Tiongson vs. National Housing Authority

The expropriating authority may withdraw its provisional deposit after the expropriation complaint is finally dismissed, and a property owner's compulsory counterclaim for damages is barred when it was dismissed with the complaint at the owner's own instance and no reservation or appeal was made.

Petitioners are owners of several lots in Tondo, Manila, with a total area of 66,783.40 square meters and an aggregate value of P21,024,136.50. Respondent National Housing Authority is the expropriating authority that sought to acquire those lots. Expropriation proceedings under Rule 67 of the Rules of Court proceed in two stages: condemnation and ascertainment of just compensation.

Petitioners are the owners of several lots located in Tondo, Manila, with a total area of 66,783.40 square meters and an aggregate value of P21,024,136.50. On April 3, 1987, respondent National Housing Authority filed a complaint for eminent domain with the Regional Trial Court of Manila, Branch 35, against petitioners. Instead of filing an answer, petitioners filed motions to dismiss with a prayer for actual, moral and exemplary damages and attorney's fees.

On March 11, 1988, NHA deposited P21,107,485.07 with the Philippine National Bank as provisional just compensation for the subject lots, as evidenced by Certificate of Time Deposit No. 233991-B; the deposit was placed under PNB (Escolta Branch) Fiduciary Account No. 068-576012-6. On March 11, 1991, the trial court rendered a Decision granting petitioners' motion to dismiss and dismissing NHA's complaint and petitioners' counterclaims, with no pronouncement as to costs. The Court of Appeals affirmed the trial court in a Decision dated February 26, 1993. On petition before the Supreme Court, the Court resolved to declare the case terminated for NHA's failure to file its petition on time; the resolution became final and executory on July 26, 1993.

On September 7, 2000, NHA filed a motion for leave of court to withdraw the deposit but failed to specify a date for hearing. On October 30, 2000, NHA filed a second motion for leave to withdraw the deposit, setting the hearing on November 10, 2000. On November 8, 2000, the trial court issued an Order expunging the first motion from the records. It declared that the amount sought to be withdrawn by NHA constituted advance payment if the expropriation proceeded, and indemnity for damages should the proceedings not succeed, as in the instant case. The trial court noted that petitioners might have sustained damages in the course of the expropriation proceedings which they could pursue or waive; the motion being litigious, it set the same for hearing. NHA's motion for reconsideration was denied on December 8, 2000.

On appeal, the Court of Appeals held that the dismissal of petitioners' counterclaim barred them from presenting evidence to prove damages. It ruled that the trial court's assessment that they suffered damages was conjectural and inconsistent with the dismissal of the counterclaim. The Court of Appeals reversed and set aside the November 8, 2000 Order and directed the trial court to release to NHA the amount of P21,107,485.07, represented by PNB (Escolta Branch) Fiduciary Account No. 068-576012-6, including accrued interest thereon. Petitioners' motion for reconsideration was denied.

The records showed that after the dismissal of the complaint for expropriation became final on July 26, 1993, NHA filed its motion to withdraw the deposit on September 7, 2000, or after seven years. Petitioners did not oppose the motion, and there was no evidence that they took action to pursue their claim for damages during the entire seven years. They did not file a motion or pleading in court to ask for a hearing or to claim the damages they later sought.

• Notice of Hearing: Petitioners argued that the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in granting NHA's motion to withdraw its deposit although the motion should have been treated as a mere scrap of paper for lack of notice of hearing.
• Damages Hearing: Petitioners argued that the Court of Appeals likewise committed grave abuse of discretion in granting NHA's motion to withdraw the deposit even before a hearing could be held to determine the amount of damages suffered by petitioners as a result of the final dismissal of the complaint for expropriation.

• Notice of Hearing: Whether the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in granting NHA's motion to withdraw its deposit although the motion should have been treated as a mere scrap of paper for lack of notice of hearing.
• Damages Hearing: Whether the Court of Appeals committed grave abuse of discretion amounting to lack or excess of jurisdiction in granting NHA's motion to withdraw its deposit even before a hearing could be held to determine the amount of damages suffered by petitioners resulting from the final dismissal of the complaint for expropriation.

