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RepublicofthePhilippines
SUPREMECOURT
Manila

THIRDDIVISION

G.R.No.147511January20,2003

MARINAZ.REYESALFREDOA.FRANCISCOANGELITAZ.GARCIAALFREDOZ.FRANCISCO,JR
ARMANDOZ.FRANCISCOALMAC.FRANCISCOEUGENIAZ.LUNACLARITAZ.ZABALLERO,
LEONARDOZ.ZABALLERO,JR,andTEODOROZ.ZABALLERO,insubstitutionofLEONARDOM.
ZABALLEROAUGUSTOM.ZABALLEROFRINEA.ZABALLEROELENAFRONDAZABALLEROVICTOR
GREGORIOF.ZABALLEROMARIAELENAF.ZABALLEROLOURDESZABALLEROLAVASOCORRO
EMILIAZABALLEROYAPandTERESITAF.ZABALLERO,petitioners,
vs.
NATIONALHOUSINGAUTHORITY,respondent.

PUNO,J.:

ThisisanappealbycertiorarifromthedecisionoftheCourtofAppealsinCAGRCVNo.51641datedSeptember
29, 20001 affirming the judgment of the Regional Trial Court of Quezon City, Branch 79 which dismissed the
complaintforforfeitureofrightsfiledbyhereinpetitioners,aswellastheResolutiondatedMarch13,2001denying
petitioners'motionforreconsideration.

Records show that in 1977, respondent National Housing Authority (NHA) filed separate complaints for the
expropriationofsugarcanelands,particularlyLotNos.6450,6448E,6198Aand6199ofthecadastralsurveyof
Dasmarias,Cavitebelongingtothepetitioners,beforethethenCourtofFirstInstanceofCavite,anddocketedas
CivilCaseNos.T.G.392,T.G.396andT.G.417.Thestatedpublicpurposeoftheexpropriationwastheexpansion
oftheDasmariasResettlementProjecttoaccommodatethesquatterswhowererelocatedfromtheMetropolitan
Manila area. The trial court rendered judgment ordering the expropriation of these lots and the payment of just
compensation.ThiswasaffirmedbytheSupremeCourtinadecisionrenderedonOctober29,1987inthecaseof
NHAvs.Zaballero2andwhichbecamefinalonNovember26,1987.3

On February 24, 1989, the expropriation court (now Branch 18, Regional Trial Court of Tagaytay City) issued an
Order4thedispositiveportionofwhichreads:

"WHEREFORE,andresolvingthus,letanAliasWritofExecutionbeimmediatelyissuedandthat:

(1)TheRegisterofDeedsoftheProvinceofCaviteisherebyorderedtotransfer,inthenameoftheplaintiff
NationalHousingAuthority,thefollowing:

(a) Transfer Certificate No. RT638 containing an area of 79,167 square meters situated in Barrio
Bangkal,Dasmarias,Cavite

(b) Transfer Certificate of Title No. T55702 containing an area of 20,872 square meters situated in
BarrioBangkal,Dasmarias,Cavite

(c) Transfer Certificate of Title No. RT639 and RT4641 covering Lot Nos. 6198A and 6199 with an
aggregateareaof159,985squaremetersalsosituatedinBarrioBangkal,Dasmarias,Cavite.

(2)PlaintiffNationalHousingAuthorityislikewiseherebyordered,underpainofcontempt,toimmediatelypay
the defendants, the amounts stated in the Writ of Execution as the adjudicated compensation of their
expropriatedproperties,whichprocesswasreceivedbyitaccordingtotherecords,onSeptember26,1988,
segregating therefrom, and in separate check, the lawyer's fees in favor of Atty. Bobby P. Yuseco, in the
amountofP322,123.05,assustainedbytheircontractasgleanedfromtherecords,withnootherdeduction,
paying on its own (NHA) account, the necessary legal expenses incident to the registration or issuance of
newcertificatesoftitle,pursuanttotheprovisionsofthePropertyRegistrationLaw(PD1529)
 (3) Defendants, however, are directed to pay the corresponding capital gains tax on the subject properties,
directing them additionally, to coordinate with the plaintiff NHA in this regard, in order to facilitate the
terminationofthiscase,putanendtothiscontroversyandconsignthesametoitsfinalrest."

