NATIONAL POWER CORPORATION, PETITIONER, VS. BENJAMIN ONG CO, RESPONDENT. D E C I S I O N

National Power Corporation versus Ong Co

The Case

This is a petition for review on certiorari brought by the National Power Corporation against Benjamin Ong Co, a landowner in Bacolor, Pampanga, whose property the Corporation sought to traverse with its transmission lines for the Lahar Affected Transmission Line Project. The Corporation filed a complaint for the acquisition of an easement of right-of-way, invoking its power of eminent domain under its charter. The landowner conceded the necessity of expropriation, so the only question left for the courts was the amount of just compensation. The case matters because it settles three things every expropriation practitioner must know: which law governs the acquisition of right-of-way for national government infrastructure projects, whether the taking of a right-of-way easement commands the full fair market value or only the ten percent easement fee fixed in the Corporation's charter, and which date fixes the value of the property.

Procedural History

The National Power Corporation filed its complaint for expropriation before the Regional Trial Court of San Fernando, Pampanga, Branch 41. At pre-trial, the landowner admitted the necessity of the expropriation, leaving just compensation as the sole issue. The trial court appointed three commissioners. Two of them, Commissioners Dayrit and Garcia, appraised the property at 1,900 pesos per square meter, for a total of 1,179,000 pesos, while Commissioner Abcejo pegged the value at 875 pesos per square meter. The trial court rendered a Partial Decision declaring the expropriation valid and ordering the Corporation to pay 1,179,000 pesos, with interest at six percent per annum from the date of actual taking until full payment, adopting the report of Commissioners Dayrit and Garcia as the more reliable one.

The Corporation appealed to the Court of Appeals. The appellate court affirmed the ruling that the Corporation is liable for the full fair market value at the time of actual taking, with interest at six percent per annum from the date of taking, and ordered the trial court to appoint a new set of disinterested commissioners to fix the actual valuation. The Corporation moved for partial reconsideration, questioning the order to pay the full fair market value computed as of the date of its actual possession, but the Court of Appeals denied the motion. Hence, the Corporation elevated the matter to the Supreme Court by petition for review on certiorari. The Supreme Court later required the parties to submit supplemental memoranda on the applicability of Republic Act Number 8974 and its effect on the valuation standards and on the ten percent easement fee in the Corporation's charter.

Facts

The National Power Corporation was established by Republic Act Number 6395 to undertake the development of hydroelectric generation of power and the production of electricity from nuclear, geothermal and other sources, as well as the transmission of electric power on a nationwide basis. Its charter expressly grants it the power to exercise the right of eminent domain. In connection with the construction of its transmission lines for the Lahar Affected Transmission Line Project, the Corporation needed to traverse three lots in Barangay Cabalantian, Bacolor, Pampanga, with a total area of 575 square meters, belonging to Benjamin Ong Co.

On 27 June 2001, the Corporation filed a complaint with the Regional Trial Court of San Fernando, Pampanga, for the acquisition of an easement of right-of-way over the landowner's lots. On 25 March 2002, the Corporation obtained a writ of possession, and on 15 April 2002, it took possession of the property. At pre-trial, the landowner conceded the necessity of the expropriation, so the sole issue for litigation revolved around the determination of just compensation.

The trial court appointed three commissioners to determine the fair market value of the property as of 15 April 2002. Commissioners Dayrit and Garcia submitted a joint report appraising the property at 1,900 pesos per square meter, or a total of 1,179,000 pesos, while Commissioner Abcejo pegged the value at 875 pesos per square meter. The trial court adopted the report of Commissioners Dayrit and Garcia as more reliable, since it was based on established facts and on an evaluation of the market, location and physical characteristics of the property, while Commissioner Abcejo's report had merely taken the average between the Provincial Appraisal Report and the Land Bank Appraisal Report, both done in 1998.

