3Republic of tbe tlbilippineg JAN 0 3 2019

~upreme Qeourt
manila

THIRD DIVISION

REPUBLIC OF THE G.R. No. 218732

PHILIPPINES, REPRESENTED
BY THE SECRETARY OF THE Present:
DEPARTMENT OF PUBLIC
WORKS AND HIGHWAYS PERALTA, J., Chairperson,
(DPWH), LEONEN,
Petitioner, GESMUNDO,*
REYES, J. JR., and
HERNANDO,. JJ

- versus -

JOSE GAMIR-CONSUELO DIAZ Promulgated:

HEIRS ASSOCIATION, INC.,
Respondent. November 12, 2018

x---------------------------~-~x
DECISION

REYES, J. JR., J.:

Before the Court is a petition for review on certiorari under Rule 45

of the Rules of Court seeking to set aside the December 12, 2013 Decision 1
and the June 9, 2015 Resolution2 of the Court of Appeals (CA) in CA-G.R.
CV No. 02251-MIN, which reversed the March 4, 2010 Decision3 of the
Regional Trial Court, Branch 15, Davao City (RTC).

On wellness leave.
Penned by Associate Justice Oscar V. Badelles, with Associate Justices Romulo V. Borja and Renato
C. Francisco concmTing; rollo, pp. 37-45.
Penned by Associate Justice Oscar V. Badelles, with Associate Justices Romulo V. Borja and Henri
Jean Paul B. lnting concurring; id. at 46-49.
Not attached in the ro/lo.
DECISION 2 G.R. No. 218732

Factual background

Jose Gamir-Consuelo Diaz Heirs Association, Inc. (respondent) is a

duly incorporated corporation composed of the heirs of Jose Gamir and
Consuelo Diaz. It was the registered owner of a parcel of land with an area
of 1,836 square meters covered under Transfer Certificate of Title (TCT)
No. T-7550. 4

On August 9, 2005, after a series of negotiations, respondent and the

Republic of the Philippines (petitioner), through the Department of Public
Works and Highways (DPWH), executed a Deed of Absolute Sale 5 where it
was agreed that respondent would sell the above-mentioned property to
petitioner in consideration of P275,099.24. The property was eventually
registered in petitioner's name under TCT No. T-390639 6 after respondent's
receipt of the full consideration. The said parcel of land forms part of Sta.
Ana Avenue, a national road. 7

On November 15, 2006, respondent filed a Complaint8 before the

RTC. It alleged that: the subject parcel of land was taken by the DPWH
sometime in 1957; the value of P275,099.24 as just compensation stated in
the Deed of Absolute Sale, was based on the value of the property in 1957; it
made verbal and written demands to petitioner for the payment of interest
from 1957; and it had a right to receive interest because the DPWH had not
paid just compensation when it occupied the property in 1957.

In its March 4, 2010 Decision, the RTC dismissed respondent's

complaint for lack of merit. Aggrieved, it appealed before the CA.

CA Decision

In its December 12, 2013 Decision, the CA granted respondent's

appeal and reversed the RTC decision. The appellate court noted that
petitioner had been occupying respondent's property since 1957 and it was
only in 2005 when the parties entered into a contract of sale for the said lot.
It explained that the Deed of Absolute Sale was not equivalent to the
constitutionally mandated just compensation because it refers not only to the
correct amount to be paid but also the payment within a reasonable time
from the taking. The CA expounded that without prompt payment,

Rollo, p. 64. Referred to as TCT No. T-390639 in the Complaint but said parcel of land was covered
by TCT No. T-7550 prior to the purchase from respondent.
Id. at 60-62.
Id. at 73.
Id. at 13-14.
Id. at 63-70.
DECISION 3 G.R. No. 218732

compensation cannot be considered just if the property is taken immediately

because the property owner suffers the immediate deprivation of both the
land and the fruits and income thereto. Relying on the pronouncements in
9
Apo Fruits Corporation v. Land Bank of the Philippines (Apo), the appellate
court posited that legal interest accrued from the time of the actual taking of
the property until actual payment to place the landowner in a position as
good as the position he was before the taking occurred.

