Heirs of Cipriano vs. National Transmission Corporation

Just compensation in inverse condemnation must be reckoned from the date of actual taking, not from the filing of the complaint, where the transmission lines are visible and the property owners could not have been unaware of their construction; however, the present value formula — which compounds the value at the time of taking to account for the property owner's opportunity loss from delayed payment — must be applied to ensure that the award is genuinely just, and consequential damages, exemplary damages, attorney's fees, and costs of suit are recoverable where the government failed to initiate expropriation proceedings before taking private property.

The heirs of Benita Yanzon Cipriano are the owners of two parcels of land in Villahermosa, Daraga, Albay, denominated as Lot No. 15870-B and Lot No. 15939. The National Power Corporation (NPC), whose electrical transmission functions were later transferred to National Transmission Corporation (TransCo) pursuant to Republic Act No. 9136 (the Electric Power Industry Reform Act of 2001), constructed high-tension transmission lines traversing these properties without initiating expropriation proceedings. The dispute centers on the proper reckoning point for determining just compensation and the appropriate measure of damages arising from the government's decades-long occupation without formal expropriation.

On July 21, 2015, the heirs of Benita Yanzon Cipriano filed before the Regional Trial Court (RTC) of Legazpi City, Albay a Complaint for Inverse Condemnation Proceeding or Claim for Just Compensation against National Transmission Corporation (TransCo). The heirs alleged that the National Power Corporation (NPC), TransCo's predecessor-in-interest, constructed high-tension transmission lines in Villahermosa, Daraga, Albay sometime in 1977, with two transmission lines traversing their parcels of land denominated as Lot No. 15870-B and Lot No. 15939, without their consent and without any expropriation proceedings being initiated. Despite a series of correspondence, the heirs' claim for just compensation remained unpaid.

TransCo responded that NPC's entry into the properties was based on a grant of right of way given by Trinidad P. Vda. De Yanzon, the predecessor-in-interest of the heirs, for a consideration of ₱1,074.71 representing payment of easement fee, fees for pole and guy occupancies, and damaged improvements. TransCo further asserted that the claim was already barred by prescription and laches, and that the determination of just compensation should be reckoned from the time of taking.

During the pre-trial conference, it was determined that TransCo had occupied Lot No. 15870-B, and that there was a need to ascertain whether it had also entered Lot No. 15939. The complaint was amended upon the court's order in view of TransCo's admission that it occupied a larger portion of Lot No. 15939 than that described by the heirs. The RTC appointed three commissioners who submitted appraisal reports with varying recommendations. Commissioner Martin P. Rabelas recommended ₱1,250 per square meter. Commissioner Noel T. Oliveros recommended ₱0.47 per square meter for portions occupied in 1977 and ₱12.37 per square meter for a portion occupied in 1994, with interest. Commissioner Roy A. Alzaga recommended ₱581.67 per square meter reckoned from 1997 and ₱575.00 per square meter reckoned from 1980, with interest.

The RTC found that the transmission lines affected a total area of 6,494 square meters: the Daraga-Putiao 69kV Transmission Lines, constructed in 1977, traversed 2,776 square meters of Lot No. 15870-B and 2,009 square meters of Lot No. 15939, while the Daraga-Bacman 230kV Transmission Lines, constructed in 1994, occupied 1,709 square meters of the eastern portion of Lot No. 15939. The RTC reckoned just compensation from the filing of the complaint in 2015, applying the exception recognized in National Power Corporation vs. Heirs of Macabangkit Sangkay and National Power Corporation vs. Saludares, and adopted Commissioner Alzaga's recommended valuation with modifications, pegging the fair market value at ₱600.00 per square meter plus ₱100.00 per square meter as consequential damages for the remaining 39,688 square meters. On motion for reconsideration, the RTC partially modified the interest rates. TransCo appealed to the Court of Appeals, which reversed the RTC, holding that no special circumstances warranted departure from the general rule that just compensation must be reckoned from the date of actual taking, and remanded the case for proper determination of just compensation at the time of taking.

