FRANCISCO I. CHAVEZ, PETITIONER, VS. NATIONAL HOUSING AUTHORITY, R-II BUILDERS, INC., R-II HOLDINGS, INC., HARBOUR CENTRE PORT TERMINAL, INC., AND MR. REGHIS ROMERO II, RESPONDE…

Chavez versus National Housing Authority

The Case

This is a petition for prohibition and mandamus, with a prayer for a temporary restraining order and a writ of preliminary injunction, brought by Francisco Chavez in his capacity as a taxpayer against the National Housing Authority, R-II Builders, R-II Holdings, Harbour Centre Port Terminal, and Reghis Romero II. He asks the Court to declare null and void the Joint Venture Agreement of March 9, 1993 between the National Housing Authority and R-II Builders, the Smokey Mountain Development and Reclamation Project embodied in it, the later amendments, and all agreements and transactions that flowed from them, as unconstitutional and invalid. He also asks that the respondents be enjoined from further implementing the project and compelled to disclose all documents and information relating to it. The case matters because it tests how far a government agency may go in a joint venture with a private developer over lands of the public domain, and how the Build-Operate-and-Transfer Law and the constitutional rules on land ownership constrain that venture.

Procedural History

This was an original action in the Supreme Court, filed as a petition for prohibition and mandamus under Rule 65. There were no prior rulings of a trial court or of the Court of Appeals recited in the decision. The petitioner came directly to the Supreme Court as a taxpayer, seeking to void the contracts and to compel disclosure, and the Court resolved the petition on its merits.

Facts

On March 1, 1988, then President Corazon Aquino issued Memorandum Order 161, approving the Comprehensive and Integrated Metropolitan Manila Waste Management Plan. The next day, Memorandum Order 161-A was issued, prescribing the functions of fifteen government departments and offices. The National Housing Authority was ordered to conduct feasibility studies and develop low-cost housing projects at the dumpsite and to absorb scavengers in its resettlement projects. Smokey Mountain in Balut, Tondo, Manila was then a wasteland where many families lived in subhuman conditions, collecting items of value from the garbage. Pursuant to these orders, the National Housing Authority prepared feasibility studies that became the Smokey Mountain Development and Reclamation Project, which aimed to convert the dumpsite into a habitable housing project, with the reclamation of the area across Radial Road 10 as the enabling component.

On July 9, 1990, the Build-Operate-and-Transfer Law, Republic Act 6957, was enacted. On February 10, 1992, Congress passed Joint Resolution No. 03, approving national infrastructure projects for implementation under that law, including port infrastructure, land reclamation and dredging, industrial estates, environmental and solid waste management facilities, and the development of new townsites and communities. On January 17, 1992, President Aquino issued Memorandum Order 415, directing the National Housing Authority to implement the project through a private sector joint venture scheme at the least cost to the government, conveying to it the Smokey Mountain dumpsite and the area to be reclaimed across Radial Road 10, and creating an Executive Committee and a technical committee. Public notices were published, thirteen contractors responded, five fully complied with pre-qualification, and R-II Builders obtained the highest score. On September 9, 1992, President Ramos issued Proclamation No. 39, placing the parcels of public domain under the administration and disposition of the National Housing Authority, and on October 7, 1992, he authorized it to enter into a joint venture agreement subject to final review and approval by the Office of the President.

On March 19, 1993, the National Housing Authority and R-II Builders entered into the Joint Venture Agreement. R-II Builders was to finance all aspects of the development and reclaim no more than 40 hectares of Manila Bay area across Radial Road 10, and as its asset share it would own the 40 hectares of reclaimed land, a 1.3 hectare commercial area, and the medium-rise housing units beyond the 3,500 units allotted to the National Housing Authority. After consultations, public hearings, and environmental evaluation, design changes and additional work were found necessary, and on February 21, 1994 the parties entered into the Amended and Restated Joint Venture Agreement. The project was divided into Phase I, covering temporary housing, clearing and leveling, and medium-rise housing, and Phase II, covering an incinerator plant. The enabling component for Phase I was increased from 40 hectares to 79 hectares, and Phase II was given 119 hectares contiguous to it, and the stipulated cost for Phase I was pegged at six billion six hundred ninety-three million three hundred eighty-seven thousand three hundred sixty-four pesos.

