National Transmission Corporation vs. Oroville Development Corporation

In expropriation cases where the government takes possession of private property without prior condemnation proceedings, just compensation must be determined based on the fair market value of the property at the time of taking, not at the time of filing of the complaint, pursuant to Section 4, Rule 67 of the Rules of Court and consistent with the doctrine of stare decisis; the exceptions allowing reckoning from the time of judicial demand apply only in special circumstances such as stealthy entry or refusal to pay, and interest at 12% per annum accrues from the time of taking until full payment to compensate for the delay.

Two parcels of land located in Puerto, Cagayan de Oro City, originally covered by Original Certificate of Title No. P-3 (owned by Alfredo Reyes) and OCT No. P-13 (owned by Grace Calingasan), were traversed in 1983 by the Tagoloan-Pulangi 138 kV transmission line constructed by petitioner National Transmission Corporation (TransCo) without expropriation proceedings or payment of just compensation. The properties were subsequently transferred to respondent Oroville Development Corporation through TCT No. T-85121 and TCT No. T-104365, giving Oroville ownership of the 13,904 square meter lot traversed by the existing transmission line. In November 2006, TransCo offered to purchase the properties to construct a new Abaga-Kirahon 230 kV transmission line parallel to the existing one, but negotiations failed when Oroville requested rerouting and payment for the 1983 line.

• TransCo constructed the Tagoloan-Pulangi 138 kV transmission line on the subject properties in 1983 without initiating expropriation proceedings or paying just compensation to the then-owners.
• Oroville acquired the properties in 1995 through purchase from previous owners, with the total area of 13,904 square meters traversed by the existing transmission line.
• In November 2006, TransCo offered to buy the properties for the Abaga-Kirahon 230 kV transmission line project, but Oroville refused and requested rerouting, citing the unpaid compensation for the 1983 line.
• The Commissioners appointed by the RTC determined the date of taking as 1983 but provided varying valuations: Commissioner Legaspi (court-appointed) valued it at P78.65/sqm; Commissioner Badelles (TransCo's nominee) at P1.20/sqm; and Commissioner Pakino (Oroville's nominee) at P2,000.00/sqm.
• The RTC rejected the Commissioners' report and fixed the value at P1,520.00/sqm based on the 2007 fair market value per City Ordinance No. 10425-2006 and BIR zonal values, reckoning interest from April 20, 2007.
• The CA modified the RTC decision, holding that no actual taking occurred in 1983 because the entry was without warrant or color of authority and the owners continued to possess and sell the properties, thus fixing the valuation as of the 2007 filing of the complaint.

• Section 4, Rule 67 of the Rules of Court and established jurisprudence mandate that just compensation be determined based on the fair market value at the time of taking (1983), not at the time of filing (2007).
• Oroville could not claim lack of knowledge of the 1983 construction because transmission lines are highly visible and occupy huge space, and Oroville's predecessors-in-interest sold the property with the lines already existing.
• The 12% interest as damages for delay is unjustified because TransCo complied with the RTC's directive to make a provisional deposit.
• The exceptions in Macabangkit Sangkay and Saludares do not apply because the taking was not stealthy and TransCo did not refuse to acknowledge the claim.

• Using the 1983 valuation (P78.65 or P1.20 per square meter) would be unjust as it would not even cover the realty taxes paid by Oroville since 1983, while TransCo earned billions from transmission charges.
• TransCo's entry in 1983 was without color of legal authority and without intent to formally expropriate, constituting a violation of due process, thus bringing the case under the Macabangkit Sangkay and Saludares exceptions where just compensation should be reckoned from the time of judicial demand (2007).
• The delay in payment of just compensation for over two decades justifies the imposition of 12% legal interest per annum.

• Procedural:
  • N/A
• Substantive Issues:
  • Whether the computation of just compensation should be based on the value of the property at the time of taking in 1983 or at the time of filing of the complaint in 2007.
  • Whether the imposition of 12% legal interest per annum is justified.

• Procedural:
  • N/A
• Substantive:
  • The Court held that the taking occurred in 1983 when TransCo constructed the transmission lines, satisfying all requisites under Republic v. Vda. De Castellvi: entry on private property, for more than a momentary period, under color of legal authority (Section 8 of RA 9136), devoted to public use, and ousting the owner of beneficial enjoyment.
  • Pursuant to Section 4, Rule 67 of the Rules of Court and the doctrine of stare decisis enunciated in Secretary of DPWH v. Spouses Tecson and similar cases (Forfom, Eusebio, MIAA v. Rodriguez, Republic v. Sarabia), just compensation must be determined based on the fair market value at the time of taking in 1983 (P78.65 per square meter), not at the time of filing in 2007.
  • The rulings in Macabangkit Sangkay and Saludares allowing reckoning from the time of judicial demand are exceptions applicable only under special circumstances (stealthy underground construction or refusal to pay), which are absent here; the visible nature of transmission lines put Oroville on notice, and TransCo did not refuse to pay but merely insisted on the correct valuation.
  • TransCo is liable to pay 12% interest per annum from January 1, 1983 (time of taking) until January 21, 2011 (date of provisional deposit) to compensate for the delay and lost income-generating potential, after which the amount shall earn interest pursuant to Nacar v. Gallery Frames.
  • Exemplary damages of P1,000,000.00 and attorney's fees of P200,000.00 are awarded due to TransCo's failure to initiate timely expropriation proceedings, constituting misuse of eminent domain power.