• Reckoning Point of Just Compensation: Petitioners argued that their case warrants the application of the rulings in Macabangkit Sangkay and Saludares, where just compensation was reckoned from the filing of the complaint for inverse condemnation due to special circumstances, considering that respondent failed to initiate expropriation proceedings prior to its entry in 1977 and that respondent's occupation of 1,709 square meters of Lot No. 15939 in 1994 was only discovered upon the filing of the complaint, prompting an amendment of the complaint.
• Due Process Violation: Petitioners maintained that Macabangkit Sangkay was premised not on the property owner's lack of knowledge of the government's entry but on whether due process was observed, and that respondent's failure to initiate expropriation proceedings violated their right to due process, their right to possess the properties, and their right to payment of just compensation.
• Exemplary Damages: Petitioners prayed for an increased award of exemplary damages in the amount of ₱3,000,000.00 (₱1,000,000.00 each for the three portions of the two lots traversed by the transmission lines) or, in the alternative, in an amount equivalent to the just compensation reckoned from the filing of the complaint.
• Attorney's Fees and Consequential Damages: Petitioners prayed for an increased award of attorney's fees in the amount of ₱1,000,000.00, as well as consequential damages and costs of suit.
• Credibility of Right-of-Way Claim: Petitioners countered that respondent's claim that NPC was granted a right of way by Trinidad should not be given credence, as the judicial affidavit of respondent's witness was never formally offered despite being on record.

• Reckoning Point of Just Compensation: Respondent argued that the CA correctly ruled that just compensation should be reckoned from the date of actual taking, and not from the filing of the complaint for inverse condemnation.
• Grant of Right of Way: Respondent asserted that NPC, its predecessor-in-interest, entered into the properties based on the grant of right of way given by Trinidad for a consideration of ₱1,074.71 — an assertion which petitioners did not dispute.
• Visibility of Transmission Lines: Respondent argued that the transmission lines were visible such that petitioners could not deny their existence when they were constructed in 1977 and 1994.
• Consequential Damages: Respondent asserted that the CA correctly did not award consequential damages, considering that the CA had ordered the remand of the case to the RTC and such award must be made following an evaluation of all the factors in determining just compensation.

• Reckoning Point of Just Compensation: Whether the CA erred in finding that the exception in Oroville is not applicable and in ruling that just compensation should be computed based on the value at the time of taking of the property.
• Consequential Damages: Whether the CA erred in not awarding consequential damages.
• Costs of Suit: Whether the CA erred in not awarding costs of suit.

• Reckoning Point of Just Compensation: No. The CA correctly ruled that just compensation should be reckoned from the time of actual taking, as the transmission lines were visible and the property owners could not have been unaware of their construction, precluding the special circumstances recognized in Macabangkit Sangkay and Saludares. However, the RTC on remand must apply the present value formula from Republic vs. Spouses Nocom and Heirs of Jose Mariano vs. City of Naga to account for opportunity loss.
• Consequential Damages: Yes. The RTC on remand should recompute consequential damages for the remaining unoccupied portions of the property, as these are a component of just compensation and must be reckoned from the time of taking, subject to the present value formula.
• Costs of Suit: Yes. Respondent should pay the costs of suit, as it was NPC and its successor TransCo that should have filed the proper expropriation proceedings before taking the properties, and it would be unjust for the petitioners to bear the costs.

• Reckoning Point of Just Compensation: Rule 67, Section 4 of the Rules of Court 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. While the Court has recognized exceptions in Macabangkit Sangkay and Saludares — where just compensation was reckoned from the filing of the inverse condemnation complaint — those cases involved special circumstances: in Macabangkit Sangkay, NPC employed stealth in constructing underground tunnels such that the property owners were unaware of the intrusion, and in Saludares, NPC refused to acknowledge the respondents' claim and insisted it had already paid. As Oroville explained, these rulings are more in consonance with equity than with Rule 67, and the Court must not lose sight of the rule mandating reckoning from the date of taking. In the present case, the transmission lines were visible and above ground, such that petitioners could not have been unaware of their construction in 1977 and 1994. Respondent also claimed a grant of right of way by Trinidad for consideration, analogous to Religious of the Virgin Mary, where the Court found no exceptional circumstances. The general rule therefore applies. However, to address the injustice of pegging compensation at decades-old values, the Court adopted the present value formula from Spouses Nocom and Heirs of Mariano, which compounds the value at the time of taking by an interest rate to account for the opportunity loss the property owner suffered from non-payment. This formula meets the middle ground between established doctrine and substantial justice, providing a stronger incentive for the government to comply with expropriation procedures while remaining consistent with the rule that just compensation is reckoned from the time of taking. The total just compensation shall earn legal interest of 6% per annum from the finality of the decision fixing just compensation until full payment.

• Consequential Damages: Consequential damages are a component of just compensation. As held in National Power Corporation vs. Marasigan, the trial court should ascertain the market value of the property, add consequential damages, and deduct consequential benefits; if benefits exceed damages, they should be disregarded. The RTC had earlier awarded ₱100.00 per square meter as consequential damages for the remaining 39,688 square meters, finding that the transmission lines pose danger to safety and health and constitute a permanent burden on the unaffected portions. Because the prior award was made in relation to the ₱600.00 per square meter valuation that the CA correctly set aside, the RTC on remand should recompute consequential damages, reckoned from the time of taking, subject to the present value formula, and earning legal interest of 6% per annum from the finality of the decision fixing just compensation until full payment.

