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

FACTS

This case involves a 1954 Deed of Donation covering five hectares of land executed by the registered landowners in favor of the City of Naga for specific public purposes. The petitioners, heirs of the donors, successfully argued before the Court that the donation was void due to the City’s non-compliance with legal requisites. The main decision (ponencia) partially denied the City’s second motion for reconsideration, ruling the petitioners’ claim was not barred by laches.
The ponencia held that since the donation was invalid, the land should be returned to the petitioners. However, recognizing that government structures had already been erected on the property, it proposed that if restitution was no longer feasible, the government must pay just compensation. It further ordered the remand of the case to the Regional Trial Court (RTC) for the determination of such compensation, citing the case of Secretary of DPWH v. Spouses Tecson.

ISSUE

Whether the determination of just compensation for the invalidly taken property should be conducted within the same remanded case or through a separate expropriation proceeding initiated by the government.

RULING

Chief Justice Gesmundo, in a Separate Opinion, concurred with the award of just compensation but dissented from the procedural method prescribed by the ponencia. He emphasized that the State’s exercise of eminent domain, even when arising from an invalid donation that effectively results in a taking, must follow the proper expropriation procedure under Rule 67 of the Rules of Court.
The legal logic is anchored on the distinction between direct and inverse condemnation. When the government takes property without initiating formal expropriation, the owner’s recourse is an action for “inverse condemnation” to recover just compensation. Crucially, as established in Forfom Development Corp. v. Philippine National Railways, an inverse condemnation proceeding is a separate and distinct action from a suit to nullify the transfer. It is not a mere incidental issue to be resolved in the same case. The two-stage process in expropriation—first, determining the authority to take, and second, ascertaining just compensation—requires the presentation of extensive evidence on property valuation, which is best accomplished in a dedicated proceeding.
Therefore, the proper remedy is not to remand the existing case for valuation. Instead, the government, having taken and utilized the property, must be directed to institute a separate expropriation action. This ensures due process and a comprehensive determination of just compensation, which must be paid with legal interest from the time of the taking until full payment, as delay constitutes forbearance of money. Chief Justice Gesmundo voted to grant the motion for reconsideration but directed the City of Naga to initiate a separate expropriation proceeding.