G.R. No. 211666, February 25, 2015
REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS v. ARLENE R. SORIANO

FACTS

The petitioner, Republic of the Philippines represented by the DPWH, filed a complaint for expropriation against respondent Arlene R. Soriano, the registered owner of a 200-square meter parcel of land in Valenzuela City. The property was needed for the NLEX-Harbor Link Project. The petitioner deposited ₱420,000.00, representing 100% of the zonal value of the property, with the court. The Regional Trial Court (RTC) issued a Writ of Possession and a Writ of Expropriation. After the appointed Board of Commissioners failed to submit a report, the RTC directed the parties to submit position papers. The petitioner presented evidence, including a BIR certification stating a zonal value of ₱2,100.00 per square meter and a tax declaration showing a lower value, and testimony that the property was poorly maintained and in a non-commercial area. The respondent failed to appear or present evidence. The RTC rendered a decision ordering the petitioner to pay the respondent ₱420,000.00 as just compensation, with legal interest at 12% per annum from the taking of possession, and to pay consequential damages including transfer taxes. The RTC later reduced the interest rate to 6% per annum, citing Article 2209 of the Civil Code and the case of National Power Corporation v. Angas. The petitioner filed a motion for reconsideration, arguing that no interest should be due as there was no delay in payment since the deposit was made before taking, and that the obligation to pay transfer taxes lies with the respondent.

ISSUE

1. Whether the respondent is entitled to legal interest on the just compensation.
2. Whether the petitioner is obligated to pay the transfer taxes for the expropriated property.

RULING

1. On the payment of legal interest: The petition is partly meritorious. The Supreme Court held that the RTC’s reliance on National Power Corporation v. Angas was misplaced, as it had been overturned by the more recent ruling in Republic v. Court of Appeals. The Court ruled that the payment of just compensation for expropriated property amounts to an effective forbearance on the part of the State. Applying the precedent set in Eastern Shipping Lines, the applicable interest rate is 12% per annum, computed from the time the property is taken until full payment is made, to account for the fluctuation in the value of currency over time. The Court clarified that this interest is due regardless of whether a deposit was made prior to taking, as it is designed to compensate the owner for the income that could have been earned from the property during the period of non-payment.
2. On the payment of transfer taxes: The Supreme Court ruled that the petitioner is not liable for the payment of transfer taxes, such as the Capital Gains Tax and Documentary Stamp Tax. Citing relevant provisions of the National Internal Revenue Code and the Local Government Code, the Court held that these taxes are the personal liabilities of the seller or transferor, which in this case is the respondent landowner. The expropriation does not shift this statutory obligation to the government. Therefore, the RTC’s order for the petitioner to pay consequential damages covering transfer taxes was erroneous and was reversed.
DISPOSITIVE PORTION:
The Supreme Court modified the RTC’s decision. It affirmed the award of just compensation in the amount of ₱420,000.00 but ordered that legal interest be computed at 12% per annum from the time of taking until full payment. It deleted the order for the petitioner to pay consequential damages for transfer taxes, declaring such taxes to be the obligation of the respondent.