Meaning of "taking"; just compensation; power of eminent domain; delayed payment, interest and damages

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 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 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 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.
x x x

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

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 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

EN BANC

August 1, 2017

G.R. No. 223366

NATIONAL TRANSMISSION CORPORATION, Petitioner,
vs.
OROVILLE DEVELOPMENT CORPORATION, Respondent