Title
Mactan-Cebu International Airport Authority vs. Urgello
Case
G.R. No. 162288
Decision Date
Apr 4, 2007
Lot expropriated for airport expansion in 1964 with reversion condition; ownership dispute arose after airport closure, leading to legal battles over reconveyance, rentals, and damages.
expropriation
compromise agreement
reconveyance
A

Case Summary (G.R. No. 94878-94881)

Factual Background

Urgello’s Lot No. 913-E-3 became the subject of an earlier expropriation attempt. In the 1950s, the then Civil Aeronautics Administration (CAA) filed a complaint before the then Court of First Instance of Cebu to expropriate Lot No. 913-E-3 for expansion of the Lahug Airport. The matter eventually reached the Court of Appeals, where a judgment was rendered on July 27, 1964 upon a joint motion of the parties based on a compromise agreement.

Under that compromise, the CAA agreed to purchase Lot No. 913-E-3 for P3,105.00, but only subject to a resolutory condition: if the Republic would no longer use the property as an airport, ownership would revert to Urgello or her heirs upon reimbursement of the purchase price of P3,105.00. Urgello executed a Conditional Deed of Sale incorporating that condition, and the deed was annotated on her title (TCT No. 10873).

Operational developments followed. On April 27, 1966, the Mactan Airport commenced operations. The evidence showed that airline users stopped using the Lahug Airport, and thereafter used the Mactan Airport. As a result, the condition for reversion became operative.

Years later, on August 2, 1983, the Bureau of Air Transportation (BAT) (then identified as the successor agency of the CAA) and the Bureau of Equipment of the then Ministry of Public Works and Highways (MPWH) executed a Memorandum of Agreement under which BAT would lease several parcels, including Lot No. 913-E-3, to MPWH for 25 years for a regional base shop complex. The MPWH then began constructing fences. BAT erected an enclosure over Urgello’s objection that enclosed portions of Lot Nos. 913-E-2 and 913-E-4 as well.

Urgello reacted by filing an injunction suit with damages on June 5, 1983 in the Regional Trial Court (RTC) of Cebu, docketed as Civil Case No. CEB-3908, against BAT and G.M. Tiongco Construction Company, with MPWH impleaded as third-party defendant.

Separate Actions and the Reconveyance Judgment

Urgello then sought reconveyance of Lot No. 913-E-3. On July 8, 1985, she requested BAT to reconvey and tendered RPB Demand Draft No. 148284 for P3,105.00. BAT received the draft but did not reconvey. Urgello thus filed, on August 9, 1985, an action for Reconveyance with Damages against BAT in the RTC of Cebu, docketed as Civil Case No. CEB-4115.

Meanwhile, on December 20, 1985, MPWH filed an evident domain case against Urgello and others, docketed as Civil Case No. CEB-4541, for the expropriation of Lot No. 913-E-4 among other lots.

In Civil Case No. CEB-4115, Branch 6 of the Cebu RTC rendered a decision on January 3, 1989. The court held that the resolutory condition in the July 27, 1964 compromise agreement had occurred. It therefore ordered reconveyance of Lot No. 913-E-3 to Urgello after payment of the repurchase price of P3,105.00.

The record later reflected a presidential direction in November 29, 1989 to transfer operations from Lahug Airport to Mactan International Airport before the end of 1990 and to close Lahug Airport thereafter. On July 31, 1990, Republic Act No. 6958 was signed into law, creating MCIAA.

The Compromise Agreement and Its Court Approval

On January 17, 1990, during the injunction litigation involving fencing and encroachment, Urgello and the government interests represented by BAT/ATO and DPWH and Tiongco Construction reached a compromise agreement. It was later approved by the RTC on January 21, 1991 in Civil Case No. CEB-3908.

The compromise required, among others, the demolition at DPWH’s expense of a concrete wall traversing Urgello’s Lot No. 913-E-2. It also provided for Urgello’s agreement to sell and DPWH’s agreement to purchase Lot No. 913-E-4 (including Lot No. 913-E-4-A) at an agreed price. Critically, the compromise expressly recognized that the parties would comply with the RTC decision of January 3, 1989 in Civil Case No. CEB-4115 ordering reconveyance of Lot No. 913-E-3.

To avert future litigation, the compromise included a waiver by the parties of their respective demands, claims, counterclaims, and third-party claims regarding matters treated in the agreement. It further stated that DPWH and the public defendant would withdraw their respective claims and appeals, including withdrawal of the appeal filed in the reconveyance case for Lot No. 913-E-3.

On March 11, 1991, the Republic of the Philippines filed a manifestation in Civil Case No. CEB-4541 reflecting conformity with the compromise agreement.

Despite Urgello’s reliance on official representations that funds were available, DPWH ignored her demands. She then filed, on June 18, 1993, a motion for the issuance of a writ of execution in Civil Case No. CEB-3908 to enforce DPWH’s obligations under the compromise. The motion was granted, and a writ was issued on July 28, 1993, served on DPWH. A sheriff’s return indicated that enforcement did not proceed.