• Eminent Domain — The sovereign power to appropriate private property for public use upon payment of just compensation; an indispensable attribute of sovereignty subject to the requirements of public purpose and just compensation.
• Requisites of Taking (Republic v. Vda. De Castellvi) — The test for determining whether a taking has occurred requires: (1) entry into private property; (2) for more than a momentary period; (3) under warrant or color of legal authority; (4) property devoted to public use or informally appropriated; and (5) utilization that ousts the owner and deprives him of beneficial enjoyment.
• Just Compensation — The full and fair equivalent of the property taken from its owner; measured by the owner's loss rather than the taker's gain, intended to place the owner in as good a position as if the property had not been taken.
• Time of Taking Rule (Section 4, Rule 67, Rules of Court) — Just compensation shall be determined as of the date of the taking of the property or the filing of the complaint, whichever came first; this is the general rule subject only to limited exceptions.
• Exceptions to Time of Taking Rule (Macabangkit Sangkay and Saludares) — Where the government enters without intent to expropriate and denies due process through stealth or refusal to acknowledge the taking, just compensation may be reckoned from the time of judicial demand to prevent unjust enrichment and compensate for due process violations.
• Interest on Just Compensation — Legal interest accrues from the time of taking until actual payment to compensate the landowner for the income lost and to eradicate currency variability; interest is compounded upon judicial demand pursuant to Article 2212 of the Civil Code.
• Construct First, Expropriate Later — A reprehensible practice whereby government agencies enter private property and construct infrastructure before initiating expropriation proceedings, which violates procedural due process and must be deterred through awards of exemplary damages.

• "Just compensation is 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 word 'just' is used to intensify the meaning of the word 'compensation' and to convey thereby the idea that the equivalent to be rendered for the property to be taken shall be real, substantial, full, and ample."
• "The Court has uniformly ruled that just compensation is the value of the property at the time of taking that is controlling for purposes of compensation."
• "The practice of construct first, expropriate later is reprehensible and must not be countenanced."
• "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."

• Republic v. Vda. De Castellvi — Established the five requisites for determining the existence of a taking for eminent domain purposes.
• Secretary of the Department of Public Works and Highways v. Spouses Tecson — Controlling precedent holding that just compensation should be reckoned from the time of taking when government took possession without prior expropriation, followed in Forfom, Eusebio, MIAA v. Rodriguez, and Republic v. Sarabia.
• National Power Corporation v. Heirs of Macabangkit Sangkay — Distinguished as an exception where reckoning from judicial demand was allowed due to stealthy underground construction without the owners' knowledge.
• National Power Corporation v. Spouses Saludares — Distinguished as an exception where reckoning from judicial demand was allowed due to the government's refusal to acknowledge the claim and insistence that compensation was already paid.
• Republic v. Lara — Cited for the principle that the value of property should be fixed as of the date when it was taken.
• Republic v. Court of Appeals — Cited for the rule that just compensation includes interest from the time of taking to compensate for delay.
• Nacar v. Gallery Frames — Cited for the reduction of interest rate to 6% for loans or forbearance of money after June 30, 2013.
• Eastern Shipping Lines v. Court of Appeals — Cited for the rule on compounding of interest upon judicial demand.
• National Power Corporation v. Spouses Zabala, Republic v. Spouses Libunao, National Power Corporation v. Tuazon — Cited for the principle that high-tension transmission lines perpetually deprive owners of normal land use, constituting a taking.

• Section 4, Rule 67 of the Rules of Court — Mandates that just compensation be determined as of the date of taking or filing of complaint, whichever came first.
• Section 8, Republic Act No. 9136 (Electric Power Industry Reform Act of 2001) — Grants TransCo the power to exercise eminent domain subject to constitutional requirements.
• Section 9, Article III of the 1987 Constitution — Guarantees that private property shall not be taken for public use without just compensation.
• Article 2212 of the Civil Code of the Philippines — Provides for the compounding of interest when judicial demand is made.
• Central Bank Circular No. 905 — Prescribed the 12% per annum legal interest rate applicable from December 22, 1982 to June 30, 2013.

• Justice Velasco, Jr. — Argued that just compensation should be reckoned from April 20, 2007 (filing of complaint) because: (1) the subject matter was the Abaga-Kirahon line, distinct from the 1983 Tagoloan-Pulangi line; (2) TransCo had no power to expropriate in 1983 as EPIRA was not yet enacted; (3) the taking violated due process, making Macabangkit Sangkay and Saludares applicable as the general rule rather than exceptions; and (4) interest payment does not compensate for due process violations, necessitating valuation at the time of judicial demand to deter the "construct first, expropriate later" practice.