National Power Corporation vs. San Pedro

A right-of-way easement for transmission lines constitutes a taking under the power of eminent domain, requiring payment of just compensation equivalent to the fair market value of the property at the time of taking, not merely an easement fee, where the installation perpetually deprives the owner of the ordinary use of the land through safety hazards, usage restrictions, and diminution of marketability.

The National Power Corporation (NPC) is a government-owned-and-controlled corporation created to undertake the development of hydroelectric generation of power and the production of electricity from any and all sources, including the construction, operation, and maintenance of power plants, transmission lines, and related infrastructure. Under Republic Act No. 6395, as amended (the Revised NPC Charter), NPC is authorized to enter private property provided that the owners thereof shall be indemnified for any actual damage caused thereby. For the construction of its San Manuel-San Jose 500 KV Transmission Line and Tower No. SMJ-389, NPC negotiated with several landowners in the Municipalities of San Jose del Monte and Norzagaray, Bulacan for easement of right of way over their properties.

The National Power Corporation (NPC), a government-owned-and-controlled corporation tasked with hydroelectric power development and electricity production, undertook the construction of its San Manuel-San Jose 500 KV Transmission Line Project, requiring easement of right of way over several properties in the Municipalities of San Jose del Monte and Norzagaray, Bulacan. Among the affected properties was Lot No. 2076, a parcel of land partly agricultural and partly residential, located in Barangay Partida, Norzagaray, Bulacan, covered by Tax Declaration No. 00386 and owned by Maria Mendoza San Pedro. NPC initially negotiated with Maria, then represented by her son Vicente, and on June 19, 1997, she executed a Right of Way Grant in favor of NPC over the lot for P1,277,886.90. NPC paid her P524,635.50 for damaged improvements, and a payment voucher for the residential portion valued at P6,000,000.00 (at P600.00 per square meter) was processed.

However, the NPC Board of Directors approved Board Resolution No. 97-246, capping payment at P230.00 per square meter for the residential portion and P89.00 per square meter for the agricultural portion, based on a joint appraisal report by Cuervo Appraisal, Inc., the Development Bank of the Philippines, and the Land Bank of the Philippines, as well as fair market values established by Provincial Appraisal Committees. Maria San Pedro refused to accept the reduced offer. On January 15, 1998, NPC filed a complaint for eminent domain in the RTC of Bulacan, docketed as Civil Case No. 28-M-98, seeking to acquire easement of right of way over several lots including Lot No. 2076. Maria San Pedro filed her Answer on February 2, 1998, alleging that there had already been an agreement as to just compensation at P600.00 per square meter for the residential portion, and later claimed in an Amended Answer that NPC had resorted to deceit and trickery to induce her to grant the right of way. The RTC issued a writ of possession against her on August 10, 1998. Maria passed away on August 22, 1998, and was substituted by her heirs Vicente, Herminia, and Francisco, all surnamed San Pedro.

At the pre-trial on January 25, 1999, the parties agreed that the only issue for resolution was just compensation. The trial court appointed a committee of commissioners composed of Atty. Josephine L. Sineneng-Baltazar (Clerk of Court, as chairperson), Engr. Oscar C. Cruz (Provincial Assessor of Bulacan), and Atty. Henry P. Alog (NPC Litigation Department). The commissioners conducted an ocular inspection on May 11, 1999. On July 12, 1999, Atty. Baltazar and Engr. Cruz submitted a majority report recommending P800.00 per square meter for the residential lot and P700.00 per square meter for the agricultural lot, based on the property's location in a highly developed area, accessibility through an all-weather road, potential for full development, and the long-term effects of the expropriation on the landowners' lives, comfort, and financial condition. Atty. Alog dissented, recommending only P2,640,274.70 total — P230.00 per square meter for residential and P89.00 per square meter for agricultural — arguing that the property was principally agricultural and that only an easement fee should be paid.

