MANILA, Philippines — In a ruling that underscores the constitutional imperative of providing true just compensation for expropriated private property, the Supreme Court (SC) Third Division, on May 7, 2025, affirmed the judgment requiring the City Government of Pasay (Pasay LGU) to pay Arellano University based on the current market value of a parcel of land taken nearly 65 years ago. The decision, penned by Associate Justice Samuel H. Gaerlan, settles a decades-long dispute over the valuation of a property converted into a public road.
The case originated from the Pasay LGU’s conversion of Arellano University’s 805-square-meter property, known as the Menlo property, into a public thoroughfare now known as Menlo Street. While the LGU claimed the property was taken for public use as far back as 1960, Pasay LGU failed to promptly initiate formal expropriation proceedings or pay the compensation due. The dispute centered on the valuation date: the LGU argued that compensation should be fixed at the fair market value prevailing in 1960, while Arellano University insisted on the value at the time of actual payment or final judgment due to the LGU’s long delay.
The Supreme Court decisively rejected the LGU’s attempt to pay the 1960 valuation. The Court affirmed the doctrine in eminent domain jurisprudence that compensation should be calculated at the time of the actual taking of the property, which is typically the commencement of the expropriation case. However, in cases where the government takes property without proper legal proceedings, compensation must be based on the fair market value at the time of final judgment. This rule exists to ensure that the property owner receives the “full and fair equivalent of the property at the time the owner is actually deprived of it,” thereby accounting for inflation and the property’s appreciation over the intervening years.
The Court held that accepting the Pasay LGU’s argument would amount to unjust enrichment on the part of the government and would violate the property owner’s constitutional rights. To force Arellano University to accept the 1960 valuation would ignore the reality of economic changes over more than six decades. By affirming the Court of Appeals’ decision, the SC ensures that the compensation is fully compensatory, placing the owner in the same position as if the taking had not occurred.
The final decision mandates that the Pasay LGU pay Arellano University the just compensation based on the value determined by the trial court at the time of final judgment. Crucially, the Pasay LGU was also ordered to pay legal interest on the final compensation amount. The imposition of interest serves as indemnity for the long delay in payment, effectively protecting the property owner from any loss resulting from the government’s failure to compensate promptly for the property already seized and used for public purposes.
This ruling reinforces that while the state has the power of eminent domain, it must exercise this power with strict adherence to the fundamental guarantee of just compensation.