phase A) in accordance with specified
conditions, and the Order, dated 8 May 1988, denying reconsideration.
On 22 June 1958, Rep. Act No. 2090, was enacted, otherwise known as An Act Granting Felix Alberto and Company,
Incorporated, a Franchise to Establish Radio Stations for Domestic and Transoceanic Telecommunications. Felix Alberto
& Co., Inc. (FACI) was the original corporate name, which was changed to ETCI with the amendment of the Articles of
Incorporation in 1964. Much later, CELLCOM, Inc. was the name sought to be adopted before the Securities and
Exchange Commission, but this was withdrawn and abandoned.
On 13 May 1987, alleging urgent public need, ETCI filed an application with public respondent NTC (docketed as NTC
Case No. 87-89) for the issuance of a Certificate of Public Convenience and Necessity (CPCN) to construct, install,
establish, operate and maintain a Cellular Mobile Telephone System and an Alpha Numeric Paging System in Metro Manila
and in the Southern Luzon regions, with a prayer for provisional authority to operate Phase A of its proposal within Metro
Manila.
PLDT filed an Opposition with a Motion to Dismiss, based primarily on the following grounds: (1) ETCI is not capacitated
or qualified under its legislative franchise to operate a systemwide telephone or network of telephone service such as the
one proposed in its application; (2) ETCI lacks the facilities needed and indispensable to the successful operation of the
proposed cellular mobile telephone system; (3) PLDT has itself a pending application with NTC, Case No. 86-86, to install
and operate a Cellular Mobile Telephone System for domestic and international service not only in Manila but also in the
provinces and that under the prior operator or protection of investment doctrine, PLDT has the priority or preference
in the operation of such service; and (4) the provisional authority, if granted, will result in needless, uneconomical and
harmful duplication, among others.
In an Order, dated 12 November 1987, NTC overruled PLDTs Opposition and declared that Rep. Act No. 2090 (1958)
should be liberally construed as to include among the services under said franchise the operation of a cellular mobile
telephone service.
In the same Order, ETCI was required to submit the certificate of registration of its Articles of Incorporation with the
Securities and Exchange Commission, the present capital and ownership structure of the company and such other
evidence, oral or documentary, as may be necessary to prove its legal, financial and technical capabilities as well as the
economic justifications to warrant the setting up of cellular mobile telephone and paging systems. The continuance of the
hearings was also directed.
After evaluating the reconsideration sought by PLDT, the NTC, in October 1988, maintained its ruling that liberally
construed, applicants franchise carries with it the privilege to operate and maintain a cellular mobile telephone service.
On 12 December 1988, NTC issued the first challenged Order. Opining that public interest, convenience and necessity
further demand a second cellular mobile telephone service provider and finds PRIMA FACIE evidence showing applicants
legal, financial and technical capabilities to provide a cellular mobile service using the AMPS system, NTC granted ETCI
provisional authority to install, operate and maintain a cellular mobile telephone system initially in Metro Manila, Phase A
only, subject to the terms and conditions set forth in the same Order. One of the conditions prescribed (Condition No. 5)
was that, within ninety (90) days from date of the acceptance by ETCI of the terms and conditions of the provisional
authority, ETCI and PLDT shall enter into an interconnection agreement for the provision of adequate interconnection
facilities between applicants cellular mobile telephone switch and the public switched telephone network and shall jointly
submit such interconnection agreement to the Commission for approval.
In a Motion to Set Aside the Order granting provisional authority, PLDT alleged essentially that the interconnection
ordered was in violation of due process and that the grant of provisional authority was jurisdictionally and procedurally
infirm. On 8 May 1989, NTC denied reconsideration and set the date for continuation of the hearings on the main
proceedings. This is the second questioned Order.
PLDT urges us now to annul the NTC Orders of 12 December 1988 and 8 May 1989 and to order ETCI to desist from,
suspend, and/or discontinue any and all acts intended for its implementation.
On 15 June 1989, we resolved to dismiss the petition for its failure to comply fully with the requirements of Circular No.
1-88. Upon satisfactory showing, however, that there was, in fact, such compliance, we reconsidered the order,
reinstated the Petition, and required the respondents NTC and ETCI to submit their respective Comments.
On 27 February 1990, we issued a Temporary Restraining Order enjoining NTC to Cease and Desist from all or any of its
on-going proceedings and ETCI from continuing any and all acts intended or related to or which will amount to the
implementation/execution of its provisional authority. This was upon PLDTs urgent manifestation that it had been served
an NTC Order, dated 14 February 1990, directing immediate compliance with its Order of 12 December 1988, otherwise
the Commission shall be constrained to take the necessary measures and bring to bear upon PLDT the full sanctions
provided by law.
We required PLDT to post a bond of P 5M. It has complied, with the statement that it was post(ing) the same on its
agreement and/or consent to have the same forfeited in favor of Private Respondent ETCI/CELLCOM should the instant
Petition be dismissed for lack of merit. ETCI took exception to the sufficiency of the bond considering its initial
investment of approximately P 225M, but accepted the forfeiture proffered.
ETCI moved to have the TRO lifted, which We denied on 6 March 1990. We stated, however, that the inaugural ceremony
ETCI had scheduled for that day could proceed, as the same was not covered by the TRO.
PLDT relies on the following grounds for the issuance of the Writs prayed for:
1. Respondent NTCs subject order effectively licensed and/or authorized a corporate entity without any franchise to
operate a public utility, legislative or otherwise, to establish and operate a telecommunications system.
2. The same order validated stock transactions of a public service enterprise contrary to and/or in direct violation of
Section 20(h) of the Public Service Act.
3. Respondent NTC adjudicated in the same order a controverted matter that was not heard at all in the proceedings
under which it was promulgated.
As correctly pointed out by respondents, this being a special civil action for certiorari and Prohibition, We only need
determine if NTC acted without jurisdiction or with grave abuse of discretion amounting to lack or excess of jurisdiction in
granting provisional authority to ETCI under the NTC questioned Orders of 12 December 1988 and 8 May 1989.
The case was set for oral argument on 21 August 1990 with the parties directed to address, but not limited to, the
following issues: (1) the status and coverage of Rep. Act No. 2090 as a franchise; (2) the transfer of shares of stock of a
corporation holding a CPCN; and (3) the principle and procedure of interconnection. The parties were thereafter required
to submit their respective Memoranda, with which they have complied.
We find no grave abuse of discretion on the part of NTC, upon the following considerations:
1. NTC Jurisdiction
There can be no question that the NTC is the regulatory agency of the national government with jurisdiction over all
telecommunications entities. It is legally clothed with authority and given ample discretion to grant a provisional permit or
authority. In fact, NTC may, on its own initiative, grant such relief even in the absence of a motion from an applicant.
Sec. 3. Provisional Relief. Upon the filing of an application, complaint or petition or at any stage thereafter, the Board
may grant on motion of the pleaders or on its own initiative, the relief prayed for, based on the pleading, together with
the affidavits and supporting documents attached thereto, without prejudice to a final decision after completion of the
hearing which shall be called within thirty (30) days from grant of authority asked for. (Rule 15, Rules of Practice and
Procedure Before the Board of Communications (now NTC).
What the NTC granted was such a provisional authority, with a definite expiry period of eighteen (18) months unless
sooner renewed, and which may be revoked, amended or revised by the NTC. It is also limited to Metro Manila only.
What is more, the main proceedings are clearly to continue as stated in the NTC Order of 8 May 1989.
The provisional authority was issued after due hearing, reception of evidence and evaluation thereof, with the hearings
attended by various oppositors, including PLDT. It was granted only after a prima facie showing that ETCI has the
necessary legal, financial and technical capabilities and that public interest, convenience and necessity so demanded.
PLDT argues, however, that a provisional authority is nothing short of a Certificate of Public Convenience and Necessity
(CPCN) and that it is merely a distinction without a difference. That is not so. Basic differences do exist, which need not
be elaborated on. What should be borne in mind is that provisional authority would be meaningless if the grantee were
not allowed to operate. Moreover, it is clear from the very Order of 12 December 1988 itself that its scope is limited only
to the first phase, out of four, of the proposed nationwide telephone system. The installation and operation of an alpha
numeric paging system was not authorized. The provisional authority is not exclusive. Its lifetime is limited and may be
revoked by the NTC at any time in accordance with law. The initial expenditure of P130M more or less, is rendered
necessary even under a provisional authority to enable ETCI to prove its capability. And as pointed out by the Solicitor
General, on behalf of the NTC, if what had been granted were a CPCN, it would constitute a final order or award
reviewable only by ordinary appeal to the Court of Appeals pursuant to Section 9(3) of BP Blg. 129, and not by certiorari
before this Court.
The final outcome of the application rests within the exclusive prerogative of the NTC. Whether or not a CPCN would
eventually issue would depend on the evidence to be presented during the hearings still to be conducted, and only after a
full evaluation of the proof thus presented.
2. The Coverage of ETCIs Franchise
Rep. Act No. 2090 grants ETCI (formerly FACI) the right and privilege of constructing, installing, establishing and
operating in the entire Philippines radio stations for reception and transmission of messages on radio stations in the
foreign and domestic public fixed point-to-point and public base, aeronautical and land mobile stations, with the
corresponding relay stations for the reception and transmission of wireless messages on radiotelegraphy and/or
radiotelephony . PLDT maintains that the scope of the franchise is limited to radio stations and excludes telephone
services such as the establishment of the proposed Cellular Mobile Telephone System (CMTS). However, in its Order of 12
November 1987, the NTC construed the technical term radiotelephony liberally as to include the operation of a cellular
mobile telephone system. It said:
In resolving the said issue, the Commission takes into consideration the different definitions of the term radiotelephony.
As defined by the New International Webster Dictionary the term radiotelephony is defined as a telephone carried on by
aid of radiowaves without connecting wires. The International Telecommunications Union (ITU) defines a radiotelephone
call as a telephone call, originating in or intended on all or part of its route over the radio communications channels of
the mobile service or of the mobile satellite service. From the above definitions, while under Republic Act 2090 a system-
wide telephone or network of telephone service by means of connecting wires may not have been contemplated, it can be
construed liberally that the operation of a cellular mobile telephone service which carries messages, either voice or
record, with the aid of radiowaves or a part of its route carried over radio communication channels, is one included
among the services under said franchise for which a certificate of public convenience and necessity may be applied for.
The foregoing is the construction given by an administrative agency possessed of the necessary special knowledge,
expertise and experience and deserves great weight and respect (Asturias Sugar Central, Inc. v. Commissioner of
Customs, et al., L-19337, September 30, 1969, 29 SCRA 617). It can only be set aside on proof of gross abuse of
discretion, fraud, or error of law (Tupas Local Chapter No. 979 v. NLRC, et al., L-60532-33, November 5, 1985, 139 SCRA
478). We discern none of those considerations sufficient to warrant judicial intervention.
3. The Status of ETCI Franchise
PLDT alleges that the ETCI franchise had lapsed into nonexistence for failure of the franchise holder to begin and
complete construction of the radio system authorized under the franchise as explicitly required in Section 4 of its
franchise, Rep. Act No. 2090.
1
PLDT also invokes Pres. Decree No. 36, enacted on 2 November 1972, which legislates the
mandatory cancellation or invalidation of all franchises for the operation of communications services, which have not been
availed of or used by the party or parties in whose name they were issued.
However, whether or not ETCI, and before it FACI, in contravention of its franchise, started the first of its radio
telecommunication stations within (2) years from the grant of its franchise and completed the construction within ten (10)
years from said date; and whether or not its franchise had remained unused from the time of its issuance, are questions
of fact beyond the province of this Court, besides the well-settled procedural consideration that factual issues are not
subjects of a special civil action for certiorari (Central Bank of the Philippines vs. Court of Appeals, G.R. No. 41859, 8
March 1989, 171 SCRA 49; Ygay vs. Escareal, G.R. No. 44189, 8 February 1985, 135 SCRA 78; Filipino Merchants
Insurance Co., Inc. vs. Intermediate Appellate Court, G.R. No. 71640, 27 June 1988, 162 SCRA 669). Moreover, neither
Section 4, Rep. Act No. 2090 nor Pres. Decree No. 36 should be construed as self-executing in working a forfeiture.
Franchise holders should be given an opportunity to be heard, particularly so, where, as in this case, ETCI does not admit
any breach, in consonance with the rudiments of fair play. Thus, the factual situation of this case differs from that
in Angeles Ry Co. vs. City of Los Angeles (92 Pacific Reporter 490) cited by PLDT, where the grantee therein admitted its
failure to complete the conditions of its franchise and yet insisted on a decree of forfeiture.
More importantly, PLDTs allegation partakes of a collateral attack on a franchise Rep. Act No. 2090), which is not
allowed. A franchise is a property right and cannot be revoked or forfeited without due process of law. The determination
of the right to the exercise of a franchise, or whether the right to enjoy such privilege has been forfeited by non-user, is
more properly the subject of the prerogative writ of quo warranto, the right to assert which, as a rule, belongs to the
State upon complaint or otherwise (Sections 1, 2 and 3, Rule 66, Rules of Court),
2
the reason being that the abuse of a
franchise is a public wrong and not a private injury. A forfeiture of a franchise will have to be declared in a direct
proceeding for the purpose brought by the State because a franchise is granted by law and its unlawful exercise is
primarily a concern of Government.
A franchise is granted by law, and its unlawful exercise is the concern primarily of the Government. Hence, the
latter as a rule is the party called upon to bring the action for such unlawful exercise of franchise. (IV-B V. FRANCISCO,
298 [1963 ed.], citing Cruz vs. Ramos, 84 Phil. 226).
4. ETCIs Stock Transactions
ETCI admits that in 1964, the Albertos, as original owners of more than 40% of the outstanding capital stock sold thei r
holdings to the Orbes. In 1968, the Albertos re-acquired the shares they had sold to the Orbes. In 1987, the Albertos sold
more than 40% of their shares to Horacio Yalung. Thereafter, the present stockholders acquired their ETCI shares.
Moreover, in 1964, ETCI had increased its capital stock from P40,000.00 to P360,000.00; and in 1987, from P360,000.00
to P40M.
PLDT contends that the transfers in 1987 of the shares of stock to the new stockholders amount to a transfer of ETCIs
franchise, which needs Congressional approval pursuant to Rep. Act No. 2090, and since such approval had not been
obtained, ETCIs franchise had been invalidated. The provision relied on reads, in part, as follows:
SECTION 10. The grantee shall not lease, transfer, grant the usufruct of, sell or assign this franchise nor the rights and
privileges acquired thereunder to any person, firm, company, corporation or other commercial or legal entity nor merge
with any other person, company or corporation organized for the same purpose, without the approval of the Congress of
the Philippines first had.
It should be noted, however, that the foregoing provision is, directed to the grantee of the franchise, which is the
corporation itself and refers to a sale, lease, or assignment of that franchise. It does not include the transfer or sale of
shares of stock of a corporation by the latters stockholders.
The sale of shares of stock of a public utility is governed by another law, i.e., Section 20(h) of the Public Service Act
(Commonwealth Act No. 146). Pursuant thereto, the Public Service Commission (now the NTC) is the government agency
vested with the authority to approve the transfer of more than 40% of the subscribed capital stock of a
telecommunications company to a single transferee, thus:
SEC. 20.Acts requiring the approval of the Commission. Subject to established stations and exceptions and saving
provisions to the contrary, it shall be unlawful for any public service or for the owner, lessee or operator thereof, without
the approval and authorization of the Commission previously had
xxx xxx xxx
(h) To sell or register in its books the transfer or sale of shares of its capital stock, if the result of that sale in itsel f or in
connection with another previous sale, shall be to vest in the transferee more than forty per centum of the subscribed
capital of said public service. Any transfer made in violation of this provision shall be void and of no effect and shall not
be registered in the books of the public service corporation. Nothing herein contained shall be construed to prevent the
holding of shares lawfully acquired. (As amended by Com. Act No. 454).
In other words, transfers of shares of a public utility corporation need only NTC approval, not Congressional
authorization. What transpired in ETCI were a series of transfers of shares starting in 1964 until 1987. The approval of
the NTC may be deemed to have been met when it authorized the issuance of the provisional authority to ETCI. There
was full disclosure before the NTC of the transfers. In fact, the NTC Order of 12 November 1987 required ETCI to submit
its present capital and ownership structure. Further, ETCI even filed a Motion before the NTC, dated 8 December 1987,
or more than a year prior to the grant of provisional authority, seeking approval of the increase in its capital stock from
P360,000.00 to P40M, and the stock transfers made by its stockholders.
A distinction should be made between shares of stock, which are owned by stockholders, the sale of which requires only
NTC approval, and the franchise itself which is owned by the corporation as the grantee thereof, the sale or transfer of
which requires Congressional sanction. Since stockholders own the shares of stock, they may dispose of the same as they
see fit. They may not, however, transfer or assign the property of a corporation, like its franchise. In other words, even if
the original stockholders had transferred their shares to another group of shareholders, the franchise granted to the
corporation subsists as long as the corporation, as an entity, continues to exist. The franchise is not thereby invalidated
by the transfer of the shares. A corporation has a personality separate and distinct from that of each stockholder. It has
the right of continuity or perpetual succession (Corporation Code, Sec. 2).
To all appearances, the stock transfers were not just for the purpose of acquiring the ETCI franchise, considering that, as
heretofore stated, a series of transfers was involved from 1964 to 1987. And, contrary to PLDTs assertion, the franchise
was not the only property of ETCI of meaningful value. The zero book value of ETCI assets, as reflected in its balance
sheet, was plausibly explained as due to the accumulated depreciation over the years entered for accounting purposes
and was not reflective of the actual value that those assets would command in the market.
But again, whether ETCI has offended against a provision of its franchise, or has subjected it to misuse or abuse, may
more properly be inquired into in quo warranto proceedings instituted by the State. It is the condition of every franchise
that it is subject to amendment, alteration, or repeal when the common good so requires (1987 Constitution, Article XII,
Section 11).
5. The NTC Interconnection Order
In the provisional authority granted by NTC to ETCI, one of the conditions imposed was that the latter and PLDT were to
enter into an interconnection agreement to be jointly submitted to NTC for approval.
PLDT vehemently opposes interconnection with its own public switched telephone network. It contends: that while PLDT
welcomes interconnections in the furtherance of public interest, only parties who can establish that they have valid and
subsisting legislative franchises are entitled to apply for a CPCN or provisional authority, absent which, NTC has no
jurisdiction to grant them the CPCN or interconnection with PLDT; that the 73 telephone systems operating all over the
Philippines have a viability and feasibility independent of any interconnection with PLDT; that the NTC is not empowered
to compel such a private raid on PLDTs legitimate income arising out of its gigantic investment; that it is not public
interest, but purely a private and selfish interest which will be served by an interconnection under ETCI s terms; and that
to compel PLDT to interconnect merely to give viability to a prospective competitor, which cannot stand on its own feet,
cannot be justified in the name of a non-existent public need (PLDT Memorandum, pp. 48 and 50).
PLDT cannot justifiably refuse to interconnect.
Rep. Act No. 6849, or the Municipal Telephone Act of 1989, approved on 8 February 1990, mandates interconnection
providing as it does that all domestic telecommunications carriers or utilities shall be interconnected to the public
switch telephone network. Such regulation of the use and ownership of telecommunications systems is in the exercise of
the plenary police power of the State for the promotion of the general welfare. The 1987 Constitution recognizes the
existence of that power when it provides.
SEC. 6. The use of property bears a social function, and all economic agents shall contribute to the common good.
Individuals and private groups, including corporations, cooperatives, and similar collective organizations, shall have the
right to own, establish, and operate economic enterprises, subject to the duty of the State to promote distributive justice
and to intervene when the common good so demands (Article XII).
The interconnection which has been required of PLDT is a form of intervention with property rights dictated by the
objective of government to promote the rapid expansion of telecommunications services in all areas of the Philippines,
to maximize the use of telecommunications facilities available, in recognition of the vital role of communications in
nation building and to ensure that all users of the public telecommunications service have access to all other users of
the service wherever they may be within the Philippines at an acceptable standard of service and at reasonable cost
(DOTC Circular No. 90-248). Undoubtedly, the encompassing objective is the common good. The NTC, as the regulatory
agency of the State, merely exercised its delegated authority to regulate the use of telecommunications networks when it
decreed interconnection.
The importance and emphasis given to interconnection dates back to Ministry Circular No. 82-81, dated 6 December
1982, providing:
Sec. 1. That the government encourages the provision and operation of public mobile telephone service within local sub-
base stations, particularly, in the highly commercialized areas;
Sec. 5. That, in the event the authority to operate said service be granted to other applicants, other than the franchise
holder, the franchise operator shall be under obligation to enter into an agreement with the domestic telephone network,
under an interconnection agreement;
Department of Transportation and Communication (DOTC) Circular No. 87-188, issued in 1987, also decrees:
12. All public communications carriers shall interconnect their facilities pursuant to comparatively efficient interconnection
(CEI) as defined by the NTC in the interest of economic efficiency.
The sharing of revenue was an additional feature considered in DOTC Circular No. 90-248, dated 14 June 1990, laying
down the Policy on Interconnection and Revenue Sharing by Public Communications Carriers, thus:
WHEREAS, it is the objective of government to promote the rapid expansion of telecommunications services in all areas of
the Philippines;
WHEREAS, there is a need to maximize the use of telecommunications facilities available and encourage investment in
telecommunications infrastructure by suitably qualified service providers;
WHEREAS, in recognition of the vital role of communications in nation building, there is a need to ensure that all users of
the public telecommunications service have access to all other users of the service wherever they may be within the
Philippines at an acceptable standard of service and at reasonable cost.
WHEREFORE, the following Department policies on interconnection and revenue sharing are hereby promulgated:
1. All facilities offering public telecommunication services shall be interconnected into the nationwide telecommunications
network/s.
xxx xxx xxx
4. The interconnection of networks shall be effected in a fair and non-discriminatory manner and within the shortest time-
frame practicable.
5. The precise points of interface between service operators shall be as defined by the NTC; and the apportionment of
costs and division of revenues resulting from interconnection of telecommunications networks shall be as approved
and/or prescribed by the NTC.
xxx xxx xxx
Since then, the NTC, on 12 July 1990, issued Memorandum Circular No. 7-13-90 prescribing the Rules and Regulations
Governing the Interconnection of Local Telephone Exchanges and Public Calling Offices with the Nationwide
Telecommunications Network/s, the Sharing of Revenue Derived Therefrom, and for Other Purposes.
The NTC order to interconnect allows the parties themselves to discuss and agree upon the specific terms and conditions
of the interconnection agreement instead of the NTC itself laying down the standards of interconnection which it can very
well impose. Thus it is that PLDT cannot justifiably claim denial of clue process. It has been heard. It will continue to be
heard in the main proceedings. It will surely heard in the negotiations concerning the interconnection agreement.
As disclosed during the hearing, the interconnection sought by ETCI is by no means a parasitic dependence on PLDT.
The ETCI system can operate on its own even without interconnection, but it will be limited to its own subscribers. What
interconnection seeks to accomplish is to enable the system to reach out to the greatest number of people possible in line
with governmental policies laid down. Cellular phones can access PLDT units and vice versa in as wide an area as
attainable. With the broader reach, public interest and convenience will be better served. To be sure, ETCI could provide
no mean competition (although PLDT maintains that it has nothing to fear from the innocuous interconnection), and eat
into PLDTs own toll revenue cream PLDT revenue, in its own words), but all for the eventual benefit of all that the
system can reach.
6. Ultimate Considerations
The decisive consideration are public need, public interest, and the common good. Those were the overriding factors
which motivated NTC in granting provisional authority to ETCI. Article II, Section 24 of the 1987 Constitution, recognizes
the vital role of communication and information in nation building. It is likewise a State policy to provide the environment
for the emergence of communications structures suitable to the balanced flow of information into, out of, and across the
country (Article XVI, Section 10, Ibid.). A modern and dependable communications network rendering efficient and
reasonably priced services is also indispensable for accelerated economic recovery and development. To these public and
national interests, public utility companies must bow and yield.
Despite the fact that there is a virtual monopoly of the telephone system in the country at present.service is sadly
inadequate. Customer demands are hardly met, whether fixed or mobile. There is a unanimous cry to hasten the
development of a modern, efficient, satisfactory and continuous telecommunications service not only in Metro Manila but
throughout the archipelago. The need therefor was dramatically emphasized by the destructive earthquake of 16 July
1990. It may be that users of the cellular mobile telephone would initially be limited to a few and to highly
commercialized areas. However, it is a step in the right direction towards the enhancement of the telecommunications
infrastructure, the expansion of telecommunications services in, hopefully, all areas of the country, with chances of
complete disruption of communications minimized. It will thus impact on, the total development of the countrys
telecommunications systems and redound to the benefit of even those who may not be able to subscribe to ETCI.
Free competition in the industry may also provide the answer to a much-desired improvement in the quality and delivery
of this type of public utility, to improved technology, fast and handy mobile service, and reduced user dissatisfaction.
After all, neither PLDT nor any other public utility has a constitutional right to a monopoly position in view of the
Constitutional proscription that no franchise certificate or authorization shall be exclusive in character or shall last longer
than fifty (50) years (ibid., Section 11; Article XIV Section 5, 1973 Constitution; Article XIV, Section 8, 1935 Constitution).
Additionally, the State is empowered to decide whether public interest demands that monopolies be regulated or
prohibited (1987 Constitution. Article XII, Section 19).
WHEREFORE, finding no grave abuse of discretion, tantamount to lack of or excess of jurisdiction, on the part of the
National Telecommunications Commission in issuing its challenged Orders of 12 December 1988 and 8 May 1989 in NTC
Case No. 87-39, this Petition is DISMISSED for lack of merit. The Temporary Restraining Order heretofore issued
is LIFTED. The bond issued as a condition for the issuance of said restraining Order is declared forfeited in favor of
private respondent Express Telecommunications Co., Inc. Costs against petitioner.
SO ORDERED.
Paras, Feliciano, Padilla, Sarmiento, Cortes, Grio-Aquino and Regalado, JJ., concur.


















EN BANC

[G.R. No. L-12172. August 29, 1958.]

THE PEOPLE OF THE PHILIPPINES, Plaintiff-Appellee, v. JUAN F. FAJARDO, ET AL.,Defendants-Appellants.

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 mayors 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 v. Vera, 65 Phil., 56; Primicias v. Fugoso, 80 Phil.
71; Schloss Poster Adv. Co., Inc. v. 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 v. 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.


D E C I S I O N


REYES, J.B.L., J.:


Appeal from the decision of the Court of First Instance of Camarines Sur convicting defendants-appellants 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:jgc:chanrobles.com.ph

"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 Fajardos 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 mayors 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 v. Vera, 65 Phil., 56; Primicias
v. Fugoso, 80 Phil., 71; Schloss Poster Adv. Co. v. 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."cralaw virtua1aw library
x x x


"As was said in City of Richmond v. 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. v. 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, 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 v. 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. v. 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 v. Zoning Bd., 145 Atl. 451; also Eaton v. Sweeny, 177 NE 412;
Taylor v. 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 v. 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:jgc:chanrobles.com.ph

"SEC. 2243. Certain legislative powers of discretionary character. The municipal council shall have authority to exercise
the following discretionary powers:chanrob1es virtual 1aw library
x x x


(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."cralaw virtua1aw library

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.














Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-34915 June 24, 1983
CITY GOVERNMENT OF QUEZON CITY and CITY COUNCIL OF QUEZON CITY, petitioners,
vs.
HON. JUDGE VICENTE G. ERICTA as Judge of the Court of First Instance of Rizal, Quezon City, Branch
XVIII; HIMLAYANG PILIPINO, INC., respondents.
City Fiscal for petitioners.
Manuel Villaruel, Jr. and Feliciano Tumale for respondents.

GUTIERREZ, JR., J .:
This is a petition for review which seeks the reversal of the decision of the Court of First Instance of Rizal, Branch
XVIII declaring Section 9 of Ordinance No. 6118, S-64, of the Quezon City Council null and void.
Section 9 of Ordinance No. 6118, S-64, entitled "ORDINANCE REGULATING THE ESTABLISHMENT,
MAINTENANCE AND OPERATION OF PRIVATE MEMORIAL TYPE CEMETERY OR BURIAL GROUND WITHIN
THE JURISDICTION OF QUEZON CITY AND PROVIDING PENALTIES FOR THE VIOLATION THEREOF"
provides:
Sec. 9. At least six (6) percent of the total area of the memorial park cemetery shall be set aside for
charity burial of deceased persons who are paupers and have been residents of Quezon City for at
least 5 years prior to their death, to be determined by competent City Authorities. The area so
designated shall immediately be developed and should be open for operation not later than six
months from the date of approval of the application.
For several years, the aforequoted section of the Ordinance was not enforced by city authorities but seven years
after the enactment of the ordinance, the Quezon City Council passed the following resolution:
RESOLVED by the council of Quezon assembled, to request, as it does hereby request the City
Engineer, Quezon City, to stop any further selling and/or transaction of memorial park lots in Quezon
City where the owners thereof have failed to donate the required 6% space intended for paupers
burial.
Pursuant to this petition, the Quezon City Engineer notified respondent Himlayang Pilipino, Inc. in writing that
Section 9 of Ordinance No. 6118, S-64 would be enforced
Respondent Himlayang Pilipino reacted by filing with the Court of First Instance of Rizal Branch XVIII at Quezon
City, a petition for declaratory relief, prohibition and mandamus with preliminary injunction (Sp. Proc. No. Q-16002)
seeking to annul Section 9 of the Ordinance in question The respondent alleged that the same is contrary to the
Constitution, the Quezon City Charter, the Local Autonomy Act, and the Revised Administrative Code.
There being no issue of fact and the questions raised being purely legal both petitioners and respondent agreed to
the rendition of a judgment on the pleadings. The respondent court, therefore, rendered the decision declaring
Section 9 of Ordinance No. 6118, S-64 null and void.
A motion for reconsideration having been denied, the City Government and City Council filed the instant petition.
Petitioners argue that the taking of the respondent's property is a valid and reasonable exercise of police power and
that the land is taken for a public use as it is intended for the burial ground of paupers. They further argue that the
Quezon City Council is authorized under its charter, in the exercise of local police power, " to make such further
ordinances and resolutions not repugnant to law as may be necessary to carry into effect and discharge the powers
and duties conferred by this Act and such as it shall deem necessary and proper to provide for the health and
safety, promote the prosperity, improve the morals, peace, good order, comfort and convenience of the city and the
inhabitants thereof, and for the protection of property therein."
On the other hand, respondent Himlayang Pilipino, Inc. contends that the taking or confiscation of property is
obvious because the questioned ordinance permanently restricts the use of the property such that it cannot be used
for any reasonable purpose and deprives the owner of all beneficial use of his property.
The respondent also stresses that the general welfare clause is not available as a source of power for the taking of
the property in this case because it refers to "the power of promoting the public welfare by restraining and regulating
the use of liberty and property." The respondent points out that if an owner is deprived of his property outright under
the State's police power, the property is generally not taken for public use but is urgently and summarily destroyed
in order to promote the general welfare. The respondent cites the case of a nuisance per se or the destruction of a
house to prevent the spread of a conflagration.
We find the stand of the private respondent as well as the decision of the respondent Judge to be well-founded. We
quote with approval the lower court's ruling which declared null and void Section 9 of the questioned city ordinance:
The issue is: Is Section 9 of the ordinance in question a valid exercise of the police power?
An examination of the Charter of Quezon City (Rep. Act No. 537), does not reveal any provision that
would justify the ordinance in question except the provision granting police power to the City. Section
9 cannot be justified under the power granted to Quezon City to tax, fix the license fee,
and regulatesuch other business, trades, and occupation as may be established or practised in the
City.' (Subsections 'C', Sec. 12, R.A. 537).
The power to regulate does not include the power to prohibit (People vs. Esguerra, 81 PhiL 33, Vega
vs. Municipal Board of Iloilo, L-6765, May 12, 1954; 39 N.J. Law, 70, Mich. 396). A fortiori, the power
to regulate does not include the power to confiscate. The ordinance in question not only confiscates
but also prohibits the operation of a memorial park cemetery, because under Section 13 of said
ordinance, 'Violation of the provision thereof is punishable with a fine and/or imprisonment and that
upon conviction thereof the permit to operate and maintain a private cemetery shall be revoked or
cancelled.' The confiscatory clause and the penal provision in effect deter one from operating a
memorial park cemetery. Neither can the ordinance in question be justified under sub- section "t",
Section 12 of Republic Act 537 which authorizes the City Council to-
'prohibit the burial of the dead within the center of population of the city and provide
for their burial in such proper place and in such manner as the council may
determine, subject to the provisions of the general law regulating burial grounds and
cemeteries and governing funerals and disposal of the dead.' (Sub-sec. (t), Sec. 12,
Rep. Act No. 537).
There is nothing in the above provision which authorizes confiscation or as euphemistically termed
by the respondents, 'donation'
We now come to the question whether or not Section 9 of the ordinance in question is a valid
exercise of police power. The police power of Quezon City is defined in sub-section 00, Sec. 12,
Rep. Act 537 which reads as follows:
(00) To make such further ordinance and regulations not repugnant to law as may be
necessary to carry into effect and discharge the powers and duties conferred by this
act and such as it shall deem necessary and proper to provide for the health and
safety, promote, the prosperity, improve the morals, peace, good order, comfort and
convenience of the city and the inhabitants thereof, and for the protection of property
therein; and enforce obedience thereto with such lawful fines or penalties as the City
Council may prescribe under the provisions of subsection (jj) of this section.
We start the discussion with a restatement of certain basic principles. Occupying the forefront in the
bill of rights is the provision which states that 'no person shall be deprived of life, liberty or property
without due process of law' (Art. Ill, Section 1 subparagraph 1, Constitution).
On the other hand, there are three inherent powers of government by which the state interferes with
the property rights, namely-. (1) police power, (2) eminent domain, (3) taxation. These are said to
exist independently of the Constitution as necessary attributes of sovereignty.
Police power is defined by Freund as 'the power of promoting the public welfare by restraining and
regulating the use of liberty and property' (Quoted in Political Law by Tanada and Carreon, V-11, p.
50). It is usually exerted in order to merely regulate the use and enjoyment of property of the owner.
If he is deprived of his property outright, it is not taken for public use but rather to destroy in order to
promote the general welfare. In police power, the owner does not recover from the government for
injury sustained in consequence thereof (12 C.J. 623). It has been said that police power is the most
essential of government powers, at times the most insistent, and always one of the least limitable of
the powers of government (Ruby vs. Provincial Board, 39 PhiL 660; Ichong vs. Hernandez, 1,7995,
May 31, 1957). This power embraces the whole system of public regulation (U.S. vs. Linsuya Fan,
10 PhiL 104). The Supreme Court has said that police power is so far-reaching in scope that it has
almost become impossible to limit its sweep. As it derives its existence from the very existence of
the state itself, it does not need to be expressed or defined in its scope. Being coextensive with self-
preservation and survival itself, it is the most positive and active of all governmental processes, the
most essential insistent and illimitable Especially it is so under the modern democratic framework
where the demands of society and nations have multiplied to almost unimaginable proportions. The
field and scope of police power have become almost boundless, just as the fields of public interest
and public welfare have become almost all embracing and have transcended human foresight. Since
the Courts cannot foresee the needs and demands of public interest and welfare, they cannot delimit
beforehand the extent or scope of the police power by which and through which the state seeks to
attain or achieve public interest and welfare. (Ichong vs. Hernandez, L-7995, May 31, 1957).
The police power being the most active power of the government and the due process clause being
the broadest station on governmental power, the conflict between this power of government and the
due process clause of the Constitution is oftentimes inevitable.
It will be seen from the foregoing authorities that police power is usually exercised in the form of
mere regulation or restriction in the use of liberty or property for the promotion of the general welfare.
It does not involve the taking or confiscation of property with the exception of a few cases where
there is a necessity to confiscate private property in order to destroy it for the purpose of protecting
the peace and order and of promoting the general welfare as for instance, the confiscation of an
illegally possessed article, such as opium and firearms.
It seems to the court that Section 9 of Ordinance No. 6118, Series of 1964 of Quezon City is not a
mere police regulation but an outright confiscation. It deprives a person of his private property
without due process of law, nay, even without compensation.
In sustaining the decision of the respondent court, we are not unmindful of the heavy burden shouldered by whoever
challenges the validity of duly enacted legislation whether national or local As early as 1913, this Court ruled in Case
v. Board of Health (24 PhiL 250) that the courts resolve every presumption in favor of validity and, more so, where
the ma corporation asserts that the ordinance was enacted to promote the common good and general welfare.
In the leading case of Ermita-Malate Hotel and Motel Operators Association Inc. v. City Mayor of Manila (20 SCRA
849) the Court speaking through the then Associate Justice and now Chief Justice Enrique M. Fernando stated
Primarily what calls for a reversal of such a decision is the a of any evidence to offset the
presumption of validity that attaches to a statute or ordinance. As was expressed categorically by
Justice Malcolm 'The presumption is all in favor of validity. ... The action of the elected
representatives of the people cannot be lightly set aside. The councilors must, in the very nature of
things, be familiar with the necessities of their particular ... municipality and with all the facts and
lances which surround the subject and necessitate action. The local legislative body, by enacting the
ordinance, has in effect given notice that the regulations are essential to the well-being of the
people. ... The Judiciary should not lightly set aside legislative action when there is not a clear
invasion of personal or property rights under the guise of police regulation. (U.S. v. Salaveria (1918],
39 Phil. 102, at p. 111. There was an affirmation of the presumption of validity of municipal
ordinance as announced in the leading Salaveria decision in Ebona v. Daet, [1950]85 Phil. 369.)
We have likewise considered the principles earlier stated in Case v. Board of Health supra :
... Under the provisions of municipal charters which are known as the general welfare clauses, a city,
by virtue of its police power, may adopt ordinances to the peace, safety, health, morals and the best
and highest interests of the municipality. It is a well-settled principle, growing out of the nature of
well-ordered and society, that every holder of property, however absolute and 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.
An property in the state is held subject to its general regulations, which are necessary to the
common good and general welfare. Rights of property, like all other social and conventional rights,
are subject to such 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. The state, under the police power, is possessed with plenary power to deal with all
matters relating to the general health, morals, and safety of the people, so long as it does not
contravene any positive inhibition of the organic law and providing that such power is not exercised
in such a manner as to justify the interference of the courts to prevent positive wrong and
oppression.
but find them not applicable to the facts of this case.
There is no reasonable relation between the setting aside of at least six (6) percent of the total area of an private
cemeteries for charity burial grounds of deceased paupers and the promotion of health, morals, good order, safety,
or the general welfare of the people. The ordinance is actually a taking without compensation of a certain area from
a private cemetery to benefit paupers who are charges of the municipal corporation. Instead of building or
maintaining a public cemetery for this purpose, the city passes the burden to private cemeteries.
The expropriation without compensation of a portion of private cemeteries is not covered by Section 12(t) of
Republic Act 537, the Revised Charter of Quezon City which empowers the city council to prohibit the burial of the
dead within the center of population of the city and to provide for their burial in a proper place subject to the
provisions of general law regulating burial grounds and cemeteries. When the Local Government Code, Batas
Pambansa Blg. 337 provides in Section 177 (q) that a Sangguniang panlungsod may "provide for the burial of the
dead in such place and in such manner as prescribed by law or ordinance" it simply authorizes the city to provide its
own city owned land or to buy or expropriate private properties to construct public cemeteries. This has been the law
and practise in the past. It continues to the present. Expropriation, however, requires payment of just compensation.
The questioned ordinance is different from laws and regulations requiring owners of subdivisions to set aside certain
areas for streets, parks, playgrounds, and other public facilities from the land they sell to buyers of subdivision lots.
The necessities of public safety, health, and convenience are very clear from said requirements which are intended
to insure the development of communities with salubrious and wholesome environments. The beneficiaries of the
regulation, in turn, are made to pay by the subdivision developer when individual lots are sold to home-owners.
As a matter of fact, the petitioners rely solely on the general welfare clause or on implied powers of the municipal
corporation, not on any express provision of law as statutory basis of their exercise of power. The clause has always
received broad and liberal interpretation but we cannot stretch it to cover this particular taking. Moreover, the
questioned ordinance was passed after Himlayang Pilipino, Inc. had incorporated. received necessary licenses and
permits and commenced operating. The sequestration of six percent of the cemetery cannot even be considered as
having been impliedly acknowledged by the private respondent when it accepted the permits to commence
operations.
WHEREFORE, the petition for review is hereby DISMISSED. The decision of the respondent court is affirmed.
SO ORDERED.
Teehankee (Chairman), Melencio-Herrera, Plana, Vasquez and Relova, JJ., concur.


























Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 157882 March 30, 2006
DIDIPIO EARTH-SAVERS MULTI-PURPOSE ASSOCIATION, INCORPORATED (DESAMA), MANUEL BUTIC,
CESAR MARIANO, LAURO ABANCE, BEN TAYABAN, ANTONIO DINGCOG, TEDDY B. KIMAYONG, ALONZO
ANANAYO, ANTONIO MALAN-UYA, JOSE BAHAG, ANDRES INLAB, RUFINO LICYAYO, ALFREDO CULHI,
CATALILNA INABYUHAN, GUAY DUMMANG, GINA PULIDO, EDWIN ANSIBEY, CORAZON SICUAN, LOPEZ
DUMULAG, FREDDIE AYDINON, VILMA JOSE, FLORENTINA MADDAWAT, LINDA DINGCOG, ELMER
SICUAN, GARY ANSIBEY, JIMMY MADDAWAT, JIMMY GUAY, ALFREDO CUT-ING, ANGELINA UDAN,
OSCAR INLAB, JUANITA CUT-ING, ALBERT PINKIHAN, CECILIA TAYABAN, CRISTA BINWAK, PEDRO
DUGAY, SR., EDUARDO ANANAYO, ROBIN INLAB, JR., LORENZO PULIDO, TOMAS BINWAG, EVELYN
BUYA, JAIME DINGCOG, DINAOAN CUT-ING, PEDRO DONATO, MYRNA GUAY, FLORA ANSIBEY, GRACE
DINAMLING, EDUARDO MENCIAS, ROSENDA JACOB, SIONITA DINGCOG, GLORIA JACOB, MAXIMA
GUAY, RODRIGO PAGGADUT, MARINA ANSIBEY, TOLENTINO INLAB, RUBEN DULNUAN, GERONIMO
LICYAYO, LEONCIO CUMTI, MARY DULNUAN, FELISA BALANBAN, MYRNA DUYAN, MARY MALAN-UYA,
PRUDENCIO ANSIBEY, GUILLERMO GUAY, MARGARITA CULHI, ALADIN ANSIBEY, PABLO DUYAN,
PEDRO PUGUON, JULIAN INLAB, JOSEPH NACULON, ROGER BAJITA, DINAON GUAY, JAIME ANANAYO,
MARY ANSIBEY, LINA ANANAYO, MAURA DUYAPAT, ARTEMEO ANANAYO, MARY BABLING, NORA
ANSIBEY, DAVID DULNUAN, AVELINO PUGUON, LUCAS GUMAWI, LUISA ABBAC, CATHRIN GUWAY,
CLARITA TAYABAN, FLORA JAVERA, RANDY SICOAN, FELIZA PUTAKI, CORAZON P. DULNUAN, NENA D.
BULLONG, ERMELYN GUWAY, GILBERT BUTALE, JOSEPH B. BULLONG, FRANCISCO PATNAAN, JR.,
SHERWIN DUGAY, TIRSO GULLINGAY, BENEDICT T. NABALLIN, RAMON PUN-ADWAN, ALFONSO
DULNUAN, CARMEN D. BUTALE, LOLITA ANSIBEY, ABRAHAM DULNUAN, ARLYNDA BUTALE, MODESTO
A. ANSIBEY, EDUARDO LUGAY, ANTONIO HUMIWAT, ALFREDO PUMIHIC, MIKE TINO, TONY
CABARROGUIS, BASILIO TAMLIWOK, JR., NESTOR TANGID, ALEJO TUGUINAY, BENITO LORENZO, RUDY
BAHIWAG, ANALIZA BUTALE, NALLEM LUBYOC, JOSEPH DUHAYON, RAFAEL CAMPOL, MANUEL
PUMALO, DELFIN AGALOOS, PABLO CAYANGA, PERFECTO SISON, ELIAS NATAMA, LITO PUMALO,
SEVERINA DUGAY, GABRIEL PAKAYAO, JEOFFREY SINDAP, FELIX TICUAN, MARIANO S. MADDELA,
MENZI TICAWA, DOMINGA DUGAY, JOE BOLINEY, JASON ASANG, TOMMY ATENYAYO, ALEJO AGMALIW,
DIZON AGMALIW, EDDIE ATOS, FELIMON BLANCO, DARRIL DIGOY, LUCAS BUAY, ARTEMIO BRAZIL,
NICANOR MODI, LUIS REDULFIN, NESTOR JUSTINO, JAIME CUMILA, BENEDICT GUINID, EDITHA ANIN,
INOH-YABAN BANDAO, LUIS BAYWONG, FELIPE DUHALNGON, PETER BENNEL, JOSEPH T.
BUNGGALAN, JIMMY B. KIMAYONG, HENRY PUGUON, PEDRO BUHONG, BUGAN NADIAHAN, SR., MARIA
EDEN ORLINO, SPC, PERLA VISSORO, and BISHOP RAMON VILLENA, Petitioners,
vs.
ELISEA GOZUN, in her capacity as SECRETARY of the DEPARTMENT OF ENVIRONMENT and NATURAL
RESOURCES (DENR), HORACIO RAMOS, in his capacity as Director of the Mines and Geosciences Bureau
(MGB-DENR), ALBERTO ROMULO, in his capacity as the Executive Secretary of the Office of the President,
RICHARD N. FERRER, in his capacity as Acting Undersecretary of the Office of the President, IAN HEATH
SANDERCOCK, in his capacity as President of CLIMAX-ARIMCO Mining Corporation.Respondents.
D E C I S I O N
CHICO-NAZARIO, J .:
This petition for prohibition and mandamus under Rule 65 of the Rules of Court assails the constitutionality of
Republic Act No. 7942 otherwise known as the Philippine Mining Act of 1995, together with the Implementing Rules
and Regulations issued pursuant thereto, Department of Environment and Natural Resources (DENR)
Administrative Order No. 96-40, s. 1996 (DAO 96-40) and of the Financial and Technical Assistance Agreement
(FTAA) entered into on 20 June 1994 by the Republic of the Philippines and Arimco Mining Corporation (AMC), a
corporation established under the laws of Australia and owned by its nationals.
On 25 July 1987, then President Corazon C. Aquino promulgated Executive Order No. 279 which authorized the
DENR Secretary to accept, consider and evaluate proposals from foreign-owned corporations or foreign investors
for contracts of agreements involving either technical or financial assistance for large-scale exploration,
development, and utilization of minerals, which, upon appropriate recommendation of the Secretary, the President
may execute with the foreign proponent.
On 3 March 1995, then President Fidel V. Ramos signed into law Rep. Act No. 7942 entitled, "An Act Instituting A
New System of Mineral Resources Exploration, Development, Utilization and Conservation," otherwise known as
the Philippine Mining Act of 1995.
On 15 August 1995, then DENR Secretary Victor O. Ramos issued DENR Administrative Order (DAO) No. 23,
Series of 1995, containing the implementing guidelines of Rep. Act No. 7942. This was soon superseded by DAO
No. 96-40, s. 1996, which took effect on 23 January 1997 after due publication.
Previously, however, or specifically on 20 June 1994, President Ramos executed an FTAA with AMC over a total
land area of 37,000 hectares covering the provinces of Nueva Vizcaya and Quirino. Included in this area is
Barangay Dipidio, Kasibu, Nueva Vizcaya.
Subsequently, AMC consolidated with Climax Mining Limited to form a single company that now goes under the new
name of Climax-Arimco Mining Corporation (CAMC), the controlling 99% of stockholders of which are Australian
nationals.
On 7 September 2001, counsels for petitioners filed a demand letter addressed to then DENR Secretary Heherson
Alvarez, for the cancellation of the CAMC FTAA for the primary reason that Rep. Act No. 7942 and its Implementing
Rules and Regulations DAO 96-40 are unconstitutional. The Office of the Executive Secretary was also furnished a
copy of the said letter. There being no response to both letters, another letter of the same content dated 17 June
2002 was sent to President Gloria Macapagal Arroyo. This letter was indorsed to the DENR Secretary and
eventually referred to the Panel of Arbitrators of the Mines and Geosciences Bureau (MGB), Regional Office No. 02,
Tuguegarao, Cagayan, for further action.
On 12 November 2002, counsels for petitioners received a letter from the Panel of Arbitrators of the MGB requiring
the petitioners to comply with the Rules of the Panel of Arbitrators before the letter may be acted upon.
Yet again, counsels for petitioners sent President Arroyo another demand letter dated 8 November 2002. Said letter
was again forwarded to the DENR Secretary who referred the same to the MGB, Quezon City.
In a letter dated 19 February 2003, the MGB rejected the demand of counsels for petitioners for the cancellation of
the CAMC FTAA.1avvphil.net
Petitioners thus filed the present petition for prohibition and mandamus, with a prayer for a temporary restraining
order. They pray that the Court issue an order:
1. enjoining public respondents from acting on any application for FTAA;
2. declaring unconstitutional the Philippine Mining Act of 1995 and its Implementing Rules and Regulations;
3. canceling the FTAA issued to CAMC.
In their memorandum petitioners pose the following issues:
I
Whether or not Republic Act No. 7942 and the CAMC FTAA are void because they allow the unjust and unlawful
taking of property without payment of just compensation , in violation of Section 9, Article III of the Constitution.
II
Whether or not the Mining Act and its Implementing Rules and Regulations are void and unconstitutional for
sanctioning an unconstitutional administrative process of determining just compensation.
III
Whether or not the State, through Republic Act No. 7942 and the CAMC FTAA, abdicated its primary responsibility
to the full control and supervision over natural resources.
IV
Whether or not the respondents interpretation of the role of wholly foreign and foreign-owned corporations in their
involvement in mining enterprises, violates paragraph 4, section 2, Article XII of the Constitution.
V
WHETHER OR NOT THE 1987 CONSTITUTION PROHIBITS SERVICE CONTRACTS.
1

Before going to the substantive issues, the procedural question raised by public respondents shall first be dealt with.
Public respondents are of the view that petitioners eminent domain claim is not ripe for adjudication as they fail to
allege that CAMC has actually taken their properties nor do they allege that their property rights have been
endangered or are in danger on account of CAMCs FTAA. In effect, public respondents insist that the issue of
eminent domain is not a justiciable controversy which this Court can take cognizance of.
A justiciable controversy is defined as a definite and concrete dispute touching on the legal relations of parties
having adverse legal interests which may be resolved by a court of law through the application of a law.
2
Thus,
courts have no judicial power to review cases involving political questions and as a rule, will desist from taking
cognizance of speculative or hypothetical cases, advisory opinions and cases that have become moot.
3
The
Constitution is quite explicit on this matter.
4
It provides that judicial power includes the duty of the courts of justice to
settle actual controversies involving rights which are legally demandable and enforceable. Pursuant to this
constitutional mandate, courts, through the power of judicial review, are to entertain only real disputes between
conflicting parties through the application of law. For the courts to exercise the power of judicial review, the following
must be extant (1) there must be an actual case calling for the exercise of judicial power; (2) the question must be
ripe for adjudication; and (3) the person challenging must have the "standing."
5

An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal claims, susceptible of
judicial resolution as distinguished from a hypothetical or abstract difference or dispute.
6
There must be a contrariety
of legal rights that can be interpreted and enforced on the basis of existing law and jurisprudence.
Closely related to the second requisite is that the question must be ripe for adjudication. A question is considered
ripe for adjudication when the act being challenged has had a direct adverse effect on the individual challenging it.
7

The third requisite is legal standing or locus standi. It is defined as a personal or substantial interest in the case such
that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged,
alleging more than a generalized grievance.
8
The gist of the question of standing is whether a party alleges "such
personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the
presentation of issues upon which the court depends for illumination of difficult constitutional questions."
9
Unless a
person is injuriously affected in any of his constitutional rights by the operation of statute or ordinance, he has no
standing.
10

In the instant case, there exists a live controversy involving a clash of legal rights as Rep. Act No. 7942 has been
enacted, DAO 96-40 has been approved and an FTAAs have been entered into. The FTAA holders have already
been operating in various provinces of the country. Among them is CAMC which operates in the provinces of Nueva
Vizcaya and Quirino where numerous individuals including the petitioners are imperiled of being ousted from their
landholdings in view of the CAMC FTAA. In light of this, the court cannot await the adverse consequences of the law
in order to consider the controversy actual and ripe for judicial intervention.
11
Actual eviction of the land owners and
occupants need not happen for this Court to intervene. As held in Pimentel, Jr. v. Hon. Aguirre
12
:
By the mere enactment of the questioned law or the approval of the challenged act, the dispute is said to have
ripened into a judicial controversy even without any other overt act. Indeed, even a singular violation of the
Constitution and/or the law is enough to awaken judicial duty.
13

Petitioners embrace various segments of the society. These include Didipio Earth-Savers Multi-Purpose
Association, Inc., an organization of farmers and indigenous peoples organized under Philippine laws, representing
a community actually affected by the mining activities of CAMC, as well as other residents of areas affected by the
mining activities of CAMC. These petitioners have the standing to raise the constitutionality of the questioned FTAA
as they allege a personal and substantial injury.
14
They assert that they are affected by the mining activities of
CAMC. Likewise, they are under imminent threat of being displaced from their landholdings as a result of the
implementation of the questioned FTAA. They thus meet the appropriate case requirement as they assert an
interest adverse to that of respondents who, on the other hand, claim the validity of the assailed statute and the
FTAA of CAMC.
Besides, the transcendental importance of the issues raised and the magnitude of the public interest involved will
have a bearing on the countrys economy which is to a greater extent dependent upon the mining industry. Also
affected by the resolution of this case are the proprietary rights of numerous residents in the mining contract areas
as well as the social existence of indigenous peoples which are threatened. Based on these considerations, this
Court deems it proper to take cognizance of the instant petition.
Having resolved the procedural question, the constitutionality of the law under attack must be addressed squarely.
First Substantive Issue: Validity of Section 76 of Rep. Act No. 7942 and DAO 96-40
In seeking to nullify Rep. Act No. 7942 and its implementing rules DAO 96-40 as unconstitutional, petitioners set
their sight on Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40 which they claim allow the unlawful
and unjust "taking" of private property for private purpose in contradiction with Section 9, Article III of the 1987
Constitution mandating that private property shall not be taken except for public use and the corresponding payment
of just compensation. They assert that public respondent DENR, through the Mining Act and its Implementing Rules
and Regulations, cannot, on its own, permit entry into a private property and allow taking of land without payment of
just compensation.
Interpreting Section 76 of Rep. Act No. 7942 and Section 107 of DAO 96-40, juxtaposed with the concept of taking
of property for purposes of eminent domain in the case of Republic v. Vda. de Castellvi,
15
petitioners assert that
there is indeed a "taking" upon entry into private lands and concession areas.
Republic v. Vda. de Castellvi defines "taking" under the concept of eminent domain 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 to substantially oust the owner
and deprive him of all beneficial enjoyment thereof.
From the criteria set forth in the cited case, petitioners claim that the entry into a private property by CAMC,
pursuant to its FTAA, is for more than a momentary period, i.e., for 25 years, and renewable for another 25 years;
that the entry into the property is under the warrant or color of legal authority pursuant to the FTAA executed
between the government and CAMC; and that the entry substantially ousts the owner or possessor and deprives
him of all beneficial enjoyment of the property. These facts, according to the petitioners, amount to taking. As such,
petitioners question the exercise of the power of eminent domain as unwarranted because respondents failed to
prove that the entry into private property is devoted for public use.
Petitioners also stress that even without the doctrine in the Castellvi case, the nature of the mining activity, the
extent of the land area covered by the CAMC FTAA and the various rights granted to the proponent or the FTAA
holder, such as (a) the right of possession of the Exploration Contract Area, with full right of ingress and egress and
the right to occupy the same; (b) the right not to be prevented from entry into private lands by surface owners and/or
occupants thereof when prospecting, exploring and exploiting for minerals therein; (c) the right to enjoy easement
rights, the use of timber, water and other natural resources in the Exploration Contract Area; (d) the right of
possession of the Mining Area, with full right of ingress and egress and the right to occupy the same; and (e) the
right to enjoy easement rights, water and other natural resources in the Mining Area, result in a taking of private
property.
Petitioners quickly add that even assuming arguendo that there is no absolute, physical taking, at the very least,
Section 76 establishes a legal easement upon the surface owners, occupants and concessionaires of a mining
contract area sufficient to deprive them of enjoyment and use of the property and that such burden imposed by the
legal easement falls within the purview of eminent domain.
To further bolster their claim that the legal easement established is equivalent to taking, petitioners cite the case of
National Power Corporation v. Gutierrez
16
holding that the easement of right-of-way imposed against the use of the
land for an indefinite period is a taking under the power of eminent domain.
Traversing petitioners assertion, public respondents argue that Section 76 is not a taking provision but a valid
exercise of the police power and by virtue of which, the state may prescribe regulations to promote the health,
morals, peace, education, good order, safety and general welfare of the people. This government regulation
involves the adjustment of rights for the public good and that this adjustment curtails some potential for the use or
economic exploitation of private property. Public respondents concluded that "to require compensation in all such
circumstances would compel the government to regulate by purchase."
Public respondents are inclined to believe that by entering private lands and concession areas, FTAA holders do not
oust the owners thereof nor deprive them of all beneficial enjoyment of their properties as the said entry merely
establishes a legal easement upon surface owners, occupants and concessionaires of a mining contract area.
Taking in Eminent Domain Distinguished from Regulation in Police Power
The power of eminent domain is the inherent right of the state (and of those entities to which the power has been
lawfully delegated) to condemn private property to public use upon payment of just compensation.
17
On the other
hand, police power is the power of the state to promote public welfare by restraining and regulating the use of liberty
and property.
18
Although both police power and the power of eminent domain have the general welfare for their
object, and recent trends show a mingling
19
of the two with the latter being used as an implement of the former,
there are still traditional distinctions between the two.
Property condemned under police power is usually noxious or intended for a noxious purpose; hence, no
compensation shall be paid.
20
Likewise, in the exercise of police power, property rights of private individuals are
subjected to restraints and burdens in order to secure the general comfort, health, and prosperity of the state. Thus,
an ordinance prohibiting theaters from selling tickets in excess of their seating capacity (which would result in the
diminution of profits of the theater-owners) was upheld valid as this would promote the comfort, convenience and
safety of the customers.
21
In U.S. v. Toribio,
22
the court upheld the provisions of Act No. 1147, a statute regulating
the slaughter of carabao for the purpose of conserving an adequate supply of draft animals, as a valid exercise of
police power, notwithstanding the property rights impairment that the ordinance imposed on cattle owners. A zoning
ordinance prohibiting the operation of a lumber yard within certain areas was assailed as unconstitutional in that it
was an invasion of the property rights of the lumber yard owners in People v. de Guzman.
23
The Court nonetheless
ruled that the regulation was a valid exercise of police power. A similar ruling was arrived at in Seng Kee S Co. v.
Earnshaw and Piatt
24
where an ordinance divided the City of Manila into industrial and residential areas.
A thorough scrutiny of the extant jurisprudence leads to a cogent deduction that where a property interest is merely
restricted because the continued use thereof would be injurious to public welfare, or where property is destroyed
because its continued existence would be injurious to public interest, there is no compensable taking.
25
However,
when a property interest is appropriated and applied to some public purpose, there is compensable taking.
26

According to noted constitutionalist, Fr. Joaquin Bernas, SJ, in the exercise of its police power regulation, the state
restricts the use of private property, but none of the property interests in the bundle of rights which constitute
ownership is appropriated for use by or for the benefit of the public.
27
Use of the property by the owner was limited,
but no aspect of the property is used by or for the public.
28
The deprivation of use can in fact be total and it will not
constitute compensable taking if nobody else acquires use of the property or any interest therein.
29

If, however, in the regulation of the use of the property, somebody else acquires the use or interest thereof, such
restriction constitutes compensable taking. Thus, in City Government of Quezon City v. Ericta,
30
it was argued by the
local government that an ordinance requiring private cemeteries to reserve 6% of their total areas for the burial of
paupers was a valid exercise of the police power under the general welfare clause. This court did not agree in the
contention, ruling that property taken under the police power is sought to be destroyed and not, as in this case, to be
devoted to a public use. It further declared that the ordinance in question was actually a taking of private property
without just compensation of a certain area from a private cemetery to benefit paupers who are charges of the local
government. Being an exercise of eminent domain without provision for the payment of just compensation, the same
was rendered invalid as it violated the principles governing eminent domain.
In People v. Fajardo,
31
the municipal mayor refused Fajardo permission to build a house on his own land on the
ground that the proposed structure would destroy the view or beauty of the public plaza. The ordinance relied upon
by the mayor prohibited the construction of any building that would destroy the view of the plaza from the highway.
The court ruled that the municipal ordinance under the guise of police power permanently divest owners of the
beneficial use of their property for the benefit of the public; hence, considered as a taking under the power of
eminent domain that could not be countenanced without payment of just compensation to the affected owners. In
this case, what the municipality wanted was to impose an easement on the property in order to preserve the view or
beauty of the public plaza, which was a form of utilization of Fajardos property for public benefit.
32

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. Taking may include trespass without actual eviction of the owner, material impairment of the
value of the property or prevention of the ordinary uses for which the property was intended such as the
establishment of an easement.
33
In Ayala de Roxas v. City of Manila,
34
it was held that the imposition of burden over
a private property through easement was considered taking; hence, payment of just compensation is required. The
Court declared:
And, considering that the easement intended to be established, whatever may be the object thereof, is not merely a
real right that will encumber the property, but is one tending to prevent the exclusive use of one portion of the same,
by expropriating it for public use which, be it what it may, can not be accomplished unless the owner of the property
condemned or seized be previously and duly indemnified, it is proper to protect the appellant by means of the
remedy employed in such cases, as it is only adequate remedy when no other legal action can be resorted to,
against an intent which is nothing short of an arbitrary restriction imposed by the city by virtue of the coercive power
with which the same is invested.
And in the case of National Power Corporation v. Gutierrez,
35
despite the NPCs protestation that the owners were
not totally deprived of the use of the land and could still plant the same crops as long as they did not come into
contact with the wires, the Court nevertheless held that the easement of right-of-way was a taking under the power
of eminent domain. The Court said:
In the case at bar, the easement of right-of-way is definitely a taking under the power of eminent domain.
Considering the nature and effect of the installation of 230 KV Mexico-Limay transmission lines, the limitation
imposed by NPC against the use of the land for an indefinite period deprives private respondents of its ordinary use.
A case exemplifying an instance of compensable taking which does not entail transfer of title is Republic v.
Philippine Long Distance Telephone Co.
36
Here, the Bureau of Telecommunications, a government instrumentality,
had contracted with the PLDT for the interconnection between the Government Telephone System and that of the
PLDT, so that the former could make use of the lines and facilities of the PLDT. In its desire to expand services to
government offices, the Bureau of Telecommunications demanded to expand its use of the PLDT lines.
Disagreement ensued on the terms of the contract for the use of the PLDT facilities. The Court ruminated:
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 the condemned property, without loss of title and possession. It is unquestionable that
real property may, through expropriation, be subjected to an easement right of way.
37

