to submit their respective position papers.

8 Thereafter, the case was set for hearing giving the

parties the opportunity to present and identify all evidence in support of their arguments therein.

According to the RTC, the records of the case reveal that petitioner adduced evidence to show
that the total amount deposited is just, fair, and equitable. Specifically, in its Position Paper,
petitioner alleged that pursuant to a Certification issued by the Bureau of Internal Revenue
(BIR), Revenue Region No. 5, the zonal value of the subject property in the amount of
THIRD DIVISION P2,100.00 per square meter is reasonable, fair, and just to compensate the defendant for the
taking of her property in the total area of 200 square meters. 9 In fact, Tax Declaration No.
C-018-07994, dated November 13, 2009 submitted by petitioner, shows that the value of the
G.R. No. 211666, February 25, 2015 subject property is at a lower rate of P400.00 per square meter. Moreover, as testified to by
Associate Solicitor III Julie P. Mercurio, and as affirmed by the photographs submitted, the
REPUBLIC OF THE PHILIPPINES, REPRESENTED BY THE DEPARTMENT OF PUBLIC subject property is poorly maintained, covered by shrubs and weeds, and not
WORKS AND HIGHWAYS, Petitioners, v. ARLENE R. SORIANO, Respondent. concretely-paved. It is located far from commercial or industrial developments in an area
without a proper drainage system, can only be accessed through a narrow dirt road, and is
DECISION surrounded by adjacent dwellings of sub-standard materials.

Accordingly, the RTC considered respondent to have waived her right to adduce evidence and
PERALTA, J.: to object to the evidence submitted by petitioner for her continued absence despite being given
several notices to do so.
Before the Court is a petition for review under Rule 45 of the Rules of Court assailing the
Decision1dated November 15, 2013 and Order2 dated March 10, 2014 of the Regional Trial On November 15, 2013, the RTC rendered its Decision, the dispositive portion of which
Court (RTC), Valenzuela City, Branch 270, in Civil Case No. 140-V-10. reads:chanRoblesvirtualLawlibrary

The antecedent facts are as follows: WHEREFORE, with the foregoing determination of just compensation,
judgment is hereby rendered:
On October 20, 2010, petitioner Republic of the Philippines, represented by the Department of
Public Works and Highways (DPWH), filed a Complaint3 for expropriation against respondent Declaring plaintiff to have lawful right to acquire possession of and title to 200 square
Arlene R. Soriano, the registered owner of a parcel of land consisting of an area of 200 square meters of defendant Arlene R. Soriano’s parcel of land covered by TCT V-13790
1)
meters, situated at Gen. T. De Leon, Valenzuela City, and covered by Transfer Certificate of necessary for the construction of the NLEX – Harbor Link Project (Segment 9) from NLEX
Title (TCT) No. V-13790.4 In its Complaint, petitioner averred that pursuant to Republic Act (RA) to MacArthur Highway Valenzuela City;
No. 8974, otherwise known as “An Act to Facilitate the Acquisition of Right-Of-Way, Site or
Location for National Government Infrastructure Projects and for other Purposes,” the property Condemning portion to the extent of 200 square meters of the above-described parcel of
sought to be expropriated shall be used in implementing the construction of the North Luzon 2) land including improvements thereon, if there be any, free from all liens and
Expressway (NLEX)- Harbor Link Project (Segment 9) from NLEX to MacArthur Highway, encumbrances;
Valenzuela City.5cralawred
Ordering the plaintiff to pay defendant Arlene R. Soriano Php2,100.00 per square meter
Petitioner duly deposited to the Acting Branch Clerk of Court the amount of P420,000.00 or the sum of Four Hundred Twenty Thousand Pesos (Php420,000.00) for the 200 square
representing 100% of the zonal value of the subject property. Consequently, in an 3) meters as fair, equitable, and just compensation with legal interest at 12% per annum
Order6 dated May 27, 2011, the RTC ordered the issuance of a Writ of Possession and a Writ from the taking of the possession of the property, subject to the payment of all unpaid real
of Expropriation for failure of respondent, or any of her representatives, to appear despite property taxes and other relevant taxes, if there be any;
notice during the hearing called for the purpose.
Plaintiff is likewise ordered to pay the defendant consequential damages which shall
In another Order7 dated June 21, 2011, the RTC appointed the following members of the 4) include the value of the transfer tax necessary for the transfer of the subject property from
Board of Commissioners for the determination of just compensation: (1) Ms. Eunice O. Josue, the name of the defendant to that of the plaintiff;
Officer-in-Charge, RTC, Branch 270, Valenzuela City; (2) Atty. Cecilynne R. Andrade, Acting
Valenzuela City Assessor, City Assessor’s Office, Valenzuela City; and (3) Engr. Restituto The Office of the Register of Deeds of Valenzuela City, Metro Manila is directed to
Bautista, of Brgy. Bisig, Valenzuela City. However, the trial court subsequently revoked the 5) annotate this Decision in Transfer Certificate of Title No. V-13790 registered under the
appointment of the Board for their failure to submit a report as to the fair market value of the name of Arlene R. Soriano.
property to assist the court in the determination of just compensation and directed the parties
 cralawlawlibrary involved is clearly not a loan or forbearance of money, goods or credits but
expropriation of certain parcels of land for a public purpose, the payment of
which is without stipulation regarding interest, and the interest adjudged by
Let a certified true copy of this decision be recorded in the Registry of Deeds the trial court is in the nature of indemnity for damages. The legal interest
of Valenzuela City. required to be paid on the amount of just compensation for the properties
expropriated is manifestly in the form of indemnity for damages for the delay
Records of this case show that the Land Bank Manager’s Check Nos. in the payment thereof. It ultimately held that Art. 2209 of the Civil Code shall
0000016913 dated January 21, 2011 in the amount of Php400,000.00 and apply.13cralawlawlibrary
0000017263 dated April 28, 2011 in the amount of Php20,000.00 issued by
the Department of Public Works and Highways (DPWH) are already stale.
Thus, the said Office is hereby directed to issue another Manager’s Check in On May 12, 2014, petitioner filed the instant petition invoking the following
the total amount Php420,000.00 under the name of the Office of the Clerk of arguments:chanRoblesvirtualLawlibrary
Court, Regional Trial Court, Valenzuela City earmarked for the instant
case.10cralawlawlibrary I.

