MCIAA vs. Tudtud

When land is expropriated for a particular public purpose with the condition that the property shall return to its former owner when that purpose is ended or abandoned, the former owner reacquires the property upon abandonment of the public use, regardless of whether the acquisition was by expropriation or by purchase. The character of the title acquired by the expropriator — whether absolute or conditional — is the determinative factor, and a judgment's dispositive portion must be read in reference to the body of the decision to ascertain the true intent and meaning of the court's ruling.

The predecessors-in-interest of respondents Benjamin Tudtud et al. owned Lot No. 988 of the Banilad Estate in Cebu City, covered by TCT No. 27692. In 1949, the National Airports Corporation (NAC), a public corporation of the Republic of the Philippines, embarked on a program to expand the Cebu Lahug Airport and sought to acquire several adjoining lots by negotiated sale or expropriation. Lot No. 988 was acquired through expropriation proceedings in Civil Case No. R-1881 before the Court of First Instance, after which TCT No. 27692 was cancelled and TCT No. 27919 was issued in the name of the Republic. The lot was later transferred to the Air Transport Office and then to petitioner MCIAA in 1990 via Republic Act No. 6958. When the Mactan International Airport at Lapu-Lapu City opened for commercial flights, the Cebu Lahug Airport was closed and abandoned, and a significant area thereof was purchased by Cebu Property Ventures, Inc. for commercial development.

The predecessors-in-interest of respondents Benjamin Tudtud et al. were the owners of a parcel of land in Cebu City identified as Lot No. 988 of the Banilad Estate, covered by Transfer Certificate of Title (TCT) No. 27692. In 1949, the National Airports Corporation (NAC), a public corporation of the Republic of the Philippines, embarked on a program to expand the Cebu Lahug Airport and sought to acquire, by negotiated sale or expropriation, several lots adjoining the then existing airport. By virtue of a judgment rendered by the third branch of the Court of First Instance in Civil Case No. R-1881, the NAC acquired Lot No. 988, among other lots. TCT No. 27692 was cancelled and TCT No. 27919 was issued in its stead in the name of the Republic of the Philippines. No structures related to the operation of the Cebu Lahug Airport were ever constructed on Lot No. 988.

Lot No. 988 was later transferred to the Air Transport Office (ATO), and still later to petitioner Mactan Cebu International Airport Authority (MCIAA) in 1990 via Republic Act No. 6958. When the Mactan International Airport at Lapu-Lapu City was opened for commercial flights, the Cebu Lahug Airport was closed and abandoned, and a significant area thereof was purchased by Cebu Property Ventures, Inc. for development as a commercial complex. No longer serving any airport purpose, Lot No. 988 became the subject of a demand for repurchase.

By letter of October 7, 1996 to the general manager of MCIAA, Lydia Adlawan, acting as attorney-in-fact of the original owners of Lot No. 988, demanded to repurchase the lot at the same price paid at the time of the taking, without interest, no structures or improvements having been erected thereon and the Cebu Lahug Airport having been closed and abandoned, hence, the purpose for which the lot was acquired no longer existed. As the demand remained unheeded, respondents, represented by Adlawan, filed a Complaint before the RTC of Cebu City, docketed as Civil Case No. CEB-19464, for reconveyance and damages with application for preliminary injunction against MCIAA. Respondents anchored their complaint on the assurance they claimed was made by the NAC that the original owners and/or their successors-in-interest would be entitled to repurchase the lot when and in the event that it was no longer used for airport purposes.

To prove their claim, respondents presented witnesses who testified that the NAC promised their predecessors-in-interest that the lot would be returned should the expansion of the Cebu Lahug Airport not materialize. Respondent Justiniano Borga, who represented his mother — one of the original owners — during the negotiations between the NAC and the landowners, declared that the original owners did not oppose the expropriation upon the assurance of the NAC that they would reacquire it if it was no longer needed by the airport. Another witness, Eugenio Amores, an NAC employee who accompanied the NAC legal team to meetings with the landowners, declared that he personally heard NAC officials give the assurance claimed by respondents. MCIAA countered that the decision in Civil Case No. R-1881 did not lay any condition that the lots subject of expropriation would revert to their owners in case the expansion of the Cebu Lahug Airport would not materialize, and that the NAC acquired Lot No. 988 not by a deed of sale but by virtue of a final judicial decree of expropriation which cannot be modified by parol evidence.

