Republic of the Philippines vs. Rural Bank of Kabacan, Inc.

Just compensation in expropriation proceedings does not include separate payment for the excavated soil, as the ownership of land extends indivisibly to its surface and subsoil; and a mere manifestation of non-ownership by the registered owner, absent proof of a valid conveyance embodied in a public document and registered, is insufficient to entitle intervenors to the payment of just compensation.

NIA, a government-owned-and-controlled corporation authorized to exercise the power of eminent domain under P.D. 552, sought to expropriate portions of three parcels of land covering a total of 14,497.91 square meters in Kabacan, Cotabato for the Malitubog-Marigadao Irrigation Project. The affected properties were Lot No. 3080, registered under the Rural Bank of Kabacan; Lot No. 455, registered under the Lao family; and Lot No. 3039, registered under Littie Sarah Agdeppa and Leosa Nanette Agdeppa. Intervenors Margarita Taboada and Portia Charisma Ruth Ortiz claimed to be the new owners of Lot No. 3080, having allegedly acquired it from the Rural Bank of Kabacan, while four other intervenors claimed to be joint tenant-cultivators of Lots 3080 and 3039.

• The Expropriation Project: NIA required 14,497.91 square meters of land for the Malitubog-Marigadao Irrigation Project. On September 8, 1994, it filed a complaint for expropriation against the registered owners of Lots 3080, 455, and 3039, later amending the complaint to properly allege the areas and owners and to pray for immediate possession upon deposit of the provisional value of ₱19,246.58.
• The Respondents' Defense: Respondents contested NIA's authority to expropriate, claimed the expropriation was unnecessary due to an adjacent abandoned government property, disputed NIA's valuation alleging the land with improvements was worth ₱5 million, and asserted that NIA never negotiated with them before taking the properties, causing damages valued at ₱250,000.
• The Commissioners' Reports: The RTC formed a committee to determine fair market value. The first committee, composed of the Clerk of Court and representatives from both parties, conducted an ocular inspection and noted the area occupied, the area to be occupied, and the number and age of gmelina, coconut, and banana trees. However, they could not agree on the market value. The RTC then appointed two new independent commissioners: the Assistant Provincial Assessor of Cotabato and the Division Chief of LBP-Kidapawan.
• The Second Committee's Valuation: The new committee conducted a second ocular inspection, obtained BIR zonal valuations, interviewed adjacent property owners, and considered factors like distance from the highway and town center. They recommended a fair market value of ₱65 per square meter based on BIR zonal valuation, and assigned specific values to the trees based on the Provincial Assessor's appraisal. A subsequent report added the value of the excavated earthfill to the computation.
• The Intervenors' Claim: Margarita Taboada and Portia Charisma Ruth Ortiz intervened, claiming to be the new owners of Lot 3080 having acquired it from the Rural Bank of Kabacan. Four other intervenors claimed to be joint tenant-cultivators of Lots 3080 and 3039. The Rural Bank of Kabacan did not participate in the proceedings and manifested that it was no longer the owner of Lot 3080.

• Inaccurate Valuation: Petitioner argued that the commissioners' report was inaccurate because it relied on Provincial Ordinance No. 173, which reflected 1999 market values, while the actual taking occurred in 1996.
• Excavated Soil: Petitioner maintained that the inclusion of the value of excavated soil in the computation of just compensation was erroneous.
• Entitlement to Payment: Petitioner contended that the trial court erred in ordering payment for Lot 3080 to be given to the intervenors instead of the registered owner, the Rural Bank of Kabacan.

• Lack of Authority and Necessity: Respondents alleged that NIA had no authority to expropriate because it was not a sovereign political entity, and that the expropriation was unnecessary because an abandoned government property adjacent to theirs could be used for the project.
• Inaccurate Valuation and Lack of Negotiation: Respondents argued that NIA's valuation was inaccurate, asserting that the improvements on the land placed its value at ₱5 million. They further maintained that NIA never negotiated with the landowners before taking their properties, causing permanent and irreparable damages valued at ₱250,000.
• Ownership of Lot 3080: Respondents-intervenors countered that they were the new owners of Lot 3080, having acquired it from the Rural Bank of Kabacan, which had manifested that it no longer owned the lot.

• Just Compensation Valuation: Whether the CA erred in affirming the trial court's finding of just compensation based on the commissioners' report.
• Excavated Soil: Whether the value of excavated soil should be included in the payment of just compensation.
• Entitlement to Payment: Whether the CA erred in ruling that payment of just compensation for Lot 3080 should be made to respondents-intervenors Margarita Taboada and Portia Charisma Ruth Ortiz.

