City of Iloilo vs. Javellana

The Supreme Court held that (1) an order granting a writ of possession in expropriation proceedings becomes final and executory if not appealed, and the authority to expropriate cannot subsequently be questioned; and (2) just compensation must be determined as of the date of filing of the expropriation complaint, not the date of a subsequent order, even where the statutory deposit required for immediate possession was not actually made; furthermore, the government entity is liable for exemplary damages and legal interest for prolonged failure to compensate the landowner.

The dispute arose from the City of Iloilo's exercise of eminent domain power to acquire two parcels of land registered under Transfer Certificate of Title No. T-44894 for use as the school site of Lapaz High School. The case highlights the government's failure to complete expropriation proceedings by paying just compensation, leaving the landowner without compensation for nearly three decades while the public enjoyed the benefits of the property.

• On September 18, 1981, the City of Iloilo filed a complaint for eminent domain against Elpidio T. Javellana and Southern Negros Development Bank (mortgagee) seeking to expropriate two parcels of land (Lot Nos. 3497-CC and 3497-DD, TCT No. T-44894) for use as a school site for Lapaz High School.
• The City alleged that the subject property had a tax declaration value of P60.00 per square meter (total of P43,560.00) and claimed to have deposited P40,000.00 with the Philippine National Bank as the required 10% of compensation under Presidential Decree No. 1533.
• On December 9, 1981, Javellana filed his Answer admitting ownership but denying the public purpose, claiming the City already had an existing school site, and asserting the true fair market value was P220.00 per square meter.
• On May 17, 1983, the trial court issued an Order granting the City's Motion for Issuance of Writ of Possession, authorizing immediate possession, control, and disposition of the properties.
• The City took physical possession of the properties sometime in mid-1985 and constructed Lapaz National High School thereon; at no time did Javellana deny that the property was actually used for the school.
• On April 21, 1984, Javellana filed an Amended Answer, after which the expropriation proceedings remained dormant for sixteen years.
• On April 17, 2000, Javellana filed an Ex Parte Motion/Manifestation alleging that when he sought to withdraw the alleged P40,000.00 deposit, he discovered through a PNB Certification that no such deposit was ever made for the expropriation.
• On April 2, 2003, Javellana filed a complaint for Recovery of Possession, Fixing and Recovery of Rental and Damages against the City, alleging illegal possession due to non-payment of just compensation and demanding rentals of P15,000.00 per month plus damages.
• The two cases were consolidated on August 26, 2003, and a commission was created on November 14, 2003 to determine just compensation.
• On April 15, 2004, the Commission submitted its Report providing various estimates of value: P110.00/sqm (1981 based on recorded sales), P686.81/sqm (1981 based on bank appraisal), P3,500.00/sqm (2002 City Appraisal Committee), and P4,200.00/sqm (2004 private appraisal).
• The City could not present any documentary or testimonial evidence to prove that any payment was actually made to Javellana.

• The trial court gravely abused its discretion amounting to lack or excess of jurisdiction in overturning the May 17, 1983 Order, which had already become final and executory.
• Just compensation for the expropriation should be based on the subject property's fair market value either at the time of taking or the filing of the complaint (September 18, 1981), not at the time of the 2004 orders.

• There was no error of jurisdiction correctible by certiorari, as the Assailed Orders were interlocutory in character.
• The Assailed Orders were subject to amendment and nullification at the discretion of the court at any time before final judgment, as they were interlocutory orders concerning the deposit requirement.

• Procedural: Whether the Regional Trial Court gravely abused its discretion amounting to lack or excess of jurisdiction in nullifying the May 17, 1983 Order which had already become final and executory.
• Substantive Issues: What is the correct reckoning point for determining just compensation in expropriation proceedings where the statutory deposit required under Presidential Decree No. 1533 was not actually made?

• Procedural: The Supreme Court held that the May 17, 1983 Order granting the writ of possession became final and executory when Javellana failed to file an appeal therefrom. Consequently, the petitioner's right to expropriate the property for public use could no longer be questioned, and the trial court gravely erred in nullifying this final order years later.
• Substantive: The Court ruled that just compensation must be determined based on the fair market value of the property at the time of filing the complaint (September 18, 1981), not at the time the assailed orders were issued in 2004. The Court ordered the payment of legal interest at six percent (6%) per annum from the time of filing until full payment to place the landowner in as good a position as money could accomplish as of the date of taking. Additionally, the City of Iloilo was ordered to pay P200,000.00 as exemplary damages for its arbitrary and irresponsible conduct in failing to compensate the landowner for over 25 years.

