EN BANC

SECRETARY OF THE DEPARTMENT G.R. No. 179334

OF PUBLIC WORKS AND
HIGHWAYS and DISTRICT Present:
ENGINEER CELESTINO R.
CONTRERAS, SERENO, CJ.,
Petitioners, CARPIO,
VELASCO, JR.,
LEONARDO-DE CASTRO,
BRION,
PERALTA,
BERSAMIN,*
DEL CASTILLO,
- versus - VILLARAMA, JR.,
PEREZ,
MENDOZA,
REYES,
PERLAS-BERNABE,*
LEONEN, and
JARDELEZA, JJ.

SPOUSES HERACLEO and RAMONA Promulgated:

TECSON,
Respondents. April 21, 2~
x-------------------------------------------------------------------------~:-x

RESOLUTION

PERALTA, J.:

For resolution is the Motion for Reconsideration 1 filed by

respondents-movants spouses Heracleo and Ramona Tecson imploring the
Court to take a second look at its July 1, 2013 Decision, the dispositive
portion of which reads: _/

No part.
Rollo, pp. 255-259.
CJ'
Resolution 2 G.R. No. 179334

WHEREFORE, premises considered, the petition is PARTIALLY

GRANTED. The Court of Appeals Decision dated July 31, 2007 in CA-
G.R. CV No. 77997 is MODIFIED, in that the valuation of the subject
property owned by respondents shall be P0.70 instead of P1,500.00 per
square meter, with interest at six percent (6%) per annum from the date of
taking in 1940 instead of March 17, 1995, until full payment.2

In view of the contrasting opinions of the members of the Third

Division on the instant motion, and the transcendental importance of the
issue raised herein, the members of the Third Division opted to refer the
issue to the En Banc for resolution.

For a proper perspective, we briefly state the factual background of

the case.

In 1940, the Department of Public Works and Highways (DPWH)

took respondents-movants’ subject property without the benefit of
expropriation proceedings for the construction of the MacArthur Highway.
In a letter dated December 15, 1994, respondents-movants demanded the
payment of the fair market value of the subject parcel of land. Celestino R.
Contreras (Contreras), then District Engineer of the First Bulacan
Engineering District of the DPWH, offered to pay for the subject land at the
rate of Seventy Centavos (P0.70) per square meter, per Resolution of the
Provincial Appraisal Committee (PAC) of Bulacan. Unsatisfied with the
offer, respondents-movants demanded the return of their property, or the
payment of compensation at the current fair market value.3 Hence, the
complaint for recovery of possession with damages filed by respondents-
movants. Respondents-movants were able to obtain favorable decisions in
the Regional Trial Court (RTC) and the Court of Appeals (CA), with the
subject property valued at One Thousand Five Hundred Pesos (P1,500.00)
per square meter, with interest at six percent (6%) per annum.

Petitioners thus elevated the matter to this Court in a petition for

review on certiorari. The only issue resolved by the Court in the assailed
decision is the amount of just compensation which respondents-movants are
entitled to receive from the government for the taking of their property.
Both the RTC and the CA valued the property at One Thousand Five
Hundred Pesos (P1,500.00) per square meter, plus six percent (6%) interest
from the time of the filing of the complaint until full payment. We, however,
did not agree with both courts and ruled instead that just compensation
should be based on the value of the property at the time of taking in 1940,
which is Seventy Centavos (P0.70) per square meter.4 In addition, and by

2
Id. at 237.
3
Id. at 230.
4
Id. at 236.
Resolution 3 G.R. No. 179334

way of compensation, we likewise awarded an interest of six percent (6%)

per annum from 1940 until full payment.5

Aggrieved, respondents-movants hereby move for the reconsideration

of said decision on the following grounds:

A. THE HONORABLE COURT MAY LOOK INTO THE “JUSTNESS”

OF THE MISERABLE AMOUNT OF COMPENSATION BEING
AWARDED TO THE HEREIN RESPONDENTS; and

B. THE HONORABLE COURT MAY SETTLE FOR A HAPPY

MIDDLE GROUND IN THE NAME OF DOCTRINAL PRECISION
AND SUBSTANTIAL JUSTICE.6

Citing the views of Justices Presbitero J. Velasco, Jr. and Marvic

Mario Victor F. Leonen in their Dissenting and Concurring Opinion and
Separate Opinion, respectively, respondents-movants insist that gross
injustice will result if the amount that will be awarded today will be based
simply on the value of the property at the time of the actual taking. Hence, as
proposed by Justice Leonen, they suggest that a happy middle ground be
achieved by meeting the need for doctrinal precision and the thirst for
substantial justice.7

We maintain our conclusions in the assailed July 1, 2013 Decision

with modification on the amount of interest awarded, as well as the
additional grant of exemplary damages and attorney’s fees.

