Q. No. 11 | Political Law | Bar 2023

Q. No. 11 | Political Law | Bar 2023 | Suggested Answer

The property of Anne was expropriated by the government for public use more than ten years ago without proper expropriation proceedings and without payment of just compensation. Since then, the value of the Philippine peso has greatly depreciated, while the inflation rate has substantially increased.

Anne now contends that in the interest of justice and fair play, the inflation rate and the depreciated value of the peso should be taken into consideration in the computation and payment of her long-delayed just compensation.

Is Anne correct? Explain briefly.

SUGGESTED ANSWER

When the State appropriates private property for public use, it must compensate the owner of the property so taken. For compensation to be just, the government must not only reimburse the owner with the property's fair value, it must also do so in a timely manner.

The power of eminent domain has been described as "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."⁷³ It is an inherent power of the state, not granted but merely limited by constitutional fiat, viz.:

Section 9. Private property shall not be taken for public use without just compensation.⁷⁴

The provision places two express limitations on the power of eminent domain: first, the condemned property must be used for a public purpose, and second, the exercising authority must pay the property owner just compensation. Correlatively, expropriation cases are divided into two stages. The first is concerned with the propriety of condemning the property, while the second involves the determination of just compensation. The first phase begins with the filing of the complaint before the trial court, which is then tasked to ascertain the purpose of the taking. If it finds that the property is being taken for a public purpose, it shall issue an order condemning the property,⁷⁵ otherwise it must dismiss the case. If the court issues an order of condemnation, it must then proceed to the second phase-the determination of just compensation.⁷⁶ For this purpose, the rules direct the trial court to appoint commissioners, who will be assigned to aid it in ascertaining the fair value of the expropriated property. The trial court will then set the amount of just compensation, order the plaintiff to pay such amount to the defendant, and proceed to completely dispose of the case.

HERE, records show that the property of Anne was expropriated by the government for public use more than ten years ago [without] proper expropriation proceedings and without payment of just compensation.

The payment of just compensation must therefore follow as a matter of course.

NOTE: (To begin with, the ascertainment of exactly how much property was taken is necessary to determine the full amount of just compensation. In expropriation cases involving land, just compensation is generally set on a per square meter basis.⁷⁷ Thus, without knowing the precise area taken by the State, there is no way of definitively setting the amount payable to the respondents[.])

Jurisprudence clearly provides for the remedies available to a landowner when his land is taken by the government for public use. The owner may recover his or her property if its return is feasible, or, if it is not, he or she may demand payment of just compensation.⁷⁸

RE: What constitutes the “taking of private property” in expropriation proceedings?

In the seminal case of Rep. of the Phils. v. Vda. de Castellvi,⁷⁹ the Court laid down several circumstances that constitute the taking of private property in expropriation proceedings. These circumstances, adopted by subsequent case law, are summed up as follows:

(1) the expropriator must enter private property; (2) the entrance in to private property must be for more than a momentary period; (3) the entry into the property should be under warrant or color of legal authority; (4) the property must be devoted to a public use or other wise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way as to oust the owner and deprive him of all beneficial enjoyment of the property.⁸⁰

Taking therefore occurs when the government actually deprives or dispossesses the proprietor of his or her property.⁸¹ So too, when there is "an intrusion so immediate and direct as to subtract from the owner's full enjoyment of the property and to limit his exploitation of it," the said property is deemed taken.⁸²

[…] with respect to the area actually expropriated, the trial court must proceed to determine when its taking occurred.

The determination of the time of taking is necessary for two reasons. First, interest, which is imposed as damages for delaying the payment of just compensation,⁸³ begins to run from the time the property is taken from its owner.⁸⁴ Second, the nature of the deposit required pending the determination of just compensation will depend on whether the property was taken before or after the date of effectivity of Republic Act (R.A.) No. 8974, which governs expropriation proceedings relative to national government infrastructure projects.⁸⁵

Interest, as will be discussed in detail below, is imposed to ensure prompt payment by the government. Its imposition is justified only when the delay in payment has been sufficiently established,⁸⁶ as is the case here. However, as mentioned earlier, since the records do not show the specific date of taking, remand is necessary so that the proper amount of interest may be determined.