For the alleged failure of respondent NHA to comply with the above order, petitioners filed on April 28, 1992 a
complaint5forforfeitureofrightsbeforetheRegionalTrialCourtofQuezonCity,Branch79,inCivilCaseNo.Q92
12093.They alleged that respondent NHA had not relocated squatters from the Metropolitan Manila area on the
expropriatedlandsinviolationofthestatedpublicpurposeforexpropriationandhadnotpaidthejustcompensation
fixed by the court. They prayed that respondent NHA be enjoined from disposing and alienating the expropriated
propertiesandthatjudgmentberenderedforfeitingallitsrightsandinterestsundertheexpropriationjudgment.Inits
Answer,6respondentNHAaverredthatithadalreadypaidasubstantialamounttohereinpetitionersandthatthe
expropriation judgment could not be executed in view of several issues raised by respondent NHA before the
expropriation court (now Branch 18, RTC, Tagaytay City) concerning capital gains tax, registration fees and other
expenses for the transfer of title to respondent NHA, as well as the claims for attorney's fees of Atty. Joaquin
Yuseco,Jr.,collaboratingcounselforpetitioners.

Ocularinspections7conductedbythetrialcourtonthesubjectpropertiesshowthat:

"1.80%ofLotNo.6198Awithanareaof120,146squaremetersisalreadyoccupiedbyrelocateeswhose
housesaremadeoflightmaterialswithveryfewhousespartlymadeofhollowblocks.Therelocateeswere
relocatedonlyon(sic)Marchof1994

2.MostoftheareacoveredbyLotNo.2075isalmostoccupiedbyhousesandstructures,mostofwhichare
madeofconcretematerials.Thesehousesarenotbeingoccupiedbysquattersrelocatedtothesaidlotby
thedefendantNHA

3.LotNo.6199isalsooccupiedbyconcretehousesandstructuresbutlikewisetherearenorelocateesin
saidlot.Alargeareaofthesameisstillunoccupied."

On September 29, 1995, the trial court rendered judgment dismissing the complaint. Finding that the failure of
respondent NHA to pay just compensation and of petitioners to pay capital gains tax are both unjustified and
unreasonable,thetrialcourtheldthat:(1)respondentNHAisnotdeemedtohaveabandonedthepublicpurposefor
which the subject properties were expropriated because the relocation of squatters involves a long and tedious
process.ItruledthatrespondentNHAactuallypursuedthepublicpurposeoftheexpropriationwhenitenteredintoa
contract with Arceo C. Cruz involving the construction of low cost housing on the expropriated lots to be sold to
qualifiedlowincomebeneficiaries(2)thereisnoconditionimposedintheexpropriationjudgmentthatthesubject
propertiesshallrevertbacktoitsoriginalownersincasethepurposeofexpropriationisterminatedorabandoned
(3)thepaymentofjustcompensationisindependentoftheobligationofhereinpetitionerstopaycapitalgainstax
and(4)inthepaymentofjustcompensation,thebasisshouldbethevalueatthetimethepropertywastaken.On
appeal,theCourtofAppealsaffirmedthedecisionofthetrialcourt.

Petitionersarenowbeforeusraisingthefollowingassignmentoferrors:

"1.TheHonorableCourtofAppealshaddecidedaquestionofsubstancenotinaccordwithjusticeandequity
when it ruled that, as the judgment of the expropriation court did not contain a condition that should the
expropriatedpropertybenotusedfortheintendedpurposeitwouldreverttothecondemnee,theactionto
declaretheforfeitureofrightsundertheexpropriationjudgmentcannotprosper

2.TheHonorableCourtofAppealsdecidedaquestionofsubstancenotinaccordwithjurisprudence,justice
andequitywhenitruledthatthenonpaymentisnotagroundforforfeiture

3.TheHonorableCourtofAppealserredinnotdeclaringthejudgmentofexpropriationforfeitedinlightofthe
failure of respondent to use the expropriated property for the intended purpose but for a totally different
purpose."