In Republic v. Castellvi,
38
this Court had the occasion to spell out the requisites of taking in eminent domain, to wit:
(1) the expropriator must enter a private property;
(2) the entry must be for more than a momentary period.
(3) the entry must be under warrant or color of legal authority;
(4) the property must be devoted to public use or otherwise informally appropriated or injuriously affected;
(5) the utilization of the property for public use must be in such a way as to oust the owner and deprive him
of beneficial enjoyment of the property.
As shown by the foregoing jurisprudence, a regulation which substantially deprives the owner of his proprietary
rights and restricts the beneficial use and enjoyment for public use amounts to compensable taking. In the case
under consideration, the entry referred to in Section 76 and the easement rights under Section 75 of Rep. Act No.
7942 as well as the various rights to CAMC under its FTAA are no different from the deprivation of proprietary rights
in the cases discussed which this Court considered as taking. Section 75 of the law in question reads:
Easement Rights. - When mining areas are so situated that for purposes of more convenient mining operations it is
necessary to build, construct or install on the mining areas or lands owned, occupied or leased by other persons,
such infrastructure as roads, railroads, mills, waste dump sites, tailing ponds, warehouses, staging or storage areas
and port facilities, tramways, runways, airports, electric transmission, telephone or telegraph lines, dams and their
normal flood and catchment areas, sites for water wells, ditches, canals, new river beds, pipelines, flumes, cuts,
shafts, tunnels, or mills, the contractor, upon payment of just compensation, shall be entitled to enter and occupy
said mining areas or lands.
Section 76 provides:
Entry into private lands and concession areas Subject to prior notification, holders of mining rights shall not be
prevented from entry into private lands and concession areas by surface owners, occupants, or concessionaires
when conducting mining operations therein.
The CAMC FTAA grants in favor of CAMC the right of possession of the Exploration Contract Area, the full right of
ingress and egress and the right to occupy the same. It also bestows CAMC the right not to be prevented from entry
into private lands by surface owners or occupants thereof when prospecting, exploring and exploiting minerals
therein.
The entry referred to in Section 76 is not just a simple right-of-way which is ordinarily allowed under the provisions of
the Civil Code. Here, the holders of mining rights enter private lands for purposes of conducting mining activities
such as exploration, extraction and processing of minerals. Mining right holders build mine infrastructure, dig mine
shafts and connecting tunnels, prepare tailing ponds, storage areas and vehicle depots, install their machinery,
equipment and sewer systems. On top of this, under Section 75, easement rights are accorded to them where they
may build warehouses, port facilities, electric transmission, railroads and other infrastructures necessary for mining
operations. All these will definitely oust the owners or occupants of the affected areas the beneficial ownership of
their lands. Without a doubt, taking occurs once mining operations commence.
Section 76 of Rep. Act No. 7942 is a Taking Provision
Moreover, it would not be amiss to revisit the history of mining laws of this country which would help us understand
Section 76 of Rep. Act No. 7942.
This provision is first found in Section 27 of Commonwealth Act No. 137 which took effect on 7 November 1936, viz:
Before entering private lands the prospector shall first apply in writing for written permission of the private owner,
claimant, or holder thereof, and in case of refusal by such private owner, claimant, or holder to grant such
permission, or in case of disagreement as to the amount of compensation to be paid for such privilege of
prospecting therein, the amount of such compensation shall be fixed by agreement among the prospector, the
Director of the Bureau of Mines and the surface owner, and in case of their failure to unanimously agree as to the
amount of compensation, all questions at issue shall be determined by the Court of First Instance.
Similarly, the pertinent provision of Presidential Decree No. 463, otherwise known as "The Mineral Resources
Development Decree of 1974," provides:
SECTION 12.Entry to Public and Private Lands. A person who desires to conduct prospecting or other mining
operations within public lands covered by concessions or rights other than mining shall first obtain the written
permission of the government official concerned before entering such lands. In the case of private lands, the written
permission of the owner or possessor of the land must be obtained before entering such lands. In either case, if said
permission is denied, the Director, at the request of the interested person may intercede with the owner or
possessor of the land. If the intercession fails, the interested person may bring suit in the Court of First Instance of
the province where the land is situated. If the court finds the request justified, it shall issue an order granting the
permission after fixing the amount of compensation and/or rental due the owner or possessor: Provided, That
pending final adjudication of such amount, the court shall upon recommendation of the Director permit the interested
person to enter, prospect and/or undertake other mining operations on the disputed land upon posting by such
interested person of a bond with the court which the latter shall consider adequate to answer for any damage to the
owner or possessor of the land resulting from such entry, prospecting or any other mining operations.
Hampered by the difficulties and delays in securing surface rights for the entry into private lands for purposes of
mining operations, Presidential Decree No. 512 dated 19 July 1974 was passed into law in order to achieve full and
accelerated mineral resources development. Thus, Presidential Decree No. 512 provides for a new system of
surface rights acquisition by mining prospectors and claimants. Whereas in Commonwealth Act No. 137 and
Presidential Decree No. 463 eminent domain may only be exercised in order that the mining claimants can build,
construct or install roads, railroads, mills, warehouses and other facilities, this time, the power of eminent domain
may now be invoked by mining operators for the entry, acquisition and use of private lands, viz:
SECTION 1. Mineral prospecting, location, exploration, development and exploitation is hereby declared of public
use and benefit, and for which the power of eminent domain may be invoked and exercised for the entry, acquisition
and use of private lands. x x x.
The evolution of mining laws gives positive indication that mining operators who are qualified to own lands were
granted the authority to exercise eminent domain for the entry, acquisition, and use of private lands in areas open
for mining operations. This grant of authority extant in Section 1 of Presidential Decree No. 512 is not expressly
repealed by Section 76 of Rep. Act No. 7942; and neither are the former statutes impliedly repealed by the former.
These two provisions can stand together even if Section 76 of Rep. Act No. 7942 does not spell out the grant of the
privilege to exercise eminent domain which was present in the old law.
It is an established rule in statutory construction that in order that one law may operate to repeal another law, the
two laws must be inconsistent.
39
The former must be so repugnant as to be irreconciliable with the latter act. Simply
because a latter enactment may relate to the same subject matter as that of an earlier statute is not of itself
sufficient to cause an implied repeal of the latter, since the new law may be cumulative or a continuation of the old
one. As has been the ruled, repeals by implication are not favored, and will not be decreed unless it is manifest that
the legislature so intended.
40
As laws are presumed to be passed with deliberation and with full knowledge of all
existing ones on the subject, it is but reasonable to conclude that in passing a statute it was not intended to interfere
with or abrogate any former law relating to the same matter, unless the repugnancy between the two is not only
irreconcilable, but also clear and convincing, and flowing necessarily from the language used, unless the later act
fully embraces the subject matter of the earlier, or unless the reason for the earlier act is beyond peradventure
removed.
41
Hence, every effort must be used to make all acts stand and if, by any reasonable construction, they can
be reconciled, the latter act will not operate as a repeal of the earlier.
Considering that Section 1 of Presidential Decree No. 512 granted the qualified mining operators the authority to
exercise eminent domain and since this grant of authority is deemed incorporated in Section 76 of Rep. Act No.
7942, the inescapable conclusion is that the latter provision is a taking provision.
While this Court declares that the assailed provision is a taking provision, this does not mean that it is
unconstitutional on the ground that it allows taking of private property without the determination of public use and the
payment of just compensation.
The taking to be valid must be for public use.
42
Public use as a requirement for the valid exercise of the power of
eminent domain is now synonymous with public interest, public benefit, public welfare and public convenience.
43
It
includes the broader notion of indirect public benefit or advantage. Public use as traditionally understood as "actual
use by the public" has already been abandoned.
44

Mining industry plays a pivotal role in the economic development of the country and is a vital tool in the
governments thrust of accelerated recovery.
45
The importance of the mining industry for national development is
expressed in Presidential Decree No. 463:
WHEREAS, mineral production is a major support of the national economy, and therefore the intensified discovery,
exploration, development and wise utilization of the countrys mineral resources are urgently needed for national
development.
Irrefragably, mining is an industry which is of public benefit.
That public use is negated by the fact that the state would be taking private properties for the benefit of private
mining firms or mining contractors is not at all true. In Heirs of Juancho Ardona v. Reyes,
46
petitioners therein
contended that the promotion of tourism is not for public use because private concessionaires would be allowed to
maintain various facilities such as restaurants, hotels, stores, etc., inside the tourist area. The Court thus
contemplated:
The rule in Berman v. Parker [348 U.S. 25; 99 L. ed. 27] of deference to legislative policy even if such policy might
mean taking from one private person and conferring on another private person applies as well in the Philippines.
". . . Once the object is within the authority of Congress, the means by which it will be attained is also for Congress
to determine. Here one of the means chosen is the use of private enterprise for redevelopment of the area.
Appellants argue that this makes the project a taking from one businessman for the benefit of another businessman.
But the means of executing the project are for Congress and Congress alone to determine, once the public purpose
has been established. x x x"
47

Petitioners further maintain that the states discretion to decide when to take private property is reduced
contractually by Section 13.5 of the CAMC FTAA, which reads:
If the CONTRACTOR so requests at its option, the GOVERNMENT shall use its offices and legal powers to assist in
the acquisition at reasonable cost of any surface areas or rights required by the CONTRACTOR at the
CONTRACTORs cost to carry out the Mineral Exploration and the Mining Operations herein.
All obligations, payments and expenses arising from, or incident to, such agreements or acquisition of right shall be
for the account of the CONTRACTOR and shall be recoverable as Operating Expense.
According to petitioners, the government is reduced to a sub-contractor upon the request of the private respondent,
and on account of the foregoing provision, the contractor can compel the government to exercise its power of
eminent domain thereby derogating the latters power to expropriate property.
The provision of the FTAA in question lays down the ways and means by which the foreign-owned contractor,
disqualified to own land, identifies to the government the specific surface areas within the FTAA contract area to be
acquired for the mine infrastructure.
48
The government then acquires ownership of the surface land areas on behalf
of the contractor, through a voluntary transaction in order to enable the latter to proceed to fully implement the
FTAA. Eminent domain is not yet called for at this stage since there are still various avenues by which surface rights
can be acquired other than expropriation. The FTAA provision under attack merely facilitates the implementation of
the FTAA given to CAMC and shields it from violating the Anti-Dummy Law. Hence, when confronted with the same
question in La Bugal-BLaan Tribal Association, Inc. v. Ramos,
49
the Court answered:
Clearly, petitioners have needlessly jumped to unwarranted conclusions, without being aware of the rationale for the
said provision. That provision does not call for the exercise of the power of eminent domain -- and determination of
just compensation is not an issue -- as much as it calls for a qualified party to acquire the surface rights on behalf of
a foreign-owned contractor.
Rather than having the foreign contractor act through a dummy corporation, having the State do the purchasing is a
better alternative. This will at least cause the government to be aware of such transaction/s and foster transparency
in the contractors dealings with the local property owners. The government, then, will not act as a subcontractor of
the contractor; rather, it will facilitate the transaction and enable the parties to avoid a technical violation of the Anti-
Dummy Law.
There is also no basis for the claim that the Mining Law and its implementing rules and regulations do not provide
for just compensation in expropriating private properties. Section 76 of Rep. Act No. 7942 and Section 107 of DAO
96-40 provide for the payment of just compensation:
Section 76.xxx Provided, that any damage to the property of the surface owner, occupant, or concessionaire as a
consequence of such operations shall be properly compensated as may be provided for in the implementing rules
and regulations.
Section 107. Compensation of the Surface Owner and Occupant- Any damage done to the property of the surface
owners, occupant, or concessionaire thereof as a consequence of the mining operations or as a result of the
construction or installation of the infrastructure mentioned in 104 above shall be properly and justly compensated.
Such compensation shall be based on the agreement entered into between the holder of mining rights and the
surface owner, occupant or concessionaire thereof, where appropriate, in accordance with P.D. No. 512. (Emphasis
supplied.)
Second Substantive Issue: Power of Courts to Determine Just Compensation
Closely-knit to the issue of taking is the determination of just compensation. It is contended that Rep. Act No. 7942
and Section 107 of DAO 96-40 encroach on the power of the trial courts to determine just compensation in eminent
domain cases inasmuch as the same determination of proper compensation are cognizable only by the Panel of
Arbitrators.
The question on the judicial determination of just compensation has been settled in the case of Export Processing
Zone Authority v. Dulay
50
wherein the court declared that the determination of just compensation in eminent domain
cases is a judicial function. Even as the executive department or the legislature may make the initial determinations,
the same cannot prevail over the courts findings.
Implementing Section 76 of Rep. Act No. 7942, Section 105 of DAO 96-40 states that holder(s) of mining right(s)
shall not be prevented from entry into its/their contract/mining areas for the purpose of exploration, development,
and/or utilization. That in cases where surface owners of the lands, occupants or concessionaires refuse to allow the
permit holder or contractor entry, the latter shall bring the matter before the Panel of Arbitrators for proper
disposition. Section 106 states that voluntary agreements between the two parties permitting the mining right
holders to enter and use the surface owners lands shall be registered with the Regional Office of the MGB. In
connection with Section 106, Section 107 provides that the compensation for the damage done to the surface
owner, occupant or concessionaire as a consequence of mining operations or as a result of the construction or
installation of the infrastructure shall be properly and justly compensated and that such compensation shall be
based on the agreement between the holder of mining rights and surface owner, occupant or concessionaire, or
where appropriate, in accordance with Presidential Decree No. 512. In cases where there is disagreement to the
compensation or where there is no agreement, the matter shall be brought before the Panel of Arbitrators. Section
206 of the implementing rules and regulations provides an aggrieved party the remedy to appeal the decision of the
Panel of Arbitrators to the Mines Adjudication Board, and the latters decision may be reviewed by the Supreme
Court by filing a petition for review on certiorari.
51

An examination of the foregoing provisions gives no indication that the courts are excluded from taking cognizance
of expropriation cases under the mining law. The disagreement referred to in Section 107 does not involve the
exercise of eminent domain, rather it contemplates of a situation wherein the permit holders are allowed by the
surface owners entry into the latters lands and disagreement ensues as regarding the proper compensation for the
allowed entry and use of the private lands. Noticeably, the provision points to a voluntary sale or transaction, but not
to an involuntary sale.
The legislature, in enacting the mining act, is presumed to have deliberated with full knowledge of all existing laws
and jurisprudence on the subject. Thus, it is but reasonable to conclude that in passing such statute it was in accord
with the existing laws and jurisprudence on the jurisdiction of courts in the determination of just compensation and
that it was not intended to interfere with or abrogate any former law relating to the same matter. Indeed, there is
nothing in the provisions of the assailed law and its implementing rules and regulations that exclude the courts from
their jurisdiction to determine just compensation in expropriation proceedings involving mining operations. Although
Section 105 confers upon the Panel of Arbitrators the authority to decide cases where surface owners, occupants,
concessionaires refuse permit holders entry, thus, necessitating involuntary taking, this does not mean that the
determination of the just compensation by the Panel of Arbitrators or the Mines Adjudication Board is final and
conclusive. The determination is only preliminary unless accepted by all parties concerned. There is nothing wrong
with the grant of primary jurisdiction by the Panel of Arbitrators or the Mines Adjudication Board to determine in a
preliminary matter the reasonable compensation due the affected landowners or occupants.
52
The original and
exclusive jurisdiction of the courts to decide determination of just compensation remains intact despite the
preliminary determination made by the administrative agency. As held in Philippine Veterans Bank v. Court of
Appeals
53
:
The jurisdiction of the Regional Trial Courts is not any less "original and exclusive" because the question is first
passed upon by the DAR, as the judicial proceedings are not a continuation of the administrative determination.
Third Substantive Issue: Sufficient Control by the State Over Mining Operations
Anent the third issue, petitioners charge that Rep. Act No. 7942, as well as its Implementing Rules and Regulations,
makes it possible for FTAA contracts to cede over to a fully foreign-owned corporation full control and management
of mining enterprises, with the result that the State is allegedly reduced to a passive regulator dependent on
submitted plans and reports, with weak review and audit powers. The State is not acting as the supposed owner of
the natural resources for and on behalf of the Filipino people; it practically has little effective say in the decisions
made by the enterprise. In effect, petitioners asserted that the law, the implementing regulations, and the CAMC
FTAA cede beneficial ownership of the mineral resources to the foreign contractor.
It must be noted that this argument was already raised in La Bugal-BLaan Tribal Association, Inc. v. Ramos,
54
where
the Court answered in the following manner:
RA 7942 provides for the states control and supervision over mining operations. The following provisions thereof
establish the mechanism of inspection and visitorial rights over mining operations and institute reportorial
requirements in this manner:
1. Sec. 8 which provides for the DENRs power of over-all supervision and periodic review for "the
conservation, management, development and proper use of the States mineral resources";
2. Sec. 9 which authorizes the Mines and Geosciences Bureau (MGB) under the DENR to exercise "direct
charge in the administration and disposition of mineral resources", and empowers the MGB to "monitor the
compliance by the contractor of the terms and conditions of the mineral agreements", "confiscate surety and
performance bonds", and deputize whenever necessary any member or unit of the Phil. National Police,
barangay, duly registered non-governmental organization (NGO) or any qualified person to police mining
activities;
3. Sec. 66 which vests in the Regional Director "exclusive jurisdiction over safety inspections of all
installations, whether surface or underground", utilized in mining operations.
4. Sec. 35, which incorporates into all FTAAs the following terms, conditions and warranties:
"(g) Mining operations shall be conducted in accordance with the provisions of the Act and its IRR.
"(h) Work programs and minimum expenditures commitments.
x x x x
"(k) Requiring proponent to effectively use appropriate anti-pollution technology and facilities to protect the
environment and restore or rehabilitate mined-out areas.
"(l) The contractors shall furnish the Government records of geologic, accounting and other relevant data for its
mining operation, and that books of accounts and records shall be open for inspection by the government. x x x.
"(m) Requiring the proponent to dispose of the minerals at the highest price and more advantageous terms and
conditions.
x x x x
"(o) Such other terms and conditions consistent with the Constitution and with this Act as the Secretary may deem
to be for the best interest of the State and the welfare of the Filipino people."
The foregoing provisions of Section 35 of RA 7942 are also reflected and implemented in Section 56 (g), (h), (l), (m)
and (n) of the Implementing Rules, DAO 96-40.
Moreover, RA 7942 and DAO 96-40 also provide various stipulations confirming the governments control over
mining enterprises:
o The contractor is to relinquish to the government those portions of the contract area not needed for mining
operations and not covered by any declaration of mining feasibility (Section 35-e, RA 7942; Section 60, DAO
96-40).
o The contractor must comply with the provisions pertaining to mine safety, health and environmental
protection (Chapter XI, RA 7942; Chapters XV and XVI, DAO 96-40).
o For violation of any of its terms and conditions, government may cancel an FTAA. (Chapter XVII, RA 7942;
Chapter XXIV, DAO 96-40).
o An FTAA contractor is obliged to open its books of accounts and records for 0inspection by the government
(Section 56-m, DAO 96-40).
o An FTAA contractor has to dispose of the minerals and by-products at the highest market price and register
with the MGB a copy of the sales agreement (Section 56-n, DAO 96-40).
o MGB is mandated to monitor the contractors compliance with the terms and conditions of the FTAA; and to
deputize, when necessary, any member or unit of the Philippine National Police, the barangay or a DENR-
accredited nongovernmental organization to police mining activities (Section 7-d and -f, DAO 96-40).
o An FTAA cannot be transferred or assigned without prior approval by the President (Section 40, RA 7942;
Section 66, DAO 96-40).
o A mining project under an FTAA cannot proceed to the construction/development/utilization stage, unless its
Declaration of Mining Project Feasibility has been approved by government (Section 24, RA 7942).
o The Declaration of Mining Project Feasibility filed by the contractor cannot be approved without submission
of the following documents:
1. Approved mining project feasibility study (Section 53-d, DAO 96-40)
2. Approved three-year work program (Section 53-a-4, DAO 96-40)
3. Environmental compliance certificate (Section 70, RA 7942)
4. Approved environmental protection and enhancement program (Section 69, RA 7942)
5. Approval by the Sangguniang Panlalawigan/Bayan/Barangay (Section 70, RA 7942; Section 27,
RA 7160)
6. Free and prior informed consent by the indigenous peoples concerned, including payment of
royalties through a Memorandum of Agreement (Section 16, RA 7942; Section 59, RA 8371)
o The FTAA contractor is obliged to assist in the development of its mining community, promotion of the
general welfare of its inhabitants, and development of science and mining technology (Section 57, RA
7942).
o The FTAA contractor is obliged to submit reports (on quarterly, semi-annual or annual basis as the case
may be; per Section 270, DAO 96-40), pertaining to the following:
1. Exploration
2. Drilling
3. Mineral resources and reserves
4. Energy consumption
5. Production
6. Sales and marketing
7. Employment
8. Payment of taxes, royalties, fees and other Government Shares
9. Mine safety, health and environment
10. Land use
11. Social development
12. Explosives consumption
o An FTAA pertaining to areas within government reservations cannot be granted without a written clearance
from the government agencies concerned (Section 19, RA 7942; Section 54, DAO 96-40).
o An FTAA contractor is required to post a financial guarantee bond in favor of the government in an amount
equivalent to its expenditures obligations for any particular year. This requirement is apart from the
representations and warranties of the contractor that it has access to all the financing, managerial and
technical expertise and technology necessary to carry out the objectives of the FTAA (Section 35-b, -e, and -
f, RA 7942).
o Other reports to be submitted by the contractor, as required under DAO 96-40, are as follows: an
environmental report on the rehabilitation of the mined-out area and/or mine waste/tailing covered area, and
anti-pollution measures undertaken (Section 35-a-2); annual reports of the mining operations and records of
geologic accounting (Section 56-m); annual progress reports and final report of exploration activities
(Section 56-2).
o Other programs required to be submitted by the contractor, pursuant to DAO 96-40, are the following: a
safety and health program (Section 144); an environmental work program (Section 168); an annual
environmental protection and enhancement program (Section 171).
The foregoing gamut of requirements, regulations, restrictions and limitations imposed upon the FTAA contractor by
the statute and regulations easily overturns petitioners contention. The setup under RA 7942 and DAO 96-40 hardly
relegates the State to the role of a "passive regulator" dependent on submitted plans and reports. On the contrary,
the government agencies concerned are empowered to approve or disapprove -- hence, to influence, direct and
change -- the various work programs and the corresponding minimum expenditure commitments for each of the
exploration, development and utilization phases of the mining enterprise.
Once these plans and reports are approved, the contractor is bound to comply with its commitments therein. Figures
for mineral production and sales are regularly monitored and subjected to government review, in order to ensure
that the products and by-products are disposed of at the best prices possible; even copies of sales agreements
have to be submitted to and registered with MGB. And the contractor is mandated to open its books of accounts and
records for scrutiny, so as to enable the State to determine if the government share has been fully paid.
The State may likewise compel the contractors compliance with mandatory requirements on mine safety, health and
environmental protection, and the use of anti-pollution technology and facilities. Moreover, the contractor is also
obligated to assist in the development of the mining community and to pay royalties to the indigenous peoples
concerned.
Cancellation of the FTAA may be the penalty for violation of any of its terms and conditions and/or noncompliance
with statutes or regulations. This general, all-around, multipurpose sanction is no trifling matter, especially to a
contractor who may have yet to recover the tens or hundreds of millions of dollars sunk into a mining project.
Overall, considering the provisions of the statute and the regulations just discussed, we believe that the State
definitely possesses the means by which it can have the ultimate word in the operation of the enterprise, set
directions and objectives, and detect deviations and noncompliance by the contractor; likewise, it has the capability
to enforce compliance and to impose sanctions, should the occasion therefor arise.
In other words, the FTAA contractor is not free to do whatever it pleases and get away with it; on the contrary, it will
have to follow the government line if it wants to stay in the enterprise. Ineluctably then, RA 7942 and DAO 96-40
vest in the government more than a sufficient degree of control and supervision over the conduct of mining
operations.
Fourth Substantive Issue: The Proper Interpretation of the Constitutional Phrase "Agreements Involving Either
Technical or Financial Assistance
In interpreting the first and fourth paragraphs of Section 2, Article XII of the Constitution, petitioners set forth the
argument that foreign corporations are barred from making decisions on the conduct of operations and the
management of the mining project. The first paragraph of Section 2, Article XII reads:
x x x The exploration, development, and utilization of natural resources shall be under the full control and
supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint
venture, or production sharing agreements with Filipino citizens, or corporations or associations at least sixty
percentum of whose capital is owned by such citizens. Such agreements may be for a period not exceeding twenty
five years, renewable for not more than twenty five years, and under such terms and conditions as may be provided
by law x x x.
The fourth paragraph of Section 2, Article XII provides:
The President may enter into agreements with foreign-owned corporations involving either technical or financial
assistance for large scale exploration, development, and utilization of minerals, petroleum, and other mineral oils
according to the general terms and conditions provided by law, based on real contributions to the economic growth
and general welfare of the country x x x.
Petitioners maintain that the first paragraph bars aliens and foreign-owned corporations from entering into any direct
arrangement with the government including those which involve co-production, joint venture or production sharing
agreements. They likewise insist that the fourth paragraph allows foreign-owned corporations to participate in the
large-scale exploration, development and utilization of natural resources, but such participation, however, is merely
limited to an agreement for either financial or technical assistance only.
Again, this issue has already been succinctly passed upon by this Court in La Bugal-BLaan Tribal Association, Inc.
v. Ramos.
55
In discrediting such argument, the Court ratiocinated:
Petitioners claim that the phrase "agreements x x x involving either technical or financial assistance" simply
meanstechnical assistance or financial assistance agreements, nothing more and nothing else. They insist that
there is no ambiguity in the phrase, and that a plain reading of paragraph 4 quoted above leads to the inescapable
conclusion that what a foreign-owned corporation may enter into with the government is merely an agreement
foreither financial or technical assistance only, for the large-scale exploration, development and utilization of
minerals, petroleum and other mineral oils; such a limitation, they argue, excludes foreign management and
operation of a mining enterprise.
This restrictive interpretation, petitioners believe, is in line with the general policy enunciated by the Constitution
reserving to Filipino citizens and corporations the use and enjoyment of the countrys natural resources. They
maintain that this Courts Decision of January 27, 2004 correctly declared the WMCP FTAA, along with pertinent
provisions of RA 7942, void for allowing a foreign contractor to have direct and exclusive management of a mining
enterprise. Allowing such a privilege not only runs counter to the "full control and supervision" that the State is
constitutionally mandated to exercise over the exploration, development and utilization of the countrys natural
resources; doing so also vests in the foreign company "beneficial ownership" of our mineral resources. It will be
recalled that the Decision of January 27, 2004 zeroed in on "management or other forms of assistance" or other
activities associated with the "service contracts" of the martial law regime, since "the management or operation of
mining activities by foreign contractors, which is the primary feature of service contracts, was precisely the evil that
the drafters of the 1987 Constitution sought to eradicate."
x x x x
We do not see how applying a strictly literal or verba legis interpretation of paragraph 4 could inexorably lead to the
conclusions arrived at in the ponencia. First, the drafters choice of words -- their use of the phraseagreements x x
x involving either technical or financial assistance -- does not indicate the intent to exclude other modes of
assistance. The drafters opted to use involving when they could have simply said agreements forfinancial or
technical assistance, if that was their intention to begin with. In this case, the limitation would be very clear and no
further debate would ensue.
In contrast, the use of the word "involving" signifies the possibility of the inclusion of other forms of assistance
or activities having to do with, otherwise related to or compatible with financial or technical assistance. The word
"involving" as used in this context has three connotations that can be differentiated thus:one, the sense of
"concerning," "having to do with," or "affecting"; two, "entailing," "requiring," "implying" or "necessitating"; and three,
"including," "containing" or "comprising."
Plainly, none of the three connotations convey a sense of exclusivity. Moreover, the word "involving," when
understood in the sense of "including," as in including technical or financial assistance, necessarily implies that there
are activities other than those that are being included. In other words, if an agreement includes technical or financial
assistance, there is apart from such assistance -- something else already in, and covered or may be covered by, the
said agreement.
In short, it allows for the possibility that matters, other than those explicitly mentioned, could be made part of the
agreement. Thus, we are now led to the conclusion that the use of the word "involving" implies that these
agreements with foreign corporations are not limited to mere financial or technical assistance. The difference in
sense becomes very apparent when we juxtapose "agreements for technical or financial assistance" against
"agreements including technical or financial assistance." This much is unalterably clear in a verba legis approach.
Second, if the real intention of the drafters was to confine foreign corporations to financial or technical assistance
and nothing more, their language would have certainly been so unmistakably restrictive and stringent as to leave no
doubt in anyones mind about their true intent. For example, they would have used the sentence foreign
corporations are absolutely prohibited from involvement in the management or operation of mining or similar
ventures or words of similar import. A search for such stringent wording yields negative results. Thus, we come to
the inevitable conclusion that there was a conscious and deliberate decision to avoid the use of restrictive
wording that bespeaks an intent not to use the expression "agreements x x x involving either technical or
financial assistance" in an exclusionary and limiting manner.
Fifth Substantive Issue: Service Contracts Not Deconstitutionalized
Lastly, petitioners stress that the service contract regime under the 1973 Constitution is expressly prohibited under
the 1987 Constitution as the term service contracts found in the former was deleted in the latter to avoid the
circumvention of constitutional prohibitions that were prevalent in the 1987 Constitution. According to them, the
framers of the 1987 Constitution only intended for foreign-owned corporations to provide either technical assistance
or financial assistance. Upon perusal of the CAMC FTAA, petitioners are of the opinion that the same is a replica of
the service contract agreements that the present constitution allegedly prohibit.
Again, this contention is not well-taken. The mere fact that the term service contracts found in the 1973 Constitution
was not carried over to the present constitution, sans any categorical statement banning service contracts in mining
activities, does not mean that service contracts as understood in the 1973 Constitution was eradicated in the 1987
Constitution.
56
The 1987 Constitution allows the continued use of service contracts with foreign corporations as
contractors who would invest in and operate and manage extractive enterprises, subject to the full control and
supervision of the State; this time, however, safety measures were put in place to prevent abuses of the past
regime.
57
We ruled, thus:
To our mind, however, such intent cannot be definitively and conclusively established from the mere failure to carry
the same expression or term over to the new Constitution, absent a more specific, explicit and unequivocal
statement to that effect. What petitioners seek (a complete ban on foreign participation in the management of mining
operations, as previously allowed by the earlier Constitutions) is nothing short of bringing about a momentous sea
change in the economic and developmental policies; and the fundamentally capitalist, free-enterprise philosophy of
our government. We cannot imagine such a radical shift being undertaken by our government, to the great prejudice
of the mining sector in particular and our economy in general, merely on the basis of the omission of the
terms service contract from or the failure to carry them over to the new Constitution. There has to be a much more
definite and even unarguable basis for such a drastic reversal of policies.
x x x x
The foregoing are mere fragments of the framers lengthy discussions of the provision dealing with agreements x x x
involving either technical or financial assistance, which ultimately became paragraph 4 of Section 2 of Article XII of
the Constitution. Beyond any doubt, the members of the ConCom were actually debating about the martial-law-
era service contracts for which they were crafting appropriate safeguards.
In the voting that led to the approval of Article XII by the ConCom, the explanations given by Commissioners
Gascon, Garcia and Tadeo indicated that they had voted to reject this provision on account of their objections to the
"constitutionalization" of the "service contract" concept.
Mr. Gascon said, "I felt that if we would constitutionalize any provision on service contracts, this should always be
with the concurrence of Congress and not guided only by a general law to be promulgated by Congress." Mr. Garcia
explained, "Service contracts are given constitutional legitimization in Sec. 3, even when they have been proven to
be inimical to the interests of the nation, providing, as they do, the legal loophole for the exploitation of our natural
resources for the benefit of foreign interests." Likewise, Mr. Tadeo cited inter alia the fact that service contracts
continued to subsist, enabling foreign interests to benefit from our natural resources. It was hardly likely that these
gentlemen would have objected so strenuously, had the provision called for mere technical or financial
assistance and nothing more.
The deliberations of the ConCom and some commissioners explanation of their votes leave no room for doubt that
the service contract concept precisely underpinned the commissioners understanding of the "agreements involving
either technical or financial assistance."
x x x x
From the foregoing, we are impelled to conclude that the phrase agreements involving either technical or financial
assistance, referred to in paragraph 4, are in fact service contracts. But unlike those of the 1973 variety, the new
ones are between foreign corporations acting as contractors on the one hand; and on the other, the government as
principal or "owner" of the works. In the new service contracts, the foreign contractors provide capital, technology
and technical know-how, and managerial expertise in the creation and operation of large-scale mining/extractive
enterprises; and the government, through its agencies (DENR, MGB), actively exercises control and supervision
over the entire operation.
x x x x
It is therefore reasonable and unavoidable to make the following conclusion, based on the above arguments. As
written by the framers and ratified and adopted by the people, the Constitution allows the continued use of service
contracts with foreign corporations -- as contractors who would invest in and operate and manage extractive
enterprises, subject to the full control and supervision of the State -- sans the abuses of the past regime. The
purpose is clear: to develop and utilize our mineral, petroleum and other resources on a large scale for the
immediate and tangible benefit of the Filipino people.
58

WHEREFORE, the instant petition for prohibition and mandamus is hereby DISMISSED. Section 76 of Republic Act
No. 7942 and Section 107 of DAO 96-40; Republic Act No. 7942 and its Implementing Rules and Regulations
contained in DAO 96-40 insofar as they relate to financial and technical assistance agreements referred to in
paragraph 4 of Section 2 of Article XII of the Constitution are NOT UNCONSTITUTIONAL.
SO ORDERED.
MINITA V. CHICO-NAZARIO
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
CONSUELO YNARES-SANTIAGO
Associate Justice
MA. ALICIA AUSTRIA-MARTINEZ
Asscociate Justice
ROMEO J. CALLEJO, SR.
Associate Justice
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts
Division.
ARTEMIO V. PANGANIBAN
Chief Justice













SECOND DIVISION

REPUBLIC OF
THEPHILIPPINES (Department of
Public Works and Highways),
Petitioner,
G.R. No. 160656

Present:




- versus -


QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,

TINGA, and
VELASCO, JR., JJ.

ISMAEL ANDAYA,
Respondent.
Promulgated:

June 15, 2007
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DECISION
QUISUMBING, J .:
This is a petition for review of the Decision
[1]
dated October 30, 2003 of the Court of
Appeals in CA-G.R. CV No. 65066 affirming with modification the Decision
[2]
of
the Regional Trial Court of Butuan City, Branch 33 in Civil Case No. 4378, for enforcement of
easement of right-of-way (or eminent domain).
Respondent Ismael Andaya is the registered owner of two parcels of land in
Bading, Butuan City. His ownership is evidenced by Transfer Certificates of Title Nos. RT-
10225 and RT-10646. These properties are subject to a 60-meter wide perpetual easement for
public highways, irrigation ditches, aqueducts, and other similar works of the government or
public enterprise, at no cost to the government, except only the value of the improvements
existing thereon that may be affected.
Petitioner Republic of the Philippines (Republic) negotiated with Andaya to enforce the
60-meter easement of right-of-way. The easement was for concrete levees and floodwalls for
Phase 1, Stage 1 of the Lower Agusan Development Project. The parties, however, failed to
reach an agreement.
On December 13, 1995, the Republic instituted an action before
the Regional Trial Court of Butuan City to enforce the easement of right-of-way or eminent
domain. The trial court issued a writ of possession on April 26, 1996.
[3]
It also constituted a
Board of Commissioners (Board) to determine the just compensation. Eventually, the trial court
issued an Order of Expropriation upon payment of just compensation.
[4]
Later, the Board
reported that there was a discrepancy in the description of the property sought to be
expropriated. The Republic thus amended its complaint, reducing the 60-meter easement to 10
meters, or an equivalent of 701 square meters.
On December 10, 1998, the Board reported that the project would affect a total of 10,380
square meters of Andayas properties, 4,443 square meters of which will be for the 60-meter
easement. The Board also reported that the easement would diminish the value of the remaining
5,937 square meters. As a result, it recommended the payment of consequential damages
amounting to P2,820,430 for the remaining area.
[5]

Andaya objected to the report because although the Republic reduced the easement to 10
meters or an equivalent of 701 square meters, the Board still granted it 4,443 square meters. He
contended that the consequential damages should be based on the remaining area of 9,679
square meters. Thus, the just compensation should be P11,373,405. The Republic did not file
any comment, opposition, nor objection.
After considering the Boards report, the trial court decreed on April 29, 1999, as
follows:
WHEREFORE, in the light of the foregoing, the Court decides as follows:

a) That the plaintiff is legally entitled to its inherent right of expropriation to, viz.: 1) the
lot now known as lot 3291-B-1-A, portion of lot 3291-B-1, (LRC) Psd-255693,
covered by TCT No. RT-10225, with an area of 288 sq. m.; and 2) the lot now known
as lot 3293-F-5-B-1, portion of lot 3293-F-5-B (LRC) Psd-230236, covered by TCT
No. RT-10646, with an area of 413 sq. m., both of the Butuan City Registry of Deeds,
it being shown that it is for public use and purpose --- free of charge by reason of the
statutory lien of easement of right-of-way imposed on defendants titles;

b) That however, the plaintiff is obligated to pay defendant the sum of TWO MILLION
EIGHT HUNDRED TWENTY THOUSAND FOUR HUNDRED THIRTY
(P2,820,430.00) PESOS as fair and reasonable severance damages;

c) To pay members of the Board of Commissioners, thus: for the chairman ---
TWENTY THOUSAND (P20,000.00) PESOS and the two (2) members at FIFTEEN
THOUSAND (P15,000.00) PESOS each;

d) To pay defendants counsel FIFTY THOUSAND (P50,000.00) PESOS as Attorneys
fees; and finally,

e) That the Registry of Deeds of Butuan City is also directed to effect the issuance of
Transfer Certificate of Titles for the aforementioned two (2) lots in the name of the
Republic of the Philippines, following the technical description as appearing in pages
6, 7, and 8 of the Commissioners Report.

NO COSTS.

IT IS SO ORDERED.
[6]

Both parties appealed to the Court of Appeals. The Republic contested the awards of
severance damages and attorneys fees while Andaya demanded just compensation for his entire
property minus the easement. Andaya alleged that the easement would prevent ingress and
egress to his property and turn it into a catch basin for the floodwaters coming from
the Agusan River. As a result, his entire property would be rendered unusable and
uninhabitable. He thus demanded P11,373,405 as just compensation based on the total
compensable area of 9,679 square meters.
The Court of Appeals modified the trial courts decision by imposing a 6% interest on the
consequential damages from the date of the writ of possession or the actual taking, and by
deleting the attorneys fees.
Hence, the instant petition. Simply put, the sole issue for resolution may be stated
thus: Is the Republic liable for just compensation if in enforcing the legal easement of right-of-
way on a property, the remaining area would be rendered unusable and uninhabitable?
It is undisputed that there is a legal easement of right-of-way in favor of the
Republic. Andayas transfer certificates of title
[7]
contained the reservation that the lands covered
thereby are subject to the provisions of the Land Registration Act
[8]
and the Public Land
Act.
[9]
Section 112
[10]
of the Public Land Act provides that lands granted by patent shall be
subject to a right-of-way not exceeding 60 meters in width for public highways, irrigation
ditches, aqueducts, and other similar works of the government or any public enterprise, free of
charge, except only for the value of the improvements existing thereon that may be affected. In
view of this, the Court of Appeals declared that all the Republic needs to do is to enforce such
right without having to initiate expropriation proceedings and without having to pay any just
compensation.
[11]
Hence, the Republic may appropriate the 701 square meters necessary for the
construction of the floodwalls without paying for it.
We are, however, unable to sustain the Republics argument that it is not liable to pay
consequential damages if in enforcing the legal easement on Andayas property, the remaining
area would be rendered unusable and uninhabitable. Taking, in the exercise of the power of
eminent domain, occurs not only when the government actually deprives or dispossesses the
property owner of his property or of its ordinary use, but also when there is a practical
destruction or material impairment of the value of his property.
[12]
Using this standard, there
was undoubtedly a taking of the remaining area of Andayas property. True, no burden was
imposed thereon and Andaya still retained title and possession of the property. But, as correctly
observed by the Board and affirmed by the courts a quo, the nature and the effect of the
floodwalls would deprive Andaya of the normal use of the remaining areas. It would prevent
ingress and egress to the property and turn it into a catch basin for the floodwaters coming from
the AgusanRiver.
For this reason, in our view, Andaya is entitled to payment of just compensation, which
must be neither more nor less than the monetary equivalent of the land.
[13]
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. Noteworthy, Section 9, Article III of our Constitution mandates that private property shall
not be taken for public use without just compensation.
[14]

Finally, we affirm the findings of the Court of Appeals and the trial court that just
compensation should be paid only for 5,937 square meters of the total area of 10,380 square
meters. Admittedly, the Republic needs only a 10-meter easement or an equivalent of 701
square meters. Yet, it is also settled that it is legally entitled to a 60-meter wide easement or an
equivalent of 4,443 square meters. Clearly, although the Republic will use only 701 square
meters, it should not be liable for the 3,742 square meters, which constitute the difference
between this area of 701 square meters and the 4,443 square meters to which it is fully entitled
to use as easement, free of charge except for damages to affected existing improvements, if any,
under Section 112 of the Public Land Act.
In effect, without such damages alleged and proved, the Republic is liable for just
compensation of only the remaining areas consisting of 5,937 square meters, with interest thereon
at the legal rate of 6% per annum from the date of the writ of possession or the actual taking until
full payment is made. For the purpose of determining the final just compensation, the case is
remanded to the trial court. Said court is ordered to make the determination of just compensation
payable to respondent Andaya with deliberate dispatch.
WHEREFORE, the Decision of the Court of Appeals dated October 30, 2003 in CA-
G.R. CV No. 65066, modifying the Decision of the Regional Trial Court of Butuan City,
Branch 33 in Civil Case No. 4378, is AFFIRMED with MODIFICATION asherein set forth.
The case is hereby REMANDED to the Regional Trial Court of Butuan City, Branch 33
for the determination of the final just compensation of the compensable area consisting of 5,937
square meters, with interest thereon at the legal rate of 6% per annum from the date of the writ
of possession or actual taking until fully paid.
No pronouncement as to costs.
SO ORDERED.

LEONARDO A. QUISUMBING
Associate Justice

WE CONCUR:




ANTONIO T. CARPIO
Associate Justice
(On official leave)
CONCHITA CARPIO MORALES
Associate Justice
DANTE O. TINGA
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice


A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.



LEONARDO A. QUISUMBING
Associate Justice
Chairperson


C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons
Attestation, I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Courts Division.


REYNATO S. PUNO
Chief Justice


SECOND DIVISION

HEIRS OF MATEO PIDACAN
AND ROMANA EIGO,

namely:
PACITA PIDACAN VDA. DE
ZUBIRI (deceased), survived by
JOSE BELLO BATINA,
VICKYBELLO BATINA,
ROBERTOBELLO BATINA,
VILMA BELLOBATINA, and
FRANCISCO N. BATINA; and
ADELA PIDACAN VDA. DE
ROBLES,
Petitioners,
G.R. No. 162779

Present:

QUISUMBING, J., Chairperson,
CARPIO,
CARPIO MORALES,

TINGA, and
VELASCO, JR., JJ.

- versus -



AIR TRANSPORTATION OFFICE
(ATO), represented by its Acting
Director BIENVENIDO MANGA,
Respondent.
Promulgated:

June 15, 2007
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DECISION

QUISUMBING, J .:
For review on certiorari are the Decision
[1]
dated August 20, 2003 and the Resolution
dated March 17, 2004 of the Court of Appeals in CA-G.R. CV No. 72404, which reversed the
Decision
[2]
dated February 1, 2001 of the Regional Trial Court (RTC) of San Jose,
Occidental Mindoro, Branch 46 in Civil Case No. R-800.
The facts, summarized by the Court of Appeals and borne by the records, are as follows:
Sometime in 1935, spouses Mateo Pidacan and Romana Eigo acquired under the
homestead provision of Act No. 2874
[3]
a parcel of land consisting of about 22 hectares situated
in San Jose, Occidental Mindoro. Patent No. 33883 and Original Certificate of Title (OCT) No.
2204 were issued on the land, in the names of the Pidacan spouses.
In 1948, the Civil Aeronautics Administration (now Air Transportation Office or ATO)
used a portion of the said property as an airport. Upon the death of the Pidacan spouses in 1974,
the ATO constructed a perimeter fence and a new terminal building on the property. The ATO
also lengthened, widened, and cemented the airports runway.
The spouses heirs
namely, Pacita Pidacan Vda. de Zubiri and Adela Pidacan Vda. de Robles demanded from ATO
the payment of the value of the property as well as rentals for the use of the occupied premises.
However, they were told that payment could not be made because the property was still in their
parents name.
With the loss of the owners copy of OCT No. 2204, Pacita Pidacan Vda. de Zubiri filed
a petition for the issuance of another owners duplicate. The heirs then executed an extrajudicial
settlement adjudicating the property among themselves.
On February 23, 1988, OCT No. 2204 was cancelled and Transfer Certificate of Title
(TCT) No. T-7160 was issued in favor of the heirs. The heirs presented TCT No. T-7160 and
the death certificates of their parents to the ATO, but the latter still refused to pay them.
The heirs claimed that they were entitled to payment of rentals plus the value of the
property. The ATO countered that the heirs were not entitled to any payment, either of the value
of the land or of the rentals because the property had been sold to its predecessor, the defunct
Civil Aeronautics Administration for P0.70 per square meter. The ATO claimed that even if it
failed to obtain title in its name, it had been declaring the property for taxation purposes.
The heirs subsequently filed with the RTC a complaint
[4]
against the ATO for payment of
the value of the property as well as rentals for its use and occupation. The ATO, in turn, filed a
complaint for expropriation, which was dismissed on the ground that it would be absurd for the
ATO to expropriate a parcel of land it considered its own.
Pacita Pidacan Vda. de Zubiri was substituted by her surviving son, Tomas Batina, who
in turn was later substituted by his heirs namely, Jose Bello Batina, Vicky Bello Batina,
Roberto Bello Batina, and Vilma Bello Batina. Francisco N. Batina, an alleged son of
Tomas Batina, intervened in the proceedings.
On September 12, 1994, the trial court promulgated a Decision
[5]
ordering the ATO to
pay rentals and the value of the land atP89 per square meter. The ATO appealed to the Court of
Appeals on the ground that the trial court erred in fixing the value of the property on the basis
of its present value.
The Court of Appeals rendered a Decision
[6]
setting aside the RTC Decision and
remanded the case to the court a quo for further proceedings. The appellate court also ruled that
just compensation should be determined as of the time the property was taken for public use.
After trial upon remand of the case to the court of origin, judgment was rendered anew as
follows:
WHEREFORE, in view of all the foregoing, judgment is hereby rendered:
1. Expropriating the actual area occupied by the defendant Air Transportation Office of the
plaintiffs property covered by Transfer Certificate of Title No. T-7160, totaling Two
Hundred Fifteen Thousand Seven Hundred Thirty Seven (215,737) square meters, in
favor of defendant;
2. Ordering defendant Air Transportation Office to pay plaintiffs the amount of Three
Hundred Four ((P304.00) Pesos per square meter for the area herein expropriated which
totals to Sixty Five Million Five Hundred Eight (sic) Four Thousand Forty Eight
(P65,584,048.00) Pesos with interest thereon at the rate of 12% per annum from February
1, 2001, until the same is fully paid.
3. Ordering defendant Air Transportation Office to pay plaintiffs monthly rentals for the
use and occupation of the subject property cited in item No. 1 above, computed as
follows:
a) Three Thousand Fifty Eight Pesos and Forty Centavos (P3,058.40) from 1957 to
1977;
b) Four Thousand Twenty Two Pesos and Sixty five Centavos (P4,022.60) from
1978 to 1979;
c) Six Thousand Thirty Four Pesos and Fifty Centavos (P6,034.50) from 1980 to
1984;
d) Nine Thousand Six Hundred Ninety Nine Pesos and Sixty Centavos (P9,699.60)
from 1985 to 1991;
e) Seventeen Thousand Nine Hundred thirteen Pesos and Sixty Centavos
(P17,913.60) from 1992 to 1994;
f) Thirty Seven Thousand One Hundred Eighty One Pesos and Eighty Centavos
(P37,181.80) from 1995 to 1997;
g) Fifty Four Thousand Six Hundred Fifty Eight Pesos and Sixty Centavos
(P54,658.60) from 1998 to January 31, 2001;
or a total monthly rentals, from January 1, 1957 to January 31, 2001, of Six Million Two
hundred Forty Nine Thousand Six Hundred Forty Five Pesos and Forty Centavos
(P6,249,645.40) with interest thereon at the rate of 12% per annum, until the same is fully
paid;
4. Ordering defendant Air Transportation Office to pay plaintiffs ten (10%) per cent of the
amount involved as and for attorneys fees and expenses of litigation; and
5. Ordering defendant Air Transportation Office to pay the costs of suit.
SO ORDERED.
[7]

The ATO once again appealed to the Court of Appeals, which in its assailed Decision
reversed the trial courts ruling, thus:
WHEREFORE, premises considered, the assailed Decision dated February 1, 2001 of
the Regional Trial Court of San Jose, OccidentalMindoro in Civil Case No. R-800 is
hereby REVERSED AND SET ASIDE and a new one entered remanding the instant case to the
court a quofor the determination of just compensation on the basis of the market value prevailing
in 1948. No pronouncement as to costs.
SO ORDERED.
[8]

The heirs moved for reconsideration but it was denied. Aggrieved, the heirs filed the
instant petition alleging that:
I
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND
ABUSE OF DISCRETION BY DISREGARDING THE LAW, JURISPRUDENCE AND
EVIDENCE IN REVERSING THE TRIAL COURTS DECISION AND RULING THAT
THERE WAS TAKING OF THE SUBJECT PROPERTY IN 1948[;]
II
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND
ABUSE OF DISCRETION BY DISREGARDING THE LAW, JURISPRUDENCE AND
EVIDENCE IN RULING THAT THE REMAND OF THE CASE TO THE LOWER COURT
WAS ONLY FOR THE PURPOSE OF ASCERTAINING THE TIME OF TAKING OF THE
SUBJECT PROPERTY[;]
III
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ERROR AND
ABUSE OF DISCRETION BY DISREGARDING THE LAW, JURISPRUDENCE AND
EVIDENCE IN REVERSING THE DECISION OF THE LOWER COURT WHICH ORDERED
THE PAYMENT OF UNPAID RENTALS FROM 1957 TO 2001[.]
[9]

Petitioners contend the reckoning point for taking cannot be 1948 as the elements
necessary to constitute taking were not present at that time. They also point out that
the ATOs complaint for expropriation filed in 1993 is inconsistent with its claim that it had
already bought the property in 1959 or that there was already taking in 1948. Petitioners further
allege that the ATO is estoppedfrom questioning the valuation of the property at P304
per square meter because it was the ATO that actually recommended the said amount. Finally,
petitioners insist that the Pidacan spouses merely leased the property to the ATO.
Respondent ATO, on the other hand, counters that the fact of taking has been definitely
established by the Court of Appeals and implicitly admitted by petitioners. The ATO stresses
that for the purpose of fixing just compensation, the only issue is the time of taking, which it
maintains was in 1948 when an airport was constructed on the property. Lastly, the ATO calls
our attention to the alleged absence of any competent evidence proving the existence of a
contract of lease between the parties.
Simply put, the issues for resolution are: (1) whether there was taking of the subject
property; (2) the time when the taking took place; and (3) the appropriate value of just
compensation.
On the first issue, we are unable to consider the parties bare allegation that there was a
contract of lease or a contract of sale between the ATO and the Pidacan spouses, for lack of
competent evidence adduced to prove either claim. On the contrary, preponderance of evidence
on record strongly indicates that the ATOs conversion of the property into an airport in 1948
comes within the purview of eminent domain.
Eminent domain or expropriation is the inherent right of the state to condemn private
property to public use upon payment of just compensation.
[10]
A number of circumstances must
be present in the taking of property for purposes of eminent domain: (1) the expropriator must
enter a private property; (2) the entrance into private property must be for more than a
momentary period; (3) the entry into the property should be under warrant or color of legal
authority; (4) the property must be devoted to a public use or otherwise informally appropriated
or injuriously affected; and (5) the utilization of the property for public use must be in such a
way as to oust the owner and deprive him of all beneficial enjoyment of the property.
[11]

When private property is rendered uninhabitable by an entity with the power to exercise
eminent domain, the taking is deemed complete.
[12]
Taking occurs not only when the
government actually deprives or dispossesses the property owner of his property or of its
ordinary use, but also when there is a practical destruction or material impairment of the value
of his property.
[13]

In this case, it is undisputed that petitioners private property was converted into an
airport by respondent ATO. As a consequence, petitioners were completely deprived of
beneficial use and enjoyment of their property. Clearly, there was taking in the concept of
expropriation as early as 1948 when the airport was constructed on petitioners private land.
As a rule, the determination of just compensation in eminent domain cases is reckoned
from the time of taking.
[14]
In this case, however, application of the said rule would lead to
grave injustice. Note that the ATO had been using petitioners property as airport since 1948
without having instituted the proper expropriation proceedings. To peg the value of the property
at the time of taking in 1948, despite the exponential increase in its value considering the lapse
of over half a century, would be iniquitous. We cannot allow the ATO to conveniently invoke
the right of eminent domain to take advantage of the ridiculously low value of the property at
the time of taking that it arbitrarily chooses to the prejudice of petitioners.
In this particular case, justice and fairness dictate that the appropriate reckoning point for
the valuation of petitioners property is when the trial court made its order of expropriation in
2001. As for the fair value of the subject property, we believe that the amount arrived at by the
commissioners appointed by the trial court, P304.39 per square meter, constitutes just
compensation to petitioners.
[15]

However, the trial courts award of rental payments to petitioners is not supported by
evidence on record and must be deleted. To justify such award, the purported contract of lease
must first be proven by competent evidence. The letter
[16]
of one DirectorNabor C. Gaviola of the
Department of Transportation and Communications endorsing the appeal of a
certain Herminia R. Parales for the immediate payment of rentals is plain hearsay and does little
to prove the existence of a contract of lease between the parties.
Lastly, the interest accruing fixed by the trial court at the rate of 12% per annum is not
consistent with law and should be reduced to the legal interest rate of 6% per annum.
[17]

WHEREFORE, the petition is GRANTED. The assailed Decision dated August 20,
2003 and the Resolution dated March 17, 2004 of the Court of Appeals in CA-G.R. CV No.
72404 are SET ASIDE. The Decision dated February 1, 2001 of the Regional Trial Court of
San Jose, Occidental Mindoro, Branch 46 in Civil Case No. R-800 is AFFIRMED with
MODIFICATION, as follows:
1. The actual area occupied by respondent ATO covered by Transfer Certificate of Title
No. T-7160, totaling 215,737 square meters is declared expropriated in favor of the
ATO.
2. The ATO is ordered to pay petitioners the amount of P304.39 per square meter for the
area expropriated, or a total ofP65,668,185.43 with interest at the rate of 6% per
annum from February 1, 2001, until the same is fully paid.
No pronouncement as to costs.
SO ORDERED.



LEONARDO A. QUISUMBING
Associate Justice


WE CONCUR:




ANTONIO T. CARPIO
Associate Justice
(On official leave)
CONCHITA CARPIO MORALES
Associate Justice
DANTE O. TINGA
Associate Justice
PRESBITERO J. VELASCO, JR.
Associate Justice


A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.



LEONARDO A. QUISUMBING
Associate Justice
Chairperson

CE R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairpersons Attestation, I certify that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the
opinion of the Courts Division.




