Title
Republic vs. Jose Gamir-Consuelo Diaz Heirs Association, Inc.
Case
G.R. No. 218732
Decision Date
Nov 12, 2018
Heirs sold land to DPWH in 2005 via voluntary sale; claimed interest from 1957. SC ruled no interest due, as contract terms were binding and lacked interest stipulation.
dispute
payment of interest
negotiated sale
A

Case Summary (G.R. No. 218732)

Factual Background

The respondent corporation owned a parcel of land described as 1,836 square meters formerly covered by TCT No. T-7550. The DPWH occupied the parcel since 1957 as part of Sta. Ana Avenue. After negotiations, the parties executed a Deed of Absolute Sale on August 9, 2005 whereby respondent agreed to sell the property to petitioner for P275,099.24. The respondent received the purchase price and the property was registered in petitioner’s name under TCT No. T-390639. Prior to the deed, respondent had made demands for payment of interest computed from 1957, claiming that the government had not paid just compensation when it occupied the land.

Trial Court Proceedings

Respondent filed a complaint in the Regional Trial Court asserting entitlement to interest from 1957 because just compensation was not paid at the time of the taking. The RTC, however, dismissed the complaint for lack of merit in its March 4, 2010 Decision. The dismissal prompted an appeal to the Court of Appeals.

Court of Appeals Decision

In its December 12, 2013 Decision, the Court of Appeals reversed the RTC and awarded legal interest at the rate of twelve percent per annum on the agreed price of the land, to be computed from 1957 until full payment. The CA reasoned that the Deed of Absolute Sale did not cure the constitutional requirement of prompt payment of just compensation and that legal interest accrues by operation of law from the time of the taking until actual payment, relying on Apo Fruits Corporation v. Land Bank of the Philippines (647 Phil. 251 (2010)). The CA held that the deed could not be treated as a waiver of interest because interest in eminent domain matters derives from law and the taking was effectively involuntary. Petitioner’s motion for reconsideration to the CA was denied in its June 9, 2015 Resolution.

Issue Presented

Whether the respondent is entitled to receive payment of interest notwithstanding the absence of any stipulation for interest in the Deed of Absolute Sale executed with petitioner.

Petitioner’s Contentions

Petitioner maintained that the Deed of Absolute Sale embodied the full and final agreement between the parties and that respondent thereby waived any claim for interest. Petitioner invoked the Parol Evidence Rule to exclude pre-contractual correspondence and alleged negotiations from altering the deed’s terms. It argued that the parties voluntarily fixed the consideration and that Apo Fruits is distinguishable because in that case the valuation of just compensation was disputed and no consensual sale had been perfected.

Respondent’s Position

Respondent maintained that legal interest accrued from the date the government occupied the property in 1957 and that the DPWH’s failure to pay just compensation at that time gave rise to an entitlement to interest. Respondent relied on the CA’s application of precedent awarding interest in cases involving government acquisition of private land.

Supreme Court’s Ruling

The Supreme Court granted the petition. The Court reversed the December 12, 2013 Decision and the June 9, 2015 Resolution of the Court of Appeals and reinstated the March 4, 2010 Decision of the Regional Trial Court. The Court held that where the government acquires property by negotiated sale and the parties reduce their agreement to a written Deed of Absolute Sale, the terms of the contract govern the parties’ rights and obligations and extrinsic evidence cannot be used to alter those terms unless an exception to the Parol Evidence Rule is properly pleaded and established.

Legal Basis and Reasoning

The Court reiterated the constitutional contours of eminent domain: the State may take private property for public use only upon payment of just compensation pursuant to Section 1, Article III and Section 9, Article III of the 1987 Constitution; just compensation requires both the correct amount and payment within a reasonable time. The Court distinguished expropriation from voluntary sale, noting that the legal rule awarding interest as part of just compensation principally attends exercises of eminent domain or cases where no consensual valuation exists. The Court observed that in many decisions awarding legal interest, the government either instituted expropriation proceedings or the parties disputed valuation, thus triggering judicial determination of just compensation. By contrast, the present case involved a voluntary, consensual sale in which the parties agreed on the consideration and the respondent accepted payment.

The Court applied the Parol Evidence Rule under Section 9, Rule 130 of the Revised Rules of Court, and the line of cases explaining its rationale and exceptions. The Court found no allegation in respondent’s pleadings that the written deed was ambiguous, that it failed to express the true intent of the parties, that it was invalid, or that other terms were agreed to after execution. The pre-deed correspondence asserting a demand for interest therefore could not be admitted to vary the deed’s terms. Th

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