Heirs of Macabangkit Sangkay vs. National Power Corporation

Execution pending appeal is discretionary and constitutes the exception to the rule that only a final judgment may be executed; it must be strictly construed and granted only upon "good reasons" consisting of compelling or superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment or final order. The mere posting of a bond does not justify execution pending appeal, and it is not for the trial court to determine the merits of its own decision or to rule that the appeal is dilatory as a basis for granting the motion.

The Heirs of Macabangkit Sangkay owned a 227,065-square-meter parcel of land in Iligan City, subdivided into nine parcels titled to the individual heirs. In 1979, NAPOCOR constructed an underground three-kilometer long tunnel traversing the properties, about 100 meters beneath the surface, used to siphon water and divert the flow of the Agus River for NAPOCOR's Hydro-Electric Project. NAPOCOR is a government corporation whose charter, Republic Act No. 6395, as amended, authorizes it to take water from public streams, intercept and divert the flow of water from lands of riparian owners upon payment of just compensation, and to construct power plants and related facilities. The Heirs were not informed of the tunnel's construction and were not compensated for the use of their property.

Macabangkit Sangkay was the owner of a 227,065-square-meter parcel of land in Iligan City. When he died intestate, the property was subdivided into nine parcels and titled to his heirs: Edgar, Nasser, Sayana, Manta, Cebu, Batowa-an, Amir, Monkoy, and Putri, all surnamed Macabangkit. The heirs declared their properties for taxation purposes in their respective names.

In 1979, NAPOCOR constructed an underground three-kilometer long tunnel traversing the properties of the heirs, about 100 meters beneath the surface. The tunnel was used to siphon water and divert the flow of the Agus River for the operation of NAPOCOR's Hydro-Electric Project in Agus V, VI, and VII, at Ditucalan and Fuentes, Iligan City. A transmission line also traversed the property. The heirs were not informed that such underground tunnel had been constructed; neither did NAPOCOR compensate them for the use of their property.

In the early part of 1996, the heirs entered into a Memorandum of Agreement with Global Asia Management and Resource Corporation for the sale of their property. On July 5, 1996, the heirs received a letter from Global Asia refusing the land due to the presence of NAPOCOR's underground tunnel. On October 10, 1996, the heirs offered their land as collateral for a loan applied with the Al-Amanah Islamic Investment Bank of the Philippines, and again the parcels of land were not accepted as collateral due to the presence of the tunnel. Written and oral demands were made for NAPOCOR to vacate and remove its tunnel, or, in the alternative, to pay just compensation and rental, but NAPOCOR refused.

The heirs filed a complaint for damages and recovery of possession of the property with alternative prayer for just compensation before the RTC of Iligan City. In its answer, NAPOCOR interposed special and affirmative defenses, citing its authority under Section 3(f) of Republic Act No. 6395 to intercept and divert the flow of water upon payment of just compensation, and asserting that the heirs' cause of action was barred by prescription, estoppel, and laches. The heirs adduced evidence that the property had an assessed value of ₱400.00 to ₱500.00 per square meter, that adjacent parcels were sold at ₱700.00 and ₱750.00 per square meter, and that the area was classified as industrial and residential.

On August 13, 1999, the RTC rendered judgment in favor of the heirs, ordering NAPOCOR to pay just compensation at ₱500.00 per square meter, or a total of ₱113,532,500.00, plus interest, monthly rental of ₱30,000.00 from 1979 up to July 1999 with 12% interest per annum, ₱200,000.00 as moral damages, ₱200,000.00 as exemplary damages, and attorney's fees equivalent to 15% of the total amount awarded. On August 18, 1999, the RTC rendered a Supplemental Decision condemning the property in favor of NAPOCOR upon payment of the aforesaid sum.

