Republic vs. Court of Appeals

A judicial declaration of unconstitutionality of a statute applies retroactively to pending cases where the rights of the parties remain unresolved, as an unconstitutional law is a total nullity that is deemed never to have existed, absent exceptional circumstances such as vested rights or fait accompli situations.

The Republic initiated expropriation proceedings for the widening and concreting of the Nabua-Bato-Agos Section of the Philippine-Japan Highway Loan road. The legal dispute centered on the method for determining just compensation: whether based on the fair market value demanded by landowners or on the statutory valuation fixed by PD 76 (as amended) and related decrees.

• Filed in RTC — The Republic filed expropriation cases seeking to deposit 10% of the assessed value under Rule 67 and enter the property; private respondents resisted the valuation based on PD 76/1533.
• RTC Decision — Ruled for private respondents, holding that just compensation must be based on fair market value, not the statutory assessment.
• CA Decision — Affirmed the RTC ruling.
• SC — Republic filed petition for review, conceding the unconstitutionality of PD 1533 per EPZA v. Dulay but arguing for prospective application only.

• The Republic sought expropriation of portions of land owned by private respondents for a public highway project.
• The Republic offered payment based on PD 76, which fixed compensation on the basis of the assessor's assessment or the owner's declared valuation, whichever is lower.
• Private respondents demanded just compensation based on fair market value, arguing that PD 76 and PD 1533 unconstitutionally encroached on judicial prerogatives.
• In EPZA v. Dulay (G.R. No. 59603, April 29, 1987), the SC declared PD 1533 unconstitutional, holding that the determination of just compensation is a judicial function that cannot be usurped by legislative decree fixing arbitrary valuation standards.
• When the present cases were pending appeal, the EPZA ruling was rendered and invoked by the parties.
• The expropriation cases remained unresolved and pending when the constitutional question was raised.

• The Republic conceded that PD 1533 is unconstitutional per EPZA v. Dulay.
• However, the Republic argued that the declaration of unconstitutionality should apply only prospectively, not retroactively to pending cases.
• The Republic maintained that the modern view of constitutional adjudication should apply, wherein the decision affects only the parties and does not strike the statute from the books as a total nullity.

• Private respondents argued that the EPZA ruling should apply to their cases, entitling them to just compensation based on fair market value rather than the statutory assessment.
• They relied on the orthodox view that an unconstitutional statute is void ab initio and confers no rights, thus the determination of just compensation must be judicial, not legislative.

• Procedural Issues: N/A
• Substantive Issues:
  • Whether the judicial declaration of unconstitutionality of PD 1533 in EPZA v. Dulay applies retroactively to pending cases where the constitutionality of the decree was not assailed before the trial court.
  • Whether the determination of just compensation in these expropriation cases must follow the EPZA doctrine (judicial determination based on fair market value) or the repealed statutory standard of PD 76/1533.

• Procedural: N/A
• Substantive:
  • Retroactivity applies. The SC adopted the orthodox view expressed in Article 7 of the Civil Code: when courts declare a law inconsistent with the Constitution, the former is void and the latter governs. An unconstitutional act is not a law; it confers no rights, imposes no duties, and is inoperative as if it had never been passed.
  • No exceptional circumstances. The SC distinguished cases involving fait accompli, vested rights, or moratorium laws where equity considerations might limit retroactivity. Here, the controversy remained unresolved—the expropriation cases were still pending appeal when EPZA was decided. No vested rights had crystallized under the void statute.
  • Affirmation of CA. The CA committed no error in applying EPZA v. Dulay retroactively and ordering payment of just compensation based on fair market value rather than the tax declaration valuation prescribed by the unconstitutional decrees.

• Orthodox View on Unconstitutional Statutes — Under this view (expressed in Norton v. Shelby and adopted in Article 7, Civil Code), an unconstitutional act is a total nullity; it confers no rights, imposes no duties, affords no protection, creates no office, and is inoperative as if it had never existed. The declaration binds all persons, and the statute is stricken from the books.
• Modern View on Unconstitutional Statutes — Under this view, the court simply refuses to recognize the statute and determines the rights of the parties as if the statute had no existence; the decision affects only the parties and does not strike the statute from the books. The SC rejected this view for purposes of this case.
• Judicial Function in Eminent Domain — The determination of just compensation is a judicial function that cannot be usurped by the legislature or executive through statutory fixing of arbitrary values (citing EPZA v. Dulay).
• Exceptions to Retroactivity of Nullity — A declaration of unconstitutionality may not obliterate all prior effects when:
  • The situation constitutes a fait accompli that can no longer be unsettled;
  • Vested rights have accrued under the void law (e.g., contractually vested rights impaired by retroactive application);
  • Strong considerations of equity and fair play apply (as in moratorium laws cases).

• "An unconstitutional act is not a law; it confers no right; it imposes no duties; it affords no protection; it creates no office; it is, in legal contemplation, inoperative, as if it had not been passed." — Adopting the orthodox view from Norton v. Shelby.
• "When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern." — Article 7, Civil Code.
• "The strict view considers a legislative enactment which is declared unconstitutional as being, for all legal intents and purposes, a total nullity, and it is deemed as if it had never existed."

• Export Processing Zone Authority (EPZA) v. Dulay — Controlling precedent declaring PD 1533 unconstitutional for encroaching on the judicial function of determining just compensation; the statutory fixing of compensation based on tax declarations was held impermissible.
• Norton v. Shelby (U.S. case) — Cited for the orthodox view that an unconstitutional statute is a total nullity, never having had legal existence.
• Shepard v. Barren (U.S. case) — Cited for the modern view that a declaration of unconstitutionality affects only the parties and does not strike the statute from the books.
• Toledo v. Fernando and Belen v. Court of Appeals — Subsequent cases reiterating the EPZA doctrine on just compensation.
• Sps. Benzonan v. Court of Appeals — Applied to new doctrines reversing prior interpretations; similar principles govern the retroactive application of constitutional rulings.
• Republic v. Herida, Republic v. CFI, Negros Occidental, and Tan v. Barrios — Cited regarding moratorium laws where interim effects were recognized prior to declaration of unconstitutionality based on equity considerations.

• Presidential Decree No. 76 (as amended) — Fixed payment for expropriated property based on the assessor's assessment or declared valuation by the owner, whichever is lower; declared unconstitutional as applied.
• Presidential Decree No. 1533 — Related decree on just compensation; declared unconstitutional in EPZA v. Dulay for violating the judicial prerogative to determine just compensation.
• Article 7, Civil Code — Provides that when courts declare a law inconsistent with the Constitution, the former is void and the latter governs; adopts the orthodox view on the effects of unconstitutionality.
• Rule 67, Revised Rules of Court — Regarding the 10% deposit required before plaintiff is permitted entry upon expropriated property; noted as not being in issue in this case.