Municipality of Parañaque vs. V.M. Realty Corporation

A local government unit may exercise the power of eminent domain only through an ordinance enacted by its local legislative council, not through a mere resolution; however, the principle of res judicata does not bar the State or its agent from subsequently expropriating the same property once all legal requirements are complied with.

The Municipality of Parañaque sought to acquire private property for a socialized housing project benefiting the poor and landless. After a negotiated sale offer was rejected by the property owner, the municipality pursued expropriation proceedings. The case raised fundamental questions about the proper exercise of delegated eminent domain power by LGUs under the Local Government Code of 1991 and the applicability of res judicata to bar subsequent expropriation attempts.

• Original Filing: Complaint for expropriation filed on September 20, 1993, with the RTC of Makati, Branch 134 (docketed as Civil Case No. 93-3349)
• Lower Court Decision: RTC issued a Resolution dated August 9, 1994, dismissing the case for failure to state a cause of action (no ordinance) and on grounds of res judicata; motion for reconsideration denied on December 2, 1994
• Appeal: Petitioner appealed to the Court of Appeals (CA GR CV No. 48048)
• CA Decision: July 22, 1996 Decision affirmed the RTC in toto; motion for reconsideration denied on January 8, 1997
• SC Action: Petition for Review on Certiorari filed with the Supreme Court

The Municipality of Parañaque, through its Sangguniang Bayan, sought to acquire two parcels of land owned by V.M. Realty Corporation for a socialized housing project. The properties, identified as Lots 2-A-2 and 2-B-1 of Subdivision Plan Psd-17917, had a combined area of approximately 10,000 square meters and were located at Wakas, San Dionisio, Parañaque, Metro Manila, covered by Torrens Certificate of Title No. 48700. The municipality's stated purpose was to alleviate the living conditions of the underprivileged by providing homes for the homeless.

Prior to filing the expropriation complaint, the municipality had made an offer to purchase the property through a negotiated sale pursuant to Sangguniang Bayan Resolution No. 577, Series of 1991. V.M. Realty Corporation did not accept this offer. Subsequently, on the basis of Sangguniang Bayan Resolution No. 93-95, Series of 1993, the Municipality of Parañaque filed a Complaint for expropriation on September 20, 1993, before the Regional Trial Court of Makati.

The RTC initially found the complaint sufficient in form and substance and issued an Order dated January 10, 1994, giving it due course. Acting on the municipality's motion, the RTC issued another Order dated February 4, 1994, authorizing the municipality to take possession of the subject property upon deposit with the clerk of court of an amount equivalent to 15 percent of its fair market value based on its current tax declaration.

On February 21, 1994, V.M. Realty Corporation filed its Answer containing affirmative defenses and a counterclaim. The corporation alleged that the complaint failed to state a cause of action because it was filed pursuant to a resolution rather than an ordinance as required by RA 7160, and that the cause of action was barred by a prior judgment or res judicata. On the corporation's motion, its Answer was treated as a motion to dismiss. The municipality filed its opposition on March 24, 1994, contending that the RTC's February 4, 1994 Order was in accord with Section 19 of RA 7160 and that res judicata was not applicable.

The RTC subsequently issued its August 9, 1994 Resolution nullifying its February 4, 1994 Order and dismissing the case. The trial court found that while the right of the plaintiff to exercise the power of eminent domain was not disputed, such right could only be exercised pursuant to an ordinance under Section 19 of RA 7160, and no such ordinance had been passed by the Municipal Council of Parañaque. The RTC also found that assuming a cause of action existed, the same was barred by a prior judgment, noting that on September 29, 1987, the municipality had filed a previous complaint for expropriation involving the same parcels of land (Civil Case No. 17939), which was dismissed with prejudice on May 18, 1988, and the dismissal order had become final. The RTC held that while the defendant in the prior case was Limpan Investment Corporation, res judicata still applied because the judgment was conclusive between the parties and their successors-in-interest, and V.M. Realty Corporation was the successor-in-interest of Limpan Investment Corporation as shown by a Deed of Assignment Exchange executed on June 13, 1990.

The municipality's motions for reconsideration and transfer of venue were denied by the trial court in a Resolution dated December 2, 1994. The municipality then appealed to the Court of Appeals, which affirmed in toto the trial court's Decision in its July 22, 1996 Decision. The CA denied the municipality's Motion for Reconsideration for lack of merit in its Resolution promulgated on January 8, 1997. Hence, the municipality elevated the case to the Supreme Court.

