G.R. No. 137152 - City of Mandaluyong vs. Aguilar

Case Summary (G.R. No. 137152)

Factual Background

The City of Mandaluyong filed an expropriation complaint seeking three adjoining parcels totaling 1,847 square meters registered under Transfer Certificates of Title Nos. 59780, 63766 and 63767, located at 9 de Febrero Street, Barangay Mauwag, Mandaluyong. Portions of the lots contained residential houses long leased to tenants while other occupants had constructed dwellings on vacant portions. The lots had earlier been classified by Resolution No. 125 of the Housing and Urban Development Coordinating Council as an Area for Priority Development under Proclamations relating to urban land reform. By Sangguniang Panlungsod Resolution No. 516, Series of 1996, the City authorized its Mayor to initiate expropriation for construction of medium-rise housing for qualified occupants. The Mayor offered to purchase the property at P3,000.00 per square meter on January 10, 1996; respondents did not answer the offer. The complaint sought expropriation and fixation of just compensation at P3,000.00 per square meter.

Trial Court Proceedings

Respondents answered, denied receipt of the purchase offer, and alleged that the expropriation was arbitrary, capricious and not for public purpose; they invoked exemption as small property owners under R.A. No. 7279 and counterclaimed damages. They filed a Motion for Preliminary Hearing to test affirmative defenses. Petitioner filed an Amended Complaint on November 5, 1997 dropping TCT No. 59780 and reducing the land sought to two parcels, TCT Nos. 63766 and 63767, totaling 1,636 square meters. The Amended Complaint was admitted December 18, 1997. The trial court granted the preliminary hearing; respondents presented testimony and documentary evidence at a hearing on February 25, 1998, while petitioner presented no evidence. The trial court dismissed the Amended Complaint on September 17, 1998, declaring respondents to be small property owners exempt from expropriation under R.A. No. 7279 and finding petitioner failed to prove that the intended beneficiaries were landless and homeless; the court denied reconsideration on December 29, 1998.

Issues Presented

The principal issue presented to this Court was whether the trial court erred in holding that respondents qualify as small property owners exempt from expropriation under R.A. No. 7279, and whether the designation of the subject lots within an Area for Priority Development authorized expropriation regardless of size.

Parties’ Contentions

Petitioner argued that the APD designation under Proclamation No. 1967, as amended by Proclamation No. 2284 pursuant to P.D. No. 1517, authorizes expropriation irrespective of land area and that the City had complied with the priorities and modes of acquisition under R.A. No. 7279. Respondents maintained that the land was exempt because they qualified as small property owners under R.A. No. 7279, that the City failed to exhaust other modes of acquisition before resorting to expropriation, and that the expropriation was not shown to be for a public purpose.

Applicable Law

The Court recited the relevant provisions of R.A. No. 7279. Section 9 sets priorities for acquisition of lands for socialized housing, placing lands within declared Areas for Priority Development ahead of privately-owned lands but after government-owned properties and other categories. Section 10 enumerates modes of land acquisition, including negotiated purchase and expropriation, and conditions that expropriation shall be resorted to only when other modes have been exhausted and that parcels owned by small property owners are exempt. Section 3(q) defines “small property owners” as those whose only real property consists of residential lands not exceeding 300 square meters in highly urbanized cities and 800 square meters in other urban areas. Section 11 exempts residential lands owned by small property owners from expropriation of idle lands.

Court’s Analysis on Modes and Priority

The Court held that Section 9 is to be read in pari materia with Section 10 so that lands listed in the acquisition priorities, including those within APDs, may be acquired only by the modes authorized under Section 10 and subject to its conditions. Thus the fact that the subject lots lie within an APD does not ipso facto permit expropriation without first attempting other modes of acquisition. The City alleged only one mode, negotiated purchase, in that a purchase offer at P3,000.00 per square meter was made and declined; it did not state with particularity that other modes such as community mortgage, land swapping, land assembly, land banking, donation, or joint venture agreements had been exhausted. The Court therefore found petitioner’s showing deficient under the express requirement that expropriation be resorted to only when other modes have been exhausted.

Court’s Analysis on Small Property Owners Exemption

The Court observed that R.A. No. 7279 introduced an express exemption from expropriation for small-property owners and that legislative history showed the exemption was deliberate and retained in the consolidated bill. The statute’s definition required two elements: that the subject property be residential land not exceeding 300 square meters in a highly urbanized city, and that it be the owner’s only real property. The Court applied this statutory standard to the facts.