The RTC rendered judgment on October 28, 1999, adopting the majority report's recommendation of P800.00 per square meter for the residential portion but fixing P499.00 per square meter for the agricultural portion, consistent with the compromise price NPC had agreed to pay the spouses Lagula for their adjoining agricultural land. The heirs moved for partial reconsideration to include the 6,565-square-meter residential portion in the dispositive, while NPC moved for reconsideration arguing it should pay only an easement fee. On June 6, 2001, the RTC granted the heirs' motion and denied NPC's, fixing just compensation at P499.00 per square meter for the 17,195-square-meter agricultural portion (P8,580,305.00) and P800.00 per square meter for the 6,565-square-meter residential portion (P5,252,000.00). NPC appealed to the Court of Appeals, which dismissed the appeal on September 28, 2005, finding the commissioners' report based on uncontroverted facts and supported by documentary evidence. The CA denied NPC's motion for reconsideration on December 22, 2005.

• Exorbitant Valuation: Petitioner argued that the just compensation fixed by the trial court, as affirmed by the CA, was exorbitant and devoid of factual and legal basis, as the majority report admitted there were no available sales data on properties within the vicinity for 1996 and 1997, the approximate time of taking.
• BIR Zonal Value as Benchmark: Petitioner contended that the BIR zonal valuation of P60.00 per square meter for residential and P30.00 per square meter for agricultural should have been given greater weight, and that respondents had not shown that the condition of adjoining properties or improvements had increased their land's economic value.
• Easement Fee Only: Petitioner maintained that, under Republic Act No. 6395 (the Revised NPC Charter), it should be made to pay only an easement fee for the right of way, not full just compensation, as the principal purpose for which the lot was devoted would not be impaired by the construction of transmission lines.
• Cuervo Appraisal as Basis: Petitioner argued that the trial court should have based its valuation on the appraisal report of Cuervo Appraisers, Inc., upon which NPC Resolution No. 97-246 was predicated, rather than on the commissioners' majority report.

• Prior Agreement on Compensation: Respondent alleged that there had already been an agreement as to just compensation for her property, specifically P600.00 per square meter for the residential portion as agreed upon in the Right of Way Grant, and that payment should be based on Provincial Appraisal Committee Resolution No. 97-005.
• Deceit and Trickery: Respondent alleged that NPC had resorted to deceit, trickery, and machination to induce her to grant the right of way by assuring her that it would also pay for the residential portion at P600.00 per square meter, only to later reduce the offer through Board Resolution No. 97-246.

• Adequacy of Just Compensation: Whether the Court of Appeals committed grave error in upholding the trial court's fixation of just compensation at P800.00 per square meter for the residential portion and P499.00 per square meter for the agricultural portion of respondents' property.
• Easement Fee vs. Just Compensation: Whether NPC should pay only an easement fee as provided under Republic Act No. 6395, as amended, rather than full just compensation for the expropriated property.

• Adequacy of Just Compensation: No. The CA committed no reversible error; the valuation was reasonable and supported by evidence on record, including the commissioners' ocular inspection, the property's location, accessibility, development potential, and the long-term effects of the expropriation.
• Easement Fee vs. Just Compensation: No. NPC must pay full just compensation, not merely an easement fee, because the right-of-way easement for transmission lines constitutes a taking under the power of eminent domain, as it perpetually deprives the owner of the ordinary use of the land.

