Hospicio de San Jose vs. Dar

HOSPICIO DE SAN JOSE De Barili, Petitioner VS DEPARTMENT OF AGRARIAN REFORM,Respondent.
September 23, 2005

FACTS
Petitioner Hospicio de San Jose de Barili (Hospicio) is a charitable
organization created as a body corporate in 1925 by Act No. 3239. The law
was enacted in order to formally accept the offer made by Pedro Cui and
Benigna Cui to establish a home for the care and support, free of charge, of
indigent invalids and incapacitated and helpless persons. The Hospicio was
to be maintained with the revenues of the personal and real properties to be
endowed by the Cuis and other donors.
Section 4 of Act No. 3239 provides that [t]he personal and real property
donated to the [Hospicio] by its founders or by other persons shall not be
sold under any consideration.
On 10 October 1987, the Department of Agrarian Reform Regional Office
(DARRO) Region VII issued an order ordaining that two parcels of land
owned by the Hospicio be placed under Operation Land Transfer in favor of
twenty-two (22) tillers thereof as beneficiaries. Presidential Decree (P.D.) No.
27, a land reform law, was cited as legal basis for the order. The Hospicio
filed a motion for the reconsideration of the order with the Department of
Agrarian Reform (DAR) Secretary, citing the aforementioned Section 4 of Act
No. 3239. It argued that Act No. 3239 is a special law, which could not have
been repealed by P.D. No. 27, a general law, or by the latters general
repealing clause.
The Secretary of DAR rejected the motion. The Court of Appeals affirmed
the decision of the DAR Secretary that Section 4 of Article 3439 was
expressly repealed by PD 27 and RA 6657
Unsatisfied with the Court of Appeals Decision, the Hospicio lodged the
present Petition for Review. The Hospicio alleges that P.D. No. 27, the
CARL, and Executive Order No. 407[7] all violate Section 10, Article III of the
Constitution, which provides that no law impairing the obligation of contracts
shall be passed. More sedately, the Hospicio also argues that Act No. 3239
was not repealed either by P.D. No. 27 or Rep. Act No. 6657 and that the
forced disposition of the Hospicios landholdings would incapacitate the
discharge of its charitable functions, which equally promote social justice
and the upliftment of the lives of the less fortunate.
On the other hand, the OSG, representing respondent DAR, bluntly replies
that Act No. 3239 was repealed by P.D. No. 27 and Rep. Act No. 6657,
which do not exempt lands owned by eleemosynary or charitable institutions
from the coverage of those agrarian reform laws.
ISSUE
IS the land transfer under the
PD 27 and CARL can be
considered as conventional
Sale under Civil Laws?
WON the sale prohibited

under Section 4 of Act No.
3239 includes even a
forced sale.
WON P.D. No. 27 and the

CARL, both enacted to
implement the urgently
needed policy of agrarian
reform, violate the nonimpairment of contracts
clause under the Bill of
Rights.
RULING
No. It is a Forced Sale.
1. The obligation arises by compulsion of law Section 4 of Act No. 3239 prohibits the sale under any consideration of the lands donated to the
Hospicio. But the land transfers mandated under P.D. No. 27 cannot be considered a conventional sale under our civil laws.Generally, sale arises out of
a contractual obligation. Thus, it must meet the first essential requisite of every contract that is the presence of consent.[13] Consent implies an act of
volition in entering into the agreement. The absence or vitiation of consent renders the sale either void or voidable.In this case, the deprivation of the
Hospicios property did not arise as a consequence of the Hospicios consent to the transfer. There was no meeting of minds between the Hospicio, on
one hand, and the DAR or the tenants, on the other, on the properties and the cause which are to constitute the contract that is to serve ultimately as
the basis for the transfer of ownership of the subject lands. Instead, the obligation to transfer arises by compulsion of law, particularly P.D. No. 27.
No. It contemplates a conventional sale. Therefore, it cannot be exempted from PD 27 or CARP where the sale involved is forced sale. The prohibition
does not apply.
1. The word sale pertains to its concept in civil law with the consent being present The contemporaneous construction of Section 4 indicates that the
prohibition intended by the crafters of the law pertained only to conventional sales, and not forced sales. The law was promulgated in 1925, or when
the Spanish Civil Code of 1889 was in effect. The provisions in the Civil Code referring to forced sales were not derived from the Spanish Civil Code.
On the other hand, the consensual nature of the contract of sale, and of contracts in general, is recognized under the Spanish Civil Code. Under Article
1261 of the Spanish Civil Code, there is no contract unless the consent of the contracting parties exists.Evidently, the word sale, as contemplated by
the framers of the law in 1925, pertains to its concept in civil law, with the requisite of consent being present. It cannot refer to sales or dispositions that
arise by operation of law, such as through judicial execution, or, as in this case, expropriation.Thus, we can hardly characterize the acquisition of the
subject properties from the Hospicio for the benefit of the tenants as a sale, within the contemplation of Section 4 of Act No. 3239. The transfer arises
from compulsion of law, and not the desire of any parties. Even if the Hospicio had voluntarily offered to surrender its properties to agrarian reform, the
resulting transaction would not be considered as a conventional sale, since the obligation is created not out of the mandate of the parties, but the will of
the law.(Note: The court refused to rule that Section 4 of Act 3239 is repealed. Instead, it ruled on non-applicability of the prohibition in s.4, Act 3239.)
No.
We have held that the States exercise of police powers may prevail over obligations imposed by private contracts. Especially in point is Kabiling v.
NHA,[33] wherein a law authorizing the expropriation of properties in favor of qualified squatter families was challenged on the basis of the nonimpairment clause. The Court held:
The stated objective of the decree, namely, to resolve the land tenure problem in the Agno-Leveriza area to allow the implementation of the
comprehensive development plans for this depressed community, provides the justification for the exercise of the police power of the State. The police
power of the State has been described as "the most essential, insistent and illimitable of powers." It is a power inherent in the State, plenary, "suitably
vague and far from precisely defined, rooted in the conception that man in organizing the state and imposing upon the government limitations to
safeguard constitutional rights did not intend thereby to enable individual citizens or group of citizens to obstruct unreasonably the enactment of such
salutary measure to ensure communal peace, safety, good order and welfare.
The objection raised by petitioners that P.D. No. 1808 impairs the obligations of contract is without merit. The constitutional guaranty of non-impairment
of obligations of contract is limited by and subject to the exercise of the police power of the State in the interest of public health, safety, morals and
general welfare.[34]

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HOSPICIO DE SAN JOSE De Barili, Petitioner VS DEPARTMENT OF AGRARIAN REFORM,Respondent.

September 23, 2005

WON the sale prohibited

WON P.D. No. 27 and the

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