OSG asks SC to reduce just compensation to PIATCO

By Perfecto T. Raymundo

MANILA, Sept. 29 (PNA) — The Office of the Solicitor General (OSG) on Tuesday asked the Supreme Court to reduce the just compensation to be paid by the government to the Philippine International Air Terminals Company, Inc. (PIATCO) from US$ 510 million to USD 104.5 million.

In a motion for reconsideration (MR) filed by Solicitor General Florin Hilbay, the OSG told the SC that what was involved was a structure that had been losing value over time.

“The idea is to return the value of what PIATCO invested, not to return it with opportunity costs. The concept of mutual restitution is to make PIATCO whole, not whole with benefits,” Hilbay said considering that PIATCO has its own misdeeds.

He said that the SC’s 12 percent interest requirement to the government and the six percent thereafter is equivalent to reasonable return on investment totaling USD 242,810,918.54 should be excluded from the computation of just compensation.

The OSG reminded the SC that it has declared that PIATCO is not a qualified bidder for the airport construction.

Its (PIATCO’s) contract with the government, Hilbay said, was even nullified by the SC.

The concept of just compensation, he said, does not imply fairness to the property owner alone but also to the public which “ultimately bears the cost of expropriation.”

“The Republic respectfully asked the Honorable Court to uphold Agan and Gingoyon to ensure that public funds will not be spent beyond what PIATCO deserves, as a government concessionaire whose contract was nullified by the Court due to irregularities it committed. The government therefore respectfully asked the Honorable Court to reconsider its decision dated September 8, 2015,” Hilbay said.

Pasay City Regional Trial Court (RTC) Judge Henrick Gingoyon ruled on the case awarding just compensation to PIATCO in the amount of USD 149,448,037 before he was murdered in December 2005.

The OSG said that the SC should also “delete the award of interests to PIATCO in the amount of $ 242,810,918.54” and to “deduct the amount of $ 113,944,044.00, representing non-compliance with contract specifications by respondent PIATCO from the principal amount of compensation due.”

In all, Hilbay argued, instead of the USD 510 million in just compensation awarded to PIATCO, the “amount should be only $ 163,959,441.39 less the proffered value of $ 59,438,604.00 already paid to PIATCO.”

“In fine, the Republic should only pay PIATCO the following, $ 300,206, 693.00 (in base construction cost valuation as of December 2004) less $ 1,738,318.00 (deterioration), $ 35,076,295.00 (depreciation) and $ 113,944, 044.00 (rectification for contract compliance, additional areas to be built), or the net sum of $ 149,448,037.00. Applying the inflation rate of 1.0971, the total just compensation payable to PIATCO is $ 163,959,441.39 less the proffered value of $ 59,438,604.00, or $ 104,520,847.39,” Hilbay said.

“While it has been the Republic’s consistent position that it is willing and ready to pay just compensation to whoever maybe finally adjudged as entitled to it, the Republic only seeks to ensure that public funds should not be spent beyond what PIATCO and its contractors and investors deserve considering the peculiar nature of this controversy,” he added.

Hilbay also asked the SC to “declare that upon payment of just compensation, full ownership be vested in the government, free from any liens or encumbrances.”

In a 144-page decision on Sept. 8, 2015, the SC ruled that the government should pay US$ 510,304,535.80 plus legal interest until fully paid.

The SC came up with the said amount when it pegged the cost of valuation at USD 300,206,693.00 then added amounts for excess concession space, four-level retail complex, exclusions due to structural issues then deducted the depreciation and deterioration cost worth USD 36,814,613.00.

As of December 2002, the replacement cost was USD 297,996,738.00 multiplied by 1.097 percent inflation rate.

The total replacement cost as of Dec. 21, 2004 was USD 326,932,221.26 plus 12 percent interest per year earned from Sept. 11, 2006 to June 30,2013 and six percent yearly interest from July 1, 2013 to Dec. 31, 2014 worth USD 242,810,918.54.

Then, the SC deducted Php 59,438,604.00 proffered value which the government paid in 2006.

The PIATCO got the contract to build the NAIA Terminal III on Sept. 20, 1996.

In July 1997, the government executed a Concession Agreement with PIATCO for the NAIA III construction under the build-operate-transfer scheme.

However, the agreement was amended a year later.

Under the amended agreement, PIATCO has been authorized to build-operate and maintain the NAIA III during the concession period of 25 years.

In 2000, PIATCO hired the services of Takenaka as well as the Asahikosan for the airport construction.

Two years later, PIATCO defaulted on its obligation to pay Takenaka and Asahikosan.

That same year, then President Gloria Macapagal-Arroyo declared that the government would not honor the PIATCO contracts at the same time Takenaka and Asahikosan suspended the airport construction.

Then a case was filed before the Pasay City RTC which nullified the PIATCO contract because it was not a duly pre-qualified bidder.

In 2004, the government filed an expropriation case before the Pasay City RTC.

The government deposited the amount of Php3.002 billion representing the assessed value of the terminal.

The Pasay City RTC issued a writ of possession in favor of the government.

In 2005, the RTC appointed three commissioners to determine the amount for just compensation for PIATCO.

The government assessed the NAIA Terminal 3’s construction cost value (CCV) at USD 300,206,693 as of December 2002.

Then, it went down to USD 263,392.081 due to depreciation.

On the other hand, the commissioners pegged the just compensation at USD 376,149,742.56 in 2011 plus 12 percent interest rate per annum and payment of commissioners’ fees.

However, the Pasay City RTC rejected the computation to which PIATCO contested.

Then, in 2013, the Court of Appeals (CA) ordered the government to pay PIATCO USD 240,768,035 as just compensation plus six percent interest until fully paid.

The CA also added that they cannot agree with the RTC ruling that deterioration of the property and costs for non-compliance with contract specifications should be a factor in computing just compensation.

The CA said that contrary to RTC’s findings, they could not see any proof of the terminal’s structural defects.

“There is no clear evidence of any massive structural defect. What may have been considered as a manifestation of a structural defect was the much publicized collapse of a portion of the ceiling which coincidentally occurred just before the equally publicized ocular inspection of the NAIA Terminal 3 premises…The ceiling collapse, however, pertains more to a ‘finishing’ issue than a structural one,” the ruling said. (PNA)