At the outset, it should be stressed that the matter of the validity of the
State’s exercise of the power of eminent domain has long been settled. In
fact, in our assailed decision, We have affirmed the ruling of the CA that the
pre-trial order issued on May 17, 2001 has limited the issues as follows: (1)
whether or not the respondents-movants are entitled to just compensation;
(2) whether or not the valuation would be based on the corresponding value
at the time of the taking or at the time of the filing of the action; and (3)
whether or not the respondents-movants are entitled to damages.8 Moreover,
it was held that for failure of respondents-movants to question the lack of
expropriation proceedings for a long period of time, they are deemed to have
waived and are estopped from assailing the power of the government to
expropriate or the public use for which the power was exercised.9 What is,
therefore, left for determination in the instant Motion for Reconsideration, in

5
Id.
6
Id. at 256.
7
Id. at 257.
8
Secretary of the Department of Public Works and Highways v. Tecson, G.R. No. 179334, July 1,
2013, 700 SCRA 243, 254.
9
Id. at 255.
Resolution 4 G.R. No. 179334

accordance with our Decision dated July 1, 2013, is the propriety of the
amount awarded to respondents as just compensation.

At this juncture, We hold that the reckoning date for property

valuation in determining the amount of just compensation had already been
addressed and squarely answered in the assailed decision. To be sure, the
justness of the award had been taken into consideration in arriving at our
earlier conclusion.

We have in the past been confronted with the same issues under
similar factual and procedural circumstances. We find no reason to depart
from the doctrines laid down in the earlier cases as we adopted in the
assailed decision. In this regard, we reiterate the doctrines laid down in the
cases of Forfom Development Corporation (Forfom) v. Philippine National
Railways (PNR),10 Eusebio v. Luis,11 Manila International Airport Authority
v. Rodriguez,12 and Republic v. Sarabia.13

In Forfom, PNR entered the property of Forfom in January 1973 for

railroad tracks, facilities and appurtenances for use of the Carmona
Commuter Service without initiating expropriation proceedings. In 1990,
Forfom filed a complaint for recovery of possession of real property and/or
damages against PNR. In Eusebio, respondent’s parcel of land was taken in
1980 by the City of Pasig and used as a municipal road without the
appropriate expropriation proceedings. In 1996, respondent filed a complaint
for reconveyance and/or damages against the city government and the
mayor. In MIAA, in the early 1970s, petitioner implemented expansion
programs for its runway, necessitating the acquisition and occupation of
some of the properties surrounding its premises. As to respondent’s
property, no expropriation proceedings were initiated. In 1997, respondent
initiated a case for accion reivindicatoria with damages against petitioner.
In Republic, sometime in 1956, the Air Transportation Office (ATO) took
possession and control of a portion of a lot situated in Aklan, registered in
the name of respondent, without initiating expropriation proceedings.
Several structures were erected thereon, including the control tower, the
Kalibo crash fire rescue station, the Kalibo airport terminal, and the
Headquarters of the PNP Aviation Security Group. In 1995, several stores
and restaurants were constructed on the remaining portion of the lot. In
1997, respondent filed a complaint for recovery of possession with damages
against the storeowners wherein ATO intervened claiming that the
storeowners were its lessees.

10
594 Phil. 10 (2008).
11
G.R. No. 162474, October 13, 2009, 603 SCRA 576.
12
518 Phil. 750, 757 (2006).
13
505 Phil. 253 (2005).
Resolution 5 G.R. No. 179334

These cases stemmed from similar background, that is, government

took control and possession of the subject properties for public use without
initiating expropriation proceedings and without payment of just
compensation; while the landowners failed for a long period of time to
question such government act and later instituted actions for recovery of
possession with damages. In these cases, the Court has uniformly ruled that
the fair market value of the property at the time of taking is controlling for
purposes of computing just compensation.

In Forfom, the payment of just compensation was reckoned from the

time of taking in 1973; in Eusebio, the Court fixed the just compensation by
determining the value of the property at the time of taking in 1980; in MIAA,
the value of the lot at the time of taking in 1972 served as basis for the award
of compensation to the owner; and, in Republic, the Court was convinced
that the taking occurred in 1956 and was thus the basis in fixing just
compensation.

