GR 103882; (November, 1998) (Digest)
G.R. No. 103882 & G.R. No. 105276, November 25, 1998
Republic of the Philippines vs. Court of Appeals and Republic Real Estate Corporation; Pasay City and Republic Real Estate Corporation vs. Court of Appeals and Republic of the Philippines.
FACTS
The Republic of the Philippines filed a complaint in 1961 against Pasay City and Republic Real Estate Corporation (RREC) to nullify a reclamation agreement. The agreement was based on Pasay City Ordinance Nos. 121 and 158, enacted under the authority of Republic Act No. 1899 , which allowed municipalities to reclaim foreshore lands. The Republic contended the agreement was void as the subject foreshore lands were outside the commerce of man, its terms violated R.A. 1899, and it was executed without public bidding. The trial court issued a preliminary injunction halting reclamation. The Court of Appeals later affirmed the trial court’s dismissal of the complaint, citing Section 3 of R.A. 5187, which mandated that existing reclamation contracts be respected.
ISSUE
The core issue was whether the reclamation agreement between Pasay City and RREC, authorized by city ordinances under R.A. 1899, was valid and effective.
RULING
The Supreme Court granted the Republic’s petition and nullified the agreement. The Court ruled that the power granted to municipalities under R.A. 1899 was limited to reclaiming foreshore lands for the purpose of establishing “docking and harbor facilities.” The law did not grant a general power to reclaim for commercial or residential purposes. The Pasay City ordinances and the subsequent contract with RREC, which aimed for broad commercial reclamation, exceeded this statutory authority and were therefore ultra vires and void. The Court rejected the defense based on R.A. 5187, finding its “saving clause” for existing contracts inapplicable as the underlying agreement was void from its inception. However, applying the principle of solutio indebiti and to prevent unjust enrichment, the Republic was ordered to reimburse Pasay City and RREC for the necessary and useful expenses they incurred for the actual reclamation work done, amounting to P10,926,071.29 plus interest. The preliminary injunction was made permanent.