Municipality of Daet vs. Court of Appeals

Where the expropriating authority fails to take possession of the property at the time of filing the complaint or shortly thereafter due to its own non-compliance with deposit requirements, just compensation should be fixed as of the date of actual taking, not the date of filing the complaint. The municipality cannot benefit from its own delay and dilly-dallying to the prejudice of the landowner.

The Municipality of Daet sought to acquire a 2,717-square-meter parcel of land owned by Li Seng Giap & Co., Inc. for conversion into a public park. The property, covered by Transfer Certificate of Title No. 207, was located in the Poblacion of Daet, Camarines Norte. The municipality filed condemnation proceedings on August 9, 1962, but failed to make the required deposit to take immediate possession. This failure triggered a protracted legal battle spanning 17 years, during which the landowner was deprived of the beneficial use of the property while the municipality continued to pursue expropriation without compensating the owner.

• Original Filing: Civil Case No. 1436, Court of First Instance of Camarines Norte, filed August 9, 1962
• Lower Court Decision: February 8, 1963 — RTC dismissed the expropriation proceedings, finding no genuine necessity and no funds to pay just compensation
• First Appeal: CA-G.R. No. 32-259-R — April 14, 1968, CA reversed the RTC, declaring the municipality had lawful right to expropriate and remanding for determination of just compensation
• RTC Decision on Remand: December 2, 1969 — RTC fixed value at P117.00 per square meter and P36,500.00 for improvement
• Second Appeal: Both parties appealed to CA; October 18, 1972, CA modified, fixing value at P200.00 per square meter and P36,500.00 for improvement, with interest from actual taking
• SC Action: Petition for Review on Certiorari filed by Municipality of Daet after CA denied motion for reconsideration

The Municipality of Daet instituted condemnation proceedings against Li Seng Giap & Co., Inc. on August 9, 1962 before the Court of First Instance of Camarines Norte, seeking to acquire a 2,717-square-meter parcel of land covered by Transfer Certificate of Title No. 207 for conversion into a public park. The property was bounded by Vinzons Avenue on the northeast, Felipe II Street on the southeast, Ildefonso Moreno Street on the south, and J. Lukban Street on the west, and was assessed in the name of Li Seng Giap & Co.

On August 20, 1962, Li Seng Giap & Co., Inc. filed a Motion to Dismiss on the grounds that the proposed expropriation had not been duly authorized by the Office of the President as required by Section 2245 of the Revised Administrative Code, that there was no genuine necessity for the expropriation, that the park should be placed on a different site entailing less expense, that the expropriation was discriminatory, and that the municipality lacked sufficient funds to complete the project. On February 8, 1963, the trial court rendered a decision dismissing the expropriation proceedings, finding no genuine need for the park and no funds to pay the reasonable value of the land and building. The municipality filed a motion for reconsideration, which was denied on February 27, 1963, prompting an appeal to the Court of Appeals docketed as CA-G.R. No. 32-259-R.

On April 14, 1968, the Court of Appeals rendered a decision reversing the trial court, declaring that the Municipality of Daet had a lawful right to take the property for public use upon payment of just compensation to be determined as of the date of the filing of the complaint. The CA directed the trial court to promptly fix the provisional value of the property for purposes of the municipality's motion to take immediate possession under Section 2 of Rule 67, and remanded the case for further proceedings. After the records were remanded, Li Seng Giap & Co., Inc. filed a Motion for Appointment of Commissioners to Fix Just Compensation on March 20, 1969.

On April 15, 1969, the trial court issued twin orders: first, fixing the provisional value of the land at P129.99 per square meter and the improvement at P30,000.00, totaling P356,040.00, and requiring the municipality to deposit this amount with the Provincial Treasurer; second, appointing Atty. Ernesto de Jesus, Provincial Assessor, as chairman, with Atty. Jose V. Jamito and Dr. Mateo Aquino as members of the committee on appraisal. The commissioners held sessions on May 10, 17, and 24, 1969, and filed their report on May 28, 1969, recommending a fair market value of P60.00 per square meter for the land and P15,000.00 for the structure as of 1962. The commissioners based their valuation on various deeds of sale submitted by the parties, including transactions ranging from P8.57 to P43.00 per square meter, and excluded evidence from 1969 transactions because just compensation was to be determined as of the filing of the complaint in 1962.

