THE RIGHT OF SELF-ORGANIZATION OF MANAGERIAL EMPLOYEES

1. In the Matter of the IBP Membership Dues Delinquency of Atty. MARCIAL A. EDILION (IBP
Administrative Case No. MDD1)
RESOLUTION
CASTRO, C.J.:
The respondent Marcial A. Edillon is a duly licensed practicing attorney in the Philippines.
On November 29, 1975, the Integrated Bar of the Philippines (IBP for short) Board of Governors unanimously
adopted Resolution No. 75-65 in Administrative Case No. MDD-1 (In the Matter of the Membership Dues
Delinquency of Atty. Marcial A. Edillon) recommending to the Court the removal of the name of the respondent
from its Roll of Attorneys for "stubborn refusal to pay his membership dues" to the IBP since the latter's
constitution notwithstanding due notice.

On January 21, 1976, the IBP, through its then President Liliano B. Neri, submitted the said resolution to the
Court for consideration and approval, pursuant to paragraph 2, Section 24, Article III of the By-Laws of the IBP,
which reads:
.... Should the delinquency further continue until the following June 29, the Board shall promptly inquire
into the cause or causes of the continued delinquency and take whatever action it shall deem
appropriate, including a recommendation to the Supreme Court for the removal of the delinquent
member's name from the Roll of Attorneys. Notice of the action taken shall be sent by registered mail to
the member and to the Secretary of the Chapter concerned.
On January 27, 1976, the Court required the respondent to comment on the resolution and letter adverted to
above; he submitted his comment on February 23, 1976, reiterating his refusal to pay the membership fees
due from him.
On March 2, 1976, the Court required the IBP President and the IBP Board of Governors to reply to Edillon's
comment: on March 24, 1976, they submitted a joint reply.
Thereafter, the case was set for hearing on June 3, 1976. After the hearing, the parties were required to submit
memoranda in amplification of their oral arguments. The matter was thenceforth submitted for resolution.
At the threshold, a painstaking scrutiny of the respondent's pleadings would show that the propriety and
necessity of the integration of the Bar of the Philippines are in essence conceded. The respondent, however,
objects to particular features of Rule of Court 139-A (hereinafter referred to as the Court Rule) 1 — in
accordance with which the Bar of the Philippines was integrated — and to the provisions of par. 2, Section 24,
Article III, of the IBP By-Laws (hereinabove cited).
The authority of the IBP Board of Governors to recommend to the Supreme Court the removal of a delinquent
member's name from the Roll of Attorneys is found in par. 2 Section 24, Article Ill of the IBP By-Laws (supra),
whereas the authority of the Court to issue the order applied for is found in Section 10 of the Court Rule, which
reads:
SEC. 10. Effect of non-payment of dues. — Subject to the provisions of Section 12 of this Rule, default
in the payment of annual dues for six months shall warrant suspension of membership in the Integrated
Bar, and default in such payment for one year shall be a ground for the removal of the name of the
delinquent member from the Roll of Attorneys.
The all-encompassing, all-inclusive scope of membership in the IBP is stated in these words of the Court Rule:
SECTION 1. Organization. — There is hereby organized an official national body to be known as the
'Integrated Bar of the Philippines,' composed of all persons whose names now appear or may hereafter be
included in the Roll of Attorneys of the Supreme Court.
The obligation to pay membership dues is couched in the following words of the Court Rule:
 SEC. 9. Membership dues. Every member of the Integrated Bar shall pay such annual dues as
the Board of Governors shall determine with the approval of the Supreme Court. ...
The core of the respondent's arguments is that the above provisions constitute an invasion of his constitutional
rights in the sense that he is being compelled, as a pre-condition to maintaining his status as a lawyer in good
standing, to be a member of the IBP and to pay the corresponding dues, and that as a consequence of this
compelled financial support of the said organization to which he is admittedly personally antagonistic, he is
being deprived of the rights to liberty and property guaranteed to him by the Constitution. Hence, the
respondent concludes, the above provisions of the Court Rule and of the IBP By-Laws are void and of no legal
force and effect.

The respondent similarly questions the jurisdiction of the Court to strike his name from the Roll of Attorneys,
contending that the said matter is not among the justiciable cases triable by the Court but is rather of an
"administrative nature pertaining to an administrative body."
The case at bar is not the first one that has reached the Court relating to constitutional issues that inevitably
and inextricably come up to the surface whenever attempts are made to regulate the practice of law, define the
conditions of such practice, or revoke the license granted for the exercise of the legal profession.
The matters here complained of are the very same issues raised in a previous case before the Court, entitled
"Administrative Case No. 526, In the Matter of the Petition for the Integration of the Bar of the Philippines,
Roman Ozaeta, et al., Petitioners." The Court exhaustively considered all these matters in that case in its
Resolution ordaining the integration of the Bar of the Philippines, promulgated on January 9, 1973. The Court
there made the unanimous pronouncement that it was
... fully convinced, after a thoroughgoing conscientious study of all the arguments adduced in Adm.
Case No. 526 and the authoritative materials and the mass of factual data contained in the exhaustive
Report of the Commission on Bar Integration, that the integration of the Philippine Bar is 'perfectly
constitutional and legally unobjectionable'. ...
Be that as it may, we now restate briefly the posture of the Court.
An "Integrated Bar" is a State-organized Bar, to which every lawyer must belong, as distinguished from bar
associations organized by individual lawyers themselves, membership in which is voluntary. Integration of the
Bar is essentially a process by which every member of the Bar is afforded an opportunity to do his share in
carrying out the objectives of the Bar as well as obliged to bear his portion of its responsibilities. Organized by
or under the direction of the State, an integrated Bar is an official national body of which all lawyers are
required to be members. They are, therefore, subject to all the rules prescribed for the governance of the Bar,
including the requirement of payment of a reasonable annual fee for the effective discharge of the purposes of
the Bar, and adherence to a code of professional ethics or professional responsibility breach of which
constitutes sufficient reason for investigation by the Bar and, upon proper cause appearing, a recommendation
for discipline or disbarment of the offending member. 2
The integration of the Philippine Bar was obviously dictated by overriding considerations of public interest and
public welfare to such an extent as more than constitutionally and legally justifies the restrictions that
integration imposes upon the personal interests and personal convenience of individual lawyers. 3
Apropos to the above, it must be stressed that all legislation directing the integration of the Bar have been
uniformly and universally sustained as a valid exercise of the police power over an important profession. The
practice of law is not a vested right but a privilege, a privilege moreover clothed with public interest because a
lawyer owes substantial duties not only to his client, but also to his brethren in the profession, to the courts,
and to the nation, and takes part in one of the most important functions of the State — the administration of
justice — as an officer of the court. 4 The practice of law being clothed with public interest, the holder of this
privilege must submit to a degree of control for the common good, to the extent of the interest he has created.
As the U. S. Supreme Court through Mr. Justice Roberts explained, the expression "affected with a public
interest" is the equivalent of "subject to the exercise of the police power" (Nebbia vs. New York, 291 U.S. 502).
When, therefore, Congress enacted Republic Act No. 6397 5 authorizing the Supreme Court to "adopt rules of
court to effect the integration of the Philippine Bar under such conditions as it shall see fit," it did so in the
exercise of the paramount police power of the State. The Act's avowal is to "raise the standards of the legal
profession, improve the administration of justice, and enable the Bar to discharge its public responsibility more
effectively." Hence, the Congress in enacting such Act, the Court in ordaining the integration of the Bar through
its Resolution promulgated on January 9, 1973, and the President of the Philippines in decreeing the
constitution of the IBP into a body corporate through Presidential Decree No. 181 dated May 4, 1973, were
prompted by fundamental considerations of public welfare and motivated by a desire to meet the demands of
pressing public necessity.
The State, in order to promote the general welfare, may interfere with and regulate personal liberty, property
and occupations. Persons and property may be subjected to restraints and burdens in order to secure the
general prosperity and welfare of the State (U.S. vs. Gomez Jesus, 31 Phil 218), for, as the Latin maxim goes,
"Salus populi est supreme lex." The public welfare is the supreme law. To this fundamental principle of
government the rights of individuals are subordinated. Liberty is a blessing without which life is a misery, but
liberty should not be made to prevail over authority because then society win fall into anarchy (Calalang vs.
Williams, 70 Phil. 726). It is an undoubted power of the State to restrain some individuals from all freedom, and
all individuals from some freedom.
But the most compelling argument sustaining the constitutionality and validity of Bar integration in the
Philippines is the explicit unequivocal grant of precise power to the Supreme Court by Section 5 (5) of Article X
of the 1973 Constitution of the Philippines, which reads:

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

xxx xxx xxx
(5)Promulgate rules concerning pleading, practice, and pro. procedure in all courts, and the admission
to the practice of law and the integration of the Bar ...,
and Section 1 of Republic Act No. 6397, which reads:
SECTION 1. Within two years from the approval of this Act, the Supreme Court may adopt rules of
Court to effect the integration of the Philippine Bar under such conditions as it shall see fit in order to
raise the standards of the legal profession, improve the administration of justice, and enable the Bar to
discharge its public responsibility more effectively.
Quite apart from the above, let it be stated that even without the enabling Act (Republic Act No. 6397), and
looking solely to the language of the provision of the Constitution granting the Supreme Court the power "to
promulgate rules concerning pleading, practice and procedure in all courts, and the admission to the practice
of law," it at once becomes indubitable that this constitutional declaration vests the Supreme Court with plenary
power in all cases regarding the admission to and supervision of the practice of law.
Thus, when the respondent Edillon entered upon the legal profession, his practice of law and his exercise of
the said profession, which affect the society at large, were (and are) subject to the power of the body politic to
require him to conform to such regulations as might be established by the proper authorities for the common
good, even to the extent of interfering with some of his liberties. If he did not wish to submit himself to such
reasonable interference and regulation, he should not have clothed the public with an interest in his concerns.
On this score alone, the case for the respondent must already fall.
The issues being of constitutional dimension, however, we now concisely deal with them seriatim.
1.The first objection posed by the respondent is that the Court is without power to compel him to become a
member of the Integrated Bar of the Philippines, hence, Section 1 of the Court Rule is unconstitutional for it
impinges on his constitutional right of freedom to associate (and not to associate). Our answer is: To compel a
lawyer to be a member of the Integrated Bar is not violative of his constitutional freedom to associate.
Integration does not make a lawyer a member of any group of which he is not already a member. He became a
member of the Bar when he passed the Bar examinations. All that integration actually does is to provide an
official national organization for the well-defined but unorganized and in cohesive group of which every lawyer
is a ready a member.
Bar integration does not compel the lawyer to associate with anyone. He is free to attend or not attend the
meetings of his Integrated Bar Chapter or vote or refuse to vote in its elections as he chooses. The only
compulsion to which he is subjected is the payment of annual dues. The Supreme Court, in order to further the
State's legitimate interest in elevating the quality of professional legal services, may require that the cost of
improving the profession in this fashion be shared by the subjects and beneficiaries of the regulatory program
— the lawyers.
Assuming that the questioned provision does in a sense compel a lawyer to be a member of the Integrated
Bar, such compulsion is justified as an exercise of the police power of the State.
2The second issue posed by the respondent is that the provision of the Court Rule requiring payment of a
membership fee is void. We see nothing in the Constitution that prohibits the Court, under its constitutional
power and duty to promulgate rules concerning the admission to the practice of law and the integration of the
Philippine Bar (Article X, Section 5 of the 1973 Constitution) — which power the respondent acknowledges —
from requiring members of a privileged class, such as lawyers are, to pay a reasonable fee toward defraying
the expenses of regulation of the profession to which they belong. It is quite apparent that the fee is indeed
imposed as a regulatory measure, designed to raise funds for carrying out the objectives and purposes of
integration.
3.The respondent further argues that the enforcement of the penalty provisions would amount to a deprivation
of property without due process and hence infringes on one of his constitutional rights. Whether the practice of
law is a property right, in the sense of its being one that entitles the holder of a license to practice a profession,
we do not here pause to consider at length, as it clear that under the police power of the State, and under the
necessary powers granted to the Court to perpetuate its existence, the respondent's right to practice law
before the courts of this country should be and is a matter subject to regulation and inquiry. And, if the power to
impose the fee as a regulatory measure is recognize, then a penalty designed to enforce its payment, which
penalty may be avoided altogether by payment, is not void as unreasonable or arbitrary.

But we must here emphasize that the practice of law is not a property right but a mere privilege, 13 and as
such must bow to the inherent regulatory power of the Court to exact compliance with the lawyer's public
responsibilities.
4.Relative to the issue of the power and/or jurisdiction of the Supreme Court to strike the name of a lawyer
from its Roll of Attorneys, it is sufficient to state that the matters of admission, suspension, disbarment and
reinstatement of lawyers and their regulation and supervision have been and are indisputably recognized as
inherent judicial functions and responsibilities, and the authorities holding such are legion. 14
In In Re Sparks (267 Ky. 93, 101 S.W. (2d) 194), in which the report of the Board of Bar Commissioners in a
disbarment proceeding was confirmed and disbarment ordered, the court, sustaining the Bar Integration Act of
Kentucky, said: "The power to regulate the conduct and qualifications of its officers does not depend upon
constitutional or statutory grounds. It is a power which is inherent in this court as a court — appropriate, indeed
necessary, to the proper administration of justice ... the argument that this is an arbitrary power which the court
is arrogating to itself or accepting from the legislative likewise misconceives the nature of the duty. It has
limitations no less real because they are inherent. It is an unpleasant task to sit in judgment upon a brother
member of the Bar, particularly where, as here, the facts are disputed. It is a grave responsibility, to be
assumed only with a determination to uphold the Ideals and traditions of an honorable profession and to
protect the public from overreaching and fraud. The very burden of the duty is itself a guaranty that the power
will not be misused or prostituted. ..."
The Court's jurisdiction was greatly reinforced by our 1973 Constitution when it explicitly granted to the Court
the power to "Promulgate rules concerning pleading, practice ... and the admission to the practice of law and
the integration of the Bar ... (Article X, Sec. 5(5) the power to pass upon the fitness of the respondent to remain
a member of the legal profession is indeed undoubtedly vested in the Court.
We thus reach the conclusion that the provisions of Rule of Court 139-A and of the By-Laws of the Integrated
Bar of the Philippines complained of are neither unconstitutional nor illegal.
WHEREFORE, premises considered, it is the unanimous sense of the Court that the respondent Marcial A.
Edillon should be as he is hereby disbarred, and his name is hereby ordered stricken from the Roll of Attorneys
of the Court.
Fernando, Teehankee, Barredo, Makasiar, Antonio, Muñoz Palma, Aquino, Concepcion, Jr., Santos,
Fernandez and Guerrero, JJ., concur.
In the Matter of the IBP Membership Dues Delinquency of Atty. MARCIAL A. EDILION, 84 SCRA 554
FACTS:
The respondent Marcial A. Edillon is a duly licensed practicing attorney in the Philippines. On November 29, 1975, the
Integrated Bar of the Philippines (IBP for short) Board of Governors unanimously adopted Resolution No. 75-65 in
Administrative Case No. MDD-1 (In the Matter of the Membership Dues Delinquency of Atty. Marcial A. Edillon)
recommending to the Court the removal of the name of the respondent from its Roll of Attorneys for "stubborn refusal to
pay his membership dues" to the IBP since the latter's constitution notwithstanding due notice. The core of the
respondent's arguments is that the above provisions constitute an invasion of his constitutional rights in the sense that he
is being compelled, as a pre-condition to maintaining his status as a lawyer in good standing, to be a member of the IBP
and to pay the corresponding dues, and that as a consequence of this compelled financial support of the said organization
to which he is admittedly personally antagonistic, he is being deprived of the rights to liberty and property guaranteed to
him by the Constitution. Hence, the respondent concludes, the above provisions of the Court Rule and of the IBP By-Laws
are void and of no legal force and effect. The respondent similarly questions the jurisdiction of the Court to strike his name
from the Roll of Attorneys, contending that the said matter is not among the justiciable cases triable by the Court but is
rather of an "administrative nature pertaining to an administrative body."
ISSUES:
Whether or not the respondent should be disbarred due to refusal to pay his membership dues?
HELD:
It is the unanimous sense of the Court that the respondent Marcial A. Edillon should be as he is hereby disbarred, and his
name is hereby ordered stricken from the Roll of Attorneys of the Court.
RATIO DECIDENDI:
To compel a lawyer to be a member of the Integrated Bar is not violative of his constitutional freedom to associate.
Integration does not make a lawyer a member of any group of which he is not already a member. He became a member
of the Bar when he passed the Bar examinations.
All that integration actually does is to provide an official national organization for the well-defined but unorganized and in
cohesive group of which every lawyer is a ready a member. Bar integration does not compel the lawyer to associate with
anyone. He is free to attend or not attend the meetings of his Integrated Bar Chapter or vote or refuse to vote in its
elections as he chooses. The only compulsion to which he is subjected is the payment of annual dues. The Supreme
Court, in order to further the State's legitimate interest in elevating the quality of professional legal services, may require
that the cost of improving the profession in this fashion be shared by the subjects and beneficiaries of the regulatory
program - the lawyers. Moreover, there is nothing in the Constitution that prohibits Court, under its constitutional power
and duty to promulgate rules concerning the admission to the practice of law and the integration of the Philippine Bar
(Article X, Section 5 of the 1973 Constitution), from requiring members of a privileged class, such as lawyers are, to pay a
reasonable fee toward defraying the expenses of regulation of the profession to which they belong. It is quite apparent
that the fee is indeed imposed as a regulatory measure, designed to raise funds for carrying out the objectives and
purposes of integration. Also, it clear that under the police power of the State, and under the necessary powers granted to
the Court to perpetuate its existence, the respondent's right to practice law before the courts of this country should be and
is a matter subject to regulation and inquiry. And, if the power to impose the fee as a regulatory measure is recognize,
then a penalty designed to enforce its payment, which penalty may be avoided altogether by payment, is not void as
unreasonable or arbitrary. It is sufficient to state then that the matters of admission, suspension, disbarment and
reinstatement of lawyers and their regulation and supervision have been and are indisputably recognized as inherent
judicial functions and responsibilities, and the authorities holding such are legion. Thus, the court‘s jurisdiction was greatly
reinforced by our 1973 Constitution when it explicitly granted to the Court the power to ―Promulgate rules concerning
pleading practice … and the admission to the practice of law and the integration of the Bar … (Article X, Sec 5(5), the
power to pass upon the fitness of the respondent to remain a member of the legal profession is indeed undoubtedly
vested in the Court.

2. ARTHUR TARNATE vs. CARMELO C. NORIEL as Director of the Bureau of Labor Relations, LUCERIO
FAJARDO, LUIS ISIP and AURELIO INTERTAS
FERNANDO, C.J.:

The crux of the matter in this proceeding for certiorari with preliminary injunction is whether or not probationary
employees are entitled to vote in the election of officers and board members of a labor union. Respondent
Director Carmelo C. Noriel 1 at first ruled that they could not, apparently relying on the applicable provision of
the Labor Code, which reads thus: "Any employee, whether employed for a definite period or not, with at least
one year of service, whether such service is continuous or broken, shall be considered a regular employee for
purposes of membership in any labor union., 2 When, however, a motion for reconsideration was filed, he
granted it and allowed the votes to be counted. Hence this suit for certiorari.

In the election of union officers on October 23, 1977, there were two strong contenders, petitioner Arthur
Ternate and respondent Lucerio Fajardo. Petitioner received 308 votes and respondent 285 votes. Forty (40)
ballots cast by employees who classified as second helpers were challenged. They were included in the list of
qualified voters upon the motion of the Fajardo faction and over the opposition of the Ternate group. It was
imposed as a condition that the challenged ballots would be segregated and would be counted only after
passing upon the question of membership of the such second helpers. The Ternate group finally agreed to
allow them to participate in the election. On October 27, 1977, after the decision, the Fajardo group moved to
have the challenged votes opened. The Med-Arbiter granted the prayer. Respondent Director Noriel in the
order now challenged in this petition, as noted earlier, decided otherwise in a motion for reconsideration.

The Solicitor General 3 when asked to comment, after stressing the constitutional right to form associations, a
corollary of which in the case of labor is the right to self-organization, pointed to Article 3 of the New Labor
Code in sustaining the power of respondent Director to issue the assailed order. Thus: "These constitutional
mandates are recognized in Article 3 of the New Labor Code. Further, Article 244 thereof is of the same tenor:
... — All persons employed in commercial, industrial and agricultural enterprises, including religious, medical or
educational institutions operating for profit, shall have the right to self-organization and to form, join, or assist
labor organizations for purposes of collective bargain. 4 Reference to the constitutional right to freedom of
association is not without relevance. The more decisive question, however, is the force and effect of the Labor
Code provision as to when a probationary employee could in the language thereof "be considered a regular
employee for purposes of membership in any labor union."

The answer arrived at by this Court after due consideration of all factors bearing on such issue, is that the
condition thus imposed in the Labor Code requiring "at least one year of service" calls for application.
Petitioner, therefore, must prevail.

1. The reliance of petitioner on the applicable Labor Code provision is not in vain. It is definite and clear. At
least one year of service is required for an employee to enjoy the benefits "of membership in any labor union."
There is no ambiguity. Its validity has not been challenged. It, therefore, calls for application in the precise
terms it was enacted. As was pointed out in Gonzaga Court of Appeals: 5 "It has been repeated time and time
again that where the statutory norm speaks unequivocally there is nothing for the courts to do except to apply
it. The law, leaving no doubt as to the scope of its operation, must be obeyed. Our decisions have consistently
been to that effect. 6 There is thus no statutory support for the challenged order of respondent Noriel.

2. In reaching such a conclusion, this Court is not unaware of the implication for freedom of
association. 7 There is plausibility on its face to the contention of the Solicitor General that to bar the
probationary employees from voting for union officials would run counter to such constitutional right. Nor
should it be forgotten that in U.E. Automotive Employees and Workers Union vs. Noriel, 8 it was stressed that
"freedom of association is explicitly ordained; it is not merely derivative, peripheral or penumbral, as is the case
in the United States. It can trace its origin to the Malolos Constitution. 9 A more realistic appraisal, however, of
the labor situation would serve to clarify matters. (The right to join a labor union remains undisputed. In the
meanwhile however, for purposes of electing the union officers, assuming it would be chosen as the sole
bargaining unit in the negotiation for a collective bargaining contract, the right of probationary employees could
be thus restricted as provided for in the Labor Code. The justification lies in the fact that management could, by
the simple device of appointing probationary employees in the labor union expected to prevail in the choice of
the sole collective bargaining agent, attain the result that would serve best its interests, not necessarily that of
labor). It must have been such a purpose that inspired a provision on this character. At any rate, there being no
attack on its validity, it must be given full force and effect.

3. The delay in the decision of this case is due to the fact that the required number of votes for this conclusion
could not be obtained until the last deliberation. Precisely to some of its members the argument based on
freedom of association weighed heavily. At any rate, before the next election takes place, matters hopefully
have been clarified by this decision.

WHEREFORE, the petition for certiorari is granted and the election of petitioner Arthur Ternate is upheld. The
restraining order issued on November 27, 1978 is lifted. This decision is immediately executory. No costs.

Aquino, Guerrero, Abad Santos and De Castro, JJ., concur.

Barredo and Concepcion, Jr., JJ., are on leave.

3. SAMAHANG MANGGAGAWA NG VIA MARE, petitioner,

vs.
HON. CARMELO C. NORIEL, VIA MARE CATERING SERVICES and FOOD SPECIALTIES, INC., and GLENDA
R. BARRETO respondents.

ABAD SANTOS, J.:

The only issue in this petition for certiorari is whether or not respondent Director Carmelo C. Noriel of the Bureau of
Labor Relations had been divested of his jurisdiction to settle a labor dispute between the petitioner and the Via
Mare Catering Services and Food Specialties, Inc. Respondent director ruled that he had lost jurisdiction in view of
the corporation's application to terminate the employment of some of the petitioner's members with the Regional
Director of the National Capital Region. At this juncture, we can readily say that the respondent director had not
been divested of his jurisdiction and we have yet to see a more shabby treatment of workers than that accorded by
the corporation to its employees in this case.

The facts are well-stated in the comment of the Solicitor General:

On October 13, 1979, petitioner Samahang Manggagawa Ng Via Mare (SAMAVIM), a duly
organized labor union, requested respondent corporation, Via Mare Catering Services and Food
Specialties, Inc., to enter into a collective bargaining agreement therewith submitting proposals
(Petition pp. 1-2).

Thereafter, petitioner twice reiterated its request to al respondents to negotiate a cove bargaining a
respondent corporation allegedly terminated four (4) of petition's members (Petition, p. 2).

On November 19, 1979, petitioner filed a Notice of Strike with the Ministry of labor c that respondent
corporation neither assented nor refused to bargain collectively and that t corporation harassed
petitioner's union members (Petition, p. 2; ANNEX "A").

The Bureau of Labor Relations, of which respondent Honorable Carmelo C. Noriel is Director,
assumed injunction over the labor dispute and through Med-Arbiter Roberto Landas, summoned
petitioner and respondent corporation to a conference/hearing on November 20, 1979. At the
scheduled conference/hearing before Med-Arbiter Landas, the parties arrived at the following
agreement (Petition, p. 3; ANNEX "B")

Representative of management appeared and manifested that he will meet with

counsel of the union tomorrow, 21 November 1979 at Via Mare at 8:00 a.m. to
 discuss when will (sic) top management will be available to discuss the terms and
conditions of employment.

Counsel of management assured the union that Via Mare Catering Services and
Food Specialties, Inc., will negotiate with the union. (Emphasis supplied)

On November 21, 1979, petitioner and respondent corporation entered into the following
"Preliminary Agreement" (Petition, p. 3; ANNEX "C")

1. That they would meet on November 24, 1979, at 5:00 p.m., at Via Mare for the purpose of
informing and determining from either party the CBA panelist and the schedule of negotiation;

2. That the initial negotiation shall be held, at the very earliest November 27, 1979 or November 28,
1979;

On November 24, 1979, petitioner and respondent corporation entered into the following 'Initial
Agreement' (Petition, p. 4; ANNEX "D")

1. That management recognizes the fact that SAMAVIM (i.e., petitioner) is duly registered Union in
the establishments and accepts the fact of their constitution;

2. That management panelist to the negotiation would be made known to the Union on November
27, 1979;

3. That after the panelist, Union and Management shall have met, which at the earliest shall be on
November 28, 1979, and there shall negotiation on the proposed CBA be started;

Petitioner and respondent corporation met on November 27, 1979. But on that date, respondent
corporation refused to negotiate a collective bargaining agreement as they had previously committed
themselves. On November 28, 1979, therefore, petitioner's members staged a walk-out, duly
informing the Bureau of Labor Relations thereof (Petition, pp. 4-5, ANNEX "E").

On November 29, 1979, respondent Noriel issued the following Return-To-Work Order (Petition, P.
5; ANNEX "F").

All striking workers of the Via Mare Catering Services & Food Specialties, Inc., are
hereby ordered to return to work immediately and to desist from striking whether the
strike is for cause or otherwise. The Management is likewise ordered to allow all
workers to return to work under the same terms and conditions prevent previous to
the work stoppage.

This order shall be without prejudice to whatever action any party might take under
existing law, decree, rules and regulation.

Petitioner and respondent corporation were also ordered by Med-Arbiter Victorians Calaycay to
appear before the Bureau of Labor Relations on December 3, 1979. In the meantime, petitioner's
members returned to work (Petition, p. 6).

On December 3. 1979, before the Bureau of Labor Relations, petitioner and respondent corporation
entered into an agreement (Petition, p. 5; ANNEX "G") which provided among other things, the
following:

1. There will be a consent election;

xxx xxx xxx

 6. That the parties will meet on December 17, 1979 to determine the eligible voters and date of
election.

However, on December 4, 1979, respondent corporation through their General Manager, respondent
Glenda R. Barreto terminated seventy three (73) union member after having allowed them to work
for one day, without prior from the Ministry of Labor, and employed other persons to rep the
terminated union members (Petition, pp. 5-6).

On December 4, 1979, petitions filed a motion to cite the private respondents in contempt for alleged
violation of respondent Noriel's Return-To-Work Order, alleged union-busting activities, and alleged
bad faith in dealing with petite (Petition, p. 6; ANNEX "H").

Pursuant to a summon, petitioner and respondent corporation appeared before Med-Arbiter

Victorians Calaycay on December 5, 1979. On that date, respondent corporation, through counsel
stated that the terminated employees will be reinstated and that the date of their re-acceptance will
be known at the hearing which was set on December 7, 1979 (Petition, p. 6).

Respondent corporation's counsel did not appear at the hearing on December 7, 1979, thus
prompting petitioner to ask for the resolution of its motion to declare private respondent in contempt.
Respondent Noriel was, however, at that time in Hongkong upon his to the Philippines, he allegedly
refused to act on the motion on the ground that he had lost j on over the labor dispute with the filing
on the part of respondent corporation of an application to dear the tion of seventy-three (73) of
petitioner's members. According to respondent Noriel jurisdiction over the case now file with the
Honorable Director Francisco Estrella, Regional IV, National Capital Region, who takes cognizance
of such applications (Petition, p. 7).

Petitioner further alleges that on or about November 27, 1979, respondent corporation filed a
'Petition For Certification Elections' before the Bureau of Labor Relations, which petition was d as
LRC-M-515-79, but remains unserved on petitioner (Petition, p. 7).

From the foregoing narration it is dear that the private respondents did not comply with their duty to bargain
collectively with the petitioner as provided in Articles 252 and 253 of the Labor Code (P.D. No. 442, as amended),
namely:

Art 252. Duty to bargain collectively in the absence collective bargaining agreements.— In the
absence of an agreement Or other voluntary arrangement improving for a more expeditious manner
of collective bargaining , it shall be the duty of the employer and the representatives of the
employees to bargain collectively in accordance with the provisions of this Code.

ART. 253. Meaning of duty to bargain collectively.— The duty to bargain collectively means the
performance of a mutual obligation to meet and convene promptly and expeditiously in good faith for
the purpose of negotiating an agreement with to wages, hours, of work and all other terms and
conditions of employment including for adjusting any grievance or question a under such agreement
and executing a contract incorporating such agreements and executing requested by either party,
but such duty does not compel any party to agree to a proposal or to make any concession.

As correctly observed by the Solicitor General: "Under the circumstances, the application for clearance filed by
respondent corporation relative -to the members of petitioner-union who were dismissed, is highly suspect as a
means to frustrate the intention of respondent corporation not to bargain collectively with petitioner. By this
strategem, the membership of petitioner union would be depleted, thus assuring its defeat in the event of a consent
or certification election. In this light, said application for clearance cannot be used to defeat the jurisdiction of
respondent Director Noriel.

Moreover, the only question before Director Noriel is whether or not the petitioner is the exclusive bargain
representative of the employees working for the respondent corporation in respect of which both the petitioner and
the respondent corporation agreed to hold a consent or certification election including in the voting those employees
who had been dismissed by the corporation conformably to the statement of the corporation's counsel during the
hearing before Us on January 9, 1980. Upon the other hand, the issue before Regional Director Estrella is whether
or not the termination of he employment of some of the petitioner's member is justified. The two questions are
unrelated and can be resolved independently of each other especially since it had been stated as aforesaid that
even the dismissed employees could take part in the certification election.

WHEREFORE, respondent Director Carmelo C. Noriel is hereby ordered to proceed with the holding of the
certification election as had been agreed between the petitioner and the respondent corporation. Costs against the
private respondents.

SAMAHANG MANGGAGAWA NG VIA MARE vs. HON. CARMELO C. NORIEL

On October 13, 1979, petitioner Samahang Manggagawa Ng Via Mare (SAMAVIM), a duly organized labor union,
requested respondent corporation, Via Mare Catering Services and Food Specialties, Inc., to enter into a collective
bargaining agreement therewith submitting proposals.

Thereafter, petitioner twice reiterated its request to al respondents to negotiate a cove bargaining a respondent
corporation allegedly terminated four (4) of petition's members.

On November 19, 1979, petitioner filed a Notice of Strike with the Ministry of labor that respondent corporation neither
assented nor refused to bargain collectively and that t corporation harassed petitioner's union members.

The Bureau of Labor Relations, of which respondent Honorable Carmelo C. Noriel is Director, assumed injunction over
the labor dispute and through Med-Arbiter Roberto Landas, summoned petitioner and respondent corporation to a
conference/hearing on November 20, 1979. At the scheduled conference/hearing before Med-Arbiter Landas, Counsel of
management assured the union that Via Mare Catering Services and Food Specialties, Inc., will negotiate with the union.

On November 21, 1979, petitioner and respondent corporation entered a "Preliminary Agreement", and on November 24,
1979, petitioner and respondent corporation entered into an 'Initial Agreement'.

Petitioner and respondent corporation met on November 27, 1979. But on that date, respondent corporation refused to
negotiate a collective bargaining agreement as they had previously committed themselves. On November 28, 1979,
therefore, petitioner's members staged a walk-out, duly informing the Bureau of Labor Relations thereof.

Petitioner and respondent corporation were also ordered by Med-Arbiter Victorians Calaycay to appear before the Bureau
of Labor Relations on December 3, 1979. In the meantime, petitioner's members returned to work.

On December 3. 1979, before the Bureau of Labor Relations, petitioner and respondent corporation entered into an
agreement which provided among other things, the following:

1. There will be a consent election;

xxx xxx xxx

6. That the parties will meet on December 17, 1979 to determine the eligible voters and date of election.

The only question before Director Noriel is whether or not the petitioner is the exclusive bargain representative of the
employees working for the respondent corporation in respect of which both the petitioner and the respondent corporation
agreed to hold a consent or certification election including in the voting those employees who had been dismissed by the
corporation conformably to the statement of the corporation's counsel during the hearing before Us on January 9, 1980.
Upon the other hand, the issue before Regional Director Estrella is whether or not the termination of he employment of
some of the petitioner's member is justified. The two questions are unrelated and can be resolved independently of each
other especially since it had been stated as aforesaid that even the dismissed employees could take part in the
certification election.

WHEREFORE, respondent Director Carmelo C. Noriel is hereby ordered to proceed with the holding of the certification
election as had been agreed between the petitioner and the respondent corporation. Costs against the private
respondents.
4. DOLORES VILLAR, ROMEO PEQUITO, DIONISIO RAMOS, BENIGNO MAMARALDO, ORLANDO ACOSTA,
RECITACION BERNUS, ANSELMA ANDAN, ROLANDO DE GUZMAN and RITA LLAGAS vs. THE HON.
AMADO G. INCIONG, as Deputy Minister of the Ministry of Labor, AMIGO MANUFACTURING
INCORPORATED and PHILIPPINE ASSOCIATION OF FREE LABOR UNIONS (PAFLU)

Aniceto Haber for petitioners.

Roberto T. Neri for respondents.

GUERRERO, J.:

Petition for review by certiorari to set aside the Order dated February 15, 1979 of respondent Deputy Minister
Amado G. Inciong affirming the Decision of the OIC of Regional Office No. 4 dated October 14, 1978 which jointly
resolved RO4-Case No. T-IV-3549-T and RO4-Case No. RD 4-4088-77-T.

The facts are as follows:

Petitioners were members of the Amigo Employees Union-PAFLU, a duly registered labor organization which, at the
time of the present dispute, was the existing bargaining agent of the employees in private respondent Amigo
Manufacturing, Inc. (hereinafter referred to as Company). The Company and the Amigo Employees Union-PAFLU
had a collective bargaining agreement governing their labor relations, which agreement was then about to expire on
February 28, 1977. Within the last sixty (60) days of the CBA, events transpired giving rise to the present dispute.

On January 5, 1977, upon written authority of at least 30% of the employees in the company, including the
petitioners, the Federation of Unions of Rizal (hereinafter referred to as FUR) filed a petition for certification election
with the Med-Arbiter's Office, Regional Office No. 4 of the Ministry of Labor and Employment. The petition was,
however, opposed by the Philippine Association of Free Labor Unions (hereinafter referred to as PAFLU) with
whom, as stated earlier, the Amigo Employees Union was at that time affiliated. PAFLU's opposition cited the "Code
of Ethics" governing inter-federation disputes among and between members of the Trade Unions Congress of the
Philippines (hereinafter referred to as TUCP). Consequently, the Med-Arbiter indorsed the case to TUCP for
appropriate action but before any such action could be taken thereon, the petitioners disauthorized FUR from
continuing the petition for certification election for which reason FUR withdrew the petition.

On February 7, 1977, the same employees who had signed the petition filed by FUR signed a joint resolution
reading in toto as follows:

Sama-Samang Kapasiyahan

1. TUMIWALAG bilang kasaping Unyon ng Philippine Association of Free Labor Unions (PAFLU) at
kaalinsabay nito, inaalisan namin ang PAFLU ng kapangyarihan na katawanin kami sa anumang
pakikipagkasundo (CBA) sa Pangasiwaan ng aming pinapasukan at kung sila man ay nagkasundo o
magkakasundo sa kabila ng pagtitiwalag na ito, ang nasabing kasunduan ay hindi namin pinagtitibay
at tahasang aming itinatakwil/tinatanggihan;

2. BINABAWI namin ang aming pahintulot sa Federation of Unions of Rizal (FUR) na katawanin
kami sa Petition for Certification Election (RO4-MED Case No. 743-77) at/o sa sama-samang
pakikipagkasundo sa aming patrons;

3. PANATILIHIN na nagsasarili (independent) ang aming samahan, AMIGO EMPLOYEES' UNION,

alinsunod sa Artikulo 240 ng Labor Code;
 4. MAGHAIN KAAGAD ang aming Unyong nagsasarili, sa pamumuno ng aming pangsamantalang
Opisyal na kinatawan, si Ginang DOLORES VILLAR, ng Petition for Certification Election sa
Department of Labor, para kilalanin ang aming Unyong nagsasarili bilang Tanging kinatawan ng
mga manggagawa sa sama-samang pakikipagkasundo (CBA);

5. BIGYAN ng kopya nito ang bawa't kinauukulan at ang mga kapasiyahang ito ay magkakabisa sa
oras na matanggap ng mga kinauukulan ang kani-kanilang sipi nito.1

Immediately thereafter or on February 9, 1977, petitioner Dolores Villar, representing herself to be the authorized
representative of the Amigo Employees Union, filed a petition for certification election in the Company before
Regional Office No. 4, with the Amigo Employees Union as the petitioner. The Amigo Employees Union-PAFLU
intervened and moved for the dismissal of the petition for certification election filed by Dolores Villar, citing as
grounds therefor, viz: (a) the petition lacked the mandatory requisite of at least 30% of the employees in the
bargaining unit; (2) Dolores Villar had no legal personality to sign the petition since she was not an officer of the
union nor is there factual or legal basis for her claim that she was the authorized representative of the local union;
(3) there was a pending case for the same subject matter filed by the same individuals; (4) the petition was barred
by the new CBA concluded on February 15, 1977; (5) there was no valid disaffiliation from PAFLU; and (6) the
supporting signatures were procured through false pretenses.

Finding that the petition involved the same parties and causes of action as the case previously indorsed to the
TUCP, the Med-Arbiter dismiss the petition filed by herein petitioner Villar, which dismissal is still pending appeal
before the Bureau of Labor Relations.

In the meantime, on February 14, 1977, the Amigo Employees Union- PAFLU called a special meeting of its general
membership. A Resolution was thereby unanimously approved which called for the investigation by the PAFLU
national president, pursuant to the constitution and by-laws of the Federation, of all of the petitioners and one Felipe
Manlapao, for "continuously maligning, libelling and slandering not only the incumbent officers but even the union
itself and the federation;" spreading 'false propaganda' that the union officers were 'merely appointees of the
management', and for causing divisiveness in the union.

Pursuant to the Resolution approved by the Amigo Employees Union- PAFLU, the PAFLU, through its national
President, formed a Trial Committee to investigate the local union's charges against the petitioners for acts of
disloyalty inimical to the interest of the local union, as well as directing the Trial Committee to subpoena the
complainants (Amigo Employees Union-PAFLU) and the respondents (herein petitioners) for investigation, to
conduct the said investigation and to submit its findings and recommendations for appropriate action.

And on the same date of February 15, 1977, the Amigo Employees Union- PAFLU and the Company concluded a
new CBA which, besides granting additional benefits to the workers, also reincorporated the same provisions of the
existing CBA, including the union security clause reading, to wit:

ARTICLE III
UNION SECURITY WITH RESPECT TO PRESENT MEMBERS

All members of the UNION as of the signing of this Agreement shall remain members thereof in
good standing. Therefore, any members who shall resign, be expelled, or shall in any manner cease
to be a member of the UNION, shall be dismissed from his employment upon written request of the
UNION to the Company. 2

Subsequently, petitioners were summoned to appear before the PAFLU Trial Committee for the
aforestated investigation of the charges filed against them by the Amigo Employees Union-PAFLU.
Petitioners, however, did not attend but requested for a "Bill of Particulars" of the charges, which
charges were stated by the Chairman of the committee as follows:

1. Disaffiliating from PAFLU and affiliating with the Federation of Unions of Rizal (FUR).
 2. Filling petition for certification election with the Bureau of Labor Relations and docketed as Case
No. R04-MED-830-77 and authorizing a certain Dolores Villar as your authorized representative
without the official sanction of the mother Federation- PAFLU.

3. Maligning, libelling and slandering the incumbent officers of the union as well as of the PAFLU
Federation.

4. By spreading false propaganda among members of the Amigo Employees Union-PAFLU that the
incumbent union officers are 'merely appointees' of the management.

5. By sowing divisiveness instead of togetherness among members of the Amigo Employees Union-
PAFLU.

6. By conduct unbecoming as members of the Amigo Employees Union- PAFLU which is highly
prejudicial to the union as well as to the PAFLU Federation.

All these charges were formalized in a resolution of the incumbent officers of the Amigo Employees
Union-PAFLU dated February 14, 1977. 3

Not recognizing PAFLU's jurisdiction over their case, petitioners again refused to participate in the investigation
rescheduled and conducted on March 9, 1979. Instead, petitioners merely appeared to file their Answer to the
charges and moved for a dismissal.

Petitioners contend in their Answer that neither the disaffiliation of the Amigo Employees Union from PAFLU nor the
act of filing the petition for certification election constitute disloyalty as these are in the exercise of their constitutional
right to self-organization. They further contended that PAFLU was without jurisdiction to investigate their case since
the charges, being intra-union problems within the Amigo Employees Union-PAFLU, should be conducted pursuant
to the provisions of Article XI, Sections 2, 3, 4 and 5 of the local union's constitution and by-laws.

The complainants, all of whom were the then incumbent officers of the Amigo Employees Union-PAFLU, however,
appeared and adduced their evidence supporting the charges against herein petitioners.

Based on the findings and recommendations of the PAFLU trial committee, the PAFLU President, on March 15,
1977, rendered a decision finding the petitioners guilty of the charges and disposing in the last paragraph thereof, to
wit,

Excepting Felipe Manlapao, the expulsion from the AMIGO EMPLOYEES UNION of all the other
nine (9) respondents, Dionisio Ramos, Recitation Bernus, Dolores Villar, Romeo Dequito, Rolando
de Guzman, Anselma Andan, Rita Llagas, Benigno Mamaradlo and Orlando Acosta is hereby
ordered, and as a consequence the Management of the employer, AMIGO MANUFACTURING, INC.
is hereby requested to terminate them from their employment in conformity with the security clause
in the collective bargaining agreement. Further, the Trial Committee is directed to investigate Felipe
Manlapao when he shall have reported back for duty. 4

Petitioners appealed the Decision to the PAFLU, citing the same grounds as before, and in addition thereto, argued
that the PAFLU decision cannot legally invoke a CBA which was unratified, not certified, and entered into without
authority from the union general membership, in asking the Company to terminate them from their employment. The
appeal was, likewise, denied by PAFLU in a Resolution dated March 28, 1977.

After denying petitioner's appeal, PAFLU on March 28, 1977 sent a letter to the Company stating, to wit,

We are furnishing you a copy of our Resolution on the Appeal of the respondent in Administrative
Case No. 2, Series of 1977, Amigo Employees Union-PAFLU vs. Dionisio Ramos, et al.

In view of the denial of their appeal and the Decision of March 15, 1977 having become final and
executory we would appreciate full cooperation on your part by implementing the provision of our
CBA on security clause by terminating the respondents concerned from their employment.5
This was followed by another letter from PAFLU to the Company dated April 25, 1977, reiterating the demand to
terminate the employment of the petitioners pursuant to the security clause of the CBA, with a statement absolving
the Company from any liability or damage that may arise from petitioner's termination.

Acting on PAFLU's demand, the Company informed PAFLU that it will first secure the necessary clearances to
terminate petitioners. By letter dated April 28, 1977, PAFLU requested the Company to put petitioners under
preventive suspension pending the application for said clearances to terminate the petitioners, upon a declaration
that petitioners' continued stay within the work premises will "result in the threat to the life and limb of the other
employees of the company."6

Hence, on April 29, 1977, the Company filed the request for clearance to terminate the petitioners before the
Department of Labor, Regional Office No. 4. The application, docketed as RO4-Case No. 7-IV-3549-T, stated as
cause therefor, "Demand by the Union Pursuant to the Union Security Clause," and further, as effectivity date,
"Termination-upon issuance of clearance; Suspension-upon receipt of notice of workers concerned." 7 Petitioners
were then informed by memorandum dated April 29, 1977 that the Company has applied for clearance to terminate
them upon demand of PAFLU, and that each of them were placed under preventive suspension pending the
resolution of the said applications. The security guard was, likewise, notified to refuse petitioners entry into the work
premises. 8

In an earlier development, on April 25, 1977, or five days before petitioners were placed under preventive
suspension, they filed a complaint with application for preliminary injunction before the same Regional Office No. 4,
docketed as RO4-Case No. RD-4-4088-77-T, praying that after due notice and hearing, "(1) A preliminary injunction
be issued forthwith to restrain the respondents from doing the act herein complained of, namely: the dismissal of the
individual complainants from their employment; (2) After due hearing on the merits of the case, an Order be entered
denying and/or setting aside the Decision dated March 15, 1977 and the Resolution dated March 28, 1977, issued
by respondent Onofre P. Guevara, National President of respondent PAFLU; (3) The Appeal of the individual
complainants to the General Membership of the complainant AMIGO EMPLOYEES UNION, dated March 22, 1977,
pursuant to Sections 2, 3, 4 & 5, Article XI in relation of Section 1, Article XII of the Union Constitution and By-Laws,
be given due course; and (4) Thereafter, the said preliminary injunction be made permanent, with costs, and with
such further orders/reliefs that are just and equitable in the premises."9

In these two cases filed before the Regional Office No. 4, the parties adopted their previous positions when they
were still arguing before the PAFLU trial committee.

On October 14, 1977, Vicente Leogardo, Jr., Officer-in-Charge of Regional Office No. 4, rendered a decision jointly
resolving said two cases, the dispositive portion of which states, to wit,

IN VIEW OF THE FOREGOING, judgment is hereby rendered granting the application of the Amigo
Manufacturing, Inc., for clearance to terminate the employment of Dolores D. Villar, Dionisio Ramos,
Benigno Mamaraldo, Orlando Acosta, Recitacion Bernus, Anselma Andan, Rolando de Guzman,
and Rita Llagas. The application of oppositors, under RO4-Case No. RD-4-4088-77, for a
preliminary injunction to restrain the Amigo Manufacturing, Inc. from terminating their employment
and from placing them under preventive suspension, is hereby DISMISSED. 10

Not satisfied with the decision, petitioners appealed to the Office of the Secretary of Labor. By Order dated February
15, 1979, the respondent Amado G. Inciong, Deputy Minister of Labor, dismissed their appeal for lack of merit. 11

Hence, the instant petition for review, raising the following issues:

A. Is it not error in both constitutional and statutory law by the respondent Minister when he affirmed
the decision of the RO4-Officer-in-Charge allowing the preventive suspension and subsequent
dismissal of petitioners by reason of the exercise of their right to freedom of association?

B. Is it not error in law by the respondent Minister when he upheld the decision of the RO4 OIC
which sustained the availment of the respondent PAFLU's constitution over that of the local union
constitution in the settlement of intra-union dispute?
 C. Is it not error in law amounting to grave abuse of discretion by the Minister in affirming the
conclusion made by the RO4 OIC, upholding the legal applicability of the security clause of a CBA
over alleged offenses committed earlier than its conclusion, and within the 60-day freedom period of
an old CBA? 12

The main thrust of the petition is the alleged illegality of the dismiss of the petitioners by private respondent
Company upon demand of PAFLU which invoked the security clause of the collective bargaining agreement
between the Company and the local union, Amigo Employees Union-PAFLU. Petitioners contend that the
respondent Deputy Minister acted in grave abuse of discretion when he affirmed the decision granting the clearance
to terminate the petitioners and dismissed petitioners' complaint, and in support thereof, allege that their
constitutional right to self-organization had been impaired. Petitioner's contention lacks merit.

It is true that disaffiliation from a labor union is not open to legal objection. It is implicit in the freedom of association
ordained by the Constitution. 13 But this Court has laid down the ruling that a closed shop is a valid form of union
security, and such provision in a collective bargaining agreement is not a restriction of the right of freedom of
association guaranteed by the Constitution. 14

In the case at bar, it appears as an undisputed fact that on February 15, 1977, the Company and the Amigo
Employees Union-PAFLU entered into a Collective Bargaining Agreement with a union security clause provided for
in Article XII thereof which is a reiteration of the same clause in the old CBA. The quoted stipulation for closed-shop
is clear and unequivocal and it leaves no room for doubt that the employer is bound, under the collective bargaining
agreement, to dismiss the employees, herein petitioners, for non- union membership. Petitioners became non-union
members upon their expulsion from the general membership of the Amigo Employees Union-PAFLU on March 15,
1977 pursuant to the Decision of the PAFLU national president.

We reject petitioners' theory that their expulsion was not valid upon the grounds adverted to earlier in this Decision.
That PAFLU had the authority to investigate petitioners on the charges filed by their co-employees in the local union
and after finding them guilty as charged, to expel them from the roll of membership of the Amigo Employees Union-
PAFLU is clear under the constitution of the PAFLU to which the local union was affiliated. And pursuant to the
security clause of the new CBA, reiterating the same clause in the old CBA, PAFLU was justified in applying said
security clause. We find no abuse of discretion on the part of the OIC of Regional Office No. 4 in upholding the
validity of the expulsion and on the part of the respondent Deputy Minister of Labor in sustaining the same. We
agree with the OIC's decision, pertinent portion of which reads:

Stripped of non-essentials, the basic and fundamental issue in this case tapers down to the
determination of WHETHER OR NOT PAFLU HAD THE AUTHORITY TO INVESTIGATE
OPPOSITORS AND, THEREAFTER, EXPEL THEM FROM THE ROLL OF MEMBERSHIP OF THE
AMIGO EMPLOYEES UNION-PAFLU.

Recognized and salutary is the principle that when a labor union affiliates with a mother union, it
becomes bound by the laws and regulations of the parent organization. Thus, the Honorable
Secretary of Labor, in the case of Amador Bolivar, et al. vs. PAFLU, et al., NLRC Case No. LR-133
& MC-476, promulgated on December 3, 1973, declared-

When a labor union affiliates with a parent organization or mother union, or accepts a charter from a
superior body, it becomes subject to the laws of the superior body under whose authority the local
union functions. The constitution, by-laws and rules of the parent body, together with the charter it
issues pursuant thereto to the subordinate union, constitute an enforceable contract between the
parent body and the subordinate union, and between the members of the subordinate union inter se.
(Citing Labor Unions, Dangel and Shriber, pp. 279-280).

It is undisputable that oppositors were members of the Amigo Employees Union at the time that said
union affiliated with PAFLU; hence, under the afore-quoted principle, oppositors are bound by the
laws and regulations of PAFLU.

Likewise, it is undeniable that in the investigation of the charges against them, oppositors were
accorded 'due process', because in this jurisdiction, the doctrine is deeply entrenched that the term
'due process' simply means that the parties were given the opportunity to be heard. In the instant
 case, ample and unmistakable evidence exists to show that the oppositors were afforded the
opportunity to present their evidence, but they themselves disdained or spurned the said opportunity
given to them.

PAFLU, therefore, correctly and legally acted when, pursuant to its Constitution and By-Laws, it
conducted and proceeded with the investigation of the charges against the oppositors and found
them guilty of acts prejudicial and inimical to the interests of the Amigo Employees Union- PAFLU, to
wit: that of falsely and maliciously slandering the officers of the union; spreading false propaganda
among the members of the Amigo Employees Union-PAFLU; calling the incumbent officers as mere
appointees and robots of management; calling the union company-dominated or assisted union;
committing acts unbecoming of the members of the union and destructive of the union and its
members.

Inherent in every labor union, or any organization for that matter, is the right of self-preservation.
When members of a labor union, therefore, sow the seeds of dissension and strife within the union;
when they seek the disintegration and destruction of the very union to which they belong, they
thereby forfeit their rights to remain as members of the union which they seek to destroy. Prudence
and equity, as well as the dictates of law and justice, therefore, compelling mandate the adoption by
the labor union of such corrective and remedial measures in keeping with its laws and regulations,
for its preservation and continued existence; lest by its folly and inaction, the labor union crumble
and fall.

Correctly and legally, therefore, the PAFLU acted when, after proper investigation and finding of
guilt, it decided to remove the oppositors from the list of members of the Amigo Employees Union-
PAFLU, and thereafter, recommended to the Amigo Manufacturing, Inc.; the termination of the
employment of the oppositors. 15

We see no reason to disturb the same.

The contention of petitioners that the charges against them being intra-union problems, should have been
investigated in accordance with the constitution and by-laws of the Amigo Employees Union-PAFLU and not of the
PAFLU, is not impressed with merit. It is true that under the Implementing Rules and Regulations of the Labor Code,
in case of intra-union disputes, redress must first be sought within the organization itself in accordance with its
constitution and by-laws. However, it has been held that this requirement is not absolute but yields to exception
under varying circumstances. Thus, in Kapisanan ng mga Manggagawa sa MRR vs. Hernandez, 20 SCRA 109, We
held:

In the case at bar, noteworthy is the fact that the complaint was filed against the union and its
incumbent officers, some of whom were members of the board of directors. The constitution and by-
laws of the union provide that charges for any violations thereof shall be filed before the said board.
But as explained by the lower court, if the complainants had done so the board of directors would in
effect be acting as respondent investigator and judge at the same time. To follow the procedure
indicated would be a farce under the circumstances, where exhaustion of remedies within the union
itself would practically amount to a denial of justice or would be illusory or vain, it will not be insisted
upon, particularly where property rights of the members are involved, as a condition to the right to
invoke the aid of a court.

The facts of the instant petition stand on all fours with the aforecited case that the principle therein enunciated
applies here as well. In the case at bar, the petitioners were charged by the officers of the Amigo Employees Union-
PAFLU themselves who were also members of the Board of Directors of the Amigo Employees Union-PAFLU. Thus,
were the petitioners to be charged and investigated according to the local union's constitution, they would have
been tried by a trial committee of three (3) elected from among the members of the Board who are themselves the
accusers. (Section 2, Article 11, Constitution of the Local Union). Petitioners would be in a far worse position had
this procedure been followed. Nonetheless, petitioners admit in their petition that two (2) of the six (6) charges, i.e.
disaffiliation and filing a petition for certification election, are not intra-union matters and, therefore, are cognizable
by PAFLU.
Petitioners insist that their disaffiliation from PAFLU and filing a petition for certification election are not acts of
disloyalty but an exercise of their right to self-organization. They contend that these acts were done within the 60-
day freedom period when questions of representation may freely be raised. Under the peculiar facts of the case, We
find petitioners' insistence untenable.

In the first place, had petitioners merely disaffiliated from the. Amigo Employees Union-PAFLU, there could be no
legal objections thereto for it was their right to do so. But what petitioners did by the very clear terms of their "Sama-
Samang Kapasiyahan" was to disaffiliate the Amigo Employees Union-PAFLU from PAFLU, an act which they could
not have done with any effective consequence because they constituted the minority in the Amigo Employees
Union-PAFLU.

Extant from the records is the fact that petitioners numbering ten (10), were among the ninety-six (96) who signed
the "Sama-Samang Kapasiyahan" whereas there are two hundred thirty four (234) union members in the Amigo
Employees Union-PAFLU. Hence, petitioners constituted a small minority for which reason they could not have
successfully disaffiliated the local union from PAFLU. Since only 96 wanted disaffiliation, it can be inferred that the
majority wanted the union to remain an affiliate of PAFLU and this is not denied or disputed by petitioners. The
action of the majority must, therefore, prevail over that of the minority members. 16

Neither is there merit to petitioners' contention that they had the right to present representation issues within the 60-
day freedom period. It is true, as contended by petitioners, that under Article 257 of the Labor Code and Section 3,
Rule 2, Book 2 of its Implementing Rules, questions of exclusive bargaining representation are entertainable within
the sixty (60) days prior to the expiry date of an existing CBA, and that they did file a petition for certification election
within that period. But the petition was filed in the name of the Amigo Employees Union which had not disaffiliated
from PAFLU, the mother union. Petitioners being a mere minority of the local union may not bind the majority
members of the local union.

Moreover, the Amigo Employees Union, as an independent union, is not duly registered as such with the Bureau of
Labor Relations. The appealed decision of OIC Leogardo of Regional Office No. 4 states as a fact that there is no
record in the Bureau of Labor Relations that the Amigo Employees Union (Independent) is registered, and this is not
disputed by petitioners, notwithstanding their allegation that the Amigo Employees Union is a duly registered labor
organization bearing Ministry of Labor Registration Certification No. 5290-IP dated March 27, 1967. But the
independent union organized after the "Sama-Samang Kapasiyahan" executed February 7, 1977 could not have
been registered earlier, much less March 27, 1967 under Registration Certificate No. 5290-IP. As such unregistered
union, it acquires no legal personality and is not entitled to the rights and privileges granted by law to legitimate
labor organizations upon issuance of the certificate of registration. Article 234 of the New Labor Code specifically
provides:

Art. 234. Requirements of Registration.—Any applicant labor organization, association, or group of

unions or workers shall acquire legal personality and shall be entitled to the rights and privileges
granted by law to legitimate labor organizations upon issuance of the certificate of registration. ....

In Phil. Association of Free Labor Unions vs. Sec. of Labor, 27 SCRA 40, We had occasion to interpret Section 23 of
R.A. No. 875 (Industrial Peace Act) requiring of labor unions registration by the Department of Labor in order to
qualify as "legitimate labor organization," and We said:

The theory to the effect that Section 23 of Republic Act No. 875 unduly curtails the freedom of
assembly and association guaranteed in the Bill of Rights is devoid of factual basis. The registration
prescribed in paragraph (b) of said section 17 is not a limitation to the right of assembly or association,
which may be exercised with or without said registration. The latter is merely a condition sine qua
non for the acquisition of legal personality by labor organizations, associations or unions and the
possession of the 'rights and privileges granted by law to legitimate labor organizations.' The
Constitution does not guarantee these rights and privileges, much less said personality, which are
mere statutory creations, for the possession and exercise of which registration is required to protect
both labor and the public against abuses, fraud, or impostors who pose as organizers, although not
truly accredited agents of the union they purport to represent. Such requirement is a valid exercise of
the police power, because the activities in which labor organizations, associations and union or
workers are engaged affect public interest, which should be protected.
Simply put, the Amigo Employees Union (Independent) Which petitioners claim to represent, not being a legitimate
labor organization, may not validly present representation issues. Therefore, the act of petitioners cannot be
considered a legitimate exercise of their right to self-organization. Hence, We affirm and reiterate the rationale
explained in Phil Association of Free Labor Unions vs. Sec. of Labor case, supra, in order to protect legitimate labor
and at the same time maintain discipline and responsibility within its ranks.

The contention of petitioners that the new CBA concluded between Amigo Employees Union-PAFLU and the
Company on February 15, 1977 containing the union security clause cannot be invoked as against the petitioners
for offenses committed earlier than its conclusion, deserves scant consideration. We find it to be the fact that the
union security clause provided in the new CBA merely reproduced the union security clause provided in the old CBA
about to expire. And since petitioners were expelled from Amigo Employees Union-PAFLU on March 28, 1982 upon
denial of their Motion for Reconsideration of the decision expelling them, the CBA of February 15, 1977 was already
applicable to their case. The "closed-shop provision" in the CBA provides:

All members of the UNION as of the signing of this Agreement shall remain members thereof in
good standing. Therefore, any members who shall resign, be expelled, or shall in any manner cease
to be a member of the UNION, shall be dismissed from his employment upon written request of the
UNION to the Company. (Art. III)

A closed-shop is a valid form of union security, and a provision therefor in a collective bargaining agreement is not a
restriction of the right of freedom of association guaranteed by the Constitution. (Manalang, et al. vs. Artex
Development Co., Inc., et al., L-20432, October 30, 1967, 21 SCRA 561). Where in a closed-shop agreement it is
stipulated that union members who cease to be in good standing shall immediately be dismissed, such dismissal
does not constitute an unfair labor practice exclusively cognizable by the Court of Industrial Relations. (Seno vs.
Mendoza, 21 SCRA 1124).

Finally, We reject petitioners' contention that respondent Minister committed error in law amounting to grave abuse
of discretion when he affirmed the conclusion made by the RO4 OIC, upholding the legal applicability of the security
clause of a CBA over alleged offenses committed earlier than its conclusion and within the 60-day freedom period of
an old CBA. In the first place, as We stated earlier, the security clause of the new CBA is a reproduction or
reiteration of the same clause in the old CBA. While petitioners were charged for alleged commission of acts of
disloyalty inimical to the interests of the Amigo Employees Union-PAFLU in the Resolution of February 14, 1977 of
the Amigo Employees Union- PAFLU and on February 15, 1977 PAFLU and the Company entered into and
concluded a new collective bargaining agreement, petitioners may not escape the effects of the security clause
under either the old CBA or the new CBA by claiming that the old CBA had expired and that the new CBA cannot be
given retroactive enforcement. To do so would be to create a gap during which no agreement would govern, from
the time the old contract expired to the time a new agreement shall have been entered into with the union. As this
Court said in Seno vs. Mendoza, 21 SCRA 1124, "without any agreement to govern the relations between labor and
management in the interim, the situation would well be productive of confusion and result in breaches of the law by
either party. "

The case of Seno vs. Mendoza, 21 SCRA 1124 mentioned previously needs further citation of the facts and the
opinion of the Court, speaking through Justice Makalintal who later became Chief Justice, and We quote:

It appears that petitioners other than Januario T. Seno who is their counsel, were members of the
United Seamen's Union of the Philippines. Pursuant to a letter-request of the Union stating that they
'had ceased to be members in good standing' and citing a closed shop clause in its bargaining
agreement with respondent Carlos A. Go Thong & Co., the latter dismissed said petitioners. Through
counsel, petitioners requested that they be reinstated to their former positions and paid their
backwages, otherwise they would picket respondents' offices and vessels. The request was denied
on the ground that the dismissal was unavoidable under the terms of the collective bargaining
agreement. ...

We, therefore, hold and rule that petitioners, although entitled to disaffiliate from their union and form a new
organization of their own, must, however, suffer the consequences of their separation from the union under the
security clause of the CBA.
WHEREFORE, IN VIEW OF ALL THE FOREGOING, the Order appealed from affirming the joint decision of the OIC
of Regional Office No. 4 in RO4-Case No. T-IV-3549-T and RO4 Case No. RD-4-4088-77-T granting clearance to
terminate petitioners as well as dismissing their complaint with application for preliminary injunction, is hereby
AFFIRMED. No costs.

SO ORDERED.

Makasiar (Chairman), Concepcion Jr., De Castro and Escolin JJ., concur.

Aquino, J., is on leave.

Separate Opinions

ABAD SANTOS, J., concuring:

Concurring to dismiss the petition by minute resolution for lack of merit.

DIGEST:

Facts: Petitioners were members of the Amigo Employees Union-PAFLU, a duly registered labor organization
which, was the existing bargaining agent of the employees in private respondent Amigo Manufacturing, Inc.
(Company). The Company and the Amigo Employees Union-PAFLU had a CBA governing their labor relations,
which agreement was then about to expire on February 28, 1977. Within the last 60 days of the CBA, upon
written authority of at least 30% of the employees in the company, including the petitioners, the Federation of
Unions of Rizal (FUR) filed a petition for certification election with MOLE. The petition was opposed by the
PAFLU with whom the Amigo Employees Union was at that time affiliated. The same employees who had
signed the petition filed by FUR signed a joint resolution disaffiliating from PAFLU. Dolores Villar, representing
herself to be the authorized representative of the Amigo Employees Union, filed a petition for certification
election in the Company. The Amigo Employees Union-PAFLU intervened and moved for the dismissal of the
petition for certification election filed by Villar, on the ground, among others that Villar had no legal personality
to sign the petition since she was not an officer of the union nor is there factual or legal basis for her claim that
she was the authorized representative of the local union. Med-Arbiter dismissed the petition filed by Villar,
which dismissal is still pending appeal before BLR. Amigo Employees Union-PAFLU called a special meeting
of its general membership. A Resolution was thereby unanimously approved which called for the investigation
by the PAFLU national president, of all of the petitioners and one Felipe Manlapao, for continuously maligning
the union spreading false propaganda that the union officers were merely appointees of the management; and
for causing divisiveness in the union. PAFLU formed a Trial Committee to investigate the local union's charges
against the petitioners for acts of disloyalty. PAFLU and the Company concluded a new CBA which also
reincorporated the same provisions of the existing CBA, including the union security clause. PAFLU President
rendered a decision finding the petitioners guilty of the charges. PAFLU demanded the Company to terminate
the employment of the petitioners pursuant to the security clause of the CBA. Acting on PAFLU's demand, the
Company informed PAFLU that it will first secure the necessary clearances to terminate petitioners. PAFLU
requested the Company to put petitioners under preventive suspension pending the application for said
clearances to terminate the petitioners. The Company filed the request for clearance to terminate the
petitioners before DOLE which was granted. DOLE Secretary Inciong denied the appeal, hence, this petition
for review.

RULING: The Amigo Employees Union, as an independent union, is not duly registered as such with the
Bureau of Labor Relations. The appealed decision of OIC Leogardo of Regional Office No. 4 states as a fact
that there is no record in the Bureau of Labor Relations that the Amigo Employees Union (Independent) is
registered, and this is not disputed by petitioners, notwithstanding their allegation that the Amigo Employees
Union is a duly registered labor organization bearing Ministry of Labor Registration Certification No. 5290-IP
dated March 27, 1967. But the independent union organized after the "Sama-Samang Kapasiyahan" executed
February 7, 1977 could not have been registered earlier, much less March 27, 1967 under Registration
Certificate No. 5290-IP. As such unregistered union, it acquires no legal personality and is not entitled to the
rights and privileges granted by law to legitimate labor organizations upon issuance of the certificate of
registration.

The contention of petitioners that the new CBA concluded between Amigo Employees Union-PAFLU and the
Company on February 15, 1977 containing the union security clause cannot be invoked as against the
petitioners for offenses committed earlier than its conclusion, deserves scant consideration. We find it to be the
fact that the union security clause provided in the new CBA merely reproduced the union security clause
provided in the old CBA about to expire. And since petitioners were expelled from Amigo Employees Union-
PAFLU on March 28, 1982 upon denial of their Motion for Reconsideration of the decision expelling them, the
CBA of February 15, 1977 was already applicable to their case.

Finally, We reject petitioners' contention that respondent Minister committed error in law amounting to grave
abuse of discretion when he affirmed the conclusion made by the RO4 OIC, upholding the legal applicability of
the security clause of a CBA over alleged offenses committed earlier than its conclusion and within the 60-day
freedom period of an old CBA. In the first place, as We stated earlier, the security clause of the new CBA is a
reproduction or reiteration of the same clause in the old CBA. While petitioners were charged for alleged
commission of acts of disloyalty inimical to the interests of the Amigo Employees Union-PAFLU in the
Resolution of February 14, 1977 of the Amigo Employees Union- PAFLU and on February 15, 1977 PAFLU
and the Company entered into and concluded a new collective bargaining agreement, petitioners may not
escape the effects of the security clause under either the old CBA or the new CBA by claiming that the old
CBA had expired and that the new CBA cannot be given retroactive enforcement. To do so would be to create
a gap during which no agreement would govern, from the time the old contract expired to the time a new
agreement shall have been entered into with the union. As this Court said in Seno vs. Mendoza, 21 SCRA
1124, "without any agreement to govern the relations between labor and management in the interim, the
situation would well be productive of confusion and result in breaches of the law by either party. "

We, therefore, hold and rule that petitioners, although entitled to disaffiliate from their union and form a new
organization of their own, must, however, suffer the consequences of their separation from the union under the
security clause of the CBA.

5. PEOPLE OF THE PHILIPPINES, petitioner,

vs.
HON. SIMEON. FERRER (in his capacity as Judge of the Court of First Instance of Tarlac, Branch I),
FELICIANO CO alias LEONCIO CO alias "Bob," and NILO S. TAYAG alias Romy Reyes alias
"Taba," respondents.

Solicitor R. Mutuc for respondent Feliciano Co.

Jose W. Diokno for respondent Nilo Tayag.

CASTRO, J.:

I. Statement of the Case

Posed in issue in these two cases is the constitutionality of the Anti-Subversion

Act,1 which outlaws the Communist Party of the Philippines and other "subversive associations," and punishes any person who "knowingly, willfully and by overt
acts affiliates himself with, becomes or remains a member" of the Party or of any other similar "subversive" organization.

On March 5, 1970 a criminal complaint for violation of section 4 of the Anti-Subversion Act was filed against the
respondent Feliciano Co in the Court of First Instance of Tarlac. On March 10 Judge Jose C. de Guzman conducted
a preliminary investigation and, finding a prima facie case against Co, directed the Government prosecutors to file
the corresponding information. The twice-amended information, docketed as Criminal Case No. 27, recites:
 That on or about May 1969 to December 5, 1969, in the Municipality of Capas, Province of
Tarlac, Philippines, and within the jurisdiction of this Honorable Court, the abovenamed
accused, feloniously became an officer and/or ranking leader of the Communist Party of the
Philippines, an outlawed and illegal organization aimed to overthrow the Government of the
Philippines by means of force, violence, deceit, subversion, or any other illegal means for the
purpose of establishing in the Philippines a totalitarian regime and placing the government
under the control and domination of an alien power, by being an instructor in the Mao Tse
Tung University, the training school of recruits of the New People's Army, the military arm of
the said Communist Party of the Philippines.

That in the commission of the above offense, the following aggravating circumstances are
present, to wit:

(a) That the crime has been committed in contempt of or with insult to public authorities;

(b) That the crime was committed by a band; and afford impunity.

(c) With the aid of armed men or persons who insure or afford impunity.

Co moved to quash on the ground that the Anti-Subversion Act is a bill of attainder.

Meanwhile, on May 25, 1970, another criminal complaint was filed with the same court, sharing the respondent Nilo
Tayag and five others with subversion. After preliminary investigation was had, an information was filed, which, as
amended, reads:

The undersigned provincial Fiscal of Tarlac and State Prosecutors duly designated by the
Secretary of Justice to collaborate with the Provincial Fiscal of Tarlac, pursuant to the Order
dated June 5, above entitled case, hereby accuse Nilo S. Tayag, alias Romy Reyes alias
TABA, ARTHUR GARCIA, RENATO (REY) CASIPE, ABELARDO GARCIA, MANUEL
ALAVADO, BENJAMIN BIE alias COMMANDER MELODY and several JOHN DOES, whose
identities are still unknown, for violation of REPUBLIC ACT No. 1700, otherwise known as
the Anti-Subversion Law, committed as follows:

That in or about March 1969 and for sometime prior thereto and thereafter, in the Province of
Tarlac, within the jurisdiction of this Honorable Court, and elsewhere in the Philippines, the
above-named accused knowingly, willfully and by overt acts organized, joined and/or
remained as offices and/or ranking leaders, of the KABATAANG MAKABAYAN, a subversive
organization as defined in Republic Act No. 1700; that BENJAMIN BIE and COMMANDER
MELODY, in addition thereto, knowingly, willfully and by over acts joined and/or remained as
a member and became an officer and/or ranking leader not only of the Communist Party of
the Philippines but also of the New People's Army, the military arm of the Communist Party
of the Philippines; and that all the above-named accused, as such officers and/or ranking
leaders of the aforestated subversive organizations, conspiring, confederating and mutually
helping one another, did then and there knowingly, willfully and feloniously commit
subversive and/or seditious acts, by inciting, instigating and stirring the people to unite and
rise publicly and tumultuously and take up arms against the government, and/or engage in
rebellious conspiracies and riots to overthrow the government of the Republic of the
Philippines by force, violence, deceit, subversion and/or other illegal means among which
are the following:

1. On several occasions within the province of Tarlac, the accused conducted meetings
and/or seminars wherein the said accused delivered speeches instigating and inciting the
people to unite, rise in arms and overthrow the Government of the Republic of the
Philippines, by force, violence, deceit, subversion and/or other illegal means; and toward this
end, the said accused organized, among others a chapter of the KABATAANG
MAKABAYAN in barrio Motrico, La Paz, Tarlac for the avowed purpose of undertaking or
promoting an armed revolution, subversive and/or seditious propaganda, conspiracies,
 and/or riots and/or other illegal means to discredit and overthrow the Government of the
Republic of the Philippines and to established in the Philippines a Communist regime.

2. The accused NILO TAYAG alias ROMY REYES alias TABA, together with FRANCISCO
PORTEM alias KIKO Gonzales and others, pursued the above subversive and/or seditious
activities in San Pablo City by recruiting members for the New People's Army, and/or by
instigating and inciting the people to organize and unite for the purpose of overthrowing the
Government of the Republic of the Philippines through armed revolution, deceit, subversion
and/or other illegal means, and establishing in the Philippines a Communist Government.

That the following aggravating circumstances attended the commission of the offense: (a) aid
of armed men or persons to insure or afford impunity; and (b) craft, fraud, or disguise was
employed.

On July 21, 1970 Tayag moved to quash, impugning the validity of the statute on the grounds that (1) it is a bill of
attainder; (2) it is vague; (3) it embraces more than one subject not expressed in the title thereof; and (4) it denied
him the equal protection of the laws.

Resolving the constitutional issues raised, the trial court, in its resolution of September 15, 1970, declared the
statute void on the grounds that it is a bill of attainder and that it is vague and overboard, and dismissed the
informations against the two accused. The Government appealed. We resolved to treat its appeal as a special civil
action for certiorari.

II. Is the Act a Bill of Attainder?

Article III, section 1 (11) of the Constitution states that "No bill of attainder or ex port facto law shall be enacted."2 A
bill of attainder is a legislative act which inflicts punishment without trial.3 Its essence is the substitution of a
legislative for a judicial determination of guilt.4 The constitutional ban against bills of attainder serves to implement
the principle of separation of powers 5 by confining legislatures to
rule-making 6 and thereby forestalling legislative usurpation of the judicial function.7 History in perspective, bills of
attainder were employed to suppress unpopular causes and political minorities, 8 and it is against this evil that the
constitutional prohibition is directed. The singling out of a definite class, the imposition of a burden on it, and a
legislative intent, suffice to stigmatizea statute as a bill of attainder. 9

In the case at bar, the Anti-Subversion Act was condemned by the court a quo as a bill of attainder because it "tars
and feathers" the Communist Party of the Philippines as a "continuing menace to the freedom and security of the
country; its existence, a 'clear, present and grave danger to the security of the Philippines.'" By means of the Act,
the trial court said, Congress usurped "the powers of the judge," and assumed "judicial magistracy by pronouncing
the guilt of the CCP without any of the forms or safeguards of judicial trial." Finally, according to the trial court, "if the
only issue [to be determined] is whether or not the accused is a knowing and voluntary member, the law is still a bill
of attainder because it has expressly created a presumption of organizational guilt which the accused can never
hope to overthrow."

1. When the Act is viewed in its actual operation, it will be seen that it does not specify the Communist Party of the
Philippines or the members thereof for the purpose of punishment. What it does is simply to declare the Party to be
an organized conspiracy for the overthrow of the Government for the purposes of the prohibition, stated in section 4,
against membership in the outlawed organization. The term "Communist Party of the Philippines" issued solely for
definitional purposes. In fact the Act applies not only to the Communist Party of the Philippines but also to "any other
organization having the same purpose and their successors." Its focus is not on individuals but on conduct. 10

This feature of the Act distinguishes it from section 504 of the U.S. Federal Labor-Management Reporting and
Disclosure Act of 1959 11 which, in U.S. vs. Brown, 12 was held to be a bill of attainder and therefore unconstitutional.
Section 504 provided in its pertinent parts as follows:

(a) No person who is or has been a member of the Communist

Party ... shall serve —
 (1) as an officer, director, trustee, member of any executive board or similar governing body,
business agent, manager, organizer, or other employee (other than as an employee
performing exclusively clerical or custodial duties) of any labor organization.

during or for five years after the termination of his membership in the Communist Party....

(b) Any person who willfully violates this section shall be fined not more than $10,000 or
imprisoned for not more than one year, or both.

This statute specified the Communist Party, and imposes disability and penalties on its members. Membership in
the Party, without more, ipso facto disqualifies a person from becoming an officer or a member of the governing
body of any labor organization. As the Supreme Court of the United States pointed out:

Under the line of cases just outlined, sec. 504 of the Labor Management Reporting and
Disclosure Act plainly constitutes a bill of attainder. Congress undoubtedly possesses power
under the Commerce Clause to enact legislation designed to keep from positions affecting
interstate commerce persons who may use of such positions to bring about political strikes.
In section 504, however, Congress has exceeded the authority granted it by the Constitution.
The statute does not set forth a generally applicable rule decreeing that any person who
commits certain acts or possesses certain characteristics (acts and characteristics which, in
Congress' view, make them likely to initiate political strikes) shall not hold union office, and
leaves to courts and juries the job of deciding what persons have committed the specified
acts or possessed the specified characteristics. Instead, it designates in no uncertain terms
the persons who possess the feared characteristics and therefore cannot hold union office
without incurring criminal liability — members of the Communist Party.

Communist Party v. Subversive Activities Control Board, 367 US 1, 6 L ed 2d 625, 81 S CT

1357, lend a support to our conclusion. That case involved an appeal from an order by the
Control Board ordering the Communist Party to register as a "Communist-action
organization," under the Subversive Activities Control Act of 1950, 64 Stat 987, 50 USC sec.
781 et seq. (1958 ed). The definition of "Communist-action organization" which the Board is
to apply is set forth in sec. 3 of the Act:

[A]ny organization in the United States ... which (i)is substantially directed, dominated, or
controlled by the foreign government or foreign organization controlling the world Communist
movement referred to in section 2 of this title, and(ii) operates primarily to advance the
objectives of such world Communist movement... 64 Stat 989, 50 USC sec. 782 (1958 ed.)

A majority of the Court rejected the argument that the Act was a bill of attainder, reasoning
that sec. 3 does not specify the persons or groups upon which the deprivations setforth in the
Act are to be imposed, but instead sets forth a general definition. Although the Board has
determined in 1953 that the Communist Party was a "Communist-action organization," the
Court found the statutory definition not to be so narrow as to insure that the Party would
always come within it:

In this proceeding the Board had found, and the Court of Appeals has sustained its
conclusion, that the Communist Party, by virtud of the activities in which it now engages,
comes within the terms of the Act. If the Party should at anytime choose to abandon these
activities, after it is once registered pursuant to sec. 7, the Act provides adequate means of
relief. (367 US, at 87, 6 L ed 2d at 683)

Indeed, were the Anti-Subversion Act a bill of attainder, it would be totally unnecessary to charge Communists in
court, as the law alone, without more, would suffice to secure their punishment. But the undeniable fact is that their
guilt still has to be judicially established. The Government has yet to prove at the trial that the accused joined the
Party knowingly, willfully and by overt acts, and that they joined the Party, knowing its subversive character and with
specific intent to further its basic objective, i.e., to overthrow the existing Government by force deceit, and other
illegal means and place the country under the control and domination of a foreign power.
As to the claim that under the statute organizationl guilt is nonetheless imputed despite the requirement of proof of
knowing membership in the Party, suffice it to say that is precisely the nature of conspiracy, which has been referred
to as a "dragneet device" whereby all who participate in the criminal covenant are liable. The contention would be
correct if the statute were construed as punishing mere membership devoid of any specific intent to further the
unlawful goals of the Party. 13 But the statute specifically required that membership must be knowing or active, with
specific intent to further the illegal objectives of the Party. That is what section 4 means when it requires that
membership, to be unlawful, must be shown to have been acquired "knowingly, willfully and by overt acts." 14 The
ingredient of specific intent to pursue the unlawful goals of the Party must be shown by "overt acts." 15 This
constitutes an element of "membership" distinct from the ingredient of guilty knowledge. The former requires proof of
direct participation in the organization's unlawful activities, while the latter requires proof of mere adherence to the
organization's illegal objectives.

2. Even assuming, however, that the Act specifies individuals and not activities, this feature is not enough to render
it a bill of attainder. A statute prohibiting partners or employees of securities underwriting firms from serving as
officers or employees of national banks on the basis of a legislative finding that the persons mentioned would be
subject to the temptation to commit acts deemed inimical to the national economy, has been declared not to be a bill
of attainder. 16 Similarly, a statute requiring every secret, oath-bound society having a membership of at least twenty
to register, and punishing any person who becomes a member of such society which fails to register or remains a
member thereof, was declared valid even if in its operation it was shown to apply only to the members of the Ku
Klux Klan. 17

In the Philippines the validity of section 23 (b) of the Industrial Peace Act, 18 requiring labor unions to file with the
Department of Labor affidavits of union officers "to the effect that they are not members of the Communist Party and
that they are not members of any organization which teaches the overthrow of the Government by force or by any
illegal or unconstitutional method," was upheld by this Court. 19

Indeed, it is only when a statute applies either to named individuals or to easily ascertainable members of a group in
such a way as to inflict punishment on them without a judicial trial does it become a bill of attainder. 20 It is upon this
ground that statutes which disqualified those who had taken part in the rebellion against the Government of the
United States during the Civil War from holding office, 21 or from exercising their profession, 22 or which prohibited the
payment of further compensation to individuals named in the Act on the basis of a finding that they had engages in
subversive activities, 23 or which made it a crime for a member of the Communist Party to serve as an officer or
employee of a labor union, 24 have been invalidated as bills of attainder.

But when the judgment expressed in legislation is so universally acknowledged to be certain as to be "judicially
noticeable," the legislature may apply its own rules, and judicial hearing is not needed fairly to make such
determination. 25

In New York ex rel. Bryant vs. Zimmerman, 26 the New York legislature passed a law requiring every secret, oath-
bound society with a membership of at least twenty to register, and punishing any person who joined or remained a
member of such a society failing to register. While the statute did not specify the Ku Klux Klan, in its operation the
law applied to the KKK exclusively. In sustaining the statute against the claim that it discriminated against the Ku
Klux Klan while exempting other secret, oath-bound organizations like masonic societies and the Knights of
Columbus, the United States Supreme Court relied on common knowledge of the nature and activities of the Ku
Klux Klan. The Court said:

The courts below recognized the principle shown in the cases just cited and reached the
conclusion that the classification was justified by a difference between the two classes of
associations shown by experience, and that the difference consisted (a) in a manifest
tendency on the part of one class to make the secrecy surrounding its purpose and
membership a cloak for acts and conduct inimical to personal rights and public welfare, and
(b) in the absence of such a tendency on the part of the other class. In pointing out this
difference one of the courts said of the Ku Klux Klan, the principal association in the included
class: "It is a matter of common knowledge that this organization functions largely at night, its
members disguised by hoods and gowns and doing things calculated to strike terror into the
minds of the people;" and later said of the other class: "These organizations and their
purposes are well known, many of them having been in existence for many years. Many of
them are oath-bound and secret. But we hear no complaint against them regarding violation
 of the peace or interfering with the rights of others." Another of the courts said: "It is a matter
of common knowledge that the association or organization of which the relator is concededly
a member exercises activities tending to the prejudice and intimidation of sundry classes of
our citizens. But the legislation is not confined to this society;" and later said of the other
class: "Labor unions have a recognized lawful purpose. The benevolent orders mentioned in
the Benevolent Orders Law have already received legislative scrutiny and have been granted
special privileges so that the legislature may well consider them beneficial rather than
harmful agencies." The third court, after recognizing "the potentialities of evil in secret
societies," and observing that "the danger of certain organizations has been judicially
demonstrated," — meaning in that state, — said: "Benevolent orders, labor unions and
college fraternities have existed for many years, and, while not immune from hostile criticism,
have on the whole justified their existence."

We assume that the legislature had before it such information as was readily available
including the published report of a hearing, before a committee of the House of
Representatives of the 57th Congress relating to the formation, purposes and activities of the
Klu Klux Klan. If so it was advised — putting aside controverted evidence — that the order
was a revival of the Ku Klux Klan of an earlier time with additional features borrowed from
the Know Nothing and the A. P. A. orders of other periods; that its memberships was limited
to native-born, gentile, protestant whites; that in part of its constitution and printed creed it
proclaimed the widest freedom for all and full adherence to the Constitution of the United
States; in another exacted of its member an oath to shield and preserve "white supremacy;"
and in still another declared any person actively opposing its principles to be "a dangerous
ingredient in the body politic of our country and an enemy to the weal of our national
commonwealth;" that it was conducting a crusade against Catholics, Jews, and Negroes,
and stimulating hurtful religious and race prejudices; that it was striving for political power
and assuming a sort of guardianship over the administration of local, state and national
affairs; and that at times it was taking into its own hands the punishment of what some of its
members conceived to be crimes. 27

In the Philippines the character of the Communist Party has been the object of continuing scrutiny by this Court. In
1932 we found the Communist Party of the Philippines to be an illegal association. 28 In 1969 we again found that the
objective of the Party was the "overthrow of the Philippine Government by armed struggle and to establish in the
Philippines a communist form of government similar to that of Soviet Russia and Red China." 29 More recently,
in Lansang vs. Garcia, 30 we noted the growth of the Communist Party of the Philippines and the organization of
Communist fronts among youth organizations such as the Kabataang Makabayan (KM) and the emergence of the
New People's Army. After meticulously reviewing the evidence, we said: "We entertain, therefore, no doubts about
the existence of a sizeable group of men who have publicly risen in arms to overthrow the government and have
thus been and still are engaged in rebellion against the Government of the Philippines.

3. Nor is it enough that the statute specify persons or groups in order that it may fall within the ambit of the
prohibition against bills of attainder. It is also necessary that it must apply retroactively and reach past conduct. This
requirement follows from the nature of a bill of attainder as a legislative adjudication of guilt. As Justice Frankfurter
observed, "frequently a bill of attainder was ... doubly objectionable because of its ex post facto features. This is the
historic explanation for uniting the two mischiefs in one
clause — 'No Bill of Attainder or ex post facto law shall be passed.' ... Therefore, if [a statute] is a bill of attainder it is
also an ex post facto law. But if it is not an ex post facto law, the reasons that establish that it is not are persuasive
that it cannot be a bill of attainder." 31

Thus in Gardner vs. Board of Public Works, 32 the U.S. Supreme Court upheld the validity of the Charter of the City
of Los Angeles which provided:

... [N]o person shall hold or retain or be eligible for any public office or employment in the
service of the City of Los Angeles, in any office or department thereof, either elective or
appointive, who has within five (5) years prior to the effective date of this section advised,
advocated, or taught, or who may, after this section becomes effective, become a member of
or affiliated with any group, society, association, organization or party which advises,
advocates or teaches or has within said period of five (5) years advised, advocated, or taught
 the overthrow by force or violence of the Government of the United States of America or of
the State of California.

In upholding the statute, the Court stressed the prospective application of the Act to the petitioner therein, thus:

... Immaterial here is any opinion we might have as to the charter provision insofar as it
purported to apply restrospectively for a five-year period to its effective date. We assume that
under the Federal Constitution the Charter Amendment is valid to the extent that it bars from
the city's public service persons who, subsequently to its adoption in 1941, advise, advocate,
or reach the violent overthrow of the Government or who are or become affiliated with any
group doing so. The provisions operating thus prospectively were a reasonable regulation to
protect the municipal service by establishing an employment qualification of loyalty to the
State and the United States.

... Unlike the provisions of the charter and ordinance under which petitioners were removed,
the statute in the Lovett case did not declare general and prospectively operative standards
of qualification and eligibility for public employment. Rather, by its terms it prohibited any
further payment of compensationto named individuals or employees. Under these
circumstances, viewed against the legislative background, the statutewas held to have
imposed penalties without judicial trial.

Indeed, if one objection to the bill of attainder is thatCongress thereby assumed judicial magistracy, them it mustbe
demonstrated that the statute claimed to be a bill of attainderreaches past conduct and that the penalties it
imposesare inescapable. As the U.S. Supreme Court observedwith respect to the U.S. Federal Subversive Activities
ControlAct of 1950:

Nor is the statute made an act of "outlawry" or of attainderby the fact that the conduct which
it regulates is describedwith such particularity that, in probability, few organizationswill come
within the statutory terms. Legislatures may act tocurb behaviour which they regard as
harmful to the public welfare,whether that conduct is found to be engaged in by
manypersons or by one. So long as the incidence of legislation issuch that the persons who
engage in the regulated conduct, bethey many or few, can escape regulation merely by
altering thecourse of their own present activities, there can be no complaintof an attainder. 33

This statement, mutatis mutandis, may be said of theAnti-Subversion Act. Section 4 thereof expressly statesthat the
prohibition therein applies only to acts committed"After the approval of this Act." Only those who "knowingly,willfully
and by overt acts affiliate themselves with,become or remain members of the Communist Party of thePhilippines
and/or its successors or of any subversive association"after June 20, 1957, are punished. Those whowere members
of the Party or of any other subversive associationat the time of the enactment of the law, weregiven the opportunity
of purging themselves of liability byrenouncing in writing and under oath their membershipin the Party. The law
expressly provides that such renunciationshall operate to exempt such persons from penalliability. 34 The penalties
prescribed by the Act are thereforenot inescapable.

III. The Act and the Requirements of Due Process

1. As already stated, the legislative declaration in section 2 of the Act that the Communist Party of the Philippinesis
an organized conspiracy for the overthrow of theGovernment is inteded not to provide the basis for a
legislativefinding of guilt of the members of the Party butrather to justify the proscription spelled out in section 4.
Freedom of expression and freedom of association are sofundamental that they are thought by some to occupy
a"preferred position" in the hierarchy of constitutional values. 35 Accordingly, any limitation on their exercise mustbe
justified by the existence of a substantive evil. This isthe reason why before enacting the statute in question
Congressconducted careful investigations and then stated itsfindings in the preamble, thus:

... [T]he Communist Party of the Philippines althoughpurportedly a political party, is in fact an
organized conspiracyto overthrow the Government of the Republic of the Philippinesnot only
by force and violence but also by deceit, subversionand other illegal means, for the purpose
of establishing in thePhilippines a totalitarian regime subject to alien dominationand control;
 ... [T]he continued existence and activities of the CommunistParty of the Philippines
constitutes a clear, present andgrave danger to the security of the Philippines;

... [I]n the face of the organized, systematice and persistentsubversion, national in scope but
international in direction,posed by the Communist Party of the Philippines and its
activities,there is urgent need for special legislation to cope withthis continuing menace to
the freedom and security of the country.

In truth, the constitutionality of the Act would be opento question if, instead of making these findings in enactingthe
statute, Congress omitted to do so.

In saying that by means of the Act Congress has assumed judicial magistracy, the trial courd failed to takeproper
account of the distinction between legislative fact and adjudicative fact. Professor Paul Freund elucidatesthe crucial
distinction, thus:

... A law forbidding the sale of beverages containingmore than 3.2 per cent of alcohol would
raise a question of legislativefact, i.e., whether this standard has a reasonable relationto
public health, morals, and the enforcement problem. Alaw forbidding the sale of intoxicating
beverages (assuming itis not so vague as to require supplementation by rule-making)would
raise a question of adjudicative fact, i.e., whether thisor that beverage is intoxicating within
the meaning of the statuteand the limits on governmental action imposed by the Constitution.
Of course what we mean by fact in each case is itselfan ultimate conclusion founded on
underlying facts and oncriteria of judgment for weighing them.

A conventional formulation is that legislative facts — those facts which are relevant to the
legislative judgment — will not be canvassed save to determine whether there is a
rationalbasis for believing that they exist, while adjudicativefacts — those which tie the
legislative enactment to the litigant — are to be demonstrated and found according to the
ordinarystandards prevailing for judicial trials. 36

The test formulated in Nebbia vs. new York, 37 andadopted by this Court in Lansang vs. Garcia, 38 is that 'if laws are
seen to have a reasonable relation to a proper legislative purpose, and are neither arbitrary nor discriminatory, the
requirements of due process are satisfied, and judicial determination to that effect renders a court functus officio."
The recital of legislative findings implements this test.

With respect to a similar statement of legislative findingsin the U.S. Federal Subversive Activities Control Actof 1950
(that "Communist-action organizations" are controlledby the foreign government controlling the worldCommunist
movement and that they operate primarily to"advance the objectives of such world Communist movement"),the U.S.
Supreme Court said:

It is not for the courts to reexamine the validity of theselegislative findings and reject
them....They are the productof extensive investigation by Committes of Congress over
morethan a decade and a half. Cf. Nebbia v. New York, 291 U.S.502, 516, 530. We certainly
cannot dismiss them as unfoundedirrational imaginings. ... And if we accept them, as we
mustas a not unentertainable appraisal by Congress of the threatwhich Communist
organizations pose not only to existing governmentin the United States, but to the United
States as asovereign, independent Nation. ...we must recognize that thepower of Congress
to regulate Communist organizations of thisnature is
extensive. 39

This statement, mutatis mutandis, may be said of thelegislative findings articulated in the Anti-Subversion Act.

