City Government of Pasay v. Arellano University
REITERATIONFacts
The Antecedents: The City Government of Pasay (Pasay LGU) converted an 805-square-meter parcel of land owned by Arellano University (Arellano), known as the Menlo property, into a public thoroughfare (Menlo Street) without expropriation proceedings or payment of just compensation. Procedural History: Arellano filed a complaint for just compensation. The parties agreed to refer the determination to a board of commissioners composed of Pasay LGU officials, who submitted an appraisal report valuing the property at P2,060.00 per square meter, based on a 1978 assessment and compounded interest. The Regional Trial Court (RTC) fixed just compensation at P200.00 per square meter (P161,000.00 total), with 12% interest from 1978 to 2018 and 6% indemnity for damages. Both parties moved for reconsideration, which the RTC denied. The Court of Appeals (CA) remanded the case to the RTC for proper determination of just compensation, exemplary damages, attorney's fees, and costs, ruling that compensation should earn 12% interest from 1978 until June 30, 2013, and 6% thereafter until full payment. The CA also affirmed the award of indemnity for damages, exemplary damages, attorney's fees, and costs. The Petition: Pasay LGU filed a petition for review on certiorari, arguing that the CA erred in setting aside the RTC's valuation, not imposing a constant 6% interest rate, and awarding exemplary damages, attorney's fees, and costs.
Issue(s)
Whether the Court of Appeals erred in remanding the case for re-determination of just compensation. Whether the Court of Appeals erred in its computation of interest rates on the award of just compensation. Whether the Court of Appeals erred in awarding exemplary damages, attorney's fees, and costs of suit.
Ruling
The petition is PARTIALLY GRANTED. The December 28, 2020 Decision and the March 15, 2021 Resolution of the Court of Appeals are MODIFIED: (1) the award of exemplary damages is DELETED; and (2) the interest on the value of the property at the time of taking shall likewise earn interest at the rate of 6% per annum from the date of finality of this Decision until full payment.
Ratio Decidendi
On Whether the Court of Appeals erred in remanding the case for re-determination of just compensation: The Court held that the CA did not err in remanding the case. The RTC's computation was based solely on the Pasay City Assessor's 1978 assessment values, without considering other factors mandated by law and jurisprudence, such as BIR zonal valuation, acquisition cost, tax declarations, size, shape, location, and value of similar properties. The "totality of circumstances" approach requires a comprehensive review of all these factors to arrive at a fair market value. Relying solely on outdated tax assessments, as done by the RTC and commissioners, is insufficient and violative of due process, as established in Export Processing Zone Authority v. Judge Dulay. Therefore, a remand for the reception of complete evidence is proper to ensure just compensation is truly just and adequate. On Whether the Court of Appeals erred in its computation of interest rates on the award of just compensation: The Court affirmed the CA's guideline on interest computation with modification. It clarified that the delay in payment of just compensation is treated as a forbearance of money, which earns legal interest. The CA correctly recognized that the legal interest rate changed over time, from 12% per annum prevailing in 1978 until June 30, 2013, to 6% per annum thereafter, as per Bangko Sentral ng Pilipinas (BSP) Monetary Board Circular No. 799, Series of 2013. The Court modified this by stating that the interest on the value of the property at the time of taking shall also earn interest at the rate of 6% per annum from the date of finality of the Supreme Court's decision until full payment, aligning with prevailing case law on interest on forbearances of money. On Whether the Court of Appeals erred in awarding exemplary damages, attorney's fees, and costs of suit: The Court deleted the award of exemplary damages. While the Pasay LGU's failure to ascertain the actual time of taking and its delay in payment could warrant damages, this negligence was tempered by Arellano's own failure to timely demand compensation, having purchased the property in 1965 but only initiating negotiations in 2012. The Court found that both parties initially seemed unaware of the property's conversion, and the dispute arose only upon discovery. Given this shared responsibility in the delay and the lack of evidence of bad faith or wanton conduct by the Pasay LGU, exemplary damages were deemed inappropriate. Consequently, the award for attorney's fees and costs, which are often tied to exemplary damages, were also implicitly affected by this deletion.
Main Doctrine
The Court reiterated that just compensation in eminent domain must be the real, substantial, full, and ample equivalent for the property taken, determined by courts based on evidence, not solely on assessor's valuations. It clarified that the 'time of taking' is crucial for valuation and that delayed payment of just compensation accrues legal interest, treated as a forbearance of money, with rates adjusted according to BSP circulars over time. The Court also modified the award of damages, deleting exemplary damages due to the parties' shared responsibility in the delay.