Prompt Payment is Paramount: Just Compensation Must Include Legal Interest in Expropriation Cases

G.R. No. 232169, March 08, 2023

The power of eminent domain allows the government to take private property for public use, but this power is tempered by the constitutional requirement of just compensation. This includes not just the fair market value of the property, but also legal interest to compensate the owner for any delay in payment. The Supreme Court, in this case, reiterates the importance of prompt payment and the proper computation of legal interest in expropriation cases, ensuring landowners are justly compensated for their loss.

The Imperative of Just Compensation in Expropriation

Eminent domain, the government’s right to expropriate private property for public use, is enshrined in the Philippine Constitution. However, this power is not absolute. Section 9, Article III of the 1987 Constitution explicitly states that “[n]o private property shall be taken for public use without just compensation.” This seemingly simple provision has far-reaching implications, ensuring that individuals are not unfairly burdened when the state exercises its power.

“Just compensation” is not merely the initial valuation of the property. It encompasses the full and fair equivalent of the loss sustained by the property owner. As the Supreme Court has consistently held, it includes interest accruing from the time the property is taken until the full amount is paid. This interest serves to offset the loss of income or use the owner experiences during the period of delayed payment.

For instance, imagine a family owning a small parcel of land in a rapidly developing area. The government decides to build a new highway that will pass through their property. While the project benefits the community, the family is deprived of their land and its potential income. Just compensation, therefore, must account for not only the current market value but also the potential earnings lost during the years it takes for the government to fully pay them.

Key legal provisions in play include:

• Section 9, Article III of the 1987 Constitution: “No private property shall be taken for public use without just compensation.”
• Rule 67, Rules of Court (Expropriation Proceedings): Governs the procedural aspects of expropriation cases.
• Republic Act No. 8974: An act to facilitate the acquisition of right-of-way, site or location for national government infrastructure projects.

Republic vs. Tamparong: A Case of Delayed Justice

The case of Republic of the Philippines vs. Casimiro Tamparong, Jr. revolves around a parcel of land in Cagayan de Oro City, expropriated by the Department of Public Works and Highways (DPWH) for the Cagayan de Oro Third Bridge project. The DPWH filed a complaint for expropriation in 1999, and the Republic was given possession of the said land by virtue of an Order of Expropriation on November 27, 2000. What followed was a protracted legal battle over the just compensation to be paid to Tamparong.

Here’s a breakdown of the key events:

• 1999: DPWH files expropriation complaint.
• November 27, 2000: RTC issues Order of Expropriation.
• January 21, 2010: RTC sets just compensation at PHP 3,500 per square meter, including legal interest from the taking of possession.
• March 7, 2013: Writ of Execution issued.
• January 13, 2014: DPWH proposes a computation with a 6% interest rate.
• March 5, 2014: Tamparong moves for recomputation, seeking 12% interest.
• June 25, 2014: RTC fixes interest at 12% per annum.
• December 3, 2018: Casimiro Tamparong, Jr. passes away without receiving full compensation.

The core dispute centered on the interest rate to be applied to the unpaid balance of the just compensation. The DPWH initially proposed a 6% interest rate, while Tamparong, citing prevailing jurisprudence, argued for 12%. The RTC sided with Tamparong, but the Republic appealed, leading to the Supreme Court decision.

The Supreme Court emphasized the importance of placing the landowner in as good a position as they were before the taking occurred:

“[I]f property is taken for public use before compensation is deposited with the court having jurisdiction over the case, the final compensation must include interests on its just value to be computed from the time the property is taken to the time when compensation is actually paid or deposited with the court. In fine, between the taking of the property and the actual payment, legal interests accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred.”

Furthermore, the Court addressed the Republic’s argument that provisional payments negated the need for interest:

“The Government’s initial payment of just compensation does not excuse it from avoiding payment of interest on the difference between the adjudged amount of just compensation and the initial payment.”

Implications and Key Lessons for Landowners

This case reinforces the principle that just compensation is not a mere formality, but a constitutional right that must be fully protected. It clarifies the proper computation of legal interest in expropriation cases and underscores the government’s obligation to ensure prompt and fair payment.

Key Lessons:

• Demand Legal Interest: Landowners should always insist on the inclusion of legal interest in the computation of just compensation, calculated from the time of taking until full payment.
• Know the Prevailing Rates: Stay informed about the applicable legal interest rates, which may change over time. From the time of taking until July 1, 2013, the rate is 12% per annum. From July 1, 2013 onwards, it is 6% per annum.
• Seek Legal Counsel: Engage a lawyer experienced in expropriation cases to protect your rights and ensure you receive just compensation.

Imagine a scenario where a business owner’s property is expropriated for a new airport expansion. The government offers an initial payment, but the business owner suspects the valuation is too low. Based on the Tamparong ruling, the business owner should:

1. Secure an independent appraisal of the property’s market value.
2. Negotiate with the government for a fair price, including all consequential damages.
3. Insist on the inclusion of legal interest in the final compensation package, calculated from the date of taking.
4. If negotiations fail, file a case in court to determine the final amount of just compensation.

Frequently Asked Questions

Q: What is just compensation in expropriation cases?

A: Just compensation is the full and fair equivalent of the loss sustained by the property owner, including the market value of the property and legal interest from the time of taking until full payment.

Q: When does the legal interest start accruing?

A: The legal interest starts accruing from the time the government takes possession of the property.

Q: What are the current legal interest rates?

A: The legal interest rate is 12% per annum from the time of taking until July 1, 2013, and 6% per annum from July 1, 2013, until full payment.

Q: Does the government’s initial payment affect the obligation to pay interest?

A: No, the government’s initial payment does not excuse it from paying interest on the difference between the final adjudged amount and the initial payment.

Q: What should I do if I believe the government’s offer is too low?

A: Seek legal counsel and obtain an independent appraisal of your property to negotiate for a fair price or file a case in court.

Q: What happens if the landowner dies before receiving full payment?

A: The right to receive just compensation passes on to the landowner’s heirs.

Q: Can the government take my property even if I don’t want to sell it?

A: Yes, if the government needs your property for public use and offers just compensation, it can exercise its power of eminent domain.

Q: What is the role of the court in expropriation cases?

A: The court determines the final amount of just compensation if the landowner and the government cannot agree on a price.

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