Evergreen Manufacturing Corporation vs. Republic of the Philippines

Just compensation in expropriation proceedings must be determined based on the fair market value of the property at the time of taking; moreover, the property owner is constitutionally entitled to legal interest on the unpaid balance of just compensation (the difference between the final adjudged amount and the initial deposit) from the date of taking until full payment, as such unpaid balance constitutes a forbearance of money that must be paid to place the owner in as good a position as if payment had been made immediately at the time of taking.

Evergreen Manufacturing Corporation is the registered owner of a 1,428.68-square-meter parcel of land in Barangay Santolan, Pasig City, covered by Transfer Certificate of Title No. PT-114857. The Republic of the Philippines, through the Department of Public Works and Highways (DPWH), sought to expropriate 173.08 square meters of this property for the construction of Package 3 of the Marikina Bridge and Access Road under the Metro Manila Urban Transport Integration Project. After Evergreen declined DPWH's offer for negotiated sale based on the BIR zonal valuation of P6,000.00 per square meter, DPWH filed a complaint for expropriation on March 22, 2004, and deposited P1,038,480.00 (equivalent to 100% of the zonal value) to secure a writ of possession.

• Evergreen owns a parcel of land in Barangay Santolan, Pasig City, with a total area of 1,428.68 square meters, covered by Transfer Certificate of Title No. PT-114857.
• DPWH sought to expropriate 173.08 square meters of this property for a national infrastructure project.
• The BIR zonal valuation for the area was P6,000.00 per square meter based on industrial classification.
• After Evergreen rejected the negotiated sale offer, DPWH filed the expropriation complaint on 22 March 2004 and deposited P1,038,480.00 with the RTC.
• The RTC appointed three commissioners (Atty. Jade Ferrer Wy, Bonifacio Maceda Jr. from the City Assessor's office, and Atty. Pablita Migrino from the RTC Clerk of Court) to determine the fair market value.
• The commissioners submitted varying recommendations: Maceda recommended P15,000.00/sqm; Wy recommended P37,500.00/sqm; and Migrino recommended P30,000.00/sqm, based on ocular inspections conducted in 2008 and referencing nearby commercial properties selling at P35,000.00 to P40,000.00/sqm.
• The commissioners and lower courts found the property to be commercial in character and best used for commercial purposes, despite its industrial classification in tax records.
• The date of actual taking was 21 April 2006, when DPWH entered into possession pursuant to an agreement with Evergreen.

• Evergreen Manufacturing Corporation (G.R. No. 218628): Argued that it is entitled to legal interest on the balance of just compensation computed from the time of the filing of the complaint until the judgment attains finality, as the constitutional guarantee of just compensation requires prompt and full payment.
• Republic-DPWH (G.R. No. 218631): Contended that the just compensation fixed by the Court of Appeals has no basis in fact and law; the commissioners' reports are hearsay and bereft of evidence; the valuation should be determined as of the date of taking (2004) and not based on "current" selling prices of commercial properties in 2008; there was no bona fide valuation as the commissioners merely relied on the LRTA case valuation from 2000; and the property should be valued as industrial, not commercial.

• Republic-DPWH (in G.R. No. 218628): Opposed the claim for interest, arguing that there was no delay in payment because it had deposited the amount required by RA 8974 before taking possession, and that the initial payment constitutes substantial compliance with the constitutional requirement.
• Evergreen Manufacturing Corporation (in G.R. No. 218631): Defended the Court of Appeals' valuation of P35,000.00 per square meter, arguing that the commissioners properly considered the commercial nature and location of the property, and that the valuation was supported by evidence of market prices in the vicinity.

• Procedural: Whether the Supreme Court may review factual findings on the amount of just compensation in a petition for review on certiorari under Rule 45 when the Regional Trial Court and the Court of Appeals have rendered conflicting decisions on the valuation.
• Substantive Issues:
  • What is the correct amount of just compensation for the 173.08 square meters of land expropriated from Evergreen?
  • Should the property be valued based on its industrial classification or its actual commercial character and use at the time of taking?
  • Is Evergreen entitled to legal interest on the unpaid balance of just compensation, and if so, from what date and at what rate should such interest commence?

