Hacienda Luisita Inc. (HLI) v. Presidential Agrarian Reform Council (PARC), et al.

,
G.R. No. 171101, November 22, 2011

FACTS:

On July 5, 2011, the Supreme Court en banc voted unanimously (11-0) to

DISMISS/DENY the petition filed by HLI and AFFIRM with MODIFICATIONS the resolutions
of the PARC revoking HLI’s Stock Distribution Plan (SDP) and placing the subject lands in
Hacienda Luisita under compulsory coverage of the Comprehensive Agrarian Reform Program
(CARP) of the government.

The Court however did not order outright land distribution. Voting 6-5, the Court noted
that there are operative facts that occurred in the interim and which the Court cannot validly
ignore. Thus, the Court declared that the revocation of the SDP must, by application of the
operative fact principle, give way to the right of the original 6,296 qualified farmworkers-
beneficiaries (FWBs) to choose whether they want to remain as HLI stockholders or [choose
actual land distribution]. It thus ordered the Department of Agrarian Reform (DAR)
to “immediately schedule meetings with the said 6,296 FWBs and explain to them the effects,
consequences and legal or practical implications of their choice, after which the FWBs will be
asked to manifest, in secret voting, their choices in the ballot, signing their signatures or placing
their thumbmarks, as the case may be, over their printed names.”

The parties thereafter filed their respective motions for reconsideration of the Court decision.

ISSUES:

(1) Is the operative fact doctrine available in this case?

(2) Is Sec. 31 of RA 6657 unconstitutional?
(3) Can’t the Court order that DAR’s compulsory acquisition of Hacienda Lusita cover the
full 6,443 hectares allegedly covered by RA 6657 and previously held by Tarlac Development
Corporation (Tadeco), and not just the 4,915.75 hectares covered by HLI’s SDP?
(4) Is the date of the “taking” (for purposes of determining the just compensation payable to
HLI) November 21, 1989, when PARC approved HLI’s SDP?
(5) Has the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed
on May 10, 1999 (since Hacienda Luisita were placed under CARP coverage through the SDOA
scheme on May 11, 1989), and thus the qualified FWBs should now be allowed to sell their land
interests in Hacienda Luisita to third parties, whether they have fully paid for the lands or not?
(6) THE CRUCIAL ISSUE: Should the ruling in the July 5, 2011 Decision that the qualified
FWBs be given an option to remain as stockholders of HLI be reconsidered?
RULING:

[The Court PARTIALLY GRANTED the motions for reconsideration of respondents

PARC, et al. with respect to the option granted to the original farmworkers-beneficiaries (FWBs)
of Hacienda Luisita to remain with petitioner HLI, which option the Court
thereby RECALLED and SET ASIDE. It reconsidered its earlier decision that the qualified
FWBs should be given an option to remain as stockholders of HLI, and UNANIMOUSLY
directed immediate land distribution to the qualified FWBs.]

1. YES, the operative fact doctrine is applicable in this case.

[The Court maintained its stance that the operative fact doctrine is applicable in this case since,
contrary to the suggestion of the minority, the doctrine is not limited only to invalid or
unconstitutional laws but also applies to decisions made by the President or the administrative
agencies that have the force and effect of laws. Prior to the nullification or recall of said
decisions, they may have produced acts and consequences that must be respected. It is on this
score that the operative fact doctrine should be applied to acts and consequences that resulted
from the implementation of the PARC Resolution approving the SDP of HLI. The majority
stressed that the application of the operative fact doctrine by the Court in its July 5, 2011
decision was in fact favorable to the FWBs because not only were they allowed to retain the
benefits and homelots they received under the stock distribution scheme, they were also given the
option to choose for themselves whether they want to remain as stockholders of HLI or not.]

2. NO, Sec. 31 of RA 6657 NOT unconstitutional.

[The Court maintained that the Court is NOT compelled to rule on the constitutionality of Sec.
31 of RA 6657, reiterating that it was not raised at the earliest opportunity and that the
resolution thereof is not the lis mota of the case. Moreover, the issue has been rendered moot
and academic since SDO is no longer one of the modes of acquisition under RA 9700. The
majority clarified that in its July 5, 2011 decision, it made no ruling in favor of the
constitutionality of Sec. 31 of RA 6657, but found nonetheless that there was no apparent grave
violation of the Constitution that may justify the resolution of the issue of constitutionality.]

