Notes on Eminent

Domain and Just

Compensation

Augusto B. Agosto
 1
This notes is a product of the author’s academic
work while taking up the Land Valuation and
Management Program in the University of the
Philippines and real estate practice.
This is designed for property and business owners
whose properties or businesses are being taken by
the government through the power of eminent
domain. It will help in understanding the basic law
and procedures applicable to eminent domain
proceedings, and with the just compensation to
which you are entitled.
This is intended also for real estate practitioners as
an aid for an in-depth knowledge on eminent
domain issues and the corresponding court
procedures. In coordination with lawyers, this will
help in clarifying the scope of the appraisal work
and will outline the role in court proceedings. Laws
and jurisprudence are constantly changing, it is
encourage to continuously study and be informed
in the latest court decisions on the substantive and
procedural matters of eminent domain issues.

AUGUSTO B. AGOSTO
Cebu City, Philippines
 2
Introduction

The Philippine Constitution states that private

property shall not be taken for public use
without just compensation. This provision
referred to as eminent domain or expropriation
has resulted in a plethora of case law and
academic literatures that help in defining what
constitute public use, and how to determine
just compensation.

Fr. Joaquin Bernas, former Constitutional

Commissioner, in his works discusses eminent
domain in a comprehensive manner. He
expounded the definition of eminent domain to
include not only the legal aspect but also in
historical and political context, and draw
practical application in citing various Supreme
Court rulings and literatures.

He clearly demonstrated the distinction of

inherent power of the State and the delegated
power. The inherent power being unlimited
power with limitations under the Bill of Rights.
 3
The eminent domain in the hands of legislature
and in different government agencies, local
government and public utilities. However the
latter are only a delegated power. The
distinction is important and has legal
consequences both with respect to the scope
of power and judicial review and the exercise
of the power.

A. Legal basis of eminent domain

Under the Philippine Constitution, Article III,

Section 9, “Private property shall not be taken
for public use without just compensation.” In
line with this, to tilth balance with the Bill of
Rights provision of the basic law of the land,
there are two constitutional limitations on the
power of eminent domain: (1) the purpose of
the taking must be public use, and (2) just
compensation must be given to the private
owner.
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Public use means its usefulness to the public,
utility or advantage, or what is productive of
general benefit. This will ensure that any
appropriation of private property by the state
should be for public use. In the historical
perspective, public use should be mean of a
constant growth and not static. As society
advances, individual demands increases and
new demand use of the resources be devoted.
In determining the genuinely of necessity for
the exercise of eminent domain is a judiciable
question, and the power exercised by the
legislature is essentially a political question.

The Constitution reiterates in Section 4, Article

XIII of the 1987 the importance of just
compensation. It emphasizes that the
redistribution of agricultural lands shall be
“subject to the payment of just compensation.”
This is to balance between the Bill of Rights
and the purpose of agrarian reform. The duty
of the court is to protect the weak and the
underprivileged, but not to deny justice to the
landowner.
 5
Just compensation on the other hand is
defined as a just and complete equivalent of
the loss which the owner of the expropriated
has to suffer by reason of expropriation. In
other words, compensation is “just“ if the
owner receives from his property a sum which
is equivalent to the market value of the
property. Market value defined as the price
fixed by the buyer and seller in the open
market in the usual and ordinary course of
legal trade and competition.

In the Bill of Rights, just compensation is

defined as the fair or market value of the
property as between the one who receives,
and the other one who desires to sell. Just
compensation also applies in agrarian
reform. In fact, the Comprehensive Agrarian
Reform Law or R.A. No. 6657 requires that just
compensation should be the full and fair
equivalent of the property taken from its owner
by the expropriator, the equivalent being real,
substantial and full.
 6
Furthermore, the determination of just
compensation in expropriation cases is a
function addressed to the discretion of the
courts owing to the constitutional mandate
that no private property shall be taken for
public use without payment of just
compensation. As such, legislative
enactments, as well as executive issuances,
fixing or providing for the method of
computing just compensation are tantamount
to impermissible encroachment on judicial
prerogatives. As such, they are not binding on
courts and are treated as mere guidelines in
ascertaining the amount of just
compensation. Even the enumeration of the
standards for the assessment of the value of
the land for purposes of expropriation under
Section 5 of Republic Act No. 8974 reflects the
non-exclusive, permissive and discretionary
character thereof.