After trial, Branch 20 of the Cebu City RTC rendered judgment in favor of respondents, ordering MCIAA to reconvey the entire subject real property covered by TCT No. 27919 within 15 days from receipt of the decision. On appeal, the Court of Appeals affirmed the RTC decision by its Decision of May 8, 2006. MCIAA's Motion for Reconsideration was denied, prompting the present petition.

• Absolute and Unconditional Judgment: MCIAA argued that the judgment of expropriation in Civil Case No. R-1881 was absolute and unconditional, citing Fery vs. Municipality of Cabanatuan for the proposition that when land is acquired for public use in fee simple, unconditionally, the former owner retains no rights in the land and the public use may be abandoned without any reversion. MCIAA pointed to the dispositive portion of the trial court's decision in R-1881 to prove that the judgment contained no assurance or stipulation for reconveyance.
• Statute of Frauds: MCIAA contended that respondents' claim of alleged verbal assurances from the government violates the Statute of Frauds under Article 1403(2)(e) of the Civil Code, which places agreements for the sale of real property or an interest therein within the coverage of the Statute of Frauds.
• Best Evidence of Title: MCIAA maintained that the best evidence showing the unconditional acquisition of Lot No. 988 is the Certificate of Title issued in the name of the Republic.
• Inapplicability of Prior Ruling: MCIAA disputed the applicability of MCIAA vs. Court of Appeals (the Limbaco case), arguing that the NAC acquired Lot No. 988 not by a deed of sale but by virtue of a final judicial decree of expropriation which cannot be modified by parol evidence.

• Conditional Expropriation: Respondents anchored their complaint on the assurance made by the NAC that the original owners and/or their successors-in-interest would be entitled to repurchase the lot when it was no longer used for airport purposes, and presented testimonial evidence of such assurance from witnesses who personally participated in or observed the negotiations.
• Applicability of Prior Ruling: Respondents invoked the Court's ruling in MCIAA vs. Court of Appeals involving another lot acquired by the NAC for the expansion of the Cebu Lahug Airport, where the Court allowed recovery based on parol evidence of a repurchase promise despite the absence of a written provision in the deed of sale.

• Character of Expropriation Title: Whether the judgment of expropriation in Civil Case No. R-1881 was absolute and unconditional, or conditional upon the continued operation of the Lahug Airport.
• Statute of Frauds: Whether respondents' claim of verbal assurances from the government is barred by the Statute of Frauds.
• Mode of Acquisition: Whether the mode of acquisition — expropriation versus deed of sale — is material in determining whether the acquisition was conditional or unconditional.

• Character of Expropriation Title: No, the judgment was not absolute and unconditional. The body of the trial court's decision in Civil Case No. R-1881 prefixed its finding of public purpose upon the understanding that the Lahug Airport would continue to be in operation, warranting the conclusion that the expropriation was conditional upon the airport's continued operation.
• Statute of Frauds: No, the claim is not barred. The Statute of Frauds under Article 1403(2)(e) of the Civil Code applies only to executory contracts and does not apply to contracts that have been completely or partially performed.
• Mode of Acquisition: No, the mode of acquisition is not material. As reflected in Fery vs. Municipality of Cabanatuan, whether the land is acquired by expropriation or by contract is not determinative; the character of the title acquired — whether conditional or unconditional — is the controlling factor.

• Character of Expropriation Title: The Court applied the doctrine from Fery vs. Municipality of Cabanatuan that the answer to whether expropriated land may be returned to its former owner upon abandonment of the public use depends upon the character of the title acquired by the expropriator. If land is expropriated with the condition that when the purpose is ended or abandoned the property shall return to its former owner, the former owner reacquires the property upon termination or abandonment of the purpose. While the dispositive portion of the trial court's decision in Civil Case No. R-1881 appeared unconditional, the Court relied on its earlier ruling in Heirs of Timoteo Moreno vs. MCIAA involving the same Civil Case No. R-1881, where it held that the body of the decision must be read together with the fallo. The trial court had stated that "the Court will presume that the Lahug Airport will continue to be in operation," prefixing its finding of public purpose upon that understanding. These statements in the body of the decision warranted the conclusion that the expropriated properties would remain so until it was confirmed that the Lahug Airport was no longer in operation. When the airport was closed and abandoned, the condition was fulfilled, and the rights between the State and the former owners had to be equitably adjusted. The dispositive portion, being inadequate and not in accord with the findings in the body, had to be read in reference to the other portions of the decision to grasp the true intent and meaning.

