Tiongson vs. National Housing Authority

A presidential decree that directly expropriates specific private property, authorizes immediate taking without deposit or hearing, fixes a maximum just compensation based solely on the assessor’s valuation, and forecloses judicial review is unconstitutional for violating the due process and just compensation clauses. Expropriation requires notice and a reasonable opportunity to be heard or a proceeding under Rule 67, and just compensation must be determined by a competent tribunal after the owner is given an opportunity to prove the property’s value at the time of taking.

The petitioners owned or held interests in the Tambunting Estate and the Estero de Sunog-Apog area, which the government included in a nationwide slum improvement and resettlement program and the Metropolitan Manila Zonal Improvement Program. The National Housing Authority and the Republic of the Philippines were the public respondents tasked with implementing the expropriation. Presidential Decree Nos. 1669 and 1670 were issued against this backdrop of slum improvement and zonal upgrading.

The petitioners in the two consolidated cases were owners and persons with interests in the Tambunting Estate and the Estero de Sunog-Apog area in Manila. The Tambunting Estate consisted of real properties covered by TCT Nos. 119059, 122450, 122459, 122452 and Lots Nos. 1-A, 1-C, 1-D, 1-E, 1-F and 1-H of (LRC) Psd-230517 (previously covered by TCT No. 119058), with an area of 52,688.70 square meters, more or less. The Sunog-Apog area along Estero de Sunog-Apog in Tondo, Manila formerly consisted of Lots Nos. 55-A, 55-B and 55-C, Block 2918 of subdivision plan Psd-11746, covered by TCT Nos. 49286, 49287 and 49288, with an area of 72,428.6 square meters, more or less, and was formerly owned by Manotok Realty, Inc.

On June 11, 1977, the President issued LOI No. 555 instituting a nationwide slum improvement and resettlement program, and LOI No. 557 adopting slum improvement as a national housing policy. On July 21, 1977, the Governor of Metro Manila issued Executive Order No. 6-77 adopting the Metropolitan Manila Zonal Improvement Program, which included the Tambunting Estate and the Sunog-Apog area in its priority list because the findings of the representative of the City of Manila and the NHA described them as blighted communities. On March 18, 1978, a fire razed almost the entire Tambunting Estate. Following the calamity, the President and the Metro Manila Governor publicly announced that the national government would acquire the property for the fire victims, and the President designated the NHA to negotiate with the owners; the negotiations failed. On December 22, 1978, the President issued Proclamation No. 1810 declaring all sites identified by the Metro Manila local governments and approved by the Ministry of Human Settlements to be included in the ZIP upon proclamation of the President, and the Tambunting Estate and Sunog-Apog area were among the sites included.

On January 28, 1980, the President issued P.D. No. 1669 and P.D. No. 1670, which respectively declared the Tambunting Estate and the Sunog-Apog area expropriated. Section 1 of each decree designated the NHA as administrator of the National Government with authority to immediately take possession, control, and disposition of the expropriated properties, with power of demolition, and to implement a comprehensive development plan. Section 6 of P.D. No. 1669 pegged just compensation at the market value determined by the City Assessor pursuant to P.D. No. 76, as amended by P.D. No. 1533, and provided that just compensation should not exceed a maximum of P17,000,000, payable to the owners within five years in five equal installments. Section 6 of P.D. No. 1670 similarly pegged compensation at the City Assessor’s market value and set a maximum of P8,000,000, payable in five equal installments over five years. Both decrees directed the City Assessor to consider existing conditions, notably that no improvement had been undertaken on the land and that the land was squatted upon by resident families, which should considerably depress the expropriation cost.

On April 4, 1980, the NHA, through its general manager, wrote the Register of Deeds of Manila, furnishing a certified copy of P.D. Nos. 1669 and 1670 for registration and requesting that the certificates of title covering the properties be cancelled and new certificates issued in the name of the Republic of the Philippines. The Register of Deeds requested the submission of the owners’ copies of the certificates of title to enable her to implement the decrees. Petitioner Elisa R. Manotok later received a letter from the NHA informing her that the NHA had deposited with the Philippine National Bank on July 16, 1980 the total amount of P5,000,000, which included P3,400,000 representing the first annual installment for the Tambunting Estate under P.D. No. 1669, and another P5,000,000, which included P1,600,000 representing the first annual installment for the Sunog-Apog area under P.D. No. 1670. She was informed that she was free to withdraw her share upon surrender of the titles, and that if she failed to avail herself of the offer, the NHA would take the necessary legal steps to implement the decrees.

