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Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 165354 January 12, 2015

REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL POWER


CORPORATION, Petitioner,
vs.
HEIRS OF SATURNINO Q. BORBON, AND COURT OF APPEALS, Respondents.

DECISION

BERSAMIN, J.:

The expropriator who has taken possession of the property subject of expropriation is obliged to pay
reasonable compensation to the landowner for the period of such possession although the
proceedings had been discontinued on the ground that the public purpose for the expropriation had
meanwhile ceased.

Antecedents

The National Power Corporation (NAPOCOR) is a government-owned and -controlled corporation


vested with authority under Republic Act No. 6395, as amended, to undertake the development of
hydro-electric generation of power, production of electricity from any and all sources, construction,
operation and maintenance of power plants, auxiliary plants, dams, reservoirs, pipes, main
transmission lines, power stations and substations, and other works for the purpose of developing
hydraulic power from any river, lake, creek, spring and waterfalls in the Philippines and to supply
such power to the inhabitants thereof.1

In February 1993, NAPOCOR entered a property located in Barangay San Isidro, Batangas City in
order to construct and maintain transmission lines for the 230 KV Mahabang Parang-Pinamucan
Power Transmission Project.2 Respondents heirs of Saturnino Q. Borbon owned the property, with a
total area of 14,257 square meters, which was registered under Transfer Certificate of Title No. T-
9696 of the Registry of Deeds of Batangas.3

On May 26, 1995, NAPOCOR filed a complaint for expropriation in the Regional Trial Court in
Batangas City (RTC),4seeking the acquisition of an easement of right of way over a portion of the
property involving an area of only 6,326 square meters, more or less,5 alleging that it had negotiated
with the respondents for the acquisition of the easement but they had failed to reach any agreement;
and that, nonetheless, it was willing to deposit the amount of ₱9,790.00 representing the assessed
value of the portion sought to be expropriated.6 It prayed for the issuance of a writ of possession
upon deposit to enable it to enter and take possession and control of the affected portion of the
property; to demolish all improvements existing thereon; and to commence construction of the
transmission line project. It likewise prayed for the appointment of three commissioners to determine
the just compensation to be paid.7

In their answer with motion to dismiss,8 the respondents staunchly maintained that NAPOCOR had
not negotiated with them before entering the property and that the entry was done without their
consent in the process, destroying some fruit trees without payment, and installing five transmission
line posts and five woodpoles for its project;9 that the area being expropriated only covered the
portion directly affected by the transmission lines; that the remaining portion of the property was also
affected because the transmission line passed through the center of the land, thereby dividing the
land into three lots; that the presence of the high tension transmission line had rendered the entire
property inutile for any future use and capabilities;10 that, nonetheless, they tendered no objection to
NAPOCOR’s entry provided it would pay just compensation not only for the portion sought to be
expropriated but for the entire property whose potential was greatly diminished, if not totally lost, due
to the project;11 and that their property was classified as industrial land. Thus, they sought the
dismissal of the complaint, the payment of just compensation of ₱1,000.00/square meter, and
attorney’s fees;12 and to be allowed to nominate their representative to the panel of commissioners to
be appointed by the trial court.13

In the pre-trial conference conducted on December 20, 1995, the parties stipulated on: (1) the
location of the property; (2) the number of the heirs of the late Saturnino Q. Borbon; (3) the names of
the persons upon whom title to the property was issued; and (4) the ownership and possession of
the property.14 In its order of that date, the RTC directed the parties to submit the names of their
nominees to sit in the panel of commissioners within 10 days from the date of the pre-trial.15

The RTC constituted the panel of three commissioners. Two commissioners submitted a joint report
on April 8, 1999,16 in which they found that the property was classified as industrial land located
within the Industrial 2 Zone;17that although the property used to be classified as agricultural (i.e.,
horticultural and pasture land), it was reclassified to industrial land for appraisal or taxation purposes
on June 30, 1994; and that the reclassification was made on the basis of a certification issued by the
Zoning Administrator pursuant to Section 3.10 (d) of the Amended Zoning Ordinance (1989) of the
City of Batangas.18 The two commissioners appraised the value at ₱550.00/square meter.19However,
the third commissioner filed a separate report dated March 16, 1999,20 whereby he recommended
the payment of "an easement fee of at least ten percent (10%) of the assessed value indicated in the
tax declaration21plus cost of damages in the course of the construction, improvements affected and
tower occupancy fee."22

The parties then submitted their respective objections to the reports. On their part, the respondents
maintained that NAPOCOR should compensate them for the entire property at the rate of
₱550.00/square meter because the property was already classified as industrial land at the time
NAPOCOR entered it.23 In contrast, NAPOCOR objected to the joint report, insisting that the property
was classified as agricultural land at the time of its taking in March 1993; and clarifying that it was
only seeking an easement of right of way over a portion of the property, not the entire area thereof,
so that it should pay only 10% of the assessed value of the portion thus occupied.24

In the judgment dated November 27, 2000,25 the RTC adopted the recommendation contained in the
joint report, and ruled thusly:

The price to be paid for an expropriated land is its value at the time of taking, which is the date when
the plaintiff actually entered the property or the date of the filing of the complaint for expropriation. In
this case, there is no evidence as to when the plaintiff actually entered the property in question, so
the reference point should be the date of filing of the complaint, which is May 5, 1995.

On this date, the property in question was already classified as industrial. So, the Joint Report
(Exhibit "1") is credible on this point. The two Commissioners who submitted the Joint Report are
government officials who were not shown to be biased. So, that their report should be given more
weight than the minority report submitted by a private lawyer representing the plaintiff. In view of
these, the Court adopts the Joint Report and rejects the minority report. The former fixed the just
compensation at ₱550.00 per square meter for the whole lot of 14,257 square meters.26

Accordingly, the RTC ordered NAPOCOR to pay the respondents: (1) just compensation for the
whole area of 14,257 square meters at the rate of ₱550.00/square meter; (2) legal rate of interest
from May 5, 1995 until full payment; and (3) the costs of suit.27

NAPOCOR appealed (CA-G.R. No. 72069).

On April 29, 2004,28 the CA promulgated its decision, viz:

WHEREFORE, premises considered, the Decision dated November 27, 2000 of Branch I of the
Regional Trial Court of Batangas City, is hereby AFFIRMED with the MODIFICATION that plaintiff-
appellant shall pay only for the occupied 6,326 square meters of the subject real property at the rate
of ₱550.00 per square meter and to pay legal interest therefrom until fully paid.

SO ORDERED.29

Hence, this appeal by NAPOCOR.

Issue

On December 3, 2012, during the pendency of the appeal, NAPOCOR filed a Motion to Defer
Proceedings stating that negotiations between the parties were going on with a view to the amicable
settlement of the case.30

On January 3, 2014, NAPOCOR filed a Manifestation and Motion to Discontinue Expropriation


Proceedings,31informing that the parties failed to reach an amicable agreement; that the property
sought to be expropriated was no longer necessary for public purpose because of the intervening
retirement of the transmission lines installed on the respondents’ property;32 that because the public
purpose for which such property would be used thereby ceased to exist, the proceedings for
expropriation should no longer continue, and the State was now duty-bound to return the property to
its owners; and that the dismissal or discontinuance of the expropriation proceedings was in
accordance with Section 4, Rule 67 of the Rules of Court. Hence, NAPOCOR prayed that the
proceedings be discontinued "under such terms as the court deems just and equitable,"33 and that
the compensation to be awarded the respondents be reduced by the equivalent of the benefit they
received from the land during the time of its occupation, for which purpose the case could be
remanded to the trial court for the determination of reasonable compensation to be paid to them.34

In light of its Manifestation and Motion to Discontinue Expropriation Proceedings, NAPOCOR


contends that the expropriation has become without basis for lack of public purpose as a result of
the retirement of the transmission lines; that if expropriation still proceeds, the Government will be
unduly burdened by payment of just compensation for property it no longer requires; and that there
is legal basis in dismissing the proceedings, citing Metropolitan Water District v. De los
Angeles35 where the Court granted petitioner’s prayer for the quashal of expropriation proceedings
and the eventual dismissal of the proceedings on the ground that the land sought to be expropriated
was no longer "indispensably necessary" in the maintenance and operation of petitioner's
waterworks system.

The issue to be considered and resolved is whether or not the expropriation proceedings should be
discontinued or dismissed pending appeal.
Ruling of the Court

The dismissal of the proceedings for expropriation at the instance of NAPOCOR is proper, but,
conformably with Section 4,36 Rule 67 of the Rules of Court, the dismissal or discontinuance of the
proceedings must be upon such terms as the court deems just and equitable.

Before anything more, we remind the parties about the nature of the power of eminent domain. The
right of eminent domain is "the ultimate right of the sovereign power to appropriate, not only the
public but the private property of all citizens within the territorial sovereignty, to public purpose."37 But
the exercise of such right is not unlimited, for two mandatory requirements should underlie the
Government’s exercise of the power of eminent domain, namely: (1) that it is for a particular public
purpose; and (2) that just compensation be paid to the property owner.38 These requirements partake
the nature of implied conditions that should be complied with to enable the condemnor to keep the
property expropriated.39

Public use, in common acceptation, means "use by the public." However, the concept has expanded
to include utility, advantage or productivity for the benefit of the public.40 In Asia's Emerging Dragon
Corporation v. Department of Transportation and Communications,41 Justice Corona, in his
dissenting opinion said that:

To be valid, the taking must be for public use. The meaning of the term "public use" has evolved
over time in response to changing public needs and exigencies. Public use which was traditionally
understood as strictly limited to actual "use by the public" has already been abandoned. "Public use"
has now been held to be synonymous with "public interest," "public benefit," and "public
convenience."

It is essential that the element of public use of the property be maintained throughout the
proceedings for expropriation. The effects of abandoning the public purpose were explained in
Mactan-Cebu International Airport Authority v. Lozada, Sr.,42 to wit:

More particularly, with respect to the element of public use, the expropriator should commit to use
the property pursuant to the purpose stated in the petition for expropriation filed, failing which, it
should file another petition for the new purpose. If not, it is then incumbent upon the expropriator to
return the said property to its private owner, if the latter desires to reacquire the same. Otherwise,
the judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for
the proper exercise of the power of eminent domain, namely, the particular public purpose for which
the property will be devoted. Accordingly, the private property owner would be denied due process of
law, and the judgment would violate the property owner's right to justice, fairness and equity.43

A review reveals that Metropolitan Water District v. De los Angeles44 is an appropriate precedent
herein. There, the Metropolitan Water District passed a board resolution requesting the Attorney-
General to file a petition in the Court of First Instance of the Province of Rizal praying that it be
permitted to discontinue the condemnation proceedings it had initiated for the expropriation of a
parcel of land in Montalban, Rizal to be used in the construction of the Angat Waterworks System. It
claimed that the land was no longer indispensably necessary in the maintenance and operation of its
waterworks system, and that the expropriation complaint should then be dismissed. The Court,
expounding on the power of the State to exercise the right of eminent domain, then pronounced:

There is no question raised concerning the right of the plaintiff here to acquire the land under the
power of eminent domain. That power was expressly granted it by its charter. The power of eminent
1âwphi 1

domain is a right reserved to the people or Government to take property for public use. It is the right
of the state, through its regular organization, to reassert either temporarily or permanently its
dominion over any portion of the soil of the state on account of public necessity and for the public
good. The right of eminent domain is the right which the Government or the people retains over the
estates of individuals to resume them for public use. It is the right of the people, or the sovereign, to
dispose, in case of public necessity and for the public safety, of all the wealth contained in the state.45

Indeed, public use is the fundamental basis for the action for expropriation; hence, NAPOCOR’s
motion to discontinue the proceedings is warranted and should be granted. The Court has observed
in Metropolitan Water District v. De los Angeles:

It is not denied that the purpose of the plaintiff was to acquire the land in question for public use. The
fundamental basis then of all actions brought for the expropriation of lands, under the power of
eminent domain, is public use. That being true, the very moment that it appears at any stage of the
proceedings that the expropriation is not for a public use, the action must necessarily fail and should
be dismissed, for the reason that the action cannot be maintained at all except when the
expropriation is for some public use. That must be true even during the pendency of the appeal or at
any other stage of the proceedings. If, for example, during the trial in the lower court, it should be
made to appear to the satisfaction of the court that the expropriation is not for some public use, it
would be the duty and the obligation of the trial court to dismiss the action. And even during the
pendency of the appeal, if it should be made to appear to the satisfaction of the appellate court that
the expropriation is not for public use, then it would become the duty and the obligation of the
appellate court to dismiss it.

In the present case the petitioner admits that the expropriation of the land in question is no longer
necessary for public use. Had that admission been made in the trial court the case should have been
dismissed there. It now appearing positively, by resolution of the plaintiff, that the expropriation is not
necessary for public use, the action should be dismissed even without a motion on the part of the
plaintiff. The moment it appears in whatever stage of the proceedings that the expropriation is not for
a public use the complaint should be dismissed and all the parties thereto should be relieved from
further annoyance or litigation.46 (underscoring and emphasis supplied)

It is notable that the dismissal of the expropriation proceedings in Metropolitan Water District v. De
los Angeles was made subject to several conditions in order to address the dispossession of the
defendants of their land, and the inconvenience, annoyance and damages suffered by the
defendants on account of the proceedings. Accordingly, the Court remanded the case to the trial
court for the issuance of a writ of possession ordering Metropolitan Water District to immediately
return possession of the land to the defendants, and for the determination of damages in favor of the
defendants, the claims for which must be presented within 30 days from the return of the record to
the court of origin and notice thereof.47

Here, NAPOCOR seeks to discontinue the expropriation proceedings on the ground that the
transmission lines constructed on the respondents’ property had already been retired. Considering
that the Court has consistently upheld the primordial importance of public use in expropriation
proceedings, NAPOCOR’s reliance on Metropolitan Water District v. De los Angeles was apt and
correct. Verily, the retirement of the transmission lines necessarily stripped the expropriation
proceedings of the element of public use. To continue with the expropriation proceedings despite the
definite cessation of the public purpose of the project would result in the rendition of an invalid
judgment in favor of the expropriator due to the absence of the essential element of public use.

Unlike in Metropolitan Water District v. De los Angeles where the request to discontinue the
expropriation proceedings was made upon the authority appearing in the board resolution issued on
July 14, 1930,48 counsel for NAPOCOR has not presented herein any document to show that
NAPOCOR had decided, as a corporate body, to discontinue the expropriation proceedings.
Nonetheless, the Court points to the Memorandum dated December 13, 201249 and the Certificate of
Inspection/Accomplishment dated February 5, 200550 attached to NAPOCOR’s motion attesting to
the retirement of the transmission lines. Also, Metropolitan Water District v. De los Angeles
emphasized that it became the duty and the obligation of the court, regardless of the stage of the
proceedings, to dismiss the action "if it should be made to appear to the satisfaction of the court that
the expropriation is not for some public use."51 Despite the lack of the board resolution, therefore, the
Court now considers the documents attached to NAPOCOR’s Manifestation and Motion to
Discontinue Expropriation Proceedings to be sufficient to establish that the expropriation sought is
no longer for some public purpose.

Accordingly, the Court grants the motion to discontinue the proceedings subject to the conditions to
be shortly mentioned hereunder, and requires the return of the property to the respondents. Having
said that, we must point out that NAPOCOR entered the property without the owners’ consent and
without paying just compensation to the respondents. Neither did it deposit any amount as required
by law prior to its entry. The Constitution is explicit in obliging the Government and its entities to pay
just compensation before depriving any person of his or her property for public use.52 Considering
that in the process of installing transmission lines, NAPOCOR destroyed some fruit trees and plants
without payment, and the installation of the transmission lines went through the middle of the land as
to divide the property into three lots, thereby effectively rendering the entire property inutile for any
future use, it would be unfair for NAPOCOR not to be made liable to the respondents for the
disturbance of their property rights from the time of entry until the time of restoration of the
possession of the property. There should be no question about the taking. In several rulings, notably
National Power Corporation v. Zabala,53 Republic v. Libunao,54 National Power Corporation v.
Tuazon,55 and National Power Corporation v. Saludares,56 this Court has already declared that "since
the high-tension electric current passing through the transmission lines will perpetually deprive the
property owners of the normal use of their land, it is only just and proper to require Napocor to
recompense them for the full market value of their property."

There is a sufficient showing that NAPOCOR entered into and took possession of the respondents’
property as early as in March 1993 without the benefit of first filing a petition for eminent domain. For
all intents and purposes, therefore, March 1993 is the reckoning point of NAPOCOR’s taking of the
property, instead of May 5, 1995, the time NAPOCOR filed the petition for expropriation. The
reckoning conforms to the pronouncement in Ansaldo v. Tantuico, Jr.,57 to wit:

Normally, of course, where the institution of an expropriation action precedes the taking of the
property subject thereof, the just compensation is fixed as of the time of the filing of the complaint.
This is so provided by the Rules of Court, the assumption of possession by the expropriator
ordinarily being conditioned on its deposits with the National or Provincial Treasurer of the value of
the property as provisionally ascertained by the court having jurisdiction of the proceedings.

There are instances, however, where the expropriating agency takes over the property prior to the
expropriation suit, as in this case although, to repeat, the case at bar is quite extraordinary in that
possession was taken by the expropriator more than 40 years prior to suit. In these instances, this
Court has ruled that the just compensation shall be determined as of the time of taking, not as of the
time of filing of the action of eminent domain.

In the context of the State's inherent power of eminent domain, there is a "taking" when the owner is
actually deprived or dispossessed of his property; when there is a practical destruction or a material
impairment of the value of his property or when he is deprived of the ordinary use thereof. There is a
"taking" in this sense when the expropriator enters private property not only for a momentary period
but for a more permanent duration, for the purpose of devoting the property to a public use in such a
manner as to oust the owner and deprive him of all beneficial enjoyment thereof. For ownership,
after all, "is nothing without the inherent rights of possession, control and enjoyment. Where the
owner is deprived of the ordinary and beneficial use of his property or of its value by its being
diverted to public use, there is taking within the Constitutional sense." x x x.58

In view of the discontinuance of the proceedings and the eventual return of the property to the
respondents, there is no need to pay "just compensation" to them because their property would not
be taken by NAPOCOR. Instead of full market value of the property, therefore, NAPOCOR should
compensate the respondents for the disturbance of their property rights from the time of entry in
March 1993 until the time of restoration of the possession by paying to them actual or other
compensatory damages. This conforms with the following pronouncement in Mactan-Cebu
International Airport Authority v. Lozada, Sr.:59

In light of these premises, we now expressly hold that the taking of private property, consequent to
the Government’s exercise of its power of eminent domain, is always subject to the condition that the
property be devoted to the specific public purpose for which it was taken. Corollarily, if this particular
purpose or intent is not initiated or not at all pursued, and is peremptorily abandoned, then the
former owners, if they so desire, may seek the reversion of the property, subject to the return of the
amount of just compensation received. In such a case, the exercise of the power of eminent domain
has become improper for lack of the required factual justification.60

This should mean that the compensation must be based on what they actually lost as a result and by
reason of their dispossession of the property and of its use, including the value of the fruit trees,
plants and crops destroyed by NAPOCOR’s construction of the transmission lines. Considering that
the dismissal of the expropriation proceedings is a development occurring during the appeal, the
Court now treats the dismissal of the expropriation proceedings as producing the effect of converting
the case into an action for damages. For that purpose, the Court remands the case to the court of
origin for further proceedings, with instruction to the court of origin to enable the parties to fully
litigate the action for damages by giving them the opportunity to re-define the factual and legal
issues by the submission of the proper pleadings on the extent of the taking, the value of the
compensation to be paid to the respondents by NAPOCOR, and other relevant matters as they
deem fit. Trial shall be limited to matters the evidence upon which had not been heretofore heard or
adduced. The assessment and payment of the correct amount of filing fees due from the
respondents shall be made in the judgment, and such amount shall constitute a first lien on the
recovery. Subject to these conditions, the court of origin shall treat the case as if originally filed as an
action for damages.

WHEREFORE, the Court DISMISSES the expropriation proceedings due to the intervening
cessation of the need for public use; REMANDS the records to the Regional Trial Court, Branch 1, in
Batangas City as the court of origin for further proceedings to be conducted in accordance with the
foregoing instructions; and ORDERS said trial court to try and decide the issues with dispatch.

SO ORDERED.
REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL POWER
CORPORATION,
vs.
HEIRS OF SATURNINO Q. BORBON, AND COURT OF APPEALS

[G.R. No. 165354; January 12, 2015] Constitutional Law| Eminent Domain|

FACTS:
The National Power Corporation (NAPOCOR) entered into a private property owned by
respondents Borbon in order to construct and maintain transmission lines for its Power
Transmission Project. NAPOCOR then filed for expropriation of an easement of right of way
over a portion of the said property. However, during the pendency of the appeal, NAPOCOR
filed a motion to discontinue the expropriation proceedings, that the property sought to be
expropriated was no longer necessary for public purpose, that because the public purpose ceased
to exist, the proceedings for expropriation should no longer continue, and the State was now
duty-bound to return the property to its owners; and that the dismissal or discontinuance of the
expropriation proceedings was in accordance of the Rules of Court.

ISSUE:
Whether the expropriation proceedings should be discontinued or dismissed pending appeal.

HELD:
The dismissal of the proceedings for expropriation at the instance of NAPOCOR is proper, but,
the dismissal or discontinuance of the proceedings must be upon such terms as the court deems
just and equitable. Here, NAPOCOR seeks to discontinue the expropriation proceedings on the
ground that the transmission lines constructed on the respondents’ property had already been
retired. The retirement of the transmission lines necessarily stripped the expropriation
proceedings of the element of public use. Accordingly, the Court grants the motion to
discontinue the proceedings and requires the return of the property to the respondents.

In view of the discontinuance of the proceedings and the eventual return of the property to
the respondents, NAPOCOR should compensate the respondents for the disturbance of
their property rights from the time of entry in March 1993 until the time of restoration of
the possession by paying actual or other compensatory damages. The compensation must be
based on what they actually lost as a result and by reason of their dispossession of the property
and of its use, including the value of the fruit trees, plants and crops destroyed by NAPOCOR’s
construction of the transmission lines.Considering that the dismissal of the expropriation
proceedings is a development occurring during the appeal, the Court treats the dismissal of the
expropriation proceedings as producing the effect of converting the case into an action for
damages.
Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 179334 July 1, 2013

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT


ENGINEER CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of
Appeals (CA) Decision1 dated July 31, 2007 in CA-G.R. CV No. 77997. The assailed decision
affirmed with modification the Regional Trial Court (RTC)2 Decision3 dated March 22, 2002 in Civil
Case No. 208-M-95.

