864 SUPREME COURT REPORTS ANNOTATED

Mateo vs. Lagua.

No. L-26270. October 30, 1969.

BONIFACIA MATEO, ET AL., petitioners, vs. GERVASIO LAGUA, ET AL., respondents.

Civil law:  Donations;  Donation propter nuptias may be reduced for being inofficious.—
Donations  propter nuptias  (by reason of marriage) are without onerous consideration, the marriage
being merely the  occasion  or  motive  for the donation, not its  causa.  Being liberalities, .they remain
subject to reduction for inofficiousness upon the donor's death, if they should infringe the legitime of a
forced heir.
Same; Succession; Legitime; Steps in determination of legal share due to a compulsory heir.—Before
any conclusion about the legal share due .to a compulsory heir may be reached, it is necessary that
certain steps be taken first. The net estate of the decedent must be ascertained, by deducting all payable
obligations and charges from the value of the property owned by the deceased at the time of his death;
then, all donations subject to collation would be added to it. With the partible estate thus determined,
the legitimes of the compulsory heir

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Mateo vs, Lagua

or heirs can be established; and only thereafter can it be ascertained whether or not a donation had
prejudiced the legitimes.

PETITION for review of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

     Pedro P. Tuason for petitioners.
     Isaiah Asuncion for respondents.

REYES, J.B.L., J.:

This is a petition for review of the decision of the Court of Appeals (In CA-G.R. Nos. 30064-R
and 30065-R), raising as only issue the correctness of the appellate court's reduction of a
donation propter nuptias, for being inofficious.
The established facts of this case are as follows: Cipriano Lagua was the original registered
owner of 3 parcels of land situated in Asingan, Pangasinan, referred to as Lot No. 998, with
an area of 11,080 sq.m., more or less and covered by O.C.T. No. 362; Lot No. 6541, with an
area of 808 sq.m., more or less, covered by O.C.T. No. 6618; and Lot No. 5106, with an area of
3,303 sq.m., covered by O.C.T. No. 8137. Sometime in 1917, Lagua and his wife Alejandra
Dumlao, in a public instrument, donated Lots 998 and 6541 to their son Alejandro Lagua, in
consideration of the latter's marriage to Bonifacia Mateo. The marriage was celebrated on 15
May 1917, and thereafter, the couple took possession of the properties, but the Certificates of
Title remained in the donor's name.
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 In 1923, the son, Alejandro, died. His widow, Bonifacia Mateo, and her inf fant daughter
lived with her father-in-law, Cipriano Lagua, who then undertook the farming of the donated
lots. It seems that at the start, Cipriano Lagua was giving to Bonifacia the owner's share of
the harvest from the land. In 1926, however, Cipriano refused to deliver the said share, thus
prompting Bonifacia
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866 SUPREME COURT REPORTS ANNOTATED

Mateo vs. Lagua

to resort to the Justice of the Peace Court of Asingan, Pangasinan, from where she obtained a
judgment awarding to her possession of the two lots, plus damages.
On 31 July 1941, Cipriano Lagua executed a deed of sale of the same two parcels of land in
favor of his younger son, Gervasio. This sale notwithstanding, Bonifacia Mateo was
continuously given the owner's share of the harvest. until 1956, when it was altogether
stopped. 11 was only then that Bonifacia Mateo learned of the sale of the lots to her brother-
in-law, who had the sale in his favor resgistered only on 22 September 1955. As a
consequence, TCT Nos. 19152 and 19153 of the Register of Deeds of Pangasinan were issued
to Gervasio,
Bonifacia Mateo and her daughter, Anatalia, assisted by her husband, Luis Alcantara,
went to the Court of First Instance of Pangasinan (Civil Case No. T-339), seeking annulment
of the deed of sale in favor of Gervasio Lagua and for recovery of possession of the properties.
On 3 January 1967, judgment was rendered in the case—
"x x x declaring the sale executed by Cipriano Lagua in favor of the other defendants, Gervasio Lagua
and Sotera Casimero, as null and void and non-existent; ordering the Register of Deeds for the province
of Pangasinan, to cancel Transfer Certificates of Title Nos. 19152 and 19153; condemning the
defendants to pay jointly and severally to the plaintiffs the sum of P200.00; ordering the defendants
Gervasio Lagua and Sotera Lagua to vacate and deliver the possession over the two parcels of land to
the plaintiffs, and to pay the costs of this suit"

The decision became final, and Bonifacia Mateo Mid her daughter, Anatalia Lagua, were
installed in possession of the land.
On 18 August 1957, the spouses Gervasio Lagua and Sotera Casimero commenced in the
Justice of the Peace Court of Asingan, Pangasinan, an action against Bonifacia Mateo and her
daughter for reimbursement of the improvements allegedly made by them on Lots 998 and
6541, plus damages. Dismissed by the Justice of the
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Mateo vs. Lagua