Li Seng Giap & Co., Inc. filed a Motion to Admit Additional Evidence, which was granted, allowing the expert testimony of a licensed broker. On August 20, 1969, the municipality manifested its conformity to the commissioners' report. Meanwhile, on July 23, 1969, Judge Gabriel V. Valero of Branch I issued an order transferring the case to Judge Isidro Vera of Branch II, who proceeded to take additional evidence consisting of the testimony of Engineer Aurelio B. Aquino, who appraised the land at P200.00 per square meter and the improvement at P36,500.00 in 1969. On December 2, 1969, the trial court rendered a decision disregarding the commissioners' valuation and using Engineer Aquino's 1969 appraisal as the basis for determining the value of the land in 1962, fixing the reasonable value at P117.00 per square meter, totaling P317,889.00, and the improvement at P36,500.00, with interest at the legal rate from the filing of the complaint until paid.

Both parties filed motions for reconsideration, which were denied, and both appealed to the Court of Appeals. On October 18, 1972, the CA rendered a decision sustaining the valuation of the property in 1969, declaring the municipality to have a lawful right to expropriate, and modifying the trial court's judgment with respect to interest, which should run from and after the date of actual taking. The municipality's motion for reconsideration was denied, prompting the filing of the instant petition for review on certiorari. The municipality submitted a Manifestation on September 15, 1977, invoking Presidential Decree No. 42 and manifesting that it had deposited P54,370.00 with the Philippine National Bank on February 9, 1973. The records also disclosed that the municipality filed a Motion for Authority to Demolish the Building on June 27, 1974, which was denied, and that on February 6, 1978, Mayor Jose P. Timoner started demolishing the building, prompting Li Seng Giap & Co., Inc. to file a Petition to Cite the Mayor in Contempt of Court on February 14, 1978.

• The CA gravely abused its discretion in applying Section 4, Rule 67 of the Revised Rules of Court, which requires just compensation to be determined as of the date of filing the complaint; the CA should have fixed the value as of 1962, not 1969.
• The CA violated the principle of res judicata by modifying, disregarding, and amending its own decision in CA-G.R. No. 32-259-R, which had already become final and executory and had directed payment of just compensation to be determined as of the date of the filing of the complaint.
• The CA erred in disregarding the commissioners' report, which was the proper procedure for determining just compensation under Section 5, Rule 67 of the Revised Rules of Court.
• The transfer of the case from Branch I to Branch II of the CFI of Camarines Norte was improper, as the jurisdiction of the branches is delineated by a controlling department circular, and Branch II had no legal authority to take over the expropriation case.
• Presidential Decree No. 42, issued on November 9, 1972, limits just compensation to the assessed value of the property for taxation purposes, and private respondent is estopped from claiming a valuation higher than the assessed value.

• The CA correctly fixed the fair market value of the property at P200.00 per square meter and P36,500.00 for the improvement, as the municipality had not actually taken possession of the property at the time of judgment in 1969.
• The doctrine of res judicata does not apply because the only question in CA-G.R. No. 32-259-R was whether the municipality had the authority to exercise eminent domain; the question of just compensation was expressly reserved for the trial court.
• The commissioners' report is merely advisory and not binding on the court; the trial court properly disregarded it in favor of the expert testimony of Engineer Aurelio B. Aquino, a licensed real estate broker and appraiser.
• The transfer of the case from Branch I to Branch II was proper because jurisdiction is vested in the court, not in the judges, and the branches are not separate and distinct courts.
• Presidential Decree No. 42 does not limit just compensation to the assessed value; it only fixes the provisional value for purposes of taking immediate possession, and the assessed value constitutes only a percentage of the current fair market value.

• Time of Valuation: Whether the CA erred in fixing the just compensation as of the date of actual taking (1969 or 1978) rather than the date of filing of the complaint (1962).
• Res Judicata: Whether the CA violated the principle of res judicata or the law of the case in modifying its earlier decision in CA-G.R. No. 32-259-R.
• Commissioners' Report: Whether the trial court erred in disregarding the commissioners' report and using the expert testimony of a licensed broker as the basis for determining just compensation.
• Transfer of Case: Whether the transfer of the case from Branch I to Branch II of the CFI of Camarines Norte was proper.
• Presidential Decree No. 42: Whether Presidential Decree No. 42 limits just compensation to the assessed value of the property for taxation purposes.

