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MACTAN-CEBU INTERNATIONAL AIRPORT AUTHORITY v. MILAGROS URGELLO

FACTS:

Lot No. 913-E of the Banilad Estate in Cebu City, owned by respondent Milagros Urgello, was subject to expropriation by the Civil Aeronautics Administration (CAA) in the 1950s. A compromise agreement was reached, stating that if the land is no longer used as an airport, ownership would be reverted to Urgello or her heirs upon reimbursement. Lahug Airport ceased operations, and the Mactan Airport commenced operations in 1966. Urgello filed a complaint for injunction in 1983 against the Bureau of Air Transportation (BAT) and a construction company. In 1985, Urgello requested reconveyance of Lot No. 913-E-3, but BAT failed to do so. Urgello filed a complaint for reconveyance in 1985, which was granted by the RTC in 1989. A compromise agreement was then approved in 1991, where Urgello agreed to sell Lot No. 913-E-4 to the DPWH.

DPWH and Urgello entered into a compromise agreement in 1990, which was approved by the court. However, DPWH failed to comply with its obligations under the agreement, prompting Urgello to file a motion for the issuance of a writ of execution. DPWH still did not comply, leading Urgello to file a complaint for reconveyance and damages against DPWH and the ATO. Urgello sought the immediate reconveyance of Lot No. 913-E-4, the demolition of a concrete wall built by DPWH, rent for the occupied lots, just compensation, and damages. DPWH questioned Urgello's failure to exhaust administrative remedies and jurisdiction of the trial court. ATO claimed it should not be held liable as it was not privy to the compromise agreement.

The plaintiff, Urgello, filed a complaint to enforce the compromise agreement against several defendants, including the ATO and the MCIAA. ATO argued that MCIAA has assumed ownership and administration of the airport works, and therefore, the enforcement of the compromise agreement is no longer possible for the ATO. Urgello sought to implead MCIAA as a party defendant and claimed rentals if the reconveyance of her properties is denied. MCIAA argued that it is a separate entity and should not be held liable for the obligations of the ATO.

ISSUES:

  1. Whether MCIAA should be held solidarily liable for the reconveyance of Lot No. 913-E-3.

  2. Whether MCIAA assumed the liabilities and obligations of ATO under RA 6958.

  3. Whether MCIAA is obligated to reconvey Lot No. 913-E-2, Lot No. 913-E-3, and Lot No. 913-E-4 to the respondent.

  4. Whether MCIAA is obligated to pay rentals for the use of the lots.

  5. Whether MCIAA is obligated to demolish the fence traversing Lot No. 913-E-2.

  6. Whether formal transfer and acceptance of assets mentioned in Section 15 of Republic Act No. 6958 were necessary for the Mactan-Cebu International Airport Authority (MCIAA) to assume the obligations arising therefrom.

  7. Whether MCIAA is liable to reconvey Lot No. 913-E-3 and pay rentals in arrears.

  8. Whether MCIAA is solidarily liable with the Department of Public Works and Highways (DPWH) and Air Transportation Office (ATO) for the return of Lot Nos. 913-E-2 and 913-E-4 and the payment of rentals thereon.

  9. Whether attorney's fees should be awarded to the respondent.

RULING:

  1. MCIAA should be held solidarily liable for the reconveyance of Lot No. 913-E-3. The trial court held that the reconveyance of the lot is a solidary obligation of all three defendants (DPWH, MCIAA, and ATO). DPWH is obliged to reconvey because it is currently in possession and occupation of the property. MCIAA is obligated to reconvey because it is the legal custodian of the lot by virtue of RA 6958 which transferred all assets of the Lahug Airport to MCIAA. Although there was no formal turnover of facilities to MCIAA yet, the court interpreted RA 6958 as making MCIAA the present administrator-custodian of all assets and properties of the Lahug Airport, including Lot No. 913-E-3.

  2. MCIAA assumed the liabilities and obligations of ATO under RA 6958. The court relied on Section 17 of RA 6958 which provides that upon the transfer to and acceptance by MCIAA of the assets and properties, it also assumes the debts, liabilities, and obligations of government agencies or entities concerned. Therefore, MCIAA has the obligation to reconvey Lot No. 913-E-3 to its owner.

  3. MCIAA is obligated to reconvey Lot No. 913-E-2, Lot No. 913-E-3, and Lot No. 913-E-4 to the respondent. Defendant ATO is also obligated to effect the reconveyance of the property to the respondent.

  4. MCIAA is obliged to pay rentals for the use of the lots.

  5. MCIAA is obliged to demolish the fence traversing Lot No. 913-E-2.

  6. The Court held that formal transfer and acceptance of assets were not necessary for MCIAA to assume the obligations arising from Section 15 of Republic Act No. 6958. The "economical, efficient and effective control, management and supervision" of the Mactan International Airport and the Lahug Airport could be impeded if such transfer and acceptance were required. Therefore, MCIAA is bound to reconvey Lot No. 913-E-3 and is solidarily liable with its co-petitioners to pay rentals in arrears over the said lot.

  7. MCIAA is solidarily liable with DPWH and ATO to reconvey Lot No. 913-E-3 and pay rentals in arrears.

  8. MCIAA is not solidarily liable with DPWH and ATO for the return of Lot Nos. 913-E-2 and 913-E-4 and the payment of rentals thereon. These obligations arose from the illegal physical possession of the said lots by DPWH and ATO up to the present. The transfer under Republic Act No. 6958 only covers properties owned or administered by ATO, not those physically possessed by ATO.

  9. Only DPWH and ATO should be held liable for the payment of attorney's fees, as their acts and omissions compelled the respondent to litigate.

PRINCIPLES:

  • Solidary liability: The court held that the reconveyance of Lot No. 913-E-3 is a solidary obligation of all three defendants (DPWH, MCIAA, and ATO).

  • Legal custodian: MCIAA was considered the legal custodian of Lot No. 913-E-3 by virtue of RA 6958 creating MCIAA and transferring to it all the assets of the Lahug Airport.

  • Transfer of liabilities and debts: MCIAA assumed the liabilities and obligations of ATO under RA 6958.

  • Private property shall not be taken for public use without just compensation, in accordance with Section 9, Article III of the Constitution.

  • Deprivation of property without due process of law violates the constitutional mandate.

  • The government is not exempt from the law and must compensate for the use of private property.

  • Liability for unauthorized use, occupation, and possession of property rests on the party in possession and occupation of the property.

  • The obligation of MCIAA to manage and administer properties of ATO is based on R.A. 6958.

  • The government is considered a builder in bad faith if it illegally constructs a fence on the property.

  • The law must not be read in truncated parts; its provisions must be read in relation to the whole law.

  • Section 17 of Republic Act No. 6958 must be read vis a viz Section 15 and other provisions of the said law.

  • Section 15 of Republic Act No. 6958 transfers all existing public airport facilities and properties to MCIAA.

  • The phrase "upon transfer to and acceptance by" in Section 15 does not require a formal turnover and acceptance by MCIAA.

  • The "economical, efficient and effective control, management and supervision" of airports may not require formal transfer and acceptance of assets for the assumption of obligations (from Republic Act No. 6958).

  • Liability for reconveyance and payment of rentals depends on legal ownership/administration and not physical possession of property.

  • Only the parties responsible for the acts and omissions that compelled litigation should be held liable for attorney's fees.