Peace Court for being barred by the judgment in  Civil Case No. T-339, therein plaintiffs
appealed to the Court of First Instance of Pangasinan where the case was docketed as  Civil
Case No. T-433. At about the same time, another case was filed, this time by Gervasio Lagua
and Cipriano Lagua, for annulment of the donation of the two lots, insofar as one-half portion
thereof was concerned (Civil Case No. T-442). It was their claim that in donating the two lots,
which allegedly were all that plaintiff Cipriano Lagua owned, said plaintiff not only neglected
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 leaving something for his own support but also prejudiced the legitime of his forced heir,
plaintiff Gervasio Lagua.
Being intimately related, the two cases were heard jointly. On November 12, 1958, while
the cases were pending final resolution, plaintiff Cipriano Lagua died. On 23 December 1960,
the court rendered a single decision dismissing  Civil Case No. T-433  for lack of cause of
action, plaintiffs spouses Gervasio Lagua and Sotera Casimero having been declared
possessors in bad faith in  Civil Case No. T-339  and, therefore, not entitled to any
reimbursement of the expenses and improvements put up by them on the land. The other
suit, Civil Case No. T-442, was, likewise, dismissed on the ground of prescription, the action
to annul the donation having been brought only in 1958, or after the lapse of 41 years.
Defendants' counterclaims were similarly dismissed although they were awarded attorneys'
fees in the sum of P150.00.
Plaintiffs appealed the decision to the Court of Appeals (CA-G.R. Nos. 30064 and 30065-R).
Said tribunal, on 18 March 1966, affirmed the ruling of the trial court in Civil Case No. T-
433 denying plaintiffs' claim for reimbursement of the improvements said to have been made
on the land. In regard to the annulment case (C.F.I. No. T-442), however, the Court of
Appeals held that the donation to Alejandro Lagua of the 2 lots with a combined area of
11,888 square meters exceeded by 494.75 square meters his (Alejandro's) legitime and the
disposable portion that Cipriano Lagua could have freely given by will, and, to the same
extent prejudiced the legitime of Cipriano's other
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868 SUPREME COURT REPORTS ANNOTATED

Mateo vs, Lagua

heir, Gervasio Lagua. The donation was thus declared inofficious, and defendants-appellees
were ordered to reconvey to plaintiff Gervasio Lagua a portion of 494.75 square meters to be
taken from any convenient part of the lots. The award of attorneys' fees to the defendants was
also eliminated for lack of proper basis.
Bonifacia, Mateo, et al., then resorted to this Court, assailing the decision of the Court of
Appeals insofar as it ordered them to reconvey a portion of the lots to herein respondent
Gervasio Lagua, It is petitioners' contention that (1) the validity of the donation  propter
nuptias having been finally determined in Civil Case No. T-339, any question in derogation of
said validity is already barred; (2) that the action. to annul the donation, filed in 1958, or 41
years after its execution, is abated by prescription; (3) that a donation  propter nuptias  is
revocable only for any of the grounds enumerated in Article 132 of the new Civil Code, and
inofficiousness is not one of them; and (4) that in determining the legitime of the Lagua
brothers in the hereditary estate of Cipriano Lagua, the Court of Appeals should have applied
the provisions of the Civil Code of 1889, and not Article 888 of the new Civil Code.
Petitioners' first two assigned errors, it may be stated, are non-contentious issues that
have no bearing in the actual controversy in this case. All of them refer to the validity of the
donation—a matter which was definitively settled in  Civil Case No. T-339  and which,
precisely, was declared by the Court of Appeals to be "beyond the realm of judicial inquiry," In
reality, the only question this case presents is whether or not the Court of Appeals acted
correctly in ordering the reduction of the donation for being inofficious, and in ordering herein
petitioners to reconvey to respondent Gervasio Lagua an unidentified 494.75square-meter
portion of the donated lots.
We are in accord with the Court of Appeals that Civil Case No. 442 is not one exclusively
for annulment or revocation of the entire donation, but of merely that portion thereof

