G.R. No. 179334 , April 21, 2015
SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT ENGINEER CELESTINO R. CONTRERAS, Petitioners, vs. SPOUSES HERACLEO and RAMONA TECSON, Respondents.

FACTS

In 1940, the Department of Public Works and Highways (DPWH) took the respondents’ property for the construction of the MacArthur Highway without initiating expropriation proceedings. In December 1994, the respondents demanded payment of the fair market value. The District Engineer offered compensation at P0.70 per square meter, based on a Provincial Appraisal Committee resolution. Dissatisfied, the respondents filed a complaint for recovery of possession with damages. The Regional Trial Court and the Court of Appeals ruled in favor of the respondents, valuing the property at P1,500.00 per square meter with 6% interest per annum. The petitioners elevated the case to the Supreme Court. In a Decision dated July 1, 2013, the Supreme Court modified the valuation, ruling that just compensation should be based on the value at the time of taking in 1940, which is P0.70 per square meter, with 6% interest from 1940 until full payment. The respondents filed a Motion for Reconsideration, which was referred to the Court En Banc due to its transcendental importance.

ISSUE

Whether the amount of just compensation due to the respondents should be based on the property’s value at the time of taking in 1940 or at a later date, and what other awards are proper.

RULING

The Motion for Reconsideration is PARTIALLY GRANTED. The Court maintained that just compensation is based on the property’s market value at the time of taking in 1940, which is P0.70 per square meter. However, it modified the interest award and granted exemplary damages and attorney’s fees. The Court held that the reckoning point for valuation is the time of taking, consistent with established jurisprudence (Forfom Development Corporation v. PNR, Eusebio v. Luis, Manila International Airport Authority v. Rodriguez, Republic v. Sarabia). The purpose of just compensation is to compensate the owner for the loss, not to reward them, and must be fair to both the owner and the public. To compensate for the income-generating potential lost due to the delay in payment, interest is imposed. The Court awarded: (1) Legal interest of 6% per annum on the just compensation (P5,087.60) from January 1, 1940, to July 28, 1974; (2) Legal interest of 12% per annum on the total amount due as of July 28, 1974, from July 29, 1974, to March 16, 1995; (3) Legal interest of 12% per annum on the total amount due as of March 16, 1995, from March 17, 1995, to June 30, 2013; and (4) Legal interest of 6% per annum on the total amount due as of June 30, 2013, from July 1, 2013, until full payment. Furthermore, exemplary damages of P200,000.00 and attorney’s fees of P200,000.00 were awarded due to the petitioners’ gross negligence in failing to initiate expropriation proceedings for over half a century, which compelled the respondents to litigate.