National Power Corporation vs. Ibrahim

Where the government enters private property without legal authority or intent to expropriate, the "taking" for purposes of computing just compensation is reckoned from the time the owner discovered the occupation and demanded payment, or when the expropriation suit was filed, not from the date of the initial illegal entry.

In 1978, the National Power Corporation constructed underground tunnels 115 meters beneath several parcels of land in Lanao del Sur to siphon water from Lake Lanao for its Agus hydroelectric projects. The construction was executed without the knowledge, consent, or the institution of expropriation proceedings against the registered owners. The landowners only discovered the tunnels in July 1992, a fact confirmed by NAPOCOR in November 1992. Upon discovery, the owners demanded NAPOCOR vacate and pay damages, which NAPOCOR refused, asserting the tunnels constituted a government project subject to easement and that the owners were not deprived of the surface's beneficial use.

• The Properties and the Tunnels: Respondent Ibrahim and his co-heirs owned Lots 1, 2, and 3 (totaling 70,000 sqm) in Lanao del Sur. In 1978, NAPOCOR took possession of the sub-terrain area and constructed underground tunnels for its Agus hydroelectric projects without the respondents' knowledge or consent.
• Discovery and Demand: The existence of the tunnels was discovered in July 1992 and confirmed by NAPOCOR in November 1992. On October 7, 1992, respondents demanded NAPOCOR vacate and pay damages, but NAPOCOR refused.
• Deprivation of Use: In September 1992, respondent Omar Maruhom's request for a permit to construct a motorized deep well on the property was denied by the Marawi City Water District due to the danger posed by the tunnels. In March 1995, respondents' loan application using the land as collateral was rejected by the Amanah Islamic Bank because the tunnels constituted an encumbrance.
• Lower Court Findings: The RTC found that the tunnels endangered lives and property given Marawi City's location in an area of local volcanic and tectonic activity, and that the construction deprived respondents of the lawful use of their land and considerably reduced its value.

• No Entitlement to Just Compensation: Petitioner argued that respondents were not deprived of the beneficial use of their property, citing the continued residence of one respondent on the surface, and asserted that respondents' right to the subsoil extends only to what is necessary for their practical utility.
• Valuation Date: Petitioner contended that assuming just compensation is due, the valuation should be based on the property's value in 1978, the year the tunnels were constructed, rather than the value at the time of the filing of the complaint.

• Ownership of Subsoil: Respondents maintained that as owners of the land, they also own the subsoil pursuant to Article 437 of the Civil Code.
• Deprivation of Beneficial Use: Respondents argued that the tunnels practically deprived them of the normal beneficial use of their property, as evidenced by the denial of a deep well permit and the rejection of a loan application using the land as collateral.
• Valuation Date: Respondents asserted that the valuation should be reckoned as of 1992, when they discovered the tunnels and demanded payment, because NAPOCOR's entry in 1978 was without legal authority or intent to expropriate.

• Entitlement to Just Compensation: Whether respondents are entitled to just compensation for the underground tunnels constructed by NAPOCOR beneath their property.
• Valuation Date: Whether the just compensation should be computed based on the value of the property at the time of the taking in 1978 or at the time of the filing of the complaint in 1992.

• Entitlement to Just Compensation: Respondents are entitled to full just compensation. Ownership of land extends to the surface and everything under it pursuant to Article 437 of the Civil Code. The construction of the tunnels without consent or expropriation proceedings violated respondents' due process rights. Because the nature of the easement practically deprives the owners of the normal beneficial use of the property—preventing them from digging deep wells and using the land as loan collateral—NAPOCOR is liable for full compensation, not merely an easement fee.
• Valuation Date: Just compensation must be computed as of 1992. The general rule is that just compensation is determined as of the date of the filing of the complaint. While an exception allows valuation at the time of taking, "taking" requires that the entry be under warrant or color of legal authority. NAPOCOR's 1978 entry was without legal authority or intent to expropriate, having been done under the mistaken belief the land was public domain. To allow valuation as of 1978 would sanction a deceptive scheme allowing the government to occupy property illegally and later expropriate it at a lower price. Thus, the valuation was rightly fixed at the time of discovery and demand in 1992.

• Indivisibility of Property Rights — The owner of a parcel of land owns its surface and everything under it; rights over the land are indivisible, requiring a categorical classification. Applied to hold that respondents own the sub-terrain portion where the tunnels were built.
• Elements of "Taking" in Eminent Domain — Taking requires: (1) the expropriator must enter a 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; and (5) the utilization must oust the owner and deprive him of all beneficial enjoyment. Applied to rule that NAPOCOR's 1978 entry was not a valid "taking" because it lacked the element of entry under color of legal authority.
• Determination of Valuation Date — The general rule is that just compensation is the value of the property as of the date of the filing of the complaint. The exception is when the property is devoted to public use causing an extraordinary increase in value, where the date of taking is used to prevent the owner from recovering unearned increments. Applied to hold that NAPOCOR's illegal entry did not trigger the exception, and the valuation date should be the time of filing/discovery.

• "The owner of a parcel of land is the owner of its surface and of everything under it, and he can construct thereon any works or make any plantations and excavations which he may deem proper, without detriment to servitudes and subject to special laws and ordinances." — Articulating the principle of indivisible ownership extending to the subsoil under Article 437 of the Civil Code.
• "Where the owner would be given undue incremental advantages arising from the use to which the government devotes the property expropriated... [the exception applies]. In the instant case, however, it is difficult to conceive of how there could have been an extra-ordinary increase in the value of the owner’s land arising from the expropriation..." — Distinguishing the exception to the valuation date rule.
• "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... claiming that the taking of the property... should be reckoned as of the date when it started to occupy the property..." — Quoting Mangondato to emphasize that illegal entry cannot be used to fix a lower valuation date.

• Republic of the Philippines v. Court of Appeals, G.R. No. L-43938 (1988) — Followed. Established that rights over land are indivisible and the owner of the surface also owns everything underneath, precluding a split classification of surface and sub-surface rights.
• National Power Corporation v. Court of Appeals and Macapanton Mangondato, G.R. No. 113194 (1996) — Followed. Served as the primary basis for ruling that when entry is without legal authority, the date of taking is not the date of illegal entry but the date of discovery or filing of complaint; also used to affirm the valuation of ₱1,000 per square meter based on adjacent properties.
• Provincial Government of Rizal v. Caro de Araullo — Distinguished. Established the exception that valuation should be at the time of taking to prevent owners from recovering unearned increments from public improvements; distinguished because NAPOCOR's tunnels did not cause an extraordinary increase in land value.

• Article 437, Civil Code — Provides that the owner of a parcel of land is the owner of its surface and everything under it. Applied to affirm respondents' ownership of the sub-terrain area occupied by NAPOCOR's tunnels.
• Section 4, Rule 67, Rules of Court — Provides that just compensation is to be determined as of the date of the filing of the complaint. Applied as the general rule for determining the valuation date, with the exception (valuation at time of taking) held inapplicable due to NAPOCOR's lack of legal authority.
• Article III, Section 9, 1987 Constitution — Mandates that private property shall not be taken for public use without just compensation. Applied to underpin the requirement that respondents be paid for the taking of their property.

Reynato S. Puno, Angelina Sandoval-Gutierrez, Renato C. Corona, Cancio C. Garcia.