Wednesday, November 18, 2009

Police power vs. eminent domain

In the recent case of THE OFFICE OF THE SOLICITOR GENERAL vs. AYALA LAND INCORPORATED, ROBINSON’S LAND CORPORATION, SHANGRI-LA PLAZA CORPORATION and SM PRIME HOLDINGS, INC., G.R. No. 177056, September 18, 2009, G.R. No. 177056, September 18, 2009, which involved the issue of whether or not private shopping malls could be compelled by law to offer free parking spaces to their customers, the Philippine Supreme Court, inter alia, rejected the assertion of the government that under the doctrine of police power private shopping malls could be so compelled by the state to provide free parking spaces to their customers.

The case distinguishes the natures and legal effects of police power and eminent domain.

By way of review, it will be noted that in Senate Committee Report No. 225 on 2 May 2000, the Senate concluded that the collection of parking fees by shopping malls was contrary to the National Building Code.

While it is true that the Code merely requires malls to provide parking spaces, without specifying whether it is free or not, the Senate Committees believed that the reasonable and logical interpretation of the Code was that the parking spaces were for free.

Article II of R.A. No. 9734 (Consumer Act of the Philippines) provides that “it is the policy of the State to protect the interest of the consumers, promote the general welfare and establish standards of conduct for business and industry.” Obviously, a contrary interpretation (i.e., justifying the collection of parking fees) would be going against the declared policy of R.A. 7394, the Report said.

Section 201 of the National Building Code gives the responsibility for the administration and enforcement of the provisions of the Code, including the imposition of penalties for administrative violations thereof to the Secretary of Public Works, the Report added.

The Senate Committee Report recommended that the Office of the Solicitor General institute the necessary action to enjoin the collection of parking fees as well as to enforce the penal sanction provisions of the National Building Code and that the Office of the Solicitor General should likewise study how refund could be exacted from mall owners who continue to collect parking fees.

The Report recommended that the Department of Trade and Industry pursuant to the provisions of R.A. No. 7394, otherwise known as the Consumer Act of the Philippines should enforce the provisions of the Code relative to parking, that the DTI should formulate the necessary implementing rules and regulations on parking in shopping malls, with prior consultations with the local government units where these are located, and that the DTI, in coordination with the Department of Public Works and Highways (DPWH), should be empowered to regulate and supervise the construction and maintenance of parking establishments. Finally, the Report recommended that Congress should amend and update the National Building Code to expressly prohibit shopping malls from collecting parking fees by at the same time, prohibit them from invoking the waiver of liability.

Suits were filed by the shopping malls under Rule 63 (declaratory relief) seeking to judicially declaring Rule XIX of the Implementing Rules and Regulations of the National Building Code as ultra vires, hence, unconstitutional and void; declaring the malls’ clear legal right to lease parking spaces; declaring the National Building Code of the Philippines Implementing Rules and Regulations as ineffective, not having been published once a week for three (3) consecutive weeks in a newspaper of general circulation, as prescribed by Section 211 of Presidential Decree No. 1096.

A similar suit was filed by the Office of the Solicitor General (OSG) praying that aAfter summary hearing, a temporary restraining order and a writ of preliminary injunction be issued restraining the malls from collecting parking fees from their customers; and after hearing, judgment be rendered declaring that the practice of respondents in charging parking fees is violative of the National Building Code and its Implementing Rules and Regulations and is therefore invalid, and making permanent any injunctive writ issued in the case.

The trial court and the appellate court sided with the private malls.

Let me digest the doctrinal pronouncements of the Supreme Court in the said case.

1. According to Section 803 of the National Building Code:

SECTION 803. Percentage of Site Occupancy

(a) Maximum site occupancy shall be governed by the use, type of construction, and height of the building and the use, area, nature, and location of the site; and subject to the provisions of the local zoning requirements and in accordance with the rules and regulations promulgated by the Secretary.

