Republic of the Philippines

SUPREME COURT
Baguio City

EN BANC

G.R. No. 179334 April 21, 2015

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT ENGINEER CELESTINO R.
CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.

RESOLUTION

PERALTA, J.:

For resolution is the Motion for Reconsideration1 filed by respondents-movants spouses Heracleo and Ramona Tecson imploring
the Court to take a second look at its July 1, 2013 Decision, the dispositive portion of which reads:

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated July 31, 2007
in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the subject property owned by respondents shall be P0.70 instead
of 1,500.00 per square meter, with interest at six percent (6%) per annum from the date of taking in 1940 instead of March 17,
1995, until full payment.2

In view of the contrasting opinions of the members of the Third Division on the instant motion, and the transcendental importance
of the issue raised herein, the members of the Third Division opted to refer the issue to the En Banc for resolution.

For a proper perspective, we briefly state the factual background of the case.

In 1940, the Department of Public Works and Highways (DPWH) took respondents-movants' subject property without the benefit
of expropriation proceedings for the construction of the MacArthur Highway. In a letter dated December 15, 1994,respondents-
movants demanded the payment of the fair market value of the subject parcel of land. Celestino R. Contreras (Contreras), then
District Engineer of the First Bulacan Engineering District of the DPWH, offered to pay for the subject land at the rate of Seventy
Centavos (P0.70) per square meter, per Resolution of the Provincial Appraisal Committee (PAC) of Bulacan. Unsatisfied with the
offer, respondents-movants demanded the return of their property, or the payment of compensation at the current fair market
value.3 Hence, the complaint for recovery of possession with damages filed by respondents-movants. Respondents-movants
were able to obtain favorable decisions in the Regional Trial Court (RTC) and the Court of Appeals (CA), with the subject
property valued at One Thousand Five Hundred Pesos (1,500.00) per square meter, with interest at six percent (6%) per
annum.

Petitioners thus elevated the matter to this Court in a petition for review on certiorari. The only issue resolved by the Court in the
assailed decision is the amount of just compensation which respondents-movants are entitled to receive from the government for
the taking of their property. Both the RTC and the CA valued the property at One Thousand Five Hundred Pesos (1,500.00) per
square meter, plus six percent (6%) interest from the time of the filing of the complaint until full payment. We, however, did not
agree with both courts and ruled instead that just compensation should be based on the value of the property at the time of
taking in 1940, which is Seventy Centavos (P0.70) per square meter.4 In addition, and by way of compensation, we likewise
awarded an interest of six percent (6%) per annum from 1940 until full payment.5

Aggrieved, respondents-movants hereby move for the reconsideration of said decision on the following grounds:
 A. THE HONORABLE COURT MAY LOOK INTO THE "JUSTNESS" OF THE MISERABLE AMOUNT OF
COMPENSATION BEING AWARDED TO THE HEREIN RESPONDENTS; and

B. THE HONORABLE COURT MAY SETTLE FOR A HAPPY MIDDLE GROUND IN THE NAME OF
DOCTRINAL PRECISION AND SUBSTANTIAL JUSTICE.6

Citing the views of Justices Presbitero J. Velasco, Jr. and Marvic Mario Victor F. Leonen in their Dissenting and Concurring
Opinion and Separate Opinion, respectively, respondents-movants insist that gross injustice will result if the amount that will be
awarded today will be based simply on the value of the property at the time of the actual taking. Hence, as proposed by Justice
Leonen, they suggest that a happy middle ground be achieved by meeting the need for doctrinal precision and the thirst for
substantial justice.7

We maintain our conclusions in the assailed July 1, 2013 Decision with modification on the amount of interest awarded, as well
as the additional grant of exemplary damages and attorney's fees.

At the outset, it should be stressed that the matter of the validity of the State's exercise of the power of eminent domain has long
been settled. In fact, in our assailed decision, We have affirmed the ruling of the CA that the pre-trial order issued on May 17,
2001 has limited the issues as follows: (1) whether or not the respondents-movants are entitled to just compensation; (2) whether
or not the valuation would be based on the corresponding value at the time of the taking or at the time of the filing of the action;
and (3) whether or not the respondents-movants are entitled to damages.8 Moreover, it was held that for failure of respondents-
movants to question the lack of expropriation proceedings for a long period of time, they are deemed to have waived and are
estopped from assailing the power of the government to expropriate or the public use for which the power was exercised.9 What
is, therefore, left for determination in the instant Motion for Reconsideration, in accordance with our Decision dated July 1, 2013,
is the propriety of the amount awarded to respondents as just compensation.

At this juncture, We hold that the reckoning date for property valuation in determining the amount of just compensation had
already been addressed and squarely answered in the assailed decision. To be sure, the justness of the award had been taken
into consideration in arriving at our earlier conclusion.

We have in the past been confronted with the same issues under similar factual and procedural circumstances. We find no
reason to depart from the doctrines laid down in the earlier cases as we adopted in the assailed decision. In this regard, we
reiterate the doctrines laid down in the cases of Forfom Development Corporation (Forfom) v. Philippine National Railways
(PNR),10 Eusebio v. Luis,11 Manila International Airport Authority v. Rodriguez,12 and Republic v. Sarabia.13

In Forfom, PNR entered the property of Forfom in January 1973 for railroad tracks, facilities and appurtenances for use of the
Carmona Commuter Service without initiating expropriation proceedings. In 1990, Forfom filed a complaint for recovery of
possession of real property and/or damages against PNR. In Eusebio, respondent's parcel of land was taken in 1980 by the City
of Pasig and used as a municipal road without the appropriate expropriation proceedings. In1996, respondent filed a complaint
for reconveyance and/or damages against the city government and the mayor. In MIAA, in the early 1970s, petitioner
implemented expansion programs for its runway, necessitating the acquisition and occupation of some of the properties
surrounding its premises. As to respondent's property, no expropriation proceedings were initiated. In 1997, respondent initiated
a case for accion reivindicatoria with damages against petitioner. In Republic, sometime in 1956, the Air Transportation Office
(ATO) took possession and control of a portion of a lot situated in Aklan, registered in the name of respondent, without initiating
expropriation proceedings. Several structures were erected thereon, including the control tower, the Kalibo crash fire rescue
station, the Kalibo airport terminal, and the Headquarters of the PNP Aviation Security Group. In 1995,several stores and
restaurants were constructed on the remaining portion of the lot. In 1997, respondent filed a complaint for recovery of possession
with damages against the storeowners wherein ATO intervened claiming that the storeowners were its lessees.

These cases stemmed from similar background, that is, government took control and possession of the subject properties for
public use without initiating expropriation proceedings and without payment of just compensation; while the landowners failed for
a long period of time to question such government act and later instituted actions for recovery of possession with damages. In
these cases, the Court has uniformly ruled that the fair market value of the property at the time of taking is controlling for
purposes of computing just compensation.

In Forfom, the payment of just compensation was reckoned from the time of taking in 1973; in Eusebio, the Court fixed the just
compensation by determining the value of the property at the time of taking in 1980; in MIAA, the value of the lot at the time of
taking in 1972 served as basis for the award of compensation to the owner; and, in Republic, the Court was convinced that the
taking occurred in 1956 and was thus the basis in fixing just compensation.

As in the aforementioned cases, just compensation due respondents-movants in this case should, therefore, be fixed not as of
the time of payment but at the time of taking in 1940 which is Seventy Centavos (P0.70) per square meter, and not One
Thousand Five Hundred Pesos (1,500.00) per square meter, as valued by the RTC and CA.

While disparity in the above amounts is obvious and may appear inequitable to respondents-movants as they would be receiving
such outdated valuation after a very long period, it should be noted that the purpose of just compensation is not to reward the
owner for the property taken but to compensate him for the loss thereof. As such, the true measure of the property, as upheld by
a plethora of cases, is the market value at the time of the taking, when the loss resulted. This principle was plainly laid down in
Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines,14 to wit:

x x x In Land Bank of the Philippines v. Orilla, a valuation case under our agrarian reform law, this Court had occasion to state:

Constitutionally, "just compensation" is the sum equivalent to the market value of the property, broadly described as the price
fixed by the seller in open market in the usual and ordinary course of legal action and competition, or the fair value of the
property as between the one who receives and the one who desires to sell, it being fixed at the time of the actual taking by
the government. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the
expropriator. It has been repeatedly stressed by this Court that the true measure is not the taker's gain but the owner's
loss. The word "just" is used to modify the meaning of the word "compensation" to convey the idea that the equivalent to be
given for the property to be taken shall be real, substantial, full and ample. [Emphasis supplied.]15

Indeed, the State is not obliged to pay premium to the property owner for appropriating the latter's property; it is only bound to
make good the loss sustained by the landowner, with due consideration of the circumstances availing at the time the property
was taken. More, the concept of just compensation does not imply fairness to the property owner alone. Compensation must also
be just to the public, which ultimately bears the cost of expropriation.16

Notwithstanding the foregoing, we recognize that the owner's loss is not only his property but also its income-generating
potential.17 Thus, when property is taken, full compensation of its value must immediately be paid to achieve a fair exchange for
the property and the potential income lost.18 Accordingly, in Apo, we held that the rationale for imposing the interest is to
compensate the petitioners for the income they would have made had they been properly compensated for their properties at the
time of the taking.19 Thus:

We recognized in Republic v. Court of Appeals the need for prompt payment and the necessity of the payment of interest to
compensate for any delay in the payment of compensation for property already taken. We ruled in this case that:

The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market value of the property,
broadly described to be the price fixed by the seller in open market in the usual and ordinary course of legal action and
competition or the fair value of the property as between one who receives, and one who desires to sell, i[f] fixed at the time of the
actual taking by the government. Thus, if property is taken for public use before compensation is deposited with the court
having jurisdiction over the case, the final compensation must include interest[s] on its just value to be computed from
the time the property is taken to the time when compensation is actually paid or deposited with the court. In fine,
between the taking of the property and the actual payment, legal interest[s] accrue in order to place the owner in a
position as good as (but not better than) the position he was in before the taking occurred.[Emphasis supplied]20
In other words, the just compensation due to the landowners amounts to an effective forbearance on the part of the State-a
proper subject of interest computed from the time the property was taken until the full amount of just compensation is paid-in
order to eradicate the issue of the constant variability of the value of the currency over time.21 In the Court's own words:

The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of the property to be computed
from the time petitioner instituted condemnation proceedings and "took" the property in September 1969. This allowance of
interest on the amount found to be the value of the property as of the time of the taking computed, being an effective
forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and inflation of the value of
the currency over time x x x.22

On this score, a review of the history of the pertinent laws, rules and regulations, as well as the issuances of the Central Bank
(CB)or Bangko Sentral ng Pilipinas (BSP)is imperative in arriving at the proper amount of interest to be awarded herein.

On May 1, 1916, Act No. 265523 took effect prescribing an interest rate of six percent (6%) or such rate as may be prescribed by
the Central Bank Monetary Board (CB-MB)for loans or forbearance of money, in the absence of express stipulation as to such
rate of interest, to wit:

Section 1. The rate of interest for the loan or forbearance of any money goods, or credits and the rate allowed in judgments, in
the absence of express contract as to such rate of interest, shall be six per centum per annum or such rate as may be
prescribed by the Monetary Board of the Central Bank of the Philippines for that purpose in accordance with the
authority hereby granted.

Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum rate or rates of interest for the loan or renewal
thereof or the forbearance of any money, goods or credits, and to change such rate or rates whenever warranted by prevailing
economic and social conditions.

In the exercise of the authority herein granted, the Monetary Board may prescribe higher maximum rates for loans of low priority,
such as consumer loans or renewals thereof as well as such loans made by pawnshops finance companies and other similar
credit institutions although the rates prescribed for these institutions need not necessarily be uniform. The Monetary Board is also
authorized to prescribe different maximum rate or rates for different types of borrowings, including deposits and deposit
substitutes, or loans of financial intermediaries.24

Under the aforesaid law, any amount of interest paid or stipulated to be paid in excess of that fixed by law is considered usurious,
therefore unlawful.25

On July 29, 1974, the CB-MB, pursuant to the authority granted to it under the aforequoted provision, issued Resolution No.
1622. On even date, Circular No. 416 was issued, implementing MB Resolution No. 1622, increasing the rate of interest for
1wphi1

loans and forbearance of money to twelve percent (12%) per annum, thus:

By virtue of the authority granted to it under Section 1 of Act No. 2655, as amended, otherwise known as the "Usury Law," the
Monetary Board, in its Resolution No. 1622 dated July 29, 1974, has prescribed that the rate of interest for the loan or
forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of express contract as to
such rate of interest, shall be twelve per cent (12%) per annum.26

The foregoing rate was sustained in CB Circular No. 90527 which took effect on December 22, 1982, particularly Section 2
thereof, which states:

Sec. 2. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the
absence of express contract as to such rate of interest, shall continue to be twelve per cent (12%) per annum.28
Recently, the BSP Monetary Board (BSP-MB),in its Resolution No. 796 dated May 16, 2013, approved the amendment of
Section 2 of Circular No. 905, Series of 1982, and accordingly, issued Circular No. 799, Series of 2013, effective July 1, 2013,
the pertinent portion of which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May 2013, approved the following revisions governing the rate of
interest in the absence of stipulation in loan contracts, thereby amending Section 2 of Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in
judgments, in the absence of an express contract as to such rate of interest, shall be six percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual of Regulations for Banks and Sections 4305Q.1, 4305S.3 and
4303P.1 of the Manual of Regulations for Non-Bank Financial Institutions are hereby amended accordingly.

This Circular shall take effect on 01 July 2013.29

Accordingly, the prevailing interest rate for loans and forbearance of money is six percent (6%) per annum, in the absence of an
express contract as to such rate of interest.

