SPOUSES ANTONIO and FE YUSAY, G.R. No. 156684 Sgd. Adventor R.

Delos Santos
steps for the expropriation of the land of the petitioners for the purpose of Acting Sanggunian Secretary
Petitioners,
Present: developing it for low cost housing for the less privileged but deserving city
Attested: Approved:
CARPIO MORALES, inhabitants. The resolution reads as follows:
-versus - Chairperson, Sgd. Roberto J. Francisco Sgd. Benjamin S. Abalos
BRION, City Councilor & Acting City Mayor
RESOLUTION NO. 552, S-1997[4] Presiding Officer
BERSAMIN,
VILLARAMA, JR., and RESOLUTION AUTHORIZING HON. BENJAMIN S.
COURT OF APPEALS, CITY MAYOR SERENO, JJ. ABALOS TO TAKE THE NECESSARY LEGAL STEPS
and CITY COUNCIL FOR THE EXPROPRIATION OF A PARCEL OF LAND Notwithstanding that the enactment of Resolution No. 552 was but the initial
OF MANDALUYONG CITY, Promulgated: SITUATED ALONG DR.
Respondents. step in the Citys exercise of its power of eminent domain granted under Section
JOSE FERNANDEZ STREET, BARANGAY MAUWAY,
April 6, 2011 CITY OF MANDALUYONG, OWNED BY MR. 19 of the Local Government Code of 1991, the petitioners became alarmed, and
x-----------------------------------------------------------------------------------------x ANTONIO YUSAY
filed a petition for certiorari and prohibition in the RTC, praying for the annulment
RESOLUTION WHEREAS, there is a parcel of land situated along Dr. of Resolution No. 552 due to its being unconstitutional, confiscatory, improper,
Jose Fernandez Street, Barangay Mauway, City of
BERSAMIN, J.: Mandaluyong, owned and registered in the name of and without force and effect.
MR. ANTONIO YUSAY;

The petitioners appeal the adverse decision promulgated on October 18, WHEREAS, this piece of land have been occupied for The City countered that Resolution No. 552 was a mere authorization given to
about ten (10) years by many financially hard-up
2002[1] and resolution promulgated on January 17, 2003,[2] whereby the Court of families which the City Government of Mandaluyong the City Mayor to initiate the legal steps towards expropriation, which included
desires, among other things, to provide modest and
Appeals (CA) reversed and set aside the order issued in their favor on February making a definite offer to purchase the property of the petitioners; hence, the
decent dwelling;
19, 2002 by the Regional Trial Court, Branch 214, in Mandaluyong City suit of the petitioners was premature.
WHEREAS, the said families have already negotiated
(RTC).[3] Thereby, the CA upheld Resolution No. 552, Series of 1997, adopted to acquire this land but was refused by the above-
named owner in total disregard to the City On January 31, 2001, the RTC ruled in favor of the City and dismissed the
by the City of Mandaluyong (City) authorizing its then City Mayor to take the
Governments effort of providing land for the landless;
necessary legal steps for the expropriation of the parcel of land registered in the petition for lack of merit, opining that certiorari did not lie against a legislative act
WHEREAS, the expropriation of said land would
names of the petitioners. certainly benefit public interest, let alone, a step of the City Government, because the special civil action of certiorari was only
towards the implementation of social justice and urban available to assail judicial or quasi-judicial acts done without or in excess of
land reform in this City;
We affirm the CA. jurisdiction, or with grave abuse of discretion amounting to lack or excess of
WHEREAS, under the present situation, the City
Council deems it necessary to authorize Hon. Mayor jurisdiction; that the special civil action of prohibition did not also lie under the

Antecedents BENJAMIN S. ABALOS to institute expropriation circumstances considering that the act of passing the resolution was not a
proceedings to achieve the noble purpose of the City
Government of Mandaluyong. judicial, or quasi-judicial, or ministerial act; and that notwithstanding the

The petitioners owned a parcel of land with an area of 1,044 square meters
situated between Nueve de Febrero Street and Fernandez Street in Barangay
Mauway, Mandaluyong City. Half of their land they used as their residence, and
the rest they rented out to nine other families. Allegedly, the land was their only
property and only source of income.
On October 2, 1997,
Panglungsod of Mandaluyong City adopted Resolution No. 552, Series of 1997,
to authorize then City Mayor Benjamin S. Abalos, Sr. to take the necessary legal
issuance of Resolution No. 552, the City had yet to commit acts of
NOW, THEREFORE, upon motion duly seconded, the
City Council of Mandaluyong, in session assembled, encroachment, excess, or usurpation, or had yet to act without or in excess of
RESOLVED, as it hereby RESOLVES, to authorize, as
it is hereby authorizing, Hon. Mayor BENJAMIN S. jurisdiction or with grave abuse of discretion amounting lack or in excess of
ABALOS, to institute expropriation proceedings against jurisdiction.
the above-named registered owner of that parcel of
land situated along Dr. Jose Fernandez Street,
Barangay Mauway, City of Mandaluyong, (f)or the
purpose of developing it to a low-cost housing project However, on February 19, 2002, the RTC, acting upon the petitioners motion for
for the less privileged but deserving constituents of this reconsideration, set aside its decision and declared that Resolution No. 552 was
the Sangguniang
City.
null and void. The RTC held that the petition was not premature because the
ADOPTED on this 2nd day of October 1997 at the City
of Mandaluyong. passage of Resolution No. 552 would already pave the way for the City to
deprive the petitioners and their heirs of their only property; that there was no

due process in the passage of Resolution No. 552 because the petitioners had
not been invited to the subsequent hearings on the resolution to enable them to
ventilate their opposition; and that the purpose for the expropriation was not for
public use and the expropriation would not benefit the greater number of
inhabitants.
Aggrieved, the City appealed to the CA.
In its decision promulgated on October 18, 2002, the CA concluded
that the reversal of the January 31, 2001 decision by the RTC was not justified
because Resolution No. 552 deserved to be accorded the benefit of the
presumption of regularity and validity absent any sufficient showing to the
contrary; that notice to the petitioners (Spouses Yusay) of the succeeding
hearings conducted by the City was not a part of due process, for it was enough
that their views had been consulted and that they had been given the full
opportunity to voice their protest; that to rule otherwise would be to give every
affected resident effective veto powers in law-making by a local government
unit; and that a public hearing, although necessary at times, was not
indispensable and merely aided in law-making.
The CA disposed as follows:
WHEREFORE, premises considered, the questioned
order of the Regional Trial Court, Branch 214,
Mandaluyong City dated February 19, 2002 in SCA
Case No. 15-MD, which declared Resolution No. 552,
Series of 1997 of the City of Mandaluyong null and
void, is hereby REVERSED and SET ASIDE. No costs.
SO ORDERED.[5]
The petitioners moved for reconsideration, but the CA denied their motion. Thus,
they appeal to the Court, posing the following issues, namely:
1. Can the validity of Resolution No. 552 be assailed
even before its implementation?
2. Must a citizen await the takeover and possession
of his property by the local government before he
can go to court to nullify an unjust expropriation?
Before resolving these issues, however, the Court considers it
necessary to first determine whether or not the action for certiorari and
prohibition commenced by the petitioners in the RTC was a proper recourse of
the petitioners.
Ruling
We deny the petition for review, and find that certiorari and
prohibition were not available to the petitioners under the circumstances. Thus,
we sustain, albeit upon different grounds, the result announced by the CA, and
declare that the RTC gravely erred in giving due course to the petition
for certiorari and prohibition.
1.
Certiorari does not lie to assail the issuance of
a resolution by the Sanggunian Panglungsod
The special civil action for certiorari is governed by Rule 65 of
the 1997 Rules of Civil Procedure, whose Section 1 provides:
Section 1. Petition for certiorari. When any
tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of its or
his jurisdiction, or with grave abuse of discretion
amounting to lack or excess of jurisdiction, and there is
no appeal, nor any plain, speedy, and adequate
remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and
praying that judgment be rendered annulling or
modifying the proceedings of such tribunal, board or
officer, and granting such incidental reliefs as law and
justice may require.
xxx
For certiorari to prosper, therefore, the petitioner must allege and
establish the concurrence of the following requisites, namely:
(a) The writ is directed against a tribunal, board, or
officer exercising judicial or quasi-judicial
functions;
(b) Such tribunal, board, or officer has acted without or
in excess of jurisdiction, or with grave abuse of
discretion amounting to lack or excess of
jurisdiction; and
(c) There is no appeal or any plain, speedy, and
adequate remedy in the ordinary course of law.[6]
It is further emphasized that a petition for certiorari seeks solely to
correct defects in jurisdiction,[7] and does not correct just any error or mistake
committed by a court, board, or officer exercising judicial or quasi-judicial
functions unless such court, board, or officer thereby acts without jurisdiction or
in excess of jurisdiction or with such grave abuse of discretion amounting to lack
of jurisdiction.[8]
The first requisite is that the respondent tribunal, board, or officer
must be exercising judicial or quasi-judicial functions. Judicial function,
according to Bouvier,[9] is the exercise of the judicial faculty or office; it also
means the capacity to act in a specific way which appertains to the judicial
power, as one of the powers of government. The term, Bouvier continues,[10] is
used to describe generally those modes of action which appertain to the
judiciary as a department of organized government, and through and by means
of which it accomplishes its purpose and exercises its peculiar powers.
Based on the foregoing, certiorari did not lie against
the Sangguniang Panglungsod, which was not a part of the Judiciary settling an
actual controversy involving legally demandable and enforceable rights when it
adopted Resolution No. 552, but a legislative and policy-making body declaring
its sentiment or opinion.
Nor did the Sangguniang Panglungsod abuse its discretion in
adopting Resolution No. 552. To demonstrate the absence of abuse of
discretion, it is well to differentiate between a resolution and an ordinance. The
first is upon a specific matter of a temporary nature while the latter is a law that
is permanent in character.[11] No rights can be conferred by and be inferred from
a resolution, which is nothing but an embodiment of what the lawmaking body

has to say in the light of attendant circumstances. In simply expressing its
sentiment or opinion through the resolution, therefore, the Sangguniang
Panglungsodin no way abused its discretion, least of all gravely, for its
expression of sentiment or opinion was a constitutionally protected right.
Moreover, Republic Act No. 7160 (The Local Government Code)
required the City to pass an ordinance, not adopt a resolution, for the purpose of
initiating an expropriation proceeding. In this regard, Section 19 of The Local
Government Code clearly provides, viz:
Section 19. Eminent Domain. A local
government unit may, through its chief executive
and acting pursuant to an ordinance, exercise the
power of eminent domain for public use, or purpose, or
welfare for the benefit of the poor and the landless,
upon payment of just compensation, pursuant to the
provisions of the Constitution and pertinent
laws: Provided, however, That the power of eminent
domain may not be exercised unless a valid and
definite offer has been previously made to the owner,
and such offer was not accepted: Provided, further,
That the local government unit may immediately take
possession of the property upon the filing of the
expropriation proceedings and upon making a deposit
with the proper court of at least fifteen percent (15%) of
the fair market value of the property based on the
current tax declaration of the property to be
expropriated: Provided, finally, That, the amount to be
paid for the expropriated property shall be determined
by the proper court, based on the fair market value at
the time of the taking of the property.
A resolution like Resolution No. 552 that merely expresses the
sentiment of the Sangguniang Panglungsod is not sufficient for the purpose of
initiating an expropriation proceeding. Indeed, in Municipality of Paraaque v.
V.M. Realty Corporation,[12] a case in which the Municipality of Paraaque based
its complaint for expropriation on a resolution, not an ordinance, the Court ruled
so:
The power of eminent domain is lodged in the
legislative branch of government, which may delegate
the exercise thereof to LGUs, other public entities and
public utilities. An LGU may therefore exercise the
power to expropriate private property only when
authorized by Congress and subject to the latters
control and restraints, imposed through the law
conferring the power or in other legislations. In this
case, Section 19 of RA 7160, which delegates to LGUs
the power of eminent domain, also lays down the
parameters for its exercise. It provides as follows:
Section 19. Eminent Domain. A
local government unit may, through its
chief executive and acting pursuant to
an ordinance, exercise the power of
eminent domain for public use, or
purpose, or welfare for the benefit of the
poor and the landless, upon payment of
just compensation, pursuant to the
provisions of the Constitution and
pertinent laws: Provided, however, That
the power of eminent domain may not
be exercised unless a valid and definite
offer has been previously made to the
owner, and such offer was not
accepted: Provided, further, That the
local government unit may immediately
take possession of the property upon
the filing of the expropriation
proceedings and upon making a deposit
with the proper court of at least fifteen
percent (15%) of the fair market value
of the property based on the current tax
declaration of the property to be
expropriated: Provided, finally, That, the
amount to be paid for the expropriated
property shall be determined by the
proper court, based on the fair market
value at the time of the taking of the
property. (Emphasis supplied)
Thus, the following essential requisites must
concur before an LGU can exercise the power of
eminent domain:
1. An ordinance is enacted by
the local legislative
council authorizing the local chief
executive, in behalf of the LGU, to
exercise the power of eminent domain
or pursue expropriation proceedings
over a particular private property.
2. The power of eminent domain
is exercised for public use, purpose or
welfare, or for the benefit of the poor
and the landless.
3. There is payment of just
compensation, as required under
Section 9 Article III of the Constitution
and other pertinent laws.
4. A valid and definite offer has
been previously made to the owner of
the property sought to be expropriated,
but said offer was not accepted.
In the case at bar, the local chief executive
sought to exercise the power of eminent domain
pursuant to a resolution of the municipal council. Thus,
there was no compliance with the first requisite that the
mayor be authorized through an ordinance. Petitioner
cites Camarines Sur vs. Court of Appeals to show that
a resolution may suffice to support the exercise of
eminent domain by an LGU. This case, however, is not
in point because the applicable law at that time was BP
337, the previous Local Government Code, which had
provided that a mere resolution would enable an LGU
to exercise eminent domain. In contrast, RA 7160, the
present Local Government Code which was already
in force when the Complaint for expropriation was
filed, explicitly required an ordinance for this
purpose.
We are not convinced by petitioners
insistence that the terms resolution and ordinance are
synonymous. A municipal ordinance is different
from a resolution. An ordinance is a law, but a
resolution is merely a declaration of the sentiment
or opinion of a lawmaking body on a specific
matter. An ordinance possesses a general and
permanent character, but a resolution is temporary
in nature. Additionally, the two are enacted
differently -- a third reading is necessary for an
ordinance, but not for a resolution, unless decided
otherwise by a majority of all the Sanggunian
members.
If Congress intended to allow LGUs to
exercise eminent domain through a mere resolution, it
would have simply adopted the language of the
previous Local Government Code. But Congress did
not. In a clear divergence from the previous Local
Government Code, Section 19 of RA 7160 categorically
requires that the local chief executive act pursuant to
an ordinance. Indeed, [l]egislative intent is determined
principally from the language of a statute. Where the
language of a statute is clear and unambiguous, the
law is applied according to its express terms, and
interpretation would be resorted to only where a literal
interpretation would be either impossible or absurd or
would lead to an injustice. In the instant case, there is
no reason to depart from this rule, since the law
requiring an ordinance is not at all impossible, absurd,
or unjust.
Moreover, the power of eminent domain
necessarily involves a derogation of a fundamental or
private right of the people. Accordingly, the manifest
change in the legislative language from resolution
under BP 337 to ordinance under RA 7160 demands a
strict construction. No species of property is held by
individuals with greater tenacity, and is guarded by the
Constitution and laws more sedulously, than the right to
the freehold of inhabitants. When the legislature
interferes with that right and, for greater public
purposes, appropriates the land of an individual without
his consent, the plain meaning of the law should not be
enlarged by doubtful interpretation.
xxx
In its Brief filed before Respondent Court,
petitioner argues that its Sangguniang Bayan passed
an ordinance on October 11, 1994 which reiterated its
Resolution No. 93-35, Series of 1993, and ratified all
the acts of its mayor regarding the subject
expropriation.
This argument is bereft of merit. In the first
place, petitioner merely alleged the existence of such
an ordinance, but it did not present any certified true
copy thereof. In the second place, petitioner did not
raise this point before this Court. In fact, it was
mentioned by private respondent, and only in passing.
In any event, this allegation does not cure the inherent
defect of petitioners Complaint for expropriation filed
on September 23, 1993. It is hornbook doctrine that:
x x x in a motion to dismiss based
on the ground that the complaint fails to
state a cause of action, the question
submitted before the court for
determination is the sufficiency of the
allegations in the complaint
itself.Whether those allegations are true
or not is beside the point, for their truth
is hypothetically admitted by the
motion. The issue rather is: admitting
them to be true, may the court render a
valid judgment in accordance with the
prayer of the complaint?
The fact that there is no cause of action is
evident from the face of the Complaint for
expropriation which was based on a mere
resolution. The absence of an ordinance
authorizing the same is equivalent to lack of cause
of action. Consequently, the Court of Appeals
committed no reversible error in affirming the trial
courts Decision which dismissed the expropriation
suit.[13] (Emphasis supplied)
In view of the absence of the proper expropriation ordinance The petitioner must further allege in the petition and establish facts
authorizing and providing for the expropriation, the petition for certiorari filed in to show that any other existing remedy is not speedy or adequate.[18] A remedy
the RTC was dismissible for lack of cause of action. is plain, speedy and adequate if it will promptly relieve the petitioner from the
injurious effects of that judgment and the acts of the tribunal or inferior court.[19]
2.
Prohibition does not lie against expropriation
The rule and relevant jurisprudence indicate that prohibition was not
The special civil action for prohibition is governed also by Section 2 available to the petitioners as a remedy against the adoption of Resolution No.
552, for the Sangguniang Panglungsod, by such adoption, was not exercising
of Rule 65 of the 1997 Rules of Civil Procedure, which states:
judicial, quasi-judicial or ministerial functions, but only expressing its collective
sentiment or opinion.
Section 2. Petition for prohibition. When the
proceedings of any tribunal, corporation, board, officer
or person, whether exercising judicial, quasi-judicial or
ministerial functions, are without or in excess of its or Verily, there can be no prohibition against a procedure whereby the
his jurisdiction, or with grave abuse of discretion
immediate possession of the land under expropriation proceedings may be
amounting to lack or excess of jurisdiction, and there is
no appeal or any other plain, speedy, and adequate
taken, provided always that due provision is made to secure the prompt
remedy in the ordinary course of law, a person
aggrieved thereby may file a verified petition in the adjudication and payment of just compensation to the owner. [20] This bar against
proper court, alleging the facts with certainty and
prohibition comes from the nature of the power of eminent domain as
praying that judgment be rendered commanding the
respondent to desist from further proceedings in the necessitating the taking of private land intended for public use,[21] and the
action or matter specified therein, or otherwise granting
such incidental reliefs as law and justice may require. interest of the affected landowner is thus made subordinate to the power of the
xxx
State. Once the State decides to exercise its power of eminent domain, the
power of judicial review becomes limited in scope, and the courts will be left to
The function of prohibition is to prevent the unlawful and oppressive
determine the appropriate amount of just compensation to be paid to the
exercise of legal authority and to provide for a fair and orderly administration of
affected landowners. Only when the landowners are not given their just
justice.[14] The writ of prohibition is directed against proceedings that are done
compensation for the taking of their property or when there has been no
without or in excess of jurisdiction, or with grave abuse of discretion, there being
agreement on the amount of just compensation may the remedy of prohibition
no appeal or other plain, speedy and adequate remedy in the ordinary course of
become available.
law.[15] For grave abuse of discretion to be a ground for prohibition, the petitioner
must first demonstrate that the tribunal, corporation, board, officer, or person,
Here, however, the remedy of prohibition was not called for,
whether exercising judicial, quasi-judicial or ministerial functions, has exercised
considering that only a resolution expressing the desire of the Sangguniang
its or his power in an arbitrary or despotic manner, by reason of passion or
Panglungsod to expropriate the petitioners property was issued. As of then, it
personal hostility, which must be so patent and gross as would amount to an
was premature for the petitioners to mount any judicial challenge, for the
evasion, or to a virtual refusal to perform the duty enjoined or to act in
power of eminent domain could be exercised by the City only through the filing
contemplation of law.[16] On the other hand, the term excess of
of a verified complaint in the proper court.[22] Before the City as the expropriating
jurisdiction signifies that the court, board, or officer has jurisdiction over a case
authority filed such verified complaint, no expropriation proceeding could be said
but has transcended such jurisdiction or acted without any authority.[17]
to exist. Until then, the petitioners as the owners could not also be deprived of
their property under the power of eminent domain.[23]