Under Sec. 4, Rule 67 the basic rule that the

value of the just compensation is to be
determined as of the date of the taking of the
 7
property or the filing of the complaint,
whichever came first. The case of National
Transmission Corporation v. Oroville
Development Corporation, settles that just
compensation should be reckoned from the
date of actual taking when such action
preceded the filing of the complaint for
expropriation.

The affected landowner upon the

implementation of the condemnation, will file
in court of their claim for just compensation.
However, if the filing will be delayed, the legal
payment will be applied from the time of
taking. The effect of the former will give the
owner an undue advantages arising from the
new development or land use of the property
expropriated. Example the common usage of
the expropriated property is road widening
where the property in the vicinity will increase
due to the accessibility and possible
development of the area. If the new market
value will be the reckoning time, the land
 8
owner will benefit through appreciation of land
value.

Also, the entry into the property prior to full

payment, Section 10 of R.A. 7160 requires a
deposit with the proper court of at least fifteen
percent (15%) of the fair market value of the
property based on the current tax declaration
of the property to be expropriated. As a rule,
there is a difference if the expropriation involve
infrastructure projects, it’s not only deposit
rather than the full payment of the value of
property. The form of compensation differ
either in cash and installments. Based on the
Rules of Court, Rule 67, Section 10 it should be
fair market value in cash, however in
Agricultural Land Reform Code (R.A.3844) the
condemned could be paid 10% in cash and the
remaining will be paid in bonds issued by
Landbank. Furthermore, Presidential Decree
No.27 calls for payment in fifteen equal annual
installments guaranteed with shares of stocks
in government owned or controlled
corporations.
 9
The Constitution and the Local
Government Code on the power of
eminent domain

Eminent domain is the power of the state to

take private property for public use. It is an
inherent power of the State as it is a power
necessary for the State’s existence. As an
inherent power, it is unlimited power.
However, limitation can be found in the Bill of
Rights, Article III, Section 9 which states that
no private property shall be taken for public
use without just compensation.

As discussed intuitively by Fr. Bernas, the two

essential limitations to the power of eminent
domain are (1) the purpose of taking must be
for public use and (2) just compensation must
be given to the owner of the private property.
It emphasizes that the compensation should
be “just” as to safeguard and ensure the
balance between property not to be taken for
public use at expense of private interest. In
 10
short, the State should balance the injury that
the taking of property will cause through
compensation for what is taken.

Constitutionally, “just compensation” is the

sum equivalent to the market value of the
property, broadly described as the price fixed
by the seller in open market in the usual and
ordinary course of legal action and
competition, or the fair value of the property
as between the one who receives and the one
who desires to sell, it being fixed at the time of
the actual taking by the government. Just
compensation is defined as the full and fair
equivalent of the property taken from its owner
by the expropriator. It has been repeatedly
stressed by this Court that the true measure is
not the taker’s gain but the owner’s loss. The
word “just” is used to modify the meaning of
the word “compensation” to convey the idea
that the equivalent to be given for the property
to be taken shall be real, substantial, full and
ample.
 11
Under Article XII, Section 18. The State may,
in the interest of national welfare or defense,
establish and operate vital industries and,
upon payment of just compensation, transfer
to public ownership utilities and other private
enterprises to be operated by the government.

Furthermore, Article XIII, Section 4 said that

the redistribution of agricultural lands shall be
“subject to the payment of just compensation.”
With just compensation seen as equivalent to
the market value of the property.

RA 10752 or “The Right-Of-Way Act” and

its IRR

There are three important points which relates

to valuation.

1. The scope of the law is broad and

covers almost all government agencies.
 12
2. The mode of acquisition such as
negotiated sale, donation, and
expropriation has different
compensation mechanism. Negotiated
is for market value, meanwhile
expropriation uses the zonal valuation
and donation thru barter or exchange.
3. The selection of appraiser is limited due
to provision that limits the qualified
appraiser other than the PRC license
requirement.