3. NO, the Court CANNOT order that DAR’s compulsory acquisition of Hacienda Lusita
cover the full 6,443 hectares and not just the 4,915.75 hectares covered by HLI’s SDP.

[Since what is put in issue before the Court is the propriety of the revocation of the SDP, which
only involves 4,915.75 has. of agricultural land and not 6,443 has., then the Court is constrained
to rule only as regards the 4,915.75 has. of agricultural land.Nonetheless, this should not
prevent the DAR, under its mandate under the agrarian reform law, from subsequently
subjecting to agrarian reform other agricultural lands originally held by Tadeco that were
allegedly not transferred to HLI but were supposedly covered by RA 6657.

However since the area to be awarded to each FWB in the July 5, 2011 Decision appears too
restrictive – considering that there are roads, irrigation canals, and other portions of the land
that are considered commonly-owned by farmworkers, and these may necessarily result in the
decrease of the area size that may be awarded per FWB – the Court reconsiders its Decision and
resolves to give the DAR leeway in adjusting the area that may be awarded per FWB in case the
number of actual qualified FWBs decreases. In order to ensure the proper distribution of the
agricultural lands of Hacienda Luisita per qualified FWB, and considering that matters
involving strictly the administrative implementation and enforcement of agrarian reform laws
are within the jurisdiction of the DAR, it is the latter which shall determine the area with which
each qualified FWB will be awarded.

On the other hand, the majority likewise reiterated its holding that the 500-hectare portion of
Hacienda Luisita that have been validly converted to industrial use and have been acquired by
intervenors Rizal Commercial Banking Corporation (RCBC) and Luisita Industrial Park
Corporation (LIPCO), as well as the separate 80.51-hectare SCTEX lot acquired by the
government, should be excluded from the coverage of the assailed PARC resolution. The Court
however ordered that the unused balance of the proceeds of the sale of the 500-hectare
converted land and of the 80.51-hectare land used for the SCTEX be distributed to the FWBs.]

4. YES, the date of “taking” is November 21, 1989, when PARC approved HLI’s SDP.

[For the purpose of determining just compensation, the date of “taking” is November 21, 1989
(the date when PARC approved HLI’s SDP) since this is the time that the FWBs were considered
to own and possess the agricultural lands in Hacienda Luisita. To be precise, these lands
became subject of the agrarian reform coverage through the stock distribution scheme only upon
the approval of the SDP, that is, on November 21, 1989. Such approval is akin to a notice of
coverage ordinarily issued under compulsory acquisition. On the contention of the minority
(Justice Sereno) that the date of the notice of coverage [after PARC’s revocation of the SDP],
that is, January 2, 2006, is determinative of the just compensation that HLI is entitled to receive,
the Court majority noted that none of the cases cited to justify this position involved the stock
distribution scheme. Thus, said cases do not squarely apply to the instant case. The foregoing
notwithstanding, it bears stressing that the DAR's land valuation is only preliminary and is not,
by any means, final and conclusive upon the landowner. The landowner can file an original
action with the RTC acting as a special agrarian court to determine just compensation. The
court has the right to review with finality the determination in the exercise of what is admittedly
a judicial function.]

5. NO, the 10-year period prohibition on the transfer of awarded lands under RA 6657 has
NOT lapsed on May 10, 1999; thus, the qualified FWBs should NOT yet be allowed to sell
their land interests in Hacienda Luisita to third parties.

[Under RA 6657 and DAO 1, the awarded lands may only be transferred or conveyed after 10
years from the issuance and registration of the emancipation patent (EP) or certificate of land
ownership award (CLOA). Considering that the EPs or CLOAs have not yet been issued to the
qualified FWBs in the instant case, the 10-year prohibitive period has not even started.
Significantly, the reckoning point is the issuance of the EP or CLOA, and not the placing of the
agricultural lands under CARP coverage. Moreover, should the FWBs be immediately allowed
the option to sell or convey their interest in the subject lands, then all efforts at agrarian reform
would be rendered nugatory, since, at the end of the day, these lands will just be transferred to
persons not entitled to land distribution under CARP.]

