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G.R. No. 179334, July 01, 2013 - SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS AND DISTRICT ENGINEER CELESTINO R. CONTRERAS, Petitioners, v. SPOUSES HERACLEO AND RAMONA TECSON, Respondents.

G.R. No. 179334, July 01, 2013 - SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS AND DISTRICT ENGINEER CELESTINO R. CONTRERAS, Petitioners, v. SPOUSES HERACLEO AND RAMONA TECSON, Respondents.

PHILIPPINE SUPREME COURT DECISIONS

THIRD DIVISION

G.R. No. 179334, July 01, 2013

SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS AND DISTRICT ENGINEER CELESTINO R. CONTRERAS, Petitioners, v. SPOUSES HERACLEO AND RAMONA TECSON, Respondents.

D E C I S I O N

PERALTA, J.:

 

This is a petition for review on certiorari under Rule 45 of the Rules of Court, assailing the Court of Appeals (CA) Decision1 dated July 31, 2007 in CA-G.R. CV No. 77997. The assailed decision affirmed with modification the Regional Trial Court (RTC)2 Decision3 dated March 22, 2002 in Civil Case No. 208-M-95.

The case stemmed from the following factual and procedural antecedents:cralavvonlinelawlibrary

Respondent spouses Heracleo and Ramona Tecson (respondents) are co-owners of a parcel of land with an area of 7,268 square meters located in San Pablo, Malolos, Bulacan and covered by Transfer Certificate of Title (TCT) No. T-430064 of the Register of Deeds of Bulacan. Said parcel of land was among the properties taken by the government sometime in 1940 without the owners’ consent and without the necessary expropriation proceedings and used for the construction of the MacArthur Highway.5

In a letter6 dated December 15, 1994, respondents demanded the payment of the fair market value of the subject parcel of land. Petitioner Celestino R. Contreras (petitioner Contreras), then District Engineer of the First Bulacan Engineering District of petitioner Department of Public Works and Highways (DPWH), offered to pay the subject land at the rate of P0.70 per square meter per Resolution of the Provincial Appraisal Committee (PAC) of Bulacan.7 Unsatisfied with the offer, respondents demanded for the return of their property or the payment of compensation at the current fair market value.8

As their demand remained unheeded, respondents filed a Complaint9 for recovery of possession with damages against petitioners, praying that they be restored to the possession of the subject parcel of land and that they be paid attorney’s fees.10 Respondents claimed that the subject parcel of land was assessed at P2,543,800.00.11

Instead of filing their Answer, petitioners moved for the dismissal of the complaint on the following grounds: (1) that the suit is against the State which may not be sued without its consent; (2) that the case has already prescribed; (3) that respondents have no cause of action for failure to exhaust administrative remedies; and (4) if respondents are entitled to compensation, they should be paid only the value of the property in 1940 or 1941.12

On June 28, 1995, the RTC issued an Order13 granting respondents’ motion to dismiss based on the doctrine of state immunity from suit. As respondents’ claim includes the recovery of damages, there is no doubt that the suit is against the State for which prior waiver of immunity is required.

When elevated to the CA,14 the appellate court did not agree with the RTC and found instead that the doctrine of state immunity from suit is not applicable, because the recovery of compensation is the only relief available to the landowner. To deny such relief would undeniably cause injustice to the landowner. Besides, petitioner Contreras, in fact, had earlier offered the payment of compensation although at a lower rate. Thus, the CA reversed and set aside the dismissal of the complaint and, consequently, remanded the case to the trial court for the purpose of determining the just compensation to which respondents are entitled to recover from the government.15 With the finality of the aforesaid decision, trial proceeded in the RTC.

The Branch Clerk of Court was initially appointed as the Commissioner and designated as the Chairman of the Committee that would determine just compensation,16 but the case was later referred to the PAC for the submission of a recommendation report on the value of the subject property.17 In PAC Resolution No. 99-007,18 the PAC recommended the amount of P1,500.00 per square meter as the just compensation for the subject property.

On March 22, 2002, the RTC rendered a Decision,19 the dispositive portion of which reads:cralavvonlinelawlibrary

WHEREFORE, premises considered, the Department of Public Works and Highways or its duly assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One Thousand Five Hundred Pesos (P1,500.00) per square meter for the lot subject matter of this case in accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001.

SO ORDERED.20

On appeal, the CA affirmed the above decision with the modification that the just compensation stated above should earn interest of six percent (6%) per annum computed from the filing of the action on March 17, 1995 until full payment.21

In its appeal before the CA, petitioners raised the issues of prescription and laches, which the CA brushed aside on two grounds: first, that the issue had already been raised by petitioners when the case was elevated before the CA in CA-G.R. CV No. 51454. Although it was not squarely ruled upon by the appellate court as it did not find any reason to delve further on such issues, petitioners did not assail said decision barring them now from raising exactly the same issues; and second, the issues proper for resolution had been laid down in the pre-trial order which did not include the issues of prescription and laches. Thus, the same can no longer be further considered. As to the propriety of the property’s valuation as determined by the PAC and adopted by the RTC, while recognizing the rule that the just compensation should be the reasonable value at the time of taking which is 1940, the CA found it necessary to deviate from the general rule. It opined that it would be obviously unjust and inequitable if respondents would be compensated based on the value of the property in 1940 which is P0.70 per sq m, but the compensation would be paid only today. Thus, the appellate court found it just to award compensation based on the value of the property at the time of payment. It, therefore, adopted the RTC’s determination of just compensation of P1,500.00 per sq m as recommended by the PAC. The CA further ordered the payment of interest at the rate of six percent (6%) per annum reckoned from the time of taking, which is the filing of the complaint on March 17, 1995.

Aggrieved, petitioners come before the Court assailing the CA decision based on the following grounds:cralavvonlinelawlibrary

I.

