National Power Corporation vs. Spouses Rodolfo Zabala and Lilia Baylon

Statutory provisions fixing the method or amount of just compensation, such as Section 3A of Republic Act No. 6395 limiting easement compensation to 10% of market value, are not binding on courts and serve merely as guidelines, where the determination of just compensation remains a judicial function that cannot be usurped by legislative or executive branches; furthermore, commissioners' valuation reports in eminent domain proceedings must be supported by documentary evidence (e.g., tax declarations, zonal valuations, sworn realtor declarations) to be admissible, as unsubstantiated reports constitute inadmissible hearsay.

National Power Corporation (Napocor) instituted expropriation proceedings to acquire an easement of right of way over parcels of land in Balanga City, Bataan, for its 230 KV Limay-Hermosa Transmission Lines Project. The subject property, owned by spouses Rodolfo Zabala and Lilia Baylon, consisted of 6,820 square meters. Napocor alleged that negotiations for the easement failed and that the land was classified as riceland devoted to palay cultivation. The spouses contested the taking, asserting that the property was being developed into a subdivision, that the transmission lines would endanger inhabitants and impede urban expansion, and that Napocor had not exhausted earnest efforts to purchase the needed portion directly.

• Nature of the Action: Eminent domain complaint filed by Napocor on October 27, 1994, before the Regional Trial Court (RTC), Branch 2, Balanga City, docketed as Civil Case No. 6321. Napocor sought a writ of possession to enter and construct transmission lines over the respondents' property, offering to deposit the assessed value pursuant to Presidential Decree No. 42.
• The Property: The affected portion comprised 6,820 square meters of land owned by Spouses Rodolfo Zabala and Lilia Baylon, located in Balanga City, Bataan. Napocor claimed the land was riceland devoted to palay cultivation. The spouses contended that the property was within the built-up area designated for residential, commercial, and industrial use, that they had incurred expenses for subdivision development, and that it was situated near the Roman Expressway.
• Opposition to Expropriation: On January 11, 1995, the spouses moved to dismiss the complaint, arguing that the transmission lines would endanger lives, decrease property value, and impede the city's housing expansion. They asserted that alternative routes farther from the city proper would be less injurious and more economical. They also challenged the sufficiency of the deposited amount, citing a higher assessed value in a revised tax declaration.
• Commissioners' Proceedings: On December 4, 1997, the court-appointed commissioners submitted a report recommending ₱150.00 per square meter based on an ocular inspection and interviews with locals regarding adjacent property values. Napocor objected, citing lack of documentary evidence and requesting valuation based on the time of taking. The spouses commented, seeking ₱250.00 per square meter. On February 25, 1998, the RTC recommitted the report for further substantiation.
• Final Report and Trial Court Ruling: On August 20, 2003, the commissioners submitted a Final Report recommending ₱500.00 per square meter, citing increased property values in the vicinity (subdivisions selling at ₱1,700.00 to ₱2,500.00 per square meter) and the lapse of time since the initial report. On June 28, 2004, the RTC rendered a Partial Decision granting the expropriation but fixing just compensation at ₱150.00 per square meter (adopting the 1997 recommendation rather than the 2003 Final Report), ruling that the deprivation of beneficial use entitled the owners to the actual or basic value.
• Appellate Proceedings: Napocor appealed to the Court of Appeals, arguing that Section 3A of Republic Act No. 6395 limited its liability to an easement fee not exceeding 10% of market value and that the ₱150.00 valuation lacked documentary support. On July 10, 2006, the CA affirmed the RTC decision.

• Statutory Limitation on Compensation: Napocor maintained that Section 3A of Republic Act No. 6395 limited its liability to an easement fee not exceeding 10% of the market value of the affected property, contending that since the land was devoted to rice cultivation and the transmission lines would not impair this principal purpose (with towers not even constructed on the property), respondents were not entitled to full market value.
• Lack of Documentary Support for Valuation: Napocor argued that the commissioners' reports recommending ₱150.00 and ₱500.00 per square meter were inadmissible hearsay, being based solely on ocular inspections, interviews, and unsubstantiated estimates without supporting documentary evidence such as tax declarations, zonal valuations, or sworn statements from real estate professionals.

• Higher Valuation and Development Potential: Respondents contended that the property was being developed into a subdivision, evidenced by fencing and containment with concrete hollow blocks, and that its proximity to the Roman Expressway and location within the built-up area justified a higher valuation. They pointed to neighboring subdivisions (St. Elizabeth Country Homes, Maria Lourdes, Vicarville) where lots sold for ₱1,700.00 to ₱2,500.00 per square meter, supporting the commissioners' Final Report of ₱500.00 per square meter.
• Deprivation of Beneficial Use: Respondents impliedly argued that the high-tension transmission lines deprived them of the normal use of their property, warranting compensation beyond the statutory 10% limitation and equivalent to the full market value.

• Binding Effect of Section 3A, RA 6395: Whether Section 3A of Republic Act No. 6395, which limits compensation for easements to 10% of market value, is binding on courts in eminent domain proceedings.
• Evidentiary Basis for Just Compensation: Whether the just compensation fixed by the RTC at ₱150.00 per square meter is supported by competent documentary evidence.

