FUNDAMENTAL POWERS OF THE STATE

a. Power of Eminent Domain

G.R. No. 113194 March 11, 1996

NATIONAL POWER CORPORATION, petitioner,

vs.
COURT OF APPEALS and MACAPANTON MANGONDATO, respondents.

PANGANIBAN, J.:p

At what point in time should the value of the land subject of expropriation be computed: at the
date of the "taking'" or the date of the filing of the complaint for eminent domain? This is the
main question posed by the parties in this petition for review on certiorari assailing the
Decision1 of the Court of Appeals2 which affirmed in toto the decision of the Regional Trial
Court of Marawi City3. The dispositive portion of the decision of the trial court reads:4

WHEREFORE, the prayer in the recovery case for Napocor's surrender of the property is denied
but Napocor is ordered to pay monthly rentals in the amount of P15,000.00 from 1978 up to July
1992 with 12% interest per annum from which sun the amount of P2,199,500.00 should be
deducted; and the property is condemned in favor of Napocor effective July 1992 upon payment
of the fair market value of the property at One Thousand (P1,000.00) Pesos per square meter or
a total of Twenty-One Million Nine Hundred Ninety-five Thousand (P21,995.000.00) Pesos.

SO ORDERED. Cost against NAPOCOR.

The Facts

The facts are undisputed by both the petitioner and the private respondent,5 and are quoted
from the Decision of the respondent Court6, as follows:

In 1978, National Power Corporation (NAPOCOR), took possession of a 21,995 square meter
land which is a portion of Lot 1 of the subdivision plan (LRC) Psd-116159 situated in Marawi
City, owned by Mangondato, and covered by Transfer Certificate Title No. T-378-A, under the
mistaken belief that it forms part of the public land reserved for use by NAPOCOR for
hydroelectric power purposes under Proclamation No. 1354 of the President of the Philippines
dated December 3, 1974.

NAPOCOR alleged that the subject land was until then possessed and administered by Marawi
City so that in exchange for the city's waiver and quitclaim of any right over the property,
NAPOCOR had paid the city a "financial assistance" of P40.00 per square meter.

In 1979, when NAPOCOR Started building its Agus I (HE Hydroelectric Plant) Project,
Mangondato demanded compensation from NAPOCOR. NAPOCOR refused to compensate
insisting that the property is public land and that it had already paid "financial assistance" to
Marawi City in exchange for the rights over the property.

Mangondato claimed that the subject land is his duly registered private property covered by
Transfer Certificate of Title No. T-378-A in his name, and that he is not privy to any agreement
between NAPOCOR and Marawi City and that any payment made to said city cannot be
considered as payment to him.

More than a decade later NAPOCOR acceded to the fact that the property belongs to
Mangondato.

At the outset, in March, 1990, NAPOCOR's regional legal counsel, pursuant to Executive Order
No. 329 dated July 11, 1988 requested Marawi City's City Appraisal Committee to appraise the
market value of the property in Saduc, Marawi City affected by the infrastructure projects of
NAPOCOR without specifying any particular land-owner . The City Appraisal Committee in its
Minutes dated March 8, 1990, fixed the fair market value as follows:7

Land Fair Market Value Per Sq. M.

Price Per Sq. M. Price per Sq. M.

Along the City Not in the City

National Highway National Highway

P150 Residential Lot P100

P250 Commercial Lot P180

P300 Industrial Lot P200

On July 13, 1990, NAPOCOR's National Power Board (hereafter NAPOCOR's board) passed
Resolution No. 90-225 resolving to pay Mangondato P100.00 per square meter for only a
12,132 square meter portion of the subject property plus 12% interest per annum from 1978.
However, in the August 7, 1990 board meeting, confirmation of said resolution was deferred to
allow NAPOCOR's regional legal counsel to determine whether P100.00 per square meter is the
fair market value. (Records, Civil Case No. 606-92 p. 45).

On August 14, 1990, NAPOCOR's board passed Resolution No. 90-316 resolving that
Mangondato be paid the base price of P40.00 per square meter for the 12,132 square meter
portion (P485,280,001 plus 12% interest per annum from 1978 (P698,808.00) pending the
determination whether P100.00 per square meter is the fair market value of the property (id.).

Pursuant to the aforementioned resolution Mangondato was paid P1,184,088.00 (id., p. 58).

NAPOCOR's regional legal counsel's findings embodied in 2 memoranda to NAPOCOR's

general counsel (dated January 29, 1991 and February 19, 1991) state that Mangondato's
property is classified as industrial, that the market value of industrial lots In Marawi City when
NAPOCOR took possession is P300,00 for those along the national highway and that on the
basis of recent Supreme Court decisions, NAPOCOR has to pay not less than P300.00 square
meter. NAPOCOR's general counsel incorporated the foregoing findings in his report to the
board plus the data that the area possessed by NAPOCOR is 21,995 square meters, and that
the legal rate of interest per annum from the time of the taking of the property alleged to be in
1978, is 12%, but recommended to the board that the fair market value of the property is
P100.00 per square meter; NAPOCOR's board on May 17, 1991 passed Resolution No. 91,247
resolving to pay Mangondato P100.00 per square meter for the property excluding 12% interest
per annum (id., pp. 50-52).

In a letter dated December 17, 1991, Mangondato disagreed with the NAPOCOR board's
Resolution No. 91-247 pegging the compensation for his land at P100.000 per square meter
without interest from 1978. Mangondato submitted that the fair market value of his land is even
more than the P300.00 (per) square meter stated in the City Appraisal Report but that for
expediency, he is willing to settle for P300.00 per square meter plus 12% interest per annum
from 1978 (id., pp. 53-59).
In another letter dated February 4, 1992, Mangondato reiterated his disagreement to the
P100.00 per square meter compensation without interest. At the same time, to get partial
payment, he asked that he be paid in the meantime, P100.00 per square meter without
prejudice to pursuing his claim for the proper and just compensation plus interest thereon (id., p.
60).

On February 12, 1992, NAPOCOR's general counsel filed a memorandum for its president
finding no legal impediment if they, in the meantime were to pay Mangondato P100.00 per
square meter without prejudice to the final determination of the proper and just compensation by
the board inasmuch as the regional counsel submitted to him (general counsel) 2 memoranda
stating that the appraisal of industrial lots in Marawi City when NAPOCOR took possession is
P300.00 per square meter for those along the national highway and P200.00 per square meter
for those not along the highway, and that NAPOCOR has to pay not less than P300.00 per
square meter plus 12% interest on the basis of recent Supreme Court decisions. Further, the
general counsel submitted that since the board has already set the purchase price at P100.00
per square meter (Resolution No. 91-247), NAPOCOR would not be prejudiced thereby (id., pp.
60-62).

In March, 1992, the parties executed a Deed of Sale Of A Registered Property where
NAPOCOR acceded to Mangondato's request of provisional payment of P100.00 per square
meter excluding interest and without prejudice to Mangondato's pursuance of claims for just
compensation and interest. Mangondato was paid P1,015,412.00 in addition to the
P,184,088.00 earlier paid to him by NAPOCOR which payments total P2,199,500.00 for the
12,995 square meter land (Records, Civil Case No. 610-92, pp. 85-87).

In his letter to NAPOCOR's president dated April 20, 1992, Mangondato asked for the payment
of P300.00 per square meter plus 12% interest per annum from 1978. NAPOCOR's president,
in his memorandum to the board dated April 24, 1993 recommended the approval of
Mangodato's request (Records, Civil Case No. 605-92, pp. 63-69).

On May 25, 1992, NAPOCOR's board passed Resolution No. 92-121 granting its president the
authority to negotiate for the payment of P100.00 per square meter for the land plus 12%
interest per annum from 1978 less the payments already made to Mangondato and to Marawi
City on the portion of his land, and with the provisos that said authorized payment shall be
effected only after Agus I HE Project has been placed in operation and that said payment shall
be covered by a deed of absolute sale with a quitclaim executed by Mangondato (id., pp. 70-
71).

On July 7, 1992, Mangondato filed before the lower court Civil Case No. 605-92 against
NAPOCOR seeking to recover the possession of the property described in the complaint as
Lots 1 and 3 of the subdivision plan (LRC) Psd-116159 against NAPOCOR, the payment of a
monthly rent of P15,000.00 from 1978 until the surrender of the property, attorney's fees and
costs, and the issuance of a temporary restraining order and a writ of preliminary mandatory
injunction to restrain NAPOCOR from proceeding with any construction and/or improvements on
Mangondato's land or from committing any act of dispossession (id., pp. 1-8).