THE COURT OF APPEALS GRAVELY ERRED IN GRANTING JUST COMPENSATION TO RESPONDENTS CONSIDERING THE HIGHLY DUBIOUS AND QUESTIONABLE CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY.

II.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING JUST COMPENSATION TO RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES.

III.

THE COURT OF APPEALS GRAVELY ERRED IN AFFIRMING THE TRIAL COURT’S DECISION ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS.22

Petitioners insist that the action is barred by prescription having been filed fifty-four (54) years after the accrual of the action in 1940. They explain that the court can motu proprio dismiss the complaint if it shows on its face that the action had already prescribed. Petitioners likewise aver that respondents slept on their rights for more than fifty years; hence, they are guilty of laches. Lastly, petitioners claim that the just compensation should be based on the value of the property at the time of taking in 1940 and not at the time of payment.23

The petition is partly meritorious.

The instant case stemmed from an action for recovery of possession with damages filed by respondents against petitioners. It, however, revolves around the taking of the subject lot by petitioners for the construction of the MacArthur Highway. There is taking when the expropriator enters private property not only for a momentary period but for a permanent duration, or for the purpose of devoting the property to public use in such a manner as to oust the owner and deprive him of all beneficial enjoyment thereof.24

It is undisputed that the subject property was taken by petitioners without the benefit of expropriation proceedings for the construction of the MacArthur Highway. After the lapse of more than fifty years, the property owners sought recovery of the possession of their property. Is the action barred by prescription or laches? If not, are the property owners entitled to recover possession or just compensation?

As aptly noted by the CA, the issues of prescription and laches are not proper issues for resolution as they were not included in the pre-trial order. We quote with approval the CA’s ratiocination in this wise:cralavvonlinelawlibrary

Procedurally, too, prescription and laches are no longer proper issues in this appeal. In the pre-trial order issued on May 17, 2001, the RTC summarized the issues raised by the defendants, to wit: (a) whether or not the plaintiffs were entitled to just compensation; (b) whether or not the valuation would be based on the corresponding value at the time of the taking or at the time of the filing of the action; and (c) whether or not the plaintiffs were entitled to damages. Nowhere did the pre-trial order indicate that prescription and laches were to be considered in the adjudication of the RTC.25

To be sure, the pre-trial order explicitly defines and limits the issues to be tried and controls the subsequent course of the action unless modified before trial to prevent manifest injustice.26

Even if we squarely deal with the issues of laches and prescription, the same must still fail. Laches is principally a doctrine of equity which is applied to avoid recognizing a right when to do so would result in a clearly inequitable situation or in an injustice.27 This doctrine finds no application in this case, since there is nothing inequitable in giving due course to respondents’ claim. Both equity and the law direct that a property owner should be compensated if his property is taken for public use.28 Neither shall prescription bar respondents’ claim following the long-standing rule “that where private property is taken by the Government for public use without first acquiring title thereto either through expropriation or negotiated sale, the owner’s action to recover the land or the value thereof does not prescribe.”29

When a property is taken by the government for public use, jurisprudence clearly provides for the remedies available to a landowner. The owner may recover his property if its return is feasible or, if it is not, the aggrieved owner may demand payment of just compensation for the land taken.30 For failure of respondents to question the lack of expropriation proceedings for a long period of time, they are deemed to have waived and are estopped from assailing the power of the government to expropriate or the public use for which the power was exercised. What is left to respondents is the right of compensation.31 The trial and appellate courts found that respondents are entitled to compensation. The only issue left for determination is the propriety of the amount awarded to respondents.

Just compensation is “the fair value of the property as between one who receives, and one who desires to sell, x x x fixed at the time of the actual taking by the government.” This rule holds true when the property is taken before the filing of an expropriation suit, and even if it is the property owner who brings the action for compensation.32

The issue in this case is not novel.

In Forfom Development Corporation [Forfom] v. Philippine National Railways [PNR],33 PNR entered the property of Forfom in January 1973 for public use, that is, for railroad tracks, facilities and appurtenances for use of the Carmona Commuter Service without initiating expropriation proceedings.34 In 1990, Forfom filed a complaint for recovery of possession of real property and/or damages against PNR. In Eusebio v. Luis,35 respondent’s parcel of land was taken in 1980 by the City of Pasig and used as a municipal road now known as A. Sandoval Avenue in Pasig City without the appropriate expropriation proceedings. In 1994, respondent demanded payment of the value of the property, but they could not agree on its valuation prompting respondent to file a complaint for reconveyance and/or damages against the city government and the mayor. In Manila International Airport Authority v. Rodriguez,36 in the early 1970s, petitioner implemented expansion programs for its runway necessitating the acquisition and occupation of some of the properties surrounding its premises. As to respondent’s property, no expropriation proceedings were initiated. In 1997, respondent demanded the payment of the value of the property, but the demand remained unheeded prompting him to institute a case for accion reivindicatoria with damages against petitioner. In Republic v. Sarabia,37 sometime in 1956, the Air Transportation Office (ATO) took possession and control of a portion of a lot situated in Aklan, registered in the name of respondent, without initiating expropriation proceedings. Several structures were erected thereon including the control tower, the Kalibo crash fire rescue station, the Kalibo airport terminal and the headquarters of the PNP Aviation Security Group. In 1995, several stores and restaurants were constructed on the remaining portion of the lot. In 1997, respondent filed a complaint for recovery of possession with damages against the storeowners where ATO intervened claiming that the storeowners were its lessees.

The Court in the above-mentioned cases was confronted with common factual circumstances where the government took control and possession of the subject properties for public use without initiating expropriation proceedings and without payment of just compensation, while the landowners failed for a long period of time to question such government act and later instituted actions for recovery of possession with damages. The Court thus determined the landowners’ right to the payment of just compensation and, more importantly, the amount of just compensation. The Court has uniformly ruled that just compensation is the value of the property at the time of taking that is controlling for purposes of compensation. In Forfom, the payment of just compensation was reckoned from the time of taking in 1973; in Eusebio, the Court fixed the just compensation by determining the value of the property at the time of taking in 1980; in MIAA, the value of the lot at the time of taking in 1972 served as basis for the award of compensation to the owner; and in Republic, the Court was convinced that the taking occurred in 1956 and was thus the basis in fixing just compensation. As in said cases, just compensation due respondents in this case should, therefore, be fixed not as of the time of payment but at the time of taking, that is, in 1940.