In summary, the interest rates applicable to loans and forbearance of money, in the absence of an express contract as to such
rate of interest, for the period of 1940 to present are as follows:

Law, Rule and Regulations, Date of Effectivity Interest Rate

BSP Issuance
Act No. 2655 May 1, 1916 6%

CB Circular No. 416 July 29, 1974 12%

CB Circular No. 905 December 22, 1982 12%

CB Circular No. 799 July 1, 2013 6%

It is important to note, however, that interest shall be compounded at the time judicial demand is made pursuant to Article 221230
of the Civil Code of the Philippines, and sustained in Eastern Shipping Lines v. Court of Appeals,31 then later on in Nacar v.
Gallery Frames,32 save for the reduction of interest rate to 6% for loans or forbearance of money, thus:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest
due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the
rate of interest shall be 6% per annum to be computed from default, i.e., from judicial or extrajudicial demand
under and subject to the provisions of Article 1169 of the Civil Code.33

Applying the foregoing law and jurisprudence, respondents-movants are entitled to interest in the amount of One Million Seven
Hundred Eighteen Thousand Eight Hundred Forty-Eight Pesos and Thirty-Two Centavos (1,718,848.32) as of September
30, 2014,34 computed as follows:

January 1, 194035 to July 28, 1974 P 10,553.4937

July 29, 1974 to March 16, 1995 26,126.3138
March 17, 199536to June 30, 2013 232,070.3339
 July 1, 2013 to September 30, 2014 250,098.1940

Market Value of the Property at the time of

taking including interest P 518,848.32

Market value of the property at the time of

taking including interest P 518,848.32
Add: Exemplary damages 1,000.000.00

Attorney's fees 200,000.00

Total Amount of Interest due to Respondents-
Movants as of September 30, 2014 1,718,848.16

Considering that respondents-movants only resorted to judicial demand for the payment of the fair market value of the land on
March 17, 1995, it is only then that the interest earned shall itself earn interest.

Lastly, from finality of the Court's Resolution on reconsideration until full payment, the total amount due to respondents-movants
shall earn a straight six percent (6%) legal interest, pursuant to Circular No. 799 and the case of Nacar. Such interest is imposed
by reason of the Court's decision and takes the nature of a judicial debt.

Clearly, the award of interest on the value of the land at the time of taking in 1940 until full payment is adequate compensation to
respondents-movants for the deprivation of their property without the benefit of expropriation proceedings. Such interest,
however meager or enormous it may be, cannot be inequitable and unconscionable because it resulted directly from the
application of law and jurisprudence-standards that have taken into account fairness and equity insetting the interest rates due
for the use or forbearance of money.41 Thus, adding the interest computed to the market value of the property at the time of taking
signifies the real, substantial, full and ample value of the property. Verily, the same constitutes due compliance with the
constitutional mandate on eminent domain and serves as a basic measure of fairness. In addition to the foregoing interest,
additional compensation shall be awarded to respondents-movants by way of exemplary damages and attorney's fees in view of
the government's taking without the benefit of expropriation proceedings. As held in Eusebio v. Luis,42 an irregularity in an
expropriation proceeding cannot ensue without consequence. Thus, the Court held that the government agency's illegal
occupation of the owner's property for a very long period of time surely resulted in pecuniary loss to the owner, to wit:

However, in taking respondents' property without the benefit of expropriation proceedings and without payment of just
compensation, the City of Pasig clearly acted in utter disregard of respondents' proprietary rights. Such conduct cannot be
countenanced by the Court. For said illegal taking, the City of Pasig should definitely be held liable for damages to
respondents. Again, in Manila International Airport Authority v. Rodriguez, the Court held that the government agency's illegal
occupation of the owner's property for a very long period of time surely resulted in pecuniary loss to the owner. The Court held as
follows:

Such pecuniary loss entitles him to adequate compensation in the form of actual or compensatory damages, which in
this case should be the legal interest (6%) on the value of the land at the time of taking, from said point up to full
payment by the MIAA. This is based on the principle that interest "runs as a matter of law and follows from the right of the
landowner to be placed in as good position as money can accomplish, as of the date of the taking."

The award of interest renders unwarranted the grant of back rentals as extended by the courts below. In Republic v. Lara, et
al., the Court ruled that the indemnity for rentals is inconsistent with a property owner's right to be paid legal interest on the value
of the property, for if the condemn or is to pay the compensation due to the owners from the time of the actual taking of their
property, the payment of such compensation is deemed to retro act to the actual taking of the property; and, hence, there is no
basis for claiming rentals from the time of actual taking. More explicitly, the Court held in Republic v. Garcellano that:

The uniform rule of this Court, however, is that this compensation must be, not in the form of rentals, but by way of
'interest from the date that the company [or entity] exercising the right of eminent domain take possession of the
condemned lands, and the amounts granted by the court shall cease to earn interest only from the moment they are
paid to the owners or deposited in court x x x.

xxxx

For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of expropriation proceedings and without
the MIAA exerting efforts to ascertain ownership of the lot and negotiating with any of the owners of the property. To our mind,
these are wanton and irresponsible acts which should be suppressed and corrected. Hence, the award of exemplary
damages and attorneys fees is in order. However, while Rodriguez is entitled to such exemplary damages and attorney's fees,
the award granted by the courts below should be equitably reduced. We hold that Rodriguez is entitled only to 200,000.00 as
exemplary damages, and attorney's fees equivalent to one percent (1%) of the amount due.43

Similarly, in Republic v. CA,44 We held that the failure of the government to initiate an expropriation proceeding to the prejudice of
the landowner may be corrected with the awarding of exemplary damages, attorney's fees and costs of litigation. Thus:

The Court will not award attorney's fees in light of respondent's choice not to appeal the CA Decision striking down the award.
However, we find it proper to award temperate and exemplary damages in light of NIA's misuse of its power of eminent
domain. Any arm of the State that exercises the delegated power of eminent domain must wield that power with circumspection
and utmost regard for procedural requirements. A government instrumentality that fails to observe the constitutional guarantees
of just compensation and due process abuses the authority delegated to it, and is liable to the property owner for damages.

Temperate or moderate damages may be recovered if pecuniary loss has been suffered but the amount cannot be proved with
certainty from the nature of the case. Here, the trial and appellate courts found that the owners were unable to plant palay on
1w phi 1

96,655 square meters of the Property for an unspecified period during and after NIA's construction of the canals in 1972. The
passage of time, however, has made it impossible to determine these losses with any certainty. NIA also deprived the owners of
the Property of possession of a substantial portion of their land since 1972. Considering the particular circumstances of this case,
an award of 150,000 as temperate damages is reasonable.

NIA's irresponsible exercise of its eminent domain powers also deserves censure. For more than three decades, NIA has been
charging irrigation fees from respondent and other landowners for the use of the canals built on the Property, without reimbursing
respondent a single cent for the loss and damage. NIA exhibits a disturbingly cavalier attitude towards respondent's property
rights, rights to due process of law and to equal protection of the laws. Worse, this is not the first time NIA has disregarded the
rights of private property owners by refusing to pay just compensation promptly. To dissuade NIA from continuing this practice
and to set an example for other agencies exercising eminent domain powers, NIA is directed to pay respondent exemplary
damages of 250,000.45

Applying the aforequoted doctrines to the present case, considering that respondents-movants were deprived of beneficial
ownership over their property for more than seventy (70) years without the benefit of a timely expropriation proceedings, and to
serve as a deterrent to the State from failing to institute such proceedings within the prescribed period under the law, a grant of
exemplary damages in the amount of One Million Pesos (1,000,000.00) is fair and reasonable. Moreover, an award for
attorney's fees in the amount of Two Hundred Thousand Pesos (200,000.00) in favor of respondents-movants is in order.

In sum, respondents-movants shall be entitled to an aggregate amount of One Million Seven Hundred Eighteen Thousand
Eight Hundred Forty-Eight Pesos and Thirty-Two Centavos (1,718,848.32) as just compensation as of September 30, 2014,
computed as follows:
 Market value of the property at the time P 518,848.32
of taking in 1940 including interest

Add: Exemplary Damages 1,000,000.00

Attorney's fees 200,000.00

Total Amount due to Respondents-
movants as of September 30, 2014 1,718,848.32

This Court is not unaware that at present, stringent laws and rules are put in place to ensure that owners of real property
acquired for national government infrastructure projects are promptly paid just compensation. Specifically, Section 4 of Republic
Act No. 8974 (R.A. 8974),46 which took effect on November 26, 2000, provides sufficient guidelines for implementing an
expropriation proceeding, to wit:

Section 4. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real property for the right-of-way or
location for any national government infrastructure project through expropriation, the appropriate implementing agency shall
initiate the expropriation proceedings before the proper court under the following guidelines:

(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall
immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%)
of the value of the property based on the current relevant zonal valuation of the Bureau of Internal Revenue
(BIR); and (2) the value of the improvements and/or structures as determined under Section 7 hereof;

(b) In provinces, cities, municipalities and other areas where there is no zonal valuation, the BIR is hereby
mandated within the period of sixty (60) days from the date of the expropriation case, to come up with a zonal
valuation for said area; and

(c) In case the completion of a government infrastructure project is of utmost urgency and importance, and there
is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the
property its proffered value taking into consideration the standards prescribed in Section 5 hereof.

Upon compliance with the guidelines abovementioned, the court shall immediately issue to the implementing agency an order to
take possession of the property and start the implementation of the project.

Before the court can issue a Writ of Possession, the implementing agency shall present to the court a certificate of availability of
funds from the proper official concerned.

In the event that the owner of the property contests the implementing agency's proffered value, the court shall determine the just
compensation to be paid the owner within sixty (60) days from the date of filing of the expropriation case. When the decision of
the court becomes final and executory, the implementing agency shall pay the owner the difference between the amount already
paid and the just compensation as determined by the court.

Failure to comply with the foregoing directives shall subject the government official or employee concerned to administrative, civil
and/or criminal sanctions, thus:

Section 11. Sanctions. - Violation of any provisions of this Act shall subject the government official or employee concerned to
appropriate administrative, civil and/or criminal sanctions, including suspension and/or dismissal from the government service
and forfeiture of benefits. While the foregoing provisions, being substantive in nature or disturbs substantive rights, cannot be
retroactively applied to the present case, We trust that this established mechanism will surely deter hasty acquisition of private
properties in the future without the benefit of immediate payment of the value of the property in accordance with Section 4 of R.A.
8974. This effectively addresses J. Velasco's concerns that sustaining our earlier rulings on the matter would be licensing the
government to dispense with constitutional requirements in taking private properties. Moreover, any gap on the procedural
aspect of the expropriation proceedings will be remedied by the aforequoted provisions.

In effect, R.A. 8974 enshrines a new approach towards eminent domain that reconciles the inherent unease attending
expropriation proceedings with a position of fundamental equity.47

Despite the foregoing developments, however, We emphasize that the government's failure, to initiate the necessary
expropriation proceedings prior to actual taking cannot simply invalidate the State's exercise of its eminent domain power, given
that the property subject of expropriation is indubitably devoted for public use, and public policy imposes upon the public utility
the obligation to continue its services to the public. To hastily nullify said expropriation in the guise of lack of due process would
certainly diminish or weaken one of the State's inherent powers, the ultimate objective of which is to serve the greater good.
Thus, the non-filing of the case for expropriation will not necessarily lead to the return of the property to the landowner. What is
left to the landowner is the right of compensation.48

All told, We hold that putting to rest the issue on the validity of the exercise of eminent domain is neither tantamount to condoning
the acts of the DPWH in disregarding the property rights of respondents-movants nor giving premium to the government's failure
to institute an expropriation proceeding. This Court had steadfastly adhered to the doctrine that its first and fundamental duty is
the application of the law according to its express terms, interpretation being called for only when such literal application is imp
ossible.49 To entertain other formula for computing just compensation, contrary to those established by law and jurisprudence,
would open varying interpretation of economic policies - a matter which this Court has no competence to take cognizance of.
Time and again, we have held that no process of interpretation or construction need be resorted to where a provision of law
peremptorily calls for application.50 Equity and equitable principles only come into full play when a gap exists in the law and
jurisprudence.51 As we have shown above, established rulings of this Court are in place for full application to the case at bar,
hence, should be upheld.

WHEREFORE, the motion for reconsideration is hereby DENIED for lack of merit.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

G.R. No. 211666 February 25, 2015

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND

HIGHWAYS, Petitioners,
vs.
ARLENE R. SORIANO, Respondent.

DECISION

PERALTA, J.:

Before the Court is a petition for review under Rule 45 of the Rules of Court assailing the Decision1
dated November 15, 2013 and Order2 dated March 10, 2014 of the Regional Trial Court (RTC),
Valenzuela City, Branch 270, in Civil Case No. 140-V-10.
The antecedent facts are as follows:

On October 20, 2010, petitioner Republic of the Philippines, represented by the Department of
Public Works and Highways (DPWH), filed a Complaint3 for expropriation against respondent Arlene
R. Soriano, the registered owner of a parcel of land consisting of an area of 200 square meters,
situated at Gen. T De Leon, Valenzuela City, and covered by Transfer Certificate of Title (TCT) No.
V-13790.4 In its Complaint, petitioner averred that pursuant to Republic Act (RA) No. 8974, otherwise
known as "An Act to Facilitate the Acquisition of Right-Of-Way, Site or Location for National
Government Infrastructure Projects and for other Purposes," the property sought to be expropriated
shall be used in implementing the construction of the North Luzon Expressway (NLEX)- Harbor Link
Project (Segment 9) from NLEX to MacArthur Highway, Valenzuela City.5

Petitioner duly deposited to the Acting Branch Clerk of Court the amount of 420,000.00
representing 100% of the zonal value of the subject property. Consequently, in an Order6 dated May
27, 2011, the RTC ordered the issuance of a Writ of Possession and a Writ of Expropriation for
failure of respondent, or any of her representatives, to appear despite notice during the hearing
called for the purpose.