The CA elucidated that the Deed of Absolute Sale cannot be taken as

a waiver of the payment of interest because the determination of just
compensation in eminent domain cases is a judicial function and the taking
of the property was done in the exercise of the state's inherent power of
eminent domain. The appellate court added that the obligation to pay interest
arises from law, independent of the contract of sale between the parties.
Thus, it disposed:

WHEREFORE, premises considered, the instant appeal is

GRANTED. The Decision dated 04 March 2010 in Civil Case No. 31,644-
2006 is hereby REVERSED and SET ASIDE, and a new one is entered,
granting the prayer for the payment of interest on the agreed price of the
land at the rate of 12% per annum to be computed from 1957 until full
payment is made. No Cost.

SO ORDERED. 10

Petitioner moved for reconsideration, but it was denied by the CA in

its June 9, 2015 Resolution.

Hence, this present petition raising:

Issue
- -
WHETHER RESPONDENT IS ENTITLED TO RECEIVE
PAYMENT OF INTEREST NOTWITHSTANDING THE ABSENCE
OF ANY STIPULATION IN THE DEED OF ABSOLUTE SALE
WITH PETITIONER.

Petitioner argued that after the execution of the Deed of Absolute

Sale, respondent cannot claim that it is still entitled to interest without
violating the Parole Evidence Rule. It pointed out that the correspondences
respondent relied on were made prior to the execution of the contract.
Petitioner assailed that the Deed of Absolute Sale was voluntarily executed
and contained all the stipulations relating to the conveyance of the property.
It posited that the lack of stipulation concerning the payment of interest in
the contract amounted to an abandonment thereof considering that

647 Phil. 251 (2010).

10
Rollo, p. 45.
DECISION 4 G.R. No. 218732

respondent had raised the same during the negot1at10n of the contract.
Petitioner believed that respondent should have asserted the payment of
interest before the execution of the Deed of Absolute Sale and the latter's
execution of the contract sans any provision for the payment of interest
amounted to a waiver of the payment of interest.

In addition, petitioner claimed that the ruling in Apo is inapplicable

because unlike in the said case, the value of just compensation was not an
issue as it was agreed upon by the parties and the only controversy here is
the payment of interest. It also noted that in Apo, the landowner offered to
sell the property to the government as opposed to the present case where the
Deed of Absolute Sale was executed after negotiations between the parties.
Finally, petitioner surmised that the provisions of the Civil Code with
regards to contract should apply because the transfer of property was made
through negotiated sale.

In its Comment 11 dated November 7, 2015, respondent lamented that

the arguments raised in petitioner's petition for review on certiorari had
been addressed by the CA.

In its Reply 12 dated June 24, 2016, petitioner reiterated that the Deed
of Absolute Sale unconditionally transferred ownership of the subject
property without objection on respondent's part as to the acquisition cost and
the lack of a stipulation concerning payment of interest. It explained that the
consensual contract between the parties is the law between them and that its
provisions are obligatory. Petitioner highlighted that respondent never raised
as an issue the alleged failure of the deed to reflect the parties' true intent or
that respondent reserved the right to claim legal interest.

The Court's Ruling

The petition is meritorious.

Eminent domain is the inherent power of a nation or a sovereign state

to take, or sanction the taking of, private property for a public use without
the owner's consent, conditioned upon payment of just compensation. 13 In
other words, eminent domain is a coercive measure on the part of the state
whereby private interests are impaired for the general welfare.

While eminent domain is an inherent power, it is not absolute such

that it is subject to limitations imposed under the 1987 Constitution. Section
1, Article III provides that no person shall be deprived of property without

II
Id. at 85-90.
12
Id. at 105-115.
Barangay Sinda!an, San Fernando Pampanga, rep. by Brgy. Capt. Gutierrez v. Court of Appeals,
547 Phil. 542, 551 (2007).
DECISION 5 G.R. No. 218732

due process of law, while Section 9 thereof states that private property shall
not be taken for public use without just compensation. These constitutionally
enshrined restrictions ensure that private individuals are not unduly
prejudiced by the capricious or oppressive exercise of the State's powers.
Thus, in order for the State to exercise its power of eminent domain, the
following requirements must be present: (a) that it is for a particular
purpose; and (b) that just compensation is paid to the property owner. 14

Just compensation is the full and fair equivalent of the property taken
from its owner by the expropriator, the true measure of which is not the
taker's gain but the owner's loss. 15 Further, it does not only refer to the
payment of the correct amount but also to the payment within a reasonable
time from its taking because without prompt payment, the compensation
cannot be considered just. 16 In other words, just compensation in the context
of eminent domain or expropriation proceedings pertains to the timely or
prompt payment of an adequate value sufficient to recoup the loss suffered
by the property owner.