The reason for the rule has been clearly explained in Republic v. Lara, et al.,38 and repeatedly held by the Court in recent cases, thus:cralavvonlinelawlibrary

x x x “[T]he value of the property should be fixed as of the date when it was taken and not the date of the filing of the proceedings.” For where property is taken ahead of the filing of the condemnation proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the entry by the plaintiff upon the property may have depreciated its value thereby; or, there may have been a natural increase in the value of the property from the time it is taken to the time the complaint is filed, due to general economic conditions. The owner of private property should be compensated only for what he actually loses; it is not intended that his compensation shall extend beyond his loss or injury. And what he loses is only the actual value of his property at the time it is taken x x x.39nadcralavvonlinelawlibrary

Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was P0.70/sq m.40 Hence, it should, therefore, be used in determining the amount due respondents instead of the higher value which is P1,500.00. While disparity in the above amounts is obvious and may appear inequitable to respondents as they would be receiving such outdated valuation after a very long period, it is equally true that they too are remiss in guarding against the cruel effects of belated claim. The concept of just compensation does not imply fairness to the property owner alone.  Compensation must be just not only to the property owner, but also to the public which ultimately bears the cost of expropriation.41

Clearly, petitioners had been occupying the subject property for more than fifty years without the benefit of expropriation proceedings. In taking respondents’ property without the benefit of expropriation proceedings and without payment of just compensation, petitioners clearly acted in utter disregard of respondents’ proprietary rights which cannot be countenanced by the Court.42 For said illegal taking, respondents are entitled to adequate compensation in the form of actual or compensatory damages which in this case should be the legal interest of six percent (6%) per annum on the value of the land at the time of taking in 1940 until full payment.43 This is based on the principle that interest runs as a matter of law and follows from the right of the landowner to be placed in as good position as money can accomplish, as of the date of taking.44

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated July 31, 2007 in CA­ G.R. CV No. 77997 is MODIFIED, in that the valuation of the subject property owned by respondents shall be P0.70 instead of Pl,SOO.OO per square meter, with interest at six percent (6%) per annum from the date of taking in 1940 instead of March 17, 1995, until full payment.

SO ORDERED.

Abad, and Mendoza,  JJ., concur.
Velasco, Jr., (Chairperson), J., see dissenting & concurring opinion.
Leonen, J
., see separate opinion.



July 26, 2013

N O T I C E  OF J U D G M E N T

Sirs/Mesdames:cralavvonlinelawlibrary

Please take notice that on July 1, 2013 a Decision, copy attached herewith, was rendered by the Supreme Court in the above-entitled case, the original of which was received by this Office on July 26, 2013 at 10:25 a.m.

Very truly yours,
(SGD)
LUCITA ABJELINA SORIANO
Division Clerk of Court


Endnotes:


1 Penned by Associate Justice Lucas P. Bersamin (now a member of this Court), with Associate Justices Portia Aliño-Hormachuelos and Estela M. Perlas-Bernabe (now a member of this Court), concurring; rollo, pp. 124-137.cralawlibrary

2 Branch 80, Malolos, Bulacan.cralawlibrary

3 Penned by Judge Caesar A. Casanova; rollo, pp. 165-167.cralawlibrary

4 Records, p. 5.cralawlibrary

5Rollo, p. 125.cralawlibrary

6 Records, p. 6.cralawlibrary

7 Id. at 7.cralawlibrary

8Rollo, p. 125.cralawlibrary

9 Records, pp. 1-4.cralawlibrary

10 Id. at 3.cralawlibrary

11 Id. at 2.cralawlibrary

12 Id. at 17-19.cralawlibrary

13 Id. at 29-30.cralawlibrary

14 The case was docketed as CA-G.R. CV No. 51454.cralawlibrary

15 Embodied in a Decision dated February 11, 1999, penned by Associate Justice Artemon D. Luna, with Associate Justices Delilah Vidallon-Magtolis and Rodrigo V. Cosico, concurring; records, pp. 56-62.cralawlibrary

16 Records, p. 104.cralawlibrary

17 Id. at 116.cralawlibrary

18 Id. at 122.cralawlibrary

19 Id. at 150-152.cralawlibrary

20 Id. at 152.cralawlibrary

21 Supra note 1.cralawlibrary

22Rollo, p. 108.cralawlibrary

23Id. at 24-32.cralawlibrary

24Manila International Airport Authority v. Rodriguez, 518 Phil. 750, 757 (2006).cralawlibrary

25Rollo, p. 133.cralawlibrary

26 Rules of Court, Rule 18, Sec. 7.cralawlibrary

27Republic v. Court of Appeals, G.R. No. 147245, March 31, 2005, 454 SCRA 516, 527.cralawlibrary

28 Id.cralawlibrary

29Eusebio v. Luis, G.R. No. 162474, October 13, 2009, 603 SCRA 576, 583; Republic v. Court of Appeals, supra note 27, at 528.cralawlibrary

30Republic v. Court of Appeals, supra note 27, at 532.cralawlibrary

31Eusebio v. Luis, supra note 29, at 584; Forfom Development Corporation v. Philippine National Railways, G.R. No. 124795, December 10, 2008, 573 SCRA 350, 366-367.cralawlibrary

32Republic v. Court of Appeals, supra note 27, at 534. (Emphasis supplied.)

