Republic v. Heirs of Francisco
REITERATIONFacts
1. The Antecedents: The Republic of the Philippines, through the Department of Public Works and Highways (DPWH), initiated an expropriation case to acquire portions of residential lots owned by the spouses Andres Francisco and Socorro Luna (now represented by their heirs) in Valenzuela City. These properties were needed for the construction of the C-5 Northern Link Road Project Phase 2 (Segment 9). The DPWH made initial deposits for the value of the improvements and the BIR zonal value of the lots, and a Writ of Possession was issued, allowing the government to take possession of the properties. 2. Procedural History: The Regional Trial Court (RTC) of Valenzuela City, Branch 172, initially fixed the just compensation at P7,500.00 per square meter, totaling P9,453,750.00, and awarded consequential damages and attorney's fees. The RTC also ordered the payment of interest at 12% per annum on the unpaid balance from the time of taking until July 1, 2013, and 6% thereafter. Upon appeal, the Court of Appeals (CA) remanded the case to the RTC for a proper determination of just compensation, deleted the awards for consequential damages and attorney's fees, but affirmed the imposition of interest at 12% per annum from the date of taking until June 30, 2013, and 6% per annum thereafter. 3. The Petition: The Republic filed a Petition for Review on Certiorari under Rule 45 of the Rules of Court, primarily questioning the CA's imposition of a 12% per annum interest rate on the unpaid balance of the just compensation. The petitioner argued that since the properties were taken after the payment of just compensation, no interest should be imposed, or at most, it should be at the rate of 6% per annum. The respondents countered that interest is due when there is no full compensation at the time of taking, citing jurisprudence that supports the imposition of interest as a forbearance of money.
Issue(s)
Whether the award of interest on the unpaid compensation is proper, including the applicable interest rate. Whether the CA erred in deleting the award of consequential damages. Whether the CA erred in deleting the award of attorney's fees.
Ruling
The petition is denied. The Decision dated June 13, 2018, and the Resolution dated January 10, 2019, of the Court of Appeals in CA-G.R. CV No. 108050 are affirmed. The unpaid balance of the just compensation shall earn interest at 12% per annum from the date of taking (February 8, 2013) until June 30, 2013, and at 6% per annum from July 1, 2013, until finality of the decision. The total amount due shall earn 6% per annum interest from finality until full payment.
Ratio Decidendi
On the propriety of awarding interest on unpaid compensation and the applicable interest rate: The Court reiterated that just compensation must be the full and fair equivalent of the property, implying timely or prompt payment in full. When full compensation is not paid immediately, the State must compensate for the shortfall in earning potential lost due to the taking. Interest on the unpaid compensation becomes due as compliance with the constitutional mandate on eminent domain and as a basic measure of fairness, compensating the property owner for the income lost due to the delay in payment. This interest is imposed in the nature of damages for delay, making the government's obligation one of forbearance. The Court clarified that the initial payment made by the petitioner, representing the provisional value of the properties, does not constitute the full and fair equivalent. Since the properties were taken before the final determination of just compensation, there was a delay in fully satisfying the payment. Therefore, the difference between the final amount adjudged and the initial payment should earn legal interest. The Court affirmed the CA's imposition of 12% interest from the time of taking (February 8, 2013) until June 30, 2013, and 6% thereafter, citing BSP Circular No. 799 which reduced the legal interest rate on loans and forbearances of money. On the deletion of consequential damages: The Court upheld the CA's deletion of consequential damages, finding that the respondents failed to present substantive evidence proving that the remaining unaffected properties suffered an impairment amounting to P1,000,000.00. On the deletion of attorney's fees: The award of attorney's fees was deleted due to the lack of proof of malice or bad faith on the part of the petitioner to justify its imposition.
Main Doctrine
In expropriation cases, the difference between the final amount of just compensation and the initial payment made by the government earns legal interest as a forbearance of money, computed at 12% per annum from the time of taking until June 30, 2013, and 6% per annum thereafter until full payment.