Republic of the Philippines
SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 179334 July 1, 2013
SECRETARY OF THE DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS and DISTRICT ENGINEER CELESTINO R. CONTRERAS, Petitioners,
vs.
SPOUSES HERACLEO and RAMONA TECSON, Respondents.
DISSENTING & CONCURRING OPINION
VELASCO, JR., J.:
When the circumstances obtaining distinctly call for a deviation from the general rule laid down by jurisprudence, the Court should give due consideration to the same, lest oppression and injustice ensue.
The Case
Before the Court is a Petition for Review on Certiorari under Rule 45 assailing the July 31, 2007 Decision1 of the Court of Appeals (CA) in CA G.R. CV No. 77997, affirming with modification the March 22, 2002 Decision2 of the Regional Trial Court (RTC) of Malolos City, Bulacan.
The Facts
Respondent spouses Heracleo and Ramona Tecson (respondents) are the co-owners of a 7,268-square meter lot located in San Pablo, Malolos, Bulacan, and covered by Transfer Certificate of Title (TCT) No. T -43006.3 This parcel of land is among the private properties traversed by the MacArthur Highway, a government project undertaken sometime in 1940. The taking appears to have been made absent the requisite expropriation proceedings and without respondents' consent.4
After the lapse of more than forty ( 40) years, respondents, in a Ietter5 dated December 15, 1994, demanded payment equivalent to the fair market value of the subject property from the Department of Public Works and Highways (DPWH). Petitioner Celestino R. Contreras (petitioner Contreras), then District Engineer of the First Bulacan Engineering District of DPWH, responded with an offer to pay just compensation at the rate of PhP 0.70 per square meter based on Resolution No. XII dated January 15, 1950 of the Provincial Appraisal Committee (PAC) of Bulacan.6 Respondents made a counter-offer that the government either return the subject property or pay just compensation based on the current fair market value.7
As the parties failed to reach any agreement on the price, respondents filed a suit for recovery of possession with damages against DPWH and petitioner Contreras (collectively referred to as "petitioners") on March 17, 1995.8 In their Complaint,9 docketed as Civil Case No. 208-M-95 and raffled to Branch 80 of the RTC of Malolos City, respondents claimed that the subject property was assessed at PhP 2,543,800.10
Subsequently, petitioners filed a Motion to Dismiss11 dated May 16, 1995, invoking (1) immunity from suit; (2) prescription; (3) lack of cause of action; and (4) different valuation for payment of just compensation.
In its Order12 dated June 28, 1995, the RTC of Malolos City granted petitioners’ motion to dismiss for lack of jurisdiction over the subject matter based on the doctrine of state immunity from suit. Therefrom, respondents filed an appeal, docketed as CA-G.R. CV No. 51454, before the CA, which reversed the RTC of Malolos and held that the doctrine of state immunity from suit should not apply to cause injustice.13 Consequently, the RTC of Malolos City was directed to hear the Complaint "for the purpose of determining the just compensation to which [respondents] are entitled to recover from the government."14 The Decision15 in CA-G.R. CV No. 51454 attained finality on March 6, 1999.16
The RTC of Malolos City conducted further proceedings. Upon respondents’ motion, the Branch Clerk of Court was authorized to serve as commissioner for the purpose of determining just compensation.17 However, upon the Branch Clerk of Court’s recommendation, the RTC of Malolos City referred the case to the PAC of Bulacan for proper action.18
In its Resolution No. 99-007, the PAC recommended the amount of PhP 1,500 per square meter as the basis for the valuation of just compensation for the subject property.19 As stated in said Resolution:
PRESENTED were the Decision of the Court of Appeals re Civil Case No. 208-M-95, the Commissioner’s Report and the report of the subcommittee on appraisal;
WHEREAS, Civil Case No. 208-M-95 is about a parcel of land situated at San Pablo, Malolos, Bulacan, which was allegedly taken by the government in 1940 during the construction of MacArthur Highway without the consent of the owner nor expropriation proceedings;
WHEREAS, a Resolution No. XII dated January 15, 1950 promulgated the price of Seventy Centavos (₱0.70) per square meter as the price of the lots affected by the aforesaid project;
WHEREAS, a suit was filed by the owner to the Court of Appeals, condemning the aforesaid market value as unfair;
WHEREAS, upon the instruction of the Chairman of the Provincial Appraisal Committee, the sub-committee conducted a thorough inspection and field investigation;
WHEREAS, taking into consideration the price during the time of the taking which is ₱0.70 per square meter and the price prevailing nowadays which is ₱10,000.00 per square meter, the members motioned and seconded by the Chairman that the reasonable and just compensation is One Thousand Five Hundred Pesos (₱1,500.00) per square meter.