• Costs of Suit: Rule 67, Section 12 of the Rules of Court provides that costs shall be paid by the plaintiff, presupposing that the expropriator is the plaintiff. In this case, the plaintiffs are the petitioners, the property owners who were forced to file inverse condemnation because NPC and TransCo failed to initiate expropriation proceedings. It would be unjust for petitioners to bear the costs when it was the government that should have filed the proper case before taking the properties. The Constitution ordains that private property shall not be taken for public use without just compensation. Tecson and Oroville, both citing Republic vs. Court of Appeals, instruct that the government's failure to initiate expropriation proceedings may be corrected with the award of exemplary damages, attorney's fees, and costs of litigation.

• General Rule on Reckoning Point of Just Compensation — Under Rule 67, Section 4 of the Rules of Court, just compensation is determined as of the date of the taking of the property or the filing of the complaint, whichever came first. This is the general rule, and the Court must not lose sight of it, as it is part of the Rules promulgated for uniformity. The exception recognized in Macabangkit Sangkay and Saludares — reckoning from the filing of the inverse condemnation complaint — applies only where special circumstances exist, such as stealth in construction (underground tunnels unknown to the owner) or the expropriator's outright refusal to acknowledge the claim and insistence that payment had already been made. Where transmission lines are visible and above ground, the property owner cannot claim ignorance, and the exception does not apply.

• Present Value Formula — To address the injustice of pegging just compensation at the value of the property at the time of taking when payment is delayed for decades, the present value formula compounds the value at the time of taking by an interest rate to account for the opportunity loss the property owner suffered from non-payment. The formula is: PV = V × (1 + r)^n, where PV is the present value, V is the value at the time of taking, r is the interest rate, and n is the number of years. This method recognizes that the value of money is not static and compensates for the opportunity loss due to non-payment of a sum that is due and demandable. It meets the middle ground between the established doctrine of reckoning from the time of taking and the demands of substantial justice, and provides the government a stronger incentive to comply with expropriation procedures.

• Consequential Damages as Component of Just Compensation — In determining just compensation, the trial court should first ascertain the market value of the property, then add consequential damages and deduct consequential benefits. If consequential benefits exceed consequential damages, these items should be disregarded altogether, as the basic value of the property should be paid in every case. Consequential damages account for the impairment in value of the remaining portions of the property not occupied by the expropriator.

• Award of Exemplary Damages and Attorney's Fees in Inverse Condemnation — Where the government takes private property without initiating expropriation proceedings, resulting in pecuniary loss to the owner, exemplary damages and attorney's fees are proper under Articles 2229 and 2208 of the Civil Code. Government agencies should be admonished that negligence and inaction in failing to commence proper expropriation proceedings before taking private property cannot be countenanced.

• Costs of Suit in Inverse Condemnation — Where the property owner is forced to file the inverse condemnation complaint because the government failed to initiate expropriation proceedings, the government should bear the costs of suit. It would be unjust for the property owner to pay costs when the government should have filed the proper case before taking the property.

• "The rulings in Macabangkit Sangkay and Saludares are more in consonance with the rules of equity than with the Rules of Court; specifically Rule 67 on expropriation. Indeed, the practice of construct first, expropriate later is reprehensible and must not be countenanced. The Court, however, must not lose sight of Section 4, Rule 67 which mandates that just compensation must be determined 'as of the date of the taking of the property or the filing of the complaint, whichever came first.'" — This passage, quoted from Oroville, articulates the tension between equity and the procedural rules that the Court resolved by adopting the present value formula as a middle ground.

• "By using the present value method, this Court recognizes that the value of money is not static. The amount of [PHP] 552.00 in 1983 does not carry the same monetary or buying power in 1995 or in 2021. Thus, the method takes into consideration the present economic value of the property taken by the government if just compensation at the time of taking was paid promptly. It compensates for the opportunity loss due to the non-payment of a sum of money that is due and demandable." — This passage explains the economic rationale behind the present value formula and why it satisfies the constitutional requirement of just compensation while remaining consistent with the time-of-taking rule.

• "In using this method, the powers that be would have a stronger incentive to comply with duly constituted procedures regarding the power of eminent domain instead of continuing its practice of taking property without filing the proper expropriation proceedings. At the same time, it remains consistent with the doctrine that just compensation must be reckoned from the time of actual taking." — This passage articulates the dual purpose of the present value formula: deterring the government's practice of taking property without expropriation proceedings while maintaining doctrinal consistency.

