National Power Corporation vs. Court of Appeals

When an entity vested with the power of eminent domain renders private property uninhabitable or useless to the owner through its operations, a compensable taking is deemed complete even without formal expropriation proceedings, and the entity must pay just compensation for the entire property affected. The dismissal of an expropriation complaint by the plaintiff does not automatically extinguish the landowner's counterclaim for damages, which may be litigated in the same action.

Petitioner National Power Corporation ("NPC") is a public corporation created under Republic Act No. 6395, as amended, to generate and transmit electric power nationwide, and is authorized by law to acquire property and exercise the right of eminent domain. Private respondent Antonino Pobre owned a 68,969-square-meter property in Barangay Bano, Municipality of Tiwi, Albay, which he had been developing since 1963 as a resort-subdivision called "Tiwi Hot Springs Resort Subdivision." The subdivision plan was approved by the Court of First Instance of Albay on 12 January 1966, and Pobre began advertising and selling lots in 1969. On 4 August 1965, the Commission on Volcanology certified the presence of thermal mineral water and steam beneath the property, suitable for domestic and potentially commercial or industrial use — a finding that would later prove relevant to NPC's geothermal interests in the area.

NPC's involvement with Pobre's property occurred in three stages. The first was on 18 February 1972, when Pobre leased to NPC for one year eleven lots from the approved subdivision plan. The second was sometime in 1977, when NPC filed its first expropriation case against Pobre to acquire an 8,311.60-square-meter portion of the property. On 23 October 1979, the trial court ordered the expropriation of those lots upon NPC's payment of ₱25 per square meter, totaling ₱207,790. NPC then began drilling operations and construction of steam wells. While the first expropriation case was pending, NPC dumped waste materials beyond the site agreed upon with Pobre, altering the topography of portions of the property. NPC did not act on Pobre's complaints and continued dumping.

The third instance was on 1 September 1979, when NPC filed its second expropriation case to acquire an additional 5,554 square meters for the construction and maintenance of Naglagbong Well Site F-20, pursuant to Proclamation No. 739 and Republic Act No. 5092. NPC immediately deposited ₱5,546.36 with the Philippine National Bank, representing 10% of the total market value of the lots covered by the second expropriation. On 6 September 1979, the trial court issued a writ of possession, and NPC entered the 5,554-square-meter lot.

On 10 December 1984, Pobre filed a "motion to dismiss/answer" to the second expropriation complaint, claiming NPC had damaged his property and praying for just compensation for all affected lots and for damages. This pleading was served on NPC, with a certain Divina Cerela receiving it on NPC's behalf. On 2 January 1985 — more than five years after filing the second expropriation complaint — NPC filed its own motion to dismiss on the ground that it had found an alternative site and had already abandoned the project in 1981 due to Pobre's opposition. On 8 January 1985, the trial court granted NPC's motion to dismiss but allowed Pobre to adduce evidence on his claim for damages, admitting Pobre's exhibits because NPC failed to object. NPC did not move for reconsideration of this order within the reglementary period, opposing it only on 27 May 1985. On 30 August 1985, the trial court ordered the case submitted for decision after NPC failed to appear and present its evidence. NPC's petition for certiorari with the Intermediate Appellate Court was dismissed on 12 February 1987, and the trial court admitted all of Pobre's exhibits on 27 March 1987.

The trial court found that NPC's geothermal operations — including steam wells, nag wells, power plants, power lines, and canals — had hemmed in Pobre's property, generating noise, water, air, and land pollution that caused "permanent injury" to the resort-subdivision. The construction and operation of the geothermal plants drastically changed the topography, making the property no longer viable as a resort-subdivision. Chemicals emitted by the plants damaged natural resources and endangered residents' lives. The trial court determined that NPC had not only taken the 8,311.60-square-meter portion previously expropriated but had rendered the entire remaining 68,969-square-meter property useless as a resort-subdivision and useful only to NPC. The trial court found NPC in bad faith, citing its five-year delay in moving for dismissal, its failure to act on Pobre's pleas to abate damage, and its singling out of Pobre's property for piecemeal expropriation when other properties could have been used. The trial court fixed just compensation at ₱50 per square meter, totaling ₱3,448,450, a valuation NPC failed to contest. The Court of Appeals affirmed this decision but deleted the ₱150,000 attorney's fees award for failure to properly plead it.