NOW THEREFORE, be it resolved as it is now resolved that the just compensation of One Thousand Five Hundred Pesos (₱1,500.00) per square meter is hereby submitted for consideration of the authorities concerned.
UNANIMOUSLY RESOLVED.20
On the basis of PAC’s recommendation, the RTC of Malolos City rendered on March 22, 2002 a Decision.21 The dispositive portion of said decision reads:
WHEREFORE, premises considered, the Department of Public Works and Highways or its duly assigned agencies are hereby directed to pay said Complainants/Appellants the amount of One Thousand Five Hundred Pesos (₱1,500.00) per square meter for the lot subject matter of this case in accordance with the Resolution of the Provincial Appraisal Committee dated December 19, 2001.
SO ORDERED.22
On appeal by petitioners, the CA affirmed with modification the above-mentioned RTC Decision. Particularly, the dispositive portion of the CA Decision reads:
WHEREFORE, the DECISION DATED MARCH 22, 2002 is AFFIRMED, subject to the MODIFICATION that the just compensation shall earn interest of 6% per annum computed from the time of the filing of this action on March 17, 1995 until full payment.
SO ORDERED.23
Aggrieved, petitioners filed the instant petition.
Issues
I
THE CA GRAVELY ERRED IN GRANTING JUST COMPENSATION TO RESPONDENTS CONSIDERING THE HIGHLY DUBIOUS AND QUESTIONABLE CIRCUMSTANCES OF THEIR ALLEGED OWNERSHIP OF THE SUBJECT PROPERTY.
II
THE CA GRAVELY ERRED IN AWARDING JUST COMPENSATION TO RESPONDENTS BECAUSE THEIR COMPLAINT FOR RECOVERY OF POSSESSION AND DAMAGES IS ALREADY BARRED BY PRESCRIPTION AND LACHES.
III
THE CA GRAVELY ERRED IN AFFIRMING THE TRIAL COURT’S DECISION ORDERING THE PAYMENT OF JUST COMPENSATION BASED ON THE CURRENT MARKET VALUE OF THE ALLEGED PROPERTY OF RESPONDENTS.
Essentially, the issues raised in the instant petition revolve around the following: (1) ownership of the subject property; (2) prescription and laches; and (3) amount of just compensation.
I submit that the petition should be denied.
Ownership of the subject property
Petitioners claim that respondents’ ownership of the subject property is highly dubious and questionable, thus, the CA allegedly erred in awarding just compensation to respondents.24 Petitioners’ contention is misplaced.
Respondents’ right to recover just compensation for the expropriation of the subject property has already been settled by the CA in its Decision dated February 11, 1999 in CA-G.R. CV No. 51454. When the CA remanded the case to the RTC of Malolos City, further proceedings were intended "for the purpose of determining the just compensation to which [respondents] are entitled to recover from the government."26 Said CA Decision in CA-G.R. CV No. 51454 has already become final.
The ruling in CA-G.R. CV No. 51454 on respondents’ right to recover just compensation was the law of the case. In Strategic Alliance Development Corporation v. Radstock Securities Limited,27 the Court explained the law of the case doctrine, as follows:
Law of the case is defined as the opinion delivered on a former appeal. More specifically, it means that 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 facts of the case before the court, notwithstanding that the rule laid down may have been reversed in other cases. Indeed, after the appellate court has issued a pronouncement on a point presented to it with a full opportunity to be heard having been accorded to the parties, that pronouncement should be regarded as the law of the case and should not be reopened on a remand of the case. (Emphasis supplied.)
