PENNSYLVANIA COAL CO. v. MAHON et al.

260 U.S. 393 (43 S.Ct. 158, 67 L.Ed. 322)

PENNSYLVANIA COAL CO. v. MAHON et al.

No. 549. Argued: Nov. 14, 1922 Decided: Dec. 11, 1922 opinion, HOLMES [HTML]

Messrs. John W. Davis, of New York City, and H. S. Drinker, Jr., of Philadelphia, Pa., for plaintiff in error.

Mr. Justice HOLMES delivered the opinion of the Court.

This is a bill in equity brought by the defendants in error to prevent the Pennsylvania Coal Company from mining under
their property in such way as to remove the supports and cause a subsidence of the surface and of their house. The bill
sets out a deed executed by the Coal Company in 1878, under which the plaintiffs claim. The deed conveys the surface
but in express terms reserves the right to remove all the coal under the same and the grantee takes the premises with the
risk and waives all claim for damages that may arise from mining out the coal. But the plaintiffs say that whatever may
have been the Coal Company's rights, they were taken away by an Act of Pennsylvania, approved May 27, 1921 (P. L.
1198), commonly known there as the Kohler Act. The Court of Common Pleas found that if not restrained the defendant
would cause the damage to prevent which the bill was brought but denied an injunction, holding that the statute if applied
to this case would be unconstitutional. On appeal the Supreme Court of the State agreed that the defendant had contract
and property rights protected by the Constitution of the United States, but held that the statute was a legitimate exercise of
the police power and directed a decree for the plaintiffs, A writ of error was granted bringing the case to this Court.

The statute forbids the mining of anthracite coal in such way as to cause the subsidence of, among other things, any
structure used as a human habitation, with certain exceptions, including among them land where the surface is owned by
the owner of the underlying coal and is distant more than one hundred and fifty feet from any improved property belonging
to any other person. As applied to this case the statute is admitted to destroy previously existing rights of property and
contract. The question is whether the police power can be stretched so far.

Government hardly could go on if to some extent values incident to property could not be diminished without paying for
every such change in the general law. As long recognized some values are enjoyed under an implied limitation and must
yield to the police power. But obviously the implied limitation must have its limits or the contract and due process clauses
are gone. One fact for consideration in determining such limits is the extent of the diminution. When it reaches a certain
magnitude, in most if not in all cases there must be an exercise of eminent domain and compensation to sustain the act.
So the question depends upon the particular facts. The greatest weight is given to the judgment of the legislature but it
always is open to interested parties to contend that the legislature has gone beyond its constitutional power.

This is the case of a single private house. No doubt there is a public interest even in this, as there is in every purchase
and sale and in all that happens within the commonwealth. Some existing rights may be modified even in such a case.
Rideout v. Knox, 148 Mass. 368, 19 N. E. 390, 2 L. R. A. 81, 12 Am. St. Rep. 560. But usually in ordinary private affairs
the public interest does not warrant much of this kind of interference. A source of damage to such a house is not a public
nuisance even if similar damage is inflicted on others in different places. The damage is not common or public. Wesson v.
Washburn Iron Co., 13 Allen (Mass.) 96, 103, 90 Am. Dec. 181. The extent of the public interest is shown by the statute to
be limited, since the statute ordinarily does not apply to land when the surface is owned by the owner of the coal.
Furthermore, it is not justified as a protection of personal safety. That could be provided for by notice. Indeed the very
foundation of this bill is that the defendant gave timely notice of its intent to mine under the house. On the other hand the
extent of the taking is great. It purports to abolish what is recognized in Pennsylvania as an estate in landa very
valuable estateand what is declared by the Court below to be a contract hitherto binding the plaintiffs. If we were called
upon to deal with the plaintiffs' position alone we should think it clear that the statute does not disclose a public interest
sufficient to warrant so extensive a destruction of the defendant's constitutionally protected rights.

But the case has been treated as one in which the general validity of the act should be discussed. The Attorney General of
the State, the City of Scranton and the representatives of other extensive interests were allowed to take part in the
argument below and have submitted their contentions here. It seems, therefore, to be our duty to go farther in the
statement of our opinion, in order that it may be known at once, and that further suits should not be brought in vain.

It is our opinion that the act cannot be sustained as an exercise of the police power, so far as it affects the mining of coal
under streets or cities in places where the right to mine such coal has been reserved. As said in a Pennsylvania case, 'For
practical purposes, the right to coal consists in the right to mine it.' Commonwealth v. Clearview Coal Co., 256 Pa. 328,
331, 100 Atl. 820, L. R. A. 1917E, 672. What makes the right to mine coal valuable is that it can be exercised with profit.
To make it commercially impracticable to mine certain coal has very nearly the same effect for constitutional purposes as
appropriating or destroying it. This we think that we are warranted in assuming that the statute does.

It is true that in Plymouth Coal Co. v. Pennsylvania, 232 U. S. 531, 34 Sup. Ct. 359, 58 L. Ed. 713, it was held competent
for the legislature to require a pillar of coal to the left along the line of adjoining property, that with the pillar on the other
side of the line would be a barrier sufficient for the safety of the employees of either mine in case the other should be
abandoned and allowed to fill with water. But that was a requirement for the safety of employees invited into the mine, and
secured an average reciprocity of advantage that has been recognized as a justification of various laws.

The rights of the public in a street purchased or laid out by eminent domain are those that it has paid for. If in any case its
representatives have been so short sighted as to acquire only surface rights without the right of support we see no more
authority for supplying the latter without compensation than there was for taking the right of way in the first place and
refusing to pay for it because the public wanted it very much. The protection of private property in the Fifth Amendment
presupposes that it is wanted for public use, but provides that it shall not be taken for such use without compensation. A
similar assumption is made in the decisions upon the Fourteenth Amendment. Hairston v. Danville & Western Ry. Co., 208
U. S. 598, 605, 28 Sup. Ct. 331, 52 L. Ed. 637, 13 Ann. Cas. 1008. When this seemingly absolute protection is found to be
qualified by the police power, the natural tendency of human nature is to extend the qualification more and more until at
last private property disappears. But that cannot be accomplished in this way under the Constitution of the United States.
The general rule at least is that while property may be regulated to a certain extent, if regulation goes too far it will be
recognized as a taking. It may be doubted how far exceptional cases, like the blowing up of a house to stop a
conflagration, go and if they go beyond the general rule, whether they do not stand as much upon tradition as upon
principle. Bowditch v. Boston, 101 U. S. 16, 25 L. Ed. 980. In general it is not plain that a man's misfortunes or necessities
will justify his shifting the damages to his neighbor's shoulders. Spade v. Lynn & Boston Ry. Co., 172 Mass. 488, 489, 52
N. E. 747, 43 L. R. A. 832, 70 Am. St. Rep. 298. We are in danger of forgetting that a strong public desire to improve the
public condition is not enough to warrant achieving the desire by a shorter cut than the constitutional way of paying for the
change. As we already have said this is a question of degreeand therefore cannot be disposed of by general
propositions. But we regard this as going beyond any of the cases decided by this Court. The late decisions upon laws
dealing with the congestion of Washington and New York, caused by the war, dealt with laws intended to meet a
temporary emergency and providing for compensation determined to be reasonable by an impartial board. They were to
the verge of the law but fell far short of the present act. Block & Hirsh, 256 U. S. 135, 41 Sup. Ct. 458, 65 L. Ed. 865, 16 A.
L. R. 165; Marcus Brown Holding Co. v. Feldman, 256 U. S. 170, 41 Sup. Ct. 465, 65 L. Ed. 877; Levy Leasing Co. v.
Siegel, 258 U. S. 242, 42 Sup. Ct. 289, 66 L. Ed. 595, March 20, 1922.

We assume, of course, that the statute was passed upon the conviction that an exigency existed that would warrant it, and
we assume that an exigency exists that would warrant the exercise of eminent domain. But the question at bottom is upon
whom the loss of the changes desired should fall. So far as private persons or communities have seen fit to take the risk
of acquiring only surface rights, we cannot see that the fact that their risk has become a danger warrants the giving to
them greater rights than they bought.

Decree reversed.

Mr. Justice BRANDEIS dissenting.

The Kohler Act prohibits, under certain conditions, the mining of anthracite coal within the limits of a city in such a manner
or to such an extent 'as to cause the * * * subsidence of * * * any dwelling or other structure used as a human habitation,
or any factory, store, or other industrial or mercantile establishment in which human labor is employed.' Act Pa. May 27,
1921, 1 (P. L. 1198). Coal in place is land, and the right of the owner to use his land is not absolute. He may not so use it
as to create a public nuisance, and uses, once harmless, may, owing to changed conditions, seriously threaten the public
welfare. Whenever they do, the Legislature has power to prohibit such uses without paying compensation; and the power
to prohibit extends alike to the manner, the character and the purpose of the use. Are we justified in declaring that the
Legislature of Pennsylvania has, in restricting the right to mine anthracite, exercised this power so arbitrarily as to violate
the Fourteenth Amendment?

Every restriction upon the use of property imposed in the exercise of the police power deprives the owner of some right
theretofore enjoyed, and is, in that sense, an abridgment by the state of rights in property without making compensation.
But restriction imposed to protect the public health, safety or morals from dangers threatended is not a taking. The
restriction here in question is merely the prohibition of a noxious use. The property so restricted remains in the possession
of its owner. The state does not appropriate it or make any use of it. The state merely prevents the owner from making a
use which interferes with paramount rights of the public. Whenever the use prohibited ceases to be noxiousas it may
because of further change in local or social conditionsthe restriction will have to be removed and the owner will again be
free to enjoy his property as heretofore.

The restriction upon the use of this property cannot, of course, be lawfully imposed, unless its purpose is to protect the
public. But the purpose of a restriction does not cease to be public, because incidentally some private persons may
thereby receive gratuitously valuable special benefits. Thus, owners of low buildings may obtain, through statutory
restrictions upon the height of neighboring structures, benefits equivalent to an easement of light and air. Welch v.
Swasey, 214 U. S. 91,29 Sup. Ct. 567, 53 L. Ed. 923. Compare Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 31
Sup. Ct. 337, 55 L. Ed. 369, Ann. Cas. 1912C, 160; Walls v. Midland Carbon Co., 254 U. S. 300, 41 Sup. Ct. 118, 65 L.
Ed. 276. Furthermore, a restriction, though imposed for a public purpose, will not be lawful, unless the restriction is an
appropriate means to the public end. But to keep coal in place is surely an appropriate means of preventing subsidence of
the surface; and ordinarily it is the only available means. Restriction upon use does not become inappropriate as a
means, merely because it deprives the owner of the only use to which the property can then be profitably put. The liquor
and the oleomargine cases settled that. Mugler v. Kansas, 123 U. S. 623, 668, 669, 8 Sup. Ct. 273, 31 L. Ed. 205; Powell
v. Pennsylvania, 127 U. S. 678, 682, 8 Sup. Ct. 992, 1257, 32 L. Ed. 253. See also Hadacheck v. Los Angeles, 239 U. S.
394, 36 Sup. Ct. 143, 60 L. Ed. 348, Ann. Cas. 1917B, 927; Pierce Oil Corporation v. City of Hope, 248 U. S. 498, 39 Sup.
Ct. 172, 63 L. Ed. 381. Nor is a restriction imposed through exercise of the police power inappropriate as a means, merely
because the same end might be effected through exercise of the power of eminent domain, or otherwise at public
expense. Every restriction upon the height of buildings might be secured through acquiring by eminent domain the right of
each owner to build above the limiting height; but it is settled that the state need not resort to that power. Compare Laurel
Hill Cemetery v. San Francisco, 216 U. S. 358, 30 Sup. Ct. 301, 54 L. Ed. 515; Missouri Pacific Railway Co. v.
Omaha, 235 U. S. 121, 35 Sup. Ct. 82, 59 L. Ed. 157. If by mining anthracite coal the owner would necessarily unloose
poisonous gases, I suppose no one would doubt the power of the state to prevent the mining, without buying his coal
fields. And why may not the state, likewise, without paying compensation, prohibit one from digging so deep or excavating
so near the surface, as to expose the community to like dangers? In the latter case, as in the former, carrying on the
business would be a public nuisance.

It is said that one fact for consideration in determining whether the limits of the police power have been exceeded is the
extent of the resulting diminution in value, and that here the restriction destroys existing rights of property and contract.
But values are relative. If we are to consider the value of the coal kept in place by the restriction, we should compare it
with the value of all other parts of the land. That is, with the value not of the coal alone, but with the value of the whole
property. The rights of an owner as against the public are not increased by dividing the interests in his property into
surface and subsoil. The sum of the rights in the parts can not be greater than the rights in the whole. The estate of an
owner in land is grandiloquently described as extending ab orco usque ad coelum. But I suppose no one would contend
that by selling his interest above 100 feet from the surface he could prevent the state from limiting, by the police power,
the height of structures in a city. And why should a sale of underground rights bar the state's power? For aught that
appears the value of the coal kept in place by the restriction may be negligible as compared with the value of the whole
property, or even as compared with that part of it which is represented by the coal remaining in place and which may be
extracted despite the statute. Ordinarily a police regulation, general in operation, will not be held void as to a particular
property, although proof is offered that owing to conditions peculiar to it the restriction could not reasonably be applied.
See Powell v. Pennsylvania, 127 U. S. 678, 681, 684, 8 Sup. Ct. 992, 1257, 32 L. Ed. 253; Murphy v. California, 225 U. S.
623, 629, 32 Sup. Ct. 697, 56 L. Ed. 1229, 41 L. R. A. (N. S.) 153. But even if the particular facts are to govern, the statute
should, in my opinion be upheld in this case. For the defendant has failed to adduce any evidence from which it appears
that to restrict its mining operations was an unreasonable exercise of the police power. Compare Reinman v. Little
Rock, 237 U. S. 171, 177, 180, 35 Sup. Ct. 511, 59 L. Ed. 900; Pierce Oil Corporation v. City of Hope, 248 U. S. 498,
500, 39 Sup. Ct. 172, 63 L. Ed. 381. Where the surface and the coal belong to the same person, self-interest would
ordinarily prevent mining to such an extent as to cause a subsidence. It was, doubtless, for this reason that the
Legislature, estimating the degrees of danger, deemed statutory restriction unnecessary for the public safety under such
conditions.

