Villanueva vs. Castañeda, Jr.

A public plaza, being property of public dominion and beyond the commerce of man, cannot be the subject of lease or any other contractual undertaking by the municipality to private parties, and the municipal government may validly order the removal of illegal structures thereon pursuant to its police power, which cannot be surrendered or bargained away through contract.

The petitioners are vendors who constructed and occupied stalls on a strip of land measuring 12 by 77 meters along Mercado Street, in the vicinity of the public market of San Fernando, Pampanga, forming what is commonly known as a talipapa. The respondents are the Presiding Judge of the Court of First Instance of Pampanga, Branch III, and the Officer-in-Charge of the Office of the Mayor of San Fernando, Pampanga. The dispute centers on whether the vendors have a right to remain on the area, which the municipal government seeks to clear and restore to its intended use as a public plaza and parking place. The National Planning Commission had reserved the area for a public plaza as early as 1951, a designation reiterated by the municipal council through Resolution No. 29, series of 1964.

On November 7, 1961, the municipal council of San Fernando, Pampanga, adopted Resolution No. 218 authorizing some 24 members of the Fernandino United Merchants and Traders Association to construct permanent stalls and sell along Mercado Street, near the public market, on a strip of land measuring 12 by 77 meters. Three days later, on November 10, 1961, the authorization was protested in Civil Case No. 2040 before the Court of First Instance of Pampanga, Branch 2, which issued a writ of preliminary injunction preventing the defendants from constructing the stalls until final resolution of the controversy.

While that case was pending, the municipal council adopted Resolution No. 29, series of 1964, on January 18, 1964, declaring the subject area as the parking place and public plaza of the municipality, thereby impliedly revoking Resolution No. 218. Four years later, on November 2, 1968, Judge Andres C. Aguilar decided Civil Case No. 2040, holding that the land occupied by the petitioners, being public in nature, was beyond the commerce of man and could not be the subject of private occupancy. The writ of preliminary injunction was made permanent. The decision was apparently not enforced, for the petitioners were not evicted; in fact, by 1971, they and 128 other persons were assigned specific areas or space allotments therein, for which they paid daily fees to the municipal government.

The problem festered for several more years under an uneasy truce. Then, on January 12, 1982, the Association of Concerned Citizens and Consumers of San Fernando filed a petition for the immediate implementation of Resolution No. 29, seeking to restore the subject property to its original and customary use as a public plaza. Acting on this complaint, respondent Vicente A. Macalino, as officer-in-charge of the office of the mayor, directed the municipal attorney to conduct an investigation. The petitioners were notified of the hearing but chose to disregard it. On June 14, 1982, Macalino issued a resolution requiring the municipal treasurer and the municipal engineer to demolish the stalls beginning July 1, 1982. Photographs of the disputed area, which appeared congested and unsightly, confirmed the validity of the complaint.

The petitioners filed a petition for prohibition with the Court of First Instance of Pampanga, docketed as Civil Case No. 6470, on June 26, 1982. The respondent judge denied the petition on July 19, 1982, and the motion for reconsideration on August 5, 1982. The petitioners then elevated the case to the Supreme Court on certiorari, which issued a temporary restraining order on August 9, 1982. The petitioners claimed a right to remain on the disputed area by virtue of alleged lease contracts with the municipal government, first in 1961 for the original occupants, and later through space allocations made in 1971 for which they paid daily fees. The municipal government denied making such agreements.

• Lease Contracts: Petitioners argued that the disputed area was under lease to them by virtue of contracts entered into with the municipal government, first in 1961 for the original occupants, and later in 1971 through space allotments for which they paid daily fees.
• Right to Remain: Petitioners maintained that they had a right to remain in and conduct business in the area by virtue of the previous authorization granted to them by the municipal government.
• Lack of Authority: Petitioners contended that respondent Macalino acted without authority or took the law into his own hands in issuing the demolition order.

• Denial of Lease: Respondent countered that the municipal government did not make any lease agreements with the petitioners.
• Day-to-Day Period: Respondent argued that, even assuming the leases were valid, the fees were collected daily, indicating that the period of the leases was from day to day, and thus the leases could be terminated at will on any day.
• Valid Exercise of Authority: Respondent maintained that, as officer-in-charge of the office of the mayor, Macalino had the duty to clear the area and restore it to its intended use as a parking place and public plaza, conformably to the court decision in Civil Case No. 2040 and the municipal council's Resolution No. 29.