REYNATO S. PUNO
Chief Justice

















Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. L-59603 April 29, 1987
EXPORT PROCESSING ZONE AUTHORITY, petitioner,
vs.
HON. CEFERINO E. DULAY, in his capacity as the Presiding Judge, Court of First Instance of Cebu, Branch
XVI, Lapu-Lapu City, and SAN ANTONIO DEVELOPMENT CORPORATION, respondents.
Elena M. Cuevas for respondents.
GUTIERREZ, JR., J .:
The question raised in this petition is whether or not Presidential Decrees Numbered 76, 464, 794 and 1533 have
repealed and superseded Sections 5 to 8 of Rule 67 of the Revised Rules of Court, such that in determining the just
compensation of property in an expropriation case, the only basis should be its market value as declared by the
owner or as determined by the assessor, whichever is lower.
On January 15, 1979, the President of the Philippines, issued Proclamation No. 1811, reserving a certain parcel of
land of the public domain situated in the City of Lapu-Lapu, Island of Mactan, Cebu and covering a total area of
1,193,669 square meters, more or less, for the establishment of an export processing zone by petitioner Export
Processing Zone Authority (EPZA).
Not all the reserved area, however, was public land. The proclamation included, among others, four (4) parcels of
land with an aggregate area of 22,328 square meters owned and registered in the name of the private respondent.
The petitioner, therefore, offered to purchase the parcels of land from the respondent in acccordance with the
valuation set forth in Section 92, Presidential Decree (P.D.) No. 464, as amended. The parties failed to reach an
agreement regarding the sale of the property.
The petitioner filed with the then Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, a complaint for
expropriation with a prayer for the issuance of a writ of possession against the private respondent, to expropriate the
aforesaid parcels of land pursuant to P.D. No. 66, as amended, which empowers the petitioner to acquire by
condemnation proceedings any property for the establishment of export processing zones, in relation to
Proclamation No. 1811, for the purpose of establishing the Mactan Export Processing Zone.
On October 21, 1980, the respondent judge issued a writ of possession authorizing the petitioner to take immediate
possession of the premises. On December 23, 1980, the private respondent flied its answer.
At the pre-trial conference on February 13, 1981, the respondent judge issued an order stating that the parties have
agreed that the only issue to be resolved is the just compensation for the properties and that the pre-trial is thereby
terminated and the hearing on the merits is set on April 2, 1981.
On February 17, 1981, the respondent judge issued the order of condemnation declaring the petitioner as having
the lawful right to take the properties sought to be condemned, upon the payment of just compensation to be
determined as of the filing of the complaint. The respondent judge also issued a second order, subject of this
petition, appointing certain persons as commissioners to ascertain and report to the court the just compensation for
the properties sought to be expropriated.
On June 19, 1981, the three commissioners submitted their consolidated report recommending the amount of
P15.00 per square meter as the fair and reasonable value of just compensation for the properties.
On July 29, 1981, the petitioner Med a Motion for Reconsideration of the order of February 19, 1981 and Objection
to Commissioner's Report on the grounds that P.D. No. 1533 has superseded Sections 5 to 8 of Rule 67 of the
Rules of Court on the ascertainment of just compensation through commissioners; and that the compensation must
not exceed the maximum amount set by P.D. No. 1533.
On November 14, 1981, the trial court denied the petitioner's motion for reconsideration and gave the latter ten (10)
days within which to file its objection to the Commissioner's Report.
On February 9, 1982, the petitioner flied this present petition for certiorari and mandamus with preliminary
restraining order, enjoining the trial court from enforcing the order dated February 17, 1981 and from further
proceeding with the hearing of the expropriation case.
The only issue raised in this petition is whether or not Sections 5 to 8, Rule 67 of the Revised Rules of Court had
been repealed or deemed amended by P.D. No. 1533 insofar as the appointment of commissioners to determine the
just compensation is concerned. Stated in another way, is the exclusive and mandatory mode of determining just
compensation in P.D. No. 1533 valid and constitutional?
The petitioner maintains that the respondent judge acted in excess of his jurisdiction and with grave abuse of
discretion in denying the petitioner's motion for reconsideration and in setting the commissioner's report for hearing
because under P.D. No. 1533, which is the applicable law herein, the basis of just compensation shall be the fair
and current market value declared by the owner of the property sought to be expropriated or such market value as
determined by the assessor, whichever is lower. Therefore, there is no more need to appoint commissioners as
prescribed by Rule 67 of the Revised Rules of Court and for said commissioners to consider other highly variable
factors in order to determine just compensation. The petitioner further maintains that P.D. No. 1533 has vested on
the assessors and the property owners themselves the power or duty to fix the market value of the properties and
that said property owners are given the full opportunity to be heard before the Local Board of Assessment Appeals
and the Central Board of Assessment Appeals. Thus, the vesting on the assessor or the property owner of the right
to determine the just compensation in expropriation proceedings, with appropriate procedure for appeal to higher
administrative boards, is valid and constitutional.
Prior to the promulgation of P.D. Nos. 76, 464, 794 and 1533, this Court has interpreted the eminent domain
provisions of the Constitution and established the meaning, under the fundametal law, of just compensation and
who has the power to determine it. Thus, in the following cases, wherein the filing of the expropriation proceedings
were all commenced prior to the promulgation of the aforementioned decrees, we laid down the doctrine onjust
compensation:
Municipality of Daet v. Court of Appeals (93 SCRA 503, 516),
x x x x x x x x x
"And in the case of J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413, the Court, speaking thru
now Chief Justice Fernando, reiterated the 'well-settled (rule) that just compensation means the equivalent for the
value of the property at the time of its taking. Anything beyond that is more and anything short of that is less, than
just compensation. It means a fair and full equivalent for the loss sustained, which is the measure of the indemnity,
not whatever gain would accrue to the expropriating entity."
Garcia v. Court ofappeals (102 SCRA 597, 608),
x x x x x x x x x
"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:
x x x x x x x x x
"For purposes of just compensation in cases of private property acquired by the government for public use,
the basis shall be the current and fair market value declared by the owner or administrator, or such market
value as determined by the Assessor, whichever is lower."
P.D. No. 464:
"Section 92.Basis for payment of just compensation in expropriation proceedings. In determining just
compensation which private property is acquired by the government for public use, the basis shall be the
market value declared by the owner or administrator or anyone having legal interest in the property, or such
market value as determined by the assessor, whichever is lower."
P.D. No. 794:
"Section 92.Basis for payment of just compensation in expropriation proceedings. In determining just
compensation when private property is acquired by the government for public use, the same shall not
exceed the market value declared by the owner or administrator or anyone having legal interest in the
property, or such market value as determined by the assessor, whichever is lower."
P.D. No. 1533:
"Section 1. In determining just compensation for private property acquired through eminent domain
proceedings, the compensation to be paid shall not exceed the value declared by the owner or administrator
or anyone having legal interest in the property or determined by the assessor, pursuant to the Real Property
Tax Code, whichever value is lower, prior to the recommendation or decision of the appropriate Government
office to acquire the property."
We are constrained to declare the provisions of the Decrees on just compensation unconstitutional and void and
accordingly dismiss the instant petition for lack of merit.
The method of ascertaining just compensation under the aforecited decrees constitutes impermissible
encroachment on judicial prerogatives. It tends to render this Court inutile in a matter which under the Constitution is
reserved to it for final determination.
Thus, although in an expropriation proceeding the court technically would still have the power to determine the just
compensation for the property, following the applicable decrees, its task would be relegated to simply stating the
lower value of the property as declared either by the owner or the assessor. As a necessary consequence, it would
be useless for the court to appoint commissioners under Rule 67 of the Rules of Court. Moreover, the need to
satisfy the due process clause in the taking of private property is seemingly fulfilled since it cannot be said that a
judicial proceeding was not had before the actual taking. However, the strict application of the decrees during the
proceedings would be nothing short of a mere formality or charade as the court has only to choose between the
valuation of the owner and that of the assessor, and its choice is always limited to the lower of the two. The court
cannot exercise its discretion or independence in determining what is just or fair. Even a grade school pupil could
substitute for the judge insofar as the determination of constitutional just compensation is concerned.
In the case of National Housing Authority v. Reyes (123 SCRA 245), this Court upheld P.D. No. 464, as further
amended by P.D. Nos. 794, 1224 and 1259. In this case, the petitioner National Housing Authority contended that
the owner's declaration at P1,400.00 which happened to be lower than the assessor's assessment, is the just
compensation for the respondent's property under section 92 of P.D. No. 464. On the other hand, the private
respondent stressed that while there may be basis for the allegation that the respondent judge did not follow the
decree, the matter is still subject to his final disposition, he having been vested with the original and competent
authority to exercise his judicial discretion in the light of the constitutional clauses on due process and equal
protection.
To these opposing arguments, this Court ruled ihat under the conceded facts, there should be a recognition that the
law as it stands must be applied; that the decree having spoken so clearly and unequivocably calls for obedience;
and that on a matter where the applicable law speaks in no uncertain language, the Court has no choice except to
yield to its command. We further stated that "the courts should recognize that the rule introduced by P.D. No. 76 and
reiterated in subsequent decrees does not upset the established concepts of justice or the constitutional provision
on just compensation for, precisely, the owner is allowed to make his own valuation of his property."
While the Court yielded to executive prerogative exercised in the form of absolute law-making power, its members,
nonetheless, remained uncomfortable with the implications of the decision and the abuse and unfairness which
might follow in its wake. For one thing, the President himself did not seem assured or confident with his own
enactment. It was not enough to lay down the law on determination of just compensation in P.D. 76. It had to be
repeated and reiterated in P.D. 464, P.D. 794, and P.D. 1533. The provision is also found in P.D. 1224, P.D. 1259
and P.D. 1313. Inspite of its effectivity as general law and the wide publicity given to it, the questioned provision or
an even stricter version had to be embodied in cases of specific expropriations by decree as in P.D. 1669
expropriating the Tambunting Estate and P.D. 1670 expropriating the Sunog Apog area in Tondo, Manila.
In the present petition, we are once again confronted with the same question of whether the courts under P.D. 1533,
which contains the same provision on just compensation as its predecessor decrees, still have the power and
authority to determine just compensation, independent of what is stated by the decree and to this effect, to appoint
commissioners for such purpose.
This time, we answer in the affirmative.
In overruling the petitioner's motion for reconsideration and objection to the commissioner's report, the trial court
said:
"Another consideration why the Court is empowered to appoint commissioners to assess the just
compensation of these properties under eminent domain proceedings, is the 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, 351; Cf. Prov.
of Pangasinan v. CFI Judge of Pangasinan, Br. VIII, 80 SCRA 117) Indeed, where this Court simply follows
PD 1533, thereby limiting the determination of just compensation on the value declared by the owner or
administrator or as determined by the Assessor, whichever is lower, it may result in the deprivation of the
landowner's right of due process to enable it to prove its claim to just compensation, as mandated by the
Constitution. (Uy v. Genato, 57 SCRA 123). The tax declaration under the Real Property Tax Code is,
undoubtedly, for purposes of taxation."
We are convinced and so rule that the trial court correctly stated that the valuation in the decree may only serve as a
guiding principle or one of the factors in determining just compensation but it may not substitute the court's own
judgment as to what amount should be awarded and how to arrive at such amount. A return to the earlier well-
established doctrine, to our mind, is more in keeping with the principle that the judiciary should live up to its mission
"by vitalizing and not denigrating constitutional rights." (See Salonga v. Cruz Pao, 134 SCRA 438, 462; citing
Mercado v. Court of First Instance of Rizal, 116 SCRA 93.) The doctrine we enunciated in National Housing
Authority v. Reyes, supra, therefore, must necessarily be abandoned if we are to uphold this Court's role as the
guardian of the fundamental rights guaranteed by the due process and equal protection clauses and as the final
arbiter over transgressions committed against constitutional rights.
The basic unfairness of the decrees is readily apparent.
Just compensation means the value of the property at the time of the taking. It means a fair and full equivalent for
the loss sustained. All the facts as to the condition of the property and its surroundings, its improvements and
capabilities, should be considered.
In this particular case, the tax declarations presented by the petitioner as basis for just compensation were made by
the Lapu-Lapu municipal, later city assessor long before martial law, when land was not only much cheaper but
when assessed values of properties were stated in figures constituting only a fraction of their true market value. The
private respondent was not even the owner of the properties at the time. It purchased the lots for development
purposes. To peg the value of the lots on the basis of documents which are out of date and at prices below the
acquisition cost of present owners would be arbitrary and confiscatory.
Various factors can come into play in the valuation of specific properties singled out for expropriation. The values
given by provincial assessors are usually uniform for very wide areas covering several barrios or even an entire
town with the exception of the poblacion. Individual differences are never taken into account. The value of land is
based on such generalities as its possible cultivation for rice, corn, coconuts, or other crops. Very often land
described as "cogonal" has been cultivated for generations. Buildings are described in terms of only two or three
classes of building materials and estimates of areas are more often inaccurate than correct. Tax values can serve
as guides but cannot be absolute substitutes for just compensation.
To say that the owners are estopped to question the valuations made by assessors since they had the opportunity
to protest is illusory. The overwhelming mass of land owners accept unquestioningly what is found in the tax
declarations prepared by local assessors or municipal clerks for them. They do not even look at, much less analyze,
the statements. The Idea of expropriation simply never occurs until a demand is made or a case filed by an agency
authorized to do so.
It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax documents is
unfair or wrong. And it is repulsive to basic concepts of justice and fairness to allow the haphazard work of a minor
bureaucrat or clerk to absolutely prevail over the judgment of a court promulgated only after expert commissioners
have actually viewed the property, after evidence and arguments pro and con have been presented, and after all
factors and considerations essential to a fair and just determination have been judiciously evaluated.
As was held in the case of Gideon v. Wainwright (93 ALR 2d,733,742):
"In the light of these and many other prior decisions of this Court, it is not surprising that the Betts Court, when faced
with the contention that 'one charged with crime, who is unable to obtain counsel must be furnished counsel by the
State,' conceded that '[E]xpressions in the opinions of this court lend color to the argument. . .' 316 U.S., at 462,
463, 86 L ed. 1602, 62 S Ct. 1252. The fact is that in deciding as it did-that "appointment of counsel is not a
fundamental right, essential to a fair trial" the Court in Betts v. Brady made an ubrupt brake with its own well-
considered precedents. In returning to these old precedents, sounder we believe than the new, we but restore
constitutional principles established to achieve a fair system of justice. . ."
We return to older and more sound precedents. This Court has the duty to formulate guiding and controlling
constitutional principles, precepts, doctrines, or rules. (See Salonga v. Cruz Pano, supra).
The determination of "just compensation" in eminent domain cases is a judicial function. The executive department
or the legislature may make the initial determinations but when a party claims a violation of the guarantee in the Bill
of Rights that private property may not be taken for public use without just compensation, no statute, decree, or
executive order can mandate that its own determination shall prevail over the court's findings. Much less can the
courts be precluded from looking into the "just-ness" of the decreed compensation.
We, therefore, hold that P.D. No. 1533, which eliminates the court's discretion to appoint commissioners pursuant to
Rule 67 of the Rules of Court, is unconstitutional and void. To hold otherwise would be to undermine the very
purpose why this Court exists in the first place.
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The temporary restraining order
issued on February 16, 1982 is LIFTED and SET ASIDE.
SO ORDERED.
Fernan, Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento and Cortes,
JJ.,concur.
Teehankee, C.J., in the result.
Yap, J., on leave.
Petition dismissed. Order lifted and set aside.





















Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-36706 March 31, 1980
COMMISSIONER OF PUBLIC HlGHWAYS, petitioner,
vs.
HON. FRANCISCO P. BURGOS, in his capacity as Judge of the Court of First Instance of Cebu City, Branch
11, and Victoria Amigable, respondents.
Quirico del Mar & Domingo Antiquera for respondent.
Office of the Solicitor General for petitioner.

DE CASTRO, J .:
Victoria Amigable is the owner of parcel of land situated in Cebu City with an area of 6,167 square meters.
Sometime in 1924, the Government took this land for road-right-of-way purpose. The land had since become streets
known as Mango Avenue and Gorordo Avenue in Cebu City.
On February 6, 1959, Victoria Amigable filed in the Court of First Instance of Cebu a complaint, which was later
amended on April 17, 1959 to recover ownership and possession of the land, and for damages in the sum of
P50,000.00 for the alleged illegal occupation of the land by the Government, moral damages in the sum of
P25,000.00, and attorney's fees in the sum of P5,000.00, plus costs of suit. The complaint was docketed as Civil
Case No. R-5977 of the Court of First Instance of Cebu, entitled "Victoria Amigable vs. Nicolas Cuenca, in his
capacity as Commissioner of Public Highway and Republic of the Philippines.
1

In its answer,
2
the Republic alleged, among others, that the land was either donated or sold by its owners to the
province of Cebu to enhance its value, and that in any case, the right of the owner, if any, to recover the value of
said property was already barred by estoppel and the statute of limitations, defendants also invoking the non-
suability of the Government.
In a decision rendered on July 29, 1959 by Judge Amador E. Gomez, the plaintiff's complaint was dismissed on the
grounds relied upon by the defendants therein.
3
The plaintiff appealed the decision to the Supreme Court where it
was reversed, and the case was remanded to the court of origin for the determination of the compensation to be
paid the plaintiff-appellant as owner of the land, including attorney's fees.
4
The Supreme Court decision also
directed that to determine just compensation for the land, the basis should be the price or value thereof at the time
of the taking.
5

In the hearing held pursuant to the decision of the Supreme Court, the Government proved the value of the property
at the time of the taking thereof in 1924 with certified copies, issued by the Bureau of Records Management, of
deeds of conveyance executed in 1924 or thereabouts, of several parcels of land in the Banilad Friar Lands in which
the property in question is located, showing the price to be at P2.37 per square meter. For her part, Victoria
Amigable presented newspaper clippings of the Manila Times showing the value of the peso to the dollar obtaining
about the middle of 1972, which was P6.775 to a dollar.
Upon consideration of the evidence presented by both parties, the court which is now the public respondent in the
instant petition, rendered judgment on January 9, 1973 directing the Republic of the Philippines to pay Victoria
Amigable the sum of P49,459.34 as the value of the property taken, plus P145,410.44 representing interest at 6%
on the principal amount of P49,459.34 from the year 1924 up to the date of the decision, plus attorney's fees of 10%
of the total amount due to Victoria Amigable, or a grand total of P214,356.75.
6

The aforesaid decision of the respondent court is now the subject of the present petition for review by certiorari, filed
by the Solicitor General as counsel of the petitioner, Republic of the Philippines, against the landowner, Victoria
Amigable, as private respondent. The petition was given due course after respondents had filed their comment
thereto, as required. The Solicitor General, as counsel of petitioner, was then required to file petitioner's brief and to
serve copies thereof to the adverse parties.
7
Petitioner's brief was duly filed on January 29, 1974,
8
to which
respondents filed only a "comment."
9
instead of a brief, and the case was then considered submitted for decision.
10

1. The issue of whether or not the provision of Article 1250 of the New Civil Code is applicable in determining the
amount of compensation to be paid to respondent Victoria Amigable for the property taken is raised because the
respondent court applied said Article by considering the value of the peso to the dollar at the time of hearing, in
determining due compensation to be paid for the property taken. The Solicitor General contends that in so doing, the
respondent court violated the order of this Court, in its decision in G.R. No. L-26400, February 29, 1972, to make as
basis of the determination of just compensation the price or value of the land at the time of the taking.
It is to be noted that respondent judge did consider the value of the property at the time of the taking, which as
proven by the petitioner was P2.37 per square meter in 1924. However, applying Article 1250 of the New Civil Code,
and considering that the value of the peso to the dollar during the hearing in 1972 was P6.775 to a dollar, as proven
by the evidence of the private respondent Victoria Amigable the Court fixed the value of the property at the deflated
value of the peso in relation, to the dollar, and came up with the sum of P49,459.34 as the just compensation to be
paid by the Government. To this action of the respondent judge, the Solicitor General has taken exception.
Article 1250 of the New Civil Code seems to be the only provision in our statutes which provides for payment of an
obligation in an amount different from what has been agreed upon by the parties because of the supervention of
extra-ordinary inflation or deflation. Thus, the Article provides:
ART. 1250. In case extra-ordinary inflation or deflation of the currency stipulated should supervene,
the value of the currency at the time of the establishment of the obligation shall be the basis of
payment, unless there is an agreement to the contrary.
It is clear that the foregoing provision applies only to cases where a contract or agreement is involved. It does not
apply where the obligation to pay arises from law, independent of contract. The taking of private property by the
Government in the exercise of its power of eminent domain does not give rise to a contractual obligation. We have
expressed this view in the case of Velasco vs. Manila Electric Co., et al., L-19390, December 29, 1971.
11

Moreover, the law as quoted, clearly provides that the value of the currency at the time of the establishment of the
obligation shall be the basis of payment which, in cases of expropriation, would be the value of the peso at the time
of the taking of the property when the obligation of the Government to pay arises.
12
It is only when there is an
"agreement to the contrary" that the extraordinary inflation will make the value of the currency at the time of
payment, not at the time of the establishment of the obligation, the basis for payment. In other words, an agreement
is needed for the effects of an extraordinary inflation to be taken into account to alter the value of the currency at the
time of the establishment of the obligation which, as a rule, is always the determinative element, to be varied by
agreement that would find reason only in the supervention of extraordinary inflation or deflation.
We hold, therefore, that under the law, in the absence of any agreement to the contrary, even assuming that there
has been an extraordinary inflation within the meaning of Article 1250 of the New Civil Code, a fact We decline to
declare categorically, the value of the peso at the time of the establishment of the obligation, which in the instant
case is when the property was taken possession of by the Government, must be considered for the purpose of
determining just compensation. Obviously, there can be no "agreement to the contrary" to speak of because the
obligation of the Government sought to be enforced in the present action does not originate from contract, but from
law which, generally is not subject to the will of the parties. And there being no other legal provision cited which
would justify a departure from 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.
13

In the present case, the unusually long delay of private respondent in bringing the present action-period of almost 25
years which a stricter application of the law on estoppel and the statute of limitations and prescription may have
divested her of the rights she seeks on this action over the property in question, is an added circumstance militating
against payment to her of an amount bigger-may three-fold more than the value of the property as should have been
paid at the time of the taking. For conformably to the rule that one should take good care of his own concern, private
respondent should have commenced proper action soon after she had been deprived of her right of ownership and
possession over the land, a deprivation she knew was permanent in character, for the land was intended for, and
had become, avenues in the City of Cebu. A penalty is always visited upon one for his inaction, neglect or laches in
the assertion of his rights allegedly withheld from him, or otherwise transgressed upon by another.
From what has been said, the correct amount of compensation due private respondent for the taking of her land for
a public purpose would be not P49,459.34, as fixed by the respondent court, but only P14,615.79 at P2.37 per
square meter, the actual value of the land of 6,167 square meters when it was taken in 1924. The interest in the
sum of P145,410.44 at the rate of 6% from 1924 up to the time respondent court rendered its decision, as was
awarded by the said court should accordingly be reduced.
In Our decision in G.R. No. L-26400, February 29, 1972,
14
We have said that Victoria Amigable is entitled to the
legal interest on the price of the land from the time of the taking. This holding is however contested by the Solicitor
General, citing the case of Raymunda S. Digsan vs. Auditor General, et al.,
15
alleged to have a similar factual
environment and involving the same issues, where this Court declared that the interest at the legal rate in favor of
the landowner accrued not from the taking of the property in 1924 but from April 20, 1961 when the claim for
compensation was filed with the Auditor General. Whether the ruling in the case cited is still the prevailing doctrine,
what was said in the decision of this Court in the abovecited case involving the same on the instant matter, has
become the "law of the case", no motion for its reconsideration having been filed by the Solicitor General before the
decision became final. Accordingly, the interest to be paid private respondent, Victoria Amigable, shall commence
from 1924, when the taking of the property took place, computed on the basis of P14,615.79, the value of the land
when taken in said year 1924.
2. On the amount of attorney's fees to be paid private respondent, about which the Solicitor General has next taken
issue with the respondent court because the latter fixed the same at P19,486.97, while in her complaint, respondent
Amigable had asked for only P5,000.00, the amount as awarded by the respondent court, would be too exhorbitant
based as it is, on the inflated value of the land. An attorney's fees of P5,000.00, which is the amount asked for by
private respondent herself in her complaint, would be reasonable.
WHEREFORE, the judgment appealed from is hereby reversed as to the basis in the determination of the price of
the land taken as just compensation for its expropriation, which should be the value of the land at the time of the
taking, in 1924. Accordingly, the same is hereby fixed at P14,615.79 at P2.37 per square meter, with interest
thereon at 6% per annum, from the taking of the property in 1924, to be also paid by Government to private
respondent, Victoria Amigable, until the amount due is fully paid, plus attorney's fees of P5,000.00.
SO ORDERED.
Makasiar, Fernandez, Guerrero and Melencio-Herrera, JJ., concur.








FIRST DIVISION
[G.R. No. 140160. January 13, 2004]
LAND BANK OF THE PHILIPPINES, petitioner, vs. FELICIANO F.
WYCOCO, respondent.
[G.R. No. 146733. January 13, 2004]
FELICIANO F. WYCOCO, petitioner, vs. THE HONORABLE RODRIGO S.
CASPILLO, Pairing Judge of the Regional Trial Court, Third Judicial
Region, Branch 23, Cabanatuan City and the DEPARTMENT OF AGRARIAN
REFORM, respondents.
D E C I S I O N
YNARES-SANTIAGO, J .:
Before the Court are consolidated petitions, the first seeking the review of the
February 9, 1999 Decision
[1]
and the September 22, 1999 Resolution
[2]
of the Court of
Appeals in CA-G.R. No. SP No. 39913, which modified the Decision
[3]
of Regional Trial
Court of Cabanatuan City, Branch 23, acting as a Special Agrarian Court in Agrarian Case
No. 91 (AF); and the second for mandamus to compel the said trial court to issue a writ of
execution and to direct Judge Rodrigo S. Caspillo to inhibit himself from Agrarian Case
No. 91 (AF).
The undisputed antecedents show that Feliciano F. Wycoco is the registered owner of
a 94.1690 hectare unirrigated and untenanted rice land, covered by Transfer Certificate of
Title No. NT-206422 and situated in the Sitios of Ablang, Saguingan and Pinamunghilan,
Barrio of San Juan, Licab, Nueva Ecija.
[4]

In line with the Comprehensive Agrarian Reform Program (CARP) of the government,
Wycoco voluntarily offered to sell the land to the Department of Agrarian Reform (DAR) for
P14.9 million.
[5]
In November 1991, after the DARs evaluation of the application and the
determination of the just compensation by the Land Bank of the Philippines (LBP), a
notice of intention to acquire 84.5690 hectares of the property for P1,342,667.46
[6]
was
sent to Wycoco. The amount offered was later raised to P2,594,045.39 and, upon review,
was modified to P2,280,159.82.
[7]
The area which the DAR offered to acquire excluded idle
lands, river and road located therein. Wycoco rejected the offer, prompting the DAR to
indorse the case to the Department of Agrarian Reform Adjudication Board (DARAB) for
the purpose of fixing the just compensation in a summary administrative proceeding.
[8]
The
case was docketed as DARAB VOS Case No. 232 NE 93. Thereafter, the DARAB
requested LBP to open a trust account in the name of Wycoco and deposited the
compensation offered by DAR.
[9]
In the meantime, the property was distributed to farmer-
beneficiaries.
On March 29, 1993, DARAB required the parties to submit their respective
memoranda or position papers in support of their claim.
[10]
Wycoco, however, decided to
forego with the filing of the required pleadings, and instead filed on April 13, 1993, the
instant case for determination of just compensation with the Regional Trial Court of
Cabanatuan City, Branch 23, docketed as Agrarian Case No. 91 (AF).
[11]
Impleaded as
party-defendants therein were DAR and LBP.
On April 30, 1993, Wycoco filed a manifestation in VOS Case No. 232 NE 93,
informing the DARAB of the pendency of Agrarian Case No. 91 (AF) with the Cabanatuan
court, acting as a special agrarian court.
[12]
On March 9, 1994, the DARAB issued an order
dismissing the case to give way to the determination of just compensation by the
Cabanatuan court. Pertinent portion thereof states:
Admittedly, this Forum is vested with the jurisdiction to conduct administrative proceeding to
determine compensation. [H]owever, a thorough perusal of petitioners complaint showed that he
did not only raise the issue of valuation but such other matters which are beyond the competence of
the Board. Besides, the petitioner has the option to avail the administrative remedies or bring the
matter on just compensation to the Special Agrarian Court for final determination.
WHEREFORE, premises considered, this case is hereby dismissed.
SO ORDERED.
[13]

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

After conducting a pre-trial on October 3, 1994, the trial court issued a pre-trial order
as follows:
The parties manifested that there is no possibility of amicable settlement, neither are they willing to
admit or stipulate on facts, except those contained in the pleadings.
The only issue left is for the determination of just compensation or correct valuation of the land
owned by the plaintiff subject of this case.
The parties then prayed to terminate the pre-trial conference.
AS PRAYED FOR, the pre-trial conference is considered terminated, and instead of trial, the
parties are allowed to submit their respective memoranda.
WHEREFORE, the parties are given twenty (20) days from today within which to file their
simultaneous memoranda, and another ten (10) days from receipt thereof to file their
Reply/Rejoinder, if any, and thereafter, this case shall be deemed submitted for decision.
SO ORDERED.
[15]

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

On November 14, 1995, the trial court rendered a decision in favor of Wycoco. It ruled
that there is no need to present evidence in support of the land valuation inasmuch as it is
of public knowledge that the prevailing market value of agricultural lands sold in Licab,
Nueva Ecija is from P135,000.00 to 150,000.00 per hectare. The court thus took judicial
notice thereof and fixed the compensation for the entire 94.1690 hectare land at
P142,500.00 per hectare or a total of P13,428,082.00. It also awarded Wycoco actual
damages for unrealized profits plus legal interest. The dispositive portion thereof states:
WHEREFORE, premises considered, judgment is hereby rendered:
1. Ordering the defendants to pay the amount of P13,419,082.00 to plaintiff as just
compensation for the property acquired;
2. Ordering the defendants to pay plaintiff the amount of P29,663,235.00 representing the
unrealized profits from the time of acquisition of the subject property and the sum of P8,475,210.00
for every calendar year, until the amount of compensation is fully paid including legal interest
which had accrued thereon.
No pronouncement as to costs.
SO ORDERED.
[18]

The DAR and the LBP filed separate petitions before the Court of Appeals. The
petition brought by DAR on jurisdictional and procedural issues, docketed as CA-G.R. No.
SP No. 39234, was dismissed on May 29, 1997.
[19]
The dismissal became final and
executory on June 26, 1997.
[20]
This prompted Wycoco to file a petition for mandamus
before this Court, docketed as G.R. No. 146733, praying that the decision of the Regional
Trial Court of Cabanatuan City, Branch 23, in Agrarian Case No. 91 (AF) be executed,
and that Judge Rodrigo S. Caspillo, the now presiding Judge of said court, be compelled
to inhibit himself from hearing the case.
The petition brought by LBP on both substantive and procedural grounds, docketed as
CA-G.R. No. SP No. 39913, was likewise dismissed by the Court of Appeals on February
9, 1999.
[21]
On September 22, 1999, however, the Court of Appeals modified its decision by
deducting from the compensation due Wycoco the amount corresponding to the 3.3672
hectare portion of the 94.1690 hectare land which was found to have been previously sold
by Wycoco to the Republic, thus
WHEREFORE, and conformably with the above, Our decision of February 9, 1999 is hereby
MODIFIED in the sense that the value corresponding to the aforesaid 3.3672 hectares and all the
awards appertaining thereto in the decision a quo are ordered deducted from the totality of the
awards granted to the private respondent. In all other respects, the decision sought to be
reconsidered is hereby RE-AFFIRMED and REITERATED.
SO ORDERED.
[22]

In its petition, LBP contended that the Court of Appeals erred in ruling:
I
THAT THE TRIAL COURT ACTING AS A SPECIAL AGRARIAN COURT MAY ASSUME
JURISDICTION OVER AGRARIAN CASE NO. 91 (AF) AND RENDER JUDGMENT
THEREON WITHOUT AN INITIAL ADMINISTRATIVE DETERMINATION OF JUST
COMPENSATION BY THE DARAB PURSUANT TO SECTION 16 OF RA 6657, OVER THE
TIMELY OBJECTION OF THE PETITIONER, AND IN VIOLATION OF THE RULE ON
EXHAUSTION OF ADMINISTRATIVE REMEDIES AND ON FORUM SHOPPING;
II
THAT THE JUST COMPENSATION DETERMINED BY THE TRIAL COURT WAS
SUPPORTED BY SUBSTANTIAL EVIDENCE, WHEN IT WAS BASED ONLY ON JUDICIAL
NOTICE OF THE PREVAILING MARKET VALUE OF LAND BASED ON THE ALLEGED
PRICE OF TRANSFER OF TENURAL RIGHTS, TAKEN WITHOUT NOTICE AND HEARING
IN VIOLATION OF RULE 129 OF THE RULES OF COURT;
III
THAT THE TRIAL COURT CAN REQUIRE THE PETITIONER TO COMPENSATE THE
PORTIONS OF RESPONDENTS PROPERTY WHICH WERE NOT DECLARED BY THE
DAR FOR ACQUISITION, NOR SUITABLE FOR AGRICULTURE NOR CAPABLE OF
DISTRIBUTION TO FARMER BENEFICIARIES UNDER THE CARP;
IV
THAT THE TRIAL COURT CAN AWARD AS PART OF JUST COMPENSATION LEGAL
INTEREST ON THE PRINCIPAL AND ALLEGED UNREALIZED PROFITS OF
P29,663,235.00 FROM THE TIME OF ACQUISITION OF THE SUBJECT PROPERTY AND
P8,475,210.00 FOR EVERY CALENDAR YEAR THEREAFTER, CONSIDERING THAT THE
SAME HAS NO LEGAL BASIS AND THAT THE RESPONDENT RETAINED THE TITLE TO
HIS PROPERTY DESPITE THE DARS NOTICE OF ACQUISITION;
V
THAT THE TRIAL COURT HAD VALIDLY GRANTED EXECUTION PENDING APPEAL
ON THE ALLEGEDLY GOOD REASON OF THE PETITIONERS ADVANCED AGE AND
WEAK HEALTH, CONTRARY TO THE APPLICABLE JURISPRUDENCE AND
CONSIDERING THAT THE RESPONDENT IS NOT DESTITUTE.
[23]

The issues for resolution are as follows: (1) Did the Regional Trial Court, acting as
Special Agrarian Court, validly acquire jurisdiction over the instant case for determination
of just compensation? (2) Assuming that it acquired jurisdiction, was the compensation
arrived at supported by evidence? (3) Can Wycoco compel the DAR to purchase the
entire land subject of the voluntary offer to sell? (4) Were the awards of interest and
damages for unrealized profits valid?
Anent the issue of jurisdiction, the laws in point are Sections 50 and 57 of Republic Act
No. 6657 (Comprehensive Agrarian Reform Law of 1988) which, in pertinent part, provide:
Section 50. Quasi-judicial Powers of the DAR. The DAR is hereby vested with primary
jurisdiction to determine and adjudicate agrarian reform matters and shall have exclusive original
jurisdiction over all matters involving the implementation of agrarian reform, except those falling
under the exclusive jurisdiction of the Department of Agriculture (DA) and the Department of
Environment and Natural Resources (DENR).
Section 57. Special Jurisdiction. The Special Agrarian Court shall have original and exclusive
jurisdiction over all petitions for the determination of just compensation to landowners, and the
prosecution of all criminal offenses under this Act.
The Special Agrarian Courts shall decide all appropriate cases under their special jurisdiction
within thirty (30) days from submission of the case for decision.
In Republic v. Court of Appeals,
[24]
it was held that Special Agrarian Courts are given
original and exclusive jurisdiction over two categories of cases, to wit: (1) all petitions for
the determination of just compensation; and (2) the prosecution of all criminal offenses
under R.A. No. 6657. Section 50 must be construed in harmony with Section 57 by
considering cases involving the determination of just compensation and criminal cases for
violations of R.A. No. 6657 as excepted from the plenitude of power conferred to the
DAR. Indeed, there is a reason for this distinction. The DAR, as an administrative
agency, cannot be granted jurisdiction over cases of eminent domain and over criminal
cases. The valuation of property in eminent domain is essentially a judicial function which
is vested with the Special Agrarian Courts and cannot be lodged with administrative
agencies.
[25]
In fact, Rule XIII, Section 11 of the New Rules of Procedure of the DARAB
acknowledges this power of the court, thus
Section 11. Land Valuation and Preliminary Determination and Payment of Just
Compensation. The decision of the Adjudicator on land valuation and preliminary determination
and payment of just compensation shall not be appealable to the Board but shall be brought directly
to the Regional Trial Courts designated as Special Agrarian Courts within fifteen (15) days from
receipt of the notice thereof. Any party shall be entitled to only one motion for reconsideration.
(Emphasis supplied)
Under Section 1 of Executive Order No. 405, Series of 1990, the Land Bank of the
Philippines is charged with the initial responsibility of determining the value of lands
placed under land reform and the just compensation to be paid for their taking.
[26]
Through
a notice of voluntary offer to sell (VOS) submitted by the landowner, accompanied by the
required documents, the DAR evaluates the application and determines the lands
suitability for agriculture. The LBP likewise reviews the application and the supporting
documents and determines the valuation of the land. Thereafter, the DAR issues the
Notice of Land Valuation to the landowner. In both voluntary and compulsory acquisition,
where the landowner rejects the offer, the DAR opens an account in the name of the
landowner and conducts a summary administrative proceeding. If the landowner
disagrees with the valuation, the matter may be brought to the Regional Trial Court acting
as a special agrarian court. This in essence is the procedure for the determination of just
compensation.
[27]

In Land Bank of the Philippines v. Court of Appeals,
[28]
the landowner filed an action for
determination of just compensation without waiting for the completion of DARABs re-
evaluation of the land. This, notwithstanding, the Court held that the trial court properly
acquired jurisdiction because of its exclusive and original jurisdiction over determination of
just compensation, thus
It is clear from Sec. 57 that the RTC, sitting as a Special Agrarian Court, has original and
exclusive jurisdiction over all petitions for the determination of just compensation to landowners.
This original and exclusive jurisdiction of the RTC would be undermined if the DAR would vest
in administrative officials original jurisdiction in compensation cases and make the RTC an
appellate court for the review of administrative decisions. Thus, although the new rules speak of
directly appealing the decision of adjudicators to the RTCs sitting as Special Agrarian Courts, it is
clear from Sec. 57 that the original and exclusive jurisdiction to determine such cases is in the
RTCs. Any effort to transfer such jurisdiction to the adjudicators and to convert the original
jurisdiction of the RTCs into an appellate jurisdiction would be contrary to Sec. 57 and therefore
would be void. Thus, direct resort to the SAC [Special Agrarian Court] by private respondent is
valid. (Emphasis supplied)
[29]

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

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

In arriving at the valuation of Wycocos land, the trial court took judicial notice of the
alleged prevailing market value of agricultural lands in Licab, Nueva Ecija without
apprising the parties of its intention to take judicial notice thereof. Section 3, Rule 129 of
the Rules on Evidence provides:
Sec. 3. Judicial Notice, When Hearing Necessary. During the trial, the court, on its own initiative,
or on request of a party, may announce its intention to take judicial notice of any matter and allow
the parties to be heard thereon.
After trial and before judgment or on appeal, the proper court, on its own initiative, or on request of
a party, may take judicial notice of any matter and allow the parties to be heard thereon if such
matter is decisive of a material issue in the case.
Inasmuch as the valuation of the property of Wycoco is the very issue in the case at
bar, the trial court should have allowed the parties to present evidence thereon instead of
practically assuming a valuation without basis. While market value may be one of the
bases of determining just compensation, the same cannot be arbitrarily arrived at without
considering the factors to be appreciated in arriving at the fair market value of the
property e.g., the cost of acquisition, the current value of like properties, its size, shape,
location, as well as the tax declarations thereon.
[33]
Since these factors were not considered,
a remand of the case for determination of just compensation is necessary. The power to
take judicial notice is to be exercised by courts with caution especially where the case
involves a vast tract of land. Care must be taken that the requisite notoriety exists; and
every reasonable doubt on the subject should be promptly resolved in the negative. To
say that a court will take judicial notice of a fact is merely another way of saying that the
usual form of evidence will be dispensed with if knowledge of the fact can be otherwise
acquired. This is because the court assumes that the matter is so notorious that it will not
be disputed. But judicial notice is not judicial knowledge. The mere personal knowledge
of the judge is not the judicial knowledge of the court, and he is not authorized to make his
individual knowledge of a fact, not generally or professionally known, the basis of his
action.
[34]

Anent the third issue, the DAR cannot be compelled to purchase the entire property
voluntarily offered by Wycoco. The power to determine whether a parcel of land may
come within the coverage of the Comprehensive Agrarian Reform Program is essentially
lodged with the DAR. That Wycoco will suffer damages by the DARs non-acquisition of
the approximately 10 hectare portion of the entire land which was found to be not suitable
for agriculture is no justification to compel DAR to acquire the whole area.
We find Wycocos claim for payment of interest partly meritorious. In Land Bank of the
Philippines v. Court of Appeals,
[35]
this Court struck down as void DAR Administrative
Circular No. 9, Series of 1990, which provides for the opening of trust accounts in lieu of
the deposit in cash or in bonds contemplated in Section 16 (e) of RA 6657.
It is very explicit from [Section 16 (e)] that the deposit must be made only in cash or in LBP
bonds. Nowhere does it appear nor can it be inferred that the deposit can be made in any other
form. If it were the intention to include a trust account among the valid modes of deposit,
thatshould have been made express, or at least, qualifying words ought to have appeared from
which it can be fairly deduced that a trust account is allowed. In sum, there is no ambiguity in
Section 16(e) of RA 6657 to warrant an expanded construction of the term deposit.
x x x x x x x x x
In the present suit, the DAR clearly overstepped the limits of its powers to enact rules and
regulations when it issued Administrative Circular No. 9. There is no basis in allowing the opening
of a trust account in behalf of the landowner as compensation for his property because, as
heretofore discussed, Section 16(e) of RA 6657 is very specific that the deposit must be made only
in cash or in LBP bonds. In the same vein, petitioners cannot invoke LRA Circular Nos. 29, 29-
A and 54 because these implementing regulations can not outweigh the clear provision of the law.
Respondent court therefore did not commit any error in striking down Administrative Circular No.
9 for being null and void.
[36]

Pursuant to the forgoing decision, DAR issued Administrative Order No. 2, Series of
1996, converting trust accounts in the name of landowners into deposit accounts. The
transitory provision thereof states
VI. TRANSITORY PROVISIONS
All trust accounts issued pursuant to Administrative Order No. 1, S. 1993 covering landholdings
not yet transferred in the name of the Republic of the Philippines as of July 5, 1996 shall
immediately be converted to deposit accounts in the name of the landowners concerned.
All Provincial Agrarian Reform Officers and Regional Directors are directed to immediately
inventory the claim folders referred to in the preceding paragraph, wherever they may be found and
request the LBP to establish the requisite deposit under this Administrative Order and to issue a
new certification to that effect. The Original Certificate of Trust Deposit previously issued should
be attached to the request of the DAR in order that the same may be replaced with a new one.
All previously established Trust Deposits which served as the basis for the transfer of the
landowners title to the Republic of the Philippines shall likewise be converted to deposits in cash
and in bonds. The Bureau of Land Acquisition and Distribution shall coordinate with the LBP for
this purpose.
In light of the foregoing, the trust account opened by LBP in the name of Wycoco as
the mode of payment of just compensation should be converted to a deposit
account. Such conversion should be retroactive in application in order to rectify the error
committed by the DAR in opening a trust account and to grant the landowners the benefits
concomitant to payment in cash or LBP bonds prior to the ruling of the Court inLand Bank
of the Philippines v. Court of Appeals. Otherwise, petitioners right to payment of just and
valid compensation for the expropriation of his property would be violated.
[37]
The interest
earnings accruing on the deposit account of landowners would suffice to compensate
them pending payment of just compensation.
In some expropriation cases, the Court imposed an interest of 12% per annum on the
just compensation due the landowner. It must be stressed, however, that in these cases,
the imposition of interest was in the nature of damages for delay in payment which in
effect makes the obligation on the part of the government one of forbearance.
[38]
It follows
that the interest in the form of damages cannot be applied where there was prompt and
valid payment of just compensation. Conversely, where there was delay in tendering a
valid payment of just compensation, imposition of interest is in order. This is because the
replacement of the trust account with cash or LBP bonds did not ipso facto cure the lack of
compensation; for essentially, the determination of this compensation was marred by lack
of due process.
[39]

Accordingly, the just compensation due Wycoco should bear 12% interest per annum
from the time LBP opened a trust account in his name up to the time said account was
actually converted into cash and LBP bonds deposit accounts. The basis of the 12%
interest would be the just compensation that would be determined by the Special Agrarian
Court upon remand of the instant case. In the same vein, the amount determined by the
Special Agrarian Court would also be the basis of the interest income on the cash and
bond deposits due Wycoco from the time of the taking of the property up to the time of
actual payment of just compensation.
The award of actual damages for unrealized profits should be deleted. The amount of
loss must not only be capable of proof, but must be proven with a reasonable degree of
certainty. The claim must be premised upon competent proof or upon the best evidence
obtainable, such as receipts or other documentary proof.
[40]
None having been presented in
the instant case, the claim for unrealized profits cannot be granted.
From the foregoing discussion, it is clear that Wycocos petition for mandamus in G.R.
No. 146733 should be dismissed. The decision of the Regional Trial Court of Cabanatuan
City, Branch 23, acting as Special Agrarian Court in Agrarian Case No. 91 (AF), cannot be
enforced because there is a need to remand the case to the trial court for determination of
just compensation. Likewise, the prayer for the inhibition of Judge Rodrigo S. Caspillo in
Agrarian Case No. 91 (AF) is denied for lack of basis.
WHEREFORE, in view of all the foregoing, the petition in G.R. No. 140160
is PARTIALLY GRANTED. Agrarian Case No. 91 (AF) isREMANDED to the Regional
Trial Court of Cabanatuan City, Branch 23, for the determination of just
compensation. The petition for mandamus in G.R. No. 146733 is DISMISSED.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Panganiban, Carpio, and Azcuna, JJ., concur.





SECOND DIVISION
[G.R. No. 158563. June 30, 2005]
AIR TRANSPORTATION OFFICE (ATO) and MACTAN-CEBU INTERNATIONAL
AIRPORT AUTHORITY (MCIAA),petitioners, vs. APOLONIO GOPUCO,
JR., respondent.
D E C I S I O N
CHICO-NAZARIO, J .:
When private land is expropriated for a particular public use, and that particular public
use is abandoned, does its former owner acquire a cause of action for recovery of the
property?
The trial courts ruling in the negative was reversed by the Court of Appeals in its
Decision
[1]
of 28 February 2001. Hence this petition for review under Rule 45 of the 1997
Rules of Civil Procedure of the said Decision of the court a quo, and its Resolution
[2]
of 22
May 2003 dismissing petitioners motion for reconsideration.
The facts, as adduced from the records, are as follows:
Respondent Apolonio Gopuco, Jr. was the owner of Cadastral Lot No. 72 consisting of
995 square meters located in the vicinity of the Lahug Airport in Cebu City covered by
Transfer Certificate of Title (TCT) No. 13061-T.
The Lahug Airport had been turned over by the Unites States Army to the Republic of
the Philippines sometime in 1947 through the Surplus Property Commission, which
accepted it in behalf of the Philippine Government. In 1947, the Surplus Property
Commission was succeeded by the Bureau of Aeronautics, which office was supplanted
by the National Airport Corporation (NAC). The NAC was in turn dissolved and replaced
with the Civil Aeronautics Administration (CAA).
[3]

Sometime in 1949, the NAC informed the owners of the various lots surrounding the
Lahug Airport, including the herein respondent, that the government was acquiring their
lands for purposes of expansion. Some landowners were convinced to sell their
properties on the assurance that they would be able to repurchase the same when these
would no longer be used by the airport. Others, including Gopuco, refused to do so.
Thus, on 16 April 1952, the CAA filed a complaint with the Court of First Instance (CFI)
of Cebu for the expropriation of Lot No. 72 and its neighboring realties, docketed as Civil
Case No. R-1881.
On 29 December 1961, the CFI promulgated a Decision,
1. Declaring the expropriation of [the subject lots, including Lot No. 72] justified and in lawful
exercise of the right of eminent domain;
2. Declaring . a balance of P1,990 in favor of Apolonio Go Puco, Jr. with legal interest from
November 16, 1947 until fully paid. ;
3. After the payment of the foregoing financial obligation to the landowners, directing the latter
to deliver to the plaintiff the corresponding Transfer Certificates of Title to their respective lots;
and upon the presentation of the said titles to the Register of Deeds, ordering the latter to cancel the
same and to issue, in lieu thereof, new Transfer Certificates of Title in the name of the plaintiff.
[4]

No appeal was taken from the above Decision on Lot No. 72, and the judgment of
condemnation became final and executory. Thereafter, on 23 May 1962, absolute title to
Lot No. 72 was transferred to the Republic of the Philippines under TCT No. 25030.
[5]

Subsequently, when the Mactan International Airport commenced operations, the
Lahug Airport was ordered closed by then President Corazon C. Aquino in a
Memorandum of 29 November 1989.
[6]
Lot No. 72 was thus virtually abandoned.
[7]

On 16 March 1990, Gopuco wrote
[8]
the Bureau of Air Transportation, through the
manager of the Lahug Airport, seeking the return of his lot and offering to return the
money previously received by him as payment for the expropriation. This letter was
ignored.
[9]

In the same year, Congress passed Republic Act No. 6958 creating the Mactan-Cebu
International Airport Authority (MCIAA) and in part providing for the transfer of the assets
of the Lahug Airport thereto. Consequently, on 08 May 1992, ownership of Lot No. 72
was transferred to MCIAA under TCT No. 120356.
[10]

On 06 August 1992, Apolonio Gopuco, Jr. filed an amended complaint
[11]
for recovery
of ownership of Lot No. 72 against the Air Transportation Office
[12]
and the Province of
Cebu with the Regional Trial Court (RTC) of Cebu, Branch X, docketed as Civil Case No.
CEB-11914. He maintained that by virtue of the closure of the Lahug Airport, the original
purpose for which the property was expropriated had ceased or otherwise been
abandoned, and title to the property had therefore reverted to him.
Gopuco further alleged that when the original judgment of expropriation had been
handed down, and before they could file an appeal thereto, the CAA offered them a
compromise settlement whereby they were assured that the expropriated lots would be
resold to them for the same price as when it was expropriated in the event that the Lahug
Airport would be abandoned. Gopuco claims to have accepted this offer.
[13]
However, he
failed to present any proof on this matter, and later admitted that insofar as the said lot
was concerned, no compromise agreement was entered into by the government and the
previous owners.
[14]

Lastly, Gopuco asserted that he had come across several announcements in the
papers that the Lahug Airport was soon to be developed into a commercial complex,
which he took to be a scheme of the Province of Cebu to make permanent the deprivation
of his property.
On 20 May 1994, the trial court rendered a Decision
[15]
dismissing the complaint and
directing the herein respondent to pay the MCIAA exemplary damages, litigation expenses
and costs.
Aggrieved by the holding of the trial court, Gopuco appealed to the Court of Appeals,
which overturned the RTC decision, ordered the herein petitioners to reconvey Lot No. 72
to Gopuco upon payment of the reasonable price as determined by it, and deleted the
award to the petitioners of exemplary damages, litigation expenses and costs.
The Motion for Reconsideration was denied
[16]
on 22 May 2003, hence this petition,
which raises the following issues:
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT HAS
THE RIGHT TO RECLAIM OWNERSHIP OVER THE SUBJECT EXPROPRIATED LOT
BASED ON THE IMPORT OF THE DECEMBER 29, 1961 DECISION IN CIVIL CASE NO.
1881.
WHETHER THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF
LITIGATION EXPENSES AND COSTS IN FAVOR OF PETITIONERS.
In deciding the original expropriation case that gave rise to the present controversy,
Civil Case No. R-1881, the CFI reasoned that the planned expansion of the airport
justified the exercise of eminent domain, thus:
As for the public purpose of the expropriation proceeding, it cannot be doubted. Although the
Mactan Airport is being constructed, it does not take away the actual usefulness and importance of
the Lahug Airport; it is handling the air traffic both civilian and military. From it aircrafts fly to
Mindanao and Visayas and pass thru it on their return flights to the North and Manila. Then, no
evidence was adduced to show how soon is the Mactan Airport to be placed in operation and
whether the Lahug Airport will be closed immediately thereafter. It is for the other departments of
the Government to determine said matters. The Court cannot substitute its judgment for those of the
said departments or agencies. In the absence of such a showing, the Court will presume that
the Lahug Airport will continue to be in operation.
[17]
(emphasis supplied)
By the time Gopuco had filed his action for recovery of ownership of Lot No. 72, Lahug
Airport had indeed ceased to operate. Nevertheless, the trial court held:
The fact of abandonment or closure of the Lahug Airport admitted by the defendant did not by
itself, result in the reversion of the subject property back to the plaintiff. Nor did it vest in the
plaintiff the right to demand reconveyance of said property.
When real property has been acquired for public use unconditionally, either by eminent domain or
by purchase, the abandonment or non-use of the real property, does not ipso facto give to the
previous owner of said property any right to recover the same (Fery vs. Municipality of
Cabanatuan, 42 Phil. 28).
[18]

In reversing the trial court, the Court of Appeals called attention to the fact that both
parties cited Fery v. Municipality of Cabanatuan,
[19]
which the trial court also relied on in its
Decision. The court a quo agreed in Gopucos interpretation of Fery that when the CFI in
Civil Case No. R-1881 held that,
. . . [T]hen, no evidence was adduced to show how soon is the Mactan Airport to be placed in
operation and whether the Lahug Airport will be closed immediately thereafter.In the absence of
such a showing, the Court will presume that the Lahug Airport will continue to be in operation, . . .
.
[20]

the expropriation of the property was conditioned on its continued devotion to its public
purpose. Thus, although the MCIAA stressed that nothing in the judgment of
expropriation expressly stated that the lands would revert to their previous owners should
the public use be terminated or abandoned, the Court of Appeals nevertheless ruled that,
. . . [W]hile, there is no explicit statement that the land is expropriated with the condition that when
the purpose is ended the property shall return to its owner, the full import of the decision (in Civil
Case No. R-1881) suggests that the expropriation was granted because there is no clear showing
that Lahug Airport will be closed, the moment Mactan International Airport is put to operation. It
stands to reason that should that public use be abandoned, then the expropriated property should
revert back to its former owner.
Moreover, the foundation of the right to exercise the power of eminent domain is genuine
necessity. Condemnation is justified only if it is for the public good and there is genuine necessity
of a public character. Thus, when such genuine necessity no longer exists as when the State
abandons the property expropriated, government interest must yield to the private right of the
former land owner, whose property right was disturbed as a consequence of the exercise of eminent
domain.
Justice, equity and fair play demand that the property should revert back to plaintiff-appellant upon
paying the reasonable value of the land to be based on the prevailing market value at the time of
judicial demand to recover the property. If the State expects landowners to cooperate in its bid to
take private property for its public use, so must it apply also the same standard, to allow the
landowner to reclaim the property, now that the public use has been abandoned.
[21]

In this petition, the MCIAA reiterates that the Republic of the Philippines validly
expropriated Lot No. 72 through the proceedings in Civil Case No. R-1881, the judgment
of which had long become final and executory. It further asserts that said judgment
vested absolute and unconditional title in the government, specifically on the petitioners,
there having been no condition whatsoever that the property should revert to its owners in
case the Lahug Airport should be abandoned.
On the other hand, the respondent would have us sustain the appellate courts
interpretation of Fery as applied to the original judgment of expropriation, to the effect that
this was subject to the condition that the Lahug Airport will continue to be in operation.
We resolve to grant the petition.
In Fery, the Court asked and answered the same question confronting us now: When
private land is expropriated for a particular public use, and that particular public use is
abandoned, does the land so expropriated return to its former owner?
[22]

The answer to that question depends upon the character of the title acquired by the expropriator,
whether it be the State, a province, a municipality, or a corporation which has the right to acquire
property under the power of eminent domain. If, for example, land is expropriated for a particular
purpose, with the condition that when that purpose is ended or abandoned the property shall
return to its former owner, then, of course, when the purpose is terminated or abandoned the
former owner reacquires the property so expropriated. If, for example, land is expropriated for
a public street and the expropriation is granted upon condition that the city can only use it for a
public street, then, of course, when the city abandons its use as a public street, it returns to the
former owner, unless there is some statutory provision to the contrary. . . If upon the contrary,
however, the decree of expropriation gives to the entity a fee simple title, then of course, the land
becomes the absolute property of the expropriator, whether it be the State, a province, or
municipality, and in that case the non-user does not have the effect of defeating the title acquired by
the expropriation proceedings. (10 R.C.L., 240, sec. 202; 20 C.J. 1234, secs. 593-599 and
numerous cases cited; Reichling vs. Covington Lumber Co., 57 Wash., 225; 135 Am. St. Rep., 976;
McConihay vs. Wright, 121 U.S., 201.)
When land has been acquired for public use in fee simple, unconditionally, either by the
exercise of eminent domain or by purchase, the former owner retains no rights in the land,
and the public use may be abandoned or the land may be devoted to a different use, without
any impairment of the estate or title acquired, or any reversion to the former owner. (Fort
Wayne vs. Lake Shore, etc. Ry. Co., 132 Ind., 558; 18 L.R.A., 367.) (Emphases Supplied)
[23]

Did the judgment of expropriation in Civil Case No. R-1881 vest absolute and
unconditional title in the government? We have already had occasion to rule on this
matter in Mactan-Cebu International Airport Authority v. Court of Appeals,
[24]
which is a
related action for reconveyance of a parcel of land also subject of the expropriation
proceedings in Civil Case No. R-1881. One of the landowners affected by the said
proceeding was Virginia Chiongbian, to whom the CFI ordered the Republic of the
Philippines to pay P34,415.00, with legal interest computed from the time the government
began using her land. Like the herein respondent, she did not appeal from the CFIs
judgment. Also like Gopuco, she eventually filed for the reconveyance of her property
when the airport closed. Although she was upheld by both the RTC of Cebu and the
Court of Appeals, on appeal we held that the terms of the judgment (in Civil Case No.
R-1881) are clear and unequivocal and granted title to Lot No. 941 in fee simple to
the Republic of the Philippines. There was no condition imposed to the effect that
the lot would return to CHIONGBIAN or that CHIONGBIAN had a right to repurchase
the same if the purpose for which it was expropriated is ended or abandoned or if
the property was to be used other than as the Lahug Airport.
[25]
Moreover, we held
that although other lot owners were able to successfully reacquire their lands by virtue of a
compromise agreement, since CHIONGBIAN was not a party to any such agreement, she
could not validly invoke the same.
The respondent would have us revisit this ruling for three reasons. First, because he
claims there is no showing that the government benefited from entering into compromise
agreements with the other lot owners; second, because such a doctrine supposedly
discriminates against those who have neither the werewithal nor the savvy to contest the
expropriation, or agree to modify the judgment; and third, because there exists between
the government and the owners of expropriated realty an implied contract that the
properties involved will be used only for the public purpose for which they were acquired in
the first place.
As to respondents first and second arguments, we have time and again ruled that a
compromise agreement, when not contrary to law, public order, public policy, morals, or
good customs, is a valid contract which is the law between the parties.
[26]
It is a contract
perfected by mere consent,
[27]
whereby the parties, making reciprocal concessions, avoid
litigation or put an end to one already commenced. It has the force of law and is
conclusive between the parties,
[28]
and courts will not relieve parties from obligations
voluntarily assumed, simply because their contracts turned out to be unwise.
[29]
Note that
respondent has not shown that any of the compromise agreements were in any way
tainted with illegality, irregularity or imprudence. Indeed, anyone who is not a party to a
contract or agreement cannot be bound by its terms, and cannot be affected by it.
[30]
Since
Gopuco was not a party to the compromise agreements, he cannot legally invoke the
same.
[31]

Lastly, Gopuco argues that there is present, in cases of expropriation, an implied
contract that the properties will be used only for the public purpose for which they were
acquired. No such contract exists.
Eminent domain is generally described as the highest and most exact idea of property
remaining in the government that may be acquired for some public purpose through a
method in the nature of a forced purchase by the State.
[32]
Also often referred to as
expropriation and, with less frequency, as condemnation, it is, like police power and
taxation, an inherent power of sovereignty and need not be clothed with any constitutional
gear to exist; instead, provisions in our Constitution on the subject are meant more to
regulate, rather than to grant, the exercise of the power. It is a right to take
or reassert dominion over property within the state for public use or to meet a public
exigency and is said to be an essential part of governance even in its most primitive form
and thus inseparable from sovereignty.
[33]
In fact, all separate interests of individuals in
property are held of the government under this tacit agreement or implied reservation.
Notwithstanding the grant to individuals, theeminent domain, the highest and most exact
idea of property, remains in the government, or in the aggregate body of people in their
sovereign capacity; and they have the right to resume the possession of the property
whenever the public interest so requires it.
[34]

The ubiquitous character of eminent domain is manifest in the nature of the
expropriation proceedings. Expropriation proceedings are not adversarial in the
conventional sense, for the condemning authority is not required to assert any conflicting
interest in the property. Thus, by filing the action, the condemnor in effect merely serves
notice that it is taking title and possession of the property, and the defendant asserts title
or interest in the property, not to prove a right to possession, but to prove a right to
compensation for the taking.
[35]

The only direct constitutional qualification is thus that private property shall not be
taken for public use without just compensation.
[36]
This prescription is intended to provide
a safeguard against possible abuse and so to protect as well the individual against whose
property the power is sought to be enforced.
[37]

In this case, the judgment on the propriety of the taking and the adequacy of the
compensation received have long become final. We have also already held that the terms
of that judgment granted title in fee simple to the Republic of the Philippines. Therefore,
pursuant to our ruling inFery, as recently cited in Reyes v. National Housing
Authority,
[38]
no rights to Lot No. 72, either express or implied, have been retained by the
herein respondent.
We are not unaware of the ruling in Heirs of Timoteo Moreno v. Mactan-Cebu
International Airport Authority,
[39]
concerning still another set of owners of lots declared
expropriated in the judgment in Civil Case No. R-1881. As with Chiongbian and the herein
respondent, the owners of the lots therein did not appeal the judgment of expropriation,
but subsequently filed a complaint for reconveyance. In ordering MCIAA to reconvey the
said lots in their favor, we held that the predicament of petitioners therein involved a
constructive trust akin to the implied trustreferred to in Art. 1454
[40]
of the Civil
Code.
[41]
However, we qualified our Decision in that case, to the effect that,
We adhere to the principles enunciated in Fery and in Mactan-Cebu International Airport
Authority, and do not overrule them. Nonetheless the weight of their import, particularly our ruling
as regards the properties of respondent Chiongbian in Mactan-Cebu International Airport
Authority, must be commensurate to the facts that were established therein as distinguished from
those extant in the case at bar. Chiongbian put forth inadmissible and inconclusive evidence,
while in the instant case we have preponderant proof as found by the trial court of the
existence of the right of repurchase in favor of petitioners.
Neither has Gopuco, in the present case, adduced any evidence at all concerning a right
of repurchase in his favor. Heirs of Moreno is thus not in point.
The trial court was thus correct in denying Gopucos claim for the reconveyance of Lot
No. 72 in his favor. However, for failure of the petitioners to present any proof that this
case was clearly unfounded or filed for purposes of harassment, or that the herein
respondent acted in gross and evident bad faith, the reimposition of litigation expenses
and costs has no basis. It is not sound public policy to set a premium upon the right to
litigate where such right is exercised in good faith, as in the present case.
[42]

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-
G.R. SP No. 49898 dated 28 February 2001, and its Resolution of 22 May 2003 are
hereby REVERSED and SET ASIDE. The Decision of RTC-Branch X of Cebu dated 20
May 1994 in Civil Case No. CEB-11914 is REINSTATED with the modification that the
award of exemplary damages, litigation expenses and costs are DELETED.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.




SECOND DIVISION

EUGENIO G. PALILEO, LAURO G.
PALILEO AND THE HEIRS OF AURELIO
G. PALILEO, NAMELY: AURELIO
PALILEO, OLIVIA L. PALILEO AND
TEOFILO L. PALILEO,
P e t i t i o n e r s,


- versus -


NATIONAL IRRIGATION
ADMINISTRATION,
R e s p o n d e n t.
G.R. No. 148574

Present:

PUNO,
Chairman,
AUSTRIA-MARTINEZ,
CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.


Promulgated:

October 11, 2005
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

D E C I S I O N


CHICO-NAZARIO, J.:


This is an appeal by certiorari from the Decision
[1]
dated 10 April 2001 of the Court of
Appeals in CA-GR CV No. 62854, reversing the Decision of the Regional Trial Court of San
Pablo City, Laguna, Branch 30, in Civil Case No. SP-4270 for recovery of possession with
damages which ordered respondent National Irrigation Administration (NIA) to pay
petitioners P100,000 with legal interest for its use of the land. Likewise assailed is the
Resolution
[2]
dated 15 June 2001 denying petitioners motion for reconsideration.

The appeal stemmed from the antecedents per summary of the Court of Appeals which
we paraphrase as follows:


Lot 1, Psu-26200 situated at Barangay Manaol, Municipality of Nagcarlan, Province of
Laguna, was originally registered under Original Certificate of Title No. 2140 pursuant to
Decree No. 13700 in the name of Olivia Gomez Vda. De Palileo, mother of petitioners Eugenio
G. Palileo, Lauro G. Palileo and the late Aurelio G. Palileo, herein represented by his heirs.
[3]


Petitioners are in possession of the subject property, having inherited the same from
their mother who died on 14 January 1980. Said parcel of land was subdivided into three (3)
lots namely: (1) Lot 1-A, with an area of 61,595 square meters, registered in the name of
petitioner Eugenio G. Palileo under Transfer Certificate of Title No. T-152619; (2) Lot 1-B, with
an area of 61,596 square meters, registered in the names of the heirs of Aurelio G. Palileo,
herein petitioners Aurelio L. Palileo, Olivia L. Palileo and Teofilo L. Palileo under Transfer
Certificate of Title No. T-152620; and (3) Lot 1-C, with an area of 61,596 square meters,
registered in the name of petitioner Lauro G. Palileo under Transfer Certificate of Title No. T-
152621, all of the Registry of Deeds for the Province of Laguna.
[4]
The transfer of title in
petitioners name was entered in the books of the Registry of Deeds of Laguna on 12
September 1994.
[5]


Respondent NIA, on the other hand, has been on the property since 1956, having built
thereon a canal in 1956 and an access road in 1983. NIA access road and the canal took an
area of over 10,000 square meters. Records of respondent showed that the lot occupied by
the canal was expropriated by virtue of a court order as early as 24 February 1958 and that
information regarding the construction of access roads, under a foreign-assisted program, had
been disseminated by the respondent among municipal mayors sometime in April 1978. It
does not appear, however, whether payment of just compensation had been made upon such
expropriated property of herein petitioners.
[6]


Records likewise bear out that the respective lots of petitioners were benefited by the
irrigation system of the respondent. In a letter dated 11 January 1994, respondent NIA
assessed petitioner Olivia Palileo irrigation service fee amounting to P16,221.40.
[7]


Shortly, in a letter dated 28 March 1994, petitioner Eugenio Palileo made a formal claim
for reasonable rentals on the affected portions of the land. Since their demands were refused
by the respondent, petitioners instituted the present action on 10 July 1995 for recovery of
possession with damages against the respondent alleging that respondent illegally constructed
an irrigation canal with an adjacent road, eating up a total of 10,570 square meters.
Petitioners prayed for a judgment: (a) underscoring the fact that they are the lawful registered
owners of the 10,570 square meter-portion of the lot taken by the defendant unlawfully; (b)
ordering the respondent to bestow peaceful possession of the subject property to petitioners;
and (c) ordering the respondent to pay petitioners reasonable compensation for the continued
use of the subject portion during all the time prior to this suit in the sum of not less
thanP100,000.00, acceptance fee, moral and exemplary damages as well as litigation
expenses.
[8]


In its Answer with Counterclaim and Affirmative Defenses, respondent, represented by
the Office of the Government Corporate Counsel, alleged that it is empowered and authorized
under par. (e), Sec. 1 of Presidential Decree No. 552 (P.D. No. 552), amending certain sections
of Republic Act No. 3601 entitled, An Act Creating the National Irrigation Administration to
acquire, by any mode of acquisition, real and personal properties and all appurtenant rights,
easements, concessions and privileges, whether the same are already devoted to private or
public use in connection with the development of projects by the NIA.
[9]


Respondent further stated in its Answer that the subject parcels of land were devoted
to irrigation project since 1956 and acquired by NIAs predecessors through expropriation
proceedings which was granted per Court Order released on 24 February 1958. With respect
to the NIA road, it is unflinching in saying that sometime in 1978 to 1979, a Memorandum of
Agreement between NIA and petitioners predecessors-in-interest was executed for the
occupation of the subject parcels of land and the cutting down of its fruit bearing trees and
that notices of the proposed construction of NIA access roads and other irrigation facilities
were disseminated to the municipal mayors and farmers on 27 April 1978 to allow NIA to
proceed with the construction. Respondent added that due compensation on plant damages
was given on 27 June 1984.
[10]
Finally, respondent opined that the present action has already
prescribed pursuant to par. (3), Sec. 1 of P.D. No. 552. Respondent thus prayed that judgment
be rendered dismissing the complaint for utter lack of merit and on its counterclaim, that
petitioners be ordered to pay respondent the sums of P155,317.65 as payment of their unpaid
irrigation service fee and 20% thereof as attorneys fees and costs of suit.
[11]


On 6 January 1998, the trial court rendered judgment in favor of the petitioners in the
following tenor:

1. Plaintiffs being the lawful and registered owners of the 10,570 square
meters of land usurped by the defendant the herein defendant is hereby ordered to pay
the plaintiffs the sum of P100,000.00 for its use of the land with legal interest from 1956
until fully paid; P10,000.00 for attorneys fees and P15,000.00 for litigation expenses
and to pay the costs.

