CITY
OF
Petitioner,
Present:
BERSAMIN, J.,*
- versus - ABAD, Acting
Chairperson,
VILLARAMA, JR.,**
SERENO,*** and
PERLAS-BERNABE, JJ.
ALEGAR
CORPORATION, TEROCEL
REALTY
CORPORATION, and Promulgated:
FILOMENA VDA. DE
LEGARDA,
Respondents. June 25, 2012
x
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ABAD,
J.:
This
case is about the issues that a local government unit has to cope with when
expropriating private property for socialized housing.
The
Facts and the Case
On
March 1, 2001 the City Council of Manila passed Ordinance 8012 that authorized the
City Mayor to acquire certain lots[1] belonging
to respondents Alegar Corporation, Terocel Realty Corporation, and Filomena
Vda. De Legarda, for use in the socialized housing project of P1,500.00
per square meter (sq m) but the owners rejected this as too low with the result
that on December 2, 2003 the City filed a complaint for expropriation against
them before the Regional Trial Court (RTC) of
The
City alleged in its complaint that it wanted to acquire the lots for its
land-for-the-landless and on-site development programs involving the residents
occupying them.[3] The City offered to acquire the lots for P1,500.00
per sq m[4]
but the owners rejected the offer. The
total aggregate value of the lots for taxation purpose was P809,280.00 but
the City deposited P1,500,000.00 with the Land Bank of the
Both
Alegar and Terocel questioned the legitimacy of the Citys taking of their lots
solely for the benefit of a few long-time occupants. Alegar also pointed out that, while it declined
the Citys initial offer, it did not foreclose the possibility of selling the lots
for the right price.[5] The filing of the suit was premature because the
City made no effort in good faith to negotiate the purchase.
Meantime,
on June 9, 2004 the trial court issued a writ of possession in the Citys favor. On December 19, 2006, upon the joint motion
of the parties, the RTC released the P1,500,000.00 deposit to the defendant
owners.
On
October 15, 2007 the parties agreed to forego with the pre-trial, opting
instead to simultaneously submit their memoranda on the issue of whether or not
there is necessity for the City to expropriate the subject properties for
public use. The owners of the lots submitted
their memorandum but the City did not.
On
February 12, 2008 the RTC dismissed the complaint on the ground that the City
did not comply with Section 9 of Republic Act (R.A.) 7279[6] which
set the order of priority in the acquisition of properties for socialized
housing. Private properties ranked last
in the order of priorities for such acquisition and the City failed to show
that no other properties were available for the project. The City also failed to comply with Section 10
which authorized expropriation only when resort to other modes (such as community
mortgage, land swapping, and negotiated purchase) had been exhausted.
The
trial court pointed out that the City also failed to show that it exhausted all
reasonable efforts to acquire the lots through a negotiated sale. Article 35 of the Rules and Regulations
Implementing the Local Government Code provides that when property owners are
willing to sell but for a higher price than that offered, the local chief
executive must confer with them for the possibility of coming to an agreement
on the price. Here, after the owners refused
to sell the lots for P1,500.00 per sq m offer, the City did not exert
any effort to renegotiate or revise its offer.
The RTC also ruled that the City submitted the issue of genuine
necessity to acquire the properties for public purpose or benefit without presenting
evidence on the same.
The
City moved for the reconsideration of the order of dismissal but before the RTC
could act on it, the City appealed the case to the Court of Appeals (CA).[7]
On
February 27, 2009[8]
the CA affirmed the RTCs dismissal of the Citys action, mainly for the reason
that the City failed to comply with the requirements of Sections 9 and 10 of R.A.
7279 which ranked privately-owned lands last in the order of priority in
acquiring lots for socialized housing and which preferred modes other than
expropriation for acquiring them. The CA
rejected the Citys claim that the RTC denied it its right to due process, given
that the City agreed to forego with pre-trial and to just submit a memorandum
on the threshold issues raised by the owners answer regarding the propriety of
expropriation.[9] The City simply did not submit a
memorandum. Although it moved for the
reconsideration of the order of dismissal, the City filed a notice of appeal
before the RTC could resolve the motion.
The
Issues
The
petition raises the following issues:
1. Whether
or not the CA erred in failing to rule that the RTC denied the City its right
to due process when it dismissed the case without hearing the Citys side;
2. Whether
or not the CA erred in affirming the RTCs ruling that the City failed to
comply with the requirements of Sections 9 and 10 of R.A. 7279 in trying to
acquire the subject lots by expropriation;
3. Whether
or not the CA erred in failing to set aside the RTCs ruling that the City
failed to establish the existence of genuine necessity in expropriating the
subject lots for public use or purpose; and
4. Whether
or not the CA erred in failing to rule that the owners withdrawal of its P1.5
million deposit constituted implied consent to the expropriation of their lots.
