Philippine National Oil Company vs. Maglasang

In eminent domain, the time of taking for the purpose of determining just compensation is the date of the filing of the complaint for expropriation, or the date of actual taking if earlier; a temporary lease agreement does not constitute “taking” in the constitutional sense. Furthermore, the findings of fact of the Court of Appeals affirming those of the trial court are final and conclusive and cannot be reviewed under Rule 45 unless they fall within established exceptions, none of which were present.

The Philippine National Oil Company (PNOC) undertook the construction of the 125MW Upper Mahiao Geothermal Power Plant Project in Lim-ao, Kananga, Leyte. It required two privately owned parcels of land for the project: Lot No. 11900, owned by Oscar S. Maglasang, and Lot No. 11907, owned by Leolino A. Maglasang. PNOC had entered into a lease agreement over one of the lots for the period of January 1 to December 31, 1992. In late 1994, PNOC initiated judicial expropriation proceedings to acquire the lots permanently.

• The Properties and the Expropriation: Lot No. 11900, with an area of 63,333 square meters, was registered in the name of Oscar S. Maglasang under TCT No. T-4097. Lot No. 11907, measuring 98,206 square meters, was registered in the name of Leolino A. Maglasang under OCT No. P-18869. Both parcels were located in Lim-ao, Kananga, Leyte. PNOC filed separate complaints for eminent domain — one on October 25, 1994 (Civil Case No. 3267-O) and the other on November 10, 1994 (Civil Case No. 3273-O) — to acquire the lots for the Upper Mahiao Geothermal Power Plant Project. Writs of possession issued in December 1994 after PNOC deposited the required provisional amounts.

• The Prior Lease: PNOC had previously leased one of the lots from its administrator under a Lease Agreement covering January 1 to December 31, 1992. PNOC later argued that this lease constituted the date of “taking.”

• Commissioners’ Report: Three commissioners — Branch Clerk of Court Atty. Bibiano Reforzado, City Assessor Briccio D. Supremo, and businessman Augusto T. Pongos — were appointed. Their valuations diverged: ₱1,000.00 per square meter (Supremo), ₱900.00 (Reforzado), and ₱400.00/₱85.00 for developed/undeveloped portions (Pongos). Their ocular inspection revealed that the lots had been flattened, were accessible by all-weather roads, and were adjacent to PNOC buildings; the surrounding area had been declared an industrial zone by the local government.

• Trial Court’s Determination: The RTC set the base value at ₱300.00 per square meter, taking the mean position and reckoning the taking from the 1994 filing dates. Citing Cosculluela v. Court of Appeals, the trial court added an “inflation factor” and an “adjustment factor” to raise the final amount to ₱700.00 per square meter — resulting in awards of ₱44,333,100.00 for Lot 11900 and ₱68,744,200.00 for Lot 11907.

• Court of Appeals’ Modification: The CA struck down the inflation and adjustment factors as legally baseless, holding that just compensation does not include such damages beyond legal interest. It reinstated the ₱300.00 per square meter valuation and imposed 6% per annum legal interest from the respective filing dates until full payment.

• Reckoning Date of Taking: PNOC argued that “taking” for purposes of computing just compensation should be reckoned from January 1, 1992, when it took possession under a lease agreement, not from the 1994 filing dates. It contended that the Lease Agreement evidenced an earlier actual taking.

• Land Classification: PNOC maintained that the subject lots were agricultural, not industrial, at the time they were taken. It asserted that the lower courts misappreciated the nature of the property and that the classification as industrial was erroneous.

• Valuation of Just Compensation: PNOC contended that the CA’s valuation of ₱300.00 per square meter was not supported by the evidence on record as representing the fair market value of the properties. It further urged the Court to adopt a purchase price of ₱80.00 per square meter paid for an adjacent property as the benchmark.

• Time of Taking: Whether the taking of the subject lots for the purpose of determining just compensation should be reckoned from January 1, 1992 (the lease date), rather than the dates the expropriation complaints were filed in 1994.

• Land Classification: Whether the Court of Appeals erred in sustaining the classification of the expropriated lots as industrial, rather than agricultural, land at the time of taking.

• Valuation of Just Compensation: Whether the Court of Appeals’ valuation of just compensation at ₱300.00 per square meter is supported by the evidence on record.

• Time of Taking: The taking was correctly reckoned from the filing dates of the complaints in 1994. A lease made for a determinate time does not constitute “taking” in the constitutional sense because it does not permanently oust the owner or deprive him of all beneficial enjoyment. Under Republic v. Castellvi, “taking” requires entry for a more permanent duration that practically destroys or materially impairs the property’s value, or deprives the owner of its ordinary use. The trial court properly applied the rule that just compensation is determined as of the time of the filing of the complaint, where no earlier permanent taking had occurred.

• Land Classification: The objection to the industrial classification was raised for the first time on appeal and was thus barred by estoppel. Throughout the trial proceedings, PNOC did not proffer any objection on this matter. Moreover, the lower courts’ finding that the lots were industrial was supported by the Commissioners’ Report, which detailed the local government’s reclassification of the area as an industrial zone, as well as the physical state of the property. The factual finding was therefore binding and not subject to review under Rule 45.