Respondent agrees with the valuation of its properties. As such, it

does not contest in its complaint the consideration stipulated in the Deed of
Absolute Sale it entered into with petitioner. Rather, it assails that it was
entitled to interest from 1957, but petitioner refused to pay the same. On this
score, the CA concurred with respondent noting that the legal interest
emanated from law and not merely from a contract, which means that it is
not subject to the will of the parties. The appellate court ratiocinated that
respondent had no choice but to sign the Deed of Absolute Sale in spite of
the absence of a stipulation regarding the payment of interest because the
property was already in possession of the government since 1957.

Essentially, expropriation is an involuntary sale where the landowner

is practically an unwilling seller. 17 Provided all the requisites for its exercise
are present, a private individual cannot resist the state's exercise of its
inherent power of eminent domain. Nevertheless, there is nothing that
precludes the government from entering into a negotiated sale with a private
landowner to acquire a property to be devoted for a public purpose. In fact,
expropriation proceedings or court intervention would be unnecessary
should a deed of sale be executed where the parties come to an agreement as
to the price of the property to be sold. 18

14
National Transmission Corporation v. Oroville Development Corporation, G.R. No. 223366, August
1, 2017.
15
Evergreen Manufacturing Corporation v. Republic, G.R. No. 218628, September 6, 2017.
16
Republic v. Lim, 500 Phil. 652, 663 (2005).
17
Secretary of the Department of Public Works and Highways v. Spouses Tecson, 758 Phil. 604, 648
(2015).
18
National Power Corporation v. Court ofAppeals, 325 Phil. 29, 47 (1996).
DECISION 6 G.R. No. 218732

In Republic v. Roque, Jr., 19 the Court recognized that the State may
acquire property through expropriation or voluntary sale, each having a
different consequence or implication, to wit:

On a final note, we point out that the parties entered into a

negotiated sale transaction; thus, the Republic did not acquire the property
through expropriation.
In expropriation, the Republic's acquisition of the expropriated
property is subject to the condition that the Republic will return the
property should the public purpose for which the expropriation was done
did not materialize. On the other hand, a sale contract between the
Republic and private persons is not subject to this same condition unless
the parties stipulate it.
The respondents in this case failed to prove that the sale was
attended by a similar condition. Hence, the parties are bound by their sale
contract transferring the property without the condition applicable in
expropriation cases.

The CA surmised that the execution of deed of sale did not amount to
a waiver on the part of respondent for the payment of interest. The rationale
for the payment of interest in expropriation cases is to compensate
landowners for the income they would have made had they been properly
compensated for their properties at the time of taking. 20

Nonetheless, the required payment of interest is related to the

computation of just compensation, which is judicially determined in
expropriation proceedings. Interest payment should be viewed in a different
light when there is a voluntary sale between the landowner and the
government. As above-mentioned, expropriation and voluntary sale have
different legal effects, especially considering that in the latter, the parties
could freely negotiate the terms and conditions of the contract, i.e., they
could include a stipulation concerning the payment of interest. In addition, in
entering into a voluntary purchase or sale, the state does not exercise its
power of eminent domain. 21

In a long line of cases where the Court awarded legal interest, there
was either an absence of concurrence between the landowner and the
government with regards to the value of the property taken or the state had
commenced expropriation proceedings.

In the cases of Reyes v. National Housing Authority, 22 Republic v.

Court of Appeals, 23 and Philippine Ports Authority v. Rosales-Bondoc, 24 the
19
G.R. No. 203610, October 10, 2016, 805 SCRA 524, 546-547.
20
.Apo rruits
17
Corporation v. Land Bank of the Philippines, supra note 9, at 283.
21
National Power Corporation v. Court ofAppeals, supra note 18.
22
443 Phil. 603 (2003).
2
' 433 Phil. 106 (2002).
24
557 Phil. 737 (2007).
DECISION 7 G.R. No. 218732

government, through different bodies and agencies, instituted expropriation

proceedings to acquire private property for public use. Meanwhile, in Land
Bank of the Philippines v. Imperial, 25 the landowner filed a complaint for
determination and payment of just compensation after the Department of
Agrarian Reform (DAR) distributed its properties to farmer-beneficiaries.
26
On the other hand, in Land Bank of the Philippines v. Wycoco, the
landowner initially offered to sell its property to DAR but the matter was
referred to the DAR Adjudication Board after the former disagreed with the
valuation of its property.