• Time of Valuation: No. The CA correctly fixed the just compensation as of the date of actual taking. Under Section 4, Rule 67, just compensation is to be determined as of the date of filing the complaint, but where the taking precedes the filing or where the expropriating authority fails to take possession due to its own non-compliance, the value should be fixed as of the time of actual taking.

• Res Judicata: No. The CA did not violate res judicata or the law of the case. The only question in CA-G.R. No. 32-259-R was whether the municipality had the authority to exercise eminent domain; the question of just compensation was expressly reserved for the trial court.

• Commissioners' Report: No. The trial court properly disregarded the commissioners' report. Commissioners' reports are merely advisory and not binding on the court, and the court may substitute its own estimate of value based on competent evidence.

• Transfer of Case: No. The transfer was proper. Jurisdiction is vested in the court, not in the judges, and when a court is divided into branches, each branch is not a separate and distinct court.

• Presidential Decree No. 42: No. Presidential Decree No. 42 does not limit just compensation to the assessed value. It only fixes the provisional value for purposes of taking immediate possession, and the assessed value constitutes only a percentage of the current fair market value.

Time of Valuation: The SC traced the jurisprudential development of the rule on the time of valuation in expropriation cases. Section 4, Rule 67 of the Revised Rules of Court, reproduced from Section 5, Rule 69 of the 1940 Rules, provides that just compensation shall be determined as of the date of filing the complaint. This rule originated from Manila Railroad Company vs. Caligsihan (1919), which enunciated that the value of the property taken should be fixed as of the date of the proceedings. However, Provincial Government of Rizal vs. Caro de Araullo (1938) held that where the taking preceded the filing of the complaint, the value should be fixed as of the date when the property was taken. This ruling was reiterated in Republic vs. Lara (1954), which held that the value of lands expropriated must be reckoned as of the time of actual possession by the government, not the time of filing the complaint, even though the 1940 Rules were already in force. The Court explained that where property is taken ahead of the filing of condemnation proceedings, the value may be enhanced by the public purpose, depreciated by the entry of the plaintiff, or affected by natural increases due to general economic conditions. The owner should be compensated only for what he actually loses, which is the actual value of his property at the time it is taken. Subsequent cases followed the Caro doctrine: Republic vs. Garcellano, Municipal Government of Sagay vs. Jison, and Alfonso vs. Pasay City. In Republic vs. Narciso, where the expropriation proceeding preceded the taking, the value was fixed at the beginning of the expropriation. The Court clarified this apparent departure in Republic vs. Philippine National Bank, holding that when the plaintiff takes possession before the institution of condemnation proceedings, the value should be fixed as of the time of taking; when the taking coincides with or is subsequent to the commencement of the proceedings, the filing of the complaint should be the basis. In the case at bar, there was no taking prior to the institution of the condemnation proceedings, and the filing of the complaint did not coincide with the taking because the municipality failed to comply with the order requiring deposit of the provisional value. At the time judgment was rendered on December 2, 1969, the municipality had not actually taken possession. The SC found the CA's valuation of P200.00 per square meter and P36,500.00 for the improvement to be just, fair, and reasonable.

Res Judicata: The SC ruled that res judicata does not apply because the requisites are not present. For res judicata to apply, there must be: (a) a final former judgment; (b) rendered by a court having jurisdiction; (c) a judgment on the merits; and (d) identity of parties, subject matter, and cause of action between the first and second actions. While there was identity of parties, there was no identity of causes of action. The only question in CA-G.R. No. 32-259-R was whether the municipality had the authority to exercise eminent domain; the question of just compensation was expressly reserved for the trial court. The judgment in the first case is conclusive only as to matters actually and directly controverted and determined, not as to matters merely involved therein. The phrase in the dispositive portion referring to just compensation "to be determined as of the date of the filing of the complaint" cannot constitute the law of the case. The law of the case, as applied to a former decision of an appellate court, merely expresses the practice of courts in refusing to reopen what has been decided. It differs from res judicata in that the conclusiveness of the first judgment is not dependent upon its finality. It relates entirely to questions of law and is confined to subsequent proceedings in the same case. It cannot be invoked except as to questions actually considered and determined in the first appeal. The SC, as the court of last resort, is the final arbiter of all legal questions properly brought before it, and its decision constitutes the law of the particular case.

