In the case of Republic of the Philippines v. Hon. Jesus M. Mupas and Philippine International Air Terminals Co., Inc., the issue was the just compensation for the expropriation of a land where the Terminal 3 of the Ninoy Aquino International Airport was built.
The case involves the expropriation of the Ninoy Aquino International Airport Terminal III (NAIA-IPT III) by the Philippine Government. The Government filed a complaint for expropriation and deposited an amount equivalent to the assessed value of the property with the Land Bank of the Philippines. The Regional Trial Court (RTC) issued a writ of possession in favor of the Government, citing City of Manila v. Serrano. However, the RTC later modified its order and directed the release of a certain amount to Philippine International Air Terminals Co., Inc. (PIATCO), the owner of NAIA-IPT III, and ordered the Government to submit a Certificate of Availability of Funds for the payment of just compensation. The Government argued that Rule 67 of the Rules of Court applied to the case since the NAIA-IPT III was not a national government infrastructure project, and that RA 8974, which requires immediate payment of 100% of the property value, did not apply. The issue was whether Rule 67 of the Rules of Court or RA 8974 applied to the case.
The Court of Appeals (CA) found that PIATCO’s computation of attendant costs was self-serving and lacked relevant evidence, while the RTC and BOC’s computation of attendant costs at 10% of construction cost lacked factual and legal support. The CA also reversed the RTC’s finding that the NAIA-IPT III suffered from massive structural defects, stating that the collapse only relates to “finishing” rather than “structural” defects. Depreciation, costs for non-compliance with contract specifications, and unnecessary areas of the NAIA-IPT III should not be deducted from the replacement cost. The CA also held that interest should be added to just compensation as of September 11, 2006, and fixed the interest rate at 6% since there was no stipulation on interests. Upon finality of the judgment, the interest shall be 6% until fully paid.
Issues:
a.)Whether the CA legally erred in computing just compensation in the expropriation of the NAIA-IPT III;
(b) Whether the depreciated replacement cost approach or the new replacement cost approach shall be used in the appraisal of the NAIA-IPT III.
Ruling:
(a) No. The Court ruled that the use of depreciated replacement cost method is consistent with the principle that the property owner shall be compensated for his actual loss.
Replacement cost is a different standard of valuation from fair market value. Fair market value is the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy. In contrast, replacement cost is the amount necessary to replace the improvements/structures, based on the current market prices for materials, equipment, labor, contractor’s profit and overhead, and all other attendant costs associated with the acquisition and installation in place of the affected improvements/structures.
(b) Yes. In computing just compensation, the Court shall use the replacement cost method and the standards laid down in Section 5 of RA 8974 as well as Section 10 of RA 8974. The Court shall likewise consider equity in the determination of the just compensation due for NAIA-IPT III.The use of depreciated replacement cost method is consistent with the principle that the property owner shall be compensated for his actual loss. It is consistent as well with Section 10 of RA 8974 IRR which provides that the courts shall consider the kinds and quantities of materials/equipment used and the configuration and other physical features of the property, among other things, in the valuation of the NAIAIPT III. The Government should not compensate PIATCO based on the value of a modern equivalent asset that has the full functional utility of a brand new asset.
The Supreme Court ruled that PIATCO must receive payment of just compensation determined in accordance with law and equity before the government can take over NAIA-3. The Republic Act 8974 applies in the expropriation case in determining the amount of just compensation, while Rule 67 of the Rules of Court applies in determining the assessed value and mode of deposit of just compensation if the national government initiates the expropriation complaint for purposes other than national infrastructure projects. The Court also authorized the government to perform acts essential to the operation of NAIA-3 as an international airport terminal once the writ of possession becomes effective, but clarified that the title to NAIA-3 shall pass to the government only upon full payment of the just compensation. The RTC was ordered to complete its determination of just compensation within 60 days from finality of the decision. The appointment of commissioners in the expropriation case did not constitute grave abuse of discretion.
Real LexEcon 