Common in the above-cited cases is the fact that either there was
never any negotiation between the government and the private landowner, or
the parties did not reach any agreement as to the consideration for the
property taken. Unlike in the present case, petitioner and respondent
voluntarily and freely executed and entered into a deed of sale covering the
latter's property. The said document purports to represent the will of the
parties concerning the transaction after a series of negotiations. It must be
remembered that the contract is the law between the parties and they are
bound by its stipulations. 27 The CA erred in relying on the pronouncements
in Apo because in the said case, there was no consensual contract between
the parties as the landowner disagreed with the valuation done by the DAR
on its property.

In sum, the award of legal interest in cases where the government

acquires private property through voluntary sale is not a matter of law.
Unlike in cases where the state exercises its power of eminent domain or a
party initiates expropriation proceedings and other similar actions, in
negotiated sale, there is an existing contract that governs the relations of the
parties and determines their respective rights and obligations. In tum, these
contractual stipulations should be complied with in good faith, unless they
are contrary to law, morals, good customs, public order or public policies. 28
Hence, the laws relating to contracts should govern in case of controversy in
their application.

In its complaint, respondent admits that upon negotiation, it agreed to

sell its property to petitioner for the amount stated in the Deed of Absolute
Sale. However, it notes that prior to the execution of the said deed, it had
demanded for the payment of interest to be computed from 1957, but
petitioner rejected it. It is worth highlighting that the Deed of Absolute Sale
between petitioner and respondent does not contain any provision or
stipulation for the payment of interest. Neither did respondent make any
reservation for it to claim interest.
25
544 Phil. 378 (2007).
26
464 Phil. 83 (2004).
27
Spouses Villanueva v. Court of Appeals, 671 Phil. 467, 479 (2011).
28
Morla v. Belmonte, 678 Phil. 102, 117 (2011), citing Roxas v. De Zuzuarregui, Jr., 516 Phil. 605,
622-623 (2006).
DECISION 8 G.R. No. 218732

29
Under Section 9, Rule 130 of the Revised Rules of Court, when the
terms of an agreement have been reduced to writing, it is considered as
containing all the terms agreed upon. In Spouses Paras v. Kimwa
Construction and Development Corporation, 30 the Court explained the
rationale behind the prohibition on the admission of extrinsic evidence in
relation to the terms of a written contract, to wit:

Per this rule, reduction to written form, regardless of the

formalities observed, "forbids any addition to, or contradiction of, the
terms of a written agreement by testimony or other evidence purporting to
show that different terms were agreed upon by the parties, varying the
purport of the written contract."
This rule is animated by a perceived wisdom in deferring to the
contracting parties' articulated intent. In choosing to reduce their
agreement into writing, they are deemed to have done so meticulously
and carefully, employing specific - frequently, even technical -
language as are appropriate to their context. From an evidentiary
standpoint, this is also because "oral testimony . . . coming from a party
who has an interest in the outcome of the case, depending exclusively on
human memory, is not as reliable as written or documentary evidence.
Spoken words could be notoriously unreliable unlike a written contract
which speaks of a uniform language." (Emphasis supplied)

In other words, reliance on the terms of written contract is practicable

because it is understood that whatever stipulations appearing therein was a
result of negotiation, posturing and bargaining between the parties.
31
Whatever is not included in the document is deemed waived or abandoned.

Nevertheless, the Parol Evidence Rule is not a hard-and-fast rule as it

admits of exceptions. Under the same rule, a party may present evidence to
modify, explain or add to the terms of the written agreement if he puts in
issue in his pleading: (a) an intrinsic ambiguity, mistake or imperfection in
the written agreement; (b) the failure of the written agreement to express the
true intent and agreement of the parties; (c) the validity of the written
agreement; or (d) the existence of other terms agreed to by the parties or
their successors-in-interest after the execution of the written agreement. In
short, in order for parol evidence to be admitted, the following must be
established: (a) the existence of any of the four exceptions has been put in
issue in a party's pleading or has not been objected to by the opposing party;
and (b) the parol evidence sought to be presented serves to form the basis of
the conclusion proposed by the presenting party. 32

Paro! Evidence Rule.

