Expropriation Due Process: What Property Owners Must Prove

The power of eminent domain allows the government to take private property for public use, but that power is not absolute. A recent Supreme Court decision reminds local governments that they must strictly comply with the requirements of the law—and that property owners have a right to a full hearing before their defenses are brushed aside.

In Jose Co Lee v. City of Olongapo (G.R. No. 246201, December 7, 2022), the Court reversed the lower courts' rulings and remanded the case for further proceedings, finding that the City of Olongapo failed to prove a valid and definite offer to buy the property and that the trial court violated the owner's right to due process.

The Facts of the Case

Jose Co Lee owned a parcel of land in East Tapinac, Olongapo City. In 2012, the city passed Ordinance No. 12, reclassifying certain properties for a mixed-use development and the construction of a new civic center complex. After several amendments, the city sent Lee a notice of negotiated sale or expropriation, offering PHP 13,824,000.00 for his property. Lee rejected the offer.

The Sangguniang Panlungsod then passed Ordinance No. 15, authorizing then-Mayor Rolen Paulino to expropriate parcels of land in East Tapinac. When the parties failed to reach an agreement, the city filed a Complaint for Expropriation and deposited PHP 239,760.00 with the court—15 percent of the property's fair market value based on its current tax declaration.

Lee filed his Answer, raising several affirmative defenses. He claimed the expropriation was not for public use but for the benefit of SM Prime Holdings, Inc., and that the complaint was defective because no separate board resolution authorized the mayor to file it. He also argued that under The Right-of-Way Act, the city should have deposited 100 percent of the property's value based on BIR zonal valuation.

During the hearing, Lee's counsel called him to the witness stand to identify his Judicial Affidavit. The city's counsel objected, and the trial court eventually issued an Order dismissing Lee's affirmative defenses without conducting a full trial. The Court of Appeals affirmed.

The Issue

The central question before the Supreme Court: Did the Court of Appeals err in affirming the trial court's order holding that the City of Olongapo had the lawful right to expropriate and take possession of Lee's property?

The Ruling

The Supreme Court granted the petition, reversing the Court of Appeals. While the Court affirmed that Mayor Paulino had authority to file the expropriation complaint, it held that the city failed to comply with the requirements for a valid expropriation—and that Lee's right to due process was violated.

Requisites for a Valid Expropriation

Citing Municipality of Parañaque v. V.M. Realty Corp., the Court enumerated the essential requisites before a local government unit can exercise eminent domain:

1. An ordinance is enacted by the local legislative council authorizing the local chief executive to exercise the power of eminent domain over a particular private property.
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.
4. A valid and definite offer has been previously made to the owner, but the offer was not accepted.

The Court found the first requisite present. Ordinance No. 15 expressly authorized Mayor Paulino to institute expropriation proceedings. The Court reasoned that it would be incongruous to allow the mayor to initiate the proceedings but deny him the authority to sign the verification and certification of nonforum shopping.

The Missing Valid and Definite Offer

However, the Court found that the fourth requisite—a valid and definite offer—was lacking. Under Article 35 of the Implementing Rules and Regulations of the Local Government Code, the offer to buy must be in writing, specify the property, the reasons for acquisition, and the price offered. If the owner is willing to sell but at a higher price, the local chief executive must call the owner to a conference to reach an agreement.

The Court cited City of Manila v. Alegar Corp., which held that when a property owner rejects an offer but hints for a better price, the government should renegotiate by calling the owner to a conference. The government must exhaust all reasonable efforts to obtain by agreement the land it desires.

In this case, there was no evidence that after Lee rejected the offer, the city exerted any effort to renegotiate. The Court found that the city failed to prove it exhausted all reasonable efforts to acquire the property by mutual agreement.

The Right to a Full Hearing

The Court also found that Lee's right to procedural due process was violated. Under Rule 67, Section 3 of the Rules of Court, if a defendant has objections or defenses to the taking of his property, he must state them in his answer. In Robern Development Corp. v. Quitain, the Court held that affirmative defenses requiring the presentation of evidence aliunde must be addressed in a full-blown trial and hearing.

Lee's assertion that the taking was not for public use but for the benefit of SM Prime Holdings required the presentation of evidence. By overruling his affirmative defenses without conducting a trial, the trial court deprived Lee of the opportunity to be heard. The Court emphasized that where there is a violation of basic constitutional rights, the courts are ousted from their jurisdiction.

The Right-of-Way Act vs. the Local Government Code

The Court also clarified the relationship between The Right-of-Way Act and the Local Government Code. The Right-of-Way Act applies only when the purpose of expropriation is for a right-of-way site or national infrastructure project. In such cases, the implementing agency must deposit 100 percent of the land's value based on BIR zonal valuation.

However, when a local government unit expropriates for purposes not considered a national infrastructure project, immediate possession may be permitted upon deposit of at least 15 percent of the fair market value based on the current tax declaration, as provided under Section 19 of the Local Government Code.

Practical Takeaways

• Local governments must genuinely negotiate. A single offer letter is not enough. If the owner rejects the offer, the government must exhaust all reasonable efforts to renegotiate—including calling the owner to a conference—before filing expropriation proceedings.
• Property owners have the right to a full hearing. Affirmative defenses that require presentation of evidence cannot be dismissed summarily. The trial court must conduct a full-blown trial to ventilate these issues.
• An ordinance authorizing the mayor to expropriate is sufficient. A separate board resolution authorizing the mayor to sign the verification and certification of nonforum shopping is not required.
• Know which law applies. The Right-of-Way Act's 100 percent BIR zonal valuation deposit applies only to national infrastructure projects. For local government expropriations, the 15 percent deposit under the Local Government Code applies.
• Violation of due process ousts the court of jurisdiction. A decision rendered in violation of a party's fundamental right to due process is void for lack of jurisdiction.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.