Under Sec. 3 of the Right-of-Way Act, the term

“national government projects” shall refer to all
national government infrastructure projects
and its public service facilities, engineering
works and service contracts, including projects
undertaken by government-owned and -
controlled corporations, all projects covered by
Republic Act No. 6957, as amended by
Republic Act No. 7718, otherwise known as the
“Build-Operate-and-Transfer Law”, and other
related and necessary activities, such as site
acquisition, supply or installation of equipment
and materials, implementation, construction,
 13
completion, operation, maintenance,
improvement, repair and rehabilitation,
regardless of the source of funding.

We can notice, that this law covers not only the

infrastructure projects, but also projects of
other government agencies, government
owned and controlled corporations that are
doing related and necessary activities such as
site acquisition, supply and installation of
equipment and materials etc. This is broad and
will affect those practitioners that are regularly
engaged in government projects.

Under Sec. 4 discusses the modes of acquiring

real property as right-of-way site or location for
any national government infrastructure project
through donation, negotiated sale,
expropriation, or any other mode of acquisition
as provided by law. The implementing agency
may utilize donation or similar mode of
acquisition if the landowner is a government-
owned or government-controlled corporation.
 14
Furthermore, we can notice the different
standard of land compensation pertaining to
various mode of acquisition. In negotiated
sale, the relevant standards in the
determination of market value of the property
includes the following:

(a) The classification and use for which the

property is suited;

(b) The development cost for improving the

land,

(c) The value declared by the owners;

(d) The current selling price of similar lands in

the vicinity,

(e) The reasonable disturbance compensation

for the removal and demolition of certain
improvements on the land and for the value of
improvements thereon;
 15
(f) The size, shape or location, tax declaration
and zonal valuation of the land;

(g) The price of the land as manifested in the

ocular findings, oral as well as documentary
evidence presented; and

(h) Such facts and events as to enable the

affected property owners to have sufficient
funds to acquire similarly situated lands of
approximate areas as those required from
them by the government, and thereby
rehabilitate themselves as early as possible.

However, in the expropriation proceeding, the

requirement are the following: (1) One
hundred percent (100%) of the value of the
land based on the current relevant zonal
valuation of the Bureau of Internal Revenue
(BIR) issued not more than three (3) years
prior to the filing of the expropriation complaint
subject to subparagraph (c) of this section; (2)
The replacement cost at current market value
 16
of the improvements and structures as
determined by the implementing agency;
government financial institution with adequate
experience in property appraisal; and
independent property appraiser accredited by
the BSP. (3) The current market value of crops
and trees located within the property as
determined by a government financial
institution or an independent property
appraiser to be selected as indicated in
subparagraph (a) of Section 5 hereof.

In the Implementing Rules and Regulations of

RA 10752, the rule applied is stricter in the
selection of an appraiser to do the job of
valuation. It includes the determination of the
appropriate price offer for the acquisition of
ROW through negotiated sale. In line with the
this, the IA may engage the services of either
of the following:

1. A government financial institution (GFI)

with adequate experience in property
 17
appraisal to be selected by the IA
through a competitive process; or
2. An independent property appraiser
(IPA) accredited by:(1) the Bangko
Sentral ng Pilipinas (BSP) or(2) a
professional association of appraisers
recognized by BSP.

