B. H. Berkenkotter & Co. vs. Court of Appeals

An owner's voluntary sales of adjacent, similarly situated property at a given price constitute the best evidence of the market value of land sought to be expropriated, and the owner cannot demand a higher price from the government than that which it accepted from private buyers. Just compensation must be fair not only to the owner but also to the taker, and the measure is the owner's loss, not the taker's gain.

B. H. Berkenkotter & Co., a corporation, owned a 10,640-square-meter parcel in Nasugbu, Batangas. The Apolinario R. Apacible School of Fisheries (ARASOF), a government institution, sought the land in line with its five-year expansion program. Two presidential decrees framed the taking: P.D. 48 required a 10% deposit as a condition for possession, and P.D. 1533 then fixed just compensation at the lower of the valuation given by the owner or by the government — a decree later declared unconstitutional in Export Processing Zone Authority vs. Dulay.

B. H. Berkenkotter & Co., a corporation, owned a 10,640-square-meter parcel of land in Nasugbu, Batangas. The Apolinario R. Apacible School of Fisheries (ARASOF), a government institution, sought the property for its five-year expansion program.

On June 18, 1982, Vicente Viray, president of the school, sent the owner a written offer to buy the land. Berkenkotter replied that it was willing to sell at P50.00 per square meter payable in cash. At Viray's request, the Provincial Appraisal Committee of the Office of the Provincial Assessor in Batangas City appraised the land and fixed its market value at P32.00 per square meter. Viray then wrote Berkenkotter another letter offering to buy at that price. Berkenkotter adhered to its original valuation and later claimed that the property had in fact appreciated to as much as P100.00 per square meter. Further negotiations failed to resolve the impasse, and expropriation proceedings were eventually commenced by the Republic of the Philippines on behalf of ARASOF.

In its complaint dated October 28, 1983, the Republic invoked the Provincial Appraisal Committee's assessment of P32.00 per square meter and sought possession of the property upon payment of the 10% deposit required by P.D. 48. Berkenkotter originally questioned the purpose of the expropriation but later abandoned that objection and concentrated only on what it called the under-appraisal of the subject land. On March 21, 1985, the Regional Trial Court of Batangas issued an order of condemnation and, pursuant to Rule 67, Section 5 of the Rules of Court, appointed a panel of commissioners to determine the just compensation to be paid.

On September 23, 1985, the panel of commissioners submitted its report recommending that the property be appraised at P85.00 per square meter. The Republic objected and pointed to three contracts of sale the petitioner had concluded in 1985, whereby it sold three tracts of land similar in topography and adjacent to the property in question at the unit price of only P19.18 per square meter. The trial court directed the commissioners to convene anew and receive additional evidence; the panel conducted more interviews and, in its second report dated April 1, 1987, reiterated its original recommendation of P85.00 per square meter.

The three deeds of sale submitted by the Republic, all dated July 18, 1985 and all in favor of Andrea Rodriguez Ilao and others, were: Exhibit "1," covering TCT 26382 with an area of 7,344 square meters, sold for P140,885.76; Exhibit "2," covering TCT 26383 with an area of 5,583 square meters, sold for P107,102.60; and Exhibit "3," covering TCT 26384 with an area of 7,924 square meters, sold for P152,011.64. The lands covered by these deeds were adjacent to the subject property and of the same topography, separated therefrom by only a road.

Acting on the commissioners' recommendation, the trial court affirmed the right of the Republic to expropriate the land upon payment of just compensation at P85.00 per square meter. The Court of Appeals reversed, noting that the three deeds of sale had been practically disregarded and that the panel of commissioners had relied only on opinions and conclusions that were patently hearsay and gratuitous, with not a single document submitted to support the recommended compensation of P85.00. The appellate court found that the petitioner had voluntarily sold the adjacent lands at P19.18 per square meter and that no showing had been made of any special reason for granting the vendees a discount amounting to as much as 75% of the claimed real value.