Co-ownership and Partition; Legal Effect

The Court examined the co-ownership status of the registered titles. The two TCTs were issued in the names of the siblings as co-owners in 1987, ten years before the filing of the expropriation complaint. The Court applied Civil Code principles, including Article 493, to hold that co-owners possess an undivided quota or ideal share but also have full ownership of their undivided interest and may alienate or dispose of it prior to partition. The partition effected in 1998, six months after the complaint was filed, converted undivided interests into definite parts. The Court treated the partition as a normal incident of co-ownership and, absent evidence of bad faith, presumed the partition was made in good faith.

Findings on Individual Shares and Qualification

The Court set out the post-partition allocations: four co-owners (Francisco, Thelma, Rodolfo and Antonio Aguilar) each received 300 square meters; Eusebio N. Aguilar received 347 square meters; and Virginia N. Aguilar received 89 square meters. The Court noted that Eusebio died in 1995 and was survived by five children; his heirs thereby became co-owners of his 347 square meters and, on division, each heir’s share equaled approximately 69.4 square meters. Consequently, after partition and taking account of in

Case Syllabus (G.R. No. 137152)

Parties and Procedural Posture

CITY OF MANDALUYONG filed a complaint for expropriation in the Regional Trial Court, Branch 168, Pasig City seeking to acquire private lands for socialized housing.
ANTONIO N. AGUILAR, FRANCISCO N. AGUILAR, THELMA N. AGUILAR, EUSEBIO N. AGUILAR, RODOLFO N. AGUILAR and later VIRGINIA N. AGUILAR were named as defendants and respondents in the expropriation action.
The trial court dismissed the Amended Complaint by orders dated September 17, 1998 and December 29, 1998, which prompted this petition for review under Rule 45, Rules of Court.
The petition was docketed as G.R. No. 137152 and the decision was promulgated on January 29, 2001 by the First Division with the opinion penned by Puno, J..

Key Factual Allegations

Petitioner sought to expropriate originally three adjoining parcels totaling 1,847 square meters and later amended the complaint to seek two parcels totaling 1,636 square meters under TCT Nos. 63766 and 63767.
Portions of the lots contained long-standing residential houses which had been leased to tenants and other families who had constructed and occupied structures on vacant portions.
The lots were previously identified in the early eighties as within an Area for Priority Development under Proclamation No. 1967, as amended by Proclamation No. 2284, pursuant to P.D. No. 1517.
The City offered to purchase the property at P3,000.00 per square meter by letter from the Mayor dated January 10, 1996, which respondents either denied receiving or did not answer.
Respondents asserted that the lots were their only real property and contended that the expropriation was arbitrary, not for a public purpose, and that the fair market value proposed by petitioner was arbitrary compared to BIR zonal valuation.

Procedural History

Petitioner filed the original complaint on August 4, 1997 and later filed an Amended Complaint on November 5, 1997 which was admitted on December 18, 1997.
Respondents filed an Answer with Counterclaim and a Motion for Preliminary Hearing asserting lack of jurisdiction over the person and lack of cause of action, and they introduced evidence at the preliminary hearing held on February 25, 1998.
The trial court granted the motion for preliminary hearing and dismissed the Amended Complaint on September 17, 1998, and denied reconsideration on December 29, 1998.
Petitioner elevated the matter to the Supreme Court by a petition for review under Rule 45, Rules of Court.

Statutory Framework

P.D. No. 1517 (the Urban Land Reform Act) declared State policy to promote optimum use of urban land and identified Urban Land Reform Zones in Metro Manila.
Republic Act No. 7279 (the Urban Development and Housing Act of 1992) mandated local government units to inventory lands for socialized housing and to acquire and dispose of lands for beneficiaries.
R.A. 7279, Sec. 9 established priorities in land acquisition, placing privately-owned lands last and lands within declared Areas for Priority Development fourth in priority.
R.A. 7279, Sec. 10 enumerated modes of acquisition, including negotiated purchase and expropriation, and conditioned expropriation on exhaustion of other modes and the exemption of parcels owned by small property owners.
R.A. 7279, Sec. 3 (q) defined "small property owners" as owners whose only real property consists of residential lands not exceeding three hundred square meters in highly urbanized cities and eight hundred square meters in other urban areas.

Issues Presented

Whether the trial court erred in declaring respondents exempt as small property owners under R.A. 7279 and dismissing the Amended Complaint.
Whether petitioner complied with the statutory prerequisite that expropriation be resorted to only after other modes of acquisition had been exhausted under Sec. 10, R.A. 7279.
Whether the location of the lots within a declared Area for Priority Development ipso facto authorized expropriation irrespective of the small-property-owner exemption.

Contentions of Parties

Petitioner contended that the lots' inclusion in an Area for Priority Development entitled the City to expropriate the property and that prior jurisprudence expanded public use to small