In Republic of the Philippines vs. Spouses Goloyuco, the Supreme Court affirmed that just compensation in expropriation cases must reflect the property’s fair market value, not merely its zonal valuation. This ruling protects property owners by ensuring they receive adequate compensation that considers various factors affecting the land’s true worth, promoting fairness in government takings.

Expropriation and Fair Value: How Much is Enough?

This case arose from the Republic of the Philippines’ (through the DPWH) expropriation of a 50-square-meter parcel of land owned by Spouses Pedro and Zenaida Goloyuco in Valenzuela City for the C-5 Northern Link Road Project. The central issue revolved around determining the just compensation for the property. The government argued that the compensation should be based on the Bureau of Internal Revenue (BIR) zonal valuation of P2,750.00 per square meter. The spouses Goloyuco, however, contended that the fair market value was significantly higher, considering the property’s location and comparable sales in the area. The Regional Trial Court (RTC) fixed the just compensation at P8,300.00 per square meter, a decision that was affirmed with modification by the Court of Appeals (CA). This ultimately led to the Supreme Court (SC) settling the dispute.

The Supreme Court emphasized that just compensation must be the “full and fair equivalent of the property taken from its owner by the expropriator.” The Court underscored that the determination of just compensation is a factual issue, and the findings of lower courts are generally respected unless there is a showing of grave error. The Court referenced Section 5 of Republic Act (R.A.) No. 8974, which lays out the standards for assessing the value of land subject to expropriation. These standards include the property’s classification and use, developmental costs, the current selling price of similar lands in the vicinity, and the size, shape, location, and zonal valuation of the land.

The Court acknowledged that while zonal valuation is a factor to consider, it cannot be the sole basis for determining just compensation. Other relevant factors must be taken into account to ensure that the property owner receives a fair price. As the Supreme Court has previously stated, zonal valuation, although one of the indices of the fair market value of real estate, cannot, by itself, be the sole basis of just compensation in expropriation cases. The CA correctly affirmed the RTC’s valuation, noting that the trial court did not rely solely on the Commissioners’ Report but made an independent assessment, considering various factors.

The Court referenced Capitol Steel Corporation v. PHIVIDEC Industrial Authority, clarifying the difference between the provisional value paid for the issuance of a writ of possession and the final just compensation. The provisional value is based on the zonal valuation, while just compensation is based on the prevailing fair market value. According to the Supreme Court:

The first refers to the preliminary or provisional determination of the value of the property. It serves a double-purpose of pre-payment if the property is fully expropriated, and of an indemnity for damages if the proceedings are dismissed. It is not a final determination of just compensation and may not necessarily be equivalent to the prevailing fair market value of the property.

The determination of just compensation in expropriation cases necessitates considering the specific characteristics of the expropriated property and the surrounding environment. Fair market value considers various factors, including location, potential use, and comparable sales. The ruling safeguards property owners from receiving inadequate compensation based solely on outdated or arbitrary valuation methods. This ensures that the government pays a fair price when exercising its power of eminent domain.

The Supreme Court also addressed the issue of interest on the unpaid balance of just compensation. Recognizing that the delay in payment constitutes a forbearance of money, the Court ordered the payment of interest. From the time of taking (September 24, 2008) until June 30, 2013, a 12% per annum interest rate was imposed. From July 1, 2013, onwards, the interest rate was reduced to 6% per annum, in accordance with Bangko Sentral ng Pilipinas (BSP) Circular No. 799. The Court further clarified that the total amount of just compensation would earn legal interest of 6% per annum from the finality of the decision until full payment.

FAQs

What is just compensation in expropriation cases?	Just compensation is the full and fair equivalent of the property taken, aiming to cover the owner’s loss, not the taker’s gain, ensuring a real, substantial, full, and ample equivalent.
Can zonal valuation be the sole basis for just compensation?	No, while zonal valuation is a factor, it cannot be the sole basis. Other factors like the property’s use, location, and comparable sales must also be considered to determine fair market value.
What factors determine just compensation?	Factors include property classification and use, developmental costs, owner-declared value, current selling price of similar lands, disturbance compensation, size, shape, location, tax declaration, and zonal valuation.
What is the difference between provisional value and just compensation?	Provisional value is a preliminary estimate based on zonal valuation, serving as a pre-payment or indemnity, while just compensation is the final determination of the fair market value of the property.
What interest rates apply to unpaid just compensation?	A 12% per annum interest rate applies from the time of taking until June 30, 2013. From July 1, 2013, onwards, the interest rate is 6% per annum until finality of the decision, with a continuing 6% until full payment.
What was the outcome of the Goloyuco case?	The Supreme Court affirmed the Court of Appeals’ decision, fixing just compensation at P8,300.00 per square meter, ensuring the spouses Goloyuco received fair compensation for their expropriated property.
Why is location important in determining just compensation?	Location significantly impacts the property’s value due to accessibility, proximity to commercial areas, and potential for development, making it a key factor in determining fair market value.
How does this case affect property owners facing expropriation?	It reinforces their right to receive just compensation based on fair market value, not just zonal valuation, ensuring they are adequately compensated for their loss.

The Supreme Court’s decision in Republic of the Philippines vs. Spouses Goloyuco reinforces the importance of protecting property rights in expropriation cases. By mandating that just compensation be based on the fair market value of the property, the Court ensures that landowners receive adequate compensation when the government exercises its power of eminent domain. This decision serves as a reminder that zonal valuation is only one factor to be considered, and that other relevant factors must be taken into account to determine the true value of the property.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Republic of the Philippines, AS REPRESENTED BY THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, vs. SPOUSES PEDRO GOLOYUCO AND ZENAIDA GOLOYUCO, G.R. No. 222551, June 19, 2019