Andales, Angelica Janelou M.

LLB- First Year

CASE DIGEST
Republic v. Cebuan
(G.R. No.: 206702, June 7, 2017)

FACTS:
For the construction of irrigation canals as part of its Lower Agusan Development Project
in the Barangays of Basag, Ampayon and Kinamlutan in Butuan, the National Irrigation
Authority (NIA) identified parcel of lands suitable for the construction owned by respondents (1)
Roland Cebuan – 652 sq.m; (2) Eric Cebuan – 503 sq.m; (3) Samuel Baring – 776 and 836 sq.m;
(4) Beatrice Low – 2, 412 and 1,550 sq.m; (5) Leonora Dela Serna – 1,440 sq.m; and (6) the
heirs of Lorenzo Umbaad – 590 sq.km.
NIA initiated expropriation proceeding after failure of negotiated sale. The respondents
expressed their agreement provided that properties be valued at ₽300/sq.m. But NIA bought the
land at ₽160 /sq.m. In 2003 – 2004, in the execution of the project which permitted NIA to enter
the premises of the respondents’ properties, the Cebuans and Baring and the heirs of Umbaad
received payment for damages but the others did not. Thereafter, NIA move for the issuance of a
writ of possession upon deposit of 100% of the value of the properties based on the current BIR
zonal value, specified in the Department Order No. 16-2000. It was approved by the RTC in
Aprial 21, 2004. Again, only Baring, the Cebuans, and the Heirs of Umbaad moved, yet
contended that they have not been fully paid for the improvements of their properties.
Subsequently on May 16, 2006, the Board of Commissioners created by the RTC to
determine fair market value of properties sought to be expropriated, assigned the value of the
properties of Cebuans, Baring, and Umbaad at ₽45/sq.m and of Dela Serna at ₽120/sq.m, while
consequential damages assessed at 5% and the consequential benefits at 3% of the value of the
remaining portion. NIA contended that the value was excessive and that it should be only
₽0.90/sq.m In this case, the RTC rule in favour of the Commissioners report and disregarded
NIA’s contention of an unrealistic fair market values. The RTC directed NIA to pay for the land
affected and the unrealized income of the respondents.
But Rolando Cebuan is excluded in the partial judgment as he submitted a manifestation
of a waiver to file any lawsuit against NIA. Upon Motion of Clarification Judgment, the RTC
rendered its Final Judgment. The NIA is directed to pay:
Computation: Land affected = JC = FMV + CD + CB
JC – Just Compensation
FMV – Fair Market Value
CD – Consequential Damages
CB – Consequential Benefits
NIA appealed to the Court of Appeals contending that the market value assigned is
contrary to the established zonal valuations of BIR or for the damages, speculative. They argued
that both damages should be equal. Here, the CA ruled in favour of NIA. The CA commented
that the values by the Commissioners were exorbitant since it was based on different appraisal,
for different appraisers that the BIR zonal valuation should be the basis and not the index value
of the properties within the locality. But CA found the award for unrealized income improper.
Hence, CA remanded the RTC for the reception of payment not made for the improvement of the
respondents’ properties. In this regard, NIA was rebuffed and submitted the appeal to the
Supreme Court.

ISSUES:
(1) WON the CA erred in affirming RTC’s ruling on just compensation
(2) WON there is justification for the CA’s remand of the case to the RTC
HELD:
The SC ruled that the petition of NIA is partly meritorious.
First, SC upheld RTC’s decision of the fair market value recommended by the
Commissioners. SC ruled that just compensation is defined as the full and fair equivalent value
of the property. The measure is not the taker’s considered to be the sum equivalent to the market
value of the property. The word “just” is used to intensify the meaning that compensation shall
be real, substantial, full, and ample. Furthermore, the determination of just compensation in
appropriation is left to the discretion of the courts. Such legislative enactments or executive
issuances fixing the computation of just compensation are not binding on courts. The insistence
of NIA to fix the amount based on the zonal valuation is utterly misplaced. SC also reminded
that the mile or “just-ness” of the compensation can only be attained by using reliable and actual
data, hence, the Board of Commissioners’ recommendation of the fair market value of the
properties is thus determined based on reliable and actual data and that the RTC did not commit
an error in using the value recommended by the Commissioners.
Secondly, the SC upheld the amount of consequential damages and consequential
consequences. Just compensation is equivalent to the market value, the rule is modified where
only a part of a certain property is expropriated. In such case, the owner is not restricted to
compensation of the portion actually taken and also recovers the consequential damage, if any, to
the remaining part of the property. The award is specially enunciated under Section 6 of Rule 6
of the Rules of Courts “the Commissioners shall assess the consequential damages of the
property taken… but in case shall the consequential benefits exceed the consequential
damages…”
In arriving at 5% of the fair market value as consequential damages and 3% and
consequential benefits, the SC did not depart, hence affirmed and adopted by the expropriation
court.
Third, the CA remanded RTC of the duly unpaid improvements on the land to the
respondents. However, a disbursement voucher clearly shows that the landowners received
payments for improvements. The contentions failed to introduce evidence in relation thereto
before the expropriation court apart from their bare allegations. Only payment of the value of
improvements of the properties at the time of taking should be given and NIA is not liable for the
payment of unrealized harvests. The measure of value of the improvements should be at the time
the less resulted, i.e., in 2003, the time of taking.
Fourth, SC found it necessary to modify the imposition of 6% interest on the amounts of
just compensation to be paid by NIA to respondents that the RTC reckoned from May 2003.
Jurisprudence proves the appropriate of interest computed from the time the property was taken
until the full amount of just compensation is paid. This allowance of interest on the amount
found to be the value of the property as of the time of the taking computed, being an effective
forbearance, at 12% per annum should help eliminate the issue of the constant fluctuation and
inflation of the value of the currency over time.
In the instant case, the interest is to be imposed only to the balance of the final just
compensation, i.e., just compensation as corrupted by the RTC less the amount of the provisional
compensation. Since NIA’s initial valuation had been contested, and it has been subsequently
determined that the expropriated properties had been undervalued, or an interest on the balance
of the difference between the amount already paid and the just compensation as determined by
the RTC, is proper.
While the debt incurred by the government on account of the taking of the property
subject of an expropriation constitutes a forbearance, nevertheless, in line with the recent circular
of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP-MB No. 799, Series of 2013,
effected July 1, 2013, the prevailing rate of interest for loans or forbearance of money is 6% per
annum, in the absence of an express contract as to such rate of interest. Accordingly, the interest
rate of 12% per annum should be imposed on the balance due from the date of the taking, or on
May 7, 2003 until June 30, 2013 and the interest rate of 6% per annum is imposed from July 1,
2013 until paid.
In view of the foregoing, SC resolves to grant the petition that NIA be liable to pay just
compensation in the amount computed by the RTC for the unrealized income. However, in
conformity with the existing law etc, the amount of interest modified such that 12% interest per
annum will be imposed from May 7, 2003 to June 30, 2013 in the interest of 6% from July 1,
2013 until fully paid. Furthermore, the remanding to the RTC for the determination of alleged
and paid improvements on the affected properties be deleted. In the case at bar, SC ruled in
favour of the respondents but partly granted the petition.