National Power Corporation vs. Heirs of Salvador Serra Serra, et al.

Just compensation in expropriation proceedings is determined based on the value and character of the property at the time of the filing of the complaint, not at any later period. Legal interest on the difference between the final amount of just compensation adjudged by the court and the initial payment made by the government accrues from the date of the issuance of the writ of possession or actual taking of the property, not from the filing of the complaint, and the applicable rate is 12% per annum until June 30, 2013, and 6% per annum from July 1, 2013, pursuant to Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013.

Petitioner National Power Corporation (NAPOCOR) is a government-owned and controlled corporation created and existing by virtue of Republic Act No. 6395, as amended. The respondents are the registered owners and possessors of parcels of land, particularly Lot Numbers 2746 and 1316, sought to be expropriated for NAPOCOR's Kabankalan-Maricalum 138KV Transmission Line Island Grid Project, a project for public purpose. The case involves the application of Rule 67 of the Rules of Court governing expropriation proceedings, particularly the proper period for valuing the property and the reckoning of legal interest on the just compensation due.

Petitioner National Power Corporation (NAPOCOR), a government-owned and controlled corporation created under Republic Act No. 6395, as amended, filed a Complaint for eminent domain on October 16, 1998 before the Regional Trial Court (RTC) of Kabankalan City against the Heirs of Salvador Serra Serra, Heirs of Gregorio Serra Serra, Margarita Serra Serra, Francisca Teresa Serra Serra, Francisco Jose Serra Serra, Spouses Primitivo Hernaez and Paz Bacol, Spouses Bernardino Moncera and Rogaciana Hernaez, Spouses Ambrosio Fortaliza and Luisa Hernaez, Arsenio Al Acuña, and the Bank of the Philippine Islands. The complaint sought to acquire an easement of right of way over portions of Lot Numbers 2746 and 1316, owned and possessed by the respondents, consisting of more or less 54,060 square meters, for NAPOCOR's Kabankalan-Maricalum 138KV Transmission Line Island Grid Project, a project for public purpose.

After depositing P258,000.00 with the Philippine National Bank, Kabankalan Branch, representing the provisional and assessed value of the property affected, NAPOCOR was placed in possession of the subject properties on August 3, 1999. Due to the need to include Lot 2747 and its improvements, NAPOCOR was directed to amend its complaint on March 10, 2000, and the Amended Complaint increased the total area for expropriation to more or less 60,526.50 square meters.

The RTC dismissed the case without prejudice on April 29, 2003 for failure to prosecute for an unreasonable length of time, but reconsidered and set aside the dismissal on October 15, 2003. The RTC then constituted a Board of Commissioners to determine just compensation, which submitted its report on October 25, 2007. On May 26, 2011, the RTC rendered its Decision ordering the expropriation of the lands in question. In determining just compensation, the RTC gave weight to the empirical data provided by Department of Finance Department Order No. 60-97, which assigned zonal values for 1997, and considered the fact that the lots were planted with sugarcane despite their residential classification, as well as the extent of disturbance the expropriation would cause to the respondents. The RTC ordered NAPOCOR to pay just compensation of P18,661,113.75 as the remaining balance after deducting the P258,000.00 deposit, with legal interest from taking of possession until fully paid.

On appeal, the CA-Cebu City affirmed with modification, finding the trial court's reliance on other indices of the value of the properties, including their actual use and potential, proper and well founded, and specifying legal interest of 12% per annum from taking of possession until fully paid. On April 8, 2016, the CA denied NAPOCOR's Motion for Reconsideration but amended its dispositive portion, changing the reckoning of legal interest to run from the time of the filing of the complaint until fully paid.

NAPOCOR filed the present petition, raising the lone issue of whether the amount of just compensation should be based on the prevailing price and character of the property at the time of the filing of the complaint in 1998. NAPOCOR submitted that the courts a quo erred by considering improvements on the property as of 2006 in fixing the amount of just compensation. The respondents argued that NAPOCOR misled the Court by contending that the RTC erroneously determined just compensation, which the RTC actually based on established factors affecting the value of the properties in 1998 conformably with Rule 67 of the Rules of Court.