RE: Expropriation involving government’s infrastructure projects:

Note that R.A. No. 8974 has been repealed by R.A. No. 10752. This, however, did not affect the Republic's obligation to deposit the land's zonal value plus the value of the improvements situated thereon. The latter law substantially retained the deposit requirement, viz.:

SEC. 6. Guidelines for Expropriation Proceedings. - Whenever it is necessary to acquire real property for the right-of-way site or location for any national government infrastructure through expropriation, the appropriate implementing agency, through the Office of the Solicitor General, the Office of the Government Corporate Counsel, or their deputized government or private legal counsel, shall immediately initiate the expropriation proceedings before the proper court under the following guidelines:

(a) Upon the filing of the complaint or at any time thereafter, and after due notice to the defendant, the implementing agency shall immediately deposit to the court in favor of the owner the amount equivalent to the sum of:

(1) One hundred percent (100%) of the value of the land based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR) issued not more than three (3) years prior to the filing of the expropriation complaint subject to sub paragraph (c) of this section (2) The replacement cost at current market value of the improvements and structures as determined by:

(i) The implementing agency;

(ii) A government financial institution with adequate experience in property appraisal; and

(iii) An independent property appraiser accredited by the BSP.

(3) The current market value of crops and trees located within the property as determined by a government financial institution or an independent property appraiser to be selected as indicated in subparagraph (a) of Section 5 hereof.⁹¹

RE: The deposit requirement differs from the obligation to pay just compensation.

The purpose of the deposit is explained in City of Manila v. Alegar Corporation, thusly:

But the advance deposit required under Section 19 of the Local Government Code constitutes an advance payment only in the event the expropriation prospers. Such deposit also has a dual purpose; as pre-payment if the expropriation succeeds and as indemnity for damages if it is dismissed. This advance payment, a prerequisite for the issuance of a writ of possession, should not be confused with payment of just compensation for the taking of property even if it could be a factor in eventually determining just compensation. If the proceedings fail, the money could be used to indemnify the owner for damages[.]⁹⁴

On the other hand, just compensation is defined as the fair and full equivalent of the loss suffered by the owner, whose property has been taken pursuant to the state's power of eminent domain.⁹⁵ It has been more completely described as:

[T]he full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker's gain, but the owner's loss. The word "just" is used to intensify the meaning of the word "compensation" and to convey thereby the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample.⁹⁶

It has been consistently held that the property's fair market value is the just compensation to which the owner of condemned property is entitled.⁹⁷ Market value is the price agreed on by a willing buyer and willing seller, both of whom are not compelled to enter into the transaction.⁹⁸ It has also been described as the amount fixed in the open market in the usual and ordinary course of legal trade and competition.⁹⁹

But from what point in time must the property's fair market value be reckoned?

Section 4, Rule 67 of the Rules of Court succinctly provides the answer, viz.:

Section 4. Order of expropriation. - If the objections to and the defenses against the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the property sought to be expropriated, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the taking of the property or the filing of the complaint, whichever came first. (Emphasis supplied)

In this regard, the Court, in National Power Corp. v. Ibrahim,¹⁰⁰ ruled:

Normally, the time of the taking coincides with the filing of the complaint for expropriation. Hence, many rulings of this Court have equated just compensation with the value of the property as of the time of filing of the complaint consistent with the above provision of the Rules. So too, where the institution of the action precedes entry to the property, the just compensation is to be ascertained as of the time of the filing of the complaint.¹⁰¹ (Emphasis supplied and citations omitted)

In other words, just compensation is, as a general rule, based on the price or value of the property at the time the complaint for expropriation was filed.¹⁰² By way of exception, National Transmission Corporation v. Oroville Development Corporation¹⁰³ instructs that when the government takes the property before initiating the expropriation case, the property's value at the time of the prior taking must be used as the basis for determining just compensation.

To be sure, this is in consonance with the Court's ruling in Ansaldo v. Tantuico, Jr.,¹⁰⁴ where the Court held:

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 deposit 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[.]¹⁰⁵ (Citations omitted and emphasis supplied)

RE: The determination of just compensation is a judicial function

It has been held in a long line of cases that the determination of just compensation is a judicial function, one that is best addressed to the discretion of the trial court.¹⁰⁶ In this respect, the Court, in Alfonso v. Land Bank of the Philippines, et al.,¹⁰⁷ elaborated, thus:

Section 1, Article VIII of the 1987 Constitution provides that "judicial power includes the duty of the courts of justice to settle actual controversies involving rights which are legally demandable and enforceable."

The right of a landowner to just compensation for the taking of his or her private property is a legally demandable and enforceable right guaranteed by no less than the Bill of Rights, under Section 9, Article III of the Constitution. The determination of just compensation in cases of eminent domain is thus an actual controversy that calls for the exercise of judicial power by the courts. x x x.