As in the aforementioned cases, just compensation due respondents-

movants in this case should, therefore, be fixed not as of the time of payment
but at the time of taking in 1940 which is Seventy Centavos (P0.70) per
square meter, and not One Thousand Five Hundred Pesos (P1,500.00) per
square meter, as valued by the RTC and CA.

While disparity in the above amounts is obvious and may appear

inequitable to respondents-movants as they would be receiving such
outdated valuation after a very long period, it should be noted that the
purpose of just compensation is not to reward the owner for the property
taken but to compensate him for the loss thereof. As such, the true measure
of the property, as upheld by a plethora of cases, is the market value at the
time of the taking, when the loss resulted. This principle was plainly laid
down in Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of
the Philippines,14 to wit:

x x x In Land Bank of the Philippines v. Orilla, a valuation case under our

agrarian reform law, this Court had occasion to state:

Constitutionally, "just compensation" is the sum

equivalent to the market value of the property, broadly
described 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 the
one who receives and the one who desires to sell, it being
fixed at the time of the actual taking by the government.
Just compensation is defined as the full and fair
equivalent of the property taken from its owner by the

14
G.R. No. 164195, October 12, 2010, 632 SCRA 727.
Resolution 6 G.R. No. 179334

expropriator. It has been repeatedly stressed by this

Court that the true measure is not the taker's gain but the
owner's loss. The word "just" is used to modify the
meaning of the word "compensation" to convey the idea
that the equivalent to be given for the property to be
taken shall be real, substantial, full and ample.
[Emphasis supplied.]15

Indeed, the State is not obliged to pay premium to the property owner
for appropriating the latter’s property; it is only bound to make good the loss
sustained by the landowner, with due consideration of the circumstances
availing at the time the property was taken. More, the concept of just
compensation does not imply fairness to the property owner alone.
Compensation must also be just to the public, which ultimately bears the
cost of expropriation.16

Notwithstanding the foregoing, we recognize that the owner's loss is

not only his property but also its income-generating potential.17 Thus, when
property is taken, full compensation of its value must immediately be paid to
achieve a fair exchange for the property and the potential income lost.18
Accordingly, in Apo, we held that the rationale for imposing the interest is to
compensate the petitioners for the income they would have made had they
been properly compensated for their properties at the time of the taking.19
Thus:
We recognized in Republic v. Court of Appeals the need for
prompt payment and the necessity of the payment of interest to
compensate for any delay in the payment of compensation for property
already taken. We ruled in this case that:

The constitutional limitation of "just compensation"

is considered to be the sum equivalent to the market value
of the property, broadly described to be 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, i[f] fixed at the time of the actual taking by the
government. Thus, if property is taken for public use
before compensation is deposited with the court having
jurisdiction over the case, the final compensation must
include interest[s] on its just value to be computed from
the time the property is taken to the time when
compensation is actually paid or deposited with the court.
In fine, between the taking of the property and the actual

15
Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines, supra, at 741.
(Italics supplied)
16
Republic v. Court of Appeals, 494 Phil. 494, 510 (2005).
17
Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines, supra note 14,
at 747.
18
Id.
19
Id. at 754-755.
Resolution 7 G.R. No. 179334

payment, legal interest[s] accrue in order to place the

owner in a position as good as (but not better than) the
position he was in before the taking occurred. [Emphasis
supplied]20

In other words, the just compensation due to the landowners amounts

to an effective forbearance on the part of the State—a proper subject of
interest computed from the time the property was taken until the full amount
of just compensation is paid—in order to eradicate the issue of the constant
variability of the value of the currency over time.21 In the Court's own
words:

The Bulacan trial court, in its 1979 decision, was correct in

imposing interests on the zonal value of the property to be computed from
the time petitioner instituted condemnation proceedings and "took" the
property in September 1969. This allowance of interest on the amount
found to be the value of the property as of the time of the taking
computed, being an effective forbearance, at 12% per annum should
help eliminate the issue of the constant fluctuation and inflation of the
value of the currency over time x x x.22

On this score, a review of the history of the pertinent laws, rules and
regulations, as well as the issuances of the Central Bank (CB) or Bangko
Sentral ng Pilipinas (BSP) is imperative in arriving at the proper amount of
interest to be awarded herein.

