REPUBLIC OF THE PHILIPPINES, PLAINTIFF-APPELLANT, VS. JOSE C. TAYENGCO AND ALICIA SCHMID-ECHOLS, DEFENDANTS-APPELLEES.

Republic versus Tayengco

The Case

This is an expropriation case. The Republic of the Philippines sued Jose C. Tayengco and Alicia Schmid Echols to take their land in Iloilo for the widening and improvement of the Iloilo South Road. The owners did not dispute the Republic's right to expropriate; they disputed only the price. The case matters because it fixes the rule on interest on just compensation: interest runs from the taking of the property or the filing of the complaint, and stops only on the portion actually paid or deposited. It is the classic illustration that a late deposit does not wipe out interest already accrued.

Procedural History

The Republic filed its complaint for expropriation in the Court of First Instance of Iloilo and simultaneously took possession of the properties. The trial court, adopting the commissioners' valuation of 35 pesos per square meter, rendered judgment ordering the Republic to pay Tayengco and Echols their respective awards, with legal interest at six percent per annum from 17 April 1957, crediting the amounts they had already received as partial payments. The Republic moved for reconsideration, asking that interest be imposed only on the balance after deducting its deposit; the motion was denied. The Republic appealed to the Court of Appeals, which, finding the case to involve purely a question of law, certified it to the Supreme Court. The Supreme Court decided the case in April 1967.

Facts

On 17 April 1957, the Republic filed a complaint in the Court of First Instance of Iloilo for the expropriation of certain parcels of land needed for the widening and improvement of the Iloilo South Road. At the same time, it took possession of the properties. The owners, Jose C. Tayengco and Alicia Schmid Echols, did not contest the right to expropriate, but objected to the amount of compensation, contending that it should be 60 pesos instead of 17 pesos per square meter.

On 17 January 1958, nine months after the complaint and the taking, the Republic deposited with the City Treasurer the sum of 12,149.22 pesos. Upon application of the defendants, the trial court, in an order dated 25 January 1958, authorized them to withdraw the deposit, apportioned as follows: 2,117.86 pesos to Tayengco and 10,131.36 pesos to Echols.

Finding the reasonable value of the properties to be 35 pesos per square meter, as evaluated by the commissioners, the trial court rendered judgment ordering the Republic to pay Tayengco the total sum of 4,360.30 pesos and Echols the total sum of 20,652.80 pesos, with legal interest at six percent per annum from 17 April 1957, crediting the amounts received under the order of 25 January 1958 as partial payments. The Republic sought reconsideration, arguing that interest should run only on the balance after deducting the deposit, invoking the Lara case. The motion was denied, and the Republic appealed.

Issues

• Whether or not the six percent legal interest on the compensation should be computed on the entire award from the date of taking, or only on the balance remaining after deducting the amount deposited by the Republic.
• Whether or not the deposit made nine months after the filing of the complaint and the taking of possession stops the running of interest on the amount deposited from the date of deposit.

Applicable Provisions

No statutory provision is quoted in the decision. The Court instead applies the settled doctrine laid down in Philippine Railway Company versus Solon, Philippine Railway Company versus Duran, and Manila Railway Company versus Attorney-General, and reiterated in Capitol Subdivision, Incorporated versus Province of Negros Occidental and Republic versus Yaptinchay. That doctrine provides:

Owners of expropriated lands are entitled to recover interest from the date the condemnor takes possession of the lands and the amounts granted by the court shall cease to earn interest only from the moment they are paid to the owners or deposited in court.

This rule governs both the period for which interest runs and the point at which it stops on the amount already deposited.

Ruling

On the first issue, the Court held that the Republic's proposition, though apparently valid, is partially incorrect. In the Lara case, the provisional deposit was made at the commencement of the proceedings; here, the Republic deposited the 12,149.22 pesos only nine months after filing the complaint and taking possession. The proposition fails to recognize that interest had already accrued from the time of taking or filing of the complaint up to the time of the deposit. The owners are therefore entitled to legal interest on their respective awards from 17 April 1957.

On the second issue, the Court held that the amount deposited ceases to bear interest only from the date it was deposited, 17 January 1958. Applying the doctrine, Tayengco and Echols should be paid legal interest on their respective awards from 17 April 1957, but the amount of 12,149.22 pesos, or 2,117.86 pesos to Tayengco and 10,131.36 pesos to Echols, shall cease to bear interest as of the date it was deposited. The appealed decision was affirmed.

Doctrine

Three rules a Bar candidate should retain. First, in expropriation, the owners of the condemned land are entitled to legal interest on the compensation from the date the condemnor takes possession, or from the filing of the complaint. Second, the amounts granted by the court cease to earn interest only from the moment they are paid to the owners or deposited in court. Third, a deposit made long after the taking does not retroactively stop interest on the whole award; interest already accrued up to the date of deposit remains due, and only the deposited amount stops earning interest from that date. The Republic versus Lara rule applies only where the provisional deposit is made at the commencement of the proceedings.

Disposition

The Supreme Court affirmed the appealed decision, with no costs. The Republic lost its appeal; the owners kept their awards with legal interest from 17 April 1957, the deposited amounts ceasing to earn interest only from 17 January 1958.

Remember This

Memorize the line: interest on just compensation runs from the taking or filing of the complaint, and the award stops earning interest only when actually paid or deposited in court. Examiners use this case to test whether a late provisional deposit can cut off interest already accrued; the answer is no, it stops interest only on the amount deposited and only from the date of deposit.