Felisa Agricultural Corporation v. National Transmission Corporation

Republic Act No. 8974 governs inverse condemnation proceedings filed after its effectivity, even where the government's physical entry and taking of the property predated the law's enactment, because the right of the landowner to receive provisional payment equivalent to 100% of the current zonal value is a substantive right declared for the first time by the statute and is more favorable to the landowner than the deposit of assessed value required under Rule 67.

Felisa Agricultural Corporation owned lands situated in Brgy. Felisa, Bacolod City. The National Power Corporation (NPC), a government-owned and controlled corporation, was responsible for the construction and installation of transmission towers and lines for electric power transmission. NPC's entry onto private property for such infrastructure was authorized under its charter, which also set a prescriptive period for claims. Republic Act No. 8974, approved on November 7, 2000 and taking effect on November 26, 2000, was enacted to facilitate the acquisition of right-of-way for national government infrastructure projects, requiring the payment of 100% of the current zonal value of property as a provisional value — a more favorable standard than the assessed-value deposit required under Rule 67 of the Rules of Court. NPC's transmission-related functions and cases were later assumed by the National Transmission Corporation pursuant to the Electric Power Industry Reform Act of 2001 (RA 9136).

Felisa Agricultural Corporation owned lands situated in Brgy. Felisa, Bacolod City. In 1997, petitioner discovered that the National Power Corporation's (NPC) transmission towers and transmission lines were located within a 19,635-square meter portion of its property. Further verification revealed that the transmission towers had been constructed sometime before 1985, with NPC having entered the subject land without petitioner's knowledge and consent. NPC, for its part, denied having entered without authority and claimed that petitioner's President, Jovito Sayson, had granted it a permit to enter on September 21, 1989 for the construction of the 138 KV Mabinay-Bacolod Transmission Line. NPC further asserted that since the transmission lines had been in existence for more than ten years, a continuous easement of right of way had already been established, and that the action was barred by prescription under the NPC Charter.

On January 9, 2001, petitioner filed a Complaint for recovery of possession with damages or payment of just compensation against NPC before the RTC of Bacolod City, Branch 54, docketed as Civil Case No. 01-11356. In the course of the proceedings, the parties agreed to narrow the issue to the payment of just compensation and agreed to settle at the price of P400.00 per square meter, but the proposed compromise did not push through because the Office of the Solicitor General failed to act on the Deed of Sale entered into by the parties. Petitioner then moved that NPC be ordered to pay P7,845,000.00 representing the 100% zonal value of the subject land in accordance with Republic Act No. 8974. NPC opposed the motion, contending that the law applies only to expropriation cases initiated by the government for national government infrastructure projects.

The RTC granted petitioner's motion in an Order dated May 7, 2010, directing NPC or its assignee to compensate petitioner P7,845,000.00 as initial payment, and denied NPC's motion for reconsideration in an Order dated May 11, 2011. NPC elevated the matter to the CA via a petition for certiorari. The CA initially ruled in a Decision dated June 27, 2014 that RA 8974 finds no application to a recovery of possession case as it applies only to expropriation proceedings. After petitioner's motion for reconsideration, in which petitioner argued that the case partakes of the nature of inverse expropriation and that the initiatory complaint was filed after RA 8974's effectivity, the CA issued an Amended Decision dated May 26, 2016 denying the motion, ruling that since the taking occurred in 1985, RA 8974 — which was approved subsequent thereto — does not apply, and Rule 67 of the Rules of Court should govern. The CA remanded the case to the RTC for determination of just compensation. Petitioner's partial motion for reconsideration was denied in a Resolution dated March 17, 2017. By this time, respondent National Transmission Corporation had been substituted as party respondent, having assumed the electrical transmission function and transmission-related cases of NPC.

• Applicability of RA 8974 to Inverse Condemnation: Petitioner maintained that RA 8974 applies even if the government failed or refused to file an expropriation case, because the recovery of possession case partakes of the nature of inverse expropriation proceedings.
• Prospective Application: Petitioner argued that since the initiatory complaint was filed after the effectivity of RA 8974, the law should govern the case both procedurally and substantively.

• Limited Scope of RA 8974: Respondent, through NPC, contended that RA 8974 applies only to expropriation cases initiated by the government to acquire property for national government infrastructure projects, and not to a recovery of possession case.
• Prescription: NPC invoked prescription of petitioner's claim, asserting that the action was brought beyond the five-year prescriptive period under the NPC Charter.
• Retroactivity Bar: NPC argued that since the taking of the property occurred sometime in 1985, RA 8974 — which was approved and took effect subsequent thereto — does not apply, and Rule 67 of the Rules of Court should govern.

