Case Summary (G.R. No. 210669)
Petitioner
HI-LON Manufacturing, Inc.
Respondent
Commission on Audit
Key Dates
• 1978 – Conversion of 29,690 sq. m. to RROW for Manila South Expressway.
• September 6, 1985 – DBP acquires entire parcel in foreclosure and issues TCT No. T-151837.
• February 3, 1987 – DBP’s assets, including subject land, transferred to APT.
• June 30, 1987 – APT public bidding; Fibertex succeeds for 5.9 ha usable area.
• October 29, 1987 – APT sells 59,380 sq. m. to TGPI; 29,690 sq. m. RROW expressly excluded.
• April 16, 1995 – TGPI sells entire 89,070 sq. m. (including RROW) to HI-LON.
• January 23, 2002 – Republic executes Deed of Sale covering RROW; DPWH pays P10,461,338.00.
• January 29, 2004 – COA Legal & Adjudication Office issues Notice of Disallowance No. 2004-032 disallowing P9,937,596.20.
• January 20, 2011 and December 3, 2013 – COA Decisions Nos. 2011-003 and 2013-212 affirm recoveries and require refund.
• August 1, 2017 – Supreme Court denies petition for certiorari.
Applicable Law
• 1987 Philippine Constitution, Art. IX-D (COA’s audit powers).
• Republic Act No. 917 (Philippine Highway Act) – Definition of RROW and public highway.
• New Civil Code Arts. 420, 649 (public dominion; easements).
• Land Registration Act (Act No. 496) Sec. 39; Property Registration Decree (P.D. 1529) Sec. 44 (statutory liens).
• Proclamation No. 50; Administrative Order No. 14; COA Revised Rules (2009).
Facts of Acquisition and Title Transfers
The subject 89,070 sq. m. parcel in Calamba, Laguna was originally registered to Commercial and Industrial Real Estate Corporation (CIREC), transferred to Philippine Polymide Industrial Corporation (PPIC), then foreclosed and titled to Development Bank of the Philippines (DBP) in 1985. DBP’s assets were handed to APT in 1987, which publicly bid out only the 59,380 sq. m. usable portion. APT’s Deed of Sale (Oct. 29, 1987) to TGPI expressly excluded the 29,690 sq. m. RROW. TGPI later sold the entire parcel, including the mistakenly included RROW, to HI-LON in 1995.
Conversion to Road Right-of-Way and Initial Compensation
In 1978 the Ministry of Public Works and Highways converted 29,690 sq. m. to RROW without expropriation proceedings or compensation annotation. In 1998, HI-LON’s attorney-in-fact sought just compensation; DPWH’s Ad Hoc Committee valued the RROW at ₱2,500/sq. m. based on 1999 zonal values. A Deed of Sale (Dec. 21, 2001) and partial payment (Jan. 23, 2002) of ₱10,461,338.00 followed.
Post-Audit Findings and Notice of Disallowance
DPWH audit observed fair market value should reflect 1978 levels (₱19.40/sq. m.), recommending recovery of ₱9,937,596.20. LAO-N issued Notice of Disallowance No. 2004-032 (Jan. 29, 2004), affirmed (May 12, 2004) and further modified to include interest (Decision No. 2008-172-A). HI-LON’s appeals to LAO-N were denied.
COA Decisions and Special Audit Team Investigation
COA’s Commission Proper, upon special audit referral, denied HI-LON’s petition for review in Decision No. 2011-003, finding anomalies that TGPI did not bid for the RROW and that HI-LON, as TGPI’s 99.9% subsidiary, cannot claim better title. COA directed issuance of disallowance for the remaining ₱523,741.80. Motion for reconsideration was denied in Decision No. 2013-212, requiring HI-LON to refund full ₱10,461,338.00.
Issues on Ownership of the 29,690 sq. m. RROW
HI-LON contended it legitimately acquired the entire parcel, including RROW, under the October 29, 1987 Deed with express warranty of no encumbrances. It further argued lack of annotation and government inaction estopped the Republic from denying its ownership. COA and OSG maintained the RROW remained public dominion, excluded from sale, and vested in the Republic since APT’s 1987 transfer.
Legal Analysis on Contractual Terms and Public Bidding
Under New Civil Code Art. 1370, clear, unambiguous contracts control. The Deed of Sale’s express exclusion of RROW aligned with public bidding terms and APT Asset Catalogue. Post-bidding amendments or hidden benefits would violate procurement principles and render transfer inconsistent with public bidding specifications.
Public Dominion and Statutory Liens on RROW
Road rights-of-way are public dominion (Civil Code Art. 420; RA 917) and given statutory lien status (Act 496 Sec. 39; P.D. 1529 Sec. 44) binding even without title annotation. Public highways and RROW cannot be alienated or registered under Torrens titles, and any erroneous inclusion remains void against the Republic.
Notice to Purchasers and Estoppel Considerations
HI-LON had actual notice of a public highway over the RROW, equivalent to constructive notice under Torrens. Purchasers cannot ignore visible facts that woul
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Procedural Posture
- Petition for Certiorari under Rule 64, in relation to Rule 65 of the 1997 Rules of Civil Procedure.
- Seeks annulment of COA Decision No. 2011-003 (Jan 20, 2011) and COA Decision No. 2013-212 (Dec 3, 2013).
- Challenges denial of just compensation petition and requirement to refund P10,461,338.00.
Antecedent Facts
- 1978: DPWH (then Ministry of Public Works and Highways) converted 29,690 sq. m. of an 89,070 sq. m. parcel in Mayapa, Calamba (subject property) into road right-of-way (RROW) for the Manila South Expressway Extension.
- Original registration: CIREC (TCT No. T-40999); subsequent transfers to PPIC (TCT No. T-120988) then foreclosure to DBP (TCT No. T-151837).
- No annotation of government’s RROW claim; no expropriation proceedings or compensation paid.
- 1987: By Administrative Order No. 14 and Proclamation No. 50, DBP assets—including subject property—transferred to Asset Privatization Trust (APT).
- June 30, 1987 public bidding by APT: Fibertex, TNC Philippines, P. Lim Investment submitted bids; TGPI did not participate.
- APT sold land (“total useable area of 59,380 sq. m.”) to TGPI for P2,222,967 (Deed of Sale Oct 29, 1987); improvements sold separately to Fibertex.
- Register of Deeds issued TCT No. T-158786 to TGPI covering the entire 89,070 sq. m. parcel, inclusive of RROW.
- 1995: TGPI sold entire 89,070 sq. m. to HI-LON for P44,535,000 (TCT No. 383819).
- 2001: URPO-PMO executed Deed of Sale for RROW (29,690 sq. m.) at P2,500/sq. m.; DPWH paid HI-LON P10,461,338 on Jan 23, 2002.
- 2003 DPWH audit recommended compensation based on 1978 value (P19.40/sq. m.); recovery of excess payment.
- 2004 LAO-N issued ND No. 2004-032 disallowing P9,937,596.20; affirmed with interest in later decisions.
- 2008 LAO-N Decision No. 2008-172-A denied appeals, affirmed ND No. 2004-032 with modification on interest.
- HI-LON petitioned COA; COA formed Special Audit Team; COA Decision No. 2011-003 affirmed ND and disallowed compensation.
- HI-LON’s motion denied by COA Decision No. 2013-212; ordered refund of P10,461,338.
Administrative Rulings
- LAO-N ND No. 2004-032 (Jan 29, 2004): Disallowed excess payment of P9,937,596.20.
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