RULE 67- EXPROPRIATION On October 23, 1983, respondent Judge issued a writ of possession in
favor of the plaintiff Municipality.
#1 G.R. No. 69260 December 22, 1989
MUNICIPALITY OF BIÑAN, petitioner,
vs.
HON. JOSE MAR GARCIA, Judge of the Regional Trial Court at Biñan,
Laguna (BRANCH XXXIV, Region IV), and ERLINDA
FRANCISCO, respondents.
The Provincial Fiscal for petitioner.
Roman M. Alonte for private respondent.
NARVASA, J.:
Three (3) questions are resolved in the action of certiorari at bar. The first
is whether the special civil action of eminent domain under Rule 67 of the
Rules of Court is a case "wherein multiple appeals are allowed, 1 as
regards which 'the period of appeal shall be thirty [30] days,2 instead of
fifteen (15) days. 3 The second is whether or not the Trial Court may treat
the motion to dismiss" filed by one of the defendants in the action of
eminent domain as a "motion to dismiss" under Rule 16 of the Rules of
Court, reverse the sequence of trial in order and hear and determine said
motion to dismiss, and thereafter dismiss the expropriation suit as against
the movant. And the third is whether or not a "locational clearance issued
by the Human Settlements Regulatory Commission relative to use of land
is a bar to an expropriation suit involving that land.
The expropriation suit involved in this certiorari proceeding was
commenced by complaint of the Municipality of Biñan, Laguna 4 filed in
the Regional Trial Court of Laguna and City of San Pablo, presided over by
respondent Judge Jose Mar Garcia. The complaint named as defendants
the owners of eleven (11) adjacent parcels of land in Biñan with an
aggregate area of about eleven and a half (11-1/2) hectares. The land
sought to be expropriated was intended for use as the new site of a
modern public market and the acquisition was authorized by a resolution
of the Sangguniang Bayan of Biñan approved on April 11, 1983.
One of the defendants was Erlinda Francisco. She filed a "Motion to
Dismiss" dated August 26, 1983, on the following grounds; (a) the
allegations of the complaint are vague and conjectural; (b) the complaint
violates the constitutional limitations of law and jurisprudence on eminent
domain; (c) it is oppressive; (d) it is barred by prior decision and
disposition on the subject matter; and (e) it states no cause of
action. 5 Now, her motion to dismiss" was filed pursuant to Section 3, Rule
67 of the Rules of Court:
Sec. 3. Defenses and objections within the time
specified in the summons, each defendant, in lieu of
an answer, shall present in a single motion to dismiss
or for other apppropriate relief, all of his objections
and defenses to the right of the plaintiff to take his
property for the use or purpose specified in the
complaint. All such objections and defenses not so
presented are waived. A copy of the motion shall be
served on the plaintiffs attorney of record and filed
with the court with the proof of service.
Her "motion to dismiss" was thus actually a pleading, taking the place of
an answer in an ordinary civil action; 6 it was not an ordinary motion
governed by Rule 15, or a "motion to dismiss" within the contemplation
of Rule 16 of the Rules of Court.
ProvRem Rule 67 Fulltext
On February 3, 1984, Erlinda Francisco filed a "Motion for Separate Trial,"
invoking Section 2, Rule 31. 7 She alleged that there had already been no
little delay in bringing all the defendants within the court's jurisdiction,
and some of the defendants seemed "nonchalant or without special
interest in the case" if not mere "free riders;" and "while the cause of
action and defenses are basically the same;" she had, among other
defenses, "a constitutional defense of vested right via a pre-existing
approved Locational Clearance from the H.S.R.C." 8 Until this clearance
was revoked, Francisco contended, or the Municipality had submitted and
obtained approval of a "rezoning of the lots in question," it was
premature for it to "file a case for expropriation. 9 The Court granted the
motion. By Order dated March 2, 1984, it directed that a separate trial be
held for defendant Erlinda Francisco regarding her special defenses
mentioned in her .. Motion for Separate Trial and in her Motion to
Dismiss, distinct from and separate from the defenses commonly raised
by all the defendants in their respective motions to dismiss."
At the separate trial, the Fiscal, in representation of the Municipality called
the Trial Court's attention to the irregularity of allowing Francisco to
present her evidence ahead of the plaintiff, "putting the cart before the
horse, as it were." He argued that the motion to dismiss was in truth an
answer, citing Rural Progress Administration v. Judge de Guzman, and its
filing did "not mean that the order of presentation of evidence will be
reversed," but the usual procedure should be followed; and the evidence
adduced should be deemed "evidence only for the motion for
reconsideration of the writ of possession." 10
Nevertheless, at the hearing of March 5, and March 26, 1984, the Court
directed Francisco to commence the presentation of evidence. Francisco
presented the testimony of Atty. Josue L. Jorvina, Jr. and certain exhibits
the Land Use Map of the Municipality of Biñan, the Locational Clearance
and Development Permit issued by the H.S.R.C. in favor of "Erlinda
Francisco c/o Ferlins Realty & Development Corporation, and Executive
Order No. 648 and Letter of Instruction No. 729, etc. Thereafter, the
respondent Judge issued an Order dated July 24, 1984 dismissing the
complaint "as against defendant ERLINDA FRANCISCO," and amending
the Writ of Possession dated October 18, 1983 so as to "exclude
therefrom and from its force and effects said defendant .. and her
property ..." His Honor found that-
1) a Locational Clearance had
been issued on May 4,1983 by
the Human Settlements
Regulatory Commission to the
"Ferlin's Realty .. owned by
defendant Erlinda Francisco to
convert .. (her) lot to a
commercial complex;"
2) according to the testimony of
Atty. Jorvina of the H.S.R.C., a
grantee of a locational clearance
acquires a vested right over the
subject property in the sense
that .. said property may not be
subject of an application for
locational clearance by another
applicant while said locational
clearance is subsisting;"
3) such a clearance should be
"considered as a decision and
disposition of private property
co-equal with or in parity with a
Page 1 of 119
 disposition of private property
through eminent domain;
4) the clearance was therefore "a
legal bar against the right of
plaintiff Municipality .. to
expropriate the said property."
The Municipality filed on August 17, 1984 a Motion for Reconsideration.
Therein it (a) reiterated its contention respecting the irregularity of the
reversal of the order of trial, supra. 11 (b) decried the act of the Court in
considering the case submitted for decision after the presentation of
evidence by Francisco without setting the case for further hearing for the
reception of the plaintiffs own proofs, (c) pointed out that as admitted by
Atty. Jorvina, the locational clearance did not "mean that other persons
are already prevented from filing locational clearance for the same
project, and so could not be considered a bar to expropriation, (d) argued
that the locational clearance issued on May 4, 1983, became a "worthless
sheet of paper" one year later, on May 4, 1984 in accordance with the
explicit condition in the clearance that it "shall be considered
automatically revoked if not used within a period of one (1) year from
date of issue," the required municipal permits to put up the commercial
complex never having been obtained by Francisco; and (e) alleged that all
legal requirements for the expropriation of the property had been duly
complied with by the Municipality. 12
The Municipality set its motion for reconsideration for hearing on August
28, 1984 after furnishing Francisco's counsel with copy thereof The Court
however re-scheduled the hearing more than two (2) months later, on
November 20, 1984. 13 Why the hearing was reset to such a remote date is
not explained.
On September 13, 1984, Francisco filed an "Ex-Parte Motion for Execution
and/or Finality of Order," contending that the Order of July 27, 1984 had
become "final and executory on August 12, 1984" for failure of the
Municipality to file a motion for reconsideration and/or appeal within the
reglementary period," 14 i.e "fifteen (15) days counted from the notice of
the final order .. appealed from. 15
On October 10, 1984, the Court issued an Order declaring the
Municipality's motion for reconsideration dated August 15, 1984 to have
been "filed out of time," on account of which the Court 49 could not give
due course to and/or act x x (thereon) except to dismiss (as it did thereby
dismiss) the same." 16 It drew attention to the fact that notice of its Order
of July 24, 1984 (dismissing the complaint as against Francisco) was
served on plaintiff Municipality on July 27, 1984, but its motion for
reconsideration was not presented until August 17, 1984, beyond the
fifteen-day period for appeal prescribed by law. And on October 15, 1985,
His Honor promulgated another Order directing the issuance of (1) a writ
of execution of the Order of July 24, 1984, and (2) a "certificate of finality"
of said order. 17
The Municipality attempted to have the respondent Court reconsider both
and Orders of October 10, and October 15, 1984. To this end it submitted
a motion contending that: 18
1) "multiple appeals are allowed
by law" in actions of eminent
domain, and hence the period of
appeal is thirty (30), not fifteen
(15) days;
2) moreover, the grant of a
separate trial at Francisco's
instance had given rise "ipso
facto to a situation where
ProvRem Rule 67 Fulltext
multiple appeals became
available (Sections 4 and 5, Rule
36, .. Santos v. Pecson, 79 Phil.
261);"
3) it was wrong for the Trial
Court to have acted exparte on
the motion for execution, the
motion being "litigable in
character;" and
4) it (the Municipality) was
denied due process when the
Court, after receiving Francisco's
evidence and admitting her
exhibits, immediately resolved
the case on the merits as regards
Francisco, without setting the
case "for further hearing for
reception of evidence for the
plaintiff."
The motion was denied, by Order dated October 18, 1984; hence, the
special civil action of certiorari at bar.
1. There are two (2) stages in every action of
expropriation. The first is concerned with the
determination of the authority of the plaintiff to
exercise the power of eminent domain and the
propriety of its exercise in the context of the facts
involved in the suit. 19 It ends with an order, if not of
dismissal of the action, "of condemnation declaring
that the plaintiff has a lawful right to take the
property sought to be condemned, 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 filing of the complaint." 20 An order
of dismissal, if this be ordained, would be a final one,
of course, since it finally disposes of the action and
leaves nothing more to be done by the Court on the
Merits. 21 So, too, would an order of condemnation
be a final one, for thereafter, as the Rules expressly
state, in the proceedings before the Trial Court, "no
objection to the exercise of the right of
condemnation (or the propriety thereof) shall be flied
or heard. 22
The second phase of the eminent domain action is concerned with the
determination by the Court of "the just compensation for the property
sought to be taken." This is done by the Court with the assistance of not
more than three (3) commissioners. 23 The order fixing the just
compensation on the basis of the evidence before, and findings of, the
commissioners would be final, too. It would finally dispose of the second
stage of the suit, and leave nothing more to be done by the Court
regarding the issue. Obviously, one or another of the parties may believe
the order to be erroneous in its appreciation of the evidence or findings
of fact or otherwise. Obviously, too, such a dissatisfied party may seek
reversal of the order by taking an appeal therefrom.
A similar two-phase feature is found in the special civil action of partition
and accounting under Rule 69 of the Rules of Court. 24
The first phase of a partition and/or accounting suit is taken up with the
determination of whether or not a co-ownership in fact exists, and a
partition is proper (i.e., not otherwise legally prescribed) and may be
made by voluntary agreement of all the parties interested in the
property. 25 This phase may end with a declaration that plaintiff is not
Page 2 of 119
entitled to have a partition either because a co-ownership does not exist,
or partition is legally prohibited.26 It may end, on the other hand, with an
adjudgment that a co-ownership does in truth exist, partition is proper in
the premises and an accounting of rents and profits received by the
defendant from the real estate in question is in order. 27 In the latter case,
"the parties may, ff they are able to agree, make partition among
themselves by proper instruments of conveyance, and the court shall
confirm the partition so agreed upon. 28, In either case i.e. either the
action is dismissed or partition and/or accounting is decreed the order is
a final one, and may be appealed by any party aggrieved thereby. 29
The second phase commences when it appears that "the parties are
unable to agree upon the partition" directed by the court. In that event
partition shall be done for the parties by the Court with the assistance of
not more than three (3) commissioners. 30 This second stage may well also
deal with the rendition of the accounting itself and its approval by the
Court after the parties have been accorded opportunity to be heard
thereon, and an award for the recovery by the party or parties thereto
entitled of their just share in the rents and profits of the real estate in
question." 31 Such an order is, to be sure, final and appealable.
Now, this Court has settled the question of the finality and appealability
of a decision or order decreeing partition or recovery of property and/or
accounting. In Miranda v. Court of Appeals, decided on June 18, 1986,32
the Court resolved the question affirmatively, and expressly revoked the
ruling in Zaldarriaga v. Enriquez 33 -that a decision or order of partition is
not final because it leaves something more to be done in the trial court
for the complete disposition of the case, i.e, the appointment of
commissioners, the proceedings for the determination by said
commissioners of just compensation, the submission of their reports, and
hearing thereon, and the approval of the partition-and in Fuentebella vs.
Carrascoso 34 -that a judgement for recovery of property with account is
not final, but merely interlocutory and hence not appealable until the
accounting is made and passed upon. As pointed out in Miranda,
imperative considerations of public policy, of sound practice and
adherence to the constitutional mandate of simplified, just, speedy and
inexpensive determination of every action require that judgments for
recovery (or partition) of property with accounting be considered as final
judgments, duly appealable. This, notwithstanding that further
proceedings will still have to be rendered by the party required to do so,
it will be ventilated and discussed by the parties, and will eventually be
passed upon by the Court. It is of course entirely possible that the Court
disposition may not sit well with either the party in whose favor the
accounting is made, or the party rendering it. In either case, the Court's
adjudication on the accounting is without doubt a final one, for it would
finally terminate the proceedings thereon and leave nothing more to be
done by the Court on the merits of the issue. And it goes without saying
that any party feeling aggrieved by that ultimate action of the Court on
the accounting may seek reversal or modification thereof by the Court of
Appeals or the Supreme Court. 35
The Miranda doctrine was reiterated in de Guzman v. C.A.- 36 Valdez v.
Bagaso; 37 Lagunzad v. Gonzales; 38 Cease v. C.A., 39 Macadangdang v.
C.A. 40 and Hernandez v. C.A., 41 Gabor v. C.A. 42 Fabrica v. C.A . 43
No reason presents itself for different disposition as regards cases of
eminent domain. On the contrary, the close analogy between the special
actions of eminent domain and partition already pointed out, argues for
the application of the same rule to both proceedings.
The Court therefore holds that in actions of eminent domain, as in actions
for partition, since no less than two (2) appeals are allowed by law, the
period for appeal from an order of condemnation 44 is thirty (30) days
counted from notice of order and not the ordinary period of fifteen (15)
days prescribed for actions in general, conformably with the provision of
Section 39 of Batas Pambansa Bilang 129, in relation to paragraph 19 (b)
of the Implementing Rules to the effect that in "appeals in special
ProvRem Rule 67 Fulltext
proceedings in accordance with Rule 109 of the Rules of Court and other
cases wherein multiple appeals are allowed, the period of appeal shall be
thirty (30) days, a record of appeal being required. 45
The municipality's motion for reconsideration filed on August 17, 1984
was therefore timely presented, well within the thirty-day period laid
down by law therefor; and it was error for the Trial Court to have ruled
otherwise and to have declared that the order sought to be considered
had become final and executory.
2. As already observed, the Municipality's complaint
for expropriation impleaded eleven (11) defendants.
A separate trial was held on motion of one of them,
Erlinda Francisco, 46 it appearing that she had
asserted a defense personal and peculiar to her, and
inapplicable to the other defendants, supra.
Subsequently, and on the basis of the evidence
presented by her, the Trial Court promulgated a
separate Order dismissing the action as to her, in
accordance with Section 4, Rule 36 of the Rules of
Court reading as follows:
Sec. 4. Several judgments in an action against several
defendants, the court may, when a several judgment
is proper, render judgment against one or more of
them, leaving the action to proceed against the
others.
It is now claimed by the Municipality that the issuance of such a separate,
final order or judgment had given rise "ipso facto to a situation where
multiple appeals became available." The Municipality is right.
In the case at bar, where a single complaint was filed against several
defendants having individual, separate interests, and a separate trial was
held relative to one of said defendants after which a final order or
judgment was rendered on the merits of the plaintiff s claim against that
particular defendant, it is obvious that in the event of an appeal from that
separate judgment, the original record cannot and should not be sent up
to the appellate tribunal. The record will have to stay with the trial court
because it will still try the case as regards the other defendants. As the
rule above quoted settles, "In an action against several defendants, the
court may, when a several judgment is proper, render judgment against
one or more of them, leaving the action to proceed against the others.
" 47 In lieu of the original record, a record on appeal will perforce have to
be prepared and transmitted to the appellate court. More than one
appeal being permitted in this case, therefore, "the period of appeal shall
be thirty (30) days, a record of appeal being required as provided by the
Implementing Rules in relation to Section 39 of B.P. Blg. 129, supra. 48
3. Erlinda Francisco filed a "motion to dismiss"
intraverse of the averments of the Municipality's
complaint for expropriation. That "motion to dismiss"
was in fact the indicated responsive pleading to the
complaint, "in lieu of an answer." 49
Now, the Trial Court conducted a separate trial to determine whether or
not, as alleged by Francisco in her "motion to dismiss," she had a "vested
right via a pre-existing approved Locational Clearance from the HRSC.,"
making the expropriation suit premature. 50 While such a separate trial
was not improper in the premises, 51 and was not put at issue by the
Municipality, the latter did protest against the Trial Court's (a) reversing
the order of trial and receiving first, the evidence of defendant Francisco,
and (b) subsequently rendering its order sustaining Francisco's defense
and dismissing the action as to her, solely on the basis of said Francisco's
evidence and without giving the plaintiff an opportunity to present its
own evidence on the issue. The Trial Court was clearly wrong on both
counts. The Court will have to sustain the Municipality on these points.
Page 3 of 119
Nothing in the record reveals any valid cause to reverse the order of trial.
What the Trial Court might have had in mind was the provision of Section
5, Rule 16 of the Rules of Court allowing "any of the grounds for
dismissal" in Rule 16 to "be pleaded as an affirmative defense and
authorizing the holding of a "preliminary hearing .. thereon as if a motion
to dismiss had been filed." Assuming this to be the fact, the reception of
Francisco's evidence first was wrong, because obviously, her asserted
objection or defense that the locational clearance issued in her favor by
the HSRC was a legal bar to the expropriation suit was not a ground for
dismissal under Rule 16. She evidently meant to prove the Municipality's
lack of cause of action; but lack of cause of action is not a ground for
dismissal of an action under Rule 16; the ground is the failure of the
complaint to state a cause of action, which is obviously not the same as
plaintiff's not having a cause of action.
Nothing in the record, moreover, discloses any circumstances from which
a waiver by the Municipality of the right to present contrary proofs may
be inferred. So, in deciding the issue without according the Municipality
that right to present contrary evidence, the Trial Court had effectively
denied the Municipality due process and thus incurred in another
reversible error.
4. Turning now to the locational clearance issued by
the HSRC in Francisco's favor on May 4, 1983, it
seems evident that said clearance did become a
"worthless sheet of paper," as averred by the
Municipality, upon the lapse of one (1) year from said
date in light of the explicit condition in the clearance
that it 44 shall be considered automatically revoked if
not used within a period of one (1) year from date of
issue," and the unrebutted fact that Francisco had not
really made use of it within that period. The failure of
the Court to consider these facts, despite its attention
having been drawn to them, is yet another error
which must be corrected.
WHEREFORE, the challenged Order issued by His Honor on July 24,1984 in
Civil Case No. 8-1960 is ANNULLED AND SET ASIDE, and the case is
remanded to the Trial Court for the reception of the evidence of the
plaintiff Municipality of Biñan as against defendant Erlinda Francisco, and
for subsequent proceedings and judgment in accordance with the Rules
of Court and the law. Costs against private respondent.
SO ORDERED.
#2 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
ProvRem Rule 67 Fulltext
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 NAPOCOR’s 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 attorney’s 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;17that 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
Page 4 of 119
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
ProvRem Rule 67 Fulltext
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,31informing 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 petitioner’s 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 Government’s 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
Page 5 of 119
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.1âwphi1 That power
was expressly granted it by its charter. The power of eminent 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, NAPOCOR’s 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
ProvRem Rule 67 Fulltext
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, NAPOCOR’s 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
NAPOCOR’s 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 NAPOCOR’s
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 Considering that in the process of installing transmission
lines, NAPOCOR destroyed some fruit trees and plants without payment,
Page 6 of 119
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
NAPOCOR’s 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 Government’s exercise of its power of
ProvRem Rule 67 Fulltext
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 NAPOCOR’s 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.
SO ORDERED.
#3 G.R. No. 153974 August 7, 2006
MIGUEL BELUSO, NATIVIDAD BELUSO, PEDRO BELUSO, ANGELITA
BELUSO, RAMON BELUSO, and AMADA DANIEL, substituted by her
heirs represented by TERESITA ARROBANG, Petitioners,
vs.
THE MUNICIPALITY OF PANAY (CAPIZ), represented by its Mayor,
VICENTE B. BERMEJO, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before this Court is a petition for review questioning the Decision 1 of the
Court of Appeals (CA) dated March 20, 2002 in CA-G.R. SP No. 47052, as
well the Resolution 2 dated June 11, 2002 denying petitioners’ Motion for
Reconsideration thereof.
The facts are as follows:
Petitioners are owners of parcels of land with a total area of about 20,424
square meters, covered by Free Patent Nos. 7265, 7266, 7267, 7268, 7269,
and 7270. 3 On November 8, 1995, the Sangguniang Bayan of the
Municipality of Panay issued Resolution No. 95-29 authorizing the
municipal government through the mayor to initiate expropriation
proceedings. 4 A petition for expropriation was thereafter filed on April 14,
Page 7 of 119
1997 by the Municipality of Panay (respondent) before the Regional Trial
Court (RTC), Branch 18 of Roxas City, docketed as Civil Case No. V-6958. 5
Petitioners filed a Motion to Dismiss alleging that the taking is not for
public use but only for the benefit of certain individuals; that it is
politically motivated because petitioners voted against the incumbent
mayor and vice-mayor; and that some of the supposed beneficiaries of
the land sought to be expropriated have not actually signed a petition
asking for the property but their signatures were forged or they were
misled into signing the same. 6
On July 31, 1997, the trial court denied petitioners’ Motion to Dismiss and
declared that the expropriation in this case is for "public use" and the
respondent has the lawful right to take the property upon payment of just
compensation. 7
Petitioners filed an Answer on August 12, 1997 reasserting the issues they
raised in their Motion to Dismiss. 8
On October 1, 1997, the trial court issued an Order appointing three
persons as Commissioners to ascertain the amount of just compensation
for the property. 9 Petitioners filed a "Motion to Hold in Abeyance the
Hearing of the Court Appointed Commissioners to Determine Just
Compensation and for Clarification of the Court’s Order dated October 1,
1997" which was denied by the trial court on November 3,
1997. 10 Petitioners’ Motion for Reconsideration was also denied on
December 9, 1997. 11
Petitioners then filed on March 2, 1998 a Petition for Certiorari before the
CA claiming that they were denied due process when the trial court
declared that the taking was for public purpose without receiving
evidence on petitioners’ claim that the Mayor of Panay was motivated by
politics in expropriating their property and in denying their Motion to
Hold in Abeyance the Hearing of the Court Appointed Commissioners;
and that the trial court also committed grave abuse of discretion when it
disregarded the affidavits of persons denying that they signed a petition
addressed to the municipal government of Panay. 12 On January 17, 2001,
petitioners filed a Motion to Admit Attached Memorandum and the
Memorandum itself where they argued that based on the Petition for
Expropriation filed by respondent, such expropriation was based only on a
resolution and not on an ordinance contrary to Sec. 19 of Republic Act
(R.A.) No. 7160; there was also no valid and definite offer to buy the
property as the price offered by respondent to the petitioners was very
low. 13
On March 20, 2002, the CA rendered its Decision dismissing the Petition
for Certiorari. It held that the petitioners were not denied due process as
they were able to file an answer to the complaint and were able to adduce
their defenses therein; and that the purpose of the taking in this case
constitutes "public use". 14 Petitioners filed a Motion for Reconsideration
which was denied on June 11, 2002. 15
Thus, the present petition claiming that:
A. RESPONDENT IS WITHOUT, LACKS AND DOES NOT HAVE THE LAWFUL
POWER TO ACQUIRE ANY OR ALL OF THE SUBJECT PROPERTIES
THROUGH EMINENT DOMAIN, IT BEING EXERCISED BY MEANS OF A
MERE RESOLUTION, AND NOT THROUGH AN ORDINANCE AS REQUIRED
BY LAW AND APPLICABLE JURISPRUDENCE;
B. RESPONDENT IS LIKEWISE WITHOUT, LACKS AND DOES NOT HAVE
THE LAWFUL POWER TO ACQUIRE ANY OR ALL OF THE SUBJECT
PROPERTIES THROUGH EMINENT DOMAIN, ITS PREVIOUS OFFER TO BUY
THEM BEING NOT VALID; and
ProvRem Rule 67 Fulltext
C. IT WAS A SERIOUS ERROR ON THE PART OF THE HONORABLE COURT
OF APPEALS NOT TO DISCUSS, MUCH LESS RULE ON, BOTH IN ITS
QUESTIONED DECISION AND ITS RESOLUTION PROMULGATED ON 11
JUNE 2002 PETITIONERS’ ARGUMENTS THAT RESPONDENT IS WITHOUT,
LACKS AND DOES NOT HAVE THE LAWFUL POWER TO ACQUIRE ANY OR
ALL OF THE SUBJECT PROPERTIES THROUGH EMINENT DOMAIN, IT
BEING EXERCISED BY MEANS OF A MERE RESOLUTION, AND NOT
THROUGH AN ORDINANCE AS REQUIRED BY LAW AND APPLICABLE
JURISPRUDENCE, AND ITS PREVIOUS OFFER TO BUY THEM BEING NOT
VALID, DESPITE THE FACT THAT THESE OBJECTIONS WERE PROPERLY
PLEADED IN PETITIONERS’ MEMORANDUM WHICH WAS DULY
ADMITTED IN ITS RESOLUTION PROMULGATED ON 29 JANUARY 2001;
and
D. PETITIONERS WERE UTTERLY DENIED PROCEDURAL DUE PROCESS OF
LAW BY THE COURT A QUO, WHEN IT SIMPLY DECLARED IN ITS ORDER
DATED 31 JULY 1997 THAT THE TAKING BY RESPONDENT OF
PETITIONERS’ PROPERTIES IS PURPORTEDLY FOR PUBLIC PURPOSE
WITHOUT RECEIVING EVIDENCE ON THEIR ASSERTED CLAIM THAT
RESPONDENT’S MUNICIPAL MAYOR WAS POLITICALLY MOTIVATED IN
SEEKING THE EXPROPRIATION OF THEIR PROPERTIES AND NOT FOR
PUBLIC PURPOSE. 16
Petitioners argue that: contrary to Sec. 19 of R.A. No. 7160 of the Local
Government Code, which provides that a local government may exercise
the power of eminent domain only by "ordinance," respondent’s
expropriation in this case is based merely on a "resolution"; while
objection on this ground was neither raised by petitioners in their Motion
to Dismiss nor in their Answer, such objection may still be considered by
this Court since the fact upon which it is based is apparent from the
petition for expropriation itself; a defense may be favorably considered
even if not raised in an appropriate pleading so long as the facts upon
which it is based are undisputed; courts have also adopted a more
censorious attitude in resolving questions involving the proper exercise of
local bodies of the delegated power of expropriation, as compared to
instances when it is directly exercised by the national legislature;
respondent failed to give, prior to the petition for expropriation, a
previous valid and definite offer to petitioners as the amount offered in
this case was only P10.00 per square meter, when the properties are
residential in nature and command a much higher price; the CA failed to
discuss and rule upon the arguments raised by petitioners in their
Memorandum; attached to the Motion to Dismiss were affidavits and
death certificates showing that there were people whose names were in
the supposed petition asking respondent for land, but who did not
actually sign the same, thus showing that the present expropriation was
not for a public purpose but was merely politically motivated; considering
the conflicting claims regarding the purpose for which the properties are
being expropriated and inasmuch as said issue may not be rightfully ruled
upon merely on the basis of petitioners’ Motion to Dismiss and Answer as
well as respondent’s Petition for Expropriation, what should have been
done was for the RTC to conduct hearing where each party is given ample
opportunity to prove its claim. 17
Respondent for its part contends that its power to acquire private
property for public use upon payment of just compensation was correctly
upheld by the trial court; that the CA was correct in finding that the
petitioners were not denied due process, even though no hearing was
conducted in the trial court, as petitioners were still able to adduce their
objections and defenses therein; and that petitioners’ arguments have
been passed upon by both the trial court and the CA and were all denied
for lack of substantial merit. 18
Respondent filed a Memorandum quoting at length the decision of the
CA to support its position. 19 Petitioners meanwhile opted to have the
case resolved based on the pleadings already filed. 20
We find the petition to be impressed with merit.
Page 8 of 119
Eminent domain, which is the power of a sovereign state to appropriate
private property to particular uses to promote public welfare, is essentially
lodged in the legislature. 21 While such power may be validly delegated to
local government units (LGUs), other public entities and public utilities the
exercise of such power by the delegated entities is not absolute. 22 In fact,
the scope of delegated legislative power is narrower than that of the
delegating authority and such entities may exercise the power to
expropriate private property only when authorized by Congress and
subject to its control and restraints imposed through the law conferring
the power or in other legislations. 23 Indeed, LGUs by themselves have no
inherent power of eminent domain. 24 Thus, strictly speaking, the power of
eminent domain delegated to an LGU is in reality not eminent but
"inferior" since it must conform to the limits imposed by the delegation
and thus partakes only of a share in eminent domain. 25 The national
legislature is still the principal of the LGUs and the latter cannot go
against the principal’s will or modify the same.26
The exercise of the power of eminent domain necessarily involves a
derogation of a fundamental right. 27 It greatly affects a landowner’s right
to private property which is a constitutionally protected right necessary
for the preservation and enhancement of personal dignity and is
intimately connected with the rights to life and liberty. 28Thus, whether
such power is exercised directly by the State or by its authorized agents,
the exercise of such power must undergo painstaking scrutiny. 29
Indeed, despite the existence of legislative grant in favor of local
governments, it is still the duty of the courts to determine whether the
power of eminent domain is being exercised in accordance with the
delegating law.
Sec. 19 of R.A. No. 7160, which delegates to LGUs the power of eminent
domain expressly provides:
SEC. 19. Eminent Domain. - A local government unit may, through its chief
executive and acting pursuant to an ordinance, exercise the power of
eminent domain for public use, or purpose, or welfare for the benefit of
the poor and the landless, upon payment of just compensation, pursuant
to the provisions of the Constitution and pertinent laws: Provided,
however, That the power of eminent domain may not be exercised unless
a valid and definite offer has been previously made to the owner, and
such offer was not accepted: Provided, further, That the local government
unit may immediately take possession of the property upon the filing of
the expropriation proceedings and upon making a deposit with the
proper court of at least fifteen percent (15%) of the fair market value of
the property based on the current tax declaration of the property to be
expropriated: Provided, finally, That, the amount to be paid for the
expropriated property shall be determined by the proper court, based on
the fair market value at the time of the taking of the property.
It is clear therefore that several requisites must concur before an LGU can
exercise the power of eminent domain, to wit:
1. An ordinance is enacted by the local legislative council authorizing the
local chief executive, in behalf of the local government unit, to exercise
the power of eminent domain or pursue expropriation proceedings over a
particular private property.
2. The power of eminent domain is exercised for public use, purpose or
welfare, or for the benefit of the poor and the landless.
3. There is payment of just compensation, as required under Section 9,
Article III of the Constitution, and other pertinent laws.
4. A valid and definite offer has been previously made to the owner of the
property sought to be expropriated, but said offer was not accepted. 30
ProvRem Rule 67 Fulltext
The Court in no uncertain terms have pronounced that a local
government unit cannot authorize an expropriation of private property
through a mere resolution of its lawmaking body. 31 R.A. No. 7160
otherwise known as the Local Government Code expressly requires an
ordinance for the purpose and a resolution that merely expresses the
sentiment of the municipal council will not suffice. 32
A resolution will not suffice for an LGU to be able to expropriate private
property; and the reason for this is settled:
x x x A municipal ordinance is different from a resolution. An ordinance is
a law, but a resolution is merely a declaration of the sentiment or opinion
of a lawmaking body on a specific matter. An ordinance possesses a
general and permanent character, but a resolution is temporary in nature.
Additionally, the two are enacted differently -- a third reading is necessary
for an ordinance, but not for a resolution, unless decided otherwise by a
majority of all the Sanggunian members.
If Congress intended to allow LGUs to exercise eminent domain through a
mere resolution, it would have simply adopted the language of the
previous Local Government Code. But Congress did not. In a clear
divergence from the previous Local Government Code, Sec. 19 of R.A.
[No.] 7160 categorically requires that the local chief executive act
pursuant to an ordinance. x x x 33
As respondent’s expropriation in this case was based merely on a
resolution, such expropriation is clearly defective. While the Court is aware
of the constitutional policy promoting local autonomy, the court cannot
grant judicial sanction to an LGU’s exercise of its delegated power of
eminent domain in contravention of the very law giving it such power. 34
The Court notes that petitioners failed to raise this point at the earliest
opportunity. Still, we are not precluded from considering the same. This
Court will not hesitate to consider matters even those raised for the first
time on appeal in clearly meritorious situations, 35 such as in this case.
Thus, the Court finds it unnecessary to resolve the other issues raised by
petitioners.
It is well to mention however that despite our ruling in this case
respondent is not barred from instituting similar proceedings in the
future, provided that it complies with all legal requirements. 36
WHEREFORE, the petition is GRANTED. The decision of the Court of
Appeals in CA-G.R. SP No. 47052 is REVERSED and SET ASIDE. The
Complaint in Civil Action No. V-6958 is DISMISSED without prejudice.
No costs.
SO ORDERED.
#4 G.R. No. 175176 October 17, 2008
NATIONAL POWER CORPORATION, petitioner,
vs.
SANTA LORO VDA. DE CAPIN and SPS. JULITO QUIMCO and GLORIA
CAPIN, respondents.
DECISION
CHICO-NAZARIO, J.:
Before this Court is a Petition for Review on Certiorari under Rule 45 of
the 1997 Revised Rules of Civil Procedure seeking to review, reverse, and
Page 9 of 119
set aside the Decision1 dated 21 April 2006 and Resolution2 dated 27
October 2006 of the Court of Appeals in CA-G.R. CV No. 73656. In its
assailed Decision, the appellate court affirmed the Resolution3 dated 16
April 2001, as modified by the Order4 dated 24 August 2001, of the
Regional Trial Court (RTC), 7th Judicial Region, Branch 25, Danao City, in
Civil Case No. DNA-547, awarding in favor of herein respondents Santa
Loro Vda. De Capin and spouses Julito Quimco and Gloria Capin (Spouses
Quimco) damages, in the total amount ₱1,434,207.67 (at the rate of
₱448.33 per square meter), for the 3,199-square-meter portion of their
lots taken by herein petitioner National Power Corporation (NAPOCOR).
In its assailed Resolution, the appellate court denied petitioner’s Motion
for Reconsideration.
The present controversy arose from the following facts:
Petitioner is a government-owned and controlled corporation duly
organized under Philippine laws and vested with the power of eminent
domain by its Charter under Republic Act No. 6395,5 as amended by
Presidential Decree No. 938.6 Pursuant to its 230 KV Leyte-Cebu
Interconnection Project (Interconnection Project), petitioner expropriated
several parcels of land in the Municipality of Carmen and City of Danao in
the Province of Cebu, which will be traversed and affected by its
transmission towers and lines.
Among the lots affected by the petitioner’s Interconnection Project were
those owned by the respondents located in Dawis Sur, Carmen, Cebu.
Respondent Santa Loro Vda. De Capin’s lot has an area of 16,193 square
meters, covered by Tax Declaration No. 15-22196 (1994);7 while
respondent-Spouses Quimco’s lot has an area of 3,298 square meters,
covered by Tax Declaration No. 31376 (1996).8 To be able to enter the
said properties, petitioner obtained from each of the respondents Santa
Loro Vda. De Capin and Spouses Quimco a "Permission to Enter for
Construction of Transmission Line Project," dated 14 June 19949 and 11
December 1996,10 respectively. The permits were signed by the
respondents upon representation by the petitioner that it would pay them
just compensation for the intrusion into their properties.
Thereafter, petitioner began to construct on respondents’ properties its
power lines and transmission towers, which were completed in 1996.
Petitioner’s Interconnection Project affected portions of respondents’
properties, with a combined area of 3,199 square meters. Upon its
completion of the construction of the power lines and transmission
towers, petitioner imposed several restrictions upon the respondents on
the use of their lands, which included the prohibition against planting or
building anything higher than three meters below the area traversed by
its transmission lines as the high tension electric current passing through
said lines pose danger to life and limbs. Additionally, respondent-Spouses
Quimco, holder of a Small Scale Quarry Permit, Series of 1995, were also
prohibited from continuing their quarry business near petitioner’s
transmission towers because of the great possibility that the quarry might
weaken the foundation of the transmission towers. In other words,
respondents lost substantial amount of income due to the restriction
imposed on their properties by the petitioner.
Petitioner then paid respondents Santa Loro Vda. De Capin and Spouses
Quimco the amounts of ₱8,015.9011and ₱5,350.49,12 respectively, for the
portions of their lots affected by the Interconnection Project. Only later
did respondents discover that in comparison to the measly sums they
were paid by petitioner, the other landowners within their area who
resisted the expropriation of their properties in court or who entered into
compromise agreements with the petitioner were paid by petitioner the
amount of ₱448.30 to ₱450.00 per square meter as just compensation for
the portions of their properties similarly affected by the petitioner’s
Interconnection Project.
Accordingly, respondents filed a Complaint13 for Rescission of Agreement,
Recovery of Possession of Parcels of Land, Removal of Tower and
ProvRem Rule 67 Fulltext
Transmission Lines, Damages and Other Reliefs, against the petitioner
before the RTC, where it was docketed as Civil Case No. DNA-547.
Petitioner, in its Answer, countered that respondents’ claim for
compensation for the full value of their properties traversed by its
transmission lines was repugnant to Section 3-A14 of its Charter, according
to which, petitioner is obligated only to pay the easement fee equivalent
to 10% of the market value of the land as just compensation, plus the cost
of damaged improvements.
During the Pre-trial Conference, the parties conceded that there was no
dispute as to the material fact that petitioner had taken portions of
respondents’ lots, with a combined area of 3,199 square meters, for use in
its Interconnection Project. They also agreed that the only issue for
resolution by the RTC was the determination of the amount of just
compensation due the respondents for the portions of their land taken by
the petitioner. Thus, respondents assented that they would file a Motion
for Summary Judgment.
On 4 September 2000, the RTC issued an Order15 giving the respondents
30 days within which to file their Motion for Summary Judgment. The
petitioner was also given 20 days from receipt of a copy of respondents’
Motion for Summary Judgment to interpose or file its Opposition thereto.
In compliance with the 4 September 2000 Order of the RTC, respondents
filed their Motion for Summary Judgment, with several documentary
evidence and affidavits of witnesses attached, on 10 October 2000.
In an Order16 dated 17 November 2000, the RTC gave petitioner a 15-day
period from receipt of the said Order to file its Opposition to or Comment
on respondents’ Motion for Summary Judgment.
On 21 December 2000, petitioner filed a Motion for Extension of Time to
File Comment on Motion for Summary Judgment. It averred that (1) it was
not inclined to oppose respondents’ Motion for Summary Judgment,
except that the area of 3,199 square meters of respondents’ lots alleged
to have been traversed by petitioner’s transmission lines was still being
verified as to its correctness by its Right of Way Officers; and (2) upon
confirmation that the area was correct, it would join respondents’ Motion
for Summary Judgment.17 In an Order18 dated 29 December 2000, the RTC
granted petitioner’s motion and gave it an extension of 15 days within
which to file its Comment to respondents’ Motion for Summary
Judgment.
Despite the extension given the petitioner, it still failed to file its
Comment. Hence, in an Order19 dated 23 February 2001, the RTC deemed
respondents’ Motion for Summary Judgment submitted for resolution.
On 16 April 2001, the RTC rendered a Resolution in favor of the
respondents, the decretal portion of which reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in
favor of the [herein respondents], ordering the [herein petitioner] to pay
damages in the amount of FOUR HUNDRED FORTY EIGHT & 33/100
PESOS (₱448.33) PER SQUARE METER or the total amount of ONE
MILLION FOUR HUNDRED THIRTY FOUR AND TWO HUNDRED SEVEN &
67/100 PESOS (₱1,434,207.67) for the 3,199 square meters of
[respondents’] lots taken by the [petitioner], with interest thereon at the
rate of 14% per annum computed since 1996 when the [petitioner] took
said portions from the [respondents].20
Petitioner filed a Motion for Reconsideration praying that the aforesaid
Resolution of the RTC be set aside and the amount of just compensation
be reduced to ₱25.00 per square meter. Petitioner also filed a
Supplemental Motion for Reconsideration seeking the reduction of the
interest rate imposed by the RTC from 14% per annum to 6% per annum.
Page 10 of 119
Acting on petitioner’s Motion for Reconsideration and Supplemental
Motion for Reconsideration, the RTC issued an Order21 dated 24 August
2001, affirming its Resolution dated 16 April 2001, with the modification
that the imposable rate of interest was reduced to 6% per annum from
the filing of the complaint, and 12% per annum from the time the
judgment has become final and executory until fully satisfied. According
to the dispositive portion of the RTC Order:
WHEREFORE, the resolution of this Court dated [16 April 2001] is hereby
affirmed with modification that the imposable rate of interest of the
monetary judgment in favor of [respondents] should be 6% per annum
from the filing of the complaint and 12% per annum from the time the
judgment has become final and executory until fully satisfied, using the
amount adjudged as the actual base for the computation.22
Still refusing to accept the judgment of the RTC, petitioner appealed the
16 April 2001 Resolution and 24 August 2001 Order of the said trial court
to the Court of Appeals. Petitioner’s appeal was docketed as CA-G.R. CV
No. 73656.
On 21 April 2006, the appellate court rendered a Decision affirming the
Resolution dated 16 April 2001, as modified by the Order dated 24
August 2001, both by the RTC.
Petitioner moved for the reconsideration of the appellate court’s Decision,
but it was denied by the same court in a Resolution dated 27 October
2006.
Hence, petitioner filed the present Petition before this Court, raising the
following issues:
I. Whether or not the Court of Appeals committed reversible error in
upholding the propriety of the trial court’s resort to summary
judgment in determining the amount of just compensation for the
properties of respondents affected by petitioner’s transmission line
project.
II. Whether or not the Court of Appeals committed reversible error in
affirming the finding of the trial court that the total area of
respondents’ lands affected by petitioner’s transmission line project
is 3,199 square meters.
III. Whether or not the Court of Appeals committed reversible error
in ruling that the decision in Civil Case No. DNA-379 provides
sufficient basis for fixing the fair market value of the affected
properties of respondents at ₱448.33 per square meter.
IV. Whether or not the Court of Appeals committed reversible error
in not ruling that under petitioner’s Charter, R.A. No. 6395, as
amended, respondents are only entitled to simple easement fees.23
Petitioner argues that although the Complaint filed by the respondents
before the RTC was one for rescission of agreement and/or damages, it
was subsequently transformed into one for "reversed eminent
domain"24 where the determination of the amount of just compensation
was the issue. In fact, respondents’ Motion for Summary Judgment
focused only on the payment of just compensation. Resultantly, the RTC
erred in resolving the respondents’ Complaint on the basis of the
provisions of the Rules of Court on Summary Judgment. The rules on
summary judgment apply only to ordinary taking of properties. Instead of
granting respondents’ Motion for Summary Judgment, the RTC should
have appointed commissioners who would ascertain the amount of just
compensation for the subject properties, pursuant to Section 5, Rule 67 of
the Revised Rules of Court.25 Thus, the determination of just
compensation by the RTC based only on the pleadings submitted, was
palpably void.
ProvRem Rule 67 Fulltext
The Resolution dated 16 April 2001 of the RTC in Civil Case No. DNA-547,
fixing the fair market value for the portions of respondents’ lots affected
by the Interconnection Project at ₱448.33 per square meter, is based on
the Decision dated 25 May 1998 also of the RTC in Civil Case No. DNA-
379;26 which, petitioner contends, is based on another Decision dated 5
May 1998 of the same RTC in Civil Case No. DNA-373.27 In its 5 May 1998
Decision in Civil Case No. DNA-373, the RTC considered the opinion
values of the Committee on Appraisal in determining the fair market value
of the properties involved therein. The said Decision, however, did not
contain a description of the properties involved therein and their land
classification at the time of the filing of the complaint and/or their taking.
Therefore, the Decision dated 25 May 1998 in Civil Case No. DNA-379 did
not provide sufficient basis for pegging the fair market value of
respondents’ properties at ₱448.33 per square meter in Civil Case No.
DNA-547.
Petitioner maintains that the RTC did not discuss in its Resolution dated
16 April 2001 its factual and legal bases for fixing the amount of damages
payable to respondents. Respondents likewise failed to demonstrate that
their properties, at the time of their taking, were of the same classification
as the properties belonging to other landowners which were similarly
traversed by petitioner’s Interconnection Project and for which petitioner
paid more. Finally, petitioner insists that it only acquired an easement of
right of way on respondents’ properties for the construction of its
transmission lines. The respondents still retained ownership of their
properties despite the imposition of an easement of right of way thereon.
Consequently, petitioner is liable only to pay respondents an easement
fee, not exceeding 10% of the fair market value of the portions of their
properties actually affected by the petitioner’s Interconnection Project, in
accordance with Section 3-A(b) of petitioner’s Charter, as amended.
The Petition is bereft of merit.
Summary or accelerated judgment is a procedural technique aimed at
weeding out sham claims or defenses at an early stage of the litigation,
thereby avoiding the expense and loss of time involved in a trial. Even if
the pleadings appear, on their face, to raise issues, summary judgment
may still ensue as a matter of law if the affidavits, depositions and
admissions show that such issues are not genuine. The presence or
absence of a genuine issue as to any material fact determines, at
bottom, the propriety of summary judgment.28
Sections 1 and 3, Rule 35 of the Revised Rules of Civil Procedure provide:
SECTION 1. Summary judgment for claimant. – A party seeking to recover
upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief
may, at any time after the pleading in answer thereto has been served,
move with supporting affidavits, depositions or admissions for a summary
judgment in his favor upon all or any part thereof.
xxxx
SEC. 3. Motion and proceedings thereon. – The motion shall be served at
least ten (10) days before the time specified for the hearing. The adverse
party may serve opposing affidavits, depositions, or admissions at least
three (3) days before the hearing. After the hearing, the judgment sought
shall be rendered forthwith if the pleadings, supporting affidavits,
depositions, and admissions on file, show that, except as to the amount of
damages, there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.
Under the afore-quoted procedural rules, for a summary judgment to be
proper, the movant must establish two requisites: (a) there must be no
genuine issue as to any material fact, except for the amount of damages;
and (b) the party presenting the motion for summary judgment must be
entitled to a judgment as a matter of law. Where, on the basis of the
Page 11 of 119
pleadings of a moving party, including documents appended thereto, no
genuine issue as to a material fact exists, the burden to produce a
genuine issue shifts to the opposing party. If the opposing party fails, the
moving party is entitled to a summary judgment.29
A "genuine issue" is an issue of fact which requires the presentation of
evidence as distinguished from a sham, fictitious, contrived or false claim.
When the facts as pleaded appear uncontested or undisputed, then there
is no real or genuine issue or question as to the facts, and summary
judgment is called for. The party who moves for summary judgment has
the burden of demonstrating clearly the absence of any genuine issue of
fact, or that the issue posed in the complaint is patently unsubstantial so
as not to constitute a genuine issue for trial. Trial courts have limited
authority to render summary judgments and may do so only when there
is clearly no genuine issue as to any material fact. When the facts as
pleaded by the parties are disputed or contested, proceedings for
summary judgment cannot take the place of trial.30
In this case, during the Pre-trial Conference, petitioner already admitted
that it had taken portions of respondents’ lands for the construction of its
power lines and transmission towers pursuant to its Interconnection
Project. However, the parties could not agree on the amount of just
compensation or damages that petitioner should pay respondents for the
lands taken. Respondents insist that they be paid the full market value of
the portions of their lots taken by the petitioner, while petitioner believed
that it was only bound to pay respondents easement fees, which was
equivalent to 10% of the market value of the respondents’ lots as
indicated in their tax declarations, pursuant to Section 3-A of petitioner’s
Charter. Evidently, based on the foregoing, what remained for the
determination of the RTC was the proper amount of damages due the
respondents for the portions of their lots taken by the petitioner.
Accordingly, respondents filed a Motion for Summary Judgment before
the RTC, where they specifically alleged that:
"4. Portions of the above-described parcels of land with a total area
of 3,199 square meters were affected by the aforesaid [petitioner’s]
230 KV Leyte-Cebu Interconnection Project and were taken by
[petitioner] in 1996, is shown by a Sketch Plan hereto attached as Annex
Cwhich is also made an integral part of this motion."31 (Emphasis
supplied.)
Petitioner, in turn, filed its Motion for Extension of Time to File Comment,
which was granted by the RTC. In its Motion, petitioner stated that it was
not inclined to oppose respondents’ Motion for Summary
Judgment, exceptthat its officers were still verifying whether the area of
respondents’ lots traversed by petitioner’s transmission lines was indeed
3,199 square meters; and the moment the area is confirmed to be correct,
petitioner will join respondents’ Motion for Summary Judgment. However,
despite the ample opportunities given to petitioner by the RTC, it never
filed any Opposition to or Comment on respondents’ Motion for
Summary Judgment. It did not submit to the RTC the results of its
supposed verification of the area of respondents’ lots actually traversed
by its transmission lines. Petitioner only raised the issue on the area
actually taken after the RTC had rendered summary judgment directing
petitioner to pay damages for the 3,199 square meters it took from
respondents.
As correctly and clearly ratiocinated by the Court of Appeals in its
appealed Decision:
[Petitioner] did not present the alleged communication of its Project
Manager or the sketch plans for the RTC’s perusal despite the extension
of time given by the court a quo. In view thereof, it is quite clear that the
[petitioner] was given sufficient time to verify the area affected by
[petitioner’s] tower and transmission lines and to inform the court of the
result thereof. Furthermore, the sketch plans32were not even signed by the
ProvRem Rule 67 Fulltext
geodetic engineer who supposedly conducted the survey and its
preparation which makes these documents of doubtful credibility. As such
without any comment filed by the [petitioner] and without any evidence
to the contrary, the court a quo correctly relied on the evidence submitted
by the [respondents]. x x x. The [petitioner] cannot now raise any issue
as to any material fact in the case at bar when through its own fault
and inaction, it chose to remain silent when the motion for summary
judgment was filed with the RTC. Such an actuation speaks of a dilatory
tactic on the part of the [petitioner] in the payment of the just
compensation due the [respondents].33 (Emphasis supplied.)
In light of the foregoing, the issue on the area of respondents’ lots
actually affected by petitioner’s Interconnection Project was not timely or
validly raised as an issue before the RTC. Except for the amount of
damages to which the respondents were entitled to as a matter of law,
there was no other genuine issue as to any material fact involved in Civil
Case No. DNA-547. Hence, the RTC was justified in resorting to summary
judgment.
Equally futile is petitioner’s insistence that respondents’ Complaint is
actually for "reversed eminent domain," which requires the appointment
of commissioners for the determination of just compensation, as provided
under Section 5, Rule 67 of the Revised Rules of Court, rather than the
promulgation of a summary judgment.
It should be emphasized that the present case stemmed from a Complaint
for Rescission of Agreement, Recovery of Possession of Parcels of Land,
Removal of Tower and Transmission Lines, Damages and Other Reliefs
filed by the respondents against the petitioner. It was an ordinary civil
action for the rescission of respondents’ agreement with petitioner, as
well as recovery of the possession of the lots taken, for failure of
petitioner to comply with its obligation to pay just compensation for the
respondents’ properties. Payment of just compensation or damages was
an alternative remedy, akin to specific performance by the petitioner of its
obligation under its agreement with respondents, which would prevent
the rescission of the agreements altogether and the return of the
possession of the properties to respondents. The parties, at the Pre-Trial
Conference, implicitly agreed to pursue the remedy for payment of
damages rather than rescission of the agreement. Clearly, the proceedings
before the RTC were not for expropriation, but were for damages, to
which Section 5, Rule 67 of the Revised Rules of Court is irrelevant.
Reference may be made to National Power Corporation v. Court of
Appeals.34 In the said case, after therein petitioner NAPOCOR withdrew its
second Petition for Expropriation, what was left for the trial court’s
determination was the counterclaim of therein private respondent
Antonino Pobre, contained in his Motion to Dismiss, for damages. The
Court ruled therein:
"In this case, NPC appropriated [private respondent’s] Property without
resort to expropriation proceedings. NPC dismissed its own complaint for
the second expropriation. At no point did NPC institute expropriation
proceedings for the lots outside the 5,554 square-meter portion subject
of the second expropriation. The only issues that the trial court had to
settle were the amount of just compensation and damages that NPC had
to pay [private respondent].
This case ceased to be an action for expropriation when NPC dismissed its
complaint for expropriation. Since this case has been reduced to a
simple case of recovery of damages, the provisions of the Rules of
Court on the ascertainment of the just compensation to be paid were
no longer applicable. A trial before commissioners, for instance, was
dispensable." (Emphasis supplied.)
Petitioner herein cannot hide behind the mantle of protection of
procedural laws when it has so arbitrarily violated respondents’ right to
just compensation for their properties taken for public use.
Page 12 of 119
Petitioner assured respondents that it will pay them just compensation for
the portions of their lots needed for the Interconnection Project, on the
basis of which respondents agreed in good faith to allow petitioner to
already enter their properties and build thereon. Yet, instead of paying
respondents just compensation for the portions of their lots taken, they
were paid negligible amounts as easements fees.
More lopsided is the fact that the other landowners within their area who
resisted the taking of their properties were paid by petitioner way more
than respondents who voluntarily dealt with petitioner. Petitioner had to
bring some of the resisting landowners to court in expropriation
proceedings where petitioner willingly paid just compensation for the said
landowners’ properties, as determined by a panel of commissioners.
Petitioner entered into compromise agreements with the other resisting
landowners in which it likewise paid just compensation for the latter’s
properties. There is no rhyme or reason why respondents were the only
ones paid with easement fees, which were of much lesser values.
The Decision dated 25 May 1998 of the RTC in Civil Case No. DNA-
37935 provides sufficient basis for the same RTC in Civil Case No. DNA-547
to award just compensation to respondents, equivalent to the fair market
value of their affected properties at a rate of P448.33 per square meter.
In its 25 May 1998 Decision in Civil Case No. DNA-379, the RTC therein
ordered the petitioner to pay just compensation in the amount of ₱448.33
per square meter for the lot owned by the heirs of Tomas Gingco, which
was similarly traversed by petitioner’s transmission lines. Said Decision
became final and executory on 3 December 1998.36 Although it is a
Decision in another case, the RTC in Civil Case No. DNA-547 can take
cognizance thereof when respondents presented the same for its
consideration.
The lot of the heirs of Tomas Gingco and those of the herein respondents
are all located within the same area in Dawis Sur, Carmen, Cebu and, are
in fact, separated only by a lot owned jointly by Epifanio, Edilberto and
Josefa, all surnamed Loro. The lots owned by the respondents are even
more advantageously situated than the lot owned by the heirs of Tomas
Gingco since respondents’ properties are traversed by a barangay road
and near the quarry areas of Llyons Richfield Industrial Corporation. The
lots of the heirs of Tomas Gingco and of the respondents were all affected
by the Interconnection Project and were taken by the petitioner at about
the same time. The lots of respondents were effectively taken in June
1996, while the lot of the heirs of Tomas Gingco was acquired only a
month later, in July 1996. Since the personalities and properties in both
Civil Case No. DNA-379 and Civil Case No. DNA-547 were essentially in
similar situations, then the just compensation awarded for the property in
the former case was a logical and reasonable basis for fixing or
determining the just compensation due in the latter.
Furthermore, petitioner attached to their Motion for Summary Judgment
several pieces of document in support of their allegations therein, and
they furnished petitioner copies of the same. The petitioner was given
ample time to study, challenge, and controvert respondents’ evidences,
yet it failed to do so. The RTC only rightfully proceeded, based on its
evaluation of the evidence on record, to render a Decision awarding to
the respondents just compensation or damages for the taking of their
lots, equivalent to the fair market value thereof at the rate of ₱448.33 per
square meter.
Finally, petitioner cannot insist that it only acquired an easement of right
of way on the properties of the respondents and that it was liable to pay
respondents only an easement fee not exceeding 10% of the fair market
value of the portions of their property actually affected by the
Interconnection Project, pursuant to Section 3-A(b) of its Charter.
Expropriation is not limited to the acquisition of real property with a
corresponding transfer of title or possession. The right-of-way easement
ProvRem Rule 67 Fulltext
resulting in a restriction or limitation on property rights over the land
traversed by transmission lines also falls within the ambit of the term
"expropriation."37
After petitioner’s transmission lines were fully constructed on portions of
respondents’ lots, petitioner imposed restrictions thereon such as the
prohibition against planting or building anything higher than three
meters below the area traversed by said lines. In addition, respondent-
Spouses Quimco, holders of a Small Scale Quarry Permit, Series of
1995,38 were also prohibited from continuing their quarry business near
petitioner’s transmission towers because of the great possibility that it
could weaken the foundation thereof. Hence, the respondent-spouses
Quimco suffered substantial loss of income. It is clear then that
petitioner’s acquisition of an easement of right of way on the lands of the
respondents amounted to an expropriation of the portions of the latter’s
properties and perpetually deprived the respondents of their proprietary
rights thereon and for which they are entitled to a reasonable and just
compensation. Just compensation is defined as the 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.39
As the Court thoroughly explained in National Power Corporation v.
Gutierrez,40 viz:
The trial court’s observation shared by the appellate court show that "x x x
While it is true that plaintiff [is] only after a right-of-way easement, it
nevertheless perpetually deprives defendants of their proprietary
rights as manifested by the imposition by the plaintiff upon defendants
that below said transmission lines no plant higher than three (3) meters is
allowed. Furthermore, because of the high-tension current conveyed
through said transmission lines, danger to life and limbs that may be
caused beneath said wires cannot altogether be discounted, and to cap it
all, plaintiff only pays the fee to defendants once, while the latter
shall continually pay the taxes due on said affected portion of their
property."
The foregoing facts considered, the acquisition of the right-of-way
easement falls within the purview of the power of eminent domain.
Such conclusion finds support in similar cases of easement of right-of-
way where the Supreme Court sustained the award of just compensation
for private property condemned for public use (See National Power
Corporation vs. Court of Appeals, 129 SCRA 665, 1984; Garcia vs. Court of
Appeals, 102 SCRA 597, 1981). The Supreme Court, in Republic of the
Philippines vs. PLDT, thus held that:
"Normally, of course, the power of eminent domain results in the taking
or appropriation of title to, and possession of, the expropriated property;
but no cogent reason appears why said power may not be availed of to
impose only a burden upon the owner of condemned property,
without loss of title and possession. It is unquestionable that real
property may, through expropriation, be subjected to an easement of
right-of-way."
In the case at bar, the easement of right-of-way is definitely a taking
under the power of eminent domain. Considering the nature and effect of
the installation of the 230 KV Mexico-Limay transmission lines,
the limitation imposed by NPC against the use of the land for an
indefinite period deprives private respondents of its ordinary
use.41 (Emphasis supplied.)
Having established that petitioner’s acquisition of right-of-way easement
over the portions of respondents’ lots was definitely a taking under the
power of eminent domain, petitioner then is liable to pay respondents
Page 13 of 119
just compensation and not merely an easement fee. The Court quotes
with affirmation the ruling of the Court of Appeals on this matter:
The [herein petitioner] vehemently insists that its Charter [Section 3A (b)
of R.A. 6395] obliges it to pay only a maximum of 10% of the market value
declared by the owner or administrator or anyone having legal interest in
the property, or such market value as determined by the assessor,
whichever is lower. To uphold such a contention would not only interfere
with a judicial function but would also render as useless the protection
guaranteed by our Constitution in Section 9, Article III of our Constitution
that no private property shall be taken for public use without payment of
just compensation.
Moreover, the valuation of a property in the tax declaration cannot be an
absolute substitute to just compensation. Stated differently, the market
value stated in the tax declaration of the condemned property is no
longer conclusive.42 It is violative of due process to deny to the owner the
opportunity to prove that the valuation in the tax documents is unfair or
wrong. It is also repulsive to the basic concepts of justice and fairness to
allow the haphazard work of a minor bureaucrat or clerk to absolutely
prevail over the judgment of a court which is promulgated only after
expert commissioners have actually viewed the property, after evidence,
arguments pro and con have been presented, and after all factors and
considerations essential to a fair and just determination have been
judicially evaluated.43 10% of the market value of the expropriated
property cannot in any way be considered as the fair and full equivalent
to the loss sustained by the owner of the property, such would be 90%
less than what is due him. Thus, we are of the conclusion that Section 3A
of [petitioner’s] Charter cannot prevail over the mandate of our
Constitution on the payment of just compensation. The court a quo did
not commit an error when it held that the [petitioner’s] charter
encroached on the function of the court in determining just
compensation.44
WHEREFORE, premises considered, the instant Petition is
hereby DENIED. The Decision and Resolution of the Court of Appeals in
CA-G.R. CV No. 73656, dated 21 April 2006 and 27 October 2006,
respectively, are hereby AFFIRMED. No pronouncement as to costs.
SO ORDERED.
#5 G.R. Nos. 94193-99 February 25, 1992
NATIONAL POWER CORPORATION, petitioner,
vs.
HON. ENRIQUE T. JOCSON, in his capacity as Presiding Judge,
Regional Trial Court, 6th Judicial Region, Branch 47, Bacolod City;
JESUS, FERNANDO, MARIA CRISTINA and MICHAEL, all surnamed
GONZAGA; LUIS, DIONISIO, ROBERTO, GABRIEL, BENJAMIN, ANA,
ALEXANDER, CARLA, SOFIA and DANIEL, all surnamed GONZAGA;
ROSARIO P. MENDOZA; CELSOY AGRO-IND. CORP.; EMMANUEL,
LYDIA, HARRY, NOLI, CLIFFORD and CHRISTIAN DALE, all surnamed
AÑO; MAYO L. LACSON; and LUCIA GOSIENFIAO, respondents.
Amado B. Parreno Law Office for Gonzaga, et al.
Francisco B. Cruz for R. Mendoza.
Eduardo M. Casiple for Mayo Lacson.
DAVIDE, JR., J.:
ProvRem Rule 67 Fulltext
This is a special civil action for certiorari to annul, for having been issued
without or in excess of jurisdiction, in violation of law and in deprivation
of petitioner's right to due process, four (4) orders successively issued by
the respondent Judge in seven (7) eminent domain cases (1) fixing the
provisional values of the parcels of land sought to be expropriated by the
petitioner, National Power Corporation (NAPOCOR), in amounts far
exceeding their market values, (2) increasing the provisional values of the
parcels of land involved in two (2) of such cases without hearing and
holding in abeyance the issuance of the writ of possession in favor of
petitioner until deposit of the additional amount, (3) requiring the private
respondents, as defendants in said cases, to state in writing within twenty-
four (24) hours whether or not they are amenable to accepting and
withdrawing the amount deposited by petitioner as provisional values in
full and final satisfaction of their respective properties, and directing that
the writ of possession be issued only until after the defendants shall have
so manifested in writing their acceptance and receipt of said amounts,
and (4) directing petitioner to release and pay within twenty-four (24)
hours, through the Court and in favor of the defendants, the amount of
P43,016,960.00.
The antecedents of this case are not controverted.
Petitioner is a government-owned and controlled corporation created and
existing by virtue of Republic Act No. 6395, as amended, for the purpose
of undertaking the development of hydraulic power, the production of
power from any source, particularly by constructing, operating and
maintaining power plants, auxiliary plants, dams, reservoirs, pipes, mains,
transmission lines, power stations and other works for the purpose of
developing hydraulic power from any river, creek, lake, spring and
waterfall in the Philippines and supplying such power to the inhabitants
thereof. In order to carry out these purposes, it is authorized to exercise
the power of eminent domain.
On 30 March 1990, petitioner filed seven (7) eminent domain cases before
the Regional Trial Court of the Sixth Judicial Region in Bacolod City, to wit:
(1) Civil Case No. 5938 against Jesus, Fernando, Ma.
Cristina and Michael, all surnamed GONZAGA; 1
(2) Civil Case No. 5939 against Louis, Dionisio,
Roberto, Gabriel, Benjamin, Ana, Alexander, Carla,
Sofia, Daniel, all surnamed GONZAGA; 2
(3) Civil Case No. 5940 against Rosario P. Mendoza; 3
(4) Civil Case No. 5941 against Celsoy Agro-Ind.
Corporation; 4
(5) Civil Case No. 5942 against Emmanuel, Lydia,
Harry, Noli, Clifford and Christian, Dale, all surnamed
AÑO; 5
(6) Civil Case No. 5943 against Mayo L. Lacson; 6
(7) Civil Case No. 5944 against Lucia Gosiengfiao 7
for the acquisition of a right-of-way easement over portions of the parcels
of land described in the complaints for its Negros-Panay Interconnection
Project, particularly the Bacolod-Tomonton Transmission Line.
The complaints uniformly (a) allege that petitioner urgently needs
portions of the affected land to enable it to construct its tower and
transmission line in a manner that is compatible with the greatest good
while at the same time causing the least private injury; the purpose for
which the lands are principally devoted will not be impaired by the
Page 14 of 119
transmission lines as it will only acquire a right-of-way-easement thereon;
and it had negotiated with and offered to pay defendants for the portions
affected by the Bacolod-Tomonton Transmission Line, but the parties
failed to reach an agreement despite long and repeated negotiations, and
(b) pray that:
1. This Honorable Court fix the provisional value of
the portions of the parcel of land herein sought to be
expropriated pursuant to Section 2, Rule 67 of the
Rules of Court;
2. This Honorable Court, by proper order and writ,
authorize the plaintiff to enter or take possession of
the premises described in paragraph 3 hereof, and to
commence and undertake the construction of the
Bacolod-Tomonton T/L after depositing with the
Provincial Treasurer of Negros Occidental the
provisional value fixed by this Honorable Court, which
amount shall be held by said official subject to the
order and final disposition of the Court;
3. This Honorable Court appoint three (3)
Commissioners to hear the parties, view the premises,
assess the damages to be paid for the condemnation,
and to report in full their proceedings to the Court;
4. The plaintiff be declared to have the lawful right to
acquire portions of the properties of the defendants
affected by the condemnation;
5. After the determination of the amount of
indemnity, the Court authorize the payment by the
plaintiff to the defendants; and
6. Judgment be rendered against the defendants,
condemning the portion of the parcels of land
referred to in paragraphs 3 and 4 hereof, including
the improvements thereof, if any, for public use and
for the purpose hereinabove set forth, free from all
other liens and encumbrances whatsoever; and
thereafter, upon plaintiff's compliance with the
requirements of said judgment, a final order of
condemnation be issued and entered in favor of the
plaintiff.
Plaintiff further prays for such other reliefs as may be
deemed just and equitable in the premises.
The cases were raffled to different branches of the trial court as follows:
Civil Cases Nos. 5938, 5943 and 5944 to Branch 43; Civil Case No. 5939 to
Branch 54; Civil Case No. 5940 to Branch 45; Civil Case No. 5941 to Branch
50; and Civil Case No. 5942 to Branch 46.
Only the defendants in Civil Cases Nos. 5938, 5939, and 5942 filed
Motions to Dismiss. 8
On 4 April 1990, petitioner filed a Motion to consolidate these cases for
joint trial 9 and an Urgent Motion To Fix Provisional Value.10
On 10 April 1990, Executive Judge Jesus V. Ramos issued an Order
granting the motion for consolidation and ordering the consolidation of
all the cases in Branch 43 of the court, then presided over by Judge
Romeo Habaradas.11
ProvRem Rule 67 Fulltext
Considering that Judge Habaradas was on sick leave, petitioner filed on 8
May 1990 an Urgent Motion to Reraffle due to the urgent necessity for
the hearing of the cases and the Urgent Motion to Fix Provisional
Value. 12 Acting on said motion, Vice Executive Judge Bethel K. Moscardon
issued on 9 May 1990 an Order granting the motion and directing the re-
raffle of the cases. 13
Upon re-raffle, the cases were assigned to Branch 47, presided over by
respondent Judge. Since the latter went on sick leave effective 16 May
1990, petitioner filed on said date an Urgent Motion for Special Re-raffle
and for Immediate Fixing of Provisional Value. 14 As a consequence
thereof, the cases were re-raffled to Branch 48 of the court.
On 17 May 1990, Judge Romeo Hibionada of Branch 48 issued an Order
directing the defendants to appear before the court on 21 May 1990 at
8:30 A.M. to register their comments or objections to the fixing of the
provisional values of the parcels of land subject of expropriation. 15
On 21 May 1990, the petitioner and the defendants, through their
respective lawyers, appeared and orally argued their respective positions
on the Motion to Fix Provisional Value. 16
Instead of ruling on the issues raised therein, Judge Hibionada, citing
Circular No. 7 of this Court dated 23 September 1974 which establishes a
pairing system,17 promulgated an Order directing the return of the seven
(7) cases to Branch 47 for further disposition.
On 5 June 1990, Branch 47, through respondent Judge, issued an Order
directing the petitioner:
. . . to show by documents and otherwise within five
(5) days from receipt hereof the following:
1. That it has earlier negotiated repeatedly with
defendants but failed to reach agreement;
2. That expropriation of heavily populated subdivision
areas in order to install primary electric transmission
lines would not endanger lives and property in the
area;
3. That such installation is of paramount public
interest and there is no other demonstrable
alternative.
and warning that "no provisional order for tentative cost payment of the
land affected would be issued" pending compliance by petitioner with the
foregoing. 18
On 25 June 1990, respondent Judge, finding the existence of paramount
public interest which. may be served by the expropriation, the long range
benefit of the project involved, substantial compliance with the rules
concerning efforts for negotiation and, taking into consideration the
market value of the subject areas and the daily opportunity profit that the
petitioner allegedly admitted in open court, issued an Order fixing the
provisional values of the subject areas, to wit:
CIVIL CASE AFFECTED MARKET PROVISIONAL
NO. AREA(SQ. M.) VALUE
1. 5938 7,050 P 45,000.00 P 180,000.00
3,000 668,700.00 2,674,800.00
6,600 219,830.00 879,320.00
2. 5939 23,400 757,437.00 3,029,748.00
3. 5940 9,030 2,870.00 11,480.00
Page 15 of 119
 4. 5941 17,430 433,130.00 1,732,520.00
5. 5942 2,700 342,900.00 1,371,600.00
6. 5943 15,900 2,125,340.00 8,501,360.00
7. 5944 21,000 1,200,000.00 1,800,000.00
and directing the petitioner:
. . . to deposit the amount with the Philippine
National Bank in escrow for the benefit of the
defendants pending decision on the merits. 19
The market values mentioned in the Order are the same values appearing
in the tax declarations of the properties and the notices of assessment
issued by the Assessor.
In compliance with the said Order, petitioner deposited the total sum of
P23,180,828.00 with the Philippine National Bank, NAPOCOR Branch,
Quezon City, under Savings Account 249-505865-7 and manifested on 3
July 1990 with the court below that it did so. 20
On 11 July 1990, the defendants in Civil Case No. 5938 filed a motion for
the reconsideration of the 25 June 1990 Order alleging that the
provisional value of the property involved therein "had been set much too
low" considering the allegations therein adduced, stating that the real
compensation that should accrue to them is estimated at P29,970,000.00
and praying that the questioned Order be reconsidered so as to reflect
"the true amount covering the properties subject to (sic) Eminent Domain
estimated at TWENTY NINE MILLION NINE HUNDRED SEVENTY
THOUSAND (P29,970,000.00)." 21
It likewise appears that the defendants in "Civil Case No. 5939 filed a
motion for reconsideration asking for a re-evaluation of the provisional
value of the subject property. 22
On 12 July 1990, respondent Judge issued an Order 23 increasing the
provisional values of the properties enumerated in the motions for
reconsideration, directing the petitioner to deposit "whatever differential
between the amounts above fixed and those already deposited within
twenty four (24) hours from receipt of the Order" and holding in abeyance
the issuance of the writ of possession pending compliance therewith. The
Order reads in full as follows:
ORDER
I
Before this Court are two (2) Motions for
Reconsideration of the Order dated June 25, 1990
fixing provisional values of the lands sought to be
expropriated belonging to the defendants in these
cases. The first motion was filed by the Torres
Valencia Ciocon Dabao Valencia & De La Paz Law
Offices for the defendants Jesus, Fernando, Ma.
Cristina and Michel (sic), all surnamed Gonzaga,
seeking a reconsideration of the values set by this
Court earlier at P3,734,120.00 for the areas affected
consisting of the following:
7,050 square meters;
6,600 square meters; and
3,000 square meters
belonging to the aforesaid persons. The Court is
aware that the Order of July 25, 1990 was not based
on ultimate factual conditions of the property of the
ProvRem Rule 67 Fulltext
movants. At that time, the Court is (sic) unaware that
the expropriation of these areas would render the
remaining portion practically a total loss considering
that it is in a subdivision and not agricultural and that
the fetching price (sic) now in the immediate vicinity
is between P1,500.00 and P2,000.00 per square
meter. Considering that the presence of the primary
transmission lines of the property and the earlier
intrusion of the Central Negros Cooperative at the
side of the areas affected for free (sic) during the
Martial Law Regime, and considering further the
proximity of the Rolling Hills Memorial Park, the San
Miguel Corporation manufacturing complex, Jesusa
Heights, Green Hills Memorial Park and other posh
subdivisions, as well as a golf course, the Court is
convinced that that (sic), defendants Jesusa Gonzaga,
Fernando Gonzaga, Ma. Cristina and Michel (sic)
Gonzaga are entitled to a higher valuation for the
property, not only because of the above-stated facts
but because of the clear danger to the inhabitants in
the area and the destruction of the marketability of
the remaining portion after expropriation.
II
In respect to the plea of defendants Louis Gonzaga,
et al. for re-evaluation of the areas owned by them,
the Court feels that adjustment should also be made
considering that it is contiguous to the areas
belonging to Jesus Gonzaga, et al. above-stated and
it is also affected by the same conditions. Considering
that the area affected is 23,000 square meters and
the fetching price (sic) in the vicinity is between
P1,500.00 and P2,000.00 per square meter, the Court
feels that the provisional value of the property should
be P12,600,000.00.
As to the rest of the defendants, there being no
extra-ordinary or peculiar conditions which may
warrant re-evaluation the amounts fixed earlier by
this Court shall stand.
WHEREFORE, (a) the Court rules that the provisional
value of 7,050 square meters aforestated should be
P6,000,000.00; the provisional value of 6,600 square
meters aforestated should be P5,000,000.00; and the
provisional value of 3,000 square meters aforestated
should be P3,000,000.00 instead of those in the June
25, 1990 Order of this Court for these properties. (b)
The provisional value of 23,000 square meters
belonging to Louis Gonzaga, et al. should be
rightfully valued at P12,600,000.00.
The plaintiff is directed to deposit whatever
differential between the amounts above fixed and
those already deposited in PNB Savings Account No.
249-5-5865-7 within 48 hours from receipt of this
Order. Pending such compliance hereof, action on
the Motion for Issuance of Writ of Possession will be
held in abeyance. The representative of the plaintiff
may get from the Branch Clerk of Court the
corresponding bank book earlier attached to
the expediente for the purpose of complying with this
Order.
SO ORDERED.
Page 16 of 119
In compliance with the said Order, petitioner immediately deposited the BENJAMIN, ANA
additional sum of P22,866,860.00 with the Philippine National Bank under ALEXANDER, CARLO
Savings Account No. 249-505865-7 as evidenced by the Bank's SOPHIA, DANIEL
certification dated 13 July 1990. 24 also named
GONZAGA 007-5224 398,260.00
On 16 July 1990, respondent Judge issued an Order 25 mandatorily 5. ROSARIO MENDOZA Notice of Assessment
requiring the defendants: of Real Property dated
March 23, 1990,
Lot No. 1278-B-1 860.00
. . . to state in writing within twenty-four (24) hours 6. ROSARIO MENDOZA Notice of Assessment
whether or not they are amenable to accept and of Real Property dated
withdraw (sic) the amounts already deposited by the March 23, 1990, 861,380.00
plaintiff for each of them at final and full satisfaction Lot No. 1278-C-1 429,080.00
of the value of their respective property (sic) affected 7. CEL-SOY-AGRO-
by expropriation, and this is mandatory. IND. CORPORATION 2284 179,650.00
8. LYDIA S. ANO
[t]he Writ of Possession sought for by the plaintiff will married to
be issued immediately after manifestation of EMMANUEL ANO 4047 (0854-05) 137,160.00
acceptance and receipt of said amounts. 9. PACITA LACSON
(MAYO L. LACSON) Notice of Assessment
On 18 July 1990, respondent Judge, claiming to act on the of Real Property dated
Manifestation — filed in compliance with the Order of 16 July 1990 — of March 21, 1990
defendants Jesus Gonzaga, et al. in Civil Case No. 5938, Luis Gonzaga, et Lot No. 7-G 861,380.00
al. in Civil Case No. 5939, Rosario Mendoza in Civil Case No. 5940, 10. DOLORES D.
Emmanuel Año, et al. in Civil Case No. 5942 and Mayo Lacson in Civil Case COSCOLLUELA 020-00017 487,730.00
No. 5943, issued an Order 26 directing the petitioner to pay the (LUCIA GOSIENFIAO)
defendants within twenty-four (24) hours, through the court and from
petitioner's Philippine National Bank Savings Account No. 249-505865-7 Yet, petitioner submits that in a clear display of abuse of discretion,
or from any other fund; whichever may be most expeditious, the following respondent Judge fixed, in the Order of 25 June 1990, the provisional
amounts by way of full payment for their expropriated property: valued as follows:

