Secretary of DPWH vs. Tecson

Just compensation for property taken by the government without prior expropriation proceedings must be valued at the fair market value at the time of the actual taking; however, the landowner is entitled to legal interest of six percent (6%) per annum from the date of taking until full payment as compensatory damages for the government's failure to institute condemnation proceedings and the consequent delay in payment.

Spouses Heracleo and Ramona Tecson owned a 7,268-square meter parcel of land located in San Pablo, Malolos, Bulacan, covered by Transfer Certificate of Title (TCT) No. T-43006. In 1940, the government took possession of the property without the owners' consent and without initiating expropriation proceedings, using the land for the construction of the MacArthur Highway. In December 1994, the Tecsons demanded payment of the fair market value from the Department of Public Works and Highways (DPWH). The District Engineer offered P0.70 per square meter based on a 1950 Provincial Appraisal Committee resolution. Rejecting this offer, the Tecsons filed a complaint for recovery of possession with damages in March 1995 when their demand for current fair market value remained unheeded.

• Spouses Heracleo and Ramona Tecson are co-owners of a 7,268 square meter parcel of land located in San Pablo, Malolos, Bulacan, covered by Transfer Certificate of Title (TCT) No. T-43006 of the Register of Deeds of Bulacan.
• The subject property was taken by the government sometime in 1940 without the owners' consent and without the necessary expropriation proceedings for the construction of the MacArthur Highway.
• On December 15, 1994, respondents sent a letter to the DPWH demanding payment of the fair market value of the subject parcel.
• Petitioner Celestino R. Contreras, then District Engineer of the First Bulacan Engineering District of DPWH, offered to pay P0.70 per square meter based on Resolution No. XII dated January 15, 1950 of the Provincial Appraisal Committee (PAC) of Bulacan.
• Respondents rejected the offer and demanded either the return of the property or payment of compensation at the current fair market value.
• On March 17, 1995, respondents filed a Complaint for recovery of possession with damages, claiming the property was assessed at P2,543,800.00.
• Petitioners filed a Motion to Dismiss invoking state immunity from suit, prescription, laches, lack of cause of action for failure to exhaust administrative remedies, and valuation based on 1940/1941 values.
• The Provincial Appraisal Committee (PAC) recommended P1,500.00 per square meter as just compensation in Resolution No. 99-007, considering the 1940 price of P0.70 and the current price of P10,000.00 per square meter.
• Both the RTC and the CA recognized that the fair market value of the subject property in 1940 was P0.70 per square meter.

• The suit is against the State which may not be sued without its consent.
• The action is barred by prescription having been filed fifty-four (54) years after the accrual of the action in 1940, and respondents are guilty of laches for sleeping on their rights for over fifty years.
• Respondents have no cause of action for failure to exhaust administrative remedies.
• If respondents are entitled to compensation, they should be paid only the value of the property in 1940 or 1941 (P0.70 per square meter), not the current market value of P1,500.00 per square meter.
• Respondents' ownership of the subject property is highly dubious and questionable.
• The court can motu proprio dismiss the complaint if it shows on its face that the action had already prescribed.

• The doctrine of state immunity from suit should not apply because recovery of compensation is the only relief available, and denying such relief would cause injustice to the landowner.
• The action for recovery of land or its value does not prescribe where private property is taken by the Government for public use without first acquiring title thereto.
• Laches does not apply because there is nothing inequitable in giving due course to the claim; equity and law direct that a property owner should be compensated if his property is taken for public use.
• Just compensation should be based on the current fair market value of the property at the time of payment (P1,500.00 per square meter as recommended by PAC), not the 1940 value, as it would be unjust and inequitable to receive outdated valuation after a very long period.

• Procedural: Whether the issues of prescription and laches may be raised on appeal when they were not included in the pre-trial order.
• Substantive Issues:
  • Whether respondents' action for recovery of possession and damages is barred by prescription and laches.
  • Whether respondents are entitled to just compensation for the government's taking of their property without expropriation proceedings.
  • Whether just compensation should be based on the value of the property at the time of taking (1940) or at the time of payment.
  • Whether respondents' ownership of the subject property is valid and binding.

• Procedural: The Supreme Court agreed with the Court of Appeals that prescription and laches are no longer proper issues for resolution as they were not included in the pre-trial order issued on May 17, 2001, which explicitly defined and limited the issues to be tried pursuant to Rule 18, Section 7 of the Rules of Court. The Court held that even if these issues were squarely dealt with, they would still fail on substantive grounds.
• Substantive:
  • The Court held that prescription does not bar respondents' claim following the long-standing rule that where private property is taken by the Government for public use without first acquiring title thereto either through expropriation or negotiated sale, the owner's action to recover the land or the value thereof does not prescribe.
  • Laches is inapplicable because there is nothing inequitable in giving due course to respondents' claim; both equity and the law direct that a property owner should be compensated if his property is taken for public use.
  • For failure of respondents to question the lack of expropriation proceedings for a long period, they are deemed to have waived and are estopped from assailing the power of the government to expropriate or the public use for which the power was exercised, leaving them only the right of compensation.
  • Just compensation must be based on the fair market value at the time of taking in 1940 (P0.70 per square meter), not at the time of payment, following the rule in Republic v. Lara et al. that the value should be fixed as of the date when it was taken to prevent enhancement by public purpose or natural increase due to general economic conditions.
  • Respondents are entitled to legal interest of six percent (6%) per annum from the date of taking in 1940 until full payment as actual or compensatory damages for the illegal taking and delay in payment, based on the principle that interest runs as a matter of law to place the landowner in as good a position as money can accomplish as of the date of taking.

