FILSTREAM INTERNATIONAL INCORPORATED v. CA| January 23, 1998| Francisco, J.

G.R. No. 125218:

FILSTREAM INTERNATIONAL INCORPORATED, petitioner
COURT OF APPEALS, JUDGE FELIPE S. TONGCO and THE CITY OF MANILA, respondents.

G.R. No. 128077.

FILSTREAM INTERNATIONAL INCORPORATED, petitioner
COURT OF APPEALS, ORLANDO MALIT, ANTONIO CAGUIAT, ALICIA CABRERA, ARMANDO LACHICA, JACINTO
CAGUIAT, GLORIA ANTONIO, ELIZALDE NAVARRA, DOLORES FUENTES, SUSANA ROY, ANTONIO IBANEZ,
BENIGNO BASILIO, LUCERIA DEMATULAC, FLORENCIA GOMEZ, LAZARO GOMEZ, JOSE GOMEZ, VENANCIO
MANALOTO, CRISTINO UMALI, DEMETRIA GATUS, PRISCILLA MALONG, DOMINGO AGUILA, RAMON SAN
AGUSTIN, JULIAN FERRER, JR., FRANCISCO GALANG, FLORENTINO MALIWAT, SEVERINA VILLAR, TRINIDAD
NAGUIT, JOSE NAGUIT, FORTUNATO AGUSTIN CABRERA, GAUDENCIO INTAL, DANILO DAVID, ENRIQUE
DAVID, VICENTE DE GUZMAN, POLICARPIO LUMBA, BELEN PALMA, ELEN SOMVILLO, LEONARDO MANICAD,
OPRENG MICLAT, BENITA MATA, GREGORIO LOPEZ, MARCELINA SAPNO, JESUS MERCADO and CALIXTO
GOMEZ, respondents.

SUMMARY: The City of Manila expropriated petitioner’s properties, which were to be sold and distributed to
qualified tenants of the area pursuant to the Land Use Development Program of the City of Manila. A lot of
things happened, but ultimately, the Court held that the City invalidly exercised its power of expropriation,
thereby violating petitioner’s right to due process. This was because the City failed to show compliance with
Secs. 9 and 10 of RA 7279 (Urban Development and Housing Act of 1992). Under these sections, a city, before
it can expropriate private property, must first show two things: (1) that resort to the acquisition of other
kinds of lands listed under Sec. 9 have proved futile, and (2) that the other modes of acquiring land listed
under Sec. 10 have been exhausted.

FACTS:
• Petitioner Filstream International, Inc., is the registered owner of the properties: adjacent parcels of land
situated in Antonio Rivera Street, Tondo II, Manila
• January 7, 1993— petitioner filed an ejectment suit before the MTC of Manila against private
respondents on the grounds of termination of the lease contract and nonpayment of rentals.
• MTC: ordered private respondents to vacate the premises and pay back rentals to petitioner.
• RTC and CA later affirmed. No further action was taken and the decision became final and
executory.
• During the pendency of the ejectment proceedings, private respondents filed a complaint for Annulment
of Deed of Exchange against petitioner Filstream (Civil Case No. 9366059)

• Thereafter (Nov 5, 1993) City of Manila government approved Ordinance No. 78133:
• Authorizing Mayor Alfredo Lim to initiate the acquisition by negotiation, expropriation,
purchase, or other legal means certain parcels of land which formed part of the properties of
petitioner then occupied by private respondents.
• Thereafter, the City of Manila approved Ordinance No. 78554:
• Declaring the expropriation of said parcels of land.
• They were to be sold and distributed to qualified tenants of the area pursuant to the Land Use
Development Program of the City of Manila.

• May 23, 1994— City of Manila filed a complaint for eminent domain (Civil Case No. 9470560) seeking to
expropriate the aforecited parcels of land owned by petitioner Filstream. (This is the subject of GR
125218)

• Meanwhile, owing to the finality of the decision in the ejectment suit (Civil Case No. 140817CV), the MTC
of Manila upon motion of petitioner Filstream, issued a Writ of Execution as well as a Notice to Vacate
the disputed premises.
 • Private respondents filed a Motion to Recall/Quash the Writ of Execution and Notice to Vacate
alleging the existence of a supervening event in that the properties subject of the dispute have
already been ordered condemned in an expropriation proceeding in favor of the City of Manila
for the benefit of the qualified occupants thereof, thus execution shall be stayed.
• For its part, the City of Manila filed a motion for intervention with prayer to stay/quash the
writ of execution on the ground that it is the present possessor of the property subject of
execution.
• MTC of Manila denied private respondents’ motion as it found the allegations therein bereft of merit and
upheld the issuance of the Writ of Execution and Notice to Vacate in petitioner’s favor.
• Issued an order commanding the demolition of the structure erected on the disputed premises.

• To avert the demolition, private respondents filed a Petition for Certiorari and Prohibition with prayer
for the issuance of a temporary restraining order and preliminary injunction (Civil Case No. 9678098).
• May 21, 1996— the RTC of Manila issued an injunction in Civil Case No. 9678098 enjoining the
implementation of the writ of execution until further orders from the court.

