National Power Corporation vs. Manalastas and Castillo

Just compensation for expropriated property is determined solely by the fair market value at the time of taking, exclusive of inflation rates, with legal interest awarded from the time of taking until full payment to compensate for delay and currency fluctuation; the State is not estopped by mistakes or erroneous recommendations made by its officials or counsel in judicial proceedings.

National Power Corporation (NPC), a government-owned and controlled corporation engaged in hydro-electric power generation, constructed 230 KV and 69 KV transmission lines on a 26,919-square-meter parcel of land owned by respondents Elizabeth Manalastas and Bea Castillo (along with their mother Celedonia and brother Mariano) sometime in 1977 to 1978. NPC entered the property without the owners' knowledge or consent, without initiating expropriation proceedings, and without paying compensation. The presence of the transmission lines prevented respondents from using the land for a planned subdivision project, causing financial loss to the family.

• NPC constructed transmission lines on respondents' land in 1977-1978 without consent, expropriation proceedings, or compensation.
• The affected area measured 26,919 square meters.
• The fair market value of the property at the time of taking was P170.00 per square meter, a fact not contested by the parties.
• Respondents originally intended to develop the land into a subdivision project but were prevented from doing so by the presence of the transmission lines.
• In July 2000, respondents (joined by their mother Celedonia and brother Mariano) filed a complaint demanding removal of the power lines and payment of damages, or alternatively, payment of fair market value at P800.00 per square meter.
• The RTC awarded just compensation factoring in the devaluation of the peso (inflation), resulting in a total award of P92,827,351.00, including 6% interest per annum for 28 years.
• The CA affirmed the RTC ruling, holding that NPC was bound by its counsel's recommendation to include the inflation factor, constituting a judicial admission.
• Celedonia and Mariano are no longer parties to the petition as the CA Decision has attained finality as to them.

• Estoppel is inoperative against the government; the inflation factor should not be included in the computation of just compensation.
• The determination of just compensation is a judicial function, and courts are therefore not bound to uphold a party's formulation of just compensation, even if recommended by counsel.
• The award of P85,850,071.00 to respondents will unjustly enrich them, as it includes inflation adjustments on top of interest.
• The RTC and CA erred in factoring the devaluation of the peso in the computation of fair market value.

• Petitioner is bound by the valuation recommended by its own counsel before the trial court, which included the inflation factor, constituting a judicial admission.
• Taking an inconsistent position on appeal should not be allowed.
• The inclusion of the inflation factor is necessary to achieve just compensation given the long delay in payment from 1978 to the time of judgment.

• Procedural: Whether the Court of Appeals erred in applying the doctrine of judicial admission or estoppel against the government based on the recommendation made by petitioner's counsel regarding the inclusion of inflation rate in the computation of just compensation.
• Substantive Issues:
  • Whether the inflation rate of the Philippine Peso should be included in the determination of just compensation for property taken for public use.
  • Whether the award of just compensation would result in unjust enrichment to the respondents.

• Procedural: The Supreme Court held that the government is not estopped by the mistakes, errors, or irregular acts of its officials and agents, including counsel. Estoppel generally finds no application against the State when it acts to rectify mistakes, irrespective of rank, to ensure efficient conduct of state affairs. Courts have the mandated duty to adjudge whether parties' submissions are correct according to law, and cannot uphold erroneous propositions merely because they were recommended by a party.
• Substantive: The Court ruled that just compensation is limited to the fair market value of the property at the time of taking (P170.00 per square meter), and the inflation rate should not be factored into the principal amount. The delay in payment is sufficiently compensated by legal interest computed from the time of taking until full payment, constituting an effective forbearance by the State. The Court imposed interest at 12% per annum from 1978 to June 30, 2013, and 6% per annum from July 1, 2013 until full satisfaction pursuant to BSP Monetary Board Circular No. 799. Additionally, the Court awarded P500,000.00 in exemplary damages and P200,000.00 in attorney's fees due to NPC's illegal occupation and failure to commence proper expropriation proceedings.

• Just Compensation — The full and fair equivalent of the property taken from the private owner by the expropriator, measured by the fair market value at the time of taking and exclusive of inflation factors, which are addressed separately through legal interest.
• Forbearance Theory — The just compensation due amounts to an effective forbearance on the part of the State, making it a proper subject of legal interest computed from the time of taking until full payment to place the owner in as good a position as before the taking occurred, without unjust enrichment.
• Estoppel Against the Government — The principle that estoppel does not apply against the State when it acts to rectify mistakes, errors, irregularities, or illegal acts of its officials and agents, regardless of rank, even if such rectification prejudices parties who received benefits from the error.

• "Just compensation is the value of the property at the time of taking that is controlling for purposes of compensation."
• "The State is not obliged to pay premium to the property owner for appropriating the latter's property; it is only bound to make good the loss sustained by the landowner, with due consideration of the circumstances availing at the time the property was taken."
• "Compensation must also be just to the public, which ultimately bears the cost of expropriation."
• "Between the taking of the property and the actual payment, legal interest/s accrue in order to place the owner in a position as good as (but not better than) the position he was in before the taking occurred."
• "The just compensation due to the landowners amounts to an effective forbearance on the part of the State—a proper subject of interest computed from the time the property was taken until the full amount of just compensation is paid—in order to eradicate the issue of the constant variability of the value of the currency over time."

• Secretary of the Department of Public Works and Highways v. Spouses Heracleo and Ramona Tecson — Controlling precedent establishing that just compensation is determined by the value at the time of taking and that legal interest compensates for delay in payment.
• Republic v. Court of Appeals — Cited for the principle that interest must be paid on just compensation from the time of taking to the time of actual payment or deposit with the court.
• Secretary of Finance v. Oro Maura Shipping Lines — Cited for the doctrine that estoppel does not apply against the State when rectifying mistakes or errors of its officials.
• Republic v. Bacas — Cited to reiterate that negligence of government representatives does not create estoppel against the Republic.
• National Power Corporation v. Samar — Cited for the principle that trial courts should disregard commissioners' recommended valuations if not based on the value at the time of taking.

• Article 2208 of the Civil Code — Governs the award of attorney's fees in cases where such would be just and equitable.
• Article 2229 of the Civil Code — Provides for exemplary or corrective damages imposed by way of example or correction for the public good.
• Rule 45 of the Rules of Court — Governs the procedure for Petition for Review on Certiorari to the Supreme Court.
• BSP Monetary Board Circular No. 799, Series of 2013 — Prescribed the six percent (6%) per annum legal interest rate effective July 1, 2013.