Rebadulla vs. Republic

Just compensation must be determined based on the fair market value of the property at the time of actual taking by the government, and zonal valuation is simply one of the indices of fair market value that cannot be the sole basis for determining just compensation. The determination of just compensation requires consideration of multiple factors, including cost of acquisition, current value of like properties, actual or potential uses, and the property's size, shape, location, and tax declaration.

The Rebadullas are the heirs of Pablo G. Rebadulla, who owned three parcels of land in Macagtas, Catarman, Northern Samar, covered by TCT No. T-1108, TCT No. T-2547, and OCT No. 9501, with a total area of 165,054 square meters. The Department of Public Works and Highways (DPWH) took these properties on March 17, 1997, for its Small Water Impounding Management Project (SWIM Project), a public infrastructure undertaking involving the construction of dams. The Rebadullas rejected the government's initial offer of P2.50 per square meter based on the Provincial Appraisal Committee's valuation, and no expropriation proceedings were ever instituted by the DPWH.

Paz E. Rebadulla is the widow of Pablo G. Rebadulla, with whom she had seven children: Perrain, Jocelyn, Clevis, Hazel R. Riguera, Ariel, Giovanni Clyde, and Paz R. Sta. Maria. Paz R. Sta. Maria died while the case was pending and was substituted by her heirs, Roel E. Sta. Maria, Kleiner Kyle R. Sta. Maria, and Kerschel R. Sta. Maria. They are collectively referred to as "the Rebadullas."

On March 17, 1997, the Department of Public Works and Highways (DPWH) took parcels of land belonging to the Rebadullas for its Small Water Impounding Management Project (SWIM Project) in Macagtas, Catarman, Northern Samar. The Rebadullas rejected the price offered by the DPWH at P2.50 per square meter, based on the valuation of the Provincial Appraisal Committee (PAC). No expropriation proceedings were instituted by the DPWH. In 1998, the Rebadullas wrote to the SWIM Project Management Office requesting a reappraisal of their property, stating that P200.00 per square meter was its fair value. In 1999, SWIM Project Manager Engr. Tomas L. Buen requested a reappraisal from the PAC, which the latter denied. Thereafter, the Rebadullas wrote to the Department of Finance-Bureau of Local Government Finance (DOF-BLGF) asking for the reappraisal of their properties. In 2000, the DOF-BLGF, finding merit in their request, indorsed the matter to the Provincial Assessor of Northern Samar for appropriate action, but the Provincial Assessor did not act on the indorsement. In its letter of April 25, 2001, the DOF-BLGF informed the Rebadullas that although it had recommended a reappraisal of the property with P100.00 per square meter as a benchmark, the PAC declined to change its initial valuation, and suggested that the Rebadullas pursue judicial remedies.

On October 15, 2002, the Rebadullas, through counsel, wrote to Engr. Buen with a final demand for P33,010,800.00, or P200.00 per square meter of their properties measuring 165,054 square meters. Subsequently, they filed a Complaint for mandamus and damages before the RTC against the Republic, the Secretary of Public Works and Highways, and Engr. Buen, praying that the Republic and/or DPWH pay just compensation for the taking and use of the properties covered by TCT No. T-1108 (30,000 sq m), TCT No. T-2547 (44,945 sq m), and OCT No. 9501 (90,109 sq m). The Rebadullas likewise prayed for legal interest at 6% per annum computed from the taking until full payment, and sought moral and exemplary damages from Engr. Buen and attorney's fees.

