National Power Corporation vs. Court of Appeals

Just compensation in eminent domain is generally determined as of the date of the filing of the complaint, pursuant to Section 4 of Rule 67; the exception—valuation as of the date of taking—applies only where the expropriator proves that its own use of the property, rather than ordinary inflation, directly caused an extraordinary increase in land value, and where the initial entry was made with intent to expropriate under warrant or color of legal authority.

National Power Corporation (NAPOCOR) is a government instrumentality vested with the power of eminent domain, engaged in hydroelectric power projects including the Agus I Hydroelectric Plant in Marawi City. Macapanton Mangondato is the registered owner of a 21,995-square-meter portion of Lot 1 of subdivision plan (LRC) Psd-116159 in Marawi City, covered by Transfer Certificate of Title No. T-378-A. Proclamation No. 1354, dated December 3, 1974, reserved certain public lands in the area for NAPOCOR's hydroelectric power purposes. The dispute arose from NAPOCOR's mistaken occupation of Mangondato's private property, which it believed formed part of the public land reservation, and the protracted negotiations that followed once private ownership was acknowledged.

In 1978, NAPOCOR took possession of a 21,995-square-meter portion of Lot 1 of the subdivision plan (LRC) Psd-116159 in Marawi City, owned by Macapanton Mangondato and covered by Transfer Certificate of Title No. T-378-A. The entry was made under the mistaken belief that the property formed part of public land reserved for NAPOCOR's hydroelectric power purposes under Proclamation No. 1354. NAPOCOR had paid Marawi City a "financial assistance" of P40.00 per square meter in exchange for the city's waiver and quitclaim of any right over the property, believing the land was possessed and administered by the city.

When NAPOCOR began building its Agus I Hydroelectric Plant Project in 1979, Mangondato demanded compensation. NAPOCOR refused, insisting the property was public land and that its payment to Marawi City sufficed. Mangondato asserted that his property was duly registered in his name, that he was not privy to any agreement between NAPOCOR and Marawi City, and that any payment to the city could not be considered payment to him. More than a decade passed before NAPOCOR acceded to the fact that the property belonged to Mangondato.

Beginning in March 1990, NAPOCOR initiated efforts to appraise the property's market value. The Marawi City Appraisal Committee fixed fair market values ranging from P100 to P300 per square meter depending on classification and location. NAPOCOR's board passed a series of resolutions offering Mangondato compensation at progressively different rates: Resolution No. 90-225 (July 13, 1990) offered P100 per square meter for only 12,132 square meters plus 12% interest from 1978; Resolution No. 90-316 (August 14, 1990) reduced the base price to P40 per square meter pending further determination; and Resolution No. 91-247 (May 17, 1991) offered P100 per square meter excluding interest. NAPOCOR's own regional legal counsel, in memoranda dated January 29 and February 19, 1991, found that the property was classified as industrial, that industrial lots along the national highway in Marawi City were valued at P300 per square meter at the time of taking, and that based on recent Supreme Court decisions NAPOCOR had to pay not less than P300 per square meter.

Mangondato consistently rejected the P100 per square meter offer, insisting on at least P300 per square meter plus 12% interest from 1978. In March 1992, the parties executed a Deed of Sale of a Registered Property whereby NAPOCOR made a provisional payment of P100 per square meter without prejudice to Mangondato's pursuit of claims for just compensation and interest. Mangondato received a total of P2,199,500.00 in provisional payments. On May 25, 1992, NAPOCOR's board passed Resolution No. 92-121 authorizing its president to negotiate payment of P100 per square meter plus 12% interest from 1978, less payments already made, with the proviso that payment would be effected only after the Agus I project had been placed in operation and that it would be covered by a deed of absolute sale with quitclaim. Mangondato rejected these conditions.

On July 7, 1992, Mangondato filed Civil Case No. 605-92 before the RTC of Marawi City seeking recovery of possession, monthly rentals of P15,000 from 1978, and injunctive relief. A temporary restraining order was issued. On July 27, 1992, before the injunction incident could be resolved, NAPOCOR filed Civil Case No. 610-92, a complaint for eminent domain over the subject property. The two cases were consolidated, and the court appointed three commissioners to ascertain just compensation. Commissioner Doromal recommended P300 per square meter as of November 23, 1978, while Commissioners Alawi and Ali jointly recommended P1,000 per square meter as of 1992. On August 21, 1992, the RTC denied Mangondato's prayer for recovery of possession but ordered NAPOCOR to pay P15,000 monthly rent from 1978 to July 1992 with 12% interest per annum, and condemned the property at P1,000 per square meter effective July 1992. The Court of Appeals affirmed this decision in toto.