The temporary restraining order was issued by the lower court. Anent the prayer for the writ of
preliminary mandatory injunction, NAPOCOR filed its Opposition thereto on July 23, 1992 (id.,
pp. 17-20).

Before the lower court could resolve the pending incident on the writ of preliminary mandatory
injunction, and instead of filing a motion to dismiss, NAPOCOR, on July 27, 1992, filed also
before the lower court, Civil Case No. 610-92 which is a Complaint for eminent domain against
Mangondato over the subject property (Records, Civil Case No. 610-92, pp. 1-3) .

On the same date Mangondato filed his Manifestation in Lieu of Answer contending that the
negotiations for payment made by NAPOCOR were "virtual dictations" on a ''take it or leave it"
basis; that he was given the "run-around" by NAPOCOR for 15 years; so that there was no
agreement reached as to payment because of NAPOCOR's insistence of its own determination
of the price; that he treats the P2,199,500.00 so far received by him as partial payment for the
rent for the use of his property. Mangondato prayed that he be compensated in damages for the
unauthorized taking and continued possession of his land from 1978 until the filing of the
Complaiant (sic) in the expropriation case; that should the lower court order the expropriation of
the subject property, that the just compensation for the land be reckoned from the time of the
filing of the expropriation case; that the expropriation case can be consolidated with the
recovery of possession case; that the restraining order issued in the recovery of possession
case be maintained and a writ of preliminary injunction be at once issued against NAPOCOR;
and that the NAPOCOR be ordered to deposit the value of the land as provisionally determined
by the lower court (id., pp. 4-5).

Upon agreement of the parties, the 2 cases were ordered consolidated and the lower court
appointed the following commissioners; Atty. Saipal Alawi, representing the lower court; Atty.
Connie Doromal, representing NAPOCOR; and Mr. Alimbsar A. Ali, from the City Assessor's
Office to ascertain and report to the court the just compensation (id., pp. 6-7).

The lower court ordered NAPOCOR to deposit with the Philippine National Bank the amount of
P10, 997,500.00, provisionally fixing the value of the land at P500.00 per square meter P100.00
lower than the assessed value of the land appearing in Tax Declaration No. 0873 for 1992
which was used as basis by the lower court (id., p. 8).
In its Motion for Reconsideration of the Order For Provisional Deposit[,] NAPOCOR opposed the
provisional value quoted by the lower court saying that the basis of the provisional value of the
land should be the assessed value of the property as of the time of the taking which in this case
is 1978 when the assessed value of the land under Tax Declaration No. 7394 was P100 per
square meter (id., pp. 28-32). In reply, Mangondato filed his Opposition to Motion For
Reconsideration Of the Order For Provisional Deposit (id., pp. 44-46). However, the lower court
did not rule on the provisional value to be deposited and chose to go right into the determination
of just compensation on that the "provisional valuation could not be decided without going into
the second phase of expropriation case which is the determination by the court of the just
compensation for the property soguht (sic) to be taken (NPC vs. Jocson, supra)" (Decision, p.
5.)

On August 5, 1992, Mangondato filed a Motion To Dismiss in the expropriation case alleging
that NAPOCOR filed its Complaint for eminent domain not for the legitimate aim of pursuing
NAPOCOR's business and purpose but to legitimize a patently illegal possession and at the
same time continue dictating its own valuation of the property. Said motion was however, later
withdrawn by Mangondato (id., pp. 37-39 and 47).

In the meanwhile, the commissioners filed their respective reports. On July 28, 1992,
Commissioner Doromal filed his report recommending a fair market value of P300.00 per
square meter as of November 23, 1978, (id., pp. 11-27). On August 6, 1992, Commissioners
Alawi and Ali filed their joint report recommending a fair market value of P1,000.00 per square
meter as of 1992 (id., pp. 40-42).

After the parties filed their respective comments to commissioners' reports. On August 21, 1992,
the lower court rendered its decision denying Mangondato recovery of possession of the
property but ordering NAPOCOR to pay a monthly rent of P15,000.00 from 1978 up to July
1992 with 12% interest per annum and condemning the property in favor of NAPOCOR effective
July, 1992 upon payment of P1,000.00 per square meter or a total of P21,995,000.00 as just
compensation.

Mangondato filed a Motion For Partial Execution Pending Appeal which was granted by the
lower court in an Order dated September 15, 1992 (id., pp. 151-152 and 157-160). However, on
appeal by NAPOCOR via a Petition For Certiorari in CA-G.R. SP No. 28971 to this Court, said
Order was annulled and set aside (Rollo, pp. 30-37).

NAPOCOR filed a Motion For Reconsideration of the decision alleging that the fair market value
of the property at the time it was taken allegedly in 1978 is P40.00 per square meter. After
Mangondato filed his Opposition To Motion For Reconsideration the lower court denied
NAPOCOR's motion for reconsideration in an Order date September 15, 1992 (Records, Civil
Case No. 610-92, pp. 145-149).
In the meanwhile, on August 7, 1992, Mangondato filed and Ex-Parte Manifestation To Correct
Clerical Error of Description of Property submitting that Lot 3 which does not form part of the
subject property was included in the Complaint because clerical error inadvertently committed
by the typist who continuously copied the description of the property covered by Transfer
Certificate of Title No. T-378-A, and thus praying that the portion of the Complaint describing Lot
3 be deleted (Records, Civil Case No. 605-92, p. 22).

On August 12, 1992, the intervenors filed their Motion For Intervention and Intervention claiming
interest against each of the parties on the ground that Lot 3 which is included in the Complaint
has since been conveyed by Mangondato to their predecessors-in-interest and that they are
entitled to just compensation from NAPOCOR is entitled to expropriate the entire area described
in the Complaint (id., pp. 23-34).

In an Order dated August 19, 1992 the lower court granted intervenor's Motion For Intervention
(id., p. 72).

On August 25, 1992, the lower court ordered the delegation of the portion in the Complaint
describing Lot 3 and declared that intervenors' Motion For Intervention has become moot (id., p.
82).

On October 13, 1992 the intervenors filed their Motion To Reconsider the Order Of August 25,
1992 and the Decision Dated August 21, 1992 which was however denied by the lower court in
an Order dated November 26, 1992 (id., pp. 162-184).

The Issues

Two errors were raised before this Court by the petitioner, thus:8

ASSIGNMENT OF ERRORS

THE RESPONDENT COURT ERRED IN AFFIRMING THAT THE JUST COMPENSATION

FOR THE PROPERTY IS ITS VALUE IN 1992, WHEN THE COMPLAINT WAS FILED, AND
NOT ITS VALUE IN 1978, WHEN THE PROPERTY WAS TAKEN BY PETITION.
THE COURT ERRED IN FIXING THE VALUE OF JUST COMPENSATION AT P1,000.00 PER
SQUARE METER INSTEAD OF P40.00 PER SQUARE METER.

The petitioner summarized the two issues it raised by asking "whether or not the respondent
court was justified in deviating from the wall-settled doctrine that just compensation is the
equivalent of the value of the property taken for public use reckoned from the time of taking;"9 in
his Comment, private respondent worded the issues as follows 10:

. . . As stated by the respondent court, Napocor, in its appeal —

. . .avers that the taking of the property (sic) should not be reckoned as of the year 1992 when
NAPOCOR filed its Complaint for eminent domain but as of the year 1978 when it took
possession of the property, and that the just compensation, determined as it should be, on the
basis of the value of the property as of 1978, as P40.00 per square meter.

The petitioner, after failing to persuade both lower courts, reiterated before us its proposition
(with cited cases) "that when the taking of property precedes the filing of the judicial proceeding,
the value of the property at the time it was taken shall be the basis for the payment of just
compensation". 11

The First Issue: Date of Taking or Date of Suit?

The general rule in determining "just compensation" in eminent domain is the value of the
property as of the date of the filing of complaint, as follows 12:

Sec. 4. Order of Condemnation. When such a motion is overruled or when any party fails to
defend as required by this rule, the court may enter an order 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. . . . (Emphasis supplied).