Issues

• Whether or not Republic Act Number 8974 applies to actions for eminent domain filed by the National Power Corporation under its charter for the purpose of constructing power transmission lines.
• Whether or not the Corporation is liable to pay the full fair market value of the property, rather than the ten percent easement fee fixed in Section 3A of its charter, in light of the valuation standards of Republic Act Number 8974.
• Whether or not just compensation should be reckoned from the date of the filing of the complaint, rather than from the date of actual taking of the property.

Applicable Provisions

Section 2 of Republic Act Number 8974 defines the national government projects it governs:

Sec. 2. National Government Projects--The term "national government projects" shall refer to all national government infrastructure, engineering works and service contracts, including projects undertaken by government-owned and -controlled corporations, all projects covered by Republic Act No. 6957, as amended by Republic Act No. 7718, otherwise known as the Build-Operate-and-Transfer Law, and other related and necessary activities, such as site acquisition, supply and/or installation of equipment and materials, implementation, construction, completion, operation, maintenance, improvement, repair and rehabilitation, regardless of source of funding.

This definition brings the Corporation's Lahar Project, a project for public use undertaken by a government-owned and controlled corporation, within the coverage of the law.

Section 4 of Republic Act Number 8974 lays down the guidelines for expropriation proceedings:

Section 4. Guidelines for Expropriation Proceedings.--Whenever it is necessary to acquire real property for the right-of-way, site or location for any national government infrastructure project through expropriation, the appropriate implementing agency shall initiate the expropriation proceedings before the proper court under the following guidelines: (a) Upon the filing of the complaint, and after due notice to the defendant, the implementing agency shall immediately pay the owner of the property the amount equivalent to the sum of (1) one hundred percent (100%) of the value of the property based on the current relevant zonal valuation of the Bureau of Internal Revenue (BIR); and (2) the value of the improvements and/or structures as determined under Section 7 hereof; (b) In provinces, cities, municipalities and other areas where there is no zonal valuation, the BIR is hereby mandated within the period of sixty (60) days from the date of filing of the expropriation case, to come up with a zonal valuation for said area; and (c) In case the completion of a government infrastructure project is of utmost urgency and importance, and there is no existing valuation of the area concerned, the implementing agency shall immediately pay the owner of the property its proferred value taking into consideration the standards prescribed in Section 5 hereof.

Because the law applies, the government agency involved must comply with these guidelines on immediate payment.

Section 5 of Republic Act Number 8974 sets the standards for the assessment of the value of the land:

Sec. 5. Standards for the Assessment of the Value of the Land Subject of Expropriation Proceedings or Negotiated Sale.--In order to facilitate the determination of just compensation, the court may consider, among other well-established factors, the following relevant standards: (a) The classification and use for which the property is suited; (b) The developmental costs for improving the land; (c) The value declared by the owners; (d) The current selling price of similar lands in the vicinity; (e) The reasonable disturbance compensation for the removal and/or demolition of certain improvements on the land and for the value of improvements thereon; (f) The size, shape, or location, tax declaration and zonal valuation of the land; (g) The price of the land as manifested in the ocular findings, oral as well as documentary evidence presented; and (h) Such facts and events as to enable the affected property owners to have sufficient funds to acquire similarly-situated lands of approximate areas as those required from them by the government, and thereby rehabilitate themselves as early as possible.

The trial court is directed to use these standards in arriving at the amount of just compensation.

Section 3A of Republic Act Number 6395, as amended, limits the compensation for a right-of-way easement:

Sec. 3A--In acquiring private property or private property rights through expropriation proceedings where the land or portion thereof will be traversed by the transmission lines, only a right-of-way easement thereon shall be acquired when the principal purpose for which such land is actually devoted will not be impaired, and where the land itself or portion thereof will be needed for the projects or works, such land or portion thereof as necessary shall be acquired. In determining the just compensation of the property or property sought to be acquired through expropriation proceedings, the same shall--(a) With respect to the acquired land or portion thereof, not to exceed the market value declared by the owner or administrator or anyone having legal interest in the property, or such market value as determined by the assessor, whichever is lower. (b) With respect to the acquired right-of-way easement over the land or portion thereof, not to exceed ten percent (10%) of the market value declared by the owner or administrator or anyone having legal interest in the property, or such market value as determined by the assessor whichever is lower.