WHEREFORE, we affirm the decision promulgated on October 18,
2002 in CA-G.R. SP No. 70618.
Costs to be paid by the petitioners.
G.R. No. 158563 June 30, 2005
AIR TRANSPORTATION OFFICE (ATO) and MACTAN-CEBU
INTERNATIONAL AIRPORT AUTHORITY (mciaa),petitioners,
vs.
APOLONIO GOPUCO, JR., respondent.
DECISION
CHICO-NAZARIO, J.:
When private land is expropriated for a particular public use, and that particular
public use is abandoned, does its former owner acquire a cause of action for
recovery of the property?
The trial courts ruling in the negative was reversed by the Court of Appeals in its
Decision1 of 28 February 2001. Hence this petition for review under Rule 45 of
the 1997 Rules of Civil Procedure of the said Decision of the court a quo, and its
Resolution2 of 22 May 2003 dismissing petitioners motion for reconsideration.
The facts, as adduced from the records, are as follows:
Respondent Apolonio Gopuco, Jr. was the owner of Cadastral Lot No. 72
consisting of 995 square meters located in the vicinity of the Lahug Airport in
Cebu City covered by Transfer Certificate of Title (TCT) No. 13061-T.
The Lahug Airport had been turned over by the Unites States Army to the
Republic of the Philippines sometime in 1947 through the Surplus Property
Commission, which accepted it in behalf of the Philippine Government. In 1947,
the Surplus Property Commission was succeeded by the Bureau of Aeronautics,
which office was supplanted by the National Airport Corporation (NAC). The
NAC was in turn dissolved and replaced with the Civil Aeronautics
Administration (CAA).3
Sometime in 1949, the NAC informed the owners of the various lots surrounding
the Lahug Airport, including the herein respondent, that the government was
acquiring their lands for purposes of expansion. Some landowners were
convinced to sell their properties on the assurance that they would be able to
repurchase the same when these would no longer be used by the airport.
Others, including Gopuco, refused to do so.
Thus, on 16 April 1952, the CAA filed a complaint with the Court of First
Instance (CFI) of Cebu for the expropriation of Lot No. 72 and its neighboring
realties, docketed as Civil Case No. R-1881.
On 29 December 1961, the CFI promulgated a Decision,
1. Declaring the expropriation of [the subject lots, including Lot No.
72] justified and in lawful exercise of the right of eminent domain;
2. Declaring . a balance of 1,990 in favor of Apolonio Go Puco,
Jr. with legal interest from November 16, 1947 until fully paid. ;
3. After the payment of the foregoing financial obligation to the
landowners, directing the latter to deliver to the plaintiff the
corresponding Transfer Certificates of Title to their respective lots;
and upon the presentation of the said titles to the Register of
Deeds, ordering the latter to cancel the same and to issue, in lieu
thereof, new Transfer Certificates of Title in the name of the
plaintiff.4
No appeal was taken from the above Decision on Lot No. 72, and the judgment
of condemnation became final and executory. Thereafter, on 23 May 1962,
absolute title to Lot No. 72 was transferred to the Republic of the Philippines
under TCT No. 25030.5
Subsequently, when the Mactan International Airport commenced operations,
the Lahug Airport was ordered closed by then President Corazon C. Aquino in a
Memorandum of 29 November 1989.6 Lot No. 72 was thus virtually abandoned.7
On 16 March 1990, Gopuco wrote8 the Bureau of Air Transportation, through the
manager of the Lahug Airport, seeking the return of his lot and offering to return
the money previously received by him as payment for the expropriation. This
letter was ignored.9
In the same year, Congress passed Republic Act No. 6958 creating the Mactan-
Cebu International Airport Authority (MCIAA) and in part providing for the
transfer of the assets of the Lahug Airport thereto. Consequently, on 08 May
1992, ownership of Lot No. 72 was transferred to MCIAA under TCT No.
120356.10
On 06 August 1992, Apolonio Gopuco, Jr. filed an amended complaint11 for
recovery of ownership of Lot No. 72 against the Air Transportation Office 12 and
the Province of Cebu with the Regional Trial Court (RTC) of Cebu, Branch X,
docketed as Civil Case No. CEB-11914. He maintained that by virtue of the
closure of the Lahug Airport, the original purpose for which the property was
expropriated had ceased or otherwise been abandoned, and title to the property
had therefore reverted to him.
Gopuco further alleged that when the original judgment of expropriation had
been handed down, and before they could file an appeal thereto, the CAA
offered them a compromise settlement whereby they were assured that the
expropriated lots would be resold to them for the same price as when it was
expropriated in the event that the Lahug Airport would be abandoned. Gopuco
claims to have accepted this offer.13 However, he failed to present any proof on
this matter, and later admitted that insofar as the said lot was concerned, no
compromise agreement was entered into by the government and the previous
owners.14
Lastly, Gopuco asserted that he had come across several announcements in the
papers that the Lahug Airport was soon to be developed into a commercial
complex, which he took to be a scheme of the Province of Cebu to make
permanent the deprivation of his property.
On 20 May 1994, the trial court rendered a Decision15 dismissing the complaint
and directing the herein respondent to pay the MCIAA exemplary damages,
litigation expenses and costs.
Aggrieved by the holding of the trial court, Gopuco appealed to the Court of
Appeals, which overturned the RTC decision, ordered the herein petitioners to
reconvey Lot No. 72 to Gopuco upon payment of the reasonable price as
determined by it, and deleted the award to the petitioners of exemplary
damages, litigation expenses and costs.
The Motion for Reconsideration was denied16 on 22 May 2003, hence this
petition, which raises the following issues:
WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT
RESPONDENT HAS THE RIGHT TO RECLAIM OWNERSHIP OVER THE
SUBJECT EXPROPRIATED LOT BASED ON THE IMPORT OF THE
DECEMBER 29, 1961 DECISION IN CIVIL CASE NO. 1881.
WHETHER THE COURT OF APPEALS ERRED IN DELETING THE AWARD
OF LITIGATION EXPENSES AND COSTS IN FAVOR OF PETITIONERS.
In deciding the original expropriation case that gave rise to the present
controversy, Civil Case No. R-1881, the CFI reasoned that the planned
expansion of the airport justified the exercise of eminent domain, thus:
As for the public purpose of the expropriation proceeding, it cannot be doubted.
Although the Mactan Airport is being constructed, it does not take away the
actual usefulness and importance of the Lahug Airport; it is handling the air
traffic both civilian and military. From it aircrafts fly to Mindanao and Visayas and
pass thru it on their return flights to the North and Manila. Then, no evidence
was adduced to show how soon is the Mactan Airport to be placed in operation
and whether the Lahug Airport will be closed immediately thereafter. It is for the
other departments of the Government to determine said matters. The Court
cannot substitute its judgment for those of the said departments or agencies. In
the absence of such a showing, the Court will presume that the Lahug
Airport will continue to be in operation.17 (emphasis supplied)1avvphi1
By the time Gopuco had filed his action for recovery of ownership of Lot No. 72,
Lahug Airport had indeed ceased to operate. Nevertheless, the trial court held:
The fact of abandonment or closure of the Lahug Airport admitted by the
defendant did not by itself, result in the reversion of the subject property back to
the plaintiff. Nor did it vest in the plaintiff the right to demand reconveyance of
said property.
When real property has been acquired for public use unconditionally, either by
eminent domain or by purchase, the abandonment or non-use of the real
property, does not ipso facto give to the previous owner of said property any
right to recover the same (Fery vs. Municipality of Cabanatuan, 42 Phil. 28).18
In reversing the trial court, the Court of Appeals called attention to the fact that
both parties cited Fery v. Municipality of Cabanatuan,19 which the trial court also
relied on in its Decision. The court a quo agreed in Gopucos interpretation
of Fery that when the CFI in Civil Case No. R-1881 held that,
. . . [T]hen, no evidence was adduced to show how soon is the Mactan Airport to
be placed in operation and whether the Lahug Airport will be closed immediately
thereafter.In the absence of such a showing, the Court will presume that the
Lahug Airport will continue to be in operation, . . . .20
the expropriation of the property was conditioned on its continued devotion to its
public purpose. Thus, although the MCIAA stressed that nothing in the judgment
of expropriation expressly stated that the lands would revert to their previous
owners should the public use be terminated or abandoned, the Court of Appeals
nevertheless ruled that,
. . . [W]hile, there is no explicit statement that the land is expropriated with the
condition that when the purpose is ended the property shall return to its owner,
the full import of the decision (in Civil Case No. R-1881) suggests that the
expropriation was granted because there is no clear showing that Lahug Airport
will be closed, the moment Mactan International Airport is put to operation. It
stands to reason that should that public use be abandoned, then the
expropriated property should revert back to its former owner.
Moreover, the foundation of the right to exercise the power of eminent domain is
genuine necessity. Condemnation is justified only if it is for the public good and
there is genuine necessity of a public character. Thus, when such genuine
necessity no longer exists as when the State abandons the property
expropriated, government interest must yield to the private right of the former
land owner, whose property right was disturbed as a consequence of the
exercise of eminent domain.
Justice, equity and fair play demand that the property should revert back to
plaintiff-appellant upon paying the reasonable value of the land to be based on
the prevailing market value at the time of judicial demand to recover the
property. If the State expects landowners to cooperate in its bid to take private
property for its public use, so must it apply also the same standard, to allow the
landowner to reclaim the property, now that the public use has been
abandoned.21
In this petition, the MCIAA reiterates that the Republic of the Philippines validly
expropriated Lot No. 72 through the proceedings in Civil Case No. R-1881, the
judgment of which had long become final and executory. It further asserts that
said judgment vested absolute and unconditional title in the government,
specifically on the petitioners, there having been no condition whatsoever that
the property should revert to its owners in case the Lahug Airport should be
abandoned.
On the other hand, the respondent would have us sustain the appellate courts
interpretation of Fery as applied to the original judgment of expropriation, to the
effect that this was subject to the condition "that the Lahug Airport will continue
to be in operation."
We resolve to grant the petition.
In Fery, the Court asked and answered the same question confronting us now:
When private land is expropriated for a particular public use, and that particular
public use is abandoned, does the land so expropriated return to its former
owner?22
The answer to that question depends upon the character of the title acquired by
the expropriator, whether it be the State, a province, a municipality, or a
corporation which has the right to acquire property under the power of eminent
domain. If, for example, land is expropriated for a particular purpose, with the
condition that when that purpose is ended or abandoned the property
shall return to its former owner, then, of course, when the purpose is
terminated or abandoned the former owner reacquires the property so
expropriated. If, for example, land is expropriated for a public street and the
expropriation is granted upon condition that the city can only use it for a public
street, then, of course, when the city abandons its use as a public street, it
returns to the former owner, unless there is some statutory provision to the
contrary. . . If upon the contrary, however, the decree of expropriation gives to
the entity a fee simple title, then of course, the land becomes the absolute
property of the expropriator, whether it be the State, a province, or municipality,
and in that case the non-user does not have the effect of defeating the title
acquired by the expropriation proceedings. (10 R.C.L., 240, sec. 202; 20 C.J.
1234, secs. 593-599 and numerous cases cited; Reichling vs. Covington
Lumber Co., 57 Wash., 225; 135 Am. St. Rep., 976; McConihay vs. Wright, 121
U.S., 201.)
When land has been acquired for public use in fee simple, unconditionally,
either by the exercise of eminent domain or by purchase, the former owner
retains no rights in the land, and the public use may be abandoned or the
land may be devoted to a different use, without any impairment of the
estate or title acquired, or any reversion to the former owner. (Fort Wayne
vs. Lake Shore, etc. Ry. Co., 132 Ind., 558; 18 L.R.A., 367.) (Emphases
Supplied)23
Did the judgment of expropriation in Civil Case No. R-1881 vest absolute and
unconditional title in the government? We have already had occasion to rule on
this matter in Mactan-Cebu International Airport Authority v. Court of
Appeals,24 which is a related action for reconveyance of a parcel of land also
subject of the expropriation proceedings in Civil Case No. R-1881. One of the
landowners affected by the said proceeding was Virginia Chiongbian, to whom
the CFI ordered the Republic of the Philippines to pay 34,415.00, with legal
interest computed from the time the government began using her land. Like the
herein respondent, she did not appeal from the CFIs judgment. Also like
Gopuco, she eventually filed for the reconveyance of her property when the
airport closed. Although she was upheld by both the RTC of Cebu and the Court
of Appeals, on appeal we held that "the terms of the judgment (in Civil Case
No. R-1881) are clear and unequivocal and granted title to Lot No. 941 in
fee simple to the Republic of the Philippines. There was no condition
imposed to the effect that the lot would return to CHIONGBIAN or that
CHIONGBIAN had a right to repurchase the same if the purpose for which
it was expropriated is ended or abandoned or if the property was to be
used other than as the Lahug Airport."25 Moreover, we held that although
other lot owners were able to successfully reacquire their lands by virtue of a
compromise agreement, since CHIONGBIAN was not a party to any such
agreement, she could not validly invoke the same.
The respondent would have us revisit this ruling for three reasons. First,
because he claims there is no showing that the government benefited from
entering into compromise agreements with the other lot owners; second,
because such a doctrine supposedly discriminates against those who have
"neither the werewithal nor the savvy to contest the expropriation," or agree to
modify the judgment; and third, because there exists between the government
and the owners of expropriated realty an "implied contract" that the properties
involved will be used only for the public purpose for which they were acquired in
the first place.
As to respondents first and second arguments, we have time and again ruled
that a compromise agreement, when not contrary to law, public order, public
policy, morals, or good customs, is a valid contract which is the law between the
parties.26 It is a contract perfected by mere consent,27 whereby the parties,
making reciprocal concessions, avoid litigation or put an end to one already
commenced. It has the force of law and is conclusive between the parties,28 and
courts will not relieve parties from obligations voluntarily assumed, simply
because their contracts turned out to be unwise.29 Note that respondent has not
shown that any of the compromise agreements were in any way tainted with
illegality, irregularity or imprudence. Indeed, anyone who is not a party to a
contract or agreement cannot be bound by its terms, and cannot be affected by
it.30 Since Gopuco was not a party to the compromise agreements, he cannot
legally invoke the same.31
Lastly, Gopuco argues that there is present, in cases of expropriation, an
"implied contract" that the properties will be used only for the public purpose for
which they were acquired. No such contract exists.
Eminent domain is generally described as "the highest and most exact idea of
property remaining in the government" that may be acquired for some public
purpose through a method in the nature of a forced purchase by the
State.32 Also often referred to as expropriation and, with less frequency, as
condemnation, it is, like police power and taxation, an inherent power of
sovereignty and need not be clothed with any constitutional gear to exist;
instead, provisions in our Constitution on the subject are meant more to
regulate, rather than to grant, the exercise of the power. It is a right to take
or reassert dominion over property within the state for public use or to meet a
public exigency and is said to be an essential part of governance even in its
most primitive form and thus inseparable from sovereignty.33 In fact, "all
separate interests of individuals in property are held of the government under
this tacit agreement or implied reservation. Notwithstanding the grant to
individuals, the eminent domain, the highest and most exact idea of property,
remains in the government, or in the aggregate body of people in their sovereign
capacity; and they have the right to resume the possession of the property
whenever the public interest so requires it."34
The ubiquitous character of eminent domain is manifest in the nature of the
expropriation proceedings. Expropriation proceedings are not adversarial in the
conventional sense, for the condemning authority is not required to assert any
G.R. No. 176625
conflicting interest in the property. Thus, by filing the action, the condemnor in
effect merely serves notice that it is taking title and possession of the property,
and the defendant asserts title or interest in the property, not to prove a right to
possession, but to prove a right to compensation for the taking.35
The only direct constitutional qualification is thus that "private property shall not
be taken for public use without just compensation." 36 This prescription is
intended to provide a safeguard against possible abuse and so to protect as well
the individual against whose property the power is sought to be
enforced.37lawphil.net
In this case, the judgment on the propriety of the taking and the adequacy of the
compensation received have long become final. We have also already held that
the terms of that judgment granted title in fee simple to the Republic of the
Philippines. Therefore, pursuant to our ruling in Fery, as recently cited in Reyes
v. National Housing Authority,38no rights to Lot No. 72, either express or implied,
have been retained by the herein respondent.
We are not unaware of the ruling in Heirs of Timoteo Moreno v. Mactan-Cebu
International Airport Authority,39concerning still another set of owners of lots
declared expropriated in the judgment in Civil Case No. R-1881. As with
Chiongbian and the herein respondent, the owners of the lots therein did not
appeal the judgment of expropriation, but subsequently filed a complaint for
reconveyance. In ordering MCIAA to reconvey the said lots in their favor, we
held that the predicament of petitioners therein involved a constructive trust
"akin to the implied trust referred to in Art. 145440 of the Civil
Code."41 However, we qualified our Decision in that case, to the effect that,
We adhere to the principles enunciated in Fery and in Mactan-Cebu
International Airport Authority, and do not overrule them. Nonetheless the weight
of their import, particularly our ruling as regards the properties of respondent
Chiongbian in Mactan-Cebu International Airport Authority, must be
commensurate to the facts that were established therein as distinguished from
those extant in the case at bar. Chiongbian put forth inadmissible and
inconclusive evidence, while in the instant case we have preponderant
proof as found by the trial court of the existence of the right of repurchase
in favor of petitioners.
Neither has Gopuco, in the present case, adduced any evidence at all
concerning a right of repurchase in his favor. Heirs of Moreno is thus not in
point.
The trial court was thus correct in denying Gopucos claim for the reconveyance
of Lot No. 72 in his favor. However, for failure of the petitioners to present any
proof that this case was clearly unfounded or filed for purposes of harassment,
or that the herein respondent acted in gross and evident bad faith, the
reimposition of litigation expenses and costs has no basis. It is not sound public
policy to set a premium upon the right to litigate where such right is exercised in
good faith, as in the present case.42
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals
in CA-G.R. SP No. 49898 dated 28 February 2001, and its Resolution of 22 May
2003 are hereby REVERSED and SET ASIDE. The Decision of RTC-Branch X
of Cebu dated 20 May 1994 in Civil Case No. CEB-11914 is REINSTATED with
the modification that the award of exemplary damages, litigation expenses and
costs are DELETED.
MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and AIR
TRANSPORTATION OFFICE, - versus - BERNARDO L. LOZADA, SR.,
and the
HEIRS OF ROSARIO MERCADO, namely, VICENTE LOZADA, MARIO M.
LOZADA, MARCIA L. GODINEZ, VIRGINIA L. FLORES, BERNARDO
LOZADA, JR., DOLORES GACASAN, SOCORRO CAFARO and ROSARIO
LOZADA, represented by MARCIA LOZADA GODINEZ
On December 29, 1961, the trial court rendered judgment in favor of the Office dispose and resell the properties which may be found to be no longer
Petitioners,
NACHURA, J.: Republic and ordered the latter to pay Lozada the fair market value of Lot No. necessary as an airport, then the policy of this Office is to give priority to the

This is a petition for review on certiorari under Rule 45 of the Rules of Court, 88, adjudged at P3.00 per square meter, with consequential damages by way of former owners subject to the approval of the President.

seeking to reverse, annul, and set aside the Decision[1] dated February 28, 2006
legal interest computed from November 16, 1947the time when the lot was first
and the Resolution[2] dated February 7, 2007 of the Court of Appeals (CA)
(Cebu City), Twentieth Division, in CA-G.R. CV No. 65796. occupied by the airport. Lozada received the amount of P3,018.00 by way of On November 29, 1989, then President Corazon C. Aquino issued a

payment. Memorandum to the Department of Transportation, directing the transfer of

The antecedent facts and proceedings are as follows:
general aviation operations of the Lahug Airport to
Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of
The affected landowners appealed. Pending appeal, the Air Transportation the MactanInternational Airport before the end of 1990 and, upon such transfer,
1,017 square meters, more or less, located in Lahug, Cebu City. Its original
Office (ATO), formerly CAA, proposed a compromise settlement whereby the the closure of the Lahug Airport.
owner was Anastacio Deiparine when the same was subject to expropriation
owners of the lots affected by the expropriation proceedings would either not
proceedings, initiated by the Republic of the Philippines (Republic), represented
appeal or withdraw their respective appeals in consideration of a commitment Sometime in 1990, the Congress of the Philippines passed Republic Act (R.A.)
by the then Civil Aeronautics Administration (CAA), for the expansion and
that the expropriated lots would be resold at the price they were expropriated in No. 6958, entitled An Act Creating the Mactan-Cebu International Airport
improvement of the Lahug Airport. The case was filed with the then Court of
the event that the ATO would abandon the Lahug Airport, pursuant to an Authority, Transferring Existing Assets of the Mactan International Airport and
First Instance of Cebu, Third Branch, and docketed as Civil Case No. R-1881.
established policy involving similar cases. Because of this promise, Lozada did the Lahug Airport to the Authority, Vesting the Authority with Power to

not pursue his appeal. Thereafter, Lot No. 88 was transferred and registered in Administer and Operate the Mactan International Airport and the Lahug Airport,
As early as 1947, the lots were already occupied by the U.S. Army. They were
the name of the Republic under TCT No. 25057. and For Other Purposes.
turned over to the Surplus Property Commission, the Bureau of Aeronautics, the

National Airport Corporation and then to the CAA.