• Notice of Hearing: No. The petition lacks merit; the first motion was expunged from the records and the second motion set the hearing, and the Court of Appeals' disposition was affirmed.
• Damages Hearing: No. The counterclaim for damages was compulsory and was dismissed with the complaint; because petitioners did not appeal or pursue the claim and the dismissal became final, the deposit may be released to NHA.

• Notice of Hearing: The first motion for leave to withdraw deposit failed to specify a date for hearing and was expunged by the trial court. NHA thereafter filed a second motion that set the hearing on November 10, 2000. The Court of Appeals reversed the trial court's November 8, 2000 Order and directed release of the deposit. The Supreme Court denied the petition for lack of merit, thereby affirming the Court of Appeals.

• Damages Hearing: Expropriation proceedings are governed by Rule 67 and have two stages: condemnation and ascertainment of just compensation. During the condemnation stage, the court may issue an order of expropriation or an order of dismissal if the taking is not for public use. Here, the trial court dismissed NHA's complaint upon finding that acquisition was not for public purpose. The counterclaim for actual, moral and exemplary damages and attorney's fees was compulsory; it was auxiliary to the original suit and derived jurisdictional support therefrom. Under Financial Building Corp. vs. Forbes Park Assoc., Inc., a counterclaim presupposes a claim against the party filing it; where there is no claim against the counterclaimant, the counterclaim is improper and must be dismissed, especially where the complaint is dismissed at the instance of the counterclaimant. If dismissal of the main action results in dismissal of the counterclaim already filed, the filing of a motion to dismiss is an implied waiver of the compulsory counterclaim because granting the motion ultimately results in dismissal of the counterclaim. This also serves the objective of avoiding circuity of action. The NAPOCOR ruling—that dismissal of an expropriation action should not foreclose the defendant's right to have damages ascertained in the same case or a separate action—was not applicable. In NAPOCOR, both the property owner and the expropriating authority moved to dismiss, and the trial court allowed the property owner to adduce evidence on damages. Here, only the property owners moved to dismiss; the trial court dismissed their counterclaim without reservation; petitioners did not adduce evidence on damages; NHA appealed the dismissal of the complaint while petitioners did not appeal the dismissal of their counterclaim; and the dismissal became final on July 26, 1993. After seven years, NHA moved to withdraw the deposit; petitioners did not oppose the motion and the records showed no action by them to pursue damages. They thus had the time and opportunity to pursue their claim and cannot claim deprivation of due process. The Court of Appeals correctly reversed the trial court and directed release of the deposit.

• Two Stages of Expropriation — Expropriation proceedings under Rule 67 have two stages: first, condemnation of the property after determination that its acquisition is for public purpose; second, ascertainment of just compensation. During the condemnation stage, the court may issue an order of expropriation declaring the plaintiff's lawful right to take the property, or an order of dismissal if the expropriation is not for public use. Applied: the trial court dismissed NHA's complaint upon finding that the acquisition was not for public purpose.
• Compulsory Counterclaim — A counterclaim presupposes the existence of a claim against the party filing it. Where there is no claim against the counterclaimant, the counterclaim is improper and must be dismissed, more so where the complaint is dismissed at the instance of the counterclaimant. A compulsory counterclaim is auxiliary to the original suit and derives its jurisdictional support therefrom. Applied: petitioners' counterclaim for damages was compulsory and was dismissed with the complaint.
• Implied Waiver of Compulsory Counterclaim — If the dismissal of the main action results in the dismissal of the counterclaim already filed, the filing of a motion to dismiss the complaint is an implied waiver of the compulsory counterclaim because the grant of the motion ultimately results in the dismissal of the counterclaim. Applied: petitioners moved to dismiss NHA's complaint, resulting in dismissal of their own compulsory counterclaim; they did not appeal, and the dismissal became final.
• Avoidance of Circuity of Action — The primary objective of a counterclaim is to avoid and prevent circuity of action by allowing the entire controversy between the parties to be litigated and finally determined in one action, wherever this can be done with justice to all parties concerned. Applied: the compulsory counterclaim was part of the original expropriation suit and was dismissed with it.
• Reservation of Damages in Expropriation (NAPOCOR Exception) — When a defendant claims that his land suffered damage because of expropriation, the dismissal of the action should not foreclose the defendant's right to have damages ascertained either in the same case or in a separate action. This rule does not apply where the motion to dismiss was filed only by the property owner, the trial court dismissed the counterclaim without reservation, the property owner did not adduce evidence on damages, and the dismissal of the counterclaim was not appealed and became final. Applied: the NAPOCOR rule was distinguished and did not save petitioners' claim.
• Due Process in Pursuing Damages — A party cannot claim deprivation of due process where it had the time and opportunity to pursue its claim for damages but failed to do so. Applied: petitioners took no action for seven years after the dismissal became final and did not oppose NHA's motion to withdraw the deposit.

