City of Mandaluyong vs. Aguilar

Under Republic Act No. 7279, parcels of land owned by "small property owners"—defined as those whose only real property consists of residential lands not exceeding 300 square meters in highly urbanized cities—are exempt from expropriation for socialized housing, regardless of the land's classification as an Area for Priority Development; furthermore, expropriation may only be resorted to after exhausting other modes of land acquisition enumerated in Section 10 of the Act, and the right of co-owners to partition their property is valid even if exercised after the filing of an expropriation suit.

The case involves the City of Mandaluyong's attempt to expropriate two adjoining residential parcels of land with a total area of 1,636 square meters, registered under Transfer Certificates of Title Nos. 63766 and 63767 in the names of the Aguilar siblings. The lots, located at 9 de Febrero Street, Barangay Mauwag, Mandaluyong City, were classified as an Area for Priority Development (APD) under Proclamation Nos. 1967 and 2284 for urban land reform purposes. The City sought to construct a medium-rise condominium for qualified occupants, offering to purchase the land at P3,000 per square meter, which the owners rejected. The dispute centers on whether the property owners qualify as "small property owners" exempt from expropriation under the Urban Development and Housing Act of 1992, and whether the City followed the proper procedure for acquisition.

• The subject properties consist of two adjoining residential parcels of land located at 9 de Febrero Street, Barangay Mauwag, City of Mandaluyong, with a total area of 1,636 square meters (687 sqm under TCT No. 63766 and 949 sqm under TCT No. 63767), registered in the names of the Aguilar siblings who inherited the property from their parents.
• The lots were classified by Resolution No. 125 of the Housing and Urban Development Coordinating Council as an Area for Priority Development (APD) for urban land reform under Proclamation Nos. 1967 and 2284 issued by then President Marcos.
• In 1983, tenants and occupants offered to purchase the land from respondents, but the latter refused to sell; in 1996, the Sangguniang Panlungsod adopted Resolution No. 516 authorizing the Mayor to initiate expropriation proceedings for the construction of a medium-rise condominium for qualified occupants.
• On January 10, 1996, Mayor Abalos sent a letter to respondents offering to purchase the property at P3,000 per square meter, which respondents did not answer, prompting the City to file the expropriation case.
• At the time of filing on August 4, 1997, the titles were held in common by the siblings; however, on February 24, 1998, the co-owners executed a Partition Agreement subdividing the property, resulting in new titles issued on May 21, 1998 where four co-owners received 300 square meters each, Eusebio Aguilar (who died in 1995) was allotted 347 square meters (subject to division among his five heirs), and Virginia Aguilar received 89 square meters.
• Respondents submitted certifications from various City and Municipal Assessors in Metro Manila attesting that they have no other registered real property declared for taxation purposes in their individual names.
• The trial court found that respondents had successfully evicted tenants from the property through ejectment suits filed before the Metropolitan Trial Court, and the subject lots were in the possession of respondents at the time of the proceedings.

• The classification of the subject lots as an Area for Priority Development (APD) under Proclamation Nos. 1967 and 2284, in relation to Presidential Decree No. 1517, authorizes the City to expropriate the property ipso facto regardless of the area of the land, and the priority given to APD lands under Section 9 of RA 7279 mandates their acquisition.
• The expanded notion of public use under present jurisprudence allows expropriation of small parcels of land for socialized housing, and the fact that only a few beneficiaries would be accommodated does not diminish the public use character of the expropriation.
• The partition of the property executed six months after the filing of the expropriation case was done in bad faith for the purpose of circumventing the provisions of RA 7279, as it artificially reduced individual shares to below the 300-square-meter threshold.
• The City had validly initiated expropriation proceedings after attempting negotiated purchase, and the trial court erred in dismissing the complaint based on the small property owner exemption.

• They qualify as "small property owners" under Section 3(q) of RA 7279, as their individual shares after partition do not exceed 300 square meters in a highly urbanized city, and the subject lots constitute their only real property, supported by certifications from various city assessors.
• The expropriation is arbitrary and capricious, not for a public purpose, and constitutes a violation of their rights as small property owners who are expressly exempt from expropriation under Section 10 of RA 7279.
• The partition was a valid exercise of their rights as co-owners under the Civil Code, was agreed upon as early as 1986, and was presumed to be in good faith, not a scheme to circumvent the law.
• The City failed to exhaust other modes of acquisition under Section 10 of RA 7279 before resorting to expropriation, and the offered price of P3,000 per square meter was arbitrary given the zonal valuation of P7,000 per square meter.

• Procedural Issues: Whether the Regional Trial Court properly dismissed the amended complaint based on the respondents' affirmative defenses without conducting a full-blown trial on the merits.
• Substantive Issues:
  • Whether respondents qualify as "small property owners" exempt from expropriation under Section 3(q) of Republic Act No. 7279.
  • Whether the classification of the subject lots as an Area for Priority Development overrides the small property owner exemption under Section 10 of RA 7279.
  • Whether the City exhausted other modes of land acquisition under Section 10 of RA 7279 before resorting to expropriation.
  • Whether the partition of the co-owned property after the filing of the expropriation case was valid or done in bad faith to circumvent the law.