• Public Nature of the Area: Whether the disputed area is a public plaza and property of public dominion beyond the commerce of man.
• Validity of Lease Contracts: Whether the alleged lease contracts between the petitioners and the municipal government over the public plaza are valid.
• Authority to Demolish: Whether respondent Macalino acted with authority and not whimsically in ordering the demolition of the stalls.
• Grave Abuse of Discretion: Whether the respondent judge committed grave abuse of discretion in denying the petition for prohibition.

• Public Nature of the Area: Yes. The area is a public plaza as found by the trial court in Civil Case No. 2040, a finding that was not appealed or reversed, and as declared by the municipal council through Resolution No. 29, series of 1964.
• Validity of Lease Contracts: No. A public plaza is beyond the commerce of man and cannot be the subject of lease or any other contractual undertaking; any such contract is null and void.
• Authority to Demolish: Yes. Respondent Macalino acted within his authority as officer-in-charge of the mayor's office, enforcing a valid court decision and municipal resolution, and only after conducting an investigation as required by due process.
• Grave Abuse of Discretion: No. The respondent judge acted correctly in sustaining the right and responsibility of the mayor to evict the petitioners and clear the area of illegally constructed structures.

• Public Nature of the Area: The trial court in Civil Case No. 2040 found the area to be a public plaza after considering the testimony of former San Fernando Mayor Rodolfo Hizon that the National Planning Commission had reserved the area for a public plaza as early as 1951. This intention was reiterated in 1964 through Resolution No. 29. The decision in Civil Case No. 2040 was not appealed or reversed, and the respondent judge in the present case used it as a basis for his own decision. The finding that the area is a public plaza is thus supported by both judicial and legislative authority.

• Validity of Lease Contracts: A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other contractual undertaking. This principle was settled as early as 1915 in Municipality of Cavite vs. Rojas, where the Court declared null and void the lease of a public plaza to a private person. The old Civil Code, Article 344, defines property for public use as including provincial and town roads, squares, streets, fountains, public waters, promenades, and public works. Article 1271 of the old Civil Code provides that everything outside the commerce of man may not be the object of a contract, and plazas and streets are outside this commerce. The new Civil Code, Article 1347, echoes this rule. Muyot vs. de la Fuente and Espiritu vs. Municipal Council of Pozorrubio applied the same doctrine, holding that town plazas are properties of public dominion, outside the commerce of man, and cannot be disposed of or leased by the municipality to private parties. Applying this doctrine, the petitioners had no right to occupy the disputed premises and cannot insist on remaining there on the strength of their alleged lease contracts.

• Authority to Demolish: Respondent Macalino was seeking to enforce the decision in Civil Case No. 2040 and Resolution No. 29, series of 1964, when he ordered the demolition of the stalls. As officer-in-charge of the office of the mayor, he had the duty to clear the area and restore it to its intended use. He did not act without authority or whimsically; he directed the demolition only after the municipal attorney conducted an investigation into the complaint filed by the Association of Concerned Citizens and Consumers of San Fernando. The petitioners were notified of the hearing but chose to disregard it. Photographs of the area showed it was congested and needed clearing. Even without the investigation, the respondent mayor was justified in ordering the area cleared on the strength of its status as a public plaza as declared by judicial and legislative authorities. The investigation was conducted in deference to due process requirements.

• Grave Abuse of Discretion: The respondent judge did not commit grave abuse of discretion in denying the petition for prohibition. He acted correctly in sustaining the right and responsibility of the mayor to evict the petitioners and clear the area of illegally constructed structures. The problems caused by the petitioners' occupation — fire hazards, obstruction of access to the public market, health and sanitation issues, traffic obstruction, and deprivation of the public's use of the plaza — are covered by the police power delegated to the municipality under the general welfare clause (Section 2238, Revised Administrative Code). Even assuming a valid lease, Resolution No. 29 could have effectively terminated the agreement, because police power cannot be surrendered or bargained away through a contract. Every contract affecting the public interest contains an implied reservation of police power, which can be activated at any time to change or abrogate the contract for the promotion of the general welfare. Such an act does not violate the non-impairment clause, which is subject to and limited by the paramount police power.

• Property of Public Dominion is Beyond the Commerce of Man — Properties for public use, such as plazas, streets, and promenades, are outside the commerce of man and cannot be the subject of lease, sale, or any other contractual undertaking by the municipality to private parties. Any contract purporting to lease or dispose of such property is null and void ab initio. The Court applied this doctrine to hold that the petitioners' alleged lease contracts over the public plaza were void and conferred no right to remain.

• Police Power Cannot Be Surrendered or Bargained Away Through Contract — Every contract affecting the public interest contains an implied reservation of police power as a postulate of the existing legal order. This power can be activated at any time to change the provisions of a contract or even abrogate it entirely for the promotion or protection of the general welfare. The non-impairment clause is subject to and limited by the paramount police power. The Court applied this principle to hold that even assuming a valid lease existed, the municipal council's Resolution No. 29 could have effectively terminated it.

• General Welfare Clause — Under Section 2238 of the Revised Administrative Code, the municipal council is authorized to enact ordinances and make regulations necessary to provide for the health, safety, prosperity, morals, peace, good order, comfort, and convenience of the municipality and its inhabitants. The Court held that this authority was validly exercised through the adoption of Resolution No. 29, series of 1964, to address the problems caused by the petitioners' occupation of the public plaza.

• "A public plaza is beyond the commerce of man and so cannot be the subject of lease or any other contractual undertaking. This is elementary." — This passage states the ratio decidendi of the case, articulating the fundamental principle that property of public dominion cannot be the object of private contractual arrangements.

• "Even assuming a valid lease of the property in dispute, the resolution could have effectively terminated the agreement for it is settled that the police power cannot be surrendered or bargained away through the medium of a contract." — This passage establishes the supremacy of police power over contractual obligations, a doctrine frequently cited in subsequent jurisprudence on the non-impairment clause.

• "In fact, every contract affecting the public interest suffers a congenital infirmity in that it contains an implied reservation of the police power as a postulate of the existing legal order." — This formulation of the implied reservation doctrine is commonly cited in Philippine jurisprudence on the relationship between police power and contractual obligations.

• Municipality of Cavite vs. Rojas, 30 Phil. 602 (1915) — Controlling precedent establishing that a public plaza is beyond the commerce of man and cannot be leased by a municipality to a private person. The Court followed this doctrine directly, quoting extensively from Justice Torres's opinion.

• Muyot vs. de la Fuente, G.R. No. L-65348 — Followed precedent holding that the City of Manila could not lease a portion of a public sidewalk on Plaza Sta. Cruz, as it was beyond the commerce of man. The Court applied the same reasoning to the present case.

• Espiritu vs. Municipal Council of Pozorrubio, 102 Phil. 869 (1958) — Directly in point precedent declaring that town plazas are properties of public dominion, outside the commerce of man, and cannot be disposed of or leased by the municipality to private parties. The Court found this case "exactly in point."

• Ortigas & Co. vs. Feati Bank, 94 SCRA 533 — Cited for the proposition that the non-impairment clause is subject to and limited by the paramount police power.

• Article 344, Old Civil Code — Defines property for public use in provinces and towns as comprising provincial and town roads, squares, streets, fountains, public waters, promenades, and public works of general service. Applied to classify the disputed area as property for public use.

• Article 1271, Old Civil Code — Provides that everything which is not outside the commerce of man may be the object of a contract; plazas and streets are outside this commerce. Applied to nullify the alleged lease contracts.

• Article 1347, New Civil Code — Echoes the rule that things outside the commerce of man cannot be the object of a contract. Applied to confirm the nullity of any lease over the public plaza.

• Section 2238, Revised Administrative Code (General Welfare Clause) — Authorizes the municipal council to enact ordinances and regulations necessary to provide for the health, safety, prosperity, morals, peace, good order, comfort, and convenience of the municipality and its inhabitants. Applied to uphold the validity of Resolution No. 29 and the demolition order as a valid exercise of police power.

Teehankee, C.J., Narvasa, and Paras, JJ., concurred. No separate concurring opinions were noted.