REPUBLIC OF THE PHILIPPINES, PLAINTIFF AND APPELLANT, VS. PHILIPPINE NATIONAL BANK, ET AL., DEFENDANTS. VICENTE J. FRANCISCO, DEFENDANT AND APPELLANT.

Republic versus Francisco

The Case

This is an expropriation case. The Republic of the Philippines, through the National Government, sued to condemn fifty-four lots needed for the construction of Commonwealth Avenue in the Barrio of Culiat, Quezon City. One of those lots belonged to Vicente J. Francisco, and it was mortgaged to the Philippine Bank of Communications, which was impleaded as a co-defendant. The case matters for two reasons. First, it fixes the rule on the time at which just compensation is measured when the government takes possession before, rather than after, the filing of the complaint. Second, it shows how the owner's own pleadings and the sales of neighboring lots set the ceiling of fair market value, and how consequential benefits may offset consequential damages.

Procedural History

The Republic commenced the expropriation proceedings in the Court of First Instance of Rizal in January 1950. An amended complaint later increased the portion sought from the Francisco lot. The trial court admitted the amended complaint, authorized the plaintiff to take possession upon deposit of a provisional value, and allowed the defendant to withdraw that amount. The right to expropriate being in effect conceded, the court appointed three commissioners to ascertain the compensation. The commissioners disagreed: one recommended eighteen pesos per square meter plus ten thousand pesos in consequential damages, while the two others recommended no more than six pesos per square meter. The trial court then rendered judgment fixing just compensation at ten pesos per square meter, with interest at six percent per annum from the date the property was actually taken, minus the provisional amount already received. Both parties appealed to the Supreme Court, the defendant claiming an amount in excess of two hundred thousand pesos, exclusive of interest and costs.

Facts

Vicente J. Francisco owned a parcel of land, Lot 795-B-3, with an area of 42,844 square meters, mortgaged for sixty thousand pesos to the Philippine Bank of Communications. The government needed part of it for Commonwealth Avenue. The original complaint sought 13,110 square meters; the amended complaint increased this to 14,026 square meters. On the strength of the amended complaint, the trial court authorized the government to take possession upon deposit of seven thousand thirteen pesos as provisional value, and the defendant later withdrew that sum. Possession was actually taken by the government on March 26, 1952.

To prove the value of the land, the defendant presented deeds of sale of lots in the vicinity, two of which adjoined his property. These showed a steep rise in price: five centavos per square meter in March 1948, one peso and twenty-eight centavos a few months later, and over three pesos by March 1949, after Quezon City was declared the capital and permanent seat of the national government. Thereafter the increase became gradual. The defendant himself, in his answer to the original complaint, alleged a market value of not less than five pesos per square meter, and in his answer to the amended complaint, ten pesos per square meter. His claim of eighteen to twenty pesos rested only on his own opinion, and he was not qualified as a real estate expert.

The defendant also claimed ten thousand pesos for a barbed wire fence and one thousand pesos for fruit-bearing trees. The evidence on the fence was unsatisfactory, the few posts found being of bamboo, and the trees were in the portions of the land not taken and were allegedly destroyed by animals after neighbors had plundered the fence, before the government took possession.

Issues

• Whether or not the fair market value of the property should be determined as of the date of the filing of the complaint or as of the date the government actually took possession.
• Whether or not the defendant is entitled to consequential damages for the fence and the fruit-bearing trees.
• Whether or not the defendant must be required to cause the mortgage on the expropriated property to be cancelled.
• Whether or not interest should be paid on the entire amount of compensation awarded, including the provisional sum already received.

Applicable Provisions

Section 5 of Rule 69 of the Rules of Court provides:

When such a motion is overruled or when any party fails to defend as required by this rule, the court may enter an order of condemnation declaring that the plaintiff has a lawful right to take the property sought to be condemned, for the public use described in the complaint, upon the payment of just compensation, to be determined as of the date of the filing of the complaint. After the entry of such an order no objection to the exercise of the right of condemnation shall be filed or heard and the plaintiff shall not be permitted to dismiss or discontinue the proceeding except on such terms as the court fixes.

This provision fixes the date of the filing of the complaint as the measuring point for just compensation, and the whole dispute turns on whether that rule applies where the government took possession before the suit.

Ruling

On the first issue, the Court held that the value should be determined as of January 16, 1950, the date the complaint was filed. The rule in Section 5 governs under what the Court called normal circumstances, where the complaint coincides with or precedes the taking. But where the government takes possession before the filing of the complaint, the value is fixed as of the time of taking, because otherwise the owner would recover the unearned increment caused by the very public improvement for which his land is taken. Here, the taking came after the filing, so the date of the complaint controls. On the evidence, the Court found the defendant's own allegations of five and ten pesos per square meter to be admissions setting a ceiling on his claim, and, noting that an adjoining lot belonging to Claro M. Recto was expropriated at six pesos per square meter under a compromise agreement, it fixed compensation at six pesos per square meter.

On the second issue, the Court denied consequential damages. The fence evidence was unsatisfactory and the loss was attributable to the acts of neighbors before possession was taken. The fruit trees were on land not taken. Moreover, the remaining property of 28,818 square meters gained access to the highway and rose in value, so that the consequential benefits more than offset the claimed damages.

On the third issue, the Court held that the defendant must cause the mortgage to be cancelled, for, as it put it, it is but right for the government to acquire the property free from encumbrance.

On the fourth issue, the Court held that interest should not accrue on the seven thousand thirteen pesos already collected by the defendant in 1952, and should be charged only on the difference between the total compensation and that sum.

Doctrine

Just compensation is measured as of the date of the filing of the complaint when the taking coincides with or follows the institution of the proceedings, following Section 5 of Rule 69. Where the government takes possession before the filing of the complaint, the value is fixed as of the time of taking, so that the owner does not recover the unearned increment produced by the public improvement itself. The owner's own allegations of value in his pleadings operate as an admission that sets a ceiling on the compensation he may recover, and his unsupported opinion of value is not competent evidence absent qualification as an expert. Consequential benefits to the remaining property may offset consequential damages claimed by the owner. The government acquires expropriated property free from encumbrance, and interest runs only on the unpaid balance of the compensation, not on the provisional amount already received.

Disposition

The decision of the trial court was modified: the Republic was ordered to pay Vicente J. Francisco six pesos per square meter, or eighty-four thousand one hundred fifty-six pesos for 14,026 square meters, with interest at six percent per annum from March 26, 1952 on seventy-seven thousand one hundred forty-three pesos, the balance after deducting the seven thousand thirteen pesos already received, and Francisco was required to cause the mortgage on the expropriated lot to be cancelled.

Remember This

Memorize the rule: file first, value at filing; take first, value at taking. Examiners use this case to test the interplay between Section 5 of Rule 69 and the unearned increment principle, and to test whether an owner's own pleaded valuation binds him as an admission.