COMMISSION ON AUDIT DECISION NO. 2011-003 - January 20 ...

Republic of the Philippines
COMMISSION ON AUDIT
Commonwealth Avenue, Quezon City, Philippines
Subject : Petition for review of Legal and
Adjudication Office-National (LAO-N)
Decision Nos. 2004-172 and 2008-172-A
dated May 12, 2004 and June 25, 2008,
respectively, on the claim of Hi-Lon
Manufacturing Co., Inc. for just
compensation for the parcel of land
converted as road right of way (ROW)
for Manila South Expressway Project
FACTS OF THE CASE
DECISION
DECISION NO. 2011- 003
JAN 2 0 2011
Petitioner Hi-Lon Manufacturing Co., Inc. (Hi-Lon for brevity) seeks
reversal of the adverse decision of the then LAO-N, this Commission, under the
above-captioned decisions. In gist, Hi-Lon moves for the lifting of Notice of
Disallowance (ND) No. 2004-032 dated January 29, 2004, disallowing the
amount of P9,937,596.20 representing the difference between the Auditor's
valuation ofthe ROW amounting to P523,741.80 and the initial payment to the
claimant amounting to P10,461 ,338.00.
The antecedent facts are chronologically discussed below.
In 1978, pursuant to the directive by the then Ministry of Public Works
and Highways, a parcel of land located in Mayapa, Calamba, Laguna with an
area of 29,690 sq. m. was converted to a ROW for the Manila South
Expressway Extension Project. At that time, the subject property with a total
area of 89,070 sq. m. covered by Transfer Certificate of Title (TCT) No.
40999 issued on March 11, 1975 was owned by Commercial and Industrial Real
Estate Corporation (CIREC).

Subsequently, the Philippine Polymide Industrial Corporation (PPIC)
acquired the subject property that brought to the cancellation ofTCT No. 40999
and the issuance of new TCT No. T -120988 dated January 4, 1985.
Then, PPIC mortgaged the subject property with the Development Bank
of the Philippines (DBP) which later acquired the same in a foreclosure
proceeding held on September 6, 1985. Title thereto was transferred in favor of
DBP under TCT No. T-151837 dated May 15, 1987.
Upon issuance of Administrative Order No. 14 dated February 3, 1987,
DBP submitted all its acquired assets, including the subject property, to the
Asset Privatization Trust (APT) for disposal pursuant to Administrative Order
No. 50 dated December 9, 1986. Accordingly, then APT (now Privatization
Management Office) disposed the subject property in a public bidding held on
June 30, 1987.
In a certification dated July 1, 1987, APT declared Fibertex Corporation
as the highest bidder having tendered a bid amounting to P154,000,000.00.
Thereafter, APT and Fibertex Corporation executed a Deed of Absolute Sale
(DOS) dated August 19, 1987 covering the said property for a total
consideration ofP 154,315,615.39.
For unknown reasons, the subject property (TCT No. 151837 in the name
of DBP) was directly transferred in favor of TG Property, Inc. under TCT
No. T-158786 dated December 9, 1987. Said transaction between APT and
TG Property, Inc. was covered by a DOS dated October 29, 1987 with a total
consideration ofP2,222,967.00.
In 1995, the subject property was transferred to Hi-Lon, a subsidiary of
TG Property being 99.99 % owner thereof, by virtue of a DOS executed on
April 16, 1995 by and between the TG Property,Inc. and Hi-Lon. This resulted
in the cancellation ofTCT No. T-158786 and issuance of new TCT No. 383819
dated October 18, 1996 in favor ofHi-Lon.
Three (3) years later, Mr. Rupert P. Quijano, Attorney-in-Fact ofHi-Lon,
requested assistance from the Urban Road Project Office (URPO), Department
of Public Works and Highways (DPWH) for payment of just compensation for
the 29,690 sq. m. converted to ROW.