• State Immunity from Suit — The State may not be sued without its consent; however, when the government takes private property for public use without proper expropriation, the doctrine does not apply to bar the landowner's claim for just compensation as it would cause injustice.
• Non-Prescription of Actions for Illegal Taking — Where private property is taken by the Government for public use without first acquiring title thereto either through expropriation or negotiated sale, the owner's action to recover the land or the value thereof does not prescribe.
• Laches — A doctrine of equity applied to avoid recognizing a right when to do so would result in a clearly inequitable situation or injustice; it finds no application when there is nothing inequitable in giving due course to a landowner's claim for compensation for property taken for public use.
• Just Compensation — The fair value of the property as between one who receives and one who desires to sell, fixed at the time of the actual taking by the government, not at the time of payment or filing of proceedings.
• Law of the Case — Whatever is once irrevocably established as the controlling legal rule between the same parties in the same case continues to be the law of the case, whether correct on general principles or not, so long as the facts on which such decision was predicated continue to be the facts of the case before the court.

• "Just compensation is 'the fair value of the property as between one who receives, and one who desires to sell, x x x fixed at the time of the actual taking by the government.'" — Defining the standard for determining just compensation in expropriation cases.
• "The owner of private property should be compensated only for what he actually loses; it is not intended that his compensation shall extend beyond his loss or injury. And what he loses is only the actual value of his property at the time it is taken x x x." — Explaining the rationale for fixing compensation at the time of taking.
• "The concept of just compensation does not imply fairness to the property owner alone. Compensation must be just not only to the property owner, but also to the public which ultimately bears the cost of expropriation." — Emphasizing that justice in expropriation must balance the interests of the owner and the public.
• "Where private property is taken by the Government for public use without first acquiring title thereto either through expropriation or negotiated sale, the owner's action to recover the land or the value thereof does not prescribe." — Establishing the exception to the statute of limitations for illegal government takings.

• Forfom Development Corporation v. Philippine National Railways — Cited as controlling precedent where the Court ruled that just compensation is the value of the property at the time of taking that is controlling for purposes of compensation.
• Eusebio v. Luis — Cited for the rule that the owner's action to recover land or its value does not prescribe when property is taken without expropriation proceedings, and for the principle that laches finds no application when there is nothing inequitable in giving due course to the claim.
• Manila International Airport Authority v. Rodriguez — Cited as precedent where the value of the lot at the time of taking served as basis for the award of compensation to the owner.
• Republic v. Sarabia — Cited as precedent where the Court fixed just compensation based on the time of taking.
• Republic v. Lara, et al. — Cited for the explanation that the value of the property should be fixed as of the date when it was taken and not the date of the filing of the proceedings to prevent enhancement of value by public purpose or natural increase.
• Strategic Alliance Development Corporation v. Radstock Securities Limited — Cited in the dissent for the definition of the law of the case doctrine.

• Section 48 of Presidential Decree No. 1529 (Property Registration Decree) — Provides that a certificate of title shall not be subject to collateral attack; cited to establish that respondents' Torrens title cannot be attacked collaterally in this proceeding.
• Rule 18, Section 7 of the Rules of Court — Provides that the pre-trial order explicitly defines and limits the issues to be tried and controls the subsequent course of the action unless modified before trial to prevent manifest injustice.
• Rule 45 of the Rules of Court — Basis for the Petition for Review on Certiorari filed by petitioners before the Supreme Court.

• Justice Marvic M.V.F. Leonen — Agreed that fair market value must be the value at the time of actual taking, but proposed using the economic concept of "present value" (PVt = V*(1+r)^t) to compute just compensation, taking into consideration the time value of money and compounding interest rates to avoid gross injustice, and voted to remand the case for proper valuation using this formula.

• Justice Presbitero J. Velasco, Jr. — Dissented on the valuation, arguing that an exception to the general rule (value at time of taking) must be made where no condemnation proceedings were instituted after a substantial period (55 years) from the illegal taking; applying the 1940 value of P0.70 per square meter would condone the government's wrongful act and penalize respondents, and the CA's award of P1,500 per square meter was just and proper to prevent government agencies from disregarding property rights and due process.