• Statute of Frauds: The Court held that the Statute of Frauds under Article 1403(2)(e) of the Civil Code applies only to executory contracts and does not apply to contracts that have been completely or partially performed. The rationale is that in executory contracts there is a wide field for fraud absent a writing, but if a contract has been totally or partially performed, excluding parol evidence would promote fraud or bad faith by enabling the defendant to keep benefits already delivered while evading obligations assumed. In this case, the landowners' non-opposition to the expropriation in reliance on the NAC's assurance constituted partial performance. Moreover, respondents' testimonial evidence was admissible and credible: respondent Justiniano Borga, who represented his mother during the negotiations, personally declared that the original owners did not oppose the expropriation upon the NAC's assurance of reacquisition, and NAC employee Eugenio Amores personally heard NAC officials give the assurance during meetings. This contrasted with MCIAA vs. Court of Appeals and Chiongbian, where the evidence was rejected because it was hearsay and inconclusive.

• Mode of Acquisition: The Court rejected MCIAA's argument that MCIAA vs. Court of Appeals (the Limbaco case) did not apply because the lot there was acquired by deed of sale while Lot No. 988 was acquired by expropriation. Citing Fery, the Court held that the mode of acquisition for public purpose — whether by expropriation or by contract — is not material in determining whether the acquisition is with or without condition. The character of the title acquired is the determinative factor, not the mode of acquisition. Accordingly, parol evidence of a conditional undertaking was admissible even in the context of an expropriation judgment, provided the body of that judgment supported the conditional character of the acquisition.

• Conditional Expropriation — Reversion upon Abandonment of Public Use — When land is expropriated for a particular public purpose with the condition that the property shall return to its former owner when that purpose is ended or abandoned, the former owner reacquires the property upon termination or abandonment of the purpose, unless there is a statutory provision to the contrary. The determinative factor is the character of the title acquired by the expropriator — whether absolute fee simple or conditional — not the mode of acquisition (expropriation or purchase). This doctrine originates from Fery vs. Municipality of Cabanatuan and was applied here to hold that the expropriation of Lot No. 988 was conditional upon the continued operation of the Lahug Airport.

• Construction of Judgments — Body and Fallo Must Be Read Together — A reading of a court's judgment must not be confined to the dispositive portion alone; rather, it should be meaningfully construed in unanimity with the ratio decidendi thereof to grasp the true intent and meaning of a decision. When the dispositive portion is not in accord with the findings contained in the body of the decision, the declarations in the body should merge with and become an intrinsic part of the fallo. Applied here, the trial court's statement in the body of its decision in Civil Case No. R-1881 that it would "presume that the Lahug Airport will continue to be in operation" was held to be an intrinsic part of the judgment, rendering the expropriation conditional.

• Statute of Frauds — Inapplicability to Performed Contracts — The Statute of Frauds under Article 1403(2)(e) of the Civil Code applies only to executory contracts and does not apply to contracts that have been completely or partially performed. The rationale is that excluding parol evidence in cases of partial performance would promote fraud by enabling a party to keep benefits received while evading obligations assumed. Applied here, the landowners' non-opposition to the expropriation in reliance on the NAC's verbal assurance constituted partial performance, taking the agreement outside the Statute of Frauds.

• Restitution in Conditional Obligations — Article 1190, Civil Code — When the conditions have for their purpose the extinguishment of an obligation to give, the parties, upon the fulfillment of said conditions, shall return to each other what they have received. Applied here, upon fulfillment of the condition (closure of the Lahug Airport), MCIAA was obliged to reconvey Lot No. 988 to respondents, and respondents were obliged to return the just compensation received plus legal interest, while MCIAA could keep fruits and income from the property and respondents could keep interest earned on the compensation and the natural appreciation in the lot's value.

• "The answer to that question depends upon the character of the title acquired by the expropriator x x x. If, for example, land is expropriated for a particular purpose, with the condition that when that purpose is ended or abandoned the property shall return to its former owner, then, of course, when the purpose is terminated or abandoned, the former owner reacquires the property so expropriated." — This passage from Fery vs. Municipality of Cabanatuan, quoted and applied by the Court, articulates the foundational doctrine on conditional expropriation and reversion, serving as the ratio decidendi for the ruling that respondents were entitled to reconveyance.

• "a reading of the Court's judgment must not be confined to the dispositive portion alone; rather, it should be meaningfully construed in unanimity with the ratio decidendi thereof to grasp the true intent and meaning of a decision." — This formulation, drawn from Heirs of Timoteo Moreno vs. MCIAA and reaffirmed here, establishes the canonical rule for construing judgments whose dispositive portions are inadequate or inconsistent with their body, and was the key to finding the expropriation conditional despite an apparently unconditional fallo.

