G.R. No. L-14158. April 12, 1961.
Republic of the Philippines, plaintiff-appellant, vs. Philippine National Bank, et al., defendants. Vicente J. Francisco, defendant-appellant.

FACTS

The Republic initiated expropriation proceedings on January 16, 1950, for lots needed to construct Commonwealth Avenue in Quezon City. This appeal concerns Lot 795-B-3-A, a 14,026-square-meter portion of a larger parcel owned by defendant Vicente J. Francisco and mortgaged to the Philippine Bank of Communications. An amended complaint in 1952 increased the area to be taken. The court authorized the Republic to take possession upon depositing a provisional value of P7,013, which Francisco withdrew. Commissioners were appointed to determine just compensation, with recommendations varying from P6.00 to P18.00 per square meter. The trial court fixed compensation at P10.00 per square meter, or P149,420, with 6% interest from March 26, 1952 (the date of actual taking), deducting the provisional deposit.
Both parties appealed. The Republic contested the valuation and the award of interest on the full amount. Francisco sought a higher valuation and consequential damages for destroyed fruit-bearing trees and a fence. Key issues involved the date for valuation, the proper market value, entitlement to consequential damages, the treatment of the mortgage, and the computation of interest.

ISSUE

The primary issues were: (1) As of what date should fair market value be determined? (2) What was the fair market value? (3) Was the defendant entitled to consequential damages? (4) Must the defendant cause the mortgage cancellation? (5) How should interest on the compensation be computed?

RULING

The Supreme Court modified the trial court’s decision. On the valuation date, the Court ruled that just compensation must be determined as of the time the plaintiff took possession of the property, not the filing of the complaint, when such taking precedes the filing. Since the Republic took possession on March 26, 1952, that was the controlling date. This aligned with precedents like Provincial Government of Rizal vs. Caro de Araullo and Republic vs. Lara, which prevent landowners from benefiting from value increases solely due to the public improvement project.
Regarding fair market value, the Court found the evidence supported a value of P6.00 per square meter, not P10.00. The commissioners’ lower recommendation was more consistent with the property’s condition and location at the time of taking. The Court denied consequential damages. The alleged destruction of fruit trees was not proven to be a direct result of the expropriation but of third-party acts before the taking. Furthermore, the remaining property gained consequential benefits from the new highway access, offsetting any claimed damages.
On the mortgage, the Court held the government is entitled to a title free from encumbrance. Therefore, Francisco was ordered to cause the mortgage’s cancellation on the expropriated portion before receiving final payment, or to bear the expense for its cancellation if already paid. For interest, it should accrue only on the unpaid balance of the compensation. Since Francisco had already withdrawn P7,013 in 1952, interest at 6% per annum from March 26, 1952, was payable only on the remaining P77,143. The decision was modified accordingly.