Fatima Kate N.

Garo
LL.B. I

1. Jurisprudence for the Basis of Fair Market Value in Expropriation Cases

Fair Market Value is the buyer willingly pays and a seller willingly takes this highest estimated, and
acceptable, price for an item in an open and competitive market. (Black’s Law Dictionary). This is typically
used for valuation in eminent domain cases.

The constitutional limitation of "just compensation" is considered to be the sum equivalent to the market
value of the property, broadly described to be the price fixed by the seller in open market in the usual and
ordinary course of legal action and competition or the fair value of the property as between one who
receives, and one who desires to sell, it fixed at the time of the actual taking by the government. (Republic
v. Court of Appeals, G.R. No. 146587, July 2, 2002, 383 SCRA 611, 622-623)

Previously, Sec. 5 of Republic Act No. 8974 enumerates the standards for the assessment of the value of
the property subject to negotiated sale. This is now repealed by Sec 7 of Republic Act No. 10752

Zonal valuation is simply one of the indices of the fair market value of real estate. By itself, however, this
index cannot be the sole basis of just compensation in expropriation cases. The standard is not the takers
gain, but the owners loss. (Leca Realty Corporation, G.R. No. 155605 v. Rep. of the Phils, September 27,
2006, 503 SCRA 563, 571)

Also, among the factors to be considered in arriving at the fair market value of the property are the cost of
acquisition, the current value of like properties, its actual or potential uses, and in the particular case of
lands, their size, shape, location, and the tax declarations thereon. The measure is not the taker's gain but
the owner's loss. (B.H. Berkenkotter & Co. v. Court of Appeals, G.R. No. 89980, December 14, 1992, 216
SCRA 584) To be just, the compensation must be fair not only to the owner but also to the taker. (Ibid.)

On the other hand, in the case of National Power Corporation v. Diato-Bernal, G.R. No. 180979, December
15, 2010, 638 SCRA 660, 669, it was specified that a commissioners’ report of land prices which is not
based on any documentary evidence is manifestly hearsay and should be disregarded by the court.

Similarly, in Republic v. Asia Pacific Integrated Steel Corporation, G.R. No. 192100, March 12, 2014, 719
SCRA 50, the Court defined just compensation "as the full and fair equivalent of the property taken from
its owner by the expropriator. The measure is not the taker’s gain, but the owner’s loss. The word ‘just’ is
used to intensify the meaning of the word ‘compensation’ and to convey thereby the idea that the equivalent
to be rendered for the property to be taken shall be real, substantial, full, and ample. Such ‘just’-ness of the
compensation can only be attained by using reliable and actual data as bases in fixing the value of the
condemned property. (Republic v. Libunao, G.R. No. 166553, July 30, 2009, 594 SCRA 363, 376) Trial
courts are required to be more circumspect in its evaluation of just compensation due the property owner,
considering that eminent domain cases involve the expenditure of public funds." (Ibid.)

The courts are not conclusively bound to legislative enactments and executive issuances, at best, those are
treated as mere guidelines in ascertaining the amount of just compensation. In National Power Corporation
v. Tuazon, 668 Phil. 301 (2011), it was stated that the determination of just compensation in expropriation
cases is a function addressed to the discretion of the courts, and may not be usurped by any other branch or
official of the government. This judicial function has constitutional raison d’être; Article III of the 1987
Constitution mandates that no private property shall be taken for public use without payment of just
compensation. Legislative enactments, as well as executive issuances, fixing or providing for the method
of computing just compensation are tantamount to impermissible encroachment on judicial prerogatives.

In Republic v CC Unson Company, Inc G.R. No. 215107, February 24, 2016, the petitioner raised a legal
question relating to the commissioners’ and the trial court’s alleged failure to take into consideration, in
arriving at the amount of just compensation, Section 5 of RA 8974 enumerating the standards for assessing
the value of expropriated land taken for national government infrastructure projects. What escapes
petitioner, however, is that the courts are not bound to consider these standards; the exact wording of the
said provision is that "in order to facilitate the determination of just compensation, the courts may consider"
them. The use of the word "may" in the provision is construed as permissive and operating to confer
discretion. In the absence of a finding of abuse, the exercise of such discretion may not be interfered with.
(Ibid.)

The Supreme Court emphasized that RTC, after hearing, had the option either to (1) accept the
Commissioner’s’ report and render judgment in accordance therewith; (2) for cause shown, it may (a)
recommit the same to the commissioners for further report of facts; or (b) it may set aside the report and
appoint new commissioners; or (c) it may accept the report in part and reject it in part; and (d) it may make
such order or render such judgment as shall secure to the plaintiff the property essential to the exercise of
his right of expropriation, and to the defendant just compensation for the property so taken. (Republic v.
Spouses Tan, 676 Phil. 337, 354 (2011))
Fatima Kate N. Garo
LL.B. I

In addition, in the case of Republic v. BPI, G.R. No. 203039, September 11, 2013, 705 SCRA 650, the Court
categorically stated that if as a result of the expropriation made by the petitioner, the remaining portion of
the property of the owner suffers from impairment or decrease in value, consequential damages were to be
awarded.

It is also worthy to note that there is now a new Expropriation law - Republic Act No. 10752, or “The Right-
of-Way Act,” which took effect in March 2016. Among its provisions is the standard for negotiated sale.
Sec 5 thereof provides that to determine the appropriate price offer, the implementing agency may engage
the services of a government financial institution with adequate experience in property appraisal, or an
independent property appraiser accredited by the Bangko Sentral ng Pilipinas (BSP) or a professional
association of appraisers recognized by the BSP to be procured by the implementing under the provisions
of Republic Act No. 9184, otherwise known as the “Government Procurement Reform Act” and its
implementing rules and regulations pertaining to consulting services.

If the property owner does not accept the price offer, the implementing agency shall initiate expropriation
proceedings pursuant to Section 6 thereof.

Specifically, the standards for the assessment of the value of the property subject to negotiated sale is
enumerated in the Sec 7 of the same Act. This repealed the provision on Sec. 5 of RA No. 8974.