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 property in Naga City registered in the names of Macario A. Mariano and Jose A. Gimenez. The City of Naga, without initiating formal expropriation proceedings, took possession of the property on August 16, 1954, and constructed its city hall and other government offices thereon. The heirs of the registered owners (petitioners) eventually filed an ejectment case on February 12, 2004. The Court’s First Division, in a March 12, 2018 Decision, ordered the City to vacate the property and pay monthly rentals of P1,250,000.00 plus attorney’s fees. The City filed a Second Motion for Reconsideration, arguing that physical return of the property was no longer feasible due to the public buildings erected and that the only proper remedy was payment of just compensation.

ISSUE

The core issue is the correct legal remedy and the proper computation of just compensation when the government takes private property for public use without initiating expropriation proceedings, and restitution is no longer possible.

RULING

Justice Gaerlan, in a Concurring and Dissenting Opinion, concurred with the ponencia that the property could not be physically returned but dissented on the computation of just compensation and the procedural path. The ponencia remanded the case to the Regional Trial Court (RTC) to determine just compensation based on the property’s value at the time of taking in 1954, with legal interest. Justice Gaerlan argued this would cause further delay. He proposed remanding the case to the Court of Appeals solely for the determination of just compensation, whose report would expedite the Supreme Court’s final resolution. On the substantive computation, while the Court settled on using the 1954 value as the base, Justice Gaerlan, aligning with Justice Lazaro-Javier’s proposal, advocated for an “inflation-adjusted fair market value” formula. This approach adjusts the 1954 base value for inflation to reflect the true economic loss suffered by the owners, upon which legal interest should then be applied. He argued that using a low 1954 value without such adjustment, as in the “present value” formula from Republic v. Spouses Nocom, would not constitute full and just compensation and would allow the government to benefit from its unconstitutional taking. Furthermore, he concurred with awarding exemplary damages of P1,000,000.00 and attorney’s fees of P75,000.00 against the City for its flagrant violation of due process, to serve as a deterrent against similar unauthorized takings.