The
Rulings of the Court
One. The RTC did not deny the City its right to be
heard on its action when that court dismissed the same. An expropriation proceeding of private lands has
two stages: first, the
determination of plaintiffs authority to exercise the power of eminent domain in
the context of the facts of the case and, second,
if there be such authority, the determination of just compensation. The first phase ends with either an order of
dismissal or a determination that the property is to be acquired for a public
purpose.[10]
Here,
the Citys action was still in the first stage when the RTC called the parties to
a pre-trial conference where, essentially, their task was to determine how the
court may resolve the issue involved in the first stage: the Citys authority
to acquire by expropriation the particular lots for its intended purpose. As it happened, the parties opted to simultaneously
submit their memoranda on that issue. There
was nothing infirm in this agreement since it may be assumed that the parties
knew what they were doing and since such agreement would facilitate early disposal
of the case.[11]
Unfortunately,
the agreement implied that the City was waiving its right to present evidence
that it was acquiring the subject lots by expropriation for a proper public
purpose. Counsel for the City may have been
confident that its allegations in the complaint can stand on their own, ignoring
the owners challenge to its right to expropriate their lots for the stated
purpose. Parenthetically, the City moved
for the reconsideration of the RTCs order of dismissal but withdrew this remedy
by filing a notice of appeal from that order to the CA. Evidently, the City cannot claim that it had been
denied the opportunity of a hearing.
Two.
The CA correctly ruled that the City failed to show that it complied
with the requirements of Section 9 of R.A. 7279 which lays down the order of
priority in the acquisition through expropriation of lands for socialized
housing. This section provides:
Section 9. Priorities in the acquisition of Land.Lands for socialized housing
shall be acquired in the following order:
(a) Those owned by the Government or any of
its subdivisions, instrumentalities, or agencies, including government-owned or
controlled corporations and their subsidiaries;
(b) Alienable lands of the public domain;
(c) Unregistered or abandoned and idle
lands;
(d) Those within the declared Areas for
Priority Development, Zonal Improvement Program sites, and Slum Improvement and
Resettlement Program sites which have not yet been acquired;
(e) Bagong Lipunan Improvement of Sites and
Services or BLISS sites which have not yet been acquired; and
(f) Privately-owned
lands.
Where on-site
development is found more practicable and advantageous to the beneficiaries,
the priorities mentioned in this section shall not apply. The local government units shall give
budgetary priority to on-site development of government lands. (Emphasis supplied)
The
City of course argues that it did not have to observe the order of priority provided
above in acquiring lots for socialized housing since it found on-site
development to be more practicable and advantageous to the beneficiaries who
were these lots long-time occupants. But
the problem remains. The City did not
adduce evidence that this was so.
Besides,
Section 10 of R.A. 7279 also prefers the acquisition of private property by
negotiated sale over the filing of an expropriation suit. It provides that such suit may be resorted to
only when the other modes of acquisitions have been exhausted. Thus:
Section 10. Modes of Land Acquisition.The modes of acquiring
land for purposes of this Act shall include, among others, community mortgage,
land swapping, land assembly or consolidation, land banking, donation to the
Government, joint-venture agreement, negotiated purchase, and expropriation:
Provided, however, That expropriation
shall be resorted to only when other modes of acquisition have been exhausted;
Provided, further, That where expropriation is resorted to, parcels of land
owned by small property owners shall be exempted for purposes of this Act. x x x (Emphasis supplied)
There
is a sensible reason for the above.
Litigation is costly and protracted.
The government should also lead in avoiding litigations and
overburdening its courts.
Indeed,
the Court has held that when the property owner rejects the offer but hints for
a better price, the government should renegotiate by calling the property owner
to a conference.[12] The government must exhaust all reasonable
efforts to obtain by agreement the land it desires. Its failure to comply will warrant the
dismissal of the complaint. Article 35
of the Rules and Regulations Implementing the Local Government Code provides
for this procedure. Thus:
Article 35. Offer to Buy and Contract of Sale(a) The offer to buy private
property for public use or purpose shall be in writing. It shall specify the property sought to be
acquired, the reasons for its acquisition, and the price offered.
x x x x
(c) If
the owner or owners are willing to sell their property but at a price higher
than that offered to them, the local chief executive shall call them to a
conference for the purpose of reaching an agreement on the selling price. The chairman of the appropriation or finance
committee of the sanggunian, or in
his absence, any member of the sanggunian
duly chosen as its representative, shall participate in the conference. When an agreement is reached by the parties,
a contract of sale shall be drawn and executed.
Here,
the City of P1,500.00 per sq m to the owners for their lots. But after the latter rejected the offer,
claiming that the offered price was even lower than their current zonal value,
the City did not bother to renegotiate or improve its offer. The intent of the law is for the State or the
local government to make a reasonable offer in good faith, not merely a pro forma offer to acquire the property.[13]
The
Court cannot treat the requirements of Sections 9 and 10 of R.A. 7279 lightly. It held in Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes v. City of
Three. Admittedly, the City alleged in its amended
complaint that it wanted to acquire the subject lots in connection with its
land-for-the-landless program and that this was in accord with its Ordinance
8012. But the City misses the
point. The owners directly challenged the
validity of the objective of its action.