Commissioners' Report: The SC held that the trial court did not err in disregarding the commissioners' report. Under Section 5, Rule 67, the court may appoint not more than three competent and disinterested persons as commissioners to ascertain and report the just compensation. However, the commissioners' power is limited to assessing the value and determining the amount of damages; they must discharge their trust according to well-established rules and form their judgment upon correct legal principles. Reports submitted by commissioners are not binding but merely advisory. The court has the undoubted right to reject the report if it is not founded upon legal evidence, to discharge the commission and appoint a new one, and to formulate its own opinion as to the value of the land based on competent evidence. The court may substitute its own estimate of value where the commissioners have applied illegal principles, disregarded a clear preponderance of evidence, or used an improper rule of assessment, provided the evidence is clear and convincing and the amount allowed is grossly inadequate or excessive. The requirement in Section 8, Rule 67 of conducting a hearing on the report bolsters the conclusion that the report is merely recommendatory. The CA found Engineer Aurelio B. Aquino to be competent to make the appraisal, as he was a licensed real estate broker and appraiser of long standing, one of the incorporators of C.M. Hoskins and Co., Inc., and the chairman of its board of directors. Although he did not maintain an office in Daet, a commercial parcel of land retains the same characteristics whether located in Manila or Daet, and the criterion for appraisal is universally applied. The value of a parcel of land taken by eminent domain is always a matter of opinion and may be proved by opinion evidence of a real estate appraiser.

Transfer of Case: The SC ruled that the transfer of the case from Branch I to Branch II was proper. Where a court of first instance is divided into several branches, each branch is not a court distinct and separate from the others. Jurisdiction is vested in the court, not in the judges, so that when a complaint is filed before one branch or judge, jurisdiction does not attach to that branch or judge alone. Trial may be had or proceedings may continue before another branch or judge. Section 57 of the Judiciary Act grants the Minister of Justice, upon recommendation of the district judge, the administrative power to apportion cases among the different branches. The apportionment does not involve a grant or limitation of jurisdiction; jurisdiction continues to be vested in the court of first instance of the province as a whole. While the apportionment of cases must be respected by the judges in the interest of order and coordination, the question of whether Branch II took cognizance of a case properly belonging to another branch is negated by the fact that Administrative Order No. 472 of the Secretary of Justice, dividing Camarines Norte between Branch I and Branch II, took effect on January 1, 1971, long after Branch II had disposed of the case on December 2, 1969.

Presidential Decree No. 42: The SC held that Presidential Decree No. 42 does not limit just compensation to the assessed value. By its title alone — "Authorizing the Plaintiff in Eminent Domain Proceedings to Take Possession of the Property Involved Upon Depositing the Assessed Value for Purposes of Taxation" — it is clear that the decree fixes only the provisional value of the property. As a provisional value, it does not necessarily represent the true and correct value of the land; it is only tentative to serve as the basis for immediate occupancy. The decree repealed Section 2, Rule 67, which imposed upon the court the duty of ascertaining and fixing the provisional value, because the existing procedure was not expeditious enough. Even in Presidential Decree No. 76, it is clearly stated that just compensation is based on the current and fair market value, not the assessed value. The assessed value constitutes only a percentage of the current fair market value — fifty percent for commercial, industrial, or mineral lands; forty percent for agricultural lands; and thirty percent for residential lands. Thus, the assessed value cannot be the direct basis of just compensation. More importantly, Presidential Decree No. 42 is inapplicable because it was issued on November 9, 1972, about three weeks after the CA had already fixed the value of the property on October 18, 1972. Laws have only prospective effect. The provisional value having already been fixed, the deposits made pursuant to the decree were insufficient. Nevertheless, the amounts deposited should be deducted from the total amount due to the private respondent. The SC also held that the demolition of the building by Mayor Timoner on February 14, 1978 constituted the actual taking of possession, and from that date, interest at the legal rate shall be paid until the full amount is paid.

