The power of eminent domain is an inherent attribute of sovereignty, allowing the State to take private property for public use. However, this power is not absolute. Under Article III, Section 9 of the 1987 Philippine Constitution, "private property shall not be taken for public use without just compensation."

In the Philippine legal system, the determination of "just compensation" is a judicial function. While the legislature or executive may provide guidelines, the final word on what constitutes "just" payment belongs to the courts.

I. Defining Just Compensation

The Supreme Court of the Philippines has consistently defined just compensation as the full and fair equivalent of the property taken from the owner by the expropriator. The measure is not the taker's gain, but the owner's loss.

To be "just," the compensation must be:

Real: Representing the actual value of the property.
Substantial: Not merely nominal.
Reasonably Prompt: Payment must be made within a reasonable time from the taking.

II. The Time of Taking

The general rule is that the value of the property is determined at the time of the taking or the filing of the complaint, whichever comes first. This prevents the owner from benefiting from any appreciation in value caused by the public project itself, and conversely, protects the owner from depreciation caused by the announcement of the project.

III. Factors in Determining Market Value

The core of just compensation is the Fair Market Value (FMV). This is defined as the price which the property would command if exposed for sale in the open market, allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted.

Under Republic Act No. 10752 (The Right-of-Way Act), which governs infrastructure projects, and various jurisprudential standards, the following factors are considered:

The classification and use for which the property is suited.
The development costs for improving the land.
The value declared by the owner in tax declarations.
The current selling price of similar properties in the vicinity (comparable sales).
The size, shape, and location of the property, including its distance from roads and business centers.
The taxes imposed on the property.

IV. Consequential Damages and Benefits

Just compensation is not always limited to the market value of the land taken. If only a portion of a landholding is expropriated, the court must consider:

Consequential Damages: The injury caused to the remaining portion of the property (e.g., if the remaining land becomes inaccessible or unusable).
Consequential Benefits: The increase in value that the remaining property may enjoy due to the public improvement.

The Formula:

Note: Under Philippine law, consequential benefits can never exceed consequential damages.

V. The Role of Appointed Commissioners

Under Rule 67 of the Rules of Court, once the right to expropriate is established, the court appoints no more than three (3) commissioners to examine the property and report on the value.

The commissioners hold hearings, receive evidence, and conduct site inspections.
They submit a report to the court recommending the amount of compensation.
The court may accept, reject, or recommit the report, but it serves as the primary evidentiary basis for the judge’s final decision.

VI. Legal Interest and Delay

Compensation is not "just" if it is delayed without indemnity. If the government takes possession of the property before full payment is made, it is liable for legal interest on the amount due.

The interest rate is typically 6% per annum, calculated from the time of the taking until full payment is made.
This interest is considered a part of the "just compensation" itself, intended to compensate the owner for the loss of use of the money.

VII. Expropriation under Comprehensive Agrarian Reform (CARP)

A unique subset of Philippine law involves the taking of agricultural land. Under the Comprehensive Agrarian Reform Law (RA 6657), the determination involves additional social justice factors, such as:

The cost of acquisition of the land.
The income of the property.
The sworn valuation by the owner.

While the Land Bank of the Philippines (LBP) makes the initial valuation, the Regional Trial Courts (acting as Special Agrarian Courts) have the final authority to determine just compensation in agrarian disputes.

VIII. Summary of Judicial Prerogative

While various statutes (like RA 10752) provide formulas and standards for the executive branch to offer a "negotiated sale," these do not bind the Judiciary. If the owner rejects the government's offer and the case goes to court, the judge is mandated to exercise independent judgment based on the evidence presented by the commissioners and the parties involved, ensuring the constitutional mandate of "justness" is satisfied.