In another Order7 dated June 21, 2011, the RTC appointed the following members of the Board of
Commissioners for the determination of just compensation: (1) Ms. Eunice O. Josue, Officer-in-
Charge, RTC, Branch 270, Valenzuela City; (2) Atty. Cecilynne R. Andrade, Acting Valenzuela City
Assessor,City Assessors Office, Valenzuela City; and (3) Engr. Restituto Bautista, of Brgy.
Bisig,Valenzuela City. However, the trial court subsequently revoked the appointment of the Board
for their failure to submit a report as to the fair market value of the property to assist the court in the
determination of just compensation and directed the parties to submit their respective position
papers.8 Thereafter, the case was set for hearing giving the parties the opportunity to present and
identify all evidence in support of their arguments therein. According to the RTC, the records of the
case reveal that petitioner adduced evidence to show that the total amount deposited is just, fair,
and equitable. Specifically, in its Position Paper, petitioner alleged that pursuant to a Certification
issued by the Bureau of Internal Revenue (BIR), Revenue Region No. 5, the zonal value of the
subject property in the amount of 2,100.00 per square meter is reasonable, fair, and just to
compensate the defendant for the taking of her property in the total area of 200 square meters.9 In
fact, Tax Declaration No. C-018-07994, dated November 13, 2009 submitted by petitioner, shows
that the value of the subject property is at a lower rate of 400.00per square meter. Moreover, as
testified to by Associate Solicitor III Julie P. Mercurio, and as affirmed by the photographs submitted,
the subject property is poorly maintained, covered by shrubs and weeds, and not concretely-paved.
It is located far from commercial or industrial developments in an area without a proper drainage
system, can only be accessed through a narrow dirt road, and is surrounded by adjacent dwellings
of sub-standard materials.

Accordingly, the RTC considered respondent to have waived her right to adduce evidence and to
object to the evidence submitted by petitioner for her continued absence despite being given several
notices to do so.

On November 15, 2013, the RTC rendered its Decision, the dispositive portion of which reads:
WHEREFORE, with the foregoing determination of just compensation, judgment is hereby rendered:

1) Declaring plaintiff to have lawful right to acquire possession of and title to 200
square meters of defendant Arlene R. Sorianos parcel of land covered by TCT V-
13790 necessary for the construction of the NLEX Harbor Link Project(Segment 9)
from NLEX to MacArthur Highway Valenzuela City;
 2) Condemning portion to the extent of 200 square meters of the above-described
parcel of land including improvements thereon, if there be any, free from all liens and
encumbrances;

3) Ordering the plaintiff to pay defendant Arlene R. Soriano Php2,100.00 per square
meter or the sum of Four Hundred Twenty Thousand Pesos (Php420,000.00) for the
200 square meters as fair, equitable, and just compensation with legal interest at
12% per annum from the taking of the possession of the property, subject to the
payment of all unpaid real property taxes and other relevant taxes, if there be any;

4) Plaintiff is likewise ordered to pay the defendant consequential damages which

shall include the value of the transfer tax necessary for the transfer of the subject
property from the name of the defendant to that of the plaintiff;

5) The Office of the Register of Deeds of Valenzuela City, Metro Manila is directed to
annotate this Decision in Transfer Certificate of Title No. V-13790 registered under
the name of Arlene R. Soriano.

Let a certified true copy of this decision be recorded in the Registry of Deeds of Valenzuela City.

Records of this case show that the Land Bank Managers Check Nos. 0000016913 dated January
21, 2011 in the amount of Php400,000.00 and 0000017263 dated April 28, 2011 in the amount of
Php20,000.00 issued by the Department of Public Works and Highways (DPWH) are already stale.
Thus, the said Office is hereby directed to issue another Managers Check in the total amount
Php420,000.00 under the name of the Office of the Clerk of Court, Regional Trial Court, Valenzuela
City earmarked for the instant case.10

Petitioner filed a Motion for Reconsideration maintaining that pursuant to Bangko Sentral ng Pilipinas
(BSP) Circular No. 799, Series of 2013, which took effect on July 1, 2013, the interest rate imposed
by the RTC on just compensation should be lowered to 6% for the instant case falls under a loan or
forbearance of money.11 In its Order12 dated March 10, 2014, the RTC reduced the interest rate to 6%
per annum not on the basis of the aforementioned Circular, but on Article 2209 of the Civil Code,
viz.:

However, the case of National Power Corporation v. Honorable Zain B. Angas is instructive.

In the aforementioned case law, which is similar to the instant case, the Supreme Court had the
occasion to rule that it is well-settled that the aforequoted provision of Bangko Sentral ng Pilipinas
Circular applies only to a loan or forbearance of money, goods or credits. However, the term
"judgments" as used in Section 1 of the Usury Law and the previous Central Bank Circular No. 416,
should be interpreted to mean only judgments involving loan or forbearance of money, goods or
credits, following the principle of ejusdem generis. And applying said rule on statutory construction,
the general term "judgments" can refer only to judgments in cases involving loans or forbearance of
any money, goods, or credits. Thus, the High Court held that, Art. 2209 of the Civil Code, and not the
Central Bank Circular, is the law applicable.

Art. 2009 of the Civil Code reads:

"If the obligation consists in the payment of a sum of money, and the debtor incurs in delay, the
indemnity for damages, there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per
annum."
Further in that case, the Supreme Court explained that the transaction involved is clearly not a loan
or forbearance of money, goods or credits but expropriation of certain parcels of land for a public
purpose, the payment of which is without stipulation regarding interest, and the interest adjudged by
the trial court is in the nature of indemnity for damages. The legal interest required to be paid on the
amount of just compensation for the properties expropriated is manifestly in the form of indemnity for
damages for the delay in the payment thereof. It ultimately held that Art. 2209 of the Civil Code shall
apply.13

On May 12, 2014, petitioner filed the instant petition invoking the following arguments:

I.

RESPONDENT IS NOT ENTITLED TO THE LEGAL INTEREST OF 6% PER

ANNUM ON THE AMOUNT OF JUST COMPENSATION OF THE SUBJECT
PROPERTY AS THERE WAS NO DELAY ON THE PART OF PETITIONER.

II.

BASED ON THE NATIONAL INTERNAL REVENUE CODE OF 1997 AND THE

LOCAL GOVERNMENT CODE, IT IS RESPONDENTS OBLIGATION TO PAY THE
TRANSFER TAXES.

Petitioner maintains that if property is taken for public use before compensation is deposited with the
court having jurisdiction over the case, the final compensation must include interests on its just value
computed from the time the property is taken up to the time when compensation is actually paid or
deposited with the court.14 Thus, legal interest applies only when the property was taken prior to the
deposit of payment with the court and only to the extent that there is delay in payment. In the instant
case, petitioner posits that since it was able to deposit with the court the amount representing the
zonal value of the property before its taking, it cannot be said to be in delay, and thus, there can be
no interest due on the payment of just compensation.15 Moreover, petitioner alleges that since the
entire subject property was expropriated and not merely a portion thereof, it did not suffer an
impairment or decrease in value, rendering the award of consequential damages nugatory.
Furthermore, petitioner claims that contrary to the RTCs instruction, transfer taxes, in the nature of
Capital Gains Tax and Documentary Stamp Tax, necessary for the transfer of the subject property
from the name of the respondent to that of the petitioner are liabilities of respondent and not
petitioner.

The petition is partly meritorious.

At the outset, it must be noted that the RTCs reliance on National Power Corporation v. Angasis
misplaced for the same has already been overturned by our more recent ruling in Republic v. Court
of Appeals,16 wherein we held that the payment of just compensation for the expropriated property
amounts to an effective forbearance on the part of the State, to wit:

Aside from this ruling, Republic notably overturned the Courts previous ruling in National Power
Corporation v. Angas which held that just compensation due for expropriated properties is not a loan
or forbearance of money but indemnity for damages for the delay in payment; since the interest
involved is in the nature of damages rather than earnings from loans, then Art. 2209 of the Civil
Code, which fixes legal interest at 6%, shall apply.

In Republic, the Court recognized that the just compensation due to the landowners for their
expropriated property amounted to an effective forbearance on the part of the State. Applying the
Eastern Shipping Lines ruling, the Court fixed the applicable interest rate at 12% per annum,
computed from the time the property was taken until the full amount of just compensation was paid,
in order to eliminate the issue of the constant fluctuation and inflation of the value of the currency
over time. In the Courts own words:

The Bulacan trial court, in its 1979 decision, was correct in imposing interest[s] on the zonal value of
the property to be computed from the time petitioner instituted condemnation proceedings and "took"
the property in September 1969. This allowance of interest on the amount found to be the value of
the property as of the time of the taking computed, being an effective forbearance, at 12% per
annum should help eliminate the issue of the constant fluctuation and inflation of the value of the
currency over time.

We subsequently upheld Republics 12% per annum interest rate on the unpaid expropriation
compensation in the following cases: Reyes v. National Housing Authority, Land Bank of the
Philippines v. Wycoco, Republic v. Court of Appeals, Land Bank of the Philippines v. Imperial,
Philippine Ports Authority v. Rosales-Bondoc, and Curata v. Philippine Ports Authority.17 Effectively,
therefore, the debt incurred by the government on account of the taking of the property subject of an
expropriation constitutes a forbearance18 which runs contrary to the trial courts opinion that the same
is in the nature of indemnity for damages calling for the application of Article 2209 of the Civil Code.
Nevertheless, in line with the recent circular of the Monetary Board of the Bangko Sentral ng
Pilipinas (BSP-MB) No. 799, Series of 2013, effective July 1, 2013, the prevailing rate of interest for
loans or forbearance of money is six percent (6%) per annum, in the absence of an express contract
as to such rate of interest.

Notwithstanding the foregoing, We find that the imposition of interest in this case is unwarranted in
view of the fact that as evidenced by the acknowledgment receipt19 signed by the Branch Clerk of
Court, petitioner was able to deposit with the trial court the amount representing the zonal value of
the property before its taking. As often ruled by this Court, the award of interest is imposed in the
nature of damages for delay in payment which, in effect, makes the obligation on the part of the
government one of forbearance to ensure prompt payment of the value of the land and limit the
opportunity loss of the owner.20 However, when there is no delay in the payment of just
compensation, We have not hesitated in deleting the imposition of interest thereon for the same is
justified only in cases where delay has been sufficiently established.21

The records of this case reveal that petitioner did not delay in its payment of just compensation as it
had deposited the pertinent amount in full due to respondent on January 24, 2011, or four (4)
months before the taking thereof, which was when the RTC ordered the issuance of a Writ of
Possession and a Writ of Expropriation on May 27, 2011. The amount deposited was deemed by the
trial court to be just, fair, and equitable, taking into account the well-established factors in assessing
the value of land, such as its size, condition, location, tax declaration, and zonal valuation as
determined by the BIR. Considering, therefore, the prompt payment by the petitioner of the full
amount of just compensation as determined by the RTC, We find that the imposition of interest
thereon is unjustified and should be deleted.

Similarly, the award of consequential damages should likewise be deleted in view of the fact that the
entire area of the subject property is being expropriated, and not merely a portion thereof, wherein
such remaining portion suffers an impairment or decrease in value, as enunciated in Republic of the
Philippines v. Bank of the Philippine Islands,22 thus:

x x x The general rule is that the just compensation to which the owner of the condemned property is
entitled to is the market value. Market value is that sum of money which a person desirous but not
compelled to buy, and an owner willing but not compelled to sell, would agree on as a price to be
paid by the buyer and received by the seller. The general rule, however, is modified where only a
part of a certain property is expropriated. In such a case, the owner is not restricted to compensation
for the portion actually taken, he is also entitled to recover the consequential damage, if any, to the
remaining part of the property.

xxxx

No actual taking of the building is necessary to grant consequential damages. Consequential

damages are awarded if as a result of the expropriation, the remaining property of the owner suffers
from an impairment or decrease in value. The rules on expropriation clearly provide a legal basis for
the award of consequential damages. Section 6 of Rule 67 of the Rules of Court provides:

x x x The commissioners shall assess the consequential damages to the property not taken and
deduct from such consequential damages the consequential benefits to be derived by the owner
from the public use or public purpose of the property taken, the operation of its franchise by the
corporation or the carrying on of the business of the corporation or person taking the property. But in
no case shall the consequential benefits assessed exceed the consequential damages assessed, or
the owner be deprived of the actual value of his property so taken.

In B.H. Berkenkotter & Co. v. Court of Appeals, we held that:

To determine just compensation, the trial court should first ascertain the market value of the
property, to which should be added the consequential damages after deducting therefrom the
consequential benefits which may arise from the expropriation. If the consequential benefits exceed
the consequential damages, these items should be disregarded altogether as the basic value of the
property should be paid in every case.23

Considering that the subject property is being expropriated in its entirety, there is no remaining
portion which may suffer an impairment or decrease in value as a result of the expropriation. Hence,
the award of consequential damages is improper.

Anent petitioners contention that it cannot be made to pay the value of the transfer taxes in the
nature of capital gains tax and documentary stamp tax, which are necessary for the transfer of the
subject property from the name of the respondent to that of the petitioner, the same is partly
meritorious.

With respect to the capital gains tax, We find merit in petitioners posture that pursuant to Sections
24(D) and 56(A)(3) of the 1997 National Internal Revenue Code (NIRC), capital gains tax due on the
sale of real property is a liability for the account of the seller, to wit:

Section 24. Income Tax Rates

xxxx

(D) Capital Gains from Sale of Real Property.

(1) In General. The provisions of Section 39(B) notwithstanding, a final tax of six percent (6%)
based on the gross selling price or current fair market value as determined in accordance with
Section 6(E) of this Code, whichever is higher, is hereby imposed upon capital gains presumed to
have been realized from the sale, exchange, or other disposition of real property located in the
Philippines, classified as capital assets, including pacto de retro sales and other forms of conditional
sales, by individuals, including estates and trusts: Provided, That the tax liability, if any, on gains
from sales or other disposition of real property to the government or any of its political subdivisions
or agencies or to government-owned or controlled corporations shall be determined either under
Section 24(A)or under this Subsection, at the option of the taxpayer.

xxxx

Section 56. Payment and Assessment of Income Tax for Individuals and Corporations. (A)
Payment of Tax

xxxx

(3) Payment of Capital Gains Tax. - The total amount of tax imposed and prescribed under Section
24 (c), 24(D), 27(E)(2), 28(A)(8)(c) and 28(B)(5)(c) shall be paid on the date the return prescribed
therefor is filed by the person liable thereto: Provided, That if the seller submits proof of his intention
to avail himself of the benefit of exemption of capital gains under existing special laws, no such
payments shall be required : Provided, further, That in case of failure to qualify for exemption under
such special laws and implementing rules and regulations, the tax due on the gains realized from the
original transaction shall immediately become due and payable, subject to the penalties prescribed
under applicable provisions of this Code: Provided, finally, That if the seller, having paid the tax,
submits such proof of intent within six (6) months from the registration of the document transferring
the real property, he shall be entitled to a refund of such tax upon verification of his compliance with
the requirements for such exemption.

