The Supreme Court (SC) has reiterated that determining just compensation in land expropriation cases must consider a "totality of circumstances," not solely the market value or assessment provided by local government units (LGUs).

The ruling emphasized that courts must comprehensively assess a property's true value at the time of its taking to ensure the payment is "real, substantial, full, and ample," as required by Article III, Section 9 of the Constitution.

Case Remanded for Reassessment

In a decision of the SC's First Division, penned by Associate Justice Samuel H. Gaerlan, the Court ordered the Regional Trial Court (RTC) to reassess the just compensation owed by the City Government of Pasay to Arellano University.

The case arose from a complaint filed by the University after the Pasay LGU took its 805-square-meter parcel of land and converted it into a public thoroughfare (now Menlo Street) without initiating proper expropriation proceedings or paying due compensation.

Incomplete Data and Insufficient Basis

The initial computation by a board of commissioners used a base value of PHP200 per square meter (sqm) from the City Assessor's 1978 General Revision. The RTC, while applying a different interest rate, adopted this outdated base value, ordering Pasay LGU to pay PHP 161,000.00 plus annual interest.

The SC affirmed the Court of Appeals (CA) finding that the RTC’s decision was based on incomplete data. The Court underscored that LGU appraisals are not controlling in expropriation cases, as they often rely on broad, general descriptions and may not reflect the specific property's current value.

The Standard: Totality of Circumstances

The SC clarified the standard that courts must follow:

• Courts must use the "totality of circumstances" approach. This requires considering all relevant facts about the property's condition, location, improvements, and capabilities.
• Other critical factors must be considered, including:
  • The Zonal Valuation of the Bureau of Internal Revenue (BIR).
  • The property's acquisition cost and tax declarations.
  • The current selling price of similar nearby properties.
  • Factors listed in the 2006 Manual on Real Property Appraisal, such as development costs and the owner's declared value.

In this specific case, the RTC relied almost exclusively on the 1978 Pasay City Assessor’s assessment, with the BIR zonal valuation and other critical data sources barely considered. Due to the reliance on this incomplete and inaccurate data, the case was sent back to the trial court for a proper assessment.

Interest as Part of Compensation

The SC also upheld the application of 6% annual interest, consistent with the prevailing rate set by the Bangko Sentral ng Pilipinas (BSP), to be applied from the finality of the judgment until the payment is made in full.

In a Separate Opinion, Associate Justice Alfredo Benjamin S. Caguioa emphasized that the interest arising from the State's delay in payment is not mere interest for forbearance of money but is an integral part of the just compensation itself, ensuring that the value paid is truly fair and ample.

Read more:

Full text of City Government of Pasay v. Arellano University, G.R. No. 260038, May 7, 2025