The Present Action for Reconveyance, Rentals, Demolition, and Damages

Because DPWH and the public entities failed to comply with the January 17, 1990 compromise agreement and the earlier January 3, 1989 reconveyance decision, Urgello filed on October 15, 1996 an action for Reconveyance with damages and attorney’s fees before the RTC of Cebu, docketed as CEB-19418. She impleaded DPWH and ATO as defendants. Later, with leave, she amended the complaint to implead MCIAA as additional defendant.

Urgello sought immediate reconveyance of Lot No. 913-E-4-A unconditionally and reconveyance of Lot No. 913-E-3 upon payment of P3,105.00, consistent with the conditional deed and reconveyance decision. She also demanded demolition of the concrete wall that blocked her access due to the fence built along Lot No. 913-E-2 and Emerald Street.

She further prayed for rentals for unlawful occupation. She claimed rentals for Lot No. 913-E-3 since 1950, and for Lot No. 913-E-4-A since 1990, because of deprivation of beneficial enjoyment. She alternatively sought just compensation for Lot Nos. 913-E-3 and 913-E-4-A in the amount of P1,452,100.00 with interest from 1990. She also sought moral and actual damages and attorney’s fees.

In response, DPWH raised defenses regarding alleged failure to exhaust administrative remedies, alleged lack of service to the Office of the Solicitor General, and jurisdiction. ATO’s position was that only DPWH should be liable for non-compliance with the compromise agreement and that it was not privy to DPWH’s assumed obligations.

ATO argued that its obligation under the compromise had ceased because DPWH assumed specific undertakings in the compromise, particularly the demolition of the concrete wall and the unconditional payment for the lots sold. It also asserted that reconveyance jointly and severally with DPWH and ATO could not be enforced against it because MCIAA’s charter under RA 6958 substituted and excluded ATO in airport operations in Cebu and because of alleged lack of turnover and inclusion of MCIAA as indispensable party.

Trial Court Ruling

By decision dated March 10, 1999, Branch 22 of the RTC Cebu ruled in Urgello’s favor. It ordered DPWH, MCIAA, and ATO to solidarily reconvey Lot No. 913-E-3 to Urgello without further payment of the repurchase price because it had already been paid. It further directed them to solidarily return Lot No. 913-E-2 and Lot No. 913-E-4 (including Lot No. 913-E-4-A).

On rentals, the RTC ordered solidary payment of rentals for Lot No. 913-E-3 at P20.00 per square meter per month from July 8, 1985 up to the present, while MCIAA’s rentals were to be reckoned from August 15, 1990. It also ordered solidary rentals for Lot Nos. 913-E-2 and 913-E-4 at P20.00 per square meter per month from January 1, 1985 up to the present, with MCIAA’s share reckoned from August 15, 1990 only.

The RTC also ordered the demolition of the fence traversing Lot No. 913-E-2 at their own expense, and ordered solidary attorney’s fees of P300,000.00.

In explaining MCIAA’s and ATO’s solidary liability, the RTC invoked Sections 15 and 17 of Republic Act No. 6958. It reasoned that MCIAA was the legal transferee and administrator-custodian of Lahug Airport assets transferred to it by law, and that upon transfer and acceptance, MCIAA assumed the liabilities and obligations of ATO, including the duty to reconvey Lot No. 913-E-3 under the resolutory condition. It also held that ATO remained liable because it had not turned over facilities and continued custody and administration of the properties.

The RTC additionally treated the taking and fencing of Lot Nos. 913-E-2 and 913-E-4 without Urgello’s consent as violating Section 9, Article III of the Constitution and due process. It reasoned that because Urgello’s lots had been unlawfully enclosed, equity demanded return and rental compensation for governmental benefit without exempting the government from obligations. It further held that the concrete fence made the government a builder in bad faith under Article 450 of the Civil Code, thus warranting demolition at the entities’ expense.

Appellate Proceedings

The Court of Appeals affirmed the trial court on February 17, 2004. Thereafter, the petitioners—MCIAA, DPWH, and ATO—filed the present Petition for Review on Certiorari.

They argued, in substance, that Urgello’s money claims should first be filed with the Commission on Audit (COA), that MCIAA should not be obliged to reconvey the relevant lots, that MCIAA should not be obliged to pay rentals, and that MCIAA should not be obliged to demolish the fence traversing Lot No. 913-E-2.

The issues also centered on whether MCIAA could be deemed ATO’s successor-in-interest and therefore bound to enforce the reconveyance and rental obligations for Lot No. 913-E-3 under RA 6958 despite alleged lack of formal turnover.

Legal Basis and Reasoning of the Court

The Court treated the core dispute as revolving around the effect of the resolutory condition in the 1964 Conditional Deed of Sale and Urgello’s compliance with the repurchas

...continue reading

Analyze Cases Smarter, Faster
Jur helps you analyze cases smarter to comprehend faster, building context before diving into full texts. AI-powered analysis, always verify critical details.

About Privacy Terms