Eminent Domain Prompt Payment Mandate FOR Government Infrastructure Projects

The Supreme Court has clarified that the government must promptly pay landowners the full zonal value of their property when acquiring land for national infrastructure projects, even if the government occupied the land years earlier without formal expropriation proceedings. In Felisa Agricultural Corporation v. National Transmission Corporation (G.R. Nos. 231655 and 231670, July 2, 2018), the Court reinforced the State's obligation to pay just compensation without delay and applied Republic Act No. 8974 to an inverse condemnation case.

The Case: A Landowner's Long Wait for Payment

The National Power Corporation (NPC) constructed transmission towers and lines on a 19,635-square meter portion of Felisa Agricultural Corporation's land in Bacolod City. The government entered the property in 1989, allegedly with permission, but the landowner claimed it discovered the intrusion only in 1997.

When the landowner filed a complaint for recovery of possession and just compensation, the parties initially agreed to settle at P400.00 per square meter. However, the compromise failed because the Office of the Solicitor General failed to act on the deed of sale. The landowner then moved for immediate payment of the property's 100% zonal value under RA 8974, which the trial court granted at P7,845,000.00.

The Court of Appeals reversed, holding that RA 8974 applies only to expropriation proceedings, not to recovery of possession cases. The Supreme Court disagreed.

The Issue: Which Law Governs?

The central question was whether RA 8974 or Rule 67 of the Rules of Court should govern the payment of provisional value in what was effectively an inverse condemnation case.

Under Rule 67, the government may take possession of property by depositing only the assessed value—a percentage of fair market value based on local assessment levels, often far lower than actual market value. RA 8974, enacted for national government infrastructure projects, requires payment of 100% of the property's current zonal value as provisional value before the government can take possession.

The Ruling: RA 8974 Applies to Inverse Condemnation

The Supreme Court ruled that RA 8974 governs the case. While the government entered the property in 1989, the landowner initiated the inverse condemnation proceedings after RA 8974 took effect on November 26, 2000. The Court held that the law's more favorable payment scheme should apply.

The Court emphasized that RA 8974 was intended to "supersede the system of deposit under Rule 67 with the scheme of 'immediate payment'" for national government infrastructure projects, citing Republic v. Gingoyon. The right of a property owner to receive just compensation before the State acquires possession is a substantive right that the legislature may define.

The Court also rejected the argument that physical entry alone constitutes expropriation. Mere occupation of property does not transfer ownership rights; the government must still initiate proper condemnation proceedings and pay compensation.

Interest on Unpaid Balance

The Court modified the provisional value to P7,854,000.00 (19,635 sq. m. × P400.00/sq. m.) and clarified that the government must pay interest on any difference between the final just compensation and the initial payment. The interest rate is 12% per annum from the time of taking (September 21, 1989) until June 30, 2013, and 6% per annum from July 1, 2013 until fully paid, consistent with the Bangko Sentral ng Pilipinas Monetary Board Circular No. 799.

Practical Takeaways

• RA 8974 requires prompt payment of 100% zonal value for properties acquired for national government infrastructure projects, including power transmission lines.
• The law applies to inverse condemnation cases where the government occupies property without formal expropriation proceedings, provided the case is filed after the law's effectivity.
• Physical entry does not equal expropriation. The government must still initiate proper proceedings and pay compensation to acquire ownership rights.
• Interest accrues on unpaid balances from the time of taking until full payment, at 12% per annum before July 1, 2013, and 6% per annum thereafter.
• Courts retain discretion to determine final just compensation, but must consider RA 8974's standards and may not arbitrarily fix amounts contrary to the law's objectives.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.