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 allegedly trenching on the legitime of respon-
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Mateo vs. Lagua
1
dent Gervasio Lagua;  that the cause of action to enforce Gervasio's legitime, having accrued
only upon the death of his father on 12 November 1958, the dispute has to be governed by the
pertinent provisions of the new Civil Code; and that a donation propter nuptias property may
be reduced for being inofficious. Contrary to the views of appellants (petitioners),
donations  propter nuptias  (by reason of marriage) are without onerous consideration, the
marriage being merely the  occasion  or  motive  for the donation, not its  causa.  Being
liberalities, they remain subject to reduction2 for inofficiousness upon the donor's death, if they
should infringe the legitime of a forced heir.
It is to be noted, however, that in rendering the judgment under review, the Court of
Appeals acted on several unsupported assumptions: that the three (3) lots mentioned in the-
decision (Nos. 998, 5106 and 6541) were the  only  properties composing the net hereditary
estate of the deceased Cipriano Lagua; that Alejandro Lagua and Gervasio Lagua were
his only legal heirs; that the 3deceased left no unpaid debts, charges, taxes, etc., for which the
estate would be answerable.  In the computation of the heirs' legitime, the Court of Appeals
also considered only the area, not the value, of the properties.
The infirmity in the above course of action lies in the fact that in its Article 908 the new
Civil Code specifically provides as follows:
"ART. 908. To determine the legitime, the value of the property left at the death of the testator shall be
considered,

________________
1 See Complaint, Civil Case No. 442, page 50, Record on Appeal: That plaintiff Gervasio Lagua is entitled for a
protection of his rights over the one-half of each of said two parcels of land which (are) supposed to be reserved for
the legitimes of forced heirs, and which plaintiff' (Cipriano) "could not donate x x x."
2 21 Scaevola, Cod. Civ., 2d Ed., pages 328-329; 348-349; Vol. I, Reyes and Puno, An Outline of Philippine Civil

Law, 1965 ed., page 166.

3 There is no evidence on these facts.

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Mateo vs. Lagua

deducting all debts, and charges, which shall not include those Imposed in the will.
"To "To the net value of the 'hereditary estate, shall be added the value of all donations by the
testator that are subject to collation, at' the time he made them."

In other words, before any conclusion about the legal share due to a compulsory heir may be
reached, it is necessary that certain steps be taken first. The net estate of the decedent must
be ascertained, by deducting all payable obligations and charges from the value of of the
property owned by the deceased at the time of his death; then, all donations subject to
collation would be added to it. With the partible estate thus determined, the legitimes of the
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 compulsory heir or heirs can be established; and only thereafter can it- be ascertained
whether or not a donation had prejudiced the legitimes. Certainly, in order that a .donation
may be reduced for being inofficious, there must be proof that the value of the donated
property exceeds that of4 the disposable free portion plus the donee's share as legitime in the
properties of the donor.   In the present case, it can .hardly be said that, with the evidence
then before the court, it was in any position to rule on the inofficiousness of the donation
involved here, and to order its reduction and reconveyance of the deducted portion to the
respondents.
FOR THE FOREGOING CONSIDERATIONS, the decision of the Court of Appeals, insofar
as Civil Case No. 442 of the court a quo is concerned, is hereby set aside and the trial court's
order of dismissal sustained, without prejudice- to the parties' litigating the issue of
inofficiousness in a proper proceeding, giving due notice to all persons interested in the estate
of the late Cipriano Lagua, Without costs.

          Concepcion,
C.J.,  Dizon,  Makalintal,  Zaldivar,  Sanchez,  Castro,  Fernando,  Teehankee  and  .Barredo,
JJ.,concur,

Decision set aside.

________________
4 Ramos vs. Cariño, L-17429 (October 31, 1962), 6 SCRA 482, 486.

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Mateo vs. Lagua

A N N O T A T I O N 
MEANING AND DETERMINATION OF JUST COMPENSATION IN EMINENT
DOMAIN OR EXPROPRIATION PROCEEDINGS

Meaning of just compensation.—In two provisions, the Constitution makes it a condition for
the taking or expropriation of private property that "just compensation" be paid. The first,
which refers to the exercise of the general power of eminent domain, declares that: "Private
property shall not be taken for public use without just compensation." [Art. III, Sec. (2)]. The
second, which allows the taking of private property even if it is not for the use of the general
public but for the benefit of only certain individuals, empowers Congress to "authorize, upon
payment of just compensation, the expropriation of lands to be subdivided into small lots and
conveyed at cost to individuals." [Art. XIII, Sec. 4].
What constitutes just compensation under these provisions? The general rule is that the
just compensation to which the owner of condemned property is entitled to its market
value [Manila, Railroad Co. vs. Fabie, 17 Phil. 206; Tenorio vs. Manila Railroad Company, 22
Phil. 41;  City of Manila v, Estrada,  25 Phil. 208;  City of Manila v, Corrales,32 Phil.
85; Manila Railroad Company v. Velasquez, 32 Phil. 287, 314; Manila Railroad Company v.
Caligsihan, 40 Phil. 327; Manila Railroad Company v. Mitchel, 49 Phil. 801; Municipality of
Tarlac v. Besa, 55 Phil. 423; Metropolitan Water District v. Director of Lands, 57 Phil. 293].
By market value is meant. according to one definition, "the price fixed by buyer and seller in

