REPUBLIC OF THE PHILIPPINES (MINISTRY OF EDUCATION AND CULTURE), PETITIONER, VS. INTERMEDIATE APPELLATE COURT AND AMEREX ELECTRONICS, PHILS. CORPORATION, RESPONDENTS.

Republic of the Philippines versus Amerex Electronics

The Case

This is an expropriation case. The Republic of the Philippines, acting for what was then the Ministry of Education and Culture, took private land in Manila for the permanent site of a public high school, and the only real quarrel left is the price. The owner, Amerex Electronics, Phils. Corporation, does not dispute the government's right to condemn; it disputes the amount of just compensation. The case matters because the Supreme Court uses it to settle two questions every expropriation practitioner must know: how much weight a court must give to the report of appraisal commissioners, and what evidence may properly fix the value of condemned property.

Procedural History

The government filed its complaint for expropriation before the Court of First Instance of Manila. The trial court placed the government in possession, appointed three commissioners, received their appraisal report, and rendered judgment fixing just compensation at two million two hundred fifty-eight thousand and eighteen pesos and fifty-seven centavos. The government appealed to the then Intermediate Appellate Court, which affirmed the trial court's decision, modifying it only by exempting the Republic from paying the commissioners' fees, the five hundred pesos granted each commissioner for preparing the report, and the costs. The government's motion for reconsideration was denied, so it came to the Supreme Court by petition for review on certiorari.

Facts

The property consists of four parcels of land with a total area of nine thousand six hundred fifty square meters on Dr. Manuel L. Carreon Street in Manila, a short walking distance from Herran Street, now Pedro Gil Street. Its previous owner, Avegon, Incorporated, offered it for sale to the City School Board of Manila in July 1973 at two million three hundred thousand pesos. The school board was willing to buy at one million eight hundred thousand pesos, but the negotiation did not materialize. In June 1974, Avegon sold the property and its improvements to Amerex for one million eight hundred thousand pesos, and new transfer certificates of title were issued in Amerex's name.

In August 1975, the Solicitor General filed a complaint for expropriation for the Ministry of Education and Culture, stating that the property was needed as the permanent site of the Manuel de la Fuente High School, later renamed Don Mariano Marcos Memorial High School. Invoking Presidential Decree Number 42, the government deposited the assessed value of one million three hundred three thousand four hundred seventy pesos with the Philippine National Bank, and in October 1975 the court ordered the government placed in possession. The government took actual possession on October 13, 1975.

The trial court appointed three commissioners. They conducted an ocular inspection and hearings, and in January 1977 submitted a report finding a fair market value of two million seven hundred sixty-three thousand four hundred pesos, yet recommending only two million two hundred fifty-eight thousand and eighteen pesos and fifty-seven centavos, the total drawn from Amerex's own statements of acquisition cost and maintenance expenses. Both parties objected. The trial court adopted the recommendation and fixed just compensation at that amount, with legal interest from October 13, 1975, after deducting the deposit. The Intermediate Appellate Court affirmed, and the government elevated the case to the Supreme Court.

Issues

• Whether or not the appellate court erred in not disqualifying Commissioner Aurelio B. Aquino from the committee of appraisal.
• Whether or not the appellate court erred in not totally disregarding the audited statements submitted by Amerex, which were hearsay and were not formally offered in evidence.
• Whether or not the appellate court erred in disregarding the government's evidence that just compensation should be only one million eight hundred thousand pesos rather than two million two hundred fifty-eight thousand and eighteen pesos and fifty-seven centavos.

Applicable Provisions

Section 8 of Rule 67 of the Rules of Court provides:

Upon the filing of such report, the court may accept the report and render judgment in accordance therewith; or for cause shown, it may recommit the same to the commissioners for further report of facts, or it may set aside the report and appoint new commissioners, or it may accept the report in part and reject it in part; and may make such order or render such judgment as shall secure to the plaintiff the property essential to the exercise of his right of condemnation, and to the defendant just compensation for the property so taken.

This provision is the foundation of the Court's ruling that the commissioners' report is merely advisory and that the power to fix just compensation remains with the court.

Ruling

On the first issue, the Court held that the disqualification of Commissioner Aquino deserves scant attention. Under Section 8 of Rule 67, the report of commissioners is merely advisory and recommendatory in character as far as the court is concerned. It hardly matters that one commissioner had a preconceived valuation, for the report of only two commissioners may suffice if the third dissents, and the participation of an allegedly biased commissioner does not warrant total disregard of the report absent proof that the other two were unduly influenced.

On the second issue, the Court held that the trial court erred in basing the award on Amerex's audited statements. The Court examined the certifications of the accounting firm and found that they merely compared the figures in the schedules with the books of Amerex, expressly stating that no audit of the books of accounts was made. The Court explained that to audit is to examine an account, compare it with the vouchers, adjust the same, and state the balance, and that audit generally includes investigation, the weighing of evidence, and the exercise of discretion. The accuracy of the statements was therefore suspect. Worse, the government was not furnished copies, the statements were not introduced in evidence, and the officers who could have been cross-examined were never presented.

On the third issue, the Court held that the courts below made an erroneous determination of just compensation. Since the Court had earlier declared unconstitutional the mode of fixing just compensation under Presidential Decree Number 794, just compensation should be determined either at the time of the actual taking by the government or at the time of the judgment of the court, whichever comes first. Here, the condemnation order and the actual taking both occurred in October 1975. The appraisal of June 5, 1975, the date nearest to the actual taking, should therefore govern, and the appraiser had testified at trial and was available for confrontation. That appraisal fixed the fair market value at two million four hundred thousand pesos, and its reasonableness was bolstered by a June 4, 1975 offer to buy the property at two million seven hundred fifty thousand pesos. The Court rejected the government's claim of one million eight hundred thousand pesos for failure of substantiation.

Doctrine

The report of commissioners in expropriation proceedings is merely advisory and recommendatory; the determination of just compensation is basically a judicial function, and the court may accept the report, recommit it, set it aside, or accept it in part and reject it in part, and may even substitute its own estimate of value as gathered from the record. The court may not accept the report without considering whether it is supported by evidence and whether the commissioners applied correct legal principles. Just compensation is determined either at the time of the actual taking or at the time of the judgment of the court, whichever comes first, and not by the unconstitutional mode of valuation under Presidential Decree Number 794.

Disposition

The petition was granted in the sense that the just compensation was fixed at two million four hundred thousand pesos, from which the deposit of one million three hundred three thousand four hundred seventy pesos is deducted, with the balance to be paid with legal interest from October 13, 1975.

Remember This

Memorize this line: the commissioners' report is merely advisory, and just compensation is a judicial function fixed at the time of taking or judgment, whichever comes first. Examiners use this case to test the weight of commissioner reports and the proper valuation date in expropriation.