G.R. No.

205428 June 7, 2017

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND

DECISION

DEL CASTILLO, J.:

We resolve the Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the
August 23, 2012 Decision   and the January 10, 2013 Order   of the Regional Trial Court (RTC),
1 2

Branch 270, Valenzuela City, in Civil Case No. 17 5-V-11 which directed petitioner Republic of the
Philippines (Republic) to pay respondents spouses Senando F. Salvador and Josefina R. Salvador
consequential damages equivalent to the value of the capital gains tax and other taxes necessary for
the transfer of the expropriated property in the Republic's name.

The Antecedent Facts

Respondents are the registered owners of a parcel of land with a total land area of 229 square
meters, located in Kaingin Street, Barangay Parada, Valenzuela City, and covered by Transfer
Certificate of Title No.V-77660. 
3

On November 9, 2011, the Republic, represented by the Department of - Public Works and
Highways (DPWH), filed a verified Complaint   before the RTC
4

for the expropriation of 83 square meters of said parcel of land (subject property), as well as the
improvements thereon, for the construction of the C-5 Northern Link Road Project Phase 2
(Segment 9) from the North Luzon Expressway (NLEX) to McArthur Highway.  5

On February 10, 2012, respondents received two checks from the DPWH representing 100% of the
zonal value of the subject property and the cost of the one-storey semi-concrete residential house
erected on the property amounting to ₱l61,850.00   and ₱523,449.22,  respectively.   The RTC
6 7 8

thereafter issued the corresponding Writ of Possession in favor of the Republic.  9

On the same day, respondents signified in open court that they recognized the purpose for which
their property is being expropriated and interposed no objection thereto.   They also manifested that
10

they have already received the total sum of ₱685,349.22 from the DPWH and are therefore no
longer intending to claim any just compensation.  11

Ruling of the Regional Trial Court

In its Decision12 dated August 23, 2012, the RTC rendered judgment in favor of the Republic
condemning t1Je subject property for the purpose of implementing the construction of the C-5
Northern Link Road Project Phase 2 (Segment 9) from NLEX to McArthur Highway, Valenzuela
City. 
13

The RTC likewise directed the Republic to pay respondents consequential damages equivalent to
the value of the capital gains tax and other taxes necessary for the transfer of the subject property in
the Republic's name.  14

The Republic moved for partial reconsideration,   specifically on the issue relating to the payment of
15

the capital gains tax, but the RTC denied the motion in its Order16 dated January 10, 2013 for
having been belatedly filed. The RTC also found no justifiable basis to reconsider its award of
Consequential damages in favor of respondents, as the payment of capital gains tax and other
transfer taxes is but a consequence of the expropriation proceedings. 17

As a result, the Republic filed the present Petition for Review on Certiorari assailing the RTC's
August 23, 2012 Decision and January 10, 2013 Order.

Issues
In the present Petition, the Republic raises the following issues for the Court's
resolution: first, whether the RTC correctly denied the Republic's Motion for Partial Reconsideration
for having been filed out of time;   and second, whether the capital gains tax on the transfer of the
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expropriated property can be considered as consequential damages that may be awarded to

The Court's Ruling

The Petition is impressed with merit.

"Section 3, Rule 13 of the Rules of Court provides that if a pleading is filed by registered mail, x x x
the date of mailing shall be considered as the date of filing. It does not matter when the court
actually receives the mailed pleading." 20

In this case, the records show that the Republic filed its Motion for Partial Reconsideration before the
RTC via registered mail on September 28, 2012.  Although the trial cou1treceived the Republic's
21

motion only on October 5, 2012,  it should have considered the pleading to have been filed on
22

September 28, 2012, the date of its mailing, which is clearly within the reglementary period of 15
days to file said motion,   counted from September 13, 2012, or the date of the Republic's receipt of
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the assailed Decision. 24

Given these circumstances, we hold that the RTC erred in denying the Republic's Motion for Partial
Reconsideration for having been filed out of time. 1âwphi1

We likewise rule that the RTC committed a serious error when it directed the Republic to pay
respondents consequential damages equivalent to the value of the capital gains tax and other taxes
necessary for the transfer of the subject property.

"Just compensation [is defined as] the full and fair equivalent of the property sought to be
expropriated.x x x The measure is not the taker's gain but the owner's loss. [The compensation,
to be just,] must be fair not only to the owner but also to the taker." 25

In order to determine just compensation, the trial court should first ascertain the market value of the
property by considering the cost of acquisition, the current value of like properties, its actual or
potential uses, and in the particular case of lands, their size, shape, location, and the tax
declarations thereon.   if as a result of the expropriation, the remaining lot suffers from an
26

impairment or decrease in value, consequential damages may be awarded by the trial court,
provided that the consequential benefits which may arise from the expropriation do not exceed said
damages suffered by the owner of the property.  27