Thus, it has been held that since capital gains is a tax on passive income, it is the seller, not the
buyer, who generally would shoulder the tax.24 Accordingly, the BIR, in its BIR Ruling No. 476-2013,
dated December 18, 2013, constituted the DPWH as a withholding agent to withhold the six percent
(6%) final withholding tax in the expropriation of real property for infrastructure projects. As far as the
government is concerned, therefore, the capital gains tax remains a liability of the seller since it is a
tax on the seller's gain from the sale of the real estate.25

As to the documentary stamp tax, however, this Court finds inconsistent petitioners denial of liability
to the same. Petitioner cites Section 196 of the 1997 NIRC as its basis in saying that the
documentary stamp tax is the liability of the seller, viz.:

SECTION 196. Stamp Tax on Deeds of Sale and Conveyances of Real Property. - On all
conveyances, deeds, instruments, or writings, other than grants, patents or original certificates of
adjudication issued by the Government, whereby any land, tenement or other realty sold shall be
granted, assigned, transferred or otherwise conveyed to the purchaser, or purchasers, or to any
other person or persons designated by such purchaser or purchasers, there shall be collected a
documentary stamp tax, at the rates herein below prescribed, based on the consideration contracted
to be paid for such realty or on its fair market value determined in accordance with Section 6(E) of
this Code, whichever is higher: Provided, That when one of the contracting parties is the
Government, the tax herein imposed shall be based on the actual consideration: (a) When the
consideration, or value received or contracted to be paid for such realty, after making proper
allowance of any encumbrance, does not exceed One thousand pesos (1,000), Fifteen pesos
(15.00).

(b) For each additional One thousand pesos (1,000), or fractional part thereof in excess of One
thousand pesos (1,000) of such consideration or value, Fifteen pesos (15.00).
When it appears that the amount of the documentary stamp tax payable hereunder has been
reduced by an incorrect statement of the consideration in any conveyance, deed, instrument or
writing subject to such tax the Commissioner, provincial or city Treasurer, or other revenue officer
shall, from the assessment rolls or other reliable source of information, assess the property of its true
market value and collect the proper tax thereon.

Yet, a perusal of the provision cited above does not explicitly impute the obligation to pay the
documentary stamp tax on the seller. In fact, according to the BIR, all the parties to a transaction are
primarily liable for the documentary stamp tax, as provided by Section 2 of BIR Revenue
Regulations No. 9-2000, which reads:26

SEC. 2. Nature of the Documentary Stamp Tax and Persons Liable for the Tax.

(a) In General. - The documentary stamp taxes under Title VII of the Code is a tax on
certain transactions. It is imposed against "the person making, signing, issuing,
1wphi1

accepting, or transferring" the document or facility evidencing the aforesaid

transactions. Thus, in general, it may be imposed on the transaction itself or upon the
document underlying such act. Any of the parties thereto shall be liable for the full
amount of the tax due: Provided, however, that as between themselves, the said
parties may agree on who shall be liable or how they may share on the cost of the
tax.

(b) Exception. - Whenever one of the parties to the taxable transaction is exempt
from the tax imposed under Title VII of the Code, the other party thereto who is not
exempt shall be the one directly liable for the tax.27

As a general rule, therefore, any of the parties to a transaction shall be liable for the full amount of
the documentary stamp tax due, unless they agree among themselves on who shall be liable for the
same.

In this case, there is no agreement as to the party liable for the documentary stamp tax due on the
sale of the land to be expropriated. But while petitioner rejects any liability for the same, this Court
must take note of petitioners Citizens Charter,28 which functions as a guide for the procedure to be
taken by the DPWH in acquiring real property through expropriation under RA 8974. The Citizens
Charter, issued by petitioner DPWH itself on December 4,2013, explicitly provides that the
documentary stamp tax, transfer tax, and registration fee due on the transfer of the title of land in the
name of the Republic shall be shouldered by the implementing agency of the DPWH, while the
capital gains tax shall be paid by the affected property owner.29 Thus, while there is no specific
agreement between petitioner and respondent, petitioner's issuance of the Citizen's Charter serves
as its notice to the public as to the procedure it shall generally take in cases of expropriation under
RA 8974. Accordingly, it will be rather unjust for this Court to blindly accede to petitioner's vague
rejection of liability in the face of its issuance of the Citizen's Charter, which contains a clear and
unequivocal assumption of accountability for the documentary stamp tax. Had petitioner provided
this Court with more convincing basis, apart from a mere citation of an indefinite provision of the
1997 NIRC, showing that it should be respondent-seller who shall be liable for the documentary
stamp tax due on the sale of the subject property, its rejection of the payment of the same could
have been sustained. WHEREFORE, premises considered, the instant pet1t10n 1s PARTIALLY
GRANTED. The Decision and Order, dated November 15, 2013 and March 10, 2014, respectively,
of the Regional Trial Court, Valenzuela City, Branch 270, in Civil Case No. 140-V-10 are hereby
MODIFIED, in that the imposition of interest on the payment of just compensation as well as the
award of consequential damages are deleted. In addition, respondent Arlene R. Soriano is
ORDERED to pay for the capital gains tax due on the transfer of the expropriated property, while the
documentary stamp tax, transfer tax, and registration fee shall be for the account of petitioner.

SO ORDERED.

DIOSDADO M. PERALTA
Associate Justice

WE CONCUR:

G.R. No. 202690 June 5, 2013

HENRY L. SY, Petitioner,

vs.
LOCAL GOVERNMENT OF QUEZON CITY, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the January 20, 2012 Decision2 and July 16,
2012 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 91964 which affirmed with
modification the August 22, 2008 Order4 of the Regional Trial Court of Quezon City, Branch 80
(RTC) in Civil Case No. Q-96-29352, ordering respondent Local Government of Quezon City (the
City) to pay petitioner Henry L. Sy (Sy) just compensation set as 5,500.00 per square meter (sq.
m.), including 200,000.00 as exemplary damages and attorneys fees equivalent to one percent
(1%) of the total amount due.

The Facts

On November 7, 1996, the City, through then Mayor Ismael Mathay, Jr., filed a complaint for
expropriation with the RTC in order to acquire a 1,000 sq. m. parcel of land, owned and registered
under the name of Sy (subject property),5 which was intended to be used as a site for a multi-
purpose barangay hall, day-care center, playground and community activity center for the benefit of
the residents of Barangay Balingasa, Balintawak, Quezon City.6 The requisite ordinance to
undertake the aforesaid expropriation namely, Ordinance No. Sp-181, s-94, was enacted on April
12, 1994.7

On March 18, 1997, pursuant to Section 198 of Republic Act No. 7160 (RA 7160), otherwise known
as the "Local Government Code of 1991," the City deposited the amount of 241,090.00 with the
Office of the Clerk of Court, representing 15% of the fair market value of the subject property based
on its tax declaration.9

During the preliminary conference on November 8, 2006, Sy did not question the Citys right to
expropriate the subject property. Thus, only the amount of just compensation remained at issue.10

On July 6, 2006, the RTC appointed Edgardo Ostaco (Commissioner Ostaco), Engr. Victor Salinas
(Commissioner Salinas) and Atty. Carlo Alcantara (Commissioner Alcantara) as commissioners to
determine the proper amount of just compensation to be paid by the City for the subject property.
Subsequently, Commissioners Ostaco and Alcantara, in a Report dated February 11, 2008,
recommended the payment of 5,500.00 per sq. m., to be computed from the date of the filing of the
expropriation complaint, or on November 7, 1996. On the other hand, Commissioner Salinas filed a
separate Report dated March 7, 2008, recommending the higher amount of 13,500.00 per sq. m.
as just compensation.11

The RTC Ruling

In the Order dated August 22, 2008,12 the RTC, citing the principle that just compensation must be
fair not only to the owner but to the expropriator as well, adopted the findings of Commissioners
Ostaco and Alcantara and thus, held that the just compensation for the subject property should be
set at 5,500.00 per sq. m.13 Further, it found no basis for the award of damages and back rentals in
favor of Sy.14 Finally, while legal interest was not claimed, for equity considerations, it awarded six
percent (6%) legal interest, computed from November 7, 1996 until full payment of just
compensation.15

Dissatisfied, Sy filed an appeal with the CA.16

The CA Ruling

In the Decision dated January 20, 2012,17 the CA affirmed the RTCs ruling but modified the same,
ordering the City to pay Sy the amount of 200,000.00 as exemplary damages and attorneys fees
equivalent to one percent (1%) of the total amount due.

It found the appraisal of Commissioners Ostaco and Alcantara for the subject property to be more
believable than the 13,000.00 per sq. m. valuation made by independent appraisers Cuervo and
Asian Appraisers in 1995 and 1996, respectively, considering that it was arrived at after taking into
account: (a) the fair market value of the subject property in the amount of 4,000.00 per sq. m.
based on the September 4, 1996 recommendation of the City Appraisal Committee;18 (b) the market
value of the subject lot in the amount of 2,000.00 per sq. m. based on several sworn statements
made by Sy himself;19 and (c) Sys own tax declaration for 1996,20 stating that the subject property
has a total market value of 2,272,050.00. Accordingly, it held that the fair market value of
5,500.00 per sq. m., or 5,500,000.00 in total, for the 1,000 sq. m. subject property arrived at by
Commissioners Ostaco and Alcantara was more than fair and reasonable.21

The CA also denied Sys assertion that he should be entitled to damages on account of the
purported shelving of his housing project, finding no sufficient evidence to support the same.
Likewise, it observed that the expropriation would not leave the rest of Sys properties useless as
they would still be accessible through a certain Lot 8 based on the Property Identification Map.22

Nonetheless, citing the case of Manila International Airport Authority v. Rodriguez (MIAA),23 it
awarded exemplary damages in the amount of 200,000.00 and attorneys fees equivalent to one
percent (1%) of the amount due because of the Citys taking of the subject property without even
initiating expropriation proceedings.24 It, however, denied Sys claim of back rentals considering that
the RTC had already granted legal interest in his favor.25

Aggrieved, Sy moved for reconsideration which was denied in the Resolution dated July 16, 201226
for being filed out of time.27 The City also filed a motion for reconsideration which was equally denied
for lack of merit.28

Hence, this petition.

Issues Before The Court

The present controversy revolves around the issue of whether the CA correctly: (a) dismissed Sys
motion for reconsideration for being filed out of time; (b) upheld the amount of just compensation as
determined by the RTC as well as its grant of six percent (6%) legal interest; and (c) awarded
exemplary damages and attorneys fees.

The Courts Ruling

The petition is partly meritorious.

A. Failure to seasonably move for

reconsideration; excusable
negligence; relaxation of procedural
rules

At the outset, the Court observes that Sys motion for reconsideration was filed out of time and thus,
was properly dismissed by the CA. Records show that, as per the Postmasters Certification, the
CAs January 20, 2012 Decision was received by Sy on January 26, 2012 and as such, any motion
for reconsideration therefrom should have been filed not later than fifteen (15) days from receipt,29 or
on February 10, 2012.30 However, Sy filed his motion for reconsideration (subject motion) a day late,
or on February 13, 2012,31 which thus, renders the CA decision final and executory.32

In this regard, it is apt to mention that Sys counsel, Atty. Tranquilino F. Meris (Atty. Meris), claims
that his secretarys inadvertent placing of the date January 27, 2012, instead of January 26, 2012,
on the Notice of Decision33 constitutes excusable negligence which should therefore, justify a
relaxation of the rules.

The assertion is untenable.

A claim of excusable negligence does not loosely warrant a relaxation of the rules. Verily, the party
invoking such should be able to show that the procedural oversight or lapse is attended by a genuine
miscalculation or unforeseen fortuitousness which ordinary prudence could not have guarded
against so as to justify the relief sought.34 The standard of carerequired is that which an ordinarily
prudent man bestows upon his important business.35 In this accord, the duty rests on every counsel
to see to adopt and strictly maintain a system that will efficiently take into account all court notices
sent to him.36

Applying these principles, the Court cannot excuse Atty. Meris misstep based on his proffered
reasons. Evidently, the erroneous stamping of the Notice of Decision could have been averted if only
he had instituted a credible filing system in his office to account for oversights such as that
committed by his secretary. Indeed, ordinary prudence could have prevented such mistake.

Be that as it may, procedural rules may, nonetheless, be relaxed for the most persuasive of reasons
in order to relieve a litigant of an injustice not commensurate with the degree of his thoughtlessness
in not complying with the procedure prescribed.37 Corollarily, the rule, which states that the mistakes
of counsel bind the client, may not be strictly followed where observance of it would result in the
outright deprivation of the clients liberty or property, or where the interest of justice so requires.38

As applied in this case, the Court finds that the procedural consequence of the above-discussed
one-day delay in the filing of the subject motion which, as a matter of course, should render the
CAs January 20, 2012 Decision already final and executory and hence, bar the instant petition is
incommensurate to the injustice which Sy may suffer. This is in line with the Courts observation that
the amount of just compensation, the rate of legal interest, as well as the time of its accrual, were
incorrectly adjudged by both the RTC and the CA, contrary to existing jurisprudence. In this respect,
the Court deems it proper to relax the rules of procedure and thus, proceed to resolve these
substantive issues.

B. Rate of legal interest and time of accrual

Based on a judicious review of the records and application of jurisprudential rulings, the Court holds
that the correct rate of legal interest to be applied is twelve percent (12%) and not six percent (6%)
per annum, owing to the nature of the Citys obligation as an effective forbearance.

