The Supreme Court ruled that the City of Cabanatuan must justly compensate landowners for property taken for public road widening projects, even if the land was initially designated as a subdivision road. This decision reinforces the constitutional right to just compensation for private property used for public purposes, ensuring that landowners are fairly compensated for their loss and preventing undue delays in payment by the government. The court’s decision highlights the government’s obligation to initiate expropriation proceedings promptly and to provide timely compensation to affected landowners, setting a precedent for similar cases involving eminent domain.

Cabanatuan’s Road to Responsibility: Can a City Sidestep Just Compensation?

This case revolves around a parcel of land in Cabanatuan City, owned by Lourdes Melencio S. Grecia and her relatives (respondents). Sometime in 1989, the local government, specifically the Sangguniang Panlungsod of Cabanatuan City (petitioners), took a portion of this land for road-right-of-way and road widening projects. Despite utilizing the land for public use, the Sangguniang Panlungsod failed to provide just compensation to the respondents, prompting a legal battle that reached the Supreme Court. The central legal question is whether the city government can avoid paying just compensation for the taken land, arguing that it was a subdivision road and therefore beyond the commerce of man.

The petitioners argued that the land was encumbered as a subdivision road, citing Section 50 of Presidential Decree (P.D.) No. 1529, also known as the Property Registration Decree, suggesting it was not subject to compensation. However, the Supreme Court dismissed this argument, referencing its earlier ruling in Republic of the Philippines v. Ortigas and Company Limited Partnership. The Court clarified that Section 50 of P.D. No. 1529 applies to roads and streets within a subdivided property and not to public thoroughfares built on private land taken for public use. “Section 50 contemplates roads and streets in a subdivided property, not public thoroughfares built on a private property that was taken from an owner for public purpose. A public thoroughfare is not a subdivision road or street.”

Building on this principle, the Court emphasized that the government’s act of taking private property for public use triggers the constitutional right to just compensation. This right is enshrined in Section 9, Article III of the 1987 Constitution, which states: “Private property shall not be taken for public use without just compensation.” The Court noted that while the government has the power of eminent domain, its exercise is contingent upon fulfilling two mandatory requirements: a public purpose and the payment of just compensation.

The Court found that Cabanatuan City had indeed taken the respondents’ land for a public purpose—road widening. However, their failure to provide just compensation constituted a violation of the respondents’ constitutional rights. The Court criticized the city’s actions, highlighting that they should have initiated eminent domain proceedings and deposited the assessed value of the land before occupying it. Instead, the city’s omission forced the respondents to file inverse condemnation proceedings to seek fair payment. This delay in payment was a significant factor in the Court’s decision.

Furthermore, the Supreme Court addressed the issue of determining just compensation. While statutory valuations can serve as a guide, the Court affirmed that the final determination of just compensation is a judicial function. It took into account the prolonged deprivation suffered by the respondents since 1989. The Court held that the respondents were entitled to the full market value of the land at the time of the filing of the complaint, amounting to P17,028,900.00. This amount represented the fair value when the respondents first made a judicial demand for just compensation.

The Court also addressed the issue of interest on the delayed payment. It reiterated that just compensation must be made without delay and that prompt payment is essential. The absence of prompt payment warrants the imposition of interest to compensate the landowner for the income they would have earned had they been properly compensated at the time of taking. The Court thus imposed a legal interest rate of twelve percent (12%) per annum from the date of the judicial demand (December 29, 2005) until June 30, 2013, and six percent (6%) per annum from July 1, 2013, until full payment, in accordance with Bangko Sentral ng Pilipinas Monetary Board Circular No. 799, Series of 2013.

Additionally, the Court found the award of exemplary damages and attorney’s fees to be warranted. The Court condemned the city’s “expropriate now, pay later” approach, underscoring that the failure to initiate timely expropriation proceedings prejudiced the respondents. Such failure justified the award of exemplary damages, attorney’s fees, and costs of litigation. Exemplary damages serve as a deterrent to the State from failing to institute expropriation proceedings within the prescribed period, while attorney’s fees compensate the respondents for the legal expenses incurred in pursuing their claim.

The decision serves as a reminder to local governments to adhere to legal and constitutional requirements when exercising their power of eminent domain. The court emphasized that it cannot allow the government to profit from its failure to comply with the law. The Supreme Court also considered the cooperative behavior of the landowners. The Court noted that the respondents cooperated with the city’s road widening program, allowing their land to be taken without resistance. This underscored the city’s obligation to compensate them fairly and promptly.

FAQs

What was the key issue in this case?	The primary issue was whether the City of Cabanatuan was obligated to pay just compensation for land taken for road widening, despite arguing it was a subdivision road not subject to compensation.
What did the Supreme Court rule?	The Supreme Court ruled that the city must pay just compensation, emphasizing that Section 50 of P.D. No. 1529 does not apply to public thoroughfares built on private land taken for public use.
What is “just compensation” in this context?	“Just compensation” refers to the fair market value of the property at the time of taking, plus interest for any delay in payment, ensuring the landowner is fully indemnified.
Why was there a delay in payment in this case?	The delay occurred because the city failed to initiate timely expropriation proceedings and argued that the land was not subject to compensation, leading to prolonged litigation.
What is the significance of Section 50 of P.D. No. 1529?	Section 50 of P.D. No. 1529 pertains to roads and streets within a subdivided property and does not exempt the government from paying just compensation for private land taken for public thoroughfares.
What are the requirements for the government to exercise eminent domain?	The government must demonstrate a public purpose for the taking and provide just compensation to the property owner.
What additional damages were awarded in this case?	The Court awarded exemplary damages, attorney’s fees, and interest on the delayed payment, in addition to the just compensation for the land.
What is the effect of the city’s failure to initiate expropriation proceedings?	The failure to initiate timely expropriation proceedings prejudiced the landowner and justified the award of exemplary damages and attorney’s fees.
How is interest calculated on just compensation?	Interest is calculated at 12% per annum from the time of judicial demand until June 30, 2013, and 6% per annum from July 1, 2013, until full payment.

This Supreme Court decision reinforces the principle that local governments must justly compensate landowners when taking private property for public use, ensuring fairness and adherence to constitutional rights. It serves as a crucial reminder of the importance of timely expropriation proceedings and the prompt payment of just compensation.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: Vergara vs. Grecia, G.R. No. 185638, August 10, 2016