The Ad Hoc Committee created by the DPWH under Office Order No.3,
series of 1999, valued the ROW at P2,500.00 per sq. m., adopting for the
purpose the 1999 Bureau of Internal Revenue zonal valuation.
On December 21, 2001, the Republic of the Philippines represented by
Mr. Lope S. Adriano, URPO-Project Management Office (PMO) Project
Director, by authority of the DPWH Secretary, executed a DOS by and between
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the Hi-Lon covering the 29,690 sq. m. converted to ROW for a total
consideration ofP67,492,500.00.
On January 23, 2002, DPWH paid the first partial payment to Hi-Lon in
the amount ofP10,461,338.00 as evidenced by Disbursement Voucher No. 101-
02-01-00826 dated January 18, 2002.
On post audit, the Supervising Auditor, DPWH, in Audit Observation
Memorandum No. NGS VIII-A-03-001 dated April 2, 2003 noted using the
1999 zonal valuation of P2,500.00 per sq. m. as basis for the determination of
just compensation was "unrealistic" considering that as of said year, the value
of the subject property has already been "glossed over by the consequential
benefits" it has obtained from years of having been used as ROW. The Auditor
suggested that just compensation should be based on the value of the said
property at the time of its actual taking, that is, in 1978. Taking into
consideration the average value between the 1978 and 1980 Tax Declarations
covering the subject land, the Auditor arrived at the amount of P19.40 per sq.
m. as reasonable compensation, recommending the recovery of the excess
payments.
Upon review, and finding the Auditor's observation judicious, the then
Director, LAO-N, this Commission, issued on January 29, 2004, Notice of
Disallowance (ND) No. 2004-032 in the amount of P9 ,937,596.20 representing
the difference between the partial payment ofP10,461,338.00 and the amount of
P523,741.80 which, according to the Auditor, is what should have been paid.
Said ND was later affirmed in LAO-N Decision No. 2004-172 dated
May 12, 2004, basically upon the ratiocination that the computation of just
compensation must be based on the value of the property at the time of actual
taking. This premise was echoed in the above-captioned LAO-N decision now
sought to be reversed, but with the modification that payment of interest is
appropriate under the circumstances considering that "payment has been denied
for a long time." Hence, the instant petition where Hi-Lon assigned the
following errors:
1. That the pertinent laws and jurisprudence on the valuation of
properties expropriated by the government do not apply in the
instant case considering that what is involved herein is not
expropriation; and
2. Assuming arguendo there was indeed expropriation herein,
still, the application of the subject property's 1978 assessed
value as the basis for the determination of just compensation is
erroneous.
Hi-Lon ratiocinated that the just compensation must be determined vis-avis
the property's fair market value at the time of the filing of the complaint
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which is supported by a recent Supreme Court ruling in National Power
Corporation vs. Tiangco, G.R. No. 170846, February 6, 2007. In this case, the
Court defined 'just compensation' as the full and fair equivalent of the property
taken from its owner by the expropriator or the sum of money which a person
desirous but not compelled to buy, and an owner willing but not compelled to
sell, would agree on as a price to be given and received therefor. Petitioner also
invoked the case of Apo Fruits Corp. vs. Court of Appeals, G.R. No. 164195,
February 6, 2007 which held that fair market value is significantly higher than
the assessed value of the property does not alter the rule on the determination of
just compensation, or makes the latter the basis thereof.
In order to aid the Commission Proper in the adjudication of the herein
claim, the latter, in its regular meeting held on June 2, 2009, deferred the
resolution of the above subject, and instructed the Legal Services Sector to
create a Special Audit Team from the Fraud Audit and Investigation Office to
investigate and validate the claim ofHi-Lon.
ISSUE
Whether or not Hi-Lon is entitled to compensation for the subject
property.
DISCUSSION
The evidence gathered by the Special Audit Team under COA Office
Order No. 2009-494 dated July 16, 2009 are fatal to the claim for just
compensation.