CIVIL CASE NO. AFFECTED AREA VALUE CIVIL CASE AFFECTED AREA MARKET PROVISIONAL
(SQ. M.) VALUE (SQ. M.) VALUE
NO.
1. 5938 7,050 P 6,000,000.00
3,000 3,000,000.00 1. 5938 7,050 P 45,000.00 P 180,000.00
6,600 5,000,000.00 3,000 668,700.00 2,674,800.00
2. 5939 23,000 12,600,000.00 6,600 219,830.00 879,320.00
3. 5940 9,030 11,480.00 2. 5939 23,400 757,437.00 3,029,748.00
4. 5941 17,430 1,732,520.00 3 5940 9,030 2,870.00 11,480.00
5. 5942 2,700 1,371,600.00 4. 5941 17,430 433,130.00 1,732,520.00
6. 5943 15,900 8,501,360.00 5. 5942 2,700 342,900.00 1,371,600.00
7. 5944 21,000 4,800,000.00 6. 5943 15,900 2,125,340.00 8,501,360.00
7. 5944 21,000 1,200,000.00 4,800,000.00
and ordering that the writ of possession be issued in these cases after the
defendants "have duly received the amounts." and that:

Unable to accept the above Orders of 25 June, 12 July, 16 July and 18 July . . . in another clear abuse (sic) of discretion, herein
1990, petitioner filed this petition on 24 July 1990 alleging therein, as respondent Judge, on the basis of the respective
grounds for its allowance, that respondent Judge acted in excess of Motion (sic) for Reconsideration of defendants in Civil
jurisdiction, in violation of laws and in dereliction of the duty to afford Cases Nos. 5938 and 5939, without affording the
respondents due process when he issued said Orders. In support thereof herein petitioner an opportunity to be heard, and
petitioner asserts that the Orders of 25 June and 12 July 1990 fixing the with evident and manifest partiality to therein
provisional values at excessive and unconscionable amounts, are utterly defendants increased the previously fixed provisional
scandalous and unreasonable. As classified under their respective tax value of their respective lands, as follows:
declarations, the several lots to be expropriated are sugarlands with the
following assessed values: a. Civil Case No. 5938:

OWNER TAX DEC. NO. ASSESSED 1. 7,050 sq. m. — From

VALUE P180,000.00 to P6,000,000.00

1. JESUS L. GONZAGA 007-000621 P18,000.00 2. 3,000 sq. m. — From

2. Estate of SOPHIA P2,674,800.00 to P3,000,000.00
Vda. de GONZAGA 007-000495 267,480.00
3. JESUS GONZAGA 005-000007 87,930.00
4. LOUIS, DIONISIO 3. 6,600 sq. m. — From
ROBERTO, GABRIEL P879,320.00 to P5,000,000.00

ProvRem Rule 67 Fulltext Page 17 of 119

 b. Civil Case No. 5939
1. 23,400 sq. m. — From
P3,029,748.00 to P12,600,000.00
Nevertheless, due to its urgent need for the areas to be able to complete
the interconnection project as soon as possible, petitioner deposited the
amounts representing the provisional values fixed by the respondent
Judge. Still, petitioner laments, the latter persisted in his stubbornness by
not issuing a writ of possession, in violation of Section 2, Rule 67 of the
Rules of Court which provides that upon the filing of the complaint or at
any time thereafter, the plaintiff shall have the right to take or enter upon
the possession of the real or personal property involved if he deposits
with the National or Provincial Treasurer its value, as provisionally and
promptly ascertained and fixed by the court having jurisdiction of the
proceedings, to be held by such treasurer subject to the orders and final
disposition of the court; and that after such deposit to made, the court
shall order the sheriff or other proper officer to forthwith place the
plaintiff in possession of the property involved P.D. No. 42, which provides
that:
. . . upon filing in the proper court of the complaint in
eminent domain proceedings or at anytime
thereafter, and after due notice to the defendant,
plaintiff shall have the right to take or enter upon the
possession of the real property involved if he
deposits with the Philippine National Bank, in its main
office or any of its branches or agencies, an amount
equivalent to the assessed value of the property for
purposes of taxation, to be held by said bank subject
to the orders and final disposition of the court.
is also alleged to have been violated by respondent Judge.
The issuance then of the writ of possession was an unqualified ministerial
duty which respondent Judge failed to perform.
Moreover, the Order of 16 July 1990 surrenders the judicial prerogative to
fix the provisional value in favor of the defendants considering that
respondent Judge's valuation may still be overruled by the latter since
they were given twenty-four (24) hours to state in writing whether or not
they are accepting and withdrawing the amount already deposited by
petitioner.
Finally, petitioner contends that the Order of 16 July 1990 partakes of the
nature of a final disposition of the case should the defendants accept the
provisional value as "final and full satisfaction of the value of their
respective property (sic)affected by expropriation," thereby preempting
and depriving the former of the right to dispute and contest the value of
the property. Clearly, respondent Judge took a short-cut, violating in the
process the procedure laid down in Sections 3 to 8, inclusive, of Rule 67 of
the Rules of Court.
In the Resolution of 31 July 1990, this court required the respondents to
comment on the petition and resolved to issue a temporary restraining
order, effective immediately and to continue until further orders from the
Court, compelling the respondent Judge to cease and desist from
enforcing and/or executing his questioned Orders and directing him,
pending determination of this case, to place petitioner in possession of
the properties subject of this
petition. 27
The following respondents filed, through their counsels, their Answers on
various dates, as follows:
ProvRem Rule 67 Fulltext
Mayo Lacson — 14 September
199028
Rosario P. Mendoza — 18
September 199029
Jesus Gonzaga, et al.;
Emmanuel Año, et al. — 27
September 199030
Luis Gonzaga, et al. — 20
September 199031
All of them, except for Rosario P. Mendoza who informed the Court that
she filed a motion to reconsider the 18 July 1990 Order of respondent
Judge and who agrees with petitioner that commissioners should be
appointed to determine the just compensation, 32 support and sustain the
actions of respondent Judge and pray for the dismissal of the petition.
Mayo Lacson, in submitting that the procedure prescribed in Rule 67 may
be abbreviated provided that the rights of the parties are duly protected,
cites the case of City Government of Toledo vs. Fernandos, et al. 33 wherein
this Court sustained the judgment of the trial court on the basis of what
transpired in the pre-trial conference.
Complying with the Resolution of the 25 September 1990, petitioner filed
on 6 November 1990 a Reply to the Comment of respondent Mayo
Lacson, 34 stressing therein that the case of City Government of Toledo City
vs.Fernandos, et al. 35 does not apply to the present case because a pre-
trial was conducted in the former during which the parties were able to
present their respective positions on just compensation.
On 22 January 1991, this Court resolved to consider the respondents'
Comments as Answers to the petition, give due course to the petition and
require the parties to file simultaneously their respective Memoranda
within twenty (20) days from notice, which petitioner complied with on 11
March
1991; 36 respondent Mendoza on 4 March 1991; 37 respondents Jesus
Gonzaga, et al. and Emmanuel Año, et al. on 19 March 1991; 38 and Mayo
Lacson on 5 April 1991. 39
We find merit in the petition.
Respondent Judge committed grave abuse of discretion amounting to
lack of jurisdiction, and is otherwise either unmindful or ignorant of the
law: when he fixed the provisional values of the properties for the purpose
of issuing a writ of possession on the basis of the market value and the
daily opportunity profit petitioner may derive in violation or in disregard
of P.D. No. 42; in amending such determination in Civil Cases Nos. 5938
and 5939 by increasing the same without hearing; in directing the
defendants to manifest within twenty-four (24) hours whether or not they
are accepting and withdrawing the amounts, representing the provisional
values, deposited by the plaintiff for each of them as "final and full
satisfaction of the value of their respective property (sic); " in declaring the
provisional values as the final values and directing the release of the
amounts deposited, in full satisfaction thereof, to the defendants even if
not all of them made the manifestation; and in suspending the issuance of
the writ of possession until after the suspending the amounts shall have
been released to and received by defendants.
In Municipality of Biñan vs. Hon. Jose Mar Garcia, et al., 40 this Court ruled
that there are two (2) stages in every action of expropriation:
The first is concerned with the determination of the
authority of the plaintiff to exercise the power of
eminent domain and the propriety of its exercise in
the context of the facts involved in the suit. 41 It ends
with an order, if not of dismissal of the action, "of
condemnation declaring that the plaintiff has a lawful
Page 18 of 119
 right to take the property sought to be condemned,
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 filing of the
complaint." 42 An order of dismissal, if this be
ordained, would be a final one, of course, since it
finally disposes of the action and leaves nothing
more to be done by the Court on the merits. 43 So,
too, would an order of condemnation be a final one,
for thereafter as the Rules expressly state, in the
proceedings before the Trial Court, "no objection to
the exercise of the right of condemnation (or the
propriety thereof) shall be filed or heard."
The second phase of the eminent domain action is
concerned with the determination by the Court of the
"just compensation for the property sought to be
taken." This is done by the Court with the assistance
of not more than three (3) commissioners. 44 The
order fixing the just compensation on the basis of the
evidence before, and findings of, the commissioners
would be final, too. It would finally dispose of the
second stage of the suit, and leave nothing more to
be done by the Court regarding the issue. . . .
However, upon the filing of the complaint or at any time thereafter, the
petitioner has the right to take or enter upon the possession of the
property involved upon compliance with P.D. No. 42 which requires the
petitioner, after due notice to the defendant, to deposit with the
Philippine National Bank in its main office or any of its branches or
agencies, "an amount equivalent to the assessed value of the property for
purposes of taxation." This assessed value is that indicated in the tax
declaration.
P.D. No. 42 repealed the "provisions of Rule 67 of the Rules of Court and
of any other existing law contrary to or inconsistent" with it. Accordingly,
it repealed Section 2 of Rule 67 insofar as the determination of the
provisional value, the form of payment and the agency with which the
deposit shall be made, are concerned. Said section reads in full as follows:
Sec. 2. Entry of plaintiff upon depositing value with
National or Provisional Treasurer. — Upon the filing
of the complaint or at any time thereafter the plaintiff
shall have the right to take or enter upon the
possession of the real or personal property involved if
he deposits with the National or Provincial Treasurer
its value, as provisionally and promptly ascertained
and fixed by the court having jurisdiction of the
proceedings, to be held by such treasurer subject to
the orders and final disposition of the court. Such
deposit shall be in money, unless in lieu thereof the
court authorizes the deposit of a certificate of deposit
of a depository of the Republic of the Philippines
payable on demand to the National or Provincial
Treasurer, as the case may be, in the amount directed
by the court to be deposited. After such deposit is
made the court shall order the sheriff or other proper
officer to forthwith place the plaintiff in possession of
the property involved.
It will be noted that under the aforequoted section, the court has the
discretion to determine the provisional value which must be deposited by
the plaintiff to enable it "to take or enter upon the possession of the
property." Notice to the parties is not indispensable. In interpreting a
similar provision of Act No. 1592, this Court, in the 1915 case of Manila
Railroad Company, et al. vs. Paredes, et al., 45 held:
ProvRem Rule 67 Fulltext
. . . The statute directs that, at the very outset, "when
condemnation proceedings are brought by any
railway corporation" the amount of the deposit is to
be "provisionally and promptly ascertained and fixed
by the court." It is very clear that it was not the
intention of the legislator that before the order fixing
the amount of the deposit could lawfully be entered
the court should finally and definitely determine who
are the true owners of the land; and after doing so,
give them a hearing as to its value, and assess the
true value of the land accordingly. In effect, that
would amount to a denial of the right of possession
of the lands involved until the conclusion of the
proceedings, when there would no need for the filing
of the deposit. Of course, there is nothing in the
statute which denies the right of the judge to hear all
persons claiming an interest in the land, and courts
should ordinarily give all such persons an opportunity
to be heard if that be practicable, and will cause no
delay in the prompt and provisional ascertainment of
the value of the land. But the scope and extent of the
inquiry is left wholly in the discretion of the court,
and a failure to hear the owners and claimants of the
land, who may or may not be known at the time of
the entry of the order, in no wise effects the validity
of the order. . . .
P.D. No. 42, however, effectively removes the discretion of the court in
determining the provisional value. What is to be deposited is an amount
equivalent to the assessed value for taxation purpose. 46 No hearing is
required for that purpose. All that is needed is notice to the owner of the
property sought to be condemned. 47
Clearly, therefore, respondent Judge either deliberately disregarded P.D.
No. 42 or was totally unaware of its existence and the cases applying the
same.
In any event, petitioner deposited the provisional value fixed by the court.
As a matter of right, it was entitled to be placed in possession of the
property involved in the complaints at once, pursuant to both Section 2 of
Rule 67 and P.D. No. 42. Respondent Court had the corresponding duty to
order the sheriff or any other proper officer to forthwith place the
petitioner in such possession. Instead of complying with the clear
mandate of the law, respondent Judge chose to ignore and overlook it.
Moreover, upon separate motions for reconsideration filed by the
defendants in Civil Cases Nos. 5938 and 5939, he issued a new Order
increasing the provisional values of the properties involved therein. No
hearing was held on the motions. As a matter of fact, as the records show,
the motion for reconsideration filed by defendants Jesus Gonzaga, et al. in
Civil Case No. 5938 is dated 11 July 1990 48 while the Order granting both
motions was issued the next day, 12 July 1990. 49 The motion for
reconsideration in Civil Case No. 5938 does not even contain a notice of
hearing. It is then a mere scrap of paper; it presents no question which
merits the attention and consideration of the court. It is not even a mere
motion for it does not comply with the rules, more particularly Sections 4
and 5, Rule 15 of the Rules of Court; the Clerk of Court then had no right
to receive it. 50
There was, moreover, a much stronger reason why the respondent Court
should not have issued the 12 July 1990 Order increasing the provisional
values of the Gonzaga lots in Civil Cases Nos. 5938 and 5939. After having
fixed these provisional values, albeit erroneously, and upon deposit by
petitioner of the said amounts, respondent Judge lost, as was held
in Manila Railroad Company vs. Paredes, 51 "plenary control over the order
fixing the amount of the deposit, and has no power to annul, amend or
modify it in matters of substance pending the course of the
condemnation proceedings." The reason for this is that a contrary ruling
would defeat the very purpose of the law which is to provide a speedy
Page 19 of 119
and summary procedure whereby the peaceable possession of the
property subject of the expropriation proceedings "may be secured
without the delays incident to prolonged and vexatious litigation touching
the ownership and value of such lands, which should not be permitted to
delay the progress of the work."
Compounding the above error and the capriciousness with which it was
committed is respondent Judge's refusal to place the petitioner in
possession of the property or issue the writ of possession despite the fact
that the latter had likewise deposited the additional amount called for by
the 12 July 1990 Order. Instead, respondent Judge issued the 16 July 1990
Order directing the defendants to state in writing within twenty-four (24)
hours whether or not they would accept and withdraw the amounts
deposited by the petitioner for each of them " as final and full satisfaction
of the value of their respective property (sic) affected by the
expropriation" and stating at the same time that the writ will be issued
after such manifestation and acceptance and receipt of the amounts.
The above Order has absolutely no legal basis even as it also unjustly,
oppressively and capriciously compels the petitioner to accept the
respondent Judge's determination of the provisional value as the just
compensation after the defendants shall have manifested their conformity
thereto. He thus subordinated his own judgment to that of the
defendants' because he made the latter the final authority to determine
such just compensation. This Court ruled in Export Processing Zone
Authority vs. Dulay, et al. 52 that the determination of just compensation in
eminent domain cases is a judicial function; accordingly, We declared as
unconstitutional and void, for being, inter alia, impermissible
encroachment on judicial prerogatives which tends to render the Court
inutile in a matter which, under the Constitution, is reserved to it for final
determination, the method of ascertaining just compensation prescribed
in P.D. Nos. 76 464, 794 and 1533, to wit: the market value as declared by
the owner or administrator or such market value as determined by the
assessor, whichever is lower in the first three (3) decrees, and the value
declared by the owner or administrator or anyone having legal interest in
the property or the value as determined by the assessor, pursuant to the
Real Property Tax Code, whichever is lower, prior to the recommendation
or decision of the appropriate Government office to acquire the property,
in the last mentioned decree. If the legislature or the executive
department cannot even impose upon the court how just compensation
should be determined, it would be far more objectionable and
impermissible for respondent Judge to grant the defendants in an
eminent domain case such power and authority.
Without perhaps intending it to be so, there is not only a clear case of
abdication of judicial prerogative, but also a complete disregard by
respondent Judge of the provisions of Rule 67 as to the procedure to be
followed after the petitioner has deposited the provisional value of the
property. It must be recalled that three (3) sets of defendants filed
motions to dismiss 53 pursuant to Section 3, Rule 67 of the Rules of Court;
Section 4 of the same rule provides that the court must rule on them and
in the event that it overrules the motions or, when any party fails to
present a defense as required in Section 3, it should enter an order of
condemnation declaring that the petitioner has a lawful right to take the
property sought to be condemned.
As may be gleaned from the 25 June 1990 Order, the respondent Judge
found that the petitioner has that right and that "there will be a (sic)
paramount public interest to be served by the expropriation of the
defendants' properties." Accordingly, considering that the parties
submitted neither a compromise agreement as to the just compensation
nor a stipulation to dispense with the appointment of commissioners and
to leave the determination of just compensation to the court on the basis
of certain criteria, respondent Judge was duty bound to set in motion
Section 5 of Rule 67; said section directs the court to appoint not more
than three (3) competent and disinterested persons as commissioners to
ascertain and report to it regarding the just compensation for the
property sought to be taken. Such commissioners shall perform their
ProvRem Rule 67 Fulltext
duties in the manner provided for in Section 6; upon the filing of their
report, the court may, after a period of ten (10) days which it must grant
to the parties in order that the latter may file their objections to such
report, and after hearing pursuant to Section 8, accept and render
judgment in accordance therewith or, for cause shown, recommit the
same to the commissioners for further report of facts. The court may also
set aside the report and appoint new commissioners, or it may accept the
report in part and reject it in part; and it may make such order or render
such judgment as shall secure to the petitioner the property essential to
the exercise of its right of condemnation, and to the defendant just
compensation for the property so taken.
Not satisfied with the foregoing violations of law and insisting upon his
own procedure, respondent Judge declared in his Order of 18 July 1990
that the provisional amounts he fixed, later increased with respect to the
properties of the Gonzagas, shall be considered as the full payment of the
value of the properties after the defendants in Civil Cases Nos. 5938, 5939,
5940, 5942 and 5943 shall have filed their manifestations; he also ruled
that the writ of possession will be issued only after the latter shall have
received the said amounts. This Order and the records before this Court
do not disclose that the defendants in Civil Cases Nos. 5941 and 5944
filed any manifestation; yet, in the Order, respondent Judge whimsically
and arbitrarily considered the so-called provisional values fixed therein as
the final values. By such Order, the case was in fact terminated and the
writ of execution then became a mere incident of an execution of a
judgment. The right of the petitioner to take or enter into possession of
the property upon the filing of the complaint granted by Section 2 of Rule
67 and P.D. No. 42 was totally negated despite compliance with the
deposit requirement under the latter law.
Nothing can justify the acts of respondent Judge. Either by design or
sheer ignorance, he made a mockery of the procedural law on eminent
domain by concocting a procedure which he believes to be correct.
Judges must apply the law; they are not at liberty to legislate. As Canon
18 of the Canon of Judicial Ethics provides:
A judge should be mindful that his duty his the
application of general law to particular instances, that
ours is a government of law and not of men, and that
he violates his duty as a minister of justice under such
a system if he seeks to do what he may personally
consider substantial justice in a particular case and
disregards the general law as he knows it to be
binding on him. Such action may become a
precedent unsettling accepted principles and may
have detrimental consequences beyond the
immediate controversy. He should administer his
office with a due regard to the integrity of the system
of the law itself, remembering that he is not a
depositary of arbitrary power, but a judge under the
sanction of law.
They must be reminded once more that "the demands of fair, impartial,
and wise administration of justice call for a faithful adherence to legal
precepts on procedure which ensure to litigants the opportunity to
present their evidence and secure a ruling on all the issues presented in
their respective pleadings. "Short-cuts" in judicial processes are to be
avoided where they impede rather than promote a judicious disposition
of justice." 54
We agree with the petitioner that the ruling in the case of City
Government of Toledo City vs. Fernandos, et al., 55does not apply to the
instant petition because at the pre-trial conference held therein, the
petitioner submitted to the discretion of the court as to the correct
valuation, private respondents stated that they have no objections and
are in conformity with the price of P30.00 per square meter as reasonable
compensation for their land and the City Assessor informed the court of
Page 20 of 119
the current market and appraisal values of the properties in the area and
the factors to be considered in the determination of such. The parties
presented their documentary exhibits. In effect, therefore, the parties
themselves agreed to submit to a judicial determination on the matter of
just compensation and that judgment be rendered based thereon. In the
instant case, no pre-trial was conducted; the proceedings were still at that
state where the provisional value was yet to be determined; and the
parties made no agreement on just compensation.
WHEREFORE, the instant petition is GRANTED and the Orders of
respondent Judge of 25 June 1990, 12 July 1990, 16 July 1990 and 18 July
1990 are hereby SET ASIDE and the temporary restraining order issued by
this Court on 31 July 1990 directing respondent Judge to cease and desist
from enforcing the questioned Orders is hereby made permanent.
The respondent Judge is hereby directed to fix the provisional values of
the parcels of land in Civil Cases Nos. 5938, 5939, 5940, 5941, 5942, 5943,
and 5944 in accordance with P.D. No. 42; thereafter, the petitioner may
retain in Savings Account No. 249-505865-7 with the Philippine National
Bank, NAPOCOR Branch, Diliman, Quezon City, a sum equivalent to the
provisional value as thus fixed, which the Bank shall hold subject to the
orders and final disposition of the court a quo, and withdraw the balance.
The respondent Judge is further directed to proceed with the above
eminent domain cases without unnecessary delay pursuant to the
procedure laid down in Rule 67 of the Rules of Court.
Finally, respondent Judge is reminded to comply faithfully with the
procedure provided for in the Rules of Court. Let a copy of this Decision
be appended to his record.
Costs against private respondents.
IT IS SO ORDERED.
#6 G.R. No. 181892 September 8, 2015
THIS CASE IS TOO LONG (eats up 60 pages of the Fulltext file)
REPUBLIC OF THE PHILIPPINES, represented by Executive Secretary
Eduardo R. Ermita, the DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, AND MANILA INTERNATIONAL AIRPORT
AUTHORITY, Petitioners,
vs.
HON. JESUS M. MUPAS, in his capacity as Acting Presiding Judge of the
Regional Trial Court, National Capital Judicial Region, Branch 117, Pasay
City, AND PHILIPPINE INTERNATIONAL AIR TERMINALS CO.,
INC., Respondents.
x-----------------------x
G.R. No. 209917
REPUBLIC OF THE PHILIPPINES, represented by Executive Secretary
Eduardo Ermita, DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, AND MANILA INTERNATIONAL AIRPORT
AUTHORITY, Petitioners,
vs.
PHILIPPINE INTERNATIONAL AIR TERMINALS COMPANY, INC.,
TAKENAKA CORPORATION AND ASAHIKOSAN
CORPORATION, Respondents.
x-----------------------x
G.R. No. 209696
ProvRem Rule 67 Fulltext
TAKENAKA CORPORATION AND ASAHIKOSAN
CORPORATION, Petitioners,
vs.
REPUBLIC OF THE PHILIPPINES, represented by Executive Secretary
Eduardo Ermita, DEPARTMENT OF TRANSPORTATION AND
COMMUNICATIONS, MANILA INTERNATIONAL AIRPORT
AUTHORITY, AND PHILIPPINE INTERNATIONAL AIR TERMINALS
COMPANY, INC. Respondents.
x-----------------------x
G.R. No. 209731
PHILIPPINE INTERNATIONAL AIR TERMINALS CO., INC. Petitioner,
vs.
REPUBLIC OF THE PHILIPPINES, as represented by EXECUTIVE
SECRETARY EDUARDO ERMITA, DEPARTMENT OF
TRANSPORTATION AND COMMUNICATIONS, MANILA
INTERNATIONAL AIRPORT AUTHORITY, TAKENAKA CORPORATION,
AND ASAHIKOSAN CORPORATION, Respondents.
DECISION
BRION, J.:
Before the Court are the consolidated petitions for review on certiorari
assailing the Decision dated August 22, 2013, and the Resolution dated
October 29, 2013, of the Court of Appeals (CA) in CA-G.R. CV No. 98029;
and the petition for certiorari assailing the May 3, 2007; May 18, 2008; and
January 7, 2008 Decision of the Regional Trial Court (RTC) of Pasay City,
Branch 117, in Civil Case No. 04-0876.1
In CA-G.R. CV No. 98029, the CA ordered petitioners Republic of the
Philippines, Department of Transportation and Communications, and
Manila International Airport Authority (Government for brevity) to pay the
Philippine International Airport Terminals Co., Inc. (PIATCO) the amount of
$371,426,688.24 with interest at 6%per annum as just compensation for
the expropriation of the Ninoy Aquino International Airport Passenger
Terminal III (NAIA-IPT III).2
In Civil Case No. 04-0876, the RTC appointed DG Jones and Partners as an
independent appraiser of the NAIA-IPT III, and ordered the Government
to submit a Certificate of Availability of Funds to cover DG Jones and
Partners' appraisal fee of $1,900,000.00.
For ease of presentation, the Court's discussion shall be under the
following structure:
I. The Factual Antecedents
A. The NAIA-IPT IIII Contract and PIATCO
1. The NAIA-IPT III Contract
2. PIATCO
3. PIATCO and the Services of Takenaka
and Asahikosan
B. The Agan v. PIATCO Case, G.R. No. 155001
1. The Case and the Decision dated May 5,
2003
Page 21 of 119
 2. The Motion for Reconsideration and the
Resolution dated January 21, 2004
VII. The Court's Rulings
C. The Expropriation Case, Civil Case No. 04-0876
D. The Republic v. Gingoyon Case, G.R. No. 166429
1. The Case and the Decision dated
December 19, 2005
2. The Motion for Reconsideration and the
Resolution dated February 1, 2006
E. Proceedings in Civil Case No. 04-0876 after the
Finality of the Gingoyon Case
1. The Appointment of DG Jones and
Partners as an Independent Appraiser
VI. The Issues
A. G.R. Nos. 209917, 209696, and 209731
1. The parties were afforded procedural
due process despite their non-receipt of
the BOC Final Report prior to the
promulgation of the May 23, 2011 Decision
in Civil Case No. 04-0876.
2. Framework: Eminent domain is an
inherent power of the State
2.a. The power of eminent
domain is a fundamental state
power that is inseparable from
sovereignty

2. The BOC's Expenses

2.b. Just compensation is the full
and fair equivalent of the
F. The Parties and the BOC's Appraisal of the NAIA- property taken from the owner
IPT III by the condemn or

1. The Government's Appraisal 2.b.1. Fair market value

is the general standard
2. PIATCO's Appraisal of value in
determining just
3. Takenaka and Asahikosan's Appraisal compensation

4. The BOC's Appraisal 2.b.2 Replacement cost

is a different standard
of value from fair
II. The RTC Rulings in Civil Case No. 04-0876
market value

A. The Main Decision

2.b.3. Replacement
cost is only one of the
B. The RTC's Interlocutory Order on the Validity of the standards that the
Escrow Account Court should consider
in appraising the
1. The Government and the Creation of an NAIA-IPT III
Escrow Account for the Payment of Just
Compensation 2.b.4. The use of
depreciated
2. The Omnibus Order dated October 11, replacement cost
2011 method is consistent
with the principle that
the property owner
III. The CA Rulings
should be
compensated for his
A. CA-G.R. CV No. 98029 actual loss

B. CA-G.R. SP. No. 123221 3. Construction cost of the NAIA-IPT III

IV. The Action to Enforce the London Awards, Civil Case No. 06-171 3.a. The base valuation of the
NAIA-IPT III
V. The Parties' Positions
3.b. Structural defects on the
A. The Government's Position NAIA-IPT III

B. PIATCO's Position 3.b.1. The Court

cannot consider the
additional evidence
C. Takenaka and Asahikosan's Position
submitted by
ProvRem Rule 67 Fulltext Page 22 of 119
 Takenaka and
Asahikosan before the
Court of Appeals
3.b.2. Equiponderance
of evidence on the
alleged structural
defects of the NAIA-
IPT III favors PIATCO,
Takenaka, and
Asahikosan
3.c. The unnecessary areas
4. Attendant cost of the NAIA-IPT III
4.a. PIATCO's attendant cost
4.b. The BOC and the RTC's
attendant cost
4.c. The Government's attendant
cost
5. Deductions to the Replacement Cost of
the NAIA-IPT III
5.a. Depreciation should be
deducted from the replacement
cost
5.b. Rectification for contract
compliance should not be
deducted from the replacement
cost
6. Adjustments to the Replacement Cost
6.a. The replacement cost should
be adjusted to December 2004
values
7. Interests, Fruits, and Income
7.a. Computation of Interests
7.b. PIATCO is not entitled to the
fruits and income of the NAIA-
IPT III
8. The BOC's Expenses
8.a. Takenaka and Asahikosan
should not share in the BOC's
expenses
9. PIATCO as the Proper Recipient of Just
Compensation
9.a. Takenaka and Asahikosan's
intervention in the case as
unpaid subcontractors is proper
ProvRem Rule 67 Fulltext
9.b. The property owner is
entitled to just compensation
9.c. A final disposition in the
eminent domain case with
respect to the order of payment
to a particular person shall be
final and executory
9.d. The determination of
whether the NAIA-IPT III shall be
burdened by liens and
mortgages even after the full
payment of just compensation is
premature
10. The exercise of eminent domain from
the perspective of "taking."
10.a. The Government may take
the property for public purpose
or public use upon the issuance
and effectivity of the writ of
possession
B. G.R. No. 181892
1. The issue on the appointment of an
independent appraiser is already moot and
academic
I. The Factual Antecedents
A. The NAIA-IPT III Contract and PIATCO
1. The NAIA-IPT III Contract
On October 5, 1994, Asia's Emerging Dragon Corp. (AEDC)
submitted an unsolicited proposal to the Government - through
the Department of Transportation and Communications
(DOTC)and the Manila International Airport Authority (MIAA)-
for the construction and development of the NAIA-IPT III under
a build-operate-and-transfer (BOT) arrangement. The DOTC
and the MIAA invited the public to submit competitive and
comparative proposals to AEDC's unsolicited proposal in
accordance with the BOT Law3 and its implementing rules.4
2. PIATCO
On September 20, 1996, Paircargo Consortium - composed of
People's Air Cargo and Warehousing Co., Inc. (Paircargo),
Philippine Air and Grounds Services, Inc.(PAGS), and Security
Bank Corporation (Security Bank)- submitted its competitive
proposal to the Prequalification Bids and Awards Committee
(PBAC).5
Both AEDC and Paircargo Consortium offered to build the
NAIA-IPT III for at least $350 million at no cost to the
Government and to pay the Government: 5% share in gross
revenues for the first five years of operation, 7.5% share in
gross revenues for the next ten years of operation, and 10%
share in gross revenues for the last ten years of operation.
However, Paircargo Consortium offered to pay the Government
a total of ₱17.75 billion as guaranteed payment for 27 years
Page 23 of 119
 while AEDC offered to pay the Government a total of ₱135
million for the same period.6
After finding that Paircargo Consortium submitted a bid
superior to the AEDC's unsolicited proposal and after the
AEDC's failure to match the competitive bid, the DOTC
awarded, through a notice of award, the NAIA-IPT III project to
the Paircargo Consortium (that later organized itself as
PIATCO).7
On July 12, 1997, the Government executed a Concession
Agreement with PIATCO for the construction, development, and
operation of the NAIA-IPT III under a build-operate-transfer
scheme. On November 26, 1998, the Amended and Restated
Concession Agreement (ARCA) superseded the 1997
Concession Agreement. The Government and PIATCO likewise
entered into a series of supplemental agreements, namely: the
First Supplement signed on August 27, 1999; the Second
Supplement signed on September 4, 2000; and the Third
Supplement signed on June 22, 2001.8
Under the 1997 Concession Agreement, the ARCA and the
Supplemental Agreement (for brevity, PIATCO contracts), the
Government authorized PIATCO to build, operate, and maintain
the NAIA-IPT III during the concession period of twenty-five
(25) years.9
3. PIATCO and the Services of Takenaka and Asahikosan
On March 31, 2000, PIATCO engaged the services of Takenaka,
a local branch of a foreign corporation duly organized under
the laws of Japan and doing business in the Philippines, for the
construction of the NAIA-IPT III under an Onshore Construction
Contract.10
On the same date, PIATCO, through an Offshore Procurement
Contract,11 likewise contracted the services of Asahikosan, a
foreign corporation duly organized under the laws of Japan, for
the design, manufacture, purchase, test and delivery of the
Plant12 in the NAIA-IPT III.
In May 2002, PIATCO defaulted on its obligation to pay
Takenaka and Asahikosan pursuant to their respective
contracts. To settle the problem, Takenaka and Asahikosan
agreed to defer PIATCO's payments until June 2003,
conditioned on their receipt of adequate security from PIATCO
as stipulated in the Fourth Supplemental Agreement (relating to
the Onshore Construction Contract)13 and the Fourth
Supplement Agreement (relating to the Offshore Procurement
Contract), respectively.14
On November 29, 2002, President Gloria Macapagal Arroyo
declared in her speech that the Government would not honor
the PIATCO contracts. On the same day, Takenaka and
Asahikosan notified PIATCO that they were suspending the
construction of the NAIA-IPT III for PIATCO's failure to provide
adequate security.15
B. The Agan v. PIATCO Case, G.R. No. 155001
1. The Case and the Decision dated May 5, 2003
On September 17, 2002, petitioners Demosthenes Agan, et al.,
asked the Court to nullify the PIATCO contracts, and to prohibit
the DOTC and the MIAA from implementing these contracts for
ProvRem Rule 67 Fulltext
being contrary to law. The case, entitled Agan v. PIATCO, was
docketed as G.R. No. 155001.16
On May 5, 2003, the Court nullified the PIATCO contracts after
finding that Paircargo Consortium (that later incorporated into
PIATCO) was not a duly pre-qualified bidder for failure to meet
the minimum equity requirements for the NAIA-IPT III project,
as required under the BOT Law and the Bid Documents. The
Court also ruled that Security Bank(member of the Paircargo
Consortium) invested its entire net worth in a single
undertaking or enterprise in gross violation of Section 21-B of
the General Banking Act(which limits a commercial bank's
equity investment, whether allied or non-allied, to fifteen
percent (15%) of its net worth).17The Court further found that
the PIATCO contracts contained provisions that substantially
departed from the draft Concession Agreement. These
substantial modification of the PIATCO contracts violated the
public policy for being repugnant to the principle that all
bidders must be on equal footing during the public bidding.18
2. The Motion for Reconsideration and the Resolution dated
January 21, 2004
We denied PIATCO, et al.'s motion for reconsideration in our
January 21, 2004 resolution.19 Significantly, we stated in the
resolution that the Government should first pay PIATCO as a
prerequisite before taking over the NAIA-IPT III, to wit:
This Court, however, is not unmindful of the reality that the
structures comprising the NAIA-IPT III facility are almost
complete and that funds have been spent by PIATCO in their
construction. For the Government to take over the said facility,
it has to compensate respondent PIATCO as builder of the said
structures. The compensation must be just and in accordance
with law and equity for the Government cannot unjustly enrich
itself at the expense of PIATCO and its investors.20 (Underlines
and emphases ours)
C. The Expropriation Case, Civil Case No. 04-087621
On December 21, 2004, the Government filed a complaint for
expropriation of the NAIA-IPT III before the RTC of Pasay,
Branch 117. The Government informed the RTC that it had
deposited with the Land Bank of the Philippines (Land Bank)the
amount of ₱3,002,125,000.00, representing the NAIA-IPT III's
assessed value.22
On the same day, the RTC issued a writ of possession in favor of
the Government. Citing City of Manila v. Serrano,23 the RTC held
that that it had the ministerial duty to issue a writ of possession
upon: (1) the filing of the complaint for expropriation sufficient
in form and substance, and (2) the Government's deposit of the
amount equivalent to the property's assessed value, pursuant to
Rule 67 of the Rules of Court.24
On January 4, 2005, the RTC modified its December 21, 2004
order and directed: (1) the Land Bank to immediately release to
PIATCO the amount of US$62,343,175.7725 that would be
deducted from the just compensation; (2) the Government to
submit to the RTC a Certificate of Availability of Funds for the
payment of just compensation; and (3) the Government to
maintain and preserve the NAIA-IPT III pending the
expropriation proceedings and the full payment of just
compensation. The RTC likewise prohibited the Government
from performing acts of ownership over the NAIA-IPT III such as
Page 24 of 119
awarding concessions or leasing any part of the NAIA-IPT III to
other parties.26
The Government sought reconsideration of the January 4, 2005
Order, arguing that Rule 67 of the Rules of Court, and not RA
8974,applied to the case since the NAIA-IPT III was not a
national government infrastructure project.27
RA 8974 is 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 Government argued that under Section 2, Rule 67 of the
Rules of Court, it shall have the right to a writ of possession
upon deposit with the authorized government depositary of an
amount equivalent to the assessed value of the property for
purposes of taxation, which amount shall be held by the
depositary subject to the orders of the court. In contrast,
Section 4 of RA 8974, as a rule, requires the Government to
immediately pay the property owner the amount equivalent
to100% of the value of the property based on the BIR's relevant
zonal valuation and the value of the improvements/and or
structures, upon the filing of the complaint and after due notice
to the defendant.
On January 7, 2005, the RTC appointed three
Commissioners28 to determine just compensation without
consulting the Government and PIATCO.29 Due to these
successive adverse rulings, the Government sought to inhibit
Judge Henrick F. Gingoyon, the RTC's presiding judge, from
hearing the case.30 (The judge was ambushed and killed on
December 31, 2005.)31
On January 10, 2005, the RTC denied the Government's urgent
motion for reconsideration and motion for inhibition.32
On December 14, 2005, Asahikosan filed a motion for leave to
intervene in Civil Case No. 04-0876 (the expropriation
case).33 On the other hand, Takenaka filed a Manifestation
dated December 15, 2005,34 with the attached Manifestation
and Motion dated December 14, 2005.35 Takenaka alleged that
the Government impleaded it as an additional defendant in an
amended complaint for expropriation of the NAIA-IPT III, but
was not served summons. Takenaka thus manifested its
voluntary appearance before the RTC.36
Takenaka and Asahikosan informed the RTC that they had
previously filed two collection cases against PIATCO, docketed
as Claim Nos. HT-04-248 and HT-05-269, before the High Court
of Justice, Queen's Bench Division, Technology and
Construction Court in London, England, (London Court) on
August 9, 2004.
In both instances, the London Court ruled in their favor. The
dispositive part of the judgment award in Claim No. HT-04-248
provides:
IT IS ORDERED THAT:
1. Judgment be entered for the First Claimant37 in the
sum of 6,602,971.00 United States dollars, together
with interest in the sum of 116,825,365.34 Philippine
pesos up to and including 18 February 2005.
2. Judgment be entered for the Second Claimant38 in
the sum of 8,224,236.00 United States dollars,
ProvRem Rule 67 Fulltext
together with interest in the sum of 2,947,564.87
United States dollars up to and including 18 February
2005, being a total of 11,171,800.87 United States
dollars.
3. Save for the costs of and caused by the
amendment of the particulars of claim, which will be
the subject of a separate Order, the Defendant do
pay the First Claimant's and the Second Claimant's
costs in the action, to be subject to detailed
assessment if not agreed.
DATED this 18th day of February 2005.39
On the other hand, the dispositive part of the judgment award
in Claim No. HT-05-269 states:
IT IS ORDERED THAT:
1. Judgment be entered for the First Claimant in the
sum of 21,688,012.18 United States dollars, together
with interest in the sum of 6,052,805.83 United States
dollars.
2. Judgment be entered for the Second Claimant in
the sum of 30,319,284.36 United States dollars,
together with interest in the sum of 5,442,628.26
United States dollars.
3. The defendant to pay the Claimants' costs in the
action, to be subject to detailed assessment if not
agreed.
DATED this 2 (sic) day of December 2005.40
Takenaka and Asahikosan asked the RTC to: (a) hold in
abeyance the release of just compensation to PIATCO until the
London awards are recognized and enforced in the Philippines;
and (b) order that the just compensation be deposited with the
RTC for the benefit of PIATCO's creditors.41
During the hearing of the motions, the Government clarified
that it neither filed an amended complaint for expropriation nor
impleaded Takenaka as a necessary party in the case.42
The RTC initially denied Takenaka and Asahikosan's respective
Motions43 in the August 8, 2006 Order, but subsequently
reconsidered its ruling.44 In a March 12, 2007 Order, the RTC
treated Takenaka's Manifestation with the attached
Manifestation and Motion as a motion to intervene and allowed
Takenaka and Asahikosan to intervene in the case as PIATCO's
creditors.45
Pending the RTC's resolution of Takenaka and Asahikosan's
motions for leave to intervene in the expropriation case, the
Government went directly to the Court seeking Judge
Gingoyon's inhibition from the case; the nullification of the
order of release of the sum of $62.3 million to PIATCO; and the
nullification as well of the appointment of the commissioners.
D. The Republic v. Gingoyon Case, G.R. No. 166429
1. The Case and the Decision dated December 19, 2005
Page 25 of 119
 On January 12, 2005, the Government, et al., filed a
petition for certiorari with the Court assailing the
validity of the January 4, 7, and 10, 2005 orders of the
RTC in the expropriation case.46 The case, entitled
Republic v. Gingoyon, was docketed as G.R. No.
166429.
The Government argued that the RTC should not
have ordered the release of $62.3 Million since the
NAIA-IPT III's assessed value was only ₱3 billion.
Moreover, the RTC's prohibition against the
Government to perform acts of ownership on the
NAIA-IPT III was contrary to the essence of a writ of
possession. It47 asserted that Rule 67 of the Rules of
Court governed the expropriation of the NAIA-IPT III
since it was not a national government infrastructure
project. The Government likewise contended that the
commissioners' appointment was void. It claimed that
it had been deprived of due process since it was not
given the opportunity to contest the appointment of
the commissioners. The Government likewise sought
Judge Gingoyon's inhibition from the case due to his
alleged manifest partiality to PIATCO.48
The Court partly granted the petition and rendered
the following rulings:
First, under the 2004 Resolution in Agan: (a) PIATCO
must receive payment of just compensation
determined in accordance with law and equity; and
(b) the Government is barred from taking over the
NAIA-IPT III until just compensation is paid.
Second, RA 8974 applies in the expropriation case
insofar as the law: (a) requires the Government to
immediately pay PIATCO at least the proffered value
of the NAIA-IPT III; and (b) provides valuation
standards in determining the amount of just
compensation.
RA 8974 is the governing law in cases where the
national government expropriates property for the
purpose of commencing national government
infrastructure projects such as the construction of the
NAIA-IPT III. However, Rule 67 of the Rules of Court
applies in determining the assessed value and the
mode of deposit of just compensation if the national
government initiates the expropriation complaint for
purposes other than national infrastructure projects.
Under both Rule 67 of the Rules of Court and RA
8974, the Government initiates the expropriation by
filing an expropriation complaint. However, the rules
on the mode of deposit differ because Rule 67 of the
Rules of Court merely requires the Government to
deposit the assessed value of the property sought to
be expropriated with an authorized government
depositary before the issuance of a writ of
possession.
In contrast, RA 8974 commands the Government to
make a direct payment to the property owner prior to
the issuance of a writ of possession. Under RA 8974,
the payment shall be based on: (a) the BIR's zonal
valuation in case of land; and (b)the value of the
improvements or structures under the replacement
cost method. If the completion of a government
ProvRem Rule 67 Fulltext
infrastructure project is of utmost urgency and
importance and if there is no existing valuation of the
property, the implementing agency shall immediately
pay the proffered value of the property.49
We thus observed that Section 2, Rule 67 of the Rules
of Court is contrary to our January 21, 2004
Resolution which required the Government to make
prior payment of just compensation to PIATCO
before it could take over the NAIA-IPT III.
The Court at the same time qualified the applicability
of RA 8974 to the expropriation of the NAIA-IPT III.
We held that the Congress may legislate on the
valuation standards of just compensation and the
manner of its payment since these are substantive
matters. We made clear, however, that the Congress
cannot legislate on the procedural aspects of
expropriation since this power lies with the Court. In
fact, Section 14 of RA 8974 IRR provides that Rule 67
of the Rules of Court shall apply to "all matters
regarding defenses and objections to the complaint,
issues on uncertain ownership and conflicting claims,
effects of appeal on the rights of the parties, and
such other incidents affecting the complaint."
Third, we held in abeyance the implementation of the
writ of possession until the Government directly pays
to PIATCO the proffered value of ₱3 billion. The zonal
valuation method under Section 4 of RA 8974 shall
not apply since the Government owns the land on
which the NAIA-IPT III stands. Consequently, PIATCO
should only be paid the value of the improvements
and/or structures using the replacement cost
method.50 Pending the determination of just
compensation, the Government shall pay the sum of
₱3 billion as the provisional amount of just
compensation because there was no expedited
means by which the Government could immediately
take possession of the NAIA-IPT III.
We also stated that the replacement cost method is
only one of the factors to be considered in
determining just compensation. Equity should
likewise be considered in determining just
compensation.
Fourth, we authorized the Government to perform
acts essential to the operation of the NAIA-IPT III as
an international airport terminal once the writ of
possession becomes effective. This authority covers
the repair, reconditioning, and improvement of the
complex; maintenance of the existing facilities and
equipment; installation of new facilities and
equipment; provision of services and facilities
pertaining to the facilitation of air traffic and
transport; and other services that are integral to a
modern-day international airport. This is consistent
with Section 4 of RA 8974 which provides that "the
court shall immediately issue to the implementing
agency an order to take possession of the property
and start the implementation of the project" upon
fulfillment of certain conditions.
This ruling qualified the Court's statement in its
January 21, 2004 Resolution that "[f]or the
Government to take over the said facility, it has to
Page 26 of 119
 compensate respondent PIATCO as builder of the
said structures." Nonetheless, we clarified that the
title to the NAIA-IPT III shall pass to the Government
only upon full payment of the just compensation
since the proffered value is merely a provisional
determination of just compensation.
Fifth, we ordered the RTC to complete its
determination of just compensation within sixty (60)
days from finality of our decision since it was no
longer possible for the RTC to determine just
compensation within sixty (60) days from the filing of
the complaint under Section 4 of RA 8974. Sixth, the
RTC did not gravely abuse its discretion in appointing
the commissioners. Neither Rule 67 of the Rules of
Court nor RA 8974 requires the RTC to consult the
parties in the expropriation case prior to the
appointment of commissioners. We also stated that
Rule 67 of the Rules of Court shall apply insofar as it
is consistent with RA 8974, the IRR, and the Court's
rulings in Agan.
Considering that the expropriation proceedings were
effectively suspended seven days after the
appointment of the commissioners, the parties may
file their objections with the RTC within five days
from finality of the decision in accordance with
Section 5, Rule 67 of the Rules of Court. Seventh,
there was no ground to order Judge Gingoyon's
inhibition since the Government failed to show his
alleged partiality.51
The dispositive portion of the Decision states:
WHEREFORE, the Petition is GRANTED in
PART with respect to the orders dated 4
January 2005 and 10 January 2005 of the
lower court. Said orders are AFFIRMED with
the following MODIFICATIONS:
1) The implementation of the
Writ of Possession dated 21
December 2005 is HELD IN
ABEYANCE, pending payment by
petitioners to PIATCO of the
amount of Three Billion Two
Million One Hundred Twenty
Five Thousand Pesos
(₱3,002,125,000.00), representing
the proffered value of the NAIA-
IPT III facilities;
2) Petitioners, upon the
effectivity of the Writ of
Possession, are authorized [to]
start the implementation of the
Ninoy Aquino International
Airport Pasenger Terminal III
project by performing the acts
that are essential to the
operation of the said
International Airport Passenger
Terminal project;
3) RTC Branch 117 is hereby
directed, within sixty (60) days
from finality of this Decision, to
ProvRem Rule 67 Fulltext
determine the just compensation
to be paid to PIATCO by the
Government.
The Order dated 7 January 2005 is
AFFIRMED in all respects subject to the
qualification that the parties are given ten
(10) days from finality of this Decision to
file, if they so choose, objections to the
appointment of the commissioners
decreed therein.
The Temporary Restraining Order dated 14
January 2005 is hereby LIFTED.
No pronouncement as to costs.52
2. The Motion for Reconsideration and the Resolution dated
February 1, 2006
On January 2, 2006, the Government, et al., filed a motion for
partial reconsideration of the Court's December 19, 2005
Decision.53 Asahikosan, Takenaka, and Rep. Salacnib F. Baterina
also filed a motion for leave to intervene and asked the Court's
reconsideration of its December 19, 2005 Decision.54
The Government raised the question of who between PIATCO,
on the one hand, and Takenaka and Asahikosan, on the other
was the NAIAIPT III's builder. The Government informed the
Court that Takenaka and Asahikosan, as the unpaid contractors
in the NAIA-IPT III project, claimed significant liens on the
NAIA-IPT III. The Government opined that it would end up
expropriating the NAIA-IPT III with liens and claims in excess of
its actual value if the proffered value would be directly released
to PIATCO.
As PIATCO's unpaid creditors, Takenaka and Asahikosan
intervened in the case. They relied on Mago v. Court of
Appeals55 as basis for their intervention. In that case, the Court
took the extraordinary step of allowing the motion for
intervention even after the challenged order of the trial court
had already become final. On the other hand, Rep. Baterina
invoked his prerogative as legislator and taxpayer to curtail the
payment of just compensation without any appropriation in
PIATCO's favor.
The Court denied the motions and held that the alleged liens
over the NAIA-IPT III have not been judicially
established.Takenaka and Asahikosan were not parties to
Gingoyon and did not present their claims before the Court.
The Court did not make any declaration regarding Takenaka
and Asahikosan's rights to any form of compensation for the
construction of the NAIA-IPT III.
Moreover, the Court did not recognize the London awards in
favor of Takenaka and Asahikosan. Under Section 48, Rule 39 of
the Rules of Court, a foreign judgment would not bind
Philippine courts unless the judgment is recognized and
enforced in this jurisdiction. Philippine courts may annul a
foreign judgment for lack of jurisdiction, lack of notice to the
party, collusion, fraud, clear mistake of law or fact, or when the
foreign judgment is contrary to public policy. Even assuming
that PIATCO is indeed liable to other parties, the creditors have
other judicial avenues to ventilate and prove their claims
against PIATCO.
Page 27 of 119
 The Court also categorically stated that PIATCO, as builder
of the NAIA-IPT III, must first receive just compensation in
accordance with law and equity before the Government
may take over the NAIA-IPT III.
The Court likewise denied the motions for intervention for
serious procedural errors. Under Section 2, Rule 19 of the Rules
of Court, the motion to intervene should be filed before the
court's rendition of judgment, and not after the resolution of
the case. Moreover, Takenaka and Asahikosan failed to
establish their legal interest in the case since their claims
against PIATCO have not been conclusively established in this
jurisdiction.56
E. Proceedings in Civil Case No. 04-0876 after the Finality of the Gingoyon
Case
1. The Appointment of DG Jones and Partners as an Independent
Appraiser
On April 11, 2006, the RTC ordered the BOC to resume its
duties. In compliance, the BOC submitted its Inception Report
and Inception Framework to the RTC. On April 24, 2007, the
parties and the BOC conferred to set the ground rules and
procedure in determining the just compensation due to the
NAIA-IPT III.
On April 26, 2006, the Government asked the RTC to stop the
payment of ₱3 billion proffered value in view of an alleged
supervening event - the collapse of the ceiling of the arrival
lobby section of the north side of the NAIA-IPT III on March 27,
2006. The Government claimed that the collapse created a 100-
square foot hole in the ceiling and caused heavy asbestos pipes
to fall on the floor of the NAIA-IPT III. The Government likewise
informed the Court that the MIAA requested the Association of
Structural Engineers of the Philippines (ASEP)to investigate the
cause of the collapse.57 In its Final Report dated June2006, the
ASEP identified the following factors that contributed to the
collapse:
a. Incomplete design coordination as shown by the
absence of detailed shop drawings during the
construction, an absence described as "unusual" for a
BOT project of this size
b. Wrong choice of ceiling and wall components and
fixing materials, e.g., use of rivets instead of clips,
screws or wire; use of furring channels instead of
stronger C channels; use of wall angles thinner than
required; and
c. Poor workmanship, e.g., uneven distribution and
improper attachment of rivets, lack of ceiling
supports in the presence of mechanical fixtures.58
The ASEP concluded that the likely cause of the collapse was
the "syncretic effect of all these factors working over time since
the construction of the ceiling."59
Upon the BOC's request,60 on May 5, 2006, the RTC ordered the
engagement of the services of an internationally accepted
independent appraiser who shall conduct the valuation of the
NAIA-IPT III.61
On May 23, 2006, the Government manifested that it engaged
the services of: (a) TCGI Engineer to determine the structural
ProvRem Rule 67 Fulltext
integrity of NAIA-IPT III; (b) Ove Arup & Partners
Massachusetts, Inc. (Ove Arup)to conduct a design and
technical review of the NAIA-IPT III and to conduct a peer
review of TCGI Engineer's methodology and test results; and (c)
Gleeds International to determine the value of the NAIA-IPT
III.62
On June 20, 2006, the RTC ordered Land Bank to immediately
release the amount of ₱3 billion to PIATCO. The RTC ruled that
the collapse of a portion of the NAIA-IPT III was not a
supervening event that would hinder the payment of the
proffered value to PIATCO. In compliance with this order, the
Government tendered to PIATCO a ₱3 billion check on
September 11, 2006. On the same day, the RTC reinstated the
writ of possession in favor of the Government.63
Thereafter, the Government and PIATCO submitted their list of
nominees for the appointment of an independent
appraiser.64 On May 3, 2007,the RTC appointed DG Jones and
Partners as independent appraiser.65
On May 18, 2007, the RTC directed the Government to submit a
Certificate of Availability of Funds to cover DG Jones and
Partners' $1.9 Million appraisal fee.66
The Government sought the reconsideration of the May 3 and
18, 2007 orders. The Government complained that the
appointment of an appraiser apart from those hired by the
Government would result in the unnecessary depletion of its
funds since it would be compelled to pay two appraisers.67
In response, PIATCO argued that the RTC has the inherent
power to appoint an independent appraiser pursuant to Section
5 (g), Rule 135 of the Rules of Court. The RTC has wide
discretion on how it shall carry its mandate under RA 8974 and
Rule67 of the Rules of Court.68
In an order dated January 7, 2008, the RTC sustained the
appointment of DG Jones and Partners. The RTC ruled that its
power to appoint the members of the BOC under Section 5,
Rule 67 of the Rules of Court includes the power to appoint an
independent appraiser.69
The Government directly challenged before the Court the May
3, May 18, and January 7, 2008 orders in a petition for certiorari
with prayer for the issuance of a temporary restraining order
and/or a writ of preliminary injunction. The case was docketed
as G.R. No. 181892.70
On January 9, 2008, the Court issued a temporary restraining
order against the implementation of the May 3 and 18, 2007
Orders as well as the January 7, 2008 Order.71
2. The BOC's Expenses
On June 15, 2006, the BOC filed a request for the release of a
mobilization fund of ₱1,600,000.00 to support the discharge of
its functions.72 The RTC approved the request and directed the
Government and PIATCO to equally share the BOC's
expenses.73 The Government and PIATCO complied with this
order and tendered the sum of ₱1,600,000.00 to the BOC.74
On November 24, 2009, the BOC requested additional funds in
the amount of ₱5,250,000.00.75 On December 7, 2010, the RTC
directed the Government and PIATCO to equally defray the
BOC's expenses.76 The Government contested this order and
Page 28 of 119
 insisted that Takenaka and Asahikosan should likewise shoulder
Deductions $USD
the BOC's expenses as intervenors in the case.77

