The Supreme Court ruled that Republic Act No. 8974 (RA 8974), which mandates prompt payment of just compensation for land acquired for national government infrastructure projects, applies even when the government has not initiated formal expropriation proceedings. This decision emphasizes the State’s obligation to ensure landowners are swiftly compensated when their property is taken for public use, addressing a historical imbalance where the government often delayed or avoided payment. It clarifies that landowners can claim the benefits of RA 8974, including the payment of 100% of the zonal value as initial compensation, even in inverse condemnation cases.

From Delayed Compensation to Prompt Payment: Resolving Landowner Disputes in Infrastructure Projects

This case arose from a dispute between Felisa Agricultural Corporation (FAC) and the National Transmission Corporation (TransCo), formerly the National Power Corporation (NPC). FAC discovered in 1997 that NPC had erected transmission towers and lines on a 19,635-square meter portion of its land in Bacolod City without its consent, dating back to 1985. FAC filed a complaint for recovery of possession with damages or payment of just compensation. The central legal question was whether RA 8974, which requires immediate payment of 100% of the zonal value of the property as initial compensation in expropriation cases, applies to this situation, particularly since NPC had occupied the land before the law’s enactment.

The Regional Trial Court (RTC) initially ordered NPC to pay FAC P7,845,000.00, representing 100% of the zonal value of the land as initial payment, citing RA 8974. However, the Court of Appeals (CA) reversed this decision, holding that RA 8974 only applies to formal expropriation proceedings initiated by the government, not to cases like this where the landowner is seeking compensation after the government has already taken possession. The Supreme Court disagreed with the CA’s interpretation. It emphasized that RA 8974 was enacted to expedite compensation to landowners in national government infrastructure projects and that its provisions should apply even in cases of inverse condemnation, where the landowner is compelled to sue for just compensation due to the government’s failure to initiate expropriation proceedings.

The Supreme Court highlighted that RA 8974 aims to supersede the system of deposit under Rule 67 of the Rules of Court with a scheme of immediate payment in cases involving national government infrastructure projects. Rule 67 generally requires the expropriator to deposit only the assessed value of the property, which is typically a fraction of its market value, before taking possession. In contrast, RA 8974 mandates payment of 100% of the current zonal value, providing more immediate and substantial compensation to the landowner. The Court stated:

It is the plain intent of [RA] 8974 to supersede the system of deposit under Rule 67 with the scheme of ‘immediate payment’ in cases involving national government infrastructure projects.

The Court clarified that while procedural aspects of expropriation, as outlined in Rule 67, still apply, the substantive right to receive just compensation prior to the government’s acquisition of possession is governed by RA 8974. The right of the owner to receive just compensation prior to acquisition of possession by the State of the property is a proprietary right. The Supreme Court addressed the issue of retroactivity, noting that while laws are generally applied prospectively, a new law declaring a right for the first time takes effect immediately, provided it does not prejudice another acquired right of the same origin.

In this case, although NPC had entered the land before RA 8974’s enactment, FAC initiated inverse condemnation proceedings after the law took effect. Therefore, the provisions of RA 8974, including the requirement of paying 100% of the zonal value as initial compensation, should apply. This application is more favorable to the landowner than the deposit of the assessed value under Rule 67. The Court explained that physical possession gained by entering the property is not equivalent to expropriating it with the aim of acquiring ownership. In Republic v. Hon. Tagle, the Court clarified this point:

The expropriation of real property does not include mere physical entry or occupation of land.

x x x [M]ere physical entry and occupation of the property fall short of the taking of title, which includes all the rights that may be exercised by an owner over the subject property. Its actual occupation, which renders academic the need for it to enter, does not by itself include its acquisition of all the rights of ownership. x x x.

x x x Ineludibly, [the] writ [of possession] is both necessary and practical, because mere physical possession that is gained by entering the property is not equivalent to expropriating it with the aim of acquiring ownership over, or even the right to possess, the expropriated property.

The Court also lamented the government’s frequent practice of taking private property for public use without initiating expropriation proceedings or promptly paying just compensation. This practice, as the Court noted, erodes citizens’ faith in the government’s willingness to justly compensate for acquired property. The Supreme Court reminded government agencies of their obligation to immediately initiate eminent domain proceedings when they intend to take private property for any public purpose, which includes the payment of the provisional value thereof.

Finally, the Court addressed the determination of just compensation. While RA 8974 provides standards for determining just compensation, it does not preclude courts from exercising their judicial discretion. The courts must consider and apply the parameters set by the law and its implementing rules and regulations. The Supreme Court also addressed the issue of interest on unpaid balances, stating that the government must pay legal interest on any difference between the final just compensation and the initial payment, calculated from the time of taking.

FAQs

What was the key issue in this case?	The key issue was whether RA 8974, requiring immediate payment of 100% zonal value as initial compensation, applies when the government occupies land for infrastructure without initiating expropriation.
What is inverse condemnation?	Inverse condemnation occurs when the government takes private property for public use without initiating eminent domain proceedings, forcing the owner to sue for just compensation.
What does RA 8974 require for national government infrastructure projects?	RA 8974 requires the government to promptly pay 100% of the zonal value of the property as initial compensation before taking possession for national government infrastructure projects.
What is the difference between the assessed value and the zonal value?	The assessed value is a percentage of the fair market value, while the zonal value is a value determined by the Bureau of Internal Revenue (BIR) for taxation purposes, generally higher than the assessed value.
When is the value of the property determined for just compensation purposes?	In cases where the government takes property before expropriation, the value is typically determined at the time of taking, which is when the government first occupied the property.
Does RA 8974 prevent courts from judicially determining just compensation?	No, RA 8974 does not take away the power of the courts to judicially determine the amount of just compensation; it provides standards to facilitate the determination.
What interest rates apply to unpaid just compensation?	Legal interest is imposed on the unpaid balance at 12% per annum from the time of taking until June 30, 2013, and thereafter at 6% per annum until fully paid.
What is the significance of the Republic v. Tagle case cited in this decision?	The Republic v. Tagle case clarifies that mere physical entry and occupation of property do not equate to expropriation with the aim of acquiring ownership.

This Supreme Court decision reinforces the State’s duty to act promptly and justly when acquiring private property for public use. By applying RA 8974 to inverse condemnation cases, the Court ensures that landowners receive fair and immediate compensation, preventing prolonged delays and protecting their constitutional rights. This ruling serves as a reminder to government agencies to adhere to the principles of eminent domain and to respect the property rights of individuals.

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: Felisa Agricultural Corporation v. National Transmission Corporation, G.R. Nos. 231655 and 231670, July 02, 2018