• Procedural: The Supreme Court may review factual findings on just compensation when the findings of the RTC and CA differ, falling under the recognized exceptions to the rule that only questions of law are reviewable under Rule 45; specifically, when the findings are contrary to that of the trial court or when there is a misapprehension of facts.
• Substantive: The Court fixed the just compensation at P33,050.00 per square meter (totaling P5,720,294.00), calculated as the mean between the 2000 valuation of P26,100.00 (from the LRTA case) and the 2008 valuation range of P35,000.00-P40,000.00, to approximate the fair market value at the time of taking in 2004. The Court affirmed that the property is commercial in character based on the commissioners' unanimous findings regarding its location and best use. The Court granted Evergreen's claim for legal interest on the difference between the final amount (P5,720,294.00) and the initial deposit (P1,038,480.00), ruling that such interest runs as a matter of law from the date of taking (21 April 2006) to place the owner in as good a position as money can accomplish; specifically, 12% per annum from 21 April 2006 to 30 June 2013, and 6% per annum from 1 July 2013 (per BSP Circular No. 799) until the finality of the decision, and thereafter 6% per annum from finality until full payment.

• Just Compensation — Defined as the full and fair equivalent of the property taken from its owner; the equivalent must be real, substantial, full, and ample, measured by the owner's loss rather than the taker's gain; must be determined based on the value of the property at the time of taking.
• Forbearance of Money in Eminent Domain — The unpaid balance of just compensation (difference between final adjudged amount and initial deposit) constitutes a forbearance of money, entitling the property owner to legal interest from the date of taking until full payment as a constitutional and equitable remedy to compensate for the lost income-generating potential of the expropriated property.
• Judicial Prerogative in Expropriation — The determination of just compensation is essentially a judicial function; while commissioners aid in this determination, courts may disregard their findings if they applied illegal principles, disregarded clear preponderance of evidence, or if the amount allowed is grossly inadequate or excessive.
• Two-Payment Scheme under RA 8974 — The initial deposit of 100% of BIR zonal valuation under Section 4(a) of RA 8974 is merely the first payment and does not constitute full just compensation; the government must still pay the difference between the initial deposit and the final adjudged amount plus interest thereon.

• "Just compensation has been defined as the fair and full equivalent of the loss."
• "The word 'just' is used to modify the meaning of the word 'compensation' to convey the idea that the equivalent to be given for the property to be taken shall be real, substantial, full and ample."
• "The true measure is not the taker's gain but the owner's loss."
• "Interest in eminent domain cases 'runs as a matter of law and follows as a matter of course from the right of the landowner to be placed in as good a position as money can accomplish, as of the date of taking.'"
• "The delay in the payment of just compensation is a forbearance of money. As such, this is necessarily entitled to earn interest."
• "The Government's initial payment of just compensation does not excuse it from avoiding payment of interest on the difference between the adjudged amount of just compensation and the initial payment."

• Light Rail Transit Authority v. Clayton Industrial Corporation — Cited for the 2000 valuation of similar nearby properties at P26,100.00 per square meter, which the Court used as a baseline for computing the 2004 just compensation.
• Republic v. Mupas — Controlling precedent establishing that interest on unpaid just compensation is a constitutional requirement and that the initial payment under RA 8974 does not excuse the government from paying interest on the difference between the initial and final payments.
• Apo Fruits Corporation v. Land Bank of the Philippines — Cited for the rationale that interest compensates the owner for the income lost from the date of taking when they were deprived of the property's income-generating potential.
• Eastern Shipping Lines, Inc. v. Court of Appeals — Authority for the 12% interest rate applicable to forbearance of money until 30 June 2013.
• National Power Corporation v. Spouses Asoque — Cited for the principle that commissioners may consider factors other than documentary evidence in determining fair market value, provided such determination reflects the value at the time of taking.

• 1987 Constitution, Article III, Section 9 — Mandates that private property shall not be taken for public use without just compensation; basis for the requirement of prompt payment and interest on delays.
• Republic Act No. 8974, Section 4 — Provides the guidelines for expropriation proceedings, including the requirement of immediate payment of 100% of BIR zonal valuation upon filing and the subsequent payment of the difference when the decision becomes final.
• Rules of Court, Rule 67, Section 4 — Mandates that just compensation shall be determined as of the date of the taking of the property or the filing of the complaint, whichever comes first.
• BSP Circular No. 799 — Reduced the legal interest rate from 12% to 6% per annum effective 1 July 2013, applied to the interest on the unpaid balance of just compensation from that date forward.