Thepetitionisnotimpressedwithmerit.

Petitioners contend that respondent NHA violated the stated public purpose for the expansion of the Dasmarias
ResettlementProjectwhenitfailedtorelocatethesquattersfromtheMetroManilaarea,asborneoutbytheocular
inspectionconductedbythetrialcourtwhichshowedthatmostoftheexpropriatedpropertiesremainunoccupied.
PetitionerslikewisequestionthepublicnatureoftheusebyrespondentNHAwhenitenteredintoacontractforthe
constructionoflowcosthousingunits,whichisallegedlydifferentfromthestatedpublicpurposeintheexpropriation
proceedings. Hence, it is claimed that respondent NHA has forfeited its rights and interests by virtue of the
expropriation judgment and the expropriated properties should now be returned to herein petitioners. We are not
persuaded.
The 1987 Constitution explicitly provides for the exercise of the power of eminent domain over private properties
uponpaymentofjustcompensation.Morespecifically,section9,ArticleIIIstatesthatprivatepropertyshallnotbe
takenforpublicusewithoutjustcompensation.Theconstitutionalrestraintsarepublicuseandjustcompensation.

PetitionerscannotinsistonarestrictiveviewoftheeminentdomainprovisionoftheConstitutionbycontendingthat
thecontractforlowcosthousingisadeviationfromthestatedpublicuse.Itisnowsettleddoctrinethattheconcept
of public use is no longer limited to traditional purposes. Here, as elsewhere, the idea that "public use" is strictly
limitedtoclearcasesof"usebythepublic"hasbeenabandoned.Theterm"publicuse"hasnowbeenheldtobe
synonymouswith"publicinterest,""publicbenefit,""publicwelfare,"and"publicconvenience."8Therationaleforthis
newapproachiswellexplainedinthecaseofHeirsofJuanchoArdona,etal.vs.Reyes,etal.,9towit:

"The restrictive view of public use may be appropriate for a nation which circumscribes the scope of
government activities and public concerns and which possesses big and correctly located public lands that
obviatetheneedtotakeprivatepropertyforpublicpurposes.NeithercircumstanceappliestothePhilippines.
WehaveneverbeenalaissezfaireState.Andthenecessitieswhichimpeltheexertionofsovereignpower
arealltoooftenfoundinareasofscarcepubliclandorlimitedgovernmentresources.

xxxxxxxxx

Thetakingtobevalidmustbeforpublicuse.Therewasatimewhenitwasfeltthataliteralmeaningshould
beattachedtosucharequirement.Whateverprojectisundertakenmustbeforthepublictoenjoy,asinthe
caseofstreetsorparks.Otherwise,expropriationisnotallowable.Itisnotanymore.Aslongasthepurpose
ofthetakingispublic,thenthepowerofeminentdomaincomesintoplay.Asjustnoted,theconstitutioninat
leasttwocases,toremoveanydoubt,determineswhatispublicuse.Oneistheexpropriationoflandstobe
subdividedintosmalllotsforresaleatcosttoindividuals.Theotherisinthetransfer,throughtheexerciseof
this power, of utilities and other private enterprise to the government. It is accurate to state then that at
present whatever may be beneficially employed for the general welfare satisfies the requirement of
publicuse."(emphasissupplied)

TheactofrespondentNHAinenteringintoacontractwitharealestatedeveloperfortheconstructionoflowcost
housing on the expropriated lots to be sold to qualified low income beneficiaries cannot be taken to mean as a
deviationfromthestatedpublicpurposeoftheirtaking.Jurisprudencehasitthattheexpropriationofprivatelandfor
slum clearance and urban development is for a public purpose even if the developed area is later sold to private
homeowners,commercialsfirms,entertainmentandservicecompanies,andotherprivateconcerns.10

Moreover, the Constitution itself allows the State to undertake, for the common good and in cooperation with the
private sector, a continuing program of urban land reform and housing which will make at affordable cost
decent housing and basic services to underprivileged and homeless citizens in urban centers and resettlement
areas.11Theexpropriationofprivatepropertyforthepurposeofsocializedhousingforthemarginalizedsectorisin
furtheranceofthesocialjusticeprovisionunderSection1,ArticleXIIIoftheConstitutionwhichprovidesthat:

"SECTION1.TheCongressshallgivehighestprioritytotheenactmentofmeasuresthatprotectandenhance
the right of all the people to human dignity, reduce social, economic, and political inequalities, and remove
culturalinequitiesbyequitablydiffusingwealthandpoliticalpowerforthecommongood.