• Jurisdiction and Grave Abuse of Discretion: NPC argued that the Court of Appeals erred in not annulling the trial court's decision for having been rendered with grave abuse of discretion and without jurisdiction.
• Taking of the Entire Property: NPC contended that the Court of Appeals erred in holding that NPC had "taken" the entire property of Pobre, asserting that it did not take the full 68,969 square meters.
• Exclusion of Previously Expropriated Portion: Assuming arguendo that there was a taking of the entire property, NPC argued that the 8,311.60-square-meter portion it had previously expropriated and paid for should have been excluded from the compensation award.
• Amount of Just Compensation: NPC challenged the fairness of the ₱3,448,450 valuation with interest from 6 September 1979, arguing instead that just compensation should be fixed at ₱25 per square meter as previously mutually agreed upon by the parties.
• Automatic Dismissal Under Rule 17: NPC maintained that under Section 1, Rule 17 of the 1964 Rules of Court, as plaintiff it had the right to move for automatic dismissal of its complaint before the defendant served an answer or motion for summary judgment, and that this dismissal should have carried with it the dismissal of Pobre's counterclaim for damages.
• Total Reversal: NPC prayed for the total setting aside of the trial court's decision.

• Procedural Dismissal: Whether NPC, as plaintiff in an expropriation case, had the right to automatic dismissal of its complaint under Section 1, Rule 17 of the 1964 Rules of Court, and whether such dismissal should have extinguished Pobre's counterclaim for damages.
• Compensable Taking: Whether NPC's geothermal operations, which rendered Pobre's entire 68,969-square-meter property uninhabitable as a resort-subdivision, constituted a compensable "taking" of the entire property despite the absence of formal expropriation proceedings for the whole.
• Exclusion of Previously Expropriated Portion: Whether the 8,311.60-square-meter portion previously expropriated and paid for should be excluded from the 68,969-square-meter property for which just compensation was awarded.
• Valuation and Interest: Whether the just compensation fixed at ₱50 per square meter (₱3,448,450 total) with 6% legal interest from 6 September 1979 is just and fair, or whether it should have been fixed at ₱25 per square meter as previously agreed.
• Damages: Whether temperate and exemplary damages were properly awardable in addition to just compensation.

• Procedural Dismissal: No. Section 1, Rule 17 of the 1964 Rules of Court does not apply to expropriation cases governed by Rule 67; in eminent domain proceedings, dismissal of the complaint is subject to court approval and does not foreclose the landowner's claim for damages, which may be litigated in the same action.
• Compensable Taking: Yes. When an entity with eminent domain authority renders private property uninhabitable through its operations, a compensable taking is deemed complete even without formal expropriation, entitling the landowner to just compensation for the entire property affected.
• Exclusion of Previously Expropriated Portion: No. The 68,969 square meters represent the remaining lots after Pobre had already sold other lots from the original 141,300-square-meter property; Pobre no longer claimed damages for lots he had previously sold, and NPC failed to object to the identification of the lots comprising the 68,969-square-meter property.
• Valuation and Interest: Yes. The ₱50-per-square-meter valuation is reasonable for an established resort-subdivision, and NPC failed to contest it before the trial court; 6% legal interest per annum accrues from 6 September 1979, the date of the writ of possession, until full payment.
• Damages: Yes. Temperate damages of ₱50,000 and exemplary damages of ₱100,000 were properly awarded; moral damages and attorney's fees were denied for failure to plead and appeal them, respectively.

• Procedural Dismissal: Section 1, Rule 17 of the 1964 Rules of Court, which allowed a plaintiff to dismiss an action as a matter of right before service of the answer or motion for summary judgment, was not intended to supplement Rule 67 governing expropriation cases. In eminent domain proceedings under the 1964 Rules, the defendant filed a motion to dismiss in lieu of an answer under Section 3 of Rule 67, making the procedural framework distinct from ordinary civil actions. Moreover, Pobre had already filed and served his "motion to dismiss/answer" on 10 December 1984 — before NPC filed its own motion to dismiss on 2 January 1985 — which would have taken the case outside Section 1, Rule 17 even assuming its applicability. In expropriation cases, there is no plaintiff's matter-of-right dismissal because the landowner may have already suffered damages at the start of the taking; dismissal is subject to court approval and conditions, including reservation of the defendant's right to recover damages. The trial court's 8 January 1985 Order reserving Pobre's right to prove his claim had become final due to NPC's failure to move for reconsideration within the reglementary period, and NPC's belated opposition — raised for the first time before the Supreme Court — was barred by rules of fair play and due process.

• Compensable Taking: The factual findings of the trial and appellate courts — binding on the Supreme Court under Rule 45, which permits only questions of law — established that NPC's geothermal operations caused permanent injury to Pobre's property through noise, water, air, and land pollution, rendering it uninhabitable as a resort-subdivision. The property became worthless to Pobre and useful only to NPC. Citing United States vs. Causby, where the U.S. Supreme Court held that rendering private property uninhabitable by an entity with eminent domain power constitutes a completed taking, the Court found that NPC had constructively taken the entire 68,969-square-meter property. Since restoration of possession was no longer feasible, the only remedy was payment of just compensation. NPC appropriated the property without instituting expropriation proceedings for the lots outside the 5,554-square-meter portion, and its dismissal of the second expropriation complaint after five years of damaging the property demonstrated utter disregard for Pobre's rights. The case thus ceased to be an action for expropriation and became a simple case for recovery of damages, making the procedural mechanisms for ascertaining just compensation (such as trial before commissioners) dispensable, as the government itself initially violated procedural requirements.

