G.R. No. 246201 - Jose Co Lee vs. City of Olongapo represented by its City Mayor Hon. Rolen C. Paulino

Case Summary (G.R. No. 246201)

Petitioner’s Principal Contentions

Lee asserted multiple defenses: (1) the complaint stated no cause of action; (2) the expropriation was not for public use but for the benefit of SM Prime Holdings, Inc.; (3) the complaint was defective because the Sangguniang Panlungsod allegedly failed to pass a separate board resolution authorizing Mayor Paulino to file the complaint and sign the verification and certificate of nonforum shopping; (4) the offer purportedly made was invalid because Balde lacked authority to negotiate; and (5) immediate possession requirements should be governed by The Right-of-Way Act, obliging a deposit equivalent to 100% of the BIR zonal valuation.

Respondent’s Principal Contentions

The City maintained that: (1) Mayor Paulino was authorized by Ordinance No. 15, Series of 2015 to institute expropriation proceedings and to sign all necessary pleadings; (2) Ordinance No. 12 (reclassified and rezoned properties) and its amendment by Ordinance No. 19 evidenced a valid public-use purpose for the civic center; (3) the City made and proved a bona fide offer and deposited the amounts required for immediate possession (initially PHP 239,760.00, with the trial court later ordering an additional PHP 235,560.00); (4) Balde acted within his duties when communicating offers; and (5) the City complied with procedural requirements under Section 19 of the Local Government Code.

Key Dates and Documentary Acts

Ordinance No. 12 (reclassification/rezoning) was passed on July 4, 2012 and later amended by Ordinance No. 19 (2014). A Notice of Negotiated Sale or Expropriation was sent on December 23, 2014. A letter of March 24, 2015 offered PHP 13,824,000.00 for Lee’s property; Lee rejected the offer. Ordinance No. 15 was passed on May 15, 2015 authorizing expropriation. The City filed its complaint and on August 28, 2015 reported depositing PHP 239,760.00 with the clerk of court.

Applicable Law and Constitutional Basis

Because the decision was rendered in 2022, the 1987 Constitution governs the determination of constitutional rights asserted in the case, specifically the guarantee that “no person shall be deprived of life, liberty or property without due process of law.” Primary statutory sources relied upon were Section 19 of the Local Government Code (RA No. 7160) governing LGU exercise of eminent domain, Article 35 of the Implementing Rules and Regulations of the Local Government Code governing the form and conduct of offers to buy, Rule 67 of the Rules of Court governing expropriation procedure, and Republic Act No. 10752 (The Right-of-Way Act) with respect to acquisitions for national infrastructure projects.

Procedural History in the Trial Court

After filing of the complaint, Lee filed an Answer asserting affirmative and special defenses. At the May 5, 2016 hearing Lee identified his judicial affidavit as a witness but the City objected to its admission as not being offered to prove affirmative defenses; the trial court ordered briefs and later deemed the matter submitted. The Regional Trial Court then dismissed Lee’s affirmative/special defenses without conducting a full trial, declared the City had lawful right to expropriate, and ordered an additional deposit of PHP 235,560.00 and appointment of commissioners to determine just compensation. Reconsideration was denied.

Court of Appeals Ruling

The Court of Appeals affirmed the RTC, holding Ordinance No. 15 vested Mayor Paulino with authority to initiate expropriation. It found Ordinance No. 12 (as amended) showed the taking was for public use, noted the City’s deposited funds enabled immediate possession, and treated the offer-and-denial correspondence as evidence of a bona fide offer. The CA rejected Lee’s defenses concerning lack of authority, public use, Right-of-Way Act applicability, and due process, and denied reconsideration.

Supreme Court Issues Presented

The Supreme Court framed the principal questions as: whether Mayor Paulino had authority to file the complaint and sign verification; whether the City complied with requisites for valid expropriation (in particular, whether a valid and definite offer was made and whether reasonable efforts to negotiate were exhausted); whether the trial court violated Lee’s right to procedural due process by overruling affirmative defenses without a hearing; and whether immediate possession requirements were governed by The Right-of-Way Act or Section 19 of the Local Government Code.