The case stemmed from the following factual and procedural antecedents:

Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a parcel of land
with an area of 7,268 square meters located in San Pablo, Malolos, Bulacan and covered by
Transfer Certificate of Title (TCT) No. T-430064 of the Register of Deeds of Bulacan. Said parcel of
land was among the properties taken by the government sometime in 1940 without the owners’
consent and without the necessary expropriation proceedings and used for the construction of the
MacArthur Highway.5

In a letter6 dated December 15, 1994, respondents demanded the payment of the fair market value
of the subject parcel of land. Petitioner Celestino R. Contreras (petitioner Contreras), then District
Engineer of the First Bulacan Engineering District of petitioner Department of Public Works and
Highways (DPWH), offered to pay the subject land at the rate of ₱0.70 per square meter per
Resolution of the Provincial Appraisal Committee (PAC) of Bulacan.7Unsatisfied with the offer,
respondents demanded for the return of their property or the payment of compensation at the current
fair market value.8

As their demand remained unheeded, respondents filed a Complaint9 for recovery of possession with
damages against petitioners, praying that they be restored to the possession of the subject parcel of
land and that they be paid attorney’s fees.10 Respondents claimed that the subject parcel of land was
assessed at ₱2,543,800.00.11

Instead of filing their Answer, petitioners moved for the dismissal of the complaint on the following
grounds: (1) that the suit is against the State which may not be sued without its consent; (2) that the
case has already prescribed; (3) that respondents have no cause of action for failure to exhaust
administrative remedies; and (4) if respondents are entitled to compensation, they should be paid
only the value of the property in 1940 or 1941.12
On June 28, 1995, the RTC issued an Order13 granting respondents’ motion to dismiss based on the
doctrine of state immunity from suit. As respondents’ claim includes the recovery of damages, there
is no doubt that the suit is against the State for which prior waiver of immunity is required. When
elevated to the CA,14 the appellate court did not agree with the RTC and found instead that the
doctrine of state immunity from suit is not applicable, because the recovery of compensation is the
only relief available to the landowner. To deny such relief would undeniably cause injustice to the
landowner. Besides, petitioner Contreras, in fact, had earlier offered the payment of compensation
although at a lower rate.Thus, the CA reversed and set aside the dismissal of the complaint and,
consequently, remanded the case to the trial court for the purpose of determining the just
compensation to which respondents are entitled to recover from the government.15 With the finality of
the aforesaid decision, trial proceeded in the RTC.

The Branch Clerk of Court was initially appointed as the Commissioner and designated as the
Chairman of the Committee that would determine just compensation,16 but the case was later
referred to the PAC for the submission of a recommendation report on the value of the subject
property.17 In PAC Resolution No. 99-007,18 the PAC recommended the amount of ₱1,500.00 per
square meter as the just compensation for the subject property.

On March 22, 2002, the RTC rendered a Decision,19 the dispositive portion of which reads:

WHEREFORE, premises considered, the Department of Public Works and Highways or its duly
assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One
Thousand Five Hundred Pesos (₱1,500.00) per square meter for the lot subject matter of this case
in accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001.

SO ORDERED.20

On appeal, the CA affirmed the above decision with the modification that the just compensation
stated above should earn interest of six percent (6%) per annum computed from the filing of the
action on March 17, 1995 until full payment.21

In its appeal before the CA, petitioners raised the issues of prescription and laches, which the CA
brushed aside on two grounds: first, that the issue had already been raised by petitioners when the
case was elevated before the CA in CA-G.R. CV No. 51454. Although it was not squarely ruled upon
by the appellate court as it did not find any reason to delve further on such issues, petitioners did not
assail said decision barring them now from raising exactly the same issues; and second, the issues
proper for resolution had been laid down in the pre-trial order which did not include the issues of
prescription and laches. Thus, the same can no longer be further considered. As to the propriety of
the property’s valuation as determined by the PAC and adopted by the RTC, while recognizing the
rule that the just compensation should be the reasonable value at the time of taking which is 1940,
the CA found it necessary to deviate from the general rule. It opined that it would be obviously unjust
and inequitable if respondents would be compensated based on the value of the property in 1940
which is ₱0.70 per sq m, but the compensation would be paid only today. Thus, the appellate court
found it just to award compensation based on the value of the property at the time of payment. It,
therefore, adopted the RTC’s determination of just compensation of ₱1,500.00 per sq m as
recommended by the PAC. The CA further ordered the payment of interest at the rate of six percent
(6%) per annum reckoned from the time of taking, which is the filing of the complaint on March 17,
1995.

Aggrieved, petitioners come before the Court assailing the CA decision based on the following
grounds:
I.

THE COURT OF APPEALS GRAVELY ERRED IN GRANTING JUST COMPENSATION TO


RESPONDENTS CONSIDERING THE HIGHLY DUBIOUS AND QUESTIONABLE
CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY.

II.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING JUST COMPENSATION TO


RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND
DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES.

III.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURT’S DECISION
ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET
VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS.22

Petitioners insist that the action is barred by prescription having been filed fifty-four (54) years after
the accrual of the action in 1940. They explain that the court can motu proprio dismiss the complaint
if it shows on its face that the action had already prescribed. Petitioners likewise aver that
respondents slept on their rights for more than fifty years; hence, they are guilty of laches. Lastly,
petitioners claim that the just compensation should be based on the value of the property at the time
of taking in 1940 and not at the time of payment.23

The petition is partly meritorious.

The instant case stemmed from an action for recovery of possession with damages filed by
respondents against petitioners. It, however, revolves around the taking of the subject lot by
petitioners for the construction of the MacArthur Highway. There is taking when the expropriator
enters private property not only for a momentary period but for a permanent duration, or for the
purpose of devoting the property to public use in such a manner as to oust the owner and deprive
him of all beneficial enjoyment thereof.24

It is undisputed that the subject property was taken by petitioners without the benefit of expropriation
proceedings for the construction of the MacArthur Highway. After the lapse of more than fifty years,
the property owners sought recovery of the possession of their property. Is the action barred by
prescription or laches? If not, are the property owners entitled to recover possession or just
compensation?

As aptly noted by the CA, the issues of prescription and laches are not proper issues for resolution
as they were not included in the pre-trial order. We quote with approval the CA’s ratiocination in this
wise:

Procedurally, too, prescription and laches are no longer proper issues in this appeal. In the pre-trial
order issued on May 17, 2001, the RTC summarized the issues raised by the defendants, to wit: (a)
whether or not the plaintiffs were entitled to just compensation; (b) whether or not the valuation
would be based on the corresponding value at the time of the taking or at the time of the filing of the
action; and (c) whether or not the plaintiffs were entitled to damages. Nowhere did the pre-trial order
indicate that prescription and laches were to be considered in the adjudication of the RTC.25
To be sure, the pre-trial order explicitly defines and limits the issues to be tried and controls the
subsequent course of the action unless modified before trial to prevent manifest injustice.26

Even if we squarely deal with the issues of laches and prescription, the same must still fail. Laches is
principally a doctrine of equity which is applied to avoid recognizing a right when to do so would
result in a clearly inequitable situation or in an injustice.27 This doctrine finds no application in this
case, since there is nothing inequitable in giving due course to respondents’ claim. Both equity and
the law direct that a property owner should be compensated if his property is taken for public
use.28 Neither shall prescription bar respondents’ claim following the long-standing rule "that where
private property is taken by the Government for public use without first acquiring title thereto either
through expropriation or negotiated sale, the owner’s action to recover the land or the value thereof
does not prescribe."29

When a property is taken by the government for public use, jurisprudence clearly provides for the
remedies available to a landowner. The owner may recover his property if its return is feasible or, if it
is not, the aggrieved owner may demand payment of just compensation for the land taken.30 For
failure of respondents to question the lack of expropriation proceedings for a long period of time,
they are deemed to have waived and are estopped from assailing the power of the government to
expropriate or the public use for which the power was exercised. What is left to respondents is the
right of compensation.31 The trial and appellate courts found that respondents are entitled to
compensation. The only issue left for determination is the propriety of the amount awarded to
respondents.

Just compensation is "the fair value of the property as between one who receives, and one who
desires to sell, x x x fixed at the time of the actual taking by the government." This rule holds true
when the property is taken before the filing of an expropriation suit, and even if it is the property
owner who brings the action for compensation.32

The issue in this case is not novel.

In Forfom Development Corporation [Forfom] v. Philippine National Railways [PNR],33 PNR entered
the property of Forfom in January 1973 for public use, that is, for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation
proceedings.34 In 1990, Forfom filed a complaint for recovery of possession of real property and/or
damages against PNR. In Eusebio v. Luis,35 respondent’s parcel of land was taken in 1980 by the
City of Pasig and used as a municipal road now known as A. Sandoval Avenue in Pasig City without
the appropriate expropriation proceedings. In 1994, respondent demanded payment of the value of
the property, but they could not agree on its valuation prompting respondent to file a complaint for
reconveyance and/or damages against the city government and the mayor. In Manila International
Airport Authority v. Rodriguez,36in the early 1970s, petitioner implemented expansion programs for
its runway necessitating the acquisition and occupation of some of the properties surrounding its
premises. As to respondent’s property, no expropriation proceedings were initiated. In 1997,
1âw phi 1

respondent demanded the payment of the value of the property, but the demand remained
unheeded prompting him to institute a case for accion reivindicatoria with damages against
petitioner. In Republic v. Sarabia,37 sometime in 1956, the Air Transportation Office (ATO) took
possession and control of a portion of a lot situated in Aklan, registered in the name of respondent,
without initiating expropriation proceedings. Several structures were erected thereon including the
control tower, the Kalibo crash fire rescue station, the Kalibo airport terminal and the headquarters of
the PNP Aviation Security Group. In 1995, several stores and restaurants were constructed on the
remaining portion of the lot. In 1997, respondent filed a complaint for recovery of possession with
damages against the storeowners where ATO intervened claiming that the storeowners were its
lessees.
The Court in the above-mentioned cases was confronted with common factual circumstances where
the government took control and possession of the subject properties for public use without initiating
expropriation proceedings and without payment of just compensation, while the landowners failed for
a long period of time to question such government act and later instituted actions for recovery of
possession with damages. The Court thus determined the landowners’ right to the payment of just
compensation and, more importantly, the amount of just compensation. The Court has uniformly
ruled that just compensation is the value of the property at the time of taking that is controlling for
purposes of compensation. In Forfom, the payment of just compensation was reckoned from the
time of taking in 1973; in Eusebio, the Court fixed the just compensation by determining the value of
the property at the time of taking in 1980; in MIAA, the value of the lot at the time of taking in 1972
served as basis for the award of compensation to the owner; and in Republic, the Court was
convinced that the taking occurred in 1956 and was thus the basis in fixing just compensation. As in
said cases, just compensation due respondents in this case should, therefore, be fixed not as of the
time of payment but at the time of taking, that is, in 1940.

The reason for the rule has been clearly explained in Republic v. Lara, et al.,38 and repeatedly held
by the Court in recent cases, thus:

x x x "The value of the property should be fixed as of the date when it was taken and not the date of
the filing of the proceedings." For where property is taken ahead of the filing of the condemnation
proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the
entry by the plaintiff upon the property may have depreciated its value thereby; or, there may have
been a natural increase in the value of the property from the time it is taken to the time the complaint
is filed, due to general economic conditions. The owner of private property should be compensated
only for what he actually loses; it is not intended that his compensation shall extend beyond his loss
or injury. And what he loses is only the actual value of his property at the time it is taken x x x.39

Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was
₱0.70/sq m.40Hence, it should, therefore, be used in determining the amount due respondents
instead of the higher value which is ₱1,500.00. While disparity in the above amounts is obvious and
may appear inequitable to respondents as they would be receiving such outdated valuation after a
very long period, it is equally true that they too are remiss in guarding against the cruel effects of
belated claim. The concept of just compensation does not imply fairness to the property owner
alone. Compensation must be just not only to the property owner, but also to the public which
ultimately bears the cost of expropriation.41

Clearly, petitioners had been occupying the subject property for more than fifty years without the
benefit of expropriation proceedings. In taking respondents’ property without the benefit of
expropriation proceedings and without payment of just compensation, petitioners clearly acted in
utter disregard of respondents’ proprietary rights which cannot be countenanced by the Court.42 For
said illegal taking, respondents are entitled to adequate compensation in the form of actual or
compensatory damages which in this case should be the legal interest of six percent (6%) per
annum on the value of the land at the time of taking in 1940 until full payment.43 This is based on the
principle that interest runs as a matter of law and follows from the right of the landowner to be placed
in as good position as money can accomplish, as of the date of taking.44

WHEREFORE, premises considered, the pet1t10n is PARTIALLY GRANTED. The Court of Appeals
Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the
subject property owned by respondents shall be F0.70 instead of ₱1,500.00 per square meter, with
interest at six percent ( 6o/o) per annum from the date of taking in 1940 instead of March 17, 1995,
until full payment.
SO ORDERED.

Republic of the Philippines


SUPREME COURT
Manila

EN BANC

G.R. No. L-26400 February 29, 1972

VICTORIA AMIGABLE, plaintiff-appellant,


vs.
NICOLAS CUENCA, as Commissioner of Public Highways and REPUBLIC OF THE
PHILIPPINES, defendants-appellees.

MAKALINTAL, J.:p

This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case No. R-5977, dismissing the plaintiff's complaint.

Victoria Amigable, the appellant herein, is the registered owner of Lot No. 639 of the Banilad Estate
in Cebu City as shown by Transfer Certificate of Title No. T-18060, which superseded Transfer
Certificate of Title No. RT-3272 (T-3435) issued to her by the Register of Deeds of Cebu on
February 1, 1924. No annotation in favor of the government of any right or interest in the property
appears at the back of the certificate. Without prior expropriation or negotiated sale, the government
used a portion of said lot, with an area of 6,167 square meters, for the construction of the Mango
and Gorordo Avenues.

It appears that said avenues were already existing in 1921 although "they were in bad condition and
very narrow, unlike the wide and beautiful avenues that they are now," and "that the tracing of said
roads was begun in 1924, and the formal construction in
1925." *

On March 27, 1958 Amigable's counsel wrote the President of the Philippines, requesting payment of the portion of her lot which had been
appropriated by the government. The claim was indorsed to the Auditor General, who disallowed it in his 9th Indorsement dated December 9,
1958. A copy of said indorsement was transmitted to Amigable's counsel by the Office of the President on January 7, 1959.

On February 6, 1959 Amigable filed in the court a quo a complaint, which was later amended on
April 17, 1959 upon motion of the defendants, against the Republic of the Philippines and Nicolas
Cuenca, in his capacity as Commissioner of Public Highways for the recovery of ownership and
possession of the 6,167 square meters of land traversed by the Mango and Gorordo Avenues. She
also sought the payment of compensatory damages in the sum of P50,000.00 for the illegal
occupation of her land, moral damages in the sum of P25,000.00, attorney's fees in the sum of
P5,000.00 and the costs of the suit.

Within the reglementary period the defendants filed a joint answer denying the material allegations of
the complaint and interposing the following affirmative defenses, to wit: (1) that the action was
premature, the claim not having been filed first with the Office of the Auditor General; (2) that the
right of action for the recovery of any amount which might be due the plaintiff, if any, had already
prescribed; (3) that the action being a suit against the Government, the claim for moral damages,
attorney's fees and costs had no valid basis since as to these items the Government had not given
its consent to be sued; and (4) that inasmuch as it was the province of Cebu that appropriated and
used the area involved in the construction of Mango Avenue, plaintiff had no cause of action against
the defendants.

During the scheduled hearings nobody appeared for the defendants notwithstanding due notice, so
the trial court proceeded to receive the plaintiff's evidence ex parte. On July 29, 1959 said court
rendered its decision holding that it had no jurisdiction over the plaintiff's cause of action for the
recovery of possession and ownership of the portion of her lot in question on the ground that the
government cannot be sued without its consent; that it had neither original nor appellate jurisdiction
to hear, try and decide plaintiff's claim for compensatory damages in the sum of P50,000.00, the
same being a money claim against the government; and that the claim for moral damages had long
prescribed, nor did it have jurisdiction over said claim because the government had not given its
consent to be sued. Accordingly, the complaint was dismissed. Unable to secure a reconsideration,
the plaintiff appealed to the Court of Appeals, which subsequently certified the case to Us, there
being no question of fact involved.

The issue here is whether or not the appellant may properly sue the government under the facts of
the case.

In the case of Ministerio vs. Court of First Instance of Cebu,1 involving a claim for payment of the
value of a portion of land used for the widening of the Gorordo Avenue in Cebu City, this Court,
through Mr. Justice Enrique M. Fernando, held that where the government takes away property from
a private landowner for public use without going through the legal process of expropriation or
negotiated sale, the aggrieved party may properly maintain a suit against the government without
thereby violating the doctrine of governmental immunity from suit without its consent. We there said:
.

... . If the constitutional mandate that the owner be compensated for property taken
for public use were to be respected, as it should, then a suit of this character should
not be summarily dismissed. The doctrine of governmental immunity from suit cannot
serve as an instrument for perpetrating an injustice on a citizen. Had the government
followed the procedure indicated by the governing law at the time, a complaint would
have been filed by it, and only upon payment of the compensation fixed by the
judgment, or after tender to the party entitled to such payment of the amount fixed,
may it "have the right to enter in and upon the land so condemned, to appropriate the
same to the public use defined in the judgment." If there were an observance of
procedural regularity, petitioners would not be in the sad plaint they are now. It is
unthinkable then that precisely because there was a failure to abide by what the law
requires, the government would stand to benefit. It is just as important, if not more
so, that there be fidelity to legal norms on the part of officialdom if the rule of law
were to be maintained. It is not too much to say that when the government takes any
property for public use, which is conditioned upon the payment of just compensation,
to be judicially ascertained, it makes manifest that it submits to the jurisdiction of a
court. There is no thought then that the doctrine of immunity from suit could still be
appropriately invoked.

Considering that no annotation in favor of the government appears at the back of her certificate of
title and that she has not executed any deed of conveyance of any portion of her lot to the
government, the appellant remains the owner of the whole lot. As registered owner, she could bring
an action to recover possession of the portion of land in question at anytime because possession is
one of the attributes of ownership. However, since restoration of possession of said portion by the
government is neither convenient nor feasible at this time because it is now and has been used for
road purposes, the only relief available is for the government to make due compensation which it
could and should have done years ago. To determine the due compensation for the land, the basis
should be the price or value thereof at the time of the taking.2

As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the
price of the land from the time it was taken up to the time that payment is made by the
government.3 In addition, the government should pay for attorney's fees, the amount of which should
be fixed by the trial court after hearing.

WHEREFORE, the decision appealed from is hereby set aside and the case remanded to the
court a quo for the determination of compensation, including attorney's fees, to which the appellant is
entitled as above indicated. No pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Zaldivar, Castro, Fernando, Teehankee, Barredo, Villamor and
Makasiar JJ., concur.
AMIGABLE VS CUENCA
G.R. No. L-26400 43 SCRA 487 February 29, 1972

VICTORIA AMIGABLE, plaintiff-appellant,


vs.
NICOLAS CUENCA, as Commissioner of Public Highways and REPUBLIC OF THE PHILIPPINES,
defendants-appellees.

Facts:
This is an appeal from the decision of the Court of First Instance of Cebu in its Civil Case, dismissing the
plaintiff’s complaint.

Victoria Amigable, the petitioner is a rightful owner of a lot in Cebu City. Without prior expropriation or
negotiated sale, the government used a portion of said lot for the construction of the Mango and Gorordo
Avenues.

Amigable’s counsel wrote the President of the Philippines, requesting payment of the portion of the said lot. It
was disallowed by the Auditor General in his 9th Endorsement. Petitioner then filed a complaint against the
Republic of the Philippines and Nicolas Cuenca, in his capacity as Commissioner of Public Highways, for the
recovery of ownership and possession of the lot.

Defendants argue that the: (1) that the action was premature, the claim not having been filed first with the
Office of the Auditor General; (2) that the right of action for the recovery had already prescribed; (3) that the
action being a suit against the Government, the claim for moral damages, attorney’s fees and costs had no valid
basis since the Government had not given its consent to be sued; and (4) that inasmuch as it was the province
of Cebu that appropriated and used the area involved in the construction of Mango Avenue, plaintiff had no
cause of action against the defendants.

The court rendered its decision holding that it had no jurisdiction over the plaintiff’s cause of action for the
recovery of possession and ownership of the lot on the ground that the government cannot be sued without its
consent; that it had neither original nor appellate jurisdiction to hear and decide plaintiff’s claim for
compensatory damages, being a money claim against the government; and that it had long prescribed, nor did
it have jurisdiction over said claim because the government had not given its consent to be sued. Accordingly,
the complaint was dismissed.

Issues:
Whether or not petitioner Amigable, may properly sue the government under the facts of the case.
Decisions:
The doctrine of immunity from suit cannot serve as an instrument for perpetrating an injustice to a citizen.
Quoting the decision from Ministerio vs. Court of First Instance of Cebu, “Where the government takes away
property from a private landowner for public use without going through the legal process of expropriation or
negotiated sale, the aggrieved party may properly maintain a suit against the government without violating the
doctrine of governmental immunity from suit.

SECOND DIVISION

G.R. No. 191945, March 11, 2015

NATIONAL POWER CORPORATION, Petitioner, v. SOCORRO T. POSADA, RENATO BUENO, ALICE


BALIN, ADRIAN TABLIZO, TEOFILO TABLIZO, AND LYDIA T. OLIVO, SUBSTITUTED BY HER HEIRS,
ALFREDO M. OLIVO, ALICIA O. SALAZAR, ANITA O. ORDONO, ANGELITA O. LIM, AND ADELFA O.
ESPINAS, Respondents.

DECISION

LEONEN, J.:

When the taking of private property is no longer for a public purpose, the expropriation complaint should be
dismissed by the trial court. The case will proceed only if the trial court's order of expropriation became final
and executory and the expropriation causes prejudice to the property owner.

Before this court is a Motion1 filed by the National Power Corporation seeking to withdraw its Petition for
Review2 dated June 4, 2010. The Petition sought to reverse the Decision3 of the Court of Appeals dated
August 7, 2009, which affirmed the trial court's Decision recalling the Writ of Possession issued in the
National Power Corporation's favor.