• A resolution duly approved by the municipal council has the same force and effect as an ordinance and should not deprive an expropriation case of a valid cause of action
• The terms "ordinance" and "resolution" are synonymous for the purpose of bestowing authority on the LGU through its chief executive to initiate expropriation proceedings
• Article 36, Rule VI of the Rules and Regulations Implementing the Local Government Code provides that an LGU may expropriate property through a resolution of the Sanggunian authorizing its chief executive to initiate expropriation proceedings
• The principle of res judicata as a ground for dismissal is not applicable when public interest is primarily involved
• The municipality passed an ordinance on October 11, 1994, which reiterated its Resolution No. 93-35, Series of 1993, and ratified all the acts of its mayor regarding the subject expropriation

• The complaint failed to state a cause of action because it was filed pursuant to a resolution and not an ordinance as required by Section 19 of RA 7160
• The cause of action, if any, was barred by a prior judgment or res judicata, as a previous expropriation case involving the same property had been dismissed with prejudice and the dismissal had become final
• V.M. Realty Corporation is the successor-in-interest of Limpan Investment Corporation, the defendant in the prior expropriation case, as shown by the Deed of Assignment Exchange executed on June 13, 1990

• Requisites for Eminent Domain: Whether a resolution duly approved by the municipal council substantially complies with the statutory requirement of Section 19 of RA 7160 for the exercise of the power of eminent domain by an LGU
• Cause of Action: Whether the complaint for expropriation states a cause of action when based on a mere resolution rather than an ordinance
• Res Judicata: Whether the principle of res judicata bars the subsequent expropriation of the same property when public interest is primarily involved

• Requisites for Eminent Domain: No. Section 19 of RA 7160 expressly and clearly requires an ordinance enacted by the local legislative council authorizing the local chief executive to exercise the power of eminent domain. A resolution is not synonymous with an ordinance and does not substantially comply with the law.

• Cause of Action: No. The complaint fails to state a cause of action because it was based on a mere resolution. The absence of an ordinance authorizing the expropriation is equivalent to lack of cause of action.

• Res Judicata: No. While all the requisites for the application of res judicata are present, the principle cannot bar the right of the State or its agent to expropriate private property. The very nature of eminent domain as an inherent power of the State dictates that the right to exercise the power be absolute and unfettered even by a prior judgment or res judicata. However, the municipality may reinstitute proceedings once all legal requirements are complied with.

Requisites for Eminent Domain: The power of eminent domain is lodged in the legislative branch of government, which may delegate the exercise thereof to LGUs, other public entities, and public utilities. An LGU may exercise the power to expropriate private property only when authorized by Congress and subject to the latter's control and restraints. Section 19 of RA 7160 delegates to LGUs the power of eminent domain and lays down the parameters for its exercise. The following essential requisites must concur before an LGU can exercise the power of eminent domain: (1) an ordinance is enacted by the local legislative council authorizing the local chief executive to exercise the power of eminent domain; (2) the power is exercised for public use, purpose or welfare, or for the benefit of the poor and the landless; (3) there is payment of just compensation; and (4) a valid and definite offer has been previously made to the owner but was not accepted. In this case, the local chief executive sought to exercise the power of eminent domain pursuant to a resolution, not an ordinance, thus failing to comply with the first requisite. The SC rejected the argument that "resolution" and "ordinance" are synonymous, explaining that an ordinance is a law while a resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific matter. An ordinance possesses a general and permanent character, while a resolution is temporary in nature. The two are enacted differently—a third reading is necessary for an ordinance but not for a resolution. The SC also noted that Congress, in enacting RA 7160, clearly diverged from the previous Local Government Code (BP 337), which had allowed expropriation through a mere resolution. This manifest change in legislative language demands strict construction because the power of eminent domain necessarily involves a derogation of a fundamental or private right. The SC held that Article 36, Rule VI of the Implementing Rules, which requires only a resolution, cannot prevail over Section 19 of RA 7160, as the clear letter of the law is controlling and cannot be amended by a mere administrative rule. The SC emphasized that an LGU is created by law and all its powers and rights are sourced therefrom; it has no power to amend or act beyond the authority given and the limitations imposed on it by law.

Cause of Action: The SC held that the complaint does not state a cause of action. In a motion to dismiss based on failure to state a cause of action, the question is the sufficiency of the allegations in the complaint itself. The fact that there is no cause of action is evident from the face of the Complaint for expropriation, which was based on a mere resolution. The absence of an ordinance authorizing the same is equivalent to lack of cause of action. The SC also rejected the municipality's argument that it subsequently passed an ordinance on October 11, 1994, which reiterated its Resolution No. 93-35 and ratified all the acts of its mayor regarding the subject expropriation. The SC noted that the municipality merely alleged the existence of such an ordinance but did not present any certified true copy thereof, and the point was not raised before the SC. In any event, this allegation does not cure the inherent defect of the Complaint filed on September 23, 1993.