In the case of Republic v. CA,39 the Court ruled that the debt incurred by the government on account
of the taking of the property subject of an expropriation constitutes an effective forbearance which
therefore, warrants the application of the 12% legal interest rate, viz:

The constitutional limitation of "just compensation" is considered to be the sum equivalent to the
market value of the property, broadly described to be the price fixed by the seller in open market in
the usual and ordinary course of legal action and competition or the fair value of the property as
between one who receives, and one who desires to sell, it fixed at the time of the actual taking by
the government. Thus, if property is taken for public use before compensation is deposited with the
court having jurisdiction over the case, the final compensation must include interests on its just value
to be computed from the time the property is taken to the time when compensation is actually paid or
deposited with the court. In fine, between the taking of the property and the actual payment, legal
interests accrue in order to place the owner in a position as good as (but not better than) the position
he was in before the taking occurred.

The Bulacan trial court, in its 1979 decision, was correct in imposing interests on the zonal value of
the property to be computed from the time petitioner instituted condemnation proceedings and "took"
the property in September 1969. This allowance of interest on the amount found to be the value of
the property as of the time of the taking computed, being an effective forbearance, at 12% per
annum should help eliminate the issue of the constant fluctuation and inflation of the value of the
currency over time. x x x (Emphasis and underscoring supplied)

In similar regard, the Court, in Land Bank of the Philippines v. Rivera,40 pronounced that:

In many cases decided by this Court,41 it has been repeated time and again that the award of 12%
interest is imposed in the nature of damages for delay in payment which in effect makes the
obligation on the part of the government one of forbearance. This is to ensure prompt payment of the
value of the land and limit the opportunity loss of the owner that can drag from days to decades.
(Emphasis and underscoring supplied)

As to the reckoning point on which the legal interest should accrue, the same should be computed
from the time of the taking of the subject property in 1986 and not from the filing of the complaint for
expropriation on November 7, 1996.

Records show that the City itself admitted in its Appellees Brief filed before the CA that as early as
1986, "a burden was already imposed upon the owner of the subject property x x x, considering that
the expropriated property was already being used as Barangay day care and office."42 Thus, the
property was actually taken during that time and from thereon, legal interest should have already
accrued. In this light, the Court has held that:43
x x x [T]he final compensation must include interests on its just value to be computed from the time
the property is taken to the time when compensation is actually paid or deposited with the court. x x
x (Emphasis supplied)

This is based on the principle that interest "runs as a matter of law and follows from the right of the
landowner to be placed in as good position as money can accomplish, as of the date of the taking."44

Notably, the lack of proper authorization, i.e., resolution to effect expropriation,45 did not affect the
character of the Citys taking of the subject property in 1986 as the CA, in its January 20, 2012
Decision, suggests. Case law dictates that there is "taking" when the owner is actually deprived or
dispossessed of his property; when there is a practical destruction or a material impairment of the
value of his property or when he is deprived of the ordinary use thereof.46 Therefore, notwithstanding
the lack of proper authorization, the legal character of the Citys action as one of "taking" did not
change. In this relation, the CA noted that the City enacted Ordinance No. Sp-181, s-94, only on
April 12, 1994 and filed its expropriation complaint on November 7, 1996. However, as it previously
admitted, it already commenced with the taking of the subject property as early as 1986.
Accordingly, interest must run from such time.

This irregularity does not, however, proceed without any consequence. As correctly observed by the
1wphi1

CA, citing as basis the MIAA case, exemplary damages and attorneys fees should be awarded to
the landowner if the government takes possession of the property for a prolonged period of time
without properly initiating expropriation proceedings. The MIAA ruling was applied in the more recent
case of City of Iloilo v. Judge Lolita Contreras-Besana ,47 wherein the Court said:

We stress, however, that the City of Iloilo should be held liable for damages for taking private
respondents property without payment of just compensation. In Manila International Airport Authority
v. Rodriguez, the Court held that a government agencys prolonged occupation of private property
without the benefit of expropriation proceedings undoubtedly entitled the landowner to damages:

Such pecuniary loss entitles him to adequate compensation in the form of actual or compensatory
damages, which in this case should be the legal interest (6%) on the value of the land at the time of
taking, from said point up to full payment by the MIAA. This is based on the principle that interest
"runs as a matter of law and follows from the right of the landowner to be placed in as good position
as money can accomplish, as of the date of the taking x x x.

xxxx

For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of
expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the lot and
negotiating with any of the owners of the property. To our mind, these are wanton and irresponsible
acts which should be suppressed and corrected. Hence, the award of exemplary damages and
attorneys fees is in order. x x x. (Emphasis and underscoring supplied; citations omitted)

All told, the Court finds the grant of exemplary damages in the amount of 200,000.00 as well as
attorneys fees equivalent to 1% of the total amount due amply justified, square as it is with existing
jurisprudence.

C. Amount of just compensation

Finally, the Court cannot sustain the amount of 5,500.00/sq. m. as just compensation which was
set by the RTC and upheld by the CA. The said valuation was actually arrived at after considering:
(a) the September 4, 1996 recommendation of the City Appraisal Committee; (b) several sworn
statements made by Sy himself; and (c) Sys own tax declaration for 1996.48

It is well-settled that the amount of just compensation is to be ascertained as of the time of the
taking.49 However, the above-stated documents do not reflect the value of the subject property at the
time of its taking in 1986 but rather, its valuation in 1996. Consequently, the case must be remanded
to the RTC in order to properly determine the amount of just compensation during such time the
subject property was actually taken.

WHEREFORE, the petition is PARTLY GRANTED. The January 20, 2012 Decision and July 16,
2012 Resolution of the Court of Appeals in CA-G.R. CV No. 91964 are hereby SET ASIDE.
Accordingly, the case is REMANDED to the trial court for the proper determination of the amount of
just compensation in accordance with this Decision. To forestall any further delay in the resolution of
this case, the trial court is hereby ordered to fix the just compensation for petitioner Henry L. Sy's
property with dispatch and report to the Court its compliance. Finally, respondent Local Government
of Quezon City is ordered to PAY exemplary damages in the amount of 200,000.00 and attorney's
fees equivalent to one percent (1%) of the amount due, after final determination of the amount of just
compensation.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

Republic of the Philippines

SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 179334 July 1, 2013

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT

ENGINEER CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.

DECISION

PERALTA, J.:

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of
Appeals (CA) Decision1 dated July 31, 2007 in CA-G.R. CV No. 77997. The assailed decision
affirmed with modification the Regional Trial Court (RTC)2 Decision3 dated March 22, 2002 in Civil
Case No. 208-M-95.

The case stemmed from the following factual and procedural antecedents:
Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a parcel of land
with an area of 7,268 square meters located in San Pablo, Malolos, Bulacan and covered by
Transfer Certificate of Title (TCT) No. T-430064 of the Register of Deeds of Bulacan. Said parcel of
land was among the properties taken by the government sometime in 1940 without the owners
consent and without the necessary expropriation proceedings and used for the construction of the
MacArthur Highway.5

In a letter6 dated December 15, 1994, respondents demanded the payment of the fair market value
of the subject parcel of land. Petitioner Celestino R. Contreras (petitioner Contreras), then District
Engineer of the First Bulacan Engineering District of petitioner Department of Public Works and
Highways (DPWH), offered to pay the subject land at the rate of 0.70 per square meter per
Resolution of the Provincial Appraisal Committee (PAC) of Bulacan.7 Unsatisfied with the offer,
respondents demanded for the return of their property or the payment of compensation at the current
fair market value.8

As their demand remained unheeded, respondents filed a Complaint9 for recovery of possession with
damages against petitioners, praying that they be restored to the possession of the subject parcel of
land and that they be paid attorneys fees.10 Respondents claimed that the subject parcel of land was
assessed at 2,543,800.00.11

Instead of filing their Answer, petitioners moved for the dismissal of the complaint on the following
grounds: (1) that the suit is against the State which may not be sued without its consent; (2) that the
case has already prescribed; (3) that respondents have no cause of action for failure to exhaust
administrative remedies; and (4) if respondents are entitled to compensation, they should be paid
only the value of the property in 1940 or 1941.12

On June 28, 1995, the RTC issued an Order13 granting respondents motion to dismiss based on the
doctrine of state immunity from suit. As respondents claim includes the recovery of damages, there
is no doubt that the suit is against the State for which prior waiver of immunity is required. When
elevated to the CA,14 the appellate court did not agree with the RTC and found instead that the
doctrine of state immunity from suit is not applicable, because the recovery of compensation is the
only relief available to the landowner. To deny such relief would undeniably cause injustice to the
landowner. Besides, petitioner Contreras, in fact, had earlier offered the payment of compensation
although at a lower rate.Thus, the CA reversed and set aside the dismissal of the complaint and,
consequently, remanded the case to the trial court for the purpose of determining the just
compensation to which respondents are entitled to recover from the government.15 With the finality of
the aforesaid decision, trial proceeded in the RTC.

The Branch Clerk of Court was initially appointed as the Commissioner and designated as the
Chairman of the Committee that would determine just compensation,16 but the case was later
referred to the PAC for the submission of a recommendation report on the value of the subject
property.17 In PAC Resolution No. 99-007,18 the PAC recommended the amount of 1,500.00 per
square meter as the just compensation for the subject property.

On March 22, 2002, the RTC rendered a Decision,19 the dispositive portion of which reads:

WHEREFORE, premises considered, the Department of Public Works and Highways or its duly
assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One
Thousand Five Hundred Pesos (1,500.00) per square meter for the lot subject matter of this case
in accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001.

SO ORDERED.20
On appeal, the CA affirmed the above decision with the modification that the just compensation
stated above should earn interest of six percent (6%) per annum computed from the filing of the
action on March 17, 1995 until full payment.21

In its appeal before the CA, petitioners raised the issues of prescription and laches, which the CA
brushed aside on two grounds: first, that the issue had already been raised by petitioners when the
case was elevated before the CA in CA-G.R. CV No. 51454. Although it was not squarely ruled upon
by the appellate court as it did not find any reason to delve further on such issues, petitioners did not
assail said decision barring them now from raising exactly the same issues; and second, the issues
proper for resolution had been laid down in the pre-trial order which did not include the issues of
prescription and laches. Thus, the same can no longer be further considered. As to the propriety of
the propertys valuation as determined by the PAC and adopted by the RTC, while recognizing the
rule that the just compensation should be the reasonable value at the time of taking which is 1940,
the CA found it necessary to deviate from the general rule. It opined that it would be obviously unjust
and inequitable if respondents would be compensated based on the value of the property in 1940
which is 0.70 per sq m, but the compensation would be paid only today. Thus, the appellate court
found it just to award compensation based on the value of the property at the time of payment. It,
therefore, adopted the RTCs determination of just compensation of 1,500.00 per sq m as
recommended by the PAC. The CA further ordered the payment of interest at the rate of six percent
(6%) per annum reckoned from the time of taking, which is the filing of the complaint on March 17,
1995.

Aggrieved, petitioners come before the Court assailing the CA decision based on the following
grounds:

I.

THE COURT OF APPEALS GRAVELY ERRED IN GRANTING JUST COMPENSATION TO

RESPONDENTS CONSIDERING THE HIGHLY DUBIOUS AND QUESTIONABLE
CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY.

II.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING JUST COMPENSATION TO

RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND
DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES.

III.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURTS DECISION
ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET
VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS.22

Petitioners insist that the action is barred by prescription having been filed fifty-four (54) years after
the accrual of the action in 1940. They explain that the court can motu proprio dismiss the complaint
if it shows on its face that the action had already prescribed. Petitioners likewise aver that
respondents slept on their rights for more than fifty years; hence, they are guilty of laches. Lastly,
petitioners claim that the just compensation should be based on the value of the property at the time
of taking in 1940 and not at the time of payment.23

The petition is partly meritorious.

The instant case stemmed from an action for recovery of possession with damages filed by
respondents against petitioners. It, however, revolves around the taking of the subject lot by
petitioners for the construction of the MacArthur Highway. There is taking when the expropriator
enters private property not only for a momentary period but for a permanent duration, or for the
purpose of devoting the property to public use in such a manner as to oust the owner and deprive
him of all beneficial enjoyment thereof.24

It is undisputed that the subject property was taken by petitioners without the benefit of expropriation
proceedings for the construction of the MacArthur Highway. After the lapse of more than fifty years,
the property owners sought recovery of the possession of their property. Is the action barred by
prescription or laches? If not, are the property owners entitled to recover possession or just
compensation?

As aptly noted by the CA, the issues of prescription and laches are not proper issues for resolution
as they were not included in the pre-trial order. We quote with approval the CAs ratiocination in this
wise:

Procedurally, too, prescription and laches are no longer proper issues in this appeal. In the pre-trial
order issued on May 17, 2001, the RTC summarized the issues raised by the defendants, to wit: (a)
whether or not the plaintiffs were entitled to just compensation; (b) whether or not the valuation
would be based on the corresponding value at the time of the taking or at the time of the filing of the
action; and (c) whether or not the plaintiffs were entitled to damages. Nowhere did the pre-trial order
indicate that prescription and laches were to be considered in the adjudication of the RTC.25

To be sure, the pre-trial order explicitly defines and limits the issues to be tried and controls the
subsequent course of the action unless modified before trial to prevent manifest injustice.26

Even if we squarely deal with the issues of laches and prescription, the same must still fail. Laches is
principally a doctrine of equity which is applied to avoid recognizing a right when to do so would
result in a clearly inequitable situation or in an injustice.27 This doctrine finds no application in this
case, since there is nothing inequitable in giving due course to respondents claim. Both equity and
the law direct that a property owner should be compensated if his property is taken for public use.28
Neither shall prescription bar respondents claim following the long-standing rule "that where private
property is taken by the Government for public use without first acquiring title thereto either through
expropriation or negotiated sale, the owners action to recover the land or the value thereof does not
prescribe."29

When a property is taken by the government for public use, jurisprudence clearly provides for the
remedies available to a landowner. The owner may recover his property if its return is feasible or, if it
is not, the aggrieved owner may demand payment of just compensation for the land taken.30 For
failure of respondents to question the lack of expropriation proceedings for a long period of time,
they are deemed to have waived and are estopped from assailing the power of the government to
expropriate or the public use for which the power was exercised. What is left to respondents is the
right of compensation.31 The trial and appellate courts found that respondents are entitled to
compensation. The only issue left for determination is the propriety of the amount awarded to
respondents.