The National Power Corporation instituted expropriation proceedings for the acquisition of a right-of-way
easement over parcels of land located in Barangay Marinawa, Bato, Catanduanes owned by respondents
Socorro T. Posada, Renato Bueno, Alice Balin, Adrian Tablizo, Teofilo Tablizo, and Lydia Tablizo.4 The
expropriation w.as for the construction and maintenance of its Substation Island Grid Project.5 The case was
docketed as Civil Case No. 0008.6 The National Power Corporation offered the, price of P500.00 per square
meter. In their Answer, respondents objected to the offer and alleged that the value of the properties was
P2,000.00 per square meter.7

In the Order dated December 16, 2002, Branch 438 of the Regional Trial Court of Virac, Catanduanes
confirmed the National Power Corporation's right to expropriate the properties and ordered the creation of a
commission to determine the amount of just compensation to be paid to respondents.9

On January 28, 2003, the National Power Corporation filed a Notice to Take Possession before the court on
the basis of Rule 67, Section 210 of the Rules of Court. It alleged that it was entitled to a Writ of Possession
in view of its deposit with the Land Bank of the Philippines in the amount of P3,280.00, alleging that it
represented the provisional value of the properties.11

On July 10, 2003, the court-appointed commissioners recommended a fair market value of P1,500.00 per
square meter based on the following considerations: chan rob lesvi rtua llawlib ra ry

a. The location of the subject parcels of land, which is along the highway, within a fast-growing
community, ideal both for residential and business purposes, about 3 1/2 kilometers from the
capital town of Virac, a stones-throw from the seashore of Cabugao Bay and not too distant from
"Maribina Falls", a tourist attraction;

b. The prevailing market value of the properties along the national highway ranges from P 1, 500.00 to
P 2, 000.00 per square meter as per interview with the residents of the place;

c. Structures and improvements consisting of the residential houses of [respondents] and others can
be found on the property, hence if the expropriation proceeds, [respondents] would be constrained
to leave their homes to relocate.12

The National Power Corporation opposed the recommendation of the commissioners, arguing that: chanroblesv irt uallawl ibra ry

a. the opinion given by the persons who live in the area should not be given weight because they are not
experts in real estate appraisal;

b. the value of the land at the time of taking and not its potential as a building site is the criteria for
determination of just compensation[;]

c. The Provincial Appraisal Committee valued the lot at P500.00 per square meter;

d. The approved zonal values of real properties in Catanduanes classified as Residential Regular (RR) is
P105.00;

e. The Schedule of Fair Market Values prescribed P160.00 for all lots along the national road from Marinawa
Bridge to FICELCO;

f. Only an easement of right-of-way shall be acquired over the properties of the other defendants which
remain classified as cocoland and as provided in [Republic Act No.] 6395 (NPC Charter), shall not exceed
10% of the market value declared by the owner or administrator or anyone having legal interest in the
property, or as determined by the assessor, whichever is lower.13
On November 19, 2003, the National Power Corporation amended its Complaint stating that it needed to
acquire portions of the properties, instead of just an easement of right of way, for the construction of the
Substation Island Grid Project. For this reason, it deposited with Land Bank of the Philippines the amount of
P580,769.93, alleging that this represented the value of the 3,954 square meters sought to be
expropriated.14

The National Power Corporation filed an Urgent Ex Parte Motion for the Issuance of a Writ of Possession.15 It
also served respondents with a Notice to Take Possession stating that "it shall enter and take possession of
the property on September 26, 2005."16

In the Order dated July 14, 2005, the trial court granted the Urgent Ex Parte Motion for the Issuance of a
Writ of Possession and issued a Writ of Possession.17

Respondents filed a Motion to Lift and/or Suspend the Issuance of the Writ of Possession, which the trial
court denied.18

Undaunted, respondents filed an Urgent Motion to Grant Defendants Time to Remove their Houses and
Improvements as well as Additional Deposit for Use in Land Acquisition and Expenses for Transfer of their
Respective Residential Houses.19

The trial court granted respondents' Motion in its Order dated June 5, 2006. It fixed the value of the
structures and improvements on the land in the amount of P827,000.00, based on the value determined by
the commissioners. It ordered the National Power Corporation to deposit an additional amount of
P262,639.17.20 The trial court stated that this amount was the difference between value of structures and
improvements determined by the trial court (P827,000.00) and the amount initially deposited by the
National Power Corporation (P564,360.83).21

The National Power Corporation failed to deposit the additional amount. The trial court issued an Order
during the November 22, 2006 hearing for the National Power Corporation to make the necessary deposit.
The issue on the amount of just compensation was also submitted for decision.22

On November 27, 2006, the trial court resolved the issue of just compensation as follows: c hanro blesvi rt uallawl ibra ry
WHEREFORE, all factors carefully evaluated and considered, this Court, hereby, fixes the just compensation
at TWO THOUSAND PESOS (P2,000.00) per square meter for the taking of the properties of [respondents]
by [petitioner].

LIKEWISE, in view of NPC's failure to comply with the Court's order dated June 5, 2006 and for misleading
this Court when it filed its Motion for the Issuance of Writ of Possession, this Court, hereby, RECALLS its
order granting said Motion and CANCELS the Writ of Possession.

AND, AS A FINAL NOTE, the amount determined by the Court in said Order represents only the value of the
structures and improvements and does not include the value of the land. Even if said amount is fully. paid
by NPC, still it would not be entitled to a Writ of Possession until it has paid the value of the land. And what
should be its value? Is it the zonal valuation of the Bureau of Internal Revenue? Under Section 4 of Rep.
[A]ct. No. 8974, payment of one hundred [percent] (100%) of the value of the property based on the
current relevant zonal valuation of the Bureau of Internal Revenue is required upon the filing of the
complaint, and after due notice to the defendant. This Court believes that this basis is used because the just
compensation is yet to be determined during the second stage of the expropriation proceeding. In the
instant case, the complaint has long been filed, and the just compensation has already been determined
above. Therefore, it should now be the basis for the re-issuance of a Writ of Possession - nay, even the
transfer of ownership if fully paid.

SO ORDERED.23 (Emphasis supplied)


The National Power Corporation appealed the trial court's Decision to the Court of Appeals.24 On August 7,
2009,25 the Court of Appeals rendered a Decision denying the appeal.26 It held that the trial court committed
no reversible error "in adopting the recommendation of the appointed commissioners insofar as the value of
the subject property is concerned."27

The Court of Appeals also held that "the writ of possession was correctly recalled by the lower
court."28Citing Republic v. Judge Gingoyon,29 it held, that the National Power Corporation must first pay
respondents the amount determined by the trial court.30 In the absence of proof that respondents were
paid, the National Power Corporation cannot take possession of the property.31

The National Power Corporation filed a Motion for Reconsideration, but this was denied in the Resolution32
dated April 14, 2010. Hence, it filed a Petition for Review on Certiorari before this court.

Respondents filed their Comment33 on September 17, 2010. The National Power Corporation filed its
Reply34 to the Comment, substantially reiterating the arguments in its Petition.

During the pendency of the case before this court, the National Power Corporation filed an Urgent Motion for
the Issuance of a Temporary Restraining Order35 dated December 13, 2012, which was received by this
court on January 7, 2013. Respondents, in turn, filed their Comments and Opposition to the Urgent Motion
for Issuance of a Temporary Restraining Order.36

On March 11, 2013, this court issued a Resolution37 deferring action on the Motion for the Issuance of a
Temporary Restraining Order.

On May 17, 2013, the National Power Corporation filed a Very Urgent Motion to Resolve38 stating that "the
delay in the possession of the subject properties — intended for the Marinawa 10 MVA Sub-Station Project —
would adversely affect the implementation of the Codon-Virac Transmission Lines[.]"39

In a turn of events, the National Power Corporation informed its counsel on July 24, 2014 that it no longer
needed the properties as it was set to acquire an alternative site.40 It also requested its counsel to withdraw
Civil Case No. 0008 before the trial court because "it [was] impractical to pursue the acquisition of the
original site[.]"41

Thus, the National Power Corporation, through counsel, filed the present Motion to Withdraw
Appeal,42praying for the withdrawal of its appeal before this court and, ultimately, for its Amended
Complaint before the trial court to be dismissed.43

We are asked to decide whether the National Power Corporation may be allowed to withdraw its Petition for
Review and whether the withdrawal has the effect of dismissing its Amended Complaint before the trial
court.
We grant the Motion to Withdraw the Petition for Review. cralawlawli bra ry

Expropriation proceedings for national infrastructure projects are governed by Rule 67 of the Rules of Court
and Republic Act No. 8974.44

The power of eminent domain is an inherent competence of the state. It is essential to a sovereign. Thus,
the Constitution does not explicitly define this power but subjects it to a limitation: that it be exercised only
for public use and with payment of just compensation.45 Whether the use is public or whether the
compensation is constitutionally just will be determined finally by the courts.

However, the manner of its exercise such as which government instrumentality can be delegated with the
power to condemn,' under what conditions, and how may be limited by law. Republic Act No. 8974 does
these, but it should not be read as superseding the power of this court to promulgate rules of procedure.
Thus, our existing rules should be read in conjunction with the law that limits and conditions the power of
eminent domain.

Expropriation, the procedure by which the government takes possession of private property, is outlined
primarily in Rule 67 of the Rules of Court. It undergoes two phases. The first phase determines the propriety
of the action. The second phase determines the compensation to be paid to the landowner. Thus: chanroble svirtuallaw lib rary

There are two (2) stages in every action for expropriation. The first is concerned with the determination of
the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the
context of the facts involved in the suit. It ends with an order, if not of dismissal of the action, "of
condemnation declaring, that the plaintiff has a lawful right to take the property sought to be condemned,
for the public use or purpose described in the complaint, upon the payment of just compensation to be
determined as of the date of the filing of the complaint." An order of dismissal, if this be ordained, would be
a final one, of course, since it finally disposes of the action and leaves nothing more to be done by the Court
on the merits. So, too, would an order of condemnation be a final one, for thereafter, as the Rules expressly
state, in the proceedings before the Trial Court, "no objection to the exercise of the right of condemnation
(or the propriety thereof) shall be filed or heard. ["]
The second phase of the eminent domain action is concerned with the determination by the Court of "the
just compensation for the property sought to be taken. " This is done by the Court with the assistance of not
more than three (3) commissioners. The order fixing the just compensation on the basis of the evidence
before, and findings of, the commissioners would be final, too. It would finally dispose of the second stage of
the suit, and leave nothing more to be done by the Court regarding the issue. Obviously, one or another of
the parties may believe the order to be erroneous in its appreciation of the evidence or findings of fact or
otherwise. Obviously, too, such a dissatisfied party may seek a reversal of the order by taking an appeal
therefrom.46 (Emphasis supplied, citations omitted)
The first phase of expropriation commences with the filing of the complaint. It ends with the order of the
trial court to proceed with the expropriation and determination of just compensation. During the pendency
of the complaint before the trial court, the state may already enter and possess the property subject to the
guidelines in Rule 67 of the Rules of Court.

Rule 67 of the Rules of Court, however, is not the only set of rules that governs the first phase of
expropriation. On November 7, 2000, Congress enacted Republic Act No. 8974 to govern the expropriation
of private property for national government infrastructure projects. The law qualifies the manner by which
the government may enter and take possession of the property to be expropriated.

Rule 67, Section 2 of the Rules of Court states: chanroblesv irt uallawl ibrary

Sec. 2. Entry of plaintiff upon depositing value with authorized government depositary. — Upon the filing of
the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have the
right to take or enter upon the possession of the real property involved if he deposits with the authorized
government depositary an amount equivalent to the assessed value of the property for purposes of taxation
to be held by such bank subject to the orders of the court. Such deposit shall be in money, unless in lieu
thereof the court authorizes the deposit of a certificate of deposit of a government bank of the Republic of
the Philippines payable on demand to the authorized government depositary.
(Emphasis supplied)
Section 4 of Republic Act No. 8974, on the other hand, mandates: chanroblesv irt uallawl ibrary

Section 4. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real property for
the right-of-way or location for any national government infrastructure project through expropriation, the
appropriate implementing agency shall initiate the expropriation proceedings before the proper court under
the following guidelines:cha nrob lesvi rtua llawlib ra ry

(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall
immediately pay the owner of the propertythe amount equivalent to the sum of (1) one hundred percent
(100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal
Re venue. (BIR); and (2) the value of the improvements and/or structures as determined under Section 7
hereof;
. . .

Upon compliance with the guidelines abovementioned, the court shall immediately issue to the implementing
agency an order to take possession of the property and start the implementation of the project. (Emphasis
supplied)
As stated in Gingoyon, Republic Act No. 8974 "provides for a procedure eminently more favorable to the
property owner than Rule 67"47 since it requires the immediate payment of the zonal value and the value of
the improvements on the land to the property owner before the trial court can allow the government to take
possession. In contrast, Rule 67 only requires the government to deposit the assessed value of the property
for it to enter and take possession.

In its Petition, the National Power Corporation argues that the amount of just compensation at P2,000.00
per square meter is excessive since the zonal valuation of the Bureau of Internal Revenue classifies the
property as cocolana48 pegged at P4.15 per square meter, and the commissioners merely "engaged in
speculation and guess-work"49 when they arrived at the amount."50

The National Power Corporation argues that the Writ of Possession should not have been recalled because it
already deposited P580,769.93, the provisional amount required by Republic Act No. 8974. It argues that
the amount ordered by the trial court to be paid to respondents was the amount of just
compensation, which should have been distinguished from the provisional amount required for the issuance
of a Writ of Possession. The deposit of the provisional amount was sufficient to be granted a Writ of
Possession and to take possession of the property.51

In their Comment, respondents argue that the Court of Appeals did not err in sustaining the amount of just
compensation determined by the trial court since the value was based on location, costs of improvements,
prevailing market values of the properties similarly located, and opinions of the residents in the area.52

Respondents also argue that the Court of Appeals correctly upheld the trial court's recall of the Writ of
Possession because there was no showing that any payment was made to respondents, as required
by Gingoyon.53

The purpose for the taking of private property was for the construction of the National Power Corporation's
Substation Island Grid Project. According to the Implementing Rules and Regulations of Republic Act No.
8974, projects related to "power generation, transmission and distribution"54 are national infrastructure
projects covered by the law. The National Power Corporation must first comply with the guidelines stated in
Republic Act No. 8974 before it can take possession of respondents' property.

The trial court allowed the National Power Corporation to take possession of the properties because of its
deposit with Land Bank of the Philippines of the alleged provisional value. However, the trial court recalled
the Writ of Possession because the National Power Corporation failed to deposit the additional amount.

We find that the trial court erred, not in recalling the Writ of Possession, but in granting the Writ of
Possession in the first place.

Section 4 of Republic Act No. 8974, unlike Rule 67, Section 2 of the Rules of Civil Procedure,
requires immediate payment to the landowner of 100% of the value of the property based on the current
relevant zonal valuation of the Bureau of Internal Revenue. It is the Bureau of Internal Revenue, not the
court, which determines the zonal value.

The law also requires the immediate payment of the value of the improvements and/or structures on the
land before the trial court can issue the Writ of Possession.

Thus, the trial court committed two errors. First, it based the value of the improvements on the property on
the determination made by the commissioners, and not on the determination made by the National Power
Corporation, contrary to the requirements of Section 7 of Republic Act No. 8974: chan roblesv irtuallawl ib rary
Section 7. Valuation of Improvements and/or Structures. - The Department of Public Works and Highways
and other implementing agencies concerned, in coordination with the local government units concerned in
the acquisition of right-of-way, site or location for any national government infrastructure project, are
hereby mandated to adopt within sixty (60) days upon approval of this Act, the necessary implementing
rules and regulations for the equitable valuation of the improvements and/or structures on the land to be
expropriated.
The Implementing Rules and Regulations of Republic Act No. 8974 clarifies: cha nrob lesvi rtua llawli bra ry

Section 10. Valuation of Improvements and/or Structures - Pursuant to Section 7 of the Act, the
Implementing Agency shall determine the valuation of the improvements and/or structures on the land to be
acquired using the replacement cost method. The replacement cost of the improvements/structures is
defined as the amount necessary to replace the improvements/structures, based on the current market
prices for materials, equipment, labor, contractor's profit and overhead, and all other attendant costs
associated with the acquisition and installation in place of the affected improvements/structures. In the
valuation of the affected improvements/structures, the Implementing Agency shall consider, among other
things, the kinds and quantities of materials/equipment used,, the location, configuration and other physical
features of the properties, and prevailing construction prices. (Emphasis supplied)
According to the law, it is the implementing agency, not the commissioners, that determines the proffered
value of the improvements and structures. A Writ of Possession may be issued once there is confirmation by
the trial court of the proffered value.

The second error of the trial court occurred when it issued a Writ of Possession on the basis of the National
Power Corporation's deposit of the alleged provisional value with Land Bank of the Philippines, not on its
actual payment to respondents. Even if the deposit of P5 80,769.93 was the correct provisional value, it
cannot be considered as compliance with Section 4 of Republic Act No. 8974. In Gingoyon: chanro blesvi rtu allawli bra ry

[T]he law plainly requires direct payment to the property owner, and not a mere deposit with the authorized
government depositary. Without such direct payment, no writ of possession may be obtained.53 (Emphasis
supplied)
There are, of course, instances when immediate payment cannot be made even if the implementing agency
is willing to do so. The owner of the property is not precluded from contesting the power of the
implementing agency to exercise eminent domain, the necessity of the taking, the public character of its
use, or the proffered' value by the implementing agency. In these instances, the implementing agency may
deposit the proffered value with the trial court having jurisdiction over the expropriation proceedings.

Considering that the National Power Corporation failed to comply with the guidelines in Republic Act No.
8974, a Writ of Possession should not have been issued. cral awlawlibra ry

II

The recall of an improperly issued Writ of Possession is not the same as an injunction.

In its Urgent Motion for the Issuance of a Temporary Restraining Order, the National Power Corporation
argued that it was unable to commence the Substation Project as it was paralyzed by the trial court's
Decision dated November 27, 2006 recalling the issuance of the Writ of Possession in its favor.56

The National Power Corporation manifested that the project was "intended to resolve the six (6) to eight (8)
hours of daily brownouts being suffered by the residents of the province."57 It cited Section 3 of Republic Act
No. 897558 and argued that the project cannot be restrained by the recall of a previously issued Writ of
Possession because this amounted to an injunctive writ expressly prohibited by Section 4 of Republic Act No.
8975."59

Respondents, on the other hand, filed their Comments and Opposition to the Urgent Motion for Issuance of a
Temporary Restraining Order. They argued that records of the First Catanduanes Electric Cooperative, Inc.
(FICELCO)60 showed that brownouts in the entire province only averaged 2.97 hours per day and not 6 to 8
hours as claimed by the National Power Corporation. Contrary to the National Power Corporation's claims,
respondents never filed any motion for the issuance of a restraining order or injunctive writ against the
National Power Corporation. They argued that the trial court recalled the Writ of Possession upon a finding
that the National Power Corporation misled the trial court by making its own interpretation of Section 4 of
Republic Act No. 8974, in that a provisional deposit was sufficient compliance when the law requires
immediate payment to the owner of the property.61

The National Power Corporation's argument that the recall of a Writ of Possession amounts to an injunctive
writ prohibited under Section 3 of Republic Act No. 8975 is without merit.
Section 3 of Republic Act No. 8975 states: chanroble svirtuallaw lib rary

Sec. 3. Prohibition on the Issuance of Temporary Restraining Orders, Preliminary Injunctions and Preliminary
Mandatory Injunctions. - No court, except the Supreme Court, shall issue any temporary restraining order,
preliminary injunction or preliminary mandatory injunction against the government, or any of its
subdivisions, officials or any person or entity, whether public or private, acting under the government's
direction, to restrain, prohibit or compel the following acts: chanro blesv irt uallawl ibra ry

(a) Acquisition, clearance and development of the right-of-way and/or site or location of any national
government project (Emphasis supplied)
The recall of a Writ of Possession for failure to comply with the guidelines of Section 4 of Republic Act No.
8974 is not the same as the issuance of an injunctive writ. The first is an action by the trial court to correct
an erroneous issuance while the second is an ancillary remedy to preserve rights.

For an injunctive writ to be issued, parties must specifically pray for its issuance. Under Rule 58, Section
4(a)62 of the Rules of Civil Procedure, a preliminary injunction or temporary restraining order may be
granted only when, among other requisites, the applicant is entitled to the relief demanded. In Nerwin
Industries Corporation v. PNOC-Energy Development Corporation:63 ChanRoble sVirtualawl ibra ry

A preliminary injunction is an order granted at any stage of an action or proceeding prior to the judgment or
final order, requiring a party or a court, agency or person, to refrain from a particular act or acts. It is an
ancillary or preventive remedy resorted to by a litigant to protect or preserve his rights or interests during
the pendency of the case. As such, it is issued only when it is established that:

(a) The applicant is entitled to the relief demanded, and the whole or part of
such relief consists in restraining the commission or continuance of the
act or acts complained of, or in requiring the performance of an act or
acts, either for a' limited period or perpetually; or

(b) The commission, continuance or non-performance of the act or acts


complained of during the litigation would probably work injustice to the
applicant; or

(c) A party, court, agency or a person is doing, threatening, or is attempting


to do, or is procuring or suffering to be done, some act or acts probably
in violation of the rights of the applicant respecting the subject of the
action or proceeding, and 'tending to render the judgment ineffectual.64
Section 3 of Republic Act No. 8975 contemplates only the issuance of an injunctive writ by lower courts.
In Republic v. Nolasco:65 ChanRoblesVirt ualawli bra ry

What is expressly prohibited by the statute is the issuance of the provisional reliefs of temporary restraining
orders, preliminary injunctions, and preliminary mandatory injunctions. It does not preclude the lower courts
from assuming jurisdiction over complaints or petitions that seek as ultimate relief the nullification or
implementation of a national government infrastructure project. A statute such as Republic Act No. 8975
cannot diminish the constitutionally mandated judicial power to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of government.66 (Emphasis supplied)
Philippine Ports Authority v. Cipres Stevedoring & Arrastre, Inc.67 adds: chanroble svirtuallaw lib rary

[I]t is settled that the sole object of a preliminary injunction, may it be prohibitory or mandatory, is to
preserve the status quo until the merits of the case can be heard and the final judgment rendered.
The status quo is the last actual peaceable uncontested status which preceded the controversy.68
In expropriation cases involving national infrastructure projects, the trial court issues a Writ of Possession
upon compliance by the implementing agency of the guidelines stated in Section 4 of Republic Act No. 8974.
If it is later found that the guidelines were not complied with, the trial court recalls the Writ of Possession for
being improperly issued.

When a trial court recalls a Writ of Possession in an expropriation proceeding, the parties do not revert to
status quo, i.e. the status of the parties before the expropriation complaint was filed. The trial court's order
of condemnation stands regardless of whether a Writ of Possession was already issued.
The National Power Corporation was not able to take possession of the property because it failed to comply
with Republic Act No. 8974. Respondents did not file an application for the issuance of a writ of preliminary
injunction or temporary restraining order against it. The trial court did not issue any injunctive writ. In other
words, it was the National Power Corporation's own acts that prevented it from implementing its
infrastructure project.
cra lawlawlib rary

III

In accordance, however, with Rule 67, Section 4 of the Rules of Civil Procedure,69 the trial court proceeded
with the second phase of expropriation, that is, the determination of just compensation.

Just compensation as required by the Constitution is different from the provisional value required by
Republic Act No. 8974. In Capitol Steel Corporation v. PHIVIDEC Industrial Authority:70 ChanRobles Vi rtua lawlib rary

Upon compliance with the requirements, a petitioner in an expropriation case ... is entitled to a writ of
possession as a matter of right and it becomes the ministerial duty of the trial court to forthwith issue the
writ of possession. No hearing is required and the court neither exercises its discretion or judgment in
determining the amount of the provisional value of the properties to be expropriated as the legislature has
fixed the amount under Section 4 of R.A. 8974.

To clarify, the payment of the provisional value as a prerequisite to the issuance of a writ of
possession differs from the payment of just compensation for the expropriated property. While the
provisional value is based on the current relevant zonal valuation, just compensation is based on the
prevailing fair market value of the property. As the appellate court-explained: chan roble svi rtual lawlib rary

The first refers to the preliminary or provisional determination of the value of the property. It serves a
double-purpose of pre-payment if the property is fully expropriated, and of an indemnity for damages if the
proceedings are dismissed. It is not a final determination of just compensation and may not necessarily be
equivalent to the prevailing fair market value of the property. Of course, it may be a factor to be considered
in the determination of just compensation.

