G.R. No. 146408 - Philippine Airlines, Inc. vs. Ligan

On December 31, 1947, the President of the Philippines authorized the Rural Progress Administration to expropriate a piece of land described in T.T. No. 9961, located in Maypajo, Caloocan, Rizal, owned by respondent Justa G. Vda. de Guido.
The purpose of the expropriation was to resell the land at cost price to bona fide tenants or occupants pursuant to the powers conferred by Executive Orders Nos. 191 and 206, and Commonwealth Acts Nos. 538 and 539.

Acting on the presidential authority, the Rural Progress Administration, through the Republic of the Philippines, filed civil case No. 400 (Republic of the Philippines vs. Justa G. Vda. de Guido) before the Court of First Instance of Rizal.
The lower court fixed a provisional value of P19,730 for the land, assessed at that time, and ordered temporary possession on January 6, 1948, after the plaintiff-petitioner deposited the said amount with the provincial treasurer of Rizal.

Before the actual delivery of possession, respondent Guido objected to the expropriation proceedings and the sufficiency of the deposit.
The Philippine National Bank intervened due to a mortgage on the land in favor of the bank amounting to P115,000.
The trial court, acknowledging the objections and based on the new (1948) assessed value, revised the provisional value to P18,780 on January 23, 1948, and suspended the order granting possession until the additional deposit was made.
On March 16, 1948, the plaintiff deposited a check of P99,050 against the Rehabilitation and Finance Corporation in addition to the original P19,730, making the total deposit P118,780.
Possession was subsequently delivered on March 18, 1948 by the provincial sheriff to the chief of the legal division of the Rural Progress Administration.

Respondent Guido filed a petition for certiorari and prohibition with mandatory injunction (G.R. No. L-2089) seeking the recall and cancellation of the order of March 16, 1948.
On March 23, 1948, the Supreme Court issued a writ of preliminary mandatory injunction ordering the trial court to recall its March 16 order, which was effected on March 24, 1948.

Pending the petition before the Supreme Court, respondent Guido, in the condemnation proceedings, filed a motion on March 29, 1948, to deduct P7,534.52 from the initial deposit of P19,730. This deduction was claimed to represent unpaid back and current rentals from July 1946 to March 31, 1948, from tenants occupying the expropriated land, as evidenced in an attached list.
Despite opposition by the plaintiff-petitioner, the trial court, by its order of April 13, 1948, authorized the deduction; consequently, defendant’s counsel withdrew P7,534.52 from the deposit.
The plaintiff filed a motion to reconsider the April 13 order on April 19, 1948.
Later, on June 28, 1948, respondent Guido filed another motion claiming additional rental dues of P3,981.66, proposing that a tenant’s deposit of P833.15 be deducted, resulting in a net amount of P3,143.51, and requested payment from the provincial treasurer.

The Republic of the Philippines (petitioner) subsequently filed a petition for certiorari and prohibition with mandatory injunction, arguing that:

The deposit of P118,780 was made solely for securing immediate possession of the land pending final adjudication of condemnation.
Any premature deduction from this deposit—in this case, the P7,534.52 withdrawal—constituted a prejudgment on the issue of damages, thereby defeating the deposit’s purpose.
The determination of rental damages should await final judgment on condemnation, as such damages might not even be attributable to the expropriation proceedings.

On August 2, 1948, the Supreme Court granted the preliminary injunction upon the filing of a bond of P200, and respondents filed their answers.

The petitioner contended that the deposit should not be diminished by deductions for alleged rental arrears before a final decision, emphasizing that:

The deduction of P7,534.52 was premature since the condemnation proceedings had not reached conclusion and compensation had not been finally determinate.
The rental arrears forming the basis of the deduction were accrued before the commencement of the expropriation proceedings and, thus, are unrelated to the damages arising from the expropriation.

The deposit partly consisted of contributions made by tenants, who were responsible for the arrears.
The rental arrears, being directly linked to the tenant’s failure to pay during the period since July 1946, warranted the deduction.
The deposit served a dual purpose—as prepayment for the expropriated properties and as indemnity for any damages due to the expropriation proceedings.

Whether the trial court’s order of April 13, 1948, authorizing the deduction of P7,534.52 from the condemnation deposit is proper and lawful.
Whether rental arrears—particularly those accrued from July 1946 which predate the initiation of expropriation proceedings—can be justifiably deducted from the deposit intended for securing immediate possession pending a final judgment on condemnation.
Whether the deposit, made by the plaintiff and in part contributed by tenants, should be treated as a singular fund solely for securing possession or as a fund from which damages (rental arrears) may be prematurely liquidated.
Whether the issuance of the deduction order constitutes a premature adjudication of damages that should only be determined after the final resolution of the condemnation proceedings.