That the Government has a right to protect itself againstsubversion is a proposition too plain to require
elaboration.Self-preservation is the "ultimate value" of society. It surpasses and transcendes every other value, "forif
a society cannot protect its very structure from armedinternal attack, ...no subordinate value can be protected" 40 As
Chief Justice Vinson so aptly said in Dennis vs. United States: 41
 Whatever theoretical merit there may be to the argumentthat there is a 'right' to rebellion
against dictatorial governmentsis without force where the existing structure of government
provides for peaceful and orderly change. We rejectany principle of governmental
helplessness in the face of preparationfor revolution, which principle, carried to its logical
conclusion,must lead to anarchy. No one could conceive that it isnot within the power of
Congress to prohibit acts intended tooverthrow the government by force and violence.

2. By carefully delimiting the reach of the Act to conduct (as explicitly described in sectin 4 thereof),
Congressreaffirmed its respect for the rule that "even throughthe governmental purpose be legitimate and
substantial,that purpose cannot be pursued by means that broadly stiflefundamental personal liberties when the end
can be more narrowly achieved." 42 The requirement of knowing membership,as distinguished
from nominal membership, hasbeen held as a sufficient basis for penalizing membershipin a subversive
organization. 43 For, as has been stated:

Membership in an organization renders aid and encouragement to the organization; and

when membership is acceptedor retained with knowledge that the organization is engaged
inan unlawful purpose, the one accepting or retaining membershipwith such knowledge
makes himself a party to the unlawfulenterprise in which it is engaged. 44

3. The argument that the Act is unconstitutionallyoverbroad because section 2 merely speaks of "overthrow"of the
Government and overthrow may be achieved by peaceful means, misconceives the function of the
phrase"knowingly, willfully and by overt acts" in section 4. Section 2 is merely a legislative declaration; the
definitionsof and the penalties prescribed for the different acts prescribedare stated in section 4 which requires that
membershipin the Communist Party of the Philippines, to be unlawful, must be acquired "knowingly, willfully and by
overt acts." Indeed, the first "whereas" clause makes clear thatthe overthrow contemplated is "overthrow not only by
forceand violence but also be deceit, subversion and other illegalmeans." The absence of this qualificatio in section
2 appearsto be due more to an oversight rather than to deliberateomission.

Moreover, the word "overthrow' sufficiently connotesthe use of violent and other illegal means. Only in a
metaphoricalsense may one speak of peaceful overthrow ofgovernments, and certainly the law does not speak in
metaphors.In the case of the Anti-Subversion Act, the use ofthe word "overthrow" in a metaphorical sense is
hardlyconsistent with the clearly delineated objective of the "overthrow,"namely, "establishing in the Philippines a
totalitarianregime and place [sic] the Government under thecontrol and domination of an alien power." What
thisCourt once said in a prosecution for sedition is appropos: "The language used by the appellant clearly imported
anoverthrow of the Government by violence, and it should beinterpreted in the plain and obvious sense in which it
wasevidently intended to be understood. The word 'overthrow'could not have been intended as referring to an
ordinarychange by the exercise of the elective franchise. The useof the whip [which the accused exhorted his
audience to useagainst the Constabulary], an instrument designed toleave marks on the sides of adversaries, is
inconsistentwith the mild interpretation which the appellant wouldhave us impute to the language." 45

IV. The Act and the Guaranty of Free Expression

As already pointed out, the Act is aimed against conspiracies to overthrow the Government by force, violence
orother illegal means. Whatever interest in freedom of speechand freedom of association is infringed by the
prohibitionagainst knowing membership in the Communist Party ofthe Philippines, is so indirect and so insubstantial
as to beclearly and heavily outweighed by the overriding considerationsof national security and the preservartion of
democraticinstitutions in his country.

The membership clause of the U.S. Federal Smith Actis similar in many respects to the membership provision ofthe
Anti-Subversion Act. The former provides:

Whoever organizes or helps or attempts to organize anysociety, group, or assembly of

persons who teach, advocate, orencourage the overthrow or destruction of any such
governmentby force or violence; or becomes or is a member of, or affiliatedwith, any such
society, group or assembly of persons, knowingthe purpose thereof —
 Shall be fined not more than $20,000 or imprisoned notmore than twenty years, or both, and
shall be ineligible for emplymentby the United States or any department or agencythereof, for
the five years next following his conviction.... 46

In sustaining the validity of this provision, the "Court said in Scales vs. United States: 47

It was settled in Dennis that advocacy with which we arehere concerned is not
constitutionally protected speech, and itwas further established that a combination to
promote suchadvocacy, albeit under the aegis of what purports to be a politicalparty, is not
such association as is protected by the firstAmendment. We can discern no reason why
membership, whenit constitutes a purposeful form of complicity in a group engagingin this
same forbidden advocacy, should receive anygreater degree of protection from the
guarantees of that Amendment.

Moreover, as was held in another case, where the problemsof accommodating the exigencies of self-
preservationand the values of liberty are as complex and intricate as inthe situation described in the legislative
findings stated inthe U.S. Federal Subversive Activities Control Act of 1950,the legislative judgment as to how that
threat may best bemet consistently with the safeguards of personal freedomsis not to be set aside merely because
the judgment of judgeswould, in the first instance, have chosen other methods. 48 For in truth, legislation, "whether it
restrains freedom tohire or freedom to speak, is itself an effort at compromisebetween the claims of the social order
and individual freedom,and when the legislative compromise in either case isbrought to the judicial test the court
stands one step removedfrom the conflict and its resolution through law." 49

V. The Act and its Title

The respondent Tayag invokes the constitutional commandthat "no bill which may be enacted into law shall
embrace more than one subject which shall be expressed in the title of the bill." 50

What is assailed as not germane to or embraced in thetitle of the Act is the last proviso of section 4 which reads:

And provided, finally, That one who conspires with anyother person to overthrow the
Government of the Republic ofthe Philippines, or the government of any of its political
subdivisionsby force, violence, deceit, subversion or illegal means,for the purpose of placing
such Government or political subdivisionunder the control and domination of any lien power,
shallbe punished by prision correccional to prision mayor with allthe accessory penalties
provided therefor in the same code.

It is argued that the said proviso, in reality, punishes notonly membership in the Communist Party of the
Philippinesor similar associations, but as well "any conspiracyby two persons to overthrow the national or any local
governmentby illegal means, even if their intent is not to establisha totalitarian regime, burt a democratic regime,
evenif their purpose is not to place the nation under an aliencommunist power, but under an alien democratic power
likethe United States or England or Malaysia or even an anti-communistpower like Spain, Japan, Thailand or
Taiwanor Indonesia."

The Act, in addition to its main title ("An Act to Outlawthe Communist Party of the Philippines and
SimilarAssociations, Penalizing Membership Therein, and forOther Purposes"), has a short title. Section 1
providesthat "This Act shall be known as the
Anti-Subversion Act."Together with the main title, the short title of the statuteunequivocally indicates that the subject
matter is subversionin general which has for its fundamental purpose the substitutionof a foreign totalitarian regime
in place of theexisting Government and not merely subversion by Communistconspiracies..

The title of a bill need not be a catalogue or an indexof its contents, and need not recite the details of the Act. 51 It is
a valid title if it indicates in broad but clear termsthe nature, scope, and consequences of the proposed lawand its
operation. 52 A narrow or technical construction isto be avoided, and the statute will be read fairly and reasonablyin
order not to thwart the legislative intent. We holdthat the Anti-Subversion Act fully satisfies these requirements.

VI. Conclusion and Guidelines

In conclusion, even as we uphold the validity of theAnti-Subversion Act, we cannot overemphasize the needfor
prudence and circumspection in its enforcement, operatingas it does in the sensitive area of freedom of
expressionand belief. Accordingly, we set the following basic guidelines to be observed in any prosecution under the
Act.The Government, in addition to proving such circumstancesas may affect liability, must establish the following
elementsof the crime of joining the Communist Party of the Philippinesor any other subversive association:

(1) In the case of subversive organizations other thanthe Communist Party of the Philippines, (a) that thepurpose of
the organization is to overthrow the presentGovernment of the Philippines and to establish in thiscountry a
totalitarian regime under the domination of aforeign power; (b) that the accused joined such organization;and (c) that
he did so knowingly, willfully and byovert acts; and

(2) In the case of the Communist Party of the Philippines,(a) that the CPP continues to pursue the objectiveswhich
led Congress in 1957 to declare it to be an organizedconspiracy for the overthrow of the Government by
illegalmeans for the purpose of placing the country under thecontrol of a foreign power; (b) that the accused joined
theCPP; and (c) that he did so willfully, knowingly and byovert acts.

We refrain from making any pronouncement as to thecrime or remaining a member of the Communist Party ofthe
Philippines or of any other subversive association: weleave this matter to future determination.

ACCORDINGLY, the questioned resolution of September15, 1970 is set aside, and these two cases are
herebyremanded to the court a quo for trial on the merits. Costs de oficio.

Makalintal, Zaldivar, Teehankee, Barredo and Esguerra, JJ., concur.

Concepcion, C.J., concurs in the result.

Makasiar and Antonio, JJ., took no part.

Separate Opinions

FERNANDO, J., dissenting:

It is with regard that I find myself unable to join therest of my brethren in the decision reached upholding thevalidity
of the Anti-Subversion Act.1 It is to be admittedthat the learned and scholarly opinbion of Justice Castro hasthe
impress of conscientious and painstaking scrutiny ofthe constitutional issues raised. What is more, the stressin the
concluding portion thereof on basic guidelines thatwill assure in the trial of those prosecuted under suchAct respect
for their constitutional rights is to be commended.Nonetheless, my own reading of the decisionscited, interpreting
the bill of attainder clause2 coupled withthe fears, perhaps induced by a too-latitudinarian constructionof the
guarantees of freedom of belief and expression3 as well as freedom of association 4 as to impermissible inroadsto
which they may be exposed, compels a differentconclusion. Hence this dissent.

1. There is to be sure no thought on my part that theequally pressing concern of state safety and security shouldbe
ignored. The political branches of the governmentwould lay themselves oepn to a justifiable indictment
fornegligence had they been remiss in their obligation tosafeguard the nation against its sworn enemies. In a
simplerera, where the overthrow of the government wasusually through the rising up in arms, with weapons farless
sophisticated than those now in existence, there wasno constitutional issue of the magnitude that now confrontsus.
Force has to be met with force. It was as clearcutas that. Advances in science as well as more subtlemethods of
inducing disloyalty and weakening the senseof allegiance have introduced complexities in coping withsuch
problems. There must be then, and I am the firstto recognize it, a greater understanding for the
governmentalresponde to situations of that character. It is inthat light that the validity of the Anti-Subversion Act isto
be appraised. From ny standpoint, and I am not presumptuousenough to claim that it is the only perspectiveor that is
the most realistic, I feel that there was an insufficientappreciation of the compulsion of the constitutionalcommands
against bills of attainder and abridgmentof free speech. I am comforted by the thought that evenhad my view
prevailed, all that it would mean is that anew legislation, more in comformity to my way of thinkingto what is ordained
by the fundamental law, wouldhave to be enacted. No valid fear need be entertained thenthat a setback would be
occasioned to legitilate state effortsto stem the tide of subversive activities, in whateverform manifested.

2. The starting point in any inquiry as to the significanceof the bill of attainder clause is the meaning attachedto it by
the Constitutional Convention of 1934 and by the people who adopted it. As was explained by the then Delegate,
later Justice, Jose P. Laurel in his address on November19, 1934 as Chairman of the Committee on the Bill of
Rights quoted in the opinion of the Court: "A billof attainder is a legislative act which inflicts punishment without
judicial trial. (Cummings v. United States, 4Wall. 277, 18 L ed 356). In England, the Bill of Attainder was an act of
Parliament by which a man was tried, convictedand sentenced to death without a jury, without ahearing in court,
without hearing the witnesses againsthim and without regard to the rules of evidence. His bloodwas attainted or
corrupted, rendering him devoid of allheritable quality — of acquiring and disposing property bydescent. (Ex
parteGarland, 4 Wall. 333, 18 L ed. 366) If the penalty imposed was less than death, the act wasknown as a 'bill of
pains and penalties.' Bills of attainder, like ex post facto laws, were favorite methods of Stuartoppression. Once, the
name of Thomas Jefferson was includedin a bill of attainder presented to Parliament becauseof his reform
activities."5 Two American SupremeCourt decision were thus in the minds of the framers.They are Cummings v.
Missouri 6 and Ex parte Garland. 7 They speak unequivocally. Legislative acts, no matter whattheir form, that apply
either to named individuals or easilyascertainable members of a group in such a way as to inflicton them
punishment amounting to a deprivation ofany right, civil or political, without judicial trial are billsof attainder
prohibited by the Constitution. 8

Cummings v. Missouri 9 was a criminal prosecution ofa Catholic priest for refusing to take the loyalty oath requiredby
the state Constitution of Missouri of 1865. Undersuch a provision, lawyers, doctors, ministers, and
otherprofessionals must disavow that they had ever, "by act orword," manifested a "desire" for the success of the
nation'senemies or a sympathy" with the rebels of the AmericanCivil War. If they swore falsely, they were guilty of
perjury.If they engaged in their professions without theoath, they were criminally liable. The United States Supreme
Court condemned the provision as a bill of attainder,identified as any legislative act inflicting punishment
withoutjudicial trial. The deprivation of any right, civil orpolitical, previously enjoyed, amounted to a punishment.Why
such a conclusion was unavoidable was explained inthe opinion of Justice Field thus: "A bill of attainder isa
legislative act, which inflicts punishment without a judicialtrial. If the punishment be less than death, the actis termed
a bill of pains and penalties. Within the meaningof the Constitution, bills of attainder include bills ofpains and
penalties. In these cases the legislative body, inaddition to its legitimate functions, exercises the powersand office of
judge; it assumes, in the language of thetextbooks, judicial magistracy; it pronounces upon theguilt of the party,
without any of the forms or safeguardsof trial; it determines the sufficiency of the proofs produced,whether
conformable to the rules of evidence orotherwise; and it fixes the degree of punishment in accordancewith its own
notions of the enormity of the offense. ... If the clauses of the 2d article of the Constitutionof Missouri, to which we
have referred, had in termsdeclared that Mr. Cummings was guilty, or should be heldguilty, of having been in armed
hostility to the UnitedStates, or of having entered that state to avoid beingenrolled or drafted into the military service
of the UnitedStates, and, therefore, should be deprived of the right topreach as a priest of the Catholic church, or to
teach inany institution of learning, there could be no question thatthe clauses would constitute a bill of attainder
within themeaning of the Federal Constitution. If these clauses, insteadof mentioning his name, had declared that all
priestsand clergymen within the state of Missouri were guiltyof these acts, or should be held guilty of them, and
hencebe subjected to the like deprivation, the clause would beequally open to objection. And further, it these
clauseshad declared that all such priests and clergymen shouldbe so held guilty, and be thus deprived, provided
they didnot, by a day designated, do certain specified acts, theywould be no less within the inhibition of the Federal
Constitution.In all these cases there would be the legislativeenactment creating the deprivation, without any of
theordinary forms and guards provided for the security ofthe citizen in the administration of justice by the
establishedtribunales." 10

On the very same day that the ruling in Cummings washanded down, Ex parte Garland 11 was also decided.
Thatwas a motion for leave to practrice as an attorney beforethe American Supreme Court. Petitioner Garland
wasadmitted to such bar at the December term of 1860. Underthe previous rules of such Court, all that was
necessarywas that the applicant have three years practice in the statecourts to which he belonged. In March 1865,
the rule waschanged by the addition of a clause requiring that an oathbe taken under the Congressional acts of
1862 and 1865to the effect that such candidate for admission to the barhad never voluntarily borne arms against the
UnitedStates. Petitioner Garland could not in conscience subscribeto such an oath, but he was able to show a
presidentialpardon extended on July 15, 1865. With such actof clemency, he moved that he be allowed to continue
inpractice contending that the test oath requirement wasunconstitutional as a bill of attainder and that at any rate,he
was pardoned. The same ruling was announced by theCourt again through Justice Field. Thus: "In the
exclusionwhich the statute adjudges, it imposes a punishmentfor some of the acts specified which were not
punishableat the time they were committedl; and for other of the actsit adds a new punishment to that before
prescribed, andit is thus brought within the further inhibition of the Consitutionagainst the passage of an ex post
facto law. Inthe case of Cummings v. Missouri, just decided, ... wehave had occasion to consider at length the
meaning of abill of attainder and of an ex post facto law in the clauseof the Constitution forbidding their passage by
the states,and it is unnecessary to repeat here what we there said.A like prohibition is contained in the Constitution
againstenactments of this kind by Congress; and the argumentpresented in that case against certain clauses of the
Constitutionof Missouri is equally applicable to the act ofCongress under consideration in this case." 12

There was a reiteration of the Cummings and Garlanddoctrine in United States v. Lovett, 13 decided in 1946.There it
was shown that in 1943 the respondents, Lovett,Watson, and Dodd, were and had been for several yearsworking for
the government. The government agencies,which had lawfully employed them, were fully satisfiedwith the quality of
their work and wished to keep thememployed on their jobs. Over their protest, Congress providedin Section 304 of
the Urgent Deficiency AppropriationAct of 1943, by way of an amendment attached to theHouse Bill, that after
November 15, 1943, no salary orcompensation should be paid respondent out of any moneythen or thereafter
appropriated except for services as jurorsor members of the armed forces, unless they wereprior to November 15,
1943, again appointed to jobs bythe President with the advide and consent of the Senate.Notwithstanding such
Congressional enactment, and thefailure of the President to reappoint the respondents, theagencies, kept all the
respondents at work on their jobs forvarying periods after November 15, 1943, but their compensationwas
discontinued after that date. Respondentsbrought this action in the Court of Claims for the salariesto which they felt
entitled. The Ameican Supreme Courtstated that its inquiry was thus confined to whether theaction in the light of
proper construction of the Act presenteda justificiable controversy, and, if so, whether Section304 is a bill of
attainder insofar as the respondents wereconcerned.

After holding that there was a juditiciable, view theAmerican Supreme Court in an opinion by Justice
Blackcategorically affirmed: "We hold that Section 304 fallsprecisely within the category of Congressional
actionswhich the Constitution barred by providing that 'No Billof Attainder or ex post Law shall be passed.'
InCummings v. State of Missouri, ... this Court said, 'Abill of attainder is a legislative act which inflicts
punishmentwithout a judicial trial. If the punishment be lessthan death, the act is termed a bill of pains and
penalties.Within the meaning of the Constitution, bills of attainderinclude bills of pains and penalties.' ... On the
sameday the Cummings case was decided, the Court, in Exparte Garland, also held invalid on the same grounds
anAct of Congress which required attorneys practicing beforethis Court to take a similar oath. Neither of thesecases
has ever been overruled. They stand for the propositionthat legislative acts, no matter what their form,that apply
either to named individuals or to easily ascertainablemembers of a group in such a way as to inflictpunishment on
them without a judicial trial are billsof attainder prohibited by the Constitution. Adherenceto this principle requires
invalidation of Section 304. Wedo adhere to it." 14

United States v. Brown 15 a 1965 decision was the firstcase to review a conviction under the Labor-
ManagementReporting and Disclosure Act of 1959, making it a crimefor a member of the Communist Party to serve
as anofficer ir, except in clerical or custodial positions, anemployee of a labor union. Respondent Brown, a
longshoremanon the San Francisco docks, and an open andavowed Communist, for more than a quarter of a
centurywas elected to the Executive Board of Local 10 of theInternational Longshoremen's and Warehousemen's
Unionfor consecutive one-year terms in 1959, 1960, and 1961.On May 24, 1961, respondent was charged in a one-
countindictment returned in a district court of California withservicing as a member of an executive board of a
labororganization while a member of the Communist Party, inwillful violation of the above provision. The question
ofits validity under the bill of attainder clause was thusproperly raised for adjudication. While convicted in thelower
court, the Court of Appeals for the Ninth Circuitreversed. It was sustained by the American SupremeCourt. As noted
in the opinion by Chief Justice Warren,"the wide variation in form, purpose and effect of ante-Constitutionbills of
attainder indicates that the properscope of the Bill of Attainder Clause, and its relevance tocontemporary problems,
must ultimately be sought by attemptingto discern the reasons for its inclusion in theConstitution, and the evils it was
desinged to eliminate.The best available evidence, the writings of the architectsof our constitutional system,
indicates that the Bill ofAttainder Clause was inteded not as a narrow, technical(and therefore soon to be outmoded)
prohibition, but ratheras an implementation of the separation of powers, ageneral safeguard against legislative
exercise of the judicialfunction, or more simply — trial by legislature." 16 Then after referring to Cummings, Garland,
and Lovett,Chief Justice Warren continued: "Under the line of casesjust outlined, Sec. 504 of the Labor
Management Reportingand Disclosure Act plainly constitutes a bill of attainder. Congress undoubtedly possesses
power under theCommerce Clause to enact legislation designed to keepfrom positions affecting interstate
commerce persons whomay use such positions to bring about political strikes. In Sec. 504, however, Congress has
exceeded the authoritygranted it by the Constitution. The statute does not setforth a generally applicable rule
decreeing that any personwho commits certain acts or possesses certain characteristics (acts and characteristics
whhich, in Congress'view, make them likely to initiate political strikes) shallnot hold union office, and leave to courts
and juries thejob of deciding what persons have committed the specifiedacts or possessed the specified
characteristics. Instead,it designates in no uncertain terms the personswho possess the fearec characteristics and
therefore cannothold union office without incurring criminal liability — members of the Communist Party." 17

Even Communist Party v. Subversive Activities ControlBoard, 18 where the provision of the Subversive
ActivitiesControl Act of 1950 requiring the Communist Party ofthe United States to register was sustained, the
opinionof Justice Frankfurter for the Court, speaking for a five-manmajority, did indicate adherence to the
Cummingsprinciple. Had the American Communist Party been outlawed,the outcome certainly would have been
different.Thus: "The Act is not a bill of attainder. It attaches notto specified organizations but to described activities
inwhich an organization may or may not engage. The singlingout of an individual for legislatively prescribed
punishmentconstitutes an attainder whether the individualis called by name or described in terms of conduct
which,because it is past conduct, operates only as a designationof particular persons. ... The Subversive Activities
ControlAct is not of that king. It requires the registrationonly of organizations which, after the date of the
Act,arefound to be under the direction, domination, or controlof certain foreign powers and to operate primarily
toadvance certain objectives. This finding must be madeafter full administrative hearing, subject to judicial
reviewwhich opens the record for the reviewing court'sdetermination whether the administrative findings as tofact
are supported by the preponderance of the evidence.Present activity constitutes an operative element to whichthe
statute attaches legal consequences, not merely a pointof reference for the ascertainment of particularly
personsineluctably designated by the legislature." 19

The teaching of the above cases, which I find highlypersuasive considering what appeared to be in the mindsof the
framers of the 1934 Constitutional Conventionyields for me the conclusion that the Anti-SubversionAct falls within
the ban of the bill of attainder clause. Itshould be noted that three subsequent cases upholding theCummings and
Garland doctrine were likewise cited in theopinion of the Court. The interpretation accorded to themby my brethren
is, of course, different but I am unable togo along with them especially in the light of the categoricallanguage
appearing in Lovett. This is not to lose sightof the qualification that for them could deprive such aholding of its
explicit character as shown by this excerptfrom the opinion of the Court: "Indeed, were the Anti-SubversionAct a bill
of attainder it would be totally unnecessaryto charge communists in court, as the law alone,without more, would
suffice to secure their conviction andpunishment. But the fact is that their guilt still has to bejudicially estblished. The
Government has yet to proveat the trial that the accused joined the Party knowingly,willfully and by overt acts, and
that they joined the Partyknowing its subversive character and with specific intentto further its objective, i.e., to
overthrow the existing Governmentby force, deceit, and other illegal means and placeit under the control and
domination of a foreign power. 20While not implausible, I find difficulty in yielding acceptance.In Cummings, there
was a criminal prosecution ofthe Catholic priest who refused to take the loyalty oath.Again in Brown, there was an
indictment of the laborleader who, judging by his membership in the CommunistParty, did transgress the statutory
provision subsequentlyfound offensive to the bill attainder clause. If the constructionI would place on theoff-repeated
pronouncementof the American Supreme Court is correct, then the merefact that a criminal case would have to be
instituted wouldnot save the statute. It does seem clear to me that fromthe very title of the Anti-Subversion Act, "to
outlaw the Communist Party of the Philippines and similar associations,"not to mention other specific provisions, the
taintof invalidity is quite marked. Hence, my inability to concurin the judgment reached as the statute not suffering
fromany fatal infirmity in view of the Constitutional prohibitionagainst bills of attainder.

3. This brings me to the question of the alleged repugnancyof the Anti-Subversion Act to the intellectual
libertysafeguarded by the Constitution in terms of the free speechand free assocition guarantees. 21 It is to be
admitted thatat the time of the enactment of Republic Act No. 1700,the threat that Communism, the Russian brand
then, didpose was a painful reality for Congressional leaders andthe then President. Its shadow fell squarely across
thelives of all. Subversion then could neither be denied notdisparaged. There was, in the expert opinion of those
conversantwith such mattes, a danger to out national existenceof no mean character. Nonetheless, the remedies
toward off such menace must not be repugnant to our Constitution.We are legally precluded from acting in anyother
way. The apprehension justly felt is no warrant forthrowing to the discard fundamental guarantees. Vigilantwe had to
be, but not at the expense of constitutional ideals.

One of them, certainly highly-prized of the utmost significance,is the right to dissent. One can differ, evenobject; one
can express dissatisfaction with things as theyare. There are timew when one not only can but must.Such dissent
can take the form of the most critical andthe most disparaging remarks. They may give offense tothose in authority,
to those who wield powe and influence.Nevertheless, they are entitled to constitutional protection.Insofar as the
content of such dissent is concerned, thelimits are hardly discernible. It cannot be confined totrivial matters or to
such as are devoid of too much significance.It can reach the heart of things. Such dissentmay, for those not so
adventurous in the realm of ideas,possess a subversive tinge. Even those who oppose a democraticform of
government cannot be silenced. This is trueespecially in centers of learning where scholars competentin their line
may, as a result of their studies, assert thata future is bleak for the system of government now favoredby Western
democracies. There may be doubts entertainedby some as to the lawfulness of their exercisingthis right to dissent to
the point of advocary of such adrastic change. Any citizen may do so without fear thatthereby he incurs the risk of a
penal sanction. That ismerely to affirm the truth of this ringing declaration fromJefferson: "If there be any among us
who would wish todissolve this union or to change its republican form, letthem stand undisturbed as monuments of
the safety withwhich error of opinion may be tolerated where reason isleft free to combat it." 22 As was so well put by
the philosopher,Sidney Hook: "Without holding the right to theexpression of heresy at any time and place to be
absolute — for even the right to non-heretical speech cannot beabsolute — it still seems wise to tolerate the
expression evenof Communist, fascist and other heresies, lest in outlawingthem we include other kings of heresies,
and deprive ourselvesof the opportunity to acquite possibly sounder ideasthan our own." 23

The line is to be drawn, however, where the wordsamount to an incitement to commit the crime of seditionor
rebellion. The state has been reached, to follow theformulation of Cardozo, where thought merges into action.Thus
is loyalty shown to the freedom of speech or pressordained by the Constitution. It does not bar the expressionof
views affecting the very life of the state, even ifopposed to its fundamental presuppositions. It allows, ifit does not
require as a matter of fact, that unorthodoxideas be freely ventilated and fully heard. Dissent is notdisloyalty.

Such an approach is reinforced by the well-settled constitutionalprinciple "that even though the governmental
purposesbe legitimate and substantial, they cannot be pursuedby means that broadly stifle fundamental
personalliberties when the end can be more narrowly achieved.For precision of regulation is the touchstone in an
areaso closely related to our most precious freedoms." 24 This is so for "a governmental purpose to control or
prevent activities constitutionally subject to state regulation may notbe achieved by means which sweep
unnecessarily broadlyand thereby invade the area of protected freedoms." 25 It isindispensable then that "an over
breadth" in the applicabilityof the statute be avoided. If such be the case, then theline dividing the valid from the
constitutionally infirm hasbeen crossed. That for me is the conclusion to be drawnfrom the wording of the Anti-
Subversion Act.

There is to my mind support for the stand I take inthe dissent of Justice Black in the Communist Party
casediscussed above. What is to be kept in view is that a legislativemeasure certainly less drastic in its treatment
ofthe admittedly serious Communist problem was found inthe opinion of this noted jurist offensive to the
FirstAmendment of the American Constitution safeguardingfree speech. Thus: "If there is one thing certain aboutthe
First Amendment it is that this Amendment was designedto guarantee the freest interchange of ideas aboutall public
matters and that, of course, means the interchangeof all ideas, however such ideas may be viewed inother countries
and whatever change in the existing structureof government it may be hoped that these ideas willbring about. Now,
when this country is trying to spreadthe high ideals of democracy all over the world — ideals that are revolutionary in
many countries — seems to be aparticularly inappropriate time to stifle First Amendmentfreedoms in this country.
The same arguments that areused to justify the outlawry of Communist ideas here couldbe used to justify an
outlawry of the ideas of democracyin other countries." 26 Further he stated: "I believe with theFramers of the First
Amendment that the internal securityof a nation like ours does not and cannot be made todepend upon the use of
force by Government to make allthe beliefs and opinions of the people fit into a commonmold on any single subject.
Such enforced conformity ofthought would tend only to deprive our people of the boldspirit of adventure and
progress which has brought thisNation to its present greatness. The creation of publicopinion by groups,
organizations, societies, clubs, and partieshas been and is a necessary part of our democraticsociety. Such groups,
like the Sons of Liberty and theAmerican Corresponding Societies, played a large part increating sentiment in this
country that led the people ofthe Colonies to want a nation of their own. The Father ofthe Constitution — James
Madison — said, in speakingof the Sedition Act aimed at crushing the Jefferson Party,that had that law been in
effect during the period beforethe Revolution, the United States might well have continuedto be 'miserable colonies,
groaning under a foreign yoke.'In my judgment, this country's internal security can betterbe served by depending
upon the affection of the peoplethan by attempting to instill them with fear and dreadof the power of Government.
The Communist Party hasnever been more than a small group in this country. Andits numbers had been dwindling
even before the Governmentbegan its campaign to destroy the Party by force oflaw. This was because a vast
majority of the Americanpeople were against the Party's policies and overwhelminglyrejected its candidates year
after year. That is the trueAmerican way of securing this Nation against dangerousideas. Of course that is not the
way to protect the Nationagainst actions of violence and treason. The Foundersdrew a distinction in our Constitution
which we would bewise to follow. They gave the Government the fullest powerto prosecute overt actions in violation
of valid lawsbut withheld any power to punish people for nothing morethan advocacy of their views." 27

With the sentiments thus expressed uppermost in mymind and congenial to my way of thinking, I cannot sharethe
conclusion reached by my breathren as to the Anti-Subversion Act successfully meeting the test of validity onfree
speech and freedom of association grounds.

4. It could be that this approach to the constitutionalquestions involved arises from an appraisal of the
challengedstatute which for me is susceptible of an interpretationthat it does represent a defeatist attitude on thepart
of those of us, who are devotees at the shrine of aliberal-democratic state. That certainly could not havebeen the
thought of its framers; nonetheless, such an assumptionis not devoid of plausibility for why resort tothis extreme
measure susceptible as it is to what apparentlyare not unfounded attacks on constitutional grounds?Is this not to
ignore what previously was accepted as anobvious truth, namely that the light of liberalism sendsits shafts in many
directions? It can illuminate, and itcan win the hearts and minds of men. It if difficult forme to accept the view then
that a resort to outlawry isindispensable, that suppression is the only answer to whatis an admitted evil. There could
have been a greater exposureof the undesirability of the communist creed, itscontradictions and arbitrarines, its lack
of fealty to reason,its inculcation of disloyalty, and its subservience tocentralized dictation that brooks no opposition.
It is thus,in a realistic sense, a manifestation of the fear of freethought and the will to suppress it. For better, of
course,is the propaganda of the deed. What the communists promise,this government can fulfill. It is up to it then to
takeremedial measures to alleviate the condition of our countrymenwhose lives are in a condition of destitution
andmisery. It may not be able to change matters radically.At least, it should take earnest steps in that direction.What
is important for those at the bottom of the economicpyramid is that they are not denied the opportunity for abetter
life. If they, or at least their children, cannot evenlook forward to that, then a constitutional regime is nothingbut a
mockery and a tragic illusion. Such a response,I am optimistic enough to believe, has the merit of thinning,if not
completely eliminating, the embattled ranksand outposts of ignorance, fanaticism and error. That forme would be
more in accordance with the basic propositionof our polity. This is not therefore to preach a doctrine of object
surrender to the forces apparently bent on the adoption of a way of life so totally opposed to the deeply felt traditions
of our people. This is, for me at least, an affirmation of the vitality of the democratic creed, with an expression of
regret that it could not have been more impressively set forth in language worthy of the subject.

It is in the light of the views above expressed that I find myself unable to yield concurrence to the ably-written
opinion of Justice Castro for the Court sustaining the validity of the Anti-Subversion Act.

DIGEST:

FACTS: Hon. Judge Simeon Ferrer is the Tarlac trial court judge that declared RA1700 or the Anti-Subversive
Act of 1957 as a bill of attainder. Thus, dismissing the information of subversion against the following: 1.)
Feliciano Co for being an officer/leader of the Communist Party of the Philippines (CPP) aggravated by
circumstances of contempt and insult to public officers, subversion by a band and aid of armed men to afford
impunity. 2.) Nilo Tayag and 5 others, for being members/leaders of the NPA, inciting, instigating people to
unite and overthrow the Philippine Government. Attended by Aggravating Circumstances of Aid or Armed Men,
Craft, and Fraud. The trial court is of opinion that 1.) The Congress usurped the powers of the judge 2.)
Assumed judicial magistracy by pronouncing the guilt of the CPP without any forms of safeguard of a judicial
trial. 3.) It created a presumption of organizational guilt by being members of the CPP regardless of
voluntariness.

The Anti Subversive Act of 1957 was approved 20June1957. It is an act to outlaw the CPP and similar
associations penalizing membership therein, and for other purposes. It defined the Communist Party being
although a political party is in fact an organized conspiracy to overthrow the Government, not only by force and
violence but also by deceit, subversion and other illegal means. It declares that the CPP is a clear and present
danger to the security of the Philippines. Section 4 provided that affiliation with full knowledge of the illegal acts
of the CPP is punishable. Section 5 states that due investigation by a designated prosecutor by the Secretary
of Justice be made prior to filing of information in court. Section 6 provides for penalty for furnishing false
evidence. Section 7 provides for 2 witnesses in open court for acts penalized by prision mayor to death.
Section 8 allows the renunciation of membership to the CCP through writing under oath. Section 9 declares the
constitutionality of the statute and its valid exercise under freedom if thought, assembly and association.
ISSUES:

(1) Whether or not RA1700 is a bill of attainder/ ex post facto law.

(2) Whether or Not RA1700 violates freedom of expression.

HELD: The court holds the VALIDITY Of the Anti-Subversion Act of 1957.

A bill of attainder is solely a legislative act. It punishes without the benefit of the trial. It is the substitution of
judicial determination to a legislative determination of guilt. In order for a statute be measured as a bill of
attainder, the following requisites must be present: 1.) The statute specifies persons, groups. 2.) the statute is
applied retroactively and reach past conduct. (A bill of attainder relatively is also an ex post facto law.)

In the case at bar, the statute simply declares the CPP as an organized conspiracy for the overthrow of the
Government for purposes of example of SECTION 4 of the Act. The Act applies not only to the CPP but also to
other organizations having the same purpose and their successors. The Act‘s focus is on the conduct not
person.

Membership to this organizations, to be UNLAWFUL, it must be shown that membership was acquired with the
intent to further the goals of the organization by overt acts. This is the element of MEMBERSHIP with
KNOWLEDGE that is punishable. This is the required proof of a member‘s direct participation. Why is
membership punished. Membership renders aid and encouragement to the organization. Membership makes
himself party to its unlawful acts.

Furthermore, the statute is PROSPECTIVE in nature. Section 4 prohibits acts committed after approval of the
act. The members of the subversive organizations before the passing of this Act is given an opportunity to
escape liability by renouncing membership in accordance with Section 8. The statute applies the principle of
mutatis mutandis or that the necessary changes having been made.

The declaration of that the CPP is an organized conspiracy to overthrow the Philippine Government should not
be the basis of guilt. This declaration is only a basis of Section 4 of the Act. The EXISTENCE OF
SUBSTANTIVE EVIL justifies the limitation to the exercise of ―Freedom of Expression and Association‖ in this
matter. Before the enactment of the statute and statements in the preamble, careful investigations by the
Congress were done. The court further stresses that whatever interest in freedom of speech and association is
excluded in the prohibition of membership in the CPP are weak considering NATIONAL SECURITY and
PRESERVATION of DEMOCRACY.

The court set basic guidelines to be observed in the prosecution under RA1700. In addition to proving
circumstances/ evidences of subversion, the following elements must also be established:

1. Subversive Organizations besides the CPP, it must be proven that the organization purpose is to overthrow
the present Government of the Philippines and establish a domination of a FOREIGN POWER. Membership is
willfully and knowingly done by overt acts.
2. In case of CPP, the continued pursuance of its subversive purpose. Membership is willfully and knowingly
done by overt acts.

The court did not make any judgment on the crimes of the accused under the Act. The Supreme Court set
aside the resolution of the TRIAL COURT.

6. PEOPLE OF THE PHILIPPINES, petitioner,

vs.
HON. SIMEON N. FERRER, in his capacity as Judge of the Court of First Instance of Tarlac, Branch I;
FELICIANO CO alias "Leoncio Co" alias "Bob" and NILO S. TAYAG alias "Romy
Reyes" alias "Taba", respondents.

Office of the Solicitor General Estelito P. Mendoza and Assistant Solicitor General Hugo E. Gutierrez, Jr. for
petitioner.

RESOLUTION

CASTRO, J.:p

The respondents Feliciano Co and Nilo Tayag separately seek a reconsideration of our decision in this case dated December 27, 1972. The motion for
reconsideration filed by Co, being a mere reiteration of arguments previously advanced, need not detain us. It is the motion filed by Tayag that requires detailed
consideration.

The burden of Tayag's motion is that knowing membership alone in the Communist Party of the Philippines or in any
other subversive organization cannot, consistently with the Constitution, be made the basis of criminal prosecution
under the Anti-Subversion Act. He argues that such membership must be coupled with direct participation by the
defendant in the illegal activities of the organization. Thus, he seeks the inclusion in the guidelines set forth in our
decision of a requirement that in prosecutions under the Act the State must prove that the defendant joined or
remained a member of the CPP or of the subversive organization, knowing its subversive character and with specific
intent to further its basic objectives as shown by direct participation in the organization's unlawful activities.

1. The respondent Tayag's submission would nullify the legislative policy embodied in the Anti-Subversion Act and
frustrate prosecutions under it. On the basis of Congressional findings that the Communist Party of the Philippines is
"an organized conspiracy to overthrow the Government of the Republic of the Philippines for the purpose of
establishing in the Philippines a totalitarian regime ... under the control and domination of an alien power,"1 the Act
provides for the punishment of any person who "knowingly, willfully and by overt acts affiliates himself with,
becomes or remains a member of the Communist Party of the Philippines."2

The Act is thus a conspiracy statute. The gist is the agreement itself rather than action taken pursuant to
it.3Obviously, to require proof of direct participation of the defendant in the substantive offenses constituting the
object of the conspiracy, in addition to proof of agreement, would render ineffectual the conspiracy device in penal
law. The law is primarily concerned with conduct and will not intervene as long as the actor withdraws from what lie
has planned to do. But where the act or acts in concert with others, the likelihood of a change of heart or of a
misreading of his intention is minuscule. He is less likely to desist from the criminal enterprise where others are also
involved. On the contrary, the encouragement and moral support of others in conspiracy with him fortifies his
perseverance. The resulting collective action toward an anti-social end gives rise to a graver danger to society than
individual action toward the same end, and justifies the intervention of the law at an earlier stage.4

Indeed, section 4 of the Act distinguishes one who only joins or maintains his membership in the CPP or other
subversive organization, for whom the penalty provided is arresto mayor, from one who not only does so but as well
takes up arms against the Government, for whom the Act provides a heavier penalty, namely, prision mayor to
death. The respondent Tayag's thesis would obliterate this distinction. The Court's traditional avoidance of
constructions of doubtful constitutionality cannot be turned into an instrument for the evisceration of a plain
legislative policy.

2. Moreover, a requirement that the prosecution must prove direct participation by the defendant in the objectives of
the conspiracy would run counter to another established principle in the law — that where conspiracy is proved, the
act of one is deemed to be the act of all.5 That is why we referred to criminal conspiracy as a dragnet device for
effectively dealing with the growth of organized crime. A contrary requirement would render society powerless to
repress widespread criminality.

3. Indeed, as we noted in our decision, the requirement that membership in the CPP or in any other subversive
organization be shown by overt acts was intended no more than to preclude the possibility that conviction may be
obtained solely on the basis of incriminating evidence rather than positive acts of the defendant. As Senator Cea
explained in the course of the deliberations on the bill: "I have inserted the words "overt acts" because we are
punishing membership in the Communist Party. I would like that membership to be proved by overt acts, by positive
acts, because it may happen that one's name may appear in the list of membership."6
Thus, where one is shown to have taken an oath of membership or signed affiliation papers in a subversive
organization, knowing its illegal purposes, the requirement of the law is satisfied. Of course where, as it often
happens, it cannot be shown that the defendant explicitly or expressly entered into the conspiracy, his agreement
may be inferred from circumstances demonstrating concert of action. It is then that the defendant's participation in
the illegal activities of the organization would constitute proof of his specific intent.

4. But the over-act requirement may also be satisfied by proof of non-criminal and relatively minor acts.7 Such acts
may consist in signing membership papers, paying dues, attending meetings, and the like, which, although in
themselves may not be illegal, are nevertheless acts in pursuance of the objectives of the conspiracy. As the U.S.
Supreme Court explained in Yates vs. United States:8

... It is not necessary that an overt act be the substantive crime charged in the indictment as
the object of the conspiracy. Nor, indeed, need such an act, taken by itself, even be criminal
in character. The function of the overt act in a conspiracy prosecution is simply to manifest
"that the conspiracy is at work," and is neither a project still resting solely in the minds of the
conspirators nor a fully completed operation no longer in existence.

Indeed, the rationale of the Anti-Subversion Act, like that of the Smith Act involved in Yates, is that the existence of
the conspiracy by itself creates the danger to national security. As held in Dennis vs. United States,9 "the formation
... of such a highly organized conspiracy, with rigidly disciplined members subject to call when the leaders ... felt that
the time has come for action, ... disposes of the contention that a conspiracy to advocate, as distinguished from the
advocacy itself, cannot be constitutionally restrained because it comprises only the preparation. It is the existence of
the conspiracy which creates the danger ... If the ingredients are present, we cannot bind the Government to wait
until the catalyst is added." In the case of the CPP and other subversive groups, the danger posed is deemed in the
Anti-Subversion Act to be so "clear, present and grave" as to warrant the prosecution of those engaged in the
conspiracy.

5. Nor is there a constitutional compulsion that the overt acts of conspiracy be evidenced by direct participation of
the defendant in the illegal objectives of the organization. In the first place, there is no reason why one who actively
and knowingly works in the ranks of the organization, intending to contribute to the success of its specific illegal
activities, should be any more immune from prosecution than one to whom the organization has assigned or
entrusted the task of carrying out the substantive criminal acts. In United States vs. Vergara, 10 for instance, it was
shown that the defendants organized the Katipunan, a society for the purpose of overthrowing the Government by
force, and that in pursuance of the conspiracy the defendants solicited public contributions. No overt acts of
insurrection were shown, but the defendants were nevertheless held guilty of conspiracy to overthrow the
Government.

In the second place, the requirement of proof of specific intent precisely limits the operation of the statute only to
illegal conduct. There need be no apprehension that unless direct participation by the defendant in the illegal
activities of the association is shown, the statute may sweep unnecessarily broadly into protected activities, as the
association may have both legal and illegal aims. In the case of the Communist Party of the Philippines, this
apprehension is without basis, for the very nature of that organization as a conspiracy for the violent overthrow of
the Government defines the character of its objectives.

Indeed, as was held in Scales vs. United States, 11 in answer to a similar contention,

If it is said that the mere existence of such an enactment tends to inhibit the exercise of
constitutionally protected rights, in that it engenders an unhealthy fear that one may find
himself unwittingly embroiled in criminal liability, the answer surely is that the statute
provides that a defendant must be proven to have knowledge of the proscribed advocacy
before he may be convicted. It is, of course, true that quasi-political parties or other groups
that may embrace both legal and illegal aims differ from a technical conspiracy, which is
defined by its purpose, so that all knowing association with the conspiracy is a proper subject
for criminal proscription as far as the First Amendment liberties are concerned. If there were
a similar blanket prohibition of association with a group having both legal and illegal aims,
there would indeed be real danger that legitimate political expression or association would be
impaired, but the membership clause, as here construed, does not cut deeper into the
freedom of association than is necessary to deal with "the substantive evils that Congress
 has a right to prevent." Schenk v. United States, 249 U.S. 47, 52. The clause does not make
criminal all association with an organization which has been shown to engage in illegal
advocacy. There must be clear proof that a defendant "specifically intend[s] to accomplish
[the aims of the organization] by resort to violence." Noto v. United States [367 U.S. at 299].
Thus the member for whom the organization is a vehicle for the advancement of legitimate
aims and policies does not fall within the ban of the statute; he lacks the requisite specific
intent "to bring about the overthrow of the government as speedily as circumstances would
permit." Such a person may be foolish, deluded or perhaps merely optimistic, but he is not by
this statute made a criminal.'

ACCORDINGLY, the two motions for reconsideration are denied. Our decision of December 27, 1972 is hereby
declared final and executory.

Makalintal, C.J., Zaldivar, Barredo, Esguerra, Fernandez and Aquino, JJ., concur.

Makasiar, Antonio and Muñoz Palma, JJ., took no part.

Separate Opinions

FERNANDO, J., dissenting:

My dissent from the well-written opinion of Justice Castro in the decision promulgated on December 27, 1972
opened with this paragraph: "It is with regret that I find myself unable to join the rest of my brethren in the decision
reached upholding the validity of the Anti-Subversion Act. It is to be admitted that the learned and scholarly opinion
of Justice Castro has the impress of conscientious and painstaking scrutiny of the Constitutional issues raised. What
is more, the stress in the concluding portion thereof on the basic guidelines that will assure in the trial of those
prosecuted under such Act respect for their constitutional rights is to be commended. Nonetheless, my own reading
of the decisions cited, interpreting the bill of attainder clause coupled with the fears, perhaps induced by a too-
latitudinarian construction of the guarantees of freedom of belief and expression as well as freedom of association
as to impermissible inroads to which they may be exposed, compels a different conclusion."1

It is beyond cavil that the present resolution bears the imprint of lucidity and comprehensiveness, characteristic of
the opinions of Justice Castro. I regret however that the basic premise that precluded me from yielding concurrence
to the decision is once again a bar to my conformity. There is no need then to repeal what was said by me before. It
only remains to be added that the stress on the conspiracy principle in the resolution, to be sure in conformity with
sound and settled concepts, does give rise to misgivings as to its too broad a scope. That is why I would like to
express briefly my doubts on the matter.

For the purposes of this dissent, I adopt the characterization of Justice Jackson that conspiracy has in it the
elements of the "elastic, sprawling and pervasive" resulting at times in "a serious threat to fairness in our
administration of justice."2 His concurring opinion in Krulewitch continues: "The modern crime of conspiracy is so
vague that it almost defies definition. Despite certain elementary and essential elements, it also, chameleon-like,
takes on a special coloration from each of the many independent offenses on which it may be overlaid. It is always
"predominantly mental in composition" because it consists primarily of a meeting of minds and an intent."3 Its
relationship to political offenses was discussed by him in these terms: "The crime comes down to us wrapped in
vague but unpleasant connotations. It sounds historical undertones of treachery, secret plotting and violence on a
scale that menaces social stability and the security of the state itself. "Privy conspiracy" ranks with sedition and
rebellion in the Litany's prayer for deliverance. Conspirational movements do indeed lie back of the political
assassination, the coup d'etat, the putsch, the revolution, and seizures of power in modern times, as they have in all
history."4

Along the same line are the comments of Professor Johnson on the dangers of conspiracy to freedom of thought
and expression. Thus: "Prosecutions of political dissidents, including labor organizers, Communist Party leaders,
and contemporary radicals, typically have been conspiracy prosecutions. The law of conspiracy is intended, after all,
to make it easier to impose criminal punishment on members of groups that plot forbidden activity. Insofar as it
accomplishes this end, it unavoidably increases the likelihood that persons will be punished for what they say rather
than for what they do or for associating with others who are found culpable. Critics who are alarmed at the resulting
threat to freedom of speech and freedom of association typically have proposed new constitutional doctrines derived
from the first amendment to curtail the use of conspiracy charges in cases having some "political" element."5 For
Professor Johnson, it does not suffice "to reform conspiracy legislatively by removing its most widely deplored
overextensions, or to reform it judicially by engrafting new doctrines derived from the first amendment [freedom of
speech and of the press]."6 He would expunge it from the corpus of the law. "The law of criminal conspiracy is not
basically sound. It should be abolished, not reformed."7

Let there be no misunderstanding. I am not prepared to go that far. It does occur to me, though, that with due
recognition of the persuasive character of the resolution from the standpoint of defense against the dangers of
subversion as well as the desire of my brethren to give the utmost protection to constitutional rights, under current
conditions with the serious problems posed, still I find it difficult to dispel my grave doubts as to Republic Act No.
1700 suffering from the corrosion of constitutional infirmity, as set forth in some detail in my dissent.

Regretfully, I am compelled to do so again.

TEEHANKEE, J., concurring and dissenting:

I concur with the resolution penned for the Court by Mr. Justice Castro insofar as it denies the motion for
reconsideration filed by respondent Feliciano Co which on the whole merely reiterates the same arguments
previously advanced and dealt with in the Court's decision of December 27, 1972 remanding the case to the court
below for trial on the merits.

I dissent from the resolution insofar as it denies the motion for reconsideration of respondent Nilo Tayag praying in
essence not for reconsideration but for a clarification of the guidelines on page 32 of the Court's decision (which
really forms an integral part of the judgment) so as to incorporate therein the Court's own rationale expressed on
pages 15-16 of its decision that the Anti-Subversion Act is not to be construed "as punishing mere membership
devoid of any specific intent to further the unlawful goals of the [Communist] Party" since section 4 thereof
"requires that membership, to be unlawful, must be shown to have been acquired "knowingly, willfully and by overt
acts." The ingredient of specific intent to pursue the unlawful goals of the Party must be shown by "overt acts." This
constitutes an element of "membership" distinct from the ingredient of guilty knowledge. The former requires proof
of direct participation in the organization's unlawful activities while the latter requires proof of mere adherence to the
organization's illegal objectives."1

1. The writer concurred with the Court's decision of December 27, 1972 on the basis of its ratio decidendi rejecting
the principal challenge against the validity of the Anti- Subversion Act on the grounds of its amounting to a bill of
attainder proscribed by Article III, section 1 (11) of the 1935 Constitution.2

The decision thus defined and stressed that "a bill of attainder is a legislative act which inflicts punishment without
trial. Its essence is the substitution of a legislative for a judicial determination of guilt. The constitutional ban against
bills of attainder serves to implement the principle of separation of powers by confining legislatures to rule-making
and thereby forestalling legislative usurpation of the judicial function. History in perspective, bills of attainder were
employed to suppress unpopular causes and political minorities, and it is against this evil that the constitutional
prohibition is directed. The singling out of a definite class, the imposition of the burden on it, and a legislative intent,
suffice to stigmatize a statute as a bill of attainder."3

The decision then summarized the reasons and considerations which impelled respondent court to declare invalid
the Anti-Subversion Act as a bill of attainder as follows: "(I)n the case at bar, the Anti-Subversion Act was
condemned by the court a quo as a bill of attainder because it "tars and feathers" the Communist Party of the
Philippines as a "continuing menace to the freedom and security of the country; its existence, a 'clear, present and
grave danger to the security of the Philippines.' " By means of the Act, the trial court said, Congress usurped "the
powers of the judge," and assumed 'judicial magistracy by pronouncing the guilt of the CPP without any of the forms
or safeguards of judicial trial.' Finally, according to the trial court, 'if the only issue [to be determined] is whether or
not the accused is a knowing and voluntary member, the law is still a bill of attainder because it has expressly
created a presumption of organization guilt which the accused can never hope to overthrow.' "4
The decision rejected respondent court's ratiocination on the following principal grounds:

1. When the Act is viewed in its actual operation, it will be seen that it does not specify the
Communist Party of the Philippines or the members thereof for the purpose of punishment.
What it does is simply to declare the Party to be an organized conspiracy for the overthrow of
the Government for the purposes of the prohibition, stated in section 4, against membership
in the outlawed organization. The term "Communist Party of the Philippines" is used solely
for definitional purposes. In fact the Act applies not only to the Communist Party of the
Philippines but also to "any other organization having the same purpose and their
successors." Its focus is not on individuals but on conduct.5

xxx xxx xxx

Indeed, were the Anti-Subversion Act a bill of attainder, it would be totally unnecessary to
charge Communists in court, as the law alone, without more, would suffice to secure their
punishment. But the undeniable fact is that their guilt still has to be judicially established. The
Government has yet to prove at the trial that the accused joined the Party knowingly,
willfully and by overt acts, and that they joined the Party, knowing its subversive
character and with specific intent to further its basic objectives, i.e., to overthrow the existing
Government by force, deceit, and other illegal means and place the country under the control
and domination of a foreign power.

As to the claim that under the statute organizational guilt is nonetheless imputed despite the
requirement of proof of knowing membership in the Party, suffice it to say that is precisely
the nature of conspiracy, which has been referred to as a "dragnet device" whereby all who
participate in the criminal covenant are liable. The contention would be correct if the statute
were construed as punishing mere membership devoid of any specific
intent to further the unlawful goals of the Party. But the statute specifically requires that
membership must be knowing6 or active, with specific intent to further the illegal objectives of
the Party. That is what section 4 means when it requires that membership, to be unlawful,
must be shown to have been acquired "knowingly, willfully and by overt
acts." The ingredient of specific intent to pursue the unlawful goals of the Party must
be shown by "overt acts." This constitutes an element of "membership" distinct from the
ingredient of guilty knowledge. The former requires proof of direct participation in the
organization's unlawful activities, while the latter requires proof of mere adherence to the
organization's illegal objectives.7

Respondent Tayag's motion should accordingly be duly granted as a necessary and logical consequence when it
prays for the clarification and spelling out of the elements of the crime of joining the Communist Party of the
Philippines or any other subversive association (as defined in the Act) "knowingly, willfully and by overt acts" by
adding after said phrase the following clarificatory or supplemental phrase:

that is, knowing its subversive character and with specific intent to further its basic
(subversive) objective by proof of direct participation in the organization's unlawful activities.

It will be readily noted that the proposed additional phrase simply projects the very thrust of the Court's decision that
"(T)he ingredient of specific intent to pursue the unlawful goals of the Party must be shown by "overt acts" " which is
"an element of "membership" distinct from the ingredient of guilty knowledge" and "requires proof of direct
participation in the organization's unlawful activities."8

The Court's conclusion and guidelines on page 32 of the decision as thus amended and supplemented, would read
as follows:

In conclusion, even as we uphold the validity of the Anti-Subversion Act, we cannot

overemphasize the need for prudence and circumspection its enforcement, operating as it
does in the sensitive area of freedom of expression and belief. Accordingly, we set the
following basic guidelines to be observed in any prosecution under the Act. The Government,
in addition to proving such circumstances as may affect liability, must establish the following
 elements of the crime of joining the Communist Party of the Philippines or any other
subversive association:

(1) In the case of subversive organizations other than the Communist Party of the
Philippines, (a) that the purpose of the organization is to overthrow the present Government
of the Philippines and to establish in this country a totalitarian regime under the domination
of a foreign power; (b) that the accused joined such organization; and (c) that he did so
knowingly, willfully and by overt acts, that is he did so knowingly, willfully and by over
acts, that is, knowing its subversive character and with specific intent to further its basic
(subversive) objective by proof of direct participation in the organization's unlawful
activities; and

(2) In the case of the Communist Party of the Philippines, (a) that the CPP continues to
pursue the objectives which led Congress in 1957 to declare it to be an organized conspiracy
for the overthrow of the Government by illegal means for the purpose of placing the country
under the control of a foreign power; (b) that the accused joined the CPP; and (c) that he did
so willfully, knowingly and by overt acts, that is, knowing its subversive character and with
specific intent to further its basic (subversive) objective by proof of direct participation in the
organization's unlawful activities.

(added phrase italicized)

I am constrained, therefore, to dissent from the resolution when it declines to incorporate into its guidelines, as
above-proposed to be amended, the very rationale of the decision in saving the Act from the fatal stigma of a bill of
attainder that it is not to be construed "as punishing mere membership devoid of any specific intent to further the
unlawful goals of the Party" but that "the statute specifically requires that membership, to be unlawful, must be
shown to have been acquired 'knowingly, willfully and by overt
acts' " — which distinctive element "requires proof of direct participation in the organization's unlawful activities."

2. Stated in another way, Section 4 of the Anti-Subversion Act is the key section of the Act which together with
section 2 defines the elements of the offense made a crime thereunder as follows:

SEC. 2. The Congress hereby declares the Communist Party of the Philippines to be an
organized conspiracy to overthrow the Government of the Republic of the Philippines for the
purpose of establishing in the Philippines a totalitarian regime and place the Government
under the control and domination of an alien power. The said party and any other
organization having the same purpose and their successors are hereby declared illegal and
outlawed.

xxx xxx xxx

SEC. 4. After the approval of this Act, whoever knowingly, willfully and by overt acts affiliates
himself with, becomes or remains a member of the Communist Party of the Philippines
and/or its successor or of any subversive association as defined in Section 2 hereof shall be
punished by the penalty of arresto mayor and shall be disqualified permanently from holding
any public office, appointive and elective, and from exercising the right to vote; in case of a
second conviction, the principal penalty shall be prision correccional, and in all subsequent
convictions the penalty of prision mayor shall be imposed; and any lien convicted under this
Act shall be deported immediately after he shall have served the sentence imposed upon
him:

Provided, That if such member is an officer or a ranking leader of the Communist Party of the
Philippines or of any subversive association as defined in Section 2 hereof, or if such
member takes up arms against the Government, he shall be punished by prision mayor to
death with all the accessory penalties provided therefor in the Revised Penal Code:

And provided, finally, That one who conspires with any other person to overthrow the
Government of the Republic of the Philippines or the government of any of its political
 subdivisions by force, violence, deceit, subversion or other illegal means, for the purpose of
placing such Government or political subdivision under the control and domination of any
alien power, shall be punished by prision correccional to prision mayor with all the accessory
penalties provided therefor in the same Code."9

Thus, whereas apparently section 4 of the Act would make criminal mere membership in the Communist Party of the
Philippines regardless of the lack of criminal intent and activity on the part of an accused member, the Court in its
decision rejected such a concept of guilt by association and quite emphatically stressed that

"Their [accused members'] guilt still has to be judicially established.

"The Government has yet to prove at the trial that the accused joined the Party knowingly, willfully and by overt acts,

"and that they joined the Party knowing its subversive character and with specific intent to further its basic
[subversive] objective, i.e. to overthrow the existing Government by force, deceit and other illegal means and place
the country under the control and domination of foreign power.

"The statute is [not to be] construed as punishing mere membership devoid of any specific intent to further the
unlawful goals of the Party.

"But the statute specifically requires that membership must be knowing or active, with specific intent to further the
illegal objectives of the Party.

"That is what section 4 means when it requires that membership to be unlawful, must be shown to have been
acquired' "knowingly, willfully and by overt acts."

"The ingredient of specific intent to pursue the unlawful goals of the Party must be shown by overt acts — [which]
requires proof of direct participation in the organization's unlawful activities." 10

In addition, the Court's decision specified in its guideline 11 that notwithstanding the outlawing of the Communist
Party of the Philippines in section 2 of the Act, the prosecution must establish "that the CCP continues to pursue the
objectives which led Congress in 1957 to declare it to be an organized conspiracy for the overthrow of the
Government by illegal means for the purpose of placing the country under the control of a foreign power" and
required that the same illegal objectives be established in the case of subversive organizations other than the
Communist Party of the Philippines.

The Court's decision thus hewed in effect to the narrow path of the bare majority decision of the U.S. Supreme
Court in Communist Party vs. Subversive Activities Control Board 12 of not outlawing or inflicting legislative
punishment on membership in the Communist Party as such but requiring registration for certain prescribed
activities subject to judicial review wherein "present activity constitutes an operative element to which the statute
attaches legal consequences", as follows:

The Act is not a bill of attainder. It attaches not to specified organizations but to described
activities in which an organization may or may not engage. The singling out of an individual
for legislatively prescribed punishment constitutes an attainder whether the individual is
called by name or described in terms of conduct which, because it is past conduct, operates
only as a designation of particular persons... The Subversive Activities Control Act is not of
that kind. It requires the registration only of organizations which, after the date of the Act,
are found to be under the direction, domination, or control of certain foreign powers and to
operate primarily to advance certain objectives. This finding must be made after full
administrative hearing, subject to judicial review which opens the record for the reviewing
court's determination whether the administrative findings as to fact are supported by the
preponderance of the evidence. Present activity constitutes an operative element to which
the statute attaches legal consequences, not merely a point of reference for the
ascertainment of particular persons ineluctably designated by the legislature. 13
The Court's decision thus adopted the prevailing view of the U.S. Supreme Court that to escape the fatal stigma of a
bill of attainder and vagueness amounting to denial of due process of law, membership in the Communist Party or
other subversive organization (the unlawfulness of whose objectives must be judicially established by the
prosecution at the trial) must be "active" and "not merely a nominal, passive, inactive or purely technical
[membership]." 14

The Court thus rejected in the writer's view after emphasizing "the need for prudence and circumspection in [the
Act's] enforcement, operating as it does in the sensitive area of freedom of expression and belief" the oppressive
concept of a blanket pronouncement of guilt by mere association or membership, having in mind what was aptly
said in one case that "Those who join an organization but do not share its unlawful purposes and who do not
participate in its unlawful activities surely pose no threat, either as citizens or as public employees. Laws such as
this which are not restricted in scope to those who join with the "specific intent" to further illegal action impose, in
effect, a conclusive presumption that the member shares the unlawful aims of the organization ... It rests on the
doctrine of 'guilt by association' which has no place here ... Such a law cannot stand." 15

By granting respondent Tayag's motion for clarification and spelling out in the guidelines on page 32 of the decision
the Court's rationale as discussed hereinabove that the prosecution bears the burden of establishing the "elements
of the crime of joining the Communist Party of the Philippines or any other subversive association" by proving that:

a) their purpose is or continues to be the overthrow of the Government by illegal means for the purpose of placing
the country under the control of a foreign power;

b) the accused joined the Party or subversive association; and

c) he so joined the Party or subversive association "knowingly, willfully and by overt acts," as required by section 4
of the Act, i.e. knowing its subversive character, willfully with specific intent to further its subversive objectives
and by overt acts as an active member by direct participation in the organization's unlawful activities, the Court
would be but reiterating and clarifying its guidelines geared against the Act being stigmatized as a bill of attainder
that suffers besides from the fatal defects of vagueness. 16

3. I dissent further from the majority resolution's pronouncement that the Anti-Subversive Act is a "conspiracy
statute. The gist is the agreement itself rather than action taken pursuant to it" 17 which leads it to the conclusion that
"non-criminal acts" such as "signing membership papers, paying dues, attending meetings and the like, which
although in themselves may not be illegal, are nevertheless acts in pursuance of the objectives in the conspiracy" —
and that proof of such non-criminal acts may be given to satisfy the overt act requirement of the Act. 18

This would constrict now the text and significance of the guidelines given on page 32 of the decision. Furthermore, it
reads the "conspiracy statute" into the membership provision of section 4 of the Act when the two are completely
separate and distinct.

As may be seen from the text of section 4 of the Act, supra, as construed in the Court's decision (at pages 15-16)
the first part thereof penalizes "knowing or active membership with specific intent to further the illegal objectives of
the Party [or other subversive organization]" after the approval of the Act on June 20, 1957, 19 "knowingly, willfully
and by overt acts." The decision specifically noted that "(T)he ingredient of specific intent to pursue the unlawful
goals of the Party ... requires proof of direct participation in the organization's unlawful activities." The Act punishes
a first conviction with arresto mayor and permanent disqualification from public office and suffrage, a second
conviction with prision correccional and all subsequent convictions with prision mayor (which is the same penalty
imposed for rebellion (under Article 135 of the Revised Penal Code).

Such construction of the proscribed membership is but consistent with the pronouncement in the Court's resolution
(at page 5) that "the requirement of proof of specific intent precisely limits the operation of the statute only to illegal
conduct" and to "direct participation by the defendant in the illegal activities of the [subversive] association" and the
holding in Scales vs. United States 20 approvingly quoted therein that "the clause does not make criminal all
association with an organization which has been shown to engage in illegal advocacy. There must be clear proofthat
a defendant 'specifically intend/s/ to accomplish [the aims of the organization] by resort to violence.' Noto v. United
States [367 U.S. at 299]. Thus the member for whom the organization is a vehicle for the advancement of legitimate
aims and policies does not fall within the ban of the statute; he lacks the requisite specific intent "to bring about the
overthrow of the government as speedily as circumstances would permit". Such a person may be foolish, deluded or
perhaps merely optimistic, but he is not by this statute made a criminal."

The first proviso of the Act however imposes the principal penalty of prision mayor to death upon a "member [who]
is an officer or ranking leader of the Communist Party of the Philippines or of any subversive association or if
such member takes up arms against the Government." This clearly draws the line that the unlawful activities which
an ordinary member must be shown to have participated in to evidence specific intent to further the unlawful goals of
the subversive organization in proof of his active (as against mere nominal, inactive or passive) membership, would
be those which falls short of taking up arms against the Government.

The second proviso of the Act constitutes the "conspiracy statute" and furnishes the "dragnet device." But it will be
noted from the very text that the proscribed criminal conspiracy does not refer to membership. Rather it provides
that one (be he a member or not of the Party or of any other subversive organization) who conspires with any other
person to overthrow the Government or any of its political subdivisions by force, violence, deceit, subversion or
other illegal means for the purpose of placing such Government or political subdivisions under the control and
domination of any alien power shall be meted the penalty of prision correccional to prision mayor.

4. The distinction is best illustrated by the case of Carino vs. People 21 where this Court set aside the petitioner-
accused's conviction by the Court of Appeals and by the court of first instance as an accomplish in the crime of
rebellion with murders, arsons, robberies and kidnappings simply because he furnished cigarettes and food supplies
to a famous Huk and performed certain other acts, when it was not shown that he was a member of the Hukbalahap
organization nor could the acts be deemed per se to carry or prove any criminal intent of helping the Huks in
committing the crime of insurrection or rebellion nor was he shown to have been engaged in any conspiracy or
proposal to commit rebellion. In acquitting the accused, the late Justice Alejo Labrador speaking for a unanimous
Court held that:

In the case at bar the appellant did not take up arms against the Government. Neither was
he a member of the Hukbalahap organization. The Court of Appeals also found that he did
not openly take part in the commission of the crime above defined by any other act without
which said crime would not have been committed.

xxx xxx xxx

We cannot agree to the above conclusion of the Court of Appeals that the above-mentioned
acts of appellant constitute acts of cooperation in the execution of the act of overthrowing the
government. If appellant's acts may be considered an indirect help or aid in the rebellion,
which we positively doubt, the same cannot constitute previous or simultaneous acts of
uprising or rebellion. In the crime of treason any act of giving comfort or moral aid may be
criminal, but such is not the case with rebellion or insurrection where the Code expressly
declares that there must be a public uprising and the taking up of arms in rebellion or
insurrection. The act of sending or furnishing cigarettes and food supplies to a famous Huk
does not prove intention to help him in committing rebellion or insurrection. Neither is the act
of having $6,000 changed to Philippine money or in helping Huks to open accounts, by
themselves show an intent or desire to participate or help in an uprising or rebellion.
Appellant's work was as a public relations officer of the bank of which he was an employee,
and the work above indicated performed by him was a part of his functions as an employee
of the bank. These acts by themselves do not and cannot carry or prove any criminal intent
of helping the Huks in committing the crime of insurrection or rebellion. The law is to the
effect that good faith is to be presumed. No presumption of the existence of a criminal
intent can arise from the above acts which are in themselves legitimate and legal. Said acts
are by law presumed to be innocent acts while the opposite has not been proved.

But granting, for the sake of argument, that appellant had the criminal intent of aiding the
communists in their unlawful designs to overthrow the Government, the assistance thus
extended by him may not be considered efficacious enough to help in the successful
prosecution of the crime of insurrection or rebellion so as to make him an accomplice therein.
(People vs. Tamayo, supra.) We, therefore, find that the supposed acts found by the Court of
Appeals to have been committed by the appellant do not necessarily and legitimately lead to
 the conclusion that he performed said acts precisely with the criminal intent of helping in the
execution or the carrying out of the rebellion or insurrection.

For the foregoing considerations, we declare that the guilt of appellant as an accomplice in
the crime of rebellion or insurrection as charged in the information has not been proved
beyond reasonable doubt, his supposed acts not having been shown to be acts of direct
cooperation in the execution of the crime, nor have they been induced by a criminal intent,
nor were they shown to be sufficiently efficacious to make appellant guilty as accomplice in
the crime charged.

5. Finally, it is submitted that the original guidelines of the decision (at page 32) if clarified as prayed for by
respondent Tayag rather than constricted by the present resolution would serve but to reiterate the rationale of the
decision of December 27, 1972 and would be in consonance with the underlying doctrine of Cariño vs. People,
supra, against presumption of the existence of criminal intent. It would furthermore give substance and meaning to
the safeguards carefully provided against unjust accusation and harassment in the Act, viz, no prosecution under
the Act unless there has first been a proper preliminary investigation with notice, whenever it is possible to give the
same to the party concerned, who shall have the right to be represented by counsel, to testify, to have compulsory
process for obtaining witnesses in his favor, and to cross-examine witnesses against him," with such investigation to
be conducted by the proper court of first instance where the offense is defined and penalized by prision mayor to
death; 22 the imposition of prision correccional against any person who knowingly furnishes false evidence in any
prosecution under the Act; 23 the prohibition of any conviction for an offense penalized with prision mayor to death
under the Act except" on the testimony of at least two witnesses to the same overt act or on confession of the
accused in open court;" 24 and the injunction that "Nothing in this Act shall be interpreted as a restriction to freedom
of thought, of assembly and of association for purposes not contrary to law as guaranteed by the Constitution." 25

CHAPTER X
THE POWER OF EMINENT DOMAIN
Section 9. Private property shall not be taken for public use without just compensation.

1. THE INHERENT POWER OF EMINENT DOMAIN

The power of eminent domain is the inherent right of the State to condemn or to take private property for public
use upon payment of just compensation.
GREEN NOTES:
May a Barangay validly exercise the power of eminent domain?
Yes, subject to the approval by the President.( Barangay Matictic vs. Elbinias, 148 SCRA 83)

BARANGAY MATICTIC, Municipality of Norzagaray, Province of Bulacan, petitioner,

vs.
HONORABLE J. M. ELBINIAS as District Judge, CFI of Bulacan, Branch V and SPOUSES JOSE
SERAPIO and GREGORIA PACIDA et al., respondents.

Danilo G. Evangelista for petitioner.

Nicomedes M. Mojado for respondent spouses Jose Serapio and GregoriaPacida.

Jesus E. Mendoza for respondent Jose S. Merced.

ALAMPAY, J.:
Subject of the petition is the Order dated May 12, 1978 of the then Court of First Instance of Bulacan,
Branch V, dismissing without prejudice, Civil Case No. SM-234, entitled "Municipality of Norzagaray
vs. Jose Serapio, et al." Civil Case No. SM-234 is an expropriation proceeding filed by the
Municipality of Norzagaray which the public respondent judge dismissed on the ground that at the
time the original complaint was filed, the plaintiff municipality had not yet obtained the requisite
authority from the Department Head or Office of the President, as required in Section 2245 of the
Revised Administrative Code. Respondent Judge held that —

... since the filing of the amended complaint to cure this fatal defect, by submitting the
requisite authority from the Office of the President as required by Section 2245 of the
Revised Administrative Code, did not vest jurisdiction with this Court which it never had
acquired even from the very filing of the original complaint — ... orders this case
dismissed without prejudice. (Rollo, p. 19).

For municipalities, the municipal council shall exercise the right of eminent domain with the approval
of the President [Sec. 2245 (h), Revised Administrative Code].

The factual and procedural antecedents which led to the filing of this petition are as follows:

1. On December 7, 1968, petitioner (then called Barrio Matictic) filed with the then Court of First
Instance of Bulacan, Branch V, an action for injunction, docketed as Civil Case No. SM-210,
entitled Barrio Matictic vs. ZosimoSerapio, et al., praying therein that the defendants (who are the
private respondents in the instant case) be enjoined from placing obstructions and closing the barrio
road and to allow plaintiff to remove the obstructions and repair the barrio road (the Poblacion-
Tomana-Canyakan barrio road) so as "to enable the people and motorized vehicles the free use
thereof and convenient passage through it. ";

2. On January 28, 1969, Barrio Matictic filed a motion to dismiss the case on the ground that an
expropriation proceeding, not an injunction, is the better remedy and on the same date, the Court,
Judge Ambrosio M. Geraldez then presiding, issued the corresponding order dismissing the case;

3. However, and also on January 28, 1969, a complaint for Eminent Domain was filed by the
Municipality of Norzagaray with the same court, docketed as Civil No. SM-234, CFI, Branch 1,
Bulacan, and entitled "Municipality of Norzagaray vs. Jose Serapio, et al." Said case involves the
same property of the aforestated defendants that was the subject of Civil Case No. SM-210
hereinabove referred to;

4. The defendants in Civil Case No. SM-234, Jose Serapio and GregoriaPacida, on February 5, 1979,
filed a Motion to Dismiss alleging that the Court of First Instance of Bulacan has no jurisdiction over
the subject of the action; that the complaint states no cause of action; and that plaintiff (municipality of
Norzagaray has no capacity to sue;)

5. On February 11, 1969, upon motion of plaintiff, the Court issued an order allowing plaintiff to take
possession of the property subject of the expropriation proceedings upon deposit of the sum of
P2,682.00;

6. On February 14, 1969, defendants FelicitasSerapio-Merced and Eustaquio Merced filed through
counsel a Motion to Dismiss the expropriation case on several grounds. Their principal contention is
that the plaintiff municipality, in the absence of an approval from the Office of the President, may not
properly file the subject expropriation case;
7. On March 14, 1969, plaintiff filed an amended complaint alleging therein that it had obtained
authority from the Office of the President to institute expropriation proceedings. Private respondents,
Jose Serapio and GregoriaPacida, in turn, filed an Amended Motion to Dismiss, dated March 19,
1969, reiterating therein plaintiff's lack of cause of action and that a subsequent authorization, even if
obtained, would not cure the jurisdictional defect attaching to the plaintiff's complaint when the subject
case was initially filed;

8. On August 18 and 19, 1969, the Court issued orders requiring plaintiff municipality to submit plans
of the land to be expropriated, duly approved by the Bureau of Lands;

9. On January 22, 1970, for failure of the plaintiff to comply with the orders of August 18 and 19,
1969, the Court issued an order dismissing said Civil Case No. SM-234 for failure of plaintiff to take
the necessary steps to prosecute its case;

10. Said order of dismissal, however, upon appeal by the municipality, was reversed by the Court of
Appeals in its decision dated January 5, 1973. The Court of First Instance of Bulacan was ordered to
proceed with the expropriation case pursuant to Sec. 3, Rule 67 of the Rules of Court;

11. The case went back to the court a quo, with Judge J.M. Elbinias presiding (now Associate Justice
of the Court of Appeals). But at this point of time the municipal mayor of Norzagaray displayed
reluctance to prosecute the said case for eminent domain. In fact, he requested the Municipal Council
to withdraw the expropriation proceedings. The Municipal Council, however, refused to accede to the
wishes of the mayor; Rollo pp. 98-99)

12. It appears then that a motion to dismiss dated April 3, 1978 was once more filed by the
defendants (private respondents herein) who reiterated their challenge to the jurisdiction of the said
trial court based on their argument that the initial lack of jurisdiction of a court cannot be cured by the
filing of an amended complaint;

13. Petitioner herein, Barangay Matictic, chagrined and confronted by the attitude of its mayor, and on
its averment that the result of the expropriation case will greatly affect the social and economic
development of the area in and around Barangay Matictic, filed on January 26, 1978 a Motion for
Intervention in Civil Case No. SM-234. Respondent Judge issued an order taking notice of the Motion
for Intervention and denied the motion to dismiss filed by the defendants until the motion for
intervention shall have been considered by the trial court;

14. On May 12, 1978, respondent Judge, without taking any further action on petitioner's motion for
intervention, issued an order dismissing, but without prejudice, the expropriation case — Civil Case
No. SM-234, on the singular reason that at the time the expropriation case was initially filed there was
no showing of any prior Presidential approval-a requisite that should have been first complied with,
pursuant to Section 2245 of the Revised Administrative Code. A motion for reconsideration of this
decision was filed by plaintiff municipality. It insisted that presidential approval was, after all, secured
and that this fact was alleged in the plaintiff's amended complaint. Said motion for reconsideration
was, however, denied in the order of the court below, dated January 15, 1978. This order closed the
case for the plaintiff municipality of Norzagaray inasmuch as it no longer appealed said order of
dismissal.

Petitioner, Barangay Matictic, in this certiorari and mandamus case before us, simply complains that
in "... these orders, dated May 12, 1978 and June 15, 1978 (Annexes CC and DD) no resolution or
ruling was made by respondent Judge with respect to its motion for intervention which was mentioned
in the order dated January 26, 1978 (Annex AA) leaving petitioner (Barangay) no personality to take
part in the case (Rollo, p. 9). Consequently, it filed the instant petition for certiorari and mandamus to
compel respondent Judge to allow and admit its complaint in intervention.

This petition was given due course, under the resolution of this Court, dated January 15, 1979 (Rollo,
p. 153) and on February 2, 1979, a temporary restraining order was issued enjoining respondents
from exacting, charging and collecting toll fees for the use of the feeder road, subject of the
expropriation proceedings until further orders from this Court (Rollo, p. 158).

The petition of Barangay Matictic is manifestly untenable.

Regarding the annulment and setting aside of the May 12, 1978 and June 15, 1979 orders of the
public respondent, dismissing the expropriation proceedings, the proper party to appeal the same or
seek a review of such dismissal, would be the Municipality of Norzagaray. Petitioner Barrio Matictic,
which is a different political entity, and although a part and parcel of the aforesaid municipality, has no
legal personality to question the aforestated orders because by itself, it may not continue the
expropriation case. It must be considered that the subject orders of the court a quo were not
appealed by the Municipality of Norzagaray. The dismissal of the expropriation case, insofar as said
municipality is concerned, became final. The expropriation case ceased to exist and there is
consequently no more proceeding wherein Barangay Matictic may possibly intervene.

An intervention has been regarded as merely "collateral or accessory or ancillary to the principal
action and not an independent proceeding; an interlocutory proceeding dependent on and subsidiary
to, the case between the original parties." (Francisco, Rules of Court, Vol. I, p. 721). With the final
dismissal of the original action, the complaint in intervention can no longer be acted upon. In the case
of Clareza vs. Rosales, 2 SCRA 455, 457-458, it was stated that:

That right of the intervenor should merely be in aid of the right of the original party, like
the plaintiffs in this case. As this right of the plaintiffs had ceased to exist, there is
nothing to aid or fight for. So the right of intervention has ceased to exist.

Consequently, it will be illogical and of no useful purpose to grant or even consider further herein
petitioner's prayer for the issuance of a writ of mandamus to compel the lower court to allow and
admit the petitioner's complaint in intervention. The dismissal of the expropriation case has no less
the inherent effect of also dismissing the motion for intervention which is but the unavoidable
consequence.

We are constrained to reject petitioner's averment that public respondent Judge "acted with grave
and manifest abuse of discretion." Firstly, nothing is lost to the petitioner. If at all petitioner can
rightfully establish that it is allowed by law to institute a separate and independent action of its own,
then there would be no necessity for it to intervene in the case initiated by the Municipality of
Norzagaray which is now apparently no longer interested in continuing the expropriation proceedings.
The dismissal of the expropriation case was without prejudice. The municipality of Norzagaray,
Bulacan can revive its action. There is no need for the proposed intervention of Barrio Matictic. What
it may do is to urge the municipality to file its case anew. If the Barangay has obtained authority for
itself to pursue the action of eminent domain, then the more reason there is to refuse its intervention.

Approximately, if the rights of the party seeking to intervene not be prejudiced by any
judgment in the case at bar and that it may be fully protected in a separate proceeding
in then the exercise of judicial discretion in court , denying a motion for intervention is
deemed correctly made. (See Pflieder vs. de Britanica, L-19077, October 20,1964, cited
in 51 SCRA 368).
Considering the foregoing discussion indicating the lack of merit of the petition for certiorari, it will
follow that the writ of mandamus prayed for by petitioner cannot be granted for lack of legal basis.

WHEREFORE, the instant petition is hereby DENIED for lack of merit. The temporary restraining
order earlier issued in this case by the Court, dated February 2, 1979, is hereby lifted and dissolved.

No costs.

SO ORDERED.

DIGEST:
FACTS

On December 7, 1968, petitioner (then called Barrio Matictic) filed with the then Court of First
Instance of Bulacan, Branch V, an action for injunction entitled Barrio Matictic vs. ZosimoSerapio, et
al., praying that the defendants (who are the private respondents in the instant case) be enjoined
from placing obstructions and closing the barrio road and to allow plaintiff to remove the obstructions
and repair the barrio road (the Poblacion-Tomana-Canyakan barrio road) so as "to enable the people
and motorized vehicles the free use thereof and convenient passage through it. "; Motion to dismiss
the case was filed by BrgyMatictic on the ground that an injunction is the better remedy for this case
and it was granted. However, a complaint for EMINENT DOMAIN was filed by the Municipality of
Norzagaray.

Several case dismissals were filed. The Court issued orders to Norzagaray to submit plans of
the land to be expropriated, which they failed to comply. Leading to the termination of the case. The
dismissal was appealed by Norzagaray and the decision was reversed. The case went back to the
court a quo, however this time the municipality displayed reluctance to prosecute the case on eminent
domain. Petitioner herein, Barangay Matictic, chagrined and confronted by the attitude of its mayor,
and on its averment that the result of the expropriation case will greatly affect the social and
economic development of the area in and around Barangay Matictic,. This was dismissed by the
judge. On the singular reason that at the time the expropriation case was initially filed there was no
showing of any prior Presidential approval-a requisite that should have been first complied with,
pursuant to Section 2245 of the Revised Administrative Code. A motion for reconsideration of this
decision was filed by plaintiff municipality. It insisted that presidential approval was, after all, secured
and that this fact was alleged in the plaintiff's amended complaint. Said motion for reconsideration
was, however, denied in the order of the court below, dated January 15, 1978. This order closed the
case for the plaintiff municipality of Norzagaray inasmuch as it no longer appealed said order of
dismissal.

RULING

The Court rejected petitioner's averment that public respondent Judge "acted with grave and manifest
abuse of discretion." Firstly, nothing is lost to the petitioner. If at all petitioner can rightfully establish
that it is allowed by law to institute a separate and independent action of its own, then there would be
no necessity for it to intervene in the case initiated by the Municipality of Norzagaray which is now
apparently no longer interested in continuing the expropriation proceedings. The dismissal of the
expropriation case was without prejudice. The municipality of Norzagaray, Bulacan can revive its
action. There is no need for the proposed intervention of Barrio Matictic. What it may do is to urge the
municipality to file its case anew. If the Barangay has obtained authority for itself to pursue the action
of eminent domain, then the more reason there is to refuse its intervention.
 Approximately, if the rights of the party seeking to intervene not be prejudiced by any
judgment in the case at bar and that it may be fully protected in a separate proceeding
in then the exercise of judicial discretion in court , denying a motion for intervention is
deemed correctly made. (See Pflieder vs. de Britanica, L-19077, October 20,1964, cited
in 51 SCRA 368).

Considering the foregoing discussion indicating the lack of merit of the petition for certiorari, it will
follow that the writ of mandamus prayed for by petitioner cannot be granted for lack of legal basis.

WHEREFORE, the instant petition is hereby DENIED for lack of merit

3. PROCEDURE FOR THE EXERCISE OF SAID POWER AND WHEN MAY A WRIT
OF POSESSION BE ISSUED IN FAVOR OF THE GOVERNMENT

105. What are the requisites before an expropriator may validly obtain a writ of possession to take
over possession of the expropriated property?
It depends:
1. If the expropriation is for a ―National government projects‖ or ―national infrastructure projects‖, like
those covered by the ―Build-Operate-Transfer‖, RA 8974 shall be followed. This means that there must
be a [a] Complaint for expropriation which is sufficient in form and in substance; and [2] the 100% of the
market value of the property sought to be expropriated must first be paid to the owner of the property.
(REPUBLIC OF THE PHILIPPINES VS. JUDGE GINGOYON, 478 SCRA 474)
2. In ordinary expropriation cases, the rule is that in the case of BIGLANG-AWA VS. JUDGE BACALLA,
354 SCRA 562. It provides:
3.
PURSUANT TO SECTION 2, RULE 67 OF THE 1997 RULES OF CIVIL PROCEDURE AND THE
DOCTRINE LAID DOWN IN THE ROBERN DEVELOPMENT CASE, THE ONLY REQUISITES FOR THE
IMMEDIATE ENTRY BY THE GOVERNMENT IN EXPROPRIATION CASES ARE:
the filing of a complaint for expropriation sufficient in form and substance; and
the making of a deposit equivalent to the ASSESSED VALUE OF THE PROPERTY SUBJECT
TO EXPROPRIATION.
4. If the expropriation is being done by a Local Government Unit, the Supreme Court decision in the case
of THE CITY OF ILOILO VS. JUDGE LEGASPI, RTC 22, ILOILO CITY, 444 SCRA 269, shall be
complied with:
1. the complaint for expropriation filed in court is sufficient in form and
substance; and
2. the expropriator must deposit the amount equivalent to 15% of the fair
market value of the property to be expropriated based on its current tax
declaration.

1. SALVADOR BIGLANG-AWA, REMEDIOS BIGLANG-AWA, petitioners, vs. HON. JUDGE

MARCIANO I. BACALLA in his capacity as Presiding Judge of Branch 216 – Regional Trial
Court of Quezon City, REPUBLIC OF THE PHILIPPINES (DEPARTMENT OF PUBLIC WORKS
AND HIGHWAYS), respondents.

DECISION
GONZAGA-REYES, J.:

Before us is a petition for certiorari under Rule 65 of the Rules of Court, with a prayer for the
issuance of a writ of preliminary injunction, seeking to annul and set aside the Orders of the
respondent Court dated August 5, 1998, ordering the issuance of Writs of Possession of the
properties of herein petitioners, and the Order dated August 12, 1998, issuing the corresponding
Writs of Possession, as well as the Order dated July 7, 1999, denying the petitioners‘ Motion for
Reconsideration of the August 5, 1998 Orders. The petition further prays for the dismissal of Civil
Cases Nos. Q-97-31368 and Q-97-31369 for being premature due to failure to comply with the
substantive requirements of Executive Order No. 1035 (1985).[1]
The antecedent facts are as follows:
Petitioners RemediosBiglang-awa and Salvador Biglang-awa are the registered owners of certain
parcels of land situated in Talipapa, Novaliches, Quezon City. The parcel of land owned by petitioner
RemediosBiglang-awa is covered by T.C.T. No. RT-101389 (362966) with an area of 769 sq. m.,
while that owned by Salvador Biglang-awa is covered by T.C.T. No. RT-101390 (19352) with an area
of 2,151 sq. m. The government needed to expropriate 558 sq. m. of the aforesaid property of
petitioner RemediosBiglang-awa, and 881 sq. m. of that belonging to petitioner Salvador Biglang-awa
for the construction of the Mindanao Avenue Extension, Stages II-B and II-C..
On August 29, 1996, the petitioner RemediosBiglang-awa received a Notice from the respondent
Republic, through the Department of Public Works and Highways (DPWH) Project Manager Patrick
G. Gatan, requiring her to submit the documents necessary to determine the just compensation for
her property.[2]
On October 15, 1996, Final Notices, signed by Project Director Cresencio M. Rocamora, were
given by the DPWH to the petitioners to submit within five (5) days the pertinent documents,
otherwise, expropriation proceedings would be filed against their properties.[3] As the petitioners failed
to comply with these final notices, the respondent Republic, through the DPWH, filed with the
respondent Regional Trial Court of Quezon City[4] separate cases for expropriation against the
petitioners, docketed as Civil Case Nos. Q-99-31368 and Q-97-31369.
On July 10, 1997, the petitioners received summons from the respondent court, and were ordered
to file their respective Answers to the Complaints for expropriation. The petitioners filed their
Answers on August 11, 1997.
Subsequently, the respondent Republic, through the DPWH, deposited with the Land Bank of the
Philippines the amounts of P3,964,500.00 and P2,511,000.00 for the properties of Salvador and
RemediosBiglang-awa, respectively, based on the appraisal report of the Quezon City Appraisal
Committee.
On April 24, 1998, respondent Republic filed separate Motions for the Issuance of Writs of
Possession of the properties of the petitioners with the respondent court. The court issued Orders
giving the petitioners, through counsel Atty. Jose Felix Lucero, ten (10) days within which to submit
their Opposition to the said motions. The petitioners failed to file their Opposition to the Motion.
On August 5, 1998, the respondent court issued separate Orders[5] granting the motions for the
issuance of writs of possession. Accordingly, the writs of possession were issued by the respondent
court on August 12, 1998.[6]
On September 11, 1998, petitioner RemediosBiglang-awa received a Notice to Vacate her
property. A similar Notice was likewise received by petitioner Salvador Biglang-awa at about the
same time.
 On January 25, 1999, the petitioners filed a joint Manifestation with the respondent court to the
effect that they were retaining the law firm of Gumpal and Valenzuela, in lieu of Atty. Jose Felix
Lucero whose services they had already terminated due to the latter‘s inaction and abandonment of
their cases.
On May 10, 1999, the petitioners, through their new counsel, moved for a reconsideration of the
respondent court‘s Orders dated August 5, 1998, and a recall of the writs of possession issued on
August 12, 1998, mainly on the ground that the respondent Republic failed to comply with the
provisions of E.O. 1035 (1985), relating to the conduct of feasibility studies, information campaign,
detailed engineering/surveys, and negotiation prior to the acquisition of, or entry into, the property
being expropriated.
On July 7, 1999, the respondent court issued an Order denying the petitioners‘ Motion for
Reconsideration, a copy of which was received by the petitioners on July 26, 1999.
Hence, this Petition for Certiorari.
The sole issue in this case is whether or not the respondent court gravely abused its discretion,
amounting to lack or excess of its jurisdiction, when it issued the questioned orders.
We rule in the negative.
The petitioners contend that due process of law in relation to expropriation proceedings mandates
that there be compliance with the provisions of Executive Order No. 1035, particularly Sections 2, 3, 4
and 6, claimed to constitute the substantive requirements of the expropriation law, prior, and as a
condition precedent, to Section 2 of Rule 67 of the 1997 Revised Rules of Civil Procedure. Hence, a
writ of possession pursuant to the above provision of Rule 67 will issue only upon showing that the
said provisions of E.O. 1035 have already been complied with. As the writs of possession in the
instant case were issued by the respondent court without the respondent Republic, through the
DPWH, having furnished the petitioners any feasibility study and ―approved‖ parcellary survey in
connection with the Mindanao Avenue Extension Project,[7] despite formal request by the latter,[8] and
therefore without showing prior compliance with E.O. 1035, the petitioners contend that such
issuance of the writs of possession by the respondent court was made with grave abuse of discretion
amounting to lack or excess of jurisdiction.
We do not agree.
The provisions of law adverted to by petitioners are as follows:

Title A. Activities Preparatory To Acquisition Of Property

Sec. 2. Feasibility Studies. Feasibility studies shall be undertaken for all major projects, and such
studies shall, in addition to the usual technical, economic and operational aspects, include the social,
political, cultural and environmental impact of the project.

