Republic of the Philippines vs. Bank of the Philippine Islands (BPI)

Where only a portion of a property is expropriated, the owner is not restricted to compensation for the portion actually taken but is also entitled to recover consequential damages for any impairment or decrease in value of the remaining property, and no actual taking of that remaining property is necessary to warrant the award. Correlatively, a judgment does not attain finality against a party absent proof of service in the manner prescribed by Sections 9 and 13 of Rule 13, the period to appeal or move for new trial running only from receipt.

The Republic, through the DPWH, undertook the construction of the Zapote-Alabang Fly-Over in Las Piñas City, a public infrastructure project requiring the acquisition of portions of privately owned lots along its route. BPI owned a lot covered by Transfer Certificate of Title No. T-59156 in Pamplona, Las Piñas City, on which stood a building, while Bayani Villanueva owned an adjoining lot covered by TCT No. T-64556. The State's exercise of eminent domain, limited by Article III, Section 9 of the 1987 Philippine Constitution and implemented by Rule 67 of the Rules of Court, supplied the legal framework governing the acquisition and the determination of just compensation.

The Republic, through the Department of Public Works and Highways, needed 281 square meters of BPI's lot covered by Transfer Certificate of Title No. T-59156 and 177 square meters of Bayani Villanueva's lot covered by TCT No. T-64556, both situated in Pamplona, Las Piñas City, for the construction of the Zapote-Alabang Fly-Over. On 12 February 1998, the DPWH filed an expropriation case before the Regional Trial Court of Las Piñas City, Branch 275. Neither BPI nor Villanueva objected to the propriety of the expropriation, and the trial court accordingly constituted a Board of Commissioners to determine just compensation. In its Report dated 29 September 1998, the Board recommended ₱40,000.00 per square meter as the fair market value. On 25 November 1998, the trial court fixed the fair market value at ₱40,000.00 per square meter and ordered the Republic to pay BPI ₱10,607,750.00, representing 281 square meters at ₱40,000.00 less the ₱632,250.00 already deposited, and Villanueva ₱4,425,000.00, representing 177 square meters at ₱40,000.00 less the ₱2,655,000.00 provisional deposit.

On 15 December 1998, the acting branch clerk of court issued a Certification stating that the 25 November 1998 Decision had become final, executory and unappealable as of 11 December 1998 because the Office of the Solicitor General failed to file any notice of appeal or motion for reconsideration despite receipt of a copy on 26 November 1998. Meanwhile, on 16 December 1998, BPI filed a Motion for Partial New Trial to determine the just compensation of its building, which had not been included in the 25 November 1998 Decision that fixed compensation only for the parcels of land. BPI claimed the motion was timely because it received a copy of the Decision on 1 December 1998. The trial court granted partial new trial in an Order dated 6 January 1999.

Because counsel for petitioner failed to appear at the scheduled hearing despite notice, the trial court allowed BPI to present its evidence ex parte. On 1 September 1999, the trial court admitted BPI's exhibits and appointed Leticia B. Agbayani, the Officer-In-Charge of the trial court, as commissioner to conduct an ocular inspection of the building. Agbayani reported that a new building had been constructed, that the building had been moved back to conform with the requirement of the Building Code, and that improvements had been introduced around it. On 10 September 1999, the trial court held that just compensation for the building was due and ordered petitioner to pay BPI ₱2,633,000.00.

Petitioner moved for reconsideration of the 10 September 1999 Decision, arguing that the proceeding fixing the just compensation of the building was null and void for non-compliance with the mandatory procedure set forth in Sections 5 to 8 of Rule 67. On 14 February 2000, the trial court granted the motion and set aside and vacated the 10 September 1999 Decision; BPI's motion for reconsideration, grounded on substantial compliance with the Rules, was denied. On 19 September 2000, the trial court appointed Atty. Edgar Allan C. Morante, the branch clerk of court, as chairman of the Board of Commissioners and gave the parties ten days to submit their respective nominees and oaths of office. BPI nominated Roland Savellano and submitted his oath of office.

Instead of submitting its nominee, petitioner filed on 13 October 2000 a Manifestation and Motion objecting to the propriety of paying just compensation for BPI's building and praying that the claim be denied, on the assertion that the building was never taken by the government. Petitioner attached a letter dated 12 September 2000 from the DPWH to the Solicitor General stating that the original plan affecting the subject property was not implemented and that the width of the sidewalk at the premises was reduced from 2.50 meters to 2.35 meters to avoid the costly structure of the bank. BPI opposed, claiming it was not aware that the original plan was not implemented and had received no correspondence on the matter except a letter dated 12 August 1997 from the DPWH stating that adjustment of the RROW limit along that section was not possible as it would affect the effective width of the sidewalk designated at 2.50 meters. BPI further argued that even if a 3-meter setback were observed, only 75% of the old building could be utilized and cutting the building's support system would affect its structural integrity.