Normally, the time of the taking coincides with the filing of the complaint for expropriation.
Hence, many rulings of this Court have equated just compensation with the value of the
property as of the time of filing of the complaint consistent with the above provision of the Rules.
So too, where the institution of the action precedes entry into the property, the just
compensation is to be ascertained as of the time of the filing of the complaint. 13
The general rule, however, admits of an exception where this Court fixed the value of the
property as of the date, it was taken and not at the date of the commencement of the
expropriation proceedings.

In the old case of Provincial Government of Rizal vs. Caro de

Araullo 14, the Court ruled that ". . . the owners of the land have no right to recover damages for
this unearned increment resulting from the construction of the public improvement (lengthening
of Taft Avenue from Manila to Pasay) for which the land was taken. To permit them to do so
would be to allow them to recover more than the value of the land at the time when it was taken,
which is the true measure of the damages, or just compensation, and would discourage the
construction of important public improvements."

In subsequent cases 15 the Court, following the above doctrine, invariably held that the time of
taking is the critical date in determining lawful or just compensation. Justifying this stance, Mr.
Justice (later Chief Justice) Enrique Fernando, speaking for the Court in Municipality of La
Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan 16, said, ". . . the owner as is the
constitutional intent, is paid what he is entitled to according to the value of the property so
devoted to public use as of the date of the taking. From that time, he had been deprived thereof.
He had no choice but to submit. He is not, however, to be despoiled of such a right. No less
than the fundamental law guarantee's just compensation. It would be an injustice to him
certainly if from such a period, he could not recover the value of what was lost. There could be
on the other hand, injustice to the expropriator if by a delay in the collection, the increment in
price would accrue to the owner. The doctrine to which this Court has been committed is
intended precisely to avoid either contingency fraught with unfairness."

Simply stated, the exception finds application where the owner would be given undue
incremental advantages arising from the use to which the government devotes the property
expropriated — as for instance, the extension of a main thoroughfare as was the case in Caro
de Araullo. In the instant case, however, it is difficult to conceive of how there could have been
an extra-ordinary increase in the value of the owner's land arising from the expropriation, as
indeed the records do not show any evidence that the valuation of P1,000.00 reached in 1992
was due to increments directly caused by petitioner's use of the land. Since the petitioner is
claiming an exception to Rule 67, Section 4, 17 it has the burden of proving its claim that its
occupancy and use — not ordinary inflation and increase in land values — was the direct cause
of the increase in valuation from 1978 to 1992.

Side Issue: When is There, "Taking" of Property?

But there is yet another cogent reason why this petition should be denied and why the
respondent Court should be sustained. An examination of the undisputed factual environment
would show that the "taking" was not really made in 1973.
This Court has defined the elements of ''taking" as the main ingredient in the exercise of power
of eminent domain, 18 in the following words:

A number of circumstances must be present in the "taking" of property for purposes of eminent
domain: (1) the expropriator must enter a private property; (2) the entrance into private property
must be for more than a momentary period; (3) the entry into the property should be under
warrant or color of legal authority; (4) the property must be devoted to a public use or otherwise
informally appropriated or injuriously affected; and (5) the utilization of the property for public
use must be in such a way to oust the owner and deprive him of all beneficial enjoyment of the
property. (Emphasis supplied)

In this case, the petitioner's entrance in 1978 was without intent to expropriate or was not made
under warrant or color of legal authority, for it believed the property was public land covered by
proclamation No. 1354. When the private respondent raised his claim of ownership sometime in
1979, the petitioner flatly refused the claim for compensation, nakedly insisted that the property
was public land and wrongly justified its possession by alleging it had already paid "financial
assistance" to Marawi City in exchange for the rights over the property. Only in 1990, after more
than a decade of beneficial use, did the petitioner recognize private respondent's ownership and
negotiate for the voluntary purchase of the property. A Deed of Sale with provisional payment
and subject to negotiations for the correct price was then executed. Clearly, this is not the intent
nor the expropriation contemplated by law. This is a simple attempt at a voluntary purchase and
sale. Obviously, the petitioner neglected and/or refused to exercise the power of eminent
domain.

Only in 1992, after the private respondent sued to recover possession and petitioner filed its
Complaint to expropriate, did petitioner manifest its intention to exercise the power of eminent
domain. Thus, the respondent Court correctly held: 19

If We decree that the fair market value of the land be determined as of 1978, then We would be
sanctioning a deceptive scheme whereby NAPOCOR, for any reason other than for eminent
domain would occupy another's property and when later pressed for payment, first negotiate for
a low price and then conveniently expropriate the property when the landowner refuses to
accept its offer claiming that the taking of the property for the purpose of eminent domain should
be reckoned as of the date when it started to occupy the property and that the value of the
property should be computed as of the date of the taking despite the increase in the meantime
in the value of the property.

In Noble vs. City of Manila,20 the City entered into a lease-purchase agreement of a building
constructed by the petitioner's predecessor-in-interest in accordance with the specifications of
the former. The Court held that being bound by the said contract, the City could not expropriate
the building. Expropriation could be reported to "only when it is made necessary by the
opposition of the owner to the sale or by the lack of any agreement as to the price". Said the
Court:

The contract, therefore, in so far as it refers to the purchase of the building, as we have
interpreted it, is in force, not having been revoked by the parties or by judicial decision. This
being the case, the city being bound to buy the building at an agreed price, under a valid and
subsisting contract, and the plaintiff being agreeable to its sale, the expropriation thereof, as
sought by the defendant, is baseless. Expropriation lies only when it is made necessary by the
opposition of the owner to the sale or by the lack of any agreement as to the price. There being
in the present case a valid and subsisting contract, between the owner of the building and the
city, for the purchase thereof at an agreed price, there is no reason for the expropriation.
(Emphasis supplied).

In the instant case, petitioner effectively repudiated the deed of sale it entered into with the
private respondent when it passed Resolution No. 92-121 on May 25, 1992 authorizing its
president to negotiate, inter alia, that payment" shall be effected only after Agus I HE project
has been placed in operation". It was only then that petitioner's intent to expropriate became
manifest as private respondent disagreed and, barely a month after, filed suit.

The Second Issue: Valuation

We now come to the issue of valuation.

The fair market value as held by the respondent Court, is the amount of P1,000.00 per square
meter. In an expropriation case where the principal issue is the determination of just
compensation, as is the case here, a trial before Commissioners is indispensable to allow the
parties to present the evidence on the issue of just compensation.21 Inasmuch as determination
of just compensation in eminent domain cases is a judicial function 22 and factual findings of the
Court of Appeals are conclusive on the parties and reviewable only when the case falls within
the recognized exceptions 23, which is not the situation obtaining in this petition, we see no
reason to disturb the factual findings as to valuation of the subject property. As can be gleaned
from the record, the court-and-the-parties-appointed commissioners did not abuse their
authority in evaluating the evidence submitted to them nor misappreciate the clear
preponderance of evidence. The amount fixed and agreed to by the respondent appellate Court
is not grossly exorbitant. 24 To quote: 25

Commissioner Ali comes from the Office of the Register of Deeds who may well be considered
an expert, with a general knowledge of the appraisal of real estate and the prevailing prices of
land in the vicinity of the land in question so that his opinion on the valuation of the property
cannot be lightly brushed aside.

The prevailing market value of the land is only one of the determinants used by the
commissioners' report the others being as herein shown:

xxx xxx xxx

Commissioner Doromal's report, recommending P300.00 per square meter, differs from the 2
commissioners only because his report was based on the valuation as of 1978 by the City
Appraisal Committee as clarified by the latter's chairman in response to NAPOCOR's general
counsel's query (id., pp. 128-129).

In sum, we agree with the Court of Appeals that petitioner has failed to show why it should be
granted an exemption from the general rule in determining just compensation provided under
Section 4 of Rule 67. On the contrary, private respondent has convinced us that, indeed, such
general rule should in fact be observed in this case.

WHEREFORE, the petition is hereby DISMISSED and the judgment appealed from AFFIRMED,
except as to the interest on the monthly rentals. which is hereby reduced from twelve percent to
the legal rate of six percent (6%) per annum. Costs against the petitioner.

SO ORDERED.

G.R. No. 169263 September 21, 2011

CITY OF MANILA, Petitioner,

vs.
MELBA TAN TE, Respondent.
DECISION

PERALTA, J.:

In this Petition for Review,1 the City of Manila assails the April 29, 2005 Decision2 of the Court
of Appeals in CA-G.R. CV No. 71894, as well as the August 12, 2005 Resolution,3 in the said
case denying reconsideration.