It is said that this is a case of a single dwelling house, that the restriction upon mining abolishes a valuable estate hitherto
secured by a contract with the plaintiffs, and that the restriction upon mining cannot be justified as a protection of personal
safety, since that could be provided for by notice. The propriety of deferring a good deal to tribunals on the spot has been
repeatedly recognized. Welch v. Swasey, 214 U. S. 91, 106, 29 Sup. Ct. 567, 53 L. Ed. 923; Laurel Hill Cemetery v. San
Francisco, 216 U. S. 358, 365, 30 Sup. Ct. 301, 54 L. Ed. 515; Patsone v. Pennsylvania, 232 U. S. 138, 144, 34 Sup. Ct.
281, 58 L. Ed. 539. May we say that notice would afford adequate protection of the public safety where the Legislature
and the highest court of the state, with greater knowledge of local conditions, have declared, in effect, that it would not? If
the public safety is imperiled, surely neither grant, nor contract, can prevail against the exercise of the police power.
Fertilizing Co. v. Hyde Park, 97 U. S. 659, 24 L. Ed. 1036; Atlantic Coast Line R. R. Co. v. North Carolina, 232 U. S.
548, 34 Sup. Ct. 364, 58 L. Ed. 721; Union Dry Goods Co. v. Georgia Public Service Corporation, 248 U. S. 372, 39 Sup.
Ct. 117, 63 L. Ed. 309, 9 A. L. R. 1420; St. Louis Poster Advertising Co. v. St. Louis, 249 U. S. 269, 39 Sup. Ct. 274, 63 L.
Ed. 599. The rule that the state's power to take appropriate measures to guard the safety of all who may be within its
jurisdiction may not be bargained away was applied to compel carriers to establish grade crossings at their own expense,
despite contracts to the contrary (Chicago, Burlington & Quincy R. R. Co. v. Nebraska, 170 U. S. 57, 18 Sup. Ct. 513, 42
L. Ed. 948); and, likewise, to supersede, by an Employers' Liability Act, the provision of a charter exempting a railroad
from liability for death of employees, since the civil liability was deemed a matter of public concern, and not a mere private
right. Texas & New Orleans R. R. Co. v. Miller, 221 U. S. 408, 31 Sup. Ct. 534, 55 L. Ed. 789. Compare Boyd v.
Alabama, 94 U. S. 645, 24 L. Ed. 302; Stone v. Mississippi, 101 U. S. 814, 25 L. Ed. 1079; Butchers' Union Co. v.
Crescent City Co., 111 U. S. 746, 4 Sup. Ct. 652, 28 L. Ed. 585; Douglas v. Kentucky, 168 U. S. 488, 18 Sup. Ct. 199, 42
L. Ed. 553; Pennsylvania Hospital v. Philadelphia, 245 U. S. 20, 23, 38 Sup. Ct. 35, 62 L. Ed. 124. Nor can existing
contracts between private individuals preclude exercise of the police power. 'One whose rights, such as they are, are
subject to state restriction cannot remove them from the power of the state by making a contract about them.' Hudson
Water Co. v. McCarter, 209 U. S. 349, 357, 28 Sup. Ct. 529, 52 L. Ed. 828, 14 Ann. Cas. 560; Knoxville Water Co. v.
Knoxville, 189 U. S. 434, 438, 23 Sup. Ct. 531, 47 L. Ed. 887; Rast v. Van Deman & Lewis Co., 240 U. S. 342, 36 Sup. Ct.
370, 60 L. Ed. 679, L. R. A. 1917A, 421, Ann. Cas. 1917B, 455. The fact that this suit is brought by a private person is, of
course, immaterial. To protect the community through invoking the aid, as litigant, of interested private citizens is not a
novelty in our law. That it may be done in Pennsylvania was decided by its Supreme Court in this case. And it is for a state
to say how its public policy shall be enforced.
This case involves only mining which causes subsidence of a dwelling house. But the Kohler Act contains provisions in
addition to that quoted above; and as to these, also, an opinion is expressed. These provisions deal with mining under
cities to such an extent as to cause subsidence of

(a) Any public building or any structure customarily used by the public as a place of resort, assemblage, or amusement,
including, but not limited to, churches, schools, hospitals, theaters, hotels, and railroad stations.

(b) Any street, road, bridge, or other public passageway, dedicated to public use or habitually used by the public.

(c) Any track, roadbed, right of way, pipe, conduit, wire, or other facility, used in the service of the public by any municipal
corporation or public service company as defined by the Public Service Law, section 1.

A prohibition of mining which causes subsidence of such structures and facilities is obviously enacted for a public
purpose; and it seems, likewise, clear that mere notice of intention to mine would not in this connection secure the public
safety. Yet it is said that these provisions of the act cannot be sustained as an exercise of the police power where the right
to mine such coal has been reserved. The conclusion seems to rest upon the assumption that in order to justify such
exercise of the police power there must be 'an average reciprocity of advantage' as between the owner of the property
restricted and the rest of the community; and that here such reciprocity is absent. Reciprocity of advantage is an important
consideration, and may even be an essential, where the state's power is exercised for the purpose of conferring benefits
upon the property of a neighborhood, as in drainage projects (Wurts v. Hoagland, 114 U. S. 606, 5 Sup. Ct. 1086, 29 L.
Ed. 229; Fallbrook Irrigation District v. Bradley, 164 U. S. 112, 17 Sup. Ct. 56, 41 L. Ed. 369); or upon adjoining owners, as
by party wall provisions (Jackman v. Rosenbaum Co., 260 U. S. 22, 43 Sup. Ct. 9, 67 L. Ed. , decided October 23,
1922). But where the police power is exercised, not to confer benefits upon property owners but to protect the public from
detriment and danger, there is in my opinion, no room for considering reciprocity of advantage. There was no reciprocal
advantage to the owner prohibited from using his oil tanks in 248 U. S. 498, 39 Sup. Ct. 172, 63 L. Ed. 381; his brickyard,
in 239 U. S. 394, 36 Sup. Ct. 143, 60 L. Ed. 348, Ann. Cas, 1917B, 927; his livery stable, in 237 U. S. 171, 35 Sup. Ct.
511, 59 L. Ed. 900; his billiard hall, in 225 U. S. 623, 32 Sup. Ct. 697, 56 L. Ed. 1229, 41 L. R. A. (N. S.) 153; his
oleomargarine factory, in 127 U. S. 678, 8 Sup. Ct. 992, 1257, 32 L. Ed. 253; his brewery, in 123 U. S. 623, 8 Sup. Ct.
273, 31 L. Ed. 205; unless it be the advantage of living and doing business in a civilized community. That reciprocal
advantage is given by the act to the coal operators.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-12032 August 31, 1959

CITY OF BAGUIO, plaintiff-appelle,

vs.
THE NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, defendant-appellant.

City Attorney Sixto A. Domondom for appellee.

Office of the Solicitor General Ambrosio Padilla, First Assistant Government Corporate Counsel Simeon Gopengco and
Solicitor Troadio T. Quinzon, Jr. for appellant.

BAUTISTA ANGELO, J.:

Plaintiff, a municipal corporation, filed on April 25, 1956, in the Court of First Instance of Baguio, a complaint for
declaratory relief against defendant, a public corporation created by Republic Act No. 1383, contending that said Act does
not include within its preview the Baguio Workshop System; that assuming that it does, said Act is unconstitutional
because it has the effect of depriving plaintiff of the ownership, control and operation of said waterworks system without
compensation and without due process of law, and that it is oppressive, unreasonable and unjust to plaintiff and other
cities, municipalities and municipal districts similarly situated.

On My 22, 1956, defendant filed a motion to dismiss on the ground that Republic Act No. 1383 is a proper exercise of the
police power of the State; that assuming that said Act contemplates an act of expropriation, it is still a constitutional
exercise of the power of eliminate domain; that at any rate the Baguio Waterworks System is not a private property but
"public works of public service" over which the Legislature has control; and that the provision of the said Act being clear
and unambiguous, there is no necessity for construction.

On June 21, 1956, the Court, acting on the motion to dismiss as well as on the answer and rejoinder filed by both parties,
denied the motion and ordered defendant to file its answer to the complaint. On July 6, 1956, defendant filed its answer
reiterating and amplifying the ground already advanced in this motion to dismiss, adding thereto that the action for the
declaratory relief is improper for the reason that the Baguio waterworks System has already been transferred to defendant
pursuant to Republic Act No. 1383 or, if such has not been done, there has already been a breach of said Act.

On August 14, 1956, the parties submitted a written stipulation of the facts and filed written memoranda. And after
allowing plaintiff to file a suplementary complaint, the Court on November 5, 1956, rendered decision the dispositive part
of which reads: "This Court, . . . holds that the workshop system of the City of Baguio falls filed within the category of
'private property', as contemplated by our constitution and may not expropriated without just compensation and that
section 8 of republic act No. 1383 provides for the exchange of the NAWASA assets for the value of workshop system of
Baguio is unconstitutional as this is not 'just compensation,'" Defendant filed a motion for reconsideration, and upon its
denial. It took the present appeal.

The issues posed in this appeal are: (1) plaintiff's action for declatory relief is improper because there has already been a
breach by plaintiff of Republic Act No. 1383 (2) Republic Act No. 1383 does not contemplates the exercise of the power of
eliminate domain but the exertion of the police power of the State; and (3) assuming arguendo that Republic Act No. 1383
involves the exercise of the power of eminent domain the same does not violate our Constitution.

Before we proceed with the discussion of this issues, there is need to state some facts necessarily for their determination
since the proper application of the principles of law that may be pertinent would greatly depend upon them.
Plaintiff is a municipal corporation organized under its Charter with principal place of business in the City of Baguio, while
defendant is in the public corporation created by Republic Act No. 1383 with provincial place of business in the City of
manila. Under section 2553 of its Charter, plaintiffs is maintaining the Baguio Waterworks System under a certificates of
public convenience, the same being financed by its own funds, the Baguio general fund, and funds advanced by the
national Government. The assets of said system as of December 31, 1955 were reported to be P1,408.795.98. The
system supplies only the City of Baguio, its inhabitants, and transient visitors, and, as provided for in accordance, it grants
to the employees of the City one fifth (1/5) of cubic meter free from every one peso of their total salary per annum as part
of their compensation. The employees of the national Government are not given this privilege but there is a provision
plaintiff Charter which says: "in consideration of the exemption from the taxation to the extensive real state holdings of the
national Government within the limit of the City, of the expenses of the improvements which the Government of the said
City is required to make a reason for the location therein of the offenses of the national Government, and of free services
in connection of the said offices, there is created a permanent and continuing appropriation from the funds in the national
Treasury not otherwise appropriated, equal to fifty per centum of the expenses of the Government of the City exclusive of
this accounts which appear as expenses by reason of inter-department charges and charges against the national
Government for services and supplies."

The purposes for which defendants was created is expressed in section 1 of republic Act No. 1383, which we quote:

Creation of the national Waterworks and Sewerage Authority;' its general purposes; Zone and extends of the
jurisdiction comprised by it; domicile and place of business of the corporation. For purposes of consolidating
and centralizing all waterworks, sewerage and drainage systems in the Philippines under one control, direction
and general supervision, there is hereby created a public corporation to be known as the National workshop and
Sewerage authority, which shall be organized within one month after the approval of this Act.

The National Waterworks and Sewerage authority shall own and/or have jurisdiction, supervision and control over
all territory now embraced by the Metropolitan Water Districts as well as all areas now served by existing
government-owned waterworks in the boundaries of cities, municipalities and municipality districts in the
Philippines including those served by the waterworks and wells and drills sections of the national Waterworks and
Sewerage authority, any from time to time extends its territory by the admission of or the inclusion of any
municipal or municipal districts in the Philippines.

The jurisdiction of the national waterworks and Sewerage Authority shall extend to the construction, maintenance,
operation and control of non-supporting and/or non-revenue producing water systems and sanitary works,
whether undertaken at the expense of the Authority or through subsidy of the national Government as provided in
Section 10 of this act.

