THIRD DIVISION

[G.R. No. 185638. August 10, 2016.]

HONORABLE ALVIN P. VERGARA, IN HIS CAPACITY AS CITY MAYOR

OF CABANATUAN CITY, AND SANGGUNIANG PANLUNGSOD OF
CABANATUAN CITY , petitioners, vs. LOURDES MELENCIO S. GRECIA,
REPRESENTED BY RENATO GRECIA, AND SANDRA MELENCIO IN
REPRESENTATION OF MA. PAZ SALGADO VDA. DE MELENCIO,
CONCHITA MELENCIO, CRISTINA MELENCIO AND LEONARDO
MELENCIO , respondents.

DECISION

REYES , J : p

Before this Court is a petition for review on certiorari 1 seeking to annul and set
aside the Decision 2 dated August 8, 2008 and the Resolution 3 dated December 5,
2008 of the Court of Appeals (CA) in CA-G.R. SP No. 97851. The CA af rmed with
modi cation the Order 4 dated November 8, 2006 of the Regional Trial Court (RTC) of
Cabanatuan City, Branch 86, and the Order 5 dated January 30, 2007 issued by the RTC
of Cabanatuan City, Branch 30, in Civil Case No. 5078, and reduced the amount to be
paid by Honorable Julius Cesar Vergara (Mayor Vergara), in his capacity as Mayor of
Cabanatuan City, and the Sangguniang Panlungsod of Cabanatuan (Sanggunian)
(petitioners) from Ten Million Pesos (P10,000,000.00) to Two Million Five Hundred
Fifty-Four Thousand Three Hundred Thirty-Five Pesos (P2,554,335.00) representing
15% of the total value of the property of Lourdes Melencio S. Grecia (Lourdes),
represented by Renato Grecia, and Sandra Melencio, in representation of Ma. Paz,
Conchita, Cristina and Leonardo, all surnamed Melencio (respondents).
The Facts
The subject of this petition is a parcel of land covered by Transfer Certi cate of
Title No. T-101793, with an area of 7,420 square meters, more or less, situated in
Barangay Barrera, Cabanatuan City, and registered under the name of the respondents.
6

The record showed that sometime in 1989, the subject land was taken by the
Sanggunian for road-right-of-way and road widening projects. Despite the taking of the
subject land and the completion of the road widening projects, the Sanggunian failed to
tender the just compensation to the respondents. Upon the request of Lourdes, the
Sanggunian created an appraisal committee, composed of City Assessor of
Cabanatuan Lorenza L. Esguerra as Chairman, with City Treasurer Bernardo C. Pineda
and City Engineer Mac Arthur C. Yap as members, to determine the proper amount of
just compensation to be paid by the Sanggunian for the subject land. The Appraisal
Committee then issued Resolution No. 20-S-2001 7 recommending the payment of
P2,295.00 per sq.m. as just compensation. 8
Thereafter, the Sanggunian issued Resolution No. 148-2000 9 authorizing Mayor
Vergara to negotiate, acquire, purchase and accept properties needed by the
Sanggunian for its project.
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 Pursuant to the said resolution, on December 4, 2001, Mayor Vergara executed a
Memorandum of Agreement 10 (MOA) with Lourdes as Attorney-in-fact of the
respondents, whereby the Sanggunian bound itself to pay the respondents the amount
of P17,028,900.00 in 12 years at the rate of P1,419,075.00 every year starting the rst
quarter of 2002 as payment of the subject land.
More than four years had lapsed after the signing of the MOA but no payment
was ever made by the petitioners to the respondents despite the fact that the subject
land was already taken by the petitioners and was being used by the constituents of the
City of Cabanatuan. 11
Despite personal and written demands, 12 the petitioners still failed to pay the
respondents the just and fair compensation of the subject land. 13
In a letter 14 dated November 18, 2005, Mayor Vergara said that the Sanggunian
denied the rati cation of the MOA per its Resolution No. 129-2002 15 on the ground of
scal restraint or de cit of the Sanggunian. In view of this resolution, Mayor Vergara
claimed that the said MOA could neither be enforced, nor bind the Sanggunian.
Aggrieved, on December 29, 2005, the respondents led a petition for
mandamus 16 before the RTC of Cabanatuan City, which was raffled to Branch 86.
On September 18, 2006, RTC-Branch 86 rendered its Order 17 in favor of the
respondents, thus: EcTCAD

