Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 158563 June 30, 2005

AIR TRANSPORTATION OFFICE (ATO) and MACTAN-CEBU INTERNATIONAL

AIRPORT AUTHORITY (mciaa), petitioners,
vs.
APOLONIO GOPUCO, JR., respondent.

DECISION

CHICO-NAZARIO, J.:

When private land is expropriated for a particular public use, and that particular public use is
abandoned, does its former owner acquire a cause of action for recovery of the property?

The trial court’s ruling in the negative was reversed by the Court of Appeals in its Decision1 of
28 February 2001. Hence this petition for review under Rule 45 of the 1997 Rules of Civil
Procedure of the said Decision of the court a quo, and its Resolution2 of 22 May 2003 dismissing
petitioners’ motion for reconsideration.

The facts, as adduced from the records, are as follows:

Respondent Apolonio Gopuco, Jr. was the owner of Cadastral Lot No. 72 consisting of 995
square meters located in the vicinity of the Lahug Airport in Cebu City covered by Transfer
Certificate of Title (TCT) No. 13061-T.

The Lahug Airport had been turned over by the Unites States Army to the Republic of the
Philippines sometime in 1947 through the Surplus Property Commission, which accepted it in
behalf of the Philippine Government. In 1947, the Surplus Property Commission was succeeded
by the Bureau of Aeronautics, which office was supplanted by the National Airport Corporation
(NAC). The NAC was in turn dissolved and replaced with the Civil Aeronautics Administration
(CAA).3

Sometime in 1949, the NAC informed the owners of the various lots surrounding the Lahug
Airport, including the herein respondent, that the government was acquiring their lands for
purposes of expansion. Some landowners were convinced to sell their properties on the assurance
that they would be able to repurchase the same when these would no longer be used by the
airport. Others, including Gopuco, refused to do so.
Thus, on 16 April 1952, the CAA filed a complaint with the Court of First Instance (CFI) of
Cebu for the expropriation of Lot No. 72 and its neighboring realties, docketed as Civil Case No.
R-1881.

On 29 December 1961, the CFI promulgated a Decision,

1. Declaring the expropriation of [the subject lots, including Lot No. 72] justified and in
lawful exercise of the right of eminent domain;

2. Declaring …. a balance of P1,990 in favor of Apolonio Go Puco, Jr. with legal interest
from November 16, 1947 until fully paid…. ;

3. After the payment of the foregoing financial obligation to the landowners, directing the
latter to deliver to the plaintiff the corresponding Transfer Certificates of Title to their
respective lots; and upon the presentation of the said titles to the Register of Deeds,
ordering the latter to cancel the same and to issue, in lieu thereof, new Transfer
Certificates of Title in the name of the plaintiff.4

No appeal was taken from the above Decision on Lot No. 72, and the judgment of condemnation
became final and executory. Thereafter, on 23 May 1962, absolute title to Lot No. 72 was
transferred to the Republic of the Philippines under TCT No. 25030.5

Subsequently, when the Mactan International Airport commenced operations, the Lahug Airport
was ordered closed by then President Corazon C. Aquino in a Memorandum of 29 November
1989.6 Lot No. 72 was thus virtually abandoned.7

On 16 March 1990, Gopuco wrote8 the Bureau of Air Transportation, through the manager of the
Lahug Airport, seeking the return of his lot and offering to return the money previously received
by him as payment for the expropriation. This letter was ignored.9

In the same year, Congress passed Republic Act No. 6958 creating the Mactan-Cebu
International Airport Authority (MCIAA) and in part providing for the transfer of the assets of
the Lahug Airport thereto. Consequently, on 08 May 1992, ownership of Lot No. 72 was
transferred to MCIAA under TCT No. 120356.10

On 06 August 1992, Apolonio Gopuco, Jr. filed an amended complaint11 for recovery of
ownership of Lot No. 72 against the Air Transportation Office12 and the Province of Cebu with
the Regional Trial Court (RTC) of Cebu, Branch X, docketed as Civil Case No. CEB-11914. He
maintained that by virtue of the closure of the Lahug Airport, the original purpose for which the
property was expropriated had ceased or otherwise been abandoned, and title to the property had
therefore reverted to him.

Gopuco further alleged that when the original judgment of expropriation had been handed down,
and before they could file an appeal thereto, the CAA offered them a compromise settlement
whereby they were assured that the expropriated lots would be resold to them for the same price
as when it was expropriated in the event that the Lahug Airport would be abandoned. Gopuco
claims to have accepted this offer.13 However, he failed to present any proof on this matter, and
later admitted that insofar as the said lot was concerned, no compromise agreement was entered
into by the government and the previous owners.14

Lastly, Gopuco asserted that he had come across several announcements in the papers that the
Lahug Airport was soon to be developed into a commercial complex, which he took to be a
scheme of the Province of Cebu to make permanent the deprivation of his property.

On 20 May 1994, the trial court rendered a Decision15 dismissing the complaint and directing the
herein respondent to pay the MCIAA exemplary damages, litigation expenses and costs.

Aggrieved by the holding of the trial court, Gopuco appealed to the Court of Appeals, which
overturned the RTC decision, ordered the herein petitioners to reconvey Lot No. 72 to Gopuco
upon payment of the reasonable price as determined by it, and deleted the award to the
petitioners of exemplary damages, litigation expenses and costs.

The Motion for Reconsideration was denied16 on 22 May 2003, hence this petition, which raises
the following issues:

WHETHER THE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT HAS

THE RIGHT TO RECLAIM OWNERSHIP OVER THE SUBJECT EXPROPRIATED LOT
BASED ON THE IMPORT OF THE DECEMBER 29, 1961 DECISION IN CIVIL CASE NO.
1881.

WHETHER THE COURT OF APPEALS ERRED IN DELETING THE AWARD OF

LITIGATION EXPENSES AND COSTS IN FAVOR OF PETITIONERS.

In deciding the original expropriation case that gave rise to the present controversy, Civil Case
No. R-1881, the CFI reasoned that the planned expansion of the airport justified the exercise of
eminent domain, thus:

As for the public purpose of the expropriation proceeding, it cannot be doubted. Although the
Mactan Airport is being constructed, it does not take away the actual usefulness and importance
of the Lahug Airport; it is handling the air traffic both civilian and military. From it aircrafts fly
to Mindanao and Visayas and pass thru it on their return flights to the North and Manila. Then,
no evidence was adduced to show how soon is the Mactan Airport to be placed in operation and
whether the Lahug Airport will be closed immediately thereafter. It is for the other departments
of the Government to determine said matters. The Court cannot substitute its judgment for those
of the said departments or agencies. In the absence of such a showing, the Court will presume
that the Lahug Airport will continue to be in operation.17 (emphasis supplied)1avvphi1

By the time Gopuco had filed his action for recovery of ownership of Lot No. 72, Lahug Airport
had indeed ceased to operate. Nevertheless, the trial court held:
The fact of abandonment or closure of the Lahug Airport admitted by the defendant did not by
itself, result in the reversion of the subject property back to the plaintiff. Nor did it vest in the
plaintiff the right to demand reconveyance of said property.

When real property has been acquired for public use unconditionally, either by eminent domain
or by purchase, the abandonment or non-use of the real property, does not ipso facto give to the
previous owner of said property any right to recover the same (Fery vs. Municipality of
Cabanatuan, 42 Phil. 28).18

In reversing the trial court, the Court of Appeals called attention to the fact that both parties cited
Fery v. Municipality of Cabanatuan,19 which the trial court also relied on in its Decision. The
court a quo agreed in Gopuco’s interpretation of Fery that when the CFI in Civil Case No. R-
1881 held that,

. . . [T]hen, no evidence was adduced to show how soon is the Mactan Airport to be placed in
operation and whether the Lahug Airport will be closed immediately thereafter….In the absence
of such a showing, the Court will presume that the Lahug Airport will continue to be in
operation, . . . .20

the expropriation of the property was conditioned on its continued devotion to its public purpose.
Thus, although the MCIAA stressed that nothing in the judgment of expropriation expressly
stated that the lands would revert to their previous owners should the public use be terminated or
abandoned, the Court of Appeals nevertheless ruled that,

. . . [W]hile, there is no explicit statement that the land is expropriated with the condition that
when the purpose is ended the property shall return to its owner, the full import of the decision
(in Civil Case No. R-1881) suggests that the expropriation was granted because there is no clear
showing that Lahug Airport will be closed, the moment Mactan International Airport is put to
operation. It stands to reason that should that public use be abandoned, then the expropriated
property should revert back to its former owner.

Moreover, the foundation of the right to exercise the power of eminent domain is genuine
necessity. Condemnation is justified only if it is for the public good and there is genuine
necessity of a public character. Thus, when such genuine necessity no longer exists as when the
State abandons the property expropriated, government interest must yield to the private right of
the former land owner, whose property right was disturbed as a consequence of the exercise of
eminent domain.

Justice, equity and fair play demand that the property should revert back to plaintiff-appellant
upon paying the reasonable value of the land to be based on the prevailing market value at the
time of judicial demand to recover the property. If the State expects landowners to cooperate in
its bid to take private property for its public use, so must it apply also the same standard, to allow
the landowner to reclaim the property, now that the public use has been abandoned.21

In this petition, the MCIAA reiterates that the Republic of the Philippines validly expropriated
Lot No. 72 through the proceedings in Civil Case No. R-1881, the judgment of which had long
become final and executory. It further asserts that said judgment vested absolute and
unconditional title in the government, specifically on the petitioners, there having been no
condition whatsoever that the property should revert to its owners in case the Lahug Airport
should be abandoned.

On the other hand, the respondent would have us sustain the appellate court’s interpretation of
Fery as applied to the original judgment of expropriation, to the effect that this was subject to the
condition "that the Lahug Airport will continue to be in operation."

We resolve to grant the petition.

In Fery, the Court asked and answered the same question confronting us now: When private land
is expropriated for a particular public use, and that particular public use is abandoned, does the
land so expropriated return to its former owner?22

The answer to that question depends upon the character of the title acquired by the expropriator,
whether it be the State, a province, a municipality, or a corporation which has the right to acquire
property under the power of eminent domain. If, for example, land is expropriated for a
particular purpose, with the condition that when that purpose is ended or abandoned the
property shall return to its former owner, then, of course, when the purpose is terminated
or abandoned the former owner reacquires the property so expropriated. If, for example,
land is expropriated for a public street and the expropriation is granted upon condition that the
city can only use it for a public street, then, of course, when the city abandons its use as a public
street, it returns to the former owner, unless there is some statutory provision to the contrary. . .
If upon the contrary, however, the decree of expropriation gives to the entity a fee simple title,
then of course, the land becomes the absolute property of the expropriator, whether it be the
State, a province, or municipality, and in that case the non-user does not have the effect of
defeating the title acquired by the expropriation proceedings. (10 R.C.L., 240, sec. 202; 20 C.J.
1234, secs. 593-599 and numerous cases cited; Reichling vs. Covington Lumber Co., 57 Wash.,
225; 135 Am. St. Rep., 976; McConihay vs. Wright, 121 U.S., 201.)

When land has been acquired for public use in fee simple, unconditionally, either by the
exercise of eminent domain or by purchase, the former owner retains no rights in the land,
and the public use may be abandoned or the land may be devoted to a different use,
without any impairment of the estate or title acquired, or any reversion to the former
owner. (Fort Wayne vs. Lake Shore, etc. Ry. Co., 132 Ind., 558; 18 L.R.A., 367.) (Emphases
Supplied)23

Did the judgment of expropriation in Civil Case No. R-1881 vest absolute and unconditional title
in the government? We have already had occasion to rule on this matter in Mactan-Cebu
International Airport Authority v. Court of Appeals,24 which is a related action for reconveyance
of a parcel of land also subject of the expropriation proceedings in Civil Case No. R-1881. One
of the landowners affected by the said proceeding was Virginia Chiongbian, to whom the CFI
ordered the Republic of the Philippines to pay P34,415.00, with legal interest computed from the
time the government began using her land. Like the herein respondent, she did not appeal from
the CFI’s judgment. Also like Gopuco, she eventually filed for the reconveyance of her property
when the airport closed. Although she was upheld by both the RTC of Cebu and the Court of
Appeals, on appeal we held that "the terms of the judgment (in Civil Case No. R-1881) are
clear and unequivocal and granted title to Lot No. 941 in fee simple to the Republic of the
Philippines. There was no condition imposed to the effect that the lot would return to
CHIONGBIAN or that CHIONGBIAN had a right to repurchase the same if the purpose
for which it was expropriated is ended or abandoned or if the property was to be used
other than as the Lahug Airport."25 Moreover, we held that although other lot owners were
able to successfully reacquire their lands by virtue of a compromise agreement, since
CHIONGBIAN was not a party to any such agreement, she could not validly invoke the same.

The respondent would have us revisit this ruling for three reasons. First, because he claims there
is no showing that the government benefited from entering into compromise agreements with the
other lot owners; second, because such a doctrine supposedly discriminates against those who
have "neither the werewithal nor the savvy to contest the expropriation," or agree to modify the
judgment; and third, because there exists between the government and the owners of
expropriated realty an "implied contract" that the properties involved will be used only for the
public purpose for which they were acquired in the first place.

As to respondent’s first and second arguments, we have time and again ruled that a compromise
agreement, when not contrary to law, public order, public policy, morals, or good customs, is a
valid contract which is the law between the parties.26 It is a contract perfected by mere consent,27
whereby the parties, making reciprocal concessions, avoid litigation or put an end to one already
commenced. It has the force of law and is conclusive between the parties,28 and courts will not
relieve parties from obligations voluntarily assumed, simply because their contracts turned out to
be unwise.29 Note that respondent has not shown that any of the compromise agreements were in
any way tainted with illegality, irregularity or imprudence. Indeed, anyone who is not a party to a
contract or agreement cannot be bound by its terms, and cannot be affected by it.30 Since Gopuco
was not a party to the compromise agreements, he cannot legally invoke the same.31

Lastly, Gopuco argues that there is present, in cases of expropriation, an "implied contract" that
the properties will be used only for the public purpose for which they were acquired. No such
contract exists.

Eminent domain is generally described as "the highest and most exact idea of property remaining
in the government" that may be acquired for some public purpose through a method in the nature
of a forced purchase by the State.32 Also often referred to as expropriation and, with less
frequency, as condemnation, it is, like police power and taxation, an inherent power of
sovereignty and need not be clothed with any constitutional gear to exist; instead, provisions in
our Constitution on the subject are meant more to regulate, rather than to grant, the exercise of
the power. It is a right to take or reassert dominion over property within the state for public use
or to meet a public exigency and is said to be an essential part of governance even in its most
primitive form and thus inseparable from sovereignty.33 In fact, "all separate interests of
individuals in property are held of the government under this tacit agreement or implied
reservation. Notwithstanding the grant to individuals, the eminent domain, the highest and most
exact idea of property, remains in the government, or in the aggregate body of people in their
sovereign capacity; and they have the right to resume the possession of the property whenever
the public interest so requires it."34

The ubiquitous character of eminent domain is manifest in the nature of the expropriation
proceedings. Expropriation proceedings are not adversarial in the conventional sense, for the
condemning authority is not required to assert any conflicting interest in the property. Thus, by
filing the action, the condemnor in effect merely serves notice that it is taking title and
possession of the property, and the defendant asserts title or interest in the property, not to prove
a right to possession, but to prove a right to compensation for the taking.35

The only direct constitutional qualification is thus that "private property shall not be taken for
public use without just compensation."36 This prescription is intended to provide a safeguard
against possible abuse and so to protect as well the individual against whose property the power
is sought to be enforced.37lawphil.net

In this case, the judgment on the propriety of the taking and the adequacy of the compensation
received have long become final. We have also already held that the terms of that judgment
granted title in fee simple to the Republic of the Philippines. Therefore, pursuant to our ruling in
Fery, as recently cited in Reyes v. National Housing Authority,38 no rights to Lot No. 72, either
express or implied, have been retained by the herein respondent.

