Case Digest: Chavez v. National Housing Authority

Posted: August 4, 2010 in Case Digests
Tags: , , , , , , ,

G.R. No. 164527                                                15 August 2007

Ponente: VELASCO, JR., J.


On August 5, 2004, former Solicitor General Francisco Chavez, filed an instant petition raising constitutional issues on the JVA entered by National Housing Authority and R-II Builders, Inc.

On March 1, 1988, then-President Cory Aquino issued Memorandum order No. (MO) 161 approving and directing implementation of the Comprehensive and Integrated Metropolitan Manila Waste Management Plan.  During this time, Smokey Mountain, a wasteland in Tondo, Manila, are being made residence of many Filipinos living in a subhuman state.

As presented in MO 161, NHA prepared feasibility studies to turn the dumpsite into low-cost housing project, thus, Smokey Mountain Development and Reclamation Project (SMDRP), came into place.  RA 6957 (Build-Operate-Transfer Law) was passed on July 1990 declaring the importance of private sectors as contractors in government projects.  Thereafter, Aquino proclaimed MO 415 applying RA 6957 to SMDRP, among others.  The same MO also established EXECOM and TECHCOM in the execution and evaluation of the plan, respectively, to be assisted by the Public Estates Authority (PEA).

Notices of public bidding to become NHA’s venture partner for SMDRP were published in newspapers in 1992, from which R-II Builders, Inc. (RBI) won the bidding process.  Then-President Ramos authorized NHA to enter into a Joint Venture Agreement with RBI.

Under the JVA, the project involves the clearing of Smokey Mountain for eventual development into a low cost housing complex and industrial/commercial site.  RBI is expected to fully finance the development of Smokey Mountain and reclaim 40 hectares of the land at the Manila Bay Area.  The latter together with the commercial area to be built on Smokey Mountain will be owned by RBI as enabling components.  If the project is revoked or terminated by the Government through no fault of RBI or by mutual agreement, the Government shall compensate RBI for its actual expenses incurred in the Project plus a reasonable rate of return not exceeding that stated in the feasibility study and in the contract as of the date of such revocation, cancellation, or termination on a schedule to be agreed upon by both parties.

To summarize, the SMDRP shall consist of Phase I and Phase II.  Phase I of the project involves clearing, levelling-off the dumpsite, and construction of temporary housing units for the current residents on the cleared and levelled site.  Phase II involves the construction of a fenced incineration area for the on-site disposal of the garbage at the dumpsite.

Due to the recommendations done by the DENR after evaluations done, the JVA was amended and restated (now ARJVA) to accommodate the design changes and additional work to be done to successfully implement the project.  The original 3,500 units of temporary housing were decreased to 2,992.  The reclaimed land as enabling component was increased from 40 hectares to 79 hectares, which was supported by the issuance of Proclamation No. 465 by President Ramos.  The revision also provided for the 119-hectare land as an enabling component for Phase II of the project.

Subsequently, the Clean Air Act was passed by the legislature which made the establishment of an incinerator illegal, making the off-site dumpsite at Smokey Mountain necessary.   On August 1, 1998, the project was suspended, to be later reconstituted by President Estrada in MO No. 33.

On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement whereby both parties agreed to terminate the JVA and subsequent agreements.  During this time, NHA reported that 34 temporary housing structures and 21 permanent housing structures had been turned over by RBI. 


  1. Whether respondents NHA and RBI have been granted the power and authority to reclaim lands of the public domain as this power is vested exclusively in PEA as claimed by petitioner
  2. Whether respondents NHA and RBI were given the power and authority by DENR to reclaim foreshore and submerged lands
  3. Whether respondent RBI can acquire reclaimed foreshore and submerged lands considered as alienable and outside the commerce of man
  4. Whether respondent RBI can acquire reclaimed lands when there was no declaration that said lands are no longer needed for public use
  5. Whether there is a law authorizing sale of reclaimed lands
  6. Whether the transfer of reclaimed lands to RBI was done by public bidding
  7. Whether RBI, being a private corporation, is barred by the Constitution to acquire lands of public domain
  8. Whether respondents can be compelled to disclose all information related to the SMDRP
  9. Whether the operative fact doctrine applies to the instant position


  1. Executive Order 525 reads that the PEA shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government.  This does not mean that it shall be responsible for all.  The requisites for a valid and legal reclamation project are approval by the President (which were provided for by MOs), favourable recommendation of PEA (which were seen as a part of its recommendations to the EXECOM), and undertaken either by PEA or entity under contract of PEA or by the National Government Agency (NHA is a government agency whose authority to reclaim lands under consultation with PEA is derived under PD 727 and RA 7279).
  2. Notwithstanding the need for DENR permission, the DENR is deemed to have granted the authority to reclaim in the Smokey Mountain Project for the DENR is one of the members of the EXECOM which provides reviews for the project.  ECCs and Special Patent Orders were given by the DENR which are exercises of its power of supervision over the project.  Furthermore, it was the President via the abovementioned MOs that originally authorized the reclamation.  It must be noted that the reclamation of lands of public domain is reposed first in the Philippine President.
  3. The reclaimed lands were classified alienable and disposable via MO 415 issued by President Aquino and Proclamation Nos. 39 and 465 by President Ramos.
  4. Despite not having an explicit declaration, the lands have been deemed to be no longer needed for public use as stated in Proclamation No. 39 that these are to be “disposed to qualified beneficiaries.”  Furthermore, these lands have already been necessarily reclassified as alienable and disposable lands under the BOT law.
  5. Letter I of Sec. 6 of PD 757 clearly states that the NHA can acquire property rights and interests and encumber or otherwise dispose of them as it may deem appropriate.
  6. There is no doubt that respondent NHA conducted a public bidding of the right to become its joint venture partner in the Smokey Mountain Project.  It was noted that notices were published in national newspapers.  The bidding proper was done by the Bids and Awards Committee on May 18, 1992.
  7. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid “a portion as percentage of the reclaimed land” subject to the constitutional requirement that only Filipino citizens or corporation with at least 60% Filipino equity can acquire the same.  In addition, when the lands were transferred to the NHA, these were considered Patrimonial lands of the state, by which it has the power to sell the same to any qualified person.
  8. This relief must be granted.  It is the right of the Filipino people to information on matters of public concerned as stated in Article II, Sec. 28, and Article III, Sec. 7 of the 1987 Constitution.
  9. When the petitioner filed the case, the JVA had already been terminated by virtue of MOA between RBI and NHA.  The properties and rights in question after the passage of around 10 years from the start of the project’s implementation cannot be disturbed or questioned.  The petitioner, being the Solicitor General at the time SMDRP was formulated, had ample opportunity to question the said project, but did not do so.  The moment to challenge has passed.
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