As the liability to respondents had been determined with finality in a prior proceeding, this Court could no longer entertain questions on ownership of the subject property so as to release the DPWH from its liability to respondents. Otherwise, this would require us to reopen and review the final decision in CA-G.R. CV No. 51454.
Also, respondents’ ownership may not be questioned in this proceeding. It is settled that a Torrens title cannot be attacked collaterally, and the issue on its validity can be raised only in an action expressly instituted for that purpose.28 Sec. 48 of Presidential Decree No. 1529, also known as the Property Registration Decree, expressly provides:
Section 48. Certificate not subject to collateral attack. A certificate of title shall not be subject to collateral attack. It cannot be altered, modified, or cancelled except in a direct proceeding in accordance with law.
Accordingly, the Torrens title of respondents (TCT T-43006) speaks for itself and is conclusive proof of ownership of the subject property.
Prescription and laches
On the issues of prescription and laches, I agree with the ponencia that these are also not proper issues for resolution since they were not included in the pre-trial order, where the issues for resolution were limited to the following: (1) whether respondents are entitled to just compensation; (2) whether the valuation would be based on the corresponding value at the time of the taking or at the time of the filing of the action; and (3) whether respondents were entitled to damages.29
And even if the issues of laches and prescription are to be dealt with substantively, still, these grounds have no leg to stand on. As aptly pointed out in the ponencia, laches "finds no application in this case, since there is nothing inequitable in giving due course to respondents’ claim." Contrarily, it would be the height of injustice if respondents would be deprived of just compensation for their property, which was taken for public use and without their consent, based on this equitable doctrine. Also, prescription will not bar respondents’ claim since, as stated in the ponencia, the owner’s action to recover the land or the value thereof does not prescribe where private property is taken for public use by the government without first acquiring title thereto.30
Accordingly, the only issue left for determination is the amount of just compensation which respondents are entitled to receive from the government for the taking of their subject property.
Basis in determining the amount of just compensation
Both the RTC of Malolos and the CA found and granted just compensation to respondents in the amount of PhP 1,500 per square meter, as recommended by the PAC. Additionally, the CA granted 6% interest on the total just compensation, reckoned from the time of the filing of the Complaint until fully paid.
Petitioners, however, insist that respondents’ entitlement to just compensation, if indeed they are entitled, should be based only on the fair market value at the time of taking, that is, at PhP 0.70 per square meter.
On this point, the majority agrees with petitioners, I am of a different mind and accordingly register this dissent.
In justifying its ruling that just compensation of the subject property should be based on 1940 values, that is, PhP 0.70 per square meter, the ponencia noted that "the Court has uniformly ruled that just compensation is the value of the property at the time of the taking that is controlling for the purposes of compensation."31 It cited in this regard the 1954 case of Republic v. Lara,32 where the Court held:
x x x 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." For where property is taken ahead of the filing of the condemnation proceedings, the value thereof may be enhanced by the public purpose for which it is taken; the entry by the plaintiff upon the property may have depreciated its value thereby; or, there may have been a natural increase in the value of the property from the time it is taken to the time the complaint is filed, due to general economic conditions. 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.33
Indeed, in a number of cases,34 the Court has ruled that the reckoning point for the determination of just compensation is the time of taking. Nonetheless, I respectfully submit that there is a necessity to deviate from such general rule in view of the attendant inequity and prejudice such application entails.