The projected improvement and expansion plan of the old Lahug Airport, From the date of the institution of the expropriation proceedings up to the

however, was not pursued. present, the public purpose of the said expropriation (expansion of the airport)
During the pendency of the expropriation proceedings, respondent Bernardo L.
was never actually initiated, realized, or implemented.Instead, the old airport
Lozada, Sr. acquired Lot No. 88 from Deiparine. Consequently, Transfer
Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, was converted into a commercial complex. Lot No. 88 became the site of a jail
Certificate of Title (TCT) No. 9045 was issued in Lozadas name.
Jr., requesting to repurchase the lots, as per previous agreement. The CAA known as Bagong Buhay Rehabilitation Complex, while a portion thereof was

replied that there might still be a need for the LahugAirport to be used as an occupied by squatters.[3]The old airport was converted into what is now known

emergency DC-3 airport. It reiterated, however, the assurance that should this as the Ayala I.T. Park, a commercial area.

Thus, on June 4, 1996, petitioners initiated a complaint for the recovery of
possession and reconveyance of ownership of Lot No. 88. The case was
docketed as Civil Case No. CEB-18823 and was raffled to the Regional Trial
Court (RTC), Branch 57, Cebu City. The complaint substantially alleged as
follows:
(a) Spouses Bernardo and Rosario Lozada were the
registered owners of Lot No. 88 covered by
TCT No. 9045;
(b) In the early 1960s, the Republic sought to acquire
by expropriation Lot No. 88, among others, in
connection with its program for the
improvement and expansion of
the Lahug Airport;
(c) A decision was rendered by the Court of First
Instance in favor of the Government and
against the land owners, among whom was
Bernardo Lozada, Sr. appealed therefrom;
(d) During the pendency of the appeal, the parties
entered into a compromise settlement to the
effect that the subject property would be
resold to the original owner at the same price
when it was expropriated in the event that the
Government abandons the Lahug Airport;
(e) Title to Lot No. 88 was subsequently transferred to
the Republic of the Philippines (TCT No.
25057);
(f) The projected expansion and improvement of
the Lahug Airport did not materialize;
(g) Plaintiffs sought to repurchase their property from
then CAA Director Vicente Rivera. The latter
replied by giving as assurance that priority
would be given to the previous owners,
subject to the approval of the President,
should CAA decide to dispose of the
properties;
(h) On November 29, 1989, then President Corazon C.
Aquino, through a Memorandum to the
Department of Transportation and
Communications (DOTC), directed the
transfer of general aviation operations at
the Lahug Airportto the Mactan-Cebu
International Airport Authority;
(i) Since the public purpose for the expropriation no
longer exists, the property must be returned to
the plaintiffs.[4]
In their Answer, petitioners asked for the immediate dismissal of the
complaint. They specifically denied that the Government had made assurances
to reconvey Lot No. 88 to respondents in the event that the property would no
longer be needed for airport operations. Petitioners instead asserted that the
judgment of condemnation was unconditional, and respondents were, therefore,
not entitled to recover the expropriated property notwithstanding non-use or
abandonment thereof.
After pretrial, but before trial on the merits, the parties stipulated on the following
set of facts:
(1) The lot involved is Lot No. 88-SWO-25042 of the
Banilad Estate, situated in the City of Cebu,
containing an area of One Thousand
Seventeen (1,017) square meters, more or
less;
(2) The property was expropriated among several other
properties in Lahug in favor of the Republic of
the Philippines by virtue of a Decision dated
December 29, 1961 of the CFI of Cebu in Civil
Case No. R-1881;
(3) The public purpose for which the property was
expropriated was for the purpose of
the Lahug Airport;
(4) After the expansion, the property was transferred in
the name of MCIAA; [and]
(5) On November 29, 1989, then President Corazon C.
Aquino directed the Department of
Transportation and Communication to transfer
general aviation operations of the Lahug
Airport to the Mactan-Cebu International
Airport Authority and to close the Lahug
Airport after such transfer[.][5]
During trial, respondents presented Bernardo Lozada, Sr. as their lone witness,
while petitioners presented their own witness, Mactan-Cebu International Airport
Authority legal assistant Michael Bacarisas.
On October 22, 1999, the RTC rendered its Decision, disposing as follows:
WHEREFORE, in the light of the foregoing, the Court
hereby renders judgment in favor of the plaintiffs,
Bernardo L. Lozada, Sr., and the heirs of Rosario
Mercado, namely, Vicente M. Lozada, Marcia L.
Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr.,
Dolores L. Gacasan, Socorro L. Cafaro and Rosario M.
Lozada, represented by their attorney-in-fact Marcia
Lozada Godinez, and against defendants Cebu-Mactan
International Airport Authority (MCIAA) and Air
Transportation Office (ATO):
1. ordering MCIAA and ATO to restore to
plaintiffs the possession and ownership of their land,
Lot No. 88 Psd-821 (SWO-23803), upon payment of
the expropriation price to plaintiffs; and
2. ordering the Register of Deeds to effect the
transfer of the Certificate of Title from defendant[s] to
plaintiffs on Lot No. [88], cancelling TCT No. 20357 in
the name of defendant MCIAA and to issue a new title
on the same lot in the name of Bernardo L. Lozada, Sr.
and the heirs of Rosario Mercado, namely: Vicente M.
Lozada, Mario M. Lozada, Marcia L. Godinez, Virginia
L. Flores, Bernardo M. Lozada, Jr., Dolores L.
Gacasan, Socorro L. Cafaro and Rosario M. Lozada.
No pronouncement as to costs.
SO ORDERED.[6]
Aggrieved, petitioners interposed an appeal to the CA. After the filing of the
necessary appellate briefs, the CA rendered its assailed Decision dated
 so expropriated. If x x x land is expropriated for a public
street and the expropriation is granted upon condition
February 28, 2006, denying petitioners appeal and affirming in toto the Decision
that the city can only use it for a public street, then, of
course, when the city abandons its use as a public
of the RTC, Branch 57, Cebu City. Petitioners motion for reconsideration was, street, it returns to the former owner, unless there is
some statutory provision to the contrary. x x x. If, upon
likewise, denied in the questioned CA Resolution dated February 7, 2007. the contrary, however, the decree of expropriation gives
to the entity a fee simple title, then, of course, the land
becomes the absolute property of the expropriator,
whether it be the State, a province, or municipality, and
in that case the non-user does not have the effect of
Hence, this petition arguing that: (1) the respondents utterly failed to prove that defeating the title acquired by the expropriation
proceedings. x x x.
there was a repurchase agreement or compromise settlement between them When land has been acquired for public
use in fee simple, unconditionally, either by the
and the Government; (2) the judgment in Civil Case No. R-1881 was absolute exercise of eminent domain or by purchase, the former
owner retains no right in the land, and the public use
may be abandoned, or the land may be devoted to a
and unconditional, giving title in fee simple to the Republic; and (3) the different use, without any impairment of the estate or
title acquired, or any reversion to the former owner. x x
respondents claim of verbal assurances from government officials violates the x.[8]
Statute of Frauds.
Contrary to the stance of petitioners, this Court had ruled otherwise
in Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International
The petition should be denied.
Airport Authority,[9] thus
Petitioners anchor their claim to the controverted property on the supposition
Moreover, respondent MCIAA has brought to our
attention a significant and telling portion in
that the Decision in the pertinent expropriation proceedings did not provide for the Decision in Civil Case No. R-1881 validating our
discernment that the expropriation by the predecessors
the condition that should the intended use of Lot No. 88 for the expansion of of respondent was ordered under the running
impression that Lahug Airport would continue in
operation
the Lahug Airport be aborted or abandoned, the property would revert to
As for the public purpose of
the expropriation proceeding,
respondents, being its former owners. Petitioners cite, in support of this
it cannot now be
doubted. Although Mactan Air
position, Fery v. Municipality of Cabanatuan,[7] which declared that the port is being constructed, it
does not take away the actual
usefulness and importance of
Government acquires only such rights in expropriated parcels of land as may be
the Lahug Airport: it is
handling the air traffic both
allowed by the character of its title over the properties civilian and military. From it
aircrafts fly to Mindanao and
Visayas and pass thru it on
If x x x land is expropriated for a particular purpose, their flights to the North
with the condition that when that purpose is ended or and Manila. Then, no evidence
abandoned the property shall return to its former owner, was adduced to show how
then, of course, when the purpose is terminated or soon is the Mactan Airport to
abandoned the former owner reacquires the property be placed in operation and
whether the Lahug Airport will
be closed immediately
thereafter. It is up to the other
departments of the
Government to determine said
matters. The Court cannot
substitute its judgment for
those of the said departments
or agencies. In the absence of
such showing, the Court will
presume that
the Lahug Airport will continue
to be in operation (emphasis
supplied).
While in the trial in Civil Case No. R-1881 [we] could
have simply acknowledged the presence of public
purpose for the exercise of eminent domain regardless
of the survival of Lahug Airport, the trial court in
its Decision chose not to do so but instead prefixed its
finding of public purpose upon its understanding
that Lahug Airport will continue to be in
operation. Verily, these meaningful statements in the
body of the Decision warrant the conclusion that the
expropriated properties would remain to be so until it
was confirmed that Lahug Airport was no longer in
operation. This inference further implies two (2) things:
(a) after the Lahug Airport ceased its undertaking as
such and the expropriated lots were not being used for
any airport expansion project, the rights vis--vis the
expropriated Lots Nos. 916 and 920 as between the
State and their former owners, petitioners herein, must
be equitably adjusted; and (b) the foregoing
unmistakable declarations in the body of
the Decision should merge with and become an
intrinsic part of the fallo thereof which under the
premises is clearly inadequate since the dispositive
portion is not in accord with the findings as contained in
the body thereof.[10]
Indeed, the Decision in Civil Case No. R-1881 should be read in its entirety,
wherein it is apparent that the acquisition by the Republic of the expropriated
lots was subject to the condition that the LahugAirport would continue its
operation. The condition not having materialized because the airport had been
abandoned, the former owner should then be allowed to reacquire the
expropriated property.[11]
On this note, we take this opportunity to revisit our ruling in Fery, which involved
an expropriation suit commenced upon parcels of land to be used as a site for a
public market. Instead of putting up a public market,
respondent Cabanatuan constructed residential houses for lease on the
area. Claiming that the municipality lost its right to the property taken since it did
not pursue its public purpose, petitioner Juan Fery, the former owner of the lots
expropriated, sought to recover his properties. However, as he had admitted
that, in 1915, respondent Cabanatuan acquired a fee simple title to the lands in
question, judgment was rendered in favor of the municipality, following American
jurisprudence, particularly City of Fort Wayne v. Lake Shore & M.S. RY.
Co.,[12] McConihay v. Theodore Wright,[13] and Reichling v. Covington Lumber
Co.,[14] all uniformly holding that the transfer to a third party of the expropriated
real property, which necessarily resulted in the abandonment of the particular
public purpose for which the property was taken, is not a ground for the recovery
of the same by its previous owner, the title of the expropriating agency being
one of fee simple.
Obviously, Fery was not decided pursuant to our now sacredly held
constitutional right that private property shall not be taken for public use without
just compensation.[15] It is well settled that the taking of private property by the
Governments power of eminent domain is subject to two mandatory
requirements: (1) that it is for a particular public purpose; and (2) that just
compensation be paid to the property owner. These requirements partake of the
nature of implied conditions that should be complied with to enable the
condemnor to keep the property expropriated.[16]
More particularly, with respect to the element of public use, the expropriator
should commit to use the property pursuant to the purpose stated in the petition
for expropriation filed, failing which, it should file another petition for the new
purpose. If not, it is then incumbent upon the expropriator to return the said
property to its private owner, if the latter desires to reacquire the
same. Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it
would lack one indispensable element for the proper exercise of the power of
eminent domain, namely, the particular public purpose for which the property will
be devoted. Accordingly, the private property owner would be denied due
process of law, and the judgment would violate the property owners right to
justice, fairness, and equity.
In light of these premises, we now expressly hold that the taking of private
property, consequent to the Governments exercise of its power of eminent
domain, is always subject to the condition that the property be devoted to the
specific public purpose for which it was taken. Corollarily, if this particular
purpose or intent is not initiated or not at all pursued, and is peremptorily
abandoned, then the former owners, if they so desire, may seek the reversion of
the property, subject to the return of the amount of just compensation
received. In such a case, the exercise of the power of eminent domain has
become improper for lack of the required factual justification.[17]
Even without the foregoing declaration, in the instant case, on the question of
whether respondents were able to establish the existence of an oral compromise
agreement that entitled them to repurchase Lot No. 88 should the operations of
the Lahug Airport be abandoned, we rule in the affirmative.
It bears stressing that both the RTC, Branch 57, Cebu and the CA have passed
upon this factual issue and have declared, in no uncertain terms, that a
compromise agreement was, in fact, entered into between the Government and
respondents, with the former undertaking to resell Lot No. 88 to the latter if the
improvement and expansion of the Lahug Airport would not be pursued. In
affirming the factual finding of the RTC to this effect, the CA declared
Lozadas testimony is cogent. An octogenarian
widower-retiree and a resident of Moon
Park, California since 1974, he testified that
government representatives verbally promised him and
his late wife while the expropriation proceedings were
on-going that the government shall return the property if
the purpose for the expropriation no longer exists. This
promise was made at the premises of the airport. As far
as he could remember, there were no expropriation
proceedings against his property in 1952 because the
first notice of expropriation he received was in
1962. Based on the promise, he did not hire a
lawyer. Lozada was firm that he was promised that the
lot would be reverted to him once the public use of the
lot ceases. He made it clear that the verbal promise
was made in Lahug with other lot owners before the
1961 decision was handed down, though he could not
name the government representatives who made the
promise. It was just a verbal promise; nevertheless, it is
binding. The fact that he could not supply the
necessary details for the establishment of his
assertions during cross-examination, but that When it
will not be used as intended, it will be returned back, we
just believed in the government, does not dismantle the
credibility and truthfulness of his allegation. This Court
notes that he was 89 years old when he testified in
November 1997 for an incident which happened
 decades ago. Still, he is a competent witness capable
of perceiving and making his perception known. The
minor lapses are immaterial. The decision of the
competency of a witness rests primarily with the trial
judge and must not be disturbed on appeal unless it is
clear that it was erroneous. The objection to his
competency must be made before he has given any
testimony or as soon as the incompetency becomes
apparent. Though Lozada is not part of the compromise
agreement,[18] he nevertheless adduced sufficient
evidence to support his claim.[19]
As correctly found by the CA, unlike in Mactan Cebu International Airport
Authority v. Court of Appeals,[20] cited by petitioners, where respondent therein
offered testimonies which were hearsay in nature, the testimony of Lozada was
based on personal knowledge as the assurance from the government was
personally made to him. His testimony on cross-examination destroyed neither
his credibility as a witness nor the truthfulness of his words.
Verily, factual findings of the trial court, especially when affirmed by
the CA, are binding and conclusive on this Court and may not be reviewed. A
petition for certiorari under Rule 45 of the Rules of Court contemplates only
questions of law and not of fact.[21] Not one of the exceptions to this rule is
present in this case to warrant a reversal of such findings.
As regards the position of petitioners that respondents testimonial evidence
violates the Statute of Frauds, suffice it to state that the Statute of Frauds
operates only with respect to executory contracts, and does not apply to
contracts which have been completely or partially performed, the rationale
thereof being as follows:
In executory contracts there is a wide field for fraud
because unless they be in writing there is no palpable
evidence of the intention of the contracting parties. The
statute has precisely been enacted to prevent
fraud. However, if a contract has been totally or partially
performed, the exclusion of parol evidence would
promote fraud or bad faith, for it would enable the
defendant to keep the benefits already delivered by him
from the transaction in litigation, and, at the same time,
evade the obligations, responsibilities or liabilities
assumed or contracted by him thereby.[22]
In this case, the Statute of Frauds, invoked by petitioners to bar the claim of
respondents for the reacquisition of Lot No. 88, cannot apply, the oral
compromise settlement having been partially performed. By reason of such
assurance made in their favor, respondents relied on the same by not pursuing
their appeal before the CA. Moreover, contrary to the claim of petitioners, the
fact of Lozadas eventual conformity to the appraisal of Lot No. 88 and his
seeking the correction of a clerical error in the judgment as to the true area of
Lot No. 88 do not conclusively establish that respondents absolutely parted with
their property. To our mind, these acts were simply meant to cooperate with the
government, particularly because of the oral promise made to them.
The right of respondents to repurchase Lot No. 88 may be enforced based on a
constructive trust constituted on the property held by the government in favor of
the former. On this note, our ruling in Heirs of Timoteo Moreno is
instructive, viz.:
Mactan-Cebu International Airport Authority is correct in
stating that one would not find an express statement in
the Decision in Civil Case No. R-1881 to the effect
that the [condemned] lot would return to [the
landowner] or that [the landowner] had a right to
repurchase the same if the purpose for which it was
expropriated is ended or abandoned or if the property
was to be used other than as the Lahug Airport. This
omission notwithstanding, and while the inclusion of
this pronouncement in the judgment of condemnation
would have been ideal, such precision is not absolutely
necessary nor is it fatal to the cause of petitioners
herein. No doubt, the return or repurchase of the
condemned properties of petitioners could be readily
justified as the manifest legal effect or consequence of
the trial courts underlying presumption that Lahug
Airport will continue to be in operation when it granted
the complaint for eminent domain and the airport
discontinued its activities.
The predicament of petitioners involves a constructive
trust, one that is akin to the implied trust referred to in
Art. 1454 of the Civil Code, If an absolute conveyance
of property is made in order to secure the performance
of an obligation of the grantor toward the grantee, a
trust by virtue of law is established. If the fulfillment of
the obligation is offered by the grantor when it becomes
due, he may demand the reconveyance of the property
to him. In the case at bar, petitioners conveyed Lots
No. 916 and 920 to the government with the latter
obliging itself to use the realties for the expansion of
Lahug Airport; failing to keep its bargain, the
government can be compelled by petitioners to
reconvey the parcels of land to them, otherwise,
petitioners would be denied the use of their properties
upon a state of affairs that was not conceived nor
contemplated when the expropriation was authorized.
Although the symmetry between the instant case and
the situation contemplated by Art. 1454 is not perfect,
the provision is undoubtedly applicable. For, as
explained by an expert on the law of trusts: The only
problem of great importance in the field of constructive
trust is to decide whether in the numerous and varying
fact situations presented to the courts there is a
wrongful holding of property and hence a threatened
unjust enrichment of the defendant. Constructive trusts
are fictions of equity which are bound by no unyielding
formula when they are used by courts as devices to
remedy any situation in which the holder of legal title
may not in good conscience retain the beneficial
interest.
In constructive trusts, the arrangement is temporary
and passive in which the trustees sole duty is to
transfer the title and possession over the property to
the plaintiff-beneficiary. Of course, the wronged party
seeking the aid of a court of equity in establishing a
constructive trust must himself do equity. Accordingly,
the court will exercise its discretion in deciding what
acts are required of the plaintiff-beneficiary as
conditions precedent to obtaining such decree and has
 the obligation to reimburse the trustee the consideration
received from the latter just as the plaintiff-beneficiary
4. Respondents are also ENTITLED to keep whatever interests the amounts
would if he proceeded on the theory of rescission. In
the good judgment of the court, the trustee may also be
paid the necessary expenses he may have incurred in In accordance with Article 1190[25] of the Civil Code vis--vis Article 1189, which they received as just compensation may have earned in the meantime, as well
sustaining the property, his fixed costs for
improvements thereon, and the monetary value of his provides that (i)f a thing is improved by its nature, or by time, the improvement as the appreciation in value of Lot No. 88, which is a natural consequence of
services in managing the property to the extent that
plaintiff-beneficiary will secure a benefit from his acts.
shall inure to the benefit of the creditor x x x, respondents, as creditors, do not nature and time;
The rights and obligations between the constructive
trustee and the beneficiary, in this case, respondent have to pay, as part of the process of restitution, the appreciation in value of Lot
MCIAA and petitioners over Lots Nos. 916 and 920, are
echoed in Art. 1190 of the Civil Code, When the
conditions have for their purpose the extinguishment of No. 88, which is a natural consequence of nature and time.[26] In light of the foregoing modifications, the case is REMANDED to the Regional
an obligation to give, the parties, upon the fulfillment of
said conditions, shall return to each other what they Trial Court, Branch 57, Cebu City, only for the purpose of receiving evidence on
have received x x x In case of the loss, deterioration or
improvement of the thing, the provisions which, with
respect to the debtor, are laid down in the preceding WHEREFORE, the petition is DENIED. The February 28, 2006 Decision of the the amounts that respondents will have to pay petitioners in accordance with this
article shall be applied to the party who is bound to
return x x x.[23] Court of Appeals, affirming the October 22, 1999 Decision of the Regional Trial Courts decision. No costs.