WHEREFORE, let a writ of mandamus be issued compelling [the

petitioners] to pay the [respondents] the following sums of money:
1. Php17,028,900.00 as just compensation of their property taken by
the Sanggunian plus accrued legal interest thereon from the filing of
this case until fully paid;
2. Php50,000.00 as attorney's fees; and
3. Php50,000.00 as actual expenses and damages.
SO ORDERED. 18
The petitioners immediately led their appeal 19 before the CA, docketed as CA-
G.R. SP No. 98397. However, before the records of appeal were submitted to the CA,
the respondents filed a Motion for Partial Execution 20 before the RTC-Branch 86. 21
On November 8, 2006, the RTC-Branch 86 issued an Order 22 granting the
respondents' motion and thereby ordering the petitioners to pay the sum of
P10,000,000.00 as partial execution of the decision.
The petitioners then led a motion for inhibition and a motion for
reconsideration. 23
On November 17, 2006, RTC-Branch 86 issued an Order granting the motion for
inhibition which subsequently led to the assignment by raf e of the case to RTC-Branch
30. 24
On January 30, 2007, RTC-Branch 30 issued an Order 25 denying the petitioners'
motions.
On February 7, 2007, a writ of execution was issued. Accordingly, a Notice of
Garnishment was issued to the manager of United Coconut Planters Bank of
Cabanatuan City. 26
Aggrieved, the petitioners led a Petition for Certiorari with urgent Motion for the
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 Issuance of a Temporary Restraining Order and Writ of Preliminary Injunction 27 before
the CA.
In a Resolution 28 dated February 26, 2007, the CA granted the petitioners' prayer
for an injunctive relief and enjoined the RTC-Branch 30 Presiding Judge and Sheriff from
enforcing the said writ of execution and orders.
On appeal, the CA, in its Decision 29 dated August 8, 2008, af rmed the trial
court's order but modi ed the same by reducing the amount to be paid by the
petitioners from P10,000,000.00 to P2,554,335.00 representing 15% of the value of the
property as provided by law. 30
Undeterred, the petitioners led a motion for reconsideration 31 but it was
denied. 32 Hence, this petition.
For their part, the petitioners argue that the subject land is a subdivision road
which is beyond the commerce of man as provided for in Section 50 of Presidential
Decree (P.D.) No. 1529. 33 Thus, the said contract entered into by Mayor Vergara with
the respondents is null and void, and there is no obligation on the part of the petitioners
to pay the respondents. 34
The Issue
The main issue before this Court is whether there is propriety in the partial
execution of the judgment pending appeal.
Ruling of the Court
The petition is bereft of merit.
To begin with, the Court notes that there has already been a nal judgment in CA-
G.R. SP No. 98397. The CA Third Division issued a Resolution 35 dated March 14, 2008
dismissing the petitioners' appeal on the ground of lack of jurisdiction stating that the
issues that were raised are pure questions of law. The petitioners led a motion for
reconsideration but it was also denied; 36 hence, the case was elevated to this Court
which was docketed as G.R. No. 186211. However, in a Resolution dated June 22, 2011,
the Court Second Division likewise denied the petition.
It is uncontroverted that the subject land was taken by the petitioners without
paying any compensation to the respondents that is too long to be ignored. The
petitioners, however, argue that they are not obliged to pay the respondents because
the subject land is burdened by encumbrances 37 which showed that it is a subdivision
lot which is beyond the commerce of man. Thus, the MOA between the petitioners and
the respondents is null and void. To support their argument, they invoked Section 50 of
P.D. No. 1529. 38
Essentially, the sole issue for resolution is whether the petitioners are liable for
just compensation. Hence, the pertinent point of inquiry is whether the subject land of
the respondents is beyond the commerce of man as provided for in Section 50 of P.D.
No. 1529.
Meanwhile, a look at the petition in CA-G.R. SP No. 98397, now G.R. No. 186211,
would show that the petitioners interposed the same issues in their appeal: (1) the
subject land is not within the commerce of men, hence, the MOA is void; (2) the
petitioners are under estoppel to deny its liability under the MOA; (3) Mayor Vergara
has no authority to sign the MOA prior to its approval by the Sanggunian; and (4) there
is no basis for the lower court to award attorney's fees and damages. 39

