5/25/2017 G.R.No.

187604

THIRDDIVISION


CITYOFMANILA,G.R.No.187604
Petitioner,
Present:
BERSAMIN,J.,*
versusABAD,ActingChairperson,
VILLARAMA,JR.,**
SERENO,***and
PERLASBERNABE,JJ.
ALEGARCORPORATION,TEROCEL
REALTYCORPORATION,andPromulgated:
FILOMENAVDA.DELEGARDA,
Respondents.June25,2012

xx


DECISION

ABAD,J.:


This case is about the issues that a local government unit has to cope with when expropriating
privatepropertyforsocializedhousing.

TheFactsandtheCase
On March 1, 2001 the City Council of Manila passed Ordinance 8012 that authorized the City
[1]
Mayor to acquire certain lots belonging to respondents Alegar Corporation, Terocel Realty
Corporation,andFilomenaVda.DeLegarda,foruseinthesocializedhousingprojectofpetitioner
City of Manila. The City offered to buy the lots at P1,500.00 per square meter (sq m) but the
ownersrejectedthisastoolowwiththeresultthatonDecember2,2003theCityfiledacomplaint
[2]
forexpropriationagainstthembeforetheRegionalTrialCourt(RTC)ofManila.

TheCityallegedinitscomplaintthatitwantedtoacquirethelotsforitslandforthelandlessand
[3]
onsite development programs involving the residents occupying them. The City offered to
[4]
acquirethelotsforP1,500.00persqm buttheownersrejectedtheoffer.The total aggregate
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[4]
acquirethelotsforP1,500.00persqm buttheownersrejectedtheoffer.The total aggregate
valueofthelotsfortaxationpurposewasP809,280.00buttheCitydepositedP1,500,000.00with
theLandBankofthePhilippinestoenableittoimmediatelyoccupythesamependinghearingof
thecase.

BothAlegarandTerocelquestionedthelegitimacyoftheCitystakingoftheirlotssolelyforthe
benefit of a few longtime occupants. Alegar also pointed out that, while it declined the Citys
[5]
initialoffer,itdidnotforeclosethepossibilityofsellingthelotsfortherightprice. Thefilingof
thesuitwasprematurebecausetheCitymadenoeffortingoodfaithtonegotiatethepurchase.

Meantime, on June 9, 2004 the trial court issued a writ of possession in the Citys favor. On
December 19, 2006, upon the joint motion of the parties, the RTC released the P1,500,000.00
deposittothedefendantowners.

On October 15, 2007 the parties agreed to forego with the pretrial, opting instead to
simultaneouslysubmittheirmemorandaontheissueofwhetherornotthereisnecessityforthe
City to expropriate the subject properties for public use. The owners of the lots submitted their
memorandumbuttheCitydidnot.

On February 12, 2008 the RTC dismissed the complaint on the ground that the City did not
[6]
comply with Section 9 of Republic Act (R.A.) 7279 which set the order of priority in the
acquisition of properties for socialized housing. Private properties ranked last in the order of
prioritiesforsuchacquisitionandtheCityfailedtoshowthatnootherpropertieswereavailable
for the project. The City also failed to comply with Section 10 which authorized expropriation
only when resort to other modes (such as community mortgage, land swapping, and negotiated
purchase)hadbeenexhausted.

ThetrialcourtpointedoutthattheCityalsofailedtoshowthatitexhaustedallreasonableefforts
toacquirethelotsthroughanegotiatedsale.Article35oftheRulesandRegulationsImplementing
the Local Government Code provides that when property owners are willing to sell but for a
higherpricethanthatoffered,thelocalchiefexecutivemustconferwiththemforthepossibilityof
comingtoanagreementontheprice.Here,aftertheownersrefusedtosellthelotsforP1,500.00
per sq m offer, the City did not exert any effort to renegotiate or revise its offer. The RTC also

ruled that the City submitted the issue of genuine necessity to acquire the properties for public
purposeorbenefitwithoutpresentingevidenceonthesame.
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purposeorbenefitwithoutpresentingevidenceonthesame.

TheCitymovedforthereconsiderationoftheorderofdismissalbutbeforetheRTCcouldacton
[7]
it,theCityappealedthecasetotheCourtofAppeals(CA).

[8]
OnFebruary27,2009 theCAaffirmedtheRTCsdismissaloftheCitysaction,mainlyforthe
reason that the City failed to comply with the requirements of Sections 9 and 10 of R.A. 7279
which ranked privatelyowned lands last in the order of priority in acquiring lots for socialized
housingandwhichpreferredmodesotherthanexpropriationforacquiringthem.TheCArejected
theCitysclaimthattheRTCdeniedititsrighttodueprocess,giventhattheCityagreedtoforego
with pretrial and to just submit a memorandum on the threshold issues raised by the owners
[9]
answer regarding the propriety of expropriation. The City simply did not submit a
memorandum.Althoughitmovedforthereconsiderationoftheorderofdismissal,theCityfileda
noticeofappealbeforetheRTCcouldresolvethemotion.

