CITY OF MANILA, PETITIONER, VS. ALEJANDRO ROCES PRIETO, BENITO ROCES PRIETO, MERCEDES PRIETO DELGADO, MONICA LOPEZ PRIETO, MARTIN LOPEZ PRIETO, BEATRIZ PRIETO DE LEON, RAFAEL RO…

City of Manila versus Prieto

The Case

This is a petition for review on certiorari brought by the City of Manila against Alejandro Roces Prieto and the other registered owners of several parcels of land in Manila. The City sought to expropriate those lots for its Land for the Landless Program, and the owners resisted. The case matters because it is the Supreme Court's clearest statement that a local government unit exercises only a delegated power of eminent domain, and that the conditions attached to that delegation — an ordinance, a valid and definite prior offer, just compensation, and compliance with the priorities and modes of land acquisition under the Urban Development and Housing Act — are mandatory and must be proved, not merely asserted.

Procedural History

The City filed a complaint for expropriation before the Regional Trial Court of Manila, Branch 52, and asked for a writ of possession. The trial court initially denied the writ until an additional deposit was made, applying the Local Government Code requirement of a deposit of fifteen percent of the fair market value rather than the general expropriation rule. After the deposit was completed, the trial court issued a writ of possession. The trial court later issued an order of expropriation, finding that all the requisites for the exercise of eminent domain had been met and that the City had a lawful right to take the lots upon payment of just compensation. The owners moved for reconsideration, which was denied. They appealed to the Court of Appeals. The Court of Appeals reversed and set aside the trial court's order, holding that the City had failed to prove compliance with the Constitution and pertinent laws. The City's motion for reconsideration was denied. The City then came to the Supreme Court by petition for review on certiorari under Rule 45.

Facts

On January 19, 2004, the City Council of Manila enacted Ordinance Number 8070, authorizing the City Mayor to acquire certain parcels of land belonging to the respondents, to be used for the City's Land for the Landless Program. The City first tried to buy the lots by negotiated sale, offering 2,000 pesos per square meter. The owners refused, saying their properties were worth more.

On September 3, 2004, the City filed a complaint for expropriation. Invoking the Rules of Court, it sought a writ of possession and manifested that it had deposited 4,812,920 pesos, representing more than one hundred percent of the assessed value of the properties based on their tax declarations. The trial court denied the writ pending an additional deposit, applying the Local Government Code rule of fifteen percent of fair market value. The additional amount was completed, partly by the City and partly by the prospective beneficiaries themselves, and a writ of possession issued in October 2006.

At the hearing, the president of the neighborhood association of the beneficiaries testified that its members had money to buy the properties they occupied, and that among them were professionals such as teachers, nurses, a doctor, and a dentist. The trial court nonetheless issued the order of expropriation, and the Court of Appeals reversed.

Issues

• Whether or not the Court of Appeals erred in finding that the City of Manila failed to prove compliance with pertinent laws in the exercise of its power of eminent domain.
• Whether or not the City validly dispensed with the order of priority in the acquisition of land for socialized housing by claiming that on-site development was more practicable and advantageous to the beneficiaries.
• Whether or not the City exhausted the other modes of land acquisition, particularly a renegotiated offer, before resorting to expropriation.
• Whether or not the prospective beneficiaries were the underprivileged and homeless contemplated by the socialized housing law.

Applicable Provisions

Section 19 of the Local Government Code provides:

Section 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 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.

This is the source of the delegated power and of the four requisites the Court enumerates: an ordinance, a public use or purpose or welfare for the benefit of the poor and the landless, payment of just compensation, and a valid and definite prior offer that was not accepted.

Section 9 of the Urban Development and Housing Act provides:

Section 9. Priorities in the Acquisition of Land. Lands for socialized housing shall be acquired in the following order: (a) Those owned by the Government or any of its subdivisions, instrumentalities, or agencies, including government-owned or controlled corporations and their subsidiaries; (b) Alienable lands of the public domain; (c) Unregistered or abandoned and idle lands; (d) Those within the declared Areas or Priority Development, Zonal Improvement Program sites, and Slum Improvement and Resettlement Program sites which have not yet been acquired; (e) Bagong Lipunan Improvement of Sites and Services or BLISS sites which have not yet been acquired; and (f) Privately-owned lands. Where on-site development is found more practicable and advantageous to the beneficiaries, the priorities mentioned in this section shall not apply. The local government units shall give budgetary priority to on-site development of government lands.