We are not unaware of the ruling in Heirs of Timoteo Moreno v. Mactan-Cebu International
Airport Authority,39 concerning still another set of owners of lots declared expropriated in the
judgment in Civil Case No. R-1881. As with Chiongbian and the herein respondent, the owners
of the lots therein did not appeal the judgment of expropriation, but subsequently filed a
complaint for reconveyance. In ordering MCIAA to reconvey the said lots in their favor, we held
that the predicament of petitioners therein involved a constructive trust "akin to the implied trust
referred to in Art. 145440 of the Civil Code."41 However, we qualified our Decision in that case,
to the effect that,

We adhere to the principles enunciated in Fery and in Mactan-Cebu International Airport

Authority, and do not overrule them. Nonetheless the weight of their import, particularly our
ruling as regards the properties of respondent Chiongbian in Mactan-Cebu International Airport
Authority, must be commensurate to the facts that were established therein as distinguished from
those extant in the case at bar. Chiongbian put forth inadmissible and inconclusive evidence,
while in the instant case we have preponderant proof as found by the trial court of the
existence of the right of repurchase in favor of petitioners.

Neither has Gopuco, in the present case, adduced any evidence at all concerning a right of
repurchase in his favor. Heirs of Moreno is thus not in point.

The trial court was thus correct in denying Gopuco’s claim for the reconveyance of Lot No. 72 in
his favor. However, for failure of the petitioners to present any proof that this case was clearly
unfounded or filed for purposes of harassment, or that the herein respondent acted in gross and
evident bad faith, the reimposition of litigation expenses and costs has no basis. It is not sound
public policy to set a premium upon the right to litigate where such right is exercised in good
faith, as in the present case.42

WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R.
SP No. 49898 dated 28 February 2001, and its Resolution of 22 May 2003 are hereby
REVERSED and SET ASIDE. The Decision of RTC-Branch X of Cebu dated 20 May 1994 in
Civil Case No. CEB-11914 is REINSTATED with the modification that the award of exemplary
damages, litigation expenses and costs are DELETED.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 187604 June 25, 2012

CITY OF MANILA, Petitioner,

vs.
ALEGAR CORPORATION, TEROCEL REALTY CORPORATION, and FILOMENA
VDA. DE LEGARDA, Respondents.

DECISION

ABAD, J.:

This case is about the issues that a local government unit has to cope with when expropriating
private property for socialized housing.

The Facts and the Case

On March 1, 2001 the City Council of Manila passed Ordinance 8012 that authorized the City
Mayor to acquire certain lots1 belonging to respondents Alegar Corporation, Terocel Realty
Corporation, and Filomena Vda. De Legarda, for use in the socialized housing project of
petitioner City of Manila. The City offered to buy the lots at P1,500.00 per square meter (sq m)
but the owners rejected this as too low with the result that on December 2, 2003 the City filed a
complaint for expropriation against them before the Regional Trial Court (RTC) of Manila.2

The City alleged in its complaint that it wanted to acquire the lots for its land-for-the-landless
and on-site development programs involving the residents occupying them.3 The City offered to
acquire the lots for P1,500.00 per sq m4 but the owners rejected the offer. The total aggregate
value of the lots for taxation purpose was P809,280.00 but the City deposited P1,500,000.00 with
the Land Bank of the Philippines to enable it to immediately occupy the same pending hearing of
the case.

Both Alegar and Terocel questioned the legitimacy of the City’s taking of their lots solely for the
benefit of a few long-time occupants. Alegar also pointed out that, while it declined the City’s
initial offer, it did not foreclose the possibility of selling the lots for the right price.5 The filing of
the suit was premature because the City made no effort in good faith to negotiate the purchase.
Meantime, on June 9, 2004 the trial court issued a writ of possession in the City’s favor. On
December 19, 2006, upon the joint motion of the parties, the RTC released the P1,500,000.00
deposit to the defendant owners.

On October 15, 2007 the parties agreed to forego with the pre-trial, opting instead to
simultaneously submit their memoranda on the issue of whether or not there is necessity for the
City to expropriate the subject properties for public use. The owners of the lots submitted their
memorandum but the City did not.

On February 12, 2008 the RTC dismissed the complaint on the ground that the City did not
comply with Section 9 of Republic Act (R.A.) 72796 which set the order of priority in the
acquisition of properties for socialized housing. Private properties ranked last in the order of
priorities for such acquisition and the City failed to show that no other properties were available
for the project. The City also failed to comply with Section 10 which authorized expropriation
only when resort to other modes (such as community mortgage, land swapping, and negotiated
purchase) had been exhausted.

The trial court pointed out that the City also failed to show that it exhausted all reasonable efforts
to acquire the lots through a negotiated sale. Article 35 of the Rules and Regulations
Implementing the Local Government Code provides that when property owners are willing to
sell but for a higher price than that offered, the local chief executive must confer with them for
the possibility of coming to an agreement on the price. Here, after the owners refused to sell the
lots for P1,500.00 per sq m offer, the City did not exert any effort to renegotiate or revise its
offer. The RTC also ruled that the City submitted the issue of genuine necessity to acquire the
properties for public purpose or benefit without presenting evidence on the same.

The City moved for the reconsideration of the order of dismissal but before the RTC could act on
it, the City appealed the case to the Court of Appeals (CA).7

On February 27, 20098 the CA affirmed the RTC’s dismissal of the City’s action, mainly for the
reason that the City failed to comply with the requirements of Sections 9 and 10 of R.A. 7279
which ranked privately-owned lands last in the order of priority in acquiring lots for socialized
housing and which preferred modes other than expropriation for acquiring them. The CA
rejected the City’s claim that the RTC denied it its right to due process, given that the City
agreed to forego with pre-trial and to just submit a memorandum on the threshold issues raised
by the owners’ answer regarding the propriety of expropriation.9 The City simply did not submit
a memorandum. Although it moved for the reconsideration of the order of dismissal, the City
filed a notice of appeal before the RTC could resolve the motion.

The Issues

The petition raises the following issues:

1. Whether or not the CA erred in failing to rule that the RTC denied the City its
right to due process when it dismissed the case without hearing the City’s side;
 2. Whether or not the CA erred in affirming the RTC’s ruling that the City failed
to comply with the requirements of Sections 9 and 10 of R.A. 7279 in trying to
acquire the subject lots by expropriation;

3. Whether or not the CA erred in failing to set aside the RTC’s ruling that the
City failed to establish the existence of genuine necessity in expropriating the
subject lots for public use or purpose; and

4. Whether or not the CA erred in failing to rule that the owners’ withdrawal of its
P1.5 million deposit constituted implied consent to the expropriation of their lots.

The Rulings of the Court

One. The RTC did not deny the City its right to be heard on its action when that court dismissed
the same. An expropriation proceeding of private lands has two stages: first, the determination of
plaintiff’s authority to exercise the power of eminent domain in the context of the facts of the
case and, second, if there be such authority, the determination of just compensation. The first
phase ends with either an order of dismissal or a determination that the property is to be acquired
for a public purpose.10

Here, the City’s action was still in the first stage when the RTC called the parties to a pre-trial
conference where, essentially, their task was to determine how the court may resolve the issue
involved in the first stage: the City’s authority to acquire by expropriation the particular lots for
its intended purpose. As it happened, the parties opted to simultaneously submit their
memoranda on that issue. There was nothing infirm in this agreement since it may be assumed
that the parties knew what they were doing and since such agreement would facilitate early
disposal of the case.11

Unfortunately, the agreement implied that the City was waiving its right to present evidence that
it was acquiring the subject lots by expropriation for a proper public purpose. Counsel for the
City may have been confident that its allegations in the complaint can stand on their own,
ignoring the owners’ challenge to its right to expropriate their lots for the stated purpose.
Parenthetically, the City moved for the reconsideration of the RTC’s order of dismissal but
withdrew this remedy by filing a notice of appeal from that order to the CA. Evidently, the City
cannot claim that it had been denied the opportunity of a hearing.

Two. The CA correctly ruled that the City failed to show that it complied with the requirements
of Section 9 of R.A. 7279 which lays down the order of priority in the acquisition through
expropriation of lands for socialized housing. This section provides:

Section 9. Priorities in the acquisition of Land.—Lands for socialized housing shall be acquired
in the following order:

(a) Those owned by the Government or any of its subdivisions, instrumentalities,

or agencies, including government-owned or controlled corporations and their
subsidiaries;
 (b) Alienable lands of the public domain;

(c) Unregistered or abandoned and idle lands;

(d) Those within the declared Areas for Priority Development, Zonal
Improvement Program sites, and Slum Improvement and Resettlement Program
sites which have not yet been acquired;

(e) Bagong Lipunan Improvement of Sites and Services or BLISS sites which
have not yet been acquired; and

(f) Privately-owned lands.

Where on-site development is found more practicable and advantageous to the beneficiaries, the
priorities mentioned in this section shall not apply. The local government units shall give
budgetary priority to on-site development of government lands. (Emphasis supplied)

The City of course argues that it did not have to observe the order of priority provided above in
acquiring lots for socialized housing since it found on-site development to be more practicable
and advantageous to the beneficiaries who were these lots’ long-time occupants. But the problem
remains. The City did not adduce evidence that this was so.

Besides, Section 10 of R.A. 7279 also prefers the acquisition of private property by "negotiated
sale" over the filing of an expropriation suit. It provides that such suit may be resorted to only
when the other modes of acquisitions have been exhausted. Thus:

Section 10. Modes of Land Acquisition.—The modes of acquiring land for purposes of this Act
shall include, among others, community mortgage, land swapping, land assembly or
consolidation, land banking, donation to the Government, joint-venture agreement, negotiated
purchase, and expropriation: Provided, however, That expropriation shall be resorted to only
when other modes of acquisition have been exhausted; Provided, further, That where
expropriation is resorted to, parcels of land owned by small property owners shall be exempted
for purposes of this Act. x x x (Emphasis supplied)

There is a sensible reason for the above. Litigation is costly and protracted. The government
should also lead in avoiding litigations and overburdening its courts.

Indeed, the Court has held that when the property owner rejects the offer but hints for a better
price, the government should renegotiate by calling the property owner to a conference.12 The
government must exhaust all reasonable efforts to obtain by agreement the land it desires. Its
failure to comply will warrant the dismissal of the complaint. Article 35 of the Rules and
Regulations Implementing the Local Government Code provides for this procedure. Thus:

Article 35. Offer to Buy and Contract of Sale—(a) The offer to buy private property for public
use or purpose shall be in writing. It shall specify the property sought to be acquired, the reasons
for its acquisition, and the price offered.
 xxxx

(c) If the owner or owners are willing to sell their property but at a price higher than that offered
to them, the local chief executive shall call them to a conference for the purpose of reaching an
agreement on the selling price. The chairman of the appropriation or finance committee of the
sanggunian, or in his absence, any member of the sanggunian duly chosen as its representative,
shall participate in the conference. When an agreement is reached by the parties, a contract of
sale shall be drawn and executed.

Here, the City of Manila initially offered P1,500.00 per sq m to the owners for their lots. But
after the latter rejected the offer, claiming that the offered price was even lower than their current
zonal value, the City did not bother to renegotiate or improve its offer. The intent of the law is
for the State or the local government to make a reasonable offer in good faith, not merely a pro
forma offer to acquire the property.13

The Court cannot treat the requirements of Sections 9 and 10 of R.A. 7279 lightly.1âwphi1 It
held in Estate or Heirs of the Late Ex-Justice Jose B.L. Reyes v. City of Manila,14 that these
requirements are strict limitations on the local government’s exercise of the power of eminent
domain. They are the only safeguards of property owners against the exercise of that power. The
burden is on the local government to prove that it satisfied the requirements mentioned or that
they do not apply in the particular case.15

Three. Admittedly, the City alleged in its amended complaint that it wanted to acquire the
subject lots in connection with its land-for-the-landless program and that this was in accord with
its Ordinance 8012. But the City misses the point. The owners directly challenged the validity of
the objective of its action. They alleged that the taking in this particular case of their lots is not
for public use or purpose since its action would benefit only a few. Whether this is the case or
not, the owners’ answer tendered a factual issue that called for evidence on the City’s part to
prove the affirmative of its allegations. As already stated, the City submitted the issue for the
RTC’s resolution without presenting evidence.

Four. The City insists that it made a deposit of P1.5 million with the RTC by way of advance
payment on the lots it sought to expropriate. By withdrawing this deposit, respondents may be
assumed to have given their consent to the expropriation.

But the advance deposit required under Section 19 of the Local Government Code constitutes an
advance payment only in the event the expropriation prospers. Such deposit also has a dual
purpose: as pre-payment if the expropriation succeeds and as indemnity for damages if it is
dismissed. This advance payment, a prerequisite for the issuance of a writ of possession, should
not be confused with payment of just compensation for the taking of property even if it could be
a factor in eventually determining just compensation.16 If the proceedings fail, the money could
be used to indemnify the owner for damages.17

Here, therefore, the owners’ withdrawal of the deposit that the City made does not amount to a
waiver of the defenses they raised against the expropriation. With the dismissal of the complaint,
the amount or a portion of it could be awarded to the owners as indemnity to cover the expenses
they incurred in defending their right.

Notably, the owners neither filed a counterclaim for damages against the City nor did they seek
indemnity for their expenses after the RTC dismissed its action. Consequently, the City
government is entitled to the return of the advance deposit it made and that the owners withdrew.
But, considering the expenses that the owners needed to incur in defending themselves in the
appeals that the City instituted before the CA and this Court, an award of P50,000.00 in
attorney’s fees against the City is in order. The owners must return the rest of the P1,500,000.00
that they withdrew.

Lastly, the Court must point out that the ruling in this case is without prejudice to the right of the
City to re-file the action after it has complied with the relevant mandatory provisions of R.A.
7279 and Article 35 of the Rules and Regulations Implementing the Local Government Code.

WHEREFORE, the Court DENIES the petition and AFFIRMS the decision of the Court of
Appeals dated February 27, 2009 in CA-G.R. CV 90530 subject to the following
MODIFICATIONS:

1. Petitioner City of Manila is ordered to indemnify respondents Alegar

Corporation, Terocel Realty Corporation, and Filomena Vda. De Legarda in the
amount of P50,000.00 as attorney’s fees;

2. Respondents Alegar Corporation, Terocel Realty Corporation, and Filomena

Vda. De Legarda are in turn ordered to return the advance deposit of
P1,500,000.00 that they withdrew incident to the expropriation case; and

3. This decision is without prejudice to the right of the City of Manila to re-file
their action for expropriation after complying with what the law requires.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 168967 February 12, 2010

CITY OF ILOILO represented by HON. JERRY P. TREÑAS, City Mayor, Petitioner,

vs.
HON. LOLITA CONTRERAS-BESANA, Presiding Judge, Regional Trial Court, Branch
32, and ELPIDIO JAVELLANA, Respondents.