However, the BSP accreditation requirement is

a roadblock for every appraiser to engage with
government agencies. Based on the list of
accreditation requirement provided by the
BSP, the required capitalization amount of the
Independent Property Appraiser is Php4
million. This is a steep requirement and seldom
for an Independent Appraiser to have an
equivalent amount that can be used in
complying with the requirement for
accreditation.
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LGUs on exercise of eminent domain

Under the Local Government Code, Section 19

on Eminent Domain states that “a local
government unit may, through its chief
executive and acting pursuant to an ordinance,
exercise the power of eminent domain for
public use, or purpose or welfare for the
benefit of the poor and the landless, upon
payment of just compensation, pursuant to the
provisions of the Constitution and pertinent
laws: Provided, however, That the power of
eminent domain may not be exercised unless
a valid and definite offer has been previously
made to the owner, and such offer was not
accepted: Provided, further, That the local
government unit may immediately take
possession of the property upon the filing of
the expropriation proceedings and upon
making a deposit with the proper court of at
least fifteen percent (15%) of the fair market
value of the property based on the current tax
declaration of the property to be expropriated:
Provided, finally, That, the amount to be paid
 19
for the expropriated property shall be
determined by the proper court, based on the
fair market value at the time of the taking of
the property”.

It is clear in the foregoing that first there are

rules to follow in exercising the power of
eminent domain, these are the following: (1)
“An ordinance is enacted by the local legislative
council authorizing the local chief executive, in
behalf of the LGU. (2) “The power of eminent
domain is exercised for public use, purpose or
welfare, or for the benefit of the poor and the
landless.”; (3) “There is payment of just
compensation, and (4) “A valid and definite
offer has been previously made to the owner
of the property sought to be expropriated, but
said offer was not accepted.” Thus, a local
government may not expropriate on the
strength merely of a sanggunian resolution
alone.
 20
The second important point is the necessity for
the LGU, to file an expropriation proceeding to
immediately take possession of the property,
upon making a deposit with the proper court,
of at least 15 percent of the fair market value
of the property.

The valid exercise of the Power of Eminent

Domain by LGUs require an ordinance
authorizing the local executive to subject the
property to eminent domain or expropriation.
It should be exercised for public use, purpose
or welfare for the benefit of the poor and the
landless; payment of just compensation and a
valid and definite offer to buy, the property
must have been made to the owner and the
latter offer was not accepted.

The following shall be considered among

others as public use, purpose or welfare:

1. Socialized housing;
 21
2. Construction or extension of roads,
streets, sidewalks, viaducts, bridges,
ferries, levees, wharves, or piers;
3. Construction or improvement of public
buildings maintained and operated by
the government for public use such as
nurseries, health centers, or hospitals,
buildings for research, breeding, or
dispersal centers for animals;
4. Establishment of parks, playgrounds,
or plazas;
5. Establishment of public market places;
6. Construction of artesian wells or water
supply systems;
7. Establishment of cemeteries or
crematories;
8. Establishment of drainage systems,
cesspools, or sewerage systems;
9. Construction of irrigation canals or
dams;
10. Establishment of nurseries, health
centers, or hospitals; and
11. Establishment of abattoirs.
12. Building of research, breeding, or
dispersal centers for animals.
 22
Under the Local Government Code, there are
two modes of acquisition of real property, the
acquisition through Negotiated Sale and if it
fails through expropriation. In appraising the
market value of the private property that is
subject to expropriation must consider, among
others, the well-established factors and the
following relevant standards:

1. The classification and use for which the

property is suited;
2. The developmental costs for improving
the land;
3. The value declared by the owners;
4. The current selling price of similar lands
in the vicinity;
5. The reasonable disturbance
compensation for the removal and/or
demolition of certain improvements on
the land and for the value of
improvements thereon;
6. The size, shape or location, Field
Appraisal and Assessment Sheet, Tax
 23
Declaration and zonal valuation of the
land;
7. The price of the land as manifested in
the ocular findings, oral as well as
documentary evidence presented; and
8. Such facts and events so as to enable
the affected property owners to have
sufficient funds to acquire similarly-
situated lands of approximate areas as
those acquired from them by the
government, and thereby rehabilitate
themselves as early as possible.

Compulsory Acquisition of Government

Agencies

Compulsory acquisition is the power of the

government to acquire private rights in land
without the willing consent of its owner or
occupant in order to benefit society. This
power is often necessary for social and
economic development and the protection of
the natural environment.
 24
Republic Act No. 10752 entitled “An Act
Facilitating the Acquisition of Right- of-Way,
Site or Location for National Government
Infrastructure Projects” or “The Right-of-Way
Act” was enacted on 07 March 2016. Right-of-
Way or ROW means a part or the entirety of a
property, site or location, with defined physical
boundaries, used or required by a national
government project.

