Lloyds Industrial Richfield Corporation vs. National Power Corporation

The governing principle is that when the installation of transmission lines imposes perpetual restrictions that indefinitely deprive a landowner of the ordinary use and enjoyment of the property, the burden transcends a mere easement and constitutes a taking that mandates payment of full just compensation equivalent to the fair market value. The Court held that a landowner is not entitled to compensation for subsurface mineral deposits, which remain exclusively owned by the State under the Constitution, and that a remand to the trial court for valuation is unwarranted when the record contains sufficient comparable sales and consistent judicial determinations for the same public works project.

Lloyds Industrial Richfield Corporation operated a cement manufacturing plant in Danao City and acquired adjoining lots in Carmen, Cebu, to quarry limestone for production. Prior to June 1996, the National Power Corporation initiated negotiations to secure a right-of-way easement over these lots to construct transmission lines for the 230 KV Leyte-Cebu Interconnection Project. Following failed negotiations, the National Power Corporation filed an expropriation complaint before the Regional Trial Court of Danao City and secured an ex parte writ of possession over seven of the lots. A Committee on Appraisal subsequently surveyed the properties, expanded the required safety zone from twenty to two hundred meters, and recommended condemning four additional lots while valuing the land at P450.00 per square meter and the extractable limestone at P26.00 per ton.

• Lloyds Industrial Richfield Corporation held title to several parcels of land in Carmen, Cebu, which it utilized for limestone quarrying to supply its cement manufacturing operations. The National Power Corporation sought to construct high-voltage transmission lines for the 230 KV Leyte-Cebu Interconnection Project across these properties. After negotiations for a right-of-way easement failed, the National Power Corporation initiated expropriation proceedings, initially seeking seven lots, and immediately secured possession through an ex parte writ.
• The trial court appointed a Committee on Appraisal to determine just compensation and assess the required safety zone for dynamite blasting. The Committee expanded the safety zone from twenty to two hundred meters on each side of the proposed transmission lines, necessitating the inclusion of four additional lots to prevent damage to the infrastructure and ensure public safety. The Committee recommended a valuation of P450.00 per square meter for the land and P26.00 per ton for the limestone deposits, totaling 3,651,092.40 tons of extractable minerals.
• The Regional Trial Court adopted the Committee's recommendations, ordering the National Power Corporation to pay the full market value for all eleven lots and compensating the landowner for the limestone deposits. The Court of Appeals affirmed the condemnation of the eleven lots and the rejection of the ten percent easement fee, but deleted the award for the limestone deposits, ruling that minerals belong to the State. The appellate court also remanded the case for a fresh determination of the land's just compensation, finding the trial court's reliance on distant deeds of sale insufficient. Both parties appealed the appellate decision, raising issues on the nature of the taking, the scope of expropriation, mineral compensation, and the propriety of the remand.

• Lloyds maintained that the indefinite prohibition against quarrying and dynamite blasting beneath the transmission lines permanently deprived it of the property's principal use, warranting full just compensation rather than a ten percent easement fee under Republic Act No. 6395.
• Lloyds argued that the inclusion of the four additional lots was legally sound, as the expanded safety zone rendered those parcels useless for its quarrying operations and posed inherent dangers to life and property.
• Lloyds contended that it was entitled to compensation for the limestone deposits, invoking Article 437 of the Civil Code and relying on Benguet Consolidated Mining v. Republic to assert that mineral rights attached to surface ownership.
• Lloyds asserted that the Court of Appeals erred in remanding the valuation issue, emphasizing that the P450.00 per square meter rate was consistent with deeds of sale and prior Supreme Court rulings involving the identical transmission project in the same locality.

• The National Power Corporation countered that its charter authorized only the acquisition of a right-of-way easement, limiting its liability to a ten percent easement fee since title remained with the landowner and agricultural use was theoretically preserved.
• The National Power Corporation disputed the inclusion of the four additional lots, arguing that the safety zone expansion lacked legal basis and was improperly tied to an unmeritorious claim for mineral compensation.
• The National Power Corporation argued that compensation for limestone deposits was unwarranted, as the Constitution vests exclusive ownership of all minerals in the State, and the landowner's quarrying permits did not confer proprietary rights to the subsurface.
• The National Power Corporation supported the remand, contending that the trial court's valuation relied exclusively on deeds of sale covering properties of different classifications and distant locations, rendering the assessment legally inadequate.

• Procedural Issues:
  • Whether the Court of Appeals correctly remanded the case to the Regional Trial Court for the redetermination of just compensation.
  • Whether the inclusion of four additional lots, not originally prayed for in the complaint, was properly adjudicated despite the absence of formal amendment to the pleadings.
• Substantive Issues:
  • Whether the landowner is entitled to full just compensation equivalent to the fair market value of the expropriated properties, rather than a ten percent easement fee under Republic Act No. 6395.
  • Whether the four additional lots covered by the expanded safety zone were properly included in the condemnation order.
  • Whether the landowner is entitled to just compensation for the limestone deposits located beneath the expropriated surface lots.

