Republic v. Salvador
REITERATIONFacts
The Antecedents: Respondents were the registered owners of a parcel of land. The Republic of the Philippines, represented by the DPWH, filed a complaint for expropriation of a portion of this land for the construction of the C-5 Northern Link Road Project Phase 2. Respondents received checks representing 100% of the zonal value and the cost of the house on the property, totaling ₱685,349.22. They signified in open court that they recognized the purpose of expropriation and had no objection, waiving any claim for just compensation. Procedural History: The RTC rendered a decision condemning the subject property and directing the Republic to pay consequential damages equivalent to the capital gains tax and other taxes necessary for the transfer. The Republic moved for partial reconsideration regarding the capital gains tax, but the RTC denied it for being belatedly filed. The RTC found the award of consequential damages to be equitable and just, as it was a consequence of the expropriation. The Petition: The Republic filed a Petition for Review on Certiorari before the Supreme Court, assailing the RTC's decision and order, primarily on the issues of whether the motion for reconsideration was filed out of time and whether capital gains tax constitutes consequential damages.
Issue(s)
Whether the RTC correctly denied the Republic's Motion for Partial Reconsideration for having been filed out of time. Whether the capital gains tax on the transfer of the expropriated property can be considered as consequential damages that may be awarded to respondents.
Ruling
The Supreme Court granted the Petition for Review on Certiorari. The Decision and Order of the RTC were modified by deleting the award of consequential damages. Spouses Senando F. Salvador and Josefina R. Salvador were ordered to pay the capital gains tax due on the transfer of the expropriated property.
Ratio Decidendi
On the timeliness of the Motion for Reconsideration: The Court held that the RTC erred in denying the Republic's Motion for Partial Reconsideration for being filed out of time. Section 3, Rule 13 of the Rules of Court provides that if a pleading is filed by registered mail, the date of mailing is considered the date of filing. The Republic filed its motion via registered mail on September 28, 2012, which was within the 15-day reglementary period from its receipt of the decision on September 13, 2012. Therefore, the motion should have been considered filed on September 28, 2012, not October 5, 2012, when the RTC actually received it. The Court emphasized that the date of mailing, not the date of receipt by the court, is controlling when filing is done through registered mail. On the nature of capital gains tax as consequential damages: The Court ruled that the RTC committed a serious error in directing the Republic to pay consequential damages equivalent to the capital gains tax and other taxes necessary for the transfer of the property. Just compensation is defined as the full and fair equivalent of the property, measured by the owner's loss, not the taker's gain. While consequential damages may be awarded if the remaining property suffers impairment or decrease in value due to expropriation, capital gains tax is a tax on passive income derived from the sale or exchange of property. Under the National Internal Revenue Code, the seller is liable for this tax. The Court cited BIR Ruling No. 476-2013, which designates the DPWH as a withholding agent for the 6% final withholding tax in expropriation cases, confirming that the tax remains a liability of the seller. Furthermore, the payment of capital gains tax has no effect on the value of the remaining property, thus it cannot be considered consequential damages.
Main Doctrine
The capital gains tax on the transfer of expropriated property is a liability of the seller (property owner) and not a consequential damage that the government must pay. The filing of a motion for reconsideration via registered mail is considered filed on the date of mailing.