Mactan-Cebu International Airport Authority vs. Lozada

The taking of private property through eminent domain is always subject to the implied condition that the property be devoted to the specific public purpose for which it was taken; if this purpose is not initiated, pursued, or is abandoned, the former owners may seek the reversion of the property upon returning the just compensation received.

Lot No. 88, originally owned by Anastacio Deiparine and later acquired by respondent Bernardo L. Lozada, Sr., was expropriated by the Republic for the expansion of the Lahug Airport. The Court of First Instance ordered the Republic to pay the fair market value, which Lozada received. Pending appeal, the Air Transportation Office proposed a compromise wherein landowners would withdraw their appeals in exchange for a commitment to resell the expropriated lots should the airport be abandoned. Relying on this assurance, Lozada did not pursue his appeal. The airport was eventually closed pursuant to a presidential memorandum, and the property was converted into a commercial complex and a jail, prompting respondents to seek reconveyance.

• Expropriation of Lot No. 88: The Republic, through the Civil Aeronautics Administration, initiated expropriation proceedings for the expansion of the Lahug Airport. The Court of First Instance rendered judgment in favor of the Republic, ordering the payment of fair market value. Respondent Bernardo L. Lozada, Sr., who had acquired the lot, received the payment.
• Compromise Agreement: Pending the landowners' appeal, the Air Transportation Office proposed a compromise. The government verbally promised to resell the expropriated lots at the expropriation price should the Lahug Airport be abandoned. Relying on this assurance, Lozada withdrew his appeal.
• Abandonment of Public Purpose: The improvement and expansion of the Lahug Airport were never realized. President Corazon C. Aquino issued a memorandum directing the closure of the airport. The property was subsequently converted into a commercial complex and a jail.
• Action for Reconveyance: Respondents filed a complaint for recovery of possession and reconveyance. Petitioners denied the existence of the compromise agreement and asserted that the judgment of condemnation was unconditional, vesting fee simple title in the government.

• Failure to Prove Agreement: Petitioner argued that respondents failed to prove the existence of a repurchase agreement or compromise settlement with the government.
• Unconditional Judgment: Petitioner maintained that the judgment in the expropriation case was absolute and unconditional, vesting fee simple title in the Republic and precluding recovery of the property despite its non-use or abandonment.
• Statute of Frauds: Petitioner argued that respondents' claim based on verbal assurances violates the Statute of Frauds.

• Existence of Oral Agreement: Respondent countered that a verbal compromise agreement was entered into with the government, promising the return of the property if the public purpose ceased.
• Conditional Expropriation: Respondent maintained that the expropriation was conditioned on the continued operation of the Lahug Airport, and the abandonment of this purpose entitled them to reconveyance.

• Implied Condition in Eminent Domain: Whether the taking of private property through eminent domain is subject to the condition that it be devoted to the specific public purpose for which it was taken, such that abandonment of the purpose entitles the former owner to reversion.
• Enforceability of Oral Compromise: Whether respondents established the existence of an oral compromise agreement entitling them to repurchase the property, and whether such agreement is barred by the Statute of Frauds.

• Implied Condition in Eminent Domain: The exercise of eminent domain is impliedly conditioned on the devotion of the property to the specific public purpose stated in the petition. If the purpose is not initiated, pursued, or is abandoned, the former owners may seek reversion of the property upon returning the just compensation received. The non-fulfillment of the public purpose renders the exercise of the power improper for lack of factual justification. The ruling in Fery v. Municipality of Cabanatuan was expressly abandoned insofar as it held that fee simple title allows the expropriator to retain the property despite abandonment of the public purpose.
• Enforceability of Oral Compromise: The factual finding of the trial court, as affirmed by the appellate court, that an oral compromise agreement existed is binding and conclusive. The Statute of Frauds does not apply because the oral compromise was partially performed—respondents relied on the government's assurance by not pursuing their appeal. A constructive trust was constituted on the property in favor of the respondents, compelling the government to reconvey the property upon failure to fulfill its obligation.

• Implied Condition in Eminent Domain — The taking of private property by the government's power of eminent domain is subject to the implied conditions that (1) it is for a particular public purpose, and (2) just compensation be paid. If the particular public purpose is not initiated or is abandoned, the former owners may seek the reversion of the property upon returning the just compensation received.
• Constructive Trust in Expropriation — When property is conveyed to the government for a specific public purpose and the government fails to fulfill this obligation, a constructive trust is established. The government, as trustee, cannot in good conscience retain the beneficial interest and must reconvey the property to the former owner, who must do equity by returning the just compensation received.
• Statute of Frauds and Partial Performance — The Statute of Frauds applies only to executory contracts. It does not apply to contracts that have been partially performed, as excluding parol evidence in such cases would promote fraud or bad faith by enabling a party to keep benefits received while evading obligations.

• "the taking of private property, consequent to the Government’s exercise of its power of eminent domain, is always subject to the condition that the property be devoted to the specific public purpose for which it was taken. Corollarily, if this particular purpose or intent is not initiated or not at all pursued, and is peremptorily abandoned, then the former owners, if they so desire, may seek the reversion of the property, subject to the return of the amount of just compensation received."
• "Constructive trusts are fictions of equity which are bound by no unyielding formula when they are used by courts as devices to remedy any situation in which the holder of legal title may not in good conscience retain the beneficial interest."

• Fery v. Municipality of Cabanatuan, 42 Phil. 28 (1921) — Previously held that fee simple title acquired through expropriation allows the government to abandon the public use without reversion to the former owner. Expressly abandoned/modified in light of the constitutional right to just compensation and the implied condition of public use.
• Heirs of Timoteo Moreno and Maria Rotea v. Mactan-Cebu International Airport Authority, G.R. No. 156273 (2003) — Followed. Held that the expropriation of lots for the Lahug Airport was predicated on the understanding that the airport would continue to operate, implying a constructive trust and the right of reconveyance upon abandonment.

• Article III, Section 9, 1987 Constitution — Private property shall not be taken for public use without just compensation. Cited as the basis for holding that public use and just compensation are implied conditions in eminent domain.
• Article 1454, Civil Code — Implied trust where an absolute conveyance is made to secure the performance of an obligation. Applied by analogy to establish a constructive trust over the expropriated property.
• Article 1187, Civil Code — Effects of a conditional obligation to give; fruits and interests during the pendency of the condition are deemed mutually compensated. Applied to allow petitioners to keep fruits/income from the property and respondents to keep interest earned on just compensation.
• Article 1189, Civil Code — Improvements by nature or time inure to the benefit of the creditor. Applied so respondents need not pay for the appreciation in value of the lot.
• Article 1190, Civil Code — Obligation to return what was received upon fulfillment of a resolutory condition. Applied to mandate mutual restitution: respondents return just compensation, petitioners return the property.

Reynato S. Puno (CJ), Antonio T. Carpio, Renato C. Corona, Conchita Carpio Morales, Presbitero J. Velasco, Jr., Teresita J. Leonardo-De Castro, Arturo D. Brion, Diosdado M. Peralta, Lucas P. Bersamin, Mariano C. Del Castillo, Roberto A. Abad, Martin S. Villarama, Jr., Jose Portugal Perez, Jose Catral Mendoza.