The trial court, however, should not be without aid in the ascertainment of what constitutes just compensation. For this purpose and as alluded to earlier, the rules direct the court to appoint not more than three competent and disinterested persons as commissioners to ascertain and report to it the value of the property sought to be taken.¹⁰⁸ The commissioners may then determine just compensation based on the evidence presented before them, and, for the same purpose, they are also authorized to enter and inspect the property and its surroundings.¹⁰⁹ Finally, after the reception and scrutiny of the evidence, the commissioners have the responsibility of reporting their findings to the trial court.¹¹⁰

It has been held that trial with the aid of the commissioners is a substantial right.¹¹¹ Therefore, the appointment of commissioners to ascertain just compensation for the property sought to be taken is a mandatory requirement in expropriation cases.¹¹²

However, this does not mean that the commissioners' determination of just compensation is final and binding on the parties. Because such determination is ultimately a judicial function, the trial court is given the discretion to either accept or reject the commissioners' findings in whole or in part. If the court rejects their report, it may require them to render a supplemental report on facts yet to be taken up, or it may appoint another set of commissioners to provide it with an entirely new report.¹¹³ The trial court is also allowed to disregard the findings of the commissioners and use its own estimate of the property's value. However, it may only do so for valid reasons, such as when the commissioners apply illegal principles to the evidence, when they disregard a clear preponderance of evidence, or when the amount allowed is either grossly inadequate or excessive.¹¹⁴ Once the trial court is satisfied with the amount of just compensation, it may render judgment ordering payment thereof to the property owner.

“Lastly, there is one more circumstance that must be addressed before the remand of the instant case to the trial court. This litigation has been dragging on for almost three decades. The complaint for expropriation was filed in 1990, and, as of today, the respondents have not yet been paid the fair value of their property. In eminent domain cases, just compensation entails not only the determination of the proper amount to be paid to the owners of the property, but also the payment of such amount within a reasonable time[.]¹¹⁵

NOTE: (In the given Bar question, the determination of just compensation has been dragging on for more than 10 years).

These delays prejudiced the respondents' (the property owner) rights over their property, and cannot be without consequence.

In National Power Corporation v. Manalastas (Manalastas),¹¹⁶ the Court held that the just compensation payable to the property owner amounts to an effective forbearance on the part of the government-a proper subject of interest, viz.:

[I]f properly 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, bet ween 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. (Italics in the original)¹¹⁷

In that case, the Court awarded interest at the rate of 12% per annum from the time of taking up to June 30, 2013 and, thereafter, 6% per annum from July 1, 2013 until full satisfaction, pursuant to Section 1 of Bangko Sentral ng Pilipinas - Monetary Board Circular No. 799, Series of 20l3.¹¹⁸

NOTE:

As mentioned earlier, the record of the instant case does not disclose the exact time of taking. Without this date, there is no way to determine the proper amount of interest due on the condemned property. Hence, before the trial court calculates interest, the date of entry must be established by competent evidence. Only then will the trial court be able to reckon the proper sum of interest in accordance with the Court's ruling in Manalastas.

Taking the foregoing into account and to encapsulate the Court's pronouncements, upon the remand of the instant case, the trial court shall designate not more than three commissioners to aid it in determining the fair market value of the respondents' property back when the complaint was filed.

Then, after it satisfies itself of the amount of just compensation, it shall ascertain the exact date of entry into the property. It shall then impose legal interest on the property's value at the rate of 12% per annum from the time of taking up to June 30, 2013 and, thereafter, six percent per annum from July 1, 2013 until complete payment.

REPUBLIC VS. ESTATE OF JUAN MARIA POSADAS III, et al. (G.R. No. 214310, February 24, 2020)

Read the full case at

https://lawphil.net/judjuris/juri2020/feb2020/gr_214310_2020.html

RE: Just Compensation

Just compensation has been defined as the fair and full equivalent of the loss.¹⁹ More specifically, just compensation has been defined in this wise:

Notably, just compensation in expropriation cases is defined "as the full and fair equivalent of the property taken from its owner by the expropriator. The Court repeatedly stressed 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."²⁰

The determination of just compensation in· expropriation proceedings is essentially a judicial prerogative.²¹ This determination of just compensation, which remains to be a judicial function performed by the court, is usually aided by the appointed commissioners.

