Republic v. Soriano
REITERATIONFacts
The Antecedents: The Republic of the Philippines, represented by the Department of Public Works and Highways (DPWH), initiated an expropriation case against Arlene R. Soriano for a 200-square-meter parcel of land. This land was needed for the North Luzon Expressway (NLEX)-Harbor Link Project (Segment 9). The DPWH deposited P420,000.00, representing 100% of the zonal value, as initial compensation. Procedural History: The Regional Trial Court (RTC) of Valenzuela City, Branch 270, issued a Writ of Possession and Expropriation after the respondent failed to appear. The RTC appointed a Board of Commissioners to determine just compensation but later revoked their appointment due to failure to submit a report. The RTC then directed the parties to submit position papers. The RTC considered the respondent to have waived her right to adduce evidence due to continued absence. The RTC rendered a decision on November 15, 2013, declaring the Republic's right to acquire the property and ordering the payment of P420,000.00 as just compensation with 12% legal interest. The RTC later modified its order on March 10, 2014, reducing the interest rate to 6% per annum, citing Article 2209 of the Civil Code. The Petition: The Republic filed a petition for review under Rule 45 of the Rules of Court, assailing the RTC's decision and order. The petitioner argued that it was not liable for legal interest because there was no delay in payment, as the compensation was deposited before the property was taken. It also contended that it should not be responsible for transfer taxes, including capital gains tax and documentary stamp tax, as these are liabilities of the seller. The petition also questioned the award of consequential damages, arguing that since the entire property was expropriated, there was no remaining portion that could suffer impairment in value.
Issue(s)
Whether the imposition of interest on the amount of just compensation is warranted. Whether consequential damages should be awarded. Whether the respondent is liable for capital gains tax and documentary stamp tax.
Ruling
The petition is partly meritorious. The imposition of interest on the payment of just compensation and the award of consequential damages are deleted. The respondent Arlene R. Soriano is ordered to pay the capital gains tax due on the transfer of the expropriated property, while the documentary stamp tax, transfer tax, and registration fee shall be for the account of the petitioner.
Ratio Decidendi
On the imposition of interest on just compensation: The Court held that the imposition of interest on just compensation is unwarranted in this case. While the government's debt in expropriation constitutes a forbearance, the award of interest is in the nature of damages for delay in payment. The records show that the petitioner deposited the full amount of just compensation prior to the taking of the property, which occurred when the RTC ordered the issuance of a Writ of Possession. Since there was no delay in payment, the imposition of interest is unjustified and should be deleted. The Court clarified that the 12% interest rate applies when there is delay, but in the absence of delay, interest is not warranted. The Court also noted that BSP-MB Circular No. 799, Series of 2013, sets the prevailing interest rate for loans or forbearance of money at 6% per annum, but this is not applicable when there is no delay. On consequential damages: The Court ruled that the award of consequential damages should be deleted. Consequential damages are awarded when only a part of a property is expropriated, and the remaining portion suffers an impairment or decrease in value. In this case, the entire subject property is being expropriated. Therefore, there is no remaining portion that could suffer from an impairment or decrease in value as a result of the expropriation. The Court cited Republic of the Philippines v. Bank of the Philippine Islands to support the principle that consequential damages are only awarded when there is a remaining portion of the property affected by the expropriation. On transfer taxes: The Court found the petitioner's contention regarding transfer taxes to be partly meritorious. With respect to capital gains tax, the Court affirmed that it is a liability of the seller (respondent) pursuant to Sections 24(D) and 56(A)(3) of the 1997 National Internal Revenue Code (NIRC). The BIR also constituted the DPWH as a withholding agent for this tax. However, regarding the documentary stamp tax, the Court found the petitioner's denial of liability inconsistent. While Section 196 of the NIRC pertains to the tax on deeds of sale, BIR Revenue Regulations No. 9-2000 states that any of the parties to a transaction shall be liable for the full amount of the documentary stamp tax, unless otherwise agreed upon. Given the DPWH's Citizen's Charter, which explicitly states that the implementing agency shoulders the documentary stamp tax, transfer tax, and registration fee, the petitioner is liable for these costs.
Main Doctrine
The imposition of interest on just compensation in expropriation cases is unwarranted when the full amount of just compensation is deposited by the government prior to the taking of the property, as there is no delay in payment. Consequential damages are not awarded when the entire property is expropriated. The capital gains tax is a liability of the seller, while the documentary stamp tax, transfer tax, and registration fees are liabilities of the expropriating agency.