Notwithstanding the implementing rules and

regulations on the engagement/ procurement
of independent property appraisers (IPA), the
importance of the qualifications of the IPA,
should be consistent with the International
Valuation Standards (IVS) Framework and the
valuations consistent with IVS General
Standards.

The requirement on the engagement of the

Independent property appraisers (IPA) is not
consistent with the Republic Act 9646. Such
requirements are the Bangko Sentral ng
 25
Pilipinas (BSP) Accreditation, and the registry
in Philgeps, tax clearance and many more. The
BSP accreditation however outlined the setting
up of a corporation or single proprietorship
with a capital of at least P4,000,000. This
amount could not be provided by a single
professional valuer. Thus it favors the big
appraisal companies.

The different modes of ROW acquisition are

the donation; negotiated sale and
expropriation. However, there are also other
modes of acquisition such as the acquisition of
properties under Commonwealth Act 141;
exchange or barter; easement of right of way;
acquisition of subsurface right of way and
other modes authorized by law.

As provided in Section 5 of the Act, the

Implementing Agency may acquire through
negotiated sale the required ROW project, by
offering to the property owner as
compensation price, the sum of the:
 26
1. current market value of the land;
2. replacement cost of structures and
improvements therein; and
3. current market value of crops and trees
therein.

With regard to Section 6.1 b of the

Implementing Rules and Regulations of the
Act, the Replacement Cost of a structure or
improvement affected by ROW shall be based
on the current market prices of materials,
equipment, labor, contractors profit and
overhead and all other attendant costs
associated with the acquisition and installation
of a similar asset in place of the affected asset.

As defined in Section 3 of the Act, refers to all

national government infrastructure projects
and their public service facilities, engineering
works and service contracts. including projects
undertaken by government-owned and
controlled corporation, all projects covered by
Republic Act No. 6957, as amended by RA No.
7718, otherwise known as the “Build-Operate-
 27
and-Transfer-Law” and other related laws
including those involving private sector
participation and all necessary activities or
projects that are intended for public use or
purpose, such as site acquisition, supply
and/or installation of equipment and materials,
implementation, construction, completion,
operation, maintenance, improvement, repair
and rehabilitation, regardless of the source of
funding. These projects shall include, but not
limited to the following:

1. Highways, including expressways,

roads, bridges, interchanges,
overpasses, tunnels, viaducts and
related facilities;
2. Railways and mass transit facilities;
3. Port infrastructure, like piers, wharves,
quays, storage handling and ferry
services;
4. Airports and air navigation facilities;
5. Power generation, transmission and
distribution facilities;
 28
6. Radio/television broadcasting and
telecommunications infrastructure;
7. Information technology infrastructure:
8. Irrigation, flood control and drainage
systems;
9. Water and debris retention structures
and dams;
10. Water supply, sanitation, sewerage and
waste management facilities;
11. Land reclamation, dredging and
development;
12. Industrial and tourism estates;
13. Government school buildings,
hospitals, clinics and other buildings
and housing projects;
14. Public markets and slaughterhouses;
and
15. Other similar or related Infrastructure
works and services of the national
government.

Under A.O. No. 50, as amended by R. A. No.

8974, provides that the zonal value shall be the
basis of the offer to acquire property for public
purpose less the additional 10% increase in the
 29
existing zonal value. Setting the acquisition to
zonal value is a departure from the standards
set by International Organizations. Also, based
on the list of relevant standards in appraising
private property that is subject for
expropriation, zonal value is only one of the
standards that need to consider. However, in
the final analysis, the amount to be paid for
the expropriated property shall be determined
by the proper court, based on the fair market
value at the time of the taking of the property.