And to accomplish the above purpose, the following was provided in section 8 of the same act:

Dissolution of the Metropolitan Water District; transfer to the Authority of its records, assets and liabilities; transfer
to the Authority of entities, waterworks and sewerage systems in the cities, municipalities, municipal district and
other government waterworks and sewerage systems. The present Metropolitan Water District created Under Act
Number Two Thousand eight hundred thirty-two, as amended, is hereby dissolved, and its records, assets and
liabilities are transferred to the authority. All existing government owned waterworks and sewerage systems are
transferred to the National waterworks and Sewerage Authority, and in turn to pledge such assets as security for
the payment of the waterworks and sewerage bonded debt.

The net book value of the properties and assets of the Metropolitan Water District and of government-owned
waterworks and sewerage systems in cities, municipalities, or municipal districts, and other government-owned
waterworks and sewerage systems shall be received by the Authority in payment for an equal value of the assets
of the National Waterworks and sewerage Authority.

The references made to the Metropolitan Water District or to any existing government-owned waterworks and
sewerage system in any city, municipality or municipal district and other waterworks and sewerage system under
the Bureau of Public Works, in any Act or Executive Order or Proclamation of the President of the Philippines or in
 any city or municipal ordinance which is still in force, shall be deemed to be a reference to the National
Waterworks and Sewerage Authority created by this Act.

On September 19, 1955, the President of the Philippines issued Executive Order No. 127 outlining the procedure for the
transfer of government-owned waterworks and sewerage systems in the provinces, cities and municipalities to defendant
and provided for a time limit for such transfer, which is "at the earliest time possible but not exceeding 90 days from the
date of said order."

And on March 15, 1956, defendant, implementing said Executive Order, issued Office Memorandum No. 7 providing,
among other things, the following:

(1) Pending the establishment of the Waterworks district offices of the Authority, District and City Engineers, shall
continue to be in charge of the operation and maintenance of all existing waterworks systems, including the repair
and improvement thereof and the construction of new waterworks projects in their respective districts in
accordance with the Memorandum of the Secretary of Public Works and Communications dated October 25,
1955, quoted in the Memorandum of the Director of Public Works dated October 27, 1955. Likewise, they shall
continue approving vouchers and payrolls for salaries and essential services chargeable against waterworks
funds heretofore, provided that said expenses do not exceed the appropriations in the approved budget for the
preceeding fiscal year.

(2) Pending the establishment of the Waterworks district offices of the Authority which shall ultimately include an
auditing force, Provincial and City auditors shall, as heretofore, audit the accounts of the different waterworks
systems in their respective jurisdictions in accordance with Provincial Auditor's Memorandum No. 151 to
Provincial and City Auditors dated December 7, 1955.

(3) Pending the establishment of the waterworks district offices of the Authority, provincial, city and municipal
treasurers shall continue to perform the work of handling the collections and disbursements of funds of the
waterworks systems and artesian wells projects in their respective jurisdictions in accordance with provincial
circular of the Secretary of Finance to all provincial and City Treasurers dated November 23, 1955.

(4) Provincial Waterworks Boards, provincial Boards, Municipal Boards, or City councils of cities and municipal
councils of Municipalities and municipal districts ipso facto ceased to have control and supervision over
waterworks systems within their respective territorial jurisdictions upon the formal organization of the National
Waterworks and sewerage Authority in accordance with the provisions of Republic Act No. 1383. All budgets and
plantillas of personnel of said waterworks personnel, including collectors who were formerly directly under the
Provincial, City or Municipal Treasurers, whether permanent, temporary or emergency, shall be effective only after
their approval by the Board of directors of the Authority.

Let us now discussed the issues raised..

As regards the first issue, appellant contends that appellee's action for declaratory relief is improper because there has
already been a breach of the Republic Act No. 1383, invoking section 2 of rule 66 which provides; "A contract or statue
may be construed before there has been a breach thereof."

This contention is untenable. To begin with, the answer filed by defendant through its counsel the Solicitor General
contains a express admission of the avernment in appellee's complaint that "although Republic Act No. 1383 took effect
upon its approval on June 18, 1955, and notwithstanding Executive Order No. 127 of the President, there has been no
breach of said law because no actual physical turn-over of the Baguio Waterworks System has so far been made."
Because of such admission, it has always been assumed in the trial court that the present action is proper because there
has not been such breach so much so that appellant desisted from raising the point in the rest of the proceedings in the
trial court and in the long memorandum it has submitted, for which reason the trial court made in its decision the following
comment: In its memorandum, however, the NAWASA has failed to argue this point. the omission is significant and this
Court takes that in any objection to the declaratory relief proceedings are waived." That appellant would now take an
inconsistent stand is strange in any event, we find that such is the situation obtaining here. Republic Act No. 1383
provides that government-owned waterworks system should be transferred to appellant at the earliest time possible, and
unless by administrative action this provision is actually carried out, it cannot be said that the transfer has been effected.
The most that appellant did to carry out such provision is to issue its Office memorandum No. 7 which prescribes the
preparatory steps for such transfer pending the establishment of the branch office of the NAWASA that would take over
the waterworks concerned, but before any definite step could be taken to comply with said directive the present action
was instituted. We agree with the trial court that so far there has not been a breach of the law and that the other requisites
necessary for an action for declaratory relief are present.

The contention that the Republic Act No. 1383 constitutes a valid exercise of police power rather than a directive to
expropriate the waterworks of the appellee by the exercise of the power of eminent domain cannot also be entertained.
This is far from the intent and purpose of the law. The act does not confiscate, nor destroy, nor appropriate property
belonging to the appellee. It merely directs that all waterworks belonging to cities, municipalities, and municipal districts in
the Philippines be transferred to the NAWASA for the purpose of placing them under the control and supervision of one
agency with a view to promoting their efficient management, but in so doing it does not confiscate them because it directs
that they be paid with an equal value of the assets of the NAWASA. This is clearly inferred from the context of the law
(section 8, Rep. Act No. 1383).

But appellant invites our attention to some authorities purporting to show the Republic Act No. 1383 could at least be
considered as a legitimate exercise of police power such that Congress may in the exercise of such power enact a law
transferring Government property from one agency to another, and laying stress one said authorities it contends that
although Congress cannot deprive the citizens of a municipal corporation of the use of property held in trust for their
benefit it may however change the trustee with or without its consent or compensation provided the citizens are not
deprived of its enjoyment. In other words, appellant invokes the principle that the transfer of property and authority by an
act of Congress from one class of public officer to another where the property continues devoted to its original purpose
does not impair any vested right of the city owning the property.

But the authorities cited are not in point. They in substance point out that the transfer, if any, of the property of municipal
corporation from one agency to another is merely done for purposes of administration, its ownership and benefits being
retained by the corporation. Such is not the clear intent of Republic Act No. 1383. Here, as we have already shown, its
purpose is to effect a real transfer of the ownership of the waterworks to the new agency and does not merely encompass
a transfer of administration. At any rate, the authorities cited do not bear out the proposition of appellant as clearly pointed
out by counsel for appellee in his brief.

But it is insisted that the waterworks system of Baguio City does not have the character of patrimonial property but comes
under the phrase "public works for public service" mentioned in Article 424 of the New Civil Code and as such is subjected
to the control of Congress. This contention is also untenable. The Baguio Waterworks System is not like any public road,
park, street or any other public property held in trust by a municipal corporation held for the benefit of the public but it is
rather a property owned by appellee in its proprietary character. While the cases may differ as to the public or private
character of waterworks, the weight of authority as far as the legislature is concerned classes them as private affairs. (sec.
239, Vol. I, Revised, McQuillin Municipal Corporation, p. 239; Shrik vs. City of Lancaster, 313 Pa. 158, 169 Atl. 557). And
in this jurisdiction, this court has already expressed the view that the waterworks system is patrimonial property of the city
that has established it.(Mendoza vs. De Leon, 33 Phil. 509). And being owned by the municipal corporation in a
proprietary character, waterworks cannot be taken away without observing the safeguards set by our Constitution for the
protection of private property.

While the judicial opinions on this subject are more or less uncertain in expression, and court judgment apparently
conflicting, perhaps it is correct to affirm that a majority of decision recognize the private rights of the municipal
corporation, and hence support the view that all its property of a distinctly private character is fully protected by
the constitutional provisions protecting private property of the individual or the private corporation. Accordingly the
right of state as to the private property of municipal corporation is a right of regulation to be exercised in harmony
with the general policy of the state, and though broader than exists in the case of individuals, or private
corporations, is not a right of appropriation.

xxx xxx xxx

 The decision maintain that the property held by a municipal corporation units private capacity is not subject to the
unrestricted control of the legislature, and the municipality cannot be deprived of such property against its will,
except by the exercise of eminent domain with payment of full compensation. (McQuillin Municipal Corporation,
2nd Ed., Vol. I, pp. 670-681).

In its private capacity a municipal corporation is wholly different. The people of a compact community usually
require certain conveniences which cannot be furnished without a franchise from the State and which are either
unnecessary in the rural districts, such as a system of sewers, or parks and open spaces, or which on account of
the expenses it would be financially impossible to supply except where the population is reasonably dense, such
as water or gas. But in so far as the municipality is thus authorized to exercise the functions of a private
corporation, it is clothed with the capacities of a private corporation and may claim its rights and immunities, even
as against the sovereign, and is subject to the liabilities of such a corporation, even as against third parties. (19
R.C. L. p. 698)

The attempt of appellant in having waterworks considered as public property subject to the control of Congress or one
which can be regulated by the exercise of police power having failed, that question that now arises is: Does Republic Act
No. 1383 provide for the automatic expropriation of the waterworks in question in the light of our Constitution? In other
words, does said law comply with the requirements of section 6, Article XIII, in relation to section 1(2), Article III, of our
Constitution?

Section 6, Article XIII of our Constitution provides:

SEC. 6. The State may, in the interest of National Welfare and defense, establish and operate industries and
means of transportation and communication, and, upon payment of just compensation, transfer to public
ownership utilities and other private enterprises to be operated by the Government.

Section 1 (2), Article III, of our Constitution provides:

(2) Private property shall not be taken for public use without just compensation.

It is clear that the State may, in the interest of National welfare, transfer to public ownership any private enterprise upon
payment of just compensation. At the same time, one has to bear in mind that no person can be deprived of his property
except for public use and upon payment of just compensation. There is an attempt to observe this requirement in Republic
Act No. 1383 when in providing for the transfer of appellee's waterworks system to a national agency it was directed that
the transfer be made upon payment of an equivalent value of the property. Has this been implemented? Has appellant
actually transferred to appellee any asset of the NAWASA that may be considered just compensation for the property
expropriated? There is nothing in the record to show that such was done. Neither is there anything to this effect in Office
Memorandum No. 7 issued by the NAWASA in implementation of the provision of the Republic Act No. 1383. The law
speaks of assets of the NAWASA by they are not specified. While the Act empowers the NAWASA to contract
indebtedness and issue bonds subject to the approval of the Secretary of Finance when necessary for the transaction of
its business (sec. 2, par. (L), sec. 5, Act No. 1383), no such action has been taken to comply with appellant's commitment
in so far as payment of compensation of appellee is concerned. As to when such action should be taken no one knows.
And unless this aspect of the law is clarified and appellee is given its due compensation, appellee cannot be deprived of
its property even if appellant desires to take over its administration in line with the spirit of the law. We are therefore
persuaded to conclude that the law, insofar as it expropriates the waterworks in question without providing for an effective
payment of just compensation, violates our Constitution. In this respect, the decision of the trial court is correct.

Wherefore, the decision appealed from is affirmed, without pronouncement as to costs.

Paras, C. J., Bengzon, Padilla, Montemayor, Endencia, and Barrera, JJ., concur.
Conception, J., concurs in the result.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-21064 June 30, 1970

J. M. TUASON & CO., INC., petitioner-appellee,

vs.
THE LAND TENURE ADMINISTRATION, THE SOLICITOR GENERAL and THE AUDITOR GENERAL, respondents-
appellants.

Araneta, Mendoza and Papa for petitioner-appellee.

Besa, Aguilar and Gancia, Office of the Solicitor General Felix V. Makasiar, Assistant Solicitor General Frine' C. Zaballero,
Solicitor Rosalio A. de Leon and Special Attorney Magno B. Pablo for respondents-appellants.

RESOLUTION

FERNANDO, J.:

From our decision of February 18, 1970, reversing the judgment of the lower court holding that Republic Act No. 2616 as
amended is unconstitutional, printed motion for reconsideration was filed by petitioner-appellee on March 31, 1970
reiterating its arguments as to its alleged invalidity for being violative of the due process and equal protection guarantees.
On May 27, 1970, a detailed opposition to such a motion for reconsideration was filed by the Solicitor General, the
Honorable Felix Q. Antonio, on behalf of respondents-appellants. Then came a rejoinder of petitioner, on June 15, 1970,
to the pleading of the Solicitor General. The motion for reconsideration is thus ripe for determination. With due recognition
of the vigor and earnestness with which petitioner argued its motion, based on what it considered to be our applicable
decisions, the Court cannot grant the same. Our decision stands.

1. It was a unanimous Court that could not locate a constitutional infirmity vitiating Republic Act No. 2616 directing the
expropriation of the Tatalon Estate in Quezon City. There are points of differences in the three written opinions, but there is
none as to the challenged legislative act being invulnerable on the grounds therein asserted to justify its sought for
nullification. While, to repeat, petitioner apparently remains unconvinced, standing fast on the contentions to which it
would seek to impart greater plausibility, still the intent of the framers of the Constitutional Convention, as shown not only
by the specific provisions allowing the expropriation of landed estates, but also by the social justice provision as reflected
in our decisions, save possibly Republic vs. Baylosis, 1 preclude a favorable action on the impassioned plea of petitioner
for a reconsideration of our decision. At any rate, petitioner-appellee can take comfort in the separate opinion of Justice
Teehankee, with which four other members of the Court, including the Chief Justice, are in agreement, to enable it to raise
questions, the answers to which, if its view would be sustained, would certainly afford sufficient protection to what it
believes to be an unconstitutional infringement on its property rights.