Section 9, Article III of the 1987 Constitution provides that "no private property shall be taken for public use without just compensation." Just compensation in expropriation cases has been held to contemplate just and timely payment, and prompt payment is the payment in full of the just compensation as finally determined by the courts.³⁵ Thus, just compensation envisions a payment in full of the expropriated property. Absent full payment, interest on the balance would necessarily be due on the unpaid amount. In Republic v. Mupas,³⁶ we held that interest on the unpaid compensation becomes due if there is no full compensation for the expropriated property, in accordance with the concept of just compensation. We held:

The reason is that just compensation would not be "just" if the State does not pay the property owner interest on the just compensation from the date of the taking of the property. Without prompt payment, the property owner suffers the immediate deprivation of both his land and its fruits or income. The owner's loss, of course, is not only his property but also its income-generating potential.

Ideally, just compensation should be immediately made available to the property owner so that he may derive income from this compensation, in the same manner that he would have derived income from his expropriated property.

However, if full compensation is not paid. for the property taken, then the State must pay for the shortfall in the earning potential immediately lost due to the taking, and the absence of replacement property from which income can be derived. Interest on the unpaid compensation becomes due as compliance with

the constitutional mandate on eminent domain and as a basic measure of fairness.

Thus, interest in eminent domain cases "runs as a matter of law and follows as a matter of course from the right of the landowner to be placed in as good a position as money can accomplish, as of the date of taking."³⁷

(EVERGREEN MANUFACTURING CORPORATION, vs. REPUBLIC et al., G.R. No. 218628, September 6, 2017)

Read the full case at

https://lawphil.net/judjuris/juri2017/sep2017/gr_218628_2017.html

NOTE:

RE: R.A. NO. 8974, November 7, 2000; AN ACT TO FACILITATE THE ACQUISITION OF RIGHT-OF-WAY, SITE OR LOCATION FOR NATIONAL GOVERNMENT INFRASTRUCTURE PROJECTS AND FOR OTHER PURPOSES

Section 5 of R.A. No. 8974 provides:

Section 5. Standards for the Assessment of the Value of the Land Subject of Expropriation Proceedings or Negotiated Sale. - In order to facilitate the determination of just compensation, the court may consider, among other well-established factors, the following relevant standards:

(a) The classification and use for which the property is suited;

(b) The developmental costs for improving the land;

(d) The current selling price of similar lands in the vicinity;

(e) The reasonable disturbance compensation for the removal and/or demolition of certain improvement on the land and for the value of improvements thereon;

(f) This size, shape or location, tax declaration and zonal valuation of the land;

(g) The price of the land as manifested in the ocular findings, oral as well as documentary evidence presented; and

(h) Such facts and events as to enable the affected property owners to have sufficient funds to acquire similarly-situated lands of approximate areas as those required from them by the government, and thereby rehabilitate themselves as early as possible.

FOOTNOTES

¹⁹ National Power Corporation v. Court of Appeals, 479 Phil. 850 (2004), citing Manila Railroad Co. v. Velasquez, 32 Phil. 286 (1915).

²⁰ Republic v. Mupas, G.R. No. 181892, 19 April 2016, 790 SCRA 217, 277, citing Apo Fruits Corporation v. Land Bank of the Philippines. 647 Phil. 251 (2010).

²¹ National Power Corporation v. Spouses Asoque, supra note 17, citing National Power Corporation v. Spouses Zabala, 702 Phil. 491, 499-500 (2013) and Land Bank of the Philippines v. Celada, 515 Phil. 467, 477 (2006).

³⁵ Land Bank of the Philippines v. Hahabag, Sr., G.R. No. 172352, 8 June 2016, 792 SCRA 399, citing Land Bank of the Philippines v. Santos, G.R. No. 213863, 27 January 2016, 782 SCRA441.

³⁶ 769 Phil. 21 (2015).

³⁷ Id. at 194-195. Citations omitted.

⁷³ Rep. of the Phils. v. Heirs of Saturnino Q. Borbon, 750 Phil. 37, 48 (2015), citing Bernas, Constitutional Rights and Social Demands: Notes and Cases, Part II, 2010 Ed.

⁷⁴ CONSTITUTION. Article III, Section 9.

⁷⁵ National Power Corporation v. Posada, 755 Phil. 613, 624 (2015).

⁷⁶ Id.

⁷⁷ See The Manila Banking Corporation v. Bases Conversion and Developmenl Authority, G.R. No. 230144, January 22, 2018, 852 SCRA 334, Rep. of the Phils. v. Heirs of Eladio Santiago, 808 Phil. 1 (2017) Rep. of the Phils. v. Larrazabal, 814 Phil. 684 (2017).