Issues

• Whether or not the petitioner has legal standing to bring this suit as a taxpayer.
• Whether or not the Joint Venture Agreement and the project violate the constitutional prohibition on private ownership of lands of the public domain.
• Whether or not the project falls within the coverage of the Build-Operate-and-Transfer Law and its repayment scheme.
• Whether or not the respondents may be compelled by mandamus to disclose the documents and information relating to the project.

Applicable Provisions

Section 1 of Republic Act 6957 declares the policy of the law:

To recognize the indispensable role of the private sector as the main engine for national growth and development and provide the most appropriate favorable incentives to mobilize private resources for the purpose.

This policy anchors the Court's treatment of the joint venture as a lawful private sector participation in a government infrastructure project.

Section 3 of the same law authorizes government infrastructure agencies to contract with private contractors:

All government infrastructure agencies, including government-owned and controlled corporations and local government units are hereby authorized and empowered to enter into contract with any duly pre-qualified private contractor for the financing, construction, operation and maintenance of any financially viable infrastructure facilities through the build-operate-transfer or build and transfer scheme.

This is the statutory authority invoked for the National Housing Authority's entry into the joint venture.

The last paragraph of Section 6 of the Build-Operate-and-Transfer Law governs the repayment scheme for reclamation projects:

The grant of a portion or percentage of the reclaimed land or industrial estate built, subject to the constitutional requirements with respect to the ownership of lands.

This provision is decisive because it permits payment in reclaimed land, but only within constitutional limits on ownership.

Ruling

On the first issue, the Court held that the petitioner may sue as a taxpayer, since the case involves the disbursement of public funds and the disposition of lands of the public domain, matters of transcendental importance to the public.

On the second issue, the Court upheld the project. The reclaimed land across Radial Road 10 was not private land but land of the public domain, and the constitutional requirement on ownership of lands had to be respected. The Court read the grant of a portion of the reclaimed land as the repayment scheme expressly allowed by the last paragraph of Section 6 of the Build-Operate-and-Transfer Law, which it quoted:

The grant of a portion or percentage of the reclaimed land or industrial estate built, subject to the constitutional requirements with respect to the ownership of lands.

Because the reclaimed area remained part of the public domain and the arrangement was authorized by law and by presidential issuances, the joint venture did not amount to an unconstitutional transfer of public land to a private party.

On the third issue, the Court held that the project fell within the coverage of the Build-Operate-and-Transfer Law. Land reclamation, dredging, environmental and solid waste management facilities, and the development of new townsites and communities were among the projects approved by Congress in Joint Resolution No. 03, and the National Housing Authority was expressly authorized to undertake the venture through a private sector joint venture scheme.

On the fourth issue, the Court held that the petitioner was not entitled to compel disclosure by mandamus of all the documents and information he demanded, there being no showing of a clear legal duty on the part of the respondents to disclose each of them in the manner prayed for.

Doctrine

A government infrastructure agency may enter into a joint venture with a duly pre-qualified private contractor for the financing, construction, operation and maintenance of a financially viable infrastructure facility under the Build-Operate-and-Transfer Law. In a land reclamation project, the contractor may be paid by the grant of a portion or percentage of the reclaimed land, but that grant is always subject to the constitutional requirements on the ownership of lands, because reclaimed land remains part of the public domain. A taxpayer has standing to question contracts involving the disposition of public lands and public funds where the matter is of transcendental importance. Mandamus to compel disclosure lies only where there is a clear legal duty to disclose.

Disposition

The petition was dismissed, and the Joint Venture Agreement, its amendments, and the Smokey Mountain Development and Reclamation Project were upheld as valid.

Remember This

Memorize the line that payment for reclamation may be a portion of the reclaimed land, but always subject to the constitutional requirements on ownership of lands. Examiners use this case to test taxpayer standing, the coverage of the Build-Operate-and-Transfer Law, and the public domain character of reclaimed land.