Sec. 3. Information Campaign. Every agency, office and instrumentality of the government proposing
to implement a development project which requires the acquisition of private real property or rights
thereon shall first make consultations with the local government officials, including the regional
development councils having jurisdiction over the area where the project will be undertaken to elicit
their support and assistance for the smooth implementation of the project. The implementing
agency/instrumentality concerned with the assistance of the local government officials and
representatives of the Office of Media Affairs shall conduct an extensive public information campaign
among the local inhabitants that will be affected by the project to acquaint them with the objectives
and benefits to be derived from the project and thus avoid any resistance to or objection against the
acquisition of the property for the project.
Sec. 4. Detailed Engineering/Surveys. The implementing government agency/ instrumentality
concerned shall, well in advance of the scheduled construction of the project, undertake detailed
engineering, including parcellary surveys to indicate the location and size of the sites and to
determine ownership of the land to be acquired, including the status of such landownership.

xxx xxx xxx

Title B. Procedure For Acquisition Of Property

Sec. 6. Acquisition Through Negotiated Sale. As an initial step, the government implementing
agency/instrumentality concerned shall negotiate with the owner of the land that is needed for the
project for the purchase of said land, including improvements thereon. In the determination of the
purchase price to be paid, the Ministry of Finance and the Provincial/City/Municipal Assessors shall
extend full assistance and coordinate with the personnel of the government implementing agency
concerned in the valuation of lands and improvements thereon taking into consideration the current
and fair market value declared by the owner or administrator of the land, or such current market value
as determined by the assessor, whichever is lower, prior to the negotiation. [Executive Order No.
1035 (1985)]

Nothing in the foregoing provisions supports the contention of the petitioners. A careful perusal of
the provisions cited do not yield the conclusion that the conduct of feasibility studies, information
campaign and detailed engineering/surveys are conditions precedent to the issuance of a writ of
possession against the property being expropriated. Although compliance with these activities
should indeed be made prior to the decision to expropriate private property, the requirements for
issuance of a writ of possession once the expropriation case is filed, are expressly and specifically
governed by Section 2 of Rule 67 of the 1997 Rules of Civil Procedure, to wit:

Sec.2. Entry of the plaintiff upon depositing value with authorized government depositary.-- Upon
the filing of the complaint or at anytime thereafter, and after due notice to the defendant, the plaintiff
shall have the right to take or enter upon the possession of the real property involved if he deposits
with the authorized government depositary an amount equivalent to the assessed value of the
property for the purposes of taxation to be held by such bank subject to the orders of the
court xxx xxx .

xxx xxx xxx

If such deposit is made the court shall order the sheriff or other proper officer to forthwith place the
plaintiff in possession of the property involved and promptly submit a report thereof to the court with
service of copies to the parties.

As clearly enunciated in Robern Development Corporation vs. Judge Jesus Quitain[9]:

“Expropriation proceedings are governed by revised Rule 67 of the 1997 Rules of Civil
Procedure which took effect on July 1, 1997. Previous doctrines inconsistent with this Rule are
deemed reversed or modified. Specifically, (1) an answer, not a motion to dismiss, is the responsive
pleading to a complaint in eminent domain; (2) the trial court may issue a writ of possession once
the plaintiff deposits an amount equivalent to the assessed value of the property, pursuant to
Section 2 of said Rule, without need of a hearing to determine the provisional sum to be
deposited; and (3) a final order of expropriation may not be issued prior to a full hearing and
resolution of the objections and defenses of the property owner.”(Emphasis Ours)
 Thus, pursuant to Section 2 of Rule 67 of the 1997 Revised Rules of Civil Procedure and
the Robern Development Corporation case, the only requisites for authorizing immediate entry in
expropriation proceedings are: (1) the filing of a complaint for expropriation sufficient in form and
substance; and (2) the making of a deposit equivalent to the assessed value of the property subject to
expropriation. Upon compliance with the requirements the issuance of the writ of possession
becomes ―ministerial.‖[10]
The antecedents and the rationale for the rule are explained thus:

“There is no prohibition against a procedure whereby immediate possession of the land involved in
expropriation proceedings may be taken, provided always that due provision is made to secure the
prompt adjudication and payment of just compensation to the owners. However, the requirements for
authorizing immediate entry in expropriation proceedings have changed.

To start with, in Manila Railroad Company v. Paredes, [Manila Railroad Company v. Paredes, 31 Phil
118, 135, March 31 & December 17, 1915] the Court held that the railway corporation had the right to
enter and possess the land involved in condemnation proceedings under Section 1, Act No. 1592,
immediately upon the filing of a deposit fixed by order of the court.

The Rules of Court of 1964 sanctioned this procedure as follows:

Sec. 2. Entry of plaintiff upon depositing value with National or Provincial Treasurer. Upon the
filing of the complaint or at any time thereafter the plaintiff shall have the right to take or enter upon
the possession of the real or personal property involved if he deposits with the National or Provincial
Treasurer its value, as provisionally and promptly ascertained and fixed by the court having
jurisdiction of the proceedings, to be held by such treasurer subject to the orders and final disposition
of the court. . . . (emphasis ours.)

Subsequently, former President Ferdinand E. Marcos signed into law Presidential Decree No. 42 and
its companion decrees, which removed the court's discretion in determining the amount of the
provisional value of the land to be expropriated and fixed the provisional deposit at its assessed value
for taxation purposes. Hearing was not required; only notice to the owner of the property sought to be
condemned.

On the issue of the immediate possession, PD 42 (Authorizing The Plaintiff In Eminent Domain
Proceedings To Take Possession Of The Property Involved Upon Depositing The Assessed Value,
For Purposes of Taxation) provided:

WHEREAS, the existing procedure for the exercise of the right of eminent domain is not expeditious
enough to enable the plaintiff to take or enter upon the possession of the real property involved as
soon as possible, when needed for public purposes;

xxx xxx xxx

. . . [T]hat, upon filing in the proper court of the complaint in eminent domain proceedings or at
anytime thereafter, and after due notice to the defendant, plaintiff shall have the right to take or enter
upon the possession of the real property involved if he deposits with the Philippine National Bank, . . .
an amount equivalent to the assessed value of the property for purposes of taxation, to be held by
said bank subject to the orders and final disposition of the court.

The provisions of Rule 67 of the Rules of Court and of any other existing law contrary to or
inconsistent herewith are hereby repealed.
Paragraph 3 of PD No. 1224 (Defining The Policy On The Expropriation Of Private Property for
Socialized Housing Upon Payment Of Just Compensation) also authorized immediate takeover of the
property in this manner:

3. Upon the filing of the petition for expropriation and the deposit of the amount of just compensation
as provided for herein, the Government, or its authorized agency or entity, shall immediately have
possession, control and disposition of the real property and the improvements thereon even pending
resolution of the issues that may be raised whether before the Court of First Instance or the higher
courts.

Where the "taking" was for "socialized housing," Section 3, PD 1259 (Amending Paragraphs 1, 2, And
3 Of PD No. 1224 Further Defining The Policy On The Expropriation Of Private Property For
Socialized Housing Upon Payment Of Just Compensation), amending the above-quoted paragraph,
provided:

Upon the filing of the petition for expropriation and the deposit of the amount of the just compensation
provided for in Section 2 hereof, the Government, or its authorized agency or entity, shall immediately
have possession, control and disposition of the real property and the improvements thereon even
pending resolution of the issues that may be raised whether before the Court of First Instance, Court
of Agrarian Relations or the higher courts.

Similarly, Section 1, PD No. 1313 (Further Amending Paragraph 3 Of Presidential Decree No. 1224
As Amended By Presidential Decree No. 1259, Defining The Policy On The Expropriation Of Private
Property For Socialized Housing Upon Payment Of Just Compensation), amending paragraph 3 of
PD 1224, decreed:

Upon the filing of the petition for expropriation and the deposit in the Philippine National Bank at its
main office or any of its branches of the amount equivalent to ten percent (10%) of the just
compensation provided for in Section 2 of Presidential Decree No. 1259, the government, or its
authorized agency or entity, shall immediately have possession, control and disposition of the real
property and the improvements thereon with the power of demolition, if necessary, even pending
resolution of the issues that may be raised whether before the Court of First Instance, Court of
Agrarian Relations, or the higher Courts.

In this connection, we also quote Section 7 of PD No. 1517 (Proclaiming Urban Land Reform In The
Philippines And Providing For The Implementing Machinery Thereof), which reads:

xxx xxx xxx

Upon the filing of the petition for expropriation and the deposit in the Philippine National Bank
at its main office or any of its branches of the amount equivalent to ten per cent (10%) of the
declared assessment value in 1975, the Government, or its authorized agency or entity shall
immediately have possession, control and disposition of the real property and the
improvements thereon with the power of demolition, if necessary, even pending resolution of
the issues that may be raised whether before the Court of First Instance, Court of Agrarian
Relations, or the higher Courts.

Finally, PD 1533 (Establishing A Uniform Basis For Determining Just Compensation And The Amount
Of Deposit For Immediate Possession Of The Property Involved In Eminent Domain Proceedings)
mandated the deposit of only ten percent (10%) of the assessed value of the private property being
sought to be expropriated, after fixing the just compensation for it at a value not exceeding that
declared by the owner or determined by the assessor, whichever is lower. Section 2 thereof reads:
 Sec. 2. Upon the filing of the petition for expropriation and the deposit in the Philippine
National Bank at its main office or any of its branches of an amount equivalent to ten per cent
(10%) of the amount of compensation provided in Section 1 hereof, the government or its
authorized instrumentality agency or entity shall be entitled to immediate possession, control
and disposition of the real property and the improvements thereon, including the power of
demolition if necessary, notwithstanding the pendency of the issues before the courts.

Accordingly, in San Diego v. Valdellon [80 Phil 305, 310, November 22, 1977], Municipality of Daet v.
Court of Appeals [93 SCRA 503, 525, October 18, 1979], and Haguisan v. Emilia [131 SCRA 517,
522-524, August 31, 1984], the Court reversed itself and ruled that Section 2, Rule 67 of the 1964
Rules, was repealed by Presidential Decree No. 42. The judicial duty of ascertaining and fixing the
provisional value of the property was done away with, because the hearing on the matter had not
been "expeditious enough to enable the plaintiff to take possession of the property involved as soon
as possible, when needed for public purpose."

In Daet, the Court clarified that the provisional value of the land did not necessarily represent the true
and correct one but only tentatively served as the basis for immediate occupancy by the condemnor.
The just compensation for the property continued to be based on its current and fair market value, not
on its assessed value which constituted only a percentage of its current fair market value.

However, these rulings were abandoned in Export Processing Zone Authority v. Dulay [149 SCRA
305, 311 & 316, April 29, 1987], because "[t]he method of ascertaining just compensation under the
aforecited decrees constitute[d] impermissible encroachment on judicial prerogatives. It tend[ed] to
render this Court inutile in a matter which under the Constitution [was] reserved to it for final
determination." The Court added:

We return to older and more sound precedents. This Court has the duty to formulate guiding and
controlling constitutional principles, precepts, doctrines, or rules. (See Salonga v. Cruz Pano, supra).

The determination of "just compensation" in eminent domain cases is a judicial function. The
executive department or the legislature may make the initial determinations but when a party claims a
violation of the guarantee in the Bill of Rights that private property may not be taken for public use
without just compensation, no statute, decree, or executive order can mandate that its own
determination shall prevail over the court's findings. Much less can the courts be precluded from
looking into the "just-ness" of the decreed compensation.

xxx xxx xxx

More precisely, Panes v. Visayas State College of Agriculture [264 SCRA 708, 719, November 27,
1996.] ruled that the judicial determination of just compensation included the determination of the
provisional deposit. In that case, the Court invalidated the Writ of Possession because of lack of
hearing on the provisional deposit, as required under then Section 2 of Rule 67, pre-1997 Rules. In
the light of the declared unconstitutionality of PD Nos. 76, 1533 and 42, insofar as they sanctioned
executive determination of just compensation, any right to immediate possession of the property must
be firmly grounded on valid compliance with Section 2 of Rule 67, pre-1997 Rules; that is, the value
of the subject property, as provisionally and promptly ascertained and fixed by the court that has
jurisdiction over the proceedings, must be deposited with the national or the provincial treasurer.

However, the 1997 Rules of Civil Procedure revised Section 2 of Rule 67 and clearly reverted to the
San Diego, Daet and Haguisan rulings. Section 2 now reads:
Sec. 2. Entry of plaintiff upon depositing value with government depositary. Upon the filing of
the complaint or at any time thereafter and after due notice to the defendant, the plaintiff shall have
the right to take or enter upon the possession of the real property involved if he deposits with the
authorized government depositary an amount equivalent to the assessed value of the property for
purposes of taxation to be held by such bank subject to the orders of the court. . . . .

xxx xxx xxx

After such deposit is made the court shall order the sheriff or other proper officer to forthwith
place the plaintiff in possession of the property involved and promptly submit a report thereof to
the court with service of copies to the parties. [Emphasis ours.]

In the present case, although the Complaint for expropriation was filed on June 6, 1997, the Motion
for the Issuance of the Writ of Possession was filed on July 28, 1997; thus, the issuance of the Writ is
covered by the 1997 Rules. As earlier stated, procedural rules are given immediate effect and are
applicable to actions pending and undetermined at the time they are passed; new court rules apply to
proceedings that take place after the date of their effectivity. Therefore, Section 2, Rule 67 of the
1997 Rules of Civil Procedure, is the prevailing and governing law in this case.

With the revision of the Rules, the trial court's issuance of the Writ of Possession becomes ministerial,
once the provisional compensation mentioned in the 1997 Rule is deposited. Thus, in the instant case
the trial court did not commit grave abuse of discretion when it granted the NPC's Motion for the
issuance of the Writ, despite the absence of hearing on the amount of the provisional deposit.

The Court nonetheless hastens to add that PD 1533 is not being revived.

Under Section 2, Rule 67 of the 1997 Rules, the provisional deposit should be in an amount
equivalent to the full assessed value of the property to be condemned, not merely ten percent of it.
Therefore, the provisional deposit of NPC is insufficient. Since it seeks to expropriate portions, not the
whole, of four parcels of land owned by Robern, the provisional deposit should be computed on the
basis of the Tax Declarations of the property: xxx”

Hence, the issuance of writs of possession by the respondent court in favor of the respondent
Republic after the latter, through the DPWH, filed complaints for expropriation and deposited the
amounts of P3,964,500.00 and P2,511,000.00 equivalent to the assessed value of the properties of
the petitioners is proper and not without basis.
Contrary to the claim of the petitioners, the issuance of a writ of possession pursuant to Rule 67
of the 1997 Revised Rules of Civil Procedure alone is neither ―capricious‖ nor ―oppressive‖, as the
said rule affords owners safeguards against unlawful deprivation of their property in expropriation
proceedings, one of which is the deposit requirement which constitutes advance payment in the event
expropriation proceeds, and stands as indemnity for damages should the proceedings fail of
consummation.[11] The deposit likewise sufficiently satisfies the compensation requirement of the
Constitution.[12] Moreover, the owners of the expropriated lands are entitled to legal interest on the
compensation eventually adjudged from the date the condemnor takes possession of the land until
the full compensation is paid to them or deposited in court.[13]
It is the ruling of this Court that there is no grave abuse of discretion amounting to lack or excess
of jurisdiction on the part of the respondent court in issuing the orders and the writs of possession
herein questioned. Accordingly, the prayer for the dismissal of Civil Cases Nos. Q-97-31368 and Q-
97-31369 on the ground of prematurity for failure to comply with E.O. 1035 is denied.
As regards Section 6 (Acquisition through Negotiated Sale) of E.O. 1035, records show that there
had been an attempt on the part of the Republic to negotiate with the petitioners through the Notices
sent by the former through the DPWH. The Notice dated August 29, 1996 sent to petitioner
RemediosBiglang-awa by the respondent Republic[14] was intended not only to inform her formally of
the planned expropriation, but also to require her to submit several documents needed for the
determination of the just compensation for her property. The petitioner failed to submit the required
documents. The respondent Republic sent both petitioners Remedios and Salvador Biglang-awa
Final Notices dated October 15, 1996 stating that failure to submit the required documents
―significantly delay[ed] the completion of the xxx project‖, and that the petitioners were given five (5)
days to ―cooperate by way of submitting the documents being requested‖, otherwise expropriation
proceedings would be initiated against them.[15] These notices were ignored by the
petitioners. Consequently, the respondent Republic, through the DPWH, filed expropriation cases
against the petitioners, conformably with Section 7 of E.O. 1035, to wit:

Sec. 7. Expropriation. If the parties fail to agree in negotiation of the sale of the land as provided in
the preceding section, the government implementing agency/instrumentality concerned shall have
authority to immediately institute expropriation proceedings through the Office of the Solicitor General
or the Government Corporate Counsel, as the case may be. The just compensation to be paid for the
property acquired through expropriation shall be in accordance with the provisions of P.D. No.
1533. Courts shall give priority to the adjudication of cases on expropriation and shall immediately
issue the necessary writ of possession upon deposit by the government implementing
agency/instrumentality concerned of an amount equivalent to ten per cent (10%) of the amount of just
compensation provided under P.D. No. 1533; Provided, That the period within which said writ of
possession shall be issued shall in no case extend beyond five (5) days from the date such deposit
was made.

Thus, the filing of the expropriation cases against the petitioners was not in violation of Section 6
of E.O. 1035, and was, on the contrary, in accordance with the provisions of the said special law.
The petitioners also claim that they are not bound by the gross and inexcusable abandonment of
their cases by their former lawyer, Atty. Jose Felix Lucero, resulting to the non-filing of their
Opposition to the respondents‘ Motion for the Issuance of Writs of Possession.
Although the general rule is that the negligence of counsel binds the client,[16] the rule is not
without an exception. Petitioners rely on the case of Aceyork Aguilar vs. Court of Appeals[17]wherein
the court relaxed the rule to prevent miscarriage of justice. We find no such prejudice to petitioners
caused by the failure of their counsel.
When petitioner Remedios received a Notice to Vacate her property on September 11, 1998, the
petitioners immediately tried to get in touch with their former counsel, Atty. Jose Felix Lucero, but to
no avail as the latter refused to talk to them or even answer their letter. [18] No reason was given for
the behavior of the counsel. The petitioners wasted no time in hiring the services of a new counsel,
the law firm of Gumpal and Valenzuela. Considering that once the deposit under Section 2 of Rule
67 of the 1997 Revised Rules on Civil Procedure has been made, the expropriator becomes entitled
to a writ of possession as a matter of right, and the issuance of the writ becomes ministerial on the
part of the trial court, no opposition on the part of the petitioners on the grounds now pleaded could
have prevented such issuance. Therefore, the petitioners were not prejudiced by the lost opportunity
to file their opposition to the respondent‘s Motions for the Issuance of Writs of Possession.
WHEREFORE, the instant petition is DISMISSED for lack of merit.
SO ORDERED.
Melo, (Chairman), Vitug, and Panganiban, JJ., concur.

DIGEST:
FACTS: Petitioners RemediosBiglang-awa and Salvador Biglang-awa are the registered owners of certain
parcels of land situated in Talipapa, Novaliches, Quezon City. The parcel of land owned by petitioner
RemediosBiglang-awa is covered by T.C.T. No. RT-101389 (362966) with an area of 769 sq. m., while that
owned by Salvador Biglang-awa is covered by T.C.T. No. RT-101390 (19352) with an area of 2,151 sq.
m. The government needed to expropriate 558 sq. m. of the aforesaid property of petitioner RemediosBiglang-
awa, and 881 sq. m. of that belonging to petitioner Salvador Biglang-awa for the construction of the Mindanao
Avenue Extension, Stages II-B and II-C. Remediosreceived a notice from the DPWH to submit the documents
necessary to determine the just compensation for her property. She failed to comply with the 5 days period to
submit the said documents otherwise, expropriation proceedings will be filed against her properties. Hence,
separate cases for expropriation was filed.
Through the DPWH, amounts of P 3,964,500 and P 2,511,00 was deposited with the Land Bank of the
Philippines for the said properties. Motions for the Issuance of Writs of Possession of the properties of the
petitioners with the respondent court was filed. The court issued Orders giving the petitioners, through counsel
Atty. Jose Felix Lucero, ten (10) days within which to submit their Opposition to the said motions. The
petitioners failed to file their Opposition to the Motion.
Petitioners then received a Notice to Vacate their properties, through their counsel, they moved for a
reconsideration. They avered that the respondent Republic failed to comply with the provisions of E.O. 1035
(1985), relating to the conduct of feasibility studies, information campaign, detailed engineering/surveys, and
negotiation prior to the acquisition of, or entry into, the property being expropriated. e respondent court issued
an Order denying the petitioners‘ Motion for Reconsideration, a copy of which was received by the petitioners
on July 26, 1999.
RULING: The court did not gravely abused its discretion in issuing the questioned orders.

“Expropriation proceedings are governed by revised Rule 67 of the 1997 Rules of Civil
Procedure which took effect on July 1, 1997. Previous doctrines inconsistent with this Rule are
deemed reversed or modified. Specifically, (1) an answer, not a motion to dismiss, is the responsive
pleading to a complaint in eminent domain; (2) the trial court may issue a writ of possession once
the plaintiff deposits an amount equivalent to the assessed value of the property, pursuant to
Section 2 of said Rule, without need of a hearing to determine the provisional sum to be
deposited; and (3) a final order of expropriation may not be issued prior to a full hearing and
resolution of the objections and defenses of the property owner.” (Emphasis Ours)

Thus, pursuant to Section 2 of Rule 67 of the 1997 Revised Rules of Civil Procedure and
the Robern Development Corporation case, the only requisites for authorizing immediate entry in
expropriation proceedings are: (1) the filing of a complaint for expropriation sufficient in form and
substance; and (2) the making of a deposit equivalent to the assessed value of the property subject to
expropriation. Upon compliance with the requirements the issuance of the writ of possession
becomes ―ministerial.
When petitioner Remedios received a Notice to Vacate her property on September 11, 1998, the
petitioners immediately tried to get in touch with their former counsel, Atty. Jose Felix Lucero, but to
no avail as the latter refused to talk to them or even answer their letter. [18] No reason was given for
the behavior of the counsel. The petitioners wasted no time in hiring the services of a new counsel,
the law firm of Gumpal and Valenzuela. Considering that once the deposit under Section 2 of Rule
67 of the 1997 Revised Rules on Civil Procedure has been made, the expropriator becomes entitled
to a writ of possession as a matter of right, and the issuance of the writ becomes ministerial on the
part of the trial court, no opposition on the part of the petitioners on the grounds now pleaded could
have prevented such issuance. Therefore, the petitioners were not prejudiced by the lost opportunity
to file their opposition to the respondent‘s Motions for the Issuance of Writs of Possession.
The instant petition is DISMISSED for lack of merit
2. THE CITY OF ILOILO, Represented by HON. JERRY P. TREAS, City Mayor, petitioner,
vs. HON. JUDGE EMILIO LEGASPI, Presiding Judge, RTC, Iloilo City, Branch 22, and HEIRS
OF MANUELA YUSAY, Represented by SYLVIA YUSAY DEL ROSARIO and ENRIQUE YUSAY,
JR., respondents.

DECISION
CHICO-NAZARIO, J.:

Via a Petition for Certiorari and Prohibition with Prayer for Issuance of a Writ of Preliminary
Injunction and Temporary Restraining Order, the City of Iloilo, represented by Mayor Jerry P. Treas,
seeks the nullification and/or modification of the Order dated 05 June 2002 of Honorable Emilio
Legaspi, Presiding Judge, Regional Trial Court, Branch 22, Iloilo City, denying its Motion for
Reconsideration of the courts Order dated 15 April 2002, holding in abeyance the resolution of the
Motion for Issuance of Writ of Possession until after it shall have rested its case.
The factual antecedents are the following:
On 07 March 2001, the SangguniangPanlungsod of the City of Iloilo enacted Regulation
Ordinance No. 2001-037 granting authority to its City Mayor to institute expropriation proceedings on
Lot No. 935, registered in the name of Manuela Yusay, located at Barangay Sto. Nio Norte, Arevalo,
Iloilo City. The regulation ordinance was approved by then City Mayor Mansueto A. Malabor. [1]
On 14 March 2001, Mayor Malabor wrote the heirs of Manuela Yusay, through Mrs. Sylvia Yusay
del Rosario, Administratrix of the estate of Manuela Yusay, making a formal offer to purchase their
property known as Cadastral Lot No. 935 with an area of 85,320 square meters covered by Transfer
Certificate of Title (TCT) No. T-67506 of the Registry of Deeds of Iloilo City for P250 per square meter
for the purpose of converting the same as an on-site relocation for the poor and landless residents of
the city in line with the citys housing development program.[2]
In a letter dated 26 June 2001, Mayor Malabor informed Administrators Sylvia Y. del Rosario and
Enrique Yusay, Jr. that their counter-proposal to the Citys proposal to purchase Lot No. 935 was not
acceptable to the City Government, particularly to the City Council, which insisted that an
expropriation case be filed per SP Resolution No. 01-445. With their apparent refusal to sell the
property, the City terminated further proceedings on the matter.[3]
Petitioner City of Iloilo, represented by Mayor Jerry P. Treas, filed an Amended Complaint [4] for
Eminent Domain against private respondents Heirs of Manuela Yusay, represented by Sylvia
Yusaydel Rosario and Enrique Yusay, Jr.[5] The subject of the same is Lot No. 935 of the Cadastral
Survey of Arevalo covered by TCT No. T-67506.
Private respondents filed an Answer,[6] dated 25 September 2001, to which petitioner filed a
Reply,[7] dated 19 October 2001.
On 23 October 2001, private respondents filed a Motion to Set Case for Preliminary Hearing on
the Special and Affirmative Defenses they have raised in the Answer. [8] Petitioner opposed[9] the
motion to which private respondents filed a Reply.[10]
In an Order dated 04 February 2002, public respondent Hon. Emilio B. Legaspi, Presiding Judge,
Regional Trial Court of Iloilo City, Branch 22, found the motion to be in order and meritorious, and the
grounds of the opposition to be untenable; thus, he set the case for Preliminary Hearing on the
Special and Affirmative Defenses.[11]
Petitioner moved for the reconsideration[12] of the order which private respondents opposed.[13]
On 01 April 2002, public respondent set the case for Pre-Trial after Atty. Amelita K. del Rosario-
Benedicto, counsel for private respondents, manifested she was withdrawing the Motion for
Preliminary Hearing on the Special and Affirmative Defenses. Petitioner did not interpose any
objection.[14]
On 11 April 2002, petitioner filed a Motion for Issuance of Writ of Possession alleging that since it
has deposited with the Court the amount of P2,809,696.50 representing fifteen percent (15%) of the
fair market value of the property sought to be expropriated based on its current tax declaration, it may
immediately take possession of the property in accordance with Section 19, Republic Act No. 7160. [15]
On 15 April 2002, public respondent issued an Order with the following disposition:

WHEREFORE, in view of the foregoing, Atty. Benedicto is given ten (10) days from today within
which to file an Opposition to the pending Motion For Issuance of Writ of Possession, furnishing copy
of the same to plaintiffs counsel who has the same period to file a Reply.

Parties agreed that the Court will resolve the Motion For Issuance of Writ of Possession after the
plaintiffs shall have rested their case after the trial on the merits.[16]

Private respondents filed their Opposition to the Motion for Issuance of Writ of Possession[17] to
which petitioner filed a Reply.[18]
On 09 May 2002, petitioner filed a Motion for Reconsideration praying that the lower court
reconsider its order of 15 April 2002, and to consider its Motion for Issuance of Writ of Possession
submitted for resolution after the filing of its Reply to private respondents Opposition to the motion.
Citing the case of Robern Development Corp. v. Judge Jesus V. Quitain, et al.,[19] it maintains there is
no need for a hearing before the Honorable Court can grant [its] Motion for Issuance of Writ of
Possession.[20]
Private respondents filed an Opposition to the Motion for Reconsideration with Rejoinder to Reply
to Opposition. They vehemently opposed the motion arguing that counsels of the parties had agreed
that the lower court will resolve the Motion for Issuance of Writ of Possession after petitioner shall
have rested its case after trial on the merits. They added that in view of the defects as to form and
substance of the amended complaint, the issuance of a writ of possession ceases to be a ministerial
duty on the court; hence, there is a need for a court hearing. [21]
On 05 June 2002, the assailed order was issued, the dispositive portion of which reads:

WHEREFORE, in view of the foregoing, the Motion for Reconsideration is DENIED and resolution of
the Motion for Writ of Possession is hereby held in abeyance until further orders from this Court. [22]

Hence, this petition.

The petition raises the following alleged errors of the lower court:

A. THAT THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO

LACK OR EXCESS OF JURISDICTION IN DENYING THE MOTION FOR RECONSIDERATION
DATED MAY 9, 2002 AS CONTAINED IN ITS ORDER OF JUNE 5, 2002, AND IN HOLDING THAT
PETITIONERS MOTION FOR ISSUANCE OF WRIT OF POSSESSION BE RESOLVED AFTER
HEREIN PETITIONER HAS CONVINCED THE TRIAL COURT THAT IT HAS A MERITORIOUS
CASE OF EMINENT DOMAIN, DESPITE THE PROVISIONS OF SECTION 2, RULE 67 OF THE
1997 RULES OF CIVIL PROCEDURE AND DESPITE THE RULING OF THE SUPREME COURT IN
THE CASE OF ROBERN DEVELOPMENT CORPORATION VS. JUDGE JESUS V. QUITAIN, ET
AL.
B. THAT THE LOWER COURT COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION IN ISSUING THE ORDER OF JUNE 5, 2002 WHICH IN
EFFECT UPHELD THE CONTENTION OF PRIVATE RESPONDENTS THAT THE AMENDED
COMPLAINT FOR EXPROPRIATION FILED BY HEREIN PETITIONER IS NOT SUFFICIENT IN
FORM AND SUBSTANCE, HENCE THE LATTER IS NOT ENTITLED TO AN IMMEDIATE
ISSUANCE OF A WRIT OF POSSESSION.[23]

As to its Amended Complaint, petitioner maintains that the same is sufficient in form and
substance since it has complied with Section 19 of Rep. Act No. 7160 (1991 Local Government
Code) and Section 1, Rule 67 of the 1997 Rules of Civil Procedure. It explains that since public
respondent has ordered the parties to proceed with the Pre-Trial Conference and trial of the case, it
can be concluded that the Amended Complaint is sufficient in form and substance.
In compliance with Section 19 of the 1991 Local Government Code, petitioner says it deposited
the amount of P2,809,696.50 with the Regional Trial Court of Iloilo, which is equivalent to fifteen
percent (15%) of the fair market value of the property sought to be expropriated based on its current
tax declaration. It further argues that in the cases of Robern Development Corporation v. Judge Jesus
Quitain, et al.,[24] and Salvador Biglang-Awa v. Hon. Judge Marciano I. Bacalla, et al.,[25] the duty to
issue a Writ of Possession becomes a ministerial duty upon the trial court without necessity of a
hearing once the provisional deposit under Section 2 of Rule 67[26] has been complied with.
In their Comment, private respondents maintain that there was nothing for the lower court to
reconsider because the order dated 15 April 2002 which was dictated in open court, and which
petitioner sought to be reconsidered, was already final (on 30 April 2002) when the latter filed its
Motion for Reconsideration on 09 May 2002. Second, they insist that petitioner is estopped to change
its position with respect to the immediate issuance of the writ of possession. The agreement entered
into is binding and is the law between the parties and should be accorded respect since it was
approved by public respondent. Third, they claim there is waiver on the part of petitioner to ask for the
immediate possession of Lot No. 935 since it took the latter eight (8) months and twelve (12) days
from the filing of the Amended Complaint, and nine (9) months and thirteen (13) days from the filing of
the Original Complaint before it filed the Motion for Issuance of Writ of Possession. Moreover, they
assert that there is a need for a court hearing before a writ of possession can be issued, because the
amended complaint is being assailed before the lower court for not being sufficient in form and
substance. Finally, they aver that the issuance of the writ of possession ceases to be ministerial when
the complaint for expropriation fails to allege compliance with the mandatory requirements for the
exercise of the power of eminent domain for purposes of socialized housing as interpreted in the
cases of Filstream International Incorporated v. Court of Appeals, et al.[27]
In its Reply, petitioner avers that the order of 15 April 2002 became final only after fifteen (15)
days from the time the same was received by it on 26 April 2002, and not fifteen (15) days from the
time the order was made in open court on 15 April 2002.
Petitioner argues that there is nothing in the rules which prohibits it from reversing its position with
respect to the issuance of the writ of possession in light of Section 2, Rule 67 of the 1997 Rules of
Civil Procedure which allows taking immediate possession of property sought to be expropriated upon
compliance with said section. Further, it adds that its stand to seek immediate possession of the
property is supported by the Robern and Biglang-awa cases.
It insists that there is no waiver or estoppel on its part. There is no provision of law which sets a
time limit within which to file a motion for the issuance of a writ of possession. It reiterated that the
sufficiency of the form and substance of the Amended Complaint can be determined and resolved by
the lower court through an examination of the allegations contained therein and if the same complies
with the requisites set forth in Section 19 of Rep. Act No. 7160 and Section 1 of Rule 67. [28] Thus,
there is no necessity of a trial before the lower court can resolve the Motion for Issuance of a Writ of
Possession.
Finally, it argues that the Filstream[29] cases are not applicable. It adds that the provisions of Rep.
Act No. 7279 which private respondents allege as not to have been complied with are not conditions
precedent for the exercise of the power of eminent domain.
We first rule on the issue of whether the Order dated 15 April 2002, which was dictated in open
court, was already final when petitioner filed a Motion for Reconsideration on 09 May 2002. Petitioner
maintains that the motion for reconsideration was filed before the order became final fifteen (15) days
from the time it received a copy thereof in writing, and not from the time the same was dictated in
open court as claimed by private respondents.
Time-honored and of constant observance is the principle that no judgment, or order, whether
final or interlocutory, has juridical existence until and unless it is set in writing, signed, and
promulgated, i.e., delivered by the Judge to the Clerk of Court for filing, release to the parties and
implementation, and that indeed, even after promulgation, it does not bind the parties until and unless
notice thereof is duly served on them by any of the modes prescribed by law. This is so even if the
order or judgment has in fact been orally pronounced in the presence of the parties, or a draft thereof
drawn up and signed and/or a copy thereof somehow read or acquired by any party.[30]
In the case at bar, the Motion for Reconsideration filed by petitioner was filed before the 15 April
2002 order became final. The order dictated in open court had no juridical existence before it is set in
writing, signed, promulgated and served on the parties. Since the order orally pronounced in court
had no juridical existence yet, the period within which to file a motion for reconsideration cannot be
reckoned therefrom, but from the time the same was received in writing. Petitioner had fifteen (15)
days from its receipt of the written order on 26 April 2002 within which to file a motion for
reconsideration. Thus, when it filed the motion for reconsideration on 09 May 2002, the said motion
was timely filed.
Petitioner has the irrefutable right to exercise its power of eminent domain. It being a local
government unit, the basis for its exercise is granted under Section 19 of Rep. Act No. 7160, to wit:

Sec. 19. Eminent Domain. - A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or
welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to
the provisions of the Constitution and pertinent laws: Provided, however, That the power of eminent
domain may not be exercised unless a valid and definite offer has been previously made to the
owner, and such offer was not accepted: Provided, further, That the local government unit may
immediately take possession of the property upon the filing of the expropriation proceedings and
upon making a deposit with the proper court of at least fifteen percent (15%) of the fair market value
of the property based on the current tax declaration of the property to be expropriated: Provided,
finally, That the amount to be paid for the expropriated property shall be determined by the proper
court, based on the fair market value at the time of the taking of the property.

The requisites for authorizing immediate entry are as follows: (1) the filing of a complaint for
expropriation sufficient in form and substance; and (2) the deposit of the amount equivalent to fifteen
percent (15%) of the fair market value of the property to be expropriated based on its current tax
declaration.[31] Upon compliance with these requirements, the issuance of a writ of possession
becomes ministerial.[32]
In the case at bar, petitioner avers that the Amended Complaint it filed complies with both
requisites, thus entitling it to a writ of possession as a matter of right and the issuance thereof
becoming ministerial on the part of the lower court even without any hearing. On the other hand,
private respondents allege that the Amended Complaint is not sufficient in form and substance since
it failed to allege compliance with the mandatory requirements for the exercise of the power of
eminent domain for purposes of socialized housing.
Section 1 of Rule 67 of the Revised Rules of Civil Procedure reads:

Section 1. The complaint. The right of eminent domain shall be exercised by the filing of a verified
complaint which shall state with certainty the right and purpose of expropriation, describe the real or
personal property sought to be expropriated, and join as defendants all persons owning or claiming to
own, or occupying, any part hereof or interest therein, showing, so far as practicable, the separate
interest of each defendant. If the title to any property sought to be expropriated appears to be in the
Republic of the Philippines, although occupied by private individuals, or if the title is otherwise
obscure or doubtful so that the plaintiff cannot with accuracy or certainty specify who are the real
owners, averment to that effect shall be made in the complaint.

The Court finds the Amended Complaint sufficient in form and substance, and the amount of
P2,809,696.50 deposited with the Regional Trial Court of Iloilo is equivalent to fifteen percent
(15%)[33] of the fair market value of the property sought to be expropriated per current tax declaration.
On the averment of private respondents that the Amended Complaint failed to allege compliance
with the mandatory requirements[34] for the exercise of the power of eminent domain for purposes of
socialized housing as interpreted in the Filstream cases, it appears that the Amended Complaint did
contain allegations showing compliance therewith. [35] However, whether there is, indeed, compliance
with these requirements, the Court deems it not proper to resolve the issue at this time. Hearing must
be held to establish compliance.
In City of Manila v. Serrano,[36] this Court ruled that hearing is still to be held to determine whether
or not petitioner indeed complied with the requirements provided in Rep. Act No. 7279. x xxThe
determination of this question must await the hearing on the complaint for expropriation, particularly
the hearing for the condemnation of the properties sought to be expropriated. From the foregoing, it is
clear that an evidentiary hearing must be conducted if compliance with the requirements for
socialized housing has been made. This hearing, however, is not a hearing to determine if a writ of
possession is to be issued, but whether there was compliance with the requirements for socialized
housing.
For a writ of possession to issue, only two requirements are required: the sufficiency in form and
substance of the complaint and the required provisional deposit. In fact, no hearing is required for the
issuance of a writ of possession. The sufficiency in form and substance of the complaint for
expropriation can be determined by the mere examination of the allegations of the complaint. In this
case, the sufficiency of the Amended Complaint was further confirmed by public respondent when he
set the case for pre-trial and hearing.
We likewise find private respondents claim that petitioner cannot change its position regarding the
immediate issuance of the writ of possession on the ground of estoppel, to be untenable.
First, estoppel may be successfully invoked only if the party fails to raise the question in the early
stages of the proceedings.[37] In the case before us, petitioner, through its counsel, undeniably
committed a mistake when it agreed that the resolution of its Motion for Issuance of Writ of
Possession be made by public respondent after a hearing is conducted and after it has adduced its
evidence. To remedy this, petitioner immediately filed a Motion for Reconsideration. The filing thereof
was precisely for the purpose of rectifying the error it committed. With the timely filing of the motion
for reconsideration, petitioner cannot be held in estoppel because it right away asked the court to
nullify the agreement it entered into. The filing of the motion for reconsideration which was done at
the earliest possible time clearly negates the presence of estoppel.
 Second, under the facts of the case, estoppel should not apply because petitioner is simply
following the procedure laid down by the rules and jurisprudence. Under Section 19 [38] of Rep. Act No.
7160 (law governing exercise of eminent domain by local government units [LGU]) and Section 2 [39] of
Rule 67 of the Revised Rules of Civil Procedure (law governing exercise of eminent domain by
entities other than LGUs), and in the cases of Robern Development Corporation v. Quitain, et al.,
and Biglang-awa v. Bacalla, et al., a prior hearing is not required before a writ of possession can be
issued. As above discussed, a complaint, sufficient in form and substance, and the required deposit,
are the only requirements before a writ of possession can be issued. Thus, petitioner should not be
prevented from changing and correcting its position when the same is in accord with the rules and
jurisprudence.
Private respondents argue that petitioner waived its right to ask for the immediate possession of
Lot No. 935 since it took the latter eight (8) months and twelve (12) days from the filing of the
Amended Complaint, and nine (9) months and thirteen (13) days from the filing of the Original
Complaint, before it filed the Motion for Issuance of Writ of Possession.
Petitioner did not waive its right. Section 19 of Rep. Act No. 7160 does not put a time limit as to
when a local government may immediately take possession of the real property. Said section
provides that the local government unit may take immediate possession of the property upon the filing
of the expropriation proceedings and upon making a deposit of at least fifteen percent (15%) of the
fair market value of the property based on its current tax declaration. As long as the expropriation
proceedings have been commenced and the deposit has been made, the local government unit
cannot be barred from praying for the issuance of a writ of possession.
WHEREFORE, the instant petition is GRANTED. The assailed orders of respondent judge in Civil
Case No. 01-26801 dated 05 June 2002 and 15 April 2002 are set aside. Respondent Judge is
directed to issue the writ of possession prayed for and to continue hearing the case. No costs.
SO ORDERED.
DIGEST:
FACTS: The SangguniangPanlungsod of the City of Iloilo on March 7, 2001 enacted regulation ordinance
granting umbrella authority to then Mayor Mansueto A. Malabor to institute expropriation proceedings on Lot
No. 935, registered in the name of Manuela Yusay, located at barangay Sto. Niño Norte, Arevalo, Iloilo City.
On March 14, 2001, Mayor Malabor wrote Mrs. Sylvia Yusaydel Rosario, administration of the estate, making
formal offer to purchase the property for the purpose of converting the same as an on-site relocation for the
poor and landless resident of the city. With apparent refusal to sell the property, the city represented by Mayor
Jerry P. Treñas filed an expropriation case based on the Power of State on Eminent Domain. Upon the strict
compliance to the governing rules on expropriation, the city of Iloilo argued that it is entitled to an immediate
issuance of a writ of possession.
ISSUE:WON the lower court committed grave abuse of discretion amounting to lack or excess of jurisdiction in
denying the motion for reconsideration dated may 9, 2002 as contained in its order of june 5, 2002, and in
holding that petitioners motion for issuance of writ of possession be resolved after herein petitioner has
convinced the trial court that it has a meritorious case of eminent domain, despite the provisions of section 2,
rule 67 of the 1997 rules of civil procedure and despite the ruling of the supreme court in the case of robern
development corporation vs. Judge jesus v. Quitain, et al.
RULING: Petitioner has the irrefutable right to exercise its power of eminent domain. It being a local
government unit, the basis for its exercise is granted under Section 19 of Rep. Act No. 7160, to wit:
Sec. 19 Eminent Domain. - A local government unit may, through its chief executive and acting
pursuant to an ordinance, exercise the power of eminent domain for public use, or purpose, or welfare
for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the
provisions of the Constitution and pertinent laws.
The requisites for authorizing immediate entry are as follows: (1) the filing of a complaint for
expropriation sufficient in form and substance; and (2) the deposit of the amount equivalent to fifteen
percent (15%) of the fair market value of the property to be expropriated based on its current tax
declaration.[31] Upon compliance with these requirements, the issuance of a writ of possession
becomes ministerial.[32]
In the case at bar, petitioner avers that the Amended Complaint it filed complies with both
requisites, thus entitling it to a writ of possession as a matter of right and the issuance thereof
becoming ministerial on the part of the lower court even without any hearing. On the other hand,
private respondents allege that the Amended Complaint is not sufficient in form and substance since
it failed to allege compliance with the mandatory requirements for the exercise of the power of
eminent domain for purposes of socialized housing.
Under the facts of the case, estoppel should not apply because petitioner is simply following the
procedure laid down by the rules and jurisprudence. Under Section 19 [38] of Rep. Act No. 7160 (law
governing exercise of eminent domain by local government units [LGU]) and Section 2 [39] of Rule 67
of the Revised Rules of Civil Procedure (law governing exercise of eminent domain by entities other
than LGUs).
The instant petition is GRANTED.

3. REPUBLIC VS JUDGE GINGOYON

FULL CASE

REPUBLIC OF THE PHILIPPINES, G.R. No. 166429

Represented by Executive Secretary
Eduardo R. Ermita, the DEPARTMENT
OF TRANSPORTATION AND Present:
COMMUNICATIONS (DOTC), and the
MANILA INTERNATIONAL AIRPORT DAVIDE, JR., C.J.,
AUTHORITY (MIAA), PUNO,
Petitioners, PANGANIBAN,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
CARPIO,
-versus- AUSTRIA-MARTINEZ,
CORONA,
CARPIO-MORALES,
CALLEJO, SR.,
AZCUNA,
HON. HENRICK F. GINGOYON, TINGA,
In his capacity as Presiding CHICO-NAZARIO, and
Judge of the Regional Trial Court, GARCIA, JJ.
Branch 117, Pasay City and
PHILIPPINE INTERNATIONAL AIR
TERMINALS CO., INC.,
Respondents. Promulgated:

December 19, 2005

x---------------------------------------------------------------------- x

DECISION
TINGA, J.:
The Ninoy Aquino International Airport Passenger Terminal III (NAIA 3) was conceived, designed and
constructed to serve as the countrys show window to the world. Regrettably, it has spawned controversies.
Regrettably too, despite the apparent completion of the terminal complex way back it has not yet been
operated. This has caused immeasurable economic damage to the country, not to mention its deplorable
discredit in the international community.

In the first case that reached this Court, Agan v. PIATCO,[1] the contracts which the Government had
with the contractor were voided for being contrary to law and public policy. The second case now before the
Court involves the matter of just compensation due the contractor for the terminal complex it built. We decide
the case on the basis of fairness, the same norm that pervades both the Courts 2004 Resolution in the first
case and the latest expropriation law.

The present controversy has its roots with the promulgation of the Courts decision in Agan v.
PIATCO,[2] promulgated in 2003 (2003 Decision). This decision nullified the Concession Agreement for the
Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III
entered into between the Philippine Government (Government) and the Philippine International Air Terminals
Co., Inc. (PIATCO), as well as the amendments and supplements thereto. The agreement had authorized
PIATCO to build a new international airport terminal (NAIA 3), as well as a franchise to operate and maintain
the said terminal during the concession period of 25 years. The contracts were nullified, among others, that
Paircargo Consortium, predecessor of PIATCO, did not possess the requisite financial capacity when it was
awarded the NAIA 3 contract and that the agreement was contrary to public policy.[3]

At the time of the promulgation of the 2003 Decision, the NAIA 3 facilities had already been built by PIATCO
and were nearing completion.[4]However, the ponencia was silent as to the legal status of the NAIA 3 facilities
following the nullification of the contracts, as well as whatever rights of PIATCO for reimbursement for its
expenses in the construction of the facilities. Still, in his Separate Opinion, Justice Panganiban, joined by
Justice Callejo, declared as follows:

Should government pay at all for reasonable expenses incurred in the construction of
the Terminal? Indeed it should, otherwise it will be unjustly enriching itself at the expense of
 Piatco and, in particular, its funders, contractors and investors both local and foreign. After
all, there is no question that the State needs and will make use of Terminal III, it being part and
parcel of the critical infrastructure and transportation-related programs of government.[5]

PIATCO and several respondents-intervenors filed their respective motions for the reconsideration of the 2003
Decision. These motions were denied by the Court in its Resolution dated 21 January 2004 (2004
Resolution).[6] However, the Court this time squarely addressed the issue of the rights of PIATCO to refund,
compensation or reimbursement for its expenses in the construction of the NAIA 3 facilities. The holding of the
Court on this crucial point follows:
This Court, however, is not unmindful of the reality that the structures comprising
the NAIA IPT III facility are almost complete and that funds have been spent by PIATCO in
their construction. For the government to take over the said facility, it has to compensate
respondent PIATCO as builder of the said structures. The compensation must be just and
in accordance with law and equity for the government can not unjustly enrich itself at the
expense of PIATCO and its investors.[7]
After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the possession of
PIATCO, despite the avowed intent of the Government to put the airport terminal into immediate operation. The
Government and PIATCO conducted several rounds of negotiation regarding the NAIA 3 facilities.[8] It also
appears that arbitral proceedings were commenced before the International Chamber of Commerce
International Court of Arbitration and the International Centre for the Settlement of Investment
Disputes,[9] although the Government has raised jurisdictional questions before those two bodies.[10]

Then, on 21 December 2004, the Government[11] filed a Complaint for expropriation with the Pasay City
Regional Trial Court (RTC), together with an Application for Special Raffle seeking the immediate holding of a
special raffle. The Government sought upon the filing of the complaint the issuance of a writ of possession
authorizing it to take immediate possession and control over the NAIA 3 facilities.

The Government also declared that it had deposited the amount of P3,002,125,000.00[12] (3 Billion)[13] in Cash
with the Land Bank of the Philippines, representing the NAIA 3 terminals assessed value for taxation
purposes.[14]

The case[15] was raffled to Branch 117 of the Pasay City RTC, presided by respondent judge Hon.
Henrick F. Gingoyon (Hon. Gingoyon). On the same day that the Complaint was filed, the RTC issued
an Order[16] directing the issuance of a writ of possession to the Government, authorizing it to take or enter
upon the possession of the NAIA 3 facilities. Citing the case of City of Manila v. Serrano,[17] the RTC noted that
it had the ministerial duty to issue the writ of possession upon the filing of a complaint for expropriation
sufficient in form and substance, and upon deposit made by the government of the amount equivalent to the
assessed value of the property subject to expropriation. The RTC found these requisites present, particularly
noting that [t]he case record shows that [the Government has] deposited the assessed value of the [NAIA 3
facilities] in the Land Bank of the Philippines, an authorized depositary, as shown by the certification attached
to their complaint. Also on the same day, the RTC issued a Writ of Possession. According to PIATCO, the
Government was able to take possession over the NAIA 3 facilities immediately after the Writ of
Possession was issued.[18]

However, on 4 January 2005, the RTC issued another Order designed to supplement its 21 December
2004 Order and the Writ of Possession. In the 4 January 2005 Order, now assailed in the present petition, the
RTC noted that its earlier issuance of its writ of possession was pursuant to Section 2, Rule 67 of the 1997
Rules of Civil Procedure. However, it was observed that Republic Act No. 8974 (Rep. Act No. 8974), otherwise
known as An Act to Facilitate the Acquisition of Right-of-Way, Site or Location for National Government
Infrastructure Projects and For Other Purposes and its Implementing Rules and Regulations (Implementing
Rules) had amended Rule 67 in many respects.

There are at least two crucial differences between the respective procedures under Rep. Act No. 8974
and Rule 67. Under the statute, the Government is required to make immediate payment to the property owner
upon the filing of the complaint to be entitled to a writ of possession, whereas in Rule 67, the Government is
required only to make an initial deposit with an authorized government depositary. Moreover, Rule 67
prescribes that the initial deposit be equivalent to the assessed value of the property for purposes of taxation,
unlike Rep. Act No. 8974 which provides, as the relevant standard for initial compensation, the market value of
the property as stated in the tax declaration or the current relevant zonal valuation of the Bureau of Internal
Revenue (BIR), whichever is higher, and the value of the improvements and/or structures using the
replacement cost method.

Accordingly, on the basis of Sections 4 and 7 of Rep. Act No. 8974 and Section 10 of the Implementing
Rules, the RTC made key qualifications to its earlier issuances. First, it directed the Land Bank of the
Philippines, Baclaran Branch (LBP-Baclaran), to immediately release the amount of US$62,343,175.77
(4156211h 44m) to PIATCO, an amount which the RTC characterized as that which the Government
specifically made available for the purpose of this expropriation; and such amount to be deducted from the
amount of just compensation due PIATCO as eventually determined by the RTC. Second, the Government
was directed to submit to the RTC a Certificate of Availability of Funds signed by authorized officials to cover
the payment of just compensation. Third, the Government was directed to maintain, preserve and safeguard
the NAIA 3 facilities or perform such as acts or activities in preparation for their direct operation of the airport
terminal, pending expropriation proceedings and full payment of just compensation. However, the Government
was prohibited from performing acts of ownership like awarding concessions or leasing any part of [NAIA 3] to
other parties.[19]

The very next day after the issuance of the assailed 4 January 2005 Order, the Government filed
an Urgent Motion for Reconsideration, which was set for hearing on 10 January 2005. On 7 January 2005, the
RTC issued another Order, the second now assailed before this Court, which appointed three (3)
Commissioners to ascertain the amount of just compensation for the NAIA 3 Complex. That same day, the
Government filed a Motion for Inhibition of Hon. Gingoyon.

The RTC heard the Urgent Motion for Reconsideration and Motion for Inhibition on 10 January 2005.
On the same day, it denied these motions in an Omnibus Order dated 10 January 2005. This is the
third Order now assailed before this Court. Nonetheless, while the Omnibus Order affirmed the earlier
dispositions in the 4 January 2005 Order, it excepted from affirmance the superfluous part of
the Order prohibiting the plaintiffs from awarding concessions or leasing any part of [NAIA 3] to other parties.[20]

Thus, the present Petition for Certiorari and Prohibition under Rule 65 was filed on 13 January 2005. The
petition prayed for the nullification of the RTC orders dated 4 January 2005, 7 January 2005, and 10 January
2005, and for the inhibition of Hon. Gingoyon from taking further action on the expropriation case. A concurrent
prayer for the issuance of a temporary restraining order and preliminary injunction was granted by this Court in
a Resolution dated 14 January 2005.[21]

The Government, in imputing grave abuse of discretion to the acts of Hon. Gingoyon, raises five general
arguments, to wit:
 (i) that Rule 67, not Rep. Act No. 8974, governs the present expropriation proceedings;

(ii) that Hon. Gingoyon erred when he ordered the immediate release of the amount of US$62 (4h
9m).3 Million to PIATCO considering that the assessed value as alleged in the complaint was only P3 Billion;

(iii) that the RTC could not have prohibited the Government from enjoining the performance of acts of
ownership;

(iv) that the appointment of the three commissioners was erroneous; and

(v) that Hon. Gingoyon should be compelled to inhibit himself from the expropriation case. [22]

Before we delve into the merits of the issues raised by the Government, it is essential to consider the crucial
holding of the Court in its 2004 Resolution in Agan, which we repeat below:

This Court, however, is not unmindful of the reality that the structures comprising the NAIA
IPT III facility are almost complete and that funds have been spent by PIATCO in their
construction. For the government to take over the said facility, it has to compensate
respondent PIATCO as builder of the said structures. The compensation must be just and in
accordance with law and equity for the government can not unjustly enrich itself at the
expense of PIATCO and its investors.[23]

This pronouncement contains the fundamental premises which permeate this decision of the Court.
Indeed, Agan, final and executory as it is, stands as governing law in this case, and any disposition of the
present petition must conform to the conditions laid down by the Court in its 2004 Resolution.

The 2004 Resolution Which Is

Law of This Case Generally
Permits Expropriation

The pronouncement in the 2004 Resolution is especially significant to this case in two aspects,
namely: (i) that PIATCO must receive payment of just compensation determined in accordance with law
and equity; and (ii) that the government is barred from taking over NAIA 3 until such just compensation
is paid. The parties cannot be allowed to evade the directives laid down by this Court through any mode of
judicial action, such as the complaint for eminent domain.

It cannot be denied though that the Court in the 2004 Resolution prescribed mandatory guidelines which
the Government must observe before it could acquire the NAIA 3 facilities. Thus, the actions of respondent
judge under review, as well as the arguments of the parties must, to merit affirmation, pass the threshold test of
whether such propositions are in accord with the 2004 Resolution.

The Government does not contest the efficacy of this pronouncement in the 2004 Resolution,[24] thus its
application to the case at bar is not a matter of controversy. Of course, questions such as what is the standard
of just compensation and which particular laws and equitable principles are applicable, remain in dispute and
shall be resolved forthwith.

The Government has chosen to resort to expropriation, a remedy available under the law, which has
the added benefit of an integrated process for the determination of just compensation and the payment thereof
to PIATCO. We appreciate that the case at bar is a highly unusual case, whereby the Government seeks to
expropriate a building complex constructed on land which the State already owns.[25] There is an inherent
illogic in the resort to eminent domain on property already owned by the State. At first blush, since the State
already owns the property on which NAIA 3 stands, the proper remedy should be akin to an action for
ejectment.

However, the reason for the resort by the Government to expropriation proceedings is understandable in this
case. The 2004 Resolution, in requiring the payment of just compensation prior to the takeover by the
Government of

NAIA 3, effectively precluded it from acquiring possession or ownership of the NAIA 3 through the unilateral
exercise of its rights as the owner of the ground on which the facilities stood. Thus, as things stood after the
2004 Resolution, the right of the Government to take over the NAIA 3 terminal was preconditioned by lawful
order on the payment of just compensation to PIATCO as builder of the structures.

The determination of just compensation could very well be agreed upon by the parties without judicial
intervention, and it appears that steps towards that direction had been engaged in. Still, ultimately, the
Government resorted to its inherent power of eminent domain through expropriation proceedings. Is eminent
domain appropriate in the first place, with due regard not only to the law on expropriation but also to the Courts
2004 Resolution in Agan?

The right of eminent domain extends to personal and real property, and the NAIA 3 structures, adhered
as they are to the soil, are considered as real property.[26] The public purpose for the expropriation is also
beyond dispute. It should also be noted that Section 1 of Rule 67 (on Expropriation) recognizes the possibility
that the property sought to be expropriated may be titled in the name of the
Republic of the Philippines, although occupied by private individuals, and in such case an averment to that
effect should be made in the complaint. The instant expropriation complaint did aver that the NAIA 3 complex
stands on a parcel of land owned by the Bases Conversion Development Authority, another agency of [the
Republic of the Philippines].[27]

Admittedly, eminent domain is not the sole judicial recourse by which the Government may have
acquired the NAIA 3 facilities while satisfying the requisites in the 2004 Resolution. Eminent domain though
may be the most effective, as well as the speediest means by which such goals may be accomplished. Not only
does it enable immediate possession after satisfaction of the requisites under the law, it also has a built-in
procedure through which just compensation may be ascertained. Thus, there should be no question as to the
propriety of eminent domain proceedings in this case.
 Still, in applying the laws and rules on expropriation in the case at bar, we are impelled to apply or
construe these rules in accordance with the Courts prescriptions in the 2004 Resolution to achieve the end
effect that the Government may validly take over the NAIA 3 facilities. Insofar as this case is concerned, the
2004 Resolution is effective not only as a legal precedent, but as the source of rights and prescriptions that
must be guaranteed, if not enforced, in the resolution of this petition. Otherwise, the integrity and efficacy of the
rulings of this Court will be severely diminished.

It is from these premises that we resolve the first question, whether Rule 67 of the Rules of Court or Rep. Act
No. 8974 governs the expropriation proceedings in this case.

Application of Rule 67 Violates

the 2004 Agan Resolution

The Government insists that Rule 67 of the Rules of Court governs the expropriation proceedings in this case
to the exclusion of all other laws. On the other hand, PIATCO claims that it is Rep. Act No. 8974 which does
apply. Earlier, we had adverted to the basic differences between the statute and the procedural rule. Further
elaboration is in order.

Rule 67 outlines the procedure under which eminent domain may be exercised by the Government. Yet by no
means does it serve at present as the solitary guideline through which the State may expropriate private
property. For example, Section 19 of the Local Government Code governs as to the exercise by local
government units of the power of eminent domain through an enabling ordinance. And then there is Rep. Act
No. 8974, which covers expropriation proceedings intended for national government infrastructure projects.

Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner than Rule
67, inescapably applies in instances when the national government expropriates property for national
government infrastructure projects.[28] Thus, if expropriation is engaged in by the national government for
purposes other than national infrastructure projects, the assessed value standard and the deposit mode
prescribed in Rule 67 continues to apply.

Under both Rule 67 and Rep. Act No. 8974, the Government commences expropriation proceedings through
the filing of a complaint. Unlike in the case of local governments which necessitate an authorizing ordinance
before expropriation may be accomplished, there is no need under Rule 67 or Rep. Act No. 8974 for legislative
authorization before the Government may proceed with a particular exercise of eminent domain. The most
crucial difference between Rule 67 and Rep. Act No. 8974 concerns the particular essential step the
Government has to undertake to be entitled to a writ of possession.

The first paragraph of Section 2 of Rule 67 provides:

SEC. 2. Entry of plaintiff upon depositing value with authorized government depository. Upon
the filing of the complaint or at any time thereafter and after due notice to the defendant, the plaintiff
shall have the right to take or enter upon the possession of the real property involved if he deposits
with the authorized government depositary an amount equivalent to the assessed value of
the property for purposes of taxation to be held by such bank subject to the orders of the
 court. Such deposit shall be in money, unless in lieu thereof the court authorizes the deposit
of a certificate of deposit of a government bank of the Republic of the Philippines payable on
demand to the authorized government depositary.

In contrast, Section 4 of Rep. Act No. 8974 relevantly states:

SEC. 4. Guidelines for Expropriation Proceedings. Whenever it is necessary to acquire real property for the
right-of-way, site or location for any national government infrastructure project through
expropriation, the appropriate proceedings before the proper court under the following guidelines:

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

...

c) In case the completion of a government infrastructure project is of utmost urgency and

importance, and there is no existing valuation of the area concerned, the implementing
agency shall immediately pay the owner of the property its proffered value taking into
consideration the standards prescribed in Section 5 hereof.

Upon completion with the guidelines abovementioned, the court shall immediately issue to
the implementing agency an order to take possession of the property and start the implementation
of the project.

Before the court can issue a Writ of Possession, the implementing agency shall present to
the court a certificate of availability of funds from the proper official concerned.

...

As can be gleaned from the above-quoted texts, Rule 67 merely requires the Government to deposit with an
authorized government depositary the assessed value of the property for expropriation for it to be entitled to a
writ of possession. On the other hand, Rep. Act No. 8974 requires that the Government make a direct payment
to the property owner before the writ may issue. Moreover, such payment is based on the zonal valuation of the
BIR in the case of land, the value of the improvements or structures under the replacement cost method,[29] or if
no such valuation is available and in cases of utmost urgency, the proffered value of the property to be seized.

It is quite apparent why the Government would prefer to apply Rule 67 in lieu of Rep. Act No. 8974.
Under Rule 67, it would not be obliged to immediately pay any amount to PIATCO before it can obtain the writ
of possession since all it need do is deposit the amount equivalent to the assessed value with an authorized
government depositary. Hence, it devotes considerable effort to point out that Rep. Act No. 8974 does not
apply in this case, notwithstanding the undeniable reality that NAIA 3 is a national government project. Yet,
these efforts fail, especially considering the controlling effect of the 2004 Resolution in Agan on the adjudication
of this case.

It is the finding of this Court that the staging of expropriation proceedings in this case with the exclusive
use of Rule 67 would allow for the Government to take over the NAIA 3 facilities in a fashion that directly
rebukes our 2004 Resolution in Agan. This Court cannot sanction deviation from its own final and executory
orders.

Section 2 of Rule 67 provides that the State shall have the right to take or enter upon the possession of
the real property involved if [the plaintiff] deposits with the authorized government depositary an amount
equivalent to the assessed value of the property for purposes of taxation to be held by such bank subject to the
orders of the court.[30] It is thus apparent that under the provision, all the Government need do to obtain a writ of
possession is to deposit the amount equivalent to the assessed value with an authorized government
depositary.

Would the deposit under Section 2 of Rule 67 satisfy the requirement laid down in the 2004 Resolution
that [f]or the government to take over the said facility, it has to compensate respondent PIATCO as builder of
the said structures? Evidently not.

If Section 2 of Rule 67 were to apply, PIATCO would be enjoined from receiving a single centavo as just
compensation before the Government takes over the NAIA 3 facility by virtue of a writ of possession. Such an
injunction squarely contradicts the letter and intent of the 2004 Resolution. Hence, the position of the
Government sanctions its own disregard or violation the prescription laid down by this Court that there must first
be just compensation paid to PIATCO before the Government may take over the NAIA 3 facilities.

Thus, at the very least, Rule 67 cannot apply in this case without violating the 2004 Resolution. Even assuming
that Rep. Act No. 8974 does not govern in this case, it does not necessarily follow that Rule 67 should then
apply. After all, adherence to the letter of Section 2, Rule 67 would in turn violate the Courts requirement in the
2004 Resolution that there must first be payment of just compensation to PIATCO before the Government may
take over the property.

It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the scheme of
immediate payment in cases involving national government infrastructure projects. The following portion of the
Senate deliberations, cited by PIATCO in its Memorandum, is worth quoting to cogitate on the purpose behind
the plain meaning of the law:

THE CHAIRMAN (SEN. CAYETANO). x xx Because the Senate believes that, you know, we
have to pay the landowners immediately not by treasury bills but by cash.

Since we are depriving them, you know, upon payment, no, of possession, we might as well
pay them as much, no, hindilang 50 percent.
 x xx

THE CHAIRMAN (REP. VERGARA). Accepted.

x xx

THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the landowners, e.

THE CHAIRMAN (REP. VERGARA). Thats why we need to really secure the availability of funds.

x xx

THE CHAIRMAN (SEN. CAYETANO). No, no. Its the same. It says here: iyong first paragraph,
diba? Iyong zonal talagangmagbabayadmuna. In other words, you know, there must be a
payment kaagad. (TSN, Bicameral Conference on the Disagreeing Provisions of House Bill 1422
and Senate Bill 2117, August 29, 2000, pp. 14-20)

x xx

THE CHAIRMAN (SEN. CAYETANO). Okay, okay, no. Unang-una, it is not deposit, no. Its
payment.

REP. BATERINA. Its payment, ho, payment. (Id., p. 63)[31]

It likewise bears noting that the appropriate standard of just compensation is a substantive matter. It is
well within the province of the legislature to fix the standard, which it did through the enactment of Rep. Act No.
8974. Specifically, this prescribes the new standards in determining the amount of just compensation in
expropriation cases relating to national government infrastructure projects, as well as the manner of payment
thereof. At the same time, Section 14 of the Implementing Rules recognizes the continued applicability of Rule
67 on procedural aspects when it provides all matters regarding defenses and objections to the complaint,
issues on uncertain ownership and conflicting claims, effects of appeal on the rights of the parties, and such
other incidents affecting the complaint shall be resolved under the provisions on expropriation of Rule 67 of the
Rules of Court.[32]

Given that the 2004 Resolution militates against the continued use of the norm under Section 2, Rule 67, is it
then possible to apply Rep. Act No. 8974? We find that it is, and moreover, its application in this case
complements rather than contravenes the prescriptions laid down in the 2004 Resolution.

Rep. Act No. 8974 Fits

to the Situation at Bar
and Complements the
2004 Agan Resolution

Rep. Act No. 8974 is entitled An Act To Facilitate The Acquisition Of Right-Of-Way, Site Or Location For
National Government Infrastructure Projects And For Other Purposes. Obviously, the law is intended to cover
expropriation proceedings intended for national government infrastructure projects. Section 2 of Rep. Act No.
8974 explains what are considered as national government projects.

Sec. 2. National Government Projects. The term national government projects shall refer to
all national government infrastructure, engineering works and service contracts, including projects
undertaken by government-owned and controlled corporations, all projects covered by Republic
Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-
Transfer Law, and other related and necessary activities, such as site acquisition, supply and/or
installation of equipment and materials, implementation, construction, completion, operation,
maintenance, improvement, repair and rehabilitation, regardless of the source of funding.

As acknowledged in the 2003 Decision, the development of NAIA 3 was made pursuant to a build-operate-and-
transfer arrangement pursuant to Republic Act No. 6957, as amended,[33] which pertains to infrastructure or
development projects normally financed by the public sector but which are now wholly or partly implemented by
the private sector.[34] Under the build-operate-and-transfer scheme, it is the project proponent which undertakes
the construction, including the financing, of a given infrastructure facility.[35] In Tatad v. Garcia,[36] the Court
acknowledged that the operator of the EDSA Light Rail Transit project under a BOT scheme was the owner of
the facilities such as the rail tracks, rolling stocks like the coaches, rail stations, terminals and the power
plant.[37]

There can be no doubt that PIATCO has ownership rights over the facilities which it had financed and
constructed. The 2004 Resolution squarely recognized that right when it mandated the payment of just
compensation to PIATCO prior to the takeover by the Government of NAIA 3. The fact that the Government
resorted to eminent domain proceedings in the first place is a concession on its part of PIATCOs ownership.
Indeed, if no such right is recognized, then there should be no impediment for the Government to seize control
of NAIA 3 through ordinary ejectment proceedings.

Since the rights of PIATCO over the NAIA 3 facilities are established, the nature of these facilities should now
be determined. Under Section 415(1) of the Civil Code, these facilities are ineluctably immovable or real
property, as they constitute buildings, roads and constructions of all kinds adhered to the soil. [38] Certainly, the
NAIA 3 facilities are of such nature that they cannot just be packed up and transported by PIATCO like a
traveling circus caravan.

Thus, the property subject of expropriation, the NAIA 3 facilities, are real property owned by PIATCO.
This point is critical, considering the Governments insistence that the NAIA 3 facilities cannot be deemed as the
right-of-way, site or location of a national government infrastructure project, within the coverage of Rep. Act No.
8974.

There is no doubt that the NAIA 3 is not, under any sensible contemplation, a right-of-way. Yet we
cannot agree with the Governments insistence that neither could NAIA 3 be a site or location. The petition
quotes the definitions provided in Blacks Law Dictionary of location as the specific place or position of a person
or thing and site as pertaining to a place or location or a piece of property set aside for specific use. [39] Yet even
Blacks Law Dictionary provides that [t]he term [site] does not of itself necessarily mean a place or tract of land
fixed by definite boundaries.[40] One would assume that the Government, to back up its contention, would be
able to point to a clear-cut rule that a site or location exclusively refers to soil, grass, pebbles and weeds. There
is none.

Indeed, we cannot accept the Governments proposition that the only properties that may be
expropriated under Rep. Act No. 8974 are parcels of land. Rep. Act No. 8974 contemplates within its coverage
such real property constituting land, buildings, roads and constructions of all kinds adhered to the soil. Section
1 of Rep. Act No. 8974, which sets the declaration of the laws policy, refers to real property acquired for
national government infrastructure projects are promptly paid just compensation. [41] Section 4 is quite explicit in
stating that the scope of the law relates to the acquisition of real property, which under civil law includes
buildings, roads and constructions adhered to the soil.

It is moreover apparent that the law and its implementing rules commonly provide for a rule for the
valuation of improvements and/or structures thereupon separate from that of the land on which such are
constructed. Section 2 of Rep. Act No. 8974 itself recognizes that the improvements or structures on the land
may very well be the subject of expropriation proceedings. Section 4(a), in relation to Section 7 of the law
provides for the guidelines for the valuation of the improvements or structures to be expropriated. Indeed,
nothing in the law would prohibit the application of Section 7, which provides for the valuation method of the
improvements and or structures in the instances wherein it is necessary for the Government to expropriate only
the improvements or structures, as in this case.

The law classifies the NAIA 3 facilities as real properties just like the soil to which they are adhered. Any
sub-classifications of real property and divergent treatment based thereupon for purposes of expropriation must
be based on substantial distinctions, otherwise the equal protection clause of the Constitution is violated. There
may be perhaps a molecular distinction between soil and the inorganic improvements adhered thereto, yet
there are no purposive distinctions that would justify a variant treatment for purposes of expropriation. Both the
land itself and the improvements thereupon are susceptible to private ownership independent of each other,
capable of pecuniary estimation, and if taken from the owner, considered as a deprivation of property. The
owner of improvements seized through expropriation suffers the same degree of loss as the owner of land
seized through similar means. Equal protection demands that all persons or things similarly situated should be
treated alike, both as to rights conferred and responsibilities imposed. For purposes of expropriation, parcels of
land are similarly situated as the buildings or improvements constructed thereon, and a disparate treatment
between those two classes of real property infringes the equal protection clause.

Even as the provisions of Rep. Act No. 8974 call for that laws application in this case, the threshold test
must still be met whether its implementation would conform to the dictates of the Court in the 2004 Resolution.
Unlike in the case of Rule 67, the application of Rep. Act No. 8974 will not contravene the 2004 Resolution,
which requires the payment of just compensation before any takeover of the NAIA 3 facilities by the
Government. The 2004 Resolution does not particularize the extent such payment must be effected before the
takeover, but it unquestionably requires at least some degree of payment to the private property owner before a
writ of possession may issue. The utilization of Rep. Act No. 8974 guarantees compliance with this bare
minimum requirement, as it assures the private property owner the payment of, at the very least, the proffered
value of the property to be seized. Such payment of the proffered value to the owner, followed by the issuance
of the writ of possession in favor of the Government, is precisely the schematic under Rep. Act No. 8974, one
which facially complies with the prescription laid down in the 2004 Resolution.

Clearly then, we see no error on the part of the RTC when it ruled that Rep. Act No. 8974 governs the
instant expropriation proceedings.
The Proper Amount to be Paid
under Rep. Act No. 8974

Then, there is the matter of the proper amount which should be paid to PIATCO by the Government
before the writ of possession may issue, consonant to Rep. Act No. 8974.

At this juncture, we must address the observation made by the Office of the Solicitor General in behalf
of the Government that there could be no BIR zonal valuations on the NAIA 3 facility, as provided in Rep. Act
No. 8974, since zonal valuations are only for parcels of land, not for airport terminals. The Court agrees with
this point, yet does not see it as an impediment for the application of Rep. Act No. 8974.

It must be clarified that PIATCO cannot be reimbursed or justly compensated for the value of the parcel
of land on which NAIA 3 stands. PIATCO is not the owner of the land on which the NAIA 3 facility is
constructed, and it should not be entitled to just compensation that is inclusive of the value of the land itself. It
would be highly disingenuous to compensate PIATCO for the value of land it does not own. Its entitlement to
just compensation should be limited to the value of the improvements and/or structures themselves. Thus, the
determination of just compensation cannot include the BIR zonal valuation under Section 4 of Rep. Act No.
8974.

Under Rep. Act No. 8974, the Government is required to immediately pay the owner of the property the
amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the
current relevant zonal valuation of the [BIR]; and (2) the value of the improvements and/or structures as
determined under Section 7. As stated above, the BIR zonal valuation cannot apply in this case, thus the
amount subject to immediate payment should be limited to the value of the improvements and/or structures as
determined under Section 7, with Section 7 referring to the implementing rules and regulations for the equitable
valuation of the improvements and/or structures on the land. Under the present implementing rules in place, the
valuation of the improvements/structures are to be based using the replacement cost method. [42] However, the
replacement cost is only one of the factors to be considered in determining the just compensation.

In addition to Rep. Act No. 8974, the 2004 Resolution in Agan also mandated that the payment of just
compensation should be in accordance with equity as well. Thus, in ascertaining the ultimate amount of just
compensation, the duty of the trial court is to ensure that such amount conforms not only to the law, such as
Rep. Act No. 8974, but to principles of equity as well.

Admittedly, there is no way, at least for the present, to immediately ascertain the value of the
improvements and structures since such valuation is a matter for factual determination. [43] Yet Rep. Act No.
8974 permits an expedited means by which the Government can immediately take possession of the property
without having to await precise determination of the valuation. Section 4(c) of Rep. Act No. 8974 states that in
case the completion of a government infrastructure project is of utmost urgency and importance, and there is
no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of
the property its proferred value, taking into consideration the standards prescribed in Section 5 [of the
law].[44] The proffered value may strike as a highly subjective standard based solely on the intuition of the
government, but Rep. Act No. 8974 does provide relevant standards by which proffered value should be
based,[45] as well as the certainty of judicial determination of the propriety of the proffered value.[46]

In filing the complaint for expropriation, the Government alleged to have deposited the amount of P3
Billion earmarked for expropriation, representing the assessed value of the property. The making of the deposit,
including the determination of the amount of the deposit, was undertaken under the erroneous notion that Rule
67, and not Rep. Act No. 8974, is the applicable law. Still, as regards the amount, the Court sees no
impediment to recognize this sum of P3 Billion as the proffered value under Section 4(b) of Rep. Act No. 8974.
After all, in the initial determination of the proffered value, the Government is not strictly required to adhere to
any predetermined standards, although its proffered value may later be subjected to judicial review using the
standards enumerated under Section 5 of Rep. Act No. 8974.

How should we appreciate the questioned order of Hon. Gingoyon, which pegged the amount to be
immediately paid to PIATCO at around $62 (4h 9m).3 Million? The Order dated 4 January 2005, which
mandated such amount, proves problematic in that regard. While the initial sum of P3 Billion may have been
based on the assessed value, a standard which should not however apply in this case, the RTC cites without
qualification Section 4(a) of Rep. Act No. 8974 as the basis for the amount of $62 (4h 9m).3 Million, thus
leaving the impression that the BIR zonal valuation may form part of the basis for just compensation, which
should not be the case. Moreover, respondent judge made no attempt to apply the enumerated guidelines for
determination of just compensation under Section 5 of Rep. Act No. 8974, as required for judicial review of the
proffered value.

The Court notes that in the 10 January 2005 Omnibus Order, the RTC noted that the concessions
agreement entered into between the Government and PIATCO stated that the actual cost of building NAIA 3
was not less than US$350 (23h 20m) Million.[47] The RTC then proceeded to observe that while Rep. Act No.
8974 required the immediate payment to PIATCO the amount equivalent to 100% of the value of NAIA 3, the
amount deposited by the Government constituted only 18% of this value. At this point, no binding import should
be given to this observation that the actual cost of building NAIA 3 was not less than US$350 (23h 20m) Million,
as the final conclusions on the amount of just compensation can come only after due ascertainment in
accordance with the standards set under Rep. Act No. 8974, not the declarations of the parties. At the same
time, the expressed linkage between the BIR zonal valuation and the amount of just compensation in this case,
is revelatory of erroneous thought on the part of the RTC.

We have already pointed out the irrelevance of the BIR zonal valuation as an appropriate basis for
valuation in this case, PIATCO not being the owner of the land on which the NAIA 3 facilities stand. The subject
order is flawed insofar as it fails to qualify that such standard is inappropriate.

It does appear that the amount of US$62 (4h 9m).3 Million was based on the certification issued by the
LBP-Baclaran that the Republic of the Philippines maintained a total balance in that branch amounting to such
amount. Yet the actual representation of the $62 (4h 9m).3 Million is not clear. The Land Bank Certification
expressing such amount does state that it was issued upon request of the Manila International Airport Authority
purportedly as guaranty deposit for the expropriation complaint.[48] The Government claims in its Memorandum
that the entire amount was made available as a guaranty fund for the final and executory judgment of the trial
court, and not merely for the issuance of the writ of possession.[49] One could readily conclude that the entire
amount of US$62 (4h 9m).3 Million was intended by the Government to answer for whatever guaranties may be
required for the purpose of the expropriation complaint.

Still, such intention the Government may have had as to the entire US$62 (4h 9m).3 Million is only
inferentially established. In ascertaining the proffered value adduced by the Government, the amount of P3
Billion as the amount deposited characterized in the complaint as to be held by [Land Bank] subject to the
[RTCs] orders,[50] should be deemed as controlling. There is no clear evidence that the Government intended to
offer US$62 (4h 9m).3 Million as the initial payment of just compensation, the wording of the Land Bank
Certification notwithstanding, and credence should be given to the consistent position of the Government on
that aspect.

In any event, for the RTC to be able to justify the payment of US$62 (4h 9m).3 Million to PIATCO and
not P3 Billion Pesos, he would have to establish that the higher amount represents the valuation of the
structures/improvements, and not the BIR zonal valuation on the land wherein NAIA 3 is built. The Order dated
5 January 2005 fails to establish such integral fact, and in the absence of contravening proof, the proffered
value of P3 Billion, as presented by the Government, should prevail.

Strikingly, the Government submits that assuming that Rep. Act No. 8974 is applicable, the deposited
amount of P3 Billion should be considered as the proffered value, since the amount was based on comparative
values made by the City Assessor.[51] Accordingly, it should be deemed as having faithfully complied with the
requirements of the statute.[52] While the Court agrees that P3 Billion should be considered as the correct
proffered value, still we cannot deem the Government as having faithfully complied with Rep. Act No. 8974. For
the law plainly requires direct payment to the property owner, and not a mere deposit with the authorized
government depositary. Without such direct payment, no writ of possession may be obtained.

Writ of Possession May Not

Be Implemented Until Actual
Receipt by PIATCO of Proferred
Value

The Court thus finds another error on the part of the RTC. The RTC authorized the issuance of the writ
of possession to the Government notwithstanding the fact that no payment of any amount had yet been made
to PIATCO, despite the clear command of Rep. Act No. 8974 that there must first be payment before the writ of
possession can issue. While the RTC did direct the LBP-Baclaran to immediately release the amount of US$62
(4h 9m) Million to PIATCO, it should have likewise suspended the writ of possession, nay, withdrawn it
altogether, until the Government shall have actually paid PIATCO. This is the inevitable consequence of the
clear command of Rep. Act No. 8974 that requires immediate payment of the initially determined amount of just
compensation should be effected. Otherwise, the overpowering intention of Rep. Act No. 8974 of ensuring
payment first before transfer of repossession would be eviscerated.

Rep. Act No. 8974 represents a significant change from previous expropriation laws such as Rule 67, or
even Section 19 of the Local Government Code. Rule 67 and the Local Government Code merely provided that
the Government deposit the initial amounts[53] antecedent to acquiring possession of the property with,
respectively, an authorized
Government depositary[54] or the proper court.[55] In both cases, the private owner does not receive
compensation prior to the deprivation of property. On the other hand, Rep. Act No. 8974 mandates immediate
payment of the initial just compensation prior to the issuance of the writ of possession in favor of the
Government.

Rep. Act No. 8974 is plainly clear in imposing the requirement of immediate prepayment, and no amount of
statutory deconstruction can evade such requisite. It enshrines a new approach towards eminent domain that
reconciles the inherent unease attending expropriation proceedings with a position of fundamental equity. While
expropriation proceedings have always demanded just compensation in exchange for private property, the
previous deposit requirement impeded immediate compensation to the private owner, especially in cases
wherein the determination
of the final amount of compensation would prove highly disputed. Under the new modality prescribed by Rep.
Act No. 8974, the private owner sees immediate monetary recompense with the same degree of speed as the
taking of his/her property.

While eminent domain lies as one of the inherent powers of the State, there is no requirement that it
undertake a prolonged procedure, or that the payment of the private owner be protracted as far as practicable.
In fact, the expedited procedure of payment, as highlighted under Rep. Act No. 8974, is inherently more fair,
especially to the layperson who would be hard-pressed to fully comprehend the social value of expropriation in
the first place. Immediate payment placates to some degree whatever ill-will that arises from expropriation, as
well as satisfies the demand of basic fairness.

The Court has the duty to implement Rep. Act No. 8974 and to direct compliance with the requirement of
immediate payment in this case. Accordingly, the Writ of Possession dated 21 December 2004 should be held
in abeyance, pending proof of actual payment by the Government to PIATCO of the proffered value of the NAIA
3 facilities, which totals P3,002,125,000.00.

Rights of the Government

upon Issuance of the Writ
of Possession

Once the Government pays PIATCO the amount of the proffered value of P3 Billion, it will be entitled to the Writ
of Possession. However, the Government questions the qualification imposed by the RTC in its 4 January
2005 Order consisting of the prohibition on the Government from performing acts of ownership such as
awarding concessions or leasing any part of NAIA 3 to other parties. To be certain, the RTC, in its 10 January
2005 Omnibus Order, expressly stated that it was not affirming the superfluous part of the Order [of 4 January
2005] prohibiting the plaintiffs from awarding concessions or leasing any part of NAIA [3] to other
parties.[56] Still, such statement was predicated on the notion that since the Government was not yet the owner
of NAIA 3 until final payment of just compensation, it was obviously incapacitated to perform such acts of
ownership.

In deciding this question, the 2004 Resolution in Agan cannot be ignored, particularly the declaration that [f]or
the government to take over the said facility, it has to compensate respondent PIATCO as builder of the said
structures. The obvious import of this holding is that unless PIATCO is paid just compensation, the Government
is barred from taking over, a phrase which in the strictest sense could encompass even a bar of physical
possession of NAIA 3, much less operation of the facilities.

There are critical reasons for the Court to view the 2004 Resolution less stringently, and thus allow the
operation by the Government of NAIA 3 upon the effectivity of the Writ of Possession. For one, the national
prestige is diminished every day that passes with the NAIA 3 remaining mothballed. For another, the continued
non-use of the facilities contributes to its physical deterioration, if it has not already. And still for another, the
economic benefits to the Government and the country at large are beyond dispute once the NAIA 3 is put in
operation.

Rep. Act No. 8974 provides the appropriate answer for the standard that governs the extent of the acts the
Government may be authorized to perform upon the issuance of the writ of possession. Section 4 states that
the court shall immediately issue to the implementing agency an order to take possession of the property
and start the implementation of the project. We hold that accordingly, once the Writ of Possession is
effective, the Government itself is authorized to perform the acts that are essential to the operation of the NAIA
3 as an international airport terminal upon the effectivity of the Writ of Possession. These would include the
repair, reconditioning and improvement of the complex, maintenance of the existing facilities and equipment,
installation of new facilities and equipment, provision of services and facilities pertaining to the facilitation of air
traffic and transport, and other services that are integral to a modern-day international airport.
The Governments position is more expansive than that adopted by the Court. It argues that with the writ
of possession, it is enabled to perform acts de jure on the expropriated property. It cites Republic v. Tagle,[57] as
well as the statement therein that the expropriation of real property does not include mere physical entry or
occupation of land, and from them concludes that its mere physical entry and occupation of the property fall
short of the taking of title, which includes all the rights that may be exercised by an owner over the subject
property.

This conclusion is indeed lifted directly from statements in Tagle,[58] but not from the ratio decidendi of
that case. Tagle concerned whether a writ of possession in favor of the Government was still necessary in light
of the fact that it was already in actual possession of the property. In ruling that the Government was entitled to
the writ of possession, the Court in Tagle explains that such writ vested not only physical possession, but also
the legal right to possess the property. Continues the Court, such legal right to possess was particularly
important in the case, as there was a pending suit against the Republic for unlawful detainer, and the writ of
possession would serve to safeguard the Government from eviction.[59]

At the same time, Tagle conforms to the obvious, that there is no transfer of ownership as of yet by virtue of the
writ of possession. Tagle may concede that the Government is entitled to exercise more than just the right of
possession by virtue of the writ of possession, yet it cannot be construed to grant the Government the entire
panoply of rights that are available to the owner. Certainly, neither Tagle nor any other case or law, lends
support to the Governments proposition that it acquires beneficial or equitable ownership of the expropriated
property merely through the writ of possession.

Indeed, this Court has been vigilant in defense of the rights of the property owner who has been validly
deprived of possession, yet retains legal title over the expropriated property pending payment of just
compensation. We reiterated the various doctrines of such import in our recent holding in Republic v. Lim:[60]

The recognized rule is that title to the property expropriated shall pass from the owner to the
expropriator only upon full payment of the just compensation. Jurisprudence on this settled
principle is consistent both here and in other democratic jurisdictions. In Association of Small
Landowners in the Philippines, Inc. et al., vs. Secretary of Agrarian Reform[[61]], thus:

Title to property which is the subject of condemnation proceedings does

not vest the condemnor until the judgment fixing just compensation is entered
and paid, but the condemnors title relates back to the date on which the petition
 under the Eminent Domain Act, or the commissioners report under the Local
Improvement Act, is filed.
x xx Although the right to appropriate and use land taken for a canal is
complete at the time of entry, title to the property taken remains in the owner
until payment is actually made. (Emphasis supplied.)
In Kennedy v. Indianapolis, the US Supreme Court cited several cases
holding that title to property does not pass to the condemnor until just compensation
had actually been made. In fact, the decisions appear to be uniform to this effect. As
early as 1838, in Rubottom v. McLure, it was held that actual payment to the owner
of the condemned property was a condition precedent to the investment of the
title to the property in the State albeit not to the appropriation of it to public
use. In Rexford v. Knight, the Court of Appeals of New York said that the construction
upon the statutes was that the fee did not vest in the State until the payment of the
compensation although the authority to enter upon and appropriate the land was
complete prior to the payment. Kennedy further said that both on principle and
authority the rule is . . . that the right to enter on and use the property is
complete, as soon as the property is actually appropriated under the authority
of law for a public use, but that the title does not pass from the owner without
his consent, until just compensation has been made to him.
Our own Supreme Court has held in Visayan Refining Co. v. Camus and
Paredes, that:

If the laws which we have exhibited or cited in the preceding discussion

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

Clearly, without full payment of just compensation, there can be no transfer of title from the
landowner to the expropriator. Otherwise stated, the Republics acquisition of ownership is
conditioned upon the full payment of just compensation within a reasonable time.
Significantly, in Municipality of Bian v. Garcia[[62]] this Court ruled that the expropriation of
lands consists of two stages, to wit:
x xx The first is concerned with the determination of the authority of the
plaintiff to exercise the power of eminent domain and the propriety of its exercise in
the context of the facts involved in the suit. It ends with an order, if not of dismissal of
the action, of condemnation declaring that the plaintiff has a lawful right to take the
property sought to be condemned, for the public use or purpose described in the
complaint, upon the payment of just compensation to be determined as of the date of
the filing of the complaint x x x.
The second phase of the eminent domain action is concerned with the
determination by the court of the just compensation for the property sought to be
taken. This is done by the court with the assistance of not more than three (3)
commissioners. x x x.

It is only upon the completion of these two stages that expropriation is said to have been
completed. In Republic v. Salem Investment Corporation[[63]] , we ruled that, the process is not
completed until payment of just compensation. Thus, here, the failure of the Republic to pay
respondent and his predecessors-in-interest for a period of 57 years rendered the expropriation
process incomplete.
Lim serves fair warning to the Government and its agencies who consistently refuse to pay just compensation
due to the private property owner whose property had been
expropriated. At the same time, Lim emphasizes the fragility of the rights of the Government as possessor
pending the final payment of just compensation, without diminishing the potency of such rights. Indeed, the
public policy, enshrined foremost in the Constitution, mandates that the Government must pay for the private
property it expropriates. Consequently, the proper judicial attitude is to guarantee compliance with this
primordial right to just compensation.
Final Determination of Just
Compensation Within 60 Days

The issuance of the writ of possession does not write finis to the expropriation proceedings. As earlier pointed
out, expropriation is not completed until payment to the property owner of just compensation. The proffered
value stands as merely a provisional determination of the amount of just compensation, the payment of which is
sufficient to transfer possession of the property to the Government. However, to effectuate the transfer of
ownership, it is necessary for the Government to pay the property owner the final just compensation.
In Lim, the Court went as far as to countenance, given the exceptional circumstances of that case, the
reversion of the validly expropriated property to private ownership due to the failure of the Government to pay
just compensation in that case.[64] It was noted in that case that the Government deliberately refused to pay just
compensation. The Court went on to rule that in cases where the government failed to pay just compensation
within five (5) years from the finality of the judgment in the expropriation proceedings, the owners concerned
shall have the right to recover possession of their property.[65]

Rep. Act No. 8974 mandates a speedy method by which the final determination of just compensation
may be had. Section 4 provides:

In the event that the owner of the property contests the implementing agencys proffered
value, the court shall determine the just compensation to be paid the owner within sixty (60) days
from the date of filing of the expropriation case. When the decision of the court becomes final and
executory, the implementing agency shall pay the owner the difference between the amount already
paid and the just compensation as determined by the court.

We hold that this provision should apply in this case. The sixty (60)-day period prescribed in Rep. Act
No. 8974 gives teeth to the laws avowed policy to ensure that owners of real property acquired for national
government infrastructure projects are promptly paid just compensation.[66] In this case, there already has
been irreversible delay in the prompt payment of PIATCO of just compensation, and it is no longer possible for
the RTC to determine the just compensation due PIATCO within sixty (60) days from the filing of the complaint
last 21 December 2004, as contemplated by the law. Still, it is feasible to effectuate the spirit of the law by
requiring the trial court to make such determination within sixty (60) days from finality of this decision, in
accordance with the guidelines laid down in Rep. Act No. 8974 and its Implementing Rules.

Of course, once the amount of just compensation has been finally determined, the Government is
obliged to pay PIATCO the said amount. As shown in Lim and other like-minded cases, the Governments
refusal to make such payment is indubitably actionable in court.
Appointment of Commissioners
The next argument for consideration is the claim of the Government that the RTC erred in appointing the three
commissioners in its 7 January 2005 Order without prior consultation with either the Government or PIATCO, or
without affording the Government the opportunity to object to the appointment of these commissioners. We can
dispose of this argument without complication.

It must be noted that Rep. Act No. 8974 is silent on the appointment of commissioners tasked with the
ascertainment of just compensation.[67]This protocol though is sanctioned under Rule 67. We rule that the
appointment of commissioners under Rule 67 may be resorted to, even in expropriation proceedings under
Rep. Act No. 8974, since the application of the provisions of Rule 67 in that regard do not conflict with the
statute. As earlier stated, Section 14 of the Implementing Rules does allow such other incidents affecting the
complaint to be resolved under the provisions on expropriation of Rule 67 of the Rules of Court. Even without
Rule 67, reference during trial to a commissioner of the examination of an issue of fact is sanctioned under
Rule 32 of the Rules of Court.

But while the appointment of commissioners under the aegis of Rule 67 may be sanctioned in expropriation
proceedings under Rep. Act No. 8974, the standards to be observed for the determination of just compensation
are provided not in Rule 67 but in the statute. In particular, the governing standards for the determination of just
compensation for the NAIA 3 facilities are found in Section 10 of the Implementing Rules for Rep. Act No. 8974,
which provides for the replacement cost method in the valuation of improvements and structures.[68]

Nothing in Rule 67 or Rep. Act No. 8974 requires that the RTC consult with the parties in the expropriation case
on who should be appointed as commissioners. Neither does the Court feel that such a requirement should be
imposed in this case. We did rule in Municipality of Talisay v. Ramirez[69] that there is nothing to prevent [the
trial court] from seeking the recommendations of the parties on [the] matter [of appointment of commissioners],
the better to ensure their fair representation.[70] At the same time, such solicitation of recommendations is not
obligatory on the part of the court, hence we cannot impute error on the part of the RTC in its exercise of
solitary discretion in the appointment of the commissioners.

