G.R. No. 197743 . October 18, 2022
HEIRS OF JOSE MARIANO AND HELEN S. MARIANO, ET AL., PETITIONERS, VS. CITY OF NAGA, RESPONDENT.

FACTS

The case involves a five-hectare portion of land registered under TCT No. 671, originally owned by Macario Mariano and Jose Gimenez. In 1954, the City Heights Subdivision, through its officers including the landowners, offered to donate this land to the City of Naga for the construction of a new city hall, public plaza, and market. The Municipal Board accepted the offer via Resolution No. 89 and authorized the execution of a deed of donation. The City subsequently entered the property, constructed government buildings, and declared it for tax purposes. Petitioners, heirs of the original landowners, contend the donation never became effective because the condition—the award of the city hall construction contract to the Subdivision—failed. They allege the contract was instead awarded by the Bureau of Public Works to another contractor, and despite demands for the property’s return, the City retained possession.
After protracted litigation, the core dispute reached the Supreme Court on a second motion for reconsideration. The primary issue revolved around the nature of the City’s possession and the corresponding remedy for the landowners. The Court had previously ordered the City to vacate the property and pay rentals. The present resolution addresses the petitioners’ plea for just compensation instead of restitution and rentals.

ISSUE

Whether the City of Naga’s occupation of the subject property constitutes an act of eminent domain, thereby obligating it to pay just compensation to the landowners, rather than a scenario warranting restitution and payment of back rentals.

RULING

Yes. The Supreme Court, through the Concurring and Dissenting Opinion of Justice Lazaro-Javier, held that the City’s occupation and use of the property for public purposes—housing the city hall and other government agencies—amounted to a taking in the exercise of eminent domain. The legal logic is anchored on the doctrine that the government cannot acquire private property for public use without just compensation. The City’s act of entering the land, constructing permanent public structures, and exercising dominion over it for decades, even absent a formal expropriation proceeding or a perfected deed of donation, constitutes a de facto expropriation.
Consequently, the proper remedy is not an action for recovery of possession or for collection of rentals, but an action for the payment of just compensation. The award of monthly rentals and the order for the City to vacate are deleted. Just compensation must be equivalent to the full and fair market value of the property at the time of the actual taking, which is deemed to be on August 16, 1954, the date the City entered the property. To ensure fairness, this value must be adjusted for inflation to reflect its present worth. Legal interest is imposed on this inflation-adjusted value: 12% per annum from 1954 until June 30, 2013, and 6% per annum from July 1, 2013, until full payment. The case is remanded to the Court of Appeals for the sole purpose of receiving evidence and determining the exact amount of just compensation in accordance with this formula, to expedite the final settlement of this long-standing dispute.