The Corporation invokes this ten percent limit, but the Court holds that it does not govern the compensation due for the taking.

Section 4 of Rule 67 of the Rules of Court fixes the reckoning date for just compensation:

If the objections to and the defenses against the right of the plaintiff to expropriate the property are overruled, or when no party appears to defend as required by this Rule, the court may issue an order of expropriation declaring that the plaintiff has a lawful right to take the property sought to be expropriated, for the public use or purpose described in the complaint, upon payment of just compensation to be determined as of the date of the taking of the property or the filing of the complaint whichever came first.

This provision supplies the rule on the date from which the value of the property is reckoned.

Ruling

On the first issue, the Court held that Republic Act Number 8974 applies. The Corporation expropriated the landowner's property for its Lahar Project, a project for public use, and the Implementing Rules of the law expressly include power generation, transmission and distribution projects among the national government projects it covers. The Court noted that the installation of transmission lines is important to the continued growth of the country, for electricity moves the economy and is a national concern. Following its earlier ruling in Republic versus Gingoyon, the Court held that Republic Act Number 8974 applies to substantive matters covered by it, to the exclusion of Rule 67, in cases when expropriation is availed of for a national government project, while Rule 67 continues to govern procedural aspects.

On the second issue, the Court held that the Corporation is liable to pay the full fair market value of the property, not merely the ten percent easement fee under its charter. The Court acknowledged that when the Corporation takes private property to construct transmission lines, it has repeatedly ruled that the Corporation is liable to pay the full market value upon proper determination by the courts. It recalled its ruling in National Power Corporation versus Manubay Agro-Industrial Development Corporation, where the taking was purely an easement of a right of way, yet the full market value was nonetheless ordered paid instead of an easement fee, because the construction of transmission lines will definitely impose limitations and will indefinitely deprive the owners of the land of their normal use. The presence of transmission lines undoubtedly restricts the owner's use of his property.

On the third issue, the Court ruled in favor of the Corporation and held that the reckoning date is 27 June 2001, the date of the filing of the complaint. Rule 67 provides that just compensation shall be determined as of the date of the taking of the property or the filing of the complaint, whichever came first. Where the institution of the action precedes entry into the property, just compensation is ascertained as of the time of the filing of the complaint. The Court recognized exceptions to the general rule, namely grave injustice to the property owner, a taking without color of legal authority, a taking not initially for expropriation, and undue increment advantages to the owner because of the expropriation, but found none of them present. It also held that the landowner's reliance on City of Cebu versus Spouses Dedamo was misplaced, since the applicable law there was the Local Government Code, which explicitly provides that the value of just compensation shall be computed at the time of taking.

Finally, the Court stressed that the determination of just compensation remains a judicial function. No statute, decree, or executive order can mandate its own determination to prevail over the court's findings, and the courts cannot be precluded from looking into the justness of the decreed compensation. The trial court must therefore use the standards set forth in Section 5 of Republic Act Number 8974. The Court also noted that the landowner failed to assign as error the appellate court's ruling on the appointment of a new set of commissioners, and that in any event the conflicting appraisals were not both reckoned as of the date of the filing of the complaint, so a remand was necessary.

Doctrine

First, Republic Act Number 8974 governs expropriation proceedings for national government infrastructure projects, including power transmission projects of the National Power Corporation, and it applies to substantive matters to the exclusion of Rule 67, while Rule 67 continues to govern procedural aspects.

Second, when the Corporation takes private property to construct transmission lines, it is liable to pay the full fair market value of the property upon proper determination by the courts, and not merely the ten percent easement fee under Section 3A of its charter, because the transmission lines indefinitely deprive the owner of the normal use of the land.

Third, just compensation is determined as of the date of the taking of the property or the filing of the complaint, whichever came first, in accordance with Section 4 of Rule 67. Where the action precedes entry into the property, the value is reckoned as of the filing of the complaint