Key Takeaway: The Supreme Court Clarifies Interest Rates and Fees in Expropriation Cases

Republic of the Philippines v. Heirs of Spouses Valentina Juan Bonifacio and Aurelio Bonifacio, G.R. No. 226734, May 10, 2021

Imagine waking up one day to find that the government has taken your property for a public project. You’re entitled to just compensation, but how is it determined, and what happens if the payment is delayed? This scenario is not uncommon in the Philippines, where expropriation cases can leave property owners grappling with the intricacies of legal compensation. The case of the Republic of the Philippines versus the Heirs of Spouses Valentina and Aurelio Bonifacio sheds light on these issues, offering crucial insights into how just compensation is calculated and the interest rates applicable when payments are delayed.

In this case, the government sought to expropriate a 913-square meter lot in Valenzuela City for the C-5 Northern Link Road Project. The Bonifacio Spouses’ heirs contested the initial valuation offered by the government, leading to a legal battle over the determination of just compensation. The central legal question was not only the appropriate amount of compensation but also the interest rate applicable to the delay in payment and the responsibility for commissioner’s fees.

Understanding the Legal Framework of Expropriation

Expropriation, or eminent domain, is the power of the state to take private property for public use upon payment of just compensation. The Philippine Constitution guarantees this right under Article III, Section 9, which states that “private property shall not be taken for public use without just compensation.”

The determination of just compensation is a judicial function, as established in the landmark case of Export Processing Zone Authority v. Dulay. The Supreme Court has consistently held that the courts, not legislative or executive bodies, have the final say in determining the value of expropriated property. This is to ensure that the compensation is fair and reflective of the property’s true value.

Key to this case is Republic Act No. 8974, which provides standards for assessing the value of land in expropriation proceedings. Section 5 of this act lists factors that courts may consider, such as the classification, size, and actual condition of the property. However, the use of “may” indicates that these are discretionary, not mandatory, considerations.

Another critical aspect is the interest on delayed payments. The Bangko Sentral ng Pilipinas (BSP) Circular No. 799, effective July 1, 2013, reduced the interest rate on loans and forbearance of money from 12% to 6% per annum. This change directly impacts how interest is calculated in expropriation cases, as seen in the Bonifacio case.

The Journey of the Bonifacio Case

The legal battle began in 2007 when the Department of Public Works and Highways (DPWH) filed a complaint for expropriation. The Bonifacio lot, valued at P2,285,500.00 with improvements worth P175,932.18, was the subject of the dispute. The government offered P2,282,500.00 for the lot and P175,996.04 for the improvements, which the heirs contested, claiming the market value was significantly higher due to the property’s location near an industrial site.

In 2009, the Regional Trial Court (RTC) issued a writ of possession, marking the official taking of the property. A Board of Commissioners was appointed in 2010 to determine just compensation, and in 2014, they recommended P10,000.00 per square meter, leading to a total compensation of P9,130,000.00. The RTC adopted this recommendation and ordered the government to pay the difference between this amount and the initial deposit, plus interest at 12% per annum from the filing of the complaint.

The Court of Appeals (CA) affirmed the RTC’s decision in 2016, but the Republic appealed to the Supreme Court, arguing that the just compensation was arbitrary and the interest rate should be 6% per annum as per BSP Circular No. 799.

The Supreme Court’s decision highlighted several key points:

• The determination of just compensation is a judicial function, and the courts’ findings are binding unless shown to be erroneous.
• The interest rate on the difference between the final just compensation and the initial deposit should be 12% per annum from the date of taking until June 30, 2013, and 6% per annum from July 1, 2013, until full payment.
• The government is exempt from paying commissioner’s fees, as per Rule 141, Section 16 of the Rules of Court.
• The award of attorney’s fees was deemed unjustified and was deleted.

The Court emphasized that just compensation should reflect the property’s fair market value at the time of taking, and any delay in payment should be penalized with appropriate interest rates.

Practical Implications and Key Lessons

This ruling has significant implications for future expropriation cases. Property owners can expect a more standardized approach to calculating interest on delayed payments, with a clear distinction between the periods before and after July 1, 2013. Additionally, the government’s exemption from paying commissioner’s fees is clarified, which may affect the costs borne by property owners in such proceedings.

For businesses and individuals facing expropriation, it’s crucial to understand the following key lessons:

• Monitor the date of taking: The interest on delayed compensation starts from this date, so it’s essential to document when the government takes possession of your property.
• Stay informed about interest rates: Be aware of changes in legal interest rates, as these can significantly impact the total compensation you receive.
• Seek legal advice: Given the complexity of expropriation cases, consulting with a legal expert can help ensure you receive fair compensation.

Frequently Asked Questions

What is just compensation in expropriation cases?
Just compensation is the fair market value of the property at the time of taking, as determined by the court, to ensure that property owners are adequately compensated for their loss.

How is the interest on delayed payment calculated?
The interest rate is 12% per annum from the date of taking until June 30, 2013, and 6% per annum from July 1, 2013, until the full payment of just compensation.

Is the government required to pay commissioner’s fees in expropriation cases?
No, the government is exempt from paying commissioner’s fees, as established by the Supreme Court.

Can property owners receive attorney’s fees in expropriation cases?
Attorney’s fees are not automatically awarded and must be justified by the facts of the case.

What should property owners do if their property is subject to expropriation?
Property owners should document the date of taking, seek legal advice, and stay informed about changes in legal interest rates to ensure they receive fair compensation.

ASG Law specializes in property law and expropriation cases. Contact us or email hello@asglawpartners.com to schedule a consultation.