In an order dated March 11, 2011,the RTC ordered Takenaka
and Asahikosan to share in the BOC's expenses. The RTC thus
ordered each party to pay ₱1,750,000.00. PIATCO complied with
this order and paid the amount of ₱1,750,000.00 to the BOC.78
Takenaka and Asahikosan sought the partial reconsideration of
this order.1âwphi1 They argued that they should not be made
to pay the BOC's expenses since "their prayer to defer the
release of a portion of the just compensation pending the
conclusion of the enforcement proceedings was addressed to
the RTC [,] and not to the BOC."79
F. The Parties and the BOC's Appraisal of the NAIA-IPT III
After the Court issued the January 9, 2008 temporary restraining
order, the parties and the BOC conducted a preliminary conference on
April 22, 2010, to adopt an alternative course of action to avoid further
delay in the determination of just compensation.80
Total CCVs $USD $186,262,649 $149,448,037
▪ $300,206,693.00 as base current cost
valuation(CCV). Based on the Gleeds report, the
construction cost of the NAIA-IPT III as of December
2002 was $300,206,693.00, consisting of the cost of
constructing the terminal building, aprons, car park,
elevated roadways, and other related items.
Gleeds appraised the NAIA-IPT III by "multiplying the
structure's dimensions (i.e., quantities) by a price (i.e.,
rate) for constructing the works at a designated time
and specific location, adding the cost of works in, on,
and around the structure, and then accounting for
inferior and nonperforming works, and rectification of
those works."84

▪ Gleeds arrived at the CCV by considering the rates

The Government manifested that it was ready to present its own valuation
and prices for the third quarter of 2001, which
of the NAIA-IPT III and other supporting evidence. PIATCO, Takenaka, and
represented the midpoint of the construction period
Asahikosan did not object to this manifestation.81
from June 2000 (the commencement of construction)
to December2002 (the suspension of construction). It
On August 5, 2010, the RTC ordered the parties to submit their appraisal claimed that calculating the cost of construction
reports of NAIA-IPT III with supporting documents and affidavits.82 The based on its midpoint was a recognized standard
Government appraised the NAIA-IPT III at $149,448,037.00while PIATCO practice in the construction industry. The base CCV
concluded that its replacement cost was $905,867,549.47. On the other excluded the following items:
hand, Takenaka and Asahikosan claimed that the NAIA-IPT III's
construction cost amounted to $360,969,790.82.
1. Failed structural elements of the
Terminal, as identified in the Arup Seismic
1. The Government's Appraisal Evaluation Report and Gravity Loading and
Element Capacity Assessment;
Based on the Gleeds Report dated November 15, 2010, the
Government computed the valuation of the NAIA-IPT III as 2. The inferior quality of material used and
follows:83 works, including floor tiling, plasterboard
wall finishes and ceilings, internal and
external metal paneling;
December 2002 December 2004
CCV CCV
3. Constructed areas that are unnecessary
to the functioning of an international aiport
Base valuation $USD @3Q01 $300,206,693 $300,206,693
terminal and therefore of no benefit to the
Deterioration $USD @2Q09 $0 $1,738,318 Republic. These areas identified in the Arup
Site Observation Report include areas
Depreciation $USD 3Q01 $0 $35,076,295 where the requirements stated in the Bid
Documents have been grossly
overprovided. They also include the
Total Base CCVs $USD $300,206,693 $263,392,081 multilevel retail mall that, with its own
internal circulation, is functionally separate
from the Terminal and accessible only
Rectification for Contract through the multi-storey car park (20,465
Compliance m2), and excess retail concession space
$USD@2Q09 (1,727 m2);

Not compliant with bid
documents
Inferior quality
Additional areas to be built
(63,490m2)
Total Contract Compliance
-$30,670,894 -$30,670,894 4. The cost of seismic and gravity load
structural retrofits for the failed elements in
the terminal buildings and multi-storey car
-$7,702,640 -$7,702,640 park structures, as those retrofits are
described in Arup's Drawings listed in
-$75,570,510 -$75,570,510 Appendix 'B' Drawing List 2 and other
rectification works required to bring the
terminal to compliance with applicable
building and airport codes (as indicated in
-$113,944,044 -$113,944,044

ProvRem Rule 67 Fulltext Page 29 of 119

 the Appendices of Arup's Site Observation
II. Attendant Costs
Report);
Engineering and Architecture 19,372,539 1.0971 21,253,613
5. The cost of completing the items listed
in the JAC project status summary report of Quality Assurance 6,923,720 1.0971 7,596,013
28 February 2003;85 and
Construction Supervision 4,302,227 1.0971 4,719,973

6. The cost of seismic and gravity load Construction Insurance 4,329,272 1.0971 4,749,644
structural retrofits for the failed elements in
the elevated roadway structures as those Site Development 8,358,169 1.0971 9,169,747
retrofits were described in Arup's Drawings
Other Costs 308,985 1.0971 338,987
listed in Appendix 'B' Drawing List 3, Arup
Review on 'TCGI Report of Civil Design
Attendant Costs exclusive of 43,594,911 1.0971 47,827,977
Review and Evaluation' - Elevated
Financing Costs
Roadway, dated March 2009, and other
rectification works required to bring the Financing Costs 26,602,890 26,602,890
elevated roadways to compliance with
applicable building and airport codes (as Total Attendant Costs 70,197,802 74,430,868
indicated in the Appendices of Arup's Site
Observation Report).86 TOTAL 431,167,593 470,450,825

▪ $263,392,081 as total base CCV as of December In US Dollars

2004. The Government asserted that the NAIA-IPT III
suffered from depreciation and deterioration in the
sum of US$36,814,612.00 from December 2002 until REPLACEMENT COST 470,450,825
December2004. The base value CCV at the time of
expropriation should be US$263,392,081.00 after Add:
deducting depreciation and deterioration.
Interest from 21 Dec 2004 to11 Sept 2006 104,014,531

▪ $113,944,044 as total contract compliance Interest from 12 Sept 2006 to 31 Dec 2010 331,402,193
deductions. The Government further deducted items
which were non-compliant with bid documents, Total Interests 435,416,724
including, among others:
Total Replacement Value 905,867,550

a. FIDS monitors not flat screen Less: Payment on 11 Sept 2006 59,438,604

b. Moving walkways under provision Amount Still Due 846,428,946

c. Sun shading to external glazing d. Lack Computation of Interest in US Dollars

of 400hz PC air to loading bridges

Period Interest No. of Days Amount in

e. Completion of testing, commissioning,
Rates USD
and operation of the facility
Replacement (a) 470,450,825
f. Provision of as-built documentation Cost

Interests
The Government likewise deducted the replacement
cost of inferior quality items and additional areas that From December 21 12% 11 1,724,986
the Government had to build to finish the NAIA-IPT takeover to December
III project.87 of NAIA T3 31, 2004
on
2. PIATCO's Appraisal 21 Dec 2004

January 1 to 12% 365 57,448,057

PIATCO claimed that the total replacement value of the
December 31,
NAIAIPT III as of December 31, 2010 amounted to
2005
$905,867,550.00.
January 1 to 12% 254 44,881,488
September 11,
Actual Inflation Base
2006
Costs @ Rate Valuation
2002 @ 2004 Total Interest from 21 December 2004 to (1) 104,014,531
11 September 2006
I. Materials, Equipment and Labor 360,969,791 1.0971 396,019,958
Engineering & Procurement TOTAL AMOUNT DUE AS OF 11 (a) + (1) 574,465,356
SEPTEMBER 2006

ProvRem Rule 67 Fulltext Page 30 of 119

 range of 8.5% to 11.5% of the Construction Contract
Less: Amount Paid on 11 September 2006 (Php 59,438,604
cost.90 Financing costs are also "attendant costs"
3,002,125,000/50.508)
because loans and guarantees were obtained to
NET AMOUNT STILL DUE AS OF 11 (b) 515,026,752 finance the NAIA-IPT III project.91
SEPTEMBER 2006
▪ Conversion to 2004 values. Since the NAIA-IPT III
Additional September 12 to 12% 112 19,227,665 shall be appraised at the time of taking, the total
Interests December 31, construction cost shall be converted to December 21,
2006 2004 values by considering the inflation rate of
1.0971.92 Inflation was computed using the Consumer
January 1 to 12% 365 65,000,954
Price Index (CPI) from 2002 to 2005. The reckoning
December 31,
period was from November 29, 2002, when Takenaka
2007
and Asahikosan suspended their works in the NAIA-
January 1 to 12% 366 73,109,155 IPT III project, until December 21, 2004, when the
December 31, Government filed a complaint for expropriation.93
2008
▪ Interests on replacement cost. The twelve (12%)
January 1 to 12% 366 82,028,472 interest rate shall be added to the replacement cost
December 31, pursuant to the principles of law and equity.94 In
2009 Benguet Consolidated v. Republic of the
Philippines,95the Court ruled that the property owner
January 1 to 12% 366 92,035,946
is entitled to the payment of interest where the
December 31,
payment of compensation does not accompany the
2010
taking of property for public use but is postponed to
a later date. The interest shall compensate for the
Additional Interests up to 31 December (2) 331,402,193
Government's delay in the payment of just
2010
compensation.96
AMOUNT STILL DUE AS REPLACEMENT (b) + (2) 846,428,946
VALUE 3. Takenaka and Asahikosan's Appraisal

Replacement 470,450,825
Cost On the other hand, Takenaka and Asahikosan,
computed the NAIAIPT III's replacement cost as
Total Interests 435,416,724 follows:
(1+2)

TOTAL 905,867,550
AMOUNT OF
REPLACEMENT
VALUE
▪ $360,969,791 as base value. PIATCO adopted
Takenaka and Asahikosan's actual construction cost
of $360,969,791 which is supported by As-Built
Drawings and Bills of Quantities. PIATCO stated that
the Japanese Airport Consultants (JAC), the quality
assurance inspector for the NAIA-IPT III project,
validated the works of Takenaka and Asahikosan.
PIATCO alleged that the Government and PIATCO
entered into a Quality Assurance Agreement with
JAC.88
▪ Attendant costs. Under RA 6957 IRR, the
replacement cost includes the "overhead and all
other attendant costs associated with the acquisition
and installation in place of the affected
improvements/structures." The items under the
attendant costs correspond to these "overhead and
other attendant costs" which are necessary to
construct an airport project.89
It is necessary to hire quality assurance surveyors to
check and monitor the work of Takenaka. PIATCO
hired Pacific Consultants, Inc. as construction
supervisor in the NAIA-IPT III project. PIATCO claimed
that the planning and design consultancy fees are
4. The BOC's Appraisal
even below the international norms which are in the
Total payments of PIATCO
Add: Awards by the London Court
Award by the Makati Court
Total Construction Cost
▪ $360,969,790.82 as total construction cost. Takenaka
and Asahikosan claimed that the initial contract price
for the construction of the NAIA-IPT III was
$323,753,238.11.
Thereafter, changes were made in the course of the
construction that increased its construction contract
price. Pursuant to the Onshore Construction and
Offshore Procurement Contracts, PIATCO paid
Takenaka and Asahikosan the amounts of
$231,312,441.28 and ₱1,796,102,030.84 (a total of
$275,119,807.88).
After PIATCO defaulted on its payments, Takenaka
and Asahikosan instituted Claim Nos. HT-04-248 and
HT-05-269 in England. The London court ruled in
their favor and awarded them the amounts of
$81,277,502.50, ₱116,825,365.34 and £65,000.00 or a
total of $ 84,035,974.44. Thereafter, they filed an
action to enforce Claim Nos. HT-04-248 and HT-05-
269 before the RTC of Makati which awarded them
the sum of $1,814,008.50.97

ProvRem Rule 67 Fulltext Page 31 of 119

 On March 31, 2011, the BOC submitted its Final
Report recommending the payment of just
compensation of $376,149,742.56 with interest at the
rate of 12% per annum computed from the time of
the taking of the property until the amount is fully
paid, plus commissioner's fees equivalent to 1% of
the amount fixed as part of the costs of the
proceedings.
In arriving at the replacement cost of the NAIA-IPT III,
the BOC proposed the following computation:
Formula In US dollars
Amount paid by PIATCO to Takenaka and Asahikosan 275,119,807.88
Add:
Award in Claim No. HT-04-248 Relating to the 14,827,207.0098
Construction Cost of NAIA-IPT III
Award in Claim No. HT-05-269 Relating to the
Construction Cost of NAIA-IPT III 52,007,296.5499
Construction Cost of NAIA-IPT III 341,954,311.42
Add:
Attendant Cost (10% of the Construction Cost) 34,195,431.14
Replacement Cost of NAIA-IPT III 376,149,742.56
▪ $341,954,311.42. In computing the construction
cost, all actual, relevant and attendant costs for the
construction of the NAIA-IPT III, including its market
price, shall be considered. The BOC divided the
construction cost into: (a) the amount paid by
PIATCO to Takenaka and Asahikosan for the
construction of NAIA-IPT III; and (b) the awards by
the London Court in Claim Nos. HT-04-248 and HT-
05-269 relating solely to construction cost, excluding
interest, attorney's fees, and costs of the suit. The
BOC relied on Takenaka and Asahikosan's
construction cost since these corporations
shouldered the actual cost of constructing the NAIA-
IPT III.
▪ $34,195,431.14. According to the BOC, PIATCO
failed to substantiate its attendant costs. In pegging
the attendant cost at 10% of the construction cost,
the BOC relied on the Scott Wilson Report, which
states that the accepted industry range for
architecture, civil and structural, electrical and
mechanical, quantity surveyor and project
management cost is 8.5% to 11.5% of the
construction cost.
▪ Depreciation shall not be deducted from the
construction cost. The BOC explained that the
inventory of materials comprising the NAIA-IPT III
does not reflect its replacement cost. Rather, it is the
actual cost of replacing an existing structure with an
identical structure that is considered in the
replacement cost method. For this reason,
depreciation shall not be deducted from the
construction cost; otherwise, the NAIAIPT III would
have been fully depreciated since the Government
estimated that the NAIA-IPT III's useful life was only
ten years.
▪ The replacement cost shall earn interest at 12% per
annum from December 21, 2004, until full payment.
The BOC stated that legal interests shall accrue from
ProvRem Rule 67 Fulltext
the time of taking of the property until actual
payment of just compensation. The delay in the
payment of just compensation is equivalent to a
forbearance of money.
▪ The commissioner's fees shall be equivalent to 1%
of just compensation. According to the BOC, the
commissioner's fees shall be equivalent to 1% of just
compensation, similar to the arbitrators' fees.
Commissioners and arbitrators perform similar
responsibilities since both act as independent and
uninterested third parties in resolving difficult factual
issues.100
II. The RTC Rulings in Civil Case No. 04-0876
A. The Main Decision
In a decision dated May 23, 2011, the RTC directed the Government,
Takenaka, and Asahikosan to pay the commissioners' fees in the amount
of ₱1,750,000.00 each; and ordered the Government to pay PIATCO just
compensation in the amount of $116,348,641.10. In determining the
amount of just compensation, the RTC adopted the following
computation:
Formula
Just compensation as determined by the Republic
Add: Attendant cost (10% of $263,992,081.00, CCV as of
December 21, 2004)
Just Compensation
Less: Proffered value paid to PIATCO
Net Just Compensation
▪ $149,448,037.00. The RTC adopted the Government's
computed just compensation of $149,448,037.00, and ruled that
the Government should not pay for the portions of the NAIAIPT
III that were defective. The RTC thus excluded the following
from the computation of the CCV:
(a) failed structural elements in the NAIA-IPT III;
(b) inferior quality of material works;
(c) constructed areas that are unnecessary to the use
of an international airport terminal;
(d) cost of seismic and gravity load structural retrofits
for the failed elements;
(e) cost of completing the items listed in the JAC
project status summary report of February 28, 2003;
and
(f) cost of seismic and gravity load structural retrofits
for the failed elements in the elevated roadway
structures.
The RTC rejected PIATCO, Takenaka, Asahikosan, and the BOC's
computation for lack of factual and legal basis. The court
criticized the BOC's computation of construction cost and
stated that the BOC erroneously relied on the amounts
allegedly paid by PIATCO to Takenaka and Asahikosan. The RTC
pointed out that PIATCO failed to present proof that it had
Page 32 of 119
 indeed paid Takenaka and Asahikosan the sum of
$275,119,807.88. The RTC further posited that the BOC did not
take into account the actual cost of the NAIA-IPT III at the time
of taking which was in a state of collapse and deterioration.
The RTC stated that just compensation is limited to the value of
the improvement at the time of the filing of the expropriation
complaint. The payment of just compensation does not include
the right to be compensated of the franchise to operate the
airport, and the increased value of improvements due to
inflation rate.
▪ $26,339,208.10. Similar to the BOC, the RTC pegged the
attendant cost at 10% of the CCV at the time of the filing of the
expropriation complaint. The RTC agreed with the BOC that the
computation of the attendant cost based on the 10% of the
CCV was an accepted industry practice.
▪ $59,438,604.00. After deducting the proffered value of
$59,438,604.00, the RTC fixed the net compensation at
$116,348,641.10, without interest. The RTC stated that no
interest shall accrue on the net just compensation since the
Concession Agreement was nullified by the Court in Agan.
The dispositive portion of the decision states:
IN THE LIGHT OF THE FOREGOING, Plaintiffs are hereby
ordered to pay respondent PIATCO the amount of
US$175,787,245.10 less the proffered value (₱3,002,125,000.00)
actually paid to and received by defendant, as the just
compensation for the improvements of NAIA-IPT III. Moreover,
both plaintiff Republic and intervenors Takenaka and
Asahikosan Corporations are directed to pay their
proportionate shares of the Commissioners' Fees in the amount
of ₱1,750,000.00 each with dispatch.
Finally, insofar as both intervenors Takenaka and Asahikosan
Corporations are concerned, resolution of their claim before
this Court is held in abeyance owing to the pendency of the
outcome of the appeal on certiorari before the CA, and in any
of their claims, as contractors are solely as against defendant
PIATCO.
SO ORDERED.101
PIATCO, Takenaka, and Asahikosan immediately appealed the
RTC's decision before the CA while the Government opted to
seek partial reconsideration of the attendant costs awarded to
PIATCO.102
PIATCO, Takenaka, and Asahikosan sought to nullify the RTC
decision for alleged violation of their right to due process. They
complained that they were only furnished copies of the BOC
Final Report only after the promulgation of the May 23, 2011
decision.103 They averred that the RTC violated Sections 7 and 8,
Rule 67 of the Rules of Court which provide that the clerk of
court shall serve copies of the commissioners' report on all
interested parties, with notice that they be allowed ten days
within which to file objections to the findings of the report, if
they so desire.104
The Government subsequently partially appealed the case to
the CA after the RTC denied its motion for partial
reconsideration.105
B. The RTC's Interlocutory Order on the Validity of the Escrow Accounts
ProvRem Rule 67 Fulltext
1. The Government and the Creation of an Escrow Account for
the Payment of Just Compensation
On July 8, 2011, the Government filed a Manifestation and
Motion106 with the RTC stating that it was ready and willing to
pay PIATCO, through an escrow account, the amount of
$175,787,245.10less the proffered value of ₱3 billion.
The Government expressed its desire to exercise full ownership
rights over the NAIA-IPT III. However, it could not directly pay
PIATCO who had various creditors - Takenaka, Asahikosan, and
Fraport, among them. The Government asserted that just
compensation should only be paid to claimants who are legally
entitled to receive just compensation.
The Government thus asked the RTC's leave to deposit the just
compensation due in an escrow account that shall be subject to
the following conditions:
8.1. The claimant(s) shall have been held to be
entitled to receive the sum claimed from the "Just
Compensation (NAIA Terminal 3) Fund" in
accordance with Philippine law and regulation, by a
final, binding and executory order or award of the
expropriation court;
8.2. The claimant(s) shall have been held to have
accepted or otherwise become subject to the
jurisdiction of the expropriation court and other
relevant courts of the Republic of the Philippines, by
reason of or in connection with the expropriation of
NAIA Terminal 3 by the ROP, directly or indirectly;
8.3. The claimant(s) shall have executed a valid and
effective quitclaim in favor of the Republic of the
Philippines acknowledging that claimant(s) against
the ROP or any agency or instrumentality or
corporation of the ROP, by reason of, or in
connection with, the expropriation of NAIA Terminal
3 by the ROP, directly or indirectly, in any capacity
whatsoever;
8.4. The claimant(s) has complied within good faith
any condition or undertaking required from
it/him/her by the expropriation court by reason of or
in connection with the expropriation of NAIA
Terminal 3 by the ROP, directly or indirectly, in any
capacity whatsoever.107
The Government thus prayed:
1. Pending determination of the entitled claimants, to
allow the Government to deposit just compensation
less the proffered value in an escrow account with a
reputable bank whose senior unsecured obligations
are rated at least 'BBB' by Standard and Poor's
Investors Service, Inc.or 'Baa2' by Moody's Service
Investors Service, Inc. to be designated by the RTC;
2. After depositing the amount in an escrow account,
to confirm the Government's right to fully exercise
any and all acts of ownership over the NAIA-IPT III;
and
3. To order the release of just compensation, or of
any portion thereof from the escrow account to the
Page 33 of 119
 entitled claimants provided that the entitled
claimants have fully complied with all the conditions
and requirements set forth under paragraphs 8.1 to
8.4 of the Manifestation and Motion.108
PIATCO opposed the Manifestation and Motion and argued
that the Government could not vary the terms of the May 23,
2011 Decision as well as the Court's rulings in Agan and
Gingoyon commanding the Government to make a direct
payment of just compensation to PIATCO. It insisted that the
offer to pay through an escrow account is not equivalent to
direct payment. PIATCO further denied the Government's
allegations that there were several claimants on the just
compensation.109
On the other hand, Takenaka and Asahikosan agreed with the
Government that just compensation should only be paid to
entitled claimants. They posited that the Court's directive in
Agan (with respect to the direct payment to PIATCO) was
premised on the erroneous assumption that PIATCO was the
builder of the NAIA-IPT III. Takenaka and Asahikosan insisted
that they were the actual builders of the NAIA-IPT III.
Nonetheless, they contended that the RTC had no jurisdiction
over the Manifestation and Motion because the parties already
filed their respective Notices of Appeal before the CA.110
case for the sole purpose of determining the amount of just
compensation to be paid to PIATCO.
Moreover, the Government did not raise the alleged dispute in
the ownership of the NAIA-IPT III during the expropriation
proceedings. The RTC stated that it could not take judicial
notice of the allegation that PIATCO was indebted to various
creditors, apart from Takenaka and Asahikosan, since these
alleged creditors were not impleaded in the expropriation
complaint.
The RTC likewise observed that compliance with the
Government's conditions under 8.1 and 8.3 for the release of
just compensation from the escrow account pending appeal
was legally impossible. For this reason, the payment through an
escrow account was not the payment that would transfer the
title of the NAIA-IPT III to the Government.
The RTC lastly ruled that the payment of just compensation
through an escrow account shall be payment of just
compensation within a reasonable time. Consequently, the
Government may exercise full rights of ownership over the
NAIA-IPT III upon the creation of an escrow account.111
The dispositive portion of this order provides:

2. The Omnibus Order dated October 11, 2011

IN THE LIGHT OF THE FOREGOING, plaintiffs'
Manifestation and Motion is GRANTED in part:
In an Omnibus Order dated October 11, 2011, the RTC granted
the Manifestation and Motion. The RTC ruled that it has
residual jurisdiction to adjudicate the Government's 1. Plaintiffs' prayer for the court to
Manifestation and Motion considering that the motion was filed determine who is/are legally entitled to
prior to the parties' filing of the Notice of Appeal. The RTC receive just compensation is DENIED for
lack of merit.
opined that the Manifestation and Motion was akin to a motion
for execution pending appeal. The Manifestation and Motion
showed the Government's intent to voluntarily comply with the 2. Plaintiffs' prayer that they be allowed to
May 23, 2011 decision which was pending appeal before the deposit the payment of just compensation
CA. Under Section 9,Rule 41 of the Rules of Court, the RTC has (less the proffered value) to an escrow
the residual power to issue orders for the protection and account is hereby GRANTED, provided that
preservation of the parties' rights, and to order the execution of only the following conditions may be
a decision pending appeal. Furthermore, Section 6, Rule 136 of imposed for the release of the money
the Rules of Court provides that courts have incidental power to deposited:
issue orders that are necessary to effectuate their judgments.
a. PIATCO must submit a
The RTC held that the creation of an escrow account conforms Warranty that the structures and
with the Court's rulings in Gingoyon that just compensation facilities of NAIA IPT III are free
shall be paid in accordance with law and equity. Since the from all liens and encumbrances;
Government had no legal obligation to create an escrow
account, it could impose conditions for the release of just b. PIATCO must submit an
compensation in the escrow account, including: (a) PIATCO's Undertaking that it is assuming
submission of a warranty that the NAIA-IPT III shall not be sole responsibility for any claims
burdened by liens and encumbrances and an undertaking that from third persons arising from
PIATCO shall be solely liable for any claims from third persons or relating to the design or
involving the NAIA-IPT III; and (b) PIATCO's execution of a Deed construction of any structure or
of Conveyance of the NAIA-IPT III in favor of the Government. facility of NAIA IPT III structures,
Equity dictated that the Government's payment of just if any; and
compensation should free the NAIA-IPTIII from liens and
encumbrances. The Deed of Conveyance should be without
c. PIATCO must submit a duly
prejudice to the appellate court's determination of just
executed Deed transferring the
compensation.
title of the NAIA IPT III structures
and facilities to the Republic of
Conversely, PIATCO had likewise no legal obligation to accept the Philippines, without however,
or reject the Government's offer of payment. prejudice to the amount which
will finally be awarded to PIATCO
The RTC clarified that PIATCO is the sole entity entitled to by the appellate court;
receive the payment from the Government. The RTC
pointed out that the Court has remanded the Gingoyon
ProvRem Rule 67 Fulltext Page 34 of 119
 The Land Bank of the Philippines and the
Development Bank of the Philippines are
hereby jointly appointed [a]s the Escrow
Agents for the above purpose.
Upon payment of the plaintiffs of the said
just compensation in an escrow account,
this court recognizes the Republic of the
Philippines' right to exercise full rights of
ownership over the NAIA IPT III structures
and facilities in accordance [with] 2 (c).
3. Plaintiffs' Formal Offer of Evidence and
defendant PIATCO's Comment and
Opposition thereto are NOTED.
4. Defendant PIATCO's motion for
reconsideration with plaintiffs'
comment/opposition of the order of this
court denying the motion for inhibition is
hereby denied.
SO ORDERED.112
The RTC subsequently denied PIATCO's as well as Takenaka and
Asahikosan's respective motions for partial reconsideration of
the above-quoted order,113 opening the way for PIATCO's
petition for certiorari with prayer for the issuance of a
temporary restraining order and/or a writ of preliminary
injunction, filed with the CA.114This petition was docketed as
CA-G.R. SP. No. 123221.
III. The CA Rulings
A. CA-G.R. CV No. 98029
In a decision dated August 7, 2013,115 the CA upheld the validity of the
RTC's May 23, 2011 decision. The CA ruled that the parties did not need
to be furnished the BOC Final Report since RA 8974 is silent on the
appointment of the BOC, as held in Gingoyon.
However, the CA modified the RTC rulings and arrived at its own formula
of the NAIA-IPT III's replacement cost, to wit:
Construction Cost
Add:Attendant Cost
= Replacement Cost
Add: Equity
Just Compensation
Substituting:
Replacement Cost = $300,206,693.00 + 0 (because
attendant cost already imputed in
construction cost)
= $300,206,693.00 + 6% interest from
December 21, 2004 to September 11,
2006 less $59,438,604.00 + 6%
interest from September 12, 2006
until finality of judgment
In US dollars
ProvRem Rule 67 Fulltext
Replacement Cost 300,206,693.00
Less: Proffered value paid to PIATCO (59,438,604.00)
Just Compensation as of September 11, 2006 240,768,035.00
Add: Interest Due as of July 31, 2013 130,658,653.24
Just Compensation as of July 31, 2013 371,426,742.24
The CA justified its computation as follows:
▪ $300,206,693.00 as Replacement Cost. Under Section 10 of RA
8974 IRR, replacement cost shall consist of the construction and
attendant costs.
$300,206,693.00 as construction cost. The CA relied on the
Gleeds Report which it characterized as more "particularized,
calculable and precise."116 The Government's construction cost
did not vastly differ from the BOC and PIATCO's computed
construction costs of $341,954,311.42 and $360,969,791.00,
respectively. But the BOC and PIATCO's computed construction
costs were unreliable since they lacked detailed proof that the
quoted amounts were directly related to the construction of
NAIA-IPT III.
$0 as attendant cost. The CA stated that there was no need to
award additional attendant costs since these costs had already
been included in the Government's computations under the
heading "General Requirements and Conditions." The inclusion
of attendant cost in the construction cost was justified since the
attendant cost becomes part of the total construction cost once
the construction of a project is completed. Based on the Bills of
Quantities, the Government provided the following detailed list
of attendant costs in the construction of the NAIA-IPT III:
Attendant Cost In US Dollars
Design 6,439,680
Staff and labour 10,491,139.54
Insurance 925,210.78
PI Insurance 2,200,000.00
Consequential Loss 800,000.00
Setting out 364,647.00
Health and safety 403,224.00
Enviro Management 176,490.00
Design 2,631,100.00
Staff and labour 2,590,774.19
Insurance 71,109.77
total 25,293,376.28117
The CA likewise observed that PIATCO's summarized
computation of attendant costs was self-serving and
unsubstantiated by relevant evidence. On the other hand, the
BOC and the RTC's computation of attendant costs at 10% of
the construction cost lacked factual and legal support. Pegging
attendant costs at 10% of the construction cost was only
relevant during the pre-construction stage since the costs of
the construction at that time could only be estimated. This
estimate carried no relevance at the post-construction stage
since the total construction costs, including the attendant costs,
could already be determined.
▪ Depreciation, costs for noncompliance with contract
specifications, and unnecessary areas of NAIA-IPT III shall not
be deducted from the replacement cost. The CA reversed the
RTC's finding that the NAIA-IPT III suffered from massive
Page 35 of 119
structural defect. The CA opined that the collapse of the portion
of the NAIA-IPT III merely relates to "finishing" rather than to
"structural" defects. In construction lingo, "finishing" pertains to
aesthetics, convenience, and functionality of a built structure
while "structural" refers to the very integrity and stability of the
built structure. The CA disagreed with the RTC's conclusion that
depreciation, costs for non-compliance with contract
specifications, and unnecessary areas of the NAIA-IPTIII, shall be
excluded from the computation of construction cost.
Depreciation should not be deducted since it merely measures
the book value of the property or the extent of use of the
property. Depreciation is inconsistent with the replacement cost
method since the replacement cost merely measures the cost of
replacing the structure at current market price at the time of
taking.
Furthermore, the market price of a building increases over time;
thus, if the construction cost of NAIA-IPT III in 2002 was
$300,206,693.00, its replacement cost in 2004 should be equal
to or higher than $300,206,693.00.
▪ Interest. The CA further held that interest shall be added to
just compensation as of September 11, 2006. Citing Gingoyon,
the CA explained that law and equity dictated that the
Government shall be liable for legal interests as a result of the
delay in the payment of just compensation to PIATCO. Since
there was no stipulation on interests, the CA fixed the interest
rate at 6%.
Upon finality of the judgment, the interest shall be 6% until fully
paid. As of July 31, 2013, the CA computed the interest as
follows:
In US Dollars
Interest from December 21, 2004 18,012,401.58
to December 21, 2005
$300,206,693*6%
Interest from December 22, 2005 13,225,544.17
to September 11, 2006
$300,206,693*6%*268 days/365
days
Interest from September 12, 2006 86,676,492.60
to September 12, 2012
$240,768,035*6%*6 years
Interest from September 13, 2012 12,744,214.89
to July 31, 2013
$240,768,035*6%*322 days/365
days
Total Interest as of July 31, 130,658,653.24
2013
The CA further ordered Takenaka and Asahikosan to share in
the expenses of the BOC. Since Takenaka and Asahikosan's
inputs on the construction costs of the NAIA-IPT III were heard
by the RTC, they should share in the expenses of the BOC.
The CA likewise denied Takenaka and Asahikosan's prayer to
set aside in an escrow account a portion ofthe just
compensation corresponding to the amounts owed them by
PIATCO. RA 8974 expressly provides that the Government shall
directly pay the property owner upon the filing of the complaint
as a prerequisite to the issuance of a writ of possession.
ProvRem Rule 67 Fulltext
The dispositive portion of the CA decision provides:
WHEREFORE, the decision appealed from is
MODIFIED. Just compensation is fixed at
US$300,206,639.00 less US $59,438,604.00 paid in
September 2006 or the net sum of
US$240,768,035.00 with legal interest at 6%
computed as above. The Republic is thus ordered to
pay PIATCO just compensation as herein determined
and which sum has reached the total of US
$371,426,688.24 as of 31 July 2014.
Upon finality of judgment, interest on the sum due by
then shall be at 12% until fully paid.
IT IS SO ORDERED.118
On August 22, 2013, the CA amended its decision in view of the
BSP's recent issuance, BSP Circular No. 799, series of 2013,
which took effect on July 1, 2013. BSP Circular No. 799 lowered
the legal interest rate on loan or forbearance of money, goods
or credit to 6% per annum.119 The CA amended decision
provides:
WHEREFORE, the decision appealed from is
MODIFIED. Just compensation is fixed at US
$300,206,639.00 less US $ 59,438,604.00 paid in
September 2006 or the net sum of
US$240,768,035.00with legal interest at 6% computed
as above. The Republic is thus ordered to pay PIATCO
just compensation as herein determined and which
sum has reached the total of $371,426,688.24 as of 31
July 2013.
Upon finality of judgment, interest on the sum due by
then shall be at 6% per annum until fully paid
pursuant to BSP Circular No. 799, series of 2013
which took effect on 01 July 2013, and which
effectively modified the interest rate rulings in
Eastern Shipping Lines, Inc. v. Court of
Appeals.1awp++i1 Eastern Shipping was the basis of
the Court's earlier imposition of a 12% interest from
finality of judgment.
IT IS SO ORDERED.120 [Emphasis supplied]
The CA likewise denied the Government's, PIATCO's,
Takenaka's, and Asahikosan's motions for partial
reconsideration in a resolution dated October 29, 2013.121
The CA's denial of their motions cleared the way for the
elevation of CA-G.R. CV No. 98029 to this Court through a
petition for review on certiorari. The Government, PIATCO, and
Takenaka and Asahikosan's consolidated petitions are docketed
as G.R. Nos. 209917, 209731, and 209696, respectively.
B. CA-G.R. SP No. 123221
In a decision dated October 18, 2014,the CA reversed the Omnibus Order
dated October 11, 2011, for having been issued with grave abuse of
discretion. The dispositive portion of the decision states:
WHEREFORE, in view of the foregoing, the instant Petition is Hereby
GRANTED. Parenthetically, the Omnibus Order dated 11 October 2011
and Order dated 5 December 2011 of the Pasay City RTC, Branch 117, in
Page 36 of 119
Civil Case No. 04-0876-CFM for Expropriation, are hereby NULLIFIED and
SET ASIDE for having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction.
SO ORDERED.122
IV. The Action to Enforce the London Awards, Civil Case No. 06-171
On February 27, 2006, Takenaka and Asahikosan filed an action to enforce
the London awards in Claim Nos. HT-04-248 and HT-05-269 before the
RTC of Makati, Branch143. The case was docketed as Civil Case No. 06-
171.123
In a decision dated September 6, 2010, the RTC recognized the validity of
the London awards in Claim Nos. HT-04-248 and HT-05-269 and declared
these awards as enforceable in the Philippine jurisdiction. The RTC thus
ordered PIATCO to pay Takenaka and Asahikosan the sum of $85.7
million.124
PIATCO appealed the case to the CA125 which affirmed the RTC rulings in a
decision dated March 13, 2012.126 The CA likewise denied PIATCO's
motion for reconsideration in a resolution dated May 31, 2012.127
PIATCO responded by filing a petition for review on certiorari with this
Court assailing the CA's ruling. The case was docketed as G.R. No.
202166and is still pending before the Court separately from the present
petitions.
To summarize, the cases pending before the Court are the consolidated
cases: G.R. Nos. 209917, 209696, 209731,and 181892, and G.R. No. 202166
as a separate case.
G.R. No. 209917 is the Government's petition for review on Certiorari128 to
partially reverse the CA's August 22, 2013 Amended Decision129 and its
October 29, 2013 Resolution130 in CA-G.R. CV No. 98029.
G.R. No. 209696 is a petition for review on certiorari filed by Takenaka and
Asahikosan to partially reverse the CA's August 22, 2013 Amended
Decision and its October 29, 2013 Resolution in CA-G.R. CV No. 98029.131
G.R. No. 209731 is PIATCO's petition for review on certiorari to reverse the
CA's August 22, 2013 Amended Decision, and October 29, 2013
Resolution in CA-G.R. CV No. 98029.132 G.R. Nos. 209917, 209696 &
209731 originally arose from the Government's complaint for
expropriation of the NAIA-IPT III filed with the RTC of Pasay, Branch117 in
Civil Case No. 04-0876. The main issue before the Court in these petitions
is the valuation of the just compensation due for the Government's
expropriation of the NAIA-IPT III.
G.R. No. 181892 is the Government's petition for certiorari with prayer for
the issuance of a temporary restraining order,133 assailing the May 3, 2007,
May 18, 2008;and January 7, 2008 orders of the RTC of Pasay City, Branch
117 in Civil Case No. 04-0876.134
This petition likewise arose from the Government's complaint for
expropriation of the NAIA-IPT III. The main issue in this petition is the
propriety of the appointment of DG Jones and Partners as an
independent appraiser of the NAIA-IPT III.1âwphi1
G.R. No. 202166 is PIATCO's petition for review on certiorari135 to assail
the CA's March 13, 2012 decision136 and May 31, 2012 Resolution137 in CA-
G.R. CV No. 96502. The petition arose from Takenaka and Asahikosan's
action to enforce the London awards before the RTC of Makati, Branch
143 in Civil Case No. 06-171. As previously mentioned, this case was not
ProvRem Rule 67 Fulltext
consolidated with the four(4) cases above and shall thus be separately
ruled upon by the Court.
V. The Parties' Positions
A. The Government's Position (G.R. Nos. 209917, 209731, and
209696)
G.R. No. 209917
In G.R. No. 209917, the Government asks the Court to partially reverse the
CA rulings and to deduct from the replacement cost of
US$300,206,693.00the following items: (a) depreciation in the amount of
US$36,814,612.00; and (b) PIATCO's non-compliance with contract
specifications in the amount of US$113,944,044.00. The Government also
refutes the CA's imposition of a legal interest on just compensation.
The Government asserts that the CA did not consider equity in computing
the replacement cost of the NAIA-IPT III. Contrary to the Court's
pronouncement in Gingoyon, the CA computed just compensation based
solely on RA 8974 and its IRR. The CCV of $300,206,639.00 only reflects
the valuation of the NAIA-IPTIII as of November 2002 when PIATCO
stopped the construction of the terminal, and did not take into account
other factors that lowered its valuation as of December 2004.
The Government posits that there are two standards in measuring the
replacement cost. The implementing rules of RA 8974 failed to provide a
complete formula to arrive at the replacement cost of an expropriated
property.
The first and common standard is the depreciated replacement cost
method which measures the cost of replacing an asset at current prices
but in its actual condition, i.e., adjusted for age, wear and tear. The
Chartered Institute of Public Finance and Accounting defines depreciated
replacement cost as "a method of valuation which provides the current
cost of replacing an asset with its modern equivalent asset less
deductions for all physical deterioration and all relevant forms of
obsolescence and optimization" and as "the replacement value of
property minus physical depreciation and obsolescence; insurance
adjusters estimate the actual cash value of property based on its
depreciated replacement cost."138
In other words, depreciated replacement cost adjusts the cost of replacing
the actual asset in accordance with the asset's age in order to take into
account the lower economic utility of an asset that is not brand new. As
an asset ages, higher economic cost is required to maintain that asset to
the level of utility of a brand new one.
The second and less common standard is the new replacement cost
method which measures the cost of replacing an asset at current prices
with no adjustment for age, wear, and tear. It refers to "the cost to replace
damaged property with like property of the same functional utility
without regard to depreciation (physical wear and tear) and
obsolescence."139
The Government asks the Court to adopt the depreciated replacement
cost method where depreciation is deducted from the replacement cost.
The Government asserts that it is an internationally accepted practice to
consider depreciation and other forms of obsolescence and optimization
in measuring the replacement cost of an asset.
The Government argues that the new replacement cost method usually
applies in cases where the property must be rebuilt. For example, an
insurance policy for a house would usually use the new replacement cost
method because a house, which was destroyed by fire or other natural
disaster, must be rebuilt. On the other hand, an insurance policy for an
Page 37 of 119
automobile would use the depreciated replacement cost because it
presupposes that a new automobile must be purchased to replace the old
automobile that suffered from wear and tear.
The Government disputes the CA's opinion that the replacement cost
cannot be lower than the actual construction because market prices tend
to move upward over time. The Government contends that the
replacement cost may be lower than the construction cost if the price of
the materials such as steel, cement, and copper used during the
construction stage decreases after the construction of the improvement.
Moreover, labor productivity and technological advancements affect the
replacement cost since these counterbalance inflation. The depreciated
replacement cost method is utilized "in setting user rates for public
utilities precisely because this standard of value will tend to result in lower
prices over time, not higher prices."140
The Government likewise disagrees with the CA that the depreciation
adjustment "would irrationally result in[a] book value which continues to
be lower and lower over time." Since an asset must be maintained, the
cost of performing maintenance and repairs increases the asset's
replacement cost. Consequently, repairs and maintenance cost counter-
balance depreciation. The recognition that an asset depreciates impliedly
acknowledges that the owner will spend more costs in maintaining the
asset's utility than on a brand new asset.
The Government agrees with the CA that depreciation is a cost allocation
method and not a valuation method. However, the Government stresses
that depreciation is also an economic cost; depreciation thus recognizes
that an asset suffers from wear and tear and would require higher cost to
maintain an asset's economic utility. Depreciation, as both economic and
accounting concepts, represents cost adjustments to reflect the fair value
of the asset due to age, wear, and tear.
The Government adds that the premise of the replacement cost method is
"to measure the cost of replacing an asset at current prices with an asset
that has the same economic utility."141 Thus, the CA erred when it held
that the depreciation adjustment was inconsistent with the replacement
cost method for the reason that this method factors in the current market
price to measure the cost of replacing an asset.
For instance, if the Government would expropriate a ten-year-old
automobile, the new replacement cost method would compensate the
owner the amount of an asset that has more economic utility than the
ten-year-old automobile. On the other hand, if the Government would
use the depreciated replacement cost method, it would only pay the value
of an asset that has economic utility of a ten-year-old automobile.
The Government likewise insists that the CA erred in not deducting from
the replacement cost the construction costs for deviations from the
original contract, the inappropriate and defective structures, and
structures that were built in violation of international standards. It asserts
that the
NAIA-IPT III suffers from structural defects, as evidenced by the following:
(a) In the August 2007 Site Observation Report, Ove
Arup found that the NAIA-IPT III suffered from
structural defects.
(b) In its Scott Wilson Report, PIATCO admitted that
the NAIAIPT III suffered from structural defects. The
relevant portions of the Report provide:
Section 3.3.23. The cracking noted in the 2004 report at the upper storey
beam/column interface appears to have worsened particularly in the outer
faces of a number of columns at high level adjacent to the internal ramps.
ProvRem Rule 67 Fulltext
Section 3.3.37. As far as the building structure is concerned the
outstanding issues are the Taking Over Inspection Defects List,
outstanding Quality Observation Report issues and the Non-Compliance
Schedule x x x.142
(c) The ASEP made the following observation in its
June 23, 2006 Report:
● Results of material tests carried out
identified that the materials used were
adequate and meet or exceed the ER
specification. However, the thickness of the
wall angle used (0.4 mm) does not meet
the minimum plate thickness for metals to
be fastened by power-actuated anchors,
which requires a minimum of 0.6 mm (Hilti
Catalogue). ASEP recommended further
tests.
● ASEP considered that the quality of
workmanship of the installation is not
considered to be within minimum
acceptable practice.
● Structural design of the ceiling system
provided by Takenaka and independently
assessed by ASEP concluded that the factor
of safety of individual components is high.
However, ASEP stated that the overall
factor of safety of the total ceiling system is
expected to be lower due to poor
workmanship of the connections. The
positioning of the air-conditioning ducts,
fire protection system pipes, and other
systems above the ceiling has affected the
standard spacing of the ceiling hangers
and may have contributed to the uneven
distribution of loads to the various ceiling
components, although without some of the
riveted joints failing, the ceiling hangers are
still adequate.
● ASEP concluded that a combination of
poor workmanship and wrong choice of
system in some areas particularly if
repeated access is required for inspection
and maintenance.143
(d) In its June 23, 2006 Report, the ASEP opined that
the NAIA-IPT III may be partially opened provided
that retrofitting works are done prior to its full
operation. Thus, the MIAA initiated the structural
remediation program of the NAIA-IPT III.144
(e) TCGI documented the "heaving of homogenous
tiles and cracks underneath the slabs in the head
house airline lounges (Level 3, Sector
4),"145 attributable to the 5.4 magnitude earthquake
that hit Lingayen, Pangasinan, on November 27,
2008. The earthquake was felt in Pasay with a 3.0
magnitude. PIATCO failed to refute TCGI's findings.146
The Government insists that the operation of the NAIA-IPT III is not an
implied admission of the nonexistence of structural defects. The
Government clarifies that the structurally defective sectors of the NAIA-
IPT III remain unoccupied. Out of the 10 Sectors of the NAIA-IPT III, the
Page 38 of 119
MIAA fully occupies Sectors 1, 3, 5, and 6, and partially occupies Sectors 2
and 4. The MIAA did not occupy Sections7, 8, 9, and the car park due to
structural issues.
That the Court declared the PIATCO contracts as null and void should not
impede the deductibility of construction costs for deviations from the
original contract, the inappropriate and defective structures, and
structures that were built in violation of international standards. The
Government emphasizes that when the Court nullified the PIATCO
contracts, the NAIAIPT III was almost complete. Consequently, the
Government had every reason to expect that PIATCO would build the
NAIA-IPT III according to the agreed specifications. PIATCO, however,
acted in bad faith in not complying with the nullified PIATCO contracts.
PIATCO should not benefit from its violation of the concession
agreements and the gross deviations from the original design of the
NAIA-IPT III.
The Government maintains that the imposition of legal interest on just
compensation is erroneous.
First, the present expropriation case is sui generis. The Government was
forced to expropriate the NAIA-IPT III due to PIATCO's violation of the
Constitution and the law. To award legal interest to PIATCO is to condone
its illegal acts. In Hulst v. PR Builders, Inc.,147 the Court held that the
illegality should not be rewarded. In Valderama v. Macalde,148 the Court
deleted the payment of interest on the ground that a person should not
be allowed to profit from an illegal act. As between two parties, he who,
by his acts, caused the loss shall bear the same. He, who comes to court
for equity must do so with clean hands.
Second, PIATCO itself caused the delay of the expropriation proceedings
before the RTC. PIATCO did not produce the vouchers, purchase orders,
and as-built documents which were in its possession despite the
Government's filing of a Motion for Production and Inspection of
Documents dated May 25,2006, before the RTC.149
Third, in Eastern Shipping Lines v. CA,150 the Court pronounced that
unliquidated claims are not subject to legal interest, such as the present
case.
Fourth, the law and jurisprudence on the imposition of interest does not
address the peculiar situation where the NAIA-IPT III is being expropriated
as a direct result of the nullification of the PIATCO contracts. The
application of the law and jurisprudence on the imposition of interest
would not result in a fair and equitable judgment for the Government. The
Court must apply equity in the absence of a specific law applicable in a
particular case or when the remedy afforded by the law would be
inadequate to address the injury suffered by a party.
The Government additionally complains that, since November 2002, "long
before the institution of the expropriation [complaint] in December 2004,"
Takenaka and Asahikosan prevented it from entering the NAIA-IPT III.151
G.R. No. 209696
The Government alleges that it is willing to pay just compensation to the
lawful claimant. However, just compensation should not be set aside in
favor of Takenaka and Asahikosan since their claim against PIATCO has
not yet been resolved with finality.
The Government disputes the applicability of Calvo v. Zandueta152 in the
present case. In that case, the Court allowed Juana Ordoñez to be
subrogated to Aquilino Calvo as defendant because Ordoñez obtained a
final judgment in her favor which entitled her to levy the land sought to
be expropriated. Furthermore, Ordoñez was not a party to the
expropriation case.
ProvRem Rule 67 Fulltext
The Government asserts that Takenaka and Asahikosan should share in
the BOC's expenses. Under Section 12, Rule 67 of the Rules of Court, the
rival claimants should shoulder their costs in litigating their claim while
the property owner should shoulder the costs of the appeal if he appeals
the case and the appellate court affirms the lower court's judgment.
To divide the BOC's expenses between the Government and PIATCO
would result in unjust enrichment. Under Section 1, Rule 142 of the Rules
of Court, the court shall have the power to divide the costs of an action as
may be equitable.
Furthermore, Takenaka and Asahikosan actively participated in and
benefited from the proceedings before the BOC, which included the
London awards in the computation of just compensation. Takenaka and
Asahikosan likewise relied on the Final Report in their Appellant's Brief
dated October 3, 2012, and in their Reply Brief dated January 20, 2013.
The Government contends that Takenaka and Asahikosan's computations
of actual construction cost of the NAIA-IPT III are conflicting.
In their Manifestation dated December 9, 2010, Takenaka and Asahikosan
stated that the actual construction cost amounted to $360,969,790.82.
However, in his report, Mr. Gary Taylor appraised the actual construction
cost at US$323 million, "plus other costs that were incurred by various
parties during its conception and construction plus any property
appreciation."153 Mr. Gary Taylor further stated that the "true value of the
NAIA-IPT III facility is nearer to US$408 million, given the fact that the
Republic's expert, Gleeds, failed to recognize or include any values for
[the] design and other consultants (10%) or property inflation based on
GRP schedules (15%)."154 However, Mr. Taylor did not explain how he
arrived at the amount of $408 million.
The Government adds that Takenaka and Asahikosan's actual construction
cost of $360,969,790.82 is erroneous as the London and Makati awards
include interests, attorney's fees and costs of litigation. Furthermore,
Takenaka and Asahikosan's "as-built" drawings are not truly "as-built."
The drawings do not reflect the quality and exact detail of the built
portions of the NAIA-IPT III.155
G.R. No. 209731
The Government disputes PIATCO's claim that it was denied due process
when it was not furnished a copy of the Final Report. The Government
points out that all the parties in the case were not given a copy of the
Final Report. Furthermore, PIATCO belatedly raised this issue; it was
brought for the first time on appeal before this Court.
The Government also emphasizes that PIATCO immediately filed a notice
of appeal a day after its receipt of the RTC decision. This is contrary to
PIATCO's claim that it wanted to secure a copy of the Final Report and
subject it to clarificatory hearing.
Even assuming that the RTC erred in not furnishing the parties copies of
the Final Report, the lapse is merely an "innocuous" technicality that
should not nullify the RTC rulings.
The Government claims that PIATCO failed to substantiate the attendant
costs. The documents attached to the Compliance dated December 14,
2010, are mostly summary of payments that PIATCO allegedly paid to the
consultants. However, PIATCO failed to prove that the alleged consultants
rendered actual service related to the construction of the NAIAIPT III.
Reyes Tacandong & Co. merely verified the mathematical accuracy of the
schedules, including the computation of the inflation rate. Furthermore,
the receipts that PIATCO submitted are not enough to cover its claimed
just compensation.156
Page 39 of 119
G.R. No. 181892
The Government disputes the RTC's appointment of an independent
appraiser of the NAIA-IPT III. It claims that Section 11 of RA 8974 IRR
solely authorizes the implementing agency to engage the services of an
appraiser in the valuation of the expropriated property, while under
Section 10 of RA 8974 IRR, it is the implementing agency that shall
determine the valuation of the improvements and/or structures on the
land to be acquired using the replacement cost method. Pursuant to
these provisions, the Government engaged the services of Gleeds, Ove
Arup and Gensler for purposes of appraising the NAIA-IPT III.
The Government also argues that the appointment of an independent
appraiser would only duplicate the efforts of the existing appraisers. A
court appointed appraiser and the existing appraisers would perform the
same task of determining the just compensation for the NAIA-IPT III. Thus,
the RTC should have relied instead on the opinion of the internationally-
renowned appraisers that the Government hired.
The Government likewise avers that the appointment of an independent
appraiser would only render the expropriation proceedings more costly.
The Government would be forced to pay for the services of two
appraisers, which is not the intention of RA 8974. The court-appointed
appraiser, too, would render the BOC's functions useless. Under Rule 67 of
the Rules of Court, it is the BOC that is required to receive evidence in the
determination of just compensation. Rule 67 of the Rules of Court does
not require the appointment of an appraiser in eminent domain cases.
Lastly, the Government complains that the RTC order requiring it to
submit a Certificate of Availability of Funds is vague because the RTC did
not specify the costs of the expropriation proceeding.157
B. PIATCO's Position
G.R. No. 209731
PIATCO argues that the RTC rulings are null and void for the failure of the
RTC clerk of court to furnish them copies of the BOC Final Report.
Sections 7 and 8, Rule 67 of the Rules of Court require that the parties be
given ten days within which to file their objections to the findings of the
commissioners.
On its base value of $360,969,790.82, PIATCO insists that its valuation is
supported by a preponderance of evidence, particularly by the As-Built
Drawings and the Bills of Quantities submitted by Takenaka and
Asahikosan. The CA should not have relied on the Government's self-
serving evidence in computing the base value of the NAIA-IPT III.
PIATCO also cites the CA's failure to include the attendant costs in the
valuation of the NAIA-IPT III as an omission; the CA merely recognized the
construction cost valuation of the terminal pursuant to the Gleeds Report.
PIATCO alleges that it incurred attendant costs of $70,197,802.00 apart
from the construction cost of $360,969,790.82. It also emphasizes that its
consultancy fees are even below the international norms, as shown in the
Scott Wilson Report. It also claims that site preparation costs, legal costs
in planning and constructing the development, and financing costs form
part of attendant costs since these costs are indispensable in completing
a complex infrastructure project.
PIATCO further alleges that its attendant costs are supported by the
attachments in its Compliance dated December 14, 2010, including the
summary of payments for incurred attendant costs, official receipts,
statements of account, sales invoices, endorsements, insurance policies
and other related documents, acknowledgement receipts, agreements,
invoices, and bonds. It claims that Reyes Tacandong & Co examined these
ProvRem Rule 67 Fulltext
documents and confirmed that the attendant costs amount to
$70,197,802.00 in its Report of Factual Findings dated December 14, 2010.
PIATCO asserts that its submission of the summary computation is
justified under Section 3 (c), Rule 130 of the Rules of Court which allows
the party to submit non-original copies if the original consist of numerous
accounts or other documents that the court cannot examine without
great loss of time; the fact sought to be established from these, after all, is
only the general result of the whole.
PIATCO likewise argues that the total construction cost of
$431,167,593.00 - which is the sum of $360,969,791.00 and
$70,197,802.00 - should be converted to 2004 values since the reckoning
period of just compensation is the date of taking or the date when the
complaint was filed, whichever is earlier. It posits that the amount of
$431,167,593.00 should thus be multiplied by 1.0971 - the prevailing
inflation rate from November 29, 2002, to December 21, 2004 - for a total
amount of $470,450,825.00.
The sum of $470,450,825.00 should further earn an interest rate of 12%
per annum beginning December 21,2004, until full payment. PIATCO
maintains that the Government's deposit in an escrow account of a
portion of just compensation is not equivalent to payment; hence, interest
on the full amount of just compensation shall continue to apply.
PIATCO contends that the CA's reduction of interest rate to 6% is
erroneous because the Court, in numerous cases, has consistently
imposed 12% interest per annum on just compensation. PIATCO
emphasizes that the imposition of interest on just compensation is not
based on contract, but on the owner's right to be immediately paid just
compensation.
Finally, PIATCO prays that it be paid all income generated from the
operations of the NAIA-IPT III, from the date of taking up to the
present.158
G.R. No. 209917
PIATCO asserts that the NAIA-IPTIII does not suffer from massive
structural defects; that the Government's reliance on the Ove Arup Report
is self-serving. The Government would not have expropriated the NAIA-
IPT III if it truly believed that the terminal suffered from massive structural
defects. Furthermore, the MIAA's Project Management Office oversaw the
construction of the NAIA-IPT III to ensure that the terminal complied with
the agreed specifications under the relevant contracts between PIATCO
and the Government.
PIATCO contends that the depreciation, deterioration, and costs for non-
compliance with contract specifications should not be deducted from the
base value of the NAIA-IPT III. The base value of $300,206,693.00 should
be the least amount that the Government should pay. The measure of just
compensation is the fair and full equivalent for the loss sustained by the
property owner, not the gain that would accrue to the condemnor.
PIATCO also asks this Court to strike from the record the affidavit of
Kaczmarek and other attachments in the Government's motion for partial
reconsideration dated August 22, 2013. The Government should not be
allowed to present new evidence on the valuation of the NAIA-IPT III
before the CA. PIATCO points out that Kaczmarek was not cross-examined
and his identity, knowledge, and credibility were not established before
the trial court. The Government is estopped from introducing new
evidence before the appellate court since it objected to Takenaka and
Asahikosan's introduction of new and additional evidence before the CA.
Page 40 of 119
As its last point, PIATCO posits that Section 10 of RA 8974 IRR does not
allow the deduction of depreciation, deterioration, and costs for non-
compliance with contract specifications from the replacement cost.
Depreciation is merely an accounting concept that facilitates the standard
of decreasing asset values in the books of accounts. It is not a method of
valuation, but of cost allocation; an asset may still be valuable and yet
appear fully depreciated in the financial statements. If at all, depreciation
was only relevant after the Government took possession and operated the
NAIA-IPT III.159
G.R. No. 209696
PIATCO agrees with the CA that just compensation must be directly paid
to it as the owner of the NAIA-IPTIII. It stresses that RA 8974 and its
implementing rules clearly provide that the owner of the expropriated
property shall receive the entire amount of just compensation.
PIATCO insists that it would be erroneous to create an escrow account in
favor of Takenaka and Asahikosan since the enforceability of Claim Nos.
HT-04-248 and HT-05-269 in Philippine jurisdiction has yet to be decided
by the Court in G.R. No. 202166. It points out that the main issue in G.R.
Nos. 209731, 209917, and 209696 is the amount of just compensation,
not the determination of Takenaka and Asahikosan's money claims
against PIATCO. Takenaka and Asahikosan's insistence to enforce their
money claims against PIATCO in G.R. Nos. 209731, 209917 & 209696
constitutes forum shopping and is still premature.
PIATCO contends that Takenaka and Asahikosan have no standing to
demand the creation of an escrow account in their favor. Section 9, Rule
67 of the Rules of Court does not apply in this case because there are no
conflicting claims regarding the ownership of the NAIA-IPT III.
Furthermore, the Court categorically stated in Gingoyon that PIATCO
owns the NAIA-IPT III. PIATCO further argues that the rules on preliminary
attachment do not apply to this case. Mere apprehension that PIATCO
would abscond from its financial liabilities is not a ground for the
attachment of the creditor's assets. Moreover, an artificial entity cannot
abscond. PIATCO likewise denies that it refuses to pay Takenaka and
Asahikosan's money claims. PIATCO posits that the eminent domain case
is not the proper venue for the adjudication of Takenaka and Asahikosan's
money claims.160
G.R. No. 181892
PIATCO agrees with the RTC's appointment of DG Jones and Partners as
an independent appraiser. The determination of just compensation is
essentially a judicial function. The trial court's power to appoint
commissioners is broad enough to include the power to appoint an
appraiser who shall assist the commissioners in ascertaining the amount
of just compensation. The latter power is inherent in the court's task to
receive evidence and to arrive at a fair valuation of the expropriated
property.
Section 5 (g), Rule 135 of the Rules of Court allows the court to amend
and control its processes and orders so as to make them consistent with
law and justice. Furthermore, nothing in RA 8974 IRR that prohibits the
trial court from appointing an independent appraiser.
Section 6, Rule 67 of the Rules of Court provides that all parties may
introduce evidence on the valuation of the property sought to be
expropriated. The trial court is not bound by the report of the
commissioners and of the independent appraisers, much less of the
findings of the Government-hired appraisers.
PIATCO asserts that the Government is estopped from assailing the
appointment of an independent appraiser. The Government voluntarily
ProvRem Rule 67 Fulltext
participated in the nomination of an independent appraiser, and in fact,
submitted its own nominees before the trial court.
Contrary to the Government's claim, the RTC did not arbitrarily appoint
DG Jones and Partners as an independent appraiser. The RTC in fact
required the nominees to submit their written proposals and invited them
to personally appear before the commissioners and the trial court prior to
the issuance of the May 3, May 18,and January 7, 2008 orders.
PIATCO argues that the Government should solely bear the expenses of
DG Jones and Partners. Section 12, Rule 67 of the Rules of Court provides
that all costs, except those of rival claimants litigating their claims, shall be
paid by the plaintiff, unless an appeal is taken by the owner of the
property and the judgment is affirmed, in which event the costs of the
appeal shall be paid by the owner.161
C. Takenaka and Asahikosan's Positions
G.R. No. 209696 and G.R. No. 209731
Takenaka and Asahikosan argue that law and equity dictate that just
compensation of at least $85,700,000.00 should be set aside to answer for
their money claims against PIATCO.RA 8974 does not prohibit the
creation of an escrow account pending the determination of the parties'
conflicting claims on the property and on the just compensation.
Takenaka and Asahikosan allege that PIATCO is a shell corporation with
no significant assets, that has repeatedly defaulted on its monetary
obligations. They emphasize that PIATCO did not pay Takenaka and
Asahikosan despite its receipt of the ₱3 billion proffered value from the
Government. Takenaka and Asahikosan seek the creation of an escrow
account to preserve their property rights against PIATCO. They posit that
PIATCO may abscond after its receipt of the remaining just compensation
from the Government.
PIATCO would profit by at least $155,000,000.00 if it solely receives the
entire amount of $431,167,593,000.00 (PIATCO's claimed just
compensation as of December 2002). PIATCO has judicially admitted that
it has paid Takenakaand Asahikosan only $275,000,000.00.
Takenaka and Asahikosan assert that the interest of justice will be served
if the Court allows the creation of an escrow account in their favor. They
point out that the lower courts already ruled on the enforceability of
Claim Nos. HT-04-248 and HT-05-269.Furthermore, the Court, in
Gingoyon, merely ordered the direct payment of just compensation to
PIATCO in order to ensure that the builder of the NAIA-IPT III is
compensated by the Government as a matter of justice and equity.
Takenaka and Asahikosan underscore that they are the real builders of the
NAIA-IPT III as PIATCO's subcontractors.
Takenaka and Asahikosan maintain that Section 9, Rule 67 of the Rules of
Court apply with respect to the adjudication of the parties' conflicting just
compensation claims. The Court did not declare in Gingoyon that Rule 67
of the Rules of Court shall not apply to the payment of final just
compensation. The Court merely applied RA 8974 in Gingoyon insofar as
the law prescribes direct payment as a prerequisite for the issuance of a
writ of possession in eminent domain cases.
Under Section 9, Rule 67 of the Rules of Court, if there are conflicting
claims on the property, the court may order the just compensation to be
paid to the court for the benefit of the person adjudged in the same
proceeding to be entitled thereto. Takenaka and Asahikosan argue that
they are the lawful recipients of just compensation as the real builders of
the NAIA-IPT III and as the prevailing parties in Claim Nos. HT-04-248 and
HT-05-269.
Page 41 of 119
Even assuming that PIATCO is the owner of the NAIA-IPT III, the owner of
the expropriated property is not solely entitled to the full amount of just
compensation.
In Republic v. Mangotara,162 citing de Knecht v. CA,163 the Court held that
just compensation is not due to the property owner alone; the term
"owner" likewise includes those who have lawful interest in the property
such as a mortgagee, a lessee, and a vendee in possession under an
executory contract. In Philippine Veterans Bank v. Bases Conversion
Development Authority,164 the Court held that just compensation may be
deposited with the court when there are questions regarding the
ownership of the expropriated property. In Calvo v. Zandueta,165 the Court
deferred the release of just compensation pending the determination of
the ownership of the expropriated property, despite the finality of the
order allowing the release of just compensation.
Takenaka and Asahikosan refuse to share in the expenses of the BOC.
Under Section 12, Rule 67 of the Rules of Court, the costs of the
expropriation suit shall be shouldered by the Government. The
Government would be unjustly enriched if other parties are required to
shoulder the costs of the suit. It would also be unfair to require Takenaka
and Asahikosan to share in the expenses of the BOC since they were not
furnished copies of the BOC Final Report, in violation of their right to due
process.166
G.R. No. 209917
Takenaka and Asahikosan argue that deductions for depreciation and
deterioration are inconsistent with the concept of replacement cost as a
measure of appraising the actual value of the NAIA-IPT III. In exercising
the power of eminent domain, the Government takes the property on "as
is, where is" basis. Takenaka and Asahikosan point out that the
Government has the option not to expropriate the terminal.
Consequently, the Government cannot base the value of the building on
whether or not the building caters to the Government's needs.
Furthermore, RA 8974 IRR provides that only the costs necessary to
replace the expropriated property should be considered in appraising the
terminal. Statutes authorizing the deprivation of private property, as in
expropriation cases, must be strictly complied with because these are in
derogation of private rights. The Court's intent in Agan when it declared
that equity should likewise be considered in appraising the NAIA-IPT III is
to prevent the Government from undervaluing the property and enriching
itself at the expense of private parties.
Takenaka and Asahikosan also insist that a multi-level retail mall is not an
unnecessary area. They point out that modern airports are subsidized by
income from retail malls and cannot operate profitably without this
additional income.
Takenaka and Asahikosan agree with the CA's finding that the NAIAIPT III
is structurally sound. There is no clear evidence that the collapse of the
ceiling of the NAIA-IPT III was caused by the terminal's structural defects.
The CA correctly concluded that the ceiling's collapse is merely a finishing
and aesthetic issue.
They emphasize that Mr. Gary Taylor, their hired appraiser, assailed the
qualifications, the methodology, and the findings of Ove Arup in its
August 2007 Site Observation Report. Furthermore, Ove Arup made
several conflicting findings on the structural soundness of the NAIA-IPT
III. Ove Arup concluded that the number of structural members failing the
Demand Capacity Rate (DCR)/m.1.10 criteria was more than those used
for the retrofit design. The DCR measures the capacity of a portion of the
NAIANAIA-IPT III to carry the load it was designed to bear, with an
optimal rate being less than 1.0. It likewise opined that the distance of the
ProvRem Rule 67 Fulltext
gap between the NAIA-IPT III's bridge and building structure had a
potential for seismic pounding.
Takenaka and Asahikosan posit that all the structural members of the
NAIA-IPT III have a DCR of less than 1.0based on the 1992 National
Structural Code of the Philippines (NSCP), the code applicable when the
NAIA-IPT III was designed and constructed. Takenaka and Asahikosan
opine that Ove Arup did not use the 1992 NSCP in the August 2007 Site
Observation Report. Ove Arup's finding that the NAIA-IPT III has a
potential for seismic pounding is baseless. The terminal is designed and
built to address the possibility of seismic pounding, taking into
consideration that the NAIA-IPT III is built on Type I soil. Takenaka and
Asahikosan claim that Ove Arup's finding was not based on the AASHTO
Standard Specification for Highway Bridges (16th Ed., 1996), the code
applicable at the time the NAIA-IPT III was designed and built. Takenaka
and Asahikosan likewise argue that Scott Wilson did not admit that the
NAIA-IPT III suffered from structural defects. They clarify that the
statements in the Scott Wilson report "were merely intended to
accommodate [the] changes that the client wished to effect."167 They also
point out that the Government stated in its petition (in G.R. No. 209917)
that "additional work is required to complete the terminal structure to
make it compliant with the standards of Takenaka and Asahikosan."168
To lay the structural issue to rest, Takenaka and Asahikosan consulted
Meinhardst (Singapore) Pte Ltd., their Structural Design Consultant, to
rebut TCGI's findings. They also hired disinterested American experts in
the construction industry - Mr. S.K. Ghosh of S.K. Ghosh Associates, Inc.;
Mr. Robert F. Mast, PE, SE of Berger/Abram Engineers, Inc.; and Mr. Mete
A. Sozen - to validate Meinhardst's conclusions. These experts
unanimously concluded that the NAIA-IPT III's design is structurally sound
because it complied with the 1992 NSCP, thus, effectively negating the
Government's claim that the NAIA-IPT III suffers from structural defects.
Takenaka and Asahikosan impugn the ASEP Report. They reiterate that
they constructed the NAIA-IPT III in accordance with the Onshore
Construction and Offshore Procurement Contracts and the prevailing
building code at the time of the design and construction of the NAIA-IPT
III. The statement in the ASEP Report that "the NAIA-IPT III may be
partially opened provided that retrofitting works are done prior to its full
operation" does not mean that the terminal is defective. The remediation
works were solely to ensure that the NAIA-IPT III structures are compliant
with the current standards, which were not yet in effect when the
construction of the NAIA-IPT III took place.
Messrs. Meinhardt opined that the scope of the proposed retrofitting
works shows that the structural design of the NAIA-IPT III is not defective
because the proposed retrofitting works are not related to the alleged
structural defects of the NAIA-IPT III vis-à-vis the 1992 NSCP. He also
stated that the proposed retrofitting works are meant to reinforce the
NAIA-IPT III which is already compliant with the 1992 NSCP.
Takenaka and Asahikosan likewise engaged the services of AECOM
Australia Pty. Ltd. to conduct a technical review of the Review on TCGI
Report of Civil Design Review and Evaluation (Elevated Roadway prepared
by Ove Arup & Partners HK Ltd. Philippines Branch). AECOM criticized the
Ove Arup's review as follows:
a. Ove Arup valuated the NAIA-IPT's Elevated
Roadway using the AASHTO Manual of Bridge
Evaluation and the FHA Bridge Inspectors Reference
Manual, which are irrelevant to any discussion of its
design;
b. Ove Arup evaluated the NAIA-IPT III's Elevated
Roadway using the Seismic Retrofitting Manual for
Highway Structures, which is irrelevant because there
is no need for a seismic retrofit of the NAIA-IPT III's
Elevated Roadway;
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 c. Ove Arup's suggestion that an in-situ measurement
of the geometry data of key structural components
be undertaken is unnecessary and irrelevant to a peer
review of the design of the NAIA-IPT III's Elevated
Roadway;
d. Ove Arup made an incorrect assessment of the
type of foundation material with respect to soil
bearing capacity;
e. Ove Arup used inappropriate codes for the
assessment of the bearings of the NAIA-IPT III's
Elevated Roadway;
f. Ove Arup's analysis suggests that 36 pier columns
of the NAIA-IPT III's Elevated Roadway are allegedly
under strength, but fails to quantify the ratio of the
column effect to the corresponding capacity;
g. AECOM objects to Ove Arup's criticism that the
value of the soil-bearing capacity used for the length
of the bridge of the NAIA-IPT III's Elevated Roadway
needs to be justified, since the design of the NAIA-
IPT III's Elevated Roadway must be judged on the
geotechnical information available to AECOM at the
time the bridge was made. No foundation could have
been built without the foundation bearing capacity
results having been submitted to the relevant
overseeing authority and approved thereby;
h. Ove Arup used an incorrect site coefficient for the
site's soil type, which resulted in seriously erroneous
input data, thus, any conclusions or
recommendations derived from these data are
rendered invalid;
i. Ove Arup's claim that there are "failures" in the
elastomeric bearings/bearing pads is based on an
Australian design code which did not exist at the time
the NAIA-IPT III's Elevated Roadway was designed;
j. Takenaka and Asahikosan were never provided a
copy of the TCGI Report that was used as basis for
the ARUP Report;
k. There are serious discrepancies between the Ove
Arup Report and the referenced, yet unseen TCGI
Report;
l. The NAIA-IPT III's Elevated Roadway complies with
the project design codes in force at the time it was
designed; and
m. AECOM refutes Ove Arup and TCGI's suggestion
that the NAIA-IPT III's Elevated Roadway requires
retrofitting or any remedial work.
Takenaka and Asahikosan aver that the Government would be able to
lessen its expenses, operate the NAIA-IPT III, and earn revenues sooner as
there is, in fact, no need to perform retrofitting works on the terminal.
Takenaka and Asahikosan point out that the design of the NAIA-IPT III is
bilaterally symmetrical which means the structural system of one area is
virtually identical to others. Since the Government opened certain areas of
the NAIA-IPT III to the public, it follows that the unused areas are also
ProvRem Rule 67 Fulltext
structurally sound considering that majority of the terminal building share
the same structural design.
They also deny that they employed armed guards to prevent the MIAA
and DOTC officials from entering the premises of the NAIA-IPT III. They
point out that the Government did not raise this issue before the lower
courts. They also state that they have provided the parties all
documentary evidence necessary in appraising the NAIA-IPT III, such as
the Bills of Quantities.169
VI. The Issues
In G.R. Nos. 209917, 209696, and 209731, we resolve the following issues:
(1) Whether the RTC's May 23, 2011 decision in Civil Case No.
04-0876 is null and void for violation of PIATCO, Takenaka and
Asahikosan's right to procedural due process;
(2) Whether the CA legally erred in computing just
compensation in the expropriation of the NAIA-IPT III;
(a) Whether "fair market value" and "replacement
cost" are similar eminent domain standards of
property valuation;
(b) Whether the depreciated replacement cost
approach or the new replacement cost approach shall
be used in the appraisal of the NAIA-IPT III;
(c) With respect to the computation of construction
costs, the issues are:
1. Whether the Government's computation
of construction cost is supported by a
preponderance of evidence;
2. Whether the NAIA-IPT III suffered/suffers
from massive structural defects;
3. Whether the alleged unnecessary areas
should be excluded from the computation
of construction cost;
(d) With respect to the computation of attendant
costs, the issues are:
1. Whether PIATCO's claimed attendant
cost is supported by a preponderance of
evidence;
a) Whether the Court may accord
probative value to photocopied
voluminous documents allegedly
proving PIATCO's attendant
costs;
b) Whether the Court may
accord probative value to the
summary report prepared by
Reyes Tacandong & Co., which
validated PIATCO's computation
of attendant costs;
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 2. Whether attendant cost may be pegged
at 10% of the construction cost;
3. Whether the Government included the
attendant cost in its valuation of the NAIA-
IPT III;
(e) Whether depreciation may be deducted from the
replacement cost of the NAIA-IPT III;
(f) Whether rectification for contract compliance (for
failure to comply with bid documents; for inferior
quality; and for the additional areas to be built)may
be deducted from the replacement cost of the NAIA-
IPT III;
(g) Whether the replacement cost of the NAIA-IPT III
shall be adjusted to December 2004 values based on
inflation;
(h) Whether the CA erred in imposing an interest rate
of 6% per annum on the replacement cost of the
NAIA-IPT III;
(i) Whether PIATCO shall be entitled to the fruits and
income of the NAIA-IPT III;
(3) Whether Takenaka and Asahikosan shall share in the
expenses of the BOC;
(4) Whether the owner of the property sought to be
expropriated shall solely receive the just compensation due;
and
(5) Whether the Government may take property for public
purpose or public use upon the issuance and the effectivity of
the writ of possession;
In G.R. No. 181892, the following issues are relevant:
(1) Whether the appointment of an independent
appraiser issue has been rendered moot and
academic by the RTC's promulgation of its rulings in
Civil Case No. 04-0876; and
(2) Whether the issue of who shall pay the
independent appraiser's fees has been rendered
moot and academic by the RTC's promulgation of its
rulings in Civil Case No. 04-0876.
VII. Our Ruling
A. G.R. Nos. 209917, 209696 & 209731
1. The parties were afforded procedural
due process despite their non-receipt
of the BOC Final Report prior to the
promulgation of the RTC's May 23,
2011 Decision.
Before ruling on the substantive issues posed, we first resolve
the issue of whether the CA erred in ruling that the RTC's May
23, 2011 decision is valid.
ProvRem Rule 67 Fulltext
PIATCO, Takenaka and Asahikosan challenge the validity of the
RTC's decision for alleged violation of their right to due process.
They point out that the RTC promulgated its decision in Civil
Case No. 04-0876 on May 23, 2011, immediately after the
release of the BOC's Final Report
on March 31, 2011. They complain that since the RTC's clerk of
court did not furnish the parties copies of the Final Report, the
trial court violated Sections 7 and 8, Rule 67 of the Rules of
Court as they failed to object to the Final Report's contents.
Rule 67 of the Rules of Court provides that the clerk of court
shall serve copies of the commissioners' final report on all
interested parties upon the filing of the report. Each party shall
have ten days within which to file their objections to the
report's findings.170
Upon the expiration of the ten-day period or after all the
parties have filed their objections and after hearing, the trial
court may: (a) accept the report and render judgment in
accordance therewith; (b) for cause shown, recommit the report
to the commissioners for further report of facts; (c) set aside the
report and appoint new commissioners; (d) partially accept the
report; and (e) make such order or render such judgment as
shall secure to the plaintiff the property essential to the exercise
of his right of expropriation; and to the defendant, the just
compensation for the property so taken.171
We rule that the parties' failure to receive the Final Report did
not render the May 23, 2011 Decision null and void.
The essence of procedural due process is the right to be
heard.172 The procedural due process requirements in an
eminent domain case are satisfied if the parties are given the
opportunity to present their evidence before the commissioners
whose findings (together with the pleadings, evidence of the
parties, and the entire record of the case) are reviewed and
considered by the expropriation court. It is the parties' total
failure to present evidence on just compensation that renders
the trial court's ruling void. The opportunity to present evidence
during the trial remains to be the vital requirement in the
observance of due process.173
The record will show that the parties exhaustively discussed
their positions in this case before the BOC, the trial court, the
appellate court, and this Court.
They had ample opportunity to refute and respond to each
other's positions with the aid of their own appraisers and
experts. Each party, in fact, submitted countervailing evidence
on the valuation of the NAIA-IPT III. They also filed numerous
and voluminous pleadings and motions before the lower courts
and before this Court. The mere failure of the RTC's clerk of
court to send the parties copies of the BOC Final Report is not
substantial enough under the attendant circumstances to affect
and nullify the whole proceedings. Litigation is not a game of
technicalities. Strong public interests require that this Court
judiciously and decisively settle the amount of just
compensation in the expropriation of the NAIA-IPT III. We
cannot further delay this more-than a-decade case and let
interests accrue on just compensation by remanding the case
once more to the trial court.
2. Framework: Eminent domain is an
inherent power of the State
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 2.a. The power of eminent domain is a fundamental
state power that is inseparable from sovereignty.
Eminent domain is a fundamental state power that is
inseparable from sovereignty. It is the power of a
sovereign state to appropriate private property within
its territorial sovereignty to promote public welfare.
The exercise of this power is based on the State's
primary duty to serve the common need and advance
the general welfare.174 It is an inherent power and is
not conferred by the Constitution.175 It is inalienable
and no legislative act or agreement can serve to
abrogate the power of eminent domain when public
necessity and convenience require its exercise.176
The decision to exercise the power of eminent
domain rests with the legislature which has the
exclusive power to prescribe how and by whom the
power of eminent domain is to be exercised. Thus,
the Executive Department cannot condemn
properties for its own use without direct authority
from the Congress.177
The exercise of eminent domain necessarily
derogates against private rights which must yield to
demand of the public good and the common
welfare.178 However, it does not confer on the State
the authority to wantonly disregard and violate the
individual's fundamental rights.
2.b. Just compensation is the full and fair equivalent of
the property taken from the owner by the condemnor.
The 1987 Constitution embodies two constitutional
safeguards against the arbitrary exercise of eminent
domain: first, private property shall not be taken for
public use without just compensation;179 and second,
no person shall be deprived of life, liberty, or
property without due process of law.180
Just compensation is defined as "the full and fair
equivalent of the property taken from its owner by
the expropriator." The word "just" is used to qualify
the meaning of the word "compensation" and to
convey the idea that the amount to be tendered for
the property to be taken shall be real, substantial, full
and ample.181 On the other hand, the word
"compensation" means "a full indemnity or
remuneration for the loss or damage sustained by
the owner of property taken or injured for public
use."182
Simply stated, just compensation means that the
former owner must be returned to the monetary
equivalent of the position that the owner had when
the taking occurred.183 To achieve this monetary
equivalent, we use the standard value of "fair market
value" of the property at the time of the filing of the
complaint for expropriation or at the time of the
taking of property, whichever is earlier.
2.b.1. Fair market value is the general
standard of value in determining just
compensation.
ProvRem Rule 67 Fulltext
Jurisprudence broadly defines "fair market
value" as the sum of money that 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 given and
received for a property.184
Fair market value is not limited to the
assessed value of the property or to the
schedule of market values determined by
the provincial or city appraisal committee.
However, these values may serve as factors
to be considered in the judicial valuation of
the property.185
Among the factors to be considered in
arriving at the fair market value of the
property are the cost of acquisition, the
current value of like properties, its actual or
potential uses, and in the particular case of
lands, their size, shape, location, and the
tax declarations. The measure is not the
taker's gain but the owner's loss.186 To be
just, the compensation must be fair not
only to the owner but also to the taker.187
While jurisprudence requires the "fair
market value" to be the measure of
recovery in expropriation cases, it is not an
absolute and exclusive standard or method
of valuation.188 There are exceptional cases
where the property has no fair market
value or where the fair market value of the
property is difficult to determine.
Examples of properties with no or with
scant data of their fair market values are
specialized properties or buildings
designed for unique purposes.189 These
specialized properties bear these
characteristics because they are "rarely x x
x sold in the market, except by way of sale
of the business or entity of which it is part,
due to the uniqueness arising from its
specialized nature and design, its
configuration, size, location, or
otherwise."190
Examples of specialized properties are
churches, colleges, cemeteries, and
clubhouses.191 These also include airport
terminals that are specifically built as "a
place where aircrafts land and take off and
where there are buildings for passengers to
wait in and for aircraft to be
sheltered."192They are all specialized
properties because they are not usually
sold in the ordinary course of trade or
business.
In the Tengson Report dated December 1,
2010, Gary Taylor characterized the NAIA-
IPT III as a specialized asset.193 Tim Lunt
also stated in the Reply to Tengson
International Ltd. Report and Response
from Takenaka & Asahikosan dated
December 7, 2010 that the market value of
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 an airport will not be the same as the
market value of other commercial,
industrial, and residential buildings within
the Metro Manila region.194
In cases where the fair market value of
the property is difficult to ascertain, the
court may use other just and equitable
market methods of valuation in order to
estimate the fair market value of a
property.
In the United States, the methods
employed include: (1) the cost of replacing
the condemned property, less depreciation;
(2) capitalization of the income the
property might reasonably have produced;
(3) the fair rental value of the property
during a temporary taking; (4) the gross
rental value of an item over its depreciable
lifetime; (5) the value which the owner's
equity could have returned, had the owner
invested in monetary instruments; (6) the
cost of repair or the capitalized cost of
inconvenience, whichever is less; and (7)
the loss of investment expenses actually
incurred.195 The primary consideration,
however, remains the same - to determine
the compensation that is just, both to the
owner whose property is taken and to the
public that will shoulder the cost of
expropriation.
2.b.2. Replacement cost is a different
standard of value from fair market value.
In Gingoyon, we held that the construction
of the NAIA-IPT III involves the
implementation of a national infrastructure
project. Thus, for purposes of determining
the just compensation of the NAIA-IPT III,
RA 8974 and its implementing rules shall
be the governing law.
Under Section 10 of the RA 8974 IRR, the
improvements and/or structures on the
land to be acquired for the purpose of
implementing national infrastructure
projects shall be appraised using the
replacement cost method.
Replacement cost is a different standard of
valuation from the fair market value. As we
previously stated, fair market value is the
price at which a property may be sold by a
seller who is not compelled to sell and
bought by a buyer who is not compelled to
buy. In contrast, replacement cost is "the
amount necessary to replace the
improvements/structures, based on the
current market prices for materials,
equipment, labor, contractor's profit and
overhead, and all other attendant costs
associated with the acquisition and
installation in place of the affected
improvements/structures."196 We use the
replacement cost method to determine just
ProvRem Rule 67 Fulltext
compensation if the expropriated property
has no market based evidence of its value.
2.b.3. Replacement cost is only one of the
standards that the Court shall consider in
appraising the NAIA-IPT III.
In using the replacement cost method to
ascertain the value of improvements that
shall be expropriated for purposes of
implementing national infrastructure
projects, Section 10 of RA 8974 IRR
requires the implementing agency to
consider the kinds and quantities of
materials/equipment used, the location,
configuration and other physical features
of the properties, and the prevailing
construction prices, among other things.
Section 5 of RA 8974 in this regard
provides that the court may consider the
following relevant standards in eminent
domain cases:
(a) The classification and use for
which the property is suited;
(b) The developmental costs for
improving the land;
(c) The value declared by the
owners;
(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) The 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.
The Court explained in Agan and Gingoyon
that the replacement cost method is only
one of the factors to be considered in
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 determining the just compensation of the
NAIA-IPT III. The Court added that the
payment of just compensation should be in
accordance with equity as well.
In Agan, we stated:
This Court, however, is not
unmindful of the reality that the
structures comprising the NAIA
IPT III facility are almost
complete and that funds have
been spent by PIATCO in their
construction. For the
government to take over the said
facility, it has to compensate
respondent PIATCO as builder of
the said structures. The
compensation must be just and
in accordance with law and
equity for the government
cannot unjustly enrich itself at
the expense of PIATCO and its
investors.(emphasis supplied)197
We also declared in Gingoyon
that:
Under RA 8974, the Government
is required to "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 [BIR]; and
(2) the value of the
improvements and/or structures
as determined under Section 7.
As stated above, the BIR zonal
valuation cannot apply in this
case, thus the amount subject to
immediate payment should be
limited to "the value of the
improvements and/or structures
as determined under Section 7,"
with Section 7 referring to the
"implementing rules and
regulations for the equitable
valuation of the improvements
and/or structures on the land."
Under the present implementing
rules in place, the valuation of
the improvements/structures are
to be based using "the
replacement cost method."
However, the replacement cost is
only one of the factors to be
considered in determining the
just compensation.
In addition to RA 8974, the 2004
Resolution in Agan also
mandated that the payment of
just compensation should be in
accordance with equity as well.
Thus, in ascertaining the ultimate
ProvRem Rule 67 Fulltext
amount of just compensation,
the duty of the trial court is to
ensure that such amount
conforms not only to the law,
such as RA 8974, but to
principles of equity as
well.(Emphasis supplied)198
The Court's pronouncements in Agan and
Gingoyon are consistent with the principle
that "eminent domain is a concept of
equity and fairness that attempts to make
the landowner whole. It is not the amount
of the owner's investment, but the 'value of
the interest' in land taken by eminent
domain, that is guaranteed to the
owner."199
In sum, in estimating the fair market value
of the NAIA-IPT III, the Court shall use(1)
the replacement cost method and(2) the
standards laid down in Section 5 of RA
8974 and Section 10 of RA 8974 IRR.
Furthermore, we shall likewise consider(3)
equity in the appraisal of NAIA-IPT III
based on the Agan and Gingoyon cases.
2.b.4. The use of depreciated replacement
cost method is consistent with the principle
that the property owner shall be
compensated for his actual loss.
The present case confronts us with the
question of the specific replacement cost
method that we should use in appraising
the NAIA-IPT III. The Government
advocates the depreciated replacement
cost method formula while PIATCO argues
for the new replacement cost method
formula.
The replacement cost method is a cost
approach in appraising real estate for
purposes of expropriation. This approach is
premised on the principle of substitution
which means that "all things being equal, a
rational, informed purchaser would pay no
more for a property than the cost of
building an acceptable substitute with like
utility."200
The cost approach considers the principles
of substitution, supply and demand,
contribution and externalities.201 "The value
of the land and the value of improvements
are determined separately according to
their highest and best use."202 "Buyers
assess the value of a piece of property not
only based on the existing condition of the
property, but also in terms of the cost to
alter or improve the property to make it
functional specifically for the purposes of
the buyer's use. This may include building
new structures, renovating existing
structures, or changing the components of
an existing structure to maximize its
utility."203
Page 47 of 119
 There are various methods of appraising a
property using the cost approach: among
them are the reproduction cost, the
replacement cost new, and the depreciated
replacement cost. Reproduction cost is the
"estimated current cost to construct an
exact replica of the subject building, using
the same materials, construction standards,
design, layout, and quality of workmanship;
and incorporating all the deficiencies,
superadequacies, and obsolescence of the
subject building."204 It is the cost of
duplicating the subject property at current
prices205 or the current cost of reproducing
a new replica of the property being
appraised using the same, or closely
similar, materials.206
In the United States, the recognized and
used method in eminent domain cases in
appraising specialized properties is the
reproduction cost less depreciation
approach.
According to AmJur, this valuation method
requires the inclusion of all expenditures
that reasonably and necessarily are to be
expected in the recreation of the structure,
including not only the construction itself
but also collateral costs, such as the costs
of financing the reproduction. "Historical
associations and architectural values may
enhance the market worth of a property by
rendering it a specialty property; if so, the
property may fairly be worth the market
price for similar properties, plus a premium
for its unique aspects. The premium value
in such a case may also be determined by
the cost of reproduction, minus
depreciation. The value assigned has also
been described as the total of the land
value, plus the specialized value of the
improvements, minus depreciation."207
Alfred Jahr explains the procedure in
appraising a specialized property using this
method:
In the valuation of the
improvement or plant, however,
market value is no criterion
because they have no market
value. It is specialty property. The
improvements are therefore
valued on several properties.
First, consideration is given tothe
original book cost of the
improvements, that is, the
original cash expenditure paid by
the company for making the
physical structures and
appurtenances. Its purpose is to
act as some guide; it is not value,
however, and the courts
recognize the fact that it is not a
value of the physical structures.
Second, evidence of
reproduction cost new is then
ProvRem Rule 67 Fulltext
considered, for it is an element
of value of specialty property. In
figuring this cost, all overhead
expenses are included. These
expenses include engineering,
construction, management fees,
insurance, legal expenses, office
overhead, and interest during
construction period. Third, from
the reproduction cost new an
allowance for depreciation of the
improvements must be made.
This depreciation is a matter of
opinion, formed after a physical
examination of the
improvements as a whole and is
generally not based on a
straight-line depreciation
according to age. Some
authorities, however, have not
accepted such an item of
depreciation and prefer the
straight-line method, at so much
per year. Obsolescence and
functional depreciation are
sometimes deducted in addition
to physical depreciation
depending on the type of utility
involved.208
Replacement cost new is "the estimated
cost to construct a building with utility
equivalent to the appraised building using
modern materials and current standards,
design, and layout"209 or "the current cost
of a similar new property having the
nearest equivalent utility as the property
being valued."210 It is the cost of acquiring
a modern, functional equivalent of the
subject property and "views the building as
if reconstructed with modern methods,
design and materials that would most
closely replace the use of the appraised
building but provide the same
utility."211Replacement cost does not
consider the most common forms of
functional obsolescence.212
Depreciated replacement cost approach is
the "method of valuation which provides
the current cost of replacing an asset with
its modern equivalent asset less deductions
for all physical deterioration and all
relevant forms of obsolescence and
optimisation."213 Depreciated replacement
cost is a method of appraising assets that
are usually not exposed to the open
market.214 A general formula of this
method is as follows:
Cost of constructing the building
(s) (including fees)
Plus: Cost of the land (including
fees)
= Total Costs
Less: Allowance for age and
depreciation
Page 48 of 119
 = Depreciated Replacement
Cost215
Under this method, the appraiser assesses
the current gross replacement of the
assets, usually comprised of the land and
the building. If the asset is an
improvement, the appraiser assesses the
cost of its replacement with a modern
equivalent and deducts depreciation to
reflect the differences between the
hypothetical modern equivalent and the
actual asset. The appraiser has to "establish
the size and specification that the
hypothetical buyer ideally requires at the
date of valuation in order to provide the
same level of productive output or an
equivalent service."216 In appraising the
improvement using the cost approach, the
appraiser considers the construction cost,
and attendant cost.
Construction costs are "the costs that are
normally and directly incurred in the
purchase and installation of an asset, or
group of assets, into functional use." On
the other hand, attendant costs are "the
costs that are normally required to
purchase and install a property but that are
not usually included in the vendor
invoice."217
Under Section 10 of the RA 8974 IRR,
construction cost is the current market
price of materials, equipment, labor, the
contractor's profit and overhead, while the
attendant cost is the cost associated with
the acquisition and installation in place of
the affected improvement.
Once the gross replacement cost or the
sum of construction and attendant costs is
derived, depreciation shall be
deducted.218 Depreciation is classified into
three categories: physical depreciation,
functional obsolescence, and external
obsolescence.
Physical obsolescence refers to the "wear
and tear over the years, which might be
combined with a lack of maintenance."219
Physical depreciation is curable if "capital
investment can bring the building to a
state in which the degree of obsolescence
is mitigated (e.g., standards of finishes and
services)."220 It is incurable if "no amount of
capital investment can rectify the
[depreciation] (for example, building
structural flexibility)."221 Curable physical
depreciation is measured by the cost to
cure or retrofitting which could extend the
life of the building.222 Incurable
depreciation or deterioration is estimated
by a variety of age-life or economic-age
calculation methods.223 Functional
obsolescence "reflects the advances in
ProvRem Rule 67 Fulltext
technology which allow for a more efficient
delivery of services and goods from a
building of different designs and
specifications."224 "Functional obsolescence
arises where the design or specification of
the asset no longer fulfills the function for
which it was originally designed."225
It is "usually related to operational
inefficiencies that typically involve either
inadequacies or superadequacies. An
inadequacy occurs when the asset is not
enough (e.g., the asset is too small) for it to
operate efficiently. A superadequacy occurs
when there is too much of an asset (e.g.,
the asset is too large) for it to operate
efficiently."226 "To be feasible, the cost of
replacing the obsolete item or design fault
must be equal to or less than the
anticipated increase in value due to its
cure. Curable functional obsolescence may
require abatement by adding or
remodelling or by removing a
superadequacy."227
Economic obsolescence results from "the
impact of changing external macro- and
micro-economic conditions on the
property and should not include internal
factors which affect the profitability of the
occupying business, the writing down of
such factors to reflect the profitability of
the business being a matter for the
occupier. Within economic obsolescence,
the prospect of extending the life of the
building by capital investment should be
considered, as well as the fact that lack of
maintenance can accelerate the rate of
depreciation."228
In these consolidated cases, we rule that
the depreciated replacement cost method,
rather than the new replacement cost
method, is the more appropriate method
to use in appraising NAIA-IPT III.
Injustice would result if we award PIATCO
just compensation based on the new
replacement cost of the NAIA-IPT III, and
disregard the fact that the Government
expropriated a terminal that is not brand
new; the NAIAIPT III simply does not have
the full economic and functional utility of a
brand new airport.
Adjustments for depreciation should be
made to reflect the differences between
the modern equivalent asset and the actual
asset or the NAIA-IPT III. The reason is that
depreciation involves the loss of value
caused by the property's reduced utility as
a result of damage, advancement of
technology, current trends and tastes, or
environmental changes.229
This conclusion is consistent with Section
10 of RA 8974 IRR which allows us - and
Page 49 of 119
 under the NAIA-IPT-III's circumstances
effectively direct us - to consider the kinds
and quantities of materials/equipments
used, configuration and other physical
features of the properties, among other
things, in determining the replacement
cost of a building. To quote Section 10:
Section 10. Valuation of Improvements
and/or Structures - Pursuant to Section 7
of the Act, the Implementing Agency shall
determine the valuation of the
improvements and/or structures on the
land to be acquired using the replacement
cost method. The replacement cost of the
improvements/structures is defined as the
amount necessary to replacement
improvements/structures, based on the
current market prices for materials,
equipment, labor, contractor's profit and
overhead, and all other attendant costs
associated with the acquisition and
installation in place of the affected
improvements/structures. In the valuation
of the affected improvements/structures,
the Implementing Agency shall consider,
among other things, the kinds and
quantities of materials/equipment used,
the location, configuration and other
physical features of the properties, and
prevailing construction prices. (Emphasis
supplied)
Depreciation should be deducted because
modern materials and design are assumed
in the replacement cost method. In using
the depreciated replacement cost method,
"[t]he intent is to provide a functionally
similar improvement in order to apply a
meaningful level of depreciation."230
If we adopt the new replacement cost
method, PIATCO would be compensated
for more than what it had actually lost. We
must remember that the concept of just
compensation does not imply fairness to
the property owner alone. In an eminent
domain situation, compensation must
likewise be just to the public which
ultimately bears the cost of expropriation.
The property owner is entitled to
compensation only for what he actually
loses; what he loses is only the actual value
of the property at the time of the taking.231
Just compensation must not extend
beyond the property owner's loss or injury.
This is the only way for the compensation
paid to be truly just, not only to the
individual whose property is taken, but also
to the public who will shoulder the cost of
expropriation. Even as under valuation
would deprive the owner of his property
without due process, so too would its
overvaluation unduly favor him to the
prejudice of the public.232
ProvRem Rule 67 Fulltext
In using the depreciated replacement cost
method of valuation, we do not rely on
Kaczmarek's affidavit and other documents
not presented before the trial court, and
which were belatedly attached to the
Government's motion for partial
reconsideration dated August 22, 2013.
This Court exercises its judicial function to
fix just compensation in eminent domain
cases on the basis of the law, the rules, and
the evidence - including the appraisal
reports and the embedded formula on how
the parties arrived at the amounts of just
compensation - presented by the parties
before the trial court and the entire record
of the consolidated cases.
The determination of just compensation in
eminent domain cases is essentially and
exclusively a judicial function. Fixing the
formula with definitiveness and
particularity in just compensation is not the
function of the executive nor of the
legislative branches, much less of the
parties in this case. Any valuation for just
compensation laid down in the statutes
may not replace the court's own judgment
as to what amount should be awarded and
how this amount should be arrived at.
Legislative enactments, as well as executive
issuances, providing the method of
computing just compensation are treated
as mere guidelines in ascertaining the
amount of just compensation. When acting
within the parameters set by the law itself,
courts are not strictly bound to apply the
formula to its minutest detail, particularly
when faced with situations that do not
warrant the formula's strict application. The
courts may, in the exercise of their
discretion, relax the formula's application
to fit the factual situations before them.233
We clarify, however, that this Court is not
confined to the use of the depreciated
replacement cost method in determining
the just compensation in these cases.
Valuation is not exclusively a technical
matter used in arriving at a numerical
measure of compensation. Rather,
valuation in eminent domain is a judicial
question based on equitable principles.
Thus, this Court shall likewise endeavor to
weigh the justness and fairness of
compensation between the condemnor
and the condemnee, considering the
factual circumstances of this case.234
3. Construction cost of the NAIA-IPT III
3.a. The base valuation of the NAIA-IPT III
The Government claims that the construction cost or
the base valuation of the NAIA-IPT III amounts to
$300,206,693.00, itemized as follows:235
Page 50 of 119
 at ain
Total $USD designated
Manila time and specific location,
@3Q01 adding the cost of works in, on, and around
the structure, and then accounting for
General Requirements and Conditions inferior and non-performing works, and
$ 36,279,033
rectification of those works.
Site Development $ 3,293,967