What Rule 67 does allow though is for the parties to protest the appointment of any of these commissioners, as
provided under Section 5 of the Rule. These objections though must be made filed within ten (10) days from
service of the order of appointment of the commissioners.[71] In this case, the proper recourse of the
Government to challenge the choice of the commissioners is to file an objection with the trial court, conformably
with Section 5, Rule 67, and not as it has done, assail the same through a special civil action for certiorari.
Considering that the expropriation proceedings in this case were effectively halted seven (7) days after
the Order appointing the commissioners,[72] it is permissible to allow the parties to file their objections with the
RTC within five (5) days from finality of this decision.

Insufficient Ground for Inhibition

of Respondent Judge
The final argument for disposition is the claim of the Government is that Hon. Gingoyon has prejudged the
expropriation case against the Governments cause and, thus, should be required to inhibit himself. This grave
charge is predicated on facts which the Government characterizes as undeniable. In particular, the Government
notes that the 4 January 2005 Order was issued motuproprio, without any preceding motion, notice or hearing.
Further, such order, which directed the payment of US$62 (4h 9m) Million to PIATCO, was attended with error
in the computation of just compensation. The Government also notes that the said Order was issued even
before summons had been served on PIATCO.

The disqualification of a judge is a deprivation of his/her judicial power [73] and should not be allowed on the
basis of mere speculations and surmises. It certainly cannot be predicated on the adverse nature of the judges
rulings towards the movant for inhibition, especially if these rulings are in accord with law. Neither could
inhibition be justified merely on the erroneous nature of the rulings of the judge. We emphasized in Webb v.
People:[74]

To prove bias and prejudice on the part of respondent judge, petitioners harp on the
alleged adverse and erroneous rulings of respondent judge on their various motions. By
themselves, however, they do not sufficiently prove bias and prejudice to disqualify
respondent judge. To be disqualifying, the bias and prejudice must be shown to have
stemmed from an extrajudicial source and result in an opinion on the merits on some basis
other than what the judge learned from his participation in the case. Opinions formed in the
course of judicial proceedings, although erroneous, as long as they are based on the evidence
presented and conduct observed by the judge, do not prove personal bias or prejudice on the part
of the judge. As a general rule, repeated rulings against a litigant, no matter how erroneous
and vigorously and consistently expressed, are not a basis for disqualification of a judge on
grounds of bias and prejudice. Extrinsic evidence is required to establish bias, bad faith,
malice or corrupt purpose, in addition to the palpable error which may be inferred from the
decision or order itself. Although the decision may seem so erroneous as to raise doubts
concerning a judge's integrity, absent extrinsic evidence, the decision itself would be
insufficient to establish a case against the judge. The only exception to the rule is when the
error is so gross and patent as to produce an ineluctable inference of bad faith or malice.[75]

The Governments contentions against Hon. Gingoyon are severely undercut by the fact that the 21 December
2004 Order, which the 4 January 2005 Order sought to rectify, was indeed severely flawed as it erroneously
applied the provisions of Rule 67 of the Rules of Court, instead of Rep. Act No. 8974, in ascertaining
compliance with the requisites for the issuance of the writ of possession. The 4 January

2005 Order, which according to the Government establishes Hon. Gingoyons bias, was promulgated precisely
to correct the previous error by applying the correct provisions of law. It would not speak well of the Court if it
sanctions a judge for wanting or even attempting to correct a previous erroneous order which precisely is the
right move to take.

Neither are we convinced that the motuproprio issuance of the 4 January 2005 Order, without the benefit of
notice or hearing, sufficiently evinces bias on the part of Hon. Gingoyon. The motuproprio amendment by a
court of an erroneous order previously issued may be sanctioned depending on the circumstances, in line with
the long-recognized principle that every court has inherent power to do all things reasonably necessary for the
administration of justice within the scope of its jurisdiction. [76] Section 5(g), Rule 135 of the Rules of Court
further recognizes the inherent power of courts to amend and control its process and orders so as to make
them conformable to law and justice,[77] a power which Hon. Gingoyon noted in his 10 January 2005 Omnibus
Order.[78] This inherent power includes the right of the court to reverse itself, especially when in its honest
opinion it has committed an error or mistake in judgment, and that to adhere to its decision will cause injustice
to a party litigant.[79]

Certainly, the 4 January 2005 Order was designed to make the RTCs previous order conformable to law and
justice, particularly to apply the correct law of the case. Of course, as earlier established, this effort proved
incomplete, as the 4 January 2005 Order did not correctly apply Rep. Act No. 8974 in several respects. Still, at
least, the 4 January 2005 Order correctly reformed the most basic premise of the case that Rep. Act No. 8974
governs the expropriation proceedings.
Nonetheless, the Government belittles Hon. Gingoyons invocation of Section 5(g), Rule 135 as patently without
merit. Certainly merit can be seen by the fact that the 4 January 2005 Order reoriented the expropriation
proceedings towards the correct governing law. Still, the Government claims that the unilateral act of the RTC
did not conform to law or justice, as it was not afforded the right to be heard.

The Court would be more charitably disposed towards this argument if not for the fact that the earlier
order with the 4 January 2005 Ordersought to correct was itself issued without the benefit of any hearing. In
fact, nothing either in Rule 67 or Rep. Act No. 8975 requires the conduct of a hearing prior to the issuance of
the writ of possession, which by design is available immediately upon the filing of the complaint provided that
the requisites attaching thereto are present. Indeed, this expedited process for the obtention of a writ of
possession in expropriation cases comes at the expense of the rights of the property owner to be heard or to be
deprived of possession. Considering these predicates, it would be highly awry to demand that an order
modifying the earlier issuance of a writ of possession in an expropriation case be barred until the staging of a
hearing, when the issuance of the writ of possession itself is not subject to hearing. Perhaps the conduct of a
hearing under these circumstances would be prudent. However, hearing is not mandatory, and the failure to
conduct one does not establish the manifest bias required for the inhibition of the judge.

The Government likewise faults Hon. Gingoyon for using the amount of US$350 (23h 20m) Million as the basis
for the 100% deposit under Rep. Act No. 8974. The Court has noted that this statement was predicated on the
erroneous belief that the BIR zonal valuation applies as a standard for determination of just compensation in
this case. Yet this is manifest not of bias, but merely of error on the part of the judge. Indeed, the Government
was not the only victim of the errors of the RTC in the assailed orders. PIATCO itself was injured by the
issuance by the RTC of the writ of possession, even though the former had yet to be paid any amount of just
compensation. At the same time, the Government was also prejudiced by the erroneous ruling of the RTC that
the amount of US$62 (4h 9m).3 Million, and not P3 Billion, should be released to PIATCO.

The Court has not been remiss in pointing out the multiple errors committed by the RTC in its assailed
orders, to the prejudice of both parties. This attitude of error towards all does not ipso facto negate the charge
of bias. Still, great care should be had in requiring the inhibition of judges simply because the magistrate did
err. Incompetence may be a ground for administrative sanction, but not for inhibition, which requires lack of
objectivity or impartiality to sit on a case.

The Court should necessarily guard against adopting a standard that a judge should be inhibited from
hearing the case if one litigant loses trust in the judge. Such loss of trust on the part of the Government may be
palpable, yet inhibition cannot be grounded merely on the feelings of the party-litigants. Indeed, every losing
litigant in any case can resort to claiming that the judge was biased, and he/she will gain a sympathetic ear
from friends, family, and people who do not understand the judicial process. The test in believing such a
proposition should not be the vehemence of the litigants claim of bias, but the Courts judicious estimation, as
people who know better than to believe any old cry of wolf!, whether such bias has been irrefutably exhibited.
 The Court acknowledges that it had been previously held that at the very first sign of lack of faith and
trust in his actions, whether well-grounded or not, the judge has no other alternative but to inhibit himself from
the case.[80] But this doctrine is qualified by the entrenched rule that a judge may not be legally prohibited from
sitting in a litigation, but when circumstances appear that will induce doubt to his honest actuations and probity
in favor of either party, or incite such state of mind, he should conduct a careful self-
examination. He should exercise his discretion in a way that the people's faith in the Courts of Justice is not
impaired.[81] And a self-assessment by the judge that he/she is not impaired to hear the case will be respected
by the Court absent any evidence to the contrary. As held in Chin v. Court of Appeals:

An allegation of prejudgment, without more, constitutes mere conjecture and is not one of
the "just and valid reasons" contemplated in the second paragraph of Rule 137 of the Rules of
Court for which a judge may inhibit himself from hearing the case. We have repeatedly held that
mere suspicion that a judge is partial to a party is not enough. Bare allegations of partiality and
prejudgment will not suffice in the absence of clear and convincing evidence to overcome the
presumption that the judge will undertake his noble role to dispense justice according to law and
evidence and without fear or favor. There should be adequate evidence to prove the allegations,
and there must be showing that the judge had an interest, personal or otherwise, in the prosecution
of the case. To be a disqualifying circumstance, the bias and prejudice must be shown to have
stemmed from an extrajudicial source and result in an opinion on the merits on some basis other
than what the judge learned from his participation in the case.[82]

The mere vehemence of the Governments claim of bias does not translate to clear and convincing evidence of
impairing bias. There is no sufficient ground to direct the inhibition of Hon. Gingoyon from hearing the
expropriation case.

In conclusion, the Court summarizes its rulings as follows:

(1) The 2004 Resolution in Agan sets the base requirement that has to be observed before the Government
may take over the NAIA 3, that there must be payment to PIATCO of just compensation in accordance with law
and equity. Any ruling in the present expropriation case must be conformable to the dictates of the Court as
pronounced in the Agan cases.

(2) Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment by the
Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides certain valuation
standards or methods for the determination of just compensation.

(3) Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the Government over
NAIA 3 is held in abeyance until PIATCO is directly paid the amount of P3 Billion, representing the proffered
value of NAIA 3 under Section 4(c) of the law.

(4) Applying Rep. Act No. 8974, the Government is authorized to start the implementation of the NAIA 3 Airport
terminal project by performing the acts that are essential to the operation of the NAIA 3 as an international
airport terminal upon the effectivity of the Writ of Possession, subject to the conditions above-stated. As
prescribed by the Court, such authority encompasses the repair, reconditioning and improvement of the
complex, maintenance of the existing facilities and equipment, installation of new facilities and equipment,
provision of services and facilities pertaining to the facilitation of air traffic and transport, and other services that
are integral to a modern-day international airport.[83]

(5) The RTC is mandated to complete its determination of the just compensation within sixty (60) days from
finality of this Decision. In doing so, the RTC is obliged to comply with law and equity as ordained in Again and
the standard set under Implementing Rules of Rep. Act No. 8974 which is the replacement cost method as the
standard of valuation of structures and improvements.

(6) There was no grave abuse of discretion attending the RTC Order appointing the commissioners for
the purpose of determining just compensation. The provisions on commissioners under Rule 67 shall apply
insofar as they are not inconsistent with Rep. Act No. 8974, its Implementing Rules, or the rulings of the Court
in Agan.

(7) The Government shall pay the just compensation fixed in the decision of the trial court to PIATCO
immediately upon the finality of the said decision.

(8) There is no basis for the Court to direct the inhibition of Hon. Gingoyon.

All told, the Court finds no grave abuse of discretion on the part of the RTC to warrant the nullification of
the questioned orders. Nonetheless, portions of these orders should be modified to conform with law and the
pronouncements made by the Court herein.

WHEREFORE, the Petition is GRANTED in PART with respect to the orders dated 4 January 2005 and 10
January 2005 of the lower court. Said orders are AFFIRMED with the following MODIFICATIONS:

1) The implementation of the Writ of Possession dated 21 December 2005 is HELD IN ABEYANCE,
pending payment by petitioners to PIATCO of the amount of Three Billion Two Million One Hundred
Twenty Five Thousand Pesos (P3,002,125,000.00), representing the proffered value of the NAIA 3
facilities;
2) Petitioners, upon the effectivity of the Writ of Possession, are authorized start the implementation
of the Ninoy Aquino International Airport Pasenger Terminal III project by performing the acts that
are essential to the operation of the said International Airport Passenger Terminal project;
3) RTC Branch 117 is hereby directed, within sixty (60) days from finality of this Decision, to
determine the just compensation to be paid to PIATCO by the Government.

The Order dated 7 January 2005 is AFFIRMED in all respects subject to the qualification that the parties
are given ten (10) days from finality of this Decision to file, if they so choose, objections to the appointment of
the commissioners decreed therein.

The Temporary Restraining Order dated 14 January 2005 is hereby LIFTED.

No pronouncement as to costs.
 SO ORDERED.

DIGEST:
FACTS: The present controversy has its roots with the promulgation of the Court‘s decision in Agan v.
PIATCO, promulgated in 2003 (2003 Decision). This decision nullified the ―Concession Agreement for the
Build-Operate-and-Transfer Arrangement of the Ninoy Aquino International Airport Passenger Terminal III‖
entered into between the Philippine Government (Government) and the Philippine International Air Terminals
Co., Inc. (PIATCO), as well as the amendments and supplements thereto.

The agreement had authorized PIATCO to build a new international airport terminal (NAIA 3), as well as a
franchise to operate and maintain the said terminal during the concession period of 25 years. The contracts
were nullified and that the agreement was contrary to public policy. At the time of the promulgation of the 2003
Decision, the NAIA 3 facilities had already been built by PIATCO and were nearing completion. However, the
ponencia was silent as to the legal status of the NAIA 3 facilities following the nullification of the contracts, as
well as whatever rights of PIATCO for reimbursement for its expenses in the construction of the facilities.

After the promulgation of the rulings in Agan, the NAIA 3 facilities have remained in the possession of PIATCO,
despite the avowed intent of the Government to put the airport terminal into immediate operation. The
Government and PIATCO conducted several rounds of negotiation regarding the NAIA 3 facilities.

In 2004, the Government filed a Complaint for expropriation with the Pasay RTC. The Government sought
upon the filing of the complaint the issuance of a writ of possession authorizing it to take immediate possession
and control over the NAIA 3 facilities. The Government also declared that it had deposited the amount of
P3,002,125,000.00 (3 Billion) in Cash with the Land Bank of the Philippines, representing the NAIA 3 terminal‘s
assessed value for taxation purposes. The Government insists that Rule 67 of the Rules of Court governs the
expropriation proceedings in this case to the exclusion of all other laws. On the other hand, PIATCO claims
that it is Rep. Act No. 8974 which does apply.

ISSUE
Whether or not Rule 67 of the Rules of Court or Rep. Act No. 8974 governs the expropriation proceedings in
this case?

HELD: The 2004 Resolution in Agan sets the base requirement that has to be observed before the
Government may take over the NAIA 3, that there must be payment to PIATCO of just compensation in
accordance with law and equity. Any ruling in the present expropriation case must be conformable to the
dictates of the Court as pronounced in the Agan cases.

Rule 67 outlines the procedure under which eminent domain may be exercised by the Government.

Rep. Act No. 8974, which covers expropriation proceedings intended for national government infrastructure
projects. Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner
than Rule 67, inescapably applies in instances when the national government expropriates property ―for
national government infrastructure projects.‖ Thus, if expropriation is engaged in by the national government
for purposes other than national infrastructure projects, the assessed value standard and the deposit mode
prescribed in Rule 67 continues to apply.

Rep. Act No. 8974 applies in this case, particularly insofar as it requires the immediate payment by the
Government of at least the proffered value of the NAIA 3 facilities to PIATCO and provides certain valuation
standards or methods for the determination of just compensation.

Applying Rep. Act No. 8974, the implementation of Writ of Possession in favor of the Government over NAIA 3
is held in abeyance until PIATCO is directly paid the amount of P3 Billion, representing the proffered value of
NAIA 3 under Section 4(c) of the law.

4. G.R. No. 172410 April 14, 2008

REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE TOLL REGULATORY BOARD (TRB), petitione,
vs.
HOLY TRINITY REALTY DEVELOPMENT CORP., respondent.

DECISION

CHICO-NAZARIO, J.:

1
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking to set aside the Decision dated 21 April 2006 of
2 3 4
the Court of Appeals in CA-G.R. SP No. 90981 which, in turn, set aside two Orders dated 7 February 2005 and 16 May 2005 of the
Regional Trial Court (RTC) of Malolos, Bulacan, in Civil Case No. 869-M-2000.

The undisputed factual and procedural antecedents of this case are as follows:

On 29 December 2000, petitioner Republic of the Philippines, represented by the Toll Regulatory Board (TRB), filed with the RTC a
Consolidated Complaint for Expropriation against landowners whose properties would be affected by the construction, rehabilitation and
expansion of the North Luzon Expressway. The suit was docketed as Civil Case No. 869-M-2000 and raffled to Branch 85, Malolos,
Bulacan. Respondent Holy Trinity Realty and Development Corporation (HTRDC) was one of the affected landowners.

On 18 March 2002, TRB filed an Urgent Ex-Parte Motion for the issuance of a Writ of Possession, manifesting that it deposited a
sufficient amount to cover the payment of 100% of the zonal value of the affected properties, in the total amount of P28,406,700.00,
with the Land Bank of the Philippines, South Harbor Branch (LBP-South Harbor), an authorized government depository. TRB
5
maintained that since it had already complied with the provisions of Section 4 of Republic Act No. 8974 in relation to Section 2 of Rule
67 of the Rules of Court, the issuance of the writ of possession becomes ministerial on the part of the RTC.

The RTC issued, on 19 March 2002, an Order for the Issuance of a Writ of Possession, as well as the Writ of Possession itself. HTRDC
thereafter moved for the reconsideration of the 19 March 2002 Order of the RTC.

On 7 October 2002, the Sheriff filed with the RTC a Report on Writ of Possession stating, among other things, that since none of the
landowners voluntarily vacated the properties subject of the expropriation proceedings, the assistance of the Philippine National Police
(PNP) would be necessary in implementing the Writ of Possession. Accordingly, TRB, through the Office of the Solicitor General
(OSG), filed with the RTC an Omnibus Motion praying for an Order directing the PNP to assist the Sheriff in the implementation of the
Writ of Possession. On 15 November 2002, the RTC issued an Order directing the landowners to file their comment on TRB‘s Omnibus
Motion.

On 3 March 2003, HTRDC filed with the RTC a Motion to Withdraw Deposit, praying that the respondent or its duly authorized
representative be allowed to withdraw the amount of P22,968,000.00, out of TRB‘s advance deposit of P28,406,700.00 with LBP-South
Harbor, including the interest which accrued thereon. Acting on said motion, the RTC issued an Order dated 21 April 2003, directing the
manager of LBP-South Harbor to release in favor of HTRDC the amount of P22,968,000.00 since the latter already proved its absolute
ownership over the subject properties and paid the taxes due thereon to the government. According to the RTC, "(t)he issue however
6
on the interest earned by the amount deposited in the bank, if there is any, should still be threshed out."

On 7 May 2003, the RTC conducted a hearing on the accrued interest, after which, it directed the issuance of an order of expropriation,
and granted TRB a period of 30 days to inquire from LBP-South Harbor "whether the deposit made by DPWH with said bank relative to
7
these expropriation proceedings is earning interest or not."
The RTC issued an Order, on 6 August 2003, directing the appearance of LBP Assistant Vice-President Atty. Rosemarie M. Osoteo
and Department Manager Elizabeth Cruz to testify on whether the Department of Public Works and Highways‘ (DPWH‘s) expropriation
account with the bank was earning interest. On 9 October 2003, TRB instead submitted a Manifestation to which was attached a letter
dated 19 August 2003 by Atty. Osoteo stating that the DPWH Expropriation Account was an interest bearing current account.

On 11 March 2004, the RTC issued an Order resolving as follows the issue of ownership of the interest that had accrued on the amount
deposited by DPWH in its expropriation current account with LBP-South Harbor:

WHEREFORE, the interest earnings from the deposit of P22,968,000.00 respecting one hundred (100%) percent of the zonal
value of the affected properties in this expropriation proceedings under the principle of accession are considered as fruits and
should properly pertain to the herein defendant/property owner [HTRDC]. Accordingly, the Land Bank as the depositary bank
in this expropriation proceedings is (1) directed to make the necessary computation of the accrued interest of the amount
of P22,968,000.00 from the time it was deposited up to the time it was released to Holy Trinity Realty and Development Corp.
and thereafter (2) to release the same to the defendant Holy Trinity Development Corporation through its authorized
8
representative.

TRB filed a Motion for Reconsideration of the afore-quoted RTC Order, contending that the payment of interest on money deposited
and/or consigned for the purpose of securing a writ of possession was sanctioned neither by law nor by jurisprudence.

TRB filed a Motion to Implement Order dated 7 May 2003, which directed the issuance of an order of expropriation. On 5 November
2004, the RTC issued an Order of Expropriation.

On 7 February 2005, the RTC likewise granted TRB‘s Motion for Reconsideration. The RTC ruled that the issue as to whether or not
HTRDC is entitled to payment of interest should be ventilated before the Board of Commissioners which will be created later for the
determination of just compensation.

Now it was HTRDC‘s turn to file a Motion for Reconsideration of the latest Order of the RTC. The RTC, however, denied HTRDC‘s
Motion for Reconsideration in an Order dated 16 May 2005.

HTRDC sought recourse with the Court of Appeals by filing a Petition for Certiorari, docketed as CA-G.R. SP No. 90981. In its Decision,
promulgated on 21 April 2006, the Court of Appeals vacated the Orders dated 7 February 2005 and 16 May 2005 of the RTC, and
reinstated the Order dated 11 March 2004 of the said trial court wherein it ruled that the interest which accrued on the amount
deposited in the expropriation account belongs to HTRDC by virtue of accession. The Court of Appeals thus declared:

WHEREFORE, the foregoing premises considered, the assailed Orders dated 07 February and 16 May 2005 respectively of
the Regional Trial Court of Malolos, Bulacan (Branch 85) are hereby VACATED and SET ASIDE. Accordingly, the Order dated
9
11 March 2004 is hereby reinstated.

From the foregoing, the Republic, represented by the TRB, filed the present Petition for Review on Certiorari, steadfast in its stance that
HTRDC is "entitled only to an amount equivalent to the zonal value of the expropriated property, nothing more and nothing
10
less." According to the TRB, the owner of the subject properties is entitled to an exact amount as clearly defined in both Section 4 of
Republic Act No. 8974, which reads:

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

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

and Section 2, Rule 67 of the Rules of Court, which provides:

Sec. 2. Entry of plaintiff upon depositing value with authorized government depositary. – Upon the filing of the complaint or at
anytime thereafter and after due notice to the defendant, the plaintiff shall have the right to take or enter upon the possession
of the real property involved if he deposits with the authorized government depositary an amount equivalent to the assessed
value of the property for purposes of taxation to be held by such bank subject to the orders of the court. Such deposit shall
be in money, unless in lieu thereof the court authorizes the deposit of a certificate of deposit of a government bank of the
Republic of the Philippines payable on demand to the authorized government depositary.

11
The TRB reminds us that there are two stages in expropriation proceedings, the determination of the authority to exercise eminent
domain and the determination of just compensation. The TRB argues that it is only during the second stage when the court will appoint
 12
commissioners and determine claims for entitlement to interest, citing Land Bank of the Philippines v. Wycoco and National Power
13
Corporation v. Angas.

The TRB further points out that the expropriation account with LBP-South Harbor is not in the name of HTRDC, but of DPWH. Thus, the
said expropriation account includes the compensation for the other landowners named defendants in Civil Case No. 869-M-2000, and
does not exclusively belong to respondent.

At the outset, we call attention to a significant oversight in the TRB‘s line of reasoning. It failed to distinguish between the expropriation
procedures under Republic Act No. 8974 and Rule 67 of the Rules of Court. Republic Act No. 8974 and Rule 67 of the Rules of Court
speak of different procedures, with the former specifically governing expropriation proceedings for national government infrastructure
14
projects. Thus, in Republic v. Gingoyon, we held:

There are at least two crucial differences between the respective procedures under Rep. Act No. 8974 and Rule 67. Under
the statute, the Government is required to make immediate payment to the property owner upon the filing of the
complaint to be entitled to a writ of possession, whereas in Rule 67, the Government is required only to make an
initial deposit with an authorized government depositary. Moreover, Rule 67 prescribes that the initial deposit be
equivalent to the assessed value of the property for purposes of taxation, unlike Rep. Act No. 8974 which provides, as the
relevant standard for initial compensation, the market value of the property as stated in the tax declaration or the current
relevant zonal valuation of the Bureau of Internal Revenue (BIR), whichever is higher, and the value of the improvements
and/or structures using the replacement cost method.

x xxx

Rule 67 outlines the procedure under which eminent domain may be exercised by the Government. Yet by no means does it
serve at present as the solitary guideline through which the State may expropriate private property. For example, Section 19 of
the Local Government Code governs as to the exercise by local government units of the power of eminent domain through an
enabling ordinance. And then there is Rep. Act No. 8974, which covers expropriation proceedings intended for national
government infrastructure projects.

Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner than Rule 67, inescapably
applies in instances when the national government expropriates property "for national government infrastructure projects."
Thus, if expropriation is engaged in by the national government for purposes other than national infrastructure projects, the
assessed value standard and the deposit mode prescribed in Rule 67 continues to apply.

There is no question that the proceedings in this case deal with the expropriation of properties intended for a national government
infrastructure project. Therefore, the RTC correctly applied the procedure laid out in Republic Act No. 8974, by requiring the deposit of
the amount equivalent to 100% of the zonal value of the properties sought to be expropriated before the issuance of a writ of
possession in favor of the Republic.

The controversy, though, arises not from the amount of the deposit, but as to the ownership of the interest that had since accrued on
the deposited amount.

Whether the Court of Appeals was correct in holding that the interest earned by the deposited amount in the expropriation account
would accrue to HRTDC by virtue of accession, hinges on the determination of who actually owns the deposited amount, since, under
Article 440 of the Civil Code, the right of accession is conferred by ownership of the principal property:

Art. 440. The ownership of property gives the right by accession to everything which is produced thereby, or which is
incorporated or attached thereto, either naturally or artificially.

The principal property in the case at bar is part of the deposited amount in the expropriation account of DPWH which pertains
particularly to HTRDC. Such amount, determined to be P22,968,000.00 of the P28,406,700.00 total deposit, was already ordered by the
RTC to be released to HTRDC or its authorized representative. The Court of Appeals further recognized that the deposit of the amount
was already deemed a constructive delivery thereof to HTRDC:

When the [herein petitioner] TRB deposited the money as advance payment for the expropriated property with an authorized
government depositary bank for purposes of obtaining a writ of possession, it is deemed to be a "constructive delivery" of the
amount corresponding to the 100% zonal valuation of the expropriated property. Since [HTRDC] is entitled thereto and
undisputably the owner of the principal amount deposited by [herein petitioner] TRB, conversely, the interest yield, as
15
accession, in a bank deposit should likewise pertain to the owner of the money deposited.

Since the Court of Appeals found that the HTRDC is the owner of the deposited amount, then the latter should also be entitled to the
interest which accrued thereon.

We agree with the Court of Appeals, and find no merit in the instant Petition.
The deposit was made in order to comply with Section 4 of Republic Act No. 8974, which requires nothing less than the immediate
payment of 100% of the value of the property, based on the current zonal valuation of the BIR, to the property owner. Thus, going back
16
to our ruling in Republic v. Gingoyon :

It is the plain intent of Rep. Act No. 8974 to supersede the system of deposit under Rule 67 with the scheme of "immediate
payment" in cases involving national government infrastructure projects. The following portion of the Senate deliberations,
cited by PIATCO in its Memorandum, is worth quoting to cogitate on the purpose behind the plain meaning of the law:

THE CHAIRMAN (SEN. CAYETANO). "x xxBecause the Senate believes that, you know, we have to pay the
landowners immediately not by treasury bills but by cash.

Since we are depriving them, you know, upon payment, ‗no, of possession, we might as well pay them as much, ‗no,
hindilang 50 percent.

x xxx

THE CHAIRMAN (REP. VERGARA). Accepted.

x xxx

THE CHAIRMAN (SEN. CAYETANO). Oo. Because this is really in favor of the landowners, e.

THE CHAIRMAN (REP. VERGARA). That‘s why we need to really secure the availability of funds.

x xxx

THE CHAIRMAN (SEN. CAYETANO). No, no. It‘s the same. It says here: iyong first paragraph, diba? Iyong zonal –
talagangmagbabayadmuna. In other words, you know, there must be a payment kaagad. (TSN, Bicameral
Conference on the Disagreeing Provisions of House Bill 1422 and Senate Bill 2117, August 29, 2000, pp. 14-20)

x xxx

THE CHAIRMAN (SEN. CAYETANO). Okay, okay, ‗no. Unang-una, it is not deposit, ‘no. It’s payment."

REP. BATERINA. It‘s payment, ho, payment."

The critical factor in the different modes of effecting delivery which gives legal effect to the act is the actual intention to deliver on the
17
part of the party making such delivery. The intention of the TRB in depositing such amount through DPWH was clearly to comply with
the requirement of immediate payment in Republic Act No. 8974, so that it could already secure a writ of possession over the properties
subject of the expropriation and commence implementation of the project. In fact, TRB did not object to HTRDC‘s Motion to Withdraw
Deposit with the RTC, for as long as HTRDC shows (1) that the property is free from any lien or encumbrance and (2) that respondent
18
is the absolute owner thereof.

A close scrutiny of TRB‘s arguments would further reveal that it does not directly challenge the Court of Appeals‘ determinative
pronouncement that the interest earned by the amount deposited in the expropriation account accrues to HTRDC by virtue of
accession. TRB only asserts that HTRDC is "entitled only to an amount equivalent to the zonal value of the expropriated property,
nothing more and nothing less."

We agree in TRB‘s statement since it is exactly how the amount of the immediate payment shall be determined in accordance with
Section 4 of Republic Act No. 8974, i.e., an amount equivalent to 100% of the zonal value of the expropriated properties. However, TRB
already complied therewith by depositing the required amount in the expropriation account of DPWH with LBP-South Harbor. By
depositing the said amount, TRB is already considered to have paid the same to HTRDC, and HTRDC became the owner thereof. The
amount earned interest after the deposit; hence, the interest should pertain to the owner of the principal who is already determined as
HTRDC. The interest is paid by LBP-South Harbor on the deposit, and the TRB cannot claim that it paid an amount more than what it is
required to do so by law.

Nonetheless, we find it necessary to emphasize that HTRDC is determined to be the owner of only a part of the amount deposited in
the expropriation account, in the sum of P22,968,000.00. Hence, it is entitled by right of accession to the interest that had accrued to
the said amount only.

We are not persuaded by TRB‘s citation of National Power Corporation v. Angas and Land Bank of the Philippines v. Wycoco, in
support of its argument that the issue on interest is merely part and parcel of the determination of just compensation which should be
determined in the second stage of the proceedings only. We find that neither case is applicable herein.
The issue in Angas is whether or not, in the computation of the legal rate of interest on just compensation for expropriated lands, the
applicable law is Article 2209 of the Civil Code which prescribes a 6% legal interest rate, or Central Bank Circular No. 416 which fixed
the legal rate at 12% per annum. We ruled in Angas that since the kind of interest involved therein is interest by way of damages for
delay in the payment thereof, and not as earnings from loans or forbearances of money, Article 2209 of the Civil Code prescribing the
6% interest shall apply. In Wycoco, on the other hand, we clarified that interests in the form of damages cannot be applied where there
is prompt and valid payment of just compensation.

The case at bar, however, does not involve interest as damages for delay in payment of just compensation. It concerns interest earned
by the amount deposited in the expropriation account.

Under Section 4 of Republic Act No. 8974, the implementing agency of the government pays just compensation twice: (1) immediately
upon the filing of the complaint, where the amount to be paid is 100% of the value of the property based on the current relevant zonal
valuation of the BIR (initial payment); and (2) when the decision of the court in the determination of just compensation becomes final
and executory, where the implementing agency shall pay the owner the difference between the amount already paid and the just
19
compensation as determined by the court (final payment).

HTRDC never alleged that it was seeking interest because of delay in either of the two payments enumerated above. In fact, HTRDC‘s
cause of action is based on the prompt initial payment of just compensation, which effectively transferred the ownership of the amount
paid to HTRDC. Being the owner of the amount paid, HTRDC is claiming, by the right of accession, the interest earned by the same
while on deposit with the bank.

That the expropriation account was in the name of DPWH, and not of HTRDC, is of no moment. We quote with approval the following
reasoning of the Court of Appeals:

Notwithstanding that the amount was deposited under the DPWH account, ownership over the deposit transferred by
operation of law to the [HTRDC] and whatever interest, considered as civil fruits, accruing to the amount of Php22,968,000.00
should properly pertain to [HTRDC] as the lawful owner of the principal amount deposited following the principle of accession.
Bank interest partake the nature of civil fruits under Art. 442 of the New Civil Code. And since these are considered fruits,
ownership thereof should be due to the owner of the principal. Undoubtedly, being an attribute of ownership, the [HTRDC‘s]
20
right over the fruits (jus fruendi), that is the bank interests, must be respected.

Considering that the expropriation account is in the name of DPWH, then, DPWH should at most be deemed as the trustee of the
amounts deposited in the said accounts irrefragably intended as initial payment for the landowners of the properties subject of the
expropriation, until said landowners are allowed by the RTC to withdraw the same.

As a final note, TRB does not object to HTRDC‘s withdrawal of the amount of P22,968,000.00 from the expropriation account, provided
21
that it is able to show (1) that the property is free from any lien or encumbrance and (2) that it is the absolute owner thereof. The said
conditions do not put in abeyance the constructive delivery of the said amount to HTRDC pending the latter‘s compliance therewith.
22
Article 1187 of the Civil Code provides that the "effects of a conditional obligation to give, once the condition has been fulfilled, shall
retroact to the day of the constitution of the obligation." Hence, when HTRDC complied with the given conditions, as determined by the
23
RTC in its Order dated 21 April 2003, the effects of the constructive delivery retroacted to the actual date of the deposit of the amount
in the expropriation account of DPWH.

WHEREFORE, the Petition is DENIED. The Court of Appeals Decision dated 21 April 2006 in CA-G.R. SP No. 90981, which set aside
the 7 February 2005 and 16 May 2005 Orders of the Regional Trial Court of Malolos, Bulacan, is AFFIRMED. No costs.

SO ORDERED.

DIGEST:

FACTS: On 29 December 2000, petitioner Republic of the Philippines, represented by the Toll Regulatory
Board (TRB), filed with the RTC a Consolidated Complaint for Expropriation against landowners whose
properties would be affected by the construction, rehabilitation and expansion of the North Luzon Expressway.
The suit was docketed as Civil Case No. 869-M2000 and raffled to Branch 85, Malolos, Bulacan. Respondent
Holy Trinity Realty and Development Corporation (HTRDC) was one of the affected landowners. On 18 March
2002, TRB filed an Urgent Ex-Parte Motion for the issuance of a Writ of Possession, manifesting that it
deposited a sufficient amount to cover the payment of 100% of the zonal value of the affected properties, in the
total amount of P28,406,700.00, with the Land Bank of the Philippines, South Harbor Branch (LBP-South
Harbor), an authorized government depository. TRB maintained that since it had already complied with the
provisions of Section 4 of Republic Act No. 897441in relation to Section 2 of Rule 67 of the Rules of Court, the
issuance of the writ of possession becomes ministerial on the part of the RTC.The RTC issued, on 19 March
2002, an Order for the Issuance of a Writ of Possession. On 3 March 2003, HTRDC filed with the RTC a
Motion to Withdraw Deposit, praying that the respondent or its duly authorized representative be allowed to
withdraw the amount of P22,968,000.00, out of TRB‘s advance deposit of P28,406,700.00 with LBP-South
Harbor, including the interest which accrued thereon. Thereafter, the RTC allowed the release of the
principal amount together with the interest to the respondent but on Motion for Reconsideration of the TRB, it
disallowed the withdrawal of the interest reasoning out that the said issue will be included in the second stage
of expropriation, that is, the determination of just compensation. The private respondent elevated the issue to
the Court of Appeals which ruled that the respondent is entitled to the interest by way of accession. Hence, this
petition of the government before the Supreme Court.
ISSUE: Who has the right over the interest of the amount deposited representing the zonal value of the
property sought to be expropriated? The expropriator or the landowner?
HELD: The TRB claims that there are two stages in expropriation proceedings, (1) the determination of the
authority to exercise eminent domain and (2) the determination of just compensation. The TRB argues that it
is only during the second stage when the court will appoint commissioners and determine claims for
entitlement to interest, citing Land Bank of the Philippines v. Wycocoand National Power Corporation v.
Angas.The TRB further points out that the expropriation account with LBP-South Harbor is not in the name of
HTRDC, but of DPWH. Thus, the said expropriation account includes the compensation for the other
landowners and does not exclusively belong to respondent.The said argument is without merit because it
failed to distinguish between the expropriations procedures under Republic Act No. 8974 and Rule 67
of the Rules of Court. Republic Act No. 8974 and Rule 67 of the Rules of Court speak of different
procedures, with the former specifically governing expropriation proceedings for national government
infrastructure projects.
x xxx
Rule 67 outlines the procedure under which eminent domain may be exercised by the Government. Yet by no
means does it serve at present as the solitary guideline through which the State may expropriate private
property. For example, Section 19 of the Local Government Code governs as to the exercise by local
government units of the power of eminent domain through an enabling ordinance. And then there is Rep. Act
No. 8974, which covers expropriation proceedings intended for national government infrastructure projects.
Rep. Act No. 8974, which provides for a procedure eminently more favorable to the property owner than Rule
67, inescapably applies in instances when the national government expropriates property ―for national
government infrastructure projects.‖ Thus, if expropriation is engaged in by the national government for
purposes other than national infrastructure projects, the assessed value standard and the deposit mode
prescribed in Rule 67 continues to apply.
There is no question that the proceedings in this case deal with the expropriation of properties intended for a
national government infrastructure project. Therefore, the RTC correctly applied the procedure laid out in
Republic Act No. 8974, by requiring the deposit of the amount equivalent to 100% of the zonal value of the
properties sought to be expropriated before the issuance of a writ of possession in favor of the Republic.
Whether the Court of Appeals was correct in holding that the interest earned by the deposited amount in the
expropriation account would accrue to HRTDC by virtue of accession, hinges on the determination of who
actually owns the deposited amount, since, under Article 440 of the Civil Code, the right of accession is
conferred by ownership of the principal property:
Art. 440. The ownership of property gives the right by accession to everything which is produced thereby, or
which is incorporated or attached thereto, either naturally or artificially.
The principal property in the case at bar is part of the deposited amount in the expropriation account of DPWH
which pertains particularly to HTRDC. Such amount, determined to be P22,968,000.00 of the P28,406,700.00
total deposit, was already ordered by the RTC to be released to HTRDC or its authorized representative. The
Court of Appeals further recognized that the deposit of the amount was already deemed a constructive
delivery. Since the Court of Appeals found that the HTRDC is the owner of the deposited amount, then the
latter should also be entitled to the interest which accrued thereon.
The critical factor in the different modes of effecting delivery which gives legal effect to the act is the actual
intention to deliver on the part of the party making such delivery. The intention of the TRB in depositing such
amount through DPWH was clearly to comply with the requirement of immediate payment in Republic Act No.
8974, so that it could already secure a writ of possession over the properties subject of the expropriation and
commence implementation of the project. In fact, TRB did not object to HTRDC‘s Motion to Withdraw Deposit
with the RTC, for as long as HTRDC shows (1) that the property is free from any lien or encumbrance and (2)
that respondent is the absolute owner thereof. TRB already complied therewith by depositing the required
amount in the expropriation account of DPWH with LBP-South Harbor. By depositing the said amount, TRB is
already considered to have paid the same to HTRDC, and HTRDC became the owner thereof. The amount
earned interest after the deposit; hence, the interest should pertain to the owner of the principal who is already
determined as HTRDC. The interest is paid by LBP-South Harbor on the deposit, and the TRB cannot claim
that it paid an amount more than what it is required to do so by law. Since the respondent is the owner of
P22,968,000.00, it is entitled by right of accession to the interest that had accrued to the said amount only.

The case at bar, however, does not involve interest as damages for delay in payment of just
compensation. It concerns interest earned by the amount deposited in the expropriation account.
Under Section 4 of Republic Act No. 8974, the implementing agency of the government pays just
compensation twice: (1) immediately upon the filing of the complaint, where the amount to be paid is
100% of the value of the property based on the current relevant zonal valuation of the BIR (initial
payment); and (2) when the decision of the court in the determination of just compensation becomes
final and executory, where the implementing agency shall pay the owner the difference between the
amount already paid and the just compensation as determined by the court (final payment). As a final
note, TRB does not object to HTRDC‘s withdrawal of the amount of P22,968,000.00 from the
expropriation account, provided that it is able to show (1) that the property is free from any lien or
encumbrance and (2) that it is the absolute owner thereof. The said conditions do not put in abeyance
the constructive delivery of the said amount to HTRDC pending the latter‘s compliance therewith.
Article 118752 of the Civil Code provides that the ―effects of a conditional obligation to give, once the
condition has been fulfilled, shall retroact to the day of the constitution of the obligation.‖ Hence,
when HTRDC complied with the given conditions, as determined by the RTC in its Orderdated 21
April 2003, the effects of the constructive delivery retroacted to the actual date of the deposit of the
amount in the expropriation account of DPWH.

5. [G.R. No. 146923. April 30, 2003]

BANK OF THE PHILIPPINE ISLANDS, petitioners, vs. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION and
DIARS ASSISTANCE LABOR UNION, respondents.

DECISION
PANGANIBAN, J.:

When a strict and literal application of the rules on non-forum shopping and verification will result in a patent denial of substantial
justice, they may be liberally construed.This guideline is especially true when the petitioner has satisfactorily explained the lapse and
fulfilled the requirements in its motion for reconsideration.

The Case

[1] [2]
Before the Court is a Petition for Review under Rule 45 of the Rules of Court, challenging the January 26, 2001 Resolution of
[3]
the Court of Appeals (CA) in CA-GR SP No. 59858. The Resolution reads as follows:

Up for consideration is petitioners motion for reconsideration of this Courts resolution of dismissal which was promulgated on August
25, 2000. Taking note of the comment by the Office of the Solicitor General for the public respondent on said motion, the same is
[4]
hereby denied. The resolution of dismissal stands.
 [5] [6]
Earlier, in its August 25, 2000 Resolution, the CA resolved to DISMISS the above-entitled petition on the ground that the
verification was signed only by petitioners vice-president, sans any board resolution or power of attorney authorizing anybody to sign
[7]
the same and the certificate on non-forum shopping.

The Facts

[8]
On January 30, 1990, 49 workers filed a Complaint against Bank of the Philippine Islands (BPI) and Diars Assistance, Inc.
(Diar). Docketed as NLRC Case No. 00-01-00580-90, the Complaint was for the Regularization of Work Status and Preliminary
Injunction with Prayer for Restraining Order. Complainants claimed that they were working in the respondent BPI performing clerical,
[9]
messengerial and general utility work as they [had] been assigned in the bank by their agency x xxDiars Assistance, Inc.
[10]
In a Manifestation and Motion filed on February 23, 1990 during the pendency of the case, the 49 workers prayed for the
inclusion of 121 more as complainants after the latter had signified their intention to join the union. Thereafter, the Complaint was
amended and the name of the complainant changed to that of the organization, Diars Employees Labor Union (BPI Unibank
[11]
Chapter). The union prayed that the employment status of their members be regularized and that BPI be ordered to absorb them as
regular employees.
[12]
In an Order dated July 18, 1991, Labor Arbiter Pablo C. Espiritu Jr. dismissed the Complaint. The dismissal was affirmed by the
[13] [14]
NLRC and by this Court.
On January 31, 1994, Diars Employees Labor Union, through NormandoBeguelme (its president) and Jose Laron (a member),
[15]
filed a new Complaint for the declaration of its members as regular employees of BPI. The Complaint was docketed as NLRC NCR
[16]
Case No. 00-01-00829-94. After Labor Arbiter Potenciano S. Canizares Jr. dismissed the case for lack of merit, the union appealed
to the NLRC. BPI and Diar opposed the appeal and interposed forum shopping as one of their defenses.
[17]
The NLRC (First Division) set aside the labor arbiters Decision and declared complainants as regular employees of BPI. On the
issue of forum shopping, the NLRC ruled thus:

A check with the record of this case did not show that the complainants in the first case are the same complainants in this third
case. Although the causes of action in the first case and this third case are the same for the regularization of the members of
complainant union there is no identity of the parties involved. The second case is for injunction and the same is, therefore, not similar to
[18]
this case.

[19]
Diar and BPI moved for a reconsideration. In its March 28, 2000 Order, the NLRC denied both Motions: BPIs, for being filed
beyond the reglementary period; and Diars, for lack of merit.
[20]
Thereafter, BPI filed with the appellate court a Petition for Certiorari under Rule 65, assailing the NLRC Decision. As earlier
stated, the CA dismissed the recourse on the ground that the verification has been signed only by petitioners vice president, without
express authority from any board resolution or power of attorney.
[21]
Presently before the CA is a similar Petition (CA-GR SP No. 59093) filed by Diar, BPIs co-respondent.
[22]
Hence this appeal.

Issues

Petitioner submits the following issues for the resolution of this Court:

1. Whether or not BPI has a clearly meritorious case so as to warrant the review and the declaration as null and void by this Honorable
Court of the resolution of the Court of Appeals dismissing BPIs petition for certiorari on a mere technicality and notwithstanding
substantial compliance thereon by BPI in its motion for reconsideration.

2. Whether or not this Honorable Courts Resolution in G.R. No. 129067 which disposed of NLRC NCR Case No. 00-01-00580-90
(FIRST REGULARIZATION CASE) constitutes a bar by former judgment to NLRC-NCR Case No. 00-01-00829-94 (SECOND
REGULARIZATION CASE) and whether or not the filing of the SECOND REGULARIZATION CASE violates the prohibition on forum-
[23]
shopping.

In simpler terms, the issues are as follows (1) whether BPIs Petition before the CA should have been given due course; and (2)
whether the second regularization case is barred by res judicata.

The Courts Ruling

 The Petition has merit.

First Issue:
Dismissal of the Appeal on Technicality

Petitioner pleads for a liberal construction of the rules on verification and forum shopping. On the other hand, respondents insist
on a strict application of these rules.
The rules on verification and forum shopping are laid out in Sections 4 and 5 of Rule 7 of the Rules of Court, which we quote:

SEC. 4. Verification. -- Except when otherwise specifically required by law or rule, pleadings need not be under oath, verified or
accompanied by affidavit.

A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations therein are true and correct of his
personal knowledge or based on authentic records.

A pleading required to be verified which contains a verification based on information and belief or upon knowledge, information, and
belief, or lacks a proper verification, shall be treated as an unsigned pleading. (As amended, A.M. No. 00-2-10, May 1, 2000.)

SEC. 5. Certification against forum shopping. -- The plaintiff or principal party shall certify under oath in the complaint or other initiatory
pleading asserting a claim for relief, or in a sworn certification annexed thereto and simultaneously filed therewith: (a) that he has not
theretofore commenced any action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and, to the
best of his knowledge, no such other action or claim is pending therein; (b) if there is such other pending action or claim, a complete
statement of the present status thereof; and (c) if he should thereafter learn that the same or similar action or claim has been filed or is
pending, he shall report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory pleading has
been filed.

Failure to comply with the foregoing requirements shall not be curable by mere amendment of the complaint or other initiatory pleading
but shall be cause for the dismissal of the case without prejudice, unless otherwise provided, upon motion and after hearing. The
submission of a false certification or non-compliance with any of the undertakings therein shall constitute indirect contempt of court,
without prejudice to the corresponding administrative and criminal actions. If the acts of the party or his counsel clearly constitute willful
and deliberate forum shopping, the same shall be ground for summary dismissal with prejudice and shall constitute direct contempt, as
well as a cause for administrative sanctions.

It cannot be denied that the BPI Petition before the CA was dismissed, because the verification and the certificate of non-forum
shopping had been signed by the vice president of the bank without any board resolution or power of attorney empowering him to do
so.
On the other hand, petitioner contends that it did authorize the vice president to act as its representative, as shown in its Motion
for Reconsideration. However, respondent union argues that his action was ratified by the Executive Committee of BPI only on
September 6, 2000. Thus, the belated authority was given 11 days after the 60-day reglementary period for filing a Petition for
Certiorari.
After carefully considering the arguments of both parties, we hold that a liberal construction of the rules on verification and forum
shopping are in order.
Verification is simply intended to secure an assurance that the allegations in the pleading are true and correct and not the product
[24]
of the imagination or a matter of speculation, and that the pleading is filed in good faith. Meanwhile, the purpose of the aforesaid
[25]
certification is to prohibit and penalize the evils of forum shopping. We see no circumvention of these objectives by the vice
presidents signing the verification and certification without express authorization from any existing board resolution.
[26]
As explained in BPIs Motion for Reconsideration, he was actually authorized to sign the verification and the certification, as
shown by the written confirmation attached to the Motion. Furthermore, he is presumed to know the requirements for validly signing
those documents.

Rules of procedure are used to help secure and not override substantial justice. Even the Rules of Court mandates a liberal
construction in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and
proceeding. Since rules of procedure are mere tools designed to facilitate the attainment of justice, their strict and rigid application
which would result in technicalities that tend to frustrate rather than promote substantial justice must always be avoided. Thus, the
[27]
dismissal of an appeal on purely, technical ground is frowned upon especially if it will result to unfairness.

We shall not rule on the merits but, in the interest of fair play and the orderly administration of justice, we find that the
reinstatement of the Petition and its consolidation with Diars CA appeal is warranted. BPI is an indispensable party to the controversy,
considering that its inclusion is necessary for the effective and complete resolution of the case.
 The fact that respondent union commenced the case against BPI and Diar in a single Complaint is an indication of the
indispensability of both parties to the action. The Rules state that [p]arties in interest without whom no final determination can be had of
[28]
an action shall be joined either as plaintiffs or defendants.
[29]
In BA Finance Corporation v. CA, the Court explained:

x xx. An indispensable party is one whose interest will be affected by the court's action in the litigation, and without whom no final
determination of the case can be had. The party's interest in the subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties' that his legal presence as a party to the proceeding is an absolute necessity. In his absence there
cannot be a resolution of the dispute of the parties before the court which is effective, complete, or equitable.

Conversely, a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the
interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. He
is not indispensable if his presence would merely permit complete relief between him and those already parties to the action or will
simply avoid multiple litigation.

[30]
Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real finality.

In all stages of an action -- including those involved in motions for reconsideration, petitions for certiorari and appeals -- the rule on
joinder of indispensable parties must be extended, as long as such extension is practicable and the reason for it, as explained above,
subsists.
The ultimate issue brought up for review in the instant case is: who is the employer of the members of respondent labor union --
BPI, Diar or both? Moreover, a review of the facts of the case reveals that (1) there is a service contract between BPI and Diar; (2) Diar
pays the salaries of the members of respondent union; and (3) the members of respondent union perform their tasks in the prem ises of
BPI.
These facts reveal close factual and legal relationships among respondent union, BPI and Diar -- relationships that are so
inextricably intertwined that the issues raised in the Complaint cannot be finally determined without considering the rights of all three
parties. Thus, it is essential that when the case is brought up for review to determine the real employer of the members of respondent
labor union, all these parties must be heard.

Second Issue:
Res Judicata

Unquestionably, any ruling on the issue of res judicata would affect the final determination on the merits of the Complaint. This
determination will, in turn, affect Diar, which is not impleaded as a party in the present appeal.
Hence, it would not be proper for this Court to resolve the issue of res judicata without Diar as a party before it, in view of the
[31]
pendency of CA-GR SP No. 59093 -- a similar petition for the review of the same NLRC Decision, the subject of the case at bar.
A consolidation is thus warranted, based on the foregoing circumstances: BPI and Diar are indispensable parties, who have filed
separate but similar petitions to review the same NLRC Decision.
WHEREFORE, the Petition is hereby GRANTED, and the assailed Resolutions REVERSED and SET ASIDE. The case
is REMANDED to the Court of Appeals, which is DIRECTED to consolidate BPIs case (CA-GR SP No. 59858) with Diars (CA-GR SP
No. 59093). No costs.
SO ORDERED.

DIGEST:

When a strict and literal application of the rules on non-forum shopping and verification will result in a patent
denial of substantial justice, they may be liberally construed. This guideline is especially true when the
petitioner has satisfactorily explained the lapse and fulfilled the requirements in its motion for reconsideration.
Before the Court is a Petition for Reviewunder Rule 45 of the Rules of Court, challenging the January 26, 2001
Resolution of the Court of Appeals (CA) in CA-GR SP No. 59858. The Resolution reads as follows:Up for
consideration is petitioners‘ motion for reconsideration of this Courts resolution of dismissal which was
promulgated on August 25, 2000. Taking note of the comment by the Office of the Solicitor General for the
public respondent on said motion, the same is hereby denied. The resolution of dismissal stands.Earlier, in its
August 25, 2000 Resolution,the CAresolved to DISMISS the above-entitled petition on the ground that the
verification was signed only by petitioners vice-president, sans any board resolution or power of attorney
authorizing anybody to sign the same and the certificate on non-forum shopping.
FACTS: On January 30, 1990, 49 workers filed a Complaintagainst Bank of the Philippine Islands (BPI) and
Diars Assistance, Inc. (Diar). Docketed as NLRC Case No. 00-01-00580-90, the Complaint was for the
Regularization of Work Status and Preliminary Injunction with Prayer for Restraining Order. Complainants
claimed that they were working in the respondent BPI performing clerical, messengerial and general utility work
as they [had] been assigned in the bank by their agency x xxDiars Assistance, Inc. In a Manifestation and
Motion filed on February 23, 1990 during the pendency of the case, the 49 workers prayed for the inclusion of
121 more as complainants after the latter had signified their intention to join the union. Thereafter, the
Complaint was amended and the name of the complainant changed to that of the organization, Diars
Employees Labor Union (BPI Unibank Chapter).The union prayed that the employment status of their
members be regularized and that BPI be ordered to absorb them as regular employees.In an Order dated July
18, 1991, Labor Arbiter Pablo C. Espiritu Jr. dismissed the Complaint. The dismissal was affirmed by the
NLRC and by this Court.On January 31, 1994, Diars Employees Labor Union, through NormandoBeguelme (its
president) and Jose Laron (a member), filed a new Complaint for the declaration of its members as regular
employees of BPI. The Complaint was docketed as NLRC NCR Case No. 00-01-00829-94. After Labor Arbiter
Potenciano S. Canizares Jr. dismissed the case for lack of merit,the union appealed to the NLRC. BPI and Diar
opposed the appeal and interposed forum shopping as one of their defenses.The NLRC (First Division) set
aside the labor arbiters Decision and declared complainants as regular employees of BPI. On the issue of
forum shopping, the NLRC ruled thus. A check with the record of this case did not show that the complainants
in the first case are the same complainants in this third case. Although the causes of action in the first case
and this third case are the same for the regularization of the members of complainant union there is no identity
of the parties involved. The second case is for injunction and the same is, therefore, not similar to this
case.Diar and BPI moved for a reconsideration. In its March 28, 2000 Order, the NLRC denied both
Motions: BPIs, for being filed beyond the reglementary period; and Diars, for lack of merit.Thereafter, BPI filed
with the appellate court a Petition for Certiorariunder Rule 65, assailing the NLRC Decision. As earlier stated,
the CA dismissed the recourse on the ground that the verification has been signed only by petitioners vice
president, without express authority from any board resolution or power of attorney.Presently before the CA is
a similar Petition (CA-GR SP No. 59093) filed by Diar, BPIs co-respondent.Hence this appeal.
ISSUES. Whether BPIs Petition before the CA should have been given due course; and (2) whether the
second regularization case is barred by res judicata.
HELD: First Issue:
The fact that respondent union commenced the case against BPI and Diar in a single Complaint is an
indication of the indispensability of both parties to the action. The Rules state that [p]arties in interest without
whom no final determination can be had of an action shall be joined either as plaintiffs or defendants.
In BA Finance Corporation v. CA,the Court explained:

x xx. An indispensable party is one whose interest will be affected by the court's action in the litigation, and
without whom no final determination of the case can be had. The party's interest in the subject matter of the
suit and in the relief sought are so inextricably intertwined with the other parties' that his legal presence as a
party to the proceeding is an absolute necessity. In his absence there cannot be a resolution of the dispute of
the parties before the court which is effective, complete, or equitable.

Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real
finality.

In all stages of an action -- including those involved in motions for reconsideration, petitions for certiorari
and appeals -- the rule on joinder of indispensable parties must be extended, as long as such extension is
practicable and the reason for it, as explained above, subsists.The ultimate issue brought up for review in the
instant case is: who is the employer of the members of respondent labor union -- BPI, Diar or both? Moreover,
a review of the facts of the case reveals that (1) there is a service contract between BPI and Diar; (2) Diar pays
the salaries of the members of respondent union; and (3) the members of respondent union perform their tasks
in the premises of BPI.These facts reveal close factual and legal relationships among respondent union, BPI
and Diar -- relationships that are so inextricably intertwined that the issues raised in the Complaint cannot be
finally determined without considering the rights of all three parties. Thus, it is essential that when the case is
brought up for review to determine the real employer of the members of respondent labor union, all these
parties must be heard.

GREEN NOTES:
Just compensation in expropriation cases; value of the property when?
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. The measure is not the taker‘s gain, but the owner‘s loss. Market value is that sum of money
which a person desirous but not compelled to buy, and an owner willing but not compelled to sell, would agree
on as a price to be given and received therefore.
The just compensation is determined as of the date of taking of the property or the filing of the complaint for
expropriation, WHICHEVER COMES FIRST.

6. FERNANDO GABATIN, JOSE GABATIN AND ALBERTO GABATIN vs. LAND BANK OF THE
PHILIPPINES

Before Us is a petition for Review on Certiorari under Rule 45 of the Rules of Court seeking to set aside the Decision and
Resolution dated 15 September 2000 and 03 May 2001, respectively, of the Court of Appeals in CA-G.R. CV No. 61240,
entitled, Fernando Gabatin, Alberto Gabatin and Jose Gabatin, petitioners-appellees v. Department of Agrarian Reform, respondent.
The Decision set aside the order of the Special Agrarian Court (SAC) dated 04 May 1998, and the Resolution denied petitioners motion
for reconsideration.
Petitioners Fernando, Alberto, and Jose, all surnamed Gabatin, were registered owners of three parcels of rice land situated in
[1]
Sariaya, Quezon, under separate certificates of title, namely: Transfer Certificate of Title (TCT) No. T-107863 (0.3965 hectare), TCT
[3]
No. T-107864 (1.4272 hectares) and TCT No. T-107865 (1.4330 hectares). In 1989, the properties, pursuant to the Land Reform
[4]
Program of the Government as defined under Presidential Decree (P.D.) No. 27 and Executive Order (E.O.) No. 228, were placed by
the Department of Agrarian Reform (DAR) under its Operation Land Transfer (OLT). The properties were distributed to deserving
farmer beneficiaries through the issuance of emancipation patents.

LV = 2.5 x AGP x GSP

The AGP for the lots covered under TCTs No. T-107863 and No. T-107864 was at 94.64 cavans per hectare while that of TCT No.
[8]
T-107865 was at 118.47. The DAR and respondent Land Bank of the Philippines (Land Bank), fixed the GSP at P35 which was the
price of each cavan of palay in 1972, when the lots were deemed taken for distribution. Hence, respondents valuation of the properties:

Acquired Property Area in hectares Land Value

TCT No. T-107864 1.4272 P 11,818.47

TCT No. T-107865 1.4330 14,854.66

[9]
TCT No. T-107863 .3965 3,283.41

======

TOTAL P 29,956.54

Petitioners rejected the valuation.

On 16 April 1996, petitioners filed a case for the determination of just compensation of their lands with the Regional Trial Court
[10]
(RTC) of Lucena City, naming the DAR and Land Bank as respondents. The case was docketed as Civil Case No. 96-57 and raffled
to Branch 56, the designated Special Agrarian Court (SAC). Petitioners prayed that the just compensation be fixed in accordance with
the formula in P.D. No. 27, with 6% compounded annual interest to be paid based on the price of palay at the time of payment and not
[11]
at the time of taking. The SAC, in its order, fixed the GSP of palay at the current price of P400 as basis for the computation of the
payment, and not the GSP at the time of taking, thus:
TCT T-107863 P 37,524.76

TCT T-107864 P 135,070.20

TCT T-107865 P 169,767.50

=======

[12]
TOTAL P 342,362.46

[13]
Respondent Land Bank filed a motion for reconsideration dated 04 June 1998 which was denied by the trial court in its
[14]
Order dated 23 July 1998. Of the two respondents in the trial court, only Land Bank appealed to the Court of Appeals under Rule 41
[15]
of the Rules of Court.
On 10 July 2000, petitioners filed a motion to remand the records to the SAC and to dismiss the appeal on the grounds that the
decision of the SAC became final and executory, and that the appeal raised issues involving purely questions of law. They maintained
that the appeal of respondent, not being an indispensable party, did not stop the running of the period to appeal, thereby making the
decision final. They also claimed that the appeal should be dismissed because the proper venue is the Supreme Court via a petition for
[16]
review under Rule 45, and not the Court of Appeals.
On 15 September 2000, the Court of Appeals rendered a decision denying the motion to dismiss and reversing the decision of the
SAC. It ruled it has jurisdiction over the appeal reasoning that its jurisdiction over appeals from RTCs cannot simply be disregarded on
the submission that the issues presented before it are purely legal in nature. As to the personality of Land Bank to file the said appeal,
the Court of Appeals made a finding that respondent was a necessary party; hence, it had a personality to appeal the SAC decision. It
also fixed the GSP at the time of taking of the land in 1972, instead of the GSP at the time of payment. Thus:

Based on the foregoing, the appropriate land valuation formula for the appellees property should be two and a half (2) multiplied by the
average gross production multiplied by the price of palay (P35.00), (P.D. No. 27). In addition, the said amount shall accumulate
compounded interest at 6% per annum, pursuant to A.O. No. 13, (1994) (supra) computed from the time of taking, i.e., when P.D. No.
27 came into effect in October, 1972, until the full amount is paid.

...

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The appealed order of the Regional Trial Court below is
hereby REVERSED and SET ASIDE. In lieu thereof, judgment is hereby rendered fixing the just compensation due to the petitioners-
appellees based on the price of palay per cavan at the time the subject properties were taken, under the formula abovementioned, with
[17]
interest at 6% per annum, compounded annually, starting October, 1972 until the full amount is paid.

[18]
The petitioners motion for reconsideration was likewise denied.
Hence, this petition for review. The following issues were raised:

FIRST: Is the special mode of appeal by petition for review from a decision of the Special Agrarian Court (SAC) pursuant to Section 60
of R.A. 6657 still effective as the only mode of appeal from decisions of the SAC?

SECOND: May the Court of Appeals give due course to the appeal filed by a necessary party without being joined by the indispensable
party which did not appeal the decision?

THIRD: Whether just compensation in kind (palay) at the time of the taking of the properties shall be appraised at the price of the
commodity at the time of the taking or at the time it was ordered paid by the SAC?

FIRST ISSUE
[19]
In the case of Land Bank v. De Leon (hereinafter referred to as Decision), we made the definitive pronouncement that a petition
for review under Rule 42, and not an ordinary appeal under Rule 41, is the appropriate mode of appeal on the decisions of the RTCs
[20]
acting as SACs. In the said case, Land Bank filed a motion for reconsideration. In a resolution dated 20 March 2003 (hereinafter
referred to as Resolution), we resolved the Motion for Reconsideration in this wise:

WHEREFORE, the motion for reconsideration dated October 16, 2002 and the supplement to the motion for reconsideration dated
November 11, 2002 are PARTIALLY GRANTED. While we clarify that the Decision of this Court dated September 10, 2002 stands, our
ruling therein that a petition for review is the correct mode of appeal from decisions of Special Agrarian Courts shall apply only to cases
[21]
appealed after the finality of this Resolution. (Emphasis supplied)

Herein petitioners assailed the Resolution. It is the remonstration of the petitioners that since the notice of appeal filed by
respondent under Rule 41 was incorrect, the same did not stop the running of the reglementary period to file a petition for review under
Rule 42. The decision, therefore, of the SAC became final and executory and, consequently, respondent had completely lost the
remedy of appeal. In effect, petitioners contended that the Resolution, when it prescribed for the prospective application of the Decision,
took away their vested rights to immediate payment of just compensation and created a second right to appeal in favor of the
respondent.
On the other hand, respondent asseverates that since its appeal of the decision of the SAC, via notice of appeal under Rule 41,
was perfected prior to the promulgation of the Resolution, the same cannot be dismissed outright since the Resolution applies
[22]
prospectively.
We do not agree with the petitioners.
It bears noting that the Decision, which prescribed for Rule 42 as the correct mode of appeal from the decisions of the SAC, was
promulgated by this Court only on 10 September 2002, while the Resolution of the motion for reconsideration of the said case giving it a
prospective application was promulgated on 20 March 2003. Respondent appealed to the Court of Appeals on 31 July
1998 via ordinary appeal under Rule 41 of the Rules of Court. Though appeal under said rule is not the proper mode of appeal, said
erroneous course of action cannot be blamed on respondent. It was of the belief that such recourse was the appropriate manner to
[23]
question the decisions of the SAC. In Land Bank v. De Leon, we held:

On account of the absence of jurisprudence interpreting Sections 60 and 61 of RA 6657 regarding the proper way to appeal decisions
of Special Agrarian Courts as well as the conflicting decisions of the Court of Appeals thereon, LBP cannot be blamed for availing of the
wrong mode. Based on its own interpretation and reliance on the Buenaventura ruling, LBP acted on the mistaken belief that an
ordinary appeal is the appropriate manner to question decisions of Special Agrarian Courts.

Thus, while the rule is that the appropriate mode of appeal from the decisions of the SAC is through petition for review under Rule
42, the same rule is inapplicable in the instant case. The Resolution categorically stated that said ruling shall apply only to those cases
[24]
appealed after 20 March 2003.
It is beyond cavil, therefore, that since this Court had already ruled on the prospective application of the Land Bank v. De
Leon decision, said issue must be laid to rest and must no longer be disturbed in this decision. Stare decisiset non
[25]
quietamovere. Stand by the decisions and disturb not what is settled. It is a very desirable and necessary judicial practice that when
a court has laid down a principle of law as applicable to a certain state of facts, it will adhere to that principle and apply it to all future
[26]
cases where the facts are substantially the same, absent any countervailing considerations. An in-depth study of the case at bar
clearly shows that it does not fall under the exception of the stare decisis rule.
SECOND ISSUE
Petitioners find fault in the decision of the Court of Appeals which ruled that Land Bank has the right to appeal on the ground that
it is a necessary party. It is argued that DAR, being the only agency authorized by law to represent the Republic of the Philippines in the
acquisition of private agricultural lands for agrarian reform, as stated under Section 51(1) of Republic Act No. 3844 and amended by
Rep. Act No. 6389, is an indispensable party in expropriation proceedings. Petitioners allege that Land Bank is only a necessary party,
[27]
thus, the Court of Appeals should have dismissed the appeal pursuant to MWSS v. Court of Appeals which states that when
indispensable parties are not before the courts, the action should be dismissed. Hence, petitioners concluded that the Court of Appeals
acted without jurisdiction when it gave due course and decided the appeal filed by Land Bank, a necessary party, without being joined
by the DAR, the indispensable party.
Respondent answered that it can file an appeal independently of the DAR in land valuation or in just compensation cases arising
from the agrarian reform program. In support of its argument, respondent avers that it is an agency created primarily to provide financial
support in all phases of agrarian reform pursuant to Section 74 of Rep. Act No. 3844 and Section 64 of Rep. Act No. 6657. It is also
vested with the primary responsibility and authority in the valuation and compensation of covered landholdings to carry out the full
[28]
implementation of the Agrarian Reform Program. It may agree with the DAR and the landowner as to the amount of just
[29]
compensation to be paid to the latter and may also disagree with them and bring the matter to court for judicial determination.
[30]
Respondent cited jurisprudence pronouncing that it is not just a mere rubber stamp but a necessary cog in agrarian reform as it
[31]
does not just exercise a ministerial function but has an independent discretionary role in the valuation process of the land covered by
land reform. Respondent further stressed that this Court, in the Decision, has recognized its right to appeal from an adverse decision in
a just compensation case.
We agree with the respondent.
The Rules of Court provides that parties in interest without whom no final determination can be had of an action shall be joined
[32] [33]
either as plaintiffs or defendants. In BPI v. Court of Appeals, this Court explained:

. . . An indispensable party is one whose interest will be affected by the courts action in the litigation, and without whom no final
determination of the case can be had. The partys interest in the subject matter of the suit and in the relief sought are so inextricably
intertwined with the other parties that his legal presence as a party to the proceeding is an absolute necessity. In his absence there
cannot be a resolution of the dispute of the parties before the court which is effective, complete, or equitable.

Conversely, a party is not indispensable to the suit if his interest in the controversy or subject matter is distinct and divisible from the
interest of the other parties and will not necessarily be prejudiced by a judgment which does complete justice to the parties in court. He
is not indispensable if his presence would merely permit complete relief between him and those already parties to the action or will
simply avoid multiple litigation.
Without the presence of indispensable parties to a suit or proceeding, judgment of a court cannot attain real finality. (emphasis
supplied)

It must be observed that once an expropriation proceeding for the acquisition of private agricultural lands is commenced by the
DAR, the indispensable role of Land Bank begins.
Even in the preliminary stage of the valuation and the determination of just compensation, the respondents task is inseparably
interwoven with that of the DAR, thus:

. . . under the law, the Land Bank of the Philippines is charged with the initial responsibility of determining the value of lands placed
under agrarian reform and compensation to be paid for their taking (Section 1, E.O. 405). Through the notice sent to the landowner
pursuant to 16(a) of R.A. No. 6657, the DAR makes an offer. In case the landowner rejects the offer, a summary administrative
proceeding is held and afterward, the provincial (PARAD), the regional (RARAD) or the central (DARAB) adjudicator as the case
maybe, depending on the value of the land, fixes the price to be paid for the land. If the landowner does not agree to the price fixed, he
[34]
may bring the matter to the RTC acting as Special Agrarian Court.

E.O. No. 405 provides that the DAR is required to make use of the determination of the land valuation and compensation by the
Land Bank as the latter is primarily responsible for the determination of the land valuation and compensation for all private lands under
[35]
Rep. Act No. 6657.
[36]
In Sharp International Marketing v. Court of Appeals, this Court even went on to say that without the Land Bank, there would be
no amount to be established by the government for the payment of just compensation, thus:

As may be gleaned very clearly from EO 229, the LBP is an essential part of the government sector with regard to the payment of
compensation to the landowner. It is, after all, the instrumentality that is charged with the disbursement of public funds for purposes of
agrarian reform. It is therefore part, an indispensable cog, in the governmental machinery that fixes and determines the amount
compensable to the landowner. Were LBP to be excluded from that intricate, if not sensitive, function of establishing the compensable
amount, there would be no amount to be established by the government as required in Section 6 of EO 229. (emphasis supplied)

More telling is the fact that Land Bank can disagree with the decision of the DAR in the determination of just compensation, and
[37]
bring the matter to the RTC designated as a SAC for final determination of just compensation.
The foregoing clearly shows that there would never be a judicial determination of just compensation absent respondent Land
Banks participation. Logically, it follows that respondent is an indispensable party in an action for the determination of just
compensation in cases arising from agrarian reform program.
Assuming arguendo that respondent is not an indispensable party but only a necessary party as is being imposed upon us by the
petitioners, we find the argument of the petitioners that only indispensable parties can appeal to be incorrect.
There is nothing in the Rules of Court that prohibits a party in an action before the lower court to make an appeal merely on the
ground that he is not an indispensable party. The Rules of Court does not distinguish whether the appellant is an indispensable party or
not. To avail of the remedy, the only requirement is that the person appealing must have a present interest in the subject matter of the
[38]
litigation and must be aggrieved or prejudiced by the judgment. A party, in turn, is deemed aggrieved or prejudiced when his interest,
[39]
recognized by law in the subject matter of the lawsuit, is injuriously affected by the judgment, order or decree. The fact that a person
is made a party to a case before the lower court, and eventually be made liable if the judgment be against him, necessarily entitles him
to exercise his right to appeal. To prohibit such party to appeal is nothing less than an outright violation of the rules on fair play.
THIRD ISSUE
To determine the land value under P.D. No. 27 and E.O. No. 228, the following formula is used:

LV (land value) = 2.5 x AGP x GSP

Petitioners argue that the GSP be fixed at the time of payment by SAC which was then at P400. In support thereof, they cited the
[40]
case of Land Bank v. Court of Appeals, wherein Land Bank was ordered to pay the land value based on the GSP at the time the
Provincial Agrarian Reform Adjudicators (PARAD) decision was rendered, and not at the time of the taking of the property. Petitioners
also made reference to Article 1958 of the Civil Code which provides for the appraisal of an interest payable in kind at the current price
[41]
of the product at the time and place of payment.
Respondent counters that in keeping with settled jurisprudence, the determination of compensation for lands covered by P.D. No.
[42]
27 is reckoned from the time of the taking of the same. Under E.O. No. 228, 21 October 1972 was the time of taking for this was
[43]
when the landowner was effectively deprived of possession and dominion over his landholding.
In the case at bar, parties are in harmony as to the AGP of the lots under consideration. The AGP for the lots covered under TCTs
[44]
No. T-107863 and No. T-107864 was at 94.64 cavans per hectare, and that for the lot under TCT No. T-107865 was at 118.47.
 The pith of the controversy is the determination of the GSP for one cavan of palay. Should the same be based on the price at the
time of taking or at the time of payment as ordered by the SAC?
We must stress, at the outset, that the taking of private lands under the agrarian reform program partakes of the nature of an
[45]
expropriation proceeding. In a number of cases, we have stated that in computing the just compensation for expropriation
proceedings, it is the value of the land at the time of the taking, not at the time of the rendition of judgment, which should be taken into
[46]
consideration. This being so, then in determining the value of the land for the payment of just compensation, the time of taking should
be the basis. In the instant case, since the dispute over the valuation of the land depends on the rate of the GSP used in the equation, it
necessarily follows that the GSP should be pegged at the time of the taking of the properties.
In the instant case, the said taking of the properties was deemed effected on 21 October 1972, when the petitioners were deprived
[47] [48]
of ownership over their lands in favor of qualified beneficiaries, pursuant to E.O. No. 228 and by virtue of P.D. No. 27. The GSP
[49]
for one cavan of palay at that time was at P35. Prescinding from the foregoing discussion, the GSP should be fixed at said rate,
which was the GSP at the time of the taking of the subject properties.
Petitioners are not rendered disadvantaged by the computation inasmuch as they are entitled to receive the increment of six
[50]
percent (6%) yearly interest compounded annually pursuant to DAR Administrative Order No. 13, Series of 1994. As amply explained
[51]
by this Court:

The purpose of AO No. 13 is to compensate the landowners for unearned interests. Had they been paid in 1972 when the GSP for rice
and corn was valued at P35.00 and P31.00, respectively, and such amounts were deposited in a bank, they would have earned a
compounded interest of 6% per annum. Thus, if the PARAD used the 1972 GSP, then the product of (2.5 x AGP x P35.00 or P31.00)
could be multiplied by (1.06) to determine the value of the land plus the additional 6% compounded interest it would have earned from
1972.

[52]
Petitioners reliance on Land Bank v. Court of Appeals where we ordered Land Bank to pay the just compensation based on the
GSP at the time the PARAD rendered the decision, and not at the time of the taking, is not well taken. In that case, PARAD, in its
decision, used the GSP at the time of payment in determining the land value. When the decision became final and executory, Land
Bank, however, refused to pay the landowner arguing that the PARADs valuation was null and void for want of jurisdiction. We ruled
therein that the PARAD has the authority to determine the initial valuation of lands involving agrarian reform. Thus, the decision of the
PARAD was binding on Land Bank. Land Bank was estopped from questioning the land valuation made by PARAD because it
participated in the valuation proceedings and did not appeal the said decision. Hence, Land Bank was compelled to pay the land value
based on the GSP at the time of payment.
The factual milieu of the case relied upon by petitioners is different from the case at bar. In the case on hand, respondent insisted
from the very start that the land valuation be based on the GSP at the time of the taking - 1972. It stood firm on that ground. When SAC
ordered Land Bank to pay petitioners the land value based on the GSP at the time of payment, respondent vehemently disagreed and
questioned the valuation before the Court of Appeals.
WHEREFORE, we DENY the instant petition. The Decision of the Court of Appeals dated 15 September 2000 and its Resolution
dated 03 May 2001 in CA-G.R. CV No. 61240 are hereby AFFIRMED. No costs.
SO ORDERED.

4. BASIS FOR JUST COMPENSATION

GREEN NOTES:
Who determines the just compensation in expropriation cases? What are the factors to be considered
in determining the same?

Determination of just compensation is a judicial function with the assistance or recommendation of the
court-appointed commissioners. (Manotok vs. CA, May 21,1987)

The factors to be considered in determining the just compensation/market value are:

1. cost of acquisition;
2. the current value of like proerties;
3. its actual or potential uses;
4. particular case of lands;
5. their size, shape, location; and
6. the tax declarations thereon.

Finally, note that as held in the case of Republic vs. Santos, 141 SCRA 30, the market value as
recommended by the board of commissioners appointed by the court were at best only ADVISORY AND
PERSUASIVE AND BY NO MEANS FINAL OR BINDING. (BERKENKOTTER, INC. VS. COURT OF
APPEALSAND REPUBLIC OF THE PHILIPPINES, December 14, 1992).
In case the government will not be able to use the land expropriated for the purpose for which it was
intended, may the landowner ask for its reversion to him?
Yes, provided he complies with the following: 1. Return the just compensation paid by the government;
2. pay the legal interest; 3. pay the necessary expenses incurred by the government in maintaining the lot; and
4. pay the pecuniary value of the services in managing it to the extent that the landowner will be benefited
thereby. (MACTAN CEBU INTERNATIONAL AIRPORT AUTHORITY VS. LOZADA, February 25, 2010)

1. G.R. No. 171101 July 5, 2011

HACIENDA LUISITA, INCORPORATED, Petitioner,

LUISITA INDUSTRIAL PARK CORPORATION and RIZAL COMMERCIAL BANKING CORPORATION,Petitioners-in-Intervention,
vs.
PRESIDENTIAL AGRARIAN REFORM COUNCIL; SECRETARY NASSER PANGANDAMAN OF THE DEPARTMENT OF
AGRARIAN REFORM; ALYANSA NG MGA MANGGAGAWANG BUKID NG HACIENDA LUISITA, RENE GALANG, NOEL
1
MALLARI, and JULIO SUNIGA and his SUPERVISORY GROUP OF THE HACIENDA LUISITA, INC. and WINDSOR
ANDAYA, Respondents.

DECISION

VELASCO, JR., J.:

"Land for the landless," a shibboleth the landed gentry doubtless has received with much misgiving, if not resistance, even if only the
number of agrarian suits filed serves to be the norm. Through the years, this battle cry and root of discord continues to reflect the
seemingly ceaseless discourse on, and great disparity in, the distribution of land among the people, "dramatizing the increasingly
2
urgent demand of the dispossessed x xx for a plot of earth as their place in the sun." As administrations and political alignments
change, policies advanced, and agrarian reform laws enacted, the latest being what is considered a comprehensive piece, the face of
land reform varies and is masked in myriads of ways. The stated goal, however, remains the same: clear the way for the true freedom
3
of the farmer.

Land reform, or the broader term "agrarian reform," has been a government policy even before the Commonwealth era. In fact, at the
4
onset of the American regime, initial steps toward land reform were already taken to address social unrest. Then, under the 1935
Constitution, specific provisions on social justice and expropriation of landed estates for distribution to tenants as a solution to land
ownership and tenancy issues were incorporated.

5
In 1955, the Land Reform Act (Republic Act No. [RA] 1400) was passed, setting in motion the expropriation of all tenanted estates.

6
On August 8, 1963, the Agricultural Land Reform Code (RA 3844) was enacted, abolishing share tenancy and converting all instances
7
of share tenancy into leasehold tenancy. RA 3844 created the Land Bank of the Philippines (LBP) to provide support in all phases of
agrarian reform.

As its major thrust, RA 3844 aimed to create a system of owner-cultivatorship in rice and corn, supposedly to be accomplished by
expropriating lands in excess of 75 hectares for their eventual resale to tenants. The law, however, had this restricting feature: its
operations were confined mainly to areas in Central Luzon, and its implementation at any level of intensity limited to the pilot project in
8
Nueva Ecija.

Subsequently, Congress passed the Code of Agrarian Reform (RA 6389) declaring the entire country a land reform area, and providing
for the automatic conversion of tenancy to leasehold tenancy in all areas. From 75 hectares, the retention limit was cut down to seven
9
hectares.

Barely a month after declaring martial law in September 1972, then President Ferdinand Marcos issued Presidential Decree No. 27 (PD
10
27) for the "emancipation of the tiller from the bondage of the soil." Based on this issuance, tenant-farmers, depending on the size of
11
the landholding worked on, can either purchase the land they tilled or shift from share to fixed-rent leasehold tenancy. While touted as
"revolutionary," the scope of the agrarian reform program PD 27 enunciated covered only tenanted, privately-owned rice and corn
12
lands.

Then came the revolutionary government of then President Corazon C. Aquino and the drafting and eventual ratification of the 1987
Constitution. Its provisions foreshadowed the establishment of a legal framework for the formulation of an expansive approach to land
13
reform, affecting all agricultural lands and covering both tenant-farmers and regular farmworkers.
So it was that Proclamation No. 131, Series of 1987, was issued instituting a comprehensive agrarian reform program (CARP) to cover
all agricultural lands, regardless of tenurial arrangement and commodity produced, as provided in the Constitution.

14
On July 22, 1987, Executive Order No. 229 (EO 229) was issued providing, as its title indicates, the mechanisms for CARP
implementation. It created the Presidential Agrarian Reform Council (PARC) as the highest policy-making body that formulates all
policies, rules, and regulations necessary for the implementation of CARP.

On June 15, 1988, RA 6657 or the Comprehensive Agrarian Reform Law of 1988, also known as CARL or the CARP Law, took effect,
ushering in a new process of land classification, acquisition, and distribution. As to be expected, RA 6657 met stiff opposition, its validity
or some of its provisions challenged at every possible turn. Association of Small Landowners in the Philippines, Inc. v. Secretary of
15
Agrarian Reform stated the observation that the assault was inevitable, the CARP being an untried and untested project, "an
experiment [even], as all life is an experiment," the Court said, borrowing from Justice Holmes.

The Case

In this Petition for Certiorari and Prohibition under Rule 65 with prayer for preliminary injunctive relief, petitioner Hacienda Luisita, Inc.
16 17
(HLI) assails and seeks to set aside PARC Resolution No. 2005-32-01 and Resolution No. 2006-34-01 issued on December 22,
18
2005 and May 3, 2006, respectively, as well as the implementing Notice of Coverage dated January 2, 2006 (Notice of Coverage).

The Facts

At the core of the case is Hacienda Luisita de Tarlac (Hacienda Luisita), once a 6,443-hectare mixed agricultural-industrial-residential
expanse straddling several municipalities of Tarlac and owned by Compañia General de Tabacos de Filipinas (Tabacalera). In 1957,
the Spanish owners of Tabacalera offered to sell Hacienda Luisita as well as their controlling interest in the sugar mill within the
hacienda, the Central Azucarera de Tarlac (CAT), as an indivisible transaction. The Tarlac Development Corporation (Tadeco), then
owned and/or controlled by the Jose Cojuangco, Sr. Group, was willing to buy. As agreed upon, Tadeco undertook to pay the purchase
19
price for Hacienda Luisita in pesos, while that for the controlling interest in CAT, in US dollars.

To facilitate the adverted sale-and-purchase package, the Philippine government, through the then Central Bank of the Philippines,
20
assisted the buyer to obtain a dollar loan from a US bank. Also, the Government Service Insurance System (GSIS) Board of Trustees
extended on November 27, 1957 a PhP 5.911 million loan in favor of Tadeco to pay the peso price component of the sale. One of the
conditions contained in the approving GSIS Resolution No. 3203, as later amended by Resolution No. 356, Series of 1958, reads as
follows:

That the lots comprising the Hacienda Luisita shall be subdivided by the applicant-corporation and sold at cost to the tenants, should
21
there be any, and whenever conditions should exist warranting such action under the provisions of the Land Tenure Act;

As of March 31, 1958, Tadeco had fully paid the purchase price for the acquisition of Hacienda Luisita and Tabacalera‘s interest in
22
CAT.

The details of the events that happened next involving the hacienda and the political color some of the parties embossed are of minimal
significance to this narration and need no belaboring. Suffice it to state that on May 7, 1980, the martial law administration filed a suit
before the Manila Regional Trial Court (RTC) against Tadeco, et al., for them to surrender Hacienda Luisita to the then Ministry of
Agrarian Reform (MAR, now the Department of Agrarian Reform [DAR]) so that the land can be distributed to farmers at cost.
Responding, Tadeco or its owners alleged that Hacienda Luisita does not have tenants, besides which sugar lands––of which the
hacienda consisted––are not covered by existing agrarian reform legislations. As perceived then, the government commenced the case
23
against Tadeco as a political message to the family of the late Benigno Aquino, Jr.

Eventually, the Manila RTC rendered judgment ordering Tadeco to surrender Hacienda Luisita to the MAR. Therefrom, Tadeco
appealed to the Court of Appeals (CA).

On March 17, 1988, the Office of the Solicitor General (OSG) moved to withdraw the government‘s case against Tadeco, et al. By
Resolution of May 18, 1988, the CA dismissed the case the Marcos government initially instituted and won against Tadeco, et al. The
dismissal action was, however, made subject to the obtention by Tadeco of the PARC‘s approval of a stock distribution plan (SDP) that
24
must initially be implemented after such approval shall have been secured. The appellate court wrote:

The defendants-appellants x xx filed a motion on April 13, 1988 joining the x xx governmental agencies concerned in moving for the
dismissal of the case subject, however, to the following conditions embodied in the letter dated April 8, 1988 (Annex 2) of the Secretary
of the [DAR] quoted, as follows:

1. Should TADECO fail to obtain approval of the stock distribution plan for failure to comply with all the requirements for
corporate landowners set forth in the guidelines issued by the [PARC]: or

2. If such stock distribution plan is approved by PARC, but TADECO fails to initially implement it.
 x xxx

WHEREFORE, the present case on appeal is hereby dismissed without prejudice, and should be revived if any of the conditions as
25
above set forth is not duly complied with by the TADECO.

26
Markedly, Section 10 of EO 229 allows corporate landowners, as an alternative to the actual land transfer scheme of CARP, to give
qualified beneficiaries the right to purchase shares of stocks of the corporation under a stock ownership arrangement and/or land-to-
share ratio.

Like EO 229, RA 6657, under the latter‘s Sec. 31, also provides two (2) alternative modalities, i.e., land or stock transfer, pursuant to
either of which the corporate landowner can comply with CARP, but subject to well-defined conditions and timeline requirements. Sec.
31 of RA 6657 provides:

SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the
Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries x xx.

Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase
such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities,
bears in relation to the company’s total assets, under such terms and conditions as may be agreed upon by them. In no case shall
the compensation received by the workers at the time the shares of stocks are distributed be reduced. x xx

Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or
other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the
following conditions are complied with:

(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the
books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the
beneficiaries;

(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one
(1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or
association;

(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and

(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a
qualified and registered beneficiary within the same corporation.

If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or realized or the
plan for such stock distribution approved by the PARC within the same period, the agricultural land of the corporate owners or
corporation shall be subject to the compulsory coverage of this Act. (Emphasis added.)

Vis-à-vis the stock distribution aspect of the aforequoted Sec. 31, DAR issued Administrative Order No. 10, Series of 1988 (DAO
27
10), entitled Guidelines and Procedures for Corporate Landowners Desiring to Avail Themselves of the Stock Distribution Plan under
Section 31 of RA 6657.

28
From the start, the stock distribution scheme appeared to be Tadeco‘s preferred option, for, on August 23, 1988, it organized a spin-
off corporation, HLI, as vehicle to facilitate stock acquisition by the farmworkers. For this purpose, Tadeco assigned and conveyed to
HLI the agricultural land portion (4,915.75 hectares) and other farm-related properties of Hacienda Luisita in exchange for HLI shares of
29
stock.

30
Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Jose Cojuangco, Jr., and Paz C. Teopaco were the incorporators of HLI.

To accommodate the assets transfer from Tadeco to HLI, the latter, with the Securities and Exchange Commission‘s (SEC‘s) approval,
increased its capital stock on May 10, 1989 from PhP 1,500,000 divided into 1,500,000 shares with a par value of PhP 1/share to PhP
400,000,000 divided into 400,000,000 shares also with par value of PhP 1/share, 150,000,000 of which were to be issued only to
31
qualified and registered beneficiaries of the CARP, and the remaining 250,000,000 to any stockholder of the corporation.

As appearing in its proposed SDP, the properties and assets of Tadeco contributed to the capital stock of HLI, as appraised and
approved by the SEC, have an aggregate value of PhP 590,554,220, or after deducting the total liabilities of the farm amounting to PhP
32
235,422,758, a net value of PhP 355,531,462. This translated to 355,531,462 shares with a par value of PhP 1/share.
On May 9, 1989, some 93% of the then farmworker-beneficiaries (FWBs) complement of Hacienda Luisita signified in a referendum
their acceptance of the proposed HLI‘s Stock Distribution Option Plan. On May 11, 1989, the Stock Distribution Option Agreement
33 34
(SDOA), styled as a Memorandum of Agreement (MOA), was entered into by Tadeco, HLI, and the 5,848 qualified FWBs and
attested to by then DAR Secretary Philip Juico. The SDOA embodied the basis and mechanics of the SDP, which would eventually be
submitted to the PARC for approval. In the SDOA, the parties agreed to the following:

1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets
(P590,554,220.00) transferred and conveyed to the SECOND PARTY [HLI] is 33.296% that, under the law, is the proportion of
the outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of
P1.00 per share, that has to be distributed to the THIRD PARTY [FWBs] under the stock distribution plan, the said 33.296%
thereof being P118,391,976.85 or 118,391,976.85 shares.

2. The qualified beneficiaries of the stock distribution plan shall be the farmworkers who appear in the annual payroll, inclusive
of the permanent and seasonal employees, who are regularly or periodically employed by the SECOND PARTY.

3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY shall arrange with the FIRST PARTY
[Tadeco] the acquisition and distribution to the THIRD PARTY on the basis of number of days worked and at no cost to
them of one-thirtieth (1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned
and held by the FIRST PARTY, until such time as the entire block of 118,391,976.85 shares shall have been completely
acquired and distributed to the THIRD PARTY.

4.The SECOND PARTY shall guarantee to the qualified beneficiaries of the [SDP] that every year they will receive on top of
their regular compensation, an amount that approximates the equivalent of three (3%) of the total gross sales from the
production of the agricultural land, whether it be in the form of cash dividends or incentive bonuses or both.

5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and
distributed to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid
and effective for one (1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of
said year which will empower the THIRD PARTY or their representative to vote in stockholders‘ and board of directors‘
meetings of the SECOND PARTY convened during the year the entire 33.296% of the outstanding capital stock of the
SECOND PARTY earmarked for distribution and thus be able to gain such number of seats in the board of directors of the
SECOND PARTY that the whole 33.296% of the shares subject to distribution will be entitled to.

6. In addition, the SECOND PARTY shall within a reasonable time subdivide and allocate for free and without charge among
the qualified family-beneficiaries residing in the place where the agricultural land is situated, residential or homelots of not
more than 240 sq.m. each, with each family-beneficiary being assured of receiving and owning a homelot in the barangay
where it actually resides on the date of the execution of this Agreement.

7. This Agreement is entered into by the parties in the spirit of the (C.A.R.P.) of the government and with the supervision of the
[DAR], with the end in view of improving the lot of the qualified beneficiaries of the [SDP] and obtaining for them greater
benefits. (Emphasis added.)

As may be gleaned from the SDOA, included as part of the distribution plan are: (a) production-sharing equivalent to three percent (3%)
of gross sales from the production of the agricultural land payable to the FWBs in cash dividends or incentive bonus; and (b) distribution
of free homelots of not more than 240 square meters each to family-beneficiaries. The production-sharing, as the SDP indicated, is
payable "irrespective of whether [HLI] makes money or not," implying that the benefits do not partake the nature of dividends, as the
term is ordinarily understood under corporation law.

While a little bit hard to follow, given that, during the period material, the assigned value of the agricultural land in the hacienda was
PhP 196.63 million, while the total assets of HLI was PhP 590.55 million with net assets of PhP 355.53 million, Tadeco/HLI would admit
that the ratio of the land-to-shares of stock corresponds to 33.3% of the outstanding capital stock of the HLI equivalent to
118,391,976.85 shares of stock with a par value of PhP 1/share.

35
Subsequently, HLI submitted to DAR its SDP, designated as "Proposal for Stock Distribution under C.A.R.P.," which was substantially
based on the SDOA.

Notably, in a follow-up referendum the DAR conducted on October 14, 1989, 5,117 FWBs, out of 5,315 who participated, opted to
36 37
receive shares in HLI. One hundred thirty-two (132) chose actual land distribution.

