Just Compensation for Property Obtained as Right-of-Way in Constructing the Metro Manila Flood Control Project

DOJ OPINION NO. 051 , s. 2010 November 11, 2010 Secretary Rogelio L. Singson Department of Public Works and Highways Manila Dear Secretary Singson : This refers to your request for legal opinion on the amount of just compensation Mesdames Nelly S. Sarabia and Louce S. Ozoa are entitled to when their property was partially taken by the Department of Public Works and Highways (DPWH) in 2001 in connection with the Construction of the Metro Manila Flood Control Project West of Manggahan. cAaDCE As a backgrounder, it appears that the DPWH offered the claimants to acquire their property needed as a right-of-way in the construction of the Metro Manila Flood Control Project West of Manggahan through a negotiated sale; that the latter accepted the value of P600.00 per square meter as just compensation based on the Bureau of Internal Revenue (BIR) zonal valuation of the property per certification dated December 15, 2004, of the Acting Revenue District Officer who classified it as agricultural lot; that, however, when the claimants went to the BIR to pay the capital gains tax on the sale of the said property, it refused to accept the said payment based on the zonal valuation of land of P600.00 per square meter on the ground that the current zonal valuation of the property is P2,000.00 per square meter as shown by the certification previously issued by the BIR dated October 4, 2004, stating that the current zonal valuation of the said property is P2,000.00 per square meter and categorized it as residential in nature; that on account of the refusal of the BIR to accept the payment of the capital gains tax based on the zonal valuation of land of P600.00 per square meter, the Deed of Sale for the property cannot be registered in the Office of the Registry of Deeds for Taguig City resulting in the non-registration of the certificate of title of the property in the name of the Republic of the Philippines and non-payment of just compensation to the claimants up to the present. It also appears that on July 4, 2007, the claimants executed a notarized Revocation and Rescission of the subject Deed of Sale invoking the Civil Code Provisions on void and inexistent contracts because of the two (2) conflicting zonal valuations issued by the BIR; that, however, the Office of the Solicitor General opined in its letter dated November 29, 2007, that the Deed of Sale executed by the parties is a perfected contract, and the fact that the BIR assessed a capital gains tax based on a higher zonal value does not affect the validity of the sale, and its mere inadequacy of the purchase price is not a valid ground for rescission. It further appears that to clarify the true zonal valuation for the subject property, the BIR stated in its BIR Technical Committee on Real Property Valuation (TCPRV) Resolution No. 17-2008 dated March 4, 2008, that pursuant to Revenue Memorandum Order (RMO) No. 41-91 dated November 11, 1991, the actual consideration appearing on the Deed of Absolute Sale shall be an acceptable tax base in the computation of capital gains and documentary stamp taxes in cases of negotiated purchase and/or sale of land by a government agency or government-owned corporation; that, however, the Central IROW-Committee passed a resolution recommending the reformation of the Deed of Sale by adopting the P2,000.00 per square meter as the just compensation for the property based on equity and Article 1359 of the Civil Code, which provides that when there having been a meeting of the minds of the parties to a contract, their true intention is not expressed in the instrument purporting to embody the agreement, by reason of mistake, fraud, inequitable conduct or accident, one of the parties may ask for reformation of the instrument to the end that such true intention may be expressed. With regret, this Department has to decline rendition of the requested opinion. Please be informed that as a matter of policy and established precedents, this Department does not render opinion on questions of just compensation, which is a justiciable matter and could at best be resolved only tentatively by the administrative authorities because the final decision rests not with them but with the courts of justice. 1 TEacSA Moreover, the specific issue raised in the instant query necessarily affects the substantive rights of private parties upon whom the opinion of the Secretary of Justice, which is merely advisory in nature, has no binding effect, and who may, in all probability, contest the same in court if the opinion turns out to be adverse to their interests. Inasmuch as the matter herein might subsequently be the subject of judicial controversy, it is neither advisable nor proper for this Office to comment thereon. 2 Further, the resolution of the issue would require us to pass upon the legality/validity of the action of the BIR relative to the payment of the capital gains tax and the refusal of the Registry of Deeds to register the Deed of Sale. Both the BIR and the Register of Deeds of Taguig City are, however, beyond the revisory authority of this Department. Pursuant to settled practice and precedents, the Secretary of Justice does not render opinion or express any comments on questions involving the interpretation and/or application of administrative rules and regulations of other departments/offices over which he exercises neither supervisory nor revisory authority, unless requested by the issuing agencies/departments by reason of their familiarity with the intent and purposes of the issuance and the extent of the application thereof. 3 Nonetheless, for your information and guidance, we invite your attention to Section 7 of the Implementing Rules & Regulations (IRR) of R.A. No. 8974 which directs the Implementing Agency to offer "as just compensation the price indicated in the current zonal valuation issued by the Bureau of Internal Revenue (BIR) for the area where the private property is located," to wit: "Section 7. Negotiated Sale of Purchase. If the owner of the property needed for a ROW is not willing to donate his property to the government, the Implementing Agency shall negotiate with the owner for the purchase of the property, offering as just compensation the price indicated in the current zonal valuation issued by the Bureau of Internal Revenue (BIR) for the area where the private property is located. . . ." (Emphasis supplied.) Just compensation has been described as "the just and complete equivalent of the loss which the owner of the thing expropriated has to suffer by reason of the expropriation." 4 The measure is not the taker's gain, but the owner's loss. 5 To compensate is to render something which is equal in value to that taken or received. The word "just" is used to intensify the meaning of the word "compensation"; to convey the idea that the equivalent to be rendered for the property taken shall be real, substantial, full, and ample. 6 It includes not only the correct determination of the amount to be paid to the owner of the land but also the payment of the land within a reasonable period of time from its taking. 7 Expressed differently, the compensation given to the owner is just if he receives for his property a sum equivalent to its "market value" 8 which, according to Section 6 9 of R.A. No. 8974, must be determined following the standards prescribed by Section 5 thereof. Section 5 of R.A. No. 8974 reads as follows: "Section 5. Standards for the Assessment of the Value of the Land Subject of Expropriation Proceedings or Negotiated Sale. In order to facilitate the determination of just compensation, the court may consider, among other well-established factors, the following relevant standards: (a) The classification and use for which the property is suited; (b) The developmental costs for improving the land; (c) The value declared by the owners; (d) The current selling price of similar lands in the vicinity; (e) The reasonable disturbance compensation for the removal and/or demolition of certain improvements on the land and for the value of improvements thereon; (f) The size, shape or location, tax declaration and zonal valuation of the land; TSDHCc (g) The price of the land as manifested in the ocular findings, oral as well as documentary evidence presented; and (h) Such facts and events as to enable the affected property owners to have sufficient funds to acquire similarly-situated lands of approximate areas as those required from them by the government, and thereby rehabilitate themselves as early as possible." Finally, it may not be amiss to state that it is an elementary rule in administrative law that administrative rules and regulations or policies enacted by administrative bodies to interpret the law which they are entrusted to enforce, have the force of law, and are entitled to great weight and respect. 10 The best authority to interpret a rule is the source of the rule itself. 11 Since it appears that the two (2) conflicting zonal valuation of the land were both issued by the BIR over a span of only two (2) months, the best authority to interpret the rule on zonal valuation of the land is the source itself, which is the BIR. Thus, if the BIR states that the zonal valuation of the subject land is P2,000.00 per square meter, then the said valuation should be controlling. Very truly yours, (SGD.) LEILA M. DE LIMA Secretary Footnotes 1. Secretary of Justice Opinion No. 95, s. 2002. 2. Secretary of Justice Opinions No. 89, s. 1999 and No. 31, s. 1997. 3. Secretary of Justice Opinions No. 88, s. 1998; No. 74, s. 1989. 4. Bernas, Joaquin G., The 1987 Philippine Constitution, A Reviewer-Primer, 1997 Ed., p. 118, citing Province of Tayabas v. Perez , 66 Phil. 467, 469 (1938). 5. NPC v. Manubay Agro-Industrial , G.R. No. 150936, 18 August 2004. 6. Jose Y. Feria and Maria Concepcion S. Noche, Civil Procedure Annotated, Vol. 2, 2001 Ed., p. 543; citing Manila Railroad Co. v. Velasquez , 32 Phil. 286, 313-314 (1915) and Province of Tayabas v. Perez , 66 Phil. 467 (1938). 7. Ibid. , p. 119, citing Municipality of Makati v. Court of Appeals , 190 SCRA 206, 213 (1990). 8. Ibid. 9. Section 6. Guidelines for Negotiated Sale. Should the implementing agency and the owner of the property agree on a negotiated sale for the acquisition of right-of-way, site or location for any national government infrastructure project, the standards prescribed under Section 5 hereof shall be used to determine the fair market value of the property, subject to review and approval by the head of the agency or department concerned. (Italics supplied.) 10. Rizal Empire Insurance Co. v. National Labor Relations Commission , 150 SCRA 565 (1987), Gonzales v. Landbank of the Philippines , 183 SCRA 520 (1990); Nestle Philippines, Inc. vs. Court of Appeals , 203 SCRA 504 (1991). 11. Bacobo v. Commission on Elections , 191 SCRA 576 (1990).