G.R. No. 197743 - Concurring and Dissenting Opinion

G.R. No. 197743, October 18, 2022,
♦ Decision, Dimaampao, [J]
♦ Separate Opinion, Caguioa, [J]
♦ Concurring and Dissenting Opinion, Gaerlan, [J]
♦ Separate Opinion, Gesmundo, [CJ]
♦ Concurring and Dissenting Opinion, Lazaro-Javier, [J]
♦ Separate Opinion, Leonen, [J]

HEIRS OF JOSE MARIANO AND HELEN S. MARIANO, REPRESENTED BY DANILO DAVID S. MARIANO, MARY THERESE IRENE S. MARIANO, MA. CATALINA SOPHIA S. MARIANO, JOSE MARIO S. MARIANO, MA. LENOR S. MARIANO, MACARIO S. MARIANO AND HEIRS OF ERLINDA MARIANO VILLANUEVA, REPRESENTED IN THIS ACT BY IRENE LOURDES M. VILLANUEVA THROUGH HER ATTORNEY-IN-FACT EDITHA S. SANTUYO AND BENJAMIN B. SANTUYO, PETITIONERS, VS. CITY OF NAGA, RESPONDENT.

I agree with my esteemed colleague, Justice Japar Dimaampao, that the return of the property subject of the case to the Heirs of Jose Mariano and Helen S. Mariano and Heirs of Erlinda Mariano-Villanueva1 (petitioners) is no longer feasible. However, I am constrained to register my dissent to the other dispositions in the ponencia.

The ponencia is not just a partial grant or modification of the Decision2 dated March 12, 2018 of the Court's First Division (assailed Decision). To recall, the said Decision directed the City of Naga and other government agencies to immediately vacate the property and pay petitioners P1,250,000.00 monthly as rentals and P75,000.00 as attorney's fees. The ponencia deleted all the foregoing which is clearly a complete reversal of the assailed Decision.

Subsequently, the ponencia remanded the case to the Regional Trial Court (RTC) of Naga for determination of just compensation which, to my mind, would further delay the resolution of the complaint. Instead of remanding the case to the RTC, I agree with Justice Amy Lazaro-Javier's (Justice Lazaro-Javier's) proposal to just remand it to the Court of Appeals (CA) solely for the determination of just compensation. Thereafter, the CA should submit a report and recommendation to the Court which could be Our basis in deciding the issue of just compensation.

While I stand firm with my position that February 12, 2004 (the date of filing of the ejectment case) should be the reckoning date of just compensation, I concede that the Court has already reached a consensus that August 16, 1954 or the date of taking would be used in the determination of just compensation due to petitioners.3

At this juncture, I join and fully support the formula suggested by Justice Lazaro-Javier that the cost of inflation should be considered so that the true value of the loss suffered by the property owner would be justly compensated (inflation-adjusted fair market value). Thereafter, the applicable legal interest should be imposed on the inflation-adjusted fair market value of the property at the time of actual taking.

The City of Naga (respondent) should not benefit from its unconstitutional, illegal, and improper act of taking petitioners' property sans an expropriation proceeding. The fair market value of the property in 1954 is ridiculously low. If the Court decides to apply the present value formula proposed by Justice Marvic Leonen in his separate opinion in Secretary of DPWH v. Spouses Tecson4 (Spouses Tecson), the lot owner will not be fully and justly compensated. The base amount upon which the interest will be applied is small vis-à-vis when the base use is the inflation-adjusted fair market value of the property.

In addition, exemplary damages in the amount of P1,000,000.00 and attorney's fees in the amount of P75,000.00 must be assessed against respondent for flagrant violation of pertinent rules and jurisprudence. This is but fair considering that the rights of petitioners to recover possession of the property and to receive rentals were disregarded.

Using Justice Lazaro-Javier's formula will send a strong warning to government agencies and corporations and to local government units not to trifle with the property and ownership rights of private individuals without due process of law.

Meanwhile, for a more comprehensive and clearer picture, let us revisit the antecedents.

