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REPUBLIC v. JOSE GAMIR-CONSUELO DIAZ HEIRS ASSOCIATION

FACTS:

The dispute arose between the Jose Gamir-Consuelo Diaz Heirs Association, Inc. (respondent) and the Republic of the Philippines (petitioner) regarding the payment of interest in connection with the sale of a piece of land by the respondent to the petitioner. The respondent, composed of the heirs of Jose Gamir and Consuelo Diaz, was the registered owner of the land. They entered into a Deed of Absolute Sale with the petitioner, represented by the Department of Public Works and Highways (DPWH). The agreed purchase price was P275,099.24, and the petitioner registered the property in their name.

Subsequently, the respondent filed a complaint alleging that the DPWH had taken the land in 1957, and the purchase price specified in the Deed of Absolute Sale was based on the land's value in 1957. They contended that the DPWH should pay them interest from 1957 for the deprivation of the land. The trial court dismissed the complaint, but the Court of Appeals (CA) reversed the decision. The CA ruled that the Deed of Absolute Sale did not constitute just compensation, and the payment of interest should be from the time of the taking until full payment to restore the landowner to their previous position. Additionally, the CA held that the payment of interest was a separate legal obligation from the contract of sale. Dissatisfied with the CA's ruling, the petitioner filed a petition for review on certiorari before the Supreme Court.

ISSUES:

  1. Whether the respondent is entitled to interest on the just compensation for the expropriated property.

  2. Whether the execution of the deed of sale between the respondent and the government amounted to a waiver of interest.

    • Whether the landowner is entitled to the payment of interest on the purchase price of the property.
    • Whether the parol evidence rule applies in this case.

  5. Did the Court of Appeals commit reversible error in ruling that the petitioner is liable to pay interest despite the absence of a provision on interest in the Deed of Absolute Sale?

  6. Did the respondent have any alternative remedies if it believed it was placed in a disadvantageous position?

  7. Was the respondent coerced into signing the Deed of Absolute Sale or was its consent vitiated in any way?

RULING:

  1. The respondent is not entitled to interest on the just compensation for the expropriated property. Interest payment in expropriation cases is meant to compensate landowners for the income they would have made if they were properly compensated at the time of taking. However, in a voluntary sale between the landowner and the government, where the parties freely negotiate the terms and conditions of the contract, including the payment of interest, interest payment should be viewed differently. Just compensation, including the payment of interest, is judicially determined in expropriation proceedings, which are not applicable in voluntary sales.

  2. The execution of the deed of sale between the respondent and the government did not amount to a waiver of interest. The parties are bound by their sale contract, which did not include a stipulation regarding the payment of interest. Unlike expropriation cases, voluntary sales between the landowner and the government do not involve the exercise of the power of eminent domain and are not subject to the same conditions. Unless parties stipulate it, the return of the property if the public purpose for the expropriation did not materialize does not apply to voluntary sales.

    • The landowner is not entitled to the payment of interest on the purchase price of the property. The Deed of Absolute Sale between the parties did not contain any provision or stipulation for the payment of interest, and the landowner did not make any reservation to claim interest. The court held that in cases of negotiated sale, where there is an existing contract governing the relations of the parties, the laws relating to contracts should govern. The contractual stipulations should be complied with in good faith, unless they are contrary to law, morals, good customs, public order, or public policies.
    • The parol evidence rule applies in this case. The court explained that when the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon. The rule prohibits the admission of extrinsic evidence in relation to the terms of a written contract that would add to or contradict the terms of the contract. However, there are exceptions to this rule, such as when there is an intrinsic ambiguity, mistake, or imperfection in the written agreement, or when the written agreement fails to express the true intent and agreement of the parties. In this case, the court held that no parol evidence can be admitted to support the landowner's claim for interest because the Deed of Absolute Sale did not contain any provision regarding the payment of interest, and the landowner did not put in issue in its complaint the ambiguity or validity of the deed, or its failure to reflect the parties' true intention.

  5. The Court finds that the Court of Appeals committed reversible error in ruling that the petitioner is liable to pay interest. The Deed of Absolute Sale did not contain any provision on interest, and the respondent voluntarily agreed to convey the property without any restrictions, limitations, or conditions. Courts have no power to modify contracts or save parties from disadvantageous provisions.

  6. The respondent had alternative remedies available, such as initiating expropriation proceedings or including a clause reserving the right to claim legal interest in the Deed of Absolute Sale. The respondent was not coerced into signing the document and its consent was not vitiated.

  7. There was no allegation in the respondent's complaint that it was coerced into signing the document or that its consent was vitiated. The respondent did not protest or object when it acknowledged receipt of the full purchase price in the Deed of Absolute Sale.

PRINCIPLES:

  • Eminent domain is the inherent power of the state to take private property for public use without the owner's consent, conditioned upon payment of just compensation.

  • Eminent domain is subject to limitations imposed under the 1987 Constitution, which include due process and the payment of just compensation.

  • Just compensation is the full and fair equivalent of the property taken, not only referring to the correct amount but also to the payment within a reasonable time from taking.

  • Expropriation is an involuntary sale where the landowner is practically an unwilling seller.

  • The government can acquire property through expropriation or voluntary sale, each having different consequences or implications.

  • In voluntary sales, the parties can freely negotiate the terms and conditions of the contract, including the payment of interest, unlike in expropriation cases where just compensation is judicially determined.

  • The required payment of interest in expropriation cases is to compensate landowners for the income they would have made had they been properly compensated at the time of taking.

  • Interest payment should be viewed differently in voluntary sales, as parties have the freedom to negotiate the terms and conditions, including the payment of interest.

  • Courts have no power to modify contracts or save parties from disadvantageous provisions.

  • Parties to a contract are bound by its terms, and if they feel shortchanged, courts cannot offer any reprieve.

  • Consent in contracts should not be vitiated, and if there is no allegation of coercion or vitiated consent, courts will uphold the validity of the contract.

  • Alternative remedies may be pursued by a party who perceives being in a disadvantageous position if such remedies are available under the law.