6. YES, the ruling in the July 5, 2011 Decision that the qualified FWBs be given an option to
remain as stockholders of HLI should be reconsidered.
[The Court reconsidered its earlier decision that the qualified FWBs should be given an option
to remain as stockholders of HLI, inasmuch as these qualified FWBs will never gain control
[over the subject lands] given the present proportion of shareholdings in HLI. The Court noted
that the share of the FWBs in the HLI capital stock is [just] 33.296%. Thus, even if all the
holders of this 33.296% unanimously vote to remain as HLI stockholders, which is unlikely,
control will never be in the hands of the FWBs. Control means the majority of [sic] 50% plus at
least one share of the common shares and other voting shares. Applying the formula to the HLI
stockholdings, the number of shares that will constitute the majority is 295,112,101 shares
(590,554,220 total HLI capital shares divided by 2 plus one [1] HLI share). The 118,391,976.85
shares subject to the SDP approved by PARC substantially fall short of the 295,112,101 shares
needed by the FWBs to acquire control over HLI.]
 REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL POWER
CORPORATION, Petitioner, vs.HEIRS OF SATURNINO Q. BORBON, AND COURT
OF APPEALS, Respondents.

G.R. No.: 165354

Date: 12 January 2015
Ponente: Bersamin, J.

Facts:

NAPOCOR entered a property located in Barangay San Isidro, Batangas City in order to
construct and maintain transmission lines. Respondents heirs of Saturnino Q. Borbon owned the
property. NAPOCOR filed a complaint for expropriation in the Regional Trial Court in Batangas
City (RTC), seeking the acquisition of an easement of right of way over a portion of the
property.

The respondents staunchly maintained that NAPOCOR had not negotiated with them before
entering the property and that the entry was done without their consent; 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.

During the pendency of an appeal, NAPOCOR filed a Manifestation and Motion to Discontinue
Expropriation Proceedings, informing 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; 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.

Issue:

Whether or not the expropriation proceedings should be discontinued or dismissed

pending appeal.

Ruling:

The dismissal of the proceedings for expropriation at the instance of NAPOCOR is

proper, but, conformably with Section 4, 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.” 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. These
requirements partake the nature of implied conditions that should be complied with to enable the
condemnor to keep the property expropriated.

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. “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., 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.

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.

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.
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. 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.

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 until the time of restoration of the possession by
paying to them actual or other compensatory damages.

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. The court of origin shall
treat the case as if originally filed as an action for damages.
 LAND BANK OF THE PHILIPPINES vs. DALAUTA
G.R. No. 190004

This is an action for determination of just compensation.

FACTS:

Respondent was the registered owner of an agricultural land in Butuan City with an area
of 25.2160 hectares and which was placed by DAR under compulsory acquisition of CARP as
reflected in the Notice of Coverage. Petitioner LBP offered ₱192,782.59 as compensation for the
land, but Dalauta rejected such valuation for being too low.

The case was referred to the DAR Adjudication Board (DARAB) through the Provincial Agrarian
Reform Adjudicator (PARAD) of Butuan City, who affirmed the valuation made by LBP, after a
summary administrative proceeding was conducted.

Respondent filed a petition for determination of just compensation with the RTC, sitting as SAC.
He alleged that LBP’s valuation of the land was inconsistent with the rules and regulations
prescribed in DAR Administrative Order (A.O.) No. 06, series of 1992, for determining the just
compensation of lands covered by CARP’s compulsory acquisition scheme.

The Board of Commissioners constituted by SAC inspected the land and recommended that the
value of the land be pegged at ₱100,000.00 per hectarei in which both parties objected.

DAR Admin. Order No. 06 (1992) – II (A)

There shall be one basic formula for the valuation of lands covered by VOS or CA regardless of
the date of offer or coverage of the claim:

LV = (CNI x 0.6) + (CS x 0.3) + (MV x 0.1)

Where: LV = Land Value; CNI = Capitalized Net Income; CS = Comparable Sales; MV =

Market Value per Tax Declaration

The above formula shall be used if all the three factors are present, relevant, and applicable.

A.1 When the CS factor is not present and CNI and MV are applicable, the formula shall
be: LV=(CNI x 0.9) + (MV x 0.1)

A.2 When the CNI factor is not present, and CS and MV are applicable, the formula shall
be: LV = (CS x 0.9) + (MV x 0.1)

A.3 When both the CS and CNI are not present and only MV is applicable, the formula shall
be: LV = MV x 2
A.4 In all the above, the computed value using the applicable formula or the Declared Value
by Landowner (DV), whichever is lower, shall be adopted as the Land Value.

xxx

Dalauta claimed that he had a net income of Php350,000.00 in 1993 from sales of trees to one
person, Fonacier, thus the formula of LV = CNI x 0.9 + MV x 0.1 should be used, which yields
a total value of ₱2,639,557.oo.