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 Since these issues did not merit the attention of the Court in G.R. No. 186211, the
Court will now put all these issues to rest. HSAcaE

ONE . The alleged encumbrance in the respondents' title and the interpretation
and application of Section 50 40 of P.D. No. 1529 are no longer novel since this Court
had already made a de nitive ruling on the matter in the case of Republic of the
Philippines v. Ortigas and Company Limited Partnership , 41 where the Court ruled that
therein petitioners' reliance on Section 50 of P.D. No. 1529 is erroneous since it
contemplates roads and streets in a subdivided property, not public thoroughfares built
on a private property that was taken from an owner for public purpose. A public
thoroughfare is not a subdivision road or street.
Section 50 contemplates roads and streets in a subdivided property, not public
thoroughfares built on a private property that was taken from an owner for
public purpose. A public thoroughfare is not a subdivision road or street.
xxx xxx xxx
Delineated roads and streets, whether part of a subdivision or segregated
for public use, remain private and will remain as such until conveyed to the
government by donation or through expropriation proceedings. An owner may
not be forced to donate his or her property even if it has been delineated as road
lots because that would partake of an illegal taking. He or she may even choose
to retain said properties. If he or she chooses to retain them, however, he or she
also retains the burden of maintaining them and paying for real estate taxes.
xxx xxx xxx
. . . [W]hen the road or street was delineated upon government request
and taken for public use, as in this case, the government has no choice but to
compensate the owner for his or her sacri ce, lest it violates the constitutional
provision against taking without just compensation, thus:
Section 9. Private property shall not be taken for public use
without just compensation.
As with all laws, Section 50 of the Property Registration Decree cannot be
interpreted to mean a license on the part of the government to disregard
constitutionally guaranteed rights. 42 (Citations omitted)
Apparently, the subject land is within the commerce of man and is therefore a
proper subject of an expropriation proceeding. Pursuant to this, the MOA between the
petitioners and the respondents is valid and binding. Thus, there is no need to discuss
the matter of the petitioners' estoppel or the authority of Mayor Vergara to sign the
MOA.
TWO . The petitioners are liable to pay the full market value of the subject land.
Without a doubt, the respondents are entitled to the payment of just
compensation. The right to recover just compensation is enshrined in the Bill of Rights;
Section 9, Article III of the 1987 Constitution states that no private property shall be
taken for public use without just compensation.
There is no question raised concerning the right of the petitioners here to acquire
the subject land under the power of eminent domain. But the exercise of such right is
not unlimited, for two mandatory requirements should underlie the Government's
exercise of the power of eminent domain namely: (1) that it is for a particular public
purpose; and (2) that just compensation be paid to the property owner. These
requirements partake the nature of implied conditions that should be complied with to
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 enable the condemnor to keep the property expropriated. 43
Undisputedly, in this case, the purpose of the condemnation is public but there
was no payment of just compensation to the respondents. The petitioners should have
rst instituted eminent domain proceedings and deposit with the authorized
government depositary an amount equivalent to the assessed value of the subject land
before it occupied the same. Due to the petitioners' omission, the respondents were
constrained to le inverse condemnation proceedings to demand the payment of just
compensation before the trial court. From 1989 until the present, the respondents were
deprived of just compensation, while the petitioners continuously burdened their
property.
The determination of just compensation in eminent domain cases is a judicial
function and any valuation for just compensation laid down in the statutes may serve
only as a guiding principle or one of the factors in determining just compensation but it
may not substitute the court's own judgment as to what amount should be awarded
and how to arrive at such amount. 44
An evaluation of the circumstances of this case and the parties' arguments
showed that the petitioners acted oppressively in their position to deny the
respondents of the just compensation that the immediate taking of their property
entailed. The Court cannot allow the petitioners to pro t from its failure to comply with
the mandate of the law. To adequately compensate the respondents from the decades
of burden on their land, the petitioners should be made to pay the full value of
P17,028,900.00 representing the just compensation of the subject land at the time of
the ling of the instant complaint when the respondents made a judicial demand for
just compensation. HESIcT