Just compensation, on the other hand, is the final determination of the fair market value of the property. It
has been described as "the just and complete equivalent of the loss which the owner of the thing
expropriated has to suffer by reason of the expropriation." Market values, has [sic] also been described in a
variety of ways as the "price fixed by the buyer and seller in the open market in the usual and ordinary
course of legal trade and competition; the price and value of the article established as shown by sale, public
or private, in the ordinary way of business; the fair' value of the property between one who desires to
purchase and one who desires to sell; the current price; the general or ordinary price for which property
may be sold in that locality.
There is no need for the determination with reasonable certainty of the final amount of just compensation
before the writ of possession may be issued.71 (Emphasis and underscoring in the original, citation omitted)
The statutory requirement to pay a provisional amount equivalent to the full Bureau of Internal Revenue
zonal valuation does' not substitute for the judicial determination of just compensation. The payment to the
property owner of a preliminary amount is one way to ensure that property will not be condemned
arbitrarily. It allows frontloading the costs of the exercise so that it is the government instrumentality that
bears the burden and not the owner whose property is taken.

The payment of a provisional value may also serve as indemnity for damages in the event that the
expropriation does not succeed. In City of Manila v. Alegar Corporation:72 ChanRobles Virtualawl ibra ry

[T]he advance deposit required under Section 19 of the Local Government Code73constitutes an advance
payment only in the event the expropriation prospers. Such deposit also has a dual purpose: as pre-
payment if the expropriation succeeds and as indemnity for damages if it is dismissed. This advance
payment, a prerequisite for the issuance of a writ of possession, should not be confused with payment of
just compensation for the taking of property even if it could be a factor in eventually determining just
compensation. If the proceedings fail, the money could be used to indemnify the owner for
damages.74(Emphasis supplied)
The National Power Corporation was only required to pay the provisional value so that it could take
possession of respondents' properties. Ordinarily, the government, in accordance with Rule 67 or Republic
Act No. 8974, would have already taken possession of the property before the proper amount of just
compensation could be determined by the court.

However, the trial court had already determined the amount of just compensation even before the National
Power Corporation could take possession of the properties. Payment of the provisional value is not anymore
enough. In Export Processing Zone Authority v. Judge Dulay:75 ChanRobles Vi rtua lawlib rary

The determination of "just compensation" in eminent domain cases is a judicial function.The executive
department or the legislature may make the initial determinations but when a party claims a violation of the
guarantee in the Bill of Rights that private property may not be taken for public use without just
compensation, no statute, decree; or executive order can mandate that its own determination shall prevail
over the court's findings. Much less can the courts be precluded from looking into the "justness" of the
decreed compensation.76 (Emphasis supplied)
Once the amount of just compensation has been determined, it stands to reason that this is the amount that
must be paid to the landowner as compensation for his or her property. In the exercise of the power of
eminent domain, taking of private property necessarily includes its possession. Government, then, must pay
the proper amount of just compensation, instead of the provisional value in order to enter and take the
private property.c ralawlawl ibra ry

IV

Before the issue of just compensation can even be considered by this court, any question on the validity of
the exercise of the power of eminent domain must first pertain to its necessity. In Vda. de Ouano, et al. v.
Republic, et al.:77 Cha nRobles Vi rtua lawlib rary

In esse, expropriation is forced private property taking, the landowner being really without a ghost of a
chance to defeat the case of the expropriating agency. In other words, in expropriation, the private owner is
deprived of property against his will. Withal, the mandatory requirement of due process ought to be strictly
followed, such that the state must show, at the minimum, a genuine need, an exacting public purpose to
take private property, the purpose to be specifically alleged or least reasonably deducible from the
complaint.

Public use, as an eminent domain concept, has now acquired an expansive meaning to include any use that
is of "usefulness, utility, or advantage, or what is productive of general benefit [of the public]. " If the
genuine public necessity—the very reason or condition as it were— allowing, at the first instance, the
expropriation of a private land ceases or disappears, then there is no more cogent point for the
government's retention of the expropriated land. The same legal situation should hold if the government
devotes the property to another public use very much different from the original or deviates from the
declared purpose to benefit another private person. It has been said that the direct use by the state of its
power to oblige landowners to renounce their productive possession to another citizen, who will use it
predominantly for that citizen's own private gain, is offensive to our laws.

A condemnor should commit to use the property pursuant to the purpose stated in the petition for
expropriation, failing which it should file another petition for the new purpose. If not, then it behooves the
condemnor to return the said property to its private owner, if the latter so desires. The government cannot
plausibly keep the property it expropriated in any manner it pleases and, in the process, dishonor the
judgment of expropriation. This is not in keeping with the idea of fair play[.]78 (Emphasis supplied)
It is the state that bears the burden of proving that the taking of private property is for a public purpose. If
it fails in discharging this burden, it must return the property to the private owner, subject to whatever
damages were incurred in the course of the taking.

In Heirs of Moreno v. Mactan-Cebu International Airport Authority, 79 private property was expropriated for
the proposed expansion of Lahug Airport in 1949.80 The property owners were assured that they would be
given a right to repurchase once Lahug Airport is closed or its operations are transferred to Mactan
Airport.81 In ,1991, Lahug Airport ceased operations when Mactan Airport became fully operational. The
former owners filed a Complaint for Reconveyance to compel the repurchase of the expropriated
properties.82

This court considered the case "difficult" as it called for "a difficult but just solution."83 In allowing the
reconveyance, this court stated: chan roble svirtual lawlib rary

Mactan-Cebu International Airport Authority [v. Court of Appeals] is correct in stating that one would not
find an express statement in the Decision in Civil Case No. R-1881 to the effect that "the [condemned] lot
would return to [the landowner] or that [the landowner] had a right to repurchase the same if the purpose
for which it was expropriated is ended or abandoned or if the property was to be used other than as the
Lahug Airport." This omission notwithstanding,.and while the inclusion of this pronouncement in the
judgment of condemnation would have been ideal, such precision is not absolutely necessary nor is it fatal
to the cause of petitioners herein. No doubt, the return or repurchase of the condemned properties of
petitioners could be readily justified as the manifest legal effect or consequence of the trial court's
underlying presumption that "Lahug Airport will continue to be in operation" when it granted the complaint
for eminent domain and the airport discontinued its activities.

The predicament of petitioners involves a constructive trust, one that is akin to the implied trust referred to
in Art. 1454 of the Civil Code, "If an absolute conveyance of property is made in order to secure the
performance of an obligation of the grantor toward the grantee, a trust by virtue of law is established. If the
fulfillment of the obligation is offered by the grantor when it becomes due, he may demand the
reconveyance of the property to him." In the case at bar, petitioners conveyed Lots Nos. 916 and 920 to the
government with the latter obliging itself to use the realties for the expansion of Lahug Airport; failing to
keep its bargain, the government can be compelled by petitioners to reconvey the parcels of land to them,
otherwise, petitioners would be denied the use of their properties upon a state of affairs that was not
conceived nor contemplated when the expropriation was authorized.

Although the symmetry between the instant case and the situation contemplated by Art. 1454 is not perfect,
the provision is undoubtedly applicable. For, as explained by an expert on the law of trusts: "The only
problem of great importance in the field of constructive trusts is to decide whether in the numerous and
varying fact situations presented to the courts there is a wrongful holding of property and hence a
threatened unjust enrichment of the defendant." Constructive trusts are fictions of equity which are bound
by no unyielding formula when they are used by courts as devices to remedy any situation in which the
holder of the legal title may not in good conscience retain the beneficial interest.

. . . .

The rights and obligations between the constructive trustee and the beneficiary, in this case, respondent
MCIAA and petitioners over Lots Nos. 916 and 920, are echoed in Art. 1190 of the Civil Code, "When the
conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the
fulfillment of said conditions, shall return to each other what they have received . . . In case of the loss,
deterioration or improvement of the thing, the provisions which, with respect to the debtor, are laid down in
the preceding article shall be applied to the party who is bound to return. ..."

Hence, respondent MCIAA as representative of the State is obliged to reconvey Lots Nos. 916 and 920 to
petitioners who shall hold the same subject to existing liens thereon, i.e., leasehold right ofDPWH. In-return,
petitioners as if they were plaintiff beneficiaries of a constructive trust must- restore to respondent MCIAA
what they received as just compensation for the expropriation of Lots Nos. 916 and 920 in Civil Case No. R-
1881, i.e., P7.065.00 for Lot No. 916 and P9,291.00 for Lot No. 920 with consequential damages by way of
legal interest from 16 November 1947. Petitioners must likewise pay respondent MCIAA the necessary
expenses it may have incurred in sustaining the properties and the monetary value of its services in
managing them to the extent that petitioners will be benefited thereby. The government however may keep
whatever income or fruits it may have obtained from the parcels of land, in the same way thai petitioners
need not account for the interests that the amounts they received as just compensation may have earned in
the meantime. As a matter of justice and convenience, the law considers the fruits and interests as the
equivalent of each other.

Under Art. 1189 of the Civil Code, "If the thing is improved by its nature, or by time, the improvement shall
inure to the benefit of the creditor . . .," the creditor being the person who stands to receive something as a
result of the process of restitution. Consequently petitioners as creditors do not have to settle as part of the
process of restitution the appreciation in value of Lots Nos. 916 and 920 which is the natural consequence of
nature and time.

Petitioners need not also pay for improvements introduced by third parties, i.e., DPWH, as the disposition of
these properties is governed by existing contracts and relevant provisions of law. As for the improvements
that respondent MCIAA may have made on Lots Nos. 916 and 920; if any, petitioners must pay respondent
their prevailing free market price in case petitioners opt to buy them and respondent decides to sell. In
other words, if petitioners do not want to appropriate such improvements or respondent does not choose to
sell them, the improvements would have to be removed without any obligation on the part of petitioners to
pay any compensation to respondent MCIAA for whatever it may have tangibly introduced
therein.84 (Emphasis supplied)
Heirs of Moreno illustrates the difficulty of determining the respective rights of the parties once it has been
determined that the expropriated properties will no longer be devoted for a public purpose. Matters involving
the dismissal of an expropriation case or the return of expropriated property must be determined on a case-
to-case basis. cralawlawlib rary
V

The National Power Corporation now requests this court for leave to withdraw this Petition on the ground
that it was in the process of acquiring a vacant lot owned by FICELCO. Considering that eminent domain is
the taking of private property for public use, no expropriation proceeding can continue if the property to be
expropriated will not be for public use.

Respondents filed a Motion for Leave to File Comment to Petitioner's Motion to Withdraw Appeal. They argue
that the grant of a Motion to Withdraw would be unjust. From their point of view, the National Power
Corporation cannot resort to a withdrawal of an appeal in order to invalidate a judgment duly rendered by
the trial court and affirmed by the Court of Appeals. They state that they have no objection to the
withdrawal of the appeal, but they object to the dismissal of the Amended Complaint before the trial court.
They propose that the effect of withdrawing the Petition for Review is to make the Court of Appeals' Decision
final and executory.86

In National Housing Authority v. Heirs of Guivelondo:87 ChanRo bles Vi rtual awlibra ry

In the early case of City of Manila v. Ruymann, the Court was confronted with the question: May the
petitioner, in an action for expropriation, after he has been placed in possession of the property and before
the termination of the action, dismiss the petition? It resolved the issue in the affirmative and held:
chan roblesv irt uallawl ibra ry

The right of the plaintiff to dismiss an action with the consent of the court is universally recognized with
certain well-defined exceptions. If the plaintiff discovers that the action which he commenced was brought
for the purpose of enforcing a right or a benefit, the advisability or necessity of which he later discovers no
longer exists, or that the result of the action would be different from what he had intended, then he should
be permitted to withdraw his action, subject to the approval of the court. The plaintiff should not be required
to continue the action, subject to-some well-defined exceptions, when it is not to his advantage to do so.
Litigation should be discouraged and not encouraged. Courts should not require parties to litigate when they
no longer desire to do so. Courts, in granting permission to dismiss an action, of course, should always take
into consideration the effect which said dismissal would have upon the rights of the defendant.
Subsequently, in Metropolitan Water District v. De Los Angeles, the Court had occasion to apply the above-
quoted ruling when the petitioner, during the pendency of the expropriation case, resolved that the land
sought to be condemned was no longer necessary in the maintenance and operation of its system of
waterworks, it was held: chanro blesvi rt uallawl ibra ry

It is not denied that the purpose of the plaintiff was to acquire the land in question for a public use. The
fundamental basis then of all actions brought for the expropriation of lands, under the power of eminent
domain, is public use. That being true, the very moment that it appears at any stage of the proceedings that
the expropriation is not for a public use, the action must necessarily fail and should be dismissed, for the
reason that the action cannot be maintained at all except when the expropriation is for some public use.
That must be true even during the pendency of the appeal of [sic] at any other stage of the proceedings. If,
for example, during the trial in the lower court, it should be made to appear to the satisfaction of the court
that the expropriation is not for some public use, it would be the duty and the obligation of the trial court to
dismiss the action. And even during the pendency of the appeal, if it should be made to appear to the
satisfaction of the appellate court that the expropriation is not for public use, then it would become the duty
and the obligation of the appellate court to dismiss it.88(Emphasis supplied)
Considering that the National Power Corporation is no longer using respondents' properties for the purpose
of building the Substation Project, it may be allowed to discontinue with the expropriation proceedings,
subject to the approval of the court.

However, the grant of the Motion to Withdraw carries with it the necessary consequence of making the trial
court's order of condemnation final and executory. In National Housing Authority:

Notably, [City of Manila and Water District] refer to the dismissal of an action for eminent domain at the
instance of the plaintiff during the pendency of the case. The rule is different where the case had been
decided and the judgment had already become final and executory.

. . . .

In the case at bar, petitioner did not appeal the Order of the trial court dated December 10, 1999, which
declared that it has a lawful right to expropriate the properties of respondent Heirs of Isidro1 Guivelondo.
Hence, the Order became final and may no longer be subject to review or reversal in any court. A final and
executory decision or order can no longer be disturbed or reopened no matter how erroneous it may be.
Although judicial determinations are not infallible, judicial error should be corrected through appeals, not
through repeated suits on the same claim.
. . . .

Respondent landowners had already been prejudiced by the expropriation case. Petitioner cannot be
permitted to institute condemnation proceedings against respondents only to abandon it later when it finds
the amount of just compensation unacceptable. Indeed, our reprobation in the case of Cosculluela v. Court
of Appeals is apropos: cha nrob lesvi rtua llawli bra ry

It is arbitrary and capricious for a government agency to initiate expropriation proceedings, seize a person's
property, allow the judgment of the court to become final and executory and then refuse to pay on the
ground that there are no appropriations for the property earlier taken and profitably used. We condemn in
the strongest possible terms the cavalier attitude of government officials who adopt such a despotic and
irresponsible stance.89 (Emphasis supplied)
The rule, therefore, is that expropriation proceedings must be dismissed when it is determined that it is not
for a public purpose, except when:

First, the trial court's order already became final and executory;

Second, the government already took possession of the property; and

Lastly, the expropriation case already caused prejudice to the landowner.

The expropriation case is not automatically dismissed when the property ceases to be for public use. The
state must first file the appropriate Motion to Withdraw before the trial court having jurisdiction over the
proceedings. The grant or denial of any Motion to Withdraw in an expropriation proceeding is always subject
to judicial discretion.

Respondents have not yet been deprived of their property since the National Power Corporation was never
able to take possession. We cannot determine whether damages have been suffered as a result of the
expropriation. This case needs to be remanded to the trial court to determine whether respondents have
already been prejudiced by the expropriation.

The withdrawal of the Petition before this court will have no practical effect other than to make the trial
court's order of condemnation final and executory. In order to prevent this absurdity, the National Power
Corporation should file the proper Motion to Withdraw before the trial court. It is now the burden of the
National Power Corporation to plead and prove to the trial court its reasons for discontinuing with the
expropriation. Respondents may also plead and prove damages incurred from the commencement of the
expropriation, if any.
cralaw red

WHEREFORE, the Motion to Withdraw Appeal dated August 28, 2014 is GRANTED insofar as it withdraws
the Petition for Review dated June 4, 2010. The Motion for Leave to File Comment (to Petitioner's Motion to
Withdraw Appeal) dated September 30, 2014 is NOTED. This case is REMANDEDto the Regional Trial Court
of Virac, Catanduanes, Branch 43 for appropriate action.

SO ORDERED.
EN BANC

[G.R. No. 161656. June 29, 2005]

REPUBLIC OF THE PHILIPPINES, GENERAL ROMEO ZULUETA,


COMMODORE EDGARDO GALEOS, ANTONIO CABALUNA,
DOROTEO MANTOS & FLORENCIO BELOTINDOS, petitioners,
vs. VICENTE G. LIM, respondent.

RESOLUTION
SANDOVAL-GUTIERREZ, J.:

Justice is the first virtue of social institutions.[1] When the state wields its
power of eminent domain, there arises a correlative obligation on its part to
pay the owner of the expropriated property a just compensation. If it fails,
there is a clear case of injustice that must be redressed. In the present case,
fifty-seven (57) years have lapsed from the time the Decision in the subject
expropriation proceedings became final, but still the Republic of the
Philippines, herein petitioner, has not compensated the owner of the property.
To tolerate such prolonged inaction on its part is to encourage distrust and
resentment among our people the very vices that corrode the ties of civility
and tempt men to act in ways they would otherwise shun.
A revisit of the pertinent facts in the instant case is imperative.
On September 5, 1938, the Republic of the Philippines (Republic)
instituted a special civil action for expropriation with the Court of First Instance
(CFI) of Cebu, docketed as Civil Case No. 781, involving Lots 932 and 939 of
the Banilad Friar Land Estate, Lahug, Cebu City, for the purpose of
establishing a military reservation for the Philippine Army. Lot 932 was
registered in the name of Gervasia Denzon under Transfer Certificate of Title
(TCT) No. 14921 with an area of 25,137 square meters, while Lot 939 was in
the name of Eulalia Denzon and covered by TCT No. 12560 consisting of
13,164 square meters.
After depositing P9,500.00 with the Philippine National Bank, pursuant to
the Order of the CFI dated October 19, 1938, the Republic took possession of
the lots. Thereafter, or on May 14, 1940, the CFI rendered its Decision
ordering the Republic to pay the Denzons the sum of P4,062.10 as just
compensation.
The Denzons interposed an appeal to the Court of Appeals but it was
dismissed on March 11, 1948. An entry of judgment was made on April 5,
1948.
In 1950, Jose Galeos, one of the heirs of the Denzons, filed with the
National Airports Corporation a claim for rentals for the two lots, but it denied
knowledge of the matter. Another heir, Nestor Belocura, brought the claim to
the Office of then President Carlos Garcia who wrote the Civil Aeronautics
Administration and the Secretary of National Defense to expedite action on
said claim. On September 6, 1961, Lt. Manuel Cabal rejected the claim but
expressed willingness to pay the appraised value of the lots within a
reasonable time.
For failure of the Republic to pay for the lots, on September 20, 1961, the
Denzons successors-in-interest, Francisca Galeos-Valdehueza and
Josefina Galeos-Panerio, filed with the same CFI an action for recovery of
[2]

possession with damages against the Republic and officers of the Armed
Forces of the Philippines in possession of the property. The case was
docketed as Civil Case No. R-7208.
In the interim or on November 9, 1961, TCT Nos. 23934 and 23935
covering Lots 932 and 939 were issued in the names of Francisca
Valdehueza and Josefina Panerio, respectively. Annotated thereon was the
phrase subject to the priority of the National Airports Corporation to acquire
said parcels of land, Lots 932 and 939 upon previous payment of a
reasonable market value.
On July 31, 1962, the CFI promulgated its Decision in favor of Valdehueza
and Panerio, holding that they are the owners and have retained their right as
such over Lots 932 and 939 because of the Republics failure to pay the
amount of P4,062.10, adjudged in the expropriation proceedings. However, in
view of the annotation on their land titles, they were ordered to execute a
deed of sale in favor of the Republic. In view of the differences in money value
from 1940 up to the present, the court adjusted the market value
at P16,248.40, to be paid with 6% interest per annum from April 5, 1948, date
of entry in the expropriation proceedings, until full payment.
After their motion for reconsideration was denied, Valdehueza and Panerio
appealed from the CFI Decision, in view of the amount in controversy, directly
to this Court. The case was docketed as No. L-21032.[3] On May 19, 1966, this
Court rendered its Decision affirming the CFI Decision. It held that
Valdehueza and Panerio are still the registered owners of Lots 932 and 939,
there having been no payment of just compensation by the Republic.
Apparently, this Court found nothing in the records to show that the Republic
paid the owners or their successors-in-interest according to the CFI decision.
While it deposited the amount of P9,500,00, and said deposit was allegedly
disbursed, however, the payees could not be ascertained.
Notwithstanding the above finding, this Court still ruled that Valdehueza
and Panerio are not entitled to recover possession of the lots but may only
demand the payment of their fair market value, ratiocinating as follows:

Appellants would contend that: (1) possession of Lots 932 and 939 should be restored
to them as owners of the same; (2) the Republic should be ordered to pay rentals for
the use of said lots, plus attorneys fees; and (3) the court a quo in the present suit had
no power to fix the value of the lots and order the execution of the deed of sale after
payment.

It is true that plaintiffs are still the registered owners of the land, there not having been
a transfer of said lots in favor of the Government. The records do not show that the
Government paid the owners or their successors-in-interest according to the 1940 CFI
decision although, as stated, P9,500.00 was deposited by it, and said deposit had been
disbursed. With the records lost, however, it cannot be known who received the
money (Exh. 14 says: It is further certified that the corresponding Vouchers and
pertinent Journal and Cash Book were destroyed during the last World War, and
therefore the names of the payees concerned cannot be ascertained.) And the
Government now admits that there is no available record showing that payment
for the value of the lots in question has been made (Stipulation of Facts, par. 9,
Rec. on Appeal, p. 28).

The points in dispute are whether such payment can still be made and, if so, in
what amount. Said lots have been the subject of expropriation proceedings. By
final and executory judgment in said proceedings, they were condemned for
public use, as part of an airport, and ordered sold to the Government. In fact, the
abovementioned title certificates secured by plaintiffs over said lots contained
annotations of the right of the National Airports Corporation (now CAA) to pay
for and acquire them. It follows that both by virtue of the judgment, long final,
in the expropriation suit, as well as the annotations upon their title certificates,
plaintiffs are not entitled to recover possession of their expropriated lots which
are still devoted to the public use for which they were expropriated but only to
demand the fair market value of the same.

Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932


to Vicente Lim, herein respondent,[4] as security for their loans. For their
failure to pay Lim despite demand, he had the mortgage foreclosed in 1976.
Thus, TCT No. 23934 was cancelled, and in lieu thereof, TCT No. 63894 was
issued in his name.
On August 20, 1992, respondent Lim filed a complaint for quieting of
title with the Regional Trial Court (RTC), Branch 10, Cebu City, against
General Romeo Zulueta, as Commander of the Armed Forces of the
Philippines, Commodore Edgardo Galeos, as Commander of Naval District V
of the Philippine Navy, Antonio Cabaluna, Doroteo Mantos and Florencio
Belotindos, herein petitioners. Subsequently, he amended the complaint to
implead the Republic.
On May 4, 2001, the RTC rendered a decision in favor of respondent,
thus:

WHEREFORE, judgment is hereby rendered in favor of plaintiff Vicente Lim and


against all defendants, public and private, declaring plaintiff Vicente Lim the
absolute and exclusive owner of Lot No. 932 with all the rights of an absolute
owner including the right to possession. The monetary claims in the complaint and
in the counter claims contained in the answer of defendants are ordered Dismissed.

