POWER OF EMINENT DOMAIN

1. Republic of the Philippines v. Mupas

(G.R. No. 181892 , 8 September 2015)

FACTS:
On October 5, 1994, Asia's Emerging Dragon Corp. (AEDC) submitted an unsolicited proposal to
the Government - through the Department of Transportation and Communications (DOTC)and the Manila
International Airport Authority (MIAA)- for the construction and development of the NAIA-IPT III under
a build-operate-and-transfer (BOT) arrangement.
DOTC awarded the NAIA-IPT III project to the Paircargo Consortium (later organized itself as
PIATCO) based on a build-operate-transfer arrangement and who, in this capacity, contracted out the actual
construction to Takenaka and Asahikosan.
In May 2002, PIATCO defaulted on its obligation to pay Takenaka and Asahikosan pursuant to
their respective contracts.
In January 2004, the Court ruled that for the Government to take over the said facility, it has to
compensate respondent PIATCO as builder of the said structures. The compensation must be just and in
accordance with law and equity for the Government cannot unjustly enrich itself at the expense of PIATCO
and its investors.

ISSUE: Whether "fair market value" and "replacement cost" are similar eminent domain standards of
property valuation

RULING: No, they are not similar domain standards of property valuation.
Eminent domain is the inseparable fundamental power of a sovereign state to appropriate private
property within its territorial sovereignty to promote public welfare. Just compensation means that the
former owner must be returned to the monetary equivalent of the position that the owner had when the
taking occurred. Fair market value is the general standard of value in determining just compensation.
However, replacement cost is a different standard of value from fair market value.
"Fair market value" is the sum of money that 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 for a property.
There are exceptional cases where the property has no fair market value or where the fair market value of
the property is difficult to determine. Examples are specialized properties that are "rarely x x x sold in the
market, except by way of sale of the business or entity of which it is part, due to the uniqueness arising
from its specialized nature and design, its configuration, size, location, or otherwise."
Replacement cost is "the amount necessary to replace the improvements/structures, based on the
current market prices for materials, equipment, labor, contractor's profit and overhead, and all other
attendant costs associated with the acquisition and installation in place of the affected
improvements/structures."196 We use the replacement cost method to determine just compensation if the
expropriated property has no market based evidence of its value.