The Government's Comment, which questioned the propriety of mandamus as a remedy for the payment of just compensation, was not admitted by the RTC for having been filed out of time. During trial, the Government filed a Motion to Dismiss essentially repeating the arguments in its Comment, which the RTC denied. The RTC rendered a Decision on December 23, 2013, ordering the Republic to pay the fair market value based on the BIR zonal valuation at P7.00 per square meter, or a total of P1,081,650.43, plus 6% legal interest per annum from the time of filing the complaint until fully paid, and P60,000.00 attorney's fees. The RTC held that while the case was one for mandamus and damages, the allegations in the complaint established an action for recovery of just compensation, which was the only relief available to the Rebadullas since they already rejected DPWH's offer and it was no longer feasible to demand the return of the property as it was already taken and used in constructing dams. The RTC found that both parties failed to satisfy the quantum of proof to support their respective valuations, noting that the Rebadullas' private appraiser failed to show the acquisition cost and to present deeds of absolute sale of properties in the same location, and that the Rebadullas themselves "vacillated and had three (3) figures in mind, Two Hundred Pesos (P200.00), Ninety Five Pesos (P95.00) and Ten Pesos (P10.00)." As regards the Government's valuation, no witness was presented to explain how the PAC arrived at its figure of P2.50 per square meter, and the valuation was based on a 1994 PAC resolution despite the taking occurring in 1997. The RTC took judicial notice of the BIR's zonal valuation of the properties in 2002 at P7.00 per square meter, reckoning just compensation in 2002, noting that DPWH's entry into the properties in 1997 was not with an intention to expropriate.

Both parties appealed to the CA. On February 24, 2015, the CA rendered the assailed Decision, affirming the RTC's determination of just compensation, increasing the interest rate to 12% per annum, and deleting the award of attorney's fees. The Rebadullas' Motion for Reconsideration was denied in the CA's January 7, 2016 Resolution. Both parties then filed the instant petitions.

• Zonal Valuation as Sole Basis: The Rebadullas argued that the CA erred when it relied on the BIR's zonal valuation as the sole basis for determining just compensation.
• Disregard of Appraisal Report: The Rebadullas argued that the CA erred in disregarding the appraisal report of its witness, real estate appraiser Victor R. Salinas.
• Area Taken: The Rebadullas argued that the CA erred in affirming the trial court's finding that only 154,521.49 square meters were taken, maintaining that the Government took the total area of 165,054 square meters.
• Personal Liability of Engr. Buen: The Rebadullas argued that the CA erred in failing to hold Engr. Buen personally liable for moral and exemplary damages.
• Interest Reckoning: The Rebadullas argued that the CA erred in reckoning the interest from the filing of the complaint rather than from the taking of the subject properties.
• Attorney's Fees: The Rebadullas argued that the CA erred in deleting the award of attorney's fees for failure to adduce evidence in support thereof.

• Impropriety of Mandamus: The Government maintained that the determination of just compensation is improper in a mandamus proceeding because the same is available only to compel the performance of a ministerial duty, and not one involving the exercise of sound judgment and discretion that takes into consideration several factors such as land classification and location.
• Zonal Valuation as Sole Basis: The Government posited that even assuming mandamus was proper, the CA erred in fixing the just compensation at P7.00 per square meter, arguing that zonal valuation cannot be the only basis for determining just compensation.
• Interest Rate: The Government argued that the CA erred in raising the interest rate to 12% per annum, contending that the 6% interest originally fixed by the RTC was not questioned by either party on appeal.
• Lack of Jurisdiction: The Government argued that even if the action were to be deemed as one for sum of money, it must still be dismissed for lack of jurisdiction due to the Rebadullas' alleged failure to pay the required docket fees.
• Appointment of Commissioners: The Government argued that pursuant to Rule 67 of the Rules of Court, commissioners must be appointed by the trial court to initially ascertain the just compensation, failing which the trial court's valuation will be ineffectual.

• Nature of the Action: Whether the Rebadullas' complaint, although captioned as one for mandamus and damages, properly made out a case for recovery of just compensation.
• Jurisdiction and Docket Fees: Whether the case should be dismissed for lack of jurisdiction due to the Rebadullas' alleged failure to pay the required docket fees.
• Basis of Just Compensation: Whether the RTC and CA erred in fixing just compensation based solely on the BIR zonal valuation of P7.00 per square meter.
• Time of Valuation: Whether just compensation should be determined based on the value of the property at the time of taking on March 17, 1997, rather than at the time of filing the complaint in 2002.
• Area Taken: Whether the lower courts correctly determined that 154,521.49 square meters, rather than the total 165,054 square meters, were taken by the Government.
• Interest on Just Compensation: Whether the interest rates of 12% per annum and 6% per annum were correctly imposed, and from what date the interest should be reckoned.
• Damages and Attorney's Fees: Whether the CA correctly deleted the award of attorney's fees and declined to grant moral and exemplary damages against Engr. Buen.