Petitioners elevated the case to the Court of Appeals, docketed therein as


CA-G.R. CV No. 72915. In its Decision[5] dated September 18, 2003, the
Appellate Court sustained the RTC Decision, thus:

Obviously, defendant-appellant Republic evaded its duty of paying what was due
to the landowners. The expropriation proceedings had already become final in
the late 1940s and yet, up to now, or more than fifty (50) years after, the
Republic had not yet paid the compensation fixed by the court while
continuously reaping benefits from the expropriated property to the prejudice of
the landowner. x x x. This is contrary to the rules of fair play because the concept
of just compensation embraces not only the correct determination of the amount
to be paid to the owners of the land, but also the payment for the land within a
reasonable time from its taking. Without prompt payment, compensation cannot
be considered just for the property owner is made to suffer the consequence of
being immediately deprived of his land while being made to wait for a decade or
more, in this case more than 50 years, before actually receiving the amount
necessary to cope with the loss. To allow the taking of the landowners properties,
and in the meantime leave them empty-handed by withholding payment of
compensation while the government speculates on whether or not it will pursue
expropriation, or worse, for government to subsequently decide to abandon the
property and return it to the landowners, is undoubtedly an oppressive exercise
of eminent domain that must never be sanctioned. (Land Bank of the Philippines
vs. Court of Appeals, 258 SCRA 404).
xxxxxx

An action to quiet title is a common law remedy for the removal of any cloud or doubt
or uncertainty on the title to real property. It is essential for the plaintiff or
complainant to have a legal or equitable title or interest in the real property, which is
the subject matter of the action. Also the deed, claim, encumbrance or proceeding that
is being alleged as cloud on plaintiffs title must be shown to be in fact invalid or
inoperative despite its prima facie appearance of validity or legal efficacy (Robles vs.
Court of Appeals, 328 SCRA 97). In view of the foregoing discussion, clearly, the
claim of defendant-appellant Republic constitutes a cloud, doubt or uncertainty
on the title of plaintiff-appellee Vicente Lim that can be removed by an action to
quiet title.

WHEREFORE, in view of the foregoing, and finding no reversible error in the


appealed May 4, 2001 Decision of Branch 9, Regional Trial Court of Cebu City, in
Civil Case No. CEB-12701, the said decision is UPHELD AND
AFFIRMED. Accordingly, the appeal is DISMISSED for lack of merit.

Undaunted, petitioners, through the Office of the Solicitor General, filed


with this Court a petition for review on certiorari alleging that the Republic has
remained the owner of Lot 932 as held by this Court in Valdehueza vs.
Republic.[6]
In our Resolution dated March 1, 2004, we denied the petition outright on
the ground that the Court of Appeals did not commit a reversible error.
Petitioners filed an urgent motion for reconsideration but we denied the
same with finality in our Resolution of May 17, 2004.
On May 18, 2004, respondent filed an ex-parte motion for the issuance of
an entry of judgment. We only noted the motion in our Resolution of July 12,
2004.
On July 7, 2004, petitioners filed an urgent plea/motion for clarification,
which is actually a second motion for reconsideration. Thus, in our
Resolution of September 6, 2004, we simply noted without action the motion
considering that the instant petition was already denied with finality in our
Resolution of May 17, 2004.
On October 29, 2004, petitioners filed a very urgent motion for leave to file
a motion for reconsideration of our Resolution dated September 6, 2004 (with
prayer to refer the case to the En Banc). They maintain that the Republics
right of ownership has been settled in Valdehueza.
The basic issue for our resolution is whether the Republic has retained
ownership of Lot 932 despite its failure to pay respondents predecessors-in-
interest the just compensation therefor pursuant to the judgment of the CFI
rendered as early as May 14, 1940.
Initially, we must rule on the procedural obstacle.
While we commend the Republic for the zeal with which it pursues the
present case, we reiterate that its urgent motion for clarification filed on July 7,
2004 is actually a second motion for reconsideration. This motion is prohibited
under Section 2, Rule 52, of the 1997 Rules of Civil Procedure, as amended,
which provides:

Sec. 2. Second motion for reconsideration. No second motion for reconsideration of a


judgment or final resolution by the same party shall be entertained.

Consequently, as mentioned earlier, we simply noted without action the


motion since petitioners petition was already denied with finality.
Considering the Republics urgent and serious insistence that it is still the
owner of Lot 932 and in the interest of justice, we take another hard look at
the controversial issue in order to determine the veracity of petitioners stance.
One of the basic principles enshrined in our Constitution is that no person
shall be deprived of his private property without due process of law; and in
expropriation cases, an essential element of due process is that there must be
just compensation whenever private property is taken for public
use.[7] Accordingly, Section 9, Article III, of our Constitution mandates: Private
property shall not be taken for public use without just compensation.
The Republic disregarded the foregoing provision when it failed and
refused to pay respondents predecessors-in-interest the just compensation for
Lots 932 and 939. The length of time and the manner with which it evaded
payment demonstrate its arbitrary high-handedness and confiscatory attitude.
The final judgment in the expropriation proceedings (Civil Case No. 781) was
entered on April 5, 1948. More than half of a century has passed, yet, to this
day, the landowner, now respondent, has remained empty-handed.
Undoubtedly, over 50 years of delayed payment cannot, in any way, be
viewed as fair. This is more so when such delay is accompanied by
bureaucratic hassles. Apparent from Valdehueza is the fact that respondents
predecessors-in-interest were given a run around by the Republics officials
and agents. In 1950, despite the benefits it derived from the use of the two
lots, the National Airports Corporation denied knowledge of the claim of
respondents predecessors-in-interest. Even President Garcia, who sent a
letter to the Civil Aeronautics Administration and the Secretary of National
Defense to expedite the payment, failed in granting relief to them. And, on
September 6, 1961, while the Chief of Staff of the Armed Forces expressed
willingness to pay the appraised value of the lots, nothing happened.
The Court of Appeals is correct in saying that Republics delay is contrary
to the rules of fair play, as just compensation embraces not only the
correct determination of the amount to be paid to the owners of the land,
but also the payment for the land within a reasonable time from its
taking. Without prompt payment, compensation cannot be considered
just. In jurisdictions similar to ours, where an entry to the expropriated
property precedes the payment of compensation, it has been held that if the
compensation is not paid in a reasonable time, the party may be treated as a
trespasser ab initio.[8]
Corollarily, in Provincial Government of Sorsogon vs. Vda. De
Villaroya,[9] similar to the present case, this Court expressed its disgust over
the governments vexatious delay in the payment of just compensation, thus:

The petitioners have been waiting for more than thirty years to be paid for their
land which was taken for use as a public high school. As a matter of fair procedure,
it is the duty of the Government, whenever it takes property from private persons
against their will, to supply all required documentation and facilitate payment of just
compensation. The imposition of unreasonable requirements and vexatious delays
before effecting payment is not only galling and arbitrary but a rich source of
discontent with government. There should be some kind of swift and effective
recourse against unfeeling and uncaring acts of middle or lower level
bureaucrats.

We feel the same way in the instant case.


More than anything else, however, it is the obstinacy of the Republic that
prompted us to dismiss its petition outright. As early as May 19, 1966,
in Valdehueza, this Court mandated the Republic to pay respondents
predecessors-in-interest the sum of P16,248.40 as reasonable market value
of the two lots in question. Unfortunately, it did not comply and allowed
several decades to pass without obeying this Courts mandate. Such
prolonged obstinacy bespeaks of lack of respect to private rights and to the
rule of law, which we cannot countenance. It is tantamount to confiscation of
private property. While it is true that all private properties are subject to the
need of government, and the government may take them whenever the
necessity or the exigency of the occasion demands, however, the Constitution
guarantees that when this governmental right of expropriation is exercised, it
shall be attended by compensation.[10] From the taking of private property by
the government under the power of eminent domain, there arises an implied
promise to compensate the owner for his loss.[11]
Significantly, the above-mentioned provision of Section 9, Article III of the
Constitution is not a grant but a limitation of power. This limiting function is in
keeping with the philosophy of the Bill of Rights against the arbitrary exercise
of governmental powers to the detriment of the individuals rights. Given this
function, the provision should therefore be strictly interpreted against the
expropriator, the government, and liberally in favor of the property owner.[12]
Ironically, in opposing respondents claim, the Republic is invoking this
Courts Decision in Valdehueza, a Decision it utterly defied. How could the
Republic acquire ownership over Lot 932 when it has not paid its owner the
just compensation, required by law, for more than 50 years? The recognized
rule is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation.
Jurisprudence on this settled principle is consistent both here and in other
democratic jurisdictions. In Association of Small Landowners in the
Philippines, Inc. et al., vs. Secretary of Agrarian Reform,[13] thus:

Title to property which is the subject of condemnation proceedings does not vest
the condemnor until the judgment fixing just compensation is entered and
paid, but the condemnors title relates back to the date on which the petition under the
Eminent Domain Act, or the commissioners report under the Local Improvement Act,
is filed.

x x x Although the right to appropriate and use land taken for a canal is
complete at the time of entry, title to the property taken remains in the owner
until payment is actually made. (Emphasis supplied.)

In Kennedy v. Indianapolis, the US Supreme Court cited several cases holding that
title to property does not pass to the condemnor until just compensation had actually
been made. In fact, the decisions appear to be uniform to this effect. As early as 1838,
in Rubottom v. McLure, it was held that actual payment to the owner of the
condemned property was a condition precedent to the investment of the title to
the property in the State albeit not to the appropriation of it to public
use. In Rexford v. Knight, the Court of Appeals of New York said that the
construction upon the statutes was that the fee did not vest in the State until the
payment of the compensation although the authority to enter upon and appropriate the
land was complete prior to the payment. Kennedy further said that both on principle
and authority the rule is . . . that the right to enter on and use the property is
complete, as soon as the property is actually appropriated under the authority of
law for a public use, but that the title does not pass from the owner without his
consent, until just compensation has been made to him.

Our own Supreme Court has held in Visayan Refining Co. v. Camus and Paredes,
that:

If the laws which we have exhibited or cited in the preceding discussion are
attentively examined it will be apparent that the method of expropriation
adopted in this jurisdiction is such as to afford absolute reassurance that no piece
of land can be finally and irrevocably taken from an unwilling owner until
compensation is paid...(Emphasis supplied.)

Clearly, without full payment of just compensation, there can be no


transfer of title from the landowner to the expropriator. Otherwise stated, the
Republics acquisition of ownership is conditioned upon the full payment of just
compensation within a reasonable time.[14]
Significantly, in Municipality of Bian v. Garcia[15] this Court ruled that the
expropriation of lands consists of two stages, to wit:

x x x The first is concerned with the determination of the authority of the plaintiff to
exercise the power of eminent domain and the propriety of its exercise in the context
of the facts involved in the suit. It ends with an order, if not of dismissal of the action,
of condemnation declaring that the plaintiff has a lawful right to take the property
sought to be condemned, for the public use or purpose described in the complaint,
upon the payment of just compensation to be determined as of the date of the filing of
the complaint x x x.

The second phase of the eminent domain action is concerned with the determination
by the court of the just compensation for the property sought to be taken. This is done
by the court with the assistance of not more than three (3) commissioners. x x x.

It is only upon the completion of these two stages that expropriation is said
to have been completed. In Republic v. Salem Investment Corporation,[16] we
ruled that, the process is not completed until payment of just compensation.
Thus, here, the failure of the Republic to pay respondent and his
predecessors-in-interest for a period of 57 years rendered the expropriation
process incomplete.
The Republic now argues that under Valdehueza, respondent is not
entitled to recover possession of Lot 932 but only to demand payment of its
fair market value. Of course, we are aware of the doctrine that non-payment of
just compensation (in an expropriation proceedings) does not entitle the
private landowners to recover possession of the expropriated lots. This is our
ruling in the recent cases of Republic of the Philippines vs. Court of Appeals,
et al.,[17] and Reyes vs. National Housing Authority.[18] However, the facts of
the present case do not justify its application. It bears stressing that the
Republic was ordered to pay just compensation twice, the firstwas in the
expropriation proceedings and the second, in Valdehueza. Fifty-seven (57)
years have passed since then. We cannot but construe the Republics
failure to pay just compensation as a deliberate refusal on its part. Under
such circumstance, recovery of possession is in order. In several
jurisdictions, the courts held that recovery of possession may be had when
property has been wrongfully taken or is wrongfully retained by one claiming
to act under the power of eminent domain[19] or where a rightful entry is
made and the party condemning refuses to pay the compensation which
has been assessed or agreed upon;[20] or fails or refuses to have the
compensation assessed and paid.[21]
The Republic also contends that where there have been constructions
being used by the military, as in this case, public interest demands that the
present suit should not be sustained.
It must be emphasized that an individual cannot be deprived of his
property for the public convenience.[22] In Association of Small Landowners in
the Philippines, Inc. vs. Secretary of Agrarian Reform,[23] we ruled:

One of the basic principles of the democratic system is that where the rights of the
individual are concerned, the end does not justify the means. It is not enough that
there be a valid objective; it is also necessary that the means employed to pursue it be
in keeping with the Constitution. Mere expediency will not excuse constitutional
shortcuts. There is no question that not even the strongest moral conviction or the
most urgent public need, subject only to a few notable exceptions, will excuse the
bypassing of an individual's rights. It is no exaggeration to say that a person
invoking a right guaranteed under Article III of the Constitution is a majority of
one even as against the rest of the nation who would deny him that right.

The right covers the persons life, his liberty and his property under Section 1 of
Article III of the Constitution. With regard to his property, the owner enjoys the
added protection of Section 9, which reaffirms the familiar rule that private
property shall not be taken for public use without just compensation.

The Republics assertion that the defense of the State will be in grave
danger if we shall order the reversion of Lot 932 to respondent is an
overstatement. First, Lot 932 had ceased to operate as an airport. What
remains in the site is just the National Historical Institutes marking stating that
Lot 932 is the former location of Lahug Airport. And second, there are only
thirteen (13) structures located on Lot 932, eight (8) of which are residence
apartments of military personnel. Only two (2) buildings are actually used as
training centers. Thus, practically speaking, the reversion of Lot 932 to
respondent will only affect a handful of military personnel. It will not result to
irreparable damage or damage beyond pecuniary estimation, as what the
Republic vehemently claims.
We thus rule that the special circumstances prevailing in this case entitle
respondent to recover possession of the expropriated lot from the Republic.
Unless this form of swift and effective relief is granted to him, the grave
injustice committed against his predecessors-in-interest, though no fault or
negligence on their part, will be perpetuated. Let this case, therefore, serve as
a wake-up call to the Republic that in the exercise of its power of eminent
domain, necessarily in derogation of private rights, it must comply with the
Constitutional limitations. This Court, as the guardian of the peoples right, will
not stand still in the face of the Republics oppressive and confiscatory taking
of private property, as in this case.
At this point, it may be argued that respondent Vicente Lim acted in bad
faith in entering into a contract of mortgage with Valdehueza and Panerio
despite the clear annotation in TCT No. 23934 that Lot 932 is subject to the
priority of the National Airports Corporation [to acquire said parcels of
land] x x x upon previous payment of a reasonable market value.
The issue of whether or not respondent acted in bad faith is immaterial
considering that the Republic did not complete the expropriation process. In
short, it failed to perfect its title over Lot 932 by its failure to pay just
compensation. The issue of bad faith would have assumed relevance if the
Republic actually acquired title over Lot 932. In such a case, even if
respondents title was registered first, it would be the Republics title or right of
ownership that shall be upheld. But now, assuming that respondent was in
bad faith, can such fact vest upon the Republic a better title over Lot
932? We believe not. This is because in the first place, the Republic has no
title to speak of.
At any rate, assuming that respondent had indeed knowledge of the
annotation, still nothing would have prevented him from entering into a
mortgage contract involving Lot 932 while the expropriation proceeding was
pending. Any person who deals with a property subject of an
expropriation does so at his own risk, taking into account the ultimate
possibility of losing the property in favor of the government. Here, the
annotation merely served as a caveat that the Republic had
a preferential right to acquire Lot 932 upon its payment of a reasonable
market value. It did not proscribe Valdehueza and Panerio from exercising
their rights of ownership including their right to mortgage or even to dispose of
their property. In Republic vs. Salem Investment Corporation,[24] we
recognized the owners absolute right over his property pending completion of
the expropriation proceeding, thus:

It is only upon the completion of these two stages that expropriation is said to have
been completed. Moreover, it is only upon payment of just compensation that title
over the property passes to the government. Therefore, until the action for
expropriation has been completed and terminated, ownership over the property being
expropriated remains with the registered owner. Consequently, the latter can
exercise all rights pertaining to an owner, including the right to dispose of his
property subject to the power of the State ultimately to acquire it through
expropriation.

It bears emphasis that when Valdehueza and Panerio mortgaged Lot 932
to respondent in 1964, they were still the owners thereof and their title had not
yet passed to the petitioner Republic. In fact, it never did. Such title or
ownership was rendered conclusive when we categorically ruled
in Valdehueza that: It is true that plaintiffs are still the registered owners
of the land, there not having been a transfer of said lots in favor of the
Government.
For respondents part, it is reasonable to conclude that he entered into the
contract of mortgage with Valdehueza and Panerio fully aware of the extent of
his right as a mortgagee. A mortgage is merely an accessory contract
intended to secure the performance of the principal obligation. One of its
characteristics is that it is inseparablefrom the property. It adheres to the
property regardless of who its owner may subsequently be.[25] Respondent
must have known that even if Lot 932 is ultimately expropriated by the
Republic, still, his right as a mortgagee is protected. In this regard, Article
2127 of the Civil Code provides:

Art. 2127. The mortgage extends to the natural accessions, to the improvements,
growing fruits, and the rents or income not yet received when the obligation becomes
due, and to the amount of the indemnity granted or owing to the proprietor from the
insurers of the property mortgaged, or in virtue of expropriation for public use,
with the declarations, amplifications, and limitations established by law, whether the
estate remains in the possession of the mortgagor or it passes in the hands of a
third person.
In summation, while the prevailing doctrine is that the non-payment of just
compensation does not entitle the private landowner to recover possession of
the expropriated lots,[26] however, in cases where the government failed to pay
just compensation within five (5)[27] years from the finality of the judgment
in the expropriation proceedings, the owners concerned shall have the right
to recover possession of their property. This is in consonance with the
principle that the government cannot keep the property and dishonor the
judgment.[28] To be sure, the five-year period limitation will encourage the
government to pay just compensation punctually. This is in keeping with
justice and equity. After all, it is the duty of the government, whenever it takes
property from private persons against their will, to facilitate the payment of just
compensation. In Cosculluela v. Court of Appeals,[29] we defined just
compensation as not only the correct determination of the amount to be paid
to the property owner but also the payment of the property within
a reasonable time. Without prompt payment, compensation cannot be
considered just.
WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R.
CV No. 72915 is AFFIRMED in toto.
The Republics motion for reconsideration of our Resolution dated March 1,
2004 is DENIED with FINALITY. No further pleadings will be allowed.
Let an entry of judgment be made in this case.
SO ORDERED.
Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago,
Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna,
Tinga, Chico-Nazario, and Garcia, JJ., concur.
REPUBLIC vs. LIM
GR no. 161656, June 29, 2005

FACTS: In 1938, the Republic instituted a special civil action for expropriation of a land in Lahug,
Cebu City for the purpose of establishing a military reservation for the Philippine Army. The said lots
were registered in the name of Gervasia and Eulalia Denzon. The Republic deposited P9,500 in the PNB
then took possession of the lots. Thereafter, on May 1940, the CFI rendered its Decision ordering the
Republic to pay the Denzons the sum of P4,062.10 as just compensation. The Denzons appealled to the
CA but it was dismissed on March 11, 1948. An entry of judgment was made on April 5, 1948.

In 1950, one of the heirs of the Denzons, filed with the National Airports Corporation a claim
for rentals for the two lots, but it "denied knowledge of the matter." On September 6, 1961, Lt. Cabal
rejected the claim but expressed willingness to pay the appraised value of the lots within a reasonable
time.

For failure of the Republic to pay for the lots, on September 20, 1961, the Denzons’ successors-
in-interest, Valdehueza and Panerio, filed with the same CFI an action for recovery of possession with
damages against the Republic and AFP officers in possession of the property.

On November 1961, Titles of the said lots were issued in the names of Valdehueza and Panerio
with the annotation "subject to the priority of the National Airports Corporation to acquire said parcels
of land, Lots 932 and 939 upon previous payment of a reasonable market value".

On July 1962, the CFI promulgated its Decision in favor of Valdehueza and Panerio, holding that
they are the owners and have retained their right as such over lots because of the Republic’s failure to
pay the amount of P4,062.10, adjudged in the expropriation proceedings. However, in view of the
annotation on their land titles, they were ordered to execute a deed of sale in favor of the Republic.

They appealed the CFI’s decision to the SC. The latter held that Valdehueza and Panerio are still
the registered owners of Lots 932 and 939, there having been no payment of just compensation by the
Republic. SC still ruled that they are not entitled to recover possession of the lots but may only demand
the payment of their fair market value.

Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932 to Vicente Lim, herein
respondent, as security for their loans. For their failure to pay Lim despite demand, he had the mortgage
foreclosed in 1976. The lot title was issued in his name.

On 1992, respondent Lim filed a complaint for quieting of title with the RTC against the
petitioners herein. On 2001, the RTC rendered a decision in favor of Lim, declaring that he is the
absolute and exclusive owner of the lot with all the rights of an absolute owner including the right to
possession. Petitioners elevated the case to the CA. In its Decision dated September 18, 2003, it
sustained the RTC Decision saying: “...This is contrary to the rules of fair play because the concept of just
compensation embraces not only the correct determination of the amount to be paid to the owners of the land,
but also the payment for the land within a reasonable time from its taking. Without prompt payment,
compensation cannot be considered "just"...”

Petitioner, through the OSG, filed with the SC a petition for review alleging that they remain as
the owner of Lot 932.
ISSUE: Whether the Republic has retained ownership of Lot 932 despite its failure to pay
respondent’s predecessors-in-interest the just compensation therefor pursuant to the judgment of
the CFI rendered as early as May 14, 1940.

HELD: One of the basic principles enshrined in our Constitution is that no person shall be
deprived of his private property without due process of law; and in expropriation cases, an essential
element of due process is that there must be just compensation whenever private property is taken for
public use.7 Accordingly, Section 9, Article III, of our Constitution mandates: "Private property shall not be
taken for public use without just compensation." The Republic disregarded the foregoing provision when it
failed and refused to pay respondent’s predecessors-in-interest the just compensation for Lots 932 and
939.

The Court of Appeals is correct in saying that Republic’s delay is contrary to the rules of fair
play. In jurisdictions similar to ours, where an entry to the expropriated property precedes the
payment of compensation, it has been held that if the compensation is not paid in a reasonable
time, the party may be treated as a trespasser ab initio.