• Two-Stage Expropriation Proceedings — Expropriation proceedings consist of two distinct stages: first, the determination of the authority to expropriate and the public purpose (ending in an order of dismissal or condemnation); and second, the determination of just compensation (ending in an order fixing the amount). Both orders are final and appealable. Applied here to establish that the 1983 order allowing possession, having become final, could not be collaterally attacked.
• Finality of Expropriation Orders — An order of condemnation or dismissal resolving whether the plaintiff has properly exercised eminent domain power becomes final if not appealed, and the authority to expropriate and its public use can no longer be questioned. Applied here to hold that the RTC could no longer nullify the 1983 order after it became final.
• Reckoning Date for Just Compensation — Just compensation is ascertained as of the time of the taking, which usually coincides with the commencement of expropriation proceedings; where the institution of the action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint. Applied here to fix the valuation date as September 18, 1981, rather than the 2004 dates set by the trial court.
• Non-Payment Does Not Entitle Recovery of Possession — Non-payment of just compensation does not entitle the private landowner to recover possession of the expropriated lot, though the landowner remains entitled to just compensation with interest. Applied here to deny Javellana's claim for recovery of possession while affirming his right to compensation.
• Damages for Delayed Payment in Expropriation — A government agency's prolonged occupation of private property without payment of just compensation entitles the landowner to actual/compensatory damages in the form of legal interest (6%) from the time of taking until full payment, plus exemplary damages and attorney's fees for wanton and irresponsible acts. Applied here to award damages against the City for its 25-year delay.

• "It is arbitrary and capricious for the government to initiate expropriation proceedings, seize a person's property, allow the order of expropriation to become final, but then fail to justly compensate the owner for over 25 years. This is government at its most high-handed and irresponsible, and should be condemned in the strongest possible terms."
• "x x x just compensation is to be ascertained as of the time of the taking, which usually coincides with the commencement of the expropriation proceedings. Where the institution of the action precedes entry into the property, the just compensation is to be ascertained as of the time of the filing of the complaint."
• "Non-payment of just compensation does not entitle the private landowners to recover possession of their expropriated lot."
• "It is high time that private respondent be paid what was due him after almost 30 years."
• "Such pecuniary loss entitles him to adequate compensation in the form of actual or compensatory damages, which in this case should be the legal interest (6%) on the value of the land at the time of taking, from said point up to full payment by the MIAA."

• Manila International Airport Authority v. Rodriguez — Cited as controlling precedent for the rule that a government agency's prolonged occupation of private property without the benefit of expropriation proceedings entitles the landowner to actual/compensatory damages (legal interest) and exemplary damages for wanton and irresponsible acts.
• Republic of the Philippines v. Vda. De Castellvi — Cited for the established rule that just compensation is determined as of the date of filing of the complaint when the taking coincides with the commencement of proceedings.
• Estate of Salud Jimenez v. Philippines Export Processing Zone — Cited regarding the two-stage nature of expropriation proceedings and the finality of orders in the first stage.
• National Power Corporation v. Co — Cited for the principle that the filing of the complaint is the point of reference for assessing value where there is no reason to depart from the general rule.
• Forfom Development Corporation v. Philippine National Railways — Cited for the principle that non-payment of just compensation does not entitle the landowner to recover possession of the expropriated lot.
• B.H. Berkenkotter & Co. v. Court of Appeals — Cited for the general rule on determining just compensation as of the time of taking or filing of the complaint.

• Presidential Decree No. 1533, Sections 1 and 2 — Cited as the statutory basis governing just compensation and immediate possession; Section 1 limits compensation to the lower of the value declared by the owner or determined by the assessor, while Section 2 allows immediate possession upon deposit of 10% of the compensation amount.
• Rules of Court, Rule 67, Section 4 — Cited for the procedural rule that just compensation is determined as of the date of the taking of the property or the filing of the complaint, whichever came first.