Court, Branch 87, Cebu City, and its February 7, 2007 Resolution
G.R. No. 87335 February 12, 1990
On the matter of the repurchase price, while petitioners are obliged to reconvey
are AFFIRMED with MODIFICATION as follows:
REPUBLIC OF THE PHILIPPINES, petitioner,
Lot No. 88 to respondents, the latter must return to the former what they vs.
CRISTINA DE KNECHT AND THE COURT OF APPEALS, respondents.
received as just compensation for the expropriation of the property, plus legal
1. Respondents are ORDERED to return to petitioners the just compensation
Villanueva, Talamayan, Nieva, Elegado, and Ante Law Offices for respondent
interest to be computed from default, which in this case runs from the time Cristina de Knecht.
they received for the expropriation of Lot No. 88, plus legal interest, in the case

petitioners comply with their obligation to respondents.

of default, to be computed from the time petitioners comply with their obligation

GANCAYCO, J.:
to reconvey Lot No. 88 to them;

Respondents must likewise pay petitioners the necessary expenses they may The issue posed in this case is whether an expropriation proceeding that was
determined by a final judgment of this Court may be the subject of a subsequent
have incurred in maintaining Lot No. 88, as well as the monetary value of their legislation for expropriation.
2. Respondents are ORDERED to pay petitioners the necessary expenses the

services in managing it to the extent that respondents were benefited thereby. On February 20, 1979 the Republic of the Philippines filed in the Court of First
latter incurred in maintaining Lot No. 88, plus the monetary value of their Instance (CFI) of Rizal in Pasay City an expropriation proceedings against the
owners of the houses standing along Fernando Rein-Del Pan streets among
services to the extent that respondents were benefited thereby; them Cristina De Knecht (de Knecht for short) together with Concepcion
Cabarrus, and some fifteen other defendants, docketed as Civil Case No. 7001-
Following Article 1187[24] of the Civil Code, petitioners may keep whatever P.

