National Power Corporation vs. The Honorable Court of Appeals

A government-owned and controlled corporation operating a dam is liable under Article 2176 of the New Civil Code for quasi-delict when its failure to maintain the prescribed maximum lake elevation and to erect and maintain warning benchmarks proximately causes flooding damage to neighboring fishponds; res ipsa loquitur may supply the inference of negligence where the instrumentality is under its exclusive management and the accident would not ordinarily occur with proper care. Actual or compensatory damages require proof with reasonable certainty; absent such proof, temperate or moderate damages may be awarded under Articles 2224 and 2225.

The National Power Corporation (NPC) is a government-owned and controlled corporation created under Commonwealth Act No. 120, as amended, and tasked with developing hydroelectric power and transmitting electricity nationwide. On 15 November 1973, the Office of the President issued Memorandum Order No. 398, prescribing measures to preserve the Lake Lanao Watershed, enforce the reservation of areas around the lake below 702 meters elevation, and directing NPC to build the Agus Regulation Dam at the mouth of the Agus River in Lanao del Sur at a normal maximum water level of 702 meters. Private respondents Hadji Abdul Carim Abdullah, Caris Abdullah, Hadji Ali Langco, and Diamael Pangcatan owned fishponds along the Lake Lanao shore in Marantao, Lanao del Sur.

The National Power Corporation (NPC) is a government-owned and controlled corporation created under Commonwealth Act No. 120, as amended, and mandated to undertake the development of hydroelectric power and the production and transmission of electricity nationwide. On 15 November 1973, the Office of the President issued Memorandum Order No. 398, prescribing measures to preserve the Lake Lanao Watershed, enforce the reservation of areas around the lake below 702 meters elevation, and directing NPC to build the Agus Regulation Dam at the mouth of the Agus River in Lanao del Sur at a normal maximum water level of Lake Lanao at 702 meters. Pursuant to that order, NPC built and operated the dam in 1978. Private respondents Hadji Abdul Carim Abdullah and Caris Abdullah owned fishponds in Barangay Bacong, Municipality of Marantao, Lanao del Sur, while Hadji Ali Langco and Diamael Pangcatan had fishponds in Poona-Marantao in the same province. All the fishponds were along the Lake Lanao shore. Between 1984 and 1986, the private respondents spent substantial amounts to construct, maintain, and stock their fishponds with fish fingerlings and to make plantings along the adjoining foreshore areas. Hadji Ali Langco died after testifying in the trial court and was substituted by his heirs, Hadji Jalila Langco, Alikan Langco, and Bokari Langco.

In October and November 1986, the water level of the lake escalated and the lakeshore area was flooded, washing away all the improvements. The private respondents blamed the inundation on the Agus Regulation Dam built and operated by NPC, theorizing that NPC failed to increase the outflow of water even as the lake level rose due to heavy rains. In December 1986, the private respondents, except Caris Abdullah, wrote separate letters to NPC Vice-President R.B. Santos in Ditucalan, Iligan City, seeking assistance and compensation for their respective damage. NPC denied the requests, stating that it was mandated under Memorandum Order No. 398 to build the dam and maintain the normal maximum lake level of 702 meters and that, since its operation in 1978, the water level never rose beyond 702 meters. NPC added that visible monuments and benchmarks indicating the 702-meter elevation had been established around the lake from 1974 to 1983, which should have warned the private respondents not to introduce improvements below that level because it was prohibited.

Left with no other recourse, the private respondents filed a complaint for damages before the Regional Trial Court of Marawi City, Branch 9, on 24 February 1987, docketed as Civil Case No. 115-87. They alleged that the negligence and inexperience of NPC’s employees assigned to operate the Agus Regulation Dam were the proximate causes of the damage to their properties and livelihood. They prayed for damages corresponding to the cost of their lost fishes plus the value of their destroyed fishponds and the expenses and fishes thereof, reimbursement of necessary expenses as may be proved during trial, moral and exemplary damages, and costs. NPC denied the allegations and countered that the water level of Lake Lanao never went beyond 702 meters, that its employees were never remiss in their duties, and that the fishponds were either located below the 702-meter level or had been introduced when the water level was abnormally low and were thus within the prohibited area under Memorandum Order No. 398. NPC concluded that the private respondents had no cause of action against it.