Before NAPOCOR was served with a copy of the Decision, the heirs filed an Urgent Motion for Execution of Judgment Pending Appeal, alleging that execution pending appeal was justified considering the trial court's finding that NAPOCOR had acted in bad faith in constructing the tunnel. The heirs appended to their motion a Joint Affidavit alleging that they constantly feared that an earthquake could happen at any time and that the tunnel could collapse or cave in, which would necessarily cause serious injuries or even death. NAPOCOR opposed the motion, contending that the heirs failed to prove bad faith, that the heirs were never deprived of the beneficial use of their land, and that its appeal was not a mere dilatory tactic.

On September 7, 1999, the trial court issued the Special Order granting the motion for execution pending appeal and awarding 70% of the money judgment, or ₱79,472,750.00, upon the filing of a ₱1,000,000.00 bond. The trial court declared that among the good reasons to grant the motion was the fact that NAPOCOR had occupied the property and had used it in bad faith since 1979 without having paid just compensation therefor, that the construction of the tunnel rendered the subject property unfit for industrial, residential, or commercial use because of the danger it posed, and that the appeal of NAPOCOR was dilatory and frivolous. The RTC thereafter issued the Writ of Execution on September 9, 1999.

NAPOCOR assailed the trial court's Special Order and Writ of Execution before the CA via petition for review on certiorari under Rule 65, claiming that the respondent Judge acted without or in excess of jurisdiction and gravely abused his discretion in granting the Motion for Execution Pending Appeal despite the absence of compelling reasons therefor. The CA rendered judgment granting the petition and set aside the assailed orders of the trial court. According to the appellate court, even assuming NAPOCOR's bad faith in constructing its tunnel, it was not an urgent and compelling reason to grant the motion for execution pending appeal, as the matter goes into the merits of the case which the CA should resolve on appeal. The CA also noted that under Section 3(i) of Republic Act No. 6395, any action by any person claiming compensation and/or damages shall be filed within five years after the right-of-way, transmission lines, substations, plants or other facilities shall have been established, and that the effect of this proviso on the decision of the trial court can be better addressed in the appeal.

• Grave Abuse of Discretion: Petitioners alleged that the CA erred in granting the writ of certiorari in favor of NAPOCOR on its finding that the trial court committed grave abuse of discretion in issuing the Special Order, maintaining that the trial court's finding that NAPOCOR acted in bad faith and that its appeal was dilatory was supported by the evidence on record and the pleadings of the parties.
• Deference to Trial Court Findings: Petitioners insisted that the appellate court should not substitute its findings for those of the trial court, as execution pending appeal is a matter addressed to the sound discretion of the trial court and cannot be nullified by the appellate court unless grave abuse of discretion amounting to excess or lack of jurisdiction is shown.
• Inapplicability of Section 3(i): Petitioners argued that the CA's reliance on Section 3(i) of Republic Act No. 6395 was misplaced because the law does not apply to the construction of a tunnel underneath the surface of their property.
• Stare Decisis: Petitioners averred that the CA should have applied its ruling in National Power Corporation vs. Ibrahim, and that by its decision, the CA condoned the unjust enrichment of NAPOCOR at their expense.
• Urgency and Danger: Petitioners insisted that, as gleaned from their Joint Affidavit, when they discovered the existence of the tunnel in 1996, they were impelled to transfer their residence, and that there was nothing in the testimony of petitioner Nasser Macabangkit which would negate the urgency to buy properties located in a safe area.