As early as May 19, 1966, in Valdehueza, this Court mandated the Republic to pay respondent’s
predecessors-in-interest the sum of P16,248.40 as "reasonable market value of the two lots in question."
Unfortunately, it did not comply and allowed several decades to pass without obeying this Court’s
mandate. It is tantamount to confiscation of private property. While it is true that all private properties
are subject to the need of government, and the government may take them whenever the necessity or
the exigency of the occasion demands, however from the taking of private property by the government
under the power of eminent domain, there arises an implied promise to compensate the owner for his
loss.

There is a recognized rule that title to the property expropriated shall pass from the owner
to the expropriator only upon full payment of the just compensation. So, how could the Republic
acquire ownership over Lot 932 when it has not paid its owner the just compensation, required by law, for
more than 50 years? Clearly, without full payment of just compensation, there can be no transfer of
title from the landowner to the expropriator.

SC ruled in earlier cases that expropriation of lands consists of two stages. First is concerned
with the determination of the authority of the plaintiff to exercise the power of eminent domain and the
propriety of its exercise. The second is concerned with the determination by the court of "the just
compensation for the property sought to be taken." It is only upon the completion of these two stages
that expropriation is said to have been completed In Republic v. Salem Investment Corporation, we ruled
that, "the process is not completed until payment of just compensation." Thus, here, the failure of the
Republic to pay respondent and his predecessors-in-interest for a period of 57 years rendered the
expropriation process incomplete.

Thus, SC ruled that the special circumstances prevailing in this case entitle respondent to
recover possession of the expropriated lot from the Republic.

While the prevailing doctrine is that "the non-payment of just compensation does not entitle the
private landowner to recover possession of the expropriated lots, however, in cases where the
government failed to pay just compensation within five (5) years from the finality of the
judgment in the expropriation proceedings, the owners concerned shall have the right to recover
possession of their property. After all, it is the duty of the government, whenever it takes property from
private persons against their will, to facilitate the payment of just compensation. In Cosculluela v. Court of
Appeals, we defined just compensation as not only the correct determination of the amount to be paid
to the property owner but also the payment of the property within a reasonable time. Without
prompt payment, compensation cannot be considered "just."
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-7859 December 22, 1955

WALTER LUTZ, as Judicial Administrator of the Intestate Estate of the deceased Antonio
Jayme Ledesma,plaintiff-appellant,
vs.
J. ANTONIO ARANETA, as the Collector of Internal Revenue, defendant-appellee.

Ernesto J. Gonzaga for appellant.


Office of the Solicitor General Ambrosio Padilla, First Assistant Solicitor General Guillermo E. Torres
and Solicitor Felicisimo R. Rosete for appellee.

REYES, J.B L., J.:

This case was initiated in the Court of First Instance of Negros Occidental to test the legality of the
taxes imposed by Commonwealth Act No. 567, otherwise known as the Sugar Adjustment Act.

Promulgated in 1940, the law in question opens (section 1) with a declaration of emergency, due to
the threat to our industry by the imminent imposition of export taxes upon sugar as provided in the
Tydings-McDuffe Act, and the "eventual loss of its preferential position in the United States market";
wherefore, the national policy was expressed "to obtain a readjustment of the benefits derived from
the sugar industry by the component elements thereof" and "to stabilize the sugar industry so as to
prepare it for the eventuality of the loss of its preferential position in the United States market and
the imposition of the export taxes."

In section 2, Commonwealth Act 567 provides for an increase of the existing tax on the manufacture
of sugar, on a graduated basis, on each picul of sugar manufactured; while section 3 levies on
owners or persons in control of lands devoted to the cultivation of sugar cane and ceded to others
for a consideration, on lease or otherwise —

a tax equivalent to the difference between the money value of the rental or consideration
collected and the amount representing 12 per centum of the assessed value of such land.

According to section 6 of the law —

SEC. 6. All collections made under this Act shall accrue to a special fund in the Philippine
Treasury, to be known as the 'Sugar Adjustment and Stabilization Fund,' and shall be paid
out only for any or all of the following purposes or to attain any or all of the following
objectives, as may be provided by law.

First, to place the sugar industry in a position to maintain itself, despite the gradual loss of
the preferntial position of the Philippine sugar in the United States market, and ultimately to
insure its continued existence notwithstanding the loss of that market and the consequent
necessity of meeting competition in the free markets of the world;

Second, to readjust the benefits derived from the sugar industry by all of the component
elements thereof — the mill, the landowner, the planter of the sugar cane, and the laborers in
the factory and in the field — so that all might continue profitably to engage
therein;lawphi1.net

Third, to limit the production of sugar to areas more economically suited to the production
thereof; and

Fourth, to afford labor employed in the industry a living wage and to improve their living and
working conditions: Provided, That the President of the Philippines may, until the adjourment
of the next regular session of the National Assembly, make the necessary disbursements
from the fund herein created (1) for the establishment and operation of sugar experiment
station or stations and the undertaking of researchers (a) to increase the recoveries of the
centrifugal sugar factories with the view of reducing manufacturing costs, (b) to produce and
propagate higher yielding varieties of sugar cane more adaptable to different district
conditions in the Philippines, (c) to lower the costs of raising sugar cane, (d) to improve the
buying quality of denatured alcohol from molasses for motor fuel, (e) to determine the
possibility of utilizing the other by-products of the industry, (f) to determine what crop or
crops are suitable for rotation and for the utilization of excess cane lands, and (g) on other
problems the solution of which would help rehabilitate and stabilize the industry, and (2) for
the improvement of living and working conditions in sugar mills and sugar plantations,
authorizing him to organize the necessary agency or agencies to take charge of the
expenditure and allocation of said funds to carry out the purpose hereinbefore enumerated,
and, likewise, authorizing the disbursement from the fund herein created of the necessary
amount or amounts needed for salaries, wages, travelling expenses, equipment, and other
sundry expenses of said agency or agencies.

Plaintiff, Walter Lutz, in his capacity as Judicial Administrator of the Intestate Estate of Antonio
Jayme Ledesma, seeks to recover from the Collector of Internal Revenue the sum of P14,666.40
paid by the estate as taxes, under section 3 of the Act, for the crop years 1948-1949 and 1949-1950;
alleging that such tax is unconstitutional and void, being levied for the aid and support of the sugar
industry exclusively, which in plaintiff's opinion is not a public purpose for which a tax may be
constitutioally levied. The action having been dismissed by the Court of First Instance, the plaintifs
appealed the case directly to this Court (Judiciary Act, section 17).

The basic defect in the plaintiff's position is his assumption that the tax provided for in
Commonwealth Act No. 567 is a pure exercise of the taxing power. Analysis of the Act, and
particularly of section 6 (heretofore quoted in full), will show that the tax is levied with a regulatory
purpose, to provide means for the rehabilitation and stabilization of the threatened sugar industry. In
other words, the act is primarily an exercise of the police power.

This Court can take judicial notice of the fact that sugar production is one of the great industries of
our nation, sugar occupying a leading position among its export products; that it gives employment
to thousands of laborers in fields and factories; that it is a great source of the state's wealth, is one of
the important sources of foreign exchange needed by our government, and is thus pivotal in the
plans of a regime committed to a policy of currency stability. Its promotion, protection and
advancement, therefore redounds greatly to the general welfare. Hence it was competent for the
legislature to find that the general welfare demanded that the sugar industry should be stabilized in
turn; and in the wide field of its police power, the lawmaking body could provide that the distribution
of benefits therefrom be readjusted among its components to enable it to resist the added strain of
the increase in taxes that it had to sustain (Sligh vs. Kirkwood, 237 U. S. 52, 59 L. Ed. 835; Johnson
vs. State ex rel. Marey, 99 Fla. 1311, 128 So. 853; Maxcy Inc. vs. Mayo, 103 Fla. 552, 139 So. 121).

As stated in Johnson vs. State ex rel. Marey, with reference to the citrus industry in Florida —

The protection of a large industry constituting one of the great sources of the state's wealth
and therefore directly or indirectly affecting the welfare of so great a portion of the population
of the State is affected to such an extent by public interests as to be within the police power
of the sovereign. (128 Sp. 857).

Once it is conceded, as it must, that the protection and promotion of the sugar industry is a matter of
public concern, it follows that the Legislature may determine within reasonable bounds what is
necessary for its protection and expedient for its promotion. Here, the legislative discretion must be
allowed fully play, subject only to the test of reasonableness; and it is not contended that the means
provided in section 6 of the law (above quoted) bear no relation to the objective pursued or are
oppressive in character. If objective and methods are alike constitutionally valid, no reason is seen
why the state may not levy taxes to raise funds for their prosecution and attainment. Taxation may
be made the implement of the state's police power (Great Atl. & Pac. Tea Co. vs. Grosjean, 301 U.
S. 412, 81 L. Ed. 1193; U. S. vs. Butler, 297 U. S. 1, 80 L. Ed. 477; M'Culloch vs. Maryland, 4
Wheat. 316, 4 L. Ed. 579).

That the tax to be levied should burden the sugar producers themselves can hardly be a ground of
complaint; indeed, it appears rational that the tax be obtained precisely from those who are to be
benefited from the expenditure of the funds derived from it. At any rate, it is inherent in the power to
tax that a state be free to select the subjects of taxation, and it has been repeatedly held that
"inequalities which result from a singling out of one particular class for taxation, or exemption infringe
no constitutional limitation" (Carmichael vs. Southern Coal & Coke Co., 301 U. S. 495, 81 L. Ed.
1245, citing numerous authorities, at p. 1251).

From the point of view we have taken it appears of no moment that the funds raised under the Sugar
Stabilization Act, now in question, should be exclusively spent in aid of the sugar industry, since it is
that very enterprise that is being protected. It may be that other industries are also in need of similar
protection; that the legislature is not required by the Constitution to adhere to a policy of "all or
none." As ruled in Minnesota ex rel. Pearson vs. Probate Court, 309 U. S. 270, 84 L. Ed. 744, "if the
law presumably hits the evil where it is most felt, it is not to be overthrown because there are other
instances to which it might have been applied;" and that "the legislative authority, exerted within its
proper field, need not embrace all the evils within its reach" (N. L. R. B. vs. Jones & Laughlin Steel
Corp. 301 U. S. 1, 81 L. Ed. 893).

Even from the standpoint that the Act is a pure tax measure, it cannot be said that the devotion of
tax money to experimental stations to seek increase of efficiency in sugar production, utilization of
by-products and solution of allied problems, as well as to the improvements of living and working
conditions in sugar mills or plantations, without any part of such money being channeled directly to
private persons, constitutes expenditure of tax money for private purposes, (compare Everson vs.
Board of Education, 91 L. Ed. 472, 168 ALR 1392, 1400).

The decision appealed from is affirmed, with costs against appellant. So ordered.
WALTER LUTZ, as Judicial Administrator of the Intestate of the deceased Antonio Jayme Ledesma,
plaintiff-appellant v. J. ANTONIO ARANETA, as collector of Internal Revenue, defendant-apppelle

G.R No. L-7856. December 22, 1955

REYES, J.B L., J.:

FACTS:

Appelant in this case Walter Lutz in his capacity as the Judicial Administrator of the intestate of the
deceased Antonio Jayme Ledesma, seeks to recover from the Collector of the Internal Revenue the total
sum of fourteen thousand six hundred sixty six and forty cents (P 14, 666.40) paid by the estate as taxes,
under section 3 of Commonwealth Act No. 567, also known as the Sugar Adjustment Act, for the crop
years 1948-1949 and 1949-1950. Commonwealth Act. 567 Section 2 provides for an increase of the
existing tax on the manufacture of sugar on a graduated basis, on each picul of sugar manufacturer;
while section 3 levies on the owners or persons in control of the land devoted tot he cultivation of
sugarcane and ceded to others for consideration, on lease or otherwise - "a tax equivalent to the
difference between the money value of the rental or consideration collected and the amount
representing 12 per centum of the assessed value of such land. It was alleged that such tax is
unconstitutional and void, being levied for the aid and support of the sugar industry exclusively, which in
plaintiff's opinion is not a public purpose for which a tax may be constitutionally levied. The action was
dismissed by the CFI thus the plaintiff appealed directly to the Supreme Court.

ISSUE:

Whether or not the tax imposition in the Commonwealth Act No. 567 are unconstitutional.

RULING:

Yes, the Supreme Court held that the fact that sugar production is one of the greatest industry of our
nation, sugar occupying a leading position among its export products; that it gives employment to
thousands of laborers in the fields and factories; that it is a great source of the state's wealth, is one of
the important source of foreign exchange needed by our government and is thus pivotal in the plans of a
regime committed to a policy of currency stability. Its promotion, protection and advancement,
therefore redounds greatly to the general welfare. Hence it was competent for the legislature to find
that the general welfare demanded that the sugar industry be stabilized in turn; and in the wide field of
its police power, the law-making body could provide that the distribution of benefits therefrom be
readjusted among its components to enable it to resist the added strain of the increase in taxes that it
had to sustain.

The subject tax is levied with a regulatory purpose, to provide means for the rehabilitation and
stabilization of the threatened sugar industry. In other words, the act is primarily a valid exercise of
police power.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 159796 July 17, 2007

ROMEO P. GEROCHI, KATULONG NG BAYAN (KB) and ENVIRONMENTALIST CONSUMERS


NETWORK, INC. (ECN), Petitioners,
vs.
DEPARTMENT OF ENERGY (DOE), ENERGY REGULATORY COMMISSION (ERC), NATIONAL
POWER CORPORATION (NPC), POWER SECTOR ASSETS AND LIABILITIES MANAGEMENT
GROUP (PSALM Corp.), STRATEGIC POWER UTILITIES GROUP (SPUG), and PANAY
ELECTRIC COMPANY INC. (PECO),Respondents.

DECISION

NACHURA, J.:

Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and Environmentalist Consumers Network,
Inc. (ECN) (petitioners), come before this Court in this original action praying that Section 34 of
Republic Act (RA) 9136, otherwise known as the "Electric Power Industry Reform Act of 2001"
(EPIRA), imposing the Universal Charge,1and Rule 18 of the Rules and Regulations (IRR)2 which
seeks to implement the said imposition, be declared unconstitutional. Petitioners also pray that the
Universal Charge imposed upon the consumers be refunded and that a preliminary injunction and/or
temporary restraining order (TRO) be issued directing the respondents to refrain from implementing,
charging, and collecting the said charge.3 The assailed provision of law reads:

SECTION 34. Universal Charge. — Within one (1) year from the effectivity of this Act, a universal
charge to be determined, fixed and approved by the ERC, shall be imposed on all electricity end-
users for the following purposes:

(a) Payment for the stranded debts4 in excess of the amount assumed by the National
Government and stranded contract costs of NPC5 and as well as qualified stranded contract
costs of distribution utilities resulting from the restructuring of the industry;

(b) Missionary electrification;6

(c) The equalization of the taxes and royalties applied to indigenous or renewable sources of
energy vis-à-vis imported energy fuels;

(d) An environmental charge equivalent to one-fourth of one centavo per kilowatt-hour


(₱0.0025/kWh), which shall accrue to an environmental fund to be used solely for watershed
rehabilitation and management. Said fund shall be managed by NPC under existing
arrangements; and

(e) A charge to account for all forms of cross-subsidies for a period not exceeding three (3)
years.
The universal charge shall be a non-bypassable charge which shall be passed on and collected from
all end-users on a monthly basis by the distribution utilities. Collections by the distribution utilities
and the TRANSCO in any given month shall be remitted to the PSALM Corp. on or before the
fifteenth (15th) of the succeeding month, net of any amount due to the distribution utility. Any end-
user or self-generating entity not connected to a distribution utility shall remit its corresponding
universal charge directly to the TRANSCO. The PSALM Corp., as administrator of the fund, shall
create a Special Trust Fund which shall be disbursed only for the purposes specified herein in an
open and transparent manner. All amount collected for the universal charge shall be distributed to
the respective beneficiaries within a reasonable period to be provided by the ERC.

The Facts

Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it took effect.7

On April 5, 2002, respondent National Power Corporation-Strategic Power Utilities Group8 (NPC-
SPUG) filed with respondent Energy Regulatory Commission (ERC) a petition for the availment from
the Universal Charge of its share for Missionary Electrification, docketed as ERC Case No. 2002-
165.9

On May 7, 2002, NPC filed another petition with ERC, docketed as ERC Case No. 2002-194,
praying that the proposed share from the Universal Charge for the Environmental charge of ₱0.0025
per kilowatt-hour (/kWh), or a total of ₱119,488,847.59, be approved for withdrawal from the Special
Trust Fund (STF) managed by respondent Power Sector Assets and

Liabilities Management Group (PSALM)10 for the rehabilitation and management of watershed
areas.11

On December 20, 2002, the ERC issued an Order12 in ERC Case No. 2002-165 provisionally
approving the computed amount of ₱0.0168/kWh as the share of the NPC-SPUG from the Universal
Charge for Missionary Electrification and authorizing the National Transmission Corporation
(TRANSCO) and Distribution Utilities to collect the same from its end-users on a monthly basis.

On June 26, 2003, the ERC rendered its Decision13 (for ERC Case No. 2002-165) modifying its
Order of December 20, 2002, thus:

WHEREFORE, the foregoing premises considered, the provisional authority granted to petitioner
National Power Corporation-Strategic Power Utilities Group (NPC-SPUG) in the Order dated
December 20, 2002 is hereby modified to the effect that an additional amount of ₱0.0205 per
kilowatt-hour should be added to the ₱0.0168 per kilowatt-hour provisionally authorized by the
Commission in the said Order. Accordingly, a total amount of ₱0.0373 per kilowatt-hour is hereby
APPROVED for withdrawal from the Special Trust Fund managed by PSALM as its share from the
Universal Charge for Missionary Electrification (UC-ME) effective on the following billing cycles:

(a) June 26-July 25, 2003 for National Transmission Corporation (TRANSCO); and

(b) July 2003 for Distribution Utilities (Dus).

Relative thereto, TRANSCO and Dus are directed to collect the UC-ME in the amount of ₱0.0373
per kilowatt-hour and remit the same to PSALM on or before the 15th day of the succeeding month.
In the meantime, NPC-SPUG is directed to submit, not later than April 30, 2004, a detailed report to
include Audited Financial Statements and physical status (percentage of completion) of the projects
using the prescribed format. 1avv phi 1

Let copies of this Order be furnished petitioner NPC-SPUG and all distribution utilities (Dus).

SO ORDERED.

On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration asking the ERC, among
others,14 to set aside the above-mentioned Decision, which the ERC granted in its Order dated
October 7, 2003, disposing:

WHEREFORE, the foregoing premises considered, the "Motion for Reconsideration" filed by
petitioner National Power Corporation-Small Power Utilities Group (NPC-SPUG) is hereby
GRANTED. Accordingly, the Decision dated June 26, 2003 is hereby modified accordingly.

Relative thereto, NPC-SPUG is directed to submit a quarterly report on the following:

1. Projects for CY 2002 undertaken;

2. Location

3. Actual amount utilized to complete the project;

4. Period of completion;

5. Start of Operation; and

6. Explanation of the reallocation of UC-ME funds, if any.

SO ORDERED.15

Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194, authorizing the NPC to draw
up to ₱70,000,000.00 from PSALM for its 2003 Watershed Rehabilitation Budget subject to the
availability of funds for the Environmental Fund component of the Universal Charge.16

On the basis of the said ERC decisions, respondent Panay Electric Company, Inc. (PECO) charged
petitioner Romeo P. Gerochi and all other end-users with the Universal Charge as reflected in their
respective electric bills starting from the month of July 2003.17

Hence, this original action.

Petitioners submit that the assailed provision of law and its IRR which sought to implement the same
are unconstitutional on the following grounds:

1) The universal charge provided for under Sec. 34 of the EPIRA and sought to be
implemented under Sec. 2, Rule 18 of the IRR of the said law is a tax which is to be collected
from all electric end-users and self-generating entities. The power to tax is strictly a
legislative function and as such, the delegation of said power to any executive or
administrative agency like the ERC is unconstitutional, giving the same unlimited authority.
The assailed provision clearly provides that the Universal Charge is to be determined, fixed
and approved by the ERC, hence leaving to the latter complete discretionary legislative
authority.

2) The ERC is also empowered to approve and determine where the funds collected should
be used.

3) The imposition of the Universal Charge on all end-users is oppressive and confiscatory
and amounts to taxation without representation as the consumers were not given a chance
to be heard and represented.18

Petitioners contend that the Universal Charge has the characteristics of a tax and is collected to fund
the operations of the NPC. They argue that the cases19 invoked by the respondents clearly show the
regulatory purpose of the charges imposed therein, which is not so in the case at bench. In said
cases, the respective funds20 were created in order to balance and stabilize the prices of oil and
sugar, and to act as buffer to counteract the changes and adjustments in prices, peso devaluation,
and other variables which cannot be adequately and timely monitored by the legislature. Thus, there
was a need to delegate powers to administrative bodies.21 Petitioners posit that the Universal Charge
is imposed not for a similar purpose.

On the other hand, respondent PSALM through the Office of the Government Corporate Counsel
(OGCC) contends that unlike a tax which is imposed to provide income for public purposes, such as
support of the government, administration of the law, or payment of public expenses, the assailed
Universal Charge is levied for a specific regulatory purpose, which is to ensure the viability of the
country's electric power industry. Thus, it is exacted by the State in the exercise of its inherent police
power. On this premise, PSALM submits that there is no undue delegation of legislative power to the
ERC since the latter merely exercises a limited authority or discretion as to the execution and
implementation of the provisions of the EPIRA.22

Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the Solicitor
General (OSG), share the same view that the Universal Charge is not a tax because it is levied for a
specific regulatory purpose, which is to ensure the viability of the country's electric power industry,
and is, therefore, an exaction in the exercise of the State's police power. Respondents further
contend that said Universal Charge does not possess the essential characteristics of a tax, that its
imposition would redound to the benefit of the electric power industry and not to the public, and that
its rate is uniformly levied on electricity end-users, unlike a tax which is imposed based on the
individual taxpayer's ability to pay. Moreover, respondents deny that there is undue delegation of
legislative power to the ERC since the EPIRA sets forth sufficient determinable standards which
would guide the ERC in the exercise of the powers granted to it. Lastly, respondents argue that the
imposition of the Universal Charge is not oppressive and confiscatory since it is an exercise of the
police power of the State and it complies with the requirements of due process.23

On its part, respondent PECO argues that it is duty-bound to collect and remit the amount pertaining
to the Missionary Electrification and Environmental Fund components of the Universal Charge,
pursuant to Sec. 34 of the EPIRA and the Decisions in ERC Case Nos. 2002-194 and 2002-165.
Otherwise, PECO could be held liable under Sec. 4624 of the EPIRA, which imposes fines and
penalties for any violation of its provisions or its IRR.25

The Issues

The ultimate issues in the case at bar are:


1) Whether or not, the Universal Charge imposed under Sec. 34 of the EPIRA is a tax; and

2) Whether or not there is undue delegation of legislative power to tax on the part of the
ERC.26

Before we discuss the issues, the Court shall first deal with an obvious procedural lapse.

Petitioners filed before us an original action particularly denominated as a Complaint assailing the
constitutionality of Sec. 34 of the EPIRA imposing the Universal Charge and Rule 18 of the EPIRA's
IRR. No doubt, petitioners havelocus standi. They impugn the constitutionality of Sec. 34 of the
EPIRA because they sustained a direct injury as a result of the imposition of the Universal Charge
as reflected in their electric bills.