After a review of the SDP, then DAR Secretary Miriam Defensor-Santiago (Sec. Defensor-Santiago) addressed a letter dated
38
November 6, 1989 to Pedro S. Cojuangco (Cojuangco), then Tadeco president, proposing that the SDP be revised, along the
following lines:
 1. That over the implementation period of the [SDP], [Tadeco]/HLI shall ensure that there will be no dilution in the shares of
stocks of individual [FWBs];

2. That a safeguard shall be provided by [Tadeco]/HLI against the dilution of the percentage shareholdings of the [FWBs], i.e.,
that the 33% shareholdings of the [FWBs] will be maintained at any given time;

3. That the mechanics for distributing the stocks be explicitly stated in the [MOA] signed between the [Tadeco], HLI and its
[FWBs] prior to the implementation of the stock plan;

4. That the stock distribution plan provide for clear and definite terms for determining the actual number of seats to be
allocated for the [FWBs] in the HLI Board;

5. That HLI provide guidelines and a timetable for the distribution of homelots to qualified [FWBs]; and

6. That the 3% cash dividends mentioned in the [SDP] be expressly provided for [in] the MOA.

In a letter-reply of November 14, 1989 to Sec. Defensor-Santiago, Tadeco/HLI explained that the proposed revisions of the SDP are
39
already embodied in both the SDP and MOA. Following that exchange, the PARC, under then Sec. Defensor-Santiago,
40 41
by Resolution No. 89-12-2 dated November 21, 1989, approved the SDP of Tadeco/HLI.

At the time of the SDP approval, HLI had a pool of farmworkers, numbering 6,296, more or less, composed of permanent, seasonal and
casual master list/payroll and non-master list members.

From 1989 to 2005, HLI claimed to have extended the following benefits to the FWBs:

(a) 3 billion pesos (P3,000,000,000) worth of salaries, wages and fringe benefits

(b) 59 million shares of stock distributed for free to the FWBs;

(c) 150 million pesos (P150,000,000) representing 3% of the gross produce;

(d) 37.5 million pesos (P37,500,000) representing 3% from the sale of 500 hectares of converted agricultural land of Hacienda
Luisita;

(e) 240-square meter homelots distributed for free;

(f) 2.4 million pesos (P2,400,000) representing 3% from the sale of 80 hectares at 80 million pesos (P80,000,000) for the
SCTEX;

(g) Social service benefits, such as but not limited to free hospitalization/medical/maternity services, old age/death benefits
42
and no interest bearing salary/educational loans and rice sugar accounts.

Two separate groups subsequently contested this claim of HLI.

On August 15, 1995, HLI applied for the conversion of 500 hectares of land of the hacienda from agricultural to industrial
43
use, pursuant to Sec. 65 of RA 6657, providing:

SEC. 65. Conversion of Lands.¾After the lapse of five (5) years from its award, when the land ceases to be economically feasible and
sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes, the DAR, upon application of the beneficiary or the landowner, with due notice to the affected
parties, and subject to existing laws, may authorize the reclassification, or conversion of the land and its disposition: Provided, That the
beneficiary shall have fully paid its obligation.

The application, according to HLI, had the backing of 5,000 or so FWBs, including respondent Rene Galang, and Jose Julio Suniga, as
44
evidenced by the Manifesto of Support they signed and which was submitted to the DAR. After the usual processing, the DAR, thru
then Sec. Ernesto Garilao, approved the application on August 14, 1996, per DAR Conversion Order No. 030601074-764-(95), Series
45
of 1996, subject to payment of three percent (3%) of the gross selling price to the FWBs and to HLI‘s continued compliance with its
undertakings under the SDP, among other conditions.

On December 13, 1996, HLI, in exchange for subscription of 12,000,000 shares of stocks of Centennary Holdings, Inc. (Centennary),
46 47
ceded 300 hectares of the converted area to the latter. Consequently, HLI‘s Transfer Certificate of Title (TCT) No. 287910 was
48
canceled and TCT No. 292091 was issued in the name of Centennary. HLI transferred the remaining 200 hectares covered by TCT
 49
No. 287909 to Luisita Realty Corporation (LRC) in two separate transactions in 1997 and 1998, both uniformly involving 100 hectares
50
for PhP 250 million each.

Centennary, a corporation with an authorized capital stock of PhP 12,100,000 divided into 12,100,000 shares and wholly-owned by HLI,
had the following incorporators: Pedro Cojuangco, Josephine C. Reyes, Teresita C. Lopa, Ernesto G. Teopaco, and Bernardo R.
Lahoz.

51
Subsequently, Centennary sold the entire 300 hectares to Luisita Industrial Park Corporation (LIPCO) for PhP 750 million. The latter
52
acquired it for the purpose of developing an industrial complex. As a result, Centennary‘s TCT No. 292091 was canceled to be
53
replaced by TCT No. 310986 in the name of LIPCO.

From the area covered by TCT No. 310986 was carved out two (2) parcels, for which two (2) separate titles were issued in the name of
54 55
LIPCO, specifically: (a) TCT No. 365800 and (b) TCT No. 365801, covering 180 and four hectares, respectively. TCT No. 310986
was, accordingly, partially canceled.

Later on, in a Deed of Absolute Assignment dated November 25, 2004, LIPCO transferred the parcels covered by its TCT Nos. 365800
and 365801 to the Rizal Commercial Banking Corporation (RCBC) by way of dacion en pago in payment of LIPCO‘s PhP
431,695,732.10 loan obligations. LIPCO‘s titles were canceled and new ones, TCT Nos. 391051 and 391052, were issued to RCBC.

Apart from the 500 hectares alluded to, another 80.51 hectares were later detached from the area coverage of Hacienda Luisita which
had been acquired by the government as part of the Subic-Clark-Tarlac Expressway (SCTEX) complex. In absolute terms, 4,335.75
56
hectares remained of the original 4,915 hectares Tadeco ceded to HLI.

Such, in short, was the state of things when two separate petitions, both undated, reached the DAR in the latter part of 2003. In the first,
57
denominated as Petition/Protest, respondents Jose Julio Suniga and Windsor Andaya, identifying themselves as head of the
Supervisory Group of HLI (Supervisory Group), and 60 other supervisors sought to revoke the SDOA, alleging that HLI had failed to
give them their dividends and the one percent (1%) share in gross sales, as well as the thirty-three percent (33%) share in the proceeds
of the sale of the converted 500 hectares of land. They further claimed that their lives have not improved contrary to the promise and
58
rationale for the adoption of the SDOA. They also cited violations by HLI of the SDOA‘s terms. They prayed for a renegotiation of the
SDOA, or, in the alternative, its revocation.

Revocation and nullification of the SDOA and the distribution of the lands in the hacienda were the call in the second petition, styled
59
as Petisyon (Petition). The Petisyon was ostensibly filed on December 4, 2003 by AlyansangmgaManggagawangBukidng Hacienda
Luisita (AMBALA), where the handwritten name of respondents Rene Galang as "Pangulo AMBALA" and Noel Mallari as "Sec-Gen.
60
AMBALA" appeared. As alleged, the petition was filed on behalf of AMBALA‘s members purportedly composing about 80% of the
5,339 FWBs of Hacienda Luisita.

61 62
HLI would eventually answer the petition/protest of the Supervisory Group. On the other hand, HLI‘s answer to the AMBALA petition
was contained in its letter dated January 21, 2005 also filed with DAR.

Meanwhile, the DAR constituted a Special Task Force to attend to issues relating to the SDP of HLI. Among other duties, the Special
Task Force was mandated to review the terms and conditions of the SDOA and PARC Resolution No. 89-12-2 relative to HLI‘s SDP;
evaluate HLI‘s compliance reports; evaluate the merits of the petitions for the revocation of the SDP; conduct ocular inspections or field
63
investigations; and recommend appropriate remedial measures for approval of the Secretary.

After investigation and evaluation, the Special Task Force submitted its "Terminal Report: Hacienda Luisita, Incorporated (HLI) Stock
64
Distribution Plan (SDP) Conflict" dated September 22, 2005 (Terminal Report), finding that HLI has not complied with its obligations
65
under RA 6657 despite the implementation of the SDP. The Terminal Report and the Special Task Force‘s recommendations were
66
adopted by then DAR Sec. Nasser Pangandaman (Sec. Pangandaman).

Subsequently, Sec. Pangandaman recommended to the PARC Executive Committee (Excom) (a) the recall/revocation of PARC
Resolution No. 89-12-2 dated November 21, 1989 approving HLI‘s SDP; and (b) the acquisition of Hacienda Luisita through the
compulsory acquisition scheme. Following review, the PARC Validation Committee favorably endorsed the DAR Secretary‘s
67
recommendation afore-stated.

On December 22, 2005, the PARC issued the assailed Resolution No. 2005-32-01, disposing as follows:

NOW, THEREFORE, on motion duly seconded, RESOLVED, as it is HEREBY RESOLVED, to approve and confirm the
recommendation of the PARC Executive Committee adopting in toto the report of the PARC ExCom Validation Committee affirming the
recommendation of the DAR to recall/revoke the SDO plan of Tarlac Development Corporation/Hacienda Luisita Incorporated.

RESOLVED, further, that the lands subject of the recalled/revoked TDC/HLI SDO plan be forthwith placed under the compulsory
coverage or mandated land acquisition scheme of the [CARP].
 68
APPROVED.

A copy of Resolution No. 2005-32-01 was served on HLI the following day, December 23, without any copy of the documents adverted
69
to in the resolution attached. A letter-request dated December 28, 2005 for certified copies of said documents was sent to, but was
not acted upon by, the PARC secretariat.

70
Therefrom, HLI, on January 2, 2006, sought reconsideration. On the same day, the DAR Tarlac provincial office issued the Notice of
71
Coverage which HLI received on January 4, 2006.

Its motion notwithstanding, HLI has filed the instant recourse in light of what it considers as the DAR‘s hasty placing of Hacienda Luisita
72
under CARP even before PARC could rule or even read the motion for reconsideration. As HLI later rued, it "can not know from the
73
above-quoted resolution the facts and the law upon which it is based."

PARC would eventually deny HLI‘s motion for reconsideration via Resolution No. 2006-34-01 dated May 3, 2006.

74 75
By Resolution of June 14, 2006, the Court, acting on HLI‘s motion, issued a temporary restraining order, enjoining the
implementation of Resolution No. 2005-32-01 and the notice of coverage.

76
On July 13, 2006, the OSG, for public respondents PARC and the DAR, filed its Comment on the petition.

On December 2, 2006, Noel Mallari, impleaded by HLI as respondent in his capacity as "Sec-Gen. AMBALA," filed his Manifestation
77
and Motion with Comment Attached dated December 4, 2006 (Manifestation and Motion). In it, Mallari stated that he has broken away
78
from AMBALA with other AMBALA ex-members and formed Farmworkers Agrarian Reform Movement, Inc. (FARM). Should this shift
in alliance deny him standing, Mallari also prayed that FARM be allowed to intervene.

As events would later develop, Mallari had a parting of ways with other FARM members, particularly would-be intervenors Renato Lalic,
et al. As things stand, Mallari returned to the AMBALA fold, creating the AMBALA-Noel Mallari faction and leaving Renato Lalic, et al.
as the remaining members of FARM who sought to intervene.

79
On January 10, 2007, the Supervisory Group and the AMBALA-Rene Galang faction submitted their Comment/Opposition dated
80
December 17, 2006.

On October 30, 2007, RCBC filed a Motion for Leave to Intervene and to File and Admit Attached Petition-In-Intervention dated October
81 82
18, 2007. LIPCO later followed with a similar motion. In both motions, RCBC and LIPCO contended that the assailed resolution
effectively nullified the TCTs under their respective names as the properties covered in the TCTs were veritably included in the January
2, 2006 notice of coverage. In the main, they claimed that the revocation of the SDP cannot legally affect their rights as innocent
purchasers for value. Both motions for leave to intervene were granted and the corresponding petitions-in-intervention admitted.

On August 18, 2010, the Court heard the main and intervening petitioners on oral arguments. On the other hand, the Court, on August
24, 2010, heard public respondents as well as the respective counsels of the AMBALA-Mallari-Supervisory Group, the AMBALA-Galang
83
faction, and the FARM and its 27 members argue their case.

Prior to the oral arguments, however, HLI; AMBALA, represented by Mallari; the Supervisory Group, represented by Suniga and
Andaya; and the United Luisita Workers Union, represented by EldifonsoPingol, filed with the Court a joint submission and motion for
approval of a Compromise Agreement (English and Tagalog versions) dated August 6, 2010.

84
On August 31, 2010, the Court, in a bid to resolve the dispute through an amicable settlement, issued a Resolution creating a
Mediation Panel composed of then Associate Justice Ma. Alicia Austria-Martinez, as chairperson, and former CA Justices Hector
Hofileña and TeresitaDy-Liacco Flores, as members. Meetings on five (5) separate dates, i.e., September 8, 9, 14, 20, and 27, 2010,
were conducted. Despite persevering and painstaking efforts on the part of the panel, mediation had to be discontinued when no
acceptable agreement could be reached.

The Issues

HLI raises the following issues for our consideration:

I.

WHETHER OR NOT PUBLIC RESPONDENTS PARC AND SECRETARY PANGANDAMAN HAVE JURISDICTION, POWER
AND/OR AUTHORITY TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA.

II.
 [IF SO], x xx CAN THEY STILL EXERCISE SUCH JURISDICTION, POWER AND/OR AUTHORITY AT THIS TIME, I.E.,
AFTER SIXTEEN (16) YEARS FROM THE EXECUTION OF THE SDOA AND ITS IMPLEMENTATION WITHOUT
VIOLATING SECTIONS 1 AND 10 OF ARTICLE III (BILL OF RIGHTS) OF THE CONSTITUTION AGAINST DEPRIVATION
OF PROPERTY WITHOUT DUE PROCESS OF LAW AND THE IMPAIRMENT OF CONTRACTUAL RIGHTS AND
OBLIGATIONS? MOREOVER, ARE THERE LEGAL GROUNDS UNDER THE CIVIL CODE, viz, ARTICLE 1191 x xx,
ARTICLES 1380, 1381 AND 1382 x xx ARTICLE 1390 x xx AND ARTICLE 1409 x xx THAT CAN BE INVOKED TO NULLIFY,
RECALL, REVOKE, OR RESCIND THE SDOA?

III.

WHETHER THE PETITIONS TO NULLIFY, RECALL, REVOKE OR RESCIND THE SDOA HAVE ANY LEGAL BASIS OR
GROUNDS AND WHETHER THE PETITIONERS THEREIN ARE THE REAL PARTIES-IN-INTEREST TO FILE SAID
PETITIONS.

IV.

WHETHER THE RIGHTS, OBLIGATIONS AND REMEDIES OF THE PARTIES TO THE SDOA ARE NOW GOVERNED BY
THE CORPORATION CODE (BATAS PAMBANSA BLG. 68) AND NOT BY THE x xx [CARL] x xx.

On the other hand, RCBC submits the following issues:

I.

RESPONDENT PARC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF

JURISDICTION WHEN IT DID NOT EXCLUDE THE SUBJECT PROPERTY FROM THE COVERAGE OF THE CARP
DESPITE THE FACT THAT PETITIONER-INTERVENOR RCBC HAS ACQUIRED VESTED RIGHTS AND INDEFEASIBLE
TITLE OVER THE SUBJECT PROPERTY AS AN INNOCENT PURCHASER FOR VALUE.

A. THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006
HAVE THE EFFECT OF NULLIFYING TCT NOS. 391051 AND 391052 IN THE NAME OF PETITIONER-
INTERVENOR RCBC.

B. AS AN INNOCENT PURCHASER FOR VALUE, PETITIONER-INTERVENOR RCBC CANNOT BE PREJUDICED

BY A SUBSEQUENT REVOCATION OR RESCISSION OF THE SDOA.

II.

THE ASSAILED RESOLUTION NO. 2005-32-01 AND THE NOTICE OF COVERAGE DATED 02 JANUARY 2006 WERE
ISSUED WITHOUT AFFORDING PETITIONER-INTERVENOR RCBC ITS RIGHT TO DUE PROCESS AS AN INNOCENT
PURCHASER FOR VALUE.

LIPCO, like RCBC, asserts having acquired vested and indefeasible rights over certain portions of the converted property, and, hence,
would ascribe on PARC the commission of grave abuse of discretion when it included those portions in the notice of coverage. And
apart from raising issues identical with those of HLI, such as but not limited to the absence of valid grounds to warrant the rescission
and/or revocation of the SDP, LIPCO would allege that the assailed resolution and the notice of coverage were issued without affording
it the right to due process as an innocent purchaser for value. The government, LIPCO also argues, is estopped from recovering
properties which have since passed to innocent parties.

Simply formulated, the principal determinative issues tendered in the main petition and to which all other related questions must yield
boil down to the following: (1) matters of standing; (2) the constitutionality of Sec. 31 of RA 6657; (3) the jurisdiction of PARC to recall or
revoke HLI‘s SDP; (4) the validity or propriety of such recall or revocatory action; and (5) corollary to (4), the validity of the terms and
conditions of the SDP, as embodied in the SDOA.

Our Ruling

I.

We first proceed to the examination of the preliminary issues before delving on the more serious challenges bearing on the validity of
PARC‘s assailed issuance and the grounds for it.

Supervisory Group, AMBALA and their

respective leaders are real parties-in-interest
HLI would deny real party-in-interest status to the purported leaders of the Supervisory Group and AMBALA, i.e., Julio Suniga, Windsor
Andaya, and Rene Galang, who filed the revocatory petitions before the DAR. As HLI would have it, Galang, the self-styled head of
85
AMBALA, gained HLI employment in June 1990 and, thus, could not have been a party to the SDOA executed a year earlier. As
regards the Supervisory Group, HLI alleges that supervisors are not regular farmworkers, but the company nonetheless considered
them FWBs under the SDOA as a mere concession to enable them to enjoy the same benefits given qualified regular farmworkers.
86
However, if the SDOA would be canceled and land distribution effected, so HLI claims, citing Fortich v. Corona, the supervisors would
87
be excluded from receiving lands as farmworkers other than the regular farmworkers who are merely entitled to the "fruits of the land."

The SDOA no less identifies "the SDP qualified beneficiaries" as "the farmworkers who appear in the annual payroll, inclusive of the
88
permanent and seasonal employees, who are regularly or periodically employed by [HLI]." Galang, per HLI‘s own admission, is
employed by HLI, and is, thus, a qualified beneficiary of the SDP; he comes within the definition of a real party-in-interest under Sec. 2,
Rule 3 of the Rules of Court, meaning, one who stands to be benefited or injured by the judgment in the suit or is the party entitled to
the avails of the suit.

The same holds true with respect to the Supervisory Group whose members were admittedly employed by HLI and whose names and
signatures even appeared in the annex of the SDOA. Being qualified beneficiaries of the SDP, Suniga and the other 61 supervisors are
certainly parties who would benefit or be prejudiced by the judgment recalling the SDP or replacing it with some other modality to
comply with RA 6657.

Even assuming that members of the Supervisory Group are not regular farmworkers, but are in the category of "other farmworkers"
89
mentioned in Sec. 4, Article XIII of the Constitution, thus only entitled to a share of the fruits of the land, as indeed Fortich teaches,
this does not detract from the fact that they are still identified as being among the "SDP qualified beneficiaries." As such, they are, thus,
90
entitled to bring an action upon the SDP. At any rate, the following admission made by Atty. Gener Asuncion, counsel of HLI, during
the oral arguments should put to rest any lingering doubt as to the status of protesters Galang, Suniga, and Andaya:

Justice Bersamin: x xx I heard you a while ago that you were conceding the qualified farmer beneficiaries of Hacienda Luisita were real
parties in interest?

Atty. Asuncion: Yes, Your Honor please, real party in interest which that question refers to the complaints of protest initiated before the
91
DAR and the real party in interest there be considered as possessed by the farmer beneficiaries who initiated the protest.

Further, under Sec. 50, paragraph 4 of RA 6657, farmer-leaders are expressly allowed to represent themselves, their fellow farmers or
their organizations in any proceedings before the DAR. Specifically:

SEC. 50. Quasi-Judicial Powers of the DAR.¾x x x

x xxx

Responsible farmer leaders shall be allowed to represent themselves, their fellow farmers or their organizations in any
proceedings before the DAR: Provided, however, that when there are two or more representatives for any individual or group, the
representatives should choose only one among themselves to represent such party or group before any DAR proceedings. (Emphasis
supplied.)

Clearly, the respective leaders of the Supervisory Group and AMBALA are contextually real parties-in-interest allowed by law to file a
petition before the DAR or PARC.

92
This is not necessarily to say, however, that Galang represents AMBALA, for as records show and as HLI aptly noted, his "petisyon"
filed with DAR did not carry the usual authorization of the individuals in whose behalf it was supposed to have been instituted. To date,
such authorization document, which would logically include a list of the names of the authorizing FWBs, has yet to be submitted to be
part of the records.

PARC’s Authority to Revoke a Stock Distribution Plan

On the postulate that the subject jurisdiction is conferred by law, HLI maintains that PARC is without authority to revoke an SDP, for
neither RA 6657 nor EO 229 expressly vests PARC with such authority. While, as HLI argued, EO 229 empowers PARC to approve the
plan for stock distribution in appropriate cases, the empowerment only includes the power to disapprove, but not to recall its previous
93
approval of the SDP after it has been implemented by the parties. To HLI, it is the court which has jurisdiction and authority to order
the revocation or rescission of the PARC-approved SDP.

We disagree.

Under Sec. 31 of RA 6657, as implemented by DAO 10, the authority to approve the plan for stock distribution of the corporate
landowner belongs to PARC. However, contrary to petitioner HLI‘s posture, PARC also has the power to revoke the SDP which it
previously approved. It may be, as urged, that RA 6657 or other executive issuances on agrarian reform do not explicitly vest the PARC
with the power to revoke/recall an approved SDP. Such power or authority, however, is deemed possessed by PARC under the
94
principle of necessary implication, a basic postulate that what is implied in a statute is as much a part of it as that which is expressed.

We have explained that "every statute is understood, by implication, to contain all such provisions as may be necessary to effectuate its
object and purpose, or to make effective rights, powers, privileges or jurisdiction which it grants, including all such collateral and
95
subsidiary consequences as may be fairly and logically inferred from its terms." Further, "every statutory grant of power, right or
96
privilege is deemed to include all incidental power, right or privilege.

Gordon v. Veridiano II is instructive:

The power to approve a license includes by implication, even if not expressly granted, the power to revoke it. By extension, the power
to revoke is limited by the authority to grant the license, from which it is derived in the first place. Thus, if the FDA grants a license upon
its finding that the applicant drug store has complied with the requirements of the general laws and the implementing administrative
rules and regulations, it is only for their violation that the FDA may revoke the said license. By the same token, having granted the
permit upon his ascertainment that the conditions thereof as applied x xx have been complied with, it is only for the violation of such
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conditions that the mayor may revoke the said permit. (Emphasis supplied.)

Following the doctrine of necessary implication, it may be stated that the conferment of express power to approve a plan for stock
distribution of the agricultural land of corporate owners necessarily includes the power to revoke or recall the approval of the plan.

As public respondents aptly observe, to deny PARC such revocatory power would reduce it into a toothless agency of CARP, because
the very same agency tasked to ensure compliance by the corporate landowner with the approved SDP would be without authority to
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impose sanctions for non-compliance with it. With the view We take of the case, only PARC can effect such revocation. The DAR
Secretary, by his own authority as such, cannot plausibly do so, as the acceptance and/or approval of the SDP sought to be taken back
or undone is the act of PARC whose official composition includes, no less, the President as chair, the DAR Secretary as vice-chair, and
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at least eleven (11) other department heads.

On another but related issue, the HLI foists on the Court the argument that subjecting its landholdings to compulsory distribution after
its approved SDP has been implemented would impair the contractual obligations created under the SDOA.

The broad sweep of HLI‘s argument ignores certain established legal precepts and must, therefore, be rejected.

A law authorizing interference, when appropriate, in the contractual relations between or among parties is deemed read into the
contract and its implementation cannot successfully be resisted by force of the non-impairment guarantee. There is, in that instance, no
impingement of the impairment clause, the non-impairment protection being applicable only to laws that derogate prior acts or contracts
by enlarging, abridging or in any manner changing the intention of the parties. Impairment, in fine, obtains if a subsequent law changes
the terms of a contract between the parties, imposes new conditions, dispenses with those agreed upon or withdraws existing remedies
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for the enforcement of the rights of the parties. Necessarily, the constitutional proscription would not apply to laws already in effect at
the time of contract execution, as in the case of RA 6657, in relation to DAO 10, vis-à-vis HLI‘s SDOA. As held in Serrano v. Gallant
Maritime Services, Inc.:

The prohibition [against impairment of the obligation of contracts] is aligned with the general principle that laws newly enacted have only
a prospective operation, and cannot affect acts or contracts already perfected; however, as to laws already in existence, their provisions
are read into contracts and deemed a part thereof. Thus, the non-impairment clause under Section 10, Article II [of the Constitution] is
limited in application to laws about to be enacted that would in any way derogate from existing acts or contracts by enlarging, abridging
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or in any manner changing the intention of the parties thereto. (Emphasis supplied.)

Needless to stress, the assailed Resolution No. 2005-32-01 is not the kind of issuance within the ambit of Sec. 10, Art. III of the
Constitution providing that "[n]o law impairing the obligation of contracts shall be passed."

Parenthetically, HLI tags the SDOA as an ordinary civil law contract and, as such, a breach of its terms and conditions is not a PARC
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administrative matter, but one that gives rise to a cause of action cognizable by regular courts. This contention has little to commend
itself. The SDOA is a special contract imbued with public interest, entered into and crafted pursuant to the provisions of RA 6657. It
embodies the SDP, which requires for its validity, or at least its enforceability, PARC‘s approval. And the fact that the certificate of
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compliance ––to be issued by agrarian authorities upon completion of the distribution of stocks––is revocable by the same issuing
authority supports the idea that everything about the implementation of the SDP is, at the first instance, subject to administrative
adjudication.

HLI also parlays the notion that the parties to the SDOA should now look to the Corporation Code, instead of to RA 6657, in
determining their rights, obligations and remedies. The Code, it adds, should be the applicable law on the disposition of the agricultural
land of HLI.

Contrary to the view of HLI, the rights, obligations and remedies of the parties to the SDOA embodying the SDP are primarily governed
by RA 6657. It should abundantly be made clear that HLI was precisely created in order to comply with RA 6657, which the OSG aptly
 104
described as the "mother law" of the SDOA and the SDP. It is, thus, paradoxical for HLI to shield itself from the coverage of CARP by
invoking exclusive applicability of the Corporation Code under the guise of being a corporate entity.

Without in any way minimizing the relevance of the Corporation Code since the FWBs of HLI are also stockholders, its applicability is
limited as the rights of the parties arising from the SDP should not be made to supplant or circumvent the agrarian reform program.

Without doubt, the Corporation Code is the general law providing for the formation, organization and regulation of private corporations.
On the other hand, RA 6657 is the special law on agrarian reform. As between a general and special law, the latter shall prevail—
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generaliaspecialibus non derogant. Besides, the present impasse between HLI and the private respondents is not an intra-corporate
dispute which necessitates the application of the Corporation Code. What private respondents questioned before the DAR is the proper
implementation of the SDP and HLI‘s compliance with RA 6657. Evidently, RA 6657 should be the applicable law to the instant case.

HLI further contends that the inclusion of the agricultural land of Hacienda Luisita under the coverage of CARP and the eventual
distribution of the land to the FWBs would amount to a disposition of all or practically all of the corporate assets of HLI. HLI would add
that this contingency, if ever it comes to pass, requires the applicability of the Corporation Code provisions on corporate dissolution.

We are not persuaded.

Indeed, the provisions of the Corporation Code on corporate dissolution would apply insofar as the winding up of HLI‘s affairs or
liquidation of the assets is concerned. However, the mere inclusion of the agricultural land of Hacienda Luisita under the coverage of
CARP and the land‘s eventual distribution to the FWBs will not, without more, automatically trigger the dissolution of HLI. As stated in
the SDOA itself, the percentage of the value of the agricultural land of Hacienda Luisita in relation to the total assets transferred and
conveyed by Tadeco to HLI comprises only 33.296%, following this equation: value of the agricultural lands divided by total corporate
assets. By no stretch of imagination would said percentage amount to a disposition of all or practically all of HLI‘s corporate assets
should compulsory land acquisition and distribution ensue.

This brings us to the validity of the revocation of the approval of the SDP sixteen (16) years after its execution pursuant to Sec. 31 of
RA 6657 for the reasons set forth in the Terminal Report of the Special Task Force, as endorsed by PARC Excom. But first, the matter
of the constitutionality of said section.

Constitutional Issue

FARM asks for the invalidation of Sec. 31 of RA 6657, insofar as it affords the corporation, as a mode of CARP compliance, to resort to
stock distribution, an arrangement which, to FARM, impairs the fundamental right of farmers and farmworkers under Sec. 4, Art. XIII of
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the Constitution.

To a more specific, but direct point, FARM argues that Sec. 31 of RA 6657 permits stock transfer in lieu of outright agricultural land
transfer; in fine, there is stock certificate ownership of the farmers or farmworkers instead of them owning the land, as envisaged in the
Constitution. For FARM, this modality of distribution is an anomaly to be annulled for being inconsistent with the basic concept of
107
agrarian reform ingrained in Sec. 4, Art. XIII of the Constitution.

Reacting, HLI insists that agrarian reform is not only about transfer of land ownership to farmers and other qualified beneficiaries. It
draws attention in this regard to Sec. 3(a) of RA 6657 on the concept and scope of the term "agrarian reform." The constitutionality of
a law, HLI added, cannot, as here, be attacked collaterally.

The instant challenge on the constitutionality of Sec. 31 of RA 6657 and necessarily its counterpart provision in EO 229 must fail as
explained below.

When the Court is called upon to exercise its power of judicial review over, and pass upon the constitutionality of, acts of the executive
or legislative departments, it does so only when the following essential requirements are first met, to wit:

(1) there is an actual case or controversy;

(2) that the constitutional question is raised at the earliest possible opportunity by a proper party or one with locus standi; and

108
(3) the issue of constitutionality must be the very lismota of the case.

Not all the foregoing requirements are satisfied in the case at bar.

While there is indeed an actual case or controversy, intervenor FARM, composed of a small minority of 27 farmers, has yet to explain
its failure to challenge the constitutionality of Sec. 3l of RA 6657, since as early as November 21, l989 when PARC approved the SDP
of Hacienda Luisita or at least within a reasonable time thereafter and why its members received benefits from the SDP without so
much of a protest. It was only on December 4, 2003 or 14 years after approval of the SDP via PARC Resolution No. 89-12-2 dated
November 21, 1989 that said plan and approving resolution were sought to be revoked, but not, to stress, by FARM or any of its
members, but by petitioner AMBALA. Furthermore, the AMBALA petition did NOT question the constitutionality of Sec. 31 of RA 6657,
but concentrated on the purported flaws and gaps in the subsequent implementation of the SDP. Even the public respondents, as
represented by the Solicitor General, did not question the constitutionality of the provision. On the other hand, FARM, whose 27
members formerly belonged to AMBALA, raised the constitutionality of Sec. 31 only on May 3, 2007 when it filed its Supplemental
Comment with the Court. Thus, it took FARM some eighteen (18) years from November 21, 1989 before it challenged the
constitutionality of Sec. 31 of RA 6657 which is quite too late in the day. The FARM members slept on their rights and even accepted
benefits from the SDP with nary a complaint on the alleged unconstitutionality of Sec. 31 upon which the benefits were derived. The
Court cannot now be goaded into resolving a constitutional issue that FARM failed to assail after the lapse of a long period of time and
the occurrence of numerous events and activities which resulted from the application of an alleged unconstitutional legal provision.

It has been emphasized in a number of cases that the question of constitutionality will not be passed upon by the Court unless it is
109
properly raised and presented in an appropriate case at the first opportunity. FARM is, therefore, remiss in belatedly questioning the
constitutionality of Sec. 31 of RA 6657. The second requirement that the constitutional question should be raised at the earliest possible
opportunity is clearly wanting.

The last but the most important requisite that the constitutional issue must be the very lismota of the case does not likewise obtain.
The lismota aspect is not present, the constitutional issue tendered not being critical to the resolution of the case. The unyielding rule
110
has been to avoid, whenever plausible, an issue assailing the constitutionality of a statute or governmental act. If some other grounds
111
exist by which judgment can be made without touching the constitutionality of a law, such recourse is favored. Garcia v. Executive
Secretary explains why:

LisMota — the fourth requirement to satisfy before this Court will undertake judicial review — means that the Court will not pass upon a
question of unconstitutionality, although properly presented, if the case can be disposed of on some other ground, such as the
application of the statute or the general law. The petitioner must be able to show that the case cannot be legally resolved unless the
constitutional question raised is determined. This requirement is based on the rule that every law has in its favor the presumption of
constitutionality; to justify its nullification, there must be a clear and unequivocal breach of the Constitution, and not one that is doubtful,
112
speculative, or argumentative. (Italics in the original.)

The lismota in this case, proceeding from the basic positions originally taken by AMBALA (to which the FARM members previously
belonged) and the Supervisory Group, is the alleged non-compliance by HLI with the conditions of the SDP to support a plea for its
revocation. And before the Court, the lismota is whether or not PARC acted in grave abuse of discretion when it ordered the recall of
the SDP for such non-compliance and the fact that the SDP, as couched and implemented, offends certain constitutional and statutory
provisions. To be sure, any of these key issues may be resolved without plunging into the constitutionality of Sec. 31 of RA 6657.
Moreover, looking deeply into the underlying petitions of AMBALA, et al., it is not the said section per se that is invalid, but rather it is
the alleged application of the said provision in the SDP that is flawed.

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It may be well to note at this juncture that Sec. 5 of RA 9700, amending Sec. 7 of RA 6657, has all but superseded Sec. 31 of RA
6657 vis-à-vis the stock distribution component of said Sec. 31. In its pertinent part, Sec. 5 of RA 9700 provides: "[T]hat after June 30,
2009, the modes of acquisition shall be limited to voluntary offer to sell and compulsory acquisition." Thus, for all intents and
purposes, the stock distribution scheme under Sec. 31 of RA 6657 is no longer an available option under existing law. The question of
whether or not it is unconstitutional should be a moot issue.

It is true that the Court, in some cases, has proceeded to resolve constitutional issues otherwise already moot and
114
academic provided the following requisites are present:

x xx first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public
interest is involved; third, when the constitutional issue raised requires formulation of controlling principles to guide the bench, the bar,
and the public; fourth, the case is capable of repetition yet evading review.

These requisites do not obtain in the case at bar.

For one, there appears to be no breach of the fundamental law. Sec. 4, Article XIII of the Constitution reads:

The State shall, by law, undertake an agrarian reform program founded on the right of the farmers and regular farmworkers, who are
landless, to OWN directly or COLLECTIVELY THE LANDS THEY TILL or, in the case of other farmworkers, to receive a just share of
the fruits thereof. To this end, the State shall encourage and undertake the just distribution of all agricultural lands, subject to such
priorities and reasonable retention limits as the Congress may prescribe, taking into account ecological, developmental, or equity
considerations, and subject to the payment of just compensation. In determining retention limits, the State shall respect the right of
small landowners. The State shall further provide incentives for voluntary land-sharing. (Emphasis supplied.)

The wording of the provision is unequivocal––the farmers and regular farmworkers have a right TO OWN DIRECTLY OR
COLLECTIVELY THE LANDS THEY TILL. The basic law allows two (2) modes of land distribution—direct and indirect ownership.
Direct transfer to individual farmers is the most commonly used method by DAR and widely accepted. Indirect transfer through
collective ownership of the agricultural land is the alternative to direct ownership of agricultural land by individual farmers. The
aforequoted Sec. 4 EXPRESSLY authorizes collective ownership by farmers. No language can be found in the 1987 Constitution that
disqualifies or prohibits corporations or cooperatives of farmers from being the legal entity through which collective ownership can be
exercised. The word "collective" is defined as "indicating a number of persons or things considered as constituting one group or
115 116
aggregate," while "collectively" is defined as "in a collective sense or manner; in a mass or body." By using the word "collectively,"
the Constitution allows for indirect ownership of land and not just outright agricultural land transfer. This is in recognition of the fact that
land reform may become successful even if it is done through the medium of juridical entities composed of farmers.

Collective ownership is permitted in two (2) provisions of RA 6657. Its Sec. 29 allows workers‘ cooperatives or associations to
collectively own the land, while the second paragraph of Sec. 31 allows corporations or associations to own agricultural land with the
farmers becoming stockholders or members. Said provisions read:

SEC. 29. Farms owned or operated by corporations or other business associations.—In the case of farms owned or operated by
corporations or other business associations, the following rules shall be observed by the PARC.

In general, lands shall be distributed directly to the individual worker-beneficiaries.

In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker beneficiaries who
shall form a workers‘ cooperative or association which will deal with the corporation or business association. x xx (Emphasis supplied.)

SEC. 31. Corporate Landowners.— x xx

x xxx

Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase such
proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to
the company‘s total assets, under such terms and conditions as may be agreed upon by them. In no case shall the compensation
received by the workers at the time the shares of stocks are distributed be reduced. The same principle shall be applied to associations,
with respect to their equity or participation. x xx (Emphasis supplied.)

Clearly, workers‘ cooperatives or associations under Sec. 29 of RA 6657 and corporations or associations under the succeeding Sec.
31, as differentiated from individual farmers, are authorized vehicles for the collective ownership of agricultural land. Cooperatives can
be registered with the Cooperative Development Authority and acquire legal personality of their own, while corporations are juridical
persons under the Corporation Code. Thus, Sec. 31 is constitutional as it simply implements Sec. 4 of Art. XIII of the Constitution that
land can be owned COLLECTIVELY by farmers. Even the framers of the l987 Constitution are in unison with respect to the two (2)
modes of ownership of agricultural lands tilled by farmers––DIRECT and COLLECTIVE, thus:

MR. NOLLEDO. And when we talk of the phrase "to own directly," we mean the principle of direct ownership by the tiller?

MR. MONSOD. Yes.

MR. NOLLEDO. And when we talk of "collectively," we mean communal ownership, stewardship or State ownership?

MS. NIEVA. In this section, we conceive of cooperatives; that is farmers‘ cooperatives owning the land, not the State.

MR. NOLLEDO. And when we talk of "collectively," referring to farmers‘ cooperatives, do the farmers own specific areas of land where
they only unite in their efforts?

MS. NIEVA. That is one way.

MR. NOLLEDO. Because I understand that there are two basic systems involved: the "moshave" type of agriculture and the "kibbutz."
So are both contemplated in the report?

MR. TADEO. Angdalawakasingpamamaraanngpagpapatupadngtunaynarepormasalupa ay angpagmamay-aringlupanahahatiinsa

individual napagmamay-ari – directly – at angtinatawagnasama-samanggagawinngmgamagbubukid. Tuladsa Negros, ang gusto
ngmgamagbubukid ay gawinnilaitong "cooperative or collective farm." Angibigsabihin ay sama-samanilangsasakahin.

x xxx

MR. TINGSON. x xx When we speak here of "to own directly or collectively the lands they till," is this land for the tillers rather than land
for the landless? Before, we used to hear "land for the landless," but now the slogan is "land for the tillers." Is that right?
MR. TADEO. Angprinsipyongumiiraldito ay iyong land for the tillers. Angibigsabihinng "directly" ay tuladsaimplementasyonsa rice and
corn lands kung saaninaarinangmgamagsasakaanglupangbinubungkalnila. Angibigsabihinnamanng "collectively" ay sama-
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samangpaggawasaisanglupain o isangbukid, katuladngsitwasyonsa Negros. (Emphasis supplied.)

As Commissioner Tadeo explained, the farmers will work on the agricultural land "sama-sama" or collectively. Thus, the main requisite
for collective ownership of land is collective or group work by farmers of the agricultural land. Irrespective of whether the landowner is a
cooperative, association or corporation composed of farmers, as long as concerted group work by the farmers on the land is present,
then it falls within the ambit of collective ownership scheme.

Likewise, Sec. 4, Art. XIII of the Constitution makes mention of a commitment on the part of the State to pursue, by law, an agrarian
reform program founded on the policy of land for the landless, but subject to such priorities as Congress may prescribe, taking into
account such abstract variable as "equity considerations." The textual reference to a law and Congress necessarily implies that the
above constitutional provision is not self-executory and that legislation is needed to implement the urgently needed program of
agrarian reform. And RA 6657 has been enacted precisely pursuant to and as a mechanism to carry out the constitutional directives.
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This piece of legislation, in fact, restates the agrarian reform policy established in the aforementioned provision of the Constitution of
promoting the welfare of landless farmers and farmworkers. RA 6657 thus defines "agrarian reform" as "the redistribution of lands … to
farmers and regular farmworkers who are landless … to lift the economic status of the beneficiaries and all other arrangements
alternative to the physical redistribution of lands, such as production or profit sharing, labor administration and the distribution of
shares of stock which will allow beneficiaries to receive a just share of the fruits of the lands they work."

With the view We take of this case, the stock distribution option devised under Sec. 31 of RA 6657 hews with the agrarian reform policy,
as instrument of social justice under Sec. 4 of Article XIII of the Constitution. Albeit land ownership for the landless appears to be the
dominant theme of that policy, We emphasize that Sec. 4, Article XIII of the Constitution, as couched, does not constrict Congress to
passing an agrarian reform law planted on direct land transfer to and ownership by farmers and no other, or else the enactment suffers
from the vice of unconstitutionality. If the intention were otherwise, the framers of the Constitution would have worded said section in a
manner mandatory in character.

For this Court, Sec. 31 of RA 6657, with its direct and indirect transfer features, is not inconsistent with the State‘s commitment to
farmers and farmworkers to advance their interests under the policy of social justice. The legislature, thru Sec. 31 of RA 6657, has
chosen a modality for collective ownership by which the imperatives of social justice may, in its estimation, be approximated, if not
achieved. The Court should be bound by such policy choice.

FARM contends that the farmers in the stock distribution scheme under Sec. 31 do not own the agricultural land but are merely given
stock certificates. Thus, the farmers lose control over the land to the board of directors and executive officials of the corporation who
actually manage the land. They conclude that such arrangement runs counter to the mandate of the Constitution that any agrarian
reform must preserve the control over the land in the hands of the tiller.

This contention has no merit.

While it is true that the farmer is issued stock certificates and does not directly own the land, still, the Corporation Code is clear that the
FWB becomes a stockholder who acquires an equitable interest in the assets of the corporation, which include the agricultural lands. It
was explained that the "equitable interest of the shareholder in the property of the corporation is represented by the term stock, and the
extent of his interest is described by the term shares. The expression shares of stock when qualified by words indicating number and
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ownership expresses the extent of the owner‘s interest in the corporate property." A share of stock typifies an aliquot part of the
corporation‘s property, or the right to share in its proceeds to that extent when distributed according to law and equity and that its holder
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is not the owner of any part of the capital of the corporation. However, the FWBs will ultimately own the agricultural lands owned by
the corporation when the corporation is eventually dissolved and liquidated.

Anent the alleged loss of control of the farmers over the agricultural land operated and managed by the corporation, a reading of the
second paragraph of Sec. 31 shows otherwise. Said provision provides that qualified beneficiaries have "the right to purchase such
proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities, bears in relation to
the company‘s total assets." The wording of the formula in the computation of the number of shares that can be bought by the farmers
does not mean loss of control on the part of the farmers. It must be remembered that the determination of the percentage of the capital
stock that can be bought by the farmers depends on the value of the agricultural land and the value of the total assets of the
corporation.

There is, thus, nothing unconstitutional in the formula prescribed by RA 6657. The policy on agrarian reform is that control over the
agricultural land must always be in the hands of the farmers. Then it falls on the shoulders of DAR and PARC to see to it the farmers
should always own majority of the common shares entitled to elect the members of the board of directors to ensure that the farmers will
have a clear majority in the board. Before the SDP is approved, strict scrutiny of the proposed SDP must always be undertaken by the
DAR and PARC, such that the value of the agricultural land contributed to the corporation must always be more than 50% of the total
assets of the corporation to ensure that the majority of the members of the board of directors are composed of the farmers. The PARC
composed of the President of the Philippines and cabinet secretaries must see to it that control over the board of directors rests with the
farmers by rejecting the inclusion of non-agricultural assets which will yield the majority in the board of directors to non-farmers. Any
deviation, however, by PARC or DAR from the correct application of the formula prescribed by the second paragraph of Sec. 31 of RA
6675 does not make said provision constitutionally infirm. Rather, it is the application of said provision that can be challenged. Ergo,
Sec. 31 of RA 6657 does not trench on the constitutional policy of ensuring control by the farmers.

A view has been advanced that there can be no agrarian reform unless there is land distribution and that actual land distribution is the
essential characteristic of a constitutional agrarian reform program. On the contrary, there have been so many instances where, despite
actual land distribution, the implementation of agrarian reform was still unsuccessful. As a matter of fact, this Court may take judicial
notice of cases where FWBs sold the awarded land even to non-qualified persons and in violation of the prohibition period provided
under the law. This only proves to show that the mere fact that there is land distribution does not guarantee a successful
implementation of agrarian reform.

As it were, the principle of "land to the tiller" and the old pastoral model of land ownership where non-human juridical persons, such as
corporations, were prohibited from owning agricultural lands are no longer realistic under existing conditions. Practically, an individual
farmer will often face greater disadvantages and difficulties than those who exercise ownership in a collective manner through a
cooperative or corporation. The former is too often left to his own devices when faced with failing crops and bad weather, or compelled
to obtain usurious loans in order to purchase costly fertilizers or farming equipment. The experiences learned from failed land reform
activities in various parts of the country are lack of financing, lack of farm equipment, lack of fertilizers, lack of guaranteed buyers of
produce, lack of farm-to-market roads, among others. Thus, at the end of the day, there is still no successful implementation of agrarian
reform to speak of in such a case.

Although success is not guaranteed, a cooperative or a corporation stands in a better position to secure funding and competently
maintain the agri-business than the individual farmer. While direct singular ownership over farmland does offer advantages, such as the
ability to make quick decisions unhampered by interference from others, yet at best, these advantages only but offset the
disadvantages that are often associated with such ownership arrangement. Thus, government must be flexible and creative in its mode
of implementation to better its chances of success. One such option is collective ownership through juridical persons composed of
farmers.

Aside from the fact that there appears to be no violation of the Constitution, the requirement that the instant case be capable of
repetition yet evading review is also wanting. It would be speculative for this Court to assume that the legislature will enact another law
providing for a similar stock option.

As a matter of sound practice, the Court will not interfere inordinately with the exercise by Congress of its official functions, the heavy
presumption being that a law is the product of earnest studies by Congress to ensure that no constitutional prescription or concept is
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infringed. Corollarily, courts will not pass upon questions of wisdom, expediency and justice of legislation or its provisions. Towards
this end, all reasonable doubts should be resolved in favor of the constitutionality of a law and the validity of the acts and processes
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taken pursuant thereof.

Consequently, before a statute or its provisions duly challenged are voided, an unequivocal breach of, or a clear conflict with the
Constitution, not merely a doubtful or argumentative one, must be demonstrated in such a manner as to leave no doubt in the mind of
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the Court. In other words, the grounds for nullity must be beyond reasonable doubt. FARM has not presented compelling arguments
to overcome the presumption of constitutionality of Sec. 31 of RA 6657.

The wisdom of Congress in allowing an SDP through a corporation as an alternative mode of implementing agrarian reform is not for
judicial determination. Established jurisprudence tells us that it is not within the province of the Court to inquire into the wisdom of the
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law, for, indeed, We are bound by words of the statute.

II.

The stage is now set for the determination of the propriety under the premises of the revocation or recall of HLI‘s SDP. Or to be more
precise, the inquiry should be: whether or not PARC gravely abused its discretion in revoking or recalling the subject SDP and placing
the hacienda under CARP‘s compulsory acquisition and distribution scheme.

The findings, analysis and recommendation of the DAR‘s Special Task Force contained and summarized in its Terminal Report
provided the bases for the assailed PARC revocatory/recalling Resolution. The findings may be grouped into two: (1) the SDP is
contrary to either the policy on agrarian reform, Sec. 31 of RA 6657, or DAO 10; and (2) the alleged violation by HLI of the
conditions/terms of the SDP. In more particular terms, the following are essentially the reasons underpinning PARC‘s revocatory or
recall action:

(1) Despite the lapse of 16 years from the approval of HLI‘s SDP, the lives of the FWBs have hardly improved and the
promised increased income has not materialized;

(2) HLI has failed to keep Hacienda Luisita intact and unfragmented;

(3) The issuance of HLI shares of stock on the basis of number of hours worked––or the so-called "man days"––is grossly
onerous to the FWBs, as HLI, in the guise of rotation, can unilaterally deny work to anyone. In elaboration of this ground,
 PARC‘s Resolution No. 2006-34-01, denying HLI‘s motion for reconsideration of Resolution No. 2005-32-01, stated that the
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man days criterion worked to dilute the entitlement of the original share beneficiaries;

(4) The distribution/transfer of shares was not in accordance with the timelines fixed by law;

(5) HLI has failed to comply with its obligations to grant 3% of the gross sales every year as production-sharing benefit on top
of the workers‘ salary; and

(6) Several homelot awardees have yet to receive their individual titles.

Petitioner HLI claims having complied with, at least substantially, all its obligations under the SDP, as approved by PARC itself, and
tags the reasons given for the revocation of the SDP as unfounded.

Public respondents, on the other hand, aver that the assailed resolution rests on solid grounds set forth in the Terminal Report, a
position shared by AMBALA, which, in some pleadings, is represented by the same counsel as that appearing for the Supervisory
Group.

FARM, for its part, posits the view that legal bases obtain for the revocation of the SDP, because it does not conform to Sec. 31 of RA
6657 and DAO 10. And training its sight on the resulting dilution of the equity of the FWBs appearing in HLI‘s masterlist, FARM would
state that the SDP, as couched and implemented, spawned disparity when there should be none; parity when there should have been
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differentiation.

The petition is not impressed with merit.

In the Terminal Report adopted by PARC, it is stated that the SDP violates the agrarian reform policy under Sec. 2 of RA 6657, as the
said plan failed to enhance the dignity and improve the quality of lives of the FWBs through greater productivity of agricultural lands. We
disagree.

Sec. 2 of RA 6657 states:

SECTION 2. Declaration of Principles and Policies.¾It is the policy of the State to pursue a Comprehensive Agrarian Reform Program
(CARP). The welfare of the landless farmers and farm workers will receive the highest consideration to promote social justice and to
move the nation towards sound rural development and industrialization, and the establishment of owner cultivatorship of economic-
sized farms as the basis of Philippine agriculture.

To this end, a more equitable distribution and ownership of land, with due regard to the rights of landowners to just compensation and
to the ecological needs of the nation, shall be undertaken to provide farmers and farm workers with the opportunity to enhance their
dignity and improve the quality of their lives through greater productivity of agricultural lands.

The agrarian reform program is founded on the right of farmers and regular farm workers, who are landless, to own directly or
collectively the lands they till or, in the case of other farm workers, to receive a share of the fruits thereof. To this end, the State shall
encourage the just distribution of all agricultural lands, subject to the priorities and retention limits set forth in this Act, having taken into
account ecological, developmental, and equity considerations, and subject to the payment of just compensation. The State shall respect
the right of small landowners and shall provide incentives for voluntary land-sharing. (Emphasis supplied.)

Paragraph 2 of the above-quoted provision specifically mentions that "a more equitable distribution and ownership of land x xx shall be
undertaken to provide farmers and farm workers with the opportunity to enhance their dignity and improve the quality of their lives
through greater productivity of agricultural lands." Of note is the term "opportunity" which is defined as a favorable chance or opening
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offered by circumstances. Considering this, by no stretch of imagination can said provision be construed as a guarantee in improving
the lives of the FWBs. At best, it merely provides for a possibility or favorable chance of uplifting the economic status of the FWBs,
which may or may not be attained.

Pertinently, improving the economic status of the FWBs is neither among the legal obligations of HLI under the SDP nor an imperative
imposition by RA 6657 and DAO 10, a violation of which would justify discarding the stock distribution option. Nothing in that option
agreement, law or department order indicates otherwise.

Significantly, HLI draws particular attention to its having paid its FWBs, during the regime of the SDP (1989-2005), some PhP 3 billion
by way of salaries/wages and higher benefits exclusive of free hospital and medical benefits to their immediate family. And attached as
Annex "G" to HLI‘s Memorandum is the certified true report of the finance manager of Jose Cojuangco& Sons Organizations-Tarlac
Operations, captioned as "HACIENDA LUISITA, INC. Salaries, Benefits and Credit Privileges (in Thousand Pesos) Since the Stock
Option was Approved by PARC/CARP," detailing what HLI gave their workers from 1989 to 2005. The sum total, as added up by the
Court, yields the following numbers: Total Direct Cash Out (Salaries/Wages & Cash Benefits) = PhP 2,927,848; Total Non-Direct Cash
Out (Hospital/Medical Benefits) = PhP 303,040. The cash out figures, as stated in the report, include the cost of homelots; the PhP 150
million or so representing 3% of the gross produce of the hacienda; and the PhP 37.5 million representing 3% from the proceeds of the
sale of the 500-hectare converted lands. While not included in the report, HLI manifests having given the FWBs 3% of the PhP 80
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million paid for the 80 hectares of land traversed by the SCTEX. On top of these, it is worth remembering that the shares of stocks
were given by HLI to the FWBs for free. Verily, the FWBs have benefited from the SDP.

To address urgings that the FWBs be allowed to disengage from the SDP as HLI has not anyway earned profits through the years, it
cannot be over-emphasized that, as a matter of common business sense, no corporation could guarantee a profitable run all the time.
As has been suggested, one of the key features of an SDP of a corporate landowner is the likelihood of the corporate vehicle not
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earning, or, worse still, losing money.

The Court is fully aware that one of the criteria under DAO 10 for the PARC to consider the advisability of approving a stock distribution
plan is the likelihood that the plan "would result in increased income and greater benefits to [qualified beneficiaries] than if the lands
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were divided and distributed to them individually." But as aptly noted during the oral arguments, DAO 10 ought to have not, as it
cannot, actually exact assurance of success on something that is subject to the will of man, the forces of nature or the inherent risky
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nature of business. Just like in actual land distribution, an SDP cannot guarantee, as indeed the SDOA does not guarantee, a
comfortable life for the FWBs. The Court can take judicial notice of the fact that there were many instances wherein after a farmworker
beneficiary has been awarded with an agricultural land, he just subsequently sells it and is eventually left with nothing in the end.

In all then, the onerous condition of the FWBs‘ economic status, their life of hardship, if that really be the case, can hardly be attributed
to HLI and its SDP and provide a valid ground for the plan‘s revocation.

Neither does HLI‘s SDP, whence the DAR-attested SDOA/MOA is based, infringe Sec. 31 of RA 6657, albeit public respondents
erroneously submit otherwise.

The provisions of the first paragraph of the adverted Sec. 31 are without relevance to the issue on the propriety of the assailed order
revoking HLI‘s SDP, for the paragraph deals with the transfer of agricultural lands to the government, as a mode of CARP compliance,
thus:

SEC. 31. Corporate Landowners.¾Corporate landowners may voluntarily transfer ownership over their agricultural landholdings to the
Republic of the Philippines pursuant to Section 20 hereof or to qualified beneficiaries under such terms and conditions, consistent with
this Act, as they may agree, subject to confirmation by the DAR.

The second and third paragraphs, with their sub-paragraphs, of Sec. 31 provide as follows:

Upon certification by the DAR, corporations owning agricultural lands may give their qualified beneficiaries the right to purchase
such proportion of the capital stock of the corporation that the agricultural land, actually devoted to agricultural activities,
bears in relation to the company’s total assets, under such terms and conditions as may be agreed upon by them. In no case shall
the compensation received by the workers at the time the shares of stocks are distributed be reduced. x xx

Corporations or associations which voluntarily divest a proportion of their capital stock, equity or participation in favor of their workers or
other qualified beneficiaries under this section shall be deemed to have complied with the provisions of this Act: Provided, That the
following conditions are complied with:

(a) In order to safeguard the right of beneficiaries who own shares of stocks to dividends and other financial benefits, the
books of the corporation or association shall be subject to periodic audit by certified public accountants chosen by the
beneficiaries;

(b) Irrespective of the value of their equity in the corporation or association, the beneficiaries shall be assured of at least one
(1) representative in the board of directors, or in a management or executive committee, if one exists, of the corporation or
association;

(c) Any shares acquired by such workers and beneficiaries shall have the same rights and features as all other shares; and

(d) Any transfer of shares of stocks by the original beneficiaries shall be void ab initio unless said transaction is in favor of a
qualified and registered beneficiary within the same corporation.

The mandatory minimum ratio of land-to-shares of stock supposed to be distributed or allocated to qualified beneficiaries, adverting to
what Sec. 31 of RA 6657 refers to as that "proportion of the capital stock of the corporation that the agricultural land, actually devoted to
agricultural activities, bears in relation to the company‘s total assets" had been observed.

Paragraph one (1) of the SDOA, which was based on the SDP, conforms to Sec. 31 of RA 6657. The stipulation reads:

1. The percentage of the value of the agricultural land of Hacienda Luisita (P196,630,000.00) in relation to the total assets
(P590,554,220.00) transferred and conveyed to the SECOND PARTY is 33.296% that, under the law, is the proportion of the
outstanding capital stock of the SECOND PARTY, which is P355,531,462.00 or 355,531,462 shares with a par value of P1.00 per
share, that has to be distributed to the THIRD PARTY under the stock distribution plan, the said 33.296% thereof
being P118,391,976.85 or 118,391,976.85 shares.

The appraised value of the agricultural land is PhP 196,630,000 and of HLI‘s other assets is PhP 393,924,220. The total value of HLI‘s
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assets is, therefore, PhP 590,554,220. The percentage of the value of the agricultural lands (PhP 196,630,000) in relation to the total
assets (PhP 590,554,220) is 33.296%, which represents the stockholdings of the 6,296 original qualified farmworker-beneficiaries
(FWBs) in HLI. The total number of shares to be distributed to said qualified FWBs is 118,391,976.85 HLI shares. This was arrived at
by getting 33.296% of the 355,531,462 shares which is the outstanding capital stock of HLI with a value of PhP 355,531,462. Thus, if
we divide the 118,391,976.85 HLI shares by 6,296 FWBs, then each FWB is entitled to 18,804.32 HLI shares. These shares under the
SDP are to be given to FWBs for free.

The Court finds that the determination of the shares to be distributed to the 6,296 FWBs strictly adheres to the formula prescribed by
Sec. 31(b) of RA 6657.

Anent the requirement under Sec. 31(b) of the third paragraph, that the FWBs shall be assured of at least one (1) representative in the
board of directors or in a management or executive committee irrespective of the value of the equity of the FWBs in HLI, the Court finds
that the SDOA contained provisions making certain the FWBs‘ representation in HLI‘s governing board, thus:

5. Even if only a part or fraction of the shares earmarked for distribution will have been acquired from the FIRST PARTY and distributed
to the THIRD PARTY, FIRST PARTY shall execute at the beginning of each fiscal year an irrevocable proxy, valid and effective for one
(1) year, in favor of the farmworkers appearing as shareholders of the SECOND PARTY at the start of said year which will empower the
THIRD PARTY or their representative to vote in stockholders‘ and board of directors‘ meetings of the SECOND PARTY convened
during the year the entire 33.296% of the outstanding capital stock of the SECOND PARTY earmarked for distribution and thus be able
to gain such number of seats in the board of directors of the SECOND PARTY that the whole 33.296% of the shares subject to
distribution will be entitled to.

Also, no allegations have been made against HLI restricting the inspection of its books by accountants chosen by the FWBs; hence, the
assumption may be made that there has been no violation of the statutory prescription under sub-paragraph (a) on the auditing of HLI‘s
accounts.

Public respondents, however, submit that the distribution of the mandatory minimum ratio of land-to-shares of stock, referring to the
118,391,976.85 shares with par value of PhP 1 each, should have been made in full within two (2) years from the approval of RA 6657,
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in line with the last paragraph of Sec. 31 of said law.

Public respondents‘ submission is palpably erroneous. We have closely examined the last paragraph alluded to, with particular focus on
the two-year period mentioned, and nothing in it remotely supports the public respondents‘ posture. In its pertinent part, said Sec. 31
provides:

SEC. 31. Corporate Landowners x xx

If within two (2) years from the approval of this Act, the [voluntary] land or stock transfer envisioned above is not made or realized or the
plan for such stock distribution approved by the PARC within the same period, the agricultural land of the corporate owners or
corporation shall be subject to the compulsory coverage of this Act. (Word in bracket and emphasis added.)

Properly viewed, the words "two (2) years" clearly refer to the period within which the corporate landowner, to avoid land transfer as a
mode of CARP coverage under RA 6657, is to avail of the stock distribution option or to have the SDP approved. The HLI secured
approval of its SDP in November 1989, well within the two-year period reckoned from June 1988 when RA 6657 took effect.

Having hurdled the alleged breach of the agrarian reform policy under Sec. 2 of RA 6657 as well as the statutory issues, We shall now
delve into what PARC and respondents deem to be other instances of violation of DAO 10 and the SDP.

On the Conversion of Lands

Contrary to the almost parallel stance of the respondents, keeping Hacienda Luisitaunfragmented is also not among the imperative
impositions by the SDP, RA 6657, and DAO 10.

The Terminal Report states that the proposed distribution plan submitted in 1989 to the PARC effectively assured the intended stock
beneficiaries that the physical integrity of the farm shall remain inviolate. Accordingly, the Terminal Report and the PARC-assailed
resolution would take HLI to task for securing approval of the conversion to non-agricultural uses of 500 hectares of the hacienda. In not
too many words, the Report and the resolution view the conversion as an infringement of Sec. 5(a) of DAO 10 which reads: "a. that the
continued operation of the corporation with its agricultural land intact and unfragmented is viable with potential for growth and increased
profitability."
The PARC is wrong.

In the first place, Sec. 5(a)––just like the succeeding Sec. 5(b) of DAO 10 on increased income and greater benefits to qualified
beneficiaries––is but one of the stated criteria to guide PARC in deciding on whether or not to accept an SDP. Said Sec. 5(a) does not
exact from the corporate landowner-applicant the undertaking to keep the farm intact and unfragmented ad infinitum. And there is logic
to HLI‘s stated observation that the key phrase in the provision of Sec. 5(a) is "viability of corporate operations": "[w]hat is thus required
is not the agricultural land remaining intact x xx but the viability of the corporate operations with its agricultural land being intact and
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unfragmented. Corporate operation may be viable even if the corporate agricultural land does not remain intact or [un]fragmented."

It is, of course, anti-climactic to mention that DAR viewed the conversion as not violative of any issuance, let alone undermining the
viability of Hacienda Luisita‘s operation, as the DAR Secretary approved the land conversion applied for and its disposition via his
Conversion Order dated August 14, 1996 pursuant to Sec. 65 of RA 6657 which reads:

Sec. 65. Conversion of Lands.¾After the lapse of five years from its award when the land ceases to be economically feasible and
sound for agricultural purposes, or the locality has become urbanized and the land will have a greater economic value for residential,
commercial or industrial purposes, the DAR upon application of the beneficiary or landowner with due notice to the affected parties, and
subject to existing laws, may authorize the x xx conversion of the land and its dispositions. x xx

On the 3% Production Share

On the matter of the alleged failure of HLI to comply with sharing the 3% of the gross production sales of the hacienda and pay
dividends from profit, the entries in its financial books tend to indicate compliance by HLI of the profit-sharing equivalent to 3% of the
gross sales from the production of the agricultural land on top of (a) the salaries and wages due FWBs as employees of the company
and (b) the 3% of the gross selling price of the converted land and that portion used for the SCTEX. A plausible evidence of compliance
or non-compliance, as the case may be, could be the books of account of HLI. Evidently, the cry of some groups of not having received
their share from the gross production sales has not adequately been validated on the ground by the Special Task Force.

Indeed, factual findings of administrative agencies are conclusive when supported by substantial evidence and are accorded due
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respect and weight, especially when they are affirmed by the CA. However, such rule is not absolute. One such exception is when
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the findings of an administrative agency are conclusions without citation of specific evidence on which they are based, such as in this
particular instance. As culled from its Terminal Report, it would appear that the Special Task Force rejected HLI‘s claim of compliance
on the basis of this ratiocination:

 The Task Force position: Though, allegedly, the Supervisory Group receives the 3% gross production share and that others
alleged that they received 30 million pesos still others maintain that they have not received anything yet. Item No. 4 of the
MOA is clear and must be followed. There is a distinction between the total gross sales from the production of the land and the
proceeds from the sale of the land. The former refers to the fruits/yield of the agricultural land while the latter is the land itself.
The phrase "the beneficiaries are entitled every year to an amount approximately equivalent to 3% would only be feasible if the
subject is the produce since there is at least one harvest per year, while such is not the case in the sale of the agricultural
land. This negates then the claim of HLI that, all that the FWBs can be entitled to, if any, is only 3% of the purchase price of
the converted land.
 Besides, the Conversion Order dated 14 August 1996 provides that "the benefits, wages and the like, presently received by
the FWBs shall not in any way be reduced or adversely affected. Three percent of the gross selling price of the sale of the
converted land shall be awarded to the beneficiaries of the SDO." The 3% gross production share then is different from the 3%
proceeds of the sale of the converted land and, with more reason, the 33% share being claimed by the FWBs as part owners
of the Hacienda, should have been given the FWBs, as stockholders, and to which they could have been entitled if only the
land were acquired and redistributed to them under the CARP.

x xxx

 The FWBs do not receive any other benefits under the MOA except the aforementioned [(viz: shares of stocks (partial), 3%
gross production sale (not all) and homelots (not all)].

Judging from the above statements, the Special Task Force is at best silent on whether HLI has failed to comply with the 3%
production-sharing obligation or the 3% of the gross selling price of the converted land and the SCTEX lot. In fact, it admits that the
FWBs, though not all, have received their share of the gross production sales and in the sale of the lot to SCTEX. At most, then, HLI
had complied substantially with this SDP undertaking and the conversion order. To be sure, this slight breach would not justify the
setting to naught by PARC of the approval action of the earlier PARC. Even in contract law, rescission, predicated on violation of
reciprocity, will not be permitted for a slight or casual breach of contract; rescission may be had only for such breaches that are
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substantial and fundamental as to defeat the object of the parties in making the agreement.

Despite the foregoing findings, the revocation of the approval of the SDP is not without basis as shown below.

On Titles to Homelots
Under RA 6657, the distribution of homelots is required only for corporations or business associations owning or operating farms which
opted for land distribution. Sec. 30 of RA 6657 states:

SEC. 30. Homelots and Farmlots for Members of Cooperatives.¾The individual members of the cooperatives or corporations
mentioned in the preceding section shall be provided with homelots and small farmlots for their family use, to be taken from the land
owned by the cooperative or corporation.

The "preceding section" referred to in the above-quoted provision is as follows:

SEC. 29. Farms Owned or Operated by Corporations or Other Business Associations.¾In the case of farms owned or operated by
corporations or other business associations, the following rules shall be observed by the PARC.

In general, lands shall be distributed directly to the individual worker-beneficiaries.

In case it is not economically feasible and sound to divide the land, then it shall be owned collectively by the worker-beneficiaries who
shall form a workers‘ cooperative or association which will deal with the corporation or business association. Until a new agreement is
entered into by and between the workers‘ cooperative or association and the corporation or business association, any agreement
existing at the time this Act takes effect between the former and the previous landowner shall be respected by both the workers‘
cooperative or association and the corporation or business association.

Noticeably, the foregoing provisions do not make reference to corporations which opted for stock distribution under Sec. 31 of RA 6657.
Concomitantly, said corporations are not obliged to provide for it except by stipulation, as in this case.

Under the SDP, HLI undertook to "subdivide and allocate for free and without charge among the qualified family-beneficiaries x xx
residential or homelots of not more than 240 sq. m. each, with each family beneficiary being assured of receiving and owning a homelot
in the barrio or barangay where it actually resides," "within a reasonable time."

More than sixteen (16) years have elapsed from the time the SDP was approved by PARC, and yet, it is still the contention of the FWBs
that not all was given the 240-square meter homelots and, of those who were already given, some still do not have the corresponding
titles.

During the oral arguments, HLI was afforded the chance to refute the foregoing allegation by submitting proof that the FWBs were
already given the said homelots:

Justice Velasco: x xx There is also an allegation that the farmer beneficiaries, the qualified family beneficiaries were not given the 240
square meters each. So, can you also [prove] that the qualified family beneficiaries were already provided the 240 square meter
homelots.

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Atty. Asuncion: We will, your Honor please.

Other than the financial report, however, no other substantial proof showing that all the qualified beneficiaries have received homelots
was submitted by HLI. Hence, this Court is constrained to rule that HLI has not yet fully complied with its undertaking to distribute
homelots to the FWBs under the SDP.

On "Man Days" and the Mechanics of Stock Distribution

In our review and analysis of par. 3 of the SDOA on the mechanics and timelines of stock distribution, We find that it violates two (2)
provisions of DAO 10. Par. 3 of the SDOA states:

3. At the end of each fiscal year, for a period of 30 years, the SECOND PARTY [HLI] shall arrange with the FIRST PARTY [TDC] the
acquisition and distribution to the THIRD PARTY [FWBs] on the basis of number of days worked and at no cost to them of one-thirtieth
(1/30) of 118,391,976.85 shares of the capital stock of the SECOND PARTY that are presently owned and held by the FIRST PARTY,
until such time as the entire block of 118,391,976.85 shares shall have been completely acquired and distributed to the THIRD PARTY.

Based on the above-quoted provision, the distribution of the shares of stock to the FWBs, albeit not entailing a cash out from them, is
contingent on the number of "man days," that is, the number of days that the FWBs have worked during the year. This formula deviates
from Sec. 1 of DAO 10, which decrees the distribution of equal number of shares to the FWBs as the minimum ratio of shares of stock
for purposes of compliance with Sec. 31 of RA 6657. As stated in Sec. 4 of DAO 10:

Section 4. Stock Distribution Plan.¾The [SDP] submitted by the corporate landowner-applicant shall provide for the distribution of
an equal number of shares of the same class and value, with the same rights and features as all other shares, to each of the qualified
beneficiaries. This distribution plan in all cases, shall be at least the minimum ratio for purposes of compliance with Section 31 of R.A.
No. 6657.
On top of the minimum ratio provided under Section 3 of this Implementing Guideline, the corporate landowner-applicant may adopt
additional stock distribution schemes taking into account factors such as rank, seniority, salary, position and other circumstances which
may be deemed desirable as a matter of sound company policy. (Emphasis supplied.)

The above proviso gives two (2) sets or categories of shares of stock which a qualified beneficiary can acquire from the corporation
under the SDP. The first pertains, as earlier explained, to the mandatory minimum ratio of shares of stock to be distributed to the FWBs
in compliance with Sec. 31 of RA 6657. This minimum ratio contemplates of that "proportion of the capital stock of the corporation that
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the agricultural land, actually devoted to agricultural activities, bears in relation to the company‘s total assets." It is this set of shares
of stock which, in line with Sec. 4 of DAO 10, is supposed to be allocated "for the distribution of an equal number of shares of stock of
the same class and value, with the same rights and features as all other shares, to each of the qualified beneficiaries."

On the other hand, the second set or category of shares partakes of a gratuitous extra grant, meaning that this set or category
constitutes an augmentation share/s that the corporate landowner may give under an additional stock distribution scheme, taking into
account such variables as rank, seniority, salary, position and like factors which the management, in the exercise of its sound
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discretion, may deem desirable.

Before anything else, it should be stressed that, at the time PARC approved HLI‘s SDP, HLI recognized 6,296 individuals as qualified
FWBs. And under the 30-year stock distribution program envisaged under the plan, FWBs who came in after 1989, new FWBs in fine,
may be accommodated, as they appear to have in fact been accommodated as evidenced by their receipt of HLI shares.

Now then, by providing that the number of shares of the original 1989 FWBs shall depend on the number of "man days," HLI violated
the afore-quoted rule on stock distribution and effectively deprived the FWBs of equal shares of stock in the corporation, for, in net
effect, these 6,296 qualified FWBs, who theoretically had given up their rights to the land that could have been distributed to them,
suffered a dilution of their due share entitlement. As has been observed during the oral arguments, HLI has chosen to use the shares
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earmarked for farmworkers as reward system chips to water down the shares of the original 6,296 FWBs. Particularly:

Justice Abad: If the SDOA did not take place, the other thing that would have happened is that there would be CARP?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: That‘s the only point I want to know x xx. Now, but they chose to enter SDOA instead of placing the land under CARP.
And for that reason those who would have gotten their shares of the land actually gave up their rights to this land in place of the shares
of the stock, is that correct?

Atty. Dela Merced: It would be that way, Your Honor.

Justice Abad: Right now, also the government, in a way, gave up its right to own the land because that way the government takes own
[sic] the land and distribute it to the farmers and pay for the land, is that correct?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: And then you gave thirty-three percent (33%) of the shares of HLI to the farmers at that time that numbered x xx those
who signed five thousand four hundred ninety eight (5,498) beneficiaries, is that correct?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: But later on, after assigning them their shares, some workers came in from 1989, 1990, 1991, 1992 and the rest of the
years that you gave additional shares who were not in the original list of owners?

Atty. Dela Merced: Yes, Your Honor.

Justice Abad: Did those new workers give up any right that would have belong to them in 1989 when the land was supposed to have
been placed under CARP?

Atty. Dela Merced: If you are talking or referring… (interrupted)

Justice Abad: None! You tell me. None. They gave up no rights to land?

Atty. Dela Merced: They did not do the same thing as we did in 1989, Your Honor.

Justice Abad: No, if they were not workers in 1989 what land did they give up? None, if they become workers later on.
Atty. Dela Merced: None, Your Honor, I was referring, Your Honor, to the original… (interrupted)

Justice Abad: So why is it that the rights of those who gave up their lands would be diluted, because the company has chosen to use
the shares as reward system for new workers who come in? It is not that the new workers, in effect, become just workers of the
corporation whose stockholders were already fixed. The TADECO who has shares there about sixty six percent (66%) and the five
thousand four hundred ninety eight (5,498) farmers at the time of the SDOA? Explain to me. Why, why will you x xx what right or where
did you get that right to use this shares, to water down the shares of those who should have been benefited, and to use it as a reward
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system decided by the company?

From the above discourse, it is clear as day that the original 6,296 FWBs, who were qualified beneficiaries at the time of the approval of
the SDP, suffered from watering down of shares. As determined earlier, each original FWB is entitled to 18,804.32 HLI shares. The
original FWBs got less than the guaranteed 18,804.32 HLI shares per beneficiary, because the acquisition and distribution of the HLI
shares were based on "man days" or "number of days worked" by the FWB in a year‘s time. As explained by HLI, a beneficiary needs
to work for at least 37 days in a fiscal year before he or she becomes entitled to HLI shares. If it falls below 37 days, the FWB,
unfortunately, does not get any share at year end. The number of HLI shares distributed varies depending on the number of days the
FWBs were allowed to work in one year. Worse, HLI hired farmworkers in addition to the original 6,296 FWBs, such that, as indicated in
the Compliance dated August 2, 2010 submitted by HLI to the Court, the total number of farmworkers of HLI as of said date stood at
10,502. All these farmworkers, which include the original 6,296 FWBs, were given shares out of the 118,931,976.85 HLI shares
representing the 33.296% of the total outstanding capital stock of HLI. Clearly, the minimum individual allocation of each original FWB
of 18,804.32 shares was diluted as a result of the use of "man days" and the hiring of additional farmworkers.

Going into another but related matter, par. 3 of the SDOA expressly providing for a 30-year timeframe for HLI-to-FWBs stock transfer is
an arrangement contrary to what Sec. 11 of DAO 10 prescribes. Said Sec. 11 provides for the implementation of the approved stock
distribution plan within three (3) months from receipt by the corporate landowner of the approval of the plan by PARC. In fact, based on
the said provision, the transfer of the shares of stock in the names of the qualified FWBs should be recorded in the stock and transfer
books and must be submitted to the SEC within sixty (60) days from implementation. As stated:

Section 11. Implementation/Monitoring of Plan.¾The approved stock distribution plan shall be implemented within three (3) months
from receipt by the corporate landowner-applicant of the approval thereof by the PARC, and the transfer of the shares of stocks in the
names of the qualified beneficiaries shall be recorded in stock and transfer books and submitted to the Securities and Exchange
Commission (SEC) within sixty (60) days from the said implementation of the stock distribution plan. (Emphasis supplied.)

It is evident from the foregoing provision that the implementation, that is, the distribution of the shares of stock to the FWBs, must be
made within three (3) months from receipt by HLI of the approval of the stock distribution plan by PARC. While neither of the clashing
parties has made a compelling case of the thrust of this provision, the Court is of the view and so holds that the intent is to compel the
corporate landowner to complete, not merely initiate, the transfer process of shares within that three-month timeframe. Reinforcing this
conclusion is the 60-day stock transfer recording (with the SEC) requirement reckoned from the implementation of the SDP.

To the Court, there is a purpose, which is at once discernible as it is practical, for the three-month threshold. Remove this timeline and
the corporate landowner can veritably evade compliance with agrarian reform by simply deferring to absurd limits the implementation of
the stock distribution scheme.

The argument is urged that the thirty (30)-year distribution program is justified by the fact that, under Sec. 26 of RA 6657, payment by
beneficiaries of land distribution under CARP shall be made in thirty (30) annual amortizations. To HLI, said section provides a justifying
dimension to its 30-year stock distribution program.

HLI‘s reliance on Sec. 26 of RA 6657, quoted in part below, is obviously misplaced as the said provision clearly deals with land
distribution.

SEC. 26. Payment by Beneficiaries.¾Lands awarded pursuant to this Act shall be paid for by the beneficiaries to the LBP in thirty (30)
annual amortizations x xx.

Then, too, the ones obliged to pay the LBP under the said provision are the beneficiaries. On the other hand, in the instant case, aside
from the fact that what is involved is stock distribution, it is the corporate landowner who has the obligation to distribute the shares of
stock among the FWBs.

Evidently, the land transfer beneficiaries are given thirty (30) years within which to pay the cost of the land thus awarded them to make
it less cumbersome for them to pay the government. To be sure, the reason underpinning the 30-year accommodation does not apply
to corporate landowners in distributing shares of stock to the qualified beneficiaries, as the shares may be issued in a much shorter
period of time.

Taking into account the above discussion, the revocation of the SDP by PARC should be upheld for violating DAO 10. It bears stressing
that under Sec. 49 of RA 6657, the PARC and the DAR have the power to issue rules and regulations, substantive or procedural. Being
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a product of such rule-making power, DAO 10 has the force and effect of law and must be duly complied with. The PARC is,
therefore, correct in revoking the SDP. Consequently, the PARC Resolution No. 89-12-2 dated November 21, l989 approving the HLI‘s
SDP is nullified and voided.

III.

We now resolve the petitions-in-intervention which, at bottom, uniformly pray for the exclusion from the coverage of the assailed PARC
resolution those portions of the converted land within Hacienda Luisita which RCBC and LIPCO acquired by purchase.

Both contend that they are innocent purchasers for value of portions of the converted farm land. Thus, their plea for the exclusion of
that portion from PARC Resolution 2005-32-01, as implemented by a DAR-issued Notice of Coverage dated January 2, 2006, which
called for mandatory CARP acquisition coverage of lands subject of the SDP.

To restate the antecedents, after the conversion of the 500 hectares of land in Hacienda Luisita, HLI transferred the 300 hectares to
Centennary, while ceding the remaining 200-hectare portion to LRC. Subsequently, LIPCO purchased the entire three hundred (300)
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hectares of land from Centennary for the purpose of developing the land into an industrial complex. Accordingly, the TCT in
Centennary‘s name was canceled and a new one issued in LIPCO‘s name. Thereafter, said land was subdivided into two (2) more
parcels of land. Later on, LIPCO transferred about 184 hectares to RCBC by way of dacion en pago, by virtue of which TCTs in the
name of RCBC were subsequently issued.

Under Sec. 44 of PD 1529 or the Property Registration Decree, "every registered owner receiving a certificate of title in pursuance of a
decree of registration and every subsequent purchaser of registered land taking a certificate of title for value and in good faith shall hold
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the same free from all encumbrances except those noted on the certificate and enumerated therein."

It is settled doctrine that one who deals with property registered under the Torrens system need not go beyond the four corners of, but
can rely on what appears on, the title. He is charged with notice only of such burdens and claims as are annotated on the title. This
principle admits of certain exceptions, such as when the party has actual knowledge of facts and circumstances that would impel a
reasonably cautious man to make such inquiry, or when the purchaser has knowledge of a defect or the lack of title in his vendor or of
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sufficient facts to induce a reasonably prudent man to inquire into the status of the title of the property in litigation. A higher level of
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care and diligence is of course expected from banks, their business being impressed with public interest.

Millena v. Court of Appeals describes a purchaser in good faith in this wise:

x xx A purchaser in good faith is one who buys property of another, without notice that some other person has a right to, or interest in,
such property at the time of such purchase, or before he has notice of the claim or interest of some other persons in the property. Good
faith, or the lack of it, is in the final analysis a question of intention; but in ascertaining the intention by which one is actuated on a given
occasion, we are necessarily controlled by the evidence as to the conduct and outward acts by which alone the inward motive may, with
safety, be determined. Truly, good faith is not a visible, tangible fact that can be seen or touched, but rather a state or condition of mind
which can only be judged by actual or fancied tokens or signs. Otherwise stated, good faith x xx refers to the state of mind which is
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manifested by the acts of the individual concerned. (Emphasis supplied.)

In fine, there are two (2) requirements before one may be considered a purchaser in good faith, namely: (1) that the purchaser buys the
property of another without notice that some other person has a right to or interest in such property; and (2) that the purchaser pays a
full and fair price for the property at the time of such purchase or before he or she has notice of the claim of another.

It can rightfully be said that both LIPCO and RCBC are––based on the above requirements and with respect to the adverted
transactions of the converted land in question––purchasers in good faith for value entitled to the benefits arising from such status.

First, at the time LIPCO purchased the entire three hundred (300) hectares of industrial land, there was no notice of any supposed
defect in the title of its transferor, Centennary, or that any other person has a right to or interest in such property. In fact, at the time
LIPCO acquired said parcels of land, only the following annotations appeared on the TCT in the name of Centennary: the Secretary‘s
Certificate in favor of TeresitaLopa, the Secretary‘s Certificate in favor of ShintaroMurai, and the conversion of the property from
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agricultural to industrial and residential use.

The same is true with respect to RCBC. At the time it acquired portions of Hacienda Luisita, only the following general annotations
appeared on the TCTs of LIPCO: the Deed of Restrictions, limiting its use solely as an industrial estate; the Secretary‘s Certificate in
favor of Koji Komai and Kyosuke Hori; and the Real Estate Mortgage in favor of RCBC to guarantee the payment of PhP 300 million.

It cannot be claimed that RCBC and LIPCO acted in bad faith in acquiring the lots that were previously covered by the SDP. Good faith
"consists in the possessor‘s belief that the person from whom he received it was the owner of the same and could convey his title. Good
faith requires a well-founded belief that the person from whom title was received was himself the owner of the land, with the right to
convey it. There is good faith where there is an honest intention to abstain from taking any unconscientious advantage from
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another." It is the opposite of fraud.
To be sure, intervenor RCBC and LIPCO knew that the lots they bought were subjected to CARP coverage by means of a stock
distribution plan, as the DAR conversion order was annotated at the back of the titles of the lots they acquired. However, they are of the
honest belief that the subject lots were validly converted to commercial or industrial purposes and for which said lots were taken out of
the CARP coverage subject of PARC Resolution No. 89-12-2 and, hence, can be legally and validly acquired by them. After all, Sec. 65
of RA 6657 explicitly allows conversion and disposition of agricultural lands previously covered by CARP land acquisition "after the
lapse of five (5) years from its award when the land ceases to be economically feasible and sound for agricultural purposes or the
locality has become urbanized and the land will have a greater economic value for residential, commercial or industrial purposes."
Moreover, DAR notified all the affected parties, more particularly the FWBs, and gave them the opportunity to comment or oppose the
proposed conversion. DAR, after going through the necessary processes, granted the conversion of 500 hectares of Hacienda Luisita
pursuant to its primary jurisdiction under Sec. 50 of RA 6657 to determine and adjudicate agrarian reform matters and its original
exclusive jurisdiction over all matters involving the implementation of agrarian reform. The DAR conversion order became final and
executory after none of the FWBs interposed an appeal to the CA. In this factual setting, RCBC and LIPCO purchased the lots in
question on their honest and well-founded belief that the previous registered owners could legally sell and convey the lots though these
were previously subject of CARP coverage. Ergo, RCBC and LIPCO acted in good faith in acquiring the subject lots.

And second, both LIPCO and RCBC purchased portions of Hacienda Luisita for value. Undeniably, LIPCO acquired 300 hectares of
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land from Centennary for the amount of PhP 750 million pursuant to a Deed of Sale dated July 30, 1998. On the other hand, in a
Deed of Absolute Assignment dated November 25, 2004, LIPCO conveyed portions of Hacienda Luisita in favor of RCBC by way
of dacion en pago to pay for a loan of PhP 431,695,732.10.

As bona fide purchasers for value, both LIPCO and RCBC have acquired rights which cannot just be disregarded by DAR, PARC or
even by this Court. As held in Spouses Chua v. Soriano:

With the property in question having already passed to the hands of purchasers in good faith, it is now of no moment that some
irregularity attended the issuance of the SPA, consistent with our pronouncement in Heirs of Spouses Benito Gavino and Juana Euste
v. Court of Appeals, to wit:

x xx the general rule that the direct result of a previous void contract cannot be valid, is inapplicable in this case as it will directly
contravene the Torrens system of registration. Where innocent third persons, relying on the correctness of the certificate of title
thus issued, acquire rights over the property, the court cannot disregard such rights and order the cancellation of the
certificate. The effect of such outright cancellation will be to impair public confidence in the certificate of title. The sanctity of the
Torrens system must be preserved; otherwise, everyone dealing with the property registered under the system will have to inquire in
every instance as to whether the title had been regularly or irregularly issued, contrary to the evident purpose of the law.

Being purchasers in good faith, the Chuas already acquired valid title to the property. A purchaser in good faith holds an
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indefeasible title to the property and he is entitled to the protection of the law. x xx (Emphasis supplied.)

To be sure, the practicalities of the situation have to a point influenced Our disposition on the fate of RCBC and LIPCO. After all, the
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Court, to borrow from Association of Small Landowners in the Philippines, Inc., is not a "cloistered institution removed" from the
realities on the ground. To note, the approval and issuances of both the national and local governments showing that certain portions of
Hacienda Luisita have effectively ceased, legally and physically, to be agricultural and, therefore, no longer CARPable are a matter of
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fact which cannot just be ignored by the Court and the DAR. Among the approving/endorsing issuances:

(a) Resolution No. 392 dated 11 December 1996 of the Sangguniang Bayan of Tarlac favorably endorsing the 300-hectare
industrial estate project of LIPCO;

(b) BOI Certificate of Registration No. 96-020 dated 20 December 1996 issued in accordance with the Omnibus Investments
Code of 1987;

(c) PEZA Certificate of Board Resolution No. 97-202 dated 27 June 1997, approving LIPCO‘s application for a mixed ecozone
and proclaiming the three hundred (300) hectares of the industrial land as a Special Economic Zone;

(d) Resolution No. 234 dated 08 August 1997 of the Sangguniang Bayan of Tarlac, approving the Final Development Permit
for the Luisita Industrial Park II Project;

(e) Development Permit dated 13 August 1997 for the proposed Luisita Industrial Park II Project issued by the Office of the
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Sangguniang Bayan of Tarlac;

(f) DENR Environmental Compliance Certificate dated 01 October 1997 issued for the proposed project of building an
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industrial complex on three hundred (300) hectares of industrial land;

(g) Certificate of Registration No. 00794 dated 26 December 1997 issued by the HLURB on the project of Luisita Industrial
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Park II with an area of three million (3,000,000) square meters;
 (h) License to Sell No. 0076 dated 26 December 1997 issued by the HLURB authorizing the sale of lots in the Luisita Industrial
Park II;

(i) Proclamation No. 1207 dated 22 April 1998 entitled "Declaring Certain Parcels of Private Land in Barangay San Miguel,
Municipality of Tarlac, Province of Tarlac, as a Special Economic Zone pursuant to Republic Act No. 7916," designating the
Luisita Industrial Park II consisting of three hundred hectares (300 has.) of industrial land as a Special Economic Zone; and

(j) Certificate of Registration No. EZ-98-05 dated 07 May 1998 issued by the PEZA, stating that pursuant to Presidential
Proclamation No. 1207 dated 22 April 1998 and Republic Act No. 7916, LIPCO has been registered as an Ecozone
Developer/Operator of Luisita Industrial Park II located in San Miguel, Tarlac, Tarlac.

While a mere reclassification of a covered agricultural land or its inclusion in an economic zone does not automatically allow the
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corporate or individual landowner to change its use, the reclassification process is a prima facie indicium that the land has ceased to
be economically feasible and sound for agricultural uses. And if only to stress, DAR Conversion Order No. 030601074-764-(95) issued
in 1996 by then DAR Secretary Garilao had effectively converted 500 hectares of hacienda land from agricultural to
industrial/commercial use and authorized their disposition.

In relying upon the above-mentioned approvals, proclamation and conversion order, both RCBC and LIPCO cannot be considered at
fault for believing that certain portions of Hacienda Luisita are industrial/commercial lands and are, thus, outside the ambit of CARP.
The PARC, and consequently DAR, gravely abused its discretion when it placed LIPCO‘s and RCBC‘s property which once formed part
of Hacienda Luisita under the CARP compulsory acquisition scheme via the assailed Notice of Coverage.

As regards the 80.51-hectare land transferred to the government for use as part of the SCTEX, this should also be excluded from the
compulsory agrarian reform coverage considering that the transfer was consistent with the government‘s exercise of the power of
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eminent domain and none of the parties actually questioned the transfer.

While We affirm the revocation of the SDP on Hacienda Luisita subject of PARC Resolution Nos. 2005-32-01 and 2006-34-01, the
Court cannot close its eyes to certain "operative facts" that had occurred in the interim. Pertinently, the "operative fact" doctrine realizes
that, in declaring a law or executive action null and void, or, by extension, no longer without force and effect, undue harshness and
resulting unfairness must be avoided. This is as it should realistically be, since rights might have accrued in favor of natural or juridical
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persons and obligations justly incurred in the meantime. The actual existence of a statute or executive act is, prior to such a
determination, an operative fact and may have consequences which cannot justly be ignored; the past cannot always be erased by a
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new judicial declaration.

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The oft-cited De Agbayani v. Philippine National Bank discussed the effect to be given to a legislative or executive act subsequently
declared invalid:

x xx It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force
and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to
obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in
a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to
be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with.
This is merely to reflect awareness that precisely because the judiciary is the government organ which has the final say on whether or
not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that
may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of
what had transpired prior to such adjudication.

In the language of an American Supreme Court decision: "The actual existence of a statute, prior to such a determination of
[unconstitutionality], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be
erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects,–
–with respect to particular relations, individual and corporate, and particular conduct, private and official." x xx

Given the above perspective and considering that more than two decades had passed since the PARC‘s approval of the HLI‘s SDP, in
conjunction with numerous activities performed in good faith by HLI, and the reliance by the FWBs on the legality and validity of the
PARC-approved SDP, perforce, certain rights of the parties, more particularly the FWBs, have to be respected pursuant to the
application in a general way of the operative fact doctrine.

A view, however, has been advanced that the operative fact doctrine is of minimal or altogether without relevance to the instant case as
it applies only in considering the effects of a declaration of unconstitutionality of a statute, and not of a declaration of nullity of a
contract. This is incorrect, for this view failed to consider is that it is NOT the SDOA dated May 11, 1989 which was revoked in the
instant case. Rather, it is PARC‘s approval of the HLI‘s Proposal for Stock Distribution under CARP which embodied the SDP that was
nullified.

A recall of the antecedent events would show that on May 11, 1989, Tadeco, HLI, and the qualified FWBs executed the SDOA. This
agreement provided the basis and mechanics of the SDP that was subsequently proposed and submitted to DAR for approval. It was
only after its review that the PARC, through then Sec. Defensor-Santiago, issued the assailed Resolution No. 89-12-2 approving the
SDP. Considerably, it is not the SDOA which gave legal force and effect to the stock distribution scheme but instead, it is the approval
of the SDP under the PARC Resolution No. 89-12-2 that gave it its validity.

The above conclusion is bolstered by the fact that in Sec. Pangandaman‘s recommendation to the PARC Excom, what he proposed is
the recall/revocation of PARC Resolution No. 89-12-2 approving HLI‘s SDP, and not the revocation of the SDOA. Sec. Pangandaman‘s
recommendation was favorably endorsed by the PARC Validation Committee to the PARC Excom, and these recommendations were
referred to in the assailed Resolution No. 2005-32-01. Clearly, it is not the SDOA which was made the basis for the implementation of
the stock distribution scheme.

That the operative fact doctrine squarely applies to executive acts––in this case, the approval by PARC of the HLI proposal for stock
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distribution––is well-settled in our jurisprudence. In Chavez v. National Housing Authority, We held:

Petitioner postulates that the "operative fact" doctrine is inapplicable to the present case because it is an equitable doctrine which could
not be used to countenance an inequitable result that is contrary to its proper office.

On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the SMDRP is an
operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.