DECISION

DEL CASTILLO, J.:

It is arbitrary and capricious for the government to initiate expropriation proceedings, seize a
person’s property, allow the order of expropriation to become final, but then fail to justly
compensate the owner for over 25 years. This is government at its most high-handed and
irresponsible, and should be condemned in the strongest possible terms. For its failure to
properly compensate the landowner, the City of Iloilo is liable for damages.

This Petition for Certiorari under Rule 65 of the Rules of Court with a prayer for the issuance of
a temporary restraining order seeks to overturn the three Orders issued by Regional Trial Court
(RTC) of Iloilo City, Branch 32 on the following dates: December 12, 2003 (the First Assailed
Order),1 June 15, 2004 (the Second Assailed Order),2 and March 9, 2005 (the Third Assailed
Order) (the three aforementioned Orders are collectively referred to as the Assailed Orders).3

Factual Antecedents

The essential facts are not in dispute.

On September 18, 1981, petitioner filed a Complaint4 for eminent domain against private
respondent Elpidio T. Javellana (Javellana) and Southern Negros Development Bank, the latter
as mortgagee. The complaint sought to expropriate two parcels of land known as Lot Nos. 3497-
CC and 3497-DD registered in Javellana’s name under Transfer Certificate of Title (TCT) No. T-
44894 (the Subject Property) to be used as a school site for Lapaz High School.5 Petitioner
alleged that the Subject Property was declared for tax purposes in Tax Declaration No. 40080 to
have a value of P60.00 per square meter, or a total value of P43,560.00. The case was docketed
as Civil Case No. 14052 and raffled to then Court of First Instance of Iloilo, Branch 7.

On December 9, 1981, Javellana filed his Answer6 where he admitted ownership of the Subject
Property but denied the petitioner’s avowed public purpose of the sought-for expropriation, since
the City of Iloilo already had an existing school site for Lapaz High School. Javellana also
claimed that the true fair market value of his property was no less than P220.00 per square meter.
7

On May 11, 1982, petitioner filed a Motion for Issuance of Writ of Possession, alleging that it
had deposited the amount of P40,000.00 with the Philippine National Bank-Iloilo Branch.
Petitioner claimed that it was entitled to the immediate possession of the Subject Property, citing
Section 1 of Presidential Decree No. 1533,8 after it had deposited an amount equivalent to 10%
of the amount of compensation. Petitioner attached to its motion a Certification issued by
Estefanio C. Libutan, then Officer-in-Charge of the Iloilo City Treasurer’s Office, stating that
said deposit was made.9

Javellana filed an Opposition to the Motion for the Issuance of Writ of Possession10 citing the
same grounds he raised in his Answer – that the city already had a vast tract of land where its
existing school site was located, and the deposit of a mere 10% of the Subject Property’s tax
valuation was grossly inadequate.

On May 17, 1983, the trial court issued an Order11 which granted petitioner’s Motion for
Issuance of Writ of Possession and authorized the petitioner to take immediate possession of the
Subject Property. The court ruled:

Premises considered, the Motion for the Issuance of a Writ of Possession dated May 10, 1982,
filed by plaintiff is hereby granted. Plaintiff is hereby allowed to take immediate possession,
control and disposition of the properties known as Lot Nos. 3497-CC and 3497-DD x x x.12

Thereafter, a Writ of Possession13 was issued in petitioner’s favor, and petitioner was able to take
physical possession of the properties sometime in the middle of 1985. At no time has Javellana
ever denied that the Subject Property was actually used as the site of Lapaz National High
School. Aside from the filing by the private respondent of his Amended Answer on April 21,
1984,14 the expropriation proceedings remained dormant.

Sixteen years later, on April 17, 2000, Javellana filed an Ex Parte Motion/Manifestation, where
he alleged that when he finally sought to withdraw the P40,000.00 allegedly deposited by the
petitioner, he discovered that no such deposit was ever made. In support of this contention,
private respondent presented a Certification from the Philippine National Bank stating that no
deposit was ever made for the expropriation of the Subject Property.15 Private respondent thus
demanded his just compensation as well as interest. Attempts at an amicable resolution and a
negotiated sale were unsuccessful. It bears emphasis that petitioner could not present any
evidence – whether documentary or testimonial – to prove that any payment was actually made
to private respondent.

Thereafter, on April 2, 2003, private respondent filed a Complaint16 against petitioner for
Recovery of Possession, Fixing and Recovery of Rental and Damages. The case was docketed as
Civil Case No. 03-27571, and raffled to Branch 28 of the Iloilo City Regional Trial Court.
Private respondent alleged that since he had not been compensated for the Subject Property,
petitioner’s possession was illegal, and he was entitled to recovery of possession of his lots. He
prayed that petitioner be ordered to vacate the Subject Property and pay rentals amounting to
P15,000.00 per month together with moral, exemplary, and actual damages, as well as attorney’s
fees.1avvphi1

On May 15, 2003, petitioner filed its Answer,17 arguing that Javellana could no longer bring an
action for recovery since the Subject Property was already taken for public use. Rather, private
respondent could only demand for the payment of just compensation. Petitioner also maintained
that the legality or illegality of petitioner’s possession of the property should be determined in
the eminent domain case and not in a separate action for recovery of possession.

Both parties jointly moved to consolidate the expropriation case (Civil Case No. 14052) and the
case for recovery of possession (Civil Case No. 03-27571),18 which motion was granted by the
trial court in an Order dated August 26, 2003.19 On November 14, 2003, a commission was
created to determine the just compensation due to Javellana.20

On November 20, 2003, private respondent filed a Motion/Manifestation dated November 19,
2003 claiming that before a commission is created, the trial court should first order the
condemnation of the property, in accordance with the Rules of Court. Javellana likewise insisted
that the fair market value of the Subject Property should be reckoned from the date when the
court orders the condemnation of the property, and not the date of actual taking, since
petitioner’s possession of the property was questionable.21 Before petitioner could file its
Comment, the RTC issued an Order dated November 21, 2003 denying the Motion.22

Undeterred, Javellana filed on November 25, 2003, an Omnibus Motion to Declare Null and
Void the Order of May 17, 1983 and to Require Plaintiff to Deposit 10% or P254,000.00.
Javellana claimed that the amount is equivalent to the 10% of the fair market value of the Subject
Property, as determined by the Iloilo City Appraisal Committee in 2001, at the time when the
parties were trying to negotiate a settlement.23

First Assailed Order

On December 12, 2003, the RTC issued the First Assailed Order, which nullified the Order dated
May 17, 1983 (concerning the issuance of a writ of possession over the Subject Property). The
trial court ruled:

x x x the Order dated May 17, 1983 is hereby declared null and void and the plaintiff [is] hereby
ordered to immediately deposit with the PNB the 10% of the just compensation after the
Commission shall have rendered its report and have determined the value of the property not at
the time it was condemned but at the time the complaint was filed in court.24 (Emphasis ours)

Second Assailed Order

Neither party sought reconsideration of this Order.25 Nonetheless, about six months later, the
RTC issued the Second Assailed Order, which it denominated as an "Amended Order". The
Second Assailed Order was identical to the first, except that the reckoning point for just
compensation was now the "time this order was issued," which is June 15, 2004.
x x x the Order dated May 17, 1983 is hereby declared null and void and the plaintiff [is] hereby
ordered to immediately deposit with the PNB the 10% of the just compensation after the
Commission shall have rendered its report and have determined the value of the property not at
the time it was condemned but at the time this order was issued. (Underscoring in original text)

This time, petitioner filed a Motion for Reconsideration claiming that there was no legal basis for
the issuance of the Second Assailed Order.26 Javellana opposed, arguing that since the May 17,
1983 Order and the Second Assailed Order were interlocutory in character, they were always
subject to modification and revision by the court anytime.27

Third Assailed Order

After the parties were able to fully ventilate their respective positions,28 the public respondent
issued the Third Assailed Order, denying the Motion for Reconsideration, and ruling as follows:

The Order dated June 15, 2004 among other things stated that parties and counsels must be
bound by the Commissioner’s Report regarding the value of the property not at the time it was
condemned but at the time this order was issued.

This is true inasmuch as there was no deposit at the PNB and their taking was illegal.

The plaintiff thru [sic] Atty. Laurea alleged that this Court had a change of heart and issued an
Amended Order with the same wordings as the order of December 12, 2003 but this time stated
not at the time it was condemned but at the time the order was issued. Naturally, this Court in the
interest of justice, can amend its order because there was no deposit by plaintiff.

The jurisprudence cited by plaintiff that the just compensation must be determined as of the date
of the filing of the complaint is true if there was a deposit. Because there was none the filing was
not in accordance with law, hence, must be at the time the order was issued.

The allegation of defendant thru [sic] counsel that the orders attacked by plaintiff thru [sic]
counsel saying it has become final and executory are interlocutory orders subject to the control
of the Judge until final judgment is correct. Furthermore, it is in the interes[t] of justice to correct
errors.29

In the meantime, on April 15, 2004, the Commission submitted its Report, providing the
following estimates of value, but without making a proper recommendation:30

Reckoning Value per Fair Market

Basis
Point square meter Value
1981 - at the
based on three or more recorded
time the
P110.00/sqm P79,860.00 sales of similar types of land in the
complaint was
vicinity in the same year
filed
 Appraisal by Southern Negros
1981 – at the
Development Bank based on market
time the
P686.81/sqm P498,625.22 value, zonal value, appraised value
complaint was
of other banks, recent selling price
filed
of neighboring lots
Appraisal by the City Appraisal
2002 P3,500.00/sqm P2,541,000.00 Committee, Office of the City
Assessor
Private Appraisal Report (Atty.
2004 P4,200.00/sqm PhP3,049,200.00 Roberto Cal Catolico dated April 6,
2004)

Hence, the present petition.

Petitioner’s Arguments

Petitioner is before us claiming that (1) the trial court gravely abused its discretion amounting to
lack or excess of jurisdiction in overturning the Order dated May 17, 1983, which was already a
final order; and (2) just compensation for the expropriation should be based on the Subject
Property’s fair market value either at the time of taking or filing of the complaint.

Private Respondent’s Arguments

Private respondent filed his Comment on October 3, 2005,31 arguing that (1) there was no error
of jurisdiction correctible by certiorari; and (2) that the Assailed Orders were interlocutory
orders that were subject to amendment and nullification at the discretion of the court.

Issues

There are only two questions we need answer, and they are not at all novel. First, does an order
of expropriation become final? Second, what is the correct reckoning point for the determination
of just compensation?

Our Ruling

Expropriation proceedings have two stages. The first phase ends with an order of dismissal, or a
determination that the property is to be acquired for a public purpose.32 Either order will be a
final order that may be appealed by the aggrieved party.33 The second phase consists of the
determination of just compensation. 34 It ends with an order fixing the amount to be paid to the
landowner. Both orders, being final, are appealable.35

An order of condemnation or dismissal is final, resolving the question of whether or not the
plaintiff has properly and legally exercised its power of eminent domain.36 Once the first order
becomes final and no appeal thereto is taken, the authority to expropriate and its public use can
no longer be questioned.371avvphi1

Javellana did not bother to file an appeal from the May 17, 1983 Order which granted
petitioner’s Motion for Issuance of Writ of Possession and which authorized petitioner to take
immediate possession of the Subject Property. Thus, it has become final, and the petitioner’s
right to expropriate the property for a public use is no longer subject to review. On the first
question, therefore, we rule that the trial court gravely erred in nullifying the May 17, 1983
Order.

We now turn to the reckoning date for the determination of just compensation. Petitioner claims
that the computation should be made as of September 18, 1981, the date when the expropriation
complaint was filed. We agree.

In a long line of cases, we have constantly affirmed that:

x x x just compensation is to be ascertained as of the time of the taking, which usually coincides
with the commencement of the expropriation proceedings. Where the institution of the action
precedes entry into the property, the just compensation is to be ascertained as of the time of the
filing of the complaint.38

When the taking of the property sought to be expropriated coincides with the commencement of
the expropriation proceedings, or takes place subsequent to the filing of the complaint for
eminent domain, the just compensation should be determined as of the date of the filing of the
complaint.39 Even under Sec. 4, Rule 67 of the 1964 Rules of Procedure, under which the
complaint for expropriation was filed, just compensation is to be determined "as of the date of
the filing of the complaint." Here, there is no reason to depart from the general rule that the point
of reference for assessing the value of the Subject Property is the time of the filing of the
complaint for expropriation.40

Private respondent claims that the reckoning date should be in 2004 because of the "clear
injustice to the private respondent who all these years has been deprived of the beneficial use of
his properties."

We commiserate with the private respondent. The school was constructed and has been in
operation since 1985. Petitioner and the residents of Iloilo City have long reaped the benefits of
the property. However, non-payment of just compensation does not entitle the private
landowners to recover possession of their expropriated lot.41

Concededly, Javellana also slept on his rights for over 18 years and did not bother to check with
the PNB if a deposit was actually made by the petitioner. Evidently, from his inaction in failing
to withdraw or even verify the amounts purportedly deposited, private respondent not only
accepted the valuation made by the petitioner, but also was not interested enough to pursue the
expropriation case until the end. As such, private respondent may not recover possession of the
Subject Property, but is entitled to just compensation.42 It is high time that private respondent be
paid what was due him after almost 30 years.
We stress, however, that the City of Iloilo should be held liable for damages for taking private
respondent’s property without payment of just compensation. In Manila International Airport
Authority v. Rodriguez,43 the Court held that a government agency’s prolonged occupation of
private property without the benefit of expropriation proceedings undoubtedly entitled the
landowner to damages:

Such pecuniary loss entitles him to adequate compensation in the form of actual or
compensatory damages, which in this case should be the legal interest (6%) on the value of
the land at the time of taking, from said point up to full payment by the MIAA. 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 the taking
x x x.

xxxx

For more than twenty (20) years, the MIAA occupied the subject lot without the benefit of
expropriation proceedings and without the MIAA exerting efforts to ascertain ownership of the
lot and negotiating with any of the owners of the property. To our mind, these are wanton and
irresponsible acts which should be suppressed and corrected. Hence, the award of
exemplary damages and attorneys fees is in order. x x x.44 (Emphasis supplied)

WHEREFORE, the petition is GRANTED. The Orders of the Regional Trial Court of Iloilo
City, Branch 32 in Civil Case No. 14052 and Civil Case No. 03-27571 dated December 12,
2003, June 15, 2004, and March 9, 2005 are hereby ANNULLED and SET ASIDE.

The Regional Trial Court of Iloilo City, Branch 32 is DIRECTED to immediately determine the
just compensation due to private respondent Elpidio T. Javellana based on the fair market value
of the Subject Property at the time Civil Case No. 14052 was filed, or on September 18, 1981
with interest at the legal rate of six percent (6%) per annum from the time of filing until full
payment is made.

The City of Iloilo is ORDERED to pay private respondent the amount of P200,000.00 as
exemplary damages.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G. R. No. 185124 January 25, 2012

REPUBLIC OF THE PHILIPPINES, represented by the NATIONAL IRRIGATION

ADMINISTRATION (NIA), Petitioner,
vs.
RURAL BANK OF KABACAN, INC., LITTIE SARAH A. AGDEPPA, LEOSA
NANETTE AGDEPPA and MARCELINO VIERNES, MARGARITA TABOADA,
PORTIA CHARISMA RUTH ORTIZ, represented by LINA ERLINDA A. ORTIZ and
MARIO ORTIZ, JUAN MAMAC and GLORIA MATAS, Respondents.

