In expropriation cases, the Supreme Court clarifies the difference between the provisional value paid for the issuance of a writ of possession and the final just compensation for the expropriated property. The provisional value, based on the current zonal valuation, allows the government to take possession, while the just compensation is the fair market value determined later, ensuring fairness to both the property owner and the public. This distinction is critical for understanding property rights and government authority in eminent domain proceedings.

PEZA’s Land Acquisition: A Clash Between Zonal Valuation and Fair Market Value

This case revolves around the Republic of the Philippines, represented by the Philippine Economic Zone Authority (PEZA), and the spouses Agustin and Imelda Cancio. PEZA sought to expropriate a 47,540 sq. m. lot owned by the spouses in Lapu-Lapu City for integration into the Mactan Export Processing Zone. The central legal issue was whether Republic Act (RA) 8974, which requires the government to pay 100% of the current zonal valuation for the issuance of a writ of possession, applied to this case. PEZA argued that Administrative Order (A.O.) No. 50, which mandates a deposit of only 10% of the offered amount, should govern. The Supreme Court had to determine which law controlled the initial payment required for PEZA to take possession of the property.

The dispute began when PEZA offered to purchase the spouses’ property for P1,100 per sq. m., totaling P52,294,000, and warned of expropriation if the offer was rejected. Instead of accepting, the spouses filed an unlawful detainer case against Maitland Smith Inc., the lessee of the property. Subsequently, PEZA initiated expropriation proceedings and sought a writ of possession, offering to deposit 10% of the offered amount, citing A.O. No. 50. The spouses countered by invoking RA 8974, which took effect before the expropriation case began. Their motion highlighted a critical distinction in the law.

The Regional Trial Court (RTC) initially sided with the spouses, then reversed its decision, and finally reinstated its original order, leading to PEZA’s appeal to the Court of Appeals (CA), which sustained the RTC’s ruling. This brought the issue to the Supreme Court. The core of PEZA’s argument rested on the premise that RA 8974 did not apply because the government already possessed the property. They believed they should only pay the land’s price at the time of taking. However, the Supreme Court disagreed, clarifying the applicability of RA 8974 to this case.

The Supreme Court emphasized that RA 8974 applies to national government infrastructure projects, which undeniably includes economic zones. The law explicitly states the payment guidelines in expropriation cases, especially concerning the issuance of a writ of possession. It is important to highlight the relevant provision of RA 8974:

Sec. 4. Guidelines for Expropriation Proceedings. – Whenever it is necessary to acquire real property for the right-of-way, site or location for any national government infrastructure project through expropriation, the appropriate implementing agency shall initiate the expropriation proceedings before the proper court under the following guidelines:

(a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7 hereof;

x x x

Upon compliance with the guidelines abovementioned, the court shall immediately issue to the implementing agency an order to take possession of the property and start the implementation of the project.

The Court noted a critical confusion between the payment for the writ of possession and the determination of just compensation. It clarified that the 100% zonal valuation payment is a prerequisite for the writ of possession, distinct from the final just compensation. This distinction is crucial. As the Supreme Court stated in Capitol Steel Corporation v. PHIVIDEC Industrial Authority:

The first refers to the preliminary or provisional determination of the value of the property. It serves a double-purpose of pre-payment if the property is fully expropriated, and of an indemnity for damages if the proceedings are dismissed. It is not a final determination of just compensation and may not necessarily be equivalent to the prevailing fair market value of the property.

The Court further explained that the payment of the provisional value is a procedural requirement to enable the government to proceed with the project, while just compensation is the final determination of the property’s fair market value. Therefore, the trial court had a ministerial duty to issue the writ of possession once PEZA complied with Section 4 of RA 8974. The final amount of just compensation would be determined later, considering factors outlined in Section 5 of RA 8974.

In establishing the amount of just compensation, the parties may present evidence relative to the property’s fair market value, as provided under Section 5 of RA 8974. Thus:

Sec. 5. Standards for the Assessment of the Value of the Land Subject of Expropriation Proceedings or Negotiated Sale. – In order to facilitate the determination of just compensation, the court may consider, among other well-established factors, the following relevant standards:

(a)	The classification and use for which the property is suited;
(b)	The developmental costs for improving the land;
(c)	The value declared by the owners;
(d)	The current selling price of similar lands in the vicinity;
(e)	The reasonable disturbance compensation for the removal and/or demolition of certain improvements on the land and for the value of improvements thereon;
(f)	The size, shape or location, tax declaration and zonal valuation of the land;
(g)	The price of the land as manifested in the ocular findings, oral as well as documentary evidence presented; and
(h)	Such facts and events as to enable the affected property owners to have sufficient funds to acquire similarly-situated lands of approximate areas as those required from them by the government, and thereby rehabilitate themselves as early as possible.

In conclusion, the Supreme Court denied PEZA’s petition, affirming that RA 8974 governs the expropriation proceedings. The Court directed the trial court to determine the just compensation within sixty days from the finality of the decision, following the guidelines in RA 8974. This decision reinforces the importance of adhering to statutory guidelines in expropriation cases and clarifies the distinction between the provisional payment for a writ of possession and the final determination of just compensation, balancing the interests of the property owner and the public.

FAQs

This case highlights the importance of understanding the legal processes and requirements involved in expropriation. By clarifying the distinction between the provisional value and just compensation, the Supreme Court provides a framework for ensuring fairness and efficiency in eminent domain proceedings.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: REPUBLIC VS. SPOUSES CANCIO, G.R. No. 170147, January 30, 2009