ENGR. YUSOPH DIANALAN, PLAINTIFF-APPELLEE, VS. NATIONAL POWER CORPORATION, DEFENDANT-APPELLANT.

Dianalan versus National Power Corporation

The Case

This is the case of Dianalan versus National Power Corporation. Engr. Yusoph Dianalan sued the National Power Corporation, or Napocor, because Napocor built underground tunnels beneath his two parcels of land in Marawi City without his consent and without paying him. He asked for damages and recovery of possession, or in the alternative, for just compensation. The case matters because it gathers in one decision several rules a Bar candidate must know: the two stages of an expropriation proceeding, when a judgment fixing just compensation becomes final and therefore executory, whether the funds of Napocor may be garnished, and when a trial before commissioners is dispensable.

Procedural History

Dianalan filed his complaint for damages and recovery of possession with an alternative prayer for just compensation before the Regional Trial Court, Branch 9, Lanao del Sur, in Marawi City. The trial court rendered a decision in his favor, awarding actual or compensatory damages, attorney's fees, and legal interest. Napocor appealed to the Court of Appeals.

The Court of Appeals partially affirmed the trial court. It held Napocor liable to pay just compensation with six percent legal interest, but it remanded the case to the court of origin for the proper determination of just compensation, because the trial court had fixed the value without considering the nature and character of the subject lots. That decision became final and executory.

On remand, the trial court appointed five commissioners, who recommended just compensation at 2,500 pesos per square meter. The trial court adopted the report, and later denied Napocor's motion for reconsideration. Dianalan then moved for execution, and the trial court granted it, issuing a writ of execution, a sheriff's demand letter, and a notice of garnishment. Napocor went up to the Court of Appeals twice: by a petition for certiorari under Rule 65, assailing the order granting execution and the writ, the demand letter, and the garnishment; and by an ordinary appeal under Rules 41 and 44, assailing the orders fixing just compensation. The Court of Appeals consolidated the two cases and resolved them together.

Facts

Hadji Amer Dianalan owned a parcel of land in Barrio Rorogagus, Marawi City, covered by a certificate of title issued in 1975. A portion had earlier been sold to Napocor, and another portion was the subject of separate litigation, so the area actually donated to his son, Engr. Yusoph Dianalan, in 1997, was 22,379.98 square meters. Yusoph also owned a second parcel in Barrio Matampay, Marawi City, with an area of 4,083 square meters. The aggregate area involved in the case is 26,462.98 square meters.

In 1978, Napocor constructed subterranean twin-rail tunnels underneath these properties for its Agus I Hydroelectric Power Plant, to divert the flow of the Agus River and run its turbines. Dianalan claimed that he and his father discovered the tunnels only in 1996, when he planned to install a motorized deep well. He said the tunnels endangered his life and property and scared away prospective developers, depriving him of the beneficial use of his land.

Napocor denied knowledge of any tunnels under the properties. It argued that even if tunnels existed, Dianalan was not deprived of the beneficial use of his land, and that the construction of tunnels in the subsoil was sanctioned by its charter, Republic Act No. 6395, as a valid limitation on his property rights. Litigation followed, culminating in the awards and the remand described above.

Issues

• Whether or not the order of the trial court fixing just compensation had already attained finality, such that it could be executed pending Napocor's appeal.
• Whether or not the funds and properties of Napocor are subject to garnishment.
• Whether or not the trial court erred in fixing just compensation at 2,500 pesos per square meter.

Applicable Provisions

Article VI, Section 29, paragraph 1 of the Constitution provides:

No money shall be paid out of the treasury except in pursuance of an appropriation made by law.

Napocor invoked this provision to argue that its funds are public funds beyond the reach of garnishment, an argument the Court rejected because Napocor is a government-owned corporation with a personality separate from the State.

Section 5 of Rule 67 of the Rules of Court, on the appointment of commissioners to ascertain just compensation, was discussed by the Court through its earlier ruling in Republic versus Court of Appeals, quoted in the decision:

Rule 67, however, presupposes that NIA exercised the right of eminent domain by filing a complaint for that purpose before the appropriate court.

The Court used this to hold that where the government itself violates procedural requirements, it waives the usual procedure, and a trial before commissioners is not necessary.

Ruling

On the first issue, the Court ruled in favor of Napocor. There are two stages in an expropriation proceeding: first, the determination of the validity of the expropriation; second, the determination of just compensation. The order fixing just compensation is itself a final order from which a separate appeal may be taken. Since Napocor had appealed the order fixing just compensation, that order had not yet attained finality, and the writ of execution issued to enforce it was premature.

On the second issue, the Court ruled against Napocor. The universal rule is that funds and properties of the government cannot be garnished even if consent to be sued has been given, because disbursements must be covered by appropriation. But if the funds belong to a public corporation or a government-owned or controlled corporation clothed with a personality of its own, separate and distinct from the government, then its funds are not exempt from garnishment. When the government enters into commercial business, it abandons its sovereign capacity and is treated like any other corporation. Napocor's funds are therefore subject to garnishment.

On the third issue, the Court ruled that the trial court erred in fixing just compensation at 2,500 pesos per square meter, because the valuation must rest on the nature, character, and condition of the property at the time of taking, and not on a sweeping reliance on values fixed in other cases involving other lots.

Doctrine

• An expropriation proceeding has two stages: the determination of the validity of the expropriation, and the determination of just compensation. The order fixing just compensation is a final order from which a separate appeal may be taken, and until it attains finality it cannot be executed.
• Funds of a government-owned or controlled corporation with a separate personality are not exempt from garnishment, because when the government enters into commercial business it abandons its sovereign capacity and is treated like any other corporation.
• Just compensation is the fair value of the property between one who receives and one who desires to sell, fixed at the time of actual taking, and measured by the nature, character, and condition of the land at that time.
• Where the expropriator itself violates procedural requirements, it waives the usual procedure under Rule 67, and a trial before commissioners is not necessary.

Disposition

The Court of Appeals ruled in favor of Napocor on the certiorari case, setting aside the writ of execution and garnishment as premature, while sustaining that Napocor's funds are subject to garnishment, and it ruled that the trial court erred in its valuation of just compensation.

Remember This

Memorize this line: the order fixing just compensation is a final order appealable on its own, but it cannot be executed until it attains finality. Examiners use this case to test the two stages of expropriation and the garnishment of government-owned corporation funds.