FRANCISCO LOPEZ, PETITIONER, VS. THE AUDITOR GENERAL, COMMISSIONER OF PUBLIC HIGHWAYS, THE SECRETARY OF PUBLIC WORKS AND COMMUNICATIONS, RESPONDENTS.

Lopez versus Auditor General

The Case

This is a petition brought by Francisco Lopez against the Auditor General, the Commissioner of Public Highways, and the Secretary of Public Works and Communications, asking the Supreme Court to review the denial of his claim for compensation for a portion of his land that the government took for road purposes. The case matters because it draws the dividing line between two situations that look alike but are governed by different rules: land taken by the government without any transfer of ownership, where the owner's action does not prescribe, and land already acquired by the government where only the price remains unpaid, where the action to collect must be brought within ten years. The Court resolves the case on the sole issue of prescription.

Procedural History

Lopez first presented his claim for compensation to the Highway District Engineer, who denied it on the ground that it had prescribed. He asked for reconsideration, and the Commissioner of Public Highways denied the request in a decision dated February 14, 1963, with the Secretary of Public Works and Communications concurring. Lopez then appealed to the Auditor General, who likewise denied the claim. In a letter dated February 16, 1966, the Deputy Auditor General informed Lopez that his claim had already prescribed, citing the Constitution and Commonwealth Act Number 327, which vest the Auditor General with exclusive jurisdiction over such claims, and noting that Lopez had never filed his claim with that office nor with the Committee on Claims. Lopez then brought the case to the Supreme Court on the sole issue of prescription.

Facts

Francisco Lopez was the registered owner of a parcel of land in Lopez, Quezon. In 1937, the municipal government of Lopez used a portion of his property in building a road, which was later converted into what is now known as the Lopez-Calauag section of the Manila South Road.

Nothing is known about any agreement between Lopez and the government, local or national, except that Lopez claims he agreed to allow the municipality to take a portion of his property in exchange for a piece of town property. Even the records of the municipal council of Lopez failed to shed light on the supposed agreement.

On May 2, 1959, Lopez presented to the Highway District Engineer a claim for compensation for the portion of his property which, he averred, had been taken without any deed of conveyance or right of way. That claim was denied on the ground that it had prescribed, and the denial was affirmed on reconsideration and on appeal to the Auditor General. The government's defense rested on prescription, arguing that unlike the owner in the earlier Alfonso case, who made repeated demands for compensation within ten years and thereby interrupted the running of the period, Lopez filed his claim only in 1959.

Issues

• Whether or not Lopez's action to collect the value of the portion of his land taken by the government in 1937 is barred by the statute of limitations.
• Whether or not ownership of the portion taken was transferred to the government in 1937, such that all that remained was the payment of the price.

Applicable Provisions

The decision cites Article 1356 of the Philippine Civil Code, which provides:

Contracts shall be obligatory, in whatever form they may have been entered into, provided all the essential requisites for their validity are present.

This provision supports the Court's holding that the unwritten exchange agreement between Lopez and the municipality is valid and binding, so that delivery of possession in 1937 transferred ownership to the municipality.

Ruling

On the first issue, the Court held that the answer depends on the second. The Court distinguished the Alfonso case, where a lot owner was allowed to recover compensation despite the lapse of thirty years, from the Jaen case, where an action for compensation was barred because it was brought after more than ten years. The rationale of Alfonso is that where private property is taken by the government for public use without first acquiring title thereto, either through expropriation or negotiated sale, the owner's action to recover the land or its value does not prescribe. But where private property is acquired by the government and all that remains is the payment of the price, the owner's action to collect the price must be brought within ten years, otherwise it is barred by the statute of limitations. The Court quoted its teaching in Jaen:

There is no pretense that the portion of the lot actually used has not yet been duly transferred to the government by its original owner. The validity of this transfer is not disputed and what petitioner merely seeks is the payment of its value which she claims has not been paid since 1920. If this is the nature of the claim, it is clear that the same has already prescribed.

On the second issue, the Court found that there was no deed of conveyance to evidence a transfer of ownership to the government. However, Lopez categorically stated, and this must be taken as an admission on his part, that he gave a portion of his property to the municipality of Lopez in exchange for another piece of land owned by the municipality. This meant that the municipal government became the owner of the land by the delivery of its possession in 1937. The Court held that the fact that the agreement was not in writing did not militate against its validity, because contracts are binding on the parties in whatever form they may have been entered into, and that registration of the exchange was not necessary for the validity of the transfer since the rights of innocent third parties or subsequent transferees were not involved. Since Lopez's action was to collect the price of the land, and it was not filed until after the lapse of more than ten years, it was barred by the statute of limitations. The Court added that even if the Moratorium Law were taken into account, the result would be the same.

Doctrine

A Bar candidate should retain two rules. First, where private property is taken by the government for public use without first acquiring title thereto, either through expropriation or negotiated sale, the owner's action to recover the land or its value does not prescribe. Second, where private property is acquired by the government and all that remains is the payment of the price, the owner's action to collect the price must be brought within ten years, otherwise it is barred by the statute of limitations. Ownership may pass by delivery of possession under an oral exchange, because under Article 1356 contracts are obligatory in whatever form they may have been entered into, and registration is unnecessary where no innocent third parties are involved. The pivotal inquiry is therefore whether ownership was transferred to the government at the time of taking.

Disposition

The Supreme Court affirmed the decision of the Auditor General denying Lopez's claim, without pronouncement as to costs.

Remember This

Memorize the line: if the government took the land without acquiring title, the action does not prescribe, but if title already passed and only the price remains unpaid, the action to collect prescribes in ten years. Examiners use this case to test the distinction between an action to recover land taken without expropriation and an action to collect the unpaid price of land already acquired.