income or fruits they may have obtained from Lot No. 88, and respondents need On March 19, 1979 de Knecht filed a motion to dismiss alleging lack of
3. Petitioners are ENTITLED to keep whatever fruits and income jurisdiction, pendency of appeal with the President of the Philippines,
prematureness of complaint and arbitrary and erroneous valuation of the
not account for the interests that the amounts they received as just properties. On March 29, 1979 de Knecht filed an ex parte urgent motion for the
they may have obtained from Lot No. 88; and
issuance by the trial court of a restraining order to restrain the Republic from
compensation may have earned in the meantime. proceeding with the taking of immediate possession and control of the property
sought to be condemned. In June, 1979 the Republic filed a motion for the
issuance of a writ of possession of the property to be expropriated on the ground
that it had made the required deposit with the Philippine National Bank (PNB) of
10% of the amount of compensation stated in the complaint. In an order dated
June 14, 1979 the lower court issued a writ of possession authorizing the
Republic to enter into and take possession of the properties sought to be
condemned, and created a Committee of three to determine the just
compensation for the lands involved in the proceedings.
On July 16, 1979 de Knecht filed with this Court a petition for certiorari and
prohibition docketed as G.R. No. L-51078 and directed against the order of the
lower court dated June 14, 1979 praying that the respondent be commanded to
desist from further proceeding in the expropriation action and from implementing
said order. On October 30, 1980 this Court rendered a decision, the dispositive
part of which reads as follows:
WHEREFORE, the petition for certiorari and prohibition
is hereby granted. The order of June 14, 1979
authorizing the Republic of the Philippines to take c
enter upon the possession of the properties sought to
be condemned is set aside and the respondent Judge
is permanently enjoined from taking any further action
on Civil Case No. 7001-P, entitled 'Republic of the
Philippines vs. Concepcion Cabarrus Vda. de Santos,
et al.' except to dismiss said case. 1
On August 8, 1981 defendants Maria Del Carmen Roxas Vda. de Elizalde,
Francisco Elizalde and Antonio Roxas moved to dismiss the expropriation action
in compliance with the dispositive portion of the aforesaid decision of this Court
which had become final and in order to avoid further damage to same
defendants who were denied possession of their properties. The Republic filed a
manifestation on September 7, 1981 stating, among others, that it had no
objection to the said motion to dismiss as it was in accordance with the
aforestated decision.
On September 2, 1983, the Republic filed a motion to dismiss said case due to
the enactment of the Batas Pambansa Blg. 340 expropriating the same
properties and for the same purpose. The lower court in an order of September
2, 1983 dismissed the case by reason of the enactment of the said law. The
motion for reconsideration thereof was denied in the order of the lower court
dated December 18, 1986.
De Knecht appealed from said order to the Court of Appeals wherein in due
course a decision was rendered on December 28, 1988, 2 the dispositive part of
which reads as follows:
PREMISES CONSIDERED, the order appealed from is
hereby SET ASIDE. As prayed for in the appellant's
brief another Order is hereby issued dismissing the
expropriation proceedings (Civil Case No. 51078)
before the lower court on the ground that the choice of
Fernando Rein-Del Pan Streets as the line through
which the Epifanio de los Santos Avenue should be
extended is arbitrary and should not receive judicial
approval.
No pronouncement as to Costs. 3
Hence the Republic filed that herein petition for review of the A aforestated
decision whereby the following issues were raised:
I
WHETHER OR NOT THE ENACTMENT OF BATAS
PAMBANSA BLG. 340 IS THE PROPER GROUND
FOR THE DISMISSAL OF THE EXPROPRIATION
CASE. (PROPERLY PUT, WHETHER OR NOT THE
LOWER COURT COMMITTED GRAVE ABUSE OF
DIS CRETION IN DISMISSING CIVIL CASE NO. 7001-
P UPON JUDICIAL NOTICE OF B.P. BLG. 340).
II
WHETHER OR NOT THE DPWH'S "CHOICE" OF
LAND TO BE EXPROPRIATED IS STILL AN ISSUE
UNDER THE CIRCUMSTANCES, SAID "CHOICE"
HAVING BEEN SUPPLANTED BY THE
LEGISLATURE'S CHOICE.
III
WHETHER OR NOT THE LAW OF THE CASE
THEORY SHOULD BE APPLIED TO THE CASE AT
BAR. 4
The petition is impressed with merit. There is no question that as early as 1977,
pursuant to the Revised Administrative Code, the national government, through
the Department of Public Works and Highways began work on what was to be
the westward extension of Epifanio de los Santos Avenue (EDSA) outfall (or
outlet) of the Manila and suburbs flood control and drainage project and the
Estero Tripa de Gallina. These projects were aimed at: (1) easing traffic
congestion in the Baclaran and outlying areas; (2) controlling flood by the
construction of the outlet for the Estero Tripa de Gallina (which drains the area
of Marikina, Pasay, Manila and Paranaque); and (3) thus completing the Manila
Flood and Control and Drainage Project.
So the petitioner acquired the needed properties through negotiated purchase
starting with the lands from Taft Avenue up to Roxas Boulevard including the
lands in Fernando Rein-Del Pan streets. It acquired through negotiated
purchases about 80 to 85 percent of the lands involved in the project whose
owners did not raise any objection as to arbitrariness on the choice of the project
and of the route. It is only with respect to the remaining 10 to 15 percent along
the route that the petitioner cannot negotiate through a sales agreement with a
few land owners, including de Knecht whose holding is hardly 5% of the whole
route area. Thus, as above related on February 20, 1979 the petitioner filed the
expropriation proceedings in the Court of First Instance.
There is no question that in the decision of this Court dated October 30, 1980
in De Knecht vs. Bautista, G.R. No. L-51078, this Court held that the "choice of
the Fernando Rein-Del Pan streets as the line through which the EDSA should
be extended to Roxas Boulevard is arbitrary and should not receive judicial
approval." 5 It is based on the recommendation of the Human Settlements
Commission that the choice of Cuneta street as the line of the extension will
minimize the social impact factor as the buildings and improvement therein are
mostly motels. 6
In view of the said finding, this Court set aside the order of the trial court dated
June 14, 1979 authorizing the Republic of the Philippines to take possession of
the properties sought to be condemned and enjoined the respondent judge from
taking any further action in the case except to dismiss the same.
Said decision having become final no action was taken by the lower court on the
said directive of this Court to dismiss the case. Subsequently B.P. Blg. 340 was
enacted by the Batasang Pambansa on February 17, 1983. On the basis of said
law petitioner filed a motion to dismiss the case before the trial court and this
was granted.
On appeal by de Knecht to the Court of Appeals the appellate court held that the
decision of the Supreme Court having become final, the petitioner's right as
determined therein should no longer be disturbed and that the same has
become the law of the case between the parties involved. Thus, the appellate
court set aside the questioned order of the trial court and issued another order
dismissing the expropriation proceedings before the lower court pursuant to the
ruling in De Knecht case.
While it is true that said final judgment of this Court on the subject becomes the
law of the case between the parties, it is equally true that the right of the
petitioner to take private properties for public use upon the payment of the just
compensation is so provided in the Constitution and our laws. 7 Such
expropriation proceedings may be undertaken by the petitioner not only by
voluntary negotiation with the land owners but also by taking appropriate court
action or by legislation. 8
When on February 17, 1983 the Batasang Pambansa passed B.P. Blg. 340
expropriating the very properties subject of the present proceedings, and for the
same purpose, it appears that it was based on supervening events that occurred
after the decision of this Court was rendered in De Knecht in 1980 justifying the
expropriation through the Fernando Rein-Del Pan Streets.
The social impact factor which persuaded the Court to consider this extension to
be arbitrary had disappeared. All residents in the area have been relocated and
duly compensated. Eighty percent of the EDSA outfall and 30% of the EDSA
extension had been completed. Only private respondent remains as the solitary
obstacle to this project that will solve not only the drainage and flood control
problem but also minimize the traffic bottleneck in the area.
The Solicitor General summarizing the situation said
The construction and completion of the Metro Manila
Flood Control and Drainage Project and the EDSA
extension are essential to alleviate the worsening traffic
problem in the Baclaran and Pasay City areas and the
perennial flood problems. Judicial notice may be taken
 that these problems bedevil life and property not only in
the areas directly affected but also in areas much
beyond. Batas Pambansa Blg. 340 was enacted to
hasten 'The Project' and thus solve these problems,
and its implementation has resulted so far in an
80% completion of the EDSA outfall and a 30%
completion of the EDSA extension, all part of 'The
Project'.
This instant case stands in the way of the final solution
of the above-mentioned problems, solely because the
single piece of property I occupied' by De Knecht,
although already expropriated under B.P. Blg. 340, is
the only parcel of land where Government engineers
could not enter due to the 'armed' resistance offered by
De Knecht, guarded and surrounded as the lot is
perennially by De Knecht's fierce private security
guards. It may thus be said that De Knecht, without any
more legal interest in the land, single-handedly stands
in the way of the completion of 'The Project' essential to
the progress of Metro Manila and surrounding areas.
Without the property she persists in occupying and
without any bloodletting, the EDSA outfall construction
on both sides of the said property cannot be joined
together,and the flood waters of Pasay, Paraaque and
Marikina which flow through the Estero Tripa de
Gallina will continue to have no way or outlet that could
drain into Manila Bay. Without said property, the EDSA
extension, already 30% completed, can in no way be
finished, and traffic will continue to clog and jam the
intersections of EDSA and Taft Avenue in Baclaran and
pile up along the airport roads.
In sum, even in the face of BP340, De Knecht holds the
Legislative sovereign will and choice inutile. 9
The Court finds justification in proceeding with the said expropriation
proceedings through the Fernando Rein-Del Pan streets from ESDA to Roxas
Boulevard due to the aforestated supervening events after the rendition of the
decision of this Court in De Knecht.
B.P. Blg. 340 therefore effectively superseded the aforesaid final and executory
decision of this Court. And the trial court committed no grave abuse of discretion
in dismissing the case pending before it on the ground of the enactment of B.P.
Blg. 340.
Moreover, the said decision, is no obstacle to the legislative arm of the
Government in thereafter (over two years later in this case) making its own
independent assessment of the circumstances then prevailing as to the propriety
of undertaking the expropriation of the properties in question and thereafter by
enacting the corresponding legislation as it did in this case. The Court agrees in
the wisdom and necessity of enacting B.P. Blg. 340. Thus the anterior decision
of this Court must yield to this subsequent legislative flat.
WHEREFORE, the petition is hereby GRANTED and the questioned decision of
the Court of Appeals dated December 28, 1988 and its resolution dated March
9, 1989 are hereby REVERSED and SET ASIDE and the order of Branch III of
the then Court of First Instance of Rizal in Pasay City in Civil Case No. 7001-P
dated September 2, 1983 is hereby reinstated without pronouncement as to
costs.
G.R. No. L-28896 February 17, 1988
COMMISSIONER OF INTERNAL REVENUE, petitioner,
vs.
ALGUE, INC., and THE COURT OF TAX APPEALS, respondents.
CRUZ, J.:
Taxes are the lifeblood of the government and so should be collected without
unnecessary hindrance On the other hand, such collection should be made in
accordance with law as any arbitrariness will negate the very reason for
government itself. It is therefore necessary to reconcile the apparently conflicting
interests of the authorities and the taxpayers so that the real purpose of taxation,
which is the promotion of the common good, may be achieved.
The main issue in this case is whether or not the Collector of Internal Revenue
The petitioner contends that the claimed deduction of P75,000.00 was properly
correctly disallowed the P75,000.00 deduction claimed by private respondent
Algue as legitimate business expenses in its income tax returns. The corollary
issue is whether or not the appeal of the private respondent from the decision of
the Collector of Internal Revenue was made on time and in accordance with law.
We deal first with the procedural question.
The record shows that on January 14, 1965, the private respondent, a domestic
corporation engaged in engineering, construction and other allied activities,
received a letter from the petitioner assessing it in the total amount of
P83,183.85 as delinquency income taxes for the years 1958 and 1959.1 On
January 18, 1965, Algue flied a letter of protest or request for reconsideration,
which letter was stamp received on the same day in the office of the
petitioner. 2 On March 12, 1965, a warrant of distraint and levy was presented to
the private respondent, through its counsel, Atty. Alberto Guevara, Jr., who
refused to receive it on the ground of the pending protest. 3 A search of the
protest in the dockets of the case proved fruitless. Atty. Guevara produced his
file copy and gave a photostat to BIR agent Ramon Reyes, who deferred service
of the warrant. 4 On April 7, 1965, Atty. Guevara was finally informed that the
BIR was not taking any action on the protest and it was only then that he
accepted the warrant of distraint and levy earlier sought to be served.5 Sixteen
days later, on April 23, 1965, Algue filed a petition for review of the decision of
the Commissioner of Internal Revenue with the Court of Tax Appeals.6
The above chronology shows that the petition was filed seasonably. According
to Rep. Act No. 1125, the appeal may be made within thirty days after receipt of
the decision or ruling challenged.7 It is true that as a rule the warrant of distraint
and levy is "proof of the finality of the assessment" 8 and renders hopeless a
request for reconsideration," 9 being "tantamount to an outright denial thereof
and makes the said request deemed rejected." 10 But there is a special
circumstance in the case at bar that prevents application of this accepted
doctrine.
The proven fact is that four days after the private respondent received the
petitioner's notice of assessment, it filed its letter of protest. This was apparently
not taken into account before the warrant of distraint and levy was issued;
indeed, such protest could not be located in the office of the petitioner. It was
only after Atty. Guevara gave the BIR a copy of the protest that it was, if at all,
considered by the tax authorities. During the intervening period, the warrant was
premature and could therefore not be served.
As the Court of Tax Appeals correctly noted," 11 the protest filed by private
respondent was not pro forma and was based on strong legal considerations. It
thus had the effect of suspending on January 18, 1965, when it was filed, the
reglementary period which started on the date the assessment was received,
viz., January 14, 1965. The period started running again only on April 7, 1965,
when the private respondent was definitely informed of the implied rejection of
the said protest and the warrant was finally served on it. Hence, when the
appeal was filed on April 23, 1965, only 20 days of the reglementary period had
been consumed.
Now for the substantive question.
disallowed because it was not an ordinary reasonable or necessary business
expense. The Court of Tax Appeals had seen it differently. Agreeing with Algue,
it held that the said amount had been legitimately paid by the private respondent
for actual services rendered. The payment was in the form of promotional fees.
These were collected by the Payees for their work in the creation of the
Vegetable Oil Investment Corporation of the Philippines and its subsequent
purchase of the properties of the Philippine Sugar Estate Development
Company.
Parenthetically, it may be observed that the petitioner had Originally claimed
these promotional fees to be personal holding company income 12 but later
conformed to the decision of the respondent court rejecting this assertion.13 In
fact, as the said court found, the amount was earned through the joint efforts of
the persons among whom it was distributed It has been established that the
Philippine Sugar Estate Development Company had earlier appointed Algue as
its agent, authorizing it to sell its land, factories and oil manufacturing process.
Pursuant to such authority, Alberto Guevara, Jr., Eduardo Guevara, Isabel
Guevara, Edith, O'Farell, and Pablo Sanchez, worked for the formation of the
Vegetable Oil Investment Corporation, inducing other persons to invest in
it.14 Ultimately, after its incorporation largely through the promotion of the said
persons, this new corporation purchased the PSEDC properties.15 For this sale,
Algue received as agent a commission of P126,000.00, and it was from this
commission that the P75,000.00 promotional fees were paid to the aforenamed
individuals.16
There is no dispute that the payees duly reported their respective shares of the
fees in their income tax returns and paid the corresponding taxes thereon.17 The
Court of Tax Appeals also found, after examining the evidence, that no
distribution of dividends was involved.18
The petitioner claims that these payments are fictitious because most of the
payees are members of the same family in control of Algue. It is argued that no
indication was made as to how such payments were made, whether by check or
in cash, and there is not enough substantiation of such payments. In short, the
petitioner suggests a tax dodge, an attempt to evade a legitimate assessment by
involving an imaginary deduction.
We find that these suspicions were adequately met by the private respondent
when its President, Alberto Guevara, and the accountant, Cecilia V. de Jesus,
testified that the payments were not made in one lump sum but periodically and
in different amounts as each payee's need arose. 19 It should be remembered
that this was a family corporation where strict business procedures were not
applied and immediate issuance of receipts was not required. Even so, at the
end of the year, when the books were to be closed, each payee made an
accounting of all of the fees received by him or her, to make up the total of
P75,000.00. 20 Admittedly, everything seemed to be informal. This arrangement
was understandable, however, in view of the close relationship among the
persons in the family corporation.
We agree with the respondent court that the amount of the promotional fees was
not excessive. The total commission paid by the Philippine Sugar Estate
Development Co. to the private respondent was P125,000.00. 21After deducting
the said fees, Algue still had a balance of P50,000.00 as clear profit from the
transaction. The amount of P75,000.00 was 60% of the total commission. This
was a reasonable proportion, considering that it was the payees who did
practically everything, from the formation of the Vegetable Oil Investment
Corporation to the actual purchase by it of the Sugar Estate properties. This
finding of the respondent court is in accord with the following provision of the
Tax Code:
SEC. 30. Deductions from gross income.--In computing
net income there shall be allowed as deductions
(a) Expenses:
(1) In general.--All the ordinary and necessary
expenses paid or incurred during the taxable year in
carrying on any trade or business, including a
reasonable allowance for salaries or other
compensation for personal services actually rendered;
... 22
and Revenue Regulations No. 2, Section 70 (1), reading as follows:
SEC. 70. Compensation for personal services.--Among
the ordinary and necessary expenses paid or incurred
in carrying on any trade or business may be included a
reasonable allowance for salaries or other
compensation for personal services actually rendered.
The test of deductibility in the case of compensation
payments is whether they are reasonable and are, in
fact, payments purely for service. This test and
deductibility in the case of compensation payments is
whether they are reasonable and are, in fact, payments
purely for service. This test and its practical application
may be further stated and illustrated as follows:
Any amount paid in the form of compensation, but not
in fact as the purchase price of services, is not
deductible. (a) An ostensible salary paid by a
corporation may be a distribution of a dividend on
stock. This is likely to occur in the case of a corporation
having few stockholders, Practically all of whom draw
salaries. If in such a case the salaries are in excess of
those ordinarily paid for similar services, and the
excessive payment correspond or bear a close
relationship to the stockholdings of the officers of
employees, it would seem likely that the salaries are
not paid wholly for services rendered, but the excessive
payments are a distribution of earnings upon the stock.
. . . (Promulgated Feb. 11, 1931, 30 O.G. No. 18, 325.)
It is worth noting at this point that most of the payees were not in the regular
employ of Algue nor were they its controlling stockholders. 23
The Solicitor General is correct when he says that the burden is on the taxpayer
to prove the validity of the claimed deduction. In the present case, however, we
find that the onus has been discharged satisfactorily. The private respondent
has proved that the payment of the fees was necessary and reasonable in the
light of the efforts exerted by the payees in inducing investors and prominent
businessmen to venture in an experimental enterprise and involve themselves in
a new business requiring millions of pesos. This was no mean feat and should
be, as it was, sufficiently recompensed.
It is said that taxes are what we pay for civilization society. Without taxes, the
government would be paralyzed for lack of the motive power to activate and
operate it. Hence, despite the natural reluctance to surrender part of one's hard
earned income to the taxing authorities, every person who is able to must
contribute his share in the running of the government. The government for its
part, is expected to respond in the form of tangible and intangible benefits
intended to improve the lives of the people and enhance their moral and material
values. This symbiotic relationship is the rationale of taxation and should dispel
the erroneous notion that it is an arbitrary method of exaction by those in the
seat of power.
But even as we concede the inevitability and indispensability of taxation, it is a
requirement in all democratic regimes that it be exercised reasonably and in
accordance with the prescribed procedure. If it is not, then the taxpayer has a
right to complain and the courts will then come to his succor. For all the
awesome power of the tax collector, he may still be stopped in his tracks if the
taxpayer can demonstrate, as it has here, that the law has not been observed.
We hold that the appeal of the private respondent from the decision of the
petitioner was filed on time with the respondent court in accordance with Rep.
Act No. 1125. And we also find that the claimed deduction by the private
respondent was permitted under the Internal Revenue Code and should
therefore not have been disallowed by the petitioner.
ACCORDINGLY, the appealed decision of the Court of Tax Appeals is
AFFIRMED in toto, without costs.
G.R. No. 79307 August 29, 1989
COMMISSIONER OF CUSTOMS, petitioner,
vs.
THE HON. RAMON P. MAKASIAR, RTC Judge, Branch 35, Manila and THE
DISTILLERS CO. LTD. OF ENGLAND, respondents.
Quasha, Asperilla, Ancheta, Pena & Nolasco for private respondent.
CORTES, J.:
Petitioner Commissioner of Customs seeks the reversal of respondent judge's
decision dated 20 July 1987 in Civil Case No. 82-12821 entitled "The Distillers
Co. Ltd., of England v. Victorio Francisco, et al.," the dispositive portion of which
reads as follows:
WHEREFORE, having been issued by the Collector of
Customs in excess of his jurisdiction the disputed
Warrant of Seizure and Detention dated January 2,
1979, in Seizure Identification No. 2-79 of the Bureau of
Customs, as well as all the proceedings taken thereon
are declared NULL and VOID, and the writ of
prohibition prayed for is GRANTED. The public
respondent is ordered to REFRAIN and DESIST from
conducting any proceedings for the seizure and
forfeiture of the articles in question until after the Court
having taken cognizance and legal custody thereof has
rendered its final judgment in the criminal cases which
involve the same articles. Without costs.
SO ORDERED. [RTC Decision, p. 7; Rollo, p. 26].
The undisputed acts are as follows:
On 7 December 1978, the then Court of First Instance of Manila (herein referred
to as CFI-MANILA) issued Search and Seizure Warrants in Criminal Case Nos.
8602 and 8603 entitled "People of the Philippines vs. Howard J. Sosis,, et al.,"
for violation of Section 11 (a) and/or 11(e) of Republic Act No. 3720, * and
violation of Article 188 of the Revised Penal Code (captioned as "Substituting
and altering trademarks, tradenames, or service marks"), respectively, and
ordering the seizure of the following:
a) Materials:
All whisky, bottles, labels, caps, cartons, boxes,
machinery equipment or other materials used or
intended to be used, or suitable for use, in connection
 with counter-feiting or imitation of Johnnie Walker
Scotch Whisky (Emphasis supplied)
b) Documents:
xxx
under the control and possession of:
1. Howard J. Sosis
2. George Morrison Lonie
3. Hercules Bottling Co.
4. Lauro Villanueva
5. Vicente Velasco
6. Manuel Esteban
7. Eugenio Mauricio
[Rollo, pp. 106-107].
On 8 December 1978, a composite team from the Ministry of Finance Bureau of
Investigation and Intelligence (herein referred to as BII), the Bureau of Customs
and the Integrated National Police enforced the search and seizure warrants,
and seized and confiscated the following articles, among others, found in the
premises of the Hercules Bottling Co., Inc. (herein referred to as HERCULES) at
Isla de Provisor, Paco, Manila:
Six (6) Tanks of Scotch Whisky; 417 cartons each
containing I doz. bottles of "Johnnie Walker Black Label
Whisky"; 109 empty bottles; Empty Cartons of "Johnnie
Walker Black Label Scotch Whisky" number 900-2044
empty cartons. [Rollo, p. 21].
The articles seized remained in the premises of HERCULES guarded and
secured by BII personnel.
On 2 January 1979, the Collector of Customs for the Port of Manila, after being
informed of the seizure of the subject goods and upon verification that the same
were imported contrary to law, issued a warrant of seizure and detention, in
Seizure Identification No. 2-79, and ordered the immediate seizure and turnover
of the seized items to its Auction and Cargo Disposal Division at the Port of
Manila. Seizure and forfeiture proceedings were then initiated against the
above-enumerated articles for alleged violation of Section 2530 (f) of the Tariff
and Customs Code, in relation to Republic Act 3720, to wit:
Sec. 2530. Property subject to forfeiture under Tariff
and Customs law:
xxx
(f) Any article the importation or exportation of which is
effected or attempted contrary to law, or any article of
prohibited importation or exportation, and all other
articles which, in the opinion of the collector have been
used, are or were entered to be used as instruments in
the importation or exportation of the former.
xxx
On 29 January 1979, the CFI-MANILA issued an order authorizing the transfer
and delivery of the seized articles to the customs warehouse located at South
Harbor, Port of Manila, subject to the following conditions:
1. The Commissioner of Customs is willing to have
custody of the same and guarantees their safekeeping
at all times in the same quantity, quality, manner and
condition when the articles shall be turned over to and
received by the Bureau of Customs in custodia legis,
subject to the further orders from the Court;
2. No article shall be transferred without the presence
of a representative of the applicant, the defendants, the
Commissioner of Customs and the Court; these
representatives to secure the necessary escort as
guarantee that nothing will happen during the transfer
of the articles.
3. The Commissioner of Customs to issue the proper
and necessary receipt for each and every article
transferred to and received by the Bureau of Customs
pursuant to this order [Rollo, p. 22].
Meanwhile, the validity and constitutionality of the issuance and service of the
search and seizure warrants issued by the CFI- MANILA were contested in and
upheld by the Court of Appeals in CA-G.R. No. SP-09153-R entitled "Hercules
Bottling Co. Inc., et al., v. Victoriano Savellano, et al." HERCULES filed a
petition for certiorari in the Supreme Court but in a resolution dated 26
November 1986 in G.R. No. 55061 captioned as Hercules Bottling Co., Inc. v.
The Court of Appeals, the Court dismissed the petition.
Consequently, the City Fiscal of Manila proceeded with the preliminary
investigation of the criminal cases, where private respondent, The Distillers Co.
Ltd. of England, claiming to be the owner and exclusive manufacturer of Johnnie
Walker Scotch Whiskey was the private complainant [Rollo, p. 61], With the
dismissal of HERCULES' petition, the Bureau of Customs also resumed hearing
the seizure and forfeiture proceedings over the said articles.
The present controversy arose when private respondent, on 11 June 1982,
objected to the continuation by the Collector of Customs of the seizure
proceedings claiming, among others, that these proceedings would hamper or
even jeopardize the preliminary investigation being conducted by the fiscal. The
Collector of Customs ignored the objections.
In order to stop and enjoin the Hearing Officer of the Bureau of Customs from
taking further action in the seizure proceedings of the subject goods, private
respondent on 24 September 1982 filed a petition for prohibition with preliminary
injunction and/or temporary restraining order, docketed as Civil Case No. 82-
12721. It must be noted at this juncture that the petition was heard not before
the CFI-MANILA which originally issued the search warrants, but before another
sala, that of respondent judge of the Regional Trial Court, Branch 35, Manila.
Respondent judge issued a temporary restraining order on 29 September 1982.
Subsequently, a writ for preliminary injunction was issued as well. Petitioner filed
an answer on 12 November 1982. On 20 July 1987, respondent judge rendered
a decision holding that the Collector of Customs acted in excess of its
jurisdiction in issuing the warrant of seizure and detention considering that the
subject goods had already come under the legal custody of the CFI-MANILA.
Hence, petitioner represented by the Solicitor General, filed the instant petition
on 11 August 1987.
In the meantime, Howard Sosis and company were charged for violation of
Chapter VI, Sec. 11(a) & (e) of Republic Act 3720 in Criminal Case No. 88-
63157 and for violation of Article 188 of the Revised Penal Code in Criminal
Case No. 88-63156 before the Regional Trial Court and the Metropolitan Trial
Court of Manila, respectively [Rollo, p. 83].
In his petition, the Commissioner of Customs assigns as errors the following:
I. RESPONDENT JUDGE ERRED IN ISSUING A
TEMPORARY RESTRAINING ORDER AND
SUBSEQUENTLY A WRIT OF INJUNCTION IN CIVIL
CASE NO. 82-12721 NOTWITHSTANDING THE FACT
THAT PRIVATE RESPONDENT, THE DISTILLERS
CO., LTD., OF ENGLAND HAS NO VALID CAUSE OF
ACTION AGAINST HEREIN PETITIONER;
II. RESPONDENT RTC JUDGE GRAVELY ERRED IN
TAKING COGNIZANCE OF THE PETITION AND IN
PROCEEDING TO HEAR AND RENDER A DECISION
IN CIVIL CASE NO. 82-12721 NOTWITHSTANDING
THE FACT THAT THE TRIAL COURT HAS NO
JURISDICTION OVER THE CASE [Rollo, pp. 10-11].
Petitioner contends that the authority of the Bureau of Customs over seizure and
forfeiture cases is beyond the judicial interference of the Regional Trial Court,
even in the form of certiorari, prohibition or mandamus which are really attempts
to review the Commissioner's actions [Rollo, p. 98]. Petitioner argues that
judicial recourse from the decision of the Bureau of Customs on seizure and
forfeiture cases can only be sought in the Court of Tax Appeals and eventually
in this Court.
Private respondent however contends that while the law may have vested
exclusive jurisdiction in the Bureau of Customs over forfeiture and seizure
cases, in this case respondent judge had jurisdiction to enjoin the Bureau of
Customs from continuing with its seizure and forfeiture proceedings since the
articles here were already in custodia legis, by virtue of the search warrants
issued by the CFI-MANILA. Private respondent contends that respondent judge
may properly take cognizance of the instant case since unlike the cases cited by
petitioner, the action for prohibition was brought not to claim ownership or
possession over the goods but only to preserve the same and to prevent the
Bureau of Customs from doing anything prejudicial to the successful prosecution
of the criminal cases [Rollo, p. 123].
The issue thus presented is whether or not respondent judge may enjoin the
Collector of Customs from continuing with its seizure and forfeiture proceedings
over goods earlier seized by virtue of search warrants issued by the CFI-
MANILA.
The instant petition is impressed with merit.
This Court finds that respondent-judge has failed to adhere to the prevailing rule
which denies him jurisdiction to enjoin the Bureau of Customs from taking further
action in the seizure and forfeiture proceedings over the subject goods.
Jurisprudence is replete with cases which have held that regional trial courts are
devoid of any competence to pass upon the validity or regularity of seizure and
forfeiture proceedings conducted in the Bureau of Customs, and to enjoin, or
otherwise interfere with, these proceedings. The Collector of Customs sitting in
seizure and forfeiture proceedings has exclusive jurisdiction to hear and
determine all questions touching on the seizure and forfeiture of dutiable goods.
The regional trial courts are precluded from assuming cognizance over such
matters even through petitions of certiorari, prohibition or mandamus
[See General Travel Service v. David, G.R. No. L-19259, September 23, 1966,
18 SCRA 59; Pacis v. Averia, G.R. No. L-22526, November 29, 1966, 18 SCRA
907; De Joya v. Lantin, G.R. No. L-24037, April 27, 1967, 19 SCRA 893; Ponce
Enrile v. Vinuya G.R. No. L-29043, January 30, 1971, 37 SCRA 381; Collector of
Customs v. Torres, G.R. No. L-22977, May 31, 1972, 45 SCRA 272; Pacis v.
Geronimo, G.R. No. L-24068, April 23, 1974,56 SCRA 583; Commissioner of
Customs v. Navarro, G.R. No. L-33146, May 31, 1977, 77 SCRA 264; Republic
v. Bocar, G.R. No. L-35260, September 4, 1979,93 SCRA 78; De la Fuente v.
De Veyra, G.R. No. L-35385, January 31, 1983, 120 SCRA 451].
It is likewise well-settled that the provisions of the Tariff and Customs Code and
that of Republic Act No. 1125, as amended ** specify the proper fora for the
ventilation of any legal objections or issues raised concerning these
proceedings. Actions of the Collector of Customs are appealable to the
Commissioner of Customs, whose decisions, in turn, are subject to the exclusive
appellate jurisdiction of the Court of Tax Appeals. Thereafter, an appeal lies to
this Court through the appropriate petition for review by writ of certiorari.
Undeniably, regional trial courts do not share these review powers.
The above rule is anchored upon the policy of placing no unnecessary
hindrance on the government's drive not only to prevent smuggling and other
frauds upon customs, but also, and more importantly, to render effective and
efficient the collection of import and export duties due the state. For tariff and
customs duties are taxes constituting a significant portion of the public revenue
which are the lifeblood that enables the government to carry out functions it has
been instituted to perform.
Notwithstanding these considerations, respondent judge entertained private
respondent's petition for prohibition holding that the seizure and forfeiture
proceedings instituted in the Bureau of Customs was null and void because the
subject goods were earlier seized by virtue of the warrants issued by the CFI-
MANILA in Criminal Cases Nos. 8602 and 8603.
This holding is erroneous.
Even if it be assumed that a taint of irregularity may be imputed to the exercise
by the Collector of Customs of his jurisdiction to institute seizure and forfeiture
proceedings over the subject goods because he had accepted custody of the
same under conditions specified in the CFI-Manila order dated January 29,
1979, it would not mean that respondent judge was correspondingly vested with
the jurisdiction to interfere with such proceedings (See Ponce Enrile v.
Vinuya supra]. It bears repeating that law and settled jurisprudence clearly
deprive the regional trial courts of jurisdiction to enjoin the Collector of Customs
from exercising his exclusive authority to order seizure and forfeiture
proceedings over imported goods.
Moreover, there is no legal basis for respondent judge's conclusion that the
Collector of Customs is deprived of his jurisdiction to issue the assailed warrant
of seizure and detention, and to institute seizure and forfeiture proceedings for
the subject goods simply because the same were first taken in custodia legis.
Undeniably, the subject goods have been brought under the legal control of the
CFI-MANILA by virtue of its search and seizure warrants and are, therefore,
in custodia legis. But this fact merely serves to deprive any other court or
tribunal, except one having supervisory control or superior jurisdiction in the
premises, of the right to divest the CFI-MANILA of its custody and control of the
said property [Collector of Internal Revenue v. Flores Vda. de Codinera G.R. No.
L-9675, September 28, 1957], or to interfere with and change its possession
without its consent [National Power Corporation v. De Veyra, G.R. No. L-15763,
December 22, 1961, 3 SCRA 646; De Leon v. Salvador, G.R. Nos. L-30871 & L-
31603, December 28, 1970, 36 SCRA 567; Vlasons Enterprises Corporation v.
Court of Appeals, G.R. No. 61688, October 28, 1987, 155 SCRA 186].
In the instant case, the CFI-Manila was not divested of its jurisdiction over the
subject goods, nor were its processes interfered with by the Collector of
Customs. It, in fact, authorized the transfer and delivery of the subject goods
from the premises of HERCULES to the Bureau of Customs warehouse/bodega
at the South Harbor, Port of Manila thereby entrusting the Bureau of Customs
with the actual possession and control of the same.
On the other hand, since the Collector of Customs herein had actual possession
and control over the subject goods, his jurisdiction over the goods was secured
for the purpose of instituting seizure and forfeiture proceedings to determine
whether or not the same were imported into the country contrary to law