• Valuation of Just Compensation: The CA’s valuation of ₱300.00 per square meter, affirming the trial court’s base figure, is a factual determination that is final and conclusive. None of the recognized exceptions permitting this Court to review factual findings was present. The trial court’s application of an “inflation factor” and “adjustment factor” was properly struck down as without legal basis, as just compensation is limited to the actual value of the property at the time of taking and does not include de facto currency devaluation. Legal interest compensates for any delay in payment, as the CA correctly ordered.

• Definition of “Taking” in Eminent Domain — “Taking” under the power of eminent domain occurs when the owner is actually deprived or dispossessed of his property; when there is a practical destruction or a material impairment of the value of the property; or when the owner is deprived of the ordinary use thereof. Entry by the expropriator must be for a more permanent duration, with the intention to devote the property to public use in a manner that ousts the owner. A lease for a determinate time does not constitute taking.

• Time of Taking as Basis for Just Compensation — Just compensation is determined as of the time of the filing of the complaint for expropriation. Where the expropriating agency takes over the property prior to the suit, just compensation is determined as of the time of actual taking. The rule is intended to ensure that the owner is compensated only for what is actually lost, avoiding any enhancement or depreciation resulting from the public project or general economic conditions. (Citing Republic v. Lara, 96 Phil. 170.)

• Just Compensation Does Not Include Inflation or Adjustment Factors — The owner must be compensated only for what he actually loses at the time of taking. De facto devaluation of the peso is not a factor in land valuation for purposes of expropriation. Damages for delay in payment are limited to the legal interest provided by law, not arbitrary inflation or adjustment factors. (Citing Cosculluela v. Court of Appeals, 164 SCRA 393, as correctly interpreted by the CA.)

• Finality of Factual Findings under Rule 45 — In petitions for review under Rule 45, only questions of law may be raised. Factual findings of the Court of Appeals affirming those of the trial court are final and conclusive and cannot be reviewed absent any of the following exceptions: (1) when the conclusion is grounded entirely on speculation, surmises, or conjectures; (2) when the inference is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when the CA went beyond the issues and its findings are contrary to admissions; (7) when the CA’s findings are contrary to those of the trial court; (8) when the conclusions do not cite specific evidence; (9) when the facts in the petition and briefs are undisputed; and (10) when the CA’s findings, supposedly premised on absence of evidence, are contradicted by the evidence on record.

• Estoppel on Appeal — Issues, theories, or arguments not raised in the original proceedings cannot be considered for the first time on review or appeal; doing so would violate the basic principles of fair play, justice, and due process. (Citing Sps. Cruz v. Sps. Fernando, 477 SCRA 173.)

• “In the context of the State’s inherent power of eminent domain, there is ‘taking’ where the owner is actually deprived or dispossessed of his property; where there is a practical destruction or a material impairment of the value of his property; or when he is deprived of the ordinary use thereof.”

• “What he loses is only the actual value of his property at the time it is taken. This is the only way that compensation to be paid can be truly just; i.e., ‘just not only to the individual whose property is taken,’ ‘but to the public, which is to pay for it.’”

• “Nowhere in the said decision may it be inferred that damages for such delay in the payment of just compensation, other than the legal interest provided by law, may be granted in addition or considered in computing the amount of just compensation such as the ‘inflation factor’ applied by the trial court.”

• “Matters, theories or arguments not brought out in the original proceedings cannot be considered on review or appeal where they are raised for the first time. To consider the alleged facts and arguments raised belatedly would amount to trampling on the basic principles of fair play, justice and due process.”

• Republic v. Castellvi, 58 SCRA 336 (1974) — Applied to define “taking”; a lease on a year-to-year basis does not give rise to a permanent right to occupy and cannot substitute for the exercise of eminent domain.
• Republic v. Lara, 96 Phil. 170 (1954) — Relied upon for the rule that the value of property taken ahead of condemnation proceedings must be determined as of the time of actual taking, to avoid valuation distortions from the public purpose, depreciation, or economic changes.
• Municipality of La Carlota v. NAWASA, 12 SCRA 164 (1964) — Cited for the definition of “taking” as including material impairment or deprivation of ordinary use.
• Cosculluela v. Court of Appeals, 164 SCRA 393 (1988) — Clarified as providing only for prompt payment and legal interest as the remedy for delay, not for an inflation or adjustment factor.
• Sps. Cruz v. Sps. Fernando, 477 SCRA 173 (2005) — Applied to bar PNOC from raising the land classification issue and the comparable-sale evidence for the first time on appeal.
• Republic v. Lensico, 466 SCRA 361 (2005) — Enumerated the ten exceptions to the rule on finality of factual findings in Rule 45 petitions, none of which were present.

• Section 5, Rule 67 of the Rules of Court — Governed the appointment of commissioners to ascertain just compensation in the expropriation proceedings.
• Section 20, Republic Act No. 7160 (Local Government Code) — Recognized as the statutory basis for a local government’s power to reclassify lands through ordinance, supporting the validity of the industrial classification.

Chief Justice Reynato S. Puno (Chairperson), Associate Justice Antonio T. Carpio, Associate Justice Renato C. Corona, Associate Justice Adolfo S. Azcuna