G.R. No. 162288 - Mactan-Cebu International Airport Authority vs. Urgello

Case Digest (G.R. No. 162288)
Expanded Legal Reasoning Model

Facts:

Ownership and Subdivision of the Property

Respondent Milagros Urgello was the owner of Lot No. 913-E of the Banilad Estate in Cebu City, evidenced by Transfer Certificate of Title No. 10873.
The lot was subdivided into four parcels: Lot No. 913-E-1, Lot No. 913-E-2, Lot No. 913-E-3, and Lot No. 913-E-4.

Expropriation Proceedings and the 1964 Compromise Agreement

In the 1950s, the then Civil Aeronautics Administration (CAA) initiated expropriation proceedings for Lot No. 913-E-3 to facilitate the expansion of the Lahug Airport.
The case ultimately reached a compromise rendered by the Court of Appeals on July 27, 1964, whereby:

The CAA agreed to purchase Lot No. 913-E-3 for P3,105.00.
A resolutory condition was embedded in the agreement, stipulating that if the Republic of the Philippines ceased using the lot as an airport, title would revert to the respondent (or her heirs) upon reimbursement of the purchase price.

Respondent executed a Conditional Deed of Sale incorporating the said resolutory condition, which was duly annotated on her TCT.

Changes in Airport Operations and Government Involvement

With the commencement of operations at Mactan Airport on April 27, 1966, airlines (including Philippine Airlines, Filipinas Airways, and Air Manila) abandoned the Lahug Airport.
On August 2, 1983, the Bureau of Air Transportation (BAT), the later-known agency of the CAA, and the Bureau of Equipment of the Ministry of Public Works and Highways (MPWH) executed a memorandum; under this agreement, Lot No. 913-E-3 was leased for 25 years for government use as a regional base shop complex.
The MPWH began constructing fences along the lot’s perimeters and, following related modifications (including the dismantling of Lahug Airport facilities and erection of new structures), BAT later enclosed portions of Lot Nos. 913-E-2 and 913-E-4 despite respondent’s objections.

Initial Litigation and Subsequent Developments

On June 5, 1983, respondent filed a Complaint for Injunction with Damages against the BAT and Tiongco Construction over the encroachments on her property.
On July 8, 1985, respondent requested reconveyance of Lot No. 913-E-3 by tendering the repurchase price (RPB Demand Draft) of P3,105.00 to the BAT.
The BAT’s failure to reconvey the lot prompted respondent’s filing of a Complaint for Reconveyance with Damages on August 9, 1985.
Simultaneously, on December 20, 1985, MPWH initiated a Complaint for Eminent Domain against respondent and others for the expropriation of Lot No. 913-E-4, among other parcels.

Judicial Determinations and the 1989 RTC Decision

Branch 6 of the Cebu Regional Trial Court rendered a decision on January 3, 1989, in Civil Case No. CEB-4115, holding that the resolutory condition in the 1964 Compromise Agreement had occurred.
The court ordered the BAT to reconvey Lot No. 913-E-3 to respondent upon her payment of the repurchase price, dismissing all collateral claims and counterclaims.

Further Compromise and Continued Non-compliance

On January 17, 1990, respondent entered into another Compromise Agreement with the Republic of the Philippines, represented by BAT (later known as Air Transportation Office or ATO), MPWH, and Tiongco Construction.

Under this agreement, MPWH agreed to demolish a concrete wall that obstructed access to respondent’s properties (Lot No. 913-E-2).
It provided for the sale of Lot No. 913-E-4 (including the specific parcel Lot No. 913-E-4-A) at an agreed price.
It reaffirmed the obligation of BAT (and by extension, its successors) to reconvey Lot No. 913-E-3 pursuant to the RTC decision of January 3, 1989.

Despite these agreements, the government agencies failed to comply:

The DPWH did not demolish the fence nor return portions of Lot Nos. 913-E-2 and 913-E-4.
A Writ of Execution was issued on July 28, 1993, but remained unenforced.

As a consequence, respondent filed, on October 15, 1996, a comprehensive Complaint for Reconveyance with Damages, including claims for:

Immediate reconveyance of Lot No. 913-E-3 (subject to repurchase) and unconditional reconveyance of Lot No. 913-E-4-A.
Demolition of the encroaching fence on Lot No. 913-E-2.
Payment of rentals for the unauthorized possession dating from relevant periods.
Alternatively, payment by way of just compensation and additional damages.

Defendants’ Position and the Involvement of MCIAA

The DPWH and ATO argued that respondent had failed to exhaust administrative remedies and questioned the trial court’s jurisdiction.
ATO maintained that its obligations under the 1990 Compromise Agreement were limited solely to what DPWH assumed.
MCIAA, which was established under Republic Act No. 6958 (signed on July 31, 1990) and became the airport operating authority, was drawn into the dispute:

It challenged its inclusion by arguing it was not a party to the 1990 Compromise Agreement and had not formally assumed ATO’s liabilities due to the lack of turnover of the property.
The parties contended over whether, under RA 6958, MCIAA was obliged to assume the obligations (including reconveyance of Lot No. 913-E-3) as the successor-in-interest to the ATO.

Trial, Appellate, and Statutory Considerations

The RTC, on March 10, 1999, rendered a decision ordering:

Solidary reconveyance of Lot No. 913-E-3 to respondent without the need for further repurchase payment.
Return of Lot Nos. 913-E-2 and 913-E-4 to respondent.
Demolition of the fence on Lot No. 913-E-2.
Payment of rentals and attorney’s fees by the defendants.

The trial court emphasized that the government’s continued occupation and the failure to reconvey the lot amounted to expropriation without just compensation.
On appeal, the decision was largely affirmed, although modifications were made concerning MCIAA’s liabilities, particularly with respect to the lots not physically turned over.
Central to the dispute was the statutory interpretation of RA 6958’s provisions—particularly Sections 15 and 17—which deal with the transfer of airport facilities and the assumption of liabilities by MCIAA.

Issues:

Whether the resolutory condition embedded in the 1964 Compromise Agreement was fulfilled, thereby obligating the government to reconvey Lot No. 913-E-3 to respondent.

Whether the defendants—DPWH, ATO, and MCIAA—are jointly and severally liable for:

Reconveying Lot No. 913-E-3 to respondent.
Returning Lot Nos. 913-E-2 and 913-E-4 (including Lot No. 913-E-4-A) to respondent.
Demolishing the illegally constructed fence on Lot No. 913-E-2.
Payment of rentals for the unauthorized use and occupation of the contested parcels.

Whether, under Republic Act No. 6958, the transfer of assets to MCIAA also automatically transferred the obligations and liabilities of the ATO—even in the absence of a formal physical turnover of the properties.

The correct interpretation of RA 6958 with respect to the effective date and whether its provisions mandate that physical possession be a prerequisite for the assumption of liabilities.

Whether the actions and inactions of the government agencies amounted to illegal expropriation and unjust deprivation of respondent’s property rights, thus justifying the remedy for reconveyance, payment of rentals, and attorney’s fees.

Ruling:

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Ratio:

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Case Digest (G.R. No. 162288) Core Legal Reasoning Model Expanded

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Case Digest (G.R. No. 162288)
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Case Digest (G.R. No. 162288)
Expanded Legal Reasoning Model