The present case involves respondent's Second Motion for Reconsideration5 (2nd MR) and Motion for Leave to File Second Motion for Reconsideration6 of the Decision7 dated March 12, 2018 of the Court's First Division. The assailed Decision ordered respondent and all other government instrumentalities, agencies, and offices claiming right of possession through and under it to vacate Blocks 25 and 26 of Transfer Certificate of Title No. 671 registered in the name of Macario A. Mariano (Mariano) and Jose A. Gimenez (Gimenez), and to peacefully surrender and deliver physical possession (Order to Vacate) of the same to petitioners. Respondent was directed to pay petitioners monthly rental of P1,250,000.00 and attorney's fees of P75,000.00.

In its 2nd MR, respondent argued that: (1) petitioners are guilty of laches which bar them from recovering the property; (2) the assailed Decision would cause disastrous consequences and irreparable damage to the City of Naga whose City Hall largely occupies the property as well as against other government offices therein; and (3) recovery of possession of the property is no longer feasible so the only relief available is for respondent to pay just compensation.8

The ponencia agreed with respondent as to the second and third points.9 It granted reconsideration and deleted the Order to Vacate as well as the award of rentals in favor of petitioners. It directed respondent to pay: (1) just compensation pegged at the value of the property at the time of taking, that is, on August 16, 1954, subject to legal interest of six percent (6%) per annum from said date until full payment is made; and (2) exemplary damages in the amount of P1,000,000.00. The computation of just compensation shall be in accordance with the "present value" formula laid down in Republic v. Spouses Nocom.10 The ponencia ordered the remand of the case to the RTC for the determination of just compensation.

I beg to differ from the ponencia's application of the present value formula, rate of interest imposed, deletion of rentals, and remand of the case to the RTC, but I concur with the deletion of the Order to Vacate and the grant of exemplary damages to petitioners.

The power of eminent domain is one of the three inherent powers of the Government by which the State interferes with the people's property rights.11 It is the ultimate right of the sovereign power to appropriate, not only the public but the private property of all citizens within the territorial sovereignty, to public purpose.12 Though it exists independently of the Constitution, it is limited by the constitutional fiat that, "[p]rivate property shall not be taken for public use without just compensation."13

Just compensation is the full and fair equivalent of the property taken from its owner by the expropriator, the true measure of which is not the taker's gain but the owner's loss. To be "just," the compensation must not only be for the correct amount but it must be made within a reasonable time from the taking of the property.14

Consequently, it is well-settled that where private property is taken by the Government for public use without first acquiring title thereto through expropriation or negotiated sale, the owner's action to recover the land or its value is imprescriptible.15 However, the remedy of recovery of possession is not absolute, this is available only when the return of the property is feasible. When no longer feasible or convenient, the aggrieved owner is left with no choice but to demand payment for the land taken.16

Here, respondent has been in possession of the property since 1954. Sometime in 1959, the City Hall of Naga was erected thereon, which up to this date remains in the site, along with other national government offices. Respondent neither expropriated nor purchased the property through negotiated sale, hence petitioners were not paid the value thereof. Be that as it may, petitioners' action to recover the property is no longer feasible. To order respondent and the other national government offices to vacate the property and deliver possession to petitioners would result to dire consequences. It would hamper the functioning of the local government unit and the delivery of public services to the city's constituents. Indeed, the only remedy left for petitioners is to be paid just compensation.

The question that now arises is, at what point in time should the just compensation be reckoned from?

Just compensation should be pegged at the time of the filing of the complaint for expropriation

As a general rule, just compensation is based on the price or value of the property at the time the complaint for expropriation was filed.17 This is because normally the time of taking coincides with the filing of the said complaint.18

Section 4. Order of expropriation. — If the objections to and the defenses against the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the property sought to be expropriated, for the public use or purpose described in the complaint, upon the payment of just compensation to be determined as of the date of the taking of the property or the filing of the complaint, whichever came first. (Emphasis supplied)