However, petitioners violated the doctrine of hierarchy of courts when they filed this "Complaint"
directly with us. Furthermore, the Complaint is bereft of any allegation of grave abuse of discretion
on the part of the ERC or any of the public respondents, in order for the Court to consider it as a
petition for certiorari or prohibition.

Article VIII, Section 5(1) and (2) of the 1987 Constitution27 categorically provides that:

SECTION 5. The Supreme Court shall have the following powers:

1. Exercise original jurisdiction over cases affecting ambassadors, other public ministers and
consuls, and over petitions for certiorari, prohibition, mandamus, quo warranto, and habeas
corpus.

2. Review, revise, reverse, modify, or affirm on appeal or certiorari, as the law or the rules of
court may provide, final judgments and orders of lower courts in:

(a) All cases in which the constitutionality or validity of any treaty, international or executive
agreement, law, presidential decree, proclamation, order, instruction, ordinance, or regulation is in
question.

But this Court's jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto,
and habeas corpus, while concurrent with that of the regional trial courts and the Court of Appeals,
does not give litigants unrestrained freedom of choice of forum from which to seek such relief.28 It
has long been established that this Court will not entertain direct resort to it unless the redress
desired cannot be obtained in the appropriate courts, or where exceptional and compelling
circumstances justify availment of a remedy within and call for the exercise of our primary
jurisdiction.29 This circumstance alone warrants the outright dismissal of the present action.

This procedural infirmity notwithstanding, we opt to resolve the constitutional issue raised herein. We
are aware that if the constitutionality of Sec. 34 of the EPIRA is not resolved now, the issue will
certainly resurface in the near future, resulting in a repeat of this litigation, and probably involving the
same parties. In the public interest and to avoid unnecessary delay, this Court renders its ruling now.

The instant complaint is bereft of merit.

The First Issue


To resolve the first issue, it is necessary to distinguish the State’s power of taxation from the police
power.

The power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its very
nature no limits, so that security against its abuse is to be found only in the responsibility of the
legislature which imposes the tax on the constituency that is to pay it.30 It is based on the principle
that taxes are the lifeblood of the government, and their prompt and certain availability is an
imperious need.31 Thus, the theory behind the exercise of the power to tax emanates from necessity;
without taxes, government cannot fulfill its mandate of promoting the general welfare and well-being
of the people.32

On the other hand, police power is the power of the state to promote public welfare by restraining
and regulating the use of liberty and property.33 It is the most pervasive, the least limitable, and the
most demanding of the three fundamental powers of the State. The justification is found in the Latin
maxims salus populi est suprema lex (the welfare of the people is the supreme law) and sic utere tuo
ut alienum non laedas (so use your property as not to injure the property of others). As an inherent
attribute of sovereignty which virtually extends to all public needs, police power grants a wide
panoply of instruments through which the State, as parens patriae, gives effect to a host of its
regulatory powers.34 We have held that the power to "regulate" means the power to protect, foster,
promote, preserve, and control, with due regard for the interests, first and foremost, of the public,
then of the utility and of its patrons.35

The conservative and pivotal distinction between these two powers rests in the purpose for which
the charge is made. If generation of revenue is the primary purpose and regulation is merely
incidental, the imposition is a tax; but if regulation is the primary purpose, the fact that revenue is
incidentally raised does not make the imposition a tax.36

In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police power,
particularly its regulatory dimension, is invoked. Such can be deduced from Sec. 34 which
enumerates the purposes for which the Universal Charge is imposed37 and which can be amply
discerned as regulatory in character. The EPIRA resonates such regulatory purposes, thus:

SECTION 2. Declaration of Policy. — It is hereby declared the policy of the State:

(a) To ensure and accelerate the total electrification of the country;

(b) To ensure the quality, reliability, security and affordability of the supply of electric power;

(c) To ensure transparent and reasonable prices of electricity in a regime of free and fair
competition and full public accountability to achieve greater operational and economic
efficiency and enhance the competitiveness of Philippine products in the global market;

(d) To enhance the inflow of private capital and broaden the ownership base of the power
generation, transmission and distribution sectors;

(e) To ensure fair and non-discriminatory treatment of public and private sector entities in the
process of restructuring the electric power industry;

(f) To protect the public interest as it is affected by the rates and services of electric utilities
and other providers of electric power;
(g) To assure socially and environmentally compatible energy sources and infrastructure;

(h) To promote the utilization of indigenous and new and renewable energy resources in
power generation in order to reduce dependence on imported energy;

(i) To provide for an orderly and transparent privatization of the assets and liabilities of the
National Power Corporation (NPC);

(j) To establish a strong and purely independent regulatory body and system to ensure
consumer protection and enhance the competitive operation of the electricity market; and

(k) To encourage the efficient use of energy and other modalities of demand side
management.

From the aforementioned purposes, it can be gleaned that the assailed Universal Charge is not a
tax, but an exaction in the exercise of the State's police power. Public welfare is surely promoted.

Moreover, it is a well-established doctrine that the taxing power may be used as an implement of
police power.38 In Valmonte v. Energy Regulatory Board, et al.39 and in Gaston v. Republic Planters
Bank,40 this Court held that the Oil Price Stabilization Fund (OPSF) and the Sugar Stabilization Fund
(SSF) were exactions made in the exercise of the police power. The doctrine was reiterated
in Osmeña v. Orbos41 with respect to the OPSF. Thus, we disagree with petitioners that the instant
case is different from the aforementioned cases. With the Universal Charge, a Special Trust Fund
(STF) is also created under the administration of PSALM.42 The STF has some notable
characteristics similar to the OPSF and the SSF, viz.:

1) In the implementation of stranded cost recovery, the ERC shall conduct a review to
determine whether there is under-recovery or over recovery and adjust (true-up) the level of
the stranded cost recovery charge. In case of an over-recovery, the ERC shall ensure that
any excess amount shall be remitted to the STF. A separate account shall be created for
these amounts which shall be held in trust for any future claims of distribution utilities for
stranded cost recovery. At the end of the stranded cost recovery period, any remaining
amount in this account shall be used to reduce the electricity rates to the end-users.43

2) With respect to the assailed Universal Charge, if the total amount collected for the same is
greater than the actual availments against it, the PSALM shall retain the balance within the
STF to pay for periods where a shortfall occurs.44

3) Upon expiration of the term of PSALM, the administration of the STF shall be transferred
to the DOF or any of the DOF attached agencies as designated by the DOF Secretary.45

The OSG is in point when it asseverates:

Evidently, the establishment and maintenance of the Special Trust Fund, under the last paragraph of
Section 34, R.A. No. 9136, is well within the pervasive and non-waivable power and responsibility of
the government to secure the physical and economic survival and well-being of the community, that
comprehensive sovereign authority we designate as the police power of the State.46

This feature of the Universal Charge further boosts the position that the same is an exaction
imposed primarily in pursuit of the State's police objectives. The STF reasonably serves and assures
the attainment and perpetuity of the purposes for which the Universal Charge is imposed, i.e., to
ensure the viability of the country's electric power industry.

The Second Issue

The principle of separation of powers ordains that each of the three branches of government has
exclusive cognizance of and is supreme in matters falling within its own constitutionally allocated
sphere. A logical corollary to the doctrine of separation of powers is the principle of non-delegation of
powers, as expressed in the Latin maxim potestas delegata non delegari potest (what has been
delegated cannot be delegated). This is based on the ethical principle that such delegated power
constitutes not only a right but a duty to be performed by the delegate through the instrumentality of
his own judgment and not through the intervening mind of another. 47

In the face of the increasing complexity of modern life, delegation of legislative power to various
specialized administrative agencies is allowed as an exception to this principle.48 Given the volume
and variety of interactions in today's society, it is doubtful if the legislature can promulgate laws that
will deal adequately with and respond promptly to the minutiae of everyday life. Hence, the need to
delegate to administrative bodies - the principal agencies tasked to execute laws in their specialized
fields - the authority to promulgate rules and regulations to implement a given statute and effectuate
its policies. All that is required for the valid exercise of this power of subordinate legislation is that the
regulation be germane to the objects and purposes of the law and that the regulation be not in
contradiction to, but in conformity with, the standards prescribed by the law. These requirements are
denominated as the completeness test and the sufficient standard test.

Under the first test, the law must be complete in all its terms and conditions when it leaves the
legislature such that when it reaches the delegate, the only thing he will have to do is to enforce it.
The second test mandates adequate guidelines or limitations in the law to determine the boundaries
of the delegate's authority and prevent the delegation from running riot.49

The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34 thereof, is
complete in all its essential terms and conditions, and that it contains sufficient standards.

Although Sec. 34 of the EPIRA merely provides that "within one (1) year from the effectivity thereof,
a Universal Charge to be determined, fixed and approved by the ERC, shall be imposed on all
electricity end-users," and therefore, does not state the specific amount to be paid as Universal
Charge, the amount nevertheless is made certain by the legislative parameters provided in the law
itself. For one, Sec. 43(b)(ii) of the EPIRA provides:

SECTION 43. Functions of the ERC. — The ERC shall promote competition, encourage market
development, ensure customer choice and penalize abuse of market power in the restructured
electricity industry. In appropriate cases, the ERC is authorized to issue cease and desist order after
due notice and hearing. Towards this end, it shall be responsible for the following key functions in
the restructured industry:

xxxx

(b) Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance with
law, a National Grid Code and a Distribution Code which shall include, but not limited to the
following:

xxxx
(ii) Financial capability standards for the generating companies, the TRANSCO, distribution utilities
and suppliers: Provided, That in the formulation of the financial capability standards, the nature and
function of the entity shall be considered: Provided, further, That such standards are set to ensure
that the electric power industry participants meet the minimum financial standards to protect the
public interest. Determine, fix, and approve, after due notice and public hearings the universal
charge, to be imposed on all electricity end-users pursuant to Section 34 hereof;

Moreover, contrary to the petitioners’ contention, the ERC does not enjoy a wide latitude of
discretion in the determination of the Universal Charge. Sec. 51(d) and (e) of the EPIRA50 clearly
provides:

SECTION 51. Powers. — The PSALM Corp. shall, in the performance of its functions and for the
attainment of its objective, have the following powers:

xxxx

(d) To calculate the amount of the stranded debts and stranded contract costs of NPC
which shall form the basis for ERC in the determination of the universal charge;

(e) To liquidate the NPC stranded contract costs, utilizing the proceeds from sales and other
property contributed to it, including the proceeds from the universal charge.

Thus, the law is complete and passes the first test for valid delegation of legislative power.

As to the second test, this Court had, in the past, accepted as sufficient standards the following:
"interest of law and order;"51 "adequate and efficient instruction;"52 "public interest;"53 "justice and
equity;"54 "public convenience and welfare;"55 "simplicity, economy and efficiency;"56 "standardization
and regulation of medical education;"57 and "fair and equitable employment practices."58 Provisions
of the EPIRA such as, among others, "to ensure the total electrification of the country and the
quality, reliability, security and affordability of the supply of electric power"59 and "watershed
rehabilitation and management"60 meet the requirements for valid delegation, as they provide the
limitations on the ERC’s power to formulate the IRR. These are sufficient standards.

It may be noted that this is not the first time that the ERC's conferred powers were challenged.
In Freedom from Debt Coalition v. Energy Regulatory Commission,61 the Court had occasion to say:

In determining the extent of powers possessed by the ERC, the provisions of the EPIRA must not be
read in separate parts. Rather, the law must be read in its entirety, because a statute is passed as a
whole, and is animated by one general purpose and intent. Its meaning cannot to be extracted from
any single part thereof but from a general consideration of the statute as a whole. Considering the
intent of Congress in enacting the EPIRA and reading the statute in its entirety, it is plain to see that
the law has expanded the jurisdiction of the regulatory body, the ERC in this case, to enable the
latter to implement the reforms sought to be accomplished by the EPIRA. When the legislators
decided to broaden the jurisdiction of the ERC, they did not intend to abolish or reduce the powers
already conferred upon ERC's predecessors. To sustain the view that the ERC possesses only the
powers and functions listed under Section 43 of the EPIRA is to frustrate the objectives of the law.

In his Concurring and Dissenting Opinion62 in the same case, then Associate Justice, now Chief
Justice, Reynato S. Puno described the immensity of police power in relation to the delegation of
powers to the ERC and its regulatory functions over electric power as a vital public utility, to wit:
Over the years, however, the range of police power was no longer limited to the preservation of
public health, safety and morals, which used to be the primary social interests in earlier times. Police
power now requires the State to "assume an affirmative duty to eliminate the excesses and injustices
that are the concomitants of an unrestrained industrial economy." Police power is now exerted "to
further the public welfare — a concept as vast as the good of society itself." Hence, "police power is
but another name for the governmental authority to further the welfare of society that is the basic end
of all government." When police power is delegated to administrative bodies with regulatory
functions, its exercise should be given a wide latitude. Police power takes on an even broader
dimension in developing countries such as ours, where the State must take a more active role in
balancing the many conflicting interests in society. The Questioned Order was issued by the ERC,
acting as an agent of the State in the exercise of police power. We should have exceptionally good
grounds to curtail its exercise. This approach is more compelling in the field of rate-regulation of
electric power rates. Electric power generation and distribution is a traditional instrument of
economic growth that affects not only a few but the entire nation. It is an important factor in
encouraging investment and promoting business. The engines of progress may come to a
screeching halt if the delivery of electric power is impaired. Billions of pesos would be lost as a result
of power outages or unreliable electric power services. The State thru the ERC should be able to
exercise its police power with great flexibility, when the need arises.

This was reiterated in National Association of Electricity Consumers for Reforms v. Energy
Regulatory Commission63 where the Court held that the ERC, as regulator, should have sufficient
power to respond in real time to changes wrought by multifarious factors affecting public utilities.

From the foregoing disquisitions, we therefore hold that there is no undue delegation of legislative
power to the ERC.

Petitioners failed to pursue in their Memorandum the contention in the Complaint that the imposition
of the Universal Charge on all end-users is oppressive and confiscatory, and amounts to taxation
without representation. Hence, such contention is deemed waived or abandoned per Resolution64 of
August 3, 2004.65 Moreover, the determination of whether or not a tax is excessive, oppressive or
confiscatory is an issue which essentially involves questions of fact, and thus, this Court is precluded
from reviewing the same.66

As a penultimate statement, it may be well to recall what this Court said of EPIRA:

One of the landmark pieces of legislation enacted by Congress in recent years is the EPIRA. It
established a new policy, legal structure and regulatory framework for the electric power industry.
The new thrust is to tap private capital for the expansion and improvement of the industry as the
large government debt and the highly capital-intensive character of the industry itself have long been
acknowledged as the critical constraints to the program. To attract private investment, largely
foreign, the jaded structure of the industry had to be addressed. While the generation and
transmission sectors were centralized and monopolistic, the distribution side was fragmented with
over 130 utilities, mostly small and uneconomic. The pervasive flaws have caused a low utilization of
existing generation capacity; extremely high and uncompetitive power rates; poor quality of service
to consumers; dismal to forgettable performance of the government power sector; high system
losses; and an inability to develop a clear strategy for overcoming these shortcomings.

Thus, the EPIRA provides a framework for the restructuring of the industry, including the
privatization of the assets of the National Power Corporation (NPC), the transition to a competitive
structure, and the delineation of the roles of various government agencies and the private entities.
The law ordains the division of the industry into four (4) distinct sectors, namely: generation,
transmission, distribution and supply.
Corollarily, the NPC generating plants have to privatized and its transmission business spun off and
privatized thereafter.67

Finally, every law has in its favor the presumption of constitutionality, and to justify its nullification,
there must be a clear and unequivocal breach of the Constitution and not one that is doubtful,
speculative, or argumentative.68Indubitably, petitioners failed to overcome this presumption in favor
of the EPIRA. We find no clear violation of the Constitution which would warrant a pronouncement
that Sec. 34 of the EPIRA and Rule 18 of its IRR are unconstitutional and void.

WHEREFORE, the instant case is hereby DISMISSED for lack of merit.

SO ORDERED.
ROMEO P. GEROCHI v. DEPARTMENT OF ENERGY, GR NO. 159796, 2007-07-17

Facts:
EPIRA
Universal Charge... respondent Panay Electric Company, Inc. (PECO) charged petitioner Romeo
P. Gerochi and all other... end-users with the Universal Charge as reflected in their respective
electric bills starting from the month of July 2003.[17]
The power to tax is strictly a... legislative function and as such, the delegation of said power to
any executive or administrative agency like the ERC is unconstitutional, giving the same
unlimited authority
The assailed provision clearly provides that the Universal Charge is to be determined, fixed
and... approved by the ERC, hence leaving to the latter complete discretionary legislative
authority.
Universal Charge has the characteristics of a tax and is collected to fund the operations of the
NPC.
unlike a tax which is imposed to provide income for public purposes, such as support of the
government, administration of the law, or payment of public expenses, the... assailed Universal
Charge is levied for a specific regulatory purpose, which is to ensure the viability of the country's
electric power industry.
Respondents Department of Energy (DOE), ERC, and NPC, through the Office of the Solicitor
General (OSG), share the same view that the Universal Charge is not a tax because it is levied
for a specific regulatory purpose, which is to ensure the viability of the country's electric... power
industry, and is, therefore, an exaction in the exercise of the State's police power
Within six (6) months from the effectivity of this Act, promulgate and enforce, in accordance
with law, a National Grid Code and a Distribution Code which shall include, but not limited to
the followin
Issues:
Universal Charge imposed under Sec. 34 of the EPIRA is a tax... undue delegation of legislative
power to tax... power of taxation from the police power.
Ruling:
In exacting the assailed Universal Charge through Sec. 34 of the EPIRA, the State's police
power, particularly its regulatory dimension, is invoked.
it can be gleaned that the assailed Universal Charge is not a tax, but an exaction in the exercise of
the State's police power. Public welfare is surely promoted.
The Court finds that the EPIRA, read and appreciated in its entirety, in relation to Sec. 34
thereof, is complete in all its essential terms and conditions, and that it contains sufficient
standards.
the law is complete and passes the first test for valid delegation of legislative power.
we therefore hold that there is no undue delegation of legislative power to the ERC.
every law has in its favor the presumption of constitutionality, and to justify its nullification,
there must be a clear and unequivocal breach of the Constitution and not one that is doubtful,
speculative, or argumentative
Principles:
The power to tax is an incident of sovereignty and is unlimited in its range, acknowledging in its
very nature no limits, so that security against its abuse is to be found only in the responsibility of
the legislature which imposes the tax on the constituency that is to pay... it.
police power is the power of the state to promote public welfare by restraining and regulating the
use of liberty and property.
, police power grants a wide panoply of instruments through which the State, as parens patriae,
gives effect to a host of its regulatory powers.[
The conservative and pivotal distinction between these two powers rests in the purpose for which
the charge is made
If generation of revenue is the primary purpose and regulation is merely incidental, the
imposition is a tax... but if regulation is the primary purpose, the fact... that revenue is
incidentally raised does not make the imposition a tax.[36]... it is a well-established doctrine that
the taxing power may be used as an implement of police power.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-10405 December 29, 1960

WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal, petitioner-


appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-
appellees.

Asst. Fiscal Noli M. Cortes and Jose P. Santos for appellant.


Office of the Asst. Solicitor General Jose G. Bautista and Solicitor A. A. Torres for appellee.

CONCEPCION, J.:

Appeal, by petitioner Wenceslao Pascual, from a decision of the Court of First Instance of Rizal,
dismissing the above entitled case and dissolving the writ of preliminary injunction therein issued,
without costs.

On August 31, 1954, petitioner Wenceslao Pascual, as Provincial Governor of Rizal, instituted this
action for declaratory relief, with injunction, upon the ground that Republic Act No. 920, entitled "An
Act Appropriating Funds for Public Works", approved on June 20, 1953, contained, in section 1-C (a)
thereof, an item (43[h]) of P85,000.00 "for the construction, reconstruction, repair, extension and
improvement" of Pasig feeder road terminals (Gen. Roxas — Gen. Araneta — Gen. Lucban — Gen.
Capinpin — Gen. Segundo — Gen. Delgado — Gen. Malvar — Gen. Lim)"; that, at the time of the
passage and approval of said Act, the aforementioned feeder roads were "nothing but projected and
planned subdivision roads, not yet constructed, . . . within the Antonio Subdivision . . . situated at . . .
Pasig, Rizal" (according to the tracings attached to the petition as Annexes A and B, near Shaw
Boulevard, not far away from the intersection between the latter and Highway 54), which projected
feeder roads "do not connect any government property or any important premises to the main
highway"; that the aforementioned Antonio Subdivision (as well as the lands on which said feeder
roads were to be construed) were private properties of respondent Jose C. Zulueta, who, at the time
of the passage and approval of said Act, was a member of the Senate of the Philippines; that on
May, 1953, respondent Zulueta, addressed a letter to the Municipal Council of Pasig, Rizal, offering
to donate said projected feeder roads to the municipality of Pasig, Rizal; that, on June 13, 1953, the
offer was accepted by the council, subject to the condition "that the donor would submit a plan of the
said roads and agree to change the names of two of them"; that no deed of donation in favor of the
municipality of Pasig was, however, executed; that on July 10, 1953, respondent Zulueta wrote
another letter to said council, calling attention to the approval of Republic Act. No. 920, and the sum
of P85,000.00 appropriated therein for the construction of the projected feeder roads in question;
that the municipal council of Pasig endorsed said letter of respondent Zulueta to the District
Engineer of Rizal, who, up to the present "has not made any endorsement thereon" that inasmuch
as the projected feeder roads in question were private property at the time of the passage and
approval of Republic Act No. 920, the appropriation of P85,000.00 therein made, for the
construction, reconstruction, repair, extension and improvement of said projected feeder roads, was
illegal and, therefore, void ab initio"; that said appropriation of P85,000.00 was made by Congress
because its members were made to believe that the projected feeder roads in question were "public
roads and not private streets of a private subdivision"'; that, "in order to give a semblance of legality,
when there is absolutely none, to the aforementioned appropriation", respondents Zulueta executed
on December 12, 1953, while he was a member of the Senate of the Philippines, an alleged deed of
donation — copy of which is annexed to the petition — of the four (4) parcels of land constituting
said projected feeder roads, in favor of the Government of the Republic of the Philippines; that said
alleged deed of donation was, on the same date, accepted by the then Executive Secretary; that
being subject to an onerous condition, said donation partook of the nature of a contract; that, such,
said donation violated the provision of our fundamental law prohibiting members of Congress from
being directly or indirectly financially interested in any contract with the Government, and, hence, is
unconstitutional, as well as null and void ab initio, for the construction of the projected feeder roads
in question with public funds would greatly enhance or increase the value of the aforementioned
subdivision of respondent Zulueta, "aside from relieving him from the burden of constructing his
subdivision streets or roads at his own expense"; that the construction of said projected feeder roads
was then being undertaken by the Bureau of Public Highways; and that, unless restrained by the
court, the respondents would continue to execute, comply with, follow and implement the
aforementioned illegal provision of law, "to the irreparable damage, detriment and prejudice not only
to the petitioner but to the Filipino nation."