They alleged that the taking in this particular case of their lots is
not for public use or purpose since its action would benefit only a few. Whether this is the case or not, the owners
answer tendered a factual issue that called for evidence on the Citys part to
prove the affirmative of its allegations.
As already stated, the City submitted the issue for the RTCs resolution
without presenting evidence.
Four.
The City insists that it made a deposit of P1.5 million with the
RTC by way of advance payment on the lots it sought to expropriate. By withdrawing this deposit, respondents may
be assumed to have given their consent to the expropriation.
But
the advance deposit required under Section 19 of the Local Government Code constitutes
an advance payment only in the event the expropriation prospers. Such deposit also has a dual purpose: as
pre-payment if the expropriation succeeds and as indemnity for damages if it is
dismissed. This advance payment, a
prerequisite for the issuance of a writ of possession, should not be confused
with payment of just compensation for the taking of property even if it could
be a factor in eventually determining just compensation.[16] If the proceedings fail, the money could be
used to indemnify the owner for damages.[17]
Here,
therefore, the owners withdrawal of the deposit that the City made does not amount
to a waiver of the defenses they raised against the expropriation. With the dismissal of the complaint, the
amount or a portion of it could be awarded to the owners as indemnity to cover the
expenses they incurred in defending their right.
Notably,
the owners neither filed a counterclaim for damages against the City nor did
they seek indemnity for their expenses after the RTC dismissed its action. Consequently, the City government is entitled
to the return of the advance deposit it made and that the owners withdrew. But, considering the expenses that the owners
needed to incur in defending themselves in the appeals that the City instituted
before the CA and this Court, an award of P50,000.00 in attorneys fees against
the City is in order. The owners must
return the rest of the P1,500,000.00 that they withdrew.
Lastly, the Court must point out
that the ruling in this case is without prejudice to the right of the City to re-file
the action after it has complied with the relevant mandatory provisions of R.A.
7279 and Article 35 of the Rules and Regulations Implementing the Local
Government Code.
WHEREFORE, the Court DENIES the petition and AFFIRMS
the decision of the Court of Appeals dated February 27, 2009 in CA-G.R. CV
90530 subject to the following MODIFICATIONS:
1. P50,000.00 as
attorneys fees;
2. Respondents Alegar Corporation, Terocel Realty Corporation,
and Filomena Vda. De Legarda are in turn ordered to return the advance deposit
of P1,500,000.00 that they withdrew incident to the expropriation case;
and
3. This decision is without prejudice to the right of the City of
SO
ORDERED.
ROBERTO A. ABAD
Associate Justice
WE
CONCUR:
LUCAS P.
BERSAMIN
Associate Justice
MARTIN S. VILLARAMA, JR. MARIA LOURDES P. A. SERENO
Associate
Justice Associate Justice
ESTELA M.
PERLAS-BERNABE
Associate Justice
ATTESTATION
I attest that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
ROBERTO A. ABAD
Associate Justice
Acting Chairperson, Third Division
CERTIFICATION
I certify that the conclusions in the
above Decision had been reached in consultation before the case was assigned to
the writer of the opinion of the Courts Division.
ANTONIO
T. CARPIO
Senior Associate Justice
(Per Section 12, R.A. 296,
The
Judiciary Act of 1948, as amended)
* Designated Acting Member in lieu
of Associate Justice Jose Catral Mendoza, per Special Order 1241 dated June 14,
2012.
** Designated Acting Member in lieu
of Associate Justice Presbitero J. Velasco, Jr., per Special Order 1229 dated
June 6, 2012.
*** Designated Additional Member in
lieu of Associate Justice Diosdado M. Peralta, per Raffle dated June 11, 2012.
[1] Totaling 1,505.30 square meters
covered by
[2]
Docketed as Civil Case 03-108565.
[3]
Amended Complaint, paragraphs 3 & 5, records, Vol. I, p. 49.
[4]
[5]
Annex 2 of Answer.
[6]
Known as the Urban Development Housing Act (UDHA).
[7]
Docketed as CA-G.R. CV 90530.
[8]
Penned by Associate Justice Remedios A. Salazar-Fernando and concurred
in by Associates Justices Fernanda Lampas-Peralta and Apolinario D. Bruselas,
Jr.
[9]
Order dated October 15, 2007.
[10]
City of Iloilo v. Hon. Lolita
Contreras-Besana, G.R. No. 168967, February 12, 2010, 612 SCRA 458,
467-468.
[11]
Rules of Court, Rule 18,
Section 2(i).
[12]
Jesus is Lord Christian School
Foundation, Inc. v. Municipality (now City) of
[13]
[14]
467 Phil. 165 (2004).
[15]
Filstream International, Inc. v.
Court of Appeals, 348 Phil. 756, 775 (1998).
[16]
Capitol Steel Corporation v.
PHIVIDEC Industrial Authority, G.R. No. 169453, December 6, 2006, 510 SCRA 590, 602-603.
[17]
Visayan Refining Company v. Camus,
40 Phil. 550, 563 (1919).