• Good Faith and Statutory Authority: NAPOCOR averred that it acted in good faith based on Section 3(f) and (g) of Republic Act No. 6395, as amended, which authorized it to take water from public streams and to intercept and divert the flow of water from lands of riparian owners upon payment of just compensation.
• Laches and Prescription: NAPOCOR posited that it is incredible that petitioners failed to discover the tunnel when it was constructed in 1979; hence, petitioners slept on their rights for 18 years or so, and their claim was barred by prescription, estoppel, and laches.
• Contentious Issues on Appeal: NAPOCOR averred that the precise amount due to petitioners for the respondent's use of the tunnel, by way of compensation, is another contentious issue on appeal, and that the appellate court still has to resolve the issue of whether petitioners' claim is barred by Section 3(i) of Republic Act No. 6395.
• No Deprivation of Beneficial Use: NAPOCOR claimed that the heirs were never deprived of the beneficial use of their land, and that there was no evidence on record that they ever attempted to use the affected portion of the property.
• No Danger Posed: NAPOCOR alleged that the heirs' claim that the tunnel exposed them to danger was belied by the testimony of Nasser Macabangkit, who testified that only two of his siblings started to reside in the subject property in 1998, after the complaint was filed.

• Grave Abuse of Discretion in Granting Execution Pending Appeal: Whether the CA erred in finding that the trial court committed grave abuse of discretion amounting to excess or lack of jurisdiction in granting petitioners' motion for execution pending appeal of its decision and supplemental decision in the amount of ₱79,472,750.00.

• Grave Abuse of Discretion in Granting Execution Pending Appeal: Yes. The trial court committed grave abuse of discretion amounting to excess or lack of jurisdiction when it granted the motion for execution pending appeal in the absence of good reasons to justify the grant. The petition was denied for lack of merit, and costs were assessed against the petitioners.

• Grave Abuse of Discretion in Granting Execution Pending Appeal: The Court ruled that execution pending appeal is discretionary and is the exception to the rule that only a final judgment may be executed, hence, it must be strictly construed and should not be granted routinely but only in extraordinary circumstances. The Rules of Court do not enumerate the circumstances which would justify execution pending appeal; however, "good reasons" consist of compelling or superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment or final order. The existence of good reasons is what confers discretionary power on a court to issue a writ of execution pending appeal, and these reasons must be stated in the order granting the same. The mere posting of a bond will not justify execution pending appeal; a combination of circumstances is the dominant consideration which impels the grant of immediate execution.

The Court found that the petitioners' claim of danger from the tunnel was merely an afterthought and barren of merit. Petitioner Nasser Macabangkit testified before the trial court on December 1, 1998, and declared that only two of the petitioners, Edgar and Sayana Macabangkit, resided in the property starting only in 1998. The Court found it incredible that after discovering the existence of the tunnel and finding the area "very dangerous," petitioners would still choose to live therein. If petitioners truly believed that the tunnel posed danger to their property and their very lives, any decision to stay on would be short of suicidal on their part.

The Court further held that it is not for the trial court to determine the merits of the decision it rendered and use the same as basis for its order allowing execution pending appeal. The authority to determine the merits of the appeal and the correctness of the findings and conclusions of the trial court is lodged in the appellate court. The trial court cannot preempt the decision of the appellate court and use its own decision as basis for affirming the trial court's order of execution pending appeal. Neither is the trial court justified to order execution pending appeal on its assertion that the appeal of the respondent is a dilatory tactic. As held in Manacop vs. Equitable PCI Bank, that the appeal is merely dilatory is not a good reason for granting execution pending appeal; it is not within the competence of the trial court, in resolving a motion for execution pending appeal, to rule that the appeal is patently dilatory and rely on the same as basis for finding good reasons to grant the motion. Only an appellate court can appreciate the dilatory intent of an appeal as an additional good reason in upholding an order for execution pending appeal.

The Court also held that the petitioners' reliance on the ruling of the CA in National Power Corporation vs. Ibrahim was misplaced, agreeing with the CA's ratiocination that based on the circumstances obtaining in the case, it would best serve the ends of justice if the appeal on the merits of the case is first resolved without any execution pending appeal, not only because the total amount involved is quite substantial — ₱113,532,500.00 — but also because of the other matters involved in the appeal.

