National Power Corp. vs. Spouses Dela Cruz

In expropriation cases, the filing of a motion for reconsideration does not cure the denial of procedural due process occasioned by the commissioners' failure to conduct hearings and receive evidence from the parties; strict observance of procedural and substantive due process is required because expropriation involves the deprivation of private property and the disbursement of public funds. Just compensation must be determined as of the time of the filing of the complaint when the filing precedes entry into the property, and the commissioners' valuation must rest on adequate factual bases rather than mere ocular inspection.

Petitioner National Power Corporation (NAPOCOR) is a government-owned and controlled corporation created under Republic Act No. 6395, as amended, mandated to develop hydroelectric power and transmission lines throughout the Philippines. For the Dasmariñas-Zapote 230 kV Transmission Line Project, NAPOCOR sought to acquire an easement of right-of-way over portions of land in Dasmariñas and Imus, Cavite, registered in the names of the respondents. The affected areas totaled 84.425 square meters across three parcels covered by TCT Nos. T-313327, T-671864, and T-454278.

NAPOCOR, a government-owned and controlled corporation created under Republic Act No. 6395, as amended, decided to acquire an easement of right-of-way over portions of land within Dasmariñas and Imus, Cavite for the construction and maintenance of the proposed Dasmariñas-Zapote 230 kV Transmission Line Project. On November 27, 1998, NAPOCOR filed a complaint for eminent domain and expropriation against respondents as registered owners of the parcels of land sought to be expropriated, covered by TCT Nos. T-313327, T-671864, and T-454278, with affected areas of 51.55, 18.25, and 14.625 square meters, respectively, totaling 84.425 square meters. After respondents filed their respective answers, NAPOCOR deposited ₱5,788.50 to cover the provisional value of the land pursuant to Section 2, Rule 67 of the Rules of Court.

On February 25, 1999, NAPOCOR filed an Urgent Ex-Parte Motion for the Issuance of a Writ of Possession, which the trial court granted on March 9, 1999. Writs of possession were issued over the lots owned by the Dela Cruz spouses and respondent Ferrer on March 10 and April 12, 1999, respectively. The trial court thereafter dropped the Dela Cruz spouses and their mortgagee, Metrobank, as party-defendants in its May 11, 1999 Order, in view of a Motion to Intervene filed by respondent/intervenor Virgilio M. Saulog, who claimed ownership of the land sought to be expropriated from the Dela Cruz spouses.

On June 24, 1999, the trial court terminated pre-trial as to respondent Ferrer, the sole issue being the amount of just compensation, and issued an Order directing the constitution of a Board of Commissioners with respect to the property of respondent S.K. Dynamics. The trial court designated Cavite Provincial Assessor Lamberto C. Parra as chairman, while NAPOCOR nominated Dasmariñas Municipal Assessor Regalado T. Andaya as member; S.K. Dynamics did not nominate any commissioner. As to the just compensation for the property of Saulog, successor-in-interest of the Dela Cruz spouses, the trial court ordered the parties to submit their compromise agreement.

The commissioners conducted an ocular inspection of S.K. Dynamics' property and submitted a report on October 8, 1999. The report described the property as located within a mixed residential and commercial area in the northern section of Dasmariñas, traversed by Gen. Emilio Aguinaldo Highway, with nearby subdivisions, commercial establishments, and community facilities. The commissioners opined that the highest and most profitable use of the property was for residential and commercial purposes, and recommended a fair market value of ₱10,000.00 per square meter as of October 5, 1999. The commissioners, however, did not afford the parties the opportunity to introduce evidence, conduct hearings, issue notices to the parties to attend hearings, or provide the parties the opportunity to argue their respective causes. NAPOCOR was also not notified of the filing of the commissioners' report or given any opportunity to file objections.

On December 1, 1999, respondent Ferrer filed a motion adopting in toto the commissioners' report with respect to the valuation of his property. On December 28, 1999, the trial court approved the commissioners' report and granted Ferrer's motion, uniformly pegging just compensation at ₱10,000.00 per square meter for all properties to be expropriated. NAPOCOR filed a Motion for Reconsideration on January 20, 2000, invoking Provincial Appraisal Committee Report No. 08-95 dated October 25, 1995, which set the just compensation of lots along Gen. Aguinaldo Highway at ₱3,000.00 per square meter. The trial court denied the motion on March 23, 2000, noting that the PAR Resolution was passed four years before the lot was taken and that the ₱10,000.00 valuation was recommended by the commissioner designated by NAPOCOR itself. On February 11, 2000, S.K. Dynamics informed the trial court that NAPOCOR had also taken possession of an additional 8.55-square meter portion covered by TCT No. 503484, and the trial court granted the motion to include said portion in the computation of just compensation.

