Just Compensation: Fair Market Value, Not Zonal Valuation, in Expropriation Cases

The Supreme Court has long held that when the government takes private property for public use, the owner must receive just compensation — the full and fair equivalent of what was taken. A 2019 ruling involving a 50-square-meter lot in Valenzuela City reaffirms a key principle: the government cannot simply rely on the Bureau of Internal Revenue (BIR) zonal valuation to determine what that compensation should be.

In Republic v. Spouses Goloyuco (G.R. No. 222551, June 19, 2019), the Court denied the government's petition and affirmed the payment of P8,300.00 per square meter for a lot expropriated for the C-5 Northern Link Road Project — more than three times the P2,750.00 zonal value the government wanted to apply. The ruling clarifies how courts should determine just compensation and when interest begins to run.

The Facts

The Republic, through the Department of Public Works and Highways (DPWH), filed an expropriation complaint in 2007 against spouses Pedro and Zenaida Goloyuco for their 50-square-meter residential lot in Barangay Ugong, Valenzuela City. The property was needed for the C-5 Northern Link Road Project.

The government deposited P137,500.00 — the amount corresponding to the property's zonal valuation of P2,750.00 per square meter — and obtained a writ of possession in September 2008.

During the second stage of the proceedings, three commissioners were appointed to determine just compensation. One recommended P12,250.00 per square meter; the other two recommended P10,000.00 per square meter. The Regional Trial Court fixed the amount at P8,300.00 per square meter, considering the BIR zonal valuation, the commissioners' reports, the selling prices of comparable properties previously expropriated for the same project, and the property's shape, terrain, and location.

The Court of Appeals affirmed with modification, and the government appealed to the Supreme Court.

The Issue

The sole issue was whether the courts erred in fixing just compensation at P8,300.00 per square meter instead of the zonal value of P2,750.00. The government argued that zonal valuation essentially reflects fair market value and that paying more would sanction unjust enrichment of landowners.

The Ruling

The Supreme Court denied the petition. It noted that the government raised only questions of fact, which are generally not reviewable under Rule 45 of the Rules of Court. More importantly, the Court reiterated that zonal valuation is only one of several factors in determining just compensation — it cannot be the sole basis.

Under Section 5 of Republic Act No. 8974, courts may consider the following standards in assessing land value:

• The classification and use for which the property is suited
• Developmental costs for improving the land
• The value declared by the owners
• The current selling price of similar lands in the vicinity
• Reasonable disturbance compensation
• Size, shape, or location, tax declaration, and zonal valuation
• The price of the land as shown by ocular findings and evidence presented
• Such facts as to enable affected owners to acquire similarly-situated lands

The Court also distinguished between the provisional value paid to obtain a writ of possession and the final just compensation. The provisional deposit, based on zonal valuation, serves as a pre-payment or indemnity — it is not a final determination of value. Just compensation, by contrast, is the final determination of fair market value: the price fixed by buyer and seller in the open market in the usual and ordinary course of legal trade and competition.

Interest on Delayed Payment

The Court also clarified the interest rules. Since the delay in paying just compensation is a forbearance of money, it earns legal interest. The difference between the final amount (P415,000.00) and the initial deposit (P137,500.00) earned:

• 12% per annum from September 24, 2008 (when the government took possession) until June 30, 2013
• 6% per annum from July 1, 2013 (when BSP Circular No. 799 took effect) until the finality of the decision
• 6% per annum on the total amount from finality until full payment

Practical Takeaways

• Zonal valuation is not conclusive. It is one factor among many. Courts must consider the property's actual characteristics, location, and the selling prices of comparable lands.
• Provisional deposits are just that — provisional. The amount the government pays to obtain a writ of possession does not fix the final just compensation.
• Fair market value governs. The measure of just compensation is the owner's loss, not the government's gain, based on what a willing buyer would pay a willing seller in the open market.
• Interest runs from taking. When the government delays full payment, legal interest accrues on the unpaid balance — 12% before July 1, 2013, and 6% after.
• Factual findings are respected. Courts of appeals' valuations based on evidence will generally not be overturned by the Supreme Court absent exceptional circumstances.

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