Just compensation must consider various factors beyond local government assessments
City Government of Pasay Vs. Arellano University
Supreme Court of the Philippines
G.R. No. 260038. May 7, 2025
The Supreme Court of the Philippines has reiterated that just compensation in land expropriation cases must take into account all relevant factors, not merely the market value determined by local government units (LGUs).
In a decision penned by Associate Justice Samuel H. Gaerlan, the Courtโs First Division remanded to the Regional Trial Court (RTC) the case between the City Government of Pasay and Arellano University for a reassessment of the amount of just compensation owed to the University.
Arellano University filed a complaint before the RTC in 2015, alleging that the Pasay LGU took its 805-square-meter parcel of land and converted it into a public road, now known as Menlo Street, without proper expropriation proceedings or payment of just compensation.
After mediation failed, the matter was referred to a board of commissioners composed of Pasay LGU officials. The board used a base value of PHP 200 per square meter from the 1978 General Revision of the City Assessorโs Office, adding 6% annual interest from 1978โthe year the street was discoveredโuntil 2017, for a total of PHP 2,060 per square meter.
The University disputed this computation, arguing that the interest should follow the rates published by the Bangko Sentral ng Pilipinas and that other factors such as inflation, fiscal policy, and currency fluctuations should also be considered. It proposed a total compensation of PHP 5,793,664.63.
The RTC adopted the commissionersโ base value but used a different interest rate, ordering Pasay LGU to pay PHP 161,000.00 plus 12% annual interest from 1978 to 2018. The Court of Appeals (CA) later ruled that the RTC relied solely on the 1978 assessment and ignored other relevant factors, remanding the case for recalculation.
The Supreme Court agreed, finding that the RTCโs computation was based on incomplete data. Citing Article III, Section 9 of the Constitution, the Court emphasized that private property cannot be taken for public use without just compensation, which must be real, substantial, full, and ample. Determining this amount, it stressed, is a judicial function.
While local government assessorsโ appraisals may serve as reference points, the Court noted that they are not controlling in expropriation cases. Such assessments typically cover large areas and fail to capture specific property characteristics. Tax assessments can guide valuation but cannot replace a comprehensive evaluation of just compensation.
The Court emphasized that trial courts must apply a โtotality of circumstancesโ approach, considering all relevant facts about the propertyโs condition, surroundings, improvements, and potential. Factors include the Bureau of Internal Revenueโs zonal valuation, acquisition cost, tax declarations, location, shape, size, and the current value of comparable properties.
The 2006 Manual on Real Property Appraisal and Assessment Operations by the Bureau of Local Government Finance also identifies additional considerations, such as property classification and use, development costs, declared value by the owner, market prices of nearby properties, and compensation for removing improvements.
In this case, the RTC relied solely on the Pasay City Assessorโs 1978 valuation, giving minimal attention to the BIRโs zonal valuation and other data sources. Because the computation was based on incomplete or inaccurate information, the Supreme Court remanded the case for a new determination.
The Court upheld the use of 6% annual interest, consistent with the prevailing Bangko Sentral ng Pilipinas rate, and ruled that the propertyโs value at the time of taking should accrue interest at the same rate from the finality of judgment until full payment.
In a Separate Opinion, Associate Justice Alfredo Benjamin S. Caguioa underscored that interest in expropriation cases should not be viewed as a mere penalty for the Stateโs delay in payment. Rather, it forms an integral part of just compensation itself, ensuring that property owners receive full and fair value for their loss.
