In eminent domain cases, the Supreme Court affirmed that just compensation for expropriated land should be determined based on the property’s fair market value at the time of taking, considering various factors beyond the Bureau of Internal Revenue (BIR) zonal valuation. This ruling ensures that property owners receive a real, substantial, full, and ample equivalent for their loss, reflecting the true value of the land in its specific context.

From Zonal Value to Fair Market Value: How is Just Compensation Determined in Land Expropriation?

The Republic of the Philippines, through the Department of Public Works and Highways (DPWH), initiated expropriation proceedings against the heirs of Spouses Luis J. Dela Cruz and Imelda Reyes to acquire portions of their land in Valenzuela City for the C-5 Northern Link Road Project. The DPWH offered compensation based on the BIR’s zonal value, but the landowners argued for a higher fair market value, citing the industrial location and nearby business ventures. The Regional Trial Court (RTC) fixed the just compensation at P9,000.00 per square meter, which was affirmed by the Court of Appeals (CA) with modifications on the interest rates. The Republic then appealed to the Supreme Court, questioning the valuation and the factors considered.

The Supreme Court reiterated the principle that **just compensation** in expropriation cases must be the full and fair equivalent of the property taken, emphasizing that it is not merely the taker’s gain but the owner’s loss that should be considered. The determination of just compensation is a judicial function, and legislative or executive issuances that fix or provide a method for computing it are not binding on the courts. The Court may consider factors specified in Republic Act No. 8974, but these are merely recommendatory and do not supplant the court’s own assessment.

Section 5 of RA 8974 outlines the standards for assessing the value of land subject to expropriation, providing guidance for courts in determining just compensation. These standards include:

SECTION 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 improvement on the land and for the value of improvements thereon;
(f) This 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.

The Court acknowledged that the RTC appropriately considered several factors, including the BIR zonal valuation, the landowners’ declared value, the value of nearby properties previously expropriated, and the characteristics of the subject properties, such as their location in a high-intensity commercial zone. The Court also noted that the absence of an ocular inspection by the Board of Commissioners (BOC) did not invalidate the valuation process, as other evidence could be relied upon to determine just compensation. The Supreme Court stated it is not mandatory for ocular inspection to take place.

Furthermore, the Supreme Court dismissed the petitioner’s argument that the BIR zonal valuation should be the primary basis for just compensation. Jurisprudence dictates that zonal valuation is only one of the factors to be considered and cannot be the sole basis for determining just compensation. In the case of National Grid Corporation of the Philippines v. Bautista, the Court reiterated that the zonal valuation is just one of the indices of the fair market value of real estate, emphasizing that it cannot be the sole basis of just compensation in expropriation cases.

The Court emphasized that the interest on just compensation should run from the time the government took possession of the property, in line with Section 10, Rule 67 of the Rules of Court. This is to compensate the property owners for the income they would have earned had they been properly compensated at the time of taking. The Court modified the CA’s ruling on interest, ordering the Republic to pay interest at 12% per annum from November 12, 2008 (the date of taking) until June 30, 2013, and 6% per annum from July 1, 2013, until full payment. This adjustment aligns with established jurisprudence and Bangko Sentral ng Pilipinas (BSP) Circular No. 799, which reduced the legal interest rate.

In essence, the Supreme Court’s decision reinforces the principle that just compensation must be determined fairly and comprehensively, considering all relevant factors and ensuring that property owners are adequately compensated for their loss when the government exercises its power of eminent domain. The case underscores the judiciary’s role in safeguarding property rights and ensuring equitable outcomes in expropriation proceedings. This ruling confirms that courts have the discretion to determine the amount of just compensation, and the factors provided are merely recommendatory.

FAQs

What is eminent domain?	Eminent domain is the right of the government to take private property for public use, with just compensation to the owner.
What is just compensation?	Just compensation is the full and fair equivalent of the property taken, aiming to indemnify the owner fully for their loss.
Can the government simply use the BIR zonal value to determine just compensation?	No, the BIR zonal value is only one factor to be considered, and the courts must consider other factors to determine the full and fair market value.
What factors do courts consider to determine just compensation?	Courts consider factors such as the property’s classification, use, developmental costs, owner-declared value, comparable sales, location, and zonal valuation.
Is ocular inspection mandatory in determining just compensation?	No, ocular inspection is not mandatory. The BOC and the courts can rely on other evidence to arrive at a full and fair value of the property subject of expropriation proceedings.
When does interest on just compensation begin to accrue?	Interest on just compensation accrues from the time the government takes possession of the property.
What is the legal interest rate applicable to just compensation?	The legal interest rate is 12% per annum until June 30, 2013, and 6% per annum from July 1, 2013, until full payment, in accordance with BSP Circular No. 799.
What happens if the landowner does not agree with the government’s valuation?	The landowner can contest the valuation in court, where the court will determine the just compensation to be paid.

This case clarifies the factors considered in determining just compensation in expropriation cases, ensuring that landowners receive fair and equitable payment for their taken properties. It reinforces the principle that while the government has the right to acquire private property for public use, it must provide compensation that reflects the true value of the property.

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 of the Philippines vs. Heirs of Spouses Luis J. Dela Cruz and Imelda Reyes, G.R. No. 245988, June 16, 2021