• Petitioner Filstream moved for the dismissal of the consolidated cases (Civil Case No. 9678382 and No.
96 78098) for violation of Supreme Court Circular No. 0494 (forum shopping) because the same parties,
causes of action and subject matter involved therein have already been disposed of in the decision in the
ejectment case (Civil Case No. 140817) which has already become final and executory prior to the filing
of these consolidated cases.
• RTC granted Motion to Dismiss

• As a consequence of the dismissal of the consolidated cases, private respondents filed a Petition for
Certiorari and Prohibition with prayer for the issuance of a temporary restraining order and preliminary
injunction before the CA
• CA granted; directed the MTC of Manila to desist from implementing the order of demolition
dated January 23, 1997, unless otherwise directed.

• Petitioner Filstream is now before this Court via a Petition for Certiorari under Rule 65 (G.R. No.
128077), seeking to nullify the Resolutions of the CA which granted private respondents’ prayer for a
TRO and Writ of Preliminary Injunction.

ISSUES:

1. Whether the CA erred in issuing a TRO and preliminary injunction enjoining the execution of the
writ of demolition issued in the ejectment suit – YES.

(Whether the exercise of the City of Manila of its power to expropriate was proper in this case –
NO.)

• The propriety of the issuance of the restraining order and the writ of preliminary injunction is but a
mere incident to the actual controversy which is rooted in the assertion of the conflicting rights of
the parties in this case over the disputed premises.
• Petitioner Filstream’s claim: by virtue of its ownership over the properties and the
existence of a final and executory judgment against private respondents ordering the
latter’s ejectment from the premises (Civil Case No. 140817CV).
• Private respondents’ claim: hinges on an alleged supervening event which has rendered the
enforcement of petitioner’s rights moot, that is, the expropriation proceedings (Civil Case
No. 9470560) undertaken by the City of Manila over the disputed premises for the benefit of
herein private respondents.
• For its part, the City of Manila is merely exercising its power of eminent domain within its
jurisdiction by expropriating petitioner’s properties for public use.
 • There is no dispute as to the existence of a final and executory judgment in favor of petitioner
Filstream ordering the ejectment of private respondents from the properties subject of this dispute.
• Thus, petitioner has every right to assert the execution of this decision as it had already
become final and executory.

• BUT, it must also be conceded that the City of Manila has an undeniable right to exercise its
power of eminent domain within its jurisdiction.
• The right to expropriate private property for public use is expressly granted to it under 1991 Local
Government Code:
SECTION 19. Eminent Domain.—A local government unit may, through its chief
executive and acting pursuant to an ordinance, exercise the power of eminent domain for
public use, or 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: Provided, however, That the power of eminent domain may not be
exercised unless a valid and definite offer has been previously made to the owner, and
such offer was not accepted; Provided, further, That the local government unit may
immediately take possession of the property upon the filing of the expropriation
proceedings and upon making a deposit with the proper court of at least fifteen (15%) of
the fair market value of the property based on the current tax declaration of the property
to be expropriated: Provided, finally, That, the amount to be paid for the expropriated
property shall be determined by the proper court, based on the fair market value at the
time of the taking of the property.”

• More specifically, the City of Manila has the power to expropriate private property in the
pursuit of its urban land reform and housing program as explicitly laid out in the Revised
Charter of the City of Manila (RA 409):
Sec. 3. General powers. – The city may have a common seal and alter the same at
pleasure, and may take, purchase, receive, hold, lease, convey, and dispose of real and
personal property for the general interest of the city, condemn private property for public
use, contract and be contracted with, sue and be sued, and prosecute and defend to final
judgment and execution, and exercise all the powers hereinafter conferred.

Sec. 100. The City of Manila is authorized to acquire private lands in the city and to
subdivide the same into home lots for sale on easy terms to city residents, giving first
priority to the bona fide tenants or occupants of said lands, and second priority to
laborers and lowsalaried employees. For the purpose of this section, the city may raise
the necessary funds by appropriations of general funds, by securing loans or by issuing
bonds, and, if necessary, may acquire the lands through expropriation proceedings in
accordance with law, with the approval of the President…

• The City of Manila’s right to exercise these prerogatives notwithstanding the existence of a final and
executory judgment over the property to be expropriated has been upheld by this Court in the case of
Philippine Columbian Association vs. Panis.
• “That only a few could actually benefit from the expropriation of the property does not
diminish its public use character. It is simply not possible to provide all at once land and
shelter for all who need them… Corollary to the expanded notion of public use,
expropriation is not anymore confined to vast tracts of land and landed estates… It is
therefore of no moment that the land sought to be expropriated in this case is less than half
a hectare only… Through the years, the public use requirement in eminent domain has
evolved into a flexible concept, influenced by changing conditions… Public use now includes
the broader notion of indirect public benefit or advantage, including in particular, urban
land reform and housing.”