33 Supra note 31.cralawlibrary

34Forfom Development Corporation v. Philippine National Railways, supra note 31, at 366.cralawlibrary

35Supra note 29.cralawlibrary

36Supra note 24.cralawlibrary

37 G.R. No. 157847, August 25, 2005, 468 SCRA 142.cralawlibrary

38 96 Phil. 170 (1954).cralawlibrary

39Republic v. Lara, et al., supra, at 177-178.cralawlibrary

40Rollo, p. 44.cralawlibrary

41Republic v. Court of Appeals, supra note 27, at 536.cralawlibrary

42Eusebio v. Luis, supra note 29, at 587.cralawlibrary

43Id. at 587-588; Forfom Development Corporation v. Philippine National Railways, supra note 31, at 373; Manila International Airport Authority v. Rodriguez, supra note 24, at 761. (Citations omitted).cralawlibrary

44Manila International Airport Authority v. Rodriguez, supra note 24, at 761. (Citation omitted).






DISSENTING & CONCURRING OPINION


VELASCO, JR., J.:



When the circumstances obtaining distinctly call for a deviation from the general rule laid down by jurisprudence, the Court should give due consideration to the same, lest oppression and injustice ensue.

The Case

Before the Cout1 is a Petition for Review on Certiorari under Rule 45 assailing the July 31, 2007 Decision1 of the Court of Appeals (CA) in CA­ G.R. CV No. 77997, affirming with modification the March 22, 2002 Decision2 of the Regional Trial Court (RTC) of Malolos City, Bulacan.

The Facts

Respondent spouses Heracleo and Ramona Tecson (respondents) are the co-owners of a 7,268-square meter lot located in San Pablo, Malolos, Bulacan, and covered by Transfer Certificate of Title (TCT) No. T-43006.3 This parcel of land is among the private properties traversed by the MacArthur Highway, a government project undertaken sometime in 1940. The taking appears to have been made absent the requisite expropriation proceedings and without respondents' consent. 4

After the lapse of more than forty (40) years, respondents, in a letter5 dated December 15, 1994, demanded payment equivalent to the fair market value of the subject property from the Department of Public Works and Highways (DPWH). Petitioner Celestino R. Contreras (petitioner Contreras), then District Engineer of the First Bulacan Engineering District of DPWH, responded with an offer to pay just compensation at the rate of PhP 0.70 per square meter based on Resolution No. XII dated January 15, 1950 of the Provincial Appraisal Committee (PAC) of Bulacan.6 Respondents made a counter-offer that the government either return the subject property or pay just compensation based on the current fair market value.7

As the parties failed to reach any agreement on the price, respondents filed a suit for recovery of possession with damages against DPWH and petitioner Contreras (collectively referred to as “petitioners”) on March 17, 1995.8 In their Complaint,9 docketed as Civil Case No. 208-M-95 and raffled to Branch 80 of the RTC of Malolos City, respondents claimed that the subject property was assessed at PhP 2,543,800.10

Subsequently, petitioners filed a Motion to Dismiss11 dated May 16, 1995, invoking (1) immunity from suit; (2) prescription; (3) lack of cause of action; and (4) different valuation for payment of just compensation.

In its Order12 dated June 28, 1995, the RTC of Malolos City granted petitioners’ motion to dismiss for lack of jurisdiction over the subject matter based on the doctrine of state immunity from suit. Therefrom, respondents filed an appeal, docketed as CA-G.R. CV No. 51454, before the CA, which reversed the RTC of Malolos and held that the doctrine of state immunity from suit should not apply to cause injustice.13 Consequently, the RTC of Malolos City was directed to hear the Complaint “for the purpose of determining the just compensation to which [respondents] are entitled to recover from the government.”14 The Decision15 in CA-G.R. CV No 51454 attained finality on March 6, 1999.16

The RTC of Malolos City conducted further proceedings. Upon respondents’ motion, the Branch Clerk of Court was authorized to serve as commissioner for the purpose of determining just compensation.17 However, upon the Branch Clerk of Court’s recommendation, the RTC of Malolos City referred the case to the PAC of Bulacan for proper action.18

In its Resolution No. 99-007, the PAC recommended the amount of PhP 1,500 per square meter as the basis for the valuation of just compensation for the subject property.19 As stated in said Resolution:cralavvonlinelawlibrary

PRESENTED were the Decision of the Court of Appeals re Civil Case No. 208-M-95, the Commissioner’s Report and the report of the sub- committee on appraisal;chanroblesvirtualawlibrary

WHEREAS, Civil Case No. 208-M-95 is about a parcel of land situated at San Pablo, Malolos, Bulacan, which was allegedly taken by the government in 1940 during the construction of MacArthur Highway without the consent of the owner nor expropriation proceedings;chanroblesvirtualawlibrary

WHEREAS, a Resolution No. XII dated January 15, 1950 promulgated the price of Seventy Centavos (P0.70) per square meter as the price of the lots affected by the aforesaid project;chanroblesvirtualawlibrary

WHEREAS, a suit was filed by the owner to the Court of Appeals, condemning the aforesaid market value as unfair;chanroblesvirtualawlibrary

WHEREAS, upon the instruction of the Chairman of the Provincial Appraisal Committee, the sub-committee conducted a thorough inspection and field investigation;chanroblesvirtualawlibrary

WHEREAS, taking into consideration the price during the time of the taking which is P0.70 per square meter and the price prevailing nowadays which is P10,000.00 per square meter, the members motioned and seconded by the Chairman that the reasonable and just compensation is One Thousand Five Hundred Pesos (P1,500.00) per square meter.

NOW THEREFORE, be it resolved as it is now resolved that the just compensation of One Thousand Five Hundred Pesos (P1,500.00) per square meter is hereby submitted for consideration of the authorities concerned.

UNANIMOUSLY RESOLVED.20

On the basis of PAC’s recommendation, the RTC of Malolos City rendered on March 22, 2002 a Decision.21 The dispositive portion of said decision reads:cralavvonlinelawlibrary

WHEREFORE, premises considered, the Department of Public Works and Highways or its duly assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One Thousand Five Hundred Pesos (P1,500.00) per square meter for the lot subject matter of this case in accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001.