For one, DPWH violated respondents’ constitutional right to procedural due process when it deprived respondents of the subject property without their consent and the requisite expropriation proceedings.35 It has been my position that since expropriation is essentially a forced taking of private property by the state or its agencies, the private owner being compelled to give up his property for the common weal, then the mandatory requirement of due process should be strictly followed.36
Expropriation is an exercise of the government’s power of eminent domain. As an inherent attribute of the government, this power is fundamentally limitless if not restrained by the Bill of Rights. Without the limitations thus imposed, the exercise of the power of eminent domain can become repressive. Thus, the Bill of Rights should always be a measure and guarantee of protecting certain areas of a person’s life, liberty, and property against the government’s abuse of power.37
In the instant case, it is not disputed that DPWH illegally took the subject lot without the consent of respondents and the necessary expropriation proceedings. To make matters worse, almost 55 years have already passed from the time of taking, yet DPWH still failed to institute condemnation proceedings. This is clearly indicative of DPWH’s lack of intention to formally expropriate the subject property and consequently deny respondents of the elementary due process of law. Thus, when respondents were constrained to file a complaint before the trial court, they were the ones who, in effect, commenced the inverse condemnation proceedings, which, to my mind, is ironic. The prevalence of the taking of a subject property without the owner’s consent and the necessary expropriation proceedings does not, and should not, cure its illegality.
Verily, the government’s action in the instant case, done as it were without observing procedural due process, is illegal and invalid. As such, the condemnation of the subject property ought to be reversed and respondents restored to its possession. However, considering that the subject property had already been put to public use—forming part of the MacArthur Highway—respondents can no longer be restored to the possession of the subject property. As pointed out by the CA, the only remedy available to respondents is the recovery of just compensation.
But if the Court is to peg the reckoning value of the just compensation to PhP 0.70, it would, in effect, be condoning the wrongful act of DPWH in taking the subject property in utter disregard of respondents’ property rights and violation of the due process of laws.
Thus, while this Court has previously ruled, in a number of cases, that the value of the property at the time of the taking which is controlling in the determination of the value of just compensation, it is my submission that an exception to the foregoing ruling must be made in cases where no condemnation proceedings were instituted after a substantial period of time from the time of illegal taking.
Pertinently, there is "illegal taking" when there is taking of a property without the benefit of expropriation proceedings and without payment of just compensation,38 as in the instant case. When the illegal taking is compounded with the failure of the condemnor to institute condemnation proceedings after a substantial period of time, i.e., 55 years from the time of taking, then it is not really hard to grasp why pegging the basis for valuation of just compensation at the time of illegal taking is erroneous, if not utterly reprehensible.
The Court cannot reluctantly close its eyes to the likelihood that the invariable application of the determination of just compensation at the time of the actual taking, as in the cases cited in the ponencia, will grant government agencies and instrumentalities the license to disregard the property rights of landowners, violate the Constitution’s proviso on due process of laws, and render nugatory statutory and procedural laws on expropriation proceedings of private properties for public use. Both the RTC of Malolos City and the CA were, therefore, correct in granting just compensation to respondents in the amount of PhP 1,500 per square meter, as recommended by the PAC. This way, government agencies and instrumentalities would think twice before taking any unwarranted short cuts in condemning private properties that violate the owners’ right to due process of laws as enshrined in the Bill of Rights.
For another, the basis for determining the amount of just compensation as awarded by the RTC of Malolos City and the CA at PhP 1,500, as recommended by the PAC, is but just and proper given the attendant circumstances.
It should be noted that at the time the case was referred to PAC for its recommendation on the value of the just compensation, the prevailing value of the subject property is already at PhP 10,000 per square meter. As indicated in PAC’s Resolution No. 99-007:
WHEREAS, taking into consideration the price during the time of the taking which is ₱0.70 per square meter and the price prevailing nowadays which is ₱10,000.00 per square meter, the members motioned and seconded by the Chairman that the reasonable and just compensation is One Thousand Five Hundred Pesos (₱1,500.00) per square meter.
NOW THEREFORE, be it resolved as it is now resolved that the just compensation of One Thousand Five Hundred Pesos (₱1,500.00) per square meter is hereby submitted for consideration of the authorities concerned.
UNANIMOUSLY RESOLVED.39 (Emphasis supplied.)
Undeniably, the valuation of PhP 10,000 is already enhanced by the public purpose for which the subject property is taken, as well as the natural increase in value of the property due its general conditions and consequent developments. However, by pegging the basis in determining just compensation at PhP 1,500, the RTC of Malolos City and the CA, as recommended by the PAC, reasonably fixed the basis for the award of just compensation. As between PhP 0.70 and PhP 10,000, the valuation of PhP 1,500 is but just and proper given the present circumstances.