[See Papa v. Mago, G.R. No. L-27360, February 28, 1968, 22 SCRA 857]. This
is consistent with the principle that the basic operative fact for the institution and
perfection of proceedings in rem like the seizure and forfeiture proceedings
pursuant to the Tariff and Customs Code, is the actual or constructive
possession of the res by the tribunal empowered by law to conduct the
proceedings [See Dodge v. US, 71 L. ed. 392 (1926); US v. Mack, 79 L. ed.
1559 (1935) citing The Ann, 3 L. ed. 734 (1815); Fettig Canning Co. v. Steckler,
188 F. 2d 715 (1951) citing Strong v. US, 46 F. 2d 257, 79 ALR 150 (1931)].
Therefore, contrary to the import of respondent judge's decision, the Collector of
Customs was not precluded by law or legal principle from assuming jurisdiction
over the subject goods. No legal infirmity attended the seizure and forfeiture
proceedings over the subject goods.
The Court must emphasize at this point that the instant case does not involve a
conflict of jurisdictions. Proceedings before the regular courts for criminal
prosecutions against Howard Sosis, et al., and seizure and forfeiture
proceedings for the subject goods conducted by the Bureau of Customs may be
maintained simultaneously and independently of each other. For the nature of
the two proceedings are entirely different such that a resolution in one is not
decisive of the issue in the other. The latter, which is administrative and civil in
nature, is directed against the res or articles imported and entails a
determination of the legality of its importation. The former is directed against
those persons who may be held liable for violating the penal laws in connection
with the importation [See Diosamito v. Balanque, G.R. No. L-30734, July
28,1969,28 SCRA 836; People v. CFI, G.R. No. L-41686, November 17, 1980,
101 SCRA 86].
Private respondent, however, argues that conflict may arise regarding the
disposition of the subject goods if the proceedings before the Collector of
Customs and the regular courts were allowed to proceed simultaneously. Private
respondent contends that in view of the nature of the seizure and forfeiture
proceedings, a judgment in favor of HERCULES will result in the release of the
subject goods to the claimants thereof, while an unfavorable decision will entail
their destruction or sale. It is asserted that either of the two outcomes will
hamper or even jeopardize the ongoing criminal prosecutions, said goods
comprising the substantial part of the evidence for the People of the Philippines.
Proper adherence by both tribunals to the rules of comity as defined in the
leading case of The Government of the Philippines v. Gale [24 Phil. 95 (1931)]
will forestall the conflict feared. In that case the Court had established the rule
that where the preservation and safekeeping of the subject matter of an action is
demanded, as it is made to appear that these articles may prove to be of vital
importance as exhibits in the prosecution of other charges in another
proceeding, the rules for the orderly course of proceedings in courts and
tribunals forbid the disposition or destruction thereof in one action which would
prejudice the other, and vice versa [Id. at pp. 98-99].
The State in the instant case must be given reasonable opportunity to present its
cases for the proper enforcement of the applicable provisions of the Revised
Penal Code, Republic Act No. 3720, and the Tariff and Customs Code, and the
prosecution of the violators thereof. It follows then that the execution of any final
decision in the seizure and forfeiture case before the Bureau of Customs,
whether it requires the destruction, sale or the release of the subject goods,
should not frustrate the prosecution's task of duly presenting and offering its
evidence in Criminal Cases Nos. 88-63156 and 88-63157.
It is apropos to note that for evidentiary purposes, it would not be necessary to
present each and every item of the goods in question before the courts trying
the criminal cases. Thus, a representative quantity of the goods, as may be
agreed upon by the authorized customs officials and fiscals prosecuting the
criminal cases, shall be set aside as evidence to be presented in the above
criminal cases and retained in custodia legis until final judgment is secured in
these cases. The rest of the goods may be disposed of in accordance with the
final decision rendered in the seizure and forfeiture proceedings pursuant to the
Tariff and Customs Code.
WHEREFORE, in view of the foregoing, the respondent judge's decision dated
20 July 1987 is REVERSED. The seizure and forfeiture proceedings involving
the goods in question before the Bureau of Customs may proceed subject to the
above pronouncements relative to the setting aside of so much of the goods as
may be required for evidentiary purposes.
G.R. No. L-7988 January 19, 1916
THE YOUNG MEN'S CHRISTIAN ASSOCIATION OF MANILA, plaintiff-
appellant,
vs.
THE COLLECTOR OF INTERNAL REVENUE, defendant-appellee.
Haussermann, Cohn and Fisher for appellant.
City Attorney Escaler for appellee.
MORELAND, J.:
The question at issue in this case is whether or not the building and grounds of
the Young Men's Christian Association of Manila are subject to taxation, under
section 48 of the charter of the city of Manila quoted in the footnote [syllabus].
The city of Manila, contending that the property is taxable, assessed it and
levied a tax thereon. It was paid under protest and this action begun to recover it
on the ground that the property was exempt from taxation under the charter of
the city of Manila. The decision was for the city and the association appealed.
The Young Men's Christian Association came to the Philippine with the army of
occupation in 1898. When the large body of troops in Manila was removed to
permanent quarters at Fort William McKinley in February, 1905, an independent
association for Manila was organized under the direction of the Army and navy
departments. Shortly after the organization of the association the directors made
a formal request to the international committee of the Young Men's Christian
Association in New York City for the assistance and cooperation of its foreign
department. I response to this request Mr. John R. Mott, general secretary of the
foreign department, visited Manila in January 1907. After a conference with the
directors and interested friends it was decided to conduct a campaign to secure
funds for an adequate and permanent association. In the name of the
international committee and friends in America Mr. Mott guaranteed P170,000
for the construction of a building on condition that friend in the Philippines
secure the site and adequately furnish the building. The campaign for funds was
begun here on February 15, 1907, and, by the 15th of March following, P83,000
was subscribed, nearly one thousand different persons contributing. Thereupon
the Young Men's Christian Association of Manila was incorporated under the law
of the Philippine Islands and received its character in June, 1907.
A site for the new building was selected on Calle Concepcion, Ermita, and the
building contract was let on the 8th of January following. The cornerstone was
laid with appropriate ceremonies on July 10, 1908, and the building was formally
dedicated on October 20, 1909.
The building is composed of three parts. The main structure, located in the
center, is three stories high and includes a reception hall, social hall and game
rooms, lecture room, library, reading room and rooming apartments. The small
building lying to the left of the principal structure, as one faces the front from
Called Concepcion, is the kitchen and servant's quarters. The large wing to the
right is known as the athletic building, where the bowling alleys, swimming pool,
locker rooms and gymnasium-auditorium are located. The construction is of
reinforced concrete with steel trussed roof covered with interlocking red tiles.
The main or central portion of the building is 150 by 45 feet and stands 20
meters back from the sidewalk. An iron canopy, suspended by brackets, projects
over the driveway which lies in front and shelters the main entrance. A wide
arched doorway opens into a large reception room, on the left of which is the
public office and the secretary's private office, while on the right is the reading
and writing rooms, and beyond that the library, each about 30 feet square. From
the reception room, on the left, a broad concrete stairway leads to the second
floor.
Passing out of the rear of the reception hall one enters upon a veranda some 15
feet in width running the full length of the main structure which looks out on the
tennis courts and affords an excellent place for lounging, games and general
social purposes. To the left of the entrance hall and also opening upon the
veranda are two large rooms of about the same size as those on the right of the
reception hall, the first being the billiard room and the other the restaurant. The
athletic building is entered from the rear veranda. It is a two story wing 68 by 85
feet. Passing from the veranda into the athletic hall one finds first, on the left, the
toilet room, and beyond this, to the rear, the shower baths and locker rooms.
The swimming pool is in the center of the athletic wing and is 60 by 19 feet in
size, lined with cement. To the right of the swimming pool are the bowling alleys.
A wide stairways leads to the second floor. Above the swimming-pool and
bowling alley is a large room 50 by 85 feet which is the gymnasium and also the
auditorium when occasion requires. About one-third of the roof converting the
athletic wing is used as a roof garden.
The second and third floors of the main building are given over almost wholly to
rooming apartments and baths. On the second floor over the entrance hall is a
members' parlor, from which a small balcony projects over the main entrance.
The remainder of the second floor and all to the third are composed of the living
rooms. These apartments, of which there are 14 on the second and 20 on the
third floor are approximately 18 by 14 feet each. They provide accommodations
for 64 men.
The purposes of the association, as set forth in its charter and constitution, are:
To develop the Christian character and usefulness of its members,
to improve the spiritual, intellectual, social and physical condition of
young men, and to acquire, hold, mortgage, and dispose of the
necessary lands, buildings and personal property for the use of said
corporation exclusively for religious, charitable and educational
purposes, and not for investment or profit.
The purposes of this association shall be exclusively religious,
charitable and educational, in developing the Christian character
and usefulness of its members and in improving the spiritual,
mental, social and physical condition of young men.
Speaking generally, the association claims exemption from taxation on the
ground that it is a religious, charitable and educational institution combined. That
it has an educational department is not denied. It is undisputed that the aim of
this department is to furnish, at much less than cost, instruction in subjects that
will greatly increase the mental efficiency and wage-earning capacity of young
men, prepare them in special lines of business and offer them special lines of
study. Attention is given to subjects included in civil service and consular
examinations both here and in the United States. The courses offer commercial
subjects, as well as many others, and include stenography and typewriting,
bookkeeping, arithmetic, English composition, foreign languages, including
elementary and advanced Spanish and Tagalog, special courses in Philippine
history, public speaking, surveying, horticulture, tropical dependencies, and the
group of subjects required for entrance into the consular services, such as
political economy, American and modern history. Courses are also offered in
law, social, ethics, political economy and other subjects.
The institution has also its religious department. In that department there are,
generally speaking, three main lines of work Bible study, religious meetings
and special classes. Course are offered in the Life of Christ and the Old
Testament and in the larger social significance of the teachings of Jesus.
Meetings are held on Sunday afternoons and several times during the week and
courses are offered in the study of missions, in the method of teaching the Bible
and kindred subjects.
The atmosphere of the Young Men's Christian Association is distinctly religious
and there is constant effort on the part of the officials to create a religious spirit;
and to that end there is continuous pressure to induce members to attend not
only the religious services of the association but also those of one or another of
the churches of Manila. While the association is nonsectarian, it is preeminently
religious; and the fundamental basis and groundwork is the Christian religion. All
of the officials of the association are devoted Christians, members of a church,
and have dedicated their lives to the spread of the Christian principles and
building of Christian character.
The institution also has charitable features. It makes no profit on any of its
activities. The professors and instructors in all departments serve without pay
and freely give of their time and ability to further the purposes of the institution.
The chief secretary and his assistant receive no salary from the institution.
Whatever they are paid comes from the United States. In estimating the cost of
instruction in the various departments, or of the other things for which pay is
received, no account is taken of the interest on the money invested in the
grounds and building, of deterioration in value resulting from the lapse of time, or
of the fact that the professors and instructors and certain officials receive no
pay. We have, then, a building and grounds, professors and instructors, and
certain institution officials, furnished free of charge, and which makes no profit
even on that basis. This, it would seem, would lend some color to the claim that
the association takes on some of the aspect of a charitable institution. While it
appears that the association is not exclusively religious or charitable or
educational, it is demonstrated that it is a happy combination of all three, giving
to its membership the religious opportunities of the church, the educational
opportunities of the school and the blessings of charity where needed without
the recipient feeling or even knowing that he is the object of charity.
It is claimed, however, that the institution is run as a business in that it keeps a
lodging and boarding house. It may be admitted that there are 64 persons
occupying rooms in the main building as lodgers or roomers and that they take
their meals at the restaurant below. These facts, however, are far from
constituting a business in ordinary acceptation of the word. In the first place, no
profit is realized by the association in any sense. In the second place, it is
undoubted, as it is undisputed, that the purpose of the association is not,
primarily, to obtain the money which comes from the lodgers and boarders. The
real purpose is to keep the membership continually within the sphere of
influence of the institution; and thereby to prevent, as far as possible, the
opportunities which vice president to young men in foreign countries who lack
home or other similar influences. We regard this feature of the institution not as
a business or means of making money, but, rather, as a very efficient means of
maintaining the influence of the institution over its membership. As we held in
the case of the Columbia Club, religious and moral teachings do not always stop
with the spoken word; but to be effective in the highest degree they must follow
the young man through as many moments of his life as possible. To this end the
feature of the Young Men's Christian Association to which objection is made
lends itself with great effect; and we are, accordingly, forced to regards this
activity of the institution not as a business but as a method by which the
institution maintains its influence and conserves the benefits which its
organization was designed to confer.
As we have seen in the description already given of the association building and
grounds, no part is occupied for any but institutional purposes. From end to end
the building and grounds are devoted exclusively to the purposes stated in the
constitution of the association. The library and reading rooms, the game and
lounging halls, the lecture rooms, the auditorium, the baths, pools, devices for
physical development, and the grounds, are all dedicated exclusively to the
objects and purpose of the association the building of Christian character and
the creation of moral sentiment and fiber in men. It is the belief of the Young
Men's Christian Association that a Christian man, a man of moral sentiment and
firm moral fiber, is yet a better man for being also all-round man one who is
sound not only according to Christian principles and the highest moral
conceptions, but physically and mentally; whose body and mind act in harmony
and within the limits which the rights of others set; who are gentleman in
physical and mental struggles, as well as in religious service; who have self-
respect and self-restraint; who can hit hard and still kindly; who can lose without
envy; who can congratulate his conqueror with sincerity; who can vie without
temper, contend without malice, concede without regret; who can win and still be
generous, in short, one who fights hard but square. To the production of such
men the association lends all its efforts, husbands all its resources.
We are aware that there are many decisions holding that institutions of this
character are not exempt from taxation; but, on investigation, we find that the
majority of them are based on statutes much narrower than the one under
consider and that in all probability the decisions would have been otherwise if
the court had been passing on a statute similar to ours. On the other hand, there
are many decisions of the courts in the United States founded on statutes like
the Philippine statute which hold that associations of this class are exempt from
taxation. We have examined all of the decisions, both for and against, with care
and deliberation, and we are convinced that the weight of authority sustains the
positions we take in this case.
There is no doubt about the correctness of the contention that an institution must
devote itself exclusively to one or the other of the purpose mentioned in the
statute before it can be exempt from taxation; but the statute does not say that it
must be devoted exclusively to any one of the purposes therein mentioned. It
may be a combination of two or three or more of those purposes and still be
entitled to exempt. The Young Men's Christian Association of Manila cannot be
said to be an institution used exclusively for religious purposes, or an institution
used exclusively for charitable purposes, or an institution devoted exclusively to
educational purposes; but we believe it can be truthfully said that it is an
institution used exclusively for all three purposes, and that, as such, it is entitled
to be exempted from taxation.
The judgment appealed from is reversed and the cause remanded with
instructions to enter a judgment against the city of Manila and in favor of the
Young Men's Christian Association of Manila in the sum of P6,221.35. Without
costs in this instance. So ordered.
G.R. No. L-27588 December 31, 1927
THE ROMAN CATHOLIC BISHOP OF NUEVA SEGOVIA, as representative
of the Roman Catholic Apostolic Church, plaintiff-appellant,
vs.
THE PROVINCIAL BOARD OF ILOCOS NORTE, ET AL., defendants-
appellants.
Vicente Llanes and Proceso Coloma for plaintiff-appellant.
Provincial Fiscal Santos for defendant-appellants.
AVANCEA, J.:
The plaintiff, the Roman Catholic Apostolic Church, represented by the Bishop
of Nueva Segovia, possesses and is the owner of a parcel of land in the
municipality of San Nicolas, Ilocos Norte, all four sides of which face on public
streets. On the south side is a part of the churchyard, the convent and an
adjacent lot used for a vegetable garden, containing an area off 1,624 square
meters, in which there is a stable and a well for the use of the convent. In the
center is the remainder of the churchyard and the church. On the north is an old
cemetery with two of its walls still standing, and a portion where formerly stood a
tower, the base of which still be seen, containing a total area of 8,955 square
meters.
As required by the defendants, on July 3, 1925 the plaintiff paid, under protest,
the land tax on the lot adjoining the convent and the lot which formerly was the
cemetery with the portion where the tower stood.
The plaintiff filed this action for the recovery of the sum paid by to the
defendants by way of land tax, alleging that the collection of this tax is illegal.
The lower court absolved the defendants from the complaint in regard to the lot
adjoining convent and declared that the tax collected on the lot, which formerly
was the cemetery and on the portion where the lower stood, was illegal. Both
parties appealed from this judgment.
The exemption in favor of the convent in the payment of the land tax (sec. 344
[c] Administrative Code) refers to the home of the parties who presides over the
church and who has to take care of himself in order to discharge his duties. In
therefore must, in the sense, include not only the land actually occupied by the
church, but also the adjacent ground destined to the ordinary incidental uses of
man. Except in large cities where the density of the population and the
development of commerce require the use of larger tracts of land for buildings, a
vegetable garden belongs to a house and, in the case of a convent, it use is
limited to the necessities of the priest, which comes under the
exemption.lawphi1.net
In regard to the lot which formerly was the cemetery, while it is no longer used
as such, neither is it used for commercial purposes and, according to the
evidence, is now being used as a lodging house by the people who participate in
religious festivities, which constitutes an incidental use in religious functions,
which also comes within the exemption.
The judgment appealed from is reversed in all it parts and it is held that both lots
are exempt from land tax and the defendants are ordered to refund to plaintiff
whatever was paid as such tax, without any special pronouncement as to costs.
So ordered.
G.R. No. L-39086 June 15, 1988
ABRA VALLEY COLLEGE, INC., represented by PEDRO V.
BORGONIA, petitioner,
vs.
HON. JUAN P. AQUINO, Judge, Court of First Instance, Abra; ARMIN M.
CARIAGA, Provincial Treasurer, Abra; GASPAR V. BOSQUE, Municipal
Treasurer, Bangued, Abra; HEIRS OF PATERNO MILLARE, respondents.
PARAS, J.:
This is a petition for review on certiorari of the decision * of the defunct Court of
First Instance of Abra, Branch I, dated June 14, 1974, rendered in Civil Case
No. 656, entitled "Abra Valley Junior College, Inc., represented by Pedro V.
Borgonia, plaintiff vs. Armin M. Cariaga as Provincial Treasurer of Abra, Gaspar
V. Bosque as Municipal Treasurer of Bangued, Abra and Paterno Millare,
defendants," the decretal portion of which reads:
IN VIEW OF ALL THE FOREGOING, the Court hereby
declares:
 That the distraint seizure and sale by the Municipal
Treasurer of Bangued, Abra, the Provincial Treasurer of
said province against the lot and building of the Abra
Valley Junior College, Inc., represented by Director
Pedro Borgonia located at Bangued, Abra, is valid;
That since the school is not exempt from paying taxes,
it should therefore pay all back taxes in the amount of
P5,140.31 and back taxes and penalties from the
promulgation of this decision;
That the amount deposited by the plaintaff him the sum
of P60,000.00 before the trial, be confiscated to apply
for the payment of the back taxes and for the
redemption of the property in question, if the amount is
less than P6,000.00, the remainder must be returned to
the Director of Pedro Borgonia, who represents the
plaintiff herein;
That the deposit of the Municipal Treasurer in the
amount of P6,000.00 also before the trial must be
returned to said Municipal Treasurer of Bangued, Abra;
And finally the case is hereby ordered dismissed with
costs against the plaintiff.
SO ORDERED. (Rollo, pp. 22-23)
Petitioner, an educational corporation and institution of higher learning duly
incorporated with the Securities and Exchange Commission in 1948, filed a
complaint (Annex "1" of Answer by the respondents Heirs of Paterno Millare;
Rollo, pp. 95-97) on July 10, 1972 in the court a quo to annul and declare void
the "Notice of Seizure' and the "Notice of Sale" of its lot and building located at
Bangued, Abra, for non-payment of real estate taxes and penalties amounting to
P5,140.31. Said "Notice of Seizure" of the college lot and building covered by
Original Certificate of Title No. Q-83 duly registered in the name of petitioner,
plaintiff below, on July 6, 1972, by respondents Municipal Treasurer and
Provincial Treasurer, defendants below, was issued for the satisfaction of the
said taxes thereon. The "Notice of Sale" was caused to be served upon the
petitioner by the respondent treasurers on July 8, 1972 for the sale at public
auction of said college lot and building, which sale was held on the same date.
Dr. Paterno Millare, then Municipal Mayor of Bangued, Abra, offered the highest
bid of P6,000.00 which was duly accepted. The certificate of sale was
correspondingly issued to him.
On August 10, 1972, the respondent Paterno Millare (now deceased) filed
through counstel a motion to dismiss the complaint.
On August 23, 1972, the respondent Provincial Treasurer and Municipal
Treasurer, through then Provincial Fiscal Loreto C. Roldan, filed their answer
(Annex "2" of Answer by the respondents Heirs of Patemo Millare; Rollo, pp. 98-
100) to the complaint. This was followed by an amended answer (Annex
"3," ibid, Rollo, pp. 101-103) on August 31, 1972.
On September 1, 1972 the respondent Paterno Millare filed his answer (Annex
"5," ibid; Rollo, pp. 106-108).
On October 12, 1972, with the aforesaid sale of the school premises at public
auction, the respondent Judge, Hon. Juan P. Aquino of the Court of First
Instance of Abra, Branch I, ordered (Annex "6," ibid; Rollo, pp. 109-110) the
respondents provincial and municipal treasurers to deliver to the Clerk of Court
the proceeds of the auction sale. Hence, on December 14, 1972, petitioner,
through Director Borgonia, deposited with the trial court the sum of P6,000.00
evidenced by PNB Check No. 904369.
On April 12, 1973, the parties entered into a stipulation of facts adopted and
embodied by the trial court in its questioned decision. Said Stipulations reads:
STIPULATION OF FACTS
COME NOW the parties, assisted by counsels, and to
this Honorable Court respectfully enter into the
following agreed stipulation of facts:
1. That the personal circumstances of the parties as
stated in paragraph 1 of the complaint is admitted; but
the particular person of Mr. Armin M. Cariaga is to be
substituted, however, by anyone who is actually holding
the position of Provincial Treasurer of the Province of
Abra;
2. That the plaintiff Abra Valley Junior College, Inc. is
the owner of the lot and buildings thereon located in
Bangued, Abra under Original Certificate of Title No. 0-
83;
3. That the defendant Gaspar V. Bosque, as Municipal
treasurer of Bangued, Abra caused to be served upon
the Abra Valley Junior College, Inc. a Notice of Seizure
on the property of said school under Original Certificate
of Title No. 0-83 for the satisfaction of real property
taxes thereon, amounting to P5,140.31; the Notice of
Seizure being the one attached to the complaint as
Exhibit A;
4. That on June 8, 1972 the above properties of the
Abra Valley Junior College, Inc. was sold at public
auction for the satisfaction of the unpaid real property
taxes thereon and the same was sold to defendant
Paterno Millare who offered the highest bid of
P6,000.00 and a Certificate of Sale in his favor was
issued by the defendant Municipal Treasurer.
5. That all other matters not particularly and specially
covered by this stipulation of facts will be the subject of
evidence by the parties.
WHEREFORE, it is respectfully prayed of the
Honorable Court to consider and admit this stipulation
of facts on the point agreed upon by the parties.
Bangued, Abra, April 12, 1973.
Sgd. Agripino Brillantes
Typ AGRIPINO BRILLANTES
Attorney for Plaintiff
Sgd. Loreto Roldan
Typ LORETO ROLDAN
Provincial Fiscal
Counsel for Defendants
Provincial Treasurer of
Abra and the Municipal
Treasurer of Bangued, Abra
Sgd. Demetrio V. Pre
Typ. DEMETRIO V. PRE
Attorney for Defendant
Paterno Millare (Rollo, pp. 17-18)
side from the Stipulation of Facts, the trial court among others, found the
following: (a) that the school is recognized by the government and is offering
Primary, High School and College Courses, and has a school population of
more than one thousand students all in all; (b) that it is located right in the heart
of the town of Bangued, a few meters from the plaza and about 120 meters from
the Court of First Instance building; (c) that the elementary pupils are housed in
a two-storey building across the street; (d) that the high school and college
students are housed in the main building; (e) that the Director with his family is
in the second floor of the main building; and (f) that the annual gross income of
the school reaches more than one hundred thousand pesos.
From all the foregoing, the only issue left for the Court to determine and as
agreed by the parties, is whether or not the lot and building in question are used
exclusively for educational purposes. (Rollo, p. 20)
The succeeding Provincial Fiscal, Hon. Jose A. Solomon and his Assistant, Hon.
Eustaquio Z. Montero, filed a Memorandum for the Government on March 25,
1974, and a Supplemental Memorandum on May 7, 1974, wherein they opined
"that based on the evidence, the laws applicable, court decisions and
jurisprudence, the school building and school lot used for educational purposes
of the Abra Valley College, Inc., are exempted from the payment of taxes."
(Annexes "B," "B-1" of Petition; Rollo, pp. 24-49; 44 and 49).
Nonetheless, the trial court disagreed because of the use of the second floor by
the Director of petitioner school for residential purposes. He thus ruled for the
government and rendered the assailed decision.
After having been granted by the trial court ten (10) days from August 6, 1974
within which to perfect its appeal (Per Order dated August 6, 1974; Annex "G" of
Petition; Rollo, p. 57) petitioner instead availed of the instant petition for review
on certiorari with prayer for preliminary injunction before this Court, which
petition was filed on August 17, 1974 (Rollo, p.2).
In the resolution dated August 16, 1974, this Court resolved to give DUE
COURSE to the petition (Rollo, p. 58). Respondents were required to answer
said petition (Rollo, p. 74).
Petitioner raised the following assignments of error:
I interns, and residents' (84 CJS 6621), such as "Athletic
THE COURT A QUO ERRED IN SUSTAINING AS VALID THE SEIZURE AND
SALE OF THE COLLEGE LOT AND BUILDING USED FOR EDUCATIONAL
PURPOSES OF THE PETITIONER.
II
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND
BUILDING OF THE PETITIONER ARE NOT USED EXCLUSIVELY FOR
EDUCATIONAL PURPOSES MERELY BECAUSE THE COLLEGE
PRESIDENT RESIDES IN ONE ROOM OF THE COLLEGE BUILDING.
III
THE COURT A QUO ERRED IN DECLARING THAT THE COLLEGE LOT AND
BUILDING OF THE PETITIONER ARE NOT EXEMPT FROM PROPERTY
TAXES AND IN ORDERING PETITIONER TO PAY P5,140.31 AS REALTY
TAXES.
IV
THE COURT A QUO ERRED IN ORDERING THE CONFISCATION OF THE
P6,000.00 DEPOSIT MADE IN THE COURT BY PETITIONER AS PAYMENT
OF THE P5,140.31 REALTY TAXES. (See Brief for the Petitioner, pp. 1-2)
The main issue in this case is the proper interpretation of the phrase "used
exclusively for educational purposes."
Petitioner contends that the primary use of the lot and building for educational
purposes, and not the incidental use thereof, determines and exemption from
property taxes under Section 22 (3), Article VI of the 1935 Constitution. Hence,
the seizure and sale of subject college lot and building, which are contrary
thereto as well as to the provision of Commonwealth Act No. 470, otherwise
known as the Assessment Law, are without legal basis and therefore void.
On the other hand, private respondents maintain that the college lot and building
in question which were subjected to seizure and sale to answer for the unpaid
tax are used: (1) for the educational purposes of the college; (2) as the
permanent residence of the President and Director thereof, Mr. Pedro V.
Borgonia, and his family including the in-laws and grandchildren; and (3) for
commercial purposes because the ground floor of the college building is being
used and rented by a commercial establishment, the Northern Marketing
Corporation (See photograph attached as Annex "8" (Comment; Rollo, p. 90]).
Due to its time frame, the constitutional provision which finds application in the
case at bar is Section 22, paragraph 3, Article VI, of the then 1935 Philippine
Constitution, which expressly grants exemption from realty taxes for
"Cemeteries, churches and parsonages or convents appurtenant thereto, and all
lands, buildings, and improvements used exclusively for religious, charitable or
educational purposes ...
Relative thereto, Section 54, paragraph c, Commonwealth Act No. 470 as
amended by Republic Act No. 409, otherwise known as the Assessment Law,
provides:
The following are exempted from real property tax
under the Assessment Law:
xxx xxx xxx
(c) churches and parsonages or convents appurtenant
thereto, and all lands, buildings, and
improvements used exclusively for religious, charitable,
scientific or educational purposes.
xxx xxx xxx
In this regard petitioner argues that the primary use of the school lot and building
is the basic and controlling guide, norm and standard to determine tax
exemption, and not the mere incidental use thereof.
As early as 1916 in YMCA of Manila vs. Collector of lnternal Revenue, 33 Phil.
217 [1916], this Court ruled that while it may be true that the YMCA keeps a
lodging and a boarding house and maintains a restaurant for its members, still
these do not constitute business in the ordinary acceptance of the word, but an
institution used exclusively for religious, charitable and educational purposes,
and as such, it is entitled to be exempted from taxation.
In the case of Bishop of Nueva Segovia v. Provincial Board of Ilocos Norte, 51
Phil. 352 [1972], this Court included in the exemption a vegetable garden in an
adjacent lot and another lot formerly used as a cemetery. It was clarified that the
term "used exclusively" considers incidental use also. Thus, the exemption from
payment of land tax in favor of the convent includes, not only the land actually
occupied by the building but also the adjacent garden devoted to the incidental
use of the parish priest. The lot which is not used for commercial purposes but
serves solely as a sort of lodging place, also qualifies for exemption because
this constitutes incidental use in religious functions.
The phrase "exclusively used for educational purposes" was further clarified by
this Court in the cases of Herrera vs. Quezon City Board of assessment
Appeals, 3 SCRA 186 [1961] and Commissioner of Internal Revenue vs. Bishop
of the Missionary District, 14 SCRA 991 [1965], thus
Moreover, the exemption in favor of property used
exclusively for charitable or educational purposes is
'not limited to property actually indispensable' therefor
(Cooley on Taxation, Vol. 2, p. 1430), but extends to
facilities which are incidental to and reasonably
necessary for the accomplishment of said purposes,
such as in the case of hospitals, "a school for training
nurses, a nurses' home, property use to provide
housing facilities for interns, resident doctors,
superintendents, and other members of the hospital
staff, and recreational facilities for student nurses,
fields" including "a firm used for the inmates of the
institution. (Cooley on Taxation, Vol. 2, p. 1430).
The test of exemption from taxation is the use of the property for purposes
mentioned in the Constitution (Apostolic Prefect v. City Treasurer of Baguio, 71
Phil, 547 [1941]).
It must be stressed however, that while this Court allows a more liberal and non-
restrictive interpretation of the phrase "exclusively used for educational
purposes" as provided for in Article VI, Section 22, paragraph 3 of the 1935
Philippine Constitution, reasonable emphasis has always been made that
exemption extends to facilities which are incidental to and reasonably necessary
for the accomplishment of the main purposes. Otherwise stated, the use of the
school building or lot for commercial purposes is neither contemplated by law,
nor by jurisprudence. Thus, while the use of the second floor of the main
building in the case at bar for residential purposes of the Director and his family,
may find justification under the concept of incidental use, which is
complimentary to the main or primary purposeeducational, the lease of the
first floor thereof to the Northern Marketing Corporation cannot by any stretch of
the imagination be considered incidental to the purpose of education.
It will be noted however that the aforementioned lease appears to have been
raised for the first time in this Court. That the matter was not taken up in the to
court is really apparent in the decision of respondent Judge. No mention thereof
was made in the stipulation of facts, not even in the description of the school
building by the trial judge, both embodied in the decision nor as one of the
issues to resolve in order to determine whether or not said properly may be
exempted from payment of real estate taxes (Rollo, pp. 17-23). On the other
hand, it is noteworthy that such fact was not disputed even after it was raised in
this Court.
Indeed, it is axiomatic that facts not raised in the lower court cannot be taken up
for the first time on appeal. Nonetheless, as an exception to the rule, this Court
has held that although a factual issue is not squarely raised below, still in the
interest of substantial justice, this Court is not prevented from considering a
pivotal factual matter. "The Supreme Court is clothed with ample authority to
review palpable errors not assigned as such if it finds that their consideration is
necessary in arriving at a just decision." (Perez vs. Court of Appeals, 127 SCRA
645 [1984]).
Under the 1935 Constitution, the trial court correctly arrived at the conclusion
that the school building as well as the lot where it is built, should be taxed, not
because the second floor of the same is being used by the Director and his
family for residential purposes, but because the first floor thereof is being used
for commercial purposes. However, since only a portion is used for purposes of Defendant answered the complaint, maintaining in turn that said ordinances
commerce, it is only fair that half of the assessed tax be returned to the school were enacted by the Municipal Board of the City of Manila by virtue of the power 2nd quarter 1949 17,802.08
involved. granted to it by section 2444, subsection (m-2) of the Revised Administrative
Code, superseded on June 18, 1949, by section 18, subsection (1) of Republic 3rd quarter 1949 16,640.79
Act No. 409, known as the Revised Charter of the City of Manila, and praying
PREMISES CONSIDERED, the decision of the Court of First Instance of Abra, 4th quarter 1949 15,961.38
that the complaint be dismissed, with costs against plaintiff. This answer was
Branch I, is hereby AFFIRMED subject to the modification that half of the
replied by the plaintiff reiterating the unconstitutionality of the often-repeated
assessed tax be returned to the petitioner.
ordinances. 1st quarter 1950 18,562.46