Res Judicata: The SC found that all the requisites for the application of res judicata are present: there is a previous final judgment on the merits in a prior expropriation case involving identical interests, subject matter, and cause of action, rendered by a court having jurisdiction over it. However, the SC held that the principle of res judicata cannot bar the right of the State or its agent to expropriate private property. The very nature of eminent domain as an inherent power of the State dictates that the right to exercise the power be absolute and unfettered even by a prior judgment or res judicata. The scope of eminent domain is plenary and, like police power, can reach every form of property which the State might need for public use. All separate interests of individuals in property are held of the government under a tacit agreement or implied reservation, and the eminent domain remains in the government or in the aggregate body of the people in their sovereign capacity, with the right to resume possession of the property whenever the public interest requires it. Thus, the State or its authorized agent cannot be forever barred from exercising said right by reason alone of previous non-compliance with any legal requirement. While res judicata does not denigrate the right of the State to exercise eminent domain, it does apply to specific issues decided in a previous case. For example, a final judgment dismissing an expropriation suit on the ground that there was no prior offer precludes another suit raising the same issue; it cannot, however, bar the State or its agent from thereafter complying with this requirement and subsequently exercising its power of eminent domain over the same property. By the same token, the SC's ruling that petitioner cannot exercise its delegated power of eminent domain through a mere resolution will not bar it from reinstituting similar proceedings once the said legal requirement and all others are properly complied with. The SC also cited Republic vs. De Knecht, where it was ruled that the power of the State or its agent to exercise eminent domain is not diminished by the mere fact that a prior final judgment over the property to be expropriated has become the law of the case as to the parties. To rule otherwise would not only improperly diminish the power of eminent domain but also clearly defeat social justice.

• Requisites for Exercise of Eminent Domain by LGUs — Before an LGU can exercise the power of eminent domain, the following essential requisites must concur: (1) an ordinance is enacted by the local legislative council authorizing the local chief executive, in behalf of the LGU, to exercise the power of eminent domain or pursue expropriation proceedings over a particular private property; (2) the power of eminent domain is exercised for public use, purpose or welfare, or for the benefit of the poor and the landless; (3) there is payment of just compensation, as required under Section 9, Article III of the Constitution and other pertinent laws; and (4) a valid and definite offer has been previously made to the owner of the property sought to be expropriated, but said offer was not accepted. In this case, the municipality failed to comply with the first requisite because it acted pursuant to a mere resolution rather than an ordinance.

• Ordinance vs. Resolution — A municipal ordinance is different from a resolution. An ordinance is a law, but a resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific matter. An ordinance possesses a general and permanent character, but a resolution is temporary in nature. Additionally, the two are enacted differently—a third reading is necessary for an ordinance, but not for a resolution, unless decided otherwise by a majority of all the Sanggunian members.

• Eminent Domain as Inferior Domain for LGUs — The power of eminent domain delegated to an LGU is in reality not eminent but "inferior" domain, since it must conform to the limits imposed by the delegation, and thus partakes only of a share in eminent domain. The national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it.

• Res Judicata Does Not Bar Eminent Domain — The principle of res judicata cannot bar the right of the State or its agent to expropriate private property. The very nature of eminent domain as an inherent power of the State dictates that the right to exercise the power be absolute and unfettered even by a prior judgment or res judicata. The State or its authorized agent cannot be forever barred from exercising said right by reason alone of previous non-compliance with any legal requirement. However, res judicata does apply to specific issues decided in a previous case—a final judgment dismissing an expropriation suit on a specific ground precludes another suit raising the same issue, but does not bar the State from thereafter complying with the requirement and subsequently exercising its power of eminent domain over the same property.

• Strict Construction of Eminent Domain Statutes — The power of eminent domain necessarily involves a derogation of a fundamental or private right of the people. Accordingly, the manifest change in legislative language from "resolution" under BP 337 to "ordinance" under RA 7160 demands a strict construction. No species of property is held by individuals with greater tenacity, and is guarded by the Constitution and laws more sedulously, than the right to the freehold of inhabitants. When the legislature interferes with that right and, for greater public purposes, appropriates the land of an individual without his consent, the plain meaning of the law should not be enlarged by doubtful interpretation.

• "A local government unit (LGU), like the Municipality of Parañaque, cannot authorize an expropriation of private property through a mere resolution of its lawmaking body. The Local Government Code expressly and clearly requires an ordinance or a local law for the purpose. A resolution that merely expresses the sentiment or opinion of the Municipal Council will not suffice."

• "An ordinance is a law, but a resolution is merely a declaration of the sentiment or opinion of a lawmaking body on a specific matter. An ordinance possesses a general and permanent character, but a resolution is temporary in nature."

• "The power of eminent domain necessarily involves a derogation of a fundamental or private right of the people. Accordingly, the manifest change in the legislative language -- from 'resolution' under BP 337 to 'ordinance' under RA 7160 -- demands a strict construction."

