Leca Realty Corporation vs. Republic of the Philippines

Just compensation in expropriation cases must be determined based on the fair market value of the property as of the date of the taking or the filing of the complaint, whichever comes first, and cannot be based solely on zonal valuation or on newspaper listings of offers of sale for properties in a different location and from a later period; where the Commissioners' Report lacks competent evidence supporting the valuation, the case must be remanded for proper determination.

The Republic of the Philippines, through the Department of Public Works and Highways (DPWH), sought to expropriate portions of properties owned by Leca Realty Corporation, Leeleng Realty Inc., Metropolitan Bank and Trust Co. (Metrobank), Bank of the Philippine Islands (BPI), and Cityland Inc. along Shaw Boulevard, Mandaluyong City, for the construction of the EDSA-Shaw Boulevard Overpass Project. The Office of the Solicitor General (OSG) represented the Republic throughout the proceedings. The Revised Zonal Values of Real Properties in the City of Mandaluyong had been implemented on April 29, 1996, by the Department of Finance under DO No. 71-96, which classified properties in the vicinity of Shaw Boulevard as residential condominiums at ₱55,000 per square meter and commercial condominiums at ₱60,000 per square meter.

On March 18, 1996, the Republic of the Philippines, represented by the DPWH, filed a complaint for eminent domain with the Regional Trial Court of Pasig City, Branch 159, for the taking of portions of properties belonging to Leca Realty Corporation, Leeleng Realty Inc., Metrobank, BPI, and Cityland Inc. The expropriation was for the construction of the EDSA-Shaw Boulevard Overpass Project in Mandaluyong City. Attached to the complaint was Resolution No. 94-1 of the City Appraisal Committee of Mandaluyong, which fixed the fair market values of properties along Shaw Boulevard from EDSA going westward at ₱35,000 per square meter, and from EDSA going eastward towards Pasig at ₱45,000 per square meter. Leca's property was approximately 297 meters from the intersection of Shaw Boulevard and EDSA, while Leeleng's was approximately 146 meters from the same intersection. Metrobank's property was approximately 200 meters from EDSA and located beside Shangri-La Plaza within Ortigas Center, BPI's was approximately 237 meters from EDSA and southeast of Shangri-La Plaza, and Cityland's was one lot away from EDSA Plaza Hotel and Shangri-La Plaza.

On October 7, 1997, the trial court appointed three commissioners — Atty. Benjamin C. Angeles, Mr. Joselito E. Gunio, and Mr. Melchor Savillo — to ascertain and report the just compensation of the properties sought to be taken. The commissioners submitted their report on January 8, 1998, recommending fair market values of ₱50,000 per square meter for the properties of Leca and Leeleng, ₱125,000 per square meter for Metrobank and BPI, and ₱137,500 per square meter for Cityland. In arriving at these values, the commissioners considered property location, identification, neighborhood data, community facilities and utilities, highest and best use, valuation, and reasonable indication of land values within the vicinity. The commissioners relied on the market-data approach, basing valuations on sales and listings of comparable property, including newspaper advertisements of offers of sale published between February and July 1997 for properties along Meralco Avenue and Doña Julia Vargas Avenue within Ortigas Center, with asking prices ranging from ₱200,000 to ₱330,000 per square meter. On March 30, 1998, the RTC rendered a decision adopting the Commissioners' Report.

The Republic received the CA decision affirming the RTC on October 7, 2002, giving it fifteen days or until October 22, 2002, to file a motion for reconsideration. It did not do so. The CA judgment became final as to BPI, Cityland, and Leeleng on October 23, 2002, and the entry of judgment was ordered by the CA in its Resolution dated July 25, 2003. The Republic filed its petition for certiorari only on October 20, 2003, more than a year after receiving the adverse decision. The Republic attributed the delay to the gross negligence of Solicitor Mauro Elinzano, who allegedly took no action after receiving the CA decision. However, the Republic's brief before the CA had been signed by Assistant Solicitor General Pio C. Guerrero and Associate Solicitor Roland C. Villaluz, and no evidence was adduced showing Elinzano's participation as attending counsel. Moreover, in letters dated May 20, 1998, and August 18, 1998, DPWH Secretary Gregorio R. Vigilar had instructed the OSG to withdraw or drop the appeal, concluding that the compensation costs recommended by the commissioners were reasonable and acceptable and that the move would hasten the legal process and stop the running of interest amounting to ₱6,240,000 per annum.