• Exclusion of Previously Expropriated Portion: The trial court's 30 October 1987 Order clarified that the property originally totaled 141,300 square meters, which Pobre converted into a resort-subdivision and sold to the public. The 68,969 square meters represented only the remaining lots, and Pobre no longer claimed damages for lots he had previously sold. Pobre identified the lots forming the 68,969-square-meter property in court, and NPC had the opportunity to object but failed to do so. The factual findings on the total land area damaged were therefore undisturbed.

• Valuation and Interest: The ₱50-per-square-meter valuation was reasonable given that the property was already an established resort-subdivision. NPC failed to contest this valuation before the trial court and could not now challenge it on appeal. The total just compensation was fixed at ₱3,448,450. Pursuant to established jurisprudence, the landowner is entitled to legal interest on the price of the land from the time of taking until full payment; the Court fixed this at 6% per annum, accruing from 6 September 1979 — the date the trial court issued the writ of possession to NPC — until full payment.

• Damages: Moral damages could not be awarded because Pobre did not assert his right to them, and attorney's fees could not be awarded because Pobre did not appeal the Court of Appeals' deletion of that award. However, temperate damages of ₱50,000 were proper under Article 2224 of the Civil Code, as Pobre had already established his resort-subdivision with encouraging prospects before NPC permanently damaged the property, and the pecuniary loss from the destruction of that prospect, while certain in fact, could not be proved with certainty in amount. Exemplary damages of ₱100,000 were imposed under Article 2229 of the Civil Code by way of example or correction for the public good, given NPC's appalling abuse of its eminent domain authority — its piecemeal expropriation, five-year delay in dismissing the complaint, and disregard for Pobre's property rights.

• Constructive Taking in Eminent Domain — A compensable taking is deemed complete when an entity with the power of eminent domain renders private property uninhabitable or useless to the owner through its operations, even without formal expropriation proceedings or physical occupation of the entire property. The Court applied this doctrine from United States vs. Causby (328 U.S. 256 [1946]) to hold that NPC's geothermal operations, which permanently damaged Pobre's resort-subdivision, constituted a taking of the entire 68,969-square-meter property entitling Pobre to just compensation.

• Dismissal of Expropriation Complaint Does Not Foreclose Landowner's Damages Claim — In expropriation cases, the plaintiff's right to dismiss the complaint is subject to court approval and conditions, unlike ordinary civil actions where dismissal may be a matter of right before the answer is served. The dismissal, withdrawal, or abandonment of an expropriation case cannot be made arbitrarily and does not extinguish the defendant's right to have damages ascertained, which may be litigated either in the same action or in a separate proceeding. The Court held that Rule 67, not Section 1, Rule 17 of the 1964 Rules of Court, governs dismissal in expropriation cases.

• Binding Effect of Factual Findings of Trial and Appellate Courts — Factual findings of the trial court, particularly when affirmed by the Court of Appeals, are generally binding on the Supreme Court. Under Rule 45, a petition for review may raise only questions of law, not questions of fact. The Court upheld the lower courts' findings on the extent of damage to Pobre's property and the valuation of just compensation.

• Legal Interest on Just Compensation — The landowner is entitled to legal interest on the price of the land from the time of taking until full payment. The Court fixed the legal interest at 6% per annum, accruing from the date of the writ of possession (6 September 1979) until full payment, consistent with prior jurisprudence on expropriation cases.

• Temperate and Exemplary Damages in Eminent Domain Abuses — Temperate damages under Article 2224 of the Civil Code may be awarded when a party has suffered some pecuniary loss that cannot be proved with certainty. Exemplary or corrective damages under Article 2229 may be imposed by way of example or correction for the public good, in addition to other damages, to deter abuse of eminent domain authority.

• "In expropriation cases, there is no such thing as the plaintiff's matter of right to dismiss the complaint precisely because the landowner may have already suffered damages at the start of the taking. The plaintiff's right in expropriation cases to dismiss the complaint has always been subject to court approval and to certain conditions." — This passage articulates the ratio decidendi on the procedural issue: that the automatic dismissal rule under Section 1, Rule 17 does not apply to expropriation cases, and that the landowner's right to recover damages survives the plaintiff's dismissal.