• Denial of Due Process: Petitioner maintained that it was deprived of due process because the commissioners failed to conduct hearings, issue notices to the parties, afford the parties the opportunity to introduce evidence, or allow the parties to argue their respective causes, and petitioner was not notified of the filing of the commissioners' report or given the opportunity to file objections.
• Insufficient Basis for Valuation: Petitioner argued that the valuation of just compensation at ₱10,000.00 per square meter was exorbitant, unjust, unreasonable, and not based on evidence on record or authentic documents, invoking Provincial Appraisal Committee Report No. 08-95 which fixed the fair market value of lots along Gen. Aguinaldo Highway at ₱3,000.00 per square meter.

• Time of Taking as Basis for Valuation: Respondent S.K. Dynamics countered that the valuation of a lot under expropriation is reckoned at the time of its taking by the government, and since the writ of possession was issued on March 10, 1999, the price or value for 1999 must be considered.
• Adoption of Commissioners' Report: Respondent Ferrer filed a motion adopting in toto the commissioners' report with respect to the valuation of his property.

• Due Process in Expropriation: Whether petitioner was denied due process when it was not allowed to present evidence on the reasonable value of the expropriated property before the Board of Commissioners.
• Sufficiency of Valuation Basis: Whether the valuation of just compensation was based on the evidence on record and other authentic documents.

• Due Process in Expropriation: Yes. Petitioner was denied due process because the commissioners failed to conduct hearings, receive evidence, or notify the parties, and the filing of a motion for reconsideration does not cure this defect in expropriation cases.
• Sufficiency of Valuation Basis: No. The valuation was speculative and lacked strong factual moorings, was pegged as of the date of the report rather than the filing of the complaint, and failed to account for the Asian financial crisis and other relevant factors.

• Due Process in Expropriation: Sections 6, 7, and 8 of Rule 67 of the Rules of Court require that commissioners conduct hearings, issue notices to the parties, afford the parties the opportunity to introduce evidence, and allow the parties to argue their respective causes. The appointment of commissioners to ascertain just compensation is a mandatory requirement in expropriation cases, and trial with the aid of commissioners is a substantial right that may not be done away with capriciously. The CA erred in ruling that the filing of a motion for reconsideration accorded NAPOCOR ample opportunity to dispute the commissioners' findings. While there is jurisprudence supporting the rule that a motion for reconsideration negates allegations of denial of due process, expropriation cases involve specific rules requiring strict observance of procedural and substantive due process because they entail the deprivation of private property for public purposes and the disbursement of public funds. The case cited by the CA, Vda. de Chua vs. Court of Appeals, involved a lack of notice in letters of administration — a private dispute with no public funds involved — and is distinguishable. A trial is materially and substantially different from a hearing on a motion for reconsideration: at the trial stage, a party is usually allowed several hearing dates and the court has an open mind, whereas after a decision is issued, the court's view may be inclined toward the winning party and may treat the motion perfunctorily. The constitutional guarantee of due process requires that a party be given the fullest and widest opportunity to adduce evidence during trial.

• Sufficiency of Valuation Basis: Just compensation is the full and fair equivalent of the property sought to be expropriated, measured not by the taker's gain but the owner's loss, and must be fair to both owner and taker. It is settled that just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of expropriation proceedings; where the institution of the action precedes entry into the property, just compensation is ascertained as of the time of the filing of the complaint. In this case, the filing of the complaint on November 27, 1998 preceded NAPOCOR's entry into the property. The commissioners' report pegged the valuation as of October 5, 1999 — almost one year after the filing of the complaint — which may have distorted the correct amount. The report was highly speculative and lacked strong factual moorings: it did not indicate the fair market value of the lots occupied by the establishments cited, did not show how convenience facilities and zoning added value, and did not explain the nature and application of the "highest and best use" method. No attempt was made to justify the recommended price through reliable means such as testimony of realtors, fair market value and tax declarations, actual sales of lots in the vicinity on or about the date of the complaint, or pertinent BIR zonal valuation. The commissioners also failed to take into account that the Asian financial crisis in the second semester of 1997 affected the fair market value of the subject lots, as judicial notice can be taken of the downward trend in real estate prices after the crisis.

• Due Process in Expropriation Proceedings — In expropriation cases, strict observance of procedural and substantive due process is required because such cases involve the deprivation of private property for public purposes and the disbursement of public funds. The filing of a motion for reconsideration does not cure the denial of procedural due process occasioned by the commissioners' failure to conduct hearings and receive evidence from the parties. A trial is materially and substantially different from a hearing on a motion for reconsideration: at the trial stage, the court has an open mind and may accommodate multiple hearing dates, whereas after a decision is issued, the court's view may be inclined toward the winning party and may treat the motion perfunctorily. The constitutional guarantee of due process requires that a party be given the fullest and widest opportunity to adduce evidence during trial, and the availment of a motion for reconsideration will not satisfy a party's right to procedural due process unless the inability to adduce evidence during trial was due to the party's own fault or negligence.