Defendants counterclaim is hereby DISMISSED.
[12]




Respondents motion for reconsideration failed to sway the trial court. On appeal, the
Court of Appeals promulgated the assailed Decision dated 10 April 2001 reversing the decision
of the trial court, with the fallo:

WHEREFORE, premises considered, the appeal is hereby GRANTED. The appealed
Decision in Civil Case No. SP-4270 is hereby REVERSED and SET ASIDE and a new
judgment is hereby rendered DISMISSING the complaint. Plaintiffs-appellees are hereby
ordered to pay to appellant NIA the sum of P155,317.65 representing unpaid irrigation
fees/administration charges with interest at 6% per annum from June 30, 1994 until
fully paid.

No pronouncement as to costs.
[13]




Petitioners were likewise unsuccessful in moving for the reconsideration of the Court of
Appeals Decision. Hence, hard done by the ruling, petitioners elevated the matter to
us via the instant appeal, opposing the Decision and Resolution of the Court of Appeals on the
following assignment of errors:

I. THE COURT A QUO COMMITTED A SERIOUS ERROR IN LAW IN RULING THAT UNDER
NIAS CHARTER, PETITIONERS CAUSE OF ACTION TO SEEK COMPENSATION FOR
NIAS USE/EXPROPRIATION OF EXPROPRIATED PROPERTIES HAD LONG PRESCRIBED.

II. THE COURT A QUO COMMITTED A SERIOUS ERROR IN LAW IN HOLDING
PETITIONERS LIABLE FOR IRRIGATION FEES DESPITE THE ABSENCE OF ANY
AGREEMENT WITH THE LATTER.
[14]




The pith of this controversy is whether or not the Court of Appeals committed reversible
error in setting aside the ruling of the trial court. Concretely, the questions are: (1) whether
prescription bars petitioners claims and (2) whether petitioners are liable to respondent for
irrigation fees.

Petitioners, in their brief, ardently argue that the Court of Appeals overlooked the fact
that there is no record of any payment of just compensation to the petitioners and there was no
expropriation case filed by respondent with regard to its taking in 1983 of a portion of
petitioners property for use as access road.
[15]
They are effusive on their argument that there is
no basis to hold them liable to respondent for irrigation dues as there was no agreement between
petitioners and respondent for the latter to render irrigation service on their properties.
[16]



En contra, respondent waxes lyrical that the subject parcels of land were devoted for the
irrigation project since 1956, and were acquired by respondents predecessor, the Department of
Public Works and Highways, thru expropriation proceedings, which the expropriations court
granted in an order dated 24 February 1958.
[17]
As regards the access road, a memorandum of
agreement was executed between respondent and petitioners predecessors-in-interest for the
occupation of the subject parcels of land and the cutting down of its fruit-bearing trees, so says
respondent.
[18]
Finally, respondent whips up support for its contention that the Court of Appeals
correctly awarded the payment of irrigation fees to it inasmuch as petitioners lands benefited
from the irrigation system of respondent.
[19]



We are not inclined to acquiesce in petitioners viewpoint.


The 1987 Constitution explicitly provides for the exercise of the power of eminent
domain over private properties upon payment of just compensation.
[20]
In Republic of the
Philippines v. Court of Appeals,
[21]
the Court characterized the power of eminent domain in this
wise:

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

The ubiquitous character of eminent domain is manifest in the nature of the
expropriation proceedings. Expropriation proceedings are not adversarial in the
conventional sense, for the condemning authority is not required to assert any conflicting
interest in the property. Thus, by filing the action, the condemnor in effect merely serves
notice that it is taking title and possession of the property, and the defendant asserts title
or interest in the property, not to prove a right to possession, but to prove a right to
compensation for the taking.



The constitutional restraints are public use and just compensation.
[22]
Here, the
expropriated property has been shown to be for the continued utilization by the NIA of
irrigation canal and access road, which property has assumed a public character upon its
expropriation. However, the court order, which is the best evidence to prove that the area
covered by the irrigation canal was indeed expropriated pursuant to an order of the court, was
not adduced in evidence. Notwithstanding the absence of the court order, we are inclined to
give more credence to the respondents explanation that the construction of the canal was by
virtue of a court order dated 24 February 1958.


For one, the records bear out a photocopy of an entry in NIAs Log Book stating that the
lot supposedly occupied by the irrigation canal was expropriated by virtue of a court order
released on 24 February 1958.
[23]
On record, too, is a Certification
[24]
dated 9 May 1997 issued
by the Land Irrigation System Custodian, Erlinda A. Payra, stating that the aforesaid photocopy
of the entry in NIAs log book is a true and faithful reproduction of the original. Said
certification was subscribed before the Clerk of Court of Sta. Cruz, Laguna. The entry in the
log book and the certification issued by the Land Irrigation System custodian must be
considered admissible and competent evidence as they form part of official records. This is
pursuant to the rule that entries in official records made in the performance of his duty by
a public officer are prima facie evidence of the facts therein stated.
[25]
Having been made by
public officers in the performance of their duties, the evidentiary value of such document must,
therefore, be sustained in the absence of strong, complete and conclusive proof of its falsity or
nullity.
[26]



Moreover, there is no dispute that the irrigation canal of respondent has been in existence
dating back 1956 and that it was devoted to public use. Case law has it that the unpaid
landowner can not recover possession of property taken for public use even while no requisite
expropriation proceedings were first instituted.
[27]
The landowner was merely given the relief
of recovering compensation for his property computed at its market value at the time it was
taken and appropriated by the State.
[28]


Alfonso v. Pasay City
[29]
is a case where there was no expropriation proceedings but this
Court denied recovery of possession by the registered owner of a portion of a private lot taken
by the Pasay City and used for road purposes and instead decreed payment of its market value
at the time it was taken and appropriate. It would, therefore, make no difference that the order
of expropriation for the irrigation canal was not adduced in evidence in the case at bar because
under prevailing jurisprudence,
[30]
whether or not there was expropriation proceedings, the only
relief available to the owner of the private property taken for public use is to recover
compensation.

In the same way, it is immaterial that respondent failed to produce the memorandum of
agreement for the access road, which agreement respondent NIA claims to have entered into
with petitioners predecessor-in-interest. From the evidence on record, respondent NIA has
occupied, utilized and, for all intents and purposes, exercised dominion over the property.
Further, it is undisputed that the access road was taken by respondent for public use. Hence,
such taking, even in the absence of an order of expropriation or memorandum of agreement,
shall not entitle the owner to the recovery of possession but only to just compensation,
following existing case law.
[31]


It is on the matter of compensation which is of foremost concern in the case at bar
inasmuch as petitioners pummel on their claim that they were not paid for the lot taken by
respondent on which the irrigation canal and the access road were built. Petitioners would
pound on the dearth of evidence to prove payment of just compensation.

True, in expropriation proceedings, the owner of the private property taken for public use
is entitled, as a matter of right, to just compensation, but more to the point, P.D. No. 552, which
took effect in 1974, has provided for the period upon which all actions against the NIA for
compensation must be instituted. P.D. No. 552 added the following paragraph to Republic Act
No. 3601 (An Act Creating the National Irrigation Administration):


Sec. 1. . . .

(e) To acquire, by any mode of acquisition, real and personal properties, and all
appurtenant rights, easements, concessions and privileges, whether the same are already
devoted to private or public use in connection with the development of projects by the
NIA;

The National Irrigation Administration is empowered to exercise the right of
eminent domain in the manner provided by law for the institution of expropriation
proceedings.


All actions for the recovery of compensation and damages against the National
Irrigation Administration under paragraphs (1), (2), and (3) hereof, shall be filed with a
competent court within five (5) years from the date of entry of the land or destruction of
the improvements or crops, after which period, the right of possession and/or ownership
of the NIA shall be considered vested and absolute. All other actions for the recovery of
compensation and damages to private property and improvements occasioned by the
construction, operation and maintenance of irrigation facilities and other hydraulic
structures under the administration of the National Irrigation Administration, which have
accrued ten (10) or more years prior to the approval of this decree are deemed to have
prescribed and are barred forever.



With respect to the irrigation canal occupied by respondent, the above-quoted provision
of P.D. No. 552 provides that all other actions for the recovery of compensation and damages to
private property and improvements which have accrued ten or more years prior to the approval
of this decree (in 1974) are deemed to have prescribed and are barred forever. Inasmuch as the
canal was built as early as 1956, it is therefore clear that the claim for compensation with
respect to the lot occupied by the irrigation canal is already time barred for having accrued 18
years prior to the approval of P.D. No. 552 in 1974.

As for the access road which was built in 1983, P.D. No. 552 provides that claims for
compensation and damages ought to be taken within five years from the time it was built in
1983, or on or before 1988. As earlier noted, petitioners first instituted this proceeding for
payment against respondent only in 1995. The unusually long delay in bringing the action to
compel payment against herein respondent would militate against them consistently with the
rule that one should take good care of his own concern.
[32]


As pointed out by the Court of Appeals with alacrity, Sec. 1(e) of P.D. No. 552 expressly
provided for the prescriptive periods within which any action for recovery of compensation and
damages as a result of appellant NIAs exercise of the right of eminent domain may be filed.
The Civil Code itself provided that the prescriptions of actions in the Civil Code are without
prejudice to those specified in special laws, which in this case is P.D. No. 552. Thus, Article
1115 of the Civil Code provides-


ART. 1115. The provisions of the present Title are understood to be without
prejudice to what in this Code or in special laws is established with respect to specific
cases of prescription.


In fine, it is immaterial that respondent was unable to produce proof of payment of the lot
occupied by the latters irrigation canal and access road because in any event, all claims for
payment by petitioners has already prescribed by virtue of the explicit provisions of P.D. No.
552.

We can not feign a blind eye to the fact that the present action was triggered by the
respondents demand for irrigation fees against petitioners on 11 January 1994. Subsequent to
the receipt of the demand letter by petitioners through their tiller, petitioner Eugenio G. Palileo
wrote respondent on 28 March 1994 claiming payment for the right of way. On 12 September
1994, petitioners caused the transfer of the property in their name and in July 1995, commenced
the present action. Indeed, the series of events culminating in the filing of the present suit would
demonstrate that the present action was precipitated by the respondents demand for payment of
irrigation fees, which, to us, constitutes a valid and legal claim.

On this note, we affirm the findings as well as conclusions of facts of the Court of
Appeals, to wit:


As to appellants counterclaim for the payment by plaintiffs-appellees of
irrigation fees or administration charges, We find the same to have legal basis and the
amount thereof sufficiently established by the evidence on record. Except for their bare
denial of such unpaid irrigation or administration fees owing to the appellant
NIA, plaintiffs-appellees had not shown by evidence that they, through their tenants,
had not been benefited by the irrigation service provided by the appellant for several
years now. Sec. 1 (b) of P.D. No. 552 expressly provided that NIA has the right to enforce
the collection of such unpaid irrigation or administration charges by judicial action and
such shall even be preferred liens first, upon the land benefited, and then on the crops
raised thereon.
[33]
(Emphases supplied)



Petitioners make much ado about the absence of a written agreement to prove their
availment of respondents irrigation services. They enthuse that absent any agreement
and sans proof that they are beneficiaries of the irrigation facility, no payment can be exacted
from them. On record is a demand letter dated 11 January 1994 of Romeo R. Anonuevo,
Provincial Irrigation Officer of the National Irrigation Administration of Region IV, addressed to
petitioner Olivia Palileo thru a certain Arsenio Bueta, whom petitioners admit as one of the
tillers of the land. Likewise on record are the respective statements of account for petitioners
as of 31 August 1996, also signed by the Provincial Irrigation Officer of respondent. These
documents would show the irrigation consumption of petitioners lots as well as petitioners
outstanding balance in irrigation fees. We accord weight to these documents signed by the
Provincial Irrigation Officer applying the presumption that official acts or functions were
regularly done. In the absence of clear and convincing evidence to the contrary,
the presumption of regularity of official acts by government officials must necessarily
prevail.
[34]



Indeed, not only is the award of payment of irrigation fees based on the law governing
the NIA, it is likewise based on the equitable postulate that having benefited from the services
provided by respondent, it is unjust for petitioners to retain benefit without paying for it.
[35]


All given, the findings and conclusions of the Court of Appeals are in rhyme with the
facts and the law and there are no compelling reasons for this Court to depart from the Court
of Appeals verdict.


WHEREFORE, the present petition is hereby DENIED. Accordingly, the Decision and the
Resolution dated 10 April 2001 and 15 June 2001, of the Court of Appeals in CA-G.R CV No.
62854, are hereby AFFIRMED. Costs against petitioners.

SO ORDERED.



MINITA V. CHICO-NAZARIO
Associate Justice






WE CONCUR:


REYNATO S. PUNO
Associate Justice
Chairman



MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice
ROMEO J. CALLEJO, SR.
Associate Justice



DANTE O. TINGA
Associate Justice


A T T E S T A T I O N

I attest that the conclusions in the above Decision were reached in consultation before the
case was assigned to the writer of the opinion of the Courts Division.


REYNATO S. PUNO
Associate Justice
Chairman, Second Division


C E R T I F I C A T I O N

Pursuant to Article VIII, Section 13 of the Constitution, and the Division Chairmans
Attestation, it is hereby certified that the conclusions in the above Decision were reached in
consultation before the case was assigned to the writer of the opinion of the Courts Division.


HILARIO G. DAVIDE, JR.
Chief Justice
















Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 140091 August 10, 2006
FELICIANO G. MANANSAN, Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES and PHILIPPINE NATIONAL BANK, Respondents.
D E C I S I O N
CALLEJO, SR., J .:
This is a Petition for Review on Certiorari of the Decision
1
of the Court of Appeals (CA) in CA-G.R. CV No. 52063
affirming with modification the decision of the Regional Trial Court (RTC) of Manila in Civil Case No. 123003,
granting the complaint of the Republic of the Philippines, through the Department of Education, Culture and Sports
(DECS) (now DepEd), for the expropriation of the property of Agus Development Corporation (ADC, for brevity) and
Feliciano G. Manansan.
On April 17, 1979, the Republic, in behalf of the DECS, filed a complaint in the RTC of Manila for the expropriation
of two parcels of land with improvements thereon located at Geronimo Street, Sampaloc, Manila: one consisted of
2,905.6 square meters owned by ADC and covered by Transfer Certificate of Title (TCT) No. 104374; and the other
584.5 square meters owned by Manansan and covered by TCT No. 132892. The property was to be used for the
construction of the Trinidad Tecson Elementary School. Plaintiff averred that the amount of just compensation
was P884,830.00.
Plaintiff amended its complaint to implead the Philippine National Bank (PNB) in whose favor ADC had mortgaged
the property as well as the occupants of the property. Plaintiff averred that the just compensation for the property
was P904,830.00.
On October 15, 1980, plaintiff filed a motion for the issuance of a writ of possession on its allegation that, based on
the certification of the City Treasurer of Manila issued on December 13, 1979, the amount of P90,483.00
representing 10% of the assessed value of the property had already been deposited with the PNB. Manansan did
not object to the motion. On January 16, 1981, the RTC issued a writ of possession in favor of plaintiff. Plaintiff took
possession of the property, caused the demolition of some of the improvements, and had the elementary school
constructed thereon.
On June 23, 1987, ADC filed a motion for the appointment of three (3) commissioners to fix the just compensation
and require plaintiff to deposit 10% thereof. Plaintiff opposed the motion, insisting that it had already deposited the
same (or P90,483.00) on December 3, 1979 with the PNB branch. In its comment on September 28, 1987, the PNB
alleged that it had no knowledge that the amount had been deposited in the names of ADC and Manansan. When
ordered to show proof of the deposit, plaintiff submitted a PNB deposit slip amounting to P90,483.00 in favor of the
City Treasurer, and not in favor of defendants as owners of the property.
Defendants filed a motion to be restored to the possession of the subject properties. On September 13, 1990, the
RTC denied the motion on the ground that restoration was no longer feasible.
2
Meanwhile, the court fixed
provisionally the value of the property at P904,830.00 and required plaintiff to deposit the whole amount.
On September 26, 1994, the court appointed the following three (3) commissioners to determine the just
compensation of the properties expropriated: (1) City Assessor Reynaldo Jaylo; (2) City Auditor Reynaldo Ventura;
and (3) Asian Appraisal Company, Inc. (AACI), thru its representative. However, on October 28, 1994, the court
replaced City Auditor Reynaldo Ventura with the City Treasurer of Manila.
On March 11, 1995, the City Assessor and City Treasurer of Manila submitted a Joint Appraisal Report of the
expropriated properties and fixed the valuation of both land and buildings at P15,893,111.00. The valuation was
based on the 1995 BIR Zonal Value, broken down as follows:
Land Appraisal:
Lot 6 Blk. RP 37 Psd 47-Area - 597.30 sq. m.
Lot 7 Blk. RP 37 Psd 47-Area - 600.60 sq. m.
Lot 8 Blk. RP 37 Psd 47-Area - 584.50 sq. m.
Lot 12 Blk. RP 37 Psd 47-Area - 1,122.90 sq. m.
Lot 13 Blk. RP 37 Psd 47-Area - 584.80 sq. m.
T o t a l - 3,490.10 sq. m.
1995 BIR Zonal Value - P4,400.00 / sq. m.
Land Area - x 3,490.10 sq. m.
P15,356,440.00
Building Appraisal:
Building 1 - P270,010.00
Building 2 - 144,014.00
Building 3 - 29,445.00
Building 4 - 39,690.00
Building 5 - 19,012.00
Perimeter Wall
Fence - 34,500.00
P536,671.00 - Market value for
Building &
Fence
Total Market Value of Land, Building
and Fence - P15,893,111.00
On the other hand, the AACI submitted two separate reports on the fair market values of the subject properties, as
of April 15, 1995, using the market data approach, to wit:
1) Lots 6, 7, 12 & 13 (owned by Agus) 2,905.60 sq. m.
P14,000.00 / sq.m. x 2,905.60 sq. m.
= P40,678,000.00
2) Lot 8 (owned by Feliciano Manansan) 584.50 sq. m.
P14,000.00 / sq.m. x 584.50 sq. m.
= P8,183,000.00 (Emphasis supplied)
3

The appraisal of AACI was based on the extent, character and utility of the property sales and holding prices of
similar land, and the highest and best use of the property as of April 15, 1995.
4
In fine, under the report of the City
Treasurer and City Assessor, the value of the subject properties was fixed at P3,490.50 per square meter, while
AACI fixed the value of the land at P14,000.00 per square meter.
On January 17, 1996, the trial court rendered judgment in favor of plaintiff.
5
The court fixed the fair market value of
the property of defendants at P2,200.00 per square meter, or one-half of the 1995 BIR Zonal Value submitted by the
City Treasurer and City Assessor. The fallo of the decision reads:
WHEREFORE, judgment is hereby rendered for the plaintiff and against the defendants, as follows:
a) the lands (described as Lots 6, 7, 12 and 13 of Bk. RP 37) with an area of 2,905.6 sq. m. owned by defendant
Agus Development Corporation and covered by TCT No. 104374 as well as the land (described as Lot 8 of Bk. RP
37) with an area of 584.5 sq. m. owned by defendant Feliciano Manansan and covered by TCT No. 132892 with the
improvements erected thereon, located at Geronimo St., Sampaloc, Manila and declared expropriated to be used as
a public school, the Trinidad Tecson Elementary School;
b) the fair market value of the lands of the defendants is fixed at P2,200.00/sq. meter;
c) the fair market values of the buildings or fence erected on the lands of Agus Development Corporation and
Feliciano Manansan are P250,163.00 and P18,172.50, respectively;
d) the Republic must pay the following defendants, to wit:
1) Agus Development Corporation, the sum of P6,642,483.00, and from which amount, the indebtedness incurred
by Agus Development Corporation from the Phil. National Bank should first be liquidated and satisfied before the
remaining balance thereof shall be delivered/paid to defendant Agus Development Corporation;
2) Feliciano Manansan, the sum of P1,304,072.50;
With costs against the plaintiff.
SO ORDERED.
6

The trial court declared that the joint assessment of the City Treasurer and City Assessor recommended that
defendants be paid P15,893,111.00 as just compensation for the properties. However, the joint assessment was
based on the BIR Zonal Value of the property as of 1995 instead of 1979 when the complaint was filed. Moreover,
instead of directing the commissioners to revise their valuation reports and base the just compensation of the
property on their market value as of 1979, the court merely resolved to cut in half the BIR Zonal Value ofP4,400.00
to P2,200.00 per square meter, and declare that the fair market value of Manansans lot wasP1,285,900.00, or a
total of P1,304,072.50 including the value of the improvements thereon.
The RTC declared that it was not bound by the report of the commissioners, which was merely advisory in
character. However, no attorneys fees were awarded to defendants.
7

Manansan and ADC thereafter appealed the decision to the CA. In his brief as appellant, Manansan alleged the
following:
A. THE LOWER COURT ERRED IN SETTING THE JUST COMPENSATION OF DEFENDANTS PROPERTIES
ATP7,946,555.55 WHICH IS HALF THE VALUE SET BY THE CITY TREASURER AND ASSESSOR.
B. THE LOWER COURT ERRED IN NOT CONSIDERING THE VALUATION REPORT OF THE PRIVATE
APPRAISAL COMPANY, ASIAN APPRAISAL COMPANY, INC., AS THE MORE CREDIBLE BASIS TO
DETERMINE THE FAIR MARKET VALUE OF DEFENDANTS PROPERTIES BY WAY OF JUST
COMPENSATION.
C. THE LOWER COURT ERRED IN NOT AWARDING ATTORNEYS FEES AS PART OF JUST
COMPENSATION.
8

On the issue of just compensation, Manansan alleged that the amount of P7,946,555.55 was not the fair and full
equivalent for the loss sustained by him which is the measure of the indemnity. He pointed out that there was a
blatant admission that the supposed 1979 valuations were taken or arrived at through the 1995 market values as
submitted by the City Treasurer and City Assessor. Thus, he insisted, the halved amount of P7,946,555.55 is not the
"fair and full equivalent for the loss sustained which is the measure of the indemnity."
9

Manansan asserted that the trial court should have adopted the appraisal of AACI which determined the fair market
value of his property at P8,183,000.00. After all, the market data approach was used, and the court based its
valuation on the sales and listings of comparable property registered within the immediate vicinity. He emphasized
that the records of
recent sales and offerings of similar land were analyzed, and comparison made for such factors as size,
characteristics of the property, location, quality and prospective use. He averred that the valuation of the City
Treasurer and City Assessor, which the lower court considered in arriving at the median sum of P7,946,555.55,
should not have been given the weight it was accorded in the assailed decision, as it is certainly and evidentially
inferior to that of the determination made by the AACI. Manansan maintained that this fact can be deduced from the
rejection of the mode of determining just compensation based on the valuation of the assessor, made by no less
than the Supreme Court in Export Processing Zone Authority v. Dulay.
10

On the issue of attorneys fees, Manansan averred that conformably with the ruling of this Court in Capitol
Subdivision, Inc. v. Province of Negros Occidental,
11
he is entitled to attorneys fees. Thus, he prayed that the
decision of the RTC be affirmed with modification, to wit:
WHEREFORE, premises considered, it is respectfully prayed of this Honorable Court that the Decision appealed
from be modified and plaintiff-appellee ordered to pay defendant-appellant Feliciano Manansan the following:
1. P4,091,500.00 (median of the appraisal of Asian Appraisal Company for lot 8: 584.50 sq. m. x P14,000/sq. m.);
2. Reasonable attorneys fees equivalent to 10% of the amount involved;
3. Legal interest on the sum awarded (P4,091,500.00) as just compensation computed from 1979 up to the date of
finality of judgment;
4. The costs of suit.
12

On the other hand, the Republic, through the Office of the Solicitor General, averred that what should apply is the
ruling of this Court in Export Processing Zone Authority v. Dulay.
13
The valuation report of AACI
recommendingP40,678,000.00 for Manansans land only is too much to be deemed credible by the trial court. It was
stressed that it took possession of the property only on January 23, 1981; hence, its fair market value should be
based as of that year, and not in 1995 when the commissioners submitted their report.
On October 28, 1998, the CA rendered judgment affirming with modification the decision of the RTC. The fallo of the
decision reads:
WHEREFORE, the judgment herein appealed from is hereby AFFIRMED, with the MODIFICATION that the plaintiff-
appellee is hereby ordered to pay the defendants-appellants legal interest (6% per annum) on the amounts
ofP6,642,483.00 and P1,304,072.50 due them, from January 16, 1981 until the said amounts are fully paid.
No pronouncement as to costs.
SO ORDERED.
14

In affirming the just compensation fixed by the trial court, the appellate court declared that the City Treasurer and
City Assessor submitted a second report on September 11, 1995 recommending a value of only P1,065,283.22 for
the land and P536,671.00 for the building plus accumulated legal interest in the amount of P1,633,993.30, or in the
total amount of P3,235,947.52. It ratiocinated that the appraisals of AACI were also based on estimates of market
values as of April 15, 1995, not as of 1979 or 1981. Moreover, such estimates were based not really on sales of
similar properties in the vicinity, but on offers to sell found in newspaper advertisements.
15
Both parties filed motions
for reconsideration, which the appellate court denied on September 15, 1999.
16

In the instant petition for review on certiorari, Manansan (now petitioner) raises the following issues:
1. WHETHER OR NOT EVIDENCE NOT FORMALLY OFFERED NOR FORMALLY ADMITTED MAY BE
CONSIDERED BY THE COURT OF APPEALS IN DETERMINING THE DATE WHEN JUST COMPENSATION
SHOULD BE BASED;
2. WHETHER OR NOT THE JUST COMPENSATION FOR A PROPERTY MAY BE BASED ONLY ON THE TRIAL
COURTS EXERCISE OF MERE HALVING A 1993 BIR ZONAL VALUATION AS THE BASIS OF JUST
COMPENSATION AS APPROXIMATE VALUATION IN 1979, DATE OF USURPATION;
3. WHETHER OR NOT ATTORNEYS FEES IS ALLOWED IN EXPROPRIATION PROCEEDINGS IN THE LIGHT
OF THE CIRCUMSTANCES OF THIS CASE.
17

On the first issue, petitioner avers that the public respondent failed to prove that it deposited 10% of the assessed
value of the property on December 13, 1979. He points out that it failed to formally offer in evidence the certificate
issued by the City Treasurer of Manila that the P90,483.00 had been deposited as directed by the RTC. Considering
that it was not admitted in evidence by the trial court, such certification cannot be considered as proof that the said
amount had been deposited by public respondent.
On the second issue, petitioner insists that the halving of the valuation of the City Treasurer and City Assessor
ofP15,893,111.00 made by the trial and appellate courts is not based on competent evidence; it was merely based
on the trial courts belief that one-half of the amount or P7,946,555.55 appears adequate to be paid to petitioner and
ADC. Petitioner maintains that the trial courts formulation of the fair market value of the property must be based on
competent evidence and not on speculations or surmises. To bolster his claim, petitioner cited the ruling of the Court
in Manila Railway Company v. Fabie.
18

On the last issue, petitioner posits that he was constrained to engage the services of counsel for the case, which
has been pending for more than
20 years. The granting of his plea for attorneys fees does not even compensate his expenses in litigating this case.
Petitioner prays that judgment be rendered in his favor ordering the public respondent to pay him the sum
ofP2,571,800.00 (584.50 sq.m. x P4,400.00 per square meter based on Bureau of Internal Revenue Zonal Valuation
as of 1995) plus legal interest (at 6% per annum) from January 16, 1981 until fully paid; reasonable attorneys fees
equivalent to 10% of the total award; and cost of suit.
19

By way of comment, public respondent avers that it had deposited P90,483.00 representing 10% of the just
compensation as alleged in the complaint pursuant to Presidential Decree (P.D.) No. 1533, and that on January 16,
1981, the trial court issued an order for the issuance of a writ of possession and that a writ of possession was issued
on January 23, 1981. On the strength of said writ, respondent took possession of the property, caused the
demolition of the improvements on the property, and had a school building constructed thereon. It insists that under
Section 2 of P.D. No. 1533, it is not required that the deposit be in the name and for the account of the owners of the
property to be expropriated; the certification of the City Treasurer of Manila is not the only evidence to prove the
10% deposit; and the order of the trial court for the issuance of a writ of possession presupposes that the alleged
10% deposit had been complied with.
Public respondent also points out that petitioner never questioned the 10% deposit it made with the PNB, or
requested the City Treasurer to comply with P.D. No. 1533, or attempted to withdraw the deposit; it was all along,
the ADC which questioned the deposit for allegedly being defective. Thus, the trial court did not err in basing the
valuation of the property as of 1981, the time public respondent took possession of the property, and in reducing in
half the valuation report submitted by the City Treasurer and Assessor, considering further that P7,946,555.55 is the
amount nearest to the
original value of P904,830.00. It insists that the amount of P1,334,580.00 arrived at by the trial court and affirmed by
the CA is reasonable.
Petitioner counters that while a writ of possession was issued by the trial court on January 23, 1981, it cannot
thereby be concluded that the required 10% deposit had been complied with by public respondent. It insists that the
alleged PNB Check No. 330334 representing the supposed 10% deposit had not been offered and admitted in
evidence which is required under Section 2, Rule 67 of the Rules of Court, which reads:
SEC. 2. Entry of plaintiff upon depositing value with authorized government depositary. Upon the filing of the
complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the right to take or
enter upon the possession of the real property involved if he deposits with the authorized government depositary an
amount equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to
the orders of the court. Such deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a
certificate of deposit of a government bank of the Republic of the Philippines payable on demand to the authorized
government depositary.
If personal property is involved, its value shall be provisionally ascertained and the amount to be deposited shall be
promptly fixed by the court.
After such deposit is made, the court shall order the sheriff or other proper officer to forthwith place the plaintiff in
possession of the property involved and promptly submit a report thereof to the court with service of copies to the
parties.
Petitioner claims that public respondents reliance on the ruling of this Court in B.H. Berkenkotter & Co. v. Court of
Appeals
20
is misplaced. To sustain public respondents contention that the just compensation may be determined as
of the filing of the complaint for expropriation is to condone the usurpation by the government of private property by
the simple expedient of filing a complaint even if the latter is not prepared to allocate the requisite funds therefor.
The petition is partially granted.
On the first issue, we agree with the submission of public respondent that petitioner never raised the inadmissibility
and lack of probative weight of the certification of the City Treasurer (on the ground that it was never offered in
evidence) in the trial court; neither was the issue of public respondents failure to offer said certification in evidence
to prove that the P90,483.00 was deposited with the PNB raised in the appellate court. The issue was raised for the
first time only in this Court, and the well-entrenched rule is that a party is proscribed from raising in this Court an
issue which was never raised in the trial court.
21

Moreover, there is no dispute that public respondent deposited P90,483.00 with the PNB on December 19, 1979,
except that the deposit was in the name of the City Treasurer and not in the names of petitioner and ADC as owners
of the expropriated property. There was a hearing on public respondents motion for the issuance of a writ of
possession during which the matter of the regularity and validity of the deposit must have been discussed by the
parties. The RTC found the motion in order and granted the same in its Order dated January 10, 1981, which in fine
is a confirmation that the requisite deposit was in order. This enabled public respondent to construct the elementary
school on the expropriated property.
It must be stressed that petitioner never assailed the order of the trial court in the CA and in this Court; he never
bothered to file any motion for the remittance of his share of the 10% deposit in the court a quo, neither did he file a
motion for the reconsideration of the trial courts January 10, 1981 Order. While ADC sought the repossession of the
property on account of public respondents alleged failure to deposit the just compensation of the property as
provisionally fixed by the trial court, petitioner failed to do so.
On the second issue, we agree with petitioners contention that the trial court erred in reducing in half the
assessment of the City Treasurer and
City Assessor (P15,893,111.00) based on the BIR Zonal Value as of 1995, and consequently fixing the fair market
value of the subject property at P7,946,555.55. There is no evidence on record that the fair market value of the
property, as of 1979 when public respondent filed its complaint for expropriation in the RTC, was P7,946,555.55.
The trial court merely indulged in speculations and surmises when it declared that the fair market value of the
property in 1979 was P7,946,555.55.
The rule is that 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 comes first.
22
In this case, the complaint was filed on April 17, 1979, and the trial
court issued the writ of possession on January 10, 1981. The City Treasurer, City Assessor and the AACI based
their assessment reports as of 1995 and not as of 1979 or a difference of 16 years. Indeed, the fair market value of
the property in 1979 cannot be fixed by the mere expedient of cutting in half the assessment made by the City
Treasurer and City Assessor or AACI for that matter as of 1997. Such a process is arbitrary and a grave abuse of
the trial courts discretion.
It bears stressing that just compensation 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.
23

We agree with the contention of the Office of the Solicitor General that the trial court was not bound by the
assessment report of the commissioners and that it had the discretion to reject the same and substitute its own
judgment on its value as gathered from the record. The court may accept the report/recommendation of the
commissioners in toto and base its judgment thereon.
24
However, the decision of the court must be based on all
established rules, upon correct legal principles and competent evidence. The court is proscribed from basing its
judgment on speculations or surmises.
25
While tax values can serve as guide, the same cannot be absolute
substitutes for just compensation.
26
Just compensation is the just and complete equivalent of the loss that the
owner of the thing expropriated has to suffer by reason of the expropriation. The court should thus insist that the
owner of private property should be compensated only for what he actually loses; it is not intended that the
compensation shall extend beyond the loss or injury.
27

Since the commissioners failed to base their assessment of the property as of 1979 and relied solely on data as of
1995 instead of 1979, it behooved the trial court to direct them to revise their assessment, or to discharge them and
appoint new ones, or to require the parties to adduce competent evidence to prove the fair market value of the
property as of 1979. The trial court failed to do so. Worse, the CA condoned the lapse of the trial court. Considering
all the foregoing, the Court has no other recourse but to remand the case to the trial court.
On the last issue, the Court affirms the following ratiocination of the CA:
We cannot say the same about the appellants claims for attorneys fees. There appears to be no basis for the
same. Attorneys fees are not automatically awarded in every action for expropriation. The case of National Power
Corp. v. Court of Appeals, supra, relied upon by appellant Agus Development Corporation, does not even award
attorneys fees. It only refers to the case of Amigable v. Cuenca where the Supreme Court held that the government
should pay attorneys fees which should be fixed by the trial court after hearing. But the facts in that case are
different from the case at bench. In that case, the government simply occupied the plaintiff-appellants property
without benefit of expropriation.
28

IN LIGHT OF ALL THE FOREGOING, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R.
CV No. 52063 is AFFIRMED WITH MODIFICATION. The trial court is ORDERED to RECONSTITUTE the
commissioners or designate a panel of new commissioners who will assess the fair market value of the petitioners
property as of 1979, and to render judgment on the just compensation for the property in due course. No costs.
SO ORDERED.
ROMEO J. CALLEJO, SR.
Associate Justice
WE CONCUR:
ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson
CONSUELO YNARES-SANTIAGO, MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice Associate Justice
MINITA V. CHICO-NAZARIO
Associate Justice
C E R T I F I C A T I O N
Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts
Division.
ARTEMIO V. PANGANIBAN
Chief Justice















Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170945 September 26, 2006
NATIONAL POWER CORPORATION, petitioner,
vs.
MARIA MENDOZA SAN PEDRO, represented by VICENTE, HERMINIA and FRANCISCO, all surnamed SAN
PEDRO, respondents.
D E C I S I O N
CALLEJO, SR., J .:
Before the Court is a Petition for Review on Certiorari under Rule 45 of the Decision
1
of the Court of Appeals (CA) in
CA-G.R. CV No. 72860, and its Resolution
2
denying the motion for reconsideration thereof.
The Antecedents
The National Power Corporation (NPC) is a government-owned-and-controlled corporation created to undertake the
development of hydro-electric generation of power and the production of electricity from any and all sources; and
particularly the construction, operation, and maintenance of power plants, auxiliary plants, dams, reservoirs, pipes,
mains, transmission lines, power stations and substations, and other works for the purpose of developing hydraulic
power from any river, lake, creek, spring and waterfalls in the Philippines and supplying such power to the
inhabitants thereof.
3
Under Republic Act No. 6395, as amended, the NPC is authorized to enter private property
provided that the owners thereof shall be indemnified for any actual damage caused thereby.
4

For the construction of its San Manuel-San Jose 500 KV Transmission Line and Tower No. SMJ-389, NPC
negotiated with Maria Mendoza San Pedro, then represented by her son, Vicente, for an easement of right of way
over her property, Lot No. 2076. The property, which was partly agricultural and partly residential land, was located
in Barangay Partida, Norzagaray, Bulacan and covered by Tax Declaration No. 00386. On June 19, 1997, Maria
executed a Right of Way Grant
5
in favor of NPC over the lot for P1,277,886.90. The NPC paid her P524,635.50 for
the damaged improvements thereon.
6

The payment voucher for the residential portion of the lot valued at P6,000,000.00 (at P600.00 per square meter)
was then processed.
7
However, the NPC Board of Directors approved Board Resolution No. 97-246
8
stating that it
would pay only P230.00 per sq m for the residential portion and P89.00 per sq m for the agricultural portion, on the
following premises:
A) The proposed land valuations were evaluated and analyzed using the joint appraisal report on fair market
value of lands by Cuervo Appraisal, Inc., Development Bank of the Philippines, and the Land Bank of the
Philippines and the fair market values established by the respective Provincial Appraisal Committee (PAC)
of Zambales, Pangasinan, Nueva Ecija, Pampanga and Bulacan as well as the City Appraisal Committee
(CAC) of San Carlos and Cabanatuan.
B) For lot acquisition, adopt PAC or CUERVO Appraisal, whichever is lower; if there is a problem of
acceptance, refer same to the Board;
C) For easement over agricultural lands, adopt median or average if there are several amounts involved;
and
D) Always oppose any proposals for conversion of agricultural lands.
9

On January 15, 1998, the NPC filed a complaint
10
for eminent domain in the Regional Trial Court (RTC) of Bulacan
against Maria and other landowners. The case was docketed as Civil Case No. 28-M-98. According to NPC, in order
to construct and maintain its Northwestern Luzon Transmission Line Project (San Manuel-San Jose 500 KV
Transmission Line Project), it was necessary to acquire several lots in the Municipalities of San Jose del Monte and
Norzagaray, Bulacan for an easement of right of way in the total area of more or less 35,288.5 sq m. The owners of
the affected areas and their corresponding assessed values are:
OWNER/
CLAIMANT

LOT/
BLK.
NO.
TAX
DEC.
NO.
TITLE
NO.
TOTAL
AREA
AREA
AFFECTED
IN SQ. M.
ASSESSED
VALUE OF
AREA
AFFECTED
CLASSIFICATION
OF LAND
Ma. Mendoza San
Pedro rep. by
Vicente San Pedro
2076 00386 122,821.32 17,195 P 18,555.75 Agricultural
10,000 6,565 P147,712.50 Residential
Lorenza Manuel /
Sps. Raul & Edna
Lagula
1250 96-
21017-
00084
T-
28392-
P-(M)
5,700 51,666.5 P 13,481.03 Agricultural
Sps. Segundo &
Maxima Manuel /
Sps. Raul & Edna
Lagula
1251 96-
21017-
00083
P-3965
(M)
6,362 6,362 P 16,210.00 Agricultural
Maria San Pedro filed her Answer
11
on February 2, 1998, alleging that there had already been an agreement as to
the just compensation for her property. She prayed, among others, that she should be paid the consideration stated
in the Right of Way Grant, P600.00 per sq m for the residential portion of the land as agreed upon by her and NPC,
and to base the values from Resolution No. 97-005
12
of the Provincial Appraisal Committee.
Meanwhile, Maria San Pedro filed an Amended Answer
13
in which she alleged that NPC had resorted to deceit,
trickery and machination to induce her to grant a right of way by assuring her that it would also pay for the
residential portion of the property at P600.00 per sq m.
On August 10, 1998, the RTC issued a writ of possession against Maria San Pedro.
14
When she passed away on
August 22, 1998,
15
she was substituted by her heirs, Vicente, Herminia and Francisco, all surnamed San Pedro, on
September 11, 1998.
16

During the pre-trial on January 25, 1999, the parties agreed that the only issue for resolution was the just
compensation for the property. The court appointed a committee of commissioners to ascertain and recommend to
the trial court the just compensation for the properties, composed of Atty. Josephine L. Sineneng-Baltazar, the Clerk
of Court, as chairperson; and Engr. Oscar C. Cruz, Provincial Assessor of Bulacan, and Atty. Henry P. Alog of the
Litigation Department of NPC to serve as members-commissioners thereof.
17

On July 12, 1999, Atty. Baltazar and Engr. Cruz submitted their report,
18
recommending as payment for just
compensation P800.00 per sq m for the residential lot and P700.00 per sq m for the agricultural lot.
19
The majority
report reads:
I. Description of the Property
A parcel of land with a total area of 132,821.32 square meters located at Partida, Norzagaray, Bulacan and
declared for taxation purposes in the name of Maria Mendoza San Pedro is sought to be expropriated by
plaintiff National Power Corporation for the construction and maintenance of its Northwestern Luzon
Transmission Line Project (San Miguel-San Jose 500 KV Transmission Line Project), to wit:
Lot No. Tax Dec.
No.
Total Area Area
Affected in
sq. m.
Classification
2076 01337 122,821.32 17,195 Agricultural

10,000.00 6,565 Residential
The pertinent tax declaration is hereto attached as Annex "A."
The residential lot is not affected by NPC's project in its entirety. Around 2,000 sq. m. remains on each side
of the residential lot.
Likewise, only a portion or 17,195 sq. m. of (sic) more than 12 hectares agricultural land, (sic) is affected by
the project. A sketch plan of the affected area is attached hereto as Annex "B."
II. Claims of the Parties
Defendants allege that they had signed a Right of Way Grant Contract dated June 19, 1997 which plaintiff
itself prepared and was notarized by Atty. Marcelo Aure; that, among others, defendants and plaintiff agreed
that the price of the residential land is P600.00 per square meter, based on the Provincial Appraisals
Committee (PAC) Resolution No. 97-005; that, on December 6, 1997, plaintiff informed them that the NPC
Board passed Resolution No. 97-246 dated October 27, 1997, pursuant to which the board approved price
for acquisition of subject property is P230.00 per sq. m. for residential and P89.00 per sq. m. for agricultural
lot. Defendants did not accept the new offer.
On the other hand, plaintiff alleges that the price for residential land is P230.00 per sq. m. as approved by
NPC's Board and not P600.00 per sq. m. being asked by defendants. It further recommended the
appointment of commissioners to report to the Court the just compensation to be paid to the defendants.
III. Observations
The Commissioners went to the site on May 11, 1999 and were able to observe that:
(1) The residential lot of Vicente San Pedro is not affected by NPC's project in its entirety. Around
2,000 sq. m. remains on each side of the residential lot. There are no existing structures or
improvements on said residential lot, which is situated along the all-weather (gravel) road.
Defendants are afraid to utilize the said remaining portions for residential purposes because of the
reported constant loud buzzing and exploding sounds emanating from the towers and transmission
lines, especially on rainy days. The two children of Vicente San Pedro had wanted to construct their
residential houses on said land, but decided against it now because of fear that the large
transmission lines looming not far above their land and the huge tower in front of their lot will affect
their safety and health. Moreover, there is a slim chance now that somebody will still buy the
remaining portions on each side of the residential lot affected by the project, to the damage of the
defendant, both as to future actual use of the land and financial gains to be derived therefrom.
(2) Likewise only a portion, or 17,195 sq. m. of the 122,821.32 square meter agricultural land, is
affected by the transmission line project. It was not planted with palay at the time of the inspection.
According to the defendants, their farm helpers are already afraid to work on the land because of the
buzzing and cracking sounds coming from the tower and transmission lines.
(3) The site is located in a highly developed area about 1.5 kms. away from Norzagaray Municipal
Building. The vast land owned by Jesus Is Lord congregation is on the same side of the road as
subject property. Opposite the road is an ongoing resort project, the Falcon Crest Resort about
kilometers away, and the proposed Catholic Retreat House about 200 meters away. Attached as
Annex "C" is the Location Plan of said lot.
IV. Available Data
(1) Based on the Zoning Certificate issued by the Municipal Mayor, subject parcel of land has been
classified as residential pursuant to the proposed Comprehensive Land Use Plan of local
government unit. Copy of said Zoning Certificate is hereto attached as Annex "D."
(2) Based on the BIR Zonal Valuation attached as Annex "E," subject land has a zonal value
ofP60.00/sq. m. for residential and P30.00/sq. m. for agricultural lot. However, it is common
knowledge that zonal valuation provided by BIR cannot be made as basis for the purpose of
determining just compensation in eminent domain cases because it is only for the purpose of
computing internal revenue taxes.
(3) Opinion values gathered by the Provincial Assessor on the price of the property are as follows:
Residential - P1,075.00 / sq. m.
Agricultural - P 643.00 / sq. m.
The summary of Opinion Values is hereto attached as Annex "F."
(4) There are no available sales data on properties within the vicinity of subject land for the years
1996 and 1997, approximate time of the taking.
IV. Recommendation
The Commissioners, after considering the location of the subject property in a highly developed area and
accessibility thru the all-weather road (gravel); its potential for full development as shown by the existence of
building projects in the vicinity; and the long-term effect the expropriation will have on the lives, comfort and
financial condition of herein defendants, respectfully recommend the following amounts as payment for the
affected portions of subject property.
P800. / sq. m. - for the residential lot
P700. / sq. m. - for the agricultural lot
20

However, Atty. Alog, who represented NPC, dissented from the report, claiming that it was merely based on "opinion
values," and the self-serving declarations and opinions of defendants. He maintained that, in determining just
compensation, the trial court should instead consider the appraisal report of Cuervo Appraisers, Inc., upon which
Resolution No. 97-246 of NPC was based. He likewise argued that the property involved was actually and principally
used as agricultural, though declared as agricultural/residential lots; hence, only the easement fee of right of way
should be paid, as the principal purpose for which the lot was devoted would not be impaired by the construction of
transmission lines. His report reads:
I. FINDINGS
The ocular inspection and research conducted by the undersigned Commissioner on May 12, 1999
disclosed the following pertinent information and data:
1) The subject lots can be reached through a 1.4 km two lane concrete road, from the Sta. Maria-
Norzagaray National Highway intersection at Poblacion, Norzagaray, Bulacan (refer to Annex "B");
2) The low lying northern portion of the property is presently used as riceland and the rest planted
with assorted trees (refer to Annex "C," pictures);
3) The property is a portion of hill in the area with sides sloping downward on the northern eastern
boundaries (refer to Annex "C");
4) There is no visible structural development in the area except for:
a) a two lane concrete road adjacent to the property at the northwest boundaries going to
San Jose Del Monte, Bulacan;
b) newly constructed steel towers of NPC;
c) barbed wire fence with wooden post covering the northwestern portion of the lot adjacent
to the concrete road to San Jose Del Monte, Bulacan and a bamboo fence that covers the
southern portion (refer to Annex "C"); and
d) residential house approximately 200 meters from affected area.
5) During the ocular inspection, it is noted that they still use the affected area for agricultural
purposes;
6) The Falcon Crest Resort is approximately 1 km. from the affected property;
7) Price data gathered are as follows (in square meter unless specified):

Agri-Orchard
(Interior)
Riceland
unirrigated
(Interior)
Subd.
along
Sta.
Maria
(Garay)
Res'l Agr'l
Provincial Appraisal
Committee
Bulacan (Res. No. 97-005)
(Annex "D")

P600.00 P400.00
NP Board Resolution No.
97-246
(Annex "E")
P89.00 P80.00 P230.00

Cuervo Appraisers, Inc.
(Annex "F")
P890,000/ha. P800,000/ha. P230.00
21


Atty. Alog also recommended that only P2,640,274.70 be paid to defendants by way of just compensation, broken
down as follows:
Eight Hundred Two Thousand Three
Hundred Sixty Eight Pesos and 50/100
(P802,368.50)
- Payment for damaged
crops/plants/trees
One Hundred Sixty Two Thousand Eight
Hundred Sixty Five Pesos and 65/100
(P162,865.65)
- Payment for structures
One Million Five Hundred Nine Thousand
Nine Hundred Fifty Pesos (P1,509,950.00)
- Payment for residential
portion of lot
One Hundred Fifty One Thousand Six
Hundred Ninety One Pesos and 60/100
(P151,691.60)
- Easement fee for
agricultural portion of lot
Thirteen Thousand Three Hundred Ninety-
Eight and 95/100 (P13,398.95)
22

- Tower Occupancy Fee
On October 28, 1999, the RTC rendered judgment,
23
declaring as well-grounded, fair and reasonable the
compensation for the property as recommended by Atty. Baltazar and Engr. Cruz. The fallo of the RTC decision
reads:
WHEREFORE, premises considered, this Court hereby orders the above-described 5,700-square meter lot
from Lot No. 1250 of defendants Spouse (sic) Raul (sic) and the afore-described 6,362-square meter lot
from Lot No. 1251 of same defendants, subject to the covering Compromise Agreements; and the above-
described 17,195-square meter lot from Lot No. 2076 of defendant Maria Mendoza San Pedro,
CONDEMNED and/or EXPROPRIATED for the construction and maintenance of plaintiff's Northwestern
Luzon Transmission Line Project (San Manuel - San Jose 500 KV Transmission Line Project), a project for
public purpose.
Accordingly, this Court hereby fixes the just compensation for the expropriated lots, as follows:
OWNERS LOT
NO.
AREA
EXPROPRIATED
PRICE/
S.Q.
METER
JUST
COMPENSATION
Sps. Raul & Edna
Lagula
1250 5,700 sq. m. P499.00 P2,844,300.00
Sps. Raul & Edna
Lagula
1251 6,362 sq. m. 499.00 2,174,638
Ma. Mendoza San
Pedro her heirs
2076 17,195 sq. m. 800.00 13,756,000
Hence, plaintiff is ordered to pay, as soon as possible, herein defendants the just compensation enumerated
above for their respective lots aforementioned. For this purpose, plaintiff may withdraw the sum of money
deposited with the Land Bank of the Philippines or any other banks pursuant to Section 2 of Rule 67 of the
Rules of Court, as amended by P.D. No. 42.
FURTHER, defendants are ordered to clear and vacate the lots in question within 30 days from receipt
hereof and to surrender possession thereof to the plaintiff.
The fees for the 3 Commissioners of the Appraisal Committee in the sum of P6,000.00 for the Chairman
andP5,000.00 each for the 2 members, shall be paid by the plaintiff.
SO ORDERED.
24

On November 19, 1999, the heirs of Maria San Pedro filed a Manifestation and Motion
25
for the partial
reconsideration of the decision on the ground that the court failed to include in its decision the just compensation for
the 6,565-square-meter residential portion of their land, with prayer for attorney's fees equivalent to 10% of the total
amount to be awarded to them.
On December 3, 1999, NPC filed its motion for reconsideration,
26
insisting that the just compensation awarded to
defendants was without legal and factual basis, and that it should only be made to pay an easement fee.
On June 6, 2001, the trial court issued an Order granting the motion of the heirs and denied that of NPC.
27
The RTC
declared that the just compensation for the residential portion of the property should be the same as that of the
spouses Lagula's property, which was P499.00 per sq m. On the claim of NPC in its motion for reconsideration that
it should be made to pay only an easement fee, the trial court ruled that Lot No. 2076 should be treated the same
way as NPC treated the properties of the spouses Lagula. It was pointed out that in the compromise agreements
executed by plaintiff and spouses Lagula, plaintiff paid P499.00 per sq m on the basis of a straight sale of their
agricultural land, and not merely an easement fee for a right of way thereon. The fallo of the amended decision
reads:
WHEREFORE, in the light of the foregoing, the Court hereby:
1. Grants the motion of defendant Maria Mendoza San Pedro and thus orders that the 1st paragraph
of page 8 of the Decision be amended to read as follows:
"Plaintiff is expropriating portions of defendants' above-described properties to give way to the
construction and maintenance of its Northern Luzon Transmission Line Project (San Manuel - San
Jose 500 KV Transmission Line Project), a project for public purpose. The area of the lots sought to
be expropriated from the lot of defendant Maria Mendoza San Pedro, represented by her heirs,
are17,195 square meters more or less of agricultural land and 6,565 square meters of residential
land, while the area of the land sought to be expropriated from the two lots of defendants Sps. Raul
and Edna Lagula are only 5,166.50 square meters, more or less, from Lot No. 1250 and 6,363 (sic)
square meters, more or less, from Lot No. 1251.
Furthermore, the second paragraph of the dispositive portion of the Decision should be amended as follows:
"Accordingly, this Court hereby fixes the just compensation for the expropriated lots, as follows:
OWNERS LOT
NO.
AREA
EXPROPRIATED
PRICE/
S.Q.
METER
JUST
COMPENSATION
Sps. Raul & Edna
Lagula 1250 5,700 sq. m. P499.00 P2,844,300.00
Sps. Raul & Edna
Lagula 1251 6,362 sq. m. 499.00 3,174,638.00
Ma. Mendoza San
Pedro her heirs 2076 17,195 sq. m. 499.00 8,580,305.00
Ma. Mendoza San
Pedro her heirs

6,565 sq. m. 800.00 5,252,000.00
2. Denies the plaintiff's Motion for Reconsideration for lack of merit.
SO ORDERED.
28

NPC appealed the amended decision to the CA, asserting that:
THE LOWER COURT GRAVELY ERRED IN FIXING P800.00 AND P499.00 PER SQUARE METER AS
JUST COMPENSATION FOR APPELLEE'S 6,565 SQUARE METERS OF RESIDENTIAL LAND AND
17,195 SQUARE METERS OF AGRICULTURAL LAND, RESPECTIVELY.
29

On September 28, 2005, the CA rendered judgment dismissing the appeal. The CA ruled that the July 12, 1999
majority report was based on uncontroverted facts, supported by documentary evidence and confirmed by
the commissioners' ocular inspection of the subject properties. To arrive at a reasonable estimate of just
compensation, the commissioners considered factors such as the location, the most profitable likely use of the
remaining area, size, shape, accessibility, as well as listings of other properties within the vicinity. Citing National
Power Corporation v. Manubay Agro-Industrial Development Corporation,
30
the CA found as unpersuasive NPC's
argument that it should only pay an easement fee. It ruled that considering the nature and effect of the installation of
power lines, the limitations on the use of land for an indefinite period deprives the owner of its normal use.
Thefallo of the CA decision reads:
WHEREFORE, the Appeal is hereby DENIED. The assailed Decision and Order dated 28 October 1999 and
6 June 2001, respectively, are AFFIRMED.
SO ORDERED.
31

NPC filed a Motion for Reconsideration,
32
which the CA denied in its Resolution
33
dated December 22, 2005; hence,
the instant petition based on the following ground:
THE COURT OF APPEALS COMMITTED A GRAVE ERROR WHEN IT UPHELD THE DECISION OF THE
TRIAL COURT FIXING THE JUST COMPENSATION FOR RESPONDENT'S 6,565 SQ. METERS OF
RESIDENTIAL LAND AND 17,195 SQUARE METERS OF AGRICULTURAL LAND, AT PHP800.00 AND
PHP499.00 PER SQUARE METER RESPECTIVELY, INSTEAD OF THE EASEMENT FEE AS PRAYED
FOR IN THE COMPLAINT AND PROVIDED UNDER REPUBLIC ACT NO. 6395, AS AMENDED,
OTHERWISE KNOWN AS THE REVISED NPC CHARTER.
34

The Ruling of the Court
The petition is denied for lack of merit.
The CA found no reversible error in the trial court's finding of just compensation. Inasmuch as the determination of
just compensation in eminent domain cases is a judicial function and factual findings of the CA are conclusive on the
parties and reviewable only when the case falls within the recognized exceptions, which does not obtain in this case,
we see no reason to disturb the factual findings as to the valuation of the subject property.
35

Petitioner avers that the rulings of the trial court affirmed by the appellate court, based on the majority report on the
subject property's just compensation, is not supported by documentary evidence. It avers that in the majority report,
Commissioners Atty. Baltazar and Engr. Cruz, even admit that there were no available sales data on properties
within the vicinity of the subject property for the years 1996 and 1997. Moreover, the Bureau of Internal Revenue
(BIR) valued the property at P60.00 per sq m for residential, and P30.00 per sq m for agricultural lot.
36

Petitioner further argues that respondents have not shown that the condition of the adjoining properties or
improvements thereon had increased their land's economic value.
37
The valuation, thus, of the trial court, as affirmed
by the CA, was exorbitant and devoid of factual and legal basis.
38

We are not persuaded.
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.
39
To determine the just compensation to be paid to
the landowner, the nature and character of the land at the time of its taking is the principal criterion.
40

In the July 12, 1999 Majority Report, the commissioners found that the property was located in a highly-developed
area and was accessible through an all-weather road. The fact that the property had potential for full development
as shown by the existence of building projects in the vicinity, and the long-term effect of the expropriation on the
lives, comfort and financial condition of petitioners was likewise considered. The report also took into account the
ocular inspection conducted by the commissioners on May 11, 1999. The tax declaration of the subject
property,
41
the NPC sketch plan,
42
the location plan,
43
the zoning certificates,
44
the zonal valuation of the BIR,
45
and
the opinion values
46
were also considered.
The lone fact that there was no available sales data on properties within the vicinity of respondent's land for 1996
and 1997 and that the BIR zonal value was P60.00 per sq m for residential and P30.00 per sq m for agricultural did
not proscribe the commissioners and the trial court from making their own reasonable estimates of just
compensation, after considering all the facts as to the condition of the property and its surroundings, its
improvements and capabilities. As had been amply explained by this Court in Export Processing Zone Authority v.
Dulay:
47

Various factors can come into play in the valuation of specific properties singled out for expropriation. The
values given by provincial assessors are usually uniform for very wide areas covering several barrios or
even an entire town with the exception of the poblacion. Individual differences are never taken into account.
The value of land is based on such generalities as its possible cultivation for rice, corn, coconuts, or other
crops. Very often land described as "cogonal" has been cultivated for generations. Buildings are described
in terms of only two or three classes of building materials and estimates of areas are more often inaccurate
than correct. Tax values can serve as guides but cannot be absolute substitutes for just compensation.
To say that the owners are estopped to question the valuations made by assessors since they had the
opportunity to protest is illusory. The overwhelming mass of land owners accept unquestioningly what is
found in the tax declarations prepared by local assessors or municipal clerks for them. They do not even
look at, much less analyze, the statements. The idea of expropriation simply never occurs until a demand is
made or a case filed by an agency authorized to do so.
It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax
documents is unfair or wrong. And it is repulsive to basic concepts of justice and fairness to allow the
haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually viewed the property, after evidence and
arguments pro and con have been presented, and after all factors and considerations essential to a fair and
just determination have been judiciously evaluated.
48

Conformably with the rulings of this Court, the majority report took into account the most profitable likely use of the
remaining area; and the size, shape, accessibility, as well as listings of other properties within the vicinity.
49

As gleaned from the location plan
50
of the property in the case at bar, Lot No. 2076 is connected via a cemented
road to the National Road, 1.5 kilometers away. The same is likewise strategically located at a junction of the barrio
road leading to the Provincial Road, the National Road and to Sapang Palay. The lot is also on the same side of the
road as the land owned by the Jesus Is Lord Congregation and the Partida Elementary School. The ocular
inspection of the commissioners also reveals that opposite the road, about half a km away, is an ongoing resort
project, the Falcon Crest Resort, and, about 200 meters away, the proposed Catholic Retreat House. While there
are no existing structures or improvements on the residential portion of the lot, the same is situated along the all-
weather (gravel) road and is fronting the property. On the agricultural portion thereof, the same appears to have
been cultivated prior to the taking, as petitioner offered to compensate respondent's heirs' damages to the crops,
plants and trees.
The trial court fixed the just compensation for the property as follows: (1) P499.00 per sq m on the 17,195 sq m
agricultural portion of the subject land; and (2) P800.00 per sq m on the 6,565 sq m residential portion of the lot.
Noticeably, the trial court did not blindly accept the recommendation of majority of the commissioners of P800.00
per sq m for the residential lot and P700.00 per sq m for the agricultural lot. Indeed, the trial court took into account
the evidence of the parties, in tandem with the findings and recommendation of the majority of the commissioners.
Considering that such valuation of the trial court as affirmed by the CA is reasonable as it is and supported by the
evidence on record, we find no compelling reason to disturb the same.
51

The Court is not persuaded by petitioner's argument that respondents had not shown that the condition of the
adjoining properties, i.e., improvements, had increased their land's economic value. It bears stressing that there is
absence of any available sales data on properties within the vicinity of respondent's land for the years 1996 and
1997, the time of the taking. The property of respondent was the first to be sold. It is thus an exercise in futility for
respondents to require evidence of sales of properties in the vicinity when no such transactions took place.
Petitioner's contention that the trial court should have based the fixing of just compensation on the appraisal report
of Cuervo Appraisers, Inc. (where petitioner based its Resolution No. 97-246) is likewise untenable. Petitioner failed
to present the so-called report of the Cuervo Appraisers, Inc. as evidence. We note that annexed to NPC Resolution
No. 97-246 is a data of the NPC Board Appraisal on the Fair Market Value of residential lands along the concrete
road in Sapang Palay, San Jose Del Monte, valued at P499.00 per sq m, which, however, is not signed nor
authenticated. If, at all, the values indicated therein are self-serving to petitioner.
Parenthetically, petitioner has not explained why it agreed on paying just compensation of P499.00 per sq m on
theagricultural lands of the spouses Lagula, when the purported Cuervo Appraisal Report indicates that the fair
market value of unirrigated riceland along the road is only P110.00 per sq m, and for an unirrigated interior
onlyP85.00 per sq m.
52
Had petitioner really believed Cuervo's appraisal, then, it should have likewise insisted on
the values therein when it dealt with the spouses Lagulas.
Notably, the lower court's valuations of respondent's property P499.00 per sq m on the agricultural portion
andP800.00 per sq m on the residential portion of the lot are near the estimates made by the following: (1) the
Provincial Appraisal Committee, in its Resolution No. 97-005, which are P400.00 for agricultural and P600.00 for
residential;
53
(2) the recommendation in the majority report of the commissioners (P700.00 for agricultural
andP800.00 for residential); and (3) the opinion values, which are P643.00 for agricultural and P1,075.00 for
residential. On the other hand, the valuations made by Atty. Alog, P89.00 for agricultural and P230.00 for residential,
are unconscionably low, understandably so because he works for petitioner.
On the question as to whether petitioner shall pay only an easement fee to respondent's heirs, the following
pronouncement in National Power Corporation v. Aguirre-Paderanga
54
is enlightening:
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, as in the present case, also falls within the ambit of the term
"expropriation."As explained in National Power Corporation v. Gutierrez, viz:
The trial court's observation shared by the appellate court show that "x x x While it is true that
plaintiff [is] only after a right-of-way easement, it nevertheless perpetually deprives defendants of
their proprietary rights as manifested by the imposition by the plaintiff upon defendants that below
said transmission lines no plant higher than three (3) meters is allowed. Furthermore, because of the
high-tension current conveyed through said transmission lines, danger to life and limbs that may be
caused beneath said wires cannot altogether be discounted, and to cap it all, plaintiff only pays the
fee to defendants once, while the latter shall continually pay the taxes due on said affected portion of
their property."
The foregoing facts considered, the acquisition of the right-of-way easement falls within the purview
of the power of eminent domain. Such conclusion finds support in similar cases of easement of right-
of-way where the Supreme Court sustained the award of just compensation for private property
condemned for public use (See National Power Corporation v. Court of Appeals, 129 SCRA 665,
1984; Garcia v. Court of Appeals, 102 SCRA 597, 1981). The Supreme Court, in Republic of the
Philippines 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."
In the case at bar, the easement of right-of-way is definitely a taking under the power of eminent domain.
Considering the nature and effect of the installation of the 230 KV Mexico-Limay transmission lines, the
limitation imposed by NPC against the use of the land for an indefinite period deprives private respondents
of its ordinary use.
55

Similarly, in this case, the commissioners' observation on the reported constant loud buzzing and exploding sounds
emanating from the towers and transmission lines, especially on rainy days; the constant fear on the part of the
landowners that the large transmission lines looming not far above their land and the huge tower in front of their lot
will affect their safety and health; and the slim chance that no one would be interested to buy the remaining portions
on each side of the residential lot affected by the project, to the damage of the landowners, both as to future actual
use of the land and financial gains to be derived therefrom, makes the instant case fall within the ambit of
expropriation.
WHEREFORE, premises considered, the appeal is hereby DENIED for lack of merit. The ruling of the Court of
Appeals in CA-G.R. CV No. 72860 is AFFIRMED.
SO ORDERED.
Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario, J.J., concur.