2. In connection therewith, Rule XIX of the old IRR, provides:


Pursuant to Section 803 of the National Building Code (PD 1096) providing for maximum site occupancy, the following provisions on parking and loading space requirements shall be observed:

1. The parking space ratings listed below are minimum off-street requirements for specific uses/occupancies for buildings/structures:

1.1 The size of an average automobile parking slot shall be computed as 2.4 meters by 5.00 meters for perpendicular or diagonal parking, 2.00 meters by 6.00 meters for parallel parking. A truck or bus parking/loading slot shall be computed at a minimum of 3.60 meters by 12.00 meters. The parking slot shall be drawn to scale and the total number of which shall be indicated on the plans and specified whether or not parking accommodations, are attendant-managed. (See Section 2 for computation of parking requirements).

x x x x

1.7 Neighborhood shopping center – 1 slot/100 sq. m. of shopping floor area

3. The explicit directive of the afore-quoted statutory and regulatory provisions, garnered from a plain reading thereof, is that respondents, as operators/lessors of neighborhood shopping centers, should provide parking and loading spaces, in accordance with the minimum ratio of one slot per 100 square meters of shopping floor area. There is nothing therein pertaining to the collection (or non-collection) of parking fees by respondents. In fact, the term “parking fees” cannot even be found at all in the entire National Building Code and its IRR.

4. Statutory construction has it that if a statute is clear and unequivocal, it must be given its literal meaning and applied without any attempt at interpretation. Since Section 803 of the National Building Code and Rule XIX of its IRR do not mention parking fees, then simply, said provisions do not regulate the collection of the same. The RTC and the Court of Appeals correctly applied Article 1158 of the New Civil Code, which states:

Art. 1158. Obligations derived from law are not presumed. Only those expressly determined in this Code or in special laws are demandable, and shall be regulated by the precepts of the law which establishes them; and as to what has not been foreseen, by the provisions of this Book. (Emphasis ours.)

Hence, in order to bring the matter of parking fees within the ambit of the National Building Code and its IRR, the OSG had to resort to specious and feeble argumentation, in which the Court cannot concur.

5. Consequently, the OSG cannot claim that in addition to fixing the minimum requirements for parking spaces for buildings, Rule XIX of the IRR also mandates that such parking spaces be provided by building owners free of charge. If Rule XIX is not covered by the enabling law, then it cannot be added to or included in the implementing rules. The rule-making power of administrative agencies must be confined to details for regulating the mode or proceedings to carry into effect the law as it has been enacted, and it cannot be extended to amend or expand the statutory requirements or to embrace matters not covered by the statute. Administrative regulations must always be in harmony with the provisions of the law because any resulting discrepancy between the two will always be resolved in favor of the basic law.

6. It is not sufficient for the OSG to claim that “the power to regulate and control the use, occupancy, and maintenance of buildings and structures carries with it the power to impose fees and, conversely, to control, partially or, as in this case, absolutely, the imposition of such fees.” Firstly, the fees within the power of regulatory agencies to impose are regulatory fees. It has been settled law in this jurisdiction that this broad and all-compassing governmental competence to restrict rights of liberty and property carries with it the undeniable power to collect a regulatory fee. It looks to the enactment of specific measures that govern the relations not only as between individuals but also as between private parties and the political society. True, if the regulatory agencies have the power to impose regulatory fees, then conversely, they also have the power to remove the same. Even so, it is worthy to note that the present case does not involve the imposition by the DPWH Secretary and local building officials of regulatory fees upon respondents; but the collection by respondents of parking fees from persons who use the mall parking facilities. Secondly, assuming arguendo that the DPWH Secretary and local building officials do have regulatory powers over the collection of parking fees for the use of privately owned parking facilities, they cannot allow or prohibit such collection arbitrarily or whimsically. Whether allowing or prohibiting the collection of such parking fees, the action of the DPWH Secretary and local building officials must pass the test of classic reasonableness and propriety of the measures or means in the promotion of the ends sought to be accomplished.

7. Keeping in mind the aforementioned test of reasonableness and propriety of measures or means, the Court notes that Section 803 of the National Building Code falls under Chapter 8 on Light and Ventilation. Evidently, the Code deems it necessary to regulate site occupancy to ensure that there is proper lighting and ventilation in every building. Pursuant thereto, Rule XIX of the IRR requires that a building, depending on its specific use and/or floor area, should provide a minimum number of parking spaces. The Court, however, fails to see the connection between regulating site occupancy to ensure proper light and ventilation in every building vis-à-vis regulating the collection by building owners of fees for the use of their parking spaces. Contrary to the averment of the OSG, the former does not necessarily include or imply the latter. It totally escapes this Court how lighting and ventilation conditions at the malls could be affected by the fact that parking facilities thereat are free or paid for.