The trial court created a committee composed of representatives of both parties to conduct an ocular inspection of the dam and its surrounding areas. The trial court found that before the construction of the Agus Regulation Dam across the Agus River just beyond the Marawi City Bridge, no report of damage to landowners around the lake was heard, but after the dam began functioning in 1978, reports and complaints of damage from overflooding became widespread. It found that Lake Lanao has only one outlet, the Agus River, which naturally regulates the lake; that NPC constructed the Intake Regulation Dam to control and regulate the amount of water discharged into the Agus River depending on the power to be generated; that when the lake level rises, especially during rainy days, it is indispensable to open the dam to allow more water to flow to the Agus River to prevent overflowing of the lakeshore and surrounding land; but that NPC cannot allow the water to flow freely because it would adversely affect its hydroelectric power plants, so it holds back water to maintain the volume required to generate power, with the consequence that lands around the lake are inundated. NPC’s witness Mama Manongguiring admitted this. The trial court also found that in October, November, and December 1986, when the lake level increased, farmlands in the Basak area around Lake Lanao and fishponds were inundated as a result of NPC’s holding back of water.

During the ocular inspection, the benchmarks pointed out by NPC’s representative could not be seen nor reached because they were totally covered with water. NPC’s Principal Hydrologist Mama Manongguiring testified that although the dam was built in 1978, the benchmarks were installed only in July and August 1984, that many had already worn out, and that they were replaced only in October 1986. The Court of Appeals echoed the trial court’s findings, observing that when the water level rises due to the rainy season, NPC ought to release more water to the Agus River to avoid flooding and prevent the water from going over the maximum level, but that NPC failed to do so, resulting in the inundation of the nearby estates. The Court of Appeals also observed that NPC installed the benchmarks only after many years from the time the dam was built, when many farms and houses were already swamped and many fishponds, including those of the private respondents, were damaged.

• Memorandum Order No. 398: Petitioner argued that the Court of Appeals disregarded the mandate of Presidential Memorandum Order No. 398.
• Negligence: Petitioner maintained that the Court of Appeals concluded it was negligent in applying Memorandum Order No. 398 despite the clear absence of evidence of such negligence.
• Ocular Inspection: Petitioner contended that the Court of Appeals erred in using the adverse result of an ocular inspection conducted at a much later date and during trial as proof of the alleged flooding in October and November 1986.
• Location of Fishponds: Petitioner argued that the Court of Appeals erred in holding that NPC failed to prove that the private respondents’ fishponds were situated below the 702-meter elevation.
• Damages: Petitioner asserted that the Court of Appeals awarded temperate or moderate damages in lieu of actual or compensatory damages, at unreasonable amounts, despite the clear absence of legal and factual bases.
• Compliance with the 702-Meter Level: Petitioner claimed that the water level of Lake Lanao never rose beyond 702 meters and that, since the dam’s operation in 1978, NPC had complied with its mandate under Memorandum Order No. 398.
• No Negligence of Employees: Petitioner argued that its employees were never remiss in the performance of their duties.
• Prohibited Area: Petitioner maintained that the private respondents’ fishponds were either located below the 702-meter level or introduced when the water level was abnormally low, and thus within the prohibited area under Memorandum Order No. 398.
• Fortuitous Event: Petitioner asserted that the damages, if any, were due to a fortuitous event.
• Damnum Absque Injuria: Petitioner invoked the principle of damnum absque injuria, or damage without injury.

• Negligence and Proximate Cause: Private respondents alleged that the negligence and inexperience of NPC’s employees assigned to operate the Agus Regulation Dam were the proximate causes of the damage to their properties and livelihood.
• Cause of Flooding: Private respondents theorized that NPC failed to increase the outflow of water even as the water level of Lake Lanao rose due to heavy rains, causing the inundation of their fishponds.
• Damages: Private respondents prayed for damages corresponding to the cost of their lost fishes plus the value of their destroyed fishponds and the expenses and fishes thereof, reimbursement of necessary expenses as may be proved in the trial, moral and exemplary damages, and costs.
• Assistance and Compensation: Private respondents sought assistance and compensation from NPC for the damage each suffered before filing the complaint.