LBP alleged that the land had no income and the corn production found during the ocular
inspection in 1994 was only for family consumption. Thus they used the formula LV= MVx
2 which yielded a total value of ₱192,782.59.

ISSUE:

Whether or not respondent is considered the trial court correctly computed the just
compensation of the subject property.

RULING:

Upon an assiduous assessment of the different valuations arrived at by the DAR, the SAC
and the CA, the Court agrees with the position of Justice Francis Jardeleza that just
compensation for respondent Dalauta’s land should be computed based on the formula
provided under DAR-LBP Joint Memorandum Circular No. 11, series of 2003 (JMC No. 11
(2003)). This Memorandum Circular, which provides for the specific guidelines for properties
with standing commercial trees, explains:

The Capitalized Net Income (CNI) approach to land valuation assumes that there would be
uniform streams of future income that would be realized in perpetuity from the
seasonal/permanent crops planted to the land. In the case of commercial trees (hardwood and
soft wood species), however, only a one-time income is realized when the trees are due for
harvest. The regular CNI approach in the valuation of lands planted to commercial trees
would therefore not apply. (Emphasis and underscoring supplied.)

Dalauta’s sale of falcata trees indeed appears to be a one-time transaction. He did not claim to
have derived any other income from the property prior to receiving the Notice of Coverage from
the DAR in February 1994. For this reason, his property would be more appropriately covered by
the formula provided under JMC No. 11 (2003).

Dalauta alleges to have sold all the falcata trees in the property to Fonacier in 1993. After
Fonacier finished harvesting in January 1994, he claims that, per advice of his lawyer, he
immediately caused the date of effectivity of this Joint Memorandum Circular x x x.” It is
submitted, however, that applying the above formula to compute just compensation for
respondent’s land would be the most equitable course of action under the circumstances. Without
JMC No. 11 (2003), Dalauta’s property would have to be valued using the formula for idle lands,
the CNI and CS factors not being applicable. Following this formula, just compensation for
Dalauta’s property would only amount to ₱225,300.00, computed as follows:

LV = MVx2

Where: LV = Land Value; MV = Market Value per Tax Declaration*

 For the area planted to corn, ₱7,740.00/hectare

 For idle/pasture land, ₱3,890/hectare

Thus:

For the 4 hectares planted to corn: LV = (P7, 7 40/hectare x 4 hectares) x 2 = ₱61,920.00

For the 21 hectares of idle/pasture land: LV = (₱3,890/hectare x 21) x 2 = ₱163,380.00

Total Land Value = P61,920.00 + Pl63,380.00 = P225,300.00

 REPUBLIC, as represented by the NIA vs. CA and FRANCISCO DIAZ
G.R. No. 147245. March 31, 2005

Facts:

Manuel Diaz owned approximately 172 hectares of property devoted to the planting of palay.
The property was located in La Fuente, Sta. Rosa, Nueva Ecija, and allegedly yielded between
132 to 200 cavans of palay per hectare every year. After Manuel Diaz’s death, his son, Franciso
Diaz, was appointed administrator of the property.

In 1972, the National Irrigation Administration bulldozed ten (10) hectares of the Property to
build two irrigation canals. Although the canals when finished occupied only a portion of the 10
hectares, the entire area became prone to flooding two months out of every year because of the
side-burrow method NIA used in the construction of the canals. NIA completed the canals
without instituting expropriation proceedings or indemnifying the property’s owners. Respondent
then sought compensation from NIA for the land affected by the canals, as well as for losses due
to unrealized profits. In 1980, NIA belatedly offered to buy the portions of the Property occupied
by the canals pursuant to NIA’s expansion program. The 1980 deeds of sale were never
implemented. Respondent did not receive any consideration pursuant to these deeds. On 20
August 1993, respondent, as administrator of the Property, filed an action for damages and just
compensation against NIA. NIA countered that respondent’s right to bring the action had
prescribed in accordance with RA 3601, as amended by PD 552. NIA also argued that
respondent’s failure to pursue the implementation of the 1980 deeds of sale amounted to laches.

Issue: Whether or not prescription or laches bars the respondent’s right to just compensation.