Supreme Court Finding on Mayor’s Authority

The Court affirmed that the Sangguniang Panlungsod’s Ordinance No. 15 sufficiently authorized Mayor Paulino to institute expropriation proceedings and to sign associated pleadings, including the verification and certification against forum shopping. The Court relied on Section 455 of the Local Government Code, which authorizes the city mayor to represent the city in its business transactions and sign documents pursuant to sanggunian authority or ordinance, and observed that denying the mayor the ability to sign such pleadings while permitting him to file the action would be incongruous.

Supreme Court Finding on Valid and Definite Offer Requirement

The Supreme Court concluded that the City failed to satisfy the statutory requirement of a valid and definite offer that must precede expropriation under Section 19 of the Local Government Code and Article 35 of its IRR. The Court emphasized that a reasonable, bona fide written offer is intended to encourage settlement and avoid litigation, and that if an owner rejects an offer but signals for a higher price the local chief executive must call a conference to negotiate with participation by sanggunian representation. After Lee rejected the March 24, 2015 offer, the record lacked any evidence that the City or Balde engaged in further negotiations or a conference to reach agreement, and thus the City did not demonstrate that it exhausted reasonable efforts to acquire the property by mutual agreement.

Supreme Court Finding on Procedural Due Process

The Court held that Lee’s right to procedural due process was violated. It explained that Rule 67 requires a defendant asserting objections or defenses to file an answer specifically stating such objections and defenses, and that affirmative defenses requiring presentation of evidence aliunde must be resolved in a full-blown trial and hearing. Because the trial court dismissed Lee’s affirmative and special defenses without conducting a trial or hearing to receive eviden

Case Syllabus (G.R. No. 246201)

Case Caption and Nature of the Case

G.R. No. 246201, December 07, 2022, Second Division; Decision penned by Justice Leonen, SAJ.
Petition for Review on Certiorari assailing the Court of Appeals Decision (September 27, 2018) and Resolution (March 15, 2019) that affirmed the Regional Trial Court (RTC) Order declaring the City of Olongapo’s lawful right to expropriate petitioner Jose Co Lee’s land.
Subject matter: exercise of eminent domain by a local government unit (LGU), compliance with statutory prerequisites for expropriation, sufficiency of pre-taking offer and negotiations, immediate possession deposit requirements, and procedural due process in expropriation proceedings.

Relevant Parties and Property

Petitioner: Jose Co Lee — registered owner of a parcel of land in East Tapinac, City of Olongapo (ownership evidenced by Original Certificate No. P-8280, Registry of Deeds, Olongapo City).
Respondent: City of Olongapo, represented by its City Mayor Hon. Rolen C. Paulino.
City planning and development coordinator involved in negotiations: Architect Tony Kar M. Balde III (Balde).

Legislative and Ordinance Background

Ordinance No. 12, Series of 2012 (passed July 4, 2012): reclassified and rezoned certain government properties into an institutional/mixed zone and mixed-use development for a new civic center complex.
Ordinance No. 12 defined: institutional/mixed use (government offices, schools, hospitals/clinics, research, convention centers co-existing with commercial developments) and mixed-use development (two or more significant revenue-producing uses such as retail, office, residential, hotel, entertainment).
Ordinance No. 12 was later amended by Ordinance No. 19, Series of 2014.
Ordinance No. 15, Series of 2015 (passed May 15, 2015): Sangguniang Panlungsod authorized then City Mayor Rolen C. Paulino to expropriate parcels of land in East Tapinac for construction of a civic center complex (housing Olongapo City Disaster Risk Reduction Management Office, City Museum, City Public Library, satellite office of the Red Cross); Section 1 expressly authorizes Mayor Paulino to institute expropriation proceedings for the listed properties.