8. X x x. The National Building Code regulates buildings, by setting the minimum specifications and requirements for the same. It does not concern itself with traffic congestion in areas surrounding the building. It is already a stretch to say that the National Building Code and its IRR also intend to solve the problem of traffic congestion around the buildings so as to ensure that the said buildings shall have adequate lighting and ventilation. Moreover, the Court cannot simply assume, as the OSG has apparently done, that the traffic congestion in areas around the malls is due to the fact that respondents charge for their parking facilities, thus, forcing vehicle owners to just park in the streets. The Court notes that despite the fees charged by respondents, vehicle owners still use the mall parking facilities, which are even fully occupied on some days. Vehicle owners may be parking in the streets only because there are not enough parking spaces in the malls, and not because they are deterred by the parking fees charged by respondents. Free parking spaces at the malls may even have the opposite effect from what the OSG envisioned: more people may be encouraged by the free parking to bring their own vehicles, instead of taking public transport, to the malls; as a result, the parking facilities would become full sooner, leaving more vehicles without parking spaces in the malls and parked in the streets instead, causing even more traffic congestion.

9. Without using the term outright, the OSG is actually invoking police power to justify the regulation by the State, through the DPWH Secretary and local building officials, of privately owned parking facilities, including the collection by the owners/operators of such facilities of parking fees from the public for the use thereof. The Court finds, however, that in totally prohibiting respondents from collecting parking fees from the public for the use of the mall parking facilities, the State would be acting beyond the bounds of police power.

10. Police power is the power of promoting the public welfare by restraining and regulating the use of liberty and property. It is usually exerted in order to merely regulate the use and enjoyment of the property of the owner. The power to regulate, however, does not include the power to prohibit. A fortiori, the power to regulate does not include the power to confiscate. Police power does not involve the taking or confiscation of property, with the exception of a few cases where there is a necessity to confiscate private property in order to destroy it for the purpose of protecting peace and order and of promoting the general welfare; for instance, the confiscation of an illegally possessed article, such as opium and firearms.

11. When there is a taking or confiscation of private property for public use, the State is no longer exercising police power, but another of its inherent powers, namely, eminent domain. Eminent domain enables the State to forcibly acquire private lands intended for public use upon payment of just compensation to the owner.

12. Normally, of course, the power of eminent domain results in the taking or appropriation of title to, and possession of, the expropriated property; but no cogent reason appears why the said power may not be availed of only to impose a burden upon the owner of condemned property, without loss of title and possession. It is a settled rule that neither acquisition of title nor total destruction of value is essential to taking. It is usually in cases where title remains with the private owner that inquiry should be made to determine whether the impairment of a property is merely regulated or amounts to a compensable taking. A regulation that deprives any person of the profitable use of his property constitutes a taking and entitles him to compensation, unless the invasion of rights is so slight as to permit the regulation to be justified under the police power. Similarly, a police regulation that unreasonably restricts the right to use business property for business purposes amounts to a taking of private property, and the owner may recover therefor.

13. Although in the present case, title to and/or possession of the parking facilities remain/s with respondents, the prohibition against their collection of parking fees from the public, for the use of said facilities, is already tantamount to a taking or confiscation of their properties. The State is not only requiring that respondents devote a portion of the latter’s properties for use as parking spaces, but is also mandating that they give the public access to said parking spaces for free. Such is already an excessive intrusion into the property rights of respondents. Not only are they being deprived of the right to use a portion of their properties as they wish, they are further prohibited from profiting from its use or even just recovering therefrom the expenses for the maintenance and operation of the required parking facilities.

14. In conclusion, the total prohibition against the collection by respondents of parking fees from persons who use the mall parking facilities has no basis in the National Building Code or its IRR. The State also cannot impose the same prohibition by generally invoking police power, since said prohibition amounts to a taking of respondents’ property without payment of just compensation.