National Transmission Corporation vs. Lacson-De Leon

Just compensation for a residential property expropriated for a transmission line easement must be pegged to the selling price of nearby lands of the same residential character, not to the average of properties with mixed residential and commercial uses; the date of valuation is the filing of the complaint, and the property’s classification is determined by local government zoning, not by tax declarations. Consequential damages are properly measured at 50% of the BIR zonal valuation of the segregated area. The unpaid balance of just compensation and consequential damages earns interest at 12% per annum from actual taking until 30 June 2013, and at 6% per annum from 1 July 2013 until full payment.

NAPOCOR, later substituted by the National Transmission Corporation, filed a complaint on 28 February 2002 to expropriate an easement of right-of-way over a 39,347-square meter parcel in Bacolod City for the construction and maintenance of the Bacolod-Cadiz 138 KV SC/ST Transmission Line. The parcel formed part of a larger 874,450-square meter lot owned by the respondents. Although tax declarations described the property as agricultural, the City Planning and Development Office had certified as early as 27 July 1995 that it was classified as residential under the city’s updated Land Use Plan. A board of commissioners jointly appointed with a related case recommended just compensation at an average of the raw land values of three nearby subdivisions, and recommended consequential damages for the western portion of the lot that was segregated and devalued by the high-tension lines.

• The Complaint and the Property: On 28 February 2002, NAPOCOR filed a complaint for expropriation to acquire an easement of right-of-way over a 39,347-square meter parcel in Barangay Vista Alegre, Bacolod City, needed for the Bacolod-Cadiz 138 KV SC/ST Transmission Line under the Negros IV-Panay IV Project. The parcel is part of a much larger 874,450-square meter lot denominated as Lot No. 1074-B, covered by TCT No. T-428, owned by the nine respondents.

• Classification of the Land: Respondents presented a Certification dated 27 July 1995 from the City Planning and Development Office stating that the property was classified as residential under the city’s updated Land Use Plan, supported by two city council resolutions (Resolution No. 373, series of 1992, and Resolution No. 5153-A, series of 1976). Tax declarations, however, continued to classify the property as agricultural.

• Proceedings before the Commissioners: The trial court appointed a board of commissioners that also handled a similar case involving an adjacent property. The commissioners conducted an ocular inspection and filed a Manifestation dated 7 October 2004, with an attached Narrative Report. They gave more weight to the local government’s residential classification than to the tax declarations, as required by Section 7(a) of the Implementing Rules of RA 8974.

• Commissioners’ Valuation: The commissioners determined the fair market value by taking the average of the raw land values of three nearby subdivisions: Montinola Subdivision (residential, PhP600.00/sq m), Victorina Heights Subdivision (residential and commercial, PhP890.00/sq m), and Green Acres Subdivision (residential and commercial, PhP677.50/sq m). The average came to PhP722.50 per square meter. The commissioners also found that the transmission lines would cause significant consequential damages, estimating that about one-third of the total lot area was prejudiced and leaving the exact quantification to a geodetic engineer. They noted very little, if any, consequential benefit.

• Trial Court’s Decision: The RTC adopted the commissioners’ report. It fixed just compensation at PhP28,428,207.50 (39,347 sq m × PhP722.50). It awarded consequential damages of PhP22,463,103.00, representing 10% of the fair market value of the 310,908-square meter western portion segregated by the transmission lines. Attorney’s fees of PhP100,000.00 were also awarded. Possession of the property was delivered to NAPOCOR on 2 February 2004 after an initial deposit based on the BIR zonal valuation of PhP17.50 per square meter.

• Appellate Modification: The Court of Appeals affirmed the trial court’s valuation and consequential damages but deleted the attorney’s fees. It further ordered interest at 12% per annum on the just compensation award from 2 February 2004 until full payment.

• Valuation Date and Classification: Petitioner argued that just compensation must be determined as of the date of filing of the complaint, 28 February 2002, and that the property remained agricultural based on its tax declarations and actual use, notwithstanding the local government’s classification.

• Lack of Evidentiary Basis for Valuation: Petitioner maintained that the amount of PhP722.50 per square meter was unsupported by evidence because the three subdivisions used in the averaging were not similar lands—only one was purely residential, the others being mixed residential-commercial.

• Speculative Consequential Damages: Petitioner contended that the award of consequential damages was speculative and lacked proper factual foundation.

• Interest Rate: Petitioner invoked BSP Circular No. 799, series of 2013, asserting that the delay in payment of just compensation is a forbearance of money and should earn interest at the reduced rate of 6% per annum from 1 July 2013.

• Residential Classification: Respondents countered that the Certification of the City Planning and Development Office and the supporting city council resolutions conclusively established the property’s residential character, which is binding for purposes of just compensation.

• Validity of Commissioners’ Report: Respondents argued that the board of commissioners’ recommendation was supported by personal ocular inspection and research, and that the averaging of comparable subdivision values had sufficient factual basis.

• Justified Consequential Damages: Respondents maintained that the high-voltage transmission lines traversing the middle of the lot severely impaired the market value of the segregated western portion, rendering potential buyers unwilling to build near the lines, thus justifying the award.

• Prevailing 12% Interest: Respondents asserted that the complaint was filed before the effectivity of BSP Circular No. 799, making 12% per annum the applicable legal interest rate.

• Just Compensation: Whether the determination of just compensation at PhP722.50 per square meter has a proper factual basis, considering the date of valuation, the land classification, and the comparability of the subdivisions used.

• Consequential Damages: Whether the award of consequential damages equivalent to 10% of the fair market value of the affected area is justified.