To this end, the State shall require the acquisition, ownership, use and disposition of property and its
increments."

ItfollowsthatthelowcosthousingprojectofrespondentNHAontheexpropriatedlotsiscompliantwiththe"public
use"requirement.

We likewise do not subscribe to petitioners' contention that the stated public purpose was abandoned when
respondent NHA failed to occupy the expropriated lots by relocating squatters from the Metro Manila area. The
expropriationjudgmentdeclaredthatrespondentNHAhasalawfulrighttotakepetitionersproperties"forthepublic
use or purpose of expanding the Dasmarias Resettlement Project." The taking here is absolute, without any
condition,restrictionorqualification.Contrarytopetitioners'submission,therulingenunciatedintheearlycaseof
Feryvs.MunicipalityofCabanatuan,12isstillgoodandsounddoctrine,viz.:

"xxxIf,forexample,landisexpropriatedforaparticularpurpose,withtheconditionthatwhenthatpurpose
is ended or abandoned the property shall return to its former owner, then, of course, when the purpose is
terminated or abandoned the former owner reacquires the property so expropriated. x x x If, upon the
contrary,however,thedecreeofexpropriationgivestotheentityafeesimpletitle,then,ofcourse,theland
becomestheabsolutepropertyoftheexpropriatorxxx.

When land has been acquired for public use in fee simple unconditionally, either by the exercise of
eminent domain or by purchase, the former owner retains no rights in the land, and the public use
 may be abandoned, or the land may be devoted to a different use, without any impairment of the
estateortitleacquired,oranyreversiontotheformerowner."

PetitionersfurtheraverthatthecontinuedfailureofrespondentNHAtopayjustcompensationforalongperiodof
time justifies the forfeiture of its rights and interests over the expropriated lots. They demand the return of the
expropriated lots. Respondent NHA justifies the delay to pay just compensation by reason of the failure of
petitionerstopaythecapitalgainstaxandtosurrendertheowners'duplicatecertificatesoftitle.

IntherecentcaseofRepublicofthePhilippinesvs.CourtofAppeals,etal.,13theCourtruledthatnonpaymentof
justcompensationdoesnotentitletheprivatelandownerstorecoverpossessionoftheirexpropriatedlots.Thus:

"Thus, in Valdehueza vs. Republic where the private landowners had remained unpaid ten years after the
terminationoftheexpropriationproceedings,thisCourtruled

'Thepointsindisputearewhethersuchpaymentcanstillbemadeand,ifso,inwhatamount.Saidlotshave
been the subject of expropriation proceedings. By final and executory judgment in said proceedings, they
werecondemnedforpublicuse,aspartofanairport,andorderedsoldtothegovernment.xxx.Itfollowsthat
bothbyvirtueofthejudgment,longfinal,intheexpropriationsuit,aswellastheannotationsupontheirtitle
certificates,plaintiffsarenotentitledtorecoverpossessionoftheirexpropriatedlotswhicharestilldevoted
tothepublicuseforwhichtheywereexpropriatedbutonlytodemandthemarketvalueofthesame.

Saidreliefmaybegrantedunderplaintiffs'prayerforsuchotherremedies,whichmaybedeemedjustand
equitableunderthepremises.'

The Court proceeded to reiterate its pronouncement in Alfonso vs. Pasay City where the recovery of
possession of property taken for public use prayed for by the unpaid landowner was denied even while no
requisite expropriation proceedings were first instituted. The landowner was merely given the relief of
recovering compensation for his property computed at its market value at the time it was taken and
appropriatedbytheState.

