G.R. No. L-65037 November 23, 1988
CRESENCIO M. ROCAMORA, FLORACION RAFOLS-PEDERO, CONCEPCION PABLEO and REGIONAL DIRECTOR OF THE COMMISSION ON AUDIT (Region VII), petitioners, vs. RTC-Cebu (Branch VIII), ROBERTO GALVEZ, ANTONIO NICDAO, TEODULFO REGIS, JUSTINO BO-OC, ERLINDA CUENCO, ANTONIO PADILLA, LOPE TUDTUD (for himself and in behalf of the heirs of Emiliano Tudtud), PRIMITIVO BRIONES, OSCAR GARCES NAPISA, DAVID GARCES (represented by Oscar G. Napisa), ROGELIO SANTIANEZ, BENITO BERMEJO and CONCORDIO OPULENTISIMA, respondents.

FACTS

This case originated from a 1981 government project to widen M.J. Cuenco Avenue in Cebu in anticipation of Pope John Paul II’s visit. The Ministry of Public Highways (MPH) negotiated with the private respondents, owners of affected properties, for the acquisition of portions of their land. An agreement was reached, guided by Ministry of Justice Opinion No. 175, s. 1974, stipulating that payment for demolished buildings would be made promptly and payment for taken land portions would follow. An MPH estimating committee appraised the properties, with the valuations accepted by the owners and approved by Regional Director Cresencio Rocamora. The owners executed “Agreement to Demolish” documents, and demolitions proceeded.
However, the Commission on Audit (COA) representative, Floracion Rafols-Pedero, refused to audit the payment vouchers, contending the appraisals were incorrect as they were not based on actual loss and violated P.D. No. 76 , which prescribes a formula for just compensation in expropriation. The private respondents filed a complaint for specific performance in the Regional Trial Court to compel payment. The petitioners, Rocamora and the COA officials, argued in their answer that the compensation claims covered the entire building values, not just the damaged portions, and that administrative remedies had not been exhausted. The trial court granted the plaintiffs’ motion for judgment on the pleadings, ruling in their favor.

ISSUE

The primary issues were: (1) whether the trial court correctly granted judgment on the pleadings; (2) whether the private respondents failed to exhaust administrative remedies; and (3) whether compensation should be based on the negotiated agreement or the formula under P.D. No. 76 .

RULING

The Supreme Court reversed the trial court’s decision. On the first issue, the Court held that judgment on the pleadings was improper under Rule 19 of the Rules of Court because the petitioners’ answer did tender genuine issues of fact. The answer specifically denied that the compensation should be based on the full value of the properties as claimed, asserting it should be limited to the actual loss from the partial taking. This constituted a material factual dispute requiring a full trial.
On the second issue, the Court found the doctrine of exhaustion of administrative remedies inapplicable. The COA’s disallowance of the payments was final and not merely a preliminary step, as the vouchers had been returned to the MPH for adjustment and no further administrative appeal was pending. The private respondents were thus justified in seeking judicial relief.
Most significantly, on the third issue, the Court ruled that P.D. No. 76 , which prescribed a rigid formula for valuation, was unconstitutional and void, as previously established in Export Processing Zone Authority v. Dulay. Therefore, it could not govern the compensation due. The agreement between the MPH and the landowners, negotiated under Justice Opinion No. 175, was valid as