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 the open market in the usual and ordinary course of legal trade and competition; the price
and value of the article established or shown by sale, public or private, in the ordinary way of
business; the fair value of the property as between one who desires to purchase and one who
desires to sell; the current price;
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Mateo vs. Lagua

the general or ordinary price for which property may be bought and sold in that
locality." (Manila, Railroad Co. v. Fabie, supra). More aptly stated, it is "that sum of money
which a person, desirous but not compelled to buy, and an owner, willing but not compelled to
sell, would agree on as a price to be given and received therefor"; or the price which the
property "'will bring when it is offered for sale 'by one who desires, but is not obliged to sell it,
and is bought by one who is under 110 necessity of having it."(City of Manila v. Estrada,
supra; Manila Railroad Company v. Caligsihan, 40 Phil. 326). Or, as another decision puts it:
"When we speak of the market value of .property taken under the power of eminent domain,
we mean.  the value which purchaser generally would pay for it. We do not mean what a
purchaser would pay who had. no particular object in view in purchasing and no definite plan
as to the use to which to put, The owner has a right to Its value for the use to which it would
bring- the most in the market." (City of Manila v. Corrales, supra).
The general rule, however, is modified where only a part of a certain property is
condemned or expropriated. In such a case the owner is not restricted to compensation for the
portion actually taken. In addition to the market value of the portion taken, he is also entitled
to recover for the consequential damage, if any, to the remaining part of the property; but
from the total compensation must be deducted the value of the consequential
benefits,  (Manila Railroad Co. v, Fabie, supra;  City of Manila v. Corralessupra;  Manila
Railroad Company v. Velasquez, supra;Municipality of Tarlac v. Besa, supra;  Republic v.
Lara, el al., 50 O.G. 5778),
Time as of which market value should 'be fixed.—ln the determination of the compensation
to be awarded to the owner- of condemned property, the first -thing that must be considered is
the time with reference to which the market value of the property must be reckoned. As of
what time must the market value of the property be fixed? The case
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Mateo vs. Lagua,

of Republic v. Phil. National Bank, et al., 1 SCRA 957, clarifies this question. The necessity
for clarification arose because of apparent conflict between two cases and the Rules of Court
on the one hand, and several other cases, on the other. In  Manila, Railroad Company v.
Caligsihan, supra, decided in 1919, the Supreme Court held that "the value of property taken
by eminent domain should be fixed as of the date of the-proceedings." This ruling became
embodied in the old as well as in the new Rules of Court, according to Section 4, Rule 67 of
which the just compensation to be paid is "to be determined as of the date of the filing of the
complaint." However, in the 1933 case of Provincial Government of Rizal v. Caro, supra,  the
Court fixed the value of the property therein involved as of the date when the property was
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 taken in 1927, although the condemnation proceedings were actually began by the f iling of
the complaint in 1928. The reason is that the value of the property was greatly enhanced by
the purpose for which it was taken. The Caro ruling was reiterated in Republic v. Lara,  50
O.G. 5778 (1954) where it was held that the value of the lands expropriated must be reckoned
as of the time of the actual possession by the Government in 1916 and not as of the time of
the filing of the complaint in 1949. In overruling the lower court, the Court expressly stated
that Section 5 of Rule 69 (now Section 4 of Rule 67) of the Rules of Court, providing that the
payment of just compensation must be determined as of the filing of the complaint, did not
supersede the  Caro  holding. Explaining the rationale of the ruling the Court said:
"Ordinarily, inquiry is limited to actual market values at the time of the institution of the
condemnation proceedings because, under normal circumstances, the filing of the complaint
coincides with or even precedes the taking of the property by the plaintiff; and Rule 69 simply
fixes this convenient date for the valuation of property sought to be expropriated. Where,
however, the actual taking or occupation by the plaintiff,' with the consent of the landowner,
long precedes the filing of the complaint for expropriation, the rule to be followed must still be
that enunciated by us in Provincial Government
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Mateo vs, Lagua