• Liability for Damages: Whether the Court of Appeals erred in affirming the trial court’s verdict that petitioner NPC was legally answerable for the damages suffered by the private respondents.
• Memorandum Order No. 398: Whether the Court of Appeals disregarded the mandate of Presidential Memorandum Order No. 398.
• Negligence: Whether the Court of Appeals erred in concluding that NPC was negligent despite the clear absence of evidence of negligence.
• Ocular Inspection: Whether the Court of Appeals erred in using the adverse result of an ocular inspection conducted at a later date as proof of the alleged flooding in October and November 1986.
• Location of Fishponds: Whether NPC proved that the private respondents’ fishponds were situated below the 702-meter elevation.
• Damages: Whether the Court of Appeals erred in awarding temperate or moderate damages in lieu of actual or compensatory damages and in the amounts awarded.
• Fortuitous Event: Whether the damages were due to a fortuitous event, exempting NPC from liability.
• Damnum Absque Injuria: Whether the principle of damnum absque injuria applies to exempt NPC from liability.

• Liability for Damages: No. The Court of Appeals did not err in affirming the trial court’s verdict; its factual findings are supported by substantial evidence and bind the Supreme Court in a petition for review.
• Memorandum Order No. 398: No. The Court of Appeals did not disregard Memorandum Order No. 398; that order imposed on NPC the twin duties to maintain the normal maximum lake elevation at 702 meters and to build benchmarks warning that cultivation below that elevation is prohibited, and NPC failed to perform both.
• Negligence: No. Negligence was established; NPC failed to release more water when the lake level rose and instead held back water for power generation, causing the inundation, and res ipsa loquitur supplied the inference of want of care.
• Ocular Inspection: Yes. The ocular inspection showed that NPC’s benchmarks were totally covered with water, which was unyielding proof that the water level rose above the benchmarks and inundated the properties.
• Location of Fishponds: No. NPC failed to prove that the fishponds were below the 702-meter elevation; its bare claim was unsupported, and it could not locate its own submerged benchmarks.
• Damages: No. The Court of Appeals did not err in awarding temperate or moderate damages instead of actual or compensatory damages because the actual amount of loss was not proved with reasonable certainty, and the amounts awarded were reasonable under Articles 2224 and 2225.
• Fortuitous Event: No. The rainy season is an expected occurrence, and NPC’s duty to maintain the lake level continued during such times; its negligence removed the occurrence from the rules applicable to acts of God.
• Damnum Absque Injuria: No. The principle does not apply because NPC’s negligence violated the private respondents’ legal rights and gave rise to liability under Article 2176.