THREE . The undue delay of the petitioners to pay the just compensation brought
about the basis for the grant of interest.
Apart from the requirement that compensation for expropriated land must be fair
and reasonable, compensation, to be "just", must also be made without delay. Without
prompt payment, compensation cannot be considered "just" if the property is
immediately taken as the property owner suffers the immediate deprivation of both his
land and its fruits or income. 45
Obviously, the delay in payment of just compensation occurred and cannot at all
be disputed. The undisputed fact is that the respondents were deprived of their lands
since 1989 and have not received a single centavo to date. The petitioners should not
be allowed to exculpate itself from this delay and should suffer all the consequences
the delay has caused.
The Court has already dealt with cases involving similar background and issues,
that is, the government took control and possession of the subject properties for
public use without initiating expropriation proceedings and without payment of just
compensation, and the landowners failed for a long period of time to question such
government act and later instituted actions to recover just compensation with
damages.
Here, the records showed that the respondents fully cooperated with the
petitioners' road widening program, and allowed their landholdings to be taken by the
petitioners without any questions. The present case therefore is not one where
substantial con ict arose on the issue of whether expropriation is proper; the
respondents voluntarily submitted to expropriation and surrendered their landholdings,
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 and never contested the valuation that was made. Apparently, had the petitioners paid
the just compensation on the subject land, there would have been no need for this case.
But, as borne by the records, the petitioners refused to pay, telling instead that the
subject land is beyond the commerce of man. Hence, the respondents have no choice
but to le actions to claim what is justly due to them. Consequently, interest must be
granted to the respondents.
The rationale for imposing the interest is to compensate the petitioners for the
income they would have made had they been properly compensated for their properties
at the time of the taking. 46 There is a need for prompt payment and the necessity of
the payment of interest to compensate for any delay in the payment of compensation
for property already taken. 47 Settled is the rule that the award of interest is imposed in
the nature of damages for delay in payment which in effect makes the obligation on the
part of the government one of forbearance. This is to ensure prompt payment of the
value of the land and limit the opportunity loss of the owner that can drag from days to
decades. 48
Based on a judicious review of the records and application of jurisprudential
rulings, legal interest shall be pegged at the rate of twelve percent (12%) per annum,
reckoned from the time of the ling of the complaint for expropriation, which in this
case is on December 29, 2005, the date when the respondents led a petition for
mandamus to compel the petitioners to comply with the MOA. Thereafter, or beginning
July 1, 2013, until fully paid, just compensation shall earn interest at the new legal rate
of six percent (6%) per annum, conformably with the modi cation on the rules
respecting interest rates introduced by the Bangko Sentral ng Pilipinas Monetary Board
Circular No. 799, Series of 2013. 49 To clarify, this incremental interest is not granted on
the computed just compensation; rather, it is a penalty imposed for damages incurred
by the landowner due to the delay in its payment. 50
FOURTH . The award of exemplary damages and attorney's fees is warranted.
The taking of the respondents' subject land without the bene t of expropriation
proceedings and without payment of just compensation, clearly resulted in an
"expropriate now, pay later" situation, which the Court abhors. It has been more than
two decades since the petitioners took the subject land without a timely expropriation
proceeding and without the petitioners exerting efforts to negotiate with the
respondents.
This irregularity will not proceed without any consequence. The Court had
repeatedly ruled that the failure of the government to initiate an expropriation
proceeding to the prejudice of the landowner may be corrected with the awarding of
exemplary damages, attorney's fees and costs of litigation. 51
Evidently, the petitioners' oppressive taking of the subject land for a very long
period of time surely resulted in pecuniary loss to the respondents. The petitioners
cannot now be heard to claim that they were simply protecting their interests when they
stubbornly defended their erroneous arguments before the courts. The more truthful
statement is that they adopted a grossly unreasonable position and the unwanted
developments that followed, particularly the attendant delay, should be directly
chargeable to them.
Indeed, the respondents were deprived of their subject land for road widening
programs, were uncompensated, and were left without any expropriation proceeding
undertaken. Hence, in order to serve as a deterrent to the State for failing to institute
such proceedings within the prescribed period under the law, the award of exemplary
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 damages and attorney's fees is in order. caITAC