Terminal North Concourse 2.2.2 I have arrived at the$CCVs by carrying

6,847,663
out the following sequence of tasks:
Terminal South Concourse $ 11,169,979

Terminal Head House 1) Understanding the project as

$ 60,763,798
bid and as eventually
Terminal Building Services constructed. $ 54,982,628

Multi Storey Car Park $ 8,791,857

2) Preparing measured quantities
Special Systems for the major $elements of the
69,321,503
completed works.
Airside Infrastructure Works $ 31,065,288

Landside Infrastructure Works 3) Establishing$ appropriate

11,496,552 rates
and prices for carrying out the
Terminal Support Facilities $ 6,194,425
works at that time in Manila,
Philippines.
Office Fit-out $0

Builder's Work in Connection with Included

4) Adjusting the quantities
and/or rates and prices to take
Services into account the extent of non-
performing and/or inferior
Total $ USD quality works,$ 300,206,693
the extent of
rectification and remediation of
the Terminal to bring it to Code
On the other hand, PIATCO, Takenaka, and and making it structurally safe,
Asahikosan argue that the construction cost amounts and 22,193 m2 of 'Unnecessary
to $360,969,791.00, viz: Areas' that was built in the
Terminal.
In US dollars
5) Making provision for the cost
total payments of piaTCO 275,119,807.88
of remediation on items which
Add: Awards by the London Court 84,035,974.44
deteriorated between December
Award by the Makati Court 1,814,008.50
2002 and December 2004.
Total Construction Cost 360,969,790.82

6) Making provision for the value

As we had earlier explained, construction cost is the amount of depreciation of Terminal 3
necessary to replace the improvements/structures, based on between December 2002 and
the current market prices for materials, equipment, labor, December 2004.
contractor's profit and overhead. Construction or direct costs is
also defined as the costs that are "normally and directly 7) Deducting the cost of
incurred in the purchase and installation of an asset or group of rectification to otherwise bring
assets into functional use." Construction costs generally take the Terminal to the standards in
into account the labor used to construct buildings; materials, the Bid Documents, including the
products, and equipment; contractor's profit and overhead, cost of building some 63,490 m2
including job supervision, workers' compensation, fire and of 'Necessary Operational Areas'
liability insurance, and unemployment insurance; performance that was not built in the
bonds, surveys, and permits; use of equipment; watchmen; Terminal.237
contractor's shack and temporary fencing; materials storage
facilities; and power-line installation and utility costs.236 We find
2.3 Understanding the Project
the Government's computation of construction cost to be more
realistic and appropriate. As the CA aptly observed, the Gleeds
Report is more "particularized, calculable and precise." Tim Lunt 2.3.1 I visited the Terminal 3 site
sufficiently explained how he arrived at the value of between May 9, 2006 and May
$300,206,693.00: 12, 2006; May 30, 2006 and June
2, 2006; and June 20 and June
25, 2006, when I held meetings
2.2 Methodology
with the Office of the Solicitor
General, White & Case, MIAA,
2.2.1 Stated simply, valuation of any given Arup, TCGI, and Gensler. I based
structure is derived by multiplying the myself at the Terminal 3 complex
structure's dimensions, i.e., quantities by a during my visits in May and June
price (i.e., rate) for constructing the works 2006 and made a number of
ProvRem Rule 67 Fulltext Page 51 of 119
 visits to various areas both
internal and external to Terminal
3 to gain a full understanding of
the scope of the works
performed.
2.3.2 Members of my staff visited
the Terminal 3 site between May
30, 2006 and June 25, 2006, and
based themselves in the Terminal
3 complex to prepare quantities
from construction drawings
made available by Takenaka,
which, as noted, are not properly
designated 'As-built' drawings.
To safeguard against error or
outdated dimensional
information in the drawings, my
staff checked certain major
dimensions against the
structures as constructed and
found the dimensions to be
substantially accurate. We did
not check the drawings for
detailed accuracy of the contents
in the drawings (i.e., what is
within the dimensions).
2.3.3 Members of my staff also
visited the Terminal 3 site
between February 26, 2008 and
March 11, 2007. During that
time, they gathered pricing
information from local
construction contractors to assist
with the pricing of the CCVs.
2.3.4 I have examined all of the
documents listed in Appendix 'B'
and had discussions with each of
the Republic's airport
architectural and engineering
experts on the content of their
reports to gain a full
understanding of the main issues
affecting Terminal 3 and the
CCVs.238
2.4. Preparing the Quantities
Bills of Quantities
2.4.1 Construction projects are
generally priced by construction
contractors for the purpose of
competitive tendering using a
Bill (or Bills) of quantities. Bills of
Quantities are defined as:
A list of numbered items, each of
which describes the work to be
done in a civil engineering or
building contract. Each item
shows the quantity or work
involved. When the procedure of
tendering is adopted (as is
usual), the Bill is sent out to
ProvRem Rule 67 Fulltext
contractors. Those contractors
who wish to do the work return
the bill, with an extended price
opposite each item. This priced
bill constitutes the contractors'
offer (or tender to bid) to do the
work.239
2.4.5 As noted, it was apparent
from commencement of
preparation of the CCVs that it
was doubtful that the set of
drawings listed in Appendix "B"
that Takenaka provided were
"As-built" or approved.
Accordingly, because of
uncertainty over the accuracy of
the "As-built" drawings, and to
avoid preparing Bills of
Quantities based on potentially
inaccurate information, I opted
not to produce full Bills of
Quantities to form the basis of
the CCVs. Instead, I relied on a
"Principle Quantities" type
approach.240
Principle Quantities
2.4.6 The "Principle Quantities"
type approach is common in the
cost planning and cost
estimating of construction
projects. CESMM3 describes
Principle Quantities as "a list of
principle components of the
works with their approximated
estimated quantities x x x given
solely to assist surveyors and
estimators in making rapid
assessment of the general scale
and character of the proposed
works prior to the examination of
the remainder of the bills of
quantities and other contract
documents on which
construction estimates or
tenders will be based." This
methodology involves the
preparation of quantities for the
major elements of the
construction works where the
costs cannot be estimated
accurately from historical data, or
for those areas which are known
to vary in cost due to the quality
or nature of the works. The
quantities produced by adopting
this approach are what I term
"Principle Quantities."241
2.4.7 Given the serious concerns
over the accuracy of the so called
"As-built" drawings, and in order
to make some assessment of the
dimensional accuracy of the
Takenaka drawings, we carried
out a number of checks of the
Page 52 of 119
 plan dimensions against our ● Any physical
measurement of the physical restrictions that might
dimensions of the structures. impede construction
Overall dimensions (length and of the works;
width) were checked for a single
floor plate in each of the ● The duration for
Terminal North Concourse, the carrying out
Terminal South Concourse and construction;
the Terminal Head House
buildings. Our checks revealed
no major discrepancies in respect ● Database of costs;
of the physical plan dimensions
of the drawings against the ● The specification of
actual dimensions of the overall the works;
building floor plans. We
therefore decided to use the ● The quality of the
drawings provided by Takenaka works as constructed;
to produce the "Principle and
Quantities" dimensions required
for us to prepare the CCVs.
● The extent of works
requiring remediation
2.4.8 The 'Principle Quantities' and rectification
dimensions produced by Gleeds
from the drawings made
2.5.2 All of the above factors
available by Takenaka (listed in
have an effect on the CCVs and it
Appendix 'B' Drawing List 1) are
is necessary to consider the
included in Appendix "G."
implications of each to arrive at
the CCV figures. General
2.4.9 It is standard good practice guidance including a number of
for quantities produced as part the above items are referred to
of the measurement process to in the document titled "Guide to
be checked by another member Carrying Out Reinstatement Cost
of the team who is not Assessments' published by the
connected to the particular Royal Institution of Chartered
project. The quantities we Surveyors in September 1999.243
produced were technically
checked by another member of
3. CCV CALCULATIONS
Gleeds for consistency among
inter-related items, e.g.,
consistency between floors and 3.1 Calculation of Rates and
ceilings, and to identify any Prices
major items not measured.
Another member of Gleeds also 3.1.1 The CCVs have
checked the accuracy of the been calculated in £UK
gross floor area, or "GFA," costs converted to
calculations for each of the $USD in Manila. x x x
buildings and no significant
errors were identified.242
3.1.2 The basic
approach to producing
2.5. Arriving at the Rates and Prices the CCV figures entails
the following steps:
2.5.1 In order to derive the rates
by which the quantities are 1) Establish
produced to arrive at the CCV UK pricing
figures for this project, it is levels at 2nd
necessary to establish: Quarter
2006 (£UK
● The period of @ 2Q06)
construction; (the date
when the
pricing
● The geographical
exercise was
location of the works;
initially
carried out);
● Access to the site;

2) Convert
the £UK @

ProvRem Rule 67 Fulltext Page 53 of 119

 2Q06 prices CCVs as £UK @ 2Q06.
into £UK at The rates used are
3rd Quarter included in Appendix
2001 prices "D." Support in respect
(£UK @ of the reference to the
3Q01) (the source derivation of
mid point of each of the rates and
construction prices included in the
) using CCVs are also included
published in Appendix 'D' in the
and column headed "Rate
recognized Source."244
indices;
3.1.4 Second, it was
3) Convert necessary to adjust the
the £UK prices to the midpoint
@3Q01 of construction. As
prices into such the "£UK @
US dollars at 3Q01" levels to align
3rd Quarter them with required
($USD base costs for
@3Q01) (the inclusion in both CCVs.
currency of This conversion is
the Termianl made by using the
3 BCIS All-in Tender
Concession Price Indices published
Contract) by the Royal
using Institution of
published Chartered surveyors.
currency These costs are shown
exchange in the CCV as "£UK @
rates; 3Q01."

4) Convert 3.1.5 Third, the "£UK

the $USD @ 3Q01" costs were
@3Q01 converted from UK
prices to pounds to US dollars
reflect local using an exchange rate
levels of of UK£1 = ISD$1.4540.
pricing by This exchange rate is
applying a obtained by averaging
Location the exchange rates
Adjustment recorded for October
using 1, November 1 and
various December 3, 2001 (i.e.,
methods 3Q01) using historical
and sources data from the
of xrates.com website.
information These particular dates
to check the represent the midpoint
accuracy of of construction which I
the refer to earlier in this
conversion. report. The result of
this conversion is
Each of these steps is shown in the column
described below. marked "£UK @ 3Q01"
in Appendix "D."

3.1.3 First, the

quantities produced
for Terminal 3 were
priced using a mixture
of current data in
Gleeds' Database of
costs and published
cost data, including
Spons, and are priced
at 2Q06 prices. These
costs are shown in the
3.1.6 Fourth, a
"Location Adjustment"
of the "$USD @ 3Q01"
cost is necessary to
account for the local
cost of constructing in
Manila. Local cost data
gathered in Manila by
members of my team
in February and March

ProvRem Rule 67 Fulltext Page 54 of 119

 2007 was compared
directly with UK prices
to establish a ratio
between the UK and
the Philippines. The
cost data gathered in
Manila was compared
on a like for like basis
with 1st Quarter 2007
UK prices. The results
of this comparison of
rates result in the
"Location Adjustment."
The Location
Adjustments resulting
from this calculation
which are applied to
the CCV are
UK£1=$USD0.7576 for
the mechanical,
electrical and plant
elements. The average
conversion rate across
the CCVs is
UK£1=$USD0.5370 or
53.70%.245
3.1.7 I double-checked
my calculations of the
Philippine prices by
considering what the
conditions in the
Philippines
construction market
were at the time the
project would have
been bid, and how
these conditions
changed through to
the end of 2002 when
works stopped on site.
During the period of
1995 to 2002 the
"Construction
Materials Wholesale
Price Index" ("CMWPI")
published by the
'Economic Indices and
Indicators Division,
Industry and Trade
Statistics Department,
Philippine National
Statistics Office,
Manila, Philippines'
showed an average
increase of 2.8% per
annum.
During the periods
2000 to 2001 and 2001
to 2002 the increases
where 2.1% and 3.4%
respectively. The
increases are seen to
be at similar levels
both in the period
during which the
works were priced,
ProvRem Rule 67 Fulltext
contracts executed
and during
construction and in my
opinion this would
have resulted in no
material difference to
the pricing level of the
onshore works
submitted at tender
stage when compared
with the actual cost
incurred.
3.1.8 I also have
gathered information
from other Chartered
Surveyors' published
data which also
indicate that the
Location Adjustment
for the Philippines is in
the region of 45%. This
percentage is in line
with the more detailed
results obtained as
part of my own
calculations.246
We thus rule in favor of the Government's
position and reject PIATCO's claimed
construction cost. For one, PIATCO made
inconsistent statements with respect to the
construction cost of the NAIA-IPT III. The
Scott Wilson report states that the
construction cost of the NAIA-IPT III
amounted to US$338.83 million, exclusive
of attorney's fees, cost of the suit, interest
rates, etc. This amount is inconsistent with
PIATCO's claimed construction cost of
$360,969,790.82 in its pleadings. The
relevant portion of the Scott Wilson report
states:
2.1.4 When Scott Wilson was
providing Lenders Technical
Advice to the Asian Development
Bank in September 2002, the
total value of the construction
contracts, estimated by PCI at
that time, was as follows:
On-Shore Contract:
US$132.35 million
Off-Shore Contract:
US$190.08 million
Total US$322.43
million, excluding
VAT
2.1.5 The contract priceS under
the EPC Contracts are as follows:
On-Shore Contract.
US$133,715,911
Page 55 of 119
 Off-Shore Contract. reasonable. We note that the
US$190,037,328 Gleeds' estimate is close to the
figure in 2.2.13 above.
Total
US$323,753,239 2.2.16 It is noted that in the
excluding VAT Gleeds Report entitled
Construction Cost Valuation for
2.1.6 The amounts certified for NAIA IPT3 dated 15th November
the costs of construction up to 2010 the project Base Case CCV
23 June 2004 in payment is valued at a gross amount of
certificate no 35 which is the last US$334.61 million (US$300.21
payment certificate that has million + US$34.6 million
been certified by PIATCO, are as deductions).247
follows:
Furthermore, PIATCO did not present
On-Shore US$133.64 detailed supporting information on how
Million the certified construction cost of
US$338.83 million was arrived at.248

Off-Shore US$189.83
Million
VAT US$11.43 Million
ER Changes US $3.93
Million
TOTAL US$338.83
Million
2.2.13 Based on the certified IPC
no. 35 for both Takenaka and
Asahikosan, the cost of the
completed and certified works
(as of IPC No. 35) are as follows:
On-Shore US$133.64
Million
Off-Shore US$189.83
Million
VAT US$11.43 Million
ER Changes US $3.93
Million
TOTAL US$338.83
Million
2.2.14 The construction cost
stated above x x x is at 2002
prices (no adjustments for
inflation/escalation) and are
exclusive for all other attendant
costs, such as the engineering
and architectural service fees,
quality assurance service fees,
construction supervision service
fees, construction insurance, site
development costs, financing
costs and other associated costs.
2.2.15 We would conclude that
the certified cost of construction
of US$338 million and the other
attendant costs are fair and
ProvRem Rule 67 Fulltext
PIATCO's statement that the total sum of
$360,969,791.00 is evidenced by the As-
Built Drawings is misleading. Takenaka and
Asahikosan's computation of construction
cost includes items which do not pertain to
the construction of the NAIA-IPT III.
PIATCO, Takenaka, and Asahikosan
erroneously included in the construction
cost the costs of the action, interest rates
on the judgment award of $14,827,207.00
and $52,008,296.54, attorney's fees, and
litigation expenses.
These items were not directly incurred in
the construction of the NAIA-IPT III. In
Claim No. HT-04-248, only $6,602,971.00
and $8,224,236.00 or the sum of
$14,827,207.00 can possibly relate to the
construction cost of the NAIA-IPT III. On
the other hand, in Claim No. HT-05-269,
only the amounts of $21, 688,012.18 and
$30,319,284.36 or the total sum of
$52,008,296.54 can be possibly imputed to
the construction cost of the terminal.
In any case, we cannot consider the
London awards as evidence of the
construction cost of the NAIA-IPT III. Todo
so in this case is to recognize Claim No.
HT-04-248 and Claim No. HT-05-269 when
their recognition and enforcement have yet
to be decided by this Court in G.R. No.
202166. It is a basic rule that Philippine
courts cannot take judicial notice of a
foreign judgment or order.249
We can only recognize and/or enforce a
foreign judgment or order after a
conclusive and a final finding by Philippine
courts that: (1) the foreign court or tribunal
has jurisdiction over the case, (2) the
parties were properly notified, and (3) there
was no collusion, fraud, or clear mistake of
law or fact.250
PIATCO, Takenaka, and Asahikosan alleged
that PIATCO paid Takenaka and Asahikosan
the sum of $275,119,807.88 pursuant to the
Page 56 of 119
 Onshore Construction and Offshore
Procurement Contracts. According to the
RTC (whose ruling the CA did not reverse),
these parties failed to prove the fact of
payment of $275,119,807.88.
We add that the alleged payment of
$275,119,807.88 does not support their
allegations that this amount pertains to the
construction cost of the NAIA-IPT III.
Takenaka and Asahikosan's admission that
the sum of $275,119,807.88 were paid by
PIATCO does not bind the Government
who is not a party to the Onshore
Construction and Offshore Procurement
Contracts. If at all, the Court can only
recognize the sum of $66,834,503.54 from
PIATCO, Takenaka, and Asahikosan's
computation of construction cost, which is
much lower than the Government's
computed construction cost of
$300,206,693.00.
Lastly, we note that Takenaka and
Asahikosan's claimed construction cost is
different from the amount reflected in the
Tengson Report. In this Report, Gary Taylor
stated the "true value of the NAIA-IPT III
facility is nearer to US$408 million, given
the fact that Gleeds failed to recognize or
include any values for design & other
consultants (10%) or property inflation
based on GRP schedules (15%)."251
3.b. Structural defects on the NAIA-IPT III
The Government contends that that the NAIA-IPT III
suffers from structural defects, as follows:
1. Failed structural elements of the NAIA-
IPT III, as identified in the Arup Seismic
Evaluation Report and Gravity Loading and
Element Capacity Assessment;
2. The inferior quality of material used and
works, including, for example, floor tiling,
plasterboard wall finishes and ceilings, and
the internal and external metal paneling;
3. The cost of seismic and gravity load
structural retrofits for the failed elements in
the terminal buildings and multi-storey car
park structures, as described in Arup's
Drawings listed in Appendix "B" Drawing
List 2 and other rectification works required
to bring the Terminal to compliance with
applicable building and airport codes as
indicated in the Appendices of Arup's Site
Observation Report; and
4. The cost of seismic and gravity load
structural retrofits for the failed elements in
the elevated roadway structures, as
described in Arup's Drawings listed in
Appendix "B" Drawing List 3, Arup Review
on "TCGI Report of Civil Design Review and
ProvRem Rule 67 Fulltext
Evaluation" - Elevated Roadway, dated
March 2009; and other rectification works
required to bring the elevated roadways to
compliance with applicable building and
airport codes, as indicated in the
Appendices of Arup's Site Observation
Report.252
Scott Wilson argued that no structural elements of
the NAIA-IPT III actually failed.253 He emphasized that
there were varying opinions regarding the integrity of
the NAIA-IPT III:
3.3.7 The adequacy of the structural frame, individual
load bearing elements and foundations under
"normal" gravity loads should be able to be readily
evaluated. However, there are clearly differences of
opinion between all 3 parties who have carried out
design and assessments in this regard in terms of the
extent of 'apparent failed elements' under the design
appraisal which ranges from:
● Meinhardt - zero failures
● Arup reports under gravity loading - 4%
of superstructure elements and less than
1% of all substructure elements
● Arup reports under seismic loading - less
than 1% of all primary RC and composite
columns, around 3% of all primary RC
beams, around 6% of all shear walls,
around 8% of piles (mostly at shearwalls)
and around 1% of mat footing locations.
Differential settlements are considered
insignificant to cause any additional
distress in the buildings. Pounding
between floors of adjacent sectors is not an
issue.
● TCGI - extent not readily identifiable
from documents reviewed although within
Section 2.0 of the TCGI July 2008 report it
states that the evaluation did not yield
results pointing to foundation instability as
a cause for concern.
3.3.8 On the basis of discussion in 3.3.6 above it
would be reasonable to follow the assessment of the
original designer (Meinhardt) who also provided a
Letter of Guarantee confirming the adequacy of their
design, (ref para 3.3.30).
He also disputed the Government's allegations that
some portions of the NAIA-IPT III would not be able
to sustain strong earthquakes and that some areas of
the NAIA-IPT III were built using materials with
inferior quality:
c. Seismic Activity (Terminal and Multi-
Storey Carpark)
3.3.12 It is understood from press reports
that, since substantial completion of the
airport in 2002, Manila has been subjected
to a number of earthquakes. It has been
Page 57 of 119
 reported that on25 March 2010 a strong
earthquake measuring 6.2 on the Richter
scale hit Metro Manila according to the
government seismology institute. It was
further reported that in July 2010 "intense
seismic activity persists in the Philippines
and Manila continues to be struck by
moderate to strong earthquakes of 6.5 to
7.6 magnitude." We can find no record
relating to any damage being reported in
terms of the structure, finishes or services
associated with NAIA Terminal 3 as a result
of these occurrences.
xxxx
3.3.14 Inferior quality of materials used, for
example internal finishes.
3.3.15 Gleeds do (sic) not define exactly
what areas they mean by this. There is a
number of finished items where deductions
in excess of US$800,000 have been made
but the rational for the quantification of
the deduction is not explained. If the works
were inferior to that specified then this
would be reflected in the payments made
to Takenaka under the EPC contract.
Scott Wilson likewise supported Takenaka and
Asahikosan position that the Government's experts
examined the structural integrity of the NAIA-IPT III
using the recent building codes, which were not yet
in place at the time the NAIA-IPT III was designed
and built.
3.3.18 Seismic and gravity load retrofit and
other rectification works required to bring
the building to compliance with applicable
building and airport codes.
3.3.22 TCGI also provided an option titled
"A Government Prerogative" which states:
Research in earthquake engineering has
rapidly progressed to the extent that
seismic design provisions for the design of
new buildings and procedures for the
evaluation of existing ones have drastically
evolved. The current edition of the National
Structural Code of the Philippines (NSCP) is
dated 2001, whereas Meinhardt used the
1992 edition which was applicable at the
time the Terminal was designed.
There are new published guidelines for the
structural safety assessment of existing
buildings from such organizations as the
Federal Emergency Management Agency
(FEMA) which have evolved into published
documents for the structural rehabilitation
of existing buildings. TCGI have therefore
suggested that MIAA and the Philippine
Government may wish to use the more
recent published documents to
enhance/upgrade the facility.
ProvRem Rule 67 Fulltext
3.3.23 It would appear from the Arup
documents reviewed that they have taken
this approach in their assessment of design
i.e., consideration of updated documents
(NSCP 2001 and UBC 1997) whilst
Meinhardt used the relevant codes at the
time of design which was NSCP 1992.
Consequently any results from assessments
carried out to later published codes has no
direct bearing on the design of the facility
which was carried out prior to the issue of
these later standards. As such any
assessment and proposed
strengthening/retrofit works in this regard
is considered to be an enhancement of the
design and has no relevance on the value
of the NAIA Terminal 3 facility as
constructed under the original contract.
On the other hand, the relevant portions of the
Tengson Report dated December 2010254 states:
In addition, we should note herein that
Takenaka's structural designer, Messrs.
Meinhardt, concluded that its check on the
structural ductility requirements (as
questioned by TCGI & Ove Arup) on
elements which do not resist lateral forces,
is in full compliance of the Philippine Code
NSCP 1992 and its originating design code
ACI-318 (1989), and this is supported by
several members of the American Concrete
Institute (ACI). Both Takenaka and other
parties (including Meinhardt and members
of the ACI), have concluded that TCGI &
Ove Arup reports use several conflicting
and misunderstood mathematical models.
These include but are not limited to the
following:
(i) TCGI used larger loadings than
those specified in the "Design &
Load Schedule Plan."
(ii) Their modeling for "sector 3"
uses incorrect storey elevations
and the slab thickness did not
match those on the "as built"
plans.
(iii) Beam section sizes do not
match those shown on the "as
built" plans.
(iv) TCGI used "Dynamic
Analysis" in their modeling,
whereas there is no requirement
for such an analysis in the
Philippine Structural Code -
NSCP 1992.
(v) TCGI & Ove Arup used the
updated NSCP 2001 (and
UBC1997) Philipine Codes, yet
Takenaka's design was based
upon the NSCP 1992 code
because the 2001 updated was
Page 58 of 119
 not available when the NAIA 3
designs were completed in 2000.
(vi) TCGI & Ove Arup reports
were based upon a system which
incorporates frame beams and
columns as primary structural
element, whereas the Takenaka
design used a building frame
system (Sheer Wall System). Two
differing design methods will
lead to different results.255
PIATCO also argued that it is not the sole entity
responsible for the completion of and/or compliance
with the outstanding items in the JAC project status
summary report dated February 28, 2003. The
summary report shows that some outstanding items
should be performed by the Government.256
While Scott Wilson stated that only retrofit works
actually undertaken should be taken into
consideration in the valuation of the NAIA-IPT
III,257 Takenaka and Asahikosan insisted that
subsequent rectification works in the NAIA-IPT III
were only intended to ensure that the terminal would
be compliant with the current building laws and
standards.258 They reiterated that the design of the
NAIA-IPT III was compliant with the NSCP 1992, the
effective building code when the terminal was
designed and built.259
3.b.1. The Court cannot consider
the additional evidence submitted
by Takenaka and Asahikosan
before the Court of Appeals
At the outset, we rule that we cannot consider
Takenaka and Asahikosan's attachments in their (1)
Motion for Submission of Additional Documents
dated July 30, 2013;260 (2) Supplemental Motion for
Submission of Additional Documents dated October
3, 2012;261 and (3) Second Supplemental Motion for
Submission of Additional Documents dated April 11,
2013 in CA G.R. No. CV-98029.262 These attachments
sought to refute the Government's position that the
NAIA-IPT III suffered from massive structural defects.
Takenaka and Asahikosan posit that they could have
submitted reports before the trial court to show that
the design of the NAIA-IPT III was structurally sound
if the RTC had only furnished the parties copies of the
BOC Final Report and afforded them the opportunity
to file a Comment on
the Final Report.
Under Section 3, Rule 6 of the Internal Rules of the
CA, the CA may receive evidence in the following
cases:
(a) In actions falling within its original
jurisdiction, such as (1) certiorari,
prohibition and mandamus, (2) annulment
of judgment or final order, (3) quo
warranto, (4) habeas corpus, (5) amparo, (6)
ProvRem Rule 67 Fulltext
habeas data, (7) anti-money laundering,
and (8) application for judicial
authorization under the Human Security
Act of 2007;
(b) In appeals in civil cases where the Court
grants a new trial on the ground of newly
discovered evidence, pursuant to Sec. 12,
Rule 53 of the Rules of Court;
(c) In appeals in criminal cases where the
Court grants a new trial on the ground of
newly discovered evidence, pursuant to
Sec. 12, Rule 124 of the rules of Court; and
(d) In appeals involving claims for damages
arising from provisional remedies.
(Emphasis supplied)
This provision qualifies the CA's power to receive
evidence in the exercise of its original and appellate
jurisdiction under Section 9 of BP 129, as amended:
Sec. 9. Jurisdiction. - The Court of Appeals shall
exercise:
xxxx
The Court of Appeals shall have the power to try
cases and conduct hearings, receive evidence, and
perform any and all acts necessary to resolve factual
issues raised in cases falling within its original and
appellate jurisdiction, including the power to grant
and conduct new trials or further proceedings. Trials
or hearings in the Court of Appeals must be
continuous and must be completed within three (3)
months, unless extended by the Chief Justice.
Since Takenaka and Asahikosan filed an ordinary
appeal pursuant to Rule 41 in relation to Rule 44 of
the Rules of Court, the CA could only have admitted
newly discovered evidence. Contrary to Takenaka and
Asahikosan's claim, the attachments to the motions
are not newly discovered evidence. Newly discovered
evidence is evidence that could not, with reasonable
diligence, have been discovered and produced at the
trial, and which, if presented, would probably alter
the result.263
We find it hard to believe that Takenaka and
Asahikosan could only have possibly secured the
attachments after the trial court had rendered its
decision. With the exercise of reasonable diligence,
Takenaka and Asahikosan could have produced these
documents before the BOC since they were fully
aware that the Government presented evidence on
the alleged structural defects of the NAIA-IPT III.
In fact, in their Manifestation/Submission dated
November 3, 2009, Takenaka and Asahikosan
attached the "Report and Response from Takenaka &
Asahikosan, Contactors for the NAIA 3 Facility and
Intervenors in the Expropriation case between the
GRP and PIATCO - October 2009" to refute the
allegations of structural defects. Moreover, Takenaka
and Asahikosan manifested that they were reserving
Page 59 of 119
 their right to submit additional reports, comments,
and memoranda with respect to this issue. The
relevant portions of the Manifestation/Submission
dated November 3, 2009 provides:
1. The record[s] of this case will show that
to date, plaintiffs have submitted various
reports prepared by TCGI Engineers, Ove
Arup & Partners Massachusetts, Inc. and
Gleeds (Bristol) Partnership to this
Honorable Court. The TCGI and Ove Arup
Reports point out alleged defects on the
IPT 3, while Gleeds made an attempt to
establish the value of the IPT 3, taking into
account the findings of the TCGI and Ove
Arup. Intervenors have not given their
comments on these reports since they have
not been required to do so by this Court.
2. With the RTC's permission, intervenors
respectfully submit the attached "Report
and Response from Takenaka &
Asahikosan, Contactors for the NAIA 3
Facility and Intervenors in the Expropriation
case between the GRP and PIATCO -
October 2009" prepared by Mr. Gary
Taylor, in response to the above mentioned
reports. Intervenors respectfully manifest
that they are reserving their right to submit
additional reports, comments and
memoranda in support of this submission
and to aid this Honorable Court in
determining the true value of the IPT 3.264
(Emphasis supplied)
3.b.2. Equiponderance of evidence on the alleged
structural defects of the NAIA-IPT III favors PIATCO,
Takenaka and Asahikosan. Nonetheless, even without
considering and/or giving probative value to the
additional evidence presented by Takenaka and
Asahikosan before the CA, this Court finds that the
Government failed to establish by preponderance of
evidence that the NAIA-IPT III suffered from structural
defects.
Under Section 3, Rule 131 of the Rules of Court, it is
presumed that a person is innocent of wrong;265 that
a person takes ordinary care of his concerns;266 that
private transactions have been fair and regular;267 and
that the ordinary course of business has been
followed.268
Based on these presumptions, we presume that
Takenaka and Asahikosan built the NAIA-IPT III in
accordance with the specifications required under the
Onshore Construction Contract and Offshore
Procurement Contract. We also presume that the
NAIA-IPT III is structurally sound and compliant with
the applicable building codes and other laws at the
time it was designed and built. However, these
presumptions are merely disputable presumptions
and may be overcome by contradicting evidence. The
burden of proof lies with the Government to prove by
preponderance of evidence that the NAIAIPT III
suffered from structural defects. "Preponderance of
evidence" is the weight, credit, and value of the
aggregate evidence on either side and is usually
ProvRem Rule 67 Fulltext
considered to be synonymous with the term "greater
weight of evidence" or "greater weight of credible
evidence."269
In determining where the preponderance of evidence
or superior weight of evidence on the issues involved
lies, the court may consider all the facts and
circumstances of the case, the witness' manner of
testifying, their intelligence, their means and
opportunity of knowing the facts to which they are
testifying, the nature of the facts to which they testify,
the probability of their testimony, their interest or
want of interest, and also their personal credibility in
so far as the same may legitimately appear during
trial. The court may also consider the number of
witnesses, although preponderance does not
necessarily lie with the greater number.270
The Government's burden of proof to show that the
NAIA-IPT III is indeed defective does not shift to its
adverse parties. The burden of proof remains
throughout the trial with the party upon whom it is
imposed.
It is the burden of evidence that shifts from party to
party during trial.271 This means that the burden of
going forward with the evidence is met by the
countervailing evidence of PIATCO, Takenaka and
Asahikosan which, in turn, balances the evidence
introduced by the Government. Thereafter, the
burden of evidence shifts back to the Government.
In the present case, the experts and consultants of
the Government, PIATCO, Takenaka and Asahikosa
arrived at conflicting findings regarding the structural
integrity of the NAIA-IPT III. The Government's
experts detailed with particularity the alleged defects
of the NAIA-IPT III, which allegations the experts of
PIATCO, Takenaka and Asahikosan refuted with
particularity.
Under the equiponderance of evidence rule, when
the scale of justice shall stand on equipoise and
nothing in the evidence inclines a conclusion to one
side or the other, the court will find for the
defendant.272
If the facts and circumstances are capable of two or
more explanations, one of which is consistent with
the allegations of the plaintiff and the other
consistent with the defense of the defendant, the
evidence does not fulfill the requirement of
preponderance of evidence. When the evidence of
the parties is in equipoise, or when there is a doubt
as to where the preponderance of evidence lies, the
party with the burden of proof fails.273
The reason for this rule is that the plaintiff must rely
on the strength of his evidence and not on the
weakness of the defendant's claim. Thus, even if the
evidence of the plaintiff may be stronger than that of
the defendant, there is no preponderance of
evidence on his side when this evidence is insufficient
in itself to establish his cause of action.274
Page 60 of 119
 In the present case, PIATCO, Takenaka and
Asahikosan, met the Government's allegations
regarding the structural integrity of the NAIA-IPT III.
A reading of the reports of the parties' respective
experts shows that each party presented an equally
persuasive case regarding the structural soundness or
defect of the NAIA-IPTIII. The Government's case on
the alleged structural defect of the NAIA-IPT III has
been met by equally persuasive refutations by the
experts of PIATCO, Takenaka and Asahikosan.
As a matter of law and evidence, the Government's
case regarding this matter must fail. Since PIATCO,
Takenaka and Asahikosan presented equally relevant
and sufficient countervailing evidence on the
structural soundness of the NAIA-IPT III, the scales of
justice tilt in their favor. Neither party successfully
established a case by preponderance of evidence in
its favor; neither side was able to establish its cause
of action and prevail with the evidence it had. As a
consequence, we can only leave them as they are.275
On August 14, 2012, the DOTC invited construction
firms to participate in the ₱212.3 million NAIA-IPT III
structural retrofit project. The structural retrofit of the
NAIA-IPT III that was offered for bidding had eleven
components: shear wall thickening; slab thickening;
application of FRPs to columns, beams and slabs;
thickening of flat slab drop; enlarging of column size;
enlarging pile cap and footings; steel jacketing;
providing shear blocks to pier headstock (elevated
access roadway); enlarging of pier footings (elevated
access roadway); application of FRP to piers (elevated
access roadway); and increasing seismic gap between
the elevated access roadway and adjacent structures
(sector 1, 2, car park).279 The Official Gazette further
stated:
Shear wall thickening is meant to fortify the
reinforced concrete wall to increase its capacity
against horizontal structure movement. At the same
time, thickened slabs will increase their bending
capacity and resistance against heavy superimposed
loadings.