• Time of Valuation in Expropriation — Just compensation is generally determined as of the date of filing of the complaint. However, where the taking of the property precedes the filing of the expropriation proceedings, or where the expropriating authority fails to take possession at the time of filing or shortly thereafter due to its own non-compliance with deposit requirements, the value should be fixed as of the time of actual taking. The owner should be compensated only for what he actually loses — the actual value of his property at the time it is taken.

• Commissioners' Reports Are Advisory — Reports submitted by commissioners of appraisal in condemnation proceedings are not binding but merely advisory in character. The court has the undoubted right to reject the report if it is not founded upon legal evidence, to discharge the commission and appoint a new one, and to formulate its own opinion as to the value of the land based on competent evidence. The court may substitute its own estimate of value where the commissioners have applied illegal principles, disregarded a clear preponderance of evidence, or used an improper rule of assessment.

• Requisites of Res Judicata — For res judicata to apply, the following requisites must be present: (a) the former judgment must be final; (b) it must have been rendered by a court having jurisdiction of the subject matter and of the parties; (c) it must be a judgment on the merits; and (d) there must be, between the first and second actions, identity of parties, of subject matter, and of cause of action. When the three identities are present, the judgment on the merits constitutes an absolute bar to the subsequent action.

• Law of the Case — The law of the case, as applied to a former decision of an appellate court, merely expresses the practice of courts in refusing to reopen what has been decided. It differs from res judicata in that the conclusiveness of the first judgment is not dependent upon its finality. It relates entirely to questions of law and is confined in its operation to subsequent proceedings in the same case. It cannot be invoked except as to questions actually considered and determined in the first appeal.

• Jurisdiction Vested in Court, Not Judges — Where a court of first instance is divided into several branches, each branch is not a court distinct and separate from the others. Jurisdiction is vested in the court, not in the judges. When a complaint is filed before one branch or judge, jurisdiction does not attach to that branch or judge alone, to the exclusion of the others. Trial may be had or proceedings may continue before another branch or judge.

• Presidential Decree No. 42 — Provisional Value Only — Presidential Decree No. 42 fixes only the provisional value of the property for purposes of taking immediate possession. As a provisional value, it does not necessarily represent the true and correct value of the land. The assessed value constitutes only a percentage of the current fair market value and cannot be the direct basis of just compensation in expropriation proceedings.

• Just Compensation Defined — Just compensation means a fair and full equivalent for the loss sustained, which is the measure of the indemnity, not whatever gain would accrue to the expropriating entity. Anything beyond that is more, and anything short of that is less, than just compensation.

• "The owner of the private property should be compensated only for what he actually loses, it is not intended that his compensation shall extend beyond his loss or injury. And what he loses is only the actual value of his property at the time it is taken. This is the only way the compensation to be paid can be truly just, i.e., 'just' not only to the individual whose property is taken, 'but to the public, which is to pay for it.'" — Articulates the rationale for fixing just compensation at the time of actual taking.

• "It is apparent from the foregoing that, when plaintiff takes possession before the institution of the condemnation proceedings, the value should be fixed as of the time of the taking of the said possession, not the filing of the complaint, and the latter should be the basis for the determination of the value, when the taking of the property involved coincides with or is subsequent to, the commencement of the proceedings. Indeed, otherwise, the provision of Rule 69, Section 5, directing that compensation 'be determined as of the date of the filing of the complaint,' would never be operative." — Clarifies the rule on time of valuation.

• "By not complying with the orders of the trial court and the appellate court, petitioner would benefit by its non-compliance and dilly-dallying in taking possession of the property which We will not sanction or allow to the prejudice of the private respondent landowner who should not be penalized by the protracted delay of petitioner in taking over the property over a period of seventeen (17) years during which time private respondent was deprived of the beneficial use of the land and the improvement thereon." — Emphasizes that the expropriating authority cannot benefit from its own delay.

• "The value of a parcel of land taken by eminent domain is always a matter of opinion, the same may be proved by opinion evidence of the real estate appraiser." — Supports the use of expert testimony in determining just compensation.

• "As a provisional value, it does not necessarily represent the true and correct value of the land. The value is only 'provisional' or 'tentative' to serve as the basis for the immediate occupancy of the property being expropriated by the condemnor." — Defines the nature of the provisional value under Presidential Decree No. 42.