of Rizal vs. Caro, supra, that '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. This is the only
way the compensation to be paid can be truly just; i.e., 'just' not only to the individual whose
property is taken, 'but to the public, which is to pay.for if (18 Am. Jur., 873, 874)." Four subse-
quent cases without making any distinction, enunciate the rule that compensation for
property expropriated must be determined as of the time the expropriating authority takes
possession thereof and not as of the institution of the proceedings.  (Republic v. Deleste, et
al., G.R. L-7208. May 23, 1956; Republic v. Garcellano, et al., G.R. L-9556  &L12630, March
29. 1958;  Municipal Government of Sagay v. Jison, et al.,  L-10484, December 29,
1958; Alfonso -.v. Pasay City, G.R. L-12754, January 30, 1960). . In between the first and the
second of these cases, the Court, in Republic v. Narciso, L-6594, May 18, 1956, held that the
prices to be considered in determining' the just compensation to be paid are those at the
beginning of the expropriation proceedings, i.e., at the time of the filing of the complaint.
Making a reconciliation of these apparently conflicting decisions, the Court, in
the  Philippine National  Bank case, states the rule to be that when the plaintiff takes
possession before the institution of the condemnation proceed-ings, the value should be fixed
as of the time of the taking of said. possession, not of the filing of the complaint; but when the
taking of the property coincides with, or is sub-sequent  to, the commencement of the
proceedings, then
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 VOL. 29, OCTOBER 30, 1969 875
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the basis is f or the determination of the value, is the f iling of the complaint and not the
taking of possession. Otherwise, the Court explains, the provision of Rule 69, Section 5 (now
Rule 67, Section 4), directing that compensation "be determined as of the f iling of the
complaint" would never be operative.
Factors or evidence on which estimate may be based.—The circumstances to be taken into
account in determining the value of property condemned for public purposes are many and
varied, so many and varied that it is practically impossible to formulate a rule to govern its
appraisement in all cases. Exceptional circumstances will modify the most carefully guarded
rule. It may, however, be stated as a guiding principle that the compensation of the owner is
to be estimated by reference to the use for which the property is suitable, having regard to the
existing business or wants of the community, or such as may reasonably be expected in the
immediate future. (City of Manila v, Corrales, supra). Otherwise stated, all the capabilities of
the property, and all the uses to which it may be applied or for which it is adapted are to be
considered, and not merely the condition it is in at the time and the use to which it is then
applied by the owner. All the facts as to the condition of the property and its surroundings, its
improvements and capabilities, may be shown and considered in estimating its value. (Manila
Railroad Company v. Velasquez, supra).  In every case, the inquiry must be; What is the
property worth in the market, viewed not merely with reference to the uses for which the
property is suitable, but with reference to the uses to which it is plainly adapted; that is to
say, what is it worth from its availability for valuable uses?  (City of Manila v. Estrada,
supra; City of Manila v. Corrales, supra; Manila Railroad Company v. Velasquez, supra).
(1) Classification or use for which suited.—Following the above stated principle, it would
be a relevant inquiry whether the property taken is suitable or useful for agricultural,
residential, commercial or industrial purposes. This would involve, among other things,
consideration of the location, topography, kind of soil, fertility or pro-
876

876 SUPREME COURT REPORTS ANNOTATED

Mateo vs. Lagua

ductivity, accessibility. and surroundings of the property.

Accordingly, in Manila Railroad Company v. Caligsihan, supra, the Court raised the price
awarded by the commissioner upon finding that the condemned land was within the
municipality of San Pablo, was not far distant from the market and the church, and was so
located as to be suitable for commercial purposes. The Court also took into account the fact
that the availability and necessity of the land for the use of the railroad was so imminent that
adds something to the value in the minds of possible buyers.
The issue that has engaged the Court's attention most' in this respect is whether a certain
expropriated land was residential or agricultural. In  Republic v. Garcia,  L-3526, March 27,
1952, the trial court refused to regard any portion of the expropriated land as residential
solely because there was not a single private house on it. On appeal, it was held that the
absence of private houses is not a decisive factor in the classification of land as agricultural or
residential. Under the circumstances of the case, the important consideration should have
been the use to which the land was dedicated before the war and the use to which It could
have been dedicated thereafter if it had not been taken for military purposes. It appeared
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 that the land used to be a part of a residential community prior to the destruction of the
houses thereon and those of the adjacent lands during the war. It was, further shown that the
lot was close to the living quarters in the military post for the establishment of which it was
expropriated. As a business proposition, the Court concluded, the lot was better adapted to
the construction of houses and stores than agricultural.
A similar holding was reached in Republic v. Lara, supra, where the Government claimed
that none of the parcels condemned should be classified as residential because, having been
converted into an airfield at the time they were taken, they were no longer fit for residential
purposes. Rejecting this argument, the Court noted that along two roads there were houses
several years old before the area's conversion into an airfield and that it appeared that after
877