And for a third, it is highly unjust and inequitable, as aptly observed by the CA, to pay respondents just compensation at the rate of PhP 0.70 per square meter, which was then the value of the subject property in 1940 when the illegal taking was committed. This injustice and inequity is emphasized by the measly award respondents will receive now, as the ponencia so rules, after having been deprived of their right to procedural due process for 55 years with the DPWH disregarding and violating practically all constitutional, statutory and procedural rules relative to the condemnation of the subject lot for public use. In effect, despite what respondents have been through, they are still penalized by the government considering that after 72 years from the time of the illegal taking of their property, they will only receive a measly amount of just compensation.
Given the foregoing perspective, the proper reckoning value for the determination of just compensation in the instant case—as aptly held and granted by the RTC of Malolos City and the CA-is PhP 1,500 per square meter.
For a better appreciation of the differing bases for the award of just compensation, the comparative figures are as follows:
| |
Land Area
of Subject
Property
|
(Awarded in
ponencia)
1940 value per
square meter at
PhP 0.70 |
(Awarded by the
Court of Appeals)
1995 value per
square meter at
PhP 1,500 |
| Just Compensation |
7,268
square
meters |
PhP 5,087.60 |
PhP 10,902,000.00 |
6% Interest (72 yrs:
from 1940-2012) |
|
PhP 21,978.432 |
|
6% Interest (17 yrs:
from 1995-2012) |
|
|
PhP 11, 120,040.00 |
| Total Award, as of 2012 |
|
PhP 27,066.0323 |
PhP 22,022,040.00 |
The ponencia, thus, awards the measly total of PhP 27,066.032 as just compensation to be paid by DPWH to respondents-the amount, except for the 6% interest from the time of taking, essentially offered by DPWH to respondents in early 1995 when respondents demanded payment for the illegal taking of the subject lot in December 1994.
Instead of being accorded justice and equity, respondents are, thus, penalized again by being awarded a mere pittance. The Court should not countenance DPWH's illegal act and penalize respondents hy awarding them with a miserable amount of just compensation after going through the arduous process of vindicating their constitutional and property rights.
In view of the foregoing, I humbly submit that the assailed CA Decision is the appropriate ruling as this would give respondents the just and proper award for recovery of just compensation of the subject property illegally taken by DPWH some 72 years ago.
Accordingly, I vote to deny the petition and affirm the appealed July 31 , 2007 Decision of the Court of Appeals.
PRESBITERO J. VELASCO, JR.
Associate Justice
Footnotes
1 Rollo. pp. 37-50. Penned by Associate Justice (now a member of this Court) Lucas P Bersamin and concurred in by Associate Justices Portia Aliño Hormachuelos and Estela M. Perlas-Bernabe (also now a member of this Court).
2 Id. at 78-80.
3 Id. at 37-38 .
4 Id. at 38.
5 Records. p. 6.
6 Rollo, p. 38.
7 Id. at 38.
8 Id. at 37-38.
9 Id. at 51-54.
10 Records, p. 5.
11 Rollo, pp. 56-58.
12 Id. at 60-61.
13 Id. at 38-39.
14 Id. at 68.
15 Id. at 62-68.
16 Id. at 39.
17 Id. at 39.
18 Id. at 39.
19 Id. at 40.
20 Id. at 40.
21 Id. at 78-80.
22 Id. at 80.
23 Id. at 49.
24 Id. at 22.
25 Id. at 62-68.
26 Id. at 68.
27 G.R. Nos. 178158 & 180428, December 4, 2009.
28 Cimafranca v. Intermediate Appellate Court, G.R. No. 68687, January 31, 1987.
29 Rollo, p. 46.
30 Eusebio v. Luis, G.R. No. 162474, October 13, 2009, 603 SCRA 576, 583; Republic v. Court of Appeals, G.R. No. 147245, March 31, 2005, 454 SCRA 516, 528.