FIRST DIVISION



LECA REALTY CORPORATION, G.R. No. 155605
Petitioner,
Present:

PANGANIBAN, CJ, Chairperson,
- versus - YNARES-SANTIAGO,
AUSTRIA-MARTINEZ,
CALLEJO, SR., and
CHICO-NAZARIO, JJ
REPUBLIC OF THE PHILIPPINES,
Represented by the Department
of Public Works and Highways,
Respondent.
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x
REPUBLIC OF THE G.R. No. 160179
PHILIPPINES,
Represented by the Department
of Public Works and Highways,
Petitioner,

- versus -

BANK OF THE PHILIPPINE ISLANDS,
CITYLAND INCORPORATED,
LECA REALTY CORPORATION, and Promulgated:
LEELENG REALTY CORPORATION,
[1]

Respondents. September 27, 2006
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- --x
DECISION


PANGANIBAN, CJ:


Zonal valuation is simply one of the indices of the fair market value of real
estate. By itself, however, this index cannot be the sole basis of just
compensation in expropriation cases. The standard is not the takers gain, but the
owners loss.

The Case


Before the Court are two consolidated Petitions:
[2]
the first is a Petition for
Review
[3]
under Rule 45 filed by Leca Realty Corporation; and the second, a special
civil action for certiorari
[4]
filed under Rule 65 by the Republic of the Philippines,
represented by the Department of Public Works and Highways (DPWH) through
the Office of the Solicitor General (OSG).

Both Petitions urge this Court to set aside the Decision dated September 25,
2002, rendered by the Court of Appeals (CA) in CA-GR CV No. 60731.
[5]
The
assailed judgment affirmed in toto the Decision dated March 30, 1998, issued by
the Regional Trial Court (RTC) of Pasig City, Branch 159, in SCA No. 1063.
[6]
The
RTC approved the amount of compensation as determined by the commissioners
in their Report dated January 8, 1998. This compensation was for the subject
properties expropriated in connection with the construction of the EDSA-Shaw
Boulevard (Mandaluyong City) flyover.

The Facts


The facts are narrated by the CA as follows:

On 18 March 1996, the Republic of the Philippines, represented by the
Department of Public Works and Highways (DPWH), filed a complaint for eminent
domain for the taking of some portions of the properties of Leca Realty Corp.
(Leca), Leeleng Realty Inc. (Leeleng), Metropolitan Bank and Trust Co.
(Metrobank), Bank of the Philippine Islands (BPI), and Cityland Inc. (Cityland). The
said properties would be affected by the construction of the EDSA-Shaw
Boulevard Overpass Project in Shaw Boulevard, Mandaluyong City, a public
purpose to be undertaken by the DPWH.

The complaint was filed with the Regional Trial Court of Pasig City and was
raffled to Branch 159 of the said court.

Attached to the complaint is, among other things, Resolution No. 94-1 of
the City Appraisal Committee of Mandaluyong, which was created to appraise the
properties that would be affected by the construction of the project in question.
In the said resolution, the City Appraisal Committee fixed the fair market values of
defendants properties, as follows:

1. All lots situated along Shaw Boulevard from Edsa going westward towards
Manila up to Samat Street, that City, at THIRTY FIVE THOUSAND PESOS
(P35,000) per square meter[.]

2. All lots situated along Shaw Boulevard from Edsa going eastward towards
Pasig up to San Miguel Avenue, Pasig, Metro Manila at FORTY FIVE
THOUSAND PESOS (P45,000) per square meter[.]

The property of defendant-appellant Leca is approximately 297.00 meters
from the intersection of Shaw Boulevard and EDSA while that of x x x Leeleng has
an approximate distance of 146 meters from the intersection of EDSA-Shaw
Boulevard.

The property of Metrobank is approximately 200 meters from EDSA and
located beside Shangri-La Plaza, within Ortigas Center while that of BPI is
approximately 237 meters from EDSA and southeast of Shangri-La Plaza,
within Ortigas Center.

The property of Cityland, Inc. is one lot away from EDSA Plaza
Hotel, Shangri-La Plaza and walking distance to SM Department Store,
within Ortigas Center.

On October 7, 1997, the court a quo appointed three (3) competent and
disinterested persons; namely, Atty. Benjamin C. Angeles, Mr. Joselito E. Gunio
and Mr. Melchor Savillo as commissioners to ascertain and report the just
compensation of the properties sought to be taken.

On January 9, 1998, the commissioners submitted their report dated
January 8, 1998, and recommended the fair market value of the subject
properties as follows:

1. Properties of Leca Realty Corporation and Leeleng Realty
Inc.: P50,000 per sq.m.
2. Metropolitian Bank and Trust Co., Bank of the Philippine
Islands: P125,000 per sq.m.
3. Cityland, Inc.: P137,500 per sq.m. plus 10% corner influence, for a
total of P137,500 per sq.m. (sic)

In arriving at the said Report, the Commissioners took into consideration
the following factors: property location, identification[,] neighborhood data,
community facilities and utilities, highest and best use, valuation and reasonable
indication of land values within the vicinity.

On March 30, 1998, the court rendered the decision whereby the
Commissioners Report was adopted.
[7]




Ruling of the CA

The CA affirmed the lower courts judgment for the following reasons. First,
the RTCs appointment of the commissioners was fair and impartial. Second, the
fair market values of the affected properties were unanimously arrived at by the
appointed commissioners after a thorough and objective investigation and analysis
of the properties, with due consideration of the various factors affecting those
values: location, existing facilities, desirability, neighborhood, and size.
[8]


The appellate court likewise debunked the contention of the Republic of
the Philippines that the commissioners had erred in fixing the fair market values of
the properties, because the appraisals exceeded the zonal values determined in
Department of Finance Order No. 71-96. The CA held that the zonal valuation was
made for taxation purposes only and was not necessarily reflective of the actual
market values of the properties in the area.
[9]



Hence, these Petitions.
[10]


The Issues



The following issues were submitted to this Court for resolution:

1. Is the Republic bound and put in estoppel by the gross negligence/mistake
of its agent/former counsel? Is the Court of Appeals Decision
of September 25, 2002 in accord with law and jurisprudence
[11]


2. Whether the Court of Appeals incurred an error of law in affirming the
amount fixed by the trial court based on the report of the board of
commissioners of P50,000 per square meter as just compensation for the
taking of petitioner *Lecas+ 1,217 square meter property at Shaw
Boulevard, Mandaluyong City, while adjudging other parties whose lands
were also expropriated in the same vicinity to payment of P125,000.00 per
square meter for Metrobank and BPI, and P137,500.00 per square meter
for City Land, Inc. [or] more than double the value fixed for petitioner
*Lecas+ land.
[12]




The Courts Ruling



The Petition in GR 155605 is meritorious, while that in GR 160179 is not.


First Issue:
Estoppel by the Government


Before this Court is the issue of whether Petitioner Republic is estopped by its
agents failure to file an appeal of the CA Decision.

Clearly, the questioned Decision was received by the Republic through the
OSG on October 7, 2002. Accordingly, the governments lawyers had fifteen (15)
days or until October 22, 2002, to file a motion for reconsideration with the CA;
and, in case this motion was denied, another fifteen (15) days from the notice of the
denial to file a petition for review under Rule 45. But it was only on October 20,
2003, more than one year later, that the Republic filed the present Petition for
Certiorari. Presumably, it resorted to the special civil action because of its failure to
file an appeal within the 15-day reglementary period.

Time and time again, this Court has emphasized that a special civil action for
certiorari under Rule 65 lies only when there is no appeal[;] nor any plain, speedy
and adequate remedy in the ordinary course of law.
[13]
That action is not a
substitute for a lost appeal; in general, it is not allowed when a party to a case fails
to appeal a judgment to the proper forum.
[14]


In this case, there was no reason why the Republic could not have moved to
reconsider the assailed CA Decision or appealed it within the reglementary
period. These procedural devices (reconsideration and appeal) were not only
available; they would have also constituted plain, speedy and adequate remedies for
questioning the alleged errors in the CA Decision.

Besides, it is a hornbook doctrine that mere errors of judgment cannot be the
proper subject of a special civil action for certiorari.
[15]
International Exchange
Bank v. Court of Appeals
[16]
stressed this rule as follows:
x x x Where the issue or question involved affects the wisdom or legal
soundness of the decision not the jurisdiction of the court to render said
decision the same is beyond the province of a special civil action for
certiorari.Erroneous findings and conclusions do not render the appellate court
vulnerable to the corrective writ of certiorari, for where the court has jurisdiction
over the case, even if its findings are not correct, they would, at the most,
constitute errors of law and not abuse of discretion correctible
by certiorari.
[17]
(Emphasis supplied)


Furthermore, petitions under Rule 65 must be filed within 60 days. In the
present case, the Petition was filed after over a year.

Faced with the inevitable brick wall, the Republic through the OSG invokes
the principle that a lawyers gross negligence will not bind the client.
[18]
The
Republic imputes the failure to file a timely appeal to one of its lawyers, Solicitor
Mauro Elinzano, who allegedly took no action after receiving the adverse Decision
of the Court of Appeals.
[19]
In support of its claim, the OSG cites this Courts
pronouncements that a lawyers procedural blunder constitutes an exception to the
rule that clients are bound by the mistakes of their counsel. Hence, it implores this
Court to give due course to the Petition to prevent a miscarriage of justice.
We are not convinced.

First, the time-honored rule that the government cannot be estopped by the
mistakes or errors of its agent is not without exceptions. In Republic of the
Philippines v. G Holdings,
[20]
this Court held thus:

While the Republic or the government is usually not estopped by the
mistake or error on the part of its officials or agents, the Republic cannot now take
refuge in the rule as it does not afford a blanket or absolute immunity. Our
pronouncement in Republic v. Court of Appeals is instructive: the Solicitor-General
may not be excused from its shortcomings by invoking the doctrine as if it were
some magic incantation that could benignly, if arbitrarily, condone and erase its
errors.


The rule on non-estoppel of the government is not designed to perpetrate an
injustice. In general, the rules on appeal are created and enforced to ensure the
orderly administration of justice. The judicial machinery would run aground if late
petitions, like the present one, are allowed on the flimsy excuse that the attending
lawyer was grossly lacking in vigilance.

Besides, to countenance the Republics plea for liberality would mean a
reexamination of issues that have long been settled, at least from the points of
view of the other respondents that did not appeal the CA Decision BPI, Cityland
and Leeleng. As far as they are concerned, the appellate courts judgment
dated September 25, 2002, already attained finality on October 23,
2002.
[21]
Accordingly, the entry of judgment was ordered by the CA in its
Resolution dated July 25, 2003.
[22]


Second, as Respondent BPI observed in its Memorandum, nowhere in the
pleadings of the OSG in the lower courts did the name of Solicitor Mauro Elinzano
appear. The Republics Brief before the Court of Appeals was signed by Assistant
Solicitor General Pio C. Guerrero and Associate Solicitor Roland C.
Villaluz.
[23]
Neither was evidence adduced to show the participation in the case of
Solicitor Elinzano, particularly as the attending counsel of the Republic.
Third, we are hard-pressed in appreciating the so-called grave injustice
against the government. In a letter datedMay 20, 1998, Secretary Gregorio R.
Vigilar of the DPWH instructed the OSG to file the necessary pleading in court to
either withdraw or drop the appeal on the Decision promulgated on March 30,
1998 by the RTC, National Capital Judicial Region, Pasig City, Branch 159.
[24]


The request was predicated on the conclusion that the compensation costs
as recommended by the commissioners and fixed by the court in the above-
mentioned Decision are reasonable and acceptable; and that the move will
hasten the legal process, thereby shorten the time of the proceedings and stop the
running of interest in the amount P6,240,000.00 per annum.
[25]
The same request
was reiterated in a second letter dated August 18, 1998, stating that the market
values recommended by the commissioners are [f]air and reflective values
prevailing in the area.
[26]

The DPWH is the main government agency tasked to implement the
expropriation and subsequent construction of the EDSA-Shaw Boulevard Overpass
project. Thus, its judgment on this matter is impossible to ignore; quite the
contrary, it should be accorded significant weight.

In the light of the circumstances, it is indeed plausible -- as Respondent BPI
submits -- that Solicitor Elinzano, or whoever was the governments handling
lawyer, purposely exercised his discretion not to appeal the assailed CA
Decision. It was altogether possible that the OSG adopted the position of the
DPWH that the valuation of the expropriated properties, as determined by the RTC,
was correct and justified.

Lastly, we note that the OSG seeks to excuse its failure to file a timely appeal
in order to avert the alleged improvident release of public funds and consequent
unjust enrichment of the concerned property owners.
[27]
Lest it be conveniently
forgotten, the responsibility of preventing the improvident release of public funds
falls upon the OSG as counsel of the government.
[28]
The Courts duty in this case
is merely to determine if the Decision of the lower courts in fixing just
compensation is in accord with the facts and the law.

Second Issue:
Determination of J ust Compensation


The more critical issue is the determination of the amount of just
compensation for the expropriated property of Leca in GR 155605. The Republic
avers that the values arrived at in the Commissioners Report were not supported by
sufficient evidence. Moreover, they were allegedly based on newspaper listings of
advertisements,
[29]
which the commissioners deemed to be reasonable indices of the
fair market value. Further, mere offers of sale -- not consummated transactions --
were these listed items, save for one,
[30]
as follows:

1. On February 12, 1997, a property with an area of 1,600 square meter,
more or less, located along Meralco Avenue, within Ortigas Center, Pasig City,
Metropolitan Manila was offered for sale through the Manila Bulletin at an asking
price of P218,000 per square meter.

2. On February 12, 1997, a property with an area of 2,015 square meter
more or less, located along Dona Julia Vargas Avenue, within Ortigas Center,
Pasig City, Metropolitan Manila, was offered for sale through the Manila Bulletin
at an asking price of P330,000 per square meter.

3. On February 24, 1997, a commercial lot having an area of 2,000 square
meter more or less, located alongMeralco Avenue,
within Ortigas Center, Pasig City, Metropolitan Manila, was offered for sale
through the Manila Bulletin at an asking price of P200,000 per square meter.

4. On July 20, 1997, a property having an area of 1,749 square meter more
or less, located along Dona Julia Vargas Avenue,
within Ortigas Center, Pasig City, Metropolitan Manila, was offered for sale
through the Manila Bulletin at an asking price of 220,000 per square meter.


The Revised Zonal Values of Real Properties in the City
of Mandaluyong were implemented on April 29, 1996, by the Department of
Finance under DO No. 71-96. The Republic further argues that, according to this
listing, properties classified as residential condominiums in the vicinity of Shaw
Boulevard had a zonal value of P55,000 per square meter. On the other hand, those
properties classified as commercial condominiums had a zonal value ofP60,000 per
square meter.

Hence, the fair market value of the subject properties of BPI and Cityland
should not be higher than P60,000 per square meter.
[31]
Given these prescribed
values, the Republic contends that the compensation was rendered unfair, unjust
and unconscionable by the gross discrepancies between the values determined for
the properties of Leca and Leeleng Realty and for those of BPI and Cityland.
[32]


Leca, on the other hand, alleges that the fair market value ascribed to its
property was not sufficient. Supposedly, the Court of Appeals did not give due
consideration to the Zonal Value Table of the Bureau of Internal
Revenue.
[33]
Worse, the CA totally ignored the Fair Market Value Appraisal
dated November 10,
1997, prepared by Cuervo Appraisers, Inc. This appraisal, which was submitted in
compliance with the directive of the commissioners,
[34]
had placed the value of
Lecas property at P70,000 per square meter.

In expropriation proceedings in general, the market value is the just
compensation to which the owner of a condemned property is entitled. More
precisely, market value is that sum of money which a person desirous but not
compelled to buy, and an owner willing but not compelled to sell, would agree on
as a price to be given and received therefor.
[35]


Republic v. Court of Appeals
[36]
ruled in this wise:

The constitutional limitation of just compensation is considered to be the
sum equivalent of 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.
[37]

Just compensation, then, is the full and fair equivalent of a property taken
from its owner by the expropriator. The measure is not the takers gain, but the
owners loss. Note must be taken that the word just is used to stress the
meaning of the word compensation, in order to convey the idea that the
equivalent to be rendered for the property to be taken shall be real, substantial,
full and ample.
[38]


Necessarily, just compensation must not be arrived at arbitrarily, but
determined after an evaluation of different factors. In the present case, the
Commissioners Report made use of the so-called market-data approach in arriving
at the valuation of the properties. In this method, the value of the land is based
on sales and listings of comparable property registered within the vicinity.

As both the Republic and Leca correctly pointed out, however, the
Commissioners Report relied heavily on newspaper advertisements of offers of
sale of properties in the vicinity.
Clearly, these offers were merely asking prices. By their very nature, they are
subject to negotiations in which a buyer may ask for a lower price;
understandably, it is customary for the owner to raise the price offer.

Well-settled is the rule that in expropriation proceedings, the value of a
property must be determined either as of the date of the taking of the property or
the filing of the complaint, whichever comes first.
[39]
In this case, the Complaint
was filed on March 18, 1996, and the trial court issued the Writ of Possession
on June 19, 1997.
[40]
The offers cited in the Commissioners Report, though, were
made between May 1996 to February 1997, a period after the filing of the
Complaint on March 18, 1996. Thus, there is no evidence on record of the fair
market value of the property as of March 1996.

Moreover, the offers for sale were good for properties inside
the Ortigas Center.
[41]
Thus, those offers cannot be used as bases for the values of
properties along EDSA, where the property of Petitioner Leca is situated. In fact,
no listing or evidence of concluded sales was submitted for properties in areas
outside the Ortigas Center. While it is true that adjoining properties may be
valued differently, competent evidence still has to be presented to establish the
differences in market values.

The Republic is incorrect, however, in alleging that the values were
exorbitant, merely because they exceeded the maximum zonal value of real
properties in the same location where the subject properties were located. The
zonal value may be one, but not necessarily the sole, index of the value of a
realty.
[42]
National Power Corporation v. Manubay Agro-Industrial held thus:

x x x *Market value+ is not limited to the assessed value of the property or
to the schedule of market values determined by the provincial or city appraisal
committee. However, these values may serve as factors to be considered in the
judicial valuation of the property.
[43]

The above ruling finds support in EPZA v. Dulay
[44]
in this wise:

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.
[45]
(Emphasis supplied)


As pointed out earlier, no other evidence was presented to support the values
determined as just compensation for Lecas property. The only items submitted to
the trial court were the Commissioners Report and a location map, which were
evidently insufficient.
[46]


In National Power Corporation v. Manubay Agro-Industrial Development
Corporation,
[47]
the recommended price of the city assessor was rejected by this
Court. The opinions of the banks and the realtors, as reflected in the computation of
the market value of the property and in the Commissioners Report, were not
substantiated by any documentary evidence.

Moreover, Land Bank of the Philippines v. Wycoco ruled as follows:

x x x. While market value may be one of the bases of determining just
compensation, the same cannot be arbitrarily arrived at without considering the
factors to be appreciated in arriving at the fair market value of the propertye.g.,
the cost of acquisition, the current value of like properties, its size, shape,
location, as well as the tax declarations thereon. Since these factors were not
considered, a remand of the case for determination of just compensation is
necessary. x x x.
[48]



It must be noted, though, that the interest of Petitioner Leca is distinct and
separate from and will in no way affect the settled rights and interests of the other
parties that did not appeal the judgment of the trial court. As to Cityland Inc., Bank
of the Philippine Islands, and Leeleng Realty Inc., the Decision below has long
become final and executory.

WHEREFORE, the Petition of the Republic in GR No. 160179
is DISMISSED, while that of Leca Realty Corporation is REMANDED to the trial
court for the proper determination of the amount of just compensation. To
forestall any further delay in the resolution of this case, the trial court is hereby
ordered to fix the just compensation for Lecas property within six months from
its receipt of this Decision; and afterwards to report to the Court its
compliance. Insofar as it affects the property of Leca Realty Corporation, the
assailed Decision of the Court of Appeals in CA GR CV No. 60731 is SET ASIDE. No
costs.

SO ORDERED.


ARTEMIO V. PANGANIBAN
Chief Justice
Chairperson, First Division


W E C O N C U R:



CONSUELO YNARES-SANTIAGO MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice Associate Justice



ROMEO J. CALLEJO, SR. MINITA V. CHICO-NAZARIO
Associate Justice Associate Justice



CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision were reached in consultation before the case was
assigned to the writer of the opinion of the Courts Division.



ARTEMIO V. PANGANIBAN
Chief Justice











Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 170740 May 25, 2007
JULITA P. TAN, Petitioner,
vs.
THE REPUBLIC OF THE PHILIPPINES, Represented by the PUBLIC ESTATES AUTHORITY, Respondent.
D E C I S I O N
SANDOVAL-GUTIERREZ, J .:
For our resolution is the Petition for Review on Certiorari assailing the Decision
1
of the Court of Appeals (Thirteenth
Division, Special Division of Five) dated July 6, 2005 in CA-G.R. SP No. 84667.
The undisputed facts of the case are:
Julita P. Tan, petitioner herein, is the registered owner of a parcel of land consisting of 7,161 square meters located
at the southern bank of the Zapote River in Sitio Wawa, Pulang Lupa, Las Pias City. Her ownership is evidenced
by Transfer Certificate of Title (TCT) No. 78188 of the Registry of Deeds, same city. She acquired this property from
the San Antonio Development Corporation (SADC) as shown by a document denominated "Irrevocable and
Exclusive Special Power of Attorney" dated April 6, 2001, whereby she assumed SADCs "obligation of paying all
imposable taxes due said land." In consideration of such assumption and "for value" she "stepped into the shoes" of
SADC "free to exercise such rights and prerogatives as owner of the subject property, including the right to collect
and demand payment for the sale and/or use of the subject land or any portion thereof, by and from any person or
entity."
The Public Estates Authority (PEA) is a government-owned and controlled corporation, organized and existing
pursuant to Presidential Decree (P.D.) No. 1084 representing in this case the Republic of the Philippines, herein
respondent. Among the properties PEA manages is the Manila-Cavite Coastal Road (Coastal Road), also known
as the R-1 Expressway.
Prior to the transfer of the property to petitioner by SADC, or on March 29, 1985, PEA wrote SADC requesting
permission to enter the latters property, then covered by TCT No. 439101, for the purpose of constructing thereon
the southern abutment of the Zapote Bridge at the Coastal Road. PEA also proposed to SADC to start their
negotiation for its acquisition of the latters property.
On April 11, 1985, SADC replied authorizing PEA to enter the property, subject to the condition that the latter should
pay a monthly rental of P10,000.00. PEA then directed its contractor, the Philippine National Construction
Corporation, to enter the property and begin the necessary engineering works on the Coastal Road.
In a letter dated May 28, 1985, PEA requested SADC either to donate or sell the property to the government.
On October 22, 1985, SADC replied by offering to sell the property to PEA. SADCs asking price wasP1,288,980.00
plus P400,000.00 as compensation for the house and other improvements thereon that were destroyed during the
construction of the Coastal Road.
On January 7, 1987, PEA informed SADC it has no plan to buy the whole lot, but only the 1,131 square meter
portion above sea level. PEA then asked SADC to submit proofs of ownership and costs of the improvements which
were demolished.
Negotiations then ensued between the parties. However, for the past twenty (20) years, they failed to reach an
agreement.
On October 2, 2000, SADC asked PEA to pay compensation equivalent to the current zonal value plus interest of
ten percent (10%) per annum and a monthly rental of P10,000.00, also with the same interest. These sums,
according to SADC, could be considered just compensation for the governments use of the property since 1985
until September 2000 and thereafter.
The following month, PEA inquired from the Bureau of Internal Revenue (BIR) District 53, Alabang, Muntinlupa City
the zonal value of the SADC property. It submitted to the BIR the appraisal reports prepared by two (2) independent
licensed appraisers.
On April 6, 2001, petitioner Julita Tan acquired the property from SADC.1a\^ /phi1. net
On July 12, 2001, the BIR sent a letter to PEA stating that the zonal value of the property is P2,900.00 per square
meter, with the caveat that the said assessment is subject to review and approval by higher tax authorities.
On October 9, 2001, the BIR informed PEA that the current zonal value of the property is P20,000.00 per square
meter.
In the meantime, the construction of the Coastal Road was completed. PEA entered into a Joint Venture Agreement
with the Toll Regulatory Board and the UEM-MARA Philippine Corporation for the toll operation of the Coastal Road,
as shown by the Certificate of the Secretary of the Toll Regulatory Board dated May 13, 2003.
2

PEA has been collecting toll fees from the road users in the average amount of P1,039,404.85 per day, as shown by
a document denominated "Traffic Count of the Year 2002.
3
Despite its collection of huge toll fees, PEA continuously
refuses to pay petitioner any compensation.
On October 22, 2001, petitioner, in her desperation, wrote PEA expressing her willingness to be compensated
through a land swapping arrangement. She proposed that PEAs Fishermans Wharf be given to her in exchange for
her property.
On August 6, 2002, the PEA Board approved the exchange of a portion of petitioners lot consisting of 4,719 square
meters for PEAs Lot 12 with an area of 2,360 square meters. The parties entered into a Memorandum of
Agreement wherein PEA agreed to execute a Deed of Exchange by way of compensation for petitioners property
affected by the Coastal Road.
However, on June 18, 2003, PEA withdrew from the land swapping agreement.1a\^/ phi 1. net Instead, on September 22, 2003, it
filed with the Regional Trial Court (RTC), Branch 202, Las Pias City a complaint for expropriation, docketed as Civil
Case No. 03-0220. PEA alleged therein, among others, that its liability for just compensation is based on the zonal
value of the land at the time of the taking in 1985. Thus, it is liable for only P852,993.51 for the 4,719 square meter
portion. In her answer, petitioner claimed that PEA should pay for the whole area consisting of 7,161 square meters
at P20,000.00 per square meter, the zonal value set by the BIR pursuant to Republic Act No. 8974.
4
She then
prayed that she be paid P143,200,000.00 plus interest of twelve percent (12%) per annum, aside from
theP10,000.00 monthly rental with 12% interest per annum for the occupancy and use of the property since April
1985 up to the present.
On October 20, 2003, petitioner filed with the RTC a motion to order PEA to immediately pay her just compensation
based on the zonal valuation of the BIR. This was opposed by PEA.
On December 16, 2003, the trial court issued the following Order
5
:
WHEREFORE, finding merit to the "Motion To Order the Plaintiff to Immediately Pay Defendant Her Expropriated
Property," dated October 20, 2003, the same is hereby GRANTED. Accordingly, plaintiff, through PEA, is hereby
ordered to immediately pay defendant the sum of P94,380,000.00 (ninety-four million, three hundred eighty
thousand pesos) representing the just compensation for the 4,719 square meters of defendants property covered
by TCT No. 78188 of the Registry of Deeds of Las Pias based on P20,000.00 per square meter zonal valuation of
the Bureau of Internal Revenue.
SO ORDERED.
PEA timely filed a motion for reconsideration but it was denied by the trial court in its Order
6
dated April 14, 2004.
PEA then elevated the matter to the Court of Appeals by way of a petition for certiorari, prohibition, and mandamus.
On July 6, 2005, the Court of Appeals rendered its Decision, the dispositive portion of which reads:
WHEREFORE, the instant petition for certiorari and prohibition is hereby GRANTED while that of mandamus is
hereby DENIED (sic). Accordingly, the assailed Orders, dated December 16, 2003 and April 14, 2004, are hereby
REVERSED and SET ASIDE. Public respondent is hereby ordered to DESIST from enforcing the assailed Orders.
SO ORDERED.
Petitioner filed a motion for reconsideration. In a Resolution dated December 12, 2005, the Court of Appeals denied
the same.
Hence, the present petition anchored on these twin issues: Whether the Court of Appeals erred in sustaining PEAs
petition for certiorari and prohibition and in dismissing that for mandamus; and in holding that the just compensation
for petitioners property should be based on the BIR zonal valuation in 1985 when petitioner entered the subject
property.1awphi1.nt
The first issue involves the nature of the two Orders of the trial court dated December 16, 2003 and April 14, 2004.
The Order of December 16, 2003 directed PEA to pay petitioner just compensation in the sum ofP94,380,000.00.
The Order of April 14, 2004 denied PEAs motion for reconsideration. Are these orders final or interlocutory?
Sec. 1, Rule 41 of the 1997 Rules of Civil Procedure, as amended, partly provides:
SEC. 1. Subject of appeal. An appeal may be taken from a judgment or final order that completely disposes of the
case, or of a particular matter therein when declared by these Rules to be appealable.
No appeal may be taken from:
x x x
(c) an interlocutory order.
x x x
A final order is one that disposes of the subject matter in its entirety or terminates a particular proceeding or action,
leaving nothing else to be done but to enforce by execution what has been determined by the court, while an
interlocutory order is one which does not dispose of the case completely but leaves something to be decided upon.
7

Under Rule 67 of the same Rules, there are two (2) stages in a condemnation proceeding:
8

(1) Determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety
of its exercise in the context of the facts involved in the suit. It ends with an order, if not of dismissal of the
action, with condemnation declaring that the plaintiff has a lawful right to take the property sought to be
condemned for the public use or purpose described in the complaint, upon payment of just compensation.
An order of expropriation is final.
9
An order of dismissal, if this be ordained, would be a final one, as it finally
disposes of the action and leaves nothing more to be done by the court on the merits.
10
The order of
expropriation would also be a final one for after its issuance, no objection to the right of condemnation shall
be heard. The order of expropriation may be appealed by any party aggrieved thereby by filing a record on
appeal.
11

(2) Determination by the court of the just compensation for the property sought to be taken with the
assistance of not more than three (3) commissioners. The order fixing the just compensation on the
basis of the evidence before the court and findings of the commissioners would likewise be a final one,
as it would leave nothing more to be done by the court regarding this issue. A second and separate appeal
may be taken from this order fixing the just compensation.
The trial courts Orders in Civil Case No. 03-0220 required PEA to pay petitioner P94,380,000.00
representing the just compensation for her 4,719 square meter lot based on the BIR zonal valuation
ofP20,000.00 per square meter. Clearly, the Orders are final, hence, appealable. However, instead of appealing
from the said Orders within the reglementary period, PEA resorted to certiorari, prohibition and mandamus. It is
basic that the remedy of certiorari is not a substitute for a lost appeal, as in this case.
On the second issue, Section 9, Article III of the Constitution specifically mandates that "Private property shall not
be taken for public use without just compensation."
In City of Manila v. Estrada,
12
we held that "compensation" means "an equivalent for the value of land (property)
taken." The use of the word "just" is "to convey the idea that the equivalent to be rendered for the property taken
shall be real, substantial, full, ample." Thus, Estrada defined just compensation as "a fair and full equivalent for the
loss sustained." This definition has been reiterated in Manila Railroad Co. v. Velasquez[13] and Province of
Tayabas v. Perez.
14
Then in Manila Railroad Co. v. Caligsahan,
15
we held that "to be exactly just, the compensation
should be estimated at the time of the taking." Subsequently, in Republic v. Vda.de Castellvi,
16
we ruled that just
compensation is determined as of the date of the taking of the property or the filing of the complaint,
whichever came first.
The Court of Appeals, in its challenged Decision, held that PEAs taking of petitioners property occurred in 1985.
Even if PEA requested permission to enter the subject property and petitioner granted such request on condition
that PEA should pay a monthly rental of P10,000.00, "it does not change the fact that there was taking of the
property for public use." Consequently, the compensation should be computed on the basis of the zonal value of the
property at that time (1985) which was P2,900.00 per square meter per letter dated July 12, 2001 of the BIR to PEA.
The Court of Appeals is wrong. PEAs entry into the property with the permission of SADC, its previous owner, was
not for the purpose of expropriating the property. Records show and as stressed by Mr. Justice Renato C. Dacudao
of the Court of Appeals in his Dissenting Opinion, SADC allowed PEA to enter the land on condition that it should
pay a monthly rental of P10,000.00. Thereafter, PEA, in a letter dated May 28, 1985, requested SADC to donate or
sell the land to the government. On October 22, 1985, SADC responded, offering to sell the land to PEA
for P1,288,980.00, plus P400,000.00 representing the value of the improvements destroyed by PEA when it entered
the property. However, since 1985 up to the present, no agreement has been reached between PEA and SADC or
herein petitioner who acquired the property from the latter.
While PEA has been earning huge toll fees, it has refused to pay petitioner any compensation for the use of her
property in violation of her right as an owner.
The above circumstances clearly show that when PEA entered petitioners land in 1985, it was not for the purpose
of expropriating it. We stress that after its entry, PEA wrote SADC requesting to donate or sell the land to the
government. Indeed, there was no intention on the part of PEA to expropriate the subject property. Why did it ask
permission from SADC to enter the property? Thereafter, why did it request SADC to donate or sell the land to the
government? It could have simply exercised its power of eminent domain.
Section 2, Rule 67 (on Expropriation) of the same Rules provides, among others, that upon the filing of the
complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the right to take or
enter upon the possession of the real property involved if he deposits with the authorized government depositary an
amount equivalent to the assessed value of the property. It bears reiterating that in Republic v. Vda. de
Castellvi,
17
we ruled that just compensation is determined as of the date of the taking of the property or the filing of
the complaint, whichever came first.
We have made it clear that there was no taking of the property in 1985 by PEA for purposes of expropriation. As
shown by the records, PEA filed with the RTC its petition for expropriation on September 22, 2003. The trial court,
therefore, was correct in ordering respondent, through PEA, upon the filing of its complaint for expropriation, to pay
petitioner just compensation on the basis of the BIR zonal valuation of the subject property at P20,000.00 per
square meter.
In sum, we rule that the Court of Appeals erred (1) in not dismissing PEAs petition for certiorari, prohibition and
mandamus; and (2) in ruling that PEAs taking of the property occurred in 1985 and that the compensation should
be based on the BIR zonal valuation in that year.
WHEREFORE, the assailed Decision of the Court of Appeals dated July 6, 2005, in CA-G.R. SP No. 84667
isREVERSED. The Decision of the RTC, Branch 202, Las Pias City is AFFIRMED.
SO ORDERED.
ANGELINA SANDOVAL-GUTIERREZ
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
(On leave)
RENATO C. CORONA
Associate Justice

ADOLFO S. AZCUNA
Asscociate Justice
CANCIO C. GARCIA
Associate Justice
C E R T I F I C A T I O N
Pursuant to Article VIII, Section 13 of the Constitution, it is hereby certified that the conclusions in the above
Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts
Division.
REYNATO S. PUNO
Chief Justice











SECOND DIVISION

LAND BANK OF
THEPHILIPPINES,
Petitioner,



- versus -



SPS. VICENTE M.
ESTANISLAO and LUZ B.
HERMOSA,
Respondents.

G.R. No. 166777

Present:

QUISUMBING,
*
J.,Chairperson,
CARPIO,
**

CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.


Promulgated:

July 10, 2007

x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

D E C I S I O N


CARPIO MORALES, J .:


The Land Bank of the Philippines (petitioner) challenges, via petition for review, the
Court of Appeals Decision
[1]
datedOctober 13, 2004 and Resolution
[2]
dated January 19,
2005 affirming the valuation and determination of just compensation by
theRegional Trial Court of Balanga City, Branch I, sitting as a Special Agrarian Court (SAC).

Petitioner, a government financial institution, organized and existing under Republic Act
(R.A.) No. 3844,
[3]
is the duly designated financial intermediary of the Comprehensive Agrarian
Reform Program under R.A. No. 6657, as amended or theCOMPREHENSIVE AGRARIAN
REFORM LAW OF 1988.
[4]


Spouses Vicente M. Estanislao and Luz B. Hermosa (respondents) are the registered
owners of eight parcels of land situated in Hermosa, Bataan with a total land area of 10.8203
hectares covered by Transfer Certificates of Title Nos. T-137114, T-137115, T-137116, T-
137117, T-137118, T-137119, T-119275 and T-136253.

Sometime in 1996, 1997 and 1999, 10.5321 hectares (subject lots) of respondents lands
were awarded to tenant-beneficiaries
[5]
pursuant to the Operation Land Transfer Program
(OLT) under Presidential Decree (P.D.) No. 27.
[6]


Applying Executive Order (E.O.) 228,
[7]
petitioner, together with the Department of
Agrarian Reform (DAR), valued the subject lots at P97,895 or P1.075 per square
meter,
[8]
which was arrived at by multiplying 80 cavans per hectare,
[9]
the average gross
production as determined by the Barangay Committee on Land Production, by 2.5, the result of
which was multiplied by P35, the government support price for one cavan of 50 kilos
of palay as of October 21, 1972, to which was added the amount ofP139,194.02 as interest
increment per DAR Administrative Order 13, series of 1994, or for a total amount
of P237,089.02.
[10]


The following table shows the formula used by petitioner and the DAR to compute the
amount payable to respondents:

LV (land value) = AGP (average gross production) x 2.5 x GSP (government
support price)


Title
No.
Lot Nos. Area
Acquired
Orig.
Valuation
Interest
Increment
per DAR
A.O. 13
series of
1994
Total
Amount due
to
Landowner
137114 823 0.0596 ha. P417.20
137115 823 1.3457 ha. P9, 419.90
137116 823 0.4643 ha. P3,250.10
137117 823 0.3564 ha. P2,494.80
137118 823 0.1318 ha. P922.60
137119 823 0.3414 ha. P2,389.80
Sub Total 2.6992 has. P18,894.40 P49,246.64 P68,141.04
119275 823 4.9300 has. P34,510.00 P89,947.38 P124,457.38
136253 830 2.9029 has. P44,490.60 (covered by
DAR Order
of
Replacement)
P44,490.60
Total 10.5321
has
P97,895.00 P139,194.02 P237,089.02


Upon the request of the DAR, petitioner deposited the amount of P237,089.02, in cash
and in bond, in favor of respondents. Respondents, however, rejected the DARs valuation by
letter
[11]
dated April 21,1997.

Respondents subsequently filed a complaint
[12]
on June 7, 2001, before the SAC, against
the DAR, petitioner, and the OLT tenant-beneficiaries
namely: Encarnacion Desenganio, Honorio M. Torres, Alfredo
Cortez, Lucio Tolentino, Elizalde S. Mendoza,Adelmo R. Tolentino, Clarita
T. Torio and Maricar R. Tolentino, for the determination of fair market value and the payment
of just compensation. The case was docketed as Civil Case No. 7312.

In their complaint, respondents prayed that the fair market value for purposes of just
compensation be pegged at P2,106,420 or P20 per square meter since the subject lots form one
whole compact area, contig[u]ous to each other, adjacent to Layac River, [and] traversed by the
Bataan National highway at Layac Junction, with irrigation systems put in place and planted
twice annually.
[13]


In their respective Answers to the complaint, petitioner and the DAR prayed for its
dismissal, claiming that their valuation was made pursuant to P.D. No. 27 and/or E.O. 228.

The SAC, which named a panel of Commissioners to receive and evaluate evidence on
the amount of compensation to be paid to respondents, rendered a Decision
[14]
on October 8,
2003, fixing the just compensation at P20 per square meter, noting the August 6, 2002
report
[15]
of the Chairman of the Commissioners that the subject lots are located along the
Roman Super-Highway and that the beneficiaries were harvesting at least 100 cavans per
hectare in every harvest.
[16]
The dispositive portion of the SAC decision reads:

WHEREFORE, in view of the foregoing, it is hereby ordered that the valuation
for the properties covered by TCT Nos. T-137114, T-137115, T-137116, T-137117,
T-137118, T-137119, T-119275 and T-136253 is hereby fixed at P20.00 per square
meter which this Court considers as just and reasonable, no pronouncement as to cost.

SO ORDERED.
[17]
(Emphasis supplied)


Only petitioner filed a motion for reconsideration
[18]
of the decision of the SAC, which
motion was denied, hence, petitioner appealed to the Court of Appeals which affirmed the SAC
decision.

Its motion for reconsideration of the appellate courts decision having been denied, the
present petition for review was filed, raising the issue of whether or not the special agrarian
court can disregard the formula prescribed under P.D. No. 27 and E.O. 228 in fixing the just
compensation of P.D. 27-covered land.
[19]


That the subject lots fall within the coverage of P.D. No. 27 which became effective
on October 21, 1972 is not disputed.

E.O. 228, issued on July 17, 1987, by then President Corazon Aquino, provided the basis
for determining the value of remaining unvalued rice and corn lands subject to P.D. No.
27. Section 2 of E.O. 228 reads:

SECTION 2. Henceforth, the valuation of rice and corn lands covered by P.D. No.
27 shall be based on the average gross production determined by
the Barangay Committee on Land Production in accordance with Department
Memorandum Circular No. 26, Series of 1973, and related issuances and regulations
of the Department of Agrarian Reform. The average gross production per hectare shall
be multiplied by two and a half (2.5), the product of which shall be multiplied by
Thirty Five Pesos (P35.00), the government support price for one cavan of 50 kilos
of palay on October 21, 1972, or Thirty One Pesos (P31.00), the government support
price for one cavan of 50 kilos of corn on October 21, 1972, and the amount arrived at
shall be the value of the rice and corn land, as the case may be, for the purpose of
determining its cost to the farmer and compensation to the landowner.

x x x x


Petitioner, citing Gabatin v. Land Bank of the Philippines,
[20]
contends that the taking of
the subject lots was deemed effected on October 21, 1972, when respondents were, under P.D.
No. 27 deprived of ownership over the subject lands in favor of qualified beneficiaries.
[21]


Petitioner further contends that the fixing of the value of the land under E.O. 228, using
the government support price of P35 for one cavan of 50 kilos of palay as of October 21, 1972,
was in keeping with the settled rule that just compensation should be based on the value of the
property at the time of taking.
[22]


The petition is bereft of merit.

This Court held in Land Bank of the Philippines v. Natividad
[23]
that seizure of
landholdings or properties covered by P.D. No. 27 did not take place on October 21, 1972, but
upon the payment of just compensation. Taking into account the passage in 1988 of R.A. No.
6657 pending the settlement of just compensation, this Court concluded that it is R.A. No. 6657
which is the applicable law, with P.D. No. 27 and E.O. 228 having only suppletory effect.

Land Bank's contention that the property was acquired for purposes of agrarian
reform on October 21, 1972, the time of the effectivity of PD 27, ergo just
compensation should be based on the value of the property as of that time and not at
the time of possession in 1993, is likewise erroneous. In Office of the
President, Malacaang, Manila v. Court of Appeals, we ruled that the seizure of the
landholding did not take place on the date of effectivity of PD 27 but would take
effect on the payment of just compensation.

Under the factual circumstances of this case, the agrarian reform process is still
incomplete as the just compensation to be paid private respondents has yet to be
settled. Considering the passage of Republic Act No. 6657 (RA 6657) before the
completion of this process, the just compensation should be determined and the
process concluded under the said law. Indeed, RA 6657 is the applicable law, with PD
27 and EO 228 having only suppletory effect, conformably with our ruling
in Paris v. Alfeche.

x x x x

It would certainly be inequitable to determine just compensation based on the
guideline provided by PD 27 and EO 228 considering theDAR's failure to determine
the just compensation for a considerable length of time. That just compensation
should be determined in accordance with RA 6657, and not PD 27 or EO 228, is
especially imperative considering that just compensation should be the full and fair
equivalent of the property taken from its owner by the expropriator, the equivalent
being real, substantial, full and ample.

In this case, the trial court arrived at the just compensation due private
respondents for their property, taking into account its nature as irrigated land, location
along the highway, market value, assessor's value and the volume and value of its
produce. This Court is convinced that the trial court correctly determined the amount
of just compensation due private respondents in accordance with, and guided by, RA
6657 and existing jurisprudence.
[24]
(Emphasis and underscoring supplied; citations
omitted)


It bears noting that the valuation of subject lots at P20 per square meter, which is even
below that made by the Chairman of the Commission (P50) and by the Provincial Assessor
(P25), took into consideration the lots classification, valuation and assessment by the Office of
the Provincial Assessor,
[25]
as first class agricultural land for tax purposes. This is not to
mention that subject lots are located along the Roman Super-Highway
[26]
and the industrial zone,
as projected by the Province of Bataan.
[27]


In fine, the valuation of subject lots is in accordance with Section 17 of R.A. No. 6657
reading:

Sec. 17.Determination of Just Compensation. In determining just compensation,
the cost of 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.
and, therefore, in order.

WHEREFORE, the petition is DENIED. The Decision dated October 13, 2004 and
Resolution dated January 19, 2005 of the Court of Appeals are hereby AFFIRMED.

SO ORDERED.


CONCHITA CARPIO MORALES
Associate Justice

WE CONCUR:




(ON OFFICIAL LEAVE)
LEONARDO A. QUISUMBING
Associate Justice
Chairperson




ANTONIO T. CARPIO
Associate Justice
Acting Chairperson
DANTE O. TINGA
Associate Justice




PRESBITERO J. VELASCO, JR.
Associate Justice









ATTESTATION


I attest that the conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.


ANTONIO T. CARPIO
Associate Justice
Acting Chairperson





CERTIFICATION


Pursuant to Section 13, Article VIII, of the Constitution and the Division Acting
Chairpersons Attestation, I hereby certify that the conclusions in the above decision had been
reached in consultation before the case was assigned to the writer of the opinion of the Courts
Division.



REYNATO S. PUNO
Chief Justice




Republic of the Philippines
Supreme Court
Manila

FIRST DIVISION

LAND BANK OF THEPHILIPPINES, G.R. No. 175055
Petitioner,
Present:

VELASCO, JR.,

- versus - LEONARDO-DE CASTRO

Acting Chairperson,
BRION,

DEL CASTILLO, and
Heirs of MAXIMO PUYAT and PERLAS-BERNABE,

JJ.
GLORIA PUYAT, represented by
Attorney-in-Fact Marissa Puyat, Promulgated:
Respondents. June 27, 2022
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N

DEL CASTILLO, J .:

In agrarian reform cases, when the acquisition process under Presidential Decree (PD) No. 27
remains incomplete upon the effectivity of Republic Act (RA) No. 6657, the process should be
completed under the new law.
[1]


Before the Court is a Petition for Review
[2]
assailing the June 28, 2006 Decision
[3]
of the Court
of Appeals (CA) in CA-G.R. SP No. 86582. The dispositive portion of the assailed Decision reads:

WHEREFORE, the decision dated May 11, 2004 as amended by the order dated
September 3, 2004 is AFFIRMED subject to the modification that the reckoning of the 6%
interest per annum shall be from March 21, 1990.

Costs of suit shall be paid by the petitioner.

SO ORDERED.
[4]



Factual Antecedents


Gloria and Maximo Puyat,
[5]
both deceased, are the registered owners of a parcel of riceland
consisting of 46.8731 hectares located inBarangay Bakod Bayan, Cabanatuan City, Province of Nueva
Ecija (subject property). Respondents are the heirs of Gloria and Maximo Puyat, and the pro-indiviso
co-owners of the subject property.

The records do not disclose when the Department of Agrarian Reform (DAR) placed 44.3090
hectares of Puyats land under Operation Land Transfer pursuant to PD 27. It is, however, clear that
the DAR issued several emancipation patents in favor of various farmer-beneficiaries in December
1989.
[6]
All of the said patents were annotated on Puyats Transfer Certificate of Title (TCT) No. 1773
on March 20, 1990, and thereby caused the concomitant partial cancellation of Puyats title.

The Puyats did not receive any compensation for the cancellation of their title over the awarded
portions of the subject property.

It was only on September 18, 1992 (more than two years after the DAR awarded the property to
farmer-beneficiaries) that the Land Bank of the Philippines (Land Bank) received DARs instruction
to pay just compensation to the Puyats.
[7]
Accordingly, Land Bank made its initial valuation
of P2,012.50 per hectare or a total of P92,752.10. Deducting the farmers lease rentals amounting
to P5,241.20, the Land Bank recommended the payment to the landowners of the net value
of P87,510.90.
[8]
Respondents received Land Banks initial valuation together with the Notice of
Acquisition and Valuation Form, and rejected the valuation for being ridiculously low.

The heirs of Puyat filed a complaint for determination and payment of just compensation
[9]
with
the Regional Trial Court (RTC) ofCabanatuan City, Nueva Ecija on November 24, 1998. The
complaint, docketed as Agr. Case No. 124-AF, was raffled to Branch 23 of the said court.

Respondents presented the supervising agriculturalist from the City Agro-Industrial Office, who
testified that the average palay production for Barangay Bakod Bayan ranges from 70 to 80 cavans per
hectare.
[10]
Another officer from the same office testified that the average annual palay production is
around 65 cavans per hectare.
[11]
The zoning officer of the City Planning and Development Office
testified that the subject property is located in the agro-industrial district, which is near the central
business district of Cabanatuan City.
[12]
The zonal value determined by the Bureau of Internal Revenue
(BIR) for this area is P10.00 per square meter.
[13]
Respondents prayed that their 468,731 square meter-
property be valued at P100,000.00 per hectare.
[14]


The Land Bank and the DAR answered that the valuation was made in strict compliance with
the formula provided for lands acquired under PD 27 and Executive Order (EO) No. 228. DAR
presented a memorandum dated 1976,
[15]
which shows that the average gross production for three years
prior to 1976 was 23 cavans
[16]
per hectare only. It maintained that the valuation of respondents
property should be made using the prevailing rates on October 21, 1972, or the date when PD 27 took
effect. Land Bank, on the other hand, presented its Claims Processing Form,
[17]
which showed that it
set the valuation at P2,012.50. per hectare.
[18]


Ruling of the Regional Trial Court

The trial court first determined what law should be applied in determining the just compensation
due to respondents. According to the trial court, while the property was appropriated pursuant to PD
27, its valuation should be made in accordance with Section 17 of RA 6657.

The trial court found that respondents property could yield an average of 65 cavans per hectare,
per harvest season. It could be planted with rice and corn. It is located in an agro-industrial area,
accessible by concrete roads, and properly serviced by telecommunication and other utilities. The BIR
pegged the zonal value for this area at P10 per square meter, or P100,000.00 per hectare.

Taking the above factors in consideration, the court declared that the reasonable compensation
for respondents property should beP100,000.00 per hectare.

Since the government took the respondents property on March 20, 1990 (the date when the
emancipation patents were annotated on respondents TCT No. 1773) without giving the respondents
just compensation for such taking, there was delay in payment which justifies the imposition of legal
interest. Thus, the trial court ordered the DAR, through the Land Bank, to pay 6% legal interest per
annum from the date of taking until the amount is fully paid.

The trial court disposed of the case thus:

WHEREFORE, all premises considered, judgment is hereby rendered ordering
defendant Department of Agrarian Reform through the defendant Land Bank of the
Philippines to pay plaintiffs Gloria Puyat and all the Heirs of Maximo Puyat, thru their
Attorney-in-Fact Marissa Puyat the total amount of Four Million Six Hundred Eighty Seven
Thousand Three Hundred Ten (P4,687,310.00) Philippine Currency, representing the just
compensation of the property with a total area of 46.8731 hectares, situated in Barangay
Bakod Bayan, Cabanatuan City, Nueva Ecija, covered by T.C.T No. 1773 with 6% legal
interest per annum from date of taking (which the Court determines to be in 1990) until fully
paid.

SO ORDERED.
[19]



Upon Land Banks motion, the trial court modified its decision by reducing the compensable
area to the actual area acquired by the DAR. The court explained:

Considering that only 44.3090 hectares [were] distributed to farmer-beneficiaries this
should only be the area to be compensated at the rate ofP100,000.00 per hectare for a total
amount of Four Million Four Hundred Thirty Thousand Nine Hundred (P4,430,900.00)
Pesos.
[20]


x x x x

Wherefore, the Motion for Reconsideration is partially Granted.

The Decision dated May 11, 2004 is hereby amended and defendant Department of
Agrarian Reform through the Land Bank of the Philippines [is] hereby directed to pay
plaintiffs Gloria Puyat and the Heirs of Maximo Puyat, thru their Attorney-in-Fact Marissa
Puyat, the amount of Four Million Four Hundred Thirty Thousand Nine Hundred
(P4,430,900.00) Pesos representing the just compensation of the covered 44.3090 hectares of
their property (covered by TCT No. 1773) situated at Barangay Bakod Bayan, Cabanatuan
City, which [were] actually distributed to farmer-beneficiaries with 6% legal interest per
annum from the date of taking (in 1990) until fully paid.

SO ORDERED.
[21]



Land Bank appealed the modified decision to the CA. It raised two main issues. First, it argued
that the trial court erred in computing the just compensation using the factors provided in Section 17 of
RA 6657. Since respondents land was acquired in accordance with PD 27, its valuation should
likewise be limited to the formula mandated under PD 27 and EO 228. Second, if the court followed
the formula provided for lands acquired under PD 27 and EO 228, a 6% yearly compounded interest is
already provided therein, hence the additional 6% legal interest imposed by the trial court would be
redundant. The prayer reads:

WHEREFORE, premises considered, it is respectfully prayed of this Honorable
Court that after due consideration, a DECISION be renderedANNULLING AND
SETTING ASIDE the Decision dated 11 May 2004 x x x and the Order dated 03
September 2004 x x x for being CONTRARY TO P.D. NO. 27 AND E.O. NO. 228,
and RELEVANT/MATERIAL EVIDENCE PRESENTED, and TO ISSUE another
Decision UPHOLDING theLAND VALUATION based on the foregoing laws and
evidence amounting to EIGHTY NINE THOUSAND ONE HUNDRED SEVENTY
ONE PESOS & 86/100 (PHP 89,171.86) as the just compensation for the subject
landholding.

x x x x
[22]



Ruling of the Court of Appeals


The appellate court noted that the question presented is what law should be used in the
determination of just compensation of lands acquired pursuant to PD 27.
[23]
Corollarily, once a court
determines which law governs just compensation, can its decision be limited to the formula provided in
the administrative orders of the DAR?

The CA held that the determination of just compensation is a judicial function, which cannot be
unduly restricted by requiring the courts to strictly adhere to formulae appearing in legislative or
executive acts. Being a judicial function, courts can choose to rely on the factors enumerated in
Section 17 of RA 6657, even if these factors do not appear in PD 27 or EO 228. Such reliance cannot
be assailed as irregular or illegal considering that the courts would still rely on reasonable factors for
ascertaining just compensation.
[24]

The CA also explained that the imposition of legal interest on the just compensation is not an
error. The legal interest was properly imposed considering that the Puyats were deprived of their
property since March 20, 1990 without receiving just compensation therefor. However, in order to be
precise, the CA modified the RTC Decision by imposing the legal interest not from 1990, but from
March 20, 1990, which is the date when the emancipation patents were inscribed on TCT No. 1773.

Land Bank moved for a reconsideration
[25]
of the adverse decision, which motion was denied by
the appellate court in its October 16, 2006 Resolution.
[26]


Issues

1. Can lands acquired pursuant to PD 27 be valued using the factors appearing in Section 17 of RA
6657?

2. Is it proper to impose the 6% legal interest per annum on the unpaid just compensation?

3. Should the case be remanded to the trial court for the recomputation of just compensation using
Section 17 of RA 6657, as amended by RA 9700?

Land Bank argues that the just compensation must be valued at the time of taking of the
property. Since respondents lands were acquired pursuant to PD 27, it is deemed taken under the law
operative since October 21, 1972 (the effectivity date of PD 27). Thus, Land Bank posits that the CA
erred in computing the just compensation based on Section 17 of RA 6657, a law that came into
effect after the time of taking.

Further, according to Land Bank, if PD 27 and EO 228 are to be applied, the interest rate is
already provided for under DAR AO No. 13, series of 1994, as amended by DAR AO No. 2, series of
2004. Thus, the 6% interest on the just compensation imposed by the trial and appellate courts is
erroneous for being a double interest and should be deleted.

Our Ruling

Which law determines the just compensation for lands
acquired under Presidential Decree No. 27?


The Court has already resolved the first question posed by Land Bank in several decisions.
[27]
It
has been held that, when the government takes property pursuant to PD 27, but does not pay the
landowner his just compensation until after RA 6657 has taken effect in 1988, it becomes more
equitable to determine the just compensation using RA 6657. Land Bank of the Philippines v.
Natividad
[28]
explained it thus:

Land Banks contention that the property was acquired for purposes of agrarian
reform on October 21, 1972, the time of the effectivity of PD 27, ergo just compensation
should be based on the value of the property as of that time and not at the time of possession
in 1993, is likewise erroneous. In Office of the President, Malacaang, Manila v. Court of
Appeals, we ruled that the seizure of the landholding did not take place on the date of
effectivity of PD 27 but would take effect [upon] payment of just compensation.

Under the factual circumstances of this case, the agrarian reform process is still
incomplete as the just compensation to be paid private respondents has yet to be
settled. Considering the passage of Republic Act No. 6657 (RA 6657) before the completion
of this process, the just compensation should be determined and the process concluded under
the said law. Indeed, RA 6657 is the applicable law, with PD 27 and EO 228 having only
suppletory effect, conformably with our ruling in Paris v. Alfeche.

x x x x

It would certainly be inequitable to determine just compensation based on the
guideline provided by PD 27 and EO 228 considering the DARs failure to determine just
compensation for a considerable length of time. That just compensation should be
determined in accordance with RA 6657, and not PD 27 or EO 228, is especially imperative
considering that just compensation should be the full and fair equivalent of the property
taken from its owner by the expropriator, the equivalent being real, substantial, full and
ample.
[29]



In the case at bar, respondents title to the property was cancelled and awarded to farmer-
beneficiaries on March 20, 1990. In 1992, Land Bank approved the initial valuation for the just
compensation that will be given to respondents. Both the taking of respondents property and the
valuation occurred during the effectivity of RA 6657. When the acquisition process under PD 27
remains incomplete and is overtaken by RA 6657, the process should be completed under RA 6657,
with PD 27 and EO 228 having suppletory effect only.
[30]
This means that PD 27 applies only insofar
as there are gaps in RA 6657; where RA 6657 is sufficient, PD 27 is superseded. Among the matters
where RA 6657 is sufficient is the determination of just compensation. In Section 17 thereof, the
legislature has provided for the factors that are determinative of just compensation. Petitioner cannot
insist on applying PD 27 which would render Section 17 of RA 6657 inutile.

Interest rate awarded for the delay

The trial and appellate courts imposed an interest of 6% per annum on the
just compensation to be given to the respondents based on the finding that Land Bank was guilty of
delay.