• Applicable Law: Whether the CA was correct in holding that Rule 67 of the Rules of Court and not RA 8974 should govern the case.

• Applicable Law: No. The CA erred in holding that Rule 67 should govern. RA 8974 applies because petitioner initiated inverse condemnation proceedings after the law's effectivity on November 26, 2000, and the right to receive provisional payment equivalent to 100% of the current zonal value is a substantive right declared for the first time by the statute, which is more favorable to the landowner than the deposit of assessed value under Rule 67.

• Applicable Law: The Court first clarified that the RTC Orders subject of the certiorari petition pertained only to the preliminary or provisional determination of the value of the subject land, as the first stage of expropriation proceedings had not been completed. The general rule under Rule 67 requires the expropriator to deposit an amount equivalent to the assessed value of the property prior to entry, while RA 8974 requires payment of 100% of the current zonal value — a higher and more favorable amount to the landowner. In Republic of the Philippines vs. Judge Gingoyon, the Court recognized that RA 8974 was intended to supersede the deposit system under Rule 67 with a scheme of "immediate payment" for national government infrastructure projects, and that the standard of just compensation is a substantive matter within the legislature's province. The right of the owner to receive just compensation prior to acquisition of possession is a proprietary right classified as substantive. While statutes are generally prospective, the principle that a new law shall not have retroactive effect governs only rights arising from acts done under the former law; if a right is declared for the first time by a subsequent law, it takes effect from that time even though it arose from acts subject to former laws, provided it does not prejudice another acquired right of the same origin. Here, petitioner initiated inverse condemnation proceedings after RA 8974's effectivity, and the payment of provisional value equivalent to 100% of current zonal value was declared for the first time by the law, which is more favorable to the landowner. No acquired right of the same origin is prejudiced. The Court further noted that physical possession gained by entering property is not equivalent to expropriating it with the aim of acquiring ownership, citing Republic vs. Hon. Tagle, so there is no legal impediment to issuing a writ of possession. The Court disapproved the government's practice of taking private property without initiating expropriation proceedings, citing Alfonso vs. Pasay City, and noted that petitioner had been deprived of beneficial enjoyment of the subject land for almost twenty-nine years without payment. Regarding the final determination of just compensation, the Court held that where actual taking was made without expropriation proceedings, the value of the property at the time of taking is controlling, but courts must consider and apply the parameters set by RA 8974 and its implementing rules, with discretion to relax guidelines when the factual situation warrants. The provisional value was recomputed to P7,854,000.00 (19,635 sq. m. × P400.00/sq. m.), and legal interest of 12% per annum was imposed on any unpaid balance from the time of taking (September 21, 1989) until June 30, 2013, and 6% per annum thereafter until fully paid.

• Substantive vs. Procedural Law in Expropriation — The standard of just compensation is a substantive matter within the legislative province. The right of the owner to receive just compensation prior to acquisition of possession by the State is a proprietary right, classified as substantive, and thus within the sole province of the legislature to legislate on. Rules of procedure, as distinguished from substantive matters, remain the exclusive preserve of the Supreme Court under the Constitution.
• Prospective Application of New Rights — While statutes are generally applied prospectively, if a right is declared for the first time by a subsequent law, it takes effect from that time even though it arose from acts subject to former laws, provided it does not prejudice another acquired right of the same origin. RA 8974's requirement of paying 100% of current zonal value as provisional payment was declared for the first time by the statute and is more favorable to the landowner than the assessed-value deposit under Rule 67.
• Inverse Condemnation — A recovery of possession case where the government has taken property without instituting expropriation proceedings partakes of the nature of inverse condemnation. RA 8974 applies to such proceedings when filed after its effectivity.
• Physical Entry vs. Expropriation — Physical possession gained by entering property is not equivalent to expropriating it with the aim of acquiring ownership. Mere physical entry and occupation fall short of the taking of title, so a writ of possession remains necessary and practical even after the government has already entered the property.
• Valuation at Time of Taking — Where actual taking was made without expropriation proceedings and the owner sought recovery of possession prior to the filing of expropriation proceedings, the value of the property at the time of taking is controlling for purposes of compensation. The owner should be compensated only for what he actually loses — the actual value of the property at the time it is taken.
• Court Discretion in Applying Valuation Guidelines — Courts must consider and apply the parameters set by law and its implementing rules to ensure just compensation is not arbitrary, but when acting within such parameters, courts are not strictly bound to apply them to the minutest detail. Courts may relax the application of guidelines subject to the limitation that the factual situation calls for it and the reason for deviation is clearly explained.