The transfer of the property in favor of TG Property, Inc., the parent
corporation of Hi-Lon was tainted with anomalies. Records show that TG
Property, Inc. did not participate in the public bidding on the disposal of subject
property held on June 30, 1987, as only three (3) bidders participated, namely:
Fibertex Corporation, TNC Philippines, Inc. and P. Lim Investment Inc.
In a Certification dated July 1, 1987, the then APT declared Fibertex
Corporation as the highest bidder having tendered a bid amounting to
Pl54,000,000.00. To consummate the transaction, APT and Fibertex
Corporation executed DOS dated August 19, 1987 for a total consideration of
P154,315,615.39. The important details on the above transaction was
summarized in the APT Terminal Report prepared by Ms. Emma R. Tolentino,
Marketing Officer noted by Mr. Felipe B. Bince, Jr., Associate Executive
Trustee.
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Very surprisingly, the records in the Registry of Deeds of Calamba,
Laguna, disclosed that the subject property (TCT No. 151837 in the name of
DBP) was transferred in favor of TG Property, Inc. under TCT No. T -158786
dated December 9, 1987. Said transaction between APT and TG Property, Inc.
was covered by a DOS dated October 29, 1987 with a total consideration of
only P2,222,967.00 or a difference of P152,092,648.39 as against the DOS
between APT and Fibertex Corporation, the winning bidder.
Notably, in the two (2) DOS covering the said property, Fibertex
Corporation and TG Property , Inc. was represented by the same person in the
name of Ester H. Tanco while APT was represented by Associate Executive
Trustee, Ramon T. Garcia. While in the subsequent DOS between TG
Properties, Inc. and Hi-Lon, the latter was also represented by Ester Tanco
Gabaldon.
Interestingly, the DOS between APT and Fibertex Corporation has a
disclosure that "The subject of this Deed of Absolute Sale, therefore, as fully
disclosed in the APT Asset Catalogue, is the total useable area of 59,380
sq.m." excluding for the purpose the 29,690 sq. m. converted to ROW. The
said exclusion was corroborated and strengthened by the Abstract of Bids duly
signed by the then APT Executive Assistant and Associate Executive Trustee
showing that the land covered by TCT No. T-151837 was offered to public
bidding for its useable portion of 5.9 hectares only, excluding the subject
29.690 sq. m. converted to ROW. Thus, the facts are undeniable that the ROW
has been the property of the Republic of the Philippines since its acquisition by
DBP up to the present.
While it is true that the whole land area of 89,070 sq. m. is registered in
the name ofHi-Lon per TCT No. 383819 dated October 18, 1996, the Supreme
Court (SC), in Republic vs. Court of Appeals, et a/., G. R. No. 162175,
June 28, 2010 enunciated that "{Tlhe registration of land under the Torrens
system does not create or vest title. because registration is not one ofthe modes
of acquiring ownership. A TCT is merely an evidence of ownership over a
particular property and its issuance in favor of a particular person does not
foreclose the possibility that the property may be co-owned by persons not
named in the certificate. or that it may be held in trust (or another person by the
registered owner."
In this case, the provisions of Section 58 of Presidential Decree No. 1529
were clearly violated, thusly:
"Section 58. Procedure where conveyance involves portion of land.
If a deed or conveyance is for a part only of the land described in a
certificate of title. the Register of Deeds shall enter any transfer
certificate to the grantee until a plan of such land showing all the
portions or lots into which it has been subdivided and the
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Copy furnished:
The Secretary
Department of Public Works and Highways
Port Area, Manila
The Project Director
URPO-PMO
Department of Public Works and Highways
Port Area, Manila
The President
Hi-Lon Manufacturing Company Inc.
Mapayapa, Calamba
Laguna
The Supervising Auditor
Department of Public Works and Highways
Port Area, Manila
The Director
Cluster D-Economic Services
National Government Sector
This Commission
The Assistant Commissioner
National Government Sector
This Commission
The Assistant Commissioner
Legal Services Sector
This Commission
LSS-FAIO
ESZ/LDB/ ABJ/enp
Dpwh- hi Ion decision
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