• "The Statute of Frauds applies, however, only to executory contracts. It does not apply to contracts which have been completely or partially performed, the rationale thereof being as follows: x x x if a contract has been totally or partially performed, the exclusion of parol evidence would promote fraud or bad faith, for it would enable the defendant to keep the benefits already delivered by him from the transaction in litigation, and, at the same time, evade the obligations, responsibilities or liabilities assumed or contracted by him thereby." — This passage states the controlling rule on the limited scope of the Statute of Frauds and the rationale for its inapplicability to partially performed contracts, which was decisive in admitting respondents' parol evidence of the NAC's repurchase assurance.

• Fery vs. Municipality of Cabanatuan, 42 Phil. 28 (1921) — Foundational precedent on conditional expropriation. The Court relied on this case for the dual propositions that (a) absolute fee simple acquisition permits abandonment or change of use without reversion, and (b) conditional expropriation requires return of the property to the former owner upon termination or abandonment of the purpose. Both propositions were quoted and applied.

• Heirs of Timoteo Moreno vs. MCIAA, 459 Phil. 948 (2003) — Controlling precedent directly on point, involving the same Civil Case No. R-1881. The Court followed this case's holding that the body of the trial court's decision must be read together with the fallo, and that the trial court's presumption of continued Lahug Airport operation rendered the expropriation conditional.

• Heirs of Timoteo Moreno and Maria Rotea vs. MCIAA, G.R. No. 156273, August 9, 2005, 466 SCRA 285 — Followed on motion for reconsideration in the Moreno case, reaffirming that the fallo must be read in reference to the other portions of the decision and that a judgment must be construed in unanimity with its ratio decidendi.

• MCIAA vs. Court of Appeals, G.R. No. 121506, October 30, 1996, 263 SCRA 736 (Limbaco case) — Followed. The Court applied this case's allowance of recovery based on parol evidence of a repurchase promise, rejecting MCIAA's argument that it was distinguishable because the lot there was acquired by deed of sale rather than expropriation.

• MCIAA vs. Court of Appeals and Chiongbian, 399 Phil. 695 (2000) — Distinguished. MCIAA cited this case for the rejection of testimonial evidence of a repurchase assurance, but the Court distinguished it because the evidence there was hearsay and inconclusive, unlike the direct and credible testimony in the present case.

• Asia Production Co., Inc. vs. Paño, G.R. No. 51058, January 27, 1992, 205 SCRA 458 — Followed for the proposition that the Statute of Frauds applies only to executory contracts and not to those completely or partially performed.

• Article 1403(2)(e), Civil Code — The Statute of Frauds provision placing agreements for the sale of real property or an interest therein within its coverage. The Court held this provision inapplicable because the Statute of Frauds applies only to executory contracts, and the alleged assurance had been partially performed through the landowners' non-opposition to the expropriation in reliance on the NAC's promise.

• Article 1190, Civil Code — Governs the effects of the fulfillment of conditions whose purpose is the extinguishment of an obligation to give, requiring the parties to return to each other what they have received. Applied as the basis for mutual restitution: MCIAA to reconvey Lot No. 988, and respondents to return the just compensation plus legal interest, with provisions on loss, deterioration, or improvement applied under Article 1189.

• Article 1189, Civil Code — Provides that if a thing is improved by its nature or by time, the improvement shall inure to the benefit of the creditor. Applied to hold that respondents, as creditors, need not settle the appreciation in value of Lot No. 988 as part of restitution, since such appreciation is a natural consequence of nature and time.

• Article 1187, Civil Code — Provides that the effects of a conditional obligation to give retroact to the day of the constitution of the obligation, but fruits and interests during the pendency of the condition shall be deemed mutually compensated. Applied to hold that MCIAA may keep whatever income or fruits it obtained from Lot No. 988, and respondents need not account for interest earned on the just compensation.

• Article 1169, Civil Code — Provides that in reciprocal obligations, neither party incurs delay if the other does not comply, and delay by the other begins from the moment one party fulfills its obligation. Applied to determine that legal interest on the just compensation to be returned by respondents runs from the time MCIAA complies with its obligation to reconvey.

• Republic Act No. 6958 — The statute by which Lot No. 988 was transferred to MCIAA in 1990. Cited as part of the chain of title from NAC to ATO to MCIAA.

Leonardo A. Quisumbing (Acting Chief Justice, Chairperson), Dante O. Tinga, Presbitero J. Velasco, Jr., and Arturo D. Brion concurred. No separate concurring opinions were noted.