• Valuation Evidence: Petitioner maintained that the value of the subject property exceeded P19.18 per square meter, citing (a) Resolution No. 2-83 (Exh. "4") of the Provincial Appraisal Committee, passed on April 4, 1983, fixing the prevailing market value of comparative properties in the locality at P32.00 per square meter; (b) the Republic's own offer, through Vicente Viray, to pay P32.00 per square meter (Exh. "D"); (c) the Appraisal Report of G. Ambrosio, Inc. (Exh. "A"), assessing the fair market value at P95.00 per square meter; (d) the testimony of Jaime Pimentel, Administrator of Roxas y Compania in Nasugbu, Batangas, that lots surrounding the property were being sold at P400.00 to P500.00 per square meter; and (e) the testimony of Justino Lim, engaged in selling lots right across the property, that the very same properties covered by the deeds of sale at P19.18 were being sold for P200.00 per square meter.
• Reliability of the Deeds of Sale: Petitioner argued that the deeds of sale were not reliable for purposes of determining just compensation because registrants tend to undervalue the cost of property to lower the expenses they would have to pay for the documents.
• Due Process — Commissioners' Report: Petitioner contended that to disregard the report of the panel of commissioners would violate due process.
• Absence of Proof of Undervaluation: Petitioner asserted that no proof was presented to show that it undervalued the sale of its properties, so that it should not be penalized in the expropriation proceedings.

• Weight of the Deeds of Sale: The Republic objected to the commissioners' report and pointed to the three contracts of sale the petitioner had concluded in 1985, whereby it sold three tracts of land similar in topography and adjacent to the property in question for the unit price of only P19.18 per square meter.

• Just Compensation — Valuation: Whether just compensation for the expropriated land should be fixed at P85.00 per square meter, as recommended by the panel of commissioners, or at P19.18 per square meter, as fixed by the Court of Appeals.
• Weight of the Commissioners' Report: Whether the commissioners' report binds the trial court, and whether disregarding it violates due process.
• Reliability of the Deeds of Sale: Whether the deeds of sale are reliable evidence of the property's market value.

• Just Compensation — Valuation: No. Just compensation is fixed at P19.18 per square meter, the uniform rate at which the owner voluntarily sold three adjacent tracts of similar topography in 1985, and which it cannot now disown as against the Republic.
• Weight of the Commissioners' Report: No. The commissioners' report is merely advisory and persuasive, not final or binding upon the trial court, which may substitute its own estimate of value as gathered from the record; no due process violation attends its disregard.
• Reliability of the Deeds of Sale: No. The deeds of sale stand as reliable evidence of value; the owner's claim that they were undervalued amounts to an admission of tax evasion from which it cannot be allowed to profit.

• Just Compensation — Valuation: Just compensation is the full and fair equivalent of the property sought to be expropriated, measured by the owner's loss rather than the taker's gain, and it must be fair not only to the owner but also to the taker. The market value of the property is the price that may be agreed upon by parties willing but not compelled to enter into a contract of sale. The Court found it mystifying that, if the property were truly worth P85.00 per square meter in 1985, the petitioner agreed to sell its other lands — of the same topography as the land in dispute and separated therefrom by only a road — at only P19.18 per square meter to three different purchasers at a uniform rate. No showing was made that the petitioner had any special reason for granting each individual vendee an extraordinary discount amounting to as much as 75% of its claimed real value; to all appearances, they were ordinary buyers, and probably land investors or speculators, who did not deserve any particular generosity or bounty. The price demanded from the Republic was more than four times the price the petitioner willingly accepted from private vendees, who bought for their own private purposes and not for the public purpose invoked by the Republic. The petitioner made no effort to differentiate the subject property from the lands sold at the lower rate to justify the increase of more than 300%. The petitioner's claim of liquidity problems was belied by its failure to withdraw the 10% deposit made by the Republic in 1985 and by its refusal to accept the government's standing offer, made as early as 1983, to buy at P32.00 per square meter for a total of P340,480.00 — a better deal than selling 20,851 square meters for only P400,000.00 from which capital gains tax and documentation expenses would still have to be deducted. On the question why the petitioner should not at least be paid P32.00, the Court noted that the Republic had no choice then because P.D. 1533 fixed just compensation at the valuation given by the owner or the government, whichever was lower, and the Provincial Appraisal Committee's price was lower; although the decree had since been declared unconstitutional in Export Processing Zone Authority vs. Dulay, the petitioner had rejected that offer and had insisted on its own unit price of P85.00. By selling its lands at the uniform rate of P19.18 per square meter, the petitioner thereby impliedly admitted that the lands subject of the expropriation, being of the same topography and virtually in the same location, should be valued at the same rate.
• Weight of the Commissioners' Report: The Court did not agree that the commissioners' report was without sufficient basis, as it was in fact made only after extensive interviews with persons who, although not necessarily experts, were nonetheless familiar with land values in the vicinity of the property sought to be expropriated; there was also an ocular inspection of the subject land to give the panel a better idea of its real value. Neither was it correct to say that the petitioner submitted no documentary evidence, since the record showed, among others, the appraisal report of the reputable realty firm of G. Ambrosio, Inc., which Ambrosio himself explained at trial. Even so, the report and recommendations of the panel of commissioners were not conclusive upon the trial court, which had the right and discretion to arrive at its own assessment of the land. The findings of the commissioners were at best only advisory and persuasive and by no means final or binding. As held in Republic vs. Santos, under Section 8 of Rule 67 the court is not bound by the commissioners' report; it may make such order or render such judgment as shall secure to the plaintiff the property essential to the exercise of his right of condemnation and to the defendant just compensation for the property expropriated, and the Court may substitute its own estimate of the value as gathered from the record.
• Reliability of the Deeds of Sale: The petitioner submitted that the consideration mentioned in deeds of sale is not a reliable index of just compensation because the parties tend to undervalue the cost of the property to lower the expenses they would have to pay for the documents — presumably the cost of documentary stamps for registration and the capital gains tax payable by the vendor. The Court found the suggestion revealing, as it amounted to a practical admission that the parties to the three transactions did not indicate the real consideration therefor so they could evade the legitimate taxes and fees due the government on the basis of the correct purchase price. If that was the petitioner's purpose in executing the deeds, then it was hoist by its own petard, and rightly so, for it cannot be allowed to profit from its own deception and claim that the subject property should be assessed at the higher rate it clandestinely agreed upon with the buyers. Even assuming that the petitioner comported itself with all propriety and did not falsify the consideration, the result would be the same: such a posture would signify that it seriously believed the fair price for its property to be only P19.18 per square meter, and not any lower or higher than that, whoever the purchaser might be. The Court expressed disappointment that the petitioner should demand a higher price from the Republic, which needed the lands for a public purpose, when it was willing to accept less from three individual buyers who had only their private interests to serve. Civic altruism aside, the petitioner could not now assert that its property was worth P85.00 per square meter as far as the Republic was concerned although, by its own voluntary act, it sold similar property to private individuals for only P19.18 per square meter. There being no satisfactory explanation for this incredible discrimination, the Republic should not pay more simply because it is the Republic, as if it were a milking cow with unlimited resources to abuse.