ThejudgmentrenderedbytheBulacanRTCin1979ontheexpropriationproceedingsprovidesnotonlyfor
the payment of just compensation to herein respondents but likewise adjudges the property
condemnedinfavorofpetitioneroverwhichparties,aswellastheirprivies,arebound.Petitionerhas
occupied,utilizedand,forallintentsandpurposes,exerciseddominionoverthepropertypursuantto
thejudgment.Theexerciseofsuchrightsvestedtoitasthecondemneeindeedhasamountedtoat
leastapartialcomplianceorsatisfactionofthe1979judgment,therebypreemptinganyclaimofbarby
prescriptionongroundsofnonexecution.Inarguingforthereturnoftheirpropertyonthebasisofnon
payment,respondentsignorethefactthattherightoftheexpropriatingauthorityisfarfromthatofan
unpaid seller in ordinary sales, to which the remedy of rescission might perhaps apply. An in rem
proceeding,condemnationactsupontheproperty.Aftercondemnation,theparamounttitleisinthepublic
under a new and independent title thus, by giving notice to all claimants to a disputed title, condemnation
proceedingsprovideajudicialprocessforsecuringbettertitleagainstalltheworldthanmaybeobtainedby
voluntaryconveyance."(emphasissupplied)

We, however, likewise find the refusal of respondent NHA to pay just compensation, allegedly for failure of
petitioners to pay capital gains tax and surrender the owners' duplicate certificates of title, to be unfounded and
unjustified.

First,undertheexpropriationjudgmentthepaymentofjustcompensationisnotsubjecttoanycondition.Second,it
isarecognizedrulethatalthoughtherighttoenteruponandappropriatethelandtopublicuseiscompletedpriorto
payment,titletothepropertyexpropriatedshallpassfromtheownertotheexpropriatoronlyuponfullpaymentof
the just compensation. In the case of Association of Small Landowners in the Phils., Inc., et al. vs. Secretary of
AgrarianReform,14itwasheldthat:

"Title to property which is the subject of condemnation proceedings does not vest the condemnor until the
judgmentfixingjustcompensationisenteredandpaid,butthecondemnor'stitlerelatesbacktothedateon
whichthepetitionundertheEminentDomainAct,orthecommissioner'sreportundertheLocalImprovement
Act,isfiled.

xxxAlthoughtherighttoappropriateanduselandtakenforacanaliscompleteatthetimeofentry,
titletothepropertytakenremainsintheowneruntilpaymentisactuallymade.

InKennedyv.Indianapolis,theUSSupremeCourtcitedseveralcasesholdingthattitletopropertydoesnot
passtothecondemnoruntiljustcompensationhadactuallybeenmade.Infact,thedecisionsappeartobe
uniformlytothiseffect.Asearlyas1838,inRubottomv.McLure,itwasheldthat'actualpaymenttotheowner
of the condemned property was a condition precedent to the investment of the title to the property in the
State'albeit'nottotheappropriationofittopublicuse.'InRexfordv.Knight,theCourtofAppealsofNewYork
 saidthattheconstructionuponthestatuteswasthatthefeedidnotvestintheStateuntilthepaymentofthe
compensation although the authority to enter upon and appropriate the land was complete prior to the
payment.Kennedyfurthersaidthat'bothonprincipleandauthoritytheruleisxxxthattherighttoenteron
andusethepropertyiscomplete,assoonasthepropertyisactuallyappropriatedundertheauthority
oflawforapublicuse,butthatthetitledoesnotpassfromtheownerwithouthisconsent,untiljust
compensationhasbeenmadetohim.'"