• Valuation Period: NAPOCOR argued that the amount of just compensation awarded to respondents should be based on the prevailing price and character of the property at the time of the filing of the Complaint for eminent domain in 1998, and that the courts a quo erred by considering the improvements on the property as of 2006 in fixing the amount of just compensation.
• Misconstruction of the RTC Ruling: NAPOCOR alleged that the trial court fixed the assailed amount of just compensation taking into consideration existing improvements within the vicinity of the properties as of 2006, and that this ruling was affirmed by the Court of Appeals, which allegedly ruled that the values proposed by respondents were "based on a comparative analysis of the fair market value of the properties' peripheral area in the year 2006."

• Proper Valuation: Respondents argued that NAPOCOR misleads the Court by contending that the RTC erroneously determined just compensation, which the RTC actually based on established factors affecting the value of the properties in 1998 conformably with Rule 67 of the Rules of Court.

• Valuation of Just Compensation: Whether the amount of just compensation awarded to respondents should be based on the prevailing price and character of the property at the time of the filing of the Complaint for eminent domain in 1998, and whether the courts a quo erred in considering improvements on the property as of 2006.
• Reckoning of Legal Interest: Whether the legal interest on the difference between the final amount of just compensation and the initial deposit should run from the time of the filing of the complaint or from the date of actual taking of possession of the property.

• Valuation of Just Compensation: Yes. The RTC properly ascertained the value and character of the property as of the time of the filing of the complaint in 1998, pursuant to Rule 67, Section 4 of the Rules of Court and jurisprudence. The appellate court correctly observed that the trial court did not consider improvements on the subject properties as of 2006, and NAPOCOR's allegation to the contrary misconstrued the ruling.
• Reckoning of Legal Interest: No, not from the filing of the complaint. Legal interest should begin to run from August 3, 1999, the date NAPOCOR was placed in possession of the expropriated properties, at 12% per annum until June 30, 2013, and 6% per annum from July 1, 2013 until the finality of the resolution, then 6% per annum until full payment.

• Valuation of Just Compensation: The Court found no need to remand the case for a re-determination of just compensation. The CA-Cebu City correctly noted that the RTC properly ascertained the value and character of the property as of the time of the filing of the complaint in 1998, pursuant to the appropriate period under the Rules of Court and jurisprudence. The appellate court observed that the trial court did not consider the improvements on the subject properties as of 2006, which is not the proper period for the correct determination of just compensation. The Court noted that factual findings of the trial and appellate courts will not be disturbed unless grounded entirely on speculations, surmises, or conjectures. NAPOCOR's submission raised a new factual allegation, and the Court is not a trier of facts; only questions of law distinctly set forth in the petition ought to be raised. The Court found that NAPOCOR either misconstrued the ruling of the appellate court or made it appear that the courts a quo recognized improvements in the year 2006. A complete textual reading of the CA decision showed that the statement regarding 2006 values referred to respondents' proposal, which the court a quo expressly did not take into account because it was "based on generalities" and "not hinged upon the relevant period." The RTC properly based its valuation on the year 1998, not 2006, and arrived at the disputed amount independently after considering the commissioners' report and both parties' respective proposals.
• Reckoning of Legal Interest: The Court held that the difference between the final amount adjudged by the court and the initial payment made by the government, which is part and parcel of the just compensation due to the property owner, should earn legal interest as a forbearance of money. Citing Republic vs. Macabagdal, the Court pointed out that accrual of legal interest should begin not from the date of the filing of the complaint but from the date of the issuance of the Writ of Possession, since it is from this date that the fact of the deprivation of property can be established. Citing Evergreen Manufacturing Corp. vs. Republic, the Court noted that where the filing of the expropriation complaint preceded the actual taking of the property, just compensation shall be appraised as of the date of filing of the complaint, but no interest shall accrue as the government did not take possession of the subject premises; legal interest on the difference between the final amount adjudged and the initial payment made shall accrue from when the government was able to take possession of the property. Here, NAPOCOR was placed in possession of the expropriated properties on August 3, 1999, so legal interest should run from that date. As to the rate, the Court applied Secretary of the Department of Public Works and Highways vs. Spouses Tecson, which upheld the applicability of Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013 to forbearances of money in expropriation cases. Thus, the applicable legal interest is 12% per annum from August 3, 1999 until June 30, 2013, and 6% per annum from July 1, 2013 until the finality of the resolution, after which the total amount due shall earn legal interest of 6% per annum until full payment.

