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 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]
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:
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 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. On the other hand, in Land Bank of the Philippines v. Wycoco,[26] 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 turn, 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.
Under Section 9, Rule 130 of the Revised Rules of Court,[29] 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:
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]
In the present case, it is undisputed that the Deed of Absolute Sale between petitioner and respondent does not contain any provision regarding the payment of interest. Petitioner agreed to convey its property upon full payment of the purchase price without reservation for any claim of interest. No parol evidence can be admitted to support respondent's claim of interest 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 Letter[33] 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 receipt[35] 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 Appeals[36] 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.
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 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]
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.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]
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.
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 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. On the other hand, in Land Bank of the Philippines v. Wycoco,[26] 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 turn, 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.
Under Section 9, Rule 130 of the Revised Rules of Court,[29] 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."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. Whatever is not included in the document is deemed waived or abandoned.[31]
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)
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]
In the present case, it is undisputed that the Deed of Absolute Sale between petitioner and respondent does not contain any provision regarding the payment of interest. Petitioner agreed to convey its property upon full payment of the purchase price without reservation for any claim of interest. No parol evidence can be admitted to support respondent's claim of interest 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 Letter[33] 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 receipt[35] 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 Appeals[36] 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.
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