2. It may not be amiss to make more explicit and categorical what was held in our opinion that Section 4 of Republic Act
No. 2616 prohibiting a suit for ejectment proceedings or the continuance of one already commenced even in the absence
of expropriation proceedings, is unconstitutional, as held in Cuatico v. Court of Appeals. 2 Greater emphasis likewise
should be laid on our holding that while an inaccuracy apparent on the face of the challenged statute as to the ownership
of the Tatalon Estate does not suffice to call for its invalidity, still to erase even a fanciful doubt on the matter, the
statement therein found in Section 1 of the Act that in addition to petitioner-appellee, Gregorio Araneta & Co., Inc. and
Florencio Deudor, et al. are included, cannot be understood as conferring on any juridical or natural persons, clearly not
entitled thereto, dominical rights over such property in question.

3. In the aforesaid decision of Cuatico v. Court of Appeals, reference was made to the amendatory Act, Republic Act No.
3453 to Section 4 as it originally was worded in Republic Act No. 2616, the amendment consisting of the following: "Upon
approval of this amendatory Act, no ejectment proceedings shall be instituted or prosecuted against the present
occupants of any lot in said Tatalon Estate, and no ejectment proceedings already commenced shall be continued, and
such lot or any portion thereof shall not be sold by the owners of said estate to any person other than the present
occupant without the consent of the latter given in a public instrument." 3 The question before the, Court, according, to the
opinion penned by Justice Bautista Angelo, was: "Are the provisions embodied in the amendatory Act which prescribe that
upon approval of said Act no ejectment proceedings shall be instituted or prosecuted against any occupant of any lot in
the Tatalon Estate, or that no ejectment proceedings already commenced shall be continued, constitutional and valid such
that it may be said that the Court of Appeals abused its discretion in denying the petitions for suspension filed by
petitioners.?" 4

Then came this portion of the opinion: "This is not the first time that this Court has been called upon to pass upon the
validity of a provision which places a landowner in the situation of losing his dominical rights over the property without due
process or compensation. We refer to the provisions of Republic Act 2616 before they were amended by Republic Act No.
3453. Note that, as originally provided, Republic Act No. 2616 prohibited the institution of an ejectment proceeding against
any occupant of any lot in the Tatalon Estate or the continuance of one that has already been commenced after the
expropriation proceedings shall have been initiated and during the pendency of the same. On the surface this provision
would appear to be valid if the same is carried out in the light of the provisions of our Constitution relative to cases of
eminent domain, for in that case the rights of the owner of the property to be expropriated are protected. But then an
attempt came to circumvent that provision in an effort to safeguard or protect the interest of some occupants of the land,
which reached this Court for adjudication, as when some occupants attempted to block their ejectment upon the plea that
the government would soon start expropriation proceedings even if no sufficient funds were appropriated to provide
compensation to the owner and even if it was not in a position to take possession of the estate, and so the owner
contested the attempt invoking its rights under the Constitution. And this Court upheld the contention of the owner by
declaring the attempt unconstitutional." 5

The conclusion that inevitably was called for is worded thus: "It is, therefore, imperative that we declare, as we now do,
that Section 4 of Republic Act No. 3453 which prohibits the filing of an ejectment proceeding, or the continuance of one
that has already been commenced, even in the absence of expropriation proceedings offends our Constitution and,
hence, is unenforceable." 6

What we said then, we reaffirm now, as was indeed evident in our decision sought to be reconsidered but perhaps not
given the importance which, in the opinion of petitioner-appellee, it was entitled to. Nothing in our decision can be taken to
detract in any wise from the binding force and effect of the Cuatico ruling which declared unconstitutional Section 4 of
Republic Act No. 3453.

4. We likewise ruled that the mistake imputed to Congress in apparently recognizing the rights of ownership in entities or
individuals not possessed of the same could not invalidate the challenged statute. In the same way, it cannot be made the
basis for non-existent rights of ownership to the property in question. It is in that sense that, as noted in our decision, no
fear need be entertained that thereby the petitioner-appellee would be adversely affected. The government certainly would
not pay to a party other than the owner the claim for just compensation which, under the Constitution, it is required to
meet. Neither, then can any party who is not in that situation have any standing whatsoever. This much is beyond dispute.
To repeat, the apprehension entertained by petitioner-appellee, perhaps indicative of it, excess of caution, is without legal
foundation.

WHEREFORE, the motion for the reconsideration of our decision of February 18, 1970, filed by petitioner-appellee, is
denied.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Teehankee and Barredo, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-20620 August 15, 1974

REPUBLIC OF THE PHILIPPINES, plaintiff-appellant,

vs.
CARMEN M. VDA. DE CASTELLVI, ET AL., defendants-appellees.

Office of the Solicitor General for plaintiff-appellant.

C.A. Mendoza & A. V. Raquiza and Alberto Cacnio & Associates for defendant-appellees.

ZALDIVAR, J.:p
Appeal from the decision of the Court of First Instance of Pampanga in its Civil Case No. 1623, an expropriation
proceeding.

Plaintiff-appellant, the Republic of the Philippines, (hereinafter referred to as the Republic) filed, on June 26, 1959, a
complaint for eminent domain against defendant-appellee, Carmen M. Vda. de Castellvi, judicial administratrix of the
estate of the late Alfonso de Castellvi (hereinafter referred to as Castellvi), over a parcel of land situated in the barrio of
San Jose, Floridablanca, Pampanga, described as follows:

A parcel of land, Lot No. 199-B Bureau of Lands Plan Swo 23666. Bounded on the NE by Maria Nieves
Toledo-Gozun; on the SE by national road; on the SW by AFP reservation, and on the NW by AFP
reservation. Containing an area of 759,299 square meters, more or less, and registered in the name of
Alfonso Castellvi under TCT No. 13631 of the Register of Pampanga ...;

and against defendant-appellee Maria Nieves Toledo Gozun (hereinafter referred to as Toledo-Gozun over two parcels of
land described as follows:

A parcel of land (Portion Lot Blk-1, Bureau of Lands Plan Psd, 26254. Bounded on the NE by Lot 3, on
the SE by Lot 3; on the SW by Lot 1-B, Blk. 2 (equivalent to Lot 199-B Swo 23666; on the NW by AFP
military reservation. Containing an area of 450,273 square meters, more or less and registered in the
name of Maria Nieves Toledo-Gozun under TCT No. 8708 of the Register of Deeds of Pampanga. ..., and

A parcel of land (Portion of lot 3, Blk-1, Bureau of Lands Plan Psd 26254. Bounded on the NE by Lot No.
3, on the SE by school lot and national road, on the SW by Lot 1-B Blk 2 (equivalent to Lot 199-B Swo
23666), on the NW by Lot 1-B, Blk-1. Containing an area of 88,772 square meters, more or less, and
registered in the name of Maria Nieves Toledo Gozun under TCT No. 8708 of the Register of Deeds of
Pampanga, ....

In its complaint, the Republic alleged, among other things, that the fair market value of the above-mentioned lands,
according to the Committee on Appraisal for the Province of Pampanga, was not more than P2,000 per hectare, or a total
market value of P259,669.10; and prayed, that the provisional value of the lands be fixed at P259.669.10, that the court
authorizes plaintiff to take immediate possession of the lands upon deposit of that amount with the Provincial Treasurer of
Pampanga; that the court appoints three commissioners to ascertain and report to the court the just compensation for the
property sought to be expropriated, and that the court issues thereafter a final order of condemnation.

On June 29, 1959 the trial court issued an order fixing the provisional value of the lands at P259,669.10.

In her "motion to dismiss" filed on July 14, 1959, Castellvi alleged, among other things, that the land under her
administration, being a residential land, had a fair market value of P15.00 per square meter, so it had a total market value
of P11,389,485.00; that the Republic, through the Armed Forces of the Philippines, particularly the Philippine Air Force,
had been, despite repeated demands, illegally occupying her property since July 1, 1956, thereby preventing her from
using and disposing of it, thus causing her damages by way of unrealized profits. This defendant prayed that the
complaint be dismissed, or that the Republic be ordered to pay her P15.00 per square meter, or a total of P11,389,485.00,
plus interest thereon at 6% per annum from July 1, 1956; that the Republic be ordered to pay her P5,000,000.00 as
unrealized profits, and the costs of the suit.

By order of the trial court, dated August, 1959, Amparo C. Diaz, Dolores G. viuda de Gil, Paloma Castellvi, Carmen
Castellvi, Rafael Castellvi, Luis Castellvi, Natividad Castellvi de Raquiza, Jose Castellvi and Consuelo Castellvi were
allowed to intervene as parties defendants. Subsequently, Joaquin V. Gozun, Jr., husband of defendant Nieves Toledo
Gozun, was also allowed by the court to intervene as a party defendant.

After the Republic had deposited with the Provincial Treasurer of Pampanga the amount of P259,669.10, the trial court
ordered that the Republic be placed in possession of the lands. The Republic was actually placed in possession of the
lands on August 10,
1959. 1
In her "motion to dismiss", dated October 22, 1959, Toledo-Gozun alleged, among other things, that her two parcels of
land were residential lands, in fact a portion with an area of 343,303 square meters had already been subdivided into
different lots for sale to the general public, and the remaining portion had already been set aside for expansion sites of the
already completed subdivisions; that the fair market value of said lands was P15.00 per square meter, so they had a total
market value of P8,085,675.00; and she prayed that the complaint be dismissed, or that she be paid the amount of
P8,085,675.00, plus interest thereon at the rate of 6% per annum from October 13, 1959, and attorney's fees in the
amount of P50,000.00.

Intervenors Jose Castellvi and Consuelo Castellvi in their answer, filed on February 11, 1960, and also intervenor Joaquin
Gozun, Jr., husband of defendant Maria Nieves Toledo-Gozun, in his motion to dismiss, dated May 27, 1960, all alleged
that the value of the lands sought to be expropriated was at the rate of P15.00 per square meter.

On November 4, 1959, the trial court authorized the Provincial Treasurer of Pampanga to pay defendant Toledo-Gozun
the sum of P107,609.00 as provisional value of her lands. 2 On May 16, 1960 the trial Court authorized the Provincial
Treasurer of Pampanga to pay defendant Castellvi the amount of P151,859.80 as provisional value of the land under her
administration, and ordered said defendant to deposit the amount with the Philippine National Bank under the supervision
of the Deputy Clerk of Court. In another order of May 16, 1960 the trial Court entered an order of condemnation. 3

The trial Court appointed three commissioners: Atty. Amadeo Yuzon, Clerk of Court, as commissioner for the court; Atty.
Felicisimo G. Pamandanan, counsel of the Philippine National Bank Branch at Floridablanca, for the plaintiff; and Atty.
Leonardo F. Lansangan, Filipino legal counsel at Clark Air Base, for the defendants. The Commissioners, after having
qualified themselves, proceeded to the performance of their duties.

On March 15,1961 the Commissioners submitted their report and recommendation, wherein, after having determined that
the lands sought to be expropriated were residential lands, they recommended unanimously that the lowest price that
should be paid was P10.00 per square meter, for both the lands of Castellvi and Toledo-Gozun; that an additional
P5,000.00 be paid to Toledo-Gozun for improvements found on her land; that legal interest on the compensation,
computed from August 10, 1959, be paid after deducting the amounts already paid to the owners, and that no
consequential damages be awarded. 4 The Commissioners' report was objected to by all the parties in the case by
defendants Castellvi and Toledo-Gozun, who insisted that the fair market value of their lands should be fixed at P15.00
per square meter; and by the Republic, which insisted that the price to be paid for the lands should be fixed at P0.20 per
square meter. 5

After the parties-defendants and intervenors had filed their respective memoranda, and the Republic, after several
extensions of time, had adopted as its memorandum its objections to the report of the Commissioners, the trial court, on
May 26, 1961, rendered its decision 6 the dispositive portion of which reads as follows:

WHEREFORE, taking into account all the foregoing circumstances, and that the lands are titled, ... the
rising trend of land values ..., and the lowered purchasing power of the Philippine peso, the court finds
that the unanimous recommendation of the commissioners of ten (P10.00) pesos per square meter for the
three lots of the defendants subject of this action is fair and just.

xxx xxx xxx

The plaintiff will pay 6% interest per annum on the total value of the lands of defendant Toledo-Gozun
since (sic) the amount deposited as provisional value from August 10, 1959 until full payment is made to
said defendant or deposit therefor is made in court.

In respect to the defendant Castellvi, interest at 6% per annum will also be paid by the plaintiff to
defendant Castellvi from July 1, 1956 when plaintiff commenced its illegal possession of the Castellvi land
when the instant action had not yet been commenced to July 10, 1959 when the provisional value thereof
was actually deposited in court, on the total value of the said (Castellvi) land as herein adjudged. The
same rate of interest shall be paid from July 11, 1959 on the total value of the land herein adjudged minus
the amount deposited as provisional value, or P151,859.80, such interest to run until full payment is made
 to said defendant or deposit therefor is made in court. All the intervenors having failed to produce
evidence in support of their respective interventions, said interventions are ordered dismissed.