• Procedural: The Court deleted the remand order, holding that the trial court's P450.00 per square meter valuation was sufficiently anchored on comparable sales and consistent with prior Supreme Court adjudications for the same transmission project in the identical municipality. The Court found no compelling justification to prolong the proceedings. Regarding the additional lots, the Court ruled that the issue was properly tried with the National Power Corporation's implied consent. Because the trial court afforded the expropriator multiple opportunities and continuances to rebut the Committee's safety zone recommendation, and the expropriator failed to present contrary evidence, Rule 10, Section 5 of the 1997 Rules of Civil Procedure deemed the issue tried and the pleadings amended to conform to the evidence.
• Substantive: The Court held that the imposition of high-voltage transmission lines indefinitely restricted the landowner's quarrying operations, transforming the burden into a full taking under the power of eminent domain. Consequently, the landowner was entitled to the fair market value of the properties, and the ten percent easement fee limitation under Section 3A of Republic Act No. 6395 was inapplicable because the land's principal use was permanently impaired. The Court affirmed the condemnation of the four additional lots, as the mandated two-hundred-meter safety zone legally precluded dynamite blasting and quarrying, effectively depriving the owner of their use. The Court further ruled that the landowner was not entitled to compensation for the limestone deposits. The Court emphasized that Article XII, Section 2 of the Constitution vests exclusive ownership of all minerals in the State, and Article 437 of the Civil Code yields to this constitutional mandate. Benguet Consolidated was distinguished, as the mineral claim therein arose under the Philippine Bill of 1902 and constituted a vested right, unlike claims under the 1987 Constitution.

• Eminent Domain and the Nature of Taking — A right-of-way easement constitutes a taking that requires full just compensation when it imposes perpetual or indefinite restrictions that deprive the owner of the ordinary use, free enjoyment, and disposal of the property. The Court applied this doctrine to rule that high-voltage transmission lines and their mandatory safety zones permanently impair quarrying operations, thereby converting the easement into a full expropriation that mandates payment of fair market value rather than a statutory easement fee.
• Regalian Doctrine and State Ownership of Minerals — All minerals found in public and private lands belong exclusively to the State under the Constitution. Surface ownership does not confer title to subsurface minerals, and expropriation proceedings compensate only for the surface rights. The Court applied this principle to deny compensation for limestone deposits, clarifying that quarrying permits or production-sharing agreements grant only usufructuary or contractual rights, not proprietary ownership of the minerals themselves.
• Amendment of Pleadings to Conform to Evidence — Under Rule 10, Section 5 of the Rules of Court, issues not raised in the pleadings but tried with the express or implied consent of the parties are treated as if formally raised. The Court invoked this procedural doctrine to validate the inclusion of four additional lots in the condemnation order, ruling that the expropriator's failure to rebut the safety zone recommendation despite ample opportunity constituted implied consent to try the issue.

• "A true easement of right of way imposes burdens on another's property without depriving the owner of its use and enjoyment. When the burden is too cumbersome as to indefinitely restrict the owner from using the property, the easement is considered a taking within the meaning of Constitution—in which case, full just compensation, not just an easement fee, must be paid." — The Court established this threshold to distinguish between compensable easements and full expropriation, anchoring the ruling on the permanent deprivation of the landowner's quarrying rights due to safety zone restrictions and high-voltage hazards.
• "If a person is the owner of agricultural land in which minerals are discovered, his ownership of such land does not give him the right to extract or utilize the said minerals without the permission of the State to which such minerals belong." — The Court reiterated this principle from Republic v. Court of Appeals to clarify that surface title does not override the constitutional mandate of State ownership of subsurface minerals, thereby precluding compensation for limestone deposits in expropriation proceedings.

• National Power Corporation v. Gutierrez — Followed as controlling precedent to establish that the installation of high-voltage transmission lines imposes permanent limitations that indefinitely deprive landowners of normal property use, thereby constituting a taking that requires full just compensation rather than an easement fee.
• Republic v. Court of Appeals — Cited to reinforce the constitutional rule that all minerals belong to the State, and that compensation for expropriated land covers only surface rights, not the extraction or value of subsurface deposits.
• Benguet Consolidated Mining v. Republic — Distinguished on the basis of temporal and statutory context; the mineral claim therein was recognized as a vested right under the Philippine Bill of 1902, whereas claims under the 1987 Constitution are strictly subject to State ownership without vested private mineral rights.
• National Power Corporation v. Santa Loro vda. de Capin and National Power Corporation v. Villamor — Applied to reject the ten percent easement fee argument and to support judicial notice of the P450.00 per square meter valuation, as those cases involved identical transmission projects and properties in the same municipality.

• Article XII, Section 2, 1987 Constitution — Declares exclusive State ownership over all minerals, serving as the constitutional basis for denying the landowner's claim for compensation of subsurface limestone deposits.
• Article 437, Civil Code — Provides that landowners own the surface and subsurface, but the Court limited its application by noting it is subject to special laws and constitutional mandates, yielding to the State's regalian ownership of minerals.
• Section 3A, Republic Act No. 6395 — Limits compensation for transmission line easements to ten percent of market value only when the land's principal use remains unimpaired. The Court held it inapplicable where transmission lines permanently restrict quarrying operations.
• Rule 10, Section 5, 1997 Rules of Civil Procedure — Governs the amendment of pleadings to conform to evidence, invoked to justify the adjudication of the four additional lots despite their absence from the original complaint.