On 7 May 2001, the trial court denied petitioner's motion and ruled that the demolition of BPI's old building could be construed as consequential damage suffered as a result of the expropriation, ordering petitioner to submit its nominee. Petitioner nominated Romulo C. Gervacio, the Officer-In-Charge of the City Assessor's Office of Las Piñas City. The Board thus constituted, Savellano recommended ₱2,633,000.00 based on an appraisal conducted by an independent professional business and property consultant, while Gervacio recommended ₱1,905,600.00, the market value indicated in the tax declaration. The Commissioner's Report presented both recommendations for the trial court's consideration. On 3 February 2003, the trial court adopted Gervacio's recommendation of ₱1,905,600.00 as the just compensation for the building, and petitioner appealed to the Court of Appeals.

Both the trial court and the appellate court found that BPI had not been notified of the reduction and had relied only on the DPWH letter dated 12 August 1997 stating that reduction of the sidewalk width was not possible; that by 7 September 1999, when Agbayani conducted her ocular inspection, a new building had already been constructed replacing the old one; and that the amended plan was communicated by the DPWH to the Office of the Solicitor General only in September 2000, when the trial court was constituting anew the Board of Commissioners to determine the amount of just compensation for the building.

• Finality of the 25 November 1998 Decision: Petitioner contended that the trial court's Decision had already become final and executory as of 11 December 1998, as stated in the Certification issued by the acting branch clerk of court, and that the Court of Appeals erred in holding otherwise and in reckoning the 15-day reglementary period from a mere admission of the date of receipt by BPI. Petitioner further argued that the Certification enjoys a presumption of regularity which BPI had not been able to overcome.
• Nullity of the Building Compensation Proceedings: Petitioner moved for reconsideration of the 10 September 1999 Decision on the ground that the proceeding fixing the just compensation of the building was null and void for not complying with the mandatory procedure set forth in Sections 5 to 8 of Rule 67 of the Rules of Court.
• Absence of Legal Basis for Consequential Damages: Petitioner contended that BPI's building was "never taken" by the government and that to award consequential damages for it was unfounded and without legal basis, relying on the DPWH letter dated 12 September 2000 stating that the proposed 2.50-meter sidewalk was reduced to 2.35 meters, thus leaving BPI's building intact.

• Timeliness of the Motion for Partial New Trial: BPI asserted that its motion for partial new trial filed on 16 December 1998 was timely because it received a copy of the 25 November 1998 Decision on 1 December 1998.
• Substantial Compliance with Rule 67: BPI moved for reconsideration of the order setting aside and vacating the 10 September 1999 Decision on the ground that there was substantial compliance with the Rules of Court.
• Consequential Damages for the Building: BPI claimed it was not aware that the original plan was not implemented and had received no correspondence from the DPWH on the matter except the letter dated 12 August 1997 stating that adjustment of the RROW limit was not possible as it would affect the effective width of the sidewalk designated at 2.50 meters; it further argued that even if a 3-meter setback were observed, only 75% of the old building could be utilized and cutting the building's support system would affect its structural integrity.

• Finality of the November 25, 1998 Decision: Whether the trial court's Decision dated 25 November 1998 had become final and executory before BPI filed its motion for partial new trial.
• Basis for Additional Just Compensation: Whether the award of additional just compensation for BPI's building in the amount fixed therefor is unfounded and without legal basis.

• Finality of the November 25, 1998 Decision: No. The Decision did not attain finality as against BPI, the records being devoid of any proof of service upon it as required by Sections 9 and 13 of Rule 13; BPI's admission that it received a copy on 01 December 1998 was binding on it and properly served as the reckoning date, rendering its 16 December 1998 motion timely.
• Basis for Additional Just Compensation: No. The award rests on both law and fact, since consequential damages may be granted even without actual taking of the remaining property, and Section 6 of Rule 67 expressly supplies the legal basis for such an award.

• Finality of the November 25, 1998 Decision: A perusal of the Certification reveals that it certifies finality only as to petitioner, reciting that the Office of the Solicitor General failed to file any notice of appeal or motion for reconsideration despite receipt of a copy on 26 November 1998. Section 9 of Rule 13 requires that judgments, final orders or resolutions be served either personally or by registered mail, while Section 13 of the same Rule provides that proof of personal service consists of a written admission of the party served, or the official return of the server, or the affidavit of the party serving containing a full statement of the date, place and manner of service; where service is made by registered mail, proof shall be made by such affidavit and the registry receipt issued by the mailing office, with the registry return card filed immediately upon its receipt by the sender. A careful review of the record showed the absence of any proof that the 25 November 1998 Decision was served upon BPI, so the 15-day period within which to file its motion for partial new trial did not begin to run against it. BPI's admission that it received a copy on 01 December 1998, however, is binding on it and was correctly considered as the reckoning date; counting from that date, the 15-day period expired on 16 December 1998, making the motion timely filed and preventing the Decision from attaining finality as against BPI.