Just compensation is "the fair value of the property as between one who receives, and one who
desires to sell, x x x fixed at the time of the actual taking by the government." This rule holds true
when the property is taken before the filing of an expropriation suit, and even if it is the property
owner who brings the action for compensation.32
The issue in this case is not novel.

In Forfom Development Corporation [Forfom] v. Philippine National Railways [PNR],33 PNR entered
the property of Forfom in January 1973 for public use, that is, for railroad tracks, facilities and
appurtenances for use of the Carmona Commuter Service without initiating expropriation
proceedings.34 In 1990, Forfom filed a complaint for recovery of possession of real property and/or
damages against PNR. In Eusebio v. Luis,35 respondents parcel of land was taken in 1980 by the
City of Pasig and used as a municipal road now known as A. Sandoval Avenue in Pasig City without
the appropriate expropriation proceedings. In 1994, respondent demanded payment of the value of
the property, but they could not agree on its valuation prompting respondent to file a complaint for
reconveyance and/or damages against the city government and the mayor. In Manila International
Airport Authority v. Rodriguez,36 in the early 1970s, petitioner implemented expansion programs for
its runway necessitating the acquisition and occupation of some of the properties surrounding its
premises. As to respondents property, no expropriation proceedings were initiated. In 1997,
1w phi 1

respondent demanded the payment of the value of the property, but the demand remained
unheeded prompting him to institute a case for accion reivindicatoria with damages against
petitioner. In Republic v. Sarabia,37 sometime in 1956, the Air Transportation Office (ATO) took
possession and control of a portion of a lot situated in Aklan, registered in the name of respondent,
without initiating expropriation proceedings. Several structures were erected thereon including the
control tower, the Kalibo crash fire rescue station, the Kalibo airport terminal and the headquarters of
the PNP Aviation Security Group. In 1995, several stores and restaurants were constructed on the
remaining portion of the lot. In 1997, respondent filed a complaint for recovery of possession with
damages against the storeowners where ATO intervened claiming that the storeowners were its
lessees.

The Court in the above-mentioned cases was confronted with common factual circumstances where
the government took control and possession of the subject properties for public use without initiating
expropriation proceedings and without payment of just compensation, while the landowners failed for
a long period of time to question such government act and later instituted actions for recovery of
possession with damages. The Court thus determined the landowners right to the payment of just
compensation and, more importantly, the amount of just compensation. The Court has uniformly
ruled that just compensation is the value of the property at the time of taking that is controlling for
purposes of compensation. In Forfom, the payment of just compensation was reckoned from the
time of taking in 1973; in Eusebio, the Court fixed the just compensation by determining the value of
the property at the time of taking in 1980; in MIAA, the value of the lot at the time of taking in 1972
served as basis for the award of compensation to the owner; and in Republic, the Court was
convinced that the taking occurred in 1956 and was thus the basis in fixing just compensation. As in
said cases, just compensation due respondents in this case should, therefore, be fixed not as of the
time of payment but at the time of taking, that is, in 1940.

The reason for the rule has been clearly explained in Republic v. Lara, et al.,38 and repeatedly held
by the Court in recent cases, thus:

x x x "The value of the property should be fixed as of the date when it was taken and not the date of
the filing of the proceedings." For where property is taken ahead of the filing of the condemnation
proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the
entry by the plaintiff upon the property may have depreciated its value thereby; or, there may have
been a natural increase in the value of the property from the time it is taken to the time the complaint
is filed, due to general economic conditions. The owner of private property should be compensated
only for what he actually loses; it is not intended that his compensation shall extend beyond his loss
or injury. And what he loses is only the actual value of his property at the time it is taken x x x.39
Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was
0.70/sq m.40 Hence, it should, therefore, be used in determining the amount due respondents
instead of the higher value which is 1,500.00. While disparity in the above amounts is obvious and
may appear inequitable to respondents as they would be receiving such outdated valuation after a
very long period, it is equally true that they too are remiss in guarding against the cruel effects of
belated claim. The concept of just compensation does not imply fairness to the property owner
alone. Compensation must be just not only to the property owner, but also to the public which
ultimately bears the cost of expropriation.41

Clearly, petitioners had been occupying the subject property for more than fifty years without the
benefit of expropriation proceedings. In taking respondents property without the benefit of
expropriation proceedings and without payment of just compensation, petitioners clearly acted in
utter disregard of respondents proprietary rights which cannot be countenanced by the Court.42 For
said illegal taking, respondents are entitled to adequate compensation in the form of actual or
compensatory damages which in this case should be the legal interest of six percent (6%) per
annum on the value of the land at the time of taking in 1940 until full payment.43 This is based on the
principle that interest runs as a matter of law and follows from the right of the landowner to be placed
in as good position as money can accomplish, as of the date of taking.44

WHEREFORE, premises considered, the pet1t10n is PARTIALLY GRANTED. The Court of Appeals
Decision dated July 31, 2007 in CAG.R. CV No. 77997 is MODIFIED, in that the valuation of the
subject property owned by respondents shall be F0.70 instead of 1,500.00 per square meter, with
interest at six percent ( 6o/o) per annum from the date of taking in 1940 instead of March 17, 1995,
until full payment.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 165354 January 12, 2015

REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL POWER CORPORATION,

Petitioner,
vs.
HEIRS OF SATURNINO Q. BORBON, AND COURT OF APPEALS, Respondents.

DECISION

BERSAMIN, J.:

The expropriator who has taken possession of the property subject of expropriation is obliged to pay
reasonable compensation to the landowner for the period of such possession although the
proceedings had been discontinued on the ground that the public purpose for the expropriation had
meanwhile ceased.

Antecedents
The National Power Corporation (NAPOCOR) is a government-owned and -controlled corporation
vested with authority under Republic Act No. 6395, as amended, to undertake the development of
hydro-electric generation of power, production of electricity from any and all sources, construction,
operation and maintenance of power plants, auxiliary plants, dams, reservoirs, pipes, main
transmission lines, power stations and substations, and other works for the purpose of developing
hydraulic power from any river, lake, creek, spring and waterfalls in the Philippines and to supply
such power to the inhabitants thereof.1

In February 1993, NAPOCOR entered a property located in Barangay San Isidro, Batangas City in
order to construct and maintain transmission lines for the 230 KV Mahabang Parang-Pinamucan
Power Transmission Project.2 Respondents heirs of Saturnino Q. Borbon owned the property, with a
total area of 14,257 square meters, which was registered under Transfer Certificate of Title No. T-
9696 of the Registry of Deeds of Batangas.3

On May 26, 1995, NAPOCOR filed a complaint for expropriation in the Regional Trial Court in
Batangas City (RTC),4 seeking the acquisition of an easement of right of way over a portion of the
property involving an area of only 6,326 square meters, more or less,5 alleging that it had negotiated
with the respondents for the acquisition of the easement but they had failed to reach any agreement;
and that, nonetheless, it was willing to deposit the amount of 9,790.00 representing the assessed
value of the portion sought to be expropriated.6 It prayed for the issuance of a writ of possession
upon deposit to enable it to enter and take possession and control of the affected portion of the
property; to demolish all improvements existing thereon; and to commence construction of the
transmission line project. It likewise prayed for the appointment of three commissioners to determine
the just compensation to be paid.7

In their answer with motion to dismiss,8 the respondents staunchly maintained that NAPOCOR had
not negotiated with them before entering the property and that the entry was done without their
consent in the process, destroying some fruit trees without payment, and installing five transmission
line posts and five woodpoles for its project;9 that the area being expropriated only covered the
portion directly affected by the transmission lines; that the remaining portion of the property was also
affected because the transmission line passed through the center of the land, thereby dividing the
land into three lots; that the presence of the high tension transmission line had rendered the entire
property inutile for any future use and capabilities;10 that, nonetheless, they tendered no objection to
NAPOCORs entry provided it would pay just compensation not only for the portion sought to be
expropriated but for the entire property whose potential was greatly diminished, if not totally lost, due
to the project;11 and that their property was classified as industrial land. Thus, they sought the
dismissal of the complaint, the payment of just compensation of 1,000.00/square meter, and
attorneys fees;12 and to be allowed to nominate their representative to the panel of commissioners to
be appointed by the trial court.13

In the pre-trial conference conducted on December 20, 1995, the parties stipulated on: (1) the
location of the property; (2) the number of the heirs of the late Saturnino Q. Borbon; (3) the names of
the persons upon whom title to the property was issued; and (4) the ownership and possession of
the property.14 In its order of that date, the RTC directed the parties to submit the names of their
nominees to sit in the panel of commissioners within 10 days from the date of the pre-trial.15

The RTC constituted the panel of three commissioners. Two commissioners submitted a joint report
on April 8, 1999,16 in which they found that the property was classified as industrial land located
within the Industrial 2 Zone;17 that although the property used to be classified as agricultural (i.e.,
horticultural and pasture land), it was reclassified to industrial land for appraisal or taxation purposes
on June 30, 1994; and that the reclassification was made on the basis of a certification issued by the
Zoning Administrator pursuant to Section 3.10 (d) of the Amended Zoning Ordinance (1989) of the
City of Batangas.18 The two commissioners appraised the value at 550.00/square meter.19 However,
the third commissioner filed a separate report dated March 16, 1999,20 whereby he recommended
the payment of "an easement fee of at least ten percent (10%) of the assessed value indicated in the
tax declaration21 plus cost of damages in the course of the construction, improvements affected and
tower occupancy fee."22

The parties then submitted their respective objections to the reports. On their part, the respondents
maintained that NAPOCOR should compensate them for the entire property at the rate of
550.00/square meter because the property was already classified as industrial land at the time
NAPOCOR entered it.23 In contrast, NAPOCOR objected to the joint report, insisting that the property
was classified as agricultural land at the time of its taking in March 1993; and clarifying that it was
only seeking an easement of right of way over a portion of the property, not the entire area thereof,
so that it should pay only 10% of the assessed value of the portion thus occupied.24

In the judgment dated November 27, 2000,25 the RTC adopted the recommendation contained in the
joint report, and ruled thusly:

The price to be paid for an expropriated land is its value at the time of taking, which is the date when
the plaintiff actually entered the property or the date of the filing of the complaint for expropriation. In
this case, there is no evidence as to when the plaintiff actually entered the property in question, so
the reference point should be the date of filing of the complaint, which is May 5, 1995.

On this date, the property in question was already classified as industrial. So, the Joint Report
(Exhibit "1") is credible on this point. The two Commissioners who submitted the Joint Report are
government officials who were not shown to be biased. So, that their report should be given more
weight than the minority report submitted by a private lawyer representing the plaintiff. In view of
these, the Court adopts the Joint Report and rejects the minority report. The former fixed the just
compensation at 550.00 per square meter for the whole lot of 14,257 square meters.26

Accordingly, the RTC ordered NAPOCOR to pay the respondents: (1) just compensation for the
whole area of 14,257 square meters at the rate of 550.00/square meter; (2) legal rate of interest
from May 5, 1995 until full payment; and (3) the costs of suit.27

NAPOCOR appealed (CA-G.R. No. 72069).

On April 29, 2004,28 the CA promulgated its decision, viz:

WHEREFORE, premises considered, the Decision dated November 27, 2000 of Branch I of the
Regional Trial Court of Batangas City, is hereby AFFIRMED with the MODIFICATION that plaintiff-
appellant shall pay only for the occupied 6,326 square meters of the subject real property at the rate
of 550.00 per square meter and to pay legal interest therefrom until fully paid.

SO ORDERED.29

Hence, this appeal by NAPOCOR.

Issue

On December 3, 2012, during the pendency of the appeal, NAPOCOR filed a Motion to Defer
Proceedings stating that negotiations between the parties were going on with a view to the amicable
settlement of the case.30
On January 3, 2014, NAPOCOR filed a Manifestation and Motion to Discontinue Expropriation
Proceedings,31 informing that the parties failed to reach an amicable agreement; that the property
sought to be expropriated was no longer necessary for public purpose because of the intervening
retirement of the transmission lines installed on the respondents property;32 that because the public
purpose for which such property would be used thereby ceased to exist, the proceedings for
expropriation should no longer continue, and the State was now duty-bound to return the property to
its owners; and that the dismissal or discontinuance of the expropriation proceedings was in
accordance with Section 4, Rule 67 of the Rules of Court. Hence, NAPOCOR prayed that the
proceedings be discontinued "under such terms as the court deems just and equitable,"33 and that
the compensation to be awarded the respondents be reduced by the equivalent of the benefit they
received from the land during the time of its occupation, for which purpose the case could be
remanded to the trial court for the determination of reasonable compensation to be paid to them.34

In light of its Manifestation and Motion to Discontinue Expropriation Proceedings, NAPOCOR

contends that the expropriation has become without basis for lack of public purpose as a result of
the retirement of the transmission lines; that if expropriation still proceeds, the Government will be
unduly burdened by payment of just compensation for property it no longer requires; and that there
is legal basis in dismissing the proceedings, citing Metropolitan Water District v. De los Angeles35
where the Court granted petitioners prayer for the quashal of expropriation proceedings and the
eventual dismissal of the proceedings on the ground that the land sought to be expropriated was no
longer "indispensably necessary" in the maintenance and operation of petitioner's waterworks
system.

The issue to be considered and resolved is whether or not the expropriation proceedings should be
discontinued or dismissed pending appeal.

Ruling of the Court

The dismissal of the proceedings for expropriation at the instance of NAPOCOR is proper, but,
conformably with Section 4,36 Rule 67 of the Rules of Court, the dismissal or discontinuance of the
proceedings must be upon such terms as the court deems just and equitable.