Nevertheless, there are instances when the taking of private property preceded the filing of the complaint for expropriation. In such cases, the payment of just compensation is reckoned from the date of taking.19 In Republic v. Vda. de Castellvi,20 the Court held that there is "taking" for purposes of expropriation when the following elements concur: (1) the expropriator must enter private property; (2) the entrance into private property must be for more than a momentary period; (3) the entry into the property should be under warrant or color of legal authority; (4) the property must be devoted to a public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way as to oust the owner and deprive him/her of all beneficial enjoyment of the property.21

Applying the foregoing parameters in this case, I submit that there was no "taking" in 1954 when respondent gained possession of the property as the donee under the Deed of Donation dated August 16, 1954. The third element of taking was missing. Respondent's entrance in 1954 was without intent to expropriate or was not made under warrant or color of legal authority since it believed that it owns the property by virtue of the donation. This is consistent with the Court's ruling in National Power Corporation v. Court of Appeals and Macapanton Mangondato22 (Mangondato).

In Mangondato, the National Power Corporation (NPC) believed that it entered a public land in 1978 so it refused just compensation when the landowners claimed ownership of the lot. The Court held that without the intent to expropriate, just compensation for the value of the property cannot be pegged in 1978 because it does not qualify as "taking" for purposes of expropriation. Instead, just compensation was based on the date of NPC's filing of the complaint for expropriation. The Court explained that:

Petitioners claimed that the donation did not take effect because it was subject to the condition that the construction of the City Hall of Naga would be awarded to City Heights Subdivision (CHS), which was not complied with by respondent. However, I note that it was only in 1959 when the construction of the City Hall was awarded to another contractor. Thus, it could be safely assumed that prior to this circumstance, respondent genuinely believed that the 1954 donation was valid and that it entered the property as its owner.

In 1959, after respondent failed to comply with the condition of the donation, Mayor Monico Imperial (Mayor Imperial) offered to purchase the property from its owners. In effect, he, as representative of respondent, recognized Mariano's and Gimenez's ownership of the property and the invalidity of the donation. By virtue of the voluntary offer to purchase the property, petitioners tolerated respondent's continued possession of the property. On May 14, 1968, Mariano made a follow-up on the proposal made by Mayor Imperial for the purchase of the property. His letter to Eusebio Lopez, Jr. (Lopez, Jr.), the General Manager of CHS, reads:

Please be advised to disregard all my previous letters and instructions to you regarding the donation of the city hall and market sites to the City of Naga. Kindly make immediate representation to the City Mayor and insist on the previous proposal made by Mayor Monico Imperial for the city to buy the land we offered to them.

Considering the lapse of time and until now, no clear actions have been made by the city, I suggest you take whatever appropriate actions on this matter the soonest possible time.24

Had Mariano wanted to recover possession of the property and turned his back on the previous proposal for the purchase of the property, he could have categorically instructed Lopez, Jr. to file a case in court or demand the return of the property from respondent. Yet, Mariano's first directive was for Lopez, Jr. to insist on the sale. Mariano was still hoping that respondent would make good on its offer. This is a clear sign of continuous tolerance or implied permission from Mariano for respondent to continue its possession pending the sale.

In Tan v. Republic,25 the Court refused to recognize the entry of the Public Estates Authority (PEA) into a private property in 1985 as the "taking" contemplated by law because it was made with the permission of the owner. After entry, PEA requested the owner to donate or to sell the land to the government. Negotiations ensued but no agreement was reached. In the interim, the property was sold to a new owner, who asked the PEA for a land swapping arrangement as a form of compensation. Initially, PEA agreed but later withdrew from the deal. In 2003, it filed a complaint for expropriation. The Court held that just compensation should be determined in 2003 because there was no intent to expropriate the land in 1985, to wit:

Notably, up to this date or specifically the filing of respondent's Second Motion for Reconsideration, respondent has not filed a case for expropriation of the property. Quite the contrary, petitioners had formally ceased from tolerating respondent's possession of the property when they commenced the ejectment suit against respondent in the Municipal Trial Court of Naga City on February 12, 2004. Considering that petitioners could no longer recover the physical possession of the property because it is not feasible, the Court may convert and/or "continue" the ejectment suit as if it were an action for recovery of just compensation filed by the landowner pursuant to National Transmission Corp. v. Bermuda Development Corp.27

Treating the ejectment case as a complaint for expropriation and remanding it to the CA, as suggested by Justice Lazaro-Javier, would expedite the protracted litigation between the parties.

