Republic of the Philippines vs. Cirilo P. Baylosis, et al.

A preliminary deposit made under Rule 69 serves the double purpose of prepayment on the value of the property if expropriated and as an indemnity against damages if the proceedings fail; where the defendant has expressly reserved the right to prove damages in the trial court and that reservation was approved and not contested on appeal, a final judgment dismissing the expropriation without pronouncing on damages does not bar the defendant from subsequently litigating those damages in the same action, and the deposit may not be withdrawn before the damage claims are finally determined.

The Republic commenced an expropriation suit (Civil Case No. 84) in the Court of First Instance of Batangas to acquire seven lots that were part of Hacienda Lian, in the municipality of Lian. Pursuant to Section 3, Rule 69 of the Rules of Court, it deposited P27,105.22 and was placed in possession of the parcels. The defendants filed motions to dismiss that contained counterclaims for damages caused by the filing of the suit and the consequent dispossession. The trial court denied the motions and held the expropriation proper. On appeal, the Supreme Court in G.R. No. L-6191 (January 31, 1955) reversed, ordering dismissal of the expropriation without any pronouncement on or reservation of the defendants’ right to claim damages. When the records were returned to the trial court, the Republic moved to withdraw its deposit, and the defendants resisted, contending their damage claims remained unliquidated.

• The Expropriation Suit and Counterclaims: The Republic filed an expropriation complaint over seven lots in Hacienda Lian, Batangas. Upon depositing P27,105.22 under Rule 69, Section 3, it obtained possession. The defendants (Cirilo P. Baylosis, et al.) moved to dismiss, each motion incorporating a counterclaim for damages allegedly sustained from the filing of the suit and the loss of possession.

• Reservation of Damages During Trial: When the motions to dismiss were heard, the trial court confined the reception of evidence to the issue of the plaintiff’s right to expropriate. As defendants began to adduce proof of damages, the lower court stopped them, stating that the matter “will be for the commissioners.” Defendants’ counsel repeatedly manifested an express reservation of the right to present evidence on damages, and the court approved that reservation. The trial court ultimately upheld the Republic’s right to expropriate. Defendants appealed exclusively that finding to the Supreme Court in G.R. No. L-6191.

• The Prior Appeal (G.R. No. L-6191): In a decision dated January 31, 1955, the Supreme Court reversed the trial court and ordered dismissal of the expropriation proceedings. The decision was silent on damages and contained no reservation of defendants’ right to pursue their counterclaims.

• Proceedings on Remand: After the records were returned, the Republic filed a motion to withdraw its deposit of P27,105.22, arguing that the final judgment in G.R. No. L-6191 contained no reservation of the defendants’ right to damages. Defendants opposed, pointing out that their damage claims had not yet been determined. The trial court granted the withdrawal, reasoning that defendants had not acted on their claims and that laches might bar them. Defendants then moved for reconsideration and separately moved to set their counterclaims for hearing. Both were denied, giving rise to the present appeal.

• Withdrawal of Deposit: Whether the trial court erred in ordering the return of the Republic’s preliminary deposit before the defendants’ claims for damages had been adjudicated.

• Res Judicata: Whether the prior final judgment in G.R. No. L-6191, which dismissed the expropriation without pronouncing on damages, barred the defendants from proving and recovering damages in the same proceeding.

• Laches: Whether the defendants’ delay in moving to set their counterclaims for hearing constituted laches barring the prosecution of those claims.

• Withdrawal of Deposit: The withdrawal was improper. The preliminary deposit serves the dual purpose of a prepayment on the value of the property if expropriated, and as an indemnity against damages if the proceedings fail of consummation (Visayan Refining Co. v. Camus, 40 Phil. 562). Allowing the government to recover the deposit before the defendants’ damage claims were settled would deprive defendants of the very safeguard the law provides. The deposit must remain until the counterclaims are finally determined.

• Res Judicata: The prior judgment did not bar the damage claims. In the original trial, the hearing was deliberately limited to the right to expropriate; the defendants expressly reserved their right to prove damages, and the trial court approved that reservation. The government did not question the reservation or appeal from it. Thus, the only matter raised and adjudicated in G.R. No. L-6191 was the right to expropriate. Because damages were never litigated, the dismissal of the expropriation could not carry res judicata effect over the reserved claims. The cases cited by the Republic — Metropolitan Water District v. De Los Angeles and City of Manila v. Ruymann — were distinguished: both involved dismissals at the instance of the plaintiff under materially different procedural postures, and in those cases the appellate reservation was necessary because the question of damages had been directly put in issue; here, the reservation was already made and approved at the trial level.

• Laches: The four-month period between the finality of the dismissal and the motion to set the counterclaims for hearing was not an unreasonable delay. No prejudice was shown, and the period did not amount to laches sufficient to deny the defendants their day in court on damages.

• Dual Purpose of the Preliminary Deposit in Expropriation: Under Rule 69, the deposit made by the expropriating authority is both a prepayment on the value of the land should expropriation be perfected, and an indemnity against damages in the event the proceedings fail. The deposit remains as security for the defendant’s damages until the claim is resolved.

• Res Judicata and Express Reservation of Issues: A final judgment on appeal resolves only the issues actually litigated and decided. Where the defendant expressly reserves the right to later litigate a counterclaim for damages, that reservation — duly approved by the trial court and not challenged on appeal — remains effective and prevents the dismissal of the main case from barring the damages claim on res judicata grounds. The reservation “negatives the idea of waiver.”

• Laches in Prosecuting Reserved Claims: A delay of a few months in moving to hear a reserved counterclaim, absent a showing of prejudice, does not constitute laches.

• “[F]or it is obvious that this preliminary deposit serve the double purpose of a prepayment upon the value of the property, if finally expropriated, and as an indemnity against damages in the eventuality that the proceedings should fail of consummation.” (citing Visayan Refining Co. vs. Camus, 40 Phil. 562) — The controlling statement on the protective function of the deposit.

• “The reservation made by appellants and approved by the court in this case can not be any less effective than the reservation in the Gabriel case.” — The Court equated the trial-level reservation to that sustained in Republic v. Gabriel, reinforcing that a formal reservation in the appellate decision was unnecessary.

• “Such reservation negatives the idea of waiver.” — The approved reservation removed any inference that defendants abandoned their damage claims.

• Visayan Refining Co. v. Camus, 40 Phil. 562 — Controlling authority on the double purpose of the preliminary deposit; followed.

• Republic v. Gabriel, G.R. No. L-6161, May 28, 1954 — Applied; held that an express reservation approved at trial remains effective and bars a finding of waiver, even if not reiterated on appeal.

• Metropolitan Water District v. De Los Angeles, 55 Phil. 776 — Distinguished; involved a dismissal at the plaintiff’s instance after a judgment on the merits, requiring an express appellate reservation, unlike the present case where reservation had been made at trial and damages were never adjudicated.

• City of Manila v. J.C. Ruymann, 37 Phil. 421 — Distinguished; the appeal there directly raised the right to recover damages in the same proceedings, whereas here the damage issue was never reached in the prior appeal.

• Section 3, Rule 69, Rules of Court — Governs the deposit of the provisional value by the expropriating authority. Applied to hold that the deposit must remain as an indemnity against damages where the expropriation fails, and cannot be withdrawn until the defendant’s damage claim is adjudicated.

Paras, C.J., Bengzon, Bautista Angelo, Labrador, Concepcion, Barrera, Gutierrez David, Paredes, and Dizon, JJ., concurred. No separate concurring opinions were recorded.

None.