VOL. 29. OCTOBER 30, 1960 877

Mateo vs. Lagua

the war, the owners would have again built their homes on these lands had not the Army
authorities restrained them from doing so. The residential nature of the land was further
shown by the topography of the land and other advantages mentioned in the commissioners'
report as well as by the tax declaration based on a general revision throughout the country in
accordance with a schedule of values approved by the Secretary of Finance and not upon
declaration of the taxpayers.
But what if, because of the gravel and earth filling caused by the Japanese during the war
on the lands under expropriation, such lands could no longer be returned to their former
status of rice and coconut lands and, had the Government not taken them, could have been
utilized by the owners for residential purposes? It was held, in  Republic v. Garcellano, et
al., L-9553 and L-12630, March 29, 1958, that if, as in fact, the lands were agricultural when
they were taken by the Japanese forces during the war and from that time the owners never
recovered or regained their use and possession. the lands should be considered agricultural in
the expropriation proceedings, in conformance with the theory that the owner of private
property should recover only for what he actually loses at the time his property is taken.
(2) Sales prices of other lands.—Purchases and sales of lands or property within the same
locality are competent and material evidence to determine the true market value of
expropriated land. This, however, is subject to certain conditions. First, the transactions must
be shown to have been made in good faith or under normal circumstances or in the ordinary
course of legal business and competition and the prices stated therein must have been real
and not affected by unusual conditions. Second, the character of the parcels subject of the
purchases and sales as sites for business purposes, dwellings, or for whatever other use which
enhances the pecuniary value of the condemned land must be so sufficiently similar to that of
the latter that it may be assumed that the price of the condemned land would be
approximately near the price brought by the par-
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Mateo vs. Lagua

cels sold. Third, the properties sold must be adjoining, or at least within the vicinity or
immediate neighborhood, that is, in the zone of of commercial activity with which the
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 condemned property is identified. And, fourth, the sales must be coeval or sufficiently near in
point of time with the date of the condemnation proceedings or the taking, as the case may be
(in accordance with. the rule laid down in the case under annotation), as to exclude general
increases or decreases in property values due to changed commercial conditions in the
vicinity. (  Manila, Railroad Co. v. Fabie, supra;  City of Manila v. Estrada, supra;  Manila
Railroad Company v, Velasquez, supra;  Manila, Railroad Company v. Mitchel,
supra,; Metropolitan Water District v. Director of Lands, supra; Republic v. Gonzales, 50 O.G.
2461; Republic v. Lara, supra; Republic v. Narciso, supra; Republic v. Deleste, supra; Republic
v. Yaptinchay, July 26, 1960).
A sale was held effected under normal circumstance where the purchaser himself declared
that he was not obliged to buy the land and that he bought it because he wanted to put up a
store near the market which was intended to be there. The fact that there was no proof as to
whether or not the vendor was in need of money was deemed cured by the purchaser's
declaration that the sale was effected in a free and voluntary manner.  (Manila Railroad
Company v. Atty. General,  41 Phil. 163). But sales and purchases made in the nature 01 a
compromise to avoid the risk of legal proceedings were held in Republic v. Lara,  supra,  and
in Republic v. Narciso, supra, to be incompetent as not being made in the ordinary course of
trade since the prices of such sales are not prices of property which is sold by one "who desires
but is not obliged to sell it." However, in Republic v. Gonzales, et al., supra, the Court based
Its estimate, among others on two sales made through a local agent by a Spaniard residing in
Madrid despite the fact that, as the Court itself noted, he "was obviously anxious to liquidate
his affairs in the Philippines, as shown by the circumstance that in two months he disposed of
two sizeable parcels of real estate" and such "disposition and such abesence must have given
him a na-
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tural disadvantage in the bargaining, so that a discount of 10 or 20 per cent was not
improbable." Much earlier, the Court also considered as competent a sale of adjacent property
made about the time the proceedings were begun, even if the vendor testif fied that the sale
was made because of the imperative necessity of obtaining money at the time. This testimony
was merely the basis for fixing a higher price for the condemned property than that of the
property sold. (Manila Railroad Company v, Caligsihan, supra).
The requirement that the character of the property sold as site for valuable uses must be
sufficiently similar to that of the condemned property does not require that the former and
the latter must be similar in all respects. No. two estates are ever exactly alike and, although
it has been stated that the evidentiary value of sales of lands in the vicinity decreases as the
differences between the property sold and the condemned one increases  (City of Manila v.
Estrada, supra;  Manila Railroad Company v. Velasquez, supra),  the differences have been
taken more as a basis for fixing a lower or higher for the condemned property that as grounds
for rejecting such evidence. Thus, in  City of Manila v. Estrada, .supra,  the fact that the
condemned land, which was 011 the same street, Calle Herran and on the same estero as a
vacant land sold on the opposite side of said street and estero, differed from the latter in that
the condemned land, aside from having improvements, also had a frontage on Calle Looban
and was on the same side of the estero and immediately in front of the market site, did not
bar the admission of testimony on the sale of the vacant property. In  Metropolitan Water
District v. Director of Lands, supra,  purchases and sales of properties adjoining that which

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 was expropriated were made the basis of fixing a higher valuation for the expropriated land
because of its topography and the fact that it was more valuable for the purposes of the water
district than the contiguous properties. Of course. where the differences between the parcels
sold and the land condemned are so great that the sales in question can form no reliable
standard for com-
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880 SUPREME COURT REPORTS ANNOTATED