The costs shall be charged to the plaintiff.

On June 21, 1961 the Republic filed a motion for a new trial and/or reconsideration, upon the grounds of newly-discovered
evidence, that the decision was not supported by the evidence, and that the decision was against the law, against which
motion defendants Castellvi and Toledo-Gozun filed their respective oppositions. On July 8, 1961 when the motion of the
Republic for new trial and/or reconsideration was called for hearing, the Republic filed a supplemental motion for new trial
upon the ground of additional newly-discovered evidence. This motion for new trial and/or reconsideration was denied by
the court on July 12, 1961.

On July 17, 1961 the Republic gave notice of its intention to appeal from the decision of May 26, 1961 and the order of
July 12, 1961. Defendant Castellvi also filed, on July 17, 1961, her notice of appeal from the decision of the trial court.

The Republic filed various ex-parte motions for extension of time within which to file its record on appeal. The Republic's
record on appeal was finally submitted on December 6, 1961.

Defendants Castellvi and Toledo-Gozun filed not only a joint opposition to the approval of the Republic's record on appeal,
but also a joint memorandum in support of their opposition. The Republic also filed a memorandum in support of its prayer
for the approval of its record on appeal. On December 27, 1961 the trial court issued an order declaring both the record
on appeal filed by the Republic, and the record on appeal filed by defendant Castellvi as having been filed out of time,
thereby dismissing both appeals.

On January 11, 1962 the Republic filed a "motion to strike out the order of December 27, 1961 and for reconsideration",
and subsequently an amended record on appeal, against which motion the defendants Castellvi and Toledo-Gozun filed
their opposition. On July 26, 1962 the trial court issued an order, stating that "in the interest of expediency, the questions
raised may be properly and finally determined by the Supreme Court," and at the same time it ordered the Solicitor
General to submit a record on appeal containing copies of orders and pleadings specified therein. In an order dated
November 19, 1962, the trial court approved the Republic's record on appeal as amended.

Defendant Castellvi did not insist on her appeal. Defendant Toledo-Gozun did not appeal.

The motion to dismiss the Republic's appeal was reiterated by appellees Castellvi and Toledo-Gozun before this Court,
but this Court denied the motion.

In her motion of August 11, 1964, appellee Castellvi sought to increase the provisional value of her land. The Republic, in
its comment on Castellvi's motion, opposed the same. This Court denied Castellvi's motion in a resolution dated October
2,1964.

The motion of appellees, Castellvi and Toledo-Gozun, dated October 6, 1969, praying that they be authorized to mortgage
the lands subject of expropriation, was denied by this Court or October 14, 1969.

On February 14, 1972, Attys. Alberto Cacnio, and Associates, counsel for the estate of the late Don Alfonso de Castellvi in
the expropriation proceedings, filed a notice of attorney's lien, stating that as per agreement with the administrator of the
estate of Don Alfonso de Castellvi they shall receive by way of attorney's fees, "the sum equivalent to ten per centum of
whatever the court may finally decide as the expropriated price of the property subject matter of the case."

---------

Before this Court, the Republic contends that the lower court erred:
 1. In finding the price of P10 per square meter of the lands subject of the instant proceedings as just
compensation;

2. In holding that the "taking" of the properties under expropriation commenced with the filing of this
action;

3. In ordering plaintiff-appellant to pay 6% interest on the adjudged value of the Castellvi property to start
from July of 1956;

4. In denying plaintiff-appellant's motion for new trial based on newly discovered evidence.

In its brief, the Republic discusses the second error assigned as the first issue to be considered. We shall follow the
sequence of the Republic's discussion.

1. In support of the assigned error that the lower court erred in holding that the "taking" of the properties under
expropriation commenced with the filing of the complaint in this case, the Republic argues that the "taking" should be
reckoned from the year 1947 when by virtue of a special lease agreement between the Republic and appellee Castellvi,
the former was granted the "right and privilege" to buy the property should the lessor wish to terminate the lease, and that
in the event of such sale, it was stipulated that the fair market value should be as of the time of occupancy; and that the
permanent improvements amounting to more that half a million pesos constructed during a period of twelve years on the
land, subject of expropriation, were indicative of an agreed pattern of permanency and stability of occupancy by the
Philippine Air Force in the interest of national Security. 7

Appellee Castellvi, on the other hand, maintains that the "taking" of property under the power of eminent domain requires
two essential elements, to wit: (1) entrance and occupation by condemn or upon the private property for more than a
momentary or limited period, and (2) devoting it to a public use in such a way as to oust the owner and deprive him of all
beneficial enjoyment of the property. This appellee argues that in the instant case the first element is wanting, for the
contract of lease relied upon provides for a lease from year to year; that the second element is also wanting, because the
Republic was paying the lessor Castellvi a monthly rental of P445.58; and that the contract of lease does not grant the
Republic the "right and privilege" to buy the premises "at the value at the time of occupancy." 8

Appellee Toledo-Gozun did not comment on the Republic's argument in support of the second error assigned, because as
far as she was concerned the Republic had not taken possession of her lands prior to August 10, 1959. 9

In order to better comprehend the issues raised in the appeal, in so far as the Castellvi property is concerned, it should be
noted that the Castellvi property had been occupied by the Philippine Air Force since 1947 under a contract of lease,
typified by the contract marked Exh. 4-Castellvi, the pertinent portions of which read:

CONTRACT OF LEASE

This AGREEMENT OF LEASE MADE AND ENTERED into by and between INTESTATE ESTATE OF
ALFONSO DE CASTELLVI, represented by CARMEN M. DE CASTELLVI, Judicial Administratrix ...
hereinafter called the LESSOR and THE REPUBLIC OF THE PHILIPPINES represented by MAJ. GEN.
CALIXTO DUQUE, Chief of Staff of the ARMED FORCES OF THE PHILIPPINES, hereinafter called the
LESSEE,

WITNESSETH:

1. For and in consideration of the rentals hereinafter reserved and the mutual terms, covenants and
conditions of the parties, the LESSOR has, and by these presents does, lease and let unto the LESSEE
the following described land together with the improvements thereon and appurtenances thereof, viz:
 Un Terreno, Lote No. 27 del Plano de subdivision Psu 34752, parte de la hacienda de Campauit, situado
en el Barrio de San Jose, Municipio de Floridablanca Pampanga. ... midiendo una extension superficial
de cuatro milliones once mil cuatro cientos trienta y cinco (4,001,435) [sic] metros cuadrados, mas o
menos.

Out of the above described property, 75.93 hectares thereof are actually occupied and covered by this
contract. .

Above lot is more particularly described in TCT No. 1016, province of

Pampanga ...

of which premises, the LESSOR warrants that he/she/they/is/are the registered owner(s) and with full authority to execute
a contract of this nature.

2. The term of this lease shall be for the period beginning July 1, 1952 the date the premises were
occupied by the PHILIPPINE AIR FORCE, AFP until June 30, 1953, subject to renewal for another year at
the option of the LESSEE or unless sooner terminated by the LESSEE as hereinafter provided.

3. The LESSOR hereby warrants that the LESSEE shall have quiet, peaceful and undisturbed possession
of the demised premises throughout the full term or period of this lease and the LESSOR undertakes
without cost to the LESSEE to eject all trespassers, but should the LESSOR fail to do so, the LESSEE at
its option may proceed to do so at the expense of the LESSOR. The LESSOR further agrees that should
he/she/they sell or encumber all or any part of the herein described premises during the period of this
lease, any conveyance will be conditioned on the right of the LESSEE hereunder.

4. The LESSEE shall pay to the LESSOR as monthly rentals under this lease the sum of FOUR
HUNDRED FIFTY-FIVE PESOS & 58/100 (P455.58) ...

5. The LESSEE may, at any time prior to the termination of this lease, use the property for any purpose or
purposes and, at its own costs and expense make alteration, install facilities and fixtures and errect
additions ... which facilities or fixtures ... so placed in, upon or attached to the said premises shall be and
remain property of the LESSEE and may be removed therefrom by the LESSEE prior to the termination of
this lease. The LESSEE shall surrender possession of the premises upon the expiration or termination of
this lease and if so required by the LESSOR, shall return the premises in substantially the same condition
as that existing at the time same were first occupied by the AFP, reasonable and ordinary wear and tear
and damages by the elements or by circumstances over which the LESSEE has no control excepted:
PROVIDED, that if the LESSOR so requires the return of the premises in such condition, the LESSOR
shall give written notice thereof to the LESSEE at least twenty (20) days before the termination of the
lease and provided, further, that should the LESSOR give notice within the time specified above, the
LESSEE shall have the right and privilege to compensate the LESSOR at the fair value or the equivalent,
in lieu of performance of its obligation, if any, to restore the premises. Fair value is to be determined as
the value at the time of occupancy less fair wear and tear and depreciation during the period of this lease.

6. The LESSEE may terminate this lease at any time during the term hereof by giving written notice to the
LESSOR at least thirty (30) days in advance ...

7. The LESSEE should not be responsible, except under special legislation for any damages to the
premises by reason of combat operations, acts of GOD, the elements or other acts and deeds not due to
the negligence on the part of the LESSEE.

8. This LEASE AGREEMENT supersedes and voids any and all agreements and undertakings, oral or
written, previously entered into between the parties covering the property herein leased, the same having
been merged herein. This AGREEMENT may not be modified or altered except by instrument in writing
only duly signed by the parties. 10
It was stipulated by the parties, that "the foregoing contract of lease (Exh. 4, Castellvi) is 'similar in terms and conditions,
including the date', with the annual contracts entered into from year to year between defendant Castellvi and the Republic
of the Philippines (p. 17, t.s.n., Vol. III)". 11 It is undisputed, therefore, that the Republic occupied Castellvi's land from July
1, 1947, by virtue of the above-mentioned contract, on a year to year basis (from July 1 of each year to June 30 of the
succeeding year) under the terms and conditions therein stated.

Before the expiration of the contract of lease on June 30, 1956 the Republic sought to renew the same but Castellvi
refused. When the AFP refused to vacate the leased premises after the termination of the contract, on July 11, 1956,
Castellvi wrote to the Chief of Staff, AFP, informing the latter that the heirs of the property had decided not to continue
leasing the property in question because they had decided to subdivide the land for sale to the general public, demanding
that the property be vacated within 30 days from receipt of the letter, and that the premises be returned in substantially the
same condition as before occupancy (Exh. 5 Castellvi). A follow-up letter was sent on January 12, 1957, demanding
the delivery and return of the property within one month from said date (Exh. 6 Castellvi). On January 30, 1957,
Lieutenant General Alfonso Arellano, Chief of Staff, answered the letter of Castellvi, saying that it was difficult for the army
to vacate the premises in view of the permanent installations and other facilities worth almost P500,000.00 that were
erected and already established on the property, and that, there being no other recourse, the acquisition of the property by
means of expropriation proceedings would be recommended to the President (Exhibit "7" Castellvi).

Defendant Castellvi then brought suit in the Court of First Instance of Pampanga, in Civil Case No. 1458, to eject the
Philippine Air Force from the land. While this ejectment case was pending, the Republic instituted these expropriation
proceedings, and, as stated earlier in this opinion, the Republic was placed in possession of the lands on August 10,
1959, On November 21, 1959, the Court of First Instance of Pampanga, dismissed Civil Case No. 1458, upon petition of
the parties, in an order which, in part, reads as follows:

1. Plaintiff has agreed, as a matter of fact has already signed an agreement with defendants, whereby
she has agreed to receive the rent of the lands, subject matter of the instant case from June 30, 1966 up
to 1959 when the Philippine Air Force was placed in possession by virtue of an order of the Court upon
depositing the provisional amount as fixed by the Provincial Appraisal Committee with the Provincial
Treasurer of Pampanga;

2. That because of the above-cited agreement wherein the administratrix decided to get the rent
corresponding to the rent from 1956 up to 1959 and considering that this action is one of illegal detainer
and/or to recover the possession of said land by virtue of non-payment of rents, the instant case now has
become moot and academic and/or by virtue of the agreement signed by plaintiff, she has waived her
cause of action in the above-entitled case. 12

The Republic urges that the "taking " of Castellvi's property should be deemed as of the year 1947 by virtue of afore-
quoted lease agreement. In American Jurisprudence, Vol. 26, 2nd edition, Section 157, on the subject of "Eminent
Domain, we read the definition of "taking" (in eminent domain) as follows:

Taking' under the power of eminent domain may be defined generally as entering upon private property
for more than a momentary period, and, under the warrant or color of legal authority, devoting it to a
public use, or otherwise informally appropriating or injuriously affecting it in such a way as substantially to
oust the owner and deprive him of all beneficial enjoyment thereof. 13

Pursuant to the aforecited authority, a number of circumstances must be present in the "taking" of property for purposes of
eminent domain.

First, the expropriator must enter a private property. This circumstance is present in the instant case, when by virtue of the
lease agreement the Republic, through the AFP, took possession of the property of Castellvi.