• Good Reasons for Execution Pending Appeal — "Good reasons" consist of compelling or superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment or final order. The existence of good reasons is what confers discretionary power on a court to issue a writ of execution pending appeal, and these reasons must be stated in the order granting the same. The mere posting of a bond will not justify execution pending appeal; a combination of circumstances is the dominant consideration which impels the grant of immediate execution. In this case, the Court found that the alleged good reasons cited by the trial court — NAPOCOR's bad faith, the danger posed by the tunnel, and the dilatory character of the appeal — were insufficient, as the claim of danger was contradicted by the petitioners' own testimony and the trial court improperly ruled on the merits of its own decision.

• Trial Court Cannot Preempt the Appellate Court — It is not for the trial court to determine the merits of the decision it rendered and use the same as basis for its order allowing execution pending appeal. The authority to determine the merits of the appeal and the correctness of the findings and conclusions of the trial court is lodged in the appellate court. The trial court cannot preempt the decision of the appellate court and use its own decision as basis for affirming the trial court's order of execution pending appeal. Neither is the trial court justified to order execution pending appeal on its assertion that the appeal of the respondent is a dilatory tactic; only an appellate court can appreciate the dilatory intent of an appeal as an additional good reason in upholding an order for execution pending appeal.

• "The rule is that execution shall issue as a matter of right, on motion, upon a judgment or order that disposes of the action or proceedings upon the expiration of the period to appeal therefrom if no appeal has been perfected. However, the trial court may grant execution before the expiration of the period to appeal upon motion of the prevailing party provided that it has jurisdiction over the case and is in possession of either the original record or the record on appeal, as the case may be, and there are good reasons for such execution to be stated in a special order after due hearing." — This passage states the general rule and the exception for execution pending appeal, establishing the framework for the Court's analysis.

• "However, this Court has held that 'good reasons' consist of compelling or superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment or final order. Were the rule otherwise, execution pending appeal may well become a tool of oppression and inequity instead of an instrument of solicitude and justice." — This passage defines the controlling standard for "good reasons" in execution pending appeal cases and is the canonical formulation of the doctrine.

• "The well-established rule is that it is not for the trial court to determine the merits of the decision it rendered and use the same as basis for its order allowing execution pending appeal. The authority to determine the merits of the appeal and the correctness of the findings and conclusions of the trial court is lodged in the appellate court. The trial court cannot preempt the decision of the appellate court and use its own decision as basis for affirming the trial court's order of execution pending appeal." — This passage articulates the principle that the trial court cannot preempt the appellate court's determination of the merits of the appeal.

• "Besides, that the appeal is merely dilatory is not a good reason for granting execution pending appeal. As held in BF Corporation v. Edsa Shangri-la Hotel: … it is not for the trial judge to determine the merit of a decision he rendered as this is the role of the appellate court. Hence, it is not within competence of the trial court, in resolving a motion for execution pending appeal, to rule that the appeal is patently dilatory and rely on the same as basis for finding good reasons to grant the motion. Only an appellate court can appreciate the dilatory intent of an appeal as an additional good reason in upholding an order for execution pending appeal…" — This passage establishes that the dilatory character of an appeal is not a good reason for the trial court to grant execution pending appeal, as only the appellate court can appreciate such dilatory intent.