• "It is the plain intent of [RA] 8974 to supersede the system of deposit under Rule 67 with the scheme of 'immediate payment' in cases involving national government infrastructure projects." — Quoted from Republic of the Philippines vs. Judge Gingoyon, this passage establishes the legislative intent behind RA 8974 and its relationship to Rule 67, forming the doctrinal basis for the Court's ruling that RA 8974 governs the case.
• "if a right be declared for the first time by a subsequent law, it shall take effect from that time even though it has arisen from acts subject to the former laws, provided that it does not prejudice another acquired right of the same origin." — This passage articulates the exception to the prospectivity principle that allows RA 8974 to apply to a taking that predated its enactment, because the right to provisional payment at 100% zonal value was first declared by that statute.
• "physical possession gained by entering the property is not equivalent to expropriating it with the aim of acquiring ownership thereon." — This passage, drawn from Republic vs. Hon. Tagle, defines the distinction between physical entry and expropriation, supporting the conclusion that a writ of possession may still issue despite prior government entry.
• "it is the value of the property at the time of taking that is controlling for purposes of compensation." — This statement sets the controlling standard for determining just compensation where property was taken ahead of condemnation proceedings, ensuring the landowner is compensated for actual loss.

• Republic of the Philippines vs. Judge Gingoyon, 514 Phil. 657 (2005) — Controlling precedent recognizing that RA 8974 was intended to supersede the deposit system under Rule 67 and that the standard of just compensation is a substantive matter within legislative province. The Court relied on this case to establish that RA 8974's provisional payment requirement is substantive and applies to cases filed after its effectivity.
• Republic vs. Hon. Tagle, 359 Phil. 892 (1998) — Followed to establish that physical entry and occupation of property is not equivalent to expropriation with the aim of acquiring ownership, supporting the issuance of a writ of possession despite prior government entry.
• Alfonso vs. Pasay City, 106 Phil. 1017 (1960) — Cited for the Court's longstanding disapproval of the government's practice of taking private property without initiating expropriation proceedings and leaving the landowner uncompensated.
• Republic vs. Lara, 96 Phil. 170 (1954) — Followed for the rule that the value of property at the time of taking is controlling for purposes of compensation, and that the owner should be compensated only for what he actually loses.
• Manila International Airport Authority vs. Rodriguez, 518 Phil. 750 (2006) — Cited for the principle that where actual taking preceded condemnation proceedings, the value at the time of taking controls.
• Metropolitan Cebu Water District vs. J. King and Sons Company, Inc., 603 Phil. 471 (2009) — Cited for the distinction between the deposit requirement under Rule 67 and the provisional value payment under RA 8974.
• Republic vs. Spouses Cancio, 597 Phil. 342 (2009) — Cited for the principle that there is no need to determine the final amount of just compensation until after the trial court ascertains the provisional amount.
• Bona vs. Briones, 38 Phil. 276 (1918) — Cited for the exception to the prospectivity principle regarding rights declared for the first time by a subsequent law.

• Section 9, Article III, 1987 Constitution — Provides that private property shall not be taken for public use without just compensation. The Court invoked this provision to emphasize that the expropriator must pay the property owner no less than the full and fair equivalent of the property from the date of taking.
• Section 5(5), Article VIII, 1987 Constitution — Vests in the Supreme Court the exclusive authority over rules of procedure, as distinguished from substantive matters. The Court used this to delineate the boundary between legislative authority over substantive standards of just compensation and judicial authority over procedural rules.
• Republic Act No. 8974 — An act to facilitate the acquisition of right-of-way for national government infrastructure projects. The Court held this statute governs the case because petitioner's inverse condemnation proceedings were filed after its effectivity, and the law declares for the first time the right to provisional payment equivalent to 100% of current zonal value, which is more favorable to the landowner than the Rule 67 deposit.
• Section 2(d), IRR of RA 8974 — Explicitly includes power generation, transmission, and distribution projects among the national government projects covered by the law, confirming that NPC's transmission towers and lines fall within RA 8974's coverage.
• Rule 67, Rules of Court — Governs expropriation proceedings and requires deposit of assessed value prior to entry. The Court held that RA 8974 supersedes this deposit system for national government infrastructure projects, while Rule 67 remains applicable on procedural aspects.
• Article 4, Civil Code — Provides that laws shall have no retroactive effect unless the contrary is provided. The Court noted this general rule but applied the exception regarding rights declared for the first time by a subsequent law.
• Section 8, RA 9136 (Electric Power Industry Reform Act of 2001) — Authorized the substitution of National Transmission Corporation in lieu of NPC for transmission-related cases.
• Section 6, RA 10752 (The Right-of-Way Act) — Repealed RA 8974 but substantially maintained the requirement of depositing 100% of the value of the land based on current BIR zonal valuation. Cited in footnotes for context.

Carpio (Senior Associate Justice), Peralta, Caguioa, and Reyes, Jr., JJ., concurred.