DECISION

SERENO, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking the reversal of the 12 August 2008 Court of Appeals (CA) Decision and 22 October
2008 Resolution in CA-G.R. CV No. 65196.

The assailed issuances affirmed with modification the 31 August 1999 "Judgment" promulgated
by the Regional Trial Court (RTC), Branch 22, Judicial Region, Kabacan, Cotabato. The RTC
had fixed the just compensation for the value of the land and improvements thereon that were
expropriated by petitioner, but excluded the value of the excavated soil. Petitioner Republic of
the Philippines is represented in this case by the National Irrigation Authority (NIA).

The Facts

NIA is a government-owned-and-controlled corporation created under Republic Act No. (R.A.)

3601 on 22 June 1963. It is primarily responsible for irrigation development and management in
the country. Its charter was amended by Presidential Decree (P.D.) 552 on 11 September 1974
and P.D. 1702 on 17 July 1980. To carry out its purpose, NIA was specifically authorized under
P.D. 552 to exercise the power of eminent domain.1

NIA needed some parcels of land for the purpose of constructing the Malitubog-Marigadao
Irrigation Project. On 08 September 1994, it filed with the RTC of Kabacan, Cotabato a
Complaint for the expropriation of a portion of three (3) parcels of land covering a total of
14,497.91 square meters.2 The case was docketed as Special Civil Case No. 61 and was assigned
to RTC-Branch 22. The affected parcels of land were the following:

1) Lot No. 3080 – covered by Transfer Certificate of Title (TCT) No. T-61963 and
registered under the Rural Bank of Kabacan
 2) Lot No. 455 – covered by TCT No. T-74516 and registered under the names of RG
May, Ronald and Rolando, all surnamed Lao

3) Lot No. 3039 – registered under the name of Littie Sarah Agdeppa3

On 11 July 1995, NIA filed an Amended Complaint to include Leosa Nanette A. Agdeppa and
Marcelino Viernes as registered owners of Lot No. 3039.4

On 25 September 1995, NIA filed a Second Amended Complaint to allege properly the area
sought to be expropriated, the exact address of the expropriated properties and the owners
thereof. NIA further prayed that it be authorized to take immediate possession of the properties
after depositing with the Philippine National Bank the amount of P 19,246.58 representing the
provisional value thereof.5

On 31 October 1995, respondents filed their Answer with Affirmative and Special Defenses and
Counterclaim.6 They alleged, inter alia, that NIA had no authority to expropriate portions of their
land, because it was not a sovereign political entity; that it was not necessary to expropriate their
properties, because there was an abandoned government property adjacent to theirs, where the
project could pass through; that Lot No. 3080 was no longer owned by the Rural Bank of
Kabacan; that NIA’s valuation of their expropriated properties was inaccurate because of the
improvements on the land that should have placed its value at P 5 million; and that NIA never
negotiated with the landowners before taking their properties for the project, causing permanent
and irreparable damages to their properties valued at P 250,000.7

On 11 September 1996, the RTC issued an Order forming a committee tasked to determine the
fair market value of the expropriated properties to establish the just compensation to be paid to
the owners. The committee was composed of the Clerk of Court of RTC Branch 22 as
chairperson and two (2) members of the parties to the case.8

On 20 September 1996, in response to the expropriation Complaint, respondents-intervenors

Margarita Tabaoda, Portia Charisma Ruth Ortiz, Lina Erlinda Ortiz, Mario Ortiz, Juan Mamac
and Gloria Matas filed their Answer-in-Intervention with Affirmative and Special Defenses and
Counter-Claim. They essentially adopted the allegations in the Answer of the other respondents
and pointed out that Margarita Tabaoda and Portia Charisma Ruth Ortiz were the new owners of
Lot No. 3080, which the two acquired from the Rural Bank of Kabacan. They further alleged that
the four other respondents-intervenors were joint tenants-cultivators of Lot Nos. 3080 and 3039.9

On 10 October 1996, the lower court issued an Order stating it would issue a writ of possession
in favor of NIA upon the determination of the fair market value of the properties, subject of the
expropriation proceedings.10 The lower court later amended its ruling and, on 21 October 1996,
issued a Writ of Possession in favor of NIA.11

On 15 October 1996, the committee submitted a Commissioners’ Report12 to the RTC stating the
following observations:

In the process of ocular inspection, the following were jointly observed:

 1) The area that was already occupied is 6x200 meters which is equivalent to 1,200
square meters;

2) The area which is to be occupied is 18,930 square meters, more or less;

3) That the area to be occupied is fully planted by gmelina trees with a spacing of 1x1
meters;

4) That the gmelina tress found in the area already occupied and used for [the] road is
planted with gmelina with spacing of 2x2 and more or less one (1) year old;

5) That the gmelina trees found in the area to be occupied are already four (4) years old;

6) That the number of banana clumps (is) two hundred twenty (220);

7) That the number of coco trees found (is) fifteen (15).13

The report, however, stated that the committee members could not agree on the market value of
the subject properties and recommended the appointment of new independent commissioners to
replace the ones coming from the parties only.14 On 22 October 1996, the RTC issued an Order15
revoking the appointments of Atty. Agdeppa and Engr. Mabang as members of the committee
and, in their stead, appointed Renato Sambrano, Assistant Provincial Assessor of the Province of
Cotabato; and Jack Tumacmol, Division Chief of the Land Bank of the Philippines–Kidapawan
Branch.16

On 25 November 1996, the new committee submitted its Commissioners’ Report to the lower
court. The committee had agreed that the fair market value of the land to be expropriated should
be P 65 per square meter based on the zonal valuation of the Bureau of Internal Revenue (BIR).
As regards the improvement on the properties, the report recommended the following
compensation:

a. P 200 for each gmelina tree that are more than four (4) years old

b. P 150 for each gmelina tree that are more than one (1) year old

c. P 164 for each coco tree

d. P 270 for each banana clump17

On 03 December 1997, the committee submitted to the RTC another report, which had adopted
the first Committee Report, as well as the former’s 25 November 1996 report. However, the
committee added to its computation the value of the earthfill excavated from portions of Lot Nos.
3039 and 3080.18 Petitioner objected to the inclusion of the value of the excavated soil in the
computation of the value of the land.19

The Ruling of the Trial Court

On 31 August 1999, the RTC promulgated its "Judgment,"20 the dispositive portion of which
reads:

WHEREFORE, IN VIEW of all the foregoing considerations, the court finds and so holds that
the commissioners have arrived at and were able to determine the fair market value of the
properties. The court adopts their findings, and orders:

1. That 18,930 square meters of the lands owned by the defendants is hereby expropriated
in favor of the Republic of the Philippines through the National Irrigation Administration;

2. That the NIA shall pay to the defendants the amount of P 1,230,450 for the 18,930
square meters expropriated in proportion to the areas so expropriated;

3. That the NIA shall pay to the defendant-intervenors, owners of Lot No. 3080, the sum
of P 5,128,375.50, representing removed earthfill;

4. That the NIA shall pay to the defendants, owners of Lot No. 3039, the sum of
P1,929,611.30 representing earthfill;

5. To pay to the defendants the sum of P 60,000 for the destroyed G-melina trees (1 year
old);

6. To pay to the defendants the sum of P 3,786,000.00 for the 4-year old G-melina trees;

7. That NIA shall pay to the defendants the sum of P 2,460.00 for the coconut trees;

8. That all payments intended for the defendant Rural Bank of Kabacan shall be given to
the defendants and intervenors who have already acquired ownership over the land titled
in the name of the Bank.21

NIA, through the Office of the Solicitor General (OSG), appealed the Decision of the RTC to the
CA, which docketed the case as CA-G.R. CV No. 65196. NIA assailed the trial court’s adoption
of the Commissioners’ Report, which had determined the just compensation to be awarded to the
owners of the lands expropriated. NIA also impugned as error the RTC’s inclusion for
compensation of the excavated soil from the expropriated properties. Finally, it disputed the trial
court’s Order to deliver the payment intended for the Rural Bank of Kabacan to defendants-
intervenors, who allegedly acquired ownership of the land still titled in the name of the said rural
bank.22

The Ruling of the Court of Appeals

On 12 August 2008, the CA through its Twenty-First (21st) Division, promulgated a Decision23
affirming with modification the RTC Decision. It ruled that the committee tasked to determine
the fair market value of the properties and improvements for the purpose of arriving at the just
compensation, properly performed its function. The appellate court noted that the committee
members had conducted ocular inspections of the area surrounding the expropriated properties
and made their recommendations based on official documents from the BIR with regard to the
zonal valuations of the affected properties.24 The CA observed that, as far as the valuation of the
improvements on the properties was concerned, the committee members took into consideration
the provincial assessor’s appraisal of the age of the trees, their productivity and the inputs
made.25 The appellate court further noted that despite the Manifestation of NIA that it be allowed
to present evidence to rebut the recommendation of the committee on the valuations of the
expropriated properties, NIA failed to do so.26

The assailed CA Decision, however, deleted the inclusion of the value of the soil excavated from
the properties in the just compensation. It ruled that the property owner was entitled to
compensation only for the value of the property at the time of the taking.27 In the construction of
irrigation projects, excavations are necessary to build the canals, and the excavated soil cannot be
valued separately from the land expropriated. Thus, it concluded that NIA, as the new owner of
the affected properties, had the right to enjoy and make use of the property, including the
excavated soil, pursuant to the latter’s objectives.28

Finally, the CA affirmed the trial court’s ruling that recognized defendants-intervenors Margarita
Tabaoda and Portia Charisma Ruth Ortiz as the new owners of Lot No. 3080 and held that they
were thus entitled to just compensation. The appellate court based its conclusion on the non-
participation by the Rural Bank of Kabacan in the expropriation proceedings and the latter’s
Manifestation that it no longer owned Lot No. 3080.29

On 11 September 2008, the NIA through the OSG filed a Motion for Reconsideration of the 12
August 2008 Decision, but that motion was denied.30

Aggrieved by the appellate court’s Decision, NIA now comes to this Court via a Petition for
Review on Certiorari under Rule 45.

The Issues

The following are the issues proffered by petitioner:

The Court of appeals seriously erred in affirming the trial court’s finding of just compensation of
the land and the improvements thereon based on the report of the commissioners.

The court of appeals erred in ruling that the payment of just compensation for lot no. 3080
should be made to respondents margarita taboada and Portia charisma ruth Ortiz.31

The Court’s Ruling

On the first issue, the Petition is not meritorious.

In expropriation proceedings, just compensation is defined as the full and fair equivalent of the
property taken from its owner by the expropriator. The measure is not the taker's gain, but the
owner's loss. The word "just" is used to intensify the meaning of the word "compensation" and to
convey thereby the idea that the equivalent to be rendered for the property to be taken shall be
real, substantial, full and ample.32 The constitutional limitation of "just compensation" is
considered to be a sum equivalent to the market value of the property, broadly defined as the
price fixed by the seller in open market in the usual and ordinary course of legal action and
competition; or the fair value of the property; as between one who receives and one who desires
to sell it, fixed at the time of the actual taking by the government.33

In the instant case, we affirm the appellate court’s ruling that the commissioners properly
determined the just compensation to be awarded to the landowners whose properties were
expropriated by petitioner.

The records show that the trial court dutifully followed the procedure under Rule 67 of the 1997
Rules of Civil Procedure when it formed a committee that was tasked to determine the just
compensation for the expropriated properties. The first set of committee members made an
ocular inspection of the properties, subject of the expropriation. They also determined the exact
areas affected, as well as the kinds and the number of improvements on the properties.34 When
the members were unable to agree on the valuation of the land and the improvements thereon,
the trial court selected another batch of disinterested members to carry out the task of
determining the value of the land and the improvements.

The new committee members even made a second ocular inspection of the expropriated areas.
They also obtained data from the BIR to determine the zonal valuation of the expropriated
properties, interviewed the adjacent property owners, and considered other factors such as
distance from the highway and the nearby town center.35 Further, the committee members also
considered Provincial Ordinance No. 173, which was promulgated by the Province of Cotabato
on 15 June 1999, and which provide for the value of the properties and the improvements for
taxation purposes.36

We can readily deduce from these established facts that the committee members endeavored a
rigorous process to determine the just compensation to be awarded to the owners of the
expropriated properties. We cannot, as petitioner would want us to, oversimplify the process
undertaken by the committee in arriving at its recommendations, because these were not based
on mere conjectures and unreliable data.

In National Power Corporation v. Diato-Bernal,37 this Court emphasized that the "just"-ness of
the compensation could only be attained by using reliable and actual data as bases for fixing the
value of the condemned property. The reliable and actual data we referred to in that case were
the sworn declarations of realtors in the area, as well as tax declarations and zonal valuation from
the BIR. In disregarding the Committee Report assailed by the National Power Corporation in
the said case, we ruled thus:

It is evident that the above conclusions are highly speculative and devoid of any actual and
reliable basis. First, the market values of the subject property’s neighboring lots were mere
estimates and unsupported by any corroborative documents, such as sworn declarations of
realtors in the area concerned, tax declarations or zonal valuation from the Bureau of Internal
Revenue for the contiguous residential dwellings and commercial establishments. The report also
failed to elaborate on how and by how much the community centers and convenience facilities
enhanced the value of respondent’s property. Finally, the market sales data and price listings
alluded to in the report were not even appended thereto.

As correctly invoked by NAPOCOR, a commissioners’ report of land prices which is not based
on any documentary evidence is manifestly hearsay and should be disregarded by the court.

The trial court adopted the flawed findings of the commissioners hook, line, and sinker. It did not
even bother to require the submission of the alleged "market sales data" and "price listings."
Further, the RTC overlooked the fact that the recommended just compensation was gauged as of
September 10, 1999 or more than two years after the complaint was filed on January 8, 1997. It
is settled that just compensation is to be ascertained as of the time of the taking, which usually
coincides with the commencement of the expropriation proceedings. Where the institution of the
action precedes entry into the property, the just compensation is to be ascertained as of the time
of the filing of the complaint. Clearly, the recommended just compensation in the
commissioners’ report is unacceptable.38

In the instant case, the committee members based their recommendations on reliable data and, as
aptly noted by the appellate court, considered various factors that affected the value of the land
and the improvements.39

Petitioner, however, strongly objects to the CA’s affirmation of the trial court’s adoption of
Provincial Ordinance No. 173. The OSG, on behalf of petitioner, strongly argues that the
recommendations of the committee formed by the trial court were inaccurate. The OSG contends
that the ordinance reflects the 1999 market values of real properties in the Province of Cotabato,
while the actual taking was made in 1996.40

We are not persuaded.

We note that petitioner had ample opportunity to rebut the testimonial, as well as documentary
evidence presented by respondents when the case was still on trial. It failed to do so, however.
The issue raised by petitioner was adequately addresses by the CA’s assailed Decision in this
wise:

A thorough scrutiny of the records reveals that the second set of Commissioners, with Atty.
Marasigan still being the Chairperson and Mr. Zambrano and Mr. Tomacmol as members, was
not arbitrary and capricious in performing the task assigned to them. We note that these
Commissioners were competent and disinterested persons who were handpicked by the court a
quo due to their expertise in appraising the value of the land and the improvements thereon in the
province of Cotabato. They made a careful study of the area affected by the expropriation,
mindful of the fact that the value of the land and its may be affected by many factors. The duly
appointed Commissioners made a second ocular inspection of the subject area on 4 September
1997; went to the BIR office in order to get the BIR zonal valuation of the properties located in
Carmen, Cotabato; interviewed adjacent property owners; and took into consideration various
factors such as the location of the land which is just less than a kilometer away from the
Poblacion and half a kilometer away from the highway and the fact that it is near a military
reservation. With regard to the improvements, the Commissioners took into consideration the
valuation of the Provincial Assessor, the age of the trees, and the inputs and their productivity.