While it is true that "the determination of the amount of just compensation is within the court's
discretion, it should not be done arbitrarily or capriciously. [Rather,] it must [always] be based on all
established rules, upon correct legal principles and competent evidence."   The court cannot base its
28

judgment on mere speculations and surmises.  29

In the present case, the RTC deemed it "fair and just that x x x whatever is the value of the capital
gains tax and all other taxes necessary for the transfer of the subject property to the [Republic] are
but consequential damages that should be paid by the latter."  The RTC further explained in its
30

assailed Order that said award in favor of respondents is but equitable, just, and fair, viz.:

As aptly pointed out by [respondents], they were merely forced by circumstances to be dispossessed
of [the] subject property owing to the exercise of the State of its sovereign power to expropriate. The
payment of capital gains tax and other transfer taxes is a consequence of the expropriation
proceedings. It is in the sense of equity, justness and fairness, and as upheld by the Supreme Court
in the case of Capitol Subdivision, Inc. vs. Province of Negros Occidental, G.R. No. L-16257,
January 31, 1963 that the assailed consequential damages was awarded by the court.  31

This is clearly an error. It is settled that the transfer of property through expropriation proceedings is
a sale or· exchange within the meaning of Sections 24(D) and 56(A) (3) of the National Internal
Revenue Code, and profit from the transaction constitutes capital gain.   Since capital gains tax is a
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tax on passive income, it is the seller, or respondents in this case, who are liable to shoulder the
tax. 
33
In fact, the Bureau of Internal Revenue (BIR), in BIR Ruling No. 476-2013 dated December 18,
2013, has constituted the DPWH as a withholding agent tasked to withhold the 6% final withholding
tax in the expropriation of real property for infrastructure projects. 11ms, as far as the government is
concerned, the capital gains tax in expropriation proceedings remains a liability of the seller, as it is a
tax on the seller's gain from the sale of real property. 
34

Besides, as previously explained, consequential damages are only awarded if as a result of the
expropriation, the remaining property of the owner suffersfrom an impairment or decrease in
value.   In this case, no evidence was submitted to prove any impairment or decrease in value of
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the subject property as a result of the expropriation. More significantly, given that the payment of
capital gains tax on the transfer· of the subject property has no effect on the increase or decrease in
value of the remaining property, it can hardly be considered as consequential damages that may be
awarded to respondents.

WHEREFORE, we GRANT the Petition for Review on Certiorari. The Decision dated August 23,
2012 and the Order dated January 10, 2013 of the Regional Trial Court, Branch 270, Valenzuela
City, in Civil Case No. 175-V-11, are hereby MODIFIED, in that the award of consequential damages
is DELETED. In addition, spouses Senando F. Salvador and Josefina R. Salvador are hereby
ORDERED to pay for the capital gains tax due on the transfer of the expropriated property.

SO ORDERED.

MARIANO C. DEL CASTILLO

WE CONCUR:

MARIA LOURDES P.A. SERENO

TERESITA J. LEONARDO-DE CASTRO ESTELA M. PERLAS-BERNABE

ALFREDO BENJAMIN S. CAGUIOA

CERTIFICATION

Pursuant to the Section 13, Article VIII of the Constitution, I certify that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the writer of the opinion
of the Court’s Division.

MARIA LOURDES P.A. SERENO

Footnotes

1
 Rollo, pp. 22-25; penned by Presiding Judge Evangeline M. Francisco.

2
 Id. at 26-27.

3
 Records, pp. 16-17.

4
 Id. at 1-15.

5
 Id. at 2-3.

6
 Id. at 68-69.
7
 Id. at 56-57.

8
 Rollo, p. 10.

9
 Id.

10
 Records, p. 67.

11
 Rollo, pp. 23-24.

12
 Id. at 22-25.

13
 Id. at 25.

14
 Id.

15
 Records, pp. 121-126.

16
 Rollo, pp. 26-27.

17
 Id.at27.

18
 Id. at 16.

19
 Id.atl2-13.

20
 Russelv. Ebasan, 633 Phil. 384, 390-391 (2010). Emphasis supplied.

21
 Rollo, p. 27. See also records, p. 128.

22
 Id.

23
 See RULES OF CCURT, Rule 37, Section 1, in rnhltion to Rule 41, Section 3.

24
 Rollo, p. 16.

25
 Republicv. Court of Appeals, 612 Phil. 965, 977 (2009).

26
 Id.

 Id. at 980-981, citing B.H Berkenkotter & Co. v. Caurt ofAppeals, 290-A Phil. 371, 374
27

(1992).

28
 National Power Corporation v. Dr. Bongbong, )49 Phil. 93, 107 (2007). Emphasis supplied.

29
 Manansan v. Republic, 530 Phil. 104, 1 18 (2005).

30
 Rollo, p. 25.

31
 Id. at 26-27. Emphasis supplied.

32
 SeeGutierrezv. CourtofTa.xAppeals, 101Phil.713, 721-722(1957).

33
 Republicv. Soriano, G.R. No. 211666, February 25, 2015, 752 SCRA 71, 87.

34
 Id.

35
 Republic v. Court of Appeals, supra note 27 at 980-981.