Before anything more, we remind the parties about the nature of the power of eminent domain. The
right of eminent domain is "the ultimate right of the sovereign power to appropriate, not only the
public but the private property of all citizens within the territorial sovereignty, to public purpose."37 But
the exercise of such right is not unlimited, for two mandatory requirements should underlie the
Governments exercise of the power of eminent domain, namely: (1) that it is for a particular public
purpose; and (2) that just compensation be paid to the property owner.38 These requirements partake
the nature of implied conditions that should be complied with to enable the condemnor to keep the
property expropriated.39

Public use, in common acceptation, means "use by the public." However, the concept has expanded
to include utility, advantage or productivity for the benefit of the public.40 In Asia's Emerging Dragon
Corporation v. Department of Transportation and Communications,41 Justice Corona, in his
dissenting opinion said that:

To be valid, the taking must be for public use. The meaning of the term "public use" has evolved
over time in response to changing public needs and exigencies. Public use which was traditionally
understood as strictly limited to actual "use by the public" has already been abandoned. "Public use"
has now been held to be synonymous with "public interest," "public benefit," and "public
convenience."
It is essential that the element of public use of the property be maintained throughout the
proceedings for expropriation. The effects of abandoning the public purpose were explained in
Mactan-Cebu International Airport Authority v. Lozada, Sr.,42 to wit:

More particularly, with respect to the element of public use, the expropriator should commit to use
the property pursuant to the purpose stated in the petition for expropriation filed, failing which, it
should file another petition for the new purpose. If not, it is then incumbent upon the expropriator to
return the said property to its private owner, if the latter desires to reacquire the same. Otherwise,
the judgment of expropriation suffers an intrinsic flaw, as it would lack one indispensable element for
the proper exercise of the power of eminent domain, namely, the particular public purpose for which
the property will be devoted. Accordingly, the private property owner would be denied due process of
law, and the judgment would violate the property owner's right to justice, fairness and equity.43

A review reveals that Metropolitan Water District v. De los Angeles44 is an appropriate precedent
herein. There, the Metropolitan Water District passed a board resolution requesting the Attorney-
General to file a petition in the Court of First Instance of the Province of Rizal praying that it be
permitted to discontinue the condemnation proceedings it had initiated for the expropriation of a
parcel of land in Montalban, Rizal to be used in the construction of the Angat Waterworks System. It
claimed that the land was no longer indispensably necessary in the maintenance and operation of its
waterworks system, and that the expropriation complaint should then be dismissed. The Court,
expounding on the power of the State to exercise the right of eminent domain, then pronounced:

There is no question raised concerning the right of the plaintiff here to acquire the land under the
power of eminent domain. That power was expressly granted it by its charter. The power of eminent
1wphi 1

domain is a right reserved to the people or Government to take property for public use. It is the right
of the state, through its regular organization, to reassert either temporarily or permanently its
dominion over any portion of the soil of the state on account of public necessity and for the public
good. The right of eminent domain is the right which the Government or the people retains over the
estates of individuals to resume them for public use. It is the right of the people, or the sovereign, to
dispose, in case of public necessity and for the public safety, of all the wealth contained in the state.45

Indeed, public use is the fundamental basis for the action for expropriation; hence, NAPOCORs
motion to discontinue the proceedings is warranted and should be granted. The Court has observed
in Metropolitan Water District v. De los Angeles:

It is not denied that the purpose of the plaintiff was to acquire the land in question for public use. The
fundamental basis then of all actions brought for the expropriation of lands, under the power of
eminent domain, is public use. That being true, the very moment that it appears at any stage of the
proceedings that the expropriation is not for a public use, the action must necessarily fail and should
be dismissed, for the reason that the action cannot be maintained at all except when the
expropriation is for some public use. That must be true even during the pendency of the appeal or at
any other stage of the proceedings. If, for example, during the trial in the lower court, it should be
made to appear to the satisfaction of the court that the expropriation is not for some public use, it
would be the duty and the obligation of the trial court to dismiss the action. And even during the
pendency of the appeal, if it should be made to appear to the satisfaction of the appellate court that
the expropriation is not for public use, then it would become the duty and the obligation of the
appellate court to dismiss it.

In the present case the petitioner admits that the expropriation of the land in question is no longer
necessary for public use. Had that admission been made in the trial court the case should have been
dismissed there. It now appearing positively, by resolution of the plaintiff, that the expropriation is not
necessary for public use, the action should be dismissed even without a motion on the part of the
plaintiff. The moment it appears in whatever stage of the proceedings that the expropriation is not for
a public use the complaint should be dismissed and all the parties thereto should be relieved from
further annoyance or litigation.46 (underscoring and emphasis supplied)

It is notable that the dismissal of the expropriation proceedings in Metropolitan Water District v. De
los Angeles was made subject to several conditions in order to address the dispossession of the
defendants of their land, and the inconvenience, annoyance and damages suffered by the
defendants on account of the proceedings. Accordingly, the Court remanded the case to the trial
court for the issuance of a writ of possession ordering Metropolitan Water District to immediately
return possession of the land to the defendants, and for the determination of damages in favor of the
defendants, the claims for which must be presented within 30 days from the return of the record to
the court of origin and notice thereof.47

Here, NAPOCOR seeks to discontinue the expropriation proceedings on the ground that the
transmission lines constructed on the respondents property had already been retired. Considering
that the Court has consistently upheld the primordial importance of public use in expropriation
proceedings, NAPOCORs reliance on Metropolitan Water District v. De los Angeles was apt and
correct. Verily, the retirement of the transmission lines necessarily stripped the expropriation
proceedings of the element of public use. To continue with the expropriation proceedings despite the
definite cessation of the public purpose of the project would result in the rendition of an invalid
judgment in favor of the expropriator due to the absence of the essential element of public use.

Unlike in Metropolitan Water District v. De los Angeles where the request to discontinue the
expropriation proceedings was made upon the authority appearing in the board resolution issued on
July 14, 1930,48 counsel for NAPOCOR has not presented herein any document to show that
NAPOCOR had decided, as a corporate body, to discontinue the expropriation proceedings.
Nonetheless, the Court points to the Memorandum dated December 13, 201249 and the Certificate of
Inspection/Accomplishment dated February 5, 200550 attached to NAPOCORs motion attesting to
the retirement of the transmission lines. Also, Metropolitan Water District v. De los Angeles
emphasized that it became the duty and the obligation of the court, regardless of the stage of the
proceedings, to dismiss the action "if it should be made to appear to the satisfaction of the court that
the expropriation is not for some public use."51 Despite the lack of the board resolution, therefore, the
Court now considers the documents attached to NAPOCORs Manifestation and Motion to
Discontinue Expropriation Proceedings to be sufficient to establish that the expropriation sought is
no longer for some public purpose.

Accordingly, the Court grants the motion to discontinue the proceedings subject to the conditions to
be shortly mentioned hereunder, and requires the return of the property to the respondents. Having
said that, we must point out that NAPOCOR entered the property without the owners consent and
without paying just compensation to the respondents. Neither did it deposit any amount as required
by law prior to its entry. The Constitution is explicit in obliging the Government and its entities to pay
just compensation before depriving any person of his or her property for public use.52 Consideringy
that in the process of installing transmission lines, NAPOCOR destroyed some fruit trees and plants
without payment, and the installation of the transmission lines went through the middle of the land as
to divide the property into three lots, thereby effectively rendering the entire property inutile for any
future use, it would be unfair for NAPOCOR not to be made liable to the respondents for the
disturbance of their property rights from the time of entry until the time of restoration of the
possession of the property. There should be no question about the taking. In several rulings, notably
National Power Corporation v. Zabala,53 Republic v. Libunao,54 National Power Corporation v.
Tuazon,55 and National Power Corporation v. Saludares,56 this Court has already declared that "since
the high-tension electric current passing through the transmission lines will perpetually deprive the
property owners of the normal use of their land, it is only just and proper to require Napocor to
recompense them for the full market value of their property."
There is a sufficient showing that NAPOCOR entered into and took possession of the respondents
property as early as in March 1993 without the benefit of first filing a petition for eminent domain. For
all intents and purposes, therefore, March 1993 is the reckoning point of NAPOCORs taking of the
property, instead of May 5, 1995, the time NAPOCOR filed the petition for expropriation. The
reckoning conforms to the pronouncement in Ansaldo v. Tantuico, Jr.,57 to wit:

Normally, of course, where the institution of an expropriation action precedes the taking of the
property subject thereof, the just compensation is fixed as of the time of the filing of the complaint.
This is so provided by the Rules of Court, the assumption of possession by the expropriator
ordinarily being conditioned on its deposits with the National or Provincial Treasurer of the value of
the property as provisionally ascertained by the court having jurisdiction of the proceedings.

There are instances, however, where the expropriating agency takes over the property prior to the
expropriation suit, as in this case although, to repeat, the case at bar is quite extraordinary in that
possession was taken by the expropriator more than 40 years prior to suit. In these instances, this
Court has ruled that the just compensation shall be determined as of the time of taking, not as of the
time of filing of the action of eminent domain.

In the context of the State's inherent power of eminent domain, there is a "taking" when the owner is
actually deprived or dispossessed of his property; when there is a practical destruction or a material
impairment of the value of his property or when he is deprived of the ordinary use thereof. There is a
"taking" in this sense when the expropriator enters private property not only for a momentary period
but for a more permanent duration, for the purpose of devoting the property to a public use in such a
manner as to oust the owner and deprive him of all beneficial enjoyment thereof. For ownership,
after all, "is nothing without the inherent rights of possession, control and enjoyment. Where the
owner is deprived of the ordinary and beneficial use of his property or of its value by its being
diverted to public use, there is taking within the Constitutional sense." x x x.58

In view of the discontinuance of the proceedings and the eventual return of the property to the
respondents, there is no need to pay "just compensation" to them because their property would not
be taken by NAPOCOR. Instead of full market value of the property, therefore, NAPOCOR should
compensate the respondents for the disturbance of their property rights from the time of entry in
March 1993 until the time of restoration of the possession by paying to them actual or other
compensatory damages. This conforms with the following pronouncement in Mactan-Cebu
International Airport Authority v. Lozada, Sr.:59

In light of these premises, we now expressly hold that the taking of private property, consequent to
the Governments exercise of its power of eminent domain, is always subject to the condition that the
property be devoted to the specific public purpose for which it was taken. Corollarily, if this particular
purpose or intent is not initiated or not at all pursued, and is peremptorily abandoned, then the
former owners, if they so desire, may seek the reversion of the property, subject to the return of the
amount of just compensation received. In such a case, the exercise of the power of eminent domain
has become improper for lack of the required factual justification.60

This should mean that the compensation must be based on what they actually lost as a result and by
reason of their dispossession of the property and of its use, including the value of the fruit trees,
plants and crops destroyed by NAPOCORs construction of the transmission lines. Considering that
the dismissal of the expropriation proceedings is a development occurring during the appeal, the
Court now treats the dismissal of the expropriation proceedings as producing the effect of converting
the case into an action for damages. For that purpose, the Court remands the case to the court of
origin for further proceedings, with instruction to the court of origin to enable the parties to fully
litigate the action for damages by giving them the opportunity to re-define the factual and legal
issues by the submission of the proper pleadings on the extent of the taking, the value of the
compensation to be paid to the respondents by NAPOCOR, and other relevant matters as they
deem fit. Trial shall be limited to matters the evidence upon which had not been heretofore heard or
adduced. The assessment and payment of the correct amount of filing fees due from the
respondents shall be made in the judgment, and such amount shall constitute a first lien on the
recovery. Subject to these conditions, the court of origin shall treat the case as if originally filed as an
action for damages.

WHEREFORE, the Court DISMISSES the expropriation proceedings due to the intervening
cessation of the need for public use; REMANDS the records to the Regional Trial Court, Branch 1, in
Batangas City as the court of origin for further proceedings to be conducted in accordance with the
foregoing instructions; and ORDERS said trial court to try and decide the issues with dispatch.

G.R. No. 197329 September 8, 2014

NATIONAL POWER CORPORATION, Petitioner,

vs.
LUIS SAMAR and MAGDALENA SAMAR, Respondents.

DECISION

DEL CASTILLO, J.:

This Petition for Review on Certiorari1 seeks to set aside the June 17, 2011 Decision2 of the Court of
Appeals (CA) in CA-G.R. CV No. 82231 which denied the herein petitioner's appeal and affirmed the
February 21, 2003 Decision3 of the Regional Trial Court (RTC) of Iriga City, Fifth Judicial Region,
Branch 34 in Civil Case No. IR-2678.

Factual Antecedents

Civil Case No. IR-2243

Sometime in 1990, petitioner National Power Corporation (NPC) filed Civil Case No. IR-2243 with
the RTC, seeking to expropriate respondent spouses Luis and Magdalena Samars 1,020-square
meter lot covered by Tax Declaration No. 30573 and situated in San Jose (Baras),Nabua,
Camarines Sur which NPC needed for the construction of a transmission line. In an August 29,
1990 Order,4 the RTC directed the issuance of a Writ of Condemnation in favor of NPC. Accordingly,
NPC entered the subject lot and constructed its transmission line,denominated as Tower No. 83.

However, on July 12, 1994, the trial court issued another Order5 dismissing Civil Case No. IR-2243
without prejudice for failure to prosecute, as follows:

In the Order dated 14 August 1991, Atty. Raymundo Nagrampa was designated as the
representative of his clients in the Committee of Appraisers to appraise the reasonable value of the
land together with the Courts and plaintiffs representatives, namely, the Branch Clerk of Court and
Mr. Lorenzo Orense, respectively for the purpose of fixing the amount with which the plaintiff may be
compensated for the land in question.
After almost three (3) years since the said order was issued, the Committee has not met nor
deliberated on said matter and the parties in this case have not exerted efforts in pursuing their
claims despite so long a time.

Hence, this case is hereby dismissed without prejudice for failure to prosecute within a reasonable
period of time.

SO ORDERED.6

It appears that the above July 12, 1994 Order was notassailed by appeal or otherwise; nor did NPC
commence any other expropriation proceeding.