The assailed decision affirmed the June 13, 2001 Order4 of the Regional Trial Court of Manila,
Branch 24 issued in Civil Case No. 00-99264 – one for expropriation filed by petitioner, the City
of Manila. The said Order, in turn, granted the motion to dismiss the complaint that was filed by
respondent Melba Tan Te, in lieu of an answer.

The facts follow.

On March 15, 1998, then Manila City Mayor Joselito L. Atienza approved Ordinance No. 7951 –
an expropriation measure enacted on February 3, 1998 by the city council – authorizing him to
acquire by negotiation or expropriation certain pieces of real property along Maria Clara and
Governor Forbes Streets where low-cost housing units could be built and then awarded to bona
fide residents therein. For this purpose, the mayor was also empowered to access the city’s
funds or utilize funding facilities of other government agencies.5 In the aggregate, the covered
property measures 1,425 square meters, and includes the 475-square-meter lot owned by
respondent Melba Tan Te.6

The records bear that respondent had acquired the property from the heirs of Emerlinda
Dimayuga Reyes in 1996, and back then it was being occupied by a number of families whose
leasehold rights had long expired even prior to said sale. In 1998, respondent had sought before
the Metropolitan Trial Court of Manila, Branch 15 the ejectment of these occupants from the
premises. The favorable ruling in that case evaded execution; hence, the court, despite
opposition of the City of Manila, issued a Writ of Demolition at respondent’s instance.7 It
appears that in the interim between the issuance of the writ of execution and the order of
demolition, the City of Manila had instituted an expropriation case8 affecting the same property.
Respondent had moved for the dismissal of that first expropriation case for lack of cause of
action, lack of showing of an ordinance authorizing the expropriation, and non-compliance with
the provisions of Republic Act (R.A.) No. 7279, otherwise known as the Urban Development and
Housing Act of 1992.9 The trial court found merit in the motion and dismissed the complaint
without prejudice.10
On November 16, 2000, petitioner11 filed this second Complaint12 for expropriation before the
Regional Trial Court of Manila, Branch 24.13 This time, it attached a copy of Ordinance No.
7951 and alleged that pursuant thereto, it had previously offered to purchase the subject
property from respondent for ₱824,330.00.14 The offer was contained in a letter sent to
respondent by the City Legal Officer on May 21, 1999,15 but respondent allegedly failed to
retrieve it despite repeated notices,16 thereby compelling petitioner to institute the present
expropriation proceedings after depositing in trust with the Land Bank of the Philippines
₱1,000,000.00 cash, representing the just compensation required by law to be paid to
respondent.17

Respondent did not file an answer and in lieu of that, she submitted a Motion to Dismiss18 and
raised the following grounds: that Ordinance No. 7951 was an invalid expropriation measure
because it violated the rule against taking private property without just compensation; that
petitioner did not comply with the requirements of Sections 919 and 1020 of R.A. No. 7279; and
that she qualified as a small property owner and, hence, exempt from the operation of R.A. No.
7279, the subject lot being the only piece of realty that she owned.

Petitioner moved that it be allowed to enter the property, but before it could be resolved, the trial
court issued its June 13, 2001 Order21 dismissing the complaint. First, the trial court held that
while petitioner had deposited with the bank the alleged ₱1M cash in trust for respondent,
petitioner nevertheless did not submit any certification from the City Treasurer’s Office of the
amount needed to justly compensate respondent for her property. Second, it emphasized that
the provisions of Sections 9 and 10 of R.A. No. 7279 are mandatory in character, yet petitioner
had failed to show that it exacted compliance with them prior to the commencement of this suit.
Lastly, it conceded that respondent had no other real property except the subject lot which,
considering its total area, should well be considered a small property exempted by law from
expropriation. In view of the dismissal of the complaint, petitioner’s motion to enter was
rendered moot and academic.22

Petitioner interposed an appeal to the Court of Appeals which, finding no merit therein,
dismissed the same.23 Petitioner sought reconsideration,24 but it was denied.25

In this Petition,26 petitioner posits that the trial court’s dismissal of its complaint was premature,
and it faults the Court of Appeals for having failed to note that by such dismissal it has been
denied an opportunity to show previous compliance with the requirements of Sections 9 and 10
of R.A. No. 7279 as well as to establish that respondent actually owns other realty apart from
the subject property. Besides, continues petitioner, whether or not it had truly complied with the
requirements of the law is a matter which can be determined only after a trial of the case on the
merits and not, as what happened in this case, at the hearing of the motion to dismiss.27
Respondent, for her part, points out that Ordinance No. 7951 is an invalid expropriation
measure as it does not even contain an appropriation of funds in its implementation. In this
respect, respondent believes that the ₱1M cash deposit certified by the bank seems to be
incredible, since petitioner has not shown any certification from the City Treasurer’s Office on
the amount necessary to implement the expropriation measure. More importantly, she believes
that the dismissal of the complaint must be sustained as it does not allege previous compliance
with Sections 9 and 10 of R.A. No. 7279 and, hence, it does not present a valid cause of
action.28 She theorizes that the expropriation for socialized housing must abide by the priorities
in land acquisition and the available modes of land acquisition laid out in the law, and that
expropriation of privately-owned lands avails only as the last resort.29 She also invokes the
exemptions provided in the law. She professes herself to be a small property owner under
Section 3 (q),30 and claims that the subject property is the only piece of land she owns where
she, as of yet, has not been able to build her own home because it is still detained by illegal
occupants whom she had already successfully battled with in the ejectment court.31

In its Reply, petitioner adopts a different and bolder theory. It claims that by virtue of the vesture
of eminent domain powers in it by its charter, it is thereby not bound by the requirements of
Sections 9 and 10 of R.A. No. 7279. It also asserts its right to immediately enter the subject
property because not only is its complaint supposedly sufficient in form and substance but also
because it has already deposited ₱1M cash with the bank in trust for respondent. It reiterates
that the dismissal of its complaint constitutes a denial of due process because all the issues
propounded by respondent, initially in her motion to dismiss and all the way in the present
appeal, must be resolved in a full-blown trial.

Prefatorily, the concept of socialized housing, whereby housing units are distributed and/or sold
to qualified beneficiaries on much easier terms, has already been included in the expanded
definition of "public use or purpose" in the context of the State’s exercise of the power of
eminent domain. Said the Court in Sumulong v. Guerrero,32 citing the earlier case of Heirs of
Juancho Ardona v. Reyes:33

The public use requirement for a valid exercise of the power of eminent domain is a flexible and
evolving concept influenced by changing conditions.

The taking to be valid must be for public use. There was a time where it was felt that a literal
meaning should be attached to such a requirement. Whatever project is undertaken must be for
the public to enjoy, as in the case of streets or parks. Otherwise, expropriation is not allowable.
It is not anymore. As long as the purpose of the taking is public, then the power of eminent
domain comes into play. x x x The constitution in at least two cases, to remove any doubt,
determines what is public use. One is the expropriation of lands to be divided into small lots for
resale at cost to individuals. The other is in the transfer, through the exercise of this power, of
utilities and other enterprise to the government. It is accurate to state then that at present
whatever may be beneficially employed for the general welfare satisfies the requirement of
public use.

The term "public use" has acquired a more comprehensive coverage. To the literal import of the
term signifying strict use or employment by the public has been added the broader notion of
indirect public benefit or advantage. x x x

The restrictive view of public use may be appropriate for a nation which circumscribes the scope
of government activities and public concerns and which possesses big and correctly located
public lands that obviate the need to take private property for public purposes. Neither
circumstance applies to the Philippines. We have never been a laissez-faire state. And the
necessities which impel the exertion of sovereign power are all too often found in areas of
scarce public land or limited government resources.

Specifically, urban renewal or development and the construction of low-cost housing are
recognized as a public purpose, not only because of the expanded concept of public use but
also because of specific provisions in the Constitution. x x x The 1987 Constitution [provides]:

The State shall promote a just and dynamic social order that will ensure the prosperity and
independence of the nation and free the people from poverty through policies that provide
adequate social services, promote full employment, a rising standard of living and an improved
quality of life for all. (Article II, Section 9)

The State shall, by law and for the common good, undertake, in cooperation with the private
sector, a continuing program for urban land reform and housing which will make available at
affordable cost decent housing and basic services to underprivileged and homeless citizens in
urban centers and resettlement areas. x xx In the implementation of such program the State
shall respect the rights of small property owners. (Article XIII, Section 9)

Housing is a basic human need. Shortage in housing is a matter of state concern since it
directly and significantly affects public health, safety, the environment and in sum, the general
welfare. The public character of housing measures does not change because units in housing
projects cannot be occupied by all but only by those who satisfy prescribed qualifications. A
beginning has to be made, for it is not possible to provide housing for all who need it, all at
once.