SO ORDERED.22

On appeal by petitioners, the CA affirmed with modification the above-mentioned RTC Decision. Particularly, the dispositive portion of the CA Decision reads:cralavvonlinelawlibrary

WHEREFORE, the DECISION DATED MARCH 22, 2002 is AFFIRMED, subject to the MODIFICATION that the just compensation shall earn interest of 6% per annum computed from the time of the filing of this action on March 17, 1995 until full payment.

SO ORDERED.23

Aggrieved, petitioners filed the instant petition.

Issues

I

THE CA GRAVELY ERRED IN GRANTING JUST COMPENSATION TO RESPONDENTS CONSIDERING THE HIGHLY DUBIOUS AND QUESTIONABLE CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY.

II

THE CA GRAVELY ERRED IN AWARDING JUST COMPENSATION TO RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES.

III

THE CA GRAVELY ERRED IN AFFIRMING THE TRIAL COURT’S DECISION ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS.

Essentially, the issues raised in the instant petition revolve around the following: (1) ownership of the subject property; (2) prescription and laches; and (3) amount of just compensation.

I submit that the petition should be denied.

Ownership of the subject property

Petitioners claim that respondents’ ownership of the subject property is highly dubious and questionable, thus, the CA allegedly erred in awarding just compensation to respondents.24 Petitioners’ contention is misplaced.

Respondents’ right to recover just compensation for the expropriation of the subject property has already been settled by the CA in its Decision25 dated February 11, 1999 in CA-G.R. CV No. 51454. When the CA remanded the case to the RTC of Malolos City, further proceedings were intended “for the purpose of determining the just compensation to which [respondents] are entitled to recover from the government.”26 Said CA Decision in CA-G.R. CV No. 51454 has already become final.

The ruling in CA-G.R. CV No. 51454 on respondents’ right to recover just compensation was the law of the case. In Strategic Alliance Development Corporation v. Radstock Securities Limited,27 the Court explained the law of the case doctrine, as follows:cralavvonlinelawlibrary

Law of the case is defined as the opinion delivered on a former appeal. More specifically, it means that whatever is once irrevocably established as the controlling legal rule between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be facts of the case before the court, notwithstanding that the rule laid down may have been reversed in other cases. Indeed, after the appellate court has issued a pronouncement on a point presented to it with a full opportunity to be heard having been accorded to the parties, that pronouncement should be regarded as the law of the case and should not be reopened on a remand of the case. (Emphasis supplied.)

As the liability to respondents had been determined with finality in a prior proceeding, this Court could no longer entertain questions on ownership of the subject property so as to release the DPWH from its liability to respondents. Otherwise, this would require us to reopen and review the final decision in CA-G.R. CV No. 51454.

Also, respondents’ ownership may not be questioned in this proceeding. It is settled that a Torrens title cannot be attacked collaterally, and the issue on its validity can be raised only in an action expressly instituted for that purpose.28  Sec. 48 of Presidential Decree No. 1529, also known as the Property Registration Decree, expressly provides:cralavvonlinelawlibrary

Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.

Accordingly, the Torrens title of respondents (TCT T-43006) speaks for itself and is conclusive proof of ownership of the subject property.

Prescription and laches

On the issues of prescription and laches, I agree with the ponencia that these are also not proper issues for resolution since they were not included in the pre-trial order, where the issues for resolution were limited to the following: (1) whether respondents are entitled to just compensation; (2) whether the valuation would be based on the corresponding value at the time of the taking or at the time of the filing of the action; and (3) whether respondents were entitled to damages.29

And even if the issues of laches and prescription are to be dealt with substantively, still, these grounds have no leg to stand on. As aptly pointed out in the ponencia, laches “finds no application in this case, since there is nothing inequitable in giving due course to respondents’ claim.” Contrarily, it would be the height of injustice if respondents would be deprived of just compensation for their property, which was taken for public use and without their consent, based on this equitable doctrine. Also, prescription will not bar respondents’ claim since, as stated in the ponencia, the owner’s action to recover the land or the value thereof does not prescribe where private property is taken for public use by the government without first acquiring title thereto.30

Accordingly, the only issue left for determination is the amount of just compensation which respondents are entitled to receive from the government for the taking of their subject property.

Basis in determining the amount of just compensation

Both the RTC of Malolos and the CA found and granted just compensation to respondents in the amount of PhP 1,500 per square meter, as recommended by the PAC. Additionally, the CA granted 6% interest on the total just compensation, reckoned from the time of the filing of the Complaint until fully paid.

Petitioners, however, insist that respondents’ entitlement to just compensation, if indeed they are entitled, should be based only on the fair market value at the time of taking, that is, at PhP 0.70 per square meter.

On this point, the majority agrees with petitioners, I am of a different mind and accordingly register this dissent.

In justifying its ruling that just compensation of the subject property should be based on 1940 values, that is, PhP 0.70 per square meter, the ponencia noted that “[t]he Court has uniformly ruled that just compensation is the value of the property at the time of the taking that is controlling for the purposes of compensation.”31 It cited in this regard the 1954 case of Republic v. Lara,32 where the Court held:cralavvonlinelawlibrary

x x x [T]he value of the property should be fixed as of the date when it was taken and not the date of the filing of the proceedings.” For where property is taken ahead of the filing of the condemnation proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the entry by the plaintiff upon the property may have depreciated its value thereby; or, there may have been a natural increase in the value of the property from the time it is taken to the time the complaint is filed, due to general economic conditions. The owner of private property should be compensated only for what he actually loses; it is not intended that his compensation shall extend beyond his loss or injury. And what he loses is only the actual value of his property at the time it is taken x x x.33nadcralavvonlinelawlibrary

Indeed, in a number of cases,34 the Court has ruled that the reckoning point for the determination of just compensation is the time of taking. Nonetheless, I respectfully submit that there is a necessity to deviate from such general rule in view of the attendant inequity and prejudice such application entails.

