Republic vs. Lim

Title to expropriated property passes to the government only upon full payment of just compensation within a reasonable time; failure to pay within five (5) years from the finality of the expropriation judgment entitles the private owner to recover possession of the property.

On September 5, 1938, the Republic of the Philippines filed an expropriation complaint against the Denzons over Lots 932 and 939 of the Banilad Friar Land Estate in Cebu City to establish a military reservation. After depositing ₱9,500.00 with the Philippine National Bank, the government took possession of the lots. The Court of First Instance (CFI) of Cebu rendered a decision on May 14, 1940, fixing just compensation at ₱4,062.10. The Denzons' appeal was dismissed in 1948, and the judgment became final and executory. The Republic, however, never paid the adjudged compensation. The owners' heirs sought payment through various government offices over the decades but were met with denials and inaction. In 1961, the heirs filed a recovery of possession suit, which reached the Supreme Court in 1966 (Valdehueza v. Republic). The Court declared the heirs still the registered owners due to non-payment but denied recovery of possession, ordering instead the payment of an adjusted market value of ₱16,248.40. The Republic again failed to pay.

• Expropriation and Non-Payment: The Republic expropriated Lots 932 and 939 in 1938 for a military reservation and airport, taking possession after depositing ₱9,500.00. The CFI fixed just compensation at ₱4,062.10 in 1940, which became final in 1948. The government never paid the adjudged amount, and the payees of the initial deposit could not be ascertained due to destroyed records.
• Attempts to Secure Payment: From 1950 to 1961, the owners' heirs attempted to claim rentals and compensation from the National Airports Corporation, the Office of the President, and the Armed Forces. Their claims were denied, ignored, or left unresolved.
• Prior Supreme Court Ruling: In 1961, the heirs sued for recovery of possession. The Supreme Court, in Valdehueza v. Republic (1966), affirmed that the heirs remained the registered owners due to non-payment but denied recovery of possession because the lots were still devoted to public use and their titles bore annotations giving the National Airports Corporation priority to acquire the lots upon payment. The Court adjusted the market value to ₱16,248.40, payable with 6% interest from 1948.
• Mortgage and Foreclosure: In 1964, while the expropriation proceedings were still effectively pending due to non-payment, the heirs mortgaged Lot 932 to Vicente Lim. Upon the heirs' default, Lim foreclosed the mortgage in 1976, and a new title was issued in his name.
• Changed Circumstances: By the time Lim filed the quieting of title suit in 1992, Lot 932 had ceased to operate as an airport, marked only as the "former location of Lahug Airport." Only 13 structures remained on the site, mostly residential apartments for military personnel, with only two buildings used as training centers.

• Ownership Under Valdehueza: The Republic maintained that it retained ownership of Lot 932 based on the Supreme Court's ruling in Valdehueza, which denied the private owners the right to recover possession and recognized the government's right to the property upon payment.
• Public Interest and National Defense: Petitioners contended that the presence of military constructions on the site meant that public interest and national defense dictated that the suit should not be sustained, claiming reversion would cause "irreparable damage."
• Bad Faith of Respondent: The Republic argued that Lim acted in bad faith by entering into a mortgage contract with the heirs despite the clear annotation on the title regarding the National Airports Corporation's priority to acquire the property.

• Unjust Delay and Oppressive Taking: Respondent countered that the Republic's 50-year failure to pay just compensation constituted an oppressive exercise of eminent domain, rendering the compensation unjust and warranting the removal of the Republic's claim as a cloud on his title.
• Cloud on Title: Respondent argued that the Republic's unresolved claim over the property constituted a cloud, doubt, or uncertainty on his title that could be remedied by an action to quiet title.

• Transfer of Title: Whether the Republic retained ownership of Lot 932 despite its failure to pay just compensation for 57 years.
• Recovery of Possession: Whether the private owner is entitled to recover possession of the expropriated lot despite the prevailing doctrine that non-payment does not warrant recovery of possession.
• Effect of Mortgagee's Bad Faith: Whether respondent Lim's alleged bad faith in acquiring the mortgaged property affects his right to ownership and possession.