• We take judicial notice of the fact that urban land reform has become a paramount task in view of the
acute shortage of decent housing in urban areas particularly in Metro Manila.
 • Nevertheless, local government units are not given an unbridled authority when
exercising their power of eminent domain in pursuit of solutions to these problems.
• The exercise by local government units of the power of eminent domain is not
without limitations. The basic rules still have to be followed:

Art. 3, Sec. 1, 1987 Constitution – No person shall be deprived of life, liberty, or property
without due process of law, nor shall any person be denied the equal protection of the laws.

Art. 3, Section 9, 1987 Constitution – Private property shall not be taken for public use
without just compensation.

• Even the 1991 Local Government Code is very explicit that it must comply with the provisions
of the Constitution and pertinent laws.

• The governing law that deals with the subject of expropriation for purposes of urban land
reform and housing is Republic Act No. 7279 (Urban Development and Housing Act of 1992)
and Sections 9 and 10 of which provide as follows:
Sec. 9. Priorities in the acquisition of Land. – Lands for socialized housing shall be acquired in
the following order: (a) Those owned by the Government or any of its subdivisions,
instrumentalities, or agencies, including government owned or controlled corporations and
their subsidiaries; (b) Alienable lands of the public domain; (c) Unregistered or abandoned
and idle lands; (d) Those within the declared Areas for Priority Development, Zonal
Improvement sites, and Slum Improvement and Resettlement Program sites which have not
yet been acquired; (e) Bagong Lipunan Improvement of Sites and Services or BLISS sites
which have not yet been acquired; and (f) Privately-owned lands…

Sec. 10. Modes of Land Acquisition.—The modes of acquiring lands for purposes of this Act
shall include, among others, community mortgage, land swapping, land assembly or
consolidation, land banking, donation to the Government, joint venture agreement, negotiated
purchase, and expropriation: Provided, however, That expropriation shall be resorted to only
when other modes of acquisition have been exhausted: Provided further, That where
expropriation is resorted to, parcels of land owned by small property owners shall be exempted
for purposes of this Act…

• Very clear from the abovequoted provisions are the limitations with respect to the order of priority
in acquiring private lands and in resorting to expropriation proceedings as a means to acquire the
same.
• Private lands rank last in the order of priority for purposes of socialized
housing.

• In the same vein, expropriation proceedings are to be resorted to only when

the other modes of acquisition have been exhausted. Compliance with these
conditions must be deemed mandatory because these are the only
safeguards in securing the right of owners of private property to due process
when their property is expropriated for public use.

•CASE AT BAR: nothing indicates that respondent City of Manila complied with Sec. 9 and Sec.
10 of R.A. 7279.

• Petitioner Filstream’s properties were expropriated and ordered condemned in favor of the
City of Manila sans any showing that resort to the acquisition of other lands listed under Sec.
9 of RA 7279 have proved futile. Evidently, there was a violation of petitioner Filstream’s
right to due process which must accordingly be rectified.
 •Indeed, it must be emphasized that the State has a paramount interest in exercising its power of
eminent domain for the general good considering that the right of the State to expropriate private
property as long as it is for public use always takes precedence over the interest of private property
owners.
• However we must not lose sight of the fact that the individual rights affected
by the exercise of such right are also entitled to protection, bearing in mind
that the exercise of this superior right cannot override the guarantee of due
process extended by the law to owners of the property to be expropriated.
• In this regard, vigilance over compliance with the due process requirements
is in order.

2. Whether the CA erred in dismissing petitioner’s petition for certiorari for non-compliance with Section
2(a), Rule 6 of the Revised Internal Rules of the Court of Appeals – YES.
• At stake in the appeal filed by petitioner before the CA is the exercise of their property rights
over the disputed premises which have been expropriated and have in fact been ordered
condemned in favor of the City of Manila. In effect, the dismissal of their appeal in the
expropriation proceedings based on the aforementioned grounds is tantamount to a deprivation
of property without due process of law as it would automatically validate the expropriation
proceedings which the petitioner is still disputing.
• Rather than simply dismissing the petition summarily for noncompliance with respondent
court’s internal rules, respondent CA should have instead entertained petitioner Filstream’s
petition for review on certiorari, and ordered petitioner to submit the corresponding pleadings
which it deems relevant and replace those which are unreadable.
• A strict adherence to the technical and procedural rules in this case would defeat rather than
meet the ends of justice as it would result in the violation of the substantial rights of petitioner.
Where substantial rights are affected, as in this case, the stringent application of procedural
rules may be relaxed if only to meet the ends of substantial justice.

DISPOSITIVE:
WHEREFORE, the petitions are hereby GRANTED. In G.R. 125218, the resolutions of the Court of
Appeals in CA- G.R. SP No. 36904 dated March 18, 1996 and May 20, 1996 are hereby REVERSED
and SET ASIDE. In G.R. No. 128077, the resolution of the Court of Appeals in CA-G.R. SP No. 43101
dated January 28, 1997 and February 18, 1997 are REVERSED and SET ASIDE.