G.R. No. L-9637 April 30, 1957 2nd quarter 1950 21,816.32
Before trial the parties submitted the following stipulation of facts:

AMERICAN BIBLE SOCIETY, plaintiff-appellant, 3rd quarter 1950 25,004.55

COME NOW the parties in the above-entitled case, thru their
vs.
undersigned attorneys and respectfully submit the following 4th quarter 1950 45,287.92
CITY OF MANILA, defendant-appellee.
stipulation of facts:
1st quarter 1951 37,841.21
City Fiscal Eugenio Angeles and Juan Nabong for appellant.
1. That the plaintiff sold for the use of the purchasers at its principal
Assistant City Fiscal Arsenio Naawa for appellee.
office at 636 Isaac Peral, Manila, Bibles, New Testaments, bible 2nd quarter 1951 29,103.98
portions and bible concordance in English and other foreign
FELIX, J.: languages imported by it from the United States as well as Bibles, 3rd quarter 1951 20,181.10
New Testaments and bible portions in the local dialects imported
and/or purchased locally; that from the fourth quarter of 1945 to the
Plaintiff-appellant is a foreign, non-stock, non-profit, religious, missionary 4th quarter 1951 22,968.91
first quarter of 1953 inclusive the sales made by the plaintiff were as
corporation duly registered and doing business in the Philippines through its follows:
Philippine agency established in Manila in November, 1898, with its principal 1st quarter 1952 23,002.65
office at 636 Isaac Peral in said City. The defendant appellee is a municipal
corporation with powers that are to be exercised in conformity with the 2nd quarter 1952 17,626.96
Quarter Amount of Sales
provisions of Republic Act No. 409, known as the Revised Charter of the City of
Manila. 3rd quarter 1952 17,921.01
4th quarter 1945 P1,244.21

In the course of its ministry, plaintiff's Philippine agency has been distributing 1st quarter 1946 2,206.85 4th quarter 1952 24,180.72
and selling bibles and/or gospel portions thereof (except during the Japanese
occupation) throughout the Philippines and translating the same into several 2nd quarter 1946 1,950.38 1st quarter 1953 29,516.21
Philippine dialects. On May 29 1953, the acting City Treasurer of the City of
Manila informed plaintiff that it was conducting the business of general
merchandise since November, 1945, without providing itself with the necessary 3rd quarter 1946 2,235.99
2. That the parties hereby reserve the right to present evidence of
Mayor's permit and municipal license, in violation of Ordinance No. 3000, as other facts not herein stipulated.
amended, and Ordinances Nos. 2529, 3028 and 3364, and required plaintiff to 4th quarter 1946 3,256.04
secure, within three days, the corresponding permit and license fees, together
with compromise covering the period from the 4th quarter of 1945 to the 2nd 1st quarter 1947 13,241.07 WHEREFORE, it is respectfully prayed that this case be set for
quarter of 1953, in the total sum of P5,821.45 (Annex A). hearing so that the parties may present further evidence on their
2nd quarter 1947 15,774.55 behalf. (Record on Appeal, pp. 15-16).