Population growth, the migration to urban areas and the mushrooming of crowded makeshift
dwellings is a worldwide development particularly in developing countries. So basic and urgent
are housing problems that the United Nations General Assembly proclaimed 1987 as the
"International Year of Shelter for the Homeless" "to focus the attention of the international
community on those problems." The General Assembly is seriously concerned that, despite the
efforts of Governments at the national and local levels and of international organizations, the
driving conditions of the majority of the people in slums and squatter areas and rural
settlements, especially in developing countries, continue to deteriorate in both relative and
absolute terms." [G.A. Res. 37/221, Yearbook of the United Nations 1982, Vol. 36, p. 1043-4]

In light of the foregoing, the Court is satisfied that "socialized housing" falls within the confines
of "public use."34

Congress passed R.A. No. 7279,35 to provide a comprehensive and continuing urban
development and housing program as well as access to land and housing by the
underprivileged and homeless citizens; uplift the conditions of the underprivileged and homeless
citizens in urban areas by making available decent housing at affordable cost; optimize the use
and productivity of land and urban resources; reduce urban dysfunctions which affect public
health, safety and ecology; and improve the capability of local governments in undertaking
urban development and housing programs and projects, among others.36 Accordingly, all city
and municipal governments are mandated to inventory all lands and improvements within their
respective locality and identify lands which may be utilized for socialized housing and as
resettlement sites for acquisition and disposition to qualified beneficiaries.37 Section 10 thereof
authorizes local government units to exercise the power of eminent domain to carry out the
objectives of the law, but subject to the conditions stated therein and in Section 9.38

It is precisely this aspect of the law which constitutes the core of the present controversy, yet
this case presents a serious procedural facet – overlooked by both the trial court and the Court
of Appeals – which needs foremost attention ahead of the issues propounded by the parties.

Expropriation is a two-pronged proceeding: first, the determination of the authority of the plaintiff
to exercise the power and the propriety of its exercise in the context of the facts which
terminates in an order of dismissal or an order of condemnation affirming the plaintiff's lawful
right to take the property for the public use or purpose described in the complaint and second,
the determination by the court of the just compensation for the property sought to be
expropriated.39

Expropriation proceedings are governed by Rule 67 of the Rules of Court. Under the Rules of
Court of 1940 and 1964, where the defendant in an expropriation case conceded to the
plaintiff’s right to expropriate (or where the trial court affirms the existence of such right), the
court-appointed commissioners would then proceed to determine the just compensation to be
paid.40 Otherwise, where the defendant had objections to and defenses against the
expropriation of his property, he was required to file a single motion to dismiss containing all
such objections and defenses.41
This motion to dismiss was not covered by Rule 15 which governed ordinary motions, and was
then the required responsive pleading, taking the place of an answer, where the plaintiff’s right
to expropriate the defendant’s property could be put in issue.42 Any relevant and material fact
could be raised as a defense, such as that which would tend to show that the exercise of the
power to condemn was unauthorized, or that there was cause for not taking defendant’s
property for the purpose alleged in the petition, or that the purpose for the taking was not public
in character. With that, the hearing of the motion and the presentation of evidence would follow.
The rule is based on fundamental constitutional provisions affecting the exercise of the power of
eminent domain, such as those that seek to protect the individual property owner from the
aggressions of the government.43 However, the rule, which was derived from the practice of
most American states, proved indeed to be a source of confusion because it likewise permitted
the filing of another motion to dismiss, such as that referred to in Rule 16, where the defendant
could raise, in addition, the preliminary objections authorized under it.44

The Supreme Court, in its en banc Resolution in Bar Matter No. 803 dated April 8, 1997, has
provided that the revisions made in the Rules of Court were to take effect on July 1, 1997. Thus,
with said amendments, the present state of Rule 67 dispenses with the filing of an extraordinary
motion to dismiss such as that required before in response to a complaint for expropriation. The
present rule requires the filing of an answer as responsive pleading to the complaint. Section 3
thereof provides:

Sec. 3. Defenses and objections. — If a defendant has no objection or defense to the action or
the taking of his property, he may and serve a notice or appearance and a manifestation to that
effect, specifically designating or identifying the property in which he claims to be interested,
within the time stated in the summons. Thereafter, he shall be entitled to notice of all
proceedings affecting the same.

If a defendant has any objection to the filing of or the allegations in the complaint, or any
objection or defense to the taking of his property, he shall serve his answer within the time
stated in the summons. The answer shall specifically designate or identify the property in which
he claims to have an interest, state the nature and extent of the interest claimed, and adduce all
his objections and defenses to the taking of his property. No counterclaim, cross-claim or third-
party complaint shall be alleged or allowed in the answer or any subsequent pleading.

A defendant waives all defenses and objections not so alleged but the court, in the interest of
justice, may permit amendments to the answer to be made not later than ten (10) days from the
filing thereof. However, at the trial of the issue of just compensation, whether or not a defendant
has previously appeared or answered, he may present evidence as to the amount of the
compensation to be paid for his property, and he may share in the distribution of the award.45
The defendant in an expropriation case who has objections to the taking of his property is now
required to file an answer and in it raise all his available defenses against the allegations in the
complaint for eminent domain. While the answer is bound by the omnibus motion rule under
Section 8,46 Rule 15, much leeway is nevertheless afforded to the defendant because
amendments may be made in the answer within 10 days from its filing.1âwphi1 Also, failure to
file the answer does not produce all the disastrous consequences of default in ordinary civil
actions, because the defendant may still present evidence on just compensation.47

At the inception of the case at bar with the filing of the complaint on November 16, 2000, the
amended provisions of Rule 67 have already been long in force. Borre v. Court of Appeals48
teaches that statutes which regulate procedure in the courts apply to actions pending and
undetermined at the time those statutes were passed. And in Laguio v. Gamet,49 it is said that
new court rules apply to proceedings which take place after the date of their effectivity.

In the case of Robern Development Corporation v. Quitain,50 a similar motion to dismiss was
filed by the private property owner, petitioner therein, in an expropriation case filed by the
National Power Corporation (NPC), alleging certain jurisdictional defects as well as issues on
the impropriety of the expropriation measure being imposed on the property. The trial court in
that case denied the motion inasmuch as the issues raised therein should be dealt with during
the trial proper. On petition for certiorari, the Court of Appeals affirmed the trial court’s denial of
the motion to dismiss. On appeal, the Supreme Court affirmed the Court of Appeals, but
declared that under the amended provisions of Section 3, Rule 67, which were already in force
at about the time the motion to dismiss had been submitted for resolution, all objections and
defenses that could be availed of to defeat the expropriator’s exercise of the power of eminent
domain must be contained in an answer and not in a motion to dismiss because these matters
require the presentation of evidence. Accordingly, while the Court in that case sustained the
setting aside of the motion to dismiss, it nevertheless characterized the order of dismissal as a
nullity. Hence, it referred the case back to the trial court and required the NPC to submit its
answer to the complaint within 10 days from the finality of the decision.

Thus, the trial court in this case should have denied respondent’s motion to dismiss and
required her to submit in its stead an answer within the reglementary period. This, because
whether petitioner has observed the provisions of Sections 9 and 10 of R.A. No. 7279 before
resorting to expropriation, and whether respondent owns other properties than the one sought to
be expropriated, and whether she is actually a small property owner beyond the reach of
petitioner’s eminent domain powers, are indeed issues in the nature of affirmative defenses
which require the presentation of evidence aliunde.51 Besides, Section 1, Rule 16 of the Rules
of Court does not consider these matters grounds for a motion to dismiss, and an action can be
dismissed only on the grounds authorized by this provision.52

The Court declared in Robern Development Corporation, thus:

Accordingly, Rule 16, Section 1 of the Rules of Court, does not consider as grounds for a
motion to dismiss the allotment of the disputed land for another public purpose or the petition for
a mere easement of right-of-way in the complaint for expropriation. The grounds for dismissal
are exclusive to those specifically mentioned in Section 1, Rule 16 of the Rules of Court, and an
action can be dismissed only on a ground authorized by this provision.

