G.R. No. L-36706 March 31, 1980
COMMISSIONER OF PUBLIC HIGHWAYS, petitioner, vs. HON. FRANCISCO P. BURGOS, in his capacity as Judge of the Court of First Instance of Cebu City, Branch 11, and VICTORIA AMIGABLE, respondents.

FACTS

Victoria Amigable owned a parcel of land in Cebu City which the government took for road-right-of-way purposes in 1924 without formal expropriation proceedings or payment of just compensation. In 1959, Amigable filed a complaint to recover ownership and possession, or alternatively, for payment. The Supreme Court, in a prior decision (G.R. No. L-26400), ruled that the government’s occupation constituted an effective taking and remanded the case to the trial court solely to determine the just compensation to be paid, instructing that the basis should be the value of the property at the time of the taking in 1924.
On remand, the trial court, presided over by respondent Judge Burgos, received evidence. The government proved the 1924 value was P2.37 per square meter. Amigable presented evidence on the deflated value of the peso against the dollar by 1972. The trial court, applying Article 1250 of the New Civil Code on extraordinary deflation, computed compensation by adjusting the 1924 peso value to its 1972 dollar-equivalent value, awarding P49,459.34 plus substantial interest and attorney’s fees. The Commissioner of Public Highways, representing the Republic, petitioned for review, arguing this violated the Supreme Court’s directive to use the 1924 value as the sole basis.

ISSUE

Whether Article 1250 of the New Civil Code on extraordinary inflation/deflation is applicable in computing just compensation for property taken by eminent domain.

RULING

No. The Supreme Court reversed the trial court’s application of Article 1250. The legal logic is clear and twofold. First, Article 1250 by its explicit terms applies only to contractual obligations. It states the basis of payment shifts to currency value at the obligation’s establishment “[i]n case extra-ordinary inflation or deflation of the currency stipulated should supervene,” implying a pre-existing stipulation or agreement. The government’s obligation to pay just compensation for property taken under eminent domain arises from law, specifically the Constitution, and not from any contract or agreement with the landowner. Therefore, the article is inapplicable ratione materiae.
Second, the Court’s prior decision in Amigable v. Cuenca constituted the “law of the case,” which directed that just compensation be based on the property’s value at the time of taking in 1924. This directive aligns with settled jurisprudence that in expropriation, the obligation to pay arises at the time of taking, and the value at that time is controlling. The trial court’s adjustment based on subsequent currency fluctuations contravened this binding instruction. Consequently, the Court fixed just compensation at P14,615.79 (6,167 sqm x P2.37), with legal interest at 6% per annum from 1924 until full payment, plus P5,000.00 as reasonable attorney’s fees. The award of interest serves as a substitute for the income the landowner would have earned and compensates for the delay, rendering any currency adjustment via Article 1250 unnecessary and erroneous.