We thus add to the construction cost the sum of Applying fiber-reinforced polymer (FRP) to columns,
$20,713,901, itemized below:276 beams, and slabs will increase their strength and
resistance against excess loads and combined forces
of elements. A thicker flat slab drop is meant to
Item In Dollars strengthen the slab-column connection.

Surface demolition 1,971,500

Bigger -sized columns will also increase their capacity
Structural retrofit 6,860,660 against combined stresses, while enlarged pile cap
and footings will increase foundation capacity under
Elevated road 2,443,276 compression. They also prevent movement of the
foundation during earthquakes.
Miscellaneous
Steel jacketing is meant to resist the additional loads.
Alarms 154,460
Shear blocks to pier headstock will provide a bridge
Defective Ceiling 479,626 interlock is meant to distribute excess load along the
carriage way.
CUTE not working 2,774,563
Enlarged pier footings will prevent foundation
Inferior FIDS 22,020
overturning during earthquake events.
BHS Inferior Screening Software 957,881
Application of FRP to piers will also increase the
Fire Protection Inferior coverage 924,851 column capacity and ductility against combined
stresses due to earthquake forces.
Civil and HV

Apron Civil 829,619 Increased seismic gap between the elevated access
roadway and adjacent structures will reduce the risk
Taxiway Civil 439,280 of pounding between the bridge and building
structure.280
Storm Water 2,604,081

HV 252,084 However, no documents regarding the retrofit project

Total 20,713,901
Admittedly, the Government did not open to the
public certain areas of the NAIA-IPT III because of
uncertainties on their structural integrity.277 The Scott
Wilson Report also recognized that some retrofit
works should also be undertaken in some of the
areas of the NAIA-IPT III. It stated that only retrofit
works actually undertaken in the building should be
taken into consideration in appraising the NAIA-IPT
III.278
exist as part of the record of the case. The retrofit bid
took place in 2012, or after the promulgation of the
trial court's ruling. Hence, we have to disregard
Government claims pertaining to the retrofit project.
3.c. The unnecessary areas
Gleeds excluded "unnecessary areas" from the
computation of the base value. These unnecessary
areas are the multi-level retail mall that is accessible
only through the multi-storey car park (20,465 m2),
and the excess retail concession space(1,727 m2).281

ProvRem Rule 67 Fulltext Page 61 of 119

 We find the exclusion of the unnecessary areas from
the base value unjustified. Since the Government
would expropriate the entire NAIA-IPT III, the
Government should pay for the replacement cost of
the retail mall and the excess retail concession space.
The Government cannot avoid payment simply
because it deems the retail mall and the retail
concession space as unnecessary in its operation of
the NAIA-IPT III. To reiterate, the measure of just
compensation is not the taker's gain, but the owner's
loss.282
Consequently, we include in the computation of
construction costs the excess concession space in the
amount of $1,081,272.00, and the four-level retail
complex in the sum of $12,809,485.00.283
4. Attendant costs of the NAIA-IPT III
Scott Wilson criticized the Gleeds Report for excluding the attendant
costs in the construction cost valuation. He stated:
3.1.13 Gleeds do (sic) not show any costs for planning and design
consultancy fees preconstruction. In our experience the following
percentage ranges of the construction cost would typically be the
international norms for these fees.
● Attendant Costs Percentage Range
● Architecture 3.0 to 4.0 %
● Civil and Structural 1.0 to 4.0 %
● Electrical and Mechanical 2.5 to 3.5 %
● Quantity Surveyor 1.0 %
● Project Management 1.0 %
Total 8.5 to 11.5 %
3.1.14 On the basis of a construction cost valuation of the order of
US$322 million we would expect planning and design consultancy fees
preconstruction to be a minimum of US$27 million, based on typical
international norms.
3.1.15 Some preliminary design was carried out by Takenaka prior to the
EPC tender design so slight lower planning and design consultancy fees
could be expected. It is understood that PIATCO have paid US$19.3
million to the designers PCI, SOM, PACICON and JGC (architect of record)
and this therefore appears a fair and reasonable fee.
3.1.16. In addition there is also the cost of site supervision. In this case
there was the independent QA role undertaken by Japan Airport
Consultants and construction supervision by PCI. It is noted that the Bid
Document suggested that up to 3% of the construction cost should be
allowed for the independent QA role. In our experience we would expect
QA and construction supervision to cost between 3% and 5% of the
construction cost.
3.1.17 On the basis of a construction cost valuation of the order of
US$322 million we would expect the cost of construction supervision to
be a minimum of US$9.5 million. It is understood that PIATCO have paid
ProvRem Rule 67 Fulltext
US$7.9 million to the QA Inspectors (JAC) and US$4.2 million to PCI, SOM,
PACICON and JGC and this therefore appears not reasonable.
3.1.18 In summary, PIATCO have paid the following consultancy fees:
● Planning and design consultancy fees US$19.3 million
preconstruction
● QA Inspectors US$7.9 Million
● Construction supervision US$4.2 Million
Total US$31.4 million
3.1.19 In our opinion these fees are in reasonable range.
Site Preparation Costs
3.1.20 We understand that PIATCO has incurred costs of US$10.3 million
for relocation of PAF existing facilities, removal of subterranean structures
and site preparation which the Gleeds Base Case CCV has not included.
Legal Costs
3.1.21 We assume that in addition to the above fees PIATCO has incurred
legal costs in planning and constructing the development and this is quite
normal on BOT concession contracts where contract agreements and
responsibilities have to be agreed between a number of different parties.
Overall Summary
3.1.21 PIATCO has incurred consultancy fees and site preparation
costs of US$41.7 million (US$31.4 plusUS$10.3 million) not included
by Gleeds in the Base Case CCV.284
In response, Tim Lunt asserted that its CCV of US$300,206,693.00 already
includes the attendant costs of US$36,279,033 under the heading
"General Requirements and Conditions." The sum of US$36,279,033
represents the General Requirements Section of the Takenaka Bill of
Quantities. The "General Requirements and Conditions" is composed of
engineering and architectural services fees, quality assurance services
fees, construction supervision services fees, construction insurance, and
site. Tim Lunt, however, admitted that the "General Requirements and
Conditions" exclude financing costs, and other associated costs. He
likewise stated that PIATCO's attendant costs have no evidentiary support.
On December 14, 2010, PIATCO attached to its Compliance documentary
evidence of its claimed attendant costs of US$70,197,802.00. These
include photocopies of summary of payments for architecture &
engineering, quality assurance, construction supervision, construction
insurance, site development, other costs and financing costs, official
receipts, statements of account, sales invoices, endorsements, insurance
policies and other related documents, acknowledgement receipts,
agreements, invoices, and bonds.
PIATCO claims that the following entities rendered services in the
construction of the NAIA-IPT III:
Services Rendered Entities that Rendered the
Services
Engineering and Architecture Pacific Consultants International
Asia, Inc. Pacicon Philippines, Inc.
Architect J. G. Cheng RMJM
Page 62 of 119

Philippines, Inc.
Quality Assurance Japan Airport Consultants I.A.
Campbell & Associates
Construction Supervision Pacific Consultants International
Asia, Inc.
Construction Insurance Gotuaco del Rosario
Site Development Bases Conversion Development
Corporation Skidmore, Owings &
Merrill Pacific Consultants
International Asia, Inc. Natural
Resource Development Corporation
Serclan Enterprises Geodesy
Services, Inc. Geotechnics
Philippines, Inc. Revalu
Constructions & Supply N.O.
Mercado Construction, Inc. Lopez
Drilling Enterprises Monark
Constructions Illustrious Security
and Investigation Agency, Inc. Core
Watchmen, Security and Detective
Agency Corp.
Other Services Laguna Lake Development
Authority National
Telecommunications Commission
Prudential Guarantee and
Assurance, Inc. Manila Electric
Company, Inc. Maynilad Philippine
Long Distance
Telecommunications, Inc. Myrtle
Intergen Exchange Corp.
Financing Services Dresdner / Kfw / Helaba Banks
Fraport AG/FAG Deutsche Bank
Reyes Tacandong & Co. checked the mathematical accuracy of the
attendant costs. PIATCO asserts that it engaged the services of various
consultants in the construction of the NAIA-IPT III and incurred the
following attendant costs:
Attendant Costs Amount
Engineering and Architecture US$19,372,539
Quality Assurance US$6,923,720
Construction Supervision US$4,302,227
Construction Insurance US$4,329,272
Site Development US$8,358,169
Other Costs US$ 308,985
Financing Costs US$26,602,890
Total US$70,197,802
The BOC, the RTC, and the CA uniformly found that PIATCO failed to
substantiate its attendant costs. The CA observed that PIATCO's
summarized computation of attendant costs was self-serving and
unsupported by relevant evidence.
Unlike the BOC and the RTC which pegged the attendant cost at 10% of
the construction cost as an accepted industry practice, the CA made a
ProvRem Rule 67 Fulltext
finding that the "General Requirements and Conditions" in the Gleeds'
Appraisal Report constitutes the attendant costs. The CA stated that there
is no need to further recognize and award separate attendant costs
because these were already included in the construction cost valuation of
US$300,206,693.00. The CA explained that the attendant cost becomes
part of the total construction cost once the construction is completed.285
4.a. PIATCO's attendant costs
Under the best evidence rule, when the subject of inquiry relates to the
contents of a document, no evidence shall be admissible other than the
original document itself. In proving the terms of a written document, the
original of the document must be produced in court.
The best evidence rule ensures that the exact contents of a document are
brought before the court. In deeds, wills, and contracts, a slight variation
in words may mean a great difference in the rights and obligations of the
parties. A substantial hazard of inaccuracy exists in the human process of
making a copy by handwriting or typewriting. Moreover, with respect to
oral testimony purporting to give the terms of a document from memory,
a special risk of error is present, greater than in the case of attempts at
describing other situations generally.286
The best evidence rule likewise acts as an insurance against fraud. If a
party is in the possession of the best evidence and withholds it, and seeks
to substitute inferior evidence in its place, the presumption naturally
arises that the better evidence is withheld for fraudulent purposes that its
production would expose and defeat. The rule likewise protects against
misleading inferences resulting from the intentional or unintentional
introduction of selected portions of a larger set of writings.287
As exceptions to the best evidence rule, Section 3, Rule 130 of the Rules
of Court provides that non-original documents may be produced in court
in the following cases:
(a) When the original has been lost or destroyed, or cannot be
produced in court, without bad faith on the part of the offeror;
(b) When the original is in the custody or under control of the
party against whom the evidence is offered, and the latter fails
to produce it after reasonable notice;
(c) When the original consists of numerous accounts or other
documents which cannot be examined in court without great
loss of time and the fact sought to be established from them is
only the general result of the whole; and
(d) When the original is a public record in the custody of a
public officer or is recorded in a public office. (Emphasis
supplied)
Secondary evidence of the contents of writings is admitted on the theory
that the original cannot be produced by the party who offers the evidence
within a reasonable time by the exercise of reasonable diligence.288
PIATCO argues that its non-submission of original documents before the
trial court is justified under Section 3 (c), Rule 130 of the Rules of Court. It
points out that a party need not submit the original when it consists of
numerous accounts or other documents which cannot be examined in
court without great loss of time and the fact sought to be established
from them is only the general result of the whole. PIATCO insists that the
lower courts erred in not giving probative value to the report prepared by
Reyes Tacandong & Co., an auditing firm, validating PIATCO's
computation of attendant costs. Significantly, Reyes Tacandong & Co.
failed to state that it examined the original documents in validating
PIATCO's computation of attendant costs.
Page 63 of 119
We agree with PIATCO that it need not submit numerous and voluminous
invoices, official receipts, and other relevant documents before the trial
court to prove the attendant costs that it incurred in the construction of
the NAIA-IPT III. The trial court may admit a summary of voluminous
original documents, in lieu of original documents, if the party has shown
that the underlying writings are numerous and that an in-court
examination of these documents would be inconvenient. In other words,
Section 3 (c), Rule 130 of the Rules of Court does away with the item-by-
item court identification and authentication of voluminous exhibits which
would only be burdensome and tedious for the parties and the court.
However, as a condition precedent to the admission of a summary of
numerous documents, the proponent must lay a proper foundation for
the admission of the original documents on which the summary is based.
The proponent must prove that the source documents being summarized
are also admissible if presented in court.289
In concrete terms, the source documents must be shown to be original,
and not secondary. Furthermore, the source documents must likewise be
accessible to the opposing party so that the correctness of the summary
of the voluminous records may be tested on cross-examination and/or
may be refuted in pleadings. In ordinary trial-type proceedings, a proper
foundation for the introduction of a summary may be established through
the "testimony of the person who is responsible for the summary's
preparation, or the person who supervised the preparation of the
summary."290
The primary reason for these procedural foundations is that the summary
of numerous documents is, in strict terms, hearsay evidence. The trial
court should not haphazardly allow a party to present a summary of
numerous documents and immediately admit and give probative value to
such summary without sufficiently laying these foundations. If the source
documents of the summary are non-original, the trial court would commit
a grave error in admitting and/or giving probative value to the summary
of non-original documents; the evidence admitted would be double
hearsay.291
Furthermore, when a party invokes Section 3 (c), Rule 130 of the Rules of
Court, he does not similarly invoke Section 3 (a), (b), and/or (d), Rule 130
of the Rules of Court. He does not likewise claim that the original
documents have been lost or destroyed. The party merely asserts that the
numerous documents cannot be examined in court without great loss of
time and that the fact sought to be established from these documents is
only the general result of the whole. Whenever a party seeks an
exemption under the best evidence rule pursuant to Section 3 (c), Rule
130 of the Rules of Court, he asks permission from the trial court to
produce a summary of numerous documents, whose originals are
available to the adverse party for inspection. He does not ask permission
from the trial court to present in evidence the numerous non-original
documents. Otherwise, the very purpose of Section 3 (c), Rule 130 of the
Rules of Court would be defeated. In that case, every exhibit of non-
original documents would be identified, authenticated, and cross-
examined, leading to a tedious and protracted litigation.
Thus, if a party desires to present photocopies of the original documents,
he must first establish that the presentation of photocopies is justified
under Section 3 (a), (b), and/or (d), Rule 130 of the Rules of Court. He
must establish the presence of all the elements under these provisions. In
the case of lost or destroyed documents, the offeror of non-original
documents must first prove the following elements before secondary
evidence is admitted before the court: (a) the existence or due execution
of the original; (b) the loss and destruction of the original, or the reason
for its non-production in court; and (c) the absence of bad faith on the
part of the offeror to which the unavailability of the original can be
attributed. To conclude otherwise is to allow the party to circumvent the
best evidence rule and the requirements under Section 3 (a), (b), and (d),
ProvRem Rule 67 Fulltext
Rule 130 of the Rules of Court by merely invoking Section 3 (c), Rule 130
of the Rules of Court.
In the present case, PIATCO attached to its Compliance dated December
14, 2010, the photocopies of numerous documents, and the validation of
PIATCO's computation of attendant costs prepared by Reyes Tacandong
& Co., among others. PIATCO justifies the non-presentment of original
documents pursuant to Section 3 (c), Rule 130 of the Rules of Court.
We affirm the lower courts' uniform findings that PIATCO failed to
establish its attendant costs. PIATCO failed to establish that the
photocopied documents fall under Section 3 (a), (b), and/or (d), Rule 130
of the Rules of Court. These photocopied documents are hearsay
evidence. They are mere scraps of paper and have no weight as basis for
the attendant costs of the NAIA-IPT III. We likewise cannot give weight to
the summary prepared by Reyes Tacandong & Co. for being double
hearsay. Reyes Tacandong & Co., whose letter was addressed to PIATCO
and not to the trial court, did not state in its report that it examined the
original documents allegedly proving attendant costs. Moreover, in a
letter dated December 14, 2010, Reyes Tacandong & Co stated it does
not "express any assurance on the attendant costs:"
We have performed the procedures agreed with Philippine International
Air Terminals, Co., ("the Company") with respect to the Company's
attendant costs incurred in building NAIA Terminal 3 from 1997 to 2004.
Our engagement was undertaken in accordance with the Philippine
Standard on Related Services applicable to agreed-upon procedures
engagements.
xxxx
The sufficiency of the procedures is solely the responsibility of the
specified users of the report. Consequently, we make no representation
regarding the sufficiency of the procedures either for the purpose for
which this report has been requested or for any other purpose.
Because the procedures do not constitute either an audit or a review of
financial statements made in accordance with Philippine Standards on
Auditing, we do not express any assurance on the attendant costs.
(Emphasis supplied)
4.b. The BOC and the RTC's
attendant cost
The CA correctly disregarded the BOC and the RTC's computation of
attendant costs, which both pegged the attendant cost at 10% of the
construction cost. The BOC and the RTC relied on the mean percentage
range of attendant cost which appears in the Scott Wilson Report as
follows:292
Attendant Costs Percentage Range
Architecture 3.0 to 4.0 %
Civil and Structural 1.0 to 4.0 %
Electrical and Mechanical 2.5 to 3.5 %
Quantity Surveyor 1.0 %
Project Management 1.0 %
Total 8.5 to 11.5 %
The BOC and the RTC computed the mean percentage range by adding
8.5% and 11.5% and dividing the result by 2, thus:
Page 64 of 119
 (8.5 + 11.5)/2 = 10%
The mean percentage range is highly speculative and devoid of any
factual basis. As a court of law, we should only measure just
compensation using relevant and actual evidence as basis in fixing the
value of the condemned property. Just compensation must be duly
proven by preponderance of evidence or greater weight of credible
evidence.293 Bare allegations, unsubstantiated by evidence, are not
equivalent to proof.294
In a case for damages, we allow the party to receive temperate damages
in the absence of competent proof on the amount of actual damages.
Temperate or moderate damages, which are more than nominal but less
than compensatory damages, may be recovered when the court finds that
some pecuniary loss has been suffered but its amount cannot, from the
nature of the case, be proved with certainty.295
We cannot adopt the same liberal attitude in an eminent domain case and
merely estimate the attendant cost in the total absence of evidence of
construction costs. The amount of just compensation must be
substantiated by a preponderance of evidence.
Takenaka Bills of Quantities nor do they use them as documents which
they have reviewed in paragraph 1.4.1 of their report. I do not understand
how Scott Wilson can ignore the items which are included in the Bills of
Quantities under the heading General Requirements and make the
suggestion that they are additional costs which should be considered.
xxxx
36. In respect of the Engineering Consultancy Fees set out by Scott
Wilson, it is clear to me on inspection of the General Requirements
section of the On shore and Off shore Bills of Quantities that an element
of design fees included as Costs has also been included in the CCVs and
should not therefore be included as an addition. Scott Wilson has not
provided any specific information on the actual cost or extent of service
provided in respect of engineering consultancy.
xxxx
39. The cost associated with the Independent QA role referred to by Scott
Wilson is included in the General Requirements section of the
CCV.(Emphasis supplied)

An eminent domain case is different from a complaint for damages. A
complaint for damages is based on tort and emanates from the
transgression of a right. A complaint for damages seeks to vindicate a
legal wrong through damages, which may be actual, moral, nominal,
temperate, liquidated, or exemplary. When a right is exercised in a
manner not conformable with Article 19 of the Civil Code and other
provisions on human relations in the Civil Code, and the exercise results in
the damage of another, a legal wrong is committed and the wrongdoer is
held responsible.296
The Government's CCV already includes attendant costs which are
incorporated in the "General Requirements and Conditions." On the basis
of the Bills of Quantities, Gleeds took into account indirect costs in
constructing the NAIA-IPT III, summarized below:
Attendant Costs under General Requirements and Conditions
Design $6,439,680.00297

Staff and labour $10,491,139.54298

In contrast, an eminent domain case arises from the State's exercise of its
power to expropriate private property for public use. The Constitution Insurance $925,210.78299
mandates that the property owner shall only receive just compensation
which, of course, should be based on preponderance of evidence. Professional Indemnity Insurance $2,200,000.00300
Moreover, the determination of eminent domain being a judicial function,
there is no constitutional or statutory provision giving the courts Consequential Loss Insurance $800,000.00301
unfettered discretion to determine just compensation based on estimates
Setting out $364,647.00302
and conjectures.
Health and Safety $403,224.00303
4.c. The Government's attendant cost
Environmental management $176,490.00304
We affirm the CA's factual finding that the Government's computation of Design $2,631,100.00305
construction cost valuation already includes the attendant costs. In the
Gleeds Report dated December 22, 2010, Tim Lunt sufficiently explained: Staff and labour $2,590,774.19306

Insurance $71,109.77307
9. I consider that Engineering and Architecture, Quality Assurance,
Construction Supervision, Construction Insurance and Site Development
Total $27,093,375.28
are clearly costs which are included for in the CCV. The CCV includes costs
associated with the General Requirements (see Appendix D - Summary).
The costs of Site Development are also included (see CCV Appendix D - 5. Deductions from the replacement cost of the NAIA-IPT III
Part 2, page 5 of 38).
5.a. Depreciation should be
xxxx deducted from the replacement
cost.
25. Scott Wilson states at paragraph 2.2.14 that the constructions costs
"are exclusive of all other attendant costs, such as the engineering and In eminent domain cases, it is acceptable that a "deduction should be
architectural services fees, quality assurance services fees, construction made to the extent to which the improvement or fixture has depreciated.
supervision services fees, construction insurance, site development costs, The cost of the buildings and fixtures, minus depreciation, is a reasonable
financing costs and other associated costs." This statement is incorrect. It test of the amount by which they enhance the market value of the land
is clear on the inspection of the General Requirements sections of the even where the market value of the land itself is not readily
Takenaka Bills of Quantities that some if not all of these items are quantifiable."308
included in the assessment of the construction costs made by PIATCO
with the exception of 1) financing costs and 2) other associated costs, for
which there is no definition. Scott Wilson makes no reference to the
ProvRem Rule 67 Fulltext Page 65 of 119
In order for this Court to arrive at a valid indication of the market value of
the NAIA-IPT III, we must consider accrued depreciation, which is the loss
in value of the terminal.
Contrary to the CA's position, "depreciation" is used in different contexts
in valuation and financial accounting. As earlier discussed, in appraisal,
depreciation "refers to the reduction or writing down of the cost of a
modern equivalent asset to reflect the obsolescence and relative
disabilities affecting the actual asset"309 or "loss in value from any
cause."310 It is further defined as "the reduction or writing down of the
cost of a modern equivalent asset to reflect the obsolescence and relative
disabilities affecting the actual asset."311
In contrast, depreciation in accounting refers to "a charge made against
an entity's income to reflect the consumption of an asset over a particular
accounting period."312 It is the "process of allocating to expense the cost
of a plant asset over its useful (service) life in a rational and systematic
manner."313 Accumulated depreciation is reported as a deduction from
plant assets and affects the income statement through depreciation
expenses. Thus, the cost allocation is designed to match expenses with
revenues.
In financial accounting, "depreciation is a process of cost allocation, not a
process of asset valuation. No attempt is made to measure the change in
an asset's market value during ownership because" it is assumed that
plant assets are not held for resale.314 Book depreciation refers to "the
amount of capital recapture written off an owner's books"; it is not market
derived.315 Thus, the book value - original cost less accumulated
depreciation - of an asset may be different from the market value.
Consequently, an asset can have zero book value but still have a
significant market value.316
Simply put, book depreciation is measured against the book value or
original cost of the property and is the amount of capital recapture
written off an owner's books.317 Accrued depreciation is measured against
the current market value of the property.318
Under the depreciated replacement cost method, accrued depreciation is
the difference between the "replacement cost of the improvements on
the effective date of the appraisal and the market value of the
improvements on the same date."319
In the Gleeds Report, Tim Lunt stated:
Deterioration
3.2.7 The Arup Site Observation Report identifies a number of items which
have deteriorated since suspension of the construction of Terminal 3 in
December 2002.
3.2.8 A provisional value has been assessed against the items identified in
the Arup report at $1,738,318.
The deterioration items have been costed with a base date of 2Q09.
Calculation of this amount is contained in Appendix 'E.' Further
examination and costing of each of the identified items are required and,
therefore, the costs of these items will require adjustment based on the
actual date when the rectification works are carried out.
Depreciation
3.2.0 An Assessment has been made of the depreciated value of the
assets from December 2002 when construction was suspended to
December 2004 when Terminal 3 was expropriated by the Republic.
ProvRem Rule 67 Fulltext
3.2.10 A depreciation value has been assessed at $USD35,076,294 in 3Q01
Manila prices. Calculation of this amount showing the various asset lives
assumed is included in Appendix "J."
3.2.11 Based on the deductions for deterioration and depreciation
between December 2002 and December 2004, the Base Value CCV at the
time of expropriation is $USD263,392,081.320
In the Scott Wilson report, he stated:
3.7.1 We consider the question of depreciation in this instance to be a
financial and legal issue which has to be dealt with in accordance with
Philippine law.
3.7.2 We therefore do not feel qualified to comment on the legal issue
except that we do not understand how deterioration in section 3.6 and
depreciation can both be applied as surely this means that Gleeds (sic)
have double counted the effect of any deterioration. (emphasis
supplied)321
In response, Tim Lunt argued:
14. With respect to PIATCO's hypothetical inclusion of inflation, I do not
consider that inflation should be applied to the base value as the
replacement cost method establishes the cost of construction when
completed in December 2002.
15. The base values included in the CCVs are the same for the December
2002 and December 2004. The December 2004 base value is not adjusted
to account for inflation because the items which make up the construction
of NAIA3, i.e., the labour, plant, materials, systems and equipment
installed should not be paid for at a higher rate (that takes into account
inflation) than the rate which would have been paid when they were
purchased at the earlier date. Put simply, it makes no sense to apply
December 2004 prices to items bought and used in the construction of
NAIA3 sometime between June 2000 and December 2002.
16. PIATCO do (sic) not consider depreciation. Having explained above
why inflation should not be included, it is the application of a similar logic
which demonstrates why depreciation should be included. In the case of
NAIA3 the materials, systems and equipment installed are at least two
years older as at December 2004 than at the time they were incorporated
into the construction of NAIA3. Their value should therefore be less. The
method used for assessing this reduced value is that of depreciation.322
66. Scott Wilson provide a "Summary of Conclusions on deductions at
section 3.11 and my responses to each of the items contained in their
"comment" column are as follows:
xxxx
● Deterioration - "Major deduction for baggage system not
justified" - The deterioration in the baggage systems is clearly
set out in the Arup (and Gensler) Site Observation Report dated
August 2007, at section 9.2. The cost deduction is set out in
Appendix to the previous CCV report which Scott Wilson do
(sic) not appear to have reviewed.
● Depreciation - Scott Wilson states" This issue appears to be a
legal issue and should be commented on by legal expert" and
offers no technical or cost related comments relevant to the
CCV.
On the other hand, Gary Taylor commented:
Page 66 of 119
Gleeds have (sic) assessed a depreciation value of US$35,076,294 (11.68%)
to conclude its 4Q04 value. This concept of depreciation is contrary to the
GRP's own statistics which shows a Consumer Price Index for Manila
("CPI") increase from107.8 (Aug 01) to 125.1 (Nov. 04), a 16% increase
over the period. The CPI is a conglomerate of all consumer prices in the
Manila region and includes property values and is published by the GRP
on a monthly basis. In assessing such a depreciation value, Gleeds have
(sic) taken an arbitrary life cycle of the building and assumed a write off of
asset over that period, then assessed the two (2) year depreciation over
the period 3Q01 to 4Q04. Whilst we acknowledge that an airport terminal
building is something of a specialized asset and appreciation of value is
not always in line with the area's general value assessments, it is still a
major structure and appreciation before depreciation (which should be
limited to equipment and fittings within the building) should not be
discounted. The concept of long term value of an asset on a similar
concept is proven out by NAIA Terminal 1, which since its construction
more than 30 years ago has maintained a value to this date.323
We uphold the Government's computed extent of deterioration and
depreciation. In the Reply to Tengson International Ltd. Report and
Response from Takenaka and Asahikosan dated December 7, 2010, Tim
Lunt explained that "[t]he asset lives are taken specifically from experience
in preparing Asset Revaluations for Airport properties which are used as
an input for annual published accounts, which are in turn audited by
appointed Accountants."324 Takenaka and Asahikosan should have
provided for contrary assumptions with respect to the useful lives of the
subject assets if they did not agree with the Government's assumptions.
Instead, Gary Taylor merely referred to the valuation of the NAIA Terminal
I without any factual basis to support his claim. Moreover, Scott Wilson
did not question the assumed useful life of the NAIA-IPT III, but agreed
that the question of whether depreciation should be deducted is a legal
issue.
Since PIATCO, Takenaka, and Asahikosan failed to present contrary
assumptions or estimates with respect to the NAIA-IPT III's useful life, we
adopt Tim Lunt's computations with respect to deterioration and
depreciation.
5.b. Rectification for contract
compliance should not be
deducted from the replacement
cost.
However, we hold that the cost for "rectification for contract compliance"
should not be deducted from the base value, as the contract, being void,
cannot be ratified.325
In the present case, the Court already nullified the PIATCO contracts for
being contrary to public policy in Agan. A substantial amendment to a
contract awarded through public bidding, when such subsequent
amendment was made without a new public bidding, is null and void. The
PIATCO contracts contain material and substantial amendments that
substantially departed from the bidded contract. If at all, the declaration
of nullity of a contract only operates to restore things to their state and
condition before the contract's execution.326
Moreover, Takenaka and Asahikosan, as subcontractors in the NAIA- IPT
III project, were not bound by the nullified PIATCO contracts. Takenaka
and Asahikosan were only bound to perform their contractual obligations
under the Onshore Construction Contract and Offshore Procurement
Contract, respectively. They were not bound by the nullified PIATCO
contracts.
If there had indeed been variations from the Onshore Construction
Contract and Offshore Procurement Contract, the cause of action for
breach of contract and damages lies with PIATCO. For purposes of
determining just compensation, the Government cannot rely on the
ProvRem Rule 67 Fulltext
specifications in the Bid Documents precisely because the concession
agreement between PIATCO and the Government had already been
nullified. The Government cannot complain of contract noncompliance in
an eminent domain case, whose cause of action is not based on a breach
of contract, but on the peremptory power of the State to take private
property for public use.
Consequently, deductions from the base value of the cost of
noncompliance with bid documents as well as inferior quality items have
no legal basis. Gleeds' reliance on the NAIA-IPT III bid documents is
misplaced.
As Scott Wilson correctly pointed out, the decisive factor of the
deductibility of items under "noncompliance with bid documents" is
whether they are functional. The Scott Wilson report shows that, except
for the nonprovision of moving walkway, the alleged noncompliant items
are functional.327 Also, the nonprovision of a moving walkway should not
be deducted from the base value. The only consequence of the failure to
provide a moving walkway is the need to construct one, which would only
increase the construction cost.328 The increase in the construction cost,
however, should not be included as part of just compensation as this
Court is
only tasked to determine the construction cost of the NAIA-IPT III as of
December 21, 2004.
For these same reasons, we cannot allow the deduction in the amount of
$75,570,510.00 "additional areas to be built." These are "areas where the
minimum requirements stated in the Bid Documents have not been met
and are necessary for the operation" of the NAIA-IPT III. These areas
include:
● Departure hall 22,462 m2
● Meeter/greeter hall 14,696 m2
● Ramp operations 13,640 m2
● Offices 4,370 m2
● Hold rooms 3,729 m2
● Public toilets 2,351 m2
● Hardstand hold rooms 1,442 m2
● Delayed flight restaurant 620 m2329
6. Adjustments to the Replacement Cost
6.a. The replacement cost
should be adjusted to
December 2004 values.
Gleeds used the Principle Quantities approach in determining the gross
replacement cost of the NAIA-IPT III.330Gleeds calculated the cost of
construction based on the midpoint between June 2000 and December
2002 to arrive at the December 2002 CCV. According to Gleeds, the cost
of construction based on its midpoint or the third quarter of 2001 is a
recognized standard practice in the construction industry.331
Gleeds did not adjust the base valuation of $300,206,693.00 as of
December 2002 to reflect the current gross replacement cost as of
December 2004. It merely assumed that the gross replacement cost as of
Page 67 of 119
December 2002 is the same as the gross replacement cost as of
December 2004. It stated that it did not consider inflation in determining
the base valuation of the NAIA-IPT III as of December 2004:
14. With respect to PIATCO's hypothetical inclusion of inflation, I do not
consider that inflation should be applied to the base value as the
replacement cost method establishes the cost of construction when
completed in December 2002.
15. The base values included in the CCVs are the same for December 2002
and December 2004. The December 2004 is not adjusted to account for
inflation because the items which make up the construction of NAIA3, i.e.,
the labour, plant, materials, systems and equipment installed should not
be paid for at a higher rate (that takes into account inflation) than the rate
which would have been paid when they were purchased at the earlier
date. Put simply, it makes no sense to apply December 2004 prices to
items bought and used in the construction of NAIA3 sometime between
June 2000 and December 2002.332 (Emphasis supplied)
Section 10 of RA 8974 IRR provides that the replacement cost shall be
based on the current market prices of construction and attendant costs.
Under the depreciated replacement cost method, the replacement cost
shall be based on the current gross replacement cost of the asset. In its
pleadings, the Government itself explained that the cost of replacing an
asset under both depreciated replacement cost and new replacement cost
methods should be measured at its current prices.
In our jurisdiction, the word "current" should be equated with the date of
the taking of the property or the filing of the complaint, whichever came
first. In the present case, the word "current" should necessarily refer to
December 21, 2004, the filing of the complaint for expropriation.
In National Power Corporation v. Co,333 the Court suppletorily applied
Section 4, Rule 67 of the Rules of Court in determining the value of the
property sought to be expropriated for purposes of implementing
national infrastructure projects. Under the Rules of Court, just
compensation shall be determined from the date of the taking of the
property or the filing of the complaint, whichever came first. Thus, where
the filing of an action precedes the taking of the property, just
compensation shall be computed as of the time of the filing of the
complaint.334 The relevant valuation date when we shall reckon the current
gross replacement cost is December 21, 2004, or the date of filing of the
complaint for expropriation.
The Government's base valuation of $300,206,693.00 is only a
measurement of the current gross replacement cost as of December 2002.
We agree with PIATCO that the gross replacement cost of the NAIA-IPT III
as of December 2002 should be adjusted to its cost as of December 2004
for the plain reason that the Government's computed gross replacement
cost is not current, as required by the Rules of Court and jurisprudence.
Equity dictates that we should adjust the replacement cost at December
2004 values using the Consumer Price Index (CPI).335 This Court should not
be confined and restricted by the use of the depreciated replacement cost
method, especially in this case where the calculated base valuation as of
December 2004 appears to be not truly reflective of the current gross
replacement cost of the NAIA-IPT III at the time of the filing of the
complaint for expropriation.
In adjusting the gross replacement cost to December 2004 values, this
Court takes cognizance of the fact that the cost of goods and services in
the Philippines increased from 2002 until 2004. This is shown by the CPI
which is used in calculating the inflation rate and the purchasing power of
the peso.336 PIATCO correctly arrived at the inflation rate of 1.0971 using
the prevailing CPI from November 29, 2002, or the date of the suspension
ProvRem Rule 67 Fulltext
of works in the NAIA-IPT III until December 21, 2004, or the date when the
Government filed the expropriation complaint.337
7. Interests, Fruits and Income
7.a. Computation of Interests
To avoid confusion in computing interests, we first distinguish three
interrelated concepts in just compensation: (1) the valuation period of just
compensation under Rule 67 of the Rules of Court; (2) the reckoning
period of interest in eminent domain cases pursuant to Section 9, Article 3
of the 1987 Constitution; and (3) the initial and final payments of just
compensation under RA 8974.
Under Section 4, Rule 67 of the Rules of Court, the property sought to be
expropriated shall be appraised as of the date of taking of the property or
the filing of the complaint for expropriation, whichever is earlier, thus:
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.
A final order sustaining the right to expropriate the property may be
appealed by any party aggrieved thereby. Such appeal, however, shall not
prevent the court from determining the just compensation to be paid.
After the rendition of such an order, the plaintiff shall not be permitted to
dismiss or discontinue the proceeding except on such terms as the court
deems just and equitable. (4a) (Emphasis supplied)
On the other hand, Section 9, Article 3 of the 1987 Constitution provides
that "[n]o private property shall be taken for public use without just
compensation." The 1987 Constitution thus commands the condemnor to
pay the property owner the full and fair equivalent of the property from
the date of taking. This provision likewise presupposes that the
condemnor incurs delay if it does not pay the property owner the full
amount of just compensation on the date of taking.338
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.339
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.340
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
Page 68 of 119
in as good a position as money can accomplish, as of the date of
taking."341
Lastly, RA 8974 requires the Government to pay just compensation twice:
(1) immediately upon the filing of the complaint, when the amount to be
paid is 100% of the value of the property based on the current relevant
zonal valuation of the BIR, and the value of the improvements and/or
structures sought to be expropriated (initial payment); and (2) when the
decision of the court in the determination of just compensation becomes
final and executory, in which case the implementing agency shall pay the
owner the difference between the amount already paid and the just
compensation as determined by the court (final payment).
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 initial payment shall be the proffered value of the
property. Section 4 of RA 8974 also states that the initial payment of just
compensation is a prerequisite for the trial court's issuance of a writ of
possession, 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. (Emphasis supplied)
The Government's initial payment of just compensation does not excuse it
from avoiding payment of interest on the difference between the
adjudged amount of just compensation and the initial payment.
ProvRem Rule 67 Fulltext
The initial payment scheme as a prerequisite for the issuance of the writ
of possession under RA 8974 only provides the Government flexibility to
immediately take the property for public purpose or public use pending
the court's final determination of just compensation. Section 4 (a) of RA
8974 only addresses the Government's need to immediately enter the
privately owned property in order to avoid delay in the implementation of
national infrastructure projects.
Otherwise, Section 4 of RA 8974 would be repugnant to Section 9, Article
3 of the 1987 Constitution which mandates that private property shall not
be taken for public use without just compensation. To reiterate, the
Constitution commands the Government to pay the property owner no
less than the full and fair equivalent of the property from the date of
taking.
In the present case, the Government avers that PIATCO is not entitled to
recover interest. According to the Government, PIATCO should not be
allowed to profit from the void contracts. This contention, however, stems
from a mistaken understanding of interest in expropriation cases.
Contrary to the Government's opinion, the interest award is not anchored
either on the law of contracts or damages; it is based on the owner's
constitutional right to just compensation. The difference in the amount
between the final payment and the initial payment - in the interim or
before the judgment on just compensation becomes final and executory -
is not unliquidated damages which do not earn interest until the amount
of damages is established with reasonable certainty. The difference
between final and initial payments forms part of the just compensation
that the property owner is entitled from the date of taking of the
property.
Thus, when the taking of the property precedes the filing of the complaint
for expropriation, the Court orders the condemnor to pay the full amount
of just compensation from the date of taking whose interest shall likewise
commence on the same date. The Court does not rule that the interest on
just compensation shall commence the date when the amount of just
compensation becomes certain, e.g., from the promulgation of the Court's
decision or the finality of the eminent domain case.
With respect to the amount of interest on just compensation, we
decisively ruled in Republic v. Court of Appeals342that the just
compensation due to the property owner is effectively a forbearance of
money, and not indemnity for damages.343 Citing Eastern Shipping Lines,
Inc. v. Court of Appeals,344 we awarded a legal interest of 12% per annum
on just compensation. The Court upheld the imposition of the 12%
interest rate in just compensation cases, as ruled in Republic, in Reyes v.
National Housing Authority,345 Land Bank of the Philippines v.
Wycoco,346 Republic v. Court of Appeals,347 Land Bank of the Philippines v.
Imperial,348 Philippine Ports Authority v. Rosales-Bondoc,349and Curata v.
Philippine Ports Authority.350 The Court reiterated the Republic ruling in
Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the
Philippines,351 Land Bank of the Philippines v. Rivera,352 Department of
Agrarian Reform v. Goduco,353 and Land Bank of the Philippines v.
Santiago, Jr.354
On June 21, 2013, the BSP issued Circular No. 799,355 pursuant to MB
Resolution No. 796 dated May 16,2013, reducing the legal interest on
loans and forbearance of money from 12% to 6% per annum. BSP Circular
No. 799 took effect on July 1, 2013.
In the present case, the Government filed a complaint for expropriation of
the NAIA-IPT III on December 21, 2004. On the same day, the RTC issued
a writ of possession in favor of the Government upon the deposit of
₱3,002,125,000.00 with the Land Bank. In Gingoyon, the Court held in
abeyance the implementation of the writ of possession pending the direct
payment of the proffered value of ₱3,002,125,000.00 to PIATCO.
Page 69 of 119
On September 11, 2006, the RTC reinstated the writ of possession after
the Government tendered PIATCO a check in this amount.
On April 11, 2012, the MIAA and the Land Bank entered into an escrow
agreement in the amount of $82,157,716.73. On the same date, the MIAA
and the DBP likewise executed an escrow agreement in the amount of
$34,190,924.59.
Based on these factual circumstances, interest shall accrue as follows:
1. The principal amount of just compensation shall be appraised on the
date of the filing of the complaint for expropriation or on December 21,
2004. The just compensation shall not earn interest from December 21,
2004, until September 10, 2006, since the Government did not take
possession of the NAIA-IPT III during this period.
2. The difference between the principal amount of just compensation and
the proffered value of ₱3,002,125,000.00 shall earn legal interest of 12%
per annum from the date of taking or September 11, 2006 until June 30,
2013.
3. The difference between the principal amount of just compensation and
the proffered value of ₱3,002,125,000.00 shall earn legal interest of 6%
per annum from July 1, 2013, until the finality of the Court's ruling.
4. The total amount of just compensation shall earn legal interest of 6%
per annum from the finality of the Court's ruling until full payment.
The execution of the escrow agreements shall not affect the accrual of
interest in this case. In its Manifestation and Motion dated July 8, 2011,
the Government stated that the escrow accounts shall be subject to the
condition that "[t]he claimant(s) shall have been held to be entitled to
receive the sum claimed from the 'Just Compensation (NAIA Terminal 3)
Fund' in accordance with Philippine law and regulation, by a final, binding
and executory order or award of the expropriation court."356
Clearly, the Government does not intend to pay the just compensation
due to either PIATCO or Takenaka and Asahikosan during the pendency
of the expropriation case or until the finality of the Court's rulings in G.R.
Nos. 209917, 209696 & 209731.
7.b. PIATCO is not entitled to
the fruits and income of the
NAIA-IPT III.
PIATCO insists that aside from the interest on just compensation, it is also
entitled to all income generated from the operations of the NAIA-IPT III,
from the date of taking up to the present.
PIATCO's claim is unmeritorious. The State, by way of interest, makes up
for the shortfall in the owners' earning potential and the absence of
replacement property from which income can be derived. This is because
the interest awarded by the expropriation court is, in reality, the
equivalent of the fruits or income of the seized property.357 In fact,
PIATCO itself admitted in its petition in G.R. No. 209731 that the interest
on just compensation already answers for the loss of income that the
owner suffered as a result of the State's deprivation of the ordinary use of
his property.358
Thus, we cannot allow PIATCO to profit from the operation of the NAIA-
IPT III whose funds are sourced from the public coffers. Otherwise,
PIATCO would be doubly compensated and unjustly enriched to the
detriment of the taxpayers.
8. The BOC's Expenses
ProvRem Rule 67 Fulltext
8.a. Takenaka and
Asahikosan should not
share in the BOC's
expenses.
Takenaka and Asahikosan refuse to share in the expenses of the BOC.
They argue that pursuant to Section 12,Rule 6 of the Rules of Court, the
Government should solely shoulder the costs incurred in the
expropriation case.
The Government, on the other hand, asserts that Section 1, Rule 142 of
the Rules of Court explicitly authorizes the expropriation court to order
the parties to equally share the costs of an action. Hence, the court can
require third-party intervenors, i.e., Takenaka and Asahikosan, to share in
the expenses of the BOC. It points out that PIATCO already shared in the
expenses of the BOC and tendered the sum of ₱2,550,000.00 to the RTC.
We find no merit in the Government's assertion.
The relevant rule is found in Section 12, Rule 67 of the Rules of Court
which provides:
SEC. 12. Costs, by whom paid. - The fees of the commissioners shall be
taxed as a part of the costs of the proceedings. All costs, except those of
rival claimants litigating their claims, shall be paid by the plaintiff, unless
an appeal is taken by the owner of the property and the judgment is
affirmed, in which event the costs of the appeal shall be paid by the
owner. [Emphasis supplied] This provision specifically deals with the costs
of eminent domain cases. Hence, we find that Section 1, Rule 142 of the
Rules of Court, more specifically, the statement allowing the court to
divide the costs of an action to either party to the case, is inapplicable to
the present case.
Based on the clear terms of Section 12, Rule 67, it is the plaintiff - in this
case, the Government - not the property owner or third-party intervenors,
i.e., Takenaka and Asahikosan, who shall shoulder the costs of the
expropriation before the court of origin. Since the expenses of the BOC
form part of the costs of the suit - as these are expenses necessary in
prosecuting or defending an action or a distinct proceeding within an
action - the Government solely bears the expenses of the BOC. The
property owner shall only bear the costs of the appeal if he loses in his
appeal.
PIATCO, in its pleading, has not questioned its share in the expenses of
the BOC before the Court. PIATCO's voluntary sharing in the expenses of
the BOC and its non-objection to its payment amount to a waiver of its
right not to share in the expenses of the BOC.
In sum, just compensation shall be computed as shown below:
Base Current Cost Valuation (Inclusive of Attendant Cost)
ADD:
Excess Concession Space
Four-Level Retail Complex
Exclusions due to Structural Issues
LESS:
Depreciation
Deterioration
REPLACEMENT COST AS OF DECEMBER 2002
Page 70 of 119
MULTIPLY: 1, 2013 rate * days 2 8
to (181/365)
Inflation Rate of 1.0971
June 30,
REPLACEMENT COST AS OF DECEMBER 21, 2004 2013 $ 326,932,221.26

ADD: July 1, principal*ra 189 6% $267,493,617. $8,310,623.62

2013 to te days 26
Interests from September 11, 2006 to December 2014 Decemb *(189/365) $ 242,810,918.54
er 31,
LESS: 2013
Proffered Value $ 59,438,604.00
January principal*ra 365 6% $267,493,617. $16,049,617.0
JUST COMPENSATION AS OF DECEMBER 31, 2014 1, 2014 te days
$ 510,304,535.80 26 4
to
Decemb
Numb Intere er 31,
Principal Straight
Period Formula er of st 2014
Amount Interest
Days Rate
Total $242,810,918.
Septemb principal*ra 113 12% $267,493,617. $9,937,571.10 54
er 11, te days 26
2006 *(113/365)
to Just
Total Interest from
Decemb Principal Compensation
Formula September 11, 2006 to
er 31, Amount as of December
December 31, 2014
2006 31, 2014

January principal*ra 365 12% $267,493,617. $32,099,234.0 Principal $267,493,617.26 $ 242,810,918.54 $510,304,535.80
1, 2007 te days 26 7 Amount +
to Interest
Decemb
er 31,
9. PIATCO as the Lawful Recipient of Just Compensation.
2007

January principal*ra 365 12% $267,493,617. $32,099,234.0 After determining the amount of just compensation, we next resolve the
1, 2008 te days 26 7 question of who shall receive the full amount of just compensation.
to
Decemb
Takenaka and Asahikosan contend that as actual builders of the NAIA-IPT
er 31,
III, they are lawfully entitled to receive just compensation. They pray that
2008
just compensation of at least $85,700,000.00 be set aside through an
January principal*ra 365 12% $267,493,617. $32,099,234.0 escrow account or other means, in their favor, to answer for their pending
1, 2009 te days 26 7 money claims against PIATCO in G.R. No. 202166.
to
Decemb PIATCO, on the other hand, bases its claim for just compensation on its
er 31, ownership of the NAIA-IPT III and on the ruling in Agan and Gingoyon
2009 that PIATCO should be fully compensated as the builder and owner of the
NAIA-IPT III.
January principal*ra 365 12% $267,493,617. $32,099,234.0
1, 2010 te days 26 7
For its part, the Government refuses to make further payments to PIATCO.
to
Instead, it created an escrow account in favor of the "entitled claimants"
Decemb
of just compensation. The Government fears that the NAIA-IPT III would
er 31,
still be burdened with liens and mortgages - as a result of PIATCO's
2010
indebtedness to other entities - even after it pays PIATCO the full amount
January principal*ra 365 12% $267,493,617. $32,099,234.0 of just compensation.
1, 2011 te days 26 7
to 9.a. Takenaka and Asahikosan's
Decemb intervention in the case as
er 31, unpaid subcontractors is proper.
2011
The defendants in an expropriation case are not limited to the owners of
January principal*ra 365 12% $267,493,617. $32,099,234.0
the property condemned. They include all other persons owning,
1, 2012 te days 26 7
occupying, or claiming to own the property. Under Sections 8 and 14 of
to
RA 8974 IRR, in relation with Section 9, Rule 67 of the Rules of Court, all
Decemb
persons who claim to have lawful interest in the property to be
er 31,
condemned should be included as defendants in the complaint for
2012
expropriation:
January principal * 181 12% $267,493,617. $15,917,702.3

