Reyes vs. National Housing Authority

Non-payment of just compensation does not entitle the former owner to recover possession of expropriated property condemned in fee simple, but the owner is entitled to the unpaid compensation with 12% legal interest per annum from the time of taking until full payment.

In 1977, the National Housing Authority (NHA) filed expropriation complaints against petitioners' sugarcane lands in Dasmariñas, Cavite, for the expansion of the Dasmariñas Resettlement Project to accommodate Metro Manila squatters. The Court of First Instance rendered judgment ordering the expropriation and payment of just compensation, which was affirmed by the Supreme Court in 1987. An alias writ of execution was issued in 1989 directing the transfer of titles to NHA, payment of just compensation, and directing petitioners to pay capital gains tax.

• The Expropriation Proceedings: In 1977, NHA initiated expropriation cases over petitioners' sugarcane lands for the Dasmariñas Resettlement Project. The trial court ruled in favor of NHA, and the Supreme Court affirmed the judgment in NHA vs. Zaballero in 1987.
• The Alias Writ of Execution: On February 24, 1989, the expropriation court issued an Alias Writ of Execution ordering the Register of Deeds to transfer the titles to NHA, directing NHA to pay the adjudicated compensation, and directing the petitioners to pay the capital gains tax.
• The Forfeiture Complaint: On April 28, 1992, petitioners filed a complaint for forfeiture of rights before the RTC of Quezon City, alleging NHA failed to pay just compensation and violated the public purpose by not relocating Metro Manila squatters and instead contracting a private developer for low-cost housing.
• The Ocular Inspection: An ocular inspection conducted by the trial court revealed that only 80% of one lot was occupied by relocatees (relocated in March 1994), while other lots contained concrete houses not occupied by NHA relocatees, with large areas still unoccupied.

• Public Use: Petitioner argued that NHA violated the stated public purpose by failing to relocate Metro Manila squatters and entering into a contract for low-cost housing construction, which allegedly deviated from the resettlement project purpose.
• Forfeiture by Non-Payment: Petitioner maintained that the continued failure of NHA to pay just compensation justified the forfeiture of its rights over the expropriated lots and the return of the property.
• Reversion: Petitioner contended that the expropriation judgment should be declared forfeited and the property returned because the property was not being used for the intended public purpose.

• Substantial Payment: Respondent countered that it had already paid a substantial amount of the just compensation.
• Execution Hindered: Respondent argued that the expropriation judgment could not be fully executed due to issues concerning petitioners' failure to pay capital gains tax, surrender the owners' duplicate certificates of title, and disputes over attorney's fees.

• Public Use: Whether the construction of low-cost housing by a private developer constitutes an abandonment or deviation from the public purpose of expanding a resettlement project for squatters.
• Effect of Non-Payment: Whether the non-payment of just compensation entitles the former owners to the return of the expropriated property or the forfeiture of the expropriator's rights.
• Reversion: Whether expropriated property automatically reverts to the former owner when the public purpose is allegedly abandoned or not strictly pursued.

• Public Use: The construction of low-cost housing on expropriated lots to be sold to qualified low-income beneficiaries does not deviate from the stated public purpose. "Public use" is synonymous with "public interest," "public benefit," "public welfare," and "public convenience." Expropriation for slum clearance and urban development is for a public purpose even if the area is later sold to private homeowners. The Constitution mandates a continuing program of urban land reform and housing.
• Effect of Non-Payment: Non-payment of just compensation does not entitle the private landowners to recover possession of their expropriated lots. The right of the expropriating authority is not akin to that of an unpaid seller in ordinary sales where rescission applies. Condemnation is an in rem proceeding that vests paramount title in the public under a new and independent title.
• Reversion: Property expropriated in fee simple unconditionally does not revert to the former owner even if the public use is abandoned or the land is devoted to a different use. The expropriation judgment here gave NHA a fee simple title without any condition of reversion.
• Just Compensation and Interest: NHA's refusal to pay just compensation based on petitioners' failure to pay capital gains tax and surrender titles is unjustified, as payment of just compensation is not subject to any condition under the judgment. However, title to the property passes only upon full payment. Petitioners are entitled to the unpaid balance plus 12% legal interest per annum from the time of taking (1977) until full payment to offset currency fluctuation and inflation.

