G.R. No. 162474 ; October 13, 2009
HON. VICENTE P. EUSEBIO, LORNA A. BERNARDO, VICTOR ENDRIGA, and the CITY OF PASIG, Petitioners, vs. JOVITO M. LUIS, LIDINILA LUIS SANTOS, ANGELITA CAGALINGAN, ROMEO M. LUIS, and VIRGINIA LUIS-BELLESTEROS, Respondents.

FACTS

Respondents are the registered owners of a 1,586-square-meter parcel of land in Pasig City. In 1980, the City of Pasig took and used the property as a municipal road, now known as A. Sandoval Avenue, without initiating formal expropriation proceedings or paying just compensation. In 1993, the city’s Appraisal Committee valued the land at only ₱150 per square meter, which respondents contested, citing a 1994 expropriation in the same area where the city paid ₱2,000 per square meter. After failed negotiations, respondents filed a Complaint for Reconveyance and/or Damages in 1996, seeking either the return of the property with rentals or payment of just compensation at ₱5,000 per square meter.
The Regional Trial Court ruled in favor of respondents, declaring the taking illegal and ordering either restitution with rentals or, if return was impossible, payment of just compensation at ₱5,000 per square meter plus damages. The Court of Appeals affirmed this decision. Petitioners appealed to the Supreme Court, arguing prescription of the claim, erroneous valuation, and improper awards for rental and attorney’s fees.

ISSUE

The primary issues were: (1) whether respondents’ action to recover the property or its value had prescribed; (2) whether the valuation of just compensation at ₱5,000 per square meter was proper; and (3) whether the awards for rental and attorney’s fees were justified.

RULING

The Supreme Court partially granted the petition. On prescription, the Court held that an action for recovery of property taken by the government for public use without due process, or for just compensation, does not prescribe. Citing Republic v. Court of Appeals, the Court emphasized that the owner’s right to seek redress is imprescriptible when the state takes property without initiating expropriation or negotiated sale.
Regarding just compensation, the Court ruled that the trial court erred in fixing the amount at ₱5,000 per square meter. Just compensation must be determined as of the time of taking, based on the property’s fair market value, and requires the formal expropriation process for proper judicial ascertainment. The Court set aside the valuation and directed the City of Pasig to institute expropriation proceedings within 15 days to determine the correct compensation, with legal interest from the time of taking in 1980.
On damages, the Court upheld the award of attorney’s fees due to the city’s unjustified refusal to pay proper compensation, warranting exemplary damages. However, the award for reasonable rental was deleted, as the property was taken for public use as a road, and such use primarily benefited the public, not the petitioners personally. The decision was modified to order the city to pay exemplary damages and attorney’s fees while remanding the compensation determination to expropriation proceedings.