Inverse Condemnation and Provisional Compensation: Republic Act No. 10752’s Impact

G.R. No. 266921, January 22, 2024

The Philippine Supreme Court recently addressed a critical issue concerning property rights and government infrastructure projects: the determination of provisional compensation in inverse condemnation cases. This decision clarifies the application of Republic Act No. 10752, also known as the “Right-of-Way Act,” and its implications for property owners affected by government projects initiated without proper expropriation.

Introduction

Imagine discovering that a high-voltage power line has been constructed across your property without your consent or any prior compensation. This scenario, while alarming, is the reality for many landowners in the Philippines. Inverse condemnation is a legal remedy designed to address such situations, allowing property owners to seek compensation when the government takes private property for public use without initiating formal expropriation proceedings.

In National Transmission Corporation vs. Spouses Manalo and Pedraja, the Supreme Court tackled the issue of how provisional compensation should be calculated in these cases, specifically when the government took the property before the enactment of Republic Act No. 10752 but the landowner initiated inverse condemnation proceedings after its effectivity. The central question was whether the old rules under Rule 67 of the Rules of Court or the new provisions of Republic Act No. 10752 should apply.

Legal Context: Expropriation, Inverse Condemnation, and Provisional Compensation

Expropriation is the inherent power of the State to forcibly acquire private property for public use upon payment of just compensation. This power is enshrined in the Philippine Constitution and is subject to certain limitations to protect property owners. Inverse condemnation, on the other hand, is an action initiated by the property owner against the government when the latter takes private property for public use without formally exercising its power of eminent domain.

Provisional compensation is a preliminary payment made by the government to the property owner to allow the immediate taking or possession of the property. The amount of provisional compensation is a crucial aspect of expropriation and inverse condemnation proceedings, as it directly impacts the landowner’s immediate financial capacity to relocate or reinvest.

Before Republic Act No. 10752, Rule 67 of the Rules of Court governed expropriation proceedings, requiring the government to deposit only the assessed value of the property for taxation purposes before taking possession. This often resulted in landowners receiving significantly less than the actual market value of their property at the initial stage.

Republic Act No. 10752 changed this by mandating that the government deposit an amount equivalent to 100% of the property’s value based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR). The relevant provision is Section 6(a)(1):

“SECTION 6. 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 through expropriation…the implementing agency shall immediately deposit to the court in favor of the owner the amount equivalent to the sum of: (1) One hundred percent (100%) of the value of the land based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR)…”

Zonal valuation is the value of real properties as determined by the BIR for tax purposes. It generally reflects a more realistic market value compared to the assessed value used under Rule 67. This shift significantly benefits property owners, ensuring fairer and more immediate compensation for their losses.

Case Breakdown: TRANSCO vs. Spouses Manalo and Pedraja

The case revolves around parcels of land owned by Spouses Manalo and the Pedrajas in Tanauan City, Batangas. In 1998, the National Power Corporation (NAPOCOR), the predecessor of TRANSCO, constructed a 500-kilovolt (KV) transmission line across their properties without initiating expropriation proceedings.

Decades later, in 2020, the landowners filed a complaint for inverse condemnation, seeking just compensation for the taking of their properties. The key procedural steps included:

• Filing of Complaint: The landowners filed a Complaint for Inverse Condemnation under Rule 67 of the Rules of Court, as amended by Republic Act No. 8974 and later by Republic Act No. 10752, before the Regional Trial Court (RTC).
• TRANSCO’s Answer: TRANSCO filed its Answer, arguing that Republic Act No. 10752 should not apply retroactively to projects initiated before its enactment.
• Motion to Comply with RA 10752: The landowners filed a Motion to Require Defendant to Comply with Republic Act No. 10752, arguing that the law governs the determination of compensation.
• RTC Ruling: The RTC granted the Motion, ordering TRANSCO to deposit provisional compensation based on the BIR’s zonal valuation, as mandated by Republic Act No. 10752.
• CA Decision: The Court of Appeals (CA) affirmed the RTC’s decision, holding that Republic Act No. 10752 applies since the inverse condemnation proceedings were initiated after its effectivity.

The Supreme Court, in affirming the CA’s decision, emphasized the principle established in Felisa Agricultural Corporation v. National Transmission Corporation, which held that if a landowner initiates inverse condemnation proceedings after the effectivity of Republic Act No. 8974 (the precursor of Republic Act No. 10752), then said law shall govern both procedurally and substantially.

The Court reasoned that Republic Act No. 10752 introduced a new standard for determining just compensation and provisional value in expropriation cases related to national government infrastructure projects. This new standard, requiring payment of 100% of the zonal value, is a right declared by the legislature for the first time through the enactment of Republic Act No. 8974 and maintained by Republic Act No. 10752.

“[I]f a right be declared for the first time by a subsequent law, it shall take effect from that time even though it has arisen from acts subject to the former laws, provided that it does not prejudice another acquired right of the same origin.“

“[A]n inverse condemnation proceedings initiated by a landowner after the effectivity of Republic Act No. 8974 shall be procedurally and substantially governed by said law.“

Practical Implications: Protecting Landowner Rights

This ruling has significant practical implications for property owners affected by government infrastructure projects. It clarifies that even if the taking occurred before the enactment of Republic Act No. 10752, the law applies if the inverse condemnation proceedings are initiated afterward. This ensures that landowners receive fairer and more immediate provisional compensation based on current zonal values.

Key Lessons:

• Know Your Rights: Landowners should be aware of their right to just compensation when the government takes their property for public use, whether through formal expropriation or inverse condemnation.
• Timely Action: While this case benefits those who file after RA 10752, filing promptly after a taking is always recommended to avoid potential legal complications.
• Understand Zonal Valuation: Familiarize yourself with the BIR’s zonal valuation for your property, as this will be the basis for provisional compensation under Republic Act No. 10752.

Hypothetical Example:

Suppose a landowner’s property was used for a road expansion project in 2010, before Republic Act No. 10752 took effect. No expropriation proceedings were initiated at that time. If the landowner files an inverse condemnation case today, the court will likely apply Republic Act No. 10752, requiring the government to deposit 100% of the current zonal value of the property as provisional compensation.

Frequently Asked Questions (FAQs)

Q: What is inverse condemnation?

A: Inverse condemnation is a legal action initiated by a property owner to recover the value of property taken for public use when the government fails to initiate eminent domain proceedings.

Q: What is zonal valuation?

A: Zonal valuation is the value of real properties as determined by the Bureau of Internal Revenue (BIR) for tax purposes. It is often used as a basis for determining just compensation in expropriation and inverse condemnation cases.

Q: Does Republic Act No. 10752 apply to takings that occurred before its enactment?

A: Yes, according to this Supreme Court decision, Republic Act No. 10752 applies if the inverse condemnation proceedings are initiated after its effectivity, even if the actual taking occurred before.

Q: What if the assessed value of my property is higher than the zonal value?

A: Republic Act No. 10752 mandates the use of zonal valuation for provisional compensation. However, the final just compensation may be determined by the court based on other factors, such as fair market value.

Q: What should I do if the government takes my property without my consent?

A: Consult with a qualified lawyer experienced in eminent domain and inverse condemnation cases to understand your rights and options.

ASG Law specializes in real estate law and expropriation cases. Contact us or email hello@asglawpartners.com to schedule a consultation.