TheIssues

Thepetitionraisesthefollowingissues:
1. Whether or not the CA erred in failing to rule that the RTC denied the City its right to due
processwhenitdismissedthecasewithouthearingtheCitysside

2.WhetherornottheCAerredinaffirmingtheRTCsrulingthattheCityfailedtocomplywith
the requirements of Sections 9 and 10 of R.A. 7279 in trying to acquire the subject lots by
expropriation

3. Whether or not the CA erred in failing to set aside the RTCs ruling that the City failed to
establish the existence of genuine necessity in expropriating the subject lots for public use or
purposeand

4.Whether or not the CA erred in failing to rule that the owners withdrawal of its P1.5 million
depositconstitutedimpliedconsenttotheexpropriationoftheirlots.

TheRulingsoftheCourt

One.TheRTCdidnotdenytheCityitsrighttobeheardonitsactionwhenthatcourtdismissed
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One.TheRTCdidnotdenytheCityitsrighttobeheardonitsactionwhenthatcourtdismissed
thesame.Anexpropriationproceedingofprivatelandshastwostages:first,thedeterminationof
plaintiffsauthoritytoexercisethepowerofeminentdomaininthecontextofthefactsofthecase
and, second, if there be such authority, the determination of just compensation. The first phase
endswitheitheranorderofdismissaloradeterminationthatthepropertyistobeacquiredfora
[10]
publicpurpose.

Here, the Citys action was still in the first stage when the RTC called the parties to a pretrial
conference where, essentially, their task was to determine how the court may resolve the issue
involvedinthefirststage:theCitysauthoritytoacquirebyexpropriationtheparticularlotsforits
intendedpurpose.Asithappened,thepartiesoptedtosimultaneouslysubmittheirmemorandaon
that issue. There was nothing infirm in this agreement since it may be assumed that the parties
knewwhattheyweredoingandsincesuchagreementwouldfacilitateearlydisposalofthecase.
[11]

Unfortunately,theagreementimpliedthattheCitywaswaivingitsrighttopresentevidencethatit
wasacquiringthesubjectlotsbyexpropriationforaproperpublicpurpose.CounselfortheCity
mayhavebeenconfidentthatitsallegationsinthecomplaintcanstandontheirown,ignoringthe
owners challenge to its right to expropriate their lots for the stated purpose. Parenthetically, the
CitymovedforthereconsiderationoftheRTCsorderofdismissalbutwithdrewthisremedyby
filing a notice of appeal from that order to the CA. Evidently, the City cannot claim that it had
beendeniedtheopportunityofahearing.

Two.TheCAcorrectlyruledthattheCityfailedtoshowthatitcompliedwiththerequirementsof
Section 9 of R.A. 7279 which lays down the order of priority in the acquisition through
expropriationoflandsforsocializedhousing.Thissectionprovides:

Section9.PrioritiesintheacquisitionofLand.Landsforsocializedhousingshallbeacquiredinthe
followingorder:

(a) Those owned by the Government or any of its subdivisions, instrumentalities, or
agencies, including governmentowned or controlled corporations and their
subsidiaries
(b)Alienablelandsofthepublicdomain
(c)Unregisteredorabandonedandidlelands

(d)ThosewithinthedeclaredAreasforPriorityDevelopment,ZonalImprovementProgram
sites, and Slum Improvement and Resettlement Program sites which have not yet
beenacquired
(e)BagongLipunanImprovementofSitesandServicesorBLISSsiteswhichhavenotyet
beenacquiredand
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beenacquiredand
(f)Privatelyownedlands.

Whereonsitedevelopmentisfoundmorepracticableandadvantageoustothebeneficiaries,
the priorities mentioned in this section shall not apply. The local government units shall give
budgetaryprioritytoonsitedevelopmentofgovernmentlands.(Emphasissupplied)

TheCityofcoursearguesthatitdidnothavetoobservetheorderofpriorityprovidedabovein
acquiringlotsforsocializedhousingsinceitfoundonsitedevelopmenttobemorepracticableand
advantageous to the beneficiaries who were these lots longtime occupants. But the problem
remains.TheCitydidnotadduceevidencethatthiswasso.