• Statutory Limitations on Just Compensation: Section 3A of Republic Act No. 6395 cannot restrict the constitutional power of courts to determine just compensation. The determination of just compensation is a judicial function that cannot be usurped by legislative or executive branches; statutes fixing the method or amount of compensation serve only as guidelines and are not binding. Because high-tension electric current passing through transmission lines perpetually deprives property owners of the normal use of their land, Napocor must compensate respondents for the full market value of the property, not merely an easement fee limited to 10% of such value.
• Admissibility of Commissioners' Reports: The award of ₱150.00 per square meter cannot be sustained. Commissioners' valuation reports that rely on unsubstantiated interviews, ocular inspections, and estimates without documentary support (such as tax declarations, Bureau of Internal Revenue zonal valuations, or sworn declarations of realtors) constitute inadmissible hearsay and speculative conclusions. The RTC erred in adopting the commissioners' recommendation without requiring competent documentary evidence to support the valuation.
• Time of Valuation: Upon remand, just compensation must be determined based on the fair market value of the property at the time of the filing of the complaint on October 27, 1994, or thereabouts, pursuant to Rule 67, Section 4 of the Rules of Court.

• Judicial Function in Eminent Domain — The determination of just compensation is a judicial function vested in the courts, which cannot be usurped by the legislative or executive branches. Legislative enactments or executive issuances that fix or prescribe the method of computing just compensation are not binding on courts and, at best, are treated merely as guidelines in ascertaining the amount thereof.
• Definition of Just Compensation — Just compensation is defined as the full and fair equivalent of the property taken from its owner by the expropriator; the measure is the owner's loss, not the taker's gain.
• Easement vs. Full Taking — Where an easement of right of way for high-tension electric transmission lines perpetually deprives the property owner of the normal use of the land, the taking is substantial enough to require payment of the full market value of the property, rather than a mere easement fee, even though legal title remains with the owner.
• Documentary Evidence Requirement for Commissioners' Reports — Valuation reports by commissioners in eminent domain cases must be supported by documentary evidence (e.g., tax declarations, zonal valuations, sworn statements of realtors). Reports based solely on unsubstantiated estimates, interviews, or ocular inspections constitute hearsay and should be disregarded by the trial court.

• "Legislative enactments, as well as executive issuances, fixing or providing fix the method of computing just compensation are tantamount to impermissible encroachment on judicial prerogatives. Thus they are not binding on courts and, at best, are treated as mere guidelines in ascertaining the amount of just compensation."
• "Just compensation has been defined as 'the full and fair equivalent of the property taken from its owner by the expropriator. The measure is not the taker's gain, but the owner’s loss.'"
• "The determination of just compensation in eminent domain cases is a judicial function and that any valuation for just compensation laid down in the statutes may serve only as a guiding principle or one of the factors in determining just compensation but it may not substitute the court’s own judgment as to what amount should be awarded and how to arrive at such amount."
• "Since the high-tension electric current passing through the transmission lines will perpetually deprive the property owners of the normal use of their land, it is only just and proper to require Napocor to recompense them for the full market value of their property."
• "A commissioners’ land valuation which is not based on any documentary evidence is manifestly hearsay and should be disregarded by the court."

• Export Processing Zone Authority v. Dulay, 233 Phil. 313 (1987) — Controlling precedent establishing that legislative enactments fixing just compensation are not binding on courts and constitute impermissible encroachment on judicial prerogatives.
• National Power Corporation v. Bagui, G.R. No. 164964, October 17, 2008, 569 SCRA 401 — Followed; reiterated that Section 3A of RA No. 6395 is not binding on the Court in determining just compensation.
• Republic v. Lubinao, G.R. No. 166553, July 30, 2009, 594 SCRA 363 — Followed; affirmed the judicial function doctrine in eminent domain.
• National Power Corporation v. Tuazon, G.R. No. 193023, June 29, 2011, 653 SCRA 84 — Followed; held that Napocor must pay full market value where transmission lines deprive owners of normal land use.
• National Power Corporation v. Saludares, G.R. No. 189127, April 25, 2012, 671 SCRA 266 — Followed; consistent with the ruling on full market value for easements depriving normal use.
• Republic v. Santos, 225 Phil. 29 (1986) — Cited for the rule that commissioners' land valuation without documentary evidence is manifestly hearsay.
• National Power Corporation v. Diato-Bernal, G.R. No. 180979, December 15, 2010, 638 SCRA 660 — Applied; overturned lower court rulings adopting commissioners' findings sans supporting documentary evidence.

• Section 9, Article III, Constitution — Guarantees that private property shall not be taken for public use without just compensation; basis for the judicial function to determine compensation.
• Section 3A, Republic Act No. 6395 — Provision limiting compensation for right-of-way easements to not more than 10% of market value; declared non-binding on courts and merely a guideline.
• Rule 67, Section 4, Rules of Court — Mandates that just compensation be determined based on the fair value of the property at the time of taking or filing of the complaint, whichever came first.
• Rule 67, Section 8, Rules of Court — Provides that commissioners' reports are advisory and that the court may accept, reject, or recommit them for further report of facts.

Antonio T. Carpio (Chairperson), Arturo D. Brion, Jose Portugal Perez, Estela M. Perlas-Bernabe.