On August 19, 1980, Elisa R. Manotok wrote the NHA alleging that the amounts fixed in the decrees did not constitute just compensation under the Constitution. She expressed doubts about the constitutionality of the decrees and stated that she did not believe she was obliged to withdraw the P5,000,000 or surrender her titles. In the meantime, some NHA officials circulated instructions to the tenants-occupants of the properties not to pay rentals to the petitioners. The owners of the Tambunting Estate then filed a petition to declare P.D. No. 1669 unconstitutional, and the owners of the Sunog-Apog area filed a similar petition attacking P.D. No. 1670. On September 27, 1982, the lessees of both areas filed a motion for leave to intervene with a petition in intervention, alleging that they owned the buildings and houses built on the properties and were real parties in interest.

The petitioners maintained that the Sunog-Apog area had been subdivided into subdivision lots and leased to occupants under contracts of lease, making them lessees rather than squatters; each lot was surrounded by adobe walls, the houses were required to have septic tanks, and there were drainage and water facilities. As for the Tambunting Estate, they maintained that aside from residential houses, there were buildings and structures of strong materials on lots fronting Rizal Avenue Extension, most of which were leased to proprietors of business establishments under long-term contracts. The Court observed that the western half of the Tambunting Estate fronting Rizal Avenue Extension was valuable commercial property located at the junction of Rizal Avenue, Jose Abad Santos Street, and Aurora Boulevard, and that the Sunog-Apog area was well-developed with roads, drainage, sewer, water, electric, and telephone facilities and had no squatters.

• Due Process — Automatic Expropriation Without Hearing: Petitioners maintained that the decrees automatically expropriated their properties by mere passage, immediately depriving them of ownership and possession without any chance to oppose the expropriation or contest just compensation; the government should have filed a complaint under Rule 67 of the Revised Rules of Court.
• Just Compensation — Fixed Maximum and Assessor’s Valuation: Petitioners argued that just compensation should not have been vested solely in the City Assessor and that a maximum or fixed amount should not have been imposed; the decrees forced the City Assessor to accept the stated conditions of no improvement and squatting to depress expropriation cost.
• Equal Protection: Petitioners maintained that the decrees violated their right to equal protection of the law.
• Vagueness and Defect: Petitioners contended that the decrees were vague, defective, and patently erroneous.
• Improper Subjects for Expropriation: Petitioners argued that their properties were not proper subjects for expropriation considering their location and other relevant circumstances, including that Sunog-Apog was subdivided and leased and Tambunting had commercial buildings.

• Political Question / Judicial Restraint: The Government and NHA contended that eminent domain is inherent in the State; when the legislature or President exercises it, public use, public necessity, and fixing just compensation are political in nature, and courts must respect the decision unless clearly arbitrary, unreasonable, and devoid of logic and reason.
• Due Process Satisfied Without Judicial Process: Public respondents argued that due process does not necessarily entail judicial process and that Rule 67 was superseded by the challenged decrees insofar as applicable.
• Assessment Appeals as Due Process: The Government argued that the owner may appeal the assessor’s action to the Board of Assessment Appeals and then to the Central Board of Assessment Appeals under P.D. No. 464, which fulfills due process.
• No Ignored Valuation: Public respondents maintained that petitioners’ valuations were not ignored because petitioners did not state any valuation in their sworn declaration of true market value.
• Installment Payment Justified: Public respondents argued that payment in installments was justified by financial constraints, as the properties were only two of 415 slum and blighted areas and 251 ZIP sites, and immediate acquisition of all sites would entail millions; the installment scheme did not arise from ill will or discrimination.

• Due Process: Whether P.D. Nos. 1669 and 1670 violate due process by automatically expropriating the properties without hearing or proceeding and by foreclosing judicial review.
• Just Compensation: Whether the decrees violate the right to just compensation by fixing maximum amounts based on the City Assessor’s valuation and providing for installment payment.
• Equal Protection: Whether the decrees violate the equal protection clause by singling out the properties for expropriation.
• Vagueness and Defect: Whether the decrees are vague, defective, and patently erroneous.
• Propriety and Necessity of Expropriation: Whether the properties are proper subjects for expropriation considering their location and circumstances, and whether a genuine public necessity for the taking was shown.
• Public Use: Whether the expropriation serves a public use, particularly where P.D. No. 1669 allows portions to be put to commercial use to defray development costs.