• Nature of the Action: Yes. The allegations in the complaint are controlling, and the Rebadullas' complaint plainly sought to recover just compensation for the taking of their properties, in an amount to be determined as the fair market value thereof by the court. The nature of an action is determined based on the averments in the complaint and the character of the relief prayed for.
• Jurisdiction and Docket Fees: No. The issue of docket fees was belatedly raised before the Supreme Court, and no question will be entertained on appeal unless it has been raised in the proceedings below. Defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived, except for certain specified grounds not applicable here.
• Basis of Just Compensation: No. Zonal valuation is simply one of the indices of the fair market value of real estate; it cannot be the sole basis of "just compensation." The case was remanded to the trial court for proper determination of just compensation considering multiple factors.
• Time of Valuation: Yes. The determination of just compensation shall reflect the value of the property at the time of taking on March 17, 1997, and not at the time of filing of the Rebadullas' Complaint in 2002.
• Area Taken: Yes. The Court sustained the lower courts' common finding that 154,521.49 square meters of land were taken by the Government, as factual findings of the trial court, when affirmed by the CA, are generally binding on the Supreme Court.
• Interest on Just Compensation: Yes. The Government shall pay legal interest from the time of taking of the property on March 17, 1997 at the rate of 12% per annum until June 30, 2013, and 6% per annum from July 1, 2013 until the finality of the decision fixing the just compensation. The interest due shall itself earn interest from the time of judicial demand on December 23, 2002, and the total amount due shall earn a straight 6% legal interest per annum from the finality of the decision until full payment.
• Damages and Attorney's Fees: Yes. The CA correctly deleted the award of attorney's fees and declined to grant moral and exemplary damages, as no proof of malice or bad faith was adduced against Engr. Buen or the Government.

• Nature of the Action: Jurisprudence clearly provides for the landowner's remedies when his property is taken by the government for public use: he may recover his property if its return is still feasible or, if it is not, he may demand payment of just compensation for the land taken. In this case, the return of the subject properties is no longer feasible as they had been used in the construction of dams for the DPWH's SWIM project which was already completed. It is a hornbook principle that the nature of an action is determined based on the averments in the complaint and the character of the relief prayed for. The Rebadullas' complaint plainly sought to recover just compensation for the taking of their properties. As the CA explained, "(t)o construe the mandamus case solely as a means to compel the government to just file expropriation proceedings would only further prolong injustice."

• Jurisdiction and Docket Fees: The issue of docket fees was belatedly raised before the Supreme Court. The Court held that no question will be entertained on appeal unless it has been raised in the proceedings below, as points of law, theories, issues and arguments not brought to the attention of the lower court need not be considered by a reviewing court. Section 1, Rule 9 of the Rules of Court provides that defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. Although the payment of the proper docket fees is a jurisdictional requirement, the trial court may allow the plaintiff to pay the same within a reasonable time, and if the defendant fails to timely raise the issue of jurisdiction, he would be considered in estoppel. The balance between the appropriate docket fees and the amount actually paid will be considered a lien on any award.