Pre-Expropriation Communications and Offer

December 23, 2014: Notice of Negotiated Sale or Expropriation sent to Lee by Balde, informing that a mixed-use development plan would affect his property and proposing acquisition by negotiated mutually agreeable price.
March 24, 2015: Balde sent a letter reiterating the City’s plan and offering PHP 13,824,000.00 for Lee’s property.
Lee rejected the offered price.
No evidence of subsequent negotiation or conference called by the local chief executive to renegotiate the price after rejection (as found by the Supreme Court).

Commencement of Expropriation Proceedings and Deposits

City of Olongapo filed a Complaint for Expropriation after failure to agree on price.
August 28, 2015: City filed a Manifestation with Motion in the RTC stating it had deposited PHP 239,760.00 with the Clerk of Court and prayed for permission to enter the property.
RTC later ordered an additional deposit of PHP 235,560.00; Court of Appeals noted total deposit of PHP 475,320.00 necessary to take immediate possession (sum of initial deposit and additional amount directed by RTC).

Petitioner’s Answer and Affirmative Defenses

Lee filed an Answer asserting multiple grounds, including:
- The Complaint states no cause of action.
- Expropriation was not for public use.
- Defective Complaint due to alleged failure of the Sangguniang Panlungsod to pass a board resolution authorizing Mayor Paulino to file the Complaint and sign verification of nonforum shopping.
- The Right-of-Way Act (Republic Act No. 10752) requires, for certain acquisitions, that just compensation be 100% of value based on BIR zonal valuation; he argued proper payment was 100% rather than 15% based on tax declaration.
Lee’s defenses were characterized as affirmative defenses requiring presentation of evidence aliunde.

Trial Court Proceedings on Presentation of Evidence

May 5, 2016 hearing: Lee was called to identify his Judicial Affidavit; plaintiff’s counsel objected to presentation of the witness on the ground that the affidavit was not offered to prove the defendant’s affirmative defenses.
RTC issued an Order giving Lee 10 days to file comment to the objection and plaintiff five days to reply; subsequently case deemed submitted (June 30, 2016).
RTC issued Order dismissing Lee’s affirmative/special defenses and declared that plaintiff City of Olongapo had lawful right to expropriate and to take possession upon deposit of additional PHP 235,560.00; directed parties to submit names of two persons each to be appointed as commissioners for determination of just compensation.
Lee’s motion for reconsideration before the RTC was denied.

Court of Appeals Ruling and Reasoning

Court of Appeals (Decision dated September 27, 2018) affirmed the RTC:
- Held City of Olongapo complied with requisites for valid expropriation.
- Found Ordinance No. 15 clothed Mayor Paulino with authority to initiate expropriation proceedings on behalf of the City and to sign necessary pleadings.
- Found Ordinance Nos. 12 and 19 established public use/purpose (construction of mixed-use civic center complex).
- Noted City deposited PHP 475,320.00 enabling immediate possession.
- Accepted Balde’s letters as proof of offer and denial of sale.
- Addressed Lee’s affirmative defenses: held Mayor Paulino had authority under Ordinance No. 15; held Right-of-Way Act did not apply to LGU-initiated expropriation; rejected Lee’s challenge about public use partly due to Lee attaching an unverified photocopy of alleged lease agreement between City and SM Prime Holdings, Inc., which Lee could not attest to and thus had no probative value.
Court of Appeals denied Lee’s Motion for Reconsideration (Resolution dated March 15, 2019).

Issues Brought to the Supreme Court

Whether the Court of Appeals erred in affirming the RTC Order that the City of Olongapo had lawful right to expropriate and take possession of Lee’s property.
Specific contentions by petitioner:
- Denial of due process because no hearing was conducted to determine necessity of expropriation and no opportunity to present evidence on his claims; affirmative defenses not tried.
- Expropriation was not for public use but for benefit of SM Prime Holdings, Inc.
- No valid offer as Balde lacked authority to negotiate purchase.
- Ordinance No. 15 does not authorize Mayor Paulino to file the Complaint and sign verification and certification of nonforum shopping.
- Immediate possession should only be permitted upon deposit of amount equivalent to 100% of value based on current relevant valuation of Bureau of Int