• Concept of Public Use in Eminent Domain — "Public use" is no longer limited to strict "use by the public" (e.g., streets or parks) but is synonymous with "public interest," "public benefit," "public welfare," and "public convenience." Whatever may be beneficially employed for the general welfare satisfies the requirement of public use.
• Reversion of Expropriated Property — If land is expropriated unconditionally in fee simple, the former owner retains no rights in the land, and the public use may be abandoned or the land devoted to a different use without any reversion to the former owner. Reversion occurs only if the decree of expropriation expressly conditions the return of the property upon the termination or abandonment of the public purpose.
• Effect of Non-Payment on Title — Although the right to enter upon and appropriate land to public use is completed prior to payment, title to the property expropriated passes from the owner to the expropriator only upon full payment of just compensation. However, non-payment does not entitle the former owner to recover possession of the property; the remedy is to demand the market value or just compensation.
• Legal Interest on Just Compensation — If property is taken before compensation is deposited, the final compensation must include legal interest (12% per annum) on its just value computed from the time the property is taken to the time of actual payment, to place the owner in as good a position as before the taking.

• "Whatever may be beneficially employed for the general welfare satisfies the requirement of public use."
• "When land has been acquired for public use in fee simple unconditionally, either by the exercise of eminent domain or by purchase, the former owner retains no rights in the land, and the public use may be abandoned, or the land may be devoted to a different use, without any impairment of the estate or title acquired, or any reversion to the former owner."
• "In arguing for the return of their property on the basis of non-payment, respondents ignore the fact that the right of the expropriating authority is far from that of an unpaid seller in ordinary sales, to which the remedy of rescission might perhaps apply. An in rem proceeding, condemnation acts upon the property."

• NHA vs. Zaballero, 155 SCRA 224 (1987) — Affirmed the trial court's judgment ordering the expropriation of the subject lots and payment of just compensation.
• Heirs of Juancho Ardona vs. Reyes, 125 SCRA 220 (1983) — Explained the rationale for the expanded concept of "public use" in the Philippines, abandoning the restrictive view that limits it to literal use by the public.
• Fery vs. Municipality of Cabanatuan, 42 Phil 28 (1921) — Established the doctrine that unconditionally expropriated property in fee simple does not revert to the former owner even if the public use is abandoned, absent a condition for reversion in the judgment.
• Republic vs. Court of Appeals, G.R. No. 146587, July 2, 2002 — Ruled that non-payment of just compensation does not entitle the landowner to recover possession of expropriated lots and imposed 12% legal interest to eliminate issues of currency fluctuation.
• Association of Small Landowners in the Phils., Inc. vs. Secretary of Agrarian Reform, 175 SCRA 343 (1989) — Held that title to property under condemnation proceedings does not vest in the condemnor until just compensation is entered and paid, although the right to appropriate the land is complete prior to payment.

• Section 9, Article III, 1987 Constitution — Private property shall not be taken for public use without just compensation. Applied as the constitutional restraint on eminent domain requiring public use and just compensation.
• Section 9, Article XIII, 1987 Constitution — Mandates the State to undertake, for the common good, a continuing program of urban land reform and housing to make affordable decent housing and basic services available to underprivileged and homeless citizens in urban centers and resettlement areas. Applied to justify the NHA's low-cost housing project as compliant with the "public use" requirement.
• Section 1, Article XIII, 1987 Constitution — Social justice provision requiring the State to protect and enhance the right of the people to human dignity and reduce social, economic, and political inequalities by equitably diffusing wealth and political power for the common good. Applied to support expropriation for socialized housing.
• Article 1250, Civil Code — Provides that in case of extraordinary inflation or deflation, the value of the currency at the time of the establishment of the obligation shall be the basis for payment. Distinguished as having strict application only to contractual obligations, hence legal interest is imposed in expropriation cases instead.

Panganiban, Sandoval-Gutierrez, Corona, and Carpio-Morales, JJ.