On May 1, 1916, Act No. 265523 took effect prescribing an interest

rate of six percent (6%) or such rate as may be prescribed by the Central
Bank Monetary Board (CB-MB) for loans or forbearance of money, in the
absence of express stipulation as to such rate of interest, to wit:

Section 1. The rate of interest for the loan or forbearance of any

money goods, or credits and the rate allowed in judgments, in the absence
of express contract as to such rate of interest, shall be six per centum per
annum or such rate as may be prescribed by the Monetary Board of the
Central Bank of the Philippines for that purpose in accordance with the
authority hereby granted.

Sec. 1-a. The Monetary Board is hereby authorized to prescribe the

maximum rate or rates of interest for the loan or renewal thereof or the
forbearance of any money, goods or credits, and to change such rate or
rates whenever warranted by prevailing economic and social conditions.

20
Id. at 743-744 (Citations omitted; italics ours)
21
Id. at 745.
22
Republic of the Philippines v. Court of Appeals, 433 Phil. 106, 123 (2002). (Emphasis ours;
citations omitted)
23
An Act Fixing Rates of Interest on Loans Declaring the Effect of Receiving or Taking Usurious
Rates and For Other Purposes.
Resolution 8 G.R. No. 179334

In the exercise of the authority herein granted, the Monetary Board

may prescribe higher maximum rates for loans of low priority, such as
consumer loans or renewals thereof as well as such loans made by
pawnshops finance companies and other similar credit institutions
although the rates prescribed for these institutions need not necessarily be
uniform. The Monetary Board is also authorized to prescribe different
maximum rate or rates for different types of borrowings, including
deposits and deposit substitutes, or loans of financial intermediaries.24

Under the aforesaid law, any amount of interest paid or stipulated to

be paid in excess of that fixed by law is considered usurious, therefore
unlawful.25

On July 29, 1974, the CB-MB, pursuant to the authority granted to it

under the aforequoted provision, issued Resolution No. 1622. On even date,
Circular No. 416 was issued, implementing MB Resolution No. 1622,
increasing the rate of interest for loans and forbearance of money to twelve
percent (12%) per annum, thus:

By virtue of the authority granted to it under Section 1 of Act No.

2655, as amended, otherwise known as the "Usury Law," the Monetary
Board, in its Resolution No. 1622 dated July 29, 1974, has prescribed that
the rate of interest for the loan or forbearance of any money, goods or
credits and the rate allowed in judgments, in the absence of express
contract as to such rate of interest, shall be twelve per cent (12%) per
annum.26

The foregoing rate was sustained in CB Circular No. 90527 which

took effect on December 22, 1982, particularly Section 2 thereof, which
states:

24
Emphasis supplied.
25
Spouses Puerto v. Court of Appeals, 432 Phil. 743, 752 (2002).
26
Emphasis supplied.
27
CB Circular 905 was issued by the Central Bank's Monetary Board pursuant to P.D. 1684
empowering them to prescribe the maximum rates of interest for loans and certain forbearances, to wit:
Sec. 1. Section 1-a of Act No. 2655, as amended, is hereby amended to read as
follows:
Sec. 1-a. The Monetary Board is hereby authorized to prescribe the maximum
rate of interest for the loan or renewal thereof or the forbearance of any money, goods or
credits, and to change such rate or rates whenever warranted by prevailing economic and
social conditions: Provided, That changes in such rate or rates may be effected gradually
on scheduled dates announced in advance.
In the exercise of the authority herein granted, the Monetary Board may prescribe higher
maximum rates for loans of low priority, such as consumer loans or renewals thereof as well as such loans
made by pawnshops, finance companies and other similar credit institutions although the rates prescribed
for these institutions need not necessarily be uniform. The Monetary Board is also authorized to prescribed
different maximum rate or rates for different types of borrowings, including deposits and deposit
substitutes, or loans of financial intermediaries.
Resolution 9 G.R. No. 179334

Sec. 2. The rate of interest for the loan or forbearance of any

money, goods or credits and the rate allowed in judgments, in the absence
of express contract as to such rate of interest, shall continue to be twelve
per cent (12%) per annum.28

Recently, the BSP Monetary Board (BSP-MB), in its Resolution No.

796 dated May 16, 2013, approved the amendment of Section 2 of Circular
No. 905, Series of 1982, and accordingly, issued Circular No. 799, Series of
2013, effective July 1, 2013, the pertinent portion of which reads:

The Monetary Board, in its Resolution No. 796 dated 16 May

2013, approved the following revisions governing the rate of interest in the
absence of stipulation in loan contracts, thereby amending Section 2 of
Circular No. 905, Series of 1982:

Section 1. The rate of interest for the loan or forbearance of any

money, goods or credits and the rate allowed in judgments, in the
absence of an express contract as to such rate of interest, shall be six
percent (6%) per annum.

Section 2. In view of the above, Subsection X305.1 of the Manual

of Regulations for Banks and Sections 4305Q.1, 4305S.3 and 4303P.1 of
the Manual of Regulations for Non-Bank Financial Institutions are hereby
amended accordingly.

This Circular shall take effect on 01 July 2013.29

Accordingly, the prevailing interest rate for loans and forbearance of

money is six percent (6%) per annum, in the absence of an express contract
as to such rate of interest.

In summary, the interest rates applicable to loans and forbearance of

money, in the absence of an express contract as to such rate of interest, for
the period of 1940 to present are as follows:

Law, Rule and Regulations, Date of Effectivity Interest Rate

BSP Issuances
Act No. 2655 May 1, 1916 6%
CB Circular No. 416 July 29, 1974 12%
CB Circular No. 905 December 22, 1982 12%
CB Circular No. 799 July 1, 2013 6%

It is important to note, however, that interest shall be compounded at

the time judicial demand is made pursuant to Article 221230 of the Civil

28
Emphasis supplied.
29
Emphasis supplied.
Resolution 10 G.R. No. 179334

Code of the Philippines, and sustained in Eastern Shipping Lines v. Court of

Appeals,31 then later on in Nacar v. Gallery Frames,32 save for the reduction
of interest rate to 6% for loans or forbearance of money, thus:

1. When the obligation is breached, and it consists in the payment of a

sum of money, i.e., a loan or forbearance of money, the interest due
should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the
time it is judicially demanded. In the absence of stipulation, the rate of
interest shall be 6% per annum to be computed from default, i.e., from
judicial or extrajudicial demand under and subject to the provisions of
Article 1169 of the Civil Code.33

Applying the foregoing law and jurisprudence, respondents-movants

are entitled to interest in the amount of One Million Seven Hundred
Eighteen Thousand Eight Hundred Forty-Eight Pesos and Thirty-Two
Centavos (P1,718,848.32) as of September 30, 2014,34 computed as
follows:

January 1, 194035 to July 28, 1974 P 10,553.4937

July 29, 1974 to March 16, 1995 26,126.3138
March 17, 199536 to June 30, 2013 232,070.3339
July 1, 2013 to September 30, 2014 250,098.1940

30
Art. 2212. Interest due shall earn legal interest from the time it is judicially demanded, although
the obligation may be silent upon this point.
31
G.R. No. 97412, July 12, 1994, 234 SCRA 78 (1994).
32
G.R. No. 189871, August 13, 2013, 703 SCRA 439 (2013).
33
Id. at 457-458.
34
The amount of interest shall be computed from the time of actual taking until full payment.
Considering that the date of full payment cannot be determined at the moment, We ought to peg the same
on September 30, 2014 for purposes of illustration and to assign an absolute value to the same.
35
Considering that the actual date of taking cannot be determined from the records of the case, the
date of taking is pegged on January 1, 1940. Consequently, the interest accruing therefrom shall be for the
entire year of 1940.
36
This pertains to the date of the Complaint filed by respondents-movants to recover the possession
of their property with damages.
37
[(P5,087.60 * 6% * 34 years) + (P5,087.60 * 6% * 209 days/365 days)]. For accuracy, the period
from January 1, 1940 to December 31, 1973 is determined by number of years, while the period from
January 1, 1974 to July 28, 1974 is determined by number of days.
38
[(P10,553.49 * 12% * 155 days/365 days) + (P10,553.49 * 12% * 20 years) + (P10,553.49 * 12%
* 75 days/365 days)]. For accuracy, the periods from July 29, 1974 to December 31, 1974 and January 1,
1995 to March 16, 1995 is determined by number of days while the period from January 1, 1975 to
December 31, 1994 is determined by number of years.
39
[P26,126.31 * (1 + 1%)219.5 months]. For accuracy and in view of the complications of compounding
the interest, the period from March 17, 1995 to June 30, 2013 is determined by number of months.
Accordingly, the rate of interest of 12% is divided by 12 to get the applicable monthly interest rate. The
formal equation to calculate monthly compounded interest is P1=P(1+m)t, where P is the starting or
average balance; m is the monthly interest rate; t is the number of months; and P1 is the balance after
monthly interest is added.
40
[P232,070.33 * (1 + 0.5%)15 moths]. For accuracy and in view of the complications of compounding
the interest, the period from July 1, 2013 to September 30, 2014 is determined by number of months.
Accordingly, the rate of interest of 6% is divided by 12 to get the applicable monthly interest rate. The
formal equation to calculate monthly compounded interest is P1=P(1+m)t, where P is the starting or
average balance; m is the monthly interest rate; t is the number of months; and P1 is the balance after
monthly interest is added.
Resolution 11 G.R. No. 179334

Market Value of the Property at the time of

taking including interest P 518,848.32

Market value of the property at the time of

taking including interest P 518,848.32
Add: Exemplary damages 1,000.000.00
Attorney’s fees 200,000.00
Total Amount of Interest due to Respondents-
Movants as of September 30, 2014 P1,718,848.16

Considering that respondents-movants only resorted to judicial

demand for the payment of the fair market value of the land on March 17,
1995, it is only then that the interest earned shall itself earn interest.

Lastly, from finality of the Court’s Resolution on reconsideration until

full payment, the total amount due to respondents-movants shall earn a
straight six percent (6%) legal interest, pursuant to Circular No. 799 and the
case of Nacar. Such interest is imposed by reason of the Court’s decision
and takes the nature of a judicial debt.

Clearly, the award of interest on the value of the land at the time of
taking in 1940 until full payment is adequate compensation to respondents-
movants for the deprivation of their property without the benefit of
expropriation proceedings. Such interest, however meager or enormous it
may be, cannot be inequitable and unconscionable because it resulted
directly from the application of law and jurisprudence—standards that have
taken into account fairness and equity in setting the interest rates due for the
use or forbearance of money.41 Thus, adding the interest computed to the
market value of the property at the time of taking signifies the real,
substantial, full and ample value of the property. Verily, the same constitutes
due compliance with the constitutional mandate on eminent domain and
serves as a basic measure of fairness.

In addition to the foregoing interest, additional compensation shall be

awarded to respondents-movants by way of exemplary damages and
attorney’s fees in view of the government’s taking without the benefit of
expropriation proceedings. As held in Eusebio v. Luis,42 an irregularity in an
expropriation proceeding cannot ensue without consequence. Thus, the
Court held that the government agency’s illegal occupation of the owner’s
property for a very long period of time surely resulted in pecuniary loss to
the owner, to wit:
41
Apo Fruits Corporation and Hijo Plantation, Inc. v. Land Bank of the Philippines, supra note 14,
at 758.
42
Supra note 11, at 585.
Resolution 12 G.R. No. 179334

However, in taking respondents’ property without the benefit of

expropriation proceedings and without payment of just compensation, the
City of Pasig clearly acted in utter disregard of respondents’ proprietary
rights. Such conduct cannot be countenanced by the Court. For said
illegal taking, the City of Pasig should definitely be held liable for
damages to respondents. Again, in Manila International Airport
Authority v. Rodriguez, the Court held that the government agency’s
illegal occupation of the owner’s property for a very long period of time
surely resulted in pecuniary loss to the owner. The Court held as follows:

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.”

The award of interest renders unwarranted the grant of back

rentals as extended by the courts below. In Republic v. Lara, et al., the
Court ruled that the indemnity for rentals is inconsistent with a property
owner’s right to be paid legal interest on the value of the property, for if
the condemnor is to pay the compensation due to the owners from the time
of the actual taking of their property, the payment of such compensation is
deemed to retroact to the actual taking of the property; and, hence, there is
no basis for claiming rentals from the time of actual taking. More
explicitly, the Court held in Republic v. Garcellano that:

The uniform rule of this Court, however, is that this

compensation must be, not in the form of rentals, but by
way of 'interest from the date that the company [or
entity] exercising the right of eminent domain take
possession of the condemned lands, and the amounts
granted by the court shall cease to earn interest only
from the moment they are paid to the owners or
deposited in court 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. However, while Rodriguez is entitled to such exemplary damages
and attorney’s fees, the award granted by the courts below should be
equitably reduced. We hold that Rodriguez is entitled only to
P200,000.00 as exemplary damages, and attorney’s fees equivalent to one
percent (1%) of the amount due. 43

43
Eusebio v. Luis, supra, at 587-588. (Italics ours; emphasis in the original; citations omitted)
Resolution 13 G.R. No. 179334

Similarly, in Republic v. CA,44 We held that the failure of the

government to initiate an expropriation proceeding to the prejudice of the
landowner may be corrected with the awarding of exemplary damages,
attorney’s fees and costs of litigation. Thus:

The Court will not award attorney’s fees in light of respondent’s

choice not to appeal the CA Decision striking down the award. However,
we find it proper to award temperate and exemplary damages in light of
NIA’s misuse of its power of eminent domain. Any arm of the State that
exercises the delegated power of eminent domain must wield that power
with circumspection and utmost regard for procedural requirements. A
government instrumentality that fails to observe the constitutional
guarantees of just compensation and due process abuses the authority
delegated to it, and is liable to the property owner for damages.

Temperate or moderate damages may be recovered if pecuniary

loss has been suffered but the amount cannot be proved with certainty
from the nature of the case. Here, the trial and appellate courts found that
the owners were unable to plant palay on 96,655 square meters of the
Property for an unspecified period during and after NIA’s construction of
the canals in 1972. The passage of time, however, has made it impossible
to determine these losses with any certainty. NIA also deprived the owners
of the Property of possession of a substantial portion of their land since
1972. Considering the particular circumstances of this case, an award of
P150,000 as temperate damages is reasonable.

NIA’s irresponsible exercise of its eminent domain powers also

deserves censure. For more than three decades, NIA has been charging
irrigation fees from respondent and other landowners for the use of the
canals built on the Property, without reimbursing respondent a single cent
for the loss and damage. NIA exhibits a disturbingly cavalier attitude
towards respondent’s property rights, rights to due process of law and to
equal protection of the laws. Worse, this is not the first time NIA has
disregarded the rights of private property owners by refusing to pay just
compensation promptly. To dissuade NIA from continuing this practice
and to set an example for other agencies exercising eminent domain
powers, NIA is directed to pay respondent exemplary damages of
P250,000.45

Applying the aforequoted doctrines to the present case, considering

that respondents-movants were deprived of beneficial ownership over their
property for more than seventy (70) years without the benefit of a timely
expropriation proceedings, and to serve as a deterrent to the State from
failing to institute such proceedings within the prescribed period under the
law, a grant of exemplary damages in the amount of One Million Pesos
(P1,000,000.00) is fair and reasonable. Moreover, an award for attorney’s
fees in the amount of Two Hundred Thousand Pesos (P200,000.00) in favor
of respondents-movants is in order.

44
494 Phil. 494 (2005).
45
Republic v. CA, supra, at 512-513. (Emphasis ours; citations omitted)
Resolution 14 G.R. No. 179334

In sum, respondents-movants shall be entitled to an aggregate amount

of One Million Seven Hundred Eighteen Thousand Eight Hundred
Forty-Eight Pesos and Thirty-Two Centavos (P1,718,848.32) as just
compensation as of September 30, 2014, computed as follows:

Market value of the property at the time

of taking in 1940 including interest P 518,848.32
Add: Exemplary Damages 1,000,000.00
Attorney’s fees 200,000.00

Total Amount due to Respondents-

movants as of September 30, 2014 P1,718,848.32

This Court is not unaware that at present, stringent laws and rules are
put in place to ensure that owners of real property acquired for national
government infrastructure projects are promptly paid just compensation.
Specifically, Section 4 of Republic Act No. 8974 (R.A. 8974),46 which took
effect on November 26, 2000, provides sufficient guidelines for
implementing an expropriation proceeding, to wit:

Section 4. Guidelines for Expropriation Proceedings. - Whenever

it is necessary to acquire real property for the right-of-way or location for
any national government infrastructure project through expropriation, the
appropriate implementing agency shall initiate the expropriation
proceedings before the proper court under the following guidelines:

(a) Upon the filing of the complaint, and after due notice
to the defendant, the implementing agency shall
immediately pay the owner of the property the amount
equivalent to the sum of (1) one hundred percent
(100%) of the value of the property based on the
current relevant zonal valuation of the Bureau of
Internal Revenue (BIR); and (2) the value of the
improvements and/or structures as determined under
Section 7 hereof;

(b) In provinces, cities, municipalities and other areas

where there is no zonal valuation, the BIR is hereby
mandated within the period of sixty (60) days from the
date of the expropriation case, to come up with a zonal
valuation for said area; and

(c) In case the completion of a government infrastructure

project is of utmost urgency and importance, and
there is no existing valuation of the area concerned,
the implementing agency shall immediately pay the
owner of the property its proffered value taking into
46
AN ACT TO FACILITATE THE ACQUISITION OF RIGHT-OF-WAY, SITE OR LOCATION
FOR NATIONAL GOVERNMENT INFRASTRUCTURE PROJECTS AND FOR OTHER PURPOSES.
Resolution 15 G.R. No. 179334

consideration the standards prescribed in Section 5

hereof.

Upon compliance with the guidelines abovementioned, the court

shall immediately issue to the implementing agency an order to take
possession of the property and start the implementation of the project.

Before the court can issue a Writ of Possession, the implementing

agency shall present to the court a certificate of availability of funds from
the proper official concerned.

In the event that the owner of the property contests the

implementing agency’s proffered value, the court shall determine the just
compensation to be paid the owner within sixty (60) days from the date of
filing of the expropriation case. When the decision of the court becomes
final and executory, the implementing agency shall pay the owner the
difference between the amount already paid and the just compensation as
determined by the court.

Failure to comply with the foregoing directives shall subject the

government official or employee concerned to administrative, civil and/or
criminal sanctions, thus:

Section 11. Sanctions. - Violation of any provisions of this Act

shall subject the government official or employee concerned to
appropriate administrative, civil and/or criminal sanctions, including
suspension and/or dismissal from the government service and forfeiture of
benefits.

While the foregoing provisions, being substantive in nature or disturbs

substantive rights, cannot be retroactively applied to the present case, We
trust that this established mechanism will surely deter hasty acquisition of
private properties in the future without the benefit of immediate payment of
the value of the property in accordance with Section 4 of R.A. 8974. This
effectively addresses J. Velasco’s concerns that sustaining our earlier rulings
on the matter would be licensing the government to dispense with
constitutional requirements in taking private properties. Moreover, any gap
on the procedural aspect of the expropriation proceedings will be remedied
by the aforequoted provisions.

In effect, R.A. 8974 enshrines a new approach towards eminent

domain that reconciles the inherent unease attending expropriation
proceedings with a position of fundamental equity.47

47
Republic v. Gingoyon, G.R. No. 166429, December 19, 2005.
 Resolution 16 G.R. No. 179334

Despite the foregoing developments, however, We emphasize that the

government's failure, to initiate the necessary expropriation proceedings
prior to actual taking cannot simply invalidate the State's exercise of its
eminent domain power, given that the property subject of expropriation is
indubitably devoted for public use, and public policy imposes upon the
public utility the obligation to continue its services to the public. To hastily
nullify said expropriation in the guise of lack of due process would certainly
diminish or weaken one of the State's inherent powers, the ultimate
objective of which is to serve the greater good. Thus, the non-filing of the
case for expropriation will not necessarily lead to the return of the property
to the landowner. What is left to the landowner is the right of
. 48
compensat10n.

All told, We hold that putting to rest the issue on the validity of the
exercise of eminent domain is neither tantamount to condoning the acts of
the DPWH in disregarding the property rights of respondents-movants nor
giving premium to the government's failure to institute an expropriation
proceeding. This Court had steadfastly adhered to the doctrine that its first
and fundamental duty is the application of the law according to its express
terms, interpretation being called for only when such literal application is
impossible. 49 To entertain other formula for computing just compensation,
contrary to those established by law and jurisprudence, would open varying
interpretation of economic policies - a matter which this Court has no
competence to take cognizance of. Time and again, we have held that no
process of interpretation or construction need be resorted to where a
provision of law peremptorily calls for application.so Equity and equitable
principles only come into full play when a gap exists in the law and
jurisprudence.s 1 As we have shown above, established rulings of this Court
are in place for full application to the case at bar, hence, should be upheld.

WHEREFORE, the motion for reconsideration is hereby DENIED

for lack of merit.

SO ORDERED.

48
For/om Development Corporation (For/om) v. Philippine National Railways (PNR), supra note
10.
49
Quijano v. Development Bank of the Philippines, 146 Phil. 283, 291 (1970).
50
Id.
51
Apo Fruits Corporation and Hija Plantation, Inc. v. Land Bank of the Philippines, supra note 14,
at 758-759.
 Resolution 17 G.R. No. 179334

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice

Associate Justice Associate Justice

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RSAMIN
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~1"'~::0 C. DEL CASTILLO
Associate Justice

REZ

JOSE CA~TDOZA BIENVENIDO L. REYES

As~~~J~~Jc: Associate Justice
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ESTELA M7PERLAS-BERNABE MARVI M.V.F.
Associate Justice

FRANC~ZA
Associate Justice
Resolution 18 G.R. No. 179334

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that

the conclusions in the above Resolution were reached in consultation before
the case was assigned to the writer of the opinion of the Court.

MARIA LOURDES P.A. SERENO

Chief Justice