Civil Case No. IR-2678

On December 5, 1994, respondents filed with the same trial court a Complaint,7 docketed as Civil
Case No. IR-2678, for compensation and damages against NPC relative to the subject lot which
NPC took over but for which it failed to pay just compensation on account of the dismissal of Civil
Case No. IR-2243. The Complaint contained the following prayer:

WHEREFORE, considering the above premises, it is most respectfully prayed for the Honorable
Court to:

1. Order the defendant to compensate the plaintiff of [sic] the lot they are now
occupying in accordance with the current market value existing in the place;

2. Order the defendant to pay the plaintiff moral and actual damages and unrealized
profits in the amount of not less than 150,000.00;

3. Order the defendant to pay the exemplary damages of [sic] the amount of
10,000.00 and to pay the cost of suit;

Plaintiffs pray for other reliefs which are just and equitable under the premises.8

As agreed by the parties during pre-trial, a panel ofcommissioners composed of one

representative each from the parties, and a third from the court was constituted for the purpose of
determining the value of the subject lot.

After conducting their appraisal, the commissioners submitted their individual reports. Atty.
Wenifredo Pornillos, commissioner for the respondents, recommended a valuation within the range
of 1,000.00 to 1,500.00 per square meter. Lorenzo C. Orense, commissioner for NPC, did notset
an amount, although he stated that the lot should be valued at the prevailing market prices of
agricultural, and not residential, lands within the area. The court representative, Esteban D. Colarina,
proposed a 1,100.00 per square meter valuation.9

Ruling of the Regional Trial Court

On February 21, 2003, the RTC rendered a Decision10 pegging the value of the subject lot at
1,000.00 per square meter, thus:

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant National

Power Corporation to pay plaintiffs the total sum of 1,020,000.00, representing the value of
plaintiffs land expropriated by the defendant. All other claims in the complaint and in the answer with
counterclaim are hereby dismissed.

SO ORDERED.11

Ruling of the Court of Appeals

NPC filed an appeal with the CA claiming that pursuant to Section 4, Rule 67 of the 1964 Rules of
Court,12 just compensation for the lot should have been computed based on its value at the time of
the taking or the filing of the expropriation case (Civil Case No. IR-2243) in 1990, and prayed thatthe
case be remanded to the lower court for further reception ofevidence based on said Section 4, Rule
67 of the 1964 Rules of Court.

On June 17, 2011, the CArendered the assailed Decision containing the following decretal portion:

WHEREFORE, premises considered, the instant appeal is DENIED. The assailed Decision [dated]
21 February 2003 renderedby the Regional Trial Court of Iriga City, Fifth Judicial Region, Branch 34
in Civil Case No. IR-2678 is hereby AFFIRMED.

SO ORDERED.13

The CA held that in the resolution of Civil Case No. IR-2678, the principles and rules of procedure in
eminent domain cases under Rule 67 of the 1964 Rules of Court cannot apply; thus, the rule that
just compensation shall be computed from the time of the taking or filing of the expropriation case is
inapplicable, since the case is not one for expropriation. Instead, Civil Case No. IR-2678 should be
treated as a simple case for the recovery of damages. Finally, the CA held that the trial court
properly exercised its judicial function of ascertaining the fair market value of the property asjust
compensation.

NPC thus instituted the instant Petition.

Issues

The Petition raises the following issues:

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN AFFIRMING THE COURT A

QUOS DECISION DATED FEBRUARY 21, 2003 IN CIVIL CASE NO. IR-2678 WHICH FIXED THE
AMOUNT OF JUST COMPENSATION FOR THE EXPROPRIATED PROPERTY OF
RESPONDENTS AT 1,000.00PER SQUARE METER IN CONTRAVENTION OF SECTION 4,
RULE 67 OF THE REVISED RULES OF COURT WHICH PROVIDES THAT THE JUST
COMPENSATION FOR THE EXPROPRIATED PROPERTY MUST BE DETERMINED EITHER AS
OF THE DATE OF THE TAKING OFTHE PROPERTY OR THE FILING OF THE COMPLAINT,
WHICHEVER COMES FIRST.

II

THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR IN NOT REMANDING THE CASE
TO THE COURT A QUOFOR THE PURPOSE OF DETERMINING THE AMOUNT OF JUST
COMPENSATION FOR THE EXPROPRIATED PROPERTY INACCORDANCE WITH SECTION 4,
RULE 67 OF THE REVISED RULES OF COURT.14

Petitioners Arguments

In its Petition and Reply,15 NPC insists that Section 4, Rule 67 of the 1964 Rules of Court should
apply to Civil Case No. IR-2678; therefore, just compensation should be based not on 1995 market
values, but on those prevailing on the date of taking or the filing of the expropriation casein 1990;
that the dismissal without prejudice of the expropriation case did not necessarily nullify the
proceedings in said case specifically, the August 29, 1990 Order of expropriation/writ of
condemnation, which became final and executory for failure of any of the parties to appeal the same
which proceedingsfor expropriation may continue through the present Civil CaseNo. IR-2678 for
compensation and damages filed by respondents; and that the cited National Power Corporation v.
Court of Appeals16 case does not apply since the factual milieu is different, and it does not appear
that the lot was damaged by NPCs entry therein.

NPC thus prays that the assailed CA disposition be set aside and that the case be remanded to the
trial court for further proceedings todetermine the proper amount of just compensation in accordance
with Section 4, Rule 67 of the 1964 Rules of Court.

Respondents Arguments

Praying that the Petition be denied for lack of merit, the respondents in their Comment17 plainly echo
the assailed CA Decision, adding that the trial courts basis for arriving at the proper amount of just
compensation was correct as the market value of adjacent properties were taken into account.
Respondents add that by agreeing to have the valuation determined by a panel of commissioners,
NPC is bound by whatever findings such panel makes, and it may not raise the issue that valuation
should be computed from the time of taking or filing of the expropriation case in 1990.

Our Ruling

The Court grants the Petition.

NPC insists that Section 4, Rule 67 ofthe 1964 Rules of Court should have been observed in fixing
the amount of just compensation for the subject lot; that the value of the lot at the time of NPCs
taking thereof or filing of Civil Case No. IR-2243 in 1990 should have been the basis for computing
just compensation and not the prevailing market value at the time of the filing or pendency of Civil
Case No. IR-2678 in 1995. NPC thus prays that Civil CaseNo. IR-2678 be remanded to the trial
court for determination of just compensation applying Section 4, Rule 67 of the 1964 Rules of Court.

We agree with NPCs contention.

In Republic v. Court of Appeals,18 we held that:

Just compensation is based on the price or value of the property at the time it was taken from the
owner and appropriated by the government. However, if the government takes possession before
the institution of expropriation proceedings, the value should befixed as of the time of the taking of
said possession, not of the filing of the complaint. The value at the time of the filing of the complaint
should be the basis for the determination of the value when the taking of the property involved
coincides with or is subsequent to the commencement of the proceedings.
The procedure for determining just compensation is set forth in Rule 67 of the 1997 Rules of Civil
Procedure. Section 5 of Rule 67 partly states that upon the rendition of the order of expropriation,
the court shall appoint not more than three (3) competent and disinterested persons as
commissioners to ascertain and report to the court the just compensation for the property sought to
be taken. However, we held in Republic v. Court of Appealsthat Rule 67 presupposes a prior filing of
complaint for eminent domain with the appropriate court by the expropriator. If no such complaint is
filed, the expropriator is considered to have violated procedural requirements, and hence, waived the
usual procedure prescribed in Rule 67, including the appointment of commissioners to ascertain just
compensation. In National Power Corporation v. Court of Appeals, we clarified that when there is no
action for expropriation and the case involves only a complaint for damages or just compensation,
the provisions of the Rules of Court on ascertainment of just compensation (i.e., provisions of Rule
67) are no longer applicable, and a trial before commissioners is dispensable x x x.

Records show that sometime in 1990, NPC filed an expropriation case docketed as Civil Case No.
IR-2243. However, in an Order dated July 12, 1994, the expropriation case was dismissed by the
RTC for failure of NPC to prosecute. Subsequently, or on December 5, 1994, respondents filed Civil
Case No. IR-2678 which is a complaint for compensation and recovery of damages. Considering the
dismissal of the expropriation case for failure of the NPC to prosecute, it is as if no expropriation suit
was filed. Hence, pursuant to the above-quoted ruling, NPC is deemed "to have violated procedural
requirements, and hence, waived the usual procedure prescribed in Rule 67, including the
appointment of commissioners to ascertain just compensation." Nevertheless, just compensation for
the property must be based on its value at the timeof the taking of said property, not at the time of
the filing ofthe complaint. Consequently, the RTC should have fixed the value ofthe property at the
time NPC took possession of the same in 1990, and not at the time of the filing of the complaint for
compensation and damages in 1994 or its fair market value in 1995.

In this case, the RTC formed a panel of commissioners in determining the just compensation of the
property. Although this is not required considering our pronouncement in Republic v. Court of
Appeals,19 nonetheless, its constitution is not improper.20 "The appointment was done mainly to aid
the trial court in determining just compensation, and it was not opposed by the parties. Besides, the
trial court is not bound by the commissioners recommended valuation of the subject property. The
court has the discretion on whether to adopt the commissioners valuation or to substitute itsown
estimate of the value as gathered from the records."21

In this case, records show that respondents representative recommended a valuation of 1,000.00
to 1,500.00 per square meter; while the courts representative recommended a value of 1,100.00
per square meter.Notably, NPCs representative did not give any value; he merely opined that the
subject property should be classified as agricultural and not residential land and valued at the
prevailing market values. Significantly, the values recommended by the commissioners were those
values prevailing in 1994 and 1995, or during the time the complaint for compensation and damages
was filed. Considering that these are not the relevant values at the timeNPC took possession of the
property in 1990, it was incumbent upon the RTC to have disregarded the same. Unfortunately, it
adopted these values. Onthis score alone, we find a need to remand this case to the RTC for further
proceedings.

Moreover, we note that the RTC simply adopted the above values without citing its basis therefor. 1avv phi 1

The pertinent portions of the trial courts Decision read:

Pursuant to the said Order of May 3, 1995, the Court formed a Commission chaired by Mr. Esteban
D. Colarina, an employee in Branch 34 of this Court; Atty. Wenifredo Pornillos representing the
plaintiffs; and Mr. Lorenzo C. Orense representing the defendant NAPOCOR. These gentlemen took
the required oath and functioned as a committee, submitting however their respective individual
Commissioners Report. x x x

On July 11, 1995, Atty. Pornillos recommended that the land be valued at 1,000.00 to 1,500.00
per square meter (page 58). On July 13, 1995, Mr. Esteban D. Colarina submitted his report
recommending 1,100.00 as the fair market value of the property per square meter. Attached to said
report was the affidavit of Mr. Nicasio V. Dio, then the Assistant CityAssessor of Iriga City pegging
the value of the said land at 1,500.00 to 1,800.00 per square meter. On August 3, 1995, Mr.
Lorenzo Orense of the NAPOCOR submitted his Commissioners Report wherein he recommended
that the valuation of the land be based on its agricultural value, without however naming a price.

On the basis of past proceedings, the parties were allowed to file their respective memoranda. Only 1wphi1

the defendant NAPOCOR filed a memorandum wherein it undertook to pay plaintiffs the value of
their land, although praying that the Court consider the land as agricultural. NAPOCOR admits that
plaintiffs[] property, per Tax Declaration No. 30573 has been classified as residential, but assails
said classification with arguments which are mere speculations.

In the light of all the postures taken by both parties which, in effect, results in a failure to agree on
how the land should be valued, this Court shall fall back on the Order of May 3, 1995 wherein the
report of the Courts representative shall be taken as a factor in determining x x x the value of the
land, including other matters germane thereto and others that may be of judicial notice.

In view of the above consideration, this Court hereby fixes the fair market value of the land in
question at 1,000.00 per square meter.

WHEREFORE, premises considered, judgment is hereby rendered ordering defendant National

Power Corporation to pay the plaintiffs the total sum of 1,020,000.00, representing the value of
plaintiffs land expropriated by the defendant. All other claims in the complaint and in the answer with
counterclaim are hereby dismissed.

SO ORDERED.22

Indeed, the trial court merely recited the values fixed by each commissioner. Although it stated in
general terms that it considered other factors germane thereto and of judicial notice, it failed to
specify what these factors were. It did not even clarify whether it considered the values
recommended by the two commissioners. In Republic v. Court of Appeals,23 we remanded the case
to the trial court and directed it to reconvene the panel of commissioners after it was shown that its
valuation of just compensation has no basis, viz:

However, we agree with the appellate court that the trial court's decision is not clear as to its basis
for ascertaining just compensation. The trial court mentioned in its decision the valuations in the
reports of the City Appraisal Committee and of the commissioners appointed pursuant to Rule 67.
But whether the trial court considered these valuations in arriving at the just compensation, or x x x
made its own independent valuation based on the records, [is] obscure in the decision. The trial
court simply gave the total amount of just compensation due to the property owner without laying
down its basis. Thus, there is no way to determine whether the adjudged just compensation is based
on competent evidence. For this reason alone, a remand of the case to the trial court for proper
determination of just compensation is in order. In National Power Corporation v. Bongbong, we held
that although the determination of just compensation lies within the trial court's discretion, it should
not be done arbitrarily or capriciously. The decision of the trial court must be based on established
rules, correct legal principles, and competent evidence. The court is proscribed from basing its
judgment on speculations and surmises.24
Finally, we hold that based on prevailing jurisprudence, respondents are entitled to "legal interest on
the price of the land from the time of the taking up to the time of full payment"25 by the NPC.

WHEREFORE, the Petition is GRANTED. The June 17, 2011 Decision of the Court of Appeals in
CA-G.R. CV No. 82231 is REVERSED and SET ASIDE. This case is REMANDED to the Regional
Trial Court of Iriga City, Fifth Judicial Region, Branch 34 which is directed to re-convene the
commissioners or appoint new commissioners to determine, in accordance with this Decision, the
just compensation of the subject property.

SO ORDERED.