THE CITY OF MANILA, PLAINTIFF AND APPELLANT, VS. THE ARELLANO LAW COLLEGES, INC., DEFENDANT AND APPELLEE.

City of Manila versus Arellano Law Colleges

The Case

This is an expropriation case. The City of Manila, as plaintiff, sought to condemn several parcels of land on Legarda Street belonging to the Arellano Law Colleges, Incorporated, so that the lots could be subdivided and resold at cost to the occupants. The City invoked the authority of cities to acquire homesites, and the central question is whether that authority extends to expropriation, and if so, whether the taking is justified in the particular circumstances. The case matters because it fixes the limits of the power of eminent domain when exercised for a private benefit dressed as a public purpose, and because it reminds the Bar candidate that a delegated power of condemnation cannot rise higher than its source.

Procedural History

The City of Manila commenced the action in the Court of First Instance of Manila, seeking to condemn the parcels of land for subdivision and resale. The trial court ruled that the governing statute empowered cities to purchase but not to expropriate lands for that purpose, and on that ground dismissed the action. The City brought the case to the Supreme Court on appeal, and the Supreme Court reviewed the dismissal and affirmed it, though on reasoning that first corrected the trial court's reading of the statute.

Facts

The City of Manila filed a complaint to condemn several parcels of land with a combined area of 7,270 square meters, situated on Legarda Street in the City of Manila. The stated purpose was to subdivide the property and resell it at cost to the occupants, relying on the authority granted to cities and municipalities to acquire homesites within their territorial jurisdiction.

The land belonged to the Arellano Law Colleges, Incorporated. The school had bought it for a university site, to replace rented buildings unsuitable for schools of higher learning. It had already invested a considerable amount, had its construction plans ready, and would have completed the project long before had it not been stopped by the city authorities. The property had cost the owner 140,000 pesos. It sits in a highly commercial section of the city and is occupied by persons who are not bona fide tenants.

The occupants had asked to buy the land, and their request was referred by the President to the Rural Progress Administration, the national agency created to purchase or expropriate lands for resale as homesites. After proper investigation, that agency turned the request down, observing that the necessity of the Arellano Law College to acquire a permanent site of its own was imperative, and that denying it would not only hamper the objectives of the educational institution but would likewise be taking a property already intended for public benefit. The Mayor of the City of Manila himself confessed that he believed the plaintiff was not entitled to keep this land.

Issues

• Whether or not the statute authorizes cities to expropriate lands for homesites, and not merely to purchase them.
• Whether or not the proposed expropriation is for a public use within the meaning of the power of eminent domain.
• Whether or not there exists a necessity for taking this particular property for the proposed purpose.

Applicable Provisions

Section 1 of Republic Act Number 267 provides:

Cities and municipalities are authorized to contract loans from the Reconstruction Finance Corporation, the Philippine National Bank, and/or any other entity or person at a rate of interest not exceeding eight per cent per annum for the purpose of purchasing or expropriating homesites within their respective territorial jurisdiction and reselling them at cost to residents of the said cities and municipalities.

The provision is the source of the power invoked, and its use of the word expropriating is the textual anchor of the Court's first holding.

Ruling

On the first issue, the Court disagreed with the trial court. The statute empowers cities to expropriate as well as to purchase lands for homesites. The word expropriating, taken singly or in the text, is susceptible of only one meaning. But the Court immediately qualified the grant: this power to expropriate is necessarily subject to the limitations and conditions laid down in the earlier decisions on the point, for the National Government may not confer upon its instrumentalities authority which it itself may not exercise. A stream cannot run higher than its source.

On the second issue, the Court applied its earlier doctrine distinguishing expropriation of large estates, which bears a direct relation to the public welfare, from the condemnation of a small property in behalf of a few persons. The size of the land, the large number of people benefited, and the extent of social and economic reform secured clothe the expropriation with public interest and public use. By contrast, the condemnation of a small property in behalf of ten, twenty, or fifty persons and their families does not inure to the benefit of the public to a degree sufficient to give the use a public character. The Court measured this case against that standard and found it wanting for the condemnor: the land is only one-third of that sought in the earlier case and about two-thirds of that in the other; it lies in a highly commercial section; and it is occupied by persons who are not bona fide tenants.

On the third issue, the Court held that necessity for the condemnation had not been shown. It recalled the rule from the City of Manila versus Manila Chinese Community decision:

The very foundation of the right to exercise eminent domain is a genuine necessity, and that necessity must be of a public character. The ascertainment of the necessity must precede or accompany, and not follow, the taking of the land.

Necessity, the Court explained, need not be absolute but only a reasonable or practical necessity, one that combines the greatest benefit to the public with the least inconvenience and expense to the condemning party and the property owner. Even by that relaxed standard the City failed. The land cost the owner 140,000 pesos, a price the poor occupants could ill afford unless they meant to borrow and later dispose of the property at a profit. Cheaper lands not dedicated to a purpose so worthy as a school, and better suited to the occupants' needs and means, were plentiful elsewhere. Meanwhile the school had invested considerably, had its plans ready, and would have completed the project but for the city authorities. While a handful of people stood to profit, the development of a university with a present enrollment of nine thousand students would be sacrificed. Any good from providing homes to a few families fades into insignificance beside the preparation of young men and young women for useful citizenship and service to the government and the community, a task the government alone is not in a position to undertake.

Doctrine

First, a statute authorizing cities to purchase or expropriate homesites grants both powers; the word expropriating is plain and needs no strained reading. Second, the power so granted is bounded by the constitutional limits on eminent domain: a delegate cannot exercise authority the National Government itself may not exercise, because a stream cannot run higher than its source. Third, public use is not synonymous with the private convenience of a few; expropriation of a small property for a handful of families lacks the public character that large-scale takings for social and economic reform possess. Fourth, eminent domain requires a genuine necessity of a public character, ascertained before or at the taking, and measured as a reasonable or practical necessity combining the greatest public benefit with the least inconvenience and expense. Applied together, these rules mean that a city may not condemn a school site in a commercial district, at a price the intended beneficiaries cannot afford, when cheaper and more suitable land is available elsewhere.

Disposition

The Supreme Court affirmed the order of the Court of First Instance of Manila dismissing the action, without costs; the City of Manila lost and the Arellano Law Colleges kept its land.

Remember This

Memorize the line that a stream cannot run higher than its source: the power to expropriate is real, but it carries every limitation binding on the National Government. Examiners use this case to test the public use and necessity requirements of eminent domain, and to test whether a statute's use of the word expropriating settles the grant of the power.