• "There are two stages in every action for expropriation: first, condemnation of the property after determination that its acquisition is for public purpose; and, second, the ascertainment of just compensation." — States the two-stage framework governing expropriation under Rule 67 and frames the Court's analysis of the dismissal at the condemnation stage.
• "A counterclaim presupposes the existence of a claim against the party filing the counterclaim. Hence, where there is no claim against the counterclaimant, the counterclaim is improper and it must be dismissed, more so where the complaint is dismissed at the instance of the counterclaimant." — Articulates the compulsory-counterclaim rule applied to petitioners' dismissed claim for damages.
• "In other words, if the dismissal of the main action results in the dismissal of the counterclaim already filed, it stands to reason that the filing of a motion to dismiss the complaint is an implied waiver of the compulsory counterclaim because the grant of the motion ultimately results in the dismissal of the counterclaim." — States the implied-waiver doctrine that barred petitioners from later pursuing damages.
• "Clearly, they cannot claim to have been deprived of due process as they had the time and opportunity to pursue their claim for the damages they may have sustained as a result of the filing of the complaint for expropriation." — Rejects petitioners' due process objection to the release of the deposit after seven years of inaction.

• Financial Building Corp. vs. Forbes Park Assoc., Inc., 392 Phil. 895 (2000) — Cited for the rule that a counterclaim presupposes a claim against the counterclaimant; where there is no claim, the counterclaim is improper and must be dismissed, more so where the complaint is dismissed at the instance of the counterclaimant; filing a motion to dismiss is an implied waiver of a compulsory counterclaim.
• National Power Corporation vs. Court of Appeals, G.R. No. 106804, August 12, 2004, 436 SCRA 195 — Distinguished. In NAPOCOR, both the property owner and the expropriating authority moved to dismiss, and the trial court allowed the property owner to adduce evidence on damages. Here, only the property owners moved to dismiss, no reservation was made, no evidence on damages was presented, and the dismissal of the counterclaim was not appealed.
• National Housing Authority vs. Heirs of Isidro Guivelondo, G.R. No. 154411, June 19, 2003, 404 SCRA 389, 398 — Cited for the two stages of expropriation: condemnation and ascertainment of just compensation.
• Metals Engineering Resources Corp. vs. Court of Appeals, G.R. No. 95631, October 28, 1991, 203 SCRA 273, 282 — Cited for the primary objective of a counterclaim to avoid and prevent circuity of action by allowing the entire controversy to be litigated and finally determined in one action.

• Rule 67, Rules of Court — Governs expropriation proceedings, or the procedure to enforce the state's right of eminent domain. The Court applied it to identify the two stages of expropriation and the condemnation-stage options of an order of expropriation or an order of dismissal if the taking is not for public use. The trial court's dismissal of NHA's complaint was an order of dismissal at the condemnation stage.

Chief Justice Hilario G. Davide, Jr.; Associate Justices Leonardo A. Quisumbing, Antonio T. Carpio, and Adolfo S. Azcuna.