• Transfer of Title: Title to expropriated property does not vest in the condemnor until just compensation is actually paid. Because the Republic failed to pay the just compensation fixed by the CFI and adjusted by the Supreme Court for over half a century, the expropriation process was never completed, and ownership remained with the private owners.
• Recovery of Possession: Recovery of possession was justified under the exceptional circumstances of the case. The general rule that non-payment does not entitle the owner to recover possession was distinguished, as the Republic was ordered to pay twice yet deliberately refused to do so for 57 years. Failure to pay just compensation within five (5) years from the finality of the judgment entitles the owners to recover possession. Furthermore, the property had ceased to be used for its original expropriated purpose, and the military's convenience cannot justify the confiscation of private property.
• Effect of Mortgagee's Bad Faith: The issue of bad faith was immaterial because the Republic never acquired title over the property. The title annotation merely established a preferential right to acquire the property upon payment, which did not proscribe the owners from mortgaging it. Pending completion of expropriation, the registered owner retains all rights of ownership, including the right to dispose of the property. Moreover, a mortgagee's rights are protected even in the event of expropriation, pursuant to Article 2127 of the Civil Code.

• Just Compensation as Prompt Payment — Just compensation embraces not only the correct determination of the amount to be paid but also the payment of the property within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just," as the property owner is immediately deprived of their land while being forced to wait for the amount necessary to cope with the loss.
• Title Transfer in Eminent Domain — Title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. The expropriation process consists of two stages: (1) the determination of the authority to exercise eminent domain, and (2) the determination of just compensation. The process is not completed, and title does not pass, until payment of just compensation.
• Recovery of Possession for Delayed Payment — While the prevailing doctrine is that non-payment of just compensation does not entitle the private landowner to recover possession of expropriated lots, an exception exists where the government fails to pay just compensation within five (5) years from the finality of the judgment in the expropriation proceedings. In such cases, the owners concerned shall have the right to recover possession of their property, in consonance with the principle that the government cannot keep the property and dishonor the judgment.

• "Title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation."
• "Without prompt payment, compensation cannot be considered 'just' for the property owner is made to suffer the consequence of being immediately deprived of his land while being made to wait for a decade or more, in this case more than 50 years, before actually receiving the amount necessary to cope with the loss."
• "In cases where the government failed to pay just compensation within five (5) years from the finality of the judgment in the expropriation proceedings, the owners concerned shall have the right to recover possession of their property. This is in consonance with the principle that 'the government cannot keep the property and dishonor the judgment.'"

• Association of Small Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform — Followed. Cited for the principle that title to condemned property does not vest in the condemnor until judgment fixing just compensation is entered and paid, and that individual constitutional rights cannot be bypassed for mere expediency.
• Municipality of Biñan v. Garcia — Followed. Cited for the two-stage process of expropriation proceedings, emphasizing that expropriation is incomplete until payment of just compensation.
• Republic v. Salem Investment Corporation — Followed. Cited for the ruling that ownership remains with the registered owner until expropriation is completed, allowing the owner to exercise all rights, including disposal of the property.
• Valdehueza v. Republic — Distinguished/Modified. While the prior ruling affirmed private ownership due to non-payment, its denial of recovery of possession was effectively superseded by the extraordinary 57-year delay and the cessation of the property's public use as an airport.
• Republic v. Court of Appeals and Reyes v. National Housing Authority — Distinguished. Recognized as the prevailing doctrine that non-payment does not entitle recovery of possession, but distinguished due to the deliberate, decades-long refusal of the government to pay the adjudged compensation.

• Section 9, Article III, 1987 Constitution — Mandates that private property shall not be taken for public use without just compensation. Interpreted strictly against the expropriator and liberally in favor of the property owner, functioning as a limitation on the government's power of eminent domain.
• Article 2127, Civil Code — Provides that a mortgage extends to the amount of indemnity owing to the proprietor in virtue of expropriation for public use. Applied to establish that a mortgagee's rights remain protected even if the mortgaged property is ultimately expropriated.
• Section 6, Rule 39, Rules of Court — Prescribes a five (5) year period for execution on motion of a final and executory judgment. Used as the analog for the reasonable time limit within which the government must pay just compensation before the owner is entitled to recover possession.
• Section 2, Rule 52, 1997 Rules of Civil Procedure — Prohibits second motions for reconsideration. Applied to deny the Republic's urgent motion for clarification, which was treated as a prohibited second motion for reconsideration.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ.