Title
Quezon City Government vs. Manila Seedling Bank Foundation, Inc.
Case
G.R. No. 208788
Decision Date
Jul 23, 2024
Quezon City Government challenged zoning rights of Manila Seedling Bank, court upheld usufructuary rights and invalidated zoning ordinance restricting Foundation's operations.

Case Summary (G.R. No. 233577)

Trial court decision (Branch 96, RTC)

  • The RTC granted the Foundation’s petition, issued a writ of prohibition and made the preliminary injunction permanent. The court ordered the City to desist from enforcing/implementing the Zoning Ordinance on the Foundation’s usufruct area and directed issuance of locational clearance and business permit.
  • The RTC’s core findings: Proclamation No. 1670 created a vested contractual right / usufruct in favor of the Foundation; application of the Zoning Ordinance to the Foundation’s usufruct was oppressive and not reasonably necessary under police power; application would unreasonably deprive the Foundation of vested property and due process; and the ordinance, insofar as it reclassified the usufruct area to uses inconsistent with Proclamation No. 1670, was ultra vires because a local ordinance cannot amend or override a national act/proclamation.

Parallel events: tax auction, forcible entry, and Second Case pleadings

  • While the First Case proceeded, the City Treasurer issued a Final Notice to Exercise Right of Redemption claiming the subject property had been sold at public auction for unpaid realty taxes and demanding a large redemption sum by July 7, 2012. When the Foundation allegedly failed to redeem, the City served a letter claiming ownership had vested in the City and the DPOS forcibly took possession, padlocked gates, posted notices and deployed police. The Foundation filed a separate prohibition/injunction petition (Branch 216, SCA No. Q‑12‑71638).
  • The RTC (Branch 216) initially denied injunctive relief on the ground that the Foundation failed to prove irreparable injury and already had been dispossessed; subsequently the court dismissed the petition on the ground that the Foundation lacked capacity to sue because the SEC had revoked its corporate registration (order of revocation dated 2001/2002). The CA affirmed that dismissal. The Foundation later obtained an SEC order (2015) setting aside the earlier revocation.

Procedural issue: direct appeal to the Supreme Court

  • The City filed a direct Rule 45 petition to the Supreme Court from the RTC decision in the First Case. The Court reiterated the general rule that Rule 45 is limited to questions of law and that mixed questions of fact and law are ordinarily improper direct appeals, but that exceptions exist (transcendental importance, genuine constitutional issues, matters better decided by the Court, etc.).
  • The Court found the consolidated petitions raised genuine constitutional and public‑policy issues—primarily the conflict between a presidential proclamation granting usufruct and a local zoning ordinance—and therefore entertained the direct petition despite mixed issues.

Corporate capacity to sue and estoppel

  • The City argued the Foundation lacked capacity because the SEC revoked its registration in 2002 and therefore at the time of filing its 2012 petitions it was not a juridical person. The Court applied the Corporation Code provision allowing a dissolved corporation a three‑year continuation for winding up and noted the Foundation did not file suit within that three‑year period.
  • Nonetheless, the Supreme Court held that the City is estopped from asserting lack of corporate personality: the City had treated the Foundation as a corporate entity for years, issuing and renewing Certificates of Non‑Conformance and business permits through 2011 and collecting fees/taxes. The doctrine of corporation by estoppel applies where a party has transacted with an entity as though it were a corporation and benefited thereby; equitable estoppel may bind public authorities in rare circumstances where justice requires it. Thus, although the Foundation objectively lacked capacity in 2012 under the Corporate Code, the City’s prior conduct barred it from raising that defect as a defense in these actions.

Characterization of the Foundation’s pleading: certiorari and prohibition

  • Although the Foundation framed its action as prohibition, it raised the constitutionality and validity of specific provisions of the Zoning Ordinance as applied to its usufruct. The Court treated the petition as invoking the expanded jurisdiction of certiorari and prohibition—permitting judicial review of grave abuse of discretion and constitutional questions arising from legislative or executive acts.
  • The Court applied standard requisites for judicial review of constitutionality: an actual case or controversy, locus standi, early presentation of the constitutional question, and the constitutional issue being the lis mota. The Foundation held a vested usufruct (confirmed by prior jurisprudence) and had been denied locational clearance and business permit—establishing standing and an appropriate vehicle to challenge the ordinance provisions.

Taxation and foreclosure: NHA ownership, tax exemption, and limits on municipal remedies

  • The Court examined whether the City lawfully foreclosed and forfeited the subject property for non‑payment of real property tax. It reaffirmed that the seven‑hectare parcel is part of NHA property (a GOCC) and that NHA is exempt from local and national taxes by statute and presidential decree. The exemption, however, does not automatically extend to beneficial users. The Foundation, as beneficial user, may be liable for real property taxes (this Court’s prior resolution had affirmed the City Treasurer’s ability to proceed against the Foundation for taxes accruing after the Local Government Code took effect).
  • Critically, the Court held a local government may assess and collect taxes from a taxable beneficial user but may not foreclose the government‑owned property itself (i.e., may not sell or forfeit NHA‑owned property in a delinquency sale) to satisfy the tax liability of the beneficial user. The proper remedies are in personam collection remedies against the taxable beneficiary; sale or forfeiture of property owned by a tax‑exempt GOCC is not allowed. Accordingly, the City’s auction sale and purported forfeiture of the NHA property were illegal insofar as they purport to foreclose NHA’s property rights.

Mootness, fait accompli, and relief limitations

  • Despite holding the City’s auction and forcible takeover unlawful in principle, the Court recognized that the particular injunctive remedies sought by the Foundation in the Second Case had become moot: the City had already taken possession, the area had been developed, and the Foundation had relocated operations. Because injunctions are preservative and do not undo completed acts, the Court dismissed the Second Case petitions on the ground of mootness and dissolved the RTC’s injunction directing issuance of clearances and business permits as to the Foundation (First Case) on the same ground. The Court emphasized the Foundation remains free to pursue proper actions to annul the foreclosure sale, recover possession, and seek damages.

Substantive constitutional and statutory rulings on the Zoning Ordinance

  • The Court affirmed the RTC’s conclusion that those provisions of the Quezon City Zoning Ordinance which reclassified and regulated the Foundation’s usufruct area in a manner that deprived the Foundation of its usufructuary rights under Proclamation No. 1670 were ultra vires and unconstitutional. Key bases: (a) local ordinances must conform to national law and cannot amend or contravene a national proclamation; (b) the Foundation’s usufruct is a vested right recognized by national instrument and prior case law (usufruct lasting until 2027 under applicable limits), and Section 14 of the Zoning Ordinance itself preserved vested rights; (c) the City did not demonstrate that the reclassification and the denial of locational clearance were reasonably necessary, nor that the means were not unduly oppressive—requirements under police‑power jurisprudence for valid zoning measures.
  • The Court therefore declared null and void only those provisions of Ordinance Nos. SP‑918 and SP‑1369 insofar as they infringed on the Foundation’s usufructuary rights under Proclamation No. 1670; the remainder of the zoni

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