On remand, the proceeding before the CA would partake the nature of an "inverse condemnation." The objective of inverse condemnation is to recover the value of property taken in fact by the government, even though no formal exercise of the power of eminent domain has been attempted by the taking agency.28 The action is anchored on Section 9, Article III of the 1987 Constitution.29 That it was the landowner rather than the expropriator who files the suit does not change the fact that the action is based on the State's exercise of its power of eminent domain.30 It would be at the height of injustice for the Court to await respondent to file an expropriation suit considering that until now, respondent remained adamant that it acquired ownership of the property by virtue of the 1954 donation. Respondent may opt not to even file an expropriation case because it is already enjoying the rights of use and possession over the property to the extreme prejudice of petitioners.

Meanwhile, even assuming that there was "taking" of property in 1954, just compensation should still be reckoned from the time that petitioners filed the complaint.

In National Power Corporation v. Heirs of Macabangkit Sangkay31 (Heirs of Sangkay), the NPC constructed a tunnel without the consent and knowledge of the owners and without going through formal expropriation proceedings. The Court held that the value of the property at the time the owners commenced the inverse condemnation proceedings should be the basis of just compensation, despite the taking of the property way back in 1979. The Court's disquisition is enlightening:

In Heirs of Sangkay and in Saludares, the Court pegged the value of the property at the time of filing of the complaint for inverse condemnation due to special circumstances. In the first case, the NPC employed stealth in entering the property instead of complying with the legal process. In the second case, the NPC refused to acknowledge the landowner's claim and insisted that it already paid just compensation, evincing that it had no intention to pay.36

Similarly, it is my humble opinion that special circumstances also exist here, warranting the application of the aforementioned cases. Respondent had no intention of paying just compensation to petitioners as it insisted until now that the property was validly donated. This is despite the fact that respondent was fully aware that it did not comply with the condition attached to the donation. Worse, respondent offered to purchase petitioners' property way back in 1959 but until the institution of the ejectment suit, the sale did not materialize. Even though respondent was aware of the flaw in its possession of the property, it did not file a formal expropriation proceeding. Hence, to peg the value of the property at the time of the donation in 1954 or in the alleged cessation of tolerance in 1968 would be unfair to petitioners.

I am aware that there is a string of cases where the Court uniformly held that the time of taking is controlling for purposes of just compensation. These are cases where the government took possession and control of the property for public use without initiating expropriation proceedings and without payment of just compensation. Spouses Tecson summarized these cases in this wise:

The common denominator between and among Forfom Development Corporation v. Phil. National Railways,39 Eusebio v. Luis,40 Manila International Airport Authority v. Rodriguez,41 and Republic v. Sarabia42 (collectively, Forfom, et al.) on one hand, and the present case, on the other hand, is the entry of the government into private property without the benefit of expropriation. The landowners were the ones who filed a complaint for recovery of possession and damages against the government. The difference lies, however, on the finding of the Court that in the first group of cases, the landowners stay silent or failed for a long period of time to question the government's act.43 Thus, they were deemed to have acquiesced to the taking.

On the contrary, Mariano, petitioners' predecessor, had taken steps to protect his right over the property. Likewise, petitioners were able to explain the delay in the filing of their suit against respondent. This was correctly discussed in the assailed Decision, to wit:

Considering that petitioners were not guilty of unreasonable delay in claiming ownership of their property against respondent, the ruling in Forfom, et al. that just compensation should be pegged at the time of taking of the property does not apply.

Nonetheless, as previously mentioned, the Court has already ruled that just compensation shall be computed from August 16, 1954, hence my position that just compensation should be reckoned as of February 12, 2004 will become the minority view.

Proceeding from the Court's ruling that just compensation should be pegged at the time of taking on August 16, 1954, I quote with approval the innovative proposition of Justice Lazaro-Javier that inflation should be included in the computation of the fair market value of the property, viz.:

The cost of inflation formula is the more realistic mode of arriving at the actual value of the property at the time of actual taking. The Court now has the opportunity to adopt the Lazaro-Javier formula in this landmark case.