• Due Process: Yes, violated. The decrees automatically expropriated the properties without any hearing or proceeding, gave no opportunity to contest the taking or compensation, and foreclosed judicial review; due process requires notice and a reasonable opportunity to be heard or a Rule 67 expropriation proceeding.
• Just Compensation: Yes, violated. The decrees fixed maximum compensation based on the City Assessor’s 1978 market value and made it payable in installments without interest, depriving owners of the opportunity to prove a higher value at the time of taking; just compensation must approximate the value at the time of taking and be judicially determined.
• Equal Protection: The decrees were invalidated on due process and just compensation grounds; the absence of any showing why the properties were singled out also implicated equal protection, but the dispositive ruling did not rest on a separate equal protection holding.
• Vagueness and Defect: Yes, the decrees were constitutionally infirm. They lacked provisions for hearing or judicial review and improperly fixed just compensation, rendering them defective under the due process and eminent domain clauses.
• Propriety and Necessity of Expropriation: No. No showing was made why the properties were singled out or what necessity impelled their selection; the Sunog-Apog area was well-developed and the Tambunting Estate included valuable commercial property.
• Public Use: No. P.D. No. 1669’s allowance of commercial use for portions of the expropriated area could not stand constitutional scrutiny; expropriation of commercial property to lease it for commercial purposes was not shown to be public use.

• Due Process: Eminent domain is inherent in the State but is limited by the Constitution: the taking must be for public use, just compensation must be paid, and due process must be observed. The decrees were uniquely unfair: the Tambunting Estate was summarily proclaimed a blighted area and directly expropriated without hearing; expropriation was instant and automatic upon signing; no deposit before taking was required; the P3,400,000 was not a deposit but an installment payment; no interest was provided on unpaid installments; owners had no opportunity to contest the expropriation or compensation; and NHA decisions were beyond judicial review. Although due process does not always require a judicial proceeding, it mandates some form of proceeding with notice and reasonable opportunity to be heard. Where a violation is alleged, courts must probe. The government should have filed an expropriation case under Rule 67 if the decrees did not provide for a hearing. P.D. No. 464 assessment appeals do not deal with the propriety of expropriation or the manner of just compensation and cannot substitute for Rule 67. Thus, due process was violated.
• Just Compensation: Just compensation means the equivalent value of the property at the time of taking; anything beyond is more and anything short is less than just compensation. P.D. No. 1533 fixes the basis as market value prior to the recommendation or decision of the appropriate government office to acquire the property. Here, maximum amounts were imposed and were only a little more than the 1978 assessed values, but the actual or symbolic taking occurred in 1980 when the decrees were promulgated. The government’s claim that the cut-off should be 1978 because it decided to acquire the properties was rejected: the decision to acquire must be made known through formal notice and a hearing or judicial proceeding under Rule 67; a television or news announcement or inclusion in the ZIP cannot suffice. The conditions of the properties should not be determined through a decree but must be shown in an appropriate proceeding. The City Assessor’s market value alone cannot substitute for the court’s judgment; denying the owner the opportunity to prove that the valuation was wrong or prejudiced violates due process and the eminent domain provisions. The maximum amounts could not adequately reflect the property’s value and should not bind the owners. Thus, just compensation was violated.
• Equal Protection: The government may not capriciously or arbitrarily choose what private property should be taken. In legislative expropriation, there are at least debates in Congress open to the public, scrutiny by individual members, and often public hearings before enactment. Here, the decrees showed no reasons for the choice of properties; the anonymous adviser who drafted them could not be questioned as to possible error, partiality, vengeance, or personal motivations. The equal protection clause will not allow the owner to be the victim of partiality and prejudice. The final disposition, however, rested on due process and just compensation violations.
• Vagueness and Defect: The decrees lacked procedural safeguards: no hearing, no opportunity to contest the expropriation or compensation, no judicial review, and a fixed compensation scheme. They were not merely vague; their procedure and compensation provisions were constitutionally defective under the due process and eminent domain clauses.
• Propriety and Necessity of Expropriation: The basis for eminent domain is necessity, which must be genuine and of a public character. Modern decisions accept reasonable or practical necessity, varying with time and circumstances. No showing was made why the properties were singled out. The western half of the Tambunting Estate fronting Rizal Avenue Extension was valuable commercial property at the junction of three main city streets; Libiran Furniture Company alone was a multi-million peso enterprise; favored squatters allowed to buy choice lots could later lease or sell them to wealthy merchants. The public use and social justice ends stated in the decrees would not be served. For Sunog-Apog, there was no showing how the President concluded it was blighted; pictures showed a well-developed area with middle-income or upper-class homes, no squatters, and roads, drainage, sewer, water, electric, and telephone facilities. There was no need to demolish existing valuable improvements. Thus, the properties were not proper subjects for expropriation.
• Public Use: P.D. No. 1669 allowed the NHA, at its sole option, to put portions of the expropriated area to commercial use to defray development costs. This could not stand constitutional scrutiny; the government cannot expropriate a flourishing commercial area merely to earn money to finance housing projects. Under Guido vs. Rural Progress Administration, the legislature may not take the property of one citizen and transfer it to another, even for full compensation, when the public interest is not thereby promoted. The government had to prove that expropriating commercial properties to lease them out for commercial purposes was public use; it did not.