The argument of the Solicitor General is meritorious.

The "operative fact" doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act,
prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus:

x xx x xx x xx

This doctrine was reiterated in the more recent case of City of Makati v. Civil Service Commission, wherein we ruled that:

Moreover, we certainly cannot nullify the City Government's order of suspension, as we have no reason to do so, much less
retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the leave application.
For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or omissions done
in reliance thereof. Consequently, the existence of a statute or executive order prior to its being adjudged void is an operative fact to
which legal consequences are attached. It would indeed be ghastly unfair to prevent private respondent from relying upon the order of
suspension in lieu of a formal leave application. (Citations omitted; Emphasis supplied.)

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The applicability of the operative fact doctrine to executive acts was further explicated by this Court in Rieta v. People, thus:

Petitioner contends that his arrest by virtue of Arrest Search and Seizure Order (ASSO) No. 4754 was invalid, as the law upon which it
was predicated — General Order No. 60, issued by then President Ferdinand E. Marcos — was subsequently declared by the Court, in
Tañada v. Tuvera, 33 to have no force and effect. Thus, he asserts, any evidence obtained pursuant thereto is inadmissible in
evidence.

We do not agree. In Tañada, the Court addressed the possible effects of its declaration of the invalidity of various presidential
issuances. Discussing therein how such a declaration might affect acts done on a presumption of their validity, the Court said:

". . .. In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District
vs. Baxter Bank to wit:

‗The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that
it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. . . . It is quite
clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications.
The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which
cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects — with respect to particular conduct, private and official. Questions of rights
claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy
in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most
difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-
inclusive statement of a principle of absolute retroactive invalidity cannot be justified.‘

x xx x xx x xx
"Similarly, the implementation/enforcement of presidential decrees prior to their publication in the Official Gazette is ‗an operative fact
which may have consequences which cannot be justly ignored. The past cannot always be erased by a new judicial declaration . . . that
an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified.‘"

The Chicot doctrine cited in Tañada advocates that, prior to the nullification of a statute, there is an imperative necessity of taking into
account its actual existence as an operative fact negating the acceptance of "a principle of absolute retroactive invalidity." Whatever
was done while the legislative or the executive act was in operation should be duly recognized and presumed to be valid in all respects.
The ASSO that was issued in 1979 under General Order No. 60 — long before our Decision in Tañada and the arrest of petitioner — is
an operative fact that can no longer be disturbed or simply ignored. (Citations omitted; Emphasis supplied.)

To reiterate, although the assailed Resolution No. 2005-32-01 states that it revokes or recalls the SDP, what it actually revoked or
recalled was the PARC‘s approval of the SDP embodied in Resolution No. 89-12-2. Consequently, what was actually declared null and
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void was an executive act, PARC Resolution No. 89-12-2, and not a contract (SDOA). It is, therefore, wrong to say that it was the
SDOA which was annulled in the instant case. Evidently, the operative fact doctrine is applicable.

IV.

While the assailed PARC resolutions effectively nullifying the Hacienda Luisita SDP are upheld, the revocation must, by application of
the operative fact principle, give way to the right of the original 6,296 qualified FWBs to choose whether they want to remain as HLI
stockholders or not. The Court cannot turn a blind eye to the fact that in 1989, 93% of the FWBs agreed to the SDOA (or the MOA),
which became the basis of the SDP approved by PARC per its Resolution No. 89-12-2 dated November 21, 1989. From 1989 to 2005,
the FWBs were said to have received from HLI salaries and cash benefits, hospital and medical benefits, 240-square meter homelots,
3% of the gross produce from agricultural lands, and 3% of the proceeds of the sale of the 500-hectare converted land and the 80.51-
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hectare lot sold to SCTEX. HLI shares totaling 118,391,976.85 were distributed as of April 22, 2005. On August 6, 20l0, HLI and
private respondents submitted a Compromise Agreement, in which HLI gave the FWBs the option of acquiring a piece of agricultural
land or remain as HLI stockholders, and as a matter of fact, most FWBs indicated their choice of remaining as stockholders. These
facts and circumstances tend to indicate that some, if not all, of the FWBs may actually desire to continue as HLI shareholders. A
matter best left to their own discretion.

With respect to the other FWBs who were not listed as qualified beneficiaries as of November 21, 1989 when the SDP was approved,
they are not accorded the right to acquire land but shall, however, continue as HLI stockholders. All the benefits and
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homelots received by the 10,502 FWBs (6,296 original FWBs and 4,206 non-qualified FWBs) listed as HLI stockholders as of August
2, 2010 shall be respected with no obligation to refund or return them since the benefits (except the homelots) were received by the
FWBs as farmhands in the agricultural enterprise of HLI and other fringe benefits were granted to them pursuant to the existing
collective bargaining agreement with Tadeco. If the number of HLI shares in the names of the original FWBs who opt to remain as HLI
stockholders falls below the guaranteed allocation of 18,804.32 HLI shares per FWB, the HLI shall assign additional shares to said
FWBs to complete said minimum number of shares at no cost to said FWBs.

With regard to the homelots already awarded or earmarked, the FWBs are not obliged to return the same to HLI or pay for its value
since this is a benefit granted under the SDP. The homelots do not form part of the 4,915.75 hectares covered by the SDP but were
taken from the 120.9234 hectare residential lot owned by Tadeco. Those who did not receive the homelots as of the revocation of the
SDP on December 22, 2005 when PARC Resolution No. 2005-32-01 was issued, will no longer be entitled to homelots. Thus, in the
determination of the ultimate agricultural land that will be subjected to land distribution, the aggregate area of the homelots will no
longer be deducted.

There is a claim that, since the sale and transfer of the 500 hectares of land subject of the August 14, 1996 Conversion Order and the
80.51-hectare SCTEX lot came after compulsory coverage has taken place, the FWBs should have their corresponding share of the
land‘s value. There is merit in the claim. Since the SDP approved by PARC Resolution No. 89-12-2 has been nullified, then all the lands
subject of the SDP will automatically be subject of compulsory coverage under Sec. 31 of RA 6657. Since the Court excluded the 500-
hectare lot subject of the August 14, 1996 Conversion Order and the 80.51-hectare SCTEX lot acquired by the government from the
area covered by SDP, then HLI and its subsidiary, Centennary, shall be liable to the FWBs for the price received for said lots. HLI shall
be liable for the value received for the sale of the 200-hectare land to LRC in the amount of PhP 500,000,000 and the equivalent value
of the 12,000,000 shares of its subsidiary, Centennary, for the 300-hectare lot sold to LIPCO for the consideration of PhP 750,000,000.
Likewise, HLI shall be liable for PhP 80,511,500 as consideration for the sale of the 80.51-hectare SCTEX lot.

We, however, note that HLI has allegedly paid 3% of the proceeds of the sale of the 500-hectare land and 80.51-hectare SCTEX lot to
the FWBs. We also take into account the payment of taxes and expenses relating to the transfer of the land and HLI‘s statement that
most, if not all, of the proceeds were used for legitimate corporate purposes. In order to determine once and for all whether or not all the
proceeds were properly utilized by HLI and its subsidiary, Centennary, DAR will engage the services of a reputable accounting firm to
be approved by the parties to audit the books of HLI to determine if the proceeds of the sale of the 500-hectare land and the 80.51-
hectare SCTEX lot were actually used for legitimate corporate purposes, titling expenses and in compliance with the August 14, 1996
Conversion Order. The cost of the audit will be shouldered by HLI. If after such audit, it is determined that there remains a balance from
the proceeds of the sale, then the balance shall be distributed to the qualified FWBs.

A view has been advanced that HLI must pay the FWBs yearly rent for use of the land from 1989. We disagree. It should not be
forgotten that the FWBs are also stockholders of HLI, and the benefits acquired by the corporation from its possession and use of the
land ultimately redounded to the FWBs‘ benefit based on its business operations in the form of salaries, and other fringe benefits under
the CBA. To still require HLI to pay rent to the FWBs will result in double compensation.

For sure, HLI will still exist as a corporation even after the revocation of the SDP although it will no longer be operating under the SDP,
but pursuant to the Corporation Code as a private stock corporation. The non-agricultural assets amounting to PhP 393,924,220 shall
remain with HLI, while the agricultural lands valued at PhP 196,630,000 with an original area of 4,915.75 hectares shall be turned over
to DAR for distribution to the FWBs. To be deducted from said area are the 500-hectare lot subject of the August 14, 1996 Conversion
Order, the 80.51-hectare SCTEX lot, and the total area of 6,886.5 square meters of individual lots that should have been distributed to
FWBs by DAR had they not opted to stay in HLI.

HLI shall be paid just compensation for the remaining agricultural land that will be transferred to DAR for land distribution to the FWBs.
We find that the date of the "taking" is November 21, 1989, when PARC approved HLI‘s SDP per PARC Resolution No. 89-12-2. DAR
shall coordinate with LBP for the determination of just compensation. We cannot use May 11, 1989 when the SDOA was executed,
since it was the SDP, not the SDOA, that was approved by PARC.

The instant petition is treated pro hac vice in view of the peculiar facts and circumstances of the case.

WHEREFORE, the instant petition is DENIED. PARC Resolution No. 2005-32-01 dated December 22, 2005 and Resolution No. 2006-
34-01 dated May 3, 2006, placing the lands subject of HLI‘s SDP under compulsory coverage on mandated land acquisition scheme of
the CARP, are hereby AFFIRMED with the MODIFICATION that the original 6,296 qualified FWBs shall have the option to remain as
stockholders of HLI. DAR shall immediately schedule meetings with the said 6,296 FWBs and explain to them the effects,
consequences and legal or practical implications of their choice, after which the FWBs will be asked to manifest, in secret voting, their
choices in the ballot, signing their signatures or placing their thumbmarks, as the case may be, over their printed names.

Of the 6,296 FWBs, he or she who wishes to continue as an HLI stockholder is entitled to 18,804.32 HLI shares, and, in case the HLI
shares already given to him or her is less than 18,804.32 shares, the HLI is ordered to issue or distribute additional shares to complete
said prescribed number of shares at no cost to the FWB within thirty (30) days from finality of this Decision. Other FWBs who do not
belong to the original 6,296 qualified beneficiaries are not entitled to land distribution and shall remain as HLI shareholders. All salaries,
benefits, 3% production share and 3% share in the proceeds of the sale of the 500-hectare converted land and the 80.51-hectare
SCTEX lot and homelots already received by the 10,502 FWBs, composed of 6,296 original FWBs and 4,206 non-qualified FWBs, shall
be respected with no obligation to refund or return them.

Within thirty (30) days after determining who from among the original FWBs will stay as stockholders, DAR shall segregate from the HLI
agricultural land with an area of 4,915.75 hectares subject of PARC‘s SDP-approving Resolution No. 89-12-2 the following: (a) the 500-
hectare lot subject of the August 14, l996 Conversion Order; (b) the 80.51-hectare lot sold to, or acquired by, the government as part of
the SCTEX complex; and (c) the aggregate area of 6,886.5 square meters of individual lots that each FWB is entitled to under the
CARP had he or she not opted to stay in HLI as a stockholder. After the segregation process, as indicated, is done, the remaining area
shall be turned over to DAR for immediate land distribution to the original qualified FWBs who opted not to remain as HLI stockholders.

The aforementioned area composed of 6,886.5-square meter lots allotted to the FWBs who stayed with the corporation shall form part
of the HLI assets.

HLI is directed to pay the 6,296 FWBs the consideration of PhP 500,000,000 received by it from Luisita Realty, Inc. for the sale to the
latter of 200 hectares out of the 500 hectares covered by the August 14, 1996 Conversion Order, the consideration of PhP 750,000,000
received by its owned subsidiary, Centennary Holdings, Inc. for the sale of the remaining 300 hectares of the aforementioned 500-
hectare lot to Luisita Industrial Park Corporation, and the price of PhP 80,511,500 paid by the government through the Bases
Conversion Development Authority for the sale of the 80.51-hectare lot used for the construction of the SCTEX road network. From the
total amount of PhP 1,330,511,500 (PhP 500,000,000 + PhP 750,000,000 + PhP 80,511,500 = PhP 1,330,511,500) shall be deducted
the 3% of the total gross sales from the production of the agricultural land and the 3% of the proceeds of said transfers that were paid to
the FWBs, the taxes and expenses relating to the transfer of titles to the transferees, and the expenditures incurred by HLI and
Centennary Holdings, Inc. for legitimate corporate purposes. For this purpose, DAR is ordered to engage the services of a reputable
accounting firm approved by the parties to audit the books of HLI and Centennary Holdings, Inc. to determine if the PhP 1,330,511,500
proceeds of the sale of the three (3) aforementioned lots were used or spent for legitimate corporate purposes. Any unspent or unused
balance as determined by the audit shall be distributed to the 6,296 original FWBs.

HLI is entitled to just compensation for the agricultural land that will be transferred to DAR to be reckoned from November 21, 1989 per
PARC Resolution No. 89-12-2. DAR and LBP are ordered to determine the compensation due to HLI.

DAR shall submit a compliance report after six (6) months from finality of this judgment. It shall also submit, after submission of the
compliance report, quarterly reports on the execution of this judgment to be submitted within the first 15 days at the end of each
quarter, until fully implemented.

The temporary restraining order is lifted.

SO ORDERED.
DIGEST:

FACTS: On July 5, 2011, the Supreme Court en banc voted unanimously (11-0) to DISMISS/DENY the petition
filed by HLI and AFFIRM with MODIFICATIONS the resolutions of the PARC revoking HLI‘s Stock Distribution
Plan (SDP) and placing the subject lands in Hacienda Luisita under compulsory coverage of the
Comprehensive Agrarian Reform Program (CARP) of the government.

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

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

ISSUES:

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

(2) Is Sec. 31 of RA 6657 unconstitutional?

(3) Can‘t the Court order that DAR‘s compulsory acquisition of Hacienda Lusita cover the full 6,443 hectares
allegedly covered by RA 6657 and previously held by Tarlac Development Corporation (Tadeco), and not just
the 4,915.75 hectares covered by HLI‘s SDP?

(4) Is the date of the ―taking‖ (for purposes of determining the just compensation payable to HLI) November 21,
1989, when PARC approved HLI‘s SDP?

(5) Has the 10-year period prohibition on the transfer of awarded lands under RA 6657 lapsed on May 10,
1999 (since Hacienda Luisita were placed under CARP coverage through the SDOA scheme on May 11,
1989), and thus the qualified FWBs should now be allowed to sell their land interests in Hacienda Luisita to
third parties, whether they have fully paid for the lands or not?

(6) THE CRUCIAL ISSUE: Should the ruling in the July 5, 2011 Decision that the qualified FWBs be given an
option to remain as stockholders of HLI be reconsidered?

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

1. YES, the operative fact doctrine is applicable in this case.The Court maintained its stance that the
operative fact doctrine is applicable in this case since, contrary to the suggestion of the minority, the doctrine is
not limited only to invalid or unconstitutional laws but also applies to decisions made by the President or the
administrative agencies that have the force and effect of laws. Prior to the nullification or recall of said
decisions, they may have produced acts and consequences that must be respected. It is on this score that the
operative fact doctrine should be applied to acts and consequences that resulted from the implementation of
the PARC Resolution approving the SDP of HLI. The majority stressed that the application of the operative fact
doctrine by the Court in its July 5, 2011 decision was in fact favorable to the FWBs because not only were they
allowed to retain the benefits and homelots they received under the stock distribution scheme, they were also
given the option to choose for themselves whether they want to remain as stockholders of HLI or not.
2. NO, Sec. 31 of RA 6657 NOT unconstitutional. The Court maintained that the Court is NOT compelled to
rule on the constitutionality of Sec. 31 of RA 6657, reiterating that it was not raised at the earliest opportunity
and that the resolution thereof is not the lismota of the case. Moreover, the issue has been rendered moot and
academic since SDO is no longer one of the modes of acquisition under RA 9700. The majority clarified that in
its July 5, 2011 decision, it made no ruling in favor of the constitutionality of Sec. 31 of RA 6657, but found
nonetheless that there was no apparent grave violation of the Constitution that may justify the resolution of the
issue of constitutionality.

3. NO, the Court CANNOT order that DAR’s compulsory acquisition of Hacienda Lusita cover the full
6,443 hectares and not just the 4,915.75 hectares covered by HLI’s SDP.Since what is put in issue before
the Court is the propriety of the revocation of the SDP, which only involves 4,915.75 has. of agricultural land
and not 6,443 has., then the Court is constrained to rule only as regards the 4,915.75 has. of agricultural land.
Nonetheless, this should not prevent the DAR, under its mandate under the agrarian reform law, from
subsequently subjecting to agrarian reform other agricultural lands originally held by Tadeco that were
allegedly not transferred to HLI but were supposedly covered by RA 6657.

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

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

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

5. NO, the 10-year period prohibition on the transfer of awarded lands under RA 6657 has NOT lapsed
on May 10, 1999; thus, the qualified FWBs should NOT yet be allowed to sell their land interests in
Hacienda Luisita to third parties. Under RA 6657 and DAO 1, the awarded lands may only be transferred or
conveyed after 10 years from the issuance and registration of the emancipation patent (EP) or certificate of
land ownership award (CLOA). Considering that the EPs or CLOAs have not yet been issued to the qualified
FWBs in the instant case, the 10-year prohibitive period has not even started. Significantly, the reckoning point
is the issuance of the EP or CLOA, and not the placing of the agricultural lands under CARP coverage.
Moreover, should the FWBs be immediately allowed the option to sell or convey their interest in the subject
lands, then all efforts at agrarian reform would be rendered nugatory, since, at the end of the day, these lands
will just be transferred to persons not entitled to land distribution under CARP.

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

3. NAPOCOR VS BERNAL

At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking the reversal
of the September 28, 2007 Decision[1] and the December 17, 2007 Resolution[2] of the Court of
Appeals (CA).

The assailed issuances affirmed the January 14, 2000 Order[3] of the Regional Trial Court
(RTC), Branch 20, Imus, Cavite, which fixed the just compensation at P10,000.00 per square meter
(sq m), in relation to the expropriation suit, entitled National Power Corporation v. TeresitaDiato-
Bernal.
The factual antecedents are undisputed.

Petitioner National Power Corporation (NAPOCOR) is a government owned and controlled

corporation created by Republic Act No. 6395,[4] as amended, for the purpose of undertaking the
development of hydroelectric power throughout the Philippines. To carry out the said purpose,
NAPOCOR is authorized to exercise the power of eminent domain.[5]

Respondent TeresitaDiato-Bernal (respondent) is the registered owner of a 946 sq m parcel of land

situated along General Aguinaldo Highway, Imus, Cavite, covered by Transfer Certificate of Title No.
T-384494.[6]
In order to complete the construction of structures and steel posts for NAPOCORs Dasmarias-Zapote
230 KV Transmission Line Project, it had to acquire an easement of right of way over respondents
property.[7]

Thus, on January 8, 1997, NAPOCOR filed an expropriation suit against respondent,

alleging, inter alia, that: the project is for public purpose; NAPOCOR negotiated with respondent for
the price of the property, as prescribed by law, but the parties failed to reach an agreement; and
NAPOCOR is willing to deposit the amount of Eight Hundred Fifty- Three Pesos and 72/100
(P853.72), representing the assessed value of the property for taxation purposes. [8]

Respondent moved for the actions dismissal, arguing the impropriety of the intended expropriation,
and claiming that the value of her property is Twenty Thousand Pesos (P20,000.00) per sq m for the
front portion, and Eighteen Thousand Pesos (P18,000.00) per sq m for the rear portion, and that she
will lose One Hundred Fifty Thousand Pesos (P150,000.00) per month by way of expected income if
the property is expropriated.[9]
On September 25, 1998, the parties filed with the RTC a partial compromise agreement, [10] which
reads:

1. That the parties, after earnest and diligent efforts, have reached an amicable
settlement regarding the location and size of Pole Site No. DZ-70 to be
constructed on the property of (respondent);

2. That the parties have agreed that the said Pole Site No. DZ-70 shall be constructed
or located on (respondents) Lot No. 6075-B covered by Transfer Certificate of
Title No. T-384494 of the Registry of Deeds for Cavite, covering a total affected
area of 29.25 square meters more or less as indicated in the Sketch hereto
attached as Annex A;

3. That the case shall[,] however, proceed to trial on its merits only with respect to the
question of just compensation.

The agreement was approved by the RTC in its Order dated September 25, 1998.[11]
With the first phase of the expropriation proceedings having been laid to rest by the partial
compromise agreement, the RTC proceeded to determine the amount of just compensation. To assist
in the evaluation of the fair market value of the subject property, the RTC appointed three (3)
commissioners, viz.: (1) the Provincial Assessor of Cavite; (2) the Municipal Assessor of Imus, Cavite,
upon recommendation of NAPOCOR; and (3) Soledad Zamora, respondents representative. [12] The
commissioners submitted their report to the RTC on September 14, 1999. In the main, they
recommended that the just compensation due from NAPOCOR be pegged at P10,000.00 per sq m,
based on the propertys fair market value.[13]

NAPOCOR filed an Opposition[14] to the Commissioners Valuation Report, asserting that it was
not substantiated by any official documents or registered deeds of sale of the subject
propertysneighboring lots. NAPOCOR invoked our ruling in Rep. of the Phil. v. Santos,[15] wherein we
held that a commissioners report that is not based on any documentary evidence is hearsay and
should be disregarded by the court. Lastly, NAPOCOR claimed that the just compensation for the
expropriated property should be P3,500.00 per sq m, based on Resolution No. 08-95 dated October
23, 1995, enacted by the Provincial Appraisal Committee of Cavite (PAC-Cavite).
On January 14, 2000, the RTC issued an Order adopting the recommendation of the
commissioners, viz.:

To the mind of the Court, the appraisal made by the Commissioners is just and
reasonable. It is of judicial notice that land values in Cavite ha[ve] considerably
increased. Such being the case, the just compensation is fixed at P10,000.00 per sq.
meter.[16]

Dissatisfied, NAPOCOR sought recourse with the CA, reiterating the arguments raised in its
Opposition.

On September 28, 2007, the CA rendered its Decision affirming the RTCs judgment.[17] Its motion for
reconsideration[18] having been denied,[19] NAPOCOR interposed the present petition.

NAPOCOR, through the Office of the Solicitor General, repleads its contentions before the courts a
quo and adds that the CA failed to explain why the value of the subject property went up by almost
200% in a span of two (2) years - P3,500.00 per sq m in 1995 to P10,000.00 per sq m at the time of
the filing of the expropriation complaint in 1997.
For her part, respondent prays for the dismissal of the petition on the ground that it raises purely
factual questions which are beyond the province of a Petition for Review on Certiorari under Rule 45
of the Rules of Court.
The petition is meritorious.

We shall first address the procedural infirmity raised by respondent.

In Santos v. Committee on Claims Settlement,[20] the Court had occasion to delineate the
distinction between a question of law and a question of fact, thus: A question of law exists when
there is doubt or controversy on what the law is on a certain state of facts. There is a question of
fact when the doubt or difference arises from the truth or the falsity of the allegations of facts.

The Court elucidated as follows:

A question of law exists when the doubt or controversy concerns the correct
application of law or jurisprudence to a certain set of facts; or when the issue does not
call for an examination of the probative value of the evidence presented, the truth or
falsehood of facts being admitted. A question of fact exists when the doubt or difference
arises as to the truth or falsehood of facts or when the query invites calibration of the
whole evidence considering mainly the credibility of the witnesses, the existence and
relevancy of specific surrounding circumstances as well as their relation to each other
and to the whole, and the probability of the situation.[21]

In this case, it is clear that NAPOCOR raises a question of law, that is, whether or not the resolution
of the PAC-Cavite should prevail over the valuation report of the court-appointed commissioners. The
issue does not call for a recalibration or reevaluation of the evidence submitted by the parties, but
rather the determination of whether the pertinent jurisprudence and laws cited by NAPOCOR in
support of its argument are applicable to the instant case.

On the substantive issue, the Court finds that the CA and the RTC erred in relying on the
unsubstantiated and insufficient findings contained in the commissioners report.

In arriving at the P10,000.00 per sq m market value of the expropriated property, the commissioners
utilized the following factors:

I. PROPERTY LOCATION

The property subject of the appraisal is situated along Gen. Aguinaldo Highway, Brgy. Anabu,
Municipality of Imus, Province of Cavite, consisting of 946 sq. m. more or less,
identified as Lot 6075-B with Flat Terrain approximately 5 kms. Distance
Southwest of Imus Town proper, about 500 to 600 m. from the entrance gate of
Orchard Club and San Miguel Yamamura Corp. from Southeast around 1 km. [t]o
1.5 kms. From EMI (Yasaki), Makro, and Robinsons Department Store.

II. NEGHBORHOOD DESCRIPTION

The neighborhood particularly in the immediate vicinity, is within a mixed residential and
commercial area situated in the Southern Section of the Municipality of Imus
which is transversed by Gen. Emilio Aguinaldo Highway w[h]ere several
residential subdivisions and commercial establishments are located.
Residential houses in the area are one to two storey in height constructed of concrete and
wood materials belonging to families in the middle income bracket, while
commercial buildings mostly located along Gen. Emilio Aguinaldo Highway.

Some of the important landmarks and commercial establishments in the immediate vicinity are:

Newly constructed Robinsons Department Store

Makro
Caltex Gasoline station and Shell Gasoline station
Goldbomb Const. Corp.
EMI (Yasaki)
Pallas Athena Subd.
and various Commercial and Savings Banks
Community [c]enters such as school, churches, public markets, shopping malls, banks and
gasoline stations are easily accessible from the subject property.

Convenience facility such as electricity, telephone service as well as pipe potable water supply
system are all available along Gen. Aguinaldo Highway

x xxx

IV. VALUATION OF LAND MARKET DATA

This method of valuation involves the research and investigation of market and
sales data of the properties comparable with the property under appraisal.
These other properties are compare[d] with the subject property as to location
and physical characteristics. Adjustment of their selling prices [is] then made with
respect to the said comparative elements as well as time compensate for the increase
or decrease in value.
Based on our investigations and verifications of market sales data and price
listings of the neighborhood where the property under appraisal is located indicates land
value within the range of P10,000.00 to P15,000.00 per square meter for residential lots
while commercial lots along Gen. E. Aguinaldo Highway are range[d] from P10,000.00
to P20,000.00 per square meters (sic).
With this data and making the proper adjustment with respect to the location,
area, shape, accessibility, and the highest and best use of the subject property, we
estimate the market value of the subject land at P10,000.00 per square meter, as of this
date September 10, 1999.[22]

It is evident that the above conclusions are highly speculative and devoid of any actual and reliable
basis. First, the market values of the subject propertysneighboring lots were mere estimates and
unsupported by any corroborative documents, such as sworn declarations of realtors in the area
concerned, tax declarations or zonal valuation from the Bureau of Internal Revenue for the
contiguous residential dwellings and commercial establishments. The report also failed to elaborate
on how and by how much the community centers and convenience facilities enhanced the value of
respondents property.[23] Finally, the market sales data and price listings alluded to in the report were
not even appended thereto.

As correctly invoked by NAPOCOR, a commissioners report of land prices which is not based on any
documentary evidence is manifestly hearsay and should be disregarded by the court. [24]
The trial court adopted the flawed findings of the commissioners hook, line, and sinker. It did not even
bother to require the submission of the alleged market sales data and price listings. Further, the RTC
overlooked the fact that the recommended just compensation was gauged as of September 10, 1999
or more than two years after the complaint was filed on January 8, 1997. It is settled that just
compensation is to be ascertained as of the time of the taking, which usually coincides with the
commencement of the expropriation proceedings. 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.[25]Clearly, the recommended just compensation in the commissioners report is
unacceptable.

Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. The measure is not the takers gain, but the owners loss. The word just is used to
intensify the meaning of the word compensation and to convey thereby the idea that the equivalent to
be rendered for the property to be taken shall be real, substantial, full, and ample.[26] Indeed, the just-
ness of the compensation can only be attained by using reliable and actual data as bases in fixing the
value of the condemned property.

The trial court should have been more circumspect in its evaluation of just compensation due
the property owner, considering that eminent domain cases involve the expenditure of public funds.

As to the resolution of the PAC-Cavite advanced by NAPOCOR, which pegged the fair market
value of the property at P3,500.00 per sq m, it can only serve as one of the factors in the judicial
evaluation of just compensation, along with several other considerations. [27] NAPOCOR cannot
demand that the PAC-Cavite resolution be substituted for the report of court-appointed
commissioners in consonance with the firm doctrine that the determination of just compensation is a
judicial function.[28]

Hence, the legal basis for the determination of just compensation being insufficient, the ruling
of the RTC and the affirming Decision and Resolution of the CA ought to be set aside.

WHEREFORE, the petition is GRANTED. The January 14, 2000 Order of the Regional Trial
Court, Branch 120, Imus, Cavite, and the September 28, 2007 Decision and the December 17, 2007
Resolution of the Court of Appeals are hereby SET ASIDE. This case is remanded to the trial court
for the proper determination of just compensation, in conformity with this Resolution. No costs.

DIGEST:
FACTS: Respondent TeresitaDiato-Bernal is the registered owner of a parcel of land. In order to complete the
construction of structures and steel posts for NAPOCORs Dasmaris-Zapote 230 KV Transmission Line Project,
it had to acquire an easement of right of way over respondents property. NAPOCOR filed an expropriation suit
against respondent, alleging,interalia,that: the project is for public purpose; NAPOCOR negotiated with
respondent for the price of the property, as prescribed by law, but the parties failed to reach an agreement; and
NAPOCOR is willing to deposit the amount representing the assessed value of the property for taxation
purposes.
With the first phase of the expropriation proceedings having been laid to rest by the partial compromise
agreement, the RTC proceeded to determine the amount of just compensation. To assist in the evaluation of
the fair market value of the subject property, the RTC appointed three (3) commissioners,viz.:(1) the Provincial
Assessor of Cavite; (2) the Municipal Assessor of Imus,Cavite, upon recommendation of NAPOCOR; and (3)
Soledad Zamora, respondents representative.The commissioners submitted their report to the RTC on
September 14, 1999. In the main, they recommended that the just compensation due from NAPOCOR be
pegged atP10,000.00 per sq m, based on the propertys fair market value.
NAPOCOR filed an Oppositionto the Commissioners Valuation Report, asserting that it was not substantiated
by any official documents or registered deeds of sale of the subject propertysneighboring lots. The RTC issued
an Order adopting the recommendation of the commissioners. On appeal, the CA rendered its Decision
affirming the RTCs judgment.
ISSUE: Whether or not the CA erred in relying on the unsubstantiated and insufficient findings contained in the
commissioners report.
HELD: Court of Appeals decision is reversed.
The CA and the RTC erred in relying on the unsubstantiated and insufficient findings contained in the
commissioners report. First, the market values of the subject propertysneighboring lots were mere estimates
and unsupported by any corroborative documents, such as sworn declarations of realtors in the area
concerned, tax declarations or zonal valuation from the Bureau of Internal Revenue for the contiguous
residential dwellings and commercial establishments. The report also failed to elaborate on how and by how
much the community centers and convenience facilities enhanced the value of respondents property. Finally,
the market sales data and price listings alluded to in the report were not even appended thereto. As correctly
invoked by NAPOCOR, a commissioners report of land prices which is not based on any documentary
evidence is manifestly hearsay and should be disregarded by the court. The trial court adopted the flawed
findings of the commissioners hook, line, and sinker. It did not even bother to require the submission of the
alleged market sales data and price listings. Further, the RTC overlooked the fact that the recommended just
compensation was gauged as of September 10, 1999 or more than two years after the complaint was filed on
January 8, 1997. It is settled that just compensation is to be ascertained as of the time of the taking, which
usually coincides with the commencement of the expropriation proceedings. 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. Clearly, the recommended just compensation in the commissioner‘s report is unacceptable.
Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator.The measure is not the takers gain, but the owners loss.The word just is used to intensify the
meaning of the word compensation and to convey thereby the idea that the equivalent to be rendered for the
property to be taken shall bereal, substantial, full, and ample. Indeed, the just-ness of the compensation can
only be attained by using reliable and actual data as bases in fixing the value of the condemned property.
The trial court should have been more circumspect in its evaluation of just compensation due the property
owner, considering that eminent domain cases involve the expenditure of public funds. Hence, the legal basis
for the determination of just compensation being insufficient, the ruling of the RTC and the affirming Decision
and Resolution of the CA ought to be set aside.
The petition for review on certiorari is GRANTED.

4. NATIONAL POWER CORPORATION, petitioner,

vs.
HON. ENRIQUE T. JOCSON, in his capacity as Presiding Judge, Regional Trial Court, 6th
Judicial Region, Branch 47, Bacolod City; JESUS, FERNANDO, MARIA CRISTINA and
MICHAEL, all surnamed GONZAGA; LUIS, DIONISIO, ROBERTO, GABRIEL, BENJAMIN, ANA,
ALEXANDER, CARLA, SOFIA and DANIEL, all surnamed GONZAGA; ROSARIO P. MENDOZA;
CELSOY AGRO-IND. CORP.; EMMANUEL, LYDIA, HARRY, NOLI, CLIFFORD and CHRISTIAN
DALE, all surnamed AÑO; MAYO L. LACSON; and LUCIA GOSIENFIAO, respondents.

Amado B. Parreno Law Office for Gonzaga, et al.

Francisco B. Cruz for R. Mendoza.

Eduardo M. Casiple for Mayo Lacson.

DAVIDE, JR., J.:

This is a special civil action for certiorari to annul, for having been issued without or in excess of
jurisdiction, in violation of law and in deprivation of petitioner's right to due process, four (4) orders
successively issued by the respondent Judge in seven (7) eminent domain cases (1) fixing the
provisional values of the parcels of land sought to be expropriated by the petitioner, National Power
Corporation (NAPOCOR), in amounts far exceeding their market values, (2) increasing the
provisional values of the parcels of land involved in two (2) of such cases without hearing and holding
in abeyance the issuance of the writ of possession in favor of petitioner until deposit of the additional
amount, (3) requiring the private respondents, as defendants in said cases, to state in writing within
twenty-four (24) hours whether or not they are amenable to accepting and withdrawing the amount
deposited by petitioner as provisional values in full and final satisfaction of their respective properties,
and directing that the writ of possession be issued only until after the defendants shall have so
manifested in writing their acceptance and receipt of said amounts, and (4) directing petitioner to
release and pay within twenty-four (24) hours, through the Court and in favor of the defendants, the
amount of P43,016,960.00.

The antecedents of this case are not controverted.

Petitioner is a government-owned and controlled corporation created and existing by virtue of

Republic Act No. 6395, as amended, for the purpose of undertaking the development of hydraulic
power, the production of power from any source, particularly by constructing, operating and
maintaining power plants, auxiliary plants, dams, reservoirs, pipes, mains, transmission lines, power
stations and other works for the purpose of developing hydraulic power from any river, creek, lake,
spring and waterfall in the Philippines and supplying such power to the inhabitants thereof. In order to
carry out these purposes, it is authorized to exercise the power of eminent domain.

On 30 March 1990, petitioner filed seven (7) eminent domain cases before the Regional Trial Court of
the Sixth Judicial Region in Bacolod City, to wit:

(1) Civil Case No. 5938 against Jesus, Fernando, Ma. Cristina and Michael, all
surnamed GONZAGA; 1

(2) Civil Case No. 5939 against Louis, Dionisio, Roberto, Gabriel, Benjamin, Ana,
Alexander, Carla, Sofia, Daniel, all surnamed GONZAGA; 2
3
(3) Civil Case No. 5940 against Rosario P. Mendoza;

(4) Civil Case No. 5941 against Celsoy Agro-Ind.

Corporation; 4

(5) Civil Case No. 5942 against Emmanuel, Lydia, Harry, Noli, Clifford and Christian,
Dale, all surnamed AÑO; 5
6
(6) Civil Case No. 5943 against Mayo L. Lacson;
7
(7) Civil Case No. 5944 against Lucia Gosiengfiao

for the acquisition of a right-of-way easement over portions of the parcels of land described in the
complaints for its Negros-Panay Interconnection Project, particularly the Bacolod-Tomonton
Transmission Line.

The complaints uniformly (a) allege that petitioner urgently needs portions of the affected land to
enable it to construct its tower and transmission line in a manner that is compatible with the greatest
good while at the same time causing the least private injury; the purpose for which the lands are
principally devoted will not be impaired by the transmission lines as it will only acquire a right-of-way-
easement thereon; and it had negotiated with and offered to pay defendants for the portions affected
by the Bacolod-Tomonton Transmission Line, but the parties failed to reach an agreement despite
long and repeated negotiations, and (b) pray that:

1. This Honorable Court fix the provisional value of the portions of the parcel of land
herein sought to be expropriated pursuant to Section 2, Rule 67 of the Rules of Court;

2. This Honorable Court, by proper order and writ, authorize the plaintiff to enter or take
possession of the premises described in paragraph 3 hereof, and to commence and
undertake the construction of the Bacolod-Tomonton T/L after depositing with the
Provincial Treasurer of Negros Occidental the provisional value fixed by this Honorable
Court, which amount shall be held by said official subject to the order and final
disposition of the Court;

3. This Honorable Court appoint three (3) Commissioners to hear the parties, view the
premises, assess the damages to be paid for the condemnation, and to report in full
their proceedings to the Court;

4. The plaintiff be declared to have the lawful right to acquire portions of the properties
of the defendants affected by the condemnation;

5. After the determination of the amount of indemnity, the Court authorize the payment
by the plaintiff to the defendants; and

6. Judgment be rendered against the defendants, condemning the portion of the parcels
of land referred to in paragraphs 3 and 4 hereof, including the improvements thereof, if
any, for public use and for the purpose hereinabove set forth, free from all other liens
and encumbrances whatsoever; and thereafter, upon plaintiff's compliance with the
requirements of said judgment, a final order of condemnation be issued and entered in
favor of the plaintiff.

Plaintiff further prays for such other reliefs as may be deemed just and equitable in the
premises.

The cases were raffled to different branches of the trial court as follows: Civil Cases Nos. 5938, 5943
and 5944 to Branch 43; Civil Case No. 5939 to Branch 54; Civil Case No. 5940 to Branch 45; Civil
Case No. 5941 to Branch 50; and Civil Case No. 5942 to Branch 46.

Only the defendants in Civil Cases Nos. 5938, 5939, and 5942 filed Motions to Dismiss. 8

On 4 April 1990, petitioner filed a Motion to consolidate these cases for joint trial 9 and an Urgent
Motion To Fix Provisional Value.10

On 10 April 1990, Executive Judge Jesus V. Ramos issued an Order granting the motion for
consolidation and ordering the consolidation of all the cases in Branch 43 of the court, then presided
over by Judge Romeo Habaradas.11

Considering that Judge Habaradas was on sick leave, petitioner filed on 8 May 1990 an Urgent
Motion to Reraffle due to the urgent necessity for the hearing of the cases and the Urgent Motion to
Fix Provisional Value. 12 Acting on said motion, Vice Executive Judge Bethel K. Moscardon issued on
9 May 1990 an Order granting the motion and directing the re-raffle of the cases. 13

Upon re-raffle, the cases were assigned to Branch 47, presided over by respondent Judge. Since the
latter went on sick leave effective 16 May 1990, petitioner filed on said date an Urgent Motion for
Special Re-raffle and for Immediate Fixing of Provisional Value. 14 As a consequence thereof, the
cases were re-raffled to Branch 48 of the court.

On 17 May 1990, Judge Romeo Hibionada of Branch 48 issued an Order directing the defendants to
appear before the court on 21 May 1990 at 8:30 A.M. to register their comments or objections to the
fixing of the provisional values of the parcels of land subject of expropriation. 15

On 21 May 1990, the petitioner and the defendants, through their respective lawyers, appeared and
orally argued their respective positions on the Motion to Fix Provisional Value. 16

Instead of ruling on the issues raised therein, Judge Hibionada, citing Circular No. 7 of this Court
dated 23 September 1974 which establishes a pairing system, 17 promulgated an Order directing the
return of the seven (7) cases to Branch 47 for further disposition.

On 5 June 1990, Branch 47, through respondent Judge, issued an Order directing the petitioner:

. . . to show by documents and otherwise within five (5) days from receipt hereof the
following:

1. That it has earlier negotiated repeatedly with defendants but failed to reach
agreement;

2. That expropriation of heavily populated subdivision areas in order to install primary

electric transmission lines would not endanger lives and property in the area;

3. That such installation is of paramount public interest and there is no other

demonstrable alternative.

and warning that "no provisional order for tentative cost payment of the land affected would be
issued" pending compliance by petitioner with the
foregoing. 18

On 25 June 1990, respondent Judge, finding the existence of paramount public interest which. may
be served by the expropriation, the long range benefit of the project involved, substantial compliance
with the rules concerning efforts for negotiation and, taking into consideration the market value of the
subject areas and the daily opportunity profit that the petitioner allegedly admitted in open court,
issued an Order fixing the provisional values of the subject areas, to wit:

CIVIL CASE AFFECTED MARKET PROVISIONAL

NO. AREA(SQ. M.) VALUE

1. 5938 7,050 P 45,000.00 P 180,000.00

3,000 668,700.00 2,674,800.00
6,600 219,830.00 879,320.00
2. 5939 23,400 757,437.00 3,029,748.00
3. 5940 9,030 2,870.00 11,480.00
 4. 5941 17,430 433,130.00 1,732,520.00
5. 5942 2,700 342,900.00 1,371,600.00
6. 5943 15,900 2,125,340.00 8,501,360.00
7. 5944 21,000 1,200,000.00 1,800,000.00

and directing the petitioner:

. . . to deposit the amount with the Philippine National Bank in escrow for the benefit of
the defendants pending decision on the merits. 19

The market values mentioned in the Order are the same values appearing in the tax declarations of
the properties and the notices of assessment issued by the Assessor.

In compliance with the said Order, petitioner deposited the total sum of P23,180,828.00 with the
Philippine National Bank, NAPOCOR Branch, Quezon City, under Savings Account 249-505865-7
and manifested on 3 July 1990 with the court below that it did so. 20

On 11 July 1990, the defendants in Civil Case No. 5938 filed a motion for the reconsideration of the
25 June 1990 Order alleging that the provisional value of the property involved therein "had been set
much too low" considering the allegations therein adduced, stating that the real compensation that
should accrue to them is estimated at P29,970,000.00 and praying that the questioned Order be
reconsidered so as to reflect "the true amount covering the properties subject to (sic) Eminent
Domain estimated at TWENTY NINE MILLION NINE HUNDRED SEVENTY THOUSAND
(P29,970,000.00)." 21

It likewise appears that the defendants in "Civil Case No. 5939 filed a motion for reconsideration
asking for a re-evaluation of the provisional value of the subject property. 22

On 12 July 1990, respondent Judge issued an Order 23 increasing the provisional values of the
properties enumerated in the motions for reconsideration, directing the petitioner to deposit "whatever
differential between the amounts above fixed and those already deposited within twenty four (24)
hours from receipt of the Order" and holding in abeyance the issuance of the writ of possession
pending compliance therewith. The Order reads in full as follows:

ORDER

Before this Court are two (2) Motions for Reconsideration of the Order dated June 25,
1990 fixing provisional values of the lands sought to be expropriated belonging to the
defendants in these cases. The first motion was filed by the Torres Valencia
CioconDabao Valencia & De La Paz Law Offices for the defendants Jesus, Fernando,
Ma. Cristina and Michel (sic), all surnamed Gonzaga, seeking a reconsideration of the
values set by this Court earlier at P3,734,120.00 for the areas affected consisting of the
following:

7,050 square meters;

6,600 square meters; and
3,000 square meters

belonging to the aforesaid persons. The Court is aware that the Order of July 25, 1990
was not based on ultimate factual conditions of the property of the movants. At that
 time, the Court is (sic) unaware that the expropriation of these areas would render the
remaining portion practically a total loss considering that it is in a subdivision and not
agricultural and that the fetching price (sic) now in the immediate vicinity is between
P1,500.00 and P2,000.00 per square meter. Considering that the presence of the
primary transmission lines of the property and the earlier intrusion of the Central Negros
Cooperative at the side of the areas affected for free (sic) during the Martial Law
Regime, and considering further the proximity of the Rolling Hills Memorial Park, the
San Miguel Corporation manufacturing complex, Jesusa Heights, Green Hills Memorial
Park and other posh subdivisions, as well as a golf course, the Court is convinced that
that (sic), defendants Jesusa Gonzaga, Fernando Gonzaga, Ma. Cristina and Michel
(sic) Gonzaga are entitled to a higher valuation for the property, not only because of the
above-stated facts but because of the clear danger to the inhabitants in the area and
the destruction of the marketability of the remaining portion after expropriation.

II

In respect to the plea of defendants Louis Gonzaga, et al. for re-evaluation of the areas
owned by them, the Court feels that adjustment should also be made considering that it
is contiguous to the areas belonging to Jesus Gonzaga, et al. above-stated and it is also
affected by the same conditions. Considering that the area affected is 23,000 square
meters and the fetching price (sic) in the vicinity is between P1,500.00 and P2,000.00
per square meter, the Court feels that the provisional value of the property should be
P12,600,000.00.

As to the rest of the defendants, there being no extra-ordinary or peculiar conditions

which may warrant re-evaluation the amounts fixed earlier by this Court shall stand.

WHEREFORE, (a) the Court rules that the provisional value of 7,050 square meters
aforestated should be P6,000,000.00; the provisional value of 6,600 square meters
aforestated should be P5,000,000.00; and the provisional value of 3,000 square meters
aforestated should be P3,000,000.00 instead of those in the June 25, 1990 Order of this
Court for these properties. (b) The provisional value of 23,000 square meters belonging
to Louis Gonzaga, et al. should be rightfully valued at P12,600,000.00.

The plaintiff is directed to deposit whatever differential between the amounts above
fixed and those already deposited in PNB Savings Account No. 249-5-5865-7 within 48
hours from receipt of this Order. Pending such compliance hereof, action on the Motion
for Issuance of Writ of Possession will be held in abeyance. The representative of the
plaintiff may get from the Branch Clerk of Court the corresponding bank book earlier
attached to the expediente for the purpose of complying with this Order.

SO ORDERED.

In compliance with the said Order, petitioner immediately deposited the additional sum of
P22,866,860.00 with the Philippine National Bank under Savings Account No. 249-505865-7 as
evidenced by the Bank's certification dated 13 July 1990. 24
25
On 16 July 1990, respondent Judge issued an Order mandatorily requiring the defendants:

. . . to state in writing within twenty-four (24) hours whether or not they are amenable to
accept and withdraw (sic) the amounts already deposited by the plaintiff for each of
 them at final and full satisfaction of the value of their respective property (sic) affected
by expropriation, and this is mandatory.

[t]he Writ of Possession sought for by the plaintiff will be issued immediately after
manifestation of acceptance and receipt of said amounts.

On 18 July 1990, respondent Judge, claiming to act on the

Manifestation — filed in compliance with the Order of 16 July 1990 — of defendants Jesus Gonzaga,
et al. in Civil Case No. 5938, Luis Gonzaga, et al. in Civil Case No. 5939, Rosario Mendoza in Civil
Case No. 5940, Emmanuel Año, et al. in Civil Case No. 5942 and Mayo Lacson in Civil Case No.
5943, issued an Order 26 directing the petitioner to pay the defendants within twenty-four (24) hours,
through the court and from petitioner's Philippine National Bank Savings Account No. 249-505865-7
or from any other fund; whichever may be most expeditious, the following amounts by way of full
payment for their expropriated property:

CIVIL CASE NO. AFFECTED AREA VALUE

(SQ. M.)

1. 5938 7,050 P 6,000,000.00

3,000 3,000,000.00
6,600 5,000,000.00
2. 5939 23,000 12,600,000.00
3. 5940 9,030 11,480.00
4. 5941 17,430 1,732,520.00
5. 5942 2,700 1,371,600.00
6. 5943 15,900 8,501,360.00
7. 5944 21,000 4,800,000.00

and ordering that the writ of possession be issued in these cases after the defendants "have duly
received the amounts."

Unable to accept the above Orders of 25 June, 12 July, 16 July and 18 July 1990, petitioner filed this
petition on 24 July 1990 alleging therein, as grounds for its allowance, that respondent Judge acted in
excess of jurisdiction, in violation of laws and in dereliction of the duty to afford respondents due
process when he issued said Orders. In support thereof petitioner asserts that the Orders of 25 June
and 12 July 1990 fixing the provisional values at excessive and unconscionable amounts, are utterly
scandalous and unreasonable. As classified under their respective tax declarations, the several lots
to be expropriated are sugarlands with the following assessed values:

OWNER TAX DEC. NO. ASSESSED

VALUE

1. JESUS L. GONZAGA 007-000621 P18,000.00

2. Estate of SOPHIA
Vda. de GONZAGA 007-000495 267,480.00
3. JESUS GONZAGA 005-000007 87,930.00
4. LOUIS, DIONISIO
ROBERTO, GABRIEL
BENJAMIN, ANA
ALEXANDER, CARLO
SOPHIA, DANIEL
also named
 GONZAGA 007-5224 398,260.00
5. ROSARIO MENDOZA Notice of Assessment
of Real Property dated
March 23, 1990,
Lot No. 1278-B-1 860.00
6. ROSARIO MENDOZA Notice of Assessment
of Real Property dated
March 23, 1990, 861,380.00
Lot No. 1278-C-1 429,080.00
7. CEL-SOY-AGRO-
IND. CORPORATION 2284 179,650.00
8. LYDIA S. ANO
married to
EMMANUEL ANO 4047 (0854-05) 137,160.00
9. PACITA LACSON
(MAYO L. LACSON) Notice of Assessment
of Real Property dated
March 21, 1990
Lot No. 7-G 861,380.00
10. DOLORES D.
COSCOLLUELA 020-00017 487,730.00
(LUCIA GOSIENFIAO)

Yet, petitioner submits that in a clear display of abuse of discretion, respondent Judge fixed, in the
Order of 25 June 1990, the provisional valued as follows:

CIVIL CASE AFFECTED AREA MARKET PROVISIONAL

VALUE (SQ. M.) VALUE
NO.

1. 5938 7,050 P 45,000.00 P 180,000.00

3,000 668,700.00 2,674,800.00
6,600 219,830.00 879,320.00
2. 5939 23,400 757,437.00 3,029,748.00
3 5940 9,030 2,870.00 11,480.00
4. 5941 17,430 433,130.00 1,732,520.00
5. 5942 2,700 342,900.00 1,371,600.00
6. 5943 15,900 2,125,340.00 8,501,360.00
7. 5944 21,000 1,200,000.00 4,800,000.00

and that:

. . . in another clear abuse (sic) of discretion, herein respondent Judge, on the basis of
the respective Motion (sic) for Reconsideration of defendants in Civil Cases Nos. 5938
and 5939, without affording the herein petitioner an opportunity to be heard, and with
evident and manifest partiality to therein defendants increased the previously fixed
provisional value of their respective lands, as follows:

a. Civil Case No. 5938:

1. 7,050 sq. m. — From P180,000.00 to P6,000,000.00

 2. 3,000 sq. m. — From P2,674,800.00 to P3,000,000.00

3. 6,600 sq. m. — From P879,320.00 to P5,000,000.00

b. Civil Case No. 5939

1. 23,400 sq. m. — From P3,029,748.00 to P12,600,000.00

Nevertheless, due to its urgent need for the areas to be able to complete the interconnection project
as soon as possible, petitioner deposited the amounts representing the provisional values fixed by the
respondent Judge. Still, petitioner laments, the latter persisted in his stubbornness by not issuing a
writ of possession, in violation of Section 2, Rule 67 of the Rules of Court which provides that upon
the filing of the complaint or at any time thereafter, the plaintiff shall have the right to take or enter
upon the possession of the real or personal property involved if he deposits with the National or
Provincial Treasurer its value, as provisionally and promptly ascertained and fixed by the court having
jurisdiction of the proceedings, to be held by such treasurer subject to the orders and final disposition
of the court; and that after such deposit to made, the court shall order the sheriff or other proper
officer to forthwith place the plaintiff in possession of the property involved P.D. No. 42, which
provides that:

. . . upon filing in the proper court of the complaint in eminent domain proceedings or at
anytime thereafter, and after due notice to the defendant, plaintiff shall have the right to
take or enter upon the possession of the real property involved if he deposits with the
Philippine National Bank, in its main office or any of its branches or agencies, an
amount equivalent to the assessed value of the property for purposes of taxation, to be
held by said bank subject to the orders and final disposition of the court.

is also alleged to have been violated by respondent Judge.

The issuance then of the writ of possession was an unqualified ministerial duty which respondent
Judge failed to perform.

Moreover, the Order of 16 July 1990 surrenders the judicial prerogative to fix the provisional value in
favor of the defendants considering that respondent Judge's valuation may still be overruled by the
latter since they were given twenty-four (24) hours to state in writing whether or not they are
accepting and withdrawing the amount already deposited by petitioner.

Finally, petitioner contends that the Order of 16 July 1990 partakes of the nature of a final disposition
of the case should the defendants accept the provisional value as "final and full satisfaction of the
value of their respective property (sic)affected by expropriation," thereby preempting and depriving
the former of the right to dispute and contest the value of the property. Clearly, respondent Judge
took a short-cut, violating in the process the procedure laid down in Sections 3 to 8, inclusive, of Rule
67 of the Rules of Court.

In the Resolution of 31 July 1990, this court required the respondents to comment on the petition and
resolved to issue a temporary restraining order, effective immediately and to continue until further
orders from the Court, compelling the respondent Judge to cease and desist from enforcing and/or
executing his questioned Orders and directing him, pending determination of this case, to place
petitioner in possession of the properties subject of this
petition. 27

The following respondents filed, through their counsels, their Answers on various dates, as follows:
 Mayo Lacson — 14 September 199028
Rosario P. Mendoza — 18 September 199029
Jesus Gonzaga, et al.;
Emmanuel Año, et al. — 27 September 199030
Luis Gonzaga, et al. — 20 September 199031

All of them, except for Rosario P. Mendoza who informed the Court that she filed a motion to
reconsider the 18 July 1990 Order of respondent Judge and who agrees with petitioner that
commissioners should be appointed to determine the just compensation, 32 support and sustain the
actions of respondent Judge and pray for the dismissal of the petition.

Mayo Lacson, in submitting that the procedure prescribed in Rule 67 may be abbreviated provided
that the rights of the parties are duly protected, cites the case of City Government of Toledo
vs. Fernandos, et al. 33 wherein this Court sustained the judgment of the trial court on the basis of
what transpired in the pre-trial conference.

Complying with the Resolution of the 25 September 1990, petitioner filed on 6 November 1990 a
Reply to the Comment of respondent Mayo Lacson, 34 stressing therein that the case of City
Government of Toledo City vs.Fernandos, et al. 35 does not apply to the present case because a pre-
trial was conducted in the former during which the parties were able to present their respective
positions on just compensation.

On 22 January 1991, this Court resolved to consider the respondents' Comments as Answers to the
petition, give due course to the petition and require the parties to file simultaneously their respective
Memoranda within twenty (20) days from notice, which petitioner complied with on 11 March
1991; 36 respondent Mendoza on 4 March 1991; 37 respondents Jesus Gonzaga, et al. and
Emmanuel Año, et al. on 19 March 1991; 38 and Mayo Lacson on 5 April 1991. 39

We find merit in the petition.

Respondent Judge committed grave abuse of discretion amounting to lack of jurisdiction, and is
otherwise either unmindful or ignorant of the law: when he fixed the provisional values of the
properties for the purpose of issuing a writ of possession on the basis of the market value and the
daily opportunity profit petitioner may derive in violation or in disregard of P.D. No. 42; in amending
such determination in Civil Cases Nos. 5938 and 5939 by increasing the same without hearing; in
directing the defendants to manifest within twenty-four (24) hours whether or not they are accepting
and withdrawing the amounts, representing the provisional values, deposited by the plaintiff for each
of them as "final and full satisfaction of the value of their respective property (sic); " in declaring the
provisional values as the final values and directing the release of the amounts deposited, in full
satisfaction thereof, to the defendants even if not all of them made the manifestation; and in
suspending the issuance of the writ of possession until after the suspending the amounts shall have
been released to and received by defendants.

In Municipality of Biñan vs. Hon. Jose Mar Garcia, et al., 40 this Court ruled that there are two (2)
stages in every action of expropriation:

The first is concerned with the determination of the authority of the plaintiff to exercise
the power of eminent domain and the propriety of its exercise in the context of the facts
involved in the suit. 41 It ends with an order, if not of dismissal of the action, "of
condemnation declaring that the plaintiff has a lawful right to take the property sought to
be condemned, for the public use or purpose described in the complaint, upon the
payment of just compensation to be determined as of the date of the filing of the
 complaint." 42 An order of dismissal, if this be ordained, would be a final one, of course,
since it finally disposes of the action and leaves nothing more to be done by the Court
on the merits. 43 So, too, would an order of condemnation be a final one, for thereafter
as the Rules expressly state, in the proceedings before the Trial Court, "no objection to
the exercise of the right of condemnation (or the propriety thereof) shall be filed or
heard."

The second phase of the eminent domain action is concerned with the determination by
the Court of the "just compensation for the property sought to be taken." This is done by
the Court with the assistance of not more than three (3) commissioners. 44 The order
fixing the just compensation on the basis of the evidence before, and findings of, the
commissioners would be final, too. It would finally dispose of the second stage of the
suit, and leave nothing more to be done by the Court regarding the issue. . . .

However, upon the filing of the complaint or at any time thereafter, the petitioner has the right to take
or enter upon the possession of the property involved upon compliance with P.D. No. 42 which
requires the petitioner, after due notice to the defendant, to deposit with the Philippine National Bank
in its main office or any of its branches or agencies, "an amount equivalent to the assessed value of
the property for purposes of taxation." This assessed value is that indicated in the tax declaration.

P.D. No. 42 repealed the "provisions of Rule 67 of the Rules of Court and of any other existing law
contrary to or inconsistent" with it. Accordingly, it repealed Section 2 of Rule 67 insofar as the
determination of the provisional value, the form of payment and the agency with which the deposit
shall be made, are concerned. Said section reads in full as follows:

Sec. 2. Entry of plaintiff upon depositing value with National or Provisional Treasurer. —
Upon the filing of the complaint or at any time thereafter the plaintiff shall have the right
to take or enter upon the possession of the real or personal property involved if he
deposits with the National or Provincial Treasurer its value, as provisionally and
promptly ascertained and fixed by the court having jurisdiction of the proceedings, to be
held by such treasurer subject to the orders and final disposition of the court. Such
deposit shall be in money, unless in lieu thereof the court authorizes the deposit of a
certificate of deposit of a depository of the Republic of the Philippines payable on
demand to the National or Provincial Treasurer, as the case may be, in the amount
directed by the court to be deposited. After such deposit is made the court shall order
the sheriff or other proper officer to forthwith place the plaintiff in possession of the
property involved.

It will be noted that under the aforequoted section, the court has the discretion to determine the
provisional value which must be deposited by the plaintiff to enable it "to take or enter upon the
possession of the property." Notice to the parties is not indispensable. In interpreting a similar
provision of Act No. 1592, this Court, in the 1915 case of Manila Railroad Company, et
al. vs. Paredes, et al., 45 held:

. . . The statute directs that, at the very outset, "when condemnation proceedings are
brought by any railway corporation" the amount of the deposit is to be "provisionally and
promptly ascertained and fixed by the court." It is very clear that it was not the intention
of the legislator that before the order fixing the amount of the deposit could lawfully be
entered the court should finally and definitely determine who are the true owners of the
land; and after doing so, give them a hearing as to its value, and assess the true value
of the land accordingly. In effect, that would amount to a denial of the right of
possession of the lands involved until the conclusion of the proceedings, when there
 would no need for the filing of the deposit. Of course, there is nothing in the statute
which denies the right of the judge to hear all persons claiming an interest in the land,
and courts should ordinarily give all such persons an opportunity to be heard if that be
practicable, and will cause no delay in the prompt and provisional ascertainment of the
value of the land. But the scope and extent of the inquiry is left wholly in the discretion
of the court, and a failure to hear the owners and claimants of the land, who may or may
not be known at the time of the entry of the order, in no wise effects the validity of the
order. . . .

P.D. No. 42, however, effectively removes the discretion of the court in determining the provisional
value. What is to be deposited is an amount equivalent to the assessed value for taxation
purpose. 46 No hearing is required for that purpose. All that is needed is notice to the owner of the
property sought to be condemned. 47

Clearly, therefore, respondent Judge either deliberately disregarded P.D. No. 42 or was totally
unaware of its existence and the cases applying the same.

In any event, petitioner deposited the provisional value fixed by the court. As a matter of right, it was
entitled to be placed in possession of the property involved in the complaints at once, pursuant to
both Section 2 of Rule 67 and P.D. No. 42. Respondent Court had the corresponding duty to order
the sheriff or any other proper officer to forthwith place the petitioner in such possession. Instead of
complying with the clear mandate of the law, respondent Judge chose to ignore and overlook it.
Moreover, upon separate motions for reconsideration filed by the defendants in Civil Cases Nos.
5938 and 5939, he issued a new Order increasing the provisional values of the properties involved
therein. No hearing was held on the motions. As a matter of fact, as the records show, the motion for
reconsideration filed by defendants Jesus Gonzaga, et al. in Civil Case No. 5938 is dated 11 July
1990 48 while the Order granting both motions was issued the next day, 12 July 1990. 49 The motion
for reconsideration in Civil Case No. 5938 does not even contain a notice of hearing. It is then a mere
scrap of paper; it presents no question which merits the attention and consideration of the court. It is
not even a mere motion for it does not comply with the rules, more particularly Sections 4 and 5, Rule
15 of the Rules of Court; the Clerk of Court then had no right to receive it. 50

There was, moreover, a much stronger reason why the respondent Court should not have issued the
12 July 1990 Order increasing the provisional values of the Gonzaga lots in Civil Cases Nos. 5938
and 5939. After having fixed these provisional values, albeit erroneously, and upon deposit by
petitioner of the said amounts, respondent Judge lost, as was held in Manila Railroad Company
vs. Paredes, 51 "plenary control over the order fixing the amount of the deposit, and has no power to
annul, amend or modify it in matters of substance pending the course of the condemnation
proceedings." The reason for this is that a contrary ruling would defeat the very purpose of the law
which is to provide a speedy and summary procedure whereby the peaceable possession of the
property subject of the expropriation proceedings "may be secured without the delays incident to
prolonged and vexatious litigation touching the ownership and value of such lands, which should not
be permitted to delay the progress of the work."

Compounding the above error and the capriciousness with which it was committed is respondent
Judge's refusal to place the petitioner in possession of the property or issue the writ of possession
despite the fact that the latter had likewise deposited the additional amount called for by the 12 July
1990 Order. Instead, respondent Judge issued the 16 July 1990 Order directing the defendants to
state in writing within twenty-four (24) hours whether or not they would accept and withdraw the
amounts deposited by the petitioner for each of them " as final and full satisfaction of the value of their
respective property (sic) affected by the expropriation" and stating at the same time that the writ will
be issued after such manifestation and acceptance and receipt of the amounts.
The above Order has absolutely no legal basis even as it also unjustly, oppressively and capriciously
compels the petitioner to accept the respondent Judge's determination of the provisional value as the
just compensation after the defendants shall have manifested their conformity thereto. He thus
subordinated his own judgment to that of the defendants' because he made the latter the final
authority to determine such just compensation. This Court ruled in Export Processing Zone Authority
vs. Dulay, et al. 52 that the determination of just compensation in eminent domain cases is a judicial
function; accordingly, We declared as unconstitutional and void, for being, inter alia, impermissible
encroachment on judicial prerogatives which tends to render the Court inutile in a matter which, under
the Constitution, is reserved to it for final determination, the method of ascertaining just compensation
prescribed in P.D. Nos. 76 464, 794 and 1533, to wit: the market value as declared by the owner or
administrator or such market value as determined by the assessor, whichever is lower in the first
three (3) decrees, and the value declared by the owner or administrator or anyone having legal
interest in the property or the value as determined by the assessor, pursuant to the Real Property Tax
Code, whichever is lower, prior to the recommendation or decision of the appropriate Government
office to acquire the property, in the last mentioned decree. If the legislature or the executive
department cannot even impose upon the court how just compensation should be determined, it
would be far more objectionable and impermissible for respondent Judge to grant the defendants in
an eminent domain case such power and authority.

Without perhaps intending it to be so, there is not only a clear case of abdication of judicial
prerogative, but also a complete disregard by respondent Judge of the provisions of Rule 67 as to the
procedure to be followed after the petitioner has deposited the provisional value of the property. It
must be recalled that three (3) sets of defendants filed motions to dismiss 53 pursuant to Section 3,
Rule 67 of the Rules of Court; Section 4 of the same rule provides that the court must rule on them
and in the event that it overrules the motions or, when any party fails to present a defense as required
in Section 3, it should enter an order of condemnation declaring that the petitioner has a lawful right to
take the property sought to be condemned.

As may be gleaned from the 25 June 1990 Order, the respondent Judge found that the petitioner has
that right and that "there will be a (sic) paramount public interest to be served by the expropriation of
the defendants' properties." Accordingly, considering that the parties submitted neither a compromise
agreement as to the just compensation nor a stipulation to dispense with the appointment of
commissioners and to leave the determination of just compensation to the court on the basis of
certain criteria, respondent Judge was duty bound to set in motion Section 5 of Rule 67; said section
directs the court to appoint not more than three (3) competent and disinterested persons as
commissioners to ascertain and report to it regarding the just compensation for the property sought to
be taken. Such commissioners shall perform their duties in the manner provided for in Section 6;
upon the filing of their report, the court may, after a period of ten (10) days which it must grant to the
parties in order that the latter may file their objections to such report, and after hearing pursuant to
Section 8, accept and render judgment in accordance therewith or, for cause shown, recommit the
same to the commissioners for further report of facts. The court may also set aside the report and
appoint new commissioners, or it may accept the report in part and reject it in part; and it may make
such order or render such judgment as shall secure to the petitioner the property essential to the
exercise of its right of condemnation, and to the defendant just compensation for the property so
taken.

Not satisfied with the foregoing violations of law and insisting upon his own procedure, respondent
Judge declared in his Order of 18 July 1990 that the provisional amounts he fixed, later increased
with respect to the properties of the Gonzagas, shall be considered as the full payment of the value of
the properties after the defendants in Civil Cases Nos. 5938, 5939, 5940, 5942 and 5943 shall have
filed their manifestations; he also ruled that the writ of possession will be issued only after the latter
shall have received the said amounts. This Order and the records before this Court do not disclose
that the defendants in Civil Cases Nos. 5941 and 5944 filed any manifestation; yet, in the Order,
respondent Judge whimsically and arbitrarily considered the so-called provisional values fixed therein
as the final values. By such Order, the case was in fact terminated and the writ of execution then
became a mere incident of an execution of a judgment. The right of the petitioner to take or enter into
possession of the property upon the filing of the complaint granted by Section 2 of Rule 67 and P.D.
No. 42 was totally negated despite compliance with the deposit requirement under the latter law.

Nothing can justify the acts of respondent Judge. Either by design or sheer ignorance, he made a
mockery of the procedural law on eminent domain by concocting a procedure which he believes to be
correct. Judges must apply the law; they are not at liberty to legislate. As Canon 18 of the Canon of
Judicial Ethics provides:

A judge should be mindful that his duty his the application of general law to particular
instances, that ours is a government of law and not of men, and that he violates his duty
as a minister of justice under such a system if he seeks to do what he may personally
consider substantial justice in a particular case and disregards the general law as he
knows it to be binding on him. Such action may become a precedent unsettling
accepted principles and may have detrimental consequences beyond the immediate
controversy. He should administer his office with a due regard to the integrity of the
system of the law itself, remembering that he is not a depositary of arbitrary power, but
a judge under the sanction of law.

They must be reminded once more that "the demands of fair, impartial, and wise administration of
justice call for a faithful adherence to legal precepts on procedure which ensure to litigants the
opportunity to present their evidence and secure a ruling on all the issues presented in their
respective pleadings. "Short-cuts" in judicial processes are to be avoided where they impede rather
than promote a judicious disposition of justice." 54

We agree with the petitioner that the ruling in the case of City Government of Toledo City
vs. Fernandos, et al., 55does not apply to the instant petition because at the pre-trial conference held
therein, the petitioner submitted to the discretion of the court as to the correct valuation, private
respondents stated that they have no objections and are in conformity with the price of P30.00 per
square meter as reasonable compensation for their land and the City Assessor informed the court of
the current market and appraisal values of the properties in the area and the factors to be considered
in the determination of such. The parties presented their documentary exhibits. In effect, therefore,
the parties themselves agreed to submit to a judicial determination on the matter of just compensation
and that judgment be rendered based thereon. In the instant case, no pre-trial was conducted; the
proceedings were still at that state where the provisional value was yet to be determined; and the
parties made no agreement on just compensation.

WHEREFORE, the instant petition is GRANTED and the Orders of respondent Judge of 25 June
1990, 12 July 1990, 16 July 1990 and 18 July 1990 are hereby SET ASIDE and the temporary
restraining order issued by this Court on 31 July 1990 directing respondent Judge to cease and desist
from enforcing the questioned Orders is hereby made permanent.

The respondent Judge is hereby directed to fix the provisional values of the parcels of land in Civil
Cases Nos. 5938, 5939, 5940, 5941, 5942, 5943, and 5944 in accordance with P.D. No. 42;
thereafter, the petitioner may retain in Savings Account No. 249-505865-7 with the Philippine National
Bank, NAPOCOR Branch, Diliman, Quezon City, a sum equivalent to the provisional value as thus
fixed, which the Bank shall hold subject to the orders and final disposition of the court a quo, and
withdraw the balance.
The respondent Judge is further directed to proceed with the above eminent domain cases without
unnecessary delay pursuant to the procedure laid down in Rule 67 of the Rules of Court.

Finally, respondent Judge is reminded to comply faithfully with the procedure provided for in the
Rules of Court. Let a copy of this Decision be appended to his record.

Costs against private respondents.

IT IS SO ORDERED.

DIGEST:

FACTS: The petitioner files a special civil action for certiorari to annul the order issued by respondent judge in
violation of deprivation of the right of the petitioner for
due process. The petitioner filed 7 eminent domain cases in theacquisition of right of way easement over 7 parcels of
land in relation to the necessity of building towers and transmission line for the common good with the offer of corresponding
compensation to landowners affected with the expropriation process. However, both parties did not come to an
agreement on just compensation thereby prompting petitioner to bring theeminent domain case. Respondent judge
found existing paramount public interest for the expropriation and therebyissued an order determining the
provisional market value of the subject areas based on tax declaration of the properties.
The petitioner, incompliance to the order of respondent judge,deposited corresponding amount of the assessed value
of said lands in the amount of P23,180,828.00 with the
Philippine National Bank. Respondents land owners filed motion forreconsideration asserting that the assessed
value is way too low and that just compensation due them is estimated as P29,970,000.00. Immediately the following day,
respondent judge increased the provisional value to that stated in the motion for reconsideration and ordered
petitioner to deposit the differential amount within 24 hours from receipt of order while holding in abeyance the
writ of possession order pending compliance to said order which the petitioner immediately complied. Thereafter,
respondent judge ordered petitioner to pay in full amount the defendants for their expropriated property.
Petitioner assailed such order to be in violation of due process and abuse of discretion on the part of
the respondent judge hence this petition. Issue: W/N the respondent judge acted in grave abuse of discretion and whether or
not the petitioner was deprived of due process of law.

HELD: The court ruled that PD No. 42 provides that upon filing in court complaints on eminent domain proceeding and after
due notice to the defendants, plaintiff will have the right to take possession of the real property upon deposit of the
amount of the assessed value with PNB to be held by the bank subject to orders and final disposition of the
court. The respondent judge failed to observe this procedure by failure to issue the writ of possession to the petitioner
despite its effort to deposit the amount in compliance to the mandate of law. Furthermore, the respondent judge erred in
increasing the provisional value of properties without holding any hearing for both parties. The instant petition
was granted by the court setting aside the temporary restraining order and directing respondent judge to
cease and desist from enforcing his orders. There are 2stages in the action of expropriation:1. Determination of
the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise in the context of the
facts involved in the suit.2. Eminent domain action is concerned with the determination by the Court of the "just compensation for
the property sought to be taken." This is done by the Court with the assistance of not more than three
(3)commissioners whose findings are deemed to be final.

5. JOSE MA. ANSALDO, for himself and as attorney-in-fact of Maria Angela

Ansaldo, petitioners
vs.
FRANCISCO S. TANTUICO, JR., Acting Chairman, Commission on Audit, and BALTAZAR
AQUINO, Minister of Public Highways, respondents.

Misa&LozadaBito for petitioners.

NARVASA, J.:

This expropriation case is quite unique. Two lots of private ownership were taken by the Government
and used for the widening of a road more than forty-three years ago, without benefit of an action of
eminent domain or agreement with its owners, albeit without protest by the latter.

The lots belong to the petitioners, Jose Ma. Ansaldo and Maria Angela Ansaldo, are covered by title
in their names 1and have an aggregate area of 1,041 square meters. These lots were taken from the
Ansaldos sometime in 1947 by the Department of Public Work Transportation and Communication
and made part of what used to be Sta. Mesa Street and is now Ramon Magsaysay Avenue at San
Juan, Metro Manila. This, to repeat, without demur on the part of the owners.

Said owners made no move whatever until twenty-six years later. They wrote to ask for compensation
for their land on January 22, 1973. 2 Their claim was referred to the Secretary of Justice who in due
course rendered an opinion dated February 22, 1973, 3 that just compensation should be paid in
accordance with Presidential Decree No. 76. 4The Decree provided that the basis for the payment of
just compensation of property taken for public use should be the current and fair market value thereof
as declared by the owner or administrator, or such market value as determined by the assessor,
whichever was lower. 5 The Secretary of Justice thus advised that the corresponding expropriation
suit be forthwith instituted to fix the just compensation to be paid to the Ansaldos.

Pursuant to this opinion, the Commissioner of Public Highways requested the Provincial Assessor of
Rizal to make a redetermination of the market value of the Ansaldos' property in accordance with PD
76. 6 The new valuation was made, after which the Auditor of the Bureau of Public Highways
forwarded the Ansaldos' claim to the Auditor General with the recommendation that payment be
made on the basis of the "current and fair market value, . . . and not on the fair market value at the
time of taking. 7

The Commission on Audit, however, declined to adopt the recommendation. In a decision handed
down on September 26, 1973, the Acting Chairman ruled that "the amount of compensation to be
paid to the claimants is to be determined as of the time of the taking of the subject lots, 8 i.e. 1947.
The ruling was reiterated by the Commission on September 8, 1978, and again on January 25, 1979
when it denied the Ansaldos' motion for reconsideration. 9 It is these rulings of the Commission on
Audit that the Ansaldos have appealed to this Court.

While not decisive of this case, it may be stressed that the provisions of Presidential Decree No. 76
and its related or successor decrees (Numbered 464, 794 and 1533) no longer determine the just
compensation payable to owners of expropriated property. Said provisions were, it may be recalled,
struck down as unconstitutional and void in 1988, in Export Processing Zone Authority
v. Dulay, 10 which declared that the mode therein prescribed for determining just compensation, i. e.,
on the basis of the value declared by the owner or administrator or on that determined by the
assessor, whichever is lower, constituted an impermissible encroachment on the judicial prerogative
to resolve the issue in an appropriate proceeding of eminent domain.

Now, nothing in the record even remotely suggests that the land was taken from the Ansaldos against
their will. Indeed, all indications, not the least of which is their silence for more than two decades, are
that they consented to such a taking although they knew that no expropriation case had been
commenced at all. There is therefore no reason, as regards the Ansaldos' property, to impugn the
existence of the power to expropriate, or the public purpose for which that power was exercised.
The sole question thus confronting the Court involves the precise time at which just compensation
should be fixed, whether as of the time of actual taking of possession by the expropriating entity or,
as the Ansaldos maintain, only after conveyance of title to the expropriator pursuant to expropriation
proceedings duly instituted since it is only at such a time that the constitutional requirements of due
process aside from those of just compensation may be fully met.

Normally, of course, where the institution of an expropriation action precedes the taking of the
property subject thereof, the just compensation is fixed as of the time of the filing of the complaint.
This is so provided by the Rules of Court, 11 the assumption of possession by the expropriator
ordinarily being conditioned on its deposits with the National or Provincial Treasurer of the value of
the property as provisionally ascertained by the court having jurisdiction of the proceedings.

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

In the context of the State's inherent power of eminent domain, there is a "taking" when the owner is
actually deprived or dispossessed of his property; when there is a practical destruction or a material
impairment of the value of his property or when he is deprived of the ordinary use thereof. 12 There is
a "taking" in this sense when the expropriator enters private property not only for a momentary period
but for a more permanent duration, for the purpose of devoting the property to a public use in such a
manner as to oust the owner and deprive him of all beneficial enjoyment thereof. 13 For ownership,
after all, "is nothing without the inherent rights of possession, control and enjoyment. Where the
owner is deprived of the ordinary and beneficial use of his property or of its value by its being diverted
to public use, there is taking within the Constitutional sense. 14 Under these norms, there was
undoubtedly a taking of the Ansaldos' property when the Government obtained possession thereof
and converted it into a part of a thoroughfare for public use.

It is as of the time of such a taking, to repeat, that the just compensation for the property is to be
established. As stated in Republic v. Philippine National Bank, 15

. . . (W)hen plaintiff takes possession before the institution of the condemnation

proceedings, the value should be fixed as of the time of the taking of said possession,
not of filing of the complaint and the latter should be the basis for the determination of
the value, when the taking of the property involved coincides with or is subsequent to,
the commencement of the proceedings. Indeed, otherwise, the provision of Rule 69,
Section 3, directing that compensation be determined as of the date of the filing of the
complaint' would never be operative. As intimated in Republic v. Lara (supra), said
provision contemplates normal circumstances, under which the complaint coincides or
even precedes the taking of the property by the plaintiff.

The reason for the rule, as pointed out in Rpublic v. Larae, 16 is that —

. . . (W)here property is taken ahead of the filing of the condemnation proceedings, the
value thereof may be enchanced by the public purpose for which it is taken; the entry by
the plaintiff upon the property may have depreciated its value thereby; or, there may
have been a natural increase in the value of the property from the time the complaint is
filed, due to general economic conditions. The owner of private property should
be compensated only for what he actually loses; it is not intended that his
compensation shall extend beyond his loss or injury. And what he loses is only
 the actual value of his property at the time it is taken. This is the only way that
compensation to be paid can be truly just i.e.,"just; not only to the individual whose
property is taken but, to the public, which is to pay for it.

Clearly, then, the value of the Ansaldos' property must be ascertained as of the year 1947, when it
was actually taken, and not at the time of the filing of the expropriation suit, which, by the way, still
has to be done. It is as of that time that the real measure of their loss may fairly be adjudged. The
value, once fixed, shall earn interest at the legal rate until full payment is effected, conformably with
other principles laid down by case law. 17

WHEREFORE, the petition is DENIED, the challenged decision of the Commission on Audit is
AFFIRMED, and the Department of Public Works and Highways is DIRECTED to forthwith institute
the appropriate expropriation action over the land in question so that the just compensation due its
owners may be determined in accordance with the Rules of Court, with interest at the legal rate of six
percent (6%) per annum from the time of taking until full payment is made. No costs.

SO ORDERED.

Cruz, Gancayco, Griño-Aquino and Medialdea, JJ., concur.

DIGEST:

FACTS: Two lots of private ownership were taken by the Government and used for the widening of a road more than forty-three
years ago, without benefit of an action of eminent domain or agreement with its owners, albeit without protest by the latter. The lots
belong to the petitioners, Jose Ma. Ansaldo and Maria Angela Ansaldo, are covered by title in their names and have an
aggregate area of 1,041 square meters. These lots were taken from the Ansaldos sometime in 1947 by the Department of Public
Work Transportation and Communication and made part of what used to be Sta. Mesa Street and is now Ramon Magsaysay
Avenue at San Juan, Metro Manila. Said owners made no move whatever until twenty-six years later. They wrote to ask
for compensation for their land on January 22, 1973.

Their claim was referred to the Secretary of Justice who in due course rendered an opinion dated February 22, 1973, that just
compensation should be paid in accordance with Presidential Decree No. 76.The Commission on Audit, however, declined to
adopt the recommendation. In a decision handed down on September 26, 1973. The Acting Chairman ruled that "the amount of
compensation to be paid to the claimants is to be determined as of the time of the taking of the subject lots.

ISSUE: whether or not just compensation should be fixed as of the time of actual taking of possession by the expropriating entity
or only after conveyance of title to the expropriator pursuant to expropriation proceedings duly instituted
HELD: In the context of the State's inherent power of eminent domain, there is a "taking" when the owner is actually deprived or
dispossessed of his property; when there is a practical destruction or a material impairment of the value of his property or when he
is deprived of the ordinary use thereof. There is a "taking" in this sense when the expropriator enters private property not only for a
momentary period but for a more permanent duration, for the purpose of devoting the property to a public use in such a manner as
to oust the owner and deprive him of all beneficial enjoyment thereof. Clearly, then, the value of the Ansaldos' property must be
ascertained as of the year 1947, when it was actually taken, and not at the time of the filing of the expropriation suit, which, by the
way, still has to be done. The value, once fixed, shall earn interest at the legal rate until full payment is effected, conformably with
other principles laid down by case law.

6. MUNICIPALITY OF MAKATI, petitioner,

vs.
THE HONORABLE COURT OF APPEALS, HON. SALVADOR P. DE GUZMAN, JR., as
 Judge RTC of Makati, Branch CXLII ADMIRAL FINANCE CREDITORS CONSORTIUM,
INC., and SHERIFF SILVINO R. PASTRANA, respondents.

Defante&Elegado for petitioner.

Roberto B. Lugue for private respondent Admiral Finance Creditors' Consortium, Inc.

RESOLUTION

CORTÉS, J.:

The present petition for review is an off-shoot of expropriation proceedings initiated by petitioner
Municipality of Makati against private respondent Admiral Finance Creditors Consortium, Inc., Home
Building System & Realty Corporation and one Arceli P. Jo, involving a parcel of land and
improvements thereon located at Mayapis St., San Antonio Village, Makati and registered in the
name of Arceli P. Jo under TCT No. S-5499.

It appears that the action for eminent domain was filed on May 20, 1986, docketed as Civil Case No.
13699. Attached to petitioner's complaint was a certification that a bank account (Account No. S/A
265-537154-3) had been opened with the PNB Buendia Branch under petitioner's name containing
the sum of P417,510.00, made pursuant to the provisions of Pres. Decree No. 42. After due hearing
where the parties presented their respective appraisal reports regarding the value of the property,
respondent RTC judge rendered a decision on June 4, 1987, fixing the appraised value of the
property at P5,291,666.00, and ordering petitioner to pay this amount minus the advanced payment
of P338,160.00 which was earlier released to private respondent.

After this decision became final and executory, private respondent moved for the issuance of a writ of
execution. This motion was granted by respondent RTC judge. After issuance of the writ of execution,
a Notice of Garnishment dated January 14, 1988 was served by respondent sheriff Silvino R.
Pastrana upon the manager of the PNB Buendia Branch. However, respondent sheriff was informed
that a "hold code" was placed on the account of petitioner. As a result of this, private respondent filed
a motion dated January 27, 1988 praying that an order be issued directing the bank to deliver to
respondent sheriff the amount equivalent to the unpaid balance due under the RTC decision dated
June 4, 1987.

Petitioner filed a motion to lift the garnishment, on the ground that the manner of payment of the
expropriation amount should be done in installments which the respondent RTC judge failed to state
in his decision. Private respondent filed its opposition to the motion.

Pending resolution of the above motions, petitioner filed on July 20, 1988 a "Manifestation" informing
the court that private respondent was no longer the true and lawful owner of the subject property
because a new title over the property had been registered in the name of Philippine Savings Bank,
Inc. (PSB) Respondent RTC judge issued an order requiring PSB to make available the documents
pertaining to its transactions over the subject property, and the PNB Buendia Branch to reveal the
amount in petitioner's account which was garnished by respondent sheriff. In compliance with this
order, PSB filed a manifestation informing the court that it had consolidated its ownership over the
property as mortgagee/purchaser at an extrajudicial foreclosure sale held on April 20, 1987. After
several conferences, PSB and private respondent entered into a compromise agreement whereby
they agreed to divide between themselves the compensation due from the expropriation proceedings.
Respondent trial judge subsequently issued an order dated September 8, 1988 which: (1) approved
the compromise agreement; (2) ordered PNB Buendia Branch to immediately release to PSB the sum
of P4,953,506.45 which corresponds to the balance of the appraised value of the subject property
under the RTC decision dated June 4, 1987, from the garnished account of petitioner; and, (3)
ordered PSB and private respondent to execute the necessary deed of conveyance over the subject
property in favor of petitioner. Petitioner's motion to lift the garnishment was denied.

Petitioner filed a motion for reconsideration, which was duly opposed by private respondent. On the
other hand, for failure of the manager of the PNB Buendia Branch to comply with the order dated
September 8, 1988, private respondent filed two succeeding motions to require the bank manager to
show cause why he should not be held in contempt of court. During the hearings conducted for the
above motions, the general manager of the PNB Buendia Branch, a Mr. Antonio Bautista, informed
the court that he was still waiting for proper authorization from the PNB head office enabling him to
make a disbursement for the amount so ordered. For its part, petitioner contended that its funds at
the PNB Buendia Branch could neither be garnished nor levied upon execution, for to do so would
result in the disbursement of public funds without the proper appropriation required under the law,
citing the case of Republic of the Philippines v. Palacio [G.R. No. L-20322, May 29, 1968, 23 SCRA
899].

Respondent trial judge issued an order dated December 21, 1988 denying petitioner's motion for
reconsideration on the ground that the doctrine enunciated in Republic v. Palacio did not apply to the
case because petitioner's PNB Account No. S/A 265-537154-3 was an account specifically opened
for the expropriation proceedings of the subject property pursuant to Pres. Decree No. 42.
Respondent RTC judge likewise declared Mr. Antonio Bautista guilty of contempt of court for his
inexcusable refusal to obey the order dated September 8, 1988, and thus ordered his arrest and
detention until his compliance with the said order.

Petitioner and the bank manager of PNB Buendia Branch then filed separate petitions
for certiorari with the Court of Appeals, which were eventually consolidated. In a decision
promulgated on June 28, 1989, the Court of Appeals dismissed both petitions for lack of merit,
sustained the jurisdiction of respondent RTC judge over the funds contained in petitioner's PNB
Account No. 265-537154-3, and affirmed his authority to levy on such funds.

Its motion for reconsideration having been denied by the Court of Appeals, petitioner now files the
present petition for review with prayer for preliminary injunction.

On November 20, 1989, the Court resolved to issue a temporary restraining order enjoining
respondent RTC judge, respondent sheriff, and their representatives, from enforcing and/or carrying
out the RTC order dated December 21, 1988 and the writ of garnishment issued pursuant thereto.
Private respondent then filed its comment to the petition, while petitioner filed its reply.

Petitioner not only reiterates the arguments adduced in its petition before the Court of Appeals, but
also alleges for the first time that it has actually two accounts with the PNB Buendia Branch, to wit:

xxx xxxxxx

(1) Account No. S/A 265-537154-3 — exclusively for the expropriation of the subject
property, with an outstanding balance of P99,743.94.

(2) Account No. S/A 263-530850-7 — for statutory obligations and other purposes of the
municipal government, with a balance of P170,098,421.72, as of July 12, 1989.
 xxx xxxxxx

[Petition, pp. 6-7; Rollo, pp. 11-12.]

Because the petitioner has belatedly alleged only in this Court the existence of two bank accounts, it
may fairly be asked whether the second account was opened only for the purpose of undermining the
legal basis of the assailed orders of respondent RTC judge and the decision of the Court of Appeals,
and strengthening its reliance on the doctrine that public funds are exempted from garnishment or
execution as enunciated in Republic v. Palacio [supra.] At any rate, the Court will give petitioner the
benefit of the doubt, and proceed to resolve the principal issues presented based on the factual
circumstances thus alleged by petitioner.

Admitting that its PNB Account No. S/A 265-537154-3 was specifically opened for expropriation
proceedings it had initiated over the subject property, petitioner poses no objection to the
garnishment or the levy under execution of the funds deposited therein amounting to P99,743.94.
However, it is petitioner's main contention that inasmuch as the assailed orders of respondent RTC
judge involved the net amount of P4,965,506.45, the funds garnished by respondent sheriff in excess
of P99,743.94, which are public funds earmarked for the municipal government's other statutory
obligations, are exempted from execution without the proper appropriation required under the law.

There is merit in this contention. The funds deposited in the second PNB Account No. S/A 263-
530850-7 are public funds of the municipal government. In this jurisdiction, well-settled is the rule that
public funds are not subject to levy and execution, unless otherwise provided for by statute [Republic
v. Palacio, supra.; The Commissioner of Public Highways v. San Diego, G.R. No. L-30098, February
18, 1970, 31 SCRA 616]. More particularly, the properties of a municipality, whether real or personal,
which are necessary for public use cannot be attached and sold at execution sale to satisfy a money
judgment against the municipality. Municipal revenues derived from taxes, licenses and market fees,
and which are intended primarily and exclusively for the purpose of financing the governmental
activities and functions of the municipality, are exempt from execution [See Viuda De Tan Toco v.
The Municipal Council of Iloilo, 49 Phil. 52 (1926): The Municipality of Paoay, IlocosNorte v. Manaois,
86 Phil. 629 (1950); Municipality of San Miguel, Bulacan v. Fernandez, G.R. No. 61744, June 25,
1984, 130 SCRA 56]. The foregoing rule finds application in the case at bar. Absent a showing that
the municipal council of Makati has passed an ordinance appropriating from its public funds an
amount corresponding to the balance due under the RTC decision dated June 4, 1987, less the sum
of P99,743.94 deposited in Account No. S/A 265-537154-3, no levy under execution may be validly
effected on the public funds of petitioner deposited in Account No. S/A 263-530850-7.

Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse.
Where a municipality fails or refuses, without justifiable reason, to effect payment of a final money
judgment rendered against it, the claimant may avail of the remedy of mandamus in order to compel
the enactment and approval of the necessary appropriation ordinance, and the corresponding
disbursement of municipal funds therefor [See Viuda De Tan Toco v. The Municipal Council of
Iloilo, supra; Baldivia v. Lota, 107 Phil. 1099 (1960); Yuviengco v. Gonzales, 108 Phil. 247 (1960)].

In the case at bar, the validity of the RTC decision dated June 4, 1987 is not disputed by petitioner.
No appeal was taken therefrom. For three years now, petitioner has enjoyed possession and use of
the subject property notwithstanding its inexcusable failure to comply with its legal obligation to pay
just compensation. Petitioner has benefited from its possession of the property since the same has
been the site of Makati West High School since the school year 1986-1987. This Court will not
condone petitioner's blatant refusal to settle its legal obligation arising from expropriation proceedings
it had in fact initiated. It cannot be over-emphasized that, within the context of the State's inherent
power of eminent domain,
 . . . [j]ust compensation means not only the correct determination of the amount to be
paid to the owner of the land but also the payment of the land within a reasonable time
from its taking. Without prompt payment, compensation cannot be considered "just" for
the property owner is made to suffer the consequence of being immediately deprived of
his land while being made to wait for a decade or more before actually receiving the
amount necessary to cope with his loss [Cosculluela v. The Honorable Court of
Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393, 400. See also Provincial
Government of Sorsogon v. Vda. de Villaroya, G.R. No. 64037, August 27, 1987, 153
SCRA 291].

The State's power of eminent domain should be exercised within the bounds of fair play and justice.
In the case at bar, considering that valuable property has been taken, the compensation to be paid
fixed and the municipality is in full possession and utilizing the property for public purpose, for three
(3) years, the Court finds that the municipality has had more than reasonable time to pay full
compensation.

WHEREFORE, the Court Resolved to ORDER petitioner Municipality of Makati to immediately pay
Philippine Savings Bank, Inc. and private respondent the amount of P4,953,506.45. Petitioner is
hereby required to submit to this Court a report of its compliance with the foregoing order within a
non-extendible period of SIXTY (60) DAYS from the date of receipt of this resolution.

The order of respondent RTC judge dated December 21, 1988, which was rendered in Civil Case No.
13699, is SET ASIDE and the temporary restraining order issued by the Court on November 20, 1989
is MADE PERMANENT.

SO ORDERED.

DIGEST:

FACTS: Petitioner Municipality of Makati expropriated a portion of land owned by private respondent Admiral
Finance Creditors Consortium, Inc. After hearing, the RTC fixed the appraised value of the property at
P5,291,666.00, and ordered petitioner to pay this amount minus the advanced payment of P338,160.00 which
was earlier released to private respondent. It then issued the corresponding writ of execution accompanied
with a writ of garnishment of funds of the petitioner which was deposited in PNB. Petitioner filed a motion for
reconsideration, contending that its funds at the PNB could neither be garnished nor levied upon execution, for
to do so would result in the disbursement of public funds without the proper appropriation required under the
law. The RTC denied the motion. CA affirmed; hence, petitioner filed a petition for review before the SC.

ISSUE:
1. Are the funds of the Municipality of Makati exempt from garnishment and levy upon execution?
2. If so, what then is the remedy of the private respondents?