• Date of Valuation: Petitioner argued that the well-settled doctrine fixes just compensation at the value of the property as of the date of taking, which in this case was 1978 when NAPOCOR first took possession, not 1992 when the expropriation complaint was filed.
• Amount of Valuation: Petitioner maintained that the fair market value of the property at the time it was taken in 1978 was only P40.00 per square meter, and that the Court of Appeals erred in fixing just compensation at P1,000.00 per square meter.

• Date of Valuation: Respondent countered that the taking should be reckoned as of 1992 when NAPOCOR filed its complaint for eminent domain, not 1978, because NAPOCOR's initial entry was without intent to expropriate and was made under a mistaken belief that the property was public land.
• Amount of Valuation: Respondent argued that just compensation should be based on the value of the property as of 1992, and that the valuation of P1,000.00 per square meter as determined by the commissioners and affirmed by both lower courts was proper and supported by evidence.

• Date of Just Compensation: Whether just compensation should be computed as of the date of the filing of the expropriation complaint (1992) or the date of the taking of the property (1978).
• Valuation: Whether the Court of Appeals erred in fixing the value of just compensation at P1,000.00 per square meter instead of P40.00 per square meter.

• Date of Just Compensation: No. The general rule under Section 4, Rule 67 applies—just compensation is determined as of the date of the filing of the complaint. The exception (valuation at date of taking) does not apply because NAPOCOR failed to prove that its use of the property, rather than ordinary inflation, caused the increase in value, and because its 1978 entry lacked the intent to expropriate required for a valid "taking."
• Valuation: No. The valuation of P1,000.00 per square meter was properly determined by the commissioners and affirmed by the Court of Appeals, the factual findings being conclusive and not shown to be grossly exorbitant or attended by abuse of authority.

• Date of Just Compensation: The general rule, codified in Section 4, Rule 67 of the Revised Rules of Court, fixes just compensation as of the date of the filing of the complaint. This rule ordinarily applies because the time of taking normally coincides with the filing of the complaint. An exception was recognized in Provincial Government of Rizal vs. Caro de Araullo and subsequent cases, where the Court valued the property as of the date of taking to prevent the owner from recovering unearned increments resulting from the public improvement for which the land was expropriated. The exception thus applies where the government's use of the property directly caused an extraordinary increase in value, so that allowing the owner to benefit from that increment would be unfair to the expropriator. In the instant case, NAPOCOR claimed the benefit of this exception but bore the burden of proving that its occupancy and use—not ordinary inflation and general increase in land values—was the direct cause of the increase from 1978 to 1992. It failed to adduce such evidence. Moreover, NAPOCOR's 1978 entry did not constitute a "taking" for eminent domain purposes. The Court defined the elements of "taking" in Republic vs. Vda. de Castellvi: (1) the expropriator must enter private property; (2) the entrance must be for more than a momentary period; (3) the entry must be under warrant or color of legal authority; (4) the property must be devoted to public use or injuriously affected; and (5) the utilization must oust the owner and deprive him of all beneficial enjoyment. NAPOCOR's 1978 entry failed the third element—it was made without intent to expropriate and not under warrant or color of legal authority, because NAPOCOR believed the property was public land. Only in 1992, when NAPOCOR filed its complaint for eminent domain after Mangondato sued for recovery of possession, did the intent to expropriate become manifest. The Court also noted that NAPOCOR had effectively repudiated the deed of sale it executed with Mangondato when it passed Resolution No. 92-121 conditioning payment on the project's operation and requiring a quitclaim, making expropriation necessary only at that point. Citing Noble vs. City of Manila, the Court underscored that expropriation lies only when made necessary by the opposition of the owner to the sale or by the lack of agreement on price.

• Valuation: The determination of just compensation in eminent domain is a judicial function, as held in National Power Corporation vs. Jocson. Factual findings of the Court of Appeals are conclusive on the parties and reviewable only within recognized exceptions, none of which obtained here. The court-appointed commissioners did not abuse their authority or misappreciate the evidence. Commissioner Ali, from the Office of the Register of Deeds, was regarded as an expert whose opinion on valuation could not be lightly brushed aside. Commissioner Doromal's recommendation of P300 per square meter differed from the other two commissioners only because it was based on the 1978 valuation. The prevailing market value was only one of several determinants used by the commissioners. The amount fixed by the Court of Appeals was not grossly exorbitant, and no sufficient basis was shown to disturb it.

• Date of Just Compensation — General Rule and Exception — The general rule is that just compensation is determined as of the date of the filing of the expropriation complaint, pursuant to Section 4, Rule 67. The exception, first articulated in Provincial Government of Rizal vs. Caro de Araullo, fixes the value as of the date of taking when the government's use of the property directly caused an extraordinary increase in value, so as to prevent the owner from recovering unearned increments attributable to the public improvement. The expropriator bears the burden of proving that its use—not ordinary inflation—caused the increase. In this case, the general rule was applied because NAPOCOR failed to meet that burden and because its 1978 entry lacked the requisite intent to expropriate.