• Eminent Domain and Its Constitutional Limits — The power of eminent domain is inherent in the State, but its exercise is limited by the Constitution: the taking must be for public use, just compensation must be paid, and due process must be observed. In this case, P.D. Nos. 1669 and 1670 failed the due process and just compensation requirements and were void.
• Due Process in Expropriation — Due process does not always require a judicial proceeding, but it mandates some form of proceeding with notice and a reasonable opportunity to be heard so the owner can protect property rights. Automatic expropriation by decree, without hearing and with judicial review foreclosed, violates due process. The Court applied this to strike down the decrees.
• Just Compensation — Just compensation is the equivalent value of the property at the time of taking, not whatever gain accrues to the expropriator. It must be determined after the owner is given an opportunity to prove value; the City Assessor’s valuation alone cannot substitute for judicial determination. The decrees’ maximum amounts based on 1978 assessed values and installment payments without interest violated this guarantee.
• Judicial Review of Expropriation — Courts may inquire into alleged violations of due process, equal protection, and eminent domain clauses even when a decree has fixed public use or just compensation. A decree cannot enjoin the Court from reviewing such violations. The Court applied this to reject the government’s political-question argument.
• Public Use and Necessity — The foundation of eminent domain is a genuine necessity of a public character. While absolute necessity is not required, there must be a reasonable or practical necessity, and the government may not take private property for private purposes. The Court found no showing of necessity and held that expropriating commercial property to lease it for commercial purposes was not public use.
• Equal Protection in Eminent Domain — The government may not capriciously or arbitrarily choose which private property to take. It is a judicial question whether the owner is the victim of partiality and prejudice. The Court noted the absence of any explanation for singling out the properties, although the final disposition rested on due process and just compensation.
• Payment of Just Compensation in Installments — The decrees allowed payment in five equal installments without interest. The Court considered this part of the just compensation infirmity, as the owner was deprived of the full equivalent value at the time of taking.

• "The due process clause cannot be rendered nugatory everytime a specific decree or law orders the expropriation of somebody's property and provides its own peculiar manner of taking the same. Neither should the courts adopt a hands-off policy just because the public use has been ordained as existing by the decree or the just compensation has been fixed and determined beforehand by a statute." — This states the Court’s rejection of automatic judicial deference to expropriation decrees and affirms judicial review of due process and just compensation violations.
• "In other words, although due process does not always necessarily demand that a proceeding be had before a court of law, it still mandates some form of proceeding wherein notice and reasonable opportunity to be heard are given to the owner to protect his property rights." — This defines the minimum due process requirement in eminent domain and is the basis for invalidating the decrees’ automatic expropriation scheme.
• "The market value stated by the city assessor alone cannot substitute for the court's judgment in expropriation proceedings. It is violative of the due process and the eminent domain provisions of the Constitution to deny to a property owner the opportunity to prove that the valuation made by a local assessor is wrong or prejudiced." — This is the core just compensation ruling: assessor valuation cannot replace judicial determination after an opportunity to prove value.
• "The legislature, according to the Guido case, may not take the property of one citizen and transfer it to another, even for a full compensation, when the public interest is not thereby promoted." — This states the public use limitation on eminent domain and supports the holding that expropriating commercial property for commercial leasing was not public use.