Thus, it could not be said that the schedule of market values in Ordinance No. 173 was the sole
basis of the Commissioners in arriving at their valuation. Said ordinance merely gave credence to
their valuation which is comparable to the current price at that time. Besides, Mr. Zambrano
testified that the date used as bases for Ordinance No. 173 were taken from 1995 to 1996.41

Moreover, factual findings of the CA are generally binding on this Court. The rule admits of
exceptions, though, such as when the factual findings of the appellate court and the trial court are
contradictory, or when the findings are not supported by the evidence on record.42 These
exceptions, however, are not present in the instant case.

Thus, in the absence of contrary evidence, we affirm the findings of the CA, which sustained the
trial court’s Decision adopting the committee’s recommendations on the just compensation to be
awarded to herein respondents.

We also uphold the CA ruling, which deleted the inclusion of the value of the excavated soil in
the payment for just compensation. There is no legal basis to separate the value of the excavated
soil from that of the expropriated properties, contrary to what the trial court did. In the context of
expropriation proceedings, the soil has no value separate from that of the expropriated land. Just
compensation ordinarily refers to the value of the land to compensate for what the owner actually
loses. Such value could only be that which prevailed at the time of the taking.

In National Power Corporation v. Ibrahim, et al.,43 we held that rights over lands are indivisible,
viz:

[C]onsequently, the CA’s findings which upheld those of the trial court that respondents owned
and possessed the property and that its substrata was possessed by petitioner since 1978 for the
underground tunnels, cannot be disturbed. Moreover, the Court sustains the finding of the lower
courts that the sub-terrain portion of the property similarly belongs to respondents. This
conclusion is drawn from Article 437 of the Civil Code which provides:

ART. 437. The owner of a parcel of land is the owner of its surface and of everything under it,
and he can construct thereon any works or make any plantations and excavations which he may
deem proper, without detriment to servitudes and subject to special laws and ordinances. He
cannot complain of the reasonable requirements of aerial navigation.

Thus, the ownership of land extends to the surface as well as to the subsoil under it.

xxx xxx xxx

Registered landowners may even be ousted of ownership and possession of their properties in the
event the latter are reclassified as mineral lands because real properties are characteristically
indivisible. For the loss sustained by such owners, they are entitled to just compensation under
the Mining Laws or in appropriate expropriation proceedings.
Moreover, petitioner’s argument that the landowners’ right extends to the sub-soil insofar as
necessary for their practical interests serves only to further weaken its case. The theory would
limit the right to the sub-soil upon the economic utility which such area offers to the surface
owners. Presumably, the landowners’ right extends to such height or depth where it is possible
for them to obtain some benefit or enjoyment, and it is extinguished beyond such limit as there
would be no more interest protected by law.

Hence, the CA correctly modified the trial court’s Decision when it ruled thus:

We agree with the OSG that NIA, in the construction of irrigation projects, must necessarily
make excavations in order to build the canals. Indeed it is preposterous that NIA will be made to
pay not only for the value of the land but also for the soil excavated from such land when such
excavation is a necessary phase in the building of irrigation projects. That NIA will make use of
the excavated soil is of no moment and is of no concern to the landowner who has been paid the
fair market value of his land. As pointed out by the OSG, the law does not limit the use of the
expropriated land to the surface area only. Further, NIA, now being the owner of the
expropriated property, has the right to enjoy and make use of the property in accordance with its
mandate and objectives as provided by law. To sanction the payment of the excavated soil is to
allow the landowners to recover more than the value of the land at the time when it was taken,
which is the true measure of the damages, or just compensation, and would discourage the
construction of important public improvements.44

On the second issue, the Petition is meritorious.

The CA affirmed the ruling of the trial court, which had awarded the payment of just
compensation – intended for Lot No. 3080 registered in the name of the Rural Bank of Kabacan
– to the defendants-intervenors on the basis of the non-participation of the rural bank in the
proceedings and the latter’s subsequent Manifestation that it was no longer the owner of that lot.
The appellate court erred on this matter.

It should be noted that eminent domain cases involve the expenditure of public funds.45 In this
kind of proceeding, we require trial courts to be more circumspect in their evaluation of the just
compensation to be awarded to the owner of the expropriated property.46 Thus, it was imprudent
for the appellate court to rely on the Rural Bank of Kabacan’s mere declaration of non-
ownership and non-participation in the expropriation proceeding to validate defendants-
intervenors’ claim of entitlement to that payment.

The law imposes certain legal requirements in order for a conveyance of real property to be
valid.1âwphi1 It should be noted that Lot No. 3080 is a registered parcel of land covered by TCT
No. T-61963. In order for the reconveyance of real property to be valid, the conveyance must be
embodied in a public document47 and registered in the office of the Register of Deeds where the
property is situated.48

We have scrupulously examined the records of the case and found no proof of conveyance or
evidence of transfer of ownership of Lot No. 3080 from its registered owner, the Rural Bank of
Kabacan, to defendants-intervenors. As it is, the TCT is still registered in the name of the said
rural bank. It is not disputed that the bank did not participate in the expropriation proceedings,
and that it manifested that it no longer owned Lot No. 3080. The trial court should have
nevertheless required the rural bank and the defendants-intervenors to show proof or evidence
pertaining to the conveyance of the subject lot. The court cannot rely on mere inference,
considering that the payment of just compensation is intended to be awarded solely owner based
on the latter’s proof of ownership.

The trial court should have been guided by Rule 67, Section 9 of the 1997 Rules of Court, which
provides thus:

SEC. 9. Uncertain ownership; conflicting claims. — If the ownership of the property taken is
uncertain, or there are conflicting claims to any part thereof, the court may order any sum or
sums awarded as compensation for the property to be paid to the court for the benefit of the
person adjudged in the same proceeding to be entitled thereto. But the judgment shall require the
payment of the sum or sums awarded to either the defendant or the court before the plaintiff can
enter upon the property, or retain it for the public use or purpose if entry has already been made.

Hence, the appellate court erred in affirming the trial court’s Order to award payment of just
compensation to the defendants-intervenors. There is doubt as to the real owner of Lot No. 3080.
Despite the fact that the lot was covered by TCT No. T-61963 and was registered under its name,
the Rural Bank of Kabacan manifested that the owner of the lot was no longer the bank, but the
defendants-intervenors; however, it presented no proof as to the conveyance thereof. In this
regard, we deem it proper to remand this case to the trial court for the reception of evidence to
establish the present owner of Lot No. 3080 who will be entitled to receive the payment of just
compensation.

WHEREFORE, the Petition is PARTLY GRANTED. The 12 August 2008 CA Decision in CA-
G.R. CV No. 65196, awarding just compensation to the defendants as owners of the expropriated
properties and deleting the inclusion of the value of the excavated soil, is hereby AFFIRMED
with MODIFICATION. The case is hereby REMANDED to the trial court for the reception of
evidence to establish the present owner of Lot No. 3080. No pronouncements as to cost.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 156093 February 2, 2007

NATIONAL POWER CORP., Petitioner,

vs.
SPOUSES NORBERTO AND JOSEFINA DELA CRUZ, METROBANK, Dasmariñas,
Cavite Branch, REYNALDO FERRER, and S.K. DYNAMICS MANUFACTURER
CORP., Respondents.

DECISION

VELASCO, JR., J.:

The Case

In this petition for review under Rule 45 of the Rules of Court, petitioner National Power
Corporation (NAPOCOR) seeks to annul and set aside the November 18, 2002 Decision1 of the
Court of Appeals (CA) in CA-G.R. CV No. 67446, which affirmed the December 28, 1999
Order2 of the Imus, Cavite Regional Trial Court (RTC), Branch XX in Civil Case No. 1816-98,
which fixed the fair market value of the expropriated lots at PhP 10,000.00 per square meter.

The Facts

Petitioner NAPOCOR is a government-owned and controlled corporation created under Republic

Act No. 6395, as amended, with the mandate of developing hydroelectric power, producing
transmission lines, and developing hydroelectric power throughout the Philippines. NAPOCOR
decided to acquire an easement of right-of-way over portions of land within the areas of
Dasmariñas and Imus, Cavite for the construction and maintenance of the proposed Dasmariñas-
Zapote 230 kV Transmission Line Project.3

On November 27, 1998, petitioner filed a Complaint4 for eminent domain and expropriation of
an easement of right-of-way against respondents as registered owners of the parcels of land
sought to be expropriated, which were covered by Transfer Certificates of Title (TCT) Nos. T-
313327, T-671864, and T-454278. The affected areas were 51.55, 18.25, and 14.625 square
meters, respectively, or a total of 84.425 square meters.

After respondents filed their respective answers to petitioner’s Complaint, petitioner deposited
PhP 5,788.50 to cover the provisional value of the land in accordance with Section 2, Rule 67 of
the Rules of Court.5 Then, on February 25, 1999, petitioner filed an Urgent Ex-Parte Motion for
the Issuance of a Writ of Possession, which the trial court granted in its March 9, 1999 Order.
The trial court issued a Writ of Possession over the lots owned by respondents spouses de la
Cruz and respondent Ferrer on March 10, 1999 and April 12, 1999, respectively.

However, the trial court dropped the Dela Cruz spouses and their mortgagee, Metrobank, as
parties-defendants in its May 11, 1999 Order,6 in view of the Motion to Intervene filed by
respondent/intervenor Virgilio M. Saulog, who claimed ownership of the land sought to be
expropriated from respondents spouses Dela Cruz.

On June 24, 1999, the trial court terminated the pre-trial in so far as respondent Ferrer was
concerned, considering that the sole issue was the amount of just compensation, and issued an
Order directing the constitution of a Board of Commissioners with respect to the property of
respondent S.K. Dynamics. The trial court designated Mr. Lamberto C. Parra, Cavite Provincial
Assessor, as chairman, while petitioner nominated the Municipal Assessor of Dasmariñas, Mr.
Regalado T. Andaya, as member. Respondent S.K. Dynamics did not nominate any
commissioner.

As to the just compensation for the property of Saulog, successor-in-interest of the Dela Cruz
spouses, the trial court ordered the latter and petitioner to submit their compromise agreement.

The commissioners conducted an ocular inspection of S.K. Dynamics’ property, and on October
8, 1999, they submitted a report to the trial court, with the following pertinent findings:

In arriving our [sic] estimate of values our studies and analysis include the following:

I. PROPERTY LOCATION

As shown to us on-site during our ocular inspection, the appraised property is land
only, identified as the area affected by the construction of the National Power
Corporation (NPC) Dasmariñas-Zapote 230KV Transmission Lines Project,
located within Barangay Salitran, Dasmariñas, Cavite registered in the name of
S.K. Dynamic[s] Manufacture[r], Corp., under Transfer Certificate of Title No. T-
454278.

II. NEIGHBORHOOD DESCRIPTION

The neighborhood particularly in the immediate vicinity is within a mixed

residential and commercial area, situated in the northern section of the
Municipality of Dasmariñas which was transversed [sic] by Gen. Emilio
Aguinaldo Highway [where] several residential subdivisions and commercial
establishment[s] are located.

Considered as some of the important improvements [on] the vicinity are (within
1.5 radius)

Orchard Golf and Country Club

 Golden City Subdivision

Southfield Subdivisions

Arcontica Sports Complex

Max’s Restaurant

Waltermart Shopping Mall

UMC Medical Center

Several savings and Commercial Banks as well as several Gasoline

stations.

Community centers such as, [sic] churches, public markets, shopping malls, banks
and gasoline stations are easily accessible from the subject real properties.

Convenience facilities such as electricity, telephone service as well as pipe

potable water supply system are all available along Gen. Emilio Aguinaldo
Highway.

Public transportation consisting of passenger jeepneys and buses as well taxicabs

are [sic] regularly available along Gen. E. Emilio Aguinaldo Highway [sic].

xxxx

IV. HIGHEST AND MOST PROFITABLE USE

xxxx

The subject property is situated within the residential/commercial zone and considering
the area affected and taking into consideration, their location, shape, lot topography,
accessibility and the predominant uses of properties in the neighborhood, as well as the
trend of land developments in the vicinity, we are on the opinion that the highest and
most profitable use of the property is good for residential and commercial purposes.

V. VALUATION OF LAND MARKET DATA

xxxx

Based on the analysis of data gathered and making the proper adjustments with respect to the
location, area, shape, accessibility, and the highest and best use of the subject properties, it is the
opinion of the herein commissioners that the fair market value of the subject real properties is
P10,000.00 per square meter, as of this date, October 05, 1999.7
Thus, both commissioners recommended that the property of S.K. Dynamics to be expropriated
by petitioner be valued at PhP 10,000.00 per square meter.

The records show that the commissioners did not afford the parties the opportunity to introduce
evidence in their favor, nor did they conduct hearings before them. In fact, the commissioners
did not issue notices to the parties to attend hearings nor provide the concerned parties the
opportunity to argue their respective causes.

Upon the submission of the commissioners’ report, petitioner was not notified of the completion
or filing of it nor given any opportunity to file its objections to it.

On December 1, 1999, respondent Ferrer filed a motion adopting in toto the commissioners’
report with respect to the valuation of his property.8 On December 28, 1999, the trial court
consequently issued the Order approving the commissioners’ report, and granted respondent
Ferrer’s motion to adopt the subject report. Subsequently, the just compensation for the disparate
properties to be expropriated by petitioner for its project was uniformly pegged at PhP 10,000.00
per square meter.

Incidentally, on February 11, 2000, respondent S.K. Dynamics filed a motion informing the trial
court that in addition to the portion of its property covered by TCT No. T-454278 sought to be
expropriated by petitioner, the latter also took possession of an 8.55-square meter portion of S.K.
Dynamics’ property covered by TCT No. 503484 for the same purpose––to acquire an easement
of right-of-way for the construction and maintenance of the proposed Dasmariñas-Zapote 230 kV
Transmission Line Project. Respondent S.K. Dynamics prayed that said portion be included in
the computation of the just compensation to be paid by petitioner.

On the same date, the Imus, Cavite RTC granted S.K. Dynamics’ motion to have the 8.55-square
meter portion of its property included in the computation of just compensation.1awphi1.net

The Ruling of the Regional Trial Court

As previously stated, in its December 28, 1999 Order, the trial court fixed the just compensation
to be paid by petitioner at PhP 10,000.00 per square meter. The relevant portion of the said Order
reads as follows:

On October 8, 1999, a Commissioner’s Valuation Report was submitted in Court by the

Provincial Assessor of Cavite and by the Municipal Assessor of Dasmariñas, Cavite. Quoting
from said Report, thus:

"Based on the analysis of data gathered and making the proper adjustments with respect to
location, area, shape, accessibility, and the highest and best use of the subject properties, it is the
opinion of herein commissioners that the fair market value of the subject real properties is
₧10,000.00 per square meter, as of this date, October 05, 1999."
Finding the opinion of the Commissioners to be in order, this Court approves the same.
Accordingly, the Motion filed by [respondent] Reynaldo Ferrer adopting said valuation report is
granted.