• Basis for Additional Just Compensation: Eminent domain is the authority and right of the State, as sovereign, to take private property for public use upon observance of due process of law and payment of just compensation, a power limited by the constitutional mandate that private property shall not be taken for public use without just compensation. Just compensation is the full and fair equivalent of the property sought to be expropriated, and the general rule is that the owner is entitled to the market value, defined as that sum of money which a person desirous but not compelled to buy, and an owner willing but not compelled to sell, would agree on as a price to be paid by the buyer and received by the seller. That general rule is modified where only a part of a certain property is expropriated: the owner is not restricted to compensation for the portion actually taken but is also entitled to recover the consequential damage, if any, to the remaining part of the property. No actual taking of the building is necessary to grant consequential damages, which are awarded if, as a result of the expropriation, the remaining property of the owner suffers from an impairment or decrease in value. Section 6 of Rule 67 provides the legal basis, directing the commissioners to assess the consequential damages to the property not taken and to deduct therefrom the consequential benefits derived by the owner, provided that the consequential benefits assessed shall in no case exceed the consequential damages assessed. The uniform findings of the trial court and the appellate court are entitled to the greatest respect and are binding absent a strong showing that they erred in appreciating established facts and drawing inferences therefrom; no cogent reason existed to deviate. The records showed a stark absence of any proof that the DPWH communicated its amended plan to BPI or to the trial court. The trial court found that BPI was not notified of the reduction and had relied only on the DPWH letter dated 12 August 1997 stating that reduction of the sidewalk width was not possible. Petitioner had actively participated in the expropriation of the portion of BPI's lot according to the original plan, the decision for which was promulgated on 25 November 1998. The trial court had also ruled that additional just compensation for the building was in order in its 10 September 1999 Decision, from which petitioner moved for reconsideration but only as to the procedure in the determination of the amount. By 7 September 1999, when Agbayani conducted her ocular inspection, a new building had already been constructed replacing the old one, whereas the amended plan was communicated by the DPWH to the Office of the Solicitor General only in September 2000. There was thus proper basis for the determination of just compensation for the building as consequential damages.

• Consequential damages in expropriation — Where only a part of a certain property is expropriated, the owner is not restricted to compensation for the portion actually taken; he is also entitled to recover the consequential damage, if any, to the remaining part of the property. No actual taking of the remaining property is necessary to grant consequential damages; it suffices that, as a result of the expropriation, the remaining property suffers from an impairment or decrease in value. The Court applied this doctrine to sustain the award for BPI's building, since the demolition of the old building and the construction of its replacement constituted consequential damage arising from the expropriation of the lot.
• Just compensation and market value — Just compensation is the full and fair equivalent of the property sought to be expropriated. The general rule is that the owner is entitled to the market value, defined as that sum of money which a person desirous but not compelled to buy, and an owner willing but not compelled to sell, would agree on as a price to be paid by the buyer and received by the seller. This general rule is modified where only a part of a property is expropriated, in which case consequential damages may be added after deducting consequential benefits.
• Finality of judgment and proof of service — Judgments, final orders or resolutions must be served either personally or by registered mail, and proof of service must comply with Section 13 of Rule 13. Absent proof of service, the period within which to appeal or to move for new trial does not begin to run against the party not served. The Court applied this rule in holding that the 25 November 1998 Decision never attained finality as against BPI, notwithstanding the clerk of court's certification of finality, which spoke only of petitioner's failure to appeal.
• Respect for uniform factual findings — The uniform findings of the trial court and the appellate court are entitled to the greatest respect and are binding on the Court in the absence of a strong showing that the courts below erred in appreciating established facts and in drawing inferences from such facts. The Court invoked this principle in declining to disturb the lower courts' findings that BPI had no notice of the amended DPWH plan and that a new building had already replaced the old one by the time of the ocular inspection.
• Eminent domain — Eminent domain is the authority and right of the State, as sovereign, to take private property for public use upon observance of due process of law and payment of just compensation. The Court anchored its analysis of the expropriation and the corresponding obligation to pay just compensation on this definition.