To be exact, the issues raised by the petitioner are affirmative defenses that should be alleged
in an answer, since they require presentation of evidence aliunde. Section 3 of Rule 67 provides
that "if a defendant has any objection to the filing of or the allegations in the complaint, or any
objection or defense to the taking of his property," he should include them in his answer.
Naturally, these issues will have to be fully ventilated in a full-blown trial and hearing. It would be
precipitate to dismiss the Complaint on such grounds as claimed by the petitioner. Dismissal of
an action upon a motion to dismiss constitutes a denial of due process if, from a consideration
of the pleadings, it appears that there are issues that cannot be decided without a trial of the
case on the merits.

Inasmuch as the 1997 Rules had just taken effect when this case arose, we believe that in the
interest of substantial justice, the petitioner should be given an opportunity to file its answer to
the Complaint for expropriation in accordance with Section 3, Rule 67 of the 1997 Rules of Civil
Procedure.x x x53

WHEREFORE, the Petition is hereby GRANTED. The Order of the Regional Trial Court of
Manila, Branch 24 in Civil Case No. 00-99264 dated June 13, 2001, as well as the April 29,
2005 Decision of the Court of Appeals in CA-G.R. CV No. 71894 affirming said order, and the
August 12, 2005 Resolution therein which denied reconsideration, are hereby SET ASIDE. The
case is hereby REMANDED to the trial court for further proceedings. Respondent is DIRECTED
to file her Answer to the complaint within ten (10) days from the finality of this Decision.

SO ORDERED.

G.R. No. 176625

MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY and AIR TRANSPORTATION

OFFICE, Petitioners,
vs.
BERNARDO L. LOZADA, SR., and the HEIRS OF ROSARIO MERCADO, namely, VICENTE
LOZADA, MARIO M. LOZADA, MARCIA L. GODINEZ, VIRGINIA L. FLORES, BERNARDO
LOZADA, JR., DOLORES GACASAN, SOCORRO CAFARO and ROSARIO LOZADA,
represented by MARCIA LOZADA GODINEZ, Respondents.

DECISION

NACHURA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, seeking to reverse,
annul, and set aside the Decision1 dated February 28, 2006 and the Resolution2 dated
February 7, 2007 of the Court of Appeals (CA) (Cebu City), Twentieth Division, in CA-G.R. CV
No. 65796.

The antecedent facts and proceedings are as follows:

Subject of this case is Lot No. 88-SWO-25042 (Lot No. 88), with an area of 1,017 square
meters, more or less, located in Lahug, Cebu City. Its original owner was Anastacio Deiparine
when the same was subject to expropriation proceedings, initiated by the Republic of the
Philippines (Republic), represented by the then Civil Aeronautics Administration (CAA), for the
expansion and improvement of the Lahug Airport. The case was filed with the then Court of First
Instance of Cebu, Third Branch, and docketed as Civil Case No. R-1881.

As early as 1947, the lots were already occupied by the U.S. Army. They were turned over to
the Surplus Property Commission, the Bureau of Aeronautics, the National Airport Corporation
and then to the CAA.

During the pendency of the expropriation proceedings, respondent Bernardo L. Lozada, Sr.
acquired Lot No. 88 from Deiparine. Consequently, Transfer Certificate of Title (TCT) No. 9045
was issued in Lozada’s name.

On December 29, 1961, the trial court rendered judgment in favor of the Republic and ordered
the latter to pay Lozada the fair market value of Lot No. 88, adjudged at ₱3.00 per square
meter, with consequential damages by way of legal interest computed from November 16, 1947
—the time when the lot was first occupied by the airport. Lozada received the amount of
₱3,018.00 by way of payment.
The affected landowners appealed. Pending appeal, the Air Transportation Office (ATO),
formerly CAA, proposed a compromise settlement whereby the owners of the lots affected by
the expropriation proceedings would either not appeal or withdraw their respective appeals in
consideration of a commitment that the expropriated lots would be resold at the price they were
expropriated in the event that the ATO would abandon the Lahug Airport, pursuant to an
established policy involving similar cases. Because of this promise, Lozada did not pursue his
appeal. Thereafter, Lot No. 88 was transferred and registered in the name of the Republic under
TCT No. 25057.

The projected improvement and expansion plan of the old Lahug Airport, however, was not
pursued.

Lozada, with the other landowners, contacted then CAA Director Vicente Rivera, Jr., requesting
to repurchase the lots, as per previous agreement. The CAA replied that there might still be a
need for the Lahug Airport to be used as an emergency DC-3 airport. It reiterated, however, the
assurance that "should this Office dispose and resell the properties which may be found to be
no longer necessary as an airport, then the policy of this Office is to give priority to the former
owners subject to the approval of the President."

On November 29, 1989, then President Corazon C. Aquino issued a Memorandum to the
Department of Transportation, directing the transfer of general aviation operations of the Lahug
Airport to the Mactan International Airport before the end of 1990 and, upon such transfer, the
closure of the Lahug Airport.

Sometime in 1990, the Congress of the Philippines passed Republic Act (R.A.) No. 6958,
entitled "An Act Creating the Mactan-Cebu International Airport Authority, Transferring Existing
Assets of the Mactan International Airport and the Lahug Airport to the Authority, Vesting the
Authority with Power to Administer and Operate the Mactan International Airport and the Lahug
Airport, and For Other Purposes."

From the date of the institution of the expropriation proceedings up to the present, the public
purpose of the said expropriation (expansion of the airport) was never actually initiated, realized,
or implemented. Instead, the old airport was converted into a commercial complex. Lot No. 88
became the site of a jail known as Bagong Buhay Rehabilitation Complex, while a portion
thereof was occupied by squatters.3 The old airport was converted into what is now known as
the Ayala I.T. Park, a commercial area.1avvphi1

Thus, on June 4, 1996, petitioners initiated a complaint for the recovery of possession and
reconveyance of ownership of Lot No. 88. The case was docketed as Civil Case No. CEB-
18823 and was raffled to the Regional Trial Court (RTC), Branch 57, Cebu City. The complaint
substantially alleged as follows:

(a) Spouses Bernardo and Rosario Lozada were the registered owners of Lot No. 88 covered by
TCT No. 9045;

(b) In the early 1960’s, the Republic sought to acquire by expropriation Lot No. 88, among
others, in connection with its program for the improvement and expansion of the Lahug Airport;

(c) A decision was rendered by the Court of First Instance in favor of the Government and
against the land owners, among whom was Bernardo Lozada, Sr. appealed therefrom;

(d) During the pendency of the appeal, the parties entered into a compromise settlement to the
effect that the subject property would be resold to the original owner at the same price when it
was expropriated in the event that the Government abandons the Lahug Airport;

(e) Title to Lot No. 88 was subsequently transferred to the Republic of the Philippines (TCT No.
25057);

(f) The projected expansion and improvement of the Lahug Airport did not materialize;

(g) Plaintiffs sought to repurchase their property from then CAA Director Vicente Rivera. The
latter replied by giving as assurance that priority would be given to the previous owners, subject
to the approval of the President, should CAA decide to dispose of the properties;

(h) On November 29, 1989, then President Corazon C. Aquino, through a Memorandum to the
Department of Transportation and Communications (DOTC), directed the transfer of general
aviation operations at the Lahug Airport to the Mactan-Cebu International Airport Authority;

(i) Since the public purpose for the expropriation no longer exists, the property must be returned
to the plaintiffs.4

In their Answer, petitioners asked for the immediate dismissal of the complaint. They specifically
denied that the Government had made assurances to reconvey Lot No. 88 to respondents in the
event that the property would no longer be needed for airport operations. Petitioners instead
asserted that the judgment of condemnation was unconditional, and respondents were,
therefore, not entitled to recover the expropriated property notwithstanding non-use or
abandonment thereof.

After pretrial, but before trial on the merits, the parties stipulated on the following set of facts:

(1) The lot involved is Lot No. 88-SWO-25042 of the Banilad Estate, situated in the City of
Cebu, containing an area of One Thousand Seventeen (1,017) square meters, more or less;

(2) The property was expropriated among several other properties in Lahug in favor of the
Republic of the Philippines by virtue of a Decision dated December 29, 1961 of the CFI of Cebu
in Civil Case No. R-1881;

(3) The public purpose for which the property was expropriated was for the purpose of the
Lahug Airport;

(4) After the expansion, the property was transferred in the name of MCIAA; [and]

(5) On November 29, 1989, then President Corazon C. Aquino directed the Department of
Transportation and Communication to transfer general aviation operations of the Lahug Airport
to the Mactan-Cebu International Airport Authority and to close the Lahug Airport after such
transfer[.]5

During trial, respondents presented Bernardo Lozada, Sr. as their lone witness, while petitioners
presented their own witness, Mactan-Cebu International Airport Authority legal assistant Michael
Bacarisas.