OurownSupremeCourthasheldinVisayanRefiningCo.v.CamusandParedes,that:

If the laws which we have exhibited or cited in the preceding discussion are attentively examined it will be
apparent that the method of expropriation adopted in this jurisdiction is such as to afford absolute
reassurance that no piece of land can be finally and irrevocably taken from an unwilling owner until
compensationispaid.xxx."(emphasissupplied)

With respect to the amount of the just compensation still due and demandable from respondent NHA, the lower
courts erred in not awarding interest computed from the time the property is actually taken to the time when
compensation is actually paid or deposited in court. In Republic, et al. vs. Court of Appeals, et al.,15 the Court
imposedinterestat12%perannuminordertohelpeliminatetheissueoftheconstantfluctuationandinflationofthe
valueofthecurrencyovertime,thus:

"Theconstitutionallimitationof'justcompensation'isconsideredtobethesumequivalenttothemarketvalue
oftheproperty,broadlydescribedtobethepricefixedbythesellerinopenmarketintheusualandordinary
courseoflegalactionandcompetitionorthefairvalueofthepropertyasbetweenonewhoreceives,andone
whodesirestosell,itbeingfixedatthetimeoftheactualtakingbythegovernment.Thus,ifpropertyistaken
for public use before compensation is deposited with the court having jurisdiction over the case, the final
compensationmustincludeinterestsonitsjustvaluetobecomputedfromthetimethepropertyistakento
the time when compensation is actually paid or deposited with the court. In fine, between the taking of the
propertyandtheactualpayment,legalinterestsaccrueinordertoplacetheownerinapositionasgoodas
(butnotbetterthan)thepositionhewasinbeforethetakingoccurred.

x x x This allowance of interest on the amount found to be the value of the property as of the time of the
taking computed, being an effective forbearance, at 12% per annum should help eliminate the issue of the
constant fluctuation and inflation of the value of the currency over time. Article 1250 of the Civil Code,
providing that, in case of extraordinary inflation or deflation, the value of the currency at the time of the
establishment of the obligation shall be the basis for the payment when no agreement to the contrary is
stipulated, has strict application only to contractual obligations. In other words, a contractual agreement is
neededfortheeffectsofextraordinaryinflationtobetakenintoaccounttoalterthevalueofthecurrency."

RecordsshowthatthereisanoutstandingbalanceofP1,218,574.35thatoughttobepaidtopetitioners.16Itisnot
disputed that respondent NHA took actual possession of the expropriated properties in 1977.17 Perforce, while
petitioners are not entitled to the return of the expropriated property, they are entitled to be paid the balance of
P1,218,574.35withlegalinterestthereonat12%perannumcomputedfromthetakingofthepropertyin1977until
thedueamountshallhavebeenfullypaid.

WHEREFORE,theappealedjudgmentismodifiedasfollows:

1.OrderingrespondentNationalHousingAuthoritytopaypetitionerstheamountofP1,218,574.35withlegal
interestthereonat12%perannumcomputedfromthetakingoftheexpropriatedpropertiesin1997untilthe
amountdueshallhavebeenfullypaid

2.Orderingpetitionerstopaythecapitalgainstaxand

3. Ordering petitioners to surrender to respondent National Housing Authority the owners' duplicate
certificatesoftitleoftheexpropriatedpropertiesuponfullpaymentofjustcompensation.

SOORDERED.

Panganiban,SandovalGutierrez,CoronaandCarpioMorales,JJ.,concur.

Footnotes
1 Penned by Associate Justice Remedios A. SalazarFernando, with Quirino D. Abad Santos, Jr. and
SalvadorJ.Valdez,Jr,JJ.,concurringAnnexA,PetitionRollo,pp.4966.

2155SCRA224(1987).
 3ExhibitBOriginalRecords,Volume2,p.305.

4ExhibitIibid.,pp.318322.

5OriginalRecords,Volume1,pp.15.

6Ibid.,pp.1014.

7Commissioner'sReportissuedincompliancewiththeOrderdatedJuly13,1994OriginalRecords,Volume
2, p. 407 Commissioner's Report issued in compliance with the Order dated November 11, 1994 ibid., p.
653.

8HeirsofJuanchoArdona,etal.vs.Reyes,etal.,125SCRA220(1983).

9Supra.

10Supra.

11Section9,ArticleXIII,1987Constitution.

1242Phil28(1921).

13G.R.No.146587,July2,2002.

14175SCRA343(1989).

15G.R.No.146587,July2,2002.

16OriginalRecords,Volume3,pp.731732.

17SeeZaballero,etal.vs.NHA,etal.,supra,pp.226227.

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