TL;DR

In a Philippine Supreme Court decision, the Republic’s petition challenging the just compensation for expropriated land was denied, affirming the Court of Appeals’ ruling. The Court reiterated that just compensation in expropriation cases must reflect the fair market value of the property at the time of taking, not solely the Bureau of Internal Revenue (BIR) zonal valuation. While zonal value is a factor, courts must consider other relevant standards like property classification, market prices of similar lands, and owner-declared values to ensure ‘just’ compensation, which is the full and fair equivalent of the loss to the landowner. The decision also clarified that legal interest on unpaid just compensation accrues from the date the government takes possession of the property, not just from the filing of the expropriation complaint. This ruling reinforces the judiciary’s role in protecting property owners’ rights to receive adequate and timely compensation when their land is taken for public projects, ensuring fairness and preventing undue financial burden on landowners.

When Public Roads Meet Private Land: Defining ‘Just’ in Expropriation

This case, Republic of the Philippines v. Heirs of Spouses Luis J. Dela Cruz and Imelda Reyes, revolves around the crucial legal concept of just compensation in expropriation proceedings. The government, through the Department of Public Works and Highways (DPWH), sought to expropriate portions of land owned by the Dela Cruz spouses for the C-5 Northern Link Road Project. The core dispute centered on determining the fair price the government should pay for taking private property for public use, a right inherent in the state but constitutionally limited by the requirement of ‘just compensation’.

The DPWH initially offered compensation based on the BIR zonal valuation, a standardized value set for tax purposes, arguing it reflected fair market value. However, the landowners contested this, asserting that the fair market value was significantly higher due to the properties’ location in an industrial area with rising land values. They pointed to nearby properties used for commercial ventures and prevailing market prices in the vicinity, advocating for a valuation determined by court-appointed commissioners as per Rule 67 of the Rules of Court. The Regional Trial Court (RTC) eventually set the just compensation at P9,000.00 per square meter, a figure higher than the zonal value but lower than the commissioners’ recommendation, and also awarded interest on the unpaid balance.

The Republic appealed, arguing that the Court of Appeals (CA) erred in affirming the RTC’s valuation, claiming it was excessive and not sufficiently grounded in the standards set by Republic Act No. 8974 (RA 8974), the law governing expropriation for national government infrastructure projects. The Republic insisted that the BIR zonal valuation should be given greater weight, highlighting the process behind its determination and questioning the higher valuation as ‘suspicious’. They also contended that the RTC and CA failed to adequately consider evidence of the properties’ actual use and condition, particularly the alleged presence of informal settlers nearby, which they argued should depress property values.

The Supreme Court, however, upheld the CA’s decision, firmly reiterating that zonal valuation is merely one factor, not the sole determinant, of just compensation. The Court emphasized that the determination of just compensation is a judicial function, and legislative or executive valuations serve only as guidelines. Quoting established jurisprudence, the Court defined just compensation as:

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 proprietor. 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.

The Court clarified that while Section 5 of RA 8974 lists standards for assessing land value in expropriation, including zonal valuation, these are recommendatory, not mandatory. The RTC and CA, in this case, were found to have appropriately considered these factors, including the zonal valuation, owner-declared value, the valuation of comparable properties (the ‘Hobart case’), and the location and classification of the subject properties. The RTC’s decision to set the compensation at P9,000.00 per square meter was deemed a reasonable exercise of judicial discretion, considering the totality of evidence presented.

Regarding the Republic’s argument about the absence of ocular inspection by the Board of Commissioners, the Court clarified that ocular inspection is not mandatory and other evidence can be relied upon. Furthermore, the Court acknowledged the reality that under RA 8974, the government can take possession and commence projects before the final determination of just compensation, making immediate ocular inspections sometimes impractical. The Court also dismissed the Republic’s claim about informal settlers affecting property value, finding insufficient evidence to support this and noting the area’s commercial and industrial character.

Finally, the Supreme Court modified the interest calculation. While the lower courts awarded interest from the filing of the complaint, the Supreme Court clarified that legal interest should accrue from the date of taking possession of the property, which was November 12, 2008, when the writ of possession was issued. The interest rates were set at 12% per annum from the taking until June 30, 2013, and 6% per annum from July 1, 2013, until full payment, aligning with prevailing jurisprudence and Bangko Sentral ng Pilipinas (BSP) circulars. This modification ensures landowners are fully compensated not only for the value of their land but also for the time they were deprived of its use.

FAQs

For inquiries regarding the application of this ruling to specific circumstances, please contact Atty. Gabriel Ablola through gaboogle.com or via email at connect@gaboogle.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Republic v. Heirs of Dela Cruz, G.R. No. 245988, June 16, 2021