31 Ponencia, p. 9.
32 96 Phil. 170 (1954).
33 Id. at 177-178; ponencia, p. 10.
34 Forfom Development Corporation v. Philippine National Railways, G.R. No. 124795, December 10, 2008, 573 SCRA 350; Eusebio v. Luis, G.R. No. 162474, October 13, 2009, 603 SCRA 576; Manila International Airport Authority v. Rodriguez, G.R. No. 161836, February 28, 2006, 483 SCRA 619; Republic v. Sarabia, G.R. No. 157847, August 25, 2005, 468 SCRA 142.
35 See National Power Corporation v. Heirs of Macabangkit Sangkay, G.R. No. 165828, August 24, 2011.
36 Concurring Opinion of Justice Presbitero J. Velasco, Jr. in Mactan-Cebu International Airport v. Tudtud, G.R. No. 174012, November 14, 2008.
37 Id.
38 Eusebio v. Luis, G.R. No. 162474, October 13, 2009.
39 Rollo, p. 40; CA Decision, p. 4.
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SEPARATE OPINION
LEONEN, J.:
I agree with the ponencia of Justice Peralta in so far as the fair market value o( a property subjected to expropriation must be the value of the property at the time of the actual taking by the government, at the moment that the owner is unable to have beneficial use (see Republic v. Vda. de Castellvi).1
However, I also agree with Justice Velasco that gross injustice will result if the amount that will be awarded today will be based simply on the value of the property at the time of the actual taking. Should the value of the property been awarded to the owners at the time of the taking, they would have used it for other profitable uses. Hence, the failure of the State to have paid at the proper time deprives the owners of the true value of the property that they had.
I am of the opinion that the proper way to resolve this would be to use the economic concept of present value.2 This concept is usually summarized this way: Money received today is more valuable than the same amount of money received tomorrow.3 By applying this concept, we are able to capture just compensation in a more holistic manner. We take into consideration the potential of money to increase (or decrease) in value across time.
If the parties in an expropriation case would have perfect foresight, they would have known the amount of "fair market value at the time of taking." If this amount of money was deposited in a bank pending expropriation proceedings, by the time proceedings are over, the property owner would be able to withdraw the principal (fair market value at the time of taking) and the interest earnings it has accumulated over the time of the proceedings. Economists have devised a simple method to compute for the value of money in consideration of this future interest earnings.
For purposes of explaining this method, consider property owner AA who owns a piece of land.1âwphi1 The government took his property at Year 0. Let us assume that his property had a fair market value of ₱100 at the time of taking. In our ideal situation, the government should have paid him ₱100 at Year 0. By then, AA could have put the money in the bank so it could earn interest. Let us peg the interest rate at 5% per annum (or in decimal form, 0.05).4
If the expropriation proceedings took just one year (again, another ideal situation), AA could only be paid after that year. The value of the ₱100 would have appreciated already. We have to take into consideration the fact that in Year 1, AA could have earned an additional ₱5 in interest if he had been paid in Year 0.
In order to compute the present value of ₱100, we have to consider this formula:
Present Value in Year 1 = Value at the Time of Taking + (Interest Earned of the Value at the Time of Taking)
In formula5 terms, it will look like this:
PV1 = V + (V*r)
PV1 = V*(1+r)
PV1 = present value in Year 1
V = value at the time of taking
r = interest rate
So in the event that AA gets paid in Year 1, then:
PV1 = V*(1+r)
PV1 = ₱100 (1 + 0.05)
PV1 = ₱105
So if AA were to be paid in Year 1 instead of in Year 0, it is only just that he be paid ₱105 to take into account the interest earnings he has foregone due to the expropriation proceedings. If he were to be paid in Year 2, we should take into consideration not only the interest earned of the principal, but the fact that the interest earned in Year 1 will also be subject to interest earnings in Year 2. This concept is referred to as compounding interest rates. So our formula becomes:
Present Value in Year 2 = [Present Value in Year 1] + [Interest Earned of Present Value in Year 1]
Recall that in formula terms, Present Value in Year 1 was expressed as:
PV1 = [V*(1+r)]
Hence, in Year 2, the formula will be:
PV2 = PV1*(1+r) or
PV2 = [V*(1+r)]*(1+r)
Seeing that the term (1+r) is repeated, it can be further simplified as:
PV2 = V*(1+r)2
PV2 = ₱100 * (1+0.05)2
PV2 = ₱100 * 1.1025
PV2 = ₱110.25
This is the same as if we multiply the present value in Year 1 of ₱105 by 1.05 (our multiplier with the interest rate).