• Liability for Damages: In a petition for review, only questions of law may be raised; the Supreme Court is not a trier of facts and generally does not weigh anew evidence already passed upon by the Court of Appeals. The factual findings of the Court of Appeals affirming those of the trial court bind the Supreme Court when supported by substantial evidence. In this case, no reversible error could be attributed to the Court of Appeals in adopting conclusions of fact similar to the trial court on NPC’s liability for the damages suffered by the private respondents.
• Memorandum Order No. 398: Memorandum Order No. 398, also known as the law “Prescribing Measures to Preserve the Lake Lanao Watershed, To Enforce the Reservation of Areas Around the Lake Below Seven Hundred And Two Meters Elevation, and for Other Purposes,” clothed NPC with the power to build the Agus Regulation Dam and to operate it for generating energy. Twin to that power were the duties (1) to maintain the normal maximum lake elevation at 702 meters and (2) to build benchmarks to warn inhabitants that cultivation of land below that elevation is forbidden. The wording of the order was clear. By the bulk of evidence, NPC reneged on both duties.
• Negligence: With respect to maintaining the normal maximum level of the lake at 702 meters, the Court of Appeals, echoing the trial court, observed that when the water level rises due to the rainy season, NPC ought to release more water to the Agus River to avoid flooding and prevent the water from going over the maximum level. NPC failed to do so, resulting in the inundation of the nearby estates. The trial court found that before the dam was constructed, no report of damage to landowners around the lake was heard; after it began functioning in 1978, reports and complaints of overflooding became widespread. Lake Lanao has only one outlet, the Agus River, which naturally regulates the lake. NPC constructed the Intake Regulation Dam to control and regulate the amount of water discharged into the Agus River depending on the power to be generated. When the lake level rises, especially during rainy days, it is indispensable to open the dam to allow more water to flow to the Agus River to prevent overflowing of the lakeshore and surrounding land, but NPC cannot allow the water to flow freely because it would adversely affect its hydroelectric power plants. It therefore holds back water to maintain the volume required to generate power, and the consequence is that lands around the lake are inundated. NPC’s witness Mama Manongguiring admitted this. Consequently, in October, November, and December 1986, when the lake level increased, farmlands in the Basak area and fishponds were inundated as a result of NPC’s holding back of water. NPC’s company records claiming that the water level never rose beyond 702 meters were not credited; the trial court and Court of Appeals held that the data collapsed in the face of the actual state of the affected areas. During the ocular inspection, the benchmarks pointed out by NPC’s representative could not be seen nor reached because they were totally covered with water, which was unyielding proof that the water level did rise above the benchmarks and inundated the properties. In the absence of any clear explanation on what other factors could have explained the flooding, it was fair to reasonably infer that the incident happened because of want of care on the part of NPC to maintain the water level within the benchmarks at the maximum normal lake elevation of 702 meters. The doctrine of res ipsa loquitur applied: where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, that the accident arose from want of care.
• Ocular Inspection: The trial court and the Court of Appeals did not lend credence to NPC’s records showing that the water level never exceeded 702 meters. Both courts held that the data contained in NPC’s records collapsed in the face of the actual state of the affected areas. During the ocular inspection conducted by the lower court, with representatives of both parties present, it was established that in the subject areas, the benchmarks as pointed out by the NPC representative could not be seen nor reached because they were totally covered with water. This fact, by itself, constituted unyielding proof that the water level did rise above the benchmarks and inundated the properties in the area. The ocular inspection was therefore properly used to contradict NPC’s claim that the lake level never exceeded 702 meters.
• Location of Fishponds: NPC attempted to shift the burden by claiming that the private respondents brought the catastrophe upon themselves by constructing their fishponds below the 702-meter level in defiance of Memorandum Order No. 398. However, NPC failed to demonstrate that the subject fishponds were situated at an area below the 702-meter level. Allegation is one thing; proof is another. Save for its bare claim, NPC was unable to indicate the position of the fishponds vis-à-vis its benchmarks, and it could not show its own benchmarks because they were submerged in water. Even assuming that the fishponds were erected below the 702-meter level, NPC must nonetheless bear the damages because it had the duty to erect and maintain the benchmarks precisely to warn owners of neighboring properties not to build fishponds below those marks. Such benchmarks also served the evidentiary purpose of extricating NPC from liability in cases of overflooding because all NPC would have to do is point out that such constructions are below the 702-meter allowable elevation. Without such points of reference, the inhabitants in the areas were clueless whether their improvements were within the prohibited area, and NPC had no way of telling if the fishponds were indeed below the prescribed maximum level.
• Damages: Article 2176 of the New Civil Code provides that whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done; such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict. In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of; it is not necessary that such damages have been foreseen or could have reasonably been foreseen by the defendant. Both the appellate court and the trial court uniformly found that NPC’s negligence directly caused the damage to the private respondents’ fishponds. The degree of damages suffered by the private respondents remained unrebutted, and there was adequate documentary evidence that they had fishponds in their respective locations and that these were inundated and damaged when the water level escalated in October 1986. However, while the private respondents claimed reimbursement for actual or compensatory damages, they failed to present independent evidence to prove with a reasonable degree of certainty the actual amount of loss. They could only testify as to the amounts they had spent to build and stock their respective fishponds and as to the amount of earnings they would have made had the fish been sold at current market prices. The Court found no reason to deflect from the award of temperate or moderate damages by the Court of Appeals in reduced amounts, which were reasonable under the circumstances conformably with Articles 2224 and 2225 of the New Civil Code.
• Fortuitous Event: NPC could not escape liability on the mere excuse that the rise of water was due to heavy rains that were acts of God. The rainy season is an expected occurrence, and NPC cannot stop doing its duty when the rains fall. In fact, it is during these critical times that NPC needs to be vigilant to make sure that the lake level does not exceed the maximum level. Negligence or imprudence is a human factor which makes the whole occurrence humanized, as it were, and removed from the rules applicable to acts of God.
• Damnum Absque Injuria: The principle of damnum absque injuria, or damage without injury, means that although there was physical damage, there was no legal injury, as there was no violation of a legal right. The negligence of NPC as a result of its inability to maintain the level of water in its dams was satisfactorily and extensively established. The principle therefore did not apply.