Held:

The principle of laches finds no application in the present case. There is nothing
inequitable in giving due course to respondent’s claim for compensation. Both equity and the law
direct that a property owner should be compensated if his property is taken for public use.

Eminent domain is the inherent power of a sovereign state to appropriate private property to
particular uses to promote public welfare. No one questions NIA’s authority to exercise the
delegated power of eminent domain. However, the power of eminent domain is not limitless.
NIA cannot exercise the power with wanton disregard for property rights. One basic limitation
on the State’s power of eminent domain is the constitutional directive that, “private property
shall not be taken for public use without just compensation.”

The thirteen-year interval between the execution of the 1980 deeds of sale and the 1993 filing of
the complaint does not bar the claim for compensation. This Court reiterated 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.
 The Municipality of Lucban vs. National Waterworks and Sewerage Authority,
G.R. No. L-15525,
October 11,1961

Facts:

The Municipality of Lucban (Lucban) has always managed and controlled the
operation of its water system, known as Apolinario de la Cruz Waterworks System since its
creation in 1920. It has also controlled the appointment of its personnel. The operating
income and expenses of its water system have always been regulated or disposed of by the
municipality's council. After the enactment of Republic Act No. 1383, Lucban's municipal
council passed Municipal Resolution No. 27 of January 31,1956, indicating to the National
Waterworks and Sewerage Authority (NAWASA) its refusal to transfer to the latter its
municipal water system.

In disregard of the aforesaid resolution, Gregorio V. Isana, Municipal Treasurer of

Lucban, transferred to NAWASA all the assets and equipment of the Apolinario de la Cruz
Waterworks System. On February 15,7956, Lucban passed Resolution No. 35 disapproving
or rejecting the transfer of its water system to NAWASA by its former Municipal Treasurer.
The Municipality of Lucban filed a case against NAWASA. Lucban prayed that (1)
the provisions of Sections 1, 8 and 9 of RA 1383 and those executive orders and circulars
providing for the transfer of the ownership and operation of the waterworks of municipalities
to the NAWASA, be declared unconstitutional; and (2) the NAWASA and its agents be
enjoined from assuming the ownership and operation of Lucban's waterworks.

Lower Court's Ruling: The CFI declared Republic Act No. 1383 as unconstitutional in so
far as it vests on the NAWASA ownership of the waterworks system of municipalities, chartered
cities and provinces without compensation. The court declared Lucban the owner of the
Lucban waterworks system and ordered the NAWASA to render an accounting of the
revenues it had received from the operation of the said waterworks system.
The CFI further held that the construction and maintenance of a waterworks system is
a purely corporate or business function of a municipal corporation, distinct and separate from
its governmental functions; that such property like those owned by private individuals is not
subject to the unrestricted authority of the Legislature, except by the exercise of eminent
domain and upon full payment ofjust compensation. Inasmuch as under Section 8, RA 1383,
Lucban will be credited by NAWASA on its book with an equivalent value merely in the
form of book entry, payment not being in the form of money, the requirements for a valid
exercise of the right of eminent domain were not complied with. The State's police power is
never intended as a substitute for just compensation in eminent domain proceedings, because
liability to the exercise of police power rests entirely on different considerations, and the
power does not extend so far as to include the acquisition of property without compensation.

Issues:
1. Whether municipal waterworks systems are public in character and are therefore
subject to legislative control;
2. Whether Republic Act No. 1383 is a legitimate exercise of police power; and
3. Whether the State can legislate over a municipal waterworks system and exercise the
right of eminent domain if the latter is not public property.
MDG-F 19L9; Enhancing Access to and Provision of Water Services with the Active
Participation of the Poor
for the Compilation and Analysis of Jurisprudence on Water Supply
Case Digests with Analysis of Development

Supreme Court's Ruling:

The Supreme Court affirmed the CFI's ruling and decided in favor
of the Lucban. The waterworks system is patrimonial property. Although it is open to the public,
the system serves only those who pay its charges. RA1383 is not a valid exercise of police
power because while the power to enact laws intended to promote public ordern safety, health,
morals and general welfare of society is inherent in every sovereign state, such power is not
without limitations, notable among which is the constitutional prohibition against the taking
of private property for public use without just compensation." [Art. III, Sec. 1, Constitution of
the Philippines.l For lack of provision regarding effective payment of just compensation,
RAl383 was declared violative of the Constitution in the case ofCity of Baguio v.
NAWASA.