HELD:

1. Yes. In this jurisdiction, well-settled is the rule that public funds are not subject to levy and execution, unless
otherwise provided for by statute. More particularly, the properties of a municipality, whether real or personal,
which are necessary for public use cannot be attached and sold at execution sale to satisfy a money judgment
against the municipality. Municipal revenues derived from taxes, licenses and market fees, and which are
intended primarily and exclusively for the purpose of financing the governmental activities and functions of the
municipality, are exempt from execution. Absent a showing that the municipal council of Makati has passed an
ordinance appropriating from its public funds an amount corresponding to the balance due under the RTC
decision, no levy under execution may be validly effected on the public funds of petitioner.

2. Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse. Where a
municipality fails or refuses, without justifiable reason, to effect payment of a final money judgment rendered
against it, the claimant may avail of the remedy of mandamus in order to compel the enactment and approval
of the necessary appropriation ordinance, and the corresponding disbursement of municipal funds therefor.

For three years now, petitioner has enjoyed possession and use of the subject property notwithstanding its
inexcusable failure to comply with its legal obligation to pay just compensation. Petitioner has benefited from its
possession of the property since the same has been the site of Makati West High School since the school year
1986-1987. This Court will not condone petitioner's blatant refusal to settle its legal obligation arising from
expropriation proceedings it had in fact initiated. The State's power of eminent domain should be exercised
within the bounds of fair play and justice. (Municipality of Makati vs. CA, G.R. Nos. 89898-99, October 1, 1990)

7. REPUBLIC OF THE PHILIPPINES (Ministry of Education and Culture), petitioner,

vs.
INTERMEDIATE APPELLATE COURT and AMEREX ELECTRONICS, PHILS.
CORPORATION, respondents.

Siguion Reyna, Montecillo and Ongsiako for private respondents.

FERNAN, C.J.:

The government, in the exercise of its power of eminent domain, expropriated property owned by
Amerex Electronics, Phils. Corporation. The amount of just compensation for such property is now
the subject of this petition for review on certiorari.

The property involved consists of four (4) parcels of land with a total area of 9,650 square meters
located at No. 2090 Dr. Manuel L. Carreon Street, Manila, a short walking distance from Herran (now
Pedro Gil) Street. Its previous owner, Avegon Inc., offered it for sale to the City School Board of
Manila on July 21, 1973 at P2,300,000. The school board was willing to buy at P1,800,000 but the
then Mayor of Manila intervened and volunteered to negotiate with Avegon Inc. for a better price.

Inasmuch as the alleged negotiation did not materialize, on June 3, 1974, Avegon Inc. sold the
property and its improvements to Amerex Electronics, Phils. Corporation (Amerex for brevity) for
P1,800,000. Thereafter, Transfer Certificates of Title Nos. 115571, 115572, 115573 and 115574 were
issued in favor of Amerex.

On August 29, 1975, the Solicitor General filed for the Department of Education and Culture (DEC) a
complaint against Amerex for the expropriation of said property before the Court of First Instance of
Manila (Civil Case No. 99190). The complaint stated that the property was needed by the government
as a permanent site for the Manuel de la Fuente High School (later renamed Don Mariano Marcos
Memorial High School); that the fair market value of the property had been declared by Amerex as
P2,435,000, and that the assessor had determined its market value as P2,432,042 and assessed it
for taxation purposes in the amount of P1,303,470.1

In a motion praying that the plaintiff be authorized to take immediate possession of the property, the
then Acting Solicitor General Hugo E. Gutierrez, Jr., invoking Presidential Decree No. 42, informed
the court that said assessed value of the property for taxation purposes had been deposited with the
Philippine National Bank (PNB) in Escolta, Manila on September 30, 1975.
Consequently, on October 9, 1975, the court issued an order directing the sheriff to place the plaintiff
in possession of the property. The plaintiff took actual possession thereof on October 13, 1975.

Amerex filed a motion to dismiss the complaint stating that while it was not contesting the merits of
the complaint, the same failed to categorically state the amount of just compensation for the property.
It therefore prayed that in consonance with P.D. No. 794, the just compensation be fixed at
P2,432,042, the market value of the property determined by the assessor which was lower than
Amerex's own declaration.

The motion to dismiss was opposed by the plaintiff reasoning that while indeed the market value as
determined by the assessor was lower than that declared by Amerex, the plaintiff intended to present
evidence of a much lower market value.

Alleging that its motion to dismiss merely sought a clarification on the just compensation for the
property, Amerex filed a motion to withdraw the plaintiffs deposit of P1,303,470 with the PNB without
prejudice to its entitlement to the amount of P1,128,572, the balance of the just compensation of
P2,432,042 insisted upon. The plaintiff interposed no objection to the motion provided that an order of
condemnation be issued by the court and that the plaintiff be allowed to present its evidence on the
matter of just compensation.

On December 3, 1975, the lower court issued an order vesting the plaintiff with the lawful light to take
the property upon payment of just compensation as provided by law. On December 19, 1975, after
the parties had submitted the names of their respective recommendees to the appraisal committee,
the lower court appointed Atty. Narciso Peña, Aurelio V. Aquino and Atty. HiginioSunico as
commissioners.

Thereafter, the lower court ordered Amerex to submit an audited financial statement on the
acquisition cost of the property including expenses for its improvement. Amerex was also allowed by
the court, after it had filed a second motion therefor, to withdraw the P1,303,470 deposit with the
PNB.

On March 12, 1976, the plaintiff filed a motion for leave of court to amend its complaint stating that
after it had filed the same, P.D. No. 464 2 was amended by P.D. No. 794; that Section 92 of said
Code, as amended, provided that when private property is acquired for public use, its just
compensation "shall not exceed the market value declared by the owner or administrator or anyone
having legal interest in the property, or such market value as determined by the assessor, whichever
is lower"; and that the amended complaint would state that the fair market value of the property could
not be in excess of P1,800,000, the amount for which defendant's predecessor-in-interest had offered
to sell said properties to the Division of Public Schools of Manila and which amount was also the
purchase price paid by Amerex to Avegon Inc. In due course, plaintiff filed an amended complaint.

Amerex, however, opposed the motion for leave to amend the complaint contending that the plaintiff
was insisting on a valuation given by neither the owner nor the assessor as mandated by P.D. No.
794 but by another person in August 1973 when the peso value was much higher.

The lower court denied the motion to amend the complaint; but after the plaintiff had filed a motion for
reconsideration, the lower court admitted the amended complaint on April 27, 1976. In the meantime,
Amerex submitted to the court "audited financial statements' consisting of an account stating that the
cost of its land and buildings was P2,107,479.48, and another account stating that it incurred total
expenses of P150,539 for their maintenance. 3 These statements yielded the amount of
P2,258,018.48 as the total value of the property.
The commissioners conducted an ocular inspection and hearing on the value of the property. On
October 18, 1976, the plaintiff filed a motion seeking the disqualification of Engineer Aurelio B. Aquino
as commissioner on the ground that he could not be expected to be unbiased inasmuch as in the
three appraisal reports submitted by Amerex, Aquino had indicated as fair market value of the
property amounts much more than the plaintiffs fair market value determination of P1,800,000. Said
appraisal reports were made by Ampil Realty and Appraisal Co., Inc. with Aquino signing thereon as
real estate appraiser. One report, dated February 15, 1974 and submitted to Commonwealth
Insurance Company indicated P2,100,000 as the fair market value of the property. 4 Two other
reports were made at the behest of Amerex with one, dated November 15, 1974, fixing the fair market
value at P2,300,000 5, and the other, dated June 5, 1975, with P2,400,000 as the fair market value. 6

Amerex opposed the motion to disqualify Aquino as commissioner, and the court, in its order of
November 5, 1976, denied it. Hence, on January 24, 1977, the commissioners submitted their
appraisal report finding that the fair market value of the property was P2,763,400. The
commissioners, however added:

Under the provision of Presidential Decree No. 464, as amended by Presidential Decree
No. 794, abovequoted, we could have safely adopted the valuation of the City Assessor
in the sum of P2,432,042.00, this being lower than that declared by the owner in the
sum of P2,435,000.00, although by actual appraisal of the undersigned Commissioners
the property could command a fair market value of P2,763,400.00 as of the date of our
ocular inspection.

Considering, however, that according to the audited statement submitted by defendant,

the acquisition costs and other legal expenses incurred on the subject property by
AMEREX, the grand total of P2,258,018.57, are (sic) lower than the findings of the
undersigned Commissioners, the explanation being the fact that the price of the sale
was a real bargain possibly due to dire necessities of the seller Avegon, it is respectfully
submitted that the said sum of P2,258,018.57 be adopted for purposes of determining
just compensation payable to defendant AMEREX, which sum does not exceed, but is
even lower than, the fair market value was determined by the City Assessor and as
declared by said defendant. 7

Both parties objected to the report of the commissioners. The plaintiff contended that the
commissioners' conclusion that the fair market value of the property was P2,763,400 was
unsupported by evidence and that their recommended just compensation of P2,258,018.57 was
excessive. It reiterated its stand that the just compensation should only be P1,800,000 it being the
price had the sale between the city school board and Avegon Inc. materialized and also the actual
price of the sale between Avegon Inc. and Amerex. On the other hand, Amerex averred that the
recommended just compensation was unjustified in view of the commissioners' finding that the fair
market value of the property was P2,763,400.

On March 15, 1977, the lower court 8 rendered a decision based on the following findings:

The court believes that the findings of the commissioners are supported by the evidence
adduced during the hearings and that their recommendation is reasonable. The property
was originaly owned by Avegon Inc. and was assessed at P1,079,370.00 by the City of
Manila for the year 1974 (Exh. A-4). Avegon Inc. offered to sell it to the City School
Board on July 21, 1973 at P2,300,000.00 but it accepted the counter-offer of
P1,800,000. The negotiations, however, fell through when the city failed to act (Exhs. C,
C-1, C-2, C-3 and C-4). The property was appraised on February 15, 1974 at
P2,100,000.00 at the Instance of Commonwealth Insurance Company, an affiliate of
 Warner, Barnes & Co., Inc. (Exh. G). The defendant company introduced improvements
on the property in the middle part of 1974 worth P260,690.50 (Exhs. 4, 4-A to 4-J; 11,
13, 14 to 19). After the renovation, the property was again appraised at the instance of
the defendant at P2,300,000.00 on November 15, 1974 (Exh. 2). Due to the world-wide
recession, there followed a slump in the demand for electronic products. On June 4,
1975, the Traders Commodities Corporation offered to buy the property at
P2,750,000.00 with a deposit of P50,000.00 as earnest money. The offer was formally
made by the law firm Salonga, Ordoñez, Yap, Africano and Associates (Exch. 6). The
offer was accepted on June 9, 1975 (Exhs. 7 and 8). The sale was not consummated,
however, when the government notified the defendant in a conference held in
Malacanang on June 15, 1975 that it wanted to buy the property for the use of the
Manuel de la Fuente High School (Exh. 9). Because of the failure of the parties to agree
on the price and other conditions of the purchase, the government filed this action on
August 2, 1975.

It is apparent that the commissioners were influenced by the fact that the city assessors
fixed the market value of the property at P2,432,042.00 for the year 1975 pursuant to
Presidential Decree No. 464 and that there was a perfected contract to buy it at
P2,750,000.00. No evidence was presented nor even an allegation made, to show that
the government valuation is fraudulent or erroneous. It must therefore be regular (Rule
131, sec. m) and in view of the reliance of the Presidential Decree upon it as a standard
to be followed by the courts in arriving at the just compensation of the property when it
is acquired by the government, it has great evidentiary weight. The offer to buy at
P2,750,000.00 was made by one of the most reputable law firms in the country. It is not
likely that it would have lent itself to any fraudulent device or scheme to inflate the value
of the property. Commissioner Peña is a renowned authority on land registration, and
has been a realtor for many years. Atty. HiginioSunico is the chief of the Land
Management Division, Bureau of Lands, who was recommended by the plaintiff. Both
are well-known for their probability Although it appears that Mr. Aquino, the
commissioner recommended by the defendant, had occasion in the past to participate in
transactions involving the same property, the court believes that the concurrence of the
other commissioners is a safe guaranty of the correctness of their appraisal and
recommendation.

Accordingly, the dispositive portion of the decision reads as follows:

WHEREFORE, judgment is hereby rendered funding the amount of P2,258.018.57 as

just compensation for the property of the defendant and declaring the plaintiff entitled to
possess and approximate it to the public use alleged in the complaint and to retain it
upon payment of the said amount, after deducting the amount of P1,303,470.00, with
legal interest from October 13, 1975 when the plaintiff was placed in possession of the
real property, and upon payment to each of the commissioners of the sum of P35.00 for
their attendance during the hearings held on January 23, February 16, May 11, July 23,
September 17, October 12 and December 10, 1976, plus P500.00 each for the
preparation of the report, and the costs.

The plaintiff elevated the case to the then Intermediate Appellate Court (IAC) for review. On October
29, 1984, it affirmed the appealed decision with the modification that the plaintiff Republic of the
Philippines be exempted from the payment of the commissioners' fees, the P500.00 granted each of
them for the preparation of the report and the costs.
Its motion for the reconsideration of said decision having been denied, petitioner filed the instant
petition submitting the following issues for resolution:

1. Whether or not respondent Court erred in not disqualifying

Commissioner Aurelio B. Aquino from membership in the Committee of
Appraisal.

2. Whether or not respondent Court erred in not totally disregarding the

audited statement by the defendant, which is hearsay in nature and was
not formally offered in evidence.

3. Whether or not respondent Court erred in totally disregarding

petitioner's evidence showing that the award of just compensation should
be only P1,800,000.00 and not P2,258.018.57 as awarded by said
respondent Court.

The issue of the disqualification of Aquino as commissioner deserves scant attention. Under Section
8, Rule 67 of the Rules of Court, the court may take the following actions on the report submitted by
commissioners: it may "accept the report and render judgment in accordance therewith; or for cause
shown, it may recommit the same to the commissioners for further report of facts, or it may set aside
the report and appoint new commissioners, or it may accept the report in part and reject it in part; . . .
." In other words, the report of the commissioners is merely advisory and recommendatory in
character as far as the court is concerned. 9

Hence, it hardly matters that one of the three commissioners had a preconceived and biased
valuation of the condemned property. The veracity or exactitude of the estimate arrived at by the
commissioners may not be adversely affected thereby. In fact, the report of only two commissioners
may suffice if the third commissioner dissents from the former's valuation. 10 Indeed, the participation
of an allegedly biased commissioner may not result in the total disregard of an appraisal report in the
absence of proof that the two other commissioners were unduly influenced by their allegedly partial
colleague.

The determination of just compensation for a condemned property is basically a judicial function. As
the court is not bound by the commissioners' report, it may make such order or render such judgment
as shall secure to the plaintiff the property essential to the exercise of its right of condemnation, and
to the defendant just compensation for the property expropriated. For that matter, this Court may
even substitute its own estimate of the value as gathered from the record. 11 Hence, although the
determination of just compensation appears to be a factual matter which is ordinarily outside the
ambit of its jurisdiction, this Court may disturb the lower court's factual finding on appeal when there is
clear error or grave abuse of discretion. 12

We hold that the courts below made an erroneous determination of just compensation in this case.

In the first place, the just compensation prescribed herein is based on the commissioners'
recommendation which in turn is founded on the "audited" statements of Amerex that the property is
worth P2,258,018.57. As earlier pointed out, while the court may accept the commissioners' report
and render judgment in accordance therewith, it may not do so without considering whether the report
is supported by evidence. The court is also duty-bound to determine whether the commissioners had
discharged the trust reposed in them according to well-established rules and formed their judgment
upon correct legal principles for they are not supposed to act ad libitum .13
Amerex's "audited" statement on the acquisition cost, cost of painting and major repairs, taxes, and
insurance premiums which totals P2,107,479.48, contains the following certification:

We have checked the details of the transactions indicated in the foregoing schedule of
Land and Building Account as at January 31, 1976 with the books and records of
Amerex Electronics (Philippines) Corporation which were presented to us for
examination and have found the details to be in accordance therewith. We have not
made an audit of the books of accounts of Amerex Electronics (Philippines)
Corporation.

Sycip, GorresVelayo& Co.

PTR No. 4709791

January 23, 1976

Makati, Rizal

(Emphasis supplied).14

Amerex's other "audited" statement on the maintenance expenses of the property wherein it allegedly
incurred the amount of P150,539.09 contains a similar certification by the same accounting firm
specifically stating that the auditor did not make an audit of the books of accounts of Amerex. 15

It is clear from these certifications that the accounting firm which issued them merely compared the
figures in the schedules or "audited" statements with those of the records and books of accounts of
Amerex. As no investigation was made as to the veracity of the figures in the account, there was no
audit in the real sense of the term. To audit is to examine an account, compare it with the vouchers,
adjust the same, and to state the balance, by persons legally authorized for the purpose. 16 While the
word "audit" is sometimes restricted to a mere mathematical process, it generally includes
investigation, the weighing of evidence, and deciding whether items should or should not be included
in the account .17 Audit involves the exercise of discretion; it is a quasi-judicial function.18 The
accuracy of the "audited" statements herein is therefore suspect.

Besides the fact that the petitioner was not furnished a copy of the audited statements which were
also not introduced in evidence, Enrique P. Esteban, vice-president and treasurer of Amerex, and
even a representative of the accounting firm, were likewise not presented during the trial thereby
depriving petitioner herein of the opportunity to cross-examine them. It would therefore be unfair to
the petitioner to hold it bound by the "audited" statements of Amerex which may have been premised
on false or mistaken data. 19

This Court having declared as unconstitutional the mode of fixing just compensation under P.D. No.
794 20 just compensation should be determined either at the time of the actual taking of the
government or at the time of the judgment of the court, whichever comes first. 21

In this case, the issuance of the condemnation order and the actual taking of the property both
occurred in October, 1975. Accordingly, the appraisal made by Ampil Realty and Appraisal Co., Inc.
on June 5, 1975, which date is nearest to that of the actual taking of the property, should be the basis
for the determination of just compensation the record being bereft of any indications of anomaly
appertaining thereto. It should be added that WenceslaoAmpil, the president of said appraisal firm,
testified at the trial and therefore petitioner had the opportunity to confront him and to question his
report. The reasonableness of the June 5,1975 appraisal fixing at P2,400,000 the fair market value of
the property, is bolstered by the fact that on June 4, 1975, Traders Commodities Corporation, through
its lawyer, Sedfrey A. Ordoñez offered to buy the property at P2,750,000. 22 It must be emphasized,
however, that legal interest on the balance of the just compensation of P2,400,000 after deducting the
amount of P1,303,470 which had been delivered to Amerex, should be paid by petitioner from the
time the government actually took over the propert y. 23

Much as we realize the need of the government, under these trying times, to get the best possible
price for the expropriated property considering the ceaseless and continuing necessity for schools,
we cannot agree with the petitioner that the just compensation for the property should be the price it
commanded when it was first offered for sale to the City School Board of Manila. Petitioner failed to
substantiate its claim that the property is worth the lower amount of P1,800,000. In contrast, Amerex
submitted evidence consisting of the aforesaid June 5, 1975 appraisal report which fixed the fair
market value of the property at P2,400,000.

WHEREFORE, the just compensation of the property expropriated for the use of the Manuel de la
Fuente High School Don Mariano Marcos Memorial High School) is hereby fixed at Two Million Four
Hundred Thousand Pesos (P2,400,000.00). After deducting the amount of P1,303,470.00 therefrom,
the petitioner shall pay the balance with legal interest from October 13, 1975.

SO ORDERED.

DIGEST:

FACTS: The property involved consists of four (4) parcels of land with a total area of 9,650 square meters
located at No. 2090 Dr. Manuel L. Carreon Street, Manila, a short walking distance from Herran (now Pedro
Gil) Street. Its previous owner, Avegon Inc., offered it for sale to the City School Board of Manila on July 21,
1973 at P2,300,000. The school board was willing to buy at P1,800,000 but the then Mayor of Manila
intervened and volunteered to negotiate with Avegon Inc. for a better price. Inasmuch as the alleged
negotiation did not materialize, on June 3, 1974, Avegon Inc. sold the property and its improvements to
Amerex Electronics, Phils. Corporation (Amerex for brevity) for P1,800,000. Thereafter, Transfer Certificates of
Title Nos. 115571, 115572, 115573 and 115574 were issued in favor of Amerex. On August 29, 1975, the
Solicitor General filed for the Department of Education and Culture (DEC) a complaint against Amerex for the
expropriation of said property before the Court of First Instance of Manila (Civil Case No. 99190). The
complaint stated that the property was needed by the government as a permanent site for the Manuel de la
Fuente High School (later renamed Don Mariano Marcos Memorial High School); that the fair market value of
the property had been declared by Amerex as P2,435,000, and that the assessor had determined its market
value as P2,432,042 and assessed it for taxation purposes in the amount of P1,303,470.1

Amerex filed a motion to dismiss the complaint stating that while it was not contesting the merits of the
complaint, the same failed to categorically state the amount of just compensation for the property. It therefore
prayed that in consonance with P.D. No. 794, the just compensation be fixed at P2,432,042, the market value
of the property determined by the assessor which was lower than Amerex's own declaration.

Alleging that its motion to dismiss merely sought a clarification on the just compensation for the property,
Amerex filed a motion to withdraw the plaintiffs deposit of P1,303,470 with the PNB without prejudice to its
entitlement to the amount of P1,128,572, the balance of the just compensation of P2,432,042 insisted upon.
The plaintiff interposed no objection to the motion provided that an order of condemnation be issued by the
court and that the plaintiff be allowed to present its evidence on the matter of just compensation.

On March 12, 1976, the plaintiff filed a motion for leave of court to amend its complaint stating that after it had
filed the same, P.D. No. 464 2 was amended by P.D. No. 794; that Section 92 of said Code, as amended,
provided that when private property is acquired for public use, its just compensation "shall not exceed the
market value declared by the owner or administrator or anyone having legal interest in the property, or such
market value as determined by the assessor, whichever is lower"; and that the amended complaint would state
that the fair market value of the property could not be in excess of P1,800,000, the amount for which
defendant's predecessor-in-interest had offered to sell said properties to the Division of Public Schools of
Manila and which amount was also the purchase price paid by Amerex to Avegon Inc. In due course, plaintiff
filed an amended complaint.

Both parties objected to the report of the commissioners. The plaintiff contended that the commissioners'
conclusion that the fair market value of the property was P2,763,400 was unsupported by evidence and that
their recommended just compensation of P2,258,018.57 was excessive. It reiterated its stand that the just
compensation should only be P1,800,000 it being the price had the sale between the city school board and
Avegon Inc. materialized and also the actual price of the sale between Avegon Inc. and Amerex. On the other
hand, Amerex averred that the recommended just compensation was unjustified in view of the commissioners'
finding that the fair market value of the property was P2,763,400.

The plaintiff elevated the case to the then Intermediate Appellate Court (IAC) for review. On October 29, 1984,
it affirmed the appealed decision with the modification that the plaintiff Republic of the Philippines be exempted
from the payment of the commissioners' fees, the P500.00 granted each of them for the preparation of the
report and the costs.

ISSUE: Whether or not respondent Court erred in totally disregarding petitioner's evidence showing that the
award of just compensation should be only P1,800,000.00 and not P2,258.018.57 as awarded by said
respondent Court.

HELD: The determination of just compensation for a condemned property is basically a judicial function. As the
court is not bound by the commissioners' report, it may make such order or render such judgment as shall
secure to the plaintiff the property essential to the exercise of its right of condemnation, and to the defendant
just compensation for the property expropriated. For that matter, this Court may even substitute its own
estimate of the value as gathered from the record. 11 Hence, although the determination of just compensation
appears to be a factual matter which is ordinarily outside the ambit of its jurisdiction, this Court may disturb the
lower court's factual finding on appeal when there is clear error or grave abuse of discretion. 12

We hold that the courts below made an erroneous determination of just compensation in this case.

In the first place, the just compensation prescribed herein is based on the commissioners' recommendation
which in turn is founded on the "audited" statements of Amerex that the property is worth P2,258,018.57. As
earlier pointed out, while the court may accept the commissioners' report and render judgment in accordance
therewith, it may not do so without considering whether the report is supported by evidence. The court is also
duty-bound to determine whether the commissioners had discharged the trust reposed in them according to
well-established rules and formed their judgment upon correct legal principles for they are not supposed to
act ad libitum .13

This Court having declared as unconstitutional the mode of fixing just compensation under P.D. No. 794 20 just
compensation should be determined either at the time of the actual taking of the government or at the time of
the judgment of the court, whichever comes first. 21

In this case, the issuance of the condemnation order and the actual taking of the property both occurred in
October, 1975. Accordingly, the appraisal made by Ampil Realty and Appraisal Co., Inc. on June 5, 1975,
which date is nearest to that of the actual taking of the property, should be the basis for the determination of
just compensation the record being bereft of any indications of anomaly appertaining thereto. It should be
added that WenceslaoAmpil, the president of said appraisal firm, testified at the trial and therefore petitioner
had the opportunity to confront him and to question his report. The reasonableness of the June 5,1975
appraisal fixing at P2,400,000 the fair market value of the property, is bolstered by the fact that on June 4,
1975, Traders Commodities Corporation, through its lawyer, Sedfrey A. Ordoñez offered to buy the property at
P2,750,000. 22 It must be emphasized, however, that legal interest on the balance of the just compensation of
P2,400,000 after deducting the amount of P1,303,470 which had been delivered to Amerex, should be paid by
petitioner from the time the government actually took over the propert y. 23
Much as we realize the need of the government, under these trying times, to get the best possible price for the
expropriated property considering the ceaseless and continuing necessity for schools, we cannot agree with
the petitioner that the just compensation for the property should be the price it commanded when it was first
offered for sale to the City School Board of Manila. Petitioner failed to substantiate its claim that the property is
worth the lower amount of P1,800,000. In contrast, Amerex submitted evidence consisting of the aforesaid
June 5, 1975 appraisal report which fixed the fair market value of the property at P2,400,000.

WHEREFORE, the just compensation of the property expropriated for the use of the Manuel de la Fuente High
School Don Mariano Marcos Memorial High School) is hereby fixed at Two Million Four Hundred Thousand
Pesos (P2,400,000.00). After deducting the amount of P1,303,470.00 therefrom, the petitioner shall pay the
balance with legal interest from October 13, 1975.

FIRST DIVISION

8. G.R. No. 77071 March 22, 1990

MUNICIPALITY OF TALISAY, petitioner,

vs.
SPOUSES HILARIO RAMIREZ and ERLINDA RAMIREZ and SPOUSES WILLIAM ABARQUEZ and
JOSEPHINE ABARQUEZ, respondents.

Carlos A. Marcos for petitioner.

Raul Ha.Sesbreño for private respondents.

CRUZ, J.:

This case has, to use a tired phrase, been overtaken by events. The petition has been de-fanged so to speak,
and must now be retired.

The facts are simple.

On 13 November 1985, the Municipality of Talisay, in Cebu, filed a complaint for the expropriation of two lots
belonging to the private respondents. On 25 November 1985, Judge Valeriano P. Tomol, Jr. of the Regional
Trial Court of Cebu denied the defendants' motion to dismiss, after hearing, and issued a writ of possession in
favor of the plaintiff. On 21 April 1986, the court ordered the parties to designate three commissioners each to
assist it in fixing the just compensation for the condemned properties. Subsequently, the plaintiff not having
complied, the respondent judge issued an order dated 15 August 1986 dismissing the complaint pursuant to
Rule 17, Section 3, of the Rules of Court. In a motion for reconsideration filed on 12 September 1986, the
plaintiff, while maintaining that the order of dismissal was invalid and praying that it be recalled, nevertheless
submitted the names of its three recommendees. The motion was denied on 3 October 1986 on the ground
that the new administration of the plaintiff had not "passed a resolution signifying its adoption of the
expropriation sought in this case," although the order was amended "by making the dismissal as being without
prejudice." A motion for clarification/ reconsideration filed by the defendants on 21 October 1986 was denied
by the respondent court on 3 December 1986, but the plaintiff, still not satisfied, then came to this court in a
petition for certiorari.

On 2 December 1987, this Court gave due course to the petition and required the parties to submit
simultaneous memoranda. The private respondents complied on 11 January 1988 but the petitioner has not
done so to date. On 30 May 1988, the private respondents filed an urgent manifestation praying for the
dismissal of the petition on the ground that the new government of the Municipality of Talisay was not pursuing
that act taken by its predecessors, besides the fact that the just compensation for the condemned properties
could no longer be fixed in accordance with the several presidential decrees invoked by the petitioner. To
ascertain the stand of the present Sangguniang Bayan of Talisay, the Court required it in a resolution dated 15
January 1990 to manifest its position regarding the pending expropriation case. In response, the said
legislative body sent a copy of its Resolution No. 90-10, adopted on 25 January 1990, manifesting to the Court
the intention of the government of the Municipality of Talisay to continue with the expropriation of the subject
lots.

Dispensing with the memorandum which the petitioner has failed to file, the Court now proceeds to examine, in
the light of the memorandum of the private respondents and the other pleadings filed by the parties, the issues
raised in the petition.

The petitioner maintains that it was not under obligation to submit the names of three commissioners to assist
in the determination of the just compensation for the condemned properties, as required by the respondent
judge in his order of 21 April 1986. Such determination, it argues, is the duty of the court alone under Rule 67,
Section 5, of the Rules of Court. Moreover, the just compensation is no longer fixed by commissioners under
the said Rule as this has been repealed by P.D. Nos. 42, 76, 464, 794, 1224, 1259, 1313, 1517, and 1533.
These decrees provide that the just compensation in expropriation cases shall be the value given to the
condemned property by either the owner thereof or the government assessor, whichever valuation is lower.

The rule laid down in these decrees is no longer controlling, having been declared unconstitutional in the
landmark case of Export Processing Zone Authority v. Dulay, 1 where Justice Hugo E. Gutierrez, Jr. held for a
unanimous Court:

The method of ascertaining just compensation under the aforecited decrees constitutes
impermissible encroachment on judicial prerogatives. It tends to render this Court inutile in a
matter which under the Constitution is reserved to it for final determination.

Thus, although in an expropriation proceeding the court technically would still have the power to
determine the just compensation for the property, following the applicable decrees, its task
would be relegated to simply stating the lower value of the property as declared either by the
owner or the assessor. As a necessary consequence, it would be useless for the court to
appoint commissioners under Rule 67 of the Rules of Court. Moreover, the need to satisfy the
due process clause in the taking of private property is seemingly fulfilled since it cannot be said
that a judicial proceeding was not had before the actual taking. However, the strict application of
the decrees during the proceedings would be nothing short of a mere formality or charade as
the court has only to choose between the valuation of the owner and that of the assessor, and
its choice is always limited to the lower of the two. The court cannot exercise its discretion or
independence in determining what is just or fair. Even a grade school pupil could substitute for
the judge insofar as the determination of constitutional just compensation is concerned.

x xx x xx x xx

In the present petition, we are once again confronted with the same question of whether the
courts under P.D. 1533, which contains the same provision on just compensation as its
predecessor decrees, still have the power and authority to determine just compensation,
independent of what is stated by the decree and to this effect, to appoint commissioners for
such purpose.

This time, we answer in the affirmative.

x xx x xx x xx

It is violative of due process to deny the owner the opportunity to prove that the valuation in the
tax documents is unfair or wrong. And it is repulsive to the basic concepts of justice and fairness
 to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the
judgment of a court promulgated only after expert commissioners have actually viewed the
property, after evidence and arguments pro and con have been presented, and after all factors
and considerations essential to a fair and just determination have been judiciously evaluated.

With this decision, the rules for determining just compensation as laid down in Rule 67 of the Rules of Court
have been reactivated and are again applicable. Hence, the petitioner cannot continue arguing that
commissioners are no longer necessary to assist the court in determining the just compensation for the
properties it seeks to expropriate. While it is true that, strictly speaking, it is the court that shall appoint the said
commissioners, there is nothing to prevent it from seeking the recommendations of the parties on this matter,
the better to ensure their fair representation. Indeed, the petitioner should have welcomed the chance to
submit their three recommendees instead of peevishly questioning the well-meaning order of the respondent
judge. We feel the petitioner was quibbling too much and needlessly belligerent. What it should have done,
instead of simply ignoring the order, was to call the attention of the court to the presidential decrees which had
made the commissioners unnecessary. It did not do this, except belatedly in its motion for reconsideration.
Under the circumstances, the trial judge was justified in dismissing the complaint under Rule 17, Section 3, of
the Rules of Court, for failure of the plaintiff to comply with his order.

We feel nevertheless that, as the petitioner finally did comply with that order by submitting the names of its
recommendees in its motion for reconsideration, such compliance should justify the setting aside of the order
of dismissal and the reinstatement of the case below. This would avoid the further delay that would be incurred
if the same complaint had to be re-filed and the parties were to go back to square one, as it were, and begin
the proceedings all over again. Such delay would not be in the best interest of either party and more so of the
people intended to be benefited by the expropriation.

WHEREFORE, the Orders of the respondent court dated 15 August 1986, 3 October 1986, and 3 December
1986 are SET ASIDE and Civil Case No. CEB-4424 in the Regional Trial Court of Cebu is REINSTATED for
hearing and decision in accordance with Rule 67 of the Rules of Court. No costs.

SO ORDERED.

DIGEST:

FACTS: Municipality of Talisay, in Cebu, filed a complaint for the expropriation of two lots belonging to the
private respondents. Judge Valeriano P. Tomol, Jr. of the RTC of Cebu denied the defendants' motion to
dismiss, after hearing, and issued a writ of possession in favor of the plaintiff. The court ordered the parties to
designate three commissioners each to assist it in fixing the just compensation for the condemned properties.
Subsequently, the plaintiff not having complied, the respondent judge issued an order dismissing the complaint
pursuant to Rule 17, Section 3, of the Rules of Court. In a motion for reconsideration, the plaintiff, while
maintaining that the order of dismissal was invalid and praying that it be recalled, nevertheless submitted the
names of its three recommendees. The motion was denied on the ground that the new administration of the
plaintiff had not "passed a resolution signifying its adoption of the expropriation sought in this case," although
the order was amended "by making the dismissal as being without prejudice." Private respondents contested
that the new government of the Municipality of Talisay was not pursuing that act taken by its predecessors,
besides the fact that the just compensation for the condemned properties could no longer be fixed in
accordance with the several presidential decrees invoked by the petitioner. Sangguniang Bayan of Talisay,
sent a copy manifesting to the Court the intention of the government of theMunicipality of Talisay to continue
with the expropriation of the subject lots.

The petitioner maintains that it was not under obligation to submit the names of three commissioners to assist
in the determination of the just compensation for the condemned properties,It argues that it is the duty of the
court alone under Rule 67, Section 5, of the Rules of Court. Moreover, the just compensation is no longer fixed
by commissioners under the said Rule as this has been repealed by P.D. Nos. 42, 76, 464, 794, 1224, 1259,
1313, 1517, and 1533. These decrees provide that the just compensation in expropriation cases shall be the
value given to the condemned property by either the owner thereof or the government assessor, whichever
valuation is lower.
HELD: The rule laid down in these decrees is no longer controlling, having been declared unconstitutional in
the landmark case of Export Processing Zone Authority v. Dulay. It was held that the method of ascertaining
just compensation under the decrees constitutes impermissible encroachment on judicial prerogatives. It tends
to render this Court inutile in a matter which under the Constitution is reserved to it for final determination.Thus,
although in an expropriation proceeding the court technically would still have the power to determine the just
compensation for the property, following the applicable decrees, its task would be relegated to
simply stating the lower value of the property as declared either by the owner or the assessor.As a necessary
consequence, it would be useless for the court to appoint commissioners under Rule 67 of the Rules of Court.
With this decision, the rules for determining just compensation as laid down in Rule 67 of the Rules of Court
have been reactivated and are again applicable. Hence, the petitioner cannot continue arguing that
commissioners are no longer necessary to assist the court in determining the just compensation for the
properties it seeks to expropriate. While it is true that, strictly speaking, it is the court that shall appoint the said
commissioners, there is nothing to prevent it from seeking the recommendations of the parties on this matter,
the better to ensure their fair representation. Indeed, the petitioner should have welcomed the chance to
submit their three recommendees instead of peevishly questioning the well-meaning order of the respondent
judge.

ADJUDICATION:The Orders of the respondent court are SET ASIDE and Civil Case in the RTC of Cebu is
REINSTATED for hearing and decision in accordance with Rule 67 of the Rules of Court.

9. NATIONAL POWER CORPORATION, Petitioner, v. THE COURT OF APPEALS; B.E. SAN DIEGO,
INC., Respondents.

The Solicitor General for Petitioner.

Sison, Sison, Resurreccion& Associates for Respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; EMINENT DOMAIN; JUST COMPENSATION; PRICE OR VALUE OF THE

PROPERTY AT THE TIME OF TAKING, BASIS FOR JUST COMPENSATION. — It is now settled doctrine,
following the leading case of Alfonso v. Pasay (106 Phil. 1017 [1960]), that to determine due compensation for
lands appropriated by the Government, the basis should be the price or value at the time it was taken from the
owner and appropriated by the Government.

2. ID.; ID.; ID.; NATURE OF THE LAND AT THE TIME OF TAKING, PRINCIPAL CRITERION FOR
DETERMINING VALUE. — The convertibility of the property into a subdivision, the criterion relied upon by
respondent Court, is not Controlling. The case of Manila electric Company v. Tuason, 60 Phil. 663, 668, cited
in Municipal Govt. of Sagay v. Jison (104 Phil. 1026 [1958]), has categorically ruled that it is the time of taking
and not as "potential building" site that is the determining factor. The doctrines in the cases of City v. Corrales,
32 Phil. 85 (1915) and Republic v. Venturanza, 17 SCRA 322 (1966) relied upon by respondent Court must be
deemed to have been superseded not only by the Alfonso, Carlota and Sagay cases but also by Republic v.
Narciso, 99 Phil. 1031 (1956); Republic v. Philippine National Bank, 1 SCRA 957 (1961); and Republic v. Juan,
92 SCRA 26 (1979), all of which held that the nature of the land at the time of the taking by the Government is
the principal criterion for awarding compensation to the landowner. The subdivision was not in existence when
NPC entered the land.

DECISION

MELENCIO-HERRERA, J.:
This is a Petition for Review on Certiorari of the Decision of the then Court of Appeals, promulgated on
December 24, 1980, in CA-G.R. No. 55959-R, entitled "National Power Corporation, Plaintiff-Appellant, versus
B. E. San Diego, Inc., Defendant-Appellant." cralawnad

In 1961, petitioner National Power Corporation (NPC, for short), commenced negotiations with the spouses
Esteban Sadang and Maria Lachica, then the registered owners, for the purchase of a portion of 8,746 sq. ms.
of the latter‘s parcel of land of 62,285 sq. ms., situated in Barrio San Mateo, Norzagaray, Bulacan, for the
purpose of constructing an access road to its Angat River Hydroelectric Project. Although the negotiations
were not yet concluded, NPC nevertheless obtained permission from said spouses to begin construction of the
access road, which it did in November 1961.chanrobles lawlibrary :rednad

On December 7, 1962, B. E. San Diego, Inc. a realty firm and private respondent herein (SAN DIEGO, for
short), acquired the parcel of land at a public auction sale and was issued a title.

On February 14, 1963, NPC instituted proceedings for eminent domain against the spouses Sadang in the
Court of First Instance of Bulacan (Civil Case No. 2725), later amended on June 20, 1963, with leave of Court,
to implead SAN DIEGO. The Motion to Amend was only granted on June 21, 1968. On March 19, 1969, the
Trial Court appointed three Commissioners, one for each of the parties and another for the Court, to receive
the evidence and determine the just compensation to be paid for the property sought to be expropriated. After
the Commissioners had submitted their individual Reports and after evaluating the evidence adduced, the Trial
Court rendered a Decision on March 28, 1973, the dispositive portion of which reads:jgc:chanrobles.com.ph

"WHEREFORE, judgment is rendered:chanrob1es virtual 1aw library

a) Declaring to plaintiff the full and legal right to acquire by eminent domain the absolute ownership over the
portion of the land referred to in Paragraphs 4 and 9 of the Amended Complaint, consisting of 8,746 square
meters, access road of the plaintiff to its Angat River Hydroelectric Project;

b) Authorizing the payment by plaintiff to defendant of the amount of P31,922.00 as full indemnity for the
property at the rate of P3.75 per square meter, with interest at 12% per annum from March 11, 1963 until fully
paid;

c) A final Order of Condemnation over the property and improvements therein is entered, for the purpose set
forth, free from all liens and encumbrances;

d) Ordering the registration of this Act of Expropriation, at plaintiff‘s expense, with the Register of Deeds of
Bulacan at the back of defendant‘s title to the whole property.

SO ORDERED."cralaw virtua1aw library

Both parties appealed to the then Court of Appeals, which rendered a Decision on December 24, 1980,
decreeing:jgc:chanrobles.com.ph

"Considering the peculiar facts and circumstances obtaining in the present case, it is our considered view that
the just and reasonable compensation for the property in question is P7.00 per square meter.

ACCORDINGLY, the judgment appealed from is hereby modified as indicated above. No costs.

SO ORDERED."cralaw virtua1aw library

Reconsideration having been denied, NPC availed of the present recourse, to which due course was given.
SAN DIEGO did not appeal from the Appellate Court judgment although it filed a Brief.chanrobles law library

The issues presented are whether or not respondent Court erred (1) in fixing the amount of P7.00 per square
meter as just compensation for the portion of land sought to be expropriated based on its planned convertibility
into a residential subdivision; and (2) in not reducing the rate of interest payable by NPC from twelve (12%) per
cent to six (6%) per cent per annum.

The Trial Court and respondent Court assessed the conflicting evidence in different lights. Reproduced below
are partial findings of the Trial Court:jgc:chanrobles.com.ph

"The plaintiff‘s commissioner, to begin with, recommended a price of P0.50 per square meter; defendant‘s
commissioner indicated P20.00 per square meter, while the commissioner of the Court pegged the value at
P4.00 per square meter. The total road area consists of 8,746 square meters (Exhibits 4-4-c, inclusive).
Against the sketch (Exhibit D-1) presented by plaintiff, the former should prevail.

There is competent testimony, too, that the land was cogonales at the time of the occupancy. During rainy
season, according to Celedonio Juarez, Instrumentman of Survey Team of the plaintiff, the proposed road
could only he passable by animal drawn sledges; that in contrast, the access-way under its present condition is
fully paved. Shaped to a curve, the thoroughfare should provide a marked improvement to the flourishing
housing subdivision managed by the defendant.

Also, the prevailing market price of residential lots in the area, according to the reputable C. M. Montano
Realty, is P20.00 per square meter. Even taking the face value of the appraisal made, it would be unfair to
compel plaintiff to pay the same price after constructing a 30-meter wide road through the property a decade
ago which enhanced its commercial value, not to mention the aesthetic gain. Safe to say, therefore, except for
the cost of the land area encompassed by the road, there is negligible, if any, consequential damage to speak
of.

Defendant‘s contention, on the other hand, that the location of the road is burdensome appears to be more
idealistic than meritorious. The right of way as now built is more beneficial to the adjoining subdivision owner
(defendant) in the sense that the residential lot on both flanks of the road could command a higher price. This
may not hold true if the access road were to be built on the east side boundary as proposed by the defendant
because only one side of the rood may be devoted to the housing area. . . . Related is evidence from
defendant that the plaintiff had once negotiated to purchase the property at P5.00 per square meter. At first
glance, this would appear significant and in keeping with the fair market value. But noticeably, the offer was
made some nine (9) years after actual taking. It is pertinent to point out, the spouses Sadang when first
contacted by the plaintiff in 1961, offered to part with the piece of property at P4.00 per square meter. The
difference in the price could be reasonably traced to the fact that the couple then may not have any concrete
plan to develop the area into a subdivision until the defendant came into the picture. But the Sadangs were the
registered owners at the time of actual occupancy, defendant‘s mortgage lien notwithstanding. Being so, they
were clothed with legal personality to enter into any transaction with the plaintiff. The property was agricultural,
in use as well as for taxation purposes. (Exhibits A and B). Privy to this fact, the spouses were presumably
aware of the reasonabless of their offer to sell.

"Thus, ‗the fair market value of the land sought to be expropriated‘, according to the Supreme Court, ‗should be
determined either at the time of actual taking or at the time of the filing of the complaint, whichever is earlier.
The future convertibility of the property into some other classification does not affect the nature of property.‘
(Alfonso v. Pasay City, G.R. No. L-12754, January 30, 1960).

x x x

"ALL CONSIDERED, P3.75 a square meter is and represents the fair market value" (Emphasis supplied).

On the other hand, respondent Court reasoned thus:jgc:chanrobles.com.ph

"It has been amply shown that the defendant purchased the land for the purpose of converting the same into a
first class residential subdivision. The court‘s commissioner and the trial court itself took cognizance of such
project of the defendant (pp. 130-131, 163, Record on Appeal). It is worthwhile to note that, before the access
road was constructed on the property, plaintiff had already known of the defendant‘s plan of converting the
land into a subdivision, since plaintiff had in his custody a copy of defendant‘s subdivision plan, Exhibit 7. In
point of fact, Exhibit 7 was produced in court by the plaintiff from its own record (p. 97, Record on Appeal).
Evidence has also been adduced to show that, as appraised by C.M. Montano Realty, the prevailing market
price of residential lots in the vicinity of defendant‘s land was P20.00 per square meter (p. 163, Ibid).

"Defendant further maintains that because the access road was not constructed in a straight line, the property
was unnecessarily divided into three separate and irregular segments (Exhibit 4). According to the court‘s
commissioner, the road, as actually laid out, had rendered the owner‘s plan of converting the land into a
subdivision ‗futile.‘

x x x

"Needless to state, plaintiff should have given heed to the above legal prescription (Art. 650, Civil Code) by
having constructed the road in a straight line in order to cover the shortest distance, and thus cause the least
prejudice to the defendant. Plaintiff failed to observe this rule, and no explanation has been offered for such
neglect. These facts contradict the conclusion of the lower court that ‗except for the cost of the land
encompassed by the road, there is neglible, if any, consequential damage to speak of .‘(p. 164, Record on
Appeal).

"It is noted that the only basis of the court a quo in assessing the just compensation of the property at the price
of P3.75 per square meter is that at the time of actual occupancy by the plaintiff, ‗the property was agricultural
in use as well as for taxation purposes (Exhibits A and D p. 165, Record on Appeal).‘ But such posture is
hardly in accord with the settled rule that ‗in determining the value of the land appropriated for public purposes,
the same considerations are to be regarded as in a sale of property between private parties. The inquiry, in
such cases, must always be not what the property is worth in the market, viewed not merely as to the uses to
which it is at the time applied, but with reference to the uses to which it is plainly adopted; that is to say, what is
its worth from its availability for valuable uses?‘ (City of Manila v. Corrales, 32 Phil. 85, 98). It has also been
held ‗that the owner has a right to its value for the use for which it would bring the most in the market‘ (City of
Manila v. Corrales, supra; Republic v. Venturanza, Et. Al. 17 SCRA 322, 327).

Indeed, we cannot lightly brush aside the evidence showing that plaintiff‘s failure to observe the rule for laying
out the right of way easement in a straight line had prevented the defendant from carrying out its plan of
converting the property into a housing subdivision. This consequential damage must be taken into account in
the assessment of the just compensation of the property" (Emphasis supplied).

After a review of the records, we are of the considered opinion that the findings of the Trial Court merit our
approval for several reasons:chanrob1es virtual 1aw library

(1) Both documentary and oral evidence indicate that the land in question, at the time of taking by NPC in
1961, was agricultural in use as well as for taxation purposes. In fact, it was described as "cogonales."

(2) SAN DIEGO‘s contention that the location and direction of the access road is burdensome is not borne out
by the evidence. The Report of the Commissioner of the Court revealed that NPC merely improved a pre-
existing mining road on the premises, which was only accessible by carabao-drawn sledge during the rainy
season. 1 As concluded by the Trial Court, which had the benefit of autopticobservation:jgc:chanrobles.com.ph

"Defendant‘s contention, on the other hand, that the location of the road is burdensome appears to be more
idealistic than meritorious. The right of way as now built is more beneficial to the adjoining subdivision owner
(defendant) in the sense that the residential lot on both flanks of the road could command a higher price. This
may not hold true if the access road were to be built on the east side boundary as proposed by the defendant
because only one side of the road may be devoted to the housing area."cralaw virtua1aw library

(3) The finding of the Trial Court that "there is negligible, if any, consequential damage to speak of" thus
becomes readily tenable. SAN DIEGO was not, as was the belief of respondent Court, "prevented from
carrying out the plan of converting the property into a housing subdivision." On the contrary, the Trial Court
observed that "the thoroughfare should provide a marked improvement to the flourishing housing subdivision
managed by defendant (private Respondent.)"

(4) The appraisal by a realty firm of P20.00 per square meter, the price that SAN DIEGO stresses the property
should command, is not, to our minds, a fair market value. The former owners, the Sadang spouses, offered to
part with the property at P4.00 per square meter. SAN DIEGO had purchased the entire property of 62,285
square meters at public auction for P10,000.00, or at P0.16 per square meter. Previous to that, or in 1957, the
property was mortgaged to the Development Bank of the Philippines for P20,000.00 and subsequently in 1958
to SAN DIEGO, by way of second mortgage, for P30,000.00. The observation of the Trial Court, on this point,
is decidedly apropos:jgc:chanrobles.com.ph

"x x x

"A very important point: On the basis of a recognized policy of lending institutions to grant a maximum
mortgage loan corresponding to 60% of the appraised value of the real estate collaterals, the twenty thousand
mortgage loan extended by the Development Bank of the Philippines to the spouses Sadang would roughly
place the approximate value of the property at P33,330 or roughly P0.51 per square meter. And at this ratio, by
granting a second mortgage of P30,000, the defendant impliedly placed the recoverable value of the property
within P83,333.33 for the area of 62,285 square meters or about P1.33 per square meter. That was in 1958,
the year of the second mortgage (Exhibit 12), or an annual increase in price at the rate of P0.81 per square
meter. From 1958 to 1961 (date of actual taking) represents three years, or an aggregate increase of P2.43
per square meter. Add P1.32 to this thus making a total of P3.75 per square meter."cralaw virtua1aw library

The price of P12.00 to P15.00, which respondent Court observed as the just compensation awarded in two civil
suits for lands condemned in the immediate vicinity, cannot be a fair gauge since said Court neither adopted
the same, and specially considering that the property was "cogonal" at the time NPC constructed its access
road in 1961. Moreover, NPC also presented contrary evidence indicating prices of P.05 and P.06 per square
meter at around the time it had entered the property. In fact, in respect of sales within the locality, the Trial
Court had this to say:jgc:chanrobles.com.ph

"While sales of properties within the locality in the same year or there about may serve as a guiding factor in
ascertaining a fair market value yet there appears want of proof to show that the alluded sales (Exhibits I-1, J,
K, and L) referred to properties of similar nature nor was proximity to the land in question properly
shown."cralaw virtua1aw library

(5) And most importantly, on the issue of just compensation, it is now settled doctrine, following the leading
case of Alfonso v. Pasay 2 , that to determine due compensation for lands appropriated by the Government,
the basis should be the price or value at the time it was taken from the owner and appropriated by the
Government.

"The owner of property expropriated by the State is entitled to how much it was worth at the time of the taking.
This has been clarified in Republic v. PNB (1 SCRA 957) thus: ‗It is apparent from the foregoing that, when
plaintiff takes possession before the institution of the condemnation proceedings, the value should be fixed as
of the time of the taking of said possession, not of filing of the complaint, and that the latter should be the basis
for the determination of the value, when the taking of the property involved coincides with or is subsequent to,
the commencement of the proceedings. Indeed, otherwise, the provision of Rule 69, section 3, directing that
compensation ‗be determined as of the date of the filing of the complaint‘ would never be operative." 3

In the case at bar, the taking by NPC occurred in November 1961, when it constructed the access road on the
expropriated property at time when it was still "cogonal" and owned by the spouses Sadang. The Complaint
was filed only in 1963.

The convertibility of the property into a subdivision, the criterion relied upon by respondent Court, is not
controlling. The case of Manila Electric Co. v. Tuason, 60 Phil. 663, 668, cited in Municipal Gov‘t. of Sagay v.
Jison, 4 has categorically ruled that it is the time of taking and not as "potential building" site that is the
determining factor,

". . . if the property to be expropriated was agricultural, the adaptability thereof for conversion in the future into
a residential site does not affect its nature when plaintiff assumed possession of the property, although it is a
circumstance that should be considered in determining its value at that time, as an ‗agricultural‘ land." 5

The doctrines in the cases of City v. Corrales, 32 Phil. 85 (1915) and Republic v. Venturanza, 17 SCRA 322
(1966) relied upon by respondent Court must be deemed to have been superseded not only by the Alfonso,
Carlota and Sagay cases but also by Republic v. Narciso, 99 Phil. 1031 (1956); Republic v. Philippine National
Bank, 1 SCRA 957 (1961); and Republic v. Juan, 92 SCRA 26 (1979), all of which held that the nature of the
land at the time of taking by the Government is the principal criterion for awarding compensation to the
landowner. The subdivision was not in existence when NPC entered the land.

Since SAN DIEGO bought the land in question in the interim and was issued a title only on December 7, 1962,
the "taking" as to it should commence only from said date.

On the issue of legal interest in expropriation proceedings, we held in Amigable v. Cuenca, 43 SCRA 360
(1972), that:jgc:chanrobles.com.ph

"As regards the claim for damages, the plaintiff is entitled thereto in the form of legal interest on the price of the
land from the time it was taken up to the time that payment is made by the government. In addition, the
government should pay for attorney‘s fees, the amount of which should be fixed by the trial court after
hearing."cralaw virtua1aw library

In the case at bar, legal interest should accrue from December 7, 1962, the time of taking as far as SAN
DIEGO is concerned, at six per cent (6%) per annum, up to the time that payment is made by NPC.

Not having appealed from the Decision of respondent Court, SAN DIEGO cannot ask for its modification by
way of increasing the amount of compensation and including an award for attorney‘s fees. 6

WHEREFORE, the judgment of respondent Appellate Court, dated December 24, 1980, is hereby set aside,
and the Decision of the then Court of First Instance of Bulacan, Branch I, in Civil Case No. 2725, authorizing
payment of P31,922.00 as full indemnity for the property at the rate of P3.75 per square meter is reinstated.
Petitioner is directed to pay interest at six per cent (6%) per annum on the amount adjudged from December 7,
1962, until fully paid. No costs.

SO ORDERED.

DIGEST:

CONSTITUTIONAL LAW; EMINENT DOMAIN; JUST COMPENSATION; PRICE OR VALUE OF THE

PROPERTY AT THE TIME OF TAKING, BASIS FOR JUST COMPENSATION. — It is now settled doctrine,
following the leading case of Alfonso v. Pasay (106 Phil. 1017 [1960]), that to determine due compensation for
lands appropriated by the Government, the basis should be the price or value at the time it was taken from the
owner and appropriated by the Government.

FACTS: In 1961, NPC commenced negotiations with the spouses Esteban Sadang and Maria Lachica, then
the registered owners, for the purchase of a portion of 8,746 sq. ms. of the latter‘s parcel of land of 62,285 sq.
ms, situated in Barrio San Mateo, Norzagaray, Bulacan, for the purpose of constructing an access road to its
Angat River Hydroelectric Project. Although the negotiations were not yet concluded, NPC nevertheless
obtained permission from said spouses to begin construction of the access road, which it did in November
1961.On1962, B. E. San Diego, Inc. a realty firm and private respondent acquired the parcel of land at a public
auction sale and was issued a title. On 1963, NPC instituted proceedings for eminent domain against the
spouses Sadang in the CFI of Bulacan, later amended with leave of Court, to implead SAN DIEGO. Trial Court
appointed three Commissioners, one for each of the parties and another for the Court, to receive the evidence
and determine the just compensation to be paid for the property sought to be expropriated. The trial court
rendered decision declaring to plaintiff the full and legal right to acquire by eminent domain the absolute
ownership over the portion of the land and authorizing the payment by plaintiff to defendant of the amount of
P31,922.00 as full indemnity for the property at the rate of P3.75 per square meter, with interest at 12% per
annum from March 11, 1963 until fully paid.Both parties appealed to the CA. The CA held that the just and
reasonable compensation for the property in question is P7.00 per square meter. SAN DIEGO did not appeal
from the Appellate Court judgment although it filed a Brief.

ISSUE: Whether the CA erred in fixing the amount oof P7.00 per square meter as just compensation for the
portion of land sought to be expropriated based on its planned convertibility into a residential subdivision

HELD: On the issue of just compensation, it is now settled doctrine, following the leading case of Alfonso v.
Pasay, that to determine due compensation for lands appropriated by the Government, the basis should be the
price or value at the time it was taken from the owner and appropriated by the Government.

"The owner of property expropriated by the State is entitled to how much it was worth at the time of the taking.
This has been clarified in Republic v. PNB (1 SCRA 957) thus: ‗It is apparent from the foregoing that, when
plaintiff takes possession before the institution of the condemnation proceedings, the value should be fixed as
of the time of the taking of said possession, not of filing of the complaint, and that the latter should be the basis
for the determination of the value, when the taking of the property involved coincides with or is subsequent to,
the commencement of the proceedings. Indeed, otherwise, the provision of Rule 69, section 3, directing that
compensation ‗be determined as of the date of the filing of the complaint‘ would never be operative." 3

In the case at bar, the taking by NPC occurred in November 1961, when it constructed the access road
on the expropriated property at time when it was still "cogonal" and owned by the spouses Sadang.
The Complaint was filed only in 1963.

The convertibility of the property into a subdivision, the criterion relied upon by respondent Court, is
not controlling. The case of Manila Electric Co. v. Tuason, 60 Phil. 663, 668, cited in Municipal Gov‘t. of
Sagay v. Jison, has categorically ruled that it is the time of taking and not as "potential building" site that is the
determining factor,". . . if the property to be expropriated was agricultural, the adaptability thereof for
conversion in the future into a residential site does not affect its nature when plaintiff assumed possession of
the property, although it is a circumstance that should be considered in determining its value at that time, as an
‗agricultural‘ land."

Since SAN DIEGO bought the land in question in the interim and was issued a title only on December 7, 1962,
the "taking" as to it should commence only from said date.

ADJUDICATION:The judgment of respondent Appellate Court is hereby set aside, and the Decision of the then
Court of First Instance of Bulacanauthorizing payment of P31,922.00 as full indemnity for the property at the
rate of P3.75 per square meter is reinstated. Petitioner is directed to pay interest at six per cent (6%) per
annum on the amount adjudged from December 7, 1962, until fully paid.

10. G.R. No. L-61293 February 15, 1990

DOMINGO B. MADDUMBA and ANITA C. MADDUMBA, petitioners,

vs.
GOVERNMENT SERVICE INSURANCE SYSTEM, Represented by its Chairman, Board of Trustees,
HONORABLE LEONILO OCAMPO, respondent.

Vicente P. Leus for petitioners.

The Government Corporate Counsel for GSIS.

REGALADO, J.:

This petition for mandamus seeks to compel respondent Government Service Insurance System (GSIS) to
accept Land Bank bonds at their face value as installments payments for a pre-existing obligation.

The records disclose that on December 10, 1980, respondent GSIS conducted a public bidding of several
foreclosed properties. Included in the properties offered to the public was a house and lot situated at 3377 New
Panaderos Street, Sta. Ana, Manila, covered by Transfer Certificate of Title No. 4749 of the Register of Deeds
of Manila.

Petitioner Domingo B. Maddumba participated in the public bidding and submitted his sealed bid in the amount
of P98,000.00 in Philippine currency. The bid was subject to the condition that there should be a down
payment of 35% of the amount thereof, the 10% constituting the proposal bond with the remaining 25% to be
paid after the receipt of the notice of award or acceptance of the bid. Accordingly, petitioner enclosed with his
sealed bid a manager's check in the amount of P9,500.00 and cash in the amount of P300.00 to complete the
P9,800.00 proposal bond.

Upon the receipt of the notice of award, petitioner offered to pay the additional 25% in Land Bank bonds at
their face value. These bonds were issued to petitioner as payment for his riceland consisting of twenty-six
hectares located in Cordon, Isabela acquired by the Government from him under Presidential Decree No. 27.
However, the GSIS rejected the offer, hence it was withdrawn by petitioner. Petitioner then offered to pay in
cash the remaining 25% down payment "and all future installments." 1 Thereafter, on November 16, 1981,
petitioner paid in cash the balance of the required down payment.

A "Deed of Conditional Sale" was executed by the parties on November 19, 1981, where the petitioner as
vendee agreed to pay the vendor GSIS "the balance of the purchase price of SIXTY THREE THOUSAND
SEVEN HUNDRED FIVE & 50/100 (P63,705.50) PESOS, Philippine currency, in SIXTY (60) monthly
installments of ONE THOUSAND FOUR HUNDRED SIXTEEN & 69/100 (P1,416.69) PESOS, Philippine
currency, at twelve (12%) percent interest per annum, compounded monthly, beginning December 1, 1981."2

The first installment in the amount of P1,416.00 was paid by petitioner on December 3, 1981. When the
second monthly installment became due, petitioner sent a letter dated January 5, 1982, to the GSIS Board of
Trustees requesting that he be allowed to pay the monthly amortizations with his Land Bank bonds
commencing in January, 1982 until the exhaustion of the said bonds. 3 Petitioner invoked the provisions of
Secton 85 of Republic Act No. 3844, as amended by Presidential Decree No. 251.

The GSIS Board of Trustees, in its Resolution No. 91 adopted on January 22, 1982, denied petitioner's offer.
The board "resolved to reiterate the policy that Land Bank bonds shall be accepted as payment only at a
discounted rate to yield the System 18% at maturity. 4

In a letter dated February 12, 1982, petitioner asked the Board of Trustees to reconsider Resolution No.
91. 5Petitioner reiterated his reliance on Section 85 of Republic Act No. 3844, as amended, and further
supported his position with the contention that the policy of the GSIS contravenes the ruling in the case
of Gonzales, et al. vs. The Government Insurance System, etc., et al.6 Likng in the case of ewise, petitioner
submitted an opinion of the Ministry of Agrarian Reform, dated February 12, 1982, wherein it was stated,a inter
alia, that "if the GSIS accepts the Land Bank bonds as payment thereof, it must accept the same at par or face
value. To accept said bonds at a discounted rate would lessen the credibility of the bonds as instruments of
indebtedness." 7
In a letter dated May 31, 1982, petitioner was advised by the Manager, Acquired Assets Department, GSIS
that Resolution No. 415 was adopted on May 18, 1982 by the GSIS Board of Trustees denying the request of
petitioner. Hence, on August 5, 1982, the instant original action for mandamus was filed by petitioner.

The issue posed by this petition is whether or not under the provisions of Section 85 of Republic Act No. 3844,
as amended by Presidential Decree No. 251 effective July 21, 1973, the GSIS may be compelled to accept
Land Bank bonds at their face value in payment for a residential house and lot purchased by the bondholder
from the GSIS.

The aforesaid provision of law provides:

Sec. 85.Use of Bonds. — The bonds issued by the Bank may be used by the holder thereof and
shall be accepted for any of the following:

x xx x xx x xx

2. Payment for the purchase of shares of stock or assets of government-owned or controlled

corporations.

Upon offer by the bondholders, the corporation owned or controlled by the Government shall,
through its Board of Directors, negotiate with such bondholder with respect to the price and
other terms and conditions of the sale. In case there are various bondholders making the offer,
the one willing to purchase under the terms and conditions most favorable to the corporation
shall be preferred. If no price is acceptable to the corporation, the same shall be determined by
the Committee of Appraisers composed of three members, one to be appointed by the
corporation, another by the bondholder making the highest or only offer, and the third by the
members so chosen. The expense of appraisal shall be borne equally by the corporation and
the successful purchaser.

Should the Government offer for sale to the public any or all the shares of stock or the assets of
any of the Government-owned or controlled corporations, the bidder who offers to pay in bonds
of the Land Bank shall be preferred, provided that the various bids be equal in every respect in
the medium of payment.

x xx x xx x xx

It is not disputed that under the above quoted provisions, a government-owned or controlled corporation, like
the GSIS, is compelled to accept Land Bank bonds as payment for the purchase of its assets. As a matter of
fact, the bidder who offers to pay in bonds of the Land Bank is entitled to preference. What respondent GSIS is
resisting, however, is its being compelled to accept said bonds at their face value. Respondent, in support of its
stance that it can discount the bonds, avers that "(a) PD 251 has amended Section 85 of RA 3844 by deleting
and eliminating the original provision that Land Bank bonds shall be accepted 'in the amount of their face
value'; and (b) to accept the said bonds at their face value will impair the actuarial solvency of the GSIS and
thoroughly prejudice its capacity to pay death, retirement, insurance, dividends and other benefits and claims
to its more than a million members, the majority of whom are low salaried government employees and
workers." 8

We cannot agree with respondent.

Respondent's arguments disregard the fact that the provisions of Section 85 are primarily designed to cushion
the impact of dispossession. Not only would there be inconvenience resulting from dispossession itself, but
also from the modes of payment in financing the acquisition of farm lots. Acceptance of Land Bank bonds,
instead of money, undoubtedly involves a certain degree of sacrifice for the landowner. This, of course, is in
addition to the fact that, in case of expropriation of land covered by land reform, the landowner will seldom get
the compensation he desires. Thus, discounting the Land Banks bonds, and thereby reducing their effective
value, entails and imposes an additional burden on his part. It is, in fact, in consideration of this sacrifice that
we extended the rule on liberality in the interpretation of the provisions of Republic Act No. 3844, then known
as the Agricultural Land Reform Code, in favor not only of the actual tillers but the landowners as well. Ita
semper fiat relatioutvaleatdispositio. The interpretation must always be such that the disposition may prevail.

The nature of a Land Bank bond itself fortifies our view that the respondent may be compelled to accept those
bonds at their face value. As explained in an earlier case:

True, the statute does not explicitly provide that Land Bank bonds shall be accepted at their
face value. There can be no question, however, that such is the intendment of the law
particularly in the absence of any provision expressly permitting discounting, as differentiated
from Republic Act No. 304, or the Backpay Law, as amended by Republic Acts Nos. 800 and
897, which expressly allows it.

Land Bank bonds are certificates of indebtedness, approved by the Monetary Board of the
Central Bank, fully tax-exempt both as to principal and income, and bear interest at the rate of
6% per annum redeemable at the option of the Land Bank at or before maturity, which in no
case shall exceed 25 years. They are fully negotiable and unconditionally guaranteed by the
Government of the Republic of the Philippines.

These bonds are deemed contracts and the obligations resulting therefrom fall within the
purview of the non-impairment clause of the Constitution, and any impairment thereof may take
any encroachment in any respect upon the obligation and cannot be permitted. Thus, the value
of these bonds cannot be diminished by any direct or indirect act, particularly, since said bonds
are fully guaranteed by the Government of the Philippines. They are issued not in the open
market nor for the primary purpose of raising funds or pooling financial resources but in the
captive market of landowners and to facilitate the speedy transfer of lands to the tenant-farmers
in support of the land reform program of the Government. They are not ordinary commercial
paper in that sense subject to discounting (Emphasis supplied). 9

We are aware that the above cited cases primarily involved Section 80 of the law as applied to cases where
government financial institutions were compelled to accept Land Bank bonds at their face value for the
discharge of existing encumbrances on parcels of land given as security even if not an the lands covered by
the mortgage were acquired by the Land Bank under Presidential Decree No. 27. Evidently, however, the
variance in the factual setting would not change the very nature of said bonds by reason of which payment of
pre-existing obligations to government financial institutions at their face or par value is justified and authorized.
It would be hermeneutically unjustified to adopt a tenuous theory which would subject the parity of Land Bank
bonds to qualifications and distinctions when the law itself does not so provide.

The deed of conditional sale which was executed by the parties herein is subject to the obligation of and
guaranteed by the Government under said bonds. Their agreement for the payment of installments in
Philippine currency cannot in any way be construed as an alteration, nor should it detract from the essence
and compulsion, of said obligation While, in one instance, petitioner offered to pay his future installments in
cash, that offer was obviously not voluntarily made but was exacted from him because of the refusal of
respondent to accept the Land Bank bonds. That incident should not prevent petitioner from making, and allow
respondent to refuse, an alternative mode of payment authorized by law and under the conditions laid down by
this Court.

Respondent cannot rely on the deletion by Presidential Decree No. 251 of the provision in Section 85 that the
bonds shall be accepted in the amount of their face value, and wrest therefrom an interpretation in support of
its thesis. Implied repeals are frowned upon in this jurisdiction. They are not favored in law and will not be so
declared unless the intent of the legislature is manifest. In the present case, no such intention to effect
changes in the law exists nor is it even apparent. On the contrary, it can be said that when amendments were
made to Section 85, the legislators were fully aware of the nature of Land Bank bonds, which would
necessarily be concordant with the analysis and explanation subsequently made by the Court in the cases
hereinbefore cited. If the legislature had really been minded to make changes in the policy on the acceptance
value of said bonds, they could have expressly so provided with facility and ease. Thus, although such
amendment by deletion was effected in 1973 and the cases which clarified this point were decided in 1986 and
1987 on factual situations subsequent to 1973, this argument now posited by respondent based on such
amendment was not taken into account by the Court in laying down its aforequoted doctrinal rulings.

Neither can the respondent complain that the acceptance of said bonds at their face value will impair its
actuarial solvency. We are constrained to quote from Gonzales again, that "(w)hatever unfavorable results the
acceptance may have on its finances, the effects must be deemed to have been intended by Presidential
Decree No. 251, particularly, when it provided for the payment in bonds to government lending institutions their
'existing charters to the contrary notwithstanding.' If iniquitous to said institutions, it remains now with the
legislative branch to make the necessary revisions if desired. The traditional role assigned to the Judiciary is to
implement and not to thwart fundamental policy goals."

It is apropos to recall, all this juncture, our reminder in the aforecited case of Philippine National Bank vs.
Amores, et al., which applies with equal force to herein respondent and the present case:

Suffice it to mention that the petitioner is a government lending institution and as such, it has the
obligation to support unequivocably government programs already on stream and not to
introduce its own interpretative policies which may thwart such programs or modify them to
nothingness. This is specially compelling with regard to land reform, the great venture of the
government.

The preamble of PD 251 eloquently articulates government intent to implement the state policy
of 'diverting landlord capital in agriculture to industrial development' by 'mobilization and
harnessing properly all available government resources for the realization of the desired
agrarian reform program.' For agrarian reform cannot be fully realized without the intervention of
the government particularly in the payment of just compensation. Surely, the tenant by himself
does not have and cannot afford the wherewithal to defray the cost of the land tranferred to
him. It is only with the full support and active assistance of the government principally through
its financial institutions that payment of just compensation to the landowner may be realized. ...
(Emphasis supplied).

WHEREFORE, the writ of mandamus prayed for is hereby GRANTED. Respondent Government Service
Insurance System is ordered to accept the bonds issued by the Land Bank of the Philippines at their par or
face value.

SO ORDERED.

DIGEST:

FACTS: Respondent GSIS conducted a public bidding of several foreclosed properties, including a house and
lot. The petitioner participated and submitted his bid. It bid was subject to a down payment of 35% of the
amount thereof, the 10% constituting the proposal bond with the remaining 25% to be paid after the receipt of
the notice of award or acceptance of the bid. Accordingly, petitioner enclosed with his sealed bid a manager's
and cash to complete the proposal bond. Upon the receipt of the notice of award, petitioner offered to pay the
additional 25% in Land Bank bonds at their face value. These bonds were issued to petitioner as payment for
his riceland acquired by the Government from him. However, the GSIS rejected the offer, hence it was
withdrawn by petitioner. Petitioner then offered to pay in cash the balance of the required down payment.
When the second monthly installment became due, petitioner sent a letter to the GSIS Board of Trustees
requesting that he be allowed to pay with his Land Bank bonds. Petitioner invoked the provisions of Section 85
of Republic Act No. 3844, as amended by Presidential Decree No. 251. The GSIS Board of Trustees denied
petitioner's offer and "resolved to reiterate the policy that Land Bank bonds shall be accepted as payment only
at a discounted rate to yield the System 18% at maturity." The petitioner asked the Board to reconsider and
them submitted an opinion of the Ministry of Agrarian Reform, wherein it was stated that "if the GSIS accepts
the Land Bank bonds as payment thereof, it must accept the same at par or face value.
ISSUE: Whether the provisions of Section 85 of Republic Act No. 3844, as amended by Presidential Decree
No. 251, the GSIS may be compelled to accept Land Bank bonds at their face value in payment for a
residential house and lot purchased by the bondholder from the GSIS.

HELD: Respondent Government Service Insurance System is ordered to accept the bonds issued by the Land
Bank of the Philippines at their par or face value. A government-owned or controlled corporation, like the GSIS,
is compelled to accept Land Bank bonds as payment for the purchase of its assets. As a matter of fact, the
bidder who offers to pay in bonds of the Land Bank is entitled to preference. Respondent's arguments
disregard the fact that the provisions of Section 85 are primarily designed to cushion the impact of
dispossession. This, of course, is in addition to the fact that, in case of expropriation of land covered by land
reform, the landowner will seldom get the compensation he desires. Thus, discounting the Land Banks bonds,
and thereby reducing their effective value, entails and imposes an additional burden on his part. Respondent
cannot rely on the deletion by Presidential Decree No. 251 of the provision in Section 85 that the bonds shall
be accepted in the amount of their face value, and wrest therefrom an interpretation in support of its thesis.

Suffice it to mention that the petitioner is a government lending institution and as such, it has the obligation to
support unequivocably government programs already on stream and not to introduce its own interpretative
policies which may thwart such programs or modify them to nothingness.

The preamble of PD 251 eloquently articulates government intent to implement the state policy of 'diverting
landlord capital in agriculture to industrial development' by 'mobilization and harnessing properly all available
government resources for the realization of the desired agrarian reform program.' For agrarian reform cannot
be fully realized without the intervention of the government particularly in the payment of just compensation.
Surely, the tenant by himself does not have and cannot afford the wherewithal to defray the cost of the land
tranferred to him. It is only with the full support and active assistance of the government principally through its
financial institutions that payment of just compensation to the landowner may be realized.

ADJUDICATION: The writ of mandamus prayed for is hereby GRANTED. Respondent Government Service
Insurance System is ordered to accept the bonds issued by the Land Bank of the Philippines at their par or
face value.

WHEN LAND IS CONSIDERED FOR “PUBLIC USE”

1. G.R. No. L-49439 June 29, 1983

NATIONAL HOUSING AUTHORITY, petitioner,

vs.
HONORABLE PASTOR P. REYES, in his capacity as Presiding Judge (on detail), Court of Agrarian
Relations, Seventh Regional District, Branch II, Cavite City, QUIRINO AUSTRIA and LUCIANO
AUSTRIA, respondents.

Lazaro, Aldana& Tan Law Office for petitioner.

Jacinto Dominguez for private respondent.

NatividadDizon for respondent Judge.

FERNANDO, C.J.:
The undisputed fact that in this certiorari proceeding against respondent Judge for failure to comply with the
provision of the Presidential Decrees as to the amount to be paid by petitioner to entitle it to a writ of
possession in an expropriation proceeding, no question was raised as to their validity, calls for the grant of the
remedy sought.

The controversy started with the filing of a complaint with the then Court of Agrarian Relations, Seventh
Regional District, Branch II, Cavite City, against private respondents, for the expropriation, pursuant to
Presidential Decree No. 757, of a parcel of land, with an area of 25,000 square meters, owned and registered
in the name of respondent Quirino Austria, and needed for the expansion of the Dasmariñas Resettlement
Project.1 Then came from petitioner about a year later a motion for the issuance of a writ of possession.
2 Petitioner was able to secure an order placing it in possession.3Thereafter, private respondent Quirino
Austria filed a Motion to Withdraw Deposit in the amount of P6,600.00, a sum which was equivalent to the
value of the property assessed for taxation purposes and which was deposited by petitioner pursuant to
Presidential Decree No. 42 .4 There was an Opposition to the Motion to Withdraw Deposit by petitioner, citing
Section 92 of Presidential Decree No. 464 which states: "Basis for payment of just compensation in
expropriation proceedings. In determining such compensation when private property is acquired by the
government for public use, the same shall not exceed the market value declared by the owner or administrator
or anyone having legal interest in the property, or such market value as determined by the assessor, whichever
is lower." 5Petitioner's submission is that the owner's declaration at P1,400.00 which is lower than the
assessor's assessment, is the just compensation for the respondents' property, respondents thus being
precluded from withdrawing any amount more than P1,400.00.6 Respondent Judge, however, issued an order
dated July 13, 1978 which, according to petitioner, is clearly contrary to the letter and spirit of the aforecited
laws.7 There was a Motion for Reconsideration dated July 21, 1978. 8Its basis is the provision in Presidential
Decree No. 1224: "In the determination of just compensation for such private lands and improvement to be
expropriated, the government shall choose between the value of the real property and improvements thereon
as declared by the owner or administrator thereof or the market value determined by the City or provincial
assessor, whichever is lower, at the time of the filing of the expropriation complaint. "9 It was then submitted
that under the aforequoted statutory provision, the owner's declared market value at P1,400.00 which is lower
than that fixed by the assessor is the just compensation of respondent Quirino Austria's property sought to be
expropriated. The motion for reconsideration was denied for lack of merit. Hence, this petition.

On January 4, 1979, the Court issued the following resolution: "Considering the allegations contained, the
issues raised and the arguments adduced in the petition for certiorari and mandamus with preliminary
injunction with prayer for a restraining order, the Court Resolved without giving due course to the petition to
require the respondents to comment, not to file a motion to dismiss, within ten (10) days from notice. The Court
further Resolved to issue a temporary restraining order, effective as of this date and continuing until otherwise
ordered by the Court."10 The comment was thereafter submitted by private respondents Quirino Austria and
Luciano Austria.

Private respondents stress that while there may be basis for the allegation that respondent Judge did not follow
Presidential Decree No. 76 as amended by Presidential Decree No. 464, as further amended by Presidential
Decree Nos. 794, 1224 and 1259, the matter is still subject to his final disposition, he having been vested with
the original and competent authority to exercise his judicial discretion in the light of the constitutional
provisions.11 There was a comment likewise submitted by counsel on behalf of respondent Judge but again,
there was no question raised as to the validity of the aforementioned Decrees. Such comments were
considered as answers. The case was originally submitted to the Second Division, and in a resolution of
February 21, 1979, it referred this case to the Court en banc.

Under the state of the pleadings as submitted to this Court, it is evident why, as noted at the outset, certiorari
lies.

1. One of the basic postulates in constitutional law is the presumption of validity of legislative or executive acts.
In Angara v. Electoral Commission 12 the leading case on the subject until now, Justice Laurel, in speaking of
judicial review, made clear that it is not for the judiciary to "pass upon questions of wisdom, justice or
expediency of legislation."13 His landmark opinion continues: "More than that, courts accord the presumption of
constitutionality to legislative enactments, not only because the legislature is presumed to abide by the
Constitution but also because the judiciary in the determination of actual cases and controversies must reflect
the wisdom and justice of the people as expressed through their representatives in the executive and
legislative departments of the government. "14 As pointed out in Ermita-Malate Hotel & Motel Operators
Association, Inc. v. City Mayor of Manila:15 "Primarily what calls for a reversal of such a decision is the absence
of any evidence to offset the presumption of validity that attaches to a challenged statute or ordinance. As was
expressed categorically by Justice Malcolm: "The presumption is all in favor of validity ..." 16 As of this stage in
this particular case, there is a failure to challenge the validity of such legislation. Both public and private
respondents in their comments considered as answers raised no such constitutional question. Even for it,
therefore, as of this stage of litigation, and under the conceded facts, there should be a recognition that the law
as it stands must be applied. The Decree having spoken so clearly and unequivocally calls for obedience. It is
repeating a common place to state that on a matter where the applicable law speaks in no uncertain language,
the Court has no choice except to yield to its command.

2. Nor is there any choice for petitioner National Housing Authority for precisely it was created for the laudable
purpose of "urban land reform." 17 The first whereas clause speaks of the "magnitude of the housing problem of
the country" which "has grown into such proportions that only a purposeful, determined, organized mass
housing development program can meet the needs of Filipino families" for decent housing. 18 Moreover, the
Presidential Decree is mandated by the Constitution which requires the State to "establish, maintain, and
ensure adequate social services in the field of ... housing ..." as well as "to guarantee the enjoyment of the
people of a decent standard of living." 19 The very first section of the Decree speaks of the following: "Pursuant
to the mandate of the New Constitution, there shall be developed a comprehensive and integrated housing
program which shall embrace, among others, housing development and resettlement, sources and schemes of
financing, and delineation of government and private sector participation. The program shall specify the
priorities and targets in accordance with the integrated national human settlements plan prepared by the
Human Settlements Commission. "20 In view of the urgency of the housing problem the various decrees
mentioned earlier were issued for the purpose of assuring that the government would be in a financial position
to cope with such basic human need which in the Philippines, under the welfare state concept, and according
to the express language of the Constitution, is an obligation cast upon the State. The memorandum for
petitioner submitted by Government Corporate Counsel, now likewise the Presidential Legal Assistant, Justice
Manuel M. Lazaro, pursues the matter further in prose impressed with force and clarity: "The issue in this
petition for certiorari and mandamus involves the application of a rule introduced by P.D. No. 76 and reiterated
in subsequent decrees that not only promotes social justice but also ends the baneful and one-sided practice
abetted by the collusive acquiescence of government officials and employees, of under declaring properties for
the purpose of taxation but ballooning the price thereof when the same properties are to be acquired by the
government for public purposes. Put to the test, therefore, is the power of the government to introduce
rationality in the laws and to discourage a deceitful practice that is not only ruinous to the government coffers
but also undermines its efforts at awakening a democratic responsiveness of the citizenry toward good
government and its economic and social programs. The courts should recognize that the rule introduced by
P.D. No. 76 and reiterated in subsequent decrees does not upset the established concepts of justice or the
constitutional provision on just compensation for, precisely, the owner is allowed to make his own valuation of
his property."21

WHEREFORE, the writ of certiorari is granted and the order of respondent Judge of July 13, 1978 is hereby
nullified and set aside. The restraining order issued by this Court on January 4, 1979 is hereby made
permanent. The case is remanded to the lower court for further action conformably to law and to the above
opinion. No costs.

DIGEST:

FACTS: The undisputed fact that in this certiorari proceeding against respondent Judge for failure to comply
with the provision of the Presidential Decrees as to the amount to be paid by petitioner to entitle it to a writ of
possession in an expropriation proceeding, no question was raised as to their validity, calls for the grant of the
remedy sought. The controversy started with the filing of a complaint with the then Court of Agrarian Relations,
Seventh Regional District, Branch II, Cavite City, against private respondents, for the expropriation, pursuant to
Presidential Decree No. 757, of a parcel of land, with an area of 25,000 square meters, owned and registered
in the name of respondent Quirino Austria, and needed for the expansion of the Dasmariñas Resettlement
Project. Then came from petitioner about a year later, a motion for the issuance of a writ of possession.
Petitioner was able to secure an order placing it in possession. Thereafter, private respondent Quirino Austria
filed a Motion to Withdraw Deposit in the amount of P6,600.00, a sum which was equivalent to the value of the
property assessed for taxation purposes and which was deposited by petitioner pursuant to Presidential
Decree No. 42 . There was an Opposition to the Motion to Withdraw Deposit by petitioner, citing Section 92 of
Presidential Decree No. 464. Petitioner's submission is that the owner's declaration at P1,400.00 which is
lower than the assessor's assessment, is the just compensation for the respondents' property, respondents
thus being precluded from withdrawing any amount more than P1,400.00. Respondent Judge, however, issued
an order dated July 13, 1978 which, according to petitioner, is clearly contrary to the letter and spirit of the
aforecited laws. There was a Motion for Reconsideration dated July 21, 1978. Its basis is the provision in
Presidential Decree No. 1224: "In the determination of just compensation for such private lands and
improvement to be expropriated, the government shall choose between the value of the real property and
improvements thereon as declared by the owner or administrator thereof or the market value determined by
the City or provincial assessor, whichever is lower, at the time of the filing of the expropriation complaint." It
was then submitted that under the aforequoted statutory provision, the owner's declared market value at
P1,400.00 which is lower than that fixed by the assessor is the just compensation of respondent Quirino
Austria's property sought to be expropriated. The motion for reconsideration was denied for lack of merit.

ISSUE: Whether or not there was just compensation.

HELD: The Presidential Decree is mandated by the Constitution which requires the State to "establish,
maintain, and ensure adequate social services in the field of ... housing ..." as well as "to guarantee the
enjoyment of the people of a decent standard of living." 20 In view of the urgency of the housing problem the
various decrees mentioned earlier were issued for the purpose of assuring that the government would be in a
financial position to cope with such basic human need which in the Philippines, under the welfare state
concept, and according to the express language of the Constitution, is an obligation cast upon the State. The
issue in this petition for certiorari and mandamus involves the application of a rule introduced by P.D. No. 76
and reiterated in subsequent decrees that not only promotes social justice but also ends the one-sided practice
supported by the conniving consent of government officials and employees, of under declaring properties for
the purpose of taxation but ballooning the price thereof when the same properties are to be acquired by the
government for public purposes. Put to test is the power of the government to introduce rationality in the laws
and to discourage a deceitful practice that is not only damaging to the government officers but also undermines
its effort at awakening a democratic responsiveness of the citizenry toward good government and its economic
and social programs. The courts should recognize that the rule introduced by P.D. 76 and reiterated in
subsequent decrees does not upset the established concepts of justice or the constitutional provision on just
compensation for, precisely, the owner is allowed to make his own valuation of his property.

ADJUDICATION: The writ of certiorari is granted and the order of respondent judge of July 13, 1978 is hereby
nullified and set aside.
GREEN NOTES:
Who determines the just compensation in expropriation cases? What are the factors to be considered
in determining the same?
Determination of just compensation is a judicial function with the assistance or recommendation of the court-
appointed commissioners. (Manotok vs. CA, May 21,1987)
The factors to be considered in determining the just compensation/market value are:
1. cost of acquisition;
2. the current value of like properties;
3. its actual or potential uses;
4. particular case of lands;
5. their size, shape, location; and
6. the tax declarations thereon.
Finally, note that as held in the case of Republic vs. Santos, 141 SCRA 30, the market value as recommended
by the board of commissioners appointed by the court were at best only ADVISORY AND PERSUASIVE AND
BY NO MEANS FINAL OR BINDING. (BERKENKOTTER, INC. VS. COURT OF APPEALS AND REPUBLIC
OF THE PHILIPPINES, December 14, 1992).

CRUZ, J.:

The sole issue for resolution in this case is the just compensation to be paid for a parcel of land sought to be
expropriated for the use of the Apolinario R. Apacible School of Fisheries, a government institution, in Nasugbu,
Batangas.

The property has an area of 10,640 square meters and belongs to B. H. Berkenkotter & Co., the herein petitioner.
On June 18, 1982, Vicente Viray, president of the said school, sent the owner a written offer to buy the land in line
with the 5-year expansion program of ARASOF. In reply, Berkenkotter expressed its willingness to sell at P50.00 per
square meter payable in cash. At Viray's request, the Provincial Appraisal Committee, Office of the Provincial
Assessor, Batangas City, appraised the land and fixed its market value at P32.00 per square meter. Viray then
wrote Berkenkotter another letter and offered to buy the property at the said price. The latter stuck to its original
valuation; later it said that the property had in fact appreciated to as much as P100.00 per square meter. Further
negotiations failed to resolve the impasse between ARASOF and the petitioner. In the end, expropriation
proceedings were commenced against the petitioner by the Republic of the Philippines on behalf of ARASOF.

In its complaint dated October 28, 1983, the Republic invoked the assessment made by the Provincial Appraisal
Committee at P32.00 per square meter and sought possession of the property upon payment of the 10% deposit
required by P.D. 48. Berkenkotter originally questioned the purpose of the expropriation but later abandoned this
objection and concentrated only on what it called the under-appraisal of the subject land. On March 21, 1985, the
Regional Trial Court of Batangas issued an order of condemnation and, pursuant to Rule 67, Section 5, of the Rules
of Court, appointed a panel of commissioners to determine the just compensation to be paid for the land. 1

Just compensation is defined as the full and fair equivalent of the property sought to be expropriated. 2 The measure is not the taker's gain but the owner's
loss. 3The compensation, to be just, must be fair not only to the owner but also to the taker. Even as undervaluation would deprive the owner of his property
without due process, so too would its overvaluation unduly favor him to the prejudice of the public.

To determine just compensation, the trial court should first ascertain the market value of the property, to which
should be added the consequential benefits which may arise from the expropriation. 4 If the consequential benefits
exceed the consequential damages, these items should be disregarded altogether as the basic value of the property
should be paid in every case. 5

The market value of the property is the price that may be agreed upon by parties willing but not compelled to enter
into the contract of sale6 Not unlikely, a buyer desperate to acquire a piece of property would agree to pay more, and
a seller in urgent need of funds would agree to accept less, than what it is actually worth. The price agreed upon in
these cases would not represent the market value of the property.

Among the factors to be considered in arriving at the fair marker value of the property are the cost of acquisition, the
current value of like properties, its actual or potential uses, and in the particular case of lands, their size, shape,
location, and the tax declarations thereon. 7

It is settled that just compensation is to be ascertained as of the time of the taking, which usually coincides with the
commencement of the expropriation proceedings. 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. 8

On September 23, 1985, the panel of commissioners submitted its report to the trial court and recommended that the property be appraised at the unit price of
P85.00. The Republic objected and pointed to three contracts of sale the petitioner had concluded in 1985 whereby it sold three tracts of land similar in topography
and adjacent to the property in question for the unit price of only P19.18. The trial court directed the commissioners to convene anew and receive additional
evidence. It did and conducted more interviews. In its second report dated April 1, 1987, however, the panel reiterated its original recommendation for the valuation
of the property at P85.00 per square meter.

Acting on this recommendation, Judge Roseo L. Venturanza rendered judgment affirming the right of the plaintiff to
expropriate the subject land upon payment to the owner of just compensation at the rate of P85.00 per square
meter, for a total of P904,400.00.9
This decision was elevated to and reversed by the Court of Appeals.10 The respondent court noted that the three
contracts of sale concluded in 1985 were practically disregarded by the trial court. Justice Jose A. R. Melo, now a
member of this Court, observed that the lands covered by these deeds, which were adjacent to the subject property,
were voluntarily sold by Berkenkotter for the price of only P19.18 per square meter. Moreover, the panel of
commissioners relied only "on opinions and conclusions which were patently hearsay and gratuitous. Not a single
document was submitted to support their recommended compensation of P85.00."

Accordingly, the respondent court set aside the compensation fixed by the trial court and ordered that the subject
property be paid for at the rate of P19.18 per square meter, or a total of P204,075.20, including the amount already
deposited by the Republic when it took possession of the land.

The present petition challenges the decision of the Court of Appeals on the following grounds:

1. The value of the subject property is more than P19.18 —

(a) Resolution No. 2-83 (Exh. "4"), which was passed by the
Provincial Appraisal Committee, Office of the Provincial Assessor,
Batangas City on April 4, 1983, provides THAT THE PREVAILING
MARKET VALUE OF COMPARATIVE PROPERTIES IN THE
LOCALITY WAS THIRTY-TWO PESOS (P32.00) PER SQUARE
METER.

(b) Respondent REPUBLIC — through Mr. VICENTE VIRAY,

Superintendent of Apolinario R. Apacible School of Fisheries —
OFFERED TO PAY PETITIONER THIRTY TWO PESOS (P32.00)
PER SQUARE METER for the subject property (Exh. "D").

(c) In the APPRAISAL REPORT OF G. AMBROSIO, INC., (Exh. "A"),

the fair market value of the subject property was assessed at
NINETY-FIVE PESOS (P95.00) per square meter, considering the
various circumstances as testified to by its representative, Mr.
Ernesto Ambrosio.

(d) MR. JAIME PIMENTEL, Administrator of Roxas y Compania in

Nasugbu, Batangas, which company owns land within the vicinity of
ARASOF, testified that lots surrounding the property subject of these
expropriation proceedings are being sold at FOUR HUNDRED
(P400.00) to FIVE HUNDRED (P500.00) PESOS PER SQUARE
METER.

(e) MR. JUSTINO LIM, who is engaged in the selling of the lots right
across the property being expropriated, testified that the very same
properties which were the subject of the Deeds of Sale (properties
sold by petitioner at P19.18) presented by respondent Republic were
being sold for TWO HUNDRED PESOS PER SQUARE METER.

2. The Deeds of Sale are not reliable for purposes of determining just compensation as the
registrants tend to undervalue the cost of property to lower the expenses they would have to pay for
the documents.

3. To disregard the report of the panel of commissioner would be to violate due process.

4. No proof was presented to show that the petitioner undervalued the sale of its properties so that it
should not be penalized in these expropriation proceedings.

This is our ruling.

We do not agree that the commissioners' report was without sufficient basis as it was in fact made only after
extensive interviews with persons who, although not necessarily experts, were nonetheless familiar with land values
in the vicinity of the property sought to be expropriated. There was also an ocular inspection of the subject land, to
give the panel a better idea of its real value. It is also not correct to say that the petitioner did not submit any
documentary evidence to support its claim. The record shows that there was, among others, the appraisal report
made by the reputable realty firm of G. Ambrosio, Inc., which Ambrosio himself explained at the trial. 11

Even so, the report and recommendations of the panel of commissioners were not conclusive upon the trial court,
which had the right and discretion to arrive at its own assessment of the land. The findings of the commissioners
were at best only advisory and persuasive and by no means final or binding. As the Court held in the case
of Republic v. Santos: 12

According to Section 8 of Rule 67, the Court is not bound by the commissioners' report. It may make
such order or render such judgement as shall secure to the plaintiff the property essential to the
exercise of his right of condemnation, and to the defendant just compensation for the property
expropriated. This Court may substitute its own estimate of the value as gathered from the record.

