Title
Republic vs. Decena
Case
G.R. No. 212786
Decision Date
Jul 30, 2018
DPWH expropriated properties for C5 Road project; RTC fixed just compensation at P25,000/sq.m., upheld by CA and SC, with interest on unpaid amounts.
expropriation
road widening project
just compensation

Case Summary (G.R. No. 212786)

Factual Background

After failed attempts at negotiated sale, DPWH initiated expropriation proceedings by filing five separate complaints between November 2010 and February 2011 in RTC Civil Cases Nos. Q-10-68298, Q-10-68299, Q-10-68390, Q-10-68731, and Q-10-68732. The complaints were later consolidated before the RTC.

On June 1, 2011, DPWH filed an ex parte motion for the issuance of a writ of possession, alleging compliance with Sec. 4(a) of Republic Act No. 8974 by depositing with the Land Bank of the Philippines (LBP) an amount equivalent to 100% of the current zonal valuation of the subject properties. The deposited amounts were allocated per owner: P1,428,000.00 for Estrella Decena; P3,668,000.00 for Marieta Decena-Brazil; P4,410,000.00 for Nolan Decena-Brazil; P3,346,000.00 and P1,554,000.00 for the Heirs of Edita R. Decena.

On June 17, 2011, the RTC issued a writ of possession placing DPWH in possession. Later, on December 12, 2011, the RTC issued an order of condemnation and created a Board of Commissioners (BOC) to determine just compensation by appointing disinterested officials: the Branch Clerk of Court, the Quezon City Assessor or representative, and the Quezon City Treasurer or representative.

BOC and PACI Valuations in the RTC

The BOC submitted its valuation report on May 14, 2012, recommending P17,893.33 per square meter. The BOC based its recommendation on three elements: the BIR zonal valuation of P14,000.00; the average recorded sales of nearby properties of P14,490.00 using data from 2011–2012; and the highest recorded sale for adjacent properties of P25,190.00. When the RTC observed that one year had passed between the filing of the complaints and the BOC’s valuation, it ordered the BOC to re-examine its assessment. In a supplemental report dated June 26, 2012, the BOC reaffirmed P17,893.33 per square meter, stating that there had been no significant change over the twelve-month period.

Respondents, through a manifestation before the RTC, submitted an opposing valuation supported by an Appraisal Report of the Philippine Appraisal Company, Inc. (PACI). PACI recommended a higher value of P30,000.00 per square meter. PACI employed a market data approach, considering sales prices, listings, and other comparable property data within the vicinity, with particular focus on properties along Commonwealth and within the Ayala Heights Subdivision. PACI also took into account property classification, site data, neighborhood data, utilities available, and the highest and best use. It expressly considered the time element, stating that the valuation was made on November 10, 2011.

RTC Resolution Fixing Just Compensation

In a Resolution dated July 5, 2012, the RTC fixed just compensation at P25,000.00 per square meter for the expropriated parcels covered by the respondents’ titles, to be paid through respondents’ attorney-in-fact, Virgilio C. Brazil, Sr. The RTC denied DPWH’s motion for reconsideration in a Resolution dated November 29, 2012.

In explaining why it chose P25,000.00 per square meter, the RTC reasoned that it could not take the BIR zonal valuation into account because it was generally lower than fair market value. It also declined to adopt the BOC valuation as the sole appraised value because the BOC’s computation relied on averages of recorded sales ranging from P5,780.00 to P25,190.00 per square meter and was supported by limited proof as to market value. The RTC likewise held that PACI’s appraisal could not be relied upon entirely because it was predominantly based on comparable property sales, listings, and market data, and it highlighted that the highest appraised value of an immediate vicinity lot—attributed to the presence of a golf course—was expected to command a higher market value, though the RTC ultimately set the fair market value at P25,000.00 per square meter based on the evidence before it.

Appellate Review by the CA

DPWH appealed to the CA, arguing that the RTC erred in setting fair market value at P25,000.00 per square meter rather than the BOC recommendation of P17,893.33 per square meter.

In a Decision dated February 28, 2014, the CA denied the appeal and affirmed the RTC in toto. The CA acknowledged three varying market values in the record: P17,893.33 (BOC), P30,000.00 (PACI), and P25,000.00 (RTC). It then applied the statutory factors under Sec. 5 of R.A. 8974. The CA ruled that the BOC report was insufficient because it relied mainly on zonal valuation and average recorded sales. It further held that PACI’s report was insufficient because PACI’s appraisal heavily used “asking prices,” which the CA described as mere offers that may remain subject to negotiation. In this regard, the CA relied on LECA Realty Corporation v. Republic, where valuations based on newspaper advertisements were rejected because they reflected “asking prices.”