• Just Compensation — Time of Ascertainment — Just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of expropriation proceedings. Where the institution of the action precedes entry into the property, just compensation is to be ascertained as of the time of the filing of the complaint. Among the factors to be considered in arriving at the fair market value are the cost of acquisition, the current value of like properties, actual or potential uses, and in the case of lands, their size, shape, location, and tax declarations.

• Role of Commissioners in Expropriation — The appointment of commissioners to ascertain just compensation is a mandatory requirement in expropriation cases. A hearing before the commissioners is indispensable to allow the parties to present evidence on the issue of just compensation. While the trial court may disregard the commissioners' findings and substitute its own estimate, it may only do so for valid reasons: where the commissioners have applied illegal principles to the evidence, disregarded a clear preponderance of evidence, or where the amount allowed is either grossly inadequate or excessive. Trial with the aid of commissioners is a substantial right that may not be done away with capriciously or for no reason at all.

• "The appointment of commissioners to ascertain just compensation for the property sought to be taken is a mandatory requirement in expropriation cases." — This passage establishes the indispensable role of commissioners and the right to trial with their aid as a substantial right in expropriation proceedings.

• "the constitutional guarantee of due process still requires that a party should be given the fullest and widest opportunity to adduce evidence during trial, and the availment of a motion for reconsideration will not satisfy a party's right to procedural due process, unless his/her inability to adduce evidence during trial was due to his/her own fault or negligence." — This passage articulates the ratio decidendi on the first issue, distinguishing expropriation cases from ordinary civil proceedings and establishing that a motion for reconsideration cannot substitute for the right to present evidence during trial.

• "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, quoted from B.H. Berkenkotter & Co. vs. Court of Appeals, provides the canonical formulation of just compensation applied in the decision.

• National Power Corporation vs. Henson, 300 SCRA 751 — Cited by the CA for the proposition that the nature and character of the land at the time of its taking is the principal criterion to determine just compensation; the Supreme Court did not disturb this principle but found its application deficient on the facts.

• Vda. De Chua vs. Court of Appeals, 287 SCRA 33 — Cited by the CA for the rule that denial of due process cannot be successfully invoked by a party who has had the opportunity to be heard on a motion for reconsideration. The Supreme Court distinguished this case as involving a private dispute (letters of administration) with no public funds involved, and held it inapplicable to expropriation cases.

• Manila Electric Company vs. Pineda, 206 SCRA 196 (1992) — Cited for the proposition that trial with the aid of commissioners is a substantial right that may not be done away with capriciously or for no reason at all.

• B.H. Berkenkotter & Co. vs. Court of Appeals, 216 SCRA 584 (1992) — Cited for the definition of just compensation as the full and fair equivalent of the property expropriated, the factors to be considered in determining fair market value, and the rule that just compensation is ascertained as of the time of the filing of the complaint when the action precedes entry into the property.

• Section 2, Rule 67, Rules of Court — Governs the entry of the plaintiff upon depositing the provisional value with an authorized government depositary. NAPOCOR deposited ₱5,788.50 pursuant to this provision.

• Section 4, Rule 67, 1997 Rules of Civil Procedure — Provides that just compensation is to be determined as of the date of the taking of the property or the filing of the complaint, whichever came first. The CA cited this provision to explain why the 1995 PAR Resolution could not serve as the basis for valuation.

• Section 6, Rule 67, Rules of Court — Governs proceedings by commissioners, requiring that evidence may be introduced by either party, that commissioners must after due notice view and examine the property, and that either party may argue the case. The Court relied on this provision to hold that the commissioners failed to comply with mandatory procedural requirements.

• Section 7, Rule 67, Rules of Court — Requires the commissioners to make a full and accurate report to the court, and mandates that the clerk serve copies on all interested parties with notice that they are allowed ten days to file objections. The Court found that NAPOCOR was not notified of the report's filing.

• Section 8, Rule 67, Rules of Court — Governs the court's action upon the commissioners' report, allowing the court to accept, recommit, set aside, or partially accept the report. The Court held that the trial court should have disregarded the commissioners' findings given the absence of any hearing or trial.

• Section 1, Rule 45, Rules of Court — Provides that petitions for review may only raise questions of law. The Court noted this limitation but proceeded to resolve the petition on the merits given the significance of the issues involving public funds.

Leonardo A. Quisumbing (Chairperson), Antonio T. Carpio, Conchita Carpio Morales, and Dante O. Tinga concurred. No separate concurring opinions were noted.