• Just Compensation — Just compensation is defined as the full and fair equivalent of the property sought to be expropriated. The measure is not the taker's gain but the owner's loss. The compensation, to be just, must be fair not only to the owner but also to the taker: even as undervaluation would deprive the owner of his property without due process, so too would its overvaluation unduly favor him to the prejudice of the public. In this case, the Court applied the doctrine to reject the owner's demand for P85.00 per square meter, holding that a rate more than four times the price it accepted from private buyers would unduly favor the owner at the public's expense.
• Market Value as the Measure of Just Compensation — To determine just compensation, the trial court should first ascertain the market value of the property, to which should be added the consequential benefits which may arise from the expropriation; if the consequential benefits exceed the consequential damages, these items should be disregarded altogether, as the basic value of the property should be paid in every case. The market value of the property is the price that may be agreed upon by parties willing but not compelled to enter into the contract of sale; a buyer desperate to acquire property might pay more, and a seller in urgent need of funds might accept less, than what the property is actually worth, and the price agreed upon in such cases would not represent market value. Among the factors to be considered in arriving at the fair market value are the cost of acquisition, the current value of like properties, its actual or potential uses, and, in the particular case of lands, their size, shape, location, and the tax declarations thereon. The Court applied this doctrine by treating the petitioner's own voluntary sales of adjacent, similarly situated lands as the best evidence of market value.
• Time of Taking — Just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of the expropriation proceedings. Where the institution of the action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint. The Court cited this rule in fixing the valuation by reference to the petitioner's 1985 sales, contemporaneous with the expropriation proceedings commenced in 1983 and the taking in 1985.
• Advisory Nature of the Commissioners' Report — Under Section 8 of Rule 67, the court is not bound by the commissioners' report; it may make such order or render such judgment as shall secure to the plaintiff the property essential to the exercise of his right of condemnation, and to the defendant just compensation for the property expropriated. The findings of the commissioners are at best only advisory and persuasive and by no means final or binding, and the court may substitute its own estimate of the value as gathered from the record. The Court applied this doctrine in holding that the trial court and the Court of Appeals were free to reject the panel's recommended P85.00 per square meter.
• Rule of Inconsistency (Estoppel by Conduct) — An owner who voluntarily sells adjacent, similarly situated property at a given price impliedly admits that the land subject of expropriation should be valued at the same rate, and cannot demand a higher price from the government. The Court expressed this rule in the familiar saying that what is sauce for the goose is also sauce for the gander, and applied it to bar the petitioner from claiming P85.00 per square meter after having sold three adjacent tracts at P19.18 per square meter.