Plaintiff protested against this requirement, but the City Treasurer demanded
that plaintiff deposit and pay under protest the sum of P5,891.45, if suit was to
be taken in court regarding the same (Annex B). To avoid the closing of its
business as well as further fines and penalties in the premises on October 24,
1953, plaintiff paid to the defendant under protest the said permit and license
fees in the aforementioned amount, giving at the same time notice to the City
Treasurer that suit would be taken in court to question the legality of the
ordinances under which, the said fees were being collected (Annex C), which
was done on the same date by filing the complaint that gave rise to this action.
In its complaint plaintiff prays that judgment be rendered declaring the said
Municipal Ordinance No. 3000, as amended, and Ordinances Nos. 2529, 3028
and 3364 illegal and unconstitutional, and that the defendant be ordered to
refund to the plaintiff the sum of P5,891.45 paid under protest, together with
legal interest thereon, and the costs, plaintiff further praying for such other relief
and remedy as the court may deem just equitable.
3rd quarter 1947 14,654.13 When the case was set for hearing, plaintiff proved, among other things, that it
has been in existence in the Philippines since 1899, and that its parent society is
4th quarter 1947 12,590.94 in New York, United States of America; that its, contiguous real properties
located at Isaac Peral are exempt from real estate taxes; and that it was never
1st quarter 1948 11,143.90 required to pay any municipal license fee or tax before the war, nor does the
American Bible Society in the United States pay any license fee or sales tax for
2nd quarter 1948 14,715.26 the sale of bible therein. Plaintiff further tried to establish that it never made any
profit from the sale of its bibles, which are disposed of for as low as one third of
the cost, and that in order to maintain its operating cost it obtains substantial
3rd quarter 1948 38,333.83
remittances from its New York office and voluntary contributions and gifts from
certain churches, both in the United States and in the Philippines, which are
4th quarter 1948 16,179.90 interested in its missionary work. Regarding plaintiff's contention of lack of profit
in the sale of bibles, defendant retorts that the admissions of plaintiff-appellant's
1st quarter 1949 23,975.10 lone witness who testified on cross-examination that bibles bearing the price of
70 cents each from plaintiff-appellant's New York office are sold here by plaintiff-
appellant at P1.30 each; those bearing the price of $4.50 each are sold here at
P10 each; those bearing the price of $7 each are sold here at P15 each; and
those bearing the price of $11 each are sold here at P22 each, clearly show that
plaintiff's contention that it never makes any profit from the sale of its bible, is
evidently untenable.
After hearing the Court rendered judgment, the last part of which is as follows:
As may be seen from the repealed section (m-2) of the Revised
Administrative Code and the repealing portions (o) of section 18 of
Republic Act No. 409, although they seemingly differ in the way the
legislative intent is expressed, yet their meaning is practically the
same for the purpose of taxing the merchandise mentioned in said
legal provisions, and that the taxes to be levied by said ordinances
is in the nature of percentage graduated taxes (Sec. 3 of Ordinance
No. 3000, as amended, and Sec. 1, Group 2, of Ordinance No.
2529, as amended by Ordinance No. 3364).
IN VIEW OF THE FOREGOING CONSIDERATIONS, this Court is
of the opinion and so holds that this case should be dismissed, as it
is hereby dismissed, for lack of merits, with costs against the
plaintiff.
Not satisfied with this verdict plaintiff took up the matter to the Court of Appeals
which certified the case to Us for the reason that the errors assigned to the
lower Court involved only questions of law.
Appellant contends that the lower Court erred:
1. In holding that Ordinances Nos. 2529 and 3000, as respectively
amended, are not unconstitutional;
2. In holding that subsection m-2 of Section 2444 of the Revised
Administrative Code under which Ordinances Nos. 2592 and 3000
were promulgated, was not repealed by Section 18 of Republic Act
No. 409;
3. In not holding that an ordinance providing for taxes based on
gross sales or receipts, in order to be valid under the new Charter of
the City of Manila, must first be approved by the President of the
Philippines; and
4. In holding that, as the sales made by the plaintiff-appellant have
assumed commercial proportions, it cannot escape from the
operation of said municipal ordinances under the cloak of religious
privilege.
The issues. As may be seen from the proceeding statement of the case, the
issues involved in the present controversy may be reduced to the following: (1)
whether or not the ordinances of the City of Manila, Nos. 3000, as amended,
and 2529, 3028 and 3364, are constitutional and valid; and (2) whether the
provisions of said ordinances are applicable or not to the case at bar.
Section 1, subsection (7) of Article III of the Constitution of the Republic of the
Philippines, provides that:
(7) No law shall be made respecting an establishment of religion, or
prohibiting the free exercise thereof, and the free exercise and
enjoyment of religious profession and worship, without
discrimination or preference, shall forever be allowed. No religion
test shall be required for the exercise of civil or political rights.
Predicated on this constitutional mandate, plaintiff-appellant contends that
Ordinances Nos. 2529 and 3000, as respectively amended, are unconstitutional
and illegal in so far as its society is concerned, because they provide for
religious censorship and restrain the free exercise and enjoyment of its religious
profession, to wit: the distribution and sale of bibles and other religious literature
to the people of the Philippines.
Before entering into a discussion of the constitutional aspect of the case, We
shall first consider the provisions of the questioned ordinances in relation to their
application to the sale of bibles, etc. by appellant. The records, show that by
letter of May 29, 1953 (Annex A), the City Treasurer required plaintiff to secure a
Mayor's permit in connection with the society's alleged business of distributing
and selling bibles, etc. and to pay permit dues in the sum of P35 for the period
covered in this litigation, plus the sum of P35 for compromise on account of
plaintiff's failure to secure the permit required by Ordinance No. 3000 of the City
of Manila, as amended. This Ordinance is of general application and not
particularly directed against institutions like the plaintiff, and it does not contain
any provisions whatever prescribing religious censorship nor restraining the free
exercise and enjoyment of any religious profession. Section 1 of Ordinance No.
3000 reads as follows:
SEC. 1. PERMITS NECESSARY. It shall be unlawful for any
person or entity to conduct or engage in any of the businesses,
trades, or occupations enumerated in Section 3 of this Ordinance or
other businesses, trades, or occupations for which a permit is
required for the proper supervision and enforcement of existing laws
and ordinances governing the sanitation, security, and welfare of
the public and the health of the employees engaged in the business
specified in said section 3 hereof, WITHOUT FIRST HAVING
OBTAINED A PERMIT THEREFOR FROM THE MAYOR AND THE
NECESSARY LICENSE FROM THE CITY TREASURER.
The business, trade or occupation of the plaintiff involved in this case is not
particularly mentioned in Section 3 of the Ordinance, and the record does not
show that a permit is required therefor under existing laws and ordinances for
the proper supervision and enforcement of their provisions governing the
sanitation, security and welfare of the public and the health of the employees
engaged in the business of the plaintiff. However, sections 3 of Ordinance 3000
contains item No. 79, which reads as follows:
79. All other businesses, trades or occupations not
mentioned in this Ordinance, except those upon which the
City is not empowered to license or to tax P5.00
Therefore, the necessity of the permit is made to depend upon the power of the
City to license or tax said business, trade or occupation.
As to the license fees that the Treasurer of the City of Manila required the
society to pay from the 4th quarter of 1945 to the 1st quarter of 1953 in the sum
of P5,821.45, including the sum of P50 as compromise, Ordinance No. 2529, as
amended by Ordinances Nos. 2779, 2821 and 3028 prescribes the following:
SEC. 1. FEES. Subject to the provisions of section 578 of the
Revised Ordinances of the City of Manila, as amended, there shall
be paid to the City Treasurer for engaging in any of the businesses
or occupations below enumerated, quarterly, license fees based on
gross sales or receipts realized during the preceding quarter in
accordance with the rates herein prescribed: PROVIDED,
HOWEVER, That a person engaged in any businesses or
occupation for the first time shall pay the initial license fee based on
the probable gross sales or receipts for the first quarter beginning
from the date of the opening of the business as indicated herein for
the corresponding business or occupation.
xxx xxx xxx
GROUP 2. Retail dealers in new (not yet used) merchandise,
which dealers are not yet subject to the payment of any municipal
tax, such as (1) retail dealers in general merchandise; (2) retail
dealers exclusively engaged in the sale of . . . books, including
stationery.
xxx xxx xxx
As may be seen, the license fees required to be paid quarterly in Section 1 of
said Ordinance No. 2529, as amended, are not imposed directly upon any
religious institution but upon those engaged in any of the business or
occupations therein enumerated, such as retail "dealers in general
merchandise" which, it is alleged, cover the business or occupation of selling
bibles, books, etc.
Chapter 60 of the Revised Administrative Code which includes section 2444,
subsection (m-2) of said legal body, as amended by Act No. 3659, approved on
December 8, 1929, empowers the Municipal Board of the City of Manila:
(M-2) To tax and fix the license fee on (a) dealers in new
automobiles or accessories or both, and (b) retail dealers in new
(not yet used) merchandise, which dealers are not yet subject to the
payment of any municipal tax.
For the purpose of taxation, these retail dealers shall be classified
as (1) retail dealers in general merchandise, and (2) retail dealers
exclusively engaged in the sale of (a) textiles . . . (e) books,
including stationery, paper and office supplies, . . .: PROVIDED,
HOWEVER, That the combined total tax of any debtor or
manufacturer, or both, enumerated under these subsections (m-1)
and (m-2), whether dealing in one or all of the articles mentioned
herein, SHALL NOT BE IN EXCESS OF FIVE HUNDRED PESOS
PER ANNUM.
and appellee's counsel maintains that City Ordinances Nos. 2529 and 3000, as
amended, were enacted in virtue of the power that said Act No. 3669 conferred
upon the City of Manila. Appellant, however, contends that said ordinances are
longer in force and effect as the law under which they were promulgated has
been expressly repealed by Section 102 of Republic Act No. 409 passed
on June 18, 1949, known as the Revised Manila Charter.
Passing upon this point the lower Court categorically stated that Republic Act
No. 409 expressly repealed the provisions of Chapter 60 of the Revised
Administrative Code but in the opinion of the trial Judge, although Section 2444
(m-2) of the former Manila Charter and section 18 (o) of the new seemingly differ
in the way the legislative intent was expressed, yet their meaning is practically
the same for the purpose of taxing the merchandise mentioned in both legal
provisions and, consequently, Ordinances Nos. 2529 and 3000, as amended,
are to be considered as still in full force and effect uninterruptedly up to the
present.
Often the legislature, instead of simply amending the pre-existing
statute, will repeal the old statute in its entirety and by the same
enactment re-enact all or certain portions of the preexisting law. Of
course, the problem created by this sort of legislative action
involves mainly the effect of the repeal upon rights and liabilities
which accrued under the original statute. Are those rights and
liabilities destroyed or preserved? The authorities are divided as to
the effect of simultaneous repeals and re-enactments. Some adhere
to the view that the rights and liabilities accrued under the repealed
act are destroyed, since the statutes from which they sprang are
actually terminated, even though for only a very short period of
time. Others, and they seem to be in the majority, refuse to accept
this view of the situation, and consequently maintain that all rights
an liabilities which have accrued under the original statute are
preserved and may be enforced, since the re-enactment neutralizes
the repeal, therefore, continuing the law in force without interruption.
(Crawford-Statutory Construction, Sec. 322).
Appellant's counsel states that section 18 (o) of Republic Act No, 409 introduces
a new and wider concept of taxation and is different from the provisions of
Section 2444(m-2) that the former cannot be considered as a substantial re-
enactment of the provisions of the latter. We have quoted above the provisions
of section 2444(m-2) of the Revised Administrative Code and We shall now copy
hereunder the provisions of Section 18, subdivision (o) of Republic Act No. 409,
which reads as follows:
(o) To tax and fix the license fee on dealers in general merchandise,
including importers and indentors, except those dealers who may
be expressly subject to the payment of some other municipal tax
under the provisions of this section.
Dealers in general merchandise shall be classified as (a) wholesale
dealers and (b) retail dealers. For purposes of the tax on retail
dealers, general merchandise shall be classified into four main
classes: namely (1) luxury articles, (2) semi-luxury articles, (3)
essential commodities, and (4) miscellaneous articles. A separate
license shall be prescribed for each class but where commodities of
different classes are sold in the same establishment, it shall not be
compulsory for the owner to secure more than one license if he
pays the higher or highest rate of tax prescribed by ordinance.
Wholesale dealers shall pay the license tax as such, as may be
provided by ordinance.
For purposes of this section, the term "General merchandise" shall
include poultry and livestock, agricultural products, fish and other
allied products.
The only essential difference that We find between these two provisions that
may have any bearing on the case at bar, is that, while subsection (m-2)
prescribes that the combined total tax of any dealer or manufacturer, or both,
enumerated under subsections (m-1) and (m-2), whether dealing in one or all of
the articles mentioned therein, shall not be in excess of P500 per annum, the
corresponding section 18, subsection (o) of Republic Act No. 409, does not
contain any limitation as to the amount of tax or license fee that the retail dealer
has to pay per annum. Hence, and in accordance with the weight of the
authorities above referred to that maintain that "all rights and liabilities which
have accrued under the original statute are preserved and may be enforced,
since the reenactment neutralizes the repeal, therefore continuing the law in
force without interruption", We hold that the questioned ordinances of the City of
Manila are still in force and effect.
Plaintiff, however, argues that the questioned ordinances, to be valid, must first
be approved by the President of the Philippines as per section 18, subsection (ii)
of Republic Act No. 409, which reads as follows:
(ii) To tax, license and regulate any business, trade or occupation
being conducted within the City of Manila, not otherwise
enumerated in the preceding subsections, including percentage
taxes based on gross sales or receipts, subject to the approval of
the PRESIDENT, except amusement taxes.
but this requirement of the President's approval was not contained in section
2444 of the former Charter of the City of Manila under which Ordinance No.
2529 was promulgated. Anyway, as stated by appellee's counsel, the business
of "retail dealers in general merchandise" is expressly enumerated in subsection
(o), section 18 of Republic Act No. 409; hence, an ordinance prescribing a
municipal tax on said business does not have to be approved by the President
to be effective, as it is not among those referred to in said subsection (ii).
Moreover, the questioned ordinances are still in force, having been promulgated
by the Municipal Board of the City of Manila under the authority granted to it by
law.
The question that now remains to be determined is whether said ordinances are
inapplicable, invalid or unconstitutional if applied to the alleged business of
distribution and sale of bibles to the people of the Philippines by a religious
corporation like the American Bible Society, plaintiff herein.
With regard to Ordinance No. 2529, as amended by Ordinances Nos. 2779,
2821 and 3028, appellant contends that it is unconstitutional and illegal because
it restrains the free exercise and enjoyment of the religious profession and
worship of appellant.
Article III, section 1, clause (7) of the Constitution of the Philippines aforequoted,
guarantees the freedom of religious profession and worship. "Religion has been
spoken of as a profession of faith to an active power that binds and elevates
man to its Creator" (Aglipay vs. Ruiz, 64 Phil., 201).It has reference to one's
views of his relations to His Creator and to the obligations they impose of
reverence to His being and character, and obedience to His Will (Davis vs.
Beason, 133 U.S., 342). The constitutional guaranty of the free exercise and
enjoyment of religious profession and worship carries with it the right to
disseminate religious information. Any restraints of such right can only be
justified like other restraints of freedom of expression on the grounds that there
is a clear and present danger of any substantive evil which the State has the
right to prevent". (Taada and Fernando on the Constitution of the Philippines,
Vol. 1, 4th ed., p. 297). In the case at bar the license fee herein involved is
imposed upon appellant for its distribution and sale of bibles and other religious
literature:
In the case of Murdock vs. Pennsylvania, it was held that an
ordinance requiring that a license be obtained before a person
could canvass or solicit orders for goods, paintings, pictures, wares
or merchandise cannot be made to apply to members of Jehovah's
Witnesses who went about from door to door distributing literature
and soliciting people to "purchase" certain religious books and
pamphlets, all published by the Watch Tower Bible & Tract Society.
The "price" of the books was twenty-five cents each, the "price" of
the pamphlets five cents each. It was shown that in making the
solicitations there was a request for additional "contribution" of
twenty-five cents each for the books and five cents each for the
pamphlets. Lesser sum were accepted, however, and books were
even donated in case interested persons were without funds.
On the above facts the Supreme Court held that it could not be said
that petitioners were engaged in commercial rather than a religious
venture. Their activities could not be described as embraced in the
occupation of selling books and pamphlets. Then the Court
continued:
"We do not mean to say that religious groups and the press are free
from all financial burdens of government. See Grosjean vs.
American Press Co., 297 U.S., 233, 250, 80 L. ed. 660, 668, 56 S.
Ct. 444. We have here something quite different, for example, from
a tax on the income of one who engages in religious activities or a
tax on property used or employed in connection with activities. It is
one thing to impose a tax on the income or property of a preacher. It
is quite another to exact a tax from him for the privilege of delivering
a sermon. The tax imposed by the City of Jeannette is a flat license
tax, payment of which is a condition of the exercise of these
constitutional privileges. The power to tax the exercise of a privilege
is the power to control or suppress its enjoyment. . . . Those who
can tax the exercise of this religious practice can make its exercise
so costly as to deprive it of the resources necessary for its
maintenance. Those who can tax the privilege of engaging in this
form of missionary evangelism can close all its doors to all those
who do not have a full purse. Spreading religious beliefs in this
ancient and honorable manner would thus be denied the needy. . . .
 It is contended however that the fact that the license tax can
suppress or control this activity is unimportant if it does not do so.
But that is to disregard the nature of this tax. It is a license tax a
flat tax imposed on the exercise of a privilege granted by the Bill of
Rights . . . The power to impose a license tax on the exercise of
these freedom is indeed as potent as the power of censorship which
this Court has repeatedly struck down. . . . It is not a nominal fee
imposed as a regulatory measure to defray the expenses of policing
the activities in question. It is in no way apportioned. It is flat license
tax levied and collected as a condition to the pursuit of activities
whose enjoyment is guaranteed by the constitutional liberties of
press and religion and inevitably tends to suppress their exercise.
That is almost uniformly recognized as the inherent vice and evil of
this flat license tax."
Nor could dissemination of religious information be conditioned
upon the approval of an official or manager even if the town were
owned by a corporation as held in the case of Marsh vs. State of
Alabama (326 U.S. 501), or by the United States itself as held in the
case of Tucker vs. Texas (326 U.S. 517). In the former case the
Supreme Court expressed the opinion that the right to enjoy
freedom of the press and religion occupies a preferred position as
against the constitutional right of property owners.
"When we balance the constitutional rights of owners of property
against those of the people to enjoy freedom of press and religion,
as we must here, we remain mindful of the fact that the latter
occupy a preferred position. . . . In our view the circumstance that
the property rights to the premises where the deprivation of property
here involved, took place, were held by others than the public, is not
sufficient to justify the State's permitting a corporation to govern a
community of citizens so as to restrict their fundamental liberties
and the enforcement of such restraint by the application of a State
statute." (Taada and Fernando on the Constitution of the
Philippines, Vol. 1, 4th ed., p. 304-306).
Section 27 of Commonwealth Act No. 466, otherwise known as the National
Internal Revenue Code, provides:
SEC. 27. EXEMPTIONS FROM TAX ON CORPORATIONS. The
following organizations shall not be taxed under this Title in respect
to income received by them as such
It may be true that in the case at bar the price asked for the bibles and other
religious pamphlets was in some instances a little bit higher than the actual cost
of the same but this cannot mean that appellant was engaged in the business or
occupation of selling said "merchandise" for profit. For this reason We believe
that the provisions of City of Manila Ordinance No. 2529, as amended, cannot
be applied to appellant, for in doing so it would impair its free exercise and
enjoyment of its religious profession and worship as well as its rights of
dissemination of religious beliefs.
With respect to Ordinance No. 3000, as amended, which requires the obtention
the Mayor's permit before any person can engage in any of the businesses,
trades or occupations enumerated therein, We do not find that it imposes any
charge upon the enjoyment of a right granted by the Constitution, nor tax the
exercise of religious practices. In the case of Coleman vs. City of Griffin, 189
S.E. 427, this point was elucidated as follows:
An ordinance by the City of Griffin, declaring that the practice of
distributing either by hand or otherwise, circulars, handbooks,
advertising, or literature of any kind, whether said articles are being
delivered free, or whether same are being sold within the city limits
of the City of Griffin, without first obtaining written permission from
the city manager of the City of Griffin, shall be deemed a nuisance
and punishable as an offense against the City of Griffin, does not
deprive defendant of his constitutional right of the free exercise and
enjoyment of religious profession and worship, even though it
prohibits him from introducing and carrying out a scheme or
purpose which he sees fit to claim as a part of his religious system.
It seems clear, therefore, that Ordinance No. 3000 cannot be considered
unconstitutional, even if applied to plaintiff Society. But as Ordinance No. 2529
of the City of Manila, as amended, is not applicable to plaintiff-appellant and
defendant-appellee is powerless to license or tax the business of plaintiff Society
involved herein for, as stated before, it would impair plaintiff's right to the free
exercise and enjoyment of its religious profession and worship, as well as its
rights of dissemination of religious beliefs, We find that Ordinance No. 3000, as
amended is also inapplicable to said business, trade or occupation of the
plaintiff.
Wherefore, and on the strength of the foregoing considerations, We hereby
reverse the decision appealed from, sentencing defendant return to plaintiff the
sum of P5,891.45 unduly collected from it. Without pronouncement as to costs.
It is so ordered.

(e) Corporations or associations organized and operated exclusively

for religious, charitable, . . . or educational purposes, . . .: Provided,
however, That the income of whatever kind and character from any
of its properties, real or personal, or from any activity conducted for
profit, regardless of the disposition made of such income, shall be
liable to the tax imposed under this Code;

Appellant's counsel claims that the Collector of Internal Revenue has exempted
the plaintiff from this tax and says that such exemption clearly indicates that the
act of distributing and selling bibles, etc. is purely religious and does not fall
under the above legal provisions.