On October 22, 1999, the RTC rendered its Decision, disposing as follows:

WHEREFORE, in the light of the foregoing, the Court hereby renders judgment in favor of the
plaintiffs, Bernardo L. Lozada, Sr., and the heirs of Rosario Mercado, namely, Vicente M.
Lozada, Marcia L. Godinez, Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan,
Socorro L. Cafaro and Rosario M. Lozada, represented by their attorney-in-fact Marcia Lozada
Godinez, and against defendants Cebu-Mactan International Airport Authority (MCIAA) and Air
Transportation Office (ATO):
1. ordering MCIAA and ATO to restore to plaintiffs the possession and ownership of their land,
Lot No. 88 Psd-821 (SWO-23803), upon payment of the expropriation price to plaintiffs; and

2. ordering the Register of Deeds to effect the transfer of the Certificate of Title from
defendant[s] to plaintiffs on Lot No. [88], cancelling TCT No. 20357 in the name of defendant
MCIAA and to issue a new title on the same lot in the name of Bernardo L. Lozada, Sr. and the
heirs of Rosario Mercado, namely: Vicente M. Lozada, Mario M. Lozada, Marcia L. Godinez,
Virginia L. Flores, Bernardo M. Lozada, Jr., Dolores L. Gacasan, Socorro L. Cafaro and Rosario
M. Lozada.

No pronouncement as to costs.

SO ORDERED.6

Aggrieved, petitioners interposed an appeal to the CA. After the filing of the necessary appellate
briefs, the CA rendered its assailed Decision dated February 28, 2006, denying petitioners’
appeal and affirming in toto the Decision of the RTC, Branch 57, Cebu City. Petitioners’ motion
for reconsideration was, likewise, denied in the questioned CA Resolution dated February 7,
2007.

Hence, this petition arguing that: (1) the respondents utterly failed to prove that there was a
repurchase agreement or compromise settlement between them and the Government; (2) the
judgment in Civil Case No. R-1881 was absolute and unconditional, giving title in fee simple to
the Republic; and (3) the respondents’ claim of verbal assurances from government officials
violates the Statute of Frauds.

The petition should be denied.

Petitioners anchor their claim to the controverted property on the supposition that the Decision
in the pertinent expropriation proceedings did not provide for the condition that should the
intended use of Lot No. 88 for the expansion of the Lahug Airport be aborted or abandoned, the
property would revert to respondents, being its former owners. Petitioners cite, in support of this
position, Fery v. Municipality of Cabanatuan,7 which declared that the Government acquires
only such rights in expropriated parcels of land as may be allowed by the character of its title
over the properties—

If x x x land is expropriated for a particular purpose, with the condition that when that purpose is
ended or abandoned the property shall return to its former owner, then, of course, when the
purpose is terminated or abandoned the former owner reacquires the property so expropriated.
If x x x land is expropriated for a public street and the expropriation is granted upon condition
that the city can only use it for a public street, then, of course, when the city abandons its use as
a public street, it returns to the former owner, unless there is some statutory provision to the
contrary. x x x. If, upon the contrary, however, the decree of expropriation gives to the entity a
fee simple title, then, of course, the land becomes the absolute property of the expropriator,
whether it be the State, a province, or municipality, and in that case the non-user does not have
the effect of defeating the title acquired by the expropriation proceedings. x x x.

When land has been acquired for public use in fee simple, unconditionally, either by the
exercise of eminent domain or by purchase, the former owner retains no right in the land, and
the public use may be abandoned, or the land may be devoted to a different use, without any
impairment of the estate or title acquired, or any reversion to the former owner. x x x.8

Contrary to the stance of petitioners, this Court had ruled otherwise in Heirs of Timoteo Moreno
and Maria Rotea v. Mactan-Cebu International Airport Authority,9 thus—

Moreover, respondent MCIAA has brought to our attention a significant and telling portion in the
Decision in Civil Case No. R-1881 validating our discernment that the expropriation by the
predecessors of respondent was ordered under the running impression that Lahug Airport would
continue in operation—

As for the public purpose of the expropriation proceeding, it cannot now be doubted. Although
Mactan Airport is being constructed, it does not take away the actual usefulness and importance
of the Lahug Airport: it is handling the air traffic both civilian and military. From it aircrafts fly to
Mindanao and Visayas and pass thru it on their flights to the North and Manila. Then, no
evidence was adduced to show how soon is the Mactan Airport to be placed in operation and
whether the Lahug Airport will be closed immediately thereafter. It is up to the other
departments of the Government to determine said matters. The Court cannot substitute its
judgment for those of the said departments or agencies. In the absence of such showing, the
Court will presume that the Lahug Airport will continue to be in operation (emphasis supplied).

While in the trial in Civil Case No. R-1881 [we] could have simply acknowledged the presence of
public purpose for the exercise of eminent domain regardless of the survival of Lahug Airport,
the trial court in its Decision chose not to do so but instead prefixed its finding of public purpose
upon its understanding that "Lahug Airport will continue to be in operation." Verily, these
meaningful statements in the body of the Decision warrant the conclusion that the expropriated
properties would remain to be so until it was confirmed that Lahug Airport was no longer "in
operation." This inference further implies two (2) things: (a) after the Lahug Airport ceased its
undertaking as such and the expropriated lots were not being used for any airport expansion
project, the rights vis-à-vis the expropriated Lots Nos. 916 and 920 as between the State and
their former owners, petitioners herein, must be equitably adjusted; and (b) the foregoing
unmistakable declarations in the body of the Decision should merge with and become an
intrinsic part of the fallo thereof which under the premises is clearly inadequate since the
dispositive portion is not in accord with the findings as contained in the body thereof.10

Indeed, the Decision in Civil Case No. R-1881 should be read in its entirety, wherein it is
apparent that the acquisition by the Republic of the expropriated lots was subject to the
condition that the Lahug Airport would continue its operation. The condition not having
materialized because the airport had been abandoned, the former owner should then be
allowed to reacquire the expropriated property.11

On this note, we take this opportunity to revisit our ruling in Fery, which involved an
expropriation suit commenced upon parcels of land to be used as a site for a public market.
Instead of putting up a public market, respondent Cabanatuan constructed residential houses
for lease on the area. Claiming that the municipality lost its right to the property taken since it did
not pursue its public purpose, petitioner Juan Fery, the former owner of the lots expropriated,
sought to recover his properties. However, as he had admitted that, in 1915, respondent
Cabanatuan acquired a fee simple title to the lands in question, judgment was rendered in favor
of the municipality, following American jurisprudence, particularly City of Fort Wayne v. Lake
Shore & M.S. RY. Co.,12 McConihay v. Theodore Wright,13 and Reichling v. Covington Lumber
Co.,14 all uniformly holding that the transfer to a third party of the expropriated real property,
which necessarily resulted in the abandonment of the particular public purpose for which the
property was taken, is not a ground for the recovery of the same by its previous owner, the title
of the expropriating agency being one of fee simple.

Obviously, Fery was not decided pursuant to our now sacredly held constitutional right that
private property shall not be taken for public use without just compensation.15 It is well settled
that the taking of private property by the Government’s power of eminent domain is subject to
two mandatory requirements: (1) that it is for a particular public purpose; and (2) that just
compensation be paid to the property owner. These requirements partake of the nature of
implied conditions that should be complied with to enable the condemnor to keep the property
expropriated.16

More particularly, with respect to the element of public use, the expropriator should commit to
use the property pursuant to the purpose stated in the petition for expropriation filed, failing
which, it should file another petition for the new purpose. If not, it is then incumbent upon the
expropriator to return the said property to its private owner, if the latter desires to reacquire the
same. Otherwise, the judgment of expropriation suffers an intrinsic flaw, as it would lack one
indispensable element for the proper exercise of the power of eminent domain, namely, the
particular public purpose for which the property will be devoted. Accordingly, the private
property owner would be denied due process of law, and the judgment would violate the
property owner’s right to justice, fairness, and equity.
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.17

Even without the foregoing declaration, in the instant case, on the question of whether
respondents were able to establish the existence of an oral compromise agreement that entitled
them to repurchase Lot No. 88 should the operations of the Lahug Airport be abandoned, we
rule in the affirmative.