• Basis of Just Compensation: Just compensation is "the sum equivalent of the market value of the property, broadly described as the price fixed in open market by the seller in the usual and ordinary course of legal action or competition, or the fair value of the property as between one who receives and who desires to sell it, fixed at the time of the actual taking by the government." The word "just" is used to emphasize the meaning of the word "compensation" so as to convey the idea that the equivalent to be rendered for the property to be taken should be real, substantial, full and ample. The nature and character of the land at the time of taking is the principal criterion in determining just compensation. The Court agreed with the RTC's finding that the evidence adduced by both parties failed to sufficiently establish the fair market value of the subject properties. The DPWH's valuation at P2.50 per square meter was based on a 1994 PAC resolution whereas the taking was done in 1997, and no evidence was adduced to explain how such amount was determined. Similarly, the private appraisal submitted by the Rebadullas, which pegged the price at P95.00 per square meter in 1997, was not sufficiently substantiated, as it failed to specify and support by corroborative documents the comparable land values used. The RTC, however, erred in fixing the just compensation based solely on the zonal valuation of the properties. Zonal valuation is simply one of the indices of the fair market value of real estate; it cannot be the sole basis of "just compensation." Among the factors to be considered in determining the fair market value of the property are the cost of acquisition, the current value of like properties, its actual or potential uses, and in the particular case of land, its size, shape, location, and the tax declaration thereon. The measure is not the taker's gain but the owner's loss. Since the determination of the value of the property is factual in nature, the Court found a need to remand the case to the trial court to determine its value.

• Time of Valuation: The determination of just compensation shall reflect the value of the property at the time of taking, and not at the time of filing of the Rebadullas' Complaint. Just compensation is "the fair value of the property as between one who receives, and one who desires to sell, fixed at the time of the actual taking by the government." This rule holds true when the property is taken before the filing of an expropriation suit, and even if it is the property owner who brings the action for compensation. The reason is that the value of the property should be fixed as of the date when it was taken and not the date of the filing of the proceedings, for where property is taken ahead of the filing of the condemnation proceedings, the value thereof may be enhanced by the public purpose for which it is taken, or there may have been a natural increase in the value of the property from the time it is taken to the time the complaint is filed. The owner of private property should be compensated only for what he actually loses, and what he loses is only the actual value of his property at the time it is taken.

• Area Taken: The Court sustained the lower courts' common finding that 154,521.49 square meters of land were taken by the Government. The Court is not a trier of facts, and factual findings of the trial court, when affirmed by the CA, are generally binding on the Supreme Court. Neither party has sufficiently shown cause for the Court to depart from the lower courts' shared conclusion. The Government had every opportunity to raise the issue before the trial court but failed to present evidence on the exact area covered by the project. The Certification it proffered was issued after the RTC had rendered its decision, and evidence not formally offered cannot be taken into consideration. The Certification also appeared to be incomplete and uncertain since verification as to the third title was "still on-going." The Rebadullas' claim that the total area was taken was belied by the very Certification they attached to their Complaint, which certified that the SWIM Project affected the three lots and utilized a total of 154,521.49 square meters.

• Interest on Just Compensation: Section 9, Article III of the 1987 Constitution provides that "no private property shall be taken for public use without just compensation." If full compensation is not paid, the State must make up for the shortfall in the earning potential immediately lost due to the taking. Interest on the unpaid compensation becomes due not only as compliance with the constitutional mandate on eminent domain but also as a basic measure of fairness. Interest in eminent domain cases accrues as a matter of law and follows as a matter of course from the landowner's right to be placed in as good a position as money can accomplish, as of the date of taking. The just compensation due to the property owner is effectively a forbearance of money. Effective July 1, 2013, Bangko Sentral ng Pilipinas Circular No. 799 amended Central Bank Circular No. 905, Series of 1982, reducing the legal interest on loans and forbearance of money, when not stipulated, from 12% to 6% per annum. Accordingly, the Government shall pay legal interest from the time of taking of the property on March 17, 1997 at the rate of 12% per annum until June 30, 2013, and 6% per annum from July 1, 2013 until the finality of the decision fixing the just compensation. Pursuant to Article 2212 of the Civil Code and the guidelines laid down in Eastern Shipping Lines, Inc. vs. Court of Appeals, as modified in Nacar vs. Gallery Frames, the interest due shall itself earn interest from the time just compensation was judicially demanded by the Rebadullas on December 23, 2002. From the finality of the decision fixing the just compensation until full payment, the total amount due shall earn a straight 6% legal interest as the court's decision takes the nature of a judicial debt.