• Estoppel by Counsel's Negligence: The Republic argued that it should not be bound by the gross negligence or mistake of its agent/former counsel, Solicitor Mauro Elinzano, who allegedly failed to file a timely appeal of the CA decision, and invoked the exception to the rule that clients are bound by the mistakes of their counsel.
• Insufficiency of Commissioners' Report: The Republic contended that the values arrived at in the Commissioners' Report were not supported by sufficient evidence, being based on newspaper listings of advertisements of mere offers of sale rather than consummated transactions.
• Exceeding Zonal Values: The Republic argued that the fair market values of the expropriated properties should not exceed the zonal values prescribed under DO No. 71-96, which set residential condominium zonal values at ₱55,000 per square meter and commercial condominium zonal values at ₱60,000 per square meter in the vicinity of Shaw Boulevard.
• Unfair Discrepancy: The Republic contended that the compensation was rendered unfair, unjust, and unconscionable by the gross discrepancies between the values fixed for Leca and Leeleng (₱50,000 per square meter) and those fixed for BPI and Cityland (₱125,000 and ₱137,500 per square meter).
• Insufficient Valuation (Leca): Leca alleged that the fair market value ascribed to its property was insufficient, asserting that the CA failed to give due consideration to the BIR Zonal Value Table and totally ignored the Fair Market Value Appraisal dated November 10, 1997, prepared by Cuervo Appraisers, Inc., which placed the value of Leca's property at ₱70,000 per square meter.

• Petition Filed Out of Time: BPI, Cityland, and Leeleng stressed that the Republic's petition for certiorari had been filed out of time, more than a year after receipt of the CA decision, and that the errors committed by OSG lawyers should bind the Republic.
• Finality of Judgment: The respondents pointed out that the CA judgment had already attained finality on October 23, 2002, and the entry of judgment had been ordered by the CA in its Resolution dated July 25, 2003.
• Counsel's Discretion: BPI submitted that it was plausible that the handling lawyer purposely exercised discretion not to appeal, given that the DPWH itself had instructed the OSG to withdraw or drop the appeal, having found the compensation reasonable and acceptable.

• Certiorari as Substitute for Lost Appeal: Whether the Republic is estopped by the gross negligence or mistake of its agent/former counsel in failing to file a timely appeal, and whether the CA decision is in accord with law and jurisprudence.
• Determination of Just Compensation: Whether the CA erred in affirming the amount of ₱50,000 per square meter as just compensation for Leca's property, while adjudging other parties in the same vicinity at ₱125,000 and ₱137,500 per square meter, and whether the Commissioners' Report was supported by sufficient evidence.

• Certiorari as Substitute for Lost Appeal: No. The Republic's petition for certiorari was dismissed, certiorari not being a substitute for a lost appeal, and the claim of counsel's gross negligence being unsubstantiated and contradicted by the DPWH's own instructions to drop the appeal.
• Determination of Just Compensation: Yes, the CA erred. The Commissioners' Report relied on newspaper listings of mere asking prices for properties in Ortigas Center, not along EDSA where Leca's property was situated, and from a period after the filing of the complaint, leaving no evidence of fair market value as of the date of taking. The case was remanded for proper determination.