Besides,Section10ofR.A.7279alsopreferstheacquisitionofprivatepropertybynegotiatedsale
overthefilingofanexpropriationsuit.Itprovidesthatsuchsuitmayberesortedtoonlywhenthe
othermodesofacquisitionshavebeenexhausted.Thus:

Section10.ModesofLandAcquisition.ThemodesofacquiringlandforpurposesofthisAct
shallinclude,amongothers,communitymortgage,landswapping,landassemblyorconsolidation,
land banking, donation to the Government, jointventure agreement, negotiated purchase, and
expropriation: Provided, however, That expropriation shall be resorted to only when other
modesofacquisitionhavebeenexhaustedProvided,further,Thatwhereexpropriationisresorted
to,parcelsoflandownedbysmallpropertyownersshallbeexemptedforpurposesofthisAct.xxx
(Emphasissupplied)

There is a sensible reason for the above. Litigation is costly and protracted. The government
shouldalsoleadinavoidinglitigationsandoverburdeningitscourts.

Indeed, the Court has held that when the property owner rejects the offer but hints for a better
[12]
price,thegovernmentshouldrenegotiatebycallingthepropertyownertoaconference. The
government must exhaust all reasonable efforts to obtain by agreement the land it desires. Its
failure to comply will warrant the dismissal of the complaint. Article 35 of the Rules and
RegulationsImplementingtheLocalGovernmentCodeprovidesforthisprocedure.Thus:

Article35.OffertoBuyandContractofSale(a)Theoffertobuyprivatepropertyforpublicuseor
purposeshallbeinwriting.Itshallspecifythepropertysoughttobeacquired,thereasonsforits
acquisition,andthepriceoffered.

xxxx

(c)Iftheownerorownersarewillingtoselltheirpropertybutatapricehigherthanthatofferedto
them, the local chief executive shall call them to a conference for the purpose of reaching an
agreement on the selling price. The chairman of the appropriation or finance committee of the
sanggunian, or in his absence, any member of the sanggunian duly chosen as its representative,
shallparticipateintheconference.Whenanagreementisreachedbytheparties,acontractofsale
shallbedrawnandexecuted.
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Here,theCityofManilainitiallyofferedP1,500.00persqmtotheownersfortheirlots.Butafter
thelatterrejectedtheoffer,claimingthattheofferedpricewasevenlowerthantheircurrentzonal
value,theCitydidnotbothertorenegotiateorimproveitsoffer.Theintentofthelawisforthe
State or the local government to make a reasonable offer in good faith, not merely a pro forma
[13]
offertoacquiretheproperty.

TheCourtcannottreattherequirementsofSections9and10ofR.A.7279lightly.ItheldinEstate
[14]
orHeirsoftheLateExJusticeJoseB.L.Reyesv.CityofManila, thattheserequirementsare
strictlimitationsonthelocalgovernmentsexerciseofthepowerofeminentdomain.Theyarethe
onlysafeguardsofpropertyownersagainsttheexerciseofthatpower.Theburdenisonthelocal
governmenttoprovethatitsatisfiedtherequirementsmentionedorthattheydonotapplyinthe
[15]
particularcase.

Three.Admittedly,theCityallegedinitsamendedcomplaintthatitwantedtoacquirethesubject
lots in connection with its landforthelandless program and that this was in accord with its
Ordinance8012.ButtheCitymissesthepoint.Theownersdirectlychallengedthevalidityofthe
objectiveofitsaction.They alleged that the taking in this particular case of their lots is not for
publicuseorpurposesinceitsactionwouldbenefitonlyafew.Whetherthisisthecaseornot,the
owners answer tendered a factual issue that called for evidence on the Citys part to prove the
affirmative of its allegations. As already stated, the City submitted the issue for the RTCs
resolutionwithoutpresentingevidence.

Four. The City insists that it made a deposit of P1.5 million with the RTC by way of advance
payment on the lots it sought to expropriate. By withdrawing this deposit, respondents may be
assumedtohavegiventheirconsenttotheexpropriation.

ButtheadvancedepositrequiredunderSection19oftheLocalGovernmentCodeconstitutesan
advance payment only in the event the expropriation prospers. Such deposit also has a dual
purpose: as prepayment if the expropriation succeeds and as indemnity for damages if it is
dismissed.Thisadvancepayment,aprerequisitefortheissuanceofawritofpossession,should
notbeconfusedwithpaymentofjustcompensationforthetakingofpropertyevenifitcouldbea
[16]
factorineventuallydeterminingjustcompensation. Iftheproceedingsfail,themoneycould
[17]
beusedtoindemnifytheownerfordamages.
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beusedtoindemnifytheownerfordamages.