Second, the entrance into private property must be for more than a momentary period. "Momentary" means, "lasting but a
moment; of but a moment's duration" (The Oxford English Dictionary, Volume VI, page 596); "lasting a very short time;
transitory; having a very brief life; operative or recurring at every moment" (Webster's Third International Dictionary, 1963
edition.) The word "momentary" when applied to possession or occupancy of (real) property should be construed to mean
"a limited period" not indefinite or permanent. The aforecited lease contract was for a period of one year, renewable
from year to year. The entry on the property, under the lease, is temporary, and considered transitory. The fact that the
Republic, through the AFP, constructed some installations of a permanent nature does not alter the fact that the entry into
the land was transitory, or intended to last a year, although renewable from year to year by consent of 'The owner of the
land. By express provision of the lease agreement the Republic, as lessee, undertook to return the premises in
substantially the same condition as at the time the property was first occupied by the AFP. It is claimed that the intention of
the lessee was to occupy the land permanently, as may be inferred from the construction of permanent improvements. But
this "intention" cannot prevail over the clear and express terms of the lease contract. Intent is to be deduced from the
language employed by the parties, and the terms 'of the contract, when unambiguous, as in the instant case, are
conclusive in the absence of averment and proof of mistake or fraud the question being not what the intention was, but
what is expressed in the language used. (City of Manila v. Rizal Park Co., Inc., 53 Phil. 515, 525); Magdalena Estate, Inc.
v. Myrick, 71 Phil. 344, 348). Moreover, in order to judge the intention of the contracting parties, their contemporaneous
and subsequent acts shall be principally considered (Art. 1371, Civil Code). If the intention of the lessee (Republic) in
1947 was really to occupy permanently Castellvi's property, why was the contract of lease entered into on year to year
basis? Why was the lease agreement renewed from year to year? Why did not the Republic expropriate this land of
Castellvi in 1949 when, according to the Republic itself, it expropriated the other parcels of land that it occupied at the
same time as the Castellvi land, for the purpose of converting them into a jet air base? 14 It might really have been the
intention of the Republic to expropriate the lands in question at some future time, but certainly mere notice - much less an
implied notice of such intention on the part of the Republic to expropriate the lands in the future did not, and could not,
bind the landowner, nor bind the land itself. The expropriation must be actually commenced in court (Republic vs.
Baylosis, et al., 96 Phil. 461, 484).

Third, the entry into the property should be under warrant or color of legal authority. This circumstance in the "taking" may
be considered as present in the instant case, because the Republic entered the Castellvi property as lessee.

Fourth, the property must be devoted to a public use or otherwise informally appropriated or injuriously affected. It may be
conceded that the circumstance of the property being devoted to public use is present because the property was used by
the air force of the AFP.

Fifth, the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all
beneficial enjoyment of the property. In the instant case, the entry of the Republic into the property and its utilization of the
same for public use did not oust Castellvi and deprive her of all beneficial enjoyment of the property. Castellvi remained as
owner, and was continuously recognized as owner by the Republic, as shown by the renewal of the lease contract from
year to year, and by the provision in the lease contract whereby the Republic undertook to return the property to Castellvi
when the lease was terminated. Neither was Castellvi deprived of all the beneficial enjoyment of the property, because the
Republic was bound to pay, and had been paying, Castellvi the agreed monthly rentals until the time when it filed the
complaint for eminent domain on June 26, 1959.

It is clear, therefore, that the "taking" of Catellvi's property for purposes of eminent domain cannot be considered to have
taken place in 1947 when the Republic commenced to occupy the property as lessee thereof. We find merit in the
contention of Castellvi that two essential elements in the "taking" of property under the power of eminent domain, namely:
(1) that the entrance and occupation by the condemnor must be for a permanent, or indefinite period, and (2) that in
devoting the property to public use the owner was ousted from the property and deprived of its beneficial use, were not
present when the Republic entered and occupied the Castellvi property in 1947.

Untenable also is the Republic's contention that although the contract between the parties was one of lease on a year to
year basis, it was "in reality a more or less permanent right to occupy the premises under the guise of lease with the 'right
and privilege' to buy the property should the lessor wish to terminate the lease," and "the right to buy the property is
merged as an integral part of the lease relationship ... so much so that the fair market value has been agreed upon, not,
as of the time of purchase, but as of the time of occupancy" 15 We cannot accept the Republic's contention that a lease on
a year to year basis can give rise to a permanent right to occupy, since by express legal provision a lease made for a
determinate time, as was the lease of Castellvi's land in the instant case, ceases upon the day fixed, without need of a
demand (Article 1669, Civil Code). Neither can it be said that the right of eminent domain may be exercised by simply
leasing the premises to be expropriated (Rule 67, Section 1, Rules of Court). Nor can it be accepted that the Republic
would enter into a contract of lease where its real intention was to buy, or why the Republic should enter into a simulated
contract of lease ("under the guise of lease", as expressed by counsel for the Republic) when all the time the Republic
had the right of eminent domain, and could expropriate Castellvi's land if it wanted to without resorting to any guise
whatsoever. Neither can we see how a right to buy could be merged in a contract of lease in the absence of any
agreement between the parties to that effect. To sustain the contention of the Republic is to sanction a practice whereby in
order to secure a low price for a land which the government intends to expropriate (or would eventually expropriate) it
would first negotiate with the owner of the land to lease the land (for say ten or twenty years) then expropriate the same
when the lease is about to terminate, then claim that the "taking" of the property for the purposes of the expropriation be
reckoned as of the date when the Government started to occupy the property under the lease, and then assert that the
value of the property being expropriated be reckoned as of the start of the lease, in spite of the fact that the value of the
property, for many good reasons, had in the meantime increased during the period of the lease. This would be sanctioning
what obviously is a deceptive scheme, which would have the effect of depriving the owner of the property of its true and
fair market value at the time when the expropriation proceedings were actually instituted in court. The Republic's claim
that it had the "right and privilege" to buy the property at the value that it had at the time when it first occupied the property
as lessee nowhere appears in the lease contract. What was agreed expressly in paragraph No. 5 of the lease agreement
was that, should the lessor require the lessee to return the premises in the same condition as at the time the same was
first occupied by the AFP, the lessee would have the "right and privilege" (or option) of paying the lessor what it would
fairly cost to put the premises in the same condition as it was at the commencement of the lease, in lieu of the lessee's
performance of the undertaking to put the land in said condition. The "fair value" at the time of occupancy, mentioned in
the lease agreement, does not refer to the value of the property if bought by the lessee, but refers to the cost of restoring
the property in the same condition as of the time when the lessee took possession of the property. Such fair value cannot
refer to the purchase price, for purchase was never intended by the parties to the lease contract. It is a rule in the
interpretation of contracts that "However general the terms of a contract may be, they shall not be understood to
comprehend things that are distinct and cases that are different from those upon which the parties intended to agree" (Art.
1372, Civil Code).

We hold, therefore, that the "taking" of the Castellvi property should not be reckoned as of the year 1947 when the
Republic first occupied the same pursuant to the contract of lease, and that the just compensation to be paid for the
Castellvi property should not be determined on the basis of the value of the property as of that year. The lower court did
not commit an error when it held that the "taking" of the property under expropriation commenced with the filing of the
complaint in this case.

Under Section 4 of Rule 67 of the Rules of Court, 16 the "just compensation" is to be determined as of the date of the filing
of the complaint. This Court has ruled that when the taking of the property sought to be expropriated coincides with the
commencement of the expropriation proceedings, or takes place subsequent to the filing of the complaint for eminent
domain, the just compensation should be determined as of the date of the filing of the complaint. (Republic vs. Philippine
National Bank, L-14158, April 12, 1961, 1 SCRA 957, 961-962). In the instant case, it is undisputed that the Republic was
placed in possession of the Castellvi property, by authority of the court, on August 10, 1959. The "taking" of the Castellvi
property for the purposes of determining the just compensation to be paid must, therefore, be reckoned as of June 26,
1959 when the complaint for eminent domain was filed.

Regarding the two parcels of land of Toledo-Gozun, also sought to be expropriated, which had never been under lease to
the Republic, the Republic was placed in possession of said lands, also by authority of the court, on August 10, 1959, The
taking of those lands, therefore, must also be reckoned as of June 26, 1959, the date of the filing of the complaint for
eminent domain.

2. Regarding the first assigned error discussed as the second issue the Republic maintains that, even assuming that
the value of the expropriated lands is to be determined as of June 26, 1959, the price of P10.00 per square meter fixed by
the lower court "is not only exhorbitant but also unconscionable, and almost fantastic". On the other hand, both Castellvi
and Toledo-Gozun maintain that their lands are residential lands with a fair market value of not less than P15.00 per
square meter.
The lower court found, and declared, that the lands of Castellvi and Toledo-Gozun are residential lands. The finding of the
lower court is in consonance with the unanimous opinion of the three commissioners who, in their report to the court,
declared that the lands are residential lands.

The Republic assails the finding that the lands are residential, contending that the plans of the appellees to convert the
lands into subdivision for residential purposes were only on paper, there being no overt acts on the part of the appellees
which indicated that the subdivision project had been commenced, so that any compensation to be awarded on the basis
of the plans would be speculative. The Republic's contention is not well taken. We find evidence showing that the lands in
question had ceased to be devoted to the production of agricultural crops, that they had become adaptable for residential
purposes, and that the appellees had actually taken steps to convert their lands into residential subdivisions even before
the Republic filed the complaint for eminent domain. In the case of City of Manila vs. Corrales (32 Phil. 82, 98) this Court
laid down basic guidelines in determining the value of the property expropriated for public purposes. This Court said:

In determining the value of land appropriated for public purposes, the same consideration are to be
regarded as in a sale of property between private parties. The inquiry, in such cases, must be what is the
property worth in the market, viewed not merely with reference to the uses to which it is at the time
applied, but with reference to the uses to which it is plainly adapted, that is to say, What is it worth from its
availability for valuable uses?

So many and varied are the circumstances to be taken into account in determining the value of property
condemned for public purposes, that it is practically impossible to formulate a rule to govern its
appraisement in all cases. Exceptional circumstances will modify the most carefully guarded rule, but, as
a general thing, we should say that the compensation of the owner is to be estimated by reference to the
use for which the property is suitable, having regard to the existing business or wants of the community,
or such as may be reasonably expected in the immediate future. (Miss. and Rum River Boom Co. vs.
Patterson, 98 U.S., 403).

In expropriation proceedings, therefore, the owner of the land has the right to its value for the use for which it would bring
the most in the market. 17 The owner may thus show every advantage that his property possesses, present and
prospective, in order that the price it could be sold for in the market may be satisfactorily determined. 18 The owner may
also show that the property is suitable for division into village or town lots. 19

The trial court, therefore, correctly considered, among other circumstances, the proposed subdivision plans of the lands
sought to be expropriated in finding that those lands are residential lots. This finding of the lower court is supported not
only by the unanimous opinion of the commissioners, as embodied in their report, but also by the Provincial Appraisal
Committee of the province of Pampanga composed of the Provincial Treasurer, the Provincial Auditor and the District
Engineer. In the minutes of the meeting of the Provincial Appraisal Committee, held on May 14, 1959 (Exh. 13-Castellvi)
We read in its Resolution No. 10 the following:

3. Since 1957 the land has been classified as residential in view of its proximity to the air base and due to
the fact that it was not being devoted to agriculture. In fact, there is a plan to convert it into a subdivision
for residential purposes. The taxes due on the property have been paid based on its classification as
residential land;

The evidence shows that Castellvi broached the idea of subdividing her land into residential lots as early as July 11, 1956
in her letter to the Chief of Staff of the Armed Forces of the Philippines. (Exh. 5-Castellvi) As a matter of fact, the layout of
the subdivision plan was tentatively approved by the National Planning Commission on September 7, 1956. (Exh. 8-
Castellvi). The land of Castellvi had not been devoted to agriculture since 1947 when it was leased to the Philippine Army.
In 1957 said land was classified as residential, and taxes based on its classification as residential had been paid since
then (Exh. 13-Castellvi). The location of the Castellvi land justifies its suitability for a residential subdivision. As found by
the trial court, "It is at the left side of the entrance of the Basa Air Base and bounded on two sides by roads (Exh. 13-
Castellvi), paragraphs 1 and 2, Exh. 12-Castellvi), the poblacion, (of Floridablanca) the municipal building, and the
Pampanga Sugar Mills are closed by. The barrio schoolhouse and chapel are also near (T.S.N. November 23,1960, p.
68)." 20
The lands of Toledo-Gozun (Lot 1-B and Lot 3) are practically of the same condition as the land of Castellvi. The lands of
Toledo-Gozun adjoin the land of Castellvi. They are also contiguous to the Basa Air Base, and are along the road. These
lands are near the barrio schoolhouse, the barrio chapel, the Pampanga Sugar Mills, and the poblacion of Floridablanca
(Exhs. 1, 3 and 4-Toledo-Gozun). As a matter of fact, regarding lot 1-B it had already been surveyed and subdivided, and
its conversion into a residential subdivision was tentatively approved by the National Planning Commission on July 8,
1959 (Exhs. 5 and 6 Toledo-Gozun). As early as June, 1958, no less than 32 man connected with the Philippine Air Force
among them commissioned officers, non-commission officers, and enlisted men had requested Mr. and Mrs. Joaquin D.
Gozun to open a subdivision on their lands in question (Exhs. 8, 8-A to 8-ZZ-Toledo-Gozun). 21

We agree with the findings, and the conclusions, of the lower court that the lands that are the subject of expropriation in
the present case, as of August 10, 1959 when the same were taken possession of by the Republic, were residential lands
and were adaptable for use as residential subdivisions. Indeed, the owners of these lands have the right to their value for
the use for which they would bring the most in the market at the time the same were taken from them. The most important
issue to be resolved in the present case relates to the question of what is the just compensation that should be paid to the
appellees.