• Manila Railroad Company vs. Caligsihan, 40 Phil. 326 (1919) — Origin of the rule that the value of the property taken should be fixed as of the date of the proceedings; cited as the source of Section 5, Rule 69 of the 1940 Rules.

• Provincial Government of Rizal vs. Caro de Araullo, 58 Phil. 308 (1938) — Established the doctrine that where the taking precedes the filing of the complaint, the value should be fixed as of the date when the property was taken, not the date of filing.

• Republic vs. Lara, 96 Phil. 170 (1954) — Reiterated the Caro doctrine, holding that the value of lands expropriated must be reckoned as of the time of actual possession by the government, not the time of filing the complaint, even with the 1940 Rules in force.

• Republic vs. Philippine National Bank, 1 SCRA 957 — Clarified the rule: when the plaintiff takes possession before the institution of condemnation proceedings, the value should be fixed as of the time of taking; when the taking coincides with or is subsequent to the commencement of the proceedings, the filing of the complaint should be the basis.

• Manila Railroad Company vs. Velasquez, 32 Phil. 286 — Held that the commissioners' power is limited to assessing the value and determining the amount of damages; they must discharge their trust according to well-established rules and form their judgment upon correct legal principles.

• City of Cebu vs. Ledesma, 14 SCRA 666 — Held that reports submitted by commissioners of appraisal in condemnation proceedings are not binding but merely advisory in character.

• Manila Railroad Company vs. Fabie, 17 SCRA 206 — Held that a Court of First Instance has the undoubted right to reject the report of the commissioners as to the value of the land if the report is not founded upon legal evidence.

• Lumpay, et al. vs. Hon. Moscoso, 105 Phil. 968 — Held that where a court of first instance is divided into several branches, each branch is not a court distinct and separate from the others; jurisdiction is vested in the court, not in the judges.

• Republic vs. Vda. de Castelvi, 58 SCRA 336 — Held that the provisional value under Presidential Decree No. 42 does not necessarily represent the true and correct value of the land; it is only tentative to serve as the basis for immediate occupancy.

• J.M. Tuason & Co., Inc. vs. Land Tenure Administration, 31 SCRA 413 — Reiterated the well-settled rule that just compensation means the value of the property at the time of its taking; anything beyond that is more, and anything short of that is less, than just compensation.

• Section 4, Rule 67, Revised Rules of Court — Provides that just compensation shall be determined as of the date of the filing of the complaint. The SC applied this provision but held that where the expropriating authority fails to take possession due to its own non-compliance, the value should be fixed as of the time of actual taking.

• Section 5, Rule 67, Revised Rules of Court — Calls for the appointment of not more than three competent and disinterested persons as commissioners to ascertain and report the just compensation. The SC applied this provision in ruling that the commissioners' report is merely advisory and not binding on the court.

• Section 8, Rule 67, Revised Rules of Court — Requires a hearing on the commissioners' report upon the expiration of the period of ten days within which all interested parties may file their objections. The SC cited this provision to bolster the conclusion that the report is merely recommendatory.

• Section 2, Rule 67, Revised Rules of Court — Imposed upon the court the duty of ascertaining and fixing the provisional value of the property. The SC noted that this provision was repealed by Presidential Decree No. 42.

• Section 57, Judiciary Act — Grants the Minister of Justice, upon recommendation of the district judge, the administrative power to apportion cases among the different branches of a court of first instance. The SC cited this provision in ruling that the transfer of the case from Branch I to Branch II was proper.

• Presidential Decree No. 42 (November 9, 1972) — Authorizes the plaintiff in eminent domain proceedings to take possession of the property upon depositing the assessed value for purposes of taxation. The SC held that this decree fixes only the provisional value and does not limit just compensation to the assessed value.

• Presidential Decree No. 76 (December 6, 1972) — Requires all persons owning or administering real property to file sworn statements of the true value of such property. The SC cited this decree to show that just compensation is based on the current and fair market value, not the assessed value.

• Justice Makasiar
• Justice Fernandez
• Justice De Castro
• Justice Melencio Herrera

Justice Claudio Teehankee took no part.

N/A