• Just Compensation Valuation: The CA was affirmed. The commissioners properly determined just compensation by conducting ocular inspections, obtaining BIR zonal valuations, interviewing adjacent property owners, and considering Provincial Ordinance No. 173. The ordinance was not the sole basis for the valuation, and a commissioner testified that the data used for the ordinance were taken from 1995 to 1996. Petitioner failed to rebut the testimonial and documentary evidence presented by respondents despite having ample opportunity to do so.
• Excavated Soil: The value of excavated soil was correctly excluded from just compensation. Ownership of land extends to the surface and the subsoil indivisibly, pursuant to Article 437 of the Civil Code. In expropriation proceedings, the soil has no value separate from the expropriated land. Just compensation refers to the value of the land at the time of taking to compensate for what the owner actually loses; paying separately for the excavated soil would allow landowners to recover more than the land's value and would discourage the construction of public improvements.
• Entitlement to Payment: The CA erred in affirming the award of payment to the intervenors. Eminent domain cases involve the expenditure of public funds, requiring trial courts to be circumspect in evaluating the just compensation's rightful recipient. A mere manifestation of non-ownership by the Rural Bank of Kabacan, without proof of a valid conveyance embodied in a public document and registered in the office of the Register of Deeds, is insufficient to validate the intervenors' claim. The TCT remains registered in the bank's name. Pursuant to Rule 67, Section 9 of the 1997 Rules of Court, when ownership is uncertain, the case must be remanded to the trial court for the reception of evidence to establish the present owner of Lot 3080.

• Indivisibility of Land Ownership — The ownership of a parcel of land extends to its surface and everything under it. The soil cannot be valued separately from the expropriated land; just compensation covers the full value of the property taken, including the substrata, and an expropriator cannot be made to pay separately for the excavated soil which it necessarily uses in the pursuit of the public project.
• Determination of Just Compensation by Commissioners — A commissioners' report based on reliable and actual data—such as BIR zonal valuations, tax declarations, ocular inspections, and interviews with adjacent property owners—is valid and will be upheld, especially when the expropriator fails to rebut the evidence presented.
• Proof of Ownership in Eminent Domain — In eminent domain cases involving the expenditure of public funds, courts must be circumspect. A mere manifestation of non-ownership by the registered owner, without proof of conveyance via a public document and registration, is insufficient to award just compensation to intervenors. When ownership is uncertain, the court must order the reception of evidence to establish the rightful owner pursuant to Rule 67, Section 9 of the Rules of Court.

• "In the context of expropriation proceedings, the soil has no value separate from that of the expropriated land. Just compensation ordinarily refers to the value of the land to compensate for what the owner actually loses. Such value could only be that which prevailed at the time of the taking."
• "It was imprudent for the appellate court to rely on the Rural Bank of Kabacan’s mere declaration of non-ownership and non-participation in the expropriation proceeding to validate defendants-intervenors’ claim of entitlement to that payment. The law imposes certain legal requirements in order for a conveyance of real property to be valid."

• National Power Corporation v. Diato-Bernal, G.R. No. 180979, 15 December 2010 — Cited as controlling precedent on the requirement that just compensation must be based on reliable and actual data (sworn declarations, tax declarations, BIR zonal valuation) and not mere speculation. Distinguished from the present case where the commissioners used reliable data.
• National Power Corporation v. Ibrahim, G.R. No. 168732, 29 June 2007 — Cited as controlling precedent establishing that rights over lands are indivisible; ownership extends to the surface and subsoil under Article 437 of the Civil Code, precluding separate valuation for excavated soil.

• Article 437, Civil Code of the Philippines — Provides that the owner of a parcel of land is the owner of its surface and of everything under it. Applied to rule that excavated soil cannot be valued separately from the land.
• Article 1358, Civil Code of the Philippines — Requires acts and contracts which have for their object the creation, transmission, modification or extinguishment of real rights over immovable property to appear in a public document. Applied to require proof of valid conveyance of Lot 3080.
• Section 112, P.D. 1529 (Property Registration Decree) — Provides that deeds, conveyances, and other voluntary instruments must be in the form of public instruments to be registrable. Applied to emphasize the need for registered conveyance to prove ownership.
• Rule 67, Section 9, 1997 Rules of Court — Governs uncertain ownership and conflicting claims in expropriation proceedings, allowing the court to order sums awarded to be paid to the court for the benefit of the person adjudged entitled thereto. Applied to justify remanding the case for reception of evidence to determine the true owner of Lot 3080.

Carpio (Chairperson), Perez, Reyes, Perlas-Bernabe