• Certiorari as Substitute for Lost Appeal: A special civil action for certiorari under Rule 65 lies only when there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law; it is not a substitute for a lost appeal. The Republic received the CA decision on October 7, 2002, and had fifteen days to file a motion for reconsideration and, if denied, another fifteen days to file a petition for review under Rule 45. Instead, it filed the certiorari petition on October 20, 2003, over a year later. Mere errors of judgment cannot be the proper subject of certiorari; where the court has jurisdiction, even if its findings are incorrect, they constitute errors of law, not abuse of discretion correctible by certiorari. The Republic's invocation of the principle that a lawyer's gross negligence will not bind the client was rejected for several reasons. First, the rule that the government cannot be estopped by the mistakes of its agents is not absolute; it is not designed to perpetrate injustice, and allowing late petitions on the excuse of counsel's negligence would cause the judicial machinery to run aground. Second, the name of Solicitor Elinzano appeared nowhere in the OSG's pleadings in the lower courts; the Republic's CA brief was signed by Assistant Solicitor General Pio C. Guerrero and Associate Solicitor Roland C. Villaluz, and no evidence was adduced showing Elinzano's participation. Third, the DPWH — the main agency tasked to implement the expropriation — had itself instructed the OSG to withdraw or drop the appeal in letters dated May 20 and August 18, 1998, finding the compensation reasonable and reflective of prevailing values, making it plausible that the handling lawyer purposely chose not to appeal. Finally, the responsibility of preventing the improvident release of public funds falls upon the OSG as counsel of the government. As to BPI, Cityland, and Leeleng, the CA judgment had already attained finality on October 23, 2002.

• Determination of Just Compensation: In expropriation proceedings, market value is the just compensation to which the owner is entitled — that sum of money which a person desirous but not compelled to buy, and an owner willing but not compelled to sell, would agree on as a price. Just compensation is the full and fair equivalent of the property taken; the measure is not the taker's gain but the owner's loss. The value must be determined as of the date of the taking or the filing of the complaint, whichever comes first. Here, the complaint was filed on March 18, 1996, and the writ of possession was issued on June 19, 1997. The offers cited in the Commissioners' Report were made between February and July 1997, a period after the filing of the complaint, leaving no evidence of fair market value as of March 1996. Moreover, the offers were for properties inside Ortigas Center, not for properties along EDSA where Leca's property was situated; no listing or evidence of concluded sales was submitted for properties outside Ortigas Center. The offers were merely asking prices, subject to negotiation, not consummated transactions. The Republic was incorrect, however, in asserting that the values were exorbitant merely because they exceeded the zonal values: zonal valuation is one index of fair market value but not the sole basis, as tax values can serve as guides but cannot be absolute substitutes for just compensation. Because no other evidence was presented to support the values determined — only the Commissioners' Report and a location map, which were insufficient — the case was remanded for proper determination. The interest of Leca was distinct from and would not affect the settled rights of the other parties that did not appeal, as to whom the decision had long become final and executory.

• Just Compensation in Eminent Domain — Just compensation is the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker's gain but the owner's loss. The word "just" is used to stress the meaning of "compensation" to convey that the equivalent rendered shall be real, substantial, full, and ample. Market value is "that sum of money which a person desirous but not compelled to buy, and an owner willing but not compelled to sell, would agree on as a price to be given and received therefor." The value must be determined as of the date of the taking of the property or the filing of the complaint, whichever comes first.

• Zonal Valuation as Index of Fair Market Value — Zonal valuation is simply one of the indices of the fair market value of real estate and cannot be the sole basis of just compensation in expropriation cases. Tax values and assessed values can serve as guides or factors to be considered but cannot be absolute substitutes for just compensation, as they are usually uniform for wide areas and do not account for individual differences.

• Certiorari Not a Substitute for Lost Appeal — A special civil action for certiorari under Rule 65 lies only when there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law. It is not a substitute for a lost appeal and is not allowed when a party fails to appeal a judgment to the proper forum within the reglementary period. Mere errors of judgment — as distinguished from lack of jurisdiction or grave abuse of discretion — cannot be the proper subject of certiorari.

• Non-Estoppel of the Government and Its Exceptions — While the government is usually not estopped by the mistake or error of its officials or agents, this rule does not afford blanket or absolute immunity. The rule on non-estoppel is not designed to perpetrate an injustice. The Solicitor General may not be excused from its shortcomings by invoking the doctrine as if it were a magic incantation that could condone and erase its errors. The responsibility of preventing the improvident release of public funds falls upon the OSG as counsel of the government.