• Procedural: The Supreme Court held that the trial court did not err in dismissing the amended complaint after a preliminary hearing on the affirmative defenses, as the issue of whether respondents qualify as small property owners presented a purely legal question involving statutory interpretation and application to established facts, which could be resolved through the documentary and testimonial evidence presented during the preliminary hearing.
• Substantive: The Court affirmed the dismissal, holding that: (1) Sections 9 and 10 of RA 7279 must be harmoniously construed, meaning that while APD lands are fourth in the order of priority under Section 9, their acquisition is still subject to the modes and conditions under Section 10, including the exemption of small property owners from expropriation; (2) "Small property owners" are defined as those whose only real property consists of residential lands not exceeding 300 sqm in highly urbanized cities (or 800 sqm in other urban areas), and respondents qualified as such since their partitioned shares did not exceed 300 sqm and they submitted certifications proving they owned no other real property; (3) Expropriation is only resorted to when other modes of acquisition have been exhausted, which the City failed to prove; and (4) The partition was a valid exercise of co-ownership rights under Article 493 of the Civil Code, presumed to be in good faith, and effective in determining individual ownership shares for purposes of the exemption.

• Harmonious Construction of Related Statutory Provisions — The principle that provisions of a law must be read together to give effect to the whole statute. The Court applied this by interpreting Section 9 (priorities in acquisition) and Section 10 (modes of acquisition) of RA 7279 together, holding that lands within Areas for Priority Development may only be acquired through the modes authorized under Section 10 and subject to its conditions, including the exemption for small property owners.
• Small Property Owner Exemption — Under Section 3(q) of RA 7279, small property owners are defined as those whose only real property consists of residential lands not exceeding 300 square meters in highly urbanized cities or 800 square meters in other urban areas. The Court held that this exemption applies to expropriation proceedings regardless of the land's classification as an APD, and that the determination of qualification depends on the individual circumstances of the owners after valid partition.
• Rights of Co-owners under Article 493 of the Civil Code — Co-owners have full ownership of their undivided interest and may freely alienate, assign, or mortgage it, and may demand partition of the property at any time. The Court held that the partition of co-owned property is a valid exercise of statutory and constitutional rights, is presumed to be in good faith, and effectively converts undivided shares into definite portions for purposes of determining compliance with statutory exemptions.

• "Section 9 of R.A. 7279 speaks of priorities in the acquisition of lands. It enumerates the type of lands to be acquired and the hierarchy in their acquisition. Section 10 deals with the modes of land acquisition or the process of acquiring lands for socialized housing. These are two different things. They mean that the type of lands that may be acquired in the order of priority in Section 9 are to be acquired only in the modes authorized under Section 10."
• "The acquisition of the lands in the priority list must be made subject to the modes and conditions set forth in the next provision. In other words, land that lies within the APD, such as in the instant case, may be acquired only in the modes under, and subject to the conditions of, Section 10."
• "While we adhere to the expanded notion of public use, the passage of R.A. No. 7279, the 'Urban Development and Housing Act of 1992' introduced a limitation on the size of the land sought to be expropriated for socialized housing. The law expressly exempted 'small property owners' from expropriation of their land for urban land reform."
• "No co-owner shall be obliged to remain in the co-ownership."

• Phil. Columbian Association v. Panis, 228 SCRA 668 (1993) — Cited for the expanded notion of public use in expropriation cases, which allows expropriation of small parcels for public housing purposes.
• J.M. Tuason & Co., Inc. v. Land Tenure Administration, 31 SCRA 413 (1970) — Cited in relation to the expanded concept of public use that is not confined to vast tracts of land.
• Alejandrino v. Court of Appeals, 295 SCRA 536 (1998) — Cited for the definition of co-ownership under Article 484 of the Civil Code.
• Oliveras v. Lopez, 168 SCRA 431 (1988) — Cited for the principle that prior to partition, co-owners have only an ideal or abstract quota in the entire property.
• Bailon-Casilao v. Court of Appeals, 160 SCRA 738 (1988) — Cited for the rule that if a co-owner sells a concrete portion of the thing owned in common, the sale affects only his share and not those of the other co-owners.
• Acebedo v. Abesamis, 217 SCRA 186 (1993) — Cited for the principle that Article 493 of the Civil Code gives co-owners the right to freely sell and dispose of their undivided interest.

• Republic Act No. 7279 (Urban Development and Housing Act of 1992), Section 3(q) — Defines "small property owners" as those whose only real property consists of residential lands not exceeding 300 sq.m. in highly urbanized cities and 800 sq.m. in other urban areas.
• Republic Act No. 7279, Section 9 — Establishes the order of priorities in the acquisition of land for socialized housing, placing lands within declared Areas for Priority Development fourth in priority.
• Republic Act No. 7279, Section 10 — Enumerates modes of land acquisition and provides that expropriation shall be resorted to only when other modes have been exhausted, and that parcels owned by small property owners shall be exempt.
• Presidential Decree No. 1517 (Urban Land Reform Act), Section 2 — Declares the State policy of liberating human communities from blight and promoting optimum use of land for public welfare.
• Civil Code of the Philippines, Article 493 — Grants each co-owner full ownership of his part and the fruits pertaining thereto, and the right to alienate, assign, or mortgage his undivided interest.
• Civil Code of the Philippines, Article 494 — Provides that no co-owner shall be obliged to remain in the co-ownership, recognizing the absolute right to demand partition.
• Rules of Court, Rule 45 — Governs petitions for review on certiorari to the Supreme Court.