ProvRem Rule 67 Fulltext Page 71 of 119

Section 8 of RA 8974 IRR. Expropriation. - If the owner of a private
property needed by the government implementing agency does not
agree to convey his property to the government by any of the foregoing
modes of acquiring and/or transferring ownership of the property, then
the government shall exercise its right of eminent domain by filing a
complaint with the proper Court for the expropriation for the private
property.
The verified complaint shall state with certainty the right and purpose of
expropriation, describe the real or personal property sought to be
expropriated, and join as defendants all persons owning or claiming to
own, or occupying, any part thereof or interest therein, showing as far as
practicable, the interest of each defendant separately. If the title to any
property sought to be condemned appears to be in the name of the
Republic of the Philippines, although occupied by private individuals, or if
the title is otherwise obscure or doubtful so that the plaintiff cannot with
accuracy or certainty specify the real owners, averment to that effect may
be made in the complaint.
Section 14 of RA 8974 IRR. Trial Proceedings. - Within sixty (60)-day
period prescribed by the Act, all matters regarding defences and
objections to the complaint, issues on uncertain ownership and conflicting
claims, effects of appeal on the rights of the parties, and such other
incidents affecting the complaint shall be resolved under the provisions
on expropriation of Rule 67 of the Rules of Court.
Section 9, Rule 67 of the Rules of Court. Uncertain ownership; conflicting
claims. - If the ownership of the property taken is uncertain, or there are
conflicting claims to any part thereof, the court may order any sum or
sums awarded as compensation for the property to be paid to the court
for the benefit of the person adjudged in the same proceeding to be
entitled thereto. But the judgment shall require the payment of the sum
or sums awarded to either the defendant or the court before the plaintiff
can enter upon the property, or retain it for the public use or purpose if
entry has already been made. (9a) (Emphasis supplied)
All persons who have lawful interest in the property sought to be
expropriated should be impleaded in the complaint for purposes of
determining who shall be entitled to just compensation. If a known owner
is not joined as defendant, he may intervene in the proceeding. If the
owner is joined but not served with process and the proceeding is already
closed before he came to know of the condemnation, he may maintain an
independent suit for damages. Consequently, Takenaka and Asahikosan
are correct in invoking Section 9, Rule 67 of the Rules of Court for
purposes of determining who shall be entitled to just compensation in
this case. This rule is likewise their proper basis of intervention in the
RTC's March 12, 2007 order in Civil Case No. 04-0876.
Our ruling on this point does not contradict Section 4 (a) of RA 8974
which provides for a scheme of direct and immediate initial payment to
the property owner in cases involving national government infrastructure
projects.
Section 4 (a) of RA 8974 applies only to cases where the issue of
ownership of the expropriated property is not disputed. In cases where
the ownership is contested; where conflicting claims or interests over the
expropriated property exist; or where there are other incidents affecting
the complaint for expropriation, the governing rule is Section 9, Rule 67 of
the Rules of Court. By creating a separate provision applicable only to the
latter cases, Section 14 of RA 8974 IRR359 necessarily acknowledged that
the scheme of immediate and direct initial payment is not an absolute
and all-encompassing rule applicable in all circumstances.
We are aware of our pronouncement in the December 19, 2005 Gingoyon
decision directing the Government to directly and immediately pay
PIATCO the proffered value of ₱3billion. We rendered the December 19,
2005 Decision based on the fact that Takenaka and Asahikosan were not
ProvRem Rule 67 Fulltext
yet parties to G.R. No. 166429 and Civil Case No. 04-0876 at that time.
The Court denied Takenaka and Asahikosan's motions for leave to
intervene in our February 1, 2006 Resolution in Gingoyon for palpable
violation of Section 2, Rule 19 of the Rules of Court which only allows
intervention before the rendition of judgment by the court. Moreover,
Takenaka and Asahikosan had not yet instituted Civil Case No. 06-171
(the enforcement case) when we promulgated our rulings in Gingoyon.
The RTC's issuance of the March 12, 2007 order, which is binding on the
parties and which allows Takenaka and Asahikosan to intervene in the
case, changed the factual circumstances of this case. As an incident in our
determination of the just compensation, we necessarily should resolve the
issue of NAIA-IPT III's ownership and the question of who the recipient of
the just compensation should be.
9.b. The property owner is
entitled to just compensation.
Citing Agan, Takenaka and Asahikosan argue that the Court intended that
the real builders of the NAIA-IPT III should be paid just compensation.
Takenaka and Asahikosan assert that they are the entities who actually
built the NAIA-IPT III pursuant to the Onshore Construction and Offshore
Procurement Contracts. In Agan, the Court declared that PIATCO is the
builder of the NAIA-IPT III. The Court stated:
This Court, however, is not unmindful of the reality that the structures
comprising the NAIA IPT III facility are almost complete and that funds
have been spent by PIATCO in their construction. For the government to
take over the said facility, it has to compensate respondent PIATCO as
builder of the said structures. The compensation must be just and in
accordance with law and equity for the government cannot unjustly
enrich itself at the expense of PIATCO and its investors.360
This finding is likewise affirmed in our February 1, 2006 Resolution in
Gingoyon where we declared:
The Court is not wont to reverse its previous rulings based on factual
premises that are not yet conclusive or judicially established. Certainly,
whatever claims or purported liens Takenaka and Asahikosan against
PIATCO or over the NAIA 3 have not been judicially established. Neither
Takenaka nor Asahikosan are parties to the present action, and thus have
not presented any claim which could be acted upon by this Court. The
earlier adjudications in Agan v. PIATCO made no mention of either
Takenaka or Asahikosan, and certainly made no declaration as to their
rights to any form of compensation. If there is indeed any right to
remuneration due to these two entities arising from NAIA 3, they have not
yet been established by the courts of the land.
It must be emphasized that the conclusive ruling in the Resolution dated
21 January 2004 in Agan v. PIATCO (Agan 2004) is that PIATCO, as builder
of the facilities, must first be justly compensated in accordance with law
and equity for the Government to take over the facilities. It is on that
premise that the Court adjudicated this case in its 19 December 2005
Decision.
While the Government refers to a judgment rendered by a London court
in favor of Takenaka and Asahikosan against PIATCO in the amount of
US$82 Million, it should be noted that this foreign judgment is not yet
binding on Philippine courts. It is entrenched in Section 48, Rule 39 of the
Rules of Civil Procedure that a foreign judgment on the mere strength of
its promulgation is not yet conclusive, as it can be annulled on the
grounds of want of jurisdiction, want of notice to the party, collusion,
fraud, or clear mistake of law or fact. It is likewise recognized in Philippine
jurisprudence and international law that a foreign judgment may be
barred from recognition if it runs counter to public policy.
Page 72 of 119
Assuming that PIATCO indeed has corresponding obligations to other
parties relating to NAIA 3, the Court does not see how such obligations,
yet unproven, could serve to overturn the Decision mandating that the
Government first pay PIATCO the amount of 3.02 Million Pesos before it
may acquire physical possession over the facilities. This directive enjoining
payment is in accordance with Republic Act No. 8974, and under the
mechanism established by the law the amount to be initially paid is that
which is provisionally determined as just compensation. The provisional
character of this payment means that it is not yet final, yet sufficient under
the law to entitle the Government to the writ of possession over the
expropriated property.
There are other judicial avenues outside of this Motion for
Reconsideration wherein all other claims relating to the airport facilities
may be ventilated, proved and determined. Since such claims involve
factual issues, they must first be established by the appropriate trier of
facts before they can be accorded any respect by or binding force on this
Court.361 [Emphasis supplied]
Contrary to Takenaka and Asahikosan's position, in the Philippine
jurisdiction, the person who is solely entitled to just compensation is the
owner of the property at the time of the taking.362 As shown below, the
test of who shall receive just compensation is not who built the terminal,
but rather who its true owner is.
From the express provision of Section 4 of RA 8974, just compensation
shall only be paid to the property owner. We implead persons with lawful
interests in the property in order to determine the person who shall
receive just compensation. Note that the last paragraph, Section 4 of RA
8974 states: "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." This provision thus envisions a situation where the court
determines with finality, for purposes of payment of just compensation,
the conflicting claims of the defendants and intervenors.
The cases cited by Takenaka and Asahikosan are inapplicable to justify
their right to receive just compensation. The Court did not award just
compensation to a non-owner in De Knecht v. Court of Appeals.363 The
Court held in that case that a person who had no legal interest in the
property at the time of the filing of a complaint for expropriation had no
right to intervene in the case. The Court ruled that only persons who have
lawful interests in the property may be impleaded as defendants or may
intervene in the expropriation case under Section 1, Rule 67 of the Rules
of Court. This case thus, at most, support their right to intervene.
In Calvo v. Zandueta,364 the Court stayed the execution of the trial court's
judgment ordering the provincial treasurer of Pangasinan to pay Aquilino
Calvo just compensation due to the pendency of the interpleader that
Juana Ordoñez brought based on her own claim of ownership of the
expropriated land. Ordoñez asserted that she acquired all rights and
interests on the subject land when she purchased it during the execution
sale while the expropriation proceedings were still pending.
Philippine Veterans Bank v. Bases Conversion Development
Authority365 further affirms the rule that just compensation shall only be
paid to the owner of the expropriated property at the time of taking. In
that case, the Court held that the trial court may order the payment of just
compensation to itself pending the adjudication of the issue of ownership
in other proceedings pursuant to Section 9, Rule 67 of the Rules of Court.
The Court likewise did not award just compensation to a non-owner in
Republic v. Mangotara.366 The Court held that the filing of a supplemental
complaint for expropriation impleading private parties does not
necessarily amount to an admission that the parcels of land sought to be
expropriated are privately owned. The Republic merely acknowledged
that there are private persons also claiming ownership of the parcels of
ProvRem Rule 67 Fulltext
land. The Republic can still consistently assert, in both actions for
expropriation and reversion, that the subject parcels of land are part of
the public domain.
The record of the present case show that PIATCO has been the original
contracting party commissioned by the Government to construct the
NAIA-IPT III based on a build-operate-transfer arrangement and who, in
this capacity, contracted out the actual construction to Takenaka and
Asahikosan. Thus, when the NAIA-IPT III was built, it was in PIATCO's
name and account, although it subsequently owed sums to
subcontractors, incurred in the course of the construction. From this
perspective, PIATCO has been the owner recognized as such by the
Government although the basis of its contractual relationship with the
Government was later on nullified. Takenaka and Asahikosan, on the other
hand, had always been subcontractors with whom the Government did
not have any formal link. These facts indubitably show that PIATCO has
been the owner of the NAIA-IPT III entitled to receive the just
compensation due. Takenaka and Asahikosan for their part, have not
shown that they possess legal title or colorable title to the NAIA-IPT III
that would defeat PIATCO's ownership.
To recap and expound on the matter:
First, Takenaka and Asahikosan were mere subcontractors in the nullified
NAIA-IPT III project. That Takenaka and Asahikosan actually built the
NAIA-IPT III does not make them the owner of the terminal building.
We carefully point out that our finding in this case that Takenaka and
Asahikosan are the actual builders of the NAIA-IPT III does not contravene
our rulings in Agan and Gingoyon that PIATCO is the builder of the
NAIAIPT III. The word "builder" is broad enough to include the contractor,
PIATCO, and the subcontractors, Takenaka and Asahikosan, in the nullified
NAIA-IPT III project. Republic Act No. 4566367 defines a "builder" as
follows:
Section 9 (b) of RA 4566. "Contractor" is deemed synonymous with the
term "builder" and, hence, any person who undertakes or offers to
undertake or purports to have the capacity to undertake or submits a bid
to, or does himself or by or through others, construct, alter, repair, add to,
subtract from, improve, move, wreckor demolish any building, highway,
road, railroad, excavation or other structure, project, development or
improvement, or to do any part thereof, including the erection of
scaffolding or other structures or works in connection therewith. The term
contractor includes subcontractor and specialty contractor.
In Gingoyon, the Court loosely used the word "builder" and "owner"
interchangeably. We clarify, however, that a builder is different from the
owner of the property. As we stated above, a builder includes the
contractor and the subcontractor. On the other hand, the "owner" who is
constitutionally entitled to just compensation is the person who has legal
title to the property. Logically, a builder is not necessarily the owner of the
property and vice-versa.
Second, we cannot recognize Takenaka and Asahikosan's claimed liens
over the NAIA-IPT III in this just compensation case. Since G.R. No. 202166
is still pending before the Court, we cannot conclusively rule that
Takenaka and Asahikosan are unpaid creditors of PIATCO without
preempting the Court's ruling in the enforcement case.
Even assuming that Takenaka and Asahikosan - as unpaid contractors in
the botched NAIA-IPT III construction contract - indeed have liens over
the NAIA-IPT III, PIATCO is still the property owner who, as such, should
directly receive just compensation from the Government.
We clarify that the expropriation court's determination of the lawful
property owner is merely provisional. By filing an action for expropriation,
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the condemnor merely serves notice that it is taking title to and
possession of the property, and that the defendant is asserting title to or
interest in the property, not to prove a right to possession, but to prove a
right to compensation for the taking. The Court's disposition with respect
to the ownership of the property is not conclusive, and it remains open to
challenge through proper actions. The court's resolution of the title to the
land at the time of taking has no legal consequences beyond the eminent
domain proceedings. The court's decision cannot be pleaded as a defense
of res judicataor collateral estoppel in any action to determine title to the
property.
As we explained in Republic of the Philippines v. Samson-Tatad:368
However, the authority to resolve ownership should be taken in the
proper context. The discussion in Republic was anchored on the question
of who among the respondents claiming ownership of the property must
be indemnified by the Government:
Now, to determine the person who is to be indemnified for the
expropriation of Lot 6, Block 6, Psd-2017, the court taking cognizance of
the expropriation must necessarily determine if the sale to the Punzalan
spouses by Antonio Feliciano is valid or not. For if valid, said spouses must
be the ones to be paid by the condemnor; but if invalid, the money will be
paid to someone else. x x x
Thus, such findings of ownership in an expropriation proceeding should
not be construed as final and binding on the parties. By filing an action
for expropriation, the condemnor (petitioner), merely serves notice that it
is taking title to and possession of the property, and that the defendant is
asserting title to or interest in the property, not to prove a right to
possession, but to prove a right to compensation for the taking.
If at all, this situation is akin to ejectment cases in which a court is
temporarily authorized to determine ownership, if only to determine who
is entitled to possession. This is not conclusive, and it remains open to
challenge through proper actions. The consequences of Sec. 9, Rule 67
cannot be avoided, as they are due to the intimate relationship of the
issue of ownership with the claim for the expropriation payment.
(Emphasis supplied)
9.c. A final disposition in the eminent
domain case with respect to the order
of payment to a particular person shall
be final and executory.
To avoid future litigation, we emphasize that a final disposition in the
eminent domain case with respect to the order to pay a particular person
shall be final and executory upon the lapse of relevant periods under Rule
39 of the Rules of Court. The recourse of the person claiming ownership
over the expropriated property in any subsequent case is against the
adjudged property owner in the expropriation case.
The principle of res judicata applies in this particular matter because the
issues on the amount of just compensation and the person to be paid just
compensation are the central issues in the second phase of expropriation.
Based on this principle, a final judgment or decree on the merits by a
court of competent jurisdiction is conclusive of the rights of the parties or
their privies in all later suits on points and matters determined in the
former suit.369
There would be no end to litigation in an eminent domain case if we rule
otherwise; we would only foment mockery of the judicial proceedings as
the order of payment in the eminent domain case would never be truly
final and executory. Furthermore, to the detriment of the public, interest
would continue to accrue on just compensation if we rule that the order
of payment to a particular recipient can be reversed in the subsequent
ProvRem Rule 67 Fulltext
judicial proceedings and is, indeed, reversed in the subsequent case. This
would be unfair to the State (and the public) that merely
exercised its immutable right to exercise the power of eminent domain.
Contrary to Takenaka and Asahikosan's claim, in Calvo v. Zandueta,370 the
Court did not stay the execution of a final and executory ruling in the
eminent domain case during the pendency of the interpleader case.
A close reading of Calvo shows that the order of payment of just
compensation in that case was not yet final and executory.
In November 1924, the municipality of San Quintin, Pangasinan filed an
action for expropriation of a parcel of land owned by Aquilino Calvo and
with a Certificate of Title No. 25100.
On November 25, 1925, the Court of First Instance (CFI) approved the
commissioners' valuation of the subject land in the sum of ₱6,943.25. The
municipality of San Quintin appealed the case but subsequently withdrew
the appeal on June 23, 1926. The CFI approved the withdrawal of appeal
on July 20, 1926.
In the meantime, Juana Ordoñez levied on the subject land after she
obtained a favorable judgment against Calvo. The levy was recorded on
the certificate of title on December 23, 1925. Thereafter, the sheriff sold
the subject land to Ordoñez inan execution sale. On January 23, 1926, the
sale was duly entered by memorandum on the certificate of title. On the
same date, Ordoñez filed a motion for substitution as a defendant in the
expropriation case on the ground that she acquired all the rights and
interests of Calvo on the subject land.
On June 29, 1926, the CFI declared the November 25, 1925 decision final
and ordered the provincial treasurer of Pangasinan to pay Calvo a part of
just compensation. The following day, Ordoñez filed a motion praying for
the revocation of the June 29, 1926 order and for the provincial treasurer
of Pangasinan to retain the award of just compensation.
On July 20, 1926, the CFI revoked the June 29, 1926 order and ordered the
provincial treasurer of Pangasinan to retain the money until further orders
of the court. After the CFI denied Calvo et al.'s motion for reconsideration,
they filed a petition for certiorari before the Court.
The Court denied the petition. The Court ruled that "assuming that the
judgment of November 25, 1925, constituted a final determination of the
petitioners' right to receive the award," Ordoñez was not a party to the
expropriation case and, therefore, could not be bound by the judgment.
Ordoñez' claim that she stands subrogated to Calvo's right to just
compensation has the appearance of validity. The judicial determination
of her claim may be adjudicated in an action for interpleader which was
then pending when the motion for substitution was filed. Consequently,
the trial court correctly stayed the execution of the judgment in the
expropriation case. Whenever necessary to promote the ends of justice,
courts have the power to temporarily stay executions of judgments
rendered by them."
Clearly, the November 25, 1925 decision in Calvo was not yet final and
executory when the Court suspended the execution of that ruling. The
July 29, 1926 order revoked the June 29, 1926 order which in turn
declared the finality of the November 25, 1925 decision of the CFI.
Ordoñez filed a motion for the reversal of the June 29, 1926 order prior to
the CFI's withdrawal of appeal on July 20, 1926. Significantly, the CFI
approved the withdrawal of appeal on the same date that the CFI revoked
the June 29, 1926 order and ordered the provincial treasurer of
Pangasinan to withhold the just compensation. There is thus no basis to
Takenaka and Asahikosan's claim that the execution of a final and
executory judgment on just compensation may be suspended if there is
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still a subsisting case regarding the disputed ownership of the
expropriated property.
9.d. The determination of whether the
NAIA-IPT III shall be burdened by liens
and mortgages even after the full
payment of just compensation is still
premature.
The determination of whether the NAIA-IPT III shall be burdened by liens
and mortgages even after the full payment of just compensation is still
premature. The enforceability of Claim Nos. HT-04-248 and HT-05-269 in
this jurisdiction has yet to be decided by the Court in G.R. No. 202166.
Furthermore, the application of Article 2242 of the Civil
Code371 presupposes that PIATCO declared insolvency or has been
declared insolvent. This, of course, should be litigated in insolvency
proceedings, not in the present eminent domain case.
The Court cannot pass upon the validity and enforceability of civil claims
against PIATCO by creditor/s in an expropriation case or the existence of
liens on the NAIA-IPT III. Section 114 of Republic Act No.
10142372 provides:
Section 114. Rights of Secured Creditors. - The Liquidation Order shall not
affect the right of a secured creditor to enforce his lien in accordance with
the applicable contract or law. A secured creditor may:
(a) waive his right under the security or lien, prove his claim in
the liquidation proceedings and share in the distribution of the
assets of the debtor; or
(b) maintain his rights under the security or lien:
If the secured creditor maintains his rights under the security or lien:
(1) the value of the property may be fixed in a manner agreed
upon by the creditor and the liquidator. When the value of the
property is less than the claim it secures, the liquidator may
convey the property to the secured creditor and the latter will
be admitted in the liquidation proceedings as a creditor for the
balance. If its value exceeds the claim secured, the liquidator
may convey the property to the creditor and waive the debtor's
right of redemption upon receiving the excess from the
creditor;
(2) the liquidator may sell the property and satisfy the secured
creditor's entire claim from the proceeds of the sale; or
(3) the secure creditor may enforce the lien or foreclose on the
property pursuant to applicable laws.
10. The exercise of eminent
domain from the perspective of
"taking."
10.a. The Government may take
the property for public
purpose or public use upon
the issuance and effectivity
of the writ of possession.
To clarify and to avoid confusion in the implementation of our judgment,
the full payment of just compensation is not a prerequisite for the
Government's effective taking of the property. As discussed above, RA
8974 allows the Government to enter the property and implement
ProvRem Rule 67 Fulltext
national infrastructure projects upon the issuance of the writ of
possession. When the taking of the property precedes the payment of just
compensation, the Government shall indemnify the property owner by
way of interest.
"Taking" under the power of eminent domain means entering upon
private property for more than a momentary period, and under the
warrant or color of legal authority, devoting it to public use, or otherwise
informally appropriating or injuriously affecting it in such a way as
substantially to oust the owner and deprive him of all beneficial
enjoyment thereof.373
"Taking" of property takes place when: (1) the owner is actually deprived
or dispossessed of his property;(2) there is a practical destruction or a
material impairment of the value of his property; (3) the owner is deprived
of the ordinary use of the property, or (4) when he is deprived of the
jurisdiction, supervision and control of his property.374
The taking of property is different from the transfer of the property title
from the private owner to the Government. Under Rule 67 of the Rules of
Court, there are two phases of expropriation: (a) the condemnation of the
property after it is determined that its acquisition will be for a public
purpose or public use; and (b) the determination of just compensation to
be paid for the taking of private property to be made by the court with
the assistance of not more than three commissioners.
The first phase is concerned with the determination of the Government's
authority to exercise the power of eminent domain and the propriety of
its exercise in the context of the facts involved in the suit. The court
declares that the Government has a lawful right to take the property
sought to be condemned, for the public use or purpose described in the
complaint.375
The second phase relates to the just amount that the Government shall
compensate the property owner.376
Whenever the court affirms the condemnation of private property in the
first phase of the proceedings, it merely confirms the Government's lawful
right to take the private property for public purpose or public use. The
court does not necessarily rule that the title to the private property
likewise vests on the Government.
The transfer of property title from the property owner to the Government
is not a condition precedent to the taking of property. The State may take
private property prior to the eventual transfer of title of the expropriated
property to the State.
In fact, there are instances when the State takes the property prior to the
filing of the complaint for expropriation or without involving the transfer
of title.377 In People v. Fajardo,378 the Court ruled that the municipal
mayor's refusal to give the property owner the permission to build a
house on his own land on the ground that the structure would destroy
the beauty of the public plaza amounts to the taking of the property
requiring just compensation.
In National Power Corporation (NPC) v. Spouses Malit,379 the NPC's
transmission lines had to pass the Spouses Malit's property. The Court
ruled that the NPC's easement of right-of-wayon the land was equivalent
to the taking of property. The limitation imposed by the NPC against the
use of the land for an indefinite period deprived the Spouses Malit of the
lot's ordinary use. Consequently, the NPC shall give the Spouses Malit just
compensation.
The reckoning period, however, of the valuation of just compensation is
the date of taking or the filing of the complaint for expropriation,
whichever is earlier. In either case, it is only after the finality of the second
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stage and after the payment of just compensation that the title shall pass
to the Government. As we have ruled in Gingoyon, the title to the
property does not pass to the condemnor until just compensation is paid.
Under Section 4 of RA 8974, the Government is only entitled to a writ of
possession upon initial payment of just compensation to the defendant,
and upon presentment to the court of a certificate of availability of funds.
A writ of possession does not transfer title to the Government; it is "a writ
of execution employed to enforce a judgment to recover the possession
of land. It commands the sheriff to enter the land and give its possession
to the person entitled under the judgment."380 Section 4 of RA 8974
further states that the writ of possession is an order to take possession of
the property and to start the implementation of the project, 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. (Emphasis supplied)
The Government is provisionally authorized to take the property for public
purpose or public use whenever the court issues a writ of possession in
favor of the Government. It may take possession of the property or
effectively deprive the property owner of the ordinary use of the property.
If the court, however, later on determines that the State has no right of
expropriation, then the State shall immediately restore the defendant of
the possession of the property and pay the property owner damages that
he sustained. Section 11, Rule 67 of the Rules of Court: Section 11. Entry
not delayed by appeal; effect of reversal. - The right of the plaintiff to
ProvRem Rule 67 Fulltext
enter upon the property of the defendant and appropriate the same for
public use or purpose shall not be delayed by an appeal from the
judgment. But if the appellate court determines that plaintiff has no right
of expropriation, judgment shall be rendered ordering the Regional Trial
Court to forthwith enforce the restoration to the defendant of the
possession of the property, and to determine the damages which the
defendant sustained and may recover by reason of the possession taken
by the plaintiff. (11a)
The State's taking of the property is not based on trust or contract, but is
founded on its inherent power to appropriate private property for public
use. It is also for this reason - to compensate the property owner for the
deprivation of his right to enjoy the ordinary use of his property until the
naked title to the property passed to the State - that the State pays
interest from the time of the taking of the property until full payment of
just compensation.
This conclusion is consistent with the dispositive portion of our ruling in
Gingoyon where we authorized the Government to perform acts that are
essential to the operation of the NAIA-IPT III as an international airport
terminal upon the effectivity of the writ of possession. The authority
granted to the Government encompasses "the repair, reconditioning and
improvement of the complex, maintenance of the existing facilities and
equipment, installation of new facilities and equipment, provision of
services and facilities pertaining to the facilitation of air traffic and
transport, and other services that are integral to a modern-day
international airport."
The present case involves the second stage of expropriation or the
determination of replacement cost of the NAIA-IPT III. The first stage has
become final after the promulgation of the December 19, 2005 decision
and the February 1, 2006 resolution in Gingoyon where we affirmed the
Government's power to expropriate the NAIA-IPT III and where we
ordered the issuance of a writ of possession upon the Government's
direct payment of the proffered value of ₱3 billion to PIATCO. Thus, the
reinstatement of the writ of possession on September 11, 2006,
empowered the Government to take the property for public use, and to
effectively deprive PIATCO of the ordinary use of the NAIA-IPT III.
B. G.R. No. 181892
1. The issue on the appointment of
an independent appraiser is
already moot and academic.
In G.R. No. 181892, the RTC, in its order dated May 5,2006, ordered the
appointment of an independent appraiser to conduct the valuation of the
NAIA-IPT III upon the BOC's request. Thereafter, the Government and
PIATCO submitted their lists of nominees to this position. On May 3, 2007,
the RTC engaged the services of DG Jones and Partners as an
independent appraiser. On May 18, 2007, the RTC directed the
Government to submit a Certificate of Availability of Funds to cover DG
Jones and Partners' $1.9 Million appraisal fee.
The Government disputed the May 3 and 18, 2007 orders and argued that
the RTC had no power to appoint an independent appraiser. The
Government insisted that the RTC should exclusively choose among its
nominees pursuant to Section 7 of RA 8974 as well as Sections 10 and 11
of RA 8974 IRR.
The RTC sustained the appointment of DG Jones and Partners in an order
dated January 7, 2008.The RTC ruled that its power to appoint the
members of the BOC under Section 5, Rule 67 of the Rules of Court was
broad enough as to include the appointment of an independent
appraiser.
Page 76 of 119
On February 6, 2008, the Government filed a petition for certiorari with
prayer for the issuance of a temporary restraining order and/or a writ of
preliminary injunction before the Court assailing the May 3, 2007; May 18,
2007; and January 7, 2008 orders (G.R. No. 181892).
On January 9, 2008, the Court issued a temporary restraining order
against the implementation of the May 3, May 18, and January 7, 2008
orders.
On August 5, 2010, the RTC ordered the parties to submit their appraisal
reports of the NAIA-IPTIII. The Government, PIATCO, Takenaka and
Asahikosan separately hired their own appraisers who came up with their
different valuations of the NAIA-IPT III.
On March 31, 2011, the BOC submitted its Final Report recommending
the payment of just compensation in the amount of $376,149,742.56. On
May 23, 2011, the RTC rendered a decision ordering the Government to
pay PIATCO just compensation in the amount of $116,348,641.10. The CA
modified the RTC ruling and held that the just compensation as of July 31,
2013, amounts to $371,426,742.24.
These developments render the appointment of DG Jones and Partners as
an independent appraiser of the NAIA-IPT III ineffective. An appraiser is a
person selected or appointed by competent authority to ascertain and
state the true value of goods or real estate.381 The purpose of appointing
DG Jones and Partners as an independent appraiser was to assist the BOC
in appraising the NAIA-IPT III. In fact, the BOC requested the RTC to
engage the services of an independent appraiser because the BOC had no
technical expertise to conduct the valuation of the NAIA-IPT III. In turn,
the BOC was to recommend to the RTC the replacement cost of the NAIA-
IPT III. Under Section 8, Rule 67 of the Rules of Court, the RTC may accept
or reject, whether in whole or in part, the BOC's report which is merely
advisory and recommendatory in character.
We find, under the given circumstances, that the propriety of the
appointment of DG Jones and Partners and the corollary issue of who
should shoulder the independent appraiser's fees moot and academic.
An actual case or controversy exists when there is a conflict of legal rights
or an assertion of opposite legal claims between the parties that is
susceptible or ripe for judicial resolution.382 A justiciable controversy must
not be moot and academic or have no practical use or value. In other
words, there must be a definite and concrete dispute touching on the
legal relations of the parties who have adverse legal interests. Otherwise,
the Court would simply render an advisory opinion on what the law would
be on a hypothetical state of facts. The disposition of the case would not
have any practical use or value as there is no actual substantial relief to
which the applicant would be entitled to and which would be negated by
the dismissal or denial of the petition.383
After the BOC submitted its Final Report on the replacement cost of the
NAIA-IPT III based on the appraisal reports and other evidence submitted
by the parties, the appointment of DG Jones and Partners ceased to serve
any purpose. Any subsequent findings of DG Jones and Partners
regarding the appraisal of the NAIA-IPT III would cease to have any
practical materiality since the RTC proceedings on the amount of just
compensation had already been terminated. As with the BOC, the
independent appraiser's valuation of the NAIAIPT III was advisory and
recommendatory in character. DG Jones and Partners' valuation was only
preliminary and was not by any means meant to be final and conclusive
on the parties. In the exercise of its judicial functions, it is the
expropriation court who has the final say on the amount of just
compensation. Since the RTC has already made a factual finding on the
valuation of the NAIA-IPT III, there is no point in appointing DG Jones and
Partners as an independent appraiser. To reiterate, valuation involves a
factual question that is within the province of the expropriation court, and
ProvRem Rule 67 Fulltext
not the BOC or the independent appraiser. DG Jones and Partners' rule
has simply been overtaken by events.
As a final note, while we stated in Gingoyon that the RTC may validly
appoint commissioners in the appraisal of the NAIA-IPT III, the trial court
should have appointed commission members who possessed technical
expertise in the appraisal of a complex terminal building. Under Section 5,
Rule 67 of the Rules of Court, the BOC's main functions are to ascertain
and report to the court the just compensation for the property sought to
be taken. The appointment of technical experts as commissioners would
have avoided the DG Jones aspect of the controversy as there would have
been no need for the trial court to hire an independent appraiser. This
would have avoided the duplication of tasks and delay in the proceedings.
To summarize, we rule that:
(1) The May 23, 2011 decision of the RTC in Civil Case No. 04-
0876 is valid. The parties were afforded procedural due process
since their respective positions, counter-positions, and evidence
were considered by the trial court in rendering the decision.
(2) Replacement cost is a different standard of valuation from
fair market value. Fair market value is the price at which a
property may be sold by a seller who is not compelled to sell
and bought by a buyer who is not compelled to buy. In
contrast, replacement cost is the amount necessary to replace
the improvements/structures, based on the current market
prices for materials, equipment, labor, contractor's profit and
overhead, and all other attendant costs associated with the
acquisition and installation in place of the affected
improvements/structures. (3) In computing just compensation,
the Court shall use the replacement cost method and the
standards laid down in Section 5 of RA 8974 as well as Section
10 of RA 8974. The Court shall likewise consider equity in the
determination of the just compensation due for NAIA-IPT III.
(4) The use of depreciated replacement cost method is
consistent with the principle that the property owner shall be
compensated for his actual loss. It is consistent as well with
Section 10 of RA 8974 IRR which provides that the courts shall
consider the kinds and quantities of materials/equipment used
and the configuration and other physical features of the
property, among other things, in the valuation of the NAIAIPT
III. The Government should not compensate PIATCO based on
the value of a modern equivalent asset that has the full
functional utility of a brand new asset.
(5) The amount of just compensation as of the filing of the
complaint for expropriation on December 21, 2004, is
$326,932,221.26. From this sum shall be deducted the proffered
value of $59,438,604.00. The resulting difference of
$267,493,617.26 shall earn a straight interest of 12% per annum
from September 11, 2006 until June 30, 2013, and a straight
interest of 6% per annum from July 1, 2013, until full payment.
(6) PIATCO, as the owner of the NAIA-IPT III, shall solely receive
the just compensation. Based on the last paragraph, Section 4
of RA 8974 and the prevailing jurisprudence, it is the owner of
the expropriated property who is constitutionally entitled to just
compensation. Other claimants should be impleaded or may
intervene in the eminent domain case if the ownership of the
property is uncertain or there are conflicting claims on the
property pursuant to Section 9, Rule 67 of the Rules of Court.
(7) The Government may deprive PIATCO of the ordinary use of
the NAIA-IPT III upon the issuance and effectivity of the writ of
Page 77 of 119
 possession on September 11, 2006. However, the Government
shall only have ownership of the NAIA-IPT III after it fully pays
PIATCO the just compensation due.
(8) The expenses of the BOC, which are part of the costs, shall
be shouldered by the Government as the condemn or of the
property pursuant to Section 12,Rule 67 of the Rules of Court.
Consequently, Takenaka and Asahikosan shall not share in the
expenses of the BOC. PIATCO is deemed to have waived its
right not to share in the expenses of the BOC since it voluntarily
shared in the expenses of the BOC.
(9) The issues of the propriety of the appointment of DG Jones
and Partners as an independent appraiser in the valuation of
the NAIA-IPT III and who should shoulder DG Jones and
Partners' appraisal fee are already moot and academic. The
purpose of appointing DG Jones and Partners as an
independent appraiser was to assist the BOC in the appraisal of
NAIA-IPT III. As with the BOC, the independent appraiser's
recommendation to the RTC was merely recommendatory and
advisory in character. Since the RTC has already ruled on the
just compensation in Civil Case No. 04-0876, the appointment
of an independent appraiser no longer serves any practical
purpose.
WHEREFORE, premises considered, we PARTIALLY REVERSE the August 22,
2013 amended Decision and the October 19, 2013 Resolution of the Court
of Appeals.
1) The principal amount of just compensation is fixed at
$326,932,221.26 as of December 21, 2004. Thereafter, the
amount of $267,493,617.26, which is the difference between
$326,932,221.26 and the proffered value of $59,438,604.00,
shall earn a straight interest of 12% per annum from September
11, 2006 until June 30, 2013, and a straight interest of 6% per
annum from July 1, 2013 until full payment;
2) The Government is hereby ordered to make direct payment
of the just compensation due to PIATCO; and
3) The Government is hereby ordered to defray the expenses of
the BOC in the sum of ₱3,500,000.00.
We DECLARE the issue of the appointment of DG Jones and Partners as
an independent appraiser of the Ninoy Aquino International Airport
Passenger Terminal III MOOT AND ACADEMIC. The temporary restraining
order issued on January 9,2008, against the implementation of the May 3,
2007; May 18, 2007; and January 7, 2008 orders of the Regional Trial
Court of Pasay City, Branch 117 is hereby made PERMANENT.
SO ORDERED.
#7 G.R. No. 175983 April 16, 2009
METROPOLITAN CEBU WATER DISTRICT (MCWD), Petitioner,
vs.
J. KING AND SONS COMPANY, INC., Respondent.
DECISION
TINGA, J.:
Before us is a Rule 45 petition1 which seeks the reversal of the
decision2 and resolution3 of the Court of Appeals in CA-G.R. CEB-SP No.
00810. The Court of Appeals’ decision nullified the orders4 and the writ of
ProvRem Rule 67 Fulltext
possession5issued by the Regional Trial Court (RTC) of Cebu City, Branch
23, allowing petitioner to take possession of respondent’s property.
Petitioner Metropolitan Cebu Water District is a government-owned and
controlled corporation created pursuant to Presidential Decree No. 198,
as amended. Among its purposes are to acquire, install, improve, maintain
and operate water supply and distribution systems within the boundaries
of the District.6
Petitioner wanted to acquire a five (5)-square meter lot occupied by its
production well. The lot is part of respondent’s property covered by TCT
No. 168605 and located in Banilad, Cebu City. Petitioner initiated
negotiations7 with respondent J. King and Sons Company, Inc. for the
voluntary sale of the latter’s property. Respondent did not acquiesce to
petitioner’s proposal. After the negotiations had failed, petitioner
pursuant to its charter8 initiated
expropriation proceedings through Board Resolution No. 015-
20049 which was duly approved by the Local Water Utilities
Administration (LWUA).10 On 10 November 2004, petitioner filed a
complaint11 to expropriate the five (5)-square meter portion of
respondent’s property.
On 7 February 2005, petitioner filed a motion12 for the issuance of a writ
of possession. Petitioner wanted to tender the amount to respondent
during a rescheduled hearing which petitioner’s counsel had failed to
attend.13Petitioner deposited14 with the Clerk of Court the amount of
₱17,500.00 equivalent to one hundred percent (100%) of the current zonal
value of the property which the Bureau of Internal Revenue had pegged
at ₱3,500.00 per square meter.15 Subsequently, the trial court granted the
motion16 and issued the writ of possession.17Respondent moved for
reconsideration but the motion was denied.18
Respondent filed a petition19 for certiorari under Rule 65 with the Court of
Appeals. It sought the issuance of a temporary restraining order (TRO)
which the Court of Appeals granted.20 Thus, petitioner was not able to
gain entry to the lot.21
On 26 July 2006, the Court of Appeals rendered the assailed
decision22 granting respondent’s petition. It ruled that the board
resolution which authorized the filing of the expropriation complaint
lacked exactitude and particularity which made it invalid; that there was
no genuine necessity for the expropriation of the five (5)-square meter lot
and; that the reliance on Republic Act (R.A.) No. 8974 in fixing the value of
the property contravenes the judicial determination of just compensation.
Petitioner moved23 for reconsideration but the motion was rejected.24
Hence, this petition.
The issues raised by petitioner can be summarized as follows:
1. Whether there was sufficient authority from the petitioner’s
board of directors to institute the expropriation complaint; and
2. Whether the procedure in obtaining a writ of possession was
properly observed.
Eminent domain is the right of the state to acquire private property for
public use upon payment of just compensation.25 The power of eminent
domain is inseparable in sovereignty being essential to the existence of
the State and inherent in government. Its exercise is proscribed by only
two Constitutional requirements: first, that there must be just
compensation, and second, that no person shall be deprived of life, liberty
or property without due process of law26 .
Page 78 of 119
As an inherent sovereign prerogative, the power to expropriate pertains
to the legislature. However, Congress may, as in fact it often does,
delegate the exercise of the power to government agencies, public
officials and quasi-public entities. Petitioner is one of the numerous
government offices so empowered. Under its charter, P.D. No. 198, as
amended,27 petitioner is explicitly granted the power of eminent domain.
On 7 November 2000, Congress enacted R.A. No. 8974, entitled "An Act
To Facilitate The Acquisition Of Right-Of-Way, Site Or Location For
National Government Infrastructure Projects And For Other Purposes."
Section 2 thereof defines national government projects as follows:
Sec. 2. National Government Projects.—The term "national government
projects" shall refer to all national government infrastructure, engineering
works and service contracts, including projects undertaken by
government-owned and -controlled corporations, all projects covered by
Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise
known as the Build-Operate-and-Transfer Law, and other related and
necessary activities, such as site acquisition, supply and/or installation of
equipment and materials, implementation, construction, completion,
operation, maintenance, improvement, repair and rehabilitation,
regardless of source of funding." (emphasis ours)
R.A. No. 8974 includes projects undertaken by government owned and
controlled corporations,28 such as petitioner. Moreover, the Implementing
Rules and Regulations of R.A. No. 8974 explicitly includes water supply,
sewerage, and waste management facilities among the national
government projects covered by the law.29 It is beyond question,
therefore, that R.A. No. 8974 applies to the expropriation subject of this
case.
The Court of Appeals held that the board resolution authorizing the
expropriation lacked exactitude and particularity. It described the board
resolution as akin to a general warrant in criminal law and as such
declared it invalid. Respondent reiterates the same argument in its
comment and adds that petitioner’s exercise of the power of eminent
domain was not reviewed by the LWUA.
A corporation does not have powers beyond those expressly conferred
upon it by its enabling law. Petitioner’s charter provides that it has the
powers, rights and privileges given to private corporations under existing
laws, in addition to the powers granted in it.30 All the powers, privileges,
and duties of the district shall be exercised and performed by and
through the board and that any executive, administrative or ministerial
power may be delegated and redelegated by the board to any of its
officers or agents for such
purpose.31 Being a corporation, petitioner can exercise its powers only
through its board of directors.
For petitioner to exercise its power of eminent domain, two requirements
should be met, namely: first, its board of directors passed a resolution
authorizing the expropriation, and; second, the exercise of the power of
eminent domain was subjected to review by the LWUA. In this case,
petitioner’s board of directors approved on 27 February 2004, Board
Resolution No. 015-200432 authorizing its general manager to file
expropriation and other cases. Moreover, the LWUA did review and gave
its stamp of approval to the filing of a complaint for the expropriation of
respondent’s lot. Specifically, the LWUA through its Administrator,
Lorenzo H. Jamora, wrote petitioner’s manager, Armando H. Paredes, a
letter dated 28 February 200533 authorizing petitioner to file the
expropriation case "against the owner of the five-square meter portion of
Lot No. 921-A covered by TCT No. 168805, pursuant to Section 25 of P.D.
No. 198, as amended."
ProvRem Rule 67 Fulltext
The letter not only explicitly debunks respondent’s claim that there was
no authorization from LWUA but it also identifies the lot sought to be
expropriated with sufficient particularity.
It is settled that the validity of a complaint may be questioned
immediately upon its filing through a motion to dismiss or raised
thereafter as an affirmative defense. However, there is no need to further
belabor the issue since it is established that petitioner has the legal
capacity to institute the expropriation complaint.
Anent the second issue involving the issuance of a writ of possession, a
discussion on the various stages in an expropriation proceeding is
necessary.
The general rule is that upon filing of the expropriation complaint, the
plaintiff has the right to take or enter into possession of the real property
involved if he deposits with the authorized government depositary an
amount equivalent to the assessed value of the property for purposes of
taxation. An exception to this procedure is provided by R.A. No. 897434 . It
requires the payment of one hundred percent (100%) of the zonal value
of the property to be expropriated to entitle the plaintiff to a writ of
possession.
In an expropriation proceeding there are two stages, first, is the
determination of the validity of the expropriation, and second is the
determination of just compensation.35 In Tan v. Republic,36 we explained
the two (2) stages in an expropriation proceeding to wit:
(1) Determination of the authority of the plaintiff to exercise the
power of eminent domain and the propriety of its exercise in
the context of the facts involved in the suit. It ends with an
order, if not of dismissal of the action, with condemnation
declaring that the plaintiff has a lawful right to take the
property sought to be condemned for the public use or
purpose described in the complaint, upon payment of just
compensation. An order of expropriation is final. An order of
dismissal, if this be ordained, would be a final one, as it finally
disposes of the action and leaves nothing more to be done by
the courts on the merits. The order of expropriation would also
be a final one for after its issuance, no objection to the right of
condemnation shall be heard. The order of expropriation may
be appealed by any party aggrieved thereby by filing a record
on appeal.
(2) Determination by the court of the just compensation for the
property sought to be taken with the assistance of not more
than three (3) commissioners. The order fixing the just
compensation on the basis of the evidence before the court
and findings of the commissioners would likewise be a final
one, as it would leave nothing more to be done by the court
regarding the issue. A second and separate appeal may be
taken from this order fixing the just compensation.37
Thus, the determination of the necessity of the expropriation is a
justiciable question which can only be resolved during the first stage of an
expropriation proceeding. Respondent’s claim that the expropriated
property is too small to be considered for public use can only be resolved
during that stage.
Further, the Court of Appeals ruled that Section 4 of R.A. No. 8974 runs
counter to the express mandate of Section 2 of Rule 67.38 It held that the
law undermined the principle that the determination of just compensation
is a judicial function. However, this Court has already settled the issue. In
Republic v. Gingoyon,39 this Court held that:
Page 79 of 119
It is the plain intent of Rep. Act No. 8974 to supersede the system of
deposit under Rule 67 with the scheme of "immediate payment" in cases
involving national government infrastructure projects.
xxx
It likewise bears noting that the appropriate standard of just
compensation is a substantive matter. It is well within the province of the
legislature to fix the standard, which it did through the enactment of Rep.
Act No. 8974. Specifically, this prescribes the new standards in
determining the amount of just compensation in expropriation cases
relating to national government infrastructure projects, as well as the
manner of payment thereof.
At the same time, Section 14 of the Implementing Rules recognizes the
continued applicability of Rule 67 on procedural aspects when it provides
"all matters regarding defenses and objections to the complaint, issues on
uncertain ownership and conflicting claims, effects of appeal on the rights
of the parties, and such other incidents affecting the complaint shall be
resolved under the provisions on expropriation of Rule 67 of the Rules of
Court.40
R.A. No. 8974 does not take away from the courts the power to judicially
determine the amount of just compensation. The law merely sets the
minimum price of the property as the provisional value. Thus,
the amount of just compensation must still be determined by the courts
according to the standards set forth in Section 541 of R.A. No. 8974.
R.A. No. 8974 provides a different scheme for the obtention of a writ of
possession. The law does not require a deposit with a government bank;
instead it requires the government to immediately pay the property
owner.42 The provisional character of this payment means that it is not yet
final, yet, sufficient under the law to entitle the Government to the writ of
possession over the expropriated property.43 The provisional payment is a
prerequisite44 and a trigger45 for the issuance of the writ of possession. In
Gingoyon,46 we held that:
It is the plain intent of Rep. Act No. 8974 to supersede the system of
deposit under Rule 67 with the scheme of "immediate payment" in cases
involving national government infrastructure projects.47
xxx
Rep. Act. No. 8974 is plainly clear in imposing the requirement of
immediate prepayment, and no amount of statutory deconstruction can
evade such requisite. It enshrines a new approach towards eminent
domain that reconciles the inherent unease attending expropriation
proceedings with a position of fundamental equity. While expropriation
proceedings have always demanded just compensation in exchange for
private property, the previous deposit requirement impeded immediate
compensation to the private owner, especially in cases wherein the
determination of the final amount of compensation would prove highly
disputed. Under the new modality prescribed by Rep. Act. No. 8974, the
private owner sees immediate monetary recompense, with the same
degree of speed as the taking of his/her property.481avvphi1
Petitioner was supposed to tender the provisional payment directly to
respondent during a hearing which it had failed to attend. Petitioner,
then, deposited the provisional payment with the court. The trial court did
not commit an error in accepting the deposit and in issuing the writ of
possession. The deposit of the provisional amount with the court is
equivalent to payment.
Indeed, Section 4 of R.A. No. 8974 is emphatic to the effect that "upon
compliance with the guidelines…the court shall immediately issue to the
ProvRem Rule 67 Fulltext
implementing agency an order to take possession of the property and
start the implementation of the project."49 Under this statutory provision,
when the government, its agencies or government-owned and controlled
corporations, make the required provisional payment, the trial court has a
ministerial duty to issue a writ of possession. In Capitol Steel Corporation
v. PHIVIDEC Industrial Authority,50 we held that:
Upon compliance with the requirements, a petitioner in an expropriation
case…is entitled to a writ of possession as a matter of right and it
becomes the ministerial duty of the trial court to forthwith issue the writ
of possession. No hearing is required and the court neither exercises its
discretion or judgment in determining the amount of the provisional
value of the properties to be expropriated as the legislature has fixed the
amount under Section 4 of R.A. No. 8974.51 (emphasis ours)
It is mandatory on the trial court’s part to issue the writ of possession and
on the sheriff’s part to deliver possession of respondent’s property to
petitioner pursuant to the writ.
WHEREFORE, the Court of Appeals’ Decision dated 26 July 2006 and
Resolution dated 28 September 2006 are REVERSED. The ORDERS of the
Regional Trial Court dated 01 April 2005 and 9 May 2005 are hereby
REINSTATED. The Regional Trial Court is further DIRECTED to immediately
REMIT the amount of ₱17,500.00 to respondent and to REQUIRE the
sheriff to implement the writ of possession. The case is REMANDED to the
trial court for further proceedings.
SO ORDERED.
#8 G.R. No. 156093 February 2, 2007
NATIONAL POWER CORP., Petitioner,
vs.
SPOUSES NORBERTO AND JOSEFINA DELA CRUZ, METROBANK,
Dasmariñas, Cavite Branch, REYNALDO FERRER, and S.K. DYNAMICS
MANUFACTURER CORP., Respondents.
DECISION
VELASCO, JR., J.:
The Case
In this petition for review under Rule 45 of the Rules of Court, petitioner
National Power Corporation (NAPOCOR) seeks to annul and set aside the
November 18, 2002 Decision1 of the Court of Appeals (CA) in CA-G.R. CV
No. 67446, which affirmed the December 28, 1999 Order2 of the Imus,
Cavite Regional Trial Court (RTC), Branch XX in Civil Case No. 1816-98,
which fixed the fair market value of the expropriated lots at PhP 10,000.00
per square meter.
The Facts
Petitioner NAPOCOR is a government-owned and controlled corporation
created under Republic Act No. 6395, as amended, with the mandate of
developing hydroelectric power, producing transmission lines, and
developing hydroelectric power throughout the Philippines. NAPOCOR
decided to acquire an easement of right-of-way over portions of land
within the areas of Dasmariñas and Imus, Cavite for the construction and
maintenance of the proposed Dasmariñas-Zapote 230 kV Transmission
Line Project.3
Page 80 of 119
On November 27, 1998, petitioner filed a Complaint4 for eminent domain
and expropriation of an easement of right-of-way against respondents as
registered owners of the parcels of land sought to be expropriated, which
were covered by Transfer Certificates of Title (TCT) Nos. T-313327, T-
671864, and T-454278. The affected areas were 51.55, 18.25, and 14.625
square meters, respectively, or a total of 84.425 square meters.
After respondents filed their respective answers to petitioner’s Complaint,
petitioner deposited PhP 5,788.50 to cover the provisional value of the
land in accordance with Section 2, Rule 67 of the Rules of Court.5 Then, on
February 25, 1999, petitioner filed an Urgent Ex-Parte Motion for the
Issuance of a Writ of Possession, which the trial court granted in its March
9, 1999 Order. The trial court issued a Writ of Possession over the lots
owned by respondents spouses de la Cruz and respondent Ferrer on
March 10, 1999 and April 12, 1999, respectively.
However, the trial court dropped the Dela Cruz spouses and their
mortgagee, Metrobank, as parties-defendants in its May 11, 1999
Order,6 in view of the Motion to Intervene filed by respondent/intervenor
Virgilio M. Saulog, who claimed ownership of the land sought to be
expropriated from respondents spouses Dela Cruz.
On June 24, 1999, the trial court terminated the pre-trial in so far as
respondent Ferrer was concerned, considering that the sole issue was the
amount of just compensation, and issued an Order directing the
constitution of a Board of Commissioners with respect to the property of
respondent S.K. Dynamics. The trial court designated Mr. Lamberto C.
Parra, Cavite Provincial Assessor, as chairman, while petitioner nominated
the Municipal Assessor of Dasmariñas, Mr. Regalado T. Andaya, as
member. Respondent S.K. Dynamics did not nominate any commissioner.
As to the just compensation for the property of Saulog, successor-in-
interest of the Dela Cruz spouses, the trial court ordered the latter and
petitioner to submit their compromise agreement.
The commissioners conducted an ocular inspection of S.K. Dynamics’
property, and on October 8, 1999, they submitted a report to the trial
court, with the following pertinent findings:
In arriving our [sic] estimate of values our studies and analysis include the
following:
I. PROPERTY LOCATION
As shown to us on-site during our ocular inspection,
the appraised property is land only, identified as the
area affected by the construction of the National
Power Corporation (NPC) Dasmariñas-Zapote 230KV
Transmission Lines Project, located within Barangay
Salitran, Dasmariñas, Cavite registered in the name of
S.K. Dynamic[s] Manufacture[r], Corp., under Transfer
Certificate of Title No. T-454278.
II. NEIGHBORHOOD DESCRIPTION
The neighborhood particularly in the immediate
vicinity is within a mixed residential and commercial
area, situated in the northern section of the
Municipality of Dasmariñas which was transversed
[sic] by Gen. Emilio Aguinaldo Highway [where]
several residential subdivisions and commercial
establishment[s] are located.
Considered as some of the important improvements
[on] the vicinity are (within 1.5 radius)
ProvRem Rule 67 Fulltext
Orchard Golf and Country Club
Golden City Subdivision
Southfield Subdivisions
Arcontica Sports Complex
Max’s Restaurant
Waltermart Shopping Mall
UMC Medical Center
Several savings and Commercial Banks as
well as several Gasoline stations.
Community centers such as, [sic] churches, public
markets, shopping malls, banks and gasoline stations
are easily accessible from the subject real properties.
Convenience facilities such as electricity, telephone
service as well as pipe potable water supply system
are all available along Gen. Emilio Aguinaldo
Highway.
Public transportation consisting of passenger
jeepneys and buses as well taxicabs are [sic] regularly
available along Gen. E. Emilio Aguinaldo Highway
[sic].
xxxx
IV. HIGHEST AND MOST PROFITABLE USE
xxxx
The subject property is situated within the
residential/commercial zone and considering the area affected
and taking into consideration, their location, shape, lot
topography, accessibility and the predominant uses of
properties in the neighborhood, as well as the trend of land
developments in the vicinity, we are on the opinion that the
highest and most profitable use of the property is good for
residential and commercial purposes.
V. VALUATION OF LAND MARKET DATA
xxxx
Based on the analysis of data gathered and making the proper
adjustments with respect to the location, area, shape, accessibility, and
the highest and best use of the subject properties, it is the opinion of the
herein commissioners that the fair market value of the subject real
properties is P10,000.00 per square meter, as of this date, October 05,
1999.7
Thus, both commissioners recommended that the property of S.K.
Dynamics to be expropriated by petitioner be valued at PhP 10,000.00 per
square meter.
The records show that the commissioners did not afford the parties the
opportunity to introduce evidence in their favor, nor did they conduct
Page 81 of 119
hearings before them. In fact, the commissioners did not issue notices to
the parties to attend hearings nor provide the concerned parties the
opportunity to argue their respective causes.
Upon the submission of the commissioners’ report, petitioner was not
notified of the completion or filing of it nor given any opportunity to file
its objections to it.
On December 1, 1999, respondent Ferrer filed a motion adopting in toto
the commissioners’ report with respect to the valuation of his
property.8 On December 28, 1999, the trial court consequently issued the
Order approving the commissioners’ report, and granted respondent
Ferrer’s motion to adopt the subject report. Subsequently, the just
compensation for the disparate properties to be expropriated by
petitioner for its project was uniformly pegged at PhP 10,000.00 per
square meter.
Incidentally, on February 11, 2000, respondent S.K. Dynamics filed a
motion informing the trial court that in addition to the portion of its
property covered by TCT No. T-454278 sought to be expropriated by
petitioner, the latter also took possession of an 8.55-square meter portion
of S.K. Dynamics’ property covered by TCT No. 503484 for the same
purpose––to acquire an easement of right-of-way for the construction
and maintenance of the proposed Dasmariñas-Zapote 230 kV
Transmission Line Project. Respondent S.K. Dynamics prayed that said
portion be included in the computation of the just compensation to be
paid by petitioner.
On the same date, the Imus, Cavite RTC granted S.K. Dynamics’ motion to
have the 8.55-square meter portion of its property included in the
computation of just compensation.1awphi1.net
The Ruling of the Regional Trial Court
As previously stated, in its December 28, 1999 Order, the trial court fixed
the just compensation to be paid by petitioner at PhP 10,000.00 per
square meter. The relevant portion of the said Order reads as follows:
On October 8, 1999, a Commissioner’s Valuation Report was submitted in
Court by the Provincial Assessor of Cavite and by the Municipal Assessor
of Dasmariñas, Cavite. Quoting from said Report, thus:
"Based on the analysis of data gathered and making the proper
adjustments with respect to location, area, shape, accessibility, and the
highest and best use of the subject properties, it is the opinion of herein
commissioners that the fair market value of the subject real properties is
₧10,000.00 per square meter, as of this date, October 05, 1999."
Finding the opinion of the Commissioners to be in order, this Court
approves the same. Accordingly, the Motion filed by [respondent]
Reynaldo Ferrer adopting said valuation report is granted.
SO ORDERED. 9
On January 20, 2000, petitioner filed a Motion for Reconsideration of the
abovementioned Order, but said motion was denied in the trial court’s
March 23, 2000 Order, which states that:
The basis of [petitioner] in seeking to set aside the Order dated December
28, 1999 is its claim that the Commissioners’ Report fixing the just
compensation at P10,000.00 per square meter is exorbitant, unjust and
unreasonable. To support its contention, [petitioner] invoked Provincial
Appraisal Committee Report No. 08-95 dated October 25, 1995 which set
the just compensation of lots along Gen. Aguinaldo Highway at P3,000.00
per sq.m. only.
ProvRem Rule 67 Fulltext
By way of opposition, [respondent] Dynamics countered that the
valuation of a lot under expropriation is reckoned at the time of its taking
by the government. And since in the case at bar, the writ of possession
was issued on March 10, 1999, the price or value for 1999 must be the
one to be considered.
We find for the defendant.
The PAR Resolution alluded to by [petitioner] was passed in 1995 or four
(4) years [before] the lot in question was taken over by the government.
This explains why the price or cost of the land has considerably increased.
Besides, the valuation of P10,000.00 per sq.m. was the one recommended
by the commissioner designated by [petitioner] itself and concurred in by
the Provincial Assessor of Cavite.
Be that as it may, the Motion for Reconsideration is denied.
SO ORDERED.10
The Ruling of the Court of Appeals
Unsatisfied with the amount of just compensation, petitioner filed an
appeal before the CA. In resolving the appeal, the CA made the following
findings:
We find nothing on record which would warrant the reversal of the Order
dated December 28, 1999 of the court a quo.
[Petitioner] submits that the order of the court a quo adopting the
Commissioners [sic] Valuation Report, fixing the just compensation for the
subject lots in the amount of P10,000.00 per square meter is exhorbitant
[sic], highly speculative and without any basis. In support thereto,
[petitioner] presented before the court a quo the Provincial Appraisal
Committee of Cavite Resolution No. 08-95 x x x which fixed the fair
market value of lots located along Gen. Aguinaldo Highway, Dasmariñas,
Cavite, which incidentally includes the lots subject of this proceedings
[sic], in the amount of P3,000.00 per square meter.
We do not agree.
"The nature and character of the land at the time of its taking is the
principal criterion to determine just compensation to the land owner."
(National Power Corporation vs. Henson, 300 SCRA 751-756).
The CA then cited Section 4, Rule 67 of the 1997 Rules of Civil
Procedure11 to explain why Resolution No. 08-95 could not "be used as [a]
basis for determining the just compensation of the subject lots, which by
reason of the changed commercial conditions in the vicinity, could have
increased its value greater than its value three (3) years ago." The said
resolution, which fixed the fair market value of the lots, including that of
the disputed lots along Gen. Aguinaldo Highway, was approved on
October 25, 1995, while petitioner filed the Complaint for the
expropriation of the disputed lots on November 27, 1998, or more than
three (3) years had elapsed after said resolution was approved. Reflecting
on the commissioners’ report, the CA noted that since the property
underwent important changes and improvements, "the highest and most
profitable use of the property is good for residential and commercial
purposes."
As regards the commissioners’ failure to conduct a hearing "to give the
parties the opportunity to present their respective evidence," as alleged
by petitioner, the CA opined that "[t]he filing by [petitioner] of a motion
for reconsideration accorded it ample opportunity to dispute the findings
of the commissioners, so that [petitioner] was as fully heard as there
might have been hearing actually taken place x x x."
Page 82 of 119
The CA ultimately rendered its judgment, as follows:
WHEREFORE, premises considered, the present appeal is hereby
DISMISSED for lack of merit. The Order dated December 28, 1999 and
March 23, 2000 of the court a quo are hereby AFFIRMED by this Court.
SO ORDERED.12
Significantly, petitioner did not file a Motion for Reconsideration of the
CA November 18, 2002 Decision, but it directly filed a petition for review
before us.
The Issues
In this petition for review, the issues are the following:
PETITIONER WAS DENIED DUE PROCESS WHEN IT WAS NOT ALLOWED
TO PRESENT EVIDENCE ON THE REASONABLE VALUE OF THE
EXPROPRIATED PROPERTY BEFORE THE BOARD OF COMMISSIONERS.
THE VALUATION OF JUST COMPENSATION HEREIN WAS NOT BASED
FROM THE EVIDENCE ON RECORD AND OTHER AUTHENTIC
DOCUMENTS.13
The Court’s Ruling
We find this petition meritorious.
It is beyond question that petitions for review may only raise questions of
law which must be distinctly set forth;14thus, this Court is mandated to
only consider purely legal questions in this petition, unless called for by
extraordinary circumstances.
In this case, petitioner raises the issue of denial of due process because it
was allegedly deprived of the opportunity to present its evidence on the
just compensation of properties it wanted to expropriate, and the
sufficiency of the legal basis or bases for the trial court’s Order on the
matter of just compensation. Unquestionably, a petition for review under
Rule 45 of the Rules of Court is the proper vehicle to raise the issues in
question before this Court.
In view of the significance of the issues raised in this petition, because this
case involves the expenditure of public funds for a clear public purpose,
this Court will overlook the fact that petitioner did not file a Motion for
Reconsideration of the CA November 18, 2002 Decision, and brush aside
this technicality in favor of resolving this case on the merits.
First Issue: Petitioner was deprived of due process when it was not given
the opportunity to present evidence before the commissioners
It is undisputed that the commissioners failed to afford the parties the
opportunity to introduce evidence in their favor, conduct hearings before
them, issue notices to the parties to attend hearings, and provide the
opportunity for the parties to argue their respective causes. It is also
undisputed that petitioner was not notified of the completion or filing of
the commissioners’ report, and that petitioner was also not given any
opportunity to file its objections to the said report.
A re-examination of the pertinent provisions on expropriation, under Rule
67 of the Rules of Court, reveals the following:
SEC. 6. Proceedings by commissioners.—Before entering upon the
performance of their duties, the commissioners shall take and subscribe
an oath that they will faithfully perform their duties as commissioners,
ProvRem Rule 67 Fulltext
which oath shall be filed in court with the other proceedings in the case.
Evidence may be introduced by either party before the commissioners
who are authorized to administer oaths on hearings before them, and the
commissioners shall, unless the parties consent to the contrary, after due
notice to the parties to attend, view and examine the property sought to
be expropriated and its surroundings, and may measure the same, after
which either party may, by himself or counsel, argue the case. 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
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.
SEC. 7. Report by commissioners and judgment thereupon.—The court
may order the commissioners to report when any particular portion of the
real estate shall have been passed upon by them, and may render
judgment upon such partial report, and direct the commissioners to
proceed with their work as to subsequent portions of the property sought
to be expropriated, and may from time to time so deal with such
property. The commissioners shall make a full and accurate report to the
court of all their proceedings, and such proceedings shall not be effectual
until the court shall have accepted their report and rendered judgment in
accordance with their recommendations. Except as otherwise expressly
ordered by the court, such report shall be filed within sixty (60) days from
the date the commissioners were notified of their appointment, which
time may be extended in the discretion of the court. Upon the filing of
such report, the clerk of the court shall serve copies thereof on all
interested parties, with notice that they are allowed ten (10) days within
which to file objections to the findings of the report, if they so desire.
SEC. 8. Action upon commissioners’ report.—Upon the expiration of the
period of ten (10) days referred to in the preceding section, or even
before the expiration of such period but after all the interested parties
have filed their objections to the report or their statement of agreement
therewith, the court may, after hearing, accept the report and render
judgment in accordance therewith; or, for cause shown, it may recommit
the same to the commissioners for further report of facts; or it may set