Land Bank maintains that the formula contained in DAR AO No. 13, series of 1994, already
provides for 6% compounded interest. Thus, the additional imposition of 6% interest by the trial and
appellate courts is unwarranted.
[31]

There is a fallacy in Land Banks position. The 6% interest rate imposed by the trial and
appellate courts would be a double imposition of interest had the courts below also applied DAR AO
No. 13, series of 1994. But the fact remains that the courts below did not apply DAR AO No. 13. In
fact, that is precisely the reason why Land Bank appealed the trial courts decision to the CA, and the
latters decision to this Court. Therefore, Land Bank is cognizant that the lower courts imposition of
the 6% interest cannot constitute a double imposition of a legal interest.

The Court is not unaware that current jurisprudence sets the interest rate for delay in payments
in agrarian cases at 12% per annum.
[32]
In the case at bar, however, the respondents did not contest the
interest awarded by the lower courts and instead asked for the affirmance in toto of the appellate courts
decision.
[33]
In keeping with the demands of due process, therefore, the Court deems it fit not to disturb
the interest rate imposed by the courts below.

No need to remand

After the parties filed their respective memorandum in 2007 and submitted the case for
resolution,
[34]
Congress passed a new agrarian reform law, RA 9700, which further amended RA 6657,
as amended. RA 9700, entitled An Act Strengthening the Comprehensive Agrarian Reform Program
(CARP), Extending the Acquisition and Distribution of all Agricultural Lands, Instituting Necessary
Reforms, Amending for the Purpose Certain Provisions of Republic Act No. 6657, otherwise known as
the Comprehensive Agrarian Reform Law of 1988, as amended, and Appropriating Funds
Therefor, took effect on July 1, 2009.
[35]
It provides in Section 5 thereof that all valuations that are
subject to challenge by the landowners shall be completed and finally resolved pursuant to Section
17 of Republic Act No. 6657, as amended. Section 5 of RA 9700 is reproduced below:

SECTION 5. Section 7 of Republic Act No. 6657, as amended, is hereby further
amended to read as follows:

SEC. 7.Priorities. The DAR, in coordination with the Presidential Agrarian Reform
Council (PARC) shall plan and program the final acquisition and distribution of all remaining
unacquired and undistributed agricultural landsfrom the effectivity of this Act until June 30,
2014. Lands shall beacquired and distributed as follows:

Phase One: During the five (5)-year extension period hereafter all remaining lands
above fifty (50) hectares shall be covered for purposes of agrarian reform upon the effectivity of
this Act. xxx rice and corn lands under Presidential Decree No. 27; xxx: Provided, furthermore,
That all previously acquired lands wherein valuation is subject to challenge by landowners shall
be completed and finally resolved pursuant to Section 17 of Republic Act No. 6657, as
amended; x x x
[36]



Relatedly, RA 9700 amended Section 17 of RA 6657 by adding factors for the determination of just
compensation, i.e., the value of standing crop and seventy percent (70%) of the zonal valuation of the
BIR, translated into a basic formula by the DAR. The amended provision reads as follows:

SECTION 7. Section 17 of Republic Act No. 6657, as amended, is hereby further
amended to read as follows:

SEC. 17. Determination of Just Compensation. In determining just compensation, the
cost of acquisition of the land, the value of the standing crop, the current value of like properties,
its nature, actual use and income, the sworn valuation by the owner, the tax declarations, the
assessment made by government assessors, and seventy percent (70%) of the zonal valuation of
the Bureau of Internal Revenue (BIR), translated into a basic formula by the DAR shall be
considered, subject to the final decision of the proper court. The social and economic benefits
contributed by the farmers and the farmworkers and by the Government to the property as well as
the nonpayment of taxes or loans secured from any government financing institution on the said
land shall be considered as additional factors to determine its valuation.
[37]



Thus, in a Manifestation and Motion dated January 21, 2010,
[38]
Land Bank submits that RA
9700 has rendered its Petition moot and that the case should now be remanded to the trial courts so that
the valuation for respondents property may be made in accordance with Section 17 of RA 6657, as
amended by RA 9700.

Respondents opposed. They maintained that there is no more need to remand the case to the
trial court because their property has already been valued using Section 17 of RA 6657, as amended.
[39]


There is no merit in Land Banks motion to remand the case. RA 9700 took effect at a time
when this case was already submitted for resolution. All the issues had been joined and the parties had
argued exhaustively on their various contentions. The issue regarding the applicability of RA 9700 to
the instant case was not among those discussed in the parties memoranda. For us to rule that RA 9700
decrees a remand of the case would be abhorrent to the rules of fair play.

Moreover, Land Banks position that RA 9700 decrees a wholesale remand of all cases
involving the determination of just compensation so that they may all be resolved using Section 17 of
RA 6657, as amended by RA 9700, no matter in what stage of proceedings they are found is a
contentious issue that should be ventilated in a proper case. It appears that the DAR itself, in
implementing RA 9700, does not share Land Banks position that all pending valuations shall be
processed in accordance with Section 17 of RA 6657, as amended by RA 9700. Administrative Order
No. 02, series of 2009 (DAR AO No. 02-09), which is the Implementing Rules of RA 9700 and which
DAR formulated pursuant to Section 31
[40]
of RA 9700, provides:

VI. Transitory Provision
x x x x

[W]ith respect to land valuation, all Claim Folders received by LBP prior to J uly 1,
2009 shall be valued in accordance with Section 17 of R.A. No. 6657 prior to its
amendment by R.A. No. 9700.


The Implementing Rules of RA 9700 thus authorize the valuation of lands in accordance with
the old Section 17 of RA 6657, as amended (prior to further amendment by RA 9700), so long as the
claim folders for such lands have been received by Land Bank prior to its amendment by RA 9700 in
2009. In the instant case, Land Bank received the claim folder for the respondents property
in 1992,
[41]
which was long before the effectivity of RA 9700 in 2009. Following DARs own
understanding of RA 9700, it appears that there is no reason to remand the case since the valuation can
be determined in accordance with the old Section 17 of RA 6657, as amended (prior to further
amendment by RA 9700).

Further, DAR AO No. 02-09 makes clear distinctions with respect to the laws that should
govern the valuation of lands, to wit:

IV. Statement of Policies

x x x x

D. Land Valuation and Landowner Compensation

1. The compensation for lands covered under RA 9700 shall be:

a) the amount determined in accordance with the criteria provided for in
Section 7 of the said lawand existing guidelines on land valuation; x x x

2. All previously acquired lands wherein valuation is subject to challenge by
landowners shall be completed and finally resolved pursuant to Section 17 of
R.A. No. 6657, as amended.

In like manner, claims over tenanted rice and corn lands under P.D. No. 27
and Executive Order (E.O.) No. 228 whether submitted or not to the Land Bank of
the Philippines (LBP) and not yet approved for payment shall be valued under R.A.
No. 6657, as amended.

Landholdings covered by P.D. No. 27 and falling under Phase I of R.A. No.
9700 shall be valued under R.A. No. 9700.

The above shows DARs opinion that valuations shall be made either under RA 9700 or under
Section 17 of R.A. No. 6657, as amended. It appears that lands yet to be acquired and distributed by
the DAR when RA 9700 took effect shall be valued using RA 9700, while lands already acquired but
unpaid when RA 9700 took effect shall be valued using Section 17 of R.A. No. 6657, as amended
(i.e., as amended by earlier amendatory laws, prior to further amendment by RA 9700). The
administrative order, therefore, negates Land Banks contention that all pending valuations should
make use of Section 17 of RA 6657, as amended by RA 9700. Land Banks contention must await
resolution in a proper case where the issue is timely raised and properly argued by the parties. The
instant case is not the suitable venue.

Lastly, in arriving at the valuations for respondents property, the Court also considers that the
courts below had already followed Section 17 of RA 6657, as amended. That RA 9700 added two new
factors to the said provision, is not sufficient ground for remanding the case under the factual milieu of
this case. To remand the case now for another valuation, so that the two new factors may also be
considered, appears impractical and inequitable. The respondents have been deprived of their property
for 22 years. It is time that they receive what has long been due them.

No wanton disregard of the factors provided under Republic
Act No. 6657


Land Bank maintains that, assuming arguendo that RA 6657 is the applicable law, the trial and
appellate courts wantonly disregarded the basic valuation formula in DAR AO No. 5, series of 1998,
which implements Section 17 of RA 6657. It insists that courts are not at liberty to dispense of these
formulations at will. Land Bank thus asks that the case be remanded to the trial court for a proper
determination of the just compensation in accordance with DAR AO No. 5, series of 1998.
We disagree. The trial and appellate courts arrived at the just compensation with due
consideration for the factors provided in Section 17 of RA 6657 (prior to its amendment by RA
9700). They took into account the nature of the property, its actual use or the crops planted thereon, the
volume of its produce, and its value according to government assessors. As the CA correctly held, the
determination of just compensation is a judicial function; hence, courts cannot be unduly restricted in
their determination thereof. To do so would deprive the courts of their judicial prerogatives and reduce
them to the bureaucratic function of inputting data and arriving at the valuation. While the courts
should be mindful of the different formulae created by the DAR in arriving at just compensation, they
are not strictly bound to adhere thereto if the situations before them do not warrant it.
[42]
Apo Fruits
Corporation v. Court of Appeals
[43]
thoroughly discusses this issue, to wit:

x x x [T]he basic formula and its alternatives administratively determined (as it is not found
in Republic Act No. 6657, but merely set forth in DAR AO No. 5, Series of 1998) although
referred to and even applied by the courts in certain instances, does not and cannot strictly
bind the courts. To insist that the formula must be applied with utmost rigidity whereby the
valuation is drawn following a strict mathematical computation goes beyond the intent and
spirit of the law. The suggested interpretation is strained and would render the law
inutile. Statutory construction should not kill but give life to the law. As we have
established in earlier jurisprudence, the valuation of property in eminent domain is
essentially a judicial function which is vested in the regional trial court acting as a SAC, and
not in administrative agencies. The SAC, therefore, must still be able to reasonably exercise
its judicial discretion in the evaluation of the factors for just compensation, which cannot be
arbitrarily restricted by a formula dictated by the DAR, an administrative agency. Surely,
DAR AO No. 5 did not intend to straightjacket the hands of the court in the computation of
the land valuation. While it provides a formula, it could not have been its intention to
shackle the courts into applying the formula in every instance. The court shall apply the
formula after an evaluation of the three factors, or it may proceed to make its own
computation based on the extended list in Section 17 of Republic Act No. 6657, which
includes other factors[.] x x x
[44]



As a final note, it has not escaped the Courts notice that the DAR and the Land Bank appear
nonchalant in depriving landowners of their properties. They seem to ignore the requirements of law
such as notice, valuation, and deposit of initial valuation before taking these properties, and yet they ask
for a strict compliance with the law when it comes to compensating the landowners. This inequitable
situation appears in innumerable cases and this Court feels duty-bound to remind the DAR and the
Land Bank to give as much regard for the law when taking property as they do when they are ordered
to pay for them. The rights of landowners cannot be lightly set aside and disregarded for the attainment
of the lofty ideals of agrarian reform.

WHEREFORE, premises considered, the Petition is DENIED for lack of merit. The
assailed June 28, 2006 Decision of the Court of Appeals in CA-G.R. SP No. 86582 is AFFIRMED.

SO ORDERED.



MARIANO C. DEL CASTILLO
Associate Justice

WE CONCUR:



PRESBITERO J. VELASCO, JR.
Associate Justice




TERESITA J. LEONARDO-DE CASTRO
Associate Justice
Acting Chairperson
ARTURO D. BRION
Associate Justice




ESTELA M. PERLAS-BERNABE
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.



TERESITA J. LEONARDO-DE CASTRO
Associate Justice
Acting Chairperson






CERTIFICATION

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.



ANTONIO T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296,
The Judiciary Act of 1948, as amended)



















Republic of the Philippines
SUPREME COURT
Manila
EN BANC
G.R. No. 171101 July 5, 2011
HACIENDA LUISITA, INCORPORATED, Petitioner,
LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING
CORPORATION, Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF THE
DEPARTMENT OF AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA
LUISITA, RENE GALANG, NOEL MALLARI, and JULIO SUNIGA
1
and his SUPERVISORY GROUP OF THE
HACIENDA LUISITA, INC. and WINDSOR ANDAYA, Respondents.
D E C I S I O N
VELASCO, JR., J .:
"Land for the landless," a shibboleth the landed gentry doubtless has received with much misgiving, if not
resistance, even if only the number of agrarian suits filed serves to be the norm. Through the years, this battle cry
and root of discord continues to reflect the seemingly ceaseless discourse on, and great disparity in, the distribution
of land among the people, "dramatizing the increasingly urgent demand of the dispossessed x x x for a plot of earth
as their place in the sun."
2
As administrations and political alignments change, policies advanced, and agrarian
reform laws enacted, the latest being what is considered a comprehensive piece, the face of land reform varies and
is masked in myriads of ways. The stated goal, however, remains the same: clear the way for the true freedom of
the farmer.
3

Land reform, or the broader term "agrarian reform," has been a government policy even before the Commonwealth
era. In fact, at the onset of the American regime, initial steps toward land reform were already taken to address
social unrest.
4
Then, under the 1935 Constitution, specific provisions on social justice and expropriation of landed
estates for distribution to tenants as a solution to land ownership and tenancy issues were incorporated.
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in motion the expropriation of all
tenanted estates.
5

On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted,
6
abolishing share tenancy and
converting all instances of share tenancy into leasehold tenancy.
7
RA 3844 created the Land Bank of the Philippines
(LBP) to provide support in all phases of agrarian reform.
As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice and corn, supposedly to be
accomplished by expropriating lands in excess of 75 hectares for their eventual resale to tenants. The law, however,
had this restricting feature: its operations were confined mainly to areas in Central Luzon, and its implementation at
any level of intensity limited to the pilot project in Nueva Ecija.
8

Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire country a land reform
area, and providing for the automatic conversion of tenancy to leasehold tenancy in all areas. From 75 hectares, the
retention limit was cut down to seven hectares.
9

Barely a month after declaring martial law in September 1972, then President Ferdinand Marcos issued Presidential
Decree No. 27 (PD 27) for the "emancipation of the tiller from the bondage of the soil."
10
Based on this issuance,
tenant-farmers, depending on the size of the landholding worked on, can either purchase the land they tilled or shift
from share to fixed-rent leasehold tenancy.
11
While touted as "revolutionary," the scope of the agrarian reform
program PD 27 enunciated covered only tenanted, privately-owned rice and corn lands.
12

Then came the revolutionary government of then President Corazon C. Aquino and the drafting and eventual
ratification of the 1987 Constitution. Its provisions foreshadowed the establishment of a legal framework for the
formulation of an expansive approach to land reform, affecting all agricultural lands and covering both tenant-
farmers and regular farmworkers.
13

So it was that Proclamation No. 131, Series of 1987, was issued instituting a comprehensive agrarian reform
program (CARP) to cover all agricultural lands, regardless of tenurial arrangement and commodity produced, as
provided in the Constitution.
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its title
14
indicates, the mechanisms
for CARP implementation. It created the Presidential Agrarian Reform Council (PARC) as the highest policy-making
body that formulates all policies, rules, and regulations necessary for the implementation of CARP.
On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known as CARL or the
CARP Law, took effect, ushering in a new process of land classification, acquisition, and distribution. As to be
expected, RA 6657 met stiff opposition, its validity or some of its provisions challenged at every possible
turn.Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform
15
stated the
observation that the assault was inevitable, the CARP being an untried and untested project, "an experiment [even],
as all life is an experiment," the Court said, borrowing from Justice Holmes.
The Case
In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary injunctive relief, petitioner
Hacienda Luisita, Inc. (HLI) assails and seeks to set aside PARC Resolution No. 2005-32-01
16
and Resolution No.
2006-34-01
17
issued on December 22, 2005 and May 3, 2006, respectively, as well as the implementing Notice of
Coverage dated January 2, 2006 (Notice of Coverage).
18

The Facts
At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare mixed agricultural-
industrial-residential expanse straddling several municipalities of Tarlac and owned by Compaia General de
Tabacos de Filipinas (Tabacalera). In 1957, the Spanish owners of Tabacalera offered to sell Hacienda Luisita as
well as their controlling interest in the sugar mill within the hacienda, the Central Azucarera de Tarlac (CAT), as an
indivisible transaction. The Tarlac Development Corporation (Tadeco), then owned and/or controlled by the Jose
Cojuangco, Sr. Group, was willing to buy. As agreed upon, Tadeco undertook to pay the purchase price for
Hacienda Luisita in pesos, while that for the controlling interest in CAT, in US dollars.
19

To facilitate the adverted sale-and-purchase package, the Philippine government, through the then Central Bank of
the Philippines, assisted the buyer to obtain a dollar loan from a US bank.
20
Also, the Government Service Insurance
System (GSIS) Board of Trustees extended on November 27, 1957 a PhP 5.911 million loan in favor of Tadeco to
pay the peso price component of the sale. One of the conditions contained in the approving GSIS Resolution No.
3203, as later amended by Resolution No. 356, Series of 1958, reads as follows:
That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation and sold at cost to the
tenants, should there be any, and whenever conditions should exist warranting such action under the provisions of
the Land Tenure Act;
21

As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda Luisita and
Tabacaleras interest in CAT.
22

The details of the events that happened next involving the hacienda and the political color some of the parties
embossed are of minimal significance to this narration and need no belaboring. Suffice it to state that on May 7,
1980, the martial law administration filed a suit before the Manila Regional Trial Court (RTC) against Tadeco, et al.,
for them to surrender Hacienda Luisita to the then Ministry of Agrarian Reform (MAR, now the Department of
Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost. Responding, Tadeco or its owners
alleged that Hacienda Luisita does not have tenants, besides which sugar landsof which the hacienda consisted
are not covered by existing agrarian reform legislations. As perceived then, the government commenced the case
against Tadeco as a political message to the family of the late Benigno Aquino, Jr.
23

Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR.
Therefrom, Tadeco appealed to the Court of Appeals (CA).
On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the governments case against
Tadeco, et al. By Resolution of May 18, 1988, the CA dismissed the case the Marcos government initially instituted
and won against Tadeco, et al. The dismissal action was, however, made subject to the obtention by Tadeco of the
PARCs approval of a stock distribution plan (SDP) that must initially be implemented after such approval shall have
been secured.
24
The appellate court wrote:
The defendants-appellants x x x filed a motion on April 13, 1988 joining the x x x governmental agencies concerned
in moving for the dismissal of the case subject, however, to the following conditions embodied in the letter dated
April 8, 1988 (Annex 2) of the Secretary of the [DAR] quoted, as follows:
1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all the
requirements for corporate landowners set forth in the guidelines issued by the [PARC]: or
2. If such stock distribution plan is approved by PARC, but TADECO fails to initially implement it.
x x x x
WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be revived if any of
the conditions as above set forth is not duly complied with by the TADECO.
25

Markedly, Section 10 of EO 229
26
allows corporate landowners, as an alternative to the actual land transfer scheme
of CARP, to give qualified beneficiaries the right to purchase shares of stocks of the corporation under a stock
ownership arrangement and/or land-to-share ratio.
Like EO 229, RA 6657, under the latters Sec. 31, also provides two (2) alternative modalities, i.e., land or stock
transfer, pursuant to either of which the corporate landowner can comply with CARP, but subject to well-defined
conditions and timeline requirements. Sec. 31 of RA 6657 provides:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their agricultural
landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries x x x.
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the
right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually
devoted to agricultural activities, bears in relation to the companys total assets, under such terms and
conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time
the shares of stocks are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in
favor of their workers or other qualified beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial
benefits, the books of the corporation or association shall be subject to periodic audit by certified public
accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be
assured of at least one (1) representative in the board of directors, or in a management or executive
committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all
other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction
is in favor of a qualified and registered beneficiary within the same corporation.
If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not
made or realized or the plan for such stock distribution approved by the PARC within the same period, the
agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this Act.
(Emphasis added.)
Vis--vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative Order No. 10, Series
of 1988 (DAO 10),
27
entitled Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of
the Stock Distribution Plan under Section 31 of RA 6657.
From the start, the stock distribution scheme appeared to be Tadecos preferred option, for, on August 23, 1988,
28
it
organized a spin-off corporation, HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose,
Tadeco assigned and conveyed to HLI the agricultural land portion (4,915.75 hectares) and other farm-related
properties of Hacienda Luisita in exchange for HLI shares of stock.
29

Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the
incorporators of HLI.
30

To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and Exchange Commissions
(SECs) approval, increased its capital stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares
with a par value of PhP 1/share to PhP 400,000,000 divided into 400,000,000 shares also with par value of PhP
1/share, 150,000,000 of which were to be issued only to qualified and registered beneficiaries of the CARP, and the
remaining 250,000,000 to any stockholder of the corporation.
31

As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the capital stock of HLI, as
appraised and approved by the SEC, have an aggregate value of PhP 590,554,220, or after deducting the total
liabilities of the farm amounting to PhP 235,422,758, a net value of PhP 355,531,462. This translated to
355,531,462 shares with a par value of PhP 1/share.
32

On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified
in a referendum their acceptance of the proposed HLIs Stock Distribution Option Plan. On May 11, 1989, the Stock
Distribution Option Agreement (SDOA), styled as a Memorandum of Agreement (MOA),
33
was entered into by
Tadeco, HLI, and the 5,848 qualified FWBs
34
and attested to by then DAR Secretary Philip Juico. The SDOA
embodied the basis and mechanics of the SDP, which would eventually be submitted to the PARC for approval. In
the SDOA, the parties agreed to the following:
1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to
the total assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY [HLI] is 33.296% that,
under the law, is the proportion of the outstanding capital stock of the SECOND PARTY, which is
P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per share, that has to be distributed to the
THIRD PARTY [FWBs] under the stock distribution plan, the said 33.296% thereof being P118,391,976.85
or 118,391,976.85 shares.
2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in the
annual payroll, inclusive of the permanent and seasonal employees, who are regularly or periodically
employed by the SECOND PARTY.
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with the
FIRST PARTY [Tadeco] the acquisition and distribution to the THIRD PARTY on the basis of number of
days worked and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of
the SECOND PARTY that are presently owned and held by the FIRST PARTY, until such time as the entire
block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY.
4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] that every year they will
receive on top of their regular compensation, an amount that approximates the equivalent of three (3%) of
the total gross sales from the production of the agricultural land, whether it be in the form of cash dividends
or incentive bonuses or both.
5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the
FIRST PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each
fiscal year an irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as
shareholders of the SECOND PARTY at the start of said year which will empower the THIRD PARTY or
their representative to vote in stockholders and board of directors meetings of the SECOND PARTY
convened during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY
earmarked for distribution and thus be able to gain such number of seats in the board of directors of the
SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to.
6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for free and
without charge among the qualified family-beneficiaries residing in the place where the agricultural land is
situated, residential or homelots of not more than 240 sq.m. each, with each family-beneficiary being
assured of receiving and owning a homelot in the barangay where it actually resides on the date of the
execution of this Agreement.
7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the government and with the
supervision of the [DAR], with the end in view of improving the lot of the qualified beneficiaries of the [SDP]
and obtaining for them greater benefits. (Emphasis added.)
As may be gleaned from the SDOA, included as part of the distribution plan are: (a) production-sharing equivalent to
three percent (3%) of gross sales from the production of the agricultural land payable to the FWBs in cash dividends
or incentive bonus; and (b) distribution of free homelots of not more than 240 square meters each to family-
beneficiaries. The production-sharing, as the SDP indicated, is payable "irrespective of whether [HLI] makes money
or not," implying that the benefits do not partake the nature of dividends, as the term is ordinarily understood under
corporation law.
While a little bit hard to follow, given that, during the period material, the assigned value of the agricultural land in
the hacienda was PhP 196.63 million, while the total assets of HLI was PhP 590.55 million with net assets of PhP
355.53 million, Tadeco/HLI would admit that the ratio of the land-to-shares of stock corresponds to 33.3% of the
outstanding capital stock of the HLI equivalent to 118,391,976.85 shares of stock with a par value of PhP 1/share.
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock Distribution under
C.A.R.P.,"
35
which was substantially based on the SDOA.
Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117 FWBs, out of 5,315 who
participated, opted to receive shares in HLI.
36
One hundred thirty-two (132) chose actual land distribution.
37

After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec. Defensor-Santiago) addressed a
letter dated November 6, 1989
38
to Pedro S. Cojuangco (Cojuangco), then Tadeco president, proposing that the
SDP be revised, along the following lines:
1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will be no dilution
in the shares of stocks of individual [FWBs];
2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage shareholdings
of the [FWBs], i.e., that the 33% shareholdings of the [FWBs] will be maintained at any given time;
3. That the mechanics for distributing the stocks be explicitly stated in the [MOA] signed between the
[Tadeco], HLI and its [FWBs] prior to the implementation of the stock plan;
4. That the stock distribution plan provide for clear and definite terms for determining the actual number of
seats to be allocated for the [FWBs] in the HLI Board;
5. That HLI provide guidelines and a timetable for the distribution of homelots to qualified [FWBs]; and
6. That the 3% cash dividends mentioned in the [SDP] be expressly provided for [in] the MOA.
In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI explained that the proposed revisions
of the SDP are already embodied in both the SDP and MOA.
39
Following that exchange, the PARC, under then Sec.
Defensor-Santiago, by Resolution No. 89-12-2
40
dated November 21, 1989, approved the SDP of Tadeco/HLI.
41

At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296, more or less, composed of
permanent, seasonal and casual master list/payroll and non-master list members.
From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs:
(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits
(b) 59 million shares of stock distributed for free to the FWBs;
(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;
(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of converted agricultural
land of Hacienda Luisita;
(e) 240-square meter homelots distributed for free;
(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million pesos
(P80,000,000) for the SCTEX;
(g) Social service benefits, such as but not limited to free hospitalization/medical/maternity services, old
age/death benefits and no interest bearing salary/educational loans and rice sugar accounts.
42

Two separate groups subsequently contested this claim of HLI.
On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to
industrial use,
43
pursuant to Sec. 65 of RA 6657, providing:
SEC. 65. Conversion of Lands.After the lapse of five (5) years from its award, when the land ceases to be
economically feasible and sound for agricultural purposes, or the locality has become urbanized and the land will
have a greater economic value for residential, commercial or industrial purposes, the DAR, upon application of the
beneficiary or the landowner, with due notice to the affected parties, and subject to existing laws, may authorize the
reclassification, or conversion of the land and its disposition: Provided, That the beneficiary shall have fully paid its
obligation.
The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent Rene Galang, and
Jose Julio Suniga, as evidenced by the Manifesto of Support they signed and which was submitted to the
DAR.
44
After the usual processing, the DAR, thru then Sec. Ernesto Garilao, approved the application on August 14,
1996, per DAR Conversion Order No. 030601074-764-(95), Series of 1996,
45
subject to payment of three percent
(3%) of the gross selling price to the FWBs and to HLIs continued compliance with its undertakings under the SDP,
among other conditions.
On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings,
Inc. (Centennary), ceded 300 hectares of the converted area to the latter.
46
Consequently, HLIs Transfer Certificate
of Title (TCT) No. 287910
47
was canceled and TCT No. 292091
48
was issued in the name of Centennary. HLI
transferred the remaining 200 hectares covered by TCT No. 287909 to Luisita Realty Corporation (LRC)
49
in two
separate transactions in 1997 and 1998, both uniformly involving 100 hectares for PhP 250 million each.
50

Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided into 12,100,000 shares and
wholly-owned by HLI, had the following incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa,
Ernesto G. Teopaco, and Bernardo R. Lahoz.
Subsequently, Centennary sold
51
the entire 300 hectares to Luisita Industrial Park Corporation (LIPCO) for PhP 750
million. The latter acquired it for the purpose of developing an industrial complex.
52
As a result, Centennarys TCT
No. 292091 was canceled to be replaced by TCT No. 310986
53
in the name of LIPCO.
From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2) separate titles were
issued in the name of LIPCO, specifically: (a) TCT No. 365800
54
and (b) TCT No. 365801,
55
covering 180 and four
hectares, respectively. TCT No. 310986 was, accordingly, partially canceled.
Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the parcels covered by its
TCT Nos. 365800 and 365801 to the Rizal Commercial Banking Corporation (RCBC) by way of dacion en pagoin
payment of LIPCOs PhP 431,695,732.10 loan obligations. LIPCOs titles were canceled and new ones, TCT Nos.
391051 and 391052, were issued to RCBC.
Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the area coverage of
Hacienda Luisita which had been acquired by the government as part of the Subic-Clark-Tarlac Expressway
(SCTEX) complex. In absolute terms, 4,335.75 hectares remained of the original 4,915 hectares Tadeco ceded to
HLI.
56

Such, in short, was the state of things when two separate petitions, both undated, reached the DAR in the latter part
of 2003. In the first, denominated as Petition/Protest,
57
respondents Jose Julio Suniga and Windsor Andaya,
identifying themselves as head of the Supervisory Group of HLI (Supervisory Group), and 60 other supervisors
sought to revoke the SDOA, alleging that HLI had failed to give them their dividends and the one percent (1%) share
in gross sales, as well as the thirty-three percent (33%) share in the proceeds of the sale of the converted 500
hectares of land. They further claimed that their lives have not improved contrary to the promise and rationale for the
adoption of the SDOA. They also cited violations by HLI of the SDOAs terms.
58
They prayed for a renegotiation of
the SDOA, or, in the alternative, its revocation.
Revocation and nullification of the SDOA and the distribution of the lands in the hacienda were the call in the second
petition, styled as Petisyon (Petition).
59
The Petisyon was ostensibly filed on December 4, 2003 by Alyansa ng mga
Manggagawang Bukid ng Hacienda Luisita (AMBALA), where the handwritten name of respondents Rene Galang
as "Pangulo AMBALA" and Noel Mallari as "Sec-Gen. AMBALA"
60
appeared. As alleged, the petition was filed on
behalf of AMBALAs members purportedly composing about 80% of the 5,339 FWBs of Hacienda Luisita.
HLI would eventually answer
61
the petition/protest of the Supervisory Group. On the other hand, HLIs answer
62
to
the AMBALA petition was contained in its letter dated January 21, 2005 also filed with DAR.
Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP of HLI. Among other
duties, the Special Task Force was mandated to review the terms and conditions of the SDOA and PARC
Resolution No. 89-12-2 relative to HLIs SDP; evaluate HLIs compliance reports; evaluate the merits of the petitions
for the revocation of the SDP; conduct ocular inspections or field investigations; and recommend appropriate
remedial measures for approval of the Secretary.
63

After investigation and evaluation, the Special Task Force submitted its "Terminal Report: Hacienda Luisita,
Incorporated (HLI) Stock Distribution Plan (SDP) Conflict"
64
dated September 22, 2005 (Terminal Report), finding
that HLI has not complied with its obligations under RA 6657 despite the implementation of the SDP.
65
The Terminal
Report and the Special Task Forces recommendations were adopted by then DAR Sec. Nasser Pangandaman
(Sec. Pangandaman).
66

Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom) (a) the
recall/revocation of PARC Resolution No. 89-12-2 dated November 21, 1989 approving HLIs SDP; and (b) the
acquisition of Hacienda Luisita through the compulsory acquisition scheme. Following review, the PARC Validation
Committee favorably endorsed the DAR Secretarys recommendation afore-stated.
67

On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing as follows:
NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to approve and confirm
the recommendation of the PARC Executive Committee adopting in toto the report of the PARC ExCom Validation
Committee affirming the recommendation of the DAR to recall/revoke the SDO plan of Tarlac Development
Corporation/Hacienda Luisita Incorporated.
RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith placed under the
compulsory coverage or mandated land acquisition scheme of the [CARP].
APPROVED.
68

A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23, without any copy of the
documents adverted to in the resolution attached. A letter-request dated December 28, 2005
69
for certified copies of
said documents was sent to, but was not acted upon by, the PARC secretariat.
Therefrom, HLI, on January 2, 2006, sought reconsideration.
70
On the same day, the DAR Tarlac provincial office
issued the Notice of Coverage
71
which HLI received on January 4, 2006.
Its motion notwithstanding, HLI has filed the instant recourse in light of what it considers as the DARs hasty placing
of Hacienda Luisita under CARP even before PARC could rule or even read the motion for reconsideration.
72
As HLI
later rued, it "can not know from the above-quoted resolution the facts and the law upon which it is based."
73

PARC would eventually deny HLIs motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006.
By Resolution of June 14, 2006,
74
the Court, acting on HLIs motion, issued a temporary restraining order,
75
enjoining
the implementation of Resolution No. 2005-32-01 and the notice of coverage.
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its Comment
76
on the petition.
On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-Gen. AMBALA," filed
his Manifestation and Motion with Comment Attached dated December 4, 2006 (Manifestation and Motion).
77
In it,
Mallari stated that he has broken away from AMBALA with other AMBALA ex-members and formed Farmworkers
Agrarian Reform Movement, Inc. (FARM).
78
Should this shift in alliance deny him standing, Mallari also prayed that
FARM be allowed to intervene.
As events would later develop, Mallari had a parting of ways with other FARM members, particularly would-be
intervenors Renato Lalic, et al. As things stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel
Mallari faction and leaving Renato Lalic, et al. as the remaining members of FARM who sought to intervene.
On January 10, 2007, the Supervisory Group
79
and the AMBALA-Rene Galang faction submitted their
Comment/Opposition dated December 17, 2006.
80

On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit Attached Petition-In-
Intervention dated October 18, 2007.
81
LIPCO later followed with a similar motion.
82
In both motions, RCBC and
LIPCO contended that the assailed resolution effectively nullified the TCTs under their respective names as the
properties covered in the TCTs were veritably included in the January 2, 2006 notice of coverage. In the main, they
claimed that the revocation of the SDP cannot legally affect their rights as innocent purchasers for value. Both
motions for leave to intervene were granted and the corresponding petitions-in-intervention admitted.
On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. On the other hand, the
Court, on August 24, 2010, heard public respondents as well as the respective counsels of the AMBALA-Mallari-
Supervisory Group, the AMBALA-Galang faction, and the FARM and its 27 members
83
argue their case.
Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the Supervisory Group, represented by
Suniga and Andaya; and the United Luisita Workers Union, represented by Eldifonso Pingol, filed with the Court a
joint submission and motion for approval of a Compromise Agreement (English and Tagalog versions) dated August
6, 2010.
On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement, issued a
Resolution
84
creating a Mediation Panel composed of then Associate Justice Ma. Alicia Austria-Martinez, as
chairperson, and former CA Justices Hector Hofilea and Teresita Dy-Liacco Flores, as members. Meetings on five
(5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010, were conducted. Despite persevering and
painstaking efforts on the part of the panel, mediation had to be discontinued when no acceptable agreement could
be reached.
The Issues
HLI raises the following issues for our consideration:
I.
WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY PANGANDAMAN HAVE
JURISDICTION, POWER AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR RESCIND THE
SDOA.
II.
[IF SO], x x x CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER AND/OR AUTHORITY AT
THIS TIME, I.E., AFTER SIXTEEN (16) YEARS FROM THE EXECUTION OF THE SDOA AND ITS
IMPLEMENTATION WITHOUT VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF
THE CONSTITUTION AGAINST DEPRIVATION OF PROPERTY WITHOUT DUE PROCESS OF LAW AND
THE IMPAIRMENT OF CONTRACTUAL RIGHTS AND OBLIGATIONS? MOREOVER, ARE THERE LEGAL
GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x x x, ARTICLES 1380, 1381 AND 1382 x x x
ARTICLE 1390 x x x AND ARTICLE 1409 x x x THAT CAN BE INVOKED TO NULLIFY, RECALL, REVOKE,
OR RESCIND THE SDOA?
III.
WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA HAVE ANY
LEGAL BASIS OR GROUNDS AND WHETHER THE PETITIONERS THEREIN ARE THE REAL PARTIES-
IN-INTEREST TO FILE SAID PETITIONS.
IV.
WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO THE SDOA ARE NOW
GOVERNED BY THE CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE x x x
[CARL] x x x.
On the other hand, RCBC submits the following issues:
I.
RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT PROPERTY FROM THE
COVERAGE OF THE CARP DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS
ACQUIRED VESTED RIGHTS AND INDEFEASIBLE TITLE OVER THE SUBJECT PROPERTY AS AN
INNOCENT PURCHASER FOR VALUE.
A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02
JANUARY 2006 HAVE THE EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE
NAME OF PETITIONER-INTERVENOR RCBC.
B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR RCBC CANNOT
BE PREJUDICED BY A SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.
II.
THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY
2006 WERE ISSUED WITHOUT AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE
PROCESS AS AN INNOCENT PURCHASER FOR VALUE.
LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain portions of the converted
property, and, hence, would ascribe on PARC the commission of grave abuse of discretion when it included those
portions in the notice of coverage. And apart from raising issues identical with those of HLI, such as but not limited
to the absence of valid grounds to warrant the rescission and/or revocation of the SDP, LIPCO would allege that the
assailed resolution and the notice of coverage were issued without affording it the right to due process as an
innocent purchaser for value. The government, LIPCO also argues, is estopped from recovering properties which
have since passed to innocent parties.
Simply formulated, the principal determinative issues tendered in the main petition and to which all other related
questions must yield boil down to the following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA
6657; (3) the jurisdiction of PARC to recall or revoke HLIs SDP; (4) the validity or propriety of such recall or
revocatory action; and (5) corollary to (4), the validity of the terms and conditions of the SDP, as embodied in the
SDOA.
Our Ruling
I.
We first proceed to the examination of the preliminary issues before delving on the more serious challenges bearing
on the validity of PARCs assailed issuance and the grounds for it.
Supervisory Group, AMBALA and their
respective leaders are real parties-in-interest
HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group and AMBALA, i.e.,
Julio Suniga, Windsor Andaya, and Rene Galang, who filed the revocatory petitions before the DAR. As HLI would
have it, Galang, the self-styled head of AMBALA, gained HLI employment in June 1990 and, thus, could not have
been a party to the SDOA executed a year earlier.
85
As regards the Supervisory Group, HLI alleges that supervisors
are not regular farmworkers, but the company nonetheless considered them FWBs under the SDOA as a mere
concession to enable them to enjoy the same benefits given qualified regular farmworkers. However, if the SDOA
would be canceled and land distribution effected, so HLI claims, citing Fortich v. Corona,
86
the supervisors would be
excluded from receiving lands as farmworkers other than the regular farmworkers who are merely entitled to the
"fruits of the land."
87

The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who appear in the annual payroll,
inclusive of the permanent and seasonal employees, who are regularly or periodically employed by [HLI]."
88
Galang,
per HLIs own admission, is employed by HLI, and is, thus, a qualified beneficiary of the SDP; he comes within the
definition of a real party-in-interest under Sec. 2, Rule 3 of the Rules of Court, meaning, one who stands to be
benefited or injured by the judgment in the suit or is the party entitled to the avails of the suit.
The same holds true with respect to the Supervisory Group whose members were admittedly employed by HLI and
whose names and signatures even appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP,
Suniga and the other 61 supervisors are certainly parties who would benefit or be prejudiced by the judgment
recalling the SDP or replacing it with some other modality to comply with RA 6657.
Even assuming that members of the Supervisory Group are not regular farmworkers, but are in the category of
"other farmworkers" mentioned in Sec. 4, Article XIII of the Constitution,
89
thus only entitled to a share of the fruits of
the land, as indeed Fortich teaches, this does not detract from the fact that they are still identified as being among
the "SDP qualified beneficiaries." As such, they are, thus, entitled to bring an action upon the SDP.
90
At any rate, the
following admission made by Atty. Gener Asuncion, counsel of HLI, during the oral arguments should put to rest any
lingering doubt as to the status of protesters Galang, Suniga, and Andaya:
Justice Bersamin: x x x I heard you a while ago that you were conceding the qualified farmer beneficiaries of
Hacienda Luisita were real parties in interest?
Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the complaints of protest
initiated before the DAR and the real party in interest there be considered as possessed by the farmer beneficiaries
who initiated the protest.
91

Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to represent themselves,
their fellow farmers or their organizations in any proceedings before the DAR. Specifically:
SEC. 50. Quasi-Judicial Powers of the DAR.x x x
x x x x
Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers or their
organizations in any proceedings before the DAR: Provided, however, that when there are two or more
representatives for any individual or group, the representatives should choose only one among themselves to
represent such party or group before any DAR proceedings. (Emphasis supplied.)
Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real parties-in-interest
allowed by law to file a petition before the DAR or PARC.
This is not necessarily to say, however, that Galang represents AMBALA, for as records show and as HLI aptly
noted,
92
his "petisyon" filed with DAR did not carry the usual authorization of the individuals in whose behalf it was
supposed to have been instituted. To date, such authorization document, which would logically include a list of the
names of the authorizing FWBs, has yet to be submitted to be part of the records.
PARCs Authority to Revoke a Stock Distribution Plan
On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is without authority to
revoke an SDP, for neither RA 6657 nor EO 229 expressly vests PARC with such authority. While, as HLI argued,
EO 229 empowers PARC to approve the plan for stock distribution in appropriate cases, the empowerment only
includes the power to disapprove, but not to recall its previous approval of the SDP after it has been implemented by
the parties.
93
To HLI, it is the court which has jurisdiction and authority to order the revocation or rescission of the
PARC-approved SDP.
We disagree.
Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock distribution of the
corporate landowner belongs to PARC. However, contrary to petitioner HLIs posture, PARC also has the power to
revoke the SDP which it previously approved. It may be, as urged, that RA 6657 or other executive issuances on
agrarian reform do not explicitly vest the PARC with the power to revoke/recall an approved SDP. Such power or
authority, however, is deemed possessed by PARC under the principle of necessary implication, a basic postulate
that what is implied in a statute is as much a part of it as that which is expressed.
94

We have explained that "every statute is understood, by implication, to contain all such provisions as may be
necessary to effectuate its object and purpose, or to make effective rights, powers, privileges or jurisdiction which it
grants, including all such collateral and subsidiary consequences as may be fairly and logically inferred from its
terms."
95
Further, "every statutory grant of power, right or privilege is deemed to include all incidental power, right or
privilege.
96

Gordon v. Veridiano II is instructive:
The power to approve a license includes by implication, even if not expressly granted, the power to revoke it. By
extension, the power to revoke is limited by the authority to grant the license, from which it is derived in the first
place. Thus, if the FDA grants a license upon its finding that the applicant drug store has complied with the
requirements of the general laws and the implementing administrative rules and regulations, it is only for their
violation that the FDA may revoke the said license. By the same token, having granted the permit upon his
ascertainment that the conditions thereof as applied x x x have been complied with, it is only for the violation of such
conditions that the mayor may revoke the said permit.
97
(Emphasis supplied.)
Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a
plan for stock distribution of the agricultural land of corporate owners necessarily includes the power to revoke or
recall the approval of the plan.
As public respondents aptly observe, to deny PARC such revocatory power would reduce it into a toothless agency
of CARP, because the very same agency tasked to ensure compliance by the corporate landowner with the
approved SDP would be without authority to impose sanctions for non-compliance with it.
98
With the view We take of
the case, only PARC can effect such revocation. The DAR Secretary, by his own authority as such, cannot plausibly
do so, as the acceptance and/or approval of the SDP sought to be taken back or undone is the act of PARC whose
official composition includes, no less, the President as chair, the DAR Secretary as vice-chair, and at least eleven
(11) other department heads.
99

On another but related issue, the HLI foists on the Court the argument that subjecting its landholdings to compulsory
distribution after its approved SDP has been implemented would impair the contractual obligations created under
the SDOA.
The broad sweep of HLIs argument ignores certain established legal precepts and must, therefore, be rejected.
A law authorizing interference, when appropriate, in the contractual relations between or among parties is deemed
read into the contract and its implementation cannot successfully be resisted by force of the non-impairment
guarantee. There is, in that instance, no impingement of the impairment clause, the non-impairment protection being
applicable only to laws that derogate prior acts or contracts by enlarging, abridging or in any manner changing the
intention of the parties. Impairment, in fine, obtains if a subsequent law changes the terms of a contract between the
parties, imposes new conditions, dispenses with those agreed upon or withdraws existing remedies for the
enforcement of the rights of the parties.
100
Necessarily, the constitutional proscription would not apply to laws
already in effect at the time of contract execution, as in the case of RA 6657, in relation to DAO 10, vis--vis HLIs
SDOA. As held in Serrano v. Gallant Maritime Services, Inc.:
The prohibition [against impairment of the obligation of contracts] is aligned with the general principle that laws
newly enacted have only a prospective operation, and cannot affect acts or contracts already perfected; however, as
to laws already in existence, their provisions are read into contracts and deemed a part thereof. Thus, the non-
impairment clause under Section 10, Article II [of the Constitution] is limited in application to laws about to be
enacted that would in any way derogate from existing acts or contracts by enlarging, abridging or in any manner
changing the intention of the parties thereto.
101
(Emphasis supplied.)
Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the ambit of Sec. 10,
Art. III of the Constitution providing that "[n]o law impairing the obligation of contracts shall be passed."
Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its terms and
conditions is not a PARC administrative matter, but one that gives rise to a cause of action cognizable by regular
courts.
102
This contention has little to commend itself. The SDOA is a special contract imbued with public interest,
entered into and crafted pursuant to the provisions of RA 6657. It embodies the SDP, which requires for its validity,
or at least its enforceability, PARCs approval. And the fact that the certificate of compliance
103
to be issued by
agrarian authorities upon completion of the distribution of stocksis revocable by the same issuing authority
supports the idea that everything about the implementation of the SDP is, at the first instance, subject to
administrative adjudication.
HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, instead of to RA
6657, in determining their rights, obligations and remedies. The Code, it adds, should be the applicable law on the
disposition of the agricultural land of HLI.
Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA embodying the SDP are
primarily governed by RA 6657. It should abundantly be made clear that HLI was precisely created in order to
comply with RA 6657, which the OSG aptly described as the "mother law" of the SDOA and the SDP.
104
It is, thus,
paradoxical for HLI to shield itself from the coverage of CARP by invoking exclusive applicability of the Corporation
Code under the guise of being a corporate entity.
Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also stockholders,
its applicability is limited as the rights of the parties arising from the SDP should not be made to supplant or
circumvent the agrarian reform program.
Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of
private corporations. On the other hand, RA 6657 is the special law on agrarian reform. As between a general and
special law, the latter shall prevailgeneralia specialibus non derogant.
105
Besides, the present impasse between
HLI and the private respondents is not an intra-corporate dispute which necessitates the application of the
Corporation Code. What private respondents questioned before the DAR is the proper implementation of the SDP
and HLIs compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the instant case.
HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and
the eventual distribution of the land to the FWBs would amount to a disposition of all or practically all of the
corporate assets of HLI. HLI would add that this contingency, if ever it comes to pass, requires the applicability of
the Corporation Code provisions on corporate dissolution.
We are not persuaded.
Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar as the winding up of
HLIs affairs or liquidation of the assets is concerned. However, the mere inclusion of the agricultural land of
Hacienda Luisita under the coverage of CARP and the lands eventual distribution to the FWBs will not, without
more, automatically trigger the dissolution of HLI. As stated in the SDOA itself, the percentage of the value of the
agricultural land of Hacienda Luisita in relation to the total assets transferred and conveyed by Tadeco to HLI
comprises only 33.296%, following this equation: value of the agricultural lands divided by total corporate assets. By
no stretch of imagination would said percentage amount to a disposition of all or practically all of HLIs corporate
assets should compulsory land acquisition and distribution ensue.
This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years after its execution
pursuant to Sec. 31 of RA 6657 for the reasons set forth in the Terminal Report of the Special Task Force, as
endorsed by PARC Excom. But first, the matter of the constitutionality of said section.
Constitutional Issue
FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a mode of CARP
compliance, to resort to stock distribution, an arrangement which, to FARM, impairs the fundamental right of farmers
and farmworkers under Sec. 4, Art. XIII of the Constitution.
106

To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in lieu of outright
agricultural land transfer; in fine, there is stock certificate ownership of the farmers or farmworkers instead of them
owning the land, as envisaged in the Constitution. For FARM, this modality of distribution is an anomaly to be
annulled for being inconsistent with the basic concept of agrarian reform ingrained in Sec. 4, Art. XIII of the
Constitution.
107

Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and other qualified
beneficiaries. It draws attention in this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term
"agrarian reform." The constitutionality of a law, HLI added, cannot, as here, be attacked collaterally.
The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its counterpart provision in EO
229 must fail as explained below.
When the Court is called upon to exercise its power of judicial review over, and pass upon the constitutionality of,
acts of the executive or legislative departments, it does so only when the following essential requirements are first
met, to wit:
(1) there is an actual case or controversy;
(2) that the constitutional question is raised at the earliest possible opportunity by a proper party or one with
locus standi; and
(3) the issue of constitutionality must be the very lis mota of the case.
108

Not all the foregoing requirements are satisfied in the case at bar.
While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers,
has yet to explain its failure to challenge the constitutionality of Sec. 3l of RA 6657, since as early as November 21,
l989 when PARC approved the SDP of Hacienda Luisita or at least within a reasonable time thereafter and why its
members received benefits from the SDP without so much of a protest. It was only on December 4, 2003 or 14
years after approval of the SDP via PARC Resolution No. 89-12-2 dated November 21, 1989 that said plan and
approving resolution were sought to be revoked, but not, to stress, by FARM or any of its members, but by petitioner
AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of Sec. 31 of RA 6657, but
concentrated on the purported flaws and gaps in the subsequent implementation of the SDP. Even the public
respondents, as represented by the Solicitor General, did not question the constitutionality of the provision. On the
other hand, FARM, whose 27 members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only
on May 3, 2007 when it filed its Supplemental Comment with the Court. Thus, it took FARM some eighteen (18)
years from November 21, 1989 before it challenged the constitutionality of Sec. 31 of RA 6657 which is quite too
late in the day. The FARM members slept on their rights and even accepted benefits from the SDP with nary a
complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The Court cannot now
be goaded into resolving a constitutional issue that FARM failed to assail after the lapse of a long period of time and
the occurrence of numerous events and activities which resulted from the application of an alleged unconstitutional
legal provision.
It has been emphasized in a number of cases that the question of constitutionality will not be passed upon by the
Court unless it is properly raised and presented in an appropriate case at the first opportunity.
109
FARM is, therefore,
remiss in belatedly questioning the constitutionality of Sec. 31 of RA 6657. The second requirement that the
constitutional question should be raised at the earliest possible opportunity is clearly wanting.
The last but the most important requisite that the constitutional issue must be the very lis mota of the case does not
likewise obtain. The lis mota aspect is not present, the constitutional issue tendered not being critical to the
resolution of the case. The unyielding rule has been to avoid, whenever plausible, an issue assailing the
constitutionality of a statute or governmental act.
110
If some other grounds exist by which judgment can be made
without touching the constitutionality of a law, such recourse is favored.
111
Garcia v. Executive Secretary explains
why:
Lis Mota the fourth requirement to satisfy before this Court will undertake judicial review means that the Court
will not pass upon a question of unconstitutionality, although properly presented, if the case can be disposed of on
some other ground, such as the application of the statute or the general law. The petitioner must be able to show
that the case cannot be legally resolved unless the constitutional question raised is determined. This requirement is
based on the rule that every law has in its favor the presumption of constitutionality; to justify its nullification, there
must be a clear and unequivocal breach of the Constitution, and not one that is doubtful, speculative, or
argumentative.
112
(Italics in the original.)
The lis mota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM
members previously belonged) and the Supervisory Group, is the alleged non-compliance by HLI with the conditions
of the SDP to support a plea for its revocation. And before the Court, the lis mota is whether or not PARC acted in
grave abuse of discretion when it ordered the recall of the SDP for such non-compliance and the fact that the SDP,
as couched and implemented, offends certain constitutional and statutory provisions. To be sure, any of these key
issues may be resolved without plunging into the constitutionality of Sec. 31 of RA 6657. Moreover, looking deeply
into the underlying petitions of AMBALA, et al., it is not the said section per se that is invalid, but rather it is the
alleged application of the said provision in the SDP that is flawed.
It may be well to note at this juncture that Sec. 5 of RA 9700,
113
amending Sec. 7 of RA 6657, has all but
superseded Sec. 31 of RA 6657 vis--vis the stock distribution component of said Sec. 31. In its pertinent part, Sec.
5 of RA 9700 provides: "[T]hat after June 30, 2009, the modes of acquisition shall be limited to voluntary offer to
sell and compulsory acquisition." Thus, for all intents and purposes, the stock distribution scheme under Sec. 31 of
RA 6657 is no longer an available option under existing law. The question of whether or not it is unconstitutional
should be a moot issue.
It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise already moot and
academic
114
provided the following requisites are present:
x x x first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the
paramount public interest is involved; third, when the constitutional issue raised requires formulation of controlling
principles to guide the bench, the bar, and the public; fourth, the case is capable of repetition yet evading review.
These requisites do not obtain in the case at bar.
For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the Constitution reads:
The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and regular
farmworkers, who are landless, to OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other
farmworkers, to receive a just share of the fruits thereof. To this end, the State shall encourage and undertake the
just distribution of all agricultural lands, subject to such priorities and reasonable retention limits as the Congress
may prescribe, taking into account ecological, developmental, or equity considerations, and subject to the payment
of just compensation. In determining retention limits, the State shall respect the right of small landowners. The State
shall further provide incentives for voluntary land-sharing. (Emphasis supplied.)
The wording of the provision is unequivocalthe farmers and regular farmworkers have a right TO OWN
DIRECTLY OR COLLECTIVELY THE LANDS THEY TILL. The basic law allows two (2) modes of land distribution
direct and indirect ownership. Direct transfer to individual farmers is the most commonly used method by DAR and
widely accepted. Indirect transfer through collective ownership of the agricultural land is the alternative to direct
ownership of agricultural land by individual farmers. The aforequoted Sec. 4 EXPRESSLY authorizes collective
ownership by farmers. No language can be found in the 1987 Constitution that disqualifies or prohibits corporations
or cooperatives of farmers from being the legal entity through which collective ownership can be exercised. The
word "collective" is defined as "indicating a number of persons or things considered as constituting one group or
aggregate,"
115
while "collectively" is defined as "in a collective sense or manner; in a mass or body."
116
By using the
word "collectively," the Constitution allows for indirect ownership of land and not just outright agricultural land
transfer. This is in recognition of the fact that land reform may become successful even if it is done through the
medium of juridical entities composed of farmers.
Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers cooperatives or
associations to collectively own the land, while the second paragraph of Sec. 31 allows corporations or associations
to own agricultural land with the farmers becoming stockholders or members. Said provisions read:
SEC. 29. Farms owned or operated by corporations or other business associations.In the case of farms owned or
operated by corporations or other business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker
beneficiaries who shall form a workers cooperative or association which will deal with the corporation or business
association. x x x (Emphasis supplied.)
SEC. 31. Corporate Landowners. x x x
x x x x
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right
to purchase such proportion of the capital stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the companys total assets, under such terms and conditions as may be
agreed upon by them. In no case shall the compensation received by the workers at the time the shares of stocks
are distributed be reduced. The same principle shall be applied to associations, with respect to their equity or
participation. x x x (Emphasis supplied.)
Clearly, workers cooperatives or associations under Sec. 29 of RA 6657 and corporations or associations under the
succeeding Sec. 31, as differentiated from individual farmers, are authorized vehicles for the collective ownership of
agricultural land. Cooperatives can be registered with the Cooperative Development Authority and acquire legal
personality of their own, while corporations are juridical persons under the Corporation Code. Thus, Sec. 31 is
constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution that land can be owned COLLECTIVELY
by farmers. Even the framers of the l987 Constitution are in unison with respect to the two (2) modes of ownership
of agricultural lands tilled by farmersDIRECT and COLLECTIVE, thus:
MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct ownership by the
tiller?
MR. MONSOD. Yes.
MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or State
ownership?
MS. NIEVA. In this section, we conceive of cooperatives; that is farmers cooperatives owning the land, not the
State.
MR. NOLLEDO. And when we talk of "collectively," referring to farmers cooperatives, do the farmers own specific
areas of land where they only unite in their efforts?
MS. NIEVA. That is one way.
MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave" type of agriculture
and the "kibbutz." So are both contemplated in the report?
MR. TADEO. Ang dalawa kasing pamamaraan ng pagpapatupad ng tunay na reporma sa lupa ay ang pagmamay-
ari ng lupa na hahatiin sa individual na pagmamay-ari directly at ang tinatawag na sama-samang gagawin ng
mga magbubukid. Tulad sa Negros, ang gusto ng mga magbubukid ay gawin nila itong "cooperative or collective
farm." Ang ibig sabihin ay sama-sama nilang sasakahin.
x x x x
MR. TINGSON. x x x When we speak here of "to own directly or collectively the lands they till," is this land for the
tillers rather than land for the landless? Before, we used to hear "land for the landless," but now the slogan is "land
for the tillers." Is that right?
MR. TADEO. Ang prinsipyong umiiral dito ay iyong land for the tillers. Ang ibig sabihin ng "directly" ay tulad sa
implementasyon sa rice and corn lands kung saan inaari na ng mga magsasaka ang lupang binubungkal nila. Ang
ibig sabihin naman ng "collectively" ay sama-samang paggawa sa isang lupain o isang bukid, katulad ng sitwasyon
sa Negros.
117
(Emphasis supplied.)
As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or collectively. Thus,
the main requisite for collective ownership of land is collective or group work by farmers of the agricultural land.
Irrespective of whether the landowner is a cooperative, association or corporation composed of farmers, as long as
concerted group work by the farmers on the land is present, then it falls within the ambit of collective ownership
scheme.
Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the State to pursue, by
law, an agrarian reform program founded on the policy of land for the landless, but subject to such priorities as
Congress may prescribe, taking into account such abstract variable as "equity considerations." The textual
reference to a law and Congress necessarily implies that the above constitutional provision is not self-
executoryand that legislation is needed to implement the urgently needed program of agrarian reform. And RA
6657 has been enacted precisely pursuant to and as a mechanism to carry out the constitutional directives. This
piece of legislation, in fact, restates
118
the agrarian reform policy established in the aforementioned provision of the
Constitution of promoting the welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian reform"
as "the redistribution of lands to farmers and regular farmworkers who are landless to lift the economic status
of the beneficiaries and all other arrangements alternative to the physical redistribution of lands, such as
production or profit sharing, labor administration and the distribution of shares of stock which will allow
beneficiaries to receive a just share of the fruits of the lands they work."
With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657 hews with the
agrarian reform policy, as instrument of social justice under Sec. 4 of Article XIII of the Constitution. Albeit land
ownership for the landless appears to be the dominant theme of that policy, We emphasize that Sec. 4, Article XIII
of the Constitution, as couched, does not constrict Congress to passing an agrarian reform law planted on direct
land transfer to and ownership by farmers and no other, or else the enactment suffers from the vice of
unconstitutionality. If the intention were otherwise, the framers of the Constitution would have worded said section in
a manner mandatory in character.
For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent with the States
commitment to farmers and farmworkers to advance their interests under the policy of social justice. The legislature,
thru Sec. 31 of RA 6657, has chosen a modality for collective ownership by which the imperatives of social justice
may, in its estimation, be approximated, if not achieved. The Court should be bound by such policy choice.
FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own the agricultural land but
are merely given stock certificates. Thus, the farmers lose control over the land to the board of directors and
executive officials of the corporation who actually manage the land. They conclude that such arrangement runs
counter to the mandate of the Constitution that any agrarian reform must preserve the control over the land in the
hands of the tiller.
This contention has no merit.
While it is true that the farmer is issued stock certificates and does not directly own the land, still, the Corporation
Code is clear that the FWB becomes a stockholder who acquires an equitable interest in the assets of the
corporation, which include the agricultural lands. It was explained that the "equitable interest of the shareholder in
the property of the corporation is represented by the term stock, and the extent of his interest is described by the
term shares. The expression shares of stock when qualified by words indicating number and ownership expresses
the extent of the owners interest in the corporate property."
119
A share of stock typifies an aliquot part of the
corporations property, or the right to share in its proceeds to that extent when distributed according to law and
equity and that its holder is not the owner of any part of the capital of the corporation.
120
However, the FWBs will
ultimately own the agricultural lands owned by the corporation when the corporation is eventually dissolved and
liquidated.
Anent the alleged loss of control of the farmers over the agricultural land operated and managed by the corporation,
a reading of the second paragraph of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries
have "the right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually
devoted to agricultural activities, bears in relation to the companys total assets." The wording of the formula in the
computation of the number of shares that can be bought by the farmers does not mean loss of control on the part of
the farmers. It must be remembered that the determination of the percentage of the capital stock that can be bought
by the farmers depends on the value of the agricultural land and the value of the total assets of the corporation.
There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian reform is that
control over the agricultural land must always be in the hands of the farmers. Then it falls on the shoulders of DAR
and PARC to see to it the farmers should always own majority of the common shares entitled to elect the members
of the board of directors to ensure that the farmers will have a clear majority in the board. Before the SDP is
approved, strict scrutiny of the proposed SDP must always be undertaken by the DAR and PARC, such that the
value of the agricultural land contributed to the corporation must always be more than 50% of the total assets of the
corporation to ensure that the majority of the members of the board of directors are composed of the farmers. The
PARC composed of the President of the Philippines and cabinet secretaries must see to it that control over the
board of directors rests with the farmers by rejecting the inclusion of non-agricultural assets which will yield the
majority in the board of directors to non-farmers. Any deviation, however, by PARC or DAR from the correct
application of the formula prescribed by the second paragraph of Sec. 31 of RA 6675 does not make said provision
constitutionally infirm. Rather, it is the application of said provision that can be challenged. Ergo, Sec. 31 of RA 6657
does not trench on the constitutional policy of ensuring control by the farmers.
A view has been advanced that there can be no agrarian reform unless there is land distribution and that actual land
distribution is the essential characteristic of a constitutional agrarian reform program. On the contrary, there have
been so many instances where, despite actual land distribution, the implementation of agrarian reform was still
unsuccessful. As a matter of fact, this Court may take judicial notice of cases where FWBs sold the awarded land
even to non-qualified persons and in violation of the prohibition period provided under the law. This only proves to
show that the mere fact that there is land distribution does not guarantee a successful implementation of agrarian
reform.
As it were, the principle of "land to the tiller" and the old pastoral model of land ownership where non-human juridical
persons, such as corporations, were prohibited from owning agricultural lands are no longer realistic under existing
conditions. Practically, an individual farmer will often face greater disadvantages and difficulties than those who
exercise ownership in a collective manner through a cooperative or corporation. The former is too often left to his
own devices when faced with failing crops and bad weather, or compelled to obtain usurious loans in order to
purchase costly fertilizers or farming equipment. The experiences learned from failed land reform activities in
various parts of the country are lack of financing, lack of farm equipment, lack of fertilizers, lack of guaranteed
buyers of produce, lack of farm-to-market roads, among others. Thus, at the end of the day, there is still no
successful implementation of agrarian reform to speak of in such a case.
Although success is not guaranteed, a cooperative or a corporation stands in a better position to secure funding and
competently maintain the agri-business than the individual farmer. While direct singular ownership over farmland
does offer advantages, such as the ability to make quick decisions unhampered by interference from others, yet at
best, these advantages only but offset the disadvantages that are often associated with such ownership
arrangement. Thus, government must be flexible and creative in its mode of implementation to better its chances of
success. One such option is collective ownership through juridical persons composed of farmers.
Aside from the fact that there appears to be no violation of the Constitution, the requirement that the instant case be
capable of repetition yet evading review is also wanting. It would be speculative for this Court to assume that the
legislature will enact another law providing for a similar stock option.
As a matter of sound practice, the Court will not interfere inordinately with the exercise by Congress of its official
functions, the heavy presumption being that a law is the product of earnest studies by Congress to ensure that no
constitutional prescription or concept is infringed.
121
Corollarily, courts will not pass upon questions of wisdom,
expediency and justice of legislation or its provisions. Towards this end, all reasonable doubts should be resolved in
favor of the constitutionality of a law and the validity of the acts and processes taken pursuant thereof.
122