For one, DPWH violated respondents’ constitutional right to procedural due process when it deprived respondents of the subject property without their consent and the requisite expropriation proceedings.35 It has been my position that since expropriation is essentially a forced taking of private property by the state or its agencies, the private owner being compelled to give up his property for the common weal, then the mandatory requirement of due process should be strictly followed.36

Expropriation is an exercise of the government’s power of eminent domain. As an inherent attribute of the government, this power is fundamentally limitless if not restrained by the Bill of Rights. Without the limitations thus imposed, the exercise of the power of eminent domain can become repressive. Thus, the Bill of Rights should always be a measure and guarantee of protecting certain areas of a person’s life, liberty, and property against the government’s abuse of power.37

In the instant case, it is not disputed that DPWH illegally took the subject lot without the consent of respondents and the necessary expropriation proceedings. To make matters worse, almost 55 years have already passed from the time of taking, yet DPWH still failed to institute condemnation proceedings. This is clearly indicative of DPWH’s lack of intention to formally expropriate the subject property and consequently deny respondents of the elementary due process of law. Thus, when respondents were constrained to file a complaint before the trial court, they were the ones who, in effect, commenced the inverse condemnation proceedings, which, to my mind, is ironic. The prevalence of the taking of a subject property without the owner’s consent and the necessary expropriation proceedings does not, and should not, cure its illegality.

Verily, the government’s action in the instant case, done as it were without observing procedural due process, is illegal and invalid. As such, the condemnation of the subject property ought to be reversed and respondents restored to its possession. However, considering that the subject property had already been put to public use—forming part of the MacArthur Highway—respondents can no longer be restored to the possession of the subject property. As pointed out by the CA, the only remedy available to respondents is the recovery of just compensation.

But if the Court is to peg the reckoning value of the just compensation to PhP 0.70, it would, in effect, be condoning the wrongful act of DPWH in taking the subject property in utter disregard of respondents’ property rights and violation of the due process of laws.

Thus, while this Court has previously ruled, in a number of cases, that the value of the property at the time of the taking which is controlling in the determination of the value of just compensation, it is my submission that an exception to the foregoing ruling must be made in cases where no condemnation proceedings were instituted after a substantial period of time from the time of illegal taking.

Pertinently, there is “illegal taking” when there is taking of a property without the benefit of expropriation proceedings and without payment of just compensation,38 as in the instant case. When the illegal taking is compounded with the failure of the condemnor to institute condemnation proceedings after a substantial period of time, i.e., 55 years from the time of taking, then it is not really hard to grasp why pegging the basis for valuation of just compensation at the time of illegal taking is erroneous, if not utterly reprehensible.

The Court cannot reluctantly close its eyes to the likelihood that the invariable application of the determination of just compensation at the time of the actual taking, as in the cases cited in the ponencia, will grant government agencies and instrumentalities the license to disregard the property rights of landowners, violate the Constitution’s proviso on due process of laws, and render nugatory statutory and procedural laws on expropriation proceedings of private properties for public use. Both the RTC of Malolos City and the CA were, therefore, correct in granting just compensation to respondents in the amount of PhP 1,500 per square meter, as recommended by the PAC. This way, government agencies and instrumentalities would think twice before taking any unwarranted short cuts in condemning private properties that violate the owners’ right to due process of laws as enshrined in the Bill of Rights.

For another, the basis for determining the amount of just compensation as awarded by the RTC of Malolos City and the CA at PhP 1,500, as recommended by the PAC, is but just and proper given the attendant circumstances.

It should be noted that at the time the case was referred to PAC for its recommendation on the value of the just compensation, the prevailing value of the subject property is already at PhP 10,000 per square meter. As indicated in PAC’s Resolution No. 99-007:cralavvonlinelawlibrary

WHEREAS, taking into consideration the price during the time of the taking which is P0.70 per square meter and the price prevailing nowadays which is P10,000.00 per square meter, the members motioned and seconded by the Chairman that the reasonable and just compensation is One Thousand Five Hundred Pesos (P1,500.00) per square meter.

NOW THEREFORE, be it resolved as it is now resolved that the just compensation of One Thousand Five Hundred Pesos (P1,500.00) per square meter is hereby submitted for consideration of the authorities concerned.

UNANIMOUSLY RESOLVED.39 (Emphasis supplied.)

Undeniably, the valuation of PhP 10,000 is already enhanced by the public purpose for which the subject property is taken, as well as the natural increase in value of the property due its general conditions and consequent developments. However, by pegging the basis in determining just compensation at PhP 1,500, the RTC of Malolos City and the CA, as recommended by the PAC, reasonably fixed the basis for the award of just compensation. As between PhP 0.70 and PhP 10,000, the valuation of PhP 1,500 is but just and proper given the present circumstances.

And for a third, it is highly unjust and inequitable, as aptly observed by the CA, to pay respondents just compensation at the rate of PhP 0.70 per square meter, which was then the value of the subject property in 1940 when the illegal taking was committed. This injustice and inequity is emphasized by the measly award respondents will receive now, as the ponencia so rules, after having been deprived of their right to procedural due process for 55 years with the DPWH disregarding and violating practically all constitutional, statutory and procedural rules relative to the condemnation of the subject lot for public use. In effect, despite what respondents have been through, they are still penalized by the government considering that after 72 years from the time of the illegal taking of their property, they will only receive a measly amount of just compensation.

Given the foregoing perspective, the proper reckoning value for the determination of just compensation in the instant case—as aptly held and granted by the RTC of Malolos City and the CA-is PhP 1,500 per square meter.