• Aquino vs. Santiago, 61 SCRA 570 — Cited by NAPOCOR to support its argument that execution pending appeal should not be granted in the absence of compelling reasons; the Court did not discuss this case in detail but it was part of the respondent's cited authorities.
• National Power Corporation vs. Ibrahim, CA-G.R. SP No. 41897 — Cited by petitioners to support their claim that execution pending appeal was justified; the Court held that petitioners' reliance on this case was misplaced, agreeing with the CA that based on the circumstances of the case, it would best serve the ends of justice if the appeal on the merits is first resolved without any execution pending appeal.
• Municipality of Biñan, Laguna vs. Court of Appeals, 219 SCRA 69 — Cited by the Heirs in support of their position that execution pending appeal was justified; the Court did not discuss this case in detail.
• Corona International, Inc. vs. Court of Appeals, 397 Phil. 575 (2000) — Cited for the proposition that execution pending appeal is discretionary and is the exception to the rule that only a final judgment may be executed, hence, must be strictly construed.
• Philippine Bank of Communications vs. Court of Appeals, 344 Phil. 777 (1997) — Cited for the proposition that if the trial court grants execution pending appeal in the absence of good reasons therefor, it is incumbent upon the CA to issue a writ of certiorari; failure to do so would constitute grave abuse of discretion on its part.
• Flexo Manufacturing Corporation vs. Columbus Foods, Incorporated, G.R. No. 164857, April 11, 2005, 455 SCRA 272 — Cited for the proposition that the Rules of Court do not enumerate the circumstances which would justify execution pending appeal.
• Intramuros Tennis Club, Inc. vs. Philippine Tourism Authority, 395 Phil. 278 (2000) — Cited for the definition of "good reasons" as compelling or superior circumstances demanding urgency which will outweigh the injury or damages should the losing party secure a reversal of the judgment or final order.
• Manacop vs. Equitable PCI Bank, G.R. Nos. 162814-17, August 25, 2005, 468 SCRA 256 — Cited for the proposition that the appeal being merely dilatory is not a good reason for granting execution pending appeal, and that it is not within the competence of the trial court to rule that the appeal is patently dilatory.
• Marcopper Mining Corporation vs. Solidbank Corporation, G.R. No. 134049, June 17, 2004, 432 SCRA 360 — Cited for the proposition that it is not for the trial court to determine the merits of the decision it rendered and use the same as basis for its order allowing execution pending appeal.

• Section 1, Rule 39, Revised Rules of Court — Provides that execution shall issue as a matter of right, on motion, upon a judgment or order that disposes of the action or proceedings upon the expiration of the period to appeal therefrom if no appeal has been perfected. The Court applied this rule to establish the general rule from which execution pending appeal is the exception.
• Section 2, Rule 39, Revised Rules of Court — Provides that execution of the judgment or final order pending appeal is discretionary. The Court applied this provision to emphasize that execution pending appeal is the exception to the rule that only a final judgment may be executed, hence, must be strictly construed.
• Section 3(f), Republic Act No. 6395, as amended — Authorizes NAPOCOR to take water from any public stream, river, creek, lake, spring or waterfall in the Philippines; to intercept and divert the flow of waters from lands of riparian owners upon payment of just compensation. NAPOCOR invoked this provision to support its claim of good faith in constructing the tunnel.
• Section 3(g), Republic Act No. 6395, as amended — Authorizes NAPOCOR to construct, operate and maintain power plants, auxiliary plants, dams, reservoirs, pipes, mains, transmission lines, power stations and substations, and other works for the purpose of developing hydraulic power. NAPOCOR invoked this provision to support its authority to construct the tunnel.
• Section 3(i), Republic Act No. 6395, as amended — Provides that any action by any person claiming compensation and/or damages shall be filed within five (5) years after the right-of-way, transmission lines, sub-stations, plants or other facilities shall have been established, and after the said period no suit shall be brought to question the same. The CA noted that the effect of this proviso on the decision of the trial court can be better addressed in the appeal; petitioners argued that this provision does not apply to the construction of a tunnel underneath the surface of their property.
• Article 437, New Civil Code — Provides that the owner of a parcel of land is the owner of its surface and everything under it and can therefore construct thereon any work or make any plantation and excavation which he may deem proper, subject to limitations imposed by special law or ordinances. NAPOCOR cited this provision in its answer, acknowledging the general rule of ownership but asserting the limitations imposed by its charter.
• Article 450, New Civil Code — Cited by the trial court as basis for the heirs' right to compel NAPOCOR to pay the price of the land or the proper rent.

• Panganiban, C.J. (Chairperson)
• Ynares-Santiago, J.
• Austria-Martinez, J.
• Chico-Nazario, J.