Here, therefore, the owners withdrawal of the deposit that the City made does not amount to a
waiverofthedefensestheyraisedagainsttheexpropriation.Withthedismissalofthecomplaint,
theamountoraportionofitcouldbeawardedtotheownersasindemnitytocovertheexpenses
theyincurredindefendingtheirright.

Notably, the owners neither filed a counterclaim for damages against the City nor did they seek
indemnity for their expenses after the RTC dismissed its action. Consequently, the City
governmentisentitledtothereturnoftheadvancedeposititmadeandthattheownerswithdrew.
But, considering the expenses that the owners needed to incur in defending themselves in the
appealsthattheCityinstitutedbeforetheCAandthisCourt,anawardofP50,000.00inattorneys
feesagainsttheCityisinorder.The owners must return the rest of the P1,500,000.00 that they
withdrew.
Lastly,theCourtmustpointoutthattherulinginthiscaseiswithoutprejudicetotheright
of the City to refile the action after it has complied with the relevant mandatory provisions of
R.A. 7279 and Article 35 of the Rules and Regulations Implementing the Local Government
Code.

WHEREFORE,theCourtDENIESthepetitionandAFFIRMSthedecisionoftheCourt
of Appeals dated February 27, 2009 in CAG.R. CV 90530 subject to the following
MODIFICATIONS:

1. Petitioner City of Manila is ordered to indemnify respondents Alegar Corporation,
Terocel Realty Corporation, and Filomena Vda. De Legarda in the amount of P50,000.00 as
attorneysfees

2. Respondents Alegar Corporation, Terocel Realty Corporation, and Filomena Vda. De
Legarda are in turn ordered to return the advance deposit of P1,500,000.00 that they withdrew
incidenttotheexpropriationcaseand

3.ThisdecisioniswithoutprejudicetotherightoftheCityofManilatorefiletheiraction
forexpropriationaftercomplyingwithwhatthelawrequires.

SOORDERED.

ROBERTOA.ABAD
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ROBERTOA.ABAD
AssociateJustice

WECONCUR:




LUCASP.BERSAMIN
AssociateJustice




MARTINS.VILLARAMA,JR.MARIALOURDESP.A.SERENO
AssociateJusticeAssociateJustice



ESTELAM.PERLASBERNABE
AssociateJustice





ATTESTATION


IattestthattheconclusionsintheaboveDecisionhadbeenreachedinconsultationbeforethecase
wasassignedtothewriteroftheopinionoftheCourtsDivision.



ROBERTOA.ABAD
AssociateJustice
ActingChairperson,ThirdDivision

CERTIFICATION

I certify that the conclusions in the above Decision had been reached in consultation before the
casewasassignedtothewriteroftheopinionoftheCourtsDivision.


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ANTONIOT.CARPIO
SeniorAssociateJustice
(PerSection12,R.A.296,
TheJudiciaryActof1948,asamended)

*DesignatedActingMemberinlieuofAssociateJusticeJoseCatralMendoza,perSpecialOrder1241datedJune14,2012.
**DesignatedActingMemberinlieuofAssociateJusticePresbiteroJ.Velasco,Jr.,perSpecialOrder1229datedJune6,2012.
***DesignatedAdditionalMemberinlieuofAssociateJusticeDiosdadoM.Peralta,perRaffledatedJune11,2012.
[1]
Totaling1,505.30squaremeterscoveredbyTCT61050,61051,61052,61059,61061,61062,61063,61064,90853and126822.
[2]
DocketedasCivilCase03108565.
[3]
AmendedComplaint,paragraphs3&5,records,Vol.I,p.49.
[4]
Id.,paragraph4.
[5]
Annex2ofAnswer.
[6]
KnownastheUrbanDevelopmentHousingAct(UDHA).
[7]
DocketedasCAG.R.CV90530.
[8]
PennedbyAssociateJusticeRemediosA.SalazarFernandoandconcurredinbyAssociatesJusticesFernandaLampasPeraltaand
ApolinarioD.Bruselas,Jr.
[9]
OrderdatedOctober15,2007.
[10]
CityofIloilov.Hon.LolitaContrerasBesana,G.R.No.168967,February12,2010,612SCRA458,467468.
[11]
RULESOFCOURT,Rule18,Section2(i).
[12]
JesusisLordChristianSchoolFoundation,Inc.v.Municipality(nowCity)ofPasig,MetroManila,503Phil.845,864(2005).
[13]
Id.at866.
[14]
467Phil.165(2004).
[15]
FilstreamInternational,Inc.v.CourtofAppeals,348Phil.756,775(1998).
[16]
CapitolSteelCorporationv.PHIVIDECIndustrialAuthority,G.R.No.169453,December6,2006,510SCRA590,602603.
[17]
VisayanRefiningCompanyv.Camus,40Phil.550,563(1919).

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