For a better appreciation of the differing bases for the award of just compensation, the comparative figures are as follows:cralavvonlinelawlibrary

 
Land Area
of Subject
Project
(Awarded in ponencia)
1940 value per square meter at
Php 0.70
(Awareded by the
Court of Appeals)
  1995 value per
square meter at
PhP 1,500
Just Compensation
7,268 square meters
PhP 5,087.60
Php 10,902,000.00
6% Interest (72 yrs: from 1940-2012)
 
PhP 21,978.432
 
6% Interest (17 yrs: from 1995-2012)
 
 
PhP 11,120,040.00
Total Award, as of 2012
 
Php 27,066.032
PhP 22,022,040.00


The ponencia, thus, awards the measly total of PhP 27,066.032 as just compensation to be paid by DPWH to respondents-the amount, except for the 6% interest from the time of taking, essentially offered by DPWH to respondents in early 1995 when respondents demanded payment for the illegal taking of the subject lot in December 1994.

Instead of being accorded justice and equity, respondents are, thus, penalized again by being awarded a mere pittance. The Court should not countenance DPWH's illegal act and penalize respondents by awarding them with a miserable amount of just compensation after going through the arduous process of vindicating their constitutional and property rights.

In view of the foregoing, I humbly submit that the assailed CA Decision is the appropriate ruling as this would give respondents the just and proper award for recovery of just compensation of the subject property illegally taken by DPWH some 72 years ago.

Accordingly, I vote to deny the petition and affirm the a pealed July 31, 2007 Decision of the Court of Appeals.


Endnotes:


1Rollo, pp. 37-50. Penned by Associate Justice (now a member of this Court) Lucas P Bersamin and concurred in by Associate Justices Portia Alino Hormachuelos and Estela M. Perlas-Bernabe (also now a member of this Court).cralawlibrary

2 Id. at 78-80.cralawlibrary

3 Id. at 37-38.cralawlibrary

4 Id. at 38.cralawlibrary

5 Records. p. 6.cralawlibrary

6Rollo, p. 38.cralawlibrary

7 Id. at 38.cralawlibrary

8 Id. at 37-38.cralawlibrary

9 Id. at 51-54.cralawlibrary

10 Records, p. 5.cralawlibrary

11Rollo, pp. 56-58.cralawlibrary

12 Id. at 60-61.cralawlibrary

13 Id. at 38-39.cralawlibrary

14 Id. at 68.cralawlibrary

15 Id. at 62-68.cralawlibrary

16 Id. at 39.cralawlibrary

17 Id. at 39.cralawlibrary

18 Id. at 39.cralawlibrary

19 Id. at 40.cralawlibrary

20 Id. at 40.cralawlibrary

21 Id. at 78-80.cralawlibrary

22 Id. at 80.cralawlibrary

23 Id. at 49.cralawlibrary

24 Id. at 22.cralawlibrary

25 Id. at 62-68.cralawlibrary

26 Id. at 68.cralawlibrary

27 G.R. Nos. 178158 & 180428, December 4, 2009.cralawlibrary

28Cimafranca v. Intermediate Appellate Court, G.R. No. 68687, January 31, 1987.cralawlibrary

29Rollo, p. 46.cralawlibrary

30Eusebio v. Luis, G.R. No. 162474, October 13, 2009, 603 SCRA 576, 583; Republic v. Court of Appeals, G.R. No. 147245, March 31, 2005, 454 SCRA 516, 528.cralawlibrary

31 Ponencia, p. 9.cralawlibrary

32 96 Phil. 170 (1954).cralawlibrary

33 Id. at 177-178; ponencia, p. 10.cralawlibrary

34  Forfom Development Corporation v. Philippine National Railways, G.R. No. 124795, December 10, 2008, 573 SCRA 350; Eusebio v. Luis, G.R. No. 162474, October 13, 2009, 603 SCRA 576; Manila International Airport Authority v. Rodriguez, G.R. No. 161836, February 28, 2006, 483 SCRA 619; Republic v. Sarabia, G.R. No. 157847, August 25, 2005, 468 SCRA 142.cralawlibrary

35 See National Power Corporation v. Heirs of Macabangkit Sangkay, G.R. No. 165828, August 24, 2011.cralawlibrary

36 Concurring Opinion of Justice Presbitero J. Velasco, Jr. in Mactan-Cebu International Airport v. Tudtud, G.R. No. 174012, November 14, 2008.cralawlibrary

37 Id.cralawlibrary

38Eusebio v. Luis, G.R. No. 162474, October 13, 2009.cralawlibrary

39Rollo, p. 40; CA Decision, p. 4.






SEPARATE OPINION


LEONEN, J.:



I agree with the ponencia of Justice Peralta in so far as the fair market value of a property subjected to expropriation must be the value of the propetiy at the time of the actual taking by the government, at the moment that the owner is unable to have beneficial use (see Republic v. Vda. de Castellvi).1

However, I also agree with Justice Velasco that gross injustice will result if the amount that will be awarded today will be based simply on the value of the property at the time of the actual taking.  Should the value of the property been awarded to the owners at the time of the taking, they would have used it for other profitable uses.  Hence, the failure of the State to have paid at the proper time deprives the owners of the true value of the property that they had.

I am of the opinion that the proper way to resolve this would be to use the economic concept of present value.2 This concept is usually summarized this way: Money received today is more valuable· than the same amount of money received tomorrow.3 By applying this concept, we are able to capture just compensation in a more holistic manner. We take into consideration the potential of money to increase (or decrease) in value across time.

If the parties in an expropriation case would have perfect foresight, they would have known the amount of "fair market value at the time of taking.'' If this amount of money was deposited in a bank pending expropriation proceedings, by the time proceedings are over, the property owner would be able to withdraw the principal (fair market value at the time of taking) and the interest earnings it has accumulated over the time of the proceedings. Economists have devised a simple method to compute for the value of money in consideration of this future interest earnings.