Case law teaches that the failure of the government to initiate an expropriation proceeding to the prejudice of the landowner may be corrected with the awarding of exemplary damages.46 Hence, in Spouses Tecson, the Court granted P1,000,000.00 exemplary damages in favor of the landowners since they were deprived of beneficial ownership over their property for more than 68 years without the benefit of a timely expropriation proceedings and to serve as deterrent to the State from failing to institute proceedings within the prescribed period under the law.47

For the same reasons stated above,48 the Court, in National Transmission Corp. v. Oroville Development Corp.49 also awarded exemplary damages in the amount of P1,000,000.00 to the owner of the property.50

Accordingly, the ponencia correctly held that P1,000,000.00 exemplary damages are due to petitioners as they were deprived of the beneficial ownership of their property without the benefit of a timely expropriation. Respondent was in bad faith when it continuously possessed the property knowing that it did not comply with the condition of the donation. In addition, respondent did not honor its commitment to purchase the property despite repeated follow-up from Mariano.

With respect to the award of rentals to petitioners, I maintain my position that reasonable compensation must be paid to them from 1954 up to 2004. Conversely, at the risk of being repetitious, the Court has already reached a consensus that the award of rentals shall be deleted. For now, the issue has been resolved.

Interest is paid to the owner of the property to compensate him/her for any delay in the payment of compensation.51 It is a forbearance of money, and not indemnity for damages.52 At the time of the taking of the property on August 16, 1954, the interest rate applicable to loans and forbearance of money is six percent (6%) per annum per Act No. 2655. On July 29, 1974, the Central Bank (CB) issued CB Circular No. 416 increasing the rate to twelve percent (12%) per annum. This was followed by Circular No. 905 dated December 22, 1982 which maintained the 12% interest. However, on June 21, 2013, the Bangko Sentral ng Pilipinas issued CB Circular No. 799 reducing the rate of interest on loans and forbearance of money from 12% to 6% per annum effective July 1, 2013.53 Hence, contrary to the ponencia, the just compensation in this case should be subject to 6% interest per annum from the date of taking on August 16, 1954 to July 28, 1974, then 12% interest per annum from July 29, 1974 to June 30, 2013, and 6% per annum from July 1, 2013 until finality of this Resolution.

In conformity with Nacar v. Gallery Frames,54 the total amount due to petitioners (that is, the inflation-adjusted fair market value of the property at the time of actual taking with interest plus damages and attorney's fees) shall earn legal interest of 6% per annum from finality of the Resolution until full payment.55

Attorney's fees are due to petitioners in the amount of P75,000.00 since they were forced to file an ejectment complaint for the recovery of their property and in the process incurred expenses for the services of a lawyer.

For the guidance of the Bench, the Bar, and the public in general, the Court must make a pronouncement on the issue of taking of private property for public use by the government or a local government unit without the benefit of a formal expropriation proceeding.

The Court should emphasize that the only constitutional and legal way of acquiring private property for public use is by filing a complaint for expropriation under Rule 67 of the Rules of Court. Without the said complaint, the taking of any private property is illegal. To fully and justly compensate the property owner for the real value of the loss he/she suffered as of the date of taking, the cost of inflation formula proposed by Justice Lazaro-Javier should be used. Aside from this, legal interest, the rate of which shall be based on the relevant CB Circular, shall be imposed in the inflationadjusted value of the property from the date of taking until June 30, 2013. From July 1, 2013 until finality of the case, the inflation-adjusted value shall earn legal interest at the rate of 6% per annum. When warranted by the circumstances, exemplary damages and attorney's fees must also be granted to the property owner. Lastly, the total amount of just compensation (that is, the inflation-adjusted value plus legal interests, damages, and attorney's fees) shall earn legal interest of 6% per annum from finality of the decision or resolution until full payment.

All told, I vote to GRANT petitioners' Second Motion for Reconsideration and REVERSE and SET ASIDE the Decision dated March 12, 2018 and Resolution dated July 23, 2018 of the First Division of the Court, in that: