01/11/2025
MARKET VALUE NOT THE SOLE DETERMINANT OF JUST COMPENSATION IN EXPROPRIATION CASES—SUPREME COURT
The Supreme Court (SC) has ordered the Regional Trial Court (RTC) to reassess the amount of just compensation owed by the Pasay City Government to Arellano University for a property taken and converted into a public road, emphasizing that just compensation is not merely based on market value but must consider all relevant factors.
In a 16-page decision written by Associate Justice Samuel Gaerlan, the SC's Third Division emphasized that just compensation in land expropriation cases must take into account all relevant factors such as the property’s condition, surroundings, existing improvements, and capabilities; the zonal valuation of the Bureau of Internal Revenue; acquisition cost; tax declarations; size; shape; location; and the current value of similar properties.
The case stemmed from a parcel of land taken by the Pasay City government nearly five decades ago. In 2015, Arellano University filed a complaint accusing the Pasay City government of converting its 805-square-meter property in Barangay San Isidro into a public road—now known as Menlo Street—without formal expropriation proceedings or payment.
After failed mediation, the dispute was referred to a board of commissioners composed of city officials, who based their valuation on a 1978 city assessor’s appraisal of P200 per square meter, plus 6 percent annual interest up to 2017. The total reached P2,060 per square meter.
The university disputed the computation, arguing that the interest rate should follow those published by the Bangko Sentral ng Pilipinas (BSP) and that other factors—such as inflation, fiscal policies, and currency fluctuations—should also be considered. Based on these, it proposed total compensation of PHP 5,793,664.63.
The RTC adopted the 1978 base value but imposed a 12 percent annual interest from 1978 to 2018, ordering the city to pay P161,000 plus interest. The Court of Appeals later found that the RTC’s computation was incomplete, as it relied solely on outdated assessments, and remanded the case for recomputation.
In affirming the said ruling, the high court cited Article III, Section 9 of the Constitution, which provides that just compensation must be “real, substantial, full, and ample.” It held that courts—not assessors—are responsible for determining the fair value of expropriated property using a “totality of circumstances” approach.
It underscored that courts in determining just compensation must take into consideration the Bureau of Internal Revenue’s zonal valuation, tax declarations, acquisition cost, property shape, size, and location, as well as the current selling prices of nearby lots.
The highest bench relied only on the 1978 Pasay City Assessor’s valuation and barely referenced the BIR’s zonal valuation or other data. It explained that because the computation was based on incomplete and inaccurate information, the Court ordered the case returned to the RTC for proper reassessment.
Meanwhile, in a separate opinion, Associate Justice Alfredo Benjamin Caguioa said that the interest in expropriation cases should not be treated as “forbearance of money” due to the State’s delay in payment but as part of the compensation itself to ensure that it remains truly just.
MARKET VALUE NOT THE SOLE DETERMINANT OF JUST COMPENSATION IN EXPROPRIATION CASES—SUPREME COURT
The Supreme Court (SC) has ordered the Regional Trial Court (RTC) to reassess the amount of just compensation owed by the Pasay City Government to Arellano University for a property taken and converted into a public road, emphasizing that just compensation is not merely based on market value but must consider all relevant factors.
In a 16-page decision written by Associate Justice Samuel Gaerlan, the SC's Third Division emphasized that just compensation in land expropriation cases must take into account all relevant factors such as the property’s condition, surroundings, existing improvements, and capabilities; the zonal valuation of the Bureau of Internal Revenue; acquisition cost; tax declarations; size; shape; location; and the current value of similar properties.
The case stemmed from a parcel of land taken by the Pasay City government nearly five decades ago. In 2015, Arellano University filed a complaint accusing the Pasay City government of converting its 805-square-meter property in Barangay San Isidro into a public road—now known as Menlo Street—without formal expropriation proceedings or payment.
After failed mediation, the dispute was referred to a board of commissioners composed of city officials, who based their valuation on a 1978 city assessor’s appraisal of P200 per square meter, plus 6 percent annual interest up to 2017. The total reached P2,060 per square meter.
The university disputed the computation, arguing that the interest rate should follow those published by the Bangko Sentral ng Pilipinas (BSP) and that other factors—such as inflation, fiscal policies, and currency fluctuations—should also be considered. Based on these, it proposed total compensation of PHP 5,793,664.63.
The RTC adopted the 1978 base value but imposed a 12 percent annual interest from 1978 to 2018, ordering the city to pay P161,000 plus interest. The Court of Appeals later found that the RTC’s computation was incomplete, as it relied solely on outdated assessments, and remanded the case for recomputation.
In affirming the said ruling, the high court cited Article III, Section 9 of the Constitution, which provides that just compensation must be “real, substantial, full, and ample.” It held that courts—not assessors—are responsible for determining the fair value of expropriated property using a “totality of circumstances” approach.
It underscored that courts in determining just compensation must take into consideration the Bureau of Internal Revenue’s zonal valuation, tax declarations, acquisition cost, property shape, size, and location, as well as the current selling prices of nearby lots.
The highest bench relied only on the 1978 Pasay City Assessor’s valuation and barely referenced the BIR’s zonal valuation or other data. It explained that because the computation was based on incomplete and inaccurate information, the Court ordered the case returned to the RTC for proper reassessment.
Meanwhile, in a separate opinion, Associate Justice Alfredo Benjamin Caguioa said that the interest in expropriation cases should not be treated as “forbearance of money” due to the State’s delay in payment but as part of the compensation itself to ensure that it remains truly just.