Expropriation for resale to the landless

The significance of expropriation of large

landed estates may be gathered from the role
land tenure has held in the political and social
history of the country. It has been told that the
earlier revolt against Spain were connected to
the abuses of the landowners against its
peasants. During the American period, the
leadership of the country have staunchly rallied
the call for the confiscation of friar lands and
 30
big landlords. The demand for equitable
distribution of lands is the basic demands of
the peasantry and even the establishment of
the armed uprising in the countryside was due
to this unresolved problem.

The public use has been synonymous with

public welfare under the Guido doctrine which
emphasizes the importance of “area test” that
embraces a town or city and should benefit a
large number of people. This enlarged concept
of “public use” when applied to expropriation
of land required a constant factor that the land
be immense in size. However, during the
Constitutional Commission of 1986 the Guido-
Baylosis rule was taken for granted and the
framers of the constitution favor that the
expropriation for resale for the purpose of
alleviating the condition of the landless farmers
is social justice.

It is important to note the judicial appointment

of three commissioners to inspect the premises
 31
and assess the compensation for the property
owner, and report to the court of their findings.
The report should be accepted and the judge
render will judgment in accordance with the
recommendations. The court has the authority
to change or modify the report by increasing
or decreasing the amount of the award. This
will be based on the facts of the case which
justifies of such change or modification, and in
line with the judicial review.

Order of Priority in Acquisition

The order of priority in the acquisition through

expropriation of lands for socialized housing was
laid down in Section 9 of R.A. 7279 (Urban
Development and Housing Act). This section
provides:

Section 9. Priorities in the acquisition of Land.—

Lands for socialized housing shall be acquired in
the following order:
 32
(a) Those owned by the Government or
any of its subdivisions, instrumentalities,
or agencies, including government-
owned or controlled corporations and
their subsidiaries;

(b) Alienable lands of the public domain;

(c) Unregistered or abandoned and idle

lands;

(d) Those within the declared Areas for

Priority Development, Zonal
Improvement Program sites, and Slum
Improvement and Resettlement Program
sites which have not yet been acquired;

(e) Bagong Lipunan Improvement of

Sites and Services or BLISS sites which
have not yet been acquired; and

(f) Privately-owned lands.

In Section 10 of R.A. 7279 also prefers the

acquisition of private property by "negotiated
sale" over the filing of an expropriation suit. It
 33
provides that such suit may be resorted to only
when the other modes of acquisitions have been
exhausted.

Section 10. Modes of Land Acquisition.—The

modes of acquiring land for purposes of this Act
shall include, among others, community
mortgage, land swapping, land assembly or
consolidation, land banking, donation to the
Government, joint-venture agreement,
negotiated purchase, and expropriation:
Provided, however, That expropriation shall be
resorted to only when other modes of acquisition
have been exhausted; Provided, further, That
where expropriation is resorted to, parcels of land
owned by small property owners shall be
exempted for purposes of this Act.

Expropriation of municipal property

In the case of NAWASA v. City of Baguio, it is

clear that there is a need to clarify the
distinction between patrimonial property of a
 34
municipal corporation and property which is for
public use. In the case of Province of
Zamboanga del Norte v. City of Zamboanga
noted that the principle in distinguishing the
two is simple, if the property is owned by the
municipality in its public and governmental
capacity, the property is public and Congress
has absolute control over it. However, if the
property is owned in its private or proprietary
capacity then it is patrimonial and Congress
has no absolute control. Again, in the Civil
Code the classification of the two can be found
which says:

The Local Government Code states that the

property of provinces, cities, and municipalities
is divided into property for public use and
patrimonial property. In Art.424 clearly defines
what property is for public use. In the
provinces, cities and municipalities, consist of
the provincial roads, city streets, municipal
streets, squares, fountains, public waters,
promenades and public works for public
service paid for by said provinces, cities or
 35
municipalities. All other property possessed by
any of them is patrimonial, without prejudice
to the provisions of special laws.

The problem of eminent domain’s necessity

and cost is not unique to the Philippines, and
there are lessons to be learned from historical
application and jurisdictions across the world.
There is a need to study eminent domain in the
economics context and explore the possibilities
of providing reforms. This reform would create
better incentives for potential condemners,
increase transparency in the process, and
ultimately make eminent domain a more
humane system.