• Elements of "Taking" in Eminent Domain — As defined in Republic vs. Vda. de Castellvi, "taking" requires: (1) the expropriator enters a private property; (2) the entrance is for more than a momentary period; (3) the entry is under warrant or color of legal authority; (4) the property is devoted to public use or injuriously affected; and (5) the utilization ousts the owner and deprives him of all beneficial enjoyment of the property. The third element—entry under warrant or color of legal authority with intent to expropriate—was absent in NAPOCOR's 1978 occupation, which was made under the mistaken belief that the land was public property.

• Expropriation as a Last Resort — Expropriation lies only when made necessary by the opposition of the owner to the sale or by the lack of any agreement as to the price, as held in Noble vs. City of Manila. Where a valid and subsisting contract for purchase exists between the owner and the expropriator, there is no basis for expropriation. In this case, NAPOCOR's repudiation of its deed of sale with Mangondato through Resolution No. 92-121, coupled with Mangondato's disagreement, made expropriation necessary only in 1992.

• "If We decree that the fair market value of the land be determined as of 1978, then We would be sanctioning a deceptive scheme whereby NAPOCOR, for any reason other than for eminent domain would occupy another's property and when later pressed for payment, first negotiate for a low price and then conveniently expropriate the property when the landowner refuses to accept its offer claiming that the taking of the property for the purpose of eminent domain should be reckoned as of the date when it started to occupy the property and that the value of the property should be computed as of the date of the taking despite the increase in the meantime in the value of the property." — This passage, quoted from the Court of Appeals' decision and adopted by the Supreme Court, articulates the policy rationale against allowing a government entity to benefit from its own wrongful occupation by backdating the valuation to the time of unauthorized entry.

• "A number of circumstances must be present in the 'taking' of property for purposes of eminent domain: (1) the expropriator must enter a private property; (2) the entrance into private property must be for more than a momentary period; (3) the entry into the property should be under warrant or color of legal authority; (4) the property must be devoted to a public use or otherwise informally appropriated or injuriously affected; and (5) the utilization of the property for public use must be in such a way to oust the owner and deprive him of all beneficial enjoyment of the property." — This is the canonical formulation of the elements of "taking" in eminent domain, originally from Republic vs. Vda. de Castellvi, reproduced in this decision and frequently cited in subsequent jurisprudence.

• "Expropriation lies only when it is made necessary by the opposition of the owner to the sale or by the lack of any agreement as to the price." — Quoted from Noble vs. City of Manila, this principle establishes that eminent domain is a remedy of last resort, unavailable where a valid purchase agreement subsists between the parties.

• Provincial Government of Rizal vs. Caro de Araullo, 58 Phil. 308 (1933) — Established the exception to the general rule on date of just compensation, holding that owners have no right to recover unearned increments resulting from the public improvement for which the land was taken. Followed and distinguished in this case; the exception was held inapplicable because NAPOCOR failed to prove its use caused the increase in value.

• Municipality of La Carlota vs. The Spouses Felicidad Baltazar and Vicente Gan, 45 SCRA 235 (1972) — Articulated the justification for the exception: the owner is paid what he is entitled to as of the date of taking, preventing injustice to both owner and expropriator. Cited to explain the rationale behind the exception that NAPOCOR invoked but failed to satisfy.

• Republic vs. Vda. de Castellvi, 58 SCRA 336 (1974) — Defined the five elements of "taking" in eminent domain. Applied to determine that NAPOCOR's 1978 entry did not constitute a valid taking because it lacked entry under warrant or color of legal authority with intent to expropriate.

• Noble vs. City of Manila, 67 Phil. 1 (1938) — Held that expropriation lies only when necessary due to the owner's opposition to a sale or lack of agreement on price. Applied to show that NAPOCOR's repudiation of its deed of sale with Mangondato made expropriation necessary only in 1992.

• National Power Corporation vs. Jocson, 206 SCRA 520 (1992) — Held that the determination of just compensation in eminent domain is a judicial function. Cited to support the Court's deference to the commissioners' findings and the Court of Appeals' factual conclusions.

• Section 4, Rule 67 (now Rule 67), Revised Rules of Court — Provides that the court may enter an order of condemnation declaring that the plaintiff has a lawful right to take the property upon payment of just compensation "to be determined as of the date of the filing of the complaint." This provision establishes the general rule that just compensation is reckoned from the date of filing the expropriation complaint, which the Court applied in this case.

Narvasa, C.J., Davide, Jr., Melo, and Francisco, JJ., concurred.