In the Philippines, the power of eminent domain allows the government to take private property for public use, provided there is just compensation. This case clarifies that “just compensation” must primarily reflect the fair market value of the property at the time of the taking, but must also include interest to account for delays in payment, as such delays deny landowners the full value of their property. The Supreme Court emphasized the need to balance fairness to landowners with the public interest in just compensation, adding additional compensation by way of exemplary damages and attorney’s fees due to the government’s failure to initiate expropriation proceedings.

Seventy Years Overdue: Can ‘Just Compensation’ Catch Up with a Belated Land Taking?

This case revolves around a parcel of land in Bulacan taken by the Department of Public Works and Highways (DPWH) in 1940 for the construction of the MacArthur Highway. No expropriation proceedings were initiated at the time, and it wasn’t until 1994 that the landowners, Spouses Heracleo and Ramona Tecson, demanded compensation. The DPWH offered a meager P0.70 per square meter, based on a 1950 valuation. The Tecson spouses rejected this offer, leading to a legal battle that reached the Supreme Court. The central legal question is whether just compensation should be based on the property’s value at the time of taking in 1940, or whether the significant delay warrants a more current valuation.

The Supreme Court acknowledged that the core issue is the amount of just compensation due to the respondents. The court then addressed the reckoning date for property valuation, firmly stating that the justness of the award had already been factored into the earlier decision. The court reinforced the principle established in prior cases such as Forfom Development Corporation v. Philippine National Railways, Eusebio v. Luis, Manila International Airport Authority v. Rodriguez, and Republic v. Sarabia. These cases uniformly held that the fair market value of the property at the time of taking is the controlling factor in computing just compensation, regardless of subsequent increases in value.

The court emphasized that the purpose of just compensation is not to reward the owner but to compensate for the loss sustained at the time the property was taken. This principle was plainly laid down in Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines, which stated:

Constitutionally, “just compensation” is the sum equivalent to the market value of the property, broadly described as 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 the one who receives and the one who desires to sell, it being fixed at the time of the actual taking by the government. Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator. It has been repeatedly stressed by this Court that the true measure is not the taker’s gain but the owner’s loss.

While the court upheld the valuation at the time of taking, it also recognized that the owner’s loss includes the income-generating potential of the property. To address this, the Court awarded interest to compensate for the delay in payment. The legal interest rates were adjusted according to prevailing laws and circulars from the Central Bank (now Bangko Sentral ng Pilipinas) over the decades since 1940. The court also addressed the issue of compounding interest, stating that it should be applied from the time judicial demand was made, pursuant to Article 2212 of the Civil Code. In summary, the interest rates applicable to loans and forbearance of money, in the absence of an express contract as to such rate of interest, for the period of 1940 to present are as follows:

Law, Rule and Regulations, BSP Issuances	Date of Effectivity	Interest Rate
Act No. 2655	May 1, 1916	6%
CB Circular No. 416	July 29, 1974	12%
CB Circular No. 905	December 22, 1982	12%
CB Circular No. 799	July 1, 2013	6%

The Court also found that the government’s failure to initiate expropriation proceedings warranted additional compensation in the form of exemplary damages and attorney’s fees. This is consistent with previous rulings, such as in Eusebio v. Luis and Republic v. CA, which held that irregularities in expropriation proceedings cannot go without consequence.

Moreover, the court underscored that the government is responsible for initiating condemnation proceedings. The Supreme Court also cited Republic Act No. 8974, which provides guidelines for expropriation proceedings, including the immediate payment of 100% of the property’s value based on the current relevant zonal valuation by the Bureau of Internal Revenue (BIR), along with the value of improvements. While this law could not be applied retroactively to the present case, it reflects a modern approach that ensures owners are promptly compensated.

Despite these developments, the court reiterated that the failure to initiate expropriation proceedings does not invalidate the State’s power of eminent domain, especially when the property is used for public purposes. The landowner’s primary recourse remains the right to just compensation. The Supreme Court also stated that equitable principles only come into play when a gap exists in the law and jurisprudence. In this case, established rulings are in place and should be fully applied.

FAQs

What was the key issue in this case?	The main issue was determining the proper amount of just compensation for land taken by the government decades ago without initiating expropriation proceedings. The court had to balance the principle of valuing the property at the time of taking with the need to compensate landowners fairly for the long delay in payment.
What does “just compensation” include?	Just compensation includes the fair market value of the property at the time it was taken, plus interest to account for delays in payment. It may also include exemplary damages and attorney’s fees if the government failed to follow proper expropriation procedures.
Why is the date of taking important?	The date of taking is crucial because it establishes the baseline for valuing the property. The government must compensate the landowner based on what the property was worth when it was appropriated for public use.
How did the court account for the long delay in payment?	The court awarded interest on the property’s value, calculated from the time of taking until full payment, to compensate the landowners for the lost income-generating potential of their property due to the delay. The applicable interest rates were determined based on prevailing laws and Central Bank circulars throughout the years.
What are exemplary damages and why were they awarded?	Exemplary damages are awarded to punish the wrongdoer and deter similar misconduct. In this case, they were imposed due to the government’s failure to initiate expropriation proceedings, disregarding the landowners’ property rights.
What is the significance of R.A. 8974?	Republic Act No. 8974 provides guidelines for expropriation proceedings, including the requirement of immediate payment based on the current zonal valuation of the property. Although it could not be applied retroactively to this case, it signals a shift towards fairer and more prompt compensation in future takings.
Can the government take private property without proper proceedings?	While the government has the power of eminent domain, it cannot take private property arbitrarily. It must follow due process, initiate expropriation proceedings, and pay just compensation to the landowner. Failure to do so can result in liability for damages.
What should a landowner do if their property is taken without compensation?	Landowners should demand payment of just compensation from the government. If no agreement is reached, they should file a lawsuit to recover possession or seek payment. It is also essential to seek legal counsel to protect their rights.

In conclusion, this case emphasizes the importance of adhering to constitutional safeguards when exercising the power of eminent domain. It also highlights the need to compensate landowners fairly, not only for the value of their property at the time of taking but also for the losses incurred due to delays in payment.

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: Secretary of the Department of Public Works and Highways vs. Spouses Heracleo and Ramona Tecson, G.R. No. 179334, April 21, 2015