• Damages and Attorney's Fees: The Court found no reason to disturb the CA's decision not to grant the damages prayed for and to delete the award of attorney's fees. Unless there is a clear showing of malice or bad faith or gross negligence, a public officer is not liable for moral and exemplary damages for acts done in the performance of duties. The general rule is that attorney's fees cannot be recovered as part of damages because of the policy that no premium should be placed on the right to litigate. The fact alone that a claimant was compelled to litigate to protect his rights will not justify the award of attorney's fees where there is no sufficient showing of bad faith. Good faith is presumed, and he who alleges bad faith has the duty to prove the same. No proof of such malice or bad faith has been adduced to justify the imposition of moral and exemplary damages against Engr. Buen or the award of attorney's fees against the Government. Records show that the Rebadullas gave permission to the DPWH to enter their lots and construct the dams, subject to the payment of just compensation. They were offered, but rejected, the price of P2.50 per square meter. Upon their request, both Engr. Buen and the DOF-BLGF endeavored to ask the PAC for a reappraisal, but the latter had been convinced of the propriety of its valuation.

• Nature of an action determined by allegations in the complaint — The nature of an action is determined based on the averments in the complaint and the character of the relief prayed for, not by the caption or title of the pleading. The Court applied this principle in holding that the Rebadullas' complaint, although captioned as one for mandamus and damages, properly made out a case for recovery of just compensation based on its allegations and the reliefs prayed for.

• Just compensation defined — Just compensation is "the sum equivalent of the market value of the property, broadly described as the price fixed in open market by the seller in the usual and ordinary course of legal action or competition, or the fair value of the property as between one who receives and who desires to sell it, fixed at the time of the actual taking by the government." The word "just" emphasizes that the equivalent to be rendered for the property taken should be real, substantial, full and ample.

• Zonal valuation as one of several indices of fair market value — Zonal valuation is simply one of the indices of the fair market value of real estate; it cannot be the sole basis of "just compensation." Among the factors to be considered in determining the fair market value of the property are the cost of acquisition, the current value of like properties, its actual or potential uses, and in the particular case of land, its size, shape, location, and the tax declaration thereon. The measure is not the taker's gain but the owner's loss.

• Time of taking as valuation date — Just compensation is fixed at the time of the actual taking by the government, not at the time of filing of the complaint. This rule holds true when the property is taken before the filing of an expropriation suit, and even if it is the property owner who brings the action for compensation. 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.

• Interest on just compensation — Interest on unpaid just compensation accrues as a matter of law and follows as a matter of course from the landowner's right to be placed in as good a position as money can accomplish, as of the date of taking. The just compensation due to the property owner is effectively a forbearance of money. Legal interest is imposed at 12% per annum from the time of taking until June 30, 2013, and 6% per annum from July 1, 2013, pursuant to Bangko Sentral ng Pilipinas Circular No. 799.

• Liability of public officers for damages — Unless there is a clear showing of malice or bad faith or gross negligence, a public officer is not liable for moral and exemplary damages for acts done in the performance of duties. Good faith is presumed, and he who alleges bad faith has the duty to prove the same.

• "Zonal valuation is simply one of the indices of the fair market value of real estate; it cannot be the sole basis of 'just compensation.'" — This passage states the core ratio decidendi on the proper basis for determining just compensation, holding that the RTC and CA erred in relying solely on the BIR zonal valuation.

• "Just compensation is 'the sum equivalent of the market value of the property, broadly described as the price fixed in open market by the seller in the usual and ordinary course of legal action or competition, or the fair value of the property as between one who receives and who desires to sell it, fixed at the time of the actual taking by the government.'" — This passage provides the canonical definition of just compensation, emphasizing that the value must be fixed at the time of actual taking by the government.

• "The owner of 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 passage explains the rationale for fixing the valuation date at the time of taking rather than the time of filing the complaint, as the owner should be compensated only for his actual loss.

• "Interest on the unpaid compensation becomes due not only as compliance with the constitutional mandate on eminent domain but also as a basic measure of fairness. Interest in eminent domain cases, thus, accrues as a matter of law and follows as a matter of course from the landowner's right to be placed in as good a position as money can accomplish, as of the date of taking." — This passage establishes the doctrinal basis for the imposition of interest on just compensation, treating it as a matter of law that follows from the constitutional mandate.