• Quasi-delict under Article 2176 — Under Article 2176 of the New Civil Code, whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done; if there is no pre-existing contractual relation between the parties, the fault or negligence is called a quasi-delict. The Court applied this provision because NPC’s negligence in maintaining the lake level and benchmarks directly caused the inundation of the private respondents’ fishponds.
• Res ipsa loquitur — Where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, that the accident arose from want of care. The Court applied the doctrine because the Agus Regulation Dam was under NPC’s management and the flooding of the surrounding properties would not ordinarily occur if NPC had exercised proper care; NPC failed to explain the flooding.
• Twin duties under Memorandum Order No. 398 — Memorandum Order No. 398 imposed on NPC the duty to maintain the normal maximum lake elevation at 702 meters and the duty to build benchmarks warning that cultivation of land below that elevation is prohibited. The Court found that NPC failed to perform both duties; even assuming the fishponds were below 702 meters, NPC’s failure to erect and maintain the benchmarks made it liable for the resulting damage.
• Fortuitous event does not excuse negligence — A party cannot escape liability for damage caused by its negligence by invoking a fortuitous event where the event, such as the rainy season, is an expected occurrence and the party’s duty to exercise care continues during that time. The Court held that NPC’s negligence or imprudence was a human factor that removed the occurrence from the rules applicable to acts of God.
• Damnum absque injuria — Damage without injury means that although there is physical damage, there is no legal injury because no legal right was violated. The Court held that the principle did not apply because NPC’s negligence violated the private respondents’ legal rights and gave rise to liability under Article 2176.
• Temperate or moderate damages — Under Articles 2224 and 2225 of the New Civil Code, temperate or moderate damages, which are more than nominal but less than compensatory, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty; such damages must be reasonable under the circumstances. The Court affirmed the award of temperate damages because the private respondents failed to prove the actual amount of their loss with reasonable certainty.
• Factual findings binding in petitions for review — In a petition for review, only questions of law may be raised; the Supreme Court is not a trier of facts and generally does not weigh anew evidence already passed upon by the Court of Appeals. The factual findings of the Court of Appeals affirming those of the trial court bind the Supreme Court when supported by substantial evidence. The Court applied this rule in upholding the findings on NPC’s liability.

• “Where the thing which causes injury is shown to be under the management of the defendant, and the accident is such as in the ordinary course of things does not happen if those who have the management use proper care, it affords reasonable evidence, in the absence of an explanation by the defendant, that the accident arose from want of care.” — This is the Court’s canonical formulation of res ipsa loquitur, which it applied because the dam was under NPC’s management and the flooding would not ordinarily occur with proper care.
• “Indeed, negligence or imprudence is human factor which makes the whole occurrence humanized, as it were, and removed from the rules applicable to acts of God.” — This states the ratio for rejecting NPC’s fortuitous-event defense: the rainy season was expected, and NPC’s negligence humanized the occurrence and removed it from the rules on acts of God.
• “Article 2176 of the New Civil Code provides that "whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict."" — This is the quasi-delict provision the Court applied to hold NPC liable for the damage caused by its fault or negligence.
• “Without such points of reference, the inhabitants in said areas are clueless whether or not their improvements are within the prohibited area. Conversely, without such benchmarks, NPC has no way of telling if the fishponds, subject matter of the present controversy, are indeed below the prescribed maximum level of elevation.” — This explains why NPC’s failure to erect and maintain benchmarks was independently actionable: the benchmarks were meant to warn inhabitants and to allow NPC to prove that improvements were below the prohibited elevation.