• "The very nature of transmission lines — how they run great distances and are supported by towers extending several stories in height — as well as respondent's own claim that there was intrusion in a sizeable portion (initially claimed to be more than 17,000 square meters) of its property precludes the expropriator's stealth and the owner's utter cluelessness." — This passage, quoted from Religious of the Virgin Mary, explains why the stealth-based exception in Macabangkit Sangkay cannot apply to cases involving visible above-ground transmission lines.

• National Power Corporation vs. Heirs of Macabangkit Sangkay, 671 Phil. 569 (2011) — Recognized the exception of reckoning just compensation from the filing of the inverse condemnation complaint where NPC employed stealth in constructing underground tunnels without the property owners' knowledge. Distinguished in this case because the transmission lines were visible and above ground.

• National Power Corporation vs. Saludares, 686 Phil. 967 (2012) — Recognized the same exception where NPC refused to acknowledge the respondents' claim and insisted it had already paid. Distinguished because TransCo's claim of a grant of right of way is not analogous to NPC's outright refusal to acknowledge the claim.

• National Transmission Corporation vs. Oroville Development Corporation, 815 Phil. 91 (2017) — Explained at length the exceptional nature of Macabangkit Sangkay and Saludares and held that visible transmission lines preclude the property owner's lack of knowledge. Followed in this case as the controlling authority for applying the general rule.

• National Transmission Corporation vs. Religious of the Virgin Mary, 927 Phil. 84 (2022) — Held that the nature of transmission lines precludes the expropriator's stealth and the owner's cluelessness, and that a claim of right of way by prescription is different from claims that payment had already been made. Followed, as the present case is analogous — TransCo claimed a grant of right of way by Trinidad.

• Heirs of Jose Mariano vs. City of Naga, 931 Phil. 369 (2022) — Applied the present value formula from Spouses Nocom for determining just compensation, compounding the value at the time of taking to account for opportunity loss. Followed as the basis for directing the RTC to apply the present value formula on remand.

• Republic vs. Spouses Mariano Nocom and Anacoreta O. Nocom, 914 Phil. 686 (2021) — Enunciated the present value formula for determining just compensation. Followed as the source of the formula applied in this case.

• Secretary of the Department of Public Works and Highways vs. Spouses Tecson, 758 Phil. 604 (2015) — Laid down remedies for aggrieved private parties when property is taken without expropriation proceedings and awarded exemplary damages and attorney's fees. Followed for the award of exemplary damages (₱1,000,000.00) and attorney's fees (₱200,000.00).

• National Power Corporation vs. Manalastas, 779 Phil. 510 (2016) — Cited in Heirs of Mariano for the proposition that exemplary damages and attorney's fees should be awarded when the government illegally occupies property for a long time without expropriation proceedings. Followed.

• National Power Corporation vs. Marasigan, 820 Phil. 1107 (2017) — Held that just compensation is determined by ascertaining market value, adding consequential damages, and deducting consequential benefits. Followed for the recomputation of consequential damages on remand.

• Republic vs. Court of Appeals, 494 Phil. 494 (2005) — Cited in Tecson and Oroville for the proposition that the government's failure to initiate expropriation proceedings may be corrected with the award of exemplary damages, attorney's fees, and costs of litigation. Followed.

• Rule 67, Section 4, Rules of Court — 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. Applied as the general rule governing the reckoning point of just compensation, with the present value formula adopted to address the inequity of decades-old valuations.

• Rule 67, Section 12, Rules of Court — Provides that costs shall be paid by the plaintiff in expropriation proceedings. Interpreted as presupposing that the expropriator is the plaintiff; where the property owner is forced to file inverse condemnation because the government failed to expropriate, the government should bear the costs.

• Article 2229, Civil Code — Provides that exemplary or corrective damages are imposed by way of example or correction for the public good. Applied to award exemplary damages against TransCo for its failure to initiate expropriation proceedings before taking private property.

• Article 2208, Civil Code — Provides that attorney's fees may be awarded by the court in cases where such would be just and equitable. Applied to award attorney's fees to petitioners.

• Article III, Section 9, 1987 Constitution — Provides that private property shall not be taken for public use without just compensation. Cited as the constitutional basis for requiring the government to bear the costs of suit, as it was the government's duty to initiate expropriation before taking the property.

• Republic Act No. 9136 (Electric Power Industry Reform Act of 2001) — Transferred NPC's electrical transmission functions to TransCo. Cited as the statutory basis for TransCo's succession to NPC's functions and liabilities.

Gesmondo, C.J. (Chairperson) and Hernando, J., concurred. Zalameda and Marquez, JJ., were on official business.