Dissension in the Court: July 2013

In a decision penned by Justice Peralta and promulgated last July 1, 2013, the Third Division of the Supreme Court ruled that just compensation for property taken by the government in 1940 should be Php0.70/sqm, its fair market value (FMV) at the time of taking, and not Php10,000/sqm, its FMV at the time of filing of the claim for just compensation by the landowners in 1995, nor Php1,500/sqm, its reasonable value as determined by the Provincial Appraisal Committee (PAC) appointed by the lower court in 1999 to determine just compensation.

Private respondents owned land in Bulacan that was taken by the DPWH in 1940 and used for the construction of the MacArthur Highway, without the owners’ consent and without the necessary expropriation proceedings.  In 1994, respondents demanded payment of the FMV of the land but petitioner DPWH District Engineer Contreras offered to pay Php0.70/sqm per resolution of the PAC of Bulacan.  Unsatisfied with the offer, respondents demanded the return of their property or the payment of compensation at current FMV.  As their demand remained unheeded, respondents filed a Complaint on March 1995 for recovery of possession with damages against petitioners DPWH Secretary and DPWH District Engineer.

Acting on petitioners’ motion, the RTC dismissed the complaint based on the doctrine of state immunity from suit. On appeal, however, the CA – finding instead that the doctrine of state immunity is not applicable because the recovery of compensation is the only relief available to the landowner and to deny such relief would cause injustice to the landowner – reversed the RTC and remanded the case to the RTC for the purpose of determining just compensation.  The RTC then referred the case to the PAC which recommended Php1,500/sqm as the just and reasonable compensation even as it noted that its current FMV was Php10,000/sqm.  The RTC adopted this recommendation and rendered a decision directing the petitioners to pay respondents that amount.

On appeal, the CA affirmed that decision with the modification that the Php1,500/sqm amount should earn interest of 6% per annum computed from the filing of the action on March 1995 until full payment.  Aggrieved, petitioners filed this petition for review on certiorari assailing the CA decision.

The majority of the Third Division justices found the petition partly meritorious and, citing several precedents with common factual circumstances as this case, ruled that just compensation is the value of the property at the time of taking (which is Php0.70/sqm), and not its value at the time of payment.  The reason for this rule, as explained in Republic v. Lara, et. al. and in a number of recent cases, is that (i) the value of the property may be enhanced by the public purpose for which it is taken or there may have been a natural increase in the value due to general economic conditions from the time it is taken to the time the complaint is filed, and (ii) the owner must be compensated only for what he actually loses since compensation must be just not only to the property owner, but also to the public which ultimately bears the cost of expropriation.  However, noting that petitioners clearly disregarded respondents’ proprietary rights in taking their property without the benefit of expropriation proceedings, the SC ordered the petitioners to pay interest at 6% per annum from the date of taking in 1940 instead of March 1995, until full payment.

In his dissenting opinion, J. Velasco submits that, while this Court has consistently ruled that the reckoning point for the determination of just compensation is the time of taking, an exception must be made in cases where no condemnation proceedings were instituted after a substantial period from the time of illegal taking, since to apply the general rule in those cases would result in inequity and prejudice.

He notes that government violated respondents’ constitutional right to procedural due process when it deprived them of their property without their consent and the requisite expropriation proceedings, and unless the mandatory requirement of due process is followed, the exercise of government powers can become repressive.  DPWH’s action in this case, done without observing procedural due process, is illegal and invalid.  As such, the condemnation of the subject property ought to be reversed. But since that would no longer be possible as it has already been put to public use, the only remedy available to respondents is the recovery of just compensation which, in this case, should not be Php0.70/sqm as that measly amount would be highly unjust and inequitable to respondents who had already been deprived of their right to due process for 55 years.  This dissenter believes that both the RTC and CA were correct in granting respondents just compensation of Php1,500/sqm as recommended by the PAC – which is just and proper considering that it falls between Php0.70/sqm and Php10,000/sqm, the valuation at the time of filing of the claim for just compensation, which is already enhanced by the public purpose and the natural appreciation in value of the property – so government would think twice next time before taking any unwarranted short cuts in condemning private property.

In his separate opinion, J. Leonen proposes using the economic concept of present value for determining just compensation, as a happy middle ground that meets the need for doctrinal precision urged by J. Peralta and the thirst for substantial justice in J. Velasco’s dissenting opinion. Under this concept, money received today is more valuable than the same amount of money received tomorrow; that is, your Php0.70 in 1940 can buy more in 1940 than your Php0.70 in 1995. And so taking into consideration the potential of money to increase (or decrease) in value across time, a proper rate of return is applied to determine, say, how much Php0.70 in 1940  – if put in the bank in 1940 and allowed to earn interest on a compounded basis until 1995 – would be worth in 1995.  The value in 1995 of that Php0.70 1940 money would then be paid out in 1995.

Secretary of the Department of Public Works and Highways and District Engineer Celesinto R. Contreras vs Spouses Heracleo and Ramona Tecson (G.R. No. 179334); dissenting and concurring opinion: Velasco, Jr., J.; separate opinion: Leonen, J.

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