In sum, the respondents have waited too long before the petitioners fully pay the
amount of the just compensation due them. Since the trial court had already made the
proper determination of the amount of just compensation in accordance with law and
to forestall any further delay in the resolution of this case, it is but proper to order the
petitioners to pay in full the amount of P17,028,900.00 representing the just
compensation of the subject land. Furthermore, the respondents are entitled to an
additional grant of interest, exemplary damages and attorney's fees. In accordance with
existing jurisprudence, the award of exemplary damages in the amount of P200,000.00
is proper, as well as attorney's fees equivalent to one percent (1%) of the total amount
due.
WHEREFORE , the petition is DENIED . The Decision dated August 8, 2008 and
the Resolution dated December 5, 2008 of the Court of Appeals in CA-G.R. SP No.
97851 are AFFIRMED with MODIFICATION . Honorable Alvin P. Vergara, in his
capacity as Mayor of Cabanatuan City, and the Sangguniang Panlungsod of Cabanatuan
are hereby ordered to PAY Lourdes Melencio S. Grecia, represented by Renato Grecia,
and Sandra Melencio, in representation of Ma. Paz Salgado Vda. De Melencio, Conchita
Melencio, Cristina Melencio and Leonardo Melencio the amount of Seventeen Million
Twenty-Eight Thousand Nine Hundred Pesos (P17,028,900.00) representing the just
compensation of the subject land, exemplary damages in the amount of Two Hundred
Thousand Pesos (P200,000.00), and attorney's fees equivalent to one percent (1%) of
the amount due. Lastly, legal interest shall be pegged at the rate of twelve percent
(12%) per annum, from the time of judicial demand on December 29, 2005. Thereafter,
or beginning July 1, 2013, until fully paid, just compensation shall earn interest at the
new legal rate of six percent (6%) per annum.
SO ORDERED. TAIaHE

Velasco, Jr., Peralta, Perez and Jardeleza, JJ., concur.

Footnotes
1. Rollo, pp. 3-19.
2. Penned by Associate Justice Monina Arevalo-Zenarosa, with Associate Justices Regalado
E. Maambong and Normandie B. Pizarro concurring; id. at 129-145.
3. Id. at 160-162.
4. Rendered by Presiding Judge Raymundo Z. Annang; id. at 81-83.
5. Rendered by Presiding Judge Virgilio G. Caballero; id. at 100-101.