The CA concluded that the RTC had carefully and judiciously set a reasonable and fair “middle ground” of P25,000.00 per square meter that would entitle respondents to just shares and allow the Republic to take the properties at a reasonable amount. The CA denied DPWH’s motion for reconsideration in a Resolution dated May 28, 2014, prompting DPWH’s petition to the Supreme Court.

The Parties’ Positions and the Sole Issue

DPWH maintained that the CA erred in affirming the RTC valuation instead of the BOC valuation. It insisted that the legal parameters for determining just compensation were not properly applied and characterized the RTC approach as more than merely selecting a midpoint between the two appraisals.

Respondents countered that the CA acted in accordance with law because the RTC’s valuation was based on all data and evidence submitted and reflected proper application of the standards under R.A. 8974.

The Supreme Court framed the sole issue as whether the CA committed reversible error when it affirmed the RTC’s determination of just compensation at P25,000.00 per square meter.

Supreme Court Ruling on Just Compensation

The petition was denied. The Supreme Court first emphasized that a Rule 45 petition covers only questions of law. It held that issues involving valuation of expropriated property are questions of fact and therefore lie beyond its review, absent exceptional circumstances. DPWH, according to the Court, effectively asked the Court to reweigh evidence already passed upon by the RTC and CA. The Court found no showing of any exceptional circumstances that would permit deviation from the factual-review limitation.

The Court nevertheless addressed DPWH’s separate contention that the RTC and CA failed to fully consider the standards under Sec. 5 of R.A. 8974. It held that the determination of just compensation is a judicial function. The Court anchored this in the constitutional command of Art. III of the 1987 Constitution that private property taken for public use must be compensated, and in jurisprudence recognizing that courts have sound discretion in arriving at just compensation so long as they consider the statutory standards. The Court noted that Sec. 5 of R.A. 8974 uses permissive language—“the court may consider”—which confers discretion, and that discretion is not interfered with absent abuse, arbitrariness, or serious error.

Applying these principles, the Court found no such abuse. It stressed that the RTC did not treat the BOC or PACI valuations as complete indicators of market value. It recalled that the BOC relied largely on zonal valuation and average recorded sales, while PACI relied largely on comparable properties’ sales and listings. Given those guideposts, the RTC exercised discretion to arrive at P25,000.00 per square meter based on the evidence in the record. The Court held that the CA did not err in sustaining this approach, since it found that the RTC properly and judiciously considered the statutory factors under Sec. 5 of R.A. 8974.

Interests Due on Just Compensation and the Date of Taking

The Court then addressed the consequential issue of interest due on the compensation. It noted that on June 1, 2011, DPWH filed its ex parte motion for a writ of possession asserting that it had deposited compliance funds equivalent to 100% of the zonal valuation, pursuant to Sec. 4(a) of R.A. 8974. While the Court recognized compliance with the statutory requirement for an initial deposit, it held that this deposit did not, by itself, constitute “just compensation” within the constitutional sense. Just compensation required payment of the proper amount as finally determined by the courts in the course of the expropriation proceedings.

The Court explained that jurisprudence considers just compensation as contemplating just and prompt payment, and prompt payment requires payment in full of the amount finally determined by the courts. Relying on Sec. 10, Rule 67 of the Rules of Court, the Court reasoned that the government incurs delay if it does not pay the full amount as of the date of taking. It further tied the result to Sec. 4 of R.A. 8974, which mandates that when the decision becomes final and executory, the implementing agency shall pay the difference between the initial amounts paid and the just compensation as determined by the court.

Accordingly, the Court held that interest runs by law on the unpaid portion, to place the owner in a position as good as, but not better than, the owner’s pre-taking status. It cited the underlying fairness rationale articulated in prior cases, including Evergreen Manufacturing Corp. v. Republic and Republic v. Mupas, that just compensation cannot be just without interest on the unpaid balance from the date of taking. It also explained that the interest compensates for the deprivation of both property and its income-generating potential.

On when interest should begin, the Court applied Sec. 4, Rule 67, which provides that just compensation must be determined as of the date of taking or the filing of the complaint, whichever came first. It cited B.H. Berkenkotter & Co. v. Co

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