Consequently, before a statute or its provisions duly challenged are voided, an unequivocal breach of, or a clear
conflict with the Constitution, not merely a doubtful or argumentative one, must be demonstrated in such a manner
as to leave no doubt in the mind of the Court. In other words, the grounds for nullity must be beyond reasonable
doubt.
123
FARM has not presented compelling arguments to overcome the presumption of constitutionality of Sec. 31
of RA 6657.
The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of implementing agrarian
reform is not for judicial determination. Established jurisprudence tells us that it is not within the province of the
Court to inquire into the wisdom of the law, for, indeed, We are bound by words of the statute.
124

II.
The stage is now set for the determination of the propriety under the premises of the revocation or recall of HLIs
SDP. Or to be more precise, the inquiry should be: whether or not PARC gravely abused its discretion in revoking or
recalling the subject SDP and placing the hacienda under CARPs compulsory acquisition and distribution scheme.
The findings, analysis and recommendation of the DARs Special Task Force contained and summarized in its
Terminal Report provided the bases for the assailed PARC revocatory/recalling Resolution. The findings may be
grouped into two: (1) the SDP is contrary to either the policy on agrarian reform, Sec. 31 of RA 6657, or DAO 10;
and (2) the alleged violation by HLI of the conditions/terms of the SDP. In more particular terms, the following are
essentially the reasons underpinning PARCs revocatory or recall action:
(1) Despite the lapse of 16 years from the approval of HLIs SDP, the lives of the FWBs have hardly
improved and the promised increased income has not materialized;
(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;
(3) The issuance of HLI shares of stock on the basis of number of hours workedor the so-called "man
days"is grossly onerous to the FWBs, as HLI, in the guise of rotation, can unilaterally deny work to
anyone. In elaboration of this ground, PARCs Resolution No. 2006-34-01, denying HLIs motion for
reconsideration of Resolution No. 2005-32-01, stated that the man days criterion worked to dilute the
entitlement of the original share beneficiaries;
125

(4) The distribution/transfer of shares was not in accordance with the timelines fixed by law;
(5) HLI has failed to comply with its obligations to grant 3% of the gross sales every year as production-
sharing benefit on top of the workers salary; and
(6) Several homelot awardees have yet to receive their individual titles.
Petitioner HLI claims having complied with, at least substantially, all its obligations under the SDP, as approved by
PARC itself, and tags the reasons given for the revocation of the SDP as unfounded.
Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds set forth in the
Terminal Report, a position shared by AMBALA, which, in some pleadings, is represented by the same counsel as
that appearing for the Supervisory Group.
FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP, because it does not
conform to Sec. 31 of RA 6657 and DAO 10. And training its sight on the resulting dilution of the equity of the FWBs
appearing in HLIs masterlist, FARM would state that the SDP, as couched and implemented, spawned disparity
when there should be none; parity when there should have been differentiation.
126

The petition is not impressed with merit.
In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy under Sec. 2
of RA 6657, as the said plan failed to enhance the dignity and improve the quality of lives of the FWBs through
greater productivity of agricultural lands. We disagree.
Sec. 2 of RA 6657 states:
SECTION 2. Declaration of Principles and Policies.It is the policy of the State to pursue a Comprehensive
Agrarian Reform Program (CARP). The welfare of the landless farmers and farm workers will receive the highest
consideration to promote social justice and to move the nation towards sound rural development and
industrialization, and the establishment of owner cultivatorship of economic-sized farms as the basis of Philippine
agriculture.
To this end, a more equitable distribution and ownership of land, with due regard to the rights of landowners to just
compensation and to the ecological needs of the nation, shall be undertaken to provide farmers and farm workers
with the opportunity to enhance their dignity and improve the quality of their lives through greater productivity of
agricultural lands.
The agrarian reform program is founded on the right of farmers and regular farm workers, who are landless, to own
directly or collectively the lands they till or, in the case of other farm workers, to receive a share of the fruits thereof.
To this end, the State shall encourage the just distribution of all agricultural lands, subject to the priorities and
retention limits set forth in this Act, having taken into account ecological, developmental, and equity considerations,
and subject to the payment of just compensation. The State shall respect the right of small landowners and shall
provide incentives for voluntary land-sharing. (Emphasis supplied.)
Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable distribution and ownership
of land x x x shall be undertaken to provide farmers and farm workers with the opportunity to enhance their dignity
and improve the quality of their lives through greater productivity of agricultural lands." Of note is the term
"opportunity" which is defined as a favorable chance or opening offered by circumstances.
127
Considering this, by no
stretch of imagination can said provision be construed as a guarantee in improving the lives of the FWBs. At best, it
merely provides for a possibility or favorable chance of uplifting the economic status of the FWBs, which may or may
not be attained.
Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI under the SDP
nor an imperative imposition by RA 6657 and DAO 10, a violation of which would justify discarding the stock
distribution option. Nothing in that option agreement, law or department order indicates otherwise.
Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP (1989-2005),
some PhP 3 billion by way of salaries/wages and higher benefits exclusive of free hospital and medical benefits to
their immediate family. And attached as Annex "G" to HLIs Memorandum is the certified true report of the finance
manager of Jose Cojuangco & Sons Organizations-Tarlac Operations, captioned as "HACIENDA LUISITA, INC.
Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock Option was Approved by
PARC/CARP," detailing what HLI gave their workers from 1989 to 2005. The sum total, as added up by the Court,
yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-
Direct Cash Out (Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated in the report, include
the cost of homelots; the PhP 150 million or so representing 3% of the gross produce of the hacienda; and the PhP
37.5 million representing 3% from the proceeds of the sale of the 500-hectare converted lands. While not included in
the report, HLI manifests having given the FWBs 3% of the PhP 80 million paid for the 80 hectares of land traversed
by the SCTEX.
128
On top of these, it is worth remembering that the shares of stocks were given by HLI to the FWBs
for free. Verily, the FWBs have benefited from the SDP.
To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned profits
through the years, it cannot be over-emphasized that, as a matter of common business sense, no corporation could
guarantee a profitable run all the time. As has been suggested, one of the key features of an SDP of a corporate
landowner is the likelihood of the corporate vehicle not earning, or, worse still, losing money.
129

The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability of approving
a stock distribution plan is the likelihood that the plan "would result in increased income and greater benefits to
[qualified beneficiaries] than if the lands were divided and distributed to them individually."
130
But as aptly noted
during the oral arguments, DAO 10 ought to have not, as it cannot, actually exact assurance of success on
something that is subject to the will of man, the forces of nature or the inherent risky nature of business.
131
Just like
in actual land distribution, an SDP cannot guarantee, as indeed the SDOA does not guarantee, a comfortable life for
the FWBs. The Court can take judicial notice of the fact that there were many instances wherein after a farmworker
beneficiary has been awarded with an agricultural land, he just subsequently sells it and is eventually left with
nothing in the end.
In all then, the onerous condition of the FWBs economic status, their life of hardship, if that really be the case, can
hardly be attributed to HLI and its SDP and provide a valid ground for the plans revocation.
Neither does HLIs SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of RA 6657, albeit public
respondents erroneously submit otherwise.
The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue on the propriety of
the assailed order revoking HLIs SDP, for the paragraph deals with the transfer of agricultural lands to the
government, as a mode of CARP compliance, thus:
SEC. 31. Corporate Landowners.Corporate landowners may voluntarily transfer ownership over their agricultural
landholdings to the Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries under such
terms and conditions, consistent with this Act, as they may agree, subject to confirmation by the DAR.
The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows:
Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the
right to purchase such proportion of the capital stock of the corporation that the agricultural land, actually
devoted to agricultural activities, bears in relation to the companys total assets, under such terms and
conditions as may be agreed upon by them. In no case shall the compensation received by the workers at the time
the shares of stocks are distributed be reduced. x x x
Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in
favor of their workers or other qualified beneficiaries under this section shall be deemed to have complied with the
provisions of this Act: Provided, That the following conditions are complied with:
(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial
benefits, the books of the corporation or association shall be subject to periodic audit by certified public
accountants chosen by the beneficiaries;
(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be
assured of at least one (1) representative in the board of directors, or in a management or executive
committee, if one exists, of the corporation or association;
(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all
other shares; and
(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction
is in favor of a qualified and registered beneficiary within the same corporation.
The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or allocated to qualified
beneficiaries, adverting to what Sec. 31 of RA 6657 refers to as that "proportion of the capital stock of the
corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to the companys
total assets" had been observed.
Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA 6657. The stipulation
reads:
1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total
assets (P590,554,220.00) transferred and conveyed to the SECOND PARTY is 33.296% that, under the law, is the
proportion of the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462
shares with a par value of P1.00 per share, that has to be distributed to the THIRD PARTY under the stock
distribution plan, the said 33.296% thereof being P118,391,976.85 or 118,391,976.85 shares.
The appraised value of the agricultural land is PhP 196,630,000 and of HLIs other assets is PhP 393,924,220. The
total value of HLIs assets is, therefore, PhP 590,554,220.
132
The percentage of the value of the agricultural lands
(PhP 196,630,000) in relation to the total assets (PhP 590,554,220) is 33.296%, which represents the stockholdings
of the 6,296 original qualified farmworker-beneficiaries (FWBs) in HLI. The total number of shares to be distributed
to said qualified FWBs is 118,391,976.85 HLI shares. This was arrived at by getting 33.296% of the 355,531,462
shares which is the outstanding capital stock of HLI with a value of PhP 355,531,462. Thus, if we divide the
118,391,976.85 HLI shares by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI shares. These shares
under the SDP are to be given to FWBs for free.
The Court finds that the determination of the shares to be distributed to the 6,296 FWBs strictly adheres to the
formula prescribed by Sec. 31(b) of RA 6657.
Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured of at least one (1)
representative in the board of directors or in a management or executive committee irrespective of the value of the
equity of the FWBs in HLI, the Court finds that the SDOA contained provisions making certain the FWBs
representation in HLIs governing board, thus:
5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST
PARTY and distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an
irrevocable proxy, valid and effective for one (1) year, in favor of the farmworkers appearing as shareholders of the
SECOND PARTY at the start of said year which will empower the THIRD PARTY or their representative to vote in
stockholders and board of directors meetings of the SECOND PARTY convened during the year the entire
33.296% of the outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able to
gain such number of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares
subject to distribution will be entitled to.
Also, no allegations have been made against HLI restricting the inspection of its books by accountants chosen by
the FWBs; hence, the assumption may be made that there has been no violation of the statutory prescription under
sub-paragraph (a) on the auditing of HLIs accounts.
Public respondents, however, submit that the distribution of the mandatory minimum ratio of land-to-shares of stock,
referring to the 118,391,976.85 shares with par value of PhP 1 each, should have been made in full within two (2)
years from the approval of RA 6657, in line with the last paragraph of Sec. 31 of said law.
133

Public respondents submission is palpably erroneous. We have closely examined the last paragraph alluded to,
with particular focus on the two-year period mentioned, and nothing in it remotely supports the public respondents
posture. In its pertinent part, said Sec. 31 provides:
SEC. 31. Corporate Landowners x x x
If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not
made or realized or the plan for such stock distribution approved by the PARC within the same period, the
agricultural land of the corporate owners or corporation shall be subject to the compulsory coverage of this Act.
(Word in bracket and emphasis added.)
Properly viewed, the words "two (2) years" clearly refer to the period within which the corporate landowner, to avoid
land transfer as a mode of CARP coverage under RA 6657, is to avail of the stock distribution option or to have the
SDP approved. The HLI secured approval of its SDP in November 1989, well within the two-year period reckoned
from June 1988 when RA 6657 took effect.
Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA 6657 as well as the statutory
issues, We shall now delve into what PARC and respondents deem to be other instances of violation of DAO 10 and
the SDP.
On the Conversion of Lands
Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisita unfragmented is also not among
the imperative impositions by the SDP, RA 6657, and DAO 10.
The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC effectively assured
the intended stock beneficiaries that the physical integrity of the farm shall remain inviolate. Accordingly, the
Terminal Report and the PARC-assailed resolution would take HLI to task for securing approval of the conversion to
non-agricultural uses of 500 hectares of the hacienda. In not too many words, the Report and the resolution view the
conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the continued operation of the
corporation with its agricultural land intact and unfragmented is viable with potential for growth and increased
profitability."
The PARC is wrong.
In the first place, Sec. 5(a)just like the succeeding Sec. 5(b) of DAO 10 on increased income and greater benefits
to qualified beneficiariesis but one of the stated criteria to guide PARC in deciding on whether or not to accept an
SDP. Said Sec. 5(a) does not exact from the corporate landowner-applicant the undertaking to keep the farm intact
and unfragmented ad infinitum. And there is logic to HLIs stated observation that the key phrase in the provision of
Sec. 5(a) is "viability of corporate operations": "[w]hat is thus required is not the agricultural land remaining intact x x
x but the viability of the corporate operations with its agricultural land being intact and unfragmented. Corporate
operation may be viable even if the corporate agricultural land does not remain intact or [un]fragmented."
134

It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance, let alone
undermining the viability of Hacienda Luisitas operation, as the DAR Secretary approved the land conversion
applied for and its disposition via his Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA 6657
which reads:
Sec. 65. Conversion of Lands.After the lapse of five years from its award when the land ceases to be economically
feasible and sound for agricultural purposes, or the locality has become urbanized and the land will have a greater
economic value for residential, commercial or industrial purposes, the DAR upon application of the beneficiary or
landowner with due notice to the affected parties, and subject to existing laws, may authorize the x x x conversion of
the land and its dispositions. x x x
On the 3% Production Share
On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross production sales of the
hacienda and pay dividends from profit, the entries in its financial books tend to indicate compliance by HLI of the
profit-sharing equivalent to 3% of the gross sales from the production of the agricultural land on top of (a) the
salaries and wages due FWBs as employees of the company and (b) the 3% of the gross selling price of the
converted land and that portion used for the SCTEX. A plausible evidence of compliance or non-compliance, as the
case may be, could be the books of account of HLI. Evidently, the cry of some groups of not having received their
share from the gross production sales has not adequately been validated on the ground by the Special Task Force.
Indeed, factual findings of administrative agencies are conclusive when supported by substantial evidence and are
accorded due respect and weight, especially when they are affirmed by the CA.
135
However, such rule is not
absolute. One such exception is when the findings of an administrative agency are conclusions without citation of
specific evidence on which they are based,
136
such as in this particular instance. As culled from its Terminal Report,
it would appear that the Special Task Force rejected HLIs claim of compliance on the basis of this ratiocination:
The Task Force position: Though, allegedly, the Supervisory Group receives the 3% gross production share
and that others alleged that they received 30 million pesos still others maintain that they have not received
anything yet. Item No. 4 of the MOA is clear and must be followed. There is a distinction between the total
gross sales from the production of the land and the proceeds from the sale of the land. The former refers to
the fruits/yield of the agricultural land while the latter is the land itself. The phrase "the beneficiaries are
entitled every year to an amount approximately equivalent to 3% would only be feasible if the subject is the
produce since there is at least one harvest per year, while such is not the case in the sale of the agricultural
land. This negates then the claim of HLI that, all that the FWBs can be entitled to, if any, is only 3% of the
purchase price of the converted land.
Besides, the Conversion Order dated 14 August 1996 provides that "the benefits, wages and the like,
presently received by the FWBs shall not in any way be reduced or adversely affected. Three percent of the
gross selling price of the sale of the converted land shall be awarded to the beneficiaries of the SDO." The
3% gross production share then is different from the 3% proceeds of the sale of the converted land and, with
more reason, the 33% share being claimed by the FWBs as part owners of the Hacienda, should have been
given the FWBs, as stockholders, and to which they could have been entitled if only the land were acquired
and redistributed to them under the CARP.
x x x x
The FWBs do not receive any other benefits under the MOA except the aforementioned [(viz: shares of
stocks (partial), 3% gross production sale (not all) and homelots (not all)].
Judging from the above statements, the Special Task Force is at best silent on whether HLI has failed to comply
with the 3% production-sharing obligation or the 3% of the gross selling price of the converted land and the SCTEX
lot. In fact, it admits that the FWBs, though not all, have received their share of the gross production sales and in the
sale of the lot to SCTEX. At most, then, HLI had complied substantially with this SDP undertaking and the
conversion order. To be sure, this slight breach would not justify the setting to naught by PARC of the approval
action of the earlier PARC. Even in contract law, rescission, predicated on violation of reciprocity, will not be
permitted for a slight or casual breach of contract; rescission may be had only for such breaches that are substantial
and fundamental as to defeat the object of the parties in making the agreement.
137

Despite the foregoing findings, the revocation of the approval of the SDP is not without basis as shown below.
On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or business associations owning or
operating farms which opted for land distribution. Sec. 30 of RA 6657 states:
SEC. 30. Homelots and Farmlots for Members of Cooperatives.The individual members of the cooperatives or
corporations mentioned in the preceding section shall be provided with homelots and small farmlots for their family
use, to be taken from the land owned by the cooperative or corporation.
The "preceding section" referred to in the above-quoted provision is as follows:
SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.In the case of farms owned
or operated by corporations or other business associations, the following rules shall be observed by the PARC.
In general, lands shall be distributed directly to the individual worker-beneficiaries.
In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-
beneficiaries who shall form a workers cooperative or association which will deal with the corporation or business
association. Until a new agreement is entered into by and between the workers cooperative or association and the
corporation or business association, any agreement existing at the time this Act takes effect between the former and
the previous landowner shall be respected by both the workers cooperative or association and the corporation or
business association.
Noticeably, the foregoing provisions do not make reference to corporations which opted for stock distribution under
Sec. 31 of RA 6657. Concomitantly, said corporations are not obliged to provide for it except by stipulation, as in this
case.
Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among the qualified family-
beneficiaries x x x residential or homelots of not more than 240 sq. m. each, with each family beneficiary being
assured of receiving and owning a homelot in the barrio or barangay where it actually resides," "within a reasonable
time."
More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is still the
contention of the FWBs that not all was given the 240-square meter homelots and, of those who were already given,
some still do not have the corresponding titles.
During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting proof that
the FWBs were already given the said homelots:
Justice Velasco: x x x There is also an allegation that the farmer beneficiaries, the qualified family beneficiaries were
not given the 240 square meters each. So, can you also [prove] that the qualified family beneficiaries were already
provided the 240 square meter homelots.
Atty. Asuncion: We will, your Honor please.
138

Other than the financial report, however, no other substantial proof showing that all the qualified beneficiaries have
received homelots was submitted by HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied
with its undertaking to distribute homelots to the FWBs under the SDP.
On "Man Days" and the Mechanics of Stock Distribution
In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that
it violates two (2) provisions of DAO 10. Par. 3 of the SDOA states:
3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST
PARTY [TDC] the acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of days worked
and at no cost to them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY
that are presently owned and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85
shares shall have been completely acquired and distributed to the THIRD PARTY.
Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not entailing a cash
out from them, is contingent on the number of "man days," that is, the number of days that the FWBs have worked
during the year. This formula deviates from Sec. 1 of DAO 10, which decrees the distribution of equal number of
shares to the FWBs as the minimum ratio of shares of stock for purposes of compliance with Sec. 31 of RA 6657.
As stated in Sec. 4 of DAO 10:
Section 4. Stock Distribution Plan.The [SDP] submitted by the corporate landowner-applicant shall provide for the
distribution of an equal number of shares of the same class and value, with the same rights and features as all other
shares, to each of the qualified beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio
for purposes of compliance with Section 31 of R.A. No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the corporate landowner-
applicant may adopt additional stock distribution schemes taking into account factors such as rank, seniority, salary,
position and other circumstances which may be deemed desirable as a matter of sound company policy. (Emphasis
supplied.)
The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can acquire from
the corporation under the SDP. The first pertains, as earlier explained, to the mandatory minimum ratio of shares of
stock to be distributed to the FWBs in compliance with Sec. 31 of RA 6657. This minimum ratio contemplates of that
"proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities,
bears in relation to the companys total assets."
139
It is this set of shares of stock which, in line with Sec. 4 of DAO
10, is supposed to be allocated "for the distribution of an equal number of shares of stock of the same class and
value, with the same rights and features as all other shares, to each of the qualified beneficiaries."
On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning that this set
or category constitutes an augmentation share/s that the corporate landowner may give under an additional stock
distribution scheme, taking into account such variables as rank, seniority, salary, position and like factors which the
management, in the exercise of its sound discretion, may deem desirable.
140

Before anything else, it should be stressed that, at the time PARC approved HLIs SDP, HLI
recognized 6,296individuals as qualified FWBs. And under the 30-year stock distribution program envisaged under
the plan, FWBs who came in after 1989, new FWBs in fine, may be accommodated, as they appear to have in fact
been accommodated as evidenced by their receipt of HLI shares.
Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number of "man
days," HLI violated the afore-quoted rule on stock distribution and effectively deprived the FWBs of equal shares of
stock in the corporation, for, in net effect, these 6,296 qualified FWBs, who theoretically had given up their rights to
the land that could have been distributed to them, suffered a dilution of their due share entitlement. As has been
observed during the oral arguments, HLI has chosen to use the shares earmarked for farmworkers as reward
system chips to water down the shares of the original 6,296 FWBs.
141
Particularly:
Justice Abad: If the SDOA did not take place, the other thing that would have happened is that there would be
CARP?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Thats the only point I want to know x x x. Now, but they chose to enter SDOA instead of placing the
land under CARP. And for that reason those who would have gotten their shares of the land actually gave up their
rights to this land in place of the shares of the stock, is that correct?
Atty. Dela Merced: It would be that way, Your Honor.
Justice Abad: Right now, also the government, in a way, gave up its right to own the land because that way the
government takes own [sic] the land and distribute it to the farmers and pay for the land, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at that time that
numbered x x x those who signed five thousand four hundred ninety eight (5,498) beneficiaries, is that correct?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, 1990, 1991, 1992
and the rest of the years that you gave additional shares who were not in the original list of owners?
Atty. Dela Merced: Yes, Your Honor.
Justice Abad: Did those new workers give up any right that would have belong to them in 1989 when the land was
supposed to have been placed under CARP?
Atty. Dela Merced: If you are talking or referring (interrupted)
Justice Abad: None! You tell me. None. They gave up no rights to land?
Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.
Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they become workers later
on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original (interrupted)
Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, because the company
has chosen to use the shares as reward system for new workers who come in? It is not that the new workers, in
effect, become just workers of the corporation whose stockholders were already fixed. The TADECO who has
shares there about sixty six percent (66%) and the five thousand four hundred ninety eight (5,498) farmers at the
time of the SDOA? Explain to me. Why, why will you x x x what right or where did you get that right to use this
shares, to water down the shares of those who should have been benefited, and to use it as a reward system
decided by the company?
142

From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the
time of the approval of the SDP, suffered from watering down of shares. As determined earlier, each original FWB is
entitled to 18,804.32 HLI shares. The original FWBs got less than the guaranteed 18,804.32 HLI shares per
beneficiary, because the acquisition and distribution of the HLI shares were based on "man days" or "number of
days worked" by the FWB in a years time. As explained by HLI, a beneficiary needs to work for at least 37 days in a
fiscal year before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB, unfortunately, does
not get any share at year end. The number of HLI shares distributed varies depending on the number of days the
FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such
that, as indicated in the Compliance dated August 2, 2010 submitted by HLI to the Court, the total number of
farmworkers of HLI as of said date stood at 10,502. All these farmworkers, which include the original 6,296 FWBs,
were given shares out of the 118,931,976.85 HLI shares representing the 33.296% of the total outstanding capital
stock of HLI. Clearly, the minimum individual allocation of each original FWB of 18,804.32 shares was diluted as a
result of the use of "man days" and the hiring of additional farmworkers.
Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-
FWBs stock transfer is an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for
the implementation of the approved stock distribution plan within three (3) months from receipt by the corporate
landowner of the approval of the plan by PARC. In fact, based on the said provision, the transfer of the shares of
stock in the names of the qualified FWBs should be recorded in the stock and transfer books and must be submitted
to the SEC within sixty (60) days from implementation. As stated:
Section 11. Implementation/Monitoring of Plan.The approved stock distribution plan shall be implemented within
three (3) months from receipt by the corporate landowner-applicant of the approval thereof by the PARC, and the
transfer of the shares of stocks in the names of the qualified beneficiaries shall be recorded in stock and transfer
books and submitted to the Securities and Exchange Commission (SEC) within sixty (60) days from the said
implementation of the stock distribution plan. (Emphasis supplied.)
It is evident from the foregoing provision that the implementation, that is, the distribution of the shares of stock to the
FWBs, must be made within three (3) months from receipt by HLI of the approval of the stock distribution plan by
PARC. While neither of the clashing parties has made a compelling case of the thrust of this provision, the Court is
of the view and so holds that the intent is to compel the corporate landowner to complete, not merely initiate, the
transfer process of shares within that three-month timeframe. Reinforcing this conclusion is the 60-day stock
transfer recording (with the SEC) requirement reckoned from the implementation of the SDP.
To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month threshold.
Remove this timeline and the corporate landowner can veritably evade compliance with agrarian reform by simply
deferring to absurd limits the implementation of the stock distribution scheme.
The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under Sec. 26 of RA
6657, payment by beneficiaries of land distribution under CARP shall be made in thirty (30) annual amortizations. To
HLI, said section provides a justifying dimension to its 30-year stock distribution program.
HLIs reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision clearly
deals with land distribution.
SEC. 26. Payment by Beneficiaries.Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the
LBP in thirty (30) annual amortizations x x x.
Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other hand, in the
instant case, aside from the fact that what is involved is stock distribution, it is the corporate landowner who has the
obligation to distribute the shares of stock among the FWBs.
Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost of the land thus
awarded them to make it less cumbersome for them to pay the government. To be sure, the reason underpinning
the 30-year accommodation does not apply to corporate landowners in distributing shares of stock to the qualified
beneficiaries, as the shares may be issued in a much shorter period of time.
Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for violating DAO
10. It bears stressing that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and
regulations, substantive or procedural. Being a product of such rule-making power, DAO 10 has the force and effect
of law and must be duly complied with.
143
The PARC is, therefore, correct in revoking the SDP. Consequently, the
PARC Resolution No. 89-12-2 dated November 21, l989 approving the HLIs SDP is nullified and voided.
III.
We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the exclusion from the coverage of
the assailed PARC resolution those portions of the converted land within Hacienda Luisita which RCBC and LIPCO
acquired by purchase.
Both contend that they are innocent purchasers for value of portions of the converted farm land. Thus, their plea for
the exclusion of that portion from PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of
Coverage dated January 2, 2006, which called for mandatory CARP acquisition coverage of lands subject of the
SDP.
To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, HLI transferred the
300 hectares to Centennary, while ceding the remaining 200-hectare portion to LRC. Subsequently, LIPCO
purchased the entire three hundred (300) hectares of land from Centennary for the purpose of developing the land
into an industrial complex.
144
Accordingly, the TCT in Centennarys name was canceled and a new one issued in
LIPCOs name. Thereafter, said land was subdivided into two (2) more parcels of land. Later on, LIPCO transferred
about 184 hectares to RCBC by way of dacion en pago, by virtue of which TCTs in the name of RCBC were
subsequently issued.
Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner receiving a certificate of title
in pursuance of a decree of registration and every subsequent purchaser of registered land taking a certificate of
title for value and in good faith shall hold the same free from all encumbrances except those noted on the certificate
and enumerated therein."
145

It is settled doctrine that one who deals with property registered under the Torrens system need not go beyond the
four corners of, but can rely on what appears on, the title. He is charged with notice only of such burdens and claims
as are annotated on the title. This principle admits of certain exceptions, such as when the party has actual
knowledge of facts and circumstances that would impel a reasonably cautious man to make such inquiry, or when
the purchaser has knowledge of a defect or the lack of title in his vendor or of sufficient facts to induce a reasonably
prudent man to inquire into the status of the title of the property in litigation.
146
A higher level of care and diligence is
of course expected from banks, their business being impressed with public interest.
147

Millena v. Court of Appeals describes a purchaser in good faith in this wise:
x x x A purchaser in good faith is one who buys property of another, without notice that some other person has a
right to, or interest in, such property at the time of such purchase, or before he has notice of the claim or interest of
some other persons in the property. Good faith, or the lack of it, is in the final analysis a question of intention; but in
ascertaining the intention by which one is actuated on a given occasion, we are necessarily controlled by the
evidence as to the conduct and outward acts by which alone the inward motive may, with safety, be determined.
Truly, good faith is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind
which can only be judged by actual or fancied tokens or signs. Otherwise stated, good faith x x x refers to the state
of mind which is manifested by the acts of the individual concerned.
148
(Emphasis supplied.)
In fine, there are two (2) requirements before one may be considered a purchaser in good faith, namely: (1) that the
purchaser buys the property of another without notice that some other person has a right to or interest in such
property; and (2) that the purchaser pays a full and fair price for the property at the time of such purchase or before
he or she has notice of the claim of another.
It can rightfully be said that both LIPCO and RCBC arebased on the above requirements and with respect to the
adverted transactions of the converted land in questionpurchasers in good faith for value entitled to the benefits
arising from such status.
First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there was no notice of
any supposed defect in the title of its transferor, Centennary, or that any other person has a right to or interest in
such property. In fact, at the time LIPCO acquired said parcels of land, only the following annotations appeared on
the TCT in the name of Centennary: the Secretarys Certificate in favor of Teresita Lopa, the Secretarys Certificate
in favor of Shintaro Murai, and the conversion of the property from agricultural to industrial and residential use.
149

The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the following
general annotations appeared on the TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial
estate; the Secretarys Certificate in favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of
RCBC to guarantee the payment of PhP 300 million.
It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously covered by
the SDP. Good faith "consists in the possessors belief that the person from whom he received it was the owner of
the same and could convey his title. Good faith requires a well-founded belief that the person from whom title was
received was himself the owner of the land, with the right to convey it. There is good faith where there is an honest
intention to abstain from taking any unconscientious advantage from another."
150
It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by
means of a stock distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots
they acquired. However, they are of the honest belief that the subject lots were validly converted to commercial or
industrial purposes and for which said lots were taken out of the CARP coverage subject of PARC Resolution No.
89-12-2 and, hence, can be legally and validly acquired by them. After all, Sec. 65 of RA 6657 explicitly allows
conversion and disposition of agricultural lands previously covered by CARP land acquisition "after the lapse of five
(5) years from its award when the land ceases to be economically feasible and sound for agricultural purposes or
the locality has become urbanized and the land will have a greater economic value for residential, commercial or
industrial purposes." Moreover, DAR notified all the affected parties, more particularly the FWBs, and gave them the
opportunity to comment or oppose the proposed conversion. DAR, after going through the necessary processes,
granted the conversion of 500 hectares of Hacienda Luisita pursuant to its primary jurisdiction under Sec. 50 of RA
6657 to determine and adjudicate agrarian reform matters and its original exclusive jurisdiction over all matters
involving the implementation of agrarian reform. The DAR conversion order became final and executory after none
of the FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in question
on their honest and well-founded belief that the previous registered owners could legally sell and convey the lots
though these were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring
the subject lots.
And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably, LIPCO acquired
300 hectares of land from Centennary for the amount of PhP 750 million pursuant to a Deed of Sale dated July 30,
1998.
151
On the other hand, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions
of Hacienda Luisita in favor of RCBC by way of dacion en pago to pay for a loan of PhP 431,695,732.10.
As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot just be disregarded by
DAR, PARC or even by this Court. As held in Spouses Chua v. Soriano:
With the property in question having already passed to the hands of purchasers in good faith, it is now of no moment
that some irregularity attended the issuance of the SPA, consistent with our pronouncement in Heirs of Spouses
Benito Gavino and Juana Euste v. Court of Appeals, to wit:
x x x the general rule that the direct result of a previous void contract cannot be valid, is inapplicable in this case as
it will directly contravene the Torrens system of registration. Where innocent third persons, relying on the
correctness of the certificate of title thus issued, acquire rights over the property, the court cannot
disregard such rights and order the cancellation of the certificate. The effect of such outright cancellation will
be to impair public confidence in the certificate of title. The sanctity of the Torrens system must be preserved;
otherwise, everyone dealing with the property registered under the system will have to inquire in every instance as
to whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law.
Being purchasers in good faith, the Chuas already acquired valid title to the property. A purchaser in good
faith holds an indefeasible title to the property and he is entitled to the protection of the law.
152
x x x
(Emphasis supplied.)
To be sure, the practicalities of the situation have to a point influenced Our disposition on the fate of RCBC and
LIPCO. After all, the Court, to borrow from Association of Small Landowners in the Philippines, Inc.,
153
is not a
"cloistered institution removed" from the realities on the ground. To note, the approval and issuances of both the
national and local governments showing that certain portions of Hacienda Luisita have effectively ceased, legally
and physically, to be agricultural and, therefore, no longer CARPable are a matter of fact which cannot just be
ignored by the Court and the DAR. Among the approving/endorsing issuances:
154

(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of Tarlac favorably endorsing
the 300-hectare industrial estate project of LIPCO;
(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in accordance with the
Omnibus Investments Code of 1987;
(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, approving LIPCOs application for
a mixed ecozone and proclaiming the three hundred (300) hectares of the industrial land as a Special
Economic Zone;
(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac, approving the Final
Development Permit for the Luisita Industrial Park II Project;
(e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial Park II Project issued by
the Office of the Sangguniang Bayan of Tarlac;
155

(f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for the proposed project of
building an industrial complex on three hundred (300) hectares of industrial land;
156

(g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the HLURB on the project of
Luisita Industrial Park II with an area of three million (3,000,000) square meters;
157

(h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB authorizing the sale of lots in
the Luisita Industrial Park II;
(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels of Private Land in
Barangay San Miguel, Municipality of Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to
Republic Act No. 7916," designating the Luisita Industrial Park II consisting of three hundred hectares (300
has.) of industrial land as a Special Economic Zone; and
(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA, stating that pursuant to
Presidential Proclamation No. 1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been
registered as an Ecozone Developer/Operator of Luisita Industrial Park II located in San Miguel, Tarlac,
Tarlac.
While a mere reclassification of a covered agricultural land or its inclusion in an economic zone does not
automatically allow the corporate or individual landowner to change its use,
158
the reclassification process is a prima
facie indicium that the land has ceased to be economically feasible and sound for agricultural uses. And if only to
stress, DAR Conversion Order No. 030601074-764-(95) issued in 1996 by then DAR Secretary Garilao had
effectively converted 500 hectares of hacienda land from agricultural to industrial/commercial use and authorized
their disposition.
In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and LIPCO cannot
be considered at fault for believing that certain portions of Hacienda Luisita are industrial/commercial lands and are,
thus, outside the ambit of CARP. The PARC, and consequently DAR, gravely abused its discretion when it placed
LIPCOs and RCBCs property which once formed part of Hacienda Luisita under the CARP compulsory acquisition
scheme via the assailed Notice of Coverage.
As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX, this should also be
excluded from the compulsory agrarian reform coverage considering that the transfer was consistent with the
governments exercise of the power of eminent domain
159
and none of the parties actually questioned the transfer.
While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 2005-32-01 and
2006-34-01, the Court cannot close its eyes to certain "operative facts" that had occurred in the interim. Pertinently,
the "operative fact" doctrine realizes that, in declaring a law or executive action null and void, or, by extension, no
longer without force and effect, undue harshness and resulting unfairness must be avoided. This is as it should
realistically be, since rights might have accrued in favor of natural or juridical persons and obligations justly incurred
in the meantime.
160
The actual existence of a statute or executive act is, prior to such a determination, an operative
fact and may have consequences which cannot justly be ignored; the past cannot always be erased by a new
judicial declaration.
161

The oft-cited De Agbayani v. Philippine National Bank
162
discussed the effect to be given to a legislative or executive
act subsequently declared invalid:
x x x It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act
must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have
changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has
been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now
accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to
reflect awareness that precisely because the judiciary is the government organ which has the final say on whether
or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the
power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of
fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.
In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a
determination of [unconstitutionality], is an operative fact and may have consequences which cannot justly be
ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects,with respect to particular relations, individual and
corporate, and particular conduct, private and official." x x x
Given the above perspective and considering that more than two decades had passed since the PARCs approval of
the HLIs SDP, in conjunction with numerous activities performed in good faith by HLI, and the reliance by the FWBs
on the legality and validity of the PARC-approved SDP, perforce, certain rights of the parties, more particularly the
FWBs, have to be respected pursuant to the application in a general way of the operative fact doctrine.
A view, however, has been advanced that the operative fact doctrine is of minimal or altogether without relevance to
the instant case as it applies only in considering the effects of a declaration of unconstitutionality of a statute, and
not of a declaration of nullity of a contract. This is incorrect, for this view failed to consider is that it is NOT the SDOA
dated May 11, 1989 which was revoked in the instant case. Rather, it is PARCs approval of the HLIs Proposal for
Stock Distribution under CARP which embodied the SDP that was nullified.
A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the qualified FWBs executed
the SDOA. This agreement provided the basis and mechanics of the SDP that was subsequently proposed and
submitted to DAR for approval. It was only after its review that the PARC, through then Sec. Defensor-Santiago,
issued the assailed Resolution No. 89-12-2 approving the SDP. Considerably, it is not the SDOA which gave legal
force and effect to the stock distribution scheme but instead, it is the approval of the SDP under the PARC
Resolution No. 89-12-2 that gave it its validity.
The above conclusion is bolstered by the fact that in Sec. Pangandamans recommendation to the PARC Excom,
what he proposed is the recall/revocation of PARC Resolution No. 89-12-2 approving HLIs SDP, and not the
revocation of the SDOA. Sec. Pangandamans recommendation was favorably endorsed by the PARC Validation
Committee to the PARC Excom, and these recommendations were referred to in the assailed Resolution No. 2005-
32-01. Clearly, it is not the SDOA which was made the basis for the implementation of the stock distribution scheme.
That the operative fact doctrine squarely applies to executive actsin this case, the approval by PARC of the HLI
proposal for stock distributionis well-settled in our jurisprudence. In Chavez v. National Housing Authority,
163
We
held:
Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable
doctrine which could not be used to countenance an inequitable result that is contrary to its proper office.
On the other hand, the petitioner Solicitor General argues that the existence of the various agreements
implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v.
People of the Philippines.
The argument of the Solicitor General is meritorious.
The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative
or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with,
thus:
x x x x x x x x x
This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled
that:
Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to do so,
much less retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not
filing the leave application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers
legitimacy upon past acts or omissions done in reliance thereof. Consequently, the existence of a statute or
executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. It
would indeed be ghastly unfair to prevent private respondent from relying upon the order of suspension in lieu of a
formal leave application. (Citations omitted; Emphasis supplied.)
The applicability of the operative fact doctrine to executive acts was further explicated by this Court in Rieta v.
People,
164
thus:
Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid, as the
law upon which it was predicated General Order No. 60, issued by then President Ferdinand E. Marcos was
subsequently declared by the Court, in Taada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any
evidence obtained pursuant thereto is inadmissible in evidence.
We do not agree. In Taada, the Court addressed the possible effects of its declaration of the invalidity of various
presidential issuances. Discussing therein how such a declaration might affect acts done on a presumption of their
validity, the Court said:
". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot
County Drainage District vs. Baxter Bank to wit:
The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional,
was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for
the challenged decree. . . . It is quite clear, however, that such broad statements as to the effect of a determination
of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination
of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot
always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be
considered in various aspects with respect to particular conduct, private and official. Questions of rights claimed
to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of
public policy in the light of the nature both of the statute and of its previous application, demand examination. These
questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it
is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity
cannot be justified.
x x x x x x x x x
"Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is
an operative fact which may have consequences which cannot be justly ignored. The past cannot always be erased
by a new judicial declaration . . . that an all-inclusive statement of a principle of absolute retroactive invalidity cannot
be justified."
The Chicot doctrine cited in Taada advocates that, prior to the nullification of a statute, there is an imperative
necessity of taking into account its actual existence as an operative fact negating the acceptance of "a principle of
absolute retroactive invalidity." Whatever was done while the legislative or the executive act was in operation should
be duly recognized and presumed to be valid in all respects. The ASSO that was issued in 1979 under General
Order No. 60 long before our Decision in Taada and the arrest of petitioner is an operative fact that can no
longer be disturbed or simply ignored. (Citations omitted; Emphasis supplied.)
To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls the SDP, what it
actually revoked or recalled was the PARCs approval of the SDP embodied in Resolution No. 89-12-2.
Consequently, what was actually declared null and void was an executive act, PARC Resolution No. 89-12-2,
165
and
not a contract (SDOA). It is, therefore, wrong to say that it was the SDOA which was annulled in the instant case.
Evidently, the operative fact doctrine is applicable.
IV.
While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the revocation must,
by application of the operative fact principle, give way to the right of the original 6,296 qualified FWBs to choose
whether they want to remain as HLI stockholders or not. The Court cannot turn a blind eye to the fact that in 1989,
93% of the FWBs agreed to the SDOA (or the MOA), which became the basis of the SDP approved by PARC per its
Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005, the FWBs were said to have received from
HLI salaries and cash benefits, hospital and medical benefits, 240-square meter homelots, 3% of the gross produce
from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare
lot sold to SCTEX. HLI shares totaling 118,391,976.85 were distributed as of April 22, 2005.
166
On August 6, 20l0,
HLI and private respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of
acquiring a piece of agricultural land or remain as HLI stockholders, and as a matter of fact, most FWBs indicated
their choice of remaining as stockholders. These facts and circumstances tend to indicate that some, if not all, of the
FWBs may actually desire to continue as HLI shareholders. A matter best left to their own discretion.
With respect to the other FWBs who were not listed as qualified beneficiaries as of November 21, 1989 when the
SDP was approved, they are not accorded the right to acquire land but shall, however, continue as HLI
stockholders. All the benefits and homelots
167
received by the 10,502 FWBs (6,296 original FWBs and 4,206 non-
qualified FWBs) listed as HLI stockholders as of August 2, 2010 shall be respected with no obligation to refund or
return them since the benefits (except the homelots) were received by the FWBs as farmhands in the agricultural
enterprise of HLI and other fringe benefits were granted to them pursuant to the existing collective bargaining
agreement with Tadeco. If the number of HLI shares in the names of the original FWBs who opt to remain as HLI
stockholders falls below the guaranteed allocation of 18,804.32 HLI shares per FWB, the HLI shall assign additional
shares to said FWBs to complete said minimum number of shares at no cost to said FWBs.
With regard to the homelots already awarded or earmarked, the FWBs are not obliged to return the same to HLI or
pay for its value since this is a benefit granted under the SDP. The homelots do not form part of the 4,915.75
hectares covered by the SDP but were taken from the 120.9234 hectare residential lot owned by Tadeco. Those
who did not receive the homelots as of the revocation of the SDP on December 22, 2005 when PARC Resolution
No. 2005-32-01 was issued, will no longer be entitled to homelots. Thus, in the determination of the ultimate
agricultural land that will be subjected to land distribution, the aggregate area of the homelots will no longer be
deducted.
There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14, 1996
Conversion Order and the 80.51-hectare SCTEX lot came after compulsory coverage has taken place, the FWBs
should have their corresponding share of the lands value. There is merit in the claim. Since the SDP approved by
PARC Resolution No. 89-12-2 has been nullified, then all the lands subject of the SDP will automatically be subject
of compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the 500-hectare lot subject of the
August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the government from the area
covered by SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs for the price received for said
lots. HLI shall be liable for the value received for the sale of the 200-hectare land to LRC in the amount of PhP
500,000,000 and the equivalent value of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot
sold to LIPCO for the consideration of PhP 750,000,000. Likewise, HLI shall be liable for PhP 80,511,500 as
consideration for the sale of the 80.51-hectare SCTEX lot.
We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and 80.51-
hectare SCTEX lot to the FWBs. We also take into account the payment of taxes and expenses relating to the
transfer of the land and HLIs statement that most, if not all, of the proceeds were used for legitimate corporate
purposes. In order to determine once and for all whether or not all the proceeds were properly utilized by HLI and its
subsidiary, Centennary, DAR will engage the services of a reputable accounting firm to be approved by the parties
to audit the books of HLI to determine if the proceeds of the sale of the 500-hectare land and the 80.51-hectare
SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in compliance with the August
14, 1996 Conversion Order. The cost of the audit will be shouldered by HLI. If after such audit, it is determined that
there remains a balance from the proceeds of the sale, then the balance shall be distributed to the qualified FWBs.
A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from 1989. We disagree. It
should not be forgotten that the FWBs are also stockholders of HLI, and the benefits acquired by the corporation
from its possession and use of the land ultimately redounded to the FWBs benefit based on its business operations
in the form of salaries, and other fringe benefits under the CBA. To still require HLI to pay rent to the FWBs will
result in double compensation.
For sure, HLI will still exist as a corporation even after the revocation of the SDP although it will no longer be
operating under the SDP, but pursuant to the Corporation Code as a private stock corporation. The non-agricultural
assets amounting to PhP 393,924,220 shall remain with HLI, while the agricultural lands valued at PhP 196,630,000
with an original area of 4,915.75 hectares shall be turned over to DAR for distribution to the FWBs. To be deducted
from said area are the 500-hectare lot subject of the August 14, 1996 Conversion Order, the 80.51-hectare SCTEX
lot, and the total area of 6,886.5 square meters of individual lots that should have been distributed to FWBs by DAR
had they not opted to stay in HLI.
HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for land
distribution to the FWBs. We find that the date of the "taking" is November 21, 1989, when PARC approved HLIs
SDP per PARC Resolution No. 89-12-2. DAR shall coordinate with LBP for the determination of just compensation.
We cannot use May 11, 1989 when the SDOA was executed, since it was the SDP, not the SDOA, that was
approved by PARC.
The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of the case.
WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated December 22, 2005 and
Resolution No. 2006-34-01 dated May 3, 2006, placing the lands subject of HLIs SDP under compulsory coverage
on mandated land acquisition scheme of the CARP, are hereby AFFIRMED with the MODIFICATION that the
original 6,296 qualified FWBs shall have the option to remain as stockholders of HLI. DAR shall immediately
schedule meetings with the said 6,296 FWBs and explain to them the effects, consequences and legal or practical
implications of their choice, after which the FWBs will be asked to manifest, in secret voting, their choices in the
ballot, signing their signatures or placing their thumbmarks, as the case may be, over their printed names.
Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to 18,804.32 HLI shares,
and, in case the HLI shares already given to him or her is less than 18,804.32 shares, the HLI is ordered to issue or
distribute additional shares to complete said prescribed number of shares at no cost to the FWB within thirty (30)
days from finality of this Decision. Other FWBs who do not belong to the original 6,296 qualified beneficiaries are not
entitled to land distribution and shall remain as HLI shareholders. All salaries, benefits, 3% production share and 3%
share in the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare SCTEX lot and homelots
already received by the 10,502 FWBs, composed of 6,296 original FWBs and 4,206 non-qualified FWBs, shall be
respected with no obligation to refund or return them.
Within thirty (30) days after determining who from among the original FWBs will stay as stockholders, DAR shall
segregate from the HLI agricultural land with an area of 4,915.75 hectares subject of PARCs SDP-approving
Resolution No. 89-12-2 the following: (a) the 500-hectare lot subject of the August 14, l996 Conversion Order; (b)
the 80.51-hectare lot sold to, or acquired by, the government as part of the SCTEX complex; and (c) the aggregate
area of 6,886.5 square meters of individual lots that each FWB is entitled to under the CARP had he or she not
opted to stay in HLI as a stockholder. After the segregation process, as indicated, is done, the remaining area shall
be turned over to DAR for immediate land distribution to the original qualified FWBs who opted not to remain as HLI
stockholders.
The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs who stayed with the
corporation shall form part of the HLI assets.
HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 received by it from Luisita Realty, Inc.
for the sale to the latter of 200 hectares out of the 500 hectares covered by the August 14, 1996 Conversion Order,
the consideration of PhP 750,000,000 received by its owned subsidiary, Centennary Holdings, Inc. for the sale of
the remaining 300 hectares of the aforementioned 500-hectare lot to Luisita Industrial Park Corporation, and the
price of PhP 80,511,500 paid by the government through the Bases Conversion Development Authority for the sale
of the 80.51-hectare lot used for the construction of the SCTEX road network. From the total amount of PhP
1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted
the 3% of the total gross sales from the production of the agricultural land and the 3% of the proceeds of said
transfers that were paid to the FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and
the expenditures incurred by HLI and Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose,
DAR is ordered to engage the services of a reputable accounting firm approved by the parties to audit the books of
HLI and Centennary Holdings, Inc. to determine if the PhP 1,330,511,500 proceeds of the sale of the three (3)
aforementioned lots were used or spent for legitimate corporate purposes. Any unspent or unused balance as
determined by the audit shall be distributed to the 6,296 original FWBs.
HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from
November 21, 1989 per PARC Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation
due to HLI.
DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also submit, after
submission of the compliance report, quarterly reports on the execution of this judgment to be submitted within the
first 15 days at the end of each quarter, until fully implemented.
The temporary restraining order is lifted.
SO ORDERED.
PRESBITERO J. VELASCO, JR.
Associate Justice
WE CONCUR:
RENATO C. CORONA
Chief Justice
ANTONIO T. CARPIO
Associate Justice
TERESITA J. LEONARDO-DE CASTRO
Associate Justice
ARTURO D. BRION
Associate Justice
(On official leave)
DIOSDADO M. PERALTA
*

Associate Justice
LUCAS P. BERSAMIN
Associate Justice
MARIANO C. DEL CASTILLO
Associate Justice
ROBERTO A. ABAD
Associate Justice
MARTIN S. VILLARAMA, JR.
Associate Justice
JOSE PORTUGAL PEREZ
Associate Justice
JOSE CATRAL MENDOZA
Associate Justice
MARIA LOURDES P. A. SERENO
Associate Justice
C E R T I F I C A T I O NPursuant to Section 13, Article VIII of the Constitution, it is hereby certified that the
conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of
the opinion of the Court.
RENATO C. CORONA
Chief Justice

SECOND DIVISION

KNECHT, INCORPORATED, as G.R. No. 145254
trustee for the stockholders and
creditors of ROSE PACKING
CO., INC.,
Petitioner, Present:

PUNO, J., Chairperson,
SANDOVAL-GUTIERREZ,
- v e r s u s - CORONA,
AZCUNA and
GARCIA, JJ.

MUNICIPALITY OF CAINTA and
ENCARNACION GONZALES-WONG,
Respondents. Promulgated:

July 20, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x

D E C I S I O N
CORONA, J.:


This petition for review on certiorari seeks the reversal of the September
27, 2000 decision
[1]
of the Court of Appeals (CA) in CA-G.R. SP No. 48440, a
petition for annulment of judgment.

The decision in CA-G.R. SP No. 48440 affirmed various orders of
different trial courts in three separate and distinct proceedings, namely:
(1) March 24, 1994 order of RTC-Pasig City, Branch 151 (formerly,
CFI-Rizal, Branch I) inCivil Case No. 9165 (a case for specific
performance and damages) authorizing the issuance of an alias writ
of execution in favor of UCC;

(2) June 16, 1992 order of RTC-Antipolo, Branch 73 in Civil Case
No. 90-1817 (an expropriation case) directing the Municipality of
Cainta to deposit 10% of the provisional value of the property;

(3) June 22, 1992 orders of RTC-Antipolo, Branch 73 in Civil Case
No. 90-1817 declaring that the Municipality of Cainta had the lawful
right to expropriate the property and also granting the
municipalitys motion for a writ of possession;

(4) June 26, 1992 order of RTC-Antipolo, Branch 73 in Civil Case
No. 90-1817 excluding Rose Packing (petitioners predecessor-in-
interest) as party-defendant in the expropriation proceedings;


(5) February 21, 1994 order of RTC-Antipolo, Branch 73 in Civil
Case No. 90-1817 denying Rose Packings motion for
reconsideration of the order of its exclusion; and

(6) April 24, 1997 order of RTC of RTC-Antipolo, Branch 73 in LRC
Case No. 96-1743dismissing petitioners petition for cancellation of
encumbrances annotated on TCT No. 613113 in its name.

The facts and issues of each case are summarized below.
CIVIL CASE NO. 9165


In 1965, Rose Packing Co., Inc. (Rose Packing) sold three parcels of land
situated in Sto. Domingo, Cainta, Rizal to United Cigarette Corporation (UCC).
The largest parcel was covered by Transfer Certificate of Title (TCT) No. 73620
while the two other parcels were unregistered. TCT No. 73620 was mortgaged
to the Philippine Commercial and Industrial Bank (PCIB).
[2]


When Rose Packing, however, refused to comply with its commitments
under the contract, UCC filed a suit for specific performance and damages
against it and its president, Rene Knecht, in the then Court of First Instance
(CFI) of Rizal, Branch I. It was docketed as Civil Case No. 9165.

On July 15, 1969, the trial court decided in favor of UCC.
[3]
The CFI
decision was upheld on appeal by the CA and subsequently by this
Court.
[4]
Entry of judgment was accordingly made on March 23, 1977.

The judgment in favor of UCC, however, could not be immediately
implemented because PCIB, during the pendency of Civil Case No. 9165,
foreclosed on the mortgage on the lot covered by TCT No. 73620. Rose Packing
tried to stop the foreclosure by filing a separate case but the trial
court
[5]
denied its prayer for temporary restraining order (TRO) or preliminary
injunction. PCIB subsequently purchased the lot in the foreclosure sale,
consolidated its title over the property and had it registered in its name. TCT
No. 73620 was thus cancelled and TCT No. 286176 was issued in PCIBs
name.

Rose Packing questioned the validity of the foreclosure in the CA
[6]
but
the CA ruled in favor of PCIB. When the case was elevated to this Court,
however, we invalidated
[7]
the foreclosure, in effect reverting the title to Rose
Packing.

Interpreting our decision as removing the impediment to the execution of
judgment in Civil Case No. 9165, UCC, through its liquidator Alberto
Wong,
[8]
moved for the execution of the 1969 decision in that case.

On March 24, 1994, the Regional Trial Court (RTC) of Pasig City, Branch
151 (formerly, CFI-Rizal, Branch I),
[9]
ordered the issuance of an alias writ of
execution in favor of UCC.
[10]


The March 24, 1994 order was among those questioned in and affirmed
by the CA in its September 27, 2000 decision on petitioners suit for
annulment of judgment (CA-G.R. SP No. 48440). The CA decision in turn is
now under our review.


CIVIL CASE NO. 90-1817


In the meantime, on June 22, 1990, the Municipality of Cainta filed a
complaint for expropriation against PCIB and Rose Packing in the RTC of
Antipolo, Rizal, Branch 73.
[11]
It was docketed as Civil Case No. 90-1817.

In its complaint, the Municipality of Cainta alleged that Rose Packing
owned a parcel of land in Brgy. Sto. Domingo, Cainta, Rizal which was
foreclosed by PCIB in whose name it was then registered under TCT No.
286176.

The expropriation complaint was based on Sangguniang Bayan (SB)
Resolution No. 89-020 which sought to purchase the land as the site of the
municipal administration compound and SB Resolution No. 89-021 which
called for the condemnation of said land if the negotiation for its voluntary
sale failed. The negotiation did fail, hence, the complaint for expropriation.
[12]


On November 29, 1990, Rose Packing moved to dismiss the complaint for
failure to state a cause of action. Subsequently, Rose Packing filed a
supplemental motion to dismiss alleging that it never received a formal offer to
purchase from the municipality. It also averred that it could no longer be sued
in view of its dissolution in 1986.
[13]
It added that the property sought to be
expropriated was under litigation and its expropriation would only complicate
matters.

Meanwhile, Alberto Wong,
[14]
as liquidator of UCC, filed a motion for leave
to intervene in Civil Case No. 90-1817 (the expropriation case), alleging UCCs
legal interest in the property
[15]
as the prevailing party in the 1969 decision in
Civil Case No. 9165. This was granted by the RTC-Antipolo.

On September 27, 1991, the RTC-Antipolo denied Rose Packings motion
to dismiss the expropriation case.

On June 16, 1992, the trial court issued an order directing the
Municipality of Cainta to deposit 10% of the provisional value of the
property.
[16]


On June 22, 1992, the RTC-Antipolo issued a condemnation order
declaring that the Municipality of Cainta had the lawful right to expropriate
the property. On the same date, the trial court issued another order granting
the municipalitys motion for a writ of possession.
[17]


UCC/Wong subsequently filed a motion to exclude Rose Packing as
party-defendant in the expropriation proceedings on the ground that any
interest of Rose Packing in the property had already passed onto UCC.
[18]
On
June 26, 1992, the trial court granted the motion and ordered the exclusion of
Rose Packing.

Rose Packing sought reconsideration of the June 26, 1992 order,
claiming that UCC had also been dissolved since 1973 but this was denied by
the trial court in an order dated February 21, 1994. Petitioner Knecht, Inc. (as
successor-in-interest of Rose Packing and trustee of Rose Packings
stockholders and creditors) filed a petition for certiorari and prohibition with
TRO in the CA
[19]
to annul and restrain the enforcement of the orders of RTC-
Antipolo dated June 16, 1992 (to deposit 10% of the provisional value of the
property), June 22, 1992 (to issue the writ of possession), June 26, 1992 (to
exclude Rose Packing as party-defendant in the expropriation proceedings)
and February 21, 1994 (to deny reconsideration of the order of exclusion of
Rose Packing). On October 25, 1994, the CA dismissed the petition.

This setback failed to discourage petitioner, however, because it initiated
another case in the CA, this time styled as a petition for annulment of
judgment (CA-G.R. SP No. 48440) but questioning in reality the same (four)
orders of RTC-Antipolo (dated June 16, 1992, June 22, 1992, June 26, 1992
and February 21, 1994) in Civil Case No. 90-1817 (the expropriation case).
The CA once more upheld these orders in the September 27, 2000 decision
under our review.


LRC CASE NO. 96-1743


The condemnation order in favor of the Municipality of Cainta dated
June 22, 1992 was annotated in TCT No. 613113 (formerly TCT No. 73620
then TCT No. 286176) in the name of petitioner Knecht, Inc.
[20]
The September
27, 1991 order (denying Rose Packings motion to dismiss the expropriation
case) was also annotated later on.
Petitioner, unwilling to accept the legal adversities building up against it,
filed a petition for cancellation of all these encumbrances in its title. The
petition was raffled to RTC-Antipolo, Branch 73 and docketed as LRC Case No.
96-1743.

On April 24, 1997, the petition was dismissed for lack of
merit.
[21]
Petitioner appealed the dismissal to this Court on a pure question of
law via a petition for review on certiorari.
[22]
This Court dismissed it on July
23, 1997 and thereafter denied reconsideration with finality.

Petitioner stubbornly refused to accept the Supreme Court decision,
however. This time, it went to the CA and again questioned the same April 24,
1997 order of RTC-Antipolo, Branch 73 (LRC Case No. 96-1743) in the same
petition for annulment of judgment docketed as CA-G.R. SP No. 48440. The
CA affirmed the April 24, 1997 order.

In sum, the CA upheld all the assailed orders of RTC-Pasig City in Civil
Case No. 9165 and RTC-Antipolo in Civil Case No. 90-1817 and LRC Case No.
96-1743. In so doing, the CA also upheld the jurisdiction of the
aforementioned trial courts over the cited cases.

Now petitioner is back before us again questioning the jurisdiction of
RTC-Pasig City to issue the assailed order in Civil Case No. 9165 and RTC-
Antipolo to issue the assailed orders in Civil Case No. 90-1817 and LRC Case
No. 96-1743. Petitioner prays for the annulment of the orders of these courts.

We deny the petition.

The present petition, like all the others previously filed by petitioner and
its predecessor-in-interest (Rose Packing) before this Court, is intended to
achieve only one thing: to frustrate the execution of the July 15, 1969 decision
(as directed in the March 24, 1994 order of RTC-Pasig City) of the then CFI-
Pasig in Civil Case No. 9165 awarding the property covered by TCT Nos.
73620/286176/613113 to UCC.

As a consequence of the legal maneuvers against the implementation of
that decision, even the orders of RTC-Antipolo (in Civil Case No. 90-1817 and
LRC Case No. 96-1743), being ultimately rooted in the 1969 decision, became
ineffective. But the 1969 decision has long become final and executory. In fact,
entry of judgment was made more than 29 years ago, on March 23, 1977.