aside the report and appoint new commissioners; or it may accept the
report in part and reject it in part; and it may make such order or render
such judgment as shall secure to the plaintiff the property essential to the
exercise of his right of expropriation, and to the defendant just
compensation for the property so taken.
Based on these provisions, it is clear that in addition to the ocular
inspection performed by the two (2) appointed commissioners in this
case, they are also required to conduct a hearing or hearings to determine
just compensation; and to provide the parties the following: (1) notice of
the said hearings and the opportunity to attend them; (2) the opportunity
to introduce evidence in their favor during the said hearings; and (3) the
opportunity for the parties to argue their respective causes during the
said hearings.
The appointment of commissioners to ascertain just compensation for the
property sought to be taken is a mandatory requirement in expropriation
cases. In the instant expropriation case, where the principal issue is the
determination of just compensation, a hearing before the commissioners
is indispensable to allow the parties to present evidence on the issue of
just compensation. While it is true that the findings of commissioners may
be disregarded and the trial court may substitute its own estimate of the
value, the latter may only do so for valid reasons, that is, where the
commissioners have applied illegal principles to the evidence submitted
to them, where they have disregarded a clear preponderance of evidence,
or where the amount allowed is either grossly inadequate or excessive.
Thus, "trial with the aid of the commissioners is a substantial right that
may not be done away with capriciously or for no reason at all."15
Page 83 of 119
In this case, the fact that no trial or hearing was conducted to afford the
parties the opportunity to present their own evidence should have
impelled the trial court to disregard the commissioners’ findings. The
absence of such trial or hearing constitutes reversible error on the part of
the trial court because the parties’ (in particular, petitioner’s) right to due
process was violated.
The Court of Appeals erred in ruling that the petitioner was not deprived
of due process when it was able to file a motion for reconsideration
In ruling that petitioner was not deprived of due process because it was
able to file a Motion for Reconsideration, the CA had this to say:
[Petitioner], further, asserts that "the appointed commissioners failed to
conduct a hearing to give the parties the opportunity to present their
respective evidence. According to [petitioner], the Commissioners
Valuation Report was submitted on October 8, 1999 in violation of the
appellant’s right to due process as it was deprived of the opportunity to
present evidence on the determination of the just compensation."
We are not persuaded.
The filing by [petitioner] of a motion for reconsideration accorded it
ample opportunity to dispute the findings of the commissioners, so that
[petitioner] was as fully heard as there might have been hearing actually
taken place. "Denial of due process cannot be successfully invoked by a
party who has had the opportunity to be heard on his motion for
reconsideration." (Vda. De Chua vs. Court of Appeals, 287 SCRA 33, 50).16
In this respect, we are constrained to disagree with the CA ruling, and
therefore, set it aside.
While it is true that there is jurisprudence supporting the rule that the
filing of a Motion for Reconsideration negates allegations of denial of due
process, it is equally true that there are very specific rules for
expropriation cases that require the strict observance of procedural and
substantive due process,17 because expropriation cases involve the
admittedly painful deprivation of private property for public purposes and
the disbursement of public funds as just compensation for the private
property taken. Therefore, it is insufficient to hold that a Motion for
Reconsideration in an expropriation case cures the defect in due process.
As a corollary, the CA’s ruling that "denial of due process cannot be
successfully invoked by a party who has had the opportunity to be heard
on his motion for reconsideration," citing Vda. de Chua v. Court of
Appeals, is not applicable to the instant case considering that the cited
case involved a lack of notice of the orders of the trial court in granting
letters of administration. It was essentially a private dispute and therefore,
no public funds were involved. It is distinct from this expropriation case
where grave consequences attached to the orders of the trial court when
it determined the just compensation.
The Court takes this opportunity to elucidate the ruling that the
opportunity to present evidence incidental to a Motion for
Reconsideration will suffice if there was no chance to do so during the
trial. We find such situation to be the exception and not the general rule.
The opportunity to present evidence during the trial remains a vital
requirement in the observance of due process. The trial is materially and
substantially different from a hearing on a Motion for Reconsideration. At
the trial stage, the party is usually allowed several hearing dates
depending on the number of witnesses who will be presented. At the
hearing of said motion, the trial court may not be more accommodating
with the grant of hearing dates even if the movant has many available
witnesses. Before the decision is rendered, a trial court has an open mind
on the merits of the parties’ positions. After the decision has been issued,
the trial court’s view of these positions might be inclined to the side of
ProvRem Rule 67 Fulltext
the winning party and might treat the Motion for Reconsideration and the
evidence adduced during the hearing of said motion perfunctorily and in
a cavalier fashion. The incident might not receive the evaluation and
judgment of an impartial or neutral judge. In sum, the constitutional
guarantee of due process still requires that a party should be given the
fullest and widest opportunity to adduce evidence during trial, and the
availment of a motion for reconsideration will not satisfy a party’s right to
procedural due process, unless his/her inability to adduce evidence during
trial was due to his/her own fault or negligence.
Second Issue: The legal basis for the determination of just compensation
was insufficient
In this case, it is not disputed that the commissioners recommended that
the just compensation be pegged at PhP 10,000.00 per square meter. The
commissioners arrived at the figure in question after their ocular
inspection of the property, wherein they considered the surrounding
structures, the property’s location and, allegedly, the prices of the other,
contiguous real properties in the area. Furthermore, based on the
commissioners’ report, the recommended just compensation was
determined as of the time of the preparation of said report on October 5,
1999.
In B.H. Berkenkotter & Co. v. Court of Appeals, we held, thus:
Just compensation is defined as the full and fair equivalent of the
property sought to be expropriated. The measure is not the taker’s gain
but the owner’s loss. The compensation, to be just, must be fair not only
to the owner but also to the taker. Even as undervaluation would deprive
the owner of his property without due process, so too would its
overvaluation unduly favor him to the prejudice of the public.
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.
The market value of the property is the price that may be agreed upon by
parties willing but not compelled to enter into the contract of sale. Not
unlikely, a buyer desperate to acquire a piece of property would agree to
pay more, and a seller in urgent need of funds would agree to accept less,
than what it is actually worth. x x x
Among the factors to be considered in arriving at the fair market value of
the property are the cost of acquisition, the current value of like
properties, its actual or potential uses, and in the particular case of lands,
their size, shape, location, and the tax declarations thereon.
It is settled that just compensation is to be ascertained as of the time of
the taking, which usually coincides with the commencement of the
expropriation proceedings. Where the institution of the action precedes
entry into the property, the just compensation is to be ascertained as of
the time of the filing of the complaint.18
We note that in this case, the filing of the complaint for expropriation
preceded the petitioner’s entry into the property.
Therefore, it is clear that in this case, the sole basis for the determination
of just compensation was the commissioners’ ocular inspection of the
properties in question, as gleaned from the commissioners’ October 5,
1999 report. The trial court’s reliance on the said report is a serious error
considering that the recommended compensation was highly speculative
and had no strong factual moorings. For one, the report did not indicate
the fair market value of the lots occupied by the Orchard Golf and
Page 84 of 119
Country Club, Golden City Subdivision, Arcontica Sports Complex, and
other business establishments cited. Also, the report did not show how
convenience facilities, public transportation, and the residential and
commercial zoning could have added value to the lots being
expropriated.
Moreover, the trial court did not amply explain the nature and application
of the "highest and best use" method to determine the just compensation
in expropriation cases. No attempt was made to justify the recommended
"just price" in the subject report through other sufficient and reliable
means such as the holding of a trial or hearing at which the parties could
have had adequate opportunity to adduce their own evidence, the
testimony of realtors in the area concerned, the fair market value and tax
declaration, actual sales of lots in the vicinity of the lot being expropriated
on or about the date of the filing of the complaint for expropriation, the
pertinent zonal valuation derived from the Bureau of Internal Revenue,
among others.
More so, the commissioners did not take into account that the Asian
financial crisis in the second semester of 1997 affected the fair market
value of the subject lots. Judicial notice can be taken of the fact that after
the crisis hit the real estate market, there was a downward trend in the
prices of real estate in the country.
Furthermore, the commissioners’ report itself is flawed considering that its
recommended just compensation was pegged as of October 5, 1999, or
the date when the said report was issued, and not the just compensation
as of the date of the filing of the complaint for expropriation, or as of
November 27, 1998. The period between the time of the filing of the
complaint (when just compensation should have been determined), and
the time when the commissioners’ report recommending the just
compensation was issued (or almost one [1] year after the filing of the
complaint), may have distorted the correct amount of just compensation.
Clearly, the legal basis for the determination of just compensation in this
case is insufficient as earlier enunciated. This being so, the trial court’s
ruling in this respect should be set aside.
WHEREFORE, the petition is GRANTED. The December 28, 1999 and
March 23, 2000 Orders of the Imus, Cavite RTC and the November 18,
2002 Decision of the CA are hereby SET ASIDE. This case is remanded to
the said trial court for the proper determination of just compensation in
conformity with this Decision. No costs.
SO ORDERED.
#9 G.R. No. 160890 November 10, 2004
BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs.
COURT OF APPEALS and NATIONAL POWER
CORPORATION, respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a petition for review under Rule 45 of the Rules of Court, assailing
the Decision dated August 30, 2002 of the Court of Appeals in CA-G.R. CV
No. 69402,1 which reversed the Decision of the Regional Trial Court of
Imus, Cavite, Branch 21,2 reducing from P10,000.00 to P3,000.00 the
amount of just compensation for the expropriated land of petitioner; and
ProvRem Rule 67 Fulltext
decreasing from P10,000.00 to P3,000.00 the commissioners' fee for each
of the three commissioners.
On April 15, 1996, private respondent National Power Corporation
(NAPOCOR) filed a Complaint for Eminent Domain, seeking to expropriate
a portion of petitioner Bank of the Philippine Islands' (BPI) property
located in Barrio Bucal, Dasmariñas, Cavite, for the purpose of
constructing and maintaining its Dasmariñas-Zapote 230 KV Transmission
Line Project.
On August 1, 1996, pursuant to Section 2 of Rule 67 of the Rules of
Court,3 NAPOCOR deposited with the Philippine National Bank, NPC
Branch, in Quezon City, the amount of P3,013.60, equivalent to the
assessed value of the property. On August 15, 1996, NAPOCOR notified
BPI, through registered mail, of its intention to take possession of the
property. Thereafter, the trial court granted their urgent ex-parte motion
for the issuance of a writ of possession and authorized them to enter and
take possession of the premises.4
Previously, petitioner BPI filed a motion for bill of particulars which the
trial court denied.5 Consequently, BPI moved for the dismissal of the case
and the same was granted without prejudice to its reinstatement.6 Private
respondent NAPOCOR filed a motion for reconsideration. The trial court
granted the motion and reinstated the case.7
In its Order dated November 28, 1997,8 the trial court designated three
commissioners to determine the just value of the property subject of the
expropriation in this case, namely: Mr. Lamberto C. Parra, Provincial
Assessor of Cavite; Mr. Regalado Andaya, Municipal Assessor of
Dasmariñas, Cavite; and Mr. Rodolfo D. Leonen, Defendant's
Representative.
Accordingly, on February 26, 1999, the Commissioners submitted its
Report which assessed the sum of the area of the property taken and the
estimated value of just compensation at 75.34 square meters x P10,000.00
= P753,400.00, and recommended an additional payment of P524,660.00
as severance damage, or a total of P1,278,060.00.9 Likewise, they
submitted an undated Commissioners' Valuation Report citing the
"Market Data Approach" as the method used in arriving at the amount of
P10,000.00 per square meter as just compensation, whereby the value of
the land is based on sales and listing of comparable property registered
within the immediate vicinity.10
On August 5, 1999, the trial court rendered judgment in favor of BPI, the
dispositive portion of which reads:
WHEREFORE, judgment is hereby rendered declaring that the
portion of the parcel of land situated in Bucal, Dasmariñas,
Cavite, embraced in, and covered by, Transfer Certificate of Title
No. T-292517 of the Registry of Deed of Cavite consisting of
75.34 square meters to have been lawfully expropriated and
now belongs to the plaintiff to be used for the construction and
maintenance of its Dasmariñas-Zapote 230 KV Transmission
Line Project.
The plaintiff is hereby ordered to pay to the defendant, through
the Branch Clerk of this Court, the fair market value of the
property at P10,000.00 per square meter or a total sum of
P753,400.00 with legal rate of interest reckoned from the date
of possession by the plaintiff.
The commissioner's fee is hereby fixed at P10,000.00 each to be
paid by the plaintiff through the Branch Clerk of this Court.
Page 85 of 119
 The Clerk of this Court is ordered to have a certified copy of this
decision be registered in the office of the Register of Deeds of
Cavite.
SO ORDERED.11
After the denial of its motion for reconsideration, NAPOCOR appealed to
the Court of Appeals, which ruled as follows:
WHEREFORE, the appealed judgment is hereby REVERSED. A
new one is entered ordering plaintiff-appellant NAPOCOR to
pay defendant-appellant BPI the amount of P3,000.00 per
square meter as just compensation for the expropriated land;
and P3,000.00 commissioner's fee to each of the three (3)
commissioners.
SO ORDERED.12
Petitioner BPI moved for the reconsideration of the decision of the Court
of Appeals, but the same was denied for lack of merit.
Hence, this petition for review based on the sole issue of whether the
Court of Appeals gravely abused its discretion and seriously erred in fixing
the just compensation for the subject property at P3,000.00 per square
meter.
In petitions for review on certiorari under Rule 45 of the Rules of Court,
the general rule is that only questions of law may be raised by the parties
and passed upon by this Court. However, this rule admits of exceptions, to
wit:
(a) where there is grave abuse of discretion; (b) when the
finding is grounded entirely on speculations, surmises or
conjectures; (c) when the inference made is manifestly
mistaken, absurd or impossible; (d) when the judgment of the
Court of Appeals was based on a misapprehension of facts; (e)
when the factual findings are conflicting; (f) when the Court of
Appeals, in making its findings, went beyond the issues of the
case and the same are contrary to the admissions of both
appellant and appellee; (g) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the
parties and which, if properly considered, would justify a
different conclusion; and, (h) where the findings of fact of the
Court of Appeals are contrary to those of the trial court, or are
mere conclusions without citation of specific evidence, or where
the facts set forth by the petitioner are not disputed by the
respondent, or where the findings of fact of the Court of
Appeals are premised on the absence of evidence and are
contradicted by the evidence on record.13 (Emphasis provided)
The case at bar falls under one of the exceptions, i.e., where the findings
of fact of the Court of Appeals are contrary to those of the trial court.
Petitioner asserts that the finding of just compensation by the court-
appointed commissioners was based on clear evidence of prior sales and
acceptable market valuation methods. Petitioner likewise avers that the
valuation made by the commissioners must be accorded weight. Likewise
it argues that NAPOCOR is estopped from questioning the valuation of
the land considering that its own nominee concurred with the findings of
the other commissioners.
Just compensation is defined as the 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.14 To compensate is to render something
which is equal in value to that taken or received. The word "just" is used
to intensify the meaning of the word "compensation"; to convey the idea
ProvRem Rule 67 Fulltext
that the equivalent to be rendered for the property taken shall be real,
substantial, full, ample.15
In eminent domain or expropriation proceedings, the general rule is that
the just compensation which the owner of 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 given and received
therefor."16
After a careful perusal of the records, we find no reason to disturb this
finding of fact by the Court of Appeals, sufficiently supported as it is, by
the evidence on record.17
We find that the rate imposed by the Commissioners is unsubstantiated.
No official documents were presented to reflect the true market value of
the subject lots in the surrounding area. The Commissioner's Report
merely states that the value of the land is based on sales and listings of
comparable property registered within the immediate vicinity without any
evidence to support the market data provided.
In this instance, we accord more weight to Resolution No. 08-95
promulgated by the Provincial Appraisal Committee of Cavite held at the
Office of the Provincial Assessor on October 25, 1995.18 Said Resolution
pegs as fair and reasonable the value of P3,000.00 per square meter of all
the lots in the Municipality of Dasmariñas, specifically along General
Aguinaldo Highway.
The just compensation is determined as of the date of the taking of the
property or the filing of the complaint whichever came first.19 NAPOCOR
filed the complaint on April 15, 1996. A period of 6 months has elapsed
from the valuation of the Provincial Assessors and the filing of the
complaint. We note the considerable discrepancy between the valuation
of the former and that of the Commissioners. Indeed, the appellate court
computed the increase of the valuation to be 233%.
The Court of Appeals pointed out that more than 70% of the 200 lot
owners have entered into compromise agreements and accepted the
price set by the Provincial Appraisal Committee of Cavite. It is also worthy
to note that one of the Commissioners in this case, Mr. Lamberto C. Parra,
was the Chairman Provincial Assessor and signatory of the same
Resolution.
WHEREFORE, the petition for review on certiorari is DENIED. The Decision
of the Court of Appeals in CA-G.R. CV No. 69402, which reversed the
decision of the Regional Trial Court of Imus, Cavite, Branch 21 in Civil Case
No. 1298-96, is AFFIRMED in toto.
SO ORDERED.
#10 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.
Page 86 of 119
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 Assessor’s 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.
Soriano’s 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;
ProvRem Rule 67 Fulltext
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 Manager’s 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 Manager’s
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."
Page 87 of 119
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 RESPONDENT’S
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 RTC’s
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 RTC’s 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 Court’s 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
ProvRem Rule 67 Fulltext
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 Court’s 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 Republic’s 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
court’s 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
Page 88 of 119
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 petitioner’s 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 petitioner’s 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
ProvRem Rule 67 Fulltext
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
petitioner’s 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
Page 89 of 119
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.1âwphi1It is imposed
against "the person making, signing, issuing, 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 petitioner’s Citizen’s 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 Citizen’s 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.
ProvRem Rule 67 Fulltext
#11 G.R. No. 164282 October 12, 2005
TERESITA M. YUJUICO, Petitioner
vs.
HON. JOSE L. ATIENZA, Chairman, City School, Board of Manila, DR.
MA. LUISA S. QUIÑONES, Co-Chairman, City School Board, and
Schools Division Superintendent, ROGER GERNALE, Member, City
School Board of Manila, HON. MANUEL M. ZARCAL, (in substitution
of ARLENE ORTIZ), Member, City School Board of Manila, BENJAMIN
VALBUENA (In substitution of MILES ROCES), Member, City School
Board of Manila, LIBERTY TOLEDO, Member, City School Board of
Manila, HON. FRANCESCA GERNALE (In substitution of PERCIVAL
FLORIENDO), Member, City School Board of Manila, ISABELITA
SANTOS, Secretary, City School Board of Manila, VICENTE
MACARUBBO (In substitution of Isabelita Ching), Assistant Secretary,
City School Board of Manila, CITY SCHOOL BOARD OF MANILA and
JUDGE MERCEDES POSADA-LACAP, in her capacity as PRESIDING
JUDGE OF THE REGIONAL TRIAL COURT OF MANILA, BRANCH
15, Respondents.
DECISION
Tinga, J.:
This is a Petition for Review on Certiorari instituted by Teresita M. Yujuico,
petitioner in the case for mandamus docketed as Civil Case No. 02-
103748 before the Regional Trial Court (RTC) of Manila, Branch 15.
Petitioner is questioning the propriety of the Order1 dated 25 June 2004,
granting respondents’ Petition for Relief from Judgment under Section 2,
Rule 38 of the 1997 Rules of Civil Procedure.
The operative facts are not disputed.
On 8 December 1995, the City Council of Manila enacted
an Ordinance2 authorizing the City Mayor to acquire by negotiation or
expropriation certain parcels of land for utilization as a site for the
Francisco Benitez Elementary School.3 The property chosen is located
along Solis St. near Juan Luna St. in the Second District of Manila and
contains an approximate area of 3,979.10 square meters. It is covered by
Transfer Certificates of Title Nos. 71541, 71548, 24423, 71544 and 71546,
all in the name of petitioner. The Ordinance provides that an amount not
to exceed the fair market value of the land then prevailing in the area will
be allocated out of the Special Education Fund (SEF) of the City of Manila
(City) to defray the cost of the property’s acquisition.4
Failing to acquire the land by negotiation, the City filed a case for eminent
domain against petitioner as owner of the property. Filed on 22 August
1996, the case was raffled to Branch 15, RTC of Manila and docketed as
Civil Case No. 96-79699.5
On 30 June 2000, the RTC rendered a Decision6 in the expropriation case
in favor of the City. The dispositive portion reads:
WHEREFORE, judgment is hereby rendered as follows:
1.) The lots including the improvements therein of defendant Teresita M.
Yujuico, as described in the complaint, are declared expropriated for
public use;
2.) The fair market value of the lots of defendant is fixed at ₱18,164.80 per
square meter. The fair market value of the improvements of lots subject of
this action is fixed at ₱ 978,000.00;
3.) The plaintiff must pay defendant the sum of ₱72,279,555.68 (3,979.10
sq. m. x ₱18,164.80) representing the value of the subject
Page 90 of 119
lots plus ₱978,000.00 representing the value of the improvements or the
total amount of ₱73,257,555.00 as just compensation for the whole
property (including the improvements) minus the sum of ₱5,363,289.00
that plaintiff deposited in Court per Order dated April 30, 1997, hence the
balance of ₱67,894,266.00 with interest at the rate of 6% per annum from
July 15, 1997 (date of possession of subject property for the purpose of
this proceedings) until the day full payment is made to defendant or
deposited in Court.7
The judgment became final and executory, no appeal having been
interposed by either party.8
On 6 April 2001, petitioner filed a Motion for Execution of Judgment9 which
the trial court granted. Pursuant to a Writ of Execution10 dated 28 June
2001, the branch sheriff served a Notice of Garnishment on the funds of
the City deposited with the Land Bank of the Philippines, YMCA Branch,
Manila (Land Bank) to satisfy the judgment amount of ₱67,894,226.00,
with interest at 6% per annum.11
Invoking jurisprudence holding that public funds cannot be made subject
to garnishment, the City filed a motion to quash the Notice of
Garnishment.12 Acting on the motion, the trial court issued an Order dated
2 August 2001.
In the Order, the lower court recalled that during the hearing on the
motion, the counsel for the City manifested that the amount of
₱36,403,170.00 had been appropriated by the City School Board (CSB)
under CSB Resolutions Nos. 613 and 623, of which ₱31,039,881.00 was
available for release. The amount of ₱5,363,269.00, representing fifteen
percent (15%) of the assessed value of the property, had been deposited
in court at the start of the expropriation proceedings and subsequently
received by petitioner. In line with the manifestation made by the counsel
for the City, the trial court ordered the release to petitioner of the amount
of ₱31,039,881.00 deposited with the Land Bank, in partial payment of the
just compensation adjudged in favor of petitioner.13
The trial court further stated in the Order:
Considering that this case is on all fours with the case of the Municipality
of Makati vs. Court of Appeals (190 SCRA 206), wherein it was ruled that
"x x x Public funds are not subject to levy and execution," the Court
therefore grants plaintiff’s Motion to Quash the Notice of Garnishment
and the Notice of Garnishment to the Landbank of the Philippines issued
by the Branch Sheriff of this Court is hereby ordered lifted.
There being no opposition for the release of the Thirty One Million Thirty
Nine Thousand Eight Hundred Eighty One Pesos (₱31,039,881.00)
deposited with the Land Bank, YMCA Branch as Special Education Fund,
the Manager of the Landbank of the Philippines, YMCA, Manila is hereby
directed to release the said amount to defendant Teresita M. Yujuico in
partial payment of the just compensation adjudged by this Court in its
Decision dated June 30, 2000.
Upon manifestation of the counsel for the plaintiff that it is the City
School Board which has the authority to pass a resolution allocating funds
for the full satisfaction of the just compensation fixed, the said body is
hereby given thirty (30) days from receipt of this Order to pass the
necessary resolution for the payments of the remaining balance due to
defendant Teresita M. Yujuico.14
A copy of the Order dated 2 August 2001 was served on the CSB on 3
August 2001.15
On 30 August 2001, petitioner submitted a manifestation before the trial
court requesting that she be informed by both the City and the CSB if a
resolution had already been passed by the latter in compliance with
ProvRem Rule 67 Fulltext
the Order.16Earlier, petitioner sent a letter to the Superintendent of City
Schools of Manila to verify the CSB’s compliance with the Order.17
Not having been favored with a reply to her queries even after the lapse
of the thirty (30)-day compliance period, petitioner sent a letter to the
CSB dated 10 September 2001, demanding compliance with the Order.18
As there was no action from the CSB, on 1 February 2002, petitioner filed
a petition for contempt of court against respondents Hon. Jose L. Atienza,
Jr., Dr. Ma. Luisa S. Quiñoňes, Roger Gernale, Arlene Ortiz, Miles Roces,
Percival Floriendo, Liberty Toledo, Isabelita Santos and Isabelita Ching in
their capacities as officers and members of the CSB.19 The case was
docketed as Civil Case No. 02-102837 of the Manila RTC.20
Countering the petition for contempt, respondents filed a Motion to
Dismiss,21 wherein they alleged inter alia that they never disregarded
the Order as the matter had in fact been calendared and deliberated upon
during the meetings of the CSB.22 In their subsequent Omnibus
Reply,23 respondents argued that petitioner’s failure to avail of the proper
recourse to enforce the final and executory judgment24 should not be a
ground to hold them in contempt of court. Citing the case of Municipality
of Makati v. Court of Appeals,25 respondents asserted that petitioner
should have filed a petition for mandamus to force the CSB to pass the
necessary resolution for immediate payment of the balance of the just
compensation awarded in her favor.26
According to respondents, petitioner took the Order as a writ of
mandamus when in fact it was a mere order in furtherance of the Writ of
Execution.27 This interpretation, respondents insisted, should never be
allowed since petitioner merely wanted to escape the payment of docket
fees in the filing of the petition for mandamus.28
In an Order29 dated 17 May 2002, the trial court denied the petition for
contempt of court.
On 6 June 2002, petitioner filed a Petition for Mandamus30 against the
members of the CSB, the same respondents in the petition for contempt
of court, seeking to compel them to pass a resolution appropriating the
amount necessary to pay the balance of the just compensation awarded
to petitioner in the expropriation case, Civil Case No. 96-79699. The
petition was docketed as Spl. Civil Action No. 02-103748 and raffled to
Branch 51 of the RTC of Manila. 31
Upon petitioner’s motion,32 Branch 51 of the Manila RTC before which the
mandamus case was pending, in an Order33 dated 23 August 2002,
directed its consolidation with the expropriation case before Branch 15.34
In a Decision35 dated 9 October 2002, the lower court (Branch 15) granted
the petition for mandamus. Specifically, it ordered respondents to
immediately pass a resolution appropriating the necessary amount and
the corresponding disbursement thereof for the full and complete
payment of the balance of the court-adjudged compensation still due
petitioner, ratiocinating as follows:36
This case is on all fours with the case of Municipality of Makati v. Court of
Appeals (190 SCRA 206).
....
The State’s power of eminent domain should be exercised within the
bounds of fair play and justice. In the case at bar, considering that
valuable property has been taken, the compensation to be paid fixed and
the municipality is in full possession and utilizing the property for the
public purpose, for three (3) years, the Court finds that the municipality
has had more than reasonable time to pay full compensation.
Page 91 of 119
The arguments of the herein respondents that passing the ordinance or
the act of appropriating special educational fund is a discretionary act
that could not be compelled by mandamus should be thrown overboard.
It must be stressed that what we have here is a final and executory
judgment, establishing a legal right for the petitioner to demand
fulfillment which on the other hand became an imperative duty on the
part of the respondent to perform the act required.
WHEREFORE, premises considered, the petition is GRANTED, and the
respondents are hereby ordered to immediately pass a resolution
appropriating the necessary amount; and the corresponding
disbursement thereof, for the full and complete payment of the remaining
balance of the court-adjudged compensation due and owing to petitioner
Teresita M. Yujuico.
SO ORDERED.37
Respondents filed a motion for reconsideration, which the trial court
denied in an Order38 dated 13 December 2002.
With respondents not interposing an appeal, the Decision became final
and executory on 2 January 200339 and eventually, the
corresponding Entry of Judgment was issued on 15 January 2003.40 The
court granted petitioner’s Motion for Execution41 in an Order42 dated 12
March 2003.
However, on 14 March 2003, respondents filed a Petition for Relief from
Judgment,43 wherein they also prayed for a temporary restraining order
(TRO) and a writ of preliminary injunction. Respondents invoked
excusable negligence as a ground for their failure to seasonably file an
appeal.44 While it denied the application for TRO in view of its prior order
granting petitioner’s Motion for Execution, the court granted the Petition
for Relief from Judgment in an Order45 dated 25 June 2004. This had the
effect of giving due course to respondents’ appeal despite the fact that
the decision of the trial court had already attained finality.
Finding the Order unacceptable, petitioner elevated it to this Court by way
of a petition for certiorari under Rule 45. In her petition, petitioner asks
that the order of the lower court giving due course to respondents’
appeal be reversed and set aside on a pure question of law.46
Before resolving the substantive issues raised by the parties, the Court will
first address the procedural infirmities ascribed by respondents to the
petition at bar.
Respondents assail the correctness and propriety of the mode of appeal
resorted to by petitioner.47 According to them, the order granting the
petition for relief from judgment is an interlocutory order which cannot
be made the subject of an appeal.48 Respondents likewise argue that
petitioner failed to respect the rule on hierarchy of courts. This Court, they
aver, had consistently held that its original jurisdiction to issue a writ of
certiorari is not exclusive but is concurrent with that of the RTC and the
Court of Appeals in certain cases.49
Respondents have correctly pointed out that an interlocutory order
cannot be made subject to an appeal. However, when viewed in context,
the recitals of the petition clearly disclose and the Court is convinced that
the lower court committed grave abuse of discretion amounting to lack or
excess of jurisdiction when it granted respondents’ petition for relief from
judgment. While this case should have been elevated to this Court not by
way of a petition for review under Rule 45 but through a special civil
action for certiorari under Rule 65, in the exercise of our sound discretion
and in order to write finis to this case which has needlessly dragged on
for so long, we shall treat the petition as a special civil action for certiorari.
After all, it was filed within the reglementary period for the filing of a Rule
65 petition. As we held in Salinas v. NLRC,50 in the interest of justice, this
ProvRem Rule 67 Fulltext
Court has often judiciously treated petitions erroneously captioned as
petitions for review on certiorari as special civil actions for certiorari. This
is in line with the principle that the strict application of procedural
technicalities should not hinder the speedy disposition of the case on the
merits.51
Accordingly, facial allegations of reversible error in the petition will be
treated, as they should be, as contextual averments of grave abuse of
discretion on the part of the court a quo. Appropriately, petitioner
impleaded the RTC Presiding Judge as party-respondent in the instant
petition.
Anent the alleged breach of the rule on hierarchy of courts, the doctrine is
not an iron-clad dictum.52 The rule may be relaxed when exceptional and
compelling circumstances warrant the exercise of this Court’s primary
jurisdiction.53 In this case, the judgment sought to be satisfied has long
attained finality and the expropriated property has been utilized as a
school site for five (5) years now; yet, the awarded just compensation has
not been fully paid. These circumstances, in the Court’s estimation, merit
the relaxation of the technical rules of procedure to ensure that
substantial justice will be served.
Concerning petitioner’s alleged failure to implead the CSB or its new
members before the trial court,54respondents argue that since there are
five (5) new members in the CSB any decision in the case requiring the
CSB to act as a body would prove to be legally impossible. The former
members of the CSB could no longer be compelled to act according to
the orders of the Court since they no longer have the capacity to do so.
On the other hand, respondents continue, the new members cannot be
directed to comply with the Court’s judgment either; they have never
been impleaded in the case; thus, the Court never acquired jurisdiction
over their persons.55
The arguments were effectively neutered in our Resolution dated 8 August
2005. There, we declared:
Considering the arguments posited by both parties, this Court is of the
view that a substitution of the original respondents by the members of
the CSB who replaced them is warranted. The phrase "or such time as may
be granted by the Court" in Sec. 17, Rule 3 of the 1997 Rules of Civil
Procedure denotes that the Court before whom the motion for
substitution is filed may grant a period longer than thirty (30) days for the
purpose. In any event, technical rules on substitution of a party should not
be so narrowly construed as to prevent this Court from taking cognizance
of a case and deciding it on the merits. Moreover, petitioner did make an
attempt to implead the new members of the CSB by making the CSB itself
a respondent before this Court. There is also no showing that the new
members of the CSB have deviated from the stand of their predecessors-
in-interest; hence, there is a substantial need for continuing or
maintaining petitioner’s action against them.56
In the same Resolution, the Court ordered the impleading of the new CSB
members Roger Gernale, Manuel M. Zarcal, Benjamin Valbuena and
Francesca Gernale as party respondents—the last three in substitution of
Arlene Ortiz, Percival Floriendo, Miles Roces—and the new CSB Assistant
Secretary Vicente Macarubbo in substitution of Isabelita Ching.57 Only
Manuel Zarcal filed a Comment58 dated 30 August 2005 through a new
counsel, adopting in toto the comment of his co-respondents. Hence, the
other four newly impleaded party respondents are deemed to have
retained the Office of the City Legal Officer (OCLO) as their counsel and to
have adopted the Commentalready filed by the OCLO in behalf of their
co-respondents.
Thus, the proper substitutions of some party respondents have already
taken place in this case.
Page 92 of 119
The last procedural hurdle thrown petitioner’s way by respondents refers
to the supposed failure of the petition to comply with the requirements of
Section 4, Rule 7 and Section 4, Rule 45 of the 1997 Rules of Civil
Procedure59as amended by Supreme Court Circular A.M. No. 00-2-10-
SC.60 Respondents claim that there was failure to include a verified
statement indicating the material dates relative to the receipt of the
judgments and the filing of the pleadings. The verification, moreover,
allegedly failed to state that petitioner has read the petition61 and that the
copies attached thereto are based on authentic records.62 The defects of
the verification allegedly render the petition without legal effect and
constitute grounds for its dismissal.
The purpose of requiring a verification is to secure an assurance that the
allegations of the petition have been made in good faith; or are true and
correct, not merely speculative.63 This requirement is simply a condition
affecting the form of pleadings and non-compliance therewith does not
necessarily render it fatally defective.64Perusal of the verification in
question shows that there was sufficient compliance with the
requirements of the Rules and the alleged defects are not so material as
to justify the dismissal of the petition.
Now, the substantial issues.
Up for determination is the tenability of the RTC’s favorable action on
respondents’ petition for relief from judgment. This engenders a look at
the grounds and defenses relied upon by respondents in support of their
petition. Sections 2 and 3, Rule 38 of the 1997 Rules of Civil Procedure
provide that a petition for relief may be granted upon a showing that (1)
through fraud, accident, mistake or excusable negligence, a party has
been prevented from taking an appeal, and (2) the party has a good and
substantial cause of action or defense.
The above requisites notwithstanding, it bears stressing that relief from
judgment is premised on equity. It is an act of grace which is allowed only
in exceptional cases.65
In this case, according to respondents they were unable to seasonably file
a notice of appeal due to "excusable negligence."66 One Ronald Silva
(Silva), an employee of the OCLO, allegedly failed to forward
the Order denying respondents’ motion for reconsideration in Civil Case
No. 02-103748 to the handling lawyers. When the order was delivered to
the OCLO on 17 December 2002,67 Silva was the one who received it
because the employee designated to do so was out on official
business.68 Since the employees were busy preparing for the office
Christmas party that day,69 Silva forgot all about the order. He only
remembered it when the order for entry of judgment in the case was
received on 29 January 2003. By that time, however, the order dated 17
December 2002 had already been misplaced.70
Clearly, the situation does not present a case of excusable negligence
which would warrant relief under Rule 38. Time and again, this Court has
ruled that the inability to perfect an appeal in due time by reason of
failure of a counsel’s clerk to notify the handling lawyer is not a
pardonable oversight.71 As held in one case:
. . . The excuse offered by respondent . . . as reason for his failure to
perfect in due time his appeal from the judgment of the Municipal Court,
that counsel’s clerk forgot to hand him the court notice, is the most
hackneyed and habitual subterfuge employed by litigants who fail to
observe the procedural requirements prescribed by the Rules of Court.
The uncritical acceptance of this kind of common-place excuses, in the
face of the Supreme Court’s repeated rulings that they are neither
credible nor constitutive of excusable negligence (Gaerlan v. Bernal, L-
4039, 29 January 1952; Mercado v. Judge Domingo, L-19457, 17
December 1966) is certainly such whimsical exercise of judgment as to be
a grave abuse of discretion.
ProvRem Rule 67 Fulltext
....
In the face of all these facts and circumstances, . . . the respondent judge
revealed a simple-minded willingness to swallow a story patently
concocted to delay as much as possible the satisfaction of a judgment
against respondent . . . .This indiscriminating credulity does not conform
to what is to be expected of a judicial mind.72
Reiterated in numerous cases is the rule that the clerks’ faults are
attributable to the handling lawyers.73 Thus, excuses offered based on the
former’s negligence are not deemed excusable. That the admonitions
issued out by this Court were mostly directed against lawyers in law firms
does not exempt respondents herein from the same treatment. For all
intents and purposes, the set-up at the OCLO is akin to that of a law firm,
the only difference being that the former serves a public entity while the
latter caters to private clients. The following pronouncement in Negros
Stevedoring Co., Inc. v. Court of Appeals74 is apropos:
The negligence committed in the case at bar cannot be considered
excusable, nor is it unavoidable. Time and again, the Court has
admonished law firms to adopt a system of distributing pleadings and
notices, whereby lawyers working therein receive promptly notices and
pleadings intended for them, so that they will always be informed of the
status of their cases. The Court has also often repeated that the
negligence of clerks which adversely affect the cases handled by lawyers
is binding upon the latter.75
Without doubt, it was grave abuse of discretion for the lower court to
have given due course to respondents’ appeal through the grant of their
petition for relief from judgment based on the flimsy ground they
proferred.
Even assuming that the negligence invoked by respondents could be
considered excusable, still the petition should not have been granted. It
must be borne in mind that two requisites must be satisfied before a
petition under Rule 38 may be granted, the other being the existence of a
good and substantial cause of action or defense.
Respondents’ defense consisted of their claim that the CSB has a
personality separate and distinct from the City such that it should not be
made to pay for the City’s obligations.76 However, the argument is
undercut by the particular circumstances of this case.
It is worthy of note that the records of this case clearly show that the
same counsel, the OCLO, represented the City in the expropriation case
and now, all except one of the individual respondents in the case at bar.
Worthy of note are the following manifestations relied upon by the lower
court in issuing the order on the motion to quash the Notice of
Garnishment over the funds of the City, to wit:
The Motion to Quash Notice of Garnishment was heard by this court this
morning and Atty. Joseph Aquino appeared for the plaintiff (City of
Manila) and Atty. Federico Alday, for the defendant. Atty. Aquino
manifested that the amount of Thirty Six Million Four Hundred Three
Thousand One Hundred Seventy Pesos (₱36,403,170.00) had been
appropriated by the City School Board (CSB) under CSB Resolution
Nos. 613 and 623 for this purpose.
....
Upon manifestation of the counsel for the plaintiff that it is the City
School Board which has the authority to pass a resolution allocating
funds for the full satisfaction of the just compensation fixed, the said
body is hereby given thirty (30) days from receipt of this Order to pass the
necessary resolution for the payments of the remaining balance due to
defendant Teresita M. Yujuico. (Emphasis supplied.)77
Page 93 of 119
The manifestation was made by the same counsel now claiming that it is
actually the City which should be made liable for the payment of its own
obligations. This, after it trotted out the CSB as the entity with authority to
pass a resolution that would satisfy the obligation it had vigorously
pursued.
The above circumstances, coupled with the rule that an act performed by
counsel within the scope of a "general or implied authority" is regarded as
an act of the client,78 render the City and, through it, respondents
in estoppel. By estoppel is meant that an admission or representation is
rendered conclusive upon the person making it and cannot be denied or
disproved as against the person relying thereon.79 Petitioner and the
courts acted in accordance with the City’s own manifestations by running
after the CSB. At this point, respondents and the OCLO can no longer turn
around and toss the obligation back to the City. After all, it was the legal
counsel of both the City and respondents who made a big production out
of showing that the liability incurred by the City will be borne by the CSB.
Contrary to respondents’ claim, the law does not make the CSB an entity
independent from the City of Manila. This is evident from the provisions
of the Local Government Code of 1991, the law providing for the creation
of school boards. It states:
TITLE IV.- LOCAL SCHOOL BOARDS
Section 98. Creation, Composition and Compensation.-
(a) There shall be established in every province, city or municipality a
provincial, city, or municipal school board, respectively.
(b) The composition of local school boards shall be as follows:
...
(2) The city school board shall be composed of the city mayor and the city
superintendent of schools as co-chairmen; the chairman of the education
committee of the sangguniang panlungsod, the city treasurer, the
representative of the "pederasyon ng mga sangguniang kabataan" in
the sangguniang panlungsod, the duly elected president of the city
federation of parents-teachers associations, the duly elected
representative of the non-academic personnel of public schools in the
city, as members;
...
Section 101. Compensation and Remuneration.-
The co-chairmen and members of the provincial, city or municipal school
board shall perform their duties as such without compensation or
remuneration. Members thereof who are not government officials or
employees shall be entitled to traveling expenses and allowances
chargeable against the funds of the local school board concerned, subject
to existing accounting and auditing rules and regulations.80
The fact that the highest ranking official of a local government unit (LGU)
is designated as co-chairman of the school board negates the claim in this
case that the CSB has a personality separate and distinct from the City.
The other fact that government officials in the school board do not
receive any compensation or remuneration while NGO representatives
merely receive allowances underscores the absurdity of respondents’
argument all the more. Indeed, such would not be the situation if the
school board has a personality separate and distinct from the LGU.
Respondents also argue that the members of the CSB cannot be directed
to decide a discretionary function in the specific manner the court
ProvRem Rule 67 Fulltext
desires.81 The question of whether the enactment of an ordinance to
satisfy the appropriation of a final money judgment rendered against an
LGU may be compelled by mandamus has already been settled
in Municipality of Makati v. Court of Appeals.82
Nevertheless, this is not to say that private respondent and PSB are left
with no legal recourse. Where a municipality fails or refuses, without
justifiable reason, to effect payment of a final money judgment rendered
against it, the claimant may avail of the remedy of mandamus in order to
compel the enactment and approval of the necessary appropriation
ordinance, and the corresponding disbursement of municipal funds
therefore [SeeViuda De Tan Toco v. The Municipal Council of Iloilo, supra,
Baldivia v. Lota, 107 Phil 1099 (1960); Yuviengco v. Gonzales, 108 Phil 247
(1960)].83
Clearly, mandamus is a remedy available to a property owner when a
money judgment is rendered in its favor and against a municipality or city,
as in this case.
Moreover, the very ordinance authorizing the expropriation of petitioner’s
property categorically states that the payment of the expropriated
property will be defrayed from the SEF. To quote:
An amount not to exceed the current fair market value, prevailing in the
area appraised in accordance with the requirements of existing laws, rules
and regulations, of the property to be acquired or so much thereof as
may be necessary for the purpose shall be allocated out of the Special
Education Fund of the City to defray the cost of acquisition of the above-
mentioned parcels of land.84
The legality of the above-quoted provision is presumed. The source of the
amount necessary to acquire petitioner’s property having in fact been
specified by the City Council of Manila, the passage of the resolution for
the allocation and disbursement thereof is indeed a ministerial duty of the
CSB.
Furthermore, respondents had argued in the petition for contempt filed
against them by petitioner that the latter’s failure to invoke the proper
remedy of mandamus should not be a ground to penalize them with
contempt. In their haste to have the contempt petition dismissed,
respondents consistently contended that what petitioner should have
filed was a case for mandamus to compel passage of the corresponding
resolution of the CSB if she wanted immediate payment.85 Having relied
on these representations of respondents and having filed the action they
adverted to, petitioner cannot now be sent by respondents on another
wild goose chase to obtain ultimate recovery of what she is legally
entitled to.
While this Court recognizes the power of LGU to expropriate private
property for public use, it will not stand idly by while the expropriating
authority maneuvers to evade the payment of just compensation of
property already in its possession.
The notion of expropriation is hard enough to take for a private owner.
He is compelled to give up his property for the common weal. But to give
it up and wait in vain for the just compensation decreed by the courts is
too much to bear. In cases like these, courts will not hesitate to step in to
ensure that justice and fair play are served. As we have already ruled:
. . . This Court will not condone petitioner’s blatant refusal to settle its
legal obligation arising from expropriation proceedings it had in fact
initiated. It cannot be over-emphasized that within the context of the
State’s inherent power of eminent domain,
. . . (j)ust compensation means not only the correct determination of the
amount to be paid to the owner of the land but also the payment of the
Page 94 of 119
land within a reasonable time from its taking. Without prompt payment,
compensation cannot be considered ‘just’ for the property owner is made
to suffer the consequence of being immediately deprived of his land while
being made to wait for a decade or more before actually receiving the
amount necessary to cope with his loss (Consculluela v. The Honorable
Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA 393,
400. See also Provincial Government of Sorsogon v. Vda. De Villaroya, G.R.
No. 64037, August 27, 1987, 153 SCRA 291).86
The decision rendering just compensation in petitioner’s favor was
promulgated way back in the year 2000.87 Five years have passed, yet the
award still has not been fully satisfied. Recently, in Republic v. Lim,88 this
Court made the following pronouncement:
. . . while the prevailing doctrine is that the non-payment of just
compensation does not entitle the private landowner to recover
possession of the expropriated lots, however, in cases where the
government failed to pay just compensation within five (5) years from
the finality of judgment in the expropriation proceedings, the owners
concerned shall have the right to recover possession of their property.
This is in consonance with the principle that ‘the government cannot keep
the property and dishonor the judgment.’ To be sure, the five-year period
limitation will encourage the government to pay just compensation
punctually. This is in keeping with justice and equity. After all, it is the duty
of the government, whenever it takes property from private persons
against their will, to facilitate the payment of just
compensation.89 (Citations omitted)
Given the above ruling, the reversion of the expropriated property to the
petitioner would prove not to be a remote prospect should respondents
and the City they represent insist on trudging on their intransigent course.
One final note. Respondents’ appeal from the Decision dated 9 October
2002 of the lower court, made possible by its grant of their petition for
relief, is before the Court of Appeals where it is docketed as CA-G.R. No.
86692.90The court’s Decision in this case would have obvious
consequences on said appeal; hence, referral of this Decision to the Court
of Appeals is in order.
WHEREFORE, the petition is GRANTED. The Order of the trial court dated
25 June 2004, granting respondents’ Petition for Relief from Judgment is
REVERSED and set aside and its Decision dated 9 October 2002, ordering
respondents to immediately pass a resolution for the payment of the
balance of the court-adjudged compensation due petitioner, is reinstated.
Let a copy of this Decision be furnished the Court of Appeals for its
information and guidance in relation to CA-G.R. No. 86692 entitled
"Teresita M. Yujuico v. Hon. Jose L. Atienza, Jr., et al."
SO ORDERED.
#12 G.R. No. 165828 August 24, 2011
NATIONAL POWER Present:
CORPORATION,
Petitioner, CORONA, C.J., Chairperson,
LEONARDO-DE CASTRO,
BERSAMIN,
- versus - DEL CASTILLO, and
VILLARAMA, JR., JJ.
HEIRS OF MACABANGKIT
SANGKAY, namely: CEBU,
BATOWA-AN, SAYANA, NASSER,
MANTA, EDGAR, PUTRI ,
MONGKOY*, and AMIR, all
ProvRem Rule 67 Fulltext
surnamed MACABANGKIT,
Respondents.
x--------------------------------------------------------------x
DECISION
BERSAMIN, J.:
Private property shall not be taken for
public use without just compensation.
Section 9, Article III, 1987 Constitution
The application of this provision of the Constitution is the focus of this
appeal.
Petitioner National Power Corporation (NPC) seeks the review
on certiorari of the decision promulgated on October 5, 2004,[1] whereby
the Court of Appeals (CA) affirmed the decision dated August 13, 1999
and the supplemental decision dated August 18, 1999, ordering NPC to
pay just compensation to the respondents, both rendered by the Regional
Trial Court, Branch 1, in Iligan City (RTC).
Antecedents
Pursuant to its legal mandate under Republic Act No. 6395 (An Act
Revising the Charter of the National Power Corporation), NPC undertook
the Agus River Hydroelectric Power Plant Project in the 1970s to generate
electricity for Mindanao. The project included the construction of several
underground tunnels to be used in diverting the water flow from the Agus
River to the hydroelectric plants.[2]
On November 21, 1997, the respondents, namely: Cebu, Bangowa-an,
Sayana, Nasser, Manta, Edgar, Putri, Mongkoy and Amir, all surnamed
Macabangkit (Heirs of Macabangkit), as the owners of land with an area
of 221,573 square meters situated in Ditucalan, Iligan City, sued NPC in
the RTC for the recovery of damages and of the property, with the
alternative prayer for the payment of just compensation.[3] They alleged
that they had belatedly discovered that one of the underground tunnels
of NPC that diverted the water flow of the Agus River for the operation of
the Hydroelectric Project in Agus V, Agus VI and Agus VII traversed their
land; that their discovery had occurred in 1995 after Atty. Saidali C.
Gandamra, President of the Federation of Arabic Madaris School, had
rejected their offer to sell the land because of the danger the
underground tunnel might pose to the proposed Arabic Language
Training Center and Muslims Skills Development Center; that such
rejection had been followed by the withdrawal by Global Asia
Management and Resource Corporation from developing the land into a
housing project for the same reason; that Al-Amanah Islamic Investment
Bank of the Philippines had also refused to accept their land as collateral
because of the presence of the underground tunnel; that the
underground tunnel had been constructed without their knowledge and
consent; that the presence of the tunnel deprived them of the agricultural,
commercial, industrial and residential value of their land; and that their
land had also become an unsafe place for habitation because of the loud
sound of the water rushing through the tunnel and the constant shaking
of the ground, forcing them and their workers to relocate to safer
grounds.
In its answer with counterclaim,[4] NPC countered that the Heirs of
Macabangkit had no right to compensation under section 3(f) of Republic
Act No. 6395, under which a mere legal easement on their land was
established; that their cause of action, should they be entitled to
compensation, already prescribed due to the tunnel having been
constructed in 1979; and that by reason of the tunnel being an apparent
and continuous easement, any action arising from such easement
prescribed in five years.
Ruling of the RTC
Page 95 of 119
 On July 23, 1998, an ocular inspection of the land that was
conducted by RTC Judge Mamindiara P. Mangotara and the
representatives of the parties resulted in the following observations and
findings:
a. That a concrete post which is about two feet in
length from the ground which according to the
claimants is the middle point of the tunnel.
b. That at least three fruit bearing durian trees
were uprooted and as a result of the
construction by the defendant of the tunnel and
about one hundred coconuts planted died.
c. That underground tunnel was constructed
therein.[5]
After trial, the RTC ruled in favor of the plaintiffs (Heirs of
Macabangkit),[6] decreeing:
WHEREFORE, premises considered:
1. The prayer for the removal or
dismantling of defendants tunnel is denied. However,
defendant is hereby directed and ordered:
a)To pay plaintiffs land with a total area
of 227,065 square meters, at the rate of FIVE
HUNDRED (P500.00) PESOS per square meter,
or a total of ONE HUNDRED THIRTEEN
MILLION FIVE HUNDRED THIRTY TWO
THOUSAND AND FIVE HUNDRED
(P113,532,500.00), PESOS, plus interest, as
actual damages or just compensation;
b) To pay plaintiff a monthly
rental of their land in the amount of THIRTY
THOUSAND (P30,000.00) PESOS from 1979
up to July 1999 with 12% interest per annum;
c)To pay plaintiffs the sum of TWO
HUNDRED THOUSAND (P200,000.00) PESOS,
as moral damages;
d) To pay plaintiffs, the sum of
TWO HUNDRED THOUSAND (P200,000.00)
PESOS, as exemplary damages;
e)To pay plaintiffs, the sum equivalent to
15% of the total amount awarded, as
attorneys fees, and to pay the cost.
SO ORDERED.
The RTC found that NPC had concealed the construction of the tunnel in
1979 from the Heirs of Macabangkit, and had since continuously denied
its existence; that NPC had acted in bad faith by taking possession of the
subterranean portion of their land to construct the tunnel without their
knowledge and prior consent; that the existence of the tunnel had
affected the entire expanse of the land, and had restricted their right to
excavate or to construct a motorized deep well; and that they, as owners,
had lost the agricultural, commercial, industrial and residential value of
the land.
ProvRem Rule 67 Fulltext
The RTC fixed the just compensation at P500.00/square meter based on
the testimony of Dionisio Banawan, OIC-City Assessor of Iligan City, to the
effect that the appraised value of the adjoining properties ranged
from P700.00 to P750.00, while the appraised value of their affected land
ranged from P400.00 to P500.00. The RTC also required NPC to pay
rentals from 1979 due to its bad faith in concealing the construction of
the tunnel from the Heirs of Macabangkit.
On August 18, 1999, the RTC issued a supplemental decision,[7] viz:
Upon a careful review of the original decision dated
August 13, 1999, a sentence should be added to
paragraph 1(a) of the dispositive portion thereof, to
bolster, harmonize, and conform to the findings of
the Court, which is quoted hereunder, to wit:
Consequently, plaintiffs land or
properties are hereby condemned in favor of
defendant National Power Corporation, upon
payment of the aforesaid sum.
Therefore, paragraph 1(a) of the dispositive portion
of the original decision should read, as follows:
a) To pay plaintiffs land with a total area of
227,065 square meters, at the rate of
FIVE HUNDRED (P500.00) PESOS per
square meter, or a total of ONE
HUNDRED THIRTEEN MILLION FIVE
HUNDRED THIRTY TWO THOUSAND
AND FIVE HUNDRED (P113,532,500.00)
PESOS, plus interest, as actual damages
or just compensation; Consequently,
plaintiffs land or properties are hereby
condemned in favor of defendant
National Power Corporation, upon
payment of the aforesaid sum;
This supplemental decision shall be considered as
part of paragraph 1(a) of the dispositive portion of
the original decision.
Furnish copy of this supplemental decision to all
parties immediately.
SO ORDERED.
On its part, NPC appealed to the CA on August 25, 1999.[8]
Earlier, on August 18, 1999, the Heirs of Macabangkit filed an
urgent motion for execution of judgment pending appeal.[9] The RTC
granted the motion and issued a writ of execution,[10] prompting NPC to
assail the writ by petition for certiorari in the CA. On September 15, 1999,
the CA issued a temporary restraining order (TRO) to enjoin the RTC from
implementing its decision. The Heirs of Macabangkit elevated the ruling
of the CA (G.R. No. 141447), but the Court upheld the CA on May 4,
2006.[11]
Ruling of the CA
NPC raised only two errors in the CA, namely:
I
THE COURT A QUO SERIOUSLY ERRED IN RULING
THAT NAPOCORS UNDERGROUND TUNNEL IN ITS
AGUS RIVER HYDRO-ELECTRIC PLANT PROJECT
TRAVERSED AND/OR AFFECTED APPELLEES
PROPERTY AS THERE IS NO CLEAR EVIDENCE
INDUBITABLY ESTABLISHING THE SAME
Page 96 of 119
 II
THE COURT A QUO SERIOUSLY ERRED IN GRANTING
APPELLEES CLAIMS IN THEIR ENTIRETY FOR
GRANTING ARGUENDO THAT NAPOCORS
UNDERGROUND TUNNEL INDEED TRAVERSED
APPELLEES PROPERTY, THEIR CAUSE OF ACTION
HAD ALREADY BEEN BARRED BY PRESCRIPTION,
ESTOPPEL AND LACHES
On October 5, 2004, the CA affirmed the decision of the RTC, holding that
the testimonies of NPCs witness Gregorio Enterone and of the
respondents witness Engr. Pete Sacedon, the topographic survey map, the
sketch map, and the ocular inspection report sufficiently established the
existence of the underground tunnel traversing the land of the Heirs of
Macabangkit; that NPC did not substantiate its defense that prescription
already barred the claim of the Heirs of Macabangkit; and that Section 3(i)
of R.A. No. 6395, being silent about tunnels, did not apply, viz:
As regard Section 3(i) of R.A. No. 6395 (An Act
Revising the Charter of the National Power
Corporation), it is submitted that the same provision
is not applicable. There is nothing in Section 3(i) of
said law governing claims involving tunnels. The
same provision is applicable to those projects or
facilities on the surface of the land, that can easily be
discovered, without any mention about the claims
involving tunnels, particularly those surreptitiously
constructed beneath the surface of the land, as in the
instant case.
Now, while it is true that Republic Act No. 6395
authorizes NAPOCOR to take water from any public
stream, river, creek, lake, spring or waterfall in the
Philippines for the realization of the purposes
specified therein for its creation; to intercept and
divert the flow of waters from lands of riparian
owners (in this case, the Heirs), and from persons
owning or interested in water which are or may be
necessary to said purposes, the same Act expressly
mandates the payment of just compensation.
WHEREFORE, premises considered, the instant appeal
is hereby DENIED for lack of merit. Accordingly, the
appealed Decision dated August 13, 1999, and the
supplemental Decision dated August 18, 1999, are
hereby AFFIRMED in toto.
SO ORDERED.[12]
Issue
NPC has come to the Court, assigning the lone error that:
THE APPELLATE COURT ERRED ON A QUESTION OF
LAW WHEN IT AFFIRMED THE DECISION AND
SUPPLEMENTAL DECISION OF THE COURT A QUO
DIRECTING AND ORDERING PETITIONER TO PAY
JUST COMPENSATION TO RESPONDENTS.
NPC reiterates that witnesses Enterone and Sacedon lacked personal
knowledge about the construction and existence of the tunnel and were
for that reason not entitled to credence; and that the topographic and
relocation maps prepared by Sacedon should not be a basis to prove the
existence and location of the tunnel due to being self-serving.
NPC contends that the CA should have applied Section 3(i) of Republic
Act No. 6395, which provided a period of only five years from the date of
the construction within which the affected landowner could bring a claim
against it; and that even if Republic Act No. 6395 should be inapplicable,
the action of the Heirs of Macabangkit had already prescribed due to the
underground tunnel being susceptible to acquisitive prescription after the
ProvRem Rule 67 Fulltext
lapse of 10 years pursuant to Article 620 of the Civil Code due to its being
a continuous and apparent legal easement under Article 634 of the Civil
Code.
The issues for resolution are, therefore, as follows:
(1) Whether the CA and the RTC erred in
holding that there was an underground tunnel
traversing the Heirs of Macabangkits land
constructed by NPC; and
(2) Whether the Heirs of Macabangkits right
to claim just compensation had prescribed under
section 3(i) of Republic Act No. 6395, or, alternatively,
under Article 620 and Article 646 of the Civil Code.
Ruling
We uphold the liability of NPC for payment of just compensation.
1.
Factual findings of the RTC,
when affirmed by the CA, are binding
The existence of the tunnel underneath the land of the Heirs of
Macabangkit, being a factual matter, cannot now be properly reviewed by
the Court, for questions of fact are beyond the pale of a petition for
review on certiorari. Moreover, the factual findings and determinations by
the RTC as the trial court are generally binding on the Court, particularly
after the CA affirmed them.[13] Bearing these doctrines in mind, the Court
should rightly dismiss NPCs appeal.
NPC argues, however, that this appeal should not be dismissed because
the Heirs of Macabangkit essentially failed to prove the existence of the
underground tunnel. It insists that the topographic survey map and the
right-of-way map presented by the Heirs of Macabangkit did not at all
establish the presence of any underground tunnel.
NPC still fails to convince.
Even assuming, for now, that the Court may review the factual findings of
the CA and the RTC, for NPC to insist that the evidence on the existence
of the tunnel was not adequate and incompetent remains futile. On the
contrary, the evidence on the tunnel was substantial, for the significance
of the topographic survey map and the sketch map (as indicative of the
extent and presence of the tunnel construction) to the question on the
existence of the tunnel was strong, as the CA correctly projected in its
assailed decision, viz:
Among the pieces of documentary evidence
presented showing the existence of the said tunnel
beneath the subject property is the topographic
survey map. The topographic survey map is one
conducted to know about the location and elevation
of the land and all existing structures above and
underneath it. Another is the Sketch Map which
shows the location and extent of the land traversed
or affected by the said tunnel. These two (2) pieces
of documentary evidence readily point the extent
and presence of the tunnel construction coming
from the power cavern near the small man-made
lake which is the inlet and approach tunnel, or at
a distance of about two (2) kilometers away from
the land of the plaintiffs-appellees, and then
traversing the entire and the whole length of the
plaintiffs-appellees property, and the outlet
channel of the tunnel is another small man-made
lake. This is a sub-terrain construction, and
considering that both inlet and outlet are bodies of
water, the tunnel can hardly be noticed. All
constructions done were beneath the surface of the
plaintiffs-appellees property. This explains why they
Page 97 of 119
 could never obtain any knowledge of the existence of (i) To construct works across, or otherwise,
such tunnel during the period that the same was any stream, watercourse, canal, ditch,
constructed and installed beneath their property.[14] flume, street, avenue, highway or railway
of private and public ownership, as the
The power cavern and the inlet and outlet channels established the location of said works may
presence of the underground tunnel, based on the declaration in the RTC require:Provided, That said works be
by Sacedon, a former employee of the NPC.[15] It is worthy to note that constructed in such a manner as not to
NPC did not deny the existence of the power cavern, and of the inlet and endanger life or property; And provided,
outlet channels adverted to and as depicted in the topographic survey further, That the stream, watercourse,
map and the sketch map. The CA cannot be faulted for crediting the canal ditch, flume, street, avenue,
testimony of Sacedon despite the effort of NPC to discount his credit due highway or railway so crossed or
to his not being an expert witness, simply because Sacedon had personal intersected be restored as near as
knowledge based on his being NPCs principal engineer and supervisor possible to their former state, or in a
tasked at one time to lay out the tunnels and transmission lines manner not to impair unnecessarily their
specifically for the hydroelectric projects,[16] and to supervise the usefulness. Every person or entity whose
construction of the Agus 1 Hydroelectric Plant itself[17] from 1978 until his right of way or property is lawfully
retirement from NPC.[18] Besides, he declared that he personally crossed or intersected by said works
experienced the vibrations caused by the rushing currents in the tunnel, shall not obstruct any such crossings or
particularly near the outlet channel.[19] Under any circumstances, Sacedon intersection and shall grant the Board or
was a credible and competent witness. its representative, the proper authority
for the execution of such work. The
The ocular inspection actually confirmed the existence of the Corporation is hereby given the right of
tunnel underneath the land of the Heirs of Macabangkit. Thus, the CA way to locate, construct and maintain
observed: such works over and throughout the
lands owned by the Republic of the
More so, the Ocular inspection conducted on July 23, Philippines or any of its branches and
1998 further bolstered such claim of the existence political subdivisions. The Corporation or
and extent of such tunnel. This was conducted by a its representative may also enter upon
team composed of the Honorable Presiding Judge of private property in the lawful
the Regional Trial Court, Branch 01, Lanao del Norte, performance or prosecution of its
herself and the respective lawyers of both of the business and purposes, including the
parties and found that, among others, said construction of the transmission lines
underground tunnel was constructed beneath the thereon; Provided, that the owner of
subject property.[20] such property shall be indemnified for
any actual damage caused
It bears noting that NPC did not raise any issue against or thereby;Provided, further, That said
tender any contrary comment on the ocular inspection report. action for damages is filed within five
years after the rights of way,
transmission lines, substations, plants
2. or other facilities shall have been
Five-year prescriptive period under Section 3(i) of established; Provided, finally, That after
Republic Act No. 6395 does not apply to claims said period, no suit shall be brought to
for just compensation question the said rights of way,
transmission lines, substations, plants or
other facilities;
The CA held that Section 3(i) of Republic Act No. 6395 had no application
to this action because it covered facilities that could be easily discovered,
not tunnels that were inconspicuously constructed beneath the surface of A cursory reading shows that Section 3(i) covers the construction of works
the land.[21] across, or otherwise, any stream, watercourse, canal, ditch, flume, street,
avenue, highway or railway of private and public ownership, as the
NPC disagrees, and argues that because Article 635[22] of location of said works may require. It is notable that Section 3(i) includes
the Civil Code directs the application of special laws when an easement, no limitation except those enumerated after the term works. Accordingly,
such as the underground tunnel, was intended for public use, the law we consider the term works as embracing all kinds of constructions,
applicable was Section 3(i) of Republic Act No. 6395, as amended, which facilities, and other developments that can enable or help NPC to meet its
limits the action for recovery of compensation to five years from the date objectives of developing hydraulic power expressly provided under
of construction. It posits that the five-year prescriptive period already set paragraph (g) of Section 3.[23] The CAs restrictive construal of Section 3(i)
in due to the construction of the underground tunnel having been as exclusive of tunnels was obviously unwarranted, for the provision
completed in 1979 yet. applies not only to development works easily discoverable or on the
Without necessarily adopting the reasoning of the CA, we uphold its surface of the earth but also to subterranean works like tunnels. Such
conclusion that prescription did not bar the present action to recover just interpretation accords with the fundamental guideline in statutory
compensation. construction that when the law does not distinguish, so must we
not.[24] Moreover, when the language of the statute is plain and free from
Section 3 (i) of Republic Act No. 6395, the cited law, relevantly provides: ambiguity, and expresses a single, definite, and sensible meaning, that
meaning is conclusively presumed to be the meaning that the Congress
Section 3. Powers and General Functions of the intended to convey.[25]
Corporation. The powers, functions, rights and Even so, we still cannot side with NPC.
activities of the Corporation shall be the following:
We rule that the prescriptive period provided under Section 3(i)
xxx of Republic Act No. 6395 is applicable only to an action for damages, and