• "Just compensation is defined as the full and fair equivalent of the property sought to be expropriated. The measure is not the taker's gain but the owner's loss. The compensation, to be just, must be fair not only to the owner but also to the taker." — This passage states the canonical formulation of just compensation applied throughout the decision, anchoring the Court's refusal to overvalue the property at the public's expense.
• "The market value of the property is the price that may be agreed upon by parties willing but not compelled to enter into the contract of sale." — This defines market value, the measure the Court used to test the competing valuations of P85.00 and P19.18 per square meter.
• "It is settled that just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of the expropriation proceedings. Where the institution of the action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint." — This states the temporal rule for fixing just compensation, which justified the Court's reliance on the petitioner's 1985 sales as the relevant benchmark.
• "The findings of the commissioners were at best only advisory and persuasive and by no means final or binding." — This articulates the weight to be accorded a Rule 67 commissioners' report and disposes of the petitioner's due process objection to its disregard.
• "There is no satisfactory explanation for this incredible discrimination. The Republic should not pay more simply because it is the Republic, as if it were a milking cow with unlimited resource to abuse." — This passage captures the ratio of the ruling on valuation, explaining why the owner's voluntary sales to private buyers bound it in its dealings with the government.

• Republic vs. Santos, 141 SCRA 30 — Controlling precedent on the weight of a commissioners' report; cited for the rule that under Section 8 of Rule 67 the court is not bound by the commissioners' report and may substitute its own estimate of the value as gathered from the record.
• Export Processing Zone Authority vs. Dulay, 149 SCRA 305 — Cited for the holding that P.D. 1533, which fixed just compensation at the lower of the owner's or the government's valuation, has been declared unconstitutional; invoked to explain why the Republic originally pegged its offer at P32.00 per square meter.
• Manila Railroad Co. vs. Velasquez, 32 Phil. 286 — Cited for the definition of just compensation as the full and fair equivalent of the property sought to be expropriated.
• Association of Small Landowners in the Philippines, Inc. vs. Secretary of Agrarian Reform, 175 SCRA 378 — Cited alongside Manila Railroad Co. vs. Velasquez for the definition of just compensation.
• Province of Tayabas vs. Perez, 66 Phil. 467 — Cited for the rule that the measure of just compensation is the owner's loss, not the taker's gain.
• Manila Railroad Co. vs. Caligsihan, 40 Phil. 326 — Cited for the definition of market value as the price that may be agreed upon by parties willing but not compelled to enter into the contract of sale.
• Republic vs. PNB, 1 SCRA 957 — Cited for the rule that just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of the expropriation proceedings.
• Ansaldo vs. Tantuico, Jr., 188 SCRA 300 — Cited alongside Republic vs. PNB for the rule on the time of taking where the institution of the action precedes entry into the property.

• Rule 67, Section 5, Rules of Court — Governs the appointment of a panel of commissioners to determine just compensation; the RTC of Batangas appointed the panel pursuant to this provision on March 21, 1985.
• Rule 67, Section 6, Rules of Court — Provides that if the consequential benefits arising from the expropriation exceed the consequential damages, these items should be disregarded altogether, as the basic value of the property should be paid in every case.
• Rule 67, Section 8, Rules of Court — Provides that the court is not bound by the commissioners' report and may make such order or render such judgment as shall secure to the plaintiff the property essential to the exercise of his right of condemnation and to the defendant just compensation for the property expropriated; applied to uphold the trial court's and the Court of Appeals' discretion to depart from the panel's recommendation.
• P.D. 48 — Required a 10% deposit as a condition for the plaintiff's possession of the property upon the filing of the complaint; the Republic invoked it in seeking possession.
• P.D. 1533 — Fixed just compensation at the valuation given by the owner or by the government, whichever was lower; cited to explain why the Republic's original offer was pegged at the lower Provincial Appraisal Committee valuation of P32.00 per square meter, and noted to have been declared unconstitutional in Export Processing Zone Authority vs. Dulay.

Padilla, Griño-Aquino and Bellosillo, JJ., concur.