• Republic vs. Juan, 92 SCRA 26, 40 — Cited for the constitutional limitations on eminent domain: public use, just compensation, and due process.
• Dohany vs. Rogers, 74 L.Ed. 904, 912, 281 U.S. 362-370 — Cited for the rule that due process does not require any particular form of state procedure but is satisfied by reasonable opportunity to be heard and present claims or defenses.
• De Knecht vs. Bautista, 100 SCRA 660, 666-667 — Cited for the landowner’s due process protection and the principle that the government may not capriciously or arbitrarily choose what private property to take.
• J.M. Tuazon & Co., Inc. vs. Land Tenure Administration, 31 SCRA 413, 433, 436 — Cited for just compensation as the equivalent value at the time of taking and for the equal protection principle that it is a judicial question whether the owner is a victim of partiality and prejudice.
• City of Manila vs. Chinese Community of Manila, 40 Phil. 349 — Cited for the rule that the foundation of eminent domain is a genuine necessity of a public character.
• City of Manila vs. Arellano Law Colleges, 85 Phil. 663 — Cited for the rule that a reasonable or practical necessity, not absolute necessity, is sufficient for expropriation.
• Guido vs. Rural Progress Administration, 84 Phil. 847 — Cited for the principle that the legislature may not take property from one citizen and transfer it to another, even for full compensation, when public interest is not promoted.
• Municipality of Daet vs. Court of Appeals, 93 SCRA 503, 506, 519 — Cited for fixing just compensation at the time of taking or at the time of judgment, whichever comes first.
• National Power Corporation vs. Court of Appeals, 129 SCRA 665, 673 — Cited for the settled doctrine that just compensation is based on the price or value at the time the property was taken.
• Alfonso vs. Pasay City, 106 Phil. 1017 (1960) — Cited as the leading case for determining just compensation at the time of taking.
• Republic vs. PNB, 1 SCRA 957 — Cited for the rule that when the government takes possession before condemnation proceedings, value is fixed as of the time of taking possession.
• Garcia vs. Court of Appeals, 102 SCRA 597, 608 — Cited for the rule that market value considers all capabilities and uses of the property, not merely its condition at the time.
• Export Processing Zone Authority vs. Hon. Ceferino E. Dulay, et al., G.R. No. 59603 — Cited as invalidating the mode of fixing just compensation under P.D. Nos. 76, 464, 794, and 1533.
• Haguisan vs. Emilia, 131 SCRA 517 — Cited as a martial-law-era decision validating expropriation without prior hearing under P.D. No. 42, which the Court re-examined.
• National Housing Authority vs. Reyes, 123 SCRA 245 — Cited as a martial-law-era decision upholding decrees fixing just compensation at the lower of owner-declared or assessor’s market value, which the Court re-examined.
• Republic vs. Santos, 141 SCRA 30, 35 — Cited for the basis of just compensation as market value prior to the recommendation or decision of the appropriate government office to acquire the property.

• Section 2, Article IV, Constitution — “Private property shall not be taken for public use without just compensation.” Cited in the decision; the decrees violated this guarantee by fixing maximum compensation and denying the opportunity to prove value.
• Due Process and Equal Protection Clauses, Bill of Rights — The decision invoked due process and equal protection in reviewing the decrees; the automatic expropriation and foreclosure of judicial review violated due process, and the arbitrary singling out of properties implicated equal protection.
• Rule 67, Revised Rules of Court — Provides the expropriation procedure. The Court held the government should have filed an expropriation case under Rule 67 if the decrees did not provide for a hearing; failure to do so violated due process.
• Presidential Decree No. 464 (Real Property Tax Code) — Provides for appeals to the Board of Assessment Appeals and Central Board of Assessment Appeals. The Court held it does not deal with the propriety of expropriation or manner of just compensation and cannot substitute for Rule 67.
• Presidential Decree No. 1533 — Basis of just compensation is market value prior to the recommendation or decision of the appropriate government office to acquire the property. The Court cited it but found the decrees’ maximum amounts and 1978 valuation cut-off infirm.
• Presidential Decree Nos. 76 and 794 — Cited as fixing just compensation at the market value declared by the owner or determined by the assessor, whichever is lower; the Court noted P.D. Nos. 1669 and 1670 went further by not mentioning owner-declared value.
• Presidential Decree No. 1669 — Declared the Tambunting Estate expropriated, authorized NHA immediate possession and demolition, and fixed just compensation at not more than P17,000,000 payable in five equal installments. Held unconstitutional and void ab initio.
• Presidential Decree No. 1670 — Declared the Sunog-Apog area expropriated, authorized NHA immediate possession and demolition, and fixed just compensation at not more than P8,000,000 payable in five equal installments. Held unconstitutional and void ab initio.

Fernan, Narvasa, Melencio-Herrera, Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Sarmiento and Cortes, JJ., concur. Yap, J., is on leave. Chief Justice Teehankee filed a separate concurring opinion. He concurred in invalidating the decrees for violating due process and the eminent domain provisions. He emphasized that the judgment overturns the majority ruling in J.M. Tuason & Co., Inc. vs. Land Tenure Administration, which had treated the power to designate property for expropriation as well-nigh all-embracing; the Court now rules that singling out properties for expropriation does not foreclose judicial scrutiny into due process, equal protection, and just compensation. The State may not capriciously or arbitrarily single out specific property for condemnation and must show the necessity of the taking for public use.