If proceedings go on until Year 3, then the formula would be:
PV3 = PV2*(1+r)
PV3 = {[V*(1+r)]*(1+r)}*(1+r)
Again, (1+r) is repeated three times, the same number as the number of years; hence, simplifying the formula would yield:
PV3 = V*(1+r)3
Due to compounding interests, the formula for present value at any given year becomes:
PVt = V*(1+r)t
PV stands for the present value of the property. In order to calculate the present value of the property, the corresponding formula is used. V stands for the value of the property at the time of the taking, taking in all the considerations that the court may use in order to arrive at the fair market value in accordance with law.
This is multiplied to (1 + r) where r equals the implied rate of return (average year-to-year interest rate) and raised to the exponent t. The exponent t refers to the time period or the number of years for which the value of the money would have changed. It is treated as an exponent because it is the number of times you have to multiply (1+r) to capture the effect of compounding interest rates.
So if AA were to be paid seventy-three (73) years from the time of taking, the present value of the amount he should have been paid at the time of taking would be:
PVt = V*(1+r)t
PV73 = ₱100 * (1+0.05)73
PV73 = ₱100 * (35.2224)
PV73 = ₱3,522.24
As applied in this case, the property which is the subject of the current controversy is worth ₱0.70/sq.m. in 1940, but it is actually worth more than ₱0.70/sq. m. by 2013. There is a period of 73 years between the actual taking and the time payment is to be made. The value of the cash to be paid to the owner at this time is definitely more because of changes in the interest rate.
Computing for present value would only reflect the cost of the property today. It should be separate from the six percent (6%) per annum computed on a compounded basis awarded as actual or compensatory damages.
Thus, applying the formula, assuming the average interest rate is at:
4%, the property will be worth P 12.26 per sq. m.;
5%, the property will be worth P 24.66 per sq. m.;
6%, the property will be worth P 49.25 per sq. m.
Using the established concept of present value incorporates the discipline of economics into our jurisprudence on takings. Valuation is indeed an inexact science and economics also has its own assumptions. However, in my reckoning, this is infinitely better than leaving it up to the trial court judge.
I submit that this proposal is a happy middle ground. It meets the need for doctrinal precision urged by Justice Peralta and the thirst for substantial justice in Justice Velasco's separate opinion. After all, I am sure that we all share in each other's goals.
I vote to GRANT the petition and to REMAND the case to the court of origin for proper valuation according to the formula discussed.
MARVIC MARIO VICTOR FAMORCA LEONEN
Associate Justice
Footnotes
1 GR. No. L-20620, August 15, 1974. 58 SCRA 336, 352.
2 Present value (of an asset) is defined as ''the value for an asset that yields a stream of income over time.'' PAUL A. SAMUELSON AND WILLIAM D. NOIWHAUS, ECONOMICS 748 (Eighteenth Edition).
3 N. GRJ-:GORY MANKI\V, ESSENTIALS OF ECONOMICS 414 (2007 Edition).
4 Interest rates are dependent on risk, inflation and tax treatment. See PAUL A. SAMUELSON AND WILLIAM D. NORDHAUS, ECONOMICS 269 (Eighteenth Edition). Actual interest rate to be applied should be computed reasonably according to historical epochs in our political economy. For example, during the war, we have experienced extraordinary inflation. This extraordinary inflation influenced adversely interest rates of financial investments. The period of martial law is another example of a historical epoch that influenced interest rates.
5 N. GREGORY MANKIW, ESSENTIALS OF ECONOMICS 414-415 (2007 Edition).
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