THE PROVINCE OF ZAMBOANGA DEL NORTE, PLAINTIFF-APPELLEE, VS. CITY OF ZAMBOANGA, SECRETARY OF FINANCE AND COMMISSIONER OF INTERNAL REVENUE, DEFENDANTS-APPELLANTS.

Province of Zamboanga del Norte versus City of Zamboanga

The Case

This is a case about who owns the old provincial properties left behind when a capital moves away, and about how far Congress may go in giving them away for free. The Province of Zamboanga del Norte sued the City of Zamboanga, together with the Secretary of Finance and the Commissioner of Internal Revenue, asking that a law transferring the former province's lots and buildings to the City without payment be declared unconstitutional. The case matters because it draws the line between public and patrimonial property of municipal corporations, and because it tells us when Congress may dispose of local property absolutely and when it may not.

Procedural History

Zamboanga del Norte filed a complaint for declaratory relief with preliminary mandatory injunction before the Court of First Instance of Zamboanga del Norte. The trial court issued the preliminary injunction, tried the case, and rendered judgment declaring Republic Act 3039 unconstitutional insofar as it deprived the province of its private properties. It ordered the City to pay the province, through quarterly deductions from its internal revenue allotment, and ordered the province to deed the lots to the City upon full payment. Before the appeal was perfected, the province moved for reconsideration asking for lump sum payment with interest, and the trial court granted the motion over the defendants' opposition. The defendants then brought the case to the Supreme Court on appeal.

Facts

Before it became a chartered city, the Municipality of Zamboanga was the capital of the old Province of Zamboanga. In October 1936, Commonwealth Act 39 converted the municipality into the City of Zamboanga, and Section 50 of that law provided that the buildings and properties which the province would abandon upon transfer of the capital to another place would be acquired and paid for by the City at a price fixed by the Auditor General. The properties were fifty lots with buildings, covered by Torrens certificates of title in the name of the province, used variously as capitol site, school sites, hospital and leprosarium sites, playgrounds, and many left vacant.

In 1945 the capital moved to Dipolog, and later to Molave. In May 1949 the Appraisal Committee formed by the Auditor General fixed the value of the properties at 1,294,241 pesos. In June 1952, Republic Act 711 divided the old province into Zamboanga del Norte and Zamboanga del Sur, and the Auditor General apportioned the assets so that Zamboanga del Norte received 54.39 percent, equivalent to 704,220.05 pesos payable by the City. In 1959 the Executive Secretary, by order of the President, ruled that Zamboanga del Norte had a vested right to the price, revoking an earlier Cabinet resolution that had conveyed the lots to the City for one peso. The Secretary of Finance then directed deductions from the City's internal revenue allotment, and 57,373.46 pesos was credited to the province in partial payment.

In June 1961, Republic Act 3039 amended Section 50 of Commonwealth Act 39 by transferring all buildings, properties and assets of the former province located within the City to the City free of charge. The Secretary of Finance then stopped further payments and ordered the return to the City of the 57,373.46 pesos already paid, of which 43,030.11 pesos had already been returned. Hence the province's suit.

Issues

• Whether or not Republic Act 3039 is valid insofar as it transfers the former province's properties to the City of Zamboanga free of charge.
• Whether or not the properties in question are public or patrimonial in character, and which classification governs.
• Whether or not the province is barred by laches.
• Whether or not the province's share may be paid in lump sum.

Applicable Provisions

Section 50 of Commonwealth Act 39, as originally enacted, provides:

Buildings and properties which the province shall abandon upon the transfer of the capital to another place will be acquired and paid for by the City of Zamboanga at a price to be fixed by the Auditor General.

This is the source of the province's right to be paid for the abandoned properties.

Section 6 of Republic Act 711 provides:

Upon the approval of this Act, the funds, assets and other properties and the obligations of the province of Zamboanga shall be divided equitably between the Province of Zamboanga del Norte and the Province of Zamboanga del Sur by the President of the Philippines, upon the recommendation of the Auditor General.

This is the basis of the province's 54.39 percent share.

Section 50 of Commonwealth Act 39, as amended by Republic Act 3039, provides:

All buildings, properties and assets belonging to the former province of Zamboanga and located within the City of Zamboanga are hereby transferred, free of charge, in favor of the said City of Zamboanga.

This is the provision whose validity the Court passes upon.

Article 423 of the Civil Code provides:

The property of provinces, cities, and municipalities is divided into property for public use and patrimonial property.

This supplies the Civil Code classification of local property.

Article 424 of the Civil Code provides:

Property for public use, in the provinces, cities, and municipalities, consists of the provincial roads, city streets, municipal streets, the squares, fountains, public waters, promenades, and public works for public service paid for by said provinces, cities, or municipalities. All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special laws.

The Court uses this article, and especially its reservation in favor of special laws, to reach its ruling.

Ruling

On the first issue, the Court holds that the validity of Republic Act 3039 depends on the nature of the properties. If property is held by the municipal corporation in its public and governmental capacity, it is public and Congress has absolute control over it. If it is held in its private or proprietary capacity, it is patrimonial, and the municipality cannot be deprived of it without due process and just compensation.

On the second issue, the Court chooses the classification under the law of municipal corporations over the Civil Code classification. Under that norm, property held and devoted for governmental purposes, such as local administration, public education and public health, is public. Applying it, twenty-four lots, namely the capitol site, the school sites and grounds, the hospital and leprosarium sites, and the high school playgrounds, are public, and Republic Act 3039 is valid as to them. The buildings thereon follow the nature of the land as accessories, and in any event were presumably erected by the national government. The remaining twenty-six lots, being vacant or not devoted to distinctly governmental purposes, are patrimonial, and the law cannot deprive the province of its share in their value. The Court explains that the Civil Code reservation controls:

All other property possessed by any of them is patrimonial and shall be governed by this Code, without prejudice to the provisions of special laws.

On laches, the Court holds the claim is without merit, because the cause of action arose only in 1949 when the Auditor General fixed the value, reconsideration was seasonably sought, and suit was brought in 1962.

On lump sum payment, the Court holds that the province's share cannot be paid in lump sum, except as to the 43,030.11 pesos already returned, because Republic Act 3039 took effect only after partial payment had been made and could not retroactively affect a completed act, and because the relief sought was merely the continuance of quarterly payments.

Doctrine

Municipal property devoted to distinctly governmental purposes is public in nature and subject to the absolute control of Congress, which may dispose of it without compensation. Property held in a proprietary capacity is patrimonial and cannot be taken without due process and just compensation. In classifying municipal property, the principles of the law of municipal corporations prevail over the Civil Code classification, by force of the clause in Article 424 of the Civil Code reading without prejudice to the provisions of special laws. Registration does not convert public property into private property.

Disposition

The decision appealed from was set aside, and the City of Zamboanga was ordered to return 43,030.11 pesos in lump sum to Zamboanga del Norte, with the remaining balance of the province's 54.39 percent share in the twenty-six patrimonial lots to be paid in the same quarterly manner originally adopted.

Remember This

Memorize the rule that public municipal property is under the absolute control of Congress while patrimonial property requires due process and just compensation. Examiners use this case to test the public and patrimonial distinction and the operation of the without prejudice to special laws clause in Article 424 of the Civil Code.