The Republic asserts that the fair market value of the lands of the appellees is P.20 per square meter. The Republic cites
the case of Republic vs. Narciso, et al., L-6594, which this Court decided on May 18, 1956. The Narciso case involved
lands that belonged to Castellvi and Toledo-Gozun, and to one Donata Montemayor, which were expropriated by the
Republic in 1949 and which are now the site of the Basa Air Base. In the Narciso case this Court fixed the fair market
value at P.20 per square meter. The lands that are sought to be expropriated in the present case being contiguous to the
lands involved in the Narciso case, it is the stand of the Republic that the price that should be fixed for the lands now in
question should also be at P.20 per square meter.

We can not sustain the stand of the Republic. We find that the price of P.20 per square meter, as fixed by this Court in the
Narciso case, was based on the allegation of the defendants (owners) in their answer to the complaint for eminent domain
in that case that the price of their lands was P2,000.00 per hectare and that was the price that they asked the court to pay
them. This Court said, then, that the owners of the land could not be given more than what they had asked,
notwithstanding the recommendation of the majority of the Commission on Appraisal which was adopted by the trial
court that the fair market value of the lands was P3,000.00 per hectare. We also find that the price of P.20 per square
meter in the Narciso case was considered the fair market value of the lands as of the year 1949 when the expropriation
proceedings were instituted, and at that time the lands were classified as sugar lands, and assessed for taxation purposes
at around P400.00 per hectare, or P.04 per square meter. 22 While the lands involved in the present case, like the lands
involved in the Narciso case, might have a fair market value of P.20 per square meter in 1949, it can not be denied that
ten years later, in 1959, when the present proceedings were instituted, the value of those lands had increased
considerably. The evidence shows that since 1949 those lands were no longer cultivated as sugar lands, and in 1959
those lands were already classified, and assessed for taxation purposes, as residential lands. In 1959 the land of Castellvi
was assessed at P1.00 per square meter. 23

The Republic also points out that the Provincial Appraisal Committee of Pampanga, in its resolution No. 5 of February 15,
1957 (Exhibit D), recommended the sum of P.20 per square meter as the fair valuation of the Castellvi property. We find
that this resolution was made by the Republic the basis in asking the court to fix the provisional value of the lands sought
to be expropriated at P259,669.10, which was approved by the court. 24 It must be considered, however, that the amount
fixed as the provisional value of the lands that are being expropriated does not necessarily represent the true and correct
value of the land. The value is only "provisional" or "tentative", to serve as the basis for the immediate occupancy of the
property being expropriated by the condemnor. The records show that this resolution No. 5 was repealed by the same
Provincial Committee on Appraisal in its resolution No. 10 of May 14, 1959 (Exhibit 13-Castellvi). In that resolution No. 10,
the appraisal committee stated that "The Committee has observed that the value of the land in this locality has increased
since 1957 ...", and recommended the price of P1.50 per square meter. It follows, therefore, that, contrary to the stand of
the Republic, that resolution No. 5 of the Provincial Appraisal Committee can not be made the basis for fixing the fair
market value of the lands of Castellvi and Toledo-Gozun.

The Republic further relied on the certification of the Acting Assistant Provincial Assessor of Pampanga, dated February 8,
1961 (Exhibit K), to the effect that in 1950 the lands of Toledo-Gozun were classified partly as sugar land and partly as
urban land, and that the sugar land was assessed at P.40 per square meter, while part of the urban land was assessed at
P.40 per square meter and part at P.20 per square meter; and that in 1956 the Castellvi land was classified as sugar land
and was assessed at P450.00 per hectare, or P.045 per square meter. We can not also consider this certification of the
Acting Assistant Provincial Assessor as a basis for fixing the fair market value of the lands of Castellvi and Toledo-Gozun
because, as the evidence shows, the lands in question, in 1957, were already classified and assessed for taxation
purposes as residential lands. The certification of the assessor refers to the year 1950 as far as the lands of Toledo-Gozun
are concerned, and to the year 1956 as far as the land of Castellvi is concerned. Moreover, this Court has held that the
valuation fixed for the purposes of the assessment of the land for taxation purposes can not bind the landowner where the
latter did not intervene in fixing it. 25

On the other hand, the Commissioners, appointed by the court to appraise the lands that were being expropriated,
recommended to the court that the price of P10.00 per square meter would be the fair market value of the lands. The
commissioners made their recommendation on the basis of their observation after several ocular inspections of the lands,
of their own personal knowledge of land values in the province of Pampanga, of the testimonies of the owners of the land,
and other witnesses, and of documentary evidence presented by the appellees. Both Castellvi and Toledo-Gozun testified
that the fair market value of their respective land was at P15.00 per square meter. The documentary evidence considered
by the commissioners consisted of deeds of sale of residential lands in the town of San Fernando and in Angeles City, in
the province of Pampanga, which were sold at prices ranging from P8.00 to P20.00 per square meter (Exhibits 15, 16, 17,
18, 19, 20, 21, 22, 23-Castellvi). The commissioners also considered the decision in Civil Case No. 1531 of the Court of
First Instance of Pampanga, entitled Republic vs. Sabina Tablante, which was expropriation case filed on January 13,
1959, involving a parcel of land adjacent to the Clark Air Base in Angeles City, where the court fixed the price at P18.00
per square meter (Exhibit 14-Castellvi). In their report, the commissioners, among other things, said:

... This expropriation case is specially pointed out, because the circumstances and factors involved
therein are similar in many respects to the defendants' lands in this case. The land in Civil Case No. 1531
of this Court and the lands in the present case (Civil Case No. 1623) are both near the air bases, the
Clark Air Base and the Basa Air Base respectively. There is a national road fronting them and are situated
in a first-class municipality. As added advantage it may be said that the Basa Air Base land is very near
the sugar mill at Del Carmen, Floridablanca, Pampanga, owned by the Pampanga Sugar Mills. Also just
stone's throw away from the same lands is a beautiful vacation spot at Palacol, a sitio of the town of
Floridablanca, which counts with a natural swimming pool for vacationists on weekends. These
advantages are not found in the case of the Clark Air Base. The defendants' lands are nearer to the
poblacion of Floridablanca then Clark Air Base is nearer (sic) to the poblacion of Angeles, Pampanga.

The deeds of absolute sale, according to the undersigned commissioners, as well as the land in Civil
Case No. 1531 are competent evidence, because they were executed during the year 1959 and before
August 10 of the same year. More specifically so the land at Clark Air Base which coincidentally is the
subject matter in the complaint in said Civil Case No. 1531, it having been filed on January 13, 1959 and
the taking of the land involved therein was ordered by the Court of First Instance of Pampanga on
January 15, 1959, several months before the lands in this case were taken by the plaintiffs ....

From the above and considering further that the lowest as well as the highest price per square meter
obtainable in the market of Pampanga relative to subdivision lots within its jurisdiction in the year 1959 is
very well known by the Commissioners, the Commission finds that the lowest price that can be awarded
to the lands in question is P10.00 per square meter. 26

The lower court did not altogether accept the findings of the Commissioners based on the documentary evidence, but it
considered the documentary evidence as basis for comparison in determining land values. The lower court arrived at the
conclusion that "the unanimous recommendation of the commissioners of ten (P10.00) pesos per square meter for the
three lots of the defendants subject of this action is fair and just". 27 In arriving at its conclusion, the lower court took into
consideration, among other circumstances, that the lands are titled, that there is a rising trend of land values, and the
lowered purchasing power of the Philippine peso.

In the case of Manila Railroad Co. vs. Caligsihan, 40 Phil. 326, 328, this Court said:
 A court of first instance or, on appeal, the Supreme Court, may change or modify the report of the
commissioners by increasing or reducing the amount of the award if the facts of the case so justify. While
great weight is attached to the report of the commissioners, yet a court may substitute therefor its
estimate of the value of the property as gathered from the record in certain cases, as, where the
commissioners have applied illegal principles to the evidence submitted to them, or where they have
disregarded a clear preponderance of evidence, or where the amount allowed is either palpably
inadequate or excessive. 28

The report of the commissioners of appraisal in condemnation proceedings are not binding, but merely advisory in
character, as far as the court is concerned. 29 In our analysis of the report of the commissioners, We find points that merit
serious consideration in the determination of the just compensation that should be paid to Castellvi and Toledo-Gozun for
their lands. It should be noted that the commissioners had made ocular inspections of the lands and had considered the
nature and similarities of said lands in relation to the lands in other places in the province of Pampanga, like San
Fernando and Angeles City. We cannot disregard the observations of the commissioners regarding the circumstances that
make the lands in question suited for residential purposes their location near the Basa Air Base, just like the lands in
Angeles City that are near the Clark Air Base, and the facilities that obtain because of their nearness to the big sugar
central of the Pampanga Sugar mills, and to the flourishing first class town of Floridablanca. It is true that the lands in
question are not in the territory of San Fernando and Angeles City, but, considering the facilities of modern
communications, the town of Floridablanca may be considered practically adjacent to San Fernando and Angeles City. It is
not out of place, therefore, to compare the land values in Floridablanca to the land values in San Fernando and Angeles
City, and form an idea of the value of the lands in Floridablanca with reference to the land values in those two other
communities.

The important factor in expropriation proceeding is that the owner is awarded the just compensation for his property. We
have carefully studied the record, and the evidence, in this case, and after considering the circumstances attending the
lands in question We have arrived at the conclusion that the price of P10.00 per square meter, as recommended by the
commissioners and adopted by the lower court, is quite high. It is Our considered view that the price of P5.00 per square
meter would be a fair valuation of the lands in question and would constitute a just compensation to the owners thereof. In
arriving at this conclusion We have particularly taken into consideration the resolution of the Provincial Committee on
Appraisal of the province of Pampanga informing, among others, that in the year 1959 the land of Castellvi could be sold
for from P3.00 to P4.00 per square meter, while the land of Toledo-Gozun could be sold for from P2.50 to P3.00 per
square meter. The Court has weighed all the circumstances relating to this expropriations proceedings, and in fixing the
price of the lands that are being expropriated the Court arrived at a happy medium between the price as recommended by
the commissioners and approved by the court, and the price advocated by the Republic. This Court has also taken judicial
notice of the fact that the value of the Philippine peso has considerably gone down since the year 1959. 30Considering that
the lands of Castellvi and Toledo-Gozun are adjoining each other, and are of the same nature, the Court has deemed it
proper to fix the same price for all these lands.

3. The third issue raised by the Republic relates to the payment of interest. The Republic maintains that
the lower court erred when it ordered the Republic to pay Castellvi interest at the rate of 6% per annum
on the total amount adjudged as the value of the land of Castellvi, from July 1, 1956 to July 10, 1959. We
find merit in this assignment of error.

In ordering the Republic to pay 6% interest on the total value of the land of Castellvi from July 1, 1956 to July 10, 1959,
the lower court held that the Republic had illegally possessed the land of Castellvi from July 1, 1956, after its lease of the
land had expired on June 30, 1956, until August 10, 1959 when the Republic was placed in possession of the land
pursuant to the writ of possession issued by the court. What really happened was that the Republic continued to occupy
the land of Castellvi after the expiration of its lease on June 30, 1956, so much so that Castellvi filed an ejectment case
against the Republic in the Court of First Instance of Pampanga. 31 However, while that ejectment case was pending, the
Republic filed the complaint for eminent domain in the present case and was placed in possession of the land on August
10, 1959, and because of the institution of the expropriation proceedings the ejectment case was later dismissed. In the
order dismissing the ejectment case, the Court of First Instance of Pampanga said:
 Plaintiff has agreed, as a matter of fact has already signed an agreement with defendants, whereby she
had agreed to receive the rent of the lands, subject matter of the instant case from June 30, 1956 up to
1959 when the Philippine Air Force was placed in possession by virtue of an order of the Court upon
depositing the provisional amount as fixed by the Provincial Appraisal Committee with the Provincial
Treasurer of
Pampanga; ...

If Castellvi had agreed to receive the rentals from June 30, 1956 to August 10, 1959, she should be considered as having
allowed her land to be leased to the Republic until August 10, 1959, and she could not at the same time be entitled to the
payment of interest during the same period on the amount awarded her as the just compensation of her land. The
Republic, therefore, should pay Castellvi interest at the rate of 6% per annum on the value of her land, minus the
provisional value that was deposited, only from July 10, 1959 when it deposited in court the provisional value of the land.

4. The fourth error assigned by the Republic relates to the denial by the lower court of its motion for a new trial based on
nearly discovered evidence. We do not find merit in this assignment of error.

After the lower court had decided this case on May 26, 1961, the Republic filed a motion for a new trial, supplemented by
another motion, both based upon the ground of newly discovered evidence. The alleged newly discovered evidence in the
motion filed on June 21, 1961 was a deed of absolute sale-executed on January 25, 1961, showing that a certain Serafin
Francisco had sold to Pablo L. Narciso a parcel of sugar land having an area of 100,000 square meters with a sugar
quota of 100 piculs, covered by P.A. No. 1701, situated in Barrio Fortuna, Floridablanca, for P14,000, or P.14 per square
meter.