• Secretary of the Department of Public Works and Highways vs. Sps. Tecson, 713 Phil. 55 (2013) — Cited as controlling authority for the rule that just compensation is fixed at the time of actual taking by the government, even when the property owner brings the action for compensation, and for the imposition of interest rates on just compensation.

• Leca Realty Corporation vs. Republic of the Philippines, 534 Phil. 693 (2006) — Cited for the proposition that zonal value may be one, but not necessarily the sole, index of the value of realty, and for the definition of just compensation.

• National Power Corporation vs. Manubay Agro-Industrial Development Corporation — Cited for the ruling that market value is not limited to the assessed value of the property or to the schedule of market values determined by the provincial or city appraisal committee, but these values may serve as factors to be considered in the judicial valuation of the property.

• EPZA vs. Dulay — Cited for the proposition that tax values can serve as guides but cannot be absolute substitutes for just compensation, and that various factors can come into play in the valuation of specific properties singled out for expropriation.

• Republic of the Philippines vs. Asia Pacific Integrated Steel Corporation, 729 Phil. 402 (2014) — Cited for the ruling that just compensation must not be arrived at arbitrarily but determined after an evaluation of different factors, and for the factors to be considered in determining fair market value.

• Republic of the Philippines vs. Court of Appeals, 612 Phil. 965 (2009) — Cited for the ruling that when there is no action for expropriation and the case involves only a complaint for damages or just compensation, the provisions of Rule 67 on ascertainment of just compensation are no longer applicable, and a trial before commissioners is dispensable.

• Nacar vs. Gallery Frames, 116 Phil. 267 (2013) — Cited for the guidelines on the imposition of legal interest, particularly the reduction of the legal interest rate from 12% to 6% per annum effective July 1, 2013, pursuant to Bangko Sentral ng Pilipinas Circular No. 799.

• Eastern Shipping Lines, Inc. vs. Court of Appeals, 304 Phil. 236 (1994) — Cited for the guidelines on the imposition of interest, particularly the rule that interest due shall itself earn interest from the time of judicial demand.

• Evergreen Manufacturing Corporation vs. Republic of the Philippines, G.R. No. 218628, September 6, 2017 — Cited for the ruling that zonal valuation cannot be the sole basis of just compensation, and for the imposition of interest on just compensation from the time of taking.

• National Steel Corporation vs. Court of Appeals, 362 Phil. 150 (1999) — Cited for the ruling that although the payment of the proper docket fees is a jurisdictional requirement, the trial court may allow the plaintiff to pay the same within a reasonable time, and if the defendant fails to timely raise the issue of jurisdiction, he would be considered in estoppel.

• Section 9, Article III, 1987 Constitution — Provides that "no private property shall be taken for public use without just compensation." The Court applied this provision as the constitutional basis for the Rebadullas' right to just compensation and for the imposition of interest on unpaid compensation as a matter of law.

• Section 1, Rule 9, Rules of Court — Provides that defenses and objections not pleaded either in a motion to dismiss or in the answer are deemed waived. The Court applied this rule in holding that the Government's belatedly raised issue of docket fees was barred by estoppel.

• Article 2212, Civil Code — Provides that interest due shall earn legal interest from the time it is judicially demanded. The Court applied this provision in holding that the interest due on just compensation shall itself earn interest from the time of judicial demand on December 23, 2002.

• Bangko Sentral ng Pilipinas Circular No. 799 — Amended Central Bank Circular No. 905, Series of 1982, reducing the legal interest on loans and forbearance of money, when not stipulated, from 12% to 6% per annum effective July 1, 2013. The Court applied this circular in determining the applicable interest rates on just compensation.

• Rule 67, Rules of Court — The Court held that when there is no action for expropriation and the case involves only a complaint for damages or just compensation, the provisions of Rule 67 on ascertainment of just compensation are no longer applicable, and a trial before commissioners is dispensable.

Sereno, C.J. (Chairperson), Leonardo-De Castro, Del Castillo, and Jardeleza, JJ., concurred.