Petitioner prayed, therefore, that the contested item of Republic Act No. 920 be declared null and
void; that the alleged deed of donation of the feeder roads in question be "declared unconstitutional
and, therefor, illegal"; that a writ of injunction be issued enjoining the Secretary of Public Works and
Communications, the Director of the Bureau of Public Works and Highways and Jose C. Zulueta
from ordering or allowing the continuance of the above-mentioned feeder roads project, and from
making and securing any new and further releases on the aforementioned item of Republic Act No.
920, and the disbursing officers of the Department of Public Works and Highways from making any
further payments out of said funds provided for in Republic Act No. 920; and that pending final
hearing on the merits, a writ of preliminary injunction be issued enjoining the aforementioned parties
respondent from making and securing any new and further releases on the aforesaid item of
Republic Act No. 920 and from making any further payments out of said illegally appropriated funds.

Respondents moved to dismiss the petition upon the ground that petitioner had "no legal capacity to
sue", and that the petition did "not state a cause of action". In support to this motion, respondent
Zulueta alleged that the Provincial Fiscal of Rizal, not its provincial governor, should represent the
Province of Rizal, pursuant to section 1683 of the Revised Administrative Code; that said respondent
is " not aware of any law which makes illegal the appropriation of public funds for the improvements
of . . . private property"; and that, the constitutional provision invoked by petitioner is inapplicable to
the donation in question, the same being a pure act of liberality, not a contract. The other
respondents, in turn, maintained that petitioner could not assail the appropriation in question
because "there is no actual bona fide case . . . in which the validity of Republic Act No. 920 is
necessarily involved" and petitioner "has not shown that he has a personal and substantial interest"
in said Act "and that its enforcement has caused or will cause him a direct injury."

Acting upon said motions to dismiss, the lower court rendered the aforementioned decision, dated
October 29, 1953, holding that, since public interest is involved in this case, the Provincial Governor
of Rizal and the provincial fiscal thereof who represents him therein, "have the requisite
personalities" to question the constitutionality of the disputed item of Republic Act No. 920; that "the
legislature is without power appropriate public revenues for anything but a public purpose", that the
instructions and improvement of the feeder roads in question, if such roads where private property,
would not be a public purpose; that, being subject to the following condition:
The within donation is hereby made upon the condition that the Government of the Republic
of the Philippines will use the parcels of land hereby donated for street purposes only and for
no other purposes whatsoever; it being expressly understood that should the Government of
the Republic of the Philippines violate the condition hereby imposed upon it, the title to the
land hereby donated shall, upon such violation, ipso facto revert to the DONOR, JOSE C.
ZULUETA. (Emphasis supplied.)

which is onerous, the donation in question is a contract; that said donation or contract is "absolutely
forbidden by the Constitution" and consequently "illegal", for Article 1409 of the Civil Code of the
Philippines, declares in existence and void from the very beginning contracts "whose cause, objector
purpose is contrary to law, morals . . . or public policy"; that the legality of said donation may not be
contested, however, by petitioner herein, because his "interest are not directly affected" thereby; and
that, accordingly, the appropriation in question "should be upheld" and the case dismissed.

At the outset, it should be noted that we are concerned with a decision granting the aforementioned
motions to dismiss, which as much, are deemed to have admitted hypothetically the allegations of
fact made in the petition of appellant herein. According to said petition, respondent Zulueta is the
owner of several parcels of residential land situated in Pasig, Rizal, and known as the Antonio
Subdivision, certain portions of which had been reserved for the projected feeder roads
aforementioned, which, admittedly, were private property of said respondent when Republic Act No.
920, appropriating P85,000.00 for the "construction, reconstruction, repair, extension and
improvement" of said roads, was passed by Congress, as well as when it was approved by the
President on June 20, 1953. The petition further alleges that the construction of said roads, to be
undertaken with the aforementioned appropriation of P85,000.00, would have the effect of relieving
respondent Zulueta of the burden of constructing his subdivision streets or roads at his own
expenses, 1and would "greatly enhance or increase the value of the subdivision" of said respondent.
The lower court held that under these circumstances, the appropriation in question was "clearly for a
private, not a public purpose."

Respondents do not deny the accuracy of this conclusion, which is self-evident. 2However,
respondent Zulueta contended, in his motion to dismiss that:

A law passed by Congress and approved by the President can never be illegal because
Congress is the source of all laws . . . Aside from the fact that movant is not aware of any law
which makes illegal the appropriation of public funds for the improvement of what we, in the
meantime, may assume as private property . . . (Record on Appeal, p. 33.)

The first proposition must be rejected most emphatically, it being inconsistent with the nature of the
Government established under the Constitution of the Republic of the Philippines and the system of
checks and balances underlying our political structure. Moreover, it is refuted by the decisions of this
Court invalidating legislative enactments deemed violative of the Constitution or organic laws. 3

As regards the legal feasibility of appropriating public funds for a public purpose, the principle
according to Ruling Case Law, is this:

It is a general rule that the legislature is without power to appropriate public revenue for
anything but a public purpose. . . . It is the essential character of the direct object of the
expenditure which must determine its validity as justifying a tax, and not the magnitude of the
interest to be affected nor the degree to which the general advantage of the community, and
thus the public welfare, may be ultimately benefited by their promotion. Incidental to the
public or to the state, which results from the promotion of private interest and the prosperity
of private enterprises or business, does not justify their aid by the use public money. (25
R.L.C. pp. 398-400; Emphasis supplied.)

The rule is set forth in Corpus Juris Secundum in the following language:

In accordance with the rule that the taxing power must be exercised for public purposes only,
discussed suprasec. 14, money raised by taxation can be expended only for public purposes
and not for the advantage of private individuals. (85 C.J.S. pp. 645-646; emphasis supplied.)

Explaining the reason underlying said rule, Corpus Juris Secundum states:

Generally, under the express or implied provisions of the constitution, public funds may be
used only for public purpose. The right of the legislature to appropriate funds is correlative
with its right to tax, and, under constitutional provisions against taxation except for public
purposes and prohibiting the collection of a tax for one purpose and the devotion thereof to
another purpose, no appropriation of state funds can be made for other than for a public
purpose.

xxx xxx xxx

The test of the constitutionality of a statute requiring the use of public funds is whether the
statute is designed to promote the public interest, as opposed to the furtherance of the
advantage of individuals, although each advantage to individuals might incidentally serve the
public. (81 C.J.S. pp. 1147; emphasis supplied.)

Needless to say, this Court is fully in accord with the foregoing views which, apart from being
patently sound, are a necessary corollary to our democratic system of government, which, as such,
exists primarily for the promotion of the general welfare. Besides, reflecting as they do, the
established jurisprudence in the United States, after whose constitutional system ours has been
patterned, said views and jurisprudence are, likewise, part and parcel of our own constitutional law. lawphil.net

This notwithstanding, the lower court felt constrained to uphold the appropriation in question, upon
the ground that petitioner may not contest the legality of the donation above referred to because the
same does not affect him directly. This conclusion is, presumably, based upon the following
premises, namely: (1) that, if valid, said donation cured the constitutional infirmity of the
aforementioned appropriation; (2) that the latter may not be annulled without a previous declaration
of unconstitutionality of the said donation; and (3) that the rule set forth in Article 1421 of the Civil
Code is absolute, and admits of no exception. We do not agree with these premises.

The validity of a statute depends upon the powers of Congress at the time of its passage or
approval, not upon events occurring, or acts performed, subsequently thereto, unless the latter
consists of an amendment of the organic law, removing, with retrospective operation, the
constitutional limitation infringed by said statute. Referring to the P85,000.00 appropriation for the
projected feeder roads in question, the legality thereof depended upon whether said roads were
public or private property when the bill, which, latter on, became Republic Act 920, was passed by
Congress, or, when said bill was approved by the President and the disbursement of said sum
became effective, or on June 20, 1953 (see section 13 of said Act). Inasmuch as the land on which
the projected feeder roads were to be constructed belonged then to respondent Zulueta, the result is
that said appropriation sought a private purpose, and hence, was null and void. 4 The donation to
the Government, over five (5) months after the approval and effectivity of said Act, made, according
to the petition, for the purpose of giving a "semblance of legality", or legalizing, the appropriation in
question, did not cure its aforementioned basic defect. Consequently, a judicial nullification of said
donation need not precede the declaration of unconstitutionality of said appropriation.

Again, Article 1421 of our Civil Code, like many other statutory enactments, is subject to exceptions.
For instance, the creditors of a party to an illegal contract may, under the conditions set forth in
Article 1177 of said Code, exercise the rights and actions of the latter, except only those which are
inherent in his person, including therefore, his right to the annulment of said contract, even though
such creditors are not affected by the same, except indirectly, in the manner indicated in said legal
provision.

Again, it is well-stated that the validity of a statute may be contested only by one who will sustain a
direct injury in consequence of its enforcement. Yet, there are many decisions nullifying, at the
instance of taxpayers, laws providing for the disbursement of public funds, 5upon the theory that "the
expenditure of public funds by an officer of the State for the purpose of administering
an unconstitutional act constitutes a misapplication of such funds," which may be enjoined at the
request of a taxpayer. 6Although there are some decisions to the contrary, 7the prevailing view in the
United States is stated in the American Jurisprudence as follows:

In the determination of the degree of interest essential to give the requisite standing to attack
the constitutionality of a statute, the general rule is that not only persons individually affected,
but also taxpayers, have sufficient interest in preventing the illegal expenditure of moneys
raised by taxation and may therefore question the constitutionality of statutes requiring
expenditure of public moneys. (11 Am. Jur. 761; emphasis supplied.)

However, this view was not favored by the Supreme Court of the U.S. in Frothingham vs. Mellon
(262 U.S. 447), insofar as federal laws are concerned, upon the ground that the relationship of a
taxpayer of the U.S. to its Federal Government is different from that of a taxpayer of a municipal
corporation to its government. Indeed, under the composite system of government existing in the
U.S., the states of the Union are integral part of the Federation from an international viewpoint, but,
each state enjoys internally a substantial measure of sovereignty, subject to the limitations imposed
by the Federal Constitution. In fact, the same was made by representatives of each state of the
Union, not of the people of the U.S., except insofar as the former represented the people of the
respective States, and the people of each State has, independently of that of the others, ratified said
Constitution. In other words, the Federal Constitution and the Federal statutes have become binding
upon the people of the U.S. in consequence of an act of, and, in this sense, through the respective
states of the Union of which they are citizens. The peculiar nature of the relation between said
people and the Federal Government of the U.S. is reflected in the election of its President, who is
chosen directly, not by the people of the U.S., but by electors chosen by each State, in such manner
as the legislature thereof may direct (Article II, section 2, of the Federal Constitution).lawphi1.net

The relation between the people of the Philippines and its taxpayers, on the other hand, and the
Republic of the Philippines, on the other, is not identical to that obtaining between the people and
taxpayers of the U.S. and its Federal Government. It is closer, from a domestic viewpoint, to that
existing between the people and taxpayers of each state and the government thereof, except that
the authority of the Republic of the Philippines over the people of the Philippines is more fully
direct than that of the states of the Union, insofar as the simple and unitary type of our national
government is not subject to limitations analogous to those imposed by the Federal Constitution
upon the states of the Union, and those imposed upon the Federal Government in the interest of the
Union. For this reason, the rule recognizing the right of taxpayers to assail the constitutionality of a
legislation appropriating local or state public funds — which has been upheld by the Federal
Supreme Court (Crampton vs. Zabriskie, 101 U.S. 601) — has greater application in the Philippines
than that adopted with respect to acts of Congress of the United States appropriating federal funds.
Indeed, in the Province of Tayabas vs. Perez (56 Phil., 257), involving the expropriation of a land by
the Province of Tayabas, two (2) taxpayers thereof were allowed to intervene for the purpose of
contesting the price being paid to the owner thereof, as unduly exorbitant. It is true that in
Custodio vs. President of the Senate (42 Off. Gaz., 1243), a taxpayer and employee of the
Government was not permitted to question the constitutionality of an appropriation for backpay of
members of Congress. However, in Rodriguez vs. Treasurer of the Philippines and
Barredo vs.Commission on Elections (84 Phil., 368; 45 Off. Gaz., 4411), we entertained the action of
taxpayers impugning the validity of certain appropriations of public funds, and invalidated the same.
Moreover, the reason that impelled this Court to take such position in said two (2) cases — the
importance of the issues therein raised — is present in the case at bar. Again, like the petitioners in
the Rodriguez and Barredo cases, petitioner herein is not merely a taxpayer. The Province of Rizal,
which he represents officially as its Provincial Governor, is our most populated political
subdivision, 8and, the taxpayers therein bear a substantial portion of the burden of taxation, in the
Philippines.

Hence, it is our considered opinion that the circumstances surrounding this case sufficiently justify
petitioners action in contesting the appropriation and donation in question; that this action should not
have been dismissed by the lower court; and that the writ of preliminary injunction should have been
maintained.

Wherefore, the decision appealed from is hereby reversed, and the records are remanded to the
lower court for further proceedings not inconsistent with this decision, with the costs of this instance
against respondent Jose C. Zulueta. It is so ordered.
WENCESLAO PASCUAL, in his official capacity as Provincial Governor of Rizal, petitioner-
appellant,
vs.
THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, ET AL., respondents-
appellees.
Facts:
110 Phil. 331 – Political Law – Appropriation For Private Use Not Allowed
In 1953, Republic Act No. 920 was passed. This law appropriated P85,000.00 “for the
construction, reconstruction, repair, extension and improvement Pasig feeder road
terminals”. Wenceslao Pascual, then governor of Rizal, assailed the validity of the law. He
claimed that the appropriation was actually going to be used for private use for the terminals
sought to be improved were part of the Antonio Subdivision. The said Subdivision is owned
by Senator Jose Zulueta who was a member of the same Senate that passed and approved
the same RA. Pascual claimed that Zulueta misrepresented in Congress the fact that he
owns those terminals and that his property would be unlawfully enriched at the expense of
the taxpayers if the said RA would be upheld. Pascual then prayed that the Secretary of
Public Works and Communications be restrained from releasing funds for such purpose.
Zulueta, on the other hand, perhaps as an afterthought, donated the said property to the
City of Pasig.
ISSUE: Whether or not the appropriation is valid.
HELD: No, the appropriation is void for being an appropriation for a private purpose. The
subsequent donation of the property to the government to make the property public does
not cure the constitutional defect. The fact that the law was passed when the said property
was still a private property cannot be ignored. “In accordance with the rule that the taxing
power must be exercised for public purposes only, money raised by taxation can be
expanded only for public purposes and not for the advantage of private individuals.”
Inasmuch as the land on which the projected feeder roads were to be constructed
belonged then to Zulueta, the result is that said appropriation sought a private purpose, and,
hence, was null and void.
Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. L-4817 May 26, 1954

SILVESTER M. PUNSALAN, ET AL., plaintiffs-appellants,


vs.
THE MUNICIPAL BOARD OF THE CITY OF MANILA, ET AL., defendants-appellants.

Calanog and Alafriz for plaintiffs-appellants.


City Fiscal Eugenio Angeles and Assistant Fiscal Eulogio S. Serreno for defendants-appellants.

REYES, J.:

This suit was commenced in the Court of First Instance of Manila by two lawyers, a medical
practitioner, a public accountant, a dental surgeon and a pharmacist, purportedly "in their own behalf
and in behalf of other professionals practising in the City of Manila who may desire to join it." Object
of the suit is the annulment of Ordinance No. 3398 of the City of Manila together with the provision of
the Manila charter authorizing it and the refund of taxes collected under the ordinance but paid under
protest.

The ordinance in question, which was approved by the municipal board of the City of Manila on July
25, 1950, imposes a municipal occupation tax on persons exercising various professions in the city
and penalizes non-payment of the tax "by a fine of not more than two hundred pesos or by
imprisonment of not more than six months, or by both such fine and imprisonment in the discretion of
the court." Among the professions taxed were those to which plaintiffs belong. The ordinance was
enacted pursuant to paragraph (1) of section 18 of the Revised Charter of the City of Manila (as
amended by Republic Act No. 409), which empowers the Municipal Board of said city to impose a
municipal occupation tax, not to exceed P50 per annum, on persons engaged in the various
professions above referred to.

Having already paid their occupation tax under section 201 of the National Internal Revenue Code,
plaintiffs, upon being required to pay the additional tax prescribed in the ordinance, paid the same
under protest and then brought the present suit for the purpose already stated. The lower court
upheld the validity of the provision of law authorizing the enactment of the ordinance but declared
the ordinance itself illegal and void on the ground that the penalty there in provided for non-payment
of the tax was not legally authorized. From this decision both parties appealed to this Court, and the
only question they have presented for our determination is whether this ruling is correct or not, for
though the decision is silent on the refund of taxes paid plaintiffs make no assignment of error on
this point.

To begin with defendants' appeal, we find that the lower court was in error in saying that the
imposition of the penalty provided for in the ordinance was without the authority of law. The last
paragraph (kk) of the very section that authorizes the enactment of this tax ordinance (section 18 of
the Manila Charter) in express terms also empowers the Municipal Board "to fix penalties for the
violation of ordinances which shall not exceed to(sic) two hundred pesos fine or six months"
imprisonment, or both such fine and imprisonment, for a single offense." Hence, the pronouncement
below that the ordinance in question is illegal and void because it imposes a penalty not authorized
by law is clearly without basis.
As to plaintiffs' appeal, the contention in substance is that this ordinance and the law authorizing it
constitute class legislation, are unjust and oppressive, and authorize what amounts to double
taxation.

In raising the hue and cry of "class legislation", the burden of plaintiffs' complaint is not that the
professions to which they respectively belong have been singled out for the imposition of this
municipal occupation tax; and in any event, the Legislature may, in its discretion, select what
occupations shall be taxed, and in the exercise of that discretion it may tax all, or it may select for
taxation certain classes and leave the others untaxed. (Cooley on Taxation, Vol. 4, 4th ed., pp.
3393-3395.) Plaintiffs' complaint is that while the law has authorized the City of Manila to impose the
said tax, it has withheld that authority from other chartered cities, not to mention municipalities. We
do not think it is for the courts to judge what particular cities or municipalities should be empowered
to impose occupation taxes in addition to those imposed by the National Government. That matter is
peculiarly within the domain of the political departments and the courts would do well not to
encroach upon it. Moreover, as the seat of the National Government and with a population and
volume of trade many times that of any other Philippine city or municipality, Manila, no doubt, offers
a more lucrative field for the practice of the professions, so that it is but fair that the professionals in
Manila be made to pay a higher occupation tax than their brethren in the provinces.

Plaintiffs brand the ordinance unjust and oppressive because they say that it creates discrimination
within a class in that while professionals with offices in Manila have to pay the tax, outsiders who
have no offices in the city but practice their profession therein are not subject to the tax. Plaintiffs
make a distinction that is not found in the ordinance. The ordinance imposes the tax upon every
person "exercising" or "pursuing" — in the City of Manila naturally — any one of the occupations
named, but does not say that such person must have his office in Manila. What constitutes exercise
or pursuit of a profession in the city is a matter of judicial determination. The argument against
double taxation may not be invoked where one tax is imposed by the state and the other is imposed
by the city (1 Cooley on Taxation, 4th ed., p. 492), it being widely recognized that there is nothing
inherently obnoxious in the requirement that license fees or taxes be exacted with respect to the
same occupation, calling or activity by both the state and the political subdivisions thereof. (51 Am.
Jur., 341.)

In view of the foregoing, the judgment appealed from is reversed in so far as it declares Ordinance
No. 3398 of the City of Manila illegal and void and affirmed in so far as it holds the validity of the
provision of the Manila charter authorizing it. With costs against plaintiffs-appellants.

Pablo, Bengzon, Montemayor, Jugo, Bautista Angelo, Labrador, and Concepcion, JJ., concur.

Separate Opinions

PARAS, C.J., dissenting:

I am constrained to dissent from the decision of the majority upon the ground that the Municipal
Board of Manila cannot outlaw what Congress of the Philippines has already authorized. The
plaintiffs-appellants — two lawyers, a physician, an accountant, a dentist and a pharmacist — had
already paid the occupation tax under section 201 of the National Internal Revenue Code and are
thereby duly licensed to practice their respective professions throughout the Philippines; and yet
they had been required to pay another occupation tax under Ordinance No. 3398 for practising in the
City of Manila. This is a glaring example of contradiction — the license granted by the National
Government is in effect withdrawn by the City in case of non-payment of the tax under the
ordinance. I fit be argued that the national occupation tax is collected to allow the professional
residing in Manila to pursue his calling in other places in the Philippines, it should then be exacted
only from professionals practising simultaneously in and outside of Manila. At any rate, we are
confronted with the following situation: Whereas the professionals elsewhere pay only one
occupation tax, in the City of Manila they have to pay two, although all are on equal footing insofar
as opportunities for earning money out of their pursuits are concerned. The statement that practice
in Manila is more lucrative than in the provinces, may be true perhaps with reference only to a
limited few, but certainly not to the general mass of practitioners in any field. Again, provincial
residents who have occasional or isolated practice in Manila may have to pay the city tax. This
obvious discrimination or lack of uniformity cannot be brushed aside or justified by any trite
pronouncement that double taxation is legitimate or that legislation may validly affect certain classes.

My position is that a professional who has paid the occupation tax under the National Internal
Revenue Code should be allowed to practice in Manila even without paying the similar tax imposed
by Ordinance No. 3398. The City cannot give what said professional already has. I would not say
that this Ordinance, enacted by the Municipal Board pursuant to paragraph 1 of section 18 of the
Revised Charter of Manila, as amended by Republic Act No. 409, empowering the Board to impose
a municipal occupation tax not to exceed P50 per annum, is invalid; but that only one tax, either
under the Internal Revenue Code or under Ordinance No. 3398, should be imposed upon a
practitioner in Manila.
PUNSALAN VS. MUNICIPAL BOARD OF MANILA [95 PHIL
46; NO.L-4817; 26 MAY 1954]

Facts: Petitioners, who are professionals in the city, assail Ordinance No.
3398 together with the law authorizing it (Section 18 of the Revised Charter of
the City of Manila). The ordinance imposes a municipal occupation tax on
persons exercising various professions in the city and penalizes non-payment of
the same. The law authorizing said ordinanceempowers the Municipal Board of
the city to impose a municipal occupation tax on persons engaged in various
professions. Petitioners, having already paid their occupation tax under section
201 of the NationalInternal Revenue Code, paid the tax under protest as
imposed by Ordinance No. 3398. The lower court declared the
ordinance invalid and affirmed the validity of the law authorizing it.

Issue: Whether or Not the ordinance and law authorizing it constitute class
legislation, and authorize what amounts to double taxation.

Held: The Legislature may, in its discretion, select what occupations shall be
taxed, and in its discretion may tax all, or select classes of occupation for
taxation, and leave others untaxed. It is not for the courts to judge which cities
or municipalities should be empowered to imposeoccupation taxes aside from
that imposed by the National Government. That matter is within the domain of
political departments. The argument against double taxation may not be
invoked if one tax is imposed by the state and the other is imposed by the city.
It is widely recognized that there is nothing inherently terrible in the
requirement that taxes be exacted with respect to the same occupation by both
the state and the political subdivisions thereof. Judgment of the lower court is
reversed with regards to the ordinance and affirmed as to the law authorizing it.