• "The very nature of eminent domain, as an inherent power of the State, dictates that the right to exercise the power be absolute and unfettered even by a prior judgment or res judicata. The scope of eminent domain is plenary and, like police power, can 'reach every form of property which the State might need for public use.'"

• "The State or its authorized agent cannot be forever barred from exercising said right by reason alone of previous non-compliance with any legal requirement."

• "Strictly speaking, the power of eminent domain delegated to an LGU is in reality not eminent but 'inferior' domain, since it must conform to the limits imposed by the delegation, and thus partakes only of a share in eminent domain."

• Camarines Sur vs. Court of Appeals, 222 SCRA 173 (1993) — Distinguished. The SC held this case was not in point because the applicable law at that time was BP 337, the previous Local Government Code, which had provided that a mere resolution would enable an LGU to exercise eminent domain. In contrast, RA 7160, the present Local Government Code, explicitly requires an ordinance for this purpose.

• Moday vs. Court of Appeals, 268 SCRA 586 (1997) — Cited to support the principle that the power of eminent domain is lodged in the legislative branch of government, which may delegate the exercise thereof to LGUs, other public entities, and public utilities.

• Magtajas vs. Pryce Properties, Corp., Inc., 234 SCRA 255 (1994) — Cited for the principle that the national legislature is still the principal of the local government units, which cannot defy its will or modify or violate it.

• Republic vs. De Knecht, 182 SCRA 142 (1990) — Followed. The SC ruled that the power of the State or its agent to exercise eminent domain is not diminished by the mere fact that a prior final judgment over the property to be expropriated has become the law of the case as to the parties. The State or its authorized agent may still subsequently exercise its right to expropriate the same property, once all legal requirements are complied with.

• National Power Corporation vs. Court of Appeals, 254 SCRA 577 (1996) — Cited to illustrate that while res judicata does not bar eminent domain, it does apply to specific issues decided in a previous case. A final judgment dismissing an expropriation suit on the ground that there was no prior offer precludes another suit raising the same issue; it cannot, however, bar the State or its agent from thereafter complying with this requirement.

• Azarcon vs. Sandiganbayan, 268 SCRA 747 (1997) — Cited for the rule on statutory construction: legislative intent is determined principally from the language of a statute. Where the language of a statute is clear and unambiguous, the law is applied according to its express terms, and interpretation would be resorted to only where a literal interpretation would be either impossible or absurd or would lead to an injustice.

• Travel Wide Associated Sales (Phils.), Inc. vs. Court of Appeals, 199 SCRA 205 (1991) — Cited for the hornbook doctrine that in a motion to dismiss based on the ground that the complaint fails to state a cause of action, the question submitted before the court for determination is the sufficiency of the allegations in the complaint itself.

• Section 19, Republic Act No. 7160 (Local Government Code of 1991) — Provides that a local government unit may, through its chief executive and acting pursuant to an ordinance, exercise the power of eminent domain for public use, purpose, or welfare for the benefit of the poor and the landless, upon payment of just compensation, pursuant to the provisions of the Constitution and pertinent laws. The SC applied this provision by holding that the municipality's reliance on a mere resolution, instead of an ordinance, failed to comply with the mandatory requirement, rendering the expropriation complaint dismissible for failure to state a cause of action.

• Section 9, Article III, 1987 Constitution — Provides that private property shall not be taken for public use without just compensation. The SC cited this provision as one of the requisites for the valid exercise of eminent domain—that there must be payment of just compensation.

• Section 2, Article X, 1987 Constitution — Provides that territorial and political subdivisions shall enjoy local autonomy. The SC clarified that its ruling does not diminish this policy but merely upholds the law as worded in RA 7160, emphasizing that an LGU is created by law and all its powers and rights are sourced therefrom.

• Section 9, Batas Pambansa Blg. 337 (Previous Local Government Code) — Provided that a local government unit may, through its head and acting pursuant to a resolution of its sanggunian, exercise the right of eminent domain and institute condemnation proceedings for public use or purpose. The SC cited this provision to contrast it with Section 19 of RA 7160, noting the manifest change in legislative language from "resolution" to "ordinance" demands strict construction.

• Article 36, Rule VI, Implementing Rules and Regulations of RA 7160 — Provides that if the LGU fails to acquire a private property for public use, purpose, or welfare through purchase, the LGU may expropriate said property through a resolution of the Sanggunian authorizing its chief executive to initiate expropriation proceedings. The SC held this provision cannot prevail over Section 19 of RA 7160, as the clear letter of the law is controlling and cannot be amended by a mere administrative rule issued for its implementation.

• Justice Davide, Jr. (Chairman)
• Justice Bellosillo
• Justice Vitug
• Justice Quisumbing

None.