• Adequacy of Just Compensation: The constitutional limitation of "just compensation" is the sum equivalent to the market value of the property — the price fixed by the seller in open market in the usual and ordinary course of legal action and competition, fixed at the time of the actual taking by the government. The nature and character of the land at the time of its taking is the principal criterion. The majority report of the commissioners found the property located in a highly developed area, accessible through an all-weather road, with potential for full development as shown by building projects in the vicinity, and considered the long-term effect of the expropriation on the landowners' lives, comfort, and financial condition. The commissioners also considered the tax declaration, NPC sketch plan, location plan, zoning certificates, BIR zonal valuation, and opinion values. The absence of sales data for 1996 and 1997 and the low BIR zonal values did not proscribe the commissioners and the trial court from making their own reasonable estimates, as tax values can serve as guides but cannot be absolute substitutes for just compensation. The trial court did not blindly accept the commissioners' recommendation but took into account the evidence of the parties, fixing the agricultural portion at P499.00 per square meter — consistent with the price NPC agreed to pay the spouses Lagula for adjoining agricultural land — and the residential portion at P800.00 per square meter. These valuations were near the estimates made by the Provincial Appraisal Committee (P400.00 agricultural, P600.00 residential), the commissioners' majority report (P700.00 agricultural, P800.00 residential), and the opinion values (P643.00 agricultural, P1,075.00 residential). NPC's reliance on the Cuervo Appraisers report was untenable because NPC failed to present the report as evidence; the data annexed to NPC Resolution No. 97-246 was unsigned and unauthenticated, and was self-serving. Moreover, NPC had not explained why it agreed to pay P499.00 per square meter for the spouses Lagula's agricultural land when the purported Cuervo appraisal indicated only P110.00 per square meter for unirrigated riceland along the road. As the determination of just compensation is a judicial function and the CA's factual findings are conclusive on the parties, there was no compelling reason to disturb the valuation.

• Easement Fee vs. Just Compensation: Expropriation is not limited to the acquisition of real property with a corresponding transfer of title or possession. The right-of-way easement resulting in a restriction or limitation on property rights over land traversed by transmission lines falls within the ambit of the term "expropriation." The installation of high-tension transmission lines perpetually deprives the owner of proprietary rights, as NPC imposes restrictions that no plant higher than three meters is allowed beneath the lines, danger to life and limbs cannot be discounted, and the owner continues to pay taxes on the affected portion while receiving payment only once. In this case, the commissioners observed constant loud buzzing and exploding sounds from the towers and transmission lines, the landowners' fear that the transmission lines and tower would affect their safety and health, and the slim chance that anyone would buy the remaining portions of the residential lot. These facts bring the case within the ambit of expropriation, requiring full just compensation rather than a mere easement fee.

• Just Compensation in Eminent Domain — Just compensation is the sum equivalent to the market value of the property, broadly described as the price fixed by the seller in open market in the usual and ordinary course of legal action and competition, or the fair value of the property as between one who receives and one who desires to sell it, fixed at the time of the actual taking by the government. The nature and character of the land at the time of its taking is the principal criterion. The Court applied this by affirming the RTC's valuation, which considered the property's location, accessibility, development potential, and the long-term effects of the expropriation, rather than relying solely on tax declarations or BIR zonal values.

• Right-of-Way Easement as Taking Under Eminent Domain — Expropriation is not limited to the acquisition of real property with a corresponding transfer of title or possession; a right-of-way easement that results in a restriction or limitation on property rights over land traversed by transmission lines also falls within the ambit of "expropriation." Where the installation of transmission lines perpetually deprives the owner of the ordinary use of the land — through safety hazards, usage restrictions, and diminution of marketability — the acquisition of the easement constitutes a taking requiring full just compensation, not merely an easement fee. The Court applied this doctrine by holding that the buzzing sounds, fear for safety and health, and the reduced marketability of the remaining portions brought the case within the scope of expropriation.

• Tax and Zonal Values as Guides, Not Substitutes — Tax values and BIR zonal valuations can serve as guides but cannot be absolute substitutes for just compensation. It is violative of due process to deny the owner the opportunity to prove that the valuation in tax documents is unfair or wrong, and it is repulsive to basic concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment of a court promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been presented, and after all factors essential to a fair and just determination have been judiciously evaluated. The Court applied this by rejecting NPC's argument that the low BIR zonal values should control, and by sustaining the commissioners' and trial court's reasonable estimates based on a broader evidentiary record.

• "Indeed, expropriation is not limited to the acquisition of real property with a corresponding transfer of title or possession. The right-of-way easement resulting in a restriction or limitation on property rights over the land traversed by transmission lines, as in the present case, also falls within the ambit of the term 'expropriation.'" — This passage defines the controlling doctrine that a right-of-way easement constitutes a taking under eminent domain, forming the ratio decidendi for the Court's rejection of NPC's claim that it need only pay an easement fee.