• "Zonal valuation is simply one of the indices of the fair market value of real estate. By itself, however, this index cannot be the sole basis of 'just compensation' in expropriation cases. The standard is not the taker's gain, but the owner's loss." — This is the opening statement of the decision, articulating the controlling principle on the relationship between zonal valuation and just compensation.

• "Just compensation, then, is the full and fair equivalent of a property taken from its owner by the expropriator. The measure is not the taker's gain, but the owner's loss. Note must be taken that the word 'just' is used to stress the meaning of the word 'compensation,' in order to convey the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full and ample." — This passage defines the constitutional standard of just compensation and is frequently cited in subsequent expropriation jurisprudence.

• "The rule on non-estoppel of the government is not designed to perpetrate an injustice. In general, the rules on appeal are created and enforced to ensure the orderly administration of justice. The judicial machinery would run aground if late petitions, like the present one, are allowed on the flimsy excuse that the attending lawyer was grossly lacking in vigilance." — This passage articulates the limits of the doctrine of non-estoppel of the government and the rationale for enforcing procedural rules against the state.

• "Well-settled is the rule that in expropriation proceedings, the value of a property must be determined either as of the date of the taking of the property or the filing of the complaint, whichever comes first." — This states the canonical rule on the reckoning date for determining just compensation, a rule consistently applied in expropriation cases.

• Republic of the Philippines vs. G Holdings, G.R. No. 141241, November 22, 2005 — Followed for the proposition that the rule on non-estoppel of the government is not absolute and does not afford blanket immunity; the Republic cannot take refuge in the rule to excuse the OSG's shortcomings.

• International Exchange Bank vs. Court of Appeals, G.R. No. 165403, February 27, 2006 — Cited for the rule that mere errors of judgment, as distinguished from jurisdictional defects, are beyond the province of certiorari; erroneous findings and conclusions do not render the appellate court vulnerable to the corrective writ.

• National Power Corporation vs. Manubay Agro-Industrial Development Corporation, 437 SCRA 60, August 18, 2004 — Followed for the principle that market value is not limited to assessed value or schedule of market values determined by appraisal committees, though these may serve as factors in judicial valuation; also cited for the rejection of the city assessor's recommended price where opinions of banks and realtors were not substantiated by documentary evidence.

• EPZA vs. Dulay, 149 SCRA 305, April 29, 1987 — Followed for the principle that tax values can serve as guides but cannot be absolute substitutes for just compensation, as values given by provincial assessors are uniform for wide areas and do not account for individual differences.

• Land Bank of the Philippines vs. Wycoco, 419 SCRA 67, January 13, 2004 — Followed for the rule that market value cannot be arbitrarily arrived at without considering factors such as cost of acquisition, current value of like properties, size, shape, location, and tax declarations; where these factors were not considered, remand for determination of just compensation is necessary.

• Republic vs. Court of Appeals, 433 Phil. 106, July 2, 2002 — Cited for the definition of just compensation as the sum equivalent of the market value of the property, fixed at the time of the actual taking by the government.

• Rule 65, Section 1, 1997 Rules of Court — Provides that the special civil action for certiorari lies only when there is no appeal nor any plain, speedy and adequate remedy in the ordinary course of law. Applied to dismiss the Republic's petition filed over a year after receipt of the CA decision, certiorari being an improper substitute for a lost appeal.

• Rule 45, Rules of Court — Governs petitions for review on certiorari from judgments of the Court of Appeals. The Republic could have availed of this remedy within fifteen days from notice of denial of a motion for reconsideration but failed to do so.

• Administrative Code of 1987, Book IV, Title III, Chapter 12, Section 35 — Defines the powers and functions of the Office of the Solicitor General, including representing the Government in the Supreme Court and the Court of Appeals. Applied to underscore that the responsibility of preventing the improvident release of public funds falls upon the OSG as counsel of the government.

• Department of Finance Order No. 71-96 — Implemented the Revised Zonal Values of Real Properties in the City of Mandaluyong on April 29, 1996. The Republic invoked this order to argue that compensation should not exceed ₱60,000 per square meter, but the Court held that zonal valuation is merely one index of fair market value and cannot be the sole basis of just compensation.

Ynares-Santiago, Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concurred.