G.R. No. 205473 , December 10, 2019
Republic of the Philippines, represented by the Department of Public Works and Highways, Petitioner, vs. Spouses Marcelino Bunsay and Nenita Bunsay, Respondents.

FACTS

The Department of Public Works and Highways (DPWH) filed a Complaint for Expropriation to acquire a 100-square meter lot (the Disputed Property) owned by respondents Spouses Marcelino and Nenita Bunsay for the C-5 Northern Link Road Project Phase 2. Notices to the Spouses Bunsay were returned unserved, and they did not file an Answer. The Regional Trial Court (RTC) issued a Writ of Possession after DPWH deposited checks representing the property’s zonal value and replacement cost of improvements, which the spouses later claimed. During proceedings, DPWH moved that the amount received by the spouses be deemed just compensation. The RTC, in its assailed Resolution, ordered the expropriation and directed DPWH to pay the replacement cost of improvements and, as consequential damages, the value of the capital gains tax (CGT) and other transfer taxes necessary to transfer the title. Upon DPWH’s Motion for Partial Reconsideration, the RTC, in its assailed Order, excluded the payment for improvements (as the spouses acknowledged receipt) but maintained the award of consequential damages equivalent to the value of CGT and transfer taxes. DPWH filed this petition, arguing it cannot be charged with these taxes.

ISSUE

Whether the Regional Trial Court erred in awarding consequential damages equivalent to the value of capital gains tax and other transfer taxes in favor of the respondents.

RULING

Yes, the RTC erred. The Petition is GRANTED. The award of consequential damages equivalent to the value of CGT and transfer taxes is DELETED. However, the petitioner Republic (through DPWH) is DIRECTED to shoulder such taxes as part of the just compensation due to the respondents.
The Court ruled that the award of “consequential damages” for the tax value was improper. Under Rule 67, Section 6 of the Rules of Court, consequential damages are assessed on the property not taken if it suffers impairment or decrease in value due to the expropriation. Here, the expropriation covered the entire 100-square meter property, leaving no “remaining portion” upon which to base an award of consequential damages. Even if a portion remained, such an award would still require evidence of impairment in value, which was absent.
The Court distinguished consequential damages from just compensation. Just compensation is the full and fair equivalent of the property taken, intended to make the owner whole. Citing Republic Act No. 8974 and related jurisprudence, the Court held that the government’s obligation to pay just compensation includes all incidental expenses for the transfer of clear title, such as CGT and transfer taxes. These taxes are ultimately borne by the owner-seller in a voluntary sale, and to deduct them from the compensation in expropriation would result in the owner not receiving the full value of their property. Therefore, while the award was incorrectly labeled as consequential damages, it is just and equitable for the Republic to shoulder these taxes to ensure the respondents receive the full and fair equivalent of their property, preserving the integrity of just compensation.