Private lands are last in the order of priority, and the exception allowing on-site development to override that order must itself be proved.

Section 10 of the same Act provides:

Section 10. Modes of Land Acquisition. The modes of acquiring lands for purposes of this Act shall include, among others, community mortgage, land swapping, land assembly or consolidation, land banking, donation to the Government, joint-venture agreement, negotiated purchase, and expropriation: Provided, however, That expropriation shall be resorted to only when other modes of acquisition have been exhausted: Provided, further, That where expropriation is resorted to, parcels of land owned by small property owners shall be exempted for purposes of this Act.

Expropriation is a last resort, available only after the other modes have been exhausted.

Article 35 of the Rules and Regulations Implementing the Local Government Code provides:

Article 35. Offer to Buy and Contract of Sale, (a) The offer to buy private property for public use or purpose shall be in writing. It shall specify the property sought to be acquired, the reasons for its acquisition, and the price offered. (c) If the owner or owners are willing to sell their property but at a price higher than that offered to 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, shall participate in the conference. When an agreement is reached by the parties, a contract of sale shall be drawn and executed.

This provision requires the local chief executive to call the owners to a conference when they are willing to sell but at a higher price, which is precisely what the owners here indicated.

Ruling

The Court denied the petition and affirmed the Court of Appeals. On the first issue, the Court held that the trial court took a facile approach, sweepingly concluding that all requisites were met. Courts have a duty to judiciously scrutinize whether the local government's exercise of the delegated power conforms to the delegating law, because bare allegations and unsupported generalizations cannot overcome the drastic effect of expropriation on constitutionally protected rights.

On the second issue, the Court held that the City presented no evidence of any study comparing the listed priorities, and no showing that it first attempted to acquire the lands enumerated in paragraphs (a) to (e) of Section 9. Nor was there proof that the lots were the blighted areas that may properly be the subject of on-site development. The Court stressed that compliance with the priorities is mandatory, as these are the only safeguards of oftentimes helpless owners against a tyrannical violation of due process.

On the third issue, the Court held that the City failed to exhaust the other modes of acquisition. When the owners rejected the offer but hinted at a better price, the City should have renegotiated by calling them to a conference. Its failure to do so meant there was no valid and definite offer, and warranted dismissal of the complaint. The Court quoted its own rule:

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.

On the fourth issue, the Court held that there was no evidence that the beneficiaries were the underprivileged and homeless. On the contrary, the records showed they could afford to buy the properties, and they even contributed a substantial amount to complete the deposit. The Court added that condemnation of private lands in a piecemeal fashion, or the random expropriation of small lots to accommodate no more than a few tenants or squatters, is not the public use contemplated by the Constitution.

Doctrine

A local government unit has no inherent power of eminent domain; it exercises only a delegated, and therefore inferior, power that must conform to the limits imposed by the delegating law. Before a local government unit may expropriate, four requisites must concur: an ordinance enacted by the local legislative council; a public use, purpose or welfare, or benefit to the poor and the landless; payment of just compensation; and a valid and definite prior offer to the owner that was not accepted. Compliance with Section 9 and Section 10 of the Urban Development and Housing Act is mandatory: private lands are last in the order of priority, the on-site development exception must be proved by evidence and not by bare assertion, and expropriation may be resorted to only after the other modes of acquisition, including a renegotiated offer, have been exhausted. Failure to comply warrants dismissal of the complaint.

Disposition

The petition was denied, and the Court of Appeals decision and resolution were affirmed; the City of Manila lost, and its complaint for expropriation did not prosper.

Remember This

Memorize the line that the power of eminent domain delegated to a local government unit is in reality not eminent but inferior, because it must conform to the limits imposed by the principal. Examiners use this case to test the requisites of local expropriation, the mandatory priorities and modes of land acquisition under the Urban Development and Housing Act, and the requirement of a valid and definite offer followed by a renegotiation conference.