• "Tax values can serve as guides but cannot be absolute substitutes for just compensation." — This formulation, quoted from Export Processing Zone Authority vs. Dulay, articulates the principle that tax declarations and BIR zonal valuations are not conclusive of just compensation, and is frequently cited in subsequent expropriation jurisprudence.

• "It is violative of due process to deny to the owner the opportunity to prove that the valuation in the tax documents is unfair or wrong. And it is repulsive to basic concepts of justice and fairness to allow the haphazard work of a minor bureaucrat or clerk to absolutely prevail over the judgment of a court promulgated only after expert commissioners have actually viewed the property, after evidence and arguments pro and con have been presented, and after all factors and considerations essential to a fair and just determination have been judiciously evaluated." — This passage underscores the due process dimension of just compensation, explaining why courts may depart from administrative valuations in favor of judicially determined compensation based on a fuller evidentiary record.

• "The foregoing facts considered, the acquisition of the right-of-way easement falls within the purview of the power of eminent domain." — This statement, quoted from National Power Corporation vs. Aguirre-Paderanga, crystallizes the Court's conclusion that easement of right of way for transmission lines is a form of expropriation, and was applied directly to the facts of the present case.

• Export Processing Zone Authority vs. Dulay, 149 SCRA 305 (1987) — Cited for the proposition that tax values can serve as guides but cannot be absolute substitutes for just compensation, and that it is violative of due process to deny the owner the opportunity to prove that the valuation in tax documents is unfair or wrong. Followed and applied to reject NPC's reliance on low BIR zonal values.

• National Power Corporation vs. Manubay Agro-Industrial Development Corporation, 437 SCRA 60 (2004) — Cited by the CA for the principle that, considering the nature and effect of the installation of power lines, the limitations on the use of land for an indefinite period deprive the owner of its normal use, making NPC's argument that it should pay only an easement fee unpersuasive. Followed.

• National Power Corporation vs. Aguirre-Paderanga, 464 SCRA 481 (2005) — Cited for the doctrine that a right-of-way easement resulting in a restriction or limitation on property rights falls within the ambit of expropriation, and that the acquisition of such an easement constitutes a taking under the power of eminent domain. Followed and applied directly to the facts of the present case.

• National Power Corporation vs. Gutierrez — Cited within the Aguirre-Paderanga quotation for the observation that a right-of-way easement perpetually deprives defendants of their proprietary rights, as manifested by NPC's imposition that no plant higher than three meters is allowed beneath transmission lines, the danger to life and limbs, and the fact that NPC pays only once while the owner continues to pay taxes. Followed.

• Republic of the Philippines vs. PLDT — Cited for the principle that the power of eminent domain may be availed of to impose only a burden upon the owner of condemned property, without loss of title and possession, and that real property may through expropriation be subjected to an easement of right-of-way. Followed.

• National Power Corporation vs. Court of Appeals, 254 SCRA 577 (1996) — Cited for the proposition that the determination of just compensation in eminent domain cases is a judicial function and that factual findings of the CA are conclusive on the parties and reviewable only within recognized exceptions. Followed.

• Bank of the Philippine Islands vs. Court of Appeals, 441 SCRA 637 (2004) — Cited for the principle that where the valuation of the trial court as affirmed by the CA is reasonable and supported by evidence on record, there is no compelling reason to disturb the same. Followed.

• Republic Act No. 6395, as amended (Revised NPC Charter) — Authorizes NPC to enter private property provided that the owners thereof shall be indemnified for any actual damage caused thereby. NPC invoked this provision to argue it should pay only an easement fee, but the Court held that the right-of-way easement constitutes a taking requiring full just compensation under the power of eminent domain.

• Constitution of the Philippines — Power of Eminent Domain and Just Compensation — The constitutional limitation of "just compensation" requires payment equivalent to the market value of the property at the time of taking. The Court applied this standard in affirming the RTC's valuation, holding that the nature and character of the land at the time of its taking is the principal criterion.

Panganiban, C.J., Chairperson; Ynares-Santiago, Austria-Martinez, Chico-Nazario, JJ., concur.