The Supreme Court of the Philippines recently released a press statement. It is titled “SC: Just compensation in land expropriation must consider all relevant factors, not just market value.” This statement refers to its decision in G.R. No. 260038 (City Government of Pasay v. Arellano University).
The ruling reiterates a fundamental principle in expropriation law. Just compensation must be real, full, and fair. It is determined not by a single administrative figure, but through judicial evaluation of all circumstances surrounding the property.
However, the Court’s post also offers a chance to clarify a common terminological confusion. The use of “market value” as cited in the post does not refer to true open-market value. Instead, it refers to the Schedule of Market Values (SMV). Local assessors use this administrative instrument for taxation purposes.
Arellano University owned an 805-square-meter parcel of land in Barangay San Isidro, Pasay City. The City Government turned this property into a public road. It is now known as Menlo Street. This was done without expropriation proceedings or payment of just compensation.
The Pasay City Assessor’s Office had assigned the land a value of Php200 per square meter. This was based on its 1978 Schedule of Market Values. The trial court later used this figure to compute compensation.
The Supreme Court, however, clarified that such assessor-based valuations are not determinative of just compensation. They can guide fiscal assessments, but they are not substitutes for market evidence or judicial determination.
Market Value vs. Schedule of Market Values
This distinction lies at the heart of both valuation and constitutional law.
| Concept | Meaning | Purpose | Authority |
|---|---|---|---|
| Market Value | The price a willing buyer would pay to a willing seller in an open market. Both parties act knowledgeably and without compulsion. | Reflects real market behavior, used in appraisals, investments, and expropriation. | Defined under PVS 102 and IVS 104; affirmed in Republic v. CA, G.R. No. 146587 (2002). |
| Schedule of Market Values (SMV) | A uniform benchmark value prepared by the local assessor for tax assessment purposes. | Ensures equity in real property taxation under the Local Government Code. | Authorized under Sections 212–216, LGC of 1991. |
The PVS (Philippine Valuation Standards) and IVS (International Valuation Standards) define market value as:
The estimated amount as the price for which an asset exchanges between a willing buyer and a willing seller. This occurs in an arm’s-length transaction after proper marketing. The parties act knowledgeably, prudently, and without compulsion.
In contrast, the Schedule of Market Values is an administrative tool. It is updated every few years. It is designed to standardize taxation but not to represent real-time market dynamics.
The Supreme Court has consistently drawn this line in cases such as NPC v. Manubay Agro-Industrial Corp. and Republic v. CA: the SMV may be indicative. However, it cannot replace the judicial process of valuation. This process ensures constitutionally mandated just compensation.
My Letter to the Supreme Court
To support accurate public understanding of this distinction, I have respectfully written to the Supreme Court Public Information Office.
My letter explains that the “Php 200 per square meter market value” is mentioned in the decision. It comes from the 1978 Schedule of Market Values. This should not be mistaken for actual market value as understood in valuation and jurisprudence.
You may read my full letter here.
In essence, my correspondence acknowledges the Court’s sound reasoning. It emphasizes the need to maintain terminological precision. This principle is crucial not only to valuation professionals but also to the legal system itself.
The phrase “market value” may appear technical. However, in matters of public taking, it defines the line between administrative convenience and constitutional fairness.
When government takes private property, just compensation must reflect the property’s true worth—its economic value, not its tax-assessed figure.
Ensuring this distinction honors both the rule of law and the integrity of valuation practice. It safeguards landowners’ rights and guides courts, assessors, and appraisers toward a shared language of fairness and precision.
The City of Pasay v. Arellano University decision reinforces a timeless principle:
Just compensation is not a matter of administrative convenience—it is a constitutional right grounded in fairness and factual valuation.
As valuation professionals, we have a responsibility to ensure that public discourse around “market value” remains technically accurate. It must also be legally sound. Clarity in language leads to clarity in justice.
Real LexEcon 