For purposes of explaining this method, consider property owner AA who owns a piece of land. The government took his property at Year 0. Let us assume that his property had a fair market value of P100 at the time of taking. In our ideal situation, the government should have paid him P100 at Year 0. By then, AA could have put the money in the bank so it could earn interest. Let us peg the interest rate at 5% per annum (or in decimal form, 0.05).4

If the expropriation proceedings took just one year (again, another ideal situation), AA could only be paid after that year. The value of the P100 would have appreciated already. We have to take into consideration the fact that in Year 1, AA could have earned an additional P5 in interest if he had been paid in Year 0.

In order to compute the present value of P100, we have to consider this formula:cralavvonlinelawlibrary

Present Value in Year 1 = Value at the Time of Taking + (Interest Earned of the
Value at the Time of Taking)

In formula5 terms, it will look like this:cralavvonlinelawlibrary

PV1 = V + (V*r)
PV1 = V*(1+r)

PV1
= present value in Year 1
V = value at the time of taking
r = interest rate

So in the event that AA gets paid in Year 1, then:cralavvonlinelawlibrary

PV1 = V*(1+r)

PV1 =P100 (1 + 0.05)
PV1 = P105

So if AA were to be paid in Year 1 instead of in Year 0, it is only just that he be paid P105 to take into account the interest earnings he has foregone due to the expropriation proceedings. If he were to be paid in Year 2, we should take into consideration not only the interest earned of the principal, but the fact that the interest earned in Year 1 will also be subject to interest earnings in Year 2. This concept is referred to as compounding interest rates. So our formula becomes:cralavvonlinelawlibrary

Present Value in Year 2 = [Present Value in Year 1] + [Interest Earned of Present
Value in Year 1]

Recall that in formula terms, Present Value in Year 1 was expressed as:cralavvonlinelawlibrary

PV1 = [V*(1+r)]


Hence, in Year 2, the formula will be:cralavvonlinelawlibrary

PV2 = PV1*(1+r) or

PV2 = [V*(1+r)]*(1+r)

Seeing that the term (1+r) is repeated, it can be further simplified as:cralavvonlinelawlibrary

PV2 = V*(1+r)2

PV2 = P100 * (1+0.05)2

PV2 = P100 * 1.1025

PV2 = P110.25

This is the same as if we multiply the present value in Year 1 of ?105 by 1.05 (our multiplier with the interest rate).

If proceedings go on until Year 3, then the formula would be:cralavvonlinelawlibrary

PV3 = PV2*(1+r)

PV3 = {[V*(1+r)]*(1+r)}*(1+r)

Again, (1+r) is repeated three times, the same number as the number of years; hence, simplifying the formula would yield:cralavvonlinelawlibrary

PV3 = V*(1+r)3

Due to compounding interests, the formula for present value at any given year becomes:cralavvonlinelawlibrary

PVt = V*(1+r)t

PV stands for the present value of the property. In order to calculate the present value of the property, the corresponding formula is used. V stands for the value of the property at the time of the taking, taking in all the considerations that the court may use in order to arrive at the fair market value in accordance with law.

This is multiplied to (1 + r) where r equals the implied rate of return (average year-to-year interest rate) and raised to the exponent t. The exponent t refers to the time period or the number of years for which the value of the money would have changed. It is treated as an exponent because it is the number of times you have to multiply (1+r) to capture the effect of compounding interest rates.

So if AA were to be paid seventy-three (73) years from the time of taking, the present value of the amount he should have been paid at the time of taking would be:cralavvonlinelawlibrary

PVt = V*(1+r)t

PV73 = P100 * (1+0.05)73

PV73 = P100 * (35.2224)

PV73 = P3,522.24

As applied in this case, the property which is the subject of the current controversy is worth P0.70/sq.m. in 1940, but it is actually worth more than P0.70/sq. m. by 2013. There is a period of 73 years between the actual taking and the time payment is to be made. The value of the cash to be paid to the owner at this time is definitely more because of changes in the interest rate.

Computing for present value would only reflect the cost of the property today. It should be separate from the six percent (6%) per annum computed on a compounded basis awarded as actual or compensatory damages.

Thus, applying the formula, assuming the average interest rate is at:cralavvonlinelawlibrary

4%, the property will be worth P 12.26 per sq. m.;chanroblesvirtualawlibrary
5%, the property will be worth P 24.66 per sq. m.;chanroblesvirtualawlibrary
6%, the property will be worth P 49.25 per sq. m.

Using the established concept of present value incorporates the discipline of economics into our jurisprudence on takings. Valuation is indeed an inexact science and economics also has its own assumptions. However, in my reckoning, this is infinitely better than leaving it up to the trial court judge.

I submit that this proposal is a happy middle ground. It meets the need for doctrinal precision urged by Justice Peralta and the thirst for substantial justice in Justice Velasco's separate opinion. After all, I am sure that we all share in each other's goals.

I vote to GRANT the petition and to REMAND the case to the court of origin for proper valuation according to the formula discussed.


Endnotes:


1 GR. No. L-20620, August 15, 1974, 58 SCRA 336, 352.cralawlibrary

2 Present value (of an asset) is defined as ''the value for an asset that yields a stream of income over time." PAUL A. SAMUELSON AND WILLIAM D. NORDHAUS. ECONOMICS 748 (Eighteenth Edition).cralawlibrary

3 N. GREGORY MANKIW, ESSENTIALS OF ECONOMICS 414 (2007 Edition).cralawlibrary

4 Interest rates are dependent on risk, inflation and tax treatment.  See PAUL A. SAMUELSON AND WILLIAM D. NORDHAUS, ECONOMICS 269 (Eighteenth Edition). Actual interest rate to be applied should be computed reasonably according to historical epochs in our political economy. For example, during the war, we have experienced extraordinary inflation. This extraordinary inflation influenced adversely interest rates of financial investments. The period of martial law is another example of a historical epoch that influenced interest rates.cralawlibrary

5 N. GREGORY MANKIW, ESSENTIALS OF ECONOMICS 414-415 (2007 Edition).
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