6. Id. at 130.
7. Id. at 33.
8. Id. at 130-131.
9. Id. at 36.
10. Id. at 34-35.

11. Id. at 131-132.

12. Id. at 37-38.
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 13. Id. at 132.
14. Id. at 39.

15. Id. at 40.

16. Id. at 26-32.
17. Id. at 60-64.
18. Id. at 64.
19. Id. at 65-67.

20. Id. at 68-70.

21. Id. at 133-134.
22. Id. at 81-83.
23. Id. at 84-88.

24. Id. at 135.

25. Id. at 100-101.
26. Id. at 136.
27. Id. at 102-121.
28. Id. at 123-127.

29. Id. at 129-145.

30. Id. at 144.
31. Id. at 146-150.
32. Id. at 160-162.
33. AMENDING AND CODIFYING THE LAWS RELATIVE TO REGISTRATION OF PROPERTY
AND FOR OTHER PURPOSES. Approved on June 11, 1978.
34. Rollo, p. 13.

35. Penned by Associate Justice Marina L. Buzon, with Associate Justices Rosmari D.
Carandang and Mariflor P. Punzalan Castillo concurring.

36. Resolution dated January 23, 2009 issued by the CA Special Former Third Division.
37. (a) The conditions imposed by Section 4, Rule 74 of the Rules of Court; and
(b) that except by way of donation in favor of the national government, city or
municipality, no portion of any street, passageway, waterway or open space so
delineated on the plan shall be closed or otherwise disposed of by the registered
owner without the approval of Court of First Instance of the Province or City in which
the land is situated (Fr. T-69586). Rollo, pp. 9-10.
38. Id. at 9-13.
39. See CA Third Division Resolution dated March 14, 2008 in CA-G.R. SP No. 98397, p. 5.

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 40. Sec. 50. Subdivision and consolidation plans . — Any owner subdividing a tract of
registered land into lots which do not constitute a subdivision project as de ned and
provided for under P.D. No. 957, shall le with the Commissioner of Land
Registration or with the Bureau of Lands a subdivision plan of such land on which all
boundaries, streets, passageways and waterways, if any, shall be distinctly and
accurately delineated.
If a subdivision plan, be it simple or complex, duly approved by the Commissioner of
Land Registration or the Bureau of Lands together with the approved technical
descriptions and the corresponding owner's duplicate certi cate of title is presented
for registration, the Register of Deeds shall, without requiring further court approval
of said plan, register the same in accordance with the provisions of the Land
Registration Act, as amended: Provided, however, that the Register of Deeds shall
annotate on the new certi cate of title covering the street, passageway or open
space, a memorandum to the effect that except by way of donation in favor of the
national government, province, city or municipality, no portion of any street,
passageway, waterway or open space so delineated on the plan shall be closed or
otherwise disposed of by the registered owner without the approval of the Court of
First Instance of the province or city in which the land is situated.
41. G.R. No. 171496, March 3, 2014, 717 SCRA 601.
42. Id. at 616-620.
43. Republic of the Philippines v. Heirs of Saturnino Q. Borbon , G.R. No. 165354, January 12,
2015, 745 SCRA 40, 50-51.
44. National Power Corporation v. Spouses Saludares , 686 Phil. 967, 978 (2012), citing
National Power Corporation v. Bagui, et al., 590 Phil. 424, 432 (2008).
45. Apo Fruits Corporation, et al. v. Land Bank of the Philippines, 647 Phil. 251, 273 (2010).
46. Secretary of the Department of Public Works and Highways and District Engineer
Celestino R. Contreras v. Spouses Heracleo and Ramona Tecson , G.R. No. 179334,
April 21, 2015.
47. Id.
48. Sy v. Local Government of Quezon City , 710 Phil. 549, 559 (2013), citing Land Bank of the
Philippines v. Rivera, et al., 705 Phil. 139, 145 (2013).
49. Nacar v. Gallery Frames, et al., 716 Phil. 267, 279-280 (2013).
50. Land Bank of the Philippines v. Lajom , G.R. No. 184982, August 20, 2014, 733 SCRA 511,
524.
51. Secretary of the Department of Public Works and Highways and District Engineer
Celestino R. Contreras v. Spouses Heracleo and Ramona Tecson, supra note 46.

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