• "No actual taking of the building is necessary to grant consequential damages. Consequential damages are awarded if as a result of the expropriation, the remaining property of the owner suffers from an impairment or decrease in value." — This passage states the ratio decidendi on the second issue, rejecting petitioner's contention that the building was never taken and supplying the controlling rule for awarding consequential damages in partial expropriations.
• "A careful review of the record shows the absence of any proof that the Decision of 25 November 1998 was served upon BPI. Hence, the Court of Appeals correctly held that absent any proof of service to BPI of the Decision, the period of 15 days within which to file its motion for partial new trial did not begin to run against BPI." — This passage articulates the controlling rule on finality and proof of service under Rule 13, and explains why the clerk of court's certification of finality did not bind BPI.
• "The general rule is that the just compensation to which the owner of the condemned property is entitled to is the market value." — This passage states the baseline measure of just compensation, which the Court then modified for partial expropriations by adding consequential damages net of consequential benefits.
• "The Court would like to stress that there is a stark absence in the records of any proof that DPWH communicated its amended plan to BPI or to the trial court." — This passage supplies the factual foundation for the affirmance of the award, showing that BPI had no notice of the reduced sidewalk width and had relied on the earlier DPWH letter.

• Republic of the Philippines vs. Court of Appeals and Rosario R. Reyes, G.R. No. 160379, 14 August 2009, 596 SCRA 57 — Quoted with approval and applied as controlling authority for the rule that no actual taking of the remaining portion of the real property is necessary to grant consequential damages, and that consequential damages may be awarded if the remaining lot suffers an impairment or decrease in value.
• B.H. Berkenkotter & Co. vs. Court of Appeals, G.R. No. 89980, 14 December 1992, 216 SCRA 584 — Cited for the rule that in determining just compensation, the trial court should first ascertain the market value of the property, to which should be added the consequential damages after deducting the consequential benefits which may arise from the expropriation; if the consequential benefits exceed the consequential damages, these items should be disregarded altogether as the basic value of the property should be paid in every case.
• National Power Corporation vs. Court of Appeals, 479 Phil. 850 (2004) — Cited for the definition of eminent domain as the authority and right of the State, as sovereign, to take private property for public use upon observance of due process of law and payment of just compensation.
• National Power Corporation vs. Chiong, 452 Phil. 649 (2003) — Cited for the general rule that the just compensation to which the owner of the condemned property is entitled is the market value.
• National Power Corporation vs. Purefoods Corporation, G.R. No. 160725, 12 September 2008, 565 SCRA 17 — Cited for the modification of the general rule where only a part of a certain property is expropriated, in which case the owner may also recover consequential damages to the remaining part.
• Republic of the Philippines vs. Tan Song Bok, G.R. No. 191448, 16 November 2011, 660 SCRA 330 — Cited for the principle that the uniform findings of the trial court and the appellate court are entitled to the greatest respect and are binding absent a strong showing of error.
• Visayan Refining Co. vs. Camus, 40 Phil. 550 (1919) — Cited as the source of the definition of eminent domain relied upon by the Court.

• Article III, Section 9, 1987 Philippine Constitution — Provides that private property shall not be taken for public use without just compensation; cited as the constitutional limitation on the State's power of eminent domain and as the source of the obligation to pay just compensation.
• Section 6, Rule 67, Rules of Court — Directs the commissioners to assess the consequential damages to the property not taken and to deduct from such consequential damages the consequential benefits to be derived by the owner, provided that the consequential benefits assessed shall in no case exceed the consequential damages assessed, or the owner be deprived of the actual value of his property so taken; relied upon as the express legal basis for the award of consequential damages for BPI's building.
• Section 9, Rule 13, Rules of Court — Requires that judgments, final orders or resolutions be served either personally or by registered mail; applied in holding that the 25 November 1998 Decision was never shown to have been served on BPI.
• Section 13, Rule 13, Rules of Court — Defines proof of personal service as consisting of a written admission of the party served, or the official return of the server, or the affidavit of the party serving containing a full statement of the date, place and manner of service, and, for registered mail, proof by affidavit and the registry receipt issued by the mailing office with the registry return card filed immediately upon receipt; applied to find no proof of service on BPI, while treating BPI's written admission of receipt on 01 December 1998 as sufficient compliance.
• Section 1, Rule 37, Rules of Court — Provides that the period within which an aggrieved party may move to set aside a judgment or final order and file a motion for new trial is within the period to file an appeal, which is fifteen days from receipt of the judgment or final order; supplied the reckoning rule for the timeliness of BPI's motion.
• Section 3, Rule 41, Rules of Court — Cited in the Court of Appeals' discussion of the reglementary period for appeal, which petitioner invoked in arguing that the 25 November 1998 Decision had become final.
• Sections 5 to 8, Rule 67, Rules of Court — Invoked by petitioner as the mandatory procedure allegedly violated in the proceeding that fixed the just compensation of the building, which the trial court initially accepted when it set aside its 10 September 1999 Decision.

Arturo D. Brion, Mariano C. Del Castillo, Jose Portugal Perez, and Estela M. Perlas-Bernabe concurred in the Decision. Chief Justice Maria Lourdes P. A. Sereno certified that the conclusions in the Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court's Division.