• Doctrine on the Valuation Period for Just Compensation — Just compensation in expropriation proceedings is determined based on the value and character of the property at the time of the filing of the complaint, pursuant to Rule 67, Section 4 of the Rules of Court. The Court applied this doctrine in affirming the RTC's valuation, which was based on the year 1998, the time of the filing of the complaint, and not on any later period such as 2006.
• Doctrine on the Accrual of Legal Interest in Expropriation Cases — Legal interest on the difference between the final amount of just compensation adjudged by the court and the initial payment made by the government accrues from the date of the issuance of the Writ of Possession or the date of actual taking of possession of the property, not from the date of the filing of the complaint, since it is from the taking that the fact of the deprivation of property can be established. The Court applied this doctrine in ruling that legal interest should run from August 3, 1999, when NAPOCOR was placed in possession of the properties.
• Doctrine on the Applicable Interest Rate in Expropriation Cases — The applicable legal interest rate for forbearances of money in expropriation cases is 12% per annum until June 30, 2013, and 6% per annum from July 1, 2013, pursuant to Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013, as upheld in Secretary of the Department of Public Works and Highways vs. Spouses Tecson. The Court applied this doctrine in modifying the interest rate imposed on the balance of just compensation.

• "Though the trial court made mention of the observations of the Commissioners, particularly the improvements had on the subject properties, after the year 1998 or after the filing of the original expropriation complaint thereon; a closer scrutiny of the ratiocinations of the trial court reveals, that it did not take into consideration these improvements in determining just compensation." — This passage from the CA decision, quoted by the Supreme Court, establishes that the trial court did not improperly consider post-1998 improvements in valuing the property, directly addressing NAPOCOR's central allegation.
• "It is settled that 'the difference in the amount between the final amount as adjudged by the court and the initial payment made by the government - which is part and parcel of the just compensation due to the property owner - should earn legal interest as a forbearance of money.'" — This quotation states the controlling rule on why the balance of just compensation earns legal interest, characterizing it as a forbearance of money.
• "In Republic v. Macabagdal, we had occasion to point out that accrual of legal interest should begin 'not from the date of the filing of the complaint but from the date of the issuance of the Writ of Possession xxx, since it is from this date that the fact of the deprivation of property can be established.'" — This passage articulates the doctrine on the reckoning point of legal interest in expropriation cases, which the Court applied in modifying the CA's ruling.

• Republic vs. Macabagdal, G.R. No. 227215, January 10, 2018 — Cited as controlling authority for the rule that legal interest in expropriation cases accrues from the date of the issuance of the Writ of Possession, not from the filing of the complaint, since deprivation of property is established from that date.
• Evergreen Manufacturing Corp. vs. Republic, 817 Phil. 1048 (2017) — Cited for the rule that just compensation shall be appraised as of the date of filing of the complaint, but legal interest on the difference between the final amount adjudged and the initial payment shall accrue from when the government was able to take possession of the property.
• Secretary of the Department of Public Works and Highways vs. Spouses Tecson, 758 Phil. 604 (2015) — Cited as controlling authority upholding the applicability of Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013 to forbearances of money in expropriation cases, establishing the 6% per annum rate from July 1, 2013.
• National Power Corporation vs. Sps. Asoque, 795 Phil. 19 (2016) — Cited for the rule that factual findings of the trial and appellate courts will not be disturbed by the Supreme Court unless grounded entirely on speculations, surmises, or conjectures.
• Nacar vs. Gallery Frames, 716 Phil. 267 (2013) — Cited in connection with the application of the 6% per annum interest rate from July 1, 2013.

• Rule 67, Section 4, Rules of Court — Governs the determination of just compensation in expropriation proceedings, providing the basis for valuing the property as of the time of the filing of the complaint. The Court applied this provision in affirming the RTC's valuation based on the year 1998.
• Rule 45, Section 1, Rules of Court — Governs petitions for review on certiorari, limiting the Court's review to questions of law. The Court noted that NAPOCOR's submission raised a new factual allegation, which is not proper for review under this rule.
• Republic Act No. 6395, as amended — The charter of the National Power Corporation, establishing it as a government-owned and controlled corporation. This provision identifies the petitioner's legal personality and purpose.
• Bangko Sentral ng Pilipinas-Monetary Board Circular No. 799, Series of 2013 — Sets the applicable legal interest rate for forbearances of money, which the Court applied to expropriation cases, establishing 6% per annum from July 1, 2013.

Peralta, C.J. (Chairperson), Caguioa (Working Chairperson), Lazaro-Javier, and Lopez, JJ., concurred.