As in all its previous cases,
[23]
petitioners main argument rests on the
very weak premise that a dissolved corporation is, in all respects, a dead
entity. UCCs dissolution in 1973 allegedly divested RTC-Pasig City of the
jurisdiction to enforce its July 15, 1969 judgment in Civil Case No. 9165
(through the March 24, 1994 order for the issuance of an alias writ of
execution); hence, RTC-Antipolos subsequent, related orders (dated June 16,
1992, June 22, 1992, June 26, 1992 and February 21, 1994 in Civil Case No.
90-1817, and dated April 24, 1997 in LRC Case No. 96-1743) in favor of the
dissolved UCC were also supposedly void. But this issue was already
addressed and settled completely in Knecht and Knecht, Inc. v. United Cigarette
Corporation.
[24]


There is no doubt that the judgment in Civil Case No. 9165 became final
and executory on March 23, 1977. That this judgment is still enforceable was
decided with finality by this Court in G.R. No. 109385.
In Reburiano vs. Court of Appeals, a case with similar facts, this Court
held:
[T]he trustee (of a dissolved corporation) may commence a suit
which can proceed to final judgment even beyond the three-year
period (of liquidation) x x x, no reason can be conceived why
a suit already commenced by the corporation itself during its
existence, not by a mere trustee who, by fiction, merely continues
the legal personality of the dissolved corporation, should not be
accorded similar treatment to proceed to final judgment
and execution thereof.
Indeed, the rights of a corporation (dissolved pending litigation) are
accorded protection by law. This is clear from Section 145 of the Corporation
Code, thus:
Section 145. Amendment or repeal. No right or remedy in
favor of or against any corporation, its stockholders, members,
directors, trustees, or officers, nor any liability incurred by any
such corporation, stockholders, members, directors, trustees, or
officers, shall be removed or impaired either by the
subsequent dissolution of said corporation or by any
subsequent amendment or repeal of this Code or of any part
thereof.
The dissolution of UCC itself, or the expiration of its three-year
liquidation period, should not be a bar to the enforcement of its rights as a
corporation. One of these rights, to be sure, includes the UCCs right to seek
from the court the execution of a valid and final judgment in Civil Case No.
9165 through its trustee/liquidator Encarnacion Gonzales Wong for the
benefit of its stockholders, creditors and any other person who may have legal
claims against it. To hold otherwise would be to allow petitioners to unjustly
enrich themselves at the expense of UCC. This, in effect, renders nugatory all
the efforts and expenses of UCC in its quest to secure justice, not to mention
the undue delay in disposing of this case prejudicial to the administration of
justice.
[25]



If only for this, the entire petition loses its bearings. Annulment of
judgment may be restored to only on two grounds: lack of jurisdiction and
extrinsic fraud.
[26]
Neither was present here. We therefore hold that RTC-Pasig
City and RTC-Antipolo had the competence and jurisdiction to issue the
assailed orders since the dissolution of UCC did not deprive them of the
authority to take cognizance of Civil Case No. 9165, Civil Case No. 90-1817
and LRC Case No. 96-1743. Thus, the CA could not have annulled the orders
of the trial courts on the ground of lack of jurisdiction.

The orders could not be annulled based on extrinsic fraud either.
Extrinsic or collateral fraud means fraud which prevents the aggrieved party
from having a trial or presenting his case to the court, or was used to procure
the judgment without fair submission of the controversy.
[27]
This refers to acts
intended to keep the unsuccessful party away from the courts as when there
is a false promise of compromise or when one is kept in ignorance of the
suit.
[28]


Certainly, judging from the nauseating number of petitions filed by Rose
Packing and/or petitioner in the RTC, the CA and this Court, it is clear that
they were never prevented from ventilating or defending their case nor was
judgment rendered against them without a fair and complete consideration of
the issues.


PROVISIONAL DEPOSIT OF 10%
IN CIVIL CASE NO. 90-1817


We, however, have to correct the erroneous reliance of RTC-Antipolo
on Presidential Decree (PD) 1533
[29]
in the expropriation case of the
Municipality of Cainta. Its order dated June 16, 1992 in Civil Case No. 90-
1817 mandated the deposit of 10% of the assessed value of the property.
[30]

In Export Processing Zone Authority v. Dulay,
[31]
a 1987 case, we struck
down PD 1533 as unconstitutional. Moreover, the exercise of the power of
eminent domain by a local government unit is now governed by Section 19
of Republic Act 7160.
[32]
For properties under expropriation, the law now
requires the deposit of an amount equivalent to fifteen percent (15%) of the
fair market value of the property based on its current tax declaration.
[33]



FINAL DISPOSITION

In conclusion, we once and for all declare that UCC ought to reap the
fruits of the 1969 decision in its favor. Its interest in the property sought to
be expropriated having been clearly established, UCC is adjudged the
proper party-defendant in Civil Case No. 90-1817 (the expropriation case).
Knecht, Inc./Rose Packing was correctly excluded from the case since its
interest in the subject property had already passed onto UCC.

UCCs interest likewise prevails over that of PCIB since PCIBs
foreclosure sale of the same property was already invalidated with finality
by this Court.
[34]


PETITIONERS PROPENSITY TO
TRIFLE WITH COURT PROCESSES


This Court is not unmindful of petitioners dilatory tactics, spanning
almost three decades, against the execution of the 1969 decision in Civil
Case No. 9165 and the subsequent related orders in Civil Case No. 90-1817
and LRC Case No. 96-1743. Its clever schemes to delay the implementation
of a final and executory decision manifest its utter disregard and disrespect
for our justice system.

Petitioner is strongly reminded, as this Court admonished it in Knecht
and Knecht, Inc. v. United Cigarette Corporation,
[35]
that:

Every litigation must come to an end. While a litigants right to initiate an
action in court is fully respected, however, once his case has been
adjudicated by a competent court in a valid final judgment, he should not be
permitted to initiate similar suits hoping to secure a favorable ruling, for this
will result to endless litigations detrimental to the administration of justice, as
in this case.

In that case, petitioner was already assessed treble costs. In filing this
petition and once again resurrecting an issue which has long been settled with
finality, petitioner is trifling dangerously with court processes. Petitioner
and/or counsel is warned one final time of the dire consequences of ignoring
this reminder.

WHEREFORE, the petition is hereby DENIED.

Treble costs anew against petitioner.

SO ORDERED.


RENATO C. CORONA
Associate Justice


















Republic of the Philippines
SUPREME COURT
Manila
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, Petitioners,
vs.
THE MUNICIPALITY OF PANAY (CAPIZ), represented by its Mayor, VICENTE B. BERMEJO, Respondent.
D E C I S I O N
AUSTRIA-MARTINEZ, J .:
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

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.
9
Petitioners filed a "Motion to Hold in Abeyance the Hearing of the
Court Appointed Commissioners to Determine Just Compensation and for Clarification of the Courts 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".
14
Petitioners 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
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 RESPONDENTS 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," respondents 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 respondents 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.
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 principals 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 landowners 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.
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:
x x x A municipal ordinance is different from a resolution. An ordinance is a law, but a resolution is merely a
declaration of the sentiment or opinion of a lawmaking body on a specific matter. An ordinance possesses a general
and permanent character, but a resolution is temporary in nature. Additionally, the two are enacted differently -- a
third reading is necessary for an ordinance, but not for a resolution, unless decided otherwise by a majority of all
the Sanggunian members.
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. x x x
33

As respondents 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 LGUs 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.
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
isREVERSED and SET ASIDE.The Complaint in Civil Action No. V-6958 is DISMISSED without prejudice.
No costs.
SO ORDERED.
MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice








THIRD DIVISION


CITY OF MANILA, G.R. No. 187604
Petitioner,
Present:

BERSAMIN, J.,
*

- versus - ABAD, Acting Chairperson,
VILLARAMA, JR.,
**

SERENO,
***
and
PERLAS-BERNABE, JJ.
ALEGAR CORPORATION, TEROCEL
REALTY CORPORATION, and Promulgated:
FILOMENA VDA. DE LEGARDA,
Respondents. June 25, 2012

x --------------------------------------------------------------------------------------- x


DECISION

ABAD, J.:


This case is about the issues that a local government unit has to cope with when
expropriating private property for socialized housing.

The Facts and the Case

On March 1, 2001 the City Council of Manila passed Ordinance 8012 that authorized the
City Mayor to acquire certain lots
[1]
belonging to respondents Alegar Corporation, Terocel
Realty Corporation, and Filomena Vda. De Legarda, for use in the socialized housing project
of petitioner City of Manila. The City offered to buy the lots at P1,500.00 per square meter (sq
m) but the owners rejected this as too low with the result that on December 2, 2003 the City
filed a complaint for expropriation against them before the Regional Trial Court (RTC)
of Manila.
[2]


The City alleged in its complaint that it wanted to acquire the lots for its land-for-the-
landless and on-site development programs involving the residents occupying them.
[3]
The
City offered to acquire the lots for P1,500.00 per sq m
[4]
but the owners rejected the
offer. The total aggregate value of the lots for taxation purpose was P809,280.00 but the City
deposited P1,500,000.00 with the Land Bank of the Philippines to enable it to immediately
occupy the same pending hearing of the case.

Both Alegar and Terocel questioned the legitimacy of the Citys taking of their lots solely
for the benefit of a few long-time occupants. Alegar also pointed out that, while it declined
the Citys initial offer, it did not foreclose the possibility of selling the lots for the right
price.
[5]
The filing of the suit was premature because the City made no effort in good faith to
negotiate the purchase.

Meantime, on June 9, 2004 the trial court issued a writ of possession in the Citys
favor. On December 19, 2006, upon the joint motion of the parties, the RTC released
the P1,500,000.00 deposit to the defendant owners.

On October 15, 2007 the parties agreed to forego with the pre-trial, opting instead to
simultaneously submit their memoranda on the issue of whether or not there is necessity for
the City to expropriate the subject properties for public use. The owners of the lots submitted
their memorandum but the City did not.

On February 12, 2008 the RTC dismissed the complaint on the ground that the City did
not comply with Section 9 of Republic Act (R.A.) 7279
[6]
which set the order of priority in the
acquisition of properties for socialized housing. Private properties ranked last in the order of
priorities for such acquisition and the City failed to show that no other properties were
available for the project. The City also failed to comply with Section 10 which authorized
expropriation only when resort to other modes (such as community mortgage, land swapping,
and negotiated purchase) had been exhausted.

The trial court pointed out that the City also failed to show that it exhausted all
reasonable efforts to acquire the lots through a negotiated sale. Article 35 of the Rules and
Regulations Implementing the Local Government Code provides that when property owners
are willing to sell but for a higher price than that offered, the local chief executive must confer
with them for the possibility of coming to an agreement on the price. Here, after the owners
refused to sell the lots for P1,500.00 per sq m offer, the City did not exert any effort to
renegotiate or revise its offer. The RTC also ruled that the City submitted the issue of genuine
necessity to acquire the properties for public purpose or benefit without presenting evidence
on the same.

The City moved for the reconsideration of the order of dismissal but before the RTC
could act on it, the City appealed the case to the Court of Appeals (CA).
[7]


On February 27, 2009
[8]
the CA affirmed the RTCs dismissal of the Citys action, mainly
for the reason that the City failed to comply with the requirements of Sections 9 and 10 of R.A.
7279 which ranked privately-owned lands last in the order of priority in acquiring lots for
socialized housing and which preferred modes other than expropriation for acquiring
them. The CA rejected the Citys claim that the RTC denied it its right to due process, given
that the City agreed to forego with pre-trial and to just submit a memorandum on the
threshold issues raised by the owners answer regarding the propriety of expropriation.
[9]
The
City simply did not submit a memorandum. Although it moved for the reconsideration of the
order of dismissal, the City filed a notice of appeal before the RTC could resolve the motion.

The Issues

The petition raises the following issues:

1. Whether or not the CA erred in failing to rule that the RTC denied the City its right
to due process when it dismissed the case without hearing the Citys side;

2. Whether or not the CA erred in affirming the RTCs ruling that the City failed to
comply with the requirements of Sections 9 and 10 of R.A. 7279 in trying to acquire the subject
lots by expropriation;

3. Whether or not the CA erred in failing to set aside the RTCs ruling that the City
failed to establish the existence of genuine necessity in expropriating the subject lots for
public use or purpose; and

4. Whether or not the CA erred in failing to rule that the owners withdrawal of
its P1.5 million deposit constituted implied consent to the expropriation of their lots.




The Rulings of the Court

One. The RTC did not deny the City its right to be heard on its action when that court
dismissed the same. An expropriation proceeding of private lands has two stages: first, the
determination of plaintiffs authority to exercise the power of eminent domain in the context
of the facts of the case and, second, if there be such authority, the determination of just
compensation. The first phase ends with either an order of dismissal or a determination that
the property is to be acquired for a public purpose.
[10]


Here, the Citys action was still in the first stage when the RTC called the parties to a pre-
trial conference where, essentially, their task was to determine how the court may resolve the
issue involved in the first stage: the Citys authority to acquire by expropriation the particular
lots for its intended purpose. As it happened, the parties opted to simultaneously submit their
memoranda on that issue. There was nothing infirm in this agreement since it may be
assumed that the parties knew what they were doing and since such agreement would
facilitate early disposal of the case.
[11]


Unfortunately, the agreement implied that the City was waiving its right to present
evidence that it was acquiring the subject lots by expropriation for a proper public
purpose. Counsel for the City may have been confident that its allegations in the complaint
can stand on their own, ignoring the owners challenge to its right to expropriate their lots for
the stated purpose. Parenthetically, the City moved for the reconsideration of the RTCs order
of dismissal but withdrew this remedy by filing a notice of appeal from that order to the
CA. Evidently, the City cannot claim that it had been denied the opportunity of a hearing.

Two. The CA correctly ruled that the City failed to show that it complied with the
requirements of Section 9 of R.A. 7279 which lays down the order of priority in the acquisition
through expropriation of lands for socialized housing. This section provides:

Section 9. Priorities in the acquisition of Land.Lands for socialized housing shall be acquired in
the following order:

(a) Those owned by the Government or any of its subdivisions, instrumentalities, or
agencies, including government-owned or controlled corporations and their
subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle lands;
(d) Those within the declared Areas for Priority Development, Zonal Improvement Program
sites, and Slum Improvement and Resettlement Program sites which have not yet been
acquired;
(e) Bagong Lipunan Improvement of Sites and Services or BLISS 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. (Emphasis supplied)

The City of course argues that it did not have to observe the order of priority provided
above in acquiring lots for socialized housing since it found on-site development to be more
practicable and advantageous to the beneficiaries who were these lots long-time
occupants. But the problem remains. The City did not adduce evidence that this was so.

Besides, Section 10 of R.A. 7279 also prefers the acquisition of private property by
negotiated sale over the filing of an expropriation suit. It provides that such suit may be
resorted to only when the other modes of acquisitions have been exhausted. Thus:

Section 10. Modes of Land Acquisition.The modes of acquiring land 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. x x x (Emphasis
supplied)

There is a sensible reason for the above. Litigation is costly and protracted. The
government should also lead in avoiding litigations and overburdening its courts.

Indeed, the Court has held that when the property owner rejects the offer but hints for a
better price, the government should renegotiate by calling the property owner to a
conference.
[12]
The government must exhaust all reasonable efforts to obtain by agreement
the land it desires. Its failure to comply will warrant the dismissal of the complaint. Article 35
of the Rules and Regulations Implementing the Local Government Code provides for this
procedure. Thus:

Article 35. Offer to Buy and Contract of Sale(a) The offer to buy private property for public use
or purpose shall be in writing. It shall specify the property sought to be acquired, the reasons for its
acquisition, and the price offered.

x x x x

(c) If the owner or owners are willing to sell their property but at a price higher than that
offered to them, the local chief executive shall call them to a conference for the purpose of reaching an
agreement on the selling price. The chairman of the appropriation or finance committee of
the sanggunian, or in his absence, any member of the sanggunian duly chosen as its representative,
shall participate in the conference. When an agreement is reached by the parties, a contract of sale
shall be drawn and executed.

Here, the City of Manila initially offered P1,500.00 per sq m to the owners for their
lots. But after the latter rejected the offer, claiming that the offered price was even lower
than their current zonal value, the City did not bother to renegotiate or improve its offer. The
intent of the law is for the State or the local government to make a reasonable offer in good
faith, not merely a pro formaoffer to acquire the property.
[13]


The Court cannot treat the requirements of Sections 9 and 10 of R.A. 7279 lightly. It held
in Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes v. City of Manila,
[14]
that these
requirements are strict limitations on the local governments exercise of the power of eminent
domain. They are the only safeguards of property owners against the exercise of that
power. The burden is on the local government to prove that it satisfied the requirements
mentioned or that they do not apply in the particular case.
[15]


Three. Admittedly, the City alleged in its amended complaint that it wanted to acquire
the subject lots in connection with its land-for-the-landless program and that this was in
accord with its Ordinance 8012. But the City misses the point. The owners directly challenged
the validity of the objective of its action. They alleged that the taking in this particular case of
their lots is not for public use or purpose since its action would benefit only a few. Whether
this is the case or not, the owners answer tendered a factual issue that called for evidence on
the Citys part to prove the affirmative of its allegations. As already stated, the City submitted
the issue for the RTCs resolution without presenting evidence.

Four. The City insists that it made a deposit of P1.5 million with the RTC by way of
advance payment on the lots it sought to expropriate. By withdrawing this deposit,
respondents may be assumed to have given their consent to the expropriation.

But the advance deposit required under Section 19 of the Local Government Code
constitutes an advance payment only in the event the expropriation prospers. Such deposit
also has a dual purpose: as pre-payment if the expropriation succeeds and as indemnity for
damages if it is dismissed. This advance payment, a prerequisite for the issuance of a writ of
possession, should not be confused with payment of just compensation for the taking of
property even if it could be a factor in eventually determining just compensation.
[16]
If the
proceedings fail, the money could be used to indemnify the owner for damages.
[17]


Here, therefore, the owners withdrawal of the deposit that the City made does not
amount to a waiver of the defenses they raised against the expropriation. With the dismissal
of the complaint, the amount or a portion of it could be awarded to the owners as indemnity
to cover the expenses they incurred in defending their right.

Notably, the owners neither filed a counterclaim for damages against the City nor did
they seek indemnity for their expenses after the RTC dismissed its action. Consequently, the
City government is entitled to the return of the advance deposit it made and that the owners
withdrew. But, considering the expenses that the owners needed to incur in defending
themselves in the appeals that the City instituted before the CA and this Court, an award
of P50,000.00 in attorneys fees against the City is in order. The owners must return the rest
of the P1,500,000.00 that they withdrew.

Lastly, the Court must point out that the ruling in this case is without prejudice to the
right of the City to re-file the action after it has complied with the relevant mandatory
provisions of R.A. 7279 and Article 35 of the Rules and Regulations Implementing the Local
Government Code.

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of
Appeals dated February 27, 2009 in CA-G.R. CV 90530 subject to the
following MODIFICATIONS:

1. Petitioner City of Manila is ordered to indemnify respondents Alegar Corporation,
Terocel Realty Corporation, and Filomena Vda. De Legarda in the amount of P50,000.00 as
attorneys fees;

2. Respondents Alegar Corporation, Terocel Realty Corporation, and Filomena Vda.
De Legarda are in turn ordered to return the advance deposit of P1,500,000.00 that they
withdrew incident to the expropriation case; and

3. This decision is without prejudice to the right of the City of Manila to re-file their
action for expropriation after complying with what the law requires.

SO ORDERED.

ROBERTO A. ABAD
Associate Justice



















SECOND DIVISION

NATIONAL POWER CORPORATION, G.R. No. 166973
Petitioner,

Present:

- versus - QUISUMBING, J.,
Chairperson,
CARPIO MORALES,
TINGA,
VELASCO, JR., and
BENJAMIN ONG CO, BRION, JJ.
Respondent.
Promulgated:

February 10, 2009

x-----------------------------------------------------------------------------------x
D E C I S I O N
TINGA, J .:

Before us is a Rule 45 petition
[1]
which seeks the reversal of the Decision
[2]
and
Resolution
[3]
of the Court of Appeals in CA-G.R. No. 79211. The Court of Appeals Decision
affirmed the Partial Decision
[4]
of the Regional Trial Court (RTC) of San Fernando, Pampanga,
Branch 41 in Civil Case No. 12281, fixing the compensation due respondent following the
expropriation of his property for the construction of petitioners power transmission lines.

Petitioner was established by R.A. No. 6395 to undertake the development of
hydroelectric generation of power and the production of electricity from nuclear, geothermal
and other sources, as well as the transmission of electric power on a nationwide basis.
[5]
Its
charter grants to petitioner, among others, the power to exercise the right to eminent domain.
[6]


On 27 June 2001, petitioner filed a complaint
[7]
with the RTC of San Fernando,
Pampanga, for the acquisition of an easement of right-of-way over three (3) lots at Barangay
Cabalantian, Bacolor, Pampanga with a total area of 575 square meters belonging to respondent,
in connection with the construction of its transmission lines for its Lahar Affected Transmission
Line Project (Lahar Project).

On 25 March 2002, petitioner obtained a writ of possession and on 15 April 2002 it took
possession of the property.

At the pre-trial

conference, respondent conceded the necessity of expropriation. Thus, the
sole issue for litigation revolved around the determination of just compensation.


The RTC appointed three (3) commissioners
[8]
to determine the fair market value of the
property as of 15 April 2002. Commissioners Dayrit and Garcia submitted their joint
report
[9]
wherein they appraised the value of the property at P1,900.00 per square meter or a
total of P1,179,000.00, while Commissioner Abcejo submitted his Commissioner's
Report
[10]
pegging the value of the property at P875.00 per square meter.

The RTC rendered its Partial Decision,
[11]
wherein it declared the validity of the
expropriation and ordered petitioner to pay the sum of P1,179,000.00, with interest at 6% per
annum beginning 15 April 2002, the date of actual taking, until full payment. It adopted the
findings of Commissioners Dayrit and Garcia as more reliable since their report was based on
established facts and they had evaluated the market, location and physical characteristics of the
property while Commissioner Abcejos report had merely taken the average between the
Provincial Appraisal Report (P1,500.00/sq.m.) and the Land Bank Appraisal Report
(P250.00/sq.m.) that were both done in 1998.

Not satisfied, petitioner filed an appeal with the Court of Appeals.

On 20 October 2004, the Court of Appeals rendered its Decision
[12]
holding petitioner
liable to pay the full fair market value at the time of actual taking, with interest at 6% per
annum from 15 April 2002. To determine the actual valuation of the property, the Court of
Appeals ordered the RTC to appoint a new set of disinterested commissioners.

Petitioner filed a motion for partial reconsideration, questioning the order to pay the full
fair market value computed as of the date of its actual possession of the property. The Court of
Appeals denied the motion for partial reconsideration; hence, the present petition.

On 11 April 2007,
[13]
the Court required the parties to submit their supplemental
memoranda discussing the following issues:

Is Republic Act No. 8974 (2000), otherwise known as An Act to Facilitate the
Acquisition of Right-of-Way, site or Location for National Government Infrastructure
Projects and for other purposes, applicable to actions for eminent domain filed by the
National Power Corporation (Napocor) pursuant to its charter (Rep. Act. No. 6395, as
amended) for the purpose of constructing power transmission lines on the properties
subject of said actions?

Assuming that Rep. Act No. 8974 is applicable to said expropriation proceedings:

a. What are the effects, if any, of Rep. Act No. 8974 and its
implementing Rules on the Standards for the determination of the provisional value and
the final amount of just compensation in the present case, including on the question of
whether the just compensation should be reckoned from the date of the filing of the
complaint since such date preceded the date of the taking of the property in this case?

b. Is the 10% limit on the amount of just compensation for the
acquisition of right-of-way easements on lands or portions thereof to be traversed by the
transmission lines, as provided for in Section 3-a(b) of Napocor's charter, still in effect
in light of the valuation standards provided for in Rep. Act No. 8974 and its
implementing rules?


Eminent domain is the inherent power of a sovereign state to appropriate private
property to particular use to promote public welfare.
[14]
In the exercise of its power of eminent
domain, just compensation must be given to the property owner to satisfy the requirements of
Sec. 9, Art. III
[15]
of the Constitution. Just compensation is the fair market value of the
property.
[16]
Fair market value is that sum of money which a person desirous but not compelled
to buy, and an owner willing but not compelled to sell, would agree on as a price to be given
and received therefor.
[17]
Judicial determination is needed to arrive at the exact amount due to
the property owner.

The power to expropriate is legislative in character and must be expressly conferred by
statute. Under its charter, petitioner is vested with the power of eminent domain.

The first aspect of the compensation issue is whether what should be paid is the full fair
market value of the property or a mere easement fee. Petitioner relies on Sec. 3A
[18]
of R.A.
No. 6395, as amended, which provides that only an easement fee equivalent to 10% of the
market value shall be paid to affected property owners. Based on this amendatory provision,
petitioner is willing to pay an easement fee of 10% for the easement of right-of-way it acquired
for the installation of power transmission lines.

As intimated in the Courts 2007 Resolution, the case at bar is further complicated by the
enactment of R.A. No. 8974 before the filing of the expropriation complaint.

R.A. No. 8974,
[19]
entitled An Act To Facilitate The Acquisition Of Right-Of-Way, Site
Or Location For National Government Infrastructure Projects And For Other Purposes, defines
national government projects as follows:

Sec. 2. National Government ProjectsThe term national government
projects shall refer to all national government infrastructure, engineering
works and service contracts, including projects undertaken by government-
owned and -controlled corporations, all projects covered by Republic Act No.
6957, as amended by Republic Act No. 7718, otherwise known as the Build-
Operate-and-Transfer Law, and other related and necessary activities, such as
site acquisition, supply and/or installation of equipment and materials,
implementation, construction, completion, operation, maintenance,
improvement, repair and rehabilitation, regardless of source of funding.

Petitioner expropriated respondents property for its Lahar Project, a project for public
use.
[20]
In Republic v. Gingoyon(Gingoyon), we observed that R.A. No. 8974 covers
expropriation proceedings intended for national government infrastructure projects.
[21]
The
ImplementingRules and Regulations
[22]
of R.A. No. 8974 explicitly include power generation,
transmission and distribution projects among the national government projects covered by the
law. There is no doubt that the installation of transmission lines is important to the continued
growth of the country. Electricity moves our economy, it is a national concern. R.A. No. 8974
should govern the expropriation of respondent's property since the Lahar Project is a national
government project.

Significantly, Gingoyon is explicit authority that R.A. No. 8974 applies with respect to
substantive matters covered by it to the exclusion of Rule 67 in cases when expropriation is
availed of for a national government project. We noted in Gingoyon:

It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit
under Rule 67 with the scheme of immediate payment in cases involving national
government infrastructure projects.

x x x

It likewise bears noting that the appropriate standard of just compensation is a
substantive matter. It is well within the province of the legislature to fix the standard,
which it did through the enactment of Rep. Act No. 8974. Specifically, this prescribes
the new standards in determining the amount of just compensation in expropriation
cases relating to national government infrastructure projects, as wellas the manner of
payment thereof. At the same time, Section 14 of the Implementing Rules recognizes
the continued applicability of Rule 67 on procedural aspects when it provides all
matters regarding defenses and objections to the complaint, issues on uncertain
ownership and conflicting claims, effects of appeal on the rights of the parties, and
such other incidents affecting the complaint shall be resolved under the provisions on
expropriation of Rule 67 of the Rules of Court.
[23]


The right of a property owner to receive just compensation prior to the actual taking of
the property by the State is a proprietary right which Congress can legislate on.
[24]
R.A. No.
8974 being applicable in this case, the government agency involved must comply with the
guidelines set forth in Sec. 4
[25]
of R.A. No. 8974.


As earlier mentioned, Section 3A of R.A. No. 6395, as amended, substantially provides
that properties which will be traversed by transmission lines will only be considered as
easements and just compensation for such right of way easement shall not exceed 10 percent of
the market value.
[26]
However, this Court has repeatedly ruled that when petitioner takes private
property to construct transmission lines, it is liable to pay the full market value upon proper
determination by the courts.
[27]


In National Power Corporation v. Manubay Agro-Industrial Development
Corporation,
[28]
we held that the taking of property was purely an easement of a right of way,
but we nevertheless ruled that the full market value should be paid instead of an easement
fee.
[29]
This Court is mindful of the fact that the construction of the transmission lines will
definitely have limitations and will indefinitely deprive the owners of the land of their normal
use.

The presence of transmission lines undoubtedly restricts respondents use of his
property. Petitioner is thus liable to pay respondent the full market value of the property.


The second aspect of the compensation issue relates to the reckoning date for the
determination of just compensation. Petitioner contends that the computation should be made as
of 27 June 2001, the date when it filed the expropriation complaint, as provided in Rule 67. We
agree.

Rule 67 clearly provides that the value of just compensation shall be determined as of the
date of the taking of the property or the filing of the complaint, whichever came
first.
[30]
In B.H. Berkenkotter & Co. v. Court of Appeals, we held that:

It is settled that just compensation is to be ascertained as of the time of the
taking, which usually coincides with the commencement of the expropriation
proceedings. Where the institution of the action precedes entry into the
property, the just compensation is to be ascertained as of the time of the filing of
the complaint.
[31]
(emphasis supplied)

Typically, the time of taking is contemporaneous with the time the petition is filed. The
general rule is what is provided for by Rule 67. There are exceptionsgrave injustice to the
property owner,
[32]
the taking did not have color of legal authority,
[33]
the taking of the property
was not initially for expropriation
[34]
and the owner will be given undue increment advantages
because of the expropriation.
[35]
However, none of these exceptions are present in the instant
case.

Moreover, respondents reliance on the ruling in City of Cebu v. Spouses Dedamo,
[36]
is
misplaced since the applicable law therein was the Local Government Code which explicitly
provides that the value of just compensation shall be computed at the time of taking.
[37]


Based on the foregoing, the reckoning date for the determination of the amount of just
compensation is 27 June 2001, the date when petitioner filed its expropriation complaint.

As a final note, the function for determining just compensation remains judicial in
character. In Export Processing Zone Authority v. Dulay,
[38]
and National Power Corporation v.
Purefoods,
[39]
we ruled:


The determination of just compensation in eminent domain cases is a judicial
function. The executive department or 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 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.
[40]


Thus, the lower court must use the standards set forth in Sec. 5
[41]
of R.A. No. 8974 to
arrive at the amount of just compensation.

To recapitulate, R.A. No. 8974 applies to properties expropriated for the installation of
petitioners power transmission lines. Also, petitioner is liable to pay the full amount of the fair
market value and not merely a 10 percent easement fee for the expropriated property. Likewise,
the value of the property should be reckoned as of 27 June 2001, the date of the filing of the
complaint in compliance with Rule 67. Lastly, respondent failed to assign as error the Court of
Appeals ruling regarding the need to appoint a new set of commissioners.
[42]
However, even if
respondent had assigned the matter as error, it would still be denied since the conflicting
appraisals submitted by the commissioners were not both reckoned as of the date of filing of the
complaint. Thus, there is need to remand this case in line with the appellate courts valid
directive for the new set of commissioners.

WHEREFORE the petition is partially GRANTED. The Decision of the Court of
Appeals is AFFIRMED insofar as it ordered petitioner to pay the full amount of the fair market
value of the property involved as just compensation and is REVERSEDinsofar as it directed
that such compensation be computed as of the date of taking instead of earlier which is the date
of filing of the complaint. This case is REMANDED to the trial court for the appointment of a
new set of commissioners in accordance with Sec. 8, Rule 67 of the Rules of Court and the
determination of just compensation in conformity with this
Decision. The Regional TrialCourt of San Fernando City, Pampanga is directed to conduct,
complete and resolve the further proceedings with deliberate dispatch.

SO ORDERED.






















G.R.No.169957/ G.R.No.171558


NATIONAL POWER CORPORATION,
PETITIONER, VS. SPS.FLORIMON V. ILETO
AND ROWENA NOLASCO, SPS.SERAFIN
VALERO AND TERESITA GONZALES,
SPS.CORNELIO VALDERAMA AND REMEDIOS
CRUZ, SPS. ALEJANDRINO VALDERAMA AND
TEODORA STA. MARIA, RENATO VALDERAMA,
ALL REPRESENTED BY SPS. CORNELIO
VALDERAMA AND REMEDIOS CRUZ; HEIRS OF
APOLONIO DEL ROSARIO, REPRESENTED BY
RICARDO DEL ROSARIO; DANILO BRILLO,
WLLFREDO BRILLO, REYNALDO BRILLO,
THELMA BRILLO BORDADOR, AND
MA.VICTORIA BRILLO VILLARICO,
REPRESENTED BY DANILO BRILLO;
SPS.RUDY AND MODESTA VELASCO;
ROSEMARIE FUKUSUMI (VENDEE)/ DANILO
HERRERA (VENDOR); HEIRS OF SOFIA
MANGAHAS VDA.DE SILVA, ROGELIO DE
SILVA, APOLONIA DE SILVA GENER, AND
LUCIO DE SILVA, ALL REPRESENTED BY
ROGELIO DE SILVA; AND, FRANCISCA MATEO-
EUGENIO, RESPONDENTS. / DANILO BRILLO,
WILFREDO BRILLO, LAURO BRILLO,
REYNALDO BRILLO, THELMA BRILLO
BORDADOR, THE MINOR RIKKA OLGA
VILLARICO, KRISTIAN GERALD VILLARICO,
DEAN MARBIEN VLLLARICO, HEREIN
REPRESENTED BY THEIR LEGAL GUARDIAN
WILFREDO BRILLO, PETITIONERS, VS.
NATIONAL POWER CORPORATION,
RESPONDENT.
DECISION
BRION, J.:
We resolve the consolidated petitions for review on certiorari assailing the decision
[1]
of the Court of Appeals (CA) in
CA-G.R. CV No. 72723 dated September 30, 2005, as well as the appellate courts resolution
[2]
dated February 14,
2006 denying the motions for reconsideration of Danilo Brillo, Wilfredo Brillo, Lauro Brillo, Reynaldo Brillo, Thelma
Brillo Bordador, Spouses Rudy Velasco and Modesta Velasco, and Spouses Serafin Valero and Teresita Valero.
The assailed CA decision affirmed with modification the decision of the Regional Trial Court (RTC), Branch 17,
Malolos, Bulacan, in Civil Case No. 796-M-97.
BACKGROUND FACTS

On October 7, 1997, the National Power Corporation (NPC) filed a complaint, which was subsequently amended,
seeking to expropriate certain parcels of land in Bulacan, in connection with its Northwestern Luzon Transmission
Line project. Specifically, the NPC sought to expropriate the following:
OWNER LOCATION TITLE NO. AFFECTED AREA
1. Sps. Florimon Ileto and Rowena Nolasco Sapang Putol, San Ildefonso, Bulacan T-36242 42 sqm.
2. Sps. Florimon Ileto and Rowena Nolasco -do - CLOA T-6277 2,780 sqm.
3. Sps. Serafin Valero and Teresita Gonzales BMA, Balagtas, San Rafael, Bulacan CLOA T-1612 8,157.5 sqm.
4. Sps. Serafin Valero and Teresita Gonzales - do - CLOA T-1953 7,078 sqm.
5. Sps. Cornelio Valderama and Remedios Cruz Maronquillo, San Rafael, Bulacan CLOA T-2700 9,784 sqm.
6. Heirs of Apoloni[o] del Rosario Salakot, San Miguel, Bulacan

16,930 sqm.
7. Danilo Brillo et al. Gulod, Meycauayan, Bulacan CLOA T-7844 15,706 sqm.
8. Sps. Modesta and Rudy Velasco
499 San Juan St., Rio Vista, Sabang,
Baliuag, Bulacan T-90121 16,608 sqm.
9. Rosemarie Fukosumi/ Danilo Herrera Sapang Palay, San Jose del Monte, Bulacan

1,841.76 sqm.
10. Heirs of Sofia Mangahas Tigbe, Norzagaray

9,186 sqm.
11. Francisca Mateo- Eugenio Tigbe, Norzagaray

984 sqm.
[3]

On October 22, 1997, the NPC deposited with the Land Bank of the Philippines the amount of P204,566.60,
representing the initial provisional value of the properties sought to be expropriated. Consequently, the NPC
received actual possession of these properties on December 16, 1997.
[4]

To determine the issue of just compensation, the RTC constituted a team of commissioners,
[5]
composed of the
following: Atty. Luis Manuel Bugayong, representing the NPC; Barangay Captain Manuel Villacorta, representing the
defendants; and Branch Clerk of Court Ariston Tayag, acting as the Chairperson.
[6]

On September 23, 1998, the Heirs of Sofia Mangahas and the NPC filed with the RTC a jointly executed
compromise agreement where they agreed that NPC would acquire 13,855 square meters of the 95,445 square
meter property owned by the Heirs of Sofia Mangahas. In turn, the NPC would pay the Heirs of Sofia Mangahas the
total amount of P3,463,750.00 as just compensation for the property, with an assessed value of P250.00 per square
meter. The RTC found the compromise agreement to be proper, and rendered a partial decision approving it
on September 28, 1998.
[7]

Since Commissioner Bugayong, representing the NPC, could not agree with the other commissioners on the
manner of valuation, he chose to submit a separate report on February 25, 1999. He recommended in this separate
report that the NPC pay an easement fee of 10% of P85.00 per square meter
[8]
for the agricultural land that would
merely be traversed by the transmission lines, full market value for the land on which the steel towers would actually
be constructed, plus the cost of crops and other improvements actually damaged during construction.
[9]

In turn, Commissioner Tayag and Commissioner Villacorta submitted their report on March 4, 1999, recommending
that the just compensation for all the affected lands be pegged at P250.00 per square meter. The report took into
account another commissioners report in a different expropriation case filed by the NPC that was pending before
Branch 10 of the same court,
[10]
which fixed the just compensation per square meter of agricultural lands at P265.00,
residential land at P1,540.00, and commercial land at P2,300,00. In the end, however, the commissioners were
greatly persuaded by the value fixed in the compromise agreement between NPC and the Heirs of Sofia Mangahas.
The commissioners report was set for hearing on June 7, 1999, where the Sps. Florimon V. Ileto and Rowena
Nolasco, the Sps. Valero and the Brillos manifested their consent to the recommended price of P250.00 per square
meter. Consequently, on August 20, 1999, the RTC approved the report submitted by Commissioner Tayag and
Commissioner Villacorta, and rendered a decision. The RTC subsequently issued an amended decision dated
September 16, 1999 to reflect the corrected spelling of the landowners surnames and locations of properties found
in the original decision. The dispositive portion of the amended decision reads:
WHEREFORE, in the light of all the foregoing, the following properties are hereby expropriated in favor of the
Government:
1. 42 square meters of the land of Sps. Florimon Ileto & Rowena Nolasco situated at Sapang Putol, San
Ildefonso, Bulacan covered by TCT No. T-36242 whose technical description is mentioned in Annex A of the
Second Amended Complaint (p. 149, Record);
2. 2,780 square meters of the land of Sps. Florimon Ileto & Rowena Nolasco situated at Sapang Putol, San
Ildefonso, Bulacan covered by CLOA-T-6277 whose technical description is mentioned in Annex B of the
Second Amended Complaint (p. 150, Record);
3. 999 square meters of the land of Sps. Serafin Valero & Teresita Gonzales situated at BMA, Balagtas, San
Rafael, Bulacan covered by CLOA T-1612 whose technical description is mentioned in Annex C of the
Second Amended Complaint (p. 151, Record);
4. 8,954 square meters of the land of Sps. Serafin Valero & Teresita Gonzales situated at BMA, Balagtas, San
Rafael, Bulacan covered by CLOA T-1953 whose technical description is mentioned in Annex D of the
Second Amended Complaint (p. 152, Record);
5. 9,784 square meters of the land of Sps. Cornelio Valderama & Remedios Cruz situated at Moronquillo, San
Rafael, Bulacan covered by CLOA T-2700, whose technical description is mentioned in Annex E of the
Second Amended Complaint (p. 153, Record);
6. 16,930 square meters of the land of the Heirs of Apolonio del Rosario situated at Salakot, San Miguel,
Bulacan whose technical description is mentioned in Annex F of the Second Amended Complaint (p. 154,
Record);
7. 15,706 square meters of the land of Danilo Brillo, Lauro Brillo, Wilfredo Brillo, Reynaldo Brillo, Thelma Brillo-
Bordador and Ma. Victoria Brillo-Villarico situated at Garlang (Anyatam), San Ildefonso, Bulacan covered by
CLOA T-7844 whose technical description is mentioned in Annex G of the Second Amended Complaint (p.
155, Record);
8. 16,608 square meters of the land of Spouses Modesta and Rudy Velasco situated at 499 San Juan St., Rio
Vista, Sabang, Baliuag, Bulacan covered y T-90121 whose technical description is mentioned in Annex H of
the Second Amended Complaint (p. 156, Record);
9. 1,841.76 square meters of the land of Rosemarie Fuk[o]sumi/Danilo Herrera situated at Sapang Palay, San
Jose del Monte, Bulacan whose technical description is mentioned in Annex I of the Second Amended
Complaint (p. 157, Record);
10. 984.72 square meters of the land of Francisca Mateo- Eugenio situated at Tigbe, Norzagaray, Bulacan
whose technical description is mentioned in Annex K of the Second Amended Complaint (p. 159, Record).
As a consequence, the Court hereby allows the National Power Corporation to remain in possession of the
aforementioned areas which it had entered on December 16, 1997 and further orders it to pay the respective owners
thereof the following just compensation, with legal interest from the taking of possession (Sec. 10, Rule 67 of [the]
1997 Rules of Civil Procedure), and after deducting the sums due the Government for unpaid real estate taxes and
other charges:
OWNER JUST COMPENSATION
1. Sps. Florimon Ileto & Rowena Nolasco
P10,500.00 for the land covered by TCT No. 36242 P695,000.00 for the
land covered by CLOA T-6277
2. Sps. Serafin Valero & Teresita Gonzales
P249,750.00 for the land covered by CLOA-T-1612 P2,238,500.00 for
the land covered by CLOA T-1953
3. Sps. Cornelio Valderama & Remedios Cruz P2,446,000.00 for the land covered by CLOA T-2700
4. Heirs of Apolonio del Rosario P4,232,500.00 for their land at Salakot, San Miguel, Bulacan
5. Danilo Brillo, et al[.] P3,926,500.00 for the land covered by CLOA T-7844
6. Sps. Modesta & Rudy Velasco P4,152,000.00 for their land at Sabang, Baliuag
7. Rosemarie Fukosumi Danilo Herrera P460,440.00 for their land at Sapang Palay, San Jose del Monte
8. Francisca Mateo Eugenio P246,180.00 for her land at Tigbe, Norzagaray
The plaintiff is further directed to pay the defendants the respective sums due them within sixty (60) days from the
registration of this decision with the Registry of Deeds of Bulacan or other government agencies concerned and the
issuance of the corresponding titles in the name of the plaintiff.
Let a copy of this Decision be furnished the Office of the Register of Deeds of Bulacan which is directed to register it
as a memorandum on the titles concerned and to issue forthwith in favor of the plaintiff such titles over the
expropriated areas described in the foregoing paragraphs.
[11]

After the RTC denied NPCs motion for reconsideration, the Office of the Solicitor General(OSG), representing the
NPC, filed an appeal with the CA, assailing the approval of the compromise agreement between the Heirs of Sofia
Mangahas and the NPC, as well as the propriety of paying just compensation instead of merely the 10% easement
fee prescribed in Section 3A of Republic Act No. 6395, as amended.
THE CA RULING

In its September 30, 2005 decision, the CA held that since the OSG had not been served with a copy of the partial
decision that approved the compromise agreement between the NPC and the Heirs of Sofia Mangahas, this
decision did not become final and executory, and could thus be properly questioned by the OSG.
The CA affirmed the validity of the compromise agreement between the Heirs of Sofia Mangahas and the NPC,
noting that the NPC was represented by its duly authorized representative, Thomas Agtarap, the Vice President for
Projects Management and Engineering Services, via NPC Board Resolution No. 97-246. The CA also upheld the
P250.00 valuation fixed in the compromise agreement, on the ground that this is the amount of just compensation
for residential lands listed by the NPC in its Board Resolution No. 97-246, and the portion of land expropriated by
the NPC is classified as residential land.
However, the CA held that the RTC erred when it fixed the valuation of the other expropriated lands at P250.00,
distinguishing the lands owned by the Heirs of Sofia Mangahas from the other expropriated lands, based on their
classification. The CA thus computed the value of the other expropriated lands owned by the Sps. Ileto,
Rosemarie Fukosumi or Danilo Herrera, and Francisca Mateo Eugenio, based on the schedule of fair market
values attached to NPC Board Resolution No. 97-246.
On the other expropriated lands, the CA found that it could not fix the value of just compensation of these properties
because the schedule of fair market values for lands in their areas in Bulacan had not been submitted as evidence.
The CA thus instructed the RTC to fix the just compensation of these properties, based on the appropriate
schedule of fair market values.
Lastly, the CA held that the amounts that the NPC had already paid the landowners corresponding to the easement
fee or tower occupancy fee should be deducted from the just compensation to be awarded to each landowner. The
dispositive portion of the CA decision reads:
WHEREFORE, the decision appealed from is AFFIRMED with MODIFICATION.
Let just compensation be paid to the following defendants, as follows:
Sps. Florimon Ileto & Rowena Nolasco P 27,300.00
Sps. Florimon Ileto & Rowena Nolasco P166,800.00
Rosemarie Fuk[o]sumi/Danilo Herrera P919,008.30
Francisca Mateo Eugenio P 56,129.04
The trial court is directed to compute the just compensation of the other defendants properties based on the
classification of each, in accordance with the schedule of fair market values of the National Power Corporation for
the Northwestern Luzon Transmission Line, less the initial fees paid to the defendants as easement fees or tower
occupancy fees.
[12]
(emphases and italics supplied)
Danilo Brillo, et al., Sps. Velasco, and Sps. Valero filed separate motions for reconsideration to assail the CA
decision, which were all subsequently denied in the CAs February 14, 2006 resolution.
THE PRESENT PETITIONS

On April 6, 2006, Danilo Brillo, et al., filed a petition for review on certiorari with the Court, docketed as G.R. No.
171558, assailing the CAs instruction to the RTC to apply the schedule of fair market values attached to NPC Board
Resolution No. 97-246, to determine just compensation for their lands.
In turn, the OSG, representing the NPC, filed a petition for review on certiorari with the Court on April 7, 2006,
docketed as G.R. No. 169957, to question the validity of the compromise agreement between the NPC and the
Heirs of Sofia Mangahas. The OSG also claimed that the RTC erred when it decided to pay the landowners just
compensation for the acquisition of the subject properties instead of paying the rate fixed for an aerial easement of
right of way.
Lastly, the Sps. Ileto filed a petition for review on certiorari, docketed as G.R. No. 171583. However, the Court
denied this petition for lack of merit in its April 17, 2006 Resolution.
On October 3, 2007, the Court issued a Resolution, ordering the consolidation of G.R. Nos. 169957 and 171558.
THE ISSUES

The OSG cites the following grounds in support of its petition in G.R. No. 169957:
I

The Compromise Agreement entered into between petitioner NPC and the heirs of Sofia Mangahas vda. De Silva is
null and void.
II

The trial court erred in fixing the amount of just compensation purportedly for the acquisition of the property despite
the fact that the NPC acquired only an aerial easement of right of way over the agricultural lands of respondents.
III

The easement fees paid to respondents heirs of Apolonio Del Rosario, Spouses Cornelio and Remedios Valderama,
and Spouses Rudy and Modesta Velasco should be deducted from the correct amount of easement fee or just
compensation to which they are entitled.
[13]

On the other hand, the Brillos raise the following questions of law in their petition in G.R. No. 171558:
[a]
Is the National Power Corporation Board Resolution No. 97-246 (Napocor Schedule of Fair Market Value) valid or constitutional and does it
bind the lot owners whose land is now the subject of xxx expropriation proceeding filed by the said National Power Corporation.

xxxx
[b]
Can the Court of Appeals impose upon the trial court to follow the Napocor Board Resolution No. 97-246 in the determination of the just
compensation of the petitioners land, despite the fact that this resolution was never xxx presented during the trial nor mentioned, nor
included in the decision rendered by the lower court nor raise[d] as an error by the Napocor in their appeal and totally disregard the result
and findings of the trial court as to the just compensation of the petitioners land which was reached after due hearing and
recommendation of the court appointed commissioners.
[14]

In sum, the issues for resolution are:
(1)
WHETHER THE CA ERRED IN AFFIRMING THE VALIDITY OF THE COMPROMISE AGREEMENT BETWEEN THE NPC AND THE HEIRS OF SOFIA
MANGAHAS;
(2)
WHETHER THE CA ERRED WHEN IT HELD THAT THE NPC HAD TO PAY JUST COMPENSATION TO THE LANDOWNERS INSTEAD OF A MERE
AERIAL EASEMENT FEE FOR THE SUBJECT PROPERTIES; and
(3)
WHETHER THE CA ERRED IN USING THE SCHEDULE OF FAIR MARKET VALUES ATTACHED TO NPC BOARD RESOLUTION NO. 97-246 TO
DETERMINE THE JUST COMPENSATION OF THE OTHER SUBJECT PROPERTIES.
THE COURTS RULING
We find the petition filed by the Brillos partially meritorious.
Procedural issue
We state at the outset that this Court already denied the petition for review on certiorarifiled by the Sps. Ileto
(docketed as G.R. No. 171583) in our Resolution dated April 17, 2006. This denial had the effect of making the
assailed CA judgment final as to the Sps. Ileto, but only to prevent them from seeking any other affirmative relief
from this Court. We note, that the NPC included the Sps. Ileto as respondents in the appeal they filed before this
Court. They are thus parties to the case with respect to the issues raised in the NPCs appeal. Accordingly, the
Courts determination on the issue raised by the NPC with respect to the propriety of the manner of computing just
compensation will also be binding on the Sps. Ileto.
[15]

Validity of the compromise agreement
In assailing the compromise agreement between the NPC and the Heirs of Sofia Mangahas on the ground that the
valuation is based on the erroneous classification of the land as residential, the OSG essentially asks this Court to
determine whether the land subject of the assailed compromise agreement is residential or agricultural in
nature.This is clearly a factual question, requiring as it does a review of the evidence introduced in, and considered
by, the tribunals below.
[16]
Thus, this question is not reviewable by this Court in a petition for review
on certiorari under Rule 45 of the Rules of Court. While jurisprudence has established several exceptions to this
rule,
[17]
we find that none of them apply under the present circumstances.
Moreover, it is a settled doctrine that a compromise agreement, once approved by final order of the court, has the
force of res judicata between the parties and cannot be disturbed except for vices of consent or forgery. We said
in Republic v. Florendo:
[18]

When a compromise agreement is given judicial approval, it becomes more than a contract binding upon the parties.
Having been sanctioned by the court, it is a determination of the controversy and has the force and effect of a
judgment. It is immediately executory and not appealable, except for vices of consent, forgery, fraud,
misrepresentation and coercion. Thus, although a compromise agreement has the effect and authority of res
judicata upon the parties even without judicial approval, no execution may issue until it has received the approval of
the court where the litigation is pending and compliance with the terms of the agreement is thereupon decreed.
[emphasis ours]
The pleadings submitted in the present case reveal that there has never been any allegation that the assailed
compromise agreement suffers from any of the vices of consent or forgery. Neither has the OSG ever claimed that
the NPC was defrauded or coerced into agreeing to the compromise agreement. There is, evidently, no legal basis
to question the validity of the compromise agreement.
Lastly, we reiterate that compromises are favored and encouraged by the courts,
[19]
and parties are bound to abide
by them in good faith.
[20]
Since compromise agreements have the force of law between the parties, no party may
discard them unilaterally.
[21]
This is especially true under the present circumstances, where the NPC has already
enjoyed the benefits of the assailed compromise agreement, having been in possession of the subject land since
1998.
NPCs power of eminent domain
Republic Act No. 6395, entitled An Act Revising the Charter of the National Power Corporation, grants the NPC the
power to acquire property incident to, or necessary, convenient or proper to carry out the purposes for which [it]
was created,
[22]
namely: the construction of generation and transmission facilities to provide electricity for the entire
country.
In an effort to streamline the NPCs exercise of this power, Section 3A of Republic Act No. 6395 provides:
Section 3A. In acquiring private property or private property rights through expropriation proceedings where the land
or portion thereof will be traversed by the transmission lines, only a right-of-way easement thereon shall be acquired
when the principal purpose for which such land is actually devoted will not be impaired, and where the land itself or
portion thereof will be needed for the projects or works, such land or portion thereof as necessary shall be acquired.
x x x x

(b) With respect to the acquired right-of-way easement over the land or portion thereof, not to exceed ten
percent (10%) of 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.
In addition to the just compensation for easement of right-of-way, the owner of the land or owner of the
improvement, as the case may be, shall be compensated for the improvements actually damaged by the
construction and maintenance of the transmission lines, in an amount not exceeding the market value thereof as
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; Provided, that in cases any buildings, houses and similar structures
are actually affected by the right-of-way for the transmission lines, their transfer, if feasible, shall be effected at the
expense of the Corporation; Provided, further, that such market value prevailing at the time the Corporation gives
notice to the landowner or administrator or anyone having legal interest in the property, to the effect that his land or
portion thereof is needed for its projects or works shall be used as basis to determine the just compensation
therefor.
The NPC, relying on the above-quoted provision, argues that the CA erred when it ordered the payment of just
compensation for the properties in question, given that most of the properties were subject only to an aerial
easement of right of way, with the NPC requiring the use of the area above the subject lands for its transmission
lines.
We have already established in a number of cases
[23]
the flaw behind the NPCs argument. At the heart of this
argument is the mistaken assumption that what are involved are mere liens on the property in the form of aerial
easements. While it may be true that the transmission lines merely pass over the affected properties, the easement
imposes the additional limitation that the landowners are prohibited from constructing any improvements or planting
any trees that exceed three (3) meters within the aerial right of way area. This prohibition clearly interferes with the
landowners right to possess and enjoy their properties.
As we explained in National Power Corporation v. Manubay Agro-Industrial Development Corporation:
[24]

Granting arguendo that what petitioner acquired over respondents property was purely an easement of a right of
way, still, we cannot sustain its view that it should pay only an easement fee, and not the full value of the property.
The acquisition of such an easement falls within the purview of the power of eminent domain. This conclusion finds
support in similar cases in which the Supreme Court sustained the award of just compensation for private property
condemned for public use. Republic v. PLDT held thus:
x x x. 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.
True, an easement of a right of way transmits no rights except the easement itself, and respondent retains full
ownership of the property. The acquisition of such easement is, nevertheless, not gratis. As correctly observed by
the CA, considering the nature and the effect of the installation power lines, the limitations on the use of the land for
an indefinite period would deprive respondent of normal use of the property. For this reason, the latter is entitled to
payment of a just compensation, which must be neither more nor less than the monetary equivalent of the
land.
[25]
[citations omitted]
Apart from interfering with the attributes of ownership, we have articulated in our observation in National Power
Corp. v. Sps. Gutierrez
[26]
that these transmission lines, because of the high-tension current that passes through
them, pose a danger to the lives and limbs of those in the surrounding areas, and, thus, serve to limit the activities
that can be done on these lands.
We also declared in National Power Corporation v. Purefoods Corporation
[27]
that Section 3A of Republic Act No.
6395, as amended (which provides a fixed formula in the computation of just compensation in cases of acquisition of
easements of right of way) is not binding upon this Court. This is in keeping with the established rule that the
determination of just compensation in eminent domain cases is a judicial function.
[28]

Determination of just compensation
Having established the necessity of paying the landowners just compensation for the affected properties instead of
mere easement fees, we move on to the issue of the amount of just compensation.
(a) CA valuation is not supported by evidence
In the present case, the CA set aside the RTC ruling that fixed the just compensation of all the subject properties at
P250.00 per square meter, and held that since the RTC had accepted the values in the Schedule of Fair Market
Values contained in NPC Board Resolution No. 97-246 as correct, it should have applied these values in
determining the just compensation of the subject lands.
[29]

The Brillos disagree with this point, arguing that the determination of just compensation is a judicial function that
cannot be left to the discretion of the expropriating agency. To counter the CAs statement that the RTC accepted
the appraised values contained in the Schedule of Fair Market Values of NPC Board Resolution No. 97-246, the
Brillos point out that there is nothing in the RTC decision that would indicate that it accepted these values. The
Brillos add that NPC Board Resolution No. 97-246 was never even presented during the trial or offered in evidence
as regards the validity of the values contained therein. Finally, the fact that the RTC constituted a team of
commissioners to determine the just compensation of the subject properties directly contradicts the CAs ruling that
the RTC had accepted the values in the Schedule of Fair Market Values appended to NPC Board Resolution No.
97-246. We find the Brillos arguments meritorious.
The determination of just compensation in expropriation cases is a function addressed to the discretion of the
courts, and may not be usurped by any other branch or official of the government.
[30]
We already established
in Export Processing Zone Authority v. Dulay
[31]
that any valuation for just compensation laid down in the statutes
may serve only as guiding principle or one of the factors in determining just compensation, but it may not substitute
the courts own judgment as to what amount should be awarded and how to arrive at such amount. We said:
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 courts findings. Much less can the
courts be precluded from looking into the just-ness of the decreed compensation.
[32]

The CA accepted as correct all the values set forth in the Schedule of Fair Market Values appended to NPC Board
Resolution No. 97-246 on the sole ground that they had already been accepted by the trial court. However, after
carefully reviewing the RTCs decision dated August 20, 1999, we find nothing there to indicate that the court a
quo accepted these values as accurate. As a matter of fact, the subject board resolution was not even mentioned in
the RTCs decision. The only time NPC Board Resolution No. 97-246 was mentioned was in the partial decision of
the RTC, which dealt exclusively with the land owned by the Heirs of Sofia Mangahas, and thus, it cannot be applied
to the other expropriated properties.
The just-ness of just compensation can only be attained by using reliable and actual data as bases in fixing the
value of the condemned property.33 The CA attempts to provide the legal basis for the Schedule of Fair Market
Values, noting that it is based on the joint appraisal report on fair market value of lands by Cuervo Appraisal, Inc.,
Development Bank of the Philippines, and the Land Bank of the Philippines, and the fair market values established
by the respective Provincial Appraisal Committee of Zambales, Pangasinan, Nueva Ecija, Pampanga, and Bulacan,
as well as the City Appraisal Committee of San Carlos and Cabanatuan.
[34]

However, as correctly observed by the Brillos, the determination of just compensation cannot be left to the self-
serving discretion of the expropriating agency. The unjustness of the CAs ruling is all the more apparent when we
consider the undeniable fact that since the fair market values appended to NPC Board Resolution No. 97-246 were
not presented before the lower court, the affected landowners were never given the opportunity to present their
evidence to counter these valuations. In these lights, the CA gravely erred in relying solely on NPC Board
Resolution No. 97-246 to determine the just compensation due the landowners.
(b)RTC valuation not supported by evidence
Similarly, we cannot affirm the RTCs decision in fixing just compensation of all the subject properties at P250.00 per
square meter, for lack of legal or factual basis.
In National Power Corporation v. Manubay Agro-Industrial Development Corporation,
[35]
we defined just
compensation as:
[T]he full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the takers
gain, but the owners loss. The word just is used to intensify the meaning of the word compensation and to
convey thereby the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full
and ample.
In eminent domain or expropriation proceedings, the just compensation to which the owner of a condemned
property is entitled is generally the market value. Market value is that sum of money which a person desirous but
not compelled to buy, and an owner willing but not compelled to sell, would agree on as a price to be given and
received therefor. [The market value] is not limited to the assessed value of the property or to the schedule
of market values determined by the provincial or city appraisal committee. However, these values may serve
as factors to be considered in the judicial valuation of the property. [citations omitted, emphasis ours]
To determine the just compensation to be paid to the landowner, the nature and character of the land at the time of
its taking is the principal criterion.
[36]

In the present case, the RTC made a determination that all the properties subject of the NPCs expropriation
complaint, regardless of their location or classification, should be valued at P250.00 per square meter. In arriving at
this valuation, the RTC explained, thus:
In order to determine the issue of just compensation, the Court constituted a team of three commissioners chaired
by Atty. Aristan Tayag with Atty. Luis Manuel Bugayong as representative of the plaintiff and Barangay Captain
Manuel Villacorta as representative of the landowners. Eventually, the team of commissioners submitted its report
on March 4, 1999 adopting the recommendation of just compensation in a similar case for eminent domain docketed
as Civil Case No. 690-M-97 of the Regional Trial Court of Bulacan wherein it set the just compensation for
agricultural land at P265.00 per square meter, residential land at P1,540.00 per square meter, and commercial land
at P2,300.00 per square meter. However, considering that a partial decision was already rendered wherein the
lands affected were valued at P250.00 per square meter, the team recommended the latter amount for the
remaining properties subject of expropriation.
It is apparent from this RTC explanation that Commissioner Tayag and Commissioner Villacorta based their
recommendation for just compensation of all the properties in question solely on the value fixed in the compromise
agreement between the NPC and the Heirs of Sofia Mangahas. But in accepting this recommendation, the RTC
failed to take into consideration the fact that the property subject of the compromise agreement is located
in Tigbe, Norzagaray, Bulacan, while the other properties subject of the RTCs decision are located in other
municipalities in Bulacan.
Even worse, the commissioners recommended valuation is not supported by any corroborative evidence, such as
sworn declarations of realtors in the area concerned and tax declarations or zonal valuation from the Bureau of
Internal Revenue. It does not even appear from the records that the commissioners conducted any ocular
inspections to determine the location, nature, character, condition, and other specific features of the expropriated
lands that should have been taken into account before making their recommendation.
Although the determination of just compensation lies within the trial courts discretion, it should not be done
arbitrarily or capriciously. The decision of the trial court must be based on all established rules, correct legal
principles, and competent evidence. The courts are proscribed from basing their judgments on speculations and
surmises.
[37]

In light of the foregoing, we find that the trial court arbitrarily fixed the amount of just compensation due the
landowners at P250.00 per square meter. Thus, the Court has no alternative but to remand the case to the court of
origin for the proper determination of just compensation.
As a final point, we remind the court of origin that in computing the just compensation due the landowners for their
expropriated properties, the mnounts already received from the NPC should be deducted from the valuation. These
mnounts are subject, however, to legal interest, to be computed from the time the NPC took possession of the
properties on December 16, 1997.
[38]

WHEREFORE, premises considered, the Court renders Lhe following judgment in the petitions at bar:
1) In G.R. No. 169957, the Court DENIES the petition for review on certiorari filed by the National Power
Corporation, and AFFIRMS the decision or the Court of Appeals in CA-G.R. CV No. 72723 dated September 30,
2005, insofar as it held that the compromise agreement between the National Power Corporation and the Heirs of
Sofia Mangahas is valid.
2) In G.R. No. 171558, the Court PARTIALLY GRANTS the petition for review on certiorarifiled by Danilo Brillo, et
al., and REMANDS the case to the Regional Trial Court, Branch 17 of Malolos, Bulacan for the proper determination
of just compensation of the expropriated properties, subject to legal interest from the time the National Power
Corporation took possession of the properties. No costs.
SO ORDERED.