In the supplemental motion, the alleged newly discovered evidence were: (1) a deed of sale of some 35,000 square
meters of land situated at Floridablanca for P7,500.00 (or about P.21 per square meter) executed in July, 1959, by the
spouses Evelyn D. Laird and Cornelio G. Laird in favor of spouses Bienvenido S. Aguas and Josefina Q. Aguas; and (2) a
deed of absolute sale of a parcel of land having an area of 4,120,101 square meters, including the sugar quota covered
by Plantation Audit No. 161 1345, situated at Floridablanca, Pampanga, for P860.00 per hectare (a little less than P.09 per
square meter) executed on October 22, 1957 by Jesus Toledo y Mendoza in favor of the Land Tenure Administration.

We find that the lower court acted correctly when it denied the motions for a new trial.

To warrant the granting of a new trial based on the ground of newly discovered evidence, it must appear that the evidence
was discovered after the trial; that even with the exercise of due diligence, the evidence could not have been discovered
and produced at the trial; and that the evidence is of such a nature as to alter the result of the case if admitted. 32 The
lower court correctly ruled that these requisites were not complied with.

The lower court, in a well-reasoned order, found that the sales made by Serafin Francisco to Pablo Narciso and that made
by Jesus Toledo to the Land Tenure Administration were immaterial and irrelevant, because those sales covered
sugarlands with sugar quotas, while the lands sought to be expropriated in the instant case are residential lands. The
lower court also concluded that the land sold by the spouses Laird to the spouses Aguas was a sugar land.

We agree with the trial court. In eminent domain proceedings, in order that evidence as to the sale price of other lands
may be admitted in evidence to prove the fair market value of the land sought to be expropriated, the lands must, among
other things, be shown to be similar.

But even assuming, gratia argumenti, that the lands mentioned in those deeds of sale were residential, the evidence
would still not warrant the grant of a new trial, for said evidence could have been discovered and produced at the trial, and
they cannot be considered newly discovered evidence as contemplated in Section 1(b) of Rule 37 of the Rules of Court.
Regarding this point, the trial court said:

The Court will now show that there was no reasonable diligence employed.
 The land described in the deed of sale executed by Serafin Francisco, copy of which is attached to the
original motion, is covered by a Certificate of Title issued by the Office of the Register of Deeds of
Pampanga. There is no question in the mind of the court but this document passed through the Office of
the Register of Deeds for the purpose of transferring the title or annotating the sale on the certificate of
title. It is true that Fiscal Lagman went to the Office of the Register of Deeds to check conveyances which
may be presented in the evidence in this case as it is now sought to be done by virtue of the motions at
bar, Fiscal Lagman, one of the lawyers of the plaintiff, did not exercise reasonable diligence as required
by the rules. The assertion that he only went to the office of the Register of Deeds 'now and then' to check
the records in that office only shows the half-hazard [sic] manner by which the plaintiff looked for evidence
to be presented during the hearing before the Commissioners, if it is at all true that Fiscal Lagman did
what he is supposed to have done according to Solicitor Padua. It would have been the easiest matter for
plaintiff to move for the issuance of a subpoena duces tecum directing the Register of Deeds of
Pampanga to come to testify and to bring with him all documents found in his office pertaining to sales of
land in Floridablanca adjacent to or near the lands in question executed or recorded from 1958 to the
present. Even this elementary precaution was not done by plaintiff's numerous attorneys.

The same can be said of the deeds of sale attached to the supplementary motion. They refer to lands
covered by certificate of title issued by the Register of Deeds of Pampanga. For the same reason they
could have been easily discovered if reasonable diligence has been exerted by the numerous lawyers of
the plaintiff in this case. It is noteworthy that all these deeds of sale could be found in several government
offices, namely, in the Office of the Register of Deeds of Pampanga, the Office of the Provincial Assessor
of Pampanga, the Office of the Clerk of Court as a part of notarial reports of notaries public that
acknowledged these documents, or in the archives of the National Library. In respect to Annex 'B' of the
supplementary motion copy of the document could also be found in the Office of the Land Tenure
Administration, another government entity. Any lawyer with a modicum of ability handling this
expropriation case would have right away though [sic] of digging up documents diligently showing
conveyances of lands near or around the parcels of land sought to be expropriated in this case in the
offices that would have naturally come to his mind such as the offices mentioned above, and had counsel
for the movant really exercised the reasonable diligence required by the Rule' undoubtedly they would
have been able to find these documents and/or caused the issuance of subpoena duces tecum. ...

It is also recalled that during the hearing before the Court of the Report and Recommendation of the
Commissioners and objection thereto, Solicitor Padua made the observation:

I understand, Your Honor, that there was a sale that took place in this place of land recently where the
land was sold for P0.20 which is contiguous to this land.

The Court gave him permission to submit said document subject to the approval of the Court. ... This was
before the decision was rendered, and later promulgated on May 26, 1961 or more than one month after
Solicitor Padua made the above observation. He could have, therefore, checked up the alleged sale and
moved for a reopening to adduce further evidence. He did not do so. He forgot to present the evidence at
a more propitious time. Now, he seeks to introduce said evidence under the guise of newly-discovered
evidence. Unfortunately the Court cannot classify it as newly-discovered evidence, because tinder the
circumstances, the correct qualification that can be given is 'forgotten evidence'. Forgotten however, is not
newly-discovered
evidence. 33

The granting or denial of a motion for new trial is, as a general rule, discretionary with the trial court, whose judgment
should not be disturbed unless there is a clear showing of abuse of discretion. 34 We do not see any abuse of discretion on
the part of the lower court when it denied the motions for a new trial.

WHEREFORE, the decision appealed from is modified, as follows:

 (a) the lands of appellees Carmen Vda. de Castellvi and Maria Nieves Toledo-Gozun, as described in the
complaint, are declared expropriated for public use;

(b) the fair market value of the lands of the appellees is fixed at P5.00 per square meter;

(c) the Republic must pay appellee Castellvi the sum of P3,796,495.00 as just compensation for her one
parcel of land that has an area of 759,299 square meters, minus the sum of P151,859.80 that she
withdrew out of the amount that was deposited in court as the provisional value of the land, with interest
at the rate of 6% per annum from July 10, 1959 until the day full payment is made or deposited in court;

(d) the Republic must pay appellee Toledo-Gozun the sum of P2,695,225.00 as the just compensation for
her two parcels of land that have a total area of 539,045 square meters, minus the sum of P107,809.00
that she withdrew out of the amount that was deposited in court as the provisional value of her lands, with
interest at the rate of 6%, per annum from July 10, 1959 until the day full payment is made or deposited in
court; (e) the attorney's lien of Atty. Alberto Cacnio is enforced; and

(f) the costs should be paid by appellant Republic of the Philippines, as provided in Section 12, Rule 67,
and in Section 13, Rule 141, of the Rules of Court.

IT IS SO ORDERED.

Makalintal, C.J., Barredo, Antonio, Esguerra, Fernandez, Muoz Palma and Aquino, JJ., concur.

Castro, Fernando, Teehankee and Makasiar, JJ., took no part.

 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),

xxx xxx xxx

"And in the case of J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413, the Court, speaking thru now
Chief Justice Fernando, reiterated the 'well-settled (rule) that just compensation means the equivalent for the value of the
property at the time of its taking. Anything beyond that is more and anything short of that is less, than just compensation. It
means a fair and full equivalent for the loss sustained, which is the measure of the indemnity, not whatever gain would
accrue to the expropriating entity."

Garcia v. Court ofappeals (102 SCRA 597, 608),

 xxx xxx xxx

"Hence, in estimating the market value, all the capabilities of the property and all the uses to which it may be
applied or for which it is adapted are to be considered and not merely the condition it is in the time and the use to
which it is then applied by the owner. All the facts as to the condition of the property and its surroundings, its
improvements and capabilities may be shown and considered in estimating its value."

Republic v. Santos (141 SCRA 30, 35-36),

"According to section 8 of Rule 67, the court is not bound by the commissioners' report. It may make such order or
render such judgment as shall secure to the plaintiff the property essential to the exercise of his right of
condemnation, and to the defendant just compensation for the property expropriated. This Court may substitute its
own estimate of the value as gathered from the record (Manila Railroad Company v. Velasquez, 32 Phil. 286)."

However, the promulgation of the aforementioned decrees practically set aside the above and many other precedents
hammered out in the course of evidence-laden, well argued, fully heard, studiously deliberated, and judiciously considered
court proceedings. The decrees categorically and peremptorily limited the definition of just compensation thus:

P.D. No. 76:

xxx xxx xxx

"For purposes of just compensation in cases of private property acquired by the government for public use, the
basis shall be the current and fair market value declared by the owner or administrator, or such market value as
determined by the Assessor, whichever is lower."

P.D. No. 464:

"Section 92. Basis for payment of just compensation in expropriation proceedings. In determining just
compensation which private property is acquired by the government for public use, the basis shall be the market
value declared by the owner or administrator or anyone having legal interest in the property, or such market value
as determined by the assessor, whichever is lower."

P.D. No. 794:

"Section 92. Basis for payment of just compensation in expropriation proceedings. In determining just
compensation when private property is acquired by the government for public use, the same shall not exceed the
market value declared by the owner or administrator or anyone having legal interest in the property, or such
market value as determined by the assessor, whichever is lower."

P.D. No. 1533:

"Section 1. In determining just compensation for private property acquired through eminent domain proceedings,
the compensation to be paid shall not exceed the value declared by the owner or administrator or anyone having
legal interest in the property or determined by the assessor, pursuant to the Real Property Tax Code, whichever
value is lower, prior to the recommendation or decision of the appropriate Government office to acquire the
property."

We are constrained to declare the provisions of the Decrees on just compensation unconstitutional and void and
accordingly dismiss the instant petition for lack of merit.
The method of ascertaining just compensation under the aforecited decrees constitutes impermissible encroachment on
judicial prerogatives. It tends to render this Court inutile in a matter which under the Constitution is reserved to it for final
determination.

Thus, although in an expropriation proceeding the court technically would still have the power to determine the just
compensation for the property, following the applicable decrees, its task would be relegated to simply stating the lower
value of the property as declared either by the owner or the assessor. As a necessary consequence, it would be useless
for the court to appoint commissioners under Rule 67 of the Rules of Court. Moreover, the need to satisfy the due process
clause in the taking of private property is seemingly fulfilled since it cannot be said that a judicial proceeding was not had
before the actual taking. However, the strict application of the decrees during the proceedings would be nothing short of a
mere formality or charade as the court has only to choose between the valuation of the owner and that of the assessor,
and its choice is always limited to the lower of the two. The court cannot exercise its discretion or independence in
determining what is just or fair. Even a grade school pupil could substitute for the judge insofar as the determination of
constitutional just compensation is concerned.

In the case of National Housing Authority v. Reyes (123 SCRA 245), this Court upheld P.D. No. 464, as further amended
by P.D. Nos. 794, 1224 and 1259. In this case, the petitioner National Housing Authority contended that the owner's
declaration at P1,400.00 which happened to be lower than the assessor's assessment, is the just compensation for the
respondent's property under section 92 of P.D. No. 464. On the other hand, the private respondent stressed that while
there may be basis for the allegation that the respondent judge did not follow the decree, the matter is still subject to his
final disposition, he having been vested with the original and competent authority to exercise his judicial discretion in the
light of the constitutional clauses on due process and equal protection.

To these opposing arguments, this Court ruled ihat under the conceded facts, there should be a recognition that the law
as it stands must be applied; that the decree having spoken so clearly and unequivocably calls for obedience; and that on
a matter where the applicable law speaks in no uncertain language, the Court has no choice except to yield to its
command. We further stated that "the courts should recognize that the rule introduced by P.D. No. 76 and reiterated in
subsequent decrees does not upset the established concepts of justice or the constitutional provision on just
compensation for, precisely, the owner is allowed to make his own valuation of his property."

While the Court yielded to executive prerogative exercised in the form of absolute law-making power, its members,
nonetheless, remained uncomfortable with the implications of the decision and the abuse and unfairness which might
follow in its wake. For one thing, the President himself did not seem assured or confident with his own enactment. It was
not enough to lay down the law on determination of just compensation in P.D. 76. It had to be repeated and reiterated in
P.D. 464, P.D. 794, and P.D. 1533. The provision is also found in P.D. 1224, P.D. 1259 and P.D. 1313. Inspite of its
effectivity as general law and the wide publicity given to it, the questioned provision or an even stricter version had to be
embodied in cases of specific expropriations by decree as in P.D. 1669 expropriating the Tambunting Estate and P.D.
1670 expropriating the Sunog Apog area in Tondo, Manila.

In the present petition, we are once again confronted with the same question of whether the courts under P.D. 1533, which
contains the same provision on just compensation as its predecessor decrees, still have the power and authority to
determine just compensation, independent of what is stated by the decree and to this effect, to appoint commissioners for
such purpose.

This time, we answer in the affirmative.

In overruling the petitioner's motion for reconsideration and objection to the commissioner's report, the trial court said:

"Another consideration why the Court is empowered to appoint commissioners to assess the just compensation of
these properties under eminent domain proceedings, is the 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.