What mystifies the Court is why, if the property was really worth P85.00 per square meter in 1985, the petitioner
agreed to sell its other lands, of the same topography as the land in dispute and separated therefrom by only a road,
at only P19.18 per square meter. The sales it made in favor of three different purchasers, and for the said uniform
rate, are embodied in the following evidence submitted by the Republic as:

Exhibit "1" Deed of Sale dated July 18, 1985 between B. H. Berkenkotter and Co., Inc., as vendor,
and Andrea Rodriguez Ilao, et al., as vendees. The property sold for P140,885.76 is covered by TCT
26382 with an area of 7,344 square meters.

Exhibit "2" Deed of Sale dated July 18, 1985 between B. H. Berkenkotter and Co., Inc., as vendors,
and Andrea Rodriguez Ilao, et al., as vendees. The property sold for P107,102.60, is covered by
TCT 26383 with an area of 5,583 square meters.

Exhibit "3" Deed of Sales dated July 18, 1985 between B. H. Berkenkotter and Co., Inc., and vendor,
and Andrea Rodriguez Ilao, as vendee. The property, sold for P152,011.64 is covered by TCT 26384
with an area of 7,924 square meters.

There is no showing that the petitioner had any special reason for granting each of the individual vendees the
extraordinary discount amounting to as much as 75% of its claimed real value of the land. To all appearances, they
were ordinary buyers and probably even land investors or speculators who did not deserve any particular generosity
of bounty form the petitioner. Given this far from extraordinary situation, we find it difficult to understand why the
petitioner, while insisting that the 10,640 square meters under expropriation had a unit price of P85.00, agreed to
sell as many as 7,344 square meters of similar land to the first private buyer, 5,583 square meters to the second,
and 7,924 square meters to the third, and all for only P19.18 per square meter.

The price demanded by the petitioner from the Republic of the Philippines is more than 4 times the price it willingly
accepted from the private vendees. It is also noteworthy that the individual buyers bought the land for their own
private purposes only and not for the public purpose invoked by the Republic and admitted by the petitioner itself.
And no less importantly, the petitioner has not even made any efforts to differentiate the subject property from the
lands sold at the lower rate, to justify the increase in its price by more than 300%.

The petitioner seek to explain its curious conduct by claiming that it had liquidity problems and needed cash when it
entered into the three contracts of sale. If it really was in that predicament, it is strange that it did not even bother to
withdraw, as it had a right to do so, the 10% deposit made by the Republic when it took possession of the subject
property in 1985. As strangely, it also did not accept the government's standing offer, made as early as 1983, to buy
the 10,640 square meters subject of the complaint at P32.00 per square meters, for a total price of P340,480.00.
This would not only have relieved its financial difficulties but could also have avoided the expense and
inconvenience of litigation that up to now have delayed its recovery of the cost of its property. Also, acceptance of
the offer would have been a better deal than selling 20,851 square meters for only P400,000.00 from which, let it be
stressed, the capital gains tax and other expenses of documentation and registration would still have to be
deducted.
The petitioner now submits that the consideration mentioned in deeds of sale is not a reliable index of just
compensation because the parties "tend to undervalue the cost of the property to lower the expenses they would
have to pay for the documents." The expenses presumably refer to the cost of the documentary stamps for the
registration of the property and the capital gains tax to be paid by the vendor to the government. The suggestion is
revealing. There is practically an admission here that the parties to the three transactions did not indicate the real
consideration therefor so they could evade the legitimate taxes and fees that were due the government on the basis
of the correct purchase price.

If this was the purpose of the petitioner when it executed Exhibits 1, 2 and 3, then it is surely hoist now by its own
petard. And rightly so, for it cannot be allowed to profit from its own deception and claim that the subject property
should be assessed at the higher rate it clandestinely agreed upon with the buyers. That is assuming the worst. But
even on the assumption that the petitioner comported itself with all propriety and rectitude and did not falsify the
consideration for the sales, the result would still be the same. Such a posture would signify that it seriously believed
the fair price for its property to be only P19.18 per square meter, and not any lower or higher than that, whoever the
purchaser might be.

The Court is disappointed that the petitioner should demand a higher price for the Republic, which needs the lands
for a public purpose, when it was willing to accept less from the three individual buyers who had only their private
interests to serve. But this is not only a matter of civic spirit. We recognize that the basic issue is the hard-nosed
business of tit for tat. Civic altruism aside, the simple fact is that, whatever its motive, the petitioner cannot now
assert that its property is worth P85.00 per square meter as far as the Republic is concerned although, by its own
voluntary act, it sold similar property to private individuals for only P19.18 per square meter. There is no satisfactory
explanation for this incredible discrimination. The Republic should not pay more simply because it is the Republic,
as if it were a milking cow with unlimited resource to abuse.

It may be asked why the petitioner should not be paid at the rate at least of P32.00, which was the price offered by
Viray and in the complaint for expropriation later filled by the Republic. The Republic had no choice then because
P.D. 1533 fixed the just compensation at the valuation given by the owner of the government, whichever was lower.
The price determined by the Provincial Appraisal Committee was lower. True, the decree has since been declared
unconstitutional in Export Processing Zone Authority v. Dulay. 13 Even so, the fact is that the petitioner rejected that
offer and has up to now been insisting on its own unit price of P85.00.

We agree with the respondent court that by selling its lands in the three deed of sale indicated as Exhibits 1, 2 and
3, at the uniform rate of P19.18 per square meter, the petitioner thereby impliedly admitted that the lands subject of
the expropriation proceeding, being of the same topography and virtually in the same location is the said other
lands, should also be valued at the same rate. This rule of inconsistency is best expressed in the familiar saying,
surely not unknown to the petitioner, that what is sauce for the goose is also sauce for the gander.

WHEREFORE, the petition is DENIED, and it is hereby affirmed that the just compensation for the subject land
should be computed at the rated of P19.18 per square meter. Costs against the petitioner.

SO ORDERED.

MANOTOK VS. CA, May 21, 1987

CASE DIGEST

FACTS:Before us are two petitions. The first one challenges the constitutionality of Presidential Decree
No. 1669 which provides for the expropriation of the property known as the "Tambunting Estate" and
the second challenges the constitutionality of Presidential Decree No.1670 which provides for the
expropriation of the property along the Estero de Sunog-Apog. In both cases, the petitioners maintain that
the two decrees are unconstitutional and should be declared null and void because:

(1) They deprived the petitioners of their properties without due process of law.

(2) The petitioners were denied to their right to just compensation

 (3) The petitioners' right to equal protection of the law was violated.

(4) The decrees are vague, defective, and patently erroneous.

(5) The petitioners' properties are not proper subjects for expropriation considering their location
and other relevant circumstances.

On June 11, 1977, the President of the Philippines issued Letter of Instruction (LOI) No. 555 instituting a
nationwide slum improvement and resettlement program (SIR). On the same date, the President also issued
LOI No. 557, adopting slum improvement as a national housing policy.

In compliance with LOI No. 555, the Governor of Metro Manila issued, on July 21, 1977, Executive Order
No.6-77 adopting the Metropolitan Manila Zonal Improvement Program which included the properties
known as the Tambunting Estate and the Sunog-Apog area in its priority list for a zonal improvement
program (ZIP) because the findings of the representative of the City of Manila and the National Housing
Authority (NHA) described these as blighted communities.

On March 18, 1978, a fire razed almost the entire Tambunting Estate. Following this calamity, the
President and the Metro Manila Governor made public announcement that the national government
would acquire the property for the fire victims. The President also designated the NHA to negotiate with
the owners of the property for the acquisition of the same. This, however, did not materialize as the
negotiations for the purchase of the property failed.

On December 22, 1978, the President issued Proclamation No. 1810 declaring all sites Identified by the Metro
Manila local governments and approved by the Ministry of Human Settlements to be included in the ZIP upon
proclamation of the President. The Tambunting Estate and the Sunog-Apog area were among the sites
included.

On January 28, 1980, the President issued the challenged Presidential Decrees Nos. 1669 and 1670 which
respectively declared the Tambunting Estate and the Sunog-Apog area expropriated.

On April 4, 1980, the National Housing Authority, through its general-manager, wrote the Register of Deeds of
Manila, furnishing it with a certified copy of P.D. Nos. 1669 and 1670 for registration, with the request that the
certificates of title covering the properties in question be cancelled and new certificates of title be issued in the
name of the Republic of the Philippines.

Subsequently, petitioner Elisa R. Manotok, one of the owners of the properties to be expropriated, received
from the NHA a letter informing her that the latter had deposited, on July 16, 1980, with the Philippine National
Bank the total amount of P5,000,000.00 which included the amount of P3,400,000.00 representing the first
annual installment for the Tambunting Estate pursuant to P.D. No. 1669; and another P5,000,000.00 which
also included the amount of P1,600,000.00 representing the first annual installment for the Sunog-Apog area
under P.D. No. 1670. The petitioner was also informed that she was free to withdraw her share in the
properties upon surrender by her of the titles pertaining to said properties and that if petitioner failed to avail
herself of the said offer, the NHA would be constrained to take the necessary legal steps to implement the
decrees.

On August 19, 1980, petitioner Elisa R. Manotok wrote a letter to the NHA alleging, inter alia, that the amounts
of compensation for the expropriation of the properties of the petitioners as fixed in the decrees do not
constitute the "just compensation" envisioned in the Constitution. She expressed veritable doubts about the
constitutionality of the said decrees and informed the NHA that she did not believe that she was obliged to
withdraw the amount of P5,000,000.00 or surrender her titles over the properties.

In the meantime, some officials of the NHA circulated instructions to the tenants-occupants of the properties in
dispute not to pay their rentals to the petitioners for their lease-occupancy of the properties in view of the
passage of P.D. Nos. 1669 and 1670. Hence, the owners of the Tambunting Estate filed a petition to declare
P.D. No. 1669 unconstitutional. The owners of the Sunog-Apog area also filed a similar petition attacking the
constitutionality of P.D. No. 1670.

The petitioners maintain that the Presidential Decrees providing for the direct expropriation of the properties in
question violate their constitutional right to due process and equal protection of the law because by the mere
passage of the said decrees their properties were automatically expropriated and they were immediately
deprived of the ownership and possession thereof without being given the chance to oppose such
expropriation or to contest the just compensation to which they are entitled.

The petitioners argue that the government must first have filed a complaint with the proper court under Rule 67
of the Revised Rules of Court in order to fulfill the requirements of due process. 'They contend that the
determination of just compensation should not have been vested solely with the City Assessor and that a
maximum or fixed amount of compensation should not have been imposed by the said decrees. Petitioners
likewise state that by providing for the maximum amount of just compensation and by directing the City
Assessor to take into consideration the alleged existing conditions of the properties in question, namely: that
no "improvement has been undertaken on the land and that the land is squatted upon by resident families
which should considerably depress the expropriation costs," the City Assessor is forced to accept, as actual
and existing conditions of the property, the foregoing statements in the decrees when in fact the Sunog-Apog
area has been subdivided into subdivision lots and leased to the occupants thereof under contracts of lease,
making them lessees and not squatters as assumed by Presidential Decree No. 1670. Moreover, each
subdivision lot is surrounded by adobe walls constructed by the particular owner of the property: the houses
were required to have septic tanks by the City Hall and the, owners themselves: there is a drainage system;
and there are adequate water facilities.

As far as the Tambunting Estate is concerned, the petitioners maintain that aside from the residential houses in
the area, there are buildings and structures of strong materials on the lots fronting Rizal Avenue Extension,
most of which are leased to proprietors of business establishments under long term contracts of lease which
use the same for their furniture business from which they secure substantial income.

ISSUE: Are the Presidential Decree Nos. 1669 and 1670 constitutional?

HELD:No. The power of eminent domain is inherent in every state and the provisions in the Constitution
pertaining to such power only serve to limit its exercise in order to protect the individual against whose property
the power is sought to be enforced. We pointed out the constitutional limitations in the case of Republic vs.
Juan (92 SCRA 26, 40):

To begin with, it must be emphasized that plaintiff-appellee in this instant case is the Republic of
the Philippines which is exercising its right of eminent domain inherent in it as a body sovereign.
In the exercise of its sovereign right the State is not subject to any limitation other than
those imposed by the Constitution which are: first, the taking must be for a public use;
secondly, the payment of just compensation must be made: and thirdly, due process
must be observed in the taking...

The challenged decrees are uniquely unfair in the procedures adopted and the powers given to the
respondent NHA.

The Tambunting subdivision is summarily proclaimed a blighted area and directly expropriated by
decree without the slightest semblance of a hearing or any proceeding whatsoever. The expropriation
is instant and automatic to take effect immediately upon the signing of the decree. No deposit before
taking is required under the decree. The P3,400,000.00 appropriated from the general fund is not a deposit
but constitutes an installment payment for the property, the maximum price of which is fixed so as not to
exceed P17,000,000.00. There is no provision for any interests to be paid on the unpaid installments spread
out over a period of five years. Not only are the owners given absolutely no opportunity to contest the
expropriation, plead their side, or question the amount of payments fixed by decree, but the decisions,
rulings, orders, or resolutions of the NHA are expressly declared as beyond the reach of judicial
review. An appeal may be made to the Office of the President but the courts are completely enjoined from any
inquiry or participation whatsoever in the expropriation of the subdivision or its incidents.

The due process clause cannot be rendered nugatory everytime a specific decree or law orders the
expropriation of somebody's property and provides its own peculiar manner of taking the same. Neither should
the courts adopt a hands-off policy just because the public use has been ordained as existing by the decree or
the just compensation has been fixed and determined beforehand by a statute.

Although due process does not always necessarily demand that a proceeding be had before a court of law, it
still mandates some form of proceeding wherein notice and reasonable opportunity to be heard are given to the
owner to protect his property rights. We agree with the public respondents that there are exceptional situations
when, in the exercise of the power of eminent domain, the requirement of due process may not necessarily
entail judicial process. But where it is alleged that in the taking of a person's property, his right to due process
of law has been violated, the courts will have to step in and probe into such an alleged violation.

The basis for the exercise of the power of eminent domain is necessity. In the instant petitions, there is no
showing whatsoever as to why the properties involved were singled out for expropriation through
decrees or what necessity impelled the particular choices or selections. In expropriations through
legislation, there are, at least, debates in Congress open to the public, scrutiny by individual members of the
legislature, and very often, public hearings before the statute is enacted. Congressional records can be
examined. In these petitions, the decrees show no reasons whatsoever for the choice of the properties as
housing projects. The anonymous adviser who drafted the decrees for the President's signature cannot be
questioned as to any possible error or partiality, act of vengeance, or other personal motivations which may
have led him to propose the direct expropriation with its onerous provisions.

The Tambunting estate or at least the western half of the subdivision fronting Rizal Avenue Extension is
valuable commercial property. It is located at the junction where three main city streets converge — Rizal
Avenue from downtown Manila, Jose Abad Santos Street from Binondo, and Aurora Boulevard leading to
Retiro Street and other points in Quezon City. The Libiran Furniture Company, alone, which fronts the entrance
to Jose Abad Santos Street is clearly a multi-million peso enterprise. It is a foregone conclusion that the
favored squatters allowed to buy these choice lots would lose no time, once it is possible to do so, to
either lease out or sell their lots to wealthy merchants even as they seek other places where they can
set up new squatter colonies. The public use and social justice ends stated in the whereas clauses of
P.D. 1669 and P.D. 1670 would not be served thereby.

The provision of P.D. 1669 which allows NHA, at its sole option, to put portions of the expropriated area to
commercial use in order to defray the development costs of its housing projects cannot stand constitutional
scrutiny. The Government, for instance, cannot expropriate the flourishing Makati commercial area in order to
earn money that would finance housing projects all over the country. The legislature, according to Guido v.
Rural Progress Administration (84 Phil. 847), may not take the property of one citizen and transfer it to
another, even for a full compensation, when the public interest is not thereby promoted. The
Government still has to prove that expropriation of commercial properties in order to lease them out also
for commercial purposes would be "public use" under the Constitution.

P.D. No. 1670 suffers from a similar infirmity. There is no showing how the President arrived at the
conclusion that the Sunog-Apog area is a blighted community. The many pictures submitted as exhibits
by the petitioners show a well-developed area subdivided into residential lots with either middle-income or
upper class homes. There are no squatters. The provisions of the decree on the relocation of qualified squatter
families and on the re-blocking and re-alignment of existing structures to allow the introduction of basic
facilities and services have no basis in fact The area is well-developed with roads, drainage and sewer
facilities, water connection to the Metropolitan Waterworks and Sewerage System electric connections to
Manila Electric Company, and telephone connections to the Philippine Long Distance Telephone Company.
There are many squatter colonies in Metro Manila in need of upgrading. The Government should have
attended to them first. There is no showing for a need to demolish the existing valuable improvements in
order to upgrade Sunog-Apog.
The decrees, do not by themselves, provide for any form of hearing or procedure by which the
petitioners can question the propriety of the expropriation of their properties or the reasonableness of
the just compensation. Having failed to provide for a hearing, the Government should have filed an
expropriation case under Rule 67 of the Revised Rules of Court but it did not do so. Obviously, it did not deem
it necessary because of the enactment of the questioned decrees which rendered, by their very passage, any
questions with regard to the expropriation of the properties, moot and academic. In effect, the properties, under
the decrees were "automatically expropriated." This became more evident when the NHA wrote the Register of
Deeds and requested her to cancel the certificate of titles of the petitioners, furnishing said Register of Deeds
only with copies of the decrees to support its request.

Another infirmity from which the questioned decrees suffer is the determination of just compensation.

Pursuant to P.D. 1533, the basis of the just compensation is the market value of the property "prior to the
recommendation or decision of the appropriate Government Office to acquire the property." (see also Republic
v. Santos, (1 41 SCRA 30, 35).

In these petitions, a maximum amount of compensation was imposed by the decrees and these amounts were
only a little more than the assessed value of the properties in 1978 when, according to the government, it
decided to acquire said properties.

The decision of the government to acquire a property through eminent domain should be made known to the
property owner through a formal notice wherein a hearing or a judicial proceeding is contemplated as provided
for in Rule 67 of the Rules of Court. This shall be the time of reckoning the value of the property for the
purpose of just compensation. A television or news announcement or the mere fact of the property's inclusion
in the Zonal Improvement Program (ZIP) cannot suffice because for the compensation to be just, it must
approximate the value of the property at the time of its taking and the government can be said to have decided
to acquire or take the property only after it has, at the least, commenced a proceeding, judicial or otherwise, for
this purpose.

P.D.s 1669 and 1670 go further. There is no mention of any market value declared by the owner. Sections 6 of
the two decrees peg just compensation at the market value determined by the City Assessor. The City
Assessor is warned by the decrees to "consider existing conditions in the area notably, that no improvement
has been undertaken on the land and that the land is squatted upon by resident families which should
considerably depress the expropriation costs."

In other cases involving expropriations under P.D. Nos. 76, 464, 794, and 1533, this Court has decided to
invalidate the mode of fixing just compensation under said decrees. (See Export Processing Zone Authority v.
Hon. Ceferino E. Dulay, et al. G.R. No. 59603) With more reason should the method in P.D.s 1669 and 1670
be declared infirm.

The market value stated by the city assessor alone cannot substitute for the court's judgment in expropriation
proceedings. It is violative of the due process and the eminent domain provisions of the Constitution to deny to
a property owner the opportunity to prove that the valuation made by a local assessor is wrong or prejudiced.
The statements made in tax documents by the assessor may serve as one of the factors to be
considered but they cannot exclude or prevail over a court determination made after expert
commissioners have examined the property and all pertinent circumstances are taken into account
and after the parties have had the opportunity to fully plead their cases before a competent and
unbiased tribunal.

The maximum amounts, therefore, which were provided for in the questioned decrees cannot
adequately reflect the value of the property and, in any case, should not be binding on the property
owners for, as stated in the above cases, there are other factors to be taken into consideration. We, thus, find
the questioned decrees to likewise transgress the petitioners' right to just compensation. Having violated the
due process and just compensation guarantees, P. D. Nos. 1669 and 1670 are unconstitutional and void.
FULL CASE

GUTIERREZ, JR., J.:

Before us are two petitions. The first one challenges the constitutionality of Presidential Decree No. 1669 which
provides for the expropriation of the property known as the "Tambunting Estate" and the second challenges the
constitutionality of Presidential Decree No.1670 which provides for the expropriation of the property along the Estero
de Sunog-Apog. In both cases, the petitioners maintain that the two decrees are unconstitutional and should be
declared null and void because:

(1) They deprived the petitioners of their properties without due process of law.

(2) The petitioners were denied to their right to just compensation

(3) The petitioners' right to equal protection of the law was violated.

(4) The decrees are vague, defective, and patently erroneous.

(5) The petitioners' properties are not proper subjects for expropriation considering their location and
other relevant circumstances.

On June 11, 1977, the President of the Philippines issued Letter of Instruction (LOI) No. 555 instituting a nationwide
slum improvement and resettlement program (SIR). On the same date, the President also issued LOI No. 557,
adopting slum improvement as a national housing policy.

In compliance with LOI No. 555, the Governor of Metro Manila issued, on July 21, 1977, Executive Order No.6-77
adopting the Metropolitan Manila Zonal Improvement Program which included the properties known as the
Tambunting Estate and the Sunog-Apog area in its priority list for a zonal improvement program (ZIP) because the
findings of the representative of the City of Manila and the National Housing Authority (NHA) described these as
blighted communities.

On March 18, 1978, a fire razed almost the entire Tambunting Estate. Following this calamity, the President and the
Metro Manila Governor made public announcement that the national government would acquire the property for the
fire victims. The President also designated the NHA to negotiate with the owners of the property for the acquisition
of the same. This, however, did not materialize as the negotiations for the purchase of the property failed.

On December 22, 1978, the President issued Proclamation No. 1810 declaring all sites Identified by the Metro
Manila local governments and approved by the Ministry of Human Settlements to be included in the ZIP upon
proclamation of the President. The Tambunting Estate and the Sunog-Apog area were among the sites included.

On January 28, 1980, the President issued the challenged Presidential Decrees Nos. 1669 and 1670 which
respectively declared the Tambunting Estate and the Sunog-Apog area expropriated.

Presidential Decree No. 1669, provides, among others:

Section 1. The real properties known as the "Tambunting Estate" and covered by TCT Nos. 119059,
122450, 122459, 122452 and Lots Nos. 1- A, 1-C, 1-D, l-E, 1-F and 1-H of (LRC) Psd-230517
(Previously covered by TCT No. 119058) of the Register of Deeds of Manila with an area of
52,688.70 square meters, more or less are hereby declared expropriated. The National Housing
Authority hereinafter referred to as the "Authority" is designated administrator of the National
Government with authority to immediately take possession, control, disposition, with the power of
demolition of the expropriated properties and their improvements and shall evolve and implement a
comprehensive development plan for the condemned properties.

xxx xxx xxx

 Section 6. Notwithstanding any provision of law or decree to the contrary and for the purpose of
expropriating this property pegged at the -.market value determined by the City Assessor pursuant to
Presidential Decree No. 76, as amended, particularly by Presidential Decree No. 1533 which is in
force and in effect at the time of the issuance of this decree. In assessing the market value, the City
Assessor pursuant consider existing conditions in the area notably, that no improvement has been
undertaken on the land and that the land is squatted upon by resident families which should
considerably depress the expropriation cost. Subject to the foregoing, the just compensation for the
above property should not exceed a maximum of SEVENTEEN MILLION PESOS (Pl7,000,000.00)
which shall be payable to the owners within a period of five (5) years in five (5) equal installments.

Presidential Decree No. 1670, on the other hand, provides:

Section 1. The real property along the Estero de Sunog-Apog in Tondo, Manila formerly consisting of
Lots Nos 55-A, 55-B and 55-C, Block 2918 of the subdivision plan Psd-1 1746, covered by TCT Nos.
49286, 49287 and 49288, respectively, of the Registry of Deeds of Manila, and formerly owned by
the Manotok Realty, Inc., with an area of 72,428.6 square meters, more or less, is hereby declared
expropriated. The National Housing Authority hereinafter referred to as the 'Authority' is designated
administrator of the National Government with authority to immediately take possession, control and
disposition, with the power of demolition of the expropriated properties and their improvements and
shall evolve and imagine implement a comprehensive development plan for the condemned
properties.

xxx xxx xxx

Section 6. Notwithstanding any provision of law or decree to the contrary and for the purpose of
expropriating this property pegged at the market value determined by the City Assessor pursuant to
Presidential Decree No. 76, as amended, particularly by Presidential Decree No. 1533 which is in
force and in effect at the time of the issuance of this decree. In assessing the market value, the City
Assessor shall consider existing conditions in the area notably, that no improvement has been
undertaken on the land and that the land is squatted upon by resident families which should
considerably depress the expropriation cost. Subject to the foregoing, the just compensation for the
above property should not exceed a maximum of EIGHT MILLION PESOS (P8,000,000.00), which
shall be payable to the owners within a period of five (5) years in five equal installment.

On April 4, 1980, the National Housing Authority, through its general-manager, wrote the Register of Deeds of
Manila, furnishing it with a certified copy of P.D. Nos. 1669 and 1670 for registration, with the request that the
certificates of title covering the properties in question be cancelled and new certificates of title be issued in the name
of the Republic of the Philippines.

However, the Register of Deeds in her letter to NHA's general-manager, requested the submission of the owner's
copy of the certificates of title of the properties in question to enable her to implement the aforementioned decrees.

Subsequently, petitioner Elisa R. Manotok, one of the owners of the properties to be expropriated, received from the
NHA a letter informing her that the latter had deposited, on July 16, 1980, with the Philippine National Bank the total
amount of P5,000,000.00 which included the amount of P3,400,000.00 representing the first annual installment for
the Tambunting Estate pursuant to P.D. No. 1669; and another P5,000,000.00 which also included the amount of
P1,600,000.00 representing the first annual installment for the Sunog-Apog area under P.D. No. 1670. The
petitioner was also informed that she was free to withdraw her share in the properties upon surrender by her of the
titles pertaining to said properties and that if petitioner failed to avail herself of the said offer, the NHA would be
constrained to take the necessary legal steps to implement the decrees.

On August 19, 1980, petitioner Elisa R. Manotok wrote a letter to the NHA alleging, inter alia, that the amounts of
compensation for the expropriation of the properties of the petitioners as fixed in the decrees do not constitute the
"just compensation" envisioned in the Constitution. She expressed veritable doubts about the constitutionality of the
said decrees and informed the NHA that she did not believe that she was obliged to withdraw the amount of
P5,000,000.00 or surrender her titles over the properties.
In the meantime, some officials of the NHA circulated instructions to the tenants-occupants of the properties in
dispute not to pay their rentals to the petitioners for their lease-occupancy of the properties in view of the passage of
P.D. Nos. 1669 and 1670. Hence, the owners of the Tambunting Estate filed a petition to declare P.D. No. 1669
unconstitutional. The owners of the Sunog-Apog area also filed a similar petition attacking the constitutionality of
P.D. No. 1670.

On September 27, 1982, the lessees of the Tambunting Estate and the Sunog-Apog area filed a motion for leave to
intervene together with their petition for intervention alleging that they are themselves owners of the buildings and
houses built on the properties to be expropriated and as such, they are real parties-in-interest to the present
petitions.

The petitioners maintain that the Presidential Decrees providing for the direct expropriation of the properties in
question violate their constitutional right to due process and equal protection of the law because by the mere
passage of the said decrees their properties were automatically expropriated and they were immediately deprived of
the ownership and possession thereof without being given the chance to oppose such expropriation or to contest the
just compensation to which they are entitled.

The petitioners argue that the government must first have filed a complaint with the proper court under Rule 67 of
the Revised Rules of Court in order to fulfill the requirements of due process. 'They contend that the determination
of just compensation should not have been vested solely with the City Assessor and that a maximum or fixed
amount of compensation should not have been imposed by the said decrees. Petitioners likewise state that by
providing for the maximum amount of just compensation and by directing the City Assessor to take into
consideration the alleged existing conditions of the properties in question, namely: that no "improvement has been
undertaken on the land and that the land is squatted upon by resident families which should considerably depress
the expropriation costs," the City Assessor is forced to accept, as actual and existing conditions of the property, the
foregoing statements in the decrees when in fact the Sunog-Apog area has been subdivided into subdivision lots
and leased to the occupants thereof under contracts of lease, making them lessees and not squatters as assumed
by Presidential Decree No. 1670. Moreover, each subdivision lot is surrounded by adobe walls constructed by the
particular owner of the property: the houses were required to have septic tanks by the City Hall and the, owners
themselves: there is a drainage system; and there are adequate water facilities.

As far as the Tambunting Estate is concerned, the petitioners maintain that aside from the residential houses in the
area, there are buildings and structures of strong materials on the lots fronting Rizal Avenue Extension, most of
which are leased to proprietors of business establishments under long term contracts of lease which use the same
for their furniture business from which they secure substantial income.

The Government as represented by the Solicitor-General and the NHA, on the other hand, contends that the power
of eminent domain is inherent in the State and when the legislature itself or the President through his law-making
prerogatives exercises this power, the public use and public necessity of the expropriation, and the fixing of the just
compensation become political in nature, and the courts must respect the decision of the law-making body, unless
the legislative decision is clearly and evidently arbitrary, unreasonable, and devoid of logic and reason; and that all
that is required is that just compensation be determined with due process of law which does not necessarily entail
judicial process.

The public respondents, further argue that since the Constitution lays down no procedure by which the authority to
expropriate may be carried into effect, Rule 67 of the Revised Rules of Court which is invoked by the petitioners
may be said to have been superseded by the challenged decrees insofar as they are applicable to the properties in
question and, therefore, there is no need to follow the said rule for due process to be observed. Moreover, the public
respondents maintain that it cannot be fairly said that the petitioners' valuations were ignored in fixing the ceiling
amount of the properties in question because the only reason why the determination appeared unilateral was
because said petitioners did not actually state any valuation in their sworn declaration of true market value of their
respective properties, and as far as payment in installments is concerned, the same can be justified by the fact that
the properties in question are only two of the four hundred and fifteen (415) slums and blighted areas in Metro
Manila and two of the two hundred and fifty one (251) sites for ungrading under the ZIP and that to immediately
acquire and upgrade all those sites would obviously entail millions and millions of pesos. The financial constraints,
therefore, require a system of payment of just compensation. Thus, the respondent states that the payment of just
compensation in installments did not arise out of ill will or the desire to discriminate.
We start with fundamentals.

The power of eminent domain is inherent in every state and the provisions in the Constitution pertaining to such
power only serve to limit its exercise in order to protect the individual against whose property the power is sought to
be enforced. We pointed out the constitutional limitations in the case of Republic vs. Juan (92 SCRA 26, 40):

To begin with, it must be emphasized that plaintiff-appellee in this instant case is the Republic of the
Philippines which is exercising its right of eminent domain inherent in it as a body sovereign. In the
exercise of its sovereign right the State is not subject to any limitation other than those imposed by
the Constitution which are: first, the taking must be for a public use; secondly, the payment of just
compensation must be made: and thirdly, due process must be observed in the taking...

The challenged decrees are uniquely unfair in the procedures adopted and the powers given to the respondent
NHA.

The Tambunting subdivision is summarily proclaimed a blighted area and directly expropriated by decree without the
slightest semblance of a hearing or any proceeding whatsoever. The expropriation is instant and automatic to take
effect immediately upon the signing of the decree. No deposit before taking is required under the decree. The
P3,400,000.00 appropriated from the general fund is not a deposit but constitutes an installment payment for the
property, the maximum price of which is fixed so as not to exceed P17,000,000.00. There is no provision for any
interests to be paid on the unpaid installments spread out over a period of five years. Not only are the owners given
absolutely no opportunity to contest the expropriation, plead their side, or question the amount of payments fixed by
decree, but the decisions, rulings, orders, or resolutions of the NHA are expressly declared as beyond the reach of
judicial review. An appeal may be made to the Office of the President but the courts are completely enjoined from
any inquiry or participation whatsoever in the expropriation of the subdivision or its incidents.

In some decisions promulgated before the February, 1986 political upheaval, this Court presumed the validity of the
beautiful "whereases" in presidential decrees governing expropriations and legitimated takings of private property
which, in normal times, would have been constitutionally suspect. There were then the avowed twin purposes of
martial law to first quell the Communist rebellion and second to reform society. Thus, in Haguisan v. Emilia (131
SCRA 517) the Court sustained the contention that prior hearing is no longer necessary under P.D. No. 42 in
ascertaining the value of the property to be expropriated and before the government may take possession. There
was a disregard in the decree for Section 2 of Rule 67 which requires the court having jurisdiction over the
proceedings to promptly ascertain and fix the provisional value of the property for purposes of the initial taking or
entry by the Government into the premises. In National Housing Authority v. Reyes (123 SCRA 245) the Court
upheld the decrees which state that the basis for just compensation shall be the market value declared by the owner
for tax purposes or such market value as determined by the government assessor, whichever is lower.

Subsequent developments have shown that a disregard for basic liberties and the shortcut methods embodied in the
decrees on expropriation do not achieve the desired results. Far from disappearing, squatter colonies and blighted
areas have multiplied and proliferated. It appears that constitutionally suspect methods or authoritarian procedures
cannot, be the basis for social justice. A program to alleviate problems of the urban poor which is well studied,
adequately funded, genuinely sincere, and more solidly grounded on basic rights and democratic procedures is
needed.

We re-examine the decisions validating expropriations under martial law and apply established principles of justice
and fairness which have been with us since the advent of constitutional government. We return to older and more
sound precedents.

The due process clause cannot be rendered nugatory everytime a specific decree or law orders the expropriation of
somebody's property and provides its own peculiar manner of taking the same. Neither should the courts adopt a
hands-off policy just because the public use has been ordained as existing by the decree or the just compensation
has been fixed and determined beforehand by a statute.

The case of Dohany v. Rogers, (74 L.ed. 904.'912, 281. U.S. 362-370) underscores the extent by which the due
process clause guarantees protection from arbitrary exercise of the power of eminent domain.
 The due process clause does not guarantee to the citizen of a state any particular form or method of
state procedure. Under it he may neither claim a right to trial by jury nor a right of appeal. Its
requirements are satisfied if he has reasonable opportunity to be heard and to present his claim or
defense, due regard being had to the nature of the proceeding and the character of the rights which
may be affected by it. Reetz v. Michigan, 188 U.S. 505, 508, 47 L.ed. 563, 566, 23 Sup. Ct. Rep.
390; Missouri ex rel. Hurwitz v. North, 271 U.S. 40, 70 L.ed. 818, 46 Sup. Ct. Rep. 384: Bauman v.
Ross, 167 U.S. 548, 593, 42 L.ed. 270, 289, 17 Sup. Ct. Rep. 966; A. Backus Jr. & Sons v. Fort
Street Union Depot Co. 169 U.S. 569, 42 L. ed. 859, 18 Sup. Ct. Rep. 445.

In other words, although due process does not always necessarily demand that a proceeding be had before a court
of law, it still mandates some form of proceeding wherein notice and reasonable opportunity to be heard are given to
the owner to protect his property rights. We agree with the public respondents that there are exceptional situations
when, in the exercise of the power of eminent domain, the requirement of due process may not necessarily entail
judicial process. But where it is alleged that in the taking of a person's property, his right to due process of law has
been violated, the courts will have to step in and probe into such an alleged violation.

Thus, certain portions of the decision in De Knecht v. Bautista, (100 SCRA 660, 666-667) state:

There is no question as to the right of the Republic of the Philippines to take private property for
public use upon the payment of just compensation. Section 2, Article IV of the Constitution of the
Philippines provides: 'Private property shall not be taken for public use without just compensation.

It is recognized, however, that the government may not capriciously or arbitrarily choose what
private property should be taken. In J.M. Tuazon & Co., Inc. v. Land tenure Administration, 31 SCRA
413, 433, the Supreme Court said:

xxx xxx xxx

It is obvious then that a land-owner is covered by the mantle of protection due process affords. It is a
mandate of reason. It frowns on arbitrariness, it is the antithesis of any governmental act that
smacks of whim or caprice. It negates state power to act in an oppressive manner. It is, as had been
stressed so often, the embodiment of the sporting Idea of fair play. In that sense, it stands as a
guaranty of justice. 'That is the standard that must be met by any governmental agency in the
exercise of whatever competence is entrusted to it As was so emphatically stressed by the present
Chief Justice, 'Acts of Congress, as well as those of the Executive, can deny due process only under
pain of nullity...

In the same case the Supreme Court concluded:

With due recognition then of the power of Congress to designate the particular property to be taken
and how much thereof may be condemned in the exercise of the power of expropriation, it is still a
judicial question whether in the exercise of such competence, the party adversely affected is the
victim of partiality and prejudice, That the equal protection clause will not allow. (p. 436)

The basis for the exercise of the power of eminent domain is necessity. This Court stated in City of Manila v.
Chinese Community of Manila (40 Phil. 349) that "(t)he very foundation of the right to exercise eminent domain is a
genuine necessity and that necessity must be of a public character.

In City of Manila v. Arellano Law Colleges (85 Phil. 663), we reiterated that a necessity must exist for the taking of
private property for the proposed uses and purposes but accepted the fact that modern decisions do not call for
absolute necessity. It is enough if the condemnor can show a reasonable or practical necessity, which of course,
varies with the time and peculiar circumstances of each case.

In the instant petitions, there is no showing whatsoever as to why the properties involved were singled out for
expropriation through decrees or what necessity impelled the particular choices or selections. In expropriations
through legislation, there are, at least, debates in Congress open to the public, scrutiny by individual members of the
legislature, and very often, public hearings before the statute is enacted. Congressional records can be examined.
In these petitions, the decrees show no reasons whatsoever for the choice of the properties as housing projects.
The anonymous adviser who drafted the decrees for the President's signature cannot be questioned as to any
possible error or partiality, act of vengeance, or other personal motivations which may have led him to propose the
direct expropriation with its onerous provisions.

The Tambunting estate or at least the western half of the subdivision fronting Rizal Avenue Extension is valuable
commercial property. It is located at the junction where three main city streets converge — Rizal Avenue from
downtown Manila, Jose Abad Santos Street from Binondo, and Aurora Boulevard leading to Retiro Street and other
points in Quezon City. The Libiran Furniture Company, alone, which fronts the entrance to Jose Abad Santos Street
is clearly a multi-million peso enterprise. It is a foregone conclusion that the favored squatters allowed to buy these
choice lots would lose no time, once it is possible to do so, to either lease out or sell their lots to wealthy merchants
even as they seek other places where they can set up new squatter colonies. The public use and social justice ends
stated in the whereas clauses of P.D. 1669 and P.D. 1670 would not be served thereby.

The provision of P.D. 1669 which allows NHA, at its sole option, to put portions of the expropriated area to
commercial use in order to defray the development costs of its housing projects cannot stand constitutional scrutiny.
The Government, for instance, cannot expropriate the flourishing Makati commercial area in order to earn money
that would finance housing projects all over the country. The leading case of Guido v. Rural Progress
Administration (84 Phil. 847) may have been modified in some ways by the provisions of the new Constitution on
agrarian and urban land reform and on housing. The principle of non-appropriation of private property for private
purposes, however, remains. The legislature, according to the Guido case, may not take the property of one citizen
and transfer it to another, even for a full compensation, when the public interest is not thereby promoted. The
Government still has to prove that expropriation of commercial properties in order to lease them out also for
commercial purposes would be "public use" under the Constitution.

P.D. No. 1670 suffers from a similar infirmity. There is no showing how the President arrived at the conclusion that
the Sunog-Apog area is a blighted community. The many pictures submitted as exhibits by the petitioners show a
well-developed area subdivided into residential lots with either middle-income or upper class homes. There are no
squatters. The provisions of the decree on the relocation of qualified squatter families and on the re-blocking and re-
alignment of existing structures to allow the introduction of basic facilities and services have no basis in fact The
area is well-developed with roads, drainage and sewer facilities, water connection to the Metropolitan Waterworks
and Sewerage System electric connections to Manila Electric Company, and telephone connections to the
Philippine Long Distance Telephone Company. There are many squatter colonies in Metro Manila in need of
upgrading. The Government should have attended to them first. There is no showing for a need to demolish the
existing valuable improvements in order to upgrade Sunog-Apog.

After a careful examination of the questioned decrees, we find P.D. Nos. 1669 and 1670 to be violative of the
petitioners' right to due process of law and, therefore, they must fail the test of constitutionality.

The decrees, do not by themselves, provide for any form of hearing or procedure by which the petitioners can
question the propriety of the expropriation of their properties or the reasonableness of the just compensation.
Having failed to provide for a hearing, the Government should have filed an expropriation case under Rule 67 of the
Revised Rules of Court but it did not do so. Obviously, it did not deem it necessary because of the enactment of the
questioned decrees which rendered, by their very passage, any questions with regard to the expropriation of the
properties, moot and academic. In effect, the properties, under the decrees were "automatically expropriated." This
became more evident when the NHA wrote the Register of Deeds and requested her to cancel the certificate of titles
of the petitioners, furnishing said Register of Deeds only with copies of the decrees to support its request.

This is hardly the due process of law which the state is expected to observe when it exercises the power of eminent
domain.

The government states that there is no arbitrary determination of the fair market value of the property by the
government assessors because if the owner is not satisfied with the assessor's action, he may within sixty (60) days
appeal to the Board of Assessment Appeals of the province or city as the case may be and if said owner is still
unsatisfied, he may appeal further to the Central Board of Assessment Appeals pursuant to P.D. No. 464. The
Government argues that with this procedure, the due process requirement is fulfilled.

We cannot sustain this argument.

Presidential Decree No. 464, as amended, otherwise known as the Real Property Tax Code, provides for the
procedure on how to contest assessments but does not deal with questions as to the propriety of the expropriation
and the manner of payment of just compensation in the exercise of the power of eminent domain. We find this
wholly unsatisfactory. It cannot in anyway substitute for the expropriation proceeding under Rule 67 of the Revised
Rules of Court.

Another infirmity from which the questioned decrees suffer is the determination of just compensation.

Pursuant to P.D. 1533, the basis of the just compensation is the market value of the property "prior to the
recommendation or decision of the appropriate Government Office to acquire the property." (see also Republic v.
Santos, (1 41 SCRA 30, 35).

In these petitions, a maximum amount of compensation was imposed by the decrees and these amounts were only
a little more than the assessed value of the properties in 1978 when, according to the government, it decided to
acquire said properties.

The fixing of the maximum amounts of compensation and the bases thereof which are the assessed values of the
properties in 1978 deprive the petitioner of the opportunity to prove a higher value because, the actual or symbolic
taking of such properties occurred only in 1980 when the questioned decrees were promulgated.

According to the government, the cut-off year must be 1978 because it was in this year that the government decided
to acquire the properties and in the case of the Tambunting Estate, the President even made a public
announcement that the government shall acquire the estate for the fire victims.

The decision of the government to acquire a property through eminent domain should be made known to the
property owner through a formal notice wherein a hearing or a judicial proceeding is contemplated as provided for in
Rule 67 of the Rules of Court. This shall be the time of reckoning the value of the property for the purpose of just
compensation. A television or news announcement or the mere fact of the property's inclusion in the Zonal
Improvement Program (ZIP) cannot suffice because for the compensation to be just, it must approximate the value
of the property at the time of its taking and the government can be said to have decided to acquire or take the
property only after it has, at the least, commenced a proceeding, judicial or otherwise, for this purpose.

In the following cases, we have upheld the determination of just compensation and the rationale behind it either at
the time of the actual taking of the government or at the time of the judgment by the court, whichever came first.

Municipality of Daet v. Court of Appeals, (93 SCRA 503, 506, 519):

...And in the case of J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413, the
Court, speaking thru now Chief Justice Fernando, reiterated the 'wen-settled (rule) that just
compensation means the equivalent for the value of the property at the time of its taking. Anything
beyond that is more and anything short of that is less, than just compensation. It means a fair and
full equivalent for the loss sustained, which is the measure of the indemnity, not whatever gain would
accrue to the expropriating entity.

xxx xxx xxx

We hold that the decision of the Court of Appeals fixing the market value of the property to be that
obtaining, at least, as of the date of the rendition of the judgment on December 2, 1969 as prayed by
private respondent, which the Court fixed at P200.00 per square meter is in conformity with doctrinal
rulings hereinabove cited that the value should be fixed as of the time of the taking of the possession
of the property because firstly, at the time judgment was rendered on December 2, 1969, petitioner
had not actually taken possession of the property sought to be expropriated and secondly, We find
the valuation determined by the Court of Appeals to be just, fair and reasonable.

National Power Corporation v. Court of Appeals, (1 29 SCRA 665, 673):

xxx xxx xxx

 (5) And most importantly,on the issue of just compensation, it is now settled doctrine, following the
leading case of Alfonso v. Pasay City, (1,06 PhiL 1017 (1960)), that no determine due compensation
for lands appropriated by the Government, the basis should be the price or value at the time it was
taken from the owner and appropriated by the Government.

The owner of property expropriated by the State is entitled to how much it was worth at the time of
the taking. This has been clarified in Republic v. PNB (1 SCRA 957) thus: 'It is apparent from the
foregoing that, when plaintiff takes possession before the institution of the condemnation
proceedings, the value should be fixed as of the time of the taking of said possession, not of filing of
the complainant, and that the latter should be the basis for the determination of the value, when the
of the property involved coincides with or is subsequent to, the commencement of the proceedings.
Indeed, otherwise, the provision of Rule 619, section 3, directing that compensation "be determined
as of the date of the filing of the complaints" would never be operative. municipality of La Carlota v.
The Spouses Baltazar, et al., 45 SCRA 235 (1972)).

Furthermore, the so-called "conditions" of the properties should not be determined through a decree but must be
shown in an appropriate proceeding in order to arrive at a just valuation of the property. In the case of Garcia v.
Court of Appeals, (102 SCRA 597, 608) we ruled:

...Hence, in estimating the market value, all the capabilities of the property and all the uses to which
it may be applied or for which it is adapted are to be considered and not merely the condition it is in
at the time and the use to which it is then applied by the owner. All the facts as to the condition of the
property and its surroundings, its improvements and capabilities may be shown and considered in
estimating its value.

In P.D. No. 76, P.D. No. 464, P.D. No. 794, and P.D. No. 1533, the basis for determining just compensation was
fixed at the market value declared by the owner or the market value determined by the assessor, whichever is lower.

P.D.s 1669 and 1670 go further. There is no mention of any market value declared by the owner. Sections 6 of the
two decrees peg just compensation at the market value determined by the City Assessor. The City Assessor is
warned by the decrees to "consider existing conditions in the area notably, that no improvement has been
undertaken on the land and that the land is squatted upon by resident families which should considerably depress
the expropriation costs."

In other cases involving expropriations under P.D. Nos. 76, 464, 794, and 1533, this Court has decided to invalidate
the mode of fixing just compensation under said decrees. (See Export Processing Zone Authority v. Hon. Ceferino
E. Dulay, et al. G.R. No. 59603) With more reason should the method in P.D.s 1669 and 1670 be declared infirm.

The market value stated by the city assessor alone cannot substitute for the court's judgment in expropriation
proceedings. It is violative of the due process and the eminent domain provisions of the Constitution to deny to a
property owner the opportunity to prove that the valuation made by a local assessor is wrong or prejudiced. The
statements made in tax documents by the assessor may serve as one of the factors to be considered but they
cannot exclude or prevail over a court determination made after expert commissioners have examined the property
and all pertinent circumstances are taken into account and after the parties have had the opportunity to fully plead
their cases before a competent and unbiased tribunal. To enjoin this Court by decree from looking into alleged
violations of the due process, equal protection, and eminent domain clauses of the Constitution is impermissible
encroachment on its independence and prerogatives.

The maximum amounts, therefore, which were provided for in the questioned decrees cannot adequately reflect the
value of the property and, in any case, should not be binding on the property owners for, as stated in the above
cases, there are other factors to be taken into consideration. We, thus, find the questioned decrees to likewise
transgress the petitioners' right to just compensation. Having violated the due process and just compensation
guarantees, P. D. Nos. 1669 and 1670 are unconstitutional and void.

WHEREFORE, the petitions in G.R. No. 55166 and G.R. No. 55167 are hereby GRANTED. Presidential Decree
Numbers 1669 and 1670 which respectively proclaimed the Tambunting Estate and the Estero de Sunog-Apog area
expropriated, are declared unconstitutional and, therefore, null and void ab initio.
SO ORDERED.

EPZA VS. DULAY, APRIL 29, 1987

CASE DIGEST

FACTS:The question raised in this petition is whether or not Presidential Decrees Numbered 76, 464, 794 and
1533 have repealed and superseded Sections 5 to 8 of Rule 67 of the Revised Rules of Court, such that in
determining the just compensation of property in an expropriation case, the only basis should be its market
value as declared by the owner or as determined by the assessor, whichever is lower.

On January 15, 1979, the President of the Philippines, issued Proclamation No. 1811, reserving a certain
parcel of land of the public domain situated in the City of Lapu-Lapu, Island of Mactan, Cebu and
covering a total area of 1,193,669 square meters, more or less, for the establishment of an export
processing zone by petitioner Export Processing Zone Authority (EPZA).

Not all the reserved area, however, was public land. The proclamation included, among others, four (4)
parcels of land with an aggregate area of 22,328 square meters owned and registered in the name of
the private respondent, San Antonio Development Corp. The petitioner, therefore, offered to purchase the
parcels of land from the respondent in acccordance with the valuation set forth in Section 92, Presidential
Decree (P.D.) No. 464, as amended. The parties failed to reach an agreement regarding the sale of the
property.

The petitioner filed with the then Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, a complaint for
expropriation with a prayer for the issuance of a writ of possession against the private respondent, to
expropriate the aforesaid parcels of land pursuant to P.D. No. 66, as amended, which empowers the petitioner
to acquire by condemnation proceedings any property for the establishment of export processing zones, in
relation to Proclamation No. 1811, for the purpose of establishing the Mactan Export Processing Zone.

On October 21, 1980, the respondent judge issued a writ of possession authorizing the petitioner to take
immediate possession of the premises. On February 17, 1981, the respondent judge issued the order of
condemnation declaring the petitioner as having the lawful right to take the properties sought to be
condemned, upon the payment of just compensation to be determined as of the filing of the complaint.
The respondent judge also issued a second order, subject of this petition, appointing certain persons as
commissioners to ascertain and report to the court the just compensation for the properties sought to be
expropriated.

On June 19, 1981, the three commissioners submitted their consolidated report recommending the
amount of P15.00 per square meter as the fair and reasonable value of just compensation for the
properties.

On July 29, 1981, the petitioner filed a Motion for Reconsideration of the order of February 19, 1981 and
Objection to Commissioner's Report on the grounds that P.D. No. 1533 has superseded Sections 5 to 8 of
Rule 67 of the Rules of Court on the ascertainment of just compensation through commissioners; and
that the compensation must not exceed the maximum amount set by P.D. No. 1533.

The petitioner flied this present petition for certiorari and mandamus with preliminary restraining order,
enjoining the trial court from enforcing the order dated February 17, 1981 and from further proceeding with the
hearing of the expropriation case.

ISSUE:Is the exclusive and mandatory mode of determining just compensation in P.D. No. 1533 valid and
constitutional?
HELD:No. The petitioner maintains that the respondent judge acted in excess of his jurisdiction and
with grave abuse of discretion in denying the petitioner's motion for reconsideration and in setting the
commissioner's report for hearing because under P.D. No. 1533, which is the applicable law herein, the
basis of just compensation shall be the fair and current market value declared by the owner of the
property sought to be expropriated or such market value as determined by the assessor, whichever is
lower. Therefore, there is no more need to appoint commissioners as prescribed by Rule 67 of the
Revised Rules of Court and for said commissioners to consider other highly variable factors in order
to determine just compensation. The petitioner further maintains that P.D. No. 1533 has vested on the
assessors and the property owners themselves the power or duty to fix the market value of the properties and
that said property owners are given the full opportunity to be heard before the Local Board of Assessment
Appeals and the Central Board of Assessment Appeals. Thus, the vesting on the assessor or the property
owner of the right to determine the just compensation in expropriation proceedings, with appropriate procedure
for appeal to higher administrative boards, is valid and constitutional.

Prior to the promulgation of P.D. Nos. 76, 464, 794 and 1533, this Court has interpreted the eminent
domain provisions of the Constitution and established the meaning, under the fundamental law, of just
compensation and who has the power to determine it.

In Municipality of Daet v. Court of Appeals (93 SCRA 503, 516), the Court stated that just compensation
means the equivalent for the value of the property at the time of its taking. Anything beyond that is more and
anything short of that is less, than just compensation. It means a fair and full equivalent for the loss sustained,
which is the measure of the indemnity, not whatever gain would accrue to the expropriating entity."

In Republic v. Santos (141 SCRA 30, 35-36), the Court said that "According to section 8 of Rule 67, the
court is not bound by the commissioners' report. It may make such order or render such judgment as
shall secure to the plaintiff the property essential to the exercise of his right of condemnation, and to
the defendant just compensation for the property expropriated. This Court may substitute its own
estimate of the value as gathered from the record (Manila Railroad Company v. Velasquez, 32 Phil. 286)."

However, the promulgation of the aforementioned decrees practically set aside the above and many
other precedents hammered out in the course of evidence-laden, well argued, fully heard, studiously
deliberated, and judiciously considered court proceedings. The decrees categorically and peremptorily
limited the definition of just compensation thus:

P.D. No. 76:

"For purposes of just compensation in cases of private property acquired by the government for public
use, the basis shall be the current and fair market value declared by the owner or administrator, or such
market value as determined by the Assessor, whichever is lower."

P.D. No. 464:

"Section 92. Basis for payment of just compensation in expropriation proceedings. — In determining
just compensation which private property is acquired by the government for public use, the basis shall
be the market value declared by the owner or administrator or anyone having legal interest in the
property, or such market value as determined by the assessor, whichever is lower."

P.D. No. 794:

"Section 92. Basis for payment of just compensation in expropriation proceedings. — In determining
just compensation when private property is acquired by the government for public use, the same shall
not exceed the market value declared by the owner or administrator or anyone having legal interest in
the property, or such market value as determined by the assessor, whichever is lower."

P.D. No. 1533:

 "Section 1. In determining just compensation for private property acquired through eminent domain
proceedings, the compensation to be paid shall not exceed the value declared by the owner or
administrator or anyone having legal interest in the property or determined by the assessor, pursuant to
the Real Property Tax Code, whichever value is lower, prior to the recommendation or decision of the
appropriate Government office to acquire the property."

We are constrained to declare the provisions of the Decrees on just compensation unconstitutional
and void and accordingly dismiss the instant petition for lack of merit.

The method of ascertaining just compensation under the aforecited decrees constitutes impermissible
encroachment on judicial prerogatives. It tends to render this Court inutile in a matter which under the
Constitution is reserved to it for final determination.

Thus, although in an expropriation proceeding the court technically would still have the power to
determine the just compensation for the property, following the applicable decrees, its task would be
relegated to simply stating the lower value of the property as declared either by the owner or the
assessor. As a necessary consequence, it would be useless for the court to appoint commissioners under
Rule 67 of the Rules of Court. Moreover, the need to satisfy the due process clause in the taking of private
property is seemingly fulfilled since it cannot be said that a judicial proceeding was not had before the actual
taking. However, the strict application of the decrees during the proceedings would be nothing short of
a mere formality or charade as the court has only to choose between the valuation of the owner and
that of the assessor, and its choice is always limited to the lower of the two. The court cannot exercise
its discretion or independence in determining what is just or fair. Even a grade school pupil could
substitute for the judge insofar as the determination of constitutional just compensation is concerned.

We are convinced and so rule that the trial court correctly stated that the valuation in the decree may
only serve as a guiding principle or one of the factors in determining just compensation but it may not
substitute the court's own judgment as to what amount should be awarded and how to arrive at such
amount. A return to the earlier well-established doctrine, to our mind, is more in keeping with the principle that
the judiciary should live up to its mission "by vitalizing and not denigrating constitutional rights." The basic
unfairness of the decrees is readily apparent.

Just compensation means the value of the property at the time of the taking. It means a fair and full
equivalent for the loss sustained. All the facts as to the condition of the property and its surroundings, its
improvements and capabilities, should be considered.

In this particular case, the tax declarations presented by the petitioner as basis for just compensation were
made by the Lapu-Lapu municipal, later city assessor long before martial law, when land was not only much
cheaper but when assessed values of properties were stated in figures constituting only a fraction of their true
market value. The private respondent was not even the owner of the properties at the time. It purchased the
lots for development purposes. To peg the value of the lots on the basis of documents which are out of date
and at prices below the acquisition cost of present owners would be arbitrary and confiscatory.

Various factors can come into play in the valuation of specific properties singled out for expropriation. The
values given by provincial assessors are usually uniform for very wide areas covering several barrios or even
an entire town with the exception of the poblacion. Individual differences are never taken into account. The
value of land is based on such generalities as its possible cultivation for rice, corn, coconuts, or other crops.
Very often land described as "cogonal" has been cultivated for generations. Buildings are described in terms of
only two or three classes of building materials and estimates of areas are more often inaccurate than correct.
Tax values can serve as guides but cannot be absolute substitutes for just compensation.

To say that the owners are estopped to question the valuations made by assessors since they had the
opportunity to protest is illusory. The overwhelming mass of land owners accept unquestioningly what
is found in the tax declarations prepared by local assessors or municipal clerks for them. They do not
even look at, much less analyze, the statements. The Idea of expropriation simply never occurs until a
demand is made or a case filed by an agency authorized to do so.
It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax
documents is unfair or wrong. And it is repulsive to basic concepts of justice and fairness to allow the
haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually viewed the property, after evidence and
arguments pro and con have been presented, and after all factors and considerations essential to a fair
and just determination have been judiciously evaluated.

The determination of "just compensation" in eminent domain cases is a judicial function. The executive
department or the legislature may make the initial determinations but when a party claims a violation of the
guarantee in the Bill of Rights that private property may not be taken for public use without just compensation,
no statute, decree, or executive order can mandate that its own determination shall prevail over the court's
findings. Much less can the courts be precluded from looking into the "just-ness" of the decreed compensation.

We, therefore, hold that P.D. No. 1533, which eliminates the court's discretion to appoint commissioners
pursuant to Rule 67 of the Rules of Court, is unconstitutional and void. To hold otherwise would be to
undermine the very purpose why this Court exists in the first place.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED.

FULL CASE

GUTIERREZ, JR., J.:

The question raised in this petition is whether or not Presidential Decrees Numbered 76, 464, 794 and 1533 have
repealed and superseded Sections 5 to 8 of Rule 67 of the Revised Rules of Court, such that in determining the just
compensation of property in an expropriation case, the only basis should be its market value as declared by the
owner or as determined by the assessor, whichever is lower.

On January 15, 1979, the President of the Philippines, issued Proclamation No. 1811, reserving a certain parcel of
land of the public domain situated in the City of Lapu-Lapu, Island of Mactan, Cebu and covering a total area of
1,193,669 square meters, more or less, for the establishment of an export processing zone by petitioner Export
Processing Zone Authority (EPZA).

Not all the reserved area, however, was public land. The proclamation included, among others, four (4) parcels of
land with an aggregate area of 22,328 square meters owned and registered in the name of the private respondent.
The petitioner, therefore, offered to purchase the parcels of land from the respondent in acccordance with the
valuation set forth in Section 92, Presidential Decree (P.D.) No. 464, as amended. The parties failed to reach an
agreement regarding the sale of the property.

The petitioner filed with the then Court of First Instance of Cebu, Branch XVI, Lapu-Lapu City, a complaint for
expropriation with a prayer for the issuance of a writ of possession against the private respondent, to expropriate the
aforesaid parcels of land pursuant to P.D. No. 66, as amended, which empowers the petitioner to acquire by
condemnation proceedings any property for the establishment of export processing zones, in relation to
Proclamation No. 1811, for the purpose of establishing the Mactan Export Processing Zone.

On October 21, 1980, the respondent judge issued a writ of possession authorizing the petitioner to take immediate
possession of the premises. On December 23, 1980, the private respondent flied its answer.

At the pre-trial conference on February 13, 1981, the respondent judge issued an order stating that the parties have
agreed that the only issue to be resolved is the just compensation for the properties and that the pre-trial is thereby
terminated and the hearing on the merits is set on April 2, 1981.

On February 17, 1981, the respondent judge issued the order of condemnation declaring the petitioner as having
the lawful right to take the properties sought to be condemned, upon the payment of just compensation to be
determined as of the filing of the complaint. The respondent judge also issued a second order, subject of this
petition, appointing certain persons as commissioners to ascertain and report to the court the just compensation for
the properties sought to be expropriated.

On June 19, 1981, the three commissioners submitted their consolidated report recommending the amount of
P15.00 per square meter as the fair and reasonable value of just compensation for the properties.

On July 29, 1981, the petitioner Med a Motion for Reconsideration of the order of February 19, 1981 and Objection
to Commissioner's Report on the grounds that P.D. No. 1533 has superseded Sections 5 to 8 of Rule 67 of the
Rules of Court on the ascertainment of just compensation through commissioners; and that the compensation must
not exceed the maximum amount set by P.D. No. 1533.

On November 14, 1981, the trial court denied the petitioner's motion for reconsideration and gave the latter ten (10)
days within which to file its objection to the Commissioner's Report.

On February 9, 1982, the petitioner flied this present petition for certiorari and mandamus with preliminary
restraining order, enjoining the trial court from enforcing the order dated February 17, 1981 and from further
proceeding with the hearing of the expropriation case.

The only issue raised in this petition is whether or not Sections 5 to 8, Rule 67 of the Revised Rules of Court had
been repealed or deemed amended by P.D. No. 1533 insofar as the appointment of commissioners to determine the
just compensation is concerned. Stated in another way, is the exclusive and mandatory mode of determining just
compensation in P.D. No. 1533 valid and constitutional?

The petitioner maintains that the respondent judge acted in excess of his jurisdiction and with grave abuse of
discretion in denying the petitioner's motion for reconsideration and in setting the commissioner's report for hearing
because under P.D. No. 1533, which is the applicable law herein, the basis of just compensation shall be the fair
and current market value declared by the owner of the property sought to be expropriated or such market value as
determined by the assessor, whichever is lower. Therefore, there is no more need to appoint commissioners as
prescribed by Rule 67 of the Revised Rules of Court and for said commissioners to consider other highly variable
factors in order to determine just compensation. The petitioner further maintains that P.D. No. 1533 has vested on
the assessors and the property owners themselves the power or duty to fix the market value of the properties and
that said property owners are given the full opportunity to be heard before the Local Board of Assessment Appeals
and the Central Board of Assessment Appeals. Thus, the vesting on the assessor or the property owner of the right
to determine the just compensation in expropriation proceedings, with appropriate procedure for appeal to higher
administrative boards, is valid and constitutional.

Prior to the promulgation of P.D. Nos. 76, 464, 794 and 1533, this Court has interpreted the eminent domain
provisions of the Constitution and established the meaning, under the fundametal law, of just compensation and
who has the power to determine it. Thus, in the following cases, wherein the filing of the expropriation proceedings
were all commenced prior to the promulgation of the aforementioned decrees, we laid down the doctrine onjust
compensation:

Municipality of Daet v. Court of Appeals (93 SCRA 503, 516),

xxx xxx xxx

"And in the case of J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413, the Court, speaking thru
now Chief Justice Fernando, reiterated the 'well-settled (rule) that just compensation means the equivalent for the
value of the property at the time of its taking. Anything beyond that is more and anything short of that is less, than
just compensation. It means a fair and full equivalent for the loss sustained, which is the measure of the indemnity,
not whatever gain would accrue to the expropriating entity."

Garcia v. Court ofappeals (102 SCRA 597, 608),

xxx xxx xxx

 "Hence, in estimating the market value, all the capabilities of the property and all the uses to which it may be
applied or for which it is adapted are to be considered and not merely the condition it is in the time and the
use to which it is then applied by the owner. All the facts as to the condition of the property and its
surroundings, its improvements and capabilities may be shown and considered in estimating its value."

Republic v. Santos (141 SCRA 30, 35-36),

"According to section 8 of Rule 67, the court is not bound by the commissioners' report. It may make such
order or render such judgment as shall secure to the plaintiff the property essential to the exercise of his
right of condemnation, and to the defendant just compensation for the property expropriated. This Court may
substitute its own estimate of the value as gathered from the record (Manila Railroad Company v.
Velasquez, 32 Phil. 286)."

However, the promulgation of the aforementioned decrees practically set aside the above and many other
precedents hammered out in the course of evidence-laden, well argued, fully heard, studiously deliberated, and
judiciously considered court proceedings. The decrees categorically and peremptorily limited the definition of just
compensation thus:

P.D. No. 76:

xxx xxx xxx

"For purposes of just compensation in cases of private property acquired by the government for public use,
the basis shall be the current and fair market value declared by the owner or administrator, or such market
value as determined by the Assessor, whichever is lower."

P.D. No. 464:

"Section 92. Basis for payment of just compensation in expropriation proceedings. — In determining just
compensation which private property is acquired by the government for public use, the basis shall be the
market value declared by the owner or administrator or anyone having legal interest in the property, or such
market value as determined by the assessor, whichever is lower."

P.D. No. 794:

"Section 92. Basis for payment of just compensation in expropriation proceedings. — In determining just
compensation when private property is acquired by the government for public use, the same shall not
exceed the market value declared by the owner or administrator or anyone having legal interest in the
property, or such market value as determined by the assessor, whichever is lower."

P.D. No. 1533:

"Section 1. In determining just compensation for private property acquired through eminent domain
proceedings, the compensation to be paid shall not exceed the value declared by the owner or administrator
or anyone having legal interest in the property or determined by the assessor, pursuant to the Real Property
Tax Code, whichever value is lower, prior to the recommendation or decision of the appropriate Government
office to acquire the property."

We are constrained to declare the provisions of the Decrees on just compensation unconstitutional and void and
accordingly dismiss the instant petition for lack of merit.

The method of ascertaining just compensation under the aforecited decrees constitutes impermissible
encroachment on judicial prerogatives. It tends to render this Court inutile in a matter which under the Constitution is
reserved to it for final determination.

Thus, although in an expropriation proceeding the court technically would still have the power to determine the just
compensation for the property, following the applicable decrees, its task would be relegated to simply stating the
lower value of the property as declared either by the owner or the assessor. As a necessary consequence, it would
be useless for the court to appoint commissioners under Rule 67 of the Rules of Court. Moreover, the need to
satisfy the due process clause in the taking of private property is seemingly fulfilled since it cannot be said that a
judicial proceeding was not had before the actual taking. However, the strict application of the decrees during the
proceedings would be nothing short of a mere formality or charade as the court has only to choose between the
valuation of the owner and that of the assessor, and its choice is always limited to the lower of the two. The court
cannot exercise its discretion or independence in determining what is just or fair. Even a grade school pupil could
substitute for the judge insofar as the determination of constitutional just compensation is concerned.

In the case of National Housing Authority v. Reyes (123 SCRA 245), this Court upheld P.D. No. 464, as further
amended by P.D. Nos. 794, 1224 and 1259. In this case, the petitioner National Housing Authority contended that
the owner's declaration at P1,400.00 which happened to be lower than the assessor's assessment, is the just
compensation for the respondent's property under section 92 of P.D. No. 464. On the other hand, the private
respondent stressed that while there may be basis for the allegation that the respondent judge did not follow the
decree, the matter is still subject to his final disposition, he having been vested with the original and competent
authority to exercise his judicial discretion in the light of the constitutional clauses on due process and equal
protection.

To these opposing arguments, this Court ruled ihat under the conceded facts, there should be a recognition that the
law as it stands must be applied; that the decree having spoken so clearly and unequivocably calls for obedience;
and that on a matter where the applicable law speaks in no uncertain language, the Court has no choice except to
yield to its command. We further stated that "the courts should recognize that the rule introduced by P.D. No. 76 and
reiterated in subsequent decrees does not upset the established concepts of justice or the constitutional provision
on just compensation for, precisely, the owner is allowed to make his own valuation of his property."

While the Court yielded to executive prerogative exercised in the form of absolute law-making power, its members,
nonetheless, remained uncomfortable with the implications of the decision and the abuse and unfairness which
might follow in its wake. For one thing, the President himself did not seem assured or confident with his own
enactment. It was not enough to lay down the law on determination of just compensation in P.D. 76. It had to be
repeated and reiterated in P.D. 464, P.D. 794, and P.D. 1533. The provision is also found in P.D. 1224, P.D. 1259
and P.D. 1313. Inspite of its effectivity as general law and the wide publicity given to it, the questioned provision or
an even stricter version had to be embodied in cases of specific expropriations by decree as in P.D. 1669
expropriating the Tambunting Estate and P.D. 1670 expropriating the Sunog Apog area in Tondo, Manila.

In the present petition, we are once again confronted with the same question of whether the courts under P.D. 1533,
which contains the same provision on just compensation as its predecessor decrees, still have the power and
authority to determine just compensation, independent of what is stated by the decree and to this effect, to appoint
commissioners for such purpose.

This time, we answer in the affirmative.

In overruling the petitioner's motion for reconsideration and objection to the commissioner's report, the trial court
said:

"Another consideration why the Court is empowered to appoint commissioners to assess the just
compensation of these properties under eminent domain proceedings, is the well-entrenched ruling that 'the
owner of property expropriated is entitled to recover from expropriating authority the fair and full value of the
lot, as of the time when possession thereof was actually taken by the province, plus consequential damages
— including attorney's fees — from which the consequential benefits, if any should be deducted, with
interest at the legal rate, on the aggregate sum due to the owner from and after the date of actual taking.'
(Capitol Subdivision, Inc. v. Province of Negros Occidental, 7 SCRA 60). In fine, the decree only establishes
a uniform basis for determining just compensation which the Court may consider as one of the factors in
arriving at 'just compensation,' as envisage in the Constitution. In the words of Justice Barredo, "Respondent
court's invocation of General Order No. 3 of September 21, 1972 is nothing short of an unwarranted
abdication of judicial authority, which no judge duly imbued with the implications of the paramount principle
of independence of the judiciary should ever think of doing." (Lina v. Purisima, 82 SCRA 344, 351; Cf. Prov.
of Pangasinan v. CFI Judge of Pangasinan, Br. VIII, 80 SCRA 117) Indeed, where this Court simply follows
PD 1533, thereby limiting the determination of just compensation on the value declared by the owner or
 administrator or as determined by the Assessor, whichever is lower, it may result in the deprivation of the
landowner's right of due process to enable it to prove its claim to just compensation, as mandated by the
Constitution. (Uy v. Genato, 57 SCRA 123). The tax declaration under the Real Property Tax Code is,
undoubtedly, for purposes of taxation."

We are convinced and so rule that the trial court correctly stated that the valuation in the decree may only serve as a
guiding principle or one of the factors in determining just compensation but it may not substitute the court's own
judgment as to what amount should be awarded and how to arrive at such amount. A return to the earlier well-
established doctrine, to our mind, is more in keeping with the principle that the judiciary should live up to its mission
"by vitalizing and not denigrating constitutional rights." (See Salonga v. Cruz Paño, 134 SCRA 438, 462; citing
Mercado v. Court of First Instance of Rizal, 116 SCRA 93.) The doctrine we enunciated in National Housing
Authority v. Reyes, supra, therefore, must necessarily be abandoned if we are to uphold this Court's role as the
guardian of the fundamental rights guaranteed by the due process and equal protection clauses and as the final
arbiter over transgressions committed against constitutional rights.

The basic unfairness of the decrees is readily apparent.

Just compensation means the value of the property at the time of the taking. It means a fair and full equivalent for
the loss sustained. All the facts as to the condition of the property and its surroundings, its improvements and
capabilities, should be considered.

In this particular case, the tax declarations presented by the petitioner as basis for just compensation were made by
the Lapu-Lapu municipal, later city assessor long before martial law, when land was not only much cheaper but
when assessed values of properties were stated in figures constituting only a fraction of their true market value. The
private respondent was not even the owner of the properties at the time. It purchased the lots for development
purposes. To peg the value of the lots on the basis of documents which are out of date and at prices below the
acquisition cost of present owners would be arbitrary and confiscatory.

Various factors can come into play in the valuation of specific properties singled out for expropriation. The values
given by provincial assessors are usually uniform for very wide areas covering several barrios or even an entire
town with the exception of the poblacion. Individual differences are never taken into account. The value of land is
based on such generalities as its possible cultivation for rice, corn, coconuts, or other crops. Very often land
described as "cogonal" has been cultivated for generations. Buildings are described in terms of only two or three
classes of building materials and estimates of areas are more often inaccurate than correct. Tax values can serve
as guides but cannot be absolute substitutes for just compensation.

To say that the owners are estopped to question the valuations made by assessors since they had the opportunity
to protest is illusory. The overwhelming mass of land owners accept unquestioningly what is found in the tax
declarations prepared by local assessors or municipal clerks for them. They do not even look at, much less analyze,
the statements. The Idea of expropriation simply never occurs until a demand is made or a case filed by an agency
authorized to do so.

It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax documents is
unfair or wrong. And it is repulsive to basic concepts of justice and fairness to allow the haphazard work of a minor
bureaucrat or clerk to absolutely prevail over the judgment of a court promulgated only after expert commissioners
have actually viewed the property, after evidence and arguments pro and con have been presented, and after all
factors and considerations essential to a fair and just determination have been judiciously evaluated.

As was held in the case of Gideon v. Wainwright (93 ALR 2d,733,742):

"In the light of these and many other prior decisions of this Court, it is not surprising that the Betts Court, when faced
with the contention that 'one charged with crime, who is unable to obtain counsel must be furnished counsel by the
State,' conceded that '[E]xpressions in the opinions of this court lend color to the argument. . .' 316 U.S., at 462,
463, 86 L ed. 1602, 62 S Ct. 1252. The fact is that in deciding as it did-that "appointment of counsel is not a
fundamental right, essential to a fair trial" — the Court in Betts v. Brady made an ubrupt brake with its own well-
considered precedents. In returning to these old precedents, sounder we believe than the new, we but restore
constitutional principles established to achieve a fair system of justice. . ."
We return to older and more sound precedents. This Court has the duty to formulate guiding and controlling
constitutional principles, precepts, doctrines, or rules. (See Salonga v. Cruz Pano, supra).

The determination of "just compensation" in eminent domain cases is a judicial function. The executive department
or the legislature may make the initial determinations but when a party claims a violation of the guarantee in the Bill
of Rights that private property may not be taken for public use without just compensation, no statute, decree, or
executive order can mandate that its own determination shall prevail over the court's findings. Much less can the
courts be precluded from looking into the "just-ness" of the decreed compensation.

We, therefore, hold that P.D. No. 1533, which eliminates the court's discretion to appoint commissioners pursuant to
Rule 67 of the Rules of Court, is unconstitutional and void. To hold otherwise would be to undermine the very
purpose why this Court exists in the first place.

WHEREFORE, IN VIEW OF THE FOREGOING, the petition is hereby DISMISSED. The temporary restraining order
issued on February 16, 1982 is LIFTED and SET ASIDE.

SO ORDERED.

LAGUNZAD VS. CA, 154 SCRA 199

CASE DIGEST
FACTS:This petition for review on certiorari seeks to set aside three orders of the respondent Court of
Appeals. An action for eminent domain was filed by the Province of Leyte against some 424
defendants, herein petitioner Jovencio Lagunzad among them, captioned Province of Leyte vs. Teresita
Yolanda, et al., and docketed as Civil Case No. 5199. On March 11, 1977, the then Court of First Instance of
Leyte decided the case on the basis of Presidential Decree (P.D.) Nos. 76 and 464, ordering the plaintiff
Province of Leyte to compensate those defendants who have not yet received full payment hereof, the market
value of their respective properties in accordance with the provisions of Presidential Decree No. 76 and
Presidential Decree No. 464, Section 92;
Not satisfied with that portion of the decision on just compensation, the petitioner interposed an appeal with the
Court of Appeals.
HELD:While we cannot fault the lower court for deciding the case on the basis of P.D. Nos. 76 and 464, we
must rule otherwise for we have declared unconstitutional and void the presidential decrees on just
compensation. In EPZA vs. Dulay, we held that it is violative of due process to deny to the owner the
opportunity to prove that the valuation in the tax documents is unfair or wrong. And it is repulsive to basic
concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to absolutely
prevail over the judgment of a court promulgated only after expert commissioners have actually viewed the
property, after evidence and arguments pro and con have been presented, and after all factors and
considerations essential to a fair and just determination have been judiciously evaluated.
The determination of "just compensation" in eminent domain cases is a judicial function. The executive
department or the legislature may make the initial determinations but when a party claims a violation of the
guarantee in the Bill of Rights that private property may not be taken for public use without just compensation,
no statute, decree or executive order can mandate that its own determination shall prevail over the court's
findings. Much less can the courts be precluded from looking into the "just-ness" of the decreed compensation.
In the same case, we, likewise, took note of the inequity that could result in the application of the presidential
decrees on just compensation.Various factors can come into play in the valuation of specific properties singled
out for expropriation. The values given by provincial assessors are usually uniform for very wide areas
covering several barrios or even an entire town with the exception of the poblacion. Individual differences are
never taken into account. The value of land is based on such generalities as its possible cultivation for rice,
corn, coconuts, or other crops. Very often land described as "cogonal" has been cultivated for generations.
Buildings are described in terms of only two or three classes of building materials and estimates of areas are
more often inaccurate than correct. Tax values can serve as guides but cannot be absolute substitutes for just
compensation.
To say that the owners are estopped to question the valuations made by assessors since they had the
opportunity to protest is illusory. The over-whelming mass of land owners accept unquestioningly what is found
in the tax declarations prepared by local assessors or municipal clerks for them. They do not even look at,
much less analyze, the statements. The Idea of expropriation simply never occurs until a demand is made or a
case filed by an agency authorized to do so.
The case at bar is a truly glaring example of the harshness of the abovementioned presidential
decrees. While the petitioner declared his 1.3090-hectare property planted with coconut trees as
having a market value of P10,260.00, the provincial assessor assessed the property in the amount of
P2,160.00 only.On the other hand, the commissioners appointed by the trial court pursuant to sections
5 and 8 of Rule 67 of the Rules of Court, valued the property at even a much higher price than the
valuation given by the petitioner himself, i.e., P20,000.00 per hectare and P25.00 per fruit bearing tree.
This valuation arrived at by the commissioners is what the petitioner prays this Court to consider and
not that fixed by the provincial assessor (the lower price pursuant to the presidential decrees on just
compensation) which, obviously, is unjust, nay oppressive.
We find nothing objectionable in the manner by which the court-appointed commissioners arrived at their
recommendations with regard to the valuation of the affected properties. Neither does petitioner. In fact, it is
precisely the commissioners' report which the petitioner prays this Court to use as the basis for the valuation of
his expropriated property and not the lower court's decision which was based on the questioned presidential
decrees already declared unconstitutional and void and of no effect by us in EPZA vs. Dulay and other cases.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed orders of the
respondent Court of Appeals and the decision of the trial court dated March 11, 1977, as well as the
supplemental judgment dated May 30, 1977, are hereby SET ASIDE and the respondent Province of Leyte
ordered to pay the petitioner the principal amount of TWENTY-SIX THOUSAND SEVEN HUNDRED NINETY
(P26,790.00) PESOS pursuant to the commissioners' valuation plus legal interest to be computed from the
date of taking.

FULL CASE
SARMIENTO, J.:
This petition for review on certiorari seeks to set aside three orders of the respondent Court of Appeals which, in
effect, bar the petitioner from pursuing his remedy to appeal.
The procedural facts as gathered from the pleadings submitted by both petitioner and respondent follow.
An action for eminent domain was filed by the Province of Leyte against some 424 defendants, herein petitioner
Lagunzad among them, captioned Province of Leyte vs. Teresita Yolanda, et al., and docketed as Civil Case No.
5199. On March 11, 1977, the then Court of First Instance of Leyte decided the case on the basis of Presidential
Decree (P.D.) Nos. 76 and 464, the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, final judgment is hereby rendered:
1) Confirming the order of condemnation declaring that plaintiff Province of Leyte has the lawful right to take
the properties herein above described and sought to be expropriated for the public use and purpose also herein
described in the Complaint;
2) Confirming the retention of possession by the plaintiff Province of Leyte of those properties already entered
in accordance with the provisions of presidential Decree No. 42, and ordering the defendants to vacate those
properties already condemned but not yet entered by plaintiff so that the latter can appropriate the same for public
use purpose aforementioned;
3) Ordering the plaintiff Province of Leyte to compensate those defendants who have not yet received full
payment hereof, the market value of their respective properties in accordance with the provisions of Presidential
Decree No. 76 and Presidential Decree No. 464, Section 92;
4) Ordering the clerk of Court and the offices of the Provincial Administrator and Provincial Treasurer to
coordinate and proceed accordingly, by following the same procedure in the payments already made herein;
5) Ordering the Register of Deeds of Leyte, upon a receipt of a certified copy of this decision with the
descriptions of the properties herein involved and a copy of the parcellary map (Exhibit "N") hereto attached, from
him to vest title in the real estate so described, in the plaintiff province of Leyte;
6) And finally, ordering the plaintiff Province of Leyte to pay the cost of this proceedings.
SO ORDERED.
Not satisfied with that portion of the decision on just compensation, the petitioner interposed an appeal with the
Court of Appeals which ordered the filing of his printed record on appeal, then an essential requisite for the
perfection of an appeal. The awareness of his inability to comply seasonably prompted his counsel to move for an
extension of thirty days to submit his record on appeal. Meanwhile, Lagunzad himself Personally filed a motion
requesting for sixty days within which to file the same record on appeal. The Court of Appeals acted favorably on
these two motions and issued two orders. The first, dated December 19, 1978, granted the petitioner thirty days
from January 1, 1979, while the second, dated January 3, 1979, granted him sixty days from the same date to
submit the required record on appeal. On April 2, 1979, the Court of Appeals dismissed the appeal, saying:
xxx xxx xxx
Acting on the Docket Report that as of March 21, 1979 defendant-appellant Lagunzad has not filed his printed
Record on Appeal and considering that the last day to file Record on Appeal expired to December 3, 1978 the Court
RESOLVED TO DISMISS this appeal.
xxx xxx xxx
On this dismissal, the petitioner filed a motion for reconsideration. By ill hap, however, it was only on May 10, 1979,
or seven days after the last day of the filing of a motion for reconsideration, that the petitioner availed of the remedy.
Hence, the respondent Court, in an Order dated June 5, 1979, denied the motion, to wit:
xxx xxx xxx
The motion for reconsideration filed by counsel for defendant-appellant Jovencio Lagunzad on May 10, 1979 by
registered mail is denied, the Resolution sought to be reconsidered having already become final and beyond the
jurisdiction of this Court to alter. It appears, as per admission of appellant Lagunzad himself in paragraph 1 of his
subject motion, that on April 18, 1979, he received a copy of the Resolution of this Court dated April 2, 1979,
dismissing his appeal for failure to file his appellant's brief, and therefore, his last day to seek a reconsideration
thereof expired on May 3, 1979.
xxx xxx xxx
The petitioner's second motion for reconsideration was likewise denied by the Court of Appeals in an order dated
July 12, 1979, to wit:
xxx xxx xxx
The Second Motion for Reconsideration filed on June 28, 1979 (reg. mail) by counsel for defendant-appellant
Jovencio Lagunzad is denied. The registry return card, attached to the Rollo, clearly shows on both sides thereof
that the Resolution of April 2, 1979, dismissing the appeal of appellant Lagunzad was received by his counsel on
April 17, 1979, and, therefore, his last day to move for a reconsideration expired on May 2, 1979. Hence, his first
motion for reconsideration filed by registered mail on May 10, 1979, was filed 8 days after the Resolution of
dismissal has become final. 6
xxx xxx xxx
Be this as it may, we grant the petition.
As petitioner affirms, the two orders granting the two motions for extension of time to file record on appeal could
indeed cause confusion. It is not unlikely that the petitioner was truly misled into believing that he had a total of
ninety days, or up to April 30, 1979, within which to file his record on appeal. Thus, when he received on April 17,
1979 the order of dismissal of his appeal dated April 2, 1979, the petitioner believed, and not without good cause,
that the dismissal was erroneous. And, this, as petitioner claims, was one of the reasons why he failed to file his
motion for reconsideration on time.
Even the respondent court, as shown by its two assailed orders quoted above, was not entirely spared from
confusion. In one order, respondent court declared that the last day for filing a motion for reconsideration expired on
May 2, while in the succeeding order issued barely a month after, the court declared that the last day for filing a
motion for reconsideration expired on May 3. Likewise the dates when the petitioner was supposed to have received
the order of denial were different, i.e., in the first order it was April 18 while in the second order, it was April 17. If
even the appellate court could not make up its mind as to material dates, we must not expect more from petitioner.
Not only this, the onslaught, of typhoon Bebeng which left the Province of Leyte in disorder, likewise left the counsel
for petitioner's office in the same sad state. His averment, which we believe, goes:
xxx xxx xxx
That after he had completed the typing and mimeographing of said record on appeal and was ready for mailing on
16 April 1979 typhoon Bebeng struck the Province of Leyte causing damage to the roofing of defendant-appellant
and as a consequence thereof the already mimeographed record on appeal got wet and some were blown away
and destroyed;
That appellant had to salvage whatever was left of the record on appeal and had to start mimeographing again the
same;
xxx xxx xxx
We cannot just ignore petitioner's plea for a review of his case in this instance. There is not the slightest indication of
malice on his part or of a desire to delay the proceedings and to transgress the rules on procedure. If at an, his was
an honest mistake or miscalculation worsened by some fortuitous occurrence which we deem condonable under the
circumstances. For we have, in many cases, granted relief where a stringent application of the requirement of
timeliness of pleadings would have denied a litigant substantial justice and equity. Suffice it to note that the rules on
technicality were promulgated to secure not to override substantial justice. As it should be in this case especially
because the petition appears also to be impressed with merit.
More importantly, however, under Batas Pambansa Blg. 129, as well as in section 18 of the Interim Rules and
Guidelines issued by the Court, a record on appeal is no longer necessary for perfecting an appeal. In giving due
course to the petition, we held in a recent case:
xxx xxx xxx

Being procedural in nature, the provisions of (BP Blg. 129 and sec. 18 of the Interim Rules and Guidelines) may be
applied retroactively for the benefit of petitioners as appellants. Statutes regulating the procedure of the court will be
construed as applicable to actions pending and undetermined at the time of their passage. Procedural laws are
retrospective in that sense and to that extent. (People vs. Sumilang, 77 Phil. 764 [1946].)
Having, therefore, disposed of the procedural issue, we shall now consider the merits of the case. Instead of
remanding this case to the lower court for approval of the appeal, and consigning in limbo the payment of the
petitioner's just compensation for his land taken by the Province of Leyte, we see the necessity of deciding this on
the merits to avoid "undue burden on the parties and needless delays only to obtain the same judgment that could
very well be laid down through this petition." In Velasco vs. Court of Appeals, we broadened our inquiry into the
case and decided the same on the merits rather than merely resolving the procedural question raised, to better
serve the interests of justice.
We have sufficient basis to end the controversy between the parties in the present case even if we have to dispense
with some procedural rules for the basic rights for the parties will, in so way, be impaired.
Moreover, the other defendants in this civil case who were similarly situated were able to seek affirmative relief in
their appeal with the Court of Appeals. It would be the height of injustice if we disallowed the petitioner herein to
seek the same relief as that accorded to his co-defendants if only for the flimsy reason of technicality.
Hence, there being no question as to the propriety of the taking of the property(ies) for public use, we shall limit
ourselves to the issue of just compensation. On this, the lower court ruled:
xxx xxx xxx
Wherefore, premises considered, final judgment is hereby rendered:
(1) x xx
(2) x xx
(3) Order the plaintiff Province of Leyte to compensate those defendants who have not yet received fun
payment hereof, the market value of their respective properties in accordance with the provisions of PD No. 76 and
PD. No.464; sec. 92.
xxx xxx xxx
SO ORDERED.
While we cannot fault the lower court for deciding the case on the basis of P.D. Nos. 76 and 464, we must rule
otherwise for we have declared unconstitutional and void the presidential decrees on just compensation. In EPZA
vs. Dulay, we held:
xxx xxx xxx
It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax documents is
unfair or wrong. And it is repulsive to basic concepts of justice and fairness to allow the haphazard work of a minor
bureaucrat or clerk to absolutely prevail over the judgment of a court promulgated only after expert commissioners
have actually viewed the property, after evidence and arguments pro and con have been presented, and after all
factors and considerations essential to a fair and just determination have been judiciously evaluated.
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The determination of "just compensation" in eminent domain cases is a judicial function. The executive department
or the legislature may make the initial determinations but when a party claims a violation of the guarantee in the Bill
of Rights that private property may not be taken for public use without just compensation, no statute, decree or
executive order can mandate that its own determination shall prevail over the court's findings. Much less can the
courts be precluded from looking into the "just-ness" of the decreed compensation.
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In the same case, we, likewise, took note of the inequity that could result in the application of the presidential
decrees on just compensation.
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... To peg the value of the lots on the basis of documents which are out of date and at prices below the acquisition
cost of present owners would be arbitrary and confiscatory.
Various factors can come into play in the valuation of specific properties singled out for expropriation. The values
given by provincial assessors are usually uniform for very wide areas covering several barrios or even an entire
town with the exception of the poblacion. Individual differences are never taken into account. The value of land is
based on such generalities as its possible cultivation for rice, corn, coconuts, or other crops. Very often land
described as "cogonal" has been cultivated for generations. Buildings are described in terms of only two or three
classes of building materials and estimates of areas are more often inaccurate than correct. Tax values can serve
as guides but cannot be absolute substitutes for just compensation.
To say that the owners are estopped to question the valuations made by assessors since they had the opportunity
to protest is illusory. The over-whelming mass of land owners accept unquestioningly what is found in the tax
declarations prepared by local assessors or municipal clerks for them. They do not even look at, much less analyze,
the statements. The Idea of expropriation simply never occurs until a demand is made or a case filed by an agency
authorized to do so. 14
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The case at bar is a truly glaring example of the harshness of the abovementioned presidential decrees. While the
petitioner declared his 1.3090-hectare property planted with coconut trees as having a market value of P10,260.00,
the provincial assessor assessed the property in the amount of P2,160.00 only. 15 On the other hand, the
commissioners appointed by the trial court pursuant to sections 5 and 8 of Rule 67 of the Rules of Court, valued the
property at even a much higher price than the valuation given by the petitioner himself, i.e., P20,000.00 per hectare
and P25.00 per fruit bearing tree. This valuation arrived at by the commissioners is what the petitioner prays this
Court to consider and not that fixed by the provincial assessor (the lower price pursuant to the presidential decrees
on just compensation) which, obviously, is unjust, nay oppressive. Even the commissioners themselves were well
aware of the stringency of the said laws necessitating them to state:
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... it is the considered view of the Commissioners that the "lower" market values reflected in the tax declarations will
not amount to "fair market value" for purposes of payment of just compensation as mandated in the Constitution
hence they have been constrained to determine the fair market values of the affected properties, as they have
herein recommended, on the basis of their own ocular findings, oral as well as documentary evidence presented,
and facts and events which they have taken judicial notice of, in the interest of justice and fairness and so as to
enable the affected property owners to have sufficient funds to acquire similarly-situated lands of appropriate areas
as those acquired from them by the government, and thereby rehabilitate themselves as early as possible. 16
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The commissioners took into consideration several points which became their bases for the determination of the fair
market values of the affected properties:
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(a) Many tax declarations do not contain an owner's market value because of his failure to file a Sworn
Statement in compliance with PD 76;
(b) Actual kind and number of improvements, as inspected and verified, are, in most instances, very much more
than those indicated in the tax declaration, but in some instances, however, the kind and number of declared
improvements are not existing;
(c) Many declared improvements, given a market value by the owner, are not correspondingly valued by the
assessor, either because the improvements are not included in the assessor's schedule of market values or the land
upon which they grow is not principally planted to such growth, in which case no market value by the assessor
appears on the tax declaration;
(d) Declared areas are, in many instances, either much more or much lesser than the surveyed areas, thereby
affecting directly the owner's as well as the assessor's market values which are reckoned on such declared areas;
(e) Many lots are not correctly classified and valued, either because of a desire to minimize realty taxes, or, in a
few instances, to arrive at exorbitant market values as in some interior lands which are clearly agricultural but
classified and valued as residential land; 17
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We find nothing objectionable in the manner by which the court-appointed commissioners arrived at their
recommendations with regard to the valuation of the affected properties. Neither does petitioner. In fact, it is
precisely the commissioners' report which the petitioner prays this Court to use as the basis for the valuation of his
expropriated property and not the lower court's decision which was based on the questioned presidential decrees
already declared unconstitutional and void and of no effect by us in EPZA vs. Dulay 18 and other cases.
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED. The assailed orders of the respondent
Court of Appeals and the decision of the trial court dated March 11, 1977, as well as the supplemental judgment
dated May 30, 1977, are hereby SET ASIDE and the respondent Province of Leyte ordered to pay the petitioner the
principal amount of TWENTY-SIX THOUSAND SEVEN HUNDRED NINETY (P26,790.00) PESOS pursuant to the
commissioners' valuation plus legal interest to be computed from the date of taking. This Decision is IMMEDIATELY
EXECUTORY.
No costs.
SO ORDERED.