• Legal Interest: Whether the imposition of interest at 12% per annum on the just compensation award is proper, or should be reduced to 6% under BSP Circular No. 799.

• Just Compensation: The valuation date was fixed at 28 February 2002—the date of filing the complaint—pursuant to Section 4, Rule 67 of the Rules of Court. No significant change in fair market value was shown to have occurred between that date and the commissioners’ 2004 valuation. The trial court correctly treated the property as residential based on the local government’s zoning certification and resolutions; tax declarations are not controlling. The commissioners’ method, however, was flawed. Averaging the selling prices of three subdivisions that were not of the same character—one purely residential, two residential-commercial—did not constitute the selling price of “similar” lands as required by Section 5(d) of RA 8974. Just compensation was therefore fixed at PhP600.00 per square meter, the raw land value of the Montinola Subdivision, the only comparable purely residential property. The total just compensation was set at PhP23,608,200.00 (39,347 sq m × PhP600.00).

• Consequential Damages: The award of consequential damages was proper, but the trial court’s formula of 10% of the fair market value lacked evidentiary foundation. Following NAPOCOR v. Marasigan, the correct measure is 50% of the BIR zonal valuation of the segregated dangling area. Based on the BIR zonal value of PhP17.50 per square meter, the 310,908-square meter affected portion yielded consequential damages of PhP2,720,445.00 (310,908 sq m × PhP17.50 × 50%).

• Legal Interest: The delay in the payment of just compensation constitutes a forbearance of money, as held in Evergreen Manufacturing Corporation v. Republic. Accordingly, the difference between the final amount of just compensation and the initial deposit earns interest at 12% per annum from the date of actual taking, 2 February 2004, until 30 June 2013. From 1 July 2013 until the finality of the Decision, the applicable rate is 6% per annum, conformably with BSP Circular No. 799. The total amount of just compensation shall thereafter earn 6% per annum from finality until full payment. The same interest rates apply to the award of consequential damages, which is a component of just compensation.

• Valuation of Just Compensation Based on Similar Lands: Just compensation must be determined as of the date of taking or filing of the complaint, whichever is earlier. The fair market value is pegged to the selling price of similar lands in the vicinity—lands of the same character and classification. Averaging prices of lands with different highest and best uses is not a permissible substitute.

• Deference to Local Government Classification: The power to reclassify land belongs to the local government. Courts determining just compensation must respect a zoning certification from the local planning office; they cannot substitute their own classification, and tax declarations are not conclusive. The judicial inquiry into classification is limited to its bearing on compensation.

• Consequential Damages for Transmission Line Easements (NAPOCOR v. Marasigan Formula): When a transmission line segregates a portion of a larger property and renders it useless or substantially devalued, the proper measure of consequential damages is 50% of the BIR zonal valuation of the affected dangling area—not an arbitrary percentage of the fair market value determined by the commissioners.

• Interest on Unpaid Just Compensation as Forbearance of Money: The delay in the payment of just compensation is a forbearance of money and earns legal interest. The rate is 12% per annum from the date of actual taking (or the date of deprivation) until 30 June 2013, and 6% per annum from 1 July 2013 until full payment, pursuant to BSP Circular No. 799. Consequential damages, being a component of full just compensation, are subject to the same interest regimen.

• “[J]ust compensation must be based on the selling price of similar lands in the vicinity at the time of taking.”

• “[T]he court’s discretion in classifying the expropriated land is only for the purpose of determining just compensation and is not meant to substitute that of the local government’s power to reclassify and convert lands through local ordinance.”

• “The delay in the payment of just compensation is a forbearance of money. As such, this is necessarily entitled to earn interest.”

• On the interest regime: “[A] legal interest of 12% per annum on the difference between the final amount adjudged by the Court and the initial payment made shall accrue from … the date of taking … until 30 June 2013. From 1 July 2013 until the finality of the Decision of the Court, the difference … shall earn interest at the rate of 6% per annum. Thereafter, the total amount of just compensation shall earn legal interest of 6% per annum from the finality of this Decision until full payment thereof.”

• NAPOCOR v. Marasigan, G.R. No. 220367, 20 November 2017 — Followed. The decision controlled the deference to local government residential classification and established the formula for consequential damages at 50% of the BIR zonal valuation of the segregated area. Also applied for the interest on consequential damages.

• Evergreen Manufacturing Corporation v. Republic, G.R. No. 218628, 6 September 2017 — Followed. It settled that the delay in the payment of just compensation is a forbearance of money, fixing the dual-rate interest (12% until 30 June 2013, 6% thereafter) under BSP Circular No. 799.

• Spouses Plaza v. Lustiva, 728 Phil. 359 (2014) — Cited as the standard restricting review under Rule 45 to questions of law, with exceptions for misapprehension of facts.

• Section 4, Rule 67, Rules of Court — Applied to fix the date of valuation at the filing of the complaint, which preceded the actual taking.

• Section 5(d), Republic Act No. 8974 — Applied as the statutory basis for using the selling price of similar lands in the vicinity, but the commissioners’ averaging of dissimilar properties was held violative of the requirement of similarity.

• Section 7(a), Implementing Rules and Regulations of Republic Act No. 8974 — Applied to give greater weight to the local government’s zoning certification over tax declarations in determining land classification.

• BSP Circular No. 799, series of 2013 — Applied to reduce the legal interest rate on forbearance of money from 12% to 6% per annum effective 1 July 2013.

Peralta, Perlas-Bernabe, Caguioa, and Reyes, Jr., JJ.