It bears stressing that both the RTC, Branch 57, Cebu and the CA have passed upon this
factual issue and have declared, in no uncertain terms, that a compromise agreement was, in
fact, entered into between the Government and respondents, with the former undertaking to
resell Lot No. 88 to the latter if the improvement and expansion of the Lahug Airport would not
be pursued. In affirming the factual finding of the RTC to this effect, the CA declared—

Lozada’s testimony is cogent. An octogenarian widower-retiree and a resident of Moon Park,

California since 1974, he testified that government representatives verbally promised him and
his late wife while the expropriation proceedings were on-going that the government shall return
the property if the purpose for the expropriation no longer exists. This promise was made at the
premises of the airport. As far as he could remember, there were no expropriation proceedings
against his property in 1952 because the first notice of expropriation he received was in 1962.
Based on the promise, he did not hire a lawyer. Lozada was firm that he was promised that the
lot would be reverted to him once the public use of the lot ceases. He made it clear that the
verbal promise was made in Lahug with other lot owners before the 1961 decision was handed
down, though he could not name the government representatives who made the promise. It was
just a verbal promise; nevertheless, it is binding. The fact that he could not supply the necessary
details for the establishment of his assertions during cross-examination, but that "When it will
not be used as intended, it will be returned back, we just believed in the government," does not
dismantle the credibility and truthfulness of his allegation. This Court notes that he was 89 years
old when he testified in November 1997 for an incident which happened decades ago. Still, he is
a competent witness capable of perceiving and making his perception known. The minor lapses
are immaterial. The decision of the competency of a witness rests primarily with the trial judge
and must not be disturbed on appeal unless it is clear that it was erroneous. The objection to his
competency must be made before he has given any testimony or as soon as the incompetency
becomes apparent. Though Lozada is not part of the compromise agreement,18 he
nevertheless adduced sufficient evidence to support his claim.19
As correctly found by the CA, unlike in Mactan Cebu International Airport Authority v. Court of
Appeals,20 cited by petitioners, where respondent therein offered testimonies which were
hearsay in nature, the testimony of Lozada was based on personal knowledge as the assurance
from the government was personally made to him. His testimony on cross-examination
destroyed neither his credibility as a witness nor the truthfulness of his words.

Verily, factual findings of the trial court, especially when affirmed by the CA, are binding and
conclusive on this Court and may not be reviewed. A petition for certiorari under Rule 45 of the
Rules of Court contemplates only questions of law and not of fact.21 Not one of the exceptions
to this rule is present in this case to warrant a reversal of such findings.

As regards the position of petitioners that respondents’ testimonial evidence violates the Statute
of Frauds, suffice it to state that the Statute of Frauds operates only with respect to executory
contracts, and does not apply to contracts which have been completely or partially performed,
the rationale thereof being as follows:

In executory contracts there is a wide field for fraud because unless they be in writing there is
no palpable evidence of the intention of the contracting parties. The statute has precisely been
enacted to prevent fraud. However, if a contract has been totally or partially performed, the
exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant
to keep the benefits already delivered by him from the transaction in litigation, and, at the same
time, evade the obligations, responsibilities or liabilities assumed or contracted by him
thereby.22

In this case, the Statute of Frauds, invoked by petitioners to bar the claim of respondents for the
reacquisition of Lot No. 88, cannot apply, the oral compromise settlement having been partially
performed. By reason of such assurance made in their favor, respondents relied on the same by
not pursuing their appeal before the CA. Moreover, contrary to the claim of petitioners, the fact
of Lozada’s eventual conformity to the appraisal of Lot No. 88 and his seeking the correction of
a clerical error in the judgment as to the true area of Lot No. 88 do not conclusively establish
that respondents absolutely parted with their property. To our mind, these acts were simply
meant to cooperate with the government, particularly because of the oral promise made to
them.

The right of respondents to repurchase Lot No. 88 may be enforced based on a constructive
trust constituted on the property held by the government in favor of the former. On this note, our
ruling in Heirs of Timoteo Moreno is instructive, viz.:
Mactan-Cebu International Airport Authority is correct in stating that one would not find an
express statement in the Decision in Civil Case No. R-1881 to the effect that "the [condemned]
lot would return to [the landowner] or that [the landowner] had a right to repurchase the same if
the purpose for which it was expropriated is ended or abandoned or if the property was to be
used other than as the Lahug Airport." This omission notwithstanding, and while the inclusion of
this pronouncement in the judgment of condemnation would have been ideal, such precision is
not absolutely necessary nor is it fatal to the cause of petitioners herein. No doubt, the return or
repurchase of the condemned properties of petitioners could be readily justified as the manifest
legal effect or consequence of the trial 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 No. 916 and 920 to the government with the latter obliging itself to
use the realties for the expansion of Lahug Airport; failing to keep its bargain, the government
can be compelled by petitioners to reconvey the parcels of land to them, otherwise, petitioners
would be denied the use of their properties upon a state of affairs that was not conceived nor
contemplated when the expropriation was authorized.

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

In constructive trusts, the arrangement is temporary and passive in which the trustee’s sole duty
is to transfer the title and possession over the property to the plaintiff-beneficiary. Of course, the
"wronged party seeking the aid of a court of equity in establishing a constructive trust must
himself do equity." Accordingly, the court will exercise its discretion in deciding what acts are
required of the plaintiff-beneficiary as conditions precedent to obtaining such decree and has
the obligation to reimburse the trustee the consideration received from the latter just as the
plaintiff-beneficiary would if he proceeded on the theory of rescission. In the good judgment of
the court, the trustee may also be paid the necessary expenses he may have incurred in
sustaining the property, his fixed costs for improvements thereon, and the monetary value of his
services in managing the property to the extent that plaintiff-beneficiary will secure a benefit
from his acts.
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 x x x In case of the loss, deterioration or improvement of the thing, the provisions
which, with respect to the debtor, are laid down in the preceding article shall be applied to the
party who is bound to return x x x."23

On the matter of the repurchase price, while petitioners are obliged to reconvey Lot No. 88 to
respondents, the latter must return to the former what they received as just compensation for
the expropriation of the property, plus legal interest to be computed from default, which in this
case runs from the time petitioners comply with their obligation to respondents.

Respondents must likewise pay petitioners the necessary expenses they may have incurred in
maintaining Lot No. 88, as well as the monetary value of their services in managing it to the
extent that respondents were benefited thereby.

Following Article 118724 of the Civil Code, petitioners may keep whatever income or fruits they
may have obtained from Lot No. 88, and respondents need not account for the interests that the
amounts they received as just compensation may have earned in the meantime.

In accordance with Article 119025 of the Civil Code vis-à-vis Article 1189, which provides that
"(i)f a thing is improved by its nature, or by time, the improvement shall inure to the benefit of
the creditor x x x," respondents, as creditors, do not have to pay, as part of the process of
restitution, the appreciation in value of Lot No. 88, which is a natural consequence of nature and
time.26

WHEREFORE, the petition is DENIED. The February 28, 2006 Decision of the Court of
Appeals, affirming the October 22, 1999 Decision of the Regional Trial Court, Branch 87, Cebu
City, and its February 7, 2007 Resolution are AFFIRMED with MODIFICATION as follows:

1. Respondents are ORDERED to return to petitioners the just compensation they received for
the expropriation of Lot No. 88, plus legal interest, in the case of default, to be computed from
the time petitioners comply with their obligation to reconvey Lot No. 88 to them;
2. Respondents are ORDERED to pay petitioners the necessary expenses the latter incurred in
maintaining Lot No. 88, plus the monetary value of their services to the extent that respondents
were benefited thereby;

3. Petitioners are ENTITLED to keep whatever fruits and income they may have obtained from
Lot No. 88; and

4. Respondents are also ENTITLED to keep whatever interests the amounts they received as
just compensation may have earned in the meantime, as well as the appreciation in value of Lot
No. 88, which is a natural consequence of nature and time;

In light of the foregoing modifications, the case is REMANDED to the Regional Trial Court,
Branch 57, Cebu City, only for the purpose of receiving evidence on the amounts that
respondents will have to pay petitioners in accordance with this Court’s decision. No costs.

SO ORDERED.