10
757 Phil. 582, 590(2015).
l J
Norton Resources and Development Corporation v. All Asia Bank Corporation, 620 Phil. 381, 390
(2009).
32
Spouses Abella v. Spouses Abella, 763 Phil. 372, 387 (2015), citing Spouses Paras v. Kimwa
Construction and Development Corporation, supra note 30, at 592.
DECISION
I
9 G.R. No. 218732

1
I

In the present case, it is undisputed that the Deed of Absolute Sale

bJ1ween petitioner and respondent does not contain any provision regarding
t e payment of interest. Petitioner agreed to convey its property upon full
p yment of the purchase price without reservation for any claim of interest.
o parol evidence can be admitted to support respondent's claim of interest
b cause it never put in issue in its complaint the ambiguity or validity of the
Deed of Absolute Sale, or its failure to reflect the parties' true intention.

In addition, respondent cannot rely on its August 1, 2005 Letter33

demanding payment of interest because the said correspondence was made
prior to the execution of the Deed of Absolute Sale. Thus, it could be
reasonably concluded that respondent had abandoned its demand for interest
after it acquiesced with the contract notwithstanding the lack of stipulation
concerning payment of interest. Respondent freely agreed to enter into the
covenant knowing fully well that petitioner was not bound by its terms to
pay interest. If it feels shortchanged, the Court cannot offer any reprieve.
After all, courts have no alternative but to enforce contractual stipulations in
the manner agreed upon by the parties, and they do not have the power to
modify contracts or save parties from disadvantageous provisions. 34

Further, the Court disagrees with the CA's observation that

respondent was left with no choice but to sign the Deed of Absolute Sale
sans any provision on the payment of interest. In respondent's complaint,
there was no allegation that it was coerced into signing the document or that
its consent was vitiated in any manner. It was not compelled to sign the said
deed should it find itself placed in a disadvantageous position. In fact,
respondent could have opted to initiate expropriation proceedings if it
was adamant in its claim for legal interest - or, at the very least, included a
clause in the perfected deed of sale that it was reserving the right to claim
legal interest. In the same vein, it did not protest or place any objection when
it acknowledged receipt35 of the full purchase price embodied in the Deed of
Absolute Sale.

It is noteworthy that the deed of sale executed in National Power

Corporation v. Court of Appeals36 contained a clause that it was without
prejudice to the landowner's pursuance for just compensation and interest.
Unfortunately in the said case, the National Power Corporation repudiated
the deed resulting in judicial intervention for the determination of just
compensation. Here, in accordance with the Deed of Absolute Sale,
respondent voluntarily agreed to convey its property to petitioner upon full
payment of the purchase price - without any other restrictions, limitations
or conditions.

33
Rollo, p. 76.
34
Pryce Corporation v. Philippine Amusement & Gaming Corp., 497 Phil. 490, 503 (2005).
35
Rollo, p. 75.
36
Supra note 18, at 44-45.
 DECISION 10 G.R. No. 218732

WHEREFORE, the petition is GRANTED. The December 12, 2013

Decision and the' June 9, 2015 Resolution of the Court of Appeals in
CA-G.R. CV No. 02251-MIN are REVERSED and SET ASIDE. The
March 4, 2010 Decision of the Regional Trial Court, Branch 15, Davao City
is REINSTATED.

SO ORDERED.

~ ~- :7Yis, ~R.
Associate Justice

WE CONCUR:

Associat ustice
Chairperson

(On Wellness Leave)

ALEXANDER G. GESMUNDO
/ Associate Justice Associate Justice

(On Wellness Leave)

RAMON PAULL. HERNANDO
Associate Justice
DECISION 11 G.R. No. 218732

ATTEST AT ION

I attest that the conclusions in the above Decision had been reached in
consultation before the case was assigned o the writer of the opinion of the
Court's Division.

.PERALTA
Associat Justice
Chairperson, Third Division

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution and the

Division Chairperson's Attestation, 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.

Senior Associate Justice

(Per Section 12, Republic Act
No. 296, The Judiciary Act of
1948, as amended)

JAN 0 3 2D19