SO ORDERED. 9

On January 20, 2000, petitioner filed a Motion for Reconsideration of the abovementioned
Order, but said motion was denied in the trial court’s March 23, 2000 Order, which states that:

The basis of [petitioner] in seeking to set aside the Order dated December 28, 1999 is its claim
that the Commissioners’ Report fixing the just compensation at P10,000.00 per square meter is
exorbitant, unjust and unreasonable. To support its contention, [petitioner] invoked Provincial
Appraisal Committee Report No. 08-95 dated October 25, 1995 which set the just compensation
of lots along Gen. Aguinaldo Highway at P3,000.00 per sq.m. only.

By way of opposition, [respondent] Dynamics countered that the valuation of a lot under
expropriation is reckoned at the time of its taking by the government. And since in the case at
bar, the writ of possession was issued on March 10, 1999, the price or value for 1999 must be the
one to be considered.

We find for the defendant.

The PAR Resolution alluded to by [petitioner] was passed in 1995 or four (4) years [before] the
lot in question was taken over by the government. This explains why the price or cost of the land
has considerably increased. Besides, the valuation of P10,000.00 per sq.m. was the one
recommended by the commissioner designated by [petitioner] itself and concurred in by the
Provincial Assessor of Cavite.

Be that as it may, the Motion for Reconsideration is denied.

SO ORDERED.10

The Ruling of the Court of Appeals

Unsatisfied with the amount of just compensation, petitioner filed an appeal before the CA. In
resolving the appeal, the CA made the following findings:

We find nothing on record which would warrant the reversal of the Order dated December 28,
1999 of the court a quo.

[Petitioner] submits that the order of the court a quo adopting the Commissioners [sic] Valuation
Report, fixing the just compensation for the subject lots in the amount of P10,000.00 per square
meter is exhorbitant [sic], highly speculative and without any basis. In support thereto,
[petitioner] presented before the court a quo the Provincial Appraisal Committee of Cavite
Resolution No. 08-95 x x x which fixed the fair market value of lots located along Gen.
Aguinaldo Highway, Dasmariñas, Cavite, which incidentally includes the lots subject of this
proceedings [sic], in the amount of P3,000.00 per square meter.

We do not agree.

"The nature and character of the land at the time of its taking is the principal criterion to
determine just compensation to the land owner." (National Power Corporation vs. Henson, 300
SCRA 751-756).

The CA then cited Section 4, Rule 67 of the 1997 Rules of Civil Procedure11 to explain why
Resolution No. 08-95 could not "be used as [a] basis for determining the just compensation of
the subject lots, which by reason of the changed commercial conditions in the vicinity, could
have increased its value greater than its value three (3) years ago." The said resolution, which
fixed the fair market value of the lots, including that of the disputed lots along Gen. Aguinaldo
Highway, was approved on October 25, 1995, while petitioner filed the Complaint for the
expropriation of the disputed lots on November 27, 1998, or more than three (3) years had
elapsed after said resolution was approved. Reflecting on the commissioners’ report, the CA
noted that since the property underwent important changes and improvements, "the highest and
most profitable use of the property is good for residential and commercial purposes."

As regards the commissioners’ failure to conduct a hearing "to give the parties the opportunity to
present their respective evidence," as alleged by petitioner, the CA opined that "[t]he filing by
[petitioner] of a motion for reconsideration accorded it ample opportunity to dispute the findings
of the commissioners, so that [petitioner] was as fully heard as there might have been hearing
actually taken place x x x."

The CA ultimately rendered its judgment, as follows:

WHEREFORE, premises considered, the present appeal is hereby DISMISSED for lack of merit.
The Order dated December 28, 1999 and March 23, 2000 of the court a quo are hereby
AFFIRMED by this Court.

SO ORDERED.12

Significantly, petitioner did not file a Motion for Reconsideration of the CA November 18, 2002
Decision, but it directly filed a petition for review before us.

The Issues

In this petition for review, the issues are the following:

PETITIONER WAS DENIED DUE PROCESS WHEN IT WAS NOT ALLOWED TO

PRESENT EVIDENCE ON THE REASONABLE VALUE OF THE EXPROPRIATED
PROPERTY BEFORE THE BOARD OF COMMISSIONERS.
THE VALUATION OF JUST COMPENSATION HEREIN WAS NOT BASED FROM THE
EVIDENCE ON RECORD AND OTHER AUTHENTIC DOCUMENTS.13

The Court’s Ruling

We find this petition meritorious.

It is beyond question that petitions for review may only raise questions of law which must be
distinctly set forth;14 thus, this Court is mandated to only consider purely legal questions in this
petition, unless called for by extraordinary circumstances.

In this case, petitioner raises the issue of denial of due process because it was allegedly deprived
of the opportunity to present its evidence on the just compensation of properties it wanted to
expropriate, and the sufficiency of the legal basis or bases for the trial court’s Order on the
matter of just compensation. Unquestionably, a petition for review under Rule 45 of the Rules of
Court is the proper vehicle to raise the issues in question before this Court.

In view of the significance of the issues raised in this petition, because this case involves the
expenditure of public funds for a clear public purpose, this Court will overlook the fact that
petitioner did not file a Motion for Reconsideration of the CA November 18, 2002 Decision, and
brush aside this technicality in favor of resolving this case on the merits.

First Issue: Petitioner was deprived of due process when it was not given the opportunity to
present evidence before the commissioners

It is undisputed that the commissioners failed to afford the parties the opportunity to introduce
evidence in their favor, conduct hearings before them, issue notices to the parties to attend
hearings, and provide the opportunity for the parties to argue their respective causes. It is also
undisputed that petitioner was not notified of the completion or filing of the commissioners’
report, and that petitioner was also not given any opportunity to file its objections to the said
report.

A re-examination of the pertinent provisions on expropriation, under Rule 67 of the Rules of

Court, reveals the following:

SEC. 6. Proceedings by commissioners.—Before entering upon the performance of their duties,

the commissioners shall take and subscribe an oath that they will faithfully perform their duties
as commissioners, which oath shall be filed in court with the other proceedings in the case.
Evidence may be introduced by either party before the commissioners who are authorized to
administer oaths on hearings before them, and the commissioners shall, unless the parties
consent to the contrary, after due notice to the parties to attend, view and examine the property
sought to be expropriated and its surroundings, and may measure the same, after which either
party may, by himself or counsel, argue the case. The commissioners shall assess the
consequential damages to the property not taken and deduct from such consequential damages
the consequential benefits to be derived by the owner from the public use or purpose of the
property taken, the operation of its franchise by the corporation or the carrying on of the business
of the corporation or person taking the property. But in no case shall the consequential benefits
assessed exceed the consequential damages assessed, or the owner be deprived of the actual
value of his property so taken.

SEC. 7. Report by commissioners and judgment thereupon.—The court may order the
commissioners to report when any particular portion of the real estate shall have been passed
upon by them, and may render judgment upon such partial report, and direct the commissioners
to proceed with their work as to subsequent portions of the property sought to be expropriated,
and may from time to time so deal with such property. The commissioners shall make a full and
accurate report to the court of all their proceedings, and such proceedings shall not be effectual
until the court shall have accepted their report and rendered judgment in accordance with their
recommendations. Except as otherwise expressly ordered by the court, such report shall be filed
within sixty (60) days from the date the commissioners were notified of their appointment, which
time may be extended in the discretion of the court. Upon the filing of such report, the clerk of
the court shall serve copies thereof on all interested parties, with notice that they are allowed ten
(10) days within which to file objections to the findings of the report, if they so desire.

SEC. 8. Action upon commissioners’ report.—Upon the expiration of the period of ten (10) days
referred to in the preceding section, or even before the expiration of such period but after all the
interested parties have filed their objections to the report or their statement of agreement
therewith, the court may, after hearing, accept the report and render judgment in accordance
therewith; or, for cause shown, it may recommit the same to the commissioners for further report
of facts; or it may set aside the report and appoint new commissioners; or it may accept the
report in part and reject it in part; and it may make such order or render such judgment as shall
secure to the plaintiff the property essential to the exercise of his right of expropriation, and to
the defendant just compensation for the property so taken.

Based on these provisions, it is clear that in addition to the ocular inspection performed by the
two (2) appointed commissioners in this case, they are also required to conduct a hearing or
hearings to determine just compensation; and to provide the parties the following: (1) notice of
the said hearings and the opportunity to attend them; (2) the opportunity to introduce evidence in
their favor during the said hearings; and (3) the opportunity for the parties to argue their
respective causes during the said hearings.

The appointment of commissioners to ascertain just compensation for the property sought to be
taken is a mandatory requirement in expropriation cases. In the instant expropriation case, where
the principal issue is the determination of just compensation, a hearing before the commissioners
is indispensable to allow the parties to present evidence on the issue of just compensation. While
it is true that the findings of commissioners may be disregarded and the trial court may substitute
its own estimate of the value, the latter may only do so for valid reasons, that is, where the
commissioners have applied illegal principles to the evidence submitted to them, where they
have disregarded a clear preponderance of evidence, or where the amount allowed is either
grossly inadequate or excessive. Thus, "trial with the aid of the commissioners is a substantial
right that may not be done away with capriciously or for no reason at all."15
In this case, the fact that no trial or hearing was conducted to afford the parties the opportunity to
present their own evidence should have impelled the trial court to disregard the commissioners’
findings. The absence of such trial or hearing constitutes reversible error on the part of the trial
court because the parties’ (in particular, petitioner’s) right to due process was violated.

The Court of Appeals erred in ruling that the petitioner was not deprived of due process when it
was able to file a motion for reconsideration

In ruling that petitioner was not deprived of due process because it was able to file a Motion for
Reconsideration, the CA had this to say:

[Petitioner], further, asserts that "the appointed commissioners failed to conduct a hearing to give
the parties the opportunity to present their respective evidence. According to [petitioner], the
Commissioners Valuation Report was submitted on October 8, 1999 in violation of the
appellant’s right to due process as it was deprived of the opportunity to present evidence on the
determination of the just compensation."

We are not persuaded.

The filing by [petitioner] of a motion for reconsideration accorded it ample opportunity to

dispute the findings of the commissioners, so that [petitioner] was as fully heard as there might
have been hearing actually taken place. "Denial of due process cannot be successfully invoked
by a party who has had the opportunity to be heard on his motion for reconsideration." (Vda. De
Chua vs. Court of Appeals, 287 SCRA 33, 50).16

In this respect, we are constrained to disagree with the CA ruling, and therefore, set it aside.

While it is true that there is jurisprudence supporting the rule that the filing of a Motion for
Reconsideration negates allegations of denial of due process, it is equally true that there are very
specific rules for expropriation cases that require the strict observance of procedural and
substantive due process,17 because expropriation cases involve the admittedly painful deprivation
of private property for public purposes and the disbursement of public funds as just
compensation for the private property taken. Therefore, it is insufficient to hold that a Motion for
Reconsideration in an expropriation case cures the defect in due process.

As a corollary, the CA’s ruling that "denial of due process cannot be successfully invoked by a
party who has had the opportunity to be heard on his motion for reconsideration," citing Vda. de
Chua v. Court of Appeals, is not applicable to the instant case considering that the cited case
involved a lack of notice of the orders of the trial court in granting letters of administration. It
was essentially a private dispute and therefore, no public funds were involved. It is distinct from
this expropriation case where grave consequences attached to the orders of the trial court when it
determined the just compensation.

The Court takes this opportunity to elucidate the ruling that the opportunity to present evidence
incidental to a Motion for Reconsideration will suffice if there was no chance to do so during the
trial. We find such situation to be the exception and not the general rule. The opportunity to
present evidence during the trial remains a vital requirement in the observance of due process.
The trial is materially and substantially different from a hearing on a Motion for
Reconsideration. At the trial stage, the party is usually allowed several hearing dates depending
on the number of witnesses who will be presented. At the hearing of said motion, the trial court
may not be more accommodating with the grant of hearing dates even if the movant has many
available witnesses. Before the decision is rendered, a trial court has an open mind on the merits
of the parties’ positions. After the decision has been issued, the trial court’s view of these
positions might be inclined to the side of the winning party and might treat the Motion for
Reconsideration and the evidence adduced during the hearing of said motion perfunctorily and in
a cavalier fashion. The incident might not receive the evaluation and judgment of an impartial or
neutral judge. In sum, the constitutional guarantee of due process still requires that a party should
be given the fullest and widest opportunity to adduce evidence during trial, and the availment of
a motion for reconsideration will not satisfy a party’s right to procedural due process, unless
his/her inability to adduce evidence during trial was due to his/her own fault or negligence.

Second Issue: The legal basis for the determination of just compensation was insufficient

In this case, it is not disputed that the commissioners recommended that the just compensation be
pegged at PhP 10,000.00 per square meter. The commissioners arrived at the figure in question
after their ocular inspection of the property, wherein they considered the surrounding structures,
the property’s location and, allegedly, the prices of the other, contiguous real properties in the
area. Furthermore, based on the commissioners’ report, the recommended just compensation was
determined as of the time of the preparation of said report on October 5, 1999.

In B.H. Berkenkotter & Co. v. Court of Appeals, we held, thus:

Just compensation is defined as the full and fair equivalent of the property sought to be
expropriated. The measure is not the taker’s gain but the owner’s loss. The compensation, to be
just, must be fair not only to the owner but also to the taker. Even as undervaluation would
deprive the owner of his property without due process, so too would its overvaluation unduly
favor him to the prejudice of the public.

To determine just compensation, the trial court should first ascertain the market value of the
property, to which should be added the consequential damages after deducting therefrom the
consequential benefits which may arise from the expropriation. If the consequential benefits
exceed the consequential damages, these items should be disregarded altogether as the basic
value of the property should be paid in every case.

The market value of the property is the price that may be agreed upon by parties willing but not
compelled to enter into the contract of sale. Not unlikely, a buyer desperate to acquire a piece of
property would agree to pay more, and a seller in urgent need of funds would agree to accept
less, than what it is actually worth. x x x

Among the factors to be considered in arriving at the fair market value of the property are the
cost of acquisition, the current value of like properties, its actual or potential uses, and in the
particular case of lands, their size, shape, location, and the tax declarations thereon.
It is settled that just compensation is to be ascertained as of the time of the taking, which usually
coincides with the commencement of the expropriation proceedings. Where the institution of the
action precedes entry into the property, the just compensation is to be ascertained as of the time
of the filing of the complaint.18

We note that in this case, the filing of the complaint for expropriation preceded the petitioner’s
entry into the property.

Therefore, it is clear that in this case, the sole basis for the determination of just compensation
was the commissioners’ ocular inspection of the properties in question, as gleaned from the
commissioners’ October 5, 1999 report. The trial court’s reliance on the said report is a serious
error considering that the recommended compensation was highly speculative and had no strong
factual moorings. For one, the report did not indicate the fair market value of the lots occupied
by the Orchard Golf and Country Club, Golden City Subdivision, Arcontica Sports Complex,
and other business establishments cited. Also, the report did not show how convenience
facilities, public transportation, and the residential and commercial zoning could have added
value to the lots being expropriated.