Mateo vs. Lagua

parison, such evidence should not be admitted.  (City of Manila v, Estrada, supra;  Manila
Railrod Company v. Velasquez, supra).  It is for this reason, among others, that evidence
showing prices of lands in Bacoor and Naic, which are near Manila and the lowlands, were
rejected as incompetent to indicate the market value of properties being expropriated in
Carmona, which is a mountainous region and farther from Manila. (Republic v. Yaptinchay, et
al., L-13684, July 26, 1960). For the same reason, a sale of land purchased from a subdivision,
prices in realty subdivisions being necessarily higher because of improvement
therein. (Republic vs. Gonzales, supra).
A land subject of a sale was held to be within the vicinity of, although not adjoining, the
land under expropriation because it was situated in the same barrio, at the same distance
from the public market, and was under the same conditions as the latter. (Manila Railroad
Company v. Atty. General, 41 Phil 163). The fact that the lands sold are in the same locality,
town or city as the condemned lands does not, however, of itself make them capable of being
considered within the neighborhood of the latter. Thus, in  Manila Railroad Company v.
Mitchel,  sales of real estates situated on several of the business streets of Manila were
rejected, since none of said estates  were  on the same street or in the vicinity of the
expropriated land, It should be emphasized, nevertheless, that the controlling consideration is
the  zone of commercial activity  to which the condemned property belongs and the distance
required between such property and others sold will be relative to and will vary according to
the area of that zone. (See City of Manila v. Estrada, supra; Republic v. Yaptinchay, supra),
On the question of what sales are sufficiently near in point of time to the date of the
condemnation proceedings or the taking, there is no hard and fast rule as to the number of
days, months or years that should intervene. The important consideration indicated in the
cases is whether there has been a general increase or decrease in property
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Mateo vs. Lagua,

values .due to changed commercial conditions in the vicinity. In  Republic v, Lara,
supra, .sales of nearby lands executed during the years 1936 to 1941 were held incompetent
as basis for determining the reasonable value of lands 'taken by expropriation in 1946. The
Court noted that, aside from the passage of at least 5 years before the taking; prewar prices of
real estate had risen considerably in 1946 and subsequent years because of post-war inflation,
But, in the same decision, .sales made in 1945, 1947, and 1948 to 1950, or within 4 years from
the date of taking, were taken. into consideration because there was no appreciable increase
in the price of lands in the vicinity during those years. In  Republic v. Gonzalez,
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 supra, wherein the land was expropriated for the purpose of distributing; it to individuals, it
was held "unimportant that the sales were consummated several months after these
proceedings had begun, because unlike other eminent domain proceedings for public use—
roads, bridges, canals, markets, etc.—these do not tend to inflate prices of adjoining.
properties." However, in the early case of  Manila Railroad Co. v. Caligsihan, supra,  it was
considered error for the trial court to base Its -estimate on a sale which transpired in 1913,
after the proceedings were begun in 1911. And in  Republic v. Deleste, et al., supra,  sales
which occurred in 1951 were rejected because the Government took possession of the- Lands
in 1947.
(3)  Price paid for neighborhood lands under expropriation proceedings.—An important
question raised in the case of City of Manila v. Estrada, was: Is evidence showing prices paid
for neighboring lands under expropriation proceedings admissible? The decision in that case
gave a negative answer, stating that such sales are a fair criterion of value because they are
forced or compulsory or in the nature of a compromise and, hence, the prices thereof are not
obtained by "one who desires but it is not obliged to sell, and is bought by one who is under no
necessity of having it." This ruling was reiterated in  Republic v. Narciso, supra,  wherein it
was stated that, in expropriation proceedings, the result of an award, a verdict or a
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882 SUPREME COURT REPORTS ANNOTATED