• "In this case, we agree with the trial and appellate courts that it is no longer possible and practical to restore possession of the Property to Pobre. The Property is no longer habitable as a resort-subdivision. The Property is worthless to Pobre and is now useful only to NPC. Pobre has completely lost the Property as if NPC had physically taken over the entire 68,969 square-meter Property." — This passage defines the Court's application of the constructive taking doctrine, establishing that rendering property uninhabitable constitutes a compensable taking equivalent to physical appropriation.

• "The lesson in this case must not be lost on entities with eminent domain authority. Such entities cannot trifle with a citizen's property rights. The power of eminent domain is an extraordinary power they must wield with circumspection and utmost regard for procedural requirements." — This passage states the corrective purpose of the exemplary damages award and serves as a cautionary principle for entities exercising delegated eminent domain power.

• United States vs. Causby, 328 U.S. 256 (1946) — U.S. Supreme Court precedent cited as controlling authority for the proposition that rendering private property uninhabitable by an entity with eminent domain power constitutes a completed, compensable taking. The Court applied this principle directly to NPC's geothermal operations.
• National Housing Authority vs. Heirs of Isidro Guivelondo, G.R. No. 154411, 19 June 2003, 404 SCRA 389 — Cited as recent precedent holding that a government agency cannot initiate expropriation, seize property, and then abandon proceedings without liability. The Court relied on this case to condemn NPC's arbitrary dismissal of its expropriation complaint after damaging Pobre's property.
• Metropolitan Water District vs. De Los Angeles, 55 Phil. 776 (1931) — Cited for the rule that dismissal of an expropriation case does not foreclose the defendant's right to recover damages, which may be litigated in the same or a separate action.
• Republic of the Philippines vs. Baylosis, 109 Phil. 580 (1960) — Cited in support of the proposition that the plaintiff's right to dismiss an expropriation complaint is subject to court approval and conditions.
• Amigable vs. Cuenca, 150 Phil. 422 (1972) — Cited for the principle that when the government takes property without expropriation and devotes it to public use, the property owner may demand just compensation after many years, and for the rule on legal interest from the time of taking.
• BA Finance Corporation vs. Co, G.R. No. 105751, 30 June 1993, 224 SCRA 163 — Cited to explain the scope and operation of Section 1, Rule 17 of the 1964 Rules of Court regarding automatic dismissal by the plaintiff, which the Court held inapplicable to expropriation cases.
• Go vs. Cruz, G.R. No. 58986, 17 April 1989, 172 SCRA 247 — Cited for the rule that a plaintiff loses the right to automatic dismissal once the defendant has served the answer or motion for summary judgment before the plaintiff files the notice of dismissal.
• National Power Corporation vs. Court of Appeals, 214 Phil. 583 (1984) — Cited as authority for fixing the legal interest at 6% per annum in expropriation cases, accruing from the time of taking until full payment.

• Section 1, Rule 17, 1964 Rules of Court — Governed dismissal of actions by the plaintiff as a matter of right before service of the answer or motion for summary judgment. The Court held this provision inapplicable to expropriation cases, which are governed by Rule 67, and noted that the 1997 Rules of Civil Procedure abrogated this exceptional right of automatic dismissal.
• Rule 67, 1964 Rules of Court — Governed eminent domain proceedings. Section 3 required the defendant to file a single motion to dismiss in lieu of an answer, presenting all objections and defenses to the taking. The Court applied this rule to determine that Pobre's "motion to dismiss/answer" served the function of an answer under expropriation procedure, defeating NPC's claim to automatic dismissal.
• Section 9, Article III, 1987 Constitution — Provides that private property shall not be taken for public use without just compensation. The Court invoked this constitutional mandate to support its ruling that NPC must pay just compensation for the entire property it had rendered useless.
• Article 2224, Civil Code — Authorizes temperate or moderate damages, more than nominal but less than compensatory, when a party has suffered some pecuniary loss that cannot be proved with certainty. Applied to award ₱50,000 in temperate damages for Pobre's lost prospect of developing his resort-subdivision.
• Article 2229, Civil Code — Authorizes exemplary or corrective damages imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated, or compensatory damages. Applied to award ₱100,000 in exemplary damages against NPC for its abuse of eminent domain authority.
• Republic Act No. 6395 — NPC's charter, authorizing it to generate and transmit electric power nationwide and to acquire property and exercise the right of eminent domain. Established NPC's delegated authority whose abuse was at issue in this case.
• Proclamation No. 739 — Declared the "Tiwi Geothermal Reservation," pursuant to which NPC sought to acquire the 5,554-square-meter portion for the Naglagbong Well Site F-20 project.
• Republic Act No. 5092 — Promoted and regulated the exploration, development, exploitation, and utilization of geothermal energy, under which NPC's geothermal project in Tiwi was authorized.

Davide, Jr., C.J. (Chairman), Quisumbing, Ynares-Santiago, and Azcuna, JJ., concurred.