REPUBLIC vs. LIM (GR no. 161656) - Digest

FACTS:

In 1938, the Republic instituted a special civil action for expropriation of a land in Lahug, Cebu City for the purpose of establishing a military reservation for the Philippine Army. The said lots were registered in the name of Gervasia and Eulalia Denzon. The Republic deposited P9,500 in the PNB then took possession of the lots. Thereafter, on May 1940, the CFI rendered its Decision ordering the Republic to pay the Denzons the sum of P4,062.10 as just compensation. The Denzons appealed to the CA but it was dismissed on March 11, 1948. An entry of judgment was made on April 5, 1948.

In 1950, one of the heirs of the Denzons, filed with the National Airports Corporation a claim for rentals for the two lots, but it "denied knowledge of the matter." On September 6, 1961, Lt. Cabal rejected the claim but expressed willingness to pay the appraised value of the lots within a reasonable time.

For failure of the Republic to pay for the lots, on September 20, 1961, the Denzons· successors-in-interest,Valdehueza and Panerio, filed with the same CFI an action for recovery of possession with damages against the Republic and AFP officers in possession of the property.

On November 1961, Titles of the said lots were issued in the names of Valdehueza and Panerio with the annotation "subject to the priority of the National Airports Corporation to acquire said parcels of land, Lots 932 and939 upon previous payment of a reasonable market value".

On July 1962, the CFI promulgated its Decision in favor of Valdehueza and Panerio, holding that they are the owners and have retained their right as such over lots because of the Republic·s failure to pay the amount of P4,062.10,adjudged in the expropriation proceedings. However, in view of the annotation on their land titles, they were ordered to execute a deed of sale in favor of the Republic.

They appealed the CFI·s decision to the SC. The latter held that Valdehueza and Panerio are still the registered owners of Lots 932 and 939, there having been no payment of just compensation by the Republic. SC still ruled that they are not entitled to recover possession of the lots but may only demand the payment of their fair market value.

Meanwhile, in 1964, Valdehueza and Panerio mortgaged Lot 932 to Vicente Lim, herein respondent, as security for their loans. For their failure to pay Lim despite demand, he had the mortgage foreclosed in 1976. The lot title was issued in his name.

On 1992, respondent Lim filed a complaint for quieting of title with the RTC against the petitioners herein. On 2001, the RTC rendered a decision in favor of Lim, declaring that he is the absolute and exclusive owner of the lot with all the rights of an absolute owner including the right to possession. Petitioners elevated the case to the CA. In its Decision dated September 18, 2003, it sustained the RTC Decision saying: ´... This is contrary to the rules of fair play because the concept of just compensation embraces not only the correct determination of the amount to be paid to the owners of the land,but also the payment for the land within a reasonable time from its taking. Without prompt payment, compensation cannot be considered "just"...”

Petitioner, through the OSG, filed with the SC a petition for review alleging that they remain as the owner of Lot 932.

ISSUE:

Whether the Republic has retained ownership of Lot 932 despite its failure to pay respondent’s predecessors-in-interest the just compensation therefor pursuant to the judgment of the CFI rendered as early as May 14, 1940.

HELD: 

One of the basic principles enshrined in our Constitution is that no person shall be deprived of his private property without due process of law; and in expropriation cases, an essential element of due process is that there must be just compensation whenever private property is taken for public use. Accordingly, Section 9, Article III,  of our Constitution mandates: "Private property shall not be taken for public use without just compensation." The Republic disregarded the foregoing provision when it failed and refused to pay respondent’s predecessors-in-interest the just compensation for Lots 932 and 939.

The Court of Appeals is correct in saying that Republic’s delay is contrary to the rules of fair play. In jurisdictions similar to ours, where an entry to the expropriated property precedes the payment of compensation, it has been held that if the compensation is not paid in a reasonable time, the party may be treated as a trespasser ab initio.

As early as May 19, 1966, in Valdehueza, this Court mandated the Republic to pay respondent’s predecessors-in- interest the sum of P16,248.40 as "reasonable market value of the two lots in question." Unfortunately, it did not comply

and allowed several decades to pass without obeying this Court’s mandate. It is tantamount to confiscation of private property. While it is true that all private properties are subject to the need of government, and the government may take them whenever the necessity or the exigency of the occasion demands, however from the taking of private property by the government under the power of eminent domain, there arises an implied promise to compensate the owner for his loss.

There is a recognized rule that title to the property expropriated shall pass from the owner to the expropriator only upon full payment of the just compensation. So, how could the Republic acquire ownership over Lot 932 when it has not paid its owner the just compensation, required by law, for more than 50 years? Clearly, without full payment of just compensation, there can be no transfer of title from the landowner to the expropriator.

SC ruled in earlier cases that expropriation of lands consists of two stages. First is concerned with the determination of the authority of the plaintiff to exercise the power of eminent domain and the propriety of its exercise. The second is concerned with the determination by the court of "the just compensation for the property sought to be taken." It is only upon the completion of these two stages that expropriation is said to have been completed In Republic v. Salem Investment Corporation, we ruled that, "the process is not completed until payment of just compensation." Thus, here, the failure of the Republic to pay respondent and his predecessors-in-interest for a period of 57 years rendered the expropriation process incomplete.

Thus, SC ruled that the special circumstances prevailing in this case entitle respondent to recover possession of the expropriated lot from the Republic.

While the prevailing doctrine is that "the non-payment of just compensation does not entitle the private landowner to recover possession of the expropriated lots, however, in cases where the government failed to pay just compensation within five (5) years from the finality of the judgment in the expropriation proceedings, the owners concerned shall have the right to recover possession of their property. After all, it is the duty of the government, whenever it takes property from private persons against their will, to facilitate the payment of just compensation. In Cosculluela v. Court of Appeals, we defined just compensation as not only the correct determination of the amount to be paid to the property owner but also the payment of the property within a reasonable time. Without prompt payment, compensation cannot be considered "just."