Mateo vs. Lagua

settlement is inadmissible as it is not a sale in the open market and does not show market
value.
These rulings, however, did not prevent the Court from applying what amounted to an
opposite holding in two later cases. Thus, in  Republic v. Deleste, et al.,  it ruled that "if the
Government willingly pays (in the same expropriation proceedings) P1.00 per square meter to
the owners of the above-mentioned lot, there is no reason why it should pay less for
the  adjoining lots  in the same locality, bearing in mind they are all of the same kind,
practically. And in the case under annotation, it awarded to the appellant the compensation
of P6.00 per square meter for his lot because the adjoining one "was expropriated at the rate
of P6.00 per square meter, in pursuance of a compromise agreement."(Italics supplied).
(4)  Value declared or demanded by the owner.—Under Commonwealth Act 530, the
statement of the value of his property by the owner in the tax declaration shall
constitute prima facie evidence of the real value of the property in expropriation proceedings
by the Government and its instrumentalities. This provision was held in  Province of Ilocos
Norte v. Cia, General de Tabacos de Filipinas,  53 O.G. 7687, not to make the statement of
value in the tax declaration conclusive and as not precluding the consideration of other
evidence, such as the price per square meter on prior sales of portions of the property (See
also Municipality of Tarlac v. Besa, supra and Republic v, Lara. et al., supra).
But prices or amounts demanded by the owners in their pleadings, even if such pleadings,
were subsequently amended to state a higher price, have been held to be conclusive. This
ruling was first formulated in the case of Republic v. Narciso, supra, as follows:
"This is evidence of the highest order: Admission by the owners. x x x. Their valuation may not in law be
binding on the Government or the court; but it should at least set a ceiling price for the compensation to
be awarded. The price for the condemned property should not be higher than what the owner
demanded."

883

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 VOL. 29, OCTOBER 30, 1969 883
Mateo vs. Lagua

This ruling was restated in  Republic v. Yaptinchay, el al., supra,  but with respect to a
memorandum wherein the owners offered to sell the properties expropriated at P700.00 per
hectare; and again, in the case under annotation. It must be noted, however, that in these last
two cases the actual holdings of the Court were quite different from what was declared to be
the rule. Thus, in the  Yaptinchay  case, the Court, taking into account the other evidence,
awarded "P1,000.00 per hectare for irrigated lands with sugar quota; P800.00 per hectare for
irrigated lands without sugar quota," etc. despite the P700.00 per hectare offer made by the
owners in their memorandum. In the case under annotation, the Court awarded P6.00 per
square meter even if the appellant demanded only P5.00 per square meter in his original
answer. And even, in the Narciso case, the Court took into consideration other evidence,
despite the so-called admission which set the "ceiling price" of the defendant's lands.
(5) Assessed value.—The assessed value of land is regarded as of little value in a judicial
investigation to determine the market value of the property since, as a rule, such assessed
value is considerably below the true market valuation. Evidence as to such assessed value is
competent and admissible and, when based in large part upon the sworn statement of the
owner, may be taken into consideration for what it is worth in determining whether the value
claimed by' the owner in a condemnation proceeding is grossly excessive and exorbitant and
wholly beyond the bounds of reason; and in some cases as an element, though by no means a
controlling one, in determining the real market value of the land taken.  (Tenorio v. Manila
Rail-road Co., supra;  City of Manila v. Estrada, supra;  Manila Railroad Company v.
Velasquez, supra; Manila Railroad Company v, Alano, 36 Phil. 500; Mun. of Tarlac v. Besa,
supra).
(6) Improvements, crops, and trees.—The plaintiff in a condemnation proceeding must pay
the value of improvements found on the property, This is the rule even if the owner built the
improvements after he became aware that
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884 SUPREME COURT REPORTS ANNOTATED

Mateo vs. Lagua

condemnation is intended but before action is begun.  (Manila Railroad Company v.

Velasquez, supra). If such improvements are permanent in character, consisting of good paved
roads, playgrounds, water system, sewerage and general levelling of the land suitable for
residential lots together with electric installations and buildings, the same are important
factors to consider in determining the value of the land.  (Republic v. Gonzales, supra).  The
original cost of such improvements may be considered, with due regard to the corresponding
depreciation. (Davao v. Dacudao, L-3741, May 8, 1952).
With. respect to crops and trees, the rule is that when the land is preferably intended for
the raising of a given crop or for the planting of trees of a certain kind, although these be
deemed improvements of the land, they should not be appraised apart from the land as they
are an integral part thereof and their value is inherent or forms part of that of the land. But
when the land is not particularly adapted to any class of plants, and it appears on the
contrary that it is planted with several classes of trees and plants, said improvements may be
valued separately from the land, inasmuch as the owners of expropriated lands are entitled to
be indemnified for the improvements thereon. (Manila Railroad Company v. Aguilar, 25 Phil.
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 118; Manila Railroad Company v. Attorney General, supra; Philippine Executive Commission
v. Estacio, 52 O.G. 773).
Interest.—The owners of expropriated land are entitled to recover interest from the date
the plaintiff in condemnation takes possession of the land, and the amounts granted by the
court as compensation f or the taking shall cease to earn interest only f rom the moment they
are paid to the owners or deposited in court.  (Philippine Railway Co. v. Campbell,  13 Phil.
34;  Philippine Railway Co. v. Duran,  33 Phil. 156;  Manila Railroad Company v. Attorney
General, supra; Republic v. Lara, supra; Philippine Executive Commission v. Estacio,supra.)—
ATTY. ESTEBAN BAUTISTA

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