Moreover, the trial court did not amply explain the nature and application of the "highest and
best use" method to determine the just compensation in expropriation cases. No attempt was
made to justify the recommended "just price" in the subject report through other sufficient and
reliable means such as the holding of a trial or hearing at which the parties could have had
adequate opportunity to adduce their own evidence, the testimony of realtors in the area
concerned, the fair market value and tax declaration, actual sales of lots in the vicinity of the lot
being expropriated on or about the date of the filing of the complaint for expropriation, the
pertinent zonal valuation derived from the Bureau of Internal Revenue, among others.

More so, the commissioners did not take into account that the Asian financial crisis in the second
semester of 1997 affected the fair market value of the subject lots. Judicial notice can be taken of
the fact that after the crisis hit the real estate market, there was a downward trend in the prices of
real estate in the country.

Furthermore, the commissioners’ report itself is flawed considering that its recommended just
compensation was pegged as of October 5, 1999, or the date when the said report was issued, and
not the just compensation as of the date of the filing of the complaint for expropriation, or as of
November 27, 1998. The period between the time of the filing of the complaint (when just
compensation should have been determined), and the time when the commissioners’ report
recommending the just compensation was issued (or almost one [1] year after the filing of the
complaint), may have distorted the correct amount of just compensation.

Clearly, the legal basis for the determination of just compensation in this case is insufficient as
earlier enunciated. This being so, the trial court’s ruling in this respect should be set aside.

WHEREFORE, the petition is GRANTED. The December 28, 1999 and March 23, 2000 Orders
of the Imus, Cavite RTC and the November 18, 2002 Decision of the CA are hereby SET
ASIDE. This case is remanded to the said trial court for the proper determination of just
compensation in conformity with this Decision. No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT

SECOND DIVISION

G.R. No. 164282 October 12, 2005

TERESITA M. YUJUICO, Petitioner

vs.
HON. JOSE L. ATIENZA, Chairman, City School, Board of Manila, DR. MA. LUISA S.
QUIÑONES, Co-Chairman, City School Board, and Schools Division Superintendent,
ROGER GERNALE, Member, City School Board of Manila, HON. MANUEL M.
ZARCAL, (in substitution of ARLENE ORTIZ), Member, City School Board of Manila,
BENJAMIN VALBUENA (In substitution of MILES ROCES), Member, City School
Board of Manila, LIBERTY TOLEDO, Member, City School Board of Manila, HON.
FRANCESCA GERNALE (In substitution of PERCIVAL FLORIENDO), Member, City
School Board of Manila, ISABELITA SANTOS, Secretary, City School Board of Manila,
VICENTE MACARUBBO (In substitution of Isabelita Ching), Assistant Secretary, City
School Board of Manila, CITY SCHOOL BOARD OF MANILA and JUDGE
MERCEDES POSADA-LACAP, in her capacity as PRESIDING JUDGE OF THE
REGIONAL TRIAL COURT OF MANILA, BRANCH 15, Respondents.

DECISION

Tinga, J.:

This is a Petition for Review on Certiorari instituted by Teresita M. Yujuico, petitioner in the
case for mandamus docketed as Civil Case No. 02-103748 before the Regional Trial Court
(RTC) of Manila, Branch 15. Petitioner is questioning the propriety of the Order1 dated 25 June
2004, granting respondents’ Petition for Relief from Judgment under Section 2, Rule 38 of the
1997 Rules of Civil Procedure.

The operative facts are not disputed.

On 8 December 1995, the City Council of Manila enacted an Ordinance2 authorizing the City
Mayor to acquire by negotiation or expropriation certain parcels of land for utilization as a site
for the Francisco Benitez Elementary School.3 The property chosen is located along Solis St.
near Juan Luna St. in the Second District of Manila and contains an approximate area of
3,979.10 square meters. It is covered by Transfer Certificates of Title Nos. 71541, 71548, 24423,
71544 and 71546, all in the name of petitioner. The Ordinance provides that an amount not to
exceed the fair market value of the land then prevailing in the area will be allocated out of the
Special Education Fund (SEF) of the City of Manila (City) to defray the cost of the property’s
acquisition.4
Failing to acquire the land by negotiation, the City filed a case for eminent domain against
petitioner as owner of the property. Filed on 22 August 1996, the case was raffled to Branch 15,
RTC of Manila and docketed as Civil Case No. 96-79699.5

On 30 June 2000, the RTC rendered a Decision6 in the expropriation case in favor of the City.
The dispositive portion reads:

WHEREFORE, judgment is hereby rendered as follows:

1.) The lots including the improvements therein of defendant Teresita M. Yujuico, as described
in the complaint, are declared expropriated for public use;

2.) The fair market value of the lots of defendant is fixed at P18,164.80 per square meter. The
fair market value of the improvements of lots subject of this action is fixed at P 978,000.00;

3.) The plaintiff must pay defendant the sum of P72,279,555.68 (3,979.10 sq. m. x P18,164.80)
representing the value of the subject lots plus P978,000.00 representing the value of the
improvements or the total amount of P73,257,555.00 as just compensation for the whole property
(including the improvements) minus the sum of P5,363,289.00 that plaintiff deposited in Court
per Order dated April 30, 1997, hence the balance of P67,894,266.00 with interest at the rate of
6% per annum from July 15, 1997 (date of possession of subject property for the purpose of this
proceedings) until the day full payment is made to defendant or deposited in Court.7

The judgment became final and executory, no appeal having been interposed by either party.8

On 6 April 2001, petitioner filed a Motion for Execution of Judgment9 which the trial court
granted. Pursuant to a Writ of Execution10 dated 28 June 2001, the branch sheriff served a Notice
of Garnishment on the funds of the City deposited with the Land Bank of the Philippines,
YMCA Branch, Manila (Land Bank) to satisfy the judgment amount of P67,894,226.00, with
interest at 6% per annum.11

Invoking jurisprudence holding that public funds cannot be made subject to garnishment, the
City filed a motion to quash the Notice of Garnishment.12 Acting on the motion, the trial court
issued an Order dated 2 August 2001.

In the Order, the lower court recalled that during the hearing on the motion, the counsel for the
City manifested that the amount of P36,403,170.00 had been appropriated by the City School
Board (CSB) under CSB Resolutions Nos. 613 and 623, of which P31,039,881.00 was available
for release. The amount of P5,363,269.00, representing fifteen percent (15%) of the assessed
value of the property, had been deposited in court at the start of the expropriation proceedings
and subsequently received by petitioner. In line with the manifestation made by the counsel for
the City, the trial court ordered the release to petitioner of the amount of P31,039,881.00
deposited with the Land Bank, in partial payment of the just compensation adjudged in favor of
petitioner.13

The trial court further stated in the Order:

Considering that this case is on all fours with the case of the Municipality of Makati vs. Court of
Appeals (190 SCRA 206), wherein it was ruled that "x x x Public funds are not subject to levy
and execution," the Court therefore grants plaintiff’s Motion to Quash the Notice of Garnishment
and the Notice of Garnishment to the Landbank of the Philippines issued by the Branch Sheriff
of this Court is hereby ordered lifted.

There being no opposition for the release of the Thirty One Million Thirty Nine Thousand Eight
Hundred Eighty One Pesos (P31,039,881.00) deposited with the Land Bank, YMCA Branch as
Special Education Fund, the Manager of the Landbank of the Philippines, YMCA, Manila is
hereby directed to release the said amount to defendant Teresita M. Yujuico in partial payment of
the just compensation adjudged by this Court in its Decision dated June 30, 2000.

Upon manifestation of the counsel for the plaintiff that it is the City School Board which has the
authority to pass a resolution allocating funds for the full satisfaction of the just compensation
fixed, the said body is hereby given thirty (30) days from receipt of this Order to pass the
necessary resolution for the payments of the remaining balance due to defendant Teresita M.
Yujuico.14

A copy of the Order dated 2 August 2001 was served on the CSB on 3 August 2001.15

On 30 August 2001, petitioner submitted a manifestation before the trial court requesting that she
be informed by both the City and the CSB if a resolution had already been passed by the latter in
compliance with the Order.16 Earlier, petitioner sent a letter to the Superintendent of City
Schools of Manila to verify the CSB’s compliance with the Order.17

Not having been favored with a reply to her queries even after the lapse of the thirty (30)-day
compliance period, petitioner sent a letter to the CSB dated 10 September 2001, demanding
compliance with the Order.18

As there was no action from the CSB, on 1 February 2002, petitioner filed a petition for
contempt of court against respondents Hon. Jose L. Atienza, Jr., Dr. Ma. Luisa S. Quiñoňes,
Roger Gernale, Arlene Ortiz, Miles Roces, Percival Floriendo, Liberty Toledo, Isabelita Santos
and Isabelita Ching in their capacities as officers and members of the CSB.19 The case was
docketed as Civil Case No. 02-102837 of the Manila RTC.20

Countering the petition for contempt, respondents filed a Motion to Dismiss,21 wherein they
alleged inter alia that they never disregarded the Order as the matter had in fact been calendared
and deliberated upon during the meetings of the CSB.22 In their subsequent Omnibus Reply,23
respondents argued that petitioner’s failure to avail of the proper recourse to enforce the final and
executory judgment24 should not be a ground to hold them in contempt of court. Citing the case
of Municipality of Makati v. Court of Appeals,25 respondents asserted that petitioner should have
filed a petition for mandamus to force the CSB to pass the necessary resolution for immediate
payment of the balance of the just compensation awarded in her favor.26

According to respondents, petitioner took the Order as a writ of mandamus when in fact it was a
mere order in furtherance of the Writ of Execution.27 This interpretation, respondents insisted,
should never be allowed since petitioner merely wanted to escape the payment of docket fees in
the filing of the petition for mandamus.28

In an Order29 dated 17 May 2002, the trial court denied the petition for contempt of court.

On 6 June 2002, petitioner filed a Petition for Mandamus30 against the members of the CSB, the
same respondents in the petition for contempt of court, seeking to compel them to pass a
resolution appropriating the amount necessary to pay the balance of the just compensation
awarded to petitioner in the expropriation case, Civil Case No. 96-79699. The petition was
docketed as Spl. Civil Action No. 02-103748 and raffled to Branch 51 of the RTC of Manila. 31

Upon petitioner’s motion,32 Branch 51 of the Manila RTC before which the mandamus case was
pending, in an Order33 dated 23 August 2002, directed its consolidation with the expropriation
case before Branch 15.34

In a Decision35 dated 9 October 2002, the lower court (Branch 15) granted the petition for
mandamus. Specifically, it ordered respondents to immediately pass a resolution appropriating
the necessary amount and the corresponding disbursement thereof for the full and complete
payment of the balance of the court-adjudged compensation still due petitioner, ratiocinating as
follows:36

This case is on all fours with the case of Municipality of Makati v. Court of Appeals (190 SCRA
206).

....

The State’s power of eminent domain should be exercised within the bounds of fair play and
justice. In the case at bar, considering that valuable property has been taken, the compensation to
be paid fixed and the municipality is in full possession and utilizing the property for the public
purpose, for three (3) years, the Court finds that the municipality has had more than reasonable
time to pay full compensation.

The arguments of the herein respondents that passing the ordinance or the act of appropriating
special educational fund is a discretionary act that could not be compelled by mandamus should
be thrown overboard. It must be stressed that what we have here is a final and executory
judgment, establishing a legal right for the petitioner to demand fulfillment which on the other
hand became an imperative duty on the part of the respondent to perform the act required.

WHEREFORE, premises considered, the petition is GRANTED, and the respondents are hereby
ordered to immediately pass a resolution appropriating the necessary amount; and the
corresponding disbursement thereof, for the full and complete payment of the remaining balance
of the court-adjudged compensation due and owing to petitioner Teresita M. Yujuico.

SO ORDERED.37
Respondents filed a motion for reconsideration, which the trial court denied in an Order38 dated
13 December 2002.

With respondents not interposing an appeal, the Decision became final and executory on 2
January 200339 and eventually, the corresponding Entry of Judgment was issued on 15 January
2003.40 The court granted petitioner’s Motion for Execution41 in an Order42 dated 12 March
2003.

However, on 14 March 2003, respondents filed a Petition for Relief from Judgment,43 wherein
they also prayed for a temporary restraining order (TRO) and a writ of preliminary injunction.
Respondents invoked excusable negligence as a ground for their failure to seasonably file an
appeal.44 While it denied the application for TRO in view of its prior order granting petitioner’s
Motion for Execution, the court granted the Petition for Relief from Judgment in an Order45 dated
25 June 2004. This had the effect of giving due course to respondents’ appeal despite the fact
that the decision of the trial court had already attained finality.

Finding the Order unacceptable, petitioner elevated it to this Court by way of a petition for
certiorari under Rule 45. In her petition, petitioner asks that the order of the lower court giving
due course to respondents’ appeal be reversed and set aside on a pure question of law.46

Before resolving the substantive issues raised by the parties, the Court will first address the
procedural infirmities ascribed by respondents to the petition at bar.

Respondents assail the correctness and propriety of the mode of appeal resorted to by
petitioner.47 According to them, the order granting the petition for relief from judgment is an
interlocutory order which cannot be made the subject of an appeal.48 Respondents likewise argue
that petitioner failed to respect the rule on hierarchy of courts. This Court, they aver, had
consistently held that its original jurisdiction to issue a writ of certiorari is not exclusive but is
concurrent with that of the RTC and the Court of Appeals in certain cases.49

Respondents have correctly pointed out that an interlocutory order cannot be made subject to an
appeal. However, when viewed in context, the recitals of the petition clearly disclose and the
Court is convinced that the lower court committed grave abuse of discretion amounting to lack or
excess of jurisdiction when it granted respondents’ petition for relief from judgment. While this
case should have been elevated to this Court not by way of a petition for review under Rule 45
but through a special civil action for certiorari under Rule 65, in the exercise of our sound
discretion and in order to write finis to this case which has needlessly dragged on for so long, we
shall treat the petition as a special civil action for certiorari. After all, it was filed within the
reglementary period for the filing of a Rule 65 petition. As we held in Salinas v. NLRC,50 in the
interest of justice, this Court has often judiciously treated petitions erroneously captioned as
petitions for review on certiorari as special civil actions for certiorari. This is in line with the
principle that the strict application of procedural technicalities should not hinder the speedy
disposition of the case on the merits.51

Accordingly, facial allegations of reversible error in the petition will be treated, as they should
be, as contextual averments of grave abuse of discretion on the part of the court a quo.
Appropriately, petitioner impleaded the RTC Presiding Judge as party-respondent in the instant
petition.

Anent the alleged breach of the rule on hierarchy of courts, the doctrine is not an iron-clad
dictum.52 The rule may be relaxed when exceptional and compelling circumstances warrant the
exercise of this Court’s primary jurisdiction.53 In this case, the judgment sought to be satisfied
has long attained finality and the expropriated property has been utilized as a school site for five
(5) years now; yet, the awarded just compensation has not been fully paid. These circumstances,
in the Court’s estimation, merit the relaxation of the technical rules of procedure to ensure that
substantial justice will be served.

