Republic vs. Larrazabal

Republic Act No. 8974 applies prospectively only and cannot be applied to expropriation proceedings commenced before its effectivity; moreover, just compensation must be determined as of the time of the taking (filing of the complaint) based on comprehensive factors including acquisition cost, current market value of like properties, tax value, and the properties' size, shape, and location, supported by actual documentary evidence, rather than relying solely on selected comparative sales.

In November 1991, heavy rains caused the Malbasag River in Ormoc City to overflow, resulting in a devastating flashflood throughout the city. To prevent future tragedies, the Department of Public Works and Highways undertook a massive flood mitigation project at the Malbasag River requiring the acquisition of right-of-way over portions of three parcels of land owned by Potenciano A. Larrazabal, Sr. (commercial property) and his relatives Victoria Larrazabal Locsin and Betty Larrazabal Macatual (residential properties).

• Petitioner sought to expropriate 1,027 square meters of Potenciano's commercial property (Lot No. 844, TCT No. 28, total area 2,629 sqm), 575 square meters of Victoria's residential property (Lot No. 1, TCT No. 16337, total area 5,682 sqm), and 4,638 square meters of Betty's residential property (Lot No. 2, TCT No. 16518, total area 5,683 sqm).
• Based on Resolution No. 8-98 of the Ormoc City Appraisal Committee, petitioner initially appraised the properties at P1,000.00 per square meter for commercial lots and P800.00 for residential lots.
• After filing the complaint, petitioner was allowed to enter the properties, demolish improvements, and deposit provisional payments totaling P5,745,520.00, which the RTC released to respondents on December 16, 1999.
• Respondents prayed for higher compensation in their Answer: P25,000.00 per square meter for Potenciano's property and P15,000.00 per square meter for Victoria's and Betty's properties.
• The Commissioners appointed by the RTC recommended P10,000.00 per square meter for Potenciano's property and P4,000.00 per square meter for Victoria's and Betty's properties, classifying all three as commercial lots and relying primarily on the sale of William Gothong and Aboitiz property on November 14, 1997 at P30,000.00 per square meter.
• The RTC approved the Commissioners' recommended values, fixed just compensation at those rates, and awarded 12% interest per annum from the filing date of the complaint.
• The CA affirmed the RTC, ruling that RA No. 8974 (effective November 26, 2000) did not apply prospectively to a complaint filed on September 15, 1999.

• Petitioner, through the Office of the Solicitor General, argued that RA No. 8974 should be made to apply to the determination of just compensation, contending that the CA, RTC, and Commissioners erred in disregarding the standards set forth in said Act.
• Petitioner maintained that RA No. 8974 could and should be applied to the case despite the complaint having been filed prior to its effectivity, effectively reversing the position the OSG took in Spouses Arrastia v. National Power Corporation where it argued against retroactive application.

• Respondents prayed in their Answer for just compensation of P25,000.00 per square meter for Potenciano's property and P15,000.00 per square meter for Victoria's and Betty's properties.
• They supported the Commissioners' Report and the RTC Decision which fixed higher values than those initially offered by petitioner based on the comparative sales methodology.

• Procedural: N/A
• Substantive Issues:
  • Whether Republic Act No. 8974 is applicable to the determination of just compensation for properties in expropriation proceedings initiated prior to its effectivity.
  • Whether the Court of Appeals acted correctly in affirming the RTC Decision on the just compensation fixed for the properties.

• Procedural: N/A
• Substantive:
  • RA No. 8974 applies only prospectively. Citing Spouses Arrastia v. National Power Corporation, the Court held that statutes operate prospectively unless the legislative intent to the contrary is manifest by express terms or by necessary implication (lex prospicit non respicit). Since RA No. 8974 is a substantive law containing no express provision for retroactive application, and since the complaint was filed on September 15, 1999 (prior to the law's effectivity on November 26, 2000), the Act does not apply to this case.
  • The RTC and CA erred in affirming the just compensation determined by the Commissioners. The determination deviated from the settled rule that just compensation should be determined as of the time of the taking (filing of the complaint on September 15, 1999).
  • The RTC improperly relied on sales transactions occurring on November 14, 1997 (almost 2 years prior) and July 10, 2000 (10 months after), which could not serve as proper bases for determining value as of September 15, 1999.
  • The RTC failed to consider other mandatory factors for determining just compensation such as acquisition cost, current market value of like properties, tax value, and the size, shape, and location of the properties, supported by documentary evidence.
  • The Commissioners' Report, based solely on comparative sales without adequate documentary support, constituted hearsay and could not properly support the award.
  • The Court set aside the CA and RTC decisions and remanded the case to the trial court for proper determination of just compensation in conformity with the decision.

• Prospective Application of Laws (Lex Prospicit Non Respicit) — Statutes, including administrative rules and regulations, operate prospectively unless the legislative intent to the contrary is manifest by express terms or by necessary implication because retroactive application usually divests vested rights. The law looks forward, not backward.
• Time of Taking Rule — Just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of the expropriation proceedings. Where the institution of the action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint.
• Comprehensive Factors for Just Compensation — Just compensation cannot be arrived at arbitrarily; several factors must be considered such as acquisition cost, current market value of like properties, tax value of the condemned property, and its size, shape, and location. These factors must be supported by documentary evidence; otherwise, the commissioners' report constitutes hearsay.
• Non-applicability of RA No. 8974 to Pending Cases — Republic Act No. 8974 is a substantive law that applies only prospectively to expropriation cases filed after its effectivity on November 26, 2000.

• "It is a well-entrenched principle that statutes, including administrative rules and regulations, operate prospectively unless the legislative intent to the contrary is manifest by express terms or by necessary implication because the retroactive application of a law usually divests rights that have already become vested. This is based on the Latin maxim: Lex prospicit non respicit (the law looks forward, not backward)."
• "[J]ust compensation cannot be arrived at arbitrarily; several factors must be considered such as, but not limited to, acquisition cost, current market value of like properties, tax value of the condemned property, its size, shape, and location. But before these factors can be considered and given weight, the same must be supported by documentary evidence."
• "A commissioners' report of land prices which is not based on any documentary evidence is manifestly hearsay and should be disregarded by the court."

• Spouses Arrastia v. National Power Corporation, 555 Phil. 263 (2007) — Controlling precedent establishing that RA No. 8974 applies only prospectively and cannot be given retroactive effect as it is a substantive law that would impose a greater burden on the State where none had existed before.
• National Power Corporation v. Diato-Bernal, 653 Phil. 345 (2010) — Cited for the rule that just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of the expropriation proceedings.
• National Power Corporation v. YCLA Sugar Development Corporation, 723 Phil. 616 (2013) — Cited for the comprehensive factors that must be considered in determining just compensation and the requirement that these be supported by documentary evidence.
• Republic v. Lichauco, 122 Phil. 33 (1965) — Cited by the RTC (and noted by the Supreme Court) for the principle that sales taken in the neighborhood of the same year of taking have been considered fair enough as to reflect fair market value.
• B.H. Berkenkotter & Co. v. Court of Appeals, 290-A Phil. 371 (1992) — Cited in NPC v. Diato-Bernal regarding the time of taking rule.

• Republic Act No. 8974 — "An Act to Facilitate the Acquisition of Right-Of-Way, Site or Location for National Government Infrastructure Projects and for Other Purposes." Held to be a substantive law applying prospectively only to expropriation cases filed after its effectivity on November 26, 2000.
• Resolution No. 8-98, Series of 1998 (Ormoc City Appraisal Committee) — The initial appraisal standard used by petitioner which the Court held cannot substitute for the judicial determination of just compensation based on comprehensive factors.