• Villarico vs. Court of Appeals, G.R. No. 132115, 04 January 2002, 373 SCRA 23 — Cited for the rule that in a petition for review, only questions of law may be raised.
• Far East Bank and Trust Company vs. Querimit, G.R. No. 148582, 16 January 2002, 373 SCRA 665 — Cited for the rule that the Supreme Court is not a trier of facts and generally does not weigh anew evidence already passed upon by the Court of Appeals.
• Manila Electric Company vs. Court of Appeals, G.R. No. 108301, 11 July 2001, 361 SCRA 35; Bordalba vs. Court of Appeals, G.R. No. 112443, 25 January 2002, 374 SCRA 555; BPI vs. Leobrera, G.R. No. 137147, 29 January 2002, 375 SCRA 81; Lubos vs. Galupo, G.R. No. 139136, 16 January 2002, 373 SCRA 618 — Cited for the rule that the factual findings of the Court of Appeals affirming those of the trial court bind the Supreme Court when supported by substantial evidence.
• Africa vs. Caltex (Phils.), Inc., G.R. No. L-12986, 31 March 1966, 16 SCRA 448 — Cited for the formulation of the doctrine of res ipsa loquitur.
• Batiquin vs. Court of Appeals, G.R. No. 118231, 05 July 1996, 258 SCRA 334 — Cited for the doctrine of res ipsa loquitur.
• Remman Enterprises vs. Court of Appeals, G.R. No. 125018, 06 April 2000, 330 SCRA 145 — Cited for the rule that negligence or imprudence is a human factor that removes the occurrence from the rules applicable to acts of God.

• Memorandum Order No. 398 (15 November 1973) — Prescribed measures to preserve the Lake Lanao Watershed, enforce the reservation of areas around the lake below 702 meters elevation, and directed NPC to build the Agus Regulation Dam at the mouth of the Agus River at a normal maximum water level of 702 meters. It imposed on NPC the twin duties to maintain the normal maximum lake elevation at 702 meters and to build benchmarks warning that cultivation below that elevation is prohibited. The Court found NPC failed to perform both duties.
• Commonwealth Act No. 120, as amended (including Republic Act No. 6395 and Presidential Decree No. 938) — Created NPC as a government-owned and controlled corporation and defined its mandate to undertake hydroelectric power development and transmission. The Court cited this as the statutory basis for NPC’s authority to construct and operate the Agus Regulation Dam.
• Republic Act No. 6395, Sections 2 and 3 — Cited for NPC’s mandate and powers, including the development of hydroelectric generation and the construction, operation, and maintenance of power plants, dams, and related works. The Court used these provisions to establish NPC’s functions and responsibilities.
• Article 2176, New Civil Code — Provides that whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done; if there is no pre-existing contractual relation, the fault or negligence is a quasi-delict. The Court applied this provision to hold NPC liable for its negligence.
• Article 2202, New Civil Code — Provides that in crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural and probable consequences of the act or omission complained of, whether or not they were foreseen. The Court cited this to support NPC’s liability for the consequences of its negligence.
• Article 2224, New Civil Code — Provides that temperate or moderate damages, which are more than nominal but less than compensatory, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. The Court affirmed the award of temperate damages under this provision.
• Article 2225, New Civil Code — Provides that temperate damages must be reasonable under the circumstances. The Court found the reduced amounts awarded by the Court of Appeals reasonable under this provision.

Puno (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concurred.