CITY GOVERNMENT OF PASAY, PETITIONER, VS. ARELLANO UNIVERSITY, RESPONDENT.
- G.R. Number: G.R. No. 260038
- Promulgated: 2025-05-07
- Ponente: GAERLAN, J.
Doctrine
## Facts of the Case The City Government of Pasay (Pasay LGU) constructed Menlo Street on an 805-square-meter parcel of land owned by Arellano University (Arellano) without formal expropriation proceedings or payment of just compensation. Arellano filed a complaint in 2015, alleging ownership and the absence of any encumbrance on its title. The Pasay LGU expressed willingness to compensate but argued that Arellano failed to allege the time of taking, making compensation impossible to determine. The parties agreed to refer the matter to a board of commissioners (three Pasay LGU officials). The commissioners appraised the property at PHP 2,060.00 per square meter, calculating it by applying a 6% interest per annum from the 1978 base value of PHP 200.00 per square meter, which was the earliest appearance of the property in tax records. Arellano sought a valuation based on the time of filing the complaint in 2015 and suggested using Bangko Sentral ng Pilipinas (BSP) interest rates. The Pasay LGU maintained that the 1978 valuation was correct and that the prompt payment principle did not apply as it did not cause undue delay. The Regional Trial Court (RTC) ruled that the time of taking was 1978, fixing the just compensation at PHP 161,000.00 (PHP 200.00 x 805 sq.m.) plus 12% legal interest per annum from 1978 to 2018, and 6% per annum as indemnity for damages. Both parties moved for reconsideration, which the RTC denied. The Court of Appeals (CA) remanded the case to the RTC for a proper determination of just compensation, ruling that the RTC's computation was based on incomplete data. The CA also adjusted the interest rate to 12% from 1978 to June 30, 2013, and 6% from July 1, 2013, until full payment. It affirmed the award of indemnity, exemplary damages, and attorney's fees, but left the amounts to the RTC. The Pasay LGU appealed to the Supreme Court. ## Issues 1. Did the CA err in remanding the case to the RTC for a re-determination of the just compensation amount? 2. Did the CA err in not imposing a constant interest rate of 6% on the award of just compensation, instead adopting a fluctuating BSP rate? 3. Did the CA err in awarding exemplary damages, attorney's fees, and costs of suit in favor of Arellano? ## Decision / Rationale **Issue 1:** The Court **affirmed** the CA's decision to remand the case to the RTC for a re-determination of just compensation. The Court reiterated that the determination of just compensation is a judicial function. It cited **Export Processing Zone Authority v. Judge Dulay**, which explained that appraisals by local government assessors are not controlling and that tax values cannot be absolute substitutes for just compensation. The Court emphasized the "totality of circumstances" approach mandated by case law, requiring consideration of factors like zonal valuation by the BIR, cost of acquisition, current value of similar properties, actual and potential uses of the property, its size, shape, location, and tax declarations. These factors are also enumerated in Executive Order No. 132 (1937) and the 2006 Manual on Real Property Appraisal and Assessment Operations. The RTC and the commissioners based their valuation solely on the 1978 general assessment revision, without considering other essential data. Thus, the RTC's orders were based on incomplete data, making remand proper. **Issue 2:** The Court **affirmed** the CA's application of the BSP interest rates, clarifying that the interest on the value of the property at the time of taking shall also earn interest, following the BSP rate, from the finality of the decision until full payment. The Court held that the concept of just compensation requires prompt payment, and if payment is delayed, the final compensation must earn legal interest from the time of taking. The Court characterized delayed payment of just compensation as a **forbearance of money**, thus subject to the interest rates set by the central monetary authority (BSP). It rejected…
Keywords
Article 1191 Civil Code, RA 9262 Section 5, Rule 45 Rules of Court, Article III Section 9 1987 Constitution, Executive Order No. 132 (1937), Executive Order No. 329 (1988), Republic Act No. 6657, Republic Act No. 9700 Section 7 (2009), Executive Order No. 229 Section 18 (1987), Civil Code Articles 2229 and 2234, Civil Code Article 2208, Civil Code Article 2199, Civil Code Article 2224, Civil Code Article 2231, Civil Code Article 2232, Act No. 2655, Doctrine of Prompt Payment, Judicial Function in Just Compensation, Totality of Circumstances Approach, Forbearance of Money (Just Compensation)