Petitioner filed a Motion for Reconsideration maintaining that pursuant to Bangko Sentral ng RESPONDENT IS NOT ENTITLED TO THE LEGAL
Pilipinas (BSP) Circular No. 799, Series of 2013, which took effect on July 1, 2013, the interest INTEREST OF 6% PER ANNUM ON THE AMOUNT OF
rate imposed by the RTC on just compensation should be lowered to 6% for the instant case JUST COMPENSATION OF THE SUBJECT PROPERTY
falls under a loan or forbearance of money. 11 In its Order12 dated March 10, 2014, the RTC AS THERE WAS NO DELAY ON THE PART OF
reduced the interest rate to 6% per annum not on the basis of the aforementioned Circular, but PETITIONER.chanroblesvirtuallawlibrary
on Article 2209 of the Civil Code, viz.:chanRoblesvirtualLawlibrary
II.
However, the case of National Power Corporation v. Honorable Zain B.
Angas is instructive.
BASED ON THE NATIONAL INTERNAL REVENUE CODE OF 1997 AND
In the aforementioned case law, which is similar to the instant case, the THE LOCAL GOVERNMENT CODE, IT IS RESPONDENT’S OBLIGATION
Supreme Court had the occasion to rule that it is well-settled that the
TO PAY THE TRANSFER TAXES.cralawlawlibrary
aforequoted provision of Bangko Sentral ng Pilipinas Circular applies only to
a loan or forbearance of money, goods or credits. However, the term
“judgments” as used in Section 1 of the Usury Law and the previous Central Petitioner maintains that if property is taken for public use before compensation is deposited
Bank Circular No. 416, should be interpreted to mean only judgments
with the court having jurisdiction over the case, the final compensation must include interests
involving loan or forbearance of money, goods or credits, following the
on its just value computed from the time the property is taken up to the time when
principle ofejusdem generis. And applying said rule on statutory construction,
the general term “judgments” can refer only to judgments in cases involving compensation is actually paid or deposited with the court.14 Thus, legal interest applies only
loans or forbearance of any money, goods, or credits. Thus, the High Court when the property was taken prior to the deposit of payment with the court and only to the
held that, Art. 2209 of the Civil Code, and not the Central Bank Circular, is extent that there is delay in payment. In the instant case, petitioner posits that since it was able
the law applicable. to deposit with the court the amount representing the zonal value of the property before its
taking, it cannot be said to be in delay, and thus, there can be no interest due on the payment
Art. 2009 of the Civil Code reads: of just compensation.15 Moreover, petitioner alleges that since the entire subject property was
expropriated and not merely a portion thereof, it did not suffer an impairment or decrease in
“If the obligation consists in the payment of a sum of value, rendering the award of consequential damages nugatory. Furthermore, petitioner claims
money, and the debtor incurs in delay, the indemnity for
that contrary to the RTC’s instruction, transfer taxes, in the nature of Capital Gains Tax and
damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the Documentary Stamp Tax, necessary for the transfer of the subject property from the name of
absence of stipulation, the legal interest, which is six per the respondent to that of the petitioner are liabilities of respondent and not petitioner.
cent per annum.”cralawlawlibrary
The petition is partly meritorious.

Further in that case, the Supreme Court explained that the transaction At the outset, it must be noted that the RTC’s reliance on National Power Corporation v.
Angas is misplaced for the same has already been overturned by our more recent ruling Notwithstanding the foregoing, We find that the imposition of interest in this case is
in Republic v. Court of Appeals,16 wherein we held that the payment of just compensation for unwarranted in view of the fact that as evidenced by the acknowledgment receipt19 signed by
the expropriated property amounts to an effective forbearance on the part of the State, to the Branch Clerk of Court, petitioner was able to deposit with the trial court the amount
wit:chanRoblesvirtualLawlibrary representing the zonal value of the property before its taking. As often ruled by this Court, the
award of interest is imposed in the nature of damages for delay in payment which, in effect,
Aside from this ruling, Republic notably overturned the Court’s makes the obligation on the part of the government one of forbearance to ensure prompt
previous ruling inNational Power Corporation v. Angas which held that payment of the value of the land and limit the opportunity loss of the owner. 20 However, when
just compensation due for expropriated properties is not a loan or there is no delay in the payment of just compensation, We have not hesitated in deleting the
forbearance of money but indemnity for damages for the delay in imposition of interest thereon for the same is justified only in cases where delay has been
payment; since the interest involved is in the nature of damages rather sufficiently established.21cralawred
than earnings from loans, then Art. 2209 of the Civil Code, which fixes
legal interest at 6%, shall apply. The records of this case reveal that petitioner did not delay in its payment of just compensation
as it had deposited the pertinent amount in full due to respondent on January 24, 2011, or four
In Republic, the Court recognized that the just compensation due to
the landowners for their expropriated property amounted to an (4) months before the taking thereof, which was when the RTC ordered the issuance of a Writ
effective forbearance on the part of the State. Applying the Eastern of Possession and a Writ of Expropriation on May 27, 2011. The amount deposited was
Shipping Lines ruling, the Court fixed the applicable interest rate at 12% per deemed by the trial court to be just, fair, and equitable, taking into account the well-established
annum, computed from the time the property was taken until the full amount factors in assessing the value of land, such as its size, condition, location, tax declaration, and
of just compensation was paid, in order to eliminate the issue of the constant zonal valuation as determined by the BIR. Considering, therefore, the prompt payment by the
fluctuation and inflation of the value of the currency over time. In the Court’s petitioner of the full amount of just compensation as determined by the RTC, We find that the
own words: imposition of interest thereon is unjustified and should be deleted.

The Bulacan trial court, in its 1979 decision, was correct in Similarly, the award of consequential damages should likewise be deleted in view of the fact
imposing interest[s] on the zonal value of the property to
that the entire area of the subject property is being expropriated, and not merely a portion
be computed from the time petitioner instituted
condemnation proceedings and "took" the property in thereof, wherein such remaining portion suffers an impairment or decrease in value, as
September 1969. This allowance of interest on the enunciated in Republic of the Philippines v. Bank of the Philippine
amount found to be the value of the property as of the Islands,22 thus:chanRoblesvirtualLawlibrary
time of the taking computed, being an effective
forbearance, at 12% per annum should help eliminate the x x x The general rule is that the just compensation to which the owner of
issue of the constant fluctuation and inflation of the value the condemned property is entitled to is the market value. Market value is
of the currency over time. that sum of money which a person desirous but not compelled to buy, and
an owner willing but not compelled to sell, would agree on as a price to be
We subsequently upheld Republic’s 12% per annum interest rate on the paid by the buyer and received by the seller. The general rule, however, is
unpaid expropriation compensation in the following cases: Reyes v. National modified where only a part of a certain property is expropriated. In
Housing Authority, Land Bank of the Philippines v. Wycoco, Republic v. such a case, the owner is not restricted to compensation for the
Court of Appeals, Land Bank of the Philippines v. Imperial, Philippine Ports portion actually taken, he is also entitled to recover the consequential
Authority v. Rosales-Bondoc, and Curata v. Philippine Ports damage, if any, to the remaining part of the property.
Authority.17cralawlawlibrary
xxxx

Effectively, therefore, the debt incurred by the government on account of the taking of the No actual taking of the building is necessary to grant consequential
property subject of an expropriation constitutes a forbearance 18 which runs contrary to the trial damages.Consequential damages are awarded if as a result of the
court’s opinion that the same is in the nature of indemnity for damages calling for the expropriation, the remaining property of the owner suffers from an
application of Article 2209 of the Civil Code. Nevertheless, in line with the recent circular of the impairment or decrease in value.The rules on expropriation clearly
provide a legal basis for the award of consequential damages. Section 6 of
Monetary Board of the Bangko Sentral ng Pilipinas (BSP-MB) No. 799, Series of 2013,
Rule 67 of the Rules of Court provides:
effective July 1, 2013, the prevailing rate of interest for loans or forbearance of money is six
percent (6%) per annum, in the absence of an express contract as to such rate of interest. x x x The commissioners shall assess the
consequential damages to the property not taken and
 deduct from such consequential damages the or other disposition of real property located in the
consequential benefits to be derived by the owner from Philippines, classified as capital assets, including pacto
the public use or public purpose of the property taken, the de retro sales and other forms of conditional sales, by
operation of its franchise by the corporation or the individuals, including estates and trusts: Provided, That
carrying on of the business of the corporation or person the tax liability, if any, on gains from sales or other
taking the property. But in no case shall the consequential disposition of real property to the government or any of its
benefits assessed exceed the consequential damages political subdivisions or agencies or to government-owned
assessed, or the owner be deprived of the actual value of or controlled corporations shall be determined either
his property so taken. under Section 24(A)or under this Subsection, at the option
of the taxpayer.chanrobleslaw
In B.H. Berkenkotter & Co. v. Court of Appeals, we held that:
xxxx
To determine just compensation, the trial court should first
ascertain the market value of the property, to which Section 56. Payment and Assessment of Income Tax for Individuals and
should be added the consequential damages after Corporations. –
deducting therefrom the consequential benefits which
may arise from the expropriation. If the consequential (A) Payment of Tax –
benefits exceed the consequential damages, these items
should be disregarded altogether as the basic value of the xxxx
property should be paid in every case.23cralawred
(3) Payment of Capital Gains Tax. - The total amount of
cralawlawlibrary tax imposed and prescribed under Section 24 (c), 24(D),
27(E)(2), 28(A)(8)(c) and 28(B)(5)(c) shall be paid on the
date the return prescribed therefor is filed by the person
Considering that the subject property is being expropriated in its entirety, there is no remaining liable thereto: Provided, That if the seller submits proof of
portion which may suffer an impairment or decrease in value as a result of the expropriation. his intention to avail himself of the benefit of exemption of
Hence, the award of consequential damages is improper. capital gains under existing special laws, no such
payments shall be required : Provided, further, That in
Anent petitioner’s contention that it cannot be made to pay the value of the transfer taxes in the case of failure to qualify for exemption under such special
nature of capital gains tax and documentary stamp tax, which are necessary for the transfer of laws and implementing rules and regulations, the tax due
the subject property from the name of the respondent to that of the petitioner, the same is on the gains realized from the original transaction shall
partly meritorious. immediately become due and payable, subject to the
penalties prescribed under applicable provisions of this
With respect to the capital gains tax, We find merit in petitioner’s posture that pursuant to Code: Provided, finally, That if the seller, having paid the
Sections 24(D) and 56(A)(3) of the 1997 National Internal Revenue Code (NIRC), capital gains tax, submits such proof of intent within six (6) months from
the registration of the document transferring the real
tax due on the sale of real property is a liability for the account of the seller, to
property, he shall be entitled to a refund of such tax upon
wit:chanRoblesvirtualLawlibrary verification of his compliance with the requirements for
such exemption.
Section 24. Income Tax Rates –
cralawlawlibrary
xxxx

(D) Capital Gains from Sale of Real Property. – Thus, it has been held that since capital gains is a tax on passive income, it is the seller, not
the buyer, who generally would shoulder the tax.24 Accordingly, the BIR, in its BIR Ruling No.
(1) In General. – The provisions of Section 39(B) 476-2013, dated December 18, 2013, constituted the DPWH as a withholding agent to
notwithstanding, a final tax of six percent (6%) based on withhold the six percent (6%) final withholding tax in the expropriation of real property for
the gross selling price or current fair market value as
infrastructure projects. As far as the government is concerned, therefore, the capital gains tax
determined in accordance with Section 6(E) of this Code,
remains a liability of the seller since it is a tax on the seller's gain from the sale of the real
whichever is higher, is hereby imposed upon capital gains
presumed to have been realized from the sale, exchange, estate.25cralawred
 be imposed on the transaction itself or upon the document underlying
As to the documentary stamp tax, however, this Court finds inconsistent petitioner’s denial of such act. Any of the parties thereto shall be liable for the full amount of
liability to the same. Petitioner cites Section 196 of the 1997 NIRC as its basis in saying that the tax due: Provided, however, that as between themselves, the said
the documentary stamp tax is the liability of the seller, viz.:chanRoblesvirtualLawlibrary parties may agree on who shall be liable or how they may share on the cost
of the tax.
SECTION 196. Stamp Tax on Deeds of Sale and Conveyances of Real
(b) Exception. - Whenever one of the parties to the taxable transaction is
Property. - On all conveyances, deeds, instruments, or writings, other than
exempt from the tax imposed under Title VII of the Code, the other party
grants, patents or original certificates of adjudication issued by the
thereto who is not exempt shall be the one directly liable for the
Government, whereby any land, tenement or other realty sold shall be
tax.27cralawlawlibrary
granted, assigned, transferred or otherwise conveyed to the purchaser, or
purchasers, or to any other person or persons designated by such
purchaser or purchasers, there shall be collected a documentary stamp tax, As a general rule, therefore, any of the parties to a transaction shall be liable for the full amount
at the rates herein below prescribed, based on the consideration contracted
of the documentary stamp tax due, unless they agree among themselves on who shall be
to be paid for such realty or on its fair market value determined in
liable for the same.
accordance with Section 6(E) of this Code, whichever is higher: Provided,
That when one of the contracting parties is the Government, the tax herein
imposed shall be based on the actual consideration: In this case, there is no agreement as to the party liable for the documentary stamp tax due on
the sale of the land to be expropriated. But while petitioner rejects any liability for the same,
(a) When the consideration, or value received or this Court must take note of petitioner’s Citizen’s Charter,28 which functions as a guide for the
contracted to be paid for such realty, after making proper procedure to be taken by the DPWH in acquiring real property through expropriation under RA
allowance of any encumbrance, does not exceed One 8974. The Citizen’s Charter, issued by petitioner DPWH itself on December 4, 2013,
thousand pesos (P1,000), Fifteen pesos (P15.00). explicitly provides that the documentary stamp tax, transfer tax, and registration fee
due on the transfer of the title of land in the name of the Republic shall be shouldered
(b) For each additional One thousand pesos (P1,000), or
by the implementing agency of the DPWH, while the capital gains tax shall be paid by
fractional part thereof in excess of One thousand pesos
the affected property owner.29 Thus, while there is no specific agreement between petitioner
(P1,000) of such consideration or value, Fifteen pesos
(P15.00). and respondent, petitioner’s issuance of the Citizen’s Charter serves as its notice to the public
as to the procedure it shall generally take in cases of expropriation under RA 8974.
When it appears that the amount of the documentary stamp tax payable Accordingly, it will be rather unjust for this Court to blindly accede to petitioner’s vague
hereunder has been reduced by an incorrect statement of the consideration rejection of liability in the face of its issuance of the Citizen’s Charter, which contains a clear
in any conveyance, deed, instrument or writing subject to such tax the and unequivocal assumption of accountability for the documentary stamp tax. Had petitioner
Commissioner, provincial or city Treasurer, or other revenue officer shall, provided this Court with more convincing basis, apart from a mere citation of an indefinite
from the assessment rolls or other reliable source of information, assess the provision of the 1997 NIRC, showing that it should be respondent-seller who shall be liable for
property of its true market value and collect the proper tax the documentary stamp tax due on the sale of the subject property, its rejection of the payment
thereon.cralawlawlibrary of the same could have been sustained.

WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The

Yet, a perusal of the provision cited above does not explicitly impute the obligation to pay the Decision and Order, dated November 15, 2013 and March 10, 2014, respectively, of the
documentary stamp tax on the seller. In fact, according to the BIR, all the parties to a Regional Trial Court, Valenzuela City, Branch 270, in Civil Case No. 140-V-10 are
transaction are primarily liable for the documentary stamp tax, as provided by Section 2 of BIR hereby MODIFIED, in that the imposition of interest on the payment of just compensation as
Revenue Regulations No. 9-2000, which reads:26cralawred well as the award of consequential damages are deleted. In addition, respondent Arlene R.
Soriano is ORDERED to pay for the capital gains tax due on the transfer of the expropriated
SEC. 2. Nature of the Documentary Stamp Tax and Persons Liable for the property, while the documentary stamp tax, transfer tax, and registration fee shall be for the
Tax. – account of petitioner.
(a) In General. - The documentary stamp taxes under Title VII of the
SO ORDERED.cralawlawlibrary
Code is a tax on certain transactions. It is imposed against "the person
making, signing, issuing, accepting, or transferring" the document or
facility evidencing the aforesaid transactions. Thus, in general, it may