ProvRem Rule 67 Fulltext Page 98 of 119

does not extend to an action to recover just compensation like this case.
Consequently, NPC cannot thereby bar the right of the Heirs of
Macabangkit to recover just compensation for their land.
The action to recover just compensation from the State or its
expropriating agency differs from the action for damages. The former,
also known as inverse condemnation, has the objective to recover the
value of property taken in fact by the governmental defendant, even
though no formal exercise of the power of eminent domain has been
attempted by the taking agency.[26] Just compensation is the full and fair
equivalent of the property taken from its owner by the expropriator. The
measure is not the takers gain, but the owners loss. The word just is used
to intensify the meaning of the word compensation in order to convey the
idea that the equivalent to be rendered for the property to be taken shall
be real, substantial, full, and ample.[27] On the other hand, the latter action
seeks to vindicate a legal wrong through damages, which may be actual,
moral, nominal, temperate, liquidated, or exemplary. When a right is
exercised in a manner not conformable with the norms enshrined in
Article 19[28] and like provisions on human relations in the Civil Code,and
the exercise results to the damage of another, a legal wrong is committed
and the wrongdoer is held responsible.[29]
The two actions are radically different in nature and purpose.
The action to recover just compensation is based on the
Constitution[30] while the action for damages is predicated on statutory
enactments. Indeed, the former arises from the exercise by the State of its
power of eminent domain against private property for public use, but the
latter emanates from the transgression of a right. The fact that the owner
rather than the expropriator brings the former does not change the
essential nature of the suit as an inverse condemnation,[31] for the suit is
not based on tort, but on the constitutional prohibition against the taking
of property without just compensation.[32] It would very well be contrary
to the clear language of the Constitution to bar the recovery of just
compensation for private property taken for a public use solely on the
basis of statutory prescription.
Due to the need to construct the underground tunnel, NPC should have
first moved to acquire the land from the Heirs of Macabangkit either by
voluntary tender to purchase or through formal expropriation
proceedings. In either case, NPC would have been liable to pay to the
owners the fair market value of the land, for Section 3(h) of Republic Act
No. 6395 expressly requires NPC to pay the fair market value of such
property at the time of the taking, thusly:
(h) To acquire, promote, hold, transfer, sell, lease,
rent, mortgage, encumber and otherwise dispose
of property incident to, or necessary, convenient
or proper to carry out the purposes for which the
Corporation was created: Provided, That in case a
right of way is necessary for its transmission lines,
easement of right of way shall only be
sought: Provided, however, That in case the property
itself shall be acquired by purchase, the cost
thereof shall be the fair market value at the time
of the taking of such property.
This was what NPC was ordered to do in National Power
Corporation v. Ibrahim,[33] where NPC had denied the right of the owners
to be paid just compensation despite their land being traversed by the
underground tunnels for siphoning water from Lake Lanao needed in the
operation of Agus II, Agus III, Agus IV, Agus VI and Agus VII Hydroelectric
Projects in Saguiran, Lanao del Sur, in Nangca and Balo-I in Lanao del
Norte and in Ditucalan and Fuentes in Iligan City. There, NPC similarly
argued that the underground tunnels constituted a mere easement that
did not involve any loss of title or possession on the part of the property
owners, but the Court resolved against NPC, to wit:
ProvRem Rule 67 Fulltext
Petitioner contends that the underground
tunnels in this case constitute an easement upon the
property of the respondents which does not involve
any loss of title or possession. The manner in which
the easement was created by petitioner, however,
violates the due process rights of respondents as it
was without notice and indemnity to them and did
not go through proper expropriation proceedings.
Petitioner could have, at any time, validly exercised
the power of eminent domain to acquire the
easement over respondents property as this power
encompasses not only the taking or appropriation of
title to and possession of the expropriated property
but likewise covers even the imposition of a mere
burden upon the owner of the condemned property.
Significantly, though, landowners cannot be deprived
of their right over their land until expropriation
proceedings are instituted in court. The court must
then see to it that the taking is for public use, that
there is payment of just compensation and that there
is due process of law.[34]
3.
NPCs construction of the tunnel
constituted taking of the land, and
entitled owners to just compensation
The Court held in National Power Corporation v. Ibrahim that
NPC was liable to pay not merely an easement fee but rather the full
compensation for land traversed by the underground tunnels, viz:
In disregarding this procedure and failing to
recognize respondents ownership of the sub-terrain
portion, petitioner took a risk and exposed itself to
greater liability with the passage of time. It must be
emphasized that the acquisition of the easement is
not without expense. The underground tunnels
impose limitations on respondents use of the
property for an indefinite period and deprive them of
its ordinary use. Based upon the foregoing,
respondents are clearly entitled to the payment of
just compensation. Notwithstanding the fact that
petitioner only occupies the sub-terrain portion, it
is liable to pay not merely an easement fee but
rather the full compensation for land. This is so
because in this case, the nature of the easement
practically deprives the owners of its normal
beneficial use. Respondents, as the owner of the
property thus expropriated, are entitled to a just
compensation which should be neither more nor
less, whenever it is possible to make the
assessment, than the money equivalent of said
property.[35]
Here, like in National Power Corporation v. Ibrahim, NPC constructed a
tunnel underneath the land of the Heirs of Macabangkit without going
through formal expropriation proceedings and without procuring their
consent or at least informing them beforehand of the construction. NPCs
construction adversely affected the owners rights and interests because
the subterranean intervention by NPC prevented them from introducing
any developments on the surface, and from disposing of the land or any
portion of it, either by sale or mortgage.
Did such consequence constitute taking of the land as to entitle the
owners to just compensation?
Page 99 of 119
 We agree with both the RTC and the CA that there was a full
taking on the part of NPC, notwithstanding that the owners were not
completely and actually dispossessed. It is settled that the taking of
private property for public use, to be compensable, need not be an actual
physical taking or appropriation.[36] Indeed, the expropriators action may
be short of acquisition of title, physical possession, or occupancy but may
still amount to a taking.[37] Compensable taking includes destruction,
restriction, diminution, or interruption of the rights of ownership or of the
common and necessary use and enjoyment of the property in a lawful
manner, lessening or destroying its value.[38] It is neither necessary that
the owner be wholly deprived of the use of his property,[39] nor material
whether the property is removed from the possession of the owner, or in
any respect changes hands.[40]
As a result, NPC should pay just compensation for the entire
land. In that regard, the RTC pegged just compensation at P500.00/square
meter based on its finding on what the prevailing market value of the
property was at the time of the filing of the complaint, and the CA upheld
the RTC.
We affirm the CA, considering that NPC did not assail the valuation in the
CA and in this Court. NPCs silence was probably due to the correctness of
the RTCs valuation after careful consideration and weighing of the parties
evidence, as follows:
The matter of what is just compensation for
these parcels of land is a matter of evidence. These
parcels of land is (sic) located in the City of Iligan, the
Industrial City of the South. Witness Dionisio
Banawan, OIC- City Assessors Office, testified, Within
that area, that area is classified as industrial and
residential. That plaintiffs land is adjacent to many
subdivisions and that is within the industrial
classification. He testified and identified Exhibit AA
and AA-1, a Certification, dated April 4, 1997,
showing that the appraised value of plaintiffs land
ranges from P400.00 to P500.00 per square meter
(see, TSN, testimony of Dionisio Banawan, pp. 51, 57,
and 71, February 9, 1999). Also, witness Banawan,
testified and identified Two (2) Deeds of Sale, marked
as Exhibit AA-2 and AA-3,[] showing that the
appraised value of the land adjoining or adjacent to
plaintiff land ranges from P700.00 to P750.00 per
square meter. As between the much lower price of
the land as testified by defendants witness Gregorio
Enterone, and that of the City Assessor of Iligan City,
the latter is more credible. Considering however, that
the appraised value of the land in the area as
determined by the City Assessors Office is not
uniform, this Court, is of the opinion that the
reasonable amount of just compensation of plaintiffs
land should be fixed at FIVE HUNDRED (500.00)
PESOS, per square meter. xxx.[41]
The RTC based its fixing of just compensation ostensibly on the prevailing
market value at the time of the filing of the complaint, instead of
reckoning from the time of the taking pursuant to Section 3(h) of
Republic Act No. 6395. The CA did not dwell on the reckoning time,
possibly because NPC did not assign that as an error on the part of the
RTC.
We rule that the reckoning value is the value at the time of the
filing of the complaint, as the RTC provided in its decision. Compensation
that is reckoned on the market value prevailing at the time either when
NPC entered or when it completed the tunnel, as NPC submits, would not
be just, for it would compound the gross unfairness already caused to the
owners by NPCs entering without the intention of formally expropriating
the land, and without the prior knowledge and consent of the Heirs of
Macabangkit. NPCs entry denied elementary due process of law to the
ProvRem Rule 67 Fulltext
owners since then until the owners commenced the inverse condemnation
proceedings. The Court is more concerned with the necessity to prevent
NPC from unjustly profiting from its deliberate acts of denying due
process of law to the owners. As a measure of simple justice and ordinary
fairness to them, therefore, reckoning just compensation on the value at
the time the owners commenced these inverse condemnation
proceedings is entirely warranted.
In National Power Corporation v. Court of Appeals,[42] a case that
involved the similar construction of an underground tunnel by NPC
without the prior consent and knowledge of the owners, and in which we
held that the basis in fixing just compensation when the initiation of the
action preceded the entry into the property was the time of the filing of
the complaint, not the time of taking,[43] we pointed out that there was no
taking when the entry by NPC was made without intent to expropriate or
was not made under warrant or color of legal authority.
4.
Awards for rentals, moral damages, exemplary
damages, and attorneys fees are deleted
for insufficiency of factual and legal bases
The CA upheld the RTCs granting to the Heirs of Macabangkit of rentals
of P 30,000.00/month from 1979 up to July 1999 with 12% interest per
annum by finding NPC guilty of bad faith in taking possession of the land
to construct the tunnel without their knowledge and consent.
Granting rentals is legally and factually bereft of justification, in
light of the taking of the land being already justly compensated.
Conformably with the ruling in Manila International Airport Authority v.
Rodriguez,[44] in which the award of interest was held to render the grant
of back rentals unwarranted, we delete the award of back rentals and in
its place prescribe interest of 12% interest per annum from November 21,
1997, the date of the filing of the complaint, until the full liability is paid
by NPC. The imposition of interest of 12% interest per annum follows a
long line of pertinent jurisprudence,[45] whereby the Court has fixed the
rate of interest on just compensation at 12% per annumwhenever the
expropriator has not immediately paid just compensation.
The RTC did not state any factual and legal justifications for awarding to
the Heirs of Macabangkit moral and exemplary damages each in the
amount of P200,000.00. The awards just appeared in the fallo of its
decision. Neither did the CA proffer any justifications for sustaining the
RTC on the awards. We consider the omissions of the lower courts as pure
legal error that we feel bound to correct even if NPC did not submit that
for our consideration. There was, to begin with, no factual and legal bases
mentioned for the awards. It is never trite to remind that moral and
exemplary damages, not by any means liquidated or assessed as a matter
of routine, always require evidence that establish the circumstances under
which the claimant is entitled to them. Moreover, the failure of both the
RTC and the CA to render the factual and legal justifications for the moral
and exemplary damages in the body of their decisions immediately
demands the striking out of the awards for being in violation of the
fundamental rule that the decision must clearly state the facts and the law
on which it is based. Without the factual and legal justifications, the
awards are exposed as the product of conjecture and speculation, which
have no place in fair judicial adjudication.
We also reverse and set aside the decree of the RTC for NPC to pay to the
Heirs of Macabangkit the sum equivalent to 15% of the total amount
awarded, as attorneys fees, and to pay the cost. The body of the decision
did not state the factual and legal reasons why NPC was liable for
attorneys fees. The terse statement found at the end of the body of the
RTCs decision, stating: xxx The contingent attorneys fee is hereby reduced
from 20% to only 15% of the total amount of the claim that may be
awarded to plaintiffs, without more, did not indicate or explain
why and how the substantial liability of NPC for attorneys fees could have
arisen and been determined.
Page 100 of 119
 In assessing attorneys fees against NPC and in favor of the
respondents, the RTC casually disregarded the fundamental distinction
between the two concepts of attorneys fees the ordinary and the
extraordinary. These concepts were aptly distinguished in Traders Royal
Bank Employees Union-Independent v. NLRC,[46] thuswise:
There are two commonly accepted concepts
of attorneys fees, the so-called ordinary and
extraordinary. In its ordinary concept, an attorneys
fee is the reasonable compensation paid to a lawyer
by his client for the legal services he has rendered to
the latter. The basis of this compensation is the fact
of his employment by and his agreement with the
client.
In its extraordinary concept, an attorneys fee
is an indemnity for damages ordered by the court to
be paid by the losing party in a litigation. The basis of
this is any of the cases provided by law where such
award can be made, such as those authorized in
Article 2208, Civil Code, and is payable not to the
lawyer but to the client, unless they have agreed that
the award shall pertain to the lawyer as additional
compensation or as part thereof.
By referring to the award as contingency fees, and reducing the
award from 20% to 15%, the RTC was really referring to a supposed
agreement on attorneys fees between the Heirs of Macabangkit and their
counsel. As such, the concept of attorneys fees involved was the
ordinary. Yet, the inclusion of the attorneys fees in the judgment among
the liabilities of NPC converted the fees to extraordinary. We have to
disagree with the RTC thereon, and we express our discomfort that the
CA did not do anything to excise the clearly erroneous and
unfounded grant.
An award of attorneys fees has always been the exception
rather than the rule. To start with, attorneys fees are not awarded every
time a party prevails in a suit.[47] Nor should an adverse decision ipso
facto justify an award of attorneys fees to the winning party. [48] The policy
of the Court is that no premium should be placed on the right to
litigate.[49] Too, such fees, as part of damages, are assessed only in the
instances specified in Art. 2208, Civil Code.[50] Indeed, attorneys fees are in
the nature of actual damages.[51] But even when a claimant is compelled
to litigate with third persons or to incur expenses to protect his rights,
attorneys fees may still be withheld where no sufficient showing of bad
faith could be reflected in a partys persistence in a suit other than an
erroneous conviction of the righteousness of his cause.[52] And, lastly, the
trial court must make express findings of fact and law that bring
the suit within the exception. What this demands is that the factual, legal
or equitable justifications for the award must be set forth
not only in the fallo but also in the text of the decision, or else, the award
should be thrown out for being speculative and conjectural.[53]
Sound policy dictates that even if the NPC failed to raise the
issue of attorneys fees, we are not precluded from correcting the lower
courts patently erroneous application of the law.[54] Indeed, the Court, in
supervising the lower courts, possesses the ample authority to
review legal matters like this one even if not specifically raised or assigned
as error by the parties.
5.
Attorneys fees under quantum meruit principle
are fixed at 10% of the judgment award
ProvRem Rule 67 Fulltext
Based on the pending motions of Atty. Macarupung Dibaratun
and Atty. Manuel D. Ballelos to assert their respective rights to attorneys
fees, both contending that they represented the Heirs of Macabangkit in
this case, a conflict would ensue from the finality of the judgment against
NPC.
A look at the history of the legal representation of the Heirs of
Macabangkit herein provides a helpful predicate for resolving the conflict.
Atty. Dibaratun was the original counsel of the Heirs of Macabangkit.
When the appeal was submitted for decision in the CA,[55] Atty. Ballelos
filed his entry of appearance,[56]and a motion for early decision.[57] Atty.
Ballelos
subsequently filed also a manifestation,[58] supplemental manifestation,[59]
reply,[60] and ex parte motion reiterating the motion for early decision.[61] It
appears that a copy of the CAs decision was furnished solely to Atty.
Ballelos. However, shortly before the rendition of the decision, Atty.
Dibaratun filed in the CA a motion to register attorneys lien, [62] alleging
that he had not withdrawn his appearance and had not been aware of the
entry of appearance by Atty. Ballelos. A similar motion was also received
by the Court from Atty. Dibaratun a few days after the petition for review
was filed.[63] Thus, on February 14, 2005,[64] the Court directed Atty.
Dibaratun to enter his appearance herein. He complied upon filing the
comment.[65]
Amir Macabangkit confirmed Atty. Dibaratuns representation through
an ex parte manifestation that he filed in his own behalf and on behalf of
his siblings Mongkoy and Putri.[66]Amir reiterated his manifestation on
March 6, 2006,[67] and further imputed malpractice to Atty. Ballelos for
having filed an entry of appearance bearing Amirs forged signature and
for plagiarism, i.e., copying verbatim the arguments contained in the
pleadings previously filed by Atty. Dibaratun.[68]
On September 11, 2008, Atty. Ballelos submitted two motions, to wit: (a) a
manifestation and motion authorizing a certain Abdulmajeed Djamla to
receive his attorneys fees equivalent of 15% of the judgment
award,[69] and (b) a motion to register his attorneys lien that he claimed
was contingent.[70]
Both Atty. Dibaratun and Atty. Ballelos posited that their entitlement to
attorneys fees was contingent. Yet, a contract for a contingent fees is an
agreement in writing by which the fees, usually a fixed percentage of what
may be recovered in the action, are made to depend upon the success in
the effort to enforce or defend a supposed right. Contingent fees depend
upon an express contract, without which the attorney can only recover on
the basis of quantum meruit.[71] With neither Atty. Dibaratun nor Atty.
Ballelos presenting a written agreement bearing upon their supposed
contingent fees, the only way to determine their right to appropriate
attorneys fees is to apply the principle of quantum meruit.
Quantum meruit literally meaning as much as he deserves is used as basis
for determining an attorneys professional fees in the absence of an
express agreement.[72] The recovery of attorneys fees on the basis
of quantum meruit is a device that prevents an unscrupulous client from
running away with the fruits of the legal services of counsel without
paying for it and also avoids unjust enrichment on the part of the attorney
himself.[73] An attorney must show that he is entitled to reasonable
compensation for the effort in pursuing the clients cause, taking into
account certain factors in fixing the amount of legal fees.[74]
Rule 20.01 of the Code of Professional Responsibility lists the guidelines for
determining the proper amount of attorney fees, to wit:
Rule 20.1 A lawyer shall be guided by the
following factors in determining his fees:
Page 101 of 119
 a) The time spent and the extent of the
services rendered or required;
b) The novelty and difficult of the
questions involved;
c) The important of the subject matter;
d) The skill demanded;
e) The probability of losing other
employment as a result of acceptance of the
proffered case;
f) The customary charges for similar
services and the schedule of fees of the IBP chapter
to which he belongs;
g) The amount involved in the controversy
and the benefits resulting to the client from the
service;
h) The contingency or certainty of
compensation;
i) The character of the employment,
whether occasional or established; and
j) The professional standing of the lawyer.
In the event of a dispute as to the amount of fees between the
attorney and his client, and the intervention of the courts is sought, the
determination requires that there be evidence to prove the amount of
fees and the extent and value of the services rendered, taking into
account the facts determinative thereof.[75] Ordinarily, therefore, the
determination of the attorneys fees on quantum meruit is remanded to
the lower court for the purpose. However, it will be just and equitable to
now assess and fix the attorneys fees of both attorneys in order that the
resolution of a comparatively simple controversy, as Justice Regalado put
it in Traders Royal Bank Employees Union-Independent v. NLRC,[76] would
not be needlessly prolonged, by taking into due consideration the
accepted guidelines and so much of the pertinent data as are extant in
the records.
Atty. Dibaratun and Atty. Ballelos each claimed attorneys fees equivalent
to 15% of the principal award of P113,532,500.00, which was the amount
granted by the RTC in its decision. Considering that the attorneys fees will
be defrayed by the Heirs of Macabangkit out of their actual recovery from
NPC, giving to each of the two attorneys 15% of the principal award as
attorneys fees would be excessive and unconscionable from the point of
view of the clients. Thus, the Court, which holds and exercises the power
to fix attorneys fees on a quantum meruit basis in the absence of an
express written agreement between the attorney and the client, now fixes
attorneys fees at 10% of the principal award of P113,532,500.00.
Whether it is Atty. Dibaratun or Atty. Ballelos, or both, who
should receive attorneys fees from the Heirs of Macabangkit is a question
that the Court must next determine and settle by considering the amount
and quality of the work each performed and the results each obtained.
Atty. Dibaratun, the attorney from the outset, unquestionably carried the
bulk of the legal demands of the case. He diligently prepared and timely
filed in behalf of the Heirs of Macabangkit every pleading and paper
necessary in the full resolution of the dispute, starting from the complaint
until the very last motion filed in this Court. He consistently appeared
during the trial, and examined and cross-examined all the witnesses
presented at that stage of the proceedings. The nature, character, and
substance of each pleading and the motions he prepared for the Heirs of
Macabangkit indicated that he devoted substantial time and energy in
researching and preparing the case for the trial. He even
ProvRem Rule 67 Fulltext
advancedP250,000.00 out of his own pocket to defray expenses from the
time of the filing of the motion to execute pending appeal until the case
reached the Court.[77] His representation of all the Heirs of Macabangkit
was not denied by any of them.
We note that Atty. Dibaratun possessed some standing in the
legal profession and in his local community. He formerly served as a
member of the Board of Director of the Integrated Bar of the Philippines
(IBP), Lanao del Norte-Iligan City Chapter, and was an IBP national
awardee as Best Legal Aid Committee Chairman. He taught at Mindanao
State University College of Law Extension. He was a Municipal Mayor of
Matungao, Lanao del Norte, and was enthroned Sultan a Gaus.
In contrast, not much about the character and standing of Atty. Ballelos,
as well as the nature and quality of the legal services he rendered
for the Heirs of Macabangkit are in the records. The motions he filed in
the
Court and in the CA lacked enlightening research and were insignificant
to the success of the clients cause. His legal service, if it can be called that,
manifested no depth or assiduousness, judging from the quality of the
pleadings from him. His written submissions in the case appeared either
to have been lifted verbatim from the pleadings previously filed by Atty.
Dibaratun, or to have been merely quoted from the decisions and
resolutions of the RTC and the CA. Of the Heirs of Macabangkit, only
Cebu, Batowa-an, Sayana, Nasser, Manta, Mongkoy[78] and Edgar gave
their consent to Atty. Ballelos to appear in their behalf in the CA, which he
did despite Atty. Dibaratun not having yet filed any withdrawal of his
appearance. The Court did not receive any notice of appearance for the
Heirs of Macabangkit from Atty. Ballelos, but that capacity has meanwhile
become doubtful in the face of Amirs strong denial of having retained
him.
In fairness and justice, the Court accords full recognition to
Atty. Dibaratun as the counsel de parte of the Heirs of Macabangkit who
discharged his responsibility in the prosecution of the clients cause to its
successful end. It is he, not Atty. Ballelos, who was entitled to the full
amount of attorneys fees that the clients ought to pay to their attorney.
Given the amount and quality of his legal work, his diligence and the time
he expended in ensuring the success of his prosecution of the clients
cause, he deserves the recognition, notwithstanding that some of the
clients might appear to have retained Atty. Ballelos after the rendition of a
favorable judgment.[79]
Atty. Ballelos may claim only from Cebu, Batowa-an, Sayana, Nasser,
Manta and Edgar, the only parties who engaged him. The Court considers
his work in the case as very minimal. His compensation under
the quantum meruit principle is fixed at P5,000.00, and only the Heirs of
Macabangkit earlier named are liable to him.
WHEREFORE, the Court AFFIRMS the decision promulgated on October
5, 2004 by the Court of Appeals, subject to the
following MODIFICATIONS, to wit:
(a) Interest at the rate of 12% per
annum is IMPOSED on the principal amount
of P113,532,500.00 as just compensation,
reckoned from the filing of the complaint on
November 21, 1997 until the full liability is paid;
(b) The awards of P30,000.00 as rental
fee, P200,000.00 as moral damages,
and P200,000.00 as exemplary damages
are DELETED; and
(c) The award of 15% attorneys fees decreed to be
paid by National Power Corporation to the Heirs
of Macabangkit is DELETED.
Page 102 of 119
The Court PARTLY GRANTS the motion to register attorneys lien filed by
Atty. Macarupung Dibaratun, and FIXES Atty. Dibaratuns attorneys fees
on the basis of quantummeruit at 10% of the principal award
of P113,532,500.00.
The motion to register attorneys lien of Atty. Manuel D. Ballelos
is PARTLY GRANTED, and Atty. Ballelos is DECLARED ENTITLED TO
RECOVER from Cebu, Batowa-an, Sayana, Nasser, Manta and Edgar, all
surnamed Macabangkit, the amount of P5,000.00 as attorneys fees on the
basis of quantum meruit.
Costs of suit to be paid by the petitioner.
SO ORDERED.
#13 G. R. No. 189127 April 25, 2012
NATIONAL POWER CORPORATION, Present:
Petitioner,
CARPIO, J., Chairperson,
BRION,
PEREZ,
- versus - SERENO, and
REYES, JJ.
SPOUSES BERNARDO AND
MINDALUZ SALUDARES,
Respondents.
x-------------------------------x
SERENO, J.:
This Rule 45 Petition questions the 21 July 2009 Decision of the
Court of Appeals (CA),[1] which affirmed the 10 September 2002 Decision
of the Regional Trial Court (RTC),[2] Branch 31, Tagum City. The RTC had
ruled that respondent spouses are entitled to ₱4,920,750 as just
compensation for the exercise of the power of eminent domain by
petitioner National Power Corporation (NAPOCOR).
Sometime in the 1970s, NAPOCOR constructed high-tension
transmission lines to implement the Davao-Manat 138 KV Transmission
Line Project.[3] These transmission lines traversed a 12,060-square meter
portion of a parcel of agricultural land covered by Transfer Certificate of
Title (TCT) No. T-15343 and owned by Esperanza Pereyras, Marciano
Pereyras, Laureano Pereyras and Mindaluz Pereyras.
In 1981, NAPOCOR commenced expropriation proceedings
covering TCT No. T-15343 in National Power Corporation v. Esperanza
Pereyras, Marciano Pereyras, Laureano Pereyras and Mindaluz
Pereyras.[4] These proceedings culminated in a final Decision ordering it to
pay the amount of ₱300,000 as just compensation for the affected
property.[5]
The trial court issued an Order[6] subrogating Tahanan Realty
Development Corporation to the rights of the defendants in National
Power Corporation v. Pereyras. Pursuant to this Order, NAPOCOR paid the
corporation the judgment award of ₱300,000[7] and Tahanan Realty
Development Corporation executed a Deed of Absolute Sale in favor of
the former.[8] This Deed covered Lot 481-B, Psd-11012718, which was a
portion of Lot 481, Cad. 276 of Barrio Magugpo, Municipality of Tagum,
Davao.[9]
Respondent Spouses Bernardo and Mindaluz Pereyras-
Saludares are registered owners of a 6,561-square-meter parcel of land
covered by TCT No. T-109865,[10] more particularly described as follows:
ProvRem Rule 67 Fulltext
A parcel of land (Lot 15, Pcs-11-000704, Amd.), being
a portion of Lots 481-D, Psd-11-012718; 480-B, Psd-
51550; H-148559 & 463-A-2 (LRC) Psd-150796,
situated in the Barrio of Magugpo, Mun. of Tagum,
Province of Davao, Island of Mindanao. x x x[11]
On 19 August 1999, respondents filed the instant Complaint
against NAPOCOR and demanded the payment of just compensation.
They alleged that it had entered and occupied their property by erecting
high-tension transmission lines therein and failed to reasonably
compensate them for the intrusion.[12]
Petitioner averred that it already paid just compensation for the
establishment of the transmission lines by virtue of its compliance with
the final and executory Decision in National Power Corporation v.
Pereyras. Furthermore, assuming that respondent spouses had not yet
received adequate compensation for the intrusion upon their property,
NAPOCOR argued that a claim for just compensation and damages may
only be filed within five years from the date of installation of the
transmission lines pursuant to the provisions of Republic Act (R.A.) No.
6395.[13]
Pretrial terminated without the parties having entered into a compromise
agreement.[14] Thereafter, the court appointed Lydia Gonzales and
Wilfredo Silawan as Commissioners for the purpose of determining the
valuation of the subject land.[15] NAPOCOR recommended Loreto
Monteposo as the third Commissioner,[16] but later clarified that its
conformity to the appointment of commissioners was only for the
purpose of determining the exact portion of the subject land, and that it
was not admitting its liability to pay just compensation.[17]
After the proceedings, the Commissioners recommended the amount
of ₱750 per square meter as the current and fair market value of the
subject property based on the Schedule of Market Values of Real
Properties within the City of Tagum effective in the year 2000.[18]
Trial on the merits ensued. On 10 September 2002, the Court
rendered judgment in favor of respondent spouses, the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is
hereby rendered in favor of the plaintiffs, and against
the defendant-National Power Corporation, ordering
the latter to pay the plaintiffs the Just Compensation
as herein fixed which they claimed for the use,
occupation and utilization of their land from which it
benefited and profited since January 1982, as follows:
First: To pay plaintiff Spouses Bernardo and Mindaluz
Saludares as just compensation of their 6,561 square
meters, more or less, titled land covered by TCT No.
T-109865 of the Registry of Deeds of Davao del
Norte hereby fixed in the amount of FOUR MILLION
NINE HUNDRED TWENTY THOUSAND SEVEN
HUNDRED FIFTY (₱4,920,750.00) PESOS, Philippine
Currency, plus interest at the rate of 12% per annum
reckoned from January 01, 1982, until said amount is
fully paid, or deposited in Court;
Second: To pay plaintiffs-spouses Bernardo and
Mindaluz Saludares attorneys fees of Fifty Thousand
(₱50,000.00) Pesos, Philippine Currency, plus
appearance fee of ₱2,000.00 per appearance and
litigation expenses which shall be supported in a Bill
of Costs to be submitted for the Courts approval;
Third. To pay the costs of the suit.
Page 103 of 119
 Fourth. For utter lack of merit, the counterclaim is
dismissed.
SO ORDERED.[19]
NAPOCOR appealed the trial courts Decision to the CA.[20] After
a review of the respective parties Briefs, the appellate court rendered the
assailed Decision on 21 July 2009, denying NAPOCORs appeal and
affirming the trial courts Decision, but reducing the rate of interest to 6%
per annum.[21]
Aggrieved, petitioner then filed the instant Rule 45 Petition
before this Court.
The Issues
The pivotal issues as distilled from the pleadings are as follows:
1. Whether NAPOCOR has previously compensated the
spouses for establishing high-tension transmission lines
over their property;
2. Whether the demand for payment of just compensation
has already prescribed;
3. Whether petitioner is liable for only ten percent of the fair
market value of the property or for the full value thereof;
and
4. Whether the trial court properly awarded the amount
of ₱4,920,750 as just compensation, based on the
Approved Schedule of Market Values for Real Property in
Tagum City for the Year 2000.
The Courts Ruling
We uphold the Decisions of the CA and the RTC.
I facilities nor the amounts of compensation and/or
NAPOCOR failed to prove that it had adequately
compensated respondents for the establishment
of high tension transmission lines over their
property
NAPOCOR argues that the parcel of land involved in the instant
Petition had already been expropriated in National Power Corporation v.
Pereyras.[22] In support of this argument, it alleges that one of the sources
of the spouses TCT No. T-109865 is TCT No. 39660; and that TCT No.
39660 is a transfer from TCT No. T-15343, the subject land in National
Power Corporation v. Pereyras.[23] Thus, having paid just compensation to
Tahanan Realty Development Corporation, the successor-in-interest of
defendants Pereyras in the aforementioned case, petitioner submits that it
should no longer be made to pay just compensation in the present case.
We disagree.
While it is true that respondent spouses TCT No. T-109865 was indeed
indirectly sourced from TCT No. T-15343, the CA correctly ruled that
NAPOCOR failed to prove that the lands involved in National Power
Corporation v. Pereyras and in the instant Petition are identical. One
cannot infer that the subject lands in both cases are the same, based on
the fact that one of the source titles of TCT No. T-109865 happens to be
TCT No. T-38660, and that TCT No. T-38660 itself was derived from T-
15343.
ProvRem Rule 67 Fulltext
Furthermore, the evidence before us supports respondent
spouses contention that the lands involved in both cases are
different. National Power Corporation v. Pereyrasinvolved Lot 481-B, Psd-
11012718, which was a portion of Lot 481, Cad. 276 of Barrio Magugpo,
Municipality of Tagum, Davao.[24] On the other hand, the instant Petition
involves Lot 15, Pcs-11-000704, Amd., which is a portion of Lots 481-D,
Psd-11-012718; 480-B, Psd-51550; H-148559 and 463-A-2 (LRC), Psd-
150796, in Barrio Magugpo, Municipality of Tagum, Davao. Clearly, these
lots refer to different parcels of land.[25]
We rule, therefore, that NAPOCOR failed to prove its previous payment of
just compensation for its expropriation of the land in question.
II
The demand for payment of just compensation
has not prescribed
Petitioner maintains that, in the event respondent spouses have not been
adequately compensated for the entry into their property, their claim for
just compensation would have already prescribed,[26] pursuant to Section
3 (i) of R.A. No. 6395, as amended by Presidential Decrees Nos. 380, 395,
758, 938, 1360 and 1443. This provision empowers the NAPOCOR to do as
follows:
x x x [E]nter upon private property in the lawful
performance or prosecution of its business or
purposes, including the construction of the
transmission lines thereon; Provided, that the owner
of such private property shall be paid the just
compensation therefor in accordance with the
provisions hereinafter provided; Provided, further,
that any action by any person claiming
compensation and/or damages shall be filed
within five (5) years after the right-of-way,
transmission lines, substations, plants or other
facilities shall have been established; Provided,
finally, that after the said period no suit shall be
brought to question the said right-of-way,
transmission lines, substations, plants or other
damages involved. (Emphasis supplied.)
NAPOCORs reliance on this provision is misplaced.
The right to recover just compensation is enshrined in no less than our Bill
of Rights, which states in clear and categorical language that [p]rivate
property shall not be taken for public use without just
compensation.[27] This constitutional mandate cannot be defeated by
statutory prescription.[28] Thus, we have ruled that the prescriptive period
under Section 3 (i) of R.A. No. 6395 does not extend to an action to
recover just compensation.[29] It would be a confiscatory act on the part of
the government to take the property of respondent spouses for a public
purpose and deprive them of their right to just compensation, solely
because they failed to institute inverse condemnation proceedings within
five years from the time the transmission lines were constructed. To begin
with, it was not the duty of respondent spouses to demand for just
compensation. Rather, it was the duty of NAPOCOR to institute eminent
domain proceedings before occupying their property. In the normal
course of events, before the expropriating power enters a private
property, it must first file an action for eminent domain[30] and deposit
with the authorized government depositary an amount equivalent to the
assessed value of the property.[31] Due to its omission, however,
respondents were constrained to file inverse condemnation proceedings
to demand the payment of just compensation before the trial court. We
therefore rule that NAPOCOR cannot invoke the statutory prescriptive
period to defeat respondent spouses constitutional right to just
compensation.
Page 104 of 119
 III
NAPOCOR is liable to pay the full market value
of the affected property
NAPOCOR submits that it should pay for only ten percent (10%)
of the fair market value of the landowners property because, under its
Charter,[32] it is only authorized to acquire easements of right-of-way over
agricultural lands.[33]
Petitioners arguments fail to convince.
We have ruled that when petitioner takes private property to
construct transmission lines, it is liable to pay the full market value upon
proper determination by the courts.[34]
In National Power Corporation v. Gutierrez,[35] the petitioner
likewise argued that it should only be made to pay easement fees instead
of the full market value of the land traversed by its transmission lines. In
striking down its argument and ruling that the property owners were
entitled to the full market value of the land in question, we ruled:
x x x While it is true that plaintiff [is] only after a
right-of-way easement, it nevertheless perpetually
deprives defendants of their proprietary rights as
manifested by the imposition by the plaintiff upon
defendants that below said transmission lines no
plant higher than three (3) meters is allowed.
Furthermore, because of the high-tension current
conveyed through said transmission lines, danger to
life and limbs that may be caused beneath said wires
cannot altogether be discounted, and to cap it all,
plaintiff only pays the fee to defendants once, while
the latter shall continually pay the taxes due on said
affected portion of their property.[36]
Similarly, in this case, while respondent spouses could still
utilize the area beneath NAPOCORs transmission lines provided that the
plants to be introduced underneath would not exceed three
meters,[37] danger is posed to the lives and limbs of respondents farm
workers, such that the property is no longer suitable for agricultural
production.[38]Considering the nature and effect of the Davao-Manat 138
KV transmission lines, the limitation imposed by NAPOCOR perpetually
deprives respondents of the ordinary use of their land.
Moreover, we have ruled that Section 3A of R.A. No. 6395, as
amended, is not binding upon this Court.[39] [T]he determination of just
compensation in eminent domain cases is a judicial function and . . . any
valuation for just compensation laid down in the statutes may serve only
as a guiding principle or one of the factors in determining just
compensation but it may not substitute the court's own judgment as to
what amount should be awarded and how to arrive at such amount.[40]
We therefore rule that NAPOCOR is liable to pay respondents
the full market value of the affected property as determined by the
court a quo.
IV
The trial court did not err in awarding just
compensation based on the Approved Schedule of
Market Values for
Real Property for the Year 2000
As its final argument, petitioner contends that the amount of just
compensation fixed by the trial court is unjust, unlawful and contrary to
existing jurisprudence, because just compensation in expropriation cases
ProvRem Rule 67 Fulltext
must be determined from the time of the filing of the complaint or the
time of taking of the subject property, whichever came first. [41] It therefore
posits that since the taking of the property happened in the 1970s, the
trial court erred in fixing the amount of just compensation with reference
to real property market values in the year 2000.[42]
Petitioners contention holds no water.
We have ruled in National Power Corporation v. Heirs of Macabangkit
Sangkay[43] that the reckoning value of just compensation is that
prevailing at the time of the filing of the inverse condemnation
proceedings for the following reason:
[c]ompensation that is reckoned on the market value
prevailing at the time either when NPC entered x x x
would not be just, for it would compound the gross
unfairness already caused to the owners by NPC's
entering without the intention of formally
expropriating the land x x x. NPC's entry denied
elementary due process of law to the owners since
then until the
owners commenced the inverse condemnation
proceedings. The Court is more concerned with the
necessity to prevent NPC from unjustly profiting from
its deliberate acts of denying due process of law to
the owners. As a measure of simple justice and
ordinary fairness to them, therefore, reckoning just
compensation on the value at the time the owners
commenced these inverse condemnation
proceedings is entirely warranted.
Indeed, respondent spouses would be deprived of their right to
just compensation if the value of the property is pegged back to its value
in the 1970s. To reiterate, NAPOCOR should have instituted eminent
domain proceedings before it occupied respondent spouses property.
Because it failed to comply with this duty, respondent spouses were
constrained to file the instant Complaint for just compensation before the
trial court. From the 1970s until the present, they were deprived of just
compensation, while NAPOCOR continuously burdened their property
with its transmission lines. This Court cannot allow petitioner to profit
from its failure to comply with the mandate of the law. We therefore rule
that, to adequately compensate respondent spouses from the decades of
burden on their property, NAPOCOR should be made to pay the value of
the property at the time of the filing of the instant Complaint when
respondent spouses made a judicial demand for just compensation.
WHEREFORE, premises considered, the instant Petition for Review
is DENIED, and the Decision of the Court of Appeals in CA-G.R. CV No.
81098 dated 21 July 2009 is AFFIRMED.
SO ORDERED.
#14 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
Page 105 of 119
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
ProvRem Rule 67 Fulltext
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 reivindicatoriawith 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.
Page 106 of 119
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:
ProvRem Rule 67 Fulltext
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
Page 107 of 119
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. 1622.1âwphi1 On even
date, Circular No. 416 was issued, implementing MB Resolution No. 1622,
increasing the rate of interest for 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%
ProvRem Rule 67 Fulltext
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,31then 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,
Page 108 of 119
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:
ProvRem Rule 67 Fulltext
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.1âwphi1 Here, the trial and appellate courts found that
the owners were unable to plant palay on 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:
Page 109 of 119
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
ProvRem Rule 67 Fulltext
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 impossible.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.
#15 G.R. No. 223366 August 1, 2017
NATIONAL TRANSMISSION CORPORATION, Petitioner,
vs.
OROVILLE DEVELOPMENT CORPORATION, Respondent
MENDOZA, J.:
This is a petition for review on certiorari seeking to reverse and set aside
the September 18, 2015 Decision1 and January 25, 2016 Resolution2 of the
Court of Appeals (CA) in CA-G.R. CV No. 03571, which affirmed with
modification the December 12, 2012 Decision3 of the Regional Trial Court,
Branch 17, Misamis Oriental (RTC) in Civil Case No. 2007-85, a case for
expropriation.
The Antecedents
The present case involves two (2) parcels of land located in Puerto,
Cagayan de Oro City, which originally belonged to Alfredo Reyes (Reyes)
and Grace Calingasan (Calingasan), covered by Original Certificate of Title
(OCT) No. P-3 and OCT No. P-13, respectively.
In 1983, petitioner National Transmission Corporation (TransCo)
constructed a power transmission line on these properties, known as the
Tagoloan-Pulangi 138 kV transmission line.
At some point, Reyes sold his land to Antonio Navarette, who later sold
the same property to respondent Oroville Development Corporation
(Oroville), which is now covered by Transfer Certificate of Title (TCT) No. T-
85121. Likewise, Calingasan sold her land to Oroville, now registered
Page 110 of 119
under TCT No. T-104365. Thus, in 1995, Oroville became the registered
owner of these properties with a total area of 13 ,904 square meters
traversed by the existing Tagoloan-Pulangi 138 kV transmission line.
On November 17, 2006, Transco offered to buy these properties from
Oroville to be used for the construction of the Abaga-Kirahon 230 kV
transmission line in Mindanao.
During the negotiation, Oroville, through its representative Antonio Tiu
(Tiu), requested to reroute the Abaga-Kirahon 230 kV transmission line
because the Tagoloan-Pulangi 138 kV transmission line is already
traversing its properties. Tiu also informed Transco that Oroville has not
been paid just compensation for the constn1ction of the Tagoloan-
Pulangi 138 kV transmission line in its property. Transco, however, refused
to reroute the proposed Abaga-Kirahon 230 kV transmission line because
it planned to construct the said transmission line parallel to the existing
Tagoloan-Pulangi 138 kV transmission line.
Consequently, on April 20, 2007, Oroville filed a complaint for injunction
and damages with prayer for issuance of a temporary restraining order
against Transco, seeking to enjoin the construction of the Abaga-Kirahon
230 kV transmission line.
On May 9, 2007, Transco filed its Answer denying the allegations in
Oroville's complaint. It also manifested that it would file the required
expropriation proceedings against Oroville in order to acquire the latter's
properties for the Abaga-Kirahon 230 kV transmission line project.
During trial, the parties agreed to have the subject properties surveyed for
purposes of fixing the just compensation. As a result, the trial court
suspended the proceedings and directed Transco to conduct a survey of
the properties.
Subsequently, Oroville filed an omnibus motion to convert the
proceedings into an expropriation case and to require Transco to pay the
Bureau of Internal Revenue (BIR) the zonal value of the subject properties.
Transco made no objections to the motion.
On May 17, 2010, the trial court directed Transco to make a provisional
deposit of ₱7,647,200.00 as just compensation for Oroville's properties
consisting of 13,904 square meters and affected by the existing Tagoloan-
Pulangi 138 kV transmission line. Transco complied after the trial court
denied its objections.
On February 4, 2011, the trial court directed the Land Bank of the
Philippines, NAPOCOR Branch, to release the aforesaid deposit to Tiu.
On March 21, 2011, the trial court issued a writ of possession directing
Oroville to surrender possession of the properties to Transco.
Subsequently, on August 8, 2011, per nomination of the parties, the trial
court appointed three (3) Commissioners, namely, Engr. Marilyn P.
Legaspi, Engr. Norberto Badelles and Atty. Avelino Pakino, to determine
the just compensation of the properties affected by the Abaga-Kirahon
230 kV transmission line.
A summary of the Commissioners' report reads as follows:
1. Engr. Marilyn Legaspi (Court-appointed Commissioner)
Date of 1983 per Transmission Line Data and
Taking: Information
(Tagoloan-Pulangi 138 kV Transmission
Line)
ProvRem Rule 67 Fulltext
Valuation of the Property: ₱78.65 per square meter or a total of
₱5,924,772.48 inclusive of interests4
2. Engr. Norberto Badelles (engaged by Transco)
Date of 1983 per Transmission Line Data and
Taking: Information
(Tagoloan-Pulangi 138 kV Transmission
Line)
Valuation of the Property: ₱1.20 per square meter or a total of
₱45,716.35 inclusive of interests5
3. Atty. Avelino Pakino (nominated by Oroville)
Date of 1983 per Transmission Line Data and
Taking: Information
(Tagoloan-Pulangi 138 kV Transmission
Line)
Valuation of the Property: ₱2,000.00 per square meter or a total
of ₱27,808,000.00 inclusive of interests6
The RTC Ruling
In its Decision, dated December 12, 2012, the RTC set aside the
Commissioners' report and fixed the just compensation at the rate of
₱1,520.00 per square meter with legal interest of 12%
per annum reckoned from April 20, 2007, the date of filing of the
complaint. It held that the said amount was based on the fair market
value of lots along the national highway of Barangay Puerto, Cagayan de
Oro City in accordance with the schedule of values under City Ordinance
No. 10425-2006 otherwise known as An Ordinance Prescribing the
Revised Schedule of Fair Market Values of Real Property in Cagayan de
Oro and in accordance with the BIR Comparative Value of Zonal Fair
Market Values. The RTC opined that the just compensation should not be
reckoned from 1983, the time of taking, because it was established by the
landowners that entry into their property was without their knowledge.
The falloreads:
WHEREFORE, in view of the foregoing premises, judgment is hereby
rendered as follows:
1) FIXING the just compensation of the affected area of 13,904
square meters at ₱1,520.oo per square meter reckoned from
April 20, 2007, the date the complaint was filed, at interest rate
of 12% per annum until the liability is fully paid
2) ORDERING defendant TRANSCO to pay plaintiff the just
compensation in the amount of ₱1,520.00 per square meter for
the 13,904 square meters the affected area at the rate of
12% per annum reckoned from April 20, 2007, the data of filing
the complaint minus the amount of ₱7,647,200.oo representing
the amount paid by TRANSCO as provisional payments
3) ORDERING defendant TRANSCO to pay plaintiff the interest
of 12% per annum based on the deficiency amount;
4) ORDERING Plaintiff and Defendant to pay the
Commissioners' fee in the amount of ₱10,000.00 each within 15
days from receipt of this Order.
Page 111 of 119
The Court will leave to the parties the correct mathematical computation
as to what is due to plaintiff based on the foregoing premises.
SO ORDERED.7
Aggrieved, Transco elevated an appeal before the CA.
The CA Ruling
In its assailed Decision, dated September 18, 2015, the CA ruled that
TransCo's entry into Oroville's lots in 1983 was made without warrant or
color of authority because at the time Transco constructed the Tagoloan-
Pulangi 138 kV transmission line over the disputed properties in 1983, it
was made without intent to expropriate. It added that Transco
constructed the transmission line without bothering to negotiate with the
owner to purchase or expropriate the disputed lots.
Further, the CA adjudged that the construction of the Tagoloan-Pulangi
138 kV transmission line did not oust or deprive Oroville or its previous
owners of the beneficial enjoyment of their properties as they continued
to possess the same. It observed that the previous owners were able to
sell the properties to Oroville; and that after acquiring them, Oroville
considered developing the lots for residential subdivision purposes, but
the subject properties were later on classified as agricultural lands
covered by the Comprehensive Agrarian Reform Program (CARP) of the
government.
The CA concluded that there was no actual taking of the subject
properties in 1983 when Transco constructed the Tagoloan-Pulangi 138
kV transmission line.1âwphi1 Accordingly, the computation of the just
compensation should be reckoned at the time of the filing of the
complaint in 2007. The dispositive portion reads:
WHEREFORE, the Judgment dated 12 December 2012 of the Regional
Trial Court, (Branch 17), 10th Judicial Region, Cagayan de Oro City, is
MODIFIED. Appellant National Transmission Corporation is hereby
ORDERED to pay appellee Oroville Corporation the unpaid balance of the
just compensation in the sum of P13,486,880.oo with legal interest of
TWELVE PERCENT (12%) per annum computed from 21 March 2011 to 30
June 2013 and SIX PERCENT (6%) per annum from 1 July 2013 until its full
payment. Both parties are DIRECTED to pay the Commissioners' fee in the
amount of ₱10,000.00 each within 15 days from notice.
SO ORDERED.8
Transco moved for reconsideration, but the same was denied by the CA in
its assailed Resolution, dated January 25, 2016.
Hence, this petition.
ISSUES
WHETHER THE COMPUTATION OF JUST COMPENSATION FOR THE
EXPROPRIATED PROPERTY SHOULD BE BASED ON ITS VALUE AT THE
TIME OF THE TAKING OF THE PROPERTY
WHETHER THE IMPOSITION OF A LEGAL INTEREST OF 12% IS
UNJUSTIFIED9
Petitioner argues that Section 4, Rule 67 of the Rules of Court and
applicable jurisprudence are explicit in saying that just compensation for
expropriated property shall be determined based on its fair market value
at the time of its taking; that Oroville could not claim lack of knowledge
to the construction of the transmission line since it is in plain view,
considering its height and the huge space that it occupied; that Oroville
ProvRem Rule 67 Fulltext
should not be allowed to benefit from its failure to question such
construction more than a decade after its completion; and that it should
not be made to pay 12% interest per annum in the nature of damages for
delay as it complied with the RTC's directive to make provisional deposit
for the subject property.
In its Comment,10 dated August 5, 2016, Oroville averred that to sustain
the argument of Transco that the basis of the payment for just
compensation is the value of the property at the time of taking would sow
immeasurable injustice; that the P78.65 per square meter valuation as
recommended by Commissioner Legaspi and the ₱1.20 per square meter
recommended by Commissioner Badelles would not be enough to
reimburse Oroville for the realty taxes it paid from the year 1983 up to the
present; that while it paid these annual taxes, Transco had been earning
billions of pesos from transmission charges; that as held in Napocor v.
Campos, Jr., there were instances when Transco removed transmission
lines from the affected properties due to diversion of its lines, thus, upon
entry, Transco did not have intent to expropriate the property because
there might be a change of plans; that Transco would initiate
expropriation proceedings only when it was certain of its transmission
plans; that the earlier entry into and/or possession of Transco of the
subject properties was patently without any color of legal authority as it
did not have the slightest intention to acquire ownership of the subject
properties either by voluntary purchase or by exercise of eminent domain;
and that the delay in the payment of just compensation justified the
payment of 12% interest per annum.
In its Reply,11 dated November 25, 2016, Transco contended that this case
is not an exception to the settled rule that just compensation should be
based on the property's value at the time of its taking; that the value and
classification of the subject property at the time of its taking in 1983
should be the basis for the computation of just compensation; that it
informed Oroville of the construction of the new transmission line over its
properties and readily agreed to the conversion of its complaint for
injunctive relief into an expropriation case; and that the landowner should
also bear the cost of being remiss in guarding against the effects of a
belated claim.
The Court's Ruling
The petition is meritorious.
Eminent domain is the right or power of a sovereign state to appropriate
private property to particular uses to promote public welfare. It is an
indispensable attribute of sovereignty; a power grounded in the primary
duty of government to serve the common need and advance the general
welfare.12 The power of eminent domain is inseparable in sovereignty
being essential to the existence of the State and inherent in government.
But the exercise of such right is not unlimited, for two mandatory
requirements should underlie the Government's 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.13 These
requirements partake the nature of implied conditions that should be
complied with to enable the condemnor to keep the property
expropriated.14
Taking of Oroville's property
occurred in 1983 upon construction of
the transmission lines
The landmark case of Republic v. Vda. De Castellvi15 provides an
enlightening discourse on the requisites of taking.
First, The expropriator must enter a private property; Second, the entrance
into private property must be for more than a momentary period; Third,
the entry into the property should be under warrant or color of legal
Page 112 of 119
authority; Fourth, the property must be devoted to a public use or
otherwise informally appropriated or injuriously affected; and Fifth, 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.16
The Court rules that there is taking of the property for purposes of
eminent domain in 1983.
The first and fourth requisites are present in this case. Transco took
possession of Oroville's property in order to construct transmission lines
to be used in generating electricity for the benefit of the public.
The second requisite is likewise present as there can be no question that
the construction of transmission lines meant an indefinite stay in the
property of Oroville. Further, Trans Co's exercise of eminent domain is
pursuant to its authority granted under Section 8 of Republic Act (R.A.)
No. 9136 or the Electric Power Industry Reform Act of 2001.17
Finally, Oroville has been deprived of the beneficial enjoyment of its
property. In several rulings, notably National Power Corporation v. Spouses
Zabala,18 Republic v. Spouses Libunao,19 and National Power Corporation v.
Tuazon20 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 nonnal use of their land, it is only just
and proper to require Napocor to recompense them for the full market
value of their property."
Just compensation reckoned from the
date of actual taking
The next question to be resolved is whether just compensation should be
reckoned from 1983 when the taking took place.
Just compensation is defined as the 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.21
In addition, Section 4, Rule 67 of the Rules of Court provides:
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.
xxxx[Emphasis supplied]
The case of Secretary of the Department of Public Works and Highways v.
Spouses Tecson (Tecson)22 provides a discussion of cases wherein the
Court conformed to the abovementioned rule and held that payment of
just compensation should be reckoned from the date of taking when such
preceded the filing of the complaint for expropriation, to wit:
In Forfom Development Corporation [Forlorn] v. Philippine National
Railways [PNR], 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. In 1990, Forlorn filed a complaint for recovery of possession
of real property and/ or damages against PNR. In Eusebio v. Luis,
respondent's 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
ProvRem Rule 67 Fulltext
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, in the early
1970s, petitioner implemented expansion programs for its runway
necessitating the acquisition and occupation of some of the properties
surrounding its premises. AB to respondent's property, no expropriation
proceedings were initiated. In 1997, 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, sometime in 1956, the Air
Transportation Office (ATO) took possession and control of a portion of a
lot situated in Aldan, 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 Forlorn, 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.23 [Citations omitted and emphases supplied]
As further pointed out in Republic v. Lara, et al.,24 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.25
Indeed, the State is only obliged to make good the loss sustained by the
landowner, with due consideration of the circumstances availing at the
time the property was taken. 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.26
The sequence of events in all of these cited cases as well as in Tecson is
similar to that obtaining in the case at bench, that is, the government took
possession of private properties without initiating expropriation
proceedings and later on, the property owners demanded either the
return of their properties or the payment of just compensation. Thus,
pursuant to the Rules of Court and in accordance with prevailing
Page 113 of 119
jurisprudence, the Court rules that just compensation must be ascertained
as of the year 1983 when Transco commenced construction of the
transmission lines. Just compensation is therefore fixed at ₱78.65 per
square meter, which is the fair market value of the property at the time of
taking. As will be discussed later on, the imposition of interest would
adequately compensate the property owner for the delay in the payment
of just compensation considering that more often than not, the amount of
interest to be paid is higher than the increase in the property's market
value.
The rulings in Macabangkit
Sangkay and Saludares are
mere exceptions
The Court is not unaware of the rulings in National Power Corporation v.
Heirs of Macabangkit Sangkay (Macabangkit Sangkay)27 and National
Power Corporation v. Spouses Saludares (Saludares) 28 wherein it was held
that just compensation should be reckoned from the time the property
owners initiated inverse condemnation proceedings notwithstanding that
the taking of the properties occurred earlier.
In Macabangkit Sangkay, NAPOCOR, in the 1970s, undertook the
construction of several underground tunnels to be used in diverting the
water flow from the Agus River to the hydroelectric plants. On November
21, 1997, respondents therein sued NAPOCOR for recovery of property
and damages, alleging that they belatedly discovered that one of the
underground tunnels of NPC traversed their land.29 In that case, the Court
adjudged that the value of the property at the time the property owners
initiated inverse condemnation proceedings should be considered for
purposes of just compensation for the following reasons, viz:
Compensation that is reckoned on the market value prevailing at the time
either when NPC entered or when it completed the tunnel, as NPC
submits, would not be just, for it would compound the gross unfairness
already caused to the owners by NPC's entering without the intention of
formally expropriating the land, and without the prior knowledge and
consent of the Heirs of Macabangkit. NPC's entry denied elementary due
process of law to the owners since then until the owners commenced the
inverse condemnation proceedings. The Court is more concerned with the
necessity to prevent NPC from unjustly profiting from its deliberate acts
of denying due process of law to the owners. As a measure of simple
justice and ordinary fairness to them, therefore, reckoning just
compensation on the value at the time the owners commenced these
inverse condemnation proceedings is entirely warranted.30
On the other hand, in Saludares, respondents therein filed a complaint for
the payment of just compensation against NAPOCOR, averring that it had
entered and occupied their property by erecting high-tension
transmission lines and failed to reasonably compensate them for the
intrusion. For its part, NAPOCOR countered that it had already paid just
compensation for the establishment of the transmission lines by virtue of
its compliance with the final and executory decision in National Power
Corporation v. Pereyras.31 In ruling that the reckoning value of just
compensation is that prevailing at the time of the filing of the inverse
condemnation proceedings, the Court declared:
x x x To reiterate, NAPOCOR should have instituted eminent domain
proceedings before it occupied respondent spouses' property. Because it
failed to comply with this duty, respondent spouses were constrained to
file the instant Complaint for just compensation before the trial court.
From the 1970s until the present, they were deprived of just
compensation, while NAPOCOR continuously burdened their property
with its transmission lines. This Court cannot allow petitioner to profit
from its failure to comply with the mandate of the law. We therefore rule
that, to adequately compensate respondent spouses from the decades of
burden on their property, NAPOCOR should be made to pay the value of
ProvRem Rule 67 Fulltext
the property at the time of the filing of the instant Complaint when
respondent spouses made a judicial demand for just compensation.32
These rulings, however, are exceptions to the general rule that just
compensation must be reckoned from the time of taking or filing of the
complaint, whichever came first. The special circumstances of the
aforementioned cases called for the valuation of just compensation at the
time the landowners initiated inverse condemnation proceedings
notwithstanding that taking of the properties occurred first.
In Macabangkit Sangkay, NAPOCOR did not even inform the property
owners of the construction of the underground tunnels. Hence, it could
be said that NAPOCOR employed stealth instead of complying with the
legal process of expropriation. Further, considering that the tunnels were
constructed underground, the property owners came to know thereof
only when the purchaser of the property refused to proceed with the sale
upon discovery of the underground tunnels. In this case, however, the
transmission lines are visible, such that Oroville could not deny
knowledge of its construction in 1983. In Saludares, NAPOCOR refused to
acknowledge the respondents' claim and insisted that it already paid just
compensation because the respondents' property was the same one
involved in the Pereyra case. Thus, NAPOCOR had no intention to pay just
compensation. This circumstance does not exist in the case at bench.
The rulings in Macabangkit Sangkay and Saludares are more in
consonance with the rules of equity than with the Rules of Court,
specifically Rule 67 on expropriation. Indeed, the practice of construct
first, expropriate later is reprehensible and must not be countenanced.
The Court, however, must not lose sight of Section 4, Rule 67 which
mandates that just compensation must be determined "as of the date of
the taking of the property or the filing of the complaint, whichever came
first." This provision is, first and foremost, part of the Rules which the
Court itself promulgated for purposes of uniformity, among others.
Further, the doctrine of stare decisis constrains the Court to follow the
ruling laid down in Tecson and similar cases. "Time and again, the court
has held that it is a very desirable and necessary judicial practice that
when a court has laid down a principle of law as applicable to a certain
state of facts, it will adhere to that principle and apply it to all future cases
in which the facts are substantially the same. Stare decisis et non quieta
movere. Stand by the decisions and disturb not what is settled. Stare
decisis simply means that for the sake of certainty, a conclusion reached in
one case should be applied to those that follow if the facts are
substantially the same, even though the parties may be different. It
proceeds from the first principle of justice that, absent any powerful
countervailing considerations, like cases ought to be decided alike."33
To reiterate, the facts of the instant case are substantially the same
with Tecson and similar cases cited therein. A government agency took
possession of private property for the benefit of the public without,
however, initiating expropriation proceedings, which thus, constrained the
landowner to file actions to recover their properties or to demand
payment of just compensation. Hence, in the absence of any compelling
reason to deviate from the rulings in the aforecited cases, the Court, in
the case at bench, must adhere to the doctrines established therein.
Amount of interest to be paid
The owner's loss, of course, is not only his property but also its income-
generating potential.34 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.35 Thus, the rationale for imposing
the interest is to compensate the landowners for the income they would
have made had they been properly compensated for their properties at
the time of the taking.36
Page 114 of 119
The Court, in Republic v. Court of Appeals,37 further enunciated on the
necessity of the payment of interest to compensate for delay in the
payment of just compensation, 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, if 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.38 [Emphasis supplied]
Tecson also clarified the amount of interest due the landowners, to wit:
x x x 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.
x x xx
It is important to note, however, that interest shall be compounded at the
time judicial demand is made pursuant to Article 2212 of the Civil Code of
the Philippines, and sustained in Eastern Shipping Lines v. Court of
Appeals, then later on in Nacar v. Gallery Frames, save for the reduction of
interest rate to 6% for loans or forbearance of money.39 x x x
In the case at bench, Transco made a provisional deposit of ₱7,647,200.00
on January 21, 2011. Consequently, from 1983 to January 21, 2011,
Oroville is entitled to twelve percent (12%) interest per annum which is
the prevailing rate during such period pursuant to Central Bank Circular
No. 905,40 effective from December 22, 1982 to June 30, 2013.
Oroville is also awarded additional compensation by way of exemplary
damages and attorney's fees. In Republic v. CA,41 the Court 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:
x x x 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.42 x x x
Hence, considering that Oroville was deprived of beneficial ownership
over their property without the benefit of a timely expropriation
proceeding, and to serve as a deterrent to the State from failing to
institute such proceedings, 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 Oroville is in order.
To recapitulate, Transco is liable to pay Oroville ₱78.65 per square meter
representing the fair market value of the property at the time of taking in
ProvRem Rule 67 Fulltext
1983 and 12% interest per annum on the total fair market value,
computed from 1983 to January 21, 2011, the date when Transco made a
provisional deposit in favor of Oroville. Considering that the actual date of
taking cannot be determined from the records of the case, the date of
taking is pegged on January 1, 1983. Oroville is also awarded exemplary
damages in the amount of ₱1,000,000.00 and attorney's fees in the
amount of ₱200,000.00.
On a final note, there are several cases which reached this Court in which
Transco and even other government agencies constructed transmission
lines, tunnels and other infrastructures before it decided to expropriate
the private properties upon which they built the same. The Court reminds
the government and its agencies that it is their obligation to initiate
eminent domain proceedings whenever they intend to take private
property for any public purpose. Before the expropriating power enters a
private property, it must first file an action for eminent domain43and
deposit with the authorized government depositary an amount equivalent
to the assessed value of the property.44
Transco should first file an expropriation case before it proceeds to
construct transmission lines or any other infrastructure on any private
property. The practice of construct first, expropriate later must be put to a
stop.
WHEREFORE, the petition is GRANTED. The September 18, 2015
Decision and January 25, 2016 Resolution of the Court of Appeals in
CAG.R. CV No. 03571, are REVERSED and SETASIDE. The valuation of the
subject property owned by respondent Oroville shall be ₱78.65 per square
meter, with interest at twelve percent (12%) per annum from January 1983
until January 21, 2011. Petitioner Transco is also ordered to pay
respondent Oroville exemplary damages in the amount of ₱1,000,000.00
and attorney's fees in the amount of ₱200,000.00.
SO ORDERED.
#16 G.R. No. 220367, November 20, 2017
NATIONAL POWER CORPORATION, Petitioner, v. APOLONIO V.
MARASIGAN, FRANCISCO V. MARASIGAN, LILIA V. MARASIGAN,
BENITO V. MARASIGAN, JR., AND ALICIA V.
MARASIGAN, Respondents.
DECISION
TIJAM, J.:
This Petition for Review1 on Certiorari under Rule 45 challenges the
Decision2 dated September 1, 2015 of the Court of Appeals (CA) in CA�
G.R. CV No. 97640, which affirmed the Decision3 dated December 20,
2010 of the Regional Trial Court (RTC) of Pili, Camarines Sur, in the
expropriation case commenced by petitioner National Power Corporation
(NPC) against respondents as registered owners of the subject properties.
The Antecedents
For purposes of constructing and maintaining its steel transmission lines
and wooden electric poles for its Naga-Tiwi 230 KV (Single Bundle), Naga-
Tiwi 230 KV (Double Bundle) and 69 KV Naga-Daraga Transmission Lines,
NPC filed, on January 23, 2006, an expropriation complaint4 against
respondents as registered owners of the following four parcels of land
located in Barangays Sagurong, San Agustin and San Jose, Pili, Camarines
Sur:
Page 115 of 119

Tax Dec. Area
Lot No. OCT No. Total Area
No. Affected
97-014-
516-B 6265 8,712 sq.m. 2,908 sq.m.
2276
97-014- 861,163
4237 6277 33,196 sq.m.
3948 sq.m.
97-014-
2870 6289 13,462 sq.m. 5,940 sq.m.
39110
97-014-
517-B 62911 13,765 sq.m. 7,129 sq.m.
22812
Total 49,173
Area: sq.m.
The total area over which NPC sought an easement of right of way covers
49,173 square meters of the subject properties.13 Based on the tax
declarations allegedly classifying the properties as agricultural and based
on the corresponding Bureau of Internal Revenue's (BIR) zoning valuation
therefor, NPC offered to pay PhP 299,550.50.14
While interposing no objection to the expropriation, respondents
nevertheless opposed the classification of the properties as agricultural on
the ground that the same were classified as industrial, commercial and
residential since the year 1993 as shown by (1) Sangguniang Bayan
Resolution No. 17; (2) Municipal Ordinance No. 7 dated February 1, 1993;
(3) annotations on the memorandum of encumbrances of the titles; (4)
DARCO Conversion Order No. 050301016014-(300)-00, Series of 2000
issued by the Department of Agrarian Reform; and (5) Certification issued
by the Municipal Assessor of Pili, Camarines Sur.15 Respondents thus
claimed PhP 47,064,400 for the affected 49,173 square meters. By way of
counterclaim, respondents sought payment of consequential damages for
the areas left in between each transmission line, like the spaces
underneath the infrastructure, commonly known as "dangling" portions in
the total area of 41,869 square meters.16
After the pre-trial, the RTC issued an Order of Expropriation and further
fixed the provisional value of the properties at PhP 47,064,400, which
amount was eventually deposited by NPC with Landbank of the
Philippines.17 Accordingly, in an Omnibus Order dated May 23, 2006, the
RTC issued a writ of possession in favor of NPC and ordered the LBP to
release to respondents the amount deposited.18 Meanwhile, an appraisal
committee was formed by the RTC for purposes of determining just
compensation,19 which thereafter submitted a Consolidated Report dated
August 10, 2006.20 A reversed trial thereafter ensued.
Respondents presented the Chairman21 of the appraisal committee who
testified that the appraisal committee recommended22 the total valuation
of PhP 49,064,400 based on the assessor's data and the BIR zonal
valuations as indicated on the 1997 tax declarations.23 Also presented was
the succeeding Chairman24 of the appraisal committee who testified that
the properties suffered consequential damages which the appraisal
committee recommended to be computed at 50% of the BIR zonal value
per square meter or for a total amount of PhP 22,227,800.25 On ocular
inspection, the appraisal committee found that the existence of the
transmission lines hampered the properties' potential use such that while
the areas before and after the transmission lines could still be used, the
areas in between could no longer be utilized. The appraisal committee
also noted that the transmission lines produced considerable noise
making the area unsuitable for residential purposes.26
NPC, on the other hand, presented its right-of-way officers whose
testimonies sought to establish that the lots being claimed by
ProvRem Rule 67 Fulltext
respondents as "dangling" areas were classified as agricultural under the
tax declarations and that NPC negotiated with respondents for purposes
of installing the transmission lines in 199627 and that NPC took the subject
properties in between the years 1996 to 1998.28 The right-of-way officer
further testified that the "dangling" areas could still be used for
agricultural purposes but nevertheless agreed that the presence of the
transmission lines may endanger the people and animals therein if in case
they fell.29 On cross-examination, the right of way officer admitted that
the properties were classified as agro� industrial as stated in the 1998 tax
declarations. He admitted that the classification of the properties as
agricultural which was used as basis for computing its value was
erroneous.30
The RTC rendered its Decision dated December 20, 2010 affirming the
recommendation of the appraisal committee for the payment of just
compensation and fixed the amount of PhP 47,064,400 for the 49,173
square meters based on the BIR zonal valuation of the properties
classified as residential, commercial and industrial as of the time of the
filing of the complaint on January 23, 2006. The RTC rejected NPC's claim
that it took possession of the property in 1972 and 1974 when
respondents allegedly. allowed NPC to construct the transmission lines for
lack of proof. In addition, the RTC held that had the properties been taken
on said years, such taking was without color of legal authority. The RTC
likewise adopted the recommendation of the appraisal committee for the
payment of PhP 22,227,800 as consequential damages for the 41,867
square meters portion of the properties which were rendered useless or
no longer fit for its intended use due to the construction of the
transmission lines.31
In disposal, the RTC held:
Wherefore, judgment is hereby rendered:
1. Approving and adopting the Commissioner's Report dated August 9,
2006 and November 24, 2008;
2. The payment of the provisional value (on May 19, 2006 when plaintiff
made the deposit) of P47,064,400.00 as just compensation for the 49,173
square meters area directly affected by the transmission lines is the
payment for the just compensation with 12% interest per annum (Marina
Z. Reyes, et al. vs. National Housing Authority, G.R. No. 147511, January 20,
2003), from the date of filing of this case until paid;
3. Condemning plaintiff to pay defendants the amount of P22,227,800.00
as consequential damages with interest at 12% per annum from January
23, 2006 until fully paid;
4. To pay P20,000.00 attorney's fees.
SO ORDERED.32
NPC's motion for reconsideration was denied by the RTC in its Order
dated May 2, 2011.33 However, the RTC modified the imposition of
interest as follows:
Wherefore, judgment is hereby rendered:
1. Approving and adopting the Commissioner's Report dated August 9,
2006 and November 24, 2008;
2. The payment of the provisional value (on May 19, 2006 when plaintiff
made the deposit) of P47,064,400.00 as just compensation for the 49,173
square meters area directly affected by the transmission lines is the
payment for the just compensation with interest at 6% per annum from
Page 116 of 119
the date of filing of the case until full payment less the interest collected
by the defendants from the bank deposit;
3. Condemning plaintiff to pay defendants the amount of P22,227,800.00
as consequential damages with interest at 6% per annum from January
23, 2006 and at 12% per annum from the date of finality of this decision
until fully paid;
5. To pay P20,000.00 attorney's fees.
SO ORDERED.34
Consequently, NPC interposed its appeal before the CA raising as issues
the alleged erroneous award of just compensation and consequential
damages. Specifically, NPC argued that the award was based on the
premise that it sought to acquire ownership over the properties when it
merely seeks to acquire a right-of-way thus necessitating the payment of
a mere easement fee equivalent to 10% of the market value of the
properties. Further, it argued that the award is contrary to the zonal
valuation of the property classified as agricultural and erroneously
reckoned as of the time of the filing of the complaint instead as of the
time of taking.
On the other hand, respondents moved for the execution of the award
pending appeal which the RTC granted.35 A writ of execution and a notice
of garnishment were thereafter issued.36
On September 1, 2015, the CA rendered its Decision denying NPC's
appeal. Contrary to NPC's claim, the CA held that the just compensation
to be paid for an easement of a right-of-way over lands that would be
traversed by high-powered transmission lines should be the full value of
the subject property.37
The CA likewise found no merit in NPC's argument that the fair market
value of the properties should have been based on the BIR zonal
valuation at the time of its supposed taking of the property in the 1970s
and on the basis of its classification as agricultural land as stated in the
tax declarations. The CA reasoned that NPC failed to allege the issue of
taking. in its complaint nor was such raised during pre-trial or proven
during trial. The CA also held that to base the fair market value of the
property during the alleged actual taking in the 1970s is to compound the
injustice caused to respondents as the expropriation complaint was filed
more than 30 years after NPC allegedly took respondents' properties.38As
regards to the proper classification of the properties, the CA noted that
these were already reclassified as residential, commercial and industrial by
the municipality of Pili, Camarines Sur even prior to the filing of the
expropriation complaint.39
Finally, the CA found no reason to disturb the RTC's award of
consequential damages as testimony to that effect was presented by
respondents while NPC, on the other hand, failed to prove the alleged
consequential benefits.
The CA thus disposed:
WHEREFORE, the foregoing considered, the appeal is
hereby DENIED and the decision of the trial court [dated] December
20,2010, as modified by its Order dated May 2, 2011, is AFFIRMED in
toto.
SO ORDERED.40
Upon denial of its motion for reconsideration, NPC filed the present
petition.
ProvRem Rule 67 Fulltext
The Issues
Reiterating its arguments before the lower courts, NPC interposes the
following issues for resolution: (1.) should the value of the property be
reckoned at the time of the taking in the 1970s; (2.) should the amount of
just compensation be based on the properties' BIR zonal valuation
corresponding to its classification as agricultural in the tax declarations;
and (3.) is the award of consequential damages for the "dangling" area
proper.41
Essentially, NPC contests the amount of just compensation and the award
of consequential damages.
The Ruling
We deny the petition.
Reckoning point of the market value of the properties
The circumstances surrounding the "taking" of property in the context of
the State's exercise of the power of eminent domain has been
jurisprudentially listed in the seminal case of Republic v. Vda. De
Castellvi,42 thus:
First, the expropriator must enter a private property. x x x
Second, the entrance into private property must be for more than a
momentary period. x x x
xxxx
Fourth, the property must be devoted to a public use or otherwise
informally appropriated or injuriously affected. x x x
Fifth, 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. x x x43
That there was taking of the subject properties for purposes of
expropriation is beyond contest. What plagues the court and the parties is
the date when such taking is to be reckoned because this will, in turn, be
determinative of the value of the subject properties from which the
amount of just compensation will be based.
Sec. 4,44 Rule 67 lays down the basic rule that the value of the just
compensation is to be determined as of the date of the taking of the
property or the filing of the complaint, whichever came first.
The case of National Transmission Corporation v. Oroville Development
Corporation,45 settles that just compensation should be reckoned from the
date of actual taking when such preceded the filing of the complaint for
expropriation. In Oroville, the Court explains that the State is. only obliged
to make good the loss sustained by the landowner and considering the
circumstances availing at the time the property was taken. Deviation from
this general rule was permitted in the cases of National Power Corporation
v. Heirs of Macabangkit Sangkay46 and National Power Corporation v.
Spouses Saludares47 due to special circumstances48 therein obtaining
which necessitated a valuation of just compensation at the time the
landowners initiated inverse condemnation proceedings notwithstanding
that taking of the properties occurred first.
The peculiarity of the instant case is that NPC insists that it took the
subject properties in the 1970s despite having initiated the expropriation
complaint only on January 23, 2006. Following the general rule, NPC thus
Page 117 of 119
reasons that the value of the properties should be reckoned in the 1970s.
However, NPC's expropriation complaint and the very testimonial
evidence it offered strongly militate against such proposition.
NPC's expropriation complaint filed on January 23, 2006 clearly sought "to
acquire an easement of right-of-way over portions of the [subject
properties]"49 to enable it "to construct and maintain its steel transmission
lines and wooden electric poles for its Naga-Tiwi 230 KV (Single Bundle),
Naga-Tiwi 230 KV (Double Bundle) and 69 KV Naga-Daraga Transmission
Lines".50 NPC's action relative to the acquisition of an easement of right-
of-way made prior to the filing of its expropriation complaint was limited
only to the conduct of negotiations with respondents. Even then, such
negotiations pertained to the construction of HVDC 350 KV transmission
lines which was not among the transmission lines subject of the
expropriation complaint. This, as much, was alleged by NPC itself in its
expropriation complaint51 and was testified to by NPC's right-of-way
officer who conducted the negotiations in 1996.52 The lower courts were
thus correct in disregarding NPC's claim of actual taking in the 1970s as
such was not alleged in the expropriation complaint nor was it
successfully proven during the trial.
There being no sufficient proof that NPC actually took the subject
properties at a date preceding the filing of the expropriation complaint,
the time of the taking should be taken to mean as coinciding with the
commencement of the expropriation proceedings on January 23, 2006.
Hence, 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.53
Amount of just compensation
To begin with, factual issues pertaining to the value of an expropriated
property is beyond the scope of judicial review under a petition filed via
Rule 45.54 As such, factual findings of the trial and appellate courts will not
be disturbed by this Court unless any of the recognized exceptions is
present.55 No such exception obtains in the instant case.
The various provisions of the Constitution56 uniformly treat the payment
of just compensation as a limitation to the State's exercise of eminent
domain. Just compensation likewise bears the consistent and settled
meaning as the 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 qualify the meaning of the word
"compensation" and to convey thereby the idea that the amount to be
tendered for the property to be taken shall be real, substantial, full and
ample.57
Further, the determination of just compensation in expropriation cases is
a function addressed to the discretion of the courts owing to the
constitutional mandate that no private property shall be taken for public
use without payment of just compensation.58 As such, legislative
enactments, as well as executive issuances, fixing or providing for the
method of computing just compensation are tantamount to
impermissible encroachment on judicial prerogatives. As such, they are
not binding on courts and are treated as mere guidelines in ascertaining
the amount of just compensation.59 Even the enumeration of the
standards for the assessment of the value of the land for purposes of
expropriation under Section 5 of Republic Act No. 897460 reflects the non-
exclusive, permissive and discretionary character thereof.61
Here, NPC assails the valuation assigned to the subject properties for
being contrary to its alleged classification as agricultural as appearing on
the tax declarations attached to its expropriation complaint.
ProvRem Rule 67 Fulltext
However, the insistence of NPC to base the value of the properties solely
on the tax declarations is misplaced considering that such is only one of
the several factors which the court may consider to facilitate the
determination of just compensation. Indeed, courts enjoy sufficient
judicial discretion to determine the classification of lands, because such
classification is one of the relevant standards for the assessment of the
value of lands subject of expropriation proceedings. It bears to
emphasize, however, that the court's discretion in classifying the
expropriated land is only for the purpose of determining just
compensation and is not meant to substitute that of the local
government's power to reclassify and convert lands through local
ordinance.62
The subject properties in this case had been reclassified as residential,
commercial and industrial several years before the expropriation
complaint was filed. If NPC contests the reclassification of the subject
properties, the expropriation case is not the proper venue to do so. As
such, the RTC and the CA did not err in abiding by the classification of the
subject properties as residential, commercial and industrial as reclassified
under Sangguniang Bayan Resolution No. 17 and Municipal Ordinance
No. 7 dated February 1, 1993 and as certified to by the Municipal Assessor
of Pili, Camarines Sur.
In any case, reliance on the tax declarations attached to NPC's
expropriation complaint to classify the properties as purely agricultural is
inaccurate as these very same tax declarations reveal that portions of the
expropriated Lot No. 4237 and Lot No. 2870 are in fact classified as
residential and commercial.63
Award of consequential damages
As a rule, just compensation, to which the owner of the property to be
expropriated is entitled, is equivalent to the market value.64 The rule 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 damages, if any, to
the remaining part of the property.
Consequential damages is specifically enunciated under Section 6 of Rule
67 as follows:
Section 6. Proceedings by Commissioners. - Before entering upon the
performance of their duties, the commissioners shall take and subscribe
an oath that they will faithfully perform their duties as commissioners,
which oath shall be filed in court with the other proceedings in the case.
Evidence may be introduced by either party before the commissioners
who are authorized to administer oaths on hearings before them, and the
commissioners shall, unless the parties consent to the contrary, after due
notice to the parties, to attend, view and examine the property sought to
be expropriated and its surroundings, and may measure the same, after
which either party may, by himself or counsel, argue the case. 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 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. (Emphasis supplied)
Thus, if as a result of expropriation, the remaining portion of the property
suffers from impairment or decrease in value, the award of consequential
damages is proper.65
Page 118 of 119
Respondents in this case claim consequential damages for the areas in
between the transmission lines which were rendered unfit for use.
"Dangling" areas, as defined under National Power Board Resolution No.
94-313, refer to those remaining small portions of the land not traversed
by the transmission line project but which are nevertheless rendered
useless in view of the presence of the transmission lines. The appraisal
committee determined the total dangling area to be 41,867 square
meters66 and consequently recommended the payment of consequential
damages equivalent to 50% of the BIR zonal value per square meter or for
a total amount of PhP 22,227,800.
In arriving at its recommendation to pay consequential damages, the
appraisal committee conducted an ocular inspection of the properties and
observed that the areas before and behind the transmission lines could
no longer be used either for commercial or residential purposes. Despite
this determination, NPC insists that the affected areas cannot be
considered "dangling" as these may still be used for agricultural
purposes.67 In so arguing, NPC loses sight of the undisputed fact that the
transmission lines conveying high-tension current posed danger to the
lives and limbs of respondents and to potential farm workers, making the
affected areas no longer suitable even for agricultural production. Thus,
the Court finds no reason to depart from the assessment of the appraisal
committee, as affirmed and adopted by the RTC.
damages was not yet included. The total just compensation should
therefore be the total of PhP 47,064,400 and PhP22,227,800. Considering
that the amount of PhP 22,227,800 as consequential damages was not yet
paid, such amount should earn interest at the rate of 12% per
annum from January 23, 2006 until June 30, 201374 and the interest rate of
6% per annum is imposed from July 1, 2013 until fully paid.75
WHEREFORE, the Petition is DENIED. The Decision dated September 1,
2015 of the Court of Appeals, which affirmed the Decision dated
December 20, 2010 of the Regional Trial Court of Pili, Camarines Sur,
is AFFIRMED with MODIFICATION such that the interest imposed on the
amount of PhP 47,064,409 is DELETED and that the award of
consequential damages in the amount of PhP 22,227,800 shall earn
interest at the rate of 12% per annum from January 23, 2006 until June 30,
2013 and the interest rate of 6% per annum is imposed from July 1, 2013
until fully paid.
SO ORDERED.

NPC's contention that the consequential benefits should have canceled

the consequential damages likewise deserve no merit. It is true that if the
expropriation resulted in benefits to the remaining lot, such consequential
benefits may be deducted from the consequential damages or from the
value of the expropriated property.68 However, such consequential
benefits refer to the actual benefits derived by the landowner which are
the direct and proximate results of the improvements as a consequence
of the expropriation and not to the general benefits which the landowner
may receive in common with the community.69 Here, it was not shown by
NPC how the alleged "tremendous increase" in the value of the remaining
portions of the properties could have been directly caused by the
construction of the transmission lines.70 If at all, any appreciation in the
value of the properties is caused by the consequent increase in land value
over time and not by the mere presence of the transmission lines.

Imposition of interest

Notwithstanding the foregoing, We find the need to modify the

imposition of interest.

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.71 Thus, the
imposition of interest is justified only in cases where delay has been
sufficiently established.72

In this case, NPC deposited the provisional value of the subject properties
in the amount of PhP 47,064,400 on May 19, 2006 which was days before
the issuance of a writ of possession. Considering NPC's prompt payment,
the imposition of interest thereon is unjustified and should therefore be
deleted.

However, interest should be imposed on the award of consequential

damages as it is a component of just compensation. To emphasize, in
order 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.73 Here, when the RTC pegged the amount of PhP
47,064,400 for the expropriated 49,173 square meters, the consequential
ProvRem Rule 67 Fulltext Page 119 of 119