Concerning petitioner’s alleged failure to implead the CSB or its new members before the trial
court,54 respondents argue that since there are five (5) new members in the CSB any decision in
the case requiring the CSB to act as a body would prove to be legally impossible. The former
members of the CSB could no longer be compelled to act according to the orders of the Court
since they no longer have the capacity to do so. On the other hand, respondents continue, the new
members cannot be directed to comply with the Court’s judgment either; they have never been
impleaded in the case; thus, the Court never acquired jurisdiction over their persons.55

The arguments were effectively neutered in our Resolution dated 8 August 2005. There, we
declared:

Considering the arguments posited by both parties, this Court is of the view that a substitution of
the original respondents by the members of the CSB who replaced them is warranted. The phrase
"or such time as may be granted by the Court" in Sec. 17, Rule 3 of the 1997 Rules of Civil
Procedure denotes that the Court before whom the motion for substitution is filed may grant a
period longer than thirty (30) days for the purpose. In any event, technical rules on substitution
of a party should not be so narrowly construed as to prevent this Court from taking cognizance of
a case and deciding it on the merits. Moreover, petitioner did make an attempt to implead the
new members of the CSB by making the CSB itself a respondent before this Court. There is also
no showing that the new members of the CSB have deviated from the stand of their
predecessors-in-interest; hence, there is a substantial need for continuing or maintaining
petitioner’s action against them.56

In the same Resolution, the Court ordered the impleading of the new CSB members Roger
Gernale, Manuel M. Zarcal, Benjamin Valbuena and Francesca Gernale as party respondents—
the last three in substitution of Arlene Ortiz, Percival Floriendo, Miles Roces—and the new CSB
Assistant Secretary Vicente Macarubbo in substitution of Isabelita Ching.57 Only Manuel Zarcal
filed a Comment58 dated 30 August 2005 through a new counsel, adopting in toto the comment of
his co-respondents. Hence, the other four newly impleaded party respondents are deemed to have
retained the Office of the City Legal Officer (OCLO) as their counsel and to have adopted the
Comment already filed by the OCLO in behalf of their co-respondents.

Thus, the proper substitutions of some party respondents have already taken place in this case.
The last procedural hurdle thrown petitioner’s way by respondents refers to the supposed failure
of the petition to comply with the requirements of Section 4, Rule 7 and Section 4, Rule 45 of the
1997 Rules of Civil Procedure59 as amended by Supreme Court Circular A.M. No. 00-2-10-SC.60
Respondents claim that there was failure to include a verified statement indicating the material
dates relative to the receipt of the judgments and the filing of the pleadings. The verification,
moreover, allegedly failed to state that petitioner has read the petition61 and that the copies
attached thereto are based on authentic records.62 The defects of the verification allegedly render
the petition without legal effect and constitute grounds for its dismissal.

The purpose of requiring a verification is to secure an assurance that the allegations of the
petition have been made in good faith; or are true and correct, not merely speculative.63 This
requirement is simply a condition affecting the form of pleadings and non-compliance therewith
does not necessarily render it fatally defective.64 Perusal of the verification in question shows
that there was sufficient compliance with the requirements of the Rules and the alleged defects
are not so material as to justify the dismissal of the petition.

Now, the substantial issues.

Up for determination is the tenability of the RTC’s favorable action on respondents’ petition for
relief from judgment. This engenders a look at the grounds and defenses relied upon by
respondents in support of their petition. Sections 2 and 3, Rule 38 of the 1997 Rules of Civil
Procedure provide that a petition for relief may be granted upon a showing that (1) through
fraud, accident, mistake or excusable negligence, a party has been prevented from taking an
appeal, and (2) the party has a good and substantial cause of action or defense.

The above requisites notwithstanding, it bears stressing that relief from judgment is premised on
equity. It is an act of grace which is allowed only in exceptional cases.65

In this case, according to respondents they were unable to seasonably file a notice of appeal due
to "excusable negligence."66 One Ronald Silva (Silva), an employee of the OCLO, allegedly
failed to forward the Order denying respondents’ motion for reconsideration in Civil Case No.
02-103748 to the handling lawyers. When the order was delivered to the OCLO on 17 December
2002,67 Silva was the one who received it because the employee designated to do so was out on
official business.68 Since the employees were busy preparing for the office Christmas party that
day,69 Silva forgot all about the order. He only remembered it when the order for entry of
judgment in the case was received on 29 January 2003. By that time, however, the order dated 17
December 2002 had already been misplaced.70

Clearly, the situation does not present a case of excusable negligence which would warrant relief
under Rule 38. Time and again, this Court has ruled that the inability to perfect an appeal in due
time by reason of failure of a counsel’s clerk to notify the handling lawyer is not a pardonable
oversight.71 As held in one case:

. . . The excuse offered by respondent . . . as reason for his failure to perfect in due time his
appeal from the judgment of the Municipal Court, that counsel’s clerk forgot to hand him the
court notice, is the most hackneyed and habitual subterfuge employed by litigants who fail to
observe the procedural requirements prescribed by the Rules of Court. The uncritical acceptance
of this kind of common-place excuses, in the face of the Supreme Court’s repeated rulings that
they are neither credible nor constitutive of excusable negligence (Gaerlan v. Bernal, L-4039, 29
January 1952; Mercado v. Judge Domingo, L-19457, 17 December 1966) is certainly such
whimsical exercise of judgment as to be a grave abuse of discretion.

....

In the face of all these facts and circumstances, . . . the respondent judge revealed a simple-
minded willingness to swallow a story patently concocted to delay as much as possible the
satisfaction of a judgment against respondent . . . .This indiscriminating credulity does not
conform to what is to be expected of a judicial mind.72

Reiterated in numerous cases is the rule that the clerks’ faults are attributable to the handling
lawyers.73 Thus, excuses offered based on the former’s negligence are not deemed excusable.
That the admonitions issued out by this Court were mostly directed against lawyers in law firms
does not exempt respondents herein from the same treatment. For all intents and purposes, the
set-up at the OCLO is akin to that of a law firm, the only difference being that the former serves
a public entity while the latter caters to private clients. The following pronouncement in Negros
Stevedoring Co., Inc. v. Court of Appeals74 is apropos:

The negligence committed in the case at bar cannot be considered excusable, nor is it
unavoidable. Time and again, the Court has admonished law firms to adopt a system of
distributing pleadings and notices, whereby lawyers working therein receive promptly notices
and pleadings intended for them, so that they will always be informed of the status of their cases.
The Court has also often repeated that the negligence of clerks which adversely affect the cases
handled by lawyers is binding upon the latter.75

Without doubt, it was grave abuse of discretion for the lower court to have given due course to
respondents’ appeal through the grant of their petition for relief from judgment based on the
flimsy ground they proferred.

Even assuming that the negligence invoked by respondents could be considered excusable, still
the petition should not have been granted. It must be borne in mind that two requisites must be
satisfied before a petition under Rule 38 may be granted, the other being the existence of a good
and substantial cause of action or defense.

Respondents’ defense consisted of their claim that the CSB has a personality separate and
distinct from the City such that it should not be made to pay for the City’s obligations.76
However, the argument is undercut by the particular circumstances of this case.

It is worthy of note that the records of this case clearly show that the same counsel, the OCLO,
represented the City in the expropriation case and now, all except one of the individual
respondents in the case at bar. Worthy of note are the following manifestations relied upon by
the lower court in issuing the order on the motion to quash the Notice of Garnishment over the
funds of the City, to wit:
The Motion to Quash Notice of Garnishment was heard by this court this morning and Atty.
Joseph Aquino appeared for the plaintiff (City of Manila) and Atty. Federico Alday, for the
defendant. Atty. Aquino manifested that the amount of Thirty Six Million Four Hundred
Three Thousand One Hundred Seventy Pesos (P36,403,170.00) had been appropriated by
the City School Board (CSB) under CSB Resolution Nos. 613 and 623 for this purpose.

....

Upon manifestation of the counsel for the plaintiff that it is the City School Board which
has the authority to pass a resolution allocating funds for the full satisfaction of the just
compensation fixed, the said body is hereby given thirty (30) days from receipt of this Order to
pass the necessary resolution for the payments of the remaining balance due to defendant
Teresita M. Yujuico. (Emphasis supplied.)77

The manifestation was made by the same counsel now claiming that it is actually the City which
should be made liable for the payment of its own obligations. This, after it trotted out the CSB as
the entity with authority to pass a resolution that would satisfy the obligation it had vigorously
pursued.

The above circumstances, coupled with the rule that an act performed by counsel within the
scope of a "general or implied authority" is regarded as an act of the client,78 render the City and,
through it, respondents in estoppel. By estoppel is meant that an admission or representation is
rendered conclusive upon the person making it and cannot be denied or disproved as against the
person relying thereon.79 Petitioner and the courts acted in accordance with the City’s own
manifestations by running after the CSB. At this point, respondents and the OCLO can no longer
turn around and toss the obligation back to the City. After all, it was the legal counsel of both the
City and respondents who made a big production out of showing that the liability incurred by the
City will be borne by the CSB.

Contrary to respondents’ claim, the law does not make the CSB an entity independent from the
City of Manila. This is evident from the provisions of the Local Government Code of 1991, the
law providing for the creation of school boards. It states:

TITLE IV.- LOCAL SCHOOL BOARDS

Section 98. Creation, Composition and Compensation.-

(a) There shall be established in every province, city or municipality a provincial, city, or
municipal school board, respectively.

(b) The composition of local school boards shall be as follows:

...

(2) The city school board shall be composed of the city mayor and the city superintendent of
schools as co-chairmen; the chairman of the education committee of the sangguniang
panlungsod, the city treasurer, the representative of the "pederasyon ng mga sangguniang
kabataan" in the sangguniang panlungsod, the duly elected president of the city federation of
parents-teachers associations, the duly elected representative of the non-academic personnel of
public schools in the city, as members;

...

Section 101. Compensation and Remuneration.-

The co-chairmen and members of the provincial, city or municipal school board shall perform
their duties as such without compensation or remuneration. Members thereof who are not
government officials or employees shall be entitled to traveling expenses and allowances
chargeable against the funds of the local school board concerned, subject to existing accounting
and auditing rules and regulations.80

The fact that the highest ranking official of a local government unit (LGU) is designated as co-
chairman of the school board negates the claim in this case that the CSB has a personality
separate and distinct from the City. The other fact that government officials in the school board
do not receive any compensation or remuneration while NGO representatives merely receive
allowances underscores the absurdity of respondents’ argument all the more. Indeed, such would
not be the situation if the school board has a personality separate and distinct from the LGU.

Respondents also argue that the members of the CSB cannot be directed to decide a discretionary
function in the specific manner the court desires.81 The question of whether the enactment of an
ordinance to satisfy the appropriation of a final money judgment rendered against an LGU may
be compelled by mandamus has already been settled in Municipality of Makati v. Court of
Appeals.82

Nevertheless, this is not to say that private respondent and PSB are left with no legal recourse.
Where a municipality fails or refuses, without justifiable reason, to effect payment of a final
money judgment rendered against it, the claimant may avail of the remedy of mandamus in order
to compel the enactment and approval of the necessary appropriation ordinance, and the
corresponding disbursement of municipal funds therefore [See Viuda De Tan Toco v. The
Municipal Council of Iloilo, supra, Baldivia v. Lota, 107 Phil 1099 (1960); Yuviengco v.
Gonzales, 108 Phil 247 (1960)].83

Clearly, mandamus is a remedy available to a property owner when a money judgment is

rendered in its favor and against a municipality or city, as in this case.

Moreover, the very ordinance authorizing the expropriation of petitioner’s property categorically
states that the payment of the expropriated property will be defrayed from the SEF. To quote:

An amount not to exceed the current fair market value, prevailing in the area appraised in
accordance with the requirements of existing laws, rules and regulations, of the property to be
acquired or so much thereof as may be necessary for the purpose shall be allocated out of the
Special Education Fund of the City to defray the cost of acquisition of the above-mentioned
parcels of land.84

The legality of the above-quoted provision is presumed. The source of the amount necessary to
acquire petitioner’s property having in fact been specified by the City Council of Manila, the
passage of the resolution for the allocation and disbursement thereof is indeed a ministerial duty
of the CSB.

Furthermore, respondents had argued in the petition for contempt filed against them by petitioner
that the latter’s failure to invoke the proper remedy of mandamus should not be a ground to
penalize them with contempt. In their haste to have the contempt petition dismissed, respondents
consistently contended that what petitioner should have filed was a case for mandamus to compel
passage of the corresponding resolution of the CSB if she wanted immediate payment.85 Having
relied on these representations of respondents and having filed the action they adverted to,
petitioner cannot now be sent by respondents on another wild goose chase to obtain ultimate
recovery of what she is legally entitled to.

While this Court recognizes the power of LGU to expropriate private property for public use, it
will not stand idly by while the expropriating authority maneuvers to evade the payment of just
compensation of property already in its possession.

The notion of expropriation is hard enough to take for a private owner. He is compelled to give
up his property for the common weal. But to give it up and wait in vain for the just compensation
decreed by the courts is too much to bear. In cases like these, courts will not hesitate to step in to
ensure that justice and fair play are served. As we have already ruled:

. . . This Court will not condone petitioner’s blatant refusal to settle its legal obligation arising
from expropriation proceedings it had in fact initiated. It cannot be over-emphasized that within
the context of the State’s inherent power of eminent domain,

. . . (j)ust compensation means not only the correct determination of the amount to be paid to the
owner of the land but also the payment of the land within a reasonable time from its taking.
Without prompt payment, compensation cannot be considered ‘just’ for the property owner is
made to suffer the consequence of being immediately deprived of his land while being made to
wait for a decade or more before actually receiving the amount necessary to cope with his loss
(Consculluela v. The Honorable Court of Appeals, G.R. No. 77765, August 15, 1988, 164 SCRA
393, 400. See also Provincial Government of Sorsogon v. Vda. De Villaroya, G.R. No. 64037,
August 27, 1987, 153 SCRA 291).86

The decision rendering just compensation in petitioner’s favor was promulgated way back in the
year 2000.87 Five years have passed, yet the award still has not been fully satisfied. Recently, in
Republic v. Lim,88 this Court made the following pronouncement:

. . . while the prevailing doctrine is that the non-payment of just compensation does not entitle
the private landowner to recover possession of the expropriated lots, however, in cases where the
government failed to pay just compensation within five (5) years from the finality of judgment
in the expropriation proceedings, the owners concerned shall have the right to recover
possession of their property. This is in consonance with the principle that ‘the government
cannot keep the property and dishonor the judgment.’ To be sure, the five-year period limitation
will encourage the government to pay just compensation punctually. This is in keeping with
justice and equity. After all, it is the duty of the government, whenever it takes property from
private persons against their will, to facilitate the payment of just compensation.89 (Citations
omitted)

Given the above ruling, the reversion of the expropriated property to the petitioner would prove
not to be a remote prospect should respondents and the City they represent insist on trudging on
their intransigent course.

One final note. Respondents’ appeal from the Decision dated 9 October 2002 of the lower court,
made possible by its grant of their petition for relief, is before the Court of Appeals where it is
docketed as CA-G.R. No. 86692.90 The court’s Decision in this case would have obvious
consequences on said appeal; hence, referral of this Decision to the Court of Appeals is in order.

WHEREFORE, the petition is GRANTED. The Order of the trial court dated 25 June 2004,
granting respondents’ Petition for Relief from Judgment is REVERSED and set aside and its
Decision dated 9 October 2002, ordering respondents to immediately pass a resolution for the
payment of the balance of the court-adjudged compensation due petitioner, is reinstated.

Let a copy of this Decision be